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AEL Personal PortfolioSM
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 534,
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 VALUESM 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 BANK, AND THE SECURITIES IT
OFFERS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ANY BANK NOR ARE THEY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY. INVESTMENTS IN AN ANNUITY INVOLVE INVESTMENT RISK
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
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A Statement of Additional Information (SAI) dated January 12, 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.
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Table of Contents
Key terms.....................................................
The AEL Personal PortfolioSM in brief.........................
Expense summary...............................................
Financial statements..........................................
Performance information.......................................
The variable account..........................................
The funds.....................................................
IDS Life Aggressive Growth Fund...........................
IDS Life International Equity Fund........................
IDS Life Capital Resource Fund............................
IDS Life Managed Fund.....................................
IDS Life Special Income Fund..............................
IDS Life Moneyshare Fund..................................
Quest for Value Accumulation Trust Managed Portfolio......
Quest for Value Accumulation Trust
U.S. Government Income Portfolio......................
PCM New Opportunities Fund................................
PCM Growth and Income Fund................................
PCM High Yield Fund.......................................
PCM Diversified Income Fund...............................
G.T. Global: Variable Latin America Fund.................
G.T. Global: Variable New Pacific Fund...................
The fixed account.............................................
Buying your annuity...........................................
Setting the retirement date...............................
Beneficiary...............................................
How to make payments......................................
Charges.......................................................
Contract administrative charge............................
Variable account administrative charge....................
Mortality and expense risk fee............................
Withdrawal charge.........................................
Premium taxes.............................................
Valuing your investment.......................................
Number of units...........................................
Accumulation unit value...................................
Net investment factor.....................................
Factors that affect variable subaccount
accumulation units....................................
Making the most of your annuity...............................
Automated dollar-cost averaging...........................
Transferring money between subaccounts....................
Transfer policies.........................................
Three ways to request a transfer or a withdrawal..........
Withdrawals from your contract................................
Withdrawal policies.......................................
Receiving payment when you request a withdrawal...........
TSA-special withdrawal provisions.........................
Changing ownership............................................
Benefits in case of death.....................................
The annuity payout period.....................................
Annuity payout plans......................................
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Death after annuity payouts begin.........................
Transfers between subaccounts after annuity
payouts begin.........................................
Taxes.........................................................
Voting rights.................................................
Substitution of investments...................................
Distribution of the contracts.................................
About American Enterprise Life................................
Regular and special reports...................................
Table of contents of the Statement of Additional
Information...............................................
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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 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 4 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.
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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 surrender 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
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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. 12)
o one fixed account, which earns interest at rates that are
adjusted periodically by American Enterprise Life. (p. 16)
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:
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) and you may
request a transfer by telephone. (p. 25)
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. 29)
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. 31)
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. 32)
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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. 33)
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. 35)
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 and deducted either from your purchase
payments or upon total withdrawal or when annuity payments begin.
(p. 19)
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.
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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> <C>
Management fees .65% .89% .65% .65% .65% .54% .60%
Other expenses .07% .14% .04% .04% .04% .05% .06%
Total .72%** 1.03%** .69%** .69%** .69%** .59%** .66%***+
Quest for Value
Accumulation
Trust U.S. Gov- PCM PCM G.T. Global: G.T. Global:
ernment Inocme PCM New Growth and PCM High Diversified Variable Variable
Portfolio Opportunities Income Yield Income Latin America New Pacific
Management fees .60% .60% .57% .70% .70% 1.00% 1.00%
Other expenses .15% .34% .04% .07% .36% .25% .25%
Total .75%***+ .94%***++ .61%** .77%** 1.06%** 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, 1993.
*** These are new funds: operating expenses are based on annualized
estimates of such expenses to be incurred in the current fiscal
year.
+ The expenses for the Quest for Value Managed and 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 Government
Income Portfolios, respectively through December 31, 1995. Without
such expense limitations, it is estimated that the Management Fees,
Other Expenses and Total Portfolio Annual Expenses that would be
incurred for the fiscal year ended December 31, 1994 would be:
0.60%, 0.17% and 0.77%, respectively, for the Quest for Value
Managed Portfolio and 0.60%, 1.96% and 2.56%, respectively, for the
Quest for Value Government Income Portfolio. Quest for Value
Advisors reserves the right to discontinue these Portfolio expense
limitations after December 31, 1995.
++ The Manager of PCM New Opportunities Fund has voluntarily agreed
to limit expenses of the Fund to an annual rate of 1.2% 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. Without such expense limitations it
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is estimated that the Management Fees, Other Expenses and Total
Portfolio Annual Expense that would be incurred for the fiscal year
ended December 31, 1994 would be: 0.60%, 1.69% and 2.29%
respectively, for the PCM New Opportunities Fund. This limitation
will expire on April 30, 1995.
Example:* 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:
<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> <C>
1 year 94.26 97.32 93.96 93.96 93.96 92.97 93.66
3 years 124.67 133.84 123.78 123.78 123.78 120.79 122.88
You would pay the following expenses on the same investment assuming annuitization or no withdrawal:
1 year 24.26 27.32 23.96 23.96 23.96 22.97 23.66
3 years 74.67 83.84 73.78 73.78 73.78 70.79 72.88
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
1 year 94.56 96.43 93.17 94.75 97.62 99.48 99.48
3 years 125.56 131.19 121.39 126.16 134.72 140.28 140.28
You would pay the following expenses on the same investment assuming annuitization or no withdrawal:
1 year 24.56 26.43 23.17 24.75 27.62 29.48 29.48
3 years 75.56 81.19 71.39 76.16 84.72 90.28 90.28
</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 our initial estimated
average contract size.
