<PAGE>
PAGE 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Post-Effective Amendment No. 2 (File No. 33-54471)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940 X
Amendment No. 3 (File No. 811-7195)
AMERICAN ENTERPRISE VARIABLE ANNUITY ACCOUNT
___________________________________________________________________
(Exact Name of Registrant)
American Enterprise Life Insurance Company
___________________________________________________________________
(Name of Depositor)
80 South 8th Street, P.O. Box 534, Minneapolis, MN 55440-0534
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (612) 671-3678
Mary Ellyn Minenko, IDS Tower 10, Minneapolis, MN 55440-0010
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering
It is proposed that this filing will become effective (check
appropriate box)
immediately upon filing pursuant to paragraph (b) of Rule 485
X on May 1, 1995 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
75 days after filing pursuant to paragraph (a)(ii)
on (date) pursuant to paragraph (a)(ii) 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.
Calculation of Registration Fee Under the Securities Act of 1933
DECLARATION REQUIRED BY RULE 24f-2(a)(1)
The Registrant has registered an indefinite number or amount of
securities under the Securities Act of 1933 pursuant to Section
24-f of the Investment Company Act of 1940. Registrant's Rule 24f-
2 Notice for its most recent fiscal year ended was filed on or
about February 28, 1995.<PAGE>
PAGE 2
CROSS REFERENCE SHEET
<TABLE><CAPTION>
Cross reference sheet showing location in the prospectus and Statement of Additional
Information of the information called for by the items enumerated in Part A and B of
Form N-4.
Negative answers omitted from prospectus and Statement of Additional Information are
so indicated.
PART A PART B
Section in
Section Statement of
Item No. in Prospectus Item No. Additional Information
<S> <C> <C> <C>
1 Cover page 15 Cover page
2 Key terms 16 Table of contents
3(a) Expense summary 17(a) NA
(b) In brief (b) NA
(c) About American Enterprise Life*
4(a) Condensed financial
information 18(a) NA
(b) Performance information (b) NA
(c) Financial statements (c) Independent auditors
(d) NA
5(a) About American (e) NA
Enterprise Life (f) NA
(b) The variable account
(c) The funds 19(a) Making the most of your annuity*
(d) Cover page and the funds (b) NA
(e) Voting rights
(f) NA 20(a) Principal underwriter
(b) Principal underwriter
6(a) Charges (c) NA
(b) Expense summary (d) NA
(c) Other information on (d) NA
charges
(d) Distribution of 21(a) Performance information
contracts (b) Performance information
(e) NA
(f) NA 22 Calculating Annuity Payouts
7(a) Buying your annuity; 23(a) NA
Benefits in case of (b) NA
death; The annuity
payout period
(b) The variable account;
Transferring money between
accounts; Transfer policies
(c) The funds; Other information
on charges
(d) The funds
8(a) The annuity payout period
(b) Setting the retirement date
(c) Annuity payout plans
(d) The annuity payout period
(e) Annuity payout plans
(f) Death after annuity payouts
begin
9(a) Benefits in case of death
(b) Benefits in case of death
10(a) Buying your annuity;
Valuing your investment
(b) Valuing your investment
(c) Valuing your investment
(d) About American Enterprise
Life
<PAGE>
PAGE 3
11(a) Withdrawals from your contract
(b) NA
(c) Receiving payment when you
request a withdrawal
(d) If installment payments
(e) Ten-day free look
12(a) Taxes
(b) Key terms
(c) NA
13 NA
14 Table of contents of the
Statement of Additional Information
*Designates section in the prospectus, which is hereby incorporated by reference
in this Statement of Additional Information.
</TABLE>
<PAGE>
PAGE 4
AEL Personal PortfolioSM
May 1, 1995
Variable Annuity Prospectus
The AEL Personal PortfolioSM is a flexible premium variable annuity
contract offered by American Enterprise Life Insurance Company
(American Enterprise Life) a subsidiary of IDS Life Insurance
Company (IDS Life), which is a subsidiary of American Express
Financial Corporation. Purchase payments may be allocated among
different accounts, providing variable and/or fixed returns and
payouts. The annuity is available for qualified and nonqualified
retirement plans.
American Enterprise Variable Annuity Account
Sold by: American Enterprise Life Insurance Company.
Administrative Office: 80 South Eighth Street, P.O. Box 458,
Minneapolis, MN 55440-0534. Telephone: 612-671-7700.
THIS PROSPECTUS CONTAINS THE INFORMATION ABOUT THE VARIABLE ACCOUNT
THAT YOU SHOULD KNOW BEFORE INVESTING. Refer to "The variable
account" in this prospectus.
THE PROSPECTUS IS ACCOMPANIED OR PRECEDED BY THE FOLLOWING
PROSPECTUSES: THE RETIREMENT ANNUITY MUTUAL FUND PROSPECTUS
(DESCRIBING IDS LIFE AGGRESSIVE GROWTH FUND, IDS LIFE INTERNATIONAL
EQUITY FUND, IDS LIFE CAPITAL RESOURCE FUND, IDS LIFE MANAGED FUND,
INC., IDS LIFE SPECIAL INCOME FUND, INC. AND IDS LIFE MONEYSHARE
FUND, INC.) THE QUEST FOR VALUE ACCUMULATION TRUST (DESCRIBING
QUEST FOR VALUE ACCUMULATION TRUST MANAGED PORTFOLIO AND QUEST FOR
VALUE ACCUMULATION TRUST U.S. GOVERNMENT INCOME PORTFOLIO); THE
PUTNAM CAPITAL MANAGER TRUST (DESCRIBING PCM NEW OPPORTUNITIES
FUND, PCM GROWTH AND INCOME FUND, PCM HIGH YIELD FUND AND PCM
DIVERSIFIED INCOME FUND); AND G.T. GLOBAL VARIABLE INVESTMENT FUNDS
(DESCRIBING G.T. GLOBAL: VARIABLE LATIN AMERICA FUND AND G.T.
GLOBAL: VARIABLE NEW PACIFIC FUND). PLEASE KEEP THESE
PROSPECTUSES FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
AMERICAN ENTERPRISE LIFE IS NOT A FINANCIAL INSTITUTION, AND THE
SECURITIES IT OFFERS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY ANY FINANCIAL INSTITUTION NOR ARE THEY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY. INVESTMENTS IN THE ANNUITY
INVOLVE INVESTMENT RISK INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
<PAGE>
PAGE 5
A Statement of Additional Information (SAI) dated May 1, 1995
(incorporated by reference into this prospectus) has been filed
with the Securities and Exchange Commission (SEC), and is available
without charge by contacting American Enterprise 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.
<PAGE>
PAGE 6
Table of Contents
Key terms..................................................... 3
The AEL Personal PortfolioSM in brief......................... 5
Expense summary............................................... 7
Financial statements.......................................... 9
Performance information....................................... 10
The variable account.......................................... 13
The funds..................................................... 14
IDS Life Aggressive Growth Fund........................... 14
IDS Life International Equity Fund........................ 14
IDS Life Capital Resource Fund............................ 14
IDS Life Managed Fund..................................... 14
IDS Life Special Income Fund.............................. 14
IDS Life Moneyshare Fund.................................. 14
Quest for Value Accumulation Trust Managed Portfolio...... 14
Quest for Value Accumulation Trust
U.S. Government Income Portfolio...................... 15
PCM New Opportunities Fund................................ 15
PCM Growth and Income Fund................................ 15
PCM High Yield Fund....................................... 15
PCM Diversified Income Fund............................... 15
G.T. Global: Variable Latin America Fund................. 15
G.T. Global: Variable New Pacific Fund................... 15
The fixed account............................................. 17
Buying your annuity........................................... 18
Setting the retirement date............................... 18
Beneficiary............................................... 19
How to make payments...................................... 19
Charges....................................................... 20
Contract administrative charge............................ 20
Variable account administrative charge.................... 20
Mortality and expense risk fee............................ 20
Withdrawal charge......................................... 21
Premium taxes............................................. 23
Valuing your investment....................................... 24
Number of units........................................... 24
Accumulation unit value................................... 24
Net investment factor..................................... 24
Factors that affect variable subaccount
accumulation units.................................... 25
Making the most of your annuity............................... 26
Automated dollar-cost averaging........................... 26
Transferring money between subaccounts.................... 27
Transfer policies......................................... 27
Two ways to request a transfer or a withdrawal............ 28
Withdrawals from your contract................................ 30
Withdrawal policies....................................... 30
Receiving payment when you request a withdrawal........... 30
TSA-special withdrawal provisions............................. 31
Changing ownership............................................ 32
Benefits in case of death..................................... 33
The annuity payout period..................................... 34
Annuity payout plans...................................... 34
<PAGE>
PAGE 7
Death after annuity payouts begin......................... 35
Transfers between subaccounts after annuity
payouts begin......................................... 35
Taxes......................................................... 36
Voting rights................................................. 39
Substitution of investments................................... 40
Distribution of the contracts................................. 41
About American Enterprise Life................................ 42
Regular and special reports................................... 43
Table of contents of the Statement of Additional
Information............................................... 44
<PAGE>
PAGE 8
Key terms
These terms can help you understand details about your annuity.
Annuity - A contract purchased from an insurance company that
offers tax-deferred growth of the contract owner's investment until
earnings are withdrawn, and that can be tailored to meet the
specific needs of the individual during retirement.
Accumulation unit - A measure of the value of each variable
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 available to the owner and/or any other payee. This
amount may be paid on a variable or fixed basis.
Annuity unit - A measure of the value of each variable subaccount
used to calculate the annuity payouts you receive.
Beneficiary - The person designated to receive annuity benefits in
case of the owner's or annuitant's death.
Close of business - When the New York Stock Exchange (NYSE) closes,
normally 3 p.m. Central time.
Code - Internal Revenue Code of 1986, as amended.
Contract value - The total value of your annuity before any
applicable withdrawal charge and any contract administrative charge
have been deducted.
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 allocated to this account earn interest at rates
that are declared periodically by American Enterprise Life.
Mutual funds (funds) - Fourteen mutual funds or portfolios, each
with a different investment objective. (See "The funds.") You may
allocate your purchase payments into variable subaccounts investing
in shares of any or all of these funds.
Owner (you, your) - The person who controls the annuity (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
annuity's benefits.
<PAGE>
PAGE 9
Purchase payments - Payments made to American Enterprise Life for
an annuity.
Qualified annuity - An annuity purchased for a retirement plan
that is subject to applicable federal law and any rules of the plan
itself. These plans include:
o Individual Retirement Annuities (IRAs)
o Simplified Employee Pension Plans (SEPs)
o Section 401(k) plans
o Custodial and trusteed pension and profit-sharing plans
o Tax-Sheltered Annuities (TSAs)
o Section 457 plans.
Generally only lump sum payments (rollovers or transfers) will be
suitable for qualified annuity purchases (other than IRAs).
All other annuities are considered nonqualified annuities.
Retirement date - The date when annuity payouts are scheduled to
begin. This date is first established when you start your
contract. You can change it in the future.
Withdrawal charge - A deferred sales charge that may be applied if
you make a withdrawal from your annuity before the retirement date.
Withdrawal value - The amount you are entitled to receive if you
fully withdraw your annuity. It is the contract value minus any
applicable withdrawal charge and contract administrative charge.
Valuation date - Any normal business day, Monday through Friday,
that the NYSE is open. The value of each variable subaccount is
calculated at the close of business on each valuation date.
Variable account - Consists of fourteen separate subaccounts to
which you may allocate purchase payments; each invests in shares of
one mutual fund. (See "The variable account.") The value of your
investment in each variable subaccount changes with the performance
of the particular fund.
The AEL Personal PortfolioSM in brief
Purpose: The AEL Personal PortfolioSM is designed to allow you to
build up funds for retirement. You do this by making one or more
investments (purchase payments) that may earn returns that increase
the value of the annuity. Beginning at a specified future date
(the retirement date), the annuity provides lifetime or other forms
of payouts to you or to anyone you designate.
Ten-day free look: You may return your annuity to your agent or our
Minneapolis administrative office within 10 days after it is
delivered to you and receive a full refund of the contract value.
No charges will be deducted. However, you bear the investment risk
from the time of purchase until return of the contract; the refund
<PAGE>
PAGE 10
amount may be more or less than the payment you made. (Exceptions:
If the law so requires, all of your purchase payment will be
refunded.)
Accounts: You may allocate your purchase payments among any or all
of:
o fourteen variable subaccounts of the variable account, each of
which invests in mutual funds with a particular investment
objective. The value of each variable subaccount varies with
the performance of the particular fund. We cannot guarantee
that the value at the retirement date will equal or exceed the
total of purchase payments allocated to the variable
subaccounts. (p. 13)
o one fixed account, which earns interest at rates that are
adjusted periodically by American Enterprise Life. (p. 17)
Buying the annuity: Your agent will help you complete and submit an
application. Applications are subject to acceptance at our
Minneapolis administrative office. You may buy a nonqualified
annuity or a qualified annuity including an IRA. Payment must be
made in a lump sum with the option of additional payments in the
future. In some states there are time limitations for making
additional payments.
o Minimum initial payment - $5,000 ($2,000 for qualified
annuities)
o Minimum additional payment - $500
o Maximum total payment(s) (without prior approval) - $1,000,000
Transfers: Subject to certain restrictions you may redistribute
your money among accounts without charge at any time until annuity
payouts begin, and once per contract year among the variable
subaccounts thereafter. You may establish automated transfers
among the fixed account and variable subaccount(s). (p. 27)
Withdrawals: You may withdraw all or part of your contract value at
any time before the retirement date. You also may establish
automated partial withdrawals. Withdrawals may be subject to
charges and tax penalties (including a 10% IRS penalty if
withdrawals are made prior to your reaching age 59 1/2) and may
have other tax consequences; also, certain restrictions apply.
(p. 30)
Changing ownership: You may change ownership of a nonqualified
annuity by written instruction, however, such changes of
nonqualified annuities may have federal income tax consequences.
Certain restrictions apply concerning change of ownership of a
qualified annuity. (p. 30)
Payment in case of death: If you or the annuitant dies before
annuity payouts begin, we will pay the beneficiary an amount at
least equal to the contract value. (p. 33)
<PAGE>
PAGE 11
Annuity payouts: The contract value of your investment can be
applied 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 they are needed. If you purchased a
qualified annuity, the payout schedule must meet requirements of
the qualified plan. Payouts may be made on a fixed or variable
basis, or both. Total monthly payouts include amounts from each
variable subaccount and the fixed account. (p. 34)
Taxes: Generally, your annuity grows tax-deferred until you fully
withdraw it or begin to receive payouts. (Under certain
circumstances, IRS penalty taxes may apply.) Even if you direct
payouts to someone else, you will still be taxed on the income if
you are the owner. (p. 36)
Charges: Your AEL Personal PortfolioSM is subject to a $30 annual
contract administrative charge, a 0.25% variable account
administrative charge, a 1.25% mortality and expense risk fee, a
withdrawal charge and any premium taxes that may be imposed by
state or local governments. Premium taxes are deducted either from
your purchase payments or upon total withdrawal or when annuity
payments begin. (p. 20)
Expense summary
The purpose of this summary is to help you understand the various
costs and expenses associated with the AEL Personal PortfolioSM.
You pay no sales charge when you purchase the AEL Personal
PortfolioSM. All costs that you bear directly or indirectly for
the variable subaccounts and underlying mutual funds are shown
below. Some expenses may vary as explained under "Contract
charges."
Direct charges. These are deducted directly from the contract
value. They include:
Withdrawal charge: The withdrawal charge starts at 7% of the
purchase payment in the first contract year of payment receipt and
decreases by 1% each contract year thereafter. There is no
withdrawal charge on earnings and on purchase payments we received
in any contract year six or more years prior to the contract year
of withdrawal.
Annual contract administrative charge: $30.
Indirect charges. The variable account pays these expenses out of
its assets. They are reflected in the variable subaccounts' daily
accumulation unit values and are not charged directly to your
account. They include:
Mortality and expense risk fee: 1.25% per year, deducted from the
subaccounts of the variable account as a percentage of the average
daily net assets of the underlying fund.
<PAGE>
PAGE 12
Variable account administrative charge: 0.25% per year, deducted
from the subaccounts of the variable account as a percentage of the
average daily net assets of the underlying fund.
Operating expenses of underlying mutual funds: management fees and
other expenses deducted as a percentage of average net assets as
follows: *
<TABLE><CAPTION>
Quest for Value
IDS Life IDS Life IDS Life IDS Life Accumulation
Aggressive International Capital IDS Life Special IDS Life Trust Managed
Growth Equity Resource Managed Income Moneyshare Portfolio
<S> <C> <C> <C> <C> <C> <C>
Management fees .64% .89% .64% .64% .64% .54% .60%
Other expenses .04 .16 .04 .04 .04 .02 .06
Total .68%** 1.05%** .68%** .68%** .68%** .56%** .66%+#
Quest for Value
Accumulation
Trust U.S. Gov- PCM PCM G.T. Global: G.T. Global:
ernment Income PCM New Growth and PCM High Diversified Variable Variable
Portfolio Opportunities Income Yield Income Latin America New Pacific
Management fees .60% .70% .57% .66% .67% 1.00% 1.00%
Other expenses .15 .30 .05 .08 .13 .25 .25
Total .75+# 1.00%++# .62%** .74%** .80%** 1.25%## 1.25%##
</TABLE>
* Premium taxes imposed by some state and local governments are not
reflected in this table.
** Annualized operating expenses of underlying mutual funds at Dec.
31, 1994.
+ The expenses for the Quest for Value Managed and U.S. Government
Income Portfolios will be voluntarily limited by Quest for Value
Advisors so that annualized operating fund expenses do not exceed
0.66% and 0.75% for the Quest for Value Managed and U.S. Government
Income Portfolios, respectively through Dec. 31, 1995. Quest for
Value Advisors reserves the right to discontinue these Portfolio
expense limitations after Dec. 31, 1995. Variations in the actual
amount of average assets in any of these Portfolios during 1995 can
cause significant variations in expenses expressed as a percentage
of that Portfolio's average net assets. It is estimated by Quest
for Value Advisors that by the end of 1995, the net assets of each
of these Portfolios will be sufficient such that the total annual
expenses of each Portfolio will, on an annualized basis, be
approximately equal to, if not less than, the voluntary limits.
++ The Manager of PCM New Opportunities Fund has voluntarily agreed
to limit expenses of the Fund to an annual rate of 1.20% of the
average daily net assets of the Fund. The Fund's expenses subject
to this limitation are exclusive of brokerage interest, taxes,
insurance, amortization of deferred organization expenses and
extraordinary expenses if any. Actual Management Fees, Other
Expenses and Total Portfolio Annual Expenses, reflecting the
expense limitation, for the fiscal year ended Dec. 31, 1994 were:
0.45%, 0.02% and 0.47% respectively, for the PCM New Opportunities
Fund. This limitation expired on April 30, 1995.
<PAGE>
PAGE 13
+++ These figures reflect new management fees effective June 2,
1994. If management fees were in effect for the whole year,
management fees would have been 0.55% for PCM Growth & Income Fund,
0.70% for PCM High Yield Fund and 0.07% for PCM Diversified Income
Fund.
# These are new funds: operating expenses are based on annualized
estimates of such expenses to be incurred in the current fiscal
year.
## Figures in "Other Expenses" and "Total Expenses" reflect
reimbursement of expenses by G.T. Capital Management, Inc. pursuant
to undertakings in effect during 1994. If there had been no
reimbursement of expenses in 1994, the actual expenses of the
Funds, expressed as a percentage of average net assets, with
Investment Management and Administration fees stated first, then
Other Expenses, followed by Total Expenses, would have been as
follows: Variable New Pacific Fund; 1.00%, 0.60%, 1.60%: and
Variable Latin America Fund; 1.00%, 0.58%, 1.58%.
<TABLE><CAPTION>
Example:*
Quest for Value
IDS Life IDS Life IDS Life IDS Life Accumulation
Aggressive International Capital IDS Life Special IDS Life Trust Managed
Growth Equity Resource Managed Income Moneyshare Portfolio
You would pay the following expenses on a $1,000 investment, assuming 5% annual return and full withdrawal at the end of
each time period:
<S> <C> <C> <C> <C> <C> <C> <C>
1 year 93.86 97.52 93.86 93.86 93.86 92.67 93.66
3 years 123.48 134.43 123.48 123.48 123.48 119.90 122.88
5 years 155.74 173.93 155.74 155.74 155.74 149.75 154.75
10 years 268.88 304.79 268.88 268.88 268.88 256.89 266.89
You would pay the following expenses on the same investment assuming no withdrawal or selection of an annuity payout plan
at the end of each time period:
1 year 23.86 27.52 23.86 23.86 23.86 22.67 23.66
3 years 73.48 84.43 73.48 73.48 73.48 69.90 72.88
5 years 125.74 143.93 125.74 125.74 125.74 119.75 124.75
10 years 268.88 304.79 268.88 268.88 268.88 256.89 266.89
Quest for Value
Accumulation
Trust U.S. Gov- PCM PCM G.T. Global: G.T. Global:
ernment Income PCM New Growth and PCM High Diversified Variable Variable
Portfolio Opportunities Income Yield Income Latin America New Pacific
You would pay the following expenses on a $1,000 investment, assuming 5% annual return and full withdrawal at the
end of each time period:
1 year 94.56 97.03 93.27 94.46 95.05 99.48 99.48
3 years 125.56 132.96 121.69 125.27 127.05 140.28 140.28
5 years 159.21 171.49 152.75 158.72 161.68 183.59 183.59
10 years 275.79 300.03 262.90 274.81 280.70 323.57 323.57
You would pay the following expenses on the same investment assuming no withdrawal or selection of an annuity payout
plan at the end of each time period:
<PAGE>
PAGE 14
1 year 24.56 27.03 23.27 24.46 25.05 29.48 29.48
3 years 75.56 82.96 71.69 75.27 77.05 90.28 90.28
5 years 129.21 141.49 122.75 128.72 131.68 153.59 153.59
10 years 275.79 300.03 262.90 274.81 280.70 323.57 323.57
</TABLE>
This example should not be considered a representation of past or
future expenses. Actual expenses may be more or less than those
shown.
* In this example, the $30 annual contract administrative charge is
approximated as a .170% charge based on the estimated average
contract size.
Financial statements
The SAI dated May 1, 1995, contains:
the financial statements of American Enterprise Life including:
- - balance sheets as of Dec. 31, 1994 and Dec. 31, 1993;
- - statements of income for the years ended Dec. 31, 1994, 1993, and
1992
- - statements of cash flows for the years ended Dec. 31, 1994, 1993,
and 1992
Performance information
Performance information for the variable subaccounts may appear
from time to time in advertisements or sales literature. In all
cases, such information reflects the performance of a hypothetical
investment in a particular account during a particular time period.
The following performance figures are calculated on the basis of
historical performance of the funds. The performance figures
relating to these funds assume that the contract was in existence
prior to Jan. 12, 1995, which it was not. Beginning Jan. 12, 1995,
when these funds became available as investment options under the
contract, actual values are used for the calculations.
Calculations are performed as follows:
Simple yield - IDS Life Moneyshare Subaccount: Income over a given
seven-day period (not counting any change in the capital value of
the investment) is annualized (multiplied by 52) by assuming that
the same income is received for 52 weeks. This annual income is
then stated as an annual percentage return on the investment.
Compound yield - IDS Life Moneyshare Subaccount: Calculated like
simple yield, except that, when annualized, the income is assumed
to be reinvested. Compounding of reinvested returns increases the
yield as compared to a simple yield.
Annualized Yields based on Seven-Day Period ended
Dec. 31, 1994
Subaccount investing in: Simple Yield Compound Yield
IDS Life Moneyshare Fund 4.35% 4.44% <PAGE>
PAGE 15
Yield - Special Income Subaccount: Net investment income (income
less expenses) per accumulation unit during a given 30-day period
is divided by the value of the unit on the last day of the period.
The result is converted to an annual percentage.
Annualized yield based on 30-Day Period ended Dec. 31, 1994
Subaccount investing in: Yield
IDS Life Special Income Fund (5.49)%
Average annual total return: Expressed as an average annual
compounded rate of return of a hypothetical investment over a
period of one, five and 10 years (or up to the life of the account
if it is less than 10 years old). This figure reflects deduction
of all applicable charges, including the contract administrative
charge, variable account administrative charge, mortality and
expense risk fee, and withdrawal charge, assuming a full withdrawal
at the end of the illustrated period. Optional average annual
total return quotations may be made that do not reflect a
withdrawal charge deduction (assuming no withdrawal).
<TABLE><CAPTION>
Average Annual Total Return For Period Ended Dec. 31, 1994:
Average Annual Total Return with Withdrawal
Since
Subaccount investing in: 1 Year 5 Year 10 Year Inception
<S> <C> <C> <C> <C>
IDS LIFE
Aggressive Growth Fund (1/92)* (14.70)% - - 1.90%
Capital Resource Fund (10/81) (7.34)% 7.87% 11.90% -
International Equity Fund (1/92) (10.39)% - - 5.82%
Managed Fund (4/86) (12.93)% 6.97% - 8.29%
Moneyshare Fund (10/81) (4.72)% 2.60% 4.16% -
Special Income Fund (10/81) (12.37)% 6.26% 8.53% -
QUEST FOR VALUE ACCUMULATION TRUST**
Managed Portfolio (8/88)*** (5.91)% 11.50% - 14.36%
GT GLOBAL:
Variable Latin America Fund (2/93) 0.52% - - 22.94%
Variable New Pacific Fund (2/93) (20.77)% - - 0.61%
PCM
New Opportunities Fund (5/94) - - - (3.45)%
Growth & Income Fund (2/88) (8.15)% 6.76% - 10.50%
High Yield Fund (2/88) (9.41)% 10.86% - 10.17%
Diversified Income Fund (9/93) (12.66)% - - (7.19)%
*Inception dates of the funds are shown in parentheses.
Average Annual Total Return without Withdrawal
Since
Subaccount investing in: 1 Year 5 Year 10 Year Inception
IDS Life
Aggressive Growth Fund (1/92)* (7.70)% - - 3.50%
Capital Resource Fund (10/81) (0.34)% 8.31% 11.90% -
International Equity Fund (1/92) (3.39)% - - 7.31%
Managed Fund (4/86) (5.93)% 7.42% - 8.29%
Moneyshare Fund (10/81) 2.28% 3.14% 4.16% -
Special Income Fund (10/81) (5.37)% 6.73% 8.53% -
QUEST FOR VALUE ACCUMULATION TRUST**
Managed Portfolio (8/88)*** 1.09% 11.89% - 14.44%
<PAGE>
PAGE 16
GT GLOBAL:
Variable Latin America (2/93) 7.52% - - 25.57%
Variable New Pacific Fund (2/93) (13.77)% - - 3.73%
PCM
New Opportunities Fund (5/94) - - - 7.13%
Growth & Income Fund (2/88) (1.15)% 7.22% - 10.58%
High Yield Fund (2/88) (2.41)% 11.25% - 10.25%
Diversified Income Fund (9/93) (5.66)% - - (2.89)%
*Inception dates of the funds are shown in parentheses.
**On Sept. 16, 1994, an investment company then called Quest for Value Accumulation Trust (the "Old Trust") was effectively divided
into two investment funds, the Old Trust and the new Quest for Value Accumulation Trust (the "Fund"), at which time the Fund
commenced operations. The total net assets for the Managed Portfolio immediately after the transaction was $682,601,380 with
respect to the Old Trust and $51,345,102 with respect to the Fund. For the period prior to Sept. 16, 1994, the performance figures
above for the Managed Portfolio reflect the performance of the corresponding Portfolio of the Old Trust.
