SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 10 (File No. 33-54471) [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 11 (File No. 811-7195) [X]
---------
(Check appropriate box or boxes)
AMERICAN ENTERPRISE VARIABLE ANNUITY ACCOUNT
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(Exact Name of Registrant)
American Enterprise Life Insurance Company
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(Name of Depositor)
80 South 8th Street, P.O. Box 534, Minneapolis, MN 55440-0534
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(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (612) 671-7981
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Colin M. Lancaster, IDS Tower 10, Minneapolis, MN 55440-0010
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(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on May 1, 1998 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[ ] on (date) pursuant to paragraph (a)(1) of Rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
CROSS REFERENCE SHEET
Cross reference sheet showing location in the prospectus and Statement of
Additional Information of the information called for by the items enumerated in
Part A and B of Form N-4.
Negative answers omitted from the prospectus and Statement of Additional
Information are so indicated.
<PAGE>
PART A
Item No. Section in Prospectus
1 Cover page
2 Key terms
3 (a) Expense summary
(b) The annuities in brief
4 (a) Condensed financial information
(b) Performance information
(c) Financial statements
5 (a) Cover page; About American Enterprise Life
(b) The variable account
(c) The funds
(d) Cover page; The funds
(e) Voting rights
(f) NA
(g) NA
6 (a) Charges
(b) Expense summary; Charges
(c) Charges
(d) Distribution of the contracts
(e) The funds
(f) NA
7 (a) Buying your annuity; Benefits in case of death; The annuity
payout period
(b) The variable account; Transferring money between subaccounts;
Transfer policies
(c) The funds; Charges
(d) Cover page
8 (a) The annuity payout period
(b) Buying your annuity
(c) The annuity payout period
(d) The annuity payout period
(e) The annuity payout period
(f) The annuity payout period
9 (a) Benefits in case of death
(b) Benefits in case of death
10 (a) Buying your annuity; Valuing your investment
(b) Valuing your investment
(c) Valuing your investment
(d) About American Enterprise Life
11 (a) Withdrawals from your contract
(b) NA
(c) Receiving payment when you request a withdrawal
(d) Buying your annuity
(e) The annuities in brief
12 (a) Taxes
(b) Key terms
(c) NA
13 NA
14 Table of contents of the Statement of Additional Information
<PAGE>
PART B
Item No. Section in Statement of Additional Information
15(a) Cover Page
(b) NA
16 Table of Contents
17 (a) NA
(b) NA
(c) About American Enterprise Life*
18 (a) NA
(b) NA
(c) Independent Auditors
(d) NA
(e) NA
(f) NA
19 (a) Distribution of the contracts*
(b) NA
20 (a) Principal Underwriter
(b) Principal Underwriter
(c) NA
(d) NA
21 (a) Performance Information
(b) Performance Information
22 Calculating Annuity Payouts
23 (a) Financial Statements
(b) Financial Statements
*Designates section in the prospectus, which is hereby incorporated by reference
in this Statement of Additional Information.
<PAGE>
AEL Personal PortfolioSM/AEL Personal Portfolio Plus
May 1, 1998
Variable Annuity Prospectus
The flexible premium variable annuity contracts described in the prospectus are
offered by American Enterprise Life Insurance Company (American Enterprise
Life), a subsidiary of IDS Life Insurance Company (IDS Life), which is a
subsidiary of American Express Financial Corporation (AEFC). Purchase payments
may be allocated among different accounts, providing variable and/or fixed
returns and payouts. The annuities are available for individual retirement
annuities (IRAs), simplified employee pension plans (SEPs), Roth IRAs and
nonqualified retirement plans.
American Enterprise Variable Annuity Account
Sold by: American Enterprise Life Insurance Company
Administrative Offices: 80 South Eighth Street, P.O. Box 534,
Minneapolis, MN 55440-0534
Telephone: 800-333-3437
This prospectus contains information about the variable account that you should
know before investing. Refer to "The variable account" in this prospectus. As in
the case of other annuities, it may not be advantageous to purchase this annuity
as a replacement for, or in addition to an existing annuity.
The prospectus is accompanied or preceded by the following prospectuses: AIM
Variable Insurance Funds, Inc.; GT Global Variable Investment Funds; IDS Life
Retirement Annuity Mutual Funds; Janus Aspen Series; OCC Accumulation Trust;
Oppenheimer Variable Account Funds; and Putnam Variable Trust. Please read these
documents carefully and keep them for future reference.
These securities have not been approved or disapproved by the Securities and
Exchange Commission, or any state securities commission, nor has the Securities
and Exchange Commission or any state securities commission passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
American Enterprise Life is not a bank or financial institution, and the
securities it offers are not deposits or obligations of, backed or guaranteed or
endorsed by any bank or financial institution nor are they insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board or any other
agency. Investments in this annuity involve investment risk including the
possible loss of principal.
<PAGE>
A Statement of Additional Information (SAI), dated May 1, 1998 (incorporated by
reference into this prospectus) and filed with the Securities and Exchange
Commission (SEC), is available without charge by contacting American Enterprise
Life at the telephone number above or by completing and sending the order form
on the last page of this prospectus. The table of contents of the SAI is on the
last page of this prospectus.
<PAGE>
Table of contents
Key terms......................................................................
The annuities in brief.........................................................
Expense summary................................................................
Condensed financial information (Unaudited)....................................
Financial statements...........................................................
Performance information........................................................
The variable account...........................................................
The funds......................................................................
AIM V.I. Growth and Income Fund...........................................
AIM V.I. International Equity Fund........................................
AIM V.I. Value Fund.......................................................
GT Global Variable Latin America Fund.....................................
GT Global Variable New Pacific Fund.......................................
IDS Life Aggressive Growth Fund...........................................
IDS Life Capital Resource Fund............................................
IDS Life Growth Dimensions Fund...........................................
IDS Life International Equity Fund........................................
IDS Life Managed Fund.....................................................
IDS Life Moneyshare Fund..................................................
IDS Life Special Income Fund..............................................
Janus Aspen Series Balanced Portfolio.....................................
Janus Aspen Series Worldwide Growth Portfolio.............................
OCC Accumulation Trust Equity Portfolio...................................
OCC Accumulation Trust Managed Portfolio..................................
OCC Accumulation Trust Small Cap Portfolio................................
OCC Accumulation Trust U.S. Government Income Portfolio...................
Oppenheimer Variable Account Growth Fund..................................
Oppenheimer Variable Account High Income Fund.............................
Putnam VT Diversified Income Fund.........................................
Putnam VT Growth and Income Fund..........................................
Putnam VT High Yield Fund.................................................
Putnam VT New Opportunities Fund..........................................
The fixed account..............................................................
Buying your annuity............................................................
The retirement date.......................................................
Beneficiary...............................................................
How to make payments......................................................
<PAGE>
Charges........................................................................
Contract administrative charge............................................
Variable account administrative charge....................................
Mortality and expense risk fee............................................
Withdrawal charge.........................................................
Waiver of withdrawal charge...............................................
Premium taxes.............................................................
Valuing your investment........................................................
Number of units...........................................................
Accumulation unit value...................................................
Net investment factor.....................................................
Factors that affect variable subaccount
accumulation units........................................................
Making the most of your annuity................................................
Automated dollar-cost averaging...........................................
Transferring money between subaccounts....................................
Transfer policies.........................................................
Two ways to request a transfer or a withdrawal............................
Withdrawals from your contract.................................................
Withdrawal policies.......................................................
Receiving payment when you request a withdrawal...........................
Changing ownership.............................................................
Benefits in case of death......................................................
The annuity payout period......................................................
Annuity payout plans......................................................
Death after annuity payouts begin.........................................
Taxes..........................................................................
Voting rights..................................................................
Substitution of investments....................................................
Distribution of the contracts..................................................
About American Enterprise Life.................................................
Year 2000 .....................................................................
Regular and special reports....................................................
Services..............................................................
Table of contents of the Statement of Additional Information..........
<PAGE>
Key terms
These terms can help you understand details about your annuity.
Accumulation unit - A measure of the value of each variable subaccount before
annuity payouts begin.
Annuitant - The person on whose life or life expectancy the annuity payouts are
based.
Annuity - A contract purchased from an insurance company that offers
tax-deferred growth of the investment until earnings are withdrawn, and that can
be tailored to meet the specific needs of the individual during retirement.
Annuity payouts - An amount paid at regular intervals under one of several plans
available to the owner and/or any other payee. This amount may be paid on a
variable or fixed basis.
Annuity unit - A measure of the value of each variable subaccount used to
calculate the annuity payouts you receive.
Beneficiary - The person designated to receive annuity benefits in case of the
owner's or annuitant's death.
Close of business - When the New York Stock Exchange (NYSE) closes, normally 3
p.m. Central time.
Code - Internal Revenue Code of 1986, as amended.
Contract value - The total value of your annuity before any applicable
withdrawal charge and any contract administrative charge have been deducted.
Contract year - A period of 12 months, starting on the effective date of your
contract and on each anniversary of the effective date.
Fixed account - An account to which you may allocate purchase payments. Amounts
allocated to this account earn interest at rates that are declared periodically
by American Enterprise Life.
Mutual funds (funds) - Mutual funds or portfolios, each with a different
investment objective. You may allocate your purchase payments into variable
subaccounts investing in shares of any or all of these funds (See "The funds").
Owner (you, your) - The person who controls the annuity (decides on investment
allocations, transfers, payout options, etc.). Usually, but not always, the
owner is also the
<PAGE>
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.
Qualified annuity - An annuity purchased for one of the following retirement
plans that is subject to applicable federal law and any rules of the plan
itself:
o Individual Retirement Annuities (IRAs), including Roth IRAs
o Simplified Employee Pension Plans (SEPs)
All other annuities are considered nonqualified annuities.
Retirement date - The date when annuity payouts are scheduled to begin. This
date is first established when you start your contract. You can change it in the
future.
Systematic Investment Plan (SIP) - A payment method you set up with your bank to
automatically make monthly investments to your annuity from your bank account.
Valuation date - Any normal business day, Monday through Friday, that the NYSE
is open. The value of each variable subaccount is calculated at the close of
business on each valuation date.
Variable account - Consists of separate subaccounts to which you may allocate
purchase payments; each subaccount invests in shares of one mutual fund (See
"The variable account"). The value of your investment in each variable
subaccount changes with the performance of the underlying mutual fund.
Withdrawal charge - A deferred sales charge that may be applied if you make a
withdrawal from your annuity before the retirement date.
Withdrawal value - The amount you are entitled to receive if you fully withdraw
your annuity. It is the contract value minus any applicable withdrawal charge
and contract administrative charge.
The annuities in brief
Purpose: Each annuity is designed to allow you to accumulate money for
retirement. You do this by making one or more investments (purchase payments)
that may earn returns that increase the value of the annuity. Beginning at a
specified future date (the retirement date), the annuity provides lifetime or
other forms of payouts to you or to anyone you designate.
Ten-day free look: You may return your annuity to your agent or to our
Minneapolis administrative offices within 10 days after it is delivered to you
and receive a full refund
<PAGE>
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 the 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
in which it invests. We cannot guarantee that the value at the
retirement date will equal or exceed the total of purchase payments
allocated to the variable subaccounts. (p. )
o one fixed account, which earns interest at a rate that is adjusted
periodically by American Enterprise Life. (p. )
Buying the annuity: Your agent will help you complete and submit an application.
Applications are subject to acceptance at our Minneapolis administrative
offices. You may buy a nonqualified annuity or a qualified annuity. Payment must
be made in a lump sum with the option of additional payments in the future. In
some states there are time limitations for making additional payments. (p. )
o Minimum initial payment - $2,000 (without prior approval)
o Minimum additional payment - $50
o Maximum total payment(s)-$1,000,000 (without prior approval)
Transfers: Subject to certain restrictions you may redistribute your money among
accounts without charge at any time until annuity payouts begin, and once per
contract year among the variable subaccounts thereafter. You may establish
automated transfers among the fixed account and variable subaccount(s). (p. )
Withdrawals: You may withdraw all or part of your contract value at any time
before the retirement date. You also may establish automated partial
withdrawals. Withdrawals may be subject to charges and tax penalties (including
a 10% IRS penalty if withdrawals are made prior to your reaching age 59 1/2) and
may have other tax consequences; also, certain restrictions apply. (p. )
Changing ownership: You may change ownership of a nonqualified annuity by
written instruction. However, such changes of nonqualified annuities may have
federal income tax consequences. Certain restrictions apply concerning change of
ownership of a qualified annuity. (p. )
Payment in case of death: If you or the annuitant die before annuity payouts
begin, we will pay the beneficiary an amount at least equal to the contract
value. (p. )
<PAGE>
Annuity payouts: The contract value of your investment can be applied to an
annuity payout plan that begins on the retirement date. You may choose from a
variety of plans to make sure that payouts continue as long as they are needed.
If you purchased a qualified annuity, the payout schedule must meet requirements
of the qualified plan. Payouts may be made on a fixed or variable basis, or
both. Total monthly payouts may include amounts from each variable subaccount
and the fixed account. (p. )
Taxes: Generally, your annuity grows tax-deferred until you fully withdraw it or
begin to receive payouts. (Under certain circumstances, IRS penalty taxes may
apply.) Even if you direct payouts to someone else, you will be taxed on the
income if you are the owner. Roth IRAs, however, may grow tax free if you meet
certain distribution requirements. (p.)
Charges: Your annuity is subject to a $30 annual contract administrative charge,
a 0.15% variable account administrative charge, a 1.25% mortality and expense
risk fee, a withdrawal charge and any premium taxes that may be imposed by state
or local governments. Premium taxes are deducted upon total withdrawal or when
annuity payouts begin. (p. )
Expense summary
The purpose of this table is to help you understand the various costs and
expenses associated with your annuity.
You pay no sales charge when you purchase your annuity. All costs that you bear
directly or indirectly for the variable subaccounts and underlying mutual funds
are shown below. Some expenses may vary as explained under "Charges."
Contract owner expenses:*
Withdrawal charge (contingent deferred sales charge as a percentage 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%
<PAGE>
Annual contract administrative charge $30
Variable account annual expenses
Variable account administrative charge
(as a percentage of average daily net assets of
the underlying fund)..............................................0.15%
Mortality and expense risk fee
(as a percentage of average daily net assets of
the underlying fund)..............................................1.25%
Total variable account annual expenses.....................................1.40%
Annual operating expenses of underlying mutual funds (management fees and other
expenses deducted as a percentage of average net assets as follows:)
<TABLE>
<CAPTION>
GT Global GT Global
AIM V.I. Variable Latin Variable
Growth AIM V.I. America New Pacific IDS Life IDS Life IDS Life
and International AIM V.I. (after expense (after expense Aggressive Capital Growth
Income+ Equity+ Value+ reimbursement) reimbursement) Growth Resource Dimensions
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 0.63% 0.75% 0.62% 1.00% 1.00% 0.60% 0.60% 0.63%
Other expenses 0.06 0.18 0.08 0.25 0.09 0.07 0.07 0.08
Total 0.69%+ 0.93%+ 0.70%+ 1.25%++ 1.09%++ 0.67%** 0.67%** 0.71%**
Janus Janus Aspen
Aspen Series
Series Worldwide OCC
IDS Life IDS Life Balanced Growth OCC Accumulation
International IDS Life IDS Life Special (after fee (after fee Accumulation Trust
Equity Managed Moneyshare Income reductions) reductions) Trust Equity Managed
Management fees 0.83% 0.59% 0.51% 0.60% 0.76% 0.66% 0.80% 0.80%
Other expenses 0.11 0.05 0.06 0.07 0.07 0.08 0.19 0.07
Total 0.94%** 0.64%** 0.57%** 0.67%** 0.83%+++ 0.74%+++ 0.99%*** 0.87%***
OCC
Accumulation Putnamm
Trust U.S. VT Growth Putnam
OCC Government Oppenheimer Oppenheimer Putnam VT and IncomeVT High Putnam VT
Accumulation Income Variable Variable Diversified Fund Yield New
Trust Small (after Account Account High Income Fund Opportunities
Cap expense Growth Income Fund Fund
limitations)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 0.80% 0.47% 0.73% 0.75% 0.69% 0.47% 0.66% 0.58%
Other expenses 0.17 0.46 0.02 0.07 0.11 0.04 0.06 0.05
Total 0.97%*** 0.93%*** 0.75%+ 0.82%+ 0.80%+ 0.51%+ 0.72%+ 0.63%+
</TABLE>
<PAGE>
+ Operating expenses of the underlying funds at Dec. 31, 1997. A I M
Advisers, Inc. ("AIM") may from time to time voluntarily waive or reduce
its respective fees. Effective May 1, 1998, the Funds reimburse AIM in an
amount up to 0.25% of the average net asset value of each Fund, for
expenses incurred in providing, or assuring that participating insurance
companies provide, certain administrative services. Currently, the fee only
applies to the average net asset value of each Fund in excess of the net
asset value of each Fund as calculated on April 30, 1998.
* Premium taxes imposed by some state and local governments are not
reflected in this table.
** Annualized operating expenses of underlying funds at Dec. 31, 1997.
*** Total portfolio Expenses of the OCC Accumulation Trust Portfolios are
limited by OpCap Advisors so that their respective annualized operating
expenses (net of any expense offsets) do not exceed 1.00% of average
daily net assets for the Equity, Managed, Small Cap and U.S. Government
Income Portfolios. Without such limitation and without giving effect to
any expense offsets, the Management Fees, Other Expenses and Total
Portfolio Expenses would have been, .80%, .19% and .99%, respectively,
for the Equity Portfolio; .80%, .07% and .87%, respectively,
for the Managed Portfolio; .80%, .17% and .97%, respectively, for the Small
Cap Portfolio; and .60%, .46% and 1.06%, respectively, for the U.S.
Government Income Portfolio for the fiscal year ended December 31, 1997.