Financial statements
The SAI dated January 12, 1995, contains:
the complete audited financial statements for American Enterprise
Life including
- - balance sheets as of Dec. 31, 1993 and Dec. 31, 1992 and
- - related statements of income and cash flows for each of the three
years in the period ended Dec. 31, 1993
and the unaudited financial statements for American Enterprise Life
including
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PAGE 11
- - balance sheet as of Sept. 30, 1994 and
- - related statements of income and cash flows for the nine months
ended Sept. 30, 1994 and 1993.
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.
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.
Yield - all other subaccounts: 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.
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).
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 are used for the calculations.
The Quest for Value Accumulation Trust is part of a fund created
for the purpose of providing, without interruption to the contract
owners of variable annuities issued by certain insurance companies
unrelated to American Enterprise Life and invested in shares of the
Enterprise Accumulation Trust, continued investment in a registered
investment company with identical investment objectives, policies
and fees as that of the Enterprise Accumulation Trust. Until
September 16, 1994, Quest for Value Advisors served as the adviser
to the Enterprise Accumulation Trust and the Quest for Value
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PAGE 12
Accumulation Trust's Board served as the Board of Trustees of the
Enterprise Accumulation Trust. On that date, management of the
Enterprise Accumulation Trust was taken over by a new Board of
Trustees and a new investment adviser. The Quest for Value
Accumulation Trust is under the day-to-day management of Quest for
Value Advisors, who also served as the original adviser to the
Enterprise Accumulation Trust, and the overall supervision of the
prior Board of Trustees of the Enterprise Accumulation Trust.
The Quest for Value Accumulation Trust Managed Portfolio will be
managed according to the same investment objectives, policies and
techniques as the Managed Portfolio of the Enterprise Accumulation
Trust when Quest for Value Advisors served as its adviser. The
performance results shown below are as if the subaccount had
existed and invested in the Managed Portfolio of the Enterprise
Accumulation Trust. These results should not be taken as an
indication of the future performance of the subaccount invested in
the Quest for Value Accumulation Trust Managed Portfolio.
Annualized Yields based on Seven-Day Period ended
September 30, 1994
Subaccount investing in: Simple Yield Compound Yield
IDS Life Moneyshare Fund 4.35% 4.44%
Average Annual Total Return Period Ended September 30, 1994:
<TABLE>
<CAPTION>
Average Annual Total Return with Withdrawal
Since
Subaccount investing in: 1 Year 3 Year 5 Year 10 Year Inception
<S> <C> <C> <C> <C> <C>
IDS LIFE
Aggressive Growth Fund (1/92)* -13.28% -- -- -- 2.50%
Capital Resource Fund (10/81) - 3.70% 4.93% 8.17% 12.07% --
International Equity Fund (1/92) 3.89% -- -- -- 8.33%
Managed Fund (4/86) - 9.12% 6.07% 8.17% -- 8.97%
Moneyshare Fund (10/81) - 5.26% 0.07% 2.78% 4.59% --
Special Income Fund (10/81) -11.22% 5.15% 6.45% 9.19% --
ENTERPRISE ACCUMULATION TRUST
Managed Portfolio (8/88) - 3.92% 11.09% 13.04% -- 15.40%
GT GLOBAL:
Variable Latin America Fund (2/93) 57.50% -- -- -- 39.98%
Variable New Pacific Fund (2/93) 1.61% -- -- -- 8.04%
PCM
New Opportunities Fund (5/94) -- -- -- -- -11.08%
Growth & Income Fund (12/87) - 3.72% 6.46% 7.35% -- 11.30%
High Yield Fund (12/87) - 3.63% 11.28% 9.41% -- 8.64%
Diversified Income Fund (7/93) - 9.60% -- -- -- - 7.58%
*Inception dates of the funds are shown in parentheses.
Average Annual Total Return without Withdrawal
Since
Subaccount investing in: 1 Year 3 Year 5 Year 10 Year Inception
IDS Life
Aggressive Growth Fund (1/92)* - 6.28% -- -- -- 4.23%
Capital Resource Fund (10/81) 3.30% 6.42% 8.60% 12.07% --
International Equity Fund (1/92) 10.89% -- -- -- 9.91%
Managed Fund (4/86) - 2.12% 7.53% 8.60% -- 8.97%
Moneyshare Fund (10/81) 1.74% 1.71% 3.31% 4.59% --
Special Income Fund (10/81) - 4.22% 6.64% 6.91% 9.19% --
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ENTERPRISE ACCUMULATION TRUST
Managed Portfolio (8/88) 3.08% 12.42% 13.41% -- 15.48%
GT GLOBAL:
Variable Latin America (2/93) 64.50% -- -- -- 42.93%
Variable New Pacific Fund (2/93) 8.61% -- -- -- 11.50%
PCM
New Opportunities Fund (5/94) -- -- -- -- 5.54%
Growth & Income Fund (12/87) 3.28% 7.91% 7.80% -- 11.38%
High Yield Fund (12/87) 3.37% 12.61% 9.83% -- 8.73%
Diversified Income Fund (7/93) - 2.60% -- -- -- - 2.43%
</TABLE>
*Inception dates of the funds are shown in parentheses.
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
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.<PAGE>
PAGE 14
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 (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.
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.
