SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 7 (File No. 33-40779) [x]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 7 (File No. 812-7731) [x]
(Check appropriate box or boxes)
IDS LIFE ACCOUNT SBS
- -------------------------------------------------------------------------------
(Exact Name of Registrant)
IDS Life Insurance Company
- -------------------------------------------------------------------------------
(Name of Depositor)
IDS Tower 10, Minneapolis, MN 55440-0010
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(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (612) 671-4085
- -------------------------------------------------------------------------------
Colin M. Lancaster, IDS Tower 10, Minneapolis, MN 55440-0010
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(Name and Address of Agent for Service)
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, 1998 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.
<PAGE>
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 the prospectus and Statement of Additional
Information are so indicated.
PART A
Item No. Section in Prospectus
1 Cover
2 Definitions
3 (a) Annuity and Certificate Expense
(b) About the Annuity
4 (a) Condensed Financial Information
(b) Performance Information
(c) Financial Statements
5 (a) Who Issues the Annuity
(b) About the Annuity
(c) About the Variable Account, Portfolios and Funds
(d) Cover
(e) Voting rights
(f) NA
(g) NA
6 (a) Certificate Charges and Charges Against the Variable Account
Annuity and Certificate Expenses
(b) Surrender Charge
(c) Calculation
(d) Surrendering Your Certificate
(e) Investment Goals and Policies of the Portfolio and Funds
(f) NA
7 (a) Buying the Certificate
(b) About the Variable Account, Portfolios and the Funds; Transferring
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
13 Legal Proceedings
14 Table of contents of the Statement of Additional Information
PART B
Item No. Section in Statement of Additional Information
15 (a) Cover
(b) NA
16 Table of Contents
17 (a) NA
(b) NA
(c) Who Issues the Annuity*
18 (a) NA
(b) NA
(c) Independent Auditors
(d) NA
(e) NA
(f) NA
19 (a) Distribution of the Contracts*
(b) Contract charges*
20 (a) Principal Underwriter
(b) Principal Underwriter
(c) NA
(d) NA
21 (a) Performance Information
(b) Performance Information
22
23 (a) Financial Statements
(b) Financial Statements
*Designates section in the prospectus, which is hereby incorporated by reference
in this Statement of Additional Information.
<PAGE>
Symphony Annuity
Prospectus/May 1, 1998
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 Annuit
Contract
Sold by:
IDS Life Insurance Company
IDS Tower 10
Minneapolis, MN 55440-0010
Telephone: (800) 422-3542
This prospectus contains the information about the variable accounts that you
should know before investing. Refer to "About the Variable Account and the
Portfolios and Funds" in this prospectus.
This prospectus is valid only when accompanied or preceded by the prospectuses
for Greenwich Street Series Fund and the IDS Life Retirement Annuity Mutual
Funds. 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 bank or financial institution, and the
securities it offers are not deposits or obligations of, backed or guaranteed or
endorsed by any bank or financial institution nor are they insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board or any other
agency.
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 __ of this prospectus.
<PAGE>
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 Special Income Fund, IDS Life Capital
Resource 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.
<PAGE>
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, Martin Luther King Jr. 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 __).
The Variable Account is registered as a single unit investment trust under the
1940 Act (page __).
<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 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 also may 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 __).
<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 __).
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
<PAGE>
$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 __).
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 __).
<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 Greenwich Street 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 __.
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
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
<PAGE>
Annual Contract Administrative Charge $30
Annual Variable Account Charges
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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)
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<TABLE>
<CAPTION>
Diversified
Money Intermediate Strategic Equity Equity
Market High Grade Income Income Index
<S> <C> <C> <C> <C> <C>
Management Fees .50% .60% .65% .65% .21%
Other Expenses .70 .35 .13 .12 .55
Total Operating 1.20% .95% .78% .77% .76%
Expenses of Portfolios #
Growth & Total International Emerging
Income Appreciation Return Equity Growth
Management Fees .65% .75% .75% 1.05% .95%
Other Expenses .12 .05 .04 .26 .31
Total Operating .77% .80% .79% 1.31% 1.26%
Expenses of Portfolios #
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 period
Diversified
Money Intermediate Strategic Equity Equity
Market High Grade Income Income Index
1 year $88.14 $85.57 $83.83 $83.73 $83.63
3 years 126.27 118.61 113.38 113.07 112.76
5 years 166.97 154.27 145.56 145.04 144.53
10 years 310.72 285.76 268.43 267.40 266.37
Growth & Total International Emerging
Income Appreciation Return Equity Growth
1 year $83.73 $84.04 $83.93 $89.26 $88.75
3 years 113.07 114.00 113.69 129.62 128.10
5 years 145.04 146.59 146.07 172.51 170.00
10 years 267.40 270.48 269.45 321.51 316.62
</TABLE>
<PAGE>
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>
Diversified
Money Intermediate Strategic Equity Equity
Market High Grade Income Income Index
<S> <C> <C> <C> <C> <C>
1 year $28.14 $25.57 $23.83 $23.73 $23.63
3 years 86.27 78.61 73.38 73.07 72.76
5 years 146.97 134.27 125.56 125.04 124.53
10 years 310.72 285.76 268.43 267.40 266.37
Growth Total International Emerging
& Income Appreciation Return Equity Growth
1 year $23.73 $24.04 $23.93 $29.26 $28.75
3 years 73.07 74.00 73.69 89.62 88.10
5 years 125.04 126.59 126.07 152.51 150.00
10 years 267.40 270.48 269.45 321.51 316.62
</TABLE>
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 .045 percent charge based on the average Annuity size.
# Annualized operating expenses of underlying portfolios at Dec. 31, 1997
IDS Life IDS Life
Capital Special IDS Life
Resource Income Managed
-------------- ----------------- -----------------
Management Fees 0.60% 0.60% 0.59%
Other Expenses 0.07 0.07 0.05
Total Operating 0.67% 0.67% 0.64%
Expenses of
Funds #
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 $82.70 $82.70 $82.40
3 years 109.99 109.99 109.06
5 years 139.89 139.89 138.34
10 years 257.06 257.06 253.93
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 $22.70 $22.70 $22.40
3 years 69.99 69.99 69.06
5 years 119.89 119.89 118.34
10 years 257.06 257.06 253.93
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 .045 percent charge based on the average Annuity size.
# Annualized operating expenses of underlying mutual funds at Dec. 31, 1997.
<PAGE>
<TABLE>
<CAPTION>
Condensed Financial Information (Unaudited)
The following tables give per-unit information about the financial history of
each subaccount.
Year ended Dec. 31,
1997 1996 1995 1994 1993 1992 1991
Subaccount AMO (Investing in shares of Money Market Portfolio)*
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulation unit $1.12 $1.08 $1.04 $1.02 $1.02 $1.00 $1.00
value at beginning
of period
Accumulation unit value $1.15 $1.12 $1.08 $1.04 $1.02 $1.02 $1.00
at end of period
Number of accumulation 3,661 4,930 4,822 6,298 3,175 2,061 828
units outstanding at end
of period (000 omitted)
Ratio of operating 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%
expense to average
net assets
Simple yield 3.05% 2.52% 2.75% 2.14% 0.72% 0.78% 2.00%
Compound yield 3.09% 2.55% 2.79% 2.16% 0.72% 0.78% 2.02%
Subaccount AIH (Investing in shares of Intermediate High Grade Portfolio)*
Accumulation unit $1.25 $1.25 $1.08 $1.13 $1.06 $1.02 $1.00
value at beginning
of period
Accumulation unit value $1.34 $1.25 $1.25 $1.08 $1.13 $1.06 $1.02
at end of period
Number of accumulation 9,640 10,509 11,659 11,655 8,070 3,417 682
units outstanding at end
of period (000 omitted)
Ratio of operating 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%
expense to average
net assets
Subaccount ADS (Investing in shares of Diversified Strategic Income Portfolio)*
Accumulation unit $1.34 $1.23 $1.07 $1.12 $1.01 $1.01 $1.00
value at beginning
of period
Accumulation unit value $1.43 $1.34 $1.23 $1.07 $1.12 $1.01 $1.01
at end of period
Number of accumulation 37,359 41,939 45,720 48,740 36,618 19,768 3,869
units outstanding at end
of period (000 omitted)
Ratio of operating 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%
expense to average
net assets
Subaccount AEM (Investing in shares of Equity Income Portfolio)*
Accumulation unit $1.47 $1.41 $1.08 $1.22 $1.12 $1.02 $1.00
value at beginning
of period
Accumulation unit value $1.79 $1.47 $1.41 $1.08 $1.22 $1.12 $1.02
at end of period
Number of accumulation 24,835 29,866 35,868 39,594 48,057 23,184 3,835
units outstanding at end
of period (000 omitted)
Ratio of operating 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%
expense to average
net assets
Subaccount AEX (Investing in shares of Equity Index Portfolio)*
Accumulation unit $1.89 $1.58 $1.18 $1.19 $1.11 $1.06 $1.00
value at beginning
of period
Accumulation unit value $2.46 $1.89 $1.58 $1.18 $1.19 $1.11 $1.06
at end of period
Number of accumulation 8,512 9,114 8,552 7,552 6,454 3,748 636
units outstanding at end
of period (000 omitted)
Ratio of operating 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%
expense to average
net assets
Subaccount AGI (Investing in shares of Growth and Income Portfolio)*
Accumulation unit $1.68 $1.42 $1.11 $1.16 $1.08 $1.01 $1.00
value at beginning
of period
Accumulation unit value $2.03 $1.68 $1.42 $1.11 $1.16 $1.08 $1.01
at end of period
Number of accumulation 19,668 21,299 23,037 25,102 20,774 10,136 1,881
units outstanding at end
of period (000 omitted)
Ratio of operating 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%
expense to average
net assets
Subaccount AAP (Investing in shares of Appreciation Portfolio)*
Accumulation unit $1.68 $1.43 $1.12 $1.15 $1.09 $1.05 $1.00
value at beginning
of period
Accumulation unit value $2.10 $1.68 $1.43 $1.12 $1.15 $1.09 $1.05
at end of period
Number of accumulation 48,070 53,860 63,015 68,920 65,534 48,842 10,929
units outstanding at end
of period (000 omitted)
Ratio of operating 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%
expense to average
net assets
Subaccount ATR (Investing in shares of Total Return Portfolio)**
Accumulation unit $1.66 $1.35 $1.09 $1.03 $1.00 -- --
value at beginning
of period
Accumulation unit value $1.91 $1.66 $1.35 $1.09 $1.03 -- --
at end of period
Number of accumulation 18,783 20,195 20,934 18,918 2,486 -- --
units outstanding at end
of period (000 omitted)
Ratio of operating 1.50% 1.50% 1.50% 1.50% 1.50% -- --
expense to average
net assets
Subaccount AIE (Investing in shares of International Equity Portfolio Fund)**
Accumulation unit $1.49 $0.97 $0.91 $1.04 $1.00 -- --
value at beginning
of period
Accumulation unit value $1.11 $1.17 $0.97 $0.91 $1.04 -- --
at end of period
Number of accumulation 23,936 27,135 28,243 29,353 5,528 -- --
units outstanding at end
of period (000 omitted)
Ratio of operating 1.50% 1.50% 1.50% 1.50% 1.50% -- --
expense to average
net assets
Subaccount AEG (Investing in shares of Emerging Growth Portfolio)**
Accumulation unit $1.56 $1.35 $0.96 $1.04 $1.00 --
value at beginning
of period
Accumulation unit value $1.85 $1.56 $1.35 $0.96 $1.04 --
at end of period
Number of accumulation 10,123 11,449 12,247 11,353 2,022 --
units outstanding at end
of period (000 omitted)
Ratio of operating 1.50% 1.50% 1.50% 1.50% 1.50% --
expense to average
net assets
Subaccount ACR (Investing in shares of IDS Life Capital Resource Fund)***
Accumulation unit $1.33 $1.25 $0.99 $1.00 --
value at beginning
of period
Accumulation unit value $1.62 $1.33 $1.25 $0.99 --
at end of period
Number of accumulation 463 528 519 560 --
units outstanding at end
of period (000 omitted)
Ratio of operating 1.50% 1.50% 1.50% 1.50% --
expense to average
net assets
Subaccount ASI (Investing in shares of IDS Life Special Income Fund)***
Accumulation unit $1.26 $1.20 $0.99 $1.00 --
value at beginning
of period
Accumulation unit value $1.35 $1.26 $1.20 $0.99 --
at end of period
Number of accumulation 869 742 722 351 --
units outstanding at end
of period (000 omitted)
Ratio of operating 1.50% 1.50% 1.50% 1.50% --
expense to average
net assets
Subaccount AMG (Investing in shares of IDS Life Managed Fund)***
Accumulation unit $1.37 $1.19 $0.97 $1.00 --
value at beginning
of period
Accumulation unit value $1.61 $1.37 $1.19 $0.97 --
at end of period
Number of accumulation 1,100 785 716 298 --
units outstanding at end
of period (000 omitted)
Ratio of operating 1.50% 1.50% 1.50% 1.50% --
expense to average
net assets
*Operations commenced on Oct. 16, 1991.
