SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 9 (File No. 33-40779) [x]
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 9 (File No. 811-06315) [x]
----
(Check appropriate box or boxes)
IDS LIFE ACCOUNT SBS
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(Exact Name of Registrant)
IDS Life Insurance Company
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(Name of Depositor)
200 AXP Financial Center, Minneapolis, MN 55474
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(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (612) 671-3678
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Mary Ellyn Minenko, 200 AXP Financial Center, Minneapolis, MN 55474
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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, 2000 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>
<PAGE>
SYMPHONY ANNUITY
PROSPECTUS/MAY 1, 2000
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED COMBINATION FIXED/VARIABLE ANNUITY.
IDS LIFE ACCOUNT SBS
ISSUED BY: IDS LIFE INSURANCE COMPANY (IDS LIFE)
200 AXP Financial Center
Minneapolis, MN 55474
Telephone: (800) 422-3542
This prospectus contains information that you should know before investing. You
also will receive the following prospectuses:
- - American Express-Registered Trademark- Variable Portfolio Funds, and
- - Greenwich Street Series Fund
Please read the prospectuses carefully and keep them for future reference.
THE SECURITIES AND EXCHANGE COMMISSION (SEC) HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
AN INVESTMENT IN THIS CONTRACT IS NOT A DEPOSIT OF A BANK OR FINANCIAL
INSTITUTION AND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN THIS CONTRACT
INVOLVES INVESTMENT RISK INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
A Statement of Additional Information (SAI), dated the same date as this
prospectus, is incorporated by reference into this prospectus. It is filed with
the SEC, and is available without charge by contacting IDS Life at the telephone
number above or by completing and sending the order form on the last page of
this prospectus. The table of contents of the SAI is on the last page of this
prospectus.
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PROSPECTUS -- MAY 1, 2000 1
<PAGE>
TABLE OF CONTENTS
KEY TERMS.................................... 3
THE CONTRACT IN BRIEF........................ 5
EXPENSE SUMMARY.............................. 7
CONDENSED FINANCIAL INFORMATION
(UNAUDITED)................................ 9
FINANCIAL STATEMENTS......................... 11
PERFORMANCE INFORMATION...................... 11
THE VARIABLE ACCOUNT AND THE FUNDS........... 12
THE FIXED ACCOUNT............................ 14
BUYING YOUR CONTRACT......................... 14
CHARGES...................................... 16
VALUING YOUR INVESTMENT...................... 19
MAKING THE MOST OF YOUR CONTRACT............. 20
SURRENDERS................................... 23
TSA - SPECIAL SURRENDER PROVISIONS........... 24
CHANGING OWNERSHIP........................... 24
BENEFITS IN CASE OF DEATH.................... 25
THE ANNUITY PAYOUT PERIOD.................... 26
TAXES........................................ 27
VOTING RIGHTS................................ 29
ABOUT THE SERVICE PROVIDERS.................. 30
YEAR 2000.................................... 31
TABLE OF CONTENTS OF THE STATEMENT OF
ADDITIONAL INFORMATION..................... 32
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2 SYMPHONY ANNUITY
<PAGE>
KEY TERMS:
THESE TERMS CAN HELP YOU UNDERSTAND DETAILS ABOUT YOUR CONTRACT.
ACCUMULATION UNIT: A measure of the value of each subaccount before annuity
payouts begin.
ANNUITANT: The person on whose life or life expectancy the annuity payouts are
based.
ANNUITY PAYOUTS: An amount paid at regular intervals under one of several plans.
BENEFICIARY: The person you designate to receive benefits in case of the owner's
or annuitant's death while the contract is in force and before annuity payouts
begin.
CLOSE OF BUSINESS: When the New York Stock Exchange (NYSE) closes, normally 4
p.m. Eastern time.
CONTRACT: A deferred annuity contract that permits you to accumulate money for
retirement by making one or more purchase payments. It provides for lifetime or
other forms of payouts beginning at a specified time in the future.
CONTRACT VALUE: The total value of your contract before we deduct any applicable
charges.
CONTRACT YEAR: A period of 12 months, starting on the effective date of your
contract and on each anniversary of the effective date.
FIXED ACCOUNT: An account to which you may allocate purchase payments. Amounts
you allocate to this account earn interest at rates that we declare
periodically.
FUNDS: Investment options under your contract. You may allocate your purchase
payments into variable accounts investing in shares of any or all of these
funds.
OWNER (YOU, YOUR): The person who controls the contract (decides on investment
allocations, transfers, payout options, etc.). Usually, but not always, the
owner is also the annuitant. The owner is responsible for taxes, regardless of
whether he or she receives the contract's benefits.
QUALIFIED ANNUITY: A contract that you purchase to fund one of the following
tax-deferred retirement plans that is subject to applicable federal law and any
rules of the plan itself:
- - Individual Retirement Annuities (IRAs) under Section 408(b) of the Internal
Revenue Code of 1986, as amended (the Code)
- - Simplified Employee Pension (SEP) plans under Section 408(k) of the Code
- - Plans under Section 401(k) of the Code
- - Custodial and trusteed pension and profit sharing plans under Section 401(a)
of the Code
- - Tax-Sheltered Annuities (TSAs) under Section 403(b) of the Code
A qualified annuity will not provide any necessary or additional tax-deferral if
it is used to fund a retirement plan that is already tax-deferred.
All other contracts are considered NONQUALIFIED ANNUITIES.
RETIREMENT DATE: The date when annuity payouts are scheduled to begin.
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PROSPECTUS -- MAY 1, 2000 3
<PAGE>
SURRENDER VALUE: The amount you are entitled to receive if you make a full
surrender from your contract. It is the contract value minus any applicable
charges.
VALUATION DATE: Any normal business day, Monday through Friday, that the NYSE is
open. Each valuation date ends at the close of business. We calculate the value
of each subaccount at the close of business on each valuation date.
VARIABLE ACCOUNT: Consists of separate subaccounts to which you may allocate
purchase payments; each invests in shares of one fund. The value of your
investment in each subaccount changes with the performance of the particular
fund.
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4 SYMPHONY ANNUITY
<PAGE>
THE CONTRACT IN BRIEF
PURPOSE: The purpose of the contract is to allow you to accumulate money for
retirement. You do this by making one or more purchase payments; you may
allocate your purchase payments to the fixed account and/or variable account
under the contract. These accounts, in turn, may earn returns that increase the
value of the contract. Beginning at a specified time in the future called the
retirement date, the contract provides lifetime or other forms of payouts of
your contract value (less any applicable premium tax). As in the case of other
annuities, it may not be advantageous for you to purchase this contract as a
replacement for, or in addition to, an existing annuity.
A qualified annuity will not provide any necessary or additional tax-deferral if
it is used to fund a retirement plan that is tax-deferred. However, the contract
has features other than tax-deferral that may make it an appropriate investment
for your retirement plan. You should compare these features and their costs with
other investment options before deciding to purchase this contract.
FREE LOOK PERIOD: You may return your contract to your sales representative or
to our office within the time stated on the first page of your contract and
receive a full refund of the contract value. We will not deduct any charges.
However, you bear the investment risk from the time of purchase until you return
the contract; the refund amount may be more or less than the payment you made.
(Exception: If the law requires, we will refund all of your purchase
payments.)
ACCOUNTS: Currently, you may allocate your purchase payments among any or all
of:
- - the subaccounts, each of which invests in a fund with a particular investment
objective. The value of each subaccount varies with the performance of the
particular fund in which it invests. We cannot guarantee that the value at the
retirement date will equal or exceed the total purchase payments you allocate
to the subaccounts. (p. 12)
- - the fixed account, which earns interest at a rate that we adjust periodically.
(p. 14)
BUYING YOUR CONTRACT: Your sales representative will help you complete and
submit an application. Applications are subject to acceptance at our office. You
may buy a nonqualified annuity or a qualified annuity. You must make an initial
lump-sum purchase payment. You have the option of making additional purchase
payments in the future. (p. 14)
- - Minimum initial purchase payment -- $5,000 for nonqualified annuities; $500
for qualified annuities
- - Minimum additional purchase payment $500 for nonqualified annuities; $50 for
qualified annuities
- - Maximum total purchase payments -- $1,000,000
TRANSFERS: Subject to certain restrictions you currently may redistribute your
money among the accounts without charge at any time until annuity payouts begin.
You may establish automated transfers among the accounts. Fixed account
transfers are subject to special restrictions. (p. 20)
SURRENDERS: You may surrender all or part of your contract value at any time
before the retirement date. You may also establish systematic withdrawals.
Surrenders may be subject to charges and tax penalties (including a 10% IRS
penalty if you surrender prior to your reaching age 59 1/2) and may have other
tax consequences; also, certain restrictions may apply. (p. 23)
CHANGING OWNERSHIP: You may change ownership of a nonqualified annuity by
written instruction, but this may have federal income tax consequences.
Restrictions apply to changing ownership of a qualified annuity. (p. 24)
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PROSPECTUS -- MAY 1, 2000 5
<PAGE>
BENEFITS IN CASE OF DEATH: If you or the annuitant die before annuity payouts
begin, we will pay the beneficiary an amount at least equal to contract value.
(p. 25)
ANNUITY PAYOUTS: You can apply your contract value to an annuity payout plan
that begins on the retirement date. You may choose from a variety of plans to
make sure that payouts continue as long as you like. If you purchased a
qualified annuity, the payout schedule must meet the requirements of the
qualified plan. Payouts will be made on a fixed basis. (p. 26)
TAXES: Generally, your contract grows tax-deferred until you surrender it or
begin to receive payouts. (Under certain circumstances, IRS penalty taxes may
apply). Even if you direct payouts to someone else, you will be taxed on the
income if you are the owner. (p. 27)
CHARGES: We assess certain charges in connection with your contract:
- - $30 annual contract administrative charge;
- - 0.25% variable account administrative charge;
- - 1.25% mortality and expense risk fee (if you allocate money to one or more
variable accounts);
- - surrender charge;
- - any premium taxes that may be imposed on us by state or local governments
(currently, we deduct any applicable premium tax when annuity payouts begin
but we reserve the right to deduct this tax at other times such as when you
make purchase payments or when you make a total withdrawal); and
- - the operating expenses of the funds in which the variable account invests.
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6 SYMPHONY ANNUITY
<PAGE>
EXPENSE SUMMARY
The purpose of the following information is to help you understand the various
costs and expenses associated with your contract.
You pay no sales charge when you purchase your contract. We show all costs that
we deduct directly from your contract or indirectly from the variable accounts
and funds below. Some expenses may vary as we explain under "Charges." Please
see the fund prospectuses for more information on the operating expenses for
each fund.
ANNUAL CONTRACT OWNERS EXPENSES:
SURRENDER CHARGE (contingent deferred sales charge as a percentage of
purchasepayments surrendered)
<TABLE>
<CAPTION>
CONTRACT SURRENDER CHARGE
YEAR PERCENTAGE
<S> <C>
1 6%
2 5
3 4
4 3
5 2
6 1
7 and later 0
</TABLE>
CONTRACT ADMINISTRATIVE CHARGE
$30
ANNUAL SUBACCOUNT EXPENSES
(as a percentage of average subaccount value):
<TABLE>
<S> <C>
Variable account administrative charge 0.25%
Mortality and expense risk fee 1.25%
----
Total annual subaccount expenses 1.50%
</TABLE>
ANNUAL OPERATING EXPENSES OF THE FUNDS (AFTER FEE WAIVERS AND/OR EXPENSE
REIMBURSEMENTS, IF APPLICABLE, AS A
PERCENTAGE OF AVERAGE DAILY NET ASSETS)
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<TABLE>
<CAPTION>
MANAGEMENT 12B-1 OTHER
FEES FEES EXPENSES TOTAL
<S> <C> <C> <C> <C>
AXP(SM) Variable Portfolio -
Bond Fund .60% .13 .08 .81%(1)
Capital Resource Fund .60% .13 .06 .79%(1)
Managed Fund .59% .13 .04 .76%(1)
Appreciation Portfolio .75% -- .04 .79%(2)
Diversified Strategic Income
Portfolio .65% -- .13 .78%(2)
Emerging Growth Portfolio .95% -- .35 1.30%(2)
Equity Income Portfolio .65% -- .22 .87%(2)
Equity Index Portfolio --
Class I .21% -- .07 .28%(2)
Growth & Income Portfolio .65% -- .15 .80%(2)
Intermediate High Grade
Portfolio .60% -- .62 1.22%(2)
International Equity
Portfolio 1.05% -- .28 1.33%(2)
Money Market Portfolio .50% -- .75 1.25%(2)
Total Return Portfolio .75% -- .04 .79%(2)
</TABLE>
(1) The fund's expense figures are based on actual expenses for the fiscal year
ended Aug. 31, 1999 restated to include a Rule 12b-1 distribution fee of
.125% that went into effect Sept. 21, 1999.
(2) Figures in "Management Fees," "Other Expenses" and "Total" are based on
actual expenses for the fiscal period ended Dec. 31, 1999. Absent fee
waivers and expense reimbursements "Management Fees", "Other Expenses" and
"Total" would be 0.50%, 1.24% and 1.74% for Money Market Portfolio.
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PROSPECTUS -- MAY 1, 2000 7
<PAGE>
EXAMPLE:*
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return and...
<TABLE>
<CAPTION>
NO SURRENDER OR SELECTION
FULL SURRENDER AT THE OF AN ANNUITY PAYOUT PLAN AT THE
END OF EACH TIME PERIOD END OF EACH TIME PERIOD
1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AXP(SM) Variable
Portfolio --
Bond Fund $84.08 $114.12 $146.79 $270.89 $24.08 $74.12 $126.79 $270.89
Capital Resource Fund 83.87 113.50 145.76 268.84 23.87 73.50 125.76 268.84
Managed Fund 83.56 112.58 144.22 265.75 23.56 72.58 124.22 265.75
Appreciation Portfolio 83.87 113.50 145.76 268.84 23.87 73.50 125.76 268.84
Diversified Strategic
Income Portfolio 83.77 113.20 145.25 267.81 23.77 73.20 125.25 267.81
Emerging Growth
Portfolio 89.10 129.14 171.71 319.95 29.10 89.14 151.71 319.95
Equity Income Portfolio 84.69 115.97 149.87 277.03 24.69 75.97 129.87 277.03
Equity Index Portfolio
-- Class I 78.64 97.71 119.26 215.08 18.64 57.71 99.26 215.08
Growth & Income
Portfolio 83.97 113.81 146.28 269.87 23.97 73.81 126.28 269.87
Intermediate High Grade
Portfolio 88.28 126.70 167.68 312.10 28.28 86.70 147.68 312.10
International Equity
Portfolio 89.41 130.05 173.22 322.88 29.41 90.05 153.22 322.88
Money Market Portfolio 88.59 127.61 169.19 315.05 28.59 87.61 149.19 315.05
Total Return Portfolio 83.87 113.50 145.76 268.84 23.87 73.50 125.76 268.84
</TABLE>
* In this example, the $30 contract administrative charge is approximated as
a 0.039% charge based on our average contract size. Premium taxes imposed
by some state and local governments are not reflected in this table.
YOU SHOULD NOT CONSIDER THIS EXAMPLE AS A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
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8 SYMPHONY ANNUITY
<PAGE>
CONDENSED FINANCIAL INFORMATION
(UNAUDITED)
The following tables give per-unit information about the financial history of
each subaccount.
<TABLE>
<CAPTION>
YEAR ENDED DEC. 31, 1999 1998 1997 1996 1995 1994 1993 1992 1991
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SUBACCOUNT ASI(1) (INVESTING IN SHARES OF AXP(SM) VARIABLE PORTFOLIO -- BOND FUND)
Accumulation unit
value at
beginning
of period $1.35 $1.35 $1.26 $1.20 $0.99 $1.00 -- -- --
Accumulation unit
value at end of
period $1.36 $1.35 $1.35 $1.26 $1.20 $0.99 -- -- --
Number of
accumulation
units outstanding
at end of period
(000 omitted) 443 629 869 742 722 351 -- -- --
Ratio of operating
expense to
average net
assets 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% -- -- --
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SUBACCOUNT ACR(1) (INVESTING IN SHARES OF AXP(SM) VARIABLE PORTFOLIO CAPITAL RESOURCE FUND)
Accumulation unit
value at
beginning of
period $1.98 $1.62 $1.33 $1.25 $0.99 $1.00 -- -- --
Accumulation unit
value at end of
period $2.42 $1.98 $1.62 $1.33 $1.25 $0.99 -- -- --
Number of
accumulation
units outstanding
at end of period
(000 omitted) 270 368 463 528 519 560 -- -- --
Ratio of operating
expense to
average net
assets 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% -- -- --
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SUBACCOUNT AMG(1) (INVESTING IN SHARES OF AXP(SM) VARIABLE PORTFOLIO -- MANAGED FUND)
Accumulation unit
value at
beginning of
period $1.84 $1.61 $1.37 $1.19 $0.97 $1.00 -- -- --
Accumulation unit
value at end of
period $2.08 $1.84 $1.61 $1.37 $1.19 $0.97 -- -- --
Number of
accumulation
units outstanding
at end of period
(000 omitted) 407 649 1,100 785 716 298 -- -- --
Ratio of operating
expense to
average net
assets 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% -- -- --
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SUBACCOUNT AAP(2) (INVESTING IN SHARES OF APPRECIATION PORTFOLIO)
Accumulation unit
value at
beginning of
period $2.46 $2.10 $1.68 $1.43 $1.12 $1.15 $1.09 $1.05 $1.00
Accumulation unit
value at end of
period $2.74 $2.46 $2.10 $1.68 $1.43 $1.12 $1.15 $1.09 $1.05
Number of
accumulation
units outstanding
at end of period
(000 omitted) 22,409 34,729 48,070 53,860 63,015 68,920 65,534 48,842 10,929
Ratio of operating
expense to
average net
assets 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%
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SUBACCOUNT ADS(2) (INVESTING IN SHARES OF DIVERSIFIED STRATEGIC INCOME PORTFOLIO)
Accumulation unit
value at
beginning of
period $1.50 $1.43 $1.34 $1.23 $1.07 $1.12 $1.01 $1.01 $1.00
Accumulation unit
value at end of
period $1.50 $1.50 $1.43 $1.34 $1.23 $1.07 $1.12 $1.01 $1.01
Number of
accumulation
units outstanding
at end of period
(000 omitted) 18,201 29,052 37,359 41,939 45,720 48,740 36,618 19,768 3,869
Ratio of operating
expense to
average net
assets 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%
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SUBACCOUNT AEG(3) (INVESTING IN SHARES OF EMERGING GROWTH PORTFOLIO)
Accumulation unit
value at
beginning of
period $2.50 $1.85 $1.56 $1.35 $0.96 $1.04 $1.00 -- --
Accumulation unit
value at end of
period $5.10 $2.50 $1.85 $1.56 $1.35 $0.96 $1.04 -- --
Number of
accumulation
units outstanding
at end of period
(000 omitted) 4,794 7,865 10,123 11,449 12,247 11,353 2,022 -- --
Ratio of operating
expense to
average net
assets 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% -- --
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SUBACCOUNT AEM(2) (INVESTING IN SHARES OF EQUITY INCOME PORTFOLIO)
Accumulation unit
value at
beginning of
period $2.06 $1.79 $1.47 $1.41 $1.08 $1.22 $1.12 $1.02 $1.00
Accumulation unit
value at end of
period $1.93 $2.06 $1.79 $1.47 $1.41 $1.08 $1.22 $1.12 $1.02
Number of
accumulation
units outstanding
at end of period
(000 omitted) 10,393 17,404 24,835 29,866 35,868 39,594 48,057 23,184 3,835
Ratio of operating
expense to
average net
assets 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%
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</TABLE>
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PROSPECTUS -- MAY 1, 2000 9
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DEC. 31, 1999 1998 1997 1996 1995 1994 1993 1992 1991
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SUBACCOUNT AEX(2) (INVESTING IN SHARES OF EQUITY INDEX PORTFOLIO -- CLASS I)
Accumulation unit
value at
beginning of
period $3.12 $2.46 $1.89 $1.58 $1.18 $1.19 $1.11 $1.06 $1.00
Accumulation unit
value at end of
period $3.71 $3.12 $2.46 $1.89 $1.58 $1.18 $1.19 $1.11 $1.06
Number of
accumulation
units outstanding
at end of period
(000 omitted) 4,545 6,349 8,512 9,114 8,552 7,552 6,454 3,748 636
Ratio of operating
expense to
average net
assets 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%
- -----------------------------------------------------------------------------------------------------------------
SUBACCOUNT AGI(2) (INVESTING IN SHARES OF GROWTH & INCOME PORTFOLIO)
Accumulation unit
value at
beginning of
period $2.24 $2.03 $1.68 $1.42 $1.11 $1.16 $1.08 $1.01 $1.00
Accumulation unit
value at end of
period $2.45 $2.24 $2.03 $1.68 $1.42 $1.11 $1.16 $1.08 $1.01
Number of
accumulation
units outstanding
at end of period
(000 omitted) 9,186 14,520 19,668 21,299 23,037 25,102 20,774 10,136 1,881
Ratio of operating
expense to
average net
assets 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%
- -----------------------------------------------------------------------------------------------------------------
SUBACCOUNT AIH(2) (INVESTING IN SHARES OF INTERMEDIATE HIGH GRADE PORTFOLIO)
Accumulation unit
value at
beginning of
period $1.41 $1.34 $1.25 $1.25 $1.08 $1.13 $1.06 $1.02 $1.00
Accumulation unit
value at end of
period $1.34 $1.41 $1.34 $1.25 $1.25 $1.08 $1.13 $1.06 $1.02
Number of
accumulation
units outstanding
at end of period
(000 omitted) 5,380 7,968 9,640 10,509 11,659 11,655 8,070 3,417 682
Ratio of operating
expense to
average net
assets 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%
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SUBACCOUNT AIE(3) (INVESTING IN SHARES OF INTERNATIONAL EQUITY PORTFOLIO)
Accumulation unit
value at
beginning of
period $1.31 $1.12 $1.17 $0.97 $0.91 $1.04 $1.00 -- --
Accumulation unit
value at end of
period $2.15 $1.31 $1.12 $1.17 $0.97 $0.91 $1.04
Number of
accumulation
units outstanding
at end of period
(000 omitted) 10,631 16,880 23,936 27,135 28,243 29,353 5,528 -- --
Ratio of operating
expense to
average net
assets 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% -- --
- -----------------------------------------------------------------------------------------------------------------
SUBACCOUNT AMO(2) (INVESTING IN SHARES OF MONEY MARKET PORTFOLIO)
Accumulation unit
value at
beginning of
period $1.18 $1.15 $1.12 $1.08 $1.04 $1.02 $1.02 $1.00 $1.00
Accumulation unit
value at end of
period $1.21 $1.18 $1.15 $1.12 $1.08 $1.04 $1.02 $1.02 $1.00
Number of
accumulation
units outstanding
at end of period
(000 omitted) 3,490 3,418 3,661 4,930 4,822 6,298 3,175 2,061 828
Ratio of operating
expense to
average net
assets 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%
Simple yield(4) 2.90% 2.43% 3.05% 2.52% 2.75% 2.14% 0.72% 0.78% 2.00%
Compound yield(4) 2.94% 2.46% 3.09% 2.55% 2.79% 2.16% 0.72% 0.78% 2.02%
- -----------------------------------------------------------------------------------------------------------------
SUBACCOUNT ATR(3) (INVESTING IN SHARES OF TOTAL RETURN PORTFOLIO)
Accumulation unit
value at
beginning of
period $1.97 $1.91 $1.66 $1.35 $1.09 $1.03 $1.00 -- --
Accumulation unit
value at end of
period $2.37 $1.97 $1.91 $1.66 $1.35 $1.09 $1.03 -- --
Number of
accumulation
units outstanding
at end of period
(000 omitted) 9,766 14,575 18,783 20,195 20,934 18,918 2,486 -- --
Ratio of operating
expense to
average net
assets 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% -- --
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Operations commenced on Oct. 3, 1994.
