<PAGE>
PAGE 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
---
Post-Effective Amendment No. 6 (File No. 33-40779)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 X
Amendment No. 6 (File No. 812-7731)
IDS LIFE ACCOUNT SBS
(Exact Name of Registrant)
IDS Life Insurance Company
(Name of Depositor)
IDS Tower 10, Minneapolis, MN 55440-0010
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (612) 671-3678
Mary Ellyn Minenko, IDS Tower 10, Minneapolis, MN 55440-0010
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering
It is proposed that this filing will become effective (check
appropriate box)
immediately upon filing pursuant to paragraph (b) of Rule 485
X on May 1, 1997 pursuant to paragraph (b) of Rule 485
60 days after filing pursuant to paragraph (a)(i) of Rule 485
on (date) pursuant to paragraph (a)(i) of Rule 485
If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
The Registrant has registered an indefinite number or securities under the
Securities Act of 1933 pur uant to Section 24f-2 of the Investment Company Act
of 1940. Registrant's Rule 24f-2 notice for its most recent fiscal year ended
was filed on or about February 26, 1997.
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PAGE 2
CROSS REFERENCE SHEET
Cross reference sheet showing location in the prospectus of the information
called for by the items enumerated in Part A and B of Form N-4.
Negative answers omitted from prospectus are so indicated.
<TABLE>
<CAPTION>
PART A PART B
Section Section in Statement of
Item No. in Prospectus Item No. Additional Information
<S> <C> <C> <C> <C>
1 Cover 15 Cover
2 Definitions 16 Table of Contents
3(a) Annuity and Certificate Expense 17(a) NA
(b) About the Annuity (b) NA
(c) Who Issues the Annuity*
4(a) Condensed Financial Information
(b) Performance Information 18(a) NA
(c) Financial Statements (b) NA
(c) Independent Auditors
5(a) Who Issues the Annuity (d) NA
(b) About the Annuity (e) NA
(c) About the Variable Account, Portfolios and Funds (f) NA
(d) Cover
(e) Voting rights 19(a) About the Annuity
(f) NA
20(a) Principal Underwriter
6(a) Certificate Charges and Charges Against the Variable (b) Principal Underwriter
Account Annuity and Certificate Expenses (c) NA
(b) Surrender Charge (d) NA
(c) Calculation
(d) Surrendering Your Certificate 21(a) Performance Information
(e) Investment Goals and Policies of the Portfolio and (b) Performance Information
and Funds
(f) NA 22
7(a) Buying the Certificate 23(a) Financial Statements
(b) About the Variable Account, Portfolios and the Funds; (b) Financial Statements
Transfering Your Money Between Accounts
(c) About the Variable Account, Portfolios and Funds;
Subaccounts Available for Investment
(d) Cover
8(a) Payout Options at Retirement
(b) Retirement Date
(c) Payout Options at Retirement
(d) Payout Options at Retirement
(e) Payout Options at Retirement
(f) Changing Ownership
9(a) Payment in Case of Death
(b) Payment in Case of Death
10(a) Buying the Certificate
(b) Settlement Value of Your Certificate
(c) Additional Information About the Annuity and
Certificate
(d) Who Issues the Annuity
11(a) Surrendering Your Certificate; Surrender Charges
(b) NA
(c) Receiving Payment When You Request a Surrender
(d) NA
(e) Ten Day Free Look
12(a) Taxes
(b) About the Variable Account, Portfolios and Funds
(c) Federal Tax Information
</TABLE>
<PAGE>
PAGE 3
13 NA
14 Table of contents of the Statement of Additional
Information
*Designates section in the prospectus, which is hereby incorporated by reference
in this Statement of Additional Information.
<PAGE>
PAGE 4
Symphony Annuity
Prospectus/May 1, 1997
This prospectus describes an individual flexible premium deferred annuity
contract (Annuity) offered by IDS Life Insurance Company (IDS Life). The Annuity
is a deferred annuity contract in which purchase payments are accumulated on a
fixed and/or variable basis and which pays retirement benefits to the owner. It
is available for qualified and nonqualified retirement plans.
IDS Life Account SBS
Individual Flexible Premium Deferred Combination Fixed and Variable
Annuity Contract
Sold by:
IDS Life Insurance Company
IDS Tower 10
Minneapolis, MN 55440-0010
Telephone: (800) 422-3542
This prospectus is valid only when accompanied or preceded by the prospectuses
for Smith Barney Series Fund, IDS Life Capital Resource Fund, IDS Life Special
Income Fund, and IDS Life Managed Fund. Please read these documents carefully
and keep them 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 Insurance Company is not a financial institution, and the securities it
offers are not deposits or obligations of, or guaranteed or endorsed by any
financial institution nor are they insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other agency.
A Statement of Additional Information (SAI) filed with the Securities and
Exchange Commission (SEC) is available without charge by contacting IDS Life at
the telephone number or address shown above. The Table of Contents of the SAI
appears on page 27 of this prospectus.
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PAGE 5
Definitions
Some terms used in this prospectus:
Accumulation Unit -- A measure of the value of your investment in each of the
subaccounts. Prior to the retirement date, these units are used to calculate the
value of your Annuity.
Annuitant -- The person on whose life annuity payments depend. Calculation of
annuity retirement payments depends on the annuitant's age.
Contract Value -- The total value of your Annuity before any applicable
surrender charge and any contract charge have been deducted.
Contract Year -- A period of 12 months, starting on the effective date of your
Annuity and on each anniversary of the effective date.
Fixed Account -- An additional account into which you may choose to allocate
purchase payments and which is included in your contract value. Purchase
payments allocated to the Fixed Account will earn interest at a rate guaranteed
by IDS Life which will change from time to time.
Owner (You, Your) -- The person or party owning the Annuity.
Payment Year -- Each contract year in which you make a purchase payment and each
succeeding year measured from the end of the contract year during which you made
such a payment. For example, if you make an initial purchase payment of $15,000
and then make a subsequent purchase payment of $10,000 during the fourth
contract year, the sixth contract year will be the sixth payment year with
respect to your initial purchase payment and the third payment year with respect
to your subsequent purchase payment.
Portfolios and Funds -- The Money Market Portfolio, Intermediate High Grade
Portfolio, Diversified Strategic Income Portfolio, Equity Income Portfolio,
Equity Index Portfolio, Growth & Income Portfolio, Appreciation Portfolio, Total
Return Portfolio, International Equity Portfolio, Emerging Growth Portfolio
(collectively, the Portfolios), IDS Life Capital Resource Fund, IDS Life Special
Income Fund, and IDS Life Managed Fund (collectively, the Funds).
You may choose to allocate your purchase payments to one or more of the
subaccounts investing in shares of one of these Portfolios or Funds, each of
which is an open-end investment company or series of an open-end investment
company registered under the Investment Company Act of 1940, as amended (1940
Act).
Purchase Payments -- Payments made to IDS Life for an Annuity.
Retirement Date -- The date on which retirement payments begin.
Surrender Charge -- A deferred sales charge that may be applied if you surrender
your Annuity.
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PAGE 6
Surrender Value -- The total value of your Annuity after any applicable
surrender charge and any contract charge have been deducted.
Valuation Date -- Any normal business day, Monday through Friday, except for the
following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Variable Account -- IDS Life Account SBS, a separate account of IDS Life.
Pursuant to the laws of the state of Minnesota, assets attributable to the
Variable Account are held by IDS Life in one or more subaccounts. Each
subaccount invests in a corresponding Portfolio or Fund. The Money Market
subaccount invests in shares of the Money Market Portfolio; the Intermediate
High Grade subaccount invests in shares of the Intermediate High Grade
Portfolio; the Diversified Strategic Income subaccount invests in shares of the
Diversified Strategic Income Portfolio; the Equity Income subaccount invests in
shares of the Equity Income Portfolio; the Equity Index subaccount invests in
shares of the Equity Index Portfolio; the Growth & Income subaccount invests in
shares of the Growth & Income Portfolio; the Appreciation subaccount invests in
shares of the Appreciation Portfolio; the Total Return subaccount invests in
shares of the Total Return Portfolio; the International Equity subaccount
invests in shares of the International Equity Portfolio; the Emerging Growth
subaccount invests in shares of the Emerging Growth Portfolio; the Capital
Resource subaccount invests in shares of the IDS Life Capital Resource Fund; the
Special Income subaccount invests in shares of the IDS Life Special Income Fund;
and the Managed subaccount invests in shares of the IDS Life Managed Fund.
Summary of Contents
About the Annuity
Purpose of the Annuity -- The Annuity allows you to invest in any or all of the
thirteen subaccounts of the Variable Account as well as in the Fixed Account.
Retirement payments are paid on a fixed basis (page __).
You may return your Annuity and receive a full refund of the contract value
(including charges) within 10 days after the Annuity is delivered to you. The
contract value returned may be greater or less than your purchase payment.
However, if applicable state law so requires, or if you purchased the Annuity as
an Individual Retirement Annuity (IRA), your purchase payment will be refunded
in full (page __).
Who Issues the Annuity -- IDS Life, a subsidiary of American Express Financial
Corporation, issues the Annuity (page __).
About the Variable Account and the Portfolios
Subaccounts Available for Investment -- There are thirteen separate subaccounts
of the Variable Account available for investment in addition to the Fixed
Account (page __).
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PAGE 7
The Variable Account is registered as a single unit investment trust under the
1940 Act (page __).
Investment Goals and Policies of the Portfolios and Funds -- Each Portfolio and
Fund has a different investment policy. The Money Market Portfolio invests in
high-quality short-term money market instruments. The Intermediate High Grade
Portfolio invests in high-quality intermediate-term U.S. government securities
and corporate bonds of U.S. issuers. The Diversified Strategic Income Portfolio
invests primarily in three types of fixed-income securities -- U.S. government
and mortgage-related securities, foreign government securities and corporate
securities rated below investment grade. The Equity Income Portfolio invests
primarily in dividend-paying common stocks, concentrating in securities of
companies in the utility industry. The Equity Index Portfolio invests in the
common stocks of the companies represented in Standard & Poor's 500 Composite
Stock Price Index (S&P 500). The Growth & Income Portfolio invests in
dividend-paying equity securities meeting certain specified investment criteria.
The Appreciation Portfolio invests primarily in equity securities. The Total
Return Portfolio invests primarily in a diversified portfolio of dividend-paying
common stocks. The International Equity Portfolio invests at least 65 percent of
its assets in a diversified portfolio of equity securities of established
non-U.S. issuers. The Emerging Growth Portfolio invests at least 65 percent of
its total assets in common stocks of small and medium-sized companies, both
domestic and foreign, considered to be emerging growth companies. The IDS Life
Capital Resource Fund invests primarily in U.S. common stocks and other
securities convertible into common stock, diversified over many different
companies in a variety of industries. The IDS Life Special Income Fund invests
primarily in high-quality, lower-risk corporate bonds issued by many different
companies in a variety of industries, and in government bonds. The IDS Life
Managed Fund invests primarily in U.S. common stocks listed on national
securities exchanges, securities convertible into common stock, warrants,
fixed-income securities (primarily high-quality corporate bonds) and money
market instruments (page __).
Using the Annuity
Buying the Annuity -- Applications are subject to acceptance at IDS Life's home
office in Minneapolis (page __).
IRAs and Other Qualified Plans -- The Annuity is available for IRAs,
Tax-sheltered Annuities (TSAs) under 403(b) plans, 401(k) plans and other
qualified plans as well as for nonqualified retirement plans (page __).
Purchase Payments -- You must make an initial lump sum purchase payment to your
Annuity and you may make additional purchase payments to your Annuity. The
initial purchase payment must be at least $5,000 for nonqualified Annuities and
at least $500 for qualified Annuities. After making the initial purchase
payment, you may make additional payments of at least $500 for nonqualified
Annuities and at least $50 for qualified Annuities. Additional purchase payments
can be mailed directly to IDS Life. IDS Life
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PAGE 8
reserves the right to limit total purchase payments for your Annuity to
$1,000,000 and to change the limits on purchase payment amounts (page __).
Your purchase payments will be allocated to the Fixed Account and/or to the
subaccount(s) you choose. For nonqualified Annuities, the minimum value of your
investment in a subaccount or in the Fixed Account is $500. This $500 minimum
value does not apply to qualified Annuities (page __).
Transferring Your Money Between Accounts -- Until the retirement date, you can
give us written or telephone instructions to redistribute your investment among
the thirteen subaccounts of the Variable Account. There are some restrictions on
transferring to or from the Fixed Account. Transfers must be for at least $500
or, if less, your entire balance in the subaccount unless you establish
automated transfers of contract values (page __).
You may establish automated transfers of contract values between the subaccounts
and/or the Fixed Account. The minimum automated transfer amount is $100. This
service is subject to restrictions (page __).
Contract Charges and Charges Against the Variable Account -- IDS Life charges
your Annuity $30 per year for administrative services (page __).
IDS Life charges the subaccounts of the Variable Account a daily asset charge at
an effective annual rate of 0.25 percent of the daily net asset value of the
subaccounts for administrative and operating expenses related to the subaccounts
(page __).
IDS Life charges the subaccounts of the Variable Account a daily mortality and
expense risk fee at an effective annual rate of 1.25 percent of the daily net
asset value of the subaccounts (page __).
A surrender charge applies if you make a full or partial surrender of your
contract value during the first six payment years following a purchase payment.
The surrender charge starts at 6 percent of a purchase payment in the first
payment year and is reduced by 1 percent each payment year thereafter. There is
no surrender charge after six payment years. In addition, there is no surrender
charge when contract values are applied to retirement payment plans or for a
death benefit. After the first contract year, you may surrender up to 10 percent
of your contract value without incurring a surrender charge. There is no
surrender charge imposed on contract earnings, as defined herein (page __).
The above charges will not increase during the term of the Annuity. For some
sales, certain administrative and surrender charges may be reduced or eliminated
altogether (page __).
Certain state and local governments impose premium taxes (page __).
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PAGE 9
Surrendering Your Annuity -- You may surrender all or part of your Annuity's
value at any time before the retirement date. You will pay income tax on the
taxable part of your surrender and you may have to pay tax penalties if you
surrender all or part of your Annuity before reaching age 59-1/2. In addition,
surrenders from certain qualified Annuities may be subject to 20 percent income
tax withholding (page __).
The Internal Revenue Code of 1986, as amended (the Code) imposes restrictions on
your right to receive a distribution from a TSA (page __).
You may establish systematic withdrawals of up to 10 percent of the contract
value at the beginning of the contract year. Systematic withdrawals may be made
in one of three ways (page __).
A partial surrender must be for at least $500. You cannot make a surrender that
would reduce the value of your investment in a subaccount or in the Fixed
Account to less than $500 unless the value of your investment in a subaccount or
in the Fixed Account is fully withdrawn (page __).
IDS Life may ask you to return the Annuity if you make a complete surrender
(page __).
Payment usually will be mailed within seven days after IDS Life receives your
surrender request (page __).
Payment in Case of Death before Retirement Payments Begin -- Prior to the
retirement date, if you or the annuitant die before the initial fifth contract
anniversary, the beneficiary will be paid the greater of: 1) the contract value;
or 2) the amount of purchase payments (minus any surrenders). If you or the
annuitant die on or after the initial fifth contract anniversary, and each
subsequent fifth contract anniversary, the beneficiary will be paid the greater
of: 1) the contract value; or 2) a minimum guaranteed death benefit which
equals: a) the death benefit calculated as of the previous fifth contract
anniversary; plus b) any purchase payments made since the previous fifth
contract anniversary; minus c) any surrenders since the previous fifth contract
anniversary (page __).
Beneficiaries will receive payment in a single lump sum or may request that
payments be made under one of the retirement payment plans IDS Life offers (page
__).
Settlement Value of Your Annuity -- The amount available on the retirement date
to apply to a retirement payment plan equals the then current contract value
(page __).
IDS Life calculates retirement payments due based on the contract value on the
retirement date. Payments are made on a fixed basis (page __).
Payout Options at Retirement -- At retirement, you may choose one of five
payment plans or make other arrangements. If you do not choose one of the five
payment plans, IDS Life will make payments under Plan B with 120 monthly
payments guaranteed (page __).
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PAGE 10
If you purchased your Annuity for a qualified plan, the payment schedule must
meet the requirements of that plan (page __).
If monthly payments would be less than $50, IDS Life reserves the right to
reduce the frequency of the retirement payments or to pay the contract value in
one lump sum payment (page __).
If you or the annuitant die after retirement payments begin, any amount payable
will be as provided in the retirement payment plan in effect (page __).
Changing Ownership -- You may change ownership of your Annuity by filing a
change of ownership form with IDS Life. Certain restrictions apply concerning
transfer of ownership of a qualified plan, and certain transfers of nonqualified
Annuities may have adverse federal income tax consequences (page __).
Federal Tax Information -- According to current interpretations of federal
income tax law, there is no federal income tax on any increase in the Annuity's
value until payments are made. Consult your tax advisor (page __).
If you surrender your Annuity or if retirement payments begin, you will be taxed
on the amount that exceeds your investment in the Annuity. Under certain
circumstances, there also may be a 10 percent IRS penalty tax on the taxable
part of payments. In addition, distributions from certain qualified Annuities
may be subject to 20 percent income tax withholding (page __).
Additional Information about the Annuity
Accumulation Units -- When your purchase payments are allocated to a subaccount,
they will be converted into accumulation units. The accumulation unit value
increases or decreases with the performance of the relevant Portfolio or Fund
(page __).
About the Portfolios and Funds -- As Annuity owner, you have voting rights in
the Smith Barney Series Fund and its Portfolios and in the Funds. IDS Life may,
in its discretion, substitute investments in shares of the Portfolios and Funds
with shares of other registered investment companies under certain conditions
(page __).
Information on the Fixed Account of the Annuity -- The Annuity also allows you
to allocate purchase payments to a Fixed Account where they will earn interest
at a rate guaranteed by IDS Life, which will change from time to time. Subject
to restrictions, you may transfer contract values from the Fixed Account to the
subaccounts and you may establish automated transfers of contract values between
the Fixed Account and the subaccounts. Automated transfers from the Fixed
Account may not exceed an amount that, if continued, would deplete the Fixed
Account within 12 months. This prospectus applies only to the variable features
of the Annuity. Information about the Fixed Account is found on page __.
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PAGE 11
Annuity Expenses
The following information is presented to help you understand the various costs
and expenses that you bear directly or indirectly as the owner of an Annuity.
The information shows the expenses of the Variable Account as well as the
expenses of the underlying Portfolios and Funds. For more information about
surrender charges, see page __.
Annual Contract Charges
- ----------------------------------------------------------
Payment
Surrender Charge Year Percentage
(Contingent Deferred 1 6%
Sales Charge as a 2 5
percentage of purchase 3 4
payments) 4 3
5 2
6 1
7 and later 0
Annual Contract Administrative Charge $30
Annual Variable Account Charges
- ----------------------------------------------------------
Variable Account Administrative Charge
(as a percentage of daily net asset value).......... 0.25%
Mortality and Expense Risk Fee
(as a percentage of daily net asset value).......... 1.25%
- ----------------------------------------------------------
Total Variable Account Annual Expenses* 1.50%
*Premium taxes imposed by some state and local governments may be
applicable. They are not reflected.
Annual Operating Expenses of the Portfolios and Funds
(as a percentage of average daily net assets)
<TABLE>
<CAPTION>
Intermedi- Diversified Interna-
Money ate High Strategic Equity Equity Growth Total tional Emerging
Market Grade Income Income Index & Income Appreciation Return Equity Growth
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees .50% .60% .65% .65% .60% .65% .75% .75% 1.05% .95%
Other Expenses .25 .30 .19 .12 .46 .19 .10 .08 .28 .32
Total Operating
Expenses of
Portfolios # .75%+ .90% .84% .77% 1.06% .84% .85% .83% 1.33% 1.27%
Example**
You would pay the following expenses on a $1,000 investment, assuming (1)
5-percent annual return and (2) surrender at the end of each time period:
1 year $ 83.05 $ 84.52 $ 83.93 $ 83.25 $ 86.08 $ 83.93 $ 84.03 $ 83.83 $ 88.70 $ 88.12
3 years 110.99 115.39 113.63 111.58 120.06 113.63 113.93 113.34 127.88 126.15
5 years 141.49 148.83 145.91 142.47 156.59 145.91 146.39 145.42 169.52 166.66
10 years 259.88 274.51 268.69 261.84 289.85 268.69 269.66 267.72 315.08 309.54
</TABLE>
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PAGE 12
You would pay the following expenses on the same investment assuming no
surrender or selection of a retirement payment plan at the end of each time
period:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year $ 23.05 $ 24.52 $ 23.93 $ 23.25 $ 26.08 $ 23.93 $ 24.03 $ 23.83 $ 28.70 $ 28.12
3 years 70.99 75.39 73.63 71.58 80.06 73.63 73.93 73.34 87.88 86.15
5 years 121.49 128.83 125.91 122.47 136.59 125.91 126.39 125.42 149.52 146.66
10 years 259.88 274.51 268.69 261.84 289.85 268.69 269.66 267.72 315.08 309.54
</TABLE>
This example should not be considered a representation of past or future
expenses. Actual expenses may be more or less than those shown.
+ Figures in "Management Fees," "Other Expenses" and "Total Operating Expenses
of Portfolios" reflects waiver of expenses by the investment adviser. If there
had been no reimbursement of expenses in 1996, actual expenses of the
Portfolio, expressed as a percentage of average daily net assets, would have
been as follows: "Management fees," .50%, "Other Expenses," .75 and "Total
Operating Expenses of Portfolios," 1.25%.
**In this example, the $30 annual contract administrative charge is approximated
as a .051 percent charge based on the average Annuity size.
# Annualized operating expenses of underlying portfolios at Dec. 31, 1996
IDS Life IDS Life
Capital Special IDS Life
Resource Income Managed
Management Fees .60% .59% .59%
Other Expenses .08 .10 .07
Total Operating
Expenses of
Funds # .68% .69% .66%
Example**
You would pay the following expenses on a $1,000 investment, assuming (1)
5-percent annual return and (2) surrender at the end of each time period:
1 year $ 82.36 $ 82.46 $ 82.17
3 years 108.92 109.22 108.33
5 years 138.04 138.54 137.05
10 years 252.96 253.95 250.97
You would pay the following expenses on the same investment assuming no
surrender or selection of a retirement payment plan at the end of each time
period.
1 year $ 22.36 $ 22.46 $ 22.17
3 years 68.92 69.22 68.33
5 years 118.04 118.54 117.05
10 years 252.96 253.95 250.97
This example should not be considered a representation of past or future
expenses. Actual expenses may be more or less than those shown.
**In this example, the $30 annual contract administrative charge is approximated
as a .051 percent charge based on the average Annuity size.
# Annualized operating expenses of underlying mutual funds at Dec. 31, 1996.
Condensed Financial Information (Unaudited)
The tables below give per-unit information about the financial history of each
subaccount.
