<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 9 (File No. 33-54471) X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940
Amendment No. 10 (File No. 811-7195) X
AMERICAN ENTERPRISE VARIABLE ANNUITY ACCOUNT
- --------------------------------------------------------------------------------
(Exact Name of Registrant)
American Enterprise Life Insurance Company
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(Name of Depositor)
80 South 8th Street, P.O. Box 534, Minneapolis, MN 55440-0534
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (612) 671-4085
Sherilyn K. Beck, IDS Tower 10, Minneapolis, MN 55440-0010
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b) of Rule 485
X on Oct. 30, 1997 pursuant to paragraph (b) of Rule 485 60 days after filing
pursuant to paragraph (a)(1) of Rule 485 on (date) pursuant to paragraph
(a)(1) of Rule 485
If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
CROSS REFERENCE SHEET
Cross reference sheet showing location in the prospectus and Statement of
Additional Information of the information called for by the items enumerated in
Part A and B of Form N-4.
Negative answers omitted from prospectus and Statement of Additional Information
are so indicated.
PART A
Item No. Section in Prospectus
1 Cover page
2 Key terms
3(a) Expense summary
(b) In brief
4(a) Condensed financial information
(b) Performance information
(c) Financial Statements
5(a) About American Enterprise Life
(b) The variable account
(c) The funds
(d) Cover page and the funds
(e) Voting rights
(f) NA
6(a) Charges
(b) Expense summary
(c) Other information on charges
(d) Distribution of contracts
(e) NA
(f) NA
7(a) Buying your annuity; Benefits in case of death; The annuity payout period
(b) The variable account; Transferring money between accounts; Transfer
policies
(c) The funds; Other information on charges
(d) The funds
8(a) The annuity payout period
(b) Setting the retirement date
(c) Annuity payout plans
(d) The annuity payout period
(e) Annuity payout plans
(f) Death after annuity payouts begin
9(a) Benefits in case of death
(b) Benefits in case of death
10(a) Buying your annuity; Valuing your investment
(b) Valuing your investment
(c) Valuing your investment
(d) About American Enterprise Life
11(a) Withdrawals from your contract
(b) NA
(c) Receiving payment when you request a withdrawal
(d) If installment payments
(e) Ten-day free look
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12(a) Taxes
(b) Key terms
(c) NA
13 NA
14 Table of contents of the Statement of Additional Information
PART B
Item No. Section in Statement of Additional Information
15 Cover Page
16 Table of contents
17(a) NA
(b) NA
(c) About American Enterprise Life*
18(a) NA
(b) NA
(c) Independent auditors
(d) NA
(e) NA
(f) NA
19(a) Making the most of your annuity*
(b) NA
20(a) Principal underwriter
(b) Principal underwriter
(c) NA
(d) NA
(e) NA
21(a) Performance information
(b) Performance information
22 Calculating Annuity Payouts
23(a) NA
(b) NA
*Designates section in the prospectus, which is hereby incorporated by reference
in this Statement of Additional Information.
<PAGE>
AEL Personal PortfolioSM/AEL Personal Portfolio Plus
October 30, 1997
Variable Annuity Prospectus
The flexible premium variable annuity contracts described in the prospectus are
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 (AEFC). Purchase payments
may be allocated among different accounts, providing variable and/or fixed
returns and payouts. The annuities are available for individual retirement
annuities (IRAs), simplified employee pension plans (SEPs) and nonqualified
retirement plans.
American Enterprise Variable Annuity Account
Sold by: American Enterprise Life Insurance Company.
Administrative Offices: 80 South Eighth Street, P.O. Box 534,
Minneapolis, MN 55440-0534. Telephone: 800-333-3437.
This prospectus contains 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: AIM
Variable Insurance Funds, Inc.; GT Global Variable Investment Funds; IDS Life
Retirement Annuity Mutual Funds; Janus Aspen Series; OCC Accumulation Trust,
formerly known as Quest for Value Accumulation Trust; Oppenheimer Trust; Putnam
Variable Trust, formerly known as Putnam Capital Manager Trust. Please read
these documents carefully and keep them for future reference.
These securities have not been approved or disapproved by the Securities and
Exchange Commission, or any state securities commission, nor has the Securities
and Exchange Commission or any state securities commission passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
American Enterprise Life is not a bank or financial institution, and the
securities it offers are not deposits or obligations of, or guaranteed or
endorsed by any bank or financial institution nor are they insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board or any other
agency. Investments in the annuity involve investment risk including the
possible loss of principal.
A Statement of Additional Information (SAI) dated October 30, 1997,
(incorporated by reference into this prospectus) and filed with the Securities
and Exchange Commission (SEC), is available without charge by contacting
American Enterprise Life at the telephone number above or by completing and
sending the order form on the last page of this prospectus. The table of
contents of the SAI is on the last page of this prospectus.
<PAGE>
Table of contents
Key terms....................................................................
The annuities in brief.......................................................
Expense summary..............................................................
Condensed financial information (unaudited)...................................
Financial statements..........................................................
Performance information......................................................
The variable account........................................................
The funds...................................................................
AIM V.I. Growth and Income Fund........................................
AIM V.I. International Equity Fund....................................
AIM V.I. Value Fund....................................................
GT Global Variable Latin America Fund.................................
GT Global Variable New Pacific Fund....................................
IDS Life Aggressive Growth Fund........................................
IDS Life Capital Resource Fund........................................
IDS Life Growth Dimensions Fund.......................................
IDS Life International Equity Fund....................................
IDS Life Managed Fund.................................................
IDS Life Moneyshare Fund..............................................
IDS Life Special Income Fund..........................................
Janus Aspen Series Balanced Portfolio.................................
Janus Aspen Series Worldwide Growth Portfolio.........................
OCC Accumulation Trust Equity Portfolio...............................
OCC Accumulation Trust Managed Portfolio..............................
OCC Accumulation Trust Small Cap Portfolio............................
OCC Accumulation Trust U.S. Government Income Portfolio................
Oppenheimer Variable Account Growth Fund...............................
Oppenheimer Variable Account High Income Fund.........................
Putnam VT Diversified Income Fund.....................................
Putnam VT Growth and Income Fund......................................
Putnam VT High Yield Fund..............................................
Putnam VT New Opportunities 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 charge..........................................
Premium taxes........................................................
Valuing your investment.....................................................
Number of units.......................................................
Accumulation unit value..............................................
Net investment factor................................................
Factors that affect variable subaccount
accumulation units...............................................
<PAGE>
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......................................................................
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.......................................................
<PAGE>
Key terms
These terms can help you understand details about your annuity.
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 - A contract purchased from an insurance company that offers
tax-deferred growth of the investment until earnings are withdrawn, and that can
be tailored to meet the specific needs of the individual during retirement.
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.
Funds - Funds or portfolios, each with a different investment objective. You may
allocate your purchase payments into variable subaccounts investing in shares of
any or all of these funds (See "The 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.
<PAGE>
Qualified annuity - An annuity purchased for one of the following retirement
plans that is subject to applicable federal law and any rules of the plan
itself:
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.
Systematic Investment Plan (SIP) - A payment method you set up with your bank to
automatically make monthly investments to your annuity from your bank account.
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 separate subaccounts to which you may allocate
purchase payments; each subaccount invests in shares of one fund. (See "The
variable account.") The value of your investment in each variable subaccount
changes with the performance of the underlying fund.
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.
The annuities in brief
Purpose: Each annuity is designed to allow you to accumulate money 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 to our
Minneapolis administrative offices 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 subaccounts of the variable account, each of which invests in a fund with a
particular investment objective. The value of each variable subaccount varies
with the performance of the particular fund in which it invests. We cannot
guarantee that the value at the retirement date will equal or exceed the total
of purchase payments allocated to the variable subaccounts. (p. )
<PAGE>
o one fixed account, which earns interest at a rate that is 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
offices. 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)-$1,000,000
(without prior approval)
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 die 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 may include amounts from each variable subaccount
and the fixed account. (p. )
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 be taxed on the
income if you are the owner. (p. )
Charges: Your annuity 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 upon total withdrawal or when
annuity payouts begin. (p. )
<PAGE>
Expense summary
The purpose of this table is to help you understand the various costs and
expenses associated with your annuity.
You pay no sales charge when you purchase your annuity. All costs that you bear
directly or indirectly for the variable subaccounts and underlying funds are
shown below. Some expenses may vary as explained under "Charges."
Contract Owner Expenses:*
Withdrawal Charge (contingent deferred sales charge as percent of purchase
payment)
Contract years from Withdrawal Charge
payment receipt Percentage
1 7%
2 6%
3 5%
4 4%
5 3%
6 2%
7 1%
Thereafter 0%
Annual Contract Administrative Charge $30
Variable Account Annual Expenses
Variable Account Administrative Charge
(as a percentage of daily net assets of
the underlying fund)..................................0.15%
Mortality and Expense Risk Fee
(as a percentage of daily net assets of
the underlying fund)..................................1.25%
Total Variable Account Annual Expenses...................1.40%
Annual Operating Expenses of Underlying Mutual Funds
(management fees and other expenses deducted as a percentage of average net
assets as follows:)
<TABLE>
<CAPTION>
GT Global GT Global
Variable Variable
AIM V.I. AIM V.I. Latin America New Pacific IDS Life IDS Life IDS Life
Growth and International AIM V.I. (after expense (after expense Aggressive Capital Growth
Income Equity Value reimbursement) reimbursement) Growth Resource Dimensions
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .65% .75% .64% 1.00% 1.00% .60% .60% .63%
Other expenses .13 .21 .09 .17 .12 .09 .08 .22
Total .78%+ .96%+ .73%+ 1.17%++ 1.12%++ .69%** .68%** .85%**
<PAGE>
Janus Aspen
Janus Aspen Series OCC OCC
Series Worldwide Accumulation Accumulation
IDS Life IDS Life Balanced Growth Trust Equity Trust Managed
International IDS Life IDS Life Special (after fee (after fee (after expense (after expense
Equity Managed Moneyshare Income reduction) reduction) limitations) limitations)
Management fees .82% .59% .50% .59% .79% .66% .80% .80%
Other expenses .16 .07 .06 .10 .15 .14 .22 .10
Total .98%** .66%** .56%** .69%** .94%+++ .80%+++ 1.02%*** .90%***
OCC OCC
Accumulation Accumulation Oppenheimer Oppenheimer
Trust Small Trust U.S. Gov- Variable Account Variable Account Putnam VT Putnam VT
Cap ernment Income Growth High Income Diversified Growth and Putnam VT Putnam VT New
(after expense (after expense (after expense (after expense Income Income High Yield Opportunities
limitations) limitations) reimbursements) reimbursements) Fund Fund Fund Fund
Management fees .80% .60% .75% .75% .70% .49% .68% .63%
Other expenses .22 .42 .04 .06 .13 .05 .08 .09
Total 1.02%*** 1.02%*** .79%# .81%# .83%+ .54%+ .76%+ .72%+
* Premium taxes imposed by some state and local governments are not reflected in this table.
** Annualized operating expenses of underlying funds at Dec. 31, 1996.
*** The annual expenses of the OCC Accumulation Trust Portfolios (the
"Portfolios") as of Dec. 31, 1996 have been restated to reflect new
management fee and expense limitation agreements in effect as of May 1,
1996. Additionally, Other Expenses are shown gross of certain expense
offsets afforded the Portfolios which effectively lowered overall custody
expenses. Effective May 1, 1996, the expenses of the portfolios were
contractually limited by OpCap Advisors so that their respective
annualized operating expenses (net of any expense offsets) do not exceed
1.25% of their respective average daily net assets. Furthermore, through
Dec. 31, 1997, the annualized operating expenses of the Portfolios will be
voluntarily limited by OpCap Advisors so that annualized operating
expenses (net of any expense offsets) of these Portfolios do not exceed
1.00% of their respective average daily net assets. Without such
contractual and voluntary expense limitations, and without giving effect
to any expense offsets, the Management Fees, Other Expenses and Total
Portfolio Annual Expenses incurred for the fiscal year ended Dec. 31, 1996
would have been, .80%, .31% and 1.11%, respectively, for the Equity
Portfolio; .80%, .10% and .90%, respectively, for the Managed Portfolio;
.80%, .26% and 1.06%, respectively, for the Small Cap Portfolio; and .60%,
1.74% and 2.34%, respectively, for the U.S. Government Income Portfolio.
+ Operating expenses of the underlying funds at Dec. 31, 1996.
++ Figures in the "Other Expenses" and "Total" columns are restated from the
amounts you would have incurred in 1996 to reflect fee and reimbursement
or waiver arrangements. If there had been no reimbursement of expenses by
Chancellor 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%, 0.42%, 1.42%; and GT Global Variable New Pacific Fund,
1.00%, 0.40%, 1.40%.
+++The figures given above are based on gross expenses before expense offset
arrangements, if any, during 1996, for these funds. As of the date of
this prospectus, certain fees are being reduced by the respective
investment managers or service providers for certain of the underlying
funds, in each case on a voluntary basis. Without such reductions, the
"Management fees", "Other expenses" and "Total" that would have been incurred
for the last completed fiscal year would be: .77%, .14 and .91%, respectively,
for Janus Aspen Series Worldwide Growth and .92%, .15% and 1.07%, respectively,
for Janus Aspen Series Balanced. See the Portfolios' prospectuses for a discussion of
fee reductions.
# Operating expenses of the underlying funds before expense reimbursements,
if any, during 1996. In the absence of a voluntary one-time fee
reimbursement, the "Management Fees", "Other expenses" and "Total" would
have been as follows: .75%, .06 and .81%, respectively, for Oppenheimer
Growth Fund and .75%, .06 and .81%, respectively, for Oppenheimer High
Income Fund. See the Funds Statement of Additional Information for a
description of the reimbursement.
</TABLE>
<PAGE>
Example:*
<TABLE>
<CAPTION>
AIM V.I. AIM V.I. GT Global GT Global IDS Life IDS Life IDS Life
Growth and International AIM V.I. Variable Variable Aggressive Capital Growth
Income Equity Value Latin America New Pacific Growth Resource Dimensions
You would pay the following expenses on a $1,000 investment, assuming 5% annual return and full withdrawal at the end of each
time period:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 year $ 93.59 $ 95.35 $ 93.10 $ 97.39 $ 96.91 $ 92.71 $ 92.61 $ 94.28
3 years 122.63 127.90 121.15 134.00 132.55 119.98 119.68 124.68
5 years 154.22 163.00 151.77 173.11 170.72 149.80 149.31 157.65
10 years 265.33 282.75 260.43 302.62 297.93 256.49 255.50 272.15
You would pay the following expenses on the same investment assuming no withdrawal or selection of an annuity payout plan at
the end of each time period:
1 year $ 23.59 $ 25.35 $ 23.10 $ 27.39 $ 26.91 $ 22.71 $ 22.61 $ 24.28
3 years 72.63 77.90 71.15 84.00 82.55 69.98 69.68 74.68
5 years 124.22 133.00 121.77 143.11 140.72 119.80 119.31 127.65
10 years 265.33 282.75 260.43 302.62 297.93 256.49 255.50 272.15
Janus Janus Aspen
IDS Life IDS Life Aspen Series OCC OCC
International IDS Life IDS Life Special Series Worldwide Accumulation Accumulation
Equity Managed Moneyshare Income Balanced Growth Trust Equity Trust Managed
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 $ 95.55 $ 92.42 $ 91.44 $ 92.71 $ 95.16 $ 93.79 $ 95.94 $ 94.77
3 years 128.48 119.09 116.13 119.98 127.31 123.21 129.64 126.14
5 years 163.96 148.32 143.37 149.80 162.03 155.20 165.90 160.08
10 years 284.67 253.52 243.54 256.49 280.84 267.29 288.48 276.99
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 $ 25.55 $ 22.42 $ 21.44 $ 22.71 $ 25.16 $ 23.79 $ 25.94 $ 24.77
3 years 78.48 69.09 66.13 69.98 77.31 73.21 79.64 76.14
5 years 133.96 118.32 113.37 119.80 132.03 125.20 135.90 130.08
10 years 284.67 253.52 243.54 256.49 280.84 267.29 288.48 276.99
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OCC OCC*** Oppenheimer Oppenheimer Putnam VT Putnam VT
Accumulation Accumulation Variable Variable Diversified Growth and Putnam VT Putnam VT New
Trust Small Trust U.S. Gov- Account Account Income Income High Yield Opportunities
Cap ernment Income Growth High Income Fund Fund Fund Fund
You would pay the following expenses on a $1,000 investment, assuming 5% annual return and full withdrawal at the end of each
time period:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 year $ 95.94 $ 95.94 $ 93.69 $ 93.89 $ 94.08 $ 91.24 $ 93.40 $ 93.01
3 years 129.64 129.64 122.92 123.51 124.09 115.54 122.04 120.86
5 years 165.90 165.90 154.71 155.69 156.67 142.37 153.24 151.28
10 years 288.48 288.48 266.31 268.26 270.21 241.53 263.38 259.45
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 $ 25.94 $ 25.94 $ 23.69 $ 23.89 $ 24.08 $ 21.24 $ 23.40 $ 23.01
3 years 79.64 79.64 72.92 73.51 74.09 65.54 72.04 70.86
5 years 135.90 135.90 124.71 125.69 126.67 112.37 123.24 121.28
10 years 288.48 288.48 266.31 268.26 270.21 241.53 263.38 259.45
</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 .177% charge based on the average contract size.
<PAGE>
Condensed Financial Information (unaudited)
The following tables give per-unit information about the financial history of
each variable subaccount.
Condensed Financial Information (unaudited)
<TABLE><CAPTION>
Period from
Year ended Feb. 21 to
Dec. 31, 1996 Dec. 31, 1995*
- -----------------------------------------------------------------------------------------------------------------------------
Subaccount ECR (Investing in shares of Capital Resource Fund)
<S> <C> <C>
Accumulation unit value at beginning of period.................................... $1.20 $1.00
Accumulation unit value at end of period.......................................... $1.27 $1.20
Number of accumulation units outstanding
at end of period (000 omitted).................................................... 2,350 818
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.......................................... $1.24 $1.17
Number of accumulation units outstanding at end
of period (000 omitted)........................................................... 1,377 414
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.......................................... $1.07 $1.03
Number of accumulation units outstanding at end
of period (000 omitted)........................................................... 241 132
Ratio of operating expense to average net assets.................................. 1.50% 1.50%
Simple yield...................................................................... 3.26% 3.53%
Compound yield.................................................................... 3.32% 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.......................................... $1.36 $1.18
Number of accumulation units outstanding at end
of period (000 omitted)........................................................... 1,546 589
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.......................................... $1.26 $1.17
Number of accumulation units outstanding at end
of period (000 omitted)........................................................... 675 220
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.......................................... $1.47 $1.28
Number of accumulation units outstanding at end
of period (000 omitted)........................................................... 1,324 473
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.......................................... $1.58 $1.31
Number of accumulation units outstanding at end
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
of period (000 omitted)........................................................... 2,462 436
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.......................................... $1.10 $1.09
Number of accumulation units outstanding at end
of period (000 omitted)........................................................... 1,252 413
Ratio of operating expense to average net assets.................................. 1.50% 1.50%
- --------------------------------------------------------------------------------------------------------------------------------
*Operations commenced on Feb. 21, 1995.
Condensed Financial Information continued
Period from
Year ended Feb. 21 to
Dec. 31, 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.......................................... $1.38 $1.07
Number of accumulation units outstanding at end
of period (000 omitted)........................................................... 530 193
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.......................................... $1.19 $0.98
Number of accumulation units outstanding
at end of period (000 omitted).................................................... 663 303
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.......................................... $1.51 $1.39
Number of accumulation units outstanding at end
of period (000 omitted)........................................................... 2,980 691
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.......................................... $1.53 $1.27
</TABLE>
<PAGE>
<TABLE><CAPTION>
Number of accumulation units outstanding at end
<S> <C> <C>
of period (000 omitted)........................................................... 3,655 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.......................................... $1.27 $1.14
Number of accumulation units outstanding at end
of period (000 omitted)........................................................... 1,270 480
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.......................................... $1.23 $1.15
Number of accumulation units outstanding at end
of period (000 omitted)........................................................... 1,824 601
Ratio of operating expense to average net assets.................................. 1.50% 1.50%
- -----------------------------------------------------------------------------------------------------------------------------
*Operations commenced on Feb. 21, 1995.
</TABLE>
Financial Statements
The SAI dated October 30, 1997 contains:
the audited financials of the variable account including:
- - statements of net assets as of Dec. 31, 1996;
- - statements of operations for the year ended Dec. 31, 1996;
- - statements of changes in net assets for the year ended Dec. 31, 1996 and
for the period from Feb. 21, 1995 (commencement of operations) to
Dec. 31, 1995.
the audited financial statements of American Enterprise Life including:
- - balance sheets as of Dec. 31, 1996 and Dec. 31 1995; and
- - related statements of income and cash flows for each of the three years
in the period ended Dec. 31, 1996.
The SAI does not include financial statements for subaccounts EGN, EIN, EVA,
EGD, ESB, EWG, EEQ, ESC, EGR, EHI because these are new subaccounts and do not
have a performance history.
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 subaccount
during a particular time period.
The performance figures are calculated on the basis of historical performance of
each fund. "Performance since Inception of the Subaccount" shows performance
since the date the subaccount actually began investing in the fund. "Performance
since Inception of the Fund" shows performance since the beginning of each fund,
even if the subaccount did not invest in the fund on that date. Before the
subaccount began investing in the fund, this category shows what the performance
would have been if the subaccount had existed during the illustrated period.
<PAGE>
Once a subaccount began investing in the fund, this category shows actual
performance. This category assumes that the annuities were offered prior to
January 12, 1995, which they were not.
Calculations are performed as follows:
Simple yield - IDS Life Moneyshare Subaccount: Income over a given seven-day
period (not counting any change in the capital value of the investment) is
annualized (multiplied by 52) by assuming that the same income is received for
52 weeks. This annual income is then stated as an annual percentage return on
the investment.
Compound yield - IDS Life Moneyshare Subaccount: Calculated like simple yield,
except that, when annualized, the income is assumed to be reinvested.
Compounding of reinvested returns increases the yield as compared to a simple
yield.
Yield - IDS Life 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 subaccount if it is less than 10 years old). This figure
reflects deduction of all applicable charges, including the contract
administrative charge, variable account administrative charge, mortality and
expense risk fee and withdrawal charge, assuming a full withdrawal at the end of
the illustrated period. Optional average annual total return quotations may be
made that do not reflect a withdrawal charge deduction (assuming no withdrawal).
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 risk fee, variable account
administrative charge and withdrawal charge, assuming a withdrawal at the end of
the illustrated period. Optional aggregate 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 annuity charges which has the effect
of decreasing advertised performance, subaccount performance should not be
compared to that of 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:
<PAGE>
Subaccount
AIM V.I. Growth and Income Fund EGN
AIM V.I. International Equity Fund EIN
AIM V.I. Value Fund EVA
GT Global Variable Latin America Fund ELA
GT Global Variable New Pacific Fund EPA
IDS Life Aggressive Growth Fund EAG
IDS Life Capital Resource Fund ECR
IDS Life Growth Dimensions Fund EGD
IDS Life International Equity Fund EIE
IDS Life Managed Fund EMG
IDS Life Moneyshare Fund EMS
IDS Life Special Income Fund ESI
Janus Aspen Series Balanced Portfolio ESB
Janus Aspen Series Worldwide Growth Portfolio EWG
OCC Accumulation Trust Equity Portfolio EEQ
OCC Accumulation Trust Managed Portfolio EMD
OCC Accumulation Trust Small Cap Portfolio ESC
OCC Accumulation Trust U.S. Government
Income Portfolio EUS
Oppenheimer Variable Account Growth Fund EGR
Oppenheimer Variable Account High Income Fund EHI
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
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 subaccount or
of our general business. Each variable subaccount's net assets are held in
relation to the contracts described in this prospectus as well as other variable
annuity contracts that we issue that are not described in this prospectus.
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
AIM V.I. Growth and Income Fund
Objective: growth of capital, with current income as a secondary objective. The
fund seeks to achieve its objective by generally investing at least 65% of its
net assets in stocks of companies believed by management to have the potential
for above average growth in revenues and earnings.
<PAGE>
AIM V.I. International Equity Fund Objective: long-term growth of capital.
Invests in international equity securities, the issuers of which are considered
by AIM to have strong earnings momentum.
AIM V.I. Value Fund Objective: long-term growth of capital. Invests primarily in
equity securities judged by AIM to be undervalued relative to the current or
projected earnings of the companies issuing the securities or relative to the
equity markets generally. Income is a secondary objective.
GT Global Variable Latin America Fund
Objective: capital appreciation. Normally invests at least 65% of its total
assets in the securities of a broad range of Latin American issuers. The Fund
may invest in common stock, preferred stock, rights, warrants and securities
convertible into common stock, and other substantially similar forms of equity
securities with comparable risk characteristics, as well as bonds, notes,
debentures or other forms of indebtedness that may be developed in the future.
GT Global Variable New Pacific Fund
Objective: long-term growth of capital. Normally invests at least 65% of its
total assets in equity securities of issuers domiciled in Australia, Hong Kong,
India, Indonesia, Malaysia, New Zealand, Pakistan, the Philippines, Singapore,
South Korea, Taiwan and Thailand. Equity securities in which the Fund may invest
include common stock, preferred stock, convertible debt securities and warrants
to acquire such securities.
IDS Life Aggressive Growth Fund Objective: capital appreciation. Invests
primarily in common stock of small- and medium-size companies.
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 Growth Dimensions Fund Objective: long-term growth of capital. Invests
primarily in common stocks of U.S. and foreign companies showing potential for
significant growth.
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 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 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
<PAGE>
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.
IDS Life Special Income Fund Objective: 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.
Janus Aspen Series Balanced Portfolio Objective: long-term growth of capital,
balanced by current income. The Portfolio normally invests 40-60% of its assets
in securities selected primarily for their growth potential and 40-60% of its
assets in securities selected primarily for their income potential.
Janus Aspen Series Worldwide Growth Portfolio Objective: long-term growth of
capital in a manner consistent with the preservation of capital. Invests
primarily in common stocks of foreign and domestic issuers.
OCC Accumulation Trust Equity Portfolio Objective: long term capital
appreciation. Invests in a diversified portfolio of equity securities selected
on the basis of a value-oriented approach to investing.
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 Small Cap Portfolio Objective: capital appreciation.
Invests in a diversified portfolio of equity securities of companies with market
capitalizations of under $1 billion.
OCC Accumulation Trust U.S. Government Income Portfolio Objective: 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.
Oppenheimer Variable Account Growth Fund Objective: capital appreciation.
Invests in securities of well-known established companies.
Oppenheimer Variable Account High Income Fund Objective: high level of current
income. Invests in high-yield, high-risk, fixed-income securities, including
unrated securities or securities in the lower rating categories. These
securities may be considered to be speculative.
Putnam VT Diversified Income Fund Objective: high current income consistent with
capital preservation by investing in the following three sectors of the fixed
income securities markets: a U.S. Government Sector, a High Yield Sector (which
invests primarily in securities commonly known as "junk
<PAGE>
bonds"), and an International Sector. Consult the Putnam Variable Trust
prospectus for further information on the risks associated with this fund's
investments in high yield higher-risk fixed income securities.
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, by investing 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. See the special considerations for
investments in high yield securities described in the Putnam Variable
prospectus.
Putnam VT New Opportunities Fund Objective: long-term capital appreciation by
investing principally in common stocks of companies in sectors of the economy
which Putnam Management believes possess above average long-term growth
potential.
More comprehensive information regarding each fund is contained in that fund's
prospectus. You should read the fund prospectus and consider carefully, and on a
continuing basis, which fund or combination of funds is best suited to your
long-term investment needs. There is no assurance that the investment objectives
of the funds will be attained nor is there any guarantee that the contract value
will equal or exceed the total purchase payments made. Some funds may involve
more risk than others. Please monitor your investment accordingly.
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 and qualified plans. It is
conceivable that in the future it may be disadvantageous for variable annuity
separate accounts and variable life insurance separate accounts and/or qualified
plans to invest in the available funds simultaneously.
Although American Enterprise Life and the funds do not currently foresee any
such disadvantages, the boards of directors or trustees of the appropriate funds
will monitor events in order to identify any material conflicts between such
contract owners, policy owners and qualified plans 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 the variable annuity, variable
life insurance and qualified plan 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 fund intends
to comply with these requirements.
The U.S. Treasury and the IRS have indicated that 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
<PAGE>
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 each contract
continues to qualify as an annuity for federal income tax purposes. We reserve
the right to modify the contract as necessary to comply with any new tax laws.
The investment managers for the funds are as follows:
o AIM V.I. Funds - A I M Advisors, Inc.
o GT Global Variable Funds - Chancellor LGT Asset Management, Inc.
o IDS Life Retirement Annuity Funds - IDS Life. American Express Financial
Corporation is the investment advisor for the IDS Life Retirement Annuity
Funds. IDS International, Inc., a wholly-owned subsidiary of AEFC, is the
sub-investment advisor for IDS Life International Equity Fund.
o Janus Aspen Series Portfolios - Janus Capital Corporation.
o OCC Accumulation Trust Portfolios - OpCap Advisors.
o Oppenheimer Variable Accounts Funds - OppenheimerFunds, Inc.
o Putnam Variable Trust Funds - Putnam Investment Management, Inc.
The investment managers and advisors cannot guarantee that the funds will meet
their investment objectives. Please read the funds' prospectuses 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 offices address or telephone number on the
front of this prospectus.
The fixed account
Purchase payments also may 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 rate 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.
<PAGE>
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.
Your annuity can be owned in joint tenancy only in spousal situations. You
cannot buy a nonqualified annuity or become 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 may select:
o the fixed account and/or subaccount(s) 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 the fixed account and subaccount(s) you selected within two business
days after we receive it at our Minneapolis administrative offices. If your
application is accepted, we will send you a contract. If we cannot accept your
application within five business days, we will decline it and return your
payment. We will credit additional purchase payments to your account(s) at the
next close of business after we receive your payments at our Minneapolis
administrative offices.
You may make monthly payments to your Annuity under a Systematic Investment Plan
(SIP). To begin the SIP, you will complete and send a form and your first
payment along with your application. There is no charge for SIP. You can stop
your SIP payments at any time.
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. In Massachusetts, additional purchase payments may be
made for ten years only.
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.
<PAGE>
For qualified annuities, to avoid IRS penalty taxes, the retirement date
generally must be:
o on or after the annuitant reaches age 59 1/2; and
o by April 1 of the year following the calendar year when the annuitant reaches
age 70 1/2.
If you are taking the minimum IRA 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.)
Minimum payment amounts
Initial payment (includes SIPs): $2,000
Minimum additional purchase payment(s)(includes SIPs): $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 contract 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
By SIP:
Contact your agent to complete the necessary SIP paperwork.
<PAGE>
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.
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 accumulation 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 pay a death benefit and 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 may use any profits realized from the mortality and expense risk fee for any
proper corporate purpose, including, among others, payment of distribution
(selling) expenses. We do not expect that the 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 contract value not yet
withdrawn this contract year. There is no withdrawal charge on withdrawals
totaling up to 10% of your prior anniversary contract value each contract year.
<PAGE>
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, we withdraw purchase payments received eight or more contract years
before the withdrawal and not previously withdrawn. There is no withdrawal
charge on purchase payments received eight or more contract years before
withdrawal.
4. Finally, if necessary, we withdraw purchase payments received in the seven
contract years before the withdrawal. There is a withdrawal charge on these
payments. We determine your withdrawal charges by multiplying each of these
payments by the applicable withdrawal charge percentage, and then totaling the
withdrawal charges.
There is a withdrawal charge on payments received seven or less contract years
before withdrawal. We determine your withdrawal charge by multiplying each of
these payments by the applicable withdrawal charge percentage, and then totaling
the withdrawal charges.
The 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
The following is an example of the calculation we would make to determine the
withdrawal charge on a contract with this history:
o The contract date is July 1, 1998 with a contract year of July 1
through June 30 and with an anniversary date of July 1 each year; and
o We received these payments - $10,000 July 1, 1998, $8,000 Dec. 31, 2004
and $6,000 Feb. 20, 2006; and
o The owner withdraws the contract for its total withdrawal value of
$38,101 on Aug.5, 2008 and had not made any other withdrawals during
that contract year; and
o The prior anniversary July 1, 2008 contract value was $38,488.
<PAGE>
Withdrawal Charge Explanation
$ 0 $3,848.80 is 10% of the prior anniversary contract value
withdrawn without withdrawal charge; and
0 $10,252.20 is contract earnings in excess of the 10% free
withdrawal amount withdrawn without withdrawal charge; and
0 $10,000 July 1, 1998 payment was received eight or more
contract years before withdrawal and is withdrawn without
withdrawal charge; and
240 $8,000 Dec. 31, 2004 is in its fifth contract year from
receipt, withdrawn with a 3% withdrawal charge; and
240 $6,000 Feb. 20, 2006 is 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 also will be deducted.
Waiver of withdrawal charge 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 the
annuities described in this prospectus);
o contracts settled using an annuity payout plan; and
o death benefits.
If your contract includes a "Waiver of Withdrawal Charges" Annuity Endorsement
or provision, 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.
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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 your state of residence or the state in which the
contract was sold. 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. Please remember
that investment performance, expenses and deductions of certain charges affect
accumulation unit value.
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 fund and on certain fund expenses. Here is how
unit values are calculated:
Number of units
To calculate the number of accumulation units for a particular subaccount, we
divide your investment, after deduction of any premium taxes, by the current
accumulation unit value.
Accumulation unit value
The current accumulation unit value for each variable subaccount equals the last
value times the subaccount's current net investment factor.
Net investment factor Determined each business day by:
o adding the underlying 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.
<PAGE>
Because the net asset value of the underlying 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 subaccount(s);
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 net asset value of underlying fund(s);
o dividends distributed to the variable subaccount(s);
o capital gains or losses of underlying fund(s);
o 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. The benefits of
dollar cost averaging also may be obtained by setting up regular automatic SIP
payments. There is no charge for dollar-cost averaging.
This systematic approach can help you benefit from fluctuations in accumulation
unit values caused by fluctuations in the market value(s) of the underlying
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.
How dollar-cost averaging works
Month Amount Accumulation Number of units
invested unit value purchased
By investing an Jan $100 $20 5.00
equal number of
dollars each month.... Feb 100 18 5.56
Mar 100 17 5.88
<PAGE>
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.
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.
Because this strategy involves continuous investing, your success with
dollar-cost averaging will depend upon your willingness to continue to invest
regularly through periods of low price levels. Dollar-cost averaging can be an
effective way 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 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 "Transfer policies.")
<PAGE>
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, contract 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
Transfers or withdrawals: $500 or entire variable subaccount or fixed account
balance
Maximum amount
Transfers or withdrawals: Contract value
2 By automated transfers and automated partial withdrawals
Your agent can help you set up automated transfers among your subaccount(s) or
fixed account or partial withdrawals from the accounts.
<PAGE>
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 12 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,
semiannually or annually
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 subaccounts and/or the fixed account in the
same proportion as your value in each correlates to your total contract value,
unless you request otherwise.
Receiving payment when you request a withdrawal
By regular or express mail:
o Payable to owner.
o Normally mailed to address of record within seven days after receiving your
request. However, we may postpone the payment if:
-the withdrawal amount includes a purchase payment check that has not
cleared;
-the NYSE is closed, except for normal holiday and weekend
closings;
-trading on the NYSE is restricted, according to SEC rules;
<PAGE>
-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.
