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AEL Personal PortfolioSM
May 1, 1997
Variable Annuity Prospectus
The AEL Personal PortfolioSM is a flexible premium variable annuity contract
offered by American Enterprise Life Insurance Company (American Enterprise
Life), a subsidiary of IDS Life Insurance Company (IDS Life), which is a
subsidiary of American Express Financial Corporation (AEFC). Purchase payments
may be allocated among different accounts, providing variable and/or fixed
returns and payouts. The annuity is 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 Office: 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: The
Retirement Annuity Mutual Funds (describing IDS Life Aggressive Growth Fund, IDS
Life International Equity Fund, IDS Life Capital Resource Fund, IDS Life Managed
Fund, IDS Life Special Income Fund, and IDS Life Moneyshare Fund); The OCC
Accumulation Trust, formerly known as Quest for Value Accumulation Trust
(describing OCC Accumulation Trust Managed Portfolio and OCC Accumulation Trust
U.S. Government Income Portfolio); Putnam Variable Trust, formerly known as
Putnam Capital Manager Trust (describing Putnam VT Diversified Income Fund,
Putnam VT Growth and Income Fund, Putnam VT High Yield Fund and Putnam VT New
Opportunities Fund); and GT Global Variable Investment Funds (describing GT
Global Variable Latin America Fund and GT Global Variable New Pacific Fund).
Please 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 financial institution, and the securities it
offers are not deposits or obligations of, or guaranteed or endorsed by any
financial institution nor are they insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other agency. Investments in the
annuity involve investment risk including the possible loss of principal.
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A Statement of Additional Information (SAI) dated May 1, 1997, (incorporated by
reference into this prospectus) 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.
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Table of contents
Key terms.....................................................
The AEL Personal PortfolioSM in brief.........................
Expense summary...............................................
Condensed financial information (unaudited)...................
Financial statements..........................................
Performance information.......................................
The variable account..........................................
The funds.....................................................
IDS Life Aggressive Growth Fund..........................
IDS Life International Equity Fund.......................
IDS Life Capital Resource Fund...........................
IDS Life Managed Fund....................................
IDS Life Special Income Fund.............................
IDS Life Moneyshare Fund.................................
OCC Accumulation Trust Managed Portfolio.................
OCC Accumulation Trust U.S. Government Income Portfolio..
Putnam VT Diversified Income Fund........................
Putnam VT Growth and Income Fund.........................
Putnam VT High Yield Fund................................
Putnam VT New Opportunities Fund.........................
GT Global Variable Latin America Fund....................
GT Global Variable New Pacific Fund......................
The fixed account.............................................
Buying your annuity...........................................
The retirement date......................................
Beneficiary..............................................
How to make payments.....................................
Charges.......................................................
Contract administrative charge...........................
Variable account administrative charge...................
Mortality and expense risk fee...........................
Withdrawal charge........................................
Waiver of withdrawal charges.............................
Premium taxes............................................
Valuing your investment.......................................
Number of units..........................................
Accumulation unit value..................................
Net investment factor....................................
Factors that affect variable subaccount
accumulation units...................................
Making the most of your annuity...............................
Automated dollar-cost averaging..........................
Transferring money between subaccounts...................
Transfer policies........................................
Two ways to request a transfer or a withdrawal...........
Withdrawals from your contract................................
Withdrawal policies......................................
Receiving payment when you request a withdrawal..........
Changing ownership............................................
Benefits in case of death.....................................
The annuity payout period.....................................
Annuity payout plans.....................................
Death after annuity payouts begin........................
Taxes.........................................................
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Voting rights.................................................
Substitution of investments...................................
Distribution of the contracts.................................
About American Enterprise Life................................
Regular and special reports...................................
Services................................................
Table of contents of the Statement of Additional
Information.............................................
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Key terms
These terms can help you understand details about your annuity.
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.
Mutual funds (funds) - Mutual funds or portfolios, each with a different
investment objective. (See "The funds.") You may allocate your purchase payments
into variable subaccounts investing in shares of any or all of these funds.
Owner (you, your) - The person who controls the annuity (decides on investment
allocations, transfers, payout options, etc.). Usually, but not always, the
owner is also the annuitant. The owner is responsible for taxes, regardless of
whether he or she receives the annuity's benefits.
Purchase payments - Payments made to American Enterprise Life for an annuity.
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Qualified annuity - An annuity purchased for a retirement plan that is subject
to applicable federal law and any rules of the plan itself. These plans include:
o Individual Retirement Annuities (IRAs)
o Simplified Employee Pension Plans (SEPs)
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.
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 invests in shares of one mutual fund. (See "The variable
account.") The value of your investment in each variable subaccount changes with
the performance of the particular fund.
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 AEL Personal PortfolioSM in brief
Purpose: The AEL Personal PortfolioSM is designed to allow you to build up funds
for retirement. You do this by making one or more investments (purchase
payments) that may earn returns that increase the value of the annuity.
Beginning at a specified future date (the retirement date), the annuity provides
lifetime or other forms of payouts to you or to anyone you designate.
Ten-day free look: You may return your annuity to your agent or to our
Minneapolis administrative office within 10 days after it is delivered to you
and receive a full refund of the contract value. No charges will be deducted.
However, you bear the investment risk from the time of purchase until return of
the contract; the refund amount may be more or less than the payment you made.
(Exceptions: If the law so requires, all of your purchase payments will be
refunded.)