***Inception date of the Managed Portfolio of the Old Trust.
</TABLE>
Aggregate total return: Represents the cumulative change in value
of an investment over a specified period of time (reflecting change
in a subaccount's accumulation unit value). The calculation
assumes reinvestment of investment earnings. Aggregate total
return may be shown by means of schedules, charts or graphs.
Performance information should be considered in light of the
investment objectives and policies, characteristics and quality of
the fund in which the subaccount invests, and the market conditions
during the given time period. Such information is not intended to
indicate future performance. Because advertised yields and total
return figures include all charges attributable to the annuity,
which has the effect of decreasing advertised performance,
subaccount performance should not be compared 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 yield and
total return for the subaccounts.)
If you would like additional information about actual performance,
contact American Enterprise Life.
The variable account
Purchase payments can be allocated to any or all of the subaccounts
of the variable account that invest in shares of the following
funds:
Subaccount
IDS Life Aggressive Growth Fund EAG
IDS Life International Equity Fund EIE
IDS Life Capital Resource Fund ECR
IDS Life Managed Fund EMG
IDS Life Special Income Fund ESI
IDS Life Moneyshare Fund EMS
Quest for Value Accumulation Trust
Managed Portfolio EMD
Quest for Value Accumulation Trust
U.S. Government Income Portfolio EUS
PCM New Opportunities Fund ENO
PCM Growth and Income Fund EGI
PCM High Yield Fund EHY
PCM Diversified Income Fund EDI
G.T. Global: Variable Latin America Fund ELA
G.T. Global: Variable New Pacific Fund EPA<PAGE>
PAGE 17
Each variable subaccount meets the definition of a separate account
under federal securities laws. Income, capital gains and capital
losses of each subaccount are credited or charged to that
subaccount alone. No variable subaccount will be charged with
liabilities of any other variable account or of our general
business. All obligations arising under the contracts are general
obligations of IDS Life.
The variable account was established under Indiana law on July 15,
1987, and the subaccounts are registered together as a single unit
investment trust under the Investment Company Act of 1940, as
amended (the 1940 Act). This registration does not involve any
supervision of our management or investment practices and policies
by the SEC.
The funds
IDS Life Aggressive Growth Fund
Objective: capital appreciation. Invests primarily in common stock
of small- and medium-size companies.
IDS Life International Equity Fund
Objective: capital appreciation. Invests primarily in common stock
of foreign issuers and foreign securities convertible into common
stock.
IDS Life Capital Resource Fund
Objective: capital appreciation. Invests primarily in U.S. common
stocks listed on national securities exchanges and other securities
convertible into common stock, diversified over many different
companies in a variety of industries.
IDS Life Managed Fund
Objective: maximum total investment return. Invests primarily in
U.S. common stocks listed on national securities exchanges,
securities convertible into common stock, warrants, fixed income
securities (primarily high-quality corporate bonds) and money
market instruments.
IDS Life Special Income Fund
Objective: to provide a high level of current income while
conserving the value of the investment for the longest time period.
Invests primarily in high-quality, lower-risk corporate bonds
issued by many different companies in a variety of industries, and
in government bonds.
IDS Life Moneyshare Fund
Objective: maximum current income consistent with liquidity and
conservation of capital. Invests in high-quality money market
securities with remaining maturities of 13 months or less. The
fund also will maintain a dollar-weighted average portfolio
maturity not exceeding 90 days. The fund attempts to maintain a
constant net asset value of $1 per share.
Quest for Value Accumulation Trust Managed Portfolio
Objective: Growth of capital over time. Invests primarily in
common stocks, bonds and money market and cash equivalent
securities.
<PAGE>
PAGE 18
Quest for Value Accumulation Trust U.S. Government Income Portfolio
Objective: to provide a high level of current income together with
protection of capital. Invests exclusively in debt obligations,
including mortgage-backed securities, issued or guaranteed by the
United States government, its agencies or instrumentalities.
PCM New Opportunities Fund
Objective: long-term capital appreciation. Invests primarily in
common stocks of companies in sectors of the economy which may
possess above average long-term growth potential.
PCM Growth and Income Fund
Objective: capital growth and current income. Invests primarily in
common stocks that offer potential for capital growth, current
income, or both.
PCM High Yield Fund
Objective: high current income (its primary objective) and, when
consistent with this primary objective, a secondary objective of
capital growth. Invests primarily in high-yielding, lower-rated
fixed income securities, constituting a portfolio which is believed
not to involve undue risk to income or principal.
PCM Diversified Income Fund
Objective: high current income consistent with capital
preservation. Invests in the following three sectors of the fixed
income securities markets: U.S. government sector, high yield
sector and international sector.
G.T. Global: Variable Latin America Fund
Objective: capital appreciation. Invests at least 65% of its total
assets in a broad range of securities including common and
preferred stock, rights, warrants and securities convertible into
common stock, as well as bonds, notes, debentures or other forms of
indebtedness of Latin American issuers.
G.T. Global: Variable New Pacific Fund
Objective: long-term growth of capital. Invests at least 80% of
its total assets in equity securities including common and
preferred stocks and warrants to acquire such securities of issuers
domiciled in the fund's Primary Investment Area: Australia, Hong
Kong, Indonesia, Malaysia, New Zealand, the Philippines, Singapore,
South Korea, Taiwan and Thailand.
All funds are available to serve as the underlying investment for
variable annuities, and some funds also are available to serve as
the underlying investment for variable life insurance contracts.
It is conceivable that in the future it may be disadvantageous for
variable annuity separate accounts and variable life insurance
separate accounts to invest in the available funds simultaneously.
Although American Enterprise Life and the funds do not currently
foresee any such disadvantages either to variable annuity contract
owners or to variable life insurance policyowners, the boards of
directors or trustees of the appropriate funds will monitor events
in order to identify any material conflicts between such contract
owners and policyowners and to determine what action, if any,
should be taken in response to a conflict. If a board were to
conclude that separate funds should be established for variable
life insurance and variable annuity separate accounts, the variable<PAGE>
PAGE 19
annuity contract holders would not bear any expenses associated
with establishing separate funds.
The Internal Revenue Service (IRS) has issued final regulations
relating to the diversification requirements under Section 817(h)
of the Code. Each mutual fund intends to comply with these
requirements.
The U.S. Treasury and the IRS have indicated they may provide
additional guidance concerning how many variable subaccounts may be
offered and how many exchanges among variable subaccounts may be
allowed before the owner is considered to have investment control,
and thus is currently taxed on income earned within variable
subaccount assets. We do not know at this time what the additional
guidance will be or when action will be taken. We reserve the
right to modify the contract, as necessary, to ensure that the
owner will not be subject to current taxation as the owner of the
variable subaccount assets.
We intend to comply with all federal tax laws to ensure 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.
IDS Life, IDS Tower 10, Minneapolis, MN 55440, is the investment
manager for each of the IDS Life funds. Quest for Value Advisors,
One World Financial Center, New York, NY 10281, is the investment
manager for the Quest for Value Accumulation Trust portfolios.
Putnam Investment Management, Inc., One Post Office Square, Boston,
MA 02109, is the investment manager for the PCM funds. G.T.
Capital Management, Inc., 50 California Street, San Francisco, CA
94111, is the investment manager for the G.T. Global Funds.
The investment managers cannot guarantee that the funds will meet
their investment objectives. Please read the prospectuses for the
funds for complete information on investment risks, deductions,
expenses and other facts you should know before investing. These
prospectuses are available by contacting American Enterprise Life
at the administrative office address or telephone number on the
front of this publication.
The fixed account
Purchase payments can also be allocated to the fixed account. The
value of the fixed account increases as interest is credited to the
account. Purchase payments and transfers to the fixed account
become part of the general account of American Enterprise Life, the
company's main portfolio of investments. Interest is credited
and compounded daily to produce an effective annual interest rate.
We may change the interest rates from time to time.
Because of exemptive and exclusionary provisions, interests in the
fixed account have not been registered under the Securities Act of
1933 (1933 Act), nor is the fixed account registered as an
investment company under the 1940 Act. Accordingly, neither the
fixed account nor any interests in it are generally subject to the
provisions of the 1933 or 1940 Acts, and we have been advised that<PAGE>
PAGE 20
the staff of the SEC has not reviewed the disclosures in this
prospectus that relate to 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.
Buying your annuity
Your agent will help you prepare and submit your application, and
send it along with your initial purchase payment to our Minneapolis
administrative office. As the owner, you have all rights and may
receive all benefits under the contract. The annuity can be owned
in joint tenancy only in spousal situations. You cannot buy an
annuity or be an annuitant if you are 86 or older. (In
Pennsylvania, the annuitant must be under age 80.)
When you apply, you can select:
o the subaccount(s) or fixed account in which you want to invest;
o how you want to make purchase payments;
o the date you want to start receiving annuity payouts (the
retirement date); and
o a beneficiary.
If your application is complete, we will process it and apply your
purchase payment to your subaccount(s) and fixed account within two
days after we receive it. If your application is accepted, we will
send you a contract. If we cannot accept your application within
five days, we will decline it and return your payment. We will
credit additional purchase payments to your account(s) at the next
close of business.
Setting the retirement date
Annuity payouts will be scheduled to begin on the retirement date.
This date can be aligned 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 can also 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:
o no earlier than the 60th day after the contract's effective
date; and
o no later than the annuitant's 85th birthday (or before the 10th
contract anniversary, if purchased after age 75).
For qualified annuities, to avoid IRS penalty taxes, the retirement
date generally must be:
o on or after the annuitant reaches age 59 1/2;
o by April 1 of the year following the calendar year when the
annuitant reaches age 70 1/2; and
o no later than the annuitant's 82nd birthday (or before the
eighth contact anniversary, if purchased after age 74) for
annuities in Pennsylvania.
<PAGE>
PAGE 21
If you are taking the minimum IRA or TSA distributions as required
by the Code from another tax-qualified investment, or in the form
of partial withdrawals from this annuity, annuity payouts can start
as late as the annuitant's 85th birthday or the 10th contract
anniversary.
Beneficiary
If death benefits become payable before the retirement date, your
named beneficiary will receive all or part of the contract value.
If there is no named beneficiary, then you or your estate will be
the beneficiary. (See "Payment in case of death" for more about
beneficiaries.)
Minimum payment
If single payment:
Nonqualified: $5,000
Qualified: $2,000
Minimum additional purchase payment(s): $500
Maximum payment(s): $1,000,000 of cumulative payments without
prior approval
How to make payments
By letter
Send your check along with your name and account number to:
Regular mail:
American Enterprise Life Insurance Company
Box 458
Minneapolis, MN 55440-0534
Express mail:
American Enterprise Life Insurance Company
Attention: Unit 829
80 South Eighth Street
Minneapolis, MN 55402
Charges
Contract administrative charge
This fee is 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 will waive this charge when the
contract value is $50,000 or more on the current contract
anniversary.
If you take a full withdrawal from your contract, the $30 annual
charge will be deducted at the time of withdrawal. The annual<PAGE>
PAGE 22
charge cannot be increased and does not apply after annuity payouts
begin.
Variable account administrative charge
This charge is applied daily to the variable subaccounts and
reflected in the unit values of the subaccounts. Annually, it
totals 0.25% of their average daily net assets. 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. The
variable account administrative charge cannot be increased.
Mortality and expense risk fee
This fee is to cover the mortality risk and expense risk and is
applied daily to the variable subaccounts and reflected in the unit
values of the subaccounts. The subaccounts pay this fee at the
time dividends are distributed from the funds in which they invest.
Annually the fee totals 1.25% of the subaccounts average daily net
assets. Approximately two-thirds of this amount is for our
assumption of mortality risk, and one-third is for our assumption
of expense risk. This fee does not apply to the fixed account.
Mortality risk arises because of our guarantee to make annuity
payouts according to the terms of the contract, no matter how long
a specific annuitant lives and no matter how long the entire group
of American Enterprise Life annuitants live. If, as a group,
American Enterprise Life annuitants outlive the life expectancy we
have assumed in our actuarial tables, then we must take money from
our general assets to meet our obligations. If, as a group,
American Enterprise Life annuitants do not live as long as
expected, we could profit from the mortality risk fee.
Expense risk arises because the contract administrative charge and
variable account administrative charge cannot be increased and may
not cover our expenses. Any deficit would have to be made up from
our general assets. We could profit from the expense risk fee if
the annual contract administrative and variable account
administrative charges are more than sufficient to meet expenses.
We do not plan to profit from the contract administrative charge or
the variable account administrative charge. However, we hope to
profit from the mortality and expense risk fee. We may use any
profits realized from this fee for any proper corporate purpose,
including, among others, payment of distribution (selling)
expenses. We do not expect that the withdrawal charge, discussed
in the following paragraphs, will cover sales and distribution
expenses.
Withdrawal charge
If you withdraw part or all of your contract, you may be subject to
a withdrawal charge. The withdrawal amount you request is
determined by drawing from your total contract value in the
following order:
1. First we withdraw up to 10% of your prior anniversary account
value not yet withdrawn this contract year. There is no withdrawal<PAGE>
PAGE 23
charge on withdrawals totaling up to 10% of your prior anniversary
value each contract year.
2. Next we withdraw any contract earnings (contract value minus all
purchase payments received and not previously withdrawn) in excess
of the annual 10% free withdrawal amount. There is no withdrawal
charge on contract earnings.
3. Next, if necessary, we withdraw the old purchase payments,
starting with the first purchase payment made and not previously
withdrawn. There is no withdrawal charge on old payments that we
received in any contract year six or more years prior to the
contract year of withdrawal.
4. Finally, if necessary, we withdraw new purchase payments. These
are payments that we received during the contract year of
withdrawal and during the six immediately preceding contract years.
There is a withdrawal charge on new payments. We determine your
withdrawal charge by multiplying each of your new payments by the
applicable withdrawal charge percentage, and then summing the total
withdrawal charges.
The new payment withdrawal charge percentage depends on the number
of contract years since you made the payment(s).
Contract Years From
Payment Receipt Withdrawal Charge Percentage
1 7%
2 6%
3 5%
4 4%
5 3%
6 2%
7 1%
Thereafter 0%
Withdrawal Charge Calculation Example
We determine your withdrawal charge by multiplying each of your new
payments by the applicable withdrawal charge percentage and then
summing the total withdrawal charges.
For example, the withdrawal charge on a total withdrawal request
for a contract with this history:
o The contract date is July 1, 1995 with a contract year of
July 1 through June 30 and with an anniversary date of July 1
each year
o We received these payments - $10,000 July 1, 1995, $8,000
Dec. 31, 2001 and $6,000 Feb. 20, 2003
o The owner withdraws the contract for its total withdrawal
value of $38,101 on Aug. 5, 2005 and had not made any other
withdrawals during that contract year
<PAGE>
PAGE 24
o The prior anniversary July 1, 2005 contract value was $38,488
is calculated this way:
Withdrawal Charge Explanation
$ 0 $3,848.80 is 10% of the prior anniversary
account value withdrawn without withdrawal
charge; and
$ 0 $10,252.20 is contract earnings in excess
of the 10% free withdrawal amount withdrawn
without withdrawal charge; and
$ 0 $10,000 7-1-95 payment is an old payment
withdrawn without withdrawal charge; and
$ 240 $8,000 12-31-01 payment is a new payment in
its fifth contract year from receipt,
withdrawn with a 3% withdrawal charge; and
$ 240 $6,000 2-20-03 payment is a new payment in
its fourth contract year from receipt
withdrawn with a 4% withdrawal charge.
$ 480
The withdrawal charge is calculated so that the total amount minus
any withdrawal charge equals the amount you request.
Waiver of Withdrawal Charges
There are no withdrawal charges for:
o withdrawals during the year totaling up to 10% of your prior
contract anniversary contract value; and
o contract earnings - if any - in excess of the annual 10% free
withdrawal amount; and
o contracts settled using an annuity payout plan; and
o death benefits.
If your contract includes a "Waiver of Withdrawal Charges" Annuity
Endorsement, we will waive withdrawal charges that are normally
assessed upon full or partial withdrawal if you provide proof
satisfactory to us that, as of the date you request the withdrawal,
you or the annuitant are confined to a hospital or nursing home and
have been for the prior 60 days.
To qualify, the nursing home must meet the following criteria:
o be licensed by an appropriate licensing agency to provide
nursing care; and
o provide 24-hour-a-day nursing services; and
o have a doctor available for emergency situations; and
o have a nurse on duty or on call at all times; and
o maintain clinical records; and
o have appropriate methods for administering drugs.
<PAGE>
PAGE 25
To the extent permitted by state law, this endorsement is included
in contracts issued when the owner and annuitant are under age 76
on the date that we issue the contract.
Possible group reductions: In some cases lower sales and
administrative expenses may be incurred due to the size of the
group, the average contribution and the use of group enrollment
procedures. In such cases, we may be able to reduce or eliminate
the contract administrative and withdrawal charges. However, we
expect this to occur infrequently.
Premium taxes
Certain state and local governments impose premium taxes that may
reach to 3.5%. These taxes are dependent upon the state of
residence or the state in which the contract was sold. In some
cases, premium taxes are deducted from your purchase payments
before they are allocated. In other cases, the deduction is made
when you fully withdraw your contract or when annuity payouts
begin.
Valuing your investment
Here is how your fixed account and variable subaccounts are valued:
Fixed account: The amounts allocated to the fixed account are
valued directly in dollars and equal the sum of your purchase
payments and transfer amounts plus interest earned, less any
amounts withdrawn or transferred.
Variable subaccounts: Amounts allocated to the variable
subaccounts are converted into accumulation units. Each time you
make a purchase payment or transfer amounts into one of the
variable subaccounts, a certain number of accumulation units are
credited to your contract for that subaccount. Conversely, each
time you take a partial withdrawal, transfer amounts out of a
variable subaccount, or are assessed a contract administrative
charge, a certain number of accumulation units are subtracted 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 underlying
fund. The dollar value of each accumulation unit can rise or fall
daily depending on the performance of the underlying mutual fund
and on certain fund expenses. Here is how unit values are
calculated:
Number of units
To calculate the number of accumulation units for a particular
subaccount, we divide your investment, after deduction of any
premium taxes, by the current accumulation unit value.
Accumulation unit value
The current accumulation unit value for each variable subaccount
equals the last value times the subaccount's current net investment
factor.
<PAGE>
PAGE 26
Net investment factor
o Determined each business day by adding the underlying mutual
fund's current net asset value per share plus per-share
amount of any current dividend or capital gain distribution;
then
o dividing that sum by the previous net asset value per share;
and
o 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 underlying mutual fund may
fluctuate, the accumulation unit value may increase or decrease.
You bear this investment risk in a variable subaccount.
Factors that affect variable subaccount accumulation units
Accumulation units may change in two ways; in number and in value.
Here are the factors that influence those changes:
The number of accumulation units you own may fluctuate due to:
o additional purchase payments allocated to the variable
subaccounts;
o transfers into or out of the variable subaccount(s);
o partial withdrawals;
o withdrawal charges; and/or
o contract administrative charges.
Accumulation unit values may fluctuate due to:
o changes in underlying mutual fund(s) net asset value;
o dividends distributed to the variable subaccount(s);
o capital gains or losses of underlying mutual funds;
o mutual fund operating expenses;
o mortality and expense risk fees; and/or
o variable account administrative charges.
Making the most of your annuity
Automated dollar-cost averaging*
You can use automated transfers to take advantage of dollar-cost
averaging (investing a fixed amount at regular intervals). For
example, you might have a set amount transferred monthly from a
relatively conservative variable subaccount to a more aggressive
one, or to several others.
This systematic approach can help you benefit from fluctuations in
accumulation unit values caused by fluctuations in the market
value(s) of the underlying mutual fund(s). Since you invest the
same amount each period, you automatically acquire more units when
the market value falls, fewer units when it rises. The potential
effect is to lower your average cost per unit. For specific
features contact your agent.
<PAGE>
PAGE 27
<TABLE><CAPTION>
How dollar-cost averaging works
Month Amount Accumulation Number of units
invested unit value purchased
<S> <C> <C> <C> <C>
By investing an Jan $100 $20 5.00
equal number of
dollars each month.... Feb 100 16 6.25
Mar 100 9 11.11
you automatically Apr 100 5 20.00
buy more units
when the per unit May 100 7 14.29
market price is low....
June 100 10 10.00
July 100 15 6.67
and fewer units Aug 100 20 5.00
when the per unit
market price is Sept 100 17 5.88
high.
Oct 100 12 8.33
</TABLE>
You have paid an average price of only $10.81 per unit over the 10
months, while the average market price actually was $13.10.
Dollar-cost averaging does not guarantee that any variable
subaccount will gain in value, nor will it protect against a
decline in value if market prices fall. However, if you can
continue to invest regularly throughout changing market conditions,
it can be an effective strategy to help meet your long term goals.
* Some restrictions may apply.
Transferring money between subaccounts
You may transfer money from any one subaccount, or the fixed
account, to another before the annuity payouts begin. Certain
restrictions apply to transfers involving the fixed account. If we
receive your request before the close of business, we will process
it that day. Requests received after the close of business will be
processed the next business day. There is no charge for transfers.
Before making a transfer, you should consider the risks involved in
switching investments.
We may suspend or modify transfer privileges at any time. The
right to transfer contract values between the subaccounts is
subject to modification if we determine, in our sole discretion,
that the exercise of that right by one or more contract owners is,
or would be, to the disadvantage of other contract owners. Any
modification could be applied to transfers to or from some or all
of the subaccounts. These modifications could include, but not be
limited to, the requirement of a minimum time period between each
transfer, not accepting transfer requests of an agent acting under
a power of attorney on behalf of more than one contract owner or
limiting the dollar amount that may be transferred between the
subaccounts and the fixed account by a contract owner at any one
time. We may apply these modifications or restrictions in any
manner reasonably designed to prevent any use of the transfer right
we consider to be to the disadvantage of other contract owners.
(For information on transfers after annuity payouts begin, see "The
annuity payout period.")
<PAGE>
PAGE 28
Transfer policies
o You may transfer contract values between the variable
subaccounts or from the subaccount(s) to the fixed account at
any time. However, if you have made a transfer from the fixed
account to the subaccount(s), you may not make a transfer
from any subaccount back to the fixed account for six months
following that transfer.
o You may transfer contract values from the fixed account to
the variable subaccount(s) on or within 30 days before or
after the contract anniversary (except for automated
transfers, which can be set up for transfer periods of your
choosing subject to certain minimums.)
o If we receive your request on or within 30 days before or
after the contract anniversary date, the transfer from the
fixed account to the variable subaccount(s) will be effective
on the day we receive it.
o We will not accept requests for transfers from the fixed
account at any other time.
o No transfers may be made to or from the fixed account once
annuity payouts begin.
Two ways to request a transfer or a withdrawal
1 By letter
Send your name, account number, Social Security Number or Taxpayer
Identification Number and signed request for a transfer or
withdrawal to:
Regular mail:
American Enterprise Life Insurance Company
80 South Eighth Street
P.O. Box 458
Minneapolis, MN 55440-0534
Express mail:
American Enterprise Life Insurance Company
Attention: Unit 829
80 South Eighth Street
Minneapolis MN 55402
Minimum amount
Mail transfers: $500 or entire variable subaccount or fixed
account balance
Mail withdrawals: $500 or entire variable subaccount or fixed
account balance
Maximum amount
Mail transfers: None (up to contract value)
Mail withdrawals: None (up to contract value)
<PAGE>
PAGE 29
2 By automated transfers and automated partial withdrawals
Your agent can help you set up automated transfers among your
accounts or partial withdrawals from the accounts.
You can start or stop this service by written request or other
method acceptable to American Enterprise Life. You must allow 30
days for American Enterprise Life to change any instructions that
are currently in place.
o Automated transfers may not exceed an amount that, if
continued, would deplete the fixed account or subaccount(s)
from which you are transferring within 24 months.
o Automated transfers and automated partial withdrawals are
subject to all of the contract provisions and terms,
including transfer of contract values between accounts.
Automated withdrawals may be restricted by applicable law
under some contracts.
o Automated partial withdrawals may result in IRS taxes and
penalties on all or part of the amount withdrawn.
Minimum amount
Automated transfers or withdrawals: $100 monthly / $250 quarterly
Maximum amount
Automated transfers or withdrawals: None (except for automated
transfers from the fixed
account)
Withdrawals from your contract
As owner, you may withdraw all or part of your contract at any time
before annuity payouts begin by sending a written request or
calling American Enterprise Life. For total withdrawals we will
compute the value of your contract at the close of business after
we receive your request. We may ask you to return the contract.
You may have to pay withdrawal charges (see "Withdrawal charge")
and IRS taxes and penalties (see "Taxes"). No withdrawals may be
made after annuity payouts begin.
Withdrawal policies
If you have a balance in more than one account and request a
partial withdrawal, we will withdraw money from all your accounts
in the same proportion as your value in each account correlates to
your total contract value, unless you request otherwise.
Receiving payment when you request a withdrawal
By regular or express mail:
o Payable to owner.
o Normally mailed to address of record within seven days after
receiving your request. However, we may postpone the payment
if:
<PAGE>
PAGE 30
-the withdrawal 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.
TSA-special withdrawal provisions
Participants in Tax-Sheltered Annuities (TSA): The Code imposes
certain restrictions on your right as owner to receive early
distributions from a TSA:
o Distributions attributable to transfers or rollovers of salary
reduction contributions made after Dec. 31, 1988, plus the
earnings on them, may be made from the TSA only if:
-you have attained age 59 1/2;
-you have become disabled as defined in the Code;
-you have separated from the service of the employer who
purchased the annuity; or
-the distribution is made to your beneficiary because of your
death.
o If you encounter a financial hardship (within the meaning of 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.
o Even though a distribution may be permitted under the above
rules, it still may be subject to IRS taxes and penalties. (See
"Taxes.")
o The above restrictions on the right to receive a distribution do
not affect the availability of the amount credited to the
contract as of Dec. 31, 1988. The restrictions do not apply to
transfers or exchanges of contract value within the annuity, or
to another registered variable annuity contract or investment
vehicle available through the employer.
Changing ownership
You may change ownership of your non-qualified annuity at any time
by filing a change of ownership with us at our Minneapolis
administrative office. The change will become binding upon us when
we receive and record it. We take no responsibility for the
validity of the change.
If you have a non-qualified annuity, you may lose your tax
advantages by transferring, assigning or pledging any part of it.
(See "Taxes".)
<PAGE>
PAGE 31
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 to any person except American Enterprise Life.
However, if the owner is a trust or custodian, or an employer
acting in a similar capacity, ownership of a contract may be
transferred to the annuitant.
Benefits in case of death
If you or the annuitant dies (or, for qualified annuities, if the
annuitant dies) before annuity payouts begin, we will pay the
beneficiary as follows:
For contracts where both the owner and annuitant were 75 or younger
on the date the contract was issued and if all withdrawals you have
made from this contract have been without withdrawal charges, the
beneficiary receives the greater of:
1. the contract value; or
2. the total purchase payments paid less any amounts withdrawn;
or
3. on or after the fifth contract anniversary, the death benefit
as of the most recent fifth contract anniversary adjusted by
adding any purchase payments made since that most recent
fifth contract anniversary and by subtracting any amounts
withdrawn since that most recent fifth contract anniversary.
For contracts where both the owner and annuitant were 75 or younger
on the date the contract was issued and you have made withdrawals
subject to withdrawal charges, the beneficiary receives the
contract value.
For contracts where either the owner or annuitant were 76 or older
on the date the contract was issued, the beneficiary receives the
contract value.