+ Operating expenses of the underlying funds at Dec. 31, 1997.
++ Figures in the "Other expenses" and "Total" columns are restated from the
amounts you would have incurred in 1997 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%,
.40%, 1.40%; and GT Global Variable New Pacific Fund, 1.00%, .43%, 1.43%.
+++ The figures given above are based on gross expenses before expense offset
arrangements, if any, during 1997, for these funds. As of the date of this
prospectus, certain fees are being reduced by the respective investment
managers or service providers for certain of the underlying funds, in each
case on a voluntary basis. Without such reductions, the "Management fees",
"Other expenses" and "Total" that would have been incurred for the last
completed fiscal year would be: .77%, .06% and .83%, respectively, for
Janus Aspen Series Balanced Portfolio, and .72%, .09% and .81%,
respectively, for Janus Aspen Series Worldwide Growth Portfolio. See the
Portfolios' prospectuses for a discussion of fee reductions.
Example:*
<PAGE>
<TABLE>
<CAPTION>
GT Global GT Global
AIM V.I. AIM V.I. Variable Variable IDS Life IDS Life IDS Life
Growth and International AIM V.I. Latin New Aggressive Capital Growth
Income Equity Value America Pacific Growth Resource Dimensions
You would pay the following expenses on a $1,000 investment, assuming 5% annual
return and full withdrawal at the end of each time period:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 year $ 92.72 $ 95.18 $ 92.83 $ 98.46 $ 96.82 $ 92.52 $ 92.52 $ 92.93
3 years 120.05 127.44 120.36 137.24 132.35 119.43 119.43 120.67
5 years 149.99 162.33 150.51 178.58 170.48 148.96 148.96 151.02
10 years 257.26 281.91 258.30 313.87 298.02 255.18 255.18 259.34
You would pay the following expenses on the same investment assuming no
withdrawal or selection of an annuity payout plan at the end of each time
period:
1 year $ 22.72 $ 25.18 $ 22.83 $ 28.46 $ 26.82 $ 22.52 $ 22.52 $ 22.93
3 years 70.05 77.44 70.36 87.24 82.35 69.43 69.43 70.67
5 years 119.99 132.33 120.51 148.58 140.48 118.96 118.96 121.02
10 years 257.26 281.91 258.30 313.87 298.02 255.18 255.18 259.34
Janus Janus Aspen OCC
IDS Life IDS Life Aspen Series OCC Accumulation
International IDS Life IDS Life Special Series Worldwide Accumulation Trust
Equity Managed Moneyshare Income Balanced Growth Trust Equity 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> <C>
1 year $ 95.29 $ 92.21 $ 91.49 $ 92.52 $ 94.16 $ 93.24 $ 95.80 $ 94.57
3 years 127.75 118.50 116.34 119.43 124.37 121.59 129.29 125.60
5 years 162.84 147.40 143.78 148.96 157.20 152.57 165.39 159.26
10 years 282.92 252.05 244.72 255.18 271.71 262.45 287.98 275.80
<PAGE>
You would pay the following expenses on the same investment assuming no
withdrawal or selection of an annuity payout plan at the end of each time
period:
1 year $ 25.29 $ 22.21 $ 21.49 $ 22.52 $ 24.16 $ 23.24 $ 25.80 $ 24.57
3 years 77.75 68.50 66.34 69.43 74.37 71.59 79.29 75.60
5 years 132.84 117.40 113.78 118.96 127.20 122.57 135.39 129.26
10 years 282.92 252.05 244.72 255.18 271.71 262.45 287.98 275.80
</TABLE>
<TABLE>
<CAPTION>
OCC Putnam VT
OCC Accumulation Oppenheimer Oppenheimer DiversifiedPutnam Putnam VT Putnam
Accumulation Trust U.S. Variable Variable Income VT Growth High VT New
Trust Small Cap Government Account Account High Fund and Income Yield Fund Opportunities
Income Growth Income Fund Fund
You would pay the following expenses on a $1,000 investment, assuming 5% annual
return and full withdrawal at the end of each time period:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 year $ 95.59 $ 95.18 $ 93.34 $ 94.06 $ 93.85 $ 90.88 $ 93.03 $ 92.11
3 years 128.67 127.44 121.90 124.06 123.44 114.48 120.98 118.19
5 years 164.37 162.33 153.09 156.69 155.66 140.66 151.54 146.89
10 years 285.96 281.91 263.48 270.69 268.63 238.39 260.38 251.01
You would pay the following expenses on the same investment assuming no
withdrawal or selection of an annuity payout plan at the end of each time
period:
1 year $ 25.59 $ 25.18 $ 23.34 $ 24.06 $ 23.85 $ 20.88 $ 23.03 $ 22.11
3 years 78.67 77.44 71.90 74.06 73.44 64.48 70.98 68.19
5 years 134.37 132.33 123.09 126.69 125.66 110.66 121.54 116.89
10 years 285.96 281.91 263.48 270.69 268.63 238.39 260.38 251.01
</TABLE>
* In this example, the $30 annual contract administrative charge is
approximated as a .127% charge based on the average contract size. IDS Life
has entered into certain arrangements under which it is compensated by the
funds' advisers and/or distributors for the administrative services it
provides to the funds.
This example should not be considered a representation of past or future
expenses. Actual expenses may be more or less than those shown.
Condensed financial information (Unaudited)
The following tables give per-unit information about the financial history of
each variable subaccount.
<PAGE>
Year ended Dec. 31,
1997 1996 1995
Subaccount EGN3 (Investing in shares of Aim V.I. Growth and Income Fund)
Accumulation unit $1.00 -- --
value at beginning
of period
Accumulation unit value $1.03 -- --
at end of period
Number of accumulation 69 -- --
units outstanding at end
of period (000 omitted)
Ratio of operating 1.40% -- --
expense to average
net assets
Subaccount EIN3 (Investing in shares of Aim V.I. International Equity Fund)
Accumulation unit $1.00 -- --
value at beginning
of period
Accumulation unit value $1.02 -- --
at end of period
Number of accumulation 57 -- --
units outstanding at end
of period (000 omitted)
Ratio of operating 1.40% -- --
expense to average
net assets
Subaccount EVA3 (Investing in shares of Aim V.I. Value Fund)
Accumulation unit $1.00 -- --
value at beginning
of period
Accumulation unit value $1.03 -- --
at end of period
Number of accumulation 66 -- --
units outstanding at end
of period (000 omitted)
Ratio of operating 1.40% -- --
expense to average
net assets
Subaccount ELA1 (Investing in shares of GT Global Variable Latin America Fund)
Accumulation unit $1.19 $0.98 $1.00
value at beginning
of period
Accumulation unit value $1.34 $1.19 $0.98
at end of period
Number of accumulation 1,004 663 303
units outstanding at end
of period (000 omitted)
Ratio of operating 1.40% 1.50% 1.50%
expense to average
net assets
Subaccount EPA1 (Investing in shares of GT Global Variable New Pacific Fund)
Accumulation unit $1.38 $1.07 $1.00
value at beginning
of period
Accumulation unit value $0.80 $1.38 $1.07
at end of period
Number of accumulation 980 530 193
units outstanding at end
of period (000 omitted)
Ratio of operating 1.40% 1.50% 1.50%
expense to average
net assets
Subaccount EAG1 (Investing in shares of IDS Life Aggressive Growth Fund)
Accumulation unit $1.47 $1.28 $1.00
value at beginning
of period
Accumulation unit value $1.63 $1.47 $1.28
at end of period
Number of accumulation 2,434 1,324 473
units outstanding at end
of period (000 omitted)
Ratio of operating 1.40% 1.50% 1.50%
expense to average
net assets
Subaccount ECR1 (Investing in shares of IDS Life Capital Resource Fund)
Accumulation unit $1.27 $1.20 $1.00
value at beginning
of period
Accumulation unit value $1.56 $1.27 $1.20
at end of period
Number of accumulation 3,813 2,350 818
units outstanding at end
of period (000 omitted)
Ratio of operating 1.40% 1.50% 1.50%
expense to average
net assets
Subaccount EGD2 (Investing in shares of IDS Life Growth Dimensions Fund)
Accumulation unit $1.00 -- --
value at beginning
of period
Accumulation unit value $1.05 -- --
at end of period
Number of accumulation 69 -- --
units outstanding at end
of period (000 omitted)
Ratio of operating 1.40% -- --
expense to average
net assets
Subaccount EIE1 (Investing in shares of IDS Life International Equity Fund)
Accumulation unit $1.26 $1.17 $1.00
value at beginning
of period
Accumulation unit value $1.28 $1.26 $1.17
at end of period
Number of accumulation 1,413 675 220
units outstanding at end
of period (000 omitted)
Ratio of operating 1.40% 1.50% 1.50%
expense to average
net assets
Subaccount EMG1 (Investing in shares of IDS Life Managed Fund)
Accumulation unit $1.36 $1.18 $1.00
value at beginning
of period
Accumulation unit value $1.60 $1.36 $1.18
at end of period
Number of accumulation 2,944 1,546 589
units outstanding at end
of period (000 omitted)
Ratio of operating 1.40% 1.50% 1.50%
expense to average
net assets
Subaccount EMS1 (Investing in shares of IDS Life Moneyshare Fund)
Accumulation unit $1.07 $1.03 $1.00
value at beginning
of period
Accumulation unit value $1.11 $1.07 $1.03
at end of period
Number of accumulation 231 241 132
units outstanding at end
of period (000 omitted)
Ratio of operating 1.40% 1.50% 1.50%
expense to average
net assets
Simple yield 3.71% 3.26% 3.53%
Compound yield 3.78% 3.32% 3.59%
Subaccount ESI1 (Investing in shares of IDS Life Special Income Fund)
Accumulation unit $1.24 $1.17 $1.00
value at beginning
of period
Accumulation unit value $1.33 $1.24 $1.17
at end of period
Number of accumulation 2,544 1,377 414
units outstanding at end
of period (000 omitted)
Ratio of operating 1.40% 1.50% 1.50%
expense to average
net assets
Subaccount ESB3 (Investing in shares of Janus Aspen Series Balanced Portfolio)
Accumulation unit $1.00 -- --
value at beginning
of period
Accumulation unit value $1.02 -- --
at end of period
Number of accumulation 69 -- --
units outstanding at end
of period (000 omitted)
Ratio of operating 1.40% -- --
expense to average
net assets
Subaccount EWG3 (Investing in shares of
Janus Aspen Series Worldwide Growth Portfolio)
Accumulation unit $1.00 -- --
value at beginning
of period
Accumulation unit value $1.03 -- --
at end of period
Number of accumulation 62 -- --
units outstanding at end
of period (000 omitted)
Ratio of operating 1.40% -- --
expense to average
net assets
Subaccount EEQ3 (Investing in shares of
OCC Accumulation Trust Equity Portfolio)
Accumulation unit $1.00 -- --
value at beginning
of period
Accumulation unit value $1.07 -- --
at end of period
Number of accumulation 63 -- --
units outstanding at end
of period (000 omitted)
Ratio of operating 1.40% -- --
expense to average
net assets
Subaccount EMD1 (Investing in shares of
OCC Accumulation Trust Managed Portfolio)
Accumulation unit $1.58 $1.31 $1.00
value at beginning
of period
Accumulation unit value $1.91 $1.58 $1.31
at end of period
Number of accumulation 4,134 2,462 436
units outstanding at end
of period (000 omitted)
Ratio of operating 1.40% 1.50% 1.50%
expense to average
net assets
Subaccount ESC3 (Investing in shares of
OCC Accumulation Trust Small Cap Portfolio)
Accumulation unit $1.00 -- --
value at beginning
of period
Accumulation unit value $1.01 -- --
at end of period
Number of accumulation 87 -- --
units outstanding at end
of period (000 omitted)
Ratio of operating 1.40% -- --
expenses to average
net assets
Subaccount EUS1 (Investing in shares of
OCC Accumulation Trust U.S. Government Income Portfolio)
Accumulation unit $1.10 $1.09 $1.00
value at beginning
of period
Accumulation unit value $1.17 $1.10 $1.09
at end of period
Number of accumulation 2,253 1,252 413
units outstanding at end
of period (000 omitted)
Ratio of operating 1.40% 1.50% 1.50%
expense to average
net assets
Subaccount EGR3 (Investing in shares of
Oppenheimer Variable Account Growth Portfolio)
Accumulation unit $1.00 -- --
value at beginning
of period
Accumulation unit value $1.02 -- --
at end of period
Number of accumulation 67 -- --
units outstanding at end
of period (000 omitted)
Ratio of operating 1.40% -- --
expense to average
net assets
Subaccount EHI3 (Investing in shares of
Oppenheimer Variable Account High Income Fund)
Accumulation unit $1.00 -- --
value at beginning
of period
Accumulation unit value $1.01 -- --
at end of period
Number of accumulation 77 -- --
units outstanding at end
of period (000 omitted)
Ratio of operating 1.40% -- --
expense to average
net assets
Subaccount EDI1 (Investing in shares of Putnam VT Diversified Income Fund)
Accumulation unit $1.23 $1.15 $1.00
value at beginning
of period
Accumulation unit value $1.30 $1.23 $1.15
at end of period
Number of accumulation 3,151 1,824 601
units outstanding at end
of period (000 omitted)
Ratio of operating 1.40% 1.50% 1.50%
expense to average
net assets
Subaccount EGI1 (Investing in shares of Putnam VT Growth and Income Fund)
Accumulation unit $1.53 $1.27 $1.00
value at beginning
of period
Accumulation unit value $1.88 $1.53 $1.27
at end of period
Number of accumulation 6,452 3,655 1,152
units outstanding at end
of period (000 omitted)
Ratio of operating 1.40% 1.50% 1.50%
expense to average
net assets
Subaccount EHY1 (Investing in shares of Putnam VT High Yield Fund)
Accumulation unit $1.27 $1.14 $1.00
value at beginning
of period
Accumulation unit value $1.43 $1.27 $1.14
at end of period
Number of accumulation 2,321 1,270 480
units outstanding at end
of period (000 omitted)
Ratio of operating 1.40% 1.50% 1.50%
expense to average
net assets
Subaccount ENO1 (Investing in shares of Putnam VT New Opportunities Fund)
Accumulation unit $1.51 $1.39 $1.00
value at beginning
of period
Accumulation unit value $1.84 $1.51 $1.39
at end of period
Number of accumulation 4,575 2,980 691
units outstanding at end
of period (000 omitted)
Ratio of operating 1.40% 1.50% 1.50%
expense to average
net assets
1 Inception date was Feb. 21, 1995.
2 Inception date was Oct. 29, 1997.
3 Inception date was Oct. 30, 1997.
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Financial statements
The SAI dated May 1, 1998 contains:
the audited financials of the variable account including:
- - statements of net assets as of Dec. 31, 1997;
- - statements of operations for the year ended Dec. 31, 1997;
- - statements of changes in net assets for the years ended Dec. 31, 1997
and Dec. 31, 1996.
the audited financial statements of American Enterprise Life including:
- - balance sheets as of Dec. 31, 1997 and Dec. 31 1996; and
- - related statements of income, stockholder's equity and cash flows for
the years ended Dec. 31, 1997, 1996, and 1995.
Performance information
Performance information for the variable subaccounts may appear from time to
time in advertisements or sales literature. In all cases, such information
reflects the performance of a hypothetical investment in a particular subaccount
during a particular time period. We show actual performance from the date the
subaccounts began investing in funds. We also show performance from the
commencement date of the funds as if the annuity had existed at that time.
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 - For subaccounts investing in income funds: 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.
<PAGE>
Average annual total return: Expressed as an average annual compounded rate of
return of a hypothetical investment over a period of one, five and 10 years (or
up to the life of the subaccount if it is less than 10 years old). This figure
reflects deduction of all applicable charges, including the contract
administrative charge, variable account administrative charge, mortality and
expense risk fee and withdrawal charge, assuming a full withdrawal at the end of
the illustrated period. Optional average annual total return quotations may be
made that do not reflect a withdrawal charge deduction (assuming no withdrawal).
Aggregate total return: Represents the cumulative change in the value of an
investment over a specified period of time (reflecting change in a subaccount's
accumulation unit value). The calculation assumes reinvestment of investment
earnings and reflects the deduction of all applicable charges, including the
contract administrative charge, mortality and expense risk fee, variable account
administrative charge and withdrawal charge, assuming a withdrawal at the end of
the illustrated period. Optional aggregate total return quotations may be made
that do not reflect a withdrawal charge deduction (assuming no withdrawal).
Aggregate total return may be shown by means of schedules, charts or graphs.
Performance information should be considered in light of the investment
objectives and policies, characteristics and quality of the fund in which the
subaccount invests and the market conditions during the given time period. Such
information is not intended to indicate future performance. Because advertised
yields and total return figures include all annuity charges that have 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
AIM V.I. Growth and Income Fund EGN
AIM V.I. International Equity Fund EIN
AIM V.I. Value Fund EVA
GT Global Variable Latin America Fund ELA
GT Global Variable New Pacific Fund EPA
IDS Life Aggressive Growth Fund EAG
IDS Life Capital Resource Fund ECR
IDS Life Growth Dimensions Fund EGD
<PAGE>
Subaccount
IDS Life International Equity Fund EIE
IDS Life Managed Fund EMG
IDS Life Moneyshare Fund EMS
IDS Life Special Income Fund ESI
Janus Aspen Series Balanced Portfolio ESB
Janus Aspen Series Worldwide Growth Portfolio EWG
OCC Accumulation Trust Equity Portfolio EEQ
OCC Accumulation Trust Managed Portfolio EMD
OCC Accumulation Trust Small Cap Portfolio ESC
OCC Accumulation Trust U.S. Government Income Portfolio EUS
Oppenheimer Variable Account Growth Fund EGR
Oppenheimer Variable Account High Income Fund EHI
Putnam VT Diversified Income Fund EDI
Putnam VT Growth and Income Fund EGI
Putnam VT High Yield Fund EHY
Putnam VT New Opportunities Fund ENO
Each variable subaccount meets the definition of a separate account under
federal securities laws. Income, capital gains and capital losses of each
subaccount are credited or charged to that subaccount alone. No variable
subaccount will be charged with liabilities of any other variable subaccount or
of our general business. Each variable subaccount's net assets are held in
relation to the contracts described in this prospectus as well as other variable
annuity contracts that we issue that are not described in this prospectus.