Accounts: You may allocate your purchase payments among any or all
of:
o fourteen variable subaccounts of the variable account, each
of which invests in a mutual fund with a particular
investment objective. The value of each variable subaccount
varies with the performance of the particular fund. We
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cannot guarantee that the value at the retirement date will
equal or exceed the total of purchase payments allocated to
the variable subaccounts. (p. 15)
o one fixed account, which earns interest at rates that are
adjusted periodically by American Enterprise Life. (p. 19)
Buying the annuity: Your agent will help you complete and submit
an application. Applications are subject to acceptance at our
Minneapolis administrative office. You may buy a nonqualified
annuity or a qualified annuity. Payment must be made in a lump sum
with the option of additional payments in the future. In some
states there are time limitations for making additional payments.
(p. 20)
o Minimum initial payment - $2,000
o Minimum additional payment - $50
o Maximum total payment(s) (without prior approval) -
$1,000,000
Transfers: Subject to certain restrictions you may redistribute
your money among accounts without charge at any time until annuity
payouts begin, and once per contract year among the variable
subaccounts thereafter. You may establish automated transfers
among the fixed account and variable subaccount(s). (p. 29)
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. 32)
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. 33)
Payment in case of death: If you or the annuitant dies before
annuity payouts begin, we will pay the beneficiary an amount at
least equal to the contract value. (p. 34)
Annuity payouts: The contract value of your investment can be applied to an
annuity payout plan that begins on the retirement date. You may choose from a
variety of plans to make sure that payouts continue as long as they are needed.
If you purchased a qualified annuity, the payout schedule must meet requirements
of the qualified plan. Payouts may be made on a fixed or variable basis, or
both. Total monthly payouts include amounts from each variable subaccount and
the fixed account. (p. 35)
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
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payouts to someone else, you will be taxed on the income if you are
the owner. (p. 37)
Charges: Your AEL Personal PortfolioSM Variable 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. 22)
Expense summary
The purpose of this table is to help you understand the various costs and
expenses associated with the AEL Personal PortfolioSM.
You pay no sales charge when you purchase AEL Personal PortfolioSM. All costs
that you bear directly or indirectly for the variable subaccounts and underlying
mutual funds are shown below. Some expenses may vary as explained under
"Contract charges."
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%
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*Premium taxes imposed by some state and local governments may be
applicable. They are not reflected.
Annual Operating Expenses of Underlying Mutual Funds (management fees and other
expenses deducted as a percentage of average net assets as follows:)
<TABLE>
<CAPTION>
OCC***
Accumulation
IDS Life IDS Life IDS Life IDS Life Trust Managed
Aggressive International Capital IDS Life Special IDS Life (after expense
Growth Equity Resource Managed Income Moneyshare limitations)
<S> <C> <C> <C> <C> <C> <C> <C>
Management fees .60% .82% .60% .59% .59% .50% .80%
Other expenses .09 .16 .08 .07 .10 .06 .10
Total .69%** .98%** .68%** .66%** .69%** .56%** .90%
OCC***
Accumulation GT Global GT Global
Trust U.S. Gov- Variable Variable
ernment Income Putnam VT Putnam VT Latin America New
Pacific (after expense Diversified Growth and Putnam VT
Putnam VT New (after expense (after expense
limitations) Income Income High Yield Opportunities reimbursement) reimbursement)
Management fees .60% .70% .49% .68% .63% 1.00% 1.00%
Other expenses .42 .13 .05 .08 .09 .17 .12
Total 1.02% .83%+ .54%+ .76%+ .72%+ 1.17%++ 1.12%++
</TABLE>
*Premium taxes imposed by some state and local governments are not reflected
in this table.
**Annualized operating expenses of underlying mutual funds at Dec. 31, 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 Managed and U.S. Government Income Portfolios will
be voluntary 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, .60%, 1.74% and
2.34%, respectively, for the U.S. Government Income Portfolio; and .80%, .10%
and .90%, respectively, for the Managed Portfolio.
+Operating expenses of the underlying mutual 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%.
Example:*
<TABLE>
<CAPTION>
IDS Life IDS Life IDS Life IDS Life OCC
Aggressive International Capital IDS Life Special IDS Life Accumulation
Growth Equity Resource Managed Income Moneyshare 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:
<S> <C> <C> <C> <C> <C> <C> <C>
1 year $ 93.69 $ 96.52 $ 93.59 $ 93.40 $ 93.69 $ 92.42 $ 95.74
3 years 122.92 131.39 122.63 122.04 122.92 119.09 129.06
5 years 154.71 168.79 154.22 153.24 154.71 148.32 164.93
10 years 266.31 294.17 265.33 263.38 266.31 253.52 286.58
</TABLE>
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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:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1 year $ 23.69 $ 26.52 $ 23.59 $ 23.40 $ 23.69 $ 22.42 $ 25.74
3 years 72.92 81.39 72.63 72.04 72.92 69.09 79.06
5 years 124.71 138.79 124.22 123.24 124.71 118.32 134.93
10 years 266.31 294.17 265.33 263.38 266.31 253.52 286.58
OCC
Accumulation
Trust U.S. Putnam VT Putnam VT GT Global GT Global
Government Diversified Growth and Putnam VT Putnam VT New Variable Variable
Income Income Income High Yield Opportunities Latin America New Pacific
You would pay the following expenses on a $1,000 investment, assuming 5% annual
return and full withdrawal at the end of each time period:
1 year $ 96.91 $ 95.06 $ 92.22 $ 94.38 $ 93.99 $ 98.36 $ 97.88
3 years 132.55 127.02 118.50 124.97 123.80 136.89 135.44
5 years 170.72 161.54 147.33 158.13 156.18 177.88 175.50
10 years 297.93 279.88 251.53 273.12 269.24 311.91 307.28
You would pay the following expenses on the same investment assuming no
withdrawal or selection of an annuity payout plan at the end of each time
period:
1 year $ 26.91 $ 25.06 $ 22.22 $ 24.38 $ 23.99 $ 28.36 $ 27.88
3 years 82.55 77.02 68.50 74.97 73.80 86.89 85.44
5 years 140.72 131.54 117.33 128.13 126.18 147.88 145.50
10 years 297.93 279.88 251.53 273.12 269.24 311.91 307.28
</TABLE>
This example should not be considered a representation of past or future
expenses. Actual expenses may be more or less than those shown.