If your spouse is sole beneficiary under a non-qualified annuity
and you die before the retirement date, your spouse may keep the
annuity 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 reaching
age 70 1/2 and before the retirement date, and the spouse is the
only beneficiary, the spouse may keep the annuity in force until
the date on which the annuitant would have reached age 70 1/2 or
such 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: We will pay the beneficiary in a single sum unless you
have given us other written instructions, or the beneficiary may
receive payouts under any annuity payout plan available under this
contract if:<PAGE>
PAGE 32
o the beneficiary asks us in writing within 60 days after we
receive proof of death;
o payouts begin no later than one year after death; and
o the payout period does not extend beyond the beneficiary's life
or life expectancy.
When paying the beneficiary, we will determine the contract's value
at the next close of business after our death claim requirements
are fulfilled. Interest, if any, will be paid 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. (See "Taxes.")
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 will mutually agree on other payout arrangements. The amount
available for payouts under the plan you select is the contract
value on your retirement date. No withdrawal charges are deducted
under the payout plans listed below.
You also decide whether annuity payouts are to be made on a fixed
or variable basis, or a combination of fixed and variable. Amounts
of fixed and variable payouts depend on:
o the annuity payout plan you select;
o the annuitant's age and, in most cases, sex;
o the annuity table in the contract; and
o the amounts you allocated to the account(s) at settlement.
In addition, for variable payouts only, amounts depend on the
investment performance of the subaccount(s) you select. These
payouts will vary from month to month because the performance of
the underlying mutual funds will fluctuate. (In the case of fixed
annuities, payouts remain the same from month to month.)
Annuity payout plans
You may choose any one of these annuity payout plans by giving us
written instructions at least 30 days before contract values are to
be used to purchase the payout plan:
o Plan A - Life annuity - no refund: Monthly payouts are made
until the annuitant's death. Payouts end with the last payout
before the annuitant's death; no further payouts will be made.
This means that if the annuitant dies after only one monthly payout
has been made, no more payouts will be made.
o Plan B - Life annuity with five, 10 or 15 years certain: Monthly
payouts are made for a guaranteed payout period of five, 10 or 15
years that the annuitant elects. This election will determine the
length of the payout period to the beneficiary if the annuitant
should die before the elected period has expired. The guaranteed
payout period is calculated from the retirement date. If the
annuitant outlives the elected guaranteed payout period, payouts
will continue until the annuitant's death.<PAGE>
PAGE 33
o Plan C - Life annuity - installment refund: Monthly payouts are
made until the annuitant's death, with our guarantee that payouts
will continue for some period of time. Payouts will be made 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.
o Plan D - Joint and last survivor life annuity - no refund:
Monthly payouts are made to the annuitant and a joint annuitant
while both are living. If either annuitant dies, monthly payouts
continue at the full amount until the death of the surviving
annuitant. Payouts end with the death of the second annuitant.
o Plan E - Payouts for a specified period (available as a fixed
payout only): Monthly payouts are made for a specific payout
period of 10 to 30 years chosen by the annuitant. Payouts will be
made only for the number of years specified whether the annuitant
is living or not. Depending on the time period selected, 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 qualified plans: If you purchased a
qualified annuity, you must select a payout plan that provides for
payouts:
o over the life of the annuitant;
o over the joint lives of the annuitant and a designated
beneficiary;
o for a period not exceeding the life expectancy of the
annuitant; or
o for a period not exceeding the joint life expectancies
of the annuitant and a designated beneficiary.
If we do not receive instructions: You must give us written
instructions for the annuity payouts at least 30 days before the
annuitant's retirement date. If you do not, we will make payouts
under Plan B, with 120 monthly payouts guaranteed.
If monthly payouts would be less than $20: We will calculate the
amount of monthly payouts at the time the contract value is used to
purchase a payout plan. If the calculations show that monthly
payouts would be less than $20, we have the right to pay the
contract value to the owner in a lump sum or to change the
frequency of the payouts.
Death after annuity payouts begin
If you or the annuitant dies after annuity payouts begin, any
amount payable to the beneficiary will be provided in the annuity
payout plan in effect.
Transfers between subaccounts after annuity payouts begin
After the annuity payouts begin, you may transfer the value of your
annuity from one variable subaccount to another once each contract
year. You must send us written instructions to do this. We will <PAGE>
PAGE 34
make the transfer at the next close of business after we receive
your instructions.
Taxes
Generally, under current law, any increase in your contract value
is taxable to you only when you receive a payout or withdrawal.
(However, see detailed discussion below.) Any portion of the
annuity payouts and any withdrawals you request that represent
ordinary income are normally taxable. You will receive a 1099 tax
information form for any year in which a taxable distribution was
made.
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 received after your investment
in the annuity is fully recovered will be subject to tax.
Tax law requires that all nonqualified deferred annuity contracts
issued by the same company to the same owner during a calendar year
are to be taxed as a single, unified contract when distributions
are taken from any one of such contracts.
Annuity payouts under qualified annuities: Under a qualified
annuity, the entire payout generally will be includable as ordinary
income and 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 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.
Withdrawals: If you withdraw part or all of your contract before
your annuity payouts begin, your withdrawal payment will be taxed
to the extent that the value of your contract immediately before
the withdrawal exceeds your investment. You also may have to pay a
10% IRS penalty for withdrawals before reaching age 59 1/2. For
qualified annuities, other penalties may apply if you make
withdrawals from your annuity before your plan specifies that you
can receive payouts.
Death benefits to beneficiaries: The death benefit under an
annuity is not tax-exempt. Any amount received by the beneficiary
that represents previously deferred earnings within the contract,
is taxable as ordinary income to the beneficiary in the year(s) he
or she receives the payments.
Annuities owned by corporations, partnerships or trusts: 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 continue to be 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 <PAGE>
PAGE 35
amount includable in your ordinary income. However, this penalty
will not apply to any amount received by you or your beneficiary:
o because of your death;
o because you become disabled (as defined in the Code);
o if the distribution is part of a series of substantially equal
periodic payments, made at least annually, over your life or
life expectancy (or joint lives or life expectancies of you and
your beneficiary); or
o 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 make withdrawals from your annuity before your plan specifies
that payouts can be made.
Withholding, generally: If you receive all or part of the contract
value from an annuity, withholding may be imposed against the
taxable income portion of the payment. Any withholding that is
done represents a prepayment of your tax due for the year. You
take credit for such amounts on the annual tax return that you
file.
If the payment is part of an annuity payout plan, the amount of
withholding generally is computed using payroll tables. You can
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 withdrawal) withholding is computed using 10% of the
taxable portion. Similar to above, as long as you've 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,
any payment from which federal withholding is deducted may also
have state withholding deducted. The withholding requirements may
differ if payment is being made to a non-U.S. citizen or if the
payment is being delivered 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), mandatory 20% income tax withholding generally will be
imposed at the time the payment is made. This mandatory
withholding is in place of the elective withholding discussed
above. This mandatory withholding will not be imposed if:
o instead of receiving the distribution check, you elect to have
the distribution rolled over directly to an IRA or another
eligible plan;
o the payment 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<PAGE>
PAGE 36
o the payment is a minimum distribution required under the Code.
Payments made to a surviving spouse instead of being directly
rolled over to an IRA may also 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 make such
a transfer without receiving adequate consideration, the transfer
is considered a gift, and also may be considered a withdrawal for
federal income tax purposes. If the gift is a currently taxable
event, the amount of deferred earnings at the time of the transfer
will be taxed to the original owner, who also may be subject to a
10% IRS penalty as discussed earlier. In this case, the new
owner's investment in the annuity will be the value of the annuity
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
withdrawal.
Important: Our discussion of federal tax laws is based upon our
understanding of these laws as they are currently interpreted.
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
The contract is intended to 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,
notwithstanding 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 such
amendments.
Voting rights
As contract owner with investments in the variable subaccount(s),
you may vote on important mutual fund policies until annuity
payouts begin. Once they begin, the person receiving them has
voting rights. We will vote fund shares according to the
instructions of the person with voting rights.
Before annuity payouts begin, the number of votes you have is
determined by applying your percentage interest in each variable
subaccount to the total number of votes allowed to the subaccount.
After annuity payouts begin, the number of votes you have is equal
to:
<PAGE>
PAGE 37
o the reserve held in each subaccount for your contract, divided
by
o the net asset value of one share of the applicable underlying
mutual fund.
As we make annuity payouts, the reserve for the contract decreases;
therefore, the number of votes also will decrease.
We calculate votes separately for each account. Notice of these
meetings, proxy materials and a statement of the number of votes to
which the voter is entitled, will be sent.
We will vote shares for which we have not received instructions in
the same proportion as the votes for which we have received
instructions. We also will vote the shares for which we have
voting rights in the same proportion as the votes for which we have
received instructions.
Substitution of Investments
If shares of any fund should not be available for purchase by the
appropriate variable subaccount or if, in the judgment of American
Enterprise Life's Management, further investment in such shares is
no longer appropriate in view of the purposes of the subaccount,
investment in the subaccount may be discontinued or another
registered open-end management investment company may be
substituted for fund shares held in the subaccounts if American
Enterprise Life believes it would be in the best interest of
persons having voting rights under the contract. The variable
account may be operated as a management company under the 1940 Act
or it may be deregistered under this Act if the registration is no
longer required. In the event of any such substitution or change,
American Enterprise Life, without the consent or approval of the
owners, may amend the contract and take whatever action is
necessary and appropriate. However, no such substitution or change
will be made without the necessary approval of the SEC and state
insurance departments. American Enterprise Life will notify owners
of any substitution or change.
Distribution of the Contracts
The contracts will be distributed by banks and financial
institutions either directly or through a network of third-party
marketers. American Express Financial Advisors Inc., the principal
underwriter for the variable account, will pay commissions for the
distribution of the contracts to the broker-dealers of the banks or
financial institutions or the broker-dealers of the third-party
marketers who have entered into distribution agreements with
American Express Financial Advisors. These commissions will not be
more than 7% of purchase payments received on the contracts.
From time to time, American Enterprise Life may pay or permit other
promotional incentives, in cash or credit or other compensation.
About American Enterprise Life
The AEL Personal PortfolioSM is issued by American Enterprise Life.
American Enterprise Life is a wholly owned subsidiary of IDS Life, <PAGE>
PAGE 38
which 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
Company is a financial services company principally engaged through
subsidiaries (in addition to American Express Financial
Corporation) in travel related services, investment services and
international banking services.
American Enterprise Life is a stock life insurance company
organized in 1981 under the laws of the state of Indiana. Its
administrative office is located at 80 South 8th Street,
Minneapolis, MN 55402. Its statutory address is 100 Capitol Center
South, 201 North Illinois Street, Indianapolis, IN 46204. American
Enterprise Life is licensed in the state of Indiana and it conducts
a conventional life insurance business in the District of Columbia
and in all states except Maine, New Hampshire, New York, Vermont
and Wyoming.
American Express Financial Advisors Inc. is the principal
underwriter for the variable account. Its home office is IDS Tower
10, Minneapolis, MN 55440-0010. American Express Financial
Advisors is registered with the SEC under the Securities Exchange
Act of 1934 as a broker-dealer and is a member of the National
Association of Securities Dealers, Inc. American Express Financial
Advisors is a wholly owned subsidiary of American Express Financial
Corporation.
The American Express Financial Corporation family of companies
offers not only insurance and annuities, but also mutual funds,
investment certificates and a broad range of financial management
services.
Other subsidiaries provide investment management and related
services for pension, profit-sharing, employee savings and
endowment funds of businesses and institutions.
Regular and special reports
Services
To help you track and evaluate the performance of your annuity,
American Enterprise Life provides:
Quarterly statements showing the value of your investment.
Annual reports containing required information on the annuity and
its underlying investments.
<PAGE>
PAGE 39
Table of contents of the Statement of Additional Information
Performance information....................... 3
Calculating annuity payouts................... 6
Rating agencies............................... 7
Principal underwriter......................... 8
Independent auditors.......................... 8
Mortality and expense risk fee................ 8
Saving for retirement......................... 8
Prospectus.................................... 8
Financial statements -
American Enterprise Life Insurance
Company.................................. 9
___________________________________________________________________
Please check the appropriate box to receive a copy of the Statement
of Additional Information for:
_____ AEL Personal PortfolioSM
_____ IDS Life Retirement Annuity Mutual Funds
_____ The Quest for ValueSM Accumulation Trust
_____ The Putnam Capital Manager Trust
_____ G.T. Global Variable Investment Funds
Mail your request to:
American Enterprise Life Insurance Company
80 South 8th Street
P.O. Box 458
Minneapolis, MN 55440-0534
American Enterprise Life will mail your request to:
Your name _______________________________________________________
Address _________________________________________________________
City ______________________ State ______________ Zip ___________
<PAGE>
PAGE 40
STATEMENT OF ADDITIONAL INFORMATION
for
AEL PERSONAL PORTFOLIOSM
AMERICAN ENTERPRISE VARIABLE ANNUITY ACCOUNT
May 1, 1995
American Enterprise Variable Annuity Account is a separate account
established and maintained by American Enterprise Life Insurance
Company (American Enterprise Life).
This Statement of Additional Information (SAI), dated May 1, 1995,
is not a prospectus. It should be read together with the Account's
prospectus, dated May 1, 1995, which may be obtained from your
agent, or by writing or calling American Enterprise Life Service at
the address or telephone number below.
American Enterprise Life Service
80 South Eighth Street
P.O. Box 458
Minneapolis, MN 55440-0534
(612) 671-7700
<PAGE>
PAGE 41
TABLE OF CONTENTS
Performance Information.......................................p. 3
Calculating Annuity Payouts...................................p. 6
Rating Agencies...............................................p. 7
Principal Underwriter.........................................p. 8
Independent Auditors..........................................p. 8
Mortality and Expense Risk Fee................................p. 8
Saving for Retirement.........................................p. 8
Prospectus....................................................p. 8
Financial Statements
- American Enterprise Life Insurance Company.............p. 9
<PAGE>
PAGE 42
PERFORMANCE INFORMATION
The following performance figures are calculated on the basis of
historical performance of the funds. The performance figures
relating to these funds assume that the contract was in existence
prior to January 12, 1995, which it was not. Beginning January 12,
1995, when these funds became available as investment options under
the contract, actual values will be used for the calculations.
Calculation of Yield for the IDS Life Moneyshare Subaccount
Simple yield for the IDS Life Moneyshare subaccount (EMS) will be
based on the: (a) change in the value of a hypothetical investment
(exclusive of capital changes) at the beginning of a seven-day
period for which yield is to be quoted; (b) subtracting a pro rata
share of subaccount expenses accrued over the seven-day period; (c)
dividing the difference by the value of the subaccount at the
beginning of the period to obtain the base period return; and (d)
annualizing the results (i.e., multiplying the base period return
by 365/7). Calculation of compound yield begins with the same base
period return used in the calculation of yield, which is then
annualized to reflect compounding according to the following
formula:
365/7
Compound Yield =[(Base Period Return + 1) ]-1
Annualized Yields based on Seven-Day Period ended
Dec. 31, 1994
Subaccount investing in: Simple Yield Compound Yield
IDS Life Moneyshare Fund 4.35% 4.44%
Calculation of Yield for the IDS Life Special Income Subaccount
For the IDS Life Special Income subaccount quotations of yield will
be based on all investment income earned during a particular 30-day
period, less expenses accrued during the period (net investment
income) and will be computed by dividing net investment income per
accumulation unit by the value of an accumulation unit on the last
day of the period, according to the following formula:
YIELD = 2[(a-b + 1)6 - 1]
cd
where: a = dividends and investment income earned during the
period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of accumulation units
outstanding during the period that were entitled to
receive dividends.
<PAGE>
PAGE 43
d = the maximum offering price per accumulation unit on
the last day of the period.
Yield on the subaccount is earned from the increase in the net
asset value of shares of the fund in which the subaccount invests
and from dividends declared and paid by the fund, which are
automatically invested in shares of the fund.
Annualized yield based on 30-Day Period ended Dec. 31, 1994
Subaccount investing in: Yield
IDS Life Special Income (5.49)%
Calculation of Average Annual Total Return
Quotations of average annual total return for any subaccount will
be expressed in terms of the average annual compounded rate of
return of a hypothetical investment in the contract over a period
of one, five and 10 years (or, if less, up to the life of the
subaccount), calculated according to the following formula:
P(1+T)n = ERV
where: P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the one-, five-or
ten-year (or other) period at the end of the one-,
five- or ten-year (or other) period (or fractional
portion thereof).
Subaccount total return figures reflect the deduction of the
contract administrative charge, variable account administrative
charge and mortality and expense risk fee. Performance figures
will be shown with the deduction of the applicable withdrawal
charge. The Securities and Exchange Commission (SEC) requires that
an assumption be made that the contract owner withdraws the entire
contract at the end of the one, five and ten year periods (or, if
less, up to the life of the subaccount) for which performance is
required to be calculated. In addition, performance figures may be
shown without the deduction of a withdrawal charge.
Average Annual Total Return For Period Ended Dec. 31, 1994
<TABLE><CAPTION>
Average Annual Total Return with Withdrawal
Since
Subaccount investing in: 1 Year 5 Year 10 Year Inception
<S> <C> <C> <C> <C>
IDS LIFE
Aggressive Growth Fund (1/92)* (14.70)% - - 1.90%
Capital Resource Fund (10/81) (7.34)% 7.87% 11.90% -
International Equity Fund (1/92) (10.39)% - - 5.82%
Managed Fund (4/86) (12.93)% 6.97% - 8.29%
Moneyshare Fund (10/81) (4.72)% 2.60% 4.16% -
Special Income Fund (10/81) (12.37)% 6.26% 8.53% -<PAGE>
PAGE 44
Since
1 Year 5 Year 10 Year Inception
QUEST FOR VALUE ACCUMULATION TRUST**
Managed Portfolio (8/88)*** (5.91)% 11.50% - 14.36%
GT GLOBAL:
Variable Latin America Fund (2/93) 0.52% - - 22.94%
Variable New Pacific Fund (2/93) (20.77)% - - 0.61%
PCM
New Opportunities Fund (5/94) - - - (3.45)%
Growth & Income Fund (2/88) (8.15)% 6.76% - 10.50%
High Yield Fund (2/88) (9.41)% 10.86% - 10.17%
Diversified Income Fund (9/93) (12.66)% - - (7.19)%
Average Annual Total Return without Withdrawal
Since
Subaccount Investing in: 1 Year 5 Year 10 Year Inception
IDS Life (7.70)% - - 3.50%
Aggressive Growth Fund (1/92) (0.34)% 8.31% 11.90% -
Capital Resource Fund (10/81) (3.39)% - - 7.31%
International Equity Fund (1/92) (5.93)% 7.42% - 8.29%
Managed Fund (4/86) 2.28% 3.14% 4.16% -
Moneyshare Fund (10/81) (5.37)% 6.73% 8.53% -
Special Income Fund (10/81)
QUEST FOR VALUE ACCUMULATION TRUST**
Managed Portfolio (8/88)*** 1.09% 11.89% - 14.44%
GT GLOBAL:
Variable Latin America (2/93) 7.52% - - 25.57%
Variable New Pacific Fund (2/93) (13.77)% - - 3.73%
PCM
New Opportunities Fund (5/94) - - - 7.13%
Growth & Income Fund (2/88) (1.15)% 7.22% - 10.58%
High Yield Fund (2/88) (2.41)% 11.25% - 10.25%
Diversified Income Fund (9/93) (5.66)% - - (2.89)%
*inception dates of the funds are shown in parentheses.
**On September 16, 1994, an investment company then called Quest for Value Accumulation
Trust (the "Old Trust") was effectively divided into two investment funds, the Old Trust
and the new Quest for Value Accumulation Trust (the "Fund"), at which time the Fund
commenced operations. The total net assets for the Managed Portfolio immediately after the
transaction was $682,601,380 with respect to the Old Trust and $51,345,102 with respect to
the Fund. For the period prior to Sept. 16, 1994, the performance figures above for the
Managed Portfolio reflect the performance of the corresponding Portfolio of the Old Trust.
***Inception date of the Managed Portfolio of the Old Trust.
</TABLE>
Aggregate 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) and is computed by the
following formula:
ERV - P
P
<PAGE>
PAGE 45
where: P = a hypothetical initial payment of $1,000.
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the one, five,
or ten year (or other) period at the end of the
one, five, or ten year (or other) period (or
fractional portion thereof).
Performance of the subaccounts may be quoted or compared to
rankings, yields, or returns as published or prepared by
independent rating or statistical services or publishers or
publications such as Barron's, Business Week, Forbes, Fortune,
Institutional Investor, Investor's Daily, Kiplinger's Personal
Finance, Money, Morningstar Mutual Fund Values, Mutual Fund
Forecaster, The New York Times, Stranger's Investment Advisor, USA
Today, U.S. News & World Report and The Wall Street Journal.
CALCULATING ANNUITY PAYOUTS
The Variable Account
The following calculations are done separately for each of the
subaccounts of the variable account. The separate monthly payouts,
added together, make up your total variable annuity payout.
Initial Payout: To compute your first monthly payment, we:
o determine the dollar value of your annuity as of the valuation
date seven days before the retirement date and then deduct any
applicable premium tax.
o apply the result to the annuity table contained in the contract
or another table at least as favorable. The annuity table shows
the amount of the first monthly payment for each $1,000 of value
which depends on factors built into the table, as described below.
Annuity Units: The value of your subaccount is then converted to
annuity units. To compute the number credited to you, we divide
the first monthly payment by the annuity unit value (see below) on
the valuation date on (or next day preceding) the seventh calendar
day before the retirement date. The number of units in your
subaccount is fixed. The value of the units fluctuates with the
performance of the underlying mutual fund.
Subsequent Payouts: To compute later payouts, we multiply:
o the annuity unit value on the valuation date on or immediately
preceding the seventh calendar day before the payout is due; by
o the fixed number of annuity units credited to you.
Annuity Table: The table shows the amount of the first monthly
payment for each $1,000 of contract value according to the age and,
when applicable, the sex of the annuitant. (Where required by law,
we will use a unisex table of settlement rates.) The table assumes
that the contract value is invested at the beginning of the annuity<PAGE>
PAGE 46
payout period and earns a 5% rate of return, which is reinvested
and helps to support future payouts.
Annuity Unit Values: This value was originally set at $1 for each
subaccount. To calculate later values we multiply the last annuity
value by the product of:
o the net investment factor; and
o the neutralizing factor. The purpose of the neutralizing factor
is to offset the effect of the assumed investment rate built into
the annuity table. With an assumed investment rate of 5%, the
neutralizing factor is 0.999866 for a one day valuation period.
Net Investment Factor:
o Determined each business day by adding the underlying mutual
fund's current net asset value per share plus per share amount of
any current dividend or capital gain distribution; then
o dividing that sum by the previous net asset value per share; and
o subtracting the percentage factor representing the mortality and
expense risk fee from the result.
Because the net asset value of the underlying mutual fund may
fluctuate, the net investment factor may be greater or less than
one, and the accumulation unit value may increase or decrease. You
bear this investment risk in a variable subaccount.
The Fixed Account
Your fixed annuity payout amounts are guaranteed. Once calculated,
your payout will remain the same and never change. To calculate
your annuity payouts we:
o take the value of your fixed account at the retirement date or
the date you have selected to begin receiving your annuity payouts;
then
o using an annuity table we apply the value according to the
annuity payout plan you select; and
o the annuity payout table we use will be the one in effect at the
time you choose to begin your annuity payouts. The table will be
equal to or greater than the table in your contract.
RATING AGENCIES
The following chart reflects the ratings given to American
Enterprise Life by independent rating agencies. These agencies
evaluate the financial soundness and claims-paying ability of
insurance companies based on a number of different factors. This
information does not relate to the management or performance of the
variable subaccounts of the AEL Personal PortfolioSM. This
information relates only to the fixed account and reflects American
Enterprise Life's ability to make annuity payouts and to pay death
benefits and other distributions from the annuity.
<PAGE>
PAGE 47
Rating agency Rating
A.M. Best A+
(Superior)
Duff & Phelps AAA
Moody's Aa2
PRINCIPAL UNDERWRITER
The principal underwriter for the variable account is American
Express Financial Advisors Inc. which offers the variable contracts
on a continuous basis.
INDEPENDENT AUDITORS
The financial statements of American Enterprise Life Insurance
Company (a wholly owned subsidiary of IDS Life Insurance Company)
as of Dec. 31, 1994 and 1993 and for each of the three years in the
period ended Dec. 31, 1994, have been audited by Ernst & Young LLP,
independent auditors as stated in their report appearing herein.
MORTALITY AND EXPENSE RISK FEE
American Enterprise Life has represented to the SEC that:
American Enterprise Life has reviewed publicly available
information regarding products of other companies. Based upon this
review, American Enterprise Life has concluded that the mortality
and expense risk fee is within the range of charges determined by
industry practice. American Enterprise Life will maintain at its
administrative office, and make available on request of the SEC or
its staff, a memorandum setting forth in detail the variable
products analyzed and the methodology, and results of, its
comparative review.
American Enterprise Life has concluded that there is a reasonable
likelihood that the proposed distribution financing arrangements
made with respect to the contracts will benefit the variable
account and investors in the contracts. The basis for such
conclusion is set forth in a memorandum which will be made
available to the SEC or its staff on request.
SAVING FOR RETIREMENT
You may have to save more for retirement because the average person
lives 17 years in retirement. Social security and pensions will
not cover your expenses in retirement. Sixty cents of every
retirement dollar must come from your personal savings.
<PAGE>
PAGE 48
Sources: Social Security Administration, U.S. Department of
Health and Human Services.
PROSPECTUS
The prospectus dated May 1, 1995, is hereby incorporated in this
SAI by reference.
<TABLE>
<CAPTION>
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
BALANCE SHEETS
December 31,
ASSETS 1994 1993
(thousands)
<S> <C> <C>
Investments:
Fixed maturities:
Held to maturity, at amortized cost (Fair value:
1994, $1,040,663) $1,130,752 $ -
Available for sale, at fair value (Amortized cost:
1994, $1,186,545) 1,119,371 -
Investment securities, at amortized cost (Fair value:
1993, $1,881,784) - 1,817,429
2,250,123 1,817,429
Mortgage loans on real estate
(Fair value: 1994, $204,883; 1993, $27,862) 219,445 28,928
Other investments 28 159
2,469,596 1,846,516
Cash and cash equivalents 53,358 1,942
Accrued investment income 33,928 25,385
Deferred policy acquisition costs 137,648 100,006
Deferred income taxes 17,065 -
Other assets 691 179
Total assets $2,712,286 $1,974,028
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Future policy benefits for fixed annuities $2,480,122 $1,735,736
Policy claims and other policyholders' funds 15,706 14,436
Amounts due to brokers 48,872 27,691
Securities sold under repurchase agreements - 30,000
Deferred income taxes - 10,394
Other liabilities 4,331 3,459
Total liabilities 2,549,031 1,821,716
Stockholder's equity:
Capital stock, $100 par value per share;
100,000 shares authorized,
20,000 shares issued and outstanding 2,000 2,000
Additional paid-in capital 142,872 107,872
Net unrealized gain (loss) on investments (43,689) 6
Retained earnings 62,072 42,434
Total stockholder's equity 163,255 152,312
Total liabilities and stockholder's equity $2,712,286 $1,974,028
======= =======
Commitments and contingencies (Note 7)
See accompanying notes.