<TABLE>
<CAPTION>
Year ended Year ended Year ended Year ended Year ended Year ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1996 1995 1994 1993 1992 1991
Subaccount AMO (Investing in shares of Money Market
Portfolio)*
<S> <C> <C> <C> <C> <C> <C>
Accumulation unit value at beginning of period...... $1.08 $1.04 $1.02 $1.02 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------
Accumulation unit value at end of period............ $1.12 $1.08 $1.04 $1.02 $1.02 $1.00
- ---------------------------------------------------------------------------------------------------------------------------
Number of accumulation units outstanding at end of
period (000 omitted)................................ 4,930 4,822 6,298 3,175 2,061 828
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of operating expense to average net assets.... 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%
Simple yield........................................ 2.52% 2.75% 2.14% 0.72% 0.78% 2.00%
Compound yield...................................... 2.55% 2.79% 2.16% 0.72% 0.78% 2.02%
- ---------------------------------------------------------------------------------------------------------------------------
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PAGE 13
Year ended Year ended Year ended Year ended Year ended Year ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1996 1995 1994 1993 1992 1991
Subaccount AIH (Investing in shares of Intermediate
High Grade Portfolio)*
Accumulation unit value at beginning of period...... $1.25 $1.08 $1.13 $1.06 $1.02 $1.00
- ---------------------------------------------------------------------------------------------------------------------------
Accumulation unit value at end of period............ $1.25 $1.25 $1.08 $1.13 $1.06 $1.02
- ---------------------------------------------------------------------------------------------------------------------------
Number of accumulation units outstanding at end of
period (000 omitted)................................ 10,509 11,659 11,655 8,070 3,417 682
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of operating expense to average net assets.... 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%
- ---------------------------------------------------------------------------------------------------------------------------
Subaccount ADS (Investing in shares of Diversified
Strategic Income Portfolio)*
Accumulation unit value at beginning of period....... $1.23 $1.07 $1.12 $1.01 $1.01 $1.00
- ---------------------------------------------------------------------------------------------------------------------------
Accumulation unit value at end of period............. $1.34 $1.23 $1.07 $1.12 $1.01 $1.01
- ---------------------------------------------------------------------------------------------------------------------------
Number of accumulation units outstanding at end of
period (000 omitted)................................. 41,939 45,720 48,740 36,618 19,768 3,869
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of operating expense to average net assets..... 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%
- ---------------------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended Year ended Year ended Year Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1996 1995 1994 1993 1992 1991
Subaccount AEM (Investing in shares of Equity Income
Portfolio)*
Accumulation unit value at beginning of period...... $1.41 $1.08 $1.22 $1.12 $1.02 $1.00
- ---------------------------------------------------------------------------------------------------------------------------
Accumulation unit value at end of period............ $1.47 $1.41 $1.08 $1.22 $1.12 $1.02
- ---------------------------------------------------------------------------------------------------------------------------
Number of accumulation units outstanding at end of
period (000 omitted)................................ 29,866 35,868 39,594 48,057 23,184 3,835
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of operating expense to average net assets.... 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%
- ---------------------------------------------------------------------------------------------------------------------------
Subaccount AEX (Investing in shares of Equity Index
Portfolio)*
Accumulation unit value at beginning of period...... $1.58 $1.18 $1.19 $1.11 $1.06 $1.00
- ---------------------------------------------------------------------------------------------------------------------------
Accumulation unit value at end of period............ $1.89 $1.58 $1.18 $1.19 $1.11 $1.06
- ---------------------------------------------------------------------------------------------------------------------------
Number of accumulation units outstanding at end of
period (000 omitted)................................ 9,114 8,552 7,552 6,454 3,748 636
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of operating expense to average net assets.... 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%
- ---------------------------------------------------------------------------------------------------------------------------
Subaccount AGI (Investing in shares of Growth &
Income Portfolio)*
Accumulation unit value at beginning of period...... $1.42 $1.11 $1.16 $1.08 $1.01 $1.00
- ---------------------------------------------------------------------------------------------------------------------------
Accumulation unit value at end of period............ $1.68 $1.42 $1.11 $1.16 $1.08 $1.01
- ---------------------------------------------------------------------------------------------------------------------------
Number of accumulation units outstanding at end of
period (000 omitted)................................ 21,299 23,037 25,102 20,774 10,136 1,881
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of operating expense to average net assets.... 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%
- ---------------------------------------------------------------------------------------------------------------------------
Subaccount AAP (Investing in shares of Appreciation
Portfolio)*
Accumulation unit value at beginning of period...... $1.43 $1.12 $1.15 $1.09 $1.05 $1.00
- ---------------------------------------------------------------------------------------------------------------------------
Accumulation unit value at end of period............ $1.68 $1.43 $1.12 $1.15 $1.09 $1.05
- ---------------------------------------------------------------------------------------------------------------------------
Number of accumulation units outstanding at end of
period (000 omitted)................................ 53,860 63,015 68,920 65,534 48,842 10,929
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of operating expense to average net assets.... 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%
- ---------------------------------------------------------------------------------------------------------------------------
Subaccount ATR (Investing in shares of Total Return
Portfolio)**
Accumulation unit value at beginning of period...... $1.35 $1.09 $1.03 $1.00 N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
Accumulation unit value at end of period............ $1.66 $1.35 $1.09 $1.03 N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
Number of accumulation units outstanding at end of
period (000 omitted)................................ 20,195 20,934 18,918 2,486 N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of operating expense to average net assets.... 1.50% 1.50% 1.50% 1.50% N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
Subaccount AIE (Investing in shares of International
Equity Portfolio)**
Accumulation unit value at beginning of period...... $0.97 $0.91 $1.04 $1.00 -- --
- ---------------------------------------------------------------------------------------------------------------------------
Accumulation unit value at end of period............ $1.17 $0.97 $0.91 $1.04 -- --
- ---------------------------------------------------------------------------------------------------------------------------
Number of accumulation units outstanding at end of
period (000 omitted)................................ 27,135 28,243 29,353 5,528 -- --
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of operating expense to average net assets.... 1.50% 1.50% 1.50% 1.50% -- --
- ---------------------------------------------------------------------------------------------------------------------------
Subaccount AEG (Investing in shares of Emerging
Growth Portfolio)**
Accumulation unit value at beginning of period...... $1.35 $0.96 $1.04 $1.00 -- --
- ---------------------------------------------------------------------------------------------------------------------------
Accumulation unit value at end of period............ $1.56 $1.35 $0.96 $1.04 -- --
- ---------------------------------------------------------------------------------------------------------------------------
Number of accumulation units outstanding at end of
period (000 omitted)................................ 11,449 12,247 11,353 2,022 -- --
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of operating expense to average net assets.... 1.50% 1.50% 1.50% 1.50% -- --
- ---------------------------------------------------------------------------------------------------------------------------
<PAGE>
PAGE 14
Year ended Year ended Year ended Year ended Year ended Year ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1996 1995 1994 1993 1992 1991
Subaccount ACR (Investing in shares of Capital
Resource Fund)***
Accumulation value at beginning of period........... $1.25 $0.99 $1.00 -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Accumulation unit value at end of period............ $1.33 $1.25 $0.99 -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Number of accumulation units outstanding at end of
period (000 omitted)............................... 528 519 560 -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of expense to average net assets.............. 1.50% 1.50% 1.50% -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Subaccount ASI (Investing in shares of Special
Income Fund)***
Accumulation value at beginning of period........... $1.20 $0.99 $1.00 -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Accumulation unit value at end of period............ $1.26 $1.20 $0.99 -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Number of accumulation units outstanding at end of
period (000 omitted)............................... 742 722 351 -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of expense to average net assets.............. 1.50% 1.50% 1.50% -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Subaccount AMG (Investing in shares of Managed
Fund)***
Accumulation value at beginning of period........... $1.19 $0.97 $1.00 -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Accumulation unit value at end of period............ $1.37 $1.19 $0.97 -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Number of accumulation units outstanding at end of
period (000 omitted)............................... 785 716 298 -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of expense to average net assets.............. 1.50% 1.50% 1.50% -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
*Operations commenced on Oct. 16, 1991.
**Operations commenced on Dec. 2, 1993.
***Operations commenced on Oct. 3, 1994.
</TABLE>
Financial Statements
Complete financial statements of the Variable Account including audited
individual and combined statements of net assets as of Dec. 31, 1996, and the
related statements of operations for the year then ended, and the related
statements of changes in net assets for each of the two years in the period then
ended, are presented in the SAI dated May 1, 1997. The audited consolidated
financial statements of IDS Life Insurance Company including consolidated
balance sheets as of Dec. 31, 1996, and 1995, and related consolidated
statements of income, stockholder's equity and cash flows for each of the three
years in the period ended Dec. 31, 1996 also are presented in the SAI.
Performance Information
Yield
Performance information for the subaccounts of the Variable Account, including
the simple yield and effective yield for the Money Market subaccount, and yield
and total return for the remaining subaccounts, may appear from time to time in
advertisements or sales literature.
The simple yield of the Money Market subaccount is based on income received by a
hypothetical investment over a given seven-day period (less expenses accrued
during the period), and then "annualized" by assuming that the seven-day yield
would be received for 52 weeks and is stated in terms of an annual percentage
return on the investment. The effective yield of the Money Market subaccount is
calculated in a manner similar to that used to calculate simple yield. However,
when annualized, the income earned by the investment is assumed to be
reinvested. The effective yield will be slightly higher than the simple yield
due to the compounding effect of this assumed reinvestment.
<PAGE>
PAGE 15
Yield quotations for the remaining subaccounts are based on all investment
income per accumulation unit earned during a given 30-day period, less expenses
accrued during the period (net investment income). Yield quotations are computed
by dividing this net investment income by the value of an accumulation unit on
the last day of the period.
Average Annual Total Return
Average annual total return quotations will be expressed in terms of the average
annual compounded rate of return of a hypothetical investment in an Annuity over
a period of one, five and 10 years (or, if less, up to the life of the
subaccount). The average annual total return quotations will reflect the
deduction of all applicable charges including the contract administrative
charge, the Variable Account administrative charge and the mortality and expense
risk fee. Quotations will be made that reflect the deduction of the applicable
surrender charge (assuming a surrender at the end of the illustrated period).
Additional average annual total return quotations may be made that do not
reflect a surrender charge deduction (assuming no surrender at the end of the
illustrated period). A subaccount also may use aggregate total return figures
for various periods, representing the cumulative change in the value of an
investment in the subaccount for the specific period (again reflecting changes
in a subaccount's accumulation unit value). The calculation assumes reinvestment
of investment earnings and reflects the deduction of all applicable charges,
including the contract administrative charge, mortality and expense fee,
variable account administrative charge and surrender charge, assuming a
surrender at the end of the illustrated period. Optional aggregate total return
quotations may be made that do not reflect a surrender charge deduction
(assuming no surrender). Aggregate total returns may be shown by means of
schedules, charts or graphs.
Performance information reflects only the performance of a hypothetical
investment in the subaccount during the particular time period on which the
calculations are based. Performance information should be considered in light of
the investment objectives and policies, characteristics and quality of the
Portfolio or the Fund in which the subaccount invests, and the market conditions
during the given time period and is not intended to indicate future performance.
Advertised yields and total return figures for the subaccounts include all
charges attributable to the Annuity which have the effect of decreasing the
advertised performance of a subaccount. For this reason, performance information
for a subaccount should not be compared to that for mutual funds that sell their
shares directly to the public. See the SAI for a description of the methods used
to determine yield and total return information for the subaccounts.
About the Annuity
Purpose of the Annuity
The goal of the Annuity is to allow you, the owner, to build up funds for
retirement. You do this by investing in any one or more of thirteen subaccounts
of the Variable Account or in the Fixed Account. Each subaccount invests only in
shares of a single
<PAGE>
PAGE 16
Portfolio or Fund. You can direct payments to go to anyone, but you will still
be taxed on the income as owner. You can choose from a variety of retirement
payment plans. The Annuity is a variable annuity. A variable annuity differs
from a fixed annuity in that during the accumulation period, the contract value
may vary from day to day. You assume the risk of gain or loss according to the
performance of your investment.
There is no guarantee that your Annuity's value at the retirement date will
equal or exceed the total of your purchase payments.
Read this prospectus carefully to decide if a variable annuity will help meet
your retirement goals. You also must read the accompanying separate prospectuses
describing the Portfolios and the Funds to help you decide on the best
investments for your needs. Keep these prospectuses for future reference.
You may return your Annuity and receive a full refund of the contract value
(including charges) within 10 days after it is delivered to you. Return it to
your Smith Barney Financial Consultant, or mail it to IDS Life's home office at
the address on the cover page of this prospectus. No fees or charges will be
deducted, but you bear the investment risk from the time your purchase payment
is applied until your Financial Consultant or IDS Life receives the Annuity you
return. The contract value returned may be greater or less than your purchase
payment. However, if applicable state law so requires, or if you purchased the
annuity for your IRA, your purchase payment will be refunded in full.
Who Issues the Annuity
IDS Life issues the Annuity. IDS Life is a wholly owned subsidiary of American
Express Financial Corporation, which itself is a wholly owned subsidiary of the
American Express Company. American Express Company is a financial services
company principally engaged through subsidiaries (in addition to American
Express Financial Corporation) in travel related services, international banking
services, financial services and portfolio management advice.
IDS Life is a stock life insurance company organized in 1957 under the laws of
the State of Minnesota. Its home office is at IDS Tower 10, Minneapolis, MN
55440-0010. IDS Life conducts a conventional life insurance business in the
District of Columbia and all states except New York.
About the Variable Account and the Portfolios and Funds
Subaccounts Available for Investment
You may choose to invest your purchase payments in any or all of thirteen
subaccounts or in the Fixed Account. Each subaccount invests in shares of one of
the following Portfolios or Funds:
o The Money Market subaccount (AMO) invests in shares of the
Money Market Portfolio;
<PAGE>
PAGE 17
o The Intermediate High Grade subaccount (AIH) invests in shares
of the Intermediate High Grade Portfolio;
o The Diversified Strategic Income subaccount (ADS) invests in
shares of the Diversified Strategic Income Portfolio;
o The Equity Income subaccount (AEM) invests in shares of the
Equity Income Portfolio;
o The Equity Index subaccount (AEX) invests in shares of the
Equity Index Portfolio;
o The Growth & Income subaccount (AGI) invests in shares of the
Growth & Income Portfolio;
o The Appreciation subaccount (AAP) invests in shares of the
Appreciation Portfolio;
o The Total Return (ATR) subaccount invests in shares of the
Total Return Portfolio;
o The International Equity subaccount (AIE) invests in shares of
the International Equity Portfolio;
o The Emerging Growth subaccount (AEG) invests in the shares of
the Emerging Growth Portfolio;
o The Capital Resource subaccount (ACR) invests in shares of the
IDS Life Capital Resource Fund;
o The Special Income subaccount (ASI) invests in shares of the
IDS Life Special Income Fund; and
o The Managed subaccount (AMG) invests in shares of the IDS Life
Managed Fund.
Income, capital gains and capital losses of each subaccount are credited or
charged to that subaccount alone. No subaccount will be charged with liabilities
or expenses of any other subaccount or of IDS Life's general business. All
obligations arising under the Annuities are general obligations of IDS Life.
The Variable Account was established on May 9, 1991 under Minnesota law. On Nov.
3, 1993 the name of the Variable Account was changed from IDS Life Account SLB
to IDS Life Account SBS. The Variable Account is registered as a single unit
investment trust under the 1940 Act. The Variable Account meets the definition
of a separate account under the federal securities laws. This registration does
not involve any supervision by the SEC of IDS Life's management or investment
practices and policies.
The Internal Revenue Service (IRS) has issued final regulations relating to the
diversification requirements under section 817(h) of the Code. Each Portfolio
and Fund intends to comply with those diversification requirements. See the
accompanying prospectuses for further tax information regarding the Portfolios
and Funds.
<PAGE>
PAGE 18
The U.S. Treasury and the IRS have indicated they may provide additional
guidance concerning circumstances in which investment control by an Annuity
owner would cause that owner to be taxed on his or her share of the income of
the Variable Account. It is not clear, at this time, what the additional
guidance will be and the timing of further action is unknown. IDS Life reserves
the right to modify the Annuity, as necessary, to prevent the owner from being
currently taxed as the owner of the underlying assets of the Variable Account
for federal income tax purposes.
IDS Life intends to comply with all U.S. Treasury guidance to insure that the
Annuity continues to qualify as an annuity for federal income tax purposes.
Investment Goals and Policies of the Portfolios and Funds
The investment goals of the Portfolios and Funds are as follows:
The Money Market Portfolio's goal is maximum current income to the extent
consistent with the preservation of capital and the maintenance of liquidity. In
seeking to achieve its goal, the Portfolio will invest in short-term money
market instruments deemed to present minimal credit risks and considered to be
"Eligible Securities" as defined by the SEC.
The Intermediate High Grade Portfolio's goal is to provide as high a level of
current income as is consistent with the protection of capital. In seeking to
achieve its goal, the Portfolio will invest, under normal market conditions,
substantially all, but not less than 65 percent, of its assets in U.S.
government securities and in high-grade corporate bonds of U.S. issuers (i.e.,
bonds rated within the two highest rating categories by Moody's Investors
Service, Inc. or Standard & Poor's Ratings Group or, if not rated, bonds
believed to be of comparable quality).
The Diversified Strategic Income Portfolio's goal is high current income. In
seeking to achieve its goal, the Portfolio will allocate and reallocate its
assets primarily among three types of fixed-income securities -- U.S. securities
and mortgage-related securities, foreign government securities and corporate
securities rated below investment grade (commonly known as junk bonds). See the
section of the Smith Barney Series Fund's prospectus entitled "Medium-, Lower-
and Unrated Securities" for further information on these bonds.
The Equity Income Portfolio's primary goal is current income. Long-term capital
appreciation is a secondary goal. In seeking to achieve its goals, the Portfolio
will invest principally in dividend-paying common stocks of companies whose
prospects for dividend growth and capital appreciation are considered favorable,
concentrating at least 25 percent of its assets in the utility industry.
The Equity Index Portfolio's goal is to provide investment results that, before
deduction of operating expenses, match the price and yield performance of U.S.
publicly traded common stocks, as measured by the S&P 500. Once the Portfolio
reaches a sufficient
<PAGE>
PAGE 19
asset size, it will seek to achieve its goal by owning all 500 stocks in the S&P
500 in proportion to their actual market capitalization weightings.
The Growth & Income Portfolio's goal is income and long-term capital growth. In
seeking to achieve its goal, the Portfolio will invest in income-producing
equity securities, including dividend-paying common stocks, securities that are
convertible into common stocks and warrants meeting certain specified investment
criteria.
The Appreciation Portfolio's goal is long-term appreciation of capital. In
seeking to achieve its goal, the Portfolio will invest primarily in equity and
equity-related securities that are believed to afford attractive opportunities
for appreciation.
The Total Return Portfolio's goal is to provide shareholders with total return,
consisting of long-term capital appreciation and income. In seeking to achieve
its goal, the Portfolio will primarily invest in a diversified portfolio of
dividend-paying common stocks.
The International Equity Portfolio's goal is to provide a total return on its
assets from growth of capital and income. In seeking to achieve its goal, under
normal market conditions the Portfolio will invest at least 65 percent of its
assets in a diversified portfolio of equity securities of established non-United
States issuers.
The Emerging Growth Portfolio's goal is to provide capital appreciation. In
seeking to achieve its goal, the Portfolio will invest at least 65% of its total
assets in common stocks of small- and medium-sized companies, both domestic and
foreign, in the early stages of their life cycle, that its investment adviser
believes have the potential to become major enterprises.
The IDS Life Capital Resource Fund's goal is capital appreciation. In seeking to
achieve its goal, the Fund will invest primarily in U.S. common stocks and other
securities convertible into common stock, diversified over many different
companies in a variety of industries.
The IDS Life Special Income Fund's goal is to provide a high level of current
income while conserving the value of the investment for the longest period of
time. In seeking to achieve its goal, the Fund will invest primarily in
high-quality, lower-risk corporate bonds issued by many different companies in a
variety of industries, and in government bonds.
The IDS Life Managed Fund's goal is maximum total investment return. In seeking
to achieve its goal, the Fund will invest primarily in U.S. common stocks,
securities convertible into common stock, warrants, fixed-income securities
(primarily high-quality corporate bonds) and money market instruments. The Fund
invests in many different companies in a variety of industries.
<PAGE>
PAGE 20
There is no guarantee that the Portfolios and Funds will meet their investment
goals. Whether they achieve their goals depends on a number of factors including
their managements' ability to manage the risks of changing economic conditions.
The organizations that perform services for the Portfolios and Funds are:
Name Service
Van Kampen American Capital Investment Adviser to the
Asset Management, Inc. Emerging Growth Portfolio
American Express Financial Investment Advisor to IDS Life
Corporation Capital Resource, IDS Life
Special Income and IDS Life
Managed Funds
IDS Life Insurance Company Investment Manager of IDS Life
Capital Resource, IDS Life
Special Income and IDS Life
Managed Funds
Smith Barney Global Capital Sub-Investment Adviser to the
Management, Inc. Diversified Strategic Income
Portfolio
Smith Barney Mutual Funds Investment Adviser to the Money
Management, Inc. (SBMFM) Market Portfolio, the
Intermediate High Grade Portfolio, the
Diversified Strategic Income
Portfolio, the Equity Income
Portfolio, the Growth & Income
Portfolio, the Appreciation Portfolio,
the Total Return Portfolio and the
International Equity Portfolio and
Administrator to each Portfolio
Travelers Investment Management Investment Adviser to the Equity
Company Index Portfolio
Davis Skaggs Investment Investment Adviser to the
Management, a division of Total Return Portfolio
SBFFM
PNC Bank, National Association Custodian to all Portfolios
except International Equity
Portfolio and Diversified
Strategic Income Portfolio
The Chase Manahattan Bank Custodian to International
Equity Portfolio and Diversified
Strategic Income Portfolio
American Express Trust Company Custodian to the Funds
<PAGE>
PAGE 21
Morgan Stanley Trust Company Subcustodian to the Funds
First Data Investor Services Transfer and Dividend Paying
Group, Inc. Agent
Smith Barney Inc. Distributor
Detailed information about each Portfolio and Fund, including the risks related
to investing in them is in the separate prospectuses. There are deductions from,
and fees and expenses paid out of, the assets of the Portfolios and Funds that
are described in these prospectuses. You should read the Portfolio and Fund
prospectuses and consider carefully, and on a continuing basis, which Portfolio
or Fund or combination of them is best suited to your long-term investment
needs. There is no assurance that the investment objectives of the Portfolios or
Funds will be attained nor is there any guarantee that the contract value will
equal or exceed the total purchase payments made. Some Portfolios and Funds may
involve more risk than others--please monitor your investments accordingly.
Using the Annuity
Buying the Annuity
Your Smith Barney Financial Consultant will help you prepare your application,
which will be sent with your purchase payment to IDS Life's home office in
Minneapolis. If your application is complete, IDS Life will apply your payment
no later than two business days after it is received at IDS Life's home office.
If IDS Life cannot accept your application within five business days, it will be
declined and your payment will be returned to you. When IDS Life accepts your
application, an Annuity contract will be sent to you. Please remember that
investment performance, expenses and deduction of certain charges affect
accumulation unit value.
When you apply for the Annuity, you can select the Fixed Account and/or the
subaccount(s) in which you wish to invest and the amounts to be allocated to
each. You also select how you wish to make purchase payments. Your purchase
payments will be allocated to the Fixed Account and/or the subaccount(s)
according to your election as of the next close of business after your
application is accepted or your payment is received and accepted at IDS Life's
home office in Minneapolis, whichever is later.
IDS Life reserves the right to impose a maximum issue age for nonqualified
Annuities of age 75 and a maximum issue age for qualified Annuities of age 65.
Ownership -- As owner, you have all rights and may receive all benefits under
the Annuity. The Annuity can be owned in joint tenancy only in spousal
situations.
Retirement Date -- A retirement date is established when you apply for the
Annuity. If you need to change it, send written instructions to IDS Life's home
office at least 30 days before you wish the change to become effective.
<PAGE>
PAGE 22
For nonqualified Annuities, the retirement date cannot be later than the
annuitant's 85th birthday or 10 years after issue, whichever is later.
If you are buying this Annuity to fund a Section 401(k) plan, custodial or
trusteed plan, IRA, TSA or Section 457 plan, to avoid penalty taxes retirement
payments generally must be:
o on or after the annuitant turns 59 1/2; and
o for IRAs, by April 1 of the year following the calendar year
when the annuitant reaches age 70 1/2; or
o for all other qualified Annuities, by April 1 of the year
which the annuitant reaches age 70 1/2 or the calendar year when the
annuitant retires.
However, in no case can the retirement date be later than the annuitant's 85th
birthday or 10 years after issue, whichever is later.
Naming a Beneficiary -- You may name a beneficiary under your Annuity. If the
annuitant dies before the retirement date and there is no beneficiary, then you
are the beneficiary. If you die before the retirement date and there is no
beneficiary, then your estate will be the beneficiary.
IRAs and Other Qualified Plans
The Annuity may be bought for a retirement plan qualified under Sections 401,
403, 408 or 457 of the Code. These plans include:
o IRAs and Simplified Employee Pension plans (SEPs);
o Custodial and trusteed pension and profit sharing plans;
o Section 401(k) plans;
o TSAs; and
o Section 457 plans.
Your purchase of the Annuity for a qualified plan will be subject to applicable
federal law and any rules of the plan itself.
Purchase Payments
Amount of Purchase Payments -- You must make an initial lump sum purchase
payment to your Annuity and you may make additional purchase payments to your
Annuity. The initial purchase payment must be at least $5,000 for nonqualified
Annuities and at least $500 for qualified Annuities. After making the initial
purchase payment, you may make additional payments of at least $500 for
nonqualified Annuities and at least $50 for qualified Annuities. In Washington,
additional purchase payments for a nonqualified contract may be made until age
80 and additional payments for a tax-qualified contract may be made until age
65. Additional
<PAGE>
PAGE 23
purchase payments can be mailed directly to IDS Life. IDS Life reserves the
right to limit total purchase payments to your Annuity to $1,000,000 and to
change the limits on purchase payment amounts.
Qualified Plans -- If you invest in the Annuity for a qualified plan, that
plan's limits on annual contributions also will apply.
Allocating your Purchase Payments -- Your purchase payment(s) will be allocated
to the Fixed Account and/or the subaccount(s) you have selected at IDS Life's
next close of business, currently the same as the close of the New York Stock
Exchange (NYSE), after IDS Life accepts your application or receives and accepts
your payment at its home office in Minneapolis, whichever is later. For
nonqualified Annuities, the minimum value of your investment in a subaccount or
in the Fixed Account is $500. This $500 minimum does not apply to qualified
Annuities.
Transferring Your Money Between Accounts
Prior to retirement, you may make unlimited transfers of your money from one
subaccount to another by making a written request. There are some restrictions
on transferring to or from the Fixed Account as discussed in the section called
"Information on the Fixed Account of the Annuity." IDS Life will make the
transfer at its next close of business. There is no charge for transfers.