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PAGE 15
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 and, when consistent with this
objective, a secondary objective of capital growth. Invests
primarily in high-yielding, lower-rated fixed income securities,
constituting a diversified 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 primarily 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 primarily in
equity securities including common and preferred stocks and
warrants to acquire such securities of issuers domiciled in
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 are available to serve as the
underlying investment for variable annuities and 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 annuity contract holders
would not bear any expenses associated with establishing separate
funds.
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PAGE 16
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
daily and compounded annually. 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
the staff of the SEC has not reviewed the disclosures in this
prospectus that relate to the fixed account. Disclosures regarding
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PAGE 17
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; and
o by April 1 of the year following the calendar year when the
annuitant reaches age 70 1/2.
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.
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PAGE 18
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 534
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
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
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PAGE 19
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. Annually it totals 1.25% of their
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
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.
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PAGE 20
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
December 31, 2001 and $6,000 February 20, 2003
o The owner withdraws the contract for its total withdrawal
value of $38,101 on August 5, 2005 and had not made any other
withdrawals during that contract year
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
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PAGE 21
$ 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.
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.
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PAGE 22
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.
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.
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PAGE 23
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.
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PAGE 24
<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 accounts
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 25
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) once a year 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.
Three 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 534
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)
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PAGE 26
2 By phone
Call between 8 a.m. and 5 p.m. Central time:
1-800-333-3437 (toll free) or
(612) 671-7700 (Minneapolis/St. Paul area)
Minimum amount
Phone transfers: $500 or entire account balance
Phone withdrawals: $500 or entire account balance
Maximum amount
Phone transfers: None (up to contract value)
Phone withdrawals: $50,000
We answer phone requests promptly, but you may experience delays
when the call volume is unusually high. If you are unable to get
through, use the mail procedure as an alternative.
We will honor any telephone transfer or withdrawal request believed
to be authentic and will use reasonable procedures to confirm that
they are. This includes asking identifying questions and tape
recording calls. A telephone withdrawal will not be allowed within
30 days of a phoned-in address change. As long as the procedures
are followed, neither American Enterprise Life nor its affiliates
will be liable for any loss resulting from fraudulent requests.
Telephone transfers or withdrawals are automatically available.
You may request that telephone transfers or withdrawals not be
authorized from your account by writing American Enterprise Life.
3 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
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PAGE 27
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:
-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.
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PAGE 28
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".)
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.
<PAGE>
PAGE 29
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:
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;
<PAGE>
PAGE 30
o the annuitant's age and, in most cases, sex;
o the annuity table in the contract;
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.
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:
<PAGE>
PAGE 31
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
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.
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PAGE 32
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
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.
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PAGE 33
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
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.
<PAGE>
PAGE 34
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 adviser if you have any questions about taxation of your
contract.
Tax Qualifications
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:
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
<PAGE>
PAGE 35
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,
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).
American Express 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 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.
<PAGE>
PAGE 36
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.
Table of contents of the Statement of Additional Information
Performance information.......................
Calculating annuity payouts...................
Rating agencies...............................
Principal underwriter.........................
Independent auditors..........................
Mortality and expense risk fee................
Prospectus....................................
Financial statements -
American Enterprise Life Insurance
Company..................................
___________________________________________________________________
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 534
Minneapolis, MN 55440-0534
<PAGE>
PAGE 37
American Enterprise Life will mail your request to:
Your name _______________________________________________________
Address _________________________________________________________
City ______________________ State ______________ Zip ___________
<PAGE>
PAGE 38
STATEMENT OF ADDITIONAL INFORMATION
for
AEL PERSONAL PORTFOLIOSM
AMERICAN ENTERPRISE VARIABLE ANNUITY ACCOUNT
January 12, 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 January 12,
1995, is not a prospectus. It should be read together with the
Account's prospectus, dated January 12, 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 534
Minneapolis, MN 55440-0534
(612) 671-7700
<PAGE>
PAGE 39
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
Prospectus....................................................p. 9
Financial Statements
- American Enterprise Life Insurance Company.............p. 10
<PAGE>
PAGE 40
PERFORMANCE INFORMATION
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 account 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
Calculation of Yield for other than the IDS Life Moneyshare
Subaccount
For a subaccount other than the IDS Life Moneyshare subaccount,
quotations of yield will be based on all investment income earned
during a particular 30-day period, less expenses accrued during the
period (net investment income) and will be computed by dividing net
investment income per accumulation unit by the value of an
accumulation unit on the last day of the period, according to the
following formula:
YIELD = 2[(a-b + 1)6 - 1]
cd
where: a = dividends and investment income earned during the
period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of accumulation units
outstanding during the period that were entitled to
receive dividends.
d = the maximum offering price per accumulation unit on
the last day of the period.
Yield on the subaccount is earned from the increase in the net
asset value of shares of the fund in which the subaccount invests
and from dividends declared and paid by the fund, which are
automatically invested in shares of the fund.
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PAGE 41
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; in addition, performance figures may be shown without the
deduction of a 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.
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 are used for
the calculations.
The Quest for Value Accumulation Trust is part of a fund created
for the purpose of providing, without interruption to the contract
owners of variable annuities issued by certain insurance companies
unrelated to American Enterprise Life and invested in shares of the
Enterprise Accumulation Trust, continued investment in a registered
investment company with identical investment objectives, policies
and fees as that of the Enterprise Accumulation Trust. Until
September 16, 1994, Quest for Value Advisors served as the adviser
to the Enterprise Accumulation Trust and the Quest for Value
Accumulation Trust's Board served as the Board of Trustees of the
Enterprise Accumulation Trust. On that date, management of the
Enterprise Accumulation Trust was taken over by a new Board of
Trustees and a new investment adviser. The Quest for Value
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PAGE 42
Accumulation Trust is under the day-to-day management of Quest for
Value Advisors, who also served as the original adviser to the
Enterprise Accumulation Trust, and the overall supervision of the
prior Board of Trustees of the Enterprise Accumulation Trust.