</TABLE>
<PAGE>
PAGE 49
<TABLE>
<CAPTION>
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
STATEMENTS OF INCOME
Years ended December 31,
1994 1993 1992
(thousands)
<S> <C> <C> <C>
Revenues:
Net investment income $ 162,201 $ 124,532 $ 87,911
Contractholder charges 2,753 1,047 516
Net gain (loss) on investments (1,190) 576 2,914
Total revenues 163,764 126,155 91,341
Benefits and expenses:
Interest credited on investment contracts 112,977 78,538 64,478
Amortization of deferred policy
acquisition costs 14,052 15,992 4,428
Other operating expenses 6,523 3,369 1,547
Total expenses 133,552 97,899 70,453
Income before income taxes 30,212 28,256 20,888
Income taxes 10,574 10,033 7,036
Net income $ 19,638 $ 18,223 $ 13,852
===== ===== =====
See accompanying notes.
<PAGE>
PAGE 50
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
Years ended December 31,
1994 1993 1992
(thousands)
Cash flows from operating activities:
Net income $ 19,638 $ 18,223 $ 13,852
Adjustments to reconcile net income to
net cash used in operating activities:
Change in accrued investment income (8,543) (7,654) (6,377)
Change in deferred policy acquisition
costs, net (37,642) (36,800) (29,915)
Change in other assets (512) (43) 1,364
Change in policy claims and other
policyholders' funds 1,270 1,792 575
Change in deferred income taxes (3,925) 3,089 4,014
Change in other liabilities 872 (991) 3,626
Amortization of premium
(accretion of discount), net 1,812 (3,332) (5,430)
Net (gain) loss on investments 1,190 (576) (2,914)
Other, net - 5 11
Net cash used in operating activities (25,840) (26,287) (21,194)
Cash flows from investing activities:
Fixed maturities held to maturity:
Purchases (136,330) - -
Maturities 84,514 - -
Sales 1,469 - -
Fixed maturities available for sale:
Purchases (569,459) - -
Maturities 64,116 - -
Sales 54,755 - -
Fixed maturites:
Purchases - (1,066,094) (714,883)
Maturities - 231,446 144,806
Sales - 302,122 40,147
Other investments:
Purchases (192,488) (26,792) (2,239)
Sales 112 22 -
Change in amounts due to brokers 21,181 10,948 9,704
Net cash used in investing activities (672,130) (548,348) (522,465)
See accompanying notes.
<PAGE>
PAGE 51
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS (continued)
Years ended December 31,
1994 1993 1992
(thousands)
Cash flows from financing activities:
Activity related to investment contracts:
Considerations received 745,053 769,355 492,823
Surrenders and other benefits (113,644) (336,316) (49,883)
Interest credited to account balances 112,977 78,538 64,478
Change in securities sold under
repurchase agreements (30,000) 15,000 15,000
Capital contribution from parent 35,000 50,000 20,000
Net cash provided by financing activities 749,386 576,577 542,418
Net increase (decrease) in cash and cash
equivalents 51,416 1,942 (1,241)
Cash and cash equivalents at beginning
of year 1,942 - 1,241
Cash and cash equivalents at end of year $ 53,358 $ 1,942 $ -
====== ====== =====
See accompanying notes.
</TABLE>
<PAGE>
PAGE 52
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
($ thousands)
1. Summary of significant accounting policies
Nature of business
American Enterprise Life Insurance Company (the Company) issues
direct business consisting of single and installment premium
annuity contracts sold through savings and loan institutions. The
Company is licensed to transact insurance business in 46 states at
Dec. 31, 1994.
Basis of presentation
The Company is a wholly owned subsidiary of IDS Life Insurance
Company (IDS Life), which is a wholly owned subsidiary of American
Express Financial Corporation (formerly IDS Financial Corporation).
American Express Financial Corporation is a wholly owned subsidiary
of American Express Company. The accompanying financial statements
have been prepared in conformity with generally accepted accounting
principles which vary in certain respects from reporting practices
prescribed or permitted by state insurance regulatory authorities
(see Note 4).
Investments
As of Jan. 1, 1994, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." Under SFAS No. 115,
fixed maturities that the Company has both the positive intent and
the ability to hold to maturity are classified as held to maturity
and carried at amortized cost. All other fixed maturities and all
marketable equity securities are classified as available for sale
and carried at fair value. Unrealized gains and losses on
securities classified as available for sale are carried as a
separate component of stockholder's equity. The effect of adopting
SFAS No. 115 was to increase stockholder's equity by approximately
$14 million, net of tax, as of Jan. 1, 1994, but the adoption had
no impact on the Company's net income.
Management determines the appropriate classification of fixed
maturities at the time of purchase and reevaluates the
classification at each balance sheet date.
Mortgage loans on real estate are carried principally at the unpaid
principal balances of the related loans. Other investments include
equity securities. 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. Equity securities are carried at
market value and the related net unrealized appreciation or
depreciation is reported as a credit or charge to stockholder's
equity.
Realized investment gain or loss is determined on an identified
cost basis.
<PAGE>
PAGE 53
1. Summary of significant accounting policies (continued)
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.
Statement of cash flows
The Company considers investments with a maturity at the date of
their acquisition of three months or less to be cash equivalents.
These securities are carried principally at amortized cost which
approximates fair value.
Supplementary information to the statements of cash flows for the
years ended Dec. 31 is summarized as follows:
1994 1993 1992
Cash paid during the year for:
Income taxes $14,750 $7,020 $1,360
Interest on borrowings 669 238 103
Recognition of profits on annuity contracts
The Company issues single premium deferred annuity contracts that
provide for a surrender charge at annually decreasing rates upon
withdrawal of the annuity accumulation value by the contract owner.
No front sales load is deducted from the contract considerations
received on these contracts ("no load" annuities). All of the
Company's single premium deferred annuity contracts provide for
crediting the contract owners' accumulations at specified rates of
interest. Such rates are revised by the Company from time to time
based on changes in the market investment yield rates for
fixed-income securities.
Profits on single premium deferred annuities and installment
annuities are recognized by the Company over the lives of the
contracts and represent the excess of investment income earned from
investment of contract considerations over interest credited to
contract owners and other expenses.
Deferred policy acquisition costs
The costs of acquiring new business, principally sales
compensation, policy issue costs, and certain sales expenses, have
been deferred on annuity contracts. These costs are amortized
based upon surrender charge revenue and a portion of the excess of
investment income earned from investment of the contract
considerations over the interest credited to contract owners.
<PAGE>
PAGE 54
1. Summary of significant accounting policies (continued)
Liabilities for future policy benefits
Liabilities for single premium deferred annuities and installment
annuities are accumulation values. Liabilities for fixed annuities
in a benefit status are based on the 1983a Table with various
interest rates ranging from 5.5 percent to 9.5 percent, depending
on year of issue.
Federal income taxes
The Company's taxable income is included in the consolidated
federal income tax return of American Express Company. The Company
provides for income taxes on a separate return basis, except that,
under an agreement between American Express Financial Corporation
and American Express Company, tax benefit is recognized for losses
to the extent they can be used on the consolidated tax return. It
is the policy of American Express Financial Corporation and its
subsidiaries that American Express Financial Corporation will
reimburse a subsidiary for any tax benefit.
Included in other liabilities at Dec. 31, 1994 and 1993 are $1,353
and $1,648, respectively, payable to IDS Life for federal income
taxes.
Reclassification
Certain 1993 and 1992 amounts have been reclassified to conform to
the 1994 presentation.
2. Investments
Fair values of investments in fixed maturities represent quoted
market prices and estimated values when quoted prices are not
available. Estimated values are determined by established
procedures involving, among other things, review of market indices,
price levels of current offerings of comparable issues, price
estimates and market data from independent brokers and financial
files.
Changes in net unrealized appreciation (depreciation) of
investments for the years ended Dec. 31 are summarized as follows:
1994 1993 1992
Fixed maturities:
Held to maturity $(132,842) $ -- $ --
Available for sale (88,775) -- --
Investment securities -- 24,390 (10,664)
Net gain (loss) on investments for the years ended Dec. 31 is
summarized as follows:
1994 1993 1992
Fixed maturities $(1,198) $568 $2,910
Other investments 8 8 4
$(1,190) $576 $2,914
===== === ====
<PAGE>
PAGE 55
2. Investments (continued)
The amortized cost, gross unrealized gains and losses and fair
value of investments in fixed maturities and equity securities at
Dec. 31, 1994 are as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Held to maturity Cost Gains Losses Value
U.S. Government
agency obligations $ 2,030 $ -- $ 32 $ 1,998
State and municipal
obligations 3,004 41 -- 3,045
Corporate bonds
and obligations 886,477 4,270 66,886 823,861
Mortgage-backed
securities 239,241 985 28,467 211,759
$1,130,752 $5,296 $95,385 $1,040,663
======= ==== ===== =======
Gross Gross
Amortized Unrealized Unrealized Fair
Available for sale Cost Gains Losses Value
U.S. Government
agency obligations $ 25,440 $ -- $ 476 $ 24,964
State and municipal
obligations 999 22 -- 1,021
Corporate bonds
and obligations 259,144 1,059 4,953 255,250
Mortgage-backed
securities 900,962 418 63,244 838,136
Total fixed
maturities 1,186,545 1,499 68,673 1,119,371
Equity securities 67 -- 39 28
$1,186,612 $1,499 $68,712 $1,119,399
======= ==== ===== =======
The change in net unrealized gain (loss) on available for sale
securities included as a separate component of stockholder's equity
was $(43,695) in 1994.
The amortized cost, gross unrealized gain and losses and fair
values on investments in fixed maturities at Dec. 31, 1993 are as
follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
U.S. Government
agency obligations $ 2,044 $ 165 $ -- $ 2,209
State and municipal
obligations 998 108 -- 1,106
Corporate bonds
and obligations 825,045 46,077 2,240 868,882
Mortgage-backed
securities 989,342 26,309 6,064 1,009,587
$1,817,429 $72,659 $8,304 $1,881,784
======= ===== ==== =======<PAGE>
PAGE 56
2. Investments (continued)
At Dec. 31, 1993, net unrealized appreciation on equity securities
included $15 of gross unrealized appreciation. The fair value of
equity securities was $159 at Dec. 31, 1993.
The amortized cost and fair value of investments in fixed
maturities at Dec. 31, 1994 by contractual maturity are shown
below. Expected maturities will differ from contractual maturities
because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties.
Amortized Fair
Held to maturity Cost Value
Due in one year or less $ 3,460 $ 3,499
Due from one to five years 79,238 78,571
Due from five to ten years 644,998 601,180
Due in more than ten years 163,815 145,654
Mortgage-backed securities 239,241 211,759
$1,130,752 $1,040,663
======= =======
Amortized Fair
Available for sale Cost Value
Due from one to five years $ 242,916 $ 238,788
Due from five to ten years 36,353 36,448
Due in more than ten years 6,314 5,999
Mortgage-backed securities 900,962 838,136
$1,186,545 $1,119,371
======== ========
During the year ended Dec. 31, 1994, fixed maturities classified as
held to maturity were sold with proceeds of $1,469 and gross
realized gains and losses on such sales were $nil and $278,
respectively. The sale of these fixed maturities was due to credit
deterioration.
In addition, fixed maturites available for sale were sold during
1994 with proceeds of $54,755 and gross realized gains and losses
on such sales were $112 and $1,059, respectively.
Proceeds from sales of investments in fixed maturities during 1993
were $302,122. During 1993, gross gains of $1,402 and gross losses
of $836 were realized on those sales.
At Dec. 31, 1994, bonds carried at $2,470 were on deposit with
various states as required by law.
Net investment income for the years ended Dec. 31 is summarized as
follows:
<PAGE>
PAGE 57
2. Investments (continued)
1994 1993 1992
Interest on fixed maturities $151,599 $123,822 $87,535
Interest on mortgage loans 9,202 858 31
Interest on cash equivalents 1,452 258 647
Other 824 210 60
163,077 125,148 88,273
Less investment expenses 876 616 362
$162,201 $124,532 $87,911
====== ====== =====
Securities are rated by Moody's and Standard & Poor's (S&P), except
for securities carried at approximately $85 million which are rated
by American Express Financial Corporation internal analysts using
criteria similar to Moody's and S&P. A summary of investments in
fixed maturities, at amortized cost, by rating on Dec. 31 is as
follows:
Rating 1994 1993
Aaa/AAA $1,151,235 $ 983,437
Aa/AA 27,882 8,795
Aa/A 23,030 18,679
A/A 299,856 115,188
A/BBB 125,633 78,285
Baa/BBB 419,369 416,313
Baa/BB 99,036 68,428
Below investment grade 171,256 128,304
$2,317,297 $1,817,429
======= =======
At Dec. 31, 1994, approximately 93 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 Dec. 31, 1994, approximately 8.9 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 at Dec. 31, 1994 are as follows:
<TABLE><CAPTION>
Dec. 31, 1994 Dec. 31, 1993
On Balance Commitments On Balance Commitments
Region Sheet to Purchase Sheet to Purchase
<S> <C> <C> <C> <C>
East North Central $ 43,162 $17,349 $ 5,756 $ 7,332
West North Central 6,695 7,590 1,177 1,375
South Atlantic 52,611 10,301 10,065 10,540
Middle Atlantic 51,838 8,132 5,462 14,665
New England 19,538 7,590 1,182 3,208
Pacific 10,147 -- 2,218 1,833
West South Central 4,996 -- -- --
East South Central 5,029 -- 498 --
Mountain 25,429 3,253 2,570 6,874
$219,445 $54,215 $28,928 $45,827
====== ===== ===== =====
<PAGE>
PAGE 58
2. Investments (continued)
Dec. 31, 1994 Dec. 31, 1993
On Balance Commitments On Balance Commitments
Property type Sheet to Purchase Sheet to Purchase
Apartments $ 80,016 $13,554 $18,208 $21,997
Department/retail stores 78,486 21,686 5,720 17,873
Office buildings 26,559 10,843 918 1,833
Industrial buildings 21,837 4,879 1,935 1,833
Nursing/retirement homes 6,521 -- 1,147 916
Medical buildings 6,026 3,253 1,000 1,375
$219,445 $54,215 $28,928 $45,827
====== ===== ===== =====
</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 the right to take possession of
the property if the borrower fails to perform according to the
terms of the agreement. The fair value of the mortgage loans is
determined by a discounted cash flow analysis using mortgage
interest rates currently offered for mortgages of similar
maturities. Commitments to purchase mortgages are made in the
ordinary course of business. The fair value of the mortgage
commitments is $nil.
3. Income taxes
The Company qualifies as a life insurance company for federal
income tax purposes. As such, the Company is subject to the
Internal Revenue Code provisions applicable to life insurance
companies.
The income tax expense consists of the following:
1994 1993 1992
Federal income taxes:
Current $14,454 $6,928 $2,995
Deferred (3,925) 3,089 4,014
10,529 10,017 7,009
State income taxes-current 45 16 27
Income tax expense $10,574 $10,033 $7,036
===== ===== ====
Increases (decreases) to the federal income tax provision
applicable to pretax income based on the statutory rate are
attributable to:
<TABLE><CAPTION>
1994 1993 1992
Provision Rate Provision Rate Provision Rate
<S> <C> <C> <C> <C> <C> <C>
Federal income taxes based on
the statutory rate $10,574 35.0% $ 9,889 35.0% $7,102 34.0%
Increases (decreases) are
attributable to:
Deferred tax adjustment due
to rate increase -- -- 210 0.8 -- --
Tax-excluded interest (81) (0.3) (86) (0.3) (89) (0.4)
Other, net 36 0.1 4 -- (4) --
Federal income taxes $10,529 34.8% $10,017 35.5% $7,009 33.6%
===== ==== ===== ==== ==== ===
</TABLE>
<PAGE>
PAGE 59
3. Income taxes (continued)
Significant components of the Company's deferred tax assets and
liabilities as of Dec. 31 are as follows:
Deferred tax assets: 1994 1993
Policy reserves $34,732 $21,945
Investments 20,491 --
Other 1,592 722
Total deferred tax assets 56,815 22,667
Deferred tax liabilities:
Deferred policy acquisition costs 39,750 30,356
Investments -- 2,705
Total deferred tax liabilities 39,750 33,061
Net deferred tax assets (liabilities) $17,065 $(10,394)
===== =====
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 aggregated
$3,165 and $3,035 as of Dec. 31, 1994 and 1993, respectively.
Statutory net income for 1994 and 1993 and stockholder's equity as
of Dec. 31, are summarized as follows:
1994 1993 1992
Statutory net income $ 8,131 $ 10,855 $ 414
Statutory stockholder's equity 148,037 112,907 55,788
The Indiana Department of Insurance has permitted the Company to
include all of its below-investment-grade securities as admitted
assets as of Dec. 31, 1994. Under prescribed statutory accounting
practices, some of these securities would have been nonadmitted,
resulting in a decrease of $32,900 in statutory stockholder's
equity as of Dec. 31, 1994.
5. Related party transactions
Charges by American Express Financial Corporation for use of joint
facilities and other services aggregated $5,581, $4,059 and $2,221
for 1994, 1993 and 1992, respectively. Certain of these costs are
included in deferred policy acquisition costs.
6. Lines of credit
The Company has available lines of credit with two banks of $30,000
at 45 to 80 basis points over each bank's cost of funds. There<PAGE>
PAGE 60
6. Lines of credit (continued)
were no borrowings outstanding under these agreement at Dec. 31,
1994 or 1993.
7. Commitments and contingencies
The economy and other factors have caused an increase in the number
of insurance companies that are under regulatory supervision.
This circumstance has resulted in substantial assessments by state
guaranty associations to cover losses to policyholders of insolvent
or rehabilitated companies. The Company expects additional future
assessments related to past insolvencies and rehabilitations.
Management is unable to estimate the impact of future assessments
on the Company's financial position but does not believe that the
impact will be material to its financial position.
8. Fair values of financial instruments
The Company is required to disclose fair value information for most
on- and off-balance sheet financial instruments for which it is
practical to estimate that value. Certain financial instruments
such as life insurance obligations, receivables and all
non-financial instruments, such as deferred acquisition costs are
excluded from required disclosure. Off-balance sheet intangible
assets are also excluded. Management believes the value of
excluded assets is significant. The fair value of the Company,
therefore, cannot be estimated by aggregating the amounts
presented.
<TABLE><CAPTION>
1994 1993
Carrying Fair Carrying Fair
Financial Assets Value Value Value Value
<S> <C> <C> <C> <C>
Investments:
Fixed maturities (Note 2):
Held to maturity $1,130,752 $1,040,663 $ -- $ --
Available for sale 1,119,371 1,119,371 -- --
Investment securities -- -- 1,817,429 1,881,784
Mortgage loans on
real estate (Note 2) 219,445 204,883 28,928 27,862
Equity securities (Note 2) 28 28 159 159
Cash and
cash equivalents (Note 1) 53,358 53,358 1,942 1,942
Financial Liabilities
Future policy benefits
for fixed annuities 2,474,920 2,347,665 1,730,972 1,639,613
</TABLE>
At Dec. 31, 1994 and 1993, the carrying amount and fair value of
future policy benefits for fixed annuities exclude life
insurance-related contracts carried at $5,202 and $4,764,
respectively. The fair value of these benefits is based on the
status of the annuities at Dec. 31, 1994 and 1993. The fair value
of deferred annuities is estimated as the carrying amount less
applicable surrender charges. The fair value for annuities in
non-life contingent payout status is estimated as the present value
of projected benefit payments at the rate appropriate for contracts
issued in 1994 and 1993.
<PAGE>
PAGE 61
Report of Independent Auditors
The Board of Directors
American Enterprise Life Insurance Company
We have audited the accompanying balance sheets of American
Enterprise Life Insurance Company (a wholly owned subsidiary of IDS
Life Insurance Company) as of December 31, 1994 and 1993, and the
related statements of income and cash flows for each of the three
years in the period ended December 31, 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of
American Enterprise Life Insurance Company at December 31, 1994 and
1993, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1994, in
conformity with generally accepted accounting principles.
As discussed in Note 1 to the financial statements, the Company
changed its method of accounting for certain investments in debt
and equity securities in 1994.
Ernst & Young LLP
Minneapolis, Minnesota
February 3, 1995<PAGE>
PAGE 62
PART C.
Item 24. Financial Statements and Exhibits
(a) Financial Statements included in Part B of this Registration
Statement:
American Enterprise Life Insurance Company:
Balance Sheets at Dec. 31, 1994 and Dec. 31, 1993.
Statements of Income for the years ended Dec. 31, 1994, 1993
and 1992.
Statements of Cash Flows for the years ended Dec. 31, 1994,
1993 and 1992.
Notes to Financial Statements.
Report of Independent Auditors dated February 3, 1995.
(b) Exhibits:
1. Resolution of the Executive Committee of the Board of
Directors of American Enterprise Life establishing the
American Enterprise Variable Annuity Account dated July 15,
1987, filed electronically as Exhibit 1 to the Initial
Registration Statement to Registration Statement No. 33-
54471, filed on or about July 5, 1994 is incorporated herein
by reference.
2. Not applicable.
3.1 Form of Variable Annuity and Life Insurance Distribution
Agreement, filed electronically as Exhibit 3.1 to Pre-
Effective Amendment No. 1 to Registration Statement No. 33-
54471 is incorporated herein by reference.
3.2 Form of Managing General Agent Agreement, filed
electronically as Exhibit 3.2 to Pre-Effective Amendment No.
1 to Registration Statement No. 33-54471 is incorporated
herein by reference.
4.1 Form of Deferred Annuity Contract (form 34560), filed
electronically as Exhibit 4.1 to the Initial Registration
Statement to Registration Statement No. 33-54471, filed on or
about July 5, 1994 is incorporated herein by reference.
4.2 Form of Tax-Qualified Endorsement (form 34563), filed
electronically as Exhibit 4.2 to the Initial Registration
Statement to Registration Statement No. 33-54471, filed on or
about July 5, 1994 is incorporated herein by reference.
4.3 Form of Annuity Endorsement (form 34562), filed
electronically as Exhibit 4.3 to the Initial Registration
Statement to Registration Statement No. 33-54471, filed on or
about July 5, 1994 is incorporated herein by reference.
5.1 Form of Application for American Enterprise Life Variable
Annuity (form 34561), filed electronically as Exhibit 5.1 to
the Initial Registration Statement to Registration Statement
No. 33-54471, filed on or about July 5, 1994 is incorporated
herein by reference.<PAGE>
PAGE 63
6.1 Amendment and Restatement of Articles of Incorporation of
American Enterprise Life dated July 29, 1986, filed
electronically as Exhibit 6.1 to the Initial Registration
Statement to Registration Statement No. 33-54471, filed on or
about July 5, 1994 is incorporated herein by reference.
6.2 Amended By-Laws of American Enterprise Life, filed
electronically as Exhibit 6.2 to the Initial Registration
Statement to Registration Statement No. 33-54471, filed on or
about July 5, 1994 is incorporated herein by reference.
7. Not applicable.
8.1 Form of Participation Agreement among (company) and G.T.
Global Variable Investment Trust and G.T. Global Variable
Investment Series and G.T. Global Financial Services, Inc.,
filed electronically as Exhibit 8.1 to Pre-Effective
Amendment No. 1 to Registration Statement No. 33-54471 is
incorporated herein by reference.
8.2 Form of Participation Agreement among Putnam Capital Manager
Trust, Putnam Mutual Funds Corp. and American Enterprise Life
Insurance Company, dated January 16, 1995, is filed
electronically herewith.
8.3 Form of Participation Agreement by and among Quest for Value
Accumulation Trust and (Insurance Company) and Quest for
Value Distributors, dated February 21, 1995, is filed
electronically herewith.
9. Opinion of counsel dated Nov. 16, 1994 as to the legality of
the securities being registered, filed electronically as
Exhibit 9 to Pre-Effective Amendment No. 1 to Registration
Statement No. 33-54471, is incorporated herein by reference.
10. Consent of Independent Auditors is filed electronically
herewith.
11. Financial Statement Schedules and Report of Independent
Auditors is filed electronically herewith.
Financial Statement Schedules:
Report of Independent Auditors dated February 3, 1995.
Schedule I Summary of Investments Other Than Investments In
Related Parties
Schedule V Valuation and Qualifying Accounts
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 the Initial
Registration Statement to Registration Statement No. 33-
54471, filed on or about July 5, 1994 is incorporated herein
by reference.
14. Financial Data Schedule is filed electronically herewith.<PAGE>
PAGE 64
15. Power of Attorney to sign this Registration Statement dated
June 22, 1994, filed electronically as Exhibit 14.2 to the
Initial Registration Statement to Registration Statement No.
33-54471, filed on or about July 5, 1994 is incorporated
herein by reference.
Item 25. Directors and Officers of the Depositor
<TABLE><CAPTION>
Positions and
Name Principal Business Address Offices with Depositor
<S> <C> <C>
Alan R. Dakay IDS Tower 10 Director and President
Minneapolis, MN 55440
Morris Goodwin Jr. IDS Tower 10 Vice President and
Minneapolis, MN 55440 Treasurer
Steven M. Gordon IDS Tower 10 Vice President-Sales
Minneapolis, MN 55440 and Marketing
Lorraine R. Hart IDS Tower 10 Vice President-
Minneapolis, MN 55440 Investments
Richard W. Kling IDS Tower 10 Director and Chairman
Minneapolis, MN 55440 of the Board
Paul S. Mannweiler IDS Tower 10 Director
Minneapolis, MN 55440
Stuart A. Sedlacek IDS Tower 10 Director and Executive
Minneapolis, MN 55440 Vice President-Assured
Assets
F. Dale Simmons IDS Tower 10 Vice President-Real
Minneapolis, MN 55440 Estate Loan Management
William A. Stoltzmann IDS Tower 10 Director, Vice President,
Minneapolis, MN 55440 General Counsel and
Secretary
Melinda S. Urion IDS Tower 10 Vice President and
Minneapolis, MN 55440 Controller
William N. Westhoff IDS Tower 10 Director
Minneapolis, MN 55440
</TABLE>
Item 26. Persons Controlled by or Under Common Control with the
Depositor or Registrant
American Enterprise Life Insurance Company is a wholly
owned subsidiary of IDS Life Insurance Company which 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.
<PAGE>
PAGE 65
Jurisdiction
Name of Subsidiary of Incorporation
I. Travel Related Services
American Express Travel Related
Services Company, Inc. New York
II. International Banking Services
American Express Bank Ltd. Connecticut
III. Companies engaged in Investors
Diversified Financial Services
American Centurion Life Insurance Company New York
American Enterprise Investment Services Inc. Minnesota
American Enterprise Life Insurance Company Indiana
American Express Financial Advisors Inc. Delaware
American Express Financial Corporation Delaware
American Express Minnesota Foundation Minnesota
American Express Service Corporation Delaware
American Express Tax and Business
Services Inc. Minnesota
American Express Trust Company Minnesota
American Partners Life Insurance Company Arizona
IDS Advisory Group Inc. Minnesota
IDS Aircraft Services Corporation Minnesota
IDS Cable Corporation Minnesota
IDS Cable II Corporation Minnesota
IDS Capital Holdings Inc. Minnesota
IDS Certificate Company Delaware
IDS Deposit Corp. Utah
IDS Fund Management Limited U.K.
IDS Futures Corporation Minnesota
IDS Futures III 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 Inc. Mississippi
IDS Insurance Agency of Nevada Inc. Nevada
IDS Insurance Agency of New Mexico Inc. New Mexico
IDS Insurance Agency of North Carolina Inc. North Carolina
IDS Insurance Agency of Ohio Inc. Ohio
IDS Insurance Agency of Texas Inc. Texas
IDS Insurance Agency of Utah Inc. Utah
IDS Insurance Agency of Wyoming Inc. Wyoming
IDS International, Inc. Delaware
IDS Life Insurance Company Minnesota
IDS Life Insurance Company of New York New York
IDS Management Corporation Minnesota
IDS Partnership Services Corporation Minnesota
IDS Plan Services of California, Inc. Minnesota
IDS Property Casualty Insurance Company Wisconsin
IDS Real Estate Services, Inc. Delaware
IDS Realty Corporation Minnesota
IDS Sales Support Inc. Minnesota
IDS Securities Corporation Delaware
Investors Syndicate Development Corp. Nevada<PAGE>
PAGE 66
Item 27. Number of Contractowners
On March 31, 1995, there were 5 contract owners of
qualified contracts. There were 2 owners of non-
qualified contracts.