* In this example, the $30 annual contract administrative charge is approximated
as a .177% charge based on the average contract size.
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Condensed Financial Information (unaudited)
The following tables give per-unit information about the financial history of
each variable subaccount.
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
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.
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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
Number of accumulation units outstanding at end
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 May 1, 1997, contains:
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
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- - 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.
Performance information
Performance information for the variable subaccounts may appear from time to
time in advertisements or sales literature. In all cases, such information
reflects the performance of a hypothetical investment in a particular account
during a particular time period.
The performance figures are calculated on the basis of historical performance of
the funds. The performance figures relating to these funds assume that the
contract was offered prior to Jan. 12, 1995, which it was not. Before the
subaccounts began investing in these funds, the figures show what the
performance would have been if these subaccounts had existed during the
illustrated periods. Once these subaccounts began investing in these funds,
actual values are used for the calculations.
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 - 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 ten years (or
up to the life of the account if it is less than ten years old). This figure
reflects deduction of all applicable charges, including the contract
administrative charge, variable account administrative charge, mortality and
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PAGE 14
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 charges attributable to the annuity,
which has the effect of decreasing advertised performance, subaccount
performance should not be compared to that of mutual funds that sell their
shares directly to the public. (See the SAI for a further description of methods
used to determine yield and total return for the subaccounts.)
If you would like additional information about actual performance, contact
American Enterprise Life at the address or telephone number on the cover.
The variable account
Purchase payments can be allocated to any or all of the subaccounts of the
variable account that invest in shares of the following funds:
Subaccount
IDS Life Aggressive Growth Fund EAG
IDS Life International Equity Fund EIE
IDS Life Capital Resource Fund ECR
IDS Life Managed Fund EMG
IDS Life Special Income Fund ESI
IDS Life Moneyshare Fund EMS
OCC Accumulation Trust Managed Portfolio EMD
OCC Accumulation Trust U.S. Government
Income Portfolio EUS
Putnam VT Diversified Income Fund EDI
Putnam VT Growth and Income Fund EGI
Putnam VT High Yield Fund EHY
Putnam VT New Opportunities Fund ENO
GT Global Variable Latin America Fund ELA
GT Global Variable New Pacific Fund EPA
<PAGE>
PAGE 15
Each variable subaccount meets the definition of a separate account under
federal securities laws. Income, capital gains and capital losses of each
subaccount are credited or charged to that subaccount alone. No variable
subaccount will be charged with liabilities of any other variable account or of
our general business.
The variable account was established under Indiana law on July 15, 1987, and the
subaccounts are registered together as a single unit investment trust under the
Investment Company Act of 1940 (the 1940 Act). This registration does not
involve any supervision of our management or investment practices and policies
by the SEC. All obligations arising under the contracts are general obligations
of American Enterprise Life.
The funds
IDS Life Aggressive Growth Fund
Objective: capital appreciation. Invests primarily in common stock
of small- and medium-size companies.
IDS Life International Equity Fund
Objective: capital appreciation. Invests primarily in common stock
of foreign issuers and foreign securities convertible into common
stock.
IDS Life Capital Resource Fund
Objective: capital appreciation. Invests primarily in U.S. common
stocks and other securities convertible into common stock,
diversified over many different companies in a variety of
industries.
IDS Life Managed Fund
Objective: maximum total investment return. Invests primarily in
U.S. common stocks, securities convertible into common stock,
warrants, fixed income securities (primarily high-quality corporate
bonds) and money market instruments.
IDS Life Special Income Fund
Objective: high level of current income while conserving the value
of the investment for the longest time period. Invests primarily
in high-quality, lower-risk corporate bonds issued by many
different companies in a variety of industries, and in government
bonds.
IDS Life Moneyshare Fund
Objective: maximum current income consistent with liquidity and conservation of
capital. Invests in high-quality money market securities with remaining
maturities of 13 months or less. The fund also will maintain a dollar-weighted
average portfolio maturity not exceeding 90 days. The fund attempts to maintain
a constant net asset value of $1 per share.
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.
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PAGE 16
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.
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 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.
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.
GT Global Variable Latin America Fund
Objective: capital appreciation. Invests primarily in a broad range of
securities including common and preferred stock, rights, warrants and securities
convertible into common stock, as well as bonds, notes, debentures or other
forms of indebtedness of Latin American issuers.
GT Global Variable New Pacific Fund
Objective: long-term growth of capital. Invests under normal
circumstances, at least 65% of its assets in equity securities of
issuers domiciled in Australia, Hong Kong, Indonesia, Malaysia, New
Zealand, Pakistan, the Philippines, Singapore, South Korea, Taiwan
and Thailand.
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.
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PAGE 17
All funds are available to serve as the underlying investment for variable
annuities, and some funds also are available to serve as the underlying
investment for variable life insurance contracts. It is conceivable that in the
future it may be disadvantageous for variable annuity separate accounts and
variable life insurance separate accounts to invest in the available funds
simultaneously.
Although American Enterprise Life and the funds do not currently foresee any
such disadvantages either to variable annuity contract owners or to variable
life insurance policy owners, the boards of directors or trustees of the
appropriate funds will monitor events in order to identify any material
conflicts between such contract owners and policy owners and to determine what
action, if any, should be taken in response to a conflict. If a board were to
conclude that separate funds should be established for variable life insurance
and variable annuity separate accounts, the variable annuity contract holders
would not bear any expenses associated with establishing separate funds.
The Internal Revenue Service (IRS) has issued final regulations relating to the
diversification requirements under Section 817(h) of the Code. Each mutual fund
intends to comply with these requirements.