However, unless the transfer is an automated transfer described below, IDS Life
does require that your transfer be for:
o at least $500; or
o your entire balance in that subaccount, if less.
Automated Transfers -- You may establish automated transfers of contract values
between the subaccounts and/or the Fixed Account through a one-time written
request or other method acceptable to IDS Life. The minimum automated transfer
amount is $100. Such transfers may be made on a monthly, quarterly, semi-annual
or annual basis. You may start or stop this service at any time, but you must
give IDS Life 30 days' notice to change any automated transfer instructions that
are currently in place. Automated transfers are subject to all of the other
Annuity provisions and terms, including provisions relating to the transfer of
money between subaccounts.
For information on restrictions on automated transfers of contract values
between the Fixed Account and the subaccounts see the section called
"Information on the Fixed Account of the Annuity." Before transferring any part
of your contract value, you should consider the risks involved in switching
investments. IDS Life may, in its sole discretion, suspend or modify transfer
privileges at any time.
Telephone Transfers -- You also may request a transfer by telephone. IDS Life
has the authority to honor any telephone requests believed to be authentic and
will use reasonable procedures to confirm that they are. This includes asking
identifying questions and tape recording calls. As long as the
<PAGE>
PAGE 24
procedures are followed, neither IDS Life nor its affiliates will be liable for
any loss resulting from fraudulent requests. If IDS Life receives your transfer
request before its close of business (normally 3 p.m. Central time), it will be
processed that day. Calls received after its close of business will be processed
the next business day. At times when the volume of telephone requests is
unusually high, IDS Life will take special measures to seek to ensure that your
call is answered as promptly as possible. A telephone transfer request will not
be allowed within 30 days of a phoned-in address change.
You may request that telephone transfers not be authorized from your account by
writing IDS Life.
Contract Charges and Charges Against the Variable Account
Contract Administrative Charge -- IDS Life charges your Annuity an
administrative fee of $30 each year. This charge is for establishing and
maintaining your records. IDS Life deducts it from the contract value on each
contract anniversary. If you fully surrender your Annuity, IDS Life will deduct
a reduced contract administrative charge that is prorated based on the number of
days from your last contract anniversary to the date of full surrender. The
contract administrative charge cannot be increased and does not apply after a
retirement payment plan begins.
Variable Account Administrative Charge -- This charge is deducted daily from the
subaccounts of the Variable Account. The charge equals an effective annual rate
of 0.25 percent of the daily net asset value of the subaccounts and is paid to
IDS Life. It covers certain administrative and operating expenses of the
subaccounts incurred by IDS Life such as accounting, legal and data processing
fees, and expenses involved in the preparation and distribution of reports and
prospectuses. The Variable Account administrative charge cannot be increased and
does not apply after a retirement payment plan begins.
Mortality and Expense Risk Fee -- This charge is deducted daily from the
subaccounts of the Variable Account. The charge equals an effective annual rate
of 1.25 percent of the daily net asset value of the subaccounts and is paid to
IDS Life. It covers IDS Life's annuity mortality risk and expense risk. IDS Life
estimates that approximately two-thirds of this fee is for assumption of the
mortality risk, and one-third is for assumption of the expense risk.
The mortality risk arises from IDS Life's guarantee to pay a death benefit and
guarantee to make retirement payments according to the terms of the Annuity no
matter how long a specific annuitant lives and no matter how long the entire
group of IDS Life annuitants live. If, as a group, IDS Life annuitants outlive
the life expectancy that has been assumed in the actuarial tables, IDS Life must
take money from its general assets to meet its obligations. If, as a group, IDS
Life annuitants do not live as long as expected, IDS Life could profit from the
mortality risk fee. The expense risk is the risk that the contract
administrative charge
<PAGE>
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and Variable Account administrative charge, which cannot be increased, will not
cover IDS Life's expenses. Any deficit would have to be made up from IDS Life's
general assets.
Any profit realized by IDS Life from the mortality and expense risk fee would be
available to it for any proper corporate purpose, including, among other things,
payment of distribution (selling) expenses. IDS Life does not expect that the
surrender charge, which is discussed in the following paragraphs, will cover
sales and distribution expenses incurred by IDS Life in connection with the
Annuity.
Surrender Charges -- If you surrender part or all of your Annuity, you may be
subject to a surrender charge. A surrender charge applies if all or part of the
contract value is surrendered during the first six payment years following a
purchase payment. The surrender charge starts at 6 percent of a purchase payment
in the first payment year and is reduced by 1 percent each payment year
thereafter. This means that there is no surrender charge after six payment
years. In addition, there is no surrender charge when contract values are
applied to a retirement payment plan or for a death benefit. The surrender
charge is used to help defray expenses incurred in the sale of the Annuity
including commissions and other promotional or distribution expenses associated
with the printing and distribution of prospectuses and sales material.
After the first contract year, you may surrender up to 10 percent of the
contract value on your prior contract anniversary in one or more surrenders each
contract year without incurring a surrender charge. The 10 percent withdrawal
provision is subject to other Annuity provisions and terms including those on
partial surrenders.
In addition, there is no surrender charge on contract earnings, which equal:
1) the contract value; minus
2) the sum of all purchase payments received that have not been
previously surrendered; minus
3) the amount of the 10 percent free withdrawal, if applicable.
For purposes of determining the amount of any surrender charge, surrenders will
be deemed to be taken first from any applicable 10 percent free withdrawal
amount; next from purchase payments (on a first in-first out basis); and finally
from contract earnings (in excess of any 10 percent free withdrawal amount).
Surrender Charge Calculation -- The following example illustrates how the
surrender charge is calculated:
<TABLE>
<CAPTION>
Assumptions:
- ----------------------------------------------------------------------------------------------
<S> <C>
Initial purchase payment at Annuity issue date of May 1, 1997......................... $10,000
Subsequent purchase payment on July 1, 2000 .......................................... 20,000
Account value on contract anniversary, April 29, 2001................................. 40,000
Account value on October 12, 2001 .................................................... 42,000
- ----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PAGE 26
Full Surrender on October 12, 2001:
<TABLE>
<CAPTION>
Basis of Rate of Dollar Amount
Charge Surrender Charge of Charge Explanation of Charge
<S> <C> <C> <C>
$ 4,000 None $ 0 10% of prior contract anniversary contract value surrendered free
$10,000 2% $ 200 Payment made in contract year 1; surrendered at payment year 5 rate
$20,000 5% $1,000 Payment made in contract year 4; surrendered at payment year 2 rate
$ 8,000 None $0 No charge on contract earnings
- -------------------------------------------------------------------------------------------------------------------------------
Total Surrender Charge: $1,200
Partial Surrender of $15,000 on October 12, 2001:
Basis of Rate of Dollar Amount of
Charge Surrender Charge Charge Explanation of Charge
$ 4,000 None $ 0 10% of prior contract anniversary contract value surrendered free
$10,000 2% $200 Payment made in contract year 1; surrendered at payment year 5 rate
$ 1,000 5% $ 50 Payment made in contract year 4; surrendered at payment year 2 rate
- -------------------------------------------------------------------------------------------------------------------------------
Total Surrender Charge: $250
</TABLE>
Surrender Charge on Partial Surrender -- The surrender charge is deducted from
the contract value remaining after the owner is paid the partial surrender
amount requested. For example, if the owner requested a partial surrender net
check amount of $1,000 and the surrender charge rate that applied to that amount
were 5 percent, the owner would receive the $1,000 requested and the surrender
charge amount would be $52.63 for a total withdrawal of $1,052.63.
Possible Reduction in Charges -- In some cases, IDS Life may expect to incur
lower sales and administrative expenses or perform fewer services. In those
cases, IDS Life may, in its discretion, reduce or eliminate certain
administrative and surrender charges. However, IDS Life expects this to occur
infrequently, if at all.
Premium Taxes -- Certain state and local governments impose premium taxes (up to
3.5%). These taxes are dependent upon the state of residence or the state in
which the Annuity was sold and are deducted as applicable. The deduction for
premium taxes usually is not made until you surrender your Annuity or retirement
payments begin.
Surrendering Your Annuity
As owner, you may surrender all or part of your Annuity's value at any time
before the retirement date by making a written request. You may have to pay
surrender charges as previously explained. Also, if you fully surrender your
Annuity, a prorated portion of the contract administrative charge based on the
number of days from your last contract anniversary to the date of full surrender
will be deducted at the time of surrender. No surrenders may be made after the
retirement date.
You may have to pay a 10 percent IRS penalty tax for surrenders made before you
reach age 59-1/2 and 20 percent income tax withholding may apply to surrenders
from certain qualified Annuities. In addition, certain restrictions may apply to
participants in TSA plans. See the section called "Tax-Sheltered Annuities."
Tax-Sheltered Annuities -- The Code imposes certain restrictions on an owner's
right to receive early distributions attributable to salary reduction
contributions from an annuity purchased for a retirement plan qualified under
Section 403(b) as a TSA.
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PAGE 27
Distributions attributable to salary reduction contributions made after Dec. 31,
1988, plus the earnings on them or to transfers or rollovers of such amounts
from other contracts, may be made from the TSA only if the owner has attained
age 59-1/2, has become disabled as defined in the Code, has separated from the
service of the employer that purchased the annuity or has died. Additionally, if
the owner should encounter a financial hardship (within the meaning of the
Code), he or she may receive a distribution of all contract values attributable
to salary reduction contributions made after Dec. 31, 1988, but not of the
earnings on them.
These restrictions do not apply to the Dec. 31, 1988 value, or to transfers or
exchanges of contract values within the annuity or to another registered
variable annuity contract or investment vehicle available through the employer.
Even though a distribution may be permitted under these rules (e.g., for
hardship or after separation from service), it may nonetheless be subject to a
10 percent IRS penalty tax (in addition to income tax) as a premature
distribution and to 20 percent income tax withholding. See the section called
"Federal Tax Information."
In addition, for certain types of contributions under a Section 403(b) annuity
to be excluded from taxable income, the employer must comply with certain
nondiscrimination requirements. You should consult your employer to determine
whether the nondiscrimination rules apply to you.
Systematic Withdrawals -- IDS Life allows you to establish systematic
withdrawals of contract values through a one-time written request or other
method acceptable to IDS Life. Amounts of up to 10 percent of the contract value
at the beginning of the contract year may be withdrawn. The minimum systematic
withdrawal amount from the contract is $100, and such withdrawals can be made on
a monthly, quarterly, semiannual or annual basis. You may designate systematic
withdrawals be made from the Annuity in one of the following ways:
o withdrawing a specific total dollar amount prorated from all subaccounts
and/or the Fixed Account in which you have a balance (if no other choice
is made, amounts will be withdrawn under this method);
o withdrawing a specific total dollar amount and also specifying which
percentage of that total amount will be withdrawn from all subaccounts
and/or the Fixed Account in which you have a balance; or
o withdrawing only the interest credited to the Fixed Account
over the systematic withdrawal period.
The minimum contract value required to begin systematic withdrawals is $5,000.
You may start or stop this service at any time, but must give IDS Life 30 days'
notice to change any systematic withdrawal instructions that are currently in
place. IDS Life will not deduct surrender charges for first-year systematic
withdrawals of amounts up to 10 percent of the initial purchase payment.
<PAGE>
PAGE 28
Systematic withdrawals may result in income taxes, withholding taxes and penalty
taxes being applied to all or a portion of the amount withdrawn. You should
consult your tax advisor regarding the tax consequences of systematic
withdrawals.
Partial Surrenders -- The minimum amount you may surrender is $500. You cannot
make a partial surrender if it would reduce the value of your investment in a
subaccount or in the Fixed Account to less than $500 unless the value of your
investment in a subaccount or in the Fixed Account is fully withdrawn.
If you have a balance in more than one subaccount and/or in the Fixed Account
and request a partial surrender, IDS Life will withdraw money from all the
subaccounts and/or the Fixed Account in the same proportion as your value in
each subaccount or in the Fixed Account bears to your total contract value,
unless you request otherwise.
A partial surrender request not exceeding $40,000 may be made by telephone. IDS
Life has the authority to honor any telephone requests believed to be authentic
and will use reasonable procedures to confirm that they are. This includes
asking identifying questions and tape recording calls. As long as the procedures
are followed, neither IDS Life nor its affiliates will be liable for any loss
resulting from fraudulent requests. At times when the volume of telephone
requests is unusually high, IDS Life will take special measures to ensure that
your call is answered as promptly as possible. A telephone surrender request
will not be allowed within 30 days of a phoned-in address change.
You may request that telephone withdrawals not be authorized from your account
by writing IDS Life.
Total Surrenders -- IDS Life will compute the value of your Annuity at the close
of business, currently the same as the close of the NYSE, after receipt of your
request for a complete surrender. IDS Life may ask you to return the Annuity.
Receiving Payment -- Payment will be mailed within seven days after IDS Life
receives your request. However, IDS Life may postpone payment if:
o the surrender value includes a purchase payment check that has
not cleared;
o the NYSE is closed, except for normal holiday and weekend
closings;
o trading on the NYSE is restricted according to the rules of
the SEC;
o an emergency, as defined by the rules of the SEC, makes it
impracticable for the Portfolios and Funds to sell securities
or to value the Portfolios' or Funds' net assets; or
o the SEC permits a delay in payment for the protection of
owners.
<PAGE>
PAGE 29
NOTE: You will be charged a fee if you request express mail delivery.
Payment in Case of Death before Retirement Payments Begin
Prior to the retirement date, if you or the annuitant die before the initial
fifth contract anniversary, IDS Life will pay the beneficiary the greater of:
1) the contract value; or
2) the amount of purchase payments (minus any surrenders).
On or after the initial fifth contract anniversary, and each subsequent fifth
contract anniversary, IDS Life will pay the beneficiary the greater of:
1) the contract value; or
2) a minimum guaranteed death benefit which equals:
a) the death benefit calculated as of the previous fifth
contract anniversary; plus
b) any purchase payments made since the previous fifth contract
anniversary; minus
c) any surrenders since the previous fifth contract anniversary.
If Your Spouse is Sole Beneficiary or Co-owner -- If you, as owner or co-owner,
die before the retirement date and your spouse is the only beneficiary or
co-owner of the Annuity, your spouse may keep the Annuity as owner. To do this,
within 60 days after IDS Life receives proof of death, it must receive written
instructions from your spouse to keep the Annuity in force.
Section 401(k) Plans, TSAs, Section 457 Plans, Custodial and Trusteed Plans, and
IRAs -- If you buy the Annuity under a Section 401(k) plan, Section 457 plan,
custodial or trusteed plan or as an IRA or TSA, and you die before reaching age
70-1/2 or such other date as provided in the Code, and your spouse is the only
beneficiary, your spouse may keep the Annuity in force until the date on which
you would have reached age 70-1/2 or any other date permitted by the Code. To do
this, within 60 days after IDS Life receives proof of death, it must receive
written instructions from your spouse to keep the Annuity in force.
Paying the Beneficiary -- Unless you have given IDS Life other written
instructions, IDS Life will pay the beneficiary in a single lump sum payment.
The beneficiary may elect to receive this payment at any time within 5 years
after the date of death. Payments made from certain qualified Annuities to a
surviving spouse instead of being directly rolled over to an IRA may be subject
to 20 percent income tax withholding. See the section called "Federal Tax
Information." IDS Life may make payments under any retirement payment plan
available under this Annuity if:
<PAGE>
PAGE 30
o the beneficiary asks IDS Life in writing within 60 days after IDS Life
receives proof of death;
o payments begin no later than one year after death, or other date as
permitted by the Code; and
o the payment period does not extend beyond the beneficiary's life or life
expectancy in accordance with applicable provisions of the Code.
When paying the contract value to the beneficiary, IDS Life will determine the
Annuity's value at the next close of the NYSE after IDS Life's death claim
requirements are fulfilled. Interest, if any, is paid at a rate no less than
that required by applicable law. IDS Life will mail payment to the beneficiary
within seven days after all death claim requirements are fulfilled.
Settlement Value of Your Annuity
The amount available on the retirement date to provide payments under a
retirement payment plan is the current value of your investment, called the
contract value. Because Portfolio or Fund investments (other than those in the
Money Market Portfolio) fluctuate in value each day, there can be no guarantee
that the contract value will exceed, or even equal, the amount of your purchase
payments. You will receive quarterly statements showing your contract value and
any other information required by applicable law at least annually.
On your retirement date, the contract value is applied to IDS Life's current
fixed annuity settlement rates table, which will be at least as favorable as the
fixed annuity settlement rates table contained in the Annuity. IDS Life then
calculates lifetime annuity payments according to the retirement payment plan
you choose.
A unisex table of settlement rates will apply, except when the Annuity is being
used to fund an IRA or a nonqualified plan. The laws of Montana and the annuity
contract as approved by Massachusetts require the use of unisex settlement
rates.
Payout Options at Retirement
As the owner of the Annuity, you have the right to decide how retirement
payments are to be made. You may select one of the retirement payment plans
outlined below, or you and IDS Life may mutually agree on other payment
arrangements. Annuity payments will be made on a fixed basis. A fixed annuity is
one with payments that are guaranteed by IDS Life as to dollar amount. Fixed
annuity payments after the first payment will never be less than the first
payment.
Retirement Payment Plans -- You may choose any one of these payment plans by
giving IDS Life written instructions at least 30 days before the retirement
date:
<PAGE>
PAGE 31
o Plan A - Life Annuity - No Refund -- Monthly payments are made until the
annuitant's death. Payments end with the last monthly payment before the
annuitant's death; no further payments will be made. You should understand
that if the annuitant dies after only the first monthly payment, no
further payments will be made.
o Plan B - Life Annuity with 5, 10 or 15 Years Certain -- Monthly payments
are made until the annuitant's death. However, payments are guaranteed for
5, 10 or 15 years. If the annuitant dies before all guaranteed payments
have been made, IDS Life will continue making those guaranteed payments to
you, if living; if not, to your beneficiary; or, if no beneficiary is
named, to your estate.
o Plan C - Life Annuity - Installment Refund -- Monthly payments are made
until the annuitant's death. However, payments are guaranteed to continue
for at least the number of months determined by dividing the contract value
at the time of retirement by the amount of the monthly payment. If the
annuitant dies before all guaranteed payments have been made, IDS Life will
continue making those guaranteed payments to you, if living; if not, to
your beneficiary; or, if no beneficiary is named, to your estate.
o Plan D - Joint and Last Survivor Life Annuity - No Refund -- Monthly
payments are made while both the annuitant and a joint annuitant are
living. If either annuitant dies, monthly payments continue at the full
amount until the death of the surviving annuitant. Payments end with the
death of the second annuitant, and no further payments will be made. You
should understand that if both the annuitant and the joint annuitant die
after only the first monthly payment, no further payments will be made.
o Plan E - Period Certain Annuity -- Monthly payments are made for a period
of years. The period of years may be no less than 10 years and no more than
30 years. Even if the annuitant lives beyond the period of years selected,
no further payments will be made. However, if the annuitant dies before the
end of the period selected, IDS Life will continue making monthly payments
to you, if living; if not, to your beneficiary; or, if no beneficiary is
named, to your estate.
Restrictions for Some Qualified Plans -- If your annuity was purchased in
connection with a Section 401(k) plan, custodial or trusteed plan, Section 457
plan, or as an IRA or TSA, you must select a payment plan (in accordance with
the applicable provisions of the Code) that provides for payments:
o over the life of the annuitant;
o over the joint lives of the annuitant and beneficiary;
o for a period not exceeding the life expectancy of the
annuitant; or
<PAGE>
PAGE 32
o for a period not exceeding the joint life expectancies of the annuitant and
beneficiary.
If IDS Life Does Not Receive Instructions -- You must give IDS Life written
instructions for paying retirement benefits at least 30 days before the
retirement date. If you do not, IDS Life will make payments under Plan B, with
120 monthly payments guaranteed.
If Monthly Payments Would be Less than $50 -- IDS Life will calculate your
contract value at the retirement date. If the calculations show that monthly
payments would be less than $50, IDS Life reserves the right to change the
frequency of the retirement payments or to pay the contract value in one lump
sum.
Death After Retirement Payments Begin -- If you or the annuitant die after
retirement payments begin, any amount payable to the beneficiary will be made as
provided in the retirement payment plan in effect.
Changing Ownership
You may change ownership of your Annuity at any time by filing a change of
ownership on a form approved by and sent to our IDS Life home office. No change
of ownership will be binding upon IDS Life until the change is received and
recorded. IDS Life takes no responsibility for the validity of the change.
If you have a qualified plan, the Annuity may not be sold, assigned,
transferred, discounted or pledged as collateral for a loan or as security for
the performance of an obligation or for any other purpose to any person other
than IDS Life. However, if the owner is a trust or custodian, or an employer
acting in a similar capacity, ownership of an Annuity may be transferred to the
annuitant.
The value of any part of a nonqualified Annuity assigned or pledged is taxed
like a cash withdrawal to the extent allocable to investment in the Annuity
after Aug. 13, 1982.
Transfer of a nonqualified Annuity to another person without adequate
consideration is considered a gift and the transfer may be considered a
surrender of the Annuity for federal income tax purposes. The income on the
Annuity will be taxed to the transferor (original owner), who may be subject to
a 10 percent IRS penalty tax for early withdrawal. The transferee's (new
owner's) investment in the Annuity will be the value of the Annuity at the time
of the transfer. Consult with your tax advisor before taking any action.
Federal Tax Information
Under current law, there is no liability for federal income tax on any increase
in the Annuity's value until payments are made, except as discussed above in
"Changing Ownership." However, since federal tax consequences cannot always be
anticipated, you should consult a tax advisor if you have any questions about
the taxation of your Annuity.
<PAGE>
PAGE 33
You are not taxed on your investment in the Annuity. Your investment in the
Annuity generally includes purchase payments made into the Annuity with
after-tax dollars. If the investment in the Annuity was made by you or on your
behalf with pre-tax dollars as part of a qualified retirement plan, such amounts
are not considered to be part of your investment in the Annuity and will be
taxed when paid to you.
If you surrender part or all of your Annuity before the date on which retirement
payments begin, you will be taxed on the payments that you receive to the extent
that the value of your Annuity exceeds your investment in the Annuity and you
may have to pay an IRS penalty tax for early withdrawal.
If payments begin under a nonqualified Annuity, a portion of each payment will
be subject to tax and a portion of each payment will be considered a return of
part of your investment in the Annuity and will not be taxed. All amounts
received after your investment in the Annuity is recovered will be subject to
tax. If payments begin under a qualified Annuity, for example an IRA, TSA, or
Section 401(k) plan, all of the payments generally will be subject to taxation
except to the extent that the contributions were made with after-tax dollars.
Unlike life insurance proceeds, the death benefit under your Annuity is not tax
exempt. The gain, if any, is taxable as ordinary income to the beneficiary in
the year(s) he or she receives the payments.
Federal tax law requires that all nonqualified deferred annuities issued by the
same company to the same owner during a calendar year be treated as a single,
unified contract. The amount of income included and taxed in a distribution (or
a transaction deemed a distribution under federal tax law) taken from any one of
such annuities is determined by aggregating all such annuities.
The income earned on an annuity held by such entities as corporations,
partnerships or trusts generally will be treated as ordinary income received
during that year.
You may have to pay a 10 percent IRS penalty tax on any amount includable in
your ordinary income. This penalty will not apply to any amount received:
o after you reach age 59-1/2;
o because of your death;
o because you become disabled (as defined in the Code);
o if the distribution is part of a series of substantially equal periodic
payments made at least annually, over your life or life expectancy (or
joint lives or life expectancies of you and your designated beneficiary);
or
o if it is allocable to an investment before Aug. 14, 1982 (except for
Annuities in qualified plans).
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PAGE 34
These are the major exceptions to the 10 percent IRS penalty tax. Additional
exceptions may apply depending upon whether your Annuity is qualified. For
qualified Annuities, other penalties apply if you surrender an Annuity bought
under your plan before the plan specifies that payments can be made under the
plan.
In general, if you receive all or part of the Contract value from a qualified
Annuity (except an IRA), mandatory 20 percent income tax withholding will be
imposed at the time the payment is made. In addition, federal income tax and the
10 percent IRS penalty tax for early withdrawals may apply to amounts properly
includable in income. This mandatory 20 percent income tax withholding will not
be imposed if:
o instead of receiving the payment, you elect to have the payment rolled over
directly to an IRA or another eligible plan;
o the payment is one of a series of substantially equal periodic payments,
made at least annually, over your life or life expectancy (or joint lives
or life expectancies of you and your designated beneficiary) or made over
a period of 10 years or more; or
o the payment is a minimum distribution required under the Code.
These are the major exceptions to the mandatory 20 percent income tax
withholding. Payments made to a surviving spouse instead of being directly
rolled over to an IRA may be subject to 20 percent income tax withholding. For
taxable distributions that are not subject to the mandatory 20 percent
withholding, federal income tax will be withheld from the taxable part of your
distribution unless you elect otherwise. State withholding also may be imposed
on taxable distributions.
You will receive a 1099 tax information form for any year in which you receive a
taxable distribution from your Annuity according to our records.