**Operations commenced on Dec. 2, 1993.
***Operations commenced on Oct. 3, 1994.
</TABLE>
<PAGE>
Financial Statements
Complete financial statements of the Variable Account including audited
individual and combined statements of net assets as of Dec. 31, 1997, 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, 1998. The audited consolidated
financial statements of IDS Life Insurance Company including consolidated
balance sheets as of Dec. 31, 1997, and 1996, and related consolidated
statements of income, stockholder's equity and cash flows for each of the three
years in the period ended Dec. 31, 1997 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.
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.
<PAGE>
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 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.
<PAGE>
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 Marke
Portfolio;
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.
<PAGE>
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.
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 Greenwich Street Series Fund's prospectus entitled "Medium-,
Lower- and Unrated Securities" for further information on these bonds.
<PAGE>
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 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.
<PAGE>
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.
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:
<TABLE>
<CAPTION>
<S> <C>
Name Service
- ------------------------------------------------------ -----------------------------------------------------
Van Kampen American Capital Asset Management, Inc Investment Adviser to the Emerging Growth Portfolio
American Express Financial Corporation Investment Advisor to IDS Life Capital Resource,
IDS Life Special Income and IDS Life Managed Funds
IDS Life Insurance Company Investment Manger of IDS Life Capital Resource, IDS
Life Special Income and IDS Life Managed Funds
Smith Barney Global Capital Management, Inc. Sub-Investment Adviser to the Diversified Strategic
Income Portfolio
Mutual Management Corp. (MMC) 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
and Administrator to each Portfolio
Travelers Investment Management Company Investment Adviser to the Equity Index Portfolio
Davis Skaggs Investment Management, a division of MMC Investment Adviser to the Total Return Portfolio
PCN Bank, National Association Custodian to all Portfolios except International
Equity Portfolio and Diversified Strategic Income
Portfolio
The Chase Manhattan Bank Custodian to International Equity Portfolio and
Diversified Strategic Income Portfolio
American Express Trust Company Custodian to the Funds
Morgan Stanley Trust Company Subcustodian to the Funds
First Data Investor Services Group, Inc. Transfer and Dividend Paying Agent
Smith Barney Inc. Distributor
- ----------------------------------- -----------------------------------------
</TABLE>
Detailed information about each Portfolio and Fund, including the risks related
to investing in them is in the separate prospectuses. For prospectuses, please
refer to the accompanying prospectuses or contact your Smith Barney financial
consultant or IDS Life Insurance company at 800-422-3542. 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.
All funds are available to serve as the underlying investment for variable
annuities, and some funds are available to serve as the underlying investment
for variable annuities and variable life insurance contracts and qualified
plans. It is conceivable that in the future it may be disadvantageous for
variable annuity separate accounts, variable life insurance separate accounts
and/or qualified plans to invest in the available funds simultaneously.
Although IDS Life and the funds do not currently foresee any such disadvantages,
the boards of directors or trustees of the appropriate funds will monitor events
in order to identify any material conflicts between such contract owners,
policyowners and qualified plans to determine what action, if any, should be
taken in response to a conflict. If a board were to conclude that separate funds
should be established for variable life insurance, variable annuities and
qualified plan separate accounts, the variable contract holders would not bear
any expenses associated with establishing separate funds. Please refer to the
fund prospectuses for risk disclosure regarding mixed and shared funding.
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.
<PAGE>
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 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.
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 or TSA 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 or 408 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; and
o TSAs.
Your purchase of the Annuity for a qualified plan will be subject to applicable
federal law and any rules of the plan itself.
<PAGE>
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 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 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 process the
transfer request at its next close of business after we receive it. 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.
<PAGE>
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 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 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
<PAGE>
administrative charge 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:
Assumptions:
- ------------------------------------------------------------------------------
Initial purchase payment at Annuity issue date of May 1, 1998......$10,000
Subsequent purchase payment on July 1, 2001 ........................20,000
Account value on contract anniversary, April 29, 2002...............40,000
Account value on October 12, 2002 ..................................42,000
- ------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
Full Surrender on October 12, 2002:
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 $1,200
Charge:
Partial Surrender of $15,000 on October 12, 2002:
Basis of Rate of Dollar Amount
Charge Surrender Charge of 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 $ 250
Charge:
</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 percent). 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.
<PAGE>
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.
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.
<PAGE>
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 next
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.
NOTE: You will be charged a fee if you request express mail delivery of your
surrender check.
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
<PAGE>
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, Custodial and Trusteed Plans, and IRAs -- If you buy
the Annuity under a Section 401(k) 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:
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.
<PAGE>
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:
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.
<PAGE>
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 that you elect. 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, 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
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.
<PAGE>
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.
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.
<PAGE>
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).
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.
<PAGE>
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.
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 current 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 Greenwich
Street 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.
<PAGE>
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 which it has received instructions. See the accompanying
prospectuses for a detailed description of voting rights in the Portfolios and
Funds.
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.
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.
<PAGE>
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 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 nature
was brought against IDS Life and its parent, AEFC. A second action was filed in
March 1997. 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. 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 also seek to establish a claims resolution facility for
the determination of individual issues.
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.
<PAGE>
Year 2000
The year 2000 issue is the result of computer programs having been written using
two digits rather than four to define a year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than 2000. This could result in the failure of major systems or miscalculation,
which could have a material impact on the operations of the Variable Account.
The Variable Account has no computer systems of its own but is dependent upon
the systems maintained by AEFC and certain other third parties.
A comprehensive review of AEFC's computer systems and business processes has
been conducted to identify the major systems that could be affected by the Year
2000 issue. Steps are being taken to resolve any potential problems including
modification to existing software and the purchase of new software. These
measures are scheduled to be completed and tested on a timely basis. AEFC's goal
is to complete internal remediation and testing of each system by the end of
1998 and to continue compliance efforts through 1999. The Year 2000 readiness of
unaffiliated investment managers and other third parties whose system failures
could have an impact on the Variable Account operations currently is being
evaluated. The potential materiality of any such impact is not known at this
time.
<PAGE>
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>
STATEMENT OF ADDITIONAL INFORMATION
for
SYMPHONY ANNUITY
IDS LIFE ACCOUNT SBS
May 1, 1998
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, 1998, is not a
prospectus. It should be read together with the account's prospectus, dated May
1, 1998, 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>
TABLE OF CONTENTS
Performance Information.......................................p.3
Rating Agencies...............................................p.4
Principal Underwriter.........................................p.5
Independent Auditors..........................................p.5
Prospectus....................................................p.5
Financial Statements
- IDS Life Account SBS
- IDS Life Insurance Company
<PAGE>
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) x (365/7)] - 1
Annualized yield based on seven-day period ended Dec. 31, 1997, the Account's
simple yield was 3.05% and its effective yield was 3.09%.
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 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:
<PAGE>
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 accounts may be quoted or compared to rankings, yields, or
returns or used in variable annuity accumulation or settlement illustration as
published or prepared by independent rating or statistical services or
publishers or publications such as The Bank Rate Monitor National Index,
Barron's, Business Week, CDA Technologies, Donoghue's Money Market Fund Report,
Financial Services Week, Financial Times, Financial World, Forbes, Fortune,
Global Investor, Institutional Investor, Investor's Daily, Kiplinger's Personal
Finance, Lipper Analytical Services, Money, Morningstar, Mutual Fund Forecaster,
Newsweek, The New York Times, Personal Investor, Stanger Report, Sylvia Porter's
Personal Finance, USA Today, U.S. News and World Report, The Wall Street Journal
and Wiesenberger Investment Companies Service.
<PAGE>
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 1997, 1996 and 1995 aggregated
$14,502,145, $11,956,753 and $10,125,726, respectively.
Commissions paid to IDS Life for 1997, 1996 and 1995 aggregated $17,883,488,
$17,247,007 and $9,019,184, 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, 1997, 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, 1997 and 1996 and for each
of the three years in the period ended Dec. 31, 1997, 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, 1998, is hereby incorporated in this SAI by
reference.
<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, 1997, 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, 1997 with the affiliated and
unaffiliated mutual fund managers. 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, 1997 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 13, 1998
<PAGE>
<TABLE>
<CAPTION>
IDS Life Account SBS
- ---------------------------------------------------------------------------------------------------------------------------------
Statements of Net Assets Dec. 31, 1997
Segregated Asset Subaccount
--------------------------------------------------------------------------
Assets AMO AIH ADS AEM AEX
- ---------------------------------------------------------------------------------------------------------------------------------
Investments in shares of mutual funds,
at market value:
Smith Barney Series Fund Money Market Portfolio
4,222,136 shares at net asset value
<S> <C> <C> <C> <C> <C>
of $1.00 per share (cost $4,222,134) $ 4,222,136 $ - $ - $ - $ -
Smith Barney Series Fund Intermediate High Grade Portfolio
1,186,346 shares at net asset value
of $10.89 per share (cost $12,277,222) - 12,919,305 - - -
Smith Barney Series Fund Diversified Strategic Income Portfolio
4,918,296 shares at net asset value
of $10.89 per share (cost $49,144,458) - - 53,560,244 - -
Smith Barney Series Fund Equity Income Portfolio
2,900,176 shares at net asset value
of $15.31 per share (cost $32,668,166) - - - 44,401,695 -
Smith Barney Series Fund Equity Index Portfolio
890,248 shares at net asset value
of $23.55 per share (cost $12,472,059) - - - - 20,965,339
Smith Barney Series Fund Growth & Income Portfolio
2,160,633 shares at net asset value
of $18.54 per share (cost $26,118,453) - - - - -
Smith Barney Series Fund Appreciation Portfolio
5,386,607 shares at net asset value
of $18.73 per share (cost $64,339,634) - - - - -
Smith Barney Series Fund Total Return Portfolio
2,045,463 shares at net asset value
of $17.62 per share (cost $24,265,261) - - - - -
Smith Barney Series Fund Emerging Growth Portfolio
1,122,206 shares at net asset value
of $16.87 per share (cost $13,610,340) - - - - -
Smith Barney Series Fund International Equity Portfolio
2,289,722 shares at net asset value
of $11.78 per share (cost $22,819,422) - - - - -
IDS Life Capital Resource Fund
26,343 shares at net asset value
of $28.58 per share (cost $652,851) - - - - -
IDS Life Special Income Fund
99,779 shares at net asset value
of $11.80 per share (cost $1,153,572) - - - - -
IDS Life Managed Fund, Inc.