NOTE: You will be charged a fee if you request express mail delivery.
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 offices. 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 authenticity. 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
Your annuity includes one of the two death benefits decribed below. Please see
your contract, together will all endorsements, for details of the benefit that
applies.
If you or the annuitant die before annuitization while this contract is in
force, and both you and the annuitant are age 80 or younger on the date of
death, we will pay the beneficiary the greatest of:
1. the contract value; or
2. the total purchase payments paid less any "adjusted partial withdrawals"; or
3. the highest contract value on any prior contract anniversary, plus any
purchase payments paid and less any "adjusted partial withdrawals" since
that contract anniversary.
The "adjusted partial withdrawal" is calculated for each partial withdrawal as
the product of (a) times (b) where:
(a) is the ratio of the amount of the partial withdrawal to the
contract value immediately before the partial withdrawal; and
(b) is the death benefit immediately before the partial withdrawal.
If either you or the annuitant is age 81 or older on the date of death, we will
pay the beneficiary the contract value.
Example:
The contract is purchased with a payment of $20,000 on January 1, 1999.
On January 1, 2000 (the first contract anniversary) the contract value
has grown to $24,000.
<PAGE>
On March 1, 2000 the contract value has fallen to $22,000, at which point
the owner takes a $1,500 partial withdrawal, leaving a contract value of
$20,500.
The death benefit on March 1, 2000 is calculated as follows:
The highest contract value on any prior contract anniversary: $24,000.00
plus any purchase payments paid since that anniversary: + 0.00
less any "adjusted partial withdrawal" taken since that anniversary,
calculated as: 1,500 x 24,000 = -1,636.36
22,000
for a death benefit of: $22,363.64
OR
If you or the annuitant die before annuitization while this contract is in
force, and both you and the annuitant were 75 or younger on the date the annuity
was issued and all withdrawals you have made from this contract have been
without withdrawal charges, we will pay the beneficiary the greatest of:
1. the contract value; or
2. the total purchase payments paid less any amounts withdrawn; or
3. on or after the fifth contract anniversary, the death benefit as of the
most recent fifth contract anniversary adjusted by adding any purchase
payments made since that most recent fifth contract anniversary and by
subtracting any amounts withdrawn since that most recent fifth contract
anniversary.
For annuities where both you and the annuitant were 75 or younger on the date
the annuity was issued and you have made withdrawals subject to withdrawal
charges, we will pay the beneficiary the contract value.
For annuities where either you or the annuitant were 76 or older on the date the
annuity was issued we will pay the beneficiary the contract value.
Example:
The owner purchases an annuity contract for $20,000 on January 1, 1998. On
January 1, 2003 the contract value has grown to $33,000.
On June 1, 2003 the owner takes a $1,500 partial withdrawal, leaving a
contract value of $31,500. On July 15, 2003, the owner makes an additional
payment of $1,000.
On March 1, 2004, the contract value has fallen to $31,000.
The death benefit on March 1, 2004 is calculated as follows:
The closest fifth anniversary contract value: $33,000.00
plus any purchase payments paid since that anniversary: + 1,000.00
less any partial withdrawals taken since that anniversary: - 1,500.00
for a death benefit of: $32,500.00
<PAGE>
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 annuity payouts begin,
and the spouse is the only beneficiary, the spouse may keep the annuity as owner
until the date on which the spouse reaches age 70 1/2 or any other date
permitted by the Code. To do this, the spouse must give us written instructions
within 60 days after we receive proof of death.
Payments: 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; and o payouts begin no later than one year after death, or other date
as permitted by the Code; and
o the payout period does not extend beyond the beneficiary's life or life
expectancy.
When paying the beneficiary, we will determine the contract's value at the next
close of business after our death claim requirements are fulfilled. Interest, if
any, will be paid from the date of death at a rate no less than required by law.
We will mail payment to the beneficiary within seven days after our death claim
requirements are fulfilled. (See "Taxes.")
The annuity payout period
As owner of the contract, you have the right to decide how and to whom annuity
payouts will be made starting at the retirement date. You may select one of the
annuity payout plans outlined below, or we will mutually agree on other payout
arrangements. The amount available for payouts under the plan you select is the
contract value on your retirement date. No withdrawal charges are deducted under
the payout plans listed below.
You also decide whether annuity payouts are to be made on a fixed or variable
basis, or a combination of fixed and variable. Amounts of fixed and variable
payouts depend on:
o the annuity payout plan you select; o the annuitant's age and, in most cases,
sex; o the annuity table in the contract; and o the amounts you allocated to the
account(s) at settlement.
In addition, for variable payouts only, amounts depend on the investment
performance of the subaccount(s) you select. These payouts will vary from month
to month because the performance of the underlying 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."
<PAGE>
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 you elect. 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 while both the annuitant and a joint annuitant are living. If either
annuitant dies, monthly payouts continue at the full amount until the death of
the surviving annuitant. Payouts end with the death of the second annuitant.
o Plan E - Payouts for a specified period (available as a fixed payout only):
Monthly payouts are made for a specific payout period of 10 to 30 years that you
elect. 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.
<PAGE>
Death after annuity payouts
If you or the annuitant die 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
according to our records.
Annuity payouts under nonqualified annuities: A portion of each payout will be
ordinary income and subject to tax, and a portion of each payout will be
considered a return of part of your investment and will not be taxed. All
amounts received after your investment in the annuity is fully recovered will be
subject to tax.
Tax law requires that all nonqualified deferred annuity contracts issued by the
same company to the same owner during a calendar year are to be taxed as a
single, unified contract when distributions are taken from any one of such
contracts.
Annuity payouts under qualified annuities: Under a qualified annuity, the entire
payout generally will be includable as ordinary income and subject to tax except
to the extent that contributions were made with after-tax dollars. If you or
your employer invested in your contract with pre-tax dollars as part of a
qualified retirement plan, such amounts are not considered to be part of your
investment in the contract and will be taxed when paid to you.
Withdrawals: If you withdraw part or all of your contract before your annuity
payouts begin, your withdrawal payment will be taxed to the extent that the
value of your contract immediately before the withdrawal exceeds your
investment. You also may have to pay a 10% IRS penalty for withdrawals made
prior to 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: For nonqualified
annuities any annual increase in the value of annuities held by such entities
generally will be treated as ordinary income received during that year. This
provision is effective for purchase payments made after Feb. 28, 1986. However,
if the trust was set up for the benefit of a natural person only, the income
will remain tax-deferred.
Penalties: If you receive amounts from your contract before reaching age 59 1/2,
you may have to pay a 10% IRS penalty on the amount includable in your ordinary
income. However, this penalty will not apply to any amount received by you or
your beneficiary: o because of your death; o because you become disabled (as
defined in the Code);
<PAGE>
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 your annual tax return.
If the payment is part of an annuity payout plan, the amount of withholding
generally is computed using payroll tables. You may provide us with a statement
of how many exemptions to use in calculating the withholding. As long as you've
provided us with a valid Social Security number or taxpayer identification
number, you may 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 have provided us with a valid Social Security number or
taxpayer identification number, you may elect not to have this withholding
occur.
Some states also may 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 for income tax purposes, 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.
<PAGE>
Tax qualification
Each contract is intended to qualify as an annuity for federal income tax
purposes. To that end, the provisions of the contracts 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 contracts to any applicable changes in the tax
qualification requirements. We will send you a copy of any such amendments.
Voting rights
As a contract owner with investments in the variable subaccount(s), you may vote
on important 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;
o divided by the net asset value of one share of the applicable underlying 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, another
registered open-end management investment company may be substituted for fund
shares held in the subaccount(s) when American Enterprise Life believes it would
be in the best interest of persons having voting rights under the contract.
American Enterprise Life also reserves the right to change the funds in which
the subaccounts invest and to create new subaccounts that invest in additional
funds.
<PAGE>
In the event of any such substitution or change, American Enterprise Life,
without the consent or approval of the owners, may amend the contract and take
whatever action is necessary and appropriate.
However, no such substitution or change will be made
without the necessary approval of the SEC and state insurance departments.
American Enterprise Life will notify owners of any substitution or change.
Distribution of the contracts
The contracts will be distributed by banks and financial institutions either
directly or through a network of third-party marketers. American Express
Financial Advisors Inc., the principal underwriter for the variable account,
will pay commissions for the distribution of the contracts to the broker-dealers
of the banks or financial institutions or the broker-dealers of the third-party
marketers who have entered into distribution agreements with American Express
Financial Advisors. These commissions will not be more than 7.5% of purchase
payments received on the contracts.
From time to time, American Enterprise Life will pay or permit other promotional
incentives, in cash or credit or other compensation.
About American Enterprise Life
The annuities are issued by American Enterprise Life. American Enterprise Life
is a wholly-owned subsidiary of IDS Life, which is a wholly-owned subsidiary of
AEFC. AEFC is a wholly-owned subsidiary of American Express Company. American
Express Company is a financial services company principally engaged through
subsidiaries (in addition to AEFC) 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 offices are 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 AEFC.
The AEFC family of companies offers not only insurance and annuities, but also
mutual funds, investment certificates and a broad range of financial management
services.
Other subsidiaries provide investment management and related services for
pension, profit-sharing, employee savings and endowment funds of businesses and
institutions.
<PAGE>
Regular and special reports
Services
To help you track and evaluate the performance of your annuity, American
Enterprise Life provides:
Quarterly statements showing the value of your investment.
Annual reports containing required information on the annuity and its underlying
investments.
Table of contents of the Statement of Additional Information
Performance information...................................................
Calculating annuity payouts...............................................
Rating agencies...........................................................
Principal underwriter.....................................................
Independent auditors......................................................
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/AEL Personal Portfolio Plus
____ AIM Variable Insurance Funds, Inc.
____ GT Global Variable Investment Funds
____ IDS Life Retirement Annuity Mutual Funds
____ Janus Aspen Series Funds
____ OCC Accumulation Trust Portfolios
____ Oppenheimer Variable Account Funds
____ Putnam Variable Trust
Mail your request to:
American Enterprise Life Insurance Company
80 South Eighth Street
P.O. Box 534
Minneapolis, MN 55440-0534
800-333-3437
<PAGE>
American Enterprise Life will mail your request to:
Your name _____________________________________________________
Address _______________________________________________________
City __________________________ State ____________ Zip ___________
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
for
AEL PERSONAL PORTFOLIOSM/AEL Personal Portfolio Plus
AMERICAN ENTERPRISE VARIABLE ANNUITY ACCOUNT
October 30, 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 October 30, 1997, is not a
prospectus. It should be read together with the prospectus dated October 30,
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
800-333-3437
<PAGE>
TABLE OF CONTENTS
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
<PAGE>
PERFORMANCE INFORMATION
The following performance figures are calculated on the basis of historical
performance of each fund. "Performance since Inception of the Subaccount" shows
performance since the date the subaccount actually began investing in the fund.
"Performance since Inception of the Fund" shows performance since the beginning
of each fund, even if the subaccount did not invest in the fund on that date.
Before the subaccount began investing in the fund, this category shows what the
performance would have been if the subaccount had existed during the illustrated
period. Once a subaccount began investing in the fund, this category shows
actual performance. This category assumes that the annuities were offered prior
to January 12, 1995, which they were not.
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
Dec. 31, 1996
Subaccount investing in: Simple Yield Compound Yield
IDS Life Moneyshare Fund 3.26% 3.32%
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 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)
<PAGE>
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 Dec. 31, 1996
Subaccount investing in: Yield
IDS Life Special Income 7.22%
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 either annuity 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 10
year (or other) period at the end of the one, five,
or 10 year (or other) period (or fractional portion
thereof)
<PAGE>
Average Annual Total Return For Period Ended Dec. 31, 1996
Average Annual Total Return with Withdrawal
<TABLE>
<CAPTION>
Performance Since Performance Since
Inception of the Subaccount Inception of the Fund
Since Since
Inception Inception
Subaccount investing in:* 1 Year (Subaccount) 1 Year 5 Year 10 Year (Fund)
AIM V.I.
<S> <C> <C> <C> <C> <C> <C>
Growth and Income Fund (10/97;5/94) --% --% 11.11% --% --% 17.59%
International Equity Fund (10/97;5/93) -- -- 11.21 -- -- 11.71
Value Fund (10/97;5/93) -- -- 6.27 -- -- 15.95
GT GLOBAL
Variable Latin America Fund (1/95;2/93) 13.59 6.61 13.59 -- -- 7.93
Variable New Pacific Fund (1/95;2/93) 22.02 15.84 22.00 -- -- 7.37
IDS LIFE
Aggressive Growth Fund (1/95;1/92) 7.42 20.08 7.42 -- -- 10.16
Capital Resource Fund (1/95;10/81) -0.45 10.63 -0.45 6.28 12.03 --
Growth Dimensions Fund (10/97;4/96) -- -- -- -- -- 5.07
International Equity Fund (1/95;1/92) 1.02 10.18 1.02 -- -- 7.46
Managed Fund (1/95;4/86) 8.18 14.99 8.18 8.58 10.74 --
Moneyshare Fund (1/95;10/81) -3.13 0.38 -3.13 1.82 3.68 --
Special Income Fund (1/95;10/81) -1.37 9.02 -1.37 7.52 7.13 --
JANUS ASPEN SERIES
Balanced Portfolio (10/97;9/93) -- -- 7.38 -- -- 10.58
Worldwide Growth Portfolio (10/97;9/93) -- -- 20.05 -- -- 19.65
OCC ACCUMULATION TRUST
Equity Portfolio (10/97;9/94) -- -- 14.46 15.58 -- 15.21
Managed Portfolio (1/95;9/94) 13.88 25.27 13.88 16.88 -- 18.39
Small Cap Portfolio (10/97;9/94) -- -- 9.88 12.25 -- 13.29
U.S. Government Income Portfolio (1/95;1/95) -4.99 2.27 -4.99 -- -- 2.89
OPPENHEIMER VARIABLE ACCOUNT
Growth Fund (10/97;4/85) -- -- 16.27 14.07 12.10 --
High Income Fund (10/97;4/86) -- -- 6.46 12.67 11.87 --
PUTNAM VT
Diversified Income Fund (1/95;9/93) 0.31 8.80 0.31 -- -- 4.63
Growth and Income Fund (1/95;2/88) 13.04 23.12 13.04 13.84 -- 13.17
High Yield Fund (1/95;2/88) 4.06 10.53 4.06 11.35 -- 9.32
New Opportunities Fund (1/95;5/94) 1.56 22.12 1.56 -- -- 20.55
* inception date of the subaccounts; funds are shown in parentheses.
</TABLE>
<PAGE>
Average Annual Total Return without Withdrawal
<TABLE>
<CAPTION>
Performance Since Performance Since
Inception of the Subaccount Inception of the Fund
Since Since
Inception Inception
Subaccount Investing in:* 1 Year (Subaccount) 1 Year 5 Year 10 Year (Fund)
AIM V.I.
<S> <C> <C> <C> <C> <C> <C>
Growth and Income Fund (10/97;5/94) --% --% 18.11% --% --% 19.07%
International Equity Fund (10/97;5/93) -- -- 18.21 -- -- 12.54
Value Fund (10/97;5/94) -- -- 13.27 -- -- 16.71
Average Annual Total Return without Withdrawal
Performance Since Performance Since
Inception of the Subaccount Inception of the Fund
Since Since
Inception Inception
Subaccount Investing in:* 1 Year (Subaccount) 1 Year 5 Year 10 Year (Fund)
GT GLOBAL
Variable Latin America Fund (1/95;2/93) 20.59% 9.63% 20.59% --% --% 8.76%
Variable New Pacific Fund (1/95;2/93) 29.00 18.65 29.00 -- -- 8.22
IDS Life
Aggressive Growth Fund (1/95;1/92) 14.42 22.81 14.42 -- -- 10.57
Capital Resource Fund (1/95;10/81) 6.29 13.56 6.29 6.74 12.03 --
Growth Dimensions Fund (10/97;4/96) -- -- -- -- -- 17.54
International Equity Fund (1/95;1/92) 7.87 13.12 7.87 -- -- 7.92
Managed Fund (1/95;4/86) 15.18 17.82 15.18 9.01 10.68 --
Moneyshare Fund (1/95;10/81) 3.41 3.43 3.41 2.37 3.76 --
Special Income Fund (1/95;10/81) 5.30 11.98 5.30 7.96 7.13 --
JANUS ASPEN SERIES
Balanced Portfolio (10/97;9/93) -- -- 14.38 -- -- 11.55
Worldwide Growth Portfolio (10/97;9/93) -- -- 27.05 -- -- 20.47
OCC ACCUMULATION TRUST
Equity Portfolio (10/97;9/94) -- -- 21.46 15.91 -- 15.21
Managed Portfolio (1/95;9/94) 20.88 27.91 20.88 17.20 -- 18.39
Small Cap Portfolio (10/97;9/94) -- -- 16.88 12.63 -- 13.29
U.S. Government Income Portfolio (1/95;1/95) 1.41 5.37 1.41 -- -- 5.90
OPPENHEIMER VARIABLE ACCOUNT
Growth Fund (10/97;4/85) -- -- 23.27 14.43 12.10 --
High Income Fund (10/97;4/86) -- -- 13.46 13.04 11.87 --
PUTNAM VT
Diversified Income Fund (1/95;9/93) 7.11 11.77 7.11 -- -- 5.66
Growth and Income Fund (1/95;2/88) 20.04 25.80 20.04 14.20 -- 13.17
High Yield Fund (1/95;2/88) 11.06 13.45 11.06 11.73 -- 9.32
New Opportunities Fund (1/95;5/94) 8.46 24.82 8.46 -- -- 21.97
</TABLE>
*inception dates of the subaccounts; funds are shown in parentheses.
<PAGE>
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
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 10 year (or
other) period at the end of the one, five, or 10 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 10 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.
Total return figures reflect the deduction of all applicable charges including
the contract administrative charge, the variable account 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 The Bank Rate Monitor National Index,
Barron's, Business Week, CDA Technologies, Donoghue's Money Market Fund Report,
Financial Services Week, Financial Times, Financial World, Forbes, Fortune,
Global Investor, Institutional Investor, Investor's Daily, Kiplinger's Personal
Finance, Lipper Analytical Services, Money, Morningstar, Mutual Fund Forecaster,
Newsweek, The New York Times, Personal Investor, Stanger Report, Sylvia Porter's
Personal Finance, USA Today, U.S. News & World Report, The Wall Street Journal
and Wiesenberger Investment Companies Service.
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; then 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 fund.
<PAGE>
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:
This value is determined each business day by:
o adding the underlying 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 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 values in the table will be equal to or
greater than the table in your contract.
RATING AGENCIES
The following chart reflects the ratings given to American Enterprise Life by
independent rating agencies. These agencies evaluate the financial soundness and
claims-paying ability of insurance companies based on a number of different
factors. This information does not relate to the management or performance of
the variable subaccounts of the annuities. 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 annuities.
<PAGE>
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
including the statements of net assets as of Dec. 31, 1996, and the related
statements of operations for the year ended Dec. 31, 1996, and changes in net
assets for the year ended Dec. 31, 1996, and the period from Feb. 21, 1995
(commencement of operations) to Dec. 31, 1995 and the balance sheets of American
Enterprise Life Insurance Company (a wholly owned subsidiary of IDS Life
Insurance Company) as of Dec. 31, 1996 and 1995, and the related statements of
income and cash flows for each of the three years in the period ended Dec. 31,
1996, 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 October 30, 1997, is hereby incorporated in this SAI by
reference.
<PAGE>
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
- ------------------------------------------------------------------------------------------------------------------------------------
Statements of Net Assets Dec. 31, 1996
Segregated Asset Subaccounts
-----------------------------------------------------------------------------------------
Assets ECR ESI EMS EMG EIE EAG EMD
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investments in shares of mutual funds,
at market value:
IDS Life Capital Resource Fund -
126,400 shares at net assets value
of $23.68 per share (cost $3,252,829) .. $2,992,860 $ -- $ -- $ -- $ -- $ -- $ --
IDS Life Special Income Fund -
143,132 shares at net asset value
of $11.90 per share (cost $1,684,234) .. -- 1,702,800 -- -- -- -- --
IDS Life Moneyshare Fund, Inc. -
256,743 shares at net asset value
of $1.00 per share (cost $256,721) ..... -- -- 256,723 -- -- -- --
IDS Life Managed Fund, Inc. -
125,309 shares at net asset value
of $16.77 per share (cost $1,993,797) .. -- -- -- 2,101,885 -- -- --
IDS Life International Equity -
61,807 shares at net asset value
of $13.77 per share (cost $821,651) .... -- -- -- -- 851,236 -- --
IDS Life Aggressive Growth -
124,152 shares at net asset value
of $15.66 per share (cost $1,944,162) .. -- -- -- -- -- 1,944,270 --
Quest for Value Accumulation Trust
Managed Portfolio -
107,698 shares at net asset value
of $36.21 per share (cost $3,425,566) .. -- -- -- -- -- -- 3,899,806
Quest for Value Accumulation Trust US Government Income Portfolio - 133,325
shares at net asset value
of $10.38 per share (cost $1,390,622) .. -- -- -- -- -- -- --
G.T. Global: Variable New Pacific -
40,532 shares at net asset value
of $18.02 per share (cost $623,536) .... -- -- -- -- -- -- --
G.T. Global: Variable Latin America -
53,329 shares at net asset value
of $14.80 per share (cost $701,044) .... -- -- -- -- -- -- --
Putnam VT New Opportunities Fund-
261,611 shares at net asset value
of $17.22 per share (cost $4,340,197) .. -- -- -- -- -- -- --
Putnam VT Growth and Income Fund -
228,348 shares at net asset value
of $24.56 per share (cost $4,944,570) .. -- -- -- -- -- -- --
Putnam VT High Yield Fund -
124,215 shares at net asset value
of $12.96 per share (cost $1,520,574) .. -- -- -- -- -- -- --
Putnam VT Diversified Income Fund -
199,566 shares at net asset value
of $11.27 per share (cost $2,151,028) .. -- -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
2,992,860 1,702,800 256,723 2,101,885 851,236 1,944,270 3,899,806
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends receivable ................... -- 10,373 1,085 -- -- -- --
Accounts receivable from American
Enterprise Lifefor contract purchase
payments ............................... -- 2,728 -- 2,756 -- 257 --
Receivable from mutual funds for
share redemptions ...................... 5,217 -- -- -- 1,182 -- 1,144
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets ........................... 2,998,077 1,715,901 257,808 2,104,641 852,418 1,944,527 3,900,950
- ------------------------------------------------------------------------------------------------------------------------------------
<PAGE>
Liabilities
- ------------------------------------------------------------------------------------------------------------------------------------
Payable to American Enterprise Life for:
Mortality and expense risk fee ....... 3,236 1,809 277 2,227 921 2,102 4,199
Contract terminations ................ 5,217 -- -- -- 1,182 -- 1,144
Issue and administrative fee ......... 648 362 55 446 184 420 840
Payable to mutual funds for investments
purchased ........................... -- 10,930 753 2,756 10 273 --
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities ...................... 9,101 13,101 1,085 5,429 2,297 2,795 6,183
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to contracts in
accumulation period ................. $2,988,976 $1,702,800 $ 256,723 $2,099,212 $ 850,121 $1,941,732 $3,894,767
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding ......... 2,350,045 1,377,190 240,823 1,545,535 675,237 1,323,955 2,462,112
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value per accumulation unit .. $ 1.27 $ 1.24 $ 1.07 $ 1.36 $ 1.26 $ 1.47 $ 1.58
- ------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
- ---------------------------------------------------------------------------------------------
Statements of Net Assets - continued Dec. 31, 1996
Segregated Asset Subaccounts
----------------------------------------------------
Assets EUS EPA ELA ENO
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investments in shares of mutual funds,
at market value:
IDS Life Capital Resource Fund -
126,400 shares at net assets value
of $23.68 per share (cost $3,252,829) .. $ -- $ -- $ -- $ --
IDS Life Special Income Fund -
143,132 shares at net asset value
of $11.90 per share (cost $1,684,234) .. -- -- -- --
IDS Life Moneyshare Fund, Inc. -
256,743 shares at net asset value
of $1.00 per share (cost $256,721) ..... -- -- -- --
IDS Life Managed Fund, Inc. -
125,309 shares at net asset value
of $16.77 per share (cost $1,993,797) .. -- -- -- --
IDS Life International Equity -
61,807 shares at net asset value
of $13.77 per share (cost $821,651) ... -- -- -- --
IDS Life Aggressive Growth -
124,152 shares at net asset value
of $15.66 per share (cost $1,944,162) .. -- -- -- --
Quest for Value Accumulation Trust
Managed Portfolio -
107,698 shares at net asset value
of $36.21 per share (cost $3,425,566) .. -- -- -- --
Quest for Value Accumulation Trust US Government Income Portfolio - 133,325
shares at net asset value
of $10.38 per share (cost $1,390,622) .. 1,383,923 -- -- --
G.T. Global: Variable New Pacific -
40,532 shares at net asset value
of $18.02 per share (cost $623,536) .... -- 730,367 -- --
G.T. Global: Variable Latin America -
53,329 shares at net asset value
of $14.80 per share (cost $701,044) .... -- -- 789,152 --
Putnam VT New Opportunities Fund-
261,611 shares at net asset value
of $17.22 per share (cost $4,340,197) .. -- -- -- 4,504,945
Putnam VT Growth and Income Fund -
228,348 shares at net asset value
of $24.56 per share (cost $4,944,570) .. -- -- -- --
Putnam VT High Yield Fund -
124,215 shares at net asset value
of $12.96 per share (cost $1,520,574) .. -- -- -- --
Putnam VT Diversified Income Fund -
199,566 shares at net asset value
of $11.27 per share (cost $2,151,028) .. -- -- -- --
- ---------------------------------------------------------------------------------------------
1,383,923 730,367 789,152 4,504,945
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Dividends receivable ................... 26 -- -- --
Accounts receivable from American
Enterprise Life for contract purchase
payments ............................... 6,029 -- -- 92,319
Receivable from mutual funds for
share redemptions ...................... -- 269 259 --
- ---------------------------------------------------------------------------------------------
Total assets ........................... 1,389,978 730,636 789,411 4,597,264
- ---------------------------------------------------------------------------------------------
<PAGE>
Liabilities
- ---------------------------------------------------------------------------------------------
Payable to American Enterprise Life for:
Mortality and expense risk fee ....... 1,472 791 853 4,748
Contract terminations ................ -- 269 259 --
Issue and administrative fee ......... 295 158 171 949
Payable to mutual funds for investments
purchased ........................... 6,029 -- -- 92,319
- ---------------------------------------------------------------------------------------------
Total liabilities ...................... 7,796 1,218 1,283 98,016
- ---------------------------------------------------------------------------------------------
Net assets applicable to contracts in
accumulation period ................. $1,382,182 $ 729,418 $ 788,128 $4,499,248
- ---------------------------------------------------------------------------------------------
Accumulation units outstanding ......... 1,252,181 530,176 663,497 2,979,587
- ---------------------------------------------------------------------------------------------
Net asset value per accumulation unit .. $ 1.10 $ 1.38 $ 1.19 $ 1.51
- ---------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
- ---------------------------------------------------------------------------------------------------------
Statements of Net Assets - continued Dec. 31, 1996
--------------------------------------- Combined
Variable
Assets EGI EHY EDI Account
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investments in shares of mutual funds,
at market value:
IDS Life Capital Resource Fund -
126,400 shares at net assets value
of $23.68 per share (cost $3,252,829) ........... $ -- $ -- $ -- $ 2,992,860
IDS Life Special Income Fund -
143,132 shares at net asset value
of $11.90 per share (cost $1,684,234) ........... -- -- -- 1,702,800
IDS Life Moneyshare Fund, Inc. -
256,743 shares at net asset value
of $1.00 per share (cost $256,721) .............. -- -- -- 256,723
IDS Life Managed Fund, Inc. -
125,309 shares at net asset value
of $16.77 per share (cost $1,993,797) ........... -- -- -- 2,101,885
IDS Life International Equity -
61,807 shares at net asset value
of $13.77 per share (cost $821,651) ............ -- -- -- 851,236
IDS Life Aggressive Growth -
124,152 shares at net asset value
of $15.66 per share (cost $1,944,162) ........... -- -- -- 1,944,270
Quest for Value Accumulation Trust
Managed Portfolio -
107,698 shares at net asset value
of $36.21 per share (cost $3,425,566) ........... -- -- -- 3,899,806
Quest for Value Accumulation Trust US Government Income Portfolio - 133,325
shares at net asset value
of $10.38 per share (cost $1,390,622) ........... -- -- -- 1,383,923
G.T. Global: Variable New Pacific -
40,532 shares at net asset value
of $18.02 per share (cost $623,536) ............. -- -- -- 730,367
G.T. Global: Variable Latin America -
53,329 shares at net asset value
of $14.80 per share (cost $701,044) ............. -- -- -- 789,152
Putnam VT New Opportunities Fund-
261,611 shares at net asset value
of $17.22 per share (cost $4,340,197) ........... -- -- -- 4,504,945
Putnam VT Growth and Income Fund -
228,348 shares at net asset value
of $24.56 per share (cost $4,944,570) ........... 5,608,219 -- -- 5,608,219
Putnam VT High Yield Fund -
124,215 shares at net asset value
of $12.96 per share (cost $1,520,574) ........... -- 1,609,824 -- 1,609,824
Putnam VT Diversified Income Fund -
199,566 shares at net asset value
of $11.27 per share (cost $2,151,028) ........... -- -- 2,249,106 2,249,106
- ---------------------------------------------------------------------------------------------------------
5,608,219 1,609,824 2,249,106 30,625,116
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Dividends receivable ............................ -- -- -- 11,484
Accounts receivable from American Enterprise Life
for contract purchase payments .................. 4,488 2,510 4,148 115,235
Receivable from mutual funds for
share redemptions ............................... -- -- -- 8,071
- ---------------------------------------------------------------------------------------------------------
Total assets .................................... 5,612,707 1,612,334 2,253,254 30,759,906
- ---------------------------------------------------------------------------------------------------------
<PAGE>
Liabilities
- ---------------------------------------------------------------------------------------------------------
Payable to American Enterprise Life for:
Mortality and expense risk fee ................ 6,057 1,698 2,427 32,817
Contract terminations ......................... -- -- -- 8,071
Issue and administrative fee .................. 1,211 340 485 6,564
Payable to mutual funds for investments
purchased .................................... 4,488 2,510 4,148 124,216
- ---------------------------------------------------------------------------------------------------------
Total liabilities ............................... 11,756 4,548 7,060 171,668
- ---------------------------------------------------------------------------------------------------------
Net assets applicable to contracts in
accumulation period .......................... $ 5,600,951 $ 1,607,786 $ 2,246,194 $30,588,238
- ---------------------------------------------------------------------------------------------------------
Accumulation units outstanding .................. 3,655,312 1,270,037 1,824,245
- -------------------------------------------------------------------------------------------
Net asset value per accumulation unit ........... $ 1.53 $ 1.27 $ 1.23
- -------------------------------------------------------------------------------------------
See accompanying notes to financial statements ..
