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AEL Personal PortfolioSM
Jan. 6, 1997
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,
IDS LIFE SPECIAL INCOME FUND, AND IDS LIFE MONEYSHARE FUND); THE
OCC ACCUMULATION TRUST,FORMERLY KNOWN AS QUEST FOR VALUE
ACCUMULATION TRUST (DESCRIBING OCC ACCUMULATION TRUST MANAGED
PORTFOLIO AND OCC ACCUMULATION TRUST U.S. GOVERNMENT INCOME
PORTFOLIO); THE PUTNAM VARIABLE TRUST, FORMERLY KNOWN AS PUTNAM
CAPITAL MANAGER TRUST, (DESCRIBING PUTNAM VT DIVERSIFIED INCOME
FUND, PUTNAM VT GROWTH AND INCOME FUND, PUTNAM VT HIGH YIELD FUND
AND PUTNAM VT NEW OPPORTUNITIES FUND); AND GT GLOBAL VARIABLE
INVESTMENT FUNDS (DESCRIBING GT GLOBAL VARIABLE LATIN AMERICA FUND
AND GT GLOBAL VARIABLE NEW PACIFIC FUND). PLEASE KEEP THESE
PROSPECTUSES FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
AMERICAN ENTERPRISE LIFE IS NOT A FINANCIAL INSTITUTION, AND THE
SECURITIES IT OFFERS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY ANY FINANCIAL INSTITUTION NOR ARE THEY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY. INVESTMENTS IN THE ANNUITY
INVOLVE INVESTMENT RISK INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
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A Statement of Additional Information (SAI) dated Jan. 6, 1997,
(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...............................................
Condensed financial information (unaudited)...................
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.................................
OCC Accumulation Trust Managed Portfolio.................
OCC Accumulation Trust U.S. Government Income Portfolio..
Putnam VT Diversified Income Fund........................
Putnam VT Growth and Income Fund.........................
Putnam VT High Yield Fund................................
Putnam VT New Opportunities Fund.........................
GT Global Variable Latin America Fund....................
GT Global Variable New Pacific Fund......................
The fixed account.............................................
Buying your annuity...........................................
The retirement date......................................
Beneficiary..............................................
How to make payments.....................................
Charges.......................................................
Contract administrative charge...........................
Variable account administrative charge...................
Mortality and expense risk fee...........................
Withdrawal charge........................................
Waiver of withdrawal charges.............................
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........................................
Two ways to request a transfer or a withdrawal...........
Withdrawals from your contract................................
Withdrawal policies......................................
Receiving payment when you request a withdrawal..........
Changing ownership............................................
Benefits in case of death.....................................
The annuity payout period.....................................
Annuity payout plans.....................................
Death after annuity payouts begin........................
Taxes.........................................................<PAGE>
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Voting rights.................................................
Substitution of investments...................................
Distribution of the contracts.................................
About American Enterprise Life................................
Regular and special reports...................................
Services................................................
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 annuity
payouts are based.
Annuity payouts - An amount paid at regular intervals under one of
several plans available to the owner and/or any other payee. This
amount may be paid on a variable or fixed basis.
Annuity unit - A measure of the value of each variable subaccount
used to calculate the annuity payouts you receive.
Beneficiary - The person designated to receive annuity benefits in
case of the owner's or annuitant's death.
Close of business - When the New York Stock Exchange (NYSE) closes,
normally 3 p.m. Central time.
Code - Internal Revenue Code of 1986, as amended.
Contract value - The total value of your annuity before any
applicable withdrawal charge and any contract administrative charge
have been deducted.
Contract year - A period of 12 months, starting on the effective
date of your contract and on each anniversary of the effective
date.
Fixed account - An account to which you may allocate purchase
payments. Amounts allocated to this account earn interest at rates
that are declared periodically by American Enterprise Life.
Mutual funds (funds) - Fourteen mutual funds or portfolios, each
with a different investment objective. (See "The funds.") You may
allocate your purchase payments into variable subaccounts investing
in shares of any or all of these funds.
Owner (you, your) - The person who controls the annuity (decides on
investment allocations, transfers, payout options, etc.). Usually,
but not always, the owner is also the annuitant. The owner is
responsible for taxes, regardless of whether he or she receives the
annuity's benefits.
Purchase payments - Payments made to American Enterprise Life for
an annuity.
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Qualified annuity - An annuity purchased for a retirement plan
thats 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)
All other annuities are considered nonqualified annuities.
Retirement date - The date when annuity payouts are scheduled to
begin. This date is first established when you start your
contract. You can change it in the future.
Withdrawal charge - A deferred sales charge that may be applied if
you make a withdrawal from your annuity before the retirement date.
Withdrawal value - The amount you are entitled to receive if you
fully withdraw your annuity. It is the contract value minus any
applicable withdrawal charge and contract administrative charge.
Valuation date - Any normal business day, Monday through Friday,
that the NYSE is open. The value of each variable subaccount is
calculated at the close of business on each valuation date.
Variable account - Consists of fourteen separate subaccounts to
which you may allocate purchase payments; each invests in shares of
one mutual fund. (See "The variable account.") The value of your
investment in each variable subaccount changes with the performance
of the particular fund.
The AEL Personal PortfolioSM in brief
Purpose: The AEL Personal PortfolioSM is designed to allow you to
build up funds for retirement. You do this by making one or more
investments (purchase payments) that may earn returns that increase
the value of the annuity. Beginning at a specified future date
(the retirement date), the annuity provides lifetime or other forms
of payouts to you or to anyone you designate.
Ten-day free look: You may return your annuity to your agent or
our Minneapolis administrative office within 10 days after it is
delivered to you and receive a full refund of the contract value.
No charges will be deducted. However, you bear the investment risk
from the time of purchase until return of the contract; the refund
amount may be more or less than the payment you made. (Exceptions:
If the law so requires, all of your purchase payments 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
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that the value at the retirement date will equal or exceed
the total of purchase payments allocated to the variable
subaccounts. (p. )
o one fixed account, which earns interest at rates that are
adjusted periodically by American Enterprise Life. (p. )
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. Payment must be made in a lump sum
with the option of additional payments in the future. In some
states there are time limitations for making additional payments.
(p.)
o Minimum initial payment - $2,000
o Minimum additional payment - $50
o Maximum total payment(s) (without prior approval) -
$1,000,000
Transfers: Subject to certain restrictions you may redistribute
your money among accounts without charge at any time until annuity
payouts begin, and once per contract year among the variable
subaccounts thereafter. You may establish automated transfers
among the fixed account and variable subaccount(s). (p. )
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. )
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. )
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. )
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. )
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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. )
Charges: Your AEL Personal PortfolioSM is subject to a $30 annual
contract administrative charge, a 0.15% variable account
administrative charge, a 1.25% mortality and expense risk fee, a
withdrawal charge and any premium taxes that may be imposed by
state or local governments. Premium taxes are deducted either from
your purchase payments or upon total withdrawal or when annuity
payments begin. (p. )
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.
Variable account administrative charge: 0.15% 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
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OCC***
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
(after expense
limitations)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .64% .86% .63% .62% .63% .54% .80%
Other expenses .04 .09 .04 .03 .04 .05 .14
Total .68%** .95%** .67%** .65%** .67%** .59%** .94%
OCC***
Accumulation
Trust U.S. Gov- Putnam VT Putnam VT GT Global GT Global
ernment Income Diversified Growth and Putnam VT Putnam VT New Variable Variable
Portfolio Income Income High Yield Opportunities Latin America New Pacific
(after expense (after expense (after expense
limitations) limitations) limitations)
Management fees .60% .70% .52% .70% .70% 1.00% 1.00%
Other expenses .40 .15 .05 .09 .14 .25 .25
Total 1.00% .85%+ .57%+ .79%+ .84%+ 1.25++ 1.25++
*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, 1995.
***The annual expenses of the OCC Accumulation Trust Portfolios as of Dec. 31, 1995 have been restated to reflect new management
fee and expense limitation agreements in effect as of May 1, 1996. Effective May 1, 1996, the expenses of the Portfolios of the
OCC Accumulation Trust are contractually limited by OpCap Advisors so that their respective annualized operating expenses do not
exceed 1.25% of their respective average daily net assets. Furthermore, through April 30, 1997, the annualized operating
expenses of the Managed and U.S. Government Income Portfolios will be voluntary limited by OpCap Advisors so that annualized
operating expenses of these Portfolios do not exceed 1.00% of their respective average daily net assets. Without such voluntary
expense limitations, and taking into account the revised contractual provisions effective May 1, 1996 concerning management fees
and expense limitations, the Management Fees, Other Expenses and Total Portfolio Annual Expenses incurred for the fiscal year
ended Dec. 31, 1995 would have been .80%, .14% and .94%, respectively, for the Managed Portfolio and .60%, .65% and 1.25%,
respectively, for the U.S. Government Income Portfolio.
+Operating expenses of the underlying mutual funds at Dec. 31, 1995.
++Figures in the "Other Expenses" and "Total" columns are restated from the amounts you would have incurred in 1995 to reflect fee
and reimbursement or waiver arrangements. If there had been no reimbursement of expenses by LGT Asset Management and no expense
reductions, the actual expenses of each Fund, expressed as a percentage of net assets, with "Management fees" stated first, then
"Other expenses," followed by "Total," would have been as follows: GT Global Variable Latin America Fund, 1.00%, 0.69%, 1.69%;
and GT Global Variable New Pacific Fund, 1.00%, 0.61%, 1.61%.
Example:*
OCC
IDS Life IDS Life IDS Life IDS Life Accumulation
Aggressive International Capital IDS Life Special IDS Life Trust Managed
Growth Equity Resource Managed Income Moneyshare Portfolio
You would pay the following expenses on a $1,000 investment, assuming 5% annual return and full withdrawal at the end of each time
period:
1 year $ 92.87 $ 95.55 $ 92.77 $ 92.57 $ 92.77 $ 91.97 $ 95.45
3 years 120.49 128.53 120.20 119.60 120.20 117.80 128.23
5 years 150.75 164.15 150.25 149.25 150.25 146.24 163.65
10 years 258.90 285.57 257.89 255.88 257.89 249.81 284.60
You would pay the following expenses on the same investment assuming no withdrawal or selection of an annuity payout plan at the
end of each time period:
1 year $ 22.87 $ 25.55 $ 22.77 $ 22.57 $ 22.77 $ 21.97 $ 25.45
3 years 70.49 78.53 70.20 69.60 70.20 67.80 78.23
5 years 120.75 134.15 120.25 119.25 120.25 116.24 133.65
10 years 258.90 285.57 257.89 255.88 257.89 249.81 284.60
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OCC
Accumulation
Trust U.S. Putnam VT Putnam VT GT Global GT Global
Government Diversified Growth and Putnam VT Putnam VT New Variable Variable
Income Portfolio Income Income High Yield Opportunities Latin America New Pacific
You would pay the following expenses on a $1,000 investment, assuming 5% annual return and full withdrawal at the end of each time
period:
1 year $ 96.04 $ 94.56 $ 91.77 $ 93.96 $ 94.46 $ 98.50 $ 98.50
3 years 130.01 125.56 117.20 123.78 125.27 137.36 137.36
5 years 166.60 159.21 145.23 156.24 158.72 178.77 178.77
10 years 290.42 275.79 247.78 269.87 274.81 314.23 314.23
You would pay the following expenses on the same investment assuming no withdrawal or selection of an annuity payout plan at the
end of each time period:
1 year $ 26.04 $ 24.56 $ 21.77 $ 23.96 $ 24.46 $ 28.50 $ 28.50
3 years 80.01 75.56 67.20 73.78 75.27 87.36 87.36
5 years 136.60 129.21 115.23 126.24 128.72 148.77 148.77
10 years 290.42 275.79 247.78 269.87 274.81 314.23 314.23
</TABLE>
This example should not be considered a representation of past or
future expenses. Actual expenses may be more or less than those
shown.
* In this example, the $30 annual contract administrative charge is
approximated as a .170% charge based on the estimated average
contract size.
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Condensed Financial Information (unaudited)
The following tables give per-unit information about the financial
history of each variable subaccount.
<TABLE>
<CAPTION>
Condensed Financial Information (unaudited)
Nine month Period from
period ended Feb. 21 to
Sept. 30, 1996 Dec. 31, 1995*
________________________________________________________________________________________
<S> <C> <C>
Subaccount ECR (Investing in shares of Capital Resource Fund)
Accumulation unit value at beginning of period.......... $1.20 $1.00
Accumulation unit value at end of period................ $1.23 $1.20
Number of accumulation units outstanding
at end of period (000 omitted).......................... 2,069 818
Ratio of operating expense to average net assets........ 1.50% 1.50%
________________________________________________________________________________________
Subaccount ESI (Investing in shares of Special Income Fund)
Accumulation unit value at beginning of period.......... $1.17 $1.00
Accumulation unit value at end of period................ $1.20 $1.17
Number of accumulation units outstanding at end
of period (000 omitted)................................. 1,162 414
Ratio of operating expense to average net assets........ 1.50% 1.50%
________________________________________________________________________________________
Subaccount EMS (Investing in shares of Moneyshare Fund)
Accumulation unit value at beginning of period.......... $1.03 $1.00
Accumulation unit value at end of period................ $1.06 $1.03
Number of accumulation units outstanding at end
of period (000 omitted)................................. 124 132
Ratio of operating expense to average net assets........ 1.50% 1.50%
Simple yield............................................ 4.90% 3.53%
Compound yield.......................................... 5.02% 3.59%
________________________________________________________________________________________
Subaccount EMG (Investing in shares of Managed Fund)
Accumulation unit value at beginning of period.......... $1.18 $1.00
Accumulation unit value at end of period................ $1.27 $1.18
Number of accumulation units outstanding at end
of period (000 omitted)................................. 1,375 589
Ratio of operating expense to average net assets........ 1.50% 1.50%
________________________________________________________________________________________
Subaccount EIE (Investing in shares of International Equity Fund)
Accumulation unit value at beginning of period.......... $1.17 $1.00
Accumulation unit value at end of period................ $1.24 $1.17
Number of accumulation units outstanding at end
of period (000 omitted)................................. 591 220
Ratio of operating expense to average net assets........ 1.50% 1.50%
________________________________________________________________________________________
Subaccount EAG (Investing in shares of Aggressive Growth Fund)
Accumulation unit value at beginning of period.......... $1.28 $1.00
Accumulation unit value at end of period................ $1.42 $1.28
Number of accumulation units outstanding at end
of period (000 omitted)................................. 1,135 473
Ratio of operating expense to average net assets........ 1.50% 1.50%
________________________________________________________________________________________
Subaccount EMD (Investing in shares of OCC Accumulation Trust
Managed Portfolio)
Accumulation unit value at beginning of period.......... $1.31 $1.00
Accumulation unit value at end of period................ $1.48 $1.31
Number of accumulation units outstanding at end
of period (000 omitted)................................. 2,076 436
Ratio of operating expense to average net
assets.................................................. 1.50% 1.50%
________________________________________________________________________________________
Subaccount EUS (Investing in shares of OCC Accumulation Trust
U.S. Government Trust Portfolio)
Accumulation unit value at beginning of period.......... $1.09 $1.00
Accumulation unit value at end of period................ $1.09 $1.09
Number of accumulation units outstanding at end
of period (000 omitted)................................. 1,081 413
Ratio of operating expense to average net assets........ 1.50% 1.50%
________________________________________________________________________________________
*Operations commenced on Feb. 21, 1995.
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Condensed Financial Information (unaudited) continued
Nine month Period from
period ended Feb. 21 to
Sept. 30, 1996 Dec. 31, 1995*
________________________________________________________________________________________
Subaccount EPA (Investing in shares of GT
Global Variable New Pacific Fund)
Accumulation unit value at beginning of period.......... $1.07 $1.00
Accumulation unit value at end of period................ $1.29 $1.07
Number of accumulation units outstanding at end
of period (000 omitted)................................. 480 193
Ratio of operating expense to average net assets........ 1.50% 1.50%
________________________________________________________________________________________
Subaccount ELA (Investing in shares of GT
Global Variable Latin America Fund)
Accumulation unit value at beginning of period.......... $0.98 $1.00
Accumulation unit value at end of period................ $1.15 $0.98
Number of accumulation units outstanding
at end of period (000 omitted).......................... 605 303
Ratio of operating expense to average net assets........ 1.50% 1.50%
________________________________________________________________________________________
Subaccount ENO (Investing in shares of Putnam VT
New Opportunities Fund)
Accumulation unit value at beginning of period.......... $1.39 $1.00
Accumulation unit value at end of period................ $1.61 $1.39
Number of accumulation units outstanding at end
of period (000 omitted)................................. 2,513 691
Ratio of operating expense to average net assets........ 1.50% 1.50%
________________________________________________________________________________________
Subaccount EGI (Investing in shares of Putnam VT
Growth and Income Fund)
Accumulation unit value at beginning of
period.................................................. $1.27 $1.00
Accumulation unit value at end of period................ $1.42 $1.27
Number of accumulation units outstanding at end
of period (000 omitted)................................. 3,131 1,152
Ratio of operating expense to average net assets........ 1.50% 1.50%
________________________________________________________________________________________
Subaccount EHY (Investing in shares of Putnam VT
High Yield Fund)
Accumulation unit value at beginning of
period.................................................. $1.14 $1.00
Accumulation unit value at end of period................ $1.24 $1.14
Number of accumulation units outstanding at end
of period (000 omitted)................................. 1,092 480
Ratio of operating expense to average net assets........ 1.50% 1.50%
________________________________________________________________________________________
Subaccount EDI (Investing in shares of Putnam VT
Diversified Income Fund)
Accumulation unit value at beginning of period.......... $1.15 $1.00
Accumulation unit value at end of period................ $1.19 $1.15
Number of accumulation units outstanding at end
of period (000 omitted)................................. 1,577 601
Ratio of operating expense to average net assets........ 1.50% 1.50%
________________________________________________________________________________________
*Operations commenced on Feb. 21, 1995.