98,475 shares at net asset value
of $18.04 per share (cost $1,615,068) - - - - -
- ---------------------------------------------------------------------------------------------------------------------------------
4,222,136 12,919,305 53,560,244 44,401,695 20,965,339
- ---------------------------------------------------------------------------------------------------------------------------------
Dividends receivable - - - - -
Accounts receivable from IDS Life for contract
purchase payments - - - - -
Receivable from mutual funds for
share redemptions - - - - -
- ---------------------------------------------------------------------------------------------------------------------------------
Total assets 4,222,136 12,919,305 53,560,244 44,401,695 20,965,339
- ---------------------------------------------------------------------------------------------------------------------------------
Liabilities
- ---------------------------------------------------------------------------------------------------------------------------------
Payable to IDS Life for:
Mortality and expense risk fee 4,817 14,758 60,816 50,448 23,857
Administrative charge 963 2,952 12,163 10,089 4,771
Contract terminations - - - - -
Payable to mutual funds for investments
purchased - - - - -
- ---------------------------------------------------------------------------------------------------------------------------------
Total liabilities 5,780 17,710 72,979 60,537 28,628
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to contracts in
accumulation period $ 4,216,356 $ 12,901,595 $ 53,487,265 $ 44,341,158 $ 20,936,711
- ---------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding 3,661,496 9,639,891 37,359,162 24,834,887 8,511,694
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value per accumulation unit $ 1.15 $ 1.34 $ 1.43 $ 1.79 $ 2.46
- ---------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Account SBS
- ---------------------------------------------------------------------------------------------------------------------------------
Statements of Net Assets - continued Dec. 31, 1997
Segregated Asset Subaccount
--------------------------------------------------------------------------
Assets AGI AAP ATR AEG AIE
- ---------------------------------------------------------------------------------------------------------------------------------
Investments in shares of mutual funds,
at market value:
Smith Barney Series Fund Money Market Portfolio
4,222,136 shares at net asset value
<S> <C> <C> <C> <C> <C>
of $1.00 per share (cost $4,222,134) $ - $ - $ - $ - $ -
Smith Barney Series Fund Intermediate High Grade Portfolio
1,186,346 shares at net asset value
of $10.89 per share (cost $12,277,222) - - - - -
Smith Barney Series Fund Diversified Strategic Income Portfolio
4,918,296 shares at net asset value
of $10.89 per share (cost $49,144,458) - - - - -
Smith Barney Series Fund Equity Income Portfolio
2,900,176 shares at net asset value
of $15.31 per share (cost $32,668,166) - - - - -
Smith Barney Series Fund Equity Index Portfolio
890,248 shares at net asset value
of $23.55 per share (cost $12,472,059) - - - - -
Smith Barney Series Fund Growth & Income Portfolio
2,160,633 shares at net asset value
of $18.54 per share (cost $26,118,453) 40,058,139 - - - -
Smith Barney Series Fund Appreciation Portfolio
5,386,607 shares at net asset value
of $18.73 per share (cost $64,339,634) - 100,891,152 - - -
Smith Barney Series Fund Total Return Portfolio
2,045,463 shares at net asset value
of $17.62 per share (cost $24,265,261) - - 36,041,059 - -
Smith Barney Series Fund Emerging Growth Portfolio
1,122,206 shares at net asset value
of $16.87 per share (cost $13,610,340) - - - 18,931,608 -
Smith Barney Series Fund International Equity Portfolio
2,289,722 shares at net asset value
of $11.78 per share (cost $22,819,422) - - - - 26,972,929
IDS Life Capital Resource Fund
26,343 shares at net asset value
of $28.58 per share (cost $652,851) - - - - -
IDS Life Special Income Fund
99,779 shares at net asset value
of $11.80 per share (cost $1,153,572) - - - - -
IDS Life Managed Fund, Inc.
98,475 shares at net asset value
of $18.04 per share (cost $1,615,068) - - - - -
- ---------------------------------------------------------------------------------------------------------------------------------
40,058,139 100,891,152 36,041,059 18,931,608 26,972,929
- ---------------------------------------------------------------------------------------------------------------------------------
Dividends receivable - - - - -
Accounts receivable from IDS Life for contract
purchase payments - - - 6,515 -
Receivable from mutual funds for
share redemptions - - - - -
- ---------------------------------------------------------------------------------------------------------------------------------
Total assets 40,058,139 100,891,152 36,041,059 18,938,123 26,972,929
- ---------------------------------------------------------------------------------------------------------------------------------
Liabilities
- ---------------------------------------------------------------------------------------------------------------------------------
Payable to IDS Life for:
Mortality and expense risk fee 45,406 115,139 40,425 21,448 30,631
Administrative charge 9,081 23,028 8,085 4,289 6,126
Contract terminations - - - - -
Payable to mutual funds for investments
purchased - - - 6,515 -
- ---------------------------------------------------------------------------------------------------------------------------------
Total liabilities 54,487 138,167 48,510 32,252 36,757
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to contracts in
accumulation period $ 40,003,652 $ 100,752,985 $ 35,992,549 $ 18,905,871 $ 26,936,172
- ---------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding 19,667,956 48,069,805 18,783,339 10,123,212 23,936,240
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value per accumulation unit $ 2.03 $ 2.10 $ 1.91 $ 1.85 $ 1.12
- ---------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Account SBS
- -------------------------------------------------------------------------------------------------------------------
Statements of Net Assets - continued Dec. 31, 1997
Segregated Asset Subaccount
-------------------------------------------- Combined
Assets ACR ASI AMG Variable
Account
- -------------------------------------------------------------------------------------------------------------------
Investments in shares of mutual funds,
at market value:
Smith Barney Series Fund Money Market Portfolio
4,222,136 shares at net asset value
<S> <C> <C> <C> <C>
of $1.00 per share (cost $4,222,134) $ - $ - $ - $ 4,222,136
Smith Barney Series Fund Intermediate High Grade Portfolio
1,186,346 shares at net asset value
of $10.89 per share (cost $12,277,222) - - - 12,919,305
Smith Barney Series Fund Diversified Strategic Income Portfolio
4,918,296 shares at net asset value
of $10.89 per share (cost $49,144,458) - - - 53,560,244
Smith Barney Series Fund Equity Income Portfolio
2,900,176 shares at net asset value
of $15.31 per share (cost $32,668,166) - - - 44,401,695
Smith Barney Series Fund Equity Index Portfolio
890,248 shares at net asset value
of $23.55 per share (cost $12,472,059) - - - 20,965,339
Smith Barney Series Fund Growth & Income Portfolio
2,160,633 shares at net asset value
of $18.54 per share (cost $26,118,453) - - - 40,058,139
Smith Barney Series Fund Appreciation Portfolio
5,386,607 shares at net asset value
of $18.73 per share (cost $64,339,634) - - 100,891,152 -
Smith Barney Series Fund Total Return Portfolio
2,045,463 shares at net asset value
of $17.62 per share (cost $24,265,261) - 36,041,059 - -
Smith Barney Series Fund Emerging Growth Portfolio
1,122,206 shares at net asset value
of $16.87 per share (cost $13,610,340) - - - 18,931,608
Smith Barney Series Fund International Equity Portfolio
2,289,722 shares at net asset value
of $11.78 per share (cost $22,819,422) - - - 26,972,929
IDS Life Capital Resource Fund
26,343 shares at net asset value
of $28.58 per share (cost $652,851) 752,772 - - 752,772
IDS Life Special Income Fund
99,779 shares at net asset value
of $11.80 per share (cost $1,153,572) - 1,176,907 - 1,176,907
IDS Life Managed Fund, Inc.
98,475 shares at net asset value
of $18.04 per share (cost $1,615,068) - - 1,776,254 1,776,254
- -------------------------------------------------------------------------------------------------------------------
752,772 1,176,907 1,776,254 362,669,539
- -------------------------------------------------------------------------------------------------------------------
Dividends receivable - 7,051 - 7,050
Accounts receivable from IDS Life for contract
purchase payments 5,248 - - 11,763
Receivable from mutual funds for
share redemptions - - 30 30
- -------------------------------------------------------------------------------------------------------------------
Total assets 758,020 1,183,958 1,776,284 362,688,382
- -------------------------------------------------------------------------------------------------------------------
Liabilities
- -------------------------------------------------------------------------------------------------------------------
Payable to IDS Life for:
Mortality and expense risk fee 848 1,290 1,987 411,869
Administrative charge 170 258 397 82,372
Contract terminations - - 30 30
Payable to mutual funds for investments
purchased 5,248 5,503 - 17,266
- -------------------------------------------------------------------------------------------------------------------
Total liabilities 6,266 7,051 2,414 511,537
- -------------------------------------------------------------------------------------------------------------------
Net assets applicable to contracts in
accumulation period $ 751,754 $ 1,176,907 $ 1,773,870 $ 362,176,845
- -------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding 463,389 869,469 1,100,487
- ---------------------------------------------------------------------------------------------------
Net asset value per accumulation unit $ 1.62 $ 1.35 $ 1.61
- ---------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Account SBS
- ---------------------------------------------------------------------------------------------------------------------------------
Statements of Operations For the year ended Dec. 31, 1997
Segregated Asset Subaccount
--------------------------------------------------------------------------
AMO AIH ADS AEM AEX
Investment income
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Dividend income from mutual funds $ 216,409 $ 823,662 $ 4,462,016 $ 2,088,145 $ 566,603
- ---------------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk fee 61,838 161,568 686,340 524,760 246,078
Administrative charge 12,368 32,313 137,268 104,952 49,215
- ---------------------------------------------------------------------------------------------------------------------------------
Total expenses 74,206 193,881 823,608 629,712 295,293
- ---------------------------------------------------------------------------------------------------------------------------------
Investment income (loss) - net 142,203 629,781 3,638,408 1,458,433 271,310
- ---------------------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investments - net
- ---------------------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on sales of investments in mutual funds:
Proceeds from sales 5,314,821 2,325,353 9,383,899 9,137,997 3,501,189
Cost of investments sold 5,314,818 2,180,948 8,202,111 7,434,775 2,189,671
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments 3 144,405 1,181,788 1,703,222 1,311,518
Net change in unrealized appreciation or
depreciation of investments 8 105,755 (1,378,549) 5,012,787 3,399,172
- ---------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments 11 250,160 (196,761) 6,716,009 4,710,690
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $ 142,214 $ 879,941 $ 3,441,647 $ 8,174,442 $ 4,982,000
- ---------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Account SBS
- ---------------------------------------------------------------------------------------------------------------------------------
Statements of Operations - continued For the year ended Dec. 31, 1997
Segregated Asset Subaccount
--------------------------------------------------------------------------
AGI AAP ATR AEG AIE
Investment income
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Dividend income from mutual funds $ 3,212,905 $ 6,508,367 $ 1,453,178 $ 2,151,621 $ 59,443
- ---------------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk fee 485,379 1,231,734 430,485 229,167 381,642
Administrative charge 97,076 246,347 86,097 45,833 76,329
- ---------------------------------------------------------------------------------------------------------------------------------
Total expenses 582,455 1,478,081 516,582 275,000 457,971
- ---------------------------------------------------------------------------------------------------------------------------------
Investment income (loss) - net 2,630,450 5,030,286 936,596 1,876,621 (398,528)
- ---------------------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investments - net
- ---------------------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on sales of investments in mutual funds:
Proceeds from sales 6,227,985 14,273,710 4,950,380 4,052,710 5,598,519
Cost of investments sold 3,830,535 9,025,811 3,395,912 2,689,733 4,510,464
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments 2,397,450 5,247,899 1,554,468 1,362,977 1,088,055
- ---------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or
depreciation of investments 2,313,905 11,002,023 2,362,940 (48,984) (1,675,323)
- ---------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments 4,711,355 16,249,922 3,917,408 1,313,993 (587,268)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $ 7,341,805 $ 21,280,208 $ 4,854,004 $ 3,190,614 $ (985,796)
- ---------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Account SBS
- ------------------------------------------------------------------------------------------------------------------
Statements of Operations - continued For the year ended Dec. 31, 1997
Segregated Asset Subaccount
-------------------------------------------- Combined
ACR ASI AMG Variable
Investment income Account
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dividend income from mutual funds $ 20,736 $ 88,714 $ 163,879 $ 21,815,678
- -------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk fee 9,047 11,341 16,997 4,476,376
Administrative charge 1,809 2,268 3,399 895,274
- -------------------------------------------------------------------------------------------------------------------
Total expenses 10,856 13,609 20,396 5,371,650
- -------------------------------------------------------------------------------------------------------------------
Investment income (loss) - net 9,880 75,105 143,483 16,444,028
- -------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investments - net
- -------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on sales of investments in mutual funds:
Proceeds from sales 193,505 180,464 266,535 65,407,067
Cost of investments sold 190,652 171,537 228,110 49,365,077
- -------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments 2,853 8,927 38,425 16,041,990
Net change in unrealized appreciation or
depreciation of investments 126,538 (20,027) 14,211 21,214,456
- -------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments 129,391 (11,100) 52,636 37,256,446
- -------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $ 139,271 $ 64,005 $ 196,119 $ 53,700,474
- -------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Account SBS
- ---------------------------------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets For the year ended Dec. 31, 1997
Segregated Asset Subaccount
--------------------------------------------------------------------------
AMO AIH ADS AEM AEX
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment income (loss) - net $ 142,203 $ 629,781 $ 3,638,408 $ 1,458,433 $ 271,310