Item 28. Indemnification
The By-Laws of the depositor provide that the Corporation
shall have the power to indemnify a director, officer,
agent or employee of the Corporation pursuant to the
provisions of applicable statues or pursuant to contract.
The Corporation may purchase and maintain insurance on
behalf of any director, officer, agent or employee of the
Corporation against any liability asserted against or
incurred by the director, officer, agent or employee in
such capacity or arising out of the director's,
officer's, agent's or employee's status as such, whether
or not the Corporation would have the power to indemnify
the director, officer, agent or employee against such
liability under the provisions of applicable law.
The By-Laws of the depositor provide that it shall
indemnify a director, officer, agent or employee of the
depositor pursuant to the provisions of applicable
statutes or pursuant to contract.
Insofar as indemnification for liability arising under
the Securities Act of 1933 may be permitted to director,
officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by
a director, officer or controlling person of the
registrant in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or
controlling person in connection with the securities
being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
Item 29. Principal Underwriters.
(a) American Expess Financial Advisors Inc. (formerly IDS
Financial Services Inc.) acts as principal underwriter
for the following investment companies:
IDS Bond Fund, Inc.; IDS California Tax-Exempt Trust; IDS
Discovery Fund, Inc.; IDS Equity Select Fund, Inc.; IDS Extra
Income Fund, Inc.; IDS Federal Income Fund, Inc.; IDS Global
Series, Inc.; IDS Growth Fund, Inc.; IDS High Yield Tax-Exempt<PAGE>
PAGE 67
Fund, Inc.; IDS International Fund, Inc.; IDS Investment
Series, Inc.; IDS Managed Retirement Fund, Inc.; IDS Market
Advantage Series, Inc.; IDS Money Market Series, Inc.; IDS New
Dimensions Fund, Inc.; IDS Precious Metals Fund, Inc.; IDS
Progressive Fund, Inc.; IDS Selective Fund, Inc.; IDS Special
Tax-Exempt Series Trust; IDS Stock Fund, Inc.; IDS Strategy
Fund, Inc.; IDS Tax-Exempt Bond Fund, Inc.; IDS Tax-Free Money
Fund, Inc.; IDS Utilities Income Fund, Inc. and IDS
Certificate Company.
(b) As to each director, officer or partner of the principal
underwriter:
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Ronald G. Abrahamson Vice President- None
IDS Tower 10 Service Quality and
Minneapolis, MN 55440 Reengineering
Douglas A. Alger Vice President-Total None
IDS Tower 10 Compensation
Minneapolis, MN 55440
Jerome R. Amundson Vice President- None
IDS Tower 10 Investment Accounting
Minneapolis, MN 55440
Peter J. Anderson Senior Vice President- None
IDS Tower 10 Investments
Minneapolis, MN 55440
Ward D. Armstrong Vice President- None
IDS Tower 10 Sales and Marketing,
Minneapolis, MN 55440 American Express
Institutional Services
Alvan D. Arthur Group Vice President- None
IDS Tower 10 Central California/
Minneapolis, MN 55440 Western Nevada
Joseph M. Barsky III Vice President-Senior None
IDS Tower 10 Portfolio Manager
Minneapolis, MN 55440
Robert C. Basten Vice President-Tax None
IDS Tower 10 and Business Services
Minneapolis, MN 55440
Timothy V. Bechtold Vice President-Risk None
IDS Tower 10 Management Products
Minneapolis, MN 55440
John D. Begley Group Vice President- None
Suite 100 Ohio/Indiana
7760 Olentangy River Rd.
Columbus, OH 43235
<PAGE>
PAGE 68
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Carl E. Beihl Vice President- None
IDS Tower 10 Strategic Technology
Minneapolis, MN 55440 Planning
Jack A. Benjamin Group Vice President- None
Suite 200 Greater Pennsylvania
3500 Market Street
Camp Hill, PA 17011
Alan F. Bignall Vice President- None
IDS Tower 10 Financial Planning
Minneapolis, MN 55440 Systems
Brent L. Bisson Group Vice President- None
Ste 900 e Westside Tower Los Angeles Metro
11835 West Olympic Blvd.
Los Angeles, CA 90064
John C. Boeder Vice President- None
IDS Tower 10 Mature Market Group
Minneapolis, MN 55440
Bruce J. Bordelon Group Vice President- None
Galleria One Suite 1900 Gulf States
Galleria Blvd.
Metairie, LA 70001
Charles R. Branch Group Vice President- None
Suite 200 Northwest
West 111 North River Dr
Spokane, WA 99201
Karl J. Breyer Senior Vice President- None
IDS Tower 10 Corporate Affairs and
Minneapolis, MN 55440 Special Counsel
Harold E. Burke Vice President None
IDS Tower 10 and Assistant
Minneapolis, MN 55440 General Counsel
Daniel J. Candura Vice President- None
IDS Tower 10 Marketing Support
Minneapolis, MN 55440
Cynthia M. Carlson Vice President- None
IDS Tower 10 American Express
Minneapolis, MN 55440 Securities Services
Orison Y. Chaffee III Vice President-Field None
IDS Tower 10 Real Estate
Minneapolis, MN 55440<PAGE>
PAGE 69
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
James E. Choat Senior Vice President- None
IDS Tower 10 Field Management
Minneapolis, MN 55440
Kenneth J. Ciak Vice President and None
IDS Property Casualty General Manager-
1400 Lombardi Avenue IDS Property Casualty
Green Bay, WI 54304
Roger C. Corea Group Vice President- None
290 Woodcliff Drive Upstate New York
Fairport, NY 14450
Henry J. Cormier Group Vice President- None
Commerce Center One Connecticut
333 East River Drive
East Hartford, CT 06108
John M. Crawford Group Vice President- None
Suite 200 Arkansas/Springfield/Memphis
10800 Financial Ctr Pkwy
Little Rock, AR 72211
Kevin F. Crowe Group Vice President- None
Suite 312 Carolinas/Eastern Georgia
7300 Carmel Executive Pk
Charlotte, NC 28226
Alan R. Dakay Vice President- None
IDS Tower 10 Institutional Products
Minneapolis, MN 55440 Group
Regenia David Vice President- None
IDS Tower 10 Systems Services
Minneapolis, MN 55440
Scott M. Digiammarino Group Vice President- None
Suite 500 Washington/Baltimore
8045 Leesburg Pike
Vienna, VA 22182
Bradford L. Drew Group Vice President- None
Two Datran Center Eastern Florida
Penthouse One B
9130 S. Dadeland Blvd.
Miami, FL 33156
William H. Dudley Director and Executive None
IDS Tower 10 Vice President-
Minneapolis MN 55440 Investment Operations
<PAGE>
PAGE 70
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Roger S. Edgar Senior Vice President None
IDS Tower 10 and Technology Advisor
Minneapolis, MN 55440
Gordon L. Eid Senior Vice President None
IDS Tower 10 and General Counsel
Minneapolis, MN 55440
Robert M. Elconin Vice President- None
IDS Tower 10 Government Relations
Minneapolis, MN 55440
Mark A. Ernst Vice President- None
IDS Tower 10 Retail Services
Minneapolis, MN 55440
Joseph Evanovich Jr. Group Vice President- None
One Old Mill Nebraska/Iowa/Dakotas
101 South 108th Avenue
Omaha, NE 68154
Louise P. Evenson Group Vice President- None
Suite 200 San Francisco Bay Area
1333 N. California Blvd.
Walnut Creek, CA 94596
Gordon M. Fines Vice President- None
IDS Tower 10 Mutual Fund Equity
Minneapolis MN 55440 Investments
Louis C. Fornetti Senior Vice President Vice
IDS Tower 10 and Chief Financial President
Minneapolis, MN 55440 Officer
Douglas L. Forsberg Group Vice President- None
Suite 100 Portland/Eugene
7931 N. E. Halsey
Portland, OR 97213
William P. Fritz Group Vice President- None
Suite 160 Northern Missouri
12855 Flushing Meadows Dr
St. Louis, MO 63131
Carl W. Gans Group Vice President- None
8500 Tower Suite 1770 Twin City Metro
8500 Normandale Lake Blvd.
Bloomington, MN 55437
<PAGE>
PAGE 71
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Robert G. Gilbert Vice President- None
IDS Tower 10 Real Estate
Minneapolis, MN 55440
John J. Golden Vice President- None
IDS Tower 10 Field Compensation
Minneapolis, MN 55440 Development
Morris Goodwin Jr. Vice President and Vice
IDS Tower 10 Corporate Treasurer President &
Minneapolis, MN 55440 Treasurer
Suzanne Graf Vice President- None
IDS Tower 10 Systems Services
Minneapolis, MN 55440
Bruce M. Guarino Group Vice President- None
Suite 1736 Hawaii
1585 Kapiolani Blvd.
Honolulu, HI 96814
David A. Hammer Vice President None
IDS Tower 10 and Marketing
Minneapolis, MN 55440 Controller
Teresa A. Hanratty Group Vice President- None
Suites 6&7 Northern New England
169 South River Road
Bedford, NH 03110
John R. Hantz Group Vice President- None
Suite 107 Detroit Metro
17177 N. Laurel Park
Livonia, MI 48154
Robert L. Harden Group Vice President- None
Two Constitution Plaza Boston Metro
Boston, MA 02129
Lorraine R. Hart Vice President- None
IDS Tower 10 Insurance Investments
Minneapolis, MN 55440
Scott A. Hawkinson Vice President-Assured None
IDS Tower 10 Assets Product Development
Minneapolis, MN 55440 and Management
Brian M. Heath Group Vice President- None
Suite 250 North Texas
801 E. Campbell Road
Richardson, TX 75081<PAGE>
PAGE 72
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Raymond E. Hirsch Vice President-Senior None
IDS Tower 10 Portfolio Manager
Minneapolis, MN 55440
James G. Hirsh Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
David J. Hockenberry Group Vice President- None
30 Burton Hills Blvd. Eastern Tennessee
Suite 175
Nashville, TN 37215
Kevin P. Howe Vice President- None
IDS Tower 10 Government and
Minneapolis, MN 55440 Customer Relations
David R. Hubers Chairman, Chief None
IDS Tower 10 Executive Officer and
Minneapolis, MN 55440 President
Marietta L. Johns Senior Vice President- None
IDS Tower 10 Field Management
Minneapolis, MN 55440
Douglas R. Jordal Vice President-Taxes None
IDS Tower 10
Minneapolis, MN 55440
James E. Kaarre Vice President- None
IDS Tower 10 Marketing Information
Minneapolis, MN 55440
Linda B. Keene Vice President- None
IDS Tower 10 Market Development
Minneapolis, MN 55440
G. Michael Kennedy Vice President-Investment None
IDS Tower 10 Services and Investment
Minneapolis, MN 55440 Research
Susan D. Kinder Senior Vice President- None
IDS Tower 10 Human Resources
Minneapolis, MN 55440
Richard W. Kling Senior Vice President- Director,
IDS Tower 10 Risk Management Products Chairman &
Minneapolis, MN 55440 President
Paul F. Kolkman Vice President- None
IDS Tower 10 Actuarial Finance
Minneapolis, MN 55440<PAGE>
PAGE 73
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Claire Kolmodin Vice President- None
IDS Tower 10 Service Quality
Minneapolis, MN 55440
David S. Kreager Group Vice President- None
Ste 108 Trestle Bridge V Greater Michigan
5136 Lovers Lane
Kalamazoo, MI 49002
Steven C. Kumagai Director and Senior None
IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Management and Business
Systems
Mitre Kutanovski Group Vice President- None
Suite 680 Chicago Metro
8585 Broadway
Merrillville, IN 48410
Edward Labenski Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Kurt A. Larson Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Lori J. Larson Vice President- None
IDS Tower 10 Variable Assets Product
Minneapolis, MN 55440 Development
Ryan R. Larson Vice President- None
IDS Tower 10 IPG Product Development
Minneapolis, MN 55440
Daniel E. Laufenberg Vice President and None
IDS Tower 10 Chief U.S. Economist
Minneapolis, MN 55440
Richard J. Lazarchic Vice President- None
IDS Tower 10 Senior Portfolio
MInneapolis, MN 55440 Manager
Peter A. Lefferts Senior Vice President- None
IDS Tower 10 Corporate Strategy and
Minneapolis, MN 55440 Development
Douglas A. Lennick Director and Executive None
IDS Tower 10 Vice President-Private
Minneapolis, MN 55440 Client Group
<PAGE>
PAGE 74
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Mary J. Malevich Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Fred A. Mandell Vice President- None
IDS Tower 10 Field Marketing Readiness
Minneapolis, MN 55440
Daniel E. Martin Group Vice President- None
Suite 650 Pittsburgh Metro
5700 Corporate Drive
Pittsburgh, PA 15237
William J. McKinney Vice President- None
IDS Tower 10 Field Management
Minneapolis, MN 55440 Support
Thomas W. Medcalf Vice President- None
IDS Tower 10 Senior Portfolio Manager
Minneapolis, MN 55440
William C. Melton Vice President- None
IDS Tower 10 International Research
Minneapolis, MN 55440 and Chief International
Economist
Janis E. Miller Vice President- Director
IDS Tower 10 Variable Assets
Minneapolis, MN 55440
James A. Mitchell Executive Vice President- None
IDS Tower 10 Marketing and Products
Minneapolis, MN 55440
John P. Moraites Group Vice President- None
Union Plaza Suite 900 Kansas/Oklahoma
3030 Northwest Expressway
Oklahoma City, OK 73112
Pamela J. Moret Vice President- None
IDS Tower 10 Corporate Communications
Minneapolis, MN 55440
Barry J. Murphy Senior Vice President- None
IDS Tower 10 Client Service
Minneapolis, MN 55440
Robert J. Neis Vice President- None
IDS Tower 10 Information Systems
Minneapolis, MN 55440 Operations
<PAGE>
PAGE 75
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Ronald E. Newton Group Vice President- None
319 Southbridge St. Rhode Island/Central
Auburn, MA 01501 Massachusetts
Thomas V. Nicolosi Group Vice President- None
Suite 220 New York Metro Area
500 Mamaronick Avenue
Harrison, NY 10528
James R. Palmer Vice President- None
IDS Tower 10 Insurance Operations
Minneapolis, MN 55440
Carla P. Pavone Vice President- None
IDS Tower 10 Specialty Service Teams
Minneapolis, MN 55440 and Emerging Business
George M. Perry Vice President- None
IDS Tower 10 Corporate Strategy
Minneapolis, MN 55440 and Development
Susan B. Plimpton Vice President- None
IDS Tower 10 Segmentation Development
Minneapolis, MN 55440 and Support
Larry M. Post Group Vice President- None
One Tower Bridge Philadelphia Metro
100 Front Street 8th Fl
West Conshohocken, PA 19428
Ronald W. Powell Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
James M. Punch Vice President- None
IDS Tower 10 TransAction Services
Minneapolis, MN 55440
Frederick C. Quirsfeld Vice President-Taxable None
IDS Tower 10 Mutual Fund Investments
Minneapolis, MN 55440
R. Daniel Richardson Group Vice President- None
Suite 800 Southern Texas
Arboretum Plaza One
9442 Capital of Texas Hwy N.
Austin, TX 78759
Roger B. Rogos Group Vice President- None
One Sarasota Tower Western Florida
Suite 700
Two N. Tamiami Trail
Sarasota, FL 34236<PAGE>
PAGE 76
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
ReBecca K. Roloff Vice President-1994 None
IDS Tower 10 Program Director
Minneapolis, MN 55440
Stephen W. Roszell Vice President- None
IDS Tower 10 Advisory Institutional
Minneapolis, MN 55440 Marketing
Max G. Roth Group Vice President- None
Suite 201 S IDS Ctr Wisconsin/Upper Michigan
1400 Lombardi Avenue
Green Bay, WI 54304
Robert A. Rudell Vice President- None
IDS Tower 10 American Express
Minneapolis, MN 55440 Institutional Services
John P. Ryan Vice President and None
IDS Tower 10 General Auditor
Minneapolis, MN 55440
Erven A. Samsel Senior Vice President- None
IDS Tower 10 Field Management
Minneapolis, MN 55440
Russell L. Scalfano Group Vice President- None
Suite 201 Exec Pk East Illinois/Indiana/Kentucky
101 Plaza East Blvd.
Evansville, IN 47715
William G. Scholz Group Vice President- None
Suite 205 Arizona/Las Vegas
7333 E Doubletree Ranch Rd
Scottsdale, AZ 85258
Stuart A. Sedlacek Vice President- None
IDS Tower 10 Assured Assets
Minneapolis, MN 55440
Donald K. Shanks Vice President- None
IDS Tower 10 Property Casualty
Minneapolis, MN 55440
F. Dale Simmons Vice President-Senior None
IDS Tower 10 Portfolio Manager,
Minneapolis, MN 55440 Insurance Investments
Judy P. Skoglund Vice President- None
IDS Tower 10 Human Resources and
Minneapolis, MN 55440 Organization Development
<PAGE>
PAGE 77
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Julian W. Sloter Group Vice Presidnet- None
Ste 1700 Orlando FinCtr Orlando/Jacksonville
800 North Magnolia Ave.
Orlando, FL 32803
Ben C. Smith Vice President- None
IDS Tower 10 Workplace Marketing
Minneapolis, MN 55440
William A. Smith Vice President and None
IDS Tower 10 Controller-Private
Minneapolis, MN 55440 Client Group
James B. Solberg Group Vice President- None
IDS Tower 10 Eastern Iowa Area
Minneapolis, MN 55440
Bridget Sperl Vice President- None
IDS Tower 10 Human Resources
Minneapolis, MN 55440 Management Services
Paul J. Stanislaw Group Vice President- None
Suite 1100 Southern California
Two Park Plaza
Irvine, CA 92714
Lois A. Stilwell Group Vice President- None
Suite 433 Outstate Minnesota Area/
9900 East Brn Road North Dakota/Western Wisconsin
Minnetonka, MN 55343
William A. Stoltzmann Vice President and Gen'l Counsel
IDS Tower 10 Assistant General & Asst. Secry
Minneapolis, MN 55440 Counsel
James J. Strauss Vice President- None
IDS Tower 10 Corporate Planning
Minneapolis, MN 55440 and Analysis
Jeffrey J. Stremcha Vice President-Information None
IDS Tower 10 Resource Management/ISD
Minneapolis, MN 55440
Neil G. Taylor Group Vice President- None
Suite 425 Seattle/Tacoma
101 Elliott Avenue West
Seattle, WA 98119
John R. Thomas Senior Vice President- None
IDS Tower 10 Information and
Minneapolis, MN 55440 Technology<PAGE>
PAGE 78
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Melinda S. Urion Vice President and Assistant
IDS Tower 10 Corporate Controller Secretary
Minneapolis, MN 55440
Peter S. Velardi Group Vice President- None
Suite 180 Atlanta/Birmingham
1200 Ashwood Parkway
Atlanta, GA 30338
Charles F. Wachendorfer Group Vice President- None
Suite 100 Denver/Salt Lake City/
Stanford Plaza II Albuquerque
7979 East Tufts Ave Pkwy
Denver, CO 80237
Wesley W. Wadman Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Norman Weaver Jr. Senior Vice President- None
1010 Main St Suite 2B Field Management
Huntington Beach, CA 92648
Michael L. Weiner Vice President- None
IDS Tower 10 Corporate Tax
Minneapolis, MN 55440 Operations
Lawrence J. Welte Vice President- None
IDS Tower 10 Investment Administration
Minneapolis, MN 55440
Jeffry M. Welter Vice President- None
IDS Tower 10 Equity and Fixed Income
Minneapolis, MN 55440 Trading
William N. Westhoff Senior Vice President and None
IDS Tower 10 Global Chief Investment
Minneapolis, MN 55440 Officer
Thomas L. White Group Vice President- None
Suite 200 Cambridge Ct Cleveland Metro
28601 Chagrin Blvd.
Woodmere, OH 44122
Eric S. Williams Group Vice President- None
Suite 250 Virginia
3951 Westerre Parkway
Richmond, VA 23233
Edwin M. Wistrand Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel<PAGE>
PAGE 79
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Michael R. Woodward Senior Vice President- None
32 Ellicott St Ste 100 Field Management
Batavia, NY 14020
Item 29(c).
<TABLE><CAPTION>
Net Underwriting
Name of Principal Discounts and Compensation on Brokerage
Underwriter Commissions Redemption Commissions Compensation
<S> <C> <C> <C> <C>
American Express None None None None
Financial Advisors
Inc.
</TABLE>
Item 30. Location of Accounts and Records
American Enterprise Life Insurance Company
IDS Tower 10
Minneapolis, MN 55402
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) Registrant undertakes that it will file a
post-effective amendment to this registration
statement as frequently as is necessary to ensure
that the audited financial statements in the
registration statement are never more than 16 months
old for so long as payments under the variable
annuity contracts may be accepted.
(b) Registrant undertakes that it will include either
(1) as part of any application to purchase a
contract offered by the prospectus, a space that an
applicant can check to request a Statement of
Additional Information, or (2) a post card or
similar written communication affixed to or included
the prospectus that the applicant can remove to send
for a Statement of Additional Information.
(c) Registrant undertakes to deliver any Statement of
Additional Information and any financial statements
required to be made available under this Form
promptly upon written or oral request to IDS Life
Contract Owner Service at the address or phone
number listed in the prospectus.
<PAGE>
PAGE 80
(d) Registrant represents that it is relying upon the
no-action assurance given to the American Council of
Life Insurance (pub. avail. Nov. 28, 1989).
Further, Registrant represents that it has complied
with the provisions of paragraphs (1) - (4) of that
no-action letter.
<PAGE>
PAGE 81
SIGNATURES
As required by the Securities Act of 1933 and the Investment
Company Act of 1940, American Enterprise Life Insurance Company, on
behalf of the Registrant certifies that it meets the requirements
of Securities Act Rule 485(b) for all effectiveness of this
Registration Statement 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, 1995.
AMERICAN ENTERPRISE VARIABLE ANNUITY ACCOUNT
(Registrant)
By American Enterprise Life Insurance Company
(Sponsor)
By /s/ Richard W. Kling*
Richard W. Kling
Chairman of the Board
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, 1995.
Signature Title
/s/ Richard W. Kling* Director and Chairman of
Richard W. Kling the Board
/s/ Alan R. Dakay* Director and President
Alan R. Dakay
/s/ Paul S. Mannweiler* Director
Paul S. Mannweiler
/s/ Stuart A. Sedlacek* Director and Executive Vice
Stuart A. Sedlacek President-Assured Assets
/s/ William A. Stoltzmann* Director, Vice President,
William A. Stoltzmann General Counsel and
Secretary
/s/ William N. Westhoff* Director
William N. Westhoff
*Signed pursuant to Power of Attorney filed electronically as
Exhibit 14.2 to the Initial Registration Statement to Registration
Statement No. 33-54471, filed on or about July 5, 1994, is
incorporated herein by reference.
/s/ Mary Ellyn Minenko
Mary Ellyn Minenko
<PAGE>
PAGE 82
CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 2
This Registration Statement is comprised of the following papers
and documents:
The Cover Page.
Cross-reference sheet.
Part A.
The prospectus.
Part B.
Statement of Additional Information.
Financial Statements.
Part C.
Other Information.
The signatures.
<PAGE>
PAGE 1
American Enterprise Variable Annuity Account
File No. 33-54471/811-7195
EXHIBIT INDEX
8.2 Form of Participation Agreement dated January 16, 1995.
8.3 Form of Participation Agreement dated February 21, 1995.
10 Consent of Independent Auditors.
11. Financial Statement Schedules and Report of Independent
Auditors.
14. Financial Data Schedule.
<PAGE>
PAGE 1
PARTICIPATION AGREEMENT
Among
PUTNAM CAPITAL MANAGER TRUST
PUTNAM MUTUAL FUNDS CORP.
and
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into as of this 16th day of
January, 1995, among AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
(the "Company"), an Indiana corporation, on its own behalf and on
behalf of each separate account of the Company set forth on
Schedule A hereto, as such Schedule may be amended from time to
time (each such account hereinafter referred to as the "Account"),
PUTNAM CAPITAL MANAGER TRUST (the "Trust"), a Massachusetts
business trust, and PUTNAM MUTUAL FUNDS CORP. (the"Underwriter), a
Massachusetts corporation.
WHEREAS, the Trust is an open-end diversified management
investment company and is available to act as the investment
vehicle for separate accounts established for variable life
insurance policies and variable annuity contracts (collectively,
the "Variable Insurance Products") to be offered by insurance
companies which have entered into participation agreements with the
Trust and the Underwriter (the "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Trust is divided into
several series of shares, each designated a "Fund" and representing
the interest in a particular managed portfolio of securities and
other assets; and
WHEREAS, the Trust has obtained an order from the Securities
and Exchange Commission, dated December 29, 1993 (File No. 812-
8612), granting the Company and certain variable annuity and
variable life insurance separate accounts exemptions from the
provisions of sections 9(a), 13(a), 15(a) and 15(b) of the
Investment Company Act of 1940, as amended (the "1940 Act"), and
Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent
necessary to permit shares of the Trust to be sold to and held by
variable annuity and variable life insurance separate accounts of
the Participating Insurance Companies (the "Shared Funding
Exemptive Order"); and
WHEREAS, the Trust is registered as an open-end management
investment company under the 1940 Act and the sale of its shares is
registered under the Securities Act of 1933, as amended (the "1933
Act"); and
WHEREAS, the Company has registered or will register certain
variable life and variable annuity contracts under the 1933 Act and
any applicable state securities and insurance law; and<PAGE>
PAGE 2
WHEREAS, each Account is a duly organized, validly existing
separate account, established by resolution of the Board of
Directors of the Company, on the date shown for such Account on
Schedule A hereto, to set aside and invest assets attributable to
the one or more variable life and annuity contracts; and
WHEREAS, the Company has registered or will register the
subaccounts of each Account together as a unit investment trust
under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with
the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and is a member
in good standing of the National Association of Securities Dealers,
Inc. (the"NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws
and regulations, the Company intends to purchase shares in certain
Funds ("Authorized Funds") on behalf of each Account to fund
certain of the aforesaid variable life and variable annuity
contracts and the Underwriter is authorized to sell such shares to
unit investment trusts such as each Account at net asset value;
NOW, THEREFORE, in consideration of the promises herein, the
Company, the Trust and the Underwriter agree as follows:
ARTICLE I. Sale of Trust Shares
1.1 The Underwriter agrees, subject to the Trust's
rights under Section 1.2 and otherwise under this Agreement, to
sell to the Company those Trust shares representing interests in
Authorized Funds which each Account orders, executing such orders
on a daily basis at the net asset value next computed after receipt
by the Trust or its designee of the order for the shares of the
Trust. For purposes of this Section 1.1, the Company shall be the
designee of the Trust for receipt of such orders from each Account
and receipt by such designee shall constitute receipt by the Trust;
provided that the Trust receives notice of such order by 9:00 a.m.
Boston time on the next following Business Day. "Business Day"
shall mean any day on which the New York Stock Exchange is open for
trading and on which the Trust calculates its net asset value
pursuant to the rules of the Securities and Exchange Commission.