</TABLE>
The SAI dated Jan. 6, 1997, contains:
The audited financial statements of the variable account including:
- - statements of net assets as of Dec. 31, 1995;
- - statements of operations for the period from Feb. 21, 1995
(commencement of operations) to Dec. 31, 1995; and
- - statements of changes in net assets for the period from Feb. 21,
1995 (commencement of operations) to Dec. 31, 1995.
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PAGE 13
The unaudited financial statements of the variable account
including:
- - statements of net assets as of Sept. 30, 1996;
- - statements of operations for the nine months ended Sept. 30,
1996; and
- - statements of changes in net assets for the nine months ended
Sept. 30, 1996.
The audited financial statements of American Enterprise Life
including:
- - balance sheets as of Dec. 31, 1995 and Dec. 31, 1994; and
- - related statements of income and cash flows for each of the
three years in the period ended Dec. 31, 1995.
The unaudited financial statements of American Enterprise Life
including:
- - balance sheet as of Sept. 30, 1996; and
- - related statements of income and cash flows for the nine months
ended Sept. 30, 1996.
Performance information
Performance information for the variable subaccounts may appear
from time to time in advertisements or sales literature. In all
cases, such information reflects the performance of a hypothetical
investment in a particular account during a particular time period.
The performance figures are calculated on the basis of historical
performance of the funds. The performance figures relating to
these funds assume that the contract was in existence prior to Jan.
12, 1995, which it was not. Beginning Jan. 12, 1995, when these
funds became available as investment options under the contract,
actual values are used for the calculations.
Calculations are performed as follows:
Simple yield - IDS Life Moneyshare Subaccount: Income over a given
seven-day period (not counting any change in the capital value of
the investment) is annualized (multiplied by 52) by assuming that
the same income is received for 52 weeks. This annual income is
then stated as an annual percentage return on the investment.
Compound yield - IDS Life Moneyshare Subaccount: Calculated like
simple yield, except that, when annualized, the income is assumed
to be reinvested. Compounding of reinvested returns increases the
yield as compared to a simple yield.
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PAGE 14
Yield - Special Income Subaccount: Net investment income (income
less expenses) per accumulation unit during a given 30-day period
is divided by the value of the unit on the last day of the period.
The result is converted to an annual percentage.
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
withdrawalat 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).
Aggregate total return: Represents the cumulative change in the
value of an investment over a specified period of time (reflecting
change in a subaccount's accumulation unit value). The calculation
assumes reinvestment of investment earnings and reflects the
deduction of all applicable charges, including the contract
administrative charge, mortality and expense fee, variable account
administrative charge, and withdrawal charge, assuming a withdrawal
at the end of the illustrated period. Optional total return
quotations may be made that do not reflect a withdrawal charge
deduction (assuming no withdrawal). Aggregate total return may be
shown by means of schedules, charts or graphs. Performance
information should be considered in light of the investment
objectives and policies, characteristics and quality of the fund in
which the subaccount invests, and the market conditions during the
given time period. Such information is not intended to indicate
future performance. Because advertised yields and total return
figures include all charges attributable to the annuity, which has
the effect of decreasing advertised performance, subaccount
performance should not be compared to that of mutual funds that
sell their shares directly to the public. (See the SAI for a
further description of methods used to determine yield and total
return for the subaccounts.)
If you would like additional information about actual performance,
contact American Enterprise Life at the address or telephone number
on the cover.
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<PAGE>
PAGE 15
IDS Life Moneyshare Fund EMS
OCC Accumulation Trust Managed Portfolio EMD
OCC Accumulation Trust U.S. Government
Income Portfolio EUS
Putnam VT Diversified Income Fund EDI
Putnam VT Growth and Income Fund EGI
Putnam VT High Yield Fund EHY
Putnam VT New Opportunities Fund ENO
GT Global Variable Latin America Fund ELA
GT 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.
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. All
obligations arising under the contracts are general obligations of
American Enterprise Life.
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 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, 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.
<PAGE>
PAGE 16
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.
OCC Accumulation Trust Managed Portfolio
Objective: Growth of capital over time. Invests primarily in
common stocks, bonds and money market and cash equivalent
securities, the percentages of which will vary based on
management's assessment of relative investment values.
OCC 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.
Putnam VT 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.
Putnam VT 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.
Putnam VT 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 portfolio which Putnam Investment Management, Inc.
("Putnam Management") believes does not involve undue risk to
income or principal.
Putnam VT New Opportunities Fund
Objective: long-term capital appreciation. Invests principally in
common stocks of companies in sectors of the economy which Putnam
Management believes may possess above average long-term growth
potential.
GT 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.
(If your annuity was purchased in California, you cannot allocate
payments to the subaccount that invests in this fund.)
<PAGE>
PAGE 17
GT Global Variable New Pacific Fund
Objective: long-term growth of capital. Invests under normal
circumstances, at least 65% of its assets in equity securities of
issuers domiciled in Australia, Hong Kong, Indonesia, Malaysia, New
Zealand, the Philippines, Singapore, South Korea, Taiwan and
Thailand.
(If your annuity was purchased in California, you cannot allocate
payments to the subaccount that invests in this fund.)
All funds are available to serve as the underlying investment for
variable annuities, and some funds also are available to serve as
the underlying investment for variable life insurance contracts.
It is conceivable that in the future it may be disadvantageous for
variable annuity separate accounts and variable life insurance
separate accounts to invest in the available funds simultaneously.
Although American Enterprise Life and the funds do not currently
foresee any such disadvantages either to variable annuity contract
owners or to variable life insurance policy owners, 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 policy owners 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.
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. OpCap Advisors, One World
Financial Center, New York, NY 10281, is the investment manager for
the OCC Accumulation Trust portfolios. Putnam Investment
Management, Inc., One Post Office Square, Boston, MA 02109, is the <PAGE>
PAGE 18
investment manager for the Putnam VT funds. Chancellor LGT Asset
Management, 50 California Street, San Francisco, CA 94111, is the
investment manager for the GT 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 prospectus.
The fixed account
Purchase payments can also be allocated to the fixed account. The
value of the fixed account increases as interest is credited to the
account. Purchase payments and transfers to the fixed account
become part of the general account of American Enterprise Life, the
company's main portfolio of investments. Interest is credited and
compounded daily to produce an effective annual interest rate. We
may change the interest rates from time to time.
Because of exemptive and exclusionary provisions, interests in the
fixed account have not been registered under the Securities Act of
1933 (1933 Act), nor is the fixed account registered as an
investment company under the 1940 Act. Accordingly, neither the
fixed account nor any interests in it are generally subject to the
provisions of the 1933 or 1940 Acts, and we have been advised that
the staff of the SEC has not reviewed the disclosures in this
prospectus that relate to the fixed account. Disclosures regarding
the fixed account, however, may be subject to certain generally
applicable provisions of the federal securities laws relating to
the accuracy and completeness of statements made in prospectuses.
Buying your annuity
Your agent will help you prepare and submit your application, and
send it along with your initial purchase payment to our Minneapolis
administrative office. As the owner, you have all rights and may
receive all benefits under the contract. The annuity can be owned
in joint tenancy only in spousal situations. You cannot buy a
nonqualified annuity or be an annuitant if you are 86 or older (age
76 or older for qualified annuities). (In Pennsylvania, the
annuitant must be under age 81.)
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 <PAGE>
PAGE 19
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. In most states, additional purchase payments may
be made to nonqualified and qualified annuities until the
retirement date. In Maryland and Washington, additional purchase
payments may be made to nonqualified annuities until the later of
the annuitant's 63rd birthday or the third contract anniversary,
and additional purchase payments may be made to qualified annuities
until the annuitant's 63rd birthday.
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) or
o no later than the annuitant's 82nd birthday (or before the
eighth contract anniversary, if purchased after age 74) for
annuities purchased in Pennsylvania.
For qualified annuities, to avoid IRS penalty taxes, the retirement
date generally must be:
o on or after the annuitant reaches age 59 1/2;
o by April 1 of the year following the calendar year when the
annuitant reaches age 70 1/2.
If you are taking the minimum IRA distribution 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. (In Pennsylvania, annuity payouts must start no later
than the annuitant's 82nd birthday or the eighth contract
anniversary.)
Beneficiary
If death benefits become payable before the retirement date, your
named beneficiary will receive all or part of the contract value.
If there is no named beneficiary, then you or your estate will be
the beneficiary. (See "Payment in case of death" for more about
beneficiaries.)
<PAGE>
PAGE 20
Minimum payment
If single payment:
Nonqualified: $2,000
Qualified: $2,000
Minimum additional purchase payment(s): $50
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
80 South Eighth Street
P.O. Box 534
Minneapolis, MN 55440-0534
Express mail:
American Enterprise Life Insurance Company
Attention: Unit 829
733 Marquette Avenue
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
regardless of contract value. 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
totals 0.15% 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.
<PAGE>
PAGE 21
Mortality and expense risk fee
This fee is to cover the mortality risk and expense risk and is
applied daily to the variable subaccounts and reflected in the unit
values of the subaccounts. The subaccounts pay this fee at the
time dividends are distributed from the funds in which they invest.
Annually the fee totals 1.25% of the subaccounts average daily net
assets. Approximately two-thirds of this amount is for our
assumption of mortality risk, and one-third is for our assumption
of expense risk. This fee does not apply to the fixed account.
Mortality risk arises because of our guarantee to make annuity
payouts according to the terms of the contract, no matter how long
a specific annuitant lives and no matter how long the entire group
of American Enterprise Life annuitants live. If, as a group,
American Enterprise Life annuitants outlive the life expectancy we
have assumed in our actuarial tables, then we must take money from
our general assets to meet our obligations. If, as a group,
American Enterprise Life annuitants do not live as long as
expected, we could profit from the mortality risk fee. Expense
risk arises because the contract administrative charge and variable
account administrative charge cannot be increased and may not cover
our expenses. Any deficit would have to be made up from our
general assets.
We 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.
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.
<PAGE>
PAGE 22
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 Withdrawal Charge
Payment Receipt 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, 1996 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, 1996, $8,000
Dec. 31, 2002 and $6,000 Feb. 20, 2004
o The owner withdraws the contract for its total withdrawal
value of $38,101 on Aug. 5, 2006 and had not made any other
withdrawals during that contract year
o The prior anniversary July 1, 2006 contract value was $38,488
is calculated this way:
Withdrawal Charge Explanation
$ 0 $3,848.80 is 10% of the prior anniversary
account value withdrawn without withdrawal
charge; and
0 $10,252.20 is contract earnings in excess
of the 10% free withdrawal amount withdrawn
without withdrawal charge; and
<PAGE>
PAGE 23
0 $10,000 July 1, 1996 payment is an old
payment withdrawn without withdrawal
charge; and
240 $8,000 Dec. 31, 2002 payment is a new
payment in its fifth contract year from
receipt, withdrawn with a 3% withdrawal
charge; and
240 $6,000 Feb. 20, 2004 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. If you take a
full withdrawal from your contract, the $30 contract charge will be
deducted.
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;
o contract earnings - if any - in excess of the annual 10% free
withdrawal amount;
o required minimum distributions from a qualified annuity after
you reach age 70 1/2 (for those amounts required to be
distributed from this annuity only);
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.
<PAGE>
PAGE 24
Possible group reductions: In some cases lower sales and
administrative expenses may be incurred due to the size of the
group, the average contribution and the use of group enrollment
procedures. In such cases, we may be able to reduce or eliminate
the contract administrative and withdrawal charges. However, we
expect this to occur infrequently.
Premium taxes
Certain state and local governments impose premium taxes that may
reach to 3.5%. These taxes are dependent upon the state of
residence or the state in which the contract was sold. In some
cases, premium taxes are deducted from your purchase payments
before they are allocated. In other cases, the deduction is made
when you fully withdraw your contract or when annuity payouts
begin.
Valuing your investment
Here is how your fixed account and variable subaccounts are valued:
Fixed account: The amounts allocated to the fixed account are
valued directly in dollars and equal the sum of your purchase
payments and transfer amounts plus interest earned, less any
amounts withdrawn or transferred and any contract administrative
charge.
Variable subaccounts: Amounts allocated to the variable
subaccounts are converted into accumulation units. Each time you
make a purchase payment or transfer amounts into one of the
variable subaccounts, a certain number of accumulation units are
credited to your contract for that subaccount. Conversely, each
time you take a partial withdrawal, transfer amounts out of a
variable subaccount, or are assessed a contract administrative
charge, a certain number of accumulation units are subtracted from
your contract.
The accumulation units are the true measure of investment value in
each subaccount during the accumulation period. They are related
to, but not the same as, the net asset value of the underlying
fund.
The dollar value of each accumulation unit can rise or fall daily
depending on the performance of the underlying mutual fund and on
certain fund expenses. Here is how unit values are calculated:
Number of units
To calculate the number of accumulation units for a particular
subaccount, we divide your investment, after deduction of any
premium taxes, by the current accumulation unit value.
Accumulation unit value
The current accumulation unit value for each variable subaccount
equals the last value times the subaccount's current net investment
factor.
<PAGE>
PAGE 25
Net investment factor
o Determined each business day by adding the underlying mutual
fund's current net asset value per share plus per-share
amount of any current dividend or capital gain distribution;
then
o dividing that sum by the previous net asset value per share;
and
o subtracting the percentage factor representing the mortality
and expense risk fee and the variable account administrative
charge from the result.
Because the net asset value of the underlying mutual fund may
fluctuate, the accumulation unit value may increase or decrease.
You bear this investment risk in a variable subaccount.
Factors that affect variable subaccount accumulation units
Accumulation units may change in two ways; in number and in value.
Here are the factors that influence those changes:
The number of accumulation units you own may fluctuate due to:
o additional purchase payments allocated to the variable
subaccounts;
o transfers into or out of the variable subaccount(s);
o partial withdrawals;
o withdrawal charges; and/or
o contract administrative charges.
Accumulation unit values may fluctuate due to:
o changes in underlying mutual fund(s) net asset value;
o dividends distributed to the variable subaccount(s);
o capital gains or losses of underlying mutual funds;
o mutual fund operating expenses;
o mortality and expense risk fees; and/or
o variable account administrative charges.
Making the most of your annuity
Automated dollar-cost averaging*
You can use automated transfers to take advantage of dollar-cost
averaging (investing a fixed amount at regular intervals). For
example, you might have a set amount transferred monthly from a
relatively conservative variable subaccount to a more aggressive
one, or to several others.
This systematic approach can help you benefit from fluctuations in
accumulation unit values caused by fluctuations in the market
value(s) of the underlying mutual fund(s). Since you invest the
same amount each period, you automatically acquire more units when
the market value falls, fewer units when it rises. The potential
effect is to lower your average cost per unit. For specific
features contact your agent.
<PAGE>
PAGE 26
<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 18 5.56
Mar 100 17 5.88
you automatically Apr 100 15 6.67
buy more units
when the per unit May 100 16 6.25
market price is low....
Jun 100 18 5.56
Jul 100 17 5.88
Aug 100 19 5.26
and fewer units Sep 100 21 4.76
when the per unit
market price is Oct 100 20 5.00
high.
</TABLE>
You have paid an average price of only $17.91 per unit over the 10
months, while the average market price actually was $18.10.
Dollar-cost averaging does not guarantee that any variable
subaccount will gain in value, nor will it protect against a
decline in value if market prices fall. However, if you can
continue to invest regularly throughout changing market conditions,
it can be an effective strategy to help meet your long term goals.
* Some restrictions may apply.
Transferring money between subaccounts
You may transfer money from any one subaccount, or the fixed
account, to another before the annuity payouts begin. Certain
restrictions apply to transfers involving the fixed account. If we
receive your request before the close of business, we will process
it that day. Requests received after the close of business will be
processed the next business day. There is no charge for transfers.
Before making a transfer, you should consider the risks involved in
switching investments.
We may suspend or modify transfer privileges at any time. The
right to transfer contract values between the subaccounts is
subject to modification if we determine, in our sole discretion,
that the exercise of that right by one or more contract owners is,
or would be, to the disadvantage of other contract owners. Any
modification could be applied to transfers to or from some or all
of the subaccounts. These modifications could include, but not be
limited to, the requirement of a minimum time period between each
transfer, not accepting transfer requests of an agent acting under
a power of attorney on behalf of more than one contract owner or
limiting the dollar amount that may be transferred between the
subaccounts and the fixed account by a contract owner at any one
time. We may apply these modifications or restrictions in any
manner reasonably designed to prevent any use of the transfer right
we consider to be to the disadvantage of other contract owners.