The Quest for Value Accumulation Trust Managed Portfolio will be
managed according to the same investment objectives, policies and
techniques as the Managed Portfolio of the Enterprise Accumulation
Trust when Quest for Value Advisors served as its adviser. The
performance results shown below are as if the subaccount had
existed and invested in the Managed Portfolio of the Enterprise
Accumulation Trust. These results should not be taken as an
indication of the future performance of the subaccount invested in
the Quest for Value Accumulation Trust Managed Portfolio.
Annualized Yields based on Seven-Day Period ended
September 30, 1994
Subaccount investing in: Simple Yield Compound Yield
IDS Life Moneyshare Fund 4.35% 4.44%
Average Annual Total Return Period Ended: September 30, 1994
<TABLE>
<CAPTION>
Average Annual Total Return with Withdrawal
Since
Subaccount investing in: 1 Year 3 Year 5 Year 10 Year Inception
<S> <C> <C> <C> <C> <C>
IDS LIFE
Aggressive Growth Fund (1/92)* -13.28% -- -- -- 2.50%
Capital Resource Fund (10/81) - 3.70% 4.93% 8.17% 12.07% --
International Equity Fund (1/92) 3.89% -- -- -- 8.33%
Managed Fund (4/86) - 9.12% 6.07% 8.17% -- 8.97%
Moneyshare Fund (10/81) - 5.26% 0.07% 2.78% 4.59% --
Special Income Fund (10/81) -11.22% 5.15% 6.45% 9.19% --
ENTERPRISE ACCUMULATION TRUST
Managed Portfolio (8/88) - 3.92% 11.09% 13.04% -- 15.40%
GT GLOBAL:
Variable Latin America Fund (2/93) 57.50% -- -- -- 39.98%
Variable New Pacific Fund (2/93) 1.61% -- -- -- 8.04%
PCM
New Opportunities Fund (5/94) -- -- -- -- -11.08%
Growth & Income Fund (12/87) - 3.72% 6.46% 7.35% -- 11.30%
High Yield Fund (12/87) - 3.63% 11.28% 9.41% -- 8.64%
Diversified Income Fund (7/93) - 9.60% -- -- -- - 7.58%
Average Annual Total Return without Withdrawal
Since
Subaccount Investing in: 1 Year 3 Year 5 Year 10 Year Inception
IDS Life
Aggressive Growth Fund (1/92) - 6.28% -- -- -- 4.23%
Capital Resource Fund (10/81) 3.30% 6.42% 8.60% 12.07% --
International Equity Fund (1/92) 10.89% -- -- -- 9.91%
Managed Fund (4/86) - 2.12% 7.53% 8.60% -- 8.97%
Moneyshare Fund (10/81) 1.74% 1.71% 3.31% 4.59% --
Special Income Fund (10/81) - 4.22% 6.64% 6.91% 9.19% --
<PAGE>
PAGE 43
ENTERPRISE ACCUMULATION TRUST
Managed Portfolio (8/88) 3.08% 12.42% 13.41% -- 15.48%
GT GLOBAL:
Variable Latin America (2/93) 64.50% -- -- -- 42.93%
Variable New Pacific Fund (2/93) 8.61% -- -- -- 11.50%
PCM
New Opportunities Fund (5/94) -- -- -- -- 5.54%
Growth & Income Fund (12/87) 3.28% 7.91% 7.80% -- 11.38%
High Yield Fund (12/87) 3.37% 12.61% 9.83% -- 8.73%
Diversified Income Fund (7/93) - 2.60% -- -- -- - 2.43%
</TABLE>
*inception dates of the funds are shown in parentheses.
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.
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PAGE 44
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
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
<PAGE>
PAGE 45
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.
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)
at December 31, 1993 and 1992 and for each of the three years in
the period ended December 31, 1993, 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.
<PAGE>
PAGE 46
PROSPECTUS
The prospectus dated January 12, 1995, is hereby incorporated in
this SAI by reference.
<PAGE>
PAGE 47
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, 1993 and 1992, and the
related statements of income and cash flows for each of the three
years in the period ended December 31, 1993. 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, 1993 and
1992, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1993, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
April 13, 1994
Minneapolis, Minnesota
<PAGE>
PAGE 48
American Enterprise Life Insurance Company
<TABLE>
<CAPTION>
Balance Sheets Dec. 31, 1993 Dec. 31,1992
(thousands)
Assets
<S> <C> <C>
Investments:
Fixed maturities (Fair value: 1993, $1,881,784; 1992, $1,320,971) $1,817,429 $1,281,006
Mortgage loans on real estate (Fair value: 1993, $27,862;
1992, $2,213) 28,928 2,239
Equity securities 159 68
1,846,516 1,283,313
Cash and cash equivalents 1,942 -
Accrued investment income 25,385 17,731
Deferred policy acquisition costs 100,006 63,206
Other assets 179 136
Total assets $1,974,028 $1,364,386
========= =========
Liabilities and Stockholder's Equity
Liabilities:
Future policy benefits for fixed annuities $1,735,736 $1,224,159
Policy claims and other policyholders' funds 14,436 12,644
Amounts due to brokers 27,691 16,743
Securities sold under repurchase agreements 30,000 15,000
Deferred federal income taxes 10,394 7,300
Other liabilities 3,459 4,450
Total liabilities 1,821,716 1,280,296
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 107,872 57,872
Net unrealized appreciation on equity securities 6 7
Retained earnings 42,434 24,211
Total stockholder's equity 152,312 84,090
Total liabilities and stockholder's equity $1,974,028 $1,364,386
========= =========
See accompanying notes.