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
- -----------------------------------------------------------------------------------------------------------------------------------
Statements of Operations Year ended Dec. 31, 1996
Segregated Asset Subaccounts
-----------------------------------------------------------------------------------------------
ECR ESI EMS EMG EIE EAG EMD EUS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividend income from mutual funds $ 447,677 $ 92,432 $ 6,603 $ 161,548 $ 24,251 $ 195,247 $ 16,891 $ 49,450
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk fee .. 26,117 14,742 1,685 17,962 7,183 16,404 27,367 11,829
Administrative charge ........... 5,224 2,948 337 3,592 1,437 3,281 5,473 2,366
- -----------------------------------------------------------------------------------------------------------------------------------
Total expenses .................. 31,341 17,690 2,022 21,554 8,620 19,685 32,840 14,195
- -----------------------------------------------------------------------------------------------------------------------------------
Investment income (loss) - net .. 416,336 74,742 4,581 139,994 15,631 175,562 (15,949) 35,255
- -----------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments - net
- -----------------------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on sales of investment in mutual funds:
Proceeds from sales ............. 117,410 152,258 153,012 120,540 34,697 95,714 74,115 67,340
Cost of investments sold ........ 119,504 153,718 153,013 113,153 33,635 90,385 67,333 67,546
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on
investments ..................... (2,094) (1,460) (1) 7,387 1,062 5,329 6,782 (206)
Net change in unrealized
appreciation or
depreciation of investments ..... (287,096) 5,443 2 83,860 19,999 (25,579) 442,091 (10,368)
- -----------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments .. (289,190) 3,983 1 91,247 21,061 (20,250) 448,873 (10,574)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase from operations .... $ 127,146 $ 78,725 $ 4,582 $ 231,241 $ 36,692 $ 155,312 $432,924 $ 24,681
- -----------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
- ------------------------------------------------------------------------------------------------------------------------------
Statements of Operations - continued Year ended Dec. 31, 1996
Segregated Asset Subaccounts
------------------------------------------------------------------------------ Combined
EPA ELA ENO EGI EHY EDI Variable
Account
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividend income from mutual funds $ 6,056 $ 16,201 $ -- $ 157,276 $ 58,665 $ 78,310 $1,310,607
- ------------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk fee .. 6,126 7,097 37,601 45,020 13,724 19,862 252,719
Administrative charge ........... 1,225 1,419 7,520 9,004 2,745 3,972 50,543
- ------------------------------------------------------------------------------------------------------------------------------
Total expenses .................. 7,351 8,516 45,121 54,024 16,469 23,834 303,262
- ------------------------------------------------------------------------------------------------------------------------------
Investment income (loss) - net .. (1,295) 7,685 (45,121) 103,252 42,196 54,476 1,007,345
- ------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments - net
- ------------------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on sales of investment in mutual funds:
Proceeds from sales ............. 38,478 36,076 94,415 124,207 187,174 200,600 1,496,036
Cost of investments sold ........ 34,086 32,467 87,298 116,565 183,615 198,770 1,451,088
- ------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on
investments ..................... 4,392 3,609 7,117 7,642 3,559 1,830 44,948
Net change in unrealized
appreciation or
depreciation of investments ..... 101,035 79,322 94,114 575,348 73,912 73,352 1,225,435
- ------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments .. 105,427 82,931 101,231 582,990 77,471 75,182 1,270,383
- ------------------------------------------------------------------------------------------------------------------------------
Net increase from operations .... $ 104,132 $ 90,616 $ 56,110 $ 686,242 $ 119,667 $ 129,658 $2,277,728
- ------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
- --------------------------------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets Year ended Dec. 31, 1996
Segregated Asset Subaccounts
--------------------------------------------------------------------------------------
Operations ECR ESI EMS EMG EIE EAG
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment income (loss) - net ........ $ 416,336 $ 74,742 $ 4,581 $ 139,994 $ 15,631 $ 175,562
Net realized gain (loss) on
investments ........................... (2,094) (1,460) (1) 7,387 1,062 5,329
Net change in unrealized
appreciation or
depreciation of investments ........... (287,096) 5,443 2 83,860 19,999 (25,579)
- --------------------------------------------------------------------------------------------------------------------------------
Net increase from operations........... 127,146 78,725 4,582 231,241 36,692 155,312
- --------------------------------------------------------------------------------------------------------------------------------
Contract Transactions
- --------------------------------------------------------------------------------------------------------------------------------
Variable annuity contract purchase
payments .............................. 1,819,729 1,330,728 277,016 1,299,140 578,213 1,188,007
Net transfers* ........................ 160,697 (128,604) (160,372) (54,922) 699 44,944
Contract terminations:
Surrender benefits and contract charges (96,464) (45,696) (67) (52,330) (21,597) (52,750)
Death benefits ........................ -- (17,536) -- (18,177) -- --
- --------------------------------------------------------------------------------------------------------------------------------
Increase from contract transactions ... 1,883,962 1,138,892 116,577 1,173,711 557,315 1,180,201
- --------------------------------------------------------------------------------------------------------------------------------
Net assets at beginning of year ....... 977,868 485,183 135,564 694,260 256,114 606,219
- --------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year ............. $ 2,988,976 $ 1,702,800 $ 256,723 $ 2,099,212 $ 850,121 $ 1,941,732
- --------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Activity
- --------------------------------------------------------------------------------------------------------------------------------
Units outstanding at beginning of year 817,655 413,748 131,600 588,760 219,594 473,162
Contract purchase payments ............ 1,485,938 1,131,063 263,096 1,062,502 476,859 858,107
Net transfers* ........................ 129,540 (109,946) (153,809) (44,426) 56 32,975
Contract terminations:
Surrender benefits and contract charges (83,088) (42,442) (64) (46,345) (21,272) (40,289)
Death benefits ........................ -- (15,233) -- (14,956) -- --
- --------------------------------------------------------------------------------------------------------------------------------
Units outstanding at end of year ...... 2,350,045 1,377,190 240,823 1,545,535 675,237 1,323,955
- --------------------------------------------------------------------------------------------------------------------------------
*Includes transfer activity from (to) other Accounts and transfers (from) to
American Enterprise Life for conversion from (to) Fixed Account.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
- --------------------------------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets - continued Year ended Dec. 31, 1996
Segregated Asset Subaccounts
---------------------------------------------------------------------------------------
Operations EMD EUS EPA ELA ENO EGI
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment income (loss) - net ........ $ (15,949) $ 35,255 $ (1,295) $ 7,685 $ (45,121) $ 103,252
Net realized gain (loss)
on investments ........................ 6,782 (206) 4,392 3,609 7,117 7,642
Net change in unrealized appreciation
or depreciation of investments ........ 442,091 (10,368) 101,035 79,322 94,114 575,348
- --------------------------------------------------------------------------------------------------------------------------------
Net increase from operations........... 432,924 24,681 104,132 90,616 56,110 686,242
- --------------------------------------------------------------------------------------------------------------------------------
Contract Transactions
- --------------------------------------------------------------------------------------------------------------------------------
Variable annuity contract
purchase payments ..................... 2,973,800 981,238 467,758 437,491 3,175,961 3,170,351
Net transfers* ........................ (25,217) (41,299) (27,205) (19,722) 411,509 427,988
Contract terminations:
Surrender benefits and contract charges (56,812) (31,888) (20,943) (18,679) (102,255) (140,638)
Death benefits ........................ -- -- -- -- -- (9,662)
- --------------------------------------------------------------------------------------------------------------------------------
Increase from contract transactions ... 2,891,771 908,051 419,610 399,090 3,485,215 3,448,039
- --------------------------------------------------------------------------------------------------------------------------------
Net assets at beginning of year ....... 570,072 449,450 205,676 298,422 957,923 1,466,670
- --------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year ............. $ 3,894,767 $ 1,382,182 $ 729,418 $ 788,128 $ 4,499,248 $ 5,600,951
- --------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Activity
- --------------------------------------------------------------------------------------------------------------------------------
Units outstanding at beginning of year. 435,846 413,258 192,917 303,151 690,849 1,151,991
Contract purchase payments ............ 2,078,911 909,198 377,258 396,610 2,086,487 2,299,290
Net transfers* ........................ (17,730) (38,115) (21,947) (17,905) 275,115 310,542
Contract terminations:
Surrender benefits and contract charges (34,915) (32,160) (18,052) (18,359) (72,864) (99,565)
Death benefits ........................ -- -- -- -- -- (6,946)
- --------------------------------------------------------------------------------------------------------------------------------
Units outstanding at end of year ...... 2,462,112 1,252,181 530,176 663,497 2,979,587 3,655,312
- --------------------------------------------------------------------------------------------------------------------------------
*Includes transfer activity from (to) other Accounts and transfers (from) to
American Enterprise Life for conversion from (to) Fixed Account.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
- --------------------------------------------------------------------------------------
Statements of Changes in Net Assets - continued Year ended Dec. 31, 1996
----------------------------------- Combined
Operations EHY EDI Variable
Account
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment income (loss) - net ........ $ 42,196 $ 54,476 $ 1,007,345
Net realized gain (loss) on
investments ........................... 3,559 1,830 44,948
Net change in unrealized
appreciation or
depreciation of investments ........... 73,912 73,352 1,225,435
- --------------------------------------------------------------------------------------
Net increase from operations........... 119,667 129,658 2,277,728
- --------------------------------------------------------------------------------------
Contract Transactions
- --------------------------------------------------------------------------------------
Variable annuity contract purchase
payments .............................. 1,223,297 1,660,528 20,583,257
Net transfers* ........................ (249,459) (184,094) 154,943
Contract terminations:
Surrender benefits and contract charges (33,017) (49,780) (722,916)
Death benefits ........................ -- -- (45,375)
- --------------------------------------------------------------------------------------
Increase from contract transactions ... 940,821 1,426,654 19,969,909
- --------------------------------------------------------------------------------------
Net assets at beginning of year ....... 547,298 689,882 8,340,601
- --------------------------------------------------------------------------------------
Net assets at end of year ............. $ 1,607,786 $ 2,246,194 $ 30,588,238
- --------------------------------------------------------------------------------------
Accumulation Unit Activity
- ----------------------------------------------------------------------
Units outstanding at beginning of year 480,470 600,567
Contract purchase payments ............ 1,030,697 1,425,924
Net transfers* ........................ (210,240) (156,974)
Contract terminations:
Surrender benefits and contract charges (30,890) (45,272)
Death benefits ........................ -- --
- ----------------------------------------------------------------------
Units outstanding at end of year ...... 1,270,037 1,824,245
- ----------------------------------------------------------------------
*Includes transfer activity from (to) other Accounts and transfers (from) to
American Enterprise Life for conversion from (to) Fixed Account.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<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>
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
- ---------------------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets (continued) 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>
American Enterprise Variable Annuity Account
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 are 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 Variable Trust (collectively, Putnam Funds) formerly known as Putnam
Capital Manager Trust. 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) 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 Variable Trust 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 Putnam VT New Opportunities Fund, formerly
PCM New Opportunities Fund, commenced operations on May 2, 1994. The Putnam VT
Growth and Income Fund, formerly PCM Growth and Income Fund, and the Putnam VT
High Yield Fund, formerly PCM High Yield Fund, commenced operations on Feb. 1,
1988. The Putnam VT Diversified Income Fund, formerly PCM Diversified Income
Fund, commenced operations on Sept. 15, 1993. Purchase payments allocated to the
Putnam VT New Opportunities (ENO) subaccount invest in shares of the Putnam VT
New Opportunities Fund, the Putnam VT Growth and Income (EGI) subaccount invests
in shares of the Putnam VT Growth and
Income Fund, the Putnam VT High Yield (EHY) subaccount invests in shares of the
Putnam VT High Yield Fund and the Putnam VT Diversified Income (EDI) subaccount
invests in shares of the Putnam VT 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.
Chancellor 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.
-------------------------------------------------------------------
2. Summary of Significant Accounting Policies
Investments in Mutual Funds
Investments in shares of the IDS Life Funds, the OCC Portfolios, the G.T. Global
Funds, or 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.
<PAGE>
- -------------------------------------------------------------------
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
0.25 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.
- -------------------------------------------------------------------
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. SurrenderCharge
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 amounted to $34,957 in 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.
<PAGE>
- -------------------------------------------------------------------
7. Investment Transactions
The subaccounts' purchases of Fund shares (net of charges), including
reinvestment of dividend distributions, were as follows:
<TABLE>
<CAPTION>
Year ended Dec. 31,
Subaccount Investment 1996 1995 *
--------------------------------------------------------------------------------------------
<S> <C> <C>
ECR IDS Life Capital Resource Fund $2,420,544 $ 978,959
ESI IDS Life Special Income Fund 1,365,892 491,218
EMS IDS Life Moneyshare Fund 274,170 199,964
EMG IDS Life Managed Fund 1,436,211 691,443
EIE IDS Life International Equity Fund 608,493 257,070
EAG IDS Life Aggressive Growth Fund 1,453,339 606,633
EMD OCC Accumulation Trust Managed Portfolio 2,954,380 557,379
EUS OCC Accumulation Trust U.S. Government Portfolio 1,012,684 472,031
EPA GT Global Variable New Pacific Fund 457,523 207,291
ELA GT Global Variable Latin America Fund 443,537 301,238
ENO Putnam VT New Opportunities Fund 3,539,234 912,517
EGI Putnam VT Growth and Income Fund 3,681,192 1,410,167
EHY Putnam VT High Yield Fund 1,171,624 558,172
EDI Putnam VT Diversified Income Fund 1,683,881 683,408
--------------------------------------------------------------------------------------------
$22,502,704 $8,327,490
--------------------------------------------------------------------------------------------
*For the period Feb. 21, 1995 (commencement of operations) to Dec. 31, 1995.
</TABLE>
<PAGE>
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
(comprised of subaccounts ECR, ESI, EMS, EMG, EIE, EAG, EMD, EUS, EPA, ELA, ENO,
EGI, EHY and EDI) as of December 31, 1996, and the related statements of
operations for the year then ended, and the statements of changes in net assets
for the year ended December 31, 1996 and 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, 1996 with the affiliated and
unaffiliated mutual fund managers. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the individual and combined financial position of the
segregated asset subaccounts of American Enterprise Variable Annuity Account at
December 31, 1996 and the individual and combined results of their operations
and the changes in their net assets for the periods described above, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Minneapolis, Minnesota
March 21, 1997
<PAGE>
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 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 SHEETS
Dec. 31, Dec. 31,
ASSETS 1996 1995
------ --------- ------
(thousands)
Investments:
Fixed maturities:
Held to maturity, at amortized cost (Fair value:
1996, $1,267,947; 1995, $1,357,977) $1,256,143 $1,308,251
Available for sale, at fair value (Amortized cost:
1996, $2,223,457; 1995, $1,546,025) 2,242,447 1,596,985
---------- ---------
3,498,590 2,905,236
Mortgage loans on real estate 582,982 393,020
Other investments 3,056 4,055
-------- -------
4,084,628 3,302,311
Cash and cash equivalents 40,829 42,896
Accrued investment income 51,571 41,879
Deferred policy acquisition costs 203,225 170,574
Other assets 14,824 4,817
Separate account assets 30,760 8,483
------- ----------
Total assets $4,425,837 $3,570,960
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Future policy benefits for fixed annuities $3,881,339 $3,155,651
Policy claims and other policyholders' funds 27,427 11,641
Amounts due to brokers 88,731 163
Securities sold under repurchase agreements -- 67,000
Deferred income taxes 18,072 24,177
Other liabilities 15,650 7,029
Separate account liabilities 30,760 8,483
------- -------
Total liabilities 4,061,979 3,274,144
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 242,872 177,872
Net unrealized gain on investments 12,343 33,124
Retained earnings 106,643 83,820
-------- -------
Total stockholder's equity 363,858 296,816
-------- --------
Total liabilities and stockholder's equity $4,425,837 $3,570,960
======== ========
Commitments and contingencies (Note 7)
See accompanying notes.
<PAGE>
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
STATEMENTS OF INCOME
Years ended Dec. 31,
1996 1995 1994
(thousands)
Revenues:
Net investment income $271,719 $223,706 $162,201
Contractholder charges 5,753 4,214 2,753
Net realized loss on investments (5,258) (1,154) (1,190)
-------- ------- --------
Total revenues 272,214 226,766 163,764
Benefits and expenses:
Interest credited on investment contracts 191,672 162,662 112,977
Amortization of deferred policy
acquisition costs 30,674 20,459 14,052
Other operating expenses 14,133 10,205 6,523
-------- ------- -------
Total expenses 236,479 193,326 133,552
------- ------- -------
Income before income taxes 35,735 33,440 30,212
Income taxes 12,912 11,692 10,574
------- ------- -------
Net income $ 22,823 $ 21,748 $19,638
====== ====== ======
See accompanying notes.
<PAGE>
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
Years ended Dec. 31,
1996 1995 1994
(thousands)
Cash flows from operating activities:
Net income $ 22,823 $ 21,748 $ 19,638
Adjustments to reconcile net income to
net cash provided by (used in) operating
activities:
Change in accrued investment income (9,692) (7,951) (8,543)
Change in deferred policy acquisition
costs, net (32,651) (32,926) (37,642)
Change in other assets (10,007) (4,126) (512)
Change in policy claims and other
policyholders' funds 15,786 (4,065) 1,270
Change in deferred income taxes 5,084 (119) (3,925)
Change in other liabilities 8,621 2,698 872
(Accretion of discount)
amortization of premium, net (2,091) (2,321) 1,812
Net realized loss on investments 5,258 1,154 1,190
Other, net (129) -- --
---------- -------- ----------
Net cash provided by (used in)
operating activities 3,002 (25,908) (25,840)
------- ------- -------
Cash flows from investing activities: Fixed maturities held to maturity:
Purchases (16,967) (252,583) (136,330)
Maturities 26,190 25,754 84,514
Sales 27,944 33,849 1,469
Fixed maturities available for sale:
Purchases (921,914) (485,250) (569,459)
Maturities 212,212 85,629 64,116
Sales 47,542 57,576 54,755
Other investments:
Purchases (212,182) (183,892) (192,488)
Sales 19,850 5,543 112
Change in amounts due to brokers 88,568 (48,709) 21,181
-------- ----------- ---------
Net cash used in
investing activities $(728,757) $(762,083) $(672,130)
--------- --------- ---------
<PAGE>
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS (continued)
Years ended Dec. 31,
1996 1995 1994
(thousands)
Cash flows from financing activities: Activity related to investment contracts:
Considerations received $ 846,378 $ 709,127 $ 745,053
Surrenders and other benefits (312,362) (196,260) (113,644)
Interest credited to
account balances 191,672 162,662 112,977
Change in securities sold under
repurchase agreements (67,000) 67,000 (30,000)
Capital contribution from parent 65,000 35,000 35,000
------- ------- ------
Net cash provided by
financing activities 723,688 777,529 749,386
-------- -------- -------
Net (decrease) increase in cash
and cash equivalents (2,067) (10,462) 51,416
Cash and cash equivalents
at beginning of year 42,896 53,358 1,942
--------- ------- -----
Cash and cash equivalents
at end of year $ 40,829 $ 42,896 $ 53,358
======= ======= ======
See accompanying notes.
<PAGE>
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 47 states at Dec.
31, 1996. 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.
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.
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, net of
deferred taxes.
Realized investment gain or loss is determined on an identified cost basis.
Prepayments are anticipated on certain investments in mortgage-backed
securities in determining the constant effective yield used to recognize
interest income. Prepayment estimates are based on information received
from brokers who deal in mortgage-backed securities.
Mortgage loans on real estate are carried at amortized cost less reserves
for mortgage loan losses. The estimated fair value of the mortgage loans is
determined by a discounted cash flow analysis using mortgage interest rates
currently offered for mortgages of similar maturities.
Impairment of mortgage loans is measured as the excess of the loan's
recorded investment over its present value of expected principal and
interest payments discounted at the loan's effective interest rate, or the
fair value of collateral. The amount of the impairment is recorded in a
reserve for mortgage loan losses. The reserve for mortgage loans losses is
maintained at a level that management believes is adequate to absorb
estimated losses in the portfolio. The level of the reserve account is
determined based on several factors, including historical experience,
expected future principal and interest payments, estimated collateral
values, and current and anticipated economic and political conditions.
Management regularly evaluates the adequacy of the reserve for mortgage
loan losses.
The Company generally stops accruing interest on mortgage loans for which
interest payments are delinquent more than three months. Based on
management's judgement as to the ultimate collectibility of principal,
interest payments received are either recognized as income or applied to
the recorded investment in the loan.
The cost of interest rate caps is amortized to investment income over the
life of the contracts and payments received as a result of these agreements
are recorded as investment income when realized. The amortized cost of
interest rate caps is included in other investments.
When evidence indicates a decline, which is other than temporary, in the
underlying value or earning power of individual investments, such
investments are written down to the fair value by a charge to income.
Statements of cash flows
The Company considers investments with a maturity at the date of their
acquisition of three months or less to be cash equivalents. These
securities are carried principally at amortized cost which approximates
fair value.
Supplementary information to the statements of cash flows is summarized as
follows:
1996 1995 1994
------ ------ -----
Cash paid during the year for:
Income taxes $10,317 $11,389 $14,750
Interest on borrowings 998 979 669
Recognition of profits on fixed annuity contracts
Profits on fixed deferred annuities are recognized by the Company over the
lives of the contracts, using primarily the interest method. Profits
represent the excess of investment income earned from investment of
contract considerations over interest credited to contract owners and other
expenses.
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 in relation to 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 8.75 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 subsidiaries for all tax benefits.
Included in other liabilities at Dec. 31, 1996 and 1995 are $787 and
($1,813), respectively receivable from/(payable to) IDS Life for federal
income taxes.
Separate account business
The separate account assets and liabilities represent funds held for the
exclusive benefit of the variable annuity contract owners. The Company
receives mortality and expense risk fees from the variable annuity 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) ) Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of," was effective Jan. 1,
1996. The new rule did not have a material impact on the Company's results
of operations or financial condition.
Reclassification
Certain 1995 and 1994 amounts have been reclassified to conform to the 1996
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.
Net realized gain (loss) on investments for the years ended Dec. 31 is
summarized as follows:
1996 1995 1994
------- ------- ------
Fixed maturities $(2,888) $(1,114) $(1,198)
Mortgage loans (2,370) -- --
Other investments -- (40) 8
--- ---- ---------
$(5,258) $(1,154) $(1,190)
======= ======= =======
Changes in net unrealized appreciation (depreciation) of investments for
the years ended Dec. 31 are summarized as follows:
1996 1995 1994
---------- ---------- -------
Fixed maturities:
Held to maturity $(37,922) $139,815 $(132,842)
Available for sale (31,970) 118,134 (88,775)
The amortized cost, gross unrealized gains and losses and fair value of
investments in fixed maturities at Dec. 31, 1996 are as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Held to maturity Cost Gains Losses Value
---------------- ---------- -------- -------- ---------
<S> <C> <C> <C> <C>
U.S. Government agency obligations $ 13,536 $ 415 $ -- $ 13,951
State and municipal obligations 3,003 125 -- 3,128
Corporate bonds and obligations 1,030,649 28,013 11,022 1,047,640
Mortgage-backed securities 208,955 1,076 6,803 203,228
----------- -------- -------- -----------
$1,256,143 $29,629 $17,825 $1,267,947
========== ======= ======= ==========
Available for sale
U.S. Government agency obligations $ 1,666 $ -- $ 63 $ 1,603
Corporate bonds and obligations 942,698 20,678 6,486 956,889
Mortgage-backed securities 1,279,093 16,047 11,185 1,283,955
---------- ------- -------- ----------
Total fixed maturities $2,223,457 $36,725 $17,734 $2,242,447
========== ======= ======= ==========
</TABLE>
The change in net unrealized loss on available for sale securities included
as a separate component of stockholder's equity, net of deferred taxes, was
$20,781 in 1996.
<PAGE>
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 obligations 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 on available for sale securities included
as a separate component of stockholder's equity, net of deferred taxes, was
$76,813 in 1995.
The amortized cost and fair value of investments in fixed maturities at
Dec. 31, 1996 by contractual maturity are shown below. Expected maturities
will differ from contractual maturities because borrowers may have the
right to call or prepay obligations with or without call or prepayment
penalties.
Amortized Fair
Held to maturity Cost Value
Due in one year or less $ 3,446 $ 3,432
Due from one to five years 203,377 211,070
Due from five to ten years 677,378 689,663
Due in more than ten years 162,987 160,555
Mortgage-backed securities 208,955 203,227
----------- -----------
$1,256,143 $1,267,947
========== ==========
Amortized Fair
Available for sale Cost Value
Due in one year or less $ 78,990 $ 79,668
Due from one to five years 102,420 105,584
Due from five to ten years 618,645 627,245
Due in more than ten years 144,309 145,995
Mortgage-backed securities 1,279,093 1,283,955
----------- -----------
$2,223,457 $2,242,447
========== ==========
During the years ended Dec. 31, 1996, 1995 and 1994, fixed maturities
classified as held to maturity were sold with amortized cost of $27,969,
$34,809 and $1,747, respectively. Net gains and losses on these sales were
not significant. The sale of these fixed maturities was due to significant
deterioration in the issuers' creditworthiness.
<PAGE>
In addition, fixed maturities available for sale were sold during 1996 with
proceeds of $47,542 and gross realized gains and losses of $17 and $3,139,
respectively. Fixed maturities available for sale were sold during 1995
with proceeds of $57,576 and gross realized gains and losses of $nil and
$646, respectively. Fixed maturities available for sale were sold during
1994 with proceeds of $54,755 and gross realized gains and losses of $112
and $1,059, respectively.
At Dec. 31, 1996, bonds carried at $2,897 were on deposit with various
states as required by law.
Net investment income for the years ended Dec. 31 is summarized as follows:
1996 1995 1994
------- -------- -----
Interest on fixed maturities $230,559 $198,829 $151,599
Interest on mortgage loans 41,010 24,969 9,202
Interest on cash equivalents 1,402 829 1,452
Other 1,194 921 824
---------- --- ------
274,165 225,548 163,077
Less investment expenses 2,446 1,842 876
---------- ------ ------
$271,719 $223,706 $162,201
======== ======== ========
Securities are rated by Moody's and Standard & Poor's (S&P), except for
securities carried at approximately $349 million which are rated by
American Express Financial Corporation internal analysts using criteria
similar to Moody's and S&P. A summary of investments in fixed maturities,
at amortized cost, by rating on Dec. 31 is as follows:
Rating 1996 1995
---------------------- ----------- ----------
Aaa/AAA $1,489,460 $1,246,755
Aa/AA 32,903 39,055
Aa/A 38,577 18,076
A/A 445,201 435,957
A/BBB 204,402 148,713
Baa/BBB 818,545 671,896
Baa/BB 97,783 81,821
Below investment grade 352,729 212,003
----------- -----------
$3,479,600 $2,854,276
========== ==========
At Dec. 31, 1996, approximately 93 percent of the securities rated Aaa/AAA
are GNMA, FNMA and FHLMC mortgage-backed securities. No holdings of any
other issuer are greater than one percent of the Company's total
investments in fixed maturities.
At Dec. 31, 1996, approximately 14.3 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, 1996 Dec. 31, 1995
------------------- ----------------
On Balance Commitments On Balance Commitments
Region Sheet to Purchase Sheet to Purchase
------------------ ---------- ----------- --------- -----------
<S> <C> <C> <C> <C>
South Atlantic $139,630 $22,525 $ 82,442 $25,781
Middle Atlantic 111,257 6,257 73,958 20,790
East North Central 105,666 7,508 81,456 7,485
Mountain 82,389 4,380 62,275 832
West North Central 54,728 15,017 34,819 9,980
New England 50,584 -- 30,481 13,306
Pacific 18,504 1,877 15,992 4,158
West South Central 14,927 5,006 6,649 832
East South Central 7,667 -- 4,948 --
--------- ------------ ---------- -----------
585,352 62,570 393,020 83,164
Less allowance for losses 2,370 -- -- --
---------- ------------ ----------- --------
$582,982 $62,570 $393,020 $83,164
======== ======= ======== =======
<PAGE>
Dec. 31, 1996 Dec. 31, 1995
--------------- --------------
On Balance Commitments On Balance Commitments
Property type Sheet to Purchase Sheet to Purchase
----------------------- --------- ----------- -------- -----------
Department/retail stores $184,192 $26,905 $138,378 $34,097
Apartments 172,208 2,816 130,601 14,554
Office buildings 112,430 14,391 59,601 9,980
Industrial buildings 54,117 2,816 31,259 9,148
Hotels/Motels 28,189 6,257 3,266 10,811
Medical buildings 18,787 7,508 16,408 2,495
Nursing/retirement homes 8,080 1,877 8,190 1,663
Mixed Use 7,349 -- 5,317 --
Other -- -- -- 416
---------- ----------- ----------- ---------
585,352 62,570 393,020 83,164
Less allowance for losses 2,370 -- -- --
---------- ----------- --------- ----------
$582,982 $62,570 $393,020 $83,164
======== ======= ======== =======
</TABLE>
Mortgage loan fundings are restricted by state insurance regulatory
authorities to 80 percent or less of the market value of the real estate at
the time of origination of the loan. The Company holds the mortgage
document, which gives the right to take possession of the property if the
borrower fails to perform according to the terms of the agreement. The fair
value of the mortgage loans is determined by a discounted cash flow
analysis using mortgage interest rates currently offered for mortgages of
similar maturities. Commitments to purchase mortgages are made in the
ordinary course of business. The fair value of the mortgage commitments is
$nil.
At Dec. 31, 1996, the Company's recorded investment in impaired loans was
$5,515 with a reserve of $870. During the year, the average recorded
investment in impaired loans was $3,577.
There were no impaired loans prior to 1996.
The following table presents changes in the reserve for investment losses
related to all loans:
1996
Balance, Jan. 1 $ 0
Provision for investment losses 2,370
-------
Balance, Dec. 31 $2,370
======
There was no reserve prior to 1996.
3. Income taxes
The Company qualifies as a life insurance company for federal income tax
purposes. As such, the Company is subject to the Internal Revenue Code
provisions applicable to life insurance companies.
The income tax expense consists of the following:
1996 1995 1994
-------- ------- -----
Federal income taxes:
Current $7,124 $11,753 $14,454
Deferred 5,084 (119) (3,925)
----- -------- --------
12,208 11,634 10,529
State income taxes-current 704 58 45
--- --- -----
Income tax expense $12,912 $11,692 $10,574
======= ======= =======
<PAGE>
Increases (decreases) to the federal income tax provision applicable to
pretax income based on the statutory rate are attributable to:
<TABLE>
<CAPTION>
1996 1995 1994
-------------------- ------------------ ------------------
Provision Rate Provision Rate Provision Rate
<S> <C> <C> <C> <C> <C> <C>
Federal income taxes based
on the statutory rate $12,507 35.0% $11,704 35.0% $10,574 35.0%
Increases (decreases) are attributable to :
Tax-excluded interest (53) (0.1) (69) (0.3) (81) (0.3)
Other, net (246) (0.7) (1) 0.1 36 0.1
---- ---- ----- --- -- ----
Federal income taxes $12,208 34.2% $11,634 34.8% $10,529 34.8%
</TABLE>
Significant components of the Company's deferred tax assets and liabilities
as of Dec. 31 are as follows:
Deferred tax assets: 1996 1995
------- -----
Policy reserves $48,321 $45,482
Other 1,851 2,036
------- ------
Total deferred tax assets 50,172 47,518
------ ------
Deferred tax liabilities:
Deferred policy acquisition costs 59,162 50,350
Investments 9,082 21,345
------- -------
Total deferred tax liabilities 68,244 71,695
------- --------
Net deferred tax liabilities $(18,072) $(24,177)
======== ========
The Company is required to establish a valuation allowance for any portion
of the deferred tax assets that management believes will not be realized.
In the opinion of management, it is more likely than not that the Company
will realize the benefit of the deferred tax assets and, therefore, no such
valuation allowance has been established.
4. Stockholder's equity
Retained earnings available for distribution as dividends to the parent are
limited to the Company's surplus as determined in accordance with
accounting practices prescribed by state insurance regulatory authorities.
Statutory unassigned surplus aggregated $6,103 and $7,553 as of Dec. 31,
1996 and 1995, respectively.
Statutory net income and stockholder's equity as of Dec. 31, are
summarized as follows:
1996 1995 1994
------ ------ -------
Statutory net income $ 9,138 $ 15,499 $ 8,131
Statutory stockholder's equity 250,975 187,425 148,037
5. Related party transactions
Charges by IDS Life for use of joint facilities and other services
aggregated $17,936, $10,380 and $5,581 for 1996, 1995 and 1994,
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 and American
Express Financial Corporation (AEFC) aggregating $80,000, of which $50,000
is with AEFC. The lines of credit are at 45 to 80 basis points over each
lender's cost of funds. The $10,000 line of credit with one bank expired on
Dec. 31, 1996 and the Company did not seek renewal. The $20,000 line of
credit with the other bank expires on June 30, 1997 and the Company expects
to seek renewal. There were no borrowings outstanding under these
agreements at Dec. 31, 1996 or 1995.
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 does not hold derivative instruments for
trading purposes. The Company manages risks associated with these
instruments as described below.
Market risk is the possibility that the value of the derivative financial
instruments will change due to fluctuations in a factor from which the
instrument derives its value, primarily an interest rate. 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.
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.
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.
The Company's holdings of derivative financial instruments are as follows:
Notional Carrying Fair Total Credit
Dec. 31, 1996 Amount Value Value Exposure
Assets:
Interest rate caps $400,000 $3,056 $1,621 $1,621
======== ====== ====== ======
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 interest
rate risk. 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.
9. Fair values of financial instruments
The Company discloses fair value information for most on- and off-balance
sheet financial instruments for which it is practicable to estimate that
value. Fair 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 and liabilities is significant. The fair value
of the Company, therefore, cannot be estimated by aggregating the amounts
presented.
<PAGE>
<TABLE>
<CAPTION>
1996 1995
--------- ---------
Carrying Fair Carrying Fair
Financial Assets Value Value Value Value
<S> <C> <C> <C> <C>
Investments:
Fixed maturities (Note 2):
Held to maturity $1,256,143 $1,267,947 $1,308,251 $1,357,977
Available for sale 2,242,447 2,242,447 1,596,985 1,596,985
Mortgage loans on real estate
(Note 2) 582,982 597,053 393,020 419,557
Equity securities (Note 2) -- -- 3 3
Derivative financial instruments
(Note 8) 3,056 1,621 4,052 1,574
Cash and cash equivalents (Note 1) 40,829 40,829 42,896 42,896
Separate account assets (Note 1) 30,760 30,760 8,483 8,483
Financial Liabilities
Future policy benefits for fixed
annuities 3,871,682 3,702,141 3,149,087 2,997,716
Separate account liabilities 30,760 28,990 8,483 8,075
</TABLE>
At Dec. 31, 1996 and 1995, the carrying amount and fair value of future
policy benefits for fixed annuities exclude life insurance-related
contracts carried at $9,657 and $6,564, respectively. The fair value of
these benefits is based on the status of the annuities at Dec. 31, 1996 and
1995. 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
1996 and 1995.
<PAGE>
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, 1996 and 1995, and the related statements of income and cash
flows for each of the three years in the period ended December 31, 1996. 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, 1996 and 1995, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
Ernst & Young LLP
February 7, 1997
Minneapolis, Minnesota
<PAGE>
PART C.
Item 24. Financial Statements and Exhibits
(a) Financial Statements included in Part B of this Registration Statement:
The audited financial statements of American Enterprise Life including:
-Balance sheets as of Dec. 31, 1996 and Dec. 31, 1995; and
-Related statements of income and cash flows for each of the
three years in the period ended Dec. 31, 1996.
-Notes to Financial Statements.
-Report of Independent Auditors dated February 7, 1997.
The audited financial statements of the variable account including:
-Statements of net assets as of Dec. 31, 1996;
-Statements of operations for the year ended Dec. 31, 1996; and
-Statements of changes in net assets for the year ended Dec. 31, 1996
and for the period from Feb. 21, 1995 (commencement of operations) to
Dec. 31, 1995.
-Notes to Financial Statements.
-Report of Independent Auditors dated March 21, 1997.
(b) Exhibits:
1.1 Resolution of the Executive Committee of the Board of Directors of
American Enterprise Life establishing the American Enterprise Variable
Annuity Account dated July 15, 1987, filed electronically as Exhibit 1
to the Initial Registration Statement to Registration Statement No.
33-54471, filed on or about July 5, 1994 is incorporated herein by
reference.
1.2 Resolution of the Executive Committee of the Board of Directors of
American Enterprise Life establishing the ten additional subaccounts
within the separate account dated Aug. 21, 1997, filed electronically
as Exhibit 1.2 to Post-Effective Amendment No. 8 to Registration
Statement No. 33-54471 is incorporated herein by reference.
2. Not applicable.
3.1 Form of Variable Annuity and Life Insurance Distribution Agreement,
filed electronically as Exhibit 3.1 to Pre-Effective Amendment No. 1 to
Registration Statement No. 33-54471 is incorporated herein by reference.
3.2 Form of Managing General Agent Agreement, filed electronically as
Exhibit 3.2 to Pre-Effective Amendment No. 1 to Registration Statement
No. 33-54471 is incorporated herein by reference.
4.1 Form of Deferred Annuity Contract (form 34560), filed electronically as
Exhibit 4.1 to the Initial Registration Statement to Registration
Statement No. 33-54471, filed on or about July 5, 1994 is incorporated
herein by reference.
<PAGE>
4.2 Form of Tax-Qualified Endorsement (form 34563), filed electronically as
Exhibit 4.2 to the Initial Registration Statement to Registration
Statement No. 33-54471, filed on or about July 5, 1994 is incorporated
herein by reference.
4.3 Form of Annuity Endorsement (form 34562), filed electronically as
Exhibit 4.3 to the Initial Registration Statement to Registration
Statement No. 33-54471, filed on or about July 5, 1994 is incorporated
herein by reference.
5.1 Form of Application for American Enterprise Life Variable Annuity (form
34561), filed electronically as Exhibit 5.1 to the Initial Registration
Statement to Registration Statement No. 33-54471, filed on or about
July 5, 1994 is incorporated herein by reference.
6.1 Amendment and Restatement of Articles of Incorporation of American
Enterprise Life dated July 29, 1986, filed electronically as Exhibit
6.1 to the Initial Registration Statement to Registration Statement No.
33-54471, filed on or about July 5, 1994 is incorporated herein by
reference.
6.2 Amended By-Laws of American Enterprise Life, filed electronically as
Exhibit 6.2 to the Initial Registration Statement to Registration
Statement No. 33-54471, filed on or about July 5, 1994 is incorporated
herein by reference.
7. Not applicable.
8.1(a) Copy of Participation Agreement among American Enterprise Life
Insurance Company and GT Global Variable Investment Trust and GT Global
Variable Investment Series and GT Global Financial Services, Inc.,
dated February 10, 1995 is filed electronically as Exhibit 8.1 to
Post-Effective Amendment No. 3 to Registration Statement No.
33-54471 is incorporated herein by reference.
8.1(b) Form of Amendment 1 to Participation Agreement among American
Enterprise Life Insurance Company and G.T. Global Variable Investment
Trust and G.T. Global Variable Investment Series and GT Global, Inc.
(formerly G.T. Global Financial Services, Inc. dated ______________,
1997, is filed electronically herewith.
8.2(a) Copy of Participation Agreement among Putnam Capital Manager Trust,
Putnam Mutual Funds Corp. and American Enterprise Life Insurance
Company, dated January 16, 1995, filed electronically as Exhibit 8.2 to
Post-Effective Amendment No. 2 to Registration Statement No. 33-54471
is incorporated herein by reference.
8.2(b) Copy of Amendment 1 to Schedule A to Participation Agreement among
Putnam Capital Manager Trust, Putnam Mutual Funds Corp., and American
Enterprise Life Insurance Company, dated April 30, 1997, is filed
electronically herewith.