(For information on transfers after annuity payouts begin, see "The
annuity payout period.")<PAGE>
PAGE 27
Transfer policies
o You may transfer contract values between the variable
subaccounts or from the subaccount(s) to the fixed account at
any time. However, if you have made a transfer from the
fixed account to the subaccount(s), you may not make a
transfer from any subaccount back to the fixed account for
six months following that transfer.
o You may transfer contract values from the fixed account to
the variable subaccount(s) on or within 30 days before or
after the contract anniversary (except for automated
transfers, which can be set up for transfer periods of your
choosing subject to certain minimums).
o If we receive your request on or within 30 days before or
after the contract anniversary date, the transfer from the
fixed account to the variable subaccount(s) will be effective
on the day we receive it.
o We will not accept requests for transfers from the fixed
account at any other time.
o Once annuity payouts begin no transfers may be made to or
from the fixed account, but transfers may be made once per
contract year among the variable subaccounts.
Two ways to request a transfer or a withdrawal
1 By letter
Send your name, account number, Social Security Number or Taxpayer
Identification Number and signed request for a transfer or
withdrawal to:
Regular mail:
American Enterprise Life Insurance Company
80 South Eighth Street
P.O. Box 534
Minneapolis, MN 55440-0534
Express mail:
American Enterprise Life Insurance Company
Attention: Unit 829
733 Marquette Avenue
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: Contract Value
Mail withdrawals: Contract Value
<PAGE>
PAGE 28
2 By automated transfers and automated partial withdrawals
Your agent can help you set up automated transfers among your
accounts or partial withdrawals from the accounts.
You can start or stop this service by written request or other
method acceptable to American Enterprise Life. You must allow 30
days for American Enterprise Life to change any instructions that
are currently in place.
o Automated transfers may not exceed an amount that, if
continued, would deplete the fixed account or subaccount(s)
from which you are transferring within 24 months.
o Automated transfers and automated partial withdrawals are
subject to all of the contract provisions and terms,
including transfer of contract values between accounts.
Automated withdrawals may be restricted by applicable law
under some contracts.
o Automated partial withdrawals may result in IRS taxes and
penalties on all or part of the amount withdrawn.
Minimum amount
Automated transfers or withdrawals: $100 monthly/$250 quarterly
Maximum amount
Automated transfers or withdrawals: Contract Value (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 to
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.
<PAGE>
PAGE 29
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.
Changing ownership
You may change ownership of your nonqualified annuity at any time
by filing a change of ownership on a form approved by us and sent
to our Minneapolis administrative office. The change will become
binding upon us when we receive and record it. We will honor any
change of ownership request believed to be authentic and will use
reasonable procedures to confirm that it is. If these procedures
are followed, we take no responsibility for the validity of the
change.
If you have a nonqualified 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
<PAGE>
PAGE 30
3. on or after the fifth contract anniversary, the death benefit
as of the most recent fifth contract anniversary adjusted by
adding any purchase payments made since that most recent
fifth contract anniversary and by subtracting any amounts
withdrawn since that most recent fifth contract anniversary.
For contracts where both the owner and annuitant were 75 or younger
on the date the contract was issued and you have made withdrawals
subject to withdrawal charges, the beneficiary receives the
contract value.
For contracts where either the owner or annuitant were 76 or older
on the date the contract was issued, the beneficiary receives the
contract value.
If your spouse is sole beneficiary under a nonqualified 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 <PAGE>
PAGE 31
value on your retirement date. No withdrawal charges are deducted
under the payout plans listed below.
You also decide whether annuity payouts are to be made on a fixed
or variable basis, or a combination of fixed and variable. Amounts
of fixed and variable payouts depend on:
o the annuity payout plan you select;
o the annuitant's age and, in most cases, sex;
o the annuity table in the contract; and
o the amounts you allocated to the account(s) at settlement.
In addition, for variable payouts only, amounts depend on the
investment performance of the subaccount(s) you select. These
payouts will vary from month to month because the performance of
the underlying mutual funds will fluctuate. (In the case of fixed
annuities, payouts remain the same from month to month.)
For information with respect to transfers between accounts after
annuity payouts begin, see "Transfer policies."
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.
<PAGE>
PAGE 32
o Plan E - Payouts for a specified period (available as a fixed
payout only): Monthly payouts are made for a specific payout
period of 10 to 30 years chosen by the annuitant. Payouts will be
made only for the number of years specified whether the annuitant
is living or not. Depending on the time period selected, it is
foreseeable that an annuitant can outlive the payout period
selected. In addition, a 10% IRS penalty tax could apply under
this payout plan. (See "Taxes.")
Restrictions for some qualified plans: If you purchased a
qualified annuity, you must select a payout plan that provides for
payouts:
o over the life of the annuitant;
o over the joint lives of the annuitant and a designated
beneficiary;
o for a period not exceeding the life expectancy of the
annuitant; or
o for a period not exceeding the joint life expectancies
of the annuitant and a designated beneficiary.
If we do not receive instructions: You must give us written
instructions for the annuity payouts at least 30 days before the
annuitant's retirement date. If you do not, we will make payouts
under Plan B, with 120 monthly payouts guaranteed.
If monthly payouts would be less than $20: We will calculate the
amount of monthly payouts at the time the contract value is used to
purchase a payout plan. If the calculations show that monthly
payouts would be less than $20, we have the right to pay the
contract value to the owner in a lump sum or to change the
frequency of the payouts.
Death after annuity payouts begin
If you or the annuitant dies after annuity payouts begin, any
amount payable to the beneficiary will be provided in the annuity
payout plan in effect.
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.
<PAGE>
PAGE 33
Tax law requires that all nonqualified deferred annuity contracts
issued by the same company to the same owner during a calendar year
are to be taxed as a single, unified contract when distributions
are taken from any one of such contracts.
Annuity payouts under qualified annuities: Under a qualified
annuity, the entire payout generally will be includable as ordinary
income and subject to tax except to the extent that contributions
were made with after-tax dollars. If you or your employer invested
in your contract with pre-tax dollars as part of a qualified
retirement plan, such amounts are not considered to be part of your
investment in the contract and will be taxed when paid to you.
Withdrawals: If you withdraw part or all of your contract before
your annuity payouts begin, your withdrawal payment will be taxed
to the extent that the value of your contract immediately before
the withdrawal exceeds your investment. You also may have to pay a
10% IRS penalty for withdrawals before reaching age 59 1/2. For
qualified annuities, other penalties may apply if you make
withdrawals from your annuity before your plan specifies that you
can receive payouts.
Death benefits to beneficiaries: The death benefit under an
annuity is not tax-exempt. Any amount received by the beneficiary
that represents previously deferred earnings within the contract is
taxable as ordinary income to the beneficiary in the year(s) he or
she receives the payments.
Annuities owned by corporations, partnerships or trusts: Any
annual increase in the value of annuities held by such entities
generally will be treated as ordinary income received during that
year. This provision is effective for purchase payments made after
Feb. 28, 1986. However, if the trust was set up for the benefit of
a natural person only, the income will continue to be tax-deferred.
Penalties: If you receive amounts from your contract before
reaching age 59 1/2, you may have to pay a 10% IRS penalty on the
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.<PAGE>
PAGE 34
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.
Transfer of ownership of a nonqualified annuity: If you make such
a transfer without receiving adequate consideration, the transfer
is considered a gift, and also may be considered a withdrawal for
federal income tax purposes. If the gift is a currently taxable
event, the amount of deferred earnings at the time of the transfer
will be taxed to the original owner, who also may be subject to a
10% IRS penalty as discussed earlier. In this case, the new
owner's investment in the annuity will be the value of the annuity
at the time of the transfer.
Collateral assignment of a nonqualified annuity: If you
collaterally assign or pledge your contract, earnings on purchase
payments you made after Aug. 13, 1982 will be taxed to you like a
withdrawal.
Important: Our discussion of federal tax laws is based upon our
understanding of these laws as they are currently interpreted.
Federal tax laws or current interpretations of them may change.
For this reason and because tax consequences are complex and highly
individual and cannot always be anticipated, you should consult a
tax advisor if you have any questions about taxation of your
contract.
Tax qualification
The contract is intended to qualify as an annuity for federal
income tax purposes. To that end, the provisions of the contract
are to be interpreted to ensure or maintain such tax qualification,
notwithstanding any other provisions of the contract. We reserve
the right to amend the contract to reflect any clarifications that
may be needed or are appropriate to maintain such qualification or
to conform the contract to any applicable changes in the tax
qualification requirements. We will send you a copy of any such
amendments.
<PAGE>
PAGE 35
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
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 <PAGE>
PAGE 36
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
Company is a financial services company principally engaged through
subsidiaries (in addition to American Express Financial
Corporation) in travel related services, investment services and
international banking services.
American Enterprise Life is a stock life insurance company
organized in 1981 under the laws of the state of Indiana. Its
administrative office is located at 80 South Eighth 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.
American Express Financial Advisors Inc. is the principal
underwriter for the variable account. Its home office is IDS Tower
10, Minneapolis, MN 55440-0010. American Express Financial
Advisors is registered with the SEC under the Securities Exchange
Act of 1934 as a broker-dealer and is a member of the National
Association of Securities Dealers, Inc. American Express Financial
Advisors is a wholly owned subsidiary of American Express Financial
Corporation.
The American Express Financial Corporation family of companies
offers not only insurance and annuities, but also mutual funds,
investment certificates and a broad range of financial management
services.
Other subsidiaries provide investment management and related
services for pension, profit-sharing, employee savings and
endowment funds of businesses and institutions.
Regular and special reports
Services
To help you track and evaluate the performance of your annuity,
American Enterprise Life provides:
<PAGE>
PAGE 37
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..................................
Saving for retirement.................................
Prospectus............................................
Financial statements -
American Enterprise Variable Annuity
Account..........................................
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 OCC Accumulation Trust
____ The Putnam Variable Trust
____ GT Global Variable Investment Funds
Mail your request to:
American Enterprise Life Insurance Company
80 South Eighth Street
P.O. Box 534
Minneapolis, MN 55440-0534
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
Jan. 6, 1997
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 Jan. 6, 1997,
is not a prospectus. It should be read together with the Account's
prospectus, dated Jan. 6, 1997, which may be obtained from your
agent, or by writing or calling American Enterprise Life Insurance
Company at the address or telephone number below.
American Enterprise Life Insurance Company
Administrative Offices
80 South Eighth Street
P.O. Box 534
Minneapolis, MN 55440-0534
(612) 671-7700
<PAGE>
PAGE 39
TABLE OF CONTENTS
Performance Information...................................... 3
Calculating Annuity Payouts.................................. 6
Rating Agencies.............................................. 8
Principal Underwriter........................................ 8
Independent Auditors......................................... 8
Saving for Retirement........................................ 8
Prospectus................................................... 8
Financial Statements -
American Enterprise Variable Annuity Account............... 9
American Enterprise Life Insurance Company................. 29
<PAGE>
PAGE 40
PERFORMANCE INFORMATION
The following performance figures are calculated on the basis of
historical performance of the funds. The performance figures
relating to these funds assume that the contract was in existence
prior to January 12, 1995, which it was not. Performance figures
are calculated on the basis of historical performance of the funds.
Before the subaccounts began investing in these funds, the figures
show what the subaccount performance would have been if these
subaccounts had existed during the illustrated periods. Once these
subaccounts began investing in these funds, actual values are used
for the calculations.
Calculation of Yield for the Subaccount investing in IDS Life
Moneyshare Fund.
Simple yield for the subaccount investing in the IDS Life
Moneyshare Fund will be based on the: (a) change in the value of a
hypothetical investment (exclusive of capital changes) at the
beginning of a seven-day period for which yield is to be quoted;
(b) subtracting a pro rata share of subaccount expenses accrued
over the seven-day period; (c) dividing the difference by the value
of the subaccount at the beginning of the period to obtain the base
period return; and (d) annualizing the results (i.e., multiplying
the base period return by 365/7).
The value of the hypothetical subaccount includes the amount of any
declared dividends, the value of any shares purchased with any
dividend paid during the period and any dividends declared for such
shares. The variable subaccount's yield does not include any
realized or unrealized gains or losses, nor does it include the
effect of any applicable surrender charge.
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:
Compound Yield = [(Base Period Return + 1) 365/7 ] -1
Annualized Yield based on Seven-Day Period ended
Sept. 30, 1996
Subaccount investing in: Simple Yield Compound Yield
IDS Life Moneyshare Fund 4.90% 5.02%
Calculation of Yield for the Subaccount investing in IDS Life
Special Income Fund.
For the subaccount investing in the IDS Life Special Income Fund
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
<PAGE>
PAGE 41
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.
Annualized yield based on 30-Day Period ended Sept. 30, 1996
Subaccount investing in: Yield
IDS Life Special Income 6.53%
Calculation of average annual total return
Quotations of average annual total return for a subaccount will be
expressed in terms of the average annual compounded rate of return
of a hypothetical investment in the annuity contract over a period
of one, five and 10 years (or, if less, up to the life of the
account), 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.
<PAGE>
PAGE 42
Average Annual Total Return For Period Ended Sept. 30, 1996
Average Annual Total Return with Withdrawal
<TABLE>
<CAPTION>
Since
Subaccount investing in: 1 Year 5 Year 10 Year Inception
<S> <C> <C> <C> <C>
IDS LIFE
Aggressive Growth Fund (1/92)* 3.94% --% --% 10.00%
Capital Resource Fund (10/81) 0.29 8.72 11.85 --
International Equity Fund (1/92) 2.28 -- -- 7.51
Managed Fund (4/86) 6.24 9.49 10.61 --
Moneyshare Fund (10/81) -2.99 2.07 3.85 --
Special Income Fund (10/81) -0.27 7.78 7.35 --
OCC ACCUMULATION TRUST
Managed Portfolio (8/88) 10.64 17.29 -- 18.08
GT GLOBAL
Variable Latin America Fund (2/93) 4.10 -- -- 7.67
Variable New Pacific Fund (2/93) 13.71 -- -- 6.08
PUTNAM VT
Diversified Income Fund (9/93) 1.60 -- -- 3.96
Growth & Income Fund (2/88) 10.95 12.71 -- 13.37
High Yield Fund (2/88) 4.91 12.22 -- 10.98
New Opportunities Fund (5/94) 16.37 -- -- 26.65
Average Annual Total Return without Withdrawal
Since
Subaccount Investing in: 1 Year 5 Year 10 Year Inception
IDS Life
Aggressive Growth Fund (1/92)* 10.94% --% --% 10.45%
Capital Resource Fund (10/81) 7.09 9.00 11.85 --
International Equity Fund (1/92) 9.23 -- -- 8.00
Managed Fund (4/86) 13.24 9.77 10.61 --
Moneyshare Fund (10/81) 3.56 2.44 3.85 --
Special Income Fund (10/81) 6.48 8.07 7.35 --
OCC ACCUMULATION TRUST
Managed Portfolio (8/88) 17.64 17.50 -- 18.08
GT GLOBAL
Variable Latin America (2/93) 11.10 -- -- 8.58
Variable New Pacific Fund (2/93) 20.71 -- -- 7.03
PUTNAM VT
Diversified Income Fund (9/93) 8.49 -- -- 5.11
Growth & Income Fund (2/88) 17.95 12.96 -- 13.37
High Yield Fund (2/88) 11.91 12.47 -- 10.98
New Opportunities Fund (5/94) 23.37 -- -- 28.20
*inception dates of the funds are shown in parentheses.
</TABLE>
Aggregate Total Return
Aggregate total return represents the cumulative change in value of
an investment for a given period (reflecting change in a
subaccount's accumulation unit value) and is computed by the
following formula:
ERV - P
P
<PAGE>
PAGE 43
where: P = a hypothetical initial payment of $1,000.
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the one, five, or
ten year (or other) period at the end of the one,
five, or ten year (or other) period (or fractional
portion thereof).
The Securities and Exchange Commission (SEC) requires that an
assumption be made that the contract owner withdraws the entire
contract at the end of the one, five and ten year periods (or, if
less, up to the life of the subaccount) for which performance is
required to be calculated. In addition, performance figures may be
shown without the deduction of a withdrawal charge.
Subaccount total return figures reflect the deduction of the
contract administrative charge and mortality and expense risk fee.
Performance of the subaccount 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.
<PAGE>
PAGE 44
Subsequent Payouts: To compute later payouts, we multiply:
o the annuity unit value on the valuation date on or immediately
preceding the seventh calendar day before the payout is due; by
o the fixed number of annuity units credited to you.
Annuity Table: The table shows the amount of the first monthly
payment for each $1,000 of contract value according to the age and,
when applicable, the sex of the annuitant. (Where required by law,
we will use a unisex table of settlement rates.) The table assumes
that the contract value is invested at the beginning of the annuity
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 value 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.