</TABLE>
<PAGE>
PAGE 49
American Enterprise Life Insurance Company
<TABLE>
<CAPTION>
Statements of Income Years ended Dec. 31,
1993 1992 1991
(thousands)
<S> <C> <C> <C>
Revenues:
Net investment income $124,532 $87,911 $59,769
Contractholder charges 1,047 516 394
Net gain on investments 576 2,914 660
Total revenues 126,155 91,341 60,823
Benefits and expenses:
Interest credited on investment contracts 78,538 64,478 44,988
Amortization of deferred policy acquisition costs 15,992 4,428 1,908
Other operating expenses 3,369 1,547 6,828
Total expenses 97,899 70,453 53,724
Income before income taxes 28,256 20,888 7,099
Income taxes 10,033 7,036 2,321
Net income $ 18,223 $13,852 $ 4,778
======= ====== =====
See accompanying notes.
</TABLE>
<PAGE>
PAGE 50
American Enterprise Life Insurance Company
<TABLE>
<CAPTION>
Statements of Cash Flows Years ended Dec. 31,
1993 1992 1991
(thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 18,223 $ 13,852 $ 4,778
Adjustments to reconcile net income to net cash used in operating
activities:
Change in accrued investment income (7,654) (6,377) (3,030)
Change in deferred policy acquisition costs, net (36,800) (29,915) (7,764)
Change in other assets (43) 1,364 (1,497)
Change in policy claims and other policyholders' funds 1,792 575 5,377
Change in deferred federal income taxes 3,089 4,014 (233)
Change in other liabilities (991) 3,626 436
Amortization of premium (accretion of discount), net (3,332) (5,430) (567)
Net gain on investments (576) (2,914) (660)
Other, net 5 11 -
Net cash used in operating activities (26,287) (21,194) (3,160)
Cash flows from investing activities:
Acquisition of investments (1,092,886) (717,122) (312,409)
Maturity of investments 231,455 144,802 37,207
Sale of investments 302,135 40,151 44,603
Change in amounts due to brokers 10,948 9,704 5,623
Net cash used in investing activities (548,348) (522,465) (224,976)
Cash flows from financing activities:
Considerations received related to investment contracts 769,355 492,823 482,518
Surrenders and other benefits related to investment contracts (336,316) (49,883) (32,776)
Interest credited to account balances related to investment contracts 78,538 64,478 44,988
Annuity contracts ceded to parent -- -- (301,592)
Change in securities sold under repurchase agreements 15,000 15,000 --
Capital contribution from parent 50,000 20,000 4,000
Net cash provided by financing activities 576,577 542,418 197,138
Net increase (decrease) in cash and cash equivalents 1,942 (1,241) (30,988)
Cash and cash equivalents at beginning of year - 1,241 32,239
Cash and cash equivalents at end of year $ 1,942 $ - $ 1,241
====== ===== ======
See accompanying notes.
</TABLE>
<PAGE>
PAGE 51
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, 1993.
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. 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
Investments in fixed maturities are carried at cost, adjusted where
appropriate for amortization of premiums and accretion of
discounts. Mortgage loans on real estate are carried principally
at the unpaid principal balances of the related loans. 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 estimated realizable value by a
charge to income. Equity securities are carried at fair value and
the related net unrealized appreciation or depreciation is reported
as a credit or charge to stockholder's equity.
The Company has the ability and the intent to recover the costs of
these investments by holding them for the forseeable future. The
ability to hold investments to scheduled maturity dates is
dependent on, among other things, annuity contract owners
maintaining their annuity contracts in force.
The Company will implement, effective Jan. 1, 1994, Statement of
Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." Under the new rules,
debt securities that the Company has both the positive intent and
ability to hold to maturity will be carried at amortized cost.
Debt securities that the Company does not have the positive intent
and ability to hold to maturity and all marketable equity
securities will be classified as available-for-sale and carried at
<PAGE>
PAGE 52
American Enterprise Life Insurance Company
Notes to Financial Statements (continued)
($ Thousands)
___________________________________________________________________
1. Summary of significant accounting policies (continued)
fair value. Unrealized gains and losses on securities classified
as available-for-sale will be carried as a separate component of
stockholder's equity. The effect of the new rules will be to
increase stockholder's equity by approximately $14 million, net of
taxes, as of Jan. 1, 1994, but the new rules will have no material
impact on the Company's results of operations.
Realized investment gain or loss is determined on an identified
cost basis.
Prepayments are anticipated on certain investments in mortgage-
backed securities in determining the constant effective yield used
to recognize interest income. Prepayment estimates are based on
information received from brokers who deal in mortgage-backed
securities.
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:
1993 1992 1991
Cash paid during the year for:
Income taxes $7,020 $1,360 $2,936
Interest on borrowings 238 103 34
Recognition of profits on annuity contracts
The Company issues single premium deferred annuity contracts that
provide for a surrender charge at annually decreasing rates upon
withdrawal of the annuity accumulation value by the contract owner.
No sales fee is deducted from the contract considerations received
on these contracts ("no load" annuities). All of the Company's
single premium deferred annuity contracts provide for crediting the
contract owners' accumulations at specified rates of interest.
Such rates are revised by the Company from time to time based on
changes in the market investment yield rates for fixed-income
securities.