Net realized gain (loss) on investments 3 144,405 1,181,788 1,703,222 1,311,518
Net change in unrealized appreciation or
depreciation of investments 8 105,755 (1,378,549) 5,012,787 3,399,172
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 142,214 879,941 3,441,647 8,174,442 4,982,000
- ---------------------------------------------------------------------------------------------------------------------------------
Contract Transactions
- ---------------------------------------------------------------------------------------------------------------------------------
Contract purchase payments 1,553 6,135 254,888 45,399 60,630
Net transfers* 407,232 615,171 138,231 (1,406,469) 980,015
Surrender benefits and contract charges (1,726,758) (1,439,085) (6,087,430) (5,714,396) (2,246,807)
Death benefits (123,680) (298,826) (623,629) (579,202) (85,989)
- ---------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) from contract transactions (1,441,653) (1,116,605) (6,317,940) (7,654,668) (1,292,151)
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets at beginning of year 5,515,795 13,138,259 56,363,558 43,821,384 17,246,862
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 4,216,356 $ 12,901,595 $ 53,487,265 $ 44,341,158 $ 20,936,711
- ---------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Activity
- ---------------------------------------------------------------------------------------------------------------------------------
Units outstanding at beginning of year 4,930,057 10,508,719 41,938,582 29,865,818 9,114,001
Contract purchase payments 1,382 4,675 187,086 31,247 28,829
Net transfers* 368,257 484,135 103,352 (972,852) 419,604
Surrender benefits and contract charges (1,529,482) (1,123,969) (4,414,681) (3,708,260) (1,012,697)
Death benefits (108,718) (233,669) (455,177) (381,066) (38,043)
- ---------------------------------------------------------------------------------------------------------------------------------
Units outstanding at end of year 3,661,496 9,639,891 37,359,162 24,834,887 8,511,694
- ---------------------------------------------------------------------------------------------------------------------------------
*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 For the year ended Dec. 31, 1997
Segregated Asset Subaccount
--------------------------------------------------------------------------
AGI AAP ATR AEG AIE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment income (loss) - net $ 2,630,450 $ 5,030,286 $ 936,596 $ 1,876,621 $ (398,528)
Net realized gain (loss) on investments 2,397,450 5,247,899 1,554,468 1,362,977 1,088,055
Net change in unrealized appreciation or
depreciation of investments 2,313,905 11,002,023 2,362,940 (48,984) (1,675,323)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 7,341,805 21,280,208 4,854,004 3,190,614 (985,796)
- ---------------------------------------------------------------------------------------------------------------------------------
Contract Transactions
- ---------------------------------------------------------------------------------------------------------------------------------
Contract purchase payments 135,879 301,440 183,857 84,482 150,915
Net transfers* 1,832,898 1,316,198 1,023,114 189,942 (334,587)
Surrender benefits and contract charges (4,498,545) (12,046,368) (3,373,778) (2,405,363) (3,303,464)
Death benefits (575,831) (753,685) (296,996) (42,141) (226,402)
- ---------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) from contract transactions (3,105,599) (11,182,415) (2,463,803) (2,173,080) (3,713,538)
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets at beginning of year 35,767,446 90,655,192 33,602,348 17,888,337 31,635,506
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 40,003,652 $ 100,752,985 $ 35,992,549 $ 18,905,871 $ 26,936,172
- ---------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Activity
- ---------------------------------------------------------------------------------------------------------------------------------
Units outstanding at beginning of year 21,298,709 53,859,928 20,195,164 11,448,609 27,135,083
Contract purchase payments 74,576 160,414 105,152 54,420 128,305
Net transfers* 988,064 665,621 578,202 70,016 (313,788)
Surrender benefits and contract charges (2,382,438) (6,206,651) (1,928,909) (1,423,797) (2,822,214)
Death benefits (310,955) (409,507) (166,270) (26,036) (191,146)
- ---------------------------------------------------------------------------------------------------------------------------------
Units outstanding at end of year 19,667,956 48,069,805 18,783,339 10,123,212 23,936,240
- ---------------------------------------------------------------------------------------------------------------------------------
*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 For the year ended Dec. 31, 1997
Segregated Asset Subaccount
-------------------------------------------- Combined
ACR ASI AMG Variable
Account
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income (loss) - net $ 9,880 $ 75,105 $ 143,483 $ 16,444,028
Net realized gain (loss) on investments 2,853 8,927 38,425 16,041,990
Net change in unrealized appreciation or
depreciation of investments 126,538 (20,027) 14,211 21,214,456
- -------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 139,271 64,005 196,119 53,700,474
- -------------------------------------------------------------------------------------------------------------------
Contract Transactions
- -------------------------------------------------------------------------------------------------------------------
Contract purchase payments - - 26,015 1,251,193
Net transfers* 26,299 344,056 619,647 5,751,747
Surrender benefits and contract charges (114,143) (167,977) (142,406) (43,266,520)
Death benefits - - - (3,606,381)
- -------------------------------------------------------------------------------------------------------------------
Increase (decrease) from contract transactions (87,844) 176,079 503,256 (39,869,961)
- -------------------------------------------------------------------------------------------------------------------
Net assets at beginning of year 700,327 936,823 1,074,495 348,346,332
- -------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 751,754 $ 1,176,907 $ 1,773,870 $ 362,176,845
- -------------------------------------------------------------------------------------------------------------------
Accumulation Unit Activity
- ---------------------------------------------------------------------------------------------------
Units outstanding at beginning of year 528,001 742,054 784,734
Contract purchase payments - - 15,990
Net transfers* 17,605 257,994 400,985
Surrender benefits and contract charges (82,217) (130,579) (101,222)
Death benefits - - -
- ---------------------------------------------------------------------------------------------------
Units outstanding at end of year 463,389 869,469 1,100,487
- ---------------------------------------------------------------------------------------------------
*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 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 (loss) 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 (decrease) 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
- ------------------------------------------------------------------------------------------------------------------------------------
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
Operations ATR AEG AIE ACR ASI AMG Variable
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 (loss) 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 (decrease) 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
- ------------------------------------------------------------------------------------------------------------------------------------
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>
IDS Life Account SBS
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. 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 Greenwich Street 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 segregated asset accounts or by IDS Life.
The Greenwich Street Series Fund (the mutual fund) is registered under the
Investment Company Act of 1940 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 and IDS Life Special Income Fund 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, Inc.
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. Mutual Management Corp., Inc. serves as investment advisor 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 advisor to the Equity Index Portfolio. Davis Skaggs Investment
Management serves as investment advisor to the Total Return Portfolio. Van
Kampen American Capital Asset Management, Inc. serves as investment advisor to
the Emerging Growth Portfolio. Smith Barney Global Capital Management, Inc.
serves as sub-investment advisor to the Diversified Strategic Income Portfolio.
Mutual Management Corp., Inc. serves as administrator to each portfolio.
- ------------------------------------------------------------
2. Summary of Significant Accounting Policies
Investments in the Mutual Fund
Investments in shares of the Portfolios 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 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.
Use of Estimates
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 disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of increase and decrease in net assets from operations
during the period. Actual results could differ from those estimates.
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.
- ------------------------------------------------------------
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 identified on an individual
segregated asset account basis. Charges for all segregated asset accounts
amounted to $14,502,145 in 1997 and $11,956,753 in 1996. Such charges are not
treated as a separate expense of the subaccounts. They are ultimately deducted
from contract surrender benefits paid by IDS Life.
- ------------------------------------------------------------
7. Investment Transactions
The subaccounts' purchases of Portfolio or Fund shares including reinvestment of
dividend distributions, were as follows:
Year ended Dec. 31,
Subaccount Investment 1997 1996
AMO Money Market Portfolio ............... $ 4,013,867 $ 5,053,294
AIH Intermediate High Grade Portfolio .... 1,838,902 1,051,570
ADS Diversified Strategic Income Portfolio 6,703,247 2,710,114
AEM Equity Income Portfolio .............. 2,944,464 712,258
AEX Equity Index Portfolio ............... 2,486,308 3,883,536
AGI Growth & Income Portfolio............. 5,760,439 1,899,403
AAP Appreciation Portfolio................ 8,140,169 8,328,853
ATR Total Return Portfolio................ 3,427,735 3,776,792
AEG Emerging Growth Portfolio............. 3,758,651 2,469,056
AIE International Equity Portfolio........ 1,481,763 2,665,898
ACR Capital Resource Fund................. 115,637 271,538
ASI Special Income Fund................... 431,647 146,592
AMG Managed Fund.......................... 914,251 292,003
Combined Variable Account............. $42,017,080 $33,260,907
- -------------------------------------------------------------------
8. Year 2000 Issue (Unaudited)
The Year 2000 issue is the result of computer programs having been written using
two digits rather than four to define a year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than 2000. This could result in the failure of major systems or miscalculations,
which could have a material impact on the operations of the Variable Account.
The Variable Account has no computer systems of its own but is dependent upon
the systems maintained by AEFC and certain other third parties.
A comprehensive review of AEFC's computer systems and business processes has
been conducted to identify the major systems that could be affected by the Year
2000 issue. Steps are being taken to resolve any potential problems including
modification to existing software and the purchase of new software. These
measures are scheduled to be completed and tested on a timely basis. AEFC's goal
is to complete internal remediation and testing of each system by the end of
1998 and to continue compliance efforts through 1999.
The Year 2000 readiness of other third parties whose system failures could have
an impact on Variable Accounts's operations is currently being evaluated. The
potential materiality of any such impact is not known at this time.
<PAGE>
<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, 1997 and 1996 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, 1997. 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, 1997 and 1996, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
Ernst & Young LLP
Minneapolis, Minnesota
February 5, 1998
<PAGE>
IDS Life Financial Information
IDS LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
Dec. 31, Dec. 31,
ASSETS 1997 1996
(thousands)
Investments:
Fixed maturities:
Held to maturity, at amortized cost (Fair value:
1997, $9,743,410; 1996, $10,521,650) $9,315,450 $10,236,379
Available for sale, at fair value (Amortized cost:
1997, $12,515,030; 199, $11,008,622) 12,876,694 11,146,845
Mortgage loans on real estate 3,618,647 3,493,364
Policy loans 498,874 459,902
Other investments 318,591 251,465
Total investments 26,628,256 25,587,955
Cash and cash equivalents 19,686 224,603
Amounts recoverable from reinsurers 205,716 157,722
Amounts due from brokers 8,400 11,047
Other accounts receivable 37,895 44,089
Accrued investment income 357,390 343,313
Deferred policy acquisition costs 2,479,577 2,330,805
Deferred income taxes, net -- 33,923
Other assets 22,700 37,364
Separate account assets 23,214,504 18,535,160
Total assets $52,974,124 $47,305,981
========= =========
<PAGE>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS (continued)
Dec. 31, Dec. 31
LIABILITIES AND STOCKHOLDER'S EQUITY 1997 1996
(thousands)
Liabilities:
Future policy benefits:
Fixed annuities $22,009,747 $21,838,008
Universal life-type insurance 3,280,489 3,177,149
Traditional life insurance 213,676 209,685
Disability income and long-term care insurance 533,124 424,200
Policy claims and other policyholders' funds 68,345 83,634
Deferred income taxes, net 61,582 --
Amounts due to brokers 381,458 261,987
Other liabilities 345,383 332,078
Separate account liabilities 23,214,504 18,535,160
Total liabilities 50,108,308 44,861,901
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 290,847 283,615
Net unrealized gain on investments 226,359 86,102
Retained earnings 2,345,610 2,071,363
Total stockholder's equity 2,865,816 2,444,080
Total liabilities and stockholder's equity $52,974,124 $47,305,981
========= =========
See accompanying notes.
<PAGE>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years ended Dec. 31,
1997 1996 1995
(thousands)
<S> <C> <C> <C>
Revenues:
Premiums:
Traditional life insurance $ 52,473 $ 51,403 $ 50,193
Disability income and long-term care insurance 154,021 131,518 111,337
Total premiums 206,494 182,921 161,530
Policyholder and contractholder charges 341,726 302,999 256,454
Management and other fees 340,892 271,342 215,581
Net investment income 1,988,389 1,965,362 1,907,309
Net realized gain (loss) on investments 860 (159) (4,898)
Total revenues 2,878,361 2,722,465 2,535,976
Benefits and expenses:
Death and other benefits:
Traditional life insurance 28,951 26,919 29,528
Universal life-type insurance
and investment contracts 92,814 85,017 71,691
Disability income and
long-term care insurance 22,333 19,185 16,259
Increase (decrease) in liabilities for
future policy benefits:
Traditional life insurance 3,946 1,859 (1,315)
Disability income and
long-term care insurance 63,631 57,230 51,279
Interest credited on universal life-type
insurance and investment contracts 1,386,448 1,370,468 1,315,989
Amortization of deferred policy acquisition costs 322,731 278,605 280,121
Other insurance and operating expenses 276,596 261,468 211,642
Total benefits and expenses 2,197,450 2,100,751 1,975,194
Income before income taxes 680,911 621,714 560,782
Income taxes 206,664 207,138 195,842
Net income $ 474,247 $ 414,576 $ 364,940
======== ======== =======
See accompanying notes.