<PAGE>
PAGE 45
RATING AGENCIES
The following chart reflects the ratings given to American
Enterprise Life by independent rating agencies. These agencies
evaluate the financial soundness and claims-paying ability of
insurance companies based on a number of different factors. This
information does not relate to the management or performance of the
variable subaccounts of the AEL Personal PortfolioSM. This
information relates only to the fixed account and reflects American
Enterprise Life's ability to make annuity payouts and to pay death
benefits and other distributions from the annuity.
Rating agency Rating
A.M. Best A+
(Superior)
Duff & Phelps AAA
Moody's Aa2
PRINCIPAL UNDERWRITER
The principal underwriter for the accounts is American Express
Financial Advisors Inc. which offers the variable contracts on a
continuous basis.
INDEPENDENT AUDITORS
The financial statements of American Enterprise Variable Annuity
Account as of Dec. 31, 1995, and for the period from Feb. 21, 1995
(commencement of operations) to Dec. 31, 1995 and the financial
statements of American Enterprise Life Insurance Company (a wholly
owned subsidiary of IDS Life Insurance Company) at Dec. 31, 1995
and 1994 and for each of the three years in the period ended Dec.
31, 1995, appearing in this SAI, have been audited by Ernst & Young
LLP, independent auditors, as set forth in their reports thereon
appearing elsewhere herein.
SAVING FOR RETIREMENT
You may have to save more for retirement because the average person
lives 17 years in retirement. Social security and pensions will
not cover your expenses in retirement. Sixty cents of every
retirement dollar must come from your personal savings.
Sources: Social Security Administration, U.S. Department of
Health and Human Services.
PROSPECTUS
The prospectus dated Jan. 6, 1997, is hereby incorporated in this
SAI by reference.
<PAGE>
PAGE 46
<TABLE><CAPTION>
American Enterprise Variable Annuity Account
______________________________________________________________________________________________________________________________
Statements of Net Assets (Unaudited) Sept. 30, 1996
__________________Segregated Asset Subaccounts_______________________________________
Assets ECR ESI EMS EMG EIE EAG
<S> <C> <C> <C> <C> <C> <C>
Investments in shares of mutual funds,
at market value:
IDS Life Capital Resource Fund --
95,791 shares at net asset value of
$26.70 per share (cost $2,488,657) $2,557,394 $ -- $ -- $ -- $ -- $ --
IDS Life Special Income Fund, Inc.--
118,311 shares at net asset value of
$11.74 per share (cost $1,387,994) -- 1,389,265 -- -- -- --
IDS Life Moneyshare Fund, Inc. --
131,151 shares at net asset value
of $1.00 per share (cost $131,139) -- -- 131,139 -- -- --
IDS Life Managed Fund, Inc. --
103,567 shares at net asset value of
$16.89 per share (cost $1,643,285) -- -- -- 1,749,251 -- --
IDS Life International Equity Fund --
53,491 shares at net asset value of
$13.66 per share (cost $707,129) -- -- -- -- 730,879 --
IDS Life Aggressive Growth Fund --
96,117 shares at net asset value of
$16.77 per share (cost $1,484,916) -- -- -- -- -- 1,612,327
OCC Accumulation Trust Managed Portfolio --
91,156 shares at net asset value of
$33.69 per share (cost $2,838,730) -- -- -- -- -- --
OCC Accumulation Trust U.S. Government
Income Portfolio -- 113,797 shares
at net asset value of $10.32 per share
(cost $1,187,569) -- -- -- -- -- --
GT Global Variable New Pacific Fund --
36,834 shares at net asset value of
$16.88 per share (cost $556,978) -- -- -- -- -- --
GT Global Variable Latin America Fund --
48,784 shares at net asset value of
$14.32 per share (cost $633,192) -- -- -- -- -- --
Putnam VT New Opportunities Fund --
221,424 shares at net asset value of
$18.31 per share (cost $3,628,604) -- -- -- -- -- --
Putnam VT Growth and Income Fund --
196,307 shares at net asset value of
$22.66 per share (cost $4,179,689) -- -- -- -- -- --
Putnam VT High Yield Fund --
107,233 shares at net asset value of
$12.64 per share (cost $1,302,887) -- -- -- -- -- --
Putnam VT Diversified Income Fund --
173,147 shares at net asset value of
$10.89 per share (cost $1,855,231) -- -- -- -- -- --
______________________________________________________________________________________________________________________________
2,557,394 1,389,265 131,139 1,749,251 730,879 1,612,327
Dividends receivable -- 7,703 546 -- -- --
Accounts receivable from American
Enterprise Life for contract
purchase payments 3,051 2,658 -- 2,211 1,058 1,774
Total assets 2,560,445 1,399,626 131,685 1,751,462 731,937 1,614,101
______________________________________________________________________________________________________________________________
Liabilities
Payable to American Enterprise Life for:
Mortality and expense risk fee 2,608 1,457 141 1,832 743 1,656
Issue and administrative fee 522 291 28 366 149 331
Payable to mutual funds for
investments purchased 3,081 8,613 377 8,660 1,067 1,789
Total liabilities 6,211 10,361 546 10,858 1,959 3,776
Net assets applicable to contracts
in accumulation period $2,554,234 $1,389,265 $131,139 $1,740,604 $729,978 $1,610,325
Accumulation units outstanding 2,068,962 1,161,592 124,073 1,375,275 590,878 1,135,072
Net asset value per accumulation unit $ 1.23 $ 1.20 $ 1.06 $ 1.27 $ 1.24 $ 1.42
______________________________________________________________________________________________________________________________
See accompanying notes to financial statements.
<PAGE>
PAGE 47
American Enterprise Variable Annuity Account
______________________________________________________________________________________________________________________________
Statements of Net Assets (Unaudited)(continued) Sept. 30, 1996
___________________Segregated Asset Subaccounts________________
Assets EMD EUS EPA ELA
Investments in shares of mutual funds,
at market value:
IDS Life Capital Resource Fund --
95,791 shares at net asset value of
$26.70 per share (cost $2,488,657) $ -- $ -- $ -- $ --
IDS Life Special Income Fund, Inc. --
118,311 shares at net asset value of
$11.74 per share (cost $1,387,994) -- -- -- --
IDS Life Moneyshare Fund, Inc. --
131,151 shares at net asset value
of $1.00 per share (cost $131,139) -- -- -- --
IDS Life Managed Fund, Inc. --
103,567 shares at net asset value of
$16.89 per share (cost $1,643,285) -- -- -- --
IDS Life International Equity Fund --
53,491 shares at net asset value of
$13.66 per share (cost $707,129) -- -- -- --
IDS Life Aggressive Growth Fund --
96,117 shares at net asset value of
$16.77 per share (cost $1,484,916) -- -- -- --
OCC Accumulation Trust Managed Portfolio --
91,165 shares at net asset value of
$33.69 per share (cost $2,838,730) 3,071,398 -- -- --
OCC Accumulation Trust U.S. Government
Income Portfolio -- 113,797 shares
at net asset value of $10.32 per share
(cost $1,187,569) -- 1,174,393 -- --
GT Global Variable New Pacific Fund --
36,834 shares at net asset value of
$16.88 per share (cost $556,978) -- -- 621,744 --
GT Global Variable Latin America Fund --
48,784 shares at net asset value of
$14.32 per share (cost $633,192) -- -- -- 698,466
Putnam VT New Opportunities Fund --
221,424 shares at net asset value of
$18.31 per share (cost $3,628,604) -- -- -- --
Putnam VT Growth and Income Fund --
196,307 shares at net asset value of
$22.66 per share (cost $4,179,689) -- -- -- --
Putnam VT High Yield Fund --
107,233 shares at net asset value of
$12.64 per share (cost $1,302,887) -- -- -- --
Putnam VT Diversified Income Fund --
173,147 shares of net asset value of
$10.89 per share (cost $1,855,231) -- -- -- --
______________________________________________________________________________________________________________________________
3,071,398 1,174,393 621,744 698,466
______________________________________________________________________________________________________________________________
Dividends receivable -- 1,902 -- --
Accounts receivable from American
Enterprise Life for contract
purchase payments -- 3 -- --
Total assets 3,071,398 1,176,298 621,744 698,466
______________________________________________________________________________________________________________________________
Liabilities
Payable to American Enterprise Life for:
Mortality and expense risk fee 3,106 1,227 640 724
Issue and administrative fee 621 245 128 145
Payable to mutual funds for investments purchased -- 3 -- --
______________________________________________________________________________________________________________________________
Total liabilities 3,727 1,475 768 869
Net assets applicable to contracts
in accumulation period $3,067,671 $1,174,823 $620,976 $697,597
______________________________________________________________________________________________________________________________
Accumulation units outstanding 2,076,468 1,080,566 480,027 604,702
Net asset value per accumulation unit $ 1.48 $ 1.09 $ 1.29 $ 1.15
______________________________________________________________________________________________________________________________
See accompanying notes to financial statements.<PAGE>
PAGE 48
American Enterprise Variable Annuity Account
______________________________________________________________________________________________________________________________
Statements of Net Assets (Unaudited)(continued) Sept. 30, 1996
Combined
____________________Segregated Asset Subaccounts________________Variable
Assets ENO EGI EHY EDI Account
Investments in shares of mutual funds, at market value:
IDS Life Capital Resource Fund --
95,791 shares at net asset value of
$26.70 per share (cost $2,488,657) $ -- $ -- $ -- $ -- $2,557,394
IDS Life Special Income Fund, Inc. --
118,311 shares at net asset value of
$11.74 per share (cost $1,387,994) -- -- -- -- 1,389,265
IDS Life Moneyshare Fund, Inc. --
131,151 shares at net asset value
of $1.00 per share (cost $131,139) -- -- -- -- 131,139
IDS Life Managed Fund, Inc. --
103,567 shares at net asset value of
$16.89 per share (cost $1,643,285) -- -- -- -- 1,749,251
IDS Life International Equity Fund --
53,491 shares at net asset value of
$13.66 per share (cost $707,129) -- -- -- -- 730,879
IDS Life Aggressive Growth Fund --
96,117 shares at net asset value of
$16.77 per share (cost $1,484,916) -- -- -- -- 1,612,327
OCC Accumulation Trust Managed Portfolio --
91,165 shares at net asset value of
$33.69 per share (cost $2,838,730) -- -- -- -- 3,071,398
OCC Accumulation Trust U.S. Government
Income Portfolio -- 113,797 shares
at net asset value of $10.32 per share
(cost $1,187,569) -- -- -- -- 1,174,393
GT Global Variable New Pacific Fund --
36,834 shares at net asset value of
$16.88 per share (cost $556,978) -- -- -- -- 621,744
GT Global Variable Latin America Fund --
48,784 shares at net asset value of
$14.32 per share (cost $633,192) -- -- -- -- 698,466
Putnam VT New Opportunities Fund --
221,424 shares at net asset value of
$18.31 per share (cost $3,628,604) 4,054,283 -- -- -- 4,054,283
Putnam VT Growth and Income Fund --
196,307 shares at net asset value of
$22.66 per share (cost $4,179,689) -- 4,448,323 -- -- 4,448,323
Putnam VT High Yield Fund --
107,233 shares at net asset value of
$12.64 per share (cost $1,302,887) -- -- 1,355,420 -- 1,355,420
Putnam VT Diversified Income Fund--
173,147 shares at net asset value of
$10.89 per share (cost $1,855,231) -- -- -- 1,885,576 1,885,576
______________________________________________________________________________________________________________________________
4,054,283 4,448,323 1,355,420 1,885,576 25,479,858
______________________________________________________________________________________________________________________________
Dividends receivable -- -- -- -- 10,151
Accounts receivable from American
Enterprise Life for contract purchase payments -- -- -- -- 10,755
Total assets 4,054,283 4,448,323 1,355,420 1,885,576 25,500,764
______________________________________________________________________________________________________________________________
Liabilities
Payable to American Enterprise Life for:
Mortality and expense risk fee 4,121 4,553 1,412 1,981 26,201
Issue and administrative fee 824 911 283 396 5,240
Payable to mutual funds for investments purchased -- -- -- -- 23,590
______________________________________________________________________________________________________________________________
Total liabilities 4,945 5,464 1,695 2,377 55,031
Net assets applicable to contracts
in accumulation period $4,049,338 $4,442,859 $1,353,725 $1,883,199 $25,445,733
______________________________________________________________________________________________________________________________
Accumulation units outstanding 2,512,951 3,131,316 1,092,310 1,576,864
Net asset value per accumulation unit $ 1.61 $ 1.42 $ 1.24 $ 1.19
______________________________________________________________________________________________________________________________
See accompanying notes to financial statements.
/TABLE
<PAGE>
PAGE 49
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
________________________________________________________________________________________________________________________
Statements of Net Assets Dec. 31, 1995
__________________Segregated Asset Subaccounts___________________________
Assets ECR ESI EMS EMG EIE EAG _
<S> <C> <C> <C> <C> <C> <C>
Investments in shares of mutual funds,
at market value:
IDS Life Capital Resource Fund -
37,868 shares at net asset value of
$25.85 per share (cost $951,789) $ 978,916 $ - $ - $ - $ - $ -
IDS Life Special Income Fund, Inc. -
40,387 shares at net asset value of
$12.01 per share (cost $472,060) - 485,183 - - - -
IDS Life Moneyshare Fund, Inc. -
135,575 shares at net asset value
of $1.00 per share (cost $135,564) - - 135,564 - - -
IDS Life Managed Fund, Inc. -
44,341 shares at net asset value of $15.67
per share (cost $670,739) - - - 694,967 - -
IDS Life International Equity Fund -
19,648 shares at net asset value of $13.05
per share (cost $246,793) - - - - 256,379 -
IDS Life Aggressive Growth Fund -
40,331 shares at net asset value of $15.05
per share (cost $581,208) - - - - - 606,895
OCC Accumulation Trust Managed Portfolio -
18,934 shares at net asset value of $30.14
per share (cost $538,519) - - - - - -
OCC Accumulation Trust U.S. Government
Income Portfolio - 42,296 shares at net asset value
of $10.62 per share (cost $445,484) - - - - - -
GT Global Variable New Pacific Fund -
14,791 shares at net asset value of $13.92,
per share (cost $200,099) - - - - - -
GT Global Variable Latin America Fund -
24,059 shares at net asset value of $12.42
per share (cost $289,974) - - - - - -
Putnam VT New Opportunities Fund -
61,350 shares at net asset value of $15.63
per share (cost $888,261) - - - - - -
Putnam VT Growth and Income Fund -
68,386 shares at net asset value of $21.47
per share (cost $1,379,943) - - - - - -
Putnam VT High Yield Fund-
44,293 shares at net asset value of $12.37
per share (cost $532,565) - - - - - -
Putnam VT Diversified Income Fund -
62,615 shares at net asset value of $11.03
per share (cost $665,917) - - - - - -
978,916 485,183 135,564 694,967 256,379 606,895
_______________________________________________________________________________________________________________________
Dividends receivable - 2,436 597 - - -
Accounts receivable from American Enterprise
Life for contract purchase payments 25,569 1,804 - 32,558 21,110 2,876
Total assets 1,004,485 489,423 136,161 727,525 277,489 609,771
Liabilities .
Payable to American Enterprise Life for:
Mortality and expense risk fee 873 421 142 589 212 550
Issue and administrative fee 175 84 29 118 43 110
Payable to mutual funds for investments
purchased 25,569 3,735 426 32,558 21,120 2,892
Total liabilities 26,617 4,240 597 33,265 21,375 3,552
Net assets applicable to contracts
in accumulation period $ 977,868 $485,183 $135,564 $694,260 $256,114 $606,219
Accumulation units outstanding 817,655 413,748 131,600 588,760 219,594 473,162
______________________________________________________________________________________________________________________
Net asset value per accumulation unit $ 1.20 $ 1.17 $ 1.03 $ 1.18 $ 1.17 $ 1.28
_______________________________________________________________________________________________________________________
See accompanying notes to financial statements.
/TABLE
<PAGE>
PAGE 50
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
_____________________________________________________________________________________________
Statements of Net Assets Dec. 31, 1995
__________________Segregated Asset Subaccounts_______________________
Assets EMD EUS EPA ELA _
<S> <C> <C> <C> <C>
Investments in shares of mutual funds,
at market value:
IDS Life Capital Resource Fund -
37,868 shares at net asset value of
$25.85 per share (cost $951,789) $ - $ - $ - $ -
IDS Life Special Income Fund, Inc. -
40,387 shares at net asset value of
$12.01 per share (cost $472,060) - - - -
IDS Life Moneyshare Fund, Inc. -
135,575 shares at net asset value
of $1.00 per share (cost $135,564) - - - -
IDS Life Managed Fund, Inc. -
44,341 shares at net asset value of $15.67
per share (cost $670,739) - - - -
IDS Life International Equity Fund -
19,648 shares at net asset value of $13.05
per share (cost $246,793) - - - -
IDS Life Aggressive Growth Fund -
40,331 shares at net asset value of $15.05
per share (cost $581,208) - - - -
OCC Accumulation Trust Managed Portfolio -
18,934 shares at net asset value of $30.14
per share (cost $538,519) 570,668 - - -
OCC Accumulation Trust U.S. Government
Income Portfolio - 42,296 shares at net asset value
of $10.62 per share (cost $445,484) - 449,153 - -
GT Global Variable New Pacific Fund -
14,791 shares at net asset value of $13.92
per share (cost $200,099) - - 205,895 -
GT Global Variable Latin America Fund -
24,059 shares at net asset value of $12.42
per share (cost $289,974) - - - 298,760
Putnam VT New Opportunities Fund -
61,350 shares at net asset value of $15.63
per share (cost $888,261) - - - -
Putnam VT Growth and Income Fund -
68,386 shares at net asset value of $21.47
per share (cost $1,379,943) - - - -
Putnam VT High Yield Fund -
44,293 shares at net asset value of $12.37
per share (cost $532,565) - - - -
Putnam VT Diversified Income Fund -
62,615 shares of net asset value of $11.03
per share (cost $665,917) - - - -
570,668 449,153 205,895 298,760
Dividends receivable - 794 - -
Accounts receivable from American Enterprise
Life for contract purchase payments 13,131 1,405 1,033 798
Total assets 583,799 451,352 206,928 299,558
Liabilities .