(2) Operations commenced on Oct. 16, 1991.
(3) Operations commenced on Dec. 2, 1993.
(4) Net of annual contract administrative charge and mortality and expense risk
fee.
- --------------------------------------------------------------------------------
10 SYMPHONY ANNUITY
<PAGE>
FINANCIAL STATEMENTS
You can find the audited financial statements of the subaccounts with financial
history in the SAI. You can find our audited financial statements later in this
prospectus.
PERFORMANCE INFORMATION
Performance information for the subaccounts may appear from time to time in
advertisements or sales literature. This information reflects the performance of
a hypothetical investment in a particular subaccount during a specified time
period. Although we base performance figures on historical earnings, past
performance does not guarantee future results.
We include non-recurring charges (such as surrender charges) in total return
figures, but not in yield quotations. Excluding non-recurring charges in yield
calculations increases the reported value.
Total return figures reflect deduction of all applicable charges, including:
- - contract administrative charge,
- - variable account administrative charge,
- - mortality and expense risk fee, and
- - surrender charge (assuming a surrender at the end of the illustrated period).
We also show optional total return quotations that do not reflect a surrender
charge deduction (assuming no surrender). We may show total return quotations by
means of schedules, charts or graphs.
AVERAGE ANNUAL TOTAL RETURN is the average annual compounded rate of return of
the investment over a period of one, five and ten years (or up to the life of
the subaccount if it is less than ten years old).
CUMULATIVE TOTAL RETURN is the cumulative change in the value of an investment
over a specified time period. We assume that income earned by the investment is
reinvested. Cumulative total return generally will be higher than average annual
total return.
ANNUALIZED SIMPLE YIELD (FOR SUBACCOUNTS INVESTING IN MONEY MARKET
FUNDS) "annualizes" the income generated by the investment over a given
seven-day period. That is, we assume the amount of income generated by the
investment during the period will be generated each seven-day period for a year.
We show this as a percentage of the investment.
ANNUALIZED COMPOUND YIELD (FOR SUBACCOUNTS INVESTING IN MONEY MARKET FUNDS) is
calculated like simple yield except that we assume the income is reinvested when
we annualize it. Compound yield will be higher than the simple yield because of
the compounding effect of the assumed reinvestment.
ANNUALIZED YIELD (FOR SUBACCOUNTS INVESTING IN INCOME FUNDS) divides the net
investment income (income less expenses) for each accumulation unit during a
given 30-day period by the value of the unit on the last day of the period. We
then convert the result to an annual percentage.
You should consider performance information in light of the investment
objectives, policies, characteristics and quality of the fund in which the
subaccount invests and the market conditions during the specified time period.
Advertised yields and total return figures include charges that reduce
advertised performance. Therefore, you should not compare subaccount performance
to that of mutual funds that sell their shares directly to the public. (See the
SAI for a further description of methods used to determine total return and
yield.)
If you would like additional information about actual performance, please
contact us at the address or telephone number on the first page of this
prospectus.
- --------------------------------------------------------------------------------
PROSPECTUS -- MAY 1, 2000 11
<PAGE>
THE VARIABLE ACCOUNT AND THE FUNDS
You may allocate payments to any or all of the subaccounts of the variable
account that invest in shares of the following funds:
<TABLE>
<CAPTION>
SUBACCOUNT INVESTING IN INVESTMENT OBJECTIVES AND POLICIES INVESTMENT ADVISOR OR MANAGER
<C> <S> <C> <C>
ASI AXP(SM) Variable Portfolio - Bond Objective: high level of current income IDS Life, investment manager; AEFC
Fund while conserving the value of the investment advisor.
investment for the longest time period.
Invests primarily in investment-grade
bonds.
ACR AXP(SM) Variable Portfolio - Objective: capital appreciation. Invests IDS Life, investment manager; AEFC
Capital Resource Fund primarily in U.S. common stocks. investment advisor.
AMG AXP(SM) Variable Portfolio - Objective: maximum total investment IDS Life, investment manager; AEFC
Managed Fund return through a combination of capital investment advisor.
growth and current income. Invests
primarily in stocks, convertible
securities, bonds and money market
instruments.
AAP Appreciation Portfolio Objective: long-term appreciation of SSBCiti Fund Management LLC (SSBCiti)
capital. The fund invests primarily in
equity securities of U.S. companies. The
fund typically invests in medium and
large capitalization companies but may
also invest in small capitalization
companies. Equity securities include
exchange traded and over-the-counter
common stocks and preferred stocks, debt
securities convertible into equity
securities, and warrants and rights
relating to equity securities.
ADS Diversified Strategic Income Objective: high current income. The fund SSBCiti, investment advisor; Smith
Portfolio invests primarily in three types of Barney Global Capital Management, Inc.
fixed income securities: sub- investment advisor.
U.S. government and mortgage-related
securities, foreign government
securities, corporate debt securities
and non-convertible preferred stocks
rated below investment grade.
AEG Emerging Growth Portfolio Objective: capital appreciation. The SSBCiti (Appointed interim adviser
fund invests primarily in common stocks pending shareholder approval)
of emerging growth companies, without
regard to market capitalization. These
are domestic or foreign companies the
manager believes are in the early stages
of their cycles and have the potential
to become major enterprises. The fund
may invest up to 20% of its assets in
securities of foreign issuers.
AEM Equity Income Portfolio Objective: current income. Long-term SSBCiti
capital appreciation is a secondary
goal. The fund invests primarily in
dividend-paying common stocks and other
equity securities of U.S. companies.
Companies with dividend-paying stocks
tend to have large market
capitalizations, but the fund also may
invest in medium and small
capitalization stocks. Equity securities
include preferred stocks and securities
convertible into common stock.
AEX Equity Index Portfolio -- Class I Objective: provide investment results Travelers Investment Management Company
that, before expenses, correspond to the
price and yield performance of the
S&P 500 Index. The fund will hold
substantially all of the stocks in the
S&P 500 Index, with comparable economic
sector weightings, market capitalization
and liquidity.
AGI Growth & Income Portfolio Objective: income and long-term capital SSBCiti
growth. The fund invests primarily in
equity securities, including convertible
securities, that provide dividend or
interest income. However, it may also
invest in non-income producing stocks
for the potential appreciation in value.
The fund emphasizes U.S. stocks with
large capitalizations. The fund may
purchase below investment grade
convertible securities (commonly known
as "junk bonds").
</TABLE>
- --------------------------------------------------------------------------------
12 SYMPHONY ANNUITY
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNT INVESTING IN INVESTMENT OBJECTIVES AND POLICIES INVESTMENT ADVISOR OR MANAGER
<C> <S> <C> <C>
AIH Intermediate High Grade Portfolio Objective: provide as high a level of SSBCiti
current income as is consistent with the
protection of capital. The fund invests
primarily in U.S. government securities
and high-grade corporate bonds of
U.S. issuers. The fund may also invest
up to 35% of its assets in other fixed
income securities.
AIE International Equity Portfolio Objective: provide a total return on SSBCiti
assets from growth of capital and
income. The fund invests primarily in
equity securities of foreign companies.
Equity securities include exchange
traded and over-the-counter common
stocks and preferred shares, debt
securities convertible into equity
securities, and warrants and rights
relating to equity securities.
AMO Money Market Portfolio Objective: maximum current income to the SSBCiti
extent consistent with the preservation
of capital and the maintenance of
liquidity. The fund invests in
short-term money market securities,
including U.S. government securities,
repurchase agreements, U.S. and
foreign-bank time deposits, certificates
of deposit and bankers' acceptances and
high-quality commercial paper and
short-term corporate debt obligations of
U.S. and foreign issuers, including
variable-rate and floating-rate
securities. The fund invests only in
securities purchased with and payable in
U.S. dollars.
ATR Total Return Portfolio Objective: total return, consisting of SSBCiti
long-term capital appreciation and
income. The fund invests primarily in
dividend-paying common stocks of U.S.
and foreign companies. These companies
tend to have large market
capitalizations, but the fund also may
invest in medium and small
capitalization stocks.
</TABLE>
The investment objectives and policies of some of the funds are similar to the
investment objectives and policies of other mutual funds that an investment
advisor or its affiliates manage. Although the objectives and policies may be
similar, each fund will have its own portfolio holdings and its own fees and
expenses. Accordingly, each fund will have its own investment results and those
results may differ significantly from other funds with similar investment
objectives and policies.
The investment managers and advisors cannot guarantee that the funds will meet
their investment objectives. Please read the fund prospectuses for facts you
should know before investing. These prospectuses are also available by
contacting us at the address or telephone number on the first page of this
prospectus.
All funds are available to serve as the underlying investments for variable
annuities. Some funds also are available to serve as investment options for
variable life insurance policies and tax-deferred retirement plans. It is
possible that in the future, it may be disadvantageous for variable annuity
accounts and variable life insurance accounts and/or tax-deferred retirement
plans to invest in the available funds simultaneously.
Although the insurance company 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 annuity
owners, policy owners and tax-deferred retirement plans and to determine what
action, if any, should be taken in response to a conflict. If a board were to
conclude that it should establish separate funds for the variable annuity,
variable life insurance and tax-deferred retirement plan accounts, you would not
bear any expenses associated with establishing separate funds. Please refer to
the fund prospectuses for risk disclosure regarding simultaneous investments by
variable annuity, variable life insurance and tax-deferred retirement plan
accounts.
- --------------------------------------------------------------------------------
PROSPECTUS -- MAY 1, 2000 13
<PAGE>
The Internal Revenue Service (IRS) issued final regulations relating to the
diversification requirements under Section 817(h) of the Code. Each fund intends
to comply with these requirements.
The variable account was established under Minnesota law on May 9, 1991. On
Nov. 3, 1993, the name of the variable account changed from IDS Life Account SLB
to IDS Life Account SBS. The subaccounts are registered together as a single
unit investment trust under the Investment Company Act of 1940 (the 1940 Act).
This registration does not involve any supervision of our management or
investment practices and policies by the SEC. All obligations arising under the
certificates are general obligations of IDS Life.
The variable account meets the definition of a separate account under federal
securities laws. We credit or charge income, capital gains and capital losses of
each subaccount only to that subaccount. State insurance law prohibits us from
charging a subaccount with liabilities of any other subaccount or of our general
business.
The U.S. Treasury and IRS indicated that they may provide additional guidance on
investment control. This concerns how many variable subaccounts an insurance
company may offer and how many exchanges among subaccounts it may allow before
the contract owner would be currently taxed on income earned within subaccount
assets. At this time, we do not know what the additional guidance will be or
when action will be taken. We reserve the right to modify the contract, as
necessary, so that the owner will not be subject to current taxation as the
owner of the subaccount assets.
We intend to comply with all federal tax laws so that the contract continues to
qualify as an annuity for federal income tax purposes. We reserve the right to
modify the contract as necessary to comply with any new tax laws.
THE FIXED ACCOUNT
You also may allocate purchase payments to the fixed account. We back the
principal and interest guarantees relating to the fixed account. The value of
the fixed account increases as we credit interest to the account. Purchase
payments and transfers to the fixed account become part of our general account.
We credit and compound interest daily. We will change the interest rates from
time to time at our discretion. These rates will be based on various factors,
including, but not limited to, the interest rate environment, returns earned on
investments backing these annuities, the rates currently in effect for new and
existing company annuities, product design, competition, and the company's
revenues and expenses.
Interests in the fixed account are not required to be registered with the SEC.
The SEC staff does not review the disclosures in this prospectus on the fixed
account. Disclosures regarding the fixed account, however, may be subject to
certain generally applicable provisions of the federal securities laws relating
to the accuracy and completeness of statements made in prospectuses. (See
"Making the Most of Your Contract -- Transfer policies" for restrictions on
transfers involving the fixed account.)
BUYING YOUR CONTRACT
You can fill out an application and send it along with your initial purchase
payment to our office. As the owner, you have all rights and may receive all
benefits under the contract. You can own a nonqualified annuity in joint tenancy
with rights of survivorship only in spousal situations. You cannot own a
qualified annuity in joint tenancy. You can buy a nonqualified annuity or become
an annuitant if you are age 75 or younger. You can buy a qualified annuity or
become an annuitant if you are age 65 or younger.
- --------------------------------------------------------------------------------
14 SYMPHONY ANNUITY
<PAGE>
When you apply, you may select:
- - the fixed account and/or the subaccounts in which you want to invest, and
- - how you wish to make purchase payments.
If your application is complete, we will process it and apply your purchase
payment to the fixed account and subaccounts you selected within two business
days after we receive it at our office. If we accept your application, we will
send you a contract. If we cannot accept your application within five business
days, we will decline it and return your payment. We will credit additional
purchase payments you make to your accounts on the valuation date we receive
them. We will value the additional payments at the next accumulation unit value
calculated after we receive your payments at our office.
THE RETIREMENT DATE
Annuity payouts are to begin on the retirement date. You can align this date
with your actual retirement from a job, or it can be a different future date,
depending on your needs and goals and on certain restrictions. You also can
change the date, provided you send us written instructions at least 30 days
before annuity payouts begin.
FOR NONQUALIFIED ANNUITIES, the retirement date must be:
- - no later than the annuitant's 85th birthday or ten years after issue,
whichever is later.
FOR QUALIFIED ANNUITIES, to avoid IRS penalty taxes, retirement payments
generally must be:
- - on or after the date the annuitant reaches age 59 1/2; and
- - for IRAs, by April 1 of the year following the calendar year when the
annuitant reaches age 70 1/2; or
- - for all other qualified annuities, by April 1 of the year which the annuitant
reaches age 70 1/2 or, if later, retires (except that 5% business owners may
not select a retirement date that is later than April 1 of the calendar year
when they reach age 70 1/2).
If you take minimum IRA or TSA distributions as required by The Code from
another tax-qualified investment or in the form of partial surrenders from this
contract, annuity payouts can start as late as the annuitant's 85th birthday or
the tenth contract anniversary.
BENEFICIARY
If death benefits become payable before the retirement date while this contract
is in force and before annuity payouts begin, we will pay your named beneficiary
all or part of the contract value. If there is no beneficiary, then your estate
will be the beneficiary. (See "Benefits in Case of Death" for more about
beneficiaries.)
PURCHASE PAYMENTS
MINIMUM ALLOWABLE PURCHASE PAYMENTS*
<TABLE>
<S> <C>
Initial payment: Additional payments:
$5,000 for nonqualified annuities $500 for nonqualified annuities
$500 for qualified annuities $50 for qualified annuities
</TABLE>
* In Washington you may not make additional purchase payments for a
nonqualified annuity on or after age 80 and for a qualified annuity on or
after age 65.
MAXIMUM ALLOWABLE PURCHASE PAYMENTS**: $1 million
** We reserve the right to change maximum limits. For qualified annuities the
tax-deferred retirement plans on the Code's limits on annual contributions
also apply.
- --------------------------------------------------------------------------------
PROSPECTUS -- MAY 1, 2000 15
<PAGE>
HOW TO MAKE PURCHASE PAYMENTS
BY LETTER
Send your check along with your name and contract number to:
IDS LIFE INSURANCE COMPANY
200 AXP FINANCIAL CENTER
MINNEAPOLIS, MN 55474
CHARGES
CONTRACT ADMINISTRATIVE CHARGE
We charge this fee for establishing and maintaining your records. We deduct $30
from the contract value on your contract anniversary at the end of each contract
year. We prorate this charge among the subaccounts and the fixed account in the
same proportion your interest in each account bears to your total contract
value. If you fully surrender your contract, we 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. We cannot increase the
annual contract administrative charge and it does not apply after annuity
payouts begin or when we pay death benefits.
VARIABLE ACCOUNT ADMINISTRATIVE CHARGE
We apply this charge daily to the subaccounts. It is reflected in the unit
values of your subaccounts and it totals 0.25% of their average daily net assets
on an annual basis. It covers certain administrative and operating expenses of
the subaccounts such as accounting, legal and data processing fees and expenses
involved in the preparation and distribution of reports and prospectuses. We
cannot increase the variable account administrative charge. It does not apply to
values allocated to the fixed account and it does not apply after annuity
payouts begin.