The U.S. Treasury and the IRS have indicated 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 subaccount assets. We do not know at this time what the
additional guidance will be or when action will be taken. We reserve the right
to modify the contract, as necessary, to ensure that the owner will not be
subject to current taxation as the owner of the variable subaccount assets.
We intend to comply with all federal tax laws to ensure that the contract
continues to qualify as an annuity for federal income tax purposes. We reserve
the right to modify the contract as necessary to comply with any new tax laws.
IDS Life is the investment manager and AEFC is the investment advisor for each
of the IDS Life funds. IDS International, Inc., a wholly-owned subsidiary of
AEFC, is the sub-investment advisor for IDS Life International Equity Fund.
OpCap Advisors is the investment manager for the OCC Accumulation Trust
portfolios. Putnam Investment Management, Inc., is the investment manager for
the Putnam VT funds. Chancellor LGT Asset Management is the investment manager
for the GT Global funds.
The investment managers and advisors cannot guarantee that the funds will meet
their investment objectives. Please read the fund 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 office address or telephone number on the
front of this prospectus.
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PAGE 18
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 rates from time to time.
Because of exemptive and exclusionary provisions, interests in the fixed account
have not been registered under the Securities Act of 1933 (1933 Act), nor is the
fixed account registered as an investment company under the 1940 Act.
Accordingly, neither the fixed account nor any interests in it are generally
subject to the provisions of the 1933 or 1940 Acts, and we have been advised
that the staff of the SEC has not reviewed the disclosures in this prospectus
that relate to the fixed account. Disclosures regarding the fixed account,
however, may be subject to certain generally applicable provisions of the
federal securities laws relating to the accuracy and completeness of statements
made in prospectuses.
Buying your annuity
Your agent will help you prepare and submit your application, and send it along
with your initial purchase payment to our Minneapolis administrative office. As
the owner, you have all rights and may receive all benefits under the contract.
The annuity can be owned in joint tenancy only in spousal situations. You cannot
buy a nonqualified annuity or 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 subaccount(s) and/or fixed account in which you want to
invest;
o how you want to make purchase payments;
o the date you want to start receiving annuity payouts (the
retirement date); and
o a beneficiary.
If your application is complete, we will process it and apply your purchase
payment to your subaccount(s) and fixed account within two business days after
we receive it at our Minneapolis administrative office. 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 and accept your payments at our Minneapolis
administrative office. 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.
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PAGE 19
The retirement date
Annuity payouts will be scheduled to begin on the retirement date. This date can
be aligned with your actual retirement from a job, or it can be a different
future date, depending on your needs and goals and on certain restrictions. You
can also change the date, provided you send us written instructions at least 30
days before annuity payouts begin.
For nonqualified annuities, the retirement date must be:
o no earlier than the 60th day after the contract's effective
date; and
o no later than the annuitant's 85th birthday (or before the 10th
contract anniversary, if purchased after age 75); or
o no later than the annuitant's 82nd birthday (or before the eighth contract
anniversary, if purchased after age 74) for annuities purchased in
Pennsylvania.
For qualified annuities, to avoid IRS penalty taxes, the retirement date
generally must be:
o on or after the annuitant reaches age 59 1/2; 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
If single payment:
Nonqualified: $2,000
Qualified: $2,000
Minimum additional purchase payment(s): $50
Maximum payment(s): $1,000,000 of cumulative payments without
prior approval
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PAGE 20
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
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
<PAGE>
PAGE 21
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.
2. Next, we withdraw any contract earnings (contract value minus all purchase
payments received and not previously withdrawn) in excess of the annual 10% free
withdrawal amount. There is no withdrawal charge on contract earnings.
3. Next, if necessary, we withdraw the old purchase payments, starting with the
first purchase payment made and not previously withdrawn. There is no withdrawal
charge on old payments that we received in any contract year six or more years
prior to the contract year of withdrawal.
4. Finally, if necessary, we withdraw new purchase payments. These are payments
that we received during the contract year of withdrawal and during the six
immediately preceding contract years. There is a withdrawal charge on new
payments. We determine your withdrawal charge by multiplying each of your new
payments by the applicable withdrawal charge percentage, and then totaling the
withdrawal charges.
The new payment withdrawal charge percentage depends on the number of contract
years since you made the payment(s).
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PAGE 22
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, 1997 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, 1997, $8,000
Dec. 31, 2003 and $6,000 Feb. 20, 2005; and
o The owner withdraws the contract for its total withdrawal
value of $38,101 on Aug. 5, 2007 and had not made any other
withdrawals during that contract year; and
o The prior anniversary July 1, 2007 contract value was
$38,488.
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, 1997 payment is an old
payment withdrawn without withdrawal
charge; and
240 $8,000 Dec. 31, 2003 payment is a new
payment in its fifth contract year from
receipt, withdrawn with a 3% withdrawal
charge; and
240 $6,000 Feb. 20, 2005 payment is a new
payment in its fourth contract year from
receipt withdrawn with a 4% withdrawal
charge.
- ----------
$480
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PAGE 23
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 charges There are no withdrawal charges for:
o withdrawals during the year totaling up to 10% of your prior
contract anniversary contract value;
o contract earnings - if any - in excess of the annual 10% free
withdrawal amount;
o required minimum distributions from a qualified annuity after you reach
age 70 1/2 (for those amounts required to be distributed from this
annuity only);
o contracts settled using an annuity payout plan; and
o death benefits.
If your contract includes a "Waiver of Withdrawal Charges" Annuity Endorsement,
we will waive withdrawal charges that are normally assessed upon full or partial
withdrawal if you provide proof satisfactory to us that, as of the date you
request the withdrawal, you or the annuitant are confined to a hospital or
nursing home and have been for the prior 60 days.