The variable account was established under Indiana law on July 15, 1987, and the
subaccounts are registered together as a single unit investment trust under the
Investment Company Act of 1940 (the 1940 Act). This registration does not
involve any supervision of our management or investment practices and policies
by the SEC. All obligations arising under the contracts are general obligations
of American Enterprise Life.
The funds
AIM V.I. Growth and Income Fund
Objective: growth of capital, with current income as a secondary objective. The
fund seeks to achieve its objective by generally investing at least 65% of its
net assets in stocks of companies believed by management to have the potential
for above average growth in revenues and earnings.
AIM V.I. International Equity Fund
Objective: long-term growth of capital. Invests in international equity
securities, the issuers of which are considered by AIM to have strong earnings
momentum.
<PAGE>
AIM V.I. Value Fund
Objective: long-term growth of capital. Invests primarily in equity securities
judged by AIM to be undervalued relative to the current or projected earnings of
the companies issuing the securities or relative to the equity markets
generally. Income is a secondary objective.
GT Global Variable Latin America Fund
Objective: capital appreciation. Normally invests at least 65% of its total
assets in the securities of a broad range of Latin American issuers. The Fund
may invest in common stock, preferred stock, rights, warrants and securities
convertible into common stock, and other substantially similar forms of equity
securities with comparable risk characteristics, as well as bonds, notes,
debentures or other forms of indebtedness that may be developed in the future.
GT Global Variable New Pacific Fund
Objective: long-term growth of capital. Normally invests at least 65% of its
total assets in equity securities of issuers domiciled in Australia, Hong Kong,
India, Indonesia, Malaysia, New Zealand, Pakistan, the Philippines, Singapore,
South Korea, Taiwan and Thailand. Equity securities in which the Fund may invest
include common stock, preferred stock, convertible debt securities and warrants
to acquire such securities.
IDS Life Aggressive Growth Fund
Objective: capital appreciation. Invests primarily in common stock of small- and
medium-size companies.
IDS Life Capital Resource Fund
Objective: capital appreciation. Invests primarily in U.S. common stocks and
other securities convertible into common stock, diversified over many different
companies in a variety of industries.
IDS Life Growth Dimensions Fund
Objective: long-term growth of capital. Invests primarily in common stocks of
U.S. and foreign companies showing potential for significant growth.
IDS Life International Equity Fund
Objective: capital appreciation. Invests primarily in common stock of foreign
issuers and foreign securities convertible into common stock.
IDS Life Managed Fund
Objective: maximum total investment return. Invests primarily in U.S. common
stocks, securities convertible into common stock, warrants, fixed income
securities (primarily high-quality corporate bonds) and money market
instruments.
<PAGE>
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.
IDS Life Special Income Fund
Objective: high level of current income while conserving the value of the
investment for the longest time period. Invests primarily in high-quality,
lower-risk corporate bonds issued by many different companies in a variety of
industries, and in government bonds.
Janus Aspen Series Balanced Portfolio
Objective: long-term growth of capital, balanced by current income. The
Portfolio normally invests 40-60% of its assets in securities selected primarily
for their growth potential and 40-60% of its assets in securities selected
primarily for their income potential.
Janus Aspen Series Worldwide Growth Portfolio
Objective: long-term growth of capital in a manner consistent with the
preservation of capital. Invests primarily in common stocks of foreign and
domestic issuers.
OCC Accumulation Trust Equity Portfolio
Objective: long term capital appreciation. Invests in a diversified portfolio of
equity securities selected on the basis of a value-oriented approach to
investing.
OCC Accumulation Trust Managed Portfolio
Objective: growth of capital over time. Invests primarily in common stocks,
bonds and money market and cash equivalent securities, the percentages of which
will vary based on management's assessment of relative investment values.
OCC Accumulation Trust Small Cap Portfolio
Objective: capital appreciation. Invests in a diversified portfolio of equity
securities of companies with market capitalizations of under $1 billion.
OCC Accumulation Trust U.S. Government Income Portfolio
Objective: high level of current income together with protection of capital.
Invests exclusively in debt obligations, including mortgage-backed securities,
issued or guaranteed by the United States government, its agencies or
instrumentalities.
Oppenheimer Variable Account Growth Fund
Objective: capital appreciation. Invests in securities of well-known established
companies.
<PAGE>
Oppenheimer Variable Account High Income Fund
Objective: high level of current income. Invests in high-yield, fixed-income
securities, including unrated securities or high-risk securities in the lower
rating categories, commonly known as "junk bonds". These securities are subject
to a greater risk of loss of principal and nonpayment of interest than
higher-rated securities.
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 by investing primarily in common
stocks that offer potential for capital growth, current income or both.
Putnam VT High Yield Fund
Objective: high current income and, when consistent with this objective, a
secondary objective of capital growth, by investing primarily in high-yielding,
lower-rated fixed income securities constituting a portfolio which Putnam
Investment Management, Inc. ("Putnam Management") believes does not involve
undue risk to income or principal. See the special considerations for
investments in high yield securities described in the Putnam Variable Trust
prospectus.
Putnam VT New Opportunities Fund
Objective: long-term capital appreciation by investing principally in common
stocks of companies in sectors of the economy which Putnam Management believes
possess above average long-term growth potential.
More comprehensive information regarding each fund is contained in that fund's
prospectus. You should read the fund prospectus and consider carefully, and on a
continuing basis, which fund or combination of funds is best suited to your
long-term investment needs. There is no assurance that the investment objectives
of the funds will be attained nor is there any guarantee that the contract value
will equal or exceed the total purchase payments made. Some funds may involve
more risk than others. Please monitor your investment accordingly.
All funds are available to serve as the underlying investment for variable
annuities, and some funds also are available to serve as the underlying
investment for variable life insurance contracts and qualified plans. It is
conceivable that in the future it may be disadvantageous for variable annuity
separate accounts and variable life insurance separate accounts and/or qualified
plans to invest in the available funds simultaneously.
<PAGE>
Although American Enterprise Life and the funds do not currently foresee any
such disadvantages, the boards of directors or trustees of the appropriate funds
will monitor events in order to identify any material conflicts between such
contract owners, policy owners and qualified plans and to determine what action,
if any, should be taken in response to a conflict. If a board were to conclude
that separate funds should be established for the variable annuity, variable
life insurance and qualified plan separate accounts, the variable annuity
contract holders would not bear any expenses associated with establishing
separate funds. Please refer to the fund prospectuses for risk disclosure
regarding mixed and shared funding.
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 each contract
continues to qualify as an annuity for federal income tax purposes. We reserve
the right to modify the contract as necessary to comply with any new tax laws.
The investment managers for the funds are as follows:
o AIM Variable Insurance Funds - A I M Advisors, Inc.
o GT Global Variable Investment Funds - Chancellor LGT Asset Management, Inc.
o IDS Life Retirement Annuity Mutual Funds - IDS Life. American Express
Financial Corporation is the investment advisor for the IDS Life Retirement
Annuity Mutual Funds. American Express Asset Management International Inc.,
a wholly-owned subsidiary of AEFC, is the sub-investment advisor for IDS
Life International Equity Fund.
o Janus Aspen Series Portfolios - Janus Capital Corporation.
o OCC Accumulation Trust Portfolios - OpCap Advisors.
<PAGE>
o Oppenheimer Variable Account Funds - OppenheimerFunds, Inc.
o Putnam Variable Trust - Putnam Investment Management, Inc.
The investment managers and advisors cannot guarantee that the funds will meet
their investment objectives. Please read the funds' prospectuses for complete
information on investment risks, deductions, expenses and other facts you should
know before investing. These prospectuses are available by contacting American
Enterprise Life at the administrative offices address or telephone number on the
front of this prospectus.
The fixed account
Purchase payments also may be allocated to the fixed account. The value of the
fixed account increases as interest is credited to the account. Purchase
payments and transfers to the fixed account become part of the general account
of American Enterprise Life, the company's main portfolio of investments.
Interest is credited and compounded daily to produce an effective annual
interest rate. We may change the interest rate from time to time.
Because of exemptive and exclusionary provisions, interests in the fixed account
have not been registered under the Securities Act of 1933 (1933 Act), nor is the
fixed account registered as an investment company under the 1940 Act.
Accordingly, neither the fixed account nor any interests in it are generally
subject to the provisions of the 1933 or 1940 Acts, and we have been advised
that the staff of the SEC has not reviewed the disclosures in this prospectus
that relate to the fixed account. Disclosures regarding the fixed account,
however, may be subject to certain generally applicable provisions of the
federal securities laws relating to the accuracy and completeness of statements
made in prospectuses.
Buying your annuity
Your agent will help you prepare and submit your application, and send it along
with your initial purchase payment to our Minneapolis administrative office. As
the owner, you have all rights and may receive all benefits under the contract.
Your annuity can be owned in joint tenancy only in spousal situations. You
cannot buy a nonqualified annuity or become an annuitant if you are 86 or older
(age 76 or older for qualified annuities). (In Pennsylvania, the annuitant must
be under age 81.)
When you apply, you may select:
o the fixed account and/or subaccount(s) in which you want to invest;
o how you want to make purchase payments;
o the date you want to start receiving annuity payouts (the
retirement date); and
o a beneficiary.
<PAGE>
If your application is complete, we will process it and apply your purchase
payment to the fixed account and subaccount(s) you selected within two business
days after we receive it at our Minneapolis administrative offices. If your
application is accepted, we will send you a contract. If we cannot accept your
application within five business days, we will decline it and return your
payment. We will credit additional purchase payments to your account(s) at the
next close of business after we receive your payments at our Minneapolis
administrative offices.
You may make monthly payments to your annuity under a Systematic Investment Plan
(SIP). To begin the SIP, you will complete and send a form and your first
payment along with your application. There is no charge for SIP. You can stop
your SIP payments at any time.
In most states, additional purchase payments may be made to nonqualified and
qualified annuities until the retirement date. In Maryland and Washington,
additional purchase payments may be made to nonqualified annuities until the
later of the annuitant's 63rd birthday or the third contract anniversary, and
additional purchase payments may be made to qualified annuities until the
annuitant's 63rd birthday. In Massachusetts, additional purchase payments may be
made for ten years only.
The retirement date
Annuity payouts will be scheduled to begin on the retirement date. This date can
be aligned with your actual retirement from a job, or it can be a different
future date, depending on your needs and goals and on certain restrictions. You
can also change the date, provided you send us written instructions at least 30
days before annuity payouts begin.
For nonqualified annuities and Roth IRAs, 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 the 10th contract
anniversary, if purchased after age 75); or
o no later than the annuitant's 82nd birthday (or the eighth contract
anniversary, if purchased after age 74) for annuities purchased in
Pennsylvania.
For qualified annuities (except Roth IRAs), 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.
<PAGE>
(In Pennsylvania, annuity payouts must start no later than the annuitant's 82nd
birthday or the eighth contract anniversary.)
Beneficiary
If death benefits become payable before the retirement date, your named
beneficiary will receive all or part of the contract value. If there is no named
beneficiary, then you or your estate will be the beneficiary. (See "Payment in
case of death" for more about beneficiaries.)
Minimum payment amounts
Initial payment (includes SIPs): $2,000 (We reserve the right to
decrease the minimum payment.)
Minimum additional purchase payment(s)(includes SIPs): $50
Maximum payment(s): $1,000,000 of cumulative payments (We reserve
the right to increase the maximum payment.)
How to make payments
By letter
Send your check along with your name and contract number to:
Regular mail:
American Enterprise Life Insurance Company
80 South Eighth Street
P.O. Box 534
Minneapolis, MN 55440-0534
Express mail:
American Enterprise Life Insurance Company
Attention: Unit 829
733 Marquette Avenue
Minneapolis, MN 55402
By SIP:
Contact your agent to complete the necessary SIP paperwork.
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
<PAGE>
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 unit values of the subaccounts.
The subaccounts pay this fee at the time dividends are distributed from the
funds in which they invest. Annually, the fee totals 1.25% of the subaccounts'
average daily net assets. Approximately two-thirds of this amount is for our
assumption of mortality risk, and one-third is for our assumption of expense
risk. This fee does not apply to the fixed account.
Mortality risk arises because of our guarantee to pay a death benefit and our
guarantee to make annuity payouts according to the terms of the contract, no
matter how long a specific annuitant lives and no matter how long the entire
group of American Enterprise Life annuitants live. If, as a group, American
Enterprise Life annuitants outlive the life expectancy we have assumed in our
actuarial tables, then we must take money from our general assets to meet our
obligations. If, as a group, American Enterprise Life annuitants do not live as
long as expected, we could profit from the mortality risk fee. Expense risk
arises because the contract administrative charge and variable account
administrative charge cannot be increased and may not cover our expenses. Any
deficit would have to be made up from our general assets.
We may use any profits realized from the mortality and expense risk fee for any
proper corporate purpose, including, among others, payment of distribution
(selling) expenses. We do not expect that the withdrawal charge, discussed in
the following paragraphs, will cover sales and distribution expenses.
Withdrawal charge
If you withdraw part or all of your contract, you may be subject to a withdrawal
charge. The withdrawal amount you request is determined by drawing from your
total contract value in the following order:
1. First, we withdraw up to 10% of your prior anniversary contract value not yet
withdrawn this contract year. There is no withdrawal charge on withdrawals
totaling up to 10% of your prior anniversary contract value each contract year.
<PAGE>
2. Next, we withdraw any contract earnings (contract value minus all purchase
payments received and not previously withdrawn) in excess of the annual 10% free
withdrawal amount. There is no withdrawal charge on contract earnings.
3. Next, we withdraw purchase payments received eight or more contract years
before the withdrawal and not previously withdrawn. There is no withdrawal
charge on purchase payments received eight or more contract years before
withdrawal.
4. Finally, if necessary, we withdraw purchase payments received in the seven
contract years before the withdrawal. There is a withdrawal charge on these
payments. We determine your withdrawal charges by multiplying each of these
payments by the applicable withdrawal charge percentage, and then totaling the
withdrawal charges.
There is a withdrawal charge on payments received seven or less contract years
before withdrawal. We determine your withdrawal charge by multiplying each of
these payments by the applicable withdrawal charge percentage, and then totaling
the withdrawal charges.
The withdrawal charge percentage depends on the number of contract years since
you made the payment(s).
Contract years from payment Withdrawal charge
receipt percentage
1 7%
2 6%
3 5%
4 4%
5 3%
6 2%
7 1%
Thereafter 0%
Withdrawal charge calculation example
The following is an example of the calculation we would make to determine the
withdrawal charge on a contract with this history:
o The contract date is July 1, 1998 with a contract year of July 1
through June 30 and with an anniversary date of July 1 each year; and
o We received these payments - $10,000 July 1, 1998, $8,000
Dec. 31, 2004 and $6,000 Feb. 20, 2006; and
<PAGE>
o The owner withdraws the contract for its total withdrawal value
of $38,101 on Aug. 5, 2008 and had not made any other withdrawals
during that contract year; and
o The prior anniversary July 1, 2008 contract value was $38,488.
Withdrawal charge Explanation
$0 $3,848.80 is 10% of the prior anniversary
contract value withdrawn without
withdrawal charge; and
0 $10,252.20 is contract earnings in excess
of the 10% free withdrawal amount
withdrawn without withdrawal charge; and
0 $10,000 July 1, 1998 payment was received
eight or more contract years before
withdrawal and is withdrawn without
withdrawal charge; and
240 $8,000 Dec. 31, 2004 payment is in its
fifth contract year from receipt, withdrawn
with a 3% withdrawal charge; and
240 $6,000 Feb. 20, 2006 payment is in its
fourth contract year from receipt withdrawn
with a 4% withdrawal charge.
- ------------------------------------
$480
The withdrawal charge is calculated so that the total amount minus any
withdrawal charge equals the amount you request. If you take a full withdrawal
from your contract, the $30 contract charge also will be deducted.
Waiver of withdrawal charge
There are no withdrawal charges for:
o withdrawals during the year totaling up to 10% of your prior contract
anniversary contract value;
o contract earnings - if any - in excess of the annual 10% free
withdrawal amount;
o required minimum distributions from a qualified annuity after you
reach age 70 1/2 (for those amounts required to be distributed from
the annuities described in this prospectus);
o contracts settled using an annuity payout plan; and
o death benefits.
<PAGE>
If your contract includes a "Waiver of Withdrawal Charges" Annuity Endorsement
or provision, we will waive withdrawal charges that are normally assessed upon
full or partial withdrawal if you provide proof satisfactory to us that, as of
the date you request the withdrawal, you or the annuitant are confined to a
hospital or nursing home and have been for the prior 60 days.
To qualify, the nursing home must meet the following criteria:
o be licensed by an appropriate licensing agency to provide nursing care; and
o provide 24-hour-a-day nursing services; and
o have a doctor available for emergency situations; and
o have a nurse on duty or on call at all times; and
o maintain clinical records; and
o have appropriate methods for administering drugs.
To the extent permitted by state law, this endorsement is included in contracts
issued when the owner and annuitant are under age 76 on the date that we issue
the contract.
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 (up to 3.5%). These
taxes are dependent upon your state of residence or the state in which the
contract was sold. The deduction is made when you fully withdraw your contract
or when annuity payouts begin.
Valuing your investment
Here is how your fixed account and variable subaccounts are valued:
Fixed account: The amounts allocated to the fixed account are valued directly in
dollars and equal the sum of your purchase payments and transfer amounts plus
interest earned, less any amounts withdrawn or transferred and any contract
administrative charge.