8.2(c) Form of Amendment 2 to Schedule A to Participation Agreement among
Putnam Capital Manager Trust, Putnam Mutual Funds Corp., and American
Enterprise Life Insurance Company, dated _____________, 1997, is filed
electronically herewith.
<PAGE>
8.3(a) Copy of Participation Agreement by and among Quest for Value Accumulation
Trust and American Enterprise Life Insurance Company and Quest for Value
Distributors, dated February 21, 1995, filed electronically as Exhibit
8.3 to Post-Effective Amendment No. 2 to Registration Statement No.
33-54471 is incorporated herein by reference.
8.3(b) Form of Amendment 1 to Schedule A to Participation Agreement among OCC
Accumulation Trust, American Enterprise Life Insurance Company, and OCC
Distributors dated ______________, 1997, is filed electronically
herewith.
8.4 Form of Participation Agreement among Oppenheimer Trust and American
Enterprise Life Insurance Company, dated ______________, 1997, is filed
electronically herewith.
8.5 Form of Participation Agreement among AIM Variable Insurance Funds and
American Enterprise Life Insurance Company, dated ______________, 1997,
is filed electronically herewith.
8.6 Copy of Participation Agreement among Janus Aspen Series, and American
Enterprise Life Insurance Company, dated October 8, 1997, is filed
electronically herewith.
8.7 Copy of Reinsurance Agreement, dated October 16, 1997, is filed
electronically herewith.
9. Opinion of Counsel and consent to its use as to the legality of the
securities being registered was filed with Registrant's most recent
24f-2 Notice on or about Feb. 19, 1997.
10. Consent of Independent Auditors, is filed electronically herewith.
11. Financial Statement Schedules and Report of Independent Auditors, is
filed electronically herewith.
Financial Statement Schedules:
Schedule I Summary of Investments other than Investments In Related
Parties
Schedule V Valuation and Qualifying Accounts
Report of Independent Auditors dated February 7, 1997.
All other schedules to the Financial Statements required by Article 7
of Regulation S-X are not required under the related instructions or
are inapplicable and, therefore, have been omitted.
12. Not applicable.
13. Copy of schedule for computation of each performance quotation provided
in the Registration Statement in response to Item 21, filed
electronically as Exhibit 13 to the Initial Registration Statement to
Registration Statement No. 33-54471, filed on or about July 5, 1994 is
incorporated herein by reference.
<PAGE>
14. Financial Data Schedules, are filed electronically herewith.
15. Power of Attorney to sign this Registration Statement dated March 28,
1997, filed electronically as Exhibit 15 to Post-Effective Amendment
No. 7, to Registration Statement No. 33-54471 is incorporated herein
by reference.
Item 25. Directors and Officers of the Depositor (American Enterprise
Life Insurance Company)
<TABLE>
<CAPTION>
Positions and
Name Principal Business Address Offices with Depositor
<S> <C> <C>
James E. Choat IDS Tower 10 Director and Chief Executive
Minneapolis, MN 55440 Officer
Douglas L. Forsberg IDS Tower 10 Director and President
Minneapolis, MN 55440
Morris Goodwin Jr. IDS Tower 10 Vice President and Treasurer
Minneapolis, MN 55440
Lorraine R. Hart IDS Tower 10 Vice President - Investments
Minneapolis, MN 55440
Richard W. Kling IDS Tower 10 Director and Chairman of the
Minneapolis, MN 55440 Board
Paul S. Mannweiler Indianapolis Power and Light Director
One Monument Circle
P.O. Box 1595
Indianapolis, IN 46206-1595
Stuart A. Sedlacek IDS Tower 10 Director and Executive Vice
Minneapolis, MN 55440 President - Assured Assets
F. Dale Simmons IDS Tower 10 Vice President - Real Estate
Minneapolis, MN 55440 Loan Management
William A. Stoltzmann IDS Tower 10 Director-Vice President,
Minneapolis, MN 55440 General Counsel and Secretary
Melinda S. Urion IDS Tower 10 Vice President and Controller
Minneapolis, MN 55440
</TABLE>
Item 26. Persons Controlled by or Under Common Control with the
Depositor or Registrant
American Enterprise Life Insurance is a wholly owned
subsidiary of IDS Life Insurance Company which is a wholly
owned subsidiary of American Express Financial Corporation.
American Express Financial Corporation is a wholly owned
subsidiary of American Express Company (American Express).
<PAGE>
The following list includes the names of major subsidiaries of
American Express.
Jurisdiction
Name of Subsidiary of Incorporation
I. Travel Related Services
American Express Travel Related
Services Company, Inc. New York
II. International Banking Services
American Express Bank Ltd. Connecticut
III. Companies engaged in American Express Financial Corporation
American Centurion Life Assurance Company New York
American Enterprise Investment Services Inc. Minnesota
American Enterprise Life Insurance Company Indiana
American Express Financial Advisors Inc. Delaware
American Express Financial Corporation Delaware
American Express Insurance Agency of Nevada Inc. Nevada
American Express Minnesota Foundation Minnesota
American Express Service Corporation Delaware
American Express Tax and Business Services Inc. Minnesota
American Express Trust Company Minnesota
American Partners Life Insurance Company Arizona
AMEX Assurance Company Illinois
IDS Advisory Group Inc. Minnesota
IDS Aircraft Services Corporation Minnesota
IDS Cable Corporation Minnesota
IDS Cable II Corporation Minnesota
IDS Capital Holdings Inc. Minnesota
IDS Certificate Company Delaware
IDS Deposit Corp. Utah
IDS Fund Management Limited U.K.
IDS Futures Corporation Minnesota
IDS Futures III Corporation Minnesota
IDS Insurance Agency of Alabama Inc. Alabama
IDS Insurance Agency of Arkansas Inc Arkansas
IDS Insurance Agency of Massachusetts Inc. Massachusetts
IDS Insurance Agency of Mississippi Ltd. Mississippi
IDS Insurance Agency of New Mexico Inc New Mexico
IDS Insurance Agency of North Carolina Inc. North Carolina
IDS Insurance Agency of Ohio Inc. Ohio
IDS Insurance Agency of Texas Inc. Texas
IDS Insurance Agency of Utah Inc Utah
IDS Insurance Agency of Wyoming Inc Wyoming
IDS International, Inc. Delaware
IDS Life Insurance Company Minnesota
IDS Life Insurance Company of New York New York
<PAGE>
IDS Management Corporation Minnesota
IDS Partnership Services Corporation Minnesota
IDS Plan Services of California, Inc. Minnesota
IDS Property Casualty Insurance Company Wisconsin
IDS Real Estate Services, Inc. Delaware
IDS Realty Corporation Minnesota
IDS Sales Support Inc. Minnesota
IDS Securities Corporation Delaware
Investors Syndicate Development Corp. Nevada
Item 27. Number of Contract owners
On Sept. 30, 1997, there were 1,314 contract owners of qualified
contracts and there were 811 owners of non-qualified contracts.
Item 28. Indemnification
The By-Laws of the depositor provide that the Corporation
shall have the power to indemnify a director, officer, agent
or employee of the Corporation pursuant to the provisions of
applicable statues or pursuant to contract.
The Corporation may purchase and maintain insurance on behalf
of any director, officer, agent or employee of the Corporation
against any liability asserted against or incurred by the
director, officer, agent or employee in such capacity or
arising out of the director's, officer's, agent's or
employee's status as such, whether or not the Corporation
would have the power to indemnify the director, officer, agent
or employee against such liability under the provisions of
applicable law.
The By-Laws of the depositor provide that it shall indemnify a
director, officer, agent or employee of the depositor pursuant
to the provisions of applicable statutes or pursuant to
contract.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to director, officers
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it
is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
<PAGE>
Item 29. Principal Underwriters.
(a) American Express Financial Advisors acts as principal
underwriter for the following investment companies:
IDS Bond Fund, Inc.; IDS California Tax-Exempt Trust; IDS
Discovery Fund, Inc.; IDS Equity Select Fund, Inc.; IDS Extra
Income Fund, Inc.; IDS Federal Income Fund, Inc.; IDS Global
Series, Inc.; IDS Growth Fund, Inc.; IDS High Yield Tax-Exempt
Fund, Inc.; IDS International Fund, Inc.; IDS Investment
Series, Inc.; IDS Managed Retirement Fund, Inc.; IDS Market
Advantage Series, Inc.; IDS Money Market Series, Inc.; IDS New
Dimensions Fund, Inc.; IDS Precious Metals Fund, Inc.; IDS
Progressive Fund, Inc.; IDS Selective Fund, Inc.; IDS Special
Tax-Exempt Series Trust; IDS Stock Fund, Inc.; IDS Strategy
Fund, Inc.; IDS Tax-Exempt Bond Fund, Inc.; IDS Tax-Free Money
Fund, Inc.; IDS Utilities Income Fund, Inc., Growth Trust;
Growth and Income Trust; Income Trust, Tax-Free Income Trust,
World Trust and IDS Certificate Company.
(b) As to each director, officer or partner of the principal
underwriter:
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Ronald G. Abrahamson Vice President- None
IDS Tower 10 Service Quality and
Minneapolis, MN 55440 Reengineering
Douglas A. Alger Vice President-Field None
IDS Tower 10 Compensation and
Minneapolis, MN 55440 Administration
Peter J. Anderson Senior Vice President- Vice
IDS Tower 10 Investments President
Minneapolis, MN 55440
Ward D. Armstrong Vice President- None
IDS Tower 10 American Express,
Minneapolis, MN 55440 Retirement Services
John M. Baker Vice President- None
Plan Sponsor Services
Joseph M. Barsky III Vice President-Senior None
IDS Tower 10 Portfolio Manager
Minneapolis, MN 55440
Robert C. Basten Vice President-Tax None
IDS Tower 10 and Business Services
Minneapolis, MN 55440
<PAGE>
Item 29(b). As to each director, officer or partner of the principal underwriter
(American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Timothy V. Bechtold Vice President-Risk None
IDS Tower 10 Management Products
Minneapolis, MN 55440
John D. Begley Group Vice President- None
Suite 100 Ohio/Indiana
7760 Olentangy River Rd.
Columbus, OH 43235
Jack A. Benjamin Group Vice President- None
Suite 200 Greater Pennsylvania
3500 Market Street
Camp Hill, PA 17011
Alan F. Bignall Vice President- None
IDS Tower 10 Technology and
Minneapolis, MN 55440 Development
Brent L. Bisson Group Vice President- None
Suite 900 Los Angeles Metro
E. Westside Twr
11835 West Olympic Blvd.
Los Angeles, CA 90064
John C. Boeder Vice President- None
IDS Tower 10 Mature Market Group
Minneapolis, MN 55440
Walter K. Booker Group Vice President- None
Suite 200 New Jersey
3500 Market Street
Camp Hill, NJ 17011
Bruce J. Bordelon Group Vice President- None
Galleria One Suite 1900 Gulf States
Galleria Blvd.
Metairie, LA 70001
Charles R. Branch Group Vice President- None
Suite 200 Northwest
West 111 North River Dr.
Spokane, WA 99201
<PAGE>
Item 29(b). As to each director, officer or partner of the principal underwriter
(American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Douglas W. Brewers Vice President- None
IDS Tower 10 Sales Support
Minneapolis, MN 55440
Karl J. Breyer Senior Vice President- None
IDS Tower 10 Corporate Affairs and
Minneapolis, MN 55440 Special Counsel
Daniel J. Candura Vice President- None
IDS Tower 10 Marketing Support
Minneapolis, MN 55440
Cynthia M. Carlson Vice President- None
IDS Tower 10 American Express
Minneapolis, MN 55440 Securities Services
Orison Y. Chaffee III Vice President-Field None
IDS Tower 10 Real Estate
Minneapolis, MN 55440
James E. Choat Senior Vice President- None
IDS Tower 10 Field Management
Minneapolis, MN 55440
Kenneth J. Ciak Vice President and None
IDS Property Casualty General Manager-
1400 Lombardi Avenue IDS Property Casualty
Green Bay, WI 54304
Roger C. Corea Group Vice President- None
290 Woodcliff Drive Upstate New York
Fairport, NY 14450
Henry J. Cormier Group Vice President- None
Commerce Center One Connecticut
333 East River Drive
East Hartford, CT 06108
John M. Crawford Group Vice President- None
Suite 200 Arkansas/Springfield/
10800 Financial Ctr Pkwy Memphis
Little Rock, AR 72211
<PAGE>
Item 29(b). As to each director, officer or partner of the principal underwriter
(American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Kevin F. Crowe Group Vice President- None
Suite 312 Carolinas/Eastern Georgia
7300 Carmel Executive Pk
Charlotte, NC 28226
Colleen Curran Vice President and None
IDS Tower 10 Assistant General Counsel
Minneapolis, MN 55440
Regenia David Vice President- None
IDS Tower 10 Systems Services
Minneapolis, MN 55440
Luz Maria Davis Vice President- None
IDS Tower 10 Communications
Minneapolis, MN 55440
Scott M. DiGiammarino Group Vice President- None
Suite 500 Washington/Baltimore
8045 Leesburg Pike
Vienna, VA 22182
Bradford L. Drew Group Vice President- None
Two Datran Center Eastern Florida
Penthouse One B
9130 S. Dadeland Blvd.
Miami, FL 33156
Gordon L. Eid Senior Vice President None
IDS Tower 10 and General Counsel
Minneapolis, MN 55440
Robert M. Elconin Vice President- None
IDS Tower 10 Government Relations
Minneapolis, MN 55440
Mark A. Ernst Vice President- None
IDS Tower 10 Retail Services
Minneapolis, MN 55440
Joseph Evanovich Jr. Group Vice President- None
One Old Mill Nebraska/Iowa/Dakotas
101 South 108th Avenue
Omaha, NE 68154
<PAGE>
Item 29(b). As to each director, officer or partner of the principal underwriter
(American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Louise P. Evenson Group Vice President- None
Suite 200 San Francisco Bay Area
1333 N. California Blvd.
Walnut Creek, CA 94596
Gordon M. Fines Vice President- None
IDS Tower 10 Mutual Fund Equity
Minneapolis MN 55440 Investments
Douglas L. Forsberg Vice President- None
IDS Tower 10 Institutional Products
Minneapolis, MN 55440 Group
Jeffrey P. Fox Vice President and None
IDS Tower 10 Corporate Controller
Minneapolis, MN 55440
William P. Fritz Group Vice President- None
Suite 160 Northern Missouri
12855 Flushing Meadows Dr
St. Louis, MO 63131
Carl W. Gans Group Vice President- None
8500 Tower Suite 1770 Twin City Metro
8500 Normandale Lake Blvd.
Bloomington, MN 55437
John J. Golden Vice President- None
IDS Tower 10 Human Resources Planning
Minneapolis, MN 55440 and Field Support
Morris Goodwin Jr. Vice President and None
IDS Tower 10 Corporate Treasurer
Minneapolis, MN 55440
David A. Hammer Vice President None
IDS Tower 10 and Marketing
Minneapolis, MN 55440 Controller
Teresa A. Hanratty Group Vice President- None
Suites 6&7 Northern New England
169 South River Road
Bedford, NH 03110
<PAGE>
Item 29(b). As to each director, officer or partner of the principal underwriter
(American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
John R. Hantz Group Vice President- None
Suite 107 Detroit Metro and
17177 N. Laurel Park Portland\Eugene
Livonia, MI 48154
Robert L. Harden Group Vice President- None
Two Constitution Plaza Boston Metro
Boston, MA 02129
Lorraine R. Hart Vice President- None
IDS Tower 10 Insurance Investments
Minneapolis, MN 55440
Scott A. Hawkinson Vice President-Assured None
IDS Tower 10 Assets Product Development
Minneapolis, MN 55440 and Management
Brian M. Heath Group Vice President- None
Suite 150 North Texas
801 E. Campbell Road
Richardson, TX 75081
Jon E. Hjelm Group Vice President- None
319 Southbridge St. Rhode Island/Central-
Auburn, MA 01501 Western Massachusetts
Janis K. Heaney Vice President- None
IDS Tower 10 Incentive Compensation
Minneapolis, MN 55440
James G. Hirsh Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
David J. Hockenberry Group Vice President- None
30 Burton Hills Blvd. Eastern Tennessee
Suite 175
Nashville, TN 37215
David R. Hubers Chairman, Chief Board member
IDS Tower 10 Executive Officer and
Minneapolis, MN 55440 President
<PAGE>
Item 29(b). As to each director, officer or partner of the principal underwriter
(American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Martin G. Hurwitz Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
James M. Jensen Vice President- None
IDS Tower 10 Life Products
Minneapolis, MN 55440
Marietta L. Johns Senior Vice President- None
IDS Tower 10 Field Management
Minneapolis, MN 55440
James E. Kaarre Vice President- None
IDS Tower 10 Marketing Promotions
Minneapolis, MN 55440
Matthew N. Karstetter Vice President- None
IDS Tower 10 Investment Accounting
Minneapolis, MN 55440
Linda B. Keene Vice President- None
IDS Tower 10 Market Development
Minneapolis, MN 55440
G. Michael Kennedy Vice President-Investment None
IDS Tower 10 Services and Investment
Minneapolis, MN 55440 Research
Susan D. Kinder Senior Vice President- None
IDS Tower 10 Human Resources
Minneapolis, MN 55440
Richard W. Kling Senior Vice President- None
IDS Tower 10 Products
Minneapolis, MN 55440
Paul F. Kolkman Vice President- None
IDS Tower 10 Actuarial Finance
Minneapolis, MN 55440
Claire Kolmodin Vice President- None
IDS Tower 10 Service Quality
Minneapolis, MN 55440
<PAGE>
Item 29(b). As to each director, officer or partner of the principal underwriter
(American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
David S. Kreager Group Vice President- None
Suite 108 Greater Michigan
Trestle Bridge V
5136 Lovers Lane
Kalamazoo, MI 49002
Steven C. Kumagai Director and Senior None
IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Management and
Business Systems
Mitre Kutanovski Group Vice President- None
Suite 680 Chicago Metro
8585 Broadway
Merrillville, IN 48410
Edward Labenski Jr. Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Kurt A. Larson Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Lori J. Larson Vice President- None
IDS Tower 10 Variable Assets Product
Minneapolis, MN 55440 Development
Ryan R. Larson Vice President- None
IDS Tower 10 IPG Product Development
Minneapolis, MN 55440
Daniel E. Laufenberg Vice President and None
IDS Tower 10 Chief U.S. Economist
Minneapolis, MN 55440
Richard J. Lazarchic Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Peter A. Lefferts Senior Vice President- None
IDS Tower 10 Corporate Strategy and
Minneapolis, MN 55440 Development
<PAGE>
Item 29(b). As to each director, officer or partner of the principal underwriter
(American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Douglas A. Lennick Director and Executive None
IDS Tower 10 Vice President-Private
Minneapolis, MN 55440 Client Group
Mary J. Malevich Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Fred A. Mandell Vice President- None
IDS Tower 10 Field Marketing Readiness
Minneapolis, MN 55440
Daniel E. Martin Group Vice President- None
Suite 650 Pittsburgh Metro
5700 Corporate Drive
Pittsburgh, PA 15237
Thomas W. Medcalf Vice President- None
IDS Tower 10 Senior Portfolio Manager
Minneapolis, MN 55440
William C. Melton Vice President- None
IDS Tower 10 International Research
Minneapolis, MN 55440 and Chief International
Economist
William P. Miller Vice President and None
IDS Tower 10 Senior Portfolio Manager
Minneapolis, MN 55440
James A. Mitchell Executive Vice President- None
IDS Tower 10 Marketing and Products
Minneapolis, MN 55440
John P. Moraites Group Vice President- None
Union Plaza Suite 900 Kansas/Oklahoma
3030 Northwest Expressway
Oklahoma City, OK 73112
Pamela J. Moret Vice President- None
IDS Tower 10 Variable Assets
Minneapolis, MN 55440
<PAGE>
Item 29(b). As to each director, officer or partner of the principal underwriter
(American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Alan D. Morgenstern Group Vice President- None
Suite 200 Central California/
3500 Market Street Western Nevada
Camp Hill, NJ 17011
Barry J. Murphy Senior Vice President- None
IDS Tower 10 Client Service
Minneapolis, MN 55440
Mary Owens Neal Vice President- None
IDS Tower 10 Mature Market Segment
Minneapolis, MN 55440
Robert J. Neis Vice President- None
IDS Tower 10 Technology Services
Minneapolis, MN 55440
Thomas V. Nicolosi Group Vice President- None
Suite 220 New York Metro Area
500 Mamaroneck Avenue
Harrison, NY 10528
James R. Palmer Vice President- None
IDS Tower 10 Taxes
Minneapolis, MN 55440
Carla P. Pavone Vice President- None
IDS Tower 10 Specialty Service Teams
Minneapolis, MN 55440 and Emerging Business
Susan B. Plimpton Vice President- None
IDS Tower 10 Segmentation Development
Minneapolis, MN 55440 and Support
Larry M. Post Group Vice President- None
One Tower Bridge Philadelphia Metro
100 Front Street 8th Fl
West Conshohocken, PA 19428
Ronald W. Powell Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
<PAGE>
Item 29(b). As to each director, officer or partner of the principal underwriter
(American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
James M. Punch Vice President- None
IDS Tower 10 Special Projects
Minneapolis, MN 55440
Frederick C. Quirsfeld Vice President-Taxable None
IDS Tower 10 Mutual Fund Investments
Minneapolis, MN 55440
Debra J. Rabe Vice President-Financial None
IDS Tower 10 Planning
Minneapolis, MN 55440
R. Daniel Richardson III Group Vice President- None
Suite 800 Southern Texas
Arboretum Plaza One
9442 Capital of Texas Hwy N.
Austin, TX 78759
Roger B. Rogos Group Vice President- None
One Sarasota Tower At Large
Suite 700
Two N. Tamiami Trail
Sarasota, FL 34236
ReBecca K. Roloff Vice President-Private None
IDS Tower 10 Client Group
Minneapolis, MN 55440
Stephen W. Roszell Vice President- None
IDS Tower 10 Advisory Institutional
Minneapolis, MN 55440 Marketing
Max G. Roth Group Vice President- None
Suite 201 S IDS Ctr Wisconsin/Upper Michigan
1400 Lombardi Avenue
Green Bay, WI 54304
John P. Ryan Vice President and None
IDS Tower 10 General Auditor
Minneapolis, MN 55440
<PAGE>
Item 29(b). As to each director, officer or partner of the principal underwriter
(American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Erven A. Samsel Senior Vice President- None
45 Braintree Hill Park Field Management
Suite 402
Braintree, MA 02184
Russell L. Scalfano Group Vice President- None
Suite 201 Illinois/Indiana/Kentucky
101 Plaza East Blvd.
Evansville, IN 47715
William G. Scholz Group Vice President- None
Suite 205 Arizona/Las Vegas
7333 E Doubletree Ranch Rd
Scottsdale, AZ 85258
Stuart A. Sedlacek Vice President- None
IDS Tower 10 Assured Assets
Minneapolis, MN 55440
Donald K. Shanks Vice President- None
IDS Tower 10 Property Casualty
Minneapolis, MN 55440
F. Dale Simmons Vice President-Senior None
IDS Tower 10 Portfolio Manager,
Minneapolis, MN 55440 Insurance Investments
Judy P. Skoglund Vice President- None
IDS Tower 10 Human Resources and
Minneapolis, MN 55440 Organization Development
Ben C. Smith Vice President- None
IDS Tower 10 Workplace Marketing
Minneapolis, MN 55440
William A. Smith Vice President and None
IDS Tower 10 Controller-Private
Minneapolis, MN 55440 Client Group
James B. Solberg Group Vice President- None
466 Westdale Mall Eastern Iowa Area
Cedar Rapids, IA 52404
<PAGE>
Item 29(b). As to each director, officer or partner of the principal underwriter
(American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Bridget Sperl Vice President- None
IDS Tower 10 Geographic Service
Minneapolis, MN 55440 Teams
Paul J. Stanislaw Group Vice President- None
Suite 1100 Southern California
Two Park Plaza
Irvine, CA 92714
Lois A. Stilwell Group Vice President- None
Suite 433 Outstate Minnesota Area/
9900 East Bren Road North Dakota/Western Wisconsin
Minnetonka, MN 55343
William A. Stoltzmann Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
James J. Strauss Vice President- None
IDS Tower 10 Corporate Planning
Minneapolis, MN 55440 and Analysis
Jeffrey J. Stremcha Vice President-Information None
IDS Tower 10 Resource Management/ISD
Minneapolis, MN 55440
Barbara Stroup Stewart Vice President-Corporate None
IDS Tower 10 Reengineering
Minneapolis, MN 55440
Craig P. Taucher Group Vice President- None
Suite 150 Orlando/Jacksonville
4190 Belfort Road
Jacksonville, FL. 32216
Neil G. Taylor Group Vice President- None
Suite 425 Seattle/Tacoma
101 Elliott Avenue West
Seattle, WA 98119
John R. Thomas Senior Vice President- Board member
IDS Tower 10 Information and
Minneapolis, MN 55440 Technology
<PAGE>
Item 29(b). As to each director, officer or partner of the principal underwriter
(American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Melinda S. Urion Senior Vice President Treasurer
IDS Tower 10 and Chief Financial
Minneapolis, MN 55440 Officer
Peter S. Velardi Group Vice President- None
Suite 180 Atlanta/Birmingham
1200 Ashwood Parkway
Atlanta, GA 30338
Charles F. Wachendorfer Group Vice President- None
Suite 100 Denver/Salt Lake City/
Stanford Plaza II Albuquerque
7979 East Tufts Ave Pkwy
Denver, CO 80237
Wesley W. Wadman Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Norman Weaver Jr. Senior Vice President- None
1010 Main St Suite 2B Field Management
Huntington Beach, CA 92648
Michael L. Weiner Vice President- None
IDS Tower 10 Tax Research and Audit
Minneapolis, MN 55440
Lawrence J. Welte Vice President- None
IDS Tower 10 Investment Administration
Minneapolis, MN 55440
Jeffry M. Welter Vice President- None
IDS Tower 10 Equity and Fixed Income
Minneapolis, MN 55440 Trading
William N. Westhoff Senior Vice President- None
IDS Tower 10 Global Investments
Minneapolis, MN 55440
Thomas L. White Group Vice President- None
Suite 200 Cleveland Metro
28601 Chagrin Blvd.
Woodmere, OH 44122
<PAGE>
Item 29(b). As to each director, officer or partner of the principal underwriter
(American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Eric S. Williams Group Vice President- None
Suite 250 Virginia
3951 Westerre Parkway
Richmond, VA 23233
William J. Williams Group Vice President- None
Two North Tamiami Trail Western Florida
Suite 702
Sarasota, FL 34236
Edwin M. Wistrand Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
Michael D. Wolf Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Michael R. Woodward Senior Vice President- None
32 Ellicott St Field Management
Suite 100
Batavia, NY 14020
Item 29(c).
<TABLE>
<CAPTION>
Net Underwriting
Name of Principal Discounts and Compensation on Brokerage
Underwriter Commissions Redemption Commissions Compensation
<S> <C> <C> <C> <C>
American Express $673,634 $34,957 -- --
Financial Advisors
Inc.
</TABLE>
Item 30. Location of Accounts and Records
American Enterprise Life Insurance Company
IDS Tower 10
Minneapolis, MN 55402
Item 31. Management Services
Not applicable.
<PAGE>
Item 32. Undertakings
(a) Registrant undertakes that it will file a post-effective amendment
to this registration statement as frequently as is necessary to
ensure that the audited financial statements in the registration
statement are never more than 16 months old for so long as
payments under the variable annuity contracts may be accepted.
(b) Registrant undertakes that it will include either
(1) as part of any application to purchase a
contract offered by the prospectus, a space that an
applicant can check to request a Statement of
Additional Information, or (2) a post card or
similar written communication affixed to or
included the prospectus that the applicant can
remove to send for a Statement of Additional
Information.
(c) Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made
available under this Form promptly upon written or oral request to
American Enterprise Life Contract Owner Service at the address or
phone number listed in the prospectus.
(d) The sponsoring insurance company represents that the fees and
charges deducted under the contract, in the aggregate, are
reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by the insurance
company.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, American Enterprise Life Insurance Company, on behalf of the Registrant
certifies that it meets the requirements for effectiveness of this Amendment to
its Registration Statement pursuant to Rule 485(b) under the Securities Act of
1933 and has duly caused this Registration Statement to be signed on its behalf,
in the City of Minneapolis, and State of Minnesota, on the 30th day of October,
1997.
AMERICAN ENTERPRISE VARIABLE ANNUITY ACCOUNT
(Registrant)
By American Enterprise Life Insurance Company
(Sponsor)
By /s/ Richard W. Kling*
Richard W. Kling
Chairman of the Board
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities indicated on the 30th day of
October, 1997.
Signature Title
/s/ James F. Choat* Director, Chief Executive Officer
James F.Choat
/s/ Douglas L. Forsberg* Director, President
Douglas L. Forsberg
/s/ Richard W. Kling* Director and Chairman of the Board
Richard W. Kling
/s/ Paul S. Mannweiler* Director
Paul S. Mannweiler
/s/ Stuart A. Sedlacek* Director and Executive Vice President-
Stuart A. Sedlacek Assured Assets
/s/ William A. Stoltzmann* Director, Vice President, General Counsel
William A. Stoltzmann and Secretary
/s/ Melinda S. Urion Vice President and Controller
Melinda S. Urion
*Signed pursuant to Power of Attorney dated March 28, 1997, filed electronically
as Exhibit 15 to Post-Effective Amendment No. 7 to Registration Statement No.
33-54471, filed on or about April 23, 1997, is incorporated herein by reference.
________________________________
Mary Ellyn Minenko
<PAGE>
CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 9
This Registration Statement is comprised of the following papers and documents:
The Cover Page.
Cross-reference sheet.
Part A.
The prospectus.
Part B.
Statement of Additional Information.
Financial Statements.
Part C.
Other Information.
The signatures.
Exhibits.
<PAGE>
PAGE 1
American Enterprise Variable Annuity Account
File No. 33-54471/811-7195
EXHIBIT INDEX
8.1(b) Form of Amendment 1 to Participation Agreement among American
Enterprise Life Insurance Company and G.T. Global Variable Investment
Trust and G.T. Global Variable Investment Series and GT Global, Inc.
(formerly G.T. Global Financial Services, Inc. dated ______________,
1997.
8.2(b) Copy of Amendment 1 to Schedule A to Participation Agreement among
Putnam Capital Manager Trust, Putnam Mutual Funds Corp., and American
Enterprise Life Insurance Company, dated April 30, 1997.
8.2(c) Form of Amendment 2 to Schedule A to Participation Agreement among
Putnam Capital Manager Trust, Putnam Mutual Funds Corp., and American
Enterprise Life Insurance Company, dated _____________, 1997.
8.3(b) Form of Amendment 1 to Schedule A to Participation Agreement among OCC
Accumulation Trust, American Enterprise Life Insurance Company, and OCC
Distributors dated ______________, 1997.
8.4 Form of Participation Agreement among Oppenheimer Trust and American
Enterprise Life Insurance Company, dated ______________, 1997.
8.5 Form of Participation Agreement among AIM Variable Insurance Funds and
American Enterprise Life Insurance Company, dated ______________, 1997.
8.6 Copy of Participation Agreement among Janus Aspen Series, and American
Enterprise Life Insurance Company, dated October 8, 1997.
8.7 Copy of Reinsurance Agreement, dated October 16, 1997.
10. Consent of Independent Auditors.
11. Financial Statement Schedules and Report of Independent Auditors.
14. Financial Data Schedules -
American Enterprise Life Insurance Company
American Enterprise Variable Annuity Account
<PAGE>
AMENDMENT NO. 1 TO PARTICIPATION AGREEMENT Among
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY And
G.T. GLOBAL VARIABLE INVESTMENT TRUST And
G.T. GLOBAL VARIABLE INVESTMENT SERIES And
GT GLOBAL, INC. (formerly G.T. Global Financial Services, Inc.)
This is an amendment to the February 10, 1995 Participation Agreement
("Agreement") among American Enterprise Life Insurance Company and G.T. Global
Variable Investment Trust and G.T. Global Variable Investment Series and GT
Global, Inc. (formerly G.T. Global Financial Services, Inc.).
Schedule A to the Agreement is amended to read as follows:
American Enterprise Variable Annuity Account, established July 15, 1987
used to fund the flexible premium variable annuity contracts known as
the AEL Personal Portfoliosm and the AEL Personal Portfolio Plus.
AMERICAN ENTERPRISE LIFE
INSURANCE COMPANY ATTEST:
Signature: /s/ Ryan Larson Signature: /s/ William A. Stoltzmann
By: Ryan Larson By: William A. Stoltzmann
Title: VP - Product Development Title: VP
G.T. GLOBAL VARIABLE G.T. GLOBAL VARIABLE
INVESTMENT TRUST INVESTMENT SERIES
Signature: Signature:
By: By:
Title: Title:
<PAGE>
GT GLOBAL, INC.
Signature:
By:
Title:
Date:________________, 1997
<PAGE>
AMENDMENT 1 TO SCHEDULE A TO
PARTICIPATION AGREEMENT
Among
PUTNAM CAPITAL MANAGER TRUST
(now known as Putnam Variable Trust)
PUTNAM MUTUAL FUNDS CORP.
and
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
THIS AMENDMENT 1 TO SCHEDULE A TO PARTICIPATION AGREEMENT (Amendment 1 to
Schedule A) is made and entered into this 30th day of April, 1997 by and among
Putnam Variable Trust (formerly Putnam Capital Manager Trust) (the "Fund");
Putnam Mutual Funds Corp. (the "Distributor"); and American Enterprise Life
Insurance Company (the "Company").
WHEREAS, the Company, the Fund and the Distributor are parties to the
Participation Agreement dated January 16th, 1995 (the "Agreement"); and
WHEREAS, the parties now desire to amend Schedule A to the Agreement to add two
funds as Authorized Funds in which American Enterprise Life Insurance Company,
on its own behalf and on behalf of the Accounts set forth on Schedule A, as
amended, may invest;
NOW, THEREFORE, in consideration of their mutual promises, the Company, the Fund
and the Distributor agree as follows:
1. Amendment to Schedule A. In accordance with the terms of the Agreement,
the parties hereby amend Schedule A to include two new funds as
Authorized Funds in which American Enterprise Life Insurance Company,
on its own behalf and on behalf of the Accounts set forth on Schedule
A, as amended, may invest. Schedule A, as amended, specifies which
Authorized Funds are offered as investment options under each of the
variable annuity contracts listed.
2. Counterparts. This Amendment 1 to Schedule A may be executed
simultaneously in two or more counterparts, each of which taken
together will constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment 1 to
Schedule A to be executed in its name and behalf by its duly authorized
representatives as of the date specified above.
PUTNAM VARIABLE TRUST PUTNAM MUTUAL FUNDS CORP.
By: /s/ John R. Veroni By: /s/ Jeffrey M. Miller
Name: John R. Veroni Name: Jeffrey M. Miller
Title: Vice President Title: Managing Director
AMERICAN ENTERPRISE LIFE
INSURANCE COMPANY ATTEST:
By: /s/ Ryan Larson By: /s/ William A. Stoltzmann
Title: VP - Product Development Name: William A. Stoltzmann
Name: Ryan Larson Title: VP
<PAGE>
Schedule A
Contracts
American Enterprise Variable Annuity Account, established July 15, 1987.