<PAGE>
PAGE 53
American Enterprise Life Insurance Company
Notes to Financial Statements (continued)
($ Thousands)
___________________________________________________________________
1. Summary of significant accounting policies (continued)
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.
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 to 9.5
percent, depending on year of issue.
At Dec. 31, 1993 and 1992, the carrying amount and fair value of
fixed annuities future policy benefits, after excluding life
insurance-related contracts carried at $4,764 and $3,682, were
$1,730,972 and $1,220,477, and $1,639,613 and $1,166,208,
respectively. The fair value of these benefits is based on the
status of the annuities at Dec. 31, 1993 and 1992. The fair value
of deferred annuities is estimated as the carrying amount less any
surrender charges. The fair value for annuities in non-life
contingent payout status is estimated as the present value of
projected benefit payments at the rate appropriate for contracts
issued in 1993 and 1992.
Federal income taxes
The Company's taxable income is included in the consolidated
federal income tax return of American Express Company. The Company
provides for income taxes on a separate return basis, except that,
under an agreement between American Express Financial Corporation
and American Express Company, tax benefit is recognized for losses
to the extent they can be used on the consolidated tax return. It
is the policy of American Express Financial Corporation and its
subsidiaries that American Express Financial Corporation will
reimburse a subsidiary for any tax benefit.
<PAGE>
PAGE 54
American Enterprise Life Insurance Company
Notes to Financial Statements (continued)
($ Thousands)
___________________________________________________________________
1. Summary of significant accounting policies (continued)
Included in other liabilities at Dec. 31, 1993 and 1992 are $1,648
and $1,726, respectively, payable to IDS Life for federal income
taxes.
Reclassification
Certain prior year amounts have been reclassified to conform to the
current year's presentation.
___________________________________________________________________
2. Investments
Fair values of investments in fixed maturities represent quoted
market prices and estimated fair values when quoted prices are not
available. Estimated fair 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 fixed
maturities for the years ended Dec. 31, 1993, 1992 and 1991 were
$24,390, $(10,664) and $46,405, respectively.
Net gain on investments for the years ended Dec. 31 is summarized
as follows:
1993 1992 1991
Fixed maturities $566 $2,600 $1,049
Other investments 8 4 --
Net (increase) decrease in
allowance for losses 2 310 (389)
$576 $2,914 $ 660
<PAGE>
PAGE 55
Fair values of and gross unrealized gain and losses on investments
in fixed maturities carried at amortized cost at Dec. 31 are as
follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
1993 Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Government
agency obligations $ 2,044 $ 165 $ - $ 2,209
State and municipal obligations 998 108 - 1,106
Corporate bonds and obligations 825,122 46,077 2,317 868,882
Mortgage-backed securities 989,342 26,309 6,064 1,009,587
1,817,506 72,659 8,381 1,881,784
Less allowance for losses 77 - 77 -
$1,817,429 $72,659 $8,304 $1,881,784
</TABLE>
<PAGE>
PAGE 56
American Enterprise Life Insurance Company
Notes to Financial Statements (continued)
($ Thousands)
___________________________________________________________________
2. Investments (continued)
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
1992 Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Government
agency obligations $ 2,058 $ 96 $ - $ 2,154
State and municipal obligations 997 102 - 1,099
Corporate bonds and obligations 445,986 15,586 4,740 456,832
Mortgage-backed securities 832,044 31,668 2,826 860,886
1,281,085 47,452 7,566 1,320,971
Less allowance for losses 79 - 79 -
$1,281,006 $47,452 $7,487 $1,320,971
</TABLE>
The amortized cost and fair value of investments in fixed
maturities at Dec. 31, 1993 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
Cost Value
Due in one year or less $ 2,485 $ 2,549
Due from one to five years 53,955 59,386
Due from five to ten years 570,040 598,549
Due in more than ten years 201,684 211,713
Mortgage-backed securities 989,342 1,009,587
$1,817,506 $1,881,784
Proceeds from sales of investments in fixed maturities during 1993
and 1992 were $301,556 and $37,547, respectively. During 1993 and
1992, gross gains of $1,402 and $3,305, respectively, and gross
losses of $836 and $705, respectively, were realized on those
sales.
At Dec. 31, 1993, the amount of net unrealized appreciation on
equity securities included $15 of gross unrealized appreciation and
deferred taxes of $9. At Dec. 31, 1992 the amount of net
unrealized appreciation on equity securities included $11 of gross
unrealized appreciation and deferred taxes of $4. The fair value
of equity securities was $159 and $68 at Dec. 31, 1993 and 1992,
respectively.
At Dec. 31, 1993, bonds carried at $1,890 were on deposit with
various states as required by law.
<PAGE>
PAGE 57
American Enterprise Life Insurance Company
Notes to Financial Statements (continued)
($ Thousands)
___________________________________________________________________
2. Investments (continued)
Net investment income for the years ended Dec. 31 is summarized as
follows:
1993 1992 1991
Interest on fixed maturities $123,822 $87,535 $59,312
Interest on mortgage loans 858 31 --
Interest on cash equivalents 258 647 723
Other 210 60 6
125,148 88,723 60,041
Less investment expenses 616 362 272
$124,532 $87,911 $59,769
Securities are rated by Moody's and Standard & Poor's (S&P), except
for approximately $93 million which is rated by IDS internal
analysts using criteria similar to Moody's and S&P. A summary of
investments in fixed maturities by rating on Dec. 31 is as follows:
Rating 1993 1992
Aaa/AAA $ 983,437 $ 832,551
Aa/AA 8,795 3,023
Aa/A 18,679 9,960
A/A 115,188 80,180
A/BBB 78,285 39,263
Baa/BBB 416,313 222,379
Baa/BB 68,428 28,183
Below investment grade 128,381 65,546
$1,817,506 $1,281,085
At Dec. 31, 1993, approximately 99 percent of the securities rated
Aaa/AAA are GNMA, FNMA and FHLMC mortgage-backed securities. No
holdings of any other issuer are greater than one percent of the
Company's total investments in fixed maturities.