To qualify, the nursing home must meet the following criteria:
o be licensed by an appropriate licensing agency to provide
nursing care; and
o provide 24-hour-a-day nursing services; and
o have a doctor available for emergency situations; and
o have a nurse on duty or on call at all times; and
o maintain clinical records; and
o have appropriate methods for administering drugs.
To the extent permitted by state law, this endorsement is included in contracts
issued when the owner and annuitant are under age 76 on the date that we issue
the contract.
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:
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PAGE 24
Fixed account: The amounts allocated to the fixed account are valued directly in
dollars and equal the sum of your purchase payments and transfer amounts plus
interest earned, less any amounts withdrawn or transferred and any contract
administrative charge.
Variable subaccounts: Amounts allocated to the variable subaccounts are
converted into accumulation units. Each time you make a purchase payment or
transfer amounts into one of the variable subaccounts, a certain number of
accumulation units are credited to your contract for that subaccount.
Conversely, each time you take a partial withdrawal, transfer amounts out of a
variable subaccount, or are assessed a contract administrative charge, a certain
number of accumulation units are subtracted from your contract.
The accumulation units are the true measure of investment value in each
subaccount during the accumulation period. They are related to, but not the same
as, the net asset value of the underlying fund.
The dollar value of each accumulation unit can rise or fall daily depending on
the performance of the underlying mutual fund and on certain fund expenses. Here
is how unit values are calculated:
Number of units
To calculate the number of accumulation units for a particular subaccount, we
divide your investment, after deduction of any premium taxes, by the current
accumulation unit value.
Accumulation unit value
The current accumulation unit value for each variable subaccount equals the last
value times the subaccount's current net investment factor.
Net investment factor Determined each business day by:
o adding the underlying mutual fund's current net asset value per share
plus per-share amount of any current dividend or capital gain
distribution; then
o dividing that sum by the previous net asset value per share;
and
o subtracting the percentage factor representing the mortality
and expense risk fee and the variable account administrative
charge from the result.
Because the net asset value of the underlying mutual fund may fluctuate, the
accumulation unit value may increase or decrease. You bear this investment risk
in a variable subaccount.
Factors that affect variable subaccount accumulation units Accumulation units
may change in two ways; in number and in value. Here are the factors that
influence those changes:
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PAGE 25
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 mutual fund(s);
o dividends distributed to the variable subaccount(s);
o capital gains or losses of underlying mutual fund(s);
o mutual fund operating expenses;
o mortality and expense risk fees; and/or
o variable account administrative charges.
Making the most of your annuity
Automated dollar-cost averaging*
You can use automated transfers to take advantage of dollar-cost averaging
(investing a fixed amount at regular intervals). For example, you might have a
set amount transferred monthly from a relatively conservative variable
subaccount to a more aggressive one, or to several others.
This systematic approach can help you benefit from fluctuations in accumulation
unit values caused by fluctuations in the market value(s) of the underlying
mutual fund(s). Since you invest the same amount each period, you automatically
acquire more units when the market value falls, fewer units when it rises. The
potential effect is to lower your average cost per unit. For specific features
contact your agent.
How dollar-cost averaging works
<TABLE>
<CAPTION>
Month Amount Accumulation Number of units
invested unit value purchased
<S> <C> <C> <C>
By investing an Jan $100 $20 5.00
equal number of
dollars each month.... Feb 100 18 5.56
Mar 100 17 5.88
you automatically Apr 100 15 6.67
buy more units
when the per unit May 100 16 6.25
market price is low....
Jun 100 18 5.56
Jul 100 17 5.88
Aug 100 19 5.26
and fewer units Sep 100 21 4.76
when the per unit
market price is Oct 100 20 5.00
high.
</TABLE>
You have paid an average price of only $17.91 per unit over the 10 months, while
the average market price actually was $18.10.
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PAGE 26
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.")
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.
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PAGE 27
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
Mail transfers: $500 or entire variable subaccount or fixed
account balance
Mail withdrawals: $500 or entire variable subaccount or fixed
account balance
Maximum amount
Mail transfers: Contract Value
Mail withdrawals: Contract Value
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.
You can start or stop this service by written request or other method acceptable
to American Enterprise Life. You must allow 30 days for American Enterprise Life
to change any instructions that are currently in place.
o Automated transfers may not exceed an amount that, if continued, would
deplete the fixed account or subaccount(s) from which you are
transferring within 24 months.
o Automated transfers and automated partial withdrawals are subject to all
of the contract provisions and terms, including transfer of contract
values between accounts. Automated withdrawals may be restricted by
applicable law under some contracts.
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PAGE 28
o Automated partial withdrawals may result in IRS taxes and
penalties on all or part of the amount withdrawn.
Minimum amount
Automated transfers or withdrawals: $100 monthly/$250 quarterly
Maximum amount
Automated transfers or withdrawals: Contract Value (except for
automated transfers from the
fixed account)
Withdrawals from your contract
As owner, you may withdraw all or part of your contract at any time before
annuity payouts begin by sending a written request to American Enterprise Life.
For total withdrawals we will compute the value of your contract at the close of
business after we receive your request. We may ask you to return the contract.
You may have to pay withdrawal charges (see "Withdrawal charge") and IRS taxes
and penalties (see "Taxes"). No withdrawals may be made after annuity payouts
begin.