AEL Personal Portfoliosm offers the following Authorized Funds as
investment options:
Putnam VT Diversified Income Fund
Putnam VT Growth and Income Fund
Putnam VT New Opportunities Fund
Putnam VT High Yield Fund
AEL variable annuity distributed through TCF offers the following
Authorized Funds as investment options:
Putnam VT Diversified Income Fund
Putnam VT Growth and Income Fund
Putnam VT New Opportunities Fund
Putnam VT Voyager Fund
Putnam VT Global Growth Fund
Date: April 30, 1997
<PAGE>
AMENDMENT 2 TO SCHEDULE A TO
PARTICIPATION AGREEMENT
Among
PUTNAM CAPITAL MANAGER TRUST
(now known as Putnam Variable Trust)
PUTNAM MUTUAL FUNDS CORP.
and
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
THIS AMENDMENT 2 TO SCHEDULE A TO PARTICIPATION AGREEMENT (Amendment 2 to
Schedule A) is made and entered into this day of , 1997 by and among Putnam
Variable Trust (formerly Putnam Capital Manager Trust) (the "Fund"); Putnam
Mutual Funds Corp. (the "Distributor"); and American Enterprise Life Insurance
Company (the "Company").
WHEREAS, the Company, the Fund and the Distributor are parties to the
Participation Agreement dated January 16th, 1995, as amended April 30th, 1997
(the "Agreement"); and
WHEREAS, the parties now desire to amend Schedule A to the Agreement so that an
enhanced flexible premium variable annuity contract may invest in the Authorized
Funds;
NOW, THEREFORE, in consideration of their mutual promises, the Company, the Fund
and the Distributor agree as follows:
<PAGE>
1. Amendment to Schedule A. In accordance with the terms of the Agreement,
the parties hereby amend Schedule A to read as follows:
Schedule A
Contracts
American Enterprise Variable Annuity Account, established July 15, 1987.
AEL Personal Portfoliosm and AEL Personal Portfolio Plus offer the
following Authorized Funds as investment options:
Putnam VT Diversified Income Fund
Putnam VT Growth and Income fund
Putnam VT New Opportunities Fund
Putnam VT High Yield Fund
AEL Preferredsm, distributed through TCF, offers the following
Authorized Funds as investment options:
Putnam VT Diversified Income Fund
Putnam VT Growth and Income Fund
Putnam VT New Opportunities Fund
Putnam VT Voyager Fund
Putnam VT Global Growth Fund
2. Counterparts. This Amendment 2 to Schedule A may be executed simultaneously
in two or more counterparts, each of which taken together will constitute
one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment 2 to
Schedule A to be executed in its name and behalf by its duly authorized
representatives as of the date specified above.
PUTNAM VARIABLE TRUST PUTNAM MUTUAL FUNDS CORP.
By: By:
Name: Name:
Title: Title:
AMERICAN ENTERPRISE LIFE
INSURANCE COMPANY ATTEST:
By: By:
Name: Name:
Title: Title:
<PAGE>
AMENDMENT NO. 1 TO PARTICIPATION AGREEMENT
by and among
OCC ACCUMULATION TRUST,
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY and
OCC DISTRIBUTORS
This is an amendment to the February 21, 1995 Participation Agreement
("Agreement") among OCC Accumulation Trust (formerly Quest for Value
Accumulation Trust), American Enterprise Life Insurance Company and OCC
Distributors (formerly Quest for Value Distributors).
Schedule 1 to the Agreement is amended to read as follows:
The following separate accounts of American Enterprise Life Insurance
Company are permitted in accordance with the provisions of this
Agreement to invest in Portfolios of the Fund shown in Schedule 2:
American Enterprise Variable Annuity Account, established July 15, 1987
as used to fund the flexible premium variable annuity contracts known
as the AEL Personal Portfoliosm and AEL Personal Portfolio Plus.
Schedule 2 to the Agreement is amended to read as follows:
The separate account(s) shown on Schedule 1 may invest in the following
Portfolios of the OCC Accumulation Trust:
Managed Portfolio
U.S. Government Income Portfolio
Small Cap Portfolio
Equity Portfolio
OCC ACCUMULATION TRUST OCC DISTRIBUTORS
Signature: Signature:
By: By:
Title: Title:
<PAGE>
AMERICAN ENTERPRISE LIFE ATTEST:
INSURANCE COMPANY
Signature: /s/ Ryan Larson Signature: /s/ William A. Stoltzmann
By: Ryan Larson By: William A. Stoltzmann
Title: VP - Product Development Title: VP
Date: ________________________, 1997
<PAGE>
PARTICIPATION AGREEMENT
Among
OPPENHEIMER VARIABLE ACCOUNT FUNDS,
OPPENHEIMERFUNDS, INC.
and
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
THIS AGREEMENT (the "Agreement") made and entered into as of the day of ,
199 by and among American Enterprise Life Insurance Company (hereinafter the
"Company"), on its own behalf and on behalf of each separate account of the
Company named in Schedule 1 to this Agreement, as may be amended from time to
time by mutual consent (hereinafter collectively the "Accounts"), Oppenheimer
Variable Account Funds (hereinafter the "Fund") and OppenheimerFunds, Inc.
(hereinafter the "Adviser").
WHEREAS, the Fund is an open-end management investment company
and is available to act as the investment vehicle for separate accounts now in
existence or to be established at any date hereafter for variable life insurance
policies and variable annuity contracts (collectively, the "Variable Insurance
Products") offered by insurance companies (hereinafter "Participating Insurance
Companies");
WHEREAS, the beneficial interest in the Fund is divided into
several series of shares, each designated a "Portfolio", and each representing
the interests in a particular managed pool of securities and other assets;
<PAGE>
WHEREAS, the Fund has obtained an order from the Securities
and Exchange commission, dated July 16, 1986 (File No. 812-6324) granting
Participating Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of sections 9(a),
13(a), 15(a) and 15(b) of the Investment Company Act of 1940, as amended,
(hereinafter the "1940 Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15)
thereunder, to the extent necessary to permit shares of the Fund to be sold to
and held by variable annuity and variable life insurance separate accounts of
both affiliated and unaffiliated life insurance companies (hereinafter the
"Mixed and Shared Funding Exemptive Order");
WHEREAS, the Fund is registered as an open-end management
investment company under the 1940 Act and its shares are registered under the
Securities Act of 1933, as amended (hereinafter the "1933 Act");
WHEREAS, the Adviser is duly registered as an investment
adviser under the federal Investment Advisers Act of 1940;
WHEREAS, the Company has registered or will register certain
variable annuity and/or life insurance contracts under the 1933 Act (hereinafter
"Contracts") (unless an exemption from registration is available);
WHEREAS, the Accounts are or will be duly organized, validly
existing segregated asset accounts, established by resolution of the board of
Directors of the Company, to set aside and invest assets attributable to the
aforesaid variable contracts (the Contract(s) covered by this Agreement are
specified in Schedule 2 attached hereto, as may be modified by mutual consent
from time to time);
<PAGE>
WHEREAS, the Company has registered or will register the
Accounts as unit investment trusts under the 1940 Act (unless an exemption from
registration is available);
WHEREAS, to the extent permitted by applicable insurance laws
and regulations, the Company intends to purchase shares in the Portfolios (the
Portfolios covered by this Agreement are specified in Schedule 3 attached hereto
as may be modified by mutual consent from time to time), on behalf of the
Accounts to fund the Contracts named in Schedule 2, as may be amended from time
to time by mutual consent, and the Fund is authorized to sell such shares to
unit investment trusts such as the Accounts at net asset value; and
NOW, THEREFORE, in consideration of their mutual promises, the Fund, the
Adviser and the Company agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Fund agrees to sell to the Company those shares of
the Fund which the Company orders on behalf of the Account, executing such
orders on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the order for the shares of the Fund. For purposes
of this Section 1.1, the Company shall be the designee of the Fund for receipt
of such orders from each Account and receipt by such designee shall constitute
receipt by the Fund; provided that the Fund receives written (or facsimile)
notice of such order by 10:00 a.m. New York time on the next following Business
Day. "Business Day" shall mean any day on which the New York Stock Exchange is
open for trading and on which the Fund calculates its net asset value pursuant
to the rules of the Securities and Exchange Commission.
<PAGE>
1.2. The Company shall pay for Fund shares on the next
Business Day after it places an order to purchase Fund shares in accordance with
Section 1.1 hereof. Payment shall be in federal funds transmitted by wire
pursuant to the instructions of the Fund's treasurer or by a credit for any
shares redeemed or by any other method agreed to by the parties.
1.3. The Fund agrees to make Fund shares available
indefinitely for purchase at the applicable net asset value per share by the
Company for its Accounts listed in Schedule 1 on those days on which the Fund
calculates its net asset value pursuant to rules of the SEC; provided, however,
that the Board of Trustees of the Fund (hereinafter the "Trustees") may refuse
to sell shares of any Portfolio to any person, or suspend or terminate the
offering of shares of any Portfolio if such action is required by law or by
regulatory authorities having jurisdiction or is, in the sole discretion of the
Trustees, acting in good faith and in light of their fiduciary duties under
federal and any applicable state laws, in the best interests of the shareholders
of any Portfolio.
1.4. The Fund agrees to redeem, upon the Company's request,
any full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.4, the Company shall be the designee of the Fund for receipt of
requests for redemption and receipt by such designee shall constitute receipt by
the Fund; provided that the Fund receives written (or facsimile) notice of such
request for redemption by 10:00 a.m. New York time on the next following
Business Day.
<PAGE>
1.5. The Fund shall endeavor to pay for the Fund shares
redeemed on the same Business Day the Fund receives notice of the redemption
order in accordance with Section 1.4 hereof, but in no event shall payment be
made beyond the time period specified in the Fund's prospectus or statement of
additional information. Payment shall be in federal funds transmitted by wire to
the Company's account as designated by the Company in writing from time to time
or by any other method agreed to by the parties.
1.6. The Company agrees to purchase and redeem the shares of
the Portfolios named in Schedule 3 offered by the then current prospectus and
statement of additional information of the Fund in accordance with the
provisions of such prospectus and statement of additional information
1.7. The Fund shall furnish same-day notice (by wire or
telephone followed by written confirmation) to the Company of any income
dividends or capital gain distributions payable on the Portfolios' shares. The
Company hereby elects to receive all such income dividends and capital gain
distributions as are payable on a Portfolio's shares in additional shares of
that Portfolio. The Company reserves the right to revoke this election on ten
Business Days' notice to the Fund and the Adviser and thereafter to receive all
such dividends and distributions in cash. The Fund will notify the Company of
the number of shares so issued as payment of such dividends and distributions.
1.8. The Fund shall make the net asset value per share for
each Portfolio available to the Company on a daily basis as soon as reasonably
practicable after the net asset value per share is calculated and will use its
best efforts to make such
<PAGE>
net asset value per share available by 5:30 p.m. New York time, but in no event
later than 6:00 p.m. New York time each Business Day.
1.9. The Fund agrees that its shares will be sold only to
Participating Insurance Companies and their separate accounts or to such other
persons permitted under applicable tax laws and/or regulations, a Revenue Ruling
or private letter ruling granted by the Internal Revenue Service.
ARTICLE II. Sales Material, Prospectuses and Other Reports
2.1. The Company shall furnish, or shall cause to be
furnished, to the Fund or its designee a copy of each Contract prospectus or
statement of additional information in which the Fund or the Adviser is named
prior to the filing of such document with the Securities and Exchange
Commission. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or the Adviser is named, at least ten Business Days
prior to its use. No such material shall be used if the Fund or its designee
reasonably object to such use within ten Business Days after receipt of such
material.
2.2. The Fund and/or the Adviser shall furnish, or shall cause
to be furnished, to the Company or its designee a copy of each Fund prospectus
or statement of additional information in which the Company is named prior to
the filing of such document with the Securities and Exchange Commission. The
Fund shall furnish, or shall cause to be furnished, to the Company or its
designee, each piece of sales literature or other promotional material in which
the Company is named, at least ten Business Days prior to its use. No such
material shall be used if the Company or its designee reasonably object to such
use within five Business Days after receipt of such material.
<PAGE>
2.3. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund or
the Adviser in connection with the sale of the Contracts other than the
information or representations contained in the registration statement,
prospectus or statement of additional information for the Fund shares, as such
registration statement, prospectus and statement of additional information may
be amended or supplemented from time to time, or in reports or proxy statements
for the Fund, or in sales literature, published reports in the public domain or
other promotional materials approved by the Fund or its designee, except as
required by legal process or regulatory authorities or with the permission of
the Fund. Nothing in this Section 2.3 will be construed as preventing the
Company or its agents from giving advice on investments in the Fund.
2.4. The Fund and/or the Adviser shall not give any
information or make any representations or statements on behalf of the Company
or concerning the Company, the Accounts or the Contracts other than the
information or representations contained in the registration statement,
prospectus or statement of additional information for the Contracts, as such
registration statement, prospectus and statement of additional information may
be amended or supplemented from time to time, in reports or proxy statements for
the Company, or in materials approved by the Company for distribution including
sales literature or other promotional materials, except as required by legal
process or regulatory authorities or with the permission of the Company.
2.5. For purposes of this Article II, the phrase "sales
literature or other promotional material" includes, without limitation,
advertisements (such as material published, or designed for use in, a newspaper,
magazine, or other periodical, radio,
<PAGE>
television, telephone or tape recording, videotape display, signs or billboard
or electronic media), and sales literature (such as brochures, circulars, market
letters and form letters), distributed or made generally available to customers
or the public.
2.6. The Fund and the Adviser hereby consent to the Company's
use of the names "Oppenheimer Variable Account Funds" and OppenheimerFunds" in
connection with the marketing of the Contracts, subject to the terms of Sections
2.1 and 2.3 of this Agreement. Such consent will terminate with the termination
of this Agreement.
2.7. The Fund or the Adviser shall provide a camera-ready copy
of and/or a computer diskette containing its current prospectus within a
reasonable period of its filing date, and provide other assistance as is
reasonably necessary in order for the Company once each year (or more frequently
if the prospectus for the Fund is supplemented or amended) to have the
prospectus for the Fund and the prospectuses for the other investment options
under the Contracts printed together in one document (such printing and
distribution to existing and prospective Contract owners to be at the Company's
expense). The Adviser shall be permitted to review and approve the typeset form
of the Fund's prospectus prior to such printing provided the prospectus has been
provided within a reasonable period.
2.8. At the option of the Company, the Fund or the Adviser
shall either: (i) provide the Company (at the Fund's expense) with as many
copies of the Fund's statement of additional information, reports to
shareholders, other information relating to the Fund necessary to prepare
financial reports, and other communications to shareholders as the Company shall
reasonably require for distribution to existing and/or
<PAGE>
prospective Contract owners (at the Company's expense), or (ii) camera-ready,
computer diskette and/or a printed copy, if appropriate, of such materials for
printing (at the Fund's expense) and distribution (at the Company's expense) to
existing and/or prospective Contract owners, within a reasonable period of the
filing date for definitive copies of such material. The Adviser shall be
permitted to review and approve the typeset form of such materials prior to such
printing provided such materials have been provided within a reasonable period.
ARTICLE III. Fees and Expenses
3.1. The Fund and Adviser shall pay no fee or other
compensation to the Company under this Agreement, and the Company shall pay no
fee or other compensation to the Fund or Adviser under this Agreement, except as
provided herein.
3.2. All expenses incident to performance by each party of its
respective duties under this Agreement shall be paid by that party. The Fund
shall see to it that all its shares are registered and authorized for issuance
in accordance with applicable federal law and, if and to the extent advisable by
the Fund, in accordance with applicable state laws prior to their sale. The Fund
shall bear the expenses for the cost of registration and qualification of the
Fund's shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, and the preparation of all statements
and notices required by any federal or state law. The Fund shall bear the
expenses of printing the Fund's statement of additional information and proxy
materials. The Company shall bear the expenses of printing the Fund's reports
and of tabulation of proxy votes.
<PAGE>
3.3. The Company shall bear the expenses of printing and
distributing to existing and prospective Contract owners the Fund's prospectus
and reports to owners of Contracts issued by the Company and the expenses of
distributing the Fund's statement of additional information to existing and
prospective Contract owners and proxy materials to existing Contract owners.
3.4. If the Fund or any Portfolio adopts and implements a plan
pursuant to Rule 12b-1 under the 1940 Act to finance distribution expenses,
then, subject to obtaining any required exemptive orders or other regulatory
approvals, the Fund may make payments to the Company, to the underwriter for the
Contracts or to the Adviser if and in such amounts agreed to by the Fund in
writing, and the Company agrees to provide the Trustees [ ? ] as may be
reasonably requested in connection with such plan.
3.5. In the event the Fund adds one or more additional Portfolios and the
parties desire to make such Portfolios available to the respective Contract
owners as an underlying investment medium, the parties may agree to execute a
new Schedule 3 or an amendment to this Agreement authorizing the issuance of
shares of the new Portfolios to the particular Account. The amendment may also
provide for the sharing of expenses for the establishment of new Portfolios
among Participating Insurance Companies desiring to invest in such Portfolios
and the provision of funds as the initial investment in the new Portfolios.
ARTICLE IV. Representations and Warranties
4.1. The Company represents and warrants that it is an
insurance company duly organized and in good standing under the laws of the
State of Indiana.
<PAGE>
4.2. The Fund represents and warrants that it is duly
organized and validly existing under the laws of the State of Massachusetts.
4.3. The Fund represents and warrants that the investments of
each Portfolio will comply with the diversification requirements set forth in
Section 817(h) of the Internal Revenue Code of 1986, as amended (hereinafter the
"Code"), and the rules and regulations thereunder, or any successor or similar
provision, or Revenue Ruling or private letter ruling granted by the Internal
Revenue Service. In the event the Fund fails to comply with these
diversification requirements, the Fund shall take all reasonable steps to notify
the Company of such noncompliance and to adequately diversify the Fund so as to
achieve compliance within the grace period afforded by Treasury Regulation
1.817-5, or any successor or similar provision, or Revenue Ruling or private
letter ruling granted by the Internal Revenue Service.
4.4. The Fund represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the Code, and that it will
make every effort to maintain such qualification (under Subchapter M or any
successor or similar provision) and that it will notify the Company immediately
upon having a reasonable basis for believing that it has ceased to so qualify or
that it might not so qualify in the future.
4.5. The Fund represents that its investment objectives,
policies and restrictions comply in all material respects with any applicable
state laws of which the Fund is aware as they may apply to the Fund. The Fund
agrees that it will endeavor to furnish the information required by state
insurance laws and requested by the Company to assist the Company in obtaining
the authority needed to issue the Contracts in the various states.
<PAGE>
4.6. The Fund represents and warrants that all of its Trustees, officers,
employees, investment advisers and other individuals/entities having access to
the funds and/or securities of the Fund are and continue to be at all times
covered by a blanket fidelity bond or similar coverage (which may, at the Fund's
election, be in the form of a joint insured bond) for the benefit of the Fund in
an amount not less than the minimal coverage as required by Rule 17g-(1) of the
1940 Act or related provisions as may be promulgated from time to time. The
aforesaid bond includes coverage for larceny and embezzlement and is issued by a
reputable bonding or insurance company.
ARTICLE V. Potential Conflicts
5.1. The Board of Trustees of the Fund (the "Board") will
monitor the Fund for the existence of any material irreconcilable conflict
between the interests of the Contract owners of all separate accounts investing
in the Fund. An irreconcilable material conflict may arise for a variety of
reasons, including: (a) an action by any state insurance regulatory authority;
(b) a change in applicable federal or state insurance, tax, or securities laws
or regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of any Portfolio
are being managed; (e) a difference in voting instructions given by variable
contract and variable life insurance contract owners; or (f) a decision by an
insurer to disregard the voting instructions of Contract owners. The Board shall
promptly inform the Company if it determines that an irreconcilable material
conflict exists and the implications thereof.
<PAGE>
5.2. The Company has reviewed a copy of the Mixed and Shared
Funding Exemptive Order, and in particular, has reviewed the conditions to the
requested relief set forth therein. The Company agrees to be bound by the
responsibilities of a participating insurance company as set forth in the Mixed
and Shared Funding Exemptive Order, including without limitation the requirement
that the Company report any potential or existing conflicts of which it is aware
to the Board. The Company will assist the Board in carrying out its
responsibilities in monitoring such conflicts under the Mixed and Shared Funding
Exemptive Order, by providing the Board in a timely manner with all information
reasonably necessary for the Board to consider any issues raised. This includes,
but is not limited to, an obligation by the Company to inform the Board whenever
Contract owner voting instructions are disregarded and by confirming in writing,
at the Fund's request, that the Company is unaware of any such potential or
existing material irreconcilable conflicts.
5.3. If it is determined by a majority of the Board, or a
majority of its disinterested Trustees, that a material irreconcilable conflict
exists, the Company shall, at its expense and to the extent reasonably
practicable (as determined by a majority of the disinterested Trustees), take
whatever steps are necessary to remedy or eliminate the irreconcilable material
conflict up to and including: (1) withdrawing the assets allocable to some or
all of the subaccounts of the Accounts from the Fund or any Portfolio and
reinvesting such assets in a different investment medium, including (but not
limited to) another Portfolio of the Fund, or submitting the question whether
such segregation should be implemented to a vote of all affected Contract owners
and, as appropriate, segregating the assets of any appropriate group (i.e.,
annuity contract owners, life insurance contract
<PAGE>
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
Contract owners the option of making such a change; and (2) establishing a new
registered management investment company or managed separate account.
5.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard Contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the subaccount of
the Account's investment in the Fund and terminate this Agreement; provided,
however, that such withdrawal and termination shall be limited to the extent
required by the foregoing material irreconcilable conflict as determined by a
majority of the disinterested members of the Board. No charge or penalty will be
imposed as a result of such withdrawal. Any such withdrawal and termination must
take place within six (6) months after the Fund gives written notice that this
provision is being implemented, and until the end of the six month period the
Fund shall continue to accept and implement orders by the Company for the
purchase and redemption of shares of the Fund.
5.5. If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to the Company
conflicts with the majority of other state regulators, then the Company will
withdraw the subaccount of the Account's investment in the Fund and terminate
this Agreement within six months after the Board informs the Company in writing
that it has determined that such decision has created an irreconcilable material
conflict; provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as
<PAGE>
determined by a majority of the disinterested members of the Board. No charge or
penalty will be imposed as a result of such withdrawal. Until the end of the
foregoing six month period, the Fund shall continue to accept and implement
orders by the Company for the purchase and redemption of shares of the Fund,
subject to applicable regulatory limitation.
5.6. For purposes of Sections 5.3 through 5.6 of this
Agreement, a majority of the disinterested members of the Board shall determine
whether any proposed action adequately remedies any irreconcilable material
conflict, but in no event will the Fund be required to establish a new funding
medium for the Contracts. The Company shall not be required by Section 5.3 to
establish a new funding medium for Contracts if an offer to do so has been
declined by vote of a majority of Contract owners materially adversely affected
by the irreconcilable material conflict. In the event that the Board determines
that any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the particular subaccount of the
Account's investment in the Fund and terminate this Agreement within six (6)
months after the Board informs the Company in writing of the foregoing
determination, provided, however, that such withdrawal and termination shall be
limited to the extent required by any such material irreconcilable conflict as
determined by a majority of the disinterested members of the Board. No charge or
penalty will be imposed as a result of such withdrawal. ARTICLE VI.
Indemnification
6.1. The Company agrees to indemnify and hold harmless the
Fund and the Adviser and each person, if any, who controls or is associated with
the Fund and the
<PAGE>
Adviser within the meaning of such terms under applicable federal securities
laws and any Trustees, officers, employees and agents of the foregoing
(collectively, the "Indemnified Parties" for purposes of this Article VI)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Company) or expenses (including
the reasonable costs of investigating or defending any alleged loss, claim,
damage, liability or expense and reasonable legal counsel fees incurred in
connection therewith) (collectively, the "Losses"), to which the Indemnified
Parties may become subject under any statute or regulation, or at common law or
otherwise, insofar as such Losses:
(a) arise out of or are based upon any
untrue statements or alleged untrue statements of
material fact contained in a registration statement,
prospectus or statement of additional information for
the Contracts or in the Contracts themselves or in
sales literature generated by the Company on behalf
of the Contracts or Accounts (or any amendment or
supplement to any of the foregoing) (collectively,
the "Company Documents" for purposes of this Article
VI), or arise out of or are based upon the omission
or the alleged omission to state therein a material
fact required to be stated therein or necessary to
make the statements therein not misleading, provided
that this indemnity shall not apply as to any
Indemnified Party if such statement or omission or
such alleged statement or omission was made in
reliance upon and was accurately derived from
information furnished to the Company by
<PAGE>
or on behalf of the Fund or the Adviser for use in
Company Documents or otherwise for use in connection
with the sale of the Contracts or Fund shares; or
(b) arise out of or result from statements
or representations (other than statements or
representations contained in and accurately derived
from Fund Documents as defined in Section 6.2(a)) or
wrongful conduct of the Company or persons under its
control, with respect to the sale or acquisition of
the Contracts or Fund shares; or
(c) arise out of or result from any untrue
statement or alleged untrue statement of a material
fact contained in Fund Documents as defined in
Section 6.2(a) or the omission or alleged omission to
state therein a material fact required to be stated
therein or necessary to make the statements therein
not misleading if such statement or omission was made
in reliance upon and accurately derived from written
information furnished to the Fund or the Adviser by
or on behalf of the Company; or
(d) arise out of or result from any failure
by the Company to provide the services or furnish the
materials required under the terms of this Agreement;
or
(e) arise out of or result from any material
breach of any representation and/or warranty made by
the Company in this
<PAGE>
Agreement or arise out of or result from any
other material breach of this Agreement by the
Company.
6.2. The Fund and the Adviser agree to indemnify and hold
harmless the Company and each person, if any, who controls or is associated with
the Company within the meaning of such terms under applicable federal securities
laws and any directors, trustees, officers, employees and agents of the
foregoing (collectively, the "Indemnified Parties" for purposes of this Article
VI) against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Fund and/or the Adviser) or
expenses (including the reasonable costs of investigating or defending any
alleged loss, claim, damage, liability or expense and reasonable legal counsel
fees incurred in connection therewith) (collectively, the "Losses"), to which
the Indemnified Parties may become subject under any statute or regulation, or
at common law or otherwise, insofar as such Losses:
(a) arise out of or are based upon any
untrue statements or alleged untrue statements of
material fact contained in a registration statement,
prospectus or statement of additional information for
the Fund or in sales literature generated by the Fund
and/or the Adviser (or any amendment or supplement to
any of the foregoing) (collectively, the "Fund
Documents" for purposes of this Article VI), or arise
out of or are based upon the omission or the alleged
omission to state therein a material fact required to
be stated therein or necessary to make the statements
therein not misleading, provided that this indemnity
shall not apply as to any
<PAGE>
Indemnified Party if such statement or
omission or such alleged statement or omission was
made in reliance upon and was accurately derived from
information furnished to the Fund or the Adviser by
or on behalf of the Company for use in Fund Documents
or otherwise for use in connection with the sale of
the Contracts or Fund shares; or
(b) arise out of or result from statements
or representations (other than statements or
representations contained in and accurately derived
from Company Documents) or wrongful conduct of the
Fund or the Adviser or persons under their control,
with respect to the sale or acquisition of the
Contracts or Fund shares; or
(c) arise out of or result from any untrue
statement or alleged untrue statement of a material
fact contained in Company Documents or the omission
or alleged omission to state therein a material fact
required to be stated therein or necessary to make
the statements therein not misleading if such
statement or omission was made in reliance upon and
accurately derived from written information furnished
to the Company by or on behalf of the Fund; or
(d) arise out of or result from any material
breach of any representation and/or warranty made by
the Fund in this
<PAGE>
Agreement or arise out of or result from any
other material breach of this Agreement by the Fund
or the Adviser.
6.3. Neither the Company nor the Fund or the Adviser shall be
liable under the indemnification provisions of Sections 6.1 or 6.2, as
applicable, with respect to any Losses incurred or assessed against an
Indemnified Party that arise from such Indemnified Party's willful misfeasance,
bad faith or gross negligence in the performance of such Indemnified Party's
duties or by reason of such Indemnified Party's reckless disregard of
obligations or duties under this Agreement.
6.4. Neither the Company nor the Fund or the Adviser shall be
liable under the indemnification provisions of Sections 6.1 or 6.2, as
applicable, with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the other party in writing within a
reasonable time after the summons, or other first written notification, giving
information of the nature of the claim, complaint or action by a regulatory
authority shall have been served upon or otherwise received by such Indemnified
Party (or after such Indemnified Party shall have received notice of service
upon or other notification to any designated agent), but failure to notify the
party against whom indemnification is sought of any such claim shall not relieve
that part from any liability which it may have to the Indemnified Party in the
absence of Sections 6.1 and 6.2.
6.5. In case any such action is brought against the Indemnified Parties,
the indemnifying party shall be entitled to participate, at its own expense, in
the defense of such action. The indemnifying party also shall be entitled to
assume the defense thereof, with counsel reasonably satisfactory to the party
named in the action. After
<PAGE>
notice from the indemnifying party to the Indemnified Party of an election to
assume such defense, the Indemnified Party shall bear the fees and expenses of
any additional counsel retained by it, and the indemnifying party will not be
liable to the Indemnified Party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in connection with
the defense thereof other than reasonable costs of investigation.
ARTICLE VII. Applicable Law
7.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of New York.
7.2. This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the Securities and
Exchange Commission may grant (including, but not limited to, the Mixed and
Shared Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE VIII. Termination
8.1. This Agreement shall terminate with respect to some or all Portfolios:
(a) at the option of any party upon six
months' advance written notice to the other parties
or as otherwise agreed in writing by all parties; or
(b) at the option of the Company to the
extent that shares of Portfolios are not reasonably
available to meet the
<PAGE>
requirements of its Contracts or are not
appropriate funding vehicles for the Contracts, as
determined by the Company reasonably and in good
faith. Prompt notice of the election to terminate for
such cause and an explanation of such cause shall be
furnished by the Company; or
(c) as provided in Article IV.
8.2. It is understood and agreed that the right of any party
hereto to terminate this Agreement pursuant to Section 6.1(a) may be exercised
for cause or for no cause.
8.3. Notwithstanding any termination of this Agreement, the
Fund shall, at the option of the Company, continue to make available additional
shares of the Fund (or any Portfolio) pursuant to the terms and conditions of
this Agreement for all Contracts in effect on the effective date of termination
of this Agreement for which shares of the Fund (or any Portfolio) serve as the
underlying medium unless such further sale of additional shares of the Fund is
prohibited by law or by regulatory authorities, or as determined by the Fund's
Board to be necessary to remedy or eliminate an irreconcilable conflict pursuant
to Article V hereof.
8.4. The provisions of this Article VIII shall survive the
termination of this Agreement, and as long as shares of the Fund are held on
behalf of Contract owners in accordance with Section 8.3, the provisions of this
Agreement shall survive the termination of this Agreement with respect to those
Contract owners.
<PAGE>
ARTICLE IX. Notices
Any notice shall be sufficiently given when sent by registered
or certified mail to the other party at the address of such party set forth
below or at such other address as such party may from time to time specify to
the other party.
If to the Fund:
Oppenheimer Variable Account Funds
c/o OppenheimerFunds, Inc.
2 World Trade Center
New York, NY 10048-0203
Attn: Legal Department
If to the Adviser:
OppenheimerFunds, Inc.
2 World Trade Center
New York, NY 10048-0203
Attn: General Counsel
If to the Company:
American Enterprise Life Insurance Company
c/o American Express Financial Advisors Inc.
IDS Tower 10
Minneapolis, MN 55440-0010
Attn: Peter L. Slattery
Director - Variable Assets Product Management
with a copy to:
Mary Ellyn Minenko
Senior Counsel
ARTICLE X. Miscellaneous
10.1. The Fund and the Adviser acknowledge that the identities
of the customers of the Company or any of its affiliates (collectively the
"Protected Parties" for purposes of this Section 10.1), information maintained
regarding those customers, and all
<PAGE>
computer programs and procedures or other information developed or used by the
Protected Parties or any of their employees or agents in connection with the
Company's performance of its duties under this Agreement are the valuable
property of the Protected Parties. The Fund and the Adviser agree that if they
come into possession of any list or compilation of the identities of or other
information about the Protected Parties' customers, or any other information or
property of the Protected Parties, other than such information as may be
independently developed or compiled by the Fund or the Adviser from information
supplied to them by the Protected Parties' customers who also maintain accounts
with the Fund, the Adviser or the Fund's transfer agent other than as Contract
owners, the Fund and the Adviser will hold such information or property in
confidence and refrain from using, disclosing or distributing any of such
information or other property except: (a) with the Company's prior written
consent; or (b) as required by legal or judicial process or regulatory
authority. The Fund and the Adviser acknowledge that any breach of the
agreements in this Section 10.1 would result in immediate and irreparable harm
to the Protected Parties for which there would be no adequate remedy at law and
agree that in the event of such a breach, the Protected Parties will be entitled
to equitable relief by way of temporary and permanent injunctions, as well as
such other relief as any court of competent jurisdiction deems appropriate.
10.2. The captions in this Agreement are included for
convenience of reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
10.3. This Agreement may be executed simultaneously in two or
more counterparts, each of which taken together shall constitute one and the
same instrument.
<PAGE>
10.4. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
10.5. Each party hereto shall cooperate with each other party
and all appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the NASD and state securities and insurance
regulators) and shall permit such authorities reasonable access to its books and
records in connection with any investigation or inquiry relating to this
Agreement or the transactions contemplated hereby.
10.6. The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
10.7. It is understood by the parties that this Agreement is not an
exclusive arrangement in any respect.
10.8. The Company and the Adviser each understand and agree
that the obligations of the Fund under this Agreement are not binding upon any
shareholder of the Fund personally, but bind only the Fund and the Fund's
property; the Company and the Adviser each represent that it has notice of the
provisions of the Declaration of Trust of the Fund disclaiming shareholder
liability for acts or obligations of the Fund.
10.9. This Agreement shall not be assigned by any party hereto without the
prior consent of all the parties.
<PAGE>
10.10. No provisions of this Agreement may be amended or
modified in any manner except by a written agreement properly authorized and
executed by all parties.
10.11. This Agreement sets forth the entire agreement between
the parties and supercedes all prior communications, agreements and
understandings, oral or written, between the parities regarding the subject
matter hereof.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed as of the date specified
below.
Date:
AMERICAN ENTERPRISE LIFE
INSURANCE COMPANY
By:
Name:
Title:
ATTEST:
By:
Name:
Title:
<PAGE>
OPPENHEIMER VARIABLE
ACCOUNT FUNDS
By:
Name:
Title:
OPPENHEIMERFUNDS, INC.
By:
Name:
Title:
<PAGE>
SCHEDULE 1
Separate Accounts
American Enterprise Variable Annuity Account
<PAGE>
SCHEDULE 2
Contracts
Contract Form 34560
Contract Form 43260
and state variations of these forms
<PAGE>
SCHEDULE 3
Portfolios
Oppenheimer Variable Account Funds/Oppenheimer Growth Fund
Oppenheimer Variable Account Funds/Oppenheimer High Income Fund
<PAGE>
PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS, INC.,
A I M DISTRIBUTORS, INC.,
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS
AND
AMERICAN EXPRESS FINANCIAL ADVISORS INC.