The initial Authorized Funds shall be PCM Diversified Income Fund,
PCM Growth and Income Fund, PCM High Yield Fund and PCM New
Opportunities Fund.
1.2 The Trust agrees to make its shares available
indefinitely for purchase at the applicable net asset value per
share by the Company and its Accounts on those days on which the
Trust calculates its net asset value pursuant to rules of the
Securities and Exchange Commission and the Trust shall use
reasonable efforts to calculate such net asset value on each day on
which the New York Stock Exchange is open for trading.
Notwithstanding the foregoing, the Trustees of the Trust (the
"Trustees") may refuse to sell shares of any Fund to the Company
and any other person, or suspend or terminate the offering of
shares of any Fund if such action is required by law or by<PAGE>
PAGE 3
regulatory authorities having jurisdiction over the Trust or if the
Trustees determine, in the exercise of their fiduciary
responsibilities, that suspending or terminating the sale of Fund
shares would be in the best interests of shareholders.
1.3 The Trust and the Underwriter agree that shares of
the Trust will be sold only to Participating Insurance Companies
and their separate accounts. No shares of any Fund will be sold to
the general public.
1.4 The Trust shall redeem its shares in accordance with
the terms of its then current prospectus. For purposes of this
Section 1.4, the Company shall be the designee of the Trust for
receipt of requests for redemption from each Account and receipt by
such designee shall constitute receipt by the Trust; provided that
the Trust receives notice of such request for redemption by 9:00
a.m., Boston time, on the next following Business Day.
1.5 The Company shall purchase and redeem the shares of
each Fund offered by the then current prospectus of the Trust and
in accordance with the provisions of such prospectus.
1.6 The Company shall pay for Trust shares on the next
Business Day after an order to purchase Trust shares is made in
accordance with the provisions of Section 1.1 hereof. Payment
shall be in federal funds transmitted by wire.
1.7 Issuance and transfer of the Trust's shares will be
by book entry only. Share certificates will not be issued to the
Company or any Account. Shares ordered from the Trust will be
recorded as instructed by the Company to the Underwriter in an
appropriate title for each Account or the appropriate subaccount of
each Account.
1.8 The Underwriter shall furnish same day notice (by
wire or telephone, followed by written confirmation) to the Company
of the declaration of any income, dividends or capital gain
distributions payable on the Trust's shares. The Company hereby
elects to receive all such income dividends and capital gain
distributions as are payable on the Fund shares in additional
shares of that Fund. The Company reserves the right to revoke this
election and to receive all such income dividends and capital gain
distributions in cash. The Underwriter shall notify the Company of
the number of shares so issued as payment of such dividends and
distributions.
1.9 The Underwriter shall make the net asset value per
share for each Fund available to the Company on a daily basis as
soon as reasonably practical after the Trust calculates its net
asset value per share and each of the Trust and the Underwriter
shall use its best efforts to make such net asset value per share
available by 6:10 p.m. Boston time.<PAGE>
PAGE 4
ARTICLE II. Representations and Warranties
2.1 The Company represents and warrants that
(a) at all times during the term of this Agreement
the Contracts are or will be registered under the 1933 Act; that
the Contracts will be issued and sold in compliance in all material
respects with all applicable laws and the sale of the Contracts
shall comply in all material respects with state insurance
suitability requirements. The Company further represents and
warrants that it is an insurance company duly organized and in good
standing under applicable law and that it has legally and validly
established each Account prior to any issuance or sale thereof as a
separate account under applicable law and has registered or, prior
to any issuance or sale of the Contracts, will register each
Account as a unit investment trust in accordance with the
provisions of the 1940 Act to serve as a segregated investment
account for the Contracts; and
(b) the Contracts are currently treated as
endowment, annuity or life insurance contracts, under applicable
provisions of the Internal Revenue Code of 1986, as amended (the
"Code") and that it will make every effort to maintain such
treatment and that it will notify the Trust and the Underwriter
immediately upon having a reasonable basis for believing that the
Contracts have ceased to be so treated or that they might not be so
treated in the future.
2.2 The Trust represents and warrants that
(a) at all times during the term of this Agreement
Trust shares sold pursuant to this Agreement shall be registered
under the 1933 Act, duly authorized for issuance and sold by the
Trust to the Company in compliance with all applicable laws subject
to the terms of Section 2.4 below, and the Trust is and shall
remain registered under the 1940 Act. The Trust shall amend the
Registration Statement for its shares under the 1933 Act and the
1940 Act from time to time as required in order to effect the
continuous offering of its shares. The Trust shall register and
qualify the shares for sale in accordance with the laws of the
various states only if and to the extent deemed advisable by the
Trust or the Underwriter in connection with their sale by the Trust
to the Company and only as required by Section 2.4;
(b) it is currently qualified as a Regulated
Investment Company under Subchapter M of the Code, and that it will
use its best efforts to maintain such qualification (under
Subchapter M or any successor provision) and that it will notify
the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so
qualify in the future; and
(c) it is lawfully organized and validly existing
under the laws of Massachusetts and that it does and will comply in
all material respects with the 1940 Act.
<PAGE>
PAGE 5
2.3 The Underwriter represents and warrants that it is a
member in good standing of the NASD and is registered as a broker-
dealer with the SEC. The Underwriter further represents that it
will sell and distribute the Trust shares in accordance with all
applicable securities laws applicable to it, including without
limitation the 1933 Act, the 1934 Act, and the 1940 Act.
2.4 Notwithstanding any other provision of this
Agreement, the Trust shall be responsible for the registration and
qualification of its shares and of the Trust itself under the laws
of any jurisdiction only in connection with the sales of shares
directly to the Company through the Underwriter. The Trust shall
not be responsible, and the Company shall take full responsibility
for, determining any jurisdiction in which any qualification or
registration of Trust shares or the Trust by the Trust may be
required in connection with the sale of the Contracts or the
indirect interest of any Contract in any shares of the Trust and
advising the Trust thereof at such time and in such manner as is
necessary to permit the Trust to comply.
2.5 The Trust makes no representation as to whether any
aspect of its operations (including, but not limited to, fees and
expenses and investment policies) complies with the insurance laws
or regulations of the various states.
ARTICLE III. Prospectuses and Proxy Statements: Voting
3.1 The Trust shall provide such documentation
(including a final copy of its prospectus as set in type at the
Trust's expense) and other assistance as is reasonably necessary in
order for the Company once each year (or more frequently if the
prospectus for the Trust is amended) to have the prospectus for the
Contracts and the Trust's prospectus printed together in one
document (such printing to be at the Company's expense).
3.2 The Trust' s prospectus shall state that the
Statement of Additional Information for the Trust is available from
the Underwriter or its designee (or in the Trust's discretion, the
Prospectus shall state that such Statement is available from the
Trust), and the Underwriter (or the Trust), at its expense, shall
print and provide such Statement free of charge to the Company and
to any owner of a Contract or prospective owner who requests such
Statement.
3.3 The Trust, at its expense, shall provide the Company
with reports to shareholders set in type, for printing and
distribution by the Company (such printing and distribution to be
at the Company's expense).
3.4 The Trust, at its expense, shall provide the Company
with copies of its proxy material and other communications to
stockholders in such quantity as the Company shall reasonably
require for distribution to the Contract owners, such distribution
to be at the expense of the Company.
<PAGE>
PAGE 6
3.5 The Company shall vote all Trust shares as required
by law and the Shared Funding Exemptive Order. The Company
reserves the right to vote Trust shares held in any separate
account in its own right, to the extent permitted by law and the
Shared Funding Exemptive Order. The Company shall be responsible
for assuring that each of its separate accounts participating in
the Trust calculates voting privileges in a manner consistent with
all legal requirements.
3.6 The Trust will comply with all applicable provisions
of the 1940 Act requiring voting by shareholders, and in particular
the Trust will either provide for annual meetings or comply with
Section 16(c) of the 1940 Act (although the Trust is not one of the
trusts described in Section 16(c) of that Act) as well as with
Sections 16(a) and, if and when applicable, 16(b). Further, the
Trust will act in accordance with the Securities and Exchange
Commission's interpretation of the requirements of Section 16(a)
with respect to periodic elections of trustees and with whatever
rules the Commission may promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
4.1 Without limiting the scope or effect of Section 4.2,
the Company shall furnish, or shall cause to be furnished, to the
Underwriter each piece of sales literature or other promotional
material in which the Trust, its investment adviser or the
Underwriter is named at least 15 days prior to its use. No such
material shall be used if the Underwriter objects to such use
within five Business Days after receipt of such material.
4.2 The Company shall not give any information or make
any representations or statements on behalf of the Trust or
concerning the Trust in connection with the sale of the Contracts
other than the information or representations contained in the
registration statement or prospectus for the Trust shares, as such
registration statement and prospectus may be amended or
supplemented from time to time, or in annual or semi-annual reports
or proxy statements for the Trust, or in sales literature or other
promotional material approved by the Trust or its designee or by
the Underwriter, except with the written permission of the Trust or
the Underwriter or the designee of either or as required by law.
4.3 The Underwriter or its designee shall furnish, or
shall cause to be furnished, to the Company or its designee, each
piece of sales literature or other promotional material prepared by
the Underwriter in which the Company and/or its separate account(s)
is named at least 15 days prior to its use. No such material shall
be used if the Company or its designee objects to such use within
five Business Days after receipt of such material. The Company
acknowledges that the Underwriter does not currently intend to
prepare sales literature naming the Company or its separate
account.
4.4 Neither the Trust nor the Underwriter shall give any
information or make any representations on behalf of the Company or
concerning the Company, each Account, or the Contracts other than
the information or representations contained in a<PAGE>
PAGE 7
registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or
supplemented from time to time, or in published reports for each
Account which are in the public domain or approved by the Company
for distribution to Contract owners, or in sales literature or
other promotional material approved by the Company or its designee,
except with the written permission of the Company or as is required
by law.
4.5 For purposes of this Article IV, the phrase "sales
literature or other promotional material" includes, but is not
limited to, advertisements (such as material published, or designed
for use in, a newspaper, magazine, or other periodical, radio,
television, telephone or tape recording, videotape display, signs
or billboards, motion pictures, or other public media), sales
literature (i.e. any written communication distributed or made
generally available to customers or the public, including
brochures, circulars, research reports, market letters, form
letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational
or training materials or other communications distributed or made
generally available to some or all registered representatives.
4.6 The Trust and the Underwriter hereby consent to the
Company's use of the names "Putnam," "Putnam Capital Manager Trust"
and "PCM" in connection with marketing the Contracts, subject to
the terms of Section 4.1 and 4.2. Such consent shall terminate
with the termination of this Agreement.
ARTICLE V. Fees and Expenses
5.1 The Trust and Underwriter shall pay no fee or other
compensation to the Company under this agreement.
5.2 All expenses incident to performance by the Trust
under this Agreement shall be paid by the Trust. The Trust shall
bear the expenses for the cost of registration and qualification of
the Trust's shares, preparation and filing of the Trust's
prospectus and registration statement, proxy materials and reports,
setting the prospectus and shareholder reports in type, setting in
type and printing the proxy materials, and the preparation of all
statements and notices required by any federal or state law, in
each case as may be necessary for the performance by it of its
obligations under this Agreement.
5.3 The Company shall bear the expenses of (a) printing
and distributing the Trust's prospectus in connection with sales of
the Contracts and (b) printing and distributing the reports to
Trust's shareholders and (c) of distributing the Trust's proxy
materials to owners of the Contracts.
<PAGE>
PAGE 8
ARTICLE VI. Diversification
6.1 The Trust shall use its best efforts to cause each
Authorized Fund to maintain a diversified pool of investments that
would, if such Fund were a segregated asset account, satisfy the
diversification provisions of Treas. Reg. 1.817-5(b)(1) or (2).
ARTICLE VII. Potential Conflicts
7.1 The Trustees will monitor the Trust for the
existence of any material irreconcilable conflict between the
interests of the Contract owners of all separate accounts investing
in the Trust. An irreconcilable material conflict may arise for a
variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal
or state insurance, tax, or securities law or regulations, or a
public ruling, private letter ruling, no-action or interpretative
letter, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision
in any relevant proceeding; (d) the manner in which the investments
of any Fund are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life
insurance Contract owners; or (f) a decision by an insurer to
disregard the voting instructions of Contract owners. The Trust
shall promptly inform the Company if the Trustees determine that an
irreconcilable material conflict exists and the implications
thereof
7.2 The Company will report any potential or existing
conflicts of which it is aware to the Trustees. The Company will
assist the Trustees in carrying out their responsibilities under
the Shared Funding Exemptive Order, by providing the Trustees with
all information reasonably necessary for the Trustees to consider
any issues raised. This includes, but is not limited to, an
obligation by the Company to inform the Trustees whenever Contract
owner voting instructions are disregarded.
7.3 If it is determined by a majority of the Trustees,
or a majority of the disinterested Trustees, that a material
irreconcilable conflict exists, the Company shall to the extent
reasonably practicable (as determined by a majority of the
disinterested Trustees), take, at the Company's expense, whatever
steps are necessary to remedy or eliminate the irreconcilable
material conflict, up to and including: (1) withdrawing the assets
allocable to some or all of the separate accounts from the Trust or
any Fund and reinvesting such assets in a different investment
medium, including (but not limited to) another Fund of the Trust,
or submitting the question whether such segregation should be
implemented to a vote of all affected Contract owners and, as
appropriate, segregating the assets of any appropriate group (i.e.,
annuity Contract owners, life insurance Contract owners, or
variable Contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to
the affected Contract owners the option of making such a change;
and (2) establishing a new registered management investment company
or managed separate account.
<PAGE>
PAGE 9
7.4 If a material irreconcilable conflict arises because
of a decision by the Company to disregard Contract owner voting
instructions and that decision represents a minority position or
would preclude a majority vote, the Company may berequired, at the
Trust's election, to withdraw the affected subaccount of the
Account's investment in one or more portfolios of the Trust and
terminate this Agreement with respect to such subaccount; provided,
however, that such withdrawal and termination shall be limited to
the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested Trustees.
No charge or penalty shall be imposed as a result of such
withdrawal. Any such withdrawal and termination must take place
within six (6) months after the Trust gives written notice that
this provision is being implemented, and until the end of that six
month period the Underwriter and Trust shall, to the extent
permitted by law and any exemptive relief previously granted to the
Trust, continue to accept and implement orders by the Company for
the purchase (or redemption) of shares of the Trust.
7.5 If a material irreconcilable conflict arises because
of a particular state insurance regulator's decision applicable to
the Company to disregard Contract owner voting instructions and
that decision represents a minority position that would preclude a
majority vote, then the Company may be required, at the Trust's
direction, to withdraw the affected subaccount of the Account's
investment in one or more portfolios of the Trust; provided,
however, that such withdrawal and termination shall be limited to
the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested Trustees.
Until the end of the foregoing six month period, the Underwriter
and Trust shall, to the extent permitted by law and any exemptive
relief previously granted to the Trust, continue to accept and
implement orders by the Company for the purchase (and redemption)
of shares of the Trust. No charge or penalty will be imposed as a
result of such withdrawal.
7.6 For purposes of Sections 7.3 through 7.6 of this
Agreement, a majority of the disinterested Trustees shall determine
whether any proposed action adequately remedies any irreconcilable
material conflict. Neither the Trust nor the Underwriter shall be
required to establish a new funding medium for the Contracts, nor
shall the Company be required to do so, if an offer to do so has
been declined by vote of a majority of Contract owners materially
adversely affected by the irreconcilable material conflict. In the
event that the Trustees determine that any proposed action does not
adequately remedy any irreconcilable material conflict, then the
Company will withdraw the subaccount of the Account's investment in
the affected portfolio or portfolios of the Trust and terminate
this Agreement within six (6) months (or such shorter period as may
be required by law or any exemptive relief previously granted to
the Trust) after the Trustees inform the Company in writing of the
foregoing determination, provided, however, that such withdrawal
and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested Trustees. No charge or penalty will be imposed as a
result of such withdrawal.
<PAGE>
PAGE 10
7.7 The responsibility to take remedial action in the
event of the Trustees' determination of a material irreconcilable
conflict and to bear the cost of such remedial action shall be the
obligation of the Company, and the obligation of the Company set
forth in this Section 7 shall be carried out with a view only to
the interests of Contract owners.
7.8 If and to the extent that Rule 6e-2 and Rule 6e-3(T)
are amended, or Rule 6e-3 is adopted, to provide exemptive relief
from any provision of the 1940 Act or the rules promulgated
thereunder with respect to mixed or shared funding (as defined in
the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding
Exemptive Order, then (a) the Trust and/or the Participating
Insurance Companies, as appropriate, shall take such steps as may
be necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and
Rule 6e-3, as adopted, to the extent such rules are applicable; and
(b) Sections 3.5, 3.6, 7.1, 7.2, 7.3, 7.4 and 7.5 of this Agreement
shall continue in effect only to the extent that terms and
conditions substantially identical to such Sections are contained
in such Rule(s) as so amended or adopted.
7.9 The Company has reviewed the Shared Funding
Exemption Order and hereby assumes all obligations referred to
therein which are required, as conditions to such Order, to be
assumed or undertaken by the Company.
ARTICLE VIII. Indemnification
8.1 Indemnification by the Company
8.1(a). The Company shall indemnify and hold harmless the
Trust and the Underwriter and each of the Trustees, and each
person, if any, who controls the Trust or the Underwriter within
the meaning of Section 15 of the 1993 Act and any trustee,
director, officer, employee or agent of the foregoing
(collectively, the "Indemnified Parties" for purposes of this
Section 8.1) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written
consent of the Company which consent may not be unnecessarily
withheld) or litigation (including legal and other expenses), to
which the Indemnified Parties may become subject under any statute,
regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of
the Trust's shares or the Contracts or the performance by the
parties of their obligations hereunder and:
(i) arise out of or are based upon any untrue statements
or alleged untrue statements of any material fact contained in the
Registration Statement, Prospectus or Statement of Additional
Information for the Contracts or contained in the Contracts or
sales literature for the Contracts (or any amendment or supplement
to any of the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make
the statements therein not misleading, provided that this agreement
to indemnify shall not apply as to any Indemnified Party if such<PAGE>
PAGE 11
statement or omission or such alleged statement or omission was
made in reliance upon and in conformity with information furnished
to the Company in writing by or on behalf of the Trust for use in
the Registration Statement, Prospectus or Statement of Additional
Information for the Contracts or in the Contracts or sales
literature (or any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Trust shares; or
(ii) arise out of or as a result of written statements or
representations (other than statements or representations contained
in the Trust's Registration Statement or Prospectus, or in sales
literature for Trust shares not supplied by the Company, or persons
under its control) or wrongful conduct of the Company or persons
under its control, with respect to the sale or distribution of the
Contracts or Trust shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration Statement,
Prospectus, or sales literature of the Trust or any amendment
thereof or supplement thereto the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading if such a
statement or omission was made in reliance upon information
furnished to the Trust or the Underwriter by or on behalf of the
Company;
(iv) arise out of or result from any breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other breach of this
Agreement by the Company, as limited by and in accordance with the
provisions of Sections 8.1 (b) and 8.1 (c) hereof
8.1(b) The Company shall not be liable under this
indemnification provision with respect to any losses, claims,
damages, liabilities or litigation incurred or assessed against an
Indemnified Party to the extent such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's duties or
by reason of such Indemnified Party's reckless disregard of
obligations or duties under this Agreement or to the Trust,
whichever is applicable.
8.1(c) The Company shall not be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified
the Company in writing within a reasonable time after the summons
or other first legal process giving information of the nature of
the claim shall have been served upon such Indemnified Party (or
after such Indemnified Party shall have received notice of such
service on any designated agent), on the basis of which the
Indemnified Party should reasonably know of the availability of
indemnity hereunder in respect of such claim but failure to notify
the Company of any such claim shall not relieve the Company from
any liability which it may have to the Indemnified Party against
whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought
against the Indemnified Parties, the Company shall be entitled to
participate, at its own expense, in the defense of such action.
The Company also shall be entitled to assume the defense thereof,<PAGE>
PAGE 12
with counsel satisfactory to the party named in the action. After
notice from the Company to such party of the Company's election to
assume the defense thereof the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the
Company will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than
reasonable costs of investigation.
8.1(d) The Underwriter shall promptly notify the Company of
the commencement of any litigation or proceedings against the Trust
and the Underwriter in connection with the issuance or sale of the
Trust Shares or the Contracts or the operation of the Trust.
8.1(e) The provisions of this Section 8.1 shall survive any
termination of this Agreement.
8.2 Indemnification by the Underwriter
8.2(a) The Underwriter shall indemnify and hold harmless
the Company and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.2) against any
and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Underwriter
which consent may not be unreasonably withheld) or litigation
(including legal and other expenses) to which the Indemnified
Parties may become subject under any statute, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements are related
to the sale or acquisition of the Trust's shares or the Contracts
or the performance by the parties of their obligations hereunder
and:
(i) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the
sales literature of the Trust prepared by or approved by the Trust
or Underwriter (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission or
such alleged statement or omission was made in reliance upon and in
conformity with information furnished to the Underwriter or Trust
by or on behalf of the Company for use in sales literature (or any
amendment or supplement) or otherwise for use in connection with
the sale of the Contracts or Trust shares; or
(ii) arise out of or as a result of written statements or
representations (other than statements or representations contained
in the Registration Statement, Prospectus, Statement of Additional
Information or sales literature for the Contracts not
supplied by the Underwriter or persons under its control) of the
Underwriter or persons under its control, with respect to the sale
or distribution of the Contracts or Trust shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration Statement,<PAGE>
PAGE 13
Prospectus, Statement of Additional Information or sales literature
covering the Contracts, or any amendment thereof or supplement
thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statement or statements therein not misleading, if such
statement or omission was made in reliance upon information
furnished to the Company by or on behalf of the Underwriter; or
(iv) arise out of or result from any breach of any
representation and/or warranty made by the Underwriter in this
Agreement or arise out of or result from any other breach of this
Agreement by the Underwriter; as limited by and in accordance with
the provisions of Sections 8.2(b) and 8.2(c) hereof.
(v) arise out of or result from any failure to supply
timely and accurate net asset value information related to the
Funds, as contemplated by Section 2, which failure is the result of
the gross negligence or willful misconduct of the Underwriter or
its affiliates (it being agreed that neither the Underwriter nor
such affiliates assume responsibility for the timing or accuracy of
prices supplied by independent third parties, such as pricing
services and market makers).
8.2(b) The Underwriter shall not be liable under this
indemnification provision with respect to any losses, claims,
damages, liabilities or litigation incurred or assessed against an
Indemnified Party as such may arise from such Indemnified Party's
willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to each Company or the Account, whichever
is applicable.
8.2(c) The Underwriter shall not be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified
the Underwriter in writing within a reasonable time after the
summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified
Party (or after such Indemnified Party shall have received notice
of such service on any designated agent) on the basis of which the
Indemnified Party should reasonably know of the availability of
indemnity hereunder in respect of such claim, but failure to notify
the Underwriter of any such claim shall not relieve the Underwriter
from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of
this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Underwriter will be entitled
to participate, at its own expense, in the defense thereof. The
Underwriter also shall be entitled to assume the defense thereof,
with counsel satisfactory to the party named in the action. After
notice from the Underwriter to such party of the Underwriter's<PAGE>
PAGE 14
election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by
it, and the Underwriter will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by
such party independently in connection with the defense thereof
other than reasonable costs of investigation.
8.2(d) The Company shall promptly notify the Underwriter of
the Trust of the commencement of any litigation or proceedings
against it or any of its officers or directors in connection with
the issuance or sale of the Contracts or the operation of each
Account.
8.2(e) The provisions of this Section 8.2 shall survive any
termination of this Agreement.
8.3 Indemnification By the Trust
8.3(a) The Trust shall indemnify and hold harmless the
Company, and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act and each of its
directors, officers and employees or agents of the foregoing
(collectively, the "Indemnified Parties" for purposes of this
Section 8.3) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written
consent of the Trust which consent may not be unnecessarily
withheld) or litigation (including legal and other expenses) to
which the Indemnified Parties may become subject under any statute,
at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the operations of the Trust and:
(i) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in
a Registration Statement, Prospectus and Statement of
Additional Information of the Trust (or any amendment or
supplement to any of the foregoing), or arise out of or are
based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading,
provided that this agreement to indemnify shall not apply as
to any Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and in
conformity with information furnished to the Underwriter or
Trust by or on behalf of the Company for use in the
Registration Statement, Prospectus, or Statement of Additional
Information for the Trust (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts
or Trust shares; or
(ii) arise out of or result from any material breach of
any representation and/or warranty made by the Trust in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Trust, as limited by and in
accordance with the provisions of Sections 8.3(b) and 8.3(c)
hereof.
<PAGE>
PAGE 15
8.3(b). The Trust shall not be liable under the
indemnification provision with respect to any losses, claims,
damages, liabilities or litigation incurred or assessed against an
Indemnified Party as such may arise from such Indemnified Party's
willful misfeasance, bad faith, or gross negligence or by reason of
such Indemnified Party's reckless disregard of obligations and
duties under this Agreement or to the Company, the Trust, the
Underwriter or each Account, whichever is applicable.
8.3(c). The Trust shall not be liable under this
indemnification provision with respect to any claim made against
any Indemnified Party unless such Indemnified Party shall have
notified the Trust in writing within a reasonable time after the
summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified
Party (or after such Indemnified Party shall have received notice
of such service on any designated agent) on the basis of which the
Indemnified Party should reasonably know of the availability of
indemnity hereunder in respect of such claim, but failure to notify
the Trust of any such claim shall not relieve the Trust from any
liability which it may have to the Indemnified Party against whom
such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought
against the Indemnified Parties, the Trust will be entitled to
participate, at its own expense, in the defense thereof. The Trust
also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from
the Trust to such party of the Trust's election to assume the
defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Trust
will not be liable to such party under this Agreement for any legal
or other expenses subsequently incurred by such party independently
in connection with the defense thereof other than reasonable costs
of investigation.
8.3(d). The Company agrees promptly to notify the Trust of
the commencement of any litigation or proceedings against it or any
of its officers or directors in connection with this Agreement, the
issuance or sale of the Contracts or the sale or acquisition of
shares of the Trust.
8.3(e) The provisions of this Section 8.3 shall survive any
termination of this Agreement.
ARTICLE IX. Applicable Law
9.1 This Agreement shall be construed and the provisions
hereof interpreted under and in accordance with the laws of the
Commonwealth of Massachusetts.
9.2 This Agreement shall be subject to the provisions of
the 1933, 1934 and 1940 acts, and the rules and regulations and
rulings thereunder, including such exemptions from those statutes,<PAGE>
PAGE 16
rules and regulations as the Securities and Exchange Commission may
grant (including, but not limited to, the Shared Funding Exemptive
Order) and the terms hereof shall be interpreted and construed in
accordance therewith.