Variable subaccounts: Amounts allocated to the variable subaccounts are
converted into accumulation units. Each time you make a purchase payment or
transfer amounts into one of the variable subaccounts, a certain number of
accumulation units are credited to your contract for that subaccount.
Conversely, each time you take a partial withdrawal, transfer amounts out of a
variable subaccount or are assessed a contract administrative charge, a certain
number of accumulation units are subtracted from your contract. Please remember
that investment performance, expenses and deductions of certain charges affect
accumulation unit value.
<PAGE>
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 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:
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 will fluctuate due to:
o changes in net asset value of underlying mutual fund(s);
o dividends distributed to the variable subaccount(s);
<PAGE>
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, or from the fixed
account to one or more variable subaccounts. The benefits of dollar-cost
averaging also may be obtained by setting up regular automatic SIP payments.
There is no charge for dollar-cost averaging.
This systematic approach can help you benefit from fluctuations in accumulation
unit values caused by fluctuations in the market value(s) of the underlying
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
Month Amount Accumulation Number of units
invested unit value purchased
By investing an Jan $100 $20 5.00
equal number of
dollars each Feb 100 18 5.56
month...
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 high Oct 100 20 5.00
You have paid an average price of only $17.91 per unit over the 10 months, while
the average market price actually was $18.10.
Dollar-cost averaging does not guarantee that any variable subaccount will gain
in value nor will it protect against a decline in value if market prices fall.
Because this strategy involves continuous investing, your success with
dollar-cost averaging will depend upon
<PAGE>
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.) We will process your transfer request at the next close of
business after we receive it. 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
certain transfer periods subject to certain minimums).
o If we receive your request on or within 30 days before or after the
contract anniversary date, the transfer from the fixed account to the
variable subaccount(s) will be effective on the day we receive it.
o We will not accept requests for transfers from the fixed account at
any other time.
<PAGE>
o Once annuity payouts begin, no transfers may be made to or from the
fixed account, but transfers may be made once per contract year among
the variable subaccounts.
Two ways to request a transfer or a withdrawal
1 By letter
Send your name, contract number, Social Security number or taxpayer
identification number and signed request for a transfer or withdrawal to:
Regular mail:
American Enterprise Life Insurance Company
80 South Eighth Street
P.O. Box 534
Minneapolis, MN 55440-0534
Express mail:
American Enterprise Life Insurance Company
Attention: Unit 829
733 Marquette Avenue
Minneapolis, MN 55402
Minimum amount
Transfers or withdrawals: $500 or entire variable subaccount or
fixed account balance
Maximum amount
Transfers or withdrawals: Contract value
2 By automated transfers and automated partial withdrawals
Your agent can help you set up automated transfers among your subaccount(s) or
fixed account or partial withdrawals from the accounts.
You can start or stop this service by written request or other method acceptable
to American Enterprise Life. You must allow 30 days for American Enterprise Life
to change any instructions that are currently in place.
o Automated transfers may not exceed an amount that, if continued, would
deplete the fixed account or subaccount(s) from which you are
transferring within 12 months.
<PAGE>
o Automated transfers and automated partial withdrawals are subject to
all of the contract provisions and terms, including transfer of
contract values between accounts. Automated withdrawals may be
restricted by applicable law under some contracts.
o Automated partial withdrawals may result in IRS taxes and penalties on
all or part of the amount withdrawn.
Minimum amount
Automated transfers or withdrawals: $100 monthly/$250 quarterly,
semiannually or annually
Maximum amount
Automated transfers or withdrawals: Contract value (except for
automated transfers from the
fixed account)
Withdrawals from your contract
As owner, you may withdraw all or part of your contract at any time before
annuity payouts begin by sending a written request to American Enterprise Life.
For total withdrawals we will compute the value of your contract at the next
close of business after we receive your request. We may ask you to return the
contract. You may have to pay withdrawal charges (see "Withdrawal charge") and
IRS taxes and penalties (see "Taxes"). No withdrawals may be made after annuity
payouts begin.
Withdrawal policies
If you have a balance in more than one account and request a partial withdrawal,
we will withdraw money from all your subaccounts and/or the fixed account in the
same proportion as your value in each correlates to your total contract value,
unless you request otherwise.
Receiving payment when you request a withdrawal
By regular or express mail:
o Payable to owner.
o Normally mailed to address of record within seven days after receiving
your request. However, we may postpone the payment if:
-the withdrawal amount includes a purchase payment check that has not
cleared;
-the NYSE is closed, except for normal holiday and weekend closings;
-trading on the NYSE is restricted, according to SEC rules;
<PAGE>
-an emergency, as defined by SEC rules, makes it impractical to sell
securities or value the net assets of the accounts; or
-the SEC permits us to delay payment for the protection of
security holders.
NOTE: You will be charged a fee if you request express mail delivery.
Changing ownership
You may change ownership of your nonqualified annuity at any time by filing a
change of ownership on a form approved by us and sent to our Minneapolis
administrative offices. The change will become binding upon us when we receive
and record it. We will honor any change of ownership request believed to be
authentic and will use reasonable procedures to confirm authenticity. If these
procedures are followed, we take no responsibility for the validity of the
change.
If you have a nonqualified annuity, you may lose your tax advantages by
transferring, assigning or pledging any part of it. (See "Taxes.")
If you have a qualified annuity, you may not sell, assign, transfer, discount or
pledge your contract as collateral for a loan, or as security for the
performance of an obligation or for any other purpose to any person except
American Enterprise Life. However, if the owner is a trust or custodian, or an
employer acting in a similar capacity, ownership of a contract may be
transferred to the annuitant.
Benefits in case of death
Your annuity includes one of the two death benefits decribed below. Please see
your contract, together with all endorsements, for details of the benefit that
applies.
If you or the annuitant die before annuitization while this contract is in
force, and both you and the annuitant are age 80 or younger on the date of
death, we will pay the beneficiary the greatest of:
1. the contract value; or
2. the total purchase payments paid less any "adjusted partial
withdrawals"; or
3. the highest contract value on any prior contract anniversary, plus any
purchase payments paid and less any "adjusted partial withdrawals" since
that contract anniversary.
The "adjusted partial withdrawal" is calculated for each partial withdrawal as
the product of (a) times (b) where:
<PAGE>
(a) is the ratio of the amount of the partial withdrawal to the
contract value immediately before the partial withdrawal; and
(b) is the death benefit immediately before the partial withdrawal.
If either you or the annuitant is age 81 or older on the date of death, we will
pay the beneficiary the contract value.
Example:
o The contract is purchased with a payment of $20,000 on January 1, 1999.
o On January 1, 2000 (the first contract anniversary) the contract value has
grown to $24,000.
o On March 1, 2000 the contract value has fallen to $22,000, at which
point the owner takes a $1,500 partial withdrawal, leaving a
contract value of $20,500.
The death benefit on March 1, 2000 is calculated as follows:
<TABLE>
<S> <C>
The highest contract value on any prior contract anniversary: $24,000.00
plus any purchase payments paid since that anniversary: + 0.00
less any "adjusted partial withdrawal" taken since that anniversary,
calculated as: 1,500 x 24,000 = - 1,636.36
----- -------------
22,000
for a death benefit of: $22,363.64
</TABLE>
OR
If you or the annuitant die before annuitization while this contract is in
force, and both you and the annuitant were 75 or younger on the date the annuity
was issued and all withdrawals you have made from this contract have been
without withdrawal charges, we will pay the beneficiary the greatest of:
1. the contract value; or
2. the total purchase payments paid less any amounts withdrawn; or
3. on or after the fifth contract anniversary, the death benefit as of the
most recent fifth contract anniversary adjusted by adding any purchase
payments made since that most recent fifth contract anniversary and by
subtracting any amounts withdrawn since that most recent fifth contract
anniversary.
For annuities where both you and the annuitant were 75 or younger on the date
the annuity was issued and you have made withdrawals subject to withdrawal
charges, we will pay the beneficiary the contract value.
<PAGE>
For annuities where either you or the annuitant were 76 or older on the date the
annuity was issued, we will pay the beneficiary the contract value.
Example:
o The owner purchases an annuity contract for $20,000 on January 1, 1999.
o On January 1, 2004 the contract value has grown to $33,000.
o On June 1, 2004 the owner takes a $1,500 partial withdrawal, leaving a
contract value of $31,500.
o On July 15, 2004 the owner makes an additional payment of $1,000.
o On March 1, 2005 the contract value has fallen to $31,000.
The death benefit on March 1, 2005 is calculated as follows:
The closest fifth anniversary contract value: $33,000.00
plus any purchase payments paid since that anniversary: + 1,000.00
less any partial withdrawals taken since that anniversary: - 1,500.00
------------
for a death benefit of: $32,500.00
If your spouse is sole beneficiary under a nonqualified annuity and you die
before the retirement date, your spouse may keep the annuity as owner. To do
this your spouse must, within 60 days after we receive proof of death, give us
written instructions to keep the contract in force.
Under a qualified annuity, if the annuitant dies before annuity payouts begin,
and the spouse is the only beneficiary, the spouse may keep the annuity as owner
until the date on which the spouse reaches age 70 1/2 or any other date
permitted by the Code. To do this, the spouse must give us written instructions
within 60 days after we receive proof of death.
Payments: We will pay the beneficiary in a single sum unless you have given us
other written instructions, or the beneficiary may receive payouts under any
annuity payout plan available under this contract if:
o the beneficiary asks us in writing within 60 days after we receive proof of
death; and
o payouts begin no later than one year after death, or other date as
permitted by the Code; and
o the payout period does not extend beyond the beneficiary's life or
life expectancy.
When paying the beneficiary, we will determine the contract's value at the next
close of business after our death claim requirements are fulfilled. Interest, if
any, will be paid
<PAGE>
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."
Annuity payout plans
You may choose any one of these annuity payout plans by giving us written
instructions at least 30 days before contract values are to be used to purchase
the payout plan:
o Plan A - Life annuity - no refund: Monthly payouts are made until the
annuitant's death. Payouts end with the last payout before the annuitant's
death; no further payouts will be made. This means that if the annuitant dies
after only one monthly payout has been made, no more payouts will be made.
o Plan B - Life annuity with five, 10 or 15 years certain: Monthly payouts are
made for a guaranteed payout period of five, 10 or 15 years that you elect. This
election will determine the length of the payout period to the beneficiary if
the annuitant should die before the elected period has expired. The guaranteed
payout period is calculated from the retirement date. If the annuitant outlives
the elected guaranteed payout period, payouts will continue until the
annuitant's death.
o Plan C - Life annuity - installment refund: Monthly payouts are made until the
annuitant's death, with our guarantee that payouts will continue for some period
of time.
<PAGE>
Payouts will be made for at least the number of months determined by dividing
the amount applied under this option by the first monthly payout, whether or not
the annuitant is living.
o Plan D - Joint and last survivor life annuity - no refund: Monthly payouts are
made while both the annuitant and a joint annuitant are living. If either
annuitant dies, monthly payouts continue at the full amount until the death of
the surviving annuitant. Payouts end with the death of the second annuitant.
o Plan E - Payouts for a specified period (available as a fixed payout only):
Monthly payouts are made for a specific payout period of 10 to 30 years that you
elect. Payouts will be made only for the number of years specified whether the
annuitant is living or not. Depending on the time period selected, it is
foreseeable that an annuitant can outlive the payout period selected. In
addition, a 10% IRS penalty tax could apply under this payout plan. (See
"Taxes.")
Restrictions for some qualified plans: If you purchased a qualified annuity, you
must select a payout plan that provides for payouts:
o over the life of the annuitant;
o over the joint lives of the annuitant and a designated beneficiary;
o for a period not exceeding the life expectancy of the annuitant; or
o for a period not exceeding the joint life expectancies of the
annuitant and a designated beneficiary.
If we do not receive instructions: You must give us written instructions for the
annuity payouts at least 30 days before the annuitant's retirement date. If you
do not, we will make payouts under Plan B, with 120 monthly payouts guaranteed.
If monthly payouts would be less than $20: We will calculate the amount of
monthly payouts at the time the contract value is used to purchase a payout
plan. If the calculations show that monthly payouts would be less than $20, we
have the right to pay the contract value to the owner in a lump sum or to change
the frequency of the payouts.
Death after annuity payouts begin
If you or the annuitant die after annuity payouts begin, any amount payable to
the beneficiary will be provided in the annuity payout plan in effect.
Taxes
Generally, under current law, any increase in your contract value is taxable to
you only when you receive a payout or withdrawal. (However, see detailed
discussion below.) Any portion of the annuity payouts and any withdrawals you
request that represent ordinary income are normally taxable. You will receive a
1099 tax information form for any year
<PAGE>
in which a taxable distribution was made according to our records. Roth IRAs may
grow tax free if you meet certain distribution requirements.
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 (except Roth IRAs): Under a qualified
annuity, the entire payout generally will be includable as ordinary income and
subject to tax except to the extent that contributions were made with after-tax
dollars. If you or your employer invested in your contract with pre-tax dollars
as part of a qualified retirement plan, such amounts are not considered to be
part of your investment in the contract and will be taxed when paid to you.
Withdrawals: If you withdraw part or all of your contract before your annuity
payouts begin, your withdrawal payment will be taxed to the extent that the
value of your contract immediately before the withdrawal exceeds your
investment. You also may have to pay a 10% IRS penalty for withdrawals made
prior to age 59 1/2. For qualified annuities, other penalties may apply if you
make withdrawals from your annuity before your plan specifies that you can
receive payouts.
Death benefits to beneficiaries: The death benefit under an annuity (except a
Roth IRA) is not tax exempt. Any amount received by the beneficiary that
represents previously deferred earnings within the contract is taxable as
ordinary income to the beneficiary in the year(s) he or she receives the
payments. The death benefit under a Roth IRA generally is not taxable as
ordinary income to the beneficiary.
Annuities owned by corporations, partnerships or trusts: For nonqualified
annuities any annual increase in the value of annuities held by such entities
generally will be treated as ordinary income received during that year. This
provision is effective for purchase payments made after Feb. 28, 1986. However,
if the trust was set up for the benefit of a natural person only, the income
will remain tax deferred.
Penalties: If you receive amounts from your contract before reaching age 59 1/2,
you may have to pay a 10% IRS penalty on the amount includable in your ordinary
income. However, this penalty will not apply to any amount received by you or
your beneficiary:
o because of your death;
o because you become disabled (as defined in the Code);
<PAGE>
o if the distribution is part of a series of substantially equal periodic
payments, made at least annually, over your life or life expectancy (or
joint lives or life expectancies of you and your beneficiary); or
o if it is allocable to an investment before Aug. 14, 1982 (except for
qualified annuities).
For a qualified annuity, other penalties or exceptions may apply if you make
withdrawals from your annuity before your plan specifies that payouts can be
made.
Withholding, generally: If you receive all or part of the contract value from an
annuity, withholding may be imposed against the taxable income portion of the
payment. Any withholding that is done represents a prepayment of your tax due
for the year. You take credit for such amounts on your annual tax return.
If the payment is part of an annuity payout plan, the amount of withholding
generally is computed using payroll tables. You may provide us with a statement
of how many exemptions to use in calculating the withholding. As long as you've
provided us with a valid Social Security number or taxpayer identification
number, you may elect not to have any withholding occur.
If the distribution is any other type of payment (such as a partial or full
withdrawal) withholding is computed using 10% of the taxable portion. Similar to
above, as long as you have provided us with a valid Social Security number or
taxpayer identification number, you may elect not to have this withholding
occur.
Some states also may impose withholding requirements similar to the federal
withholding described above. If this should be the case, any payment from which
federal withholding is deducted also may have state withholding deducted. The
withholding requirements may differ if payment is being made to a non-U.S.
citizen or if the payment is being delivered outside the United States.
Transfer of ownership of a nonqualified annuity: If you make such a transfer
without receiving adequate consideration, the transfer is considered a gift, and
also may be considered a withdrawal for federal income tax purposes. If the gift
is a currently taxable event for income tax purposes, the amount of deferred
earnings at the time of the transfer will be taxed to the original owner, who
also may be subject to a 10% IRS penalty as discussed earlier. In this case, the
new owner's investment in the annuity will be the value of the annuity at the
time of the transfer.
Collateral assignment of a nonqualified annuity: If you collaterally assign or
pledge your contract, earnings on purchase payments you made after Aug. 13, 1982
will be taxed to you like a withdrawal.
Important: Our discussion of federal tax laws is based upon our understanding of
these laws as they are currently interpreted. Federal tax laws or current
interpretations of them
<PAGE>
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
Each contract is intended to qualify as an annuity for federal income tax
purposes. To that end, the provisions of the contracts are to be interpreted to
ensure or maintain such tax qualification, notwithstanding any other provisions
of the contract. We reserve the right to amend the contract to reflect any
clarifications that may be needed or are appropriate to maintain such
qualification or to conform the contracts to any applicable changes in the tax
qualification requirements. We will send you a copy of any such amendments.
Voting rights
As a contract owner with investments in the variable subaccount(s), you may vote
on important 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.
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 mutual fund should not be available for purchase by the
appropriate variable subaccount or if, in the judgment of American Enterprise
Life's Management, further investment in such shares is no longer appropriate,
another registered open-end management investment company may be substituted for
mutual fund shares held in the
<PAGE>
subaccount(s) when American Enterprise Life believes it would be in the best
interest of persons having voting rights under the contract. American Enterprise
Life also reserves the right to change the mutual funds in which the subaccounts
invest and to create new subaccounts that invest in additional funds.
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 Inc. These commissions will not be more than 7.5% of purchase
payments received on the contracts.
From time to time, American Enterprise Life will pay or permit other promotional
incentives, in cash or credit or other compensation.