<PAGE>
TABLE OF CONTENTS
Description Page
Section 1. Available Funds........................................ 2
1.1 Availability............................................. 2
1.2 Addition, Deletion or Modification of Funds.............. 2
1.3 No Sales to the General Public........................... 2
Section 2. Processing Transactions................................ 2
2.1 Timely Pricing and Orders................................ 2
2.2 Timely Payments.......................................... 3
2.3 Applicable Price......................................... 3
2.4 Dividends and Distributions.............................. 4
2.5 Book Entry............................................... 4
Section 3. Costs and Expenses..................................... 4
3.1 General.................................................. 4
3.2 Registration............................................. 4
3.3 Other (Non-Sales-Related)................................ 5
3.4 Other (Sales-Related).................................... 5
3.5 Parties To Cooperate..................................... 5
Section 4. Legal Compliance....................................... 5
4.1 Tax Laws................................................. 5
4.2 Insurance and Certain Other Laws......................... 8
4.3 Securities Laws.......................................... 8
4.4 Notice of Certain Proceedings and Other Circumstance..... 9
4.5 American Enterprise Life To Provide Documents;
Information About AVIF................................... 10
4.6 AVIF To Provide Documents; Information About
American Enterprise Life................................. 11
Section 5. Mixed and Shared Funding............................... 12
5.1 General.................................................. 12
5.2 Disinterested Directors.................................. 12
5.3 Monitoring for Material Irreconcilable Conflicts......... 13
5.4 Conflict Remedies........................................ 13
5.5 Notice to American Enterprise Life....................... 15
5.6 Information Requested by Board of Directors.............. 15
5.7 Compliance with SEC Rules................................ 15
5.8 Other Requirements....................................... 15
<PAGE>
Description
Page
Section 6.
Termination........................................................ 15
6.1 Events of Termination..................................... 15
6.2 Notice Requirement for Termination........................ 16
6.3 Funds To Remain Available................................. 17
6.4 Survival of Warranties and Indemnifications............... 17
6.5 Continuance of Agreement for Certain Purposes............. 17
Section 7. Parties To Cooperate Respecting Termination............. 17
Section 8. Assignment.............................................. 18
Section 9. Notices................................................. 18
Section 10. Voting Procedures...................................... 19
Section 11. Foreign Tax Credits.................................... 19
Section 12. Indemnification........................................ 20
12.1 Of AVIF and AIM by American Enterprise Life and AEFA..... 20
12.2 Of American Enterprise Life and AEFA by AVIF and AIM..... 22
12.3 Effect of Notice......................................... 24
12.4 Successors............................................... 24
Section 13. Applicable Law......................................... 24
Section 14. Execution in Counterparts.............................. 25
Section 15. Severability........................................... 25
Section 16. Rights Cumulative...................................... 25
Section 17. Headings............................................... 25
Section 18. Confidentiality........................................ 25
Section 19. Trademarks and Fund Names.............................. 26
Section 20. Parties to Cooperate................................... 27
<PAGE>
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the ____ day of
_______________, 1997 ("Agreement"), by and among AIM Variable Insurance Funds,
Inc., a Maryland corporation ("AVIF"); AIM Distributors, Inc., a Delaware
corporation ("AIM"); American Enterprise Life Insurance Company, an Indiana life
insurance company ("American Enterprise Life"), on behalf of itself and each of
its segregated asset accounts listed in Schedule A hereto, as the parties hereto
may amend from time to time (each, an "Account," and collectively, the
"Accounts"); and American Express Financial Advisors Inc. ("AEFA"), an affiliate
of American Enterprise Life and the principal underwriter of the Contracts
(collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, AVIF is registered with the Securities and Exchange Commission
("SEC") as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, AVIF currently consists of nine separate series ("Series"), shares
("Shares") of each of which are registered under the Securities Act of 1933, as
amended (the "1933 Act") and are currently sold to one or more separate accounts
of life insurance companies to fund benefits under variable annuity contracts
and variable life insurance contracts; and
WHEREAS, AVIF will make Shares of each Series listed on Schedule A hereto
as the Parties hereto may amend from time to time (each a "Fund"; reference
herein to "AVIF" includes reference to each Fund, to the extent the context
requires) available for purchase by the Accounts; and
WHEREAS, American Enterprise Life will be the issuer of certain variable
annuity contracts and/or variable life insurance contracts ("Contracts") as set
forth on Schedule A hereto, as the Parties hereto may amend from time to time,
which Contracts (hereinafter collectively, the "Contracts"), if required by
applicable law, will be registered under the 1933 Act; and
WHEREAS, American Enterprise Life will fund the Contracts through the
Accounts, each of which may be divided into two or more subaccounts
("Subaccounts"; reference herein to an "Account" includes reference to each
Subaccount thereof to the extent the context requires); and
WHEREAS, American Enterprise Life will serve as the depositor of the
Accounts, each of which is registered as a unit investment trust investment
company under the 1940 Act (or exempt therefrom), and the security interests
deemed to be issued by the Accounts under the Contracts will be registered as
securities under the 1933 Act (or exempt therefrom); and
<PAGE>
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, American Enterprise Life intends to purchase Shares in one or more
of the Funds on behalf of the Accounts to fund the Contracts; and
WHEREAS, AEFA is a broker-dealer registered with the SEC under the
Securities Exchange Act of 1934 ("1934 Act") and a member in good standing of
the National Association of Securities Dealers, Inc.
("NASD");
NOW, THEREFORE, in consideration of the mutual benefits and promises
contained herein, the Parties hereto agree as follows:
Section 1. Available Funds
1.1 Availability.
AVIF will make Shares of each Fund available to American Enterprise Life
for purchase and redemption at net asset value and with no sales charges,
subject to the terms and conditions of this Agreement. The Board of Directors of
AVIF may refuse to sell Shares of any Fund to any person, or suspend or
terminate the offering of Shares of any Fund if such action is required by law
or by regulatory authorities having jurisdiction or if, in the sole discretion
of the Directors acting in good faith and in light of their fiduciary duties
under federal and any applicable state laws, such action is deemed in the best
interests of the shareholders of such Fund.
1.2 Addition, Deletion or Modification of Funds.
The Parties hereto may agree, from time to time, to add other Funds to
provide additional funding media for the Contracts, or to delete, combine, or
modify existing Funds, by amending Schedule A hereto. Upon such amendment to
Schedule A, any applicable reference to a Fund, AVIF, or its Shares herein shall
include a reference to any such additional Fund. Schedule A, as amended from
time to time, is incorporated herein by reference and is a part hereof.
1.3 No Sales to the General Public.
AVIF represents and warrants that no Shares of any Fund have been or will
be sold to the general public.
Section 2. Processing Transactions
2.1 Timely Pricing and Orders.
(a) AVIF or its designated agent will use its best efforts to provide American
Enterprise Life with the net asset value per Share for each Fund by 5:30 p.m.
Central
<PAGE>
Time on each Business Day. As used herein, "Business Day" shall mean any day on
which (i) the New York Stock Exchange is open for regular trading, (ii) AVIF
calculates the Fund's net asset value, and (iii) American Enterprise Life is
open for business.
(b) American Enterprise Life will use the data provided by AVIF each
Business Day pursuant to paragraph (a) immediately above to calculate Account
unit values and to process transactions that receive that same Business Day's
Account unit values. American Enterprise Life will perform such Account
processing the same Business Day, and will place corresponding orders to
purchase or redeem Shares with AVIF by 9:00 a.m. Central Time the following
Business Day; provided, however, that AVIF shall provide additional time to
American Enterprise Life in the event that AVIF is unable to meet the 5:30 p.m.
time stated in paragraph (a) immediately above. Such additional time shall be
equal to the additional time that AVIF takes to make the net asset values
available to American Enterprise Life.
(c) With respect to payment of the purchase price by American Enterprise
Life and of redemption proceeds by AVIF, American Enterprise Life and AVIF shall
net purchase and redemption orders with respect to each Fund and shall transmit
one net payment per Fund in accordance with Section 2.2, below.
(d) If AVIF provides materially incorrect Share net asset value information
(as determined under SEC guidelines), American Enterprise Life shall be entitled
to an adjustment to the number of Shares purchased or redeemed to reflect the
correct net asset value per Share. Any material error in the calculation or
reporting of net asset value per Share, dividend or capital gain information
shall be reported promptly upon discovery to American Enterprise Life.
2.2 Timely Payments.
American Enterprise Life will wire payment for net purchases to a custodial
account designated by AVIF by 1:00 p.m. Central Time on the same day as the
order for Shares is placed, to the extent practicable. AVIF will wire payment
for net redemptions to an account designated by American Enterprise Life by 1:00
p.m. Central Time on the same day as the Order is placed, to the extent
practicable, but in any event within five (5) calendar days after the date the
order is placed in order to enable American Enterprise Life to pay redemption
proceeds within the time specified in Section 22(e) of the 1940 Act or such
shorter period of time as may be required by law.
2.3 Applicable Price.
(a) Share purchase payments and redemption orders that result from purchase
payments, premium payments, surrenders and other transactions under Contracts
(collectively, "Contract transactions") and that American Enterprise Life
receives prior to the close of regular trading on the New York Stock Exchange on
a Business Day will be executed at the net asset values of the appropriate Funds
next computed after receipt by AVIF or its designated agent of the orders. For
purposes of this Section 2.3(a), American
<PAGE>
Enterprise Life shall be the designated agent of AVIF for receipt of orders
relating to Contract transactions on each Business Day and receipt by such
designated agent shall constitute receipt by AVIF; provided that AVIF receives
notice of such orders by 9:00 a.m. Central Time on the next following Business
Day or such later time as computed in accordance with Section 2.1(b) hereof.
(b) All other Share purchases and redemptions by American Enterprise Life
will be effected at the net asset values of the appropriate Funds next computed
after receipt by AVIF or its designated agent of the order therefor, and such
orders will be irrevocable.
2.4 Dividends and Distributions.
AVIF will furnish notice by wire or telephone (followed by written
confirmation) on or prior to the payment date to American Enterprise Life of any
income dividends or capital gain distributions payable on the Shares of any
Fund. American Enterprise Life hereby elects to reinvest all dividends and
capital gains distributions in additional Shares of the corresponding Fund at
the ex-dividend date net asset values until American Enterprise Life otherwise
notifies AVIF in writing, it being agreed by the Parties that the ex-dividend
date and the payment date with respect to any dividend or distribution will be
the same Business Day. American Enterprise Life reserves the right to revoke
this election and to receive all such income dividends and capital gain
distributions in cash.
2.5 Book Entry.
Issuance and transfer of AVIF Shares will be by book entry only. Stock
certificates will not be issued to American Enterprise Life. Shares ordered from
AVIF will be recorded in an appropriate title for American Enterprise Life, on
behalf of its Account.
Section 3. Costs and Expenses
3.1 General.
Except as otherwise specifically provided herein, each Party will bear all
expenses incident to its performance under this Agreement.
3.2 Registration.
(a) AVIF will bear the cost of its registering as a management investment
company under the 1940 Act and registering its Shares under the 1933 Act, and
keeping such registrations current and effective; including, without limitation,
the preparation of and filing with the SEC of Forms N-SAR and Rule 24f-2 Notices
with respect to AVIF and its Shares and payment of all applicable registration
or filing fees with respect to any of the foregoing.
<PAGE>
(b) American Enterprise Life will bear the cost of registering, to the
extent required, each Account as a unit investment trust under the 1940 Act and
registering units of interest under the Contracts under the 1933 Act and keeping
such registrations current and effective; including, without limitation, the
preparation and filing with the SEC of Forms N-SAR and Rule 24f-2 Notices with
respect to each Account and its units of interest and payment of all applicable
registration or filing fees with respect to any of the foregoing.
3.3 Other (Non-Sales-Related).
(a) AVIF will bear, or arrange for others to bear, the costs of preparing,
filing with the SEC and setting for printing AVIF's prospectus, statement of
additional information and any amendments or supplements thereto (collectively,
the "AVIF Prospectus"), periodic reports to shareholders, AVIF proxy material
and other shareholder communications.
(b) American Enterprise Life will bear the costs of preparing, filing with
the SEC and setting for printing each Account's prospectus, statement of
additional information and any amendments or supplements thereto (collectively,
the "Account Prospectus"), any periodic reports to Contract owners, annuitants,
insureds or participants (as appropriate) under the Contracts (collectively,
"Participants"), voting instruction solicitation material, and other Participant
communications.
(c) American Enterprise Life will print in quantity and deliver to existing
Participants the documents described in Section 3.3(b) above and the prospectus
provided by AVIF in camera ready or computer diskette form. AVIF will print the
AVIF statement of additional information, proxy materials relating to AVIF and
periodic reports of AVIF.
3.4 Other (Sales-Related).
American Enterprise Life will bear the expenses of distribution. These
expenses would include by way of illustration, but are not limited to, the costs
of distributing to Participants the following documents, whether they relate to
the Account or AVIF: prospectuses, statements of additional information, proxy
materials and periodic reports. These costs would also include the costs of
preparing, printing, and distributing sales literature and advertising relating
to the Funds, as well as filing such materials with, and obtaining approval
from, the SEC, NASD, any state insurance regulatory authority, and any other
appropriate regulatory authority, to the extent required.
3.5 Parties To Cooperate.
Each Party agrees to cooperate with the others, as applicable, in arranging
to print, mail and/or deliver, in a timely manner, combined or coordinated
prospectuses or other materials of AVIF and the Accounts.
<PAGE>
Section 4. Legal Compliance
4.1 Tax Laws.
(a) AVIF represents and warrants that each Fund is currently qualified as a
regulated investment company ("RIC") under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"), and represents that it will use its best
efforts to qualify and to maintain qualification of each Fund as a RIC. AVIF
will notify American Enterprise Life immediately upon having a reasonable basis
for believing that a Fund has ceased to so qualify or that it might not so
qualify in the future.
(b) AVIF represents that it will use its best efforts to comply and to
maintain each Fund's compliance with the diversification requirements set forth
in Section 817(h) of the Code and Section 1.817-5(b) of the regulations under
the Code. AVIF will notify American Enterprise Life immediately upon having a
reasonable basis for believing that a Fund has ceased to so comply or that a
Fund might not so comply in the future. In the event of a breach of this Section
4.1(b) by AVIF, it will take all reasonable steps to adequately diversify the
Fund so as to achieve compliance within the grace period afforded by Section
1.817-5 of the regulations under the Code.
(c) American Enterprise Life agrees that if the Internal Revenue Service
("IRS") asserts in writing in connection with any governmental audit or review
of American Enterprise Life or, to American Enterprise Life's knowledge, of an
Participant, that any Fund has failed to comply with the diversification
requirements of Section 817(h) of the Code or American Enterprise Life otherwise
becomes aware of any facts that could give rise to any claim against AVIF or its
affiliates as a result of such a failure or alleged failure:
(i) American Enterprise Life shall promptly notify AVIF of
such assertion or potential claim (subject to the
Confidentiality provisions of Section 18 as to any
Participant);
(ii) American Enterprise Life shall consult with AVIF as to how to
minimize any liability that may arise as a result of such
failure or alleged failure;
(iii) American Enterprise Life shall use its best efforts to
minimize any liability of AVIF or its affiliates resulting
from such failure, including, without limitation,
demonstrating, pursuant to Treasury Regulations Section
1.817-5(a)(2), to the Commissioner of the IRS that such
failure was inadvertent;
(iv) American Enterprise Life shall permit AVIF, its affiliates and
their legal and accounting advisors to participate in any
conferences, settlement discussions or other administrative or
judicial proceeding or contests (including judicial appeals
thereof) with the IRS, any Participant or any other claimant
regarding any claims that could give rise to liability to
<PAGE>
AVIF or its affiliates as a result of such a failure or
alleged failure; provided, however, that American Enterprise
Life will retain control of the conduct of such conferences
discussions, proceedings, contests or appeals;
(v) any written materials to be submitted by American Enterprise Life to the
IRS, any Participant or any other claimant in connection with any of the
foregoing proceedings or contests (including, without limitation, any such
materials to be submitted to the IRS pursuant to Treasury Regulations
Section 1.8175(a)(2)), (a) shall be provided by American Enterprise Life to
AVIF (together with any supporting information or analysis); subject to the
confidentiality provisions of Section 18, at least ten (10) business days
or such shorter period to which the Parties hereto agree prior to the day
on which such proposed materials are to be submitted, and (b) shall not be
submitted by American Enterprise Life to any such person without the
express written consent of AVIF which shall not be unreasonably withheld;
(vi) American Enterprise Life shall provide AVIF or its
affiliates and their accounting and legal advisors with
such cooperation as AVIF shall
reasonably request (including, without limitation, by
permitting AVIF and its accounting and legal advisors to
review the relevant books and records of American Enterprise
Life) in order to facilitate review by AVIF or its advisors of
any written submissions provided to it pursuant to the
preceding clause or its assessment of the validity or amount
of any claim against its arising from such a failure or
alleged failure;
(vii)American Enterprise Life shall not with respect to any claim of the IRS or
any Participant that would give rise to a claim against AVIF or its
affiliates (a) compromise or settle any claim, (b) accept any adjustment on
audit, or (c) forego any allowable administrative or judicial appeals,
without the express written consent of AVIF or its affiliates, which shall
not be unreasonably withheld, provided that American Enterprise Life shall
not be required, after exhausting all administrative penalties, to appeal
any adverse judicial decision unless AVIF or its affiliates shall have
provided an opinion of independent counsel to the effect that a reasonable
basis exists for taking such appeal; and provided further that the costs of
any such appeal shall be borne equally by the Parties hereto; and
(viii) AVIF and its affiliates shall have no liability as a result of
such failure or alleged failure if American Enterprise Life
fails to comply with any of the foregoing clauses (i) through
(vii), and such failure could be shown to have materially
contributed to the liability.
<PAGE>
Should AVIF or any of its affiliates refuse to give its written consent to
any compromise or settlement of any claim or liability hereunder, American
Enterprise Life may, in its discretion, authorize AVIF or its affiliates to act
in the name of American Enterprise Life in, and to control the conduct of, such
conferences, discussions, proceedings, contests or appeals and all
administrative or judicial appeals thereof, and in that event AVIF or its
affiliates shall bear the fees and expenses associated with the conduct of the
proceedings that it is so authorized to control; provided, that in no event
shall American Enterprise Life have any liability resulting from AVIF's refusal
to accept the proposed settlement or compromise with respect to any failure
caused by AVIF. As used in this Agreement, the term "affiliates" shall have the
same meaning as "affiliated person" as defined in Section 2(a)(3) of the 1940
Act.
(d) American Enterprise Life represents and warrants that the Contracts
currently are and will be treated as annuity contracts or life insurance
contracts under applicable provisions of the Code and that it will use its best
efforts to maintain such treatment; American Enterprise Life will notify AVIF
immediately upon having a reasonable basis for believing that any of the
Contracts have ceased to be so treated or that they might not be so treated in
the future.
(e) American Enterprise Life represents and warrants that each Account is a
"segregated asset account" and that interests in each Account are offered
exclusively through the purchase of or transfer into a "variable contract,"
within the meaning of such terms under Section 817 of the Code and the
regulations thereunder. American Enterprise Life will use its best efforts to
continue to meet such definitional requirements, and it will notify AVIF
immediately upon having a reasonable basis for believing that such requirements
have ceased to be met or that they might not be met in the future.
4.2 Insurance and Certain Other Laws.
(a) AVIF will use its best efforts to comply with any applicable state
insurance laws or regulations, to the extent specifically requested in writing
by American Enterprise Life, including, the furnishing of information not
otherwise available to American Enterprise Life which is required by state
insurance law to enable American Enterprise Life to obtain the authority needed
to issue the Contracts in any applicable state.
(b) American Enterprise Life represents and warrants that (i) it is an
insurance company duly organized, validly existing and in good standing under
the laws of the State of Indiana and has full corporate power, authority and
legal right to execute, deliver and perform its duties and comply with its
obligations under this Agreement, (ii) it has legally and validly established
and maintains each Account as a segregated asset account under Section 27-1-51
Section 1 Class 1(c) of the Indiana Insurance Code and the regulations
thereunder, and (iii) the Contracts comply in all material respects with all
other applicable federal and state laws and regulations.
<PAGE>
(c) AVIF represents and warrants that it is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Maryland
and has full power, authority, and legal right to execute, deliver, and perform
its duties and comply with its obligations under this Agreement.
4.3 Securities Laws.
(a) American Enterprise Life represents and warrants that (i) interests in
each Account pursuant to the Contracts will be registered under the 1933 Act to
the extent required by the 1933 Act, (ii) the Contracts will be duly authorized
for issuance and sold in compliance with all applicable federal and state laws,
including, without limitation, the 1933 Act, the 1934 Act, the 1940 Act and
Indiana law, (iii) each Account is and will remain registered under the 1940
Act, to the extent required by the 1940 Act, (iv) each Account does and will
comply in all material respects with the requirements of the 1940 Act and the
rules thereunder, to the extent required, (v) each Account's 1933 Act
registration statement relating to the Contracts, together with any amendments
thereto, will at all times comply in all material respects with the requirements
of the 1933 Act and the rules thereunder, (vi) American Enterprise Life will
amend the registration statement for its Contracts under the 1933 Act and for
its Accounts under the 1940 Act from time to time as required in order to effect
the continuous offering of its Contracts or as may otherwise be required by
applicable law, and (vii) each Account Prospectus will at all times comply in
all material respects with the requirements of the 1933 Act and the rules
thereunder.
(b) AVIF represents and warrants that (i) Shares sold pursuant to this
Agreement will be registered under the 1933 Act to the extent required by the
1933 Act and duly authorized for issuance and sold in compliance with Maryland
law, (ii) AVIF is and will remain registered under the 1940 Act to the extent
required by the 1940 Act, (iii) AVIF will amend the registration statement for
its Shares under the 1933 Act and itself under the 1940 Act from time to time as
required in order to effect the continuous offering of its Shares, (iv) AVIF
does and will comply in all material respects with the requirements of the 1940
Act and the rules thereunder, (v) AVIF's 1933 Act registration statement,
together with any amendments thereto, will at all times comply in all material
respects with the requirements of the 1933 Act and rules thereunder, and (vi)
AVIF's Prospectus will at all times comply in all material respects with the
requirements of the 1933 Act and the rules thereunder.
(c) AVIF will at its expense register and qualify its Shares for sale in
accordance with the laws of any state or other jurisdiction if and to the extent
reasonably deemed advisable by AVIF.
(d) AVIF currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it reserves the right to make such payments in the future. To the
extent that it decides to finance
<PAGE>
distribution expenses pursuant to Rule 12b-1, AVIF undertakes to have its Board
of Directors, a majority of whom are not "interested" persons of the Fund,
formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
(e) AVIF represents and warrants that all of its trustees, officers,
employees, investment advisers, and other individuals/entities having access to
the funds and/or securities of the Fund are and continue to be at all times
covered by a blanket fidelity bond or similar coverage for the benefit of the
Fund in an amount not less than the minimal coverage as required currently by
Rule 17g-(1) of the 1940 Act or related provisions as maybe promulgated from
time to time. The aforesaid bond includes coverage for larceny and embezzlement
and is issued by a reputable bonding company.
4.4 Notice of Certain Proceedings and Other Circumstances.
(a) AVIF will immediately notify American Enterprise Life of (i) the
issuance by any court or regulatory body of any stop order, cease and desist
order, or other similar order with respect to AVIF's registration statement
under the 1933 Act or AVIF Prospectus, (ii) any request by the SEC for any
amendment to such registration statement or AVIF Prospectus that may affect the
offering of Shares of AVIF, (iii) the initiation of any proceedings for that
purpose or for any other purpose relating to the registration or offering of
AVIF's Shares, or (iv) any other action or circumstances that may prevent the
lawful offer or sale of Shares of any Fund in any state or jurisdiction,
including, without limitation, any circumstances in which (a) such Shares are
not registered and, in all material respects, issued and sold in accordance with
applicable state and federal law, or (b) such law precludes the use of such
Shares as an underlying investment medium of the Contracts issued or to be
issued by American Enterprise Life. AVIF will make every reasonable effort to
prevent the issuance, with respect to any Fund, of any such stop order, cease
and desist order or similar order and, if any such order is issued, to obtain
the lifting thereof at the earliest possible time.
(b) American Enterprise Life will immediately notify AVIF of (i) the
issuance by any court or regulatory body of any stop order, cease and desist
order, or other similar order with respect to each Account's registration
statement under the 1933 Act relating to the Contracts or each Account
Prospectus, (ii) any request by the SEC for any amendment to such registration
statement or Account Prospectus that may affect the offering of Shares of AVIF,
(iii) the initiation of any proceedings for that purpose or for any other
purpose relating to the registration or offering of each Account's interests
pursuant to the Contracts, or (iv) any other action or circumstances that may
prevent the lawful offer or sale of said interests in any state or jurisdiction,
including, without limitation, any circumstances in which said interests are not
registered and, in all material respects, issued and sold in accordance with
applicable state and federal law. American Enterprise Life will make every
reasonable effort to prevent the issuance of any such stop order, cease and
desist order or similar order and, if any such order is issued, to obtain the
lifting thereof at the earliest possible time.
<PAGE>
4.5 American Enterprise Life To Provide Documents; Information About AVIF.
(a) American Enterprise Life will provide to AVIF or its designated agent
at least one (1) complete copy of all SEC registration statements, Account
Prospectuses, reports, any preliminary and final voting instruction solicitation
material, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to each Account or the Contracts,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
(b) American Enterprise Life will provide to AVIF or its designated agent
at least one (1) complete copy of each piece of sales literature or other
promotional material in which AVIF or any of its affiliates is named, at least
five (5) Business Days prior to its use or such shorter period as the Parties
hereto may, from time to time, agree upon. No such material shall be used if
AVIF or its designated agent objects to such use within five (5) Business Days
after receipt of such material or such shorter period as the Parties hereto may,
from time to time, agree upon. AVIF hereby designates A I M as the entity to
receive such sales literature, until such time as AVIF appoints another
designated agent by giving notice to American Enterprise Life in the manner
required by Section 9 hereof.
(c) Neither American Enterprise Life nor any of its affiliates, will give
any information or make any representations or statements on behalf of or
concerning AVIF or its affiliates in connection with the sale of the Contracts
other than (i) the information or representations contained in the registration
statement, including the AVIF Prospectus contained therein, relating to Shares,
as such registration statement and AVIF Prospectus may be amended from time to
time; or (ii) in reports or proxy materials for AVIF; or (iii) in published
reports for AVIF that are in the public domain and approved by AVIF for
distribution; or (iv) in sales literature or other promotional material approved
by AVIF, except with the express written permission of AVIF.
(d) American Enterprise Life shall adopt and implement procedures
reasonably designed to ensure that information concerning AVIF and its
affiliates that is intended for use only by brokers or agents selling the
Contracts (i.e., information that is not intended for distribution to
Participants) ("broker only materials") is so used, and neither AVIF nor any of
its affiliates shall be liable for any losses, damages or expenses relating to
the improper use of such broker only materials.
(e) For the purposes of this Section 4.5, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media, (e.g.,
on-line networks such as the Internet or other electronic messages), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or
<PAGE>
employees, registration statements, prospectuses, statements of additional
information, shareholder reports, and proxy materials and any other material
constituting sales literature or advertising under the NASD rules, the 1933 Act
or the 1940 Act.
4.6 AVIF To Provide Documents; Information About American Enterprise Life.
(a) AVIF will provide to American Enterprise Life at least one (1) complete
copy of all SEC registration statements, AVIF Prospectuses, reports, any
preliminary and final proxy material, applications for exemptions, requests for
no-action letters, and all amendments to any of the above, that relate to AVIF
or the Shares of a Fund, contemporaneously with the filing of such document with
the SEC or other regulatory authorities.
(b) AVIF will provide to American Enterprise Life camera ready or computer
diskette copies of all AVIF prospectuses and printed copies, in an amount
specified by American Enterprise Life, of AVIF statements of additional
information, proxy materials, periodic reports to shareholders and other
materials required by law to be sent to Participants who have allocated any
Contract value to a Fund. AVIF will provide such copies to American Enterprise
Life in a timely manner so as to enable American Enterprise Life, to print and
distribute such materials within the time required by law to be furnished to
Participants.
(c) AVIF will provide to American Enterprise Life or its designated agent
at least one (1) complete copy of each piece of sales literature or other
promotional material in which American Enterprise Life, or any of its respective
affiliates is named, or that refers to the Contracts, at least five (5) Business
Days prior to its use or such shorter period as the Parties hereto may, from
time to time, agree upon. No such material shall be used if American Enterprise
Life or its designated agent objects to such use within five (5) Business Days
after receipt of such material or such shorter period as the Parties hereto may,
from time to time, agree upon. American Enterprise Life shall receive all such
sales literature until such time as it appoints a designated agent by giving
notice to AVIF in the manner required by Section 9 hereof.
(d) Neither AVIF nor any of its affiliates will give any information or
make any representations or statements on behalf of or concerning American
Enterprise Life, each Account, or the Contracts other than (i) the information
or representations contained in the registration statement, including each
Account Prospectus contained therein, relating to the Contracts, as such
registration statement and Account Prospectus may be amended from time to time;
or (ii) in published reports for the Account or the Contracts that are in the
public domain and approved by American Enterprise Life for distribution; or
(iii) in sales literature or other promotional material approved by American
Enterprise Life or its affiliates, except with the express written permission of
American Enterprise Life.
(e) AVIF shall cause its principal underwriter to adopt and implement
procedures reasonably designed to ensure that information concerning American
Enterprise Life, and its respective affiliates that is intended for use only by
brokers or agents selling the
<PAGE>
Contracts (i.e., information that is not intended for distribution to
Participants) ("broker only materials") is so used, and neither American
Enterprise Life, nor any of its respective affiliates shall be liable for any
losses, damages or expenses relating to the improper use of such broker only
materials.
(f) For purposes of this Section 4.6, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements (such as
material published, or designed for use in, a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, or other public media, (e.g., on-line
networks such as the Internet or other electronic messages), sales literature
(i.e., any written communication distributed or made generally available to
customers or the public, including brochures, circulars, research reports,
market letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or training
materials or other communications distributed or made generally available to
some or all agents or employees, registration statements, prospectuses,
statements of additional information, shareholder reports, and proxy materials
and any other material constituting sales literature or advertising under the
NASD rules, the 1933 Act or the 1940 Act.
Section 5. Mixed and Shared Funding
5.1 General.
The SEC has granted an order to AVIF exempting it from certain provisions
of the 1940 Act and rules thereunder so that AVIF may be available for
investment by certain other entities, including, without limitation, separate
accounts funding variable annuity contracts or variable life insurance
contracts, separate accounts of insurance companies unaffiliated with American
Enterprise Life, and trustees of qualified pension and retirement plans
(collectively, "Mixed and Shared Funding"). The Parties recognize that the SEC
has imposed terms and conditions for such orders that are substantially
identical to many of the provisions of this Section 5. Sections 5.2 through 5.8
below shall apply pursuant to such an exemptive order granted to AVIF. AVIF
hereby notifies American Enterprise Life that, in the event that AVIF implements
Mixed and Shared Funding, it may be appropriate to include in the prospectus
pursuant to which a Contract is offered disclosure regarding the potential risks
of Mixed and Shared Funding.
5.2 Disinterested Directors.
AVIF agrees that its Board of Directors shall at all times consist of
directors a majority of whom (the "Disinterested Directors") are not interested
persons of AVIF within the meaning of Section 2(a)(19) of the 1940 Act and the
Rules thereunder and as modified by any applicable orders of the SEC, except
that if this condition is not met by reason of the death, disqualification, or
bona fide resignation of any director, then the operation of this condition
shall be suspended (a) for a period of forty-five (45) days if
<PAGE>
the vacancy or vacancies may be filled by the Board; (b) for a period of sixty
(60) days if a vote of shareholders is required to fill the vacancy or
vacancies; or (c) for such longer period as the SEC may prescribe by order upon
application.
5.3 Monitoring for Material Irreconcilable Conflicts.
AVIF agrees that its Board of Directors will monitor for the existence of
any material irreconcilable conflict between the interests of the Participants
in all separate accounts of life insurance companies utilizing AVIF
("Participating Insurance Companies"), including each Account, and participants
in all qualified retirement and pension plans investing in AVIF ("Participating
Plans"). American Enterprise Life agrees to inform the Board of Directors of
AVIF of the existence of or any potential for any such material irreconcilable
conflict of which it is aware. The concept of a "material irreconcilable
conflict" is not defined by the 1940 Act or the rules thereunder, but the
Parties recognize that such a conflict may arise for a variety of reasons,
including, without limitation:
(a) an action by any state insurance or other regulatory authority;
(b) a change in applicable federal or state insurance, tax or securities
laws or regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax or securities
regulatory authorities;
(c) an administrative or judicial decision in any relevant proceeding;
(d) the manner in which the investments of any Fund are being managed;
(e) a difference in voting instructions given by variable annuity contract
and variable life insurance contract Participants or by Participants of
different Participating Insurance Companies;
(f) a decision by a Participating Insurance Company to disregard the
voting instructions of Participants; or
(g) a decision by a Participating Plan to disregard the voting
instructions of Plan participants.
Consistent with the SEC's requirements in connection with exemptive orders
of the type referred to in Section 5.1 hereof, American Enterprise Life will
assist the Board of Directors in carrying out its responsibilities by providing
the Board of Directors with all information reasonably necessary for the Board
of Directors to consider any issue raised, including information as to a
decision by American Enterprise Life to disregard voting instructions of
Participants.
<PAGE>
5.4 Conflict Remedies.
(a) It is agreed that if it is determined by a majority of the members of
the Board of Directors or a majority of the Disinterested Directors that a
material irreconcilable conflict exists, American Enterprise Life will, if it is
a Participating Insurance Company for which a material irreconcilable conflict
is relevant, at its own expense and to the extent reasonably practicable (as
determined by a majority of the Disinterested Directors), take whatever steps
are necessary to remedy or eliminate the material irreconcilable conflict, which
steps may include, but are not limited to:
(i) withdrawing the assets allocable to some or all of the Accounts
from AVIF or any Fund and reinvesting such assets in a different
investment medium, including another Fund of AVIF, or submitting
the question whether such segregation should be implemented to a
vote of all affected Participants and, as appropriate, segregating
the assets of any particular group (e.g., annuity Participants,
life insurance Participants or all Participants) that votes in
favor of such segregation, or offering to the affected
Participants the option of making such a change; and
(ii) establishing a new registered investment company of the type
defined as a "management company" in Section 4(3) of the 1940 Act
or a new separate account that is operated as a management
company.
(b) If the material irreconcilable conflict arises because of American
Enterprise Life's decision to disregard Participant voting instructions and that
decision represents a minority position or would preclude a majority vote,
American Enterprise Life may be required, at AVIF's election, to withdraw each
Account's investment in AVIF or any Fund. No charge or penalty will be imposed
as a result of such withdrawal. Any such withdrawal must take place within six
(6) months after AVIF gives notice to American Enterprise Life that this
provision is being implemented, and until such withdrawal AVIF shall continue to
accept and implement orders by American Enterprise Life for the purchase and
redemption of Shares of AVIF.
(c) If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to American Enterprise Life conflicts
with the majority of other state regulators, then American Enterprise Life will
withdraw each Account's investment in AVIF within six (6) months after AVIF's
Board of Directors informs American Enterprise Life that it has determined that
such decision has created a material irreconcilable conflict, and until such
withdrawal AVIF shall continue to accept and implement orders by American
Enterprise Life for the purchase and redemption of Shares of AVIF. No charge or
penalty will be imposed as a result of such withdrawal.
(d) American Enterprise Life agrees that any remedial action taken by it in
resolving any material irreconcilable conflict will be carried out at its
expense and with a view only to the interests of Participants.