At Dec. 31, 1993, approximately 1.6 percent of the Company's
invested assets were mortgage loans on real estate. Summaries of
mortgage loans by region of the United States and by type of real
estate at Dec. 31, 1993 are as follows:
<PAGE>
PAGE 58
American Enterprise Life Insurance Company
Notes to Financial Statements (continued)
($ Thousands)
___________________________________________________________________
2. Investments (continued)
Dec. 31, 1993
On Balance Commitments
Region Sheet to Purchase
South Atlantic $10,065 $10,540
East North Central 5,756 7,332
Middle Atlantic 5,462 14,665
Mountain 2,570 6,874
Pacific 2,218 1,833
New England 1,182 3,208
West North Central 1,177 1,375
East South Central 498 -
$28,928 $45,827
Dec. 31, 1993
On Balance Commitments
Property type Sheet to Purchase
Apartments $18,208 $21,997
Department/retail stores 5,720 --
Industrial 1,935 1,833
Nursing/retirement homes 1,147 916
Medical buildings 1,000 1,375
Office buildings 918 1,833
Shopping centers - 17,873
$28,928 $45,827
At. Dec. 31, 1992, the Company held three mortgage loans on real
estate totaling $2,239.
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 $nil.
___________________________________________________________________
3. Income taxes
The Company qualifies as a life insurance company for federal
income tax purposes. As such, the Company is subject to the
Internal Revenue Code provisions applicable to life insurance
companies.
<PAGE>
PAGE 59
American Enterprise Life Insurance Company
Notes to Financial Statements (continued)
($ Thousands)
___________________________________________________________________
3. Income taxes (continued)
The income tax expense consists of the following:
1993 1992 1991
Federal income taxes:
Current $ 6,928 $2,995 $2,554
Deferred 3,089 4,014 (233)
10,017 7,009 2,321
State income taxes - Current 16 27 --
Income tax expense $10,033 $7,036 2,321
Increases (decreases) to the federal income tax provision
applicable to pretax income based on the statutory rate are
attributable to:
<TABLE><CAPTION>
1993 1992 1991
Provision Rate Provision Rate Provision Rate
<S> <C> <C> <C> <C> <C> <C>
Federal income taxes based on
the statutory rate $ 9,889 35.0% $7,102 34.0% $2,413 34.0%
Increases (decreases) are
attributable to:
Deferred tax adjustment due to
rate increase 210 0.8 -- -- -- --
Tax-excluded interest (86) (0.3) (89) (0.4) (93) (1.3)
Other, net 4 - (4) - 1 --
Federal income taxes $10,017 35.5% $7,009 33.6% $2,321 32.7%
</TABLE>
Significant components of the Company's deferred tax assets and
liabilities as of Dec. 31 are as follows:
Deferred tax assets: 1993 1992
Policy reserves $21,945 $12,909
Other 722 229
Total deferred tax assets 22,667 13,138
Deferred tax liabilities:
Deferred policy acquisition costs 30,356 18,968
Investments 2,705 1,470
Total deferred tax liabilities 33,061 20,438
Net deferred tax liabilities $10,394 $ 7,300
___________________________________________________________________
4. Stockholder's equity
Retained earnings available for distribution as dividends to parent
are limited to the Company's surplus as determined in accordance
with accounting practices prescribed by state insurance regulatory
authorities. Statutory unassigned surplus (deficit) aggregated
$3,035 and $(4,083) as of Dec. 31, 1993 and 1992, respectively.<PAGE>
PAGE 60
American Enterprise Life Insurance Company
Notes to Financial Statements (continued)
($ Thousands)
___________________________________________________________________
4. Stockholder's equity (continued)
Statutory net income for 1993, 1992 and 1991 and stockholder's
equity as of Dec. 31, are summarized as follows:
1993 1992 1991
Statutory net income $ 10,855 $ 414 $ 5,338
Statutory stockholder's equity 112,907 55,788 36,564
The Company is required to maintain a minimum statutory capital and
surplus of $4,350.
___________________________________________________________________
5. Related party transactions
On Dec. 31, 1991 the Company assumed a block of single premium
deferred annuity business from IDS Life. The accompanying balance
sheet at Dec. 31, 1992 includes $286,918 of liabilities for future
policy benefits and $7,250 of deferred policy acquisition costs
related to this transaction. Effective July 1, 1993, the Company
ceded the existing inforce business back to its parent. The effect
of this transaction was to reduce liabilities for future policy
benefits by $281,332, investments in fixed maturities by $274,539
and deferred acquisition costs by $6,793. This transaction had no
effect on income.
Charges by IDS for use of joint facilities and other services
aggregated $4,059, $2,221 and $1,746 for 1993, 1992 and 1991,
respectively. Certain of these costs are included in deferred
policy acquisition costs.
___________________________________________________________________
6. Line of credit
The Company has available a line of credit with a bank of $20,000
at 45 basis points over the bank's cost of funds. There were no
borrowings outstanding under this agreement at Dec. 31, 1993 or
1992.