Payable to American Enterprise Life for:
Mortality and expense risk fee 497 414 182 282
Issue and administrative fee 99 83 37 56
Payable to mutual funds for investments
purchased 13,131 1,405 1,033 798
Total liabilities 13,727 1,902 1,252 1,136
Net assets applicable to contracts
in accumulation period $570,072 $449,450 $205,676 $298,422
_____________________________________________________________________________________________
Accumulation units outstanding 435,846 413,258 192,917 303,151
_____________________________________________________________________________________________
Net asset value per accumulation unit $ 1.31 $ 1.09 $ 1.07 $ 0.98
_____________________________________________________________________________________________
See accompanying notes to financial statements.
/TABLE
<PAGE>
PAGE 51
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account .
Statements of Net Assets Dec. 31, 1995
Combined
__________________Segregated Asset Subaccounts_________ Variable
Assets ENO EGI EHY EDI Account
<S> <C> <C> <C> <C> <C>
Investments in shares of mutual funds,
at market value:
IDS Life Capital Resource Fund -
37,868 shares at net asset value of
$25.85 per share (cost $951,789) $ - $ - $ - $ - $ 978,916
IDS Life Special Income Fund, Inc. -
40,387 shares at net asset value of
$12.01 per share (cost $472,060) - - - - 485,183
IDS Life Moneyshare Fund, Inc. -
135,575 shares at net asset value
of $1.00 per share (cost $135,564) - - - - 135,564
IDS Life Managed Fund, Inc. -
44,341 shares at net asset value of $15.67
per share (cost $670,739) - - - - 694,967
IDS Life International Equity Fund -
19,648 shares at net asset value of $13.05
per share (cost $246,793) - - - - 256,379
IDS Life Aggressive Growth Fund -
40,331 shares at net asset value of $15.05
per share (cost $581,208) - - - - 606,895
OCC Accumulation Trust Managed Portfolio -
18,934 shares at net asset value of $30.14
per share (cost $538,519) - - - - 570,668
OCC Accumulation Trust U.S. Government
Income Portfolio - 42,296 shares at net asset value
of $10.62 per share (cost $445,484) - - - - 449,153
GT Global Variable New Pacific Fund -
14,791 shares at net asset value of $13.92
per share (cost $200,099) - - - - 205,895
GT Global Variable Latin America Fund -
24,059 shares at net asset value of $12.42
per share (cost $289,974) - - - - 298,760
Putnam VT New Opportunities Fund -
61,350 shares at net asset value of $15.63
per share (cost $888,261) 958,895 - - - 958,895
Putnam VT Growth and Income Fund -
68,386 shares at net asset value of $21.47
per share (cost $1,379,943) - 1,468,244 - - 1,468,244
Putnam VT High Yield Fund -
44,293 shares at net asset value of $12.37
per share (cost $532,565) - - 547,903 - 547,903
Putnam VT Diversified Income Fund-
62,615 shares at net asset value of $11.03
per share (cost $665,917) - - - 690,643 690,643
958,895 1,468,244 547,903 690,643 8,348,065
Dividends receivable - - - - 3,827
Accounts receivable from American Enterprise
Life for contract purchase payments 23,235 3,575 1,803 1,803 130,700
Total assets 982,130 1,471,819 549,706 692,446 8,482,592
Liabilities .
Payable to American Enterprise Life for:
Mortality and expense risk fee 810 1,312 504 634 7,422
Issue and administrative fee 162 262 101 127 1,486
Payable to mutual funds for
investments purchased 23,235 3,575 1,803 1,803 133,083
Total liabilities 24,207 5,149 2,408 2,564 141,991
Net assets applicable to contracts in
accumulation period $957,923 $1,466,670 $547,298 $689,882 $8,340,601
Accumulation units outstanding 690,849 1,151,991 480,470 600,567
Net asset value per accumulation unit $ 1.39 $ 1.27 $ 1.14 $ 1.15
See accompanying notes to financial statements.
</TABLE>
<PAGE>
PAGE 52
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
______________________________________________________________________________________________________________________________
Statements of Operations (Unaudited) For the nine month period ended Sept. 30, 1996
__________________________Segregated Asset Subaccounts_________________________
ECR ESI EMS EMG EIE EAG EMD
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income (loss):
Dividend income from mutual funds $15,796 $ 54,759 $ 4,209 $ 28,276 $12,001 $ 5,139 $ 16,891
______________________________________________________________________________________________________________________________
Expenses:
Mortality and expense risk fee (Note 3) 16,917 9,861 1,071 11,564 4,635 10,641 16,155
Administrative charge (Note 4) 3,383 1,972 214 2,313 927 2,128 3,231
______________________________________________________________________________________________________________________________
Total expenses 20,300 11,833 1,285 13,877 5,562 12,769 19,386
______________________________________________________________________________________________________________________________
Investment income
(loss)-net (4,504) 42,926 2,924 14,399 6,439 (7,630) (2,495)
______________________________________________________________________________________________________________________________
Realized and Unrealized Gain (Loss) on Investments - net
______________________________________________________________________________________________________________________________
Realized gain (loss) on sales of
investments in mutual funds:
Proceeds from sales 73,889 136,291 142,482 81,245 21,153 35,306 50,852
Cost of investments sold 72,783 137,961 142,483 76,994 20,439 33,007 46,654
______________________________________________________________________________________________________________________________
Net realized gain (loss) on investments 1,106 (1,670) (1) 4,251 714 2,299 4,198
Net change in unrealized appreciation
or depreciation of investments 41,610 (11,852) -- 81,738 14,164 101,724 200,519
______________________________________________________________________________________________________________________________
Net gain (loss) on investments 42,716 (13,522) (1) 85,989 14,878 104,023 204,717
______________________________________________________________________________________________________________________________
Net increase (decrease) from operations $38,212 $ 29,404 $ 2,923 $100,388 $21,317 $ 96,393 $202,222
______________________________________________________________________________________________________________________________
See accompanying notes to financial statements.
<PAGE>
PAGE 53
American Enterprise Variable Annuity Account
______________________________________________________________________________________________________________________________
Statements of Operations (Unaudited)(continued) For the nine month period ended Sept. 30, 1996
Combined
___________________Segregated Asset Subaccounts_____________________________Variable
EUS EPA ELA ENO EGI EHY EDI Account
Investment income (loss):
Dividend income from mutual fund $32,456 $ 6,056 $16,201 $ -- $157,276 $58,665 $78,311 $486,036
______________________________________________________________________________________________________________________________
Expenses:
Mortality and expense risk fee (Note 3) 7,758 3,968 4,758 24,457 28,751 9,122 13,194 162,852
Administrative charge (Note 4) 1,552 794 952 4,891 5,750 1,824 2,639 32,570
______________________________________________________________________________________________________________________________
Total expenses 9,310 4,762 5,710 29,348 34,501 10,946 15,833 195,422
______________________________________________________________________________________________________________________________
Investment income(loss) - net 23,146 1,294 10,491 (29,348) 122,775 47,719 62,478 290,614
______________________________________________________________________________________________________________________________
Realized and Unrealized Gain (Loss) on Investments - net
______________________________________________________________________________________________________________________________
Realized gain (loss) on sales of investments
in mutual fund portfolios:
Proceeds from sales 44,823 18,436 19,347 34,059 65,744 153,423 132,707 1,009,757
Cost of investments sold 44,936 16,726 17,540 31,247 64,256 151,225 133,214 989,465
______________________________________________________________________________________________________________________________
Net realized gain (loss) on investments (113) 1,710 1,807 2,812 1,488 2,198 (507) 20,292
Net change in unrealized appreciation
or depreciation of investments (16,845) 58,970 56,488 355,045 180,333 37,195 5,619 1,104,708
______________________________________________________________________________________________________________________________
Net gain (loss) on investments (16,958) 60,680 58,295 357,857 181,821 39,393 5,112 1,125,000
______________________________________________________________________________________________________________________________
Net increase (decrease) from operations $ 6,188 $61,974 $68,786 $328,509 $304,596 $87,112 $67,590 $1,415,614
______________________________________________________________________________________________________________________________
See accompanying notes to financial statements.
</TABLE>
<PAGE>
PAGE 54
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
________________________________________________________________________________________
Statements of Operations For the period Feb. 21, 1995 (commencement
of operations) to Dec. 31, 1995
________________Segregated Asset Subaccounts________________
ECR ESI EMS EMG EIE EAG EMD _
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income (loss):
Dividend income from mutual
funds $26,607 $ 7,816 $ 2,941 $ 4,837 $ 2,378 $ 1,295 $ -
__________________________________________________________________________________________
Expenses:
Mortality and expense risk
fee (Note 3) 2,888 1,265 705 1,881 710 1,834 1,671
Administrative charge (Note 4) 578 253 141 376 142 367 334
__________________________________________________________________________________________
Total expenses 3,466 1,518 846 2,257 852 2,201 2,005
__________________________________________________________________________________________
Investment income
(loss) - net 23,141 6,298 2,095 2,580 1,526 (906) (2,005)
__________________________________________________________________________________________
Realized and Unrealized Gain (Loss) on Investments - net
__________________________________________________________________________________________
Realized gain (loss) on sales of
investments in mutual funds:
Proceeds from sales 28,264 19,561 64,400 21,572 10,599 26,474 20,429
Cost of investments sold 27,170 19,158 64,400 20,704 10,277 25,425 18,860
__________________________________________________________________________________________
Net realized gain (loss)
on investments 1,094 403 - 868 322 1,049 1,569
Net change in unrealized
appreciation or depreciation
of investments 27,127 13,123 - 24,228 9,586 25,687 32,149
__________________________________________________________________________________________
Net gain on investments 28,221 13,526 - 25,096 9,908 26,736 33,718
__________________________________________________________________________________________
Net increase from operations $51,362 $19,824 $ 2,095 $27,676 $11,434 $25,830 $31,713
__________________________________________________________________________________________
See accompanying notes to financial statements.
</TABLE>
<PAGE>
PAGE 55
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
_________________________________________________________________________________________________________
Statements of Operations For the period Feb. 21, 1995 (commencement
of operations) to Dec. 31, 1995
Combined
__Segregated Asset Subaccounts__ Variable
EUS EPA ELA ENO EGI EHY EDI Account
_________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income (loss):
Dividend income from mutual
fund portfolios $ 8,584 $ 33 $ 3,436 $ 77 $ 1,692 $ 2,689 $ 1,516 $ 63,901
________________________________________________________________________________________________________
Expenses:
Mortality and expense risk
fee (Note 3) 1,372 614 796 2,346 3,599 1,575 1,834 23,090
Administrative charge
(Note 4) 274 123 159 469 720 315 367 4,618
________________________________________________________________________________________________________
Total expenses 1,646 737 955 2,815 4,319 1,890 2,201 27,708
________________________________________________________________________________________________________
Investment income
(loss) - net 6,938 (704) 2,481 (2,738) (2,627) 799 (685) 36,193
________________________________________________________________________________________________________
Realized and Unrealized Gain (Loss) on Investments - net
________________________________________________________________________________________________________
Realized gain (loss) on sales
of investments in mutual
fund portfolios:
Proceeds from sales 26,701 7,350 11,179 25,751 31,781 26,030 17,763 337,854
Cost of investments sold 26,547 7,192 11,264 24,257 30,224 25,607 17,491 328,576
________________________________________________________________________________________________________
Net realized gain (loss)
on investments 154 158 (85) 1,494 1,557 423 272 9,278
Net change in unrealized
appreciation or depreciation
of investments 3,669 5,796 8,786 70,635 88,301 15,338 24,726 349,151
________________________________________________________________________________________________________
Net gain on investments 3,823 5,954 8,701 72,129 89,858 15,761 24,998 358,429
________________________________________________________________________________________________________
Net increase from operations $10,761 $5,250 $11,182 $69,391 $87,231 $16,560 $24,313 $394,622
________________________________________________________________________________________________________
See accompanying notes to financial statements.
</TABLE>
<PAGE>
PAGE 56
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
______________________________________________________________________________________________________________________________
Statements of Changes in Net Assets (Unaudited) For the nine month period ended Sept. 30, 1996
________________________________Segregated Asset Subaccounts_______________________________
Operations ECR ESI EMS EMG EIE EAG EMD
______________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income(loss) - net $ (4,504) $ 42,926 $ 2,924 $ 14,399 $ 6,439 $ (7,630) $ (2,495)
Net realized gain
(loss) on investments 1,106 (1,670) (1) 4,251 714 2,299 4,198
Net change in unrealized
appreciation or depreciation
of investments 41,610 (11,852) -- 81,738 14,164 101,724 200,519
______________________________________________________________________________________________________________________________
Net increase (decrease)
from operations 38,212 29,404 2,923 100,388 21,317 96,393 202,222
______________________________________________________________________________________________________________________________
Contract Transactions
______________________________________________________________________________________________________________________________
Variable annuity contract
purchase payments 1,475,565 1,053,760 140,554 1,039,843 467,742 860,124 2,341,539
Net transfers* 101,797 (125,919) (147,872) (47,870) (9,758) 63,527 (23,124)
Contract terminations:
Surrender benefits (Note 6) (39,208) (35,627) (30) (27,840) (5,437) (15,938) (23,038)
Death benefits -- (17,536) -- (18,177) -- -- --
______________________________________________________________________________________________________________________________
Increase (decrease) from
contract transactions 1,538,154 874,678 (7,348) 945,956 452,547 907,713 2,295,377
______________________________________________________________________________________________________________________________
Net assets at
beginning of period 977,868 485,183 135,564 694,260 256,114 606,219 570,072
______________________________________________________________________________________________________________________________
Net assets at end of period $2,554,234 $1,389,265 $131,139 $1,740,604 $729,978 $1,610,325 $3,067,671
______________________________________________________________________________________________________________________________
Accumulation Unit Activity
______________________________________________________________________________________________________________________________
Units outstanding at beginning
of period 817,655 413,748 131,600 588,760 219,594 473,162 435,846
Contract purchase payments 1,206,662 904,932 134,521 868,744 387,948 631,307 1,670,277
Net transfers* 82,641 (107,716) (142,019) (39,221) (8,361) 45,564 (16,420)
Contract terminations:
Surrender benefits (37,996) (34,139) (29) (28,052) (8,303) (14,961) (13,235)
Death benefits -- (15,233) -- (14,956) -- -- --
_______________________________________________________________________________________________________________________________
Units outstanding at
end of period 2,068,962 1,161,592 124,073 1,375,275 590,878 1,135,072 2,076,468
_______________________________________________________________________________________________________________________________
*Includes transfer activity from (to) other Accounts and transfers from (to)American Enterprise Life for conversion from (to)
the fixed account.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
PAGE 57
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
______________________________________________________________________________________________________________________________
Statements of Changes in Net Assets For the nine month period
(Unaudited)(continued) ended Sept. 30, 1996
____________________Segregated Asset Subaccounts___________________
Operations EUS EPA ELA ENO
______________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Investment income (loss) - net $ 23,146 $ 1,294 $ 10,491 $ (29,348)
Net realized gain
(loss) on investments (113) 1,710 1,807 2,812
Net change in unrealized appreciation
or depreciation of investments (16,845) 58,970 56,488 355,045
______________________________________________________________________________________________________________________________
Net increase (decrease) from operations 6,188 61,974 68,786 328,509
______________________________________________________________________________________________________________________________
Contract Transactions
______________________________________________________________________________________________________________________________
Variable annuity contract purchase payments 785,195 375,795 348,897 2,404,038
Net transfers* (48,611) (15,482) (13,411) 385,058
Contract terminations:
Surrender benefits (Note 6) (17,399) (6,987) (5,097) (26,190)
Death benefits -- -- -- --
______________________________________________________________________________________________________________________________
Increase (decrease) from contract transactions 719,185 353,326 330,389 2,762,906
______________________________________________________________________________________________________________________________
Net assets at beginning of period 449,450 205,676 298,422 957,923
______________________________________________________________________________________________________________________________
Net assets at end of period $1,174,823 $620,976 $697,597 $4,049,338
______________________________________________________________________________________________________________________________
Accumulation Unit Activity
______________________________________________________________________________________________________________________________
Units outstanding at beginning of period 413,258 192,917 303,151 690,849
Contract purchase payments 730,940 308,008 320,963 1,588,359
Net transfers* (44,693) (13,206) (12,509) 258,156
Contract terminations:
Surrender benefits (18,939) (7,692) (6,903) (24,413)
Death benefits -- -- -- --
______________________________________________________________________________________________________________________________
Units outstanding at end of period 1,080,566 480,027 604,702 2,512,951
______________________________________________________________________________________________________________________________
* Includes transfer activity from (to) other Accounts and transfers from (to) American Enterprise Life for conversion from (to)
the fixed account.