</TABLE>
<PAGE>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
Three years ended Dec. 31, 1997
(thousands)
<TABLE>
<CAPTION>
Additional Net Unrealized
Capital Paid-In Gain (Loss) on Retained
Stock Capital on Investments Earnings Total
<S> <C> <C> <C> <C> <C>
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
Net income -- -- -- 474,247 474,247
Change in net unrealized
gain (loss) on investments -- -- 140,257 -- 140,257
Capital contribution from parent -- 7,232 -- -- 7,232
Cash dividends -- -- -- (200,000) (200,000)
Balance, Dec. 31, 1997 $3,000 $290,847 $226,359 $2,345,610 $2,865,816
===== ======= ======= ========= ========
See accompanying notes.
</TABLE>
<PAGE>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended Dec. 31,
1997 1996 1995
(thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 474,247 $ 414,576 $ 364,940
Adjustments to reconcile net income to
net cash provided by (used in) operating activities:
Policy loan issuance, excluding universal
life-type insurance (54,665) (49,314) (46,011)
Policy loan repayment, excluding universal
life-type insurance 46,015 41,179 36,416
Change in amounts recoverable from reinsurers (47,994) (43,335) (34,083)
Change in other accounts receivable 6,194 (4,981) 12,231
Change in accrued investment income (14,077) 4,695 (30,498)
Change in deferred policy acquisition
costs, net (156,486) (294,755) (196,963)
Change in liabilities for future policy
benefits for traditional life,
disability income and
long-term care insurance 112,915 97,479 85,575
Change in policy claims and other
policyholders' funds (15,289) 27,311 6,255
Change in deferred income tax provision (benefit) 19,982 (65,609) (33,810)
Change in other liabilities 13,305 46,724 (6,548)
(Accretion of discount)
amortization of premium, net (5,649) (23,032) (22,528)
Net realized (gain) loss on investments (860) 159 4,898
Policyholder and contractholder
charges, non-cash (160,885) (154,286) (140,506)
Other, net 7,161 (10,816) 3,849
Net cash provided by (used in) operating
activities $ 223,914 $ (14,005) $ 3,217
</TABLE>
<PAGE>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
<TABLE>
<CAPTION>
Years ended Dec. 31,
1997 1996 1995
(thousands)
<S> <C> <C> <C>
Cash flows from investing activities:
Fixed maturities held to maturity:
Purchases $ (1,996) $ (43,751) $ (1,007,208)
Maturities, sinking fund payments and calls 686,503 759,248 538,219
Sales 236,761 279,506 332,154
Fixed maturities available for sale:
Purchases (3,160,133) (2,299,198) (2,452,181)
Maturities, sinking fund payments and calls 1,206,213 1,270,240 861,545
Sales 457,585 238,905 136,825
Other investments, excluding policy loans:
Purchases (524,521) (904,536) (823,131)
Sales 335,765 236,912 160,521
Change in amounts due from brokers 2,647 (11,047) 7,933
Change in amounts due to brokers 119,471 140,369 (105,119)
Net cash used in investing activities (641,705) (333,352) (2,350,442)
Cash flows from financing activities:
Activity related to universal life-type insurance
and investment contracts:
Considerations received 2,785,758 3,567,586 4,189,525
Surrenders and death benefits (3,736,242) (4,250,294) (3,141,404)
Interest credited to account balances 1,386,448 1,370,468 1,315,989
Universal life-type insurance policy loans:
Issuance (84,835) (86,501) (84,700)
Repayment 54,513 58,753 52,188
Capital contribution from parent 7,232 4,801 --
Dividends paid (200,000) (165,000) (180,000)
Net cash provided by financing activities 212,874 499,813 2,151,598
Net (decrease) increase in cash and
cash equivalents (204,917) 152,456 (195,627)
Cash and cash equivalents at
beginning of year 224,603 72,147 267,774
Cash and cash equivalents at
end of year $ 19,686 $ 224,603 $ 72,147
======= ======== ========
See accompanying notes.
</TABLE>
<PAGE>
IDS LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
($ thousands)
1. Summary of significant accounting policies
------------------------------------------
Nature of business
IDS Life Insurance Company (the Company) is a stock life insurance
company organized under the laws of the State of Minnesota. The
Company is a wholly owned subsidiary of American Express Financial
Corporation (AEFC), which is a wholly owned subsidiary of American
Express Company. The Company serves residents of all states except New
York. IDS Life Insurance Company of New York is a wholly owned
subsidiary of the Company and serves New York State residents. The
Company also wholly owns American Enterprise Life Insurance Company,
American Centurion Life Assurance Company (ACLAC), American Partners
Life Insurance Company and American Express Corporation.
The Company's principal products are deferred annuities and universal
life insurance, which are issued primarily to individuals. It offers
single premium and flexible premium deferred annuities on both a fixed
and variable dollar basis. Immediate annuities are offered as well.
The Company's insurance products include universal life (fixed and
variable), whole life, single premium life and term products (including
waiver of premium and accidental death benefits). The Company also
markets disability income and long-term care insurance.
Basis of presentation
The accompanying consolidated financial statements include the accounts
of the Company and its wholly owned subsidiaries. All material
intercompany accounts and transactions have been eliminated in
consolidation.
The accompanying consolidated financial statements have been prepared
in conformity with generally accepted accounting principles which vary
in certain respects from reporting practices prescribed or permitted by
state insurance regulatory authorities (see Note 4).
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Investments
Fixed maturities that the Company has both the positive intent and the
ability to hold to maturity are classified as held to maturity and
carried at amortized cost. All other fixed maturities and all
marketable equity securities are classified as available for sale and
carried at fair value. Unrealized gains and losses on securities
classified as available for sale are reported as a separate component
of stockholder's equity, net of deferred taxes.
<PAGE>
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.
<PAGE>
1. Summary of significant accounting policies (continued)
------------------------------------------
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 judgment as to the ultimate collectibility of
principal, interest payments received are either recognized as income
or applied to the recorded investment in the loan.
The cost of interest rate caps and floors is amortized to investment
income over the life of the contracts and payments received as a result
of these agreements are recorded as investment income when realized.
The amortized cost of interest rate caps and floors is included in
other investments. Amounts paid or received under interest rate swap
agreements are recognized as an adjustment to investment income.
During 1997, 1996 and 1995, the Company purchased and wrote index
options to protect against significant declines in fee income as a
result of a decrease in the market value of its managed assets. These
options were marked-to-market through the income statement.
During 1997, the Company purchased and wrote index options to hedge
1998 management fee and other income from separate accounts and the
underlying mutual funds. These index options are carried at market
value and are included in other investments. Gains or losses on these
instruments are deferred and recognized in management and other fees in
the same period as the hedged fee 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.
<PAGE>
Supplementary information to the consolidated statements of cash flows
for the years ended December 31 is summarized as
follows:
1997 1996 1995
---- ---- ----
Cash paid during the year for:
Income taxes $174,472 $317,283 $191,011
Interest on borrowings 8,213 4,119 5,524
<PAGE>
1. Summary of significant accounting policies (continued)
------------------------------------------
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. Under this method, profits are recognized over
the lives of the policies in proportion to the estimated gross profits
expected to be realized.
Premiums on traditional life, disability income and long-term care
insurance policies are recognized as revenue when due, and related
benefits and expenses are associated with premium revenue in a manner
that results in recognition of profits over the lives of the insurance
policies. This association is accomplished by means of the provision
for future policy benefits and the deferral and subsequent amortization
of policy acquisition costs.
Policyholder and contractholder charges include the monthly cost of
insurance charges 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
received from the variable annuity and variable life insurance separate
accounts and underlying mutual 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 accumulation values and surrender charge revenue.
The costs for universal life-type insurance and certain installment
annuities are amortized as a percentage of the estimated gross profits
expected to be realized on the policies. For traditional life, disability
income and long-term care insurance policies, the costs are amortized over
an appropriate period in proportion to premium revenue.
Liabilities for future policy benefits
Liabilities for universal life-type insurance and deferred annuities
are accumulation values.
Liabilities for fixed annuities in a benefit status are based on
established industry mortality tables and interest rates ranging from
5% to 9.5%, depending on year of issue.
<PAGE>
Liabilities for future benefits on traditional life insurance are based
on the net level premium method, using anticipated mortality, policy
persistency and interest earning rates. Anticipated mortality rates
are based on established industry mortality tables. Anticipated policy
persistency rates vary by policy form, issue age and policy duration
with persistency on cash value plans generally anticipated to be better
than persistency on term insurance plans. Anticipated interest rates
range from 4% to 10%, depending on policy form, issue year and policy
duration.
<PAGE>
1. Summary of significant accounting policies (continued)
------------------------------------------
Liabilities for future disability income and long-term care policy
benefits include both policy reserves and claim reserves. Policy
reserves are based on the net level premium method, using anticipated
morbidity, mortality, policy persistency and interest earning rates.
Anticipated morbidity and mortality rates are based on established
industry morbidity and mortality tables. Anticipated policy
persistency rates vary by policy form, issue age, policy duration and,
for disability income policies, occupation class. Anticipated interest
rates for disability income and long-term care policy reserves are 3%
to 9.5% at policy issue and grade to ultimate rates of 5% to 10% over 5
to 10 years.
Claim reserves are calculated based on claim continuance tables and
anticipated interest earnings. Anticipated claim continuance rates are
based on a national survey. Anticipated interest rates for claim
reserves for both disability income and long-term care range from 6% to
8%.
Reinsurance
The maximum amount of life insurance risk retained by the Company on
any one life is $750 of life 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 AEFC and American Express Company, tax benefit is
recognized for losses to the extent they can be used on the
consolidated tax return. It is the policy of AEFC and its subsidiaries
that AEFC will reimburse subsidiaries for all tax benefits.
Included in other liabilities at December 31, 1997 and 1996 are $12,061
and $33,358, respectively, receivable from 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 receives investment
management fees from the proprietary mutual funds used as investment
options for variable annuities and variable life insurance. The
Company receives mortality and expense risk fees from the separate
accounts.
<PAGE>
1. Summary of significant accounting policies (continued)
------------------------------------------
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.
Reclassification
Certain 1996 and 1995 amounts have been reclassified to conform to the
1997 presentation.
2. Investments
-----------
Fair values of investments in fixed maturities represent quoted market
prices and estimated values when quoted prices are not available.
Estimated values are determined by established procedures involving,
among other things, review of market indices, price levels of current
offerings of comparable issues, price estimates and market data from
independent brokers and financial files.
The amortized cost, gross unrealized gains and losses and fair values
of investments in fixed maturities and equity securities at December
31, 1997 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 $41,932 $ 2,950 $ -- $ 44,881
State and municipal obligations 9,684 568 -- 10,252
Corporate bonds and obligations 7,280,646 415,700 9,322 7,687,024
Mortgage-backed securities 1,983,188 25,976 7,911 2,001,253
--------- ------ ----- ---------
$9,315,450 $445,194 $17,233 $9,743,410
========= ======= ====== =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Available for sale Cost Gains Losses Value
------------------ --------- ---------- ---------- -----
<S> <C> <C> <C> <C>
U.S. Government agency obligations $ 65,291 $ 4,154 $ -- $69,445
State and municipal obligations 11,045 1,348 -- 12,393
Corporate bonds and obligations 5,308,129 232,761 30,198 5,510,692
Mortgage-backed securities 7,130,565 160,478 6,879 7,284,164
--------- ------- ----- ---------
Total fixed maturities 12,515,030 398,741 37,077 12,876,694
Equity securities 3,000 361 -- 3,361
---------- ------- ------ ----------
$12,518,030 $399,102 $37,077 $12,880,055
========== ======= ====== ==========
</TABLE>
<PAGE>
2. Investments (continued)
-----------
The amortized cost, gross unrealized gains and losses and fair values
of investments in fixed maturities and equity securities at December
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
========== ======= ====== ==========
</TABLE>
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Available for sale Cost Gains Losses Value
------------------ ---- ----- ------ -----
<S> <C> <C> <C> <C>
U.S. Government agency obligations $ 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 and fair value of investments in fixed maturities at
December 31, 1997 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.