<PAGE>
PAGE 61
American Enterprise Life Insurance Company
<TABLE>
<CAPTION>
Balance Sheet (Unaudited) Sept. 30, 1994
Assets (Thousands)
<S> <C>
Investments:
Fixed maturities held for investment, at amortized cost
(Fair value: $1,068,062) $1,139,601
Fixed maturities available for sale, at fair value
(Amortized cost: $1,039,628) 990,865
Mortgage loans on real estate (Fair value: $146,286) 161,573
Other investments 39
_________
Total investments 2,292,078
Cash and cash equivalents 12,971
Accrued investment income 29,731
Deferred policy acquisition costs 125,585
Other assets 373
Deferred federal income taxes 9,830
_________
Total assets $2,470,568
=========
Liabilities and Stockholder's Equity
Liabilities:
Future policy benefits for fixed annuities $2,270,257
Policy claims and other policyholders' funds 21,359
Amounts due to brokers 27,197
Securities sold under repurchase agreements 13,000
Other liabilities 2,466
_________
Total liabilities 2,334,279
_________
Stockholder's equity:
Capital stock, $100 par value per share; 100,000 shares authorized,
20,000 shares issued and outstanding 2,000
Additional paid-in capital 107,872
Net unrealized loss on investments (31,714)
Retained earnings 58,131
_________
Total stockholder's equity 136,289
_________
Total liabilities and stockholder's equity $2,470,568
=========
See accompanying notes.
</TABLE>
<PAGE>
PAGE 62
American Enterprise Life Insurance Company
<TABLE>
<CAPTION>
Statements of Income (Unaudited) Nine months ended Sept. 30,
1994 1993
(Thousands)
Revenues:
<S> <C> <C>
Net investment income $116,364 $91,158
Contractholder charges 2,004 609
Net gain (loss) on investments (238) 708
Total revenues 118,130 92,475
Benefits and expenses:
Interest credited on investment contracts 79,407 55,755
Amortization of deferred policy acquisition costs 10,089 11,629
Other operating expenses 4,468 2,019
Total expenses 93,964 69,403
Income before income taxes 24,166 23,072
Income taxes 8,469 8,239
Net income $ 15,697 $14,833
======= =======
See accompanying notes.
<PAGE>
PAGE 63
American Enterprise Life Insurance Company
Statements of Cash Flows (Unaudited) Nine months ended Sept. 30,
1994 1993
(Thousands)
Cash flows from operating activities:
Net income $ 15,697 $ 14,833
Adjustments to reconcile net income to
net cash used in operating activities:
Change in accrued investment income (4,346) (5,015)
Change in deferred policy acquisition costs, net (25,579) (27,802)
Change in other assets (194) (26)
Change in policy claims and other policyholders' funds 6,922 15,273
Change in deferred federal income taxes (3,138) 3,418
Change in other liabilities (993) (2,279)
Amortization of premium (accretion of discount), net 1,008 (2,841)
Net (gain) loss on investments 238 (708)
Other, net - (11)
Net cash used in operating activities (10,385) (5,158)
Cash flows from investing activities:
Fixed maturities held for investment:
Acquisitions (130,109) (808,440)
Maturities, sinking fund payments 72,480 170,008
Sales 247 281,699
Fixed maturities available for sale:
Acquisitions (359,822) -
Maturities, sinking fund payments 49,060 -
Sales 6,026 -
Other Investments:
Acquisitions (133,748) -
Sales 253 -
Change in amounts due to brokers (494) 42,351
Net cash used in investing activities (496,107) (314,382)
Cash flows from financing activities:
Considerations received related to investment contracts 534,069 586,706
Surrenders and other benefits related to investment contracts (78,955) (319,212)
Interest credited to account balances related to investment contracts 79,407 55,755
Change in securities sold under repurchase agreements (17,000) (3,000)
Net cash provided by financing activities 517,521 320,249
Net increase in cash and cash equivalents 11,029 709
Cash and cash equivalents at beginning of year 1,942 -
Cash and cash equivalents at end of year $ 12,971 $ 709
======== ========
See accompanying notes.
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American Enterprise Life Insurance Company
Notes to Financial Statements ($ Thousands) (Unaudited)
Sept. 30, 1994
___________________________________________________________________
1. General
In the opinion of the management of American Enterprise Life
Insurance Company (the Company), the accompanying unaudited
financial statements contain all adjustments (consisting of normal
recurring adjustments) necessary to present fairly its balance
sheet as of Sept. 30, 1994, and statements of operations and cash
flows for the nine months ended Sept. 30, 1994 and 1993.
___________________________________________________________________
2. Nature of business
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 business in 46
states.
___________________________________________________________________
3. Statement of cash flows
The Company considers investments with a maturity date at their
acquisition of three months or less to be cash equivalents. These
securities are carried principally at amortized cost which
approximates market value. Cash paid for interest on borrowings
totaled $613 and $156 for the nine months ended Sept. 30, 1994 and
1993, respectively. Cash paid for income taxes was $12,806 and
$4,943 for the nine months Sept. 30, 1994 and 1993, respectively.
___________________________________________________________________
4. Commitments and contingencies
Commitments for purchases of investments in the ordinary course of
business at Sept. 30, 1994 aggregated approximately $58,200.
The Company is not involved in any lawsuits.
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STATEMENT OF DIFFERENCES
Difference Description
1) Headings. 1) The headings in the
prospectus are placed
in a strip at the top
of the page.
2) Footnotes for charts and 2) The footnotes for each
graphs are described at chart or graph are typed
the left margin. below the description of
the chart or graph.