<PAGE>
(e) For purposes hereof, a majority of the Disinterested Directors will
determine whether or not any proposed action adequately remedies any material
irreconcilable conflict. In no event, however, will AVIF or any of its
affiliates be required to establish a new funding medium for any Contracts.
American Enterprise Life will not be required by the terms hereof to establish a
new funding medium for any Contracts if an offer to do so has been declined by
vote of a majority of Participants materially adversely affected by the material
irreconcilable conflict.
5.5 Notice to American Enterprise Life.
AVIF will promptly make known in writing to American Enterprise Life the
Board of Directors' determination of the existence of a material irreconcilable
conflict, a description of the facts that give rise to such conflict and the
implications of such conflict.
5.6 Information Requested by Board of Directors.
American Enterprise Life and AVIF (or its investment adviser) will at least
annually submit to the Board of Directors of AVIF such reports, materials or
data as the Board of Directors may reasonably request so that the Board of
Directors may fully carry out the obligations imposed upon it by the provisions
hereof or any exemptive order granted by the SEC to permit Mixed and Shared
Funding, and said reports, materials and data will be submitted at any
reasonable time deemed appropriate by the Board of Directors. All reports
received by the Board of Directors of potential or existing conflicts, and all
Board of Directors actions with regard to determining the existence of a
conflict, notifying Participating Insurance Companies and Participating Plans of
a conflict, and determining whether any proposed action adequately remedies a
conflict, will be properly recorded in the minutes of the Board of Directors or
other appropriate records, and such minutes or other records will be made
available to the SEC upon request.
5.7 Compliance with SEC Rules.
If, at any time during which AVIF is serving as an investment medium for
variable life insurance Contracts, 1940 Act Rules 6e-3(T) or, if applicable,
6e-2 are amended or Rule 6e-3 is adopted to provide exemptive relief with
respect to Mixed and Shared Funding, AVIF agrees that it will comply with the
terms and conditions thereof and that the terms of this Section 5 shall be
deemed modified if and only to the extent required in order also to comply with
the terms and conditions of such exemptive relief that is afforded by any of
said rules that are applicable.
5.8 Other Requirements.
AVIF will require that each Participating Insurance Company and
Participating Plan enter into an agreement with AVIF that contains in substance
the same provisions as are set forth in Sections 4.1(b), 4.1(d), 4.3(a), 4.4(b),
4.5(a), 5, and 10 of this Agreement.
<PAGE>
Section 6. Termination
6.1 Events of Termination.
Subject to Section 6.4 below, this Agreement will terminate as to a Fund:
(a) at the option of any party, with or without cause with respect to the
Fund, upon six (6) months advance written notice to the other parties, or, if
later, upon receipt of any required exemptive relief from the SEC, unless
otherwise agreed to in writing by the parties; or
(b) at the option of AVIF upon institution of formal proceedings against
American Enterprise Life or its affiliates by the NASD, the SEC, any state
insurance regulator or any other regulatory body regarding American Enterprise
Life's obligations under this Agreement or related to the sale of the Contracts,
the operation of each Account, or the purchase of Shares, if, in each case, AVIF
reasonably determines that such proceedings, or the facts on which such
proceedings would be based, have a material likelihood of imposing material
adverse consequences on the Fund with respect to which the Agreement is to be
terminated; or
(c) at the option of American Enterprise Life upon institution of formal
proceedings against AVIF, its principal underwriter, or its investment adviser
by the NASD, the SEC, or any state insurance regulator or any other regulatory
body regarding AVIF's obligations under this Agreement or related to the
operation or management of AVIF or the purchase of AVIF Shares, if, in each
case, American Enterprise Life reasonably determines that such proceedings, or
the facts on which such proceedings would be based, have a material likelihood
of imposing material adverse consequences on American Enterprise Life, or the
Subaccount corresponding to the Fund with respect to which the Agreement is to
be terminated; or
(d) at the option of any Party in the event that (i) the Fund's Shares are
not registered and, in all material respects, issued and sold in accordance with
any applicable federal or state law, or (ii) such law precludes the use of such
Shares as an underlying investment medium of the Contracts issued or to be
issued by American Enterprise Life; or
(e) upon termination of the corresponding Subaccount's investment in the
Fund pursuant to Section 5 hereof; or
(f) at the option of American Enterprise Life if the Fund ceases to qualify
as a RIC under Subchapter M of the Code or under successor or similar
provisions, or if American Enterprise Life reasonably believes that the Fund may
fail to so qualify; or
(g) at the option of American Enterprise Life if the Fund fails to comply
with Section 817(h) of the Code or with successor or similar provisions, or if
American Enterprise Life reasonably believes that the Fund may fail to so
comply; or
<PAGE>
(h) at the option of AVIF if the Contracts issued by American Enterprise
Life cease to qualify as annuity contracts or life insurance contracts under the
Code (other than by reason of the Fund's noncompliance with Section 817(h) or
Subchapter M of the Code) or if interests in an Account under the Contracts are
not registered, where required, and, in all material respects, are not issued or
sold in accordance with any applicable federal or state law; or
(i) upon another Party's material breach of any provision of this
Agreement.
6.2 Notice Requirement for Termination.
No termination of this Agreement will be effective unless and until the
Party terminating this Agreement gives prior written notice to the other Party
to this Agreement of its intent to terminate, and such notice shall set forth
the basis for such termination. Furthermore:
(a) in the event that any termination is based upon the provisions of
Sections 6.1(a) or 6.1(e) hereof, such prior written notice shall be given at
least six (6) months in advance of the effective date of termination unless a
shorter time is agreed to by the Parties hereto;
(b) in the event that any termination is based upon the provisions of
Sections 6.1(b) or 6.1(c) hereof, such prior written notice shall be given at
least ninety (90) days in advance of the effective date of termination unless a
shorter time is agreed to by the Parties hereto; and
(c) in the event that any termination is based upon the provisions of
Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof, such prior written
notice shall be given as soon as possible within twenty-four (24) hours after
the terminating Party learns of the event causing termination to be required.
6.3 Funds To Remain Available.
Notwithstanding any termination of this Agreement, AVIF will, at the option
of American Enterprise Life, continue to make available additional shares of the
Fund pursuant to the terms and conditions of this Agreement, for all Contracts
in effect on the effective date of termination of this Agreement (hereinafter
referred to as "Existing Contracts."). Specifically, without limitation, the
owners of the Existing Contracts will be permitted to reallocate investments in
the Fund (as in effect on such date), redeem investments in the Fund and/or
invest in the Fund upon the making of additional purchase payments under the
Existing Contracts. The parties agree that this Section 6.3 will not apply to
any terminations under Section 5 and the effect of such terminations will be
governed by Section 5 of this Agreement.
6.4 Survival of Warranties and Indemnifications.
All warranties and indemnifications will survive the termination of this
Agreement.
<PAGE>
6.5 Continuance of Agreement for Certain Purposes.
If any Party terminates this Agreement with respect to any Fund pursuant to
Sections 6.1(b), 6.1(c), 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof, this
Agreement shall nevertheless continue in effect as to any Shares of that Fund
that are outstanding as of the date of such termination (the "Initial
Termination Date"). This continuation shall extend to the earlier of the date as
of which an Account owns no Shares of the affected Fund or a date (the "Final
Termination Date") six (6) months following the Initial Termination Date, except
that American Enterprise Life may, by written notice shorten said six (6) month
period in the case of a termination pursuant to Sections 6.1(d), 6.1(f), 6.1(g),
6.1(h) or 6.1(i).
Section 7. Parties To Cooperate Respecting Termination
The Parties hereto agree to cooperate and give reasonable assistance to one
another in taking all necessary and appropriate steps for the purpose of
ensuring that an Account owns no Shares of a Fund after the Final Termination
Date with respect thereto, or, in the case of a termination pursuant to Section
6.1(a), the termination date specified in the notice of termination. Such steps
may include combining the affected Account with another Account, substituting
other mutual fund shares for those of the affected Fund, or otherwise
terminating participation by the Contracts in such Fund.
Section 8. Assignment
This Agreement may not be assigned by any Party, except with the written
consent of each other Party.
Section 9. Notices
Notices and communications required or permitted by Section 9 hereof will
be given by means mutually acceptable to the Parties concerned. Each other
notice or communication required or permitted by this Agreement will be given to
the following persons at the following addresses and facsimile numbers, or such
other persons, addresses or facsimile numbers as the Party receiving such
notices or communications may subsequently direct in writing:
American Express Financial Advisors Inc.
American Enterprise Life Insurance Company
IDS Tower 10
Minneapolis, MN 55440-0010
Facsimile: 612-671-2269
Attn: Mr. Peter L. Slattery
Director, Variable Assets Product Management
cc: Mary Ellyn Minenko, Esq.
Senior Counsel
<PAGE>
AIM Variable Insurance Funds, Inc.
11 Greenway Plaza, Suite 1919
Houston, TX 77046
Facsimile: 713-993-9185
Attn: Nancy L. Martin, Esq.
AIM Distributors, Inc.
11 Greenway Plaza, Suite 1919
Houston, TX 77046
Facsimile: 713-993-9185
Attn: Mr. Gary Littlepage
cc: Nancy L. Martin, Esq.
Assistant General Counsel
Section 10. Voting Procedures
Subject to the cost allocation procedures set forth in Section 3 hereof,
American Enterprise Life will distribute all proxy material furnished by AVIF to
Participants to whom pass-through voting privileges are required to be extended
and will solicit voting instructions from Participants. American Enterprise Life
will vote Shares in accordance with timely instructions received from
Participants. American Enterprise Life will vote Shares that are (a) not
attributable to Participants to whom pass-through voting privileges are
extended, or (b) attributable to Participants, but for which no timely
instructions have been received, in the same proportion as Shares for which said
instructions have been received from Participants, so long as and to the extent
that the SEC continues to interpret the 1940 Act to require pass through voting
privileges for Participants. Neither American Enterprise Life nor any of its
affiliates will in any way recommend action in connection with or oppose or
interfere with the solicitation of proxies for the Shares held for such
Participants. American Enterprise Life reserves the right to vote shares held in
any Account in its own right, to the extent permitted by law. American
Enterprise Life shall be responsible for assuring that each of its Accounts
holding Shares calculates voting privileges in a manner consistent with that of
other Participating Insurance Companies or in the manner required by the Mixed
and Shared Funding exemptive order obtained by AVIF. AVIF will notify American
Enterprise Life of any changes of interpretations or amendments to Mixed and
Shared Funding exemptive order it has obtained. AVIF will comply with all
provisions of the 1940 Act requiring voting by shareholders, and in particular,
AVIF either will provide for annual meetings (except insofar as the SEC may
interpret Section 16 of the 1940 Act not to require such meetings) or will
comply with Section 16(c) of the 1940 Act (although AVIF is not one of the
trusts described in Section 16(c) of that Act) as well as with Sections 16(a)
and, if and when applicable, 16(b). Further, AVIF will act in accordance with
the SEC's interpretation of the requirements of Section 16(a) with respect to
periodic elections of directors and with whatever rules the SEC may promulgate
with respect thereto.
<PAGE>
Section 11. Foreign Tax Credits
AVIF agrees to consult in advance with American Enterprise Life concerning
any decision to elect or not to elect pursuant to Section 853 of the Code to
pass through the benefit of any foreign tax credits to its shareholders.
Section 12. Indemnification
12.1 Of AVIF and AIM by American Enterprise Life and AEFA.
(a) Except to the extent provided in Sections 12.1(b) and 12.1(c), below,
American Enterprise Life and AEFA agree to indemnify and hold harmless AVIF,
AIM, their respective affiliates, and each person, if any, who controls AVIF,
AIM, or their affiliates within the meaning of Section 15 of the 1933 Act and
each of their respective directors and officers, (collectively, the "Indemnified
Parties" for purposes of this Section 12.1) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of American Enterprise Life and AEFA) or actions in respect thereof
(including, to the extent reasonable, legal and other expenses), to which the
Indemnified Parties may become subject under any statute, regulation, at common
law or otherwise; provided, the Account owns shares of the Fund and insofar as
such losses, claims, damages, liabilities or actions:
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any Account's 1933 Act
registration statement, any Account Prospectus, the Contracts, or sales
literature or advertising for the Contracts (or any amendment or supplement
to any of the foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, that this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such alleged statement
or omission was made in reliance upon and in conformity with information
furnished to American Enterprise Life or AEFA by or on behalf of AVIF for
use in any Account's 1933 Act registration statement, any Account
Prospectus, the Contracts, or sales literature or advertising or otherwise
for use in connection with the sale of Contracts or Shares (or any
amendment or supplement to any of the foregoing); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in AVIF's 1933 Act registration statement, AVIF
Prospectus, sales literature or advertising of AVIF, or any
amendment or supplement to any of the foregoing, not supplied for
use therein by or on behalf of American Enterprise Life, AEFA or
their respective affiliates and on which such persons have
reasonably relied) or the negligent, illegal or fraudulent conduct
of American Enterprise Life, AEFA or their respective affiliates
or persons under their control (including, without
<PAGE>
limitation, their employees and "Associated Persons," as that term is defined
in paragraph (m) of Article I of the NASD's By-Laws), in
connection with the sale or distribution of the Contracts or
Shares; or
(iii)arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in AVIF's 1933 Act registration
statement, AVIF Prospectus, sales literature or advertising of AVIF, or any
amendment or supplement to any of the foregoing, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading if such a statement
or omission was made in reliance upon and in conformity with information
furnished to AVIF, AIM or their respective affiliates by or on behalf of
American Enterprise Life, AEFA or their respective affiliates for use in
AVIF's 1933 Act registration statement, AVIF Prospectus, sales literature
or advertising of AVIF, or any amendment or supplement to any of the
foregoing; or
(iv) arise as a result of any failure by American Enterprise Life or
AEFA to perform the obligations, provide the services and furnish
the materials required of them under the terms of this Agreement,
or any material breach of any representation and/or warranty made
by American Enterprise Life or AEFA in this Agreement or arise out
of or result from any other material breach of this Agreement by
American Enterprise Life or AEFA; or
(v) arise as a result of failure by the Contracts issued by American
Enterprise Life to qualify as annuity contracts or life insurance
contracts under the Code, otherwise than by reason of any Fund's
failure to comply with Subchapter M or Section 817(h) of the Code.
(b) Neither American Enterprise Life nor AEFA shall be liable under this
Section 12.1 with respect to any losses, claims, damages, liabilities or actions
to which an Indemnified Party would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance by that
Indemnified Party of its duties or by reason of that Indemnified Party's
reckless disregard of obligations or duties (i) under this Agreement, or (ii) to
AVIF.
(c) Neither American Enterprise Life nor AEFA shall be liable under this
Section 12.1 with respect to any action against an Indemnified Party unless AVIF
or AIM shall have notified American Enterprise Life and AEFA in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the action shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify American Enterprise
Life and AEFA of any such action shall not relieve American Enterprise Life and
AEFA from any liability which they may have to the Indemnified Party against
whom such action is brought otherwise than on account of this Section 12.1.
Except as otherwise provided herein, in case any such action is brought against
an Indemnified Party, American Enterprise Life and AEFA shall be entitled to
participate, at
<PAGE>
their own expense, in the defense of such action and also shall be entitled to
assume the defense thereof, with counsel approved by the Indemnified Party named
in the action, which approval shall not be unreasonably withheld. After notice
from American Enterprise Life or AEFA to such Indemnified Party of American
Enterprise Life's or AEFA's election to assume the defense thereof, the
Indemnified Party will cooperate fully with American Enterprise Life and AEFA
and shall bear the fees and expenses of any additional counsel retained by it,
and neither American Enterprise Life nor AEFA will be liable to such Indemnified
Party under this Agreement for any legal or other expenses subsequently incurred
by such Indemnified Party independently in connection with the defense thereof,
other than reasonable costs of investigation.
12.2 Of American Enterprise Life and AEFA by AVIF and AIM.
(a) Except to the extent provided in Sections 12.2(c), 12.2(d) and 12.2(e),
below, AVIF and AIM agree to indemnify and hold harmless American Enterprise
Life, AEFA, their respective affiliates, and each person, if any, who controls
American Enterprise Life, AEFA or their respective affiliates within the meaning
of Section 15 of the 1933 Act and each of their respective directors and
officers, (collectively, the "Indemnified Parties" for purposes of this Section
12.2) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of AVIF and AIM) or actions
in respect thereof (including, to the extent reasonable, legal and other
expenses), to which the Indemnified Parties may become subject under any
statute, regulation, at common law, or otherwise; provided, the Account owns
shares of the Fund and insofar as such losses, claims, damages, liabilities or
actions:
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in AVIF's 1933 Act registration
statement, AVIF Prospectus or sales literature or advertising of AVIF (or
any amendment or supplement to any of the foregoing), or arise out of or
are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, that this agreement to
indemnify shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance upon
and in conformity with information furnished to AVIF, AIM or their
respective affiliates by or on behalf of American Enterprise Life, AEFA or
their respective affiliates for use in AVIF's 1933 Act registration
statement, AVIF Prospectus, or in sales literature or advertising or
otherwise for use in connection with the sale of Contracts or Shares (or
any amendment or supplement to any of the foregoing); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in any Account's 1933 Act registration statement, any
Account Prospectus, sales literature or advertising for the
Contracts, or any amendment or supplement to any of the foregoing,
not supplied for use therein by or on behalf of AVIF, AIM or their
respective
<PAGE>
affiliates and on which such persons have reasonably relied) or the
negligent, illegal or fraudulent conduct of AVIF, AIM, their
respective affiliates or persons under their control (including,
without limitation, their employees and "Associated Persons" as
that Term is defined in Section (n) of Article 1 of the NASD
By-Laws), in connection with the sale or distribution of AVIF
Shares; or
(iii)arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any Account's 1933 Act
registration statement, any Account Prospectus, sales literature or
advertising covering the Contracts, or any amendment or supplement to any
of the foregoing, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, if such statement or omission was made
in reliance upon and in conformity with information furnished to American
Enterprise Life, AEFA or their respective affiliates by or on behalf of
AVIF or AIM for use in any Account's 1933 Act registration statement, any
Account Prospectus, sales literature or advertising covering the Contracts,
or any amendment or supplement to any of the foregoing; or
(iv) arise as a result of any failure by AVIF or AIM to perform the
obligations, provide the services and furnish the materials
required of them under the terms of this Agreement, or any
material breach of any representation and/or warranty made by AVIF
or AIM in this Agreement or arise out of or result from any other
material breach of this Agreement by AVIF or AIM.
(b) Except to the extent provided in Sections 12.2(c), 12.2(d) and 12.2(e)
hereof, AVIF and AIM agree to indemnify and hold harmless the Indemnified
Parties from and against any and all losses, claims, damages, liabilities
(including amounts paid in settlement thereof with, the written consent of AVIF
or AIM) or actions in respect thereof (including, to the extent reasonable,
legal and other expenses) to which the Indemnified Parties may become subject
directly or indirectly under any statute, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or actions directly or indirectly
result from or arise out of the failure of any Fund to operate as a regulated
investment company in compliance with (i) Subchapter M of the Code and
regulations thereunder, or (ii) Section 817(h) of the Code and regulations
thereunder, including, without limitation, any income taxes and related
penalties, rescission charges, liability under state law to Participants
asserting liability against American Enterprise Life pursuant to the Contracts,
the costs of any ruling and closing agreement or other settlement with the IRS,
and the cost of any substitution by American Enterprise Life of Shares of
another investment company or portfolio for those of any adversely affected Fund
as a funding medium for each Account that American Enterprise Life reasonably
deems necessary or appropriate as a result of the noncompliance.
<PAGE>
(c) Neither AVIF nor AIM shall be liable under this Section 12.2 with
respect to any losses, claims, damages, liabilities or actions to which an
Indemnified Party would otherwise be subject by reason of willful misfeasance,
bad faith, or gross negligence in the performance by that Indemnified Party of
its duties or by reason of such Indemnified Party's reckless disregard of its
obligations and duties (i) under this Agreement, or (ii) to American Enterprise
Life, AEFA, each Account or Participants.
(d) Neither AVIF nor AIM shall be liable under this Section 12.2 with
respect to any action against an Indemnified Party unless the Indemnified Party
shall have notified AVIF and AIM in writing within a reasonable time after the
summons or other first legal process giving information of the nature of the
action shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any designated
agent), but failure to notify AVIF and AIM of any such action shall not relieve
AVIF and AIM from any liability which they may have to the Indemnified Party
against whom such action is brought otherwise than on account of this Section
12.2. Except as otherwise provided herein, in case any such action is brought
against an Indemnified Party, AVIF and AIM will be entitled to participate, at
their own expense, in the defense of such action and also shall be entitled to
assume the defense thereof (which shall include, without limitation, the conduct
of any ruling request and closing agreement or other settlement proceeding with
the IRS), with counsel approved by the Indemnified Party named in the action,
which approval shall not be unreasonably withheld. After notice from AVIF or AIM
to such Indemnified Party of AVIF's or AIM's election to assume the defense
thereof, the Indemnified Party will cooperate fully with AVIF and AIM and shall
bear the fees and expenses of any additional counsel retained by it, and neither
AVIF nor AIM will be liable to such Indemnified Party under this Agreement for
any legal or other expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof, other than reasonable
costs of investigation.
(e) In no event shall AVIF or AIM be liable under the indemnification
provisions contained in this Agreement to any individual or entity, including,
without limitation, American Enterprise Life, AEFA or any other Participating
Insurance Company or any Participant, with respect to any losses, claims,
damages, liabilities or expenses that arise out of or result from (i) a breach
of any representation, warranty, and/or covenant made by American Enterprise
Life or AEFA hereunder or by any Participating Insurance Company under an
agreement containing substantially similar representations, warranties and
covenants; (ii) the failure by American Enterprise Life or any Participating
Insurance Company to maintain its segregated asset account (which invests in any
Fund) as a legally and validly established segregated asset account under
applicable state law and as a duly registered unit investment trust under the
provisions of the 1940 Act (unless exempt therefrom); or (iii) the failure by
American Enterprise Life or any Participating Insurance Company to maintain its
variable annuity or life insurance contracts (with respect to which any Fund
serves as an underlying funding vehicle) as annuity contracts or life insurance
contracts under applicable provisions of the Code.
<PAGE>
12.3 Effect of Notice.
Any notice given by the indemnifying Party to an Indemnified Party referred
to in Sections 12.1(c) or 12.2(d) above of participation in or control of any
action by the indemnifying Party will in no event be deemed to be an admission
by the indemnifying Party of liability, culpability or responsibility, and the
indemnifying Party will remain free to contest liability with respect to the
claim among the Parties or otherwise.
12.4 Successors.
A successor by law of any Party shall be entitled to the benefits of the
indemnification contained in this Section 12.
Section 13. Applicable Law
This Agreement will be construed and the provisions hereof interpreted
under and in accordance with Maryland law, without regard for that state's
principles of conflict of laws.
Section 14. Execution in Counterparts
This Agreement may be executed simultaneously in two or more counterparts,
each of which taken together will constitute one and the same instrument.
Section 15. Severability
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will not
be affected thereby.
Section 16. Rights Cumulative
The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, that the Parties are entitled to under federal and state
laws.
Section 17. Headings
The Table of Contents and headings used in this Agreement are for purposes
of reference only and shall not limit or define the meaning of the provisions of
this Agreement.
Section 18. Confidentiality
AVIF acknowledges that the identities of the customers of American
Enterprise Life or any of its affiliates (collectively, the "American Enterprise
Life Protected Parties" for purposes of this Section 18), information maintained
regarding those customers, and all
<PAGE>
computer programs and procedures or other information developed by the American
Enterprise Life Protected Parties or any of their employees or agents in
connection with American Enterprise Life's performance of its duties under this
Agreement are the valuable property of the American Enterprise Life Protected
Parties. AVIF agrees that if it comes into possession of any list or compilation
of the identities of or other information about the American Enterprise Life
Protected Parties' customers, or any other information or property of the
American Enterprise Life Protected Parties, other than such information as may
be independently developed or compiled by AVIF from information supplied to it
by the American Enterprise Life Protected Parties' customers who also maintain
accounts directly with AVIF, AVIF will hold such information or property in
confidence and refrain from using, disclosing or distributing any of such
information or other property except: (a) with American Enterprise Life's prior
written consent; or (b) as required by law or judicial process. American
Enterprise Life acknowledges that the identities of the customers of AVIF or any
of its affiliates (collectively the "AVIF Protected Parties" for purposes of
this Section 18), information maintained regarding those customers, and all
computer programs and procedures or other information developed by the AVIF
Protected Parties or any of their employees or agents in connection with AVIF's
performance of its duties under this Agreement are the valuable property of the
AVIF Protected Parties. American Enterprise Life agrees that if it comes into
possession of any list or compilation of the identities of or other information
about the AVIF Protected Parties' customers or any other information or property
of the AVIF Protected Parties, other than such information as may be
independently developed or compiled by American Enterprise Life from information
supplied to it by the AVIF Protected Parties' customers who also maintain
accounts directly with American Enterprise Life, American Enterprise Life will
hold such information or property in confidence and refrain from using,
disclosing or distributing any of such information or other property except: (a)
with AVIF's prior written consent; or (b) as required by law or judicial
process. Each party acknowledges that any breach of the agreements in this
Section 18 would result in immediate and irreparable harm to the other parties
for which there would be no adequate remedy at law and agree that in the event
of such a breach, the other parties will be entitled to equitable relief by way
of temporary and permanent injunctions, as well as such other relief as any
court of competent jurisdiction deems appropriate.
Section 19. Trademarks and Fund Names
(a) AIM, or its affiliates, owns all right, title and interest in and to
the name, trademark and service mark "AIM" and such other tradenames, trademarks
and service marks as may be set forth on Schedule B, as amended from time to
time by written notice from AIM to American Enterprise Life (the "AIM licensed
marks" or the "licensor's licensed marks") and is authorized to use and to
license other persons to use such marks. AIM hereby grants to American
Enterprise Life and its affiliates a non-exclusive license to use the AIM
licensed marks in connection with American Enterprise Life's performance of the
services contemplated under this Agreement, subject to the terms and conditions
set forth in this Section 19.
<PAGE>
(b) The grant of license by AIM (a "licensor") to American Enterprise Life
and its affiliates (the "licensee") shall terminate automatically upon
termination of this Agreement. Upon automatic termination, the licensee shall
cease to use the licensor's licensed marks, except that American Enterprise Life
shall have the right to continue to service any outstanding Contracts bearing
any of the AIM licensed marks. Upon AIM's elective termination of this license,
American Enterprise Life and its affiliates shall immediately cease to issue any
new annuity or life insurance contracts bearing any of the AIM licensed marks
and shall likewise cease any activity which suggests that it has any right under
any of the AIM licensed marks or that it has any association with AIM, except
that American Enterprise Life shall have the right to continue to service
outstanding Contracts bearing any of the AIM licensed marks.
(c) The licensee shall obtain the prior written approval of the licensor
for the public release by such licensee of any materials bearing the licensor's
licensed marks. The licensor's approvals shall not be unreasonably withheld.
(d) During the term of this grant of license, a licensor may request that a
licensee submit samples of any materials bearing any of the licensor's licensed
marks which were previously approved by the licensor but, due to changed
circumstances, the licensor may wish to reconsider. If, on reconsideration, or
on initial review, respectively, any such samples fail to meet with the written
approval of the licensor, then the licensee shall immediately cease distributing
such disapproved materials. The licensor's approval shall not be unreasonably
withheld, and the licensor, when requesting reconsideration of a prior approval,
shall assume the reasonable expenses of withdrawing and replacing such
disapproved materials. The licensee shall obtain the prior written approval of
the licensor for the use of any new materials developed to replace the
disapproved materials, in the manner set forth above.
(e) The licensee hereunder: (i) acknowledges and stipulates that, to the
best of the knowledge of the licensee, the licensor's licensed marks are valid
and enforceable trademarks and/or service marks and that such licensee does not
own the licensor's licensed marks and claims no rights therein other than as a
licensee under this Agreement; (ii) agrees never to contend otherwise in legal
proceedings or in other circumstances; and (iii) acknowledges and agrees that
the use of the licensor's licensed marks pursuant to this grant of license shall
inure to the benefit of the licensor.
Section 20. Parties to Cooperate
Each party to this Agreement will cooperate with each other party and all
appropriate governmental authorities (including, without limitation, the SEC,
the NASD and state insurance regulators) and will permit each other and such
authorities reasonable access to its books and records (including copies
thereof) in connection with any investigation or inquiry relating to this
Agreement or the transactions contemplated hereby.
-------------------------
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized officers
signing below.
AIM VARIABLE INSURANCE
FUNDS, INC.
Attest: /s/ Nancy L. Martin By: /s/ Robert H. Graham
Nancy L. Martin Name: Robert H. Graham
Assistant Secretary Title: President
AIM DISTRIBUTORS, INC.
Attest: /s/ Nancy L. Martin By: /s/ W. Gary Littlepage
Nancy L. Martin Name: W. Gary Littlepage
Assistant General Counsel Title: Sr. Vice President
& Assistant Secretary
AMERICAN ENTERPRISE LIFE
INSURANCE COMPANY, on
behalf of itself and its separate
accounts
Attest: By:
Name: Name:
Title: Title:
AMERICAN EXPRESS FINANCIAL
ADVISORS INC.
Attest: By:
Name: Name:
Title: Title:
<PAGE>
SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
o AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Growth and Income Fund
AIM V.I. International Equity Fund
AIM V.I. Value Fund
SEPARATE ACCOUNTS UTILIZING THE FUNDS
o American Enterprise Variable Annuity Account
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
o Flexible Premium Deferred Variable Annuity Contract Form Nos. 34560, and
43260 (and any state variations thereof)
<PAGE>
SCHEDULE B
o AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Growth and Income Fund
AIM V.I. International Equity Fund
AIM V.I. Value Fund
o AIM and Design
<PAGE>
JANUS ASPEN SERIES
FUND PARTICIPATION AGREEMENT
THIS AGREEMENT made this 8th day of October, 1997, between JANUS ASPEN
SERIES, an open-end management investment company organized as a Delaware
business trust (the "Trust"), and American Enterprise Life Insurance Company, a
life insurance company organized under the laws of the State of Indiana (the
"Company"), on its own behalf and on behalf of each segregated asset account of
the Company set forth on Schedule A, as may be amended from time to time (the
"Accounts").
W I T N E S S E T H:
WHEREAS, the Trust has registered with the Securities and Exchange
Commission as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"), and has registered the offer
and sale of its shares under the Securities Act of 1933, as amended (the "1933
Act"); and
WHEREAS, the Trust desires to act as an investment vehicle for separate
accounts established for variable life insurance policies and variable annuity
contracts to be offered by insurance companies that have entered into
participation agreements with the Trust ("Participating Insurance Companies");
and
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares, each series representing an interest in a particular managed
portfolio of securities and other assets (the "Portfolios"); and
WHEREAS, the Trust has received an order from the Securities and
Exchange Commission granting Participating Insurance Companies and their
separate accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a)
and 15(b) of the 1940 Act, and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder,
to the extent necessary to permit shares of the Trust to be sold to and held by
variable annuity and variable life insurance separate accounts of both
affiliated and unaffiliated life insurance companies and certain qualified
pension and retirement plans (the "Exemptive Order"); and
WHEREAS, the Company has registered or will register (unless
registration is not required under applicable law) certain variable life
insurance policies and/or variable annuity contracts under the 1933 Act (the
"Contracts"); and
WHEREAS, the Company has registered or will register (unless
registration is not required under applicable law) each Account as a unit
investment trust under the 1940 Act; and
WHEREAS, the Company desires to utilize shares of the Portfolios listed
on Schedule B, as may be amended from time to time, as an investment vehicle of
the Accounts;
NOW THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
<PAGE>
ARTICLE I
Sale of Trust Shares
1.1 The Trust shall make shares of its Portfolios available to the
Accounts at the net asset value next computed after receipt of such purchase
order by the Trust (or its agent), as established in accordance with the
provisions of the then current prospectus of the Trust. Shares of a particular
Portfolio of the Trust shall be ordered in such quantities and at such times as
determined by the Company to be necessary to meet the requirements of the
Contracts. The Trustees of the Trust (the "Trustees") may refuse to sell shares
of any Portfolio to any person, or suspend or terminate the offering of shares
of any Portfolio if such action is required by law or by regulatory authorities
having jurisdiction or is, in the sole discretion of the Trustees acting in good
faith and in light of their fiduciary duties under federal and any applicable
state laws, necessary in the best interests of the shareholders of such
Portfolio.
1.2 The Trust will redeem any full or fractional shares of any
Portfolio when requested by the Company on behalf of an Account at the net asset
value next computed after receipt by the Trust (or its agent) of the request for
redemption, as established in accordance with the provisions of the then current
prospectus of the Trust. The Trust shall make payment for such shares on the
same Business Day (as defined below) as the Trust receives notice of redemption
orders in accordance with Section 1.3 and in the manner established from time to
time by the Trust, except that the Trust reserves the right to suspend payment
consistent with Section 22(e) of the 1940 Act and any rules thereunder.
1.3 For the purposes of Sections 1.1 and 1.2, the Trust hereby appoints
the Company as its agent for the limited purpose of receiving and accepting
purchase and redemption orders resulting from investment in and payments under
the Contracts. Receipt by the Company shall constitute receipt by the Trust
provided that i) such orders are received by the Company in good order prior to
the time the net asset value of each Portfolio is priced in accordance with its
prospectus and ii) the Trust receives notice of such orders by 11:00 a.m. New
York time on the next following Business Day. "Business Day" shall mean any day
on which the New York Stock Exchange is open for trading and on which the Trust
calculates its net asset value pursuant to the rules of the Securities and
Exchange Commission.
1.4 Purchase orders that are transmitted to the Trust in accordance
with Section 1.3 shall be initiated by wire no later than 12:00 noon New York
time on the same Business Day that the Trust receives notice of the order.
Payments shall be made in federal funds transmitted by wire.
1.5 Issuance and transfer of the Trust's shares will be by book entry
only. Stock certificates will not be issued to the Company or the Account.
Shares ordered from the Trust will be recorded in the appropriate title for each
Account or the appropriate subaccount of each Account.
1.6 The Trust shall furnish same-day notice (by wire or telephone
followed by written confirmation) to the Company of any income dividends or
capital gain distributions payable on the Trust's shares. The Company hereby
elects to receive all such gain distributions as are payable on a Portfolio's
shares in additional shares of that Portfolio. The Company reserves the right to
revoke this election and to receive all such
<PAGE>
dividends and distributions in cash upon 90 days' prior notice to the
Trust. The Trust shall notify the Company of the number of shares so issued as
payment of such dividends and distributions.
1.7 The Trust shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available by 6 p.m. New York
time.
1.8 The Trust agrees that its shares will be sold only to Participating
Insurance Companies and their separate accounts and to certain qualified pension
and retirement plans to the extent permitted by the Exemptive Order. No shares
of any Portfolio will be sold directly to the general public. The Company agrees
that Trust shares will be used only for the purposes of funding the Contracts
and Accounts listed in Schedule A, as amended from time to time.
1.9 The Trust agrees that all Participating Insurance Companies shall
have the obligations and responsibilities regarding pass-through voting and
conflicts of interest corresponding to those contained in Section 2.8 and
Article IV of this Agreement.
ARTICLE II
Obligations of the Parties
2.1 The Trust shall prepare and be responsible for filing with the
Securities and Exchange Commission and any state regulators requiring such
filing all shareholder reports, notices, proxy materials (or similar materials
such as voting instruction solicitation materials), prospectuses and statements
of additional information of the Trust. The Trust shall bear the costs of
registration and qualification of its shares, preparation and filing of the
documents listed in this Section 2.1 and all taxes to which an issuer is subject
on the issuance and transfer of its shares.