Our discussion of federal tax laws is based on our understanding of these laws
as they are currently interpreted. Either federal tax laws or current
interpretations of them may change. You are urged to consult your tax advisor
regarding your specific circumstances.
Additional Information about the Annuity
Accumulation Units
When your purchase payments are allocated to the subaccount(s) you have chosen,
they will be converted into accumulation units. The number of accumulation units
to be credited to your Annuity is determined by dividing the purchase payment by
the accumulation unit value.
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PAGE 35
Accumulation Unit Value -- The accumulation unit value for each subaccount was
originally set at $1. IDS Life determines the current accumulation unit value by
taking the last accumulation unit value for that subaccount and multiplying it
by the current net investment factor.
Net Investment Factor -- The net investment factor is determined by:
o adding the Portfolio's or Fund's net asset value per share and the per
share amount of any current dividend or capital gain distribution made by
the Portfolio or Fund and held in the subaccount;
o dividing that sum by the last net asset value per share; and
o subtracting the percentage factor representing the mortality and expense
risk fee and Variable Account administrative charge from the result.
Because the net investment factor may be greater or less than one, the
accumulation unit value may increase or decrease. You bear this investment risk.
Distribution of the Contracts
IDS Life, a registered broker/dealer is the sole distributor of the contract.
IDS Life pays total commissions of up to 7.0% of the total purchase payments
received on the contracts.
From time to time IDS Life may pay or permit other promotional incentives, in
cash or credit or other compensation.
About the Portfolios and Funds
Voting Rights -- As the Annuity owner, you have voting rights in the Smith
Barney Series Fund and its Portfolios and in the Funds, the shares of which are
held by the subaccounts in which you have invested. IDS Life will vote the
shares of each Portfolio or Fund in which you have a beneficial interest
according to the instructions received from you. The number of votes you have is
determined by applying your percentage interest in the subaccount to the total
number of votes allowed to the subaccount.
IDS Life calculates votes separately for each subaccount, and will do this not
more than 60 days before a meeting of beneficial owners of the Portfolios and
Funds. Owners with an interest in the matter or matters being considered will
receive notice of these meetings, proxy materials and a statement of the number
of votes to which they are entitled.
If you do not give IDS Life voting instructions, it will vote your shares in the
same proportion as the votes for which it has received instructions. IDS Life
also will vote the shares for which it has voting rights in the same proportion
as the votes for
<PAGE>
PAGE 36
which it has received instructions. See the accompanying prospectuses for a
detailed description of voting rights in the Portfolios and Funds.
Substitution of Investments -- If shares of any Portfolio or Funds should not be
available 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 in view of the purposes of the subaccount, shares of another
registered, open-end management investment company may be substituted for
Portfolio or Fund shares held in the subaccounts. If deemed by IDS Life to be in
the best interest of persons having voting rights under the Annuity, the
Variable Account may be operated as a management company under the 1940 Act or
it may be deregistered under such Act in the event such registration is no
longer required. In the event of any such substitution or change, IDS Life,
without the consent or approval of the owners, may amend the Annuity and take
whatever action is necessary and appropriate. However, no such substitution or
change will be made without any necessary approval of the SEC and state
insurance departments. IDS Life will notify owners of any substitution or
change.
Information on the Fixed Account of the Annuity
In addition to the thirteen subaccounts of the Variable Account described in
this prospectus, the Annuity has a Fixed Account available for allocation of
purchase payments. Generally, the information in the section called "Using the
Annuity" applies in a like manner to the Fixed Account. However, there are some
differences.
Fixed annuity cash values increase based on interest rates that may change from
time to time but are guaranteed by IDS Life. Interest is credited and compounded
daily to yield an effective annual interest rate. The minimum guaranteed
interest rate is 4 percent.
Purchase payments and transfers to the Fixed Account become part of the general
account of IDS Life. In contrast, purchase payments and transfers to the
subaccounts of the Variable Account go into a segregated asset account; they are
not mingled with IDS Life's main portfolio of investments that support fixed
annuity obligations. The gains achieved or losses suffered by the segregated
asset account have no effect on the Fixed Account.
The Annuity allows you to transfer contract values between the Fixed Account and
the subaccounts, but such transfers are restricted as follows:
1. You may transfer contract values from the Fixed Account to the subaccount(s)
or from the subaccount(s) to the Fixed Account up to six times per contract
year, subject to restrictions #2 and #3 below.
2. If a transfer is made from the Fixed Account to the subaccount(s), no
subsequent transfer from any subaccount back to the Fixed Account may be made
for six months from the last transfer date from the Fixed Account.
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3. Except for automated transfers of contract values, transfers must be at least
$500 or your entire balance in the Fixed Account, if less.
IDS Life may, in its sole discretion, suspend or modify these transfer
privileges at any time.
The Annuity allows you to make automated transfers of contract values between
the Fixed Account and the subaccounts, but such transfers may not exceed an
amount that, if continued, would deplete the Fixed Account within 12 months. The
minimum automated transfer amount is $100. Such transfers may be made on a
monthly, quarterly, semiannual or annual basis. The limit on transfers between
the Fixed Account and subaccounts to six times per year may be waived if the
automated transfer of contract values service is in effect. You may start or
stop this service at any time, but you must give IDS Life 30 days' notice to
change any automated transfer instructions that are currently in place.
Automated transfers are subject to all of the other Annuity provisions and
terms.
If you make any type of transfer from the Fixed Account, you may not transfer
contract values from any subaccount back to the Fixed Account for six months
from the last transfer date from the Fixed Account.
The mortality and expense risk charge and the Variable Account administrative
charge do not apply to values allocated to the Fixed Account. However, the other
charges described in this prospectus do apply to the Fixed Account.
Because of exemptive and exclusionary provisions, interests in IDS Life's
general account have not been registered under the Securities Act of 1933, as
amended (1933 Act), nor is the general account registered as an investment
company under the 1940 Act. Accordingly, neither the general account of IDS Life
nor any interests therein are generally subject to the provisions of the 1933 or
1940 Acts, and IDS Life has been advised that the staff of the SEC has not
reviewed the disclosures in this prospectus that relate to the Fixed Account.
Disclosures regarding the Fixed Account of the Annuity and the general account
of IDS Life, however, may be subject to certain generally applicable provisions
of the federal securities laws relating to the accuracy and completeness of
statements made in the prospectuses.
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
<PAGE>
PAGE 38
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 it 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.
Table of Contents of the SAI
Page
Performance Information..........................................
Rating Agencies..................................................
Principal Underwriter............................................
Independent Auditors.............................................
Prospectus.......................................................
Financial Statements
-- IDS Life Account SBS
-- IDS Life Insurance Company
- -------------------------------------------------------------------
If you would like to receive a copy of the SAI for:
IDS Life Account SBS
Individual Flexible Premium Deferred Combination Fixed and Variable
Annuity Contract
Please return this request to:
IDS Life Insurance Company
Unit 829
P.O. Box 458
Minneapolis, MN 55440-0499
Your name___________________________________________
Address_____________________________________________
City_________________________ State______ Zip_______
<PAGE>
PAGE 39
STATEMENT OF ADDITIONAL INFORMATION
for
SYMPHONY ANNUITY
IDS LIFE ACCOUNT SBS
May 1, 1997
IDS Life Account SBS is a separate account established and maintained by IDS
Life Insurance Company (IDS Life).
This Statement of Additional Information (SAI), dated May 1, 1997, is not a
prospectus. It should be read together with the account's prospectus, dated May
1, 1997, which may be obtained from your Smith Barney Financial Consultant or by
writing or calling IDS Life Annuity Service at the address or telephone number
below.
IDS Life Insurance Company
Unit 829
P.O. Box 458
Minneapolis, MN 55440-0499
1-800-422-3542
<PAGE>
PAGE 40
TABLE OF CONTENTS
Performance Information........................................p. 3
Rating Agencies................................................p. 5
Principal Underwriter..........................................p. 5
Independent Auditors...........................................p. 5
Prospectus.....................................................p. 5
Financial Statements
- IDS Life Account SBS
- IDS Life Insurance Company
<PAGE>
PAGE 41
PERFORMANCE INFORMATION
Calculation of Yield for the Money Market Subaccount
Simple yield for the Money Market subaccount will be based on the: (a) change in
the value of a hypothetical investment (exclusive of capital changes) at the
beginning of a seven-day period for which yield is to be quoted; (b) subtracting
a pro rata share of subaccount expenses accrued over the seven-day period; (c)
dividing the difference by the value of the subaccount at the beginning of the
period to obtain the base period return; and (d) annualizing the results (i.e.,
multiplying the base period return by 365/7). Calculation of effective yield
begins with the same base period return used in the calculation of yield, which
is then annualized to reflect compounding according to the following formula:
Effective Yield = [(Base Period Return + 1) 365/7 ] - 1
On Dec. 31, 1996, the Account's simple yield was 2.52% and its effective yield
was 2.55%.
Calculation of Yield for Non Money Market Subaccounts
For a subaccount other than the Money Market subaccount, quotations of yield
will be based on all investment income earned during a particular 30-day period,
less expenses accrued during the period (net investment income) and will be
computed by dividing net investment income per accumulation unit by the value of
an accumulation unit on the last day of the period, according to the following
formula:
YIELD = 2[(a-b + 1) 6 - 1]
cd
where: a = dividends and investment income earned during the
period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of accumulation units outstanding
during the period that were entitled to receive dividends.
d = the maximum offering price per accumulation unit
on the last day of the period.
Yield on the subaccount is earned from the increase in the net asset value of
shares of the portfolio or fund in which the subaccount invests and from
dividends declared and paid by the fund, which are automatically invested in
shares of the portfolio or fund.
Calculation of Average Annual Total Return
Quotations of average annual total return for a subaccount will be expressed in
terms of the average annual compounded rate of return
<PAGE>
PAGE 42
of a hypothetical investment in the Annuity contract over a period of one, five
and ten years (or, if less, up to the life of the subaccount), calculated
according to the following formula:
P(1+T) n = ERV
where: P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = Ending Redeemable Value of a hypothetical $1,000 payment made
at the beginning of the one-, five-, or ten-year (or other)
period at the end of the one-, five-, or ten-year (or other)
period (or fractional portion thereof).
Subaccount total return figures reflect the deduction of the contract
administrative charge, Variable Account administrative charge and mortality and
expense risk fee. Performance figures will be shown with the deduction of the
applicable surrender charge; in addition, performance figures may be shown
without the deduction of a surrender charge. The Securities and Exchange
Commission (SEC) requires that an assumption be made that the contract owner
surrenders the entire contract at the end of the one, five and ten year periods
(or, if less, up to the life of the subaccount) for which performance is
required to be calculated.
Aggregate Total Return
Aggregate total return represents the cumulative change in the value of an
investment over a specific period of time (reflecting change in a subaccount's
accumulation unit value) and is computed by the following formula:
ERV - P
P
where: P = a hypothetical initial payment of $1,000.
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the one-, five-, or ten-year (or
other) period at the end of the one-, five-, or ten-year (or
other) period (or fractional portion thereof).
Subaccount total return figures reflect the deduction of the contract
administrative charge, Variable Account administrative charge and mortality and
expense risk fee.
Performance of the subaccounts may be quoted or compared to rankings, yields, or
returns as published or prepared by independent rating or statistical services
or publishers or publications such as Barron's, Business Week, Forbes, Fortune,
Institutional Investor, Investor's Daily, Kiplinger's Personal Finance, Money,
Morningstar, Mutual Fund Values, Mutual Fund Forecaster, The New York Times,
Stranger's Investment Advisor, USA Today, U.S. News & World Report and The Wall
Street Journal.
<PAGE>
PAGE 43
RATING AGENCIES
The following chart reflects the ratings given to IDS Life Insurance Company by
independent rating agencies. These agencies evaluate the financial soundness and
claims-paying ability of insurance companies based on a number of different
factors. This information does not relate to the management or performance of
the variable subaccounts. This information relates only to the fixed account and
reflects IDS Life's ability to make annuity payouts and to pay death benefits
and other distributions from the annuity.
Rating agency Rating
A.M. Best A+
(Superior)
Duff & Phelps AAA
Moody's Aa2
PRINCIPAL UNDERWRITER
The principal underwriter for the Account is IDS Life, which offers the variable
annuity on a continuous basis.
Surrender charges received by IDS Life for 1996, 1995 and 1994 aggregated
$11,956,753, $10,125,726 and $6,969,493, respectively.
Commissions paid to IDS Life for 1996, 1995 and 1994 aggregated $17,247,007,
$9,019,184 and $17,331,801, respectively. The surrender charges were applied
toward payment of commissions.
INDEPENDENT AUDITORS
The financial statements of IDS Life Account SBS including the statements of net
assets as of Dec. 31, 1996, and the related statements of operations for the
year then ended and the related statements of changes in net assets for each of
the two years in the period then ended, and 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, appearing in this SAI,
have been audited by Ernst & Young LLP, independent auditors, as stated in their
reports appearing herein.
PROSPECTUS
The prospectus dated May 1, 1997, is hereby incorporated in this SAI by
reference.
<PAGE>
<TABLE>
<CAPTION>
IDS Life Account SBS
- -----------------------------------------------------------------------------------------------------------------------
Statements of Net Assets Dec. 31, 1996
Segregated Asset Subaccount
--------------------------------------------------------------------
Assets AMO AIH ADS AEM AEX
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investments in shares of mutual funds,
at market value:
Smith Barney Series Fund Money Market
Portfolio - 5,523,091 shares at net asset value
of $1.00 per share (cost $5,523,086) ........... $5,523,080 $ -- $ -- $ -- $ --
Smith Barney Series Fund Intermediate High
Grade Portfolio - 1,229,495 shares at net asset
value of $10.70 per share (cost $12,619,268) ... -- 13,155,596 -- -- --
Smith Barney Series Fund Diversified Strategic
Income Portfolio - 5,140,042 shares at net asset
value of $10.98 per share (cost $50,643,322) ... -- -- 56,437,657 -- --
Smith Barney Series Fund Equity Income
Portfolio - 3,372,730 shares at net asset value
of $13.01 per share (cost $37,158,477) ......... -- -- -- 43,879,219 --
Smith Barney Series Fund Equity Index
Portfolio - 940,606 shares at net asset value
of $18.36 per share (cost $12,175,422) ......... -- -- -- -- 17,269,530
Smith Barney Series Fund Growth & Income
Portfolio - 2,179,813 shares at net asset value
of $16.43 per share (cost $24,188,549) ......... -- -- -- -- --
Smith Barney Series Fund Appreciation
Portfolio - 5,723,504 shares at net asset value
of $15.86 per share (cost $65,225,276) ......... -- -- -- -- --
Smith Barney Series Fund Total Return
Portfolio - 2,139,010 shares at net asset value
of $15.73 per share (cost $24,233,438) ......... -- -- -- -- --
Smith Barney Series Fund Emerging Growth
Portfolio - 1,131,502 shares at net asset value
of $15.83 per share (cost $12,541,422) ......... -- -- -- -- --
Smith Barney Series Fund International Equity
Portfolio - 2,624,447 shares at net asset value
of $12.07 per share (cost $25,848,123) ......... -- -- -- -- --
IDS Life Capital Resource Fund -
29,616 shares at net asset value
of $23.68 per share (cost $727,866) ............ -- -- -- -- --
IDS Life Special Income Fund -
78,747 shares at net asset value
of $11.90 per share (cost $893,462) ............ -- -- -- -- --
IDS Life Managed Fund, Inc. -
64,143 shares at net asset value
of $16.77 per share (cost $928,927) ............ -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------
5,523,080 13,155,596 56,437,657 43,879,219 17,269,530
- -----------------------------------------------------------------------------------------------------------------------
Dividends receivable ............................ -- -- -- -- --
Accounts receivable from IDS Life for contract
purchase payments ............................... -- -- 629 -- 379
Receivable from mutual funds for
share redemptions ............................... 130 567 -- 10,515 --
- -----------------------------------------------------------------------------------------------------------------------
Total assets .................................... 5,523,210 13,156,163 56,438,286 43,889,734 17,269,909
- -----------------------------------------------------------------------------------------------------------------------
<PAGE>
Liabilities
- -----------------------------------------------------------------------------------------------------------------------
Payable to IDS Life for:
Mortality and expense risk fee .................. 6,071 14,447 61,749 48,196 18,890
Administrative charge ........................... 1,214 2,890 12,350 9,639 3,778
Contract terminations ........................... 130 567 -- 10,515 --
Payable to mutual funds for investments
purchased .................................... -- -- 629 -- 379
- -----------------------------------------------------------------------------------------------------------------------
Total liabilities ............................... 7,415 17,904 74,728 68,350 23,047
- -----------------------------------------------------------------------------------------------------------------------
Net assets applicable to contracts in
accumulation period ......................... $5,515,795 $13,138,259 $56,363,558 $43,821,384 $17,246,862
- -----------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding .................. 4,930,057 10,508,719 41,938,582 29,865,818 9,114,001
- -----------------------------------------------------------------------------------------------------------------------
Net asset value per accumulation unit ........... $1.12 $1.25 $1.34 $1.47 $1.89
- -----------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Account SBS
- -----------------------------------------------------------------------------------------------------------------------
Statements of Net Assets - continued Dec. 31, 1996
Segregated Asset Subaccount
-----------------------------------------------------------------
Assets AGI AAP ATR AEG AIE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investments in shares of mutual funds,
at market value:
Smith Barney Series Fund Money Market
Portfolio - 5,523,091 shares at net asset value
of $1.00 per share (cost $5,523,086) ........... $ -- $ -- $ -- $ -- $ --
Smith Barney Series Fund Intermediate High
Grade Portfolio - 1,229,495 shares at net asset
value of $10.70 per share (cost $12,619,268) ... -- -- -- -- --
Smith Barney Series Fund Diversified Strategic
Income Portfolio - 5,140,042 shares at net asset
value of $10.98 per share (cost $50,643,322) ... -- -- -- -- --
Smith Barney Series Fund Equity Income
Portfolio - 3,372,730 shares at net asset value
of $13.01 per share (cost $37,158,477) ......... -- -- -- -- --
Smith Barney Series Fund Equity Index
Portfolio - 940,606 shares at net asset value
of $18.36 per share (cost $12,175,422) ......... -- -- -- -- --
Smith Barney Series Fund Growth & Income
Portfolio - 2,179,813 shares at net asset value
of $16.43 per share (cost $24,188,549) ......... 35,814,330 -- -- -- --
Smith Barney Series Fund Appreciation
Portfolio - 5,723,504 shares at net asset value
of $15.86 per share (cost $65,225,276) ......... -- 90,774,771 -- -- --
Smith Barney Series Fund Total Return
Portfolio - 2,139,010 shares at net asset value
of $15.73 per share (cost $24,233,438) ......... -- -- 33,646,296 -- --
Smith Barney Series Fund Emerging Growth
Portfolio - 1,131,502 shares at net asset value
of $15.83 per share (cost $12,541,422) ......... -- -- -- 17,911,674 --
Smith Barney Series Fund International Equity
Portfolio - 2,624,447 shares at net asset value
of $12.07 per share (cost $25,848,123) ......... -- -- -- -- 31,676,953
IDS Life Capital Resource Fund -
29,616 shares at net asset value
of $23.68 per share (cost $727,866) ............ -- -- -- -- --
IDS Life Special Income Fund -
78,747 shares at net asset value
of $11.90 per share (cost $893,462) ............ -- -- -- -- --
IDS Life Managed Fund, Inc. -
64,143 shares at net asset value
of $16.77 per share (cost $928,927) ............ -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------
35,814,330 90,774,771 33,646,296 17,911,674 31,676,953
- -----------------------------------------------------------------------------------------------------------------------
Dividends receivable ............................ -- -- -- -- --
Accounts receivable from IDS Life for contract
purchase payments ............................... -- -- -- 12,788 --
Receivable from mutual funds for
share redemptions ............................... 29,890 143,822 26,970 -- 6,913
- -----------------------------------------------------------------------------------------------------------------------
Total assets .................................... 35,844,220 90,918,593 33,673,266 17,924,462 31,683,866
- -----------------------------------------------------------------------------------------------------------------------
<PAGE>
Liabilities
- -----------------------------------------------------------------------------------------------------------------------
Payable to IDS Life for:
Mortality and expense risk fee .................. 39,070 99,649 36,623 19,447 34,539
Administrative charge ........................... 7,814 19,930 7,325 3,890 6,908
Contract terminations ........................... 29,890 143,822 26,970 -- 6,913
Payable to mutual funds for investments
purchased .................................... -- -- -- 12,788 --
- -----------------------------------------------------------------------------------------------------------------------
Total liabilities ............................... 76,774 263,401 70,918 36,125 48,360
- -----------------------------------------------------------------------------------------------------------------------
Net assets applicable to contracts in
accumulation period ......................... $35,767,446 $90,655,192 $33,602,348 $17,888,337 $31,635,506
- -----------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding .................. 21,298,709 53,859,928 20,195,164 11,448,609 27,135,083
- -----------------------------------------------------------------------------------------------------------------------
Net asset value per accumulation unit ........... $1.68 $1.68 $1.66 $1.56 $1.17
- -----------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Account SBS
- ------------------------------------------------------------------------------------------------------------
Statements of Net Assets - continued Dec. 31, 1996
Segregated Asset Subaccount Combined
----------------------------------------- Variable
Assets ACR ASI AMG Account
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investments in shares of mutual funds,
at market value:
Smith Barney Series Fund Money Market
Portfolio - 5,523,091 shares at net asset value
of $1.00 per share (cost $5,523,086) ........... $ -- $ -- $ -- $ 5,523,080
Smith Barney Series Fund Intermediate High
Grade Portfolio - 1,229,495 shares at net asset
value of $10.70 per share (cost $12,619,268) ... -- -- -- 13,155,596
Smith Barney Series Fund Diversified Strategic
Income Portfolio - 5,140,042 shares at net asset
value of $10.98 per share (cost $50,643,322) ... -- -- -- 56,437,657
Smith Barney Series Fund Equity Income
Portfolio - 3,372,730 shares at net asset value
of $13.01 per share (cost $37,158,477) ......... -- -- -- 43,879,219
Smith Barney Series Fund Equity Index
Portfolio - 940,606 shares at net asset value
of $18.36 per share (cost $12,175,422) ......... -- -- -- 17,269,530
Smith Barney Series Fund Growth & Income
Portfolio - 2,179,813 shares at net asset value
of $16.43 per share (cost $24,188,549) ......... -- -- -- 35,814,330
Smith Barney Series Fund Appreciation
Portfolio - 5,723,504 shares at net asset value
of $15.86 per share (cost $65,225,276) ......... -- -- -- 90,774,771
Smith Barney Series Fund Total Return
Portfolio - 2,139,010 shares at net asset value
of $15.73 per share (cost $24,233,438) ......... -- -- -- 33,646,296
Smith Barney Series Fund Emerging Growth
Portfolio - 1,131,502 shares at net asset value
of $15.83 per share (cost $12,541,422) ......... -- -- -- 17,911,674
Smith Barney Series Fund International Equity
Portfolio - 2,624,447 shares at net asset value
of $12.07 per share (cost $25,848,123) ......... -- -- -- 31,676,953
IDS Life Capital Resource Fund -
29,616 shares at net asset value
of $23.68 per share (cost $727,866) ............ 701,250 -- -- 701,250
IDS Life Special Income Fund -
78,747 shares at net asset value
of $11.90 per share (cost $893,462) ............ -- 936,824 -- 936,824
IDS Life Managed Fund, Inc. -
64,143 shares at net asset value
of $16.77 per share (cost $928,927) ............ -- -- 1,075,902 1,075,902
- -------------------------------------------------------------------------------------------------------------
701,250 936,824 1,075,902 348,803,082
- -------------------------------------------------------------------------------------------------------------
Dividends receivable ............................ -- 5,873 -- 5,873
Accounts receivable from IDS Life for contract
purchase payments ............................... -- -- -- 13,796
Receivable from mutual funds for
share redemptions ............................... 8 -- 15 218,830
- -------------------------------------------------------------------------------------------------------------
Total assets .................................... 701,258 942,697 1,075,917 349,041,581
- -------------------------------------------------------------------------------------------------------------
<PAGE>
Liabilities
- -------------------------------------------------------------------------------------------------------------
Payable to IDS Life for:
Mortality and expense risk fee .................. 769 1,026 1,172 381,648
Administrative charge ........................... 154 205 235 76,332
Contract terminations ........................... 8 -- 15 218,830
Payable to mutual funds for investments
purchased .................................... -- 4,643 -- 18,439
- -------------------------------------------------------------------------------------------------------------
Total liabilities ............................... 931 5,874 1,422 695,249
- -------------------------------------------------------------------------------------------------------------
Net assets applicable to contracts in
accumulation period ......................... $700,327 $936,823 $1,074,495 $348,346,332