<PAGE>
Amortized Fair
Held to maturity Cost Value
---------------- --------- --------
Due in one year or less $ 356,597 $360,956
Due from one to five years 1,536,239 1,619,875
Due from five to ten years 4,337,547 4,577,552
Due in more than ten years 1,101,879 1,183,774
Mortgage-backed securities 1,983,188 2,001,253
--------- ---------
$9,315,450 $9,743,410
========= =========
Amortized Fair
Available for sale Cost Value
--------- -----
Due in one year or less $ 162,663 $ 164,012
Due from one to five years 633,339 679,561
Due from five to ten years 2,418,162 2,517,098
Due in more than ten years 2,170,301 2,231,859
Mortgage-backed securities 7,130,565 7,284,164
---------- ----------
$12,515,030 $12,876,694
========== ==========
<PAGE>
2. Investments (continued)
-----------
During the years ended December 31, 1997, 1996 and 1995, fixed
maturities classified as held to maturity were sold with amortized cost
of $229,848, $277,527 and $333,508, respectively. Net gains and losses
on these sales were not significant. The sale of these fixed
maturities was due to significant deterioration in the issuers' credit
worthiness.
Fixed maturities available for sale were sold during 1997 with proceeds
of $457,585 and gross realized gains and losses of $6,639 and $7,518,
respectively. Fixed maturities available for sale were sold during
1996 with proceeds of $238,905 and gross realized gains and losses of
$571 and $16,084, respectively. 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.
At December 31, 1997, bonds carried at $14,351 were on deposit with
various states as required by law.
At December 31, 1997, investments in fixed maturities comprised 83
percent of the Company's total invested assets. These securities are
rated by Moody's and Standard & Poor's (S&P), except for securities
carried at approximately $2.7 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 December 31 is as follows:
Rating 1997 1996
--------- --------- ---------
Aaa/AAA $ 9,195,619 $ 9,460,134
Aaa/AA -- 2,870
Aa/AA 232,451 241,914
Aa/A 246,792 192,631
A/A 2,787,936 2,949,895
A/BBB 1,200,345 1,034,661
Baa/BBB 5,226,616 4,531,515
Baa/BB 475,084 768,285
Below investment grade 2,465,637 2,063,096
--------- ---------
$21,830,480 $21,245,001
========== ==========
At December 31, 1997, 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 one percent of the Company's total
investments in fixed maturities.
At December 31, 1997, approximately 14 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:
<PAGE>
December 31, 1997 December 31, 1996
------------------------ -----------------------
On Balance Commitments On Balance Commitments
Region Sheet to Purchase Sheet to Purchase
------------- ---------- ------------ ---------- -----------
East North Central $ 748,372 $ 32,462 $ 777,960 $ 19,358
West North Central 456,934 14,340 389,285 29,620
South Atlantic 922,172 14,619 891,852 35,007
Middle Atlantic 545,601 15,507 553,869 17,959
New England 316,250 2,136 310,177 14,042
Pacific 184,917 3,204 190,770 4,997
West South Central 125,227 -- 105,173 11,246
East South Central 60,274 -- 75,176 --
Mountain 297,545 28,717 236,597 11,401
--------- ------- --------- -------
3,657,292 110,985 3,530,859 143,630
Less allowance for
losses 38,645 -- 37,495 --
--------- ------- --------- -------
$3,618,647 $110,985 $3,493,364 $143,630
========= ======= ========= =======
<PAGE>
2. Investments (continued)
-----------
December 31, 1997 December 31, 1996
------------------------ -------------------------
On Balance Commitments On Balance Commitments
Property type Sheet to Purchase Sheet to Purchase
--------------- ---------- ----------- ---------- -----------
Department/retail
stores $1,189,203 $ 27,314 $1,154,179 $ 68,032
Apartments 1,089,127 16,576 1,119,352 23,246
Office buildings 716,729 34,546 611,395 27,653
Industrial buildings 295,889 21,200 296,944 6,716
Hotels/motels 101,052 -- 97,870 6,257
Medical buildings 99,979 9,748 67,178 8,289
Nursing/retirement
homes 72,359 -- 88,226 1,877
Mixed Use 71,007 -- 73,120 --
Other 21,947 1,601 22,595 1,560
--------- ------- --------- ------
3,657,292 110,985 3,530,859 143,630
Less allowance for
losses 38,645 -- 37,495 --
--------- ------- --------- -------
$3,618,647 $110,985 $3,493,364 $143,630
========= ======= ========= =======
Mortgage loan fundings are restricted by state insurance regulatory
authorities to 80 percent or less of the market value of the real
estate at the time of origination of the loan. The Company holds the
mortgage document, which gives it the right to take possession of the
property if the borrower fails to perform according to the terms of the
agreement. 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 December 31, 1997 and 1996, the Company's recorded investment in
impaired loans was $45,714 and $79,441, respectively, with allowances
of $9,812 and $16,162, respectively. During 1997 and 1996, the average
recorded investment in impaired loans was $61,870 and $74,338,
respectively.
The Company recognized $2,981, $4,889 and $5,014 of interest income
related to impaired loans for the years ended December 31, 1997, 1996
and 1995 respectively.
<PAGE>
The following table presents changes in the allowance for investment
losses related to all loans:
1997 1996 1995
------ ------ ------
Balance, January 1 $37,495 $37,340 $35,252
Provision for investment losses 8,801 10,005 15,900
Loan payoffs (3,851) (4,700) (11,900)
Foreclosures (3,800) (5,150) (1,350)
Other -- -- (562)
------ ------ -------
Balance, December 31 $38,645 $37,495 $37,340
====== ====== ======
At December 31, 1997, the Company had commitments to purchase
investments other than mortgage loans for $234,485. Commitments to
purchase investments are made in the ordinary course of business. The
fair value of these commitments is $nil.
<PAGE>
2. Investments (continued)
-----------
Net investment income for the years ended December 31 is summarized as
follows:
1997 1996 1995
--------- --------- ---------
Interest on fixed maturities $1,692,481 $1,666,929 $1,656,136
Interest on mortgage loans 305,742 283,830 232,827
Other investment income 25,089 43,283 35,936
Interest on cash equivalents 5,914 5,754 5,363
--------- --------- ---------
2,029,226 1,999,796 1,930,262
Less investment expenses 40,837 34,434 22,953
--------- --------- ---------
$1,988,389 $1,965,362 $1,907,309
========= ========= =========
Net realized gain (loss) on investments for the years ended December 31
is summarized as follows:
1997 1996 1995
------ ----- -----
Fixed maturities $ 16,115 $ 8,736 $ 9,973
Mortgage loans (6,424) (8,745) (13,259)
Other investments (8,831) (150) (1,612)
------- ----- -------
$ 860 $ (159) $ (4,898)
======= ====== ======
Changes in net unrealized appreciation (depreciation) of investments
for the years ended December 31 are summarized as follows:
1997 1996 1995
------- ------- -------
Fixed maturities available
for sale $223,441 $(231,853) $811,649
Equity securities 53 (52) 3,118
3. Income taxes
------------
The Company qualifies as a life insurance company for federal income
tax purposes. As such, the Company is subject to the Internal Revenue
Code provisions applicable to life insurance companies.
The income tax expense consists of the following:
1997 1996 1995
Federal income taxes:
Current $176,879 $260,357 $218,040
Deferred 19,982 (65,609) (33,810)
------- -------- -------
196,861 194,748 184,230
State income taxes-current 9,803 12,390 11,612
------- ------- -------
Income tax expense $206,664 $207,138 $195,842
======= ======= =======
<PAGE>
3. Income taxes (continued)
------------
Increases (decreases) to the federal tax provision applicable to pretax
income based on the statutory rate are attributable to:
<TABLE>
<CAPTION>
1997 1996 1995
---------------- --------------- ---------------
Provision Rate Provision Rate Provision Rate
--------- ---- --------- ---- --------- ----
<S> <C> <C> <C> <C> <C> <C>
Federal income
taxes based on
the statutory rate $238,319 35.0% $217,600 35.0% $196,274 35.0%
Increases (decreases)
are attributable to:
Tax-excluded interest
and dividend income (10,294) (1.5) (9,636) (1.5) (8,524) (1.5)
State Taxes, net of federal
benefit 6,372 0.9 8,053 1.3 7,548 1.3
Low income housing
credits (20,705) (3.0) (5,090) (0.8) (861) (0.2)
Other, net (7,028) (1.0) (3,789) (0.7) 1,405 0.3
------- ----- ------- ---- ------- ----
Federal income taxes $206,664 30.4% $207,138 33.3% $195,842 34.9%
======= ==== ======= ==== ======= ====
</TABLE>
A portion of life insurance company income earned prior to 1984 was not
subject to current taxation but was accumulated, for tax purposes, in a
policyholders' surplus account. At December 31, 1997, 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.
Significant components of the Company's deferred tax assets and
liabilities as of December 31 are as follows:
1997 1996
---- ----
Deferred tax assets:
Policy reserves $748,204 $724,412
Life insurance guarantee
fund assessment reserve 20,101 29,854
Other 9,589 2,763
------- -------
Total deferred tax assets 777,894 757,029
------- -------
<PAGE>
Deferred tax
liabilities:
Deferred policy acquisition costs 700,032 665,685
Unrealized gain on investments 121,885 48,486
Investments, other 17,559 8,935
------- -------
Total deferred tax liabilities 839,476 723,106
------- -------
Net deferred tax (liabilities) assets $(61,582) $ 33,923
====== ======
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.
<PAGE>
4. Stockholder's equity
--------------------
Retained earnings available for distribution as dividends to the parent
are limited to the Company's surplus as determined in accordance with
accounting practices prescribed by state insurance regulatory
authorities. Statutory unassigned surplus aggregated $1,468,677 as of
December 31, 1997 and $1,261,592 as of December 31, 1996 (see Note 3
with respect to the income tax effect of certain distributions). In
addition, any dividend distributions in 1998 in excess of approximately
$331,480 would require approval of the Department of Commerce of the
State of Minnesota.
Statutory net income for the years ended December 31 and capital and
surplus as of December 31 are summarized as follows:
1997 1996 1995
---------- ---------- ----------
Statutory net income $ 379,615 $ 365,585 $ 326,799
Statutory capital and surplus 1,765,290 1,565,082 1,398,649
surplus
5. Related party transactions
--------------------------
The Company loans funds to American Express Financial Corporation under
a collateral loan agreement. The balance of the loan was $nil and
$11,800 at December 31, 1997 and 1996, 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. Interest income on related party loans totaled
$103, $780 and $1,371 in 1997, 1996 and 1995, respectively.
The Company purchased a five year secured note from an affiliated
company which was redeemed in 1996. The interest rate on the note was
8.42 percent. Interest income on the above note totaled $1,637 and
$1,937 in 1996 and 1995, respectively.
The Company participates in the American Express Company Retirement
Plan which covers all permanent employees age 21 and over who have met
certain employment requirements. Employer contributions to the plan
are based on participants' age, years of service and total compensation
for the year. Funding of retirement costs for this plan complies with
the applicable minimum funding requirements specified by ERISA. The
Company's share of the total net periodic pension cost was $201, $174
and $155 in 1997, 1996 and 1995, 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 1997,
1996 and 1995 were $1,245, $990 and $815, respectively.
<PAGE>
The Company participates in defined benefit health care plans of AEFC
that provide health care and life insurance benefits to retired
employees and retired financial advisors. The plans include
participant contributions and service related eligibility
requirements. Upon retirement, such employees are considered to have
been employees of AEFC. AEFC expenses these benefits and allocates the
expenses to its subsidiaries. Accordingly, costs of such benefits to
the Company are included in employee compensation and benefits and
cannot be identified on a separate company basis.
<PAGE>
5. Related party transactions (continued)
--------------------------
Charges by AEFC for use of joint facilities, marketing services and
other services aggregated $414,155, $397,362 and $377,139 for 1997,
1996 and 1995, respectively. Certain of these costs are included in
deferred policy acquisition costs. In addition, the Company rents its
home office space from AEFC on an annual renewable basis.
6. Commitments and contingencies
-----------------------------
At December 31, 1997 and 1996, traditional life insurance and universal
life-type insurance in force aggregated $74,730,720 and $67,274,354,
respectively, of which $4,351,904 and $3,875,921 were reinsured at the
respective year ends. The Company also reinsures a portion of the
risks assumed under disability income and long-term care policies.
Under all reinsurance agreements, premiums ceded to reinsurers amounted
to $60,495, $48,250 and $39,399 and reinsurance recovered from
reinsurers amounted to $19,042, $15,612, and $14,088 for the years
ended December 31, 1997, 1996 and 1995, respectively. Reinsurance
contracts do not relieve the Company from its primary obligation to
policyholders.
A number of lawsuits have been filed against life and health insurers
in jurisdictions in which the Company 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,
AEFC. A second action was filed in March, 1997. The plaintiffs
purport to represent a class consisting of all persons who replaced
existing Company policies with new Company policies from and after
January 1, 1985. The complaint puts at issue various alleged sales
practices and misrepresentations, alleged breaches of fiduciary duties
and alleged violations of consumer fraud statutes. 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. 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.