See accompanying notes to financial statements.
<PAGE>
PAGE 58
American Enterprise Variable Annuity Account
______________________________________________________________________________________________________________________________
Statements of Changes in Net Assets For the nine month period
(Unaudited)(continued) ended Sept. 30, 1996
Combined
_______________Segregated Asset Subaccounts_______________Variable
Operations EGI EHY EDI Account
______________________________________________________________________________________________________________________________
Investment income (loss) - net $ 122,775 $ 47,719 $ 62,478 $ 290,614
Net realized gain (loss) on investments 1,488 2,198 (507) 20,292
Net change in unrealized appreciation or
depreciation of investments 180,333 37,195 5,619 1,104,708
______________________________________________________________________________________________________________________________
Net increase (decrease)
from operations 304,596 87,112 67,590 1,415,614
______________________________________________________________________________________________________________________________
Contract Transactions
______________________________________________________________________________________________________________________________
Variable annuity contract purchase payments 2,391,802 956,669 1,288,641 15,930,164
Net transfers* 339,999 (215,894) (140,393) 102,047
Contract terminations:
Surrender benefits (Note 6) (50,546) (21,460) (22,521) (297,318)
Death benefits (9,662) -- -- (45,375)
______________________________________________________________________________________________________________________________
Increase (decrease) from contract transactions 2,671,593 719,315 1,125,727 15,689,518
______________________________________________________________________________________________________________________________
Net assets at beginning of period 1,466,670 547,298 689,882 8,340,601
______________________________________________________________________________________________________________________________
Net assets at end of period $4,442,859 $1,353,725 $1,883,199 $25,445,733
______________________________________________________________________________________________________________________________
Accumulation Unit Activity
______________________________________________________________________________________________________________________________
Units outstanding at beginning of period 1,151,991 480,470 600,567
Contract purchase payments 1,774,583 816,592 1,120,209
Net transfers* 251,091 (183,144) (121,031)
Contract terminations:
Surrender benefits (39,403) (21,608) (22,881)
Death benefits (6,946) -- --
______________________________________________________________________________________________________________________________
Units outstanding at end of period 3,131,316 1,092,310 1,576,864
______________________________________________________________________________________________________________________________
* Includes transfer activity from (to) other Accounts and transfers from (to) American Enterprise Life for conversion from (to)
the fixed account.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
PAGE 59
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
____________________________________________________________________________________________________________
Statements of Changes in Net Assets For the period Feb. 21, 1995 (commencement
of operations) to Dec. 31, 1995
Segregated Asset Subaccounts .
Operations ECR ESI EMS EMG EIE EAG EMD
____________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income
(loss) - net $ 23,141 $ 6,298 $ 2,095 $ 2,580 $ 1,526 $ (906) $ (2,005)
Net realized gain
(loss) on investments 1,094 403 - 868 322 1,049 1,569
Net change in unrealized
appreciation or
depreciation of
investments 27,127 13,123 - 24,228 9,586 25,687 32,149
____________________________________________________________________________________________________________
Net increase from operations 51,362 19,824 2,095 27,676 11,434 25,830 31,713
___________________________________________________________________________________________________________
Contract Transactions
____________________________________________________________________________________________________________
Variable annuity contract
purchase payments 906,083 465,579 192,695 668,364 248,520 557,366 549,262
Net transfers* 26,610 445 (59,226) 816 665 27,715 3,794
Contract terminations:
Surrender benefits (Note 6) (6,187) (665) - (2,596) (4,505) (4,692) (14,697)
____________________________________________________________________________________________________________
Increase from
contract transactions 926,506 465,359 133,469 666,584 244,680 580,389 538,359
____________________________________________________________________________________________________________
Net assets at beginning
of period - - - - - - -
____________________________________________________________________________________________________________
Net assets at end
of period $977,868 $485,183 $135,564 $694,260 $256,114 $606,219 $570,072
____________________________________________________________________________________________________________
Accumulation Unit Activity
____________________________________________________________________________________________________________
Units outstanding at
beginning of period - - - - - - -
Contract purchase payments 800,247 413,918 189,518 590,321 223,000 454,945 444,358
Net transfers* 22,925 434 (57,918) 767 597 22,093 3,027
Contract terminations:
Surrender benefits (5,517) (604) - (2,328) (4,003) (3,876) (11,539)
____________________________________________________________________________________________________________
Units outstanding at
end of period 817,655 413,748 131,600 588,760 219,594 473,162 435,846
____________________________________________________________________________________________________________
* Includes transfer activity from (to) other Accounts and transfers from (to) American Enterprise Life for conversion
from (to) the fixed account.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
PAGE 60
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
_____________________________________________________________________________________________________________________
Statements of Changes in Net Assets For the period Feb. 21, 1995 (commencement
of operations) to Dec. 31, 1995
______________________Segregated Asset Subaccounts_____________________________ Variable
Operations EUS EPA ELA ENO EGI EHY EDI Account
_____________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income
(loss) - net $ 6,938 $ (704) $ 2,481 $ (2,738) $ (2,627) $ 799 $ (685) $ 36,193
Net realized gain
(loss) on investments 154 158 (85) 1,494 1,557 423 272 9,278
Net change in unrealized
appreciation or
depreciation of
investments 3,669 5,796 8,786 70,635 88,301 15,338 24,726 349,151
_____________________________________________________________________________________________________________________
Net increase
from operations 10,761 5,250 11,182 69,391 87,231 16,560 24,313 394,622
_____________________________________________________________________________________________________________________
Contract Transactions
____________________________________________________________________________________________________________________
Variable annuity contract
purchase payments 439,825 201,104 288,402 887,679 1,410,722 555,962 667,230 8,038,793
Net transfers* 347 657 202 20,208 9,040 (24,548) 447 7,172
Contract terminations:
Surrender benefits
(Note 6) (1,483) (1,335) (1,364) (19,355) (40,323) (676) (2,108) (99,986)
_____________________________________________________________________________________________________________________
Increase from
contract transactions 438,689 200,426 287,240 888,532 1,379,439 530,738 665,569 7,945,979
_____________________________________________________________________________________________________________________
Net assets at beginning
of period - - - - - - - -
____________________________________________________________________________________________________________________
Net assets at end
of period $449,450 $205,676 $298,422 $957,923 $1,466,670 $547,298 $689,882 $8,340,601
_____________________________________________________________________________________________________________________
Accumulation Unit Activity
_____________________________________________________________________________________________________________________
Units outstanding at
beginning of period - - - - - - -
Contract purchase
payments 414,325 193,497 304,194 690,494 1,177,088 502,860 602,054
Net transfers* 340 627 212 15,447 7,402 (21,772) 430
Contract terminations:
Surrender benefits (1,407) (1,207) (1,255) (15,092) (32,499) (618) (1,917)
_______________________________________________________________________________________________________
Units outstanding at
end of period 413,258 192,917 303,151 690,849 1,151,991 480,470 600,567
_______________________________________________________________________________________________________
* Includes transfer activity from (to) other Accounts and transfers from (to) American Enterprise Life for conversion
from (to) the fixed account.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
PAGE 61
Notes to Financial Statements
___________________________________________________________________
1. Organization
American Enterprise Variable Annuity Account (the Account) was
established under Indiana law on July 15, 1987 and with the
subaccounts is registered together as a single unit investment
trust of American Enterprise Life Insurance Company (American
Enterprise Life) under the Investment Company Act of 1940, as
amended (the "1940 Act"). Operations of the Account commenced on
Feb. 21, 1995.
The Account is comprised of fourteen subaccounts. Each subaccount
invests exclusively in shares of six funds of the IDS Life
Retirement Annuity Mutual Funds (collectively, the IDS Life Funds),
or in shares of two portfolios of OCC Accumulation Trust
(collectively, the OCC Portfolios), or in shares of two funds of
G.T. Global (collectively, the G.T. Global Funds), or in shares of
four funds of Putnam Capital Manager Trust (collectively, Putnam
Funds). The assets of each subaccount of the Account are not
chargeable with liabilities arising out of the business conducted
by any other subaccount, account or by American Enterprise Life.
Purchase payments are allocated to any or all fourteen subaccounts
or in the fixed account. The purchase payments allocated to the
subaccounts are then invested in shares of the specific Portfolio
or Fund selected.
IDS Life Investment Series, Inc., formerly known as IDS Life
Capital Resource Fund, Inc., is a series mutual fund. It has three
series of stock representing three separate, diversified funds -
Capital Resource, International Equity and Aggressive Growth. IDS
Life Investment Series, Inc., IDS Life Special Income Fund, Inc.
and IDS Life Moneyshare Fund, Inc. commenced operations Oct. 13,
1981. IDS Life Managed Fund, Inc. commenced operations April 30,
1986. These mutual funds are registered under the 1940 Act as
diversified, open-end management investment companies. Purchase
payments allocated to Aggressive Growth (EAG) subaccount invest in
shares of IDS Life Aggressive Growth Fund; the International Equity
(EIE) subaccount invests in shares of IDS Life International Equity
Fund; the Capital Resource (ECR) subaccount invests in shares of
IDS Life Capital Resource Fund; the Managed (EMG) subaccount
invests in shares of IDS Life Managed Fund; the Special Income
(ESI) subaccount invests in shares of IDS Life Special Income Fund;
and the Moneyshare (EMS) subaccount invests in shares of IDS Life
Moneyshare Fund.
OCC Accumulation Trust was organized on May 12, 1994 as a
Massachusetts business trust and is registered under the 1940 Act
as a diversified, open-end management investment company. The
Managed Portfolio commenced operations on Sept. 16, 1994. The U.S.
Government Income Portfolio commenced operations on Jan. 3, 1995.
Purchase payments allocated to the Managed Portfolio (EMD)
<PAGE>
PAGE 62
subaccount invest in shares of the Quest for Value Managed
Portfolio and the U.S. Government Income (EUS) subaccount invests
in shares of the Quest for Value U.S. Government Income Portfolio.
Putnam Capital Manager was organized on Sept. 24, 1987 as a
Massachusetts business trust and is registered under the 1940 Act
as a diversified, open-end management investment company. The PCM
New Opportunities Fund commenced operations on May 2, 1994. The
PCM Growth and Income Fund and the PCM High Yield Fund commenced
operations on Feb. 1, 1988. The PCM Diversified Income Fund
commenced operations on Sept. 15, 1993. Purchase payments
allocated to the PCM New Opportunities (ENO) subaccount invest in
shares of the PCM New Opportunities Fund, The PCM Growth and Income
(EGI) subaccount invests in shares of the PCM Growth and Income
Fund, the PCM High Yield (EHY) subaccount invests in shares of the
PCM High Yield Fund and the PCM Diversified Income (EDI) subaccount
invests in shares of the PCM Diversified Income Fund.
GT Global Variable Investment Series and GT Global Variable
Investment Trust were organized as Massachusetts business trusts on
May 26, 1992 and Sept. 17, 1992, respectively. They are registered
under the 1940 Act as open-end management investment companies. GT
Global Variable Latin America Fund commenced operations on Feb. 10,
1993, is registered as a non-diversified management investment
company and is part of the GT Global Variable Investment Trust. GT
Global Variable New Pacific Fund commenced operations on Feb. 10,
1993, is registered as a diversified management investment company
and is part of the GT Global Variable Investment Series. Purchase
payments allocated to the GT Global Variable Latin America (ELA)
subaccount invest in shares of the GT Global Variable Latin America
fund and the GT Global Variable New Pacific (EPA) subaccount
invests in shares of the GT Global Variable New Pacific Fund.
American Enterprise Life issues the contracts which are distributed
by banks and financial institutions either directly or through a
network of third-party marketers. IDS Life Insurance Company,
parent company of American Enterprise Life, serves as investment
manager and distributor for the IDS Life Funds. American Express
Financial Corporation serves as investment advisor to the IDS Life
Funds.
OCC Distributors serves as exclusive distributor for the OCC
Portfolios. OpCap Advisors serves as investment manager for the
Portfolios. State Street Bank and Trust Company serves as
custodian for the Quest for Value Accumulation Trust.
LGT Asset Management serves as the distributor and the investment
manager for the G.T. Global Funds. State Street Bank and Trust
Company serves as custodian for the G.T. Global Funds.
Putnam Mutual Funds serves as distributor and prinicpal underwriter
for the Putnam Funds. Putnam Investment Management, Inc. serves as
the Putnam Funds investment manager. Putnam Fiduciary Trust
Company serves as the Putnam Funds custodian.<PAGE>
PAGE 63
___________________________________________________________________
2. Summary of Significant Accounting Policies
Investments in the Mutual Fund
Investments in shares of the IDS Life Funds, the OCC Portfolios,
the G.T. Global Funds, and the Putnam Funds (collectively, the
Funds) are stated at market value which is the net asset value per
share as determined by the respective portfolio or fund.
Investment transactions are accounted for on the date the shares
are purchased and sold. The cost of investments sold and redeemed
is determined on the average cost method. Dividend distributions
received from the Portfolios or the Funds are reinvested, net of
any expenses payable to American Enterprise Life, in additional
shares of the Funds and are recorded as income by the subaccounts
on the ex-dividend date.
Unrealized appreciation or depreciation of investments in the
accompanying financial statements represents the subaccounts' share
of the Funds undistributed net investment income, undistributed
realized gain or loss and the unrealized appreciation or
depreciation on their investment securities.
Federal Income Taxes
American Enterprise Life is taxed as a life insurance company. The
Account is treated as part of American Enterprise Life for federal
income tax purposes. Under existing federal income tax law, no
income taxes are payable with respect to any investment income of
the Account.
___________________________________________________________________
3. Mortality and Expense Risk Fee
American Enterprise Life makes guarantees to the Account that
possible future adverse changes in administrative expenses and
mortality experience of the annuitants will not affect the Account.
The mortality and expense risk fee paid to American Enterprise Life
is applied daily to the subaccounts and reflected in the unit
values of the subaccounts. The subaccounts pay this fee at the
time dividends are distributed from the Funds in which they invest.
It is equal, on an annual basis, to 1.25 percent of the subaccounts
average daily net assets. This fee does not apply to the fixed
account.
___________________________________________________________________
4. Administrative Charge
American Enterprise Life deducts a daily charge equal, on an annual
basis, to 0.15 percent of the average daily net assets of each
subaccount. It covers certain administrative and operating
expenses of the subaccounts incurred by American Enterprise Life
such as accounting, legal and data processing fees, and expenses
involved in the preparation and distribution of reports and
prospectuses. This charge cannot be increased.
<PAGE>
PAGE 64
___________________________________________________________________
5. Contract Administrative Charge
American Enterprise Life deducts an administrative charge of $30
per year on each contract anniversary. This charge reimburses
American Enterprise Life for expenses incurred in establishing and
maintaining the annuity records. This charge will be waived when
the contract value is $50,000 or more on the current contract
anniversary.
The $30 annual charge will be deducted at the time of any full
surrender. This charge cannot be increased and does not apply
after annuity payouts begin. American Enterprise Life does not
expect to profit from this charge.
___________________________________________________________________
6. Surrender Charge
American Enterprise Life will use a surrender charge to help it
recover certain expenses relating to the sale of the annuity. The
surrender charge will be deducted for surrenders during the first
seven payment years following a purchase payment. Charges by
American Enterprise Life for surrenders are not available on an
individual segregated asset account basis. Charges for all
segregated asset accounts amount to $14,355 for the nine month
period ended Sept. 30, 1996 and $nil in 1995.
Such charges are not an expense of the subaccounts or Account.
They are deducted from contract surrender benefits paid by American
Enterprise Life.