About American Enterprise Life
The annuities are issued by American Enterprise Life. American Enterprise Life
is a wholly-owned subsidiary of IDS Life, which is a wholly-owned subsidiary of
AEFC. AEFC is a wholly-owned subsidiary of American Express Company. American
Express Company is a financial services company principally engaged through
subsidiaries (in addition to AEFC) in travel related services, investment
services and international banking services.
American Enterprise Life is a stock life insurance company organized in 1981
under the laws of the state of Indiana. Its administrative offices are located
at 80 South Eighth Street, Minneapolis, MN 55402. Its statutory address is 100
Capitol Center South, 201 North Illinois Street, Indianapolis, IN 46204.
American Enterprise Life is licensed in the state of Indiana and it conducts a
conventional life insurance business.
American Express Financial Advisors Inc. is the principal underwriter for the
variable account. Its home office is IDS Tower 10, Minneapolis, MN 55440-0010.
American Express Financial Advisors is registered with the SEC under the
Securities Exchange Act of 1934 as a broker-dealer and is a member of the
National Association of Securities Dealers, Inc. American Express Financial
Advisors is a wholly-owned subsidiary of AEFC.
<PAGE>
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.
Year 2000
The Year 2000 issue is the result of computer programs having been written using
two digits rather than four to define a year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than 2000. This could result in the failure of major systems or miscalculations,
which could have a material impact on the operations of the variable account.
The variable account has no computer systems of its own but is dependent upon
the systems maintained by AEFC and certain other third parties.
A comprehensive review of AEFC's computer systems and business processes has
been conducted to identify the major systems that could be affected by the Year
2000 issue. Steps are being taken to resolve any potential problems including
modification to existing software and the purchase of new software. These
measures are scheduled to be completed and tested on a timely basis. AEFC's goal
is to complete internal remediation and testing of each system by the end of
1998 and to continue compliance efforts through 1999. The Year 2000 readiness of
unaffiliated investment managers and other third parties whose system failures
could have an impact on the variable account's operations currently is being
evaluated. The potential materiality of any such impact is not known at this
time.
Regular and special reports
Services
To help you track and evaluate the performance of your annuity, American
Enterprise Life provides:
Quarterly statements showing the value of your investment.
Annual reports containing required information on the annuity and its underlying
investments.
Table of contents of the Statement of Additional Information
Performance Information................................................
Calculating Annuity Payouts............................................
Rating Agencies........................................................
Principal Underwriter..................................................
<PAGE>
Independent Auditors...................................................
Saving for Retirement..................................................
Prospectus.............................................................
Financial Statements -
American Enterprise Variable Annuity Account
American Enterprise Life Insurance Company
- -------------------------------------------------------------------------------
Please check the appropriate box to receive a copy of the Statement of
Additional Information for:
AEL Personal PortfolioSM/AEL Personal Portfolio Plus
AIM Variable Insurance Funds, Inc.
GT Global Variable Investment Funds
IDS Life Retirement Annuity Mutual Funds
Janus Aspen Series Portfolios
OCC Accumulation Trust Portfolios
Oppenheimer Variable Account Funds
Putnam Variable Trust
Mail your request to:
American Enterprise Life Insurance Company
80 South Eighth Street
P.O. Box 534
Minneapolis, MN 55440-0534
800-333-3437
American Enterprise Life will mail your request to:
Your name
Address
City State Zip
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
for
AEL PERSONAL PORTFOLIOSM/AEL Personal Portfolio Plus
AMERICAN ENTERPRISE VARIABLE ANNUITY ACCOUNT
May 1, 1998
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, 1998, is not a
prospectus. It should be read together with the prospectus dated May 1, 1998,
which may be obtained from your agent, or by writing or calling American
Enterprise Life at the address or telephone number below.
American Enterprise Life Insurance Company
80 South Eighth Street
P.O. Box 534
Minneapolis, MN 55440-0534
800-333-3437
<PAGE>
AEL Personal PortfolioSM/AEL Personal Portfolio Plus
TABLE OF CONTENTS
Performance Information.....................................................3
Calculating Annuity Payouts.................................................7
Rating Agencies.............................................................9
Principal Underwriter.......................................................9
Independent Auditors........................................................9
Saving for Retirement......................................................10
Prospectus.................................................................10
Financial Statements -
American Enterprise Variable Annuity Account
American Enterprise Life Insurance Company
<PAGE>
PERFORMANCE INFORMATION
We show actual performance from the date the subaccounts began investing in
funds. We also show performance from the commencement date of the funds as if
the annuity had existed at that time.
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) x (365/7)] - 1
Annualized Yields based on Seven-Day Period ended Dec. 31, 1997
Subaccount investing in: Simple Yield Compound Yield
IDS Life Moneyshare Fund 3.71% 3.78%
Calculation of Yield for the subaccounts investing in income funds
For the subaccounts investing in income funds quotations of yield will be based
on all investment income earned during a particular 30-day period, less expenses
accrued during the period (net investment income) and will be computed by
dividing net investment income per accumulation unit by the value of an
accumulation unit on the last day of the period, according to the following
formula:
YIELD = 2[(a-b + 1)6 - 1]
cd
<PAGE>
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, 1997
Subaccount investing in: Yield
IDS Life Special Income Fund 6.83%
Calculation of Average Annual Total Return
Quotations of average annual total return for a subaccount will be expressed in
terms of the average annual compounded rate of return of a hypothetical
investment in either annuity over a period of one, five and 10 years (or, if
less, up to the life of the account), calculated according to the following
formula:
P(1+T)n = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
EVR = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the one-, five-, or
10-year (or other) period at the end of the one-,
five-, or 10-year (or other) period (or fractional
portion thereof)
<PAGE>
Average Annual Total Return For Period Ended Dec. 31, 1997
Average Annual Total Return with Withdrawal
<TABLE>
<CAPTION>
Performance Since
Commencement of the Performance Since
Subaccount Commencement of the Fund
Since Since
Commencement Commencement
Subaccount investing in: 1 Year (Subaccount) 1 Year 5 Year 10 Year (Fund)
- -----------------------
<S> <C> <C> <C> <C> <C> <C>
AIM V.I.
Growth and Income Fund (10/97;5/94)* -- -3.48% 16.82% -- -- 19.68%
International Equity Fund (10/97;5/93) -- -4.73% -1.37% -- -- 10.47%
Value Fund (10/97;5/93) -- -3.82% 14.87% -- -- 17.45%
GT GLOBAL
Variable Latin America Fund (2/95;2/93) 5.76% 10.14% 5.76% -- -- 9.13%
Variable New Pacific Fund (2/95;2/93) -45.46% -9.83% -45.46% -- -- -5.39%
IDS LIFE
Aggressive Growth Fund (2/95;1/92) 3.90% 18.95% 3.90% 10.66% -- 10.42%
Capital Resource Fund (2/95;10/81) 15.24% 16.71% 15.24% 10.17% 12.92% --
Growth Dimensions Fund (10/97;4/96) -- -2.54% 15.46% -- -- 17.20%
International Equity Fund (2/95;1/92) -5.27% 7.94% -5.27% 8.19% -- 6.49%
Managed Fund (2/95;4/86) 10.67% 18.12% 10.67% 10.95% 11.91% --
Moneyshare Fund (2/95;10/81) -3.02% 1.96% -3.02% 2.20% 3.65% --
Special Income Fund (2/95;10/81) 0.34% 9.63% 0.34% 7.40% 7.96% --
JANUS ASPEN SERIES
Balanced Portfolio (10/97;9/93) -- -4.55% 13.28% -- -- 13.07%
Worldwide Growth Portfolio (10/97;9/93) -- -4.13% 13.33% -- -- 20.05%
OCC ACCUMULATION TRUST
Equity Portfolio (10/97;8/88) -- 0.46% 17.74% 17.27% -- 16.22%
Managed Portfolio (2/95;8/88) 13.42% 26.59% 13.42% 17.60% -- 18.61%
Small Cap Portfolio (10/97;8/88) -- -5.51% 13.42% 12.40% -- 14.05%
U.S. Government Income Portfolio -1.29% 4.12% -1.29% -- -- 4.16%
(2/95;1/95)
OPPENHEIMER VARIABLE ACCOUNT
Growth Fund (10/97;4/85) -- -5.02% 17.80% 16.47% 14.53% --
High Income Fund (10/97;4/86) -- -5.18% 3.56% 11.62% 12.36% --
PUTNAM VT
Diversified Income Fund (2/95;9/93) -0.99% 8.90% -0.99% -- -- 5.32%
Growth and Income Fund (2/95;2/88) 15.25% 25.80% 15.25% 16.73% -- 14.30%
High Yield Fund (2/95;2/88) 5.58% 12.89% 5.58% 10.45% -- 9.82%
New Opportunities Fund (2/95;5/94) 14.40% 24.74% 14.40% -- -- 21.14%
</TABLE>
* (Commencement date of the subaccount; Commencement date of the fund)
<PAGE>
Average Annual Total Return without Withdrawal
<TABLE>
<CAPTION>
Performance Since
Commencement of the Performance Since
Subaccount Commencement of the Fund
Since Since
Commencement Commencement
Subaccount investing in: 1 Year (Subaccount) 1 Year 5 Year 10 Year (Fund)
- -----------------------
<S> <C> <C> <C> <C> <C> <C>
AIM V.I.
Growth and Income Fund (10/97;5/94)* -- 3.20% 23.82% -- -- 20.37%
International Equity Fund (10/97;5/93) -- 1.85% 5.30% -- -- 10.92%
Value Fund (10/97;5/93) -- 2.83% 21.87% -- -- 17.81%
GT GLOBAL
Variable Latin America Fund (2/95;2/93) 12.76% 11.76% 12.76% -- -- 9.57%
Variable New Pacific Fund (2/95;2/93) -42.11% -8.36% -42.11% -- -- -4.90%
IDS LIFE
Aggressive Growth Fund (2/95;1/92) 10.90% 20.39% 10.90% 11.06% -- 10.63%
Capital Resource Fund (2/95;10/81) 22.24% 18.18% 22.24% 10.58% 12.92% --
Growth Dimensions Fund (10/97;4/96) -- 4.20% 22.46% -- -- 20.62%
International Equity Fund (2/95;1/92) 1.11% 9.61% 1.11% 8.63% -- 6.74%
Managed Fund (2/95;4/86) 17.67% 19.57% 17.67% 11.34% 11.91% --
Moneyshare Fund (2/95;10/81) 3.52% 3.78% 3.52% 2.75% 3.65% --
Special Income Fund (2/95;10/81) 7.14% 11.26% 7.14% 7.85% 7.96% --
JANUS ASPEN SERIES
Balanced Portfolio (10/97;9/93) -- 2.05% 20.28% -- -- 13.54%
Worldwide Growth Portfolio (10/97;9/93) -- 2.49% 20.33% -- -- 20.43%
OCC ACCUMULATION TRUST
Equity Portfolio (10/97;8/88) -- 7.43% 24.74% 17.59% -- 16.22%
Managed Portfolio (2/95;8/88) 20.42% 27.88% 20.42% 17.91% -- 18.61%
Small Cap Portfolio (10/97;8/88) -- 1.01% 20.42% 12.77% -- 14.05%
U.S. Government Income Portfolio 5.39% 5.89% 5.39% -- -- 5.72%
(2/95;1/95)
OPPENHEIMER VARIABLE ACCOUNT
Growth Fund (10/97;4/85) -- 1.53% 24.80% 16.79% 14.53% --
High Income Fund (10/97;4/86) -- 1.37% 10.56% 12.01% 12.36% --
PUTNAM VT
Diversified Income Fund (2/95;9/93) 5.71% 10.54% 5.71% -- -- 5.91%
Growth and Income Fund (2/95;2/88) 22.25% 27.11% 22.25% 17.05% -- 14.30%
High Yield Fund (2/95;2/88) 12.58% 14.45% 12.58% 10.85% -- 9.82%
New Opportunities Fund (2/95;5/94) 21.40% 26.07% 21.40% -- -- 21.81%
</TABLE>
*(Commencement date of the subaccount; Commencement date of the fund)
Aggregate Total Return
Aggregate total return represents the cumulative change in value of an
investment for a given period (reflecting change in a subaccount's accumulation
unit value) and is computed by the following formula:
ERV - P
P
<PAGE>
where: P = a hypothetical initial payment of $1,000
ERV = Ending Redeemable Value of a hypothetical $1,000 payment
made at the beginning of the one-, five-, or 10- year (or
other) period at the end of the one-, five-, or 10- year (or
other) period (or fractional portion thereof)
The Securities and Exchange Commission (SEC) requires that an assumption be made
that the contract owner withdraws the entire contract at the end of the one-,
five- and 10- year periods (or, if less, up to the life of the subaccount) for
which performance is required to be calculated. In addition, performance figures
may be shown without the deduction of a withdrawal charge.
Total return figures reflect the deduction of all applicable charges including
the contract administrative charge, the variable account administrative charge,
and mortality and expense risk fee.
Performance of the subaccount may be quoted or compared to rankings, yields, or
returns or used in variable annuity accumulation or settlement illustrations 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.
<PAGE>
Annuity Units: The value of your subaccount is then converted to annuity units.
To compute the number credited to you, we divide the first monthly payment by
the annuity unit value (see below) on the valuation date on (or next day
preceding) the seventh calendar day before the retirement date. The number of
units in your subaccount is fixed. The value of the units fluctuates with the
performance of the underlying mutual fund.
Subsequent Payouts: To compute later payouts, we multiply:
o the annuity unit value on the valuation date on or immediately
preceding the seventh calendar day before the payout is due; by
o the fixed number of annuity units credited to you.
Annuity Table: The table shows the amount of the first monthly payment for each
$1,000 of contract value according to the age and, when applicable, the sex of
the annuitant. (Where required by law, we will use a unisex table of settlement
rates.) The table assumes that the contract value is invested at the beginning
of the annuity 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 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 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.
<PAGE>
The Fixed Account
Your fixed annuity payout amounts are guaranteed. Once calculated, your payout
will remain the same and never change. To calculate your annuity payouts we:
o take the value of your fixed account at the retirement date or the date
you have selected to begin receiving your annuity payouts; then
o using an annuity table, we apply the value according to the annuity
payout plan you select; and
o the annuity payout table we use will be the one in effect at the
time you choose to begin your annuity payouts. The values in the
table will be equal to or greater than the table in your contract.
RATING AGENCIES
The following chart reflects the ratings given to American Enterprise Life by
independent rating agencies. These agencies evaluate the financial soundness and
claims-paying ability of insurance companies based on a number of different
factors. This information does not relate to the management or performance of
the variable subaccounts of the annuities. This information relates only to the
fixed account and reflects American Enterprise Life's ability to make annuity
payouts and to pay death benefits and other distributions from the annuities.
Rating agency Rating
A.M. Best A+
(Superior)
Duff & Phelps AAA
Moody's Aa2
PRINCIPAL UNDERWRITER
The principal underwriter for the variable 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 December 31, 1997 and the related
statements of operations for the year then ended, and the statements of changes
in net assets for the years ended December 31, 1997 and December 31, 1996 and
the financial statements of American Enterprise Life Insurance Company (a
wholly-owned subsidiary of IDS Life Insurance Company) as of December 31, 1997
and 1996, and for each of the three years in the
<PAGE>
period ended December 31, 1997 appearing in this Statement of Additional
Information have been audited by Ernst & Young LLP, independent auditors, as
stated in their reports appearing herein.
SAVING FOR RETIREMENT
You may have to save more for retirement because the average person lives 17
years in retirement. Social security and pensions will not cover your expenses
in retirement. Sixty cents of every retirement dollar must come from your
personal savings.
Sources: Social Security Administration, U.S. Department of Health and
Human Services.
PROSPECTUS
The prospectus, dated May 1, 1998, is hereby incorporated in this SAI by
reference.