The IRS routinely examines the Company's federal income tax returns,
and is currently auditing the Company's returns for the 1990 through
1992 tax years. Management does not believe there will be a material
adverse effect on the Company's consolidated financial position as a
result of this audit.
7. Lines of credit
---------------
The Company has an available line of credit with its parent aggregating
$100,000. The rate for the line of credit is the parent's cost of
funds, ranging from 20 to 45 basis points over the established index.
Borrowings outstanding under this agreement were $nil at
December 31, 1997 and 1996.
<PAGE>
8. Derivative financial instruments
--------------------------------
The Company enters into transactions involving derivative financial
instruments to manage its exposure to interest rate risk and equity
market risk, including hedging specific transactions. The Company does
not hold derivative instruments for trading purposes. The Company
manages risks associated with these instruments as described below.
<PAGE>
8. Derivative financial instruments (continued)
--------------------------------
Market risk is the possibility that the value of the derivative
financial instruments will change due to fluctuations in a factor from
which the instrument derives its value, primarily an interest rate or
equity market index. The Company is not impacted by market risk
related to derivatives held for non-trading purposes beyond that
inherent in cash market transactions. Derivatives held for purposes
other than trading are largely used to manage risk and, therefore, the
cash flow and income effects of the derivatives are inverse to the
effects of the underlying transactions.
Credit risk is the possibility that the counterparty will not fulfill
the terms of the contract. The Company monitors credit risk related to
derivative financial instruments through established approval
procedures, including setting concentration limits by counterparty, and
requiring collateral, where appropriate. A vast majority of the
Company's counterparties are rated A or better by Moody's and Standard
& Poor's.
Credit risk related to interest rate caps and floors and index options
is measured by the replacement cost of the contracts. The replacement
cost represents the fair value of the instruments.
The notional or contract amount of a derivative financial instrument is
generally used to calculate the cash flows that are received or paid
over the life of the agreement. Notional amounts are not recorded on
the balance sheet. Notional amounts far exceed the related credit risk.
The Company's holdings of derivative financial instruments are as
follows:
Notional Carrying Fair Total Credit
December 31, 1997 Amount Amount Value Exposure
----------------- -------- -------- ----- ------------
Assets:
Interest rate caps $ 4,600,000 $ 24,963 $ 15,665 $ 15,665
Interest rate floors 1,000,000 1,561 4,551 4,551
Put index options 221,984 11,120 11,120 11,120
Liabilities:
Call index options 221,984 (8,273) (8,273) --
Off balance sheet:
Interest rate swaps 1,267,000 -- (45,799) --
--------- ------ ------ ------
$29,371 $(22,736) $31,336
====== ====== ======
Notional Carrying Fair Total Credit
December 31, 1996 Amount Amount 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
Off balance sheet:
Interest rate swaps 1,000,000 -- (24,715) --
--------- ------ -------- ------
$18,268 $(12,935) $11,780
====== ====== ======
<PAGE>
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 1998 to 2003. The interest rate
swaps expire on various dates from 2000 to 2003. All put and call
options expire in 1998.
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.
<PAGE>
8. Derivative financial instruments (continued)
--------------------------------
Index options are used to manage the equity market risk related to the
fee income that the Company receives from its separate accounts and the
underlying mutual funds. The amount of the fee income received is
based upon the daily market value of the separate account and mutual
fund assets. As a result, the Company's fee income could be impacted
significantly by changing economic conditions in the equity market.
The Company entered into index option collars (combination of puts and
calls) to hedge anticipated fee income for 1998 related to separate
accounts and mutual funds which invest in equity securities. Testing
has demonstrated the impact of these instruments on the income
statement closely correlates with the amount of fee income the Company
realizes. In the event that testing demonstrates that this correlation
no longer exists, or in the event the Company disposes of the index
options collars, the instruments will be marked-to-market through the
income statement. At December 31, 1997, deferred gains on purchased
put index options were $11,120 and deferred losses on written call
index options were $8,273.
9. Fair values of financial instruments
------------------------------------
The Company discloses fair value information for most on- and
off-balance sheet financial instruments for which it is practicable to
estimate that value. Fair values of life insurance obligations and all
non-financial instruments, such as deferred acquisition costs are
excluded. Off-balance sheet intangible assets, such as the value of
the field force, are also excluded. Management believes the value of
excluded assets and liabilities is significant. The fair value of the
Company, therefore, cannot be estimated by aggregating the amounts
presented.
<TABLE>
<CAPTION>
1997 1996
------------------ ---------------------
Carrying Fair Carrying Fair
Financial Assets Amount Value Amount Value
---------------- -------- ------ ------- -----
<S> <C> <C> <C> <C>
Investments:
Fixed maturities (Note 2):
Held to maturity $9,315,450 $9,743,410 $10,236,379 $10,521,650
Available for sale 12,876,694 12,876,694 11,146,845 11,146,845
Mortgage loans on
real estate (Note 2) 3,618,647 3,808,570 3,493,364 3,606,077
Other:
Equity securities (Note 2) 3,361 3,361 3,308 3,308
Derivative financial
instruments (Note 8) 37,644 31,336 18,268 11,780
Other 82,347 85,383 63,993 66,242
Cash and
cash equivalents (Note 1) 19,686 19,686 224,603 224,603
Separate account assets
(Note 1) 23,214,504 23,214,504 18,535,160 18,535,160
<PAGE>
Financial Liabilities
Future policy benefits
for fixed annuities 20,731,052 19,882,302 20,641,986 19,721,968
Derivative financial
instruments (Note 8) (8,273) (54,072) -- (24,715)
Separate account liabilities 21,488,282 20,707,620 17,358,087 16,688,519
</TABLE>
<PAGE>
9. Fair values of financial instruments (continued)
------------------------------------
At December 31, 1997 and 1996, the carrying amount and fair value of
future policy benefits for fixed annuities exclude life
insurance-related contracts carried at $1,185,155 and $1,112,155,
respectively, and policy loans of $93,540 and $83,867, respectively.
The fair value of these benefits is based on the status of the
annuities at December 31, 1997 and 1996. 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
1997 and 1996.
At December 31, 1997 and 1996, 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 $1,726,222 and $1,177,073, 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
December 31, 1997, 1996 and 1995 and total assets at December 31, 1997,
1996 and 1995 by segment are summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Net investment income:
Life, disability income
and long-term care insurance $ 269,874 $ 262,998 $ 256,242
Annuities 1,718,515 1,702,364 1,651,067
--------- --------- ---------
$ 1,988,389 $ 1,965,362 $ 1,907,309
========= ========= =========
Premiums, charges and fees:
Life, disability income
and long-term care insurance $ 514,838 $ 448,389 $ 384,008
Annuities 374,274 308,873 249,557
------- ------- -------
$ 889,112 $ 757,262 $ 633,565
======= ======= =======
Income before income taxes:
Life, disability income
and long-term care insurance $ 178,717 $ 161,115 $ 125,402
Annuities 501,334 460,758 440,278
Net gain (loss) on investments 860 (159) (4,898)
------- ------- -------
$ 680,911 $ 621,714 $ 560,782
======= ======= =======
<PAGE>
Total assets:
Life, disability income
and long-term care insurance $ 8,193,796 $ 7,028,906 $ 6,195,870
Annuities 44,780,328 40,277,075 36,704,208
---------- ---------- ----------
$52,974,124 $47,305,981 $42,900,078
========== ========== ==========
</TABLE>
<PAGE>
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.
11. Year 2000 Issue (unaudited)
---------------
The Year 2000 issue is the result of computer programs having been
written using two digits rather than four to define a year. Any
programs that have time-sensitive software may recognize a date using "00"
as the year 1900 rather than 2000. This could result in the failure of
major systems or miscalculations, which could have a material impact on
the operations of the Company. All of the systems used by the Company are
maintained by AEFC and are utilized by multiple subsidiaries and
affiliates of AEFC. The Company's business is heavily dependent
upon AEFC's computer systems and has significant interactions with
systems of third parties.
A comprehensive review of AEFC's computer systems and business
processes, including those specific to the Company, has been conducted to
identify the major systems that could be affected by the Year 2000
issue. Steps are being taken to resolve any potential problems including
modification to existing software and the purchase of new software. These
measures are scheduled to be completed and tested on a timely basis.
AEFC's goal is to complete internal remediation and testing of each
system by the end of 1998 and to continue compliance efforts through
1999.
AEFC is evaluating the Year 2000 readiness of advisors and other third
parties whose system failures could have an impact on the Company's
operations. The potential materiality of any such impact is not known at
this time.
<PAGE>
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, 1997.
Statements of Operations for the year ended Dec. 31, 1997.
Statements of Changes in Net Assets for the years ended Dec. 31, 1997
and 1996.
Notes to Financial Statements.
Report of Independent Auditors dated March 13, 1998.
IDS Life Insurance Company:
Consolidated Balance Sheets at Dec. 31, 1997 and Dec. 31, 1996.
Consolidated Statements of Income for the years ended Dec. 31, 1997,
1996 and 1995.
Consolidated Statements of Stockholder's Equity for the years ended
Dec. 31, 1997, 1996 and 1995.
Consolidated Statements of Cash Flows for the years ended Dec. 31,
1997, 1996 and 1995.
Notes to Consolidated Financial Statements.
Report of Independent Auditors dated Feb. 5, 1998.
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 5 1998.
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>
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 Amendment 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, filed electronically herewith.
10. Consent of Independent Auditors, filed electronically herewith.
11. Financial Statement Schedules and Report of Independent Auditors, 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.
14. Financial Data Schedule, filed electronically herewith.
15.1 Power of Attorney, dated August 19, 1997, filed electronically herewith.
15.2 Power of Attorney, dated April 9, 1998, filed electronically herewith.
<PAGE>
<TABLE>
<CAPTION>
Item 25. Directors and Officers of the Depositor (IDS Life Insurance Company)
Positions and Offices with Depositor
Name Principal Business Address
- -------------------------------- ----------------------------------- ---------------------------------------
<S> <C> <C>
Timothy V. Bechtold IDS Tower 10 Executive Vice President-Risk
Minneapolis, MN 55440 Management Products
David J. Berry IDS Tower 10 Vice President
Minneapolis, MN 55440
Mark W. Carter IDS Tower 10 Executive Vice President-Marketing
Minneapolis, MN 55440
Robert M. Elconin IDS Tower 10 Vice President
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 Product
Minneapolis, MN 55440 Development
Richard W. Kling IDS Tower 10 Director and President
Minneapolis, MN 55440
Paul F. Kolkman IDS Tower 10 Director and Executive Vice President
Minneapolis, MN 55440
Ryan R. Larson IDS Tower 10 Vice President
Minneapolis, MN 55440
James A. Mitchell IDS Tower 10 Director, Chairman of the Board and
Minneapolis, MN 55440 Chief Executive Officer
Pamela J. Moret IDS Tower 10 Executive Vice President-Variable
Minneapolis, MN 55440 Assets
Barry J. Murphy IDS Tower 10 Director and Executive Vice
Minneapolis, MN 55440 President-Client Service
James R. Palmer IDS Tower 10 Vice President-Taxes
Minneapolis, MN 55440
<PAGE>
Stuart A. Sedlacek IDS Tower 10 Director and Executive Vice
Minneapolis, MN 55440 President-Assured Assets
F. Dale Simmons IDS Tower 10 Vice President-Real Estate Loan
Minneapolis, MN 55440 Management and Assistant Treasurer
William A. Stoltzmann IDS Tower 10 Vice President, General Counsel and
Minneapolis, MN 55440 Secretary
Philip C. Wentzel IDS Tower 10 Vice President and Controller
Minneapolis, MN 55440
</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.