___________________________________________________________________
7. Investment Transactions
The subaccounts' purchases of Fund shares (net of charges),
including reinvestment of dividend distributions, were as follows:
<TABLE><CAPTION>
For the period
For the from Feb. 21, 1995
nine month (commencement of
period ended operations) to
Subaccount Investment Sept. 30, 1996 Dec. 31, 1995
___________________________________________________________________________________________________________
<S> <C> <C> <C>
ECR IDS Life Capital Resource Fund $ 1,609,651 $ 978,959
ESI IDS Life Special Income Fund 1,053,894 491,218
EMS IDS Life Moneyshare Fund 138,060 199,964
EMG IDS Life Managed Fund 1,049,540 691,443
EIE IDS Life International Equity Fund 480,774 257,070
EAG IDS Life Aggressive Growth Fund 936,715 606,633
EMD OCC Accumulation Trust Managed Portfolio 2,346,865 557,379
EUS OCC Accumulation Trust U.S. Government Portfolio 787,021 472,031
EPA GT Global VAriable New Pacific Fund 373,604 207,291
ELA GT Global Variable Latin America Fund 360,758 301,238
ENO Putnam New Opportunities Fund 2,771,590 912,517
EGI Putnam Growth and Income Fund 2,864,002 1,410,167
EHY Putnam High Yield Fund 921,547 558,172
EDI Putnam Diversified Income Fund 1,322,528 683,408
$17,016,549 $8,327,490
</TABLE>
<PAGE>
PAGE 65
American Enterprise Variable Annuity Account
Annual Financial Information
Report of Independent Auditors
The Board of Directors
American Enterprise Life Insurance Company
We have audited the individual and combined statements of net
assets of the segregated asset subaccounts of American Enterprise
Variable Annuity Account (comprising, respectively, the ECR, ESI,
EMS, EMG, EIE, EAG, EMD, EUS, EPA, ELA, ENO, EGI, EHY and EDI
subaccounts) as of December 31, 1995, and the related statements of
operations and the statements of changes in net assets for the
period from February 21, 1995 (commencement of operations) to
December 31, 1995. These financial statements are the
responsibility of the management of American Enterprise Life
Insurance Company. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. Our procedures
included confirmation of securities owned at December 31, 1995 with
the mutual fund managers. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the individual and combined
financial position of the segregated asset subaccounts of American
Enterprise Variable Annuity Account at December 31, 1995 and the
individual and combined results of its operations and the changes
in its net assets for the period described above, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Minneapolis, Minnesota
March 15, 1996
<PAGE>
PAGE 66
American Enterprise Life Financial Information
The financial statements shown below are those of the insurance
company and not those of any other entity. They are included in
the prospectus for the purpose of informing investors as to the
financial condition of the insurance company and its ability to
carry out its obligations under its variable contracts.
American Enterprise Life Insurance Company
Balance Sheet (Unaudited) Sept. 30, 1996
Assets (thousands)
Investments:
Fixed maturities:
Held to maturity, at amortized cost (Fair value:
$1,283,488) $1,291,545
Available for sale, at fair value (Amortized cost:
$1,873,442) 1,871,495
Mortgage loans on real estate
(Fair value: $557,518) 557,916
Other investments 3,305
3,724,261
Cash and cash equivalents 26,297
Accrued investment income 49,131
Deferred policy acquisition costs 191,375
Other assets 7,196
Separate account assets 25,495
Total assets $4,023,755
Liabilities and Stockholder's Equity
Liabilities:
Future policy benefits for fixed annuities $3,658,080
Policy claims and other policyholders' funds 28,261
Amounts due to brokers 20,683
Deferred income taxes 7,151
Other liabilities 3,865
Separate account liabilities 25,495
Total liabilities 3,743,535
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 177,872
Net unrealized loss on investments (1,265)
Retained earnings 101,613
Total stockholder's equity 280,220
Total liabilities and stockholder's equity $4,023,755
Commitments and contingencies (Note 4)
See accompanying notes.
<PAGE>
PAGE 67
American Enterprise Life Insurance Company
Statement of Income (Unaudited) Nine month period ended
Sept. 30, 1996
(thousands)
Revenues:
Net investment income $197,700
Contractholder charges 3,987
Net realized loss on investments (4,212)
Total revenues 197,475
Benefits and expenses:
Interest credited on investment contracts 138,006
Amortization of deferred policy
acquisition costs 22,414
Other operating expenses 10,002
Total expenses 170,422
Income before income taxes 27,053
Income taxes 9,465
Net income $ 17,588
See accompanying notes.
<PAGE>
PAGE 68
American Enterprise Life Insurance Company
Statement of Cash Flows (Unaudited) Nine month period ended
Sept. 30, 1996
(thousands)
Cash flows from operating activities:
Net income $ 17,588
Adjustments to reconcile net income to
net cash provided by operating activities:
Change in accrued investment income (7,252)
Change in deferred policy acquisition
costs, net (20,801)
Change in other assets (2,379)
Change in policy claims and other
policyholders' funds 16,620
Change in deferred income taxes 1,697
Change in other liabilities (3,164)
Amortization of premium
(accretion of discount), net (1,217)
Net realized loss on investments 4,212
Other, net (127)
Net cash provided by operating activities 5,177
Cash flows from investing activities:
Fixed maturities held to maturity:
Purchases (14,940)
Maturities 18,241
Sales 11,904
Fixed maturities available for sale:
Purchases (527,089)
Maturities 157,513
Sales 42,542
Other investments:
Purchases (176,753)
Sales 10,857
Change in amounts due to brokers 20,520
Net cash used in investing activities (457,205)
Cash flows from financing activities:
Activity related to investment contracts:
Considerations received 573,985
Surrenders and other benefits (209,561)
Interest credited to account balances 138,005
Change in securities sold under repurchase agreements (67,000)
Net cash provided by financing activities 435,429
Net increase (decrease) in cash and cash
equivalents (16,599)
Cash and cash equivalents at beginning
of year 42,896
Cash and cash equivalents at end of year $ 26,297
See accompanying notes.
<PAGE>
PAGE 69
American Enterprise Life Insurance Company
Notes to Financial Statements
Sept. 30, 1996 ($ Thousands) (Unaudited)
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, 1996, and the related statement of income and
statement of cash flows for the nine month period ended Sept. 30,
1996.
The Company is a wholly owned subsidiary of IDS Life Insurance
Company which is a wholly owned subsidiary of American Express
Financial Corporation which is a wholly owned subsidiary of
American Express Company.
2. Nature of business
The Company is domiciled in Indiana and licensed to transact
insurance business in 46 states. The Company's principal product is
deferred annuities which are issued primarily to individuals. It
offers single premium and annual premium deferred annuities on both
a fixed and variable dollar basis. Immediate annuities are offered
as well.
3. 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 market value.
Cash paid for interest on borrowings totaled $951 for the nine
months ended Sept. 30, 1996. Cash paid for income taxes totaled
$11,491 for the nine months ended Sept. 30, 1996.
4. Commitments and contingencies
The Company is a defendant in various lawsuits, none of which, in
the opinion of the Company counsel, will result in material
liability.
<PAGE>
PAGE 70
<TABLE><CAPTION>
American Enterprise Life Insurance Company
Balance Sheets
Dec. 31,
Assets 1995 1994
(thousands)
<S> <C> <C>
Investments:
Fixed maturities:
Held to maturity, at amortized cost (Fair value:
1995, $1,357,977; 1994, $1,040,663) $1,308,251 $1,130,752
Available for sale, at fair value (Amortized cost:
1995, $1,546,025; 1994, $1,186,545) 1,596,985 1,119,371
2,905,236 2,250,123
Mortgage loans on real estate
(Fair value: 1995, $419,557; 1994, $204,883) 393,020 219,445
Other investments 4,055 28
Total investments 3,302,311 2,469,596
Cash and cash equivalents 42,896 53,358
Accrued investment income 41,879 33,928
Deferred policy acquisition costs 170,574 137,648
Deferred income taxes -- 17,065
Other assets 4,817 691
Separate account assets 8,483 --
Total assets $3,570,960 $2,712,286
Liabilities and Stockholder's Equity
Liabilities:
Future policy benefits for fixed annuities $3,155,651 $2,480,122
Policy claims and other policyholders' funds 11,641 15,706
Amounts due to brokers 163 48,872
Securities sold under repurchase agreements 67,000 --
Deferred income taxes 24,177 --
Other liabilities 7,029 4,331
Separate account liabilities 8,483 --
Total liabilities 3,274,144 2,549,031
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 177,872 142,872
Net unrealized gain (loss) on investments 33,124 (43,689)
Retained earnings 83,820 62,072
Total stockholder's equity 296,816 163,255
Total liabilities and stockholder's equity $3,570,960 $2,712,286
Commitments and contingencies (Note 7)
See accompanying notes.
/TABLE
<PAGE>
PAGE 71
American Enterprise Life Insurance Company
Statements of Income
<TABLE><CAPTION>
Years ended Dec. 31,
1995 1994 1993
(thousands)
<S> <C> <C> <C>
Revenues:
Net investment income $223,706 $162,201 $124,532
Contractholder charges 4,214 2,753 1,047
Net realized gain (loss) on investments (1,154) (1,190) 576
Total revenues 226,766 163,764 126,155
Benefits and expenses:
Interest credited on investment contracts 162,662 112,977 78,538
Amortization of deferred policy
acquisition costs 20,459 14,052 15,992
Other operating expenses 10,205 6,523 3,369
Total expenses 193,326 133,552 97,899
Income before income taxes 33,440 30,212 28,256
Income taxes 11,692 10,574 10,033
Net income $ 21,748 $ 19,638 $ 18,223
See accompanying notes.
/TABLE
<PAGE>
PAGE 72
American Enterprise Life Insurance Company
Statements of Cash Flows
<TABLE><CAPTION>
Years ended Dec. 31,
1995 1994 1993
(thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 21,748 $ 19,638 $ 18,223
Adjustments to reconcile net income to
net cash used in operating activities:
Change in accrued investment income (7,951) (8,543) (7,654)
Change in deferred policy acquisition
costs, net (32,926) (37,642) (36,800)
Change in other assets (4,126) (512) (43)
Change in policy claims and other
policyholders' funds (4,065) 1,270 1,792
Change in deferred income taxes (119) (3,925) 3,089
Change in other liabilities 2,698 872 (991)
Amortization of premium
(accretion of discount), net (2,321) 1,812 (3,327)
Net realized (gain) loss on investments 1,154 1,190 (576)
Net cash used in operating activities (25,908) (25,840) (26,287)
Cash flows from investing activities:
Fixed maturities held to maturity:
Purchases (252,583) (136,330) --
Maturities 25,754 84,514 --
Sales 33,849 1,469 --
Fixed maturities available for sale:
Purchases (485,250) (569,459) --
Maturities 85,629 64,116 --
Sales 57,576 54,755 --
Fixed maturites:
Purchases -- -- (1,066,094)
Maturities -- -- 231,446
Sales -- -- 302,122
Other investments:
Purchases (183,892) (192,488) (26,792)
Sales 5,543 112 22
Change in amounts due to brokers (48,709) 21,181 10,948
Net cash used in investing activities (762,083) (672,130) (548,348)
Cash flows from financing activities:
Activity related to investment contracts:
Considerations received 709,127 745,053 769,355
Surrenders and other benefits (196,260) (113,644) (336,316)
Interest credited to account balances 162,662 112,977 78,538
Change in securities sold under
repurchase agreements 67,000 (30,000) 15,000
Capital contribution from parent 35,000 35,000 50,000
Net cash provided by financing activities 777,529 749,386 576,577
Net (decrease) increase in cash and cash
equivalents (10,462) 51,416 1,942
Cash and cash equivalents at beginning
of year 53,358 1,942 --
Cash and cash equivalents at end of year $ 42,896 $ 53,358 $ 1,942
See accompanying notes.
/TABLE
<PAGE>
PAGE 73
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) is
domiciled in Indiana and is licensed to transact insurance business
in 46 states at Dec. 31, 1995. The Company's principal product is
deferred annuities which are issued primarily to individuals. It
offers single premium and annual premium deferred annuities on both
a fixed and variable dollar basis. Immediate annuities are offered
as well.
The Company's principal annuity product in terms of amount in force
is the fixed deferred annuity. The annuity contract guarantees a
minimum interest rate during the accumulation period (the time
before annuity payments begin), although the Company normally pays
a higher rate reflective of current market rates. The fixed
annuity provides for a surrender charge during the first seven to
ten years after a purchase payment is made. The Company has also
adopted a practice whereby the higher current rate is guaranteed
for a specified period. The Company also offers a variable annuity
product under the name AEL Personal Porfolio Annuity. This is a
fixed/variable annuity offering the purchasers a choice among
mutual funds with portfolios of equities, bonds, managed assets
and/or short-term securities, and the Company's general account, as
the underlying investment vehicles. With respect to funds applied
to the variable portion of the annuity, the purchaser, rather than
the Company, assumes the investment risks and receives the rewards
inherent in the ownership of the underlying investment. The AEL
Personal Portfolio Annuity provides for a surrender charge
during the first six years after a purchase payment is made.
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 the Indiana Department of Insurance (see Note 4).
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
<PAGE>
PAGE 74
1. Summary of significant accounting policies (continued)
Investments
Fixed maturities that the Company has both the positive intent and
the ability to hold to maturity are classified as held to maturity
and carried at amortized cost. All other fixed maturities and all
marketable equity securities are classified as available for sale
and carried at fair value. Unrealized gains and losses on
securities classified as available for sale are carried as a
separate component of stockholder's equity.
Management determines the appropriate classification of fixed
maturities at the time of purchase and reevaluates the
classification at each balance sheet date.
Mortgage loans on real estate are carried principally at the unpaid
principal balances of the related loans. Other investments include
equity securities. When evidence indicates a decline, which is
other than temporary, in the underlying value or earning power of
individual investments, such investments are written down to the
fair value by a charge to income. Equity securities are carried at
market value and the related net unrealized appreciation or
depreciation is reported as a credit or charge to stockholder's
equity.
Realized investment gain or loss is determined on an identified
cost basis.
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.
Statements of cash flows
The Company considers investments with a maturity at the date of
their acquisition of three months or less to be cash equivalents.
These securities are carried principally at amortized cost which
approximates fair value.
Supplementary information to the statements of cash flows for the
years ended Dec. 31 is summarized as follows:
1995 1994 1993
Cash paid during the year for:
Income taxes $11,389 $14,750 $7,020
Interest on borrowings 979 669 238
<PAGE>
PAGE 75
1. Summary of significant accounting policies (continued)
Recognition of profits on fixed annuity contracts
The Company issues single premium deferred annuity contracts that
provide for a surrender charge at annually decreasing rates upon
withdrawal of the annuity accumulation value by the contract owner.
No front sales load is deducted from the contract considerations
received on these contracts ("no load" annuities). All of the
Company's single premium deferred annuity contracts provide for
crediting the contract owners' accumulations at specified rates of
interest. Such rates are revised by the Company from time to time
based on changes in the market investment yield rates for fixed-
income securities.
Profits on single premium deferred annuities and installment
annuities are recognized by the Company over the lives of the
contracts and represent the excess of investment income earned from
investment of contract considerations over interest credited to
contract owners and other expenses.
Deferred policy acquisition costs
The costs of acquiring new business, principally sales
compensation, policy issue costs, and certain sales expenses, have
been deferred on annuity contracts. These costs are amortized
based upon surrender charge revenue and a portion of the excess of
investment income earned from investment of the contract
considerations over the interest credited to contract owners.
Liabilities for future policy benefits
Liabilities for single premium deferred annuities and installment
annuities are accumulation values. Liabilities for fixed annuities
in a benefit status are based on the 1983a Table with various
interest rates ranging from 5.5 percent to 9.5 percent, depending
on year of issue.
Federal income taxes
The Company's taxable income is included in the consolidated
federal income tax return of American Express Company. The Company
provides for income taxes on a separate return basis, except that,
under an agreement between American Express Financial Corporation
and American Express Company, tax benefit is recognized for losses
to the extent they can be used on the consolidated tax return. It
is the policy of American Express Financial Corporation and its
subsidiaries that American Express Financial Corporation will
reimburse a subsidiary for any tax benefit.
Included in other liabilities at Dec. 31, 1995 and 1994 are $1,813
and $1,353, respectively, payable to IDS Life for federal income
taxes.
<PAGE>
PAGE 76
1. Summary of significant accounting policies (continued)
Separate account business
The separate account assets and liabilities represent funds held
for the exclusive benefit of the variable annuity and variable life
insurance contract owners. The Company receives investment
management and mortality and expense assurance fees from the
variable annuity and variable life insurance mutual funds and
separate accounts.
The Company makes contractual mortality assurances to the variable
annuity contract owners that the net assets of the separate
accounts will not be affected by future variations in the actual
life expectancy experience of the annuitants and the beneficiaries
from the mortality assumptions implicit in the annuity contracts.
The Company makes periodic fund transfers to, or withdrawals from,
the separate accounts for such actuarial adjustments for variable
annuities that are in the benefit payment period.
Accounting changes
The Financial Accounting Standards Board's (FASB) SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of," is effective Jan. 1, 1996. The
new rule is not expected to have a material impact on the Company's
results of operations or financial condition.
The Company's adoption of SFAS No. 114 as of Jan. 1, 1995 is
discussed in Note 2.
The Company adopted SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." The effect of adopting
the new rule was to increase stockholder's equity by approximately
$14 million, net of tax, as of Jan. 1, 1994, but the adoption had
no impact on the Company's net income.
Reclassification
Certain 1994 and 1993 amounts have been reclassified to conform to
the 1995 presentation.
2. Investments
Fair values of investments in fixed maturities represent quoted
market prices and estimated values when quoted prices are not
available. Estimated values are determined by established
procedures involving, among other things, review of market indices,
price levels of current offerings of comparable issues, price
estimates and market data from independent brokers and financial
files.