<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, EDI, EGD, ESC, EEQ, EGR, EHI, EIN, EVA, EGN, EWG and ESB) as of
December 31, 1997, and the related statements of operations for the year then
ended, except for subaccounts EGO, ESC, EEQ, EGR, EHI, EIN, EVA, EGN, EWG and
ESB which are for the period October 30, 1997 (commencement of operations) to
December 31, 1997 and the statements of changes in net assets for each of the
two years in the year then ended, except for subaccounts EGO, ESC, EEQ, EGR,
EHI, EIN, EVA, EGN, EWG and ESB which are for the period October 30, 1997
(commencement of operations) to December 31, 1997. 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, 1997 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, 1997, 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 13, 1998
<PAGE>
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
- --------------------------------------------------------------------------------------------------------------------
Statements of Net Assets Dec. 31, 1997
Assets Segregated Asset Subaccount
-------------------------------------------------------------------------
ECR ESI EMS EMG EIE
- --------------------------------------------------------------------------------------------------------------------
Investments in shares of mutual funds,
at market value:(identified cost, $5,428,208,
$3,387,074, $259,264, $4,499,557 and
<S> <C> <C> <C> <C> <C>
$1,835,588, respectively) $ 5,948,360 $ 3,374,186 $ 259,264 $ 4,718,524 $ 1,808,618
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Dividends receivable - 20,265 1,249 - -
Accounts receivable from American Enterprise Life
for contract purchase payments 23,164 4,750 - 16,619 803
- --------------------------------------------------------------------------------------------------------------------
Total assets 5,971,524 3,399,201 260,513 4,735,143 1,809,421
- --------------------------------------------------------------------------------------------------------------------
Liabilities
- --------------------------------------------------------------------------------------------------------------------
Payable to American Enterprise Life for:
Mortality and expense risk fee 6,603 3,705 298 5,175 1,974
Issue and administrative fee 792 444 36 621 237
Payable to mutual funds for investments
purchased 23,164 20,866 914 16,619 813
- --------------------------------------------------------------------------------------------------------------------
Total liabilities 30,559 25,015 1,248 22,415 3,024
- --------------------------------------------------------------------------------------------------------------------
Net assets applicable to contracts in
accumulation period $ 5,940,965 $ 3,374,186 $ 259,265 $ 4,712,728 $ 1,806,397
- --------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding 3,812,754 2,543,718 231,256 2,944,208 1,413,420
- --------------------------------------------------------------------------------------------------------------------
Net asset value per accumulation unit $ 1.56 $ 1.33 $ 1.12 $ 1.60 $ 1.28
- --------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
- --------------------------------------------------------------------------------------------------------------------
Statements of Net Assets - continued Dec. 31, 1997
Segregated Asset Subaccount
-------------------------------------------------------------------------
EAG EMD EUS EPA ELA
- --------------------------------------------------------------------------------------------------------------------
Investments in shares of mutual funds,
at market value:(identified cost, $3,921,718,
$6,612,376, $2,609,097, $1,154,625 and
<S> <C> <C> <C> <C> <C>
$1,158,175, respectively) $ 3,974,790 $ 7,900,201 $ 2,637,088 $ 783,562 $ 1,349,108
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Dividends receivable - - - - -
Accounts receivable from American Enterprise Life
for contract purchase payments 24,010 - 3 - -
- --------------------------------------------------------------------------------------------------------------------
Total assets 3,998,800 7,900,201 2,637,091 783,562 1,349,108
- --------------------------------------------------------------------------------------------------------------------
Liabilities
- --------------------------------------------------------------------------------------------------------------------
Payable to American Enterprise Life for:
Mortality and expense risk fee 4,380 8,797 2,914 873 1,508
Issue and administrative fee 525 1,056 350 105 181
Payable to mutual funds for investments
purchased 24,026 - 3 - -
- --------------------------------------------------------------------------------------------------------------------
Total liabilities 28,931 9,853 3,267 978 1,689
- --------------------------------------------------------------------------------------------------------------------
Net assets applicable to contracts in
accumulation period $ 3,969,869 $ 7,890,348 $ 2,633,824 $ 782,584 $ 1,347,419
- --------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding 2,434,211 4,133,891 2,252,972 979,513 1,004,189
- --------------------------------------------------------------------------------------------------------------------
Net asset value per accumulation unit $ 1.63 $ 1.91 $ 1.17 $ 0.80 $ 1.34
- --------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
- --------------------------------------------------------------------------------------------------------------------
Statements of Net Assets - continued Dec. 31, 1997
Segregated Asset Subaccount
-------------------------------------------------------------------------
Assets ENO EGI EHY EDI EGD
- --------------------------------------------------------------------------------------------------------------------
Investments in shares of mutual funds,
at market value:(identified cost, $6,904,520,
$10,204,893, $3,079,122, $3,951,105 and
<S> <C> <C> <C> <C> <C>
$70,723, respectively) $ 8,409,024 $ 12,128,319 $ 3,321,608 $ 4,113,049 $ 72,101
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Dividends receivable - - - - -
Accounts receivable from American Enterprise Life
for contract purchase payments - - - - 358
- --------------------------------------------------------------------------------------------------------------------
Total assets 8,409,024 12,128,319 3,321,608 4,113,049 72,459
- --------------------------------------------------------------------------------------------------------------------
Liabilities
- --------------------------------------------------------------------------------------------------------------------
Payable to American Enterprise Life for:
Mortality and expense risk fee 9,296 13,327 3,670 4,527 47
Issue and administrative fee 1,116 1,599 440 543 6
Payable to mutual funds for investments
purchased - - - - 358
- --------------------------------------------------------------------------------------------------------------------
Total liabilities 10,412 14,926 4,110 5,070 411
- --------------------------------------------------------------------------------------------------------------------
Net assets applicable to contracts in
accumulation period $ 8,398,612 $ 12,113,393 $ 3,317,498 $ 4,107,979 $ 72,048
- --------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding 4,575,051 6,452,046 2,321,011 3,150,958 68,572
- --------------------------------------------------------------------------------------------------------------------
Net asset value per accumulation unit $ 1.84 $ 1.88 $ 1.43 $ 1.30 $ 1.05
- --------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
- --------------------------------------------------------------------------------------------------------------------
Statements of Net Assets - continued Dec. 31,1997
Segregated Asset Subaccount
-------------------------------------------------------------------------
Assets ESC EEQ EGR EHI EIN
- --------------------------------------------------------------------------------------------------------------------
Investments in shares of mutual funds, at market value:(identified cost, $86,338
$65,479, $67,321, $78,673 and $58,904,
<S> <C> <C> <C> <C> <C>
respectively) $ 87,741 $ 67,253 $ 67,843 $ 78,069 $ 58,594
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Dividends receivable - - - - -
Accounts receivable from American Enterprise Life
for contract purchase payments - - - - -
- --------------------------------------------------------------------------------------------------------------------
Total assets 87,741 67,253 67,843 78,069 58,594
- --------------------------------------------------------------------------------------------------------------------
Liabilities
- --------------------------------------------------------------------------------------------------------------------
Payable to American Enterprise Life for:
Mortality and expense risk fee 64 50 50 59 43
Issue and administrative fee 8 6 6 7 5
Payable to mutual funds for investments
purchased - - - - -
- --------------------------------------------------------------------------------------------------------------------
Total liabilities 72 56 56 66 48
- --------------------------------------------------------------------------------------------------------------------
Net assets applicable to contracts in
accumulation period $ 87,669 $ 67,197 $ 67,787 $ 78,003 $ 58,546
- --------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding 86,771 62,532 66,744 76,928 57,468
- --------------------------------------------------------------------------------------------------------------------
Net asset value per accumulation unit $ 1.01 $ 1.07 $ 1.02 $ 1.01 $ 1.02
- --------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
- --------------------------------------------------------------------------------------------------------------------
Statements of Net Assets - continued Dec. 31, 1997
Segregated Asset Subaccount
--------------------------------------------------------- Combined
Assets EVA EGN EWG ESB Variable
Account
- --------------------------------------------------------------------------------------------------------------------
Investments in shares of mutual funds,
at market value:(identified cost, $68,804,
<S> <C> <C> <C> <C> <C>
$70,635, $62,556 and $70,424, respectively) $ 67,813 $ 71,349 $ 63,446 $ 70,839 $ 61,430,749
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Dividends receivable - - - - 21,514
Accounts receivable from American Enterprise Life
for contract purchase payments - - - - 69,707
- --------------------------------------------------------------------------------------------------------------------
Total assets 67,813 71,349 63,446 70,839 61,521,970
- --------------------------------------------------------------------------------------------------------------------
Liabilities
- --------------------------------------------------------------------------------------------------------------------
Payable to IDS Life for:
Mortality and expense risk fee 50 53 46 53 67,562
Issue and administrative fee 6 6 5 6 8,106
Payable to mutual funds for investments
purchased - - - - 86,763
- --------------------------------------------------------------------------------------------------------------------
Total liabilities 56 59 51 59 162,431
- --------------------------------------------------------------------------------------------------------------------
Net assets applicable to contracts in
accumulation period $ 67,757 $ 71,290 $ 63,395 $ 70,780 $ 61,359,539
- --------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding 65,875 69,062 61,836 69,342
- ----------------------------------------------------------------------------------------------------
Net asset value per accumulation unit $ 1.03 $ 1.03 $ 1.03 $ 1.02
- ----------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
- --------------------------------------------------------------------------------------------------------------------
Statements of Operations Year ended Dec. 31, 1997
Segregated Asset Subaccount
-------------------------------------------------------------------------
ECR ESI EMS EMG EIE
Investment income
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Dividend income from mutual funds $ 153,199 $ 240,646 $ 14,597 $ 422,131 $ 51,846
- --------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk fee 56,486 30,448 3,632 41,336 15,037
Administrative charge 6,805 3,668 438 4,984 1,811
- --------------------------------------------------------------------------------------------------------------------
Total expenses 63,291 34,116 4,070 46,320 16,848
- --------------------------------------------------------------------------------------------------------------------
Investment income (loss) - net 89,908 206,530 10,527 375,811 34,998
- --------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investments - net
- --------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on sales of investments in mutual funds:
Proceeds from sales 158,773 112,045 540,740 89,104 95,716
Cost of investments sold 149,918 111,089 540,740 79,682 93,841
- --------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments 8,855 956 - 9,422 1,875
- --------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or
depreciation of investments 780,121 (31,454) (2) 110,879 (56,555)
- --------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments 788,976 (30,498) (2) 120,301 (54,680)
- --------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $ 878,884 $ 176,032 $ 10,525 $ 496,112 $ (19,682)
- --------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
- --------------------------------------------------------------------------------------------------------------------
Statements of Operations - continued Year ended Dec. 31, 1997
Segregated Asset Subaccount
-------------------------------------------------------------------------
EAG EMD EUS EPA ELA
Investment income
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Dividend income from mutual funds $ 332,337 $ 194,154 $ 112,380 $ 9,300 $ -
- --------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk fee 36,264 75,498 24,979 10,585 14,813
Administrative charge 4,361 9,082 3,005 1,274 1,782
- --------------------------------------------------------------------------------------------------------------------
Total expenses 40,625 84,580 27,984 11,859 16,595
- --------------------------------------------------------------------------------------------------------------------
Investment income (loss) - net 291,712 109,574 84,396 (2,559) (16,595)
- --------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investments - net
- --------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on sales of investments in mutual funds:
Proceeds from sales 84,947 904,854 136,389 116,991 72,398
Cost of investments sold 79,228 727,329 137,102 108,626 61,646
- --------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments 5,719 177,525 (713) 8,365 10,752
- --------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or
depreciation of investments 52,964 813,585 34,690 (477,894) 102,825
- --------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments 58,683 991,110 33,977 (469,529) 113,577
- --------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $ 350,395 $ 1,100,684 $ 118,373 $ (472,088) $ 96,982
- --------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
- --------------------------------------------------------------------------------------------------------------------
Statements of Operations - continued Year ended Dec. 31, 1997
Segregated Asset Subaccount
-------------------------------------------------------------------------
ENO EGI EHY EDI EGD*
Investment income
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Dividend income from mutual funds $ - $ 492,321 $ 182,008 $ 172,964 $ 30
- --------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk fee 78,568 109,993 31,628 38,975 51
Administrative charge 9,454 13,231 3,804 4,689 6
- --------------------------------------------------------------------------------------------------------------------
Total expenses 88,022 123,224 35,432 43,664 57
- --------------------------------------------------------------------------------------------------------------------
Investment income (loss) - net (88,022) 369,097 146,576 129,300 (27)
- --------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investments - net
- --------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on sales of investments in mutual funds:
Proceeds from sales 171,581 121,773 383,788 243,854 -
Cost of investments sold 159,191 103,014 377,010 242,699 -
- --------------------------------------------------------------------------------------------------------------------
Net realized gain(loss) on investments 12,390 18,759 6,778 1,155 -
- --------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or
depreciation of investments 1,339,756 1,259,777 153,236 63,866 1,378
- --------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments 1,352,146 1,278,536 160,014 65,021 1,378
- --------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $ 1,264,124 $ 1,647,633 $ 306,590 $ 194,321 $ 1,351
- --------------------------------------------------------------------------------------------------------------------
*For the period Oct. 30, 1997 (commencement of operations) to Dec. 31, 1997.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
- --------------------------------------------------------------------------------------------------------------------
Statements of Operations - continued Year ended Dec. 31, 1997
Segregated Asset Subaccount
-------------------------------------------------------------------------
ESC* EEQ* EGR* EHI* EIN*
Investment income
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Dividend income from mutual funds $ - $ - $ - $ 1,098 $ 713
- --------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk fee 72 55 55 60 47
Administrative charge 8 6 6 7 6
- --------------------------------------------------------------------------------------------------------------------
Total expenses 80 61 61 67 53
- --------------------------------------------------------------------------------------------------------------------
Investment income (loss) - net (80) (61) (61) 1,031 660
- --------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investments - net
- --------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on sales of investments in mutual funds:
Proceeds from sales - - - - -
Cost of investments sold - - - - -
- --------------------------------------------------------------------------------------------------------------------
Net realized gain(loss) on investments - - - - -
- --------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or
depreciation of investments 1,403 1,774 522 (604) (310)
- --------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments 1,403 1,774 522 (604) (310)
- --------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $ 1,323 $ 1,713 $ 461 $ 427 $ 350
- --------------------------------------------------------------------------------------------------------------------
*For the period Oct. 30, 1997 (commencement of operations) to Dec. 31, 1997.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
- --------------------------------------------------------------------------------------------------------------------
Statements of Operations - continued Year ended Dec. 31, 1997
Segregated Asset Subaccount
--------------------------------------------------------- Combined
EVA* EGN* EWG* ESB* Variable
Investment income Account
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Dividend income from mutual funds $ 1,468 $ 57 $ 133 $ 593 $ 2,381,975
- --------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk fee 54 56 49 55 568,796
Administrative charge 6 7 6 7 68,453
- --------------------------------------------------------------------------------------------------------------------
Total expenses 60 63 55 62 637,249
- --------------------------------------------------------------------------------------------------------------------
Investment income (loss) - net 1,408 (6) 78 531 1,744,726
- --------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investments - net
- --------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on sales of investments in mutual funds:
Proceeds from sales - - - - 3,232,953
Cost of investments sold - - - - 2,971,115
- --------------------------------------------------------------------------------------------------------------------
Net realized gain(loss) on investments - - - - 261,838
- --------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or
depreciation of investments (991) 714 890 415 4,150,985
- --------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments (991) 714 890 415 4,412,823
- --------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $ 417 $ 708 $ 968 $ 946 $ 6,157,549
- --------------------------------------------------------------------------------------------------------------------
*For the period Oct. 30, 1997 (commencement of operations) to Dec. 31, 1997.
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, 1997
Segregated Asset Subaccount
-------------------------------------------------------------------------
Operations ECR ESI EMS EMG EIE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment income (loss) - net $ 89,908 $ 206,530 $ 10,527 $ 375,811 $ 34,998
Net realized gain (loss) on investments 8,855 956 - 9,422 1,875
Net change in unrealized appreciation or
depreciation of investments 780,121 (31,454) (2) 110,879 (56,555)
- --------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 878,884 176,032 10,525 496,112 (19,682)
- --------------------------------------------------------------------------------------------------------------------
Contract Transactions
- --------------------------------------------------------------------------------------------------------------------
Variable annuity contract purchase payments 2,409,335 1,670,135 327,812 2,390,284 978,359
Net transfers** (33,041) (29,630) (234,808) (72,853) 62,561
Annuity payments (138) - - - (133)
Contract terminations:
Surrender benefits and contract charges (297,350) (139,046) (100,987) (192,773) (63,562)
Death benefits (5,701) (6,105) - (7,254) (1,267)
- --------------------------------------------------------------------------------------------------------------------
Increase (decrease) from contract transactions 2,073,105 1,495,354 (7,983) 2,117,404 975,958
- --------------------------------------------------------------------------------------------------------------------
Net assets at beginning of year 2,988,976 1,702,800 256,723 2,099,212 850,121
- --------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 5,940,965 $ 3,374,186 $ 259,265 $ 4,712,728 $ 1,806,397
- --------------------------------------------------------------------------------------------------------------------
Accumulation Unit Activity
- --------------------------------------------------------------------------------------------------------------------
Units outstanding at beginning of year 2,350,045 1,377,190 240,823 1,545,535 675,237
Contract purchase payments 1,696,748 1,304,174 302,938 1,581,579 746,548
Net transfers** (18,567) (24,030) (215,723) (49,221) 44,803
Contract terminations:
Surrender benefits and contract charges (211,339) (108,787) (96,782) (128,743) (52,181)
Death benefits (4,133) (4,829) - (4,942) (987)
- --------------------------------------------------------------------------------------------------------------------
Units outstanding at end of year 3,812,754 2,543,718 231,256 2,944,208 1,413,420
- --------------------------------------------------------------------------------------------------------------------
**Includes transfer activity from (to) other subaccounts 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, 1997
Segregated Asset Subaccount
-------------------------------------------------------------------------
Operations EAG EMD EUS EPA ELA
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment income (loss) - net $ 291,712 $ 109,574 $ 84,396 $ (2,559) $ (16,595)
Net realized gain (loss) on investments 5,719 177,525 (713) 8,365 10,752
Net change in unrealized appreciation or
depreciation of investments 52,964 813,585 34,690 (477,894) 102,825
- --------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 350,395 1,100,684 118,373 (472,088) 96,982
- --------------------------------------------------------------------------------------------------------------------
Contract Transactions
- --------------------------------------------------------------------------------------------------------------------
Variable annuity contract purchase payments 1,753,076 3,105,291 1,258,037 521,520 524,916
Net transfers* * 110,988 106,370 45,942 50,856 20,467
Annuity payments (140) (139) (280) - -
Contract terminations:
Surrender benefits and contract charges (182,947) (309,146) (161,220) (45,870) (81,703)
Death benefits (3,235) (7,479) (9,210) (1,252) (1,371)
- --------------------------------------------------------------------------------------------------------------------
Increase (decrease) from contract transactions 1,677,742 2,894,897 1,133,269 525,254 462,309
- --------------------------------------------------------------------------------------------------------------------
Net assets at beginning of year 1,941,732 3,894,767 1,382,182 729,418 788,128
- --------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 3,969,869 $ 7,890,348 $ 2,633,824 $ 782,584 $ 1,347,419
- --------------------------------------------------------------------------------------------------------------------
Accumulation Unit Activity
- --------------------------------------------------------------------------------------------------------------------
Units outstanding at beginning of year 1,323,955 2,462,112 1,252,181 530,176 663,497
Contract purchase payments 1,158,663 1,773,647 1,120,325 410,360 387,161
Net transfers** 75,131 58,720 39,842 79,558 16,318
Contract terminations:
Surrender benefits and contract charges (121,302) (156,347) (151,142) (39,670) (61,787)
Death benefits (2,236) (4,241) (8,234) (911) (1,000)
- --------------------------------------------------------------------------------------------------------------------
Units outstanding at end of year 2,434,211 4,133,891 2,252,972 979,513 1,004,189
- --------------------------------------------------------------------------------------------------------------------
**Includes transfer activity from (to) other subaccounts 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, 1997
Segregated Asset Subaccount
-------------------------------------------------------------------------
Operations ENO EGI EHY EDI EGD*
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment income (loss) - net $ (88,022) $ 369,097 $ 146,576 $ 129,300 $ (27)
Net realized gain (loss) on investments 12,390 18,759 6,778 1,155 -
Net change in unrealized appreciation or
depreciation of investments 1,339,756 1,259,777 153,236 63,866 1,378
- --------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 1,264,124 1,647,633 306,590 194,321 1,351
- --------------------------------------------------------------------------------------------------------------------
Contract Transactions
- --------------------------------------------------------------------------------------------------------------------
Contract purchase payments 2,860,597 5,025,579 1,607,690 1,907,829 70,697
Net transfers** 55,283 294,386 (64,211) (41,214) -
Annuity payments - (139) (141) - -
Contract terminations:
Surrender benefits and contract charges (277,368) (449,047) (133,971) (193,089) -
Death benefits (3,272) (5,970) (6,245) (6,062) -
- --------------------------------------------------------------------------------------------------------------------
Increase (decrease) from contract transactions 2,635,240 4,864,809 1,403,122 1,667,464 70,697
- --------------------------------------------------------------------------------------------------------------------
Net assets at beginning of year 4,499,248 5,600,951 1,607,786 2,246,194 -
- --------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 8,398,612 $ 12,113,393 $ 3,317,498 $ 4,107,979 $ 72,048
- --------------------------------------------------------------------------------------------------------------------
Accumulation Unit Activity
- --------------------------------------------------------------------------------------------------------------------
Units outstanding at beginning of year 2,979,587 3,655,312 1,270,037 1,824,245 -
Contract purchase payments 1,731,364 2,886,258 1,201,158 1,520,166 68,572
Net transfers** 30,592 174,142 (42,259) (34,583) -
Contract terminations:
Surrender benefits and contract charges (164,430) (260,212) (103,191) (154,007) -
Death benefits (2,062) (3,454) (4,734) (4,863) -
- --------------------------------------------------------------------------------------------------------------------
Units outstanding at end of year 4,575,051 6,452,046 2,321,011 3,150,958 68,572
- --------------------------------------------------------------------------------------------------------------------
*For the period Oct. 30, 1997 (commencement of operations) to Dec. 31, 1997.