Withdrawal policies
If you have a balance in more than one account and request a partial withdrawal,
we will withdraw money from all your 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;
-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
<PAGE>
PAGE 29
to our Minneapolis administrative office. The change will become binding upon us
when we receive and record it. We will honor any change of ownership request
believed to be authentic and will use reasonable procedures to confirm
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
If you or the annuitant dies (or, for qualified annuities, if the annuitant
dies) before annuity payouts begin, we will pay the beneficiary as follows:
For contracts where both the owner and annuitant were 75 or younger on the date
the contract was issued and if all withdrawals you have made from this contract
have been without withdrawal charges, the beneficiary receives the greater of:
1. the contract value; or
2. the total purchase payments paid less any amounts withdrawn;
or
3. on or after the fifth contract anniversary, the death benefit as of the
most recent fifth contract anniversary adjusted by adding any purchase
payments made since that most recent fifth contract anniversary and by
subtracting any amounts withdrawn since that most recent fifth contract
anniversary.
For contracts where both the owner and annuitant were 75 or younger on the date
the contract was issued and you have made withdrawals subject to withdrawal
charges, the beneficiary receives the contract value.
For contracts where either the owner or annuitant were 76 or older on the date
the contract was issued, the beneficiary receives the contract value.
If your spouse is sole beneficiary under a 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.
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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;
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 mutual funds will fluctuate.
(In the case of fixed annuities, payouts remain the same from month to month.)
For information with respect to transfers between accounts after annuity payouts
begin, see "Transfer policies."
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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, ten or 15 years certain: Monthly payouts are
made for a guaranteed payout period of five, ten or 15 years that you elect.
This election will determine the length of the payout period to the beneficiary
if the annuitant should die before the elected period 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 ten 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.
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If we do not receive instructions: You must give us written instructions for the
annuity payouts at least 30 days before the annuitant's retirement date. If you
do not, we will make payouts under Plan B, with 120 monthly payouts guaranteed.
If monthly payouts would be less than $20: We will calculate the amount of
monthly payouts at the time the contract value is used to purchase a payout
plan. If the calculations show that monthly payouts would be less than $20, we
have the right to pay the contract value to the owner in a lump sum or to change
the frequency of the payouts.
Death after annuity payouts begin
If you or the annuitant dies after annuity payouts begin, any amount payable to
the beneficiary will be provided in the annuity payout plan in effect.
Taxes
Generally, under current law, any increase in your contract value is taxable to
you only when you receive a payout or withdrawal. (However, see detailed
discussion below.) Any portion of the annuity payouts and any withdrawals you
request that represent ordinary income are normally taxable. You will receive a
1099 tax information form for any year in which a taxable distribution was made
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.
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Death benefits to beneficiaries: The death benefit under an annuity is not
tax-exempt. Any amount received by the beneficiary that represents previously
deferred income 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);
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've 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.
<PAGE>
PAGE 34
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.
Tax qualification
The contract is intended to qualify as an annuity for federal income tax
purposes. To that end, the provisions of the contract are to be interpreted to
ensure or maintain such tax qualification, notwithstanding any other provisions
of the contract. We reserve the right to amend the contract to reflect any
clarifications that may be needed or are appropriate to maintain such
qualification or to conform the contract to any applicable changes in the tax
qualification requirements. We will send you a copy of any such amendments.
Voting rights
As a contract owner with investments in the variable subaccount(s), you may vote
on important mutual fund policies until annuity payouts begin. Once they begin,
the person receiving them has voting rights. We will vote fund shares according
to the instructions of the person with voting rights.
Before annuity payouts begin, the number of votes you have is determined by
applying your percentage interest in each variable subaccount to the total
number of votes allowed to the subaccount.
After annuity payouts begin, the number of votes you have is equal to:
o the reserve held in each subaccount for your contract;
o divided by the net asset value of one share of the applicable
underlying mutual fund.
As we make annuity payouts, the reserve for the contract decreases; therefore,
the number of votes also will decrease.
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PAGE 35
We calculate votes separately for each account. Notice of these meetings, proxy
materials and a statement of the number of votes to which the voter is entitled
will be sent.
We will vote shares for which we have not received instructions in the same
proportion as the votes for which we have received instructions. We also will
vote the shares for which we have voting rights in the same proportion as the
votes for which we have received instructions.
Substitution of investments
If shares of any fund should not be available for purchase by the appropriate
variable subaccount or if, in the judgment of American Enterprise Life's
Management, further investment in such shares is no longer appropriate in view
of the purposes of the subaccount, investment in the subaccount may be
discontinued or another registered open-end management investment company may be
substituted for fund shares held in the subaccount(s) if American Enterprise
Life believes it would be in the best interest of persons having voting rights
under the contract. The variable account may be operated as a management company
under the 1940 Act or it may be deregistered under this Act if the registration
is no longer required. In the event of any such substitution or change, American
Enterprise Life, without the consent or approval of the owners, may amend the
contract and take whatever action is necessary and appropriate. However, no such
substitution or change will be made without the necessary approval of the SEC
and state insurance departments. American Enterprise Life will notify owners of
any substitution or change.
Distribution of the contracts
The contracts will be distributed by banks and financial institutions either
directly or through a network of third-party marketers. American Express
Financial Advisors Inc., the principal underwriter for the variable account,
will pay commissions for the distribution of the contracts to the broker-dealers
of the banks or financial institutions or the broker-dealers of the third-party
marketers who have entered into distribution agreements with American Express
Financial Advisors. These commissions will not be more than 7% of purchase
payments received on the contracts.
From time to time, American Enterprise Life may pay or permit other promotional
incentives, in cash or credit or other compensation.
About American Enterprise Life
AEL Personal PortfolioSM is issued by American Enterprise Life. American
Enterprise Life is a wholly-owned subsidiary of IDS Life, which is a
wholly-owned subsidiary of 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.
<PAGE>
PAGE 36
American Enterprise Life is a stock life insurance company organized in 1981
under the laws of the state of Indiana. Its administrative office is located at
80 South Eighth Street, Minneapolis, MN 55402. Its statutory address is 100
Capitol Center South, 201 North Illinois Street, Indianapolis, IN 46204.