MORTALITY AND EXPENSE RISK FEE
We charge this fee daily to the subaccounts. The unit values of your subaccounts
reflect this fee and it totals 1.25 % of their average daily net assets on an
annual basis. This fee covers the mortality and expense risk that we assume.
Approximately two-thirds of this amount is for assumption of the mortality risk,
and one-third is for our assumption of the expense risk. This fee does not apply
to the fixed account.
Mortality risk arises because of our guarantee to pay a death benefit and our
guarantee to make annuity payments according to the terms of the contracts no
matter how long a specific annuitant lives and no matter how long our entire
group of annuitants live. If, as a group, annuitants outlive the life expectancy
we assumed in the actuarial tables, we must take money from our general assets
to meet our obligations. If, as a group, annuitants do not live as long as
expected, we could profit from the mortality risk fee.
Expense risk arises because we cannot increase the contract administrative
charge or variable account administrative charge and these charges may not cover
our expenses. We would have to make up any deficit from our general assets. We
could profit from the expense risk fee if future expenses are less than
expected.
The subaccounts pay us the mortality and expense risk fee they accrued as
follows:
- - first, to the extent possible, the subaccounts pay this fee from any dividends
distributed from the funds in which they invest;
- --------------------------------------------------------------------------------
16 SYMPHONY ANNUITY
<PAGE>
- - then, if necessary, the funds redeem shares to cover any remaining fees
payable.
We may use any profits we realize from the subaccounts' payment to us of the
mortality and expense risk fee for any proper corporate purpose, including,
among others, payment of distribution (selling) expenses. We do not expect that
the surrender charge, discussed in the following paragraphs, will cover sales
and distribution expenses.
SURRENDER CHARGE
If you surrender part or all of your contract, you may be subject to a surrender
charge. A surrender charge applies if you surrender all or part of the contract
value during the first six payment years following a purchase payment. The
surrender charge starts at 6% of a purchase payment in the first payment year
and is reduced by 1% 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.
<TABLE>
<CAPTION>
YEARS FROM PURCHASE SURRENDER CHARGE
PAYMENT RECEIPT PERCENTAGE
<S> <C>
1 6%
2 5
3 4
4 3
5 2
6 1
Thereafter 0
</TABLE>
After the first contract year, you may surrender amounts totaling up to 10% of
your prior anniversary contract value in one or more surrenders each contract
year without incurring a surrender charge. The 10% withdrawal provision is
subject to other contract provisions and terms including those on partial
surrenders. In addition, there is no surrender charge on contract earnings,
which equal:
- - the contract value; minus
- - the sum of all purchase payments received that have not been previously
surrendered; minus
- - the amount of the 10% free withdrawal, if applicable.
For purposes of determining the amount of any surrender charge, we deem
surrenders to be taken first from any applicable 10% free withdrawal amount;
next from purchase payments on a "first in-first out" (FIFO) basis; and finally
from contract earnings (in excess of any 10% free withdrawal amount).
SURRENDER CHARGE ON PARTIAL SURRENDER -- For a partial withdrawal that is
subject to a withdrawal charge, the amount deducted for the withdrawal charge
will be a percentage of the total amount withdrawn. We will deduct the charge
from the value remaining after we pay you the amount you requested.
- --------------------------------------------------------------------------------
PROSPECTUS -- MAY 1, 2000 17
<PAGE>
SURRENDER CHARGE CALCULATION EXAMPLE:
ASSUMPTIONS:
<TABLE>
<S> <C>
Initial purchase payment at Annuity issue date of
May 1, 2000 $10,000
Subsequent purchase payment on July 1, 2003 20,000
Account value on contract anniversary, April 29,
2004 40,000
Account value on October 12, 2004 42,000
</TABLE>
FULL SURRENDER ON OCTOBER 12, 2004:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BASIS OF RATE OF DOLLAR AMOUNT
CHARGE SURRENDER CHARGE OF CHARGE EXPLANATION OF CHARGE
<S> <C> <C> <C>
None $0 10% of prior contract anniversary
$4,000
contract value surrendered free
$8,000 None 0 No charge on contract earnings
$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
Total Surrender Charge: $1,200
</TABLE>
PARTIAL SURRENDER OF $15,000 ON OCTOBER 12, 2004:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BASIS OF RATE OF DOLLAR AMOUNT
CHARGE SURRENDER CHARGE OF CHARGE EXPLANATION OF CHARGE
<S> <C> <C> <C>
$4,000 None $0 10% of prior contract anniversary
contract value surrendered free
$10,000 2% 200 Payment made in contract year 1;
surrendered at payment year 5 rate
$1,000 5% 50 Payment made in contract year 4;
surrendered at payment year 2 rate
Total Surrender Charge: $250
</TABLE>
POSSIBLE REDUCTION IN CHARGES -- In some cases, we may incur lower sales and
administrative expenses or perform fewer services. In those cases, we may, at
our discretion, reduce or eliminate certain administrative and surrender
charges. However, we expect this to occur infrequently, if at all.
PREMIUM TAXES
Certain state and local governments impose premium taxes on us (up to 3.5%).
These taxes depend upon the state of residence or the state in which the
contract was sold. Currently, we deduct any applicable premium taxes when
annuity payouts begin, but we reserve the right to deduct this tax at other
times such as when you make purchase payments or when you surrender your
contract.
- --------------------------------------------------------------------------------
18 SYMPHONY ANNUITY
<PAGE>
VALUING YOUR INVESTMENT
We value your accounts as follows:
FIXED ACCOUNT
We value the amounts you allocated to the fixed account directly in dollars. The
fixed account value equals:
- - the sum of your purchase payments and transfer amounts allocated to the fixed
account;
- - plus interest credited;
- - minus the sum of amounts withdrawn (including any applicable surrender
charges) and amounts transferred out; and
- - minus any prorated contract administrative charge.
SUBACCOUNTS
We convert amounts you allocated to the subaccounts into accumulation units.
Each time you make a purchase payment or transfer amounts into one of the
subaccounts, we credit a certain number of accumulation units to your contract
for that subaccount. Conversely, each time you take a partial withdrawal,
transfer amounts out of a subaccount or we assess a contract administrative
charge, we subtract a certain number of accumulation units from your contract.
The accumulation units are the true measure of investment value in each
subaccount during the accumulation period. They are related to, but not the same
as, the net asset value of the fund in which the subaccount invests. The dollar
value of each accumulation unit can rise or fall daily depending on the
subaccount expenses, performance of the fund and on certain fund expenses. Here
is how we calculate accumulation unit values:
NUMBER OF UNITS: to calculate the number of accumulation units for a particular
subaccount we divide your investment by the current accumulation unit value.
ACCUMULATION UNIT VALUE: the current accumulation unit value for each subaccount
equals the last value times the subaccount's current net investment factor.
WE DETERMINE THE NET INVESTMENT FACTOR BY:
- - adding the fund's current net asset value per share, plus the per share amount
of any accrued income or capital gain dividends to obtain a current adjusted
net asset value per share; then
- - dividing that sum by the previous adjusted net asset value per share; and
- - subtracting the percentage factor representing the mortality and expense risk
fee and the variable account administrative charge from the result.
Because the net asset value of the fund may fluctuate, the accumulation unit
value may increase or decrease. You bear all the investment risk in a
subaccount.
- --------------------------------------------------------------------------------
PROSPECTUS -- MAY 1, 2000 19
<PAGE>
FACTORS THAT AFFECT SUBACCOUNT ACCUMULATION UNITS: accumulation units may change
in two ways - in number and in value.
The number of accumulation units you own may fluctuate due to:
- - additional purchase payments you allocate to the subaccounts;
- - transfers into or out of the subaccounts;
- - partial withdrawals;
- - surrender charges; and/or
- - prorated portions of the contract administrative charge.
Accumulation unit values will fluctuate due to:
- - changes in funds' net asset value;
- - dividends distributed to the subaccounts;
- - capital gains or losses of funds;
- - fund operating expenses;
- - mortality and expense risk fees; and/or
- - variable account administrative charges.
MAKING THE MOST OF YOUR CONTRACT
You may transfer money from any one subaccount, or the fixed account, to another
subaccount before annuity payouts begin. (Certain restrictions apply to
transfers involving the fixed account.) We will process your transfer on the
valuation date we receive your request. We will value your transfer at the next
accumulation unit value calculated after we receive your request. There is no
charge for transfers. Before making a transfer, you should consider the risks
involved in switching investments.
We may suspend or modify transfer privileges at any time.
TRANSFER POLICIES
- - You may transfer contract values between the subaccounts or from the
subaccounts to the fixed account at any time. However, if you made a transfer
from the fixed account to the subaccounts, you may not make a transfer from
any subaccount back to the fixed account for six months following that
transfer.
- - You may transfer between the subaccounts and the fixed account up to the six
times per contract year. This limit may be waived if the automated transfer of
contract value is in effect.
- --------------------------------------------------------------------------------
20 SYMPHONY ANNUITY
<PAGE>
HOW TO REQUEST A TRANSFER OR SURRENDER
1 BY LETTER
- --------------------------------------------------------------------------------
Send your name, contract number, Social Security Number or Taxpayer
Identification Number and signed request for a transfer or surrender to:
IDS LIFE INSURANCE COMPANY
200 AXP FINANCIAL CENTER
MINNEAPOLIS, MN 55474
MINIMUM AMOUNT
Transfers: $500 or entire account balance
Surrenders: $500 (If a partial surrender would reduce the account balance to
less than $500, you either cannot make the surrender or you
must surrender the full account value.)
MAXIMUM AMOUNT
Transfers or surrenders: Contract value
2 BY AUTOMATED TRANSFERS AND AUTOMATED PARTIAL SURRENDERS
- --------------------------------------------------------------------------------
Your sales representative can help you set up automated transfers among your
subaccounts or fixed account or partial surrenders from the accounts.
You can start or stop this service by written request or other method acceptable
to us. You must allow 30 days for us to change any instructions that are
currently in place.
- - Automated transfers from the fixed account to the subaccounts may not exceed
an amount that, if continued, would deplete the fixed account within 12
months.
- - Automated transfers and automated partial surrenders are subject to all of the
contract provisions and terms, including transfer of contract values between
accounts.
- - Automated partial surrenders may result in IRS taxes and penalties on all or
part of the amount surrendered.
MINIMUM AMOUNT
Transfers: $100
Surrenders: $500 (If a partial surrender would reduce the account balance to
less than $500, you either cannot make the surrender or you
must surrender the full account value.)
- --------------------------------------------------------------------------------
PROSPECTUS -- MAY 1, 2000 21
<PAGE>
3 BY PHONE
- --------------------------------------------------------------------------------
Call between 8 a.m. and 4:30 p.m. Central time:
1-800-422-3542 (TOLL FREE)
MINIMUM AMOUNT
Transfers: $500 or entire account balance
Surrenders: $500 (If a partial surrender would reduce the account
balance to less than $500, you either cannot make the
surrender or you must surrender the full account
value.)
MAXIMUM AMOUNT
Transfers: Contract value
Surrenders: $40,000
We answer telephone requests promptly, but you may experience delays when the
call volume is unusually high. If you are unable to get through, use the mail
procedure as an alternative.
We will honor any telephone transfer or surrender requests that we believe are
authentic and we will use reasonable procedures to confirm that they are. This
includes asking identifying questions and tape recording calls. We will not
allow a telephone surrender within 30 days of a phoned-in address change. As
long as we follow the procedures, we (and our affiliates) will not be liable for
any loss resulting from fraudulent requests.
Telephone transfers or surrenders are automatically available. You may request
that telephone transfers or surrenders NOT be authorized from your account by
writing to us.
4 BY SYSTEMATIC WITHDRAWALS
- --------------------------------------------------------------------------------
You may start or stop this service by written request or other method acceptable
to us. You must allow 30 days' notice for us to change any instructions that are
currently in place.
You may withdraw amounts of up to 10 percent of the contract value at the
beginning of the contract year. We 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 IRS taxes and penalties
on all or part of the amount withdrawn. You should consult your tax advisor
regarding the tax consequences of systematic withdrawals.
You may designate withdrawals from the contract in one of the following ways:
- - withdrawing a specific total dollar amount prorated from all accounts in which
you have a balance (if no other choice is made, we will withdraw amounts under
this method);
- - withdrawing a specific total dollar amount and specifying which percentage of
that total amount will be withdrawn from all accounts in which you have a
balance; or
- - withdrawing only the interest credited to the fixed account over the
systematic withdrawal period.
Minimum contract value $5,000
Minimum systematic withdrawal amount
$100
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22 SYMPHONY ANNUITY
<PAGE>
SURRENDERS
You may surrender all or part of your contract at any time before annuity
payouts begin by sending us a written request or calling us. We will process
your surrender request on the valuation date we receive it. For total
surrenders, we will compute the value of your contract at the next accumulation
unit value calculated after we receive your request. We may ask you to return
the contract. You may have to pay surrender charges (see "Charges -- Surrender
charge") and IRS taxes and penalties (see "Taxes"). You cannot make surrenders
after annuity payouts begin.
SURRENDER POLICIES
If you have a balance in more than one account and you request a partial
surrender, we will withdraw money from all your subaccounts and/or the fixed
account in the same proportion as your value in each account correlates to your
total contract value, unless you request otherwise.
RECEIVING PAYMENT
By regular or express mail:
- - payable to you.
- - mailed to address of record.
NOTE: We will charge you a fee if you request express mail delivery.
Normally, we will send the payment within seven days after receiving your
request. However, we may postpone the payment if:
-- the surrender amount includes a purchase payment check that has not
cleared;
-- the NYSE is closed, except for normal holiday and weekend closings;
-- trading on the NYSE is restricted, according to SEC rules;
-- an emergency, as defined by SEC rules, makes it impractical to sell
securities or value the net assets of the accounts; or
-- the SEC permits us to delay payment for the protection of security holders.
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PROSPECTUS -- MAY 1, 2000 23
<PAGE>
TSA - SPECIAL SURRENDER PROVISIONS
PARTICIPANTS IN TAX-SHELTERED ANNUITIES
The Code imposes certain restrictions on your right to receive early
distributions from a TSA:
- - Distributions attributable to salary reduction contributions (plus earnings)
made after Dec. 31, 1988, or to transfers or rollovers from other contracts,
may be made from the TSA only if:
-- you are at least age 59 1/2;
-- you are disabled as defined in the Code;
-- you separated from the service of the employer who purchased the contract;
or
-- the distribution is because of your death.
- - If you encounter a financial hardship (as defined by the Code), you may
receive a distribution of all contract values attributable to salary reduction
contributions made after Dec. 31, 1988, but not the earnings on them.
- - Even though a distribution may be permitted under the above rules, it may be
subject to IRS taxes and penalties (see "Taxes").
- - The employer must comply with certain nondiscrimination requirements for
certain types of contributions under a TSA contract to be excluded from
taxable income. You should consult your employer to determine whether the
nondiscrimination rules apply to you.
- - The above restrictions on distributions do not affect the availability of the
amount credited to the contract as of Dec. 31, 1988. The restrictions also do
not apply to transfers or exchanges of contract values within the contract, or
to another registered variable annuity contract or investment vehicle
available through the employer.
CHANGING OWNERSHIP
You may change ownership of your nonqualified annuity at any time by completing
a change of ownership form we approve and sending it to our office. The change
will become binding upon us when we receive and record it. We will honor any
change of ownership request that we believe is authentic and we will use
reasonable procedures to confirm authenticity. If we follow these procedures, we
will not take any responsibility for the validity of the change.
If you have a nonqualified annuity, you may incur income tax liability by
transferring, assigning or pledging any part of it. (See "Taxes.")
If you have a qualified annuity, you may not sell, assign, transfer, discount or
pledge your contract as collateral for a loan, or as security for the
performance of an obligation or for any other purpose except as required or
permitted by the Code. However, if the owner is a trust or custodian, or an
employer acting in similar capacity, ownership of the contract may be
transferred to the annuitant.
- --------------------------------------------------------------------------------
24 SYMPHONY ANNUITY
<PAGE>
BENEFITS IN CASE OF DEATH
If you or the annuitant die before the retirement date while the contract is in
force we will pay the beneficiary as follows:
Before the initial fifth contract anniversary, the beneficiary receives the
greater of:
- - the contract value; or
- - the amount of purchase payments (minus any surrenders).
On or after the initial fifth contract anniversary, and each subsequent fifth
contract anniversary, the beneficiary receives the greater of:
- - the contract value; or
- - a minimum guaranteed death benefit which equals:
-- the death benefit calculated as of the previous fifth contract anniversary;
-- plus any purchase payments made since the previous fifth contract
anniversary;
-- minus any surrenders since the previous fifth contract anniversary.
If a contract has more than one person as owner, we will pay benefits upon the
first to die of any owner or the annuitant.
IF YOUR SPOUSE IS SOLE BENEFICIARY under a nonqualified annuity and you die
before the retirement date, your spouse may keep the contract as owner. To do
this your spouse must, within 60 days after we receive proof of death, give us
written instructions to keep the contract in force.
Under a qualified annuity, if the annuitant dies before the Code requires
distributions to begin, and the spouse is the only beneficiary, the spouse may
keep the contract as owner until the date on which the annuitant would have
reached age 70 1/2 or any other date permitted by the Code. To do this, the
spouse must give us written instructions within 60 days after we receive
proof of death.
PAYMENTS: Under a nonqualified annuity we will pay the beneficiary in a single
sum unless you give us other written instructions. We must fully distribute the
death benefit within five years of your death. However, the beneficiary may
receive payouts under any annuity payout plan available under this contract if:
- - the beneficiary asks us in writing within 60 days after we receive proof of
death; and
- - payouts begin no later than one year after your death, or other date as
permitted by the Code; and
- - the payout period does not extend beyond the beneficiary's life or life
expectancy.
When paying the beneficiary, we will process the death claim on the valuation
date our death claim requirements are fulfilled. We will determine the
contract's value at the next accumulation unit value calculated after our death
claim requirements are fulfilled. We pay interest, if any, from the date of
death at a rate no less than required by law. We will mail payment to the
beneficiary within seven days after our death claim requirements are fulfilled.
Other rules may apply to qualified annuities. (See "Taxes.")
- --------------------------------------------------------------------------------
PROSPECTUS -- MAY 1, 2000 25
<PAGE>
THE ANNUITY PAYOUT PERIOD
As owner of the contract, you have the right to decide how and to whom annuity
payouts will be made starting at the retirement date. You may select one of the
annuity payout plans outlined below, or we may mutually agree on other payout
arrangements.
The amount available to purchase payouts under the plan you select is the
contract value on your retirement date (less any applicable premium tax). We
will make annuity payouts on a fixed basis. We do not deduct any surrender
charges under the payout plans listed below.
RETIREMENT PAYMENT PLANS
You may choose any one of these annuity payout plans by giving us written
instructions at least 30 days before contract values are used to purchase the
payout plan:
PLAN A -- LIFE ANNUITY -- NO REFUND: We make monthly payouts until the
annuitant's death. Payouts end with the last payout before the annuitant's
death. We will not make any further payouts. This means that if the annuitant
dies after we have made only one monthly payout, we will not make any more
payouts.
PLAN B -- LIFE ANNUITY WITH FIVE, TEN OR 15 YEARS CERTAIN: We make monthly
payouts for a guaranteed payout period of five, ten or 15 years that you elect.
This election will determine the length of the payout period to the beneficiary
if the annuitant should die before the elected period expires. We calculate the
guaranteed payout period from the retirement date. If the annuitant outlives the
elected guaranteed payout period, we will continue to make payouts until the
annuitant's death.
PLAN C -- LIFE ANNUITY -- INSTALLMENT REFUND: We make monthly payouts until the
annuitant's death, with our guarantee that payouts will continue for some period
of time. We will make payouts for at least the number of months determined by
dividing the amount applied under this option by the first monthly payout,
whether or not the annuitant is living.