ARTICLE X. Termination
10.1. This Agreement shall terminate:
(a) at the option of any party upon 180 days advance
written notice to the other parties; or
(b) at the option of the Trust or the Underwriter in
the event that formal administrative proceedings are instituted
against the Company by the NASD, the Securities and Exchange
Commission, the Commerce Commissioner of the State of Indiana or
any other regulatory body regarding the Company's duties under this
Agreement or related to the sales of the Contracts, with respect to
the operation of any Account, or the purchase of the Trust shares,
provided, however, that the Trust or the Underwriter determines in
its sole judgment exercised in good faith, that any such
administrative proceedings will have a material adverse effect upon
the ability of the Company to perform its obligations under this
Agreement; or
(c) at the option of the Company in the event that
formal administrative proceedings are instituted against the Trust
or Underwriter by the NASD, the Securities and Exchange Commission,
or any state securities or insurance department or any other
regulatory body in respect of the sale of shares of the Trust to
the Company, provided, however, that the Company determines in its
sole judgment exercised in good faith, that any such administrative
proceedings will have a material adverse effect upon the ability of
the Trust or Underwriter to perform its obligations under this
Agreement; or
(d) with respect to any Account, upon requisite vote
of the Contract owners having an interest in such Account (or any
subaccount) to substitute the shares of another investment company
for the corresponding Fund shares of the Trust in accordance with
the terms of the Contracts for which those Fund shares had been
selected to serve as the underlying investment media. The Company
will give 30 days' prior written notice to the
Trust of the date of any proposed vote to replace the Trust's
shares; or
(e) with respect to any Authorized Fund, upon 60
days advance written notice from the Underwriter to the Company,
upon a decision by the Underwriter or the Trust to cease offering
shares of the Fund for sale.
10.2. It is understood and agreed that the right of any
party hereto to terminate this Agreement pursuant to Section 10.1
(a) may be exercised for any reason or for no reason.<PAGE>
PAGE 17
10.3 No termination of this Agreement shall be effective
unless and until the party terminating this Agreement gives prior
written notice to all other parties to this Agreement of its intent
to terminate, which notice shall set forth the basis for such
termination. Such prior written notice shall be given in advance of
the effective date of termination as required by this Article X.
10.4 Notwithstanding any termination of this Agreement,
subject to Section 1.2 of this Agreement, the Trust and the
Underwriter shall, at the option of the Company, continue to make
available additional shares of the Trust pursuant to the terms and
conditions of this Agreement, for all Contracts in effect on the
effective date of termination of this Agreement (hereinafter
referred to as "Existing Contracts"). Specifically, without
limitation, subject to Section 1.2 of this Agreement, the owners of
the Existing Contracts shall be permitted to reallocate investments
in the Trust, redeem investments in the Trust and/or invest in the
Trust upon the making of additional purchase payments under the
Existing Contracts. The parties agree that this Section 10.4 shall
not apply to any terminations under Article VII and the effect of
such Article VII terminations shall be governed by Article VII of
this Agreement.
10.5 The Company shall not redeem Trust shares
attributable to the Contracts (as opposed to Trust shares
attributable to the Company's assets held in either Account) except
(i) as necessary to implement Contract owner initiated
transactions, or (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general
application (hereinafter referred to as a "Legally Required
Redemption"). Upon request, the Company will promptly furnish to
the Trust and the Underwriter the opinion of counsel for the
Company, reasonably satisfactory to the Trust, to the effect that
any redemption pursuant to clause (ii) above is a Legally Required
Redemption. Furthermore, except in cases where permitted under the
terms of the Contracts, subject to Section 1.2 of this Agreement,
the Company shall not prevent Contract owners from allocating
payments to a Fund that was otherwise available under the Contracts
without first giving the Trust or the Underwriter 90 days notice of
its intention to do so.
<PAGE>
PAGE 18
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by
registered or certified mail to the other party at the address of
such party set forth below or at such other address as such party
may from time to time specify in writing to the other party.
If to the Trust:
One Post Office Square
Boston, MA 02109
Attention: John R. Verani
If to the Underwriter:
One Post Office Square
Boston, MA 02109
Attention: General Counsel
If to the Company:
80 South Eighth Street
Minneapolis, MN 55402
Attention: President
ARTICLE XII. Miscellaneous
12.1 A copy of the Agreement and Declaration of Trust of
the Fund is on file with the Secretary of State of the Commonwealth
of Massachusetts, and notice is hereby given that this instrument
is executed on behalf of the Trustees of the Trust as Trustees and
not individually and that the obligations of or arising out of this
instrument, including without limitations
Article VII are not binding upon any of the Trustees or
shareholders individually but binding only upon the assets and
property of the Trust.
12.2 The captions in this Agreement are included for
convenience of reference only and in no way define or delineate any
of the provisions hereof or otherwise affect their construction or
effect.
12.3 This Agreement may be executed simultaneously in two
or more counterparts, each of which taken together shall constitute
one and the same instrument.
12.4 If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the
remainder of the Agreement shall not be affected thereby.
12.5 Each party hereto shall cooperate with each other
party and all appropriate governmental authorities (including
without limitation the Securities and Exchange Commission the NASD
and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any
investigation or inquiry relating to this Agreement or the
transactions contemplated hereby.
<PAGE>
PAGE 19
12.6 The rights, remedies and obligations contained in
this Agreement are cumulative and are in addition to any and all
rights, remedies and obligations, at law or in equity, which the
parties hereto are entitled to under state and federal laws.
12.7 Notwithstanding any other provision of this
Agreement, the obligations of the Trust and the Underwriter are
several and, without limiting in any way the generality of the
other foregoing, neither such party shall have any liability for
any action or failure to act by the other party, or any person
acting on such other party's behalf.
[Remainder of page intentionally left blank.]
<PAGE>
PAGE 20
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly
authorized representative and its seal to be hereunder affixed
hereto as of the date specified below.
AMERICAN ENTERPRISE LIFE
INSURANCE COMPANY
By its authorized officer,
/s/ Ryan Larson
Name: Ryan Larson
Title: Vice President
PUTNAM CAPITAL MANAGER TRUST
By its authorized officer,
/s/ John R. Verani
Name: John R. Verani
Title: Vice President
PUTNAM MUTUAL FUNDS CORP.
By its authorized officer,
/s/ Vincent Esposito
Name: Vincent Esposito
Title: Managing Director
<PAGE>
PAGE 21
Schedule A
Contracts
American Enterprise Variable Annuity Account, established July 15,
1987.
<PAGE>
PAGE 1
PARTICIPATION AGREEMENT
By and Among
QUEST FOR VALUE ACCUMULATION TRUST
And
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
And
QUEST FOR VALUE DISTRIBUTORS
THIS AGREEMENT, made and entered into this 21st day of
February 1995 by and among AMERICAN ENTERPRISE LIFE INSURANCE
COMPANY, an Indiana Corporation (hereinafter the "Company"), on its
own behalf and on behalf of each separate account of the Company
named in Schedule 1 to this agreement, as may be amended from time
to time (each account referred to as the "Account"), QUEST FOR
VALUE ACCUMULATION TRUST, an open-end diversified management
investment company organized under the laws of the State of
Massachusetts (hereinafter the "Fund") and QUEST FOR VALUE
DISTRIBUTORS, a Delaware general partnership (hereinafter the
"Underwriter").
WHEREAS, the Fund engages in business as an open-end
diversified, management investment company and was established for
the purpose of serving as the investment vehicle for separate
accounts established for variable life insurance contracts and
variable annuity contracts to be offered by insurance companies
which have entered into participation agreements substantially
identical to this Agreement (hereinafter "Participating Insurance
Companies"); and
WHEREAS, beneficial interests in the Fund are divided into
several series of shares, each representing the interest in a
particular managed portfolio of securities and other assets (the
"Portfolios"); and
WHEREAS, the Fund plans to file an application with the
Securities & Exchange Commission (alternatively referred to as the
"SEC" or the "Commission") to request an order granting
Participating Insurance Companies and variable annuity and variable
life insurance separate accounts relief from the provisions of
Sections 9(a), 13(a), 15(a), and 15(b) of the Investment Company
Act of 1940, as amended, (hereinafter the "1940 Act") and Rules 6e-
2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to
permit shares of the Fund to be sold to and held by variable
annuity separate accounts and variable life insurance separate
accounts of both affiliated and unaffiliated Participating
Insurance Companies and qualified pension and retirement plans
(hereinafter the "application for a mixed and shared funding
exemptive order"). The parties to this Agreement agree that the
conditions or undertakings specified in the application for a mixed
and shared funding exemptive order and that may be imposed on the
Company, the Fund and/or the Underwriter by virtue of the receipt
of such order by the SEC shall be incorporated herein by reference,<PAGE>
PAGE 2
as of the date such order is granted and such parties agree to
comply with such conditions and undertakings to the extend
applicable to each such party; and
WHEREAS, the Fund is registered as an open-end management
investment company under the 1940 Act and its shares are registered
under the Securities Act of 1933, as amended (hereinafter the "1933
Act"); and
WHEREAS, the Company has registered or will register certain
variable annuity contracts (the "Contracts") under the 1933 Act;
and
WHEREAS, the Account is a duly organized, validly existing
segregated asset account, established by resolution of the Board of
Directors of the Company under the insurance laws of the State of
Indiana, to set aside and invest assets attributable to the
Contracts; and
WHEREAS, the Company has registered the subaccounts of the
account as a unit investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker-dealer with
the SEC under the Securities Exchange Act of 1934, as amended
(hereinafter the "1934 Act"), and is a member in good standing of
the National Association of Securities Dealers, Inc. (hereinafter
"NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws
and regulations, the Company intends to purchase shares in the
Portfolios named in Schedule 2 on behalf of the Account to fund the
Contracts and the Underwriter is authorized to sell such shares to
unit investment trusts such as the Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Underwriter agrees to sell to the Company those
shares of the Fund which the Company orders on behalf of the
Account, executing such orders on a daily basis at the net asset
value next computed after receipt and acceptance by the Fund or its
agent of the order for the shares of the Fund. For purposes of
this Section 1.1, the Company shall be the designee of the Fund for
receipt of such orders from each Account and receipt by such
designee shall constitute receipt by the Fund; provided that the
Fund receives notice of such order by 10:00 a.m. Eastern Time on
the next following Business Day. "Business Day" shall mean any day
on which the New York Stock Exchange is open for trading and on
which the Fund calculates its net asset value pursuant to the rules
of the SEC.
1.2. The Company shall pay for Fund shares on the next
Business Day after it places an order to purchase Fund shares in
accordance with Section 1.1 hereof. Payment shall be in federal
funds transmitted by wire.
<PAGE>
PAGE 3
1.3. The Fund agrees to make its shares available indefinitely
for purchase at the applicable net asset value per share by
Participating Insurance Companies and their separate accounts on
those days on which the Fund calculates its net asset value
pursuant to rules of the SEC; provided, however, that the Board of
Trustees of the Fund (hereinafter the "Directors") may refuse to
sell shares of any Portfolio to any person, or suspend or terminate
the offering of shares of any Portfolio if such action is required
by law or by regulatory authorities having jurisdiction or is, in
the sole discretion of the Directors, acting in good faith and in
light of their fiduciary duties under federal and any applicable
state laws, necessary in the best interests of the shareholders of
any Portfolio.
1.4. The Fund and the Underwriter agree that shares of the
Fund will be sold only to Participating Insurance Companies and
their separate accounts, qualified pension and retirement plans or
such other persons as are permitted under applicable provisions of
the Internal Revenue Code of 1986, as amended, (the "Internal
Revenue Code"), and regulations promulgated thereunder, the sale to
which will not impair the tax treatment currently afforded the
contracts. No shares of any Portfolio will be sold to the general
public.
1.5. The Fund and the Underwriter will not sell Fund shares to
any insurance company or separate account unless an agreement
containing provisions substantially the same as Articles I, III, V,
and VII of this Agreement are in effect to govern such sales. The
Fund shall make available upon written request from the Company (i)
a list of all other Participating Insurance Companies and (ii) a
copy of the Participation Agreement executed by any other
Participating Insurance Company.
1.6. The Fund agrees to redeem for cash, upon the Company's
request, any full or fractional shares of the Fund held by the
Company, executing such requests on a daily basis at the net asset
value next computed after receipt and acceptance by the Fund or its
agent of the request for redemption. For purposes of this Section
1.6, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such
designee shall constitute receipt by the Fund; provided the Fund
receives notice of request for redemption by 10:00 a.m. Eastern
Time on the next following Business Day. Payment shall be in
federal funds transmitted by wire to the Company's account as
designated by the Company in writing from time to time, on the same
Business Day the Fund receives notice of the redemption order from
the Company except that the Fund reserves the right to delay
payment of redemption proceeds, but in no event may such payment be
delayed longer than the period permitted under Section 22(e) of the
1940 Act. Neither the Fund nor the Underwriter shall bear any
responsibility whatsoever for the proper disbursement or crediting
of redemption proceeds; the Company alone shall be responsible for
such action. If notification of redemption is received after 10:00
a.m. Eastern Time, payment for redeemed shares will be made on the
next following Business Day.<PAGE>
PAGE 4
1.7. The Company agrees to purchase and redeem the shares of
the Portfolio named in Schedule 2 offered by the then current
prospectus of the Fund in accordance with the provisions of such
prospectus. The Company agrees that all net amounts available
under the Contracts shall be invested in the Fund, or in the
Company's general account; provided that such amounts may also be
invested in an investment company other than the Fund if (a) such
other investment company, or series thereof, has investment
objectives or policies that are substantially different from the
investment objectives and policies of all the Portfolios of the
Fund named in Schedule 2; or (b) the Company gives the
Fund and the Underwriter 45 days written notice of its intention to
make such other investment company available as a funding vehicle
for the Contracts; or (c) such other investment company was
available as a funding vehicle for the Contracts prior to the date
of this Agreement and the Company so informs the Fund and
Underwriter prior to their signing this Agreement; or (d) the Fund
or Underwriter consents in writing to the use of such other
investment company.
1.8. Issuance and transfer of the Fund's shares will be by
book entry only. Stock certificates will not be issued to the
Company or any Account. Purchase and redemption orders for Fund
shares will be recorded in an appropriate title for each Account or
the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or
telephone followed by written confirmation) to the Company of any
income, dividends or capital gain distributions payable on the
Fund's shares. The Company hereby elects to receive all such
dividends and distributions as are payable on the Portfolio shares
in the form of additional shares of that Portfolio. The Company
reserves the right to revoke this election and to receive all such
dividends and distributions in cash. The Fund shall notify the
Company of the number of shares so issued as payment of such
dividends and distributions.
1.10. The Fund shall make the net asset value per share for
each Portfolio available to the Company on a daily basis as soon as
reasonably practical after the net asset value per share is
calculated and shall use its best efforts to make such net asset
value per share available by 5:30 p.m., Eastern Standard Time, each
business day.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Contracts
are or will be registered under the 1933 Act and that the Contracts
will be issued and sold in compliance with all applicable federal
and state laws. The Company further represents and warrants that
it is an insurance company duly organized and in good standing
under applicable law and that it has legally and validly
established each Account as a separate account under applicable
state law and has registered the subaccounts of each Account as a
unit investment trust in accordance with the provisions of the 1940
Act to serve as segregated investment accounts for the Contracts,
and that it will maintain such registration for so long as any
Contracts are outstanding. The Company shall amend the
registration statement under the 1933 Act for the Contracts and the<PAGE>
PAGE 5
registration statement under the 1940 Act for the Account from time
to time as required in order to effect the continuous offering of
the Contracts or as may otherwise be required by applicable law.
The Company shall register and qualify the Contracts for sale in
accordance with the securities laws of the various states only if
and to the extent deemed necessary by the Company.
2.2. The Company represents that it believes that the
Contracts are currently and at the time of issuance will be treated
as annuity contracts under applicable provisions of the Internal
Revenue Code and that it will make every effort to maintain such
treatment and that it will notify the Fund and the Underwriter
immediately upon having a reasonable basis for believing that the
Contracts have ceased to be so treated or that they might not be so
treated in the future.
2.3. The Fund represents and warrants that Fund shares sold
pursuant to this Agreement shall be registered under the 1933 Act
and duly authorized for issuance in accordance with applicable law
and that the Fund is and shall remain registered under the 1940 Act
for as long as the Fund shares are sold. The Fund shall amend the
registration statement for its shares under the 1933 Act and the
1940 Act from time to time as required in order to effect the
continuous offering of its shares. The Fund shall register and
qualify the shares for sale in accordance with the laws of the
various states only if and to the extent deemed advisable by the
Fund or the Underwriter.
2.4. The Fund represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the Internal
Revenue Code, and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or similar
provision) and that it will notify the Company immediately upon
having a reasonable basis for believing that it has ceased to so
qualify or that it might not so qualify in the future.
2.5. The Fund represents that its investment objectives,
policies and restrictions comply with applicable state investment
laws as they may apply to the Fund. The Fund makes no
representation as to whether any aspect of its operations
(including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws and regulations of any
state. The Company alone shall be responsible for informing the
Fund of any insurance restrictions imposed by state insurance laws
which are applicable to the Fund. To the extent feasible and
consistent with market conditions, the Fund will adjust its
investments to comply with the aforementioned state insurance laws
upon written notice from the Company of such requirements and
proposed adjustments, it being agreed and understood that in any
such case the Fund shall be allowed a reasonable period of time
under the circumstances after receipt of such notice to make any
such adjustment.
2.6. The Fund currently does not intend to make any payments
to finance distribution expenses pursuant to Rule 12b-1 under the
1940 Act or otherwise, although it may make such payments in the
future. To the extent that it decides to finance distribution
expenses pursuant to Rule 12b-1, the Fund undertakes to have its
Board of Trustees, a majority of whom are not interested persons of<PAGE>
PAGE 6
the Fund, formulate and approve any plan under Rule 12b-1 to
finance distribution expenses.
2.7. The Underwriter represents and warrants that it is a
member in good standing of the National Association of Securities
Dealers, Inc., ("NASD") and is registered as a broker-dealer with
the SEC. The Underwriter further represents that it will sell and
distribute the Fund shares in accordance with all applicable
federal and state securities laws, including without limitation the
1933 Act, the 1934 Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and
validly existing under the laws of Massachusetts and that it does
and will comply with applicable provisions of the 1940 Act.
2.9. The Underwriter represents and warrants that the Fund's
Adviser, Quest for Value Advisors, is and shall remain duly
registered under all applicable federal and state securities laws
and that the Adviser will perform its obligations to the Fund in
accordance with the laws of Massachusetts and any applicable state
and federal securities laws.
2.10. The Fund and Underwriter represent and warrant that all
of their directors, officers, employees, investment advisers, and
other individuals/entities having access to the funds and/or
securities of the Fund are and continue to be at all times covered
by a blanket fidelity bond or similar coverage for the benefit of
the Fund in an amount not less than the minimal coverage as
required currently by Rule 17g-(1) of the 1940 Act or related
provisions as may be promulgated from time to time. The aforesaid
Bond includes coverage for larceny and embezzlement and is issued
by a reputable bonding company.
2.11. The Company represents and warrants that all of its
directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of
the Fund are covered by a blanket fidelity bond or similar coverage
for the benefit of the Fund, in an amount not less than $5 million.
The aforesaid includes coverage for larceny and embezzlement and is
issued by a reputable bonding company. The Company agrees to make
all reasonable efforts to see that this bond or another bond
containing these provisions is always in effect, and agrees to
notify the Fund and the Underwriter in the event that such coverage
no longer applies.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. The Underwriter shall provide the Company, at the
Company's expense, with as many copies of the Fund's current
prospectus as the Company may reasonably request for use with
prospective contractowners and applicants. The Underwriter shall
print and distribute, at the Fund's or Underwriter's expense, as
many copies of said prospectus as necessary for distribution to
existing contractowners or participants. If requested by the
Company in lieu thereof, the Fund shall provide such documentation
including a final copy of a current prospectus set in type at the
Fund's expense and other assistance as is reasonably necessary in
order for the Company at least annually (or more frequently if the
Fund prospectus is amended more frequently) to have the new<PAGE>
PAGE 7
prospectus for the Contracts and the Fund's new prospectus printed
together in one document, in such case the Fund shall bear its
share of expenses as described above.
3.2. The Fund's prospectus shall state that the statement of
additional information for the Fund is available from the
Underwriter or alternatively from the Company (or, in the Fund's
discretion, the Prospectus shall state that such Statement is
available from the Fund), and the Underwriter (or the Fund) shall
provide such Statement, at its expense, to the Company and to any
owner of or participant under a Contract who requests such
Statement or, at the Company's expense, to any prospective
contractowner and applicant who requests such statement.
3.3. The Fund, at its expense, shall provide the Company with
copies of its proxy material, if any, reports to shareholders and
other communications to shareholders in such quantity as the
Company shall reasonably require and shall bear the costs of
distributing them to existing contractowners or participants.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from contractowners or
participants;
(ii) vote the Fund shares held in the Account in
accordance with instructions received from
contractowners or participants; and
(iii) vote Fund shares held in the Account for which no
timely instructions have been received, in the
same proportion as Fund shares of such Portfolio
for which instructions have been received from the
Company's contractowners or participants;
so long as and to the extent that the SEC continues to interpret
the 1940 Act to require pass through voting privileges for variable
contractowners. The Company reserves the right to vote Fund shares
held in any segregated asset account in its own right, to the
extent permitted by law. Participating Insurance Companies shall
be responsible for assuring that each of their separate accounts
participating in the Fund calculates voting privileges in a manner
consistent with other Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular as required,
the Fund will either provide for annual meetings or comply with
Section 16(c) of the 1940 Act (although the Fund is not one of the
trusts described in Section 16(c) of that Act) as well as with
Sections 16(a) and, if and when applicable, 16(b). Further, the
Fund will act in accordance with the SEC interpretation of the
requirements of Section 16(a) with respect to periodic elections of
directors and with whatever rules the Commission may promulgate
with respect thereto.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be
furnished, to the Fund or the Underwriter, each piece of sales<PAGE>
PAGE 8
literature or other promotional material in which the Fund or the
Underwriter is named, at least fifteen business days prior to its
use. No such material shall be used if the Fund or the Underwriter
reasonably objects in writing to such use within fifteen business
days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning
the Fund in connection with the sale of the Contracts other than
the information or representations contained in the registration
statement or prospectus for the Fund shares, as such registration
statement and prospectus may be amended or supplemented from time
to time, or in reports or proxy statements for the Fund, or in
sales literature or other promotional material approved by the Fund
or by the Underwriter, except with the permission of the Fund or
the Underwriter. The Fund and the Underwriter agree to respond to
any request for approval on a prompt and timely basis.
4.3. The Fund or the Underwriter shall furnish, or shall cause
to be furnished, to the Company or its designee, each piece of
sales literature or other promotional material in which the Company
or its separate account is named, at least fifteen business days
prior to its use. No such material shall be used if the Company
reasonably objects in writing to such use within fifteen business
days after receipt of such material.
4.4. The Fund and the Underwriter shall not give any
information or make any representations on behalf of the Company or
concerning the Company, each Account, or the Contracts other than
the information or representations contained in a registration
statement or prospectus for the Contracts, as such registration
statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the
public domain or approved by the Company for distribution to
contractowners or participants, or in sales literature or other
promotional material approved by the Company, except with the
permission of the Company. The Company agrees to respond to any
request for approval on a prompt and timely basis.
4.5. The Fund will provide to the Company at least one
complete copy of all registration statements, prospectuses,
statements of additional information, reports, proxy statements,
sales literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments to
any of the above, that relate to the Fund or its shares,
contemporaneously with the filing of such document with the SEC or
other regulatory authorities.
4.6. The Company will provide to the Fund at least one
complete copy of all registration statements, prospectuses,
statements of additional information, reports, solicitations for
voting instructions, sales literature and other promotional
materials, applications for exemptions, requests for no action
letters, and all amendments to any of the above, that relate to the
Contracts or each Account, contemporaneously with the filing of
such document with the SEC or other regulatory authorities.
4.7 For purposes of this Article IV, the phrase "sales
literature or other promotional material" includes, but is not<PAGE>
PAGE 9
limited to, advertisements (such as material published, or designed
for use in, a newspaper, magazine, or other periodical, radio,
television, telephone or tape recording, videotape display, signs
or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made
generally available to customers or the public, including
brochures, circulars, research reports, market letters, form
letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational
or training materials or other communications distributed or made
generally available to some or all agents or employees,
registration statements, prospectuses, statements of additional
information, shareholder reports, and proxy materials and any other
material constituting sales literature or advertising under NASD
rules, the 1940 Act or the 1933 Act.
4.8. The Company agrees and acknowledges that Oppenheimer
Capital is the sole owner of the name and mark "Quest For Value"
and that all use of any designation comprised in whole or part of
such name or mark under this Agreement shall inure to the benefit
of Oppenheimer Capital. Except as provided in Section 4.1, the
Company shall not use any such name or mark on its own behalf or on
behalf of each Account in connection with marketing the contracts
without prior written consent of Oppenheimer Capital. Oppenheimer
Capital consents to the use of the name and mark "Quest For Value"
in connection with each Account, subject to the terms of this
agreement. Upon termination of this Agreement for any reason, the
Company shall cease all use of any such name or mark.
ARTICLE V. Fees and Expenses
5.1. The Fund and Underwriter shall pay no fee or other
compensation to the Company under this Agreement, except that if
the Fund or any Portfolio adopts and implements a plan pursuant to
Rule 12b-1 under the 1940 Act to finance distribution expenses,
then, subject to obtaining any required exemptive orders or other
regulatory approvals, the Underwriter may make payments to the
Company or to the underwriter for the Contracts if and in amounts
agreed to by the Underwriter in writing. Currently, no such
payments are contemplated.
5.2. All expenses incident to performance by the Fund of this
Agreement shall be paid by the Fund to the extent permitted by law.
All Fund shares will be duly authorized for issuance and registered
in accordance with applicable federal law and to the extent deemed
advisable by the Fund, in accordance with applicable state law,
prior to sale. The Fund shall bear the expenses for the cost of
registration and qualification of the Fund's shares, preparation
and filing of the Fund's prospectus and registration statement,
Fund proxy materials and reports, setting in type, printing and
distributing the prospectuses, the proxy materials and reports to
existing shareholders and contractowners, the preparation of all
statements and notices required by any federal or state law, all
taxes on the issuance or transfer of the Fund's shares, and any
expenses permitted to be paid or assumed by the Fund pursuant to a
plan, if any, under Rule 12b-1 under the 1940 Act.
<PAGE>
PAGE 10
ARTICLE VI. Diversification
6.1. The Fund will at all times invest money from the
Contracts in such a manner as to ensure that the Contracts will be
treated as variable contracts under the Internal Revenue Code and
the regulations issued thereunder. Without limiting the scope of
the foregoing, the Fund will comply with Section 817(h) of the
Internal Revenue Code and Treasury Regulation 1.817-5, relating to
the diversification requirements for variable annuity, endowment,
or life insurance contracts and any amendments or other
modifications to such Section or Regulations in accordance with
guidelines provided by the Company prior to the execution of this
Agreement and as necessary thereafter. In the event of a breach of
this Article VI by the Fund, it will take all reasonable steps (a)
to notify the Company of such breach and (b) to adequately
diversify the Fund so as to achieve compliance with the grace
period afforded by Treasury Regulation 1.817-5.
ARTICLE VII. Potential Conflicts
7.1. The Board of Trustees of the Fund (the "Fund Board") will
monitor the Fund for the existence of any material irreconcilable
conflict among the interests of the contractowners of all separate
accounts investing in the Fund. An irreconcilable material
conflict may arise for a variety of reasons, including: (a) an
action by any state insurance regulatory authority; (b) a change in
applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no-action
or interpretative letter, or any similar action by insurance, tax,
or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in
which the investments of any Portfolio are being managed; (e) a
difference in voting instructions given by Participating Insurance
Companies or by variable annuity contract and variable life
insurance contractowners; or (f) a decision by an insurer to
disregard the voting instructions of contractowners. The Board
shall promptly inform the Company if it determines that an
irreconcilable material conflict exists and the implications
thereof. A majority of the Fund Board shall consist of persons who
are not "interested" persons of the Fund.