American Enterprise Life is licensed in the state of Indiana and it conducts a
conventional life insurance business.
American Express Financial Advisors Inc. is the principal underwriter for the
variable account. Its home office is IDS Tower 10, Minneapolis, MN 55440-0010.
American Express Financial Advisors is registered with the SEC under the
Securities Exchange Act of 1934 as a broker-dealer and is a member of the
National Association of Securities Dealers, Inc. American Express Financial
Advisors is a wholly owned subsidiary of 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.
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............................... 3
Calculating annuity payouts........................... 6
Rating agencies....................................... 8
Principal underwriter................................. 8
Independent auditors.................................. 8
Saving for retirement................................. 8
Prospectus............................................ 9
Financial statements -
American Enterprise Variable Annuity Account
American Enterprise Life Insurance Company
- -------------------------------------------------------------------
Please check the appropriate box to receive a copy of the Statement of
Additional Information for:
____ AEL Personal PortfolioSM
____ IDS Life Retirement Annuity Mutual Funds
____ The OCC Accumulation Trust
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PAGE 37
____ Putnam Variable Trust
____ GT Global Variable Investment Funds
Mail your request to:
American Enterprise Life Insurance Company
80 South Eighth Street
P.O. Box 534
Minneapolis, MN 55440-0534
American Enterprise Life will mail your request to:
Your name _____________________________________________________
Address _______________________________________________________
City __________________________ State ____________ Zip ________
<PAGE>
PAGE 38
STATEMENT OF ADDITIONAL INFORMATION
for
AEL PERSONAL PORTFOLIOSM
AMERICAN ENTERPRISE VARIABLE ANNUITY ACCOUNT
May 1, 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 May 1, 1997, is not a
prospectus. It should be read together with the prospectus dated May 1, 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
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TABLE OF CONTENTS
Performance Information......................................3
Calculating Annuity Payouts..................................6
Rating Agencies..............................................8
Principal Underwriter........................................8
Independent Auditors.........................................8
Saving for Retirement........................................8
Prospectus...................................................9
Financial Statements -
American Enterprise Variable Annuity Account
American Enterprise Life Insurance Company
<PAGE>
PAGE 40
PERFORMANCE INFORMATION
The following performance figures are calculated on the basis of historical
performance of the funds. The performance figures relating to these funds assume
that the contract was offered prior to January 12, 1995, which it was not.
Before the subaccounts began investing in these funds, the figures show what the
subaccount performance would have been if these subaccounts had existed during
the illustrated periods. Once these subaccounts began investing in these funds,
actual values are used for the calculations.
Calculation of Yield for the Subaccount investing in IDS Life Moneyshare Fund.
Simple yield for the subaccount investing in the IDS Life Moneyshare Fund will
be based on the: (a) change in the value of a hypothetical investment (exclusive
of capital changes) at the beginning of a seven-day period for which yield is to
be quoted; (b) subtracting a pro rata share of subaccount expenses accrued over
the seven-day period; (c) dividing the difference by the value of the subaccount
at the beginning of the period to obtain the base period return; and (d)
annualizing the results (i.e., multiplying the base period return by 365/7).
The value of the hypothetical subaccount includes the amount of any declared
dividends, the value of any shares purchased with any dividend paid during the
period and any dividends declared for such shares. The variable subaccount's
yield does not include any realized or unrealized gains or losses, nor does it
include the effect of any applicable surrender charge.
Calculation of compound yield begins with the same base period return used in
the calculation of yield, which is then annualized to reflect compounding
according to the following formula:
Compound Yield = [(Base Period Return + 1) 365/7 ] -1
Annualized Yield based on Seven-Day Period ended
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
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investment income per accumulation unit by the value of an accumulation unit on
the last day of the period, according to the following formula:
YIELD = 2[(a-b + 1) 6 - 1]
cd
where: a = dividends and investment income earned during the
period
b = expenses accrued for the period (net of
reimbursements)
c = the average daily number of accumulation units outstanding
during the period that were entitled to receive dividends
d = the maximum offering price per accumulation unit on
the last day of the period
Yield on the subaccount is earned from the increase in the net asset value of
shares of the fund in which the subaccount invests and from dividends declared
and paid by the fund, which are automatically invested in shares of the fund.
Annualized yield based on 30-Day Period ended 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 the annuity contract over a period of one, five and ten years (or,
if less, up to the life of the account), calculated according to the following
formula:
P(1+T) n = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = Ending Redeemable Value of a hypothetical $1,000 payment made
at the beginning of the one, five, or ten year (or other) period
at the end of the one, five, or ten year (or other) period (or
fractional portion thereof)
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PAGE 42
Average Annual Total Return For Period Ended Dec. 31, 1996
Average Annual Total Return with Withdrawal
<TABLE>
<CAPTION>
Since
Subaccount investing in:* 1 Year 5 Year 10 Year Inception
- -----------------------
IDS LIFE
<S> <C> <C> <C> <C>
Aggressive Growth Fund (1/92) 7.49% --% --% 10.23%
Capital Resource Fund (10/81) -0.39 6.50 12.10 --
International Equity Fund (1/92) 1.07 -- -- 7.53
Managed Fund (4/86) 8.24 8.80 10.74 --
Moneyshare Fund (10/81) -3.06 2.08 3.84 --
Special Income Fund (10/81) -1.31 7.73 7.20 --
OCC ACCUMULATION TRUST
Managed Portfolio (8/88) 13.94 17.05 -- 18.45
GT GLOBAL
Variable Latin America Fund (2/93) 13.64 -- -- 7.99
Variable New Pacific Fund (2/93) 22.05 -- -- 7.44
PUTNAM VT
Diversified Income Fund (9/93) 0.38 -- -- 4.62
Growth and Income Fund (2/88) 13.10 14.02 -- 13.94
High Yield Fund (2/88) 4.12 11.54 -- 10.92
New Opportunities Fund (5/94) 1.62 -- -- 20.60
Average Annual Total Return without Withdrawal
Since
Subaccount Investing in:* 1 Year 5 Year 10 Year Inception
- -----------------------
IDS Life
Aggressive Growth Fund (1/92) 14.49% --% --% 10.64%
Capital Resource Fund (10/81) 6.36 6.81 12.10 --
International Equity Fund (1/92) 7.93 -- -- 7.99
Managed Fund (4/86) 15.24 9.08 10.74 --
Moneyshare Fund (10/81) 3.48 2.45 3.84 --
Special Income Fund (10/81) 5.37 8.03 7.20 --
OCC ACCUMULATION TRUST
Managed Portfolio (8/88) 20.94 17.26 -- 18.45
GT GLOBAL
Variable Latin America (2/93) 20.64 -- -- 8.82
Variable New Pacific Fund (2/93) 29.05 -- -- 8.28
PUTNAM VT
Diversified Income Fund (9/93) 7.18 -- -- 5.66
Growth and Income Fund (2/88) 20.10 14.26 -- 13.94
High Yield Fund (2/88) 11.12 11.80 -- 10.92
New Opportunities Fund (5/94) 8.52 -- -- 22.02
</TABLE>
*inception dates of the funds are shown in parentheses.