<TABLE>
<CAPTION>
Jurisdiction of
Name of Subsidiary Incorporation
<S> <C>
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 Asset Management Group Inc. Minnesota
American Express Asset Management International Inc. Delaware
American Express Asset Management International (Japan) Ltd. Japan
American Express Asset Management Ltd. England
American Express Client Service Corporation Minnesota
American Express Corporation Delaware
American Express Financial Advisors Inc. Delaware
American Express Financial Corporation Minnesota
Delaware
<PAGE>
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 Insurance Agency of Oregon Inc. Oregon
American Express Minnesota Foundation Minnesota
American Express Property Casualty Insurance Agency of Kentucky Inc. Kentucky
American Express Property Casualty Insurance Agency of Maryland Inc. Maryland
American Express Property Casualty Insurance Agency of Pennsylvania Inc. Pennsylvania
American Express Trust Company Minnesota
American Partners Life Insurance Company Arizona
IDS Cable Corporation Minnesota
IDS Cable II Corporation Minnesota
IDS Capital Holdings Inc. Minnesota
IDS Certificate Company Delaware
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 New Mexico Inc. New Mexico
IDS Insurance Agency of North Carolina Inc. North Carolina
IDS Insurance Agency of Utah Inc. Utah
IDS Insurance Agency of Wyoming Inc. Wyoming
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
North Dakota Public Employee Payment Company Minnesota
</TABLE>
<PAGE>
Item 27. Number of Contractowners
On February 28, 1998, there were 1,112 contract owners of
qualified contracts. There were 5,488 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 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.
<PAGE>
<TABLE>
<CAPTION>
(c)
Name of Net Underwriting
Principal Discounts and Compensation on Brokerage
Underwriter Commissions Redemption Commissions Compensation
<S> <C> <C> <C> <C> <C>
IDS Life $17,883,488 $14,502,145 None None
</TABLE>
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>
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 29th day of April, 1998.
IDS LIFE ACCOUNT SBS
(Registrant)
By IDS Life Insurance Company
(Sponsor)
By /s/ James A. Mitchell*
James A. Mitchell
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities indicated on the 29th day of
April, 1998.
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/ Jeffrey S. Horton** Vice President and Treasurer
Jeffrey S. Horton
/s/ David R. Hubers* Director
David R. Hubers
/s/ Paul F. Kolkman* Director and Executive Vice
Paul F. Kolkman President
/s/ Barry J. Murphy* Director and Executive Vice
Barry J. Murphy President, Client Service
/s/ Stuart A. Sedlacek* Director and Executive Vice
Stuart A. Sedlacek President, Assured Assets
<PAGE>
Signature Title
/s/ Philip C. Wentzel** Vice President and
Philip C. Wentzel Controller
*Signed pursuant to Power of Attorney, dated August 19, 1997 filed
electronically herewith by:
**Signed pursuant to Power of Attorney, dated April 9, 1998 filed electronically
herewith by:
- --------------------------
Colin M. Lancaster
<PAGE>
CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 7
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.
IDS LIFE ACCOUNT SBS
Registration No. 33-40779/812-7731
EXHIBIT INDEX
9. Opinion of Counsel.
10. Consent of Independent Auditors.
11. Financial Statement Schedules and Report of Independent Auditors.
14. Financial Data Schedule.
15.1 Power of Attorney, dated August 19, 1997.
15.2 Power of Attorney, dated April 9, 1998.
April 29, 1998
IDS Life Insurance Company
IDS Tower 10
Minneapolis, MN 55440-0010
RE: Registration Statement on Form N-4
File No.: 33-40779
Ladies and Gentlemen:
I am familiar with the establishment of the IDS Life Account SBS ("Account"),
which is a separate account of IDS Life Insurance Company ("Company")
established by the Company's Board of Directors according to applicable
insurance law. I also am familiar with the above-referenced Registration
Statement filed by the Company on behalf of the Account with the Securities and
Exchange Commission.
I have made such examination of law and examined such documents and records as
in my judgment are necessary and appropriate to enable me to give the following
opinion:
1. The Company is duly incorporated, validly existing and in good standing
under applicable state law and is duly licensed or qualified to do business
in each jurisdiction where it transacts business. The Company has all
corporate powers required to carry on its business and to issue the
contracts.
2. The Account is a validly created and existing separate account of the
Company and is duly authorized to issue the securities registered.
3. The contracts issued by the Company during the past fiscal year, when
offered and sold in accordance with the prospectus contained in the
Registration Statement and in compliance with applicable law, were legally
issued and represent binding obligations of the Company in accordance with
their terms.
I hereby consent to the filing of this opinion as an exhibit to the Registration
Statement.
Sincerely,
Colin M. Lancaster
Associate Counsel
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 5, 1998 on the consolidated
financial statements and schedules of IDS Life Insurance Company and our report
dated March 13, 1998 on the financial statements of IDS Life Account SBS in
Post- Effective Amendment No. 7 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 27, 1998
<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, 1997 and 1996, and for each of the three years in the
period ended December 31, 1997, and have issued our report thereon dated
February 5, 1998 (included elsewhere in this Registration Statement). Our audits
also included the financial statement schedules listed in the index to financial
statement schedules 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 5, 1998
<PAGE>
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
SCHEDULE I - CONSOLIDATED SUMMARY OF INVESTMENTS
OTHER THAN INVESTMENTS IN RELATED PARTIES ($ thousands)
AS OF DECEMBER 31, 1997
- -----------------------------------------------------------------------------------------------------
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) $ 1,829,112 $ 1,846,833 $ 1,829,112
States, municipalities and
political subdivisions 9,684 10,252 9,684
All other corporate bonds (b) 7,476,654 7,886,325 7,476,654
------------ ---------- ----------
Total held to maturity 9,315,450 9,743,410 9,315,450
Available for sale:
United States Government and
government agencies and
authorities (c) 6,798,425 6,944,942 6,944,942
States, municipalities and
political subdivisions 11,045 12,393 12,393
All other corporate bonds (d) 5,705,560 5,919,359 5,919,359
------------ ---------- ----------
Total available for sale 12,515,030 12,876,694 12,876,694
Mortgage loans on real estate 3,618,647 XXXXXXXXX 3,618,647
Policy loans 498,874 XXXXXXXXX 498,874
Other investments 318,591 XXXXXXXXX 318,591
------------ ----------
Total investments $ 26,266,592 $ XXXXXXXXX $ 26,628,256
============ ========== ==========
(a) - Includes mortgage-backed securities with a cost and market value of $1,787,180 and $1,801,952,
respectively.
(b) - Includes mortgage-backed securities with a cost and market value of $196,008 and $199,301,
respectively.
(c) - Includes mortgage-backed securities with a cost and market value of $6,733,134 and $6,875,498,
respectively.
(d) - Includes mortgage-backed securities with a cost and market value of $397,431 and $408,667,
respectively.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION ($
thousands)
FOR THE YEAR ENDED DECEMBER 31, 1997
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>
Annuities $ 1,453,441 $ 22,009,747 $ - $ 35,007 $ - $1,718,515 $ 1,720 $229,729 $262,680 N/A
Life, DI, and
Long-term Care
Insurance 1,026,136 4,027,289 - 33,338 206,494 269,874 209,955 93,002 13,916 N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Total $ 2,479,577 $ 26,037,036 $ - $ 68,345 $ 206,494 $ 1,988,389 $ 211,675 $322,731 $276,596 N/A
- -----------------------------------------------------------------------------------------------------------------------------------
*Allocations of net investment income and other operating expenses are based on various assumptions and estimates.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION ($ thousands)
FOR THE YEAR ENDED DECEMBER 31, 1996
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>
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
- ------------------------------------------------------------------------------------------------------------------------------------
*Allocations of net investment income and other operating expenses are based on various assumptions and estimates.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION ($ thousands)
FOR THE YEAR ENDED DECEMBER 31, 1995
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>
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
- ------------------------------------------------------------------------------------------------------------------------------------
*Allocations of net investment income and other operating expenses are based on various assumptions and estimates.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
SCHEDULE IV - REINSURANCE ($ thousands)
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
- --------------------------------------------------------------------------------------------------
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, 1997
Life insurance in force $ 73,119,122 $ 4,351,904 $ 1,611,596 $ 70,378,814 2.29%
- -------------------------------------------------------------------------------------------
Premiums:
Life insurance $ 55,094 $ 3,124 $ 503 $ 52,473 0.96%
DI & LTC insurance 196,799 42,778 -- 154,021 0.00%
- -------------------------------------------------------------------------------------------
Total premiums $ 251,893 $ 45,902 $ 503 $ 206,494 0.24%
- -------------------------------------------------------------------------------------------
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%
- -------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS LIFE INSURANCE COMPANY
SCHEDULE V - VALUATION AND QUALIFYING ACCOUNTS ($ thousands)
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
- ------------------------------------------------------------------------------------------------------
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, 1997
- ----------------------------
Reserve for Mortgage Loans $37,495 $8,801 $0 $7,651 $38,645
Reserve for Other Investments $3,963 $2,100 $0 $0 $6,063
For the year ended
December 31, 1996
- ----------------------------
Reserve for Mortgage Loans $37,340 $10,005 $0 $9,850 $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 $15,900 $0 $13,812 $37,340
Reserve for Other Investments $7,515 ($2,802) $0 $0 $4,713
* 1997, 1996 and 1995 amounts represent $7,651, $9,850, and $13,812, respectively, for loan
payoffs and foreclosures.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 265358640
<INVESTMENTS-AT-VALUE> 362669539
<RECEIVABLES> 18843
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 362688382
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 511537
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 207021027
<SHARES-COMMON-PRIOR> 232349459
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 362176845
<DIVIDEND-INCOME> 21815678
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (5371650)
<NET-INVESTMENT-INCOME> 16444028
<REALIZED-GAINS-CURRENT> 16041990
<APPREC-INCREASE-CURRENT> 21214456
<NET-CHANGE-FROM-OPS> 53700474
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5145911
<NUMBER-OF-SHARES-REDEEMED> (30474343)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 13830513
<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> (5371650)
<AVERAGE-NET-ASSETS> 355261589
<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
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLAR
<S> <C>
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<PERIOD-TYPE> YEAR
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 12876694
<DEBT-CARRYING-VALUE> 9315450
<DEBT-MARKET-VALUE> 9743410
<EQUITIES> 3361
<MORTGAGE> 3618647
<REAL-ESTATE> 102433
<TOTAL-INVEST> 26628256
<CASH> 19686
<RECOVER-REINSURE> 989
<DEFERRED-ACQUISITION> 2479577
<TOTAL-ASSETS> 52974124
<POLICY-LOSSES> 26037036
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 68345
<NOTES-PAYABLE> 0
<COMMON> 3000
0
0
<OTHER-SE> 2862816
<TOTAL-LIABILITY-AND-EQUITY> 52974124
206494
<INVESTMENT-INCOME> 1988389
<INVESTMENT-GAINS> 860
<OTHER-INCOME> 682618
<BENEFITS> 1598123
<UNDERWRITING-AMORTIZATION> 322731
<UNDERWRITING-OTHER> 276596
<INCOME-PRETAX> 680911
<INCOME-TAX> 206664
<INCOME-CONTINUING> 474247
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 474247
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 26387
<PROVISION-CURRENT> 144098
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 143237
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 27248
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
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
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 applications for exemptive relief), periodic reports, registration
statements for existing or future products of existing separate accounts (with
all exhibits and other documents required or desirable in connection therewith),
other
<PAGE>
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 19th day of August, 1997.
/s/ David R. Hubers August 15, 1997
- ------------------------------------
David R. Hubers
Director
/s/ Richard W. Kling August 18, 1997
-----------------------------------
Richard W. Kling
Director and President
/s/ Paul F. Kolkman August 19, 1997
- ------------------------------------
Paul F. Kolkman
Director and Executive Vice
President
/s/ James A. Mitchell August 15, 1997
- ------------------------------------
James A. Mitchell
Director, Chairman of the
Board and Chief Executive Officer
/s/ Barry J. Murphy August 14, 1997
- ------------------------------------
Barry J. Murphy
Director and Executive Vice
President, Client Service
/s/ Stuart A. Sedlacek August 19, 1997
- ------------------------------------
Stuart A. Sedlacek
Director and Executive Vice
President, Assured Assets
/s/ Melinda S. Urion August 14, 1997
- ------------------------------------
Melinda S. Urion
Director, Executive Vice
President and Controller
IDS LIFE INSURANCE COMPANY
POWER OF ATTORNEY
City of Minneapolis
State of Minnesota
Each of the undersigned, as principal financial officer and controller,
respectively, 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 Insurance Company
Portfolio Guaranteed Term Annuity 333-42793 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
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 his attorney-in-fact and agent, to sign for him in
his name, place and stead any and all filings, applications (including
applications for exemptive relief), periodic reports, registration statements
for existing or future products of existing separate accounts (with all
<PAGE>
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 9th day of April, 1998.
/s/ Jeffrey S. Horton April 8, 1998
- ------------------------------------
Jeffrey S. Horton
Vice President, Treasurer
and Assistant Secretary
/s/ Philip C. Wentzel April 9, 1998
- ------------------------------------
Philip C. Wentzel
Vice President and Controller