PLAN D -- JOINT AND LAST SURVIVOR LIFE ANNUITY -- NO REFUND: We make monthly
payouts while both the annuitant and a joint annuitant are living. If either
annuitant dies, we will continue to make monthly payouts at the full amount
until the death of the surviving annuitant. Payouts end with the death of the
second annuitant.
PLAN E -- PAYOUTS FOR A SPECIFIED PERIOD: We make monthly payouts for a specific
payout period of ten to 30 years that you elect. We will make payouts only for
the number of years specified whether the annuitant is living or not. Depending
on the selected time period, it is foreseeable that an annuitant can outlive the
payout period selected. In addition, a 10% IRS penalty tax could apply under
this payout plan. (See "Taxes.")
RESTRICTIONS FOR SOME TAX-DEFERRED RETIREMENT PLANS -- If you purchased a
qualified annuity in connection with a Section 401(k) plan, custodial or
trusteed plan, or as an IRA or TSA, you may be required to select a payment plan
(in accordance with the applicable provisions of the Code) that provides for
payments:
- - over the life of the annuitant;
- - over the joint lives of the annuitant and beneficiary;
- - for a period not exceeding the life expectancy of the annuitant; or
- - for a period not exceeding the joint life expectancies of the annuitant and
beneficiary.
- --------------------------------------------------------------------------------
26 SYMPHONY ANNUITY
<PAGE>
IF WE DO NOT RECEIVE INSTRUCTIONS -- You must give us written instructions for
paying retirement benefits at least 30 days before the retirement date. If you
do not, we will make payments under Plan B, with 120 monthly payments
guaranteed.
IF MONTHLY PAYMENTS WOULD BE LESS THAN $50 -- We will calculate your contract
value at the retirement date. If the calculations show that monthly payments
would be less than $50, we reserve 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, we will pay any amount payable to the beneficiary as
provided in the retirement payment plan in effect.
TAXES
Generally, under current law, your contract has a tax-deferral feature. This
means any increase in the value of the fixed account and/or variable accounts in
which you invest is taxable to you only when you receive a payout or surrender
(see detailed discussion below). Any portion of the annuity payouts and any
surrenders you request that represent ordinary income are normally taxable. We
will send you a tax information reporting form for any year in which we made a
taxable distribution according to our records.
ANNUITY PAYOUTS UNDER NONQUALIFIED ANNUITIES: A portion of each payout will be
ordinary income and subject to tax, and a portion of each payout will be
considered a return of part of your investment and will not be taxed. All
amounts you receive after your investment in the contract is fully recovered
will be subject to tax.
Tax law requires that all nonqualified deferred annuities issued by the same
company (and possibly its affiliates) to the same owner during a calendar year
be taxed as a single, unified contract when you take distributions from any one
of those contracts.
QUALIFIED ANNUITIES: Your contract may be used to fund a tax-deferred retirement
plan that is already tax-deferred under the Code. The contract will not provide
any necessary or additional tax-deferral if it is used to fund a retirement plan
that is tax-deferred. Special rules apply to these retirement plans. Your rights
to benefits may be subject to the terms and conditions of these retirement plans
regardless of the terms of the contract.
Adverse tax consequences may result if you do not ensure that contributions,
distributions and other transactions under the contract comply with the law.
Qualified annuities have minimum distribution rules that govern the timing and
amount of distributions during your life and after your death. You should refer
to your retirement plan or adoption agreement or consult a tax advisor for more
information about your distribution rules.
ANNUITY PAYOUTS UNDER QUALIFIED ANNUITIES: Under a qualified annuity, the entire
payout generally is includable as ordinary income and is subject to tax except
to the extent that contributions were made with after-tax dollars. If you or
your employer invested in your contract with deductible or pre-tax dollars as
part of a qualified retirement plan, such amounts are not considered to be part
of your investment in the contract and will be taxed when paid to you.
SURRENDERS: If you surrender part or all of your contract before your annuity
payouts begin, your surrender payment will be taxed to the extent that the value
of your contract immediately before the surrender exceeds your investment. You
also may have to pay a 10% IRS penalty for surrenders you make before reaching
age 59 1/2 unless certain exceptions apply. For qualified annuities, other
penalties may apply if you surrender your contract before your plan specifies
that you can receive payouts.
- --------------------------------------------------------------------------------
PROSPECTUS -- MAY 1, 2000 27
<PAGE>
DEATH BENEFITS TO BENEFICIARIES: The death benefit under a contract is not
tax-exempt. Any amount your beneficiary receives that represents previously
deferred earnings within the contract is taxable as ordinary income to the
beneficiary in the years he or she receives the payments.
ANNUITIES OWNED BY CORPORATIONS, PARTNERSHIPS OR TRUSTS: For nonqualified
annuities any annual increase in the value of annuities held by such entities
generally will be treated as ordinary income received during that year. This
provision is effective for purchase payments made after Feb. 28, 1986. However,
if the trust was set up for the benefit of a natural person only, the income
will remain tax-deferred.
PENALTIES: If you receive amounts from your contract before reaching age 59 1/2,
you may have to pay a 10% IRS penalty on the amount includable in your ordinary
income. However, this penalty will not apply to any amount received by you or
your beneficiary:
- - because of your death;
- - because you become disabled (as defined in the Code);
- - 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 beneficiary); or
- - if it is allocable to an investment before Aug. 14, 1982 (except for qualified
annuities).
For a qualified annuity, other penalties or exceptions may apply if you
surrender your contract before your plan specifies that payouts can be made.
WITHHOLDING, GENERALLY: If you receive all or part of the contract value, we may
deduct withholding against the taxable income portion of the payment. Any
withholding represents a prepayment of your tax due for the year. You take
credit for these amounts on your annual tax return.
If the payment is part of an annuity payout plan, we generally compute the
amount of withholding using payroll tables. You may provide us with a statement
of how many exemptions to use in calculating the withholding. As long as you've
provided us with a valid Social Security Number or Taxpayer Identification
Number, you can elect not to have any withholding occur.
If the distribution is any other type of payment (such as a partial or full
surrender), we compute withholding using 10% of the taxable portion. Similar to
above, as long as you have provided us with a valid Social Security Number or
Taxpayer Identification Number, you can elect not to have this withholding
occur.
Some states also impose withholding requirements similar to the federal
withholding described above. If this should be the case, we may deduct state
withholding from any payment from which we deduct federal withholding. The
withholding requirements may differ if we are making payment to a non-U.S.
citizen or if we deliver the payment outside the United States.
WITHHOLDING FROM QUALIFIED ANNUITIES: If you receive directly all or part of the
contract value from a qualified annuity (except an IRA, SEP, or Section 457
Plan), mandatory 20% federal income tax withholding (and possibly state income
tax withholding) generally will be imposed at the time we make payout. This
mandatory withholding is in place of the elective withholding discussed above.
This mandatory withholding will not be imposed if:
- - instead of receiving the distribution check, you elect to have the
distribution rolled over directly to an IRA or another eligible plan;
- --------------------------------------------------------------------------------
28 SYMPHONY ANNUITY
<PAGE>
- - the payout is one in a series of substantially equal periodic payouts, made at
least annually, over your life or life expectancy (or the joint lives or life
expectancies of you and your designated beneficiary) or over a specified
period of 10 years or more; or
- - the payout is a minimum distribution required under the Code.
Payments we make to a surviving spouse instead of being directly rolled over to
an IRA also may be subject to mandatory 20% income tax withholding.
State withholding also may be imposed on taxable distributions.
TRANSFER OF OWNERSHIP OF A NONQUALIFIED ANNUITY: If you transfer a nonqualified
annuity without receiving adequate consideration, the transfer is a gift and
also may be a surrender for federal income tax purposes. If the gift is a
currently taxable event for income tax purposes, the original owner will be
taxed on the amount of deferred earnings at the time of the transfer and also
may be subject to the 10% IRS penalty discussed earlier. In this case, the new
owner's investment in the contract will be the value of the contract at the time
of the transfer.
COLLATERAL ASSIGNMENT OF A NONQUALIFIED ANNUITY: If you collaterally assign or
pledge your contract, earnings on purchase payments you made after Aug. 13, 1982
will be taxed to you like a surrender.
IMPORTANT: Our discussion of federal tax laws is based upon our understanding of
current interpretations of these laws. Federal tax laws or current
interpretations of them may change. For this reason and because tax consequences
are complex and highly individual and cannot always be anticipated, you should
consult a tax advisor if you have any questions about taxation of your contract.
TAX QUALIFICATION: We intend that the contract qualify as an annuity for federal
income tax purposes. To that end, the provisions of the contract are to be
interpreted to ensure or maintain such tax qualification, in spite of any other
provisions of the contract. We reserve the right to amend the contract to
reflect any clarifications that may be needed or are appropriate to maintain
such qualification or to conform the contract to any applicable changes in the
tax qualification requirements. We will send you a copy of any amendments.
VOTING RIGHTS
As an owner with investments in the subaccounts, you may vote on important fund
policies. We will vote fund shares according to your instructions.
The number of votes you have is determined by applying your percentage interest
in each subaccount to the total number of votes allowed to the subaccount.
We calculate votes separately for each subaccount. We will send notice of these
meetings, proxy materials and a statement of the number of votes to which the
voter is entitled.
We will vote shares for which we have not received instructions in the same
proportion as the votes for which we received instructions. We also will vote
the shares for which we have voting rights in the same proportion as the votes
for which we received instructions.
- --------------------------------------------------------------------------------
PROSPECTUS -- MAY 1, 2000 29
<PAGE>
ABOUT THE SERVICE PROVIDERS
ISSUER AND PRINCIPAL UNDERWRITER
IDS Life issues and is the principal underwriter for the contracts. IDS Life is
a stock life insurance company organized in 1957 under the laws of the State of
Minnesota and is located at 200 AXP Financial Center, Minneapolis, MN 55474. IDS
Life conducts a conventional life insurance business.
IDS Life is a wholly-owned subsidiary of AEFC, which itself is a wholly-owned
subsidiary of American Express Company, a financial services company
headquartered in New York City. The AEFC family of companies offers not only
insurance and annuities, but also
mutual funds, investment certificates, and a broad range of financial management
services. American Express Financial Advisors Inc.
(AEFA) serves individuals and businesses through its nationwide network of more
than 600 supervisory offices, more than 3,800 branch offices and 9,480 financial
advisors.
IDS Life pays commissions for sales of the contracts of up to 7% of the total
purchase payments to AEFA. This revenue is used to cover distribution costs that
include compensation to advisors and field leadership for the selling advisors.
These commissions consist of a combination of time of sale and on-going
service/trail commissions (which, when totaled, could exceed 7% of purchase
payments). From time to time, IDS Life will pay or permit other promotional
incentives, in cash or credit or other compensation
LEGAL PROCEEDINGS
A number of lawsuits have been filed against life and health insurers in
jurisdictions in which IDS Life and AEFC do business involving insurers' sales
practices, alleged agent misconduct, failure to properly supervise agents and
other matters. IDS Life and AEFC, like other life and health insurers, from time
to time are involved in such litigation. On December 13, 1996, an action
entitled Lesa Benacquisto and Daniel Benacquisto vs. IDS Life Insurance Company
and American Express Financial Corporation was commenced in Minnesota state
court. The action was brought by individuals who replaced an existing IDS Life
insurance policy with a new IDS Life policy. The plaintiffs purported to
represent a class consisting of all persons who replaced existing IDS Life
policies with new policies from and after January 1, 1985. The complaint put at
issue various alleged sales practices and misrepresentations, alleged breaches
of fiduciary duties and alleged violations of consumer fraud statutes. IDS Life
and AEFC filed an answer to the complaint on February 18, 1997, denying the
allegations. A second action, entitled Arnold Mork, Isabella Mork, Ronald
Melchart and Susan Melchart vs. IDS Life Insurance Company and American Express
Financial Corporation was commenced in the same court on March 21, 1997. In
addition to claims that were included in the Benacquisto lawsuit, the second
action included an allegation of improper replacement of an existing IDS Life
annuity contract. A subsequent class action, Richard Thoresen and Elizabeth
Thoresen vs. AEFC, American Partners Life Insurance Company, American Enterprise
Life Insurance Company, American Centurion Life Assurance Company, IDS Life
Insurance Company and IDS Life Insurance Company of New York, was filed in the
same court on October 13, 1998 alleging that the sale of annuities in
tax-deferred contributory retirement investment plans (e.g. IRAs) was done
through deceptive marketing practices, which IDS Life denies. Plaintiffs in each
of the above actions sought damages in an unspecified amount and also sought to
establish a claims resolution facility for the determination of individual
issues.
IDS Life is included as a party to a preliminary settlement of all three class
action lawsuits. We believe this approach will put these cases behind us and
provide a fair outcome for our clients. Our decisions to settle does not include
any admission of wrongdoing. We do not anticipate that this proposed settlement
or any other lawsuits in which IDS Life is a defendant, will have a material
adverse effect on our financial condition.
- --------------------------------------------------------------------------------
30 SYMPHONY ANNUITY
<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 miscalculations,
which could have a material impact on the operations of IDS Life and the
variable account. All of the major systems used by IDS Life and the variable
account are maintained by AEFC and are utilized by multiple subsidiaries and
affiliates of AEFC. IDS Life's and the variable account's businesses are heavily
dependent upon AEFC's computer systems and have significant interaction with
systems of third parties.
A comprehensive review of AEFC's computer systems and business processes,
including those specific to IDS Life and the variable account, was conducted to
identify the major systems that could be affected by the Year 2000 issue. Steps
were taken to resolve potential problems including modification to existing
software and the purchase of new software. As of Dec. 31, 1999, AEFC had
completed its program of corrective measures on its internal systems and
applications, including Year 2000 compliance testing. As of Dec. 31, 1999, AEFC
had also completed an evaluation of the Year 2000 readiness of other third
parties whose system failures could have an impact on IDS Life's and the
variable account's operations.
AEFC's Year 2000 project also included establishing Year 2000 contingency plans
for all key business units. Business continuation plans, which address business
continuation in the event of a system disruption, are in place for all key
business units. As of Dec. 31, 1999, these plans had been amended to include
specific Year 2000 considerations.
In assessing its Year 2000 initiatives and the results of actual production
since Jan. 1, 2000, management believes no material adverse consequences were
experienced, and there was no material effect on IDS Life's and the variable
account's business, results of operations, or financial condition as a result of
the Year 2000 issue.
- --------------------------------------------------------------------------------
PROSPECTUS -- MAY 1, 2000 31
<PAGE>
TABLE OF CONTENTS OF THE STATEMENT OF
ADDITIONAL INFORMATION
Performance Information.......... ........... 3
Calculating Annuity Payouts.................. 5
Rating Agencies.............................. 5
Principal Underwriter........................ 6
Independent Auditors......................... 6
Financial Statements
- --------------------------------------------------------------------------------
32 SYMPHONY ANNUITY
<PAGE>
Please check the appropriate box to receive a copy of the Statement of
Additional Information for:
/ / Symphony Annuity
/ / American Express Variable Portfolio Funds
/ / Greenwich Street Series Fund
MAIL YOUR REQUEST TO:
IDS LIFE INSURANCE COMPANY
200 AXP FINANCIAL CENTER
MINNEAPOLIS, MN 55474
WE WILL MAIL YOUR REQUEST TO:
Your name _____________________________________________________________________
Address _______________________________________________________________________
City _________________________ State ___________ Zip ________________________
<PAGE>
Symphony
- -------------------------------
IDS Life Insurance Company
200 AXP Financial Center
Minneapolis, MN 55474
IN0122 H1 S-6402 P (5/00)
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
for
SYMPHONY ANNUITY
IDS LIFE ACCOUNT SBS
May 1, 2000
IDS Life Account SBS is a separate account established and maintained by IDS
Life Insurance Company (IDS Life).
This Statement of Additional Information (SAI) is not a prospectus. It should be
read together with the prospectus dated the same date as this SAI, which may be
obtained from your financial consultant, or by writing or calling us at the
address and telephone number below. The prospectus is incorporated in this SAI
by reference.
IDS Life Insurance Company
200 AXP Financial Center
Minneapolis, MN 55474
800-422-3542
<PAGE>
SYMPHONY ANNUITY
IDS LIFE ACCOUNT SBS
TABLE OF CONTENTS
Performance Information.....................................................p. 3
Calculating Annuity Payouts.................................................p. 5
Rating Agencies.............................................................p. 5
Principal Underwriter.......................................................p. 6
Independent Auditors........................................................p. 6
Financial Statements
<PAGE>
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The subaccounts may quote various performance figures to illustrate past
performance. We base total return and current yield quotations (if applicable)
on standardized methods of computing performance as required by the Securities
and Exchange Commission (SEC). An explanation of the methods used to compute
performance follows below.
Average Annual Total Return
We will express quotations of average annual total return for the subaccounts in
terms of the average annual compounded rate of return of a hypothetical
investment in the contract over a period of one, five and ten years (or, if
less, up to the life of the subaccounts), calculated according to the following
formula:
P(1+T)n = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = Ending Redeemable Value of a hypothetical $1,000 payment
made at the beginning of the period, at the end of the
period (or fractional period thereof)
Cumulative Total Return
Aggregate total return represents the cumulative change in value of an
investment for a given period (reflecting change in a subaccount's accumulation
unit value). We compute cumulative total return using 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 period, at the
end of the period (or fractional period thereof)
Total return figures reflect the deduction of the surrender charge which assumes
you surrender the entire contract value at the end of the one, five and ten year
periods (or, if less, up to the life of the subaccount). We also may show
performance figures without the deduction of a surrender charge. In addition,
total return figures reflect the deduction of all other applicable charges
including the contract administrative charge, the variable account
administrative charge and the mortality and expense risk fee.
<PAGE>
Annualized Calculation of Yield for Subaccounts Investing in Money Market Fund
Annualized Simple Yield:
For the subaccounts investing in the money market fund, we base quotations of
simple yield on:
(a) the change in the value of a hypothetical subaccount (exclusive of
capital changes and income other than investment income) at the
beginning of a particular seven-day period; (
(b) less a pro rata share of the subaccount expenses accrued over the
period;
(c) dividing this difference by the value of the subaccount at the
beginning of the period to obtain the base period return; and
(d) multiplying the base period return by 365/7.
The subaccount's value includes:
o any declared dividends,
o the value of any shares purchased with dividends paid during the period,
and
o any dividends declared for such shares.
It does not include:
o the effect of any applicable surrender charge, or
o any realized or unrealized gains or losses.
Annualized Compound Yield:
We calculate compound yield using the base period return described above, which
we then compound according to the following formula:
Compound Yield = [(Base Period Return + 1)365/7] -1
Annualized Yield for Subaccounts Investing in Income Funds
For the subaccounts investing in income funds, we base quotations of yield on
all investment income earned during a particular 30-day period, less expenses
accrued during the period (net investment income) and compute it 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
<PAGE>
The subaccount earns yield from the increase in the net asset value of shares of
the fund in which it invests and from dividends declared and paid by the fund,
which are automatically invested in shares of the fund.
Independent rating or statistical services or publishers or publications such as
those listed below may quote subaccount performance, compare it to rankings,
yields or returns, or use it in variable annuity accumulation or settlement
illustrations they publish or prepare.
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 Business 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 & World Report, The Wall Street Journal and Wiesenberger
Investment Companies Service.
CALCULATING ANNUITY PAYOUTS
We guarantee the fixed annuity payout amounts. Once calculated, the payout will
remain the same and never change. To calculate annuity payouts we:
o take the total value of the fixed account and the subaccounts at the
annuity start date, retirement date, or the date selected to begin
receiving annuity payouts; then
o using an annuity table we apply the value according to the annuity payout
plan selected.
The table will be equal to or greater than the table in the contract.
The annuity payout table we use will be the one in effect at the time chosen to
begin annuity payouts.