7.2. The Company will report any potential or existing
conflicts of which it is aware to the Fund Board. The Company
agrees to assist the Fund Board in carrying out its
responsibilities as delineated in the application for a mixed and
shared funding exemptive order, by providing the Fund Board with
all information reasonably necessary for the Fund Board to consider
any issues raised. This includes, but is not limited to, an
obligation by the Company to inform the Fund Board whenever
contractowner voting instructions are disregarded. The Fund Board
shall record in its minutes or other appropriate records, all
reports received by it and all action with regard to a conflict.
<PAGE>
PAGE 11
7.3. If it is determined by a majority of the Fund Board, or a
majority of its disinterested Directors, that an irreconcilable
material conflict exists, the Company and other Participating
Insurance Companies shall, at their expense and to the extent
reasonably practicable (as determined by a majority of the
disinterested Directors), take whatever steps are necessary to
remedy or eliminate the irreconcilable material conflict, up to and
including: (1) withdrawing the assets allocable to some or all of
the subaccounts of the separate accounts from the Fund or any
Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the
Fund, or submitting the question whether such segregation should be
implemented to a vote of all affected contractowners and, as
appropriate, segregating the assets of any appropriate group (i.e.,
variable annuity contractowners or variable life insurance
contractowners, of one or more Participating Insurance Companies)
that votes in favor of such segregation, or offering to the
affected contractowners the option of making such a change; and (2)
establishing a new registered management investment company or
managed separate account.
7.4. If the Company's disregard of voting instructions could
conflict with the majority of contractowner voting instructions,
and the Company's judgment represents a minority position or would
preclude a majority vote, the Company may be required, at the
Fund's election, to withdraw the affected subaccount of the
Account's investment in the Fund and terminate this Agreement with
respect to such subaccounts of the Account. Any such withdrawal
and termination must take place within 60 days after the Fund gives
written notice to the Company that this provision is being
implemented. Until the end of such 60 day period the Underwriter
and Fund shall continue to except and implement orders by the
Company for the purchase (and redemption) of shares of the Fund.
7.5. If a particular state insurance regulator's decision
applicable to the Company conflicts with the majority of other
state insurance regulators, then the Company will withdraw the
affected subaccount of the Account's investment in the Fund and
terminate this Agreement with respect to such subaccount of the
Account. Any such withdrawal and termination must take place
within 60 days after the Fund gives written notice to the Company
that this provision is being implemented. Until the end of such 60
day period the Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption)
of shares of the Fund.
7.6. For purposes of Section 7.3 through 7.6 of this
Agreement, a majority of the disinterested members of the Fund
Board shall determine whether any proposed action adequately
remedies any irreconcilable material conflict, but in no event will
the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to
establish a new funding medium for the Contracts if an offer to do
so has been declined by vote of a majority of contractowners
materially adversely affected by the irreconcilable material
conflict.<PAGE>
PAGE 12
7.7 The Company shall at least annually submit to the Fund
Board such reports, material or data as the Fund Board may
reasonably request so that the Fund Board may fully carry out the
duties imposed upon it as delineated in the application for a mixed
and shared funding exemptive order, and said reports, materials and
data shall be submitted more frequently if deemed appropriate by
the Fund Board.
7.8. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are
amended, or Rule 6e-3 is adopted, to provide exemptive relief from
any provision of the Act or the rules promulgated thereunder with
respect to mixed or shared funding (as defined in the application
for a mixed and shared funding exemptive order) on terms and
conditions materially different from those contained in the
application for a mixed and shared funding exemptive order and/or a
Mixed and Shared Funding Exemptive Order, once issued, then (a) the
Fund and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2
and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent
such rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2,
7.3, 7.4, and 7.5 of this Agreement shall continue in effect only
to the extent that terms and conditions substantially identical to
such Sections are contained in such Rule(s) as so amended or
adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By The Company
8.1(a). The Company agrees to indemnify and hold
harmless the Fund, the Underwriter, and each person, if any, who
controls or is associated with the Fund or the Underwriter within
the meaning of such terms under the Federal Securities law and any
director, officer, employee or agent of the foregoing
(collectively, the "indemnified parties" for purposes of this
Section 8.1) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written
consent of the Company) or litigation (including legal and other
expenses), to which the indemnified parties may become subject
under any statute, regulation, at common law or otherwise, insofar
as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements:
(i) arise out of or are based upon any untrue statements
or alleged untrue statements of any material fact
contained in the registration statement, prospectus
or statement of additional information for the
Contracts or contained in the Contracts or sales
literature or other promotional material for the
Contracts (or any amendment or supplement to any of
the foregoing), or arise out of or are based upon
the omission or the alleged omission to state
therein a material fact required to be stated
therein or necessary to make the statements therein
not misleading in light of the circumstances in
which they were made; provided that this agreement
to indemnify shall not apply as to any indemnified
party if such statement or omission or such alleged
<PAGE>
PAGE 13
statement or omission was made in reliance upon and
in conformity with information furnished to the
Company by or on behalf of the Fund for use in the
registration statement or prospectus or statement of
additional information for the Contracts or in the
Contracts or sales literature (or any amendment or
supplement) or otherwise for use in connection with
the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations by or on behalf of the Company
(other than statements or representations contained
in Fund registration statement, Fund prospectus,
Fund statement of additional information, or sales
literature or other promotional material of the Fund
not supplied by the Company or persons under its
control) or wrongful conduct of the Company or
persons under its control, with respect to the sale
or distribution of the Contracts or Fund shares; or
(iii)arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Fund
registration statement, Fund prospectus, statement
of additional information or sales literature or
other promotional material of the Fund or any
amendment thereof or supplement thereto or the
omission or alleged omission to state therein a
material fact required to be stated therein or
necessary to make the statements therein not
misleading in light of the circumstances in which
they were made, if such a statement or omission was
made in reliance upon and in conformity with
information furnished to the Fund by or on behalf of
the Company or persons under its control; or
(iv) arise as a result of any failure by the Company to
provide the services and furnish the materials or to
make any payments under the terms of this Agreement;
or
(v) arise out of any material breach of any
representation and/or warranty made by the Company
in this Agreement or arise out of or result from any
other material breach by the Company of this
Agreement;
except to the extent provided in Sections 8.1(b) and 8.4 hereof.
This indemnification shall be in addition to any liability which
the Company may otherwise have.
(b). No party shall be entitled to indemnification if
such loss, claim, damage, liability or litigation is due to the
willful misfeasance, bad faith, gross negligence or reckless
disregard of duty by the party seeking indemnification.
(c). The indemnified parties will promptly notify the
Company of the commencement of any litigation or proceedings
against them in connection with the issuance or sale of the Fund
shares or the Contracts or the operation of the Fund.<PAGE>
PAGE 14
8.2. Indemnification By the Underwriter
(a). The Underwriter on its own behalf and on behalf
of the Fund, agrees to indemnify and hold harmless the Company and
each person, if any, who controls or is associated with the Company
within the meaning of such terms under the federal securities laws
and any director, officer, employee or agent of the foregoing
(collectively, the "indemnified parties" for purposes of this
Section 8.2) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written
consent of the Underwriter) or litigation (including legal and
other expenses) to which the indemnified parties may become subject
under any statute, regulation, at common law or otherwise, insofar
as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements:
(i) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in the registration statement, prospectus
or statement of additional information for the Fund
or sales literature or other promotional material of
the Fund (or any amendment or supplement to any of
the foregoing), or arise out of or are based upon
the omission or the alleged omission to state
therein a material fact required to be stated
therein or necessary to make the statements therein
not misleading in light of the circumstances in
which they were made; provided that this agreement
to indemnify shall not apply as to any indemnified
party if such statement or omission or such alleged
statement or omission was made in reliance upon and
in conformity with information furnished to the
Underwriter or Fund by or on behalf of the Company
for use in the registration statement or prospectus
or statement of additional information for the Fund
or in sales literature for the Fund (or any
amendment or supplement thereto) or otherwise for
use in connection with the sale of the Contracts or
Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or
representations contained in the Contracts or in the
Contract or Fund registration statement, the
Contract or Fund prospectus or statement of
additional information or sales literature or other
promotional material for the Contracts or of the
Fund not supplied by the Underwriter or the Fund or
persons under the control of the Underwriter or the
Fund respectively) or wrongful<PAGE>
PAGE 15
conduct of the Underwriter or persons under its
control, with respect to the sale or distribution
of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged
untrue statement of a material fact contained
in a registration statement, prospectus,
statement of additional information or sales
literature or other promotional material
covering the Contracts (or any amendment
thereof or supplement thereto), or the omission
or alleged omission to state therein a material
fact required to be stated therein or necessary
to make the statement or statements therein not
misleading in light of the circumstances in
which they were made, if such statement or
omission was made in reliance upon and in
conformity with information furnished to the
Company by or on behalf of the Underwriter or
the Fund or persons under the control of the
Underwriter or the Fund; or
(iv) arise as a result of any failure by the Fund to
provide the services and furnish the materials
under the terms of this Agreement (including a
failure, whether unintentional or in good faith
or otherwise, to comply with the
diversification requirements and procedures
related thereto specified in Article VI of this
Agreement except if such failure is a result of
the Company's failure to comply with the
notification procedures specified in Article
VI); or
(v) arise out of or result from any material breach
of any representation and/or warranty made by
the Underwriter or the Fund in this Agreement
or arise out of or result from any other
material breach of this Agreement by the
Underwriter or the Fund;
except to the extent provided in Sections 8.2(b) and 8.3 hereof.
This indemnification shall be in addition to any liability which
the Underwriter may otherwise have.
(b). No party shall be entitled to indemnification if
such loss, claim, damage, liability or litigation is due to the
willful misfeasance, bad faith, gross negligence or reckless
disregard of duty by the party seeking indemnification.
(c). The indemnified parties will promptly notify the
Underwriter and the Fund of the commencement of any litigation or
proceedings against them in connection with the issuance or sale of
the Contracts or the operation of the account.
<PAGE>
PAGE 16
8.3. Indemnification Procedure
Any person obligated to provide indemnification under this
Article VIII ("indemnifying party" for the purpose of this Section
8.3) shall not be liable under the indemnification provisions of
this Article VIII with respect to any claim made against a party
entitled to indemnification under this Article VIII ("indemnified
party" for the purpose of this Section 8.3) unless such indemnified
party shall have notified the indemnifying party in writing within
a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been
served upon such indemnified party (or after such party shall have
received notice of such service on any designated agent), but
failure to notify the indemnifying party of any such claim shall
not relieve the indemnifying party from any liability which it may
have to the indemnified party against whom such action is brought
under the indemnification provision of this Article VIII, except to
the extent that the failure to notify results in the failure of
actual notice to the indemnifying party and such indemnifying party
is damaged solely as a result of failure to give such notice. In
case any such action is brought against the indemnified party, the
indemnifying party will be entitled to participate, at its own
expense, in the defense thereof. The indemnifying party also shall
be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from
the indemnifying party to the indemnified party of the indemnifying
party's election to assume the defense thereof, the indemnified
party shall bear the fees and expenses of any additional counsel
retained by it, and the indemnifying party will not be liable to
such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of
investigation, unless (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of
such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying
party and the indemnified party and representation of both parties
by the same counsel would be inappropriate due to actual or
potential differing interests between them. The indemnifying party
shall not be liable for any settlement of any proceeding effected
without its written consent but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party
agrees to indemnify the indemnified party from and against any loss
or liability by reason of such settlement or judgment.
A successor by law of the parties to this Agreement shall be
entitled to the benefits of the indemnification contained in this
Article VIII. The indemnification provisions contained in this
Article VIII shall survive any termination of this Agreement.
8.4. Contribution
In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in this
Section 8 is due in accordance with its terms but for any reason is
held to be unenforceable with respect to a party entitled to
indemnification (the "indemnified parties" for purposes of this
Section 8.4) pursuant to the terms of this Section 8, then each
party obligated to indemnify pursuant to the terms of this Section<PAGE>
PAGE 17
8 shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages,
liabilities and litigations in such proportion as is appropriate to
reflect the relative benefits received by the parties to this
Agreement in connection with the offering of Fund shares to the
Account and the acquisition, holding or sale of Fund shares by the
Account, or if such allocation is not permitted by applicable law,
in such proportions as is appropriate to reflect the relative net
benefits referred to above but also the relative fault of the
parties to this Agreement in connection with any actions that lead
to such losses, claims, damages, liabilities or litigations, as
well as any other relevant equitable considerations.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions
hereof interpreted under and in accordance with the laws of the
State of New York.
9.2. This Agreement shall be subject to the provisions of
the 1933, 1934 and 1940 Acts, and the rules and regulations and
rulings thereunder, including such exemptions from those statutes,
rules and regulations as the SEC grant (including, but not limited
to, a Mixed and Shared Funding Exemptive Order received pursuant to
the application for a mixed and shared exemptive order) and the
terms hereof shall be interpreted and construed in accordance
therewith.
ARTICLE X. Termination
10.1. This Agreement shall terminate:
(a) at the option of any party upon one-year advance
written notice to the other parties unless otherwise agreed in a
separate written agreement among the parties; or
(b) at the option of the Company if shares of the
Portfolios delineated in Schedule 2 are not reasonably available to
meet the requirements of the Contracts as determined by the
Company; or
(c) at the option of the Fund upon institution of
formal proceedings against the Company by the NASD, the SEC, the
insurance commission of any state or any other regulatory body
regarding the Company's duties under this Agreement or related to
the sale of the Contracts, the operation of the Account, or the
purchase of the Fund shares, which would have a material adverse
effect on the Company's ability to perform its obligation under
this Agreement; or
(d) at the option of the Company upon institution of
formal proceedings against the Fund by the NASD, the SEC, or any
state securities or insurance department or any other regulatory
body, which would have a material adverse effect on the Fund's
ability to perform its obligation under this Agreement; or
(e) at the option of the Company or the Fund upon
receipt of any necessary regulatory approvals and/or the vote of<PAGE>
PAGE 18
the contractowners having an interest in the Account (or any
subaccount) to substitute the shares of another investment company
for the corresponding Portfolio shares of the Fund in accordance
with the terms of the Contracts for which those Portfolio shares
had been selected to serve as the underlying investment media. The
Company will give 30 day's prior written notice to the Fund of the
date of any proposed vote or other action taken to replace the
Fund's shares; or
(f) at the option of the Company or the Fund upon a
determination by a majority of the Fund Board, or a majority of the
disinterested Fund Board members, that an irreconcilable material
conflict exists among the interests of (i) all contractowners of
variable insurance products of all separate accounts or (ii) the
interests of the Participating Insurance Companies investing in the
Fund as delineated in Article VII of this Agreement; or
(g) at the option of the Company if the Fund ceases
to qualify as a Regulated Investment Company under Subchapter M of
the Internal Revenue Code, or under any successor or similar
provision, or if the Company reasonably believes that the Fund may
fail to so qualify; or
(h) at the option of the Company if the Fund fails
to meet the diversification requirements specified in Article VI
hereof; or
(i) at the option of any party to this Agreement,
upon another party's materials breach of any provision of this
Agreement; or
(j) the option of the Company, if the Company
determines in its sole judgment exercised in good faith, that
either the Fund or the Underwriter has suffered a material adverse
change in its business, operations or financial condition since the
date of this Agreement or is the subject of material adverse
publicity which is likely to have a material adverse impact upon
the business and operations of the Company; or
(k) at the option of the Fund or Underwriter, if the
Fund or Underwriter respectively, shall determine in its sole
judgment exercised in good faith, that the Company has suffered a
material adverse change in its business, operations or financial
conditions since the date of this Agreement or is the subject of
material adverse publicity which is likely to have a material
adverse impact upon the business and operations of the Fund or
Underwriter; or
(l) at the option of the Fund in the event any of
the Contracts are not issued or sold in accordance with applicable
federal and/or state law. Termination shall be effective
immediately upon such occurrence without notice.<PAGE>
PAGE 19
10.2. Notice Requirement
(a) In the event that any termination of this
Agreement is based upon the provisions of Article VII, such prior
written notice shall be given in advance of the effective date of
termination as required by such provisions.
(b) In the event that any termination of this
Agreement is based upon the provisions of Sections 10.1(b)-(d) or
10.1(g)-(i), prompt written notice of the election to terminate
this Agreement for cause shall be furnished by the party
terminating the Agreement to the non-terminating parties with said
termination to be effective upon receipt of such notice by the non-
terminating parties.
(c) In the event that any termination of this
Agreement is based upon the provisions of Sections 10.1(j) or
10.1(k), prior written notice of the election to terminate this
Agreement for cause shall be furnished by the party terminating
this Agreement to the non-terminating parties. Such prior written
notice shall be given by the party terminating this Agreement to
the non-terminating parties at least 30 days before the effective
date of termination.
10.3 It is understood and agreed that the right to
terminate this Agreement pursuant to Section 10.1(a) may be
exercised for any reason or for no reason.
10.4. Effect of Termination
(a). Notwithstanding any termination of this
Agreement, subject to section 1.3 of this Agreement, the Company
may require the Fund and the Underwriter to continue to make
available additional shares of the Company for so long after the
termination of this Agreement as the Company desires pursuant to
the terms and conditions of this Agreement as provided in paragraph
(b) below for all Contracts in effect on the effective date of
termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, the owners of the
Existing Contracts shall be permitted to reallocate investments in
the Fund, redeem investments in the Fund and/or invest in the Fund
upon the making of additional purchase payments under the Existing
Contracts. The parties agree that this Section 10.4 shall not
apply to any terminations under Article VII and the effect of such
Article VII terminations shall be governed by Article VII of this
Agreement.
(b). If shares of the Fund continue to be made
available after termination of this Agreement pursuant to this
Section 10.4, the provisions of this Agreement shall remain in
effect except for Section 10.1(a) and thereafter the Fund, the
Underwriter, or the Company may terminate the Agreement, as so
continued pursuant to this Section 10.4, upon written notice to the
other party, such notice to be for a period that is reasonable
under the circumstances but, if given by the Fund or Underwriter,
need not be for more than 90 days.<PAGE>
PAGE 20
10.5. Except as necessary to implement contractowner
initiated or approved transactions, or as required by state
insurance laws or regulations, the Company shall not redeem Fund
shares attributable to the Contracts (as opposed to Fund shares
attributable to the Company's assets held in the Account), and the
Company shall not prevent contractowners from allocating payments
to a Portfolio that was otherwise available under the Contracts,
until 90 days after the Company shall have notified the Fund or
Underwriter of its intention to do so.
<PAGE>
PAGE 21
ARTICLE XI. Notices
Any notice shall be deemed duly given only if sent by hand,
evidenced by written receipt or by certified mail, return receipt
requested, to the other party at the address of such party set
forth below or at such other address as such party may from time to
time specify in writing to the other party. All notices shall be
deemed given three business days after the date received or
rejected by the addressee.
If to the Fund:
Mr. Bernard H. Garil
President
Quest For Value Advisors
200 Liberty Street
New York, NY 10281
If to the Company:
American Enterprise Life Insurance Company
80 South Eighth Street
Minneapolis, MN 55402
Attention: President
If to the Underwriter:
Mr. Thomas E. Duggan
Secretary
Quest for Value Distributors
Two World Financial Center
New York, NY 10080
ARTICLE XII. Miscellaneous
12.1. All persons dealing with the Fund must look solely
to the property of the Fund for the enforcement of any claims
against the Fund as neither the directors, officers, agents or
shareholders assume any personal liability for obligations entered
into on behalf of the Fund.
12.2. Subject to law and regulatory authority, each party
hereto shall treat as confidential all information reasonably
identified as such in writing by any other party hereto (including
without limitation the names and addresses of the owners of the
Contracts) and, except as contemplated by this Agreement, shall not
disclose, disseminate or utilize such confidential information
until such time as it may come into the public domain without the
express prior written consent of the affected party.
12.3. The captions in this Agreement are included for
convenience of reference only and in no way define or delineate any
of the provisions hereof or otherwise affect their construction or
effect.
12.4. This Agreement may be executed simultaneously in
two or more counterparts, each of which taken together shall
constitute one and the same instrument.
<PAGE>
PAGE 22
12.5. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the
remainder of the Agreement shall not be affected thereby.
12.6. This Agreement shall not be assigned by any party
hereto without the prior written consent of all the parties.
12.7. Each party hereto shall cooperate with each other
party and all appropriate governmental authorities (including
without limitation the SEC, the NASD and state insurance
regulators) and shall permit each other and such authorities
reasonable access to its books and records in connection with any
investigation or inquiry relating to this Agreement or the
transactions contemplated hereby.
12.8. Each party represents that the execution and
delivery of this Agreement and the consummation of the transactions
contemplated herein have been duly authorized by all necessary
corporate or trust action, as applicable, by such party and when so
executed and delivered this Agreement will be the valid and binding
obligation of such party enforceable in accordance with its terms.
12.9 The parties to this Agreement may amend the
schedules to this Agreement from time to time to reflect changes in
or relating to the Contracts, the Accounts or the Portfolios of the
Fund.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and behalf by its duly
authorized representative and its seal to be hereunder affixed
hereto as of the date specified below.
Company:
American Enterprise Life Insurance
Company
SEAL By: /s/ Ryan Larson
Fund:
QUEST FOR VALUE ACCUMULATION TRUST
SEAL By: /s/ Bernard H. Gaiel
Underwriter:
QUEST FOR VALUE DISTRIBUTORS
SEAL By: /s/ Thomas E. Dugger
<PAGE>
PAGE 23
Schedule 1
Participation Agreement
Among
Quest for Value Accumulation Trust, American Enterprise Life
Insurance Company
and
Quest for Value Distributors
The following separate accounts of American Enterprise Life
Insurance Company are permitted in accordance with the provisions
of this Agreement to invest in Portfolios of the Fund shown in
Schedule 2:
American Enterprise Variable Annuity Account, established July 15,
1987
February 21, 1995<PAGE>
PAGE 24
Schedule 2
Participation Agreement
Among
Quest for Value Accumulation Trust, American Enterprise Life
Insurance Company
and
Quest for Value Distributors
The Separate Account(s) shown on Schedule 1 may invest in the
following Portfolios of the Quest for Value Accumulation Trust:
Managed Portfolio
U.S. Government Income Portfolio
February 21, 1995
<PAGE>
PAGE 1
Consent of Independent Auditors
We consent to the use of our reports dated February 3, 1995 on the
financial statements and financial statement schedules of American
Enterprise Life Insurance Company in Post-Effective Amendment No. 2
to the Registration Statement (Form N-4 No. 33-54471) being filed
under the Securities Act of 1993 and the Investment Company Act of
1940.
Ernst & Young LLP
Minneapolis, Minnesota
April 26, 1995
<PAGE>
PAGE 1
<TABLE>
<CAPTION>
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
SCHEDULE I - SUMMARY OF INVESTMENTS
OTHER THAN INVESTMENTS IN RELATED PARTIES ($ thousands)
AS OF DECEMBER 31, 1994
Column A Column B Column C Column D
Amount at which
Type of Investment Cost Value shown in the
balance sheet
<S> <C> <C> <C>
Fixed maturities:
Held to maturity:
United States Government and
government agencies and
authorities (a) $ 119,179 $ 104,960 $ 119,179
States, municipalities and
political subdivisions 3,004 3,045 3,004
All other corporate bonds 1,008,569 932,658 1,008,569
Total held to maturity 1,130,752 $ 1,040,663 1,130,752
Available for sale:
United States Government and
government agencies and
authorities (a) $ 539,616 $ 499,309 $ 499,309
States, municipalities and
political subdivisions 999 1,021 1,021
All other corporate bonds 645,930 619,041 619,041
Total available for sale 1,186,545 $ 1,119,371 1,119,371
Mortgage loans on real estate 219,445 XXXXXXXXXX 219,445
Other investments 28 XXXXXXXXXX 28
Total investments $ 2,536,770 XXXXXXXXXX $ 2,469,596
(a) - Includes mortgage-backed securities with a cost and market value of $117,149 and $102,962,
respectively.
(b) - Includes mortgage-backed securities with a cost and market value of $514,176 and $474,345,
respectively.
</TABLE>
<PAGE>
PAGE 2
<TABLE>
<CAPTION>
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
SCHEDULE V - VALUATION AND QUALIFYING ACCOUNTS ($ thousands)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
Column A Column B Column C Column D Column E
Additions
--------------
Balance at Charged to
Description Beginning Charged to Other Accounts- Deductions- Balance at End
of Period Costs & Expenses Describe Describe of Period
<S> <C> <C> <C> <C> <C>
For the year ended
December 31, 1994
------------------------------
Reserve for
Fixed Maturities $ 77 $ (77) $0 $0 $ 0
For the year ended
December 31, 1993
------------------------------
Reserve for
Fixed Maturities $ 79 $ (2) $0 $0 $ 77
For the year ended
December 31, 1992
------------------------------
Reserve for
Fixed Maturities $ 389 $ (310) $0 $0 $ 79
</TABLE>
<PAGE>
PAGE 3
Report of Independent Auditors
The Board of Directors
We have audited the financial statements of American Enterprise
Life Insurance Company (a wholly owned subsidiary of IDS Life
Insurance Company) as of December 31, 1994 and 1993, and for each
of the three years in the period ended December 31, 1994, and have
issued our report thereon dated February 3, 1995 (included
elsewhere in this Registration Statement).
Our audits also included the financial statements schedules I and V
included elsewhere in this Registration Statement. These schedules
are the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedules referred to
above, when considered in relation to the basic financial
statements taken as a whole, present fairly, in all material
respects, the information set forth therein.
Ernst & Young LLP
Minneapolis, Minnesota
February 3, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<CIK> 0000926266
<NAME> American Enterprise Life Insurance Company
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLAR
<FISCAL-YEAR-END> DEC-31-1993 DEC-31-1994
<PERIOD-START> JAN-01-1993 JAN-01-1994
<PERIOD-END> DEC-31-1993 DEC-31-1994
<PERIOD-TYPE> YEAR YEAR
<EXCHANGE-RATE> 1 1
<DEBT-HELD-FOR-SALE> 0 1119371
<DEBT-CARRYING-VALUE> 1817429 1130752
<DEBT-MARKET-VALUE> 1881784 1040663
<EQUITIES> 159 28
<MORTGAGE> 28928 219445
<REAL-ESTATE> 0 0
<TOTAL-INVEST> 1846516 2469596
<CASH> 1942 53358
<RECOVER-REINSURE> 0 0
<DEFERRED-ACQUISITION> 100006 137648
<TOTAL-ASSETS> 1974028 2712286
<POLICY-LOSSES> 1735736 2480122
<UNEARNED-PREMIUMS> 0 0
<POLICY-OTHER> 0 0
<POLICY-HOLDER-FUNDS> 14436 15706
<NOTES-PAYABLE> 0 0
<COMMON> 2000 2000
0 0
0 0
<OTHER-SE> 150312 161255
<TOTAL-LIABILITY-AND-EQUITY> 1974028 2712286
0 0
<INVESTMENT-INCOME> 124532 162201
<INVESTMENT-GAINS> 576 (1190)
<OTHER-INCOME> 1047 2753
<BENEFITS> 78538 112977
<UNDERWRITING-AMORTIZATION> 15992 14052
<UNDERWRITING-OTHER> 3369 6523
<INCOME-PRETAX> 28256 30212
<INCOME-TAX> 10033 10574
<INCOME-CONTINUING> 18223 19638
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 18223 19638
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
<RESERVE-OPEN> 0 0
<PROVISION-CURRENT> 0 0
<PROVISION-PRIOR> 0 0
<PAYMENTS-CURRENT> 0 0
<PAYMENTS-PRIOR> 0 0
<RESERVE-CLOSE> 0 0
<CUMULATIVE-DEFICIENCY> 0 0
</TABLE>