2.2 At the option of the Company, the Trust shall either (a) provide
the Company (at the Company's expense) with as many copies of the Trust's
current prospectus, annual report, semi-annual report and other shareholder
communications, including any amendments or supplements to any of the foregoing,
as the Company shall reasonably request; or (b) provide the Company with a
camera ready copy or a computer disk of such documents in a form suitable for
printing. The Trust shall provide the Company with a copy of its statement of
additional information in a form suitable for duplication by the Company. The
Trust (at its expense) shall provide the Company with copies of any
Trust-sponsored proxy materials in such quantity as the Company shall reasonably
require for distribution to Contract owners.
2.3 The Company shall bear the costs of printing and distributing the
Trust's prospectus, statement of additional information, shareholder reports and
other shareholder communications to owners of and applicants for policies for
which the Trust is serving or is to serve as an investment vehicle. The Company
shall bear the costs of distributing proxy materials (or similar materials such
as voting solicitation instructions) to Contract owners. The Company assumes
sole responsibility for ensuring that such materials are delivered to Contract
owners in accordance with applicable federal and state securities laws.
<PAGE>
2.4 The Company agrees and acknowledges that the Trust's adviser, Janus
Capital Corporation ("Janus Capital"), is the sole owner of the name and mark
"Janus" and that all use of any designation comprised in whole or part of Janus
(a "Janus Mark") under this Agreement shall inure to the benefit of Janus
Capital. Except as provided in Section 2.5, the Company shall not use any Janus
Mark on its own behalf or on behalf of the Accounts or Contracts in any
registration statement, advertisement, sales literature or other materials
relating to the Accounts or Contracts without the prior written consent of Janus
Capital. Upon termination of this Agreement for any reason, the Company shall
cease all use of any Janus Mark(s) as soon as reasonably practicable.
2.5 The Company shall furnish, or cause to be furnished, to the Trust
or its designee, a copy of each Contract prospectus or statement of additional
information in which the Trust or its investment adviser is named prior to the
filing of such document with the Securities and Exchange Commission. The Company
shall furnish, or shall cause to be furnished, to the Trust or its designee,
each piece of sales literature or other promotional material in which the Trust
or its investment adviser is named, at least ten Business Days prior to its use.
No such material shall be used if the Trust or its designee reasonably objects
to such use within five Business Days after receipt of such material.
2.6 The Trust shall furnish, or cause to be furnished, to the Company
or its designee, a copy of each Trust prospectus or statement of additional
information in which the Company is named prior to the filing of such document
with the Securities and Exchange Commission. The Trust shall furnish, or shall
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company is named, at least
ten Business Days prior to its use. No such material shall be used if the
Company or its designee reasonably objects to such use within five Business Days
after receipt of such material.
2.7 The Company shall not give any information or make any
representations or statements on behalf of the Trust or concerning the Trust or
its investment adviser in connection with the sale of the Contracts other than
information or representations contained in and accurately derived from the
registration statement, prospectus or statement of additional information for
the Trust shares (as such registration statement, prospectus and statement of
additional information may be amended or supplemented from time to time),
reports of the Trust, Trust-sponsored proxy statements, or in sales literature
or published reports in the public domain or other promotional material approved
by the Trust or its designee, except as required by legal process or regulatory
authorities or with the written permission of the Trust or its designee. Nothing
in this Section 2.7 will be construed as preventing the Company or its employees
or agents from giving advice on investments in the Trust.
2.8 The Trust shall not give any information or make any
representations or statements on behalf of the Company or concerning the
Company, the Accounts or the Contracts other than information or representations
contained in and accurately derived from the registration statement, prospectus
or statement of additional information for the Contracts (as such registration
statement, prospectus and statement of additional information may be amended or
supplemented from time to time), or in materials approved by the Company for
distribution including sales literature or other promotional materials, except
as required by legal process or regulatory authorities or with the written
permission of the Company.
<PAGE>
2.9 So long as, and to the extent that the Securities and Exchange
Commission interprets the 1940 Act to require pass-through voting privileges for
variable policyowners, the Company will provide pass-through voting privileges
to owners of policies whose cash values are invested, through the Accounts, in
shares of the Trust. The Trust shall require all Participating Insurance
Companies to calculate voting privileges in the same manner and the Company
shall be responsible for assuring that the Accounts calculate voting privileges
in the manner established by the Trust. With respect to each Account, the
Company will vote shares of the Trust held by the Account and for which no
timely voting instructions from policyowners are received as well as shares it
owns that are held by that Account, in the same proportion as those shares for
which voting instructions are received. The Company and its agents will in no
way recommend or oppose or interfere with the solicitation of proxies for Trust
shares held by Contract owners without the prior written consent of the Trust,
which consent may be withheld in the Trust's sole discretion.
2.10 The Company shall notify the Trust of any applicable state
insurance laws of which it becomes aware that restrict the Portfolios'
investments or otherwise affect the operation of the Trust and shall notify the
Trust of any changes in such laws.
ARTICLE III
Representations and Warranties
3.1 The Company represents and warrants that it is an insurance company
duly organized and in good standing under the laws of the State of Indiana and
that it has legally and validly established each Account as a segregated asset
account under such law on the date set forth in Schedule A.
3.2 The Company represents and warrants that each Account (1) has been
registered or, prior to any issuance or sale of the Contracts, will be
registered as a unit investment trust in accordance with the provisions of the
1940 Act or, alternatively (2) has not been registered in proper reliance upon
an exclusion from registration under the 1940 Act.
3.3 The Company represents and warrants that the Contracts or interests
in the Accounts (1) are or, prior to issuance, will be registered as securities
under the 1933 Act or, alternatively (2) are not registered because they are
properly exempt from registration under the 1933 Act or will be offered
exclusively in transactions that are properly exempt from registration under the
1933 Act. The Company further represents and warrants that the Contracts will be
issued and sold in compliance in all material respects with all applicable
federal and state laws; and the sale of the contracts shall comply in all
material respects with state insurance suitability requirements.
3.4 The Trust represents and warrants that it is duly organized and
validly existing under the laws of the State of Delaware.
3.5 The Trust represents and warrants that the Trust shares offered and
sold pursuant to this Agreement will be registered under the 1933 Act and the
Trust shall be registered under the 1940 Act prior to any issuance or sale of
such shares. The Trust shall amend its registration statement under the 1933 Act
and the 1940 Act from time to time
<PAGE>
as required in order to effect the continuous offering of its shares.
The Trust shall register and qualify its shares for sale in accordance with the
laws of the various states only if and to the extent deemed advisable by the
Trust.
3.6 The Trust represents and warrants that the investments of each
Portfolio will comply with the diversification requirements set forth in Section
817(h) of the Internal Revenue Code of 1986, as amended, and the rules and
regulations thereunder. In the event the Trust fails to comply with these
diversification requirements, the Trust will take all reasonable steps: (a) to
notify the Company of such noncompliance; and (b) to adequately diversify the
Trust so as to achieve compliance within the grace period afforded by Treasury
Regulation 1.817-5.
3.7 The Trust represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code, and that it
will make every effort to maintain such qualification (under Subchapter M or any
successor or similar provision) and that it will notify the Company immediately
upon having a reasonable basis for believing that it has ceased to so qualify or
that it might not so qualify in the future.
3.8 The Trust represents that its investment objectives, policies and
restrictions comply in all material respects with any applicable state
securities laws of which the Trust is aware as they may apply to the Trust. The
Trust makes no representation as to whether any aspect of its operations
(including, but not limited to, fees and expenses and investment policies,
objectives and restrictions) complies with the insurance laws and regulations of
any state. The Trust agrees that it will furnish the information required by
state insurance laws and requested by the Company to assist the Company in
obtaining the authority needed to issue the Contracts in the various states.
3.9 The Trust represents and warrants that all of its trustees,
officers, employees, investment advisers, and other individuals/entities having
access to the funds and/or securities of the Trust are and continue to be at all
times covered by a blanket fidelity bond or similar coverage for the benefit of
the Trust in an amount not less than the minimal coverage as required currently
by Rule 17g-(1) of the 1940 Act or related provisions as may be promulgated from
time to time. The aforesaid bond includes coverage for larceny and embezzlement
and is issued by a reputable bonding company.
ARTICLE IV
Potential Conflicts
4.1 The parties acknowledge that the Trust's shares may be made
available for investment to other Participating Insurance Companies. In such
event, the Trustees will monitor the Trust for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
Participating Insurance Companies. An irreconcilable material conflict may arise
for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by variable annuity contract and variable life
<PAGE>
insurance contract owners; or (f) a decision by an insurer to disregard
the voting instructions of contract owners. The Trustees shall promptly inform
the Company if they determine that an irreconcilable material conflict exists
and the implications thereof.
4.2 The Company agrees to promptly report any potential or existing
conflicts of which it is aware to the Trustees. The Company will assist the
Trustees in carrying out their responsibilities under the Exemptive Order by
providing the Trustees with all information reasonably necessary for the
Trustees to consider any issues raised including, but not limited to,
information as to a decision by the Company to disregard Contract owner voting
instructions.
4.3 If it is determined by a majority of the Trustees, or a majority of
its disinterested Trustees, that a material irreconcilable conflict exists that
affects the interests of Contract owners, the Company shall, in cooperation with
other Participating Insurance Companies whose contract owners are also affected,
at its expense and to the extent reasonably practicable (as determined by the
Trustees) take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, which steps could include: (a) withdrawing the
assets allocable to some or all of the subaccounts of the Accounts from the
Trust or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Trust, or
submitting the question of whether or not such segregation should be implemented
to a vote of all affected Contract owners and, as appropriate, segregating the
assets of any appropriate group (i.e., annuity contract owners, life insurance
contract owners, or variable contract owners of one or more Participating
Insurance Companies) that votes in favor of such segregation, or offering to the
affected Contract owners the option of making such a change; and (b)
establishing a new registered management investment company or managed separate
account.
4.4 If a material irreconcilable conflict arises because of a decision
by the Company to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Trust's election, to withdraw the affected subaccount of
the Account's investment in the Trust and terminate this Agreement with respect
to such subaccount of the Account; provided, however that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested
Trustees. No charge or penalty will be imposed as a result of such withdrawal.
Any such withdrawal and termination must take place within six (6) months after
the Trust gives written notice that this provision is being implemented. Until
the end of such six (6) month period, the Trust shall continue to accept and
implement orders by the Company for the purchase and redemption of shares of the
Trust.
4.5 If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected subaccount of the Account's investment in the Trust and terminate this
Agreement with respect to such subaccount of the Account within six (6) months
after the Trustees inform the Company in writing that it has determined that
such decision has created an irreconcilable material conflict; provided,
however, that such withdrawal and termination shall be limited to the extent
required by the foregoing material irreconcilable conflict as determined by a
majority of the disinterested Trustees. No charge or penalty will be imposed as
a result of
<PAGE>
such withdrawal. Until the end of such six (6) month period, the Trust
shall continue to accept and implement orders by the Company for the purchase
and redemption of shares of the Trust.
4.6 For purposes of Sections 4.3 through 4.6 of this Agreement, a
majority of the disinterested Trustees shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Company be required to establish a new funding medium for the Contracts
if an offer to do so has been declined by vote of a majority of Contract owners
materially adversely affected by the irreconcilable material conflict. In the
event that the Trustees determine that any proposed action does not adequately
remedy any irreconcilable material conflict, then the Company will withdraw the
subaccount of the Account's investment in the Trust and terminate this Agreement
within six (6) months after the Trustees inform the Company in writing of the
foregoing determination; provided, however, that such withdrawal and termination
shall be limited to the extent required by any such material irreconcilable
conflict as determined by a majority of the disinterested Trustees. No charge or
penalty will be imposed as a result of such withdrawal.
4.7 The Company shall at least annually submit to the Trustees such
reports, materials or data as the Trustees may reasonably request so that the
Trustees may fully carry out the duties imposed upon them by the Exemptive
Order, and said reports, materials and data shall be submitted more frequently
of deemed appropriate by the Trustees.
4.8 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
1940 Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Exemptive Order) on terms and conditions materially
different from those contained in the Exemptive Order, then the Trust and/or the
Participating Insurance Companies, as appropriate, shall take such steps as may
be necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3,
as adopted, to the extent such rules are applicable.
ARTICLE V
Indemnification
5.1 Indemnification By the Company. The Company agrees to indemnify and
hold harmless the Trust and each person, if any, who controls the Trust within
the meaning of Section 15 of the 1933 Act and any Trustees, officers, employees
and agents of the foregoing (collectively, the "Indemnified Parties" for
purposes of this Article V) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the Company) or expenses (including the reasonable costs of investigating or
defending any alleged loss, claim, damage, liability or expense and reasonable
legal counsel fees incurred in connection therewith) (collectively, "Losses"),
to which the Indemnified Parties may become subject under any statute or
regulation, or at common law or otherwise, insofar as such Losses:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in a
registration statement, prospectus or statement of additional
information for the Contracts or in the Contracts themselves or in
sales literature generated or approved by the Company on behalf of the
Contracts or Accounts (or any amendment or supplement to any
<PAGE>
of the foregoing) (collectively, "Company Documents" for the
purposes of this Article V), or arise out of or are based upon the
omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, provided that this indemnity shall not apply as
to any Indemnified Party if such statement or omission was made in
reliance upon and was accurately derived from written information
furnished to the Company by or on behalf of the Trust for use in
Company Documents or otherwise for use in connection with the sale of
the Contracts or Trust shares; or
(b) arise out of or result from statements or representations
(other than statements or representations contained in and accurately
derived from Trust Documents as defined in Section 5.2(a)) or wrongful
conduct of the Company or persons under its control, with respect to
the sale or acquisition of the Contracts or Trust shares: or
(c) arise out of or result from any untrue statement or
alleged untrue statement of a material fact contained in Trust
Documents as defined in Section 5.2(a) or the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading if such
statement or omission was made in reliance upon and accurately derived
from written information furnished to the Trust by or on behalf of the
Company; or
(d) arise out of or result from any failure by the Company to
provide the services or furnish the materials required under the terms
of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Company.
5.2 Indemnification By the Trust. The Trust agrees to indemnify and
hold harmless the Company and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act and any directors, officers,
employees and agents of the foregoing (collectively, the "Indemnified Parties"
for purposes of this Article V) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the Trust) or expenses (including the reasonable costs of investigating or
defending any alleged loss, claim, damage, liability or expense and reasonable
legal counsel fees incurred in connection therewith) (collectively, "Losses"),
to which the Indemnified Parties may become subject under any statute or
regulation, or at common law or otherwise, insofar as such Losses:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
registration statement, prospectus or statement of additional
information for the Trust or any sales literature generated or approved
by the Trust (or any amendment or supplement thereto), (collectively,
"Trust Documents" for the purposes of this Article V), or arise out of
or are based upon the omission or the alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, provided that this indemnity shall
not apply as to any Indemnified Party if such statement or omission or
such alleged statement or
<PAGE>
omission was made in reliance upon and was accurately derived
from written information furnished to the Trust by or on behalf of the
Company for use in Trust Documents or otherwise for use in connection
with the sale of the Contracts or Trust shares; or
(b) arise out of or result from statements or representations
(other than statements or representations contained in and accurately
derived from Company Documents) or wrongful conduct of the Trust or
persons under its control, with respect to the sale or acquisition of
the Contracts or Trust shares; or
(c) arise out of or result from any untrue statement or
alleged untrue statement of a material fact contained in Company
Documents or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading if such statement or omission was
made in reliance upon and accurately derived from written information
furnished to the Company by or on behalf of the Trust; or
(d) arise out of or result from any failure by the Trust to
provide the services or furnish the materials required under the terms
of this Agreement, including, but not limited to, any material (based
on current standards of the Securities and Exchange Commission) errors
in or untimely calculation or reporting of the daily net asset value
per share or dividend or capital gain distribution rate; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Trust.
5.3 Neither the Company nor the trust shall be liable under the
indemnification provisions of Sections 5.1 or 5.2, as applicable, with respect
to any Losses incurred or assessed against an Indemnified Party that arise from
such Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations or duties under this Agreement.
5.4 Neither the Company nor the trust shall be liable under the
indemnification provisions of Sections 5.1 or 5.2, as applicable, with respect
to any claim made against an Indemnified Party unless such Indemnified Party
shall have notified the other party in writing within a reasonable time after
the summons, or other first written notification, giving information of the
nature of the claim, complaint or action by a regulatory authority shall have
been served upon or otherwise received by such Indemnified Party (or after such
Indemnified Party shall have received notice of service upon or other
notification to any designated agent), but failure to notify the party against
whom indemnification is sought of any such claim shall not relieve that party
from any liability which it may have to the Indemnified Party in the absence of
Sections 5.1 and 5.2.
5.5 In case any such action is brought against the Indemnified Parties,
the indemnifying party shall be entitled to participate, at its own expense, in
the defense of such action. The indemnifying party also shall be entitled to
assume the defense thereof, with counsel reasonably satisfactory to the party
named in the action. After notice from the indemnifying party to the Indemnified
Party of an election to assume such defense, the Indemnified Party shall bear
the fees and expenses of any additional counsel retained
<PAGE>
by it, and the indemnifying party will not be liable to the Indemnified
Party under this Agreement for any legal or other expenses subsequently incurred
by such party independently in connection with the defense thereof other than
reasonable costs of investigation.
ARTICLE VI
Termination
6.1 This Agreement may be terminated by either party for any reason by
ninety (90) days' advance written notice delivered to the other party or as
otherwise agreed in writing by both parties. This Agreement may be terminated at
the option of the Trust immediately if the Company is no longer controlled by or
under common control with IDS Life Insurance Company.
6.2 Notwithstanding any termination of this Agreement, the Trust shall,
at the option of the Company, continue to make available additional shares of
the Trust (or any Portfolio) pursuant to the terms and conditions of this
Agreement for all Contracts in effect on the effective date of termination of
this Agreement, provided that the company continues to pay the costs set forth
in Section 2.3.
6.3 The provisions of Article V shall survive the termination of this
Agreement, and as long as shares of the trust are held on behalf of Contract
owners in accordance with Section 6.2, the provisions of this Agreement shall
survive the termination of this Agreement with respect to those Contract owners.
ARTICLE VII
Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Trust:
100 Fillmore Street, Suite 300
Denver, Colorado 80206
Attention: General Counsel
If to the Company:
American Enterprise Life Insurance Company
c/o American Express Financial Advisors Inc.
IDS Tower 10
Minneapolis, MN 55440-0010
Attention: Peter L. Slattery
Director - Variable Assets Product Management
<PAGE>
With a simultaneous copy to:
American Enterprise Life Insurance Company
c/o American Express Financial Advisors Inc.
IDS Tower 10
Minneapolis, MN 55440-0010
Attention: Mary Ellyn Minenko
Senior Counsel
ARTICLE VIII
Miscellaneous
8.1 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
8.2 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
8.3 If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
8.4 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of State of Colorado. This
Agreement will be subject to the provisions of the 1933 Act, the Securities
Exchange Act of 1934 and the 1940 Act, and the rules and regulations and rulings
thereunder, including such exemptions from those statues, rules and regulations
as the Securities and Exchange commission may grant (including, but not limited
to, the Exemptive Order) and the terms hereof will be interpreted and construed
in accordance therewith.
8.5 The parties to this Agreement acknowledge and agree that all
liabilities of the Trust arising, directly or indirectly, under this Agreement,
of any and every nature whatsoever, shall be satisfied solely out of the assets
of the Trust and that no Trustee, officer, agent or holder of shares of
beneficial interest of the Trust shall be personally liable for any such
liabilities.
8.6 Each party shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the National Association of Securities
Dealers, Inc., and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
The Trust agrees that the Company will have the right to inspect, audit and copy
all records pertaining to the performance of services under this Agreement to
the extent required by any state insurance department upon reasonable notice to
the Trust and during the Trust's normal business hours.
8.7 The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
<PAGE>
8.8 The parties to this Agreement acknowledge and agree that this
Agreement shall not be exclusive in any respect.
8.9 Neither this Agreement nor any rights or obligations hereunder may
be assigned by either party without the prior written approval of the other
party.
8.10 No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties.
8.11 The Trust acknowledges that the identities of the customers of the
Company or any of its affiliates (collectively the "Protected Parties" for
purposes of this Section 8.11), information maintained regarding those
customers, and all computer programs and procedures or other information
developed or used by the Protected Parties or any of their employees or agents
in connection with the Company's performance of its duties under this Agreement
are the valuable property of the Protected Parties. The Trust agrees that if it
comes into possession of any list or compilation of the identities of or other
information about the Protected Parties' customers, or any other information or
property of the Protected Parties, other than such information as may be
independently developed or compiled by the Trust from information supplied to it
by the Protected Parties' customers who also maintain accounts directly with the
Trust, the Trust will hold such information or property in confidence and
refrain from using, disclosing or distributing any of such information or other
property except: (a) with the Company's prior written consent; or (b) as
required by law or judicial process. The Trust acknowledges that any breach of
the agreements in this Section 8.11 would result in immediate and irreparable
harm to the Protected Parties for which there would be no adequate remedy at law
and agree that in the event of such a breach, the Protected Parties will be
entitled to equitable relief by way of temporary and permanent injunctions, as
well as such other relief as any court of competent jurisdiction deems
appropriate.
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Participation Agreement as of the date and year first
above written.
ATTEST: AMERICAN ENTERPRISE LIFE
INSURANCE COMPANY
By: /s/ William A. Stoltzmann By: /s/ Ryan Larson
Name: William A. Stoltzmann Name: Ryan Larson
Title: VP Title: VP - Product Development
JANUS ASPEN SERIES
ATTEST:
By: /s/ Bonnie Howe
By:
Name: Name: Bonnie Howe
Title: Title: Assistant Vice President
<PAGE>
Schedule A
Separate Accounts and Associated Contracts
Name of Separate Account and Contracts Funded
Date Established by Board of Directors By Separate Account
American Enterprise Variable Annuity Account Contract Form 34560
established July 15, 1987 Contract Form 43260
and state variations
of these forms
<PAGE>
Schedule B
Portfolios of Janus Aspen Series
Available as an Investment Vehicle of the Accounts
Balanced Portfolio
Worldwide Growth Portfolio
<PAGE>
Swiss Re Life & Health
Mr. Tracy Anderson Philip A Velazquez
Actuary, Institutional Products Group Actuary
American Express Financial Advisors Swiss Re Life and Health
IDS Tower 10,T8/1251 237 Park Avenue
Minneapolis, MN 55440 New York, New York 10017
Telephone (212) 907-8420
Fax (212) 907-8989
October 16, 1997
Dear Tracy:
This will confirm that American Enterprise Life Insurance Company (AELIC), and
Swiss Re Life and Health ("SRLH") have reached substantive agreement for SRLH to
reinsure the mortality risk generated by the guaranteed minimum death benefit
("GMDB") provisions within the AEL Personal Portfolio Variable Annuity (or its
renamed replacement) issued by AELIC. In general, SRLH agrees to assume defined
mortality risk amounts in exchange for an asset based reinsurance premium
applied to the greater of aggregate account values and aggregate GMDB.
The general terms of the agreement are set forth on the attached specification
pages. They are intended to become effective on October 16, 1997 and apply to
new business only. If a revised effective date is desired, please cross out
October 16, 1997 and insert in ink the new effective date and initial the
change.
Within 30 days from receipt of a signed copy of this letter, SRL&H will send to
AEL a pending copy of a formal reinsurance treaty for AEL's review and
signature.
Accepted on behalf of Accepted on behalf of
American Enterprise Life Ins. Co. Swiss Re Life and Health
/s/ Douglas Forsberg /s/ Phillip A. Velazquez
Name Name
President Actuary
Title Title
October 22, 1997 October 16, 1997
Date Date
<PAGE>
Swiss Re Life & Health
PROPRIETARY REINSURANCE SPECIFICATIONS FOR
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
Submitted by
SWISS RE LIFE AND HEALTH
GMDB REINSURED
Annual Ratchet to attained age 80. Reinsurance terminates at the earlier of
policyholder and annuitant age 80.
RELATED CONTRACTS
AEL Personal Portfolio (To be named)
EFFECTIVE DATE
October 16, 1997
METHOD /MODE
Automatic reinsurance for a quota-share of the mortality net amount at risk.
MORTALITY NET AMOUNT AT RISK (MNAR)
MNAR = GMDB - Account Value (but not less than 0)
RETENTION
None
SRLH QUOTA SHARE
100% of MNAR
REINSURANCE PREMIUMS - CONTRACTS WITH INITIAL CONSIDERATIONS OF UP TO $1 million
The reinsurance premium is an asset based reinsurance premium subject to
minimum and maximum rate levels varying by issue age.
The minimum premium rate shall be applied to the greater of the average
aggregate GMDB value and the average aggregate account value over the
reporting period (monthly).
The maximum premium rate shall be applied to the greater of the average
aggregate GMDB value and the average aggregate account value over the
reporting period.
The initial premium rate is equal to the minimum premium rate.
<PAGE>
The actual premium paid in subsequent periods is equal to 150% of the prior
period's death claim reimbursement, subject to the minimum and maximum
premium levels mentioned above.
October 16, 1997
Proprietary Reinsurance Specifications for American Enterprise Life
Insurance Company
REINSURANCE PREMIUMS (cont.) The total reinsurance premium in the first month
after the effective date of the reinsurance agreement shall at least equal
$300. The minimum monthly reinsurance premium shall increase $100 per month
thereafter, until it is $1,500 in the thirteenth month after effective
date. The total reinsurance premium in the thirteenth month after effective
date and any month thereafter shall at least equal $1,500.
The current minimum premium shall be in effect for the duration of the
contract. The current maximum premium rate shall be in effect for a minimum
of 20 years from the effective date of this reinsurance agreement.
Thereafter, it may be increased based on prior experience but not beyond
the stated guaranteed maximum rates shown.
The annualized reinsurance premium rates are shown below and are expressed in
terms of basis points. In practice, they shall be applied on a monthly
basis by utilizing 1/12th of the annualized rates.
<TABLE>
<CAPTION>
GMDB Design Issue Current Min Premium Max Guaranteed Max
Ages
<S> <C> <C> <C> <C>
Annual Ratchet to attained age 80 0-59 5.0 10.0 21.0
60-69 7.5 15.0 32.0
70+ 12.0 21.0 44.0
</TABLE>
REINSURANCE PREMIUMS - CONTRACTS WITH INITIAL CONSIDERATIONS OF $1 - $10 million
The reinsurance premium is a YRT based reinsurance premium subject to
minimum and maximum levels which vary by GMDB design.
The annualized YRT rate is equal to 75% of the 1988 U.S. Life Table and is to be
applied to the MNAR for each qualifying contract. In practice 1/12th of the
annual YRT rate should be applied to the average MNAR over the previous month.
The minimum premium level is equal to the product of the YRT minimum rate level
and the average aggregate account value for each quaiifying contract
<PAGE>
The maximum premium level is equal to the product of the YRT maximum rate level
and the average aggregate account value for each qualifying contract.
Premium taxes, if any, are factored into the proposed rate and are not
reimbursed separately.
October 16, 1997
Proprietary Reinsurance Specifications for American Enterprise Life
Insurance Company
REINSURANCE PREMIUMS - CONTRACTS WITH INITIAL CONSIDERATIONS OF $10 million or
more Risk amounts for contracts with initial considerations exceeding $10
million will require individual consideration (i.e., facultative
consideration).
EXPERIENCE REFUND
This program is not subject to an experience refund.
TREATY RESERVE SRLH intends to hold the statutory minimum reserves as required
by New York, SRLH's state of domicile.
It is anticipated that NY will adopt the AAA recommendation regarding GMDB
reserve methodology and that SRLH will establish reserves in accordance
with such methodology. In essence, the methodology calls for the reinsurer
to establish a general account reserve equal to the present value of
projected mortality costs less the present value of reinsurance premiums.
Until NY adopts the recommendation, SRLH intends to establish reserves on
an interim basis defined as the greater of (a) and (b) defined below:
(a) (80% of reinsurance premiums less 100% of incurred claims) accumulated at a
nominal annual interest rate of 6%
(b) one year term cost seriatim reserves calculated based on the net amount at
risk as of the valuation date using a valuation rate equal to that used for
long-term life insurance and the 1983 GAM table for males and females
separately
REINSURANCE BENEFITS SRLH agrees to reimburse American Enterprise Life for the
mortality net amount at risk realized upon death as determined by American
Enterprise Life under the terms of the contracts reinsured, subject to the
benefit limitations set forth below.
<PAGE>
Deathclaims shall be reported monthly along with reinsurance premiums and
netted from them. A positive net amount will indicate amounts due SRLH. A
negative net amount will indicate amounts due American Enterprise Life.
Reinsurance coverage automatically terminates at the earlier of policyholder and
annuitant age 80.
October 16, 1997
Proprietary Reinsurance Specifications for American Enterprise Life
Insurance Company
BENEFIT LIMITATIONS SRLH's annual liability shall be capped at 200 basis points
of the average aggregate account value inforce multiplied by the quota
share percentage reinsured by SRLH over each calendar year of coverage and
will apply to all business reinsured under the contract.
RECAPTURE Election is available after the fifteenth anniversary of this
agreement, provided that the notional carry-forward is not in a negative
position. The notional carry-forward is equal to (Premiums Claims -
Expenses - Change in Reserves) brought forward monthly at an annual rate of
6%.
Upon election, recapture shall occur ratably over a 36 month period. It is
irrevocable.
DURATION OF REINSURANCE FACILITY This reinsurance facility shall be available
for new business for two years, as measured from the inception of the
agreement. The facility may be renewed for another two year period, subject
to mutually acceptable terms and with a minimum 90 day notice.
DURATION OF COVERAGE The reinsurance coverage provided hereunder may be
continued indefinitely at the option of American Enterprise Life.
ADM INISTRATION This reinsurance agreement assumes that American Enterprise
Life will be able to provide bulk reinsurance reports on a monthly basis
within 30 days after month-end. These summary reports shall contain the
following aggregate month-end information for each product:
- death benefit
- account value in total and split by sub-account and fixed account
- cumulative considerations
<PAGE>
- mortality net amount at risk
- number of contracts
- cash surrender value
This reinsurance agreement also assumes that American Enterprise Life will
provide SRLH with an electronic seriatim listing of all reinsured contracts
inforce as of month-end. This listing shall contain the owner's name, date
of birth, issue age, social security number, tax status, contract number,
issue date, and contract type in addition to the values listed above.
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Independent Auditors"
and to the use of our reports dated February 7, 1997 on the financial statements
and schedules of American Enterprise Life Insurance Company and our report dated
March 21, 1997 on the financial statements of American Enterprise Variable
Annuity Account in Post-Effective Amendment No. 9 to the Registration Statement
(Form N-4, No. 33-54471) and related Prospectus for the registration of the
American Enterprise Variable Annuity Account to be offered by American
Enterprise Life Insurance Company.
Ernst & Young LLP
Minneapolis, Minnesota
October 30, 1997
<PAGE>
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
SCHEDULE I - CONSOLIDATED SUMMARY OF INVESTMENTS
OTHER THAN INVESTMENTS IN RELATED PARTIES ($ thousands)
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Column A Column B Column C Column D
Type of Investment Cost Value Amount at which
shown in the
balance sheet
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturities:
Held to maturity:
United States Government and
government agencies and
authorities (a) $ 208,049 $ 202,824 $ 208,049
States, municipalities and
political subdivisions 3,003 3,128 3,003
All other corporate bonds 1,045,091 1,061,995 1,045,091
------------- --------------- ------------------
Total held to maturity 1,256,143 1,267,947 1,256,143
Available for sale:
United States Government and
government agencies and
authorities (b) 1,177,626 1,181,505 1,181,505
States, municipalities and
political subdivisions 0 0 0
All other corporate bonds 1,045,831 1,060,942 1,060,942
------------- --------------- ------------------
Total available for sale 2,223,457 2,242,447 2,242,447
Mortgage loans on real estate 582,982 XXXXXXXXX 582,982
Other investments 3,056 XXXXXXXXX 3,056
------------- ------------------
Total investments $ 4,065,638 $ XXXXXXXXX $ 4,084,628
============= ==================
</TABLE>
(a) - Includes mortgage-backed securities with a cost and market value of
$194,513 and $188,873, respectively.
(b) - Includes mortgage-backed securities with a cost and market value of
$1,175,960 and $1,179,902, respectively.
<PAGE>
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY SCHEDULE V - VALUATION AND QUALIFYING
ACCOUNTS ($ thousands) FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE> <CAPTION>
- ---------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
Additions
--------------
Balance at Charged to
Description Beginning Charged to Other Accounts- Deductions- Balance at End
of Period Costs & Expenses Describe Describe of Period
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
For the year ended
December 31, 1996
- ------------------------------
Reserve for Mortgage Loans $0 $2,370 $0 $0 $2,370
Reserve for Fixed Maturities $9 $7 $0 $0 $16
For the year ended
December 31, 1995
- ------------------------------
Reserve for Fixed Maturities $0 $9 $0 $0 $9
For the year ended
December 31, 1994
- ------------------------------
Reserve for Fixed Maturities $77 ($77) $0 $0 $0
</TABLE>
<PAGE>
Report of Independent Auditors
The Board of Directors
American Enterprise Life Insurance Company
We have audited the financial statements of American Enterprise Life Insurance
Company (a wholly owned subsidiary of IDS Life Insurance Company) as of December
31, 1996 and 1995, and for each of the three years in the period ended December
31, 1996, and have issued our report thereon dated February 7, 1997 (included
elsewhere in this Registration Statement). Our audits also included the
financial statement schedules listed in Item 24(b) of this Registration
Statement. These schedules are the responsibility of the Company's management.
Our responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
Ernst & Young LLP
Minneapolis, Minnesota
February 7, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000926266
<NAME> American Enterprise Variable Annuity Account
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLAR
<S> <C>
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> FEB-21-1996
<PERIOD-END> DEC-31-1996
<PERIOD-TYPE> YEAR
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<INVESTMENTS-AT-COST> 29050533
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<OTHER-ITEMS-LIABILITIES> (171668)
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<NUMBER-OF-SHARES-SOLD> 16630168
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<SHARES-REINVESTED> 0
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<ACCUMULATED-NII-PRIOR> 0
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<GROSS-EXPENSE> (303262)
<AVERAGE-NET-ASSETS> 19464420
<PER-SHARE-NAV-BEGIN> 0
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLAR
<S> <C>
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<PERIOD-TYPE> YEAR
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 2242447
<DEBT-CARRYING-VALUE> 1256143
<DEBT-MARKET-VALUE> 1267947
<EQUITIES> 0
<MORTGAGE> 582982
<REAL-ESTATE> 0
<TOTAL-INVEST> 4084628
<CASH> 40829
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 203225
<TOTAL-ASSETS> 4425837
<POLICY-LOSSES> 3881339
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 27427
<NOTES-PAYABLE> 0
<COMMON> 2000
0
0
<OTHER-SE> 361858
<TOTAL-LIABILITY-AND-EQUITY> 4425837
0
<INVESTMENT-INCOME> 271719
<INVESTMENT-GAINS> (5258)
<OTHER-INCOME> 5753
<BENEFITS> 191672
<UNDERWRITING-AMORTIZATION> 30674
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<INCOME-PRETAX> 35735
<INCOME-TAX> 12912
<INCOME-CONTINUING> 22823
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<EPS-PRIMARY> 0
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<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