RATING AGENCIES
The following chart reflects the ratings given to us 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 subaccounts
of the contract. This information relates only to the fixed account and reflects
our ability to make annuity payouts and to pay death benefits and other
distributions from the contract.
Rating Agency Rating
A.M. Best A+
(Superior)
_______________________
Duff & Phelps AAA
_______________________
Moody's Aa2 (Excellent)
A.M. Best's superior rating reflects our strong distribution network, favorable
overall balance sheet, consistently improving profitability, adequate level of
capitalization and asset/liability management expertise.
Duff & Phelps rating reflects our consistently excellent profitability record,
leadership position in chosen markets, stable operating leverage and effective
use of asset/liability management techniques.
<PAGE>
Moody's excellent rating reflects our leadership position in financial planning,
strong asset, liability management and good capitalization. IDS Life has a
strong market focus and greatly emphasizes quality service. This information
applies only to fixed products invested in IDS Life's General Account and
reflects IDS Life's ability to fulfill its obligations under its contracts. This
information does not relate to the management and performance of the separate
account assets associated with IDS Life's variable products.
PRINCIPAL UNDERWRITER
The principal underwriter for the contract is IDS Life which offers the contract
on a continuous basis.
Surrender charges we received for the last three years aggregated total
19,803,247, 17,936,810, and 14,502,145, respectively.
Commissions we paid for the last three years aggregated total 21,517,281,
17,634,855, and 17,885,488, respectively.
INDEPENDENT AUDITORS
The financial statements appearing in this SAI have been audited by Ernst &
Young LLP (1400 Pillsbury Center, 200 South Sixth Street, Minneapolis, MN 55402)
independent auditors, as stated in their report appearing herein.
FINANCIAL STATEMENTS
<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 ASI, ACR, AMG, AAP, ADS, AEG, AEM, AEX, AGI, AIH, AIE, AMO and ATR)
as of December 31, 1999, 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 auditing standards generally accepted
in the United States. 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, 1999 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 (as described above) at
December 31, 1999 and the individual and combined results of their operations
and the changes in their net assets for the periods described above, in
conformity with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Ernst & Young LLP
Minneapolis, Minnesota
March 17, 2000
<PAGE>
<TABLE>
<CAPTION>
IDS Life Account SBS
Statements of Net Assets
December 31, 1999
Segregated Asset Subaccounts
Assets ASI ACR AMG AAP ADS AEG AEM
Investments in shares of mutual funds and
portfolios:
<S> <C> <C> <C> <C> <C> <C> <C>
at cost $ 648,908 $ 543,096 $ 734,427 $ 33,647,691 $ 26,456,416 $ 11,064,046 $ 19,992,692
--------- --------- --------- ------------ ------------ ------------ ------------
at market value $ 597,577 $ 653,666 $ 846,514 $ 61,498,565 $ 27,373,667 $ 24,939,536 $ 20,065,804
Dividends receivable 3,687 -- -- -- -- -- --
Accounts receivable from IDS Life for
contract purchase payments -- 14 -- 90,349 -- 6,515 --
Receivable from mutual funds and portfolios
for share redemptions -- -- -- 81,725 97,829 130,116 42,611
----- ------ ---- ------ ------ ------- ------
Total assets 601,264 653,680 846,514 61,670,639 27,471,496 25,076,167 20,108,415
======= ======= ======= ========== ========== ========== ==========
Liabilities
Payable to IDS Life for:
Mortality and expense risk fee 638 698 900 68,104 30,237 27,984 22,079
Administrative charge 127 139 180 113,621 6,048 5,597 4,416
Contract terminations -- -- 30 -- 61,714 96,535 16,116
Payable to mutual funds and portfolios for
investments purchased -- -- -- 90,349 -- 6,515 --
---- --- ----- ------ ----- ----- ----
Total liabilities 765 837 1,110 172,074 97,999 136,631 42,611
--- --- ----- ------- ------ ------- ------
Net assets applicable to contracts in
accumulation $ 600,499 $ 652,843 $ 845,404 $ 61,498,565 $ 27,373,497 $ 24,939,536 $ 20,065,804
========= ========= ========= ============ ============ ============ ============
Accumulation units outstanding 442,742 270,103 406,554 22,409,456 18,200,829 4,794,272 10,392,848
======= ======= ======= ========== ========== ========= ==========
Net asset value per accumulation unit $ 1.36 $ 2.42 $ 2.08 $ 2.74 $ 1.50 $ 5.10 $ 1.93
====== ====== ====== ====== ====== ====== ======
Combined
Variable
Assets AEX AGI AIH AIE AMO ATR Account
Investments in shares of mutual funds
and portfolios:
at cost $ 7,425,292 $ 18,505,337 $ 7,689,441 $ 11,903,935 $ 4,235,868 $ 14,823,341 $ 157,670,490
----------- ------------ ----------- ------------ ----------- ------------ -------------
at market value $16,848,378 $ 22,462,997 $ 7,186,927 $ 23,019,708 $ 4,235,869 $ 23,364,138 $ 233,093,346
Dividends receivable -- -- -- -- 9,903 -- 13,590
Accounts receivable from IDS Life for
contract purchase payments 30,438 -- -- -- -- -- 127,316
Receivable from mutual funds and portfolios
for share redemptions 22,122 43,125 10,781 189,533 4,589 79,401 701,832
------ ------ ------ ------- ----- ------ -------
Total assets 16,900,938 22,506,122 7,197,708 23,209,241 4,250,361 23,443,539 233,936,084
========== ========== ========= ========== ========= ========== ===========
Liabilities
Payable to IDS Life for:
Mortality and expense risk fee 18,435 25,037 7,894 24,929 3,719 25,807 256,461
Administrative charge 3,687 5,007 1,579 4,986 744 5,162 51,293
Contract terminations 13,081 1,308 159,618 126 48,432 396,960
Payable to mutual funds and portfolios for
investments purchased 30,438 -- -- -- 9,903 -- 137,205
------ ----- ---- ---- ----- ---- -------
Total liabilities 52,560 43,125 10,781 189,533 14,492 79,401 841,919
------ ------ ------ ------- ------ ------ -------
Net assets applicable to contracts in
accumulation period $ 16,848,378 $ 22,462,997 $ 7,186,927 $ 23,019,708 $ 4,235,869 $ 23,364,138 $ 233,094,165
============ ============ =========== ============ =========== ============ =============
Accumulation units outstanding 4,544,771 9,185,596 5,379,642 10,630,809 3,489,868 9,765,712
========= ========= ========= ========== ========= =========
Net asset value per accumulation unit $ 3.71 $ 2.45 $ 1.34 $ 2.15 $ 1.21 $ 2.37
====== ====== ====== ====== ====== ======
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Account SBS
Statements of Operations
Year ended December 31, 1999
Segregated Asset Subaccounts
Investment income ASI ACR AMG AAP ADS AEG AEM
Dividend income from mutual funds and
<S> <C> <C> <C> <C> <C> <C> <C>
portfolio $ 47,948 $ 60,335 $ 58,592 $ 1,739,450 $ 2,146,666 $ 3,441,471 $ 6,937,120
-------- -------- -------- ----------- ----------- ----------- -----------
Expenses:
Mortality and expense risk fee 8,725 7,837 12,095 927,141 448,922 248,297 355,096
Administrative charge 1,745 1,567 2,419 185,428 89,785 49,659 71,019
----- ----- ----- ------- ------ ------ ------
Total expenses 10,470 9,404 14,514 1,112,569 538,707 297,956 426,115
------ ----- ------ --------- ------- ------- -------
Investment income (loss) - net 37,478 50,931 44,078 626,881 1,607,959 3,143,515 6,511,005
====== ====== ====== ======= ========= ========= =========
Realized and unrealized gain (loss) on investments - net
Realized gain (loss) on sales of investments
in mutual funds and portfolios:
Proceeds from sales 260,830 505,532 565,982 34,497,972 18,166,771 11,533,251 15,080,283
Cost of investments sold 276,224 412,097 505,612 19,600,608 17,269,685 7,331,800 12,803,563
------- ------- ------- ---------- ---------- --------- ----------
Net realized gain (loss) on investments (15,394) 93,435 60,370 14,897,364 897,086 4,201,451 2,276,720
Net change in unrealized appreciation or
depreciation of investments (21,767) (20,533) 10,305 (7,495,135) (2,444,805) 7,296,725 (10,293,727)
------- ------- ------ ---------- ---------- --------- -----------
Net gain (loss) on investments (37,161) 72,902 70,675 7,402,229 (1,547,719) 11,498,176 (8,017,007)
------- ------ ------ --------- ---------- ---------- ----------
Net increase (decrease) in net assets
resulting from operations $ 317 $ 123,833 $ 114,753 $ 8,029,110 $ 60,240 $ 14,641,691 $ (1,506,002)
===== ========= ========= =========== ======== ============ ============
Combined
Variable
Investment income AEX AGI AIH AIE AMO ATR Account
Dividend income from mutual funds and
portfolios $ 166,760 $ 5,652,237 $ 714,869 $ 2,124,361 $ 150,696 $ 1,645,977 $ 24,886,482
--------- ----------- --------- ----------- --------- ----------- ------------
Expenses:
Mortality and expense risk fee 227,499 351,687 115,100 257,449 48,240 326,971 3,335,059
Administrative charge 45,500 70,338 23,020 51,490 9,649 65,394 667,013
------ ------ ------ ------ ----- ------ -------
Total expenses 272,999 422,025 138,120 308,939 57,889 392,365 4,002,072
------- ------- ------- ------- ------ ------- ---------
Investment income (loss) - net (106,239) 5,230,212 576,749 1,815,422 92,807 1,253,612 20,884,410
======== ========= ======= ========= ====== ========= ==========
Realized and unrealized gain (loss) on investments - net
Realized gain (loss) on sales of investments
in mutual funds and portfolios:
Proceeds from sales 7,397,966 13,494,902 3,868,785 10,482,897 5,455,373 11,185,064 132,495,608
Cost of investments sold 3,512,625 10,594,758 3,941,052 7,232,396 5,455,369 7,497,421 96,433,210
--------- ---------- --------- --------- --------- --------- ----------
Net realized gain (loss) on investments 3,885,341 2,900,144 (72,267) 3,250,501 4 3,687,643 36,062,398
Net change in unrealized appreciation or
depreciation of investments (696,101) (5,768,949) (991,652) 5,061,104 (5) (168,276) (15,532,816)
-------- ---------- -------- --------- -- -------- -----------
Net gain (loss) on investments 3,189,240 (2,868,805) (1,063,919) 8,311,605 (1) 3,519,367 20,529,582
--------- ---------- ---------- --------- -- --------- ----------
Net increase (decrease) in net assets
resulting from operations $ 3,083,001 $ 2,361,407 $ (487,170)$ 10,127,027 $ 92,806 $ 4,772,979 $ 41,413,992
=========== =========== ========== ============ ======== =========== ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IDS Life Account SBS
Statements of Changes in Net Assets
Year ended December 31, 1999
Segregated Asset Subaccounts
Operations ASI ACR AMG AAP ADS AEG AEM
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income (loss) - net $ 37,478 $ 50,931 $ 44,078 $ 626,881 $ 1,607,959 $ 3,143,515 $ 6,511,005
Net realized gain (loss) on investments (15,394) 93,435 60,370 14,897,364 897,086 4,201,451 2,276,720
Net change in unrealized appreciation or
depreciation of investments (21,767) (20,533) 10,305 (7,495,135) (2,444,805) 7,296,725 (10,293,727)
------- ------- ------ ---------- ---------- --------- -----------
Net increase (decrease) in net assets
resulting from operations 317 123,833 114,753 8,029,110 60,240 14,641,691 (1,506,002)
=== ======= ======= ========= ====== ========== ==========
Contract transactions
Contract purchase payments -- -- -- 107,258 10,170 23,599 8,000
Net transfers* (123,574) 46,305 64,890 355,934 (648,820) (945,418) (324,135)
Contract terminations:
Surrender benefits and contract charges (128,116) (247,078) (421,463) (31,268,157) (14,474,879) (8,595,023) (13,340,477)
Death benefits -- -- (105,631) (1,149,149) (1,176,358) (93,209) (582,694)
----- ---- -------- ---------- ---------- ------- --------
Increase (decrease) from contract
transacctions (251,690) (200,773) (462,204) (31,954,114) (16,289,887) (9,610,051) (14,239,306)
-------- -------- -------- ----------- ----------- ---------- -----------
Net assets at beginning of year 851,872 729,783 1,192,855 85,423,569 43,603,144 19,907,896 35,811,112
------- ------- --------- ---------- ---------- ---------- ----------
Net assets at end of year $ 600,499 $ 652,843 $ 845,404 $ 61,498,565 $ 27,373,497$ 24,939,536 $ 20,065,804
========= ========= ========= ============ ========================= ============
Accumulation unit activity
Units outstanding at beginning of year 629,408 368,106 648,969 34,729,455 29,052,125 7,864,513 17,403,958
Contract purchase payments -- -- -- 41,169 6,821 8,015 4,187
Net transfers* (91,043) 21,186 35,622 125,954 (431,298) (293,225) (162,510)
Contract terminations:
Surrender benefits and contract charges (95,623) (119,189) (223,372) (12,047,343) (9,644,212) (2,749,122) (6,565,589)
Death benefits -- -- (54,665) (439,779) (782,607) (35,909) (287,198)
----- ----- ------- -------- -------- ------- --------
Units outstanding at end of year 442,742 270,103 406,554 22,409,456 18,200,829 4,794,272 10,392,848
======= ======= ======= ========== ========== ========= ==========
Combined
Variable
Operations AEX AGI AIH AIE AMO ATR Account
Investment income (loss) - net $ (106,239) $ 5,230,212 $ 576,749 $ 1,815,422 $ 92,807 $ 1,253,612 $ 20,884,410
Net realized gain (loss) on investments 3,885,341 2,900,144 (72,267) 3,250,501 4 3,687,643 36,062,398
Net change in unrealized appreciation or
depreciation of investments (696,101) (5,768,949) (991,652) 5,061,104 (5) (168,276) (15,532,816)
-------- ---------- -------- --------- -- -------- -----------
Net increase (decrease) in net assets
resulting from operations 3,083,001 2,361,407 (487,170) 10,127,027 92,806 4,772,979 41,413,992
========= ========= ======== ========== ====== ========= ==========
Contract transactions
Contract purchase payments 55,596 18,228 1,503 10,289 24,513 78,007 337,163
Net transfers* 584,988 (526,399) (46,188) (1,128,724) 4,266,869 (1,362,547) 213,181
Contract terminations:
Surrender benefits and contract
charges (6,528,524) (11,770,145) (3,124,326) (8,123,169) (4,165,705) (8,623,308) (110,810,370)
Death benefits (127,683) (191,921) (376,201) (157,624) (30,891) (433,974) (4,425,335)
-------- -------- -------- -------- ------- -------- ----------
Increase (decrease) from contract
transactions (6,015,623) (12,470,237) (3,545,212) (9,399,228) 94,786 (10,341,822) (114,685,361)
---------- ----------- ---------- ---------- ------ ----------- ------------
Net assets at beginning of year 19,781,000 32,571,827 11,219,309 22,291,909 4,048,277 28,932,981 306,365,534
---------- ---------- ---------- ---------- --------- ---------- -----------
Net assets at end of year $ 16,848,378 $ 22,462,997 $ 7,186,927 $ 23,019,708 $ 4,235,869 $ 23,364,138 $ 233,094,165
============ ============ =========== ============ =========== ============ =============
Accumulation unit activity
Units outstanding at beginning of year 6,349,349 14,519,911 7,967,854 16,879,877 3,417,817 14,575,392
Contract purchase payments 16,639 7,598 1,073 7,275 20,524 34,548
Net transfers* 176,500 (226,779) (33,658) (739,671) 3,557,196 (641,576)
Contract terminations:
Surrender benefits and contract
charges (1,959,280) (5,032,976) (2,279,457) (5,406,184) (3,479,811) (4,002,470)
Death benefits (38,437) (82,158) (276,170) (110,488) (25,858) (200,182)
------- ------- -------- -------- ------- --------
Units outstanding at end of year 4,544,771 9,185,596 5,379,642 10,630,809 3,489,868 9,765,712
========= ========= ========= ========== ========= =========
*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 December 31, 1998
Segregated Asset Subaccounts
Operations ASI ACR AMG AAP
<S> <C> <C> <C> <C>
Investment income (loss) - net $ 53,370 $ 43,461 $ 117,121 $ 3,628,293
Net realized gain (loss) on investments 1,803 61,912 128,000 12,379,943
Net change in unrealized appreciation or
depreciation of investments (52,899) 31,182 (59,404) (1,205,509)
------- ------ ------- ----------
Net increase (decrease) in net assets
resulting from operations 2,274 136,555 185,717 14,802,727
===== ======= ======= ==========
Contract transactions
Contract purchase payments -- -- -- 208,824
Net transfers* 118,679 22,696 7,347 (2,428,570)
Contract terminations:
Surrender benefits and contract charges (179,507) (181,222) (451,813) (26,954,573)
Death benefits (266,481) -- (322,266) (957,824)
-------- ------ -------- --------
Increase (decrease) from contract transactions (327,309) (158,526) (766,732) (30,132,143)
-------- -------- -------- -----------
Net assets at beginning of year 1,176,907 751,754 1,773,870 100,752,985
--------- ------- --------- -----------
Net assets at end of year $ 851,872 $ 729,783 $ 1,192,855 $ 85,423,569
========= ========= =========== ============
Accumulation unit activity
Units outstanding at beginning of year 869,469 463,389 1,100,487 48,069,805
Contracts purchase payments -- -- -- 92,068
Net transfers* 88,646 12,359 1,065 (1,095,747)
Contract terminations:
Surrender benefits and contract charges (133,884) (107,642) (262,921) (11,912,217)
Death benefits (194,823) -- (189,662) (424,454)
-------- ------ -------- --------
Units outstanding at the end of the year 629,408 368,106 648,969 34,729,455
======= ======= ======= ==========
Operations ADS AEG AEM
Investment income (loss) - net $ 2,242,534 $ 2,851,673 $ 2,961,938
Net realized gain (loss) on investments 1,130,842 1,466,758 4,120,288
Net change in unrealized appreciation or
depreciation of investments (1,053,730) 1,257,497 (1,366,690)
---------- --------- ----------
Net increase (decrease) in net assets
resulting from operations 2,319,646 5,575,928 5,715,536
========= ========= =========
Contract transactions
Contract purchase payments 152,910 11,713 77,018
Net transfers* 695,149 (236,311) (672,279)
Contract terminations:
Surrender benefits and contract charges (12,276,001) (4,169,526) (12,554,409)
Death benefits (775,825) (179,779) (1,095,912)
-------- -------- ----------
Increase (decrease) from contract transactions (12,203,767) (4,573,903) (14,245,582)
----------- ---------- -----------
Net assets at beginning of year 53,487,265 18,905,871 44,341,158
---------- ---------- ----------
Net assets at end of year $ 43,603,144 $ 19,907,896 $ 35,811,112
============ ============ ============
Accumulation unit activity
Units outstanding at beginning of year 37,359,162 10,123,212 24,834,887
Contracts purchase payments 104,512 5,675 41,234
Net transfers* 480,146 (140,028) (342,953)
Contract terminations:
Surrender benefits and contract charges (8,360,096) (2,035,364) (6,541,209)
Death benefits (531,599) (88,982) (588,001)
-------- ------- --------
Units outstanding at the end of the year 29,052,125 7,864,513 17,403,958
========== ========= ==========
Operations AEX AGI AIH AIE
Investment income (loss) - net $ (82,227) $ 3,730,586 $ 611,512 $ (263,203)
Net realized gain (loss) on investments 3,122,502 4,006,092 184,541 2,191,552
Net change in unrealized appreciation or
depreciation of investments 1,625,907 (4,213,077) (152,945) 1,901,162
--------- ---------- -------- ---------
Net increase (decrease) in net assets
resulting from operations 4,666,182 3,523,601 643,108 3,829,511
========= ========= ======= =========
Contract transactions
Contract purchase payments 30,852 85,785 9,850 18,993
Net transfers (435,115) (679,124) 934,902 (1,972,861)
Contract terminations:
Surrender benefits and contract charges (5,226,700) (9,324,770) (2,568,828) (6,200,605)
Death benefits (190,930) (1,037,317) (701,318) (319,301)
-------- ---------- -------- --------
Increase (decrease) from contract transactions (5,821,893) (10,955,426) (2,325,394) (8,473,774)
---------- ----------- ---------- ----------
Net assets at beginning of year 20,936,711 40,003,652 12,901,595 26,936,172
---------- ---------- ---------- ----------
Net assets at end of year $ 19,781,000 $ 32,571,827 $ 11,219,309 $ 22,291,909
============ ============ ============ ============
Accumulation unit activity
Units outstanding at beginning of year 8,511,694 19,667,956 9,639,891 23,936,240
Contracts purchase payments 11,374 38,912 7,016 15,343
Net transfers* (183,203) (348,238) 684,570 (1,757,254)
Contract terminations:
Surrender benefits and contract charges (1,918,131) (4,363,155) (1,857,735) (5,047,158)
Death benefits (72,385) (475,564) (505,888) (267,294)
------- -------- -------- --------
Units outstanding at the end of the year 6,349,349 14,519,911 7,967,854 16,879,877
========= ========== ========= ==========
*Includes transfer activity from (to) other subaccounts and transfers from (to)
IDS Life's fixed account.