**Includes transfer activity from (to) other subaccounts 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, 1997
Segregated Asset Subaccount
-------------------------------------------------------------------------
Operations ESC* EEQ* EGR* EHI* EIN*
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment income (loss) - net $ (80) $ (61) $ (61) $ 1,031 $ 660
Net realized gain (loss) on investments - - - - -
Net change in unrealized appreciation or
depreciation of investments 1,403 1,774 522 (604) (310)
- --------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 1,323 1,713 461 427 350
- --------------------------------------------------------------------------------------------------------------------
Contract Transactions
- --------------------------------------------------------------------------------------------------------------------
Contract purchase payments 86,346 65,484 67,326 77,576 58,196
Net transfers** - - - - -
Annuity payments - - - - -
Contract terminations:
Surrender benefits and contract charges - - - - -
Death benefits - - - - -
- --------------------------------------------------------------------------------------------------------------------
Increase (decrease) from contract transactions 86,346 65,484 67,326 77,576 58,196
- --------------------------------------------------------------------------------------------------------------------
Net assets at beginning of year - - - - -
- --------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 87,669 $ 67,197 $ 67,787 $ 78,003 $ 58,546
- --------------------------------------------------------------------------------------------------------------------
Accumulation Unit Activity
- --------------------------------------------------------------------------------------------------------------------
Units outstanding at beginning of year - - - - -
Contract purchase payments 86,771 62,532 66,744 76,928 57,468
Net transfers** - - - - -
Contract terminations:
Surrender benefits and contract charges - - - - -
Death benefits - - - - -
- --------------------------------------------------------------------------------------------------------------------
Units outstanding at end of year 86,771 62,532 66,744 76,928 57,468
- --------------------------------------------------------------------------------------------------------------------
*For the period Oct. 30, 1997 (commencement of operations) to Dec. 31, 1997.
**Includes transfer activity from (to) other subaccounts 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, 1997
Segregated Asset Subaccount
--------------------------------------------------------- Combined
Operations EVA* EGN* EWG* ESB* Variable
Account
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment income (loss) - net $ 1,408 $ (6) $ 78 $ 531 $ 1,744,726
Net realized gain (loss) on investments - - - - 261,838
Net change in unrealized appreciation or
depreciation of investments (991) 714 890 415 4,150,985
- --------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 417 708 968 946 6,157,549
- --------------------------------------------------------------------------------------------------------------------
Contract Transactions
- --------------------------------------------------------------------------------------------------------------------
Contract purchase payments 66,156 70,582 59,091 69,834 27,031,748
Net transfers** 1,184 - 3,336 - 275,616
Annuity payments - - - - (1,110)
Contract terminations:
Surrender benefits and contract charges - - - - (2,147,594)
Death benefits - - - - (64,423)
- --------------------------------------------------------------------------------------------------------------------
Increase (decrease) from contract transactions 67,340 70,582 62,427 69,834 24,613,752
- --------------------------------------------------------------------------------------------------------------------
Net assets at beginning of year - - - - 30,588,238
- --------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 67,757 $ 71,290 $ 63,395 $ 70,780 $ 61,359,539
- --------------------------------------------------------------------------------------------------------------------
Accumulation Unit Activity
- ----------------------------------------------------------------------------------------------------
Units outstanding at beginning of year - - - -
Contract purchase payments 64,716 69,062 58,509 69,342
Net transfers** 1,159 - 3,327 -
Contract terminations:
Surrender benefits - - - -
Death benefits - - - -
- ----------------------------------------------------------------------------------------------------
Units outstanding at end of year 65,875 69,062 61,836 69,342
- ----------------------------------------------------------------------------------------------------
*For the period Oct. 30, 1997 (commencement of operations) to Dec. 31, 1997.
**Includes transfer activity from (to) other subaccounts 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 Year ended Dec. 31, 1996
Segregated Asset Subaccount
-------------------------------------------------------------------------------------------
Operations ECR ESI EMS EMG EIE EAG EMD EUS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income (loss) - net $ 416,336 $ 74,742 $ 4,581 $ 139,994 $ 15,631 $ 175,562 $ (15,949) $ 35,255
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 increase (decrease) in net assets
resulting from operations 127,146 78,725 4,582 231,241 36,692 155,312 432,924 24,681
- ------------------------------------------------------------------------------------------------------------------------------------
Contract Transactions
- ------------------------------------------------------------------------------------------------------------------------------------
Contract purchase payments 1,819,729 1,330,728 277,016 1,299,140 578,213 1,188,007 2,973,800 981,238
Net transfers** 160,697 (128,604) (160,372) (54,922) 699 44,944 (25,217) (41,299)
Contract terminations:
Surrender benefits and contract charges (96,464) (45,696) (67) (52,330) (21,597) (52,750) (56,812) (31,888)
Death benefits - (17,536) - (18,177) - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) from contract transact1,883,962 1,138,892 116,577 1,173,711 557,315 1,180,201 2,891,771 908,051
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at beginning of year 977,868 485,183 135,564 694,260 256,114 606,219 570,072 449,450
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 2,988,976$ 1,702,800 $ 256,723 $ 2,099,212 $ 850,121 $ 1,941,732 $ 3,894,767 $ 1,382,182
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Activity
- ------------------------------------------------------------------------------------------------------------------------------------
Units outstanding at beginning of year 817,655 413,748 131,600 588,760 219,594 473,162 435,846 413,258
Contract purchase payments 1,485,938 1,131,063 263,096 1,062,502 476,859 858,107 2,078,911 909,198
Net transfers** 129,540 (109,946) (153,809) (44,426) 56 32,975 (17,730) (38,115)
Contract terminations:
Surrender benefits and contract charges (83,088) (42,442) (64) (46,345) (21,272) (40,289) (34,915) (32,160)
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 2,462,112 1,252,181
- ------------------------------------------------------------------------------------------------------------------------------------
**Includes transfer activity from (to) other subaccounts 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 Subaccount
------------------------------------------------------------------- Combined
Operations EPA ELA ENO EGI EHY EDI Variable
Account
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income (loss) - net $ (1,295) $ 7,685 $ (45,121) $ 103,252 $ 42,196 $ 54,476 $ 1,007,345
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 increase (decrease) in net assets
resulting from operations 104,132 90,616 56,110 686,242 119,667 129,658 2,277,728
- -------------------------------------------------------------------------------------------------------------------------
Contract Transactions
- -------------------------------------------------------------------------------------------------------------------------
Contract purchase payments 467,758 437,491 3,175,961 3,170,351 1,223,297 1,660,528 20,583,257
Net transfers** (27,205) (19,722) 411,509 427,988 (249,459) (184,094) 154,943
Contract terminations:
Surrender benefits and contract charges (20,943) (18,679) (102,255) (140,638) (33,017) (49,780) (722,916)
Death benefits - - - (9,662) - - (45,375)
- -------------------------------------------------------------------------------------------------------------------------
Increase (decrease) from
contract transactions 419,610 399,090 3,485,215 3,448,039 940,821 1,426,654 19,969,909
- -------------------------------------------------------------------------------------------------------------------------
Net assets at beginning of year 205,676 298,422 957,923 1,466,670 547,298 689,882 8,340,601
- -------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 729,418 $ 788,128 $ 4,499,248$ 5,600,951$ 1,607,786$ 2,246,194$ 30,588,238
- -------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Activity
- ------------------------------------------------------------------------------------------------------------
Units outstanding at beginning of year 192,917 303,151 690,849 1,151,991 480,470 600,567
Contract purchase payments 377,258 396,610 2,086,487 2,299,290 1,030,697 1,425,924
Net transfers** (21,947) (17,905) 275,115 310,542 (210,240) (156,974)
Contract terminations:
Surrender benefits and contract charges (18,052) (18,359) (72,864) (99,565) (30,890) (45,272)
Death benefits - - - (6,946) - -
- ------------------------------------------------------------------------------------------------------------
Units outstanding at end of year 530,176 663,497 2,979,587 3,655,312 1,270,037 1,824,245
- ------------------------------------------------------------------------------------------------------------
**Includes transfer activity from (to) other subaccounts and transfers (from) to
American Enterprise Life for conversion from (to) 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 as a separate account of American Enterprise Life
Insurance Company (American Enterprise Life). The Account is registered together
as a single unit investment trust under the Investment Company Act of 1940, as
amended. Operations of the Account commenced on Feb. 21, 1995.
The Account is comprised of various subaccounts. Each subaccount invests
exclusively in shares of the following funds or portfolios, which are registered
under the Investment Company Act of 1940 as a diversified (non-diversified for
GT Global Variable Latin America Fund), open-end management investment company.
and has the following investment manager.
<TABLE>
<CAPTION>
Subaccount Invests exclusively in shares of Investment Manager
<S> <C> <C>
ECR IDS Life Capital Resource Fund IDS Life Insurance Company*
ESI IDS Life Special Income Fund IDS Life Insurance Company*
EMS IDS Life Moneyshare Fund, Inc. IDS Life Insurance Company*
EMG IDS Life Managed Fund, Inc. IDS Life Insurance Company*
EIE IDS Life International Equity Fund IDS Life Insurance Company**
EAG IDS Life Aggressive Growth Fund IDS Life Insurance Company*
EMD OCC Accumulation Trust Managed Portfolio OpCap Advisors
EUS OCC Accumulation Trust U.S. Government Income Portfolio OpCap Advisors
EPA GT Global Variable New Pacific Fund Chancellor LGT Asset Management, Inc.
ELA GT Global Variable Latin America Fund Chancellor LGT Asset Management, Inc.
ENO Putnam VT New Opportunities Fund Putnam Investment Management, Inc.
EGI Putnam VT Growth and Income Fund Putnam Investment Management, Inc.
EHY Putnam VT High Yield Fund Putnam Investment Management, Inc.
EDI Putnam VT Diversified Income Fund Putnam Investment Management, Inc.
EGD IDS Life Growth Dimensions Fund *** IDS Life Insurance Company*
ESC OCC Accumulation Trust Small Cap Portfolio OpCap Advisors
EEQ OCC Accumulation Trust Equity Portfolio OpCap Advisors
EGR Oppenheimer Variable Account Growth Fund OppenheimerFunds, Inc.
EHI Oppenheimer Variable Account High Income Fund OppenheimerFunds, Inc.
EIN AIM V.I. International Equity Fund A I M Advisors, Inc.
EVA AIM V.I. Value Fund A I M Advisors, Inc.
EGN AIM V.I. Growth and Income Fund A I M Advisors, Inc.
EWG Janus Aspen Series Worldwide Growth Portfolio Janus Capital Corporation
ESB Janus Aspen Series Balanced Portfolio Janus Capital Corporation
</TABLE>
* American Express Financial Corporation is the investment advisor.
** American Express Asset Management International Inc. is the sub-investment
advisor.
*** Commencement of operations was April 30, 1996.
The assets of each subaccount of the Account are not chargeable with liabilities
arising out of the business conducted by any other segregated asset accounts or
by American Enterprise Life.
American Enterprise Life issues the contracts that are distributed by banks and
financial institutions either directly or through a network of third-party
marketers.
<PAGE>
- ------------------------------------------------------------------
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, the AIM Funds, the Janus Portfolios, the Oppenheimer Funds, and the
Putnam Funds (collectively, the Funds) are stated at market value which is the
net asset value per share as determined by the respective 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 Funds are reinvested 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.
Use of Estimates
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 disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of increase and decrease in net assets from operations
during the period. Actual results could differ from those estimates.
Federal Income Taxes
American Enterprise Life is taxed as a life insurance company. The Account is
treated as part of American Enterprise Life for federal income tax purposes.
Under existing federal income tax law, no income taxes are payable with respect
to any investment income of the Account.
- ------------------------------------------------------------------
3. Mortality and Expense Risk Fee
American Enterprise Life makes guarantees to the Account that possible future
adverse changes in administrative expenses and mortality experience of the
annuitants will not affect the Account. The mortality and expense risk fee paid
to American Enterprise Life is computed daily and is equal, on an annual basis,
to 1.25 percent of the average daily net assets of the Account.
- ------------------------------------------------------------------
4. Administrative Charge
American Enterprise Life deducts a daily charge equal, on an annual basis, to
0.15 percent of the average daily net assets of each subaccount as an
administrative charge. This charge 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 Charge
American Enterprise Life deducts a contract charge of $30 per year on each
contract anniversary. This charge reimburses American Enterprise Life for
expenses incurred in establishing and maintaining the annuity records. This
charge will be waived when the contract value is $50,000 or more on the current
contract anniversary.
The $30 annual charge will be deducted at the time of any full surrender. This
charge cannot be increased and does not apply after annuity payouts begin.
American Enterprise Life does not expect to profit from this charge.
- ------------------------------------------------------------------
6. Surrender Charge
American Enterprise Life will use a surrender charge to help it recover certain
expenses relating to the sale of the annuity. The surrender charge will be
deducted for surrenders up to the first seven payment years following a
purchasepayment. Charges by American Enterprise Life for surrenders are not
identified on an individual segregated asset account basis. Charges for all
segregated asset accounts amounted to $79,195 in 1997 and $34,957 in 1996. Such
charges are not treated as a separate expense of the subaccounts. They are
ultimately deducted from contract surrender benefits paid by American Enterprise
Life.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
7. Investment in Shares of Mutual Funds
The subaccounts' investment in shares of Mutual Funds as of December 31, 1997
were as follows:
Subaccount Mutual Fund Shares NAV
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ECR IDS Life Capital Resource Fund 208,159 $28.58
ESI IDS Life Special Income Fund 286,067 11.80
EMS IDS Life Moneyshare Fund, Inc. 259,286 1.00
EMG IDS Life Managed Fund, Inc. 261,594 18.04
EIE IDS Life International Equity Fund 132,704 13.63
EAG IDS Life Aggressive Growth Fund 247,332 16.07
EMD OCC Accumulation Trust Managed Portfolio 186,413 42.38
EUS OCC Accumulation Trust U.S. Government Income Portfolio 250,912 10.51
EPA G.T. Global Variable New Pacific Fund 74,554 10.51
ELA G.T. Global Variable Latin America Fund 79,593 16.95
ENO Putnam VT New Opportunities Fund 396,092 21.23
EGI Putnam VT Growth and Income Fund 428,260 28.32
EHY Putnam VT High Yield Fund 243,877 13.62
EDI Putnam VT Diversified Income Fund 363,665 11.31
EGD IDS Life Growth Dimensions Fund 5,265 13.69
ESC OCC Accumulation Trust Small Cap Portfolio 3,327 26.37
EEQ OCC Accumulation Trust Equity Portfolio 1,842 36.52
EGR Oppenheimer Variable Account Growth Fund 2,091 32.44
EHI Oppenheimer Variable Account High Income Fund 6,777 11.52
EIN AIM V.I. International Equity Fund 3,421 17.13
EVA AIM V.I. Value Fund 3,256 20.83
EGN AIM V.I. Growth and Income Fund 3,781 18.87
EWG Janus Aspen Series Worldwide Growth Portfolio 2,713 23.39
ESB Janus Aspen Series Balanced Portfolio 4,055 17.47
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
8. Investment Transactions
The subaccounts' purchases of Fund shares including reinvestment of dividend
distributions, were as follows:
Year ended Dec. 31,
Subaccount Investment 1997 1996
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ECR IDS Life Capital Resource Fund $2,325,297 $2,420,544
ESI IDS Life Special Income Fund 1,813,929 1,365,892
EMS IDS Life Moneyshare Fund, Inc. 543,283 274,170
EMG IDS Life Managed Fund, Inc. 2,585,442 1,436,211
EIE IDS Life International Equity Fund 1,107,778 608,493
EAG IDS Life Aggressive Growth Fund 2,056,784 1,453,339
EMD OCC Accumulation Trust Managed Portfolio 3,914,139 2,954,380
EUS OCC Accumulation Trust U.S. Government Income Portfolio 1,355,577 1,012,684
EPA GT Global Variable New Pacific Fund 639,715 457,523
ELA GT Global Variable Latin America Fund 518,777 443,537
ENO Putnam VT New Opportunities Fund 2,723,514 3,539,234
EGI Putnam VT Growth and Income Fund 5,363,337 3,681,192
EHY Putnam VT High Yield Fund 1,935,558 1,171,624
EDI Putnam VT Diversified Income Fund 2,042,776 1,683,881
EGD IDS Life Growth Dimensions Fund 70,723 --
ESC OCC Accumulation Trust Small Cap Portfolio 86,338 --
EEQ OCC Accumulation Trust Equity Portfolio 65,479 --
EGR Oppenheimer Variable Account Growth Fund 67,321 --
EHI Oppenheimer Variable Account High Income Fund 78,673 --
EIN AIM V.I. International Equity Fund 58,904 --
EVA AIM V.I. Value Fund 68,804 --
EGN AIM V.I. Growth and Income Fund 70,635 --
EWG Janus Aspen Series Worldwide Growth Portfolio 62,556 --
ESB Janus Aspen Series Balanced Portfolio 70,424 --
- ------------------------------------------------------------------------------------------------------
Combined Variable Account $29,625,763 $22,502,704
- ------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- ------------------------------------------------------------------
9. Year 2000 Issue (Unaudited)
The Year 2000 issue is the result of computer programs having been written using
two digits rather than four to define a year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than 2000. This could result in the failure of major systems or miscalculations,
which could have a material impact on the operations of the Variable Account.