<PAGE>
PAGE 77
2. Investments (continued)
Changes in net unrealized appreciation (depreciation) of
investments for the years ended Dec. 31 are summarized as follows:
1995 1994 1993
Fixed maturities:
Held to maturity $139,815 $(132,842) $ --
Available for sale 118,134 (88,775) --
Investment securities -- -- 24,390
Net realized gain (loss) on investments for the years ended Dec. 31
is summarized as follows:
1995 1994 1993
Fixed maturities $(1,114) $(1,198) $568
Other investments (40) 8 8
$(1,154) $(1,190) $576
The amortized cost, gross unrealized gains and losses and fair
value of investments in fixed maturities and equity securities at
Dec. 31, 1995 are as follows:
<TABLE><CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Held to maturity Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Government agency
obligations $ 16,050 $ 570 $ -- $ 16,620
State and municipal
obligations 3,004 110 -- 3,114
Corporate bonds and
obligations 1,068,971 53,544 5,427 1,117,088
Mortgage-backed
securities 220,226 2,460 1,531 221,155
$1,308,251 $56,684 $6,958 $1,357,977
Available for sale
U.S. Government agency
obligations $ 543 $ 14 $ -- $ 557
State and municipal
obligation 999 25 -- 1,024
Corporate bonds and
obligations 520,978 26,751 436 547,293
Mortgage-backed
securities 1,023,505 26,731 2,125 1,048,111
Total fixed maturities 1,546,025 53,521 2,561 1,596,985
Equity securities 3 -- -- 3
$1,546,028 $53,521 $2,561 $1,596,988
</TABLE>
The change in net unrealized gain (loss) on available for sale
securities included as a separate component of stockholder's equity
was $76,813 in 1995.
The amortized cost, gross unrealized gains and losses and fair
value of investments in fixed maturities and equity securities at
Dec. 31, 1994 are as follows:
<PAGE>
PAGE 78
2. Investments (continued)
<TABLE><CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Held to maturity Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Government agency
obligations $ 2,030 $ -- $ 32 $ 1,998
State and municipal
obligations 3,004 41 -- 3,045
Corporate bonds and
obligations 886,477 4,270 66,886 823,861
Mortgage-backed securities 239,241 985 28,467 211,759
$1,130,752 $5,296 $95,385 $1,040,663
Available for sale
U.S. Government agency
obligations $ 25,440 $ -- $ 476 $ 24,964
State and municipal
obligations 999 22 -- 1,021
Corporate bonds and
obligations 259,144 1,050 4,953 255,250
Mortgage-backed securities 900,962 418 63,244 838,136
Total fixed maturities 1,186,545 1,499 68,673 1,119,371
Equity securities 67 -- 39 28
$1,186,612 $1,499 $68,712 $1,119,399
</TABLE>
The change in net unrealized gain (loss) on available for sale
securities included as a separate component of stockholder's equity
was $(43,695) in 1994.
The amortized cost and fair value of investments in fixed
maturities at Dec. 31, 1995 by contractual maturity are shown
below. Expected maturities will differ from contractual maturities
because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties.
Amortized Fair
Held to maturity Cost Value
Due in one year or less $ 4,746 $ 4,835
Due from one to five years 127,391 132,641
Due from five to ten years 748,370 783,865
Due in more than ten years 207,518 215,480
Mortgage-backed securities 220,226 221,156
$1,308,251 $1,357,977
Amortized Fair
Available for sale Cost Value
Due in one year or less $ 45,205 $ 45,513
Due from one to five years 165,582 172,879
Due from five to ten years 261,512 277,089
Due in more than ten years 50,222 53,394
Mortgage-backed securities 1,023,504 1,048,110
$1,546,025 $1,596,985
During the year ended Dec. 31, 1995, fixed maturities classified as
held to maturity were sold with proceeds of $33,849 and gross
realized gains and losses on such sales were $552 and $1,512, <PAGE>
PAGE 79
2. Investments (continued)
respectively. The sale of these fixed maturities was due to
significant deterioration in the issuers' creditworthiness. As a
result of adopting the FASB Special Report, "A Guide to
Implementation of Statement 115 on Accounting for Certain
Investments in Debt and Equity Securities," the Company
reclassified securities with a book value of $14,031 and net
unrealized gains of $15 from held to maturity to available for sale
in December 1995.
In addition, fixed maturites available for sale were sold during
1995 with proceeds of $57,576 and gross realized gains and losses
on such sales were $nil and $646, respectively.
During the year ended Dec. 31, 1994, fixed maturities classified as
held to maturity were sold with proceeds of $1,469 and gross
realized gains and losses on such sales were $nil and $278,
respectively. The sale of these fixed maturities was due to
significant deterioration in the issuers' creditworthiness.
In addition, fixed maturites available for sale were sold during
1994 with proceeds of $54,755 and gross realized gains and losses
on such sales were $112 and $1,059, respectively.
At Dec. 31, 1995, bonds carried at $2,775 were on deposit with
various states as required by law.
Net investment income for the years ended Dec. 31 is summarized as
follows:
1995 1994 1993
Interest on fixed maturities $198,829 $151,599 $123,822
Interest on mortgage loans 24,969 9,202 858
Interest on cash equivalents 829 1,452 258
Other 921 824 210
225,548 163,077 125,148
Less investment expenses 1,842 876 616
$223,706 $162,201 $124,532
Securities are rated by Moody's and Standard & Poor's (S&P), except
for securities carried at approximately $85 million which are rated
by American Express Financial Corporation internal analysts using
criteria similar to Moody's and S&P. A summary of investments in
fixed maturities, at amortized cost, by rating on Dec. 31 is as
follows:
<PAGE>
PAGE 80
2. Investments (continued)
Rating 1995 1994
Aaa/AAA $1,246,755 $1,151,235
Aa/AA 39,055 27,882
Aa/A 18,076 23,030
A/A 435,957 299,856
A/BBB 148,713 125,633
Baa/BBB 671,896 419,369
Baa/BB 81,821 99,036
Below investment grade 212,003 171,256
$2,854,276 $2,317,297
At Dec. 31, 1995, approximately 92 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, 1995, approximately 11.9 percent of the Company's
invested assets were mortgage loans on real estate. Summaries of
mortgage loans by region of the United States and by type of real
estate are as follows:
<TABLE><CAPTION>
Dec. 31, 1995 Dec. 31, 1994
On Balance Commitments On Balance Commitments
Region Sheet to Purchase Sheet to Purchase
<S> <C> <C> <C> <C>
East North Central $ 81,456 $ 7,485 $ 43,162 $17,349
West North Central 34,819 9,980 6,695 7,590
South Atlantic 82,442 25,781 52,611 10,301
Middle Atlantic 73,958 20,790 51,838 8,132
New England 30,481 13,306 19,538 7,590
Pacific 15,992 4,158 10,147 --
West South Central 6,649 832 4,996 --
East South Central 4,948 -- 5,029 --
Mountain 62,275 832 25,429 3,253
$393,020 $83,164 $219,445 $54,215
Dec. 31, 1995 Dec. 31, 1994
On Balance Commitments On Balance Commitments
Property type Sheet to Purchase Sheet to Purchase
Apartments $130,601 $14,554 $ 80,016 $13,554
Department/retail stores 138,378 34,097 78,486 21,686
Office buildings 59,601 9,980 26,559 10,843
Industrial buildings 31,259 9,148 21,837 4,879
Nursing/retirement homes 8,190 1,663 6,521 --
Mixed Use 5,317 -- -- --
Hotels/Motels 3,266 10,811 -- --
Other -- 416 -- --
Medical buildings 16,408 2,495 6,026 3,253
$393,020 $83,164 $219,445 $54,215
</TABLE>
Mortgage loan fundings are restricted by state insurance regulatory
authorities to 80 percent or less of the market value of the real
estate at the time of origination of the loan. The Company holds
the mortgage document, which gives the right to take possession of
the property if the borrower fails to perform according to the
terms of the agreement. The fair value of the mortgage loans is
determined by a discounted cash flow analysis using mortgage
interest rates currently offered for mortgages of similar
<PAGE>
PAGE 81
2. Investments (continued)
maturities. Commitments to purchase mortgages are made in the
ordinary course of business. The fair value of the mortgage
commitments is $nil.
As of Jan.1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for
Impairment of a Loan" (SFAS No. 114), as amended by Statement of
Financial Accounting Standards No. 118, "Accounting by Creditors
for Impairment of a Loan - Income Recognition and Disclosures".
The adoption of the new rules did not have a material impact on the
Company's results of operations or financial condition.
SFAS No. 114 applies to all loans except for smaller-balance
homogeneous loans, that are collectively evaluated for impairment.
Impairment is measured as the excess of the loan's recorded
investment over its present value of expected principal and
interest payments discounted at the loan's effective interest rate,
or the fair value of collateral. The amount of the impairment is
recorded as a reserve for investment losses.
Based on management's judgment as to the ultimate collectibility of
principal, interest payments received are either recognized as
income or applied to the recorded investment in the loan until it
has been recovered. Once the recorded investment has been
recovered, any additional payments are recognized as interest
income.
The reserve for investment losses is maintained at a level that
management believes is adequate to absorb estimated credit losses
in the portfolio. The level of the reserve account is determined
based on several factors, including historical experience, expected
future principal and interest payments, estimated collateral
values, and current and anticipated economic and political
conditions. Management regularly evaluates the adequacy of the
reserve for investment losses. The Company did not have a reserve
recorded at Dec. 31, 1995.
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 82
3. Income taxes (continued)
The income tax expense consists of the following:
1995 1994 1993
Federal income taxes:
Current $11,753 $14,454 $ 6,928
Deferred (119) (3,925) 3,089
11,634 10,529 10,017
State income taxes-current 58 45 16
Income tax expense $11,692 $10,574 $10,033
Increases (decreases) to the federal income tax provision
applicable to pretax income based on the statutory rate are
attributable to:
<TABLE><CAPTION>
1995 1994 1993
Provision Rate Provision Rate Provision Rate
<S> <C> <C> <C> <C>
Federal income
taxes based on the
statutory rate $11,704 35.0% $10,574 35.0% $ 9,889 35.0%
Increases (decreases)
are attributable to:
Deferred tax adjustment
due to rate increase -- -- -- -- 210 0.8
Tax-excluded interest (69) (0.2) (81) (0.3) (86) (0.3)
Other, net (1) (0.0) 36 0.1 4 --
Federal income taxes $11,634 34.8% $10,529 34.8% $10,017 35.5%
</TABLE>
Significant components of the Company's deferred tax assets and
liabilities as of Dec.31 are as follows:
1995 1994
Deferred tax assets:
Policy reserves $ 45,482 $34,732
Investments -- 20,491
Other 2,036 1,592
Total deferred tax assets 47,518 56,815
Deferred tax liabilities:
Deferred policy acquisition costs 50,350 39,750
Investments 21,345 --
Total deferred tax liabilities 71,695 39,750
Net deferred tax assets (liabilities) $(24,177) $17,065
The Company is required to establish a valuation allowance for any
portion of the deferred tax assets that management believes will
not be realized. In the opinion of management, it is more likely
than not that the Company will realize the benefit of the deferred
tax assets, and, therefore, no such valuation allowance has been
established.
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PAGE 83
4. Stockholder's equity
Retained earnings available for distribution as dividends to the
parent are limited to the Company's surplus as determined in
accordance with accounting practices prescribed by state insurance
regulatory authorities. Statutory unassigned surplus aggregated
$7,553 and $3,165 as of Dec.31, 1995 and 1994, respectively.
Statutory net income and stockholder's equity as of Dec.31, are
summarized as follows:
1995 1994 1993
Statutory net income $ 15,499 $ 8,131 $ 10,855
Statutory stockholder's equity 187,425 148,037 112,907
5. Related party transactions
Charges by American Express Financial Corporation for use of joint
facilities and other services aggregated $10,380, $5,581 and $4,059
for 1995, 1994 and 1993, respectively. Certain of these costs are
included in deferred policy acquisition costs.
6. Lines of credit
The Company has available lines of credit with two banks of $30,000
at 45 to 80 basis points over each bank's cost of funds. There
were no borrowings outstanding under these agreements at Dec.31,
1995 or 1994.
7. Commitments and contingencies
The economy and other factors have caused an increase in the number
of insurance companies that are under regulatory supervision. This
circumstance has resulted in substantial assessments by state
guaranty associations to cover losses to policyholders of insolvent
or rehabilitated companies. The Company expects additional future
assessments related to past insolvencies and rehabilitations.
Management has estimated the impact of future assessments on the
Company's financial position and recorded a reserve for such future
assessments.
8. Derivative financial instruments
The Company enters into transactions involving derivative
financial instruments to manage its exposure to interest rate risk,
including hedging specific transactions. The Company manages risks
associated with these instruments as described below. The Company
does not hold derivative instruments for trading purposes.
Market risk is the possibility that the value of the derivative
financial instruments will change due to fluctuations in a factor
from which the instrument derives its value, primarily an interest
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PAGE 84
8. Derivative financial instruments (continued)
rate. The Company is not impacted by market risk related to
derivatives held for non-trading purposes beyond that inherent in
cash market transactions. Derivatives held for purposes other than
trading are largely used to manage risk and, therefore, the cash
flow and income effects of the derivatives are inverse to the
effects of the underlying transactions.
Credit risk is the possibility that the counterparty will not
fulfill the terms of the contract. The Company monitors credit
exposure related to derivative financial instruments through
established approval procedures, including setting concentration
limits by counterparty and industry, and requiring collateral,
where appropriate. A vast majority of the Company's counterparties
are rated A or better by Moody's and Standard & Poor's.
The notional or contract amount of a derivative financial
instrument is generally used to calculate the cash flows that are
received or paid over the life of the agreement. Notional amounts
are not recorded on the balance sheet. Notional amounts far exceed
the related credit exposure.
Credit exposure related to interest rate caps is measured by
replacement cost of the contracts. The replacement cost represents
the fair value of the instruments.
Notional Carrying Fair Total Credit
Dec.31, 1995 Amount Value Value Exposure
Assets
Interest rate caps $400,000 $4,052 $1,574 $1,574
The fair values of derivative financial instruments are based on
market values, dealer quotes or pricing models. All interest rate
caps expire in the year 2000.
Interest rate caps are used to manage the Company's exposure to
rising interest rates. These instruments are used primarily to
protect the margin between interest rates earned on investments and
the interest rates credited to related annuity contract holders.
The cost of interest rate caps is amortized to interest expense
over the life of the contracts and payments received as a result of
these agreements are recorded as a reduction of interest expense
when realized. The amortized cost of interest rate cap contracts
is included in other investments.
<PAGE>
PAGE 85
9. Fair values of financial instruments
The Company discloses fair value information for most on- and off-
balance sheet financial instruments for which it is practical to
estimate that value. Fair value of life insurance obligations,
receivables and all non-financial instruments, such as deferred
acquisition costs are excluded. Off-balance sheet intangible
assets are also excluded. Management believes the value of
excluded assets is significant. The fair value of the Company,
therefore, cannot be estimated by aggregating the amounts
presented.
<TABLE><CAPTION>
1995 1994
Carrying Fair Carrying Fair
Financial Assets Value Value Value Value
<S> <C> <C> <C> <C>
Investments:
Fixed maturities
(Note 2):
Held to maturity $1,308,251 $1,357,977 $1,130,752 $1,040,663
Available for sale 1,596,985 1,596,985 1,119,371 1,119,371
Mortgage loans on real
estate (Note 2) 393,020 419,557 219,445 204,883
Equity securities
(Note 2) 3 3 28 28
Derivative financial
instruments (Note 8) 4,052 1,574 -- --
Cash and cash
equivalents (Note 1) 42,896 42,896 53,358 53,358
Separate account assets
(Note 1) 8,483 8,483 -- --
Financial Liabilities
Future policy benefits for
fixed annuities 3,149,087 2,997,716 2,474,920 2,347,665
Separate account
liabilities 8,483 8,075 -- --
</TABLE>
At Dec. 31, 1995 and 1994, the carrying amount and fair value of
future policy benefits for fixed annuities exclude life insurance-
related contracts carried at $6,564 and $5,202, respectively. The
fair value of these benefits is based on the status of the
annuities at Dec. 31, 1995 and 1994. The fair value of deferred
annuities is estimated as the carrying amount less applicable
surrender charges. The fair value for annuities in non-life
contingent payout status is estimated as the present value of
projected benefit payments at rates appropriate for contracts
issued in 1995 and 1994.
<PAGE>
PAGE 86
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, 1995 and 1994, and the
related statements of income and cash flows for each of the three
years in the period ended December 31, 1995. 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, 1995 and
1994, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.
As discussed in Note 1 to the financial statements, the Company
changed its method of accounting for certain investments in debt
and equity securities in 1994.
Ernst & Young LLP
February 2, 1996
Minneapolis, Minnesota
<PAGE>
PAGE 87
STATEMENT OF DIFFERENCES
Difference Description
1) Text deletion. 1) In Performance information,
the word "following" was
deleted from the second
paragraph.
2) Text deletion. 2) In The variable account,
the sentence "All
obligations arising under
the contracts are general
obligations of IDS Life,"
was deleted from the second
to the last paragraph.
3) Text addition. 3) The last three lines in the
table of contents of the
Statement of Additional
Information were added.
4) Number change. 4) A figure was changed from
0.25, to 0.15 in the Notes
to Financial Statements,
under item "4. Administrative
Charge."