See accompanying notes to financial statements.
Combined
Variable
Operations AMO ATR Account
Investment income (loss) - net $ 122,641 $ 1,261,699 $ 17,279,398
Net realized gain (loss) on investments 2 2,789,200 31,583,435
Net change in unrealized appreciation or
depreciation of investments 4 (3,066,724) (6,355,226)
- ---------- ----------
Net increase (decrease) in net assets
resulting from operations 122,647 984,175 42,507,607
======= ======= ==========
Contract transactions
Contract purchase payments 150 39,661 635,756
Net transfers 6,877,075 (1,533,973) 697,615
Contract terminations:
Surrender benefits and contract charges (7,163,722) (6,266,093) (93,517,769)
Death benefits (4,229) (283,338) (6,134,520)
------ -------- ----------
Increase (decrease) from contract transactions (290,726) (8,043,743) (98,318,918)
-------- ---------- -----------
Net assets at beginning of year 4,216,356 35,992,549 362,176,845
--------- ---------- -----------
Net assets at end of year $ 4,048,277 $ 28,932,981 $ 306,365,534
=========== ============ =============
Accumulation unit activity
Units outstanding at beginning of year 3,661,496 18,783,339
Contracts purchase payments 130 20,486
Net transfers* 5,889,033 (834,980)
Contract terminations:
Surrender benefits and contract charges (6,129,230) (3,245,745)
Death benefits (3,612) (147,708)
------ --------
Units outstanding at the end of the year 3,417,817 14,575,392
========= ==========
*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
Notes to Financial Statements
1. ORGANIZATION
IDS Life Account SBS (the Variable Account) was established on May 9, 1991 as a
single unit investment trust of IDS Life Insurance Company (IDS Life) under the
Investment Company Act of 1940, as amended (the 1940 Act). Operations of the
Variable Account commenced on Oct. 16, 1991.
The Variable Account is comprised of various subaccounts. Each subaccount
invests exclusively in shares of the following mutual funds or portfolios
(collectively, the Funds), which are registered under the 1940 Act as
diversified, open-end management investment companies and have the following
investment managers.
<S> <C> <C>
Subaccount Invests exclusively in shares of Investment Manager
ASI AXPSM Variable Portfolio-- Bond Fund IDS Life Insurance Company 1
ACR AXPSM Variable Portfolio-- Capital Resource Fund IDS Life Insurance Company 1
AMG AXPSM Variable Portfolio-- Managed Fund IDS Life Insurance Company 1
AAP Appreciation Portfolio Salomon Smith Barney Inc.2
ADS Diversified Strategic Income Portfolio Salomon Smith Barney Inc.3
AEG Emerging Growth Portfolio Salomon Smith Barney Inc.4
AEM Equity Income Portfolio Salomon Smith Barney Inc.2
AEX Equity Index Portfolio Salomon Smith Barney Inc.5
AGI Growth & Income Portfolio Salomon Smith Barney Inc.2
AIH Intermediate High Grade Portfolio Salomon Smith Barney Inc.2
AIE International Equity Portfolio Salomon Smith Barney Inc.2
AMO Money Market Portfolio Salomon Smith Barney Inc.2
ATR Total Return Portfolio Salomon Smith Barney Inc.2
1 American Express Financial Corporation (AEFC) is the investment advisor.
2 SSBCiti Fund Management LLC (SSBCiti) is the investment advisor.
3 SSBCiti is the investment advisor. Smith Barney Global Capital Management, Inc.
is the sub-investment advisor.
4 SSBCiti (Appointed interim advisor pending shareholder approval)
5 Travelers Investment Management Company is the investment advisor.
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
account or by IDS Life.
IDS Life serves as issuer of the contracts.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investments in the Fund
Investments in shares of the Funds are stated at market value which is the net
asset value per share as determined by the respective Funds. 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 Funds are reinvested in
additional shares of 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 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 accounting principles
generally accepted in the United States 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 contractual assurances to the Variable Account that possible
future adverse changes in administrative expenses and mortality experience of
the contract owners and annuitants will not affect the Variable Account. The
mortality and expense risk fee paid to IDS Life is computed daily and is equal,
on an annual basis, to 1.25% of the average daily net assets of the subaccounts.
4. VARIABLE ACCOUNT ADMINISTRATIVE CHARGE
IDS Life deducts a daily charge equal, on an annual basis, to 0.25% of the daily
net asset value of each subaccount. This charge 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 ADMINSTRATIVE CHARGE
IDS Life deducts an administrative charge of $30 per year on each contract
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 is 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 $19,803,247 in 1999 and $17,936,810 in 1998. Such charges are not
treated as a separate expense of the subaccounts. They are ultimately deducted
from contract surrender benefits paid by IDS Life.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
7. INVESTMENT IN SHARES
The subaccounts' investment in shares of the Funds as of Dec. 31, 1999 were as
follows:
Subaccount Investment Shares NAV
<S> <C> <C> <C>
ASI AXPSM Variable Portfolio-- Bond Fund 56,674 $10.54
ACR AXPSM Variable Portfolio-- Capital Resource Fund 17,960 36.40
AMG AXPSM Variable Portfolio-- Managed Fund 42,718 19.82
AAP Appreciation Portfolio 2,629,267 23.39
ADS Diversified Strategic Income Portfolio 2,621,999 10.44
AEG Emerging Growth Portfolio 753,233 33.11
AEM Equity Income Portfolio 1,663,831 12.06
AEX Equity Index Portfolio 469,838 35.86
AGI Growth & Income Portfolio 1,363,874 16.47
AIH Intermediate High Grade Portfolio 741,685 9.69
AIE International Equity Portfolio 1,112,063 20.70
AMO Money Market Portfolio 4,235,869 1.00
ATR Total Return Portfolio 1,160,086 20.14
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
8. INVESTMENT TRANSACTIONS
The subaccounts' purchases of Funds' shares, including reinvestment of dividend
distributions, were as follows:
Year ended Dec. 31,
Subaccount Investment 1999 1998
<S> <C> <C> <C>
ASI AXPSM Variable Portfolio-- Bond Fund $43,695 $ 220,725
ACR AXPSM Variable Portfolio-- Capital Resource Fund 356,513 271,679
AMG AXPSM Variable Portfolio-- Managed Fund 148,966 352,608
AAP Appreciation Portfolio 3,059,807 5,791,915
ADS Diversified Strategic Income Portfolio 3,428,182 4,892,642
AEG Emerging Growth Portfolio 5,041,369 4,312,141
AEM Equity Income Portfolio 7,304,703 4,225,478
AEX Equity Index Portfolio 1,250,846 1,022,318
AGI Growth & Income Portfolio 6,212,268 5,539,362
AIH Intermediate High Grade Portfolio 885,633 2,357,644
AIE International Equity Portfolio 2,870,415 1,373,895
AMO Money Market Portfolio 5,637,000 8,325,001
ATR Total Return Portfolio 2,059,483 2,471,032
--------- ---------
Combined Variable Account $38,298,880 $41,156,440
</TABLE>
<PAGE>
9. YEAR 2000 (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 IDS Life and the
Variable Account. All of the major systems used by the IDS Life and by the
Variable Account are maintained by AEFC and are utilized by multiple
subsidiaries and affiliates of AEFC. IDS Life's and the Variable Account's
businesses are heavily dependent upon AEFC's computer systems and have
significant interactions with systems of third parties.
A comprehensive review of AEFC's computer systems and business processes,
including those specific to IDS Life and the Variable Account, was conducted to
identify the major systems that could be affected by the Year 2000 issue. Steps
were taken to resolve potential problems including modification to existing
software and the purchase of new software. As of Dec. 31, 1999, AEFC had
completed its program of corrective measures on its internal systems and
applications, including Year 2000 compliance testing. As of Dec. 31, 1999, AEFC
had also completed an evaluation of the Year 2000 readiness of other third
parties whose system failures could have an impact on IDS Life's and the
Variable Account's operations.
AEFC's Year 2000 project also included establishing Year 2000 contingency plans
for all key business units. Business continuation plans, which address business
continuation in the event of a system disruption, are in place for all key
business units. As of Dec. 31, 1999, these plans had been amended to include
specific Year 2000 considerations.
In assessing its Year 2000 initiatives and the results of actual production
since Jan. 1, 2000, management believes no material adverse consequences were
experienced, and there was no material effect on IDS Life's and the Variable
Account's business, results of operations, or financial condition as a result of
the Year 2000 issue.
<PAGE>
<PAGE>
IDS LIFE INSURANCE COMPANY
FINANCIAL INFORMATION
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, 1999 and 1998, 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, 1999. 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 auditing standards generally accepted
in the United States. 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, 1999 and 1998, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States.
ERNST & YOUNG LLP
February 3, 2000
Minneapolis, Minnesota
- --------------------------------------------------------------------------------
IDS LIFE INSURANCE COMPANY F-1
<PAGE>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, ($ THOUSANDS) 1999 1998
<S> <C> <C>
ASSETS
- ------------------------------------------------------------------
Investments:
Fixed maturities:
Held to maturity, at amortized cost
(fair value:
1999, $7,105,743; 1998, $8,420,035) $ 7,156,292 $ 7,964,114
Available for sale, at fair value
(amortized cost:
1999, $13,703,137; 1998,
$13,344,949) 13,049,549 13,613,139
- ------------------------------------------------------------------
20,205,841 21,577,253
Mortgage loans on real estate 3,606,377 3,505,458
Policy loans 561,834 525,431
Other investments 506,797 366,604
- ------------------------------------------------------------------
Total investments 24,880,849 25,974,746
Cash and cash equivalents 32,333 22,453
Amounts recoverable from reinsurers 327,168 262,260
Amounts due from brokers 145 327
Other accounts receivable 48,578 47,963
Accrued investment income 343,449 366,574
Deferred policy acquisition costs 2,665,175 2,496,352
Deferred income taxes, net 216,020 --
Other assets 33,089 30,487
Separate account assets 35,894,732 27,349,401
- ------------------------------------------------------------------
Total assets $64,441,538 $56,550,563
- ------------------------------------------------------------------
LIABILITIES AND STOCKHOLDER'S EQUITY
- ------------------------------------------------------------------
Liabilities:
Future policy benefits:
Fixed annuities $20,552,159 $21,172,303
Universal life-type insurance 3,391,203 3,343,671
Traditional life insurance 226,842 225,306
Disability income and long-term care
insurance 811,941 660,320
Policy claims and other policyholders'
funds 24,600 70,309
Deferred income taxes, net -- 16,930
Amounts due to brokers 148,112 195,406
Other liabilities 579,678 410,285
Separate account liabilities 35,894,732 27,349,401
- ------------------------------------------------------------------
Total liabilities 61,629,267 53,443,931
- ------------------------------------------------------------------
Commitments and contingencies
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 288,327 288,327
Accumulated other comprehensive (loss)
income, net of tax:
Net unrealized securities (losses) gains (411,230) 169,584
- ------------------------------------------------------------------
Retained earnings 2,932,174 2,645,721
- ------------------------------------------------------------------
Total stockholder's equity 2,812,271 3,106,632
- ------------------------------------------------------------------
Total liabilities and stockholder's
equity $64,441,538 $56,550,563
==================================================================
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
F-2 IDS LIFE INSURANCE COMPANY
<PAGE>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, ($ THOUSANDS) 1999 1998 1997
<S> <C> <C> <C>
REVENUES:
- -----------------------------------------------------------------------------
Premiums:
Traditional life insurance $ 53,790 $ 53,132 $ 52,473
Disability income and long-term care
insurance 201,637 176,298 154,021
- -----------------------------------------------------------------------------
Total premiums 255,427 229,430 206,494
Policyholder and contractholder charges 411,994 383,965 341,726
Management and other fees 473,108 401,057 340,892
Net investment income 1,919,573 1,986,485 1,988,389
Net realized gain on investments 26,608 6,902 860
- -----------------------------------------------------------------------------
Total revenues 3,086,710 3,007,839 2,878,361
- -----------------------------------------------------------------------------
BENEFITS AND EXPENSES:
- -----------------------------------------------------------------------------
Death and other benefits:
Traditional life insurance 29,819 29,835 28,951
Universal life-type insurance and
investment contracts 118,561 108,349 92,814
Disability income and long-term care
insurance 30,622 27,414 22,333
Increase in liabilities for future
policy benefits:
Traditional life insurance 7,311 6,052 3,946
Disability income and long-term care
insurance 87,620 73,305 63,631
Interest credited on universal life-type
insurance and investment contracts 1,240,575 1,317,124 1,386,448
Amortization of deferred policy
acquisition costs 332,705 382,642 322,731
Other insurance and operating expenses 335,180 287,326 276,596
- -----------------------------------------------------------------------------
Total benefits and expenses 2,182,393 2,232,047 2,197,450
- -----------------------------------------------------------------------------
Income before income taxes 904,317 775,792 680,911
Income taxes 267,864 235,681 206,664
- -----------------------------------------------------------------------------
Net income $ 636,453 $ 540,111 $ 474,247
=============================================================================
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
IDS LIFE INSURANCE COMPANY F-3
<PAGE>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
TOTAL ADDITIONAL COMPREHENSIVE
STOCKHOLDER'S CAPITAL PAID-IN (LOSS) INCOME, RETAINED
THREE YEARS ENDED DECEMBER 31, 1999 ($ THOUSANDS) EQUITY STOCK CAPITAL NET OF TAX EARNINGS
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 $2,444,080 $3,000 $283,615 $ 86,102 $2,071,363
Comprehensive income:
Net income 474,247 -- -- -- 474,247
Unrealized holding gains arising during the year,
net of deferred policy acquisition costs of
($7,714) and taxes of ($75,215) 139,686 -- -- 139,686 --
Reclassification adjustment for losses included in
net income, net of tax of ($308) 571 -- -- 571 --
Other comprehensive income 140,257 -- -- 140,257 --
- ---------------------------------------------------------------------------------------------------------------------
Comprehensive income 614,504 -- -- -- --
Capital contribution from parent 7,232 -- 7,232 -- --
Cash dividends to parent (200,000) -- -- -- (200,000)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 2,865,816 3,000 290,847 226,359 2,345,610
Comprehensive income:
Net income 540,111 -- -- -- 540,111
Unrealized holding losses arising during the year,
net of deferred policy acquisition costs of
$6,333 and taxes of $32,826 (60,964) -- -- (60,964) --
Reclassification adjustment for losses included in
net income, net of tax of ($2,254) 4,189 -- -- 4,189 --
Other comprehensive loss (56,775) -- -- (56,775) --
Comprehensive income 483,336 -- -- -- --
Other changes (2,520) -- (2,520) -- --
- ---------------------------------------------------------------------------------------------------------------------
Cash dividends to parent (240,000) -- -- -- (240,000)
- ---------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 3,106,632 3,000 288,327 169,584 2,645,721
- ---------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 $3,106,632 $3,000 $288,327 $ 169,584 $2,645,721
Comprehensive income:
Net income 636,453 -- -- -- 636,453
Unrealized holding losses arising during the year,
net of deferred policy acquisition costs of
$28,444 and taxes of $304,936 (566,311) -- -- (566,311) --
Reclassification adjustment for gains included in
net income, net of tax of $7,810 (14,503) -- -- (14,503) --
- ---------------------------------------------------------------------------------------------------------------------
Other comprehensive loss (580,814) -- -- (580,814) --
Comprehensive income 55,639 -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------
Cash dividends to parent (350,000) -- -- -- (350,000)
- ---------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1999 $2,812,271 $3,000 $288,327 $(411,230) $2,932,174
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
F-4 IDS LIFE INSURANCE COMPANY
<PAGE>
IDS LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, ($ THOUSANDS) 1999 1998 1997
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
- -------------------------------------------------------------------------------
Net income $ 636,453 $ 540,111 $ 474,247
Adjustments to reconcile net income to
net cash provided by operating
activities: Policy loans, excluding
universal life-type insurance:
Issuance (56,153) (53,883) (54,665)
Repayment 54,105 57,902 46,015
Change in amounts recoverable from
reinsurers (64,908) (56,544) (47,994)
Change in other accounts receivable (615) (10,068) 6,194
Change in accrued investment income 23,125 (9,184) (14,077)
Change in deferred policy acquisition
costs, net (140,379) (10,443) (156,486)
Change in liabilities for future policy
benefits for traditional life,
disability income and long-term care
insurance 153,157 138,826 112,915
Change in policy claims and other
policyholders' funds (45,709) 1,964 (15,289)
Deferred income tax provision (benefit) 79,796 (19,122) 19,982
Change in other liabilities 169,395 64,902 13,305
(Accretion of discount), amortization of
premium, net (17,907) 9,170 (5,649)
Net realized gain on investments (26,608) (6,902) (860)
Policyholder and contractholder charges,
non-cash (175,059) (172,396) (160,885)
Other, net (5,324) 10,786 7,161
- -------------------------------------------------------------------------------
Net cash provided by operating
activities $ 583,369 $ 485,119 $ 223,914
CASH FLOWS FROM INVESTING ACTIVITIES:
- -------------------------------------------------------------------------------
Fixed maturities held to maturity:
Purchases $ (3,030) $ (1,020) $ (1,996)
Maturities, sinking fund payments and
calls 741,949 1,162,731 686,503
Sales 66,547 236,963 236,761
Fixed maturities available for sale:
Purchases (3,433,128) (4,100,238) (3,160,133)
Maturities, sinking fund payments and
calls 1,442,507 2,967,311 1,206,213
Sales 1,691,389 278,955 457,585
Other investments, excluding policy
loans:
Purchases (657,383) (555,647) (524,521)
Sales 406,684 579,038 335,765
Change in amounts due from brokers 182 8,073 2,647
Change in amounts due to brokers (47,294) (186,052) 119,471
- -------------------------------------------------------------------------------
Net cash provided by (used in) investing
activities 208,423 390,114 (641,705)
CASH FLOWS FROM FINANCING ACTIVITIES:
- -------------------------------------------------------------------------------
Activity related to universal life-type
insurance and investment contracts:
Considerations received 2,031,630 1,873,624 2,785,758
Surrenders and other benefits (3,669,759) (3,792,612) (3,736,242)
Interest credited to account balances 1,240,575 1,317,124 1,386,448
Universal life-type insurance policy
loans:
Issuance (102,239) (97,602) (84,835)
Repayment 67,881 67,000 54,513
Capital transaction with parent -- -- 7,232
Dividends paid (350,000) (240,000) (200,000)
- -------------------------------------------------------------------------------
Net cash (used in) provided by financing
activities (781,912) (872,466) 212,874
- -------------------------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents 9,880 2,767 (204,917)
Cash and cash equivalents at beginning
of year 22,453 19,686 224,603
- -------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 32,333 $ 22,453 $ 19,686
- -------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
IDS LIFE INSURANCE COMPANY F-5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
IDS Life Insurance Company (the Company) is a stock life insurance company
organized under the laws of the State of Minnesota. The Company is a
wholly-owned subsidiary of American Express Financial Corporation (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, 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 significant intercompany accounts
and transactions have been eliminated in consolidation.