- -------------------------------------------------------------------------------------------------------------
Accumulation units outstanding .................. 528,001 742,054 784,734
- ----------------------------------------------------------------------------------------------
Net asset value per accumulation unit ........... $1.33 $1.26 $1.37
- ----------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Account SBS
- ------------------------------------------------------------------------------------------------------------------------------------
Statements of Operations Year ended Dec. 31, 1996
Segregated Asset Subaccount
---------------------------------------------------------------------------------------------
AMO AIH ADS AEM AEX AGI AAP
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income (loss):
Dividend income from mutual funds... $ 262,022 $ 97,869 $ 747,975 $ 268,617 $ 555,673 $ 49,878 $ 7,383,013
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk fee ..... 70,192 171,386 706,474 576,370 194,068 432,572 1,146,278
Administrative charge .............. 14,038 34,277 141,295 115,274 38,814 86,514 229,256
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses ..................... 84,230 205,663 847,769 691,644 232,882 519,086 1,375,534
- ------------------------------------------------------------------------------------------------------------------------------------
Investment income (loss) - net ..... 177,792 (107,794) (99,794) (423,027) 322,791 (469,208) 6,007,479
- ------------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments - net
- ------------------------------------------------------------------------------------------------------------------------------------
Realized gain on sales
of investments n mutual
fund portfolios:
Proceeds from sales ................ 4,762,079 2,558,812 7,613,935 9,460,820 2,654,457 5,075,162 16,137,619
Cost of investments sold ........... 4,762,074 2,522,162 7,178,965 8,472,545 1,923,278 3,715,481 11,495,978
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments ... 5 36,650 434,970 988,275 731,179 1,359,681 4,641,641
Net change in unrealized
appreciation or depreciation of
investments ........................ (5) 71,167 4,782,921 1,172,760 1,792,809 4,818,856 3,942,238
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments ..... -- 107,817 5,217,891 2,161,035 2,523,988 6,178,537 8,583,879
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets
resulting from operations .......... $ 177,792 $ 23 $5,118,097 $1,738,008 $2,846,779 $5,709,329 $14,591,358
- ------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Account SBS
- -----------------------------------------------------------------------------------------------------------------------------------
Statements of Operations - continued Year ended Dec. 31, 1996
Segregated Asset Subaccount Combined
-------------------------------------------------------------------------------- Variable
ATR AEG AIE ACR ASI AMG Account
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income (loss):
Dividend income from mutual funds. $ 527,056 $ 422,526 $ 113,035 $112,915 $ 70,406 $ 91,062 $10,702,047
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk fee ... 394,073 224,593 391,486 8,809 11,487 11,954 4,339,742
Administrative charge ............ 78,815 44,919 78,297 1,762 2,297 2,390 867,948
- -----------------------------------------------------------------------------------------------------------------------------------
Total expenses ................... 472,888 269,512 469,783 10,571 13,784 14,344 5,207,690
- -----------------------------------------------------------------------------------------------------------------------------------
Investment income (loss) - net ... 54,168 153,014 (356,748) 102,344 56,622 76,718 5,494,357
- -----------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments - net
- -----------------------------------------------------------------------------------------------------------------------------------
Realized gain on sales
of investments in mutual
fund portfolios:
Proceeds from sales .............. 4,927,099 3,530,513 4,303,374 153,116 66,839 121,559 61,365,384
Cost of investments sold ......... 3,862,178 2,430,743 3,735,187 143,452 64,383 104,546 50,410,972
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments . 1,064,921 1,099,770 568,187 9,664 2,456 17,013 10,954,412
Net change in unrealized
appreciation or depreciation
of investments ................... 5,515,092 1,379,364 5,179,978 (74,498) (10,785) 36,441 28,606,338
- -----------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments ... 6,580,013 2,479,134 5,748,165 (64,834) (8,329) 53,454 39,560,750
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets
resulting from operations ........ $6,634,181 $2,632,148 $5,391,417 $ 37,510 $ 48,293 $130,172 $45,055,107
- -----------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Account SBS
- -----------------------------------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets Year ended Dec. 31, 1996
Segregated Asset Subaccount
------------------------------------------------------------------------------------------------
Operations AMO AIH ADS AEM AEX AGI AAP
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income (loss) - net.. $ 177,792 $ (107,794) $ (99,794) $ (423,027) $ 322,791 $ (469,208) $ 6,007,479
Net realized gain on investments 5 36,650 434,970 988,275 731,179 1,359,681 4,641,641
Net change in unrealized
appreciation or depreciation
of investments ............... (5) 71,167 4,782,921 1,172,760 1,792,809 4,818,856 3,942,238
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets
resulting from operations .... 177,792 23 5,118,097 1,738,008 2,846,779 5,709,329 14,591,358
- -----------------------------------------------------------------------------------------------------------------------------------
Contract Transactions
- -----------------------------------------------------------------------------------------------------------------------------------
Variable annuity contract
purchase payments ............ 65,719 246,425 129,284 190,034 524,214 182,782 576,636
Net transfers* ................. 2,311,900 287,474 1,353,995 (2,348,570) 2,127,650 1,729,364 (5,226,708)
Surrender benefits
and contract charges ......... (2,187,254) (1,301,033) (5,231,894) (4,729,849) (1,577,253) (3,757,116) (7,878,648)
Death benefits ................. (77,748) (632,209) (1,062,535) (1,434,833) (175,049) (869,266) (1,299,452)
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) from
contract transactions ........ 112,617 (1,399,343) (4,811,150) (8,323,218) 899,562 (2,714,236) (13,828,172)
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at beginning of year. 5,225,386 14,537,579 56,056,611 50,406,594 13,500,521 32,772,353 89,892,006
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year ...... $5,515,795 $13,138,259 $56,363,558 $43,821,384 $17,246,862 $35,767,446 $ 90,655,192
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Activity
- -----------------------------------------------------------------------------------------------------------------------------------
Units outstanding at
beginning of year ............ 4,821,643 11,659,231 45,719,901 35,868,058 8,551,551 23,036,571 63,014,889
Contract purchase payments ..... 59,710 198,477 101,928 137,110 315,079 122,636 380,154
Net transfers* ................. 1,999,507 241,508 1,083,638 (1,678,705) 1,254,817 1,139,375 (3,599,063)
Surrender benefits
and contract charges ......... (1,880,368) (1,067,404) (4,129,478) (3,424,716) (907,436) (2,434,167) (5,089,685)
Death benefits ................. (70,435) (523,093) (837,407) (1,035,929) (100,010) (565,706) (846,367)
- -----------------------------------------------------------------------------------------------------------------------------------
Units outstanding at end of year 4,930,057 10,508,719 41,938,582 29,865,818 9,114,001 21,298,709 53,859,928
- -----------------------------------------------------------------------------------------------------------------------------------
*Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's Fixed Account.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Account SBS
- ----------------------------------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets - continued Year ended Dec. 31, 1996
Segregated Asset Subaccount Combined
------------------------------------------------------------------------------- Variable
Operations ATR AEG AIE ACR ASI AMG Account
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income (loss) - net .. $ 54,168 $ 153,014 $ (356,748) $ 102,344 $ 56,622 $ 76,718 $ 5,494,357
Net realized gain on investments 1,064,921 1,099,770 568,187 9,664 2,456 17,013 10,954,412
Net change in unrealized
appreciation or depreciation
of investments .................. 5,515,092 1,379,364 5,179,978 (74,498) (10,785) 36,441 28,606,338
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets
resulting from operations ..... 6,634,181 2,632,148 5,391,417 37,510 48,293 130,172 45,055,107
- ----------------------------------------------------------------------------------------------------------------------------------
Contract Transactions
- ----------------------------------------------------------------------------------------------------------------------------------
Variable annuity contract
purchase payments ............. 535,210 142,374 279,160 1,898 -- 114,941 2,988,677
Net transfers* .................. 2,265,154 919,412 2,208,696 122,464 77,762 49,836 5,878,429
Surrender benefits
and contract charges .......... (3,639,676) (1,933,406) (2,971,466) (108,415) (30,071) (59,856) (35,405,937)
Death benefits .................. (375,676) (346,711) (805,806) -- (24,561) (11,596) (7,115,442)
- ----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) from
contract transactions ........... (1,214,988) (1,218,331) (1,289,416) 15,947 23,130 93,325 (33,654,273)
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets at beginning of year . 28,183,155 16,474,520 27,533,505 646,870 865,400 850,998 336,945,498
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year ....... $33,602,348 $17,888,337 $31,635,506 $ 700,327 $936,823 $1,074,495 $348,346,332
- ----------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Activity
- ------------------------------------------------------------------------------------------------------------------
Units outstanding at
beginning of year ............. 20,934,365 12,246,999 28,243,415 518,671 722,212 716,245
Contract purchase payments ...... 380,585 95,754 258,040 1,467 -- 85,321
Net transfers* .................. 1,583,187 612,273 2,099,461 91,890 64,825 40,883
Surrender benefits
and contract charges .......... (2,454,869) (1,281,038) (2,718,499) (84,027) (24,885) (48,241)
Death benefits .................. (248,104) (225,379) (747,334) -- (20,098) (9,474)
- ------------------------------------------------------------------------------------------------------------------
Units outstanding at end of year 20,195,164 11,448,609 27,135,083 528,001 742,054 784,734
- ------------------------------------------------------------------------------------------------------------------
*Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's Fixed Account.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
IDS Life Account SBS
- ----------------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets Year ended Dec. 31, 1995
Segregated Asset Subaccounts
--------------------------------------------------------------------------------
Operations AMO AIH ADS AEM AEX AGI
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment income
(loss) - net $ 209,456 $ 771,970 $ 2,622,756 $ 1,934,255 $ 20,233 $ 198,204
Net realized gain
(loss) on investments (5) (8,911) (159,206) (43,663) 283,451 593,971
Net change in unrealized
appreciation or depreciation
of investments 5 1,295,411 4,778,047 10,528,484 2,822,574 6,816,514
- ----------------------------------------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 209,456 2,058,470 7,241,597 12,419,076 3,126,258 7,608,689
- ----------------------------------------------------------------------------------------------------------------
Contract Transactions
- ----------------------------------------------------------------------------------------------------------------
Variable annuity contract
purchase payments 217,680 322,885 319,704 243,226 341,729 214,357
Net transfers* (485,240) 772,678 186,043 (683,735) 1,992,082 77,327
Surrender benefits and
contract charges (1,104,891) (879,624) (3,375,238) (3,566,457) (803,543) (2,444,670)
Death benefits (190,053) (274,093) (579,372) (600,168) (66,049) (435,005)
- ----------------------------------------------------------------------------------------------------------------
Increase (decrease) from
contract transactions (1,562,504) (58,155) (3,448,863) (4,607,134) 1,464,219 (2,587,991)
- ----------------------------------------------------------------------------------------------------------------
Net assets at beginning
of year 6,578,434 12,537,264 52,263,877 42,594,652 8,910,044 27,751,655
- ----------------------------------------------------------------------------------------------------------------
Net assets at end of year $5,225,386 $14,537,579 $56,056,611 $50,406,594 $13,500,521 $32,772,353
- ----------------------------------------------------------------------------------------------------------------
Accumulation Unit Activity
- ----------------------------------------------------------------------------------------------------------------
Units outstanding at
beginning of year 6,298,015 11,654,538 48,739,883 39,594,399 7,551,590 25,101,785
Contract purchase payments 206,731 290,180 276,598 205,092 255,791 169,357
Net transfers* (471,891) 708,366 153,395 (544,881) 1,376,042 26,612
Surrender benefits and
contract charges (1,032,709) (754,851) (2,938,873) (2,898,070) (585,479) (1,923,434)
Death benefits (178,503) (239,002) (511,102) (488,482) (46,393) (337,749)
- ----------------------------------------------------------------------------------------------------------------
Units outstanding at
end of year 4,821,643 11,659,231 45,719,901 35,868,058 8,551,551 23,036,571
- ----------------------------------------------------------------------------------------------------------------
*Includes transfer activity from (to) other subaccounts and transfers from (to)
IDS Life's Fixed Account. See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
IDS Life Account SBS
- ------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets - continued Year ended Dec. 31, 1995
Segregated Asset Subaccounts
----------------------------------------------------
Operations AAP ATR AEG AIE
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income (loss) - net $ 1,406,550 $ 994,320 $ (203,932) $ (298,204)
Net realized gain (loss) on investments 1,943,781 298,611 211,404 (128,091)
Net change in unrealized appreciation
or depreciation of investments 16,644,379 3,877,088 4,539,315 2,266,033
- ------------------------------------------------------------------------------------------------
Net increase in net assets resulting
from operations 19,994,710 5,170,019 4,546,787 1,839,738
- ------------------------------------------------------------------------------------------------
Contract Transactions
- ------------------------------------------------------------------------------------------------
Variable annuity contract purchase payments 792,050 443,940 112,616 428,544
Net transfers* 284,101 4,239,331 1,834,956 1,016,372
Surrender benefits and contract charges (7,642,199) (2,124,340) (794,861) (2,143,581)
Death benefits (980,264) (246,727) (79,462) (299,595)
- ------------------------------------------------------------------------------------------------
Increase (decrease) from
contract transactions (7,546,312) 2,312,204 1,073,249 (998,260)
- ------------------------------------------------------------------------------------------------
Net assets at beginning of year 77,443,608 20,700,932 10,854,484 26,692,027
- ------------------------------------------------------------------------------------------------
Net assets at end of year $89,892,006 $28,183,155 $16,474,520 $27,533,505
- ------------------------------------------------------------------------------------------------
Accumulation Unit Activity
- ------------------------------------------------------------------------------------------------
Units outstanding at beginning of year 68,920,135 18,917,974 11,352,545 29,352,810
Contract purchase payments 619,900 364,886 98,468 458,847
Net transfers* 161,806 3,534,093 1,566,936 1,041,615
Surrender benefits and contract charges (5,933,172) (1,691,001) (706,192) (2,295,789)
Death benefits (753,780) (191,587) (64,758) (314,068)
- ------------------------------------------------------------------------------------------------
Units outstanding at end of year 63,014,889 20,934,365 12,246,999 28,243,415
- ------------------------------------------------------------------------------------------------
*Includes transfer activity from (to) other subaccounts and transfers from (to)
IDS Life's Fixed Account.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
IDS Life Account SBS
- --------------------------------------------------------------------------
Statements of Changes in Net Assets - continued Year ended Dec. 31, 1995
Segregated Asset Subaccounts Combined
-------------------------------- Variable
Operations ACR ASI AMG Account
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income
(loss) -net $ 63,709 $ 30,729 $ 8,775 $ 7,758,821
Net realized gain
(loss) on investments 34,314 1,094 4,714 3,031,464
Net change in unrealized
appreciation or
depreciation of
investments 53,984 56,792 116,965 53,795,591
- --------------------------------------------------------------------------
Net increase
in net assets resulting
from operations 152,007 88,615 130,454 64,585,876
- --------------------------------------------------------------------------
Contract Transactions .
- --------------------------------------------------------------------------
Variable annuity contract
purchase payments 15,627 1,481 151,237 3,605,076
Net transfers* 261,486 434,031 352,700 10,282,132
Surrender benefits and
contract charges (326,447) (7,803) (72,692) (25,286,347)
Death benefits (10,454) - - (3,761,242)
- --------------------------------------------------------------------------
Increase (decrease) from
contract transactions (59,788) 427,709 431,245 (15,160,381)
- --------------------------------------------------------------------------
Net assets at beginning
of year 554,651 349,076 289,299 287,520,003
- --------------------------------------------------------------------------
Net assets at end
of year $646,870 $865,400 $850,998 $336,945,498
- --------------------------------------------------------------------------
Accumulation Unit Activity
- --------------------------------------------------------------------------
Accumulation units
outstanding at
beginning of year 560,252 351,059 297,773
Contract purchase
payments 14,923 1,325 150,106
Net transfers* 244,044 376,773 334,142
Surrender benefits
and contract charges (291,008) (6,945) (65,776)
Death benefits (9,540) - -
- -----------------------------------------------------------
Units outstanding at
end of year 518,671 722,212 716,245
- -----------------------------------------------------------
*Includes transfer activity from (to) other subaccounts and transfers from (to)
IDS Life's Fixed Account. See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
- -------------------------------------------------------------------
1. Organization
IDS Life Account SBS (the Variable Account) was established on May 9, 1991 as a
single unit investment trust of IDS Life Insurance Company (IDS Life ) under the
Investment Company Act of 1940, as amended (the "1940 Act"). Operations of the
Variable Account commenced on Oct. 16, 1991.
The Variable Account is comprised of various subaccounts. Each subaccount
invests exclusively in shares of ten portfolios (collectively, the Portfolios)
of the Smith Barney Series Fund or three funds of the IDS Life Retirement
Annuity Mutual Funds (collectively, the Funds). The assets of each subaccount of
the Variable Account are not chargeable with liabilities arising out of the
business conducted by any other Subaccount, Account or by IDS Life. Purchase
payments are allocated to any or all thirteen subaccounts or in the Fixed
Account of IDS Life. The purchase payments allocated to the subaccounts are then
invested in shares of the specific Portfolio(s) or Fund(s) selected.
The Smith Barney Series Fund (the mutual fund) is registered under the 1940 Act
as a diversified, open-end management investment company. The mutual fund
currently offers a selection of ten portfolios. Purchase payments allocated to
the Money Market (AMO) subaccount invest in shares of the Money Market
Portfolio, the Intermediate High Grade (AIH) subaccount invests in shares of the
Intermediate High Grade Portfolio; the Diversified Strategic Income (ADS)
subaccount invests in shares of the Diversified Strategic Income Portfolio; the
Equity Income (AEM) subaccount invests in shares of the Equity Income Portfolio;
the Equity Index (AEX) subaccount invests in shares of the Equity Index
Portfolio; the Growth & Income (AGI) subaccount invests in shares of the Growth
& Income Portfolio; the Appreciation (AAP) subaccount invests in shares of the
Appreciation Portfolio; the Total Return (ATR) subaccount invests in shares of
the Total Return Portfolio; the Emerging Growth (AEG) subaccount invests in
shares of the Emerging Growth Portfolio; and the International Equity (AIE)
subaccount invests in shares of the International Equity Portfolio.
IDS Life Capital Resource Fund, Inc. and IDS Life Special Income Fund, Inc.
commenced operations Oct. 13, 1981. IDS Life Managed Fund, Inc. commenced
operations April 30, 1986. These mutual funds are registered under the
Investment Company Act of 1940 as diversified, open-end management investment
companies. Purchase payments allocated to the Capital Resource (ACR) subaccount
invest in shares of IDS Life Capital Resource Fund; the Special Income (ASI)
subaccount invests in shares of IDS Life Special Income Fund; and the Managed
(AMG) subaccount invests in shares of IDS Life Managed Fund.
IDS Life serves as investment manager and distributor for the Variable Account
and for the Funds. American Express Financial Corporation serves as investment
advisor to the Funds. Smith Barney Inc. serves as distributor for the mutual
fund. Smith Barney Mutual Funds Management Inc. serves as investment adviser to
the Money Market Portfolio, the Intermediate High Grade Portfolio, the
Diversified Strategic Income Portfolio, the Equity Income Portfolio, the Growth
& Income Portfolio, the Appreciation Portfolio, the Total Return Portfolio and
the International Equity Portfolio. Travelers Investment Management Company
serves as investment adviser to the Equity Index Portfolio. Van Kampen American
Capital Asset Management, Inc. serves as investment adviser to the Emerging
Growth Portfolio. Smith Barney Global Capital Management, Inc. serves as
sub-investment adviser to the Diversified Strategic Income Portfolio. Smith
Barney Mutual Funds Management Inc. serves as administrator to each Portfolio.
PNC Bank, National Association serves as custodian to all Portfolios except
International Equity Portfolio and Diversified Strategic Income Portfolio. The
Chase Manhattan Bank serves as custodian to International Equity Portfolio and
Diversified Strategic Income Portfolio. American Express Trust Company serves as
custodian and Morgan Stanley Trust Company serves as subcustodian for the Funds.
- ------------------------------------------------------------
2.Summary of Significant Accounting Policies
Investments in the Mutual Fund
Investments in shares of the Portfolio(s) of the mutual fund or in shares of the
Funds are stated at market value which is the net asset value per share as
determined by the respective portfolio or fund. Investment transactions are
accounted for on the date the shares are purchased and sold. The cost of
investments sold and redeemed is determined on the average cost method. Dividend
distributions received from the Portfolios or the Funds are reinvested, net of
any expense payable to IDS Life, in additional shares of the Portfolios or the
Funds and are recorded as income by the subaccounts on the ex-dividend date.
Unrealized appreciation or depreciation of investments in the accompanying
financial statements represents the subaccounts' share of the Portfolios' or the
Funds' undistributed net investment income, undistributed realized gain or loss
and the unrealized appreciation or depreciation on their investment securities.
Federal Income Taxes
IDS Life is taxed as a life insurance company. The Variable Account is treated
as part of IDS Life for federal income tax purposes. Under existing federal
income tax law, no income taxes are payable with respect to any investment
income of the Variable Account.
- ------------------------------------------------------------
3. Mortality and Expense Risk Fee
IDS Life makes guarantees to the Variable Account that possible future adverse
changes in administrative expenses and mortality experience of the annuitants
will not affect the Variable Account. The mortality and expense risk fee paid to
IDS Life is deducted daily and is equal, on an annual basis, to 1.25 percent of
the daily net asset value of each subaccount.
- ------------------------------------------------------------
4. Variable Account Administrative Charge
IDS Life deducts a daily charge equal, on an annual basis, to 0.25 percent of
the daily net asset value of each subaccount. It covers certain administrative
and operating expenses of the subaccounts incurred by IDS Life such as
accounting, legal and data processing fees and expenses involved in the
preparation and distribution of reports and prospectuses.
<PAGE>
- ------------------------------------------------------------
5. Contract Administrative Charge
IDS Life deducts an administrative charge of $30 per year on each certificate
anniversary. This charge reimburses IDS Life for expenses incurred in
establishing and maintaining the Annuity records. This charge cannot be
increased and does not apply after a retirement payment plan begins. IDS Life
does not expect to profit from this charge.
- ------------------------------------------------------------
6. Surrender Charge
IDS Life will use a surrender charge to help it recover certain expenses
relating to the sale of the Annuity. The surrender charge will be deducted for
surrenders during the first six payment years following a purchase payment.
Charges by IDS Life for surrenders are not available on an individual segregated
asset account basis. Charges for all segregated asset accounts amounted to
$11,956,753 in 1996 and $10,125,762 in 1995. Such charges are not an expense of
the subaccounts or Variable Account. They are deducted from contract surrender
benefits paid by IDS Life.
- ------------------------------------------------------------
7. Investment Transactions
The subaccounts' purchases of Portfolio or Fund shares (net of charges),
including reinvestment of dividend distributions, were as follows:
<TABLE>
<CAPTION>
Year ended Dec. 31,
Subaccount Investment 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
AMO Money Market Portfolio $ 5,053,294 $ 4,451,970
AIH Intermediate High Grade Portfolio 1,051,570 2,861,990
ADS Diversified Strategic Income Portfolio 2,710,114 5,970,004
AEM Equity Income Portfolio 712,258 4,653,438
AEX Equity Index Portfolio 3,883,536 3,267,306
AGI Growth & Income Portfolio 1,899,403 2,274,039
AAP Appreciation Portfolio 8,328,853 5,283,718
ATR Total Return Portfolio 3,776,792 6,176,948
AEG Emerging Growth Portfolio 2,469,056 2,532,212
AIE International Equity Portfolio 2,665,898 2,958,219
ACR Capital Resource Fund 271,538 398,665
ASI Special Income Fund 146,592 479,832
AMG Managed Fund 292,003 509,847
- --------------------------------------------------------------------------------
$33,260,907 $41,818,188
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
IDS Life Account SBS
Annual Financial Information
Report of Independent Auditors
The Board of Directors
IDS Life Insurance Company
We have audited the accompanying individual and combined statements of net
assets of the segregated asset subaccounts of IDS Life Account SBS (comprised of
subaccounts AMO, AIH, ADS, AEM, AEX, AGI, AAP, ATR, AEG, AIE, ACR, ASI and AMG)
as of December 31, 1996, and the related statements of operations for the year
then ended and the statements of changes in net assets for each of the two years
in the period then ended. These financial statements are the responsibility of
the management of IDS Life Insurance Company. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned at December 31, 1996 with the affiliated mutual
fund manager and the portfolio administrator. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the individual and combined financial position of the
segregated asset subaccounts of IDS Life Account SBS at December 31, 1996 and
the individual and combined results of their operations and the changes in their
net assets for the periods described above, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Minneapolis, Minnesota
March 21, 1997
<PAGE>
IDS Life Financial Information
The financial statements shown below are those of the insurance company and not
those of any other entity. They are included for the purpose of informing the
investor as to the financial condition of the insurance company and its ability
to carry out its obligations under its variable contracts.