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
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PAGE 43
payment made at the beginning of the one, five, or ten year (or
other) period at the end of the one, five, or ten year (or other)
period (or fractional portion thereof)
The Securities and Exchange Commission (SEC) requires that an assumption be made
that the contract owner withdraws the entire contract at the end of the one,
five and ten year periods (or, if less, up to the life of the subaccount) for
which performance is required to be calculated. In addition, performance figures
may be shown without the deduction of a withdrawal charge.
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 mutual fund.
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PAGE 44
Subsequent Payouts: To compute later payouts, we multiply:
o the annuity unit value on the valuation date on or immediately preceding the
seventh calendar day before the payout is due; by o the fixed number of annuity
units credited to you.
Annuity Table: The table shows the amount of the first monthly payment for each
$1,000 of contract value according to the age and, when applicable, the sex of
the annuitant. (Where required by law, we will use a unisex table of settlement
rates.) The table assumes that the contract value is invested at the beginning
of the annuity payout period and earns a 5% rate of return, which is reinvested
and helps to support future payouts.
Annuity Unit Values: This value was originally set at $1 for each
subaccount. To calculate later value we multiply the last annuity
value by the product of:
o the net investment factor; and
o the neutralizing factor. The purpose of the neutralizing factor is to offset
the effect of the assumed investment rate built into the annuity table. With an
assumed investment rate of 5%, the neutralizing factor is 0.999866 for a one day
valuation period.
Net Investment Factor:
This value is determined each business day by:
o adding the underlying mutual fund's current net asset value per share plus per
share amount of any current dividend or capital gain distribution; then o
dividing that sum by the previous net asset value per share; and o subtracting
the percentage factor representing the mortality and expense risk fee from the
result.
Because the net asset value of the underlying mutual fund may fluctuate, the net
investment factor may be greater or less than one, and the accumulation unit
value may increase or decrease. You bear this investment risk in a variable
subaccount.
The Fixed Account
Your fixed annuity payout amounts are guaranteed. Once calculated, your payout
will remain the same and never change. To calculate your annuity payouts we:
o take the value of your fixed account at the retirement date or the date you
have selected to begin receiving your annuity payouts; then o using an annuity
table, we apply the value according to the annuity payout plan you select; and o
the annuity payout table we use will be the one in effect at the time you choose
to begin your annuity payouts. The table will be equal to or greater than the
table in your contract.
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PAGE 45
RATING AGENCIES
The following chart reflects the ratings given to American Enterprise Life by
independent rating agencies. These agencies evaluate the financial soundness and
claims-paying ability of insurance companies based on a number of different
factors. This information does not relate to the management or performance of
the variable subaccounts of AEL Personal PortfolioSM. This information relates
only to the fixed account and reflects American Enterprise Life's ability to
make annuity payouts and to pay death benefits and other distributions from the
annuity.
Rating agency Rating
A.M. Best A+
(Superior)
Duff & Phelps AAA
Moody's Aa2
PRINCIPAL UNDERWRITER
The principal underwriter for the accounts is American Express Financial
Advisors Inc. which offers the variable contracts on a continuous basis.
INDEPENDENT AUDITORS
The financial statements of American Enterprise Variable Annuity Account
including the statements of net assets as of Dec. 31, 1996, and 1995, and the
related statement of operations for the year ended Dec. 31, 1996, and the
statements of 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
financial statements of American Enterprise Life Insurance Company (a wholly
owned subsidiary of IDS Life Insurance Company) at Dec. 31, 1996 and 1995 and
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.
<PAGE>
PAGE 46
PROSPECTUS
The prospectus dated May 1, 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>
PAGE 47
STATEMENT OF DIFFERENCES
Difference Description
1) The layout is different 1) Some of the layout in the
throughout the prospectus. prospectus is in two
columns.
2) Headings. 2) The headings in the
prospectus are placed
in gray strip at the top
of the page.
3) The page numbers in the 3) The prospectus begins on
electronic document do not page 1 in both documents,
correspond to the printed ends on page 37 in the
prospectus. electronic document, and
page 45 in the printed
prospectus.
4) Symbols. 4) On page 9 of the electronic
filing under the heading, "GT Global
Variable Latin America", an additional
+ was added to the figure of 1.17%+.
On page 9 of the electronic filing under
the heading, "GT Global Variable New
Pacific", an additional + was added to
the figure of 1.12%+.