The accompanying consolidated financial statements have been prepared in
conformity with accounting principles generally accepted in the United States
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 accounting principles
generally accepted in the United States 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 accumulated other comprehensive (loss) income, net of the related
deferred policy acquisition costs effect and deferred taxes.
Realized investment gain or loss is determined on an identified cost basis.
Prepayments are anticipated on certain investments in mortgage-backed securities
in determining the constant effective yield used to recognize interest income.
Prepayment estimates are based on information received from brokers who deal in
mortgage-backed securities.
- --------------------------------------------------------------------------------
F-6 IDS LIFE INSURANCE COMPANY
<PAGE>
Mortgage loans on real estate are carried at amortized cost less reserves for
mortgage loan losses. The estimated fair value of the mortgage loans is
determined by a discounted cash flow analysis using mortgage interest rates
currently offered for mortgages of similar maturities.
Impairment of mortgage loans is measured as the excess of a 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 loan 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 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.
The Company may purchase and write index options to hedge the fee income earned
on the management of equity securities in separate accounts and the underlying
mutual funds. These index options are carried at market value and are included
in other investments or other liabilities, as appropriate. Gains or losses on
index options that qualify as hedges are deferred and recognized in management
and other fees in the same period as the hedged fee income.
The Company also uses index options to manage the risks related to a certain
annuity product that pay interest based upon the relative change in a major
stock market index between the beginning and end of the product's term.
Purchased options used in conjunction with this product are reported in other
investments and written options are included in other liabilities. The
amortization of the cost of purchased options, the proceeds of written options
and the changes in intrinsic value of the contracts are included in net
investment income.
Policy loans are carried at the aggregate of the unpaid loan balances which do
not exceed the cash surrender values of the related policies.
When evidence indicates a decline, which is other than temporary, in the
underlying value or earning power of individual investments, such investments
are written down to the fair value by a charge to income.
STATEMENTS OF CASH FLOWS
The Company considers investments with a maturity at the date of their
acquisition of three months or less to be cash equivalents. These securities are
carried principally at amortized cost, which approximates fair value.
- --------------------------------------------------------------------------------
IDS LIFE INSURANCE COMPANY F-7
<PAGE>
Supplementary information to the consolidated statements of cash flows for the
years ended December 31 is summarized as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- -----------------------------------------------------------------
<S> <C> <C> <C>
Cash paid during the year for:
Income taxes $214,940 $215,003 $174,472
Interest on borrowings 4,521 14,529 8,213
</TABLE>
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, issue and administrative fees and surrender charges. 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 from underlying proprietary mutual funds and mortality and
expense risk fees received from the variable annuity and variable life insurance
separate accounts.
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 using
primarily the interest method. 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.
Amortization of deferred policy acquisition costs requires the use of
assumptions including interest margins, mortality margins, persistency rates,
maintenance expense levels and, for variable products, separate account
performance. For universal life-type insurance and deferred annuities, actual
experience is reflected in the Company's amortization models monthly. As actual
experience differs from the current assumptions, management considers the need
to change key assumptions underlying the amortization models prospectively. The
impact of changing prospective assumptions is reflected in the period that such
changes are made and is generally referred to as an unlocking adjustment. During
1999, unlocking adjustments resulted in a net decrease in amortization of $56.8
million. Net unlocking adjustments in 1998 and 1997 were not significant.
LIABILITIES FOR FUTURE POLICY BENEFITS
Liabilities for universal-life type insurance and fixed and variable deferred
annuities are accumulation values.
- --------------------------------------------------------------------------------
F-8 IDS LIFE INSURANCE COMPANY
<PAGE>
Liabilities for equity indexed deferred annuities are determined as the present
value of guaranteed benefits and the intrinsic value of index-based benefits.
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.
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.
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 7% 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 established
industry tables. Anticipated interest rates for claim reserves for both
disability income and long-term care range from 5% to 8%.
REINSURANCE
The maximum amount of life insurance risk retained by the Company is $750 on any
policy insuring a single life and $1,500 on any policy insuring a joint-life
combination. Beginning in 1999, the Company retains only 20% of the mortality
risk on new variable universal life insurance policies. Risk not retained is
reinsured with other life insurance companies, primarily on a yearly renewable
term basis. Long-term care policies are primarily reinsured on a coinsurance
basis. The Company retains all disability income and waiver of premium risk.
Beginning in 2000, the Company will retain all accidental death benefit risk.
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, 1999 and 1998 are $852 receivable
from and $26,291 payable to, respectively, AEFC 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.
- --------------------------------------------------------------------------------
IDS LIFE INSURANCE COMPANY F-9
<PAGE>
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 beneficiaries from the mortality assumptions implicit in the
annuity contracts. The Company makes periodic fund transfers to, or withdrawals
from, the separate account assets for such actuarial adjustments for variable
annuities that are in the benefit payment period. The Company also guarantees
that the rates at which administrative fees are deducted from contract funds
will not exceed contractual maximums.
For variable life insurance, the Company guarantees that the rates at which
insurance charges and administrative fees are deducted from contract funds will
not exceed contractual maximums. The Company also guarantees that the death
benefit will continue payable at the initial level regardless of investment
performance so long as minimum premium payments are made.
ACCOUNTING CHANGES
American Institute of Certified Public Accountants (AICPA) Statement of Position
(SOP) 98-1, "Accounting for Costs of Computer Software Developed or Obtained for
Internal Use" became effective January 1, 1999. The SOP requires the
capitalization of certain costs incurred after the date of adoption to develop
or obtain software for internal use. Software utilized by the Company is owned
by AEFC and capitalized by AEFC. As a result, the new rule did not have a
material impact on the Company's results of operations or financial condition.
Effective January 1, 1999, the Company adopted AICPA SOP 97-3, "Accounting by
Insurance and Other Enterprises for Insurance-Related Assessments," providing
guidance for the timing of recognition of liabilities related to guaranty fund
assessments. The Company had historically carried a liability for estimated
guaranty fund assessment exposure. Adoption of the SOP did not have a material
impact on the Company's results of operations or financial condition.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities," which is effective January 1, 2001. This Statement
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. It requires the recognition of all derivatives as either
assets or liabilities on the balance sheet and measure those instruments at fair
value. The accounting for changes in the fair value of a derivative depends on
the intended use of the derivative and the resulting designation. The ultimate
financial effect of adoption of the new rule will depend on the derivatives in
place at adoption and cannot be estimated at this time.
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.
- --------------------------------------------------------------------------------
F-10 IDS LIFE INSURANCE COMPANY
<PAGE>
The amortized cost, gross unrealized gains and losses and fair values of
investments in fixed maturities and equity securities at December 31, 1999 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 $ 37,613 $ 236 $ 2,158 $ 35,691
State and municipal
obligations 9,681 150 -- 9,831
Corporate bonds and
obligations 5,713,475 91,571 113,350 5,691,696
Mortgage-backed securities 1,395,523 4,953 31,951 1,368,525
- ------------------------------------------------------------------------------
$7,156,292 $96,910 $147,459 $7,105,743
- ------------------------------------------------------------------------------
</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 $ 46,325 $ 612 $ 2,231 $ 44,706
State and municipal
obligations 13,226 519 191 13,554
Corporate bonds and
obligations 7,960,352 60,120 560,450 7,460,022
Mortgage-backed securities 5,683,234 9,692 161,659 5,531,267
- --------------------------------------------------------------------------------
Total fixed maturities 13,703,137 70,943 724,531 13,049,549
Equity securities 3,000 16 -- 3,016
- --------------------------------------------------------------------------------
$13,706,137 $70,959 $724,531 $13,052,565
- --------------------------------------------------------------------------------
</TABLE>
The amortized cost, gross unrealized gains and losses and fair values of
investments in fixed maturities and equity securities at December 31, 1998 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 $ 39,888 $ 4,460 $ -- $ 44,348
State and municipal
obligations 9,683 490 -- 10,173
Corporate bonds and
obligations 6,305,476 447,752 27,087 6,726,141
Mortgage-backed securities 1,609,067 30,458 152 1,639,373
- -------------------------------------------------------------------------------
$7,964,114 $483,160 $27,239 $8,420,035
- -------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
IDS LIFE INSURANCE COMPANY F-11
<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 $ 52,043 $ 3,324 $ -- $ 55,367
State and municipal
obligations 11,060 1,231 -- 12,291
Corporate bonds and
obligations 7,332,344 271,174 155,181 7,448,337
Mortgage-backed securities 5,949,502 151,511 3,869 6,097,144
- --------------------------------------------------------------------------------
Total fixed maturities 13,344,949 427,240 159,050 13,613,139
Equity securities 3,000 158 -- 3,158
- --------------------------------------------------------------------------------
$13,347,949 $427,398 $159,050 $13,616,297
- --------------------------------------------------------------------------------
</TABLE>
The amortized cost and fair value of investments in fixed maturities at
December 31, 1999 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.
<TABLE>
<CAPTION>
AMORTIZED FAIR
HELD TO MATURITY COST VALUE
- ----------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 238,740 $ 239,747
Due from one to five years 2,996,713 3,012,721
Due from five to ten years 1,922,199 1,893,918
Due in more than ten years 603,117 590,832
Mortgage-backed securities 1,395,523 1,368,525
- ----------------------------------------------------------------
$7,156,292 $7,105,743
- ----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AMORTIZED FAIR
AVAILABLE FOR SALE COST VALUE
- ------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 271,381 $ 274,415
Due from one to five years 595,747 592,533
Due from five to ten years 4,936,041 4,669,573
Due in more than ten years 2,216,734 1,981,761
Mortgage-backed securities 5,683,234 5,531,267
- ------------------------------------------------------------------
$13,703,137 $13,049,549
- ------------------------------------------------------------------
</TABLE>
During the years ended December 31, 1999, 1998 and 1997, fixed maturities
classified as held to maturity were sold with amortized cost of $68,470,
$230,036 and $229,848, 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 1999 with proceeds of
$1,691,389 and gross realized gains and losses of $36,568 and $14,255,
respectively. Fixed maturities available for sale were sold during 1998 with
proceeds of $278,955 and gross realized gains and losses of $15,658 and $22,102,
respectively. 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.
At December 31, 1999, bonds carried at $14,559 were on deposit with various
states as required by law.
- --------------------------------------------------------------------------------
F-12 IDS LIFE INSURANCE COMPANY
<PAGE>
At December 31, 1999, investments in fixed maturities comprised 81 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 $3.7
billion which are rated by AEFC's 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:
<TABLE>
<CAPTION>
RATING 1999 1998
- ------------------------------------------------------------------
<S> <C> <C>
Aaa/AAA $ 7,144,280 $ 7,629,628
Aaa/AA 1,920 2,277
Aa/AA 301,728 308,053
Aa/A 314,168 301,325
A/A 2,598,300 2,525,283
A/BBB 1,014,566 1,148,736
Baa/BBB 6,319,549 6,237,014
Baa/BB 348,849 492,696
Below investment grade 2,816,069 2,664,051
- ------------------------------------------------------------------
$20,859,429 $21,309,063
- ------------------------------------------------------------------
</TABLE>
At December 31, 1999, 90 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, 1999, 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:
<TABLE>
<CAPTION>
DECEMBER 31, 1999 DECEMBER 31, 1998
ON BALANCE COMMITMENTS ON BALANCE COMMITMENTS
REGION SHEET TO PURCHASE SHEET TO PURCHASE
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
East North Central $ 715,998 $ 10,380 $ 750,705 $ 16,393
West North Central 555,635 42,961 491,006 81,648
South Atlantic 867,838 23,317 839,233 21,020
Middle Atlantic 428,051 1,806 476,448 6,169
New England 259,243 4,415 263,761 2,824
Pacific 238,299 3,466 195,851 16,946
West South Central 144,607 4,516 136,841 1,412
East South Central 43,841 -- 46,029 --
Mountain 381,148 9,380 345,379 8,473
- ----------------------------------------------------------------------------------
3,634,660 100,241 3,545,253 154,885
Less allowance for losses 28,283 -- 39,795 --
- ----------------------------------------------------------------------------------
$3,606,377 $100,241 $3,505,458 $154,885
- ----------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
IDS LIFE INSURANCE COMPANY F-13
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, 1999 DECEMBER 31, 1998
ON BALANCE COMMITMENTS ON BALANCE COMMITMENTS
PROPERTY TYPE SHEET TO PURCHASE SHEET TO PURCHASE
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Department/retail stores $1,158,712 $ 33,829 $1,139,349 $ 59,305
Apartments 887,538 11,343 960,808 9,272
Office buildings 931,234 26,062 783,576 50,450
Industrial buildings 309,845 5,525 298,549 13,263
Hotels/motels 103,625 -- 109,185 14,122
Medical buildings 114,045 -- 124,369 --
Nursing/retirement homes 45,935 -- 46,696 --
Mixed use 66,893 -- 65,151 --
Other 16,833 23,482 17,570 8,473
- ----------------------------------------------------------------------------------
3,634,660 100,241 3,545,253 154,885
Less allowance for losses 28,283 -- 39,795 --
- ----------------------------------------------------------------------------------
$3,606,377 $100,241 $3,505,458 $154,885
- ----------------------------------------------------------------------------------
</TABLE>
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. Commitments to purchase mortgages are
made in the ordinary course of business. The fair value of the mortgage
commitments is $nil.
At December 31, 1999 and 1998, the Company's recorded investment in impaired
loans was $21,375 and $24,941, respectively, with allowances of $5,750 and
$6,662, respectively. During 1999 and 1998, the average recorded investment in
impaired loans was $23,815 and $37,873, respectively.
The Company recognized $1,190, $1,809 and $2,981 of interest income related to
impaired loans for the years ended December 31, 1999, 1998 and 1997
respectively.
The following table presents changes in the allowance for losses related to all
loans:
<TABLE>
<CAPTION>
1999 1998 1997
- --------------------------------------------------------------
<S> <C> <C> <C>
Balance, January 1 $39,795 $38,645 $37,495
Provision (reduction) for
investment losses (9,512) 7,582 8,801
Loan payoffs (500) (800) (3,851)
Foreclosures and writeoffs (1,500) (5,632) (3,800)
- --------------------------------------------------------------
Balance, December 31 $28,283 $39,795 $38,645
- --------------------------------------------------------------
</TABLE>
At December 31, 1999, the Company had no commitments to purchase investments
other than mortgage loans.
- --------------------------------------------------------------------------------
F-14 IDS LIFE INSURANCE COMPANY
<PAGE>
Net investment income for the years ended December 31 is summarized as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Interest on fixed maturities $1,598,059 $1,676,984 $1,692,481
Interest on mortgage loans 285,921 301,253 305,742
Other investment income 70,892 43,518 25,089
Interest on cash equivalents 5,871 5,486 5,914
- -----------------------------------------------------------------------
1,960,743 2,027,241 2,029,226
Less investment expenses 41,170 40,756 40,837
- -----------------------------------------------------------------------
$1,919,573 $1,986,485 $1,988,389
- -----------------------------------------------------------------------
</TABLE>
Net realized gain (loss) on investments for the years ended December 31 is
summarized as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- --------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturities $22,387 $12,084 $16,115
Mortgage loans 10,211 (5,933) (6,424)
Other investments (5,990) 751 (8,831)
- --------------------------------------------------------------
$26,608 $ 6,902 $ 860
- --------------------------------------------------------------
</TABLE>
Changes in net unrealized appreciation (depreciation) of investments for the
years ended December 31 are summarized as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturities available for sale $(921,778) $(93,474) $223,441
Equity securities (142) (203) 53
</TABLE>
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 (benefit) for the years ended December 31 consists of the
following:
<TABLE>
<CAPTION>
1999 1998 1997
- -----------------------------------------------------------------
<S> <C> <C> <C>
Federal income taxes:
Current $178,444 $244,946 $176,879
Deferred 79,796 (16,602) 19,982
- -----------------------------------------------------------------
258,240 228,344 196,861
State income taxes-current 9,624 7,337 9,803
- -----------------------------------------------------------------
Income tax expense $267,864 $235,681 $206,664
- -----------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
IDS LIFE INSURANCE COMPANY F-15
<PAGE>
Increases (decreases) to the income tax provision applicable to pretax income
based on the statutory rate are attributable to:
<TABLE>
<CAPTION>
1999 1998 1997
PROVISION RATE PROVISION RATE PROVISION RATE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Federal income taxes
based on the statutory
rate $316,511 35.0% $271,527 35.0% $238,319 35.0%
Tax-excluded interest and
dividend income (9,626) (1.1) (12,289) (1.6) (10,294) (1.5)
State taxes, net of
federal benefit 6,256 0.7 4,769 0.6 6,372 0.9
Affordable housing
credits (31,000) (3.4) (19,688) (2.5) (20,705) (3.0)
Other, net (14,277) (1.6) (8,638) (1.1) (7,028) (1.0)
- -------------------------------------------------------------------------------
Total income taxes $267,864 29.6% $235,681 30.4% $206,664 30.4%
- -------------------------------------------------------------------------------
</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, 1999, 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:
<TABLE>
<CAPTION>
1999 1998
- ------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Policy reserves $733,647 $756,769
Unrealized loss on available for sale
investments 221,431 --
Investments, other 1,873 --
Life insurance guaranty fund assessment
reserve 4,789 15,289
Other -- 4,253
- ------------------------------------------------------------
Total deferred tax assets 961,740 776,311
- ------------------------------------------------------------
Deferred tax liabilities:
Deferred policy acquisition costs 740,837 698,471
Unrealized gain on available for sale
investments -- 91,315
Investments, other -- 3,455
Other 4,883 --
- ------------------------------------------------------------
Total deferred tax liabilities 745,720 793,241
- ------------------------------------------------------------
Net deferred tax assets (liabilities) $216,020 $(16,930)
- ------------------------------------------------------------
</TABLE>
The Company is required to establish a valuation allowance for any portion of
the deferred tax assets that management believes will not be realized. In the
opinion of management, it is more likely than not that the Company will realize
the benefit of the deferred tax assets and, therefore, no such valuation
allowance has been established.
4. STOCKHOLDER'S EQUITY
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
- --------------------------------------------------------------------------------
F-16 IDS LIFE INSURANCE COMPANY
<PAGE>
aggregated $1,693,356 as of December 31, 1999 and $1,598,203 as of December 31,
1998 (see Note 3 with respect to the income tax effect of certain
distributions). In addition, any dividend distributions in 2000 in excess of
approximately $418,845 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:
<TABLE>
<CAPTION>
1999 1998 1997
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Statutory net income $ 478,173 $ 429,903 $ 379,615
Statutory capital and surplus 1,978,406 1,883,405 1,765,290
</TABLE>
5. RELATED PARTY TRANSACTIONS
The Company loans funds to AEFC under a collateral loan agreement. The balance
of the loan was $nil at December 31, 1999 and 1998. 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 $nil, $nil and $103 in 1999, 1998
and 1997, 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 $223, $211 and $201 in 1999, 1998 and 1997, 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 1999, 1998 and 1997 were $1,906, $1,503 and $1,245,
respectively.
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. The Company's share of postretirement benefits in
1999, 1998 and 1997 was $1,147, $1,352 and $1,330, respectively.
Charges by AEFC for use of joint facilities, technology support, marketing
services and other services aggregated $485,177, $411,337 and $414,155 for 1999,
1998 and 1997, respectively. Certain of these costs are included in deferred
policy acquisition costs.