IDS LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
Dec. 31, Dec. 31,
ASSETS 1996 1995
- ------ ---- ---------
(thousands)
Investments:
Fixed maturities:
Held to maturity, at amortized cost (Fair value:
1996, $10,521,650; 1995, $11,878,377) .............. $10,236,379 $11,257,591
Available for sale, at fair value (Amortized cost:
1996, $11,008,622; 1995, $10,146,136) .............. 11,146,845 10,516,212
Mortgage loans on real estate ...................... 3,493,364 2,945,495
Policy loans ....................................... 459,902 424,019
Other investments .................................. 251,465 146,894
Total investments .................................. 25,587,955 25,290,211
Cash and cash equivalents .......................... 224,603 72,147
Amounts recoverable from reinsurers ................ 157,722 114,387
Amounts due from brokers ........................... 11,047 --
Other accounts receivable .......................... 44,089 39,108
Accrued investment income .......................... 343,313 348,008
Deferred policy acquisition costs .................. 2,330,805 2,025,725
Deferred income taxes .............................. 33,923 --
Other assets ....................................... 37,364 36,410
Separate account assets ............................ 18,535,160 14,974,082
Total assets ....................................... $47,305,981 $42,900,078
=========== ===========
<PAGE>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS (continued)
Dec. 31, Dec. 31
LIABILITIES AND STOCKHOLDER'S EQUITY 1996 1995
- ------------------------------------ ---- ----
(thousands)
Liabilities:
Future policy benefits:
Fixed annuities .................................... $21,838,008 $21,404,836
Universal life-type insurance ...................... 3,177,149 3,076,847
Traditional life insurance ......................... 209,685 209,249
Disability income and long-term care insurance ..... 424,200 327,157
Policy claims and other
policyholders' funds ............................... 83,634 56,323
Deferred income taxes .............................. -- 112,904
Amounts due to brokers ............................. 261,987 121,618
Other liabilities .................................. 332,078 285,354
Separate account liabilities ....................... 18,535,160 14,974,082
Total liabilities .................................. 44,861,901 40,568,370
Stockholder's equity:
Capital stock, $30 par value per share;
100,000 shares authorized, issued and outstanding .. 3,000 3,000
Additional paid-in capital ......................... 283,615 278,814
Net unrealized gain on investments ................. 86,102 230,129
Retained earnings .................................. 2,071,363 1,819,765
Total stockholder's equity ......................... 2,444,080 2,331,708
Total liabilities and stockholder's equity ......... $47,305,981 $42,900,078
=========== ===========
Commitments and contingencies (Note 6)
See accompanying notes to consolidated financial statements.
<PAGE>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years ended Dec. 31,
1996 1995 1994
---- ---- ----
(thousands)
<S> <C> <C> <C>
Revenues:
Premiums:
Traditional life insurance $ 51,403 $ 50,193 $ 48,184
Disability income and long-term care insurance 131,518 111,337 96,456
Total premiums 182,921 161,530 144,640
Policyholder and contractholder charges 302,999 256,454 219,936
Management and other fees 271,342 215,581 164,169
Net investment income 1,965,362 1,907,309 1,781,873
Net realized loss on investments (159) (4,898) (4,282)
Total revenues 2,722,465 2,535,976 2,306,336
Benefits and expenses:
Death and other benefits:
Traditional life insurance 26,919 29,528 28,263
Universal life-type insurance
and investment contracts 85,017 71,691 52,027
Disability income and
long-term care insurance 19,185 16,259 13,393
Increase (decrease) in liabilities for future policy benefits:
Traditional life insurance 1,859 (1,315) (3,229)
Disability income and
long-term care insurance 57,230 51,279 37,912
Interest credited on universal life-type
insurance and investment contracts 1,370,468 1,315,989 1,174,985
Amortization of deferred policy acquisition costs 278,605 280,121 280,372
Other insurance and operating expenses 261,468 211,642 210,101
Total benefits and expenses 2,100,751 1,975,194 1,793,824
Income before income taxes 621,714 560,782 512,512
Income taxes 207,138 195,842 176,343
Net income $ 414,576 $ 364,940 $ 336,169
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
Three years ended Dec. 31, 1996
(thousands)
Additional Net Unrealized
Capital Paid-In Gain (Loss) on Retained
Stock Capital Investments Earnings Total
----- ------- ----------- -------- -----
<S> <C> <C> <C> <C> <C>
Balance, Dec. 31, 1993 $3,000 $ 222,000 $ 114 $1,468,230 $1,693,344
Initial adoption of SFAS No. 115 -- -- 181,269 -- 181,269
Net income -- -- -- 336,169 336,169
Change in net unrealized
gain (loss) on investments -- -- (457,091) -- (457,091)
Cash dividends -- -- -- (165,000) (165,000)
Balance, Dec. 31, 1994 3,000 222,000 (275,708) 1,639,399 1,588,691
Net income -- -- -- 364,940 364,940
Change in net unrealized
gain (loss) on investments -- -- 505,837 -- 505,837
Capital contribution from parent -- 56,814 -- -- 56,814
Loss on reinsurance transaction
with affiliate -- -- -- (4,574) (4,574)
Cash dividends -- -- -- (180,000) (180,000)
Balance, Dec. 31, 1995 3,000 278,814 230,129 1,819,765 2,331,708
Net income -- -- -- 414,576 414,576
Change in net unrealized
gain (loss) on investments -- -- (144,027) -- (144,027)
Capital contribution from parent -- 4,801 -- -- 4,801
Other changes -- -- -- 2,022 2,022
Cash dividends -- -- -- (165,000) (165,000)
Balance, Dec. 31, 1996 $3,000 $283,615 $ 86,102 $2,071,363 $2,444,080
===== ======= ====== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended Dec. 31,
1996 1995 1994
---- ---- ----
(thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 414,576 $ 364,940 $ 336,169
Adjustments to reconcile net income to
net cash (used in) provided by operating activities:
Policy loan issuance, excluding universal
life-type insurance (49,314) (46,011) (37,110)
Policy loan repayment, excluding universal
life-type insurance 41,179 36,416 33,384
Change in amounts recoverable from reinsurers (43,335) (34,083) (25,006)
Change in other accounts receivable (4,981) 12,231 (28,551)
Change in accrued investment income 4,695 (30,498) (10,333)
Change in deferred policy acquisition
costs, net (294,755) (196,963) (192,768)
Change in liabilities for future policy
benefits for traditional life,
disability income and
long-term care insurance 97,479 85,575 55,354
Change in policy claims and other
policyholders' funds 27,311 6,255 5,552
Change in deferred income taxes (65,609) (33,810) (19,176)
Change in other liabilities 46,724 (6,548) (122)
(Accretion of discount)
amortization of premium, net (23,032) (22,528) 30,921
Net realized loss on investments 159 4,898 4,282
Policyholder and contractholder
charges, non-cash (154,286) (140,506) (126,918)
Other, net (10,816) 3,849 (8,709)
Net cash (used in) provided by operating
activities $ (14,005) $ 3,217 $ 16,969
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
Years ended Dec. 31,
1996 1995 1994
(thousands)
<S> <C> <C> <C>
Cash flows from investing activities:
Fixed maturities held to maturity:
Purchases $ (43,751) $ (1,007,208) $ (879,740)
Maturities, sinking fund payments and calls 759,248 538,219 1,651,762
Sales 279,506 332,154 58,001
Fixed maturities available for sale:
Purchases (2,299,198) (2,452,181) (2,763,278)
Maturities, sinking fund payments and calls 1,270,240 861,545 1,234,401
Sales 238,905 136,825 374,564
Other investments, excluding policy loans:
Purchases (904,536) (823,131) (634,807)
Sales 236,912 160,521 243,862
Change in amounts due from brokers (11,047) 7,933 (2,214)
Change in amounts due to brokers 140,369 (105,119) (124,749)
Net cash used in investing activities (333,352) (2,350,442) (842,198)
Cash flows from financing activities:
Activity related to universal life-type insurance
and investment contracts:
Considerations received 3,567,586 4,189,525 3,566,814
Surrenders and death benefits (4,250,294) (3,141,404) (3,602,392)
Interest credited to account balances 1,370,468 1,315,989 1,174,985
Universal life-type insurance policy loans:
Issuance (86,501) (84,700) (78,239)
Repayment 58,753 52,188 50,554
Capital contribution from parent 4,801 -- --
Cash dividends to parent (165,000) (180,000) (165,000)
Net cash provided by financing activities 499,813 2,151,598 946,722
Net increase (decrease) in cash and
cash equivalents 152,456 (195,627) 121,493
Cash and cash equivalents at
beginning of year 72,147 267,774 146,281
Cash and cash equivalents at
end of year $ 224,603 $ 72,147 $ 267,774
========= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
IDS LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ thousands)
1. Summary of significant accounting policies
Nature of business
IDS Life Insurance Company (the Company) is a stock life insurance company
organized under the laws of the State of Minnesota. The Company is a wholly
owned subsidiary of American Express Financial Corporation, which is a wholly
owned subsidiary of American Express Company. The Company serves residents of
all states except New York. IDS Life Insurance Company of New York is a
wholly owned subsidiary of the Company and serves New York State residents.
The Company also wholly owns American Enterprise Life Insurance Company,
American Centurion Life Assurance Company (ACLAC) and American Partners Life
Insurance Company.
The Company's principal products are deferred annuities and universal life
insurance, which are issued primarily to individuals. It offers single
premium and flexible premium deferred annuities on both a fixed and variable
dollar basis. Immediate annuities are offered as well. The Company's
insurance products include universal life (fixed and variable), whole life,
single premium life and term products (including waiver of premium and
accidental death benefits). The Company also markets disability income and
long-term care insurance.
Basis of presentation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries. All material intercompany
accounts and transactions have been eliminated in consolidation.
The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles which vary in
certain respects from reporting practices prescribed or permitted by state
insurance regulatory authorities.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Investments
Fixed maturities that the Company has both the positive intent and the
ability to hold to maturity are classified as held to maturity and carried at
amortized cost. All other fixed maturities and all marketable equity
securities are classified as available for sale and carried at fair value.
Unrealized gains and losses on securities classified as available for sale
are carried as a separate component of stockholder's equity, net of deferred
taxes.
Realized investment gain or loss is determined on an identified cost basis.
Prepayments are anticipated on certain investments in mortgage-backed
securities in determining the constant effective yield used to recognize
interest income. Prepayment estimates are based on information received from
brokers who deal in mortgage-backed securities.
Mortgage loans on real estate are carried at amortized cost less reserves for
mortgage loan losses. The estimated fair value of the mortgage loans is
determined by a discounted cash flow analysis using mortgage interest rates
currently offered for mortgages of similar maturities.
Impairment of mortgage loans is measured as the excess of the loan's recorded
investment over its present value of expected principal and interest payments
discounted at the loan's effective interest rate, or the fair value of
collateral. The amount of the impairment is recorded in a reserve for
mortgage loan losses. The reserve for mortgage loans losses is maintained at
a level that management believes is adequate to absorb estimated losses in
the portfolio. The level of the reserve account is determined based on
several factors, including historical experience, expected future principal
and interest payments, estimated collateral values, and current and
anticipated economic and political conditions. Management regularly evaluates
the adequacy of the reserve for mortgage loan losses.
The Company generally stops accruing interest on mortgage loans for which
interest payments are delinquent more than three months. Based on
management's judgement as to the ultimate collectibility of principal,
interest payments received are either recognized as income or applied to the
recorded investment in the loan.
The cost of interest rate caps and floors is amortized to investment income
over the life of the contracts and payments received as a result of these
agreements are recorded as investment income when realized. The amortized
cost of interest rate caps and floors is included in other investments.
Amounts paid or received under interest rate swap agreements are recognized
as an adjustment to investment income.
Policy loans are carried at the aggregate of the unpaid loan balances which
do not exceed the cash surrender values of the related policies.
When evidence indicates a decline, which is other than temporary, in the
underlying value or earning power of individual investments, such investments
are written down to the fair value by a charge to income.
Statements of cash flows
The Company considers investments with a maturity at the date of their
acquisition of three months or less to be cash equivalents. These securities
are carried principally at amortized cost which approximates fair value.
Supplementary information to the consolidated statements of cash flows
for the years ended Dec. 31 is summarized as follows:
1996 1995 1994
--------- -------- -----
Cash paid during the year for:
Income taxes $317,283 $191,011 $226,365
Interest on borrowings 4,119 5,524 1,553
Recognition of profits on annuity contracts and insurance policies
Profits on fixed deferred annuities are recognized by the Company over the
lives of the contracts, using primarily the interest method. Profits
represent the excess of investment income earned from investment of contract
considerations over interest credited to contract owners and other expenses.
The retrospective deposit method is used in accounting for universal
life-type insurance. This method recognizes profits over the lives of the
policies in proportion to the estimated gross profits expected to be
realized.
Premiums on traditional life, disability income and long-term care insurance
policies are recognized as revenue when due, and related benefits and
expenses are associated with premium revenue in a manner that results in
recognition of profits over the lives of the insurance policies. This
association is accomplished by means of the provision for future policy
benefits and the deferral and subsequent amortization of policy acquisition
costs.
Policyholder and contractholder charges include the monthly cost of insurance
charges and issue and administrative fees. These charges also include the
minimum death benefit guarantee fees received from the variable life
insurance separate accounts. Management and other fees include investment
management fees and mortality and expense risk fees from the variable annuity
and variable life insurance separate accounts and underlying funds.
Deferred policy acquisition costs
The costs of acquiring new business, principally sales compensation, policy
issue costs, underwriting and certain sales expenses, have been deferred on
insurance and annuity contracts. The deferred acquisition costs for most
single premium deferred annuities and installment annuities are amortized in
relation to surrender charge revenue and a portion of the excess of
investment income earned from investment of the contract considerations over
the interest credited to contract owners. The costs for universal life-type
insurance and certain installment annuities are amortized as a percentage of
the estimated gross profits expected to be realized on the policies. For
traditional life, disability income and long-term care insurance policies,
the costs are amortized over an appropriate period in proportion to premium
revenue.
Liabilities for future policy benefits
Liabilities for universal life-type insurance, single premium deferred
annuities and installment annuities are accumulation values.
Liabilities for fixed annuities in a benefit status are based on the
Progressive Annuity Table with interest at 5 percent, the 1971 Individual
Annuity Table with interest at 7 percent or 8.25 percent, or the 1983a Table
with various interest rates ranging from 5.5 percent to 9.5 percent,
depending on year of issue.
Liabilities for future benefits on traditional life insurance are based on
the net level premium method and anticipated rates of mortality, policy
persistency and interest earnings. Anticipated mortality rates generally
approximate the 1955-1960 Select and Ultimate Basic Table for policies issued
prior to 1980, the 1965-1970 Select and Ultimate Basic Table for policies
issued from 1981-1984 and the 1975-1980 Select and Ultimate Basic Table for
policies issued after 1984. Anticipated policy persistency rates vary by
policy form, issue age and policy duration with persistency on cash value
plans generally anticipated to be better than persistency on term insurance
plans. Anticipated interest rates are 4% for policies issued before 1974,
5.25% for policies issued from 1974-1980, and range from 10% to 6% depending
on policy form, issue year and policy duration for policies issued after
1980.
Liabilities for future disability income policy benefits include both policy
reserves and claim reserves. Policy reserves are based on the net level
premium method and anticipated rates of morbidity, mortality, policy
persistency and interest earnings. Anticipated morbidity rates are based on
the 1964 Commissioners Disability Table for policies issued before 1996 and
the 1985 CIDA table for policies issued in 1996. Anticipated mortality rates
are based on the 1958 Commissioners Standard Ordinary Table for policies
issued before 1996 and the 1975-1980 Basic Table for policies issued in 1996.
Anticipated policy persistency rates vary by policy form, occupation class,
issue age and policy duration. Anticipated interest rates are 3% for policies
issued before 1996 and grade from 7.5% to 5% over five years for policies
issued in 1996. Claim reserves are calculated on the basis of anticipated
rates of claim continuance and interest earnings. Anticipated claim
continuance rates are based on the 1964 Commissioners Disability Table for
claims incurred before 1993 and the 1985 CIDA Table for claims incurred after
1992. Anticipated interest rates are 8% for claims incurred prior to 1992, 7%
for claims incurred in 1992 and 6% for claims incurred after 1992.
Liabilities for future long-term care policy benefits include both policy
reserves and claim reserves. Policy reserves are based on the net level
premium method and anticipated rates of morbidity, mortality, policy
persistency and interest earnings. Anticipated morbidity rates are based on
the 1985 National Nursing Home Survey. Anticipated mortality rates are based
on the 1983a Table. Anticipated policy persistency rates vary by policy form,
issue age and policy duration. Anticipated interest rates are 9.5% grading to
7% over 10 years for policies issued from 1989-1992 and 7.75% grading to 7%
over 4 years for policies issued after 1992. Claim reserves are calculated on
the basis of anticipated rates of claim continuance and interest earnings.
Anticipated claim continuance rates are based on the 1985 National Nursing
Home Survey. Anticipated interest rates are 8% for claims incurred prior to
1992, 7% claims incurred in 1992 and 6% for claims incurred after 1992.
Reinsurance
The maximum amount of life insurance risk retained by the Company on any one
life is $750 of life and waiver of premium benefits plus $50 of accidental
death benefits. The maximum amount of disability income risk retained by the
Company on any one life is $6 of monthly benefit for benefit periods longer
than three years. The excesses are reinsured with other life insurance
companies on a yearly renewable term basis. Graded premium whole life and
long-term care policies are primarily reinsured on a coinsurance basis.
Federal income taxes
The Company's taxable income is included in the consolidated federal income
tax return of American Express Company. The Company provides for income taxes
on a separate return basis, except that, under an agreement between American
Express Financial Corporation and American Express Company, tax benefit is
recognized for losses to the extent they can be used on the consolidated tax
return. It is the policy of American Express Financial Corporation to
reimburse subsidiaries for all tax benefits.
Included in other liabilities at Dec. 31, 1996 and 1995 are $33,358 and
($13,415), respectively, receivable from/(payable to) American Express
Financial Corporation for federal income taxes.
Separate account business
The separate account assets and liabilities represent funds held for the
exclusive benefit of the variable annuity and variable life insurance
contract owners.
The Company makes contractual mortality assurances to the variable annuity
contract owners that the net assets of the separate accounts will not be
affected by future variations in the actual life expectancy experience of the
annuitants and the beneficiaries from the mortality assumptions implicit in
the annuity contracts. The Company makes periodic fund transfers to, or
withdrawals from, the separate accounts for such actuarial adjustments for
variable annuities that are in the benefit payment period. For variable life
insurance, the Company guarantees that the rates at which insurance charges
and administrative fees are deducted from contract funds will not exceed
contractual maximums. The Company also guarantees that the death benefit will
continue payable at the initial level regardless of investment performance so
long as minimum premium payments are made.
Accounting changes
The Financial Accounting Standards Board's (FASB) Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," was effective
Jan. 1, 1996. The new rule did not have a material impact on the Company's
results of operations or financial condition. The Company adopted SFAS No.
115, "Accounting for Certain Investments in Debt and Equity Securities." The
effect of adopting the new rule was to increase stockholder's equity by
$181,269, net of tax, as of Jan. 1, 1994, but the adoption had no impact on
the Company's net income.
Reclassification
Certain 1995 and 1994 amounts have been reclassified to conform to the 1996
presentation.
2. Investments
Fair values of investments in fixed maturities represent quoted market prices
and estimated values when quoted prices are not available. Estimated values
are determined by established procedures involving, among other things,
review of market indices, price levels of current offerings of comparable
issues, price estimates and market data from independent brokers and
financial files.
Net realized gain (loss) on investments for the years ended Dec. 31 is
summarized as follows:
1996 1995 1994
-------- -------- --------
Fixed maturities ............ $ 8,736 $ 9,973 $ (1,575)
Mortgage loans .............. (8,745) (13,259) (3,013)
Other investments ........... (150) (1,612) 306
-------- -------- --------
$ (159) $ (4,898) $ (4,282)
======== ======== ========
<PAGE>
Changes in net unrealized appreciation (depreciation) of investments for the
years ended Dec. 31 are summarized as follows:
1996 1995 1994
---------- ------------ -----------
Fixed maturities:
Held to maturity ....... $ (335,515) $ 1,195,847 $(1,329,740)
Available for sale ..... (231,853) 811,649 (720,449)
Equity securities ......... (52) 3,118 (2,917)
The amortized cost, gross unrealized gains and losses and fair values of
investments in fixed maturities and equity securities at Dec. 31, 1996 are as
follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Held to maturity Cost Gains Losses Value
---------------- ---- ----- ------ -----
<S> <C> <C> <C> <C>
U.S. Government agency obligations $ 44,002 $ 933 $ 1,276 $ 43,659
State and municipal obligations 9,685 412 -- 10,097
Corporate bonds and obligations 8,057,997 356,687 47,639 8,367,045
Mortgage-backed securities 2,124,695 21,577 45,423 2,100,849
------------ --------- ------- ------------
$10,236,379 $379,609 $94,338 $10,521,650
=========== ======== ======= ===========
Gross Gross
Amortized Unrealized Unrealized Fair
Available for sale Cost Gains Losses Value
------------------ ---- ----- ------ -----
U.S. Government agency obligations $ 77,944 $ 2,607 $ 96 $ 80,455
State and municipal obligations 11,032 1,336 -- 12,368
Corporate bonds and obligations 3,701,604 122,559 24,788 3,799,375
Mortgage-backed securities 7,218,042 104,808 68,203 7,254,647
---------- -------- ------ -----------
Total fixed maturities 11,008,622 231,310 93,087 11,146,845
Equity securities 3,000 308 -- 3,308
----------- -------- ------- -----------
$11,011,622 $231,618 $93,087 $11,150,153
=========== ======== ======= ===========
</TABLE>
The amortized cost, gross unrealized gains and losses and fair values of
investments in fixed maturities and equity securities at Dec. 31, 1995 are as
follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Held to maturity Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Government agency obligations $ 64,523 $ 3,919 $ -- $ 68,442
State and municipal obligations 11,936 362 32 12,266
Corporate bonds and obligations 8,921,431 620,327 36,786 9,504,972
Mortgage-backed securities 2,259,701 42,684 9,688 2,292,697
----------- --------- ------- -----------
$11,257,591 $667,292 $46,506 $11,878,377
=========== ======== ======= ===========
Gross Gross
Amortized Unrealized Unrealized Fair
Available for sale Cost Gains Losses Value
U.S. Government agency obligations $ 84,082 $ 3,248 $ 50 $ 87,280
State and municipal obligations 11,020 1,476 -- 12,496
Corporate bonds and obligations 2,514,308 186,596 3,451 2,697,453
Mortgage-backed securities 7,536,726 206,288 24,031 7,718,983
---------- -------- ------- ----------
Total fixed maturities 10,146,136 397,608 27,532 10,516,212
Equity securities 3,156 361 -- 3,517
---------- -------- ------- ----------
$10,149,292 $397,969 $27,532 $10,519,729
=========== ======== ======= ===========
</TABLE>
<PAGE>
The amortized cost and fair value of investments in fixed maturities at Dec.
31, 1996 by contractual maturity are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
Amortized Fair
Held to maturity Cost Value
Due in one year or less $ 197,711 $ 200,134
Due from one to five years 2,183,374 2,294,335
Due from five to ten years 4,606,775 4,779,690
Due in more than ten years 1,123,824 1,146,642
Mortgage-backed securities 2,124,695 2,100,849
------------ ------------
$10,236,379 $10,521,650
Amortized Fair
Available for sale Cost Value
Due in one year or less $ 227,051 $ 229,650
Due from one to five years 851,428 899,098
Due from five to ten years 2,140,579 2,182,079
Due in more than ten years 571,522 581,371
Mortgage-backed securities 7,218,042 7,254,647
------------ ------------
$11,008,622 $11,146,845
During the years ended Dec. 31, 1996, 1995 and 1994, fixed maturities
classified as held to maturity were sold with amortized cost of $277,527,
$333,508 and $61,290, respectively. Net gains and losses on these sales were
not significant. The sale of these fixed maturities was due to significant
deterioration in the issuers' creditworthiness.
As a result of adopting the FASB Special Report, "A Guide to Implementation
of Statement 115 on Accounting for Certain Investments in Debt and Equity
Securities," the Company reclassified securities with a book value of $91,760
and net unrealized gains of $881 from held to maturity to available for sale
in December 1995.
In addition, fixed maturities available for sale were sold during 1996 with
proceeds of $238,905 and gross realized gains and losses of $571 and $16,084,
respectively. Fixed maturities available for sale were sold during 1995 with
proceeds of $136,825 and gross realized gains and losses of $nil and $5,781,
respectively. Fixed maturities available for sale were sold during 1994 with
proceeds of $374,564 and gross realized gains and losses of $1,861 and
$7,602, respectively.
At Dec. 31, 1996, bonds carried at $13,571 were on deposit with various
states as required by law.
<PAGE>
Net investment income for the years ended Dec. 31 is summarized as follows:
1996 1995 1994
--------- ------- -----
Interest on fixed maturities $1,666,929 $1,656,136 $1,556,756
Interest on mortgage loans 283,830 232,827 196,521
Other investment income 43,283 35,936 38,366
Interest on cash equivalents 5,754 5,363 6,872
------------- ------- -----------
1,999,796 1,930,262 1,798,515
Less investment expenses 34,434 22,953 16,642
------------ --------- ----------
$1,965,362 $1,907,309 $1,781,873
========== ========== ==========
At Dec. 31, 1996, investments in fixed maturities comprised 84 percent of the
Company's total invested assets. These securities are rated by Moody's and
Standard & Poor's (S&P), except for securities carried at approximately $1.9
billion which are rated by American Express Financial Corporation internal
analysts using criteria similar to Moody's and S&P. A summary of investments
in fixed maturities, at amortized cost, by rating on Dec. 31 is as follows:
Rating 1996 1995
------ ----------- -----------
Aaa/AAA ....................... $ 9,460,134 $ 9,907,664
Aaa/AA ........................ 2,870 3,112
Aa/AA ......................... 241,914 279,403
Aa/A .......................... 192,631 154,846
A/A ........................... 2,949,895 3,104,122
A/BBB ......................... 1,034,661 871,782
Baa/BBB ....................... 4,531,515 4,417,654
Baa/BB ........................ 768,285 657,633
Below investment grade ........ 2,063,096 2,007,511
----------- -----------
$21,245,001 $21,403,727
At Dec. 31, 1996, 95 percent of the securities rated Aaa/AAA are GNMA, FNMA
and FHLMC mortgage-backed securities. No holdings of any other issuer are
greater than 1 percent of the Company's total investments in fixed
maturities.
<PAGE>
At Dec. 31, 1996, approximately 13.7 percent of the Company's invested assets
were mortgage loans on real estate. Summaries of mortgage loans by region of
the United States and by type of real estate are as follows:
Dec. 31, 1996 Dec. 31, 1995
------------------------- ------------------------
On Balance Commitments On Balance Commitments
Region Sheet to Purchase Sheet to Purchase
------------------ ----------- ----------- ----------- ----------
East North Central $ 777,960 $ 19,358 $ 720,185 $ 67,206
West North Central 389,285 29,620 303,113 34,411
South Atlantic 891,852 35,007 732,529 111,967
Middle Atlantic 553,869 17,959 508,634 37,079
New England 310,177 14,042 244,816 40,452
Pacific 190,770 4,997 168,272 23,161
West South Central 105,173 11,246 61,860 27,978
East South Central 75,176 -- 58,462 10,122
Mountain 236,597 11,401 184,964 16,774
---------- -------- -------- ------
3,530,859 143,630 2,982,835 369,150
Less allowance for losses 37,495 -- 37,340 --
---------- -------- ------- ---
$3,493,364 $143,630 $2,945,495 $369,150
========== ======== ========== ========
Dec. 31, 1996 Dec. 31, 1995
------------------------- ------------------------
On Balance Commitments On Balance Commitments
Property type Sheet to Purchase Sheet to Purchase
- ----------------------- --------- --------- ----------- -----------
Department/retail stores $1,154,179 $ 68,032 $ 985,660 $ 134,538
Apartments 1,119,352 23,246 1,038,446 84,978
Office buildings 611,395 27,653 464,381 62,664
Industrial buildings 296,944 6,716 255,469 22,721
Hotels/motels 97,870 6,257 31,335 48,816
Nursing/retirement homes 88,226 1,877 80,864 4,378
Mixed Use 73,120 -- 53,169 --
Medical buildings 67,178 8,289 57,772 2,495
Other 22,595 1,560 15,739 8,560
------------ ---------- --------- --------
3,530,859 143,630 2,982,835 369,150
Less allowance for losses 37,495 -- 37,340 --
------------ ------ --------- ------
$3,493,364 $143,630 $2,945,495 $369,150
========== ======== ========== ========
<PAGE>
Mortgage loan fundings are restricted by state insurance regulatory authorities
to 80 percent or less of the market value of the real estate at the time of
origination of the loan. The Company holds the mortgage document, which gives
the right to take possession of the property if the borrower fails to perform
according to the terms of the agreement. The fair value of the mortgage loans is
determined by a discounted cash flow analysis using mortgage interest rates
currently offered for mortgages of similar maturities. Commitments to purchase
mortgages are made in the ordinary course of business. The fair value of the
mortgage commitments is $nil.
At Dec. 31, 1996 and 1995, the Company's recorded investment in impaired loans
was $79,441 and $83,874 with a reserve of $16,162 and $19,307, respectively.
During 1996 and 1995, the average recorded investment in impaired loans was
$74,338 and $74,567, respectively.
The Company recognized $4,889 and $5,014 of interest income related to impaired
loans for the year ended Dec. 31, 1996 and 1995, respectively.
The following table presents changes in the reserve for investment losses
related to all loans:
1996 1995
--------- --------
Balance, Jan. 1 .................... $ 37,340 $ 35,252
Provision for investment losses .... 10,005 15,900
Loan payoffs ....................... (4,700) (11,900)
Foreclosures ....................... (5,150) (1,350)
Other .............................. -- (562)
-------- --------
Balance, Dec. 31 ................... $ 37,495 $ 37,340
======== ========
At Dec. 31, 1996, the Company had commitments to purchase affordable housing
limited partnership investments of $28,476, which is recorded as a liability in
the accompanying balance sheets. The total amounts committed in 1997 and 1998
are $25,234 and $3,242, respectively. The Company also had commitments to
purchase real estate investments for $35,425. Commitments to purchase real
estate investments are made in the ordinary course of business. The fair value
of these commitments is $nil.
<PAGE>
3. Income taxes
The Company qualifies as a life insurance company for federal income tax
purposes. As such, the Company is subject to the Internal Revenue Code
provisions applicable to life insurance companies.
Income tax expense consists of the following:
1996 1995 1994
------ -------- -------
Federal income taxes:
Current $260,357 $218,040 $186,508
Deferred (65,609) (33,810) (19,175)
-------- -------- --------
194,748 184,230 167,333
State income taxes-current 12,390 11,612 9,010
--------- ------- ------
Income tax expense $207,138 $195,842 $176,343
======== ======== ========
Increases (decreases) to the federal tax provision applicable to pretax
income based on the statutory rate are attributable to:
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ----------------- -----------------
Provision Rate Provision Rate Provision Rate
<S> <C> <C> <C> <C> <C> <C>
Federal income
taxes based on
the statutory rate $217,600 35.0% $196,274 35.0% $179,379 35.0%
Increases (decreases)
are attributable to:
Tax-excluded interest
and dividend income (9,636) (1.6) (8,524) (1.5) (9,939) (2.0)
Other, net (13,216) (2.1) (3,520) (0.6) (2,107) (0.4)
--------- ----- -------- ---- -------- ----
Federal income taxes $194,748 31.3% $184,230 32.9% $167,333 32.6%
======== ===== ======== ==== ======== ====
</TABLE>
A portion of life insurance company income earned prior to 1984 was not
subject to current taxation but was accumulated, for tax purposes, in a
policyholders' surplus account. At Dec. 31, 1996, the Company had a
policyholders' surplus account balance of $20,114. The policyholders' surplus
account is only taxable if dividends to the stockholder exceed the
stockholder's surplus account or if the Company is liquidated. Deferred
income taxes of $7,040 have not been established because no distributions of
such amounts are contemplated.
<PAGE>
Significant components of the Company's deferred tax assets and liabilities
as of Dec. 31 are as follows:
1996 1995
------- -----
Deferred tax assets:
Policy reserves $724,412 $600,176
Life insurance guarantee
fund assessment reserve 29,854 26,785
Other 2,763 --
--------- -------
Total deferred tax assets 757,029 626,961
--------- -------
Deferred tax liabilities:
Deferred policy acquisition costs 665,685 590,762
Unrealized gain on investments 48,486 129,653
Investments, other 8,935 17,152
Other -- 2,298
-------- -------
Total deferred tax liabilities 723,106 739,865
-------- -------
Net deferred tax assets (liabilities)$ 33,923 $(112,904)
========= =========
The Company is required to establish a "valuation allowance" for any portion
of the deferred tax assets that management believes will not be realized. In
the opinion of management, it is more likely than not that the Company will
realize the benefit of the deferred tax assets and, therefore, no such
valuation allowance has been established.
4. Stockholder's equity
During 1996, the Company received a $4,801 capital contribution from its
parent, American Express Financial Corporation. During 1995, the Company
received a $39,700 capital contribution from its parent in the form of
investments in fixed maturities and mortgage loans. In addition, effective
Jan. 1, 1995, the Company began consolidating the financial results of ACLAC.
This change reflected the transfer of ownership of ACLAC from Amex Life
Assurance Company (Amex Life), a former affiliate, to the Company prior to
the sale of Amex Life to an unaffiliated third party on Oct. 2, 1995. This
transfer of ownership to the Company has been reflected as a capital
contribution of $17,114 in the accompanying financial statements. The effect
of this change in reporting entity was not significant and prior periods have
not been restated.
As discussed in Note 5, the Company entered into a reinsurance agreement with
Amex Life during 1995. As a result of this transaction, a loss of $4,574 was
realized and reported as a direct charge to retained earnings.
Other changes in the statements of stockholder's equity are primarily related
to reinsurance transactions with affiliates.
Retained earnings available for distribution as dividends to the parent are
limited to the Company's surplus as determined in accordance with accounting
practices prescribed by state insurance regulatory authorities. Statutory
unassigned surplus aggregated $1,261,592 as of Dec. 31, 1996 and $1,103,993
as of Dec. 31, 1995 (see Note 3 with respect to the income tax effect of
certain distributions). In addition, any dividend distributions in 1997 in
excess of approximately $351,306 would require approval of the Department of
Commerce of the State of Minnesota.
Statutory net income for the years ended Dec. 31 and capital and surplus as
of Dec. 31 are summarized as follows:
1996 1995 1994
------ ------ ------
Statutory net income $ 365,585 $ 326,799 $ 294,699
Statutory capital and surplus 1,565,082 1,398,649 1,261,958
Dividends paid to American Express Financial Corporation were $165,000 in
1996, $180,000 in 1995, and $165,000 in 1994.
5. Related party transactions
The Company has loaned funds to American Express Financial Corporation under
a collateral loan agreement. The balance of the loan was $11,800 and $25,800
at Dec. 31, 1996 and 1995, respectively. This loan can be increased to a
maximum of $75,000 and pays interest at a rate equal to the preceding month's
effective new money rate for the Company's permanent investments. It is
collateralized by equity securities valued at $116,543 at Dec. 31, 1996.
Interest income on related party loans totaled $780, $1,371 and $2,894 in
1996, 1995 and 1994, respectively.
The Company purchased a five year secured note from an affiliated company
which had an outstanding balance of $nil and $19,444 at Dec. 31, 1996 and
1995, respectively. The note bears a fixed rate of 8.42 percent. Interest
income on the above note totaled $1,637, $1,937 and $2,278 in 1996, 1995 and
1994, respectively.
The Company has a reinsurance agreement whereby it assumed 100 percent of a
block of single premium life insurance business from Amex Life Assurance
Company (Amex Life), a former affiliate. The accompanying consolidated
balance sheets at Dec. 31, 1996 and 1995 include $758,812 and $764,663,
respectively, of future policy benefits related to this agreement.
The Company has a reinsurance agreement to cede 50 percent of its long-term
care insurance business to Amex Life. The accompanying consolidated balance
sheets at Dec. 31, 1996 and 1995 include $134,121 and $95,484, respectively,
of reinsurance receivables related to this agreement. Premiums ceded amounted
to $32,917, $25,553 and $20,360 and reinsurance recovered from reinsurers
amounted to $5,135, $4,998 and $3,022 for the years ended Dec. 31, 1996, 1995
and 1994, respectively.
The Company has a reinsurance agreement to assume deferred annuity contracts
from Amex Life. At Oct. 1, 1995, a $803,618 block of deferred annuities and
$28,327 of deferred policy acquisition costs were transferred to the Company.
The accompanying consolidated balance sheet at Dec. 31, 1996 includes
$828,298 of future policy benefits related to this agreement. Contracts with
future policy benefits totaling $50,400 were still reinsured with the former
affiliate at Dec. 31, 1996. The remaining contracts had been novated to
Company contracts.
Until July 1, 1995, the Company participated in the IDS Retirement Plan of
American Express Financial Corporation which covered all permanent employees
age 21 and over who had met certain employment requirements. Effective July
1, 1995, the IDS Retirement Plan was merged with American Express Company's
American Express Retirement Plan, which simultaneously was amended to include
a cash balance formula and a lump sum distribution option. Employer
contributions to the plan are based on participants' age, years of service
and total compensation for the year. Funding of retirement costs for this
plan complies with the applicable minimum funding requirements specified by
ERISA. The Company's share of the total net periodic pension cost was $174,
$155 and $156 in 1996, 1995 and 1994, respectively.
The Company also participates in defined contribution pension plans of
American Express Company which cover all employees who have met certain
employment requirements. Company contributions to the plans are a percent of
either each employee's eligible compensation or basic contributions. Costs of
these plans charged to operations in 1996, 1995 and 1994 were $990, $815 and
$957, respectively.
The Company participates in defined benefit health care plans of American
Express Financial Corporation that provide health care and life insurance
benefits to retired employees and retired financial advisors. The plans
include participant contributions and service related eligibility
requirements. Upon retirement, such employees are considered to have been
employees of American Express Financial Corporation. American Express
Financial Corporation expenses these benefits and allocates the expenses to
its subsidiaries. Accordingly, costs of such benefits to the Company are
included in employee compensation and benefits and cannot be identified on a
separate company basis.
Charges by American Express Financial Corporation for use of joint
facilities, marketing services and other services aggregated $397,362,
$377,139, and $335,183 for 1996, 1995 and 1994, respectively. Certain of
these costs are included in deferred policy acquisition costs. In addition,
the Company rents its home office space from American Express Financial
Corporation on an annual renewable basis.
6. Commitments and contingencies
At Dec. 31, 1996 and 1995, traditional life insurance and universal life-type
insurance in force aggregated $67,274,354 and $59,683,532, respectively, of
which $3,875,921 and $3,771,204 were reinsured at the respective year ends.
The Company also reinsures a portion of the risks assumed under disability
income and long-term care policies. Under all reinsurance agreements,
premiums ceded to reinsurers amounted to $48,250, $39,399 and $31,016 and
reinsurance recovered from reinsurers amounted to $15,612, $14,088, and
$10,778 for the years ended Dec. 31, 1996, 1995 and 1994. Reinsurance
contracts do not relieve the Company from its primary obligation to
policyholders.
A number of lawsuits have been filed against life and health insurers in
jurisdictions in which the Company and its subsidiaries do business involving
insurers' sales practices, alleged agent misconduct, failure to properly
supervise agents, and other matters. In December 1996, an action of this type
was brought against the Company and its parent, American Express Financial
Corporation. The plaintiffs purport to represent a class consisting of all
persons who replaced existing Company policies with new Company policies from
and after Jan. 1, 1985. The complaint puts at issue various alleged sales
practices and misrepresentations, alleged breaches of fiduciary duties and
alleged violations of consumer fraud statutes. Plaintiffs seek damages in an
unspecified amount and seek to establish a claims resolution facility for the
determination of individual issues. The Company and its parent believe they
have meritorious defenses to the claims raised in the lawsuit. The outcome of
any litigation cannot be predicted with certainty, particularly in the early
stages of an action. In the opinion of management, however, the ultimate
resolution of the above lawsuit and others filed against the Company should
not have a material adverse effect on the Company's consolidated financial
position.
During 1996, the Company settled the federal tax audit for 1987 through 1989
tax years. There was no material impact as a result of that audit. Also, the
IRS is currently auditing the Company's 1990 through 1992 tax years.
Management does not believe there will be a material impact as a result of
this audit.
7. Lines of credit
The Company has available lines of credit with two banks and its parent
aggregating $175,000, of which $100,000 is with its parent. The lines of
credit are at 40 to 80 basis points over the lenders' cost of funds or equal
to the prime rate, depending on which line of credit agreement is used. The
$25,000 line of credit with one bank expired on Dec. 31, 1996 and the Company
did not seek renewal. The $50,000 line of credit with the other bank expires
on June 30, 1997 and the Company expects to seek renewal. Borrowings
outstanding under these agreements were $nil at Dec. 31, 1996 and 1995.
8. Derivative financial instruments
The Company enters into transactions involving derivative financial
instruments to manage its exposure to interest rate risk, including hedging
specific transactions. The Company does not hold derivative instruments for
trading purposes. The Company manages risks associated with these instruments
as described below.
Market risk is the possibility that the value of the derivative financial
instruments will change due to fluctuations in a factor from which the
instrument derives its value, primarily an interest rate. The Company is not
impacted by market risk related to derivatives held for non-trading purposes
beyond that inherent in cash market transactions. Derivatives held for
purposes other than trading are largely used to manage risk and, therefore,
the cash flow and income effects of the derivatives are inverse to the
effects of the underlying transactions.
Credit risk is the possibility that the counterparty will not fulfill the
terms of the contract. The Company monitors credit exposure related to
derivative financial instruments through established approval procedures,
including setting concentration limits by counterparty and industry, and
requiring collateral, where appropriate. A vast majority of the Company's
counterparties are rated A or better by Moody's and Standard & Poor's.
Credit exposure related to interest rate caps and floors is measured by the
replacement cost of the contracts. The replacement cost represents the fair
value of the instruments.
The notional or contract amount of a derivative financial instrument is
generally used to calculate the cash flows that are received or paid over the
life of the agreement. Notional amounts are not recorded on the balance
sheet. Notional amounts far exceed the related credit exposure.
<PAGE>
The Company's holdings of derivative financial instruments are as follows:
Notional Carrying Fair Total Credit
Dec. 31, 1996 Amount Value Value Exposure
------------- --------- ------- -------- ------------
Assets:
Interest rate caps $ 4,000,000 $16,227 $ 7,439 $ 7,439
Interest rate floors 1,000,000 2,041 4,341 4,341
Interest rate swaps 1,000,000 -- (24,715) --
---------- ------- -------- -------
$6,000,000 $18,268 $(12,935) $11,780
========== ======= ======== =======
Dec. 31, 1995
Assets:
Interest rate caps $5,100,000 $26,680 $ 8,366 $ 8,366
========== ======= ======== =======
The fair values of derivative financial instruments are based on market
values, dealer quotes or pricing models. The interest rate caps and floors
expire on various dates from 1996 to 2001. The interest rate swaps are in
effect through 2001.
Interest rate caps, swaps and floors are used principally to manage the
Company's interest rate risk. These instruments are used to protect the
margin between interest rates earned on investments and the interest rates
credited to related annuity contract holders.
9. Fair values of financial instruments
The Company discloses fair value information for most on- and off-balance
sheet financial instruments for which it is practicable to estimate that
value. Fair values of life insurance obligations and all non-financial
instruments, such as deferred acquisition costs are excluded. Off-balance
sheet intangible assets, such as the value of the field force, are also
excluded. Management believes the value of excluded assets is significant.
The fair value of the Company, therefore, cannot be estimated by aggregating
the amounts presented.
1996 1995
------ -----
<TABLE>
<CAPTION>
Carrying Fair Carrying Fair
Financial Assets Value Value Value Value
---------------- ----- ----- ----- -----
<S> <C> <C> <C> <C>
Investments:
Fixed maturities (Note 2):
Held to maturity $10,236,379 $10,521,650 $11,257,591 $11,878,377
Available for sale 11,146,845 11,146,845 10,516,212 10,516,212
Mortgage loans on
real estate (Note 2) 3,493,364 3,606,077 2,945,495 3,184,666
Other:
Equity securities (Note 2) 3,308 3,308 3,517 3,517
Derivative financial
instruments (Note 8) 18,268 (12,935) 26,680 8,366
Other 63,993 66,242 52,182 52,182
Cash and
cash equivalents (Note 1) 224,603 224,603 72,147 72,147
Separate account assets
(Note 1) 18,535,160 18,535,160 14,974,082 14,974,082
Financial Liabilities
Future policy benefits
for fixed annuities 20,641,986 19,721,968 20,259,265 19,603,114
Separate account
liabilities 17,358,087 16,688,519 14,208,619 13,665,636
</TABLE>
<PAGE>
At Dec. 31, 1996 and 1995, the carrying amount and fair value of future
policy benefits for fixed annuities exclude life insurance-related contracts
carried at $1,112,155 and $1,070,598, respectively, and policy loans of
$83,867 and $74,973, respectively. The fair value of these benefits is based
on the status of the annuities at Dec. 31, 1996 and 1995. The fair value of
deferred annuities is estimated as the carrying amount less any applicable
surrender charges and related loans. The fair value for annuities in non-life
contingent payout status is estimated as the present value of projected
benefit payments at rates appropriate for contracts issued in 1996 and 1995.
At Dec. 31, 1996 and 1995, the fair value of liabilities related to separate
accounts is estimated as the carrying amount less any applicable surrender
charges and less variable insurance contracts carried at $1,177,073 and
$765,463, respectively.
10.Segment information
The Company's operations consist of two business segments; first, individual
and group life insurance, disability income and long-term care insurance, and
second, annuity products designed for individuals, pension plans, small
businesses and employer-sponsored groups. The consolidated condensed
statements of income for the years ended Dec. 31, 1996, 1995 and 1994 and
total assets at Dec. 31, 1996, 1995 and 1994 by segment are summarized as
follows:
1996 1995 1994
------ ------ -----
Net investment income:
Life, disability income
and long-term care insurance $ 262,998 $ 256,242 $ 247,047
Annuities 1,702,364 1,651,067 1,534,826
----------- ----------- ------------
$ 1,965,362 $ 1,907,309 $ 1,781,873
=========== =========== ============
Premiums, charges and fees:
Life, disability income
and long-term care insurance $ 448,389 $ 384,008 $ 335,375
Annuities 308,873 249,557 193,370
------------ ------------ -------------
$ 757,262 $ 633,565 $ 528,745
============ ============ =============
Income before income taxes:
Life, disability income
and long-term care insurance $ 161,115 $ 125,402 $ 122,677
Annuities 460,758 440,278 394,117
Net loss on investments (159) (4,898) (4,282)
------------- ------------- --------------
$ 621,714 $ 560,782 $ 512,512
============ ============ =============
Total assets:
Life, disability income
and long-term care insurance $ 7,028,906 $ 6,195,870 $ 5,269,188
Annuities 40,277,075 36,704,208 30,478,355
----------- ----------- -----------
$47,305,981 $42,900,078 $35,747,543
=========== =========== ===========
Allocations of net investment income and certain general expenses are based
on various assumptions and estimates.
Assets are not individually identifiable by segment and have been allocated
principally based on the amount of future policy benefits by segment.
Capital expenditures and depreciation expense are not material, and
consequently, are not reported.
<PAGE>
Report of Independent Auditors
The Board of Directors
IDS Life Insurance Company
We have audited the accompanying consolidated balance sheets of IDS Life
Insurance Company (a wholly owned subsidiary of American Express Financial
Corporation) as of December 31, 1996 and 1995, and the related consolidated
statements of income, stockholder's equity and cash flows for each of the three
years in the period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of IDS Life Insurance
Company at December 31, 1996 and 1995, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, the Company
changed its method of accounting for certain investments in debt and equity
securities in 1994.
Ernst & Young LLP
February 7, 1997
Minneapolis, Minnesota
<PAGE>
PAGE 44
PART C.
Item 24. Financial Statements and Exhibits
(a) Financial Statements included in Part B of this Registration
Statement:
IDS Life Account SBS:
Statements of Net Assets at Dec. 31, 1996.
Statements of Operations for the year ended Dec. 31,
1996.
Statements of Changes in Net Assets for the years ended
Dec. 31, 1996 and 1995.
Notes to Financial Statements.
Report of Independent Auditors dated March 21, 1997.
IDS Life Insurance Company:
Consolidated Balance Sheets at Dec. 31, 1996 and
Dec. 31, 1995.
Consolidated Statements of Income for the years ended
Dec. 31, 1996, 1995 and 1994.
Consolidated Statements of Stockholder's Equity for the
years ended Dec. 31, 1996, 1995 and 1994.
Consolidated Statements of Cash Flows for the years ended
Dec. 31, 1996, 1995 and 1994.
Notes to Consolidated Financial Statements.
Report of Independent Auditors dated Feb. 7, 1997.
Exhibits to Financial Statements included in Part C: Financial Statement
Schedules I, III, IV, and V as required by Regulation S-X.:
Schedule I - Consolidated Summary of Investments
Other than Investments in Related
Parties
Schedule III - Supplementary Insurance Information
Schedule IV - Reinsurance
Schedule V - Valuation and Qualifying Accounts
Report of Independent Auditors dated February 7, 1997.
All other schedules to the consolidated financial statements required by
Article 7 of Regulation S-X are not required under the related
instructions or are inapplicable and, therefore, have been omitted.
(b) Exhibits:
1.1 Copy of Consent in Writing in Lieu of a Meeting of the Board of Directors
of IDS Life Insurance Company establishing IDS Life Account SLB on May 9,
1991, filed electronically as Exhibit 1.1 to Registrant's Post-Effective
Amendment No. 4 to Registration Statement No. 33-40779 is herein
incorporated by reference.