6. COMMITMENTS AND CONTINGENCIES
At December 31, 1999, 1998 and 1997, traditional life insurance and universal
life-type insurance in force aggregated $89,271,957, $81,074,928 and $74,730,720
respectively, of which $8,281,576, $4,912,313 and $4,351,904 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 $76,970,
$66,378 and $60,495 and reinsurance recovered from reinsurers amounted to
$27,816, $20,982, and $19,042 for the years ended December 31, 1999, 1998 and
1997, respectively. Reinsurance contracts do not relieve the Company from its
primary obligation to policyholders.
- --------------------------------------------------------------------------------
IDS LIFE INSURANCE COMPANY F-17
<PAGE>
In January 2000, AEFC reached an agreement in principle to settle three
class-action lawsuits. The Company had been named as a co-defendant in all three
lawsuits. It is expected the settlement will provide $215 million of benefits to
more than 2 million class participants. The agreement in principle to settle
also provides for release by class members of all insurance and annuity market
conduct claims dating back to 1985 and is subject to a number of contingencies
including a definitive agreement and court approval. The settlement costs
allocated to the Company are included in the accompanying 1999 statement of
income and did not have a material impact on the Company's consolidated
financial position or results from operations.
The Company is named as a defendant in various other lawsuits. The outcome of
any litigation cannot be predicted with certainty. In the opinion of management,
however, the ultimate resolution of these lawsuits, taken in aggregate 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 completing the audit 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 available lines of credit with its parent aggregating $200,000
($100,000 committed and $100,000 uncommitted). The interest rate for any
borrowings is established by reference to various indices plus 20 to 45 basis
points, depending on the term. Borrowings outstanding under this agreement were
$50,000 uncommitted at December 31, 1999 and $nil at December 31, 1998.
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.
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.
- --------------------------------------------------------------------------------
F-18 IDS LIFE INSURANCE COMPANY
<PAGE>
The Company's holdings of derivative financial instruments are as follows:
<TABLE>
<CAPTION>
NOTIONAL CARRYING FAIR TOTAL CREDIT
DECEMBER 31, 1999 AMOUNT AMOUNT VALUE EXPOSURE
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Interest rate caps $2,500,000 $ 9,685 $ 12,773 $12,773
Interest rate floors 1,000,000 602 319 319
Options purchased 180,897 49,789 61,745 61,745
Liabilities:
Options written 43,262 (1,677) (2,402) --
Off balance sheet:
Interest rate swaps 1,267,000 -- (17,582) --
------- -------- -------
$58,399 $ 54,853 $74,837
======= ======== =======
</TABLE>
<TABLE>
<CAPTION>
NOTIONAL CARRYING FAIR TOTAL CREDIT
DECEMBER 31, 1998 AMOUNT AMOUNT VALUE EXPOSURE
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Interest rate caps $3,400,000 $ 15,985 $ 4,256 $ 4,256
Interest rate floors 1,000,000 1,082 13,971 13,971
Options purchased 110,912 24,094 29,453 29,453
Liabilities:
Options purchased/written 265,454 (10,526) (11,062) --
Off balance sheet:
Interest rate swaps 1,667,000 -- (73,477) --
-------- -------- -------
$ 30,635 $(36,859) $47,680
======== ======== =======
</TABLE>
The fair values of derivative financial instruments are based on market values,
dealer quotes or pricing models. The interest rate caps, floors and swaps expire
on various dates from 2000 to 2003. The purchased and written options expire on
various dates from 2000 to 2006.
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.
The Company also uses interest rate swaps to manage interest rate risk related
to the level of fee income earned on the management of fixed income securities
in separate accounts and the underlying mutual funds. The amount of fee income
received is based upon the daily market value of the separate account and mutual
fund assets. As a result, changing interest rate conditions could impact the
Company's fee income significantly. The Company entered into interest rate swaps
to hedge anticipated fee income for 1999 related to separate accounts and mutual
funds which invest in fixed income securities. Interest was reported in
management and other fees.
The Company offers an annuity product that pays interest based upon the relative
change in a major stock market index between the beginning and end of the
product's term. As a means of hedging its obligation under the provisions of
this product, the Company purchases and writes options on the major stock market
index.
- --------------------------------------------------------------------------------
IDS LIFE INSURANCE COMPANY F-19
<PAGE>
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 fluctuations in the
equity market. The Company entered into index option collars (combination of
puts and calls) to hedge anticipated fee income for 1999 and 1998 related to
separate accounts and mutual funds which invest in equity securities. Testing
demonstrated the impact of these instruments on the income statement closely
correlates with the amount of fee income the Company realizes. At December 31,
1999 deferred losses on purchased put and written call index options were $nil.
At December 31, 1998 deferred losses on purchased put and written call index
options were $2,933 and deferred gains on written call index options were
$7,435, respectively.
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>
1999 1998
CARRYING FAIR CARRYING FAIR
FINANCIAL ASSETS VALUE VALUE VALUE VALUE
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investments:
Fixed maturities (Note 2):
Held to maturity $ 7,156,292 $ 7,105,743 $ 7,964,114 $ 8,420,035
Available for sale 13,049,549 13,049,549 13,613,139 13,613,139
Mortgage loans on real
estate (Note 2) 3,606,377 3,541,958 3,505,458 3,745,617
Other:
Equity securities (Note 2) 3,016 3,016 3,158 3,158
Derivative financial
Instruments (Note 8) 60,076 74,837 41,161 47,680
Other 2,258 2,258 28,872 28,872
Cash and cash equivalents
(Note 1) 32,333 32,333 22,453 22,453
Separate account assets (Note
1) 35,894,732 35,894,732 27,349,401 27,349,401
</TABLE>
<TABLE>
<CAPTION>
1999 1998
CARRYING FAIR CARRYING FAIR
FINANCIAL LIABILITIES VALUE VALUE VALUE VALUE
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Future policy benefits for
fixed annuities $19,189,170 $18,591,859 $19,855,203 $19,144,838
Derivative financial
instruments (Note 8) 1,677 19,984 10,526 84,539
Separate account liabilities 31,869,184 31,016,081 25,005,732 24,179,115
</TABLE>
At December 31, 1999 and 1998, the carrying amount and fair value of future
policy benefits for fixed annuities exclude life insurance-related contracts
carried at $1,270,094 and $1,226,985, respectively, and policy loans of $92,895
and $90,115, respectively. The fair value of these benefits is based on the
status of the annuities at December 31, 1999 and 1998. The fair value of
deferred
- --------------------------------------------------------------------------------
F-20 IDS LIFE INSURANCE COMPANY
<PAGE>
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 1999 and 1998.
At December 31, 1999 and 1998, 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 $4,025,548 and
$2,343,669, respectively.
10. YEAR 2000 (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
major systems used by the Company are maintained by AEFC and are utilized by
multiple subsidiaries and affiliates of AEFC. The Company's businesses are
heavily dependent upon AEFC's computer systems and have significant interaction
with systems of third parties.
A comprehensive review of AEFC's computer systems and business processes,
including those specific to the Company, was conducted to identify the major
systems that could be affected by the Year 2000 issue. Steps were taken to
resolve potential problems including modification to existing software and the
purchase of new software. As of December 31, 1999, AEFC had completed its
program of corrective measures on its internal systems and applications,
including Year 2000 compliance testing. As of December 31, 1999, AEFC had also
completed an evaluation of the Year 2000 readiness of other third parties whose
system failures could have an impact on the Company's operations.
AEFC's Year 2000 project also included establishing Year 2000 contingency plans
for all key business units. Business continuation plans, which address business
continuation in the event of a system disruption, are in place for all key
business units. At December 31, 1999, these plans had been amended to include
specific Year 2000 considerations.
In assessing its Year 2000 initiatives and the results of actual production
since January 1, 2000, management believes no material adverse consequences were
experienced, and there was no material effect on the Company's business, results
of operations, or financial condition as a result of the Year 2000 issue.
- --------------------------------------------------------------------------------
IDS LIFE INSURANCE COMPANY F-21
<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 for year ended Dec. 31, 1999.
Statements of Operations for year ended Dec. 31, 1999.
Statements of Changes in Net Assets for year ended Dec. 31, 1999 and
1998.
Notes to Financial Statements.
Report of Independent Auditors dated March 17, 2000.
IDS Life Insurance Company:
Consolidated Balance Sheets at Dec. 31, 1999 and Dec. 31, 1998.
Consolidated Statements of Income for years ended Dec. 31, 1999, 1998
and 1997.
Consolidated Statements of Stockholder's Equity for years ended Dec.
31, 1999, 1998 and 1997.
Consolidated Statements of Cash Flows for years ended Dec. 31, 1999,
1998 and 1997.
Notes to Consolidated Financial Statements.
Report of Independent Auditors dated February 3, 2000.
(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.
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.
<PAGE>
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 Registrant's 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 Registrant's 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, dated April 27, 2000 filed electronically
herewith.
10. Consent of Independent Auditors, filed electronically herewith.
11. None.
12. Not applicable.
13. Copy of schedule for computation of each performance quotation provided
in the Registration Statement in response to Item 21, filed
electronically as Exhibit 13 to Registrant's Post-Effective Amendment
No. 4 to Registration Statement 33-40779 is hereby incorporated by
reference.
14(a). Power of Attorney to sign this Registration Statement dated April 20,
2000, is filed electronically as herewith.
<PAGE>
<TABLE>
<CAPTION>
Item 25. Directors and Officers of the Depositor (IDS Life Insurance Company)
<S> <C> <C>
Name Principal Business Address Position and Offices with Depositor
- ------------------------------------- ----------------------------------------- ----------------------------------------
200 AXP Financial Center
Timothy V. Bechtold Minneapolis, MN 55474 Executive Vice President, Risk
Management Products
200 AXP Financial Center
David J. Berry Minneapolis, MN 55474 Vice President
200 AXP Financial Center
Mark W. Carter Minneapolis, MN 55474 Executive Vice President, Marketing
200 AXP Financial Center
Robert M. Elconin Minneapolis, MN 55474 Vice President
200 AXP Financial Center
Lorraine R. Hart Minneapolis, MN 55474 Vice President, Investments
200 AXP Financial Center
Jeffrey S. Horton Minneapolis, MN 55474 Vice President, Treasurer and
Assistant Secretary
200 AXP Financial Center
David R. Hubers Minneapolis, MN 55474 Director
200 AXP Financial Center
James M. Jensen Minneapolis, MN 55474 Vice President, Insurance Product
Development
200 AXP Financial Center
Richard W. Kling Minneapolis, MN 55474 Director, Chief Executive Officer and
President
200 AXP Financial Center
Paul F. Kolkman Minneapolis, MN 55474 Director and Executive Vice President
200 AXP Financial Center
Paula R. Meyer Minneapolis, MN 55474 Director and Executive Vice President,
Assured Assets
James A. Mitchell 200 AXP Financial Center Director and Chairman of the Board
Minneapolis, MN 55474
200 AXP Financial Center
Pamela J. Moret Minneapolis, MN 55474 Director and Executive Vice President,
Variable Assets
200 AXP Financial Center
Barry J. Murphy Minneapolis, MN 55474 Director and Executive Vice President,
Client Service
200 AXP Financial Center
James R. Palmer Minneapolis, MN 55474 Vice President, Taxes
200 AXP Financial Center
Stuart A. Sedlacek Minneapolis, MN 55474 Director and Executive Vice President
200 AXP Financial Center
William A. Stoltzmann Minneapolis, MN 55474 Vice President, General Counsel and
Secretary
200 AXP Financial Center
Philip C. Wentzel Minneapolis, MN 55474 Vice President and Controller
</TABLE>
<PAGE>
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>
<S> <C>
Jurisdiction of
Name of Subsidiary Incorporation
I. Travel Related Services
American Express Travel Related Services Company, Inc. New York
II. International Banking Services
American Express Bank Ltd. Connecticut
III. Companies engaged in Financial Services
Advisory Capital Partners LLC Delaware
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 Advisors Japan Inc. Delaware
American Express Financial Corporation Delaware
American Express Insurance Agency of Arizona Inc. Arizona
American Express Insurance Agency of Idaho Inc. Idaho
American Express Insurance Agency of Nevada Inc. Nevada
American Express 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 Mississippi Inc. Mississippi
American Express Property Casualty Insurance Agency of Pennsylvania Inc. Pennsylvania
American Express Trust Company Minnesota
American Partners Life Insurance Company Arizona
<PAGE>
IDS Cable Corporation Minnesota
IDS Cable II Corporation Minnesota
IDS Capital Holdings Inc. Minnesota
IDS Certificate Company Delaware
IDS Futures Brokerage Group Minnesota
IDS Futures Corporation Minnesota
IDS Insurance Agency of Alabama Inc. Alabama
IDS Insurance Agency of Arkansas Inc. Arkansas
IDS Insurance Agency of Massachusetts Inc. Massachusetts
IDS Insurance Agency of Mississippi Ltd. Mississippi
IDS Insurance Agency of New Mexico Inc. New Mexico
IDS Insurance Agency of North Carolina Inc. North Carolina
IDS Insurance Agency of Ohio Inc. Ohio
IDS Insurance Agency of Texas Inc. Texas
IDS Insurance Agency of Utah Inc. Utah
IDS Insurance Agency of Wyoming Inc. Wyoming
IDS 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
Investors Syndicate Development Corp. Nevada
Public Employee Payment Company Minnesota
</TABLE>
Item 27. Number of Contractowners
On March 31, 2000, there were 398 contract owners of qualified
contracts. There were 2,709 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
<PAGE>
indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
Item 29. Principal Underwriters
(a) IDS Life is the principal underwriter for IDS Life Accounts F,
IZ, JZ, G, H, N, KZ, LZ and MZ, IDS Life Variable Annuity Fund
A, IDS Life Variable Annuity Fund B, IDS Life Account RE, IDS
Life Account MGA and IDS Life Account SBS, IDS Life Variable
Account 10, IDS Life Variable Life Separate Account and IDS
Life Variable Account for Smith Barney.
(b) This table is the same as our response to Item 25 of this
Registration Statement.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
(c)
Name of Net Underwriting
Principal Discounts and Compensation on Brokerage
Underwriter Commissions Redemption Commissions Compensation
IDS Life $21,517,281 $19,803,247 None None
</TABLE>
Item 30. Location of Accounts and Records
IDS Life Insurance Company
200 AXP Financial Center
Minneapolis, MN
Item 31. Management Services
Not applicable.
<PAGE>
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 27th day of April, 2000.
IDS LIFE ACCOUNT SBS
(Registrant)
By IDS Life Insurance Company
(Sponsor)
By /s/ Richard W. Kling*
President
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities indicated on the 27th day of
April, 2000.
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, Treasurer
Jeffrey S. Horton and Assistant Secretary
/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 Vice President
Stuart A. Sedlacek
<PAGE>
Signature Title
/s/ Philip C. Wentzel* Vice President and Controller
Philip C. Wentzel
*Signed pursuant to Power of Attorney, dated April 20, 2000 filed electronically
herewith.
By:/s/ Mary Ellyn Minenko
Mary Ellyn Minenko
<PAGE>
CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 9
This Registration Statement is comprised of the following papers and documents:
The Cover Page.
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. 33-40779/811-06315
EXHIBIT INDEX
Exhibit 9: Opinion of Counsel.
Exhibit 10: Consent of Independent Auditors.
Exhibit 14(a): Power of Attorney.
April 27, 2000
IDS Life Insurance Company
200 AXP Financial Center
Minneapolis, MN 55474
RE: IDS Life Account SBS
File No.: 33-40779/812-7731
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, when offered and sold in accordance
with the prospectus contained in the Registration Statement and in
compliance with applicable law, will be 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,
/s/ Mary Ellyn Minenko
Mary Ellyn Minenko
Vice President, Group Counsel and Assistant Secretary
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Independent Auditors"
in the Statement of Additional Information and to the use of our report dated
February 3, 2000 with respect to the consolidated financial statements of IDS
Life Insurance Company and to the use of our report dated March 17, 2000 with
respect to the financial statements of IDS Life Account SBS, included in
Post-Effective Amendment No. 9 to the Registration Statement (Form N-4, No.
33-40779) and related Prospectus for the registration of the Symphony Annuity
Contracts to be offered by IDS Life Insurance Company.
/s/ Ernst & Young
Ernst & Young
Minneapolis, Minnesota
April 24, 2000
IDS LIFE INSURANCE COMPANY
POWER OF ATTORNEY
City of Minneapolis
State of Minnesota
Each of the undersigned, as officers and/or directors, 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>
<S> <C> <C>
1933 Act 1940 Act
Reg. Number Reg. Number
IDS Life Variable Account 10
IDS Life Flexible Portfolio Annuity (FPA) 33-62407 811-07355
American Express Retirement
Advisor Variable AnnuitySM (RAVA) 333-79311 811-07355
American Express Retirement
Advisor Variable AnnuitySM (RAVA-B3) 333-79311 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 Variable Retirement and Combination
Retirement Annuities (CRA) 2-73114 811-3217
IDS Life Employee Benefit Annuity (EBA) 33-52518 811-3217
IDS Life Group Variable Annuity Contract (GVAC) 33-47302 811-3217
IDS Life Group Variable Annuity Contract
(GVAC Fixed Account) 33-48701 N/A
IDS Life Insurance Company
IDS Life Flexible Payment Market Value Annuity (FP-MVA) 33-50968 N/A
IDS Life Guaranteed Term Annuity (GTA) 33-28976 N/A
Portfolio Guaranteed Term Annuity (PGTA) 333-42793 N/A
IDS Life Variable Life Separate Account
Flexible Premium Variable Life Insurance Policy (VUL) 33-11165 811-4298
Flexible Premium Survivorship Variable Life
Insurance Policy (V2D) 33-62457 811-4298
Flexible Premium Variable Life Insurance Policy (VUL-3) 333-69777 811-4298
Single Premium Variable Life Insurance Policy (SPVL) 2-97637 811-4298
<PAGE>
IDS Life Variable Account for Smith Barney
Single Premium Variable Life Insurance Policy 33-5210 811-4652
(SBS-SPVL)
IDS Life Account SBS
Symphony Annuity (SYMPHONY) 33-40779 811-06315
IDS Life Account RE
Real Estate Variable Annuity (REVA) 33-13375 N/A
</TABLE>
hereby constitutes and appoints William A. Stoltzmann, Mary Ellyn Minenko,
Eileen J. Newhouse, Bruce Kohn and Timothy S. Meehan or any one of them, as his
or her attorney-in-fact and agent, to sign for him or her 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 (with all exhibits and other documents required or desirable in
connection therewith), other documents, and amendments thereto and to file such
filings, applications, periodic reports, registration statements, other
documents, and amendments thereto with the Securities and Exchange Commission,
and any necessary jurisdictions, and grants to any or all of them the full power
and authority to do and perform each and every act required, necessary or
appropriate in connection therewith.
Dated the 20th day of April, 2000.
<PAGE>
/s/ Timothy V. Bechtold
Timothy V. Bechtold
Executive Vice President,
Risk Management Products
/s/ Jeffrey S. Horton
Jeffrey S. Horton
Vice President, Treasurer
and Assistant Secretary
/s/ David R. Hubers
David R. Hubers
Director
/s/ Richard W. Kling
Richard W. Kling
Director, President
and Chief Executive Officer
/s/ Paul F. Kolkman
Paul F. Kolkman
Director and Executive Vice President
/s/ Paula R. Meyer
Paula R. Meyer
Director and Executive Vice President, Assured Assets
/s/ James A. Mitchell
James A. Mitchell
Director and Chairman of the Board
/s/ Pamela J. Moret
Pamela J. Moret
Director and Executive Vice President, Variable Assets
/s/ Barry J. Murphy
Barry J. Murphy
Director and Executive Vice President, Client Service
/s/ Stuart A. Sedlacek
Stuart A. Sedlacek
Director and Executive Vice President
/s/ Philip C. Wentzel
Philip C. Wentzel
Vice President and Controller