<PAGE>
PAGE 45
1.2 Copy of Consent in Writing in Lieu of a Meeting of the Board of Directors
of IDS Life Insurance Company Account SLB establishing three additional
subaccounts on May 9, 1991, filed electronically as Exhibit 1.2 to
Registrant's Post- Effective Amendment No. 4 to Registration Statement No.
33- 40779 is herein incorporated by reference.
2. Not applicable.
3. Form of Distribution Agreement between IDS Life Insurance Company and
Shearson Lehman Brothers, Inc., filed electronically as Exhibit 3 to
Registrant's Post-Effective Amendment No. 4 to Registration Statement No.
33-40779 is herein incorporated by reference.
4.1 Copy of Flexible Premium Deferred Variable Annuity Contract (No. 30377)
filed as Exhibit 4 to Registrant's Pre-Effective Amendment No. 1 to
Registration Statement No. 33-40779, is herein incorporated by reference.
5. Copy of Flexible Premium Deferred Variable Annuity Application (No. 34613),
filed electronically as Exhibit 5 to Registrant's Post-Effective Amendment
No. 4 to Registration Statement No. 33-40779 is herein incorporated by
reference.
6.1 Copy of Certificate of Incorporation of IDS Life dated July 24, 1957, filed
electronically as Exhibit 6.1 to Post- Effective Amendment No. 3 to
Registration Statement No. 33- 40779/812-7731, is hereby incorporated by
reference.
6.2 Copy of Amended By-Laws of IDS Life, filed electronically as Exhibit 6.2 to
Post-Effective Amendmend No. 3 to Registration Statement No.
33-40779/812-7731, is hereby incorporated by reference.
7. Not applicable.
8. Not applicable.
9. Opinion of Counsel and consent to its use as to the legality of the
securities being registered is filed with Registrant's most recent 24f-2
notice.
10. Consent of Independent Auditors is filed electronically herewith.
11. Financial Statement Schedules and Report of Independent Auditors, is filed
electronically herewith.
12. Not applicable.
13. Copy of schedule for computation of each performance quotation, filed
electronically as Exhibit 13 to Registrant's Post-Effective Amendment No. 4
to Registration Statement 33- 40779 is hereby incorporated by reference.
<PAGE>
PAGE 46
14. Financial Data Schedule is filed electronically herewith.
15. Power of Attorney, dated March 12, 1997 is filed electronically herewith.
Item 25. Directors and Officers of the Depositor (IDS Life
Insurance Company)
<TABLE>
<CAPTION>
Positions and
Name Principal Business Address Offices with Depositor
<S> <C> <C>
Timothy V. Bechtold IDS Tower 10 Vice President-Risk
Minneapolis, MN 55440 Management Products
David J. Berry IDS Tower 10 Vice President
Minneapolis, MN 55440
Robert M. Elconin IDS Tower 10 Vice President
Minneapolis, MN 55440
Morris Goodwin Jr. IDS Tower 10 Vice President and Treasurer
Minneapolis, MN 55440
Lorraine R. Hart IDS Tower 10 Vice President-Investments
Minneapolis, MN 55440
David R. Hubers IDS Tower 10 Director
Minneapolis, MN 55440
James M. Jensen IDS Tower 10 Vice President-Insurance
Minneapolis, MN 55440 Product Development
Richard W. Kling IDS Tower 10 Director and President
Minneapolis, MN 55440
Paul F. Kolkman IDS Tower 10 Director and Executive
Minneapolis, MN 55440 Vice President
Ryan R. Larson IDS Tower 10 Vice President
Minneapolis, MN 55440
James A. Mitchell IDS Tower 10 Director, Chairman of
Minneapolis, MN 55440 the Board and Chief
Executive Officer
Barry J. Murphy IDS Tower 10 Director and Executive
Minneapolis, MN 55440 Vice President-
Client Service
James R. Palmer IDS Tower 10 Vice President-Taxes
Minneapolis, MN 55440
Stuart A. Sedlacek IDS Tower 10 Director and Executive
Minneapolis, MN 55440 Vice President-Assured
Assets
<PAGE>
PAGE 47
Item 25. Directors and Officers of the Depositor (IDS Life Insurance Company (cont'd)
F. Dale Simmons IDS Tower 10 Vice President-
Minneapolis, MN 55440 Real Estate
Loan Management
William A. Stoltzmann IDS Tower 10 Vice President, General
Minneapolis, MN 55440 Counsel and Secretary
Melinda S. Urion IDS Tower 10 Director, Executive
Minneapolis, MN 55440 Vice President and
Controller
</TABLE>
Item 26. Persons Controlled by or Under Common Control with the
Depositor or Registrant
IDS Life Insurance Company is a wholly owned subsidiary
of American Express Financial Corporation. American
Express Financial Corporation is a wholly owned
subsidiary of American Express Company (American
Express).
The following list includes the names of major subsidiaries of
American Express.
Jurisdiction
Name of Subsidiary of Incorporation
I. Travel Related Services
American Express Travel Related
Services Company, Inc. New York
II. International Banking Services
American Express Bank Ltd. Connecticut
III. Companies engaged in Financial Services
Advisory Capital Strategies Group Inc. Minnesota
American Centurion Life Assurance Company New York
American Enterprise Investment Services Inc. Minnesota
American Enterprise Life Insurance Company Indiana
American Express Client Services Corporation Minnesota
American Express Financial Advisors Inc. Delaware
American Express Financial Corporation Delaware
American Express Insurance Agency of Arizona Inc.Arizona
American Express Insurance Agency of Idaho Inc. Idaho
American Express Insurance Agency of Nevada Inc. Nevada
American Express Minnesota Foundation Minnesota
American Express Property Casualty Insurance
Agency of Kentucky Inc. Kentucky
American Express Property Casualty Insurance
Agency of Mississippi Inc. Mississippi
<PAGE>
PAGE 48
Item 26. Persons Controlled by or Under Common Control with the
Depositor or Registrant (Continued)
Jurisdiction
Name of Subsidiary of Incorporation
American Express Property Casualty Insurance
Agency of Pennsylvania Inc. Pennsylvania
American Express Service Corporation Delaware
American Express Tax and Business Services Inc. Minnesota
American Express Trust Company Minnesota
American Partners Life Insurance Company Arizona
AMEX Assurance Company Illinois
IDS Advisory Group Inc. Minnesota
IDS Aircraft Services Corporation Minnesota
IDS Cable Corporation Minnesota
IDS Cable II Corporation Minnesota
IDS Capital Holdings Inc. Minnesota
IDS Certificate Company Delaware
IDS Deposit Corp. Utah
IDS Fund Management Limited U.K.
IDS Futures Corporation Minnesota
IDS Insurance Agency of Alabama Inc. Alabama
IDS Insurance Agency of Arkansas Inc. Arkansas
IDS Insurance Agency of Massachusetts Inc. Massachusetts
IDS Insurance Agency of Mississippi Ltd. Mississippi
IDS Insurance Agency of New Mexico Inc. New Mexico
IDS Insurance Agency of North Carolina Inc. North Carolina
IDS Insurance Agency of Ohio Inc. Ohio
IDS Insurance Agency of Texas Inc. Texas
IDS Insurance Agency of Utah Inc. Utah
IDS Insurance Agency of Wyoming Inc. Wyoming
IDS International, Inc. Delaware
IDS Life Insurance Company Minnesota
IDS Life Insurance Company of New York New York
IDS Management Corporation Minnesota
IDS Partnership Services Corporation Minnesota
IDS Plan Services of California, Inc. Minnesota
IDS Property Casualty Insurance Company Wisconsin
IDS Real Estate Services, Inc. Delaware
IDS Realty Corporation Minnesota
IDS Sales Support Inc. Minnesota
IDS Securities Corporation Delaware
Investors Syndicate Development Corp. Nevada
Item 27. Number of Contractowners
On January 31, 1997, there were 1,335 contract owners of qualified
contracts. There were 6,337 owners of nonqualified contracts.
Item 28. Indemnification
The By-Laws of the depositor 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
<PAGE>
PAGE 49
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 of 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 director, 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.
Item 29. Principal Underwriters
(a) IDS Life is the principal underwriter for IDS Life Accounts F,
IZ, JZ, G, H, N, KZ, LZ and MZ, IDS Life Variable Annuity Fund
A, IDS Life Variable Annuity Fund B, IDS Life Account RE, IDS
Life Account MGA and IDS Life Account SBS, IDS Life Variable
Account 10, IDS Life Variable Life Separate Account and IDS
Life Variable Account for Smith Barney.
(b) This table is the same as our response to Item 25 of
this Registration Statement.
<TABLE>
<CAPTION>
(c)
Name of Net Underwriting
Principal Discounts and Compensation on Brokerage
Underwriter Commissions Redemption Commissions Compensation
<S> <C> <C> <C> <C>
IDS Life $17,247,007 $11,956,753 None None
</TABLE>
<PAGE>
PAGE 50
Item 30. Location of Accounts and Records
IDS Life Insurance Company
IDS Tower 10
Minneapolis, MN
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) Registrant undertakes that it will file a post-effective
amendment to this registration statement as frequently as is
necessary to ensure that the audited financial statements in
the registration statement are never more than 16 months old
for so long as payments under the variable annuity contracts
may be accepted.
(b) Registrant undertakes that it will include either
(1) as part of any application to purchase a
contract offered by the prospectus, a space that an
applicant can check to request a Statement of
Additional Information, or (2) a post card or
similar written communication affixed to or included
the prospectus that the applicant can remove to send
for a Statement of Additional Information.
(c) Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made
available under this Form promptly upon written or oral
request to IDS Life Contract Owner Service at the address or
phone number listed in the prospectus.
(d) The sponsoring insurance company represents that the fees and
charges deducted under the contract, in the aggregate, are
reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by the
insurance company.
<PAGE>
PAGE 51
SIGNATURES
As required by 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 the requirements for effectiveness of this Amendment to its Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Registration Statement to be signed on its behalf in the City of
Minneapolis, and State of Minnesota, on the 25th day of April, 1997.
IDS LIFE ACCOUNT SBS
(Registrant)
By IDS Life Insurance Company
(Sponsor)
By /s/ Richard W. Kling*
President
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities indicated on the 25th day of
April, 1997.
Signature Title
/s/ James A. Mitchell* Director, Chairman of the
James A. Mitchell Board 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
/s/ Melinda S. Urion* Director, Exective Vice
Melinda S. Urion President and Controller
* Signed pursuant to Power of Attorney, dated March 12, 1997 filed
electronically herewith by:
_________________________________
Mary Ellyn Minenko
<PAGE>
PAGE 52
CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 6
This Registration Statement is comprised of the following papers and documents:
The Cover Page.
Cross-reference sheet.
Part A.
The prospectus.
Part B.
Statement of Additional Information.
Financial Statements.
Part C.
Other Information.
The signatures.
Exhibits.
<PAGE>
PAGE 1
IDS Life Account SBS
Registration No. 33-40779/812-7731
EXHIBIT INDEX
10. Consent of Independent Auditors.
11. Financial Statement Schedules and Report of Independent Auditors.
14. Financial Data Schedules:
IDS Life Account SBS
IDS Life Insurance Company
15. Power of Attorney.
<PAGE>
PAGE 1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Independent Auditors"
and to the use of our reports dated February 7, 1997 on the consolidated
financial statements and schedules of IDS Life Insurance Company and our report
dated March 21, 1997 on the financial statements of IDS Life Account SBS in
Post-Effective Amendment No. 6 to the Registration Statement (Form N-4, No. 33-
40779) and related Prospectus for the registration of the IDS Life Account SBS
to be offered by IDS Life Insurance Company.
Ernst & Young LLP
Minneapolis, Minnesota
April 24, 1997
<PAGE>
IDS LIFE INSURANCE COMPANY
SCHEDULE I - CONSOLIDATED SUMMARY OF INVESTMENTS
OTHER THAN INVESTMENTS IN RELATED PARTIES ($ thousands)
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Column A Column B Column C Column D
Type of Investment Cost Value Amount at which
shown in the
balance sheet
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturities:
Held to maturity:
United States Government and
government agencies and
authorities (a) $ 2,085,280 $ 2,060,778 $ 2,085,280
States, municipalities and
political subdivisions 9,685 10,097 9,685
All other corporate bonds 8,141,414 8,450,775 8,141,414
------------- --------------- -----------------
Total held to maturity 10,236,379 10,521,650 10,236,379
Available for sale:
United States Government and
government agencies and
authorities (b) 6,925,876 6,960,002 6,960,002
States, municipalities and
political subdivisions 11,032 12,368 12,368
All other corporate bonds 4,071,714 4,174,475 4,174,475
------------- --------------- -----------------
Total available for sale 11,008,622 11,146,845 11,146,845
Mortgage loans on real estate 3,493,364 XXXXXXXXX 3,493,364
Policy loans 459,902 XXXXXXXXX 459,902
Other investments 251,465 XXXXXXXXX 251,465
------------- -----------------
Total investments $ 25,449,732 $ XXXXXXXXX $ 25,587,955
============= =================
(a) - Includes mortgage-backed securities with a cost and market value of $2,041,278 and $2,017,119,
respectively.
(b) - Includes mortgage-backed securities with a cost and market value of $6,847,932 and $6,879,547,
respectively.
</TABLE>
<PAGE>
IDS LIFE INSURANCE COMPANY
SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION ($ thousands)
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F Column G Column H Column I Column J Column K
Segment Deferred Future Unearned Other policy Premium Net Benefits, Amortization Other Premiums
policy policy premiums claims and revenue investment claims, of deferred operating written
acquisition benefits, benefits income losses and policy expenses
cost losses, payable settlement acquisition
claims and expenses costs
loss
expenses
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Annuities $ 1,398,025 $ 21,838,008 $ - $ 50,137 $ - $1,702,364 $ 2,724 $ 189,645 $ 180,942 N/A
Life, DI, and
Long-term
Care Insurance 932,780 3,811,034 - 33,497 182,921 262,998 187,486 88,960 80,526 N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 2,330,805 $ 25,649,042 $ - $ 83,634 $ 182,921 $1,965,362 $ 190,210 $ 278,605 $ 261,468 N/A
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
IDS LIFE INSURANCE COMPANY
SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION ($ thousands)
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F Column G Column H Column I Column J Column K
Segment Deferred Future Unearned Other policy Premium Net Benefits, Amortization Other Premiums
policy policy premiums claims and revenue investment claims, of deferred operating written
acquisition benefits, benefits income losses and policy expenses
cost losses, payable settlement acquisition
claims and expenses costs
loss
expenses
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Annuities $ 1,227,169 $ 21,404,836 $ - $ 28,191 $ - $1,651,067 $ 2,693 $ 189,626 $ 166,191 N/A
Life, DI,
and Long-term
Care Insurance 798,556 3,613,253 - 28,132 161,530 256,242 164,749 90,495 45,451 N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 2,025,725 $ 25,018,089 $ - $ 56,323 $ 161,530 $1,907,309 $ 167,442 $ 280,121 $ 211,642 N/A
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
IDS LIFE INSURANCE COMPANY
SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION ($ thousands)
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F Column G Column H Column I Column J Column K
Segment Deferred Future Unearned Other policy Premium Net Benefits, Amortization Other Premiums
policy policy premiums claims and revenue investment claims, of deferred operating written
acquisition benefits, benefits income losses and policy expenses
cost losses, payable settlement acquisition
claims and expenses costs
loss
expenses
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Annuities $ 1,150,585 $ 19,361,979 $ - $ 23,888 $ - $1,534,826 $ (5,762) $ 194,060 $ 131,515 N/A
Life, DI, and
Long-term Care
Insurance 714,739 3,346,931 - 26,180 144,640 247,047 134,128 86,312 78,586 N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Total $ 1,865,324 $ 22,708,910 $ - $ 50,068 $ 144,640 $1,781,873 $ 128,366 $ 280,372 $ 210,101 N/A
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
IDS LIFE INSURANCE COMPANY
SCHEDULE IV - REINSURANCE ($ thousands)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E Column F
Gross amount Ceded to other Assumed from Net % of amount
companies other companies Amount assumed to net
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
For the year ended
December 31, 1996
Life insurance in force $ 65,571,173 $ 3,875,921 $ 1,703,181 $63,398,433 2.69%
===================================================================================================
Premiums:
Life insurance $ 54,111 $ 3,253 $ 545 $ 51,403 1.06%
DI & LTC insurance 164,561 33,043 -- 131,518 0.00%
- ---------------------------------------------------------------------------------------------------
Total premiums $ 218,672 $ 36,296 $ 545 $ 182,921 0.30%
===================================================================================================
For the year ended
December 31, 1995
Life insurance in force $ 57,895,180 $ 3,771,204 $ 1,788,352 $55,912,328 3.20%
===================================================================================================
Premiums:
Life insurance $ 53,089 $ 2,648 $ (248) $ 50,193 -0.49%
DI & LTC insurance 137,016 25,679 -- 111,337 0.00%
- ---------------------------------------------------------------------------------------------------
Total premiums $ 190,105 $ 28,327 $ (248) $ 161,530 -0.15%
===================================================================================================
For the year ended
December 31, 1994
Life insurance in force $ 50,814,651 $ 3,246,608 $ 1,851,916 $49,419,959 3.75%
===================================================================================================
Premiums:
Life insurance $ 51,219 $ 3,354 $ 319 $ 48,184 0.66%
DI & LTC insurance 114,049 17,593 -- 96,456 0.00%
- ---------------------------------------------------------------------------------------------------
Total premiums $ 165,268 $ 20,947 $ 319 $ 144,640 0.22%
===================================================================================================
</TABLE>
<PAGE>
IDS LIFE INSURANCE COMPANY
SCHEDULE V - VALUATION AND QUALIFYING ACCOUNTS ($ thousands)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
Additions
-------------
Balance at Charged to
Description Beginning Charged to Other Accounts- Deductions- Balance at End
of Period Costs & Expenses Describe Describe * of Period
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
For the year ended
December 31, 1996
- ------------------------------
Reserve for Mortgage Loans $37,340 $155 $0 $0 $37,495
Reserve for Other Investments $4,713 ($750) $0 $0 $3,963
For the year ended
December 31, 1995
- ------------------------------
Reserve for Mortgage Loans $35,252 $1,088 $0 ($1,000) $37,340
Reserve for Other Investments $7,515 ($2,802) $0 $0 $4,713
For the year ended
December 31, 1994
- ------------------------------
Reserve for Mortgage Loans $35,020 $232 $0 $0 $35,252
Reserve for Fixed Maturities $22,777 ($16,777) $0 $6,000 $0
Reserve for Other Investments $10,700 ($3,185) $0 $0 $7,515
* 1995 amount represents a reserve on mortgage loans which were transferred from an affiliate.
1994 amount represents a direct writedown of the related investments in fixed maturities.
</TABLE>
<PAGE>
Report of Independent Auditors
The Board of Directors
IDS Life Insurance Company
We have audited the consolidated financial statements of IDS Life Insurance
Company as of December 31, 1996 and 1995, and for each of the three years in the
period ended December 31, 1996, and have issued our report thereon dated
February 7, 1997 (included elsewhere in this Registration Statement). Our audits
also included the financial statement schedules listed in Item 24(a) of this
Registration Statement. These schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
Ernst & Young LLP
Minneapolis, Minnesota
February 7, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000875131
<NAME> IDS Life Account SBS
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 272706638
<INVESTMENTS-AT-VALUE> 348803082
<RECEIVABLES> 238499
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 349041581
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 695249
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 232349459
<SHARES-COMMON-PRIOR> 256053751
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 348346332
<DIVIDEND-INCOME> 10702047
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (5207690)
<NET-INVESTMENT-INCOME> 5494357
<REALIZED-GAINS-CURRENT> 10954412
<APPREC-INCREASE-CURRENT> 28606338
<NET-CHANGE-FROM-OPS> 45055107
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 12347625
<NUMBER-OF-SHARES-REDEEMED> (36051917)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 11400834
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (5207690)
<AVERAGE-NET-ASSETS> 342645915
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<CIK> 0000875131
<NAME> IDS Life Insurance Company
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-TYPE> YEAR
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 11146845
<DEBT-CARRYING-VALUE> 10236379
<DEBT-MARKET-VALUE> 10521650
<EQUITIES> 3308
<MORTGAGE> 3493364
<REAL-ESTATE> 70290
<TOTAL-INVEST> 25587955
<CASH> 224603
<RECOVER-REINSURE> 1803
<DEFERRED-ACQUISITION> 2330805
<TOTAL-ASSETS> 47305981
<POLICY-LOSSES> 25649042
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 83634
<NOTES-PAYABLE> 0
<COMMON> 3000
0
0
<OTHER-SE> 2144080
<TOTAL-LIABILITY-AND-EQUITY> 47305981
182921
<INVESTMENT-INCOME> 1965362
<INVESTMENT-GAINS> (159)
<OTHER-INCOME> 574341
<BENEFITS> 1560678
<UNDERWRITING-AMORTIZATION> 278605
<UNDERWRITING-OTHER> 261468
<INCOME-PRETAX> 621714
<INCOME-TAX> 207138
<INCOME-CONTINUING> 414576
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 414576
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 24192
<PROVISION-CURRENT> 88549
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 86354
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 26387
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
<PAGE>
PAGE 1
IDS LIFE INSURANCE COMPANY
POWER OF ATTORNEY
City of Minneapolis
State of Minnesota
Each of the undersigned, as directors of IDS Life Insurance Company on
behalf of the below listed registrants that previously have filed registration
statements and amendments thereto pursuant to the requirements of the Securities
Act of 1933 and the Investment Company Act of 1940 with the Securities and
Exchange Commission:
<TABLE>
<CAPTION>
1933 Act 1940 Act
Reg. Number Reg. Number
<S> <C> <C>
IDS Life Variable Account 10
IDS Life Flexible Portfolio Annuity 33-62407 811-07355
IDS Life Accounts F, IZ, JZ, G, H, N, KZ, LZ and MZ
IDS Life Flexible Annuity 33-4173 811-3217
IDS Life Accounts F, IZ, JZ, G, H, N, KZ, LZ and MZ
IDS Life Variable Retirement and Combination
Retirement Annuities 2-73114 811-3217
IDS Life Accounts F, IZ, JZ, G, H, N, KZ, LZ and MZ
IDS Life Employee Benefit Annuity 33-52518 811-3217
IDS Life Accounts F, IZ, JZ, G, H, N, KZ, LZ and MZ
IDS Life Group Variable Annuity Contract 33-47302 811-3217
IDS Life Insurance Company
IDS Life Group Variable Annuity Contract
(Fixed Account) 33-48701 N/A
IDS Life Insurance Company
IDS Life Guaranteed Term Annuity 33-28976 N/A
IDS Life Insurance Company
IDS Life Flexible Payment Market Value Annuity 33-50968 N/A
IDS Life Variable Life Separate Account
Flexible Premium Variable Life Insurance Policy 33-11165 811-4298
IDS Life Variable Life Separate Account
Flexible Premium Survivorship Variable
Life Insurance Policy 33-62457 811-4298
IDS Life Variable Life Separate Account
Single Premium Variable Life
Insurance Policy 2-97637 811-4298
IDS Life Variable Account for Smith Barney
Single Premium Variable Life Insurance Policy 33-5210 811-4652
IDS Life Account SBS
Symphony Annuity 33-40779 812-7731
IDS Life Account RE
IDS Life Real Estate Variable Annuity 33-13375 N/A
IDS Life Variable Annuity Fund A 2-29081 811-1653
IDS Life Variable Annuity Fund B 2-47430 811-1674
</TABLE>
hereby constitutes and appoints William A. Stoltzmann, Mary Ellyn Minenko,
Eileen J. Newhouse, Sherilyn K. Beck, Colin Lancaster, Bruce Kohn and Timothy S.
Meehan or any one of them, as her or his attorney-in-fact and agent, to sign for
her or him in her or his name, place and stead any and all filings, applications
(including
<PAGE>
PAGE 2
applications for exemptive relief), periodic reports, registration statements
(with all exhibits and other documents required or desirable in connection
therewith), other documents, and amendments thereto and to file such filings,
applications, periodic reports, registration statements, other documents, and
amendments thereto with the Securities and Exchange Commission, and any
necessary states, and grants to any or all of them the full power and authority
to do and perform each and every act required or necessary in connection
therewith.
Dated the 12th day of March, 1997.
/s/ David R. Hubers March 10, 1997
- ---------------------------------
David R. Hubers
Director
/s/ Richard W. Kling March 12, 1997
- ---------------------------------
Richard W. Kling
Director and President
/s/ Paul F. Kolkman March 11, 1997
- ---------------------------------
Paul F. Kolkman
Director and Executive Vice
President
/s/ James A. Mitchell March 10, 1997
- ---------------------------------
James A. Mitchell
Director, Chairman of the
Board and Chief Executive Officer
/s/ Barry J. Murphy March 10, 1997
- ---------------------------------
Barry J. Murphy
Director and Executive Vice
President, Client Service
/s/ Stuart A. Sedlacek March 7, 1997
- ---------------------------------
Stuart A. Sedlacek
Director and Executive Vice
President, Assured Assets
/s/ Melinda S. Urion March 10, 1997
- ---------------------------------
Melinda S. Urion
Director, Executive Vice
President and Controller