The Variable Account has no computer systems of its own but is dependent upon
the systems maintained by AEFC and certain other third parties.
A comprehensive review of AEFC's computer systems and business processes has
been conducted to identify the major systems that could be affected by the Year
2000 issue. Steps are being taken to resolve any potential problems including
modification to existing software and the purchase of new software. These
measures are scheduled to be completed and tested on a timely basis. AEFC's goal
is to complete internal remediation and testing of each system by the end of
1998 and to continue compliance efforts through 1999.
The Year 2000 readiness of unaffiliated investment managers and other third
parties whose system failures could have an impact on Variable Account's
operations is currently being evaluated. The potential materiality of any such
impact is not known at this time.
<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, 1997 and 1996, and the related statements of income,
stockholder's equity and cash flows for each of the three years in the period
ended December 31, 1997. 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, 1997 and 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
Ernst & Young LLP
February 5, 1998
Minneapolis, Minnesota
<PAGE>
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
BALANCE SHEETS
December 31,
<TABLE><CAPTION>
ASSETS 1997 1996
- ------ ---------- ----------
<S> <C> <C>
Investments:
Fixed maturities:
Held to maturity, at amortized cost (Fair value:
1997, $1,223,108; 1996, $1,267,947) $1,186,682 $1,256,143
Available for sale, at fair value (Amortized cost:
1997, $2,609,621; 1996, $2,223,457) 2,685,799 2,242,447
----------- ----------
3,872,481 3,498,590
Mortgage loans on real estate 738,052 582,982
Other investments 16,024 3,056
----------- ----------
Total investments 4,626,557 4,084,628
Cash and cash equivalents -- 40,829
Other accounts receivable 563 9,867
Accrued investment income 59,588 51,571
Deferred policy acquisition costs 224,501 203,225
Other assets 117 4,957
Separate account assets 62,087 30,760
----------- ----------
Total assets $4,973,413 $4,425,837
=========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Future policy benefits for fixed annuities $4,343,213 $3,881,339
Policy claims and other policyholders' funds 11,328 27,427
Deferred income taxes 35,601 18,072
Amounts due to brokers 34,935 88,731
Other liabilities 16,905 15,650
Separate account liabilities 62,087 30,760
------------ ----------
Total liabilities 4,504,069 4,061,979
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 282,872 242,872
Net unrealized gain on investments 49,516 12,343
Retained earnings 134,956 106,643
------------ ----------
Total stockholder's equity 469,344 363,858
------------ ----------
Total liabilities and stockholder's equity $4,973,413 $4,425,837
============ ==========
See accompanying notes.
</TABLE>
<PAGE>
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
STATEMENTS OF INCOME
Years ended December 31,
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ -----
(thousands)
<S> <C> <C> <C>
Revenues:
Net investment income $332,268 $271,719 $223,706
Contractholder charges 5,688 5,450 4,186
Management and other fees 641 303 28
Net realized loss on investments (509) (5,258) (1,154)
--------- ---------- ---------
Total revenues 338,088 272,214 226,766
--------- ---------- ---------
Benefits and expenses:
Interest credited on investment contracts 231,437 191,672 162,662
Amortization of deferred policy
acquisition costs 36,803 30,674 20,459
Other operating expenses 24,890 14,133 10,205
--------- ---------- ---------
Total benefits and expenses 293,130 236,479 193,326
--------- ---------- ---------
Income before income taxes 44,958 35,735 33,440
Income taxes 16,645 12,912 11,692
--------- ---------- ---------
Net income $ 28,313 $ 22,823 $ 21,748
========= ========== =========
See accompanying notes.
</TABLE>
<PAGE>
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
STATEMENTS OF STOCKHOLDER'S EQUITY
Three years ended December 31, 1997
(thousands)
<TABLE>
<CAPTION>
Additional Net Unrealized
Capital Paid-In Gain (Loss) on Retained
Stock Capital Investments Earnings Total
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994 $2,000 $ 142,872 $ (43,689) $ 62,072 $163,255
Net income -- -- -- 21,748 21,748
Change in net unrealized
gain (loss) on investments -- -- 76,813 -- 76,813
Capital contribution from parent -- 35,000 -- -- 35,000
-------- --------- ----------- --------- ----------
Balance, December 31, 1995 2,000 177,872 33,124 83,820 296,816
Net income -- -- -- 22,823 22,823
Change in net unrealized
gain (loss) on investments -- -- (20,781) -- (20,781)
Capital contribution from parent -- 65,000 -- -- 65,000
-------- --------- ----------- --------- ----------
Balance, December 31, 1996 2,000 242,872 12,343 106,643 363,858
Net income -- -- -- 28,313 28,313
Change in net unrealized
gain (loss) on investments -- -- 37,173 -- 37,173
Capital contribution from parent -- 40,000 -- -- 40,000
-------- --------- ---------- --------- ----------
Balance, December 31, 1997 $2,000 $282,872 $ 49,516 $134,956 $469,344
======== ========= ========== ========= ==========
See accompanying notes.
</TABLE>
<PAGE>
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
Years ended December 31,
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- ------
(thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 28,313 $ 22,823 $ 21,748
Adjustments to reconcile net income to
net cash (used in) provided by operating activities:
Change in accrued investment income (8,017) (9,692) (7,951)
Change in other accounts receivable 9,304 -- --
Change in deferred policy acquisition
costs, net (21,276) (32,651) (32,926)
Change in other assets 4,840 (10,007) (4,126)
Change in policy claims and other
policyholders' funds (16,099) 15,786 (4,065)
Deferred income tax (benefit) provision (2,485) 5,084 (119)
Change in other liabilities 1,255 8,621 2,698
(Accretion of discount)
amortization of premium, net (2,316) (2,091) (2,321)
Net realized loss on investments 509 5,258 1,154
Other, net 959 (129) --
---------- --------- ---------
Net cash (used in) provided by operating activities (5,013) 3,002 (25,908)
---------- --------- ---------
Cash flows from investing activities: Fixed maturities held to maturity:
Purchases (1,996) (16,967) (252,583)
Maturities 41,221 26,190 25,754
Sales 30,601 27,944 33,849
Fixed maturities available for sale:
Purchases (688,050) (921,914) (485,250)
Maturities 231,419 212,212 85,629
Sales 73,366 47,542 57,576
Other investments:
Purchases (199,593) (212,182) (183,892)
Sales 29,139 19,850 5,543
Change in amounts due to brokers (53,796) 88,568 (48,709)
--------- --------- ---------
Net cash used in investing activities $(537,689) $(728,757) $(762,083)
--------- --------- ---------
</TABLE>
<PAGE>
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS (continued)
Years ended December 31,
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- ------
(thousands)
Cash flows from financing activities: Activity related to investment contracts:
<S> <C> <C> <C>
Considerations received $ 783,339 $ 846,378 $ 709,127
Surrenders and other benefits (552,903) (312,362) (196,260)
Interest credited to account balances 231,437 191,672 162,662
Change in securities sold under
repurchase agreements -- (67,000) 67,000
Capital contribution from parent 40,000 65,000 35,000
---------- --------- ---------
Net cash provided by financing activities 501,873 723,688 777,529
---------- --------- ---------
Net decrease in cash and cash equivalents (40,829) (2,067) (10,462)
Cash and cash equivalents at beginning of year 40,829 42,896 53,358
---------- --------- ---------
Cash and cash equivalents at end of year $ -- $ $ 42,896
40,829
========== ======== =========
See accompanying notes.
</TABLE>
<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 a stock life
insurance company that is domiciled in Indiana and is licensed to transact
insurance business in 47 states. The Company's principal product is
deferred annuities which are issued primarily to individuals. It offers
single premium and annual premium deferred annuities on both a fixed and
variable dollar basis. Immediate annuities are offered as well.
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 (AEFC). AEFC 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 are classified as available
for sale and carried at fair value. Unrealized gains and losses on
securities classified as available for sale are reported as a separate
component of stockholder's equity, net of deferred income 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 an
allowance 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 an
allowance for mortgage loan losses. The allowance for mortgage loan losses
is maintained at a level that management believes is adequate to absorb
estimated losses in the portfolio. The level of the allowance 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 allowance for mortgage
loan losses.
<PAGE>
1. Summary of significant accounting policies (continued)
The Company generally stops accruing interest on mortgage loans for which
interest payments are delinquent more than three months. Based on
management's judgment as to the ultimate collectibility of principal,
interest payments received are either recognized as income or applied to
the recorded investment in the loan.
The cost of interest rate caps and floors 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 and floors 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 for the years
ended December 31, is summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ -----
<S> <C> <C> <C>
Cash paid during the year for:
Income taxes $19,456 $10,317 $11,389
Interest on borrowings 1,832 998 979
</TABLE>
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.
Contractholder charges include fees collected regarding the issue and
administration of annuity contracts.
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 deferred 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.
<PAGE>
1. Summary of significant accounting policies (continued)
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
AEFC 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 AEFC and its subsidiaries that AEFC will reimburse subsidiaries
for all tax benefits.
Included in other liabilities at December 31, 1997 and 1996 are $1,289 and
$787, respectively receivable from 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.
Reclassifications
Certain 1996 and 1995 amounts have been reclassified to conform to the 1997
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.
The amortized cost, gross unrealized gains and losses and fair value of
investments in fixed maturities at December 31, 1997 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 $ 11,120 $ 710 $ -- $ 11,830
State and municipal obligations 3,003 173 -- 3,176
Corporate bonds and obligations 970,498 38,176 2,763 1,005,911
Mortgage-backed securities 202,061 1,497 1,367 202,191
---------- ------- ------ ----------
$1,186,682 $40,556 $4,130 $1,223,108
========== ======= ====== ==========
Available for sale
U.S. Government agency obligations $ 2,077 $ 13 $ -- $ 2,090
Corporate bonds and obligations 1,273,217 52,207 8,020 1,317,404
Mortgage-backed securities 1,334,327 33,017 1,039 1,366,305
---------- ------- ------ ----------
$2,609,621 $85,237 $9,059 $2,685,799
========== ======= ====== ==========
</TABLE>
<PAGE>
2. Investments (continued)
The amortized cost, gross unrealized gains and losses and fair value of
investments in fixed maturities and equity securities at December 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 6,487 956,889
Mortgage-backed securities 1,279,093 16,047 11,185 1,283,955
---------- ------- ------- ----------
$2,223,457 $36,725 $17,735 $2,242,447
========== ======= ======= ==========
</TABLE>
The amortized cost and fair value of investments in fixed maturities at
December 31, 1997 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.
<TABLE>
<CAPTION>
Amortized Fair
Held to maturity Cost Value
<S> <C> <C>
Due in one year or less $ 21,818 $ 22,085
Due from one to five years 156,874 163,378
Due from five to ten years 647,127 671,734
Due in more than ten years 158,802 163,720
Mortgage-backed securities 202,061 202,191
---------- ----------
$1,186,682 $1,223,108
========== ==========
Amortized Fair
Available for sale Cost Value
Due in one year or less $ 37,804 $ 37,930
Due from one to five years 56,938 60,498
Due from five to ten years 689,418 715,717
Due in more than ten years 491,134 505,349
Mortgage-backed securities 1,334,327 1,366,305
---------- ----------
$2,609,621 $2,685,799
========== ==========
</TABLE>
During the years ended December 31, 1997, 1996 and 1995, fixed maturities
classified as held to maturity were sold with amortized cost of $29,561,
$27,969 and $34,809, respectively. Net gains and losses on these sales were
not significant. The sales of these fixed maturities were due to
significant deterioration in the issuers' credit worthiness.
<PAGE>
2. Investments (continued)
In addition, fixed maturities available for sale were sold during 1997 with
proceeds of $73,366 and gross realized gains and losses of $1,081 and
$1,440, respectively. 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.
At December 31, 1997, bonds carried at $3,307 were on deposit with various
states as required by law.
At December 31, 1997, investments in fixed maturities comprised 84 percent
of the Company's total invested assets. These securities are rated by
Moody's and Standard & Poor's (S&P), except for securities carried at
approximately $461 million which are rated by AEFC internal analysts using
criteria similar to Moody's and S&P. A summary of investments in fixed
maturities, at amortized cost, by rating on December 31 is as follows:
<TABLE>
<CAPTION>
Rating 1997 1996
---------------------- ---------- ----------
<S> <C> <C>
Aaa/AAA $1,531,588 $1,489,460
Aa/AA 34,167 32,903
Aa/A 69,775 38,577
A/A 421,733 445,201
A/BBB 222,022 204,402
Baa/BBB 954,962 818,545
Baa/BB 84,053 97,783
Below investment grade 478,003 352,729
----------- ----------
$3,796,303 $3,479,600
=========== ==========
</TABLE>
At December 31, 1997, approximately 95 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 December 31, 1997, approximately 16 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>
December 31, 1997 December 31, 1996
----------------------- --------------------
On Balance Commitments On Balance Commitments
Region Sheet to Purchase Sheet to Purchase
------------------ ----------- -------------- ---------- -----------
<S> <C> <C> <C> <C>
South Atlantic $186,714 $9,199 $139,630 $22,525
Middle Atlantic 128,239 10,167 111,257 6,257
East North Central 125,018 6,294 105,666 7,508
Mountain 94,061 11,620 82,389 4,380
West North Central 96,701 11,135 54,728 15,017
New England 50,932 -- 50,584 --
Pacific 33,052 -- 18,504 1,877
West South Central 19,573 -- 14,927 5,006
East South Central 7,480 -- 7,667 --
----------- -------------- ---------- -----------
741,770 48,415 585,352 62,570
Less allowance for losses 3,718 -- 2,370 --
----------- -------------- ---------- -----------
$738,052 $48,415 $582,982 $62,570
=========== ============== ========== ===========
<PAGE>
2. Investments (continued)
December 31, 1997 December 31, 1996
------------------- ------------------
On Balance Commitments On Balance Commitments
Property type Sheet to Purchase Sheet to Purchase
----------------------- ---------- ----------- -------- -----------
Department/retail stores $242,307 $9,683 $184,192 $26,905
Apartments 189,752 10,167 172,208 2,816
Office buildings 169,177 7,262 112,430 14,391
Industrial buildings 60,195 17,430 54,117 2,816
Hotels/Motels 33,508 -- 28,189 6,257
Medical buildings 30,103 3,873 18,787 7,508
Nursing/retirement homes
9,552 -- 8,080 1,877
Mixed Use 7,176 -- 7,349 --
---------- ----------- --------- -----------
741,770 48,415 585,352 62,570
Less allowance for losses 3,718 -- 2,370 --
---------- ----------- --------- -----------
$738,052 $48,415 $582,982 $62,570
========== =========== ========= ===========
</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 it 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 December 31, 1997, the Company's recorded investment in impaired loans
was $4,443 with an allowance of $718. At December 31, 1996, the Company's
recorded investment in impaired loans was $5,515 with an allowance of $870.
During 1997 and 1996, the average recorded investment in impaired loans was
$6,473 and $3,577, respectively.
There were no impaired loans prior to 1996.
The following table presents changes in the allowance for investment losses
related to all loans:
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Balance, January 1 $2,370 $ --
Provision for investment losses 1,805 2,370
Loan payoffs (457) --
------ ------
Balance, December 31 $3,718 $2,370
====== ======
</TABLE>
There was no allowance prior to 1996.
Net investment income for the years ended December 31 is summarized as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- -------
<S> <C> <C> <C>
Interest on fixed maturities $278,736 $230,559 $198,829
Interest on mortgage loans 55,085 41,010 24,969
Interest on cash equivalents 1,544 1,402 829
Other 704 1,194 921
--------- -------- --------
336,069 274,165 225,548
Less investment expenses 3,801 2,446 1,842
--------- -------- --------
$332,268 $271,719 $223,706
========= ======== ========
</TABLE>
2. Investments (continued)
Net realized gain (loss) on investments for the years ended December 31 is
summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- ------
<S> <C> <C> <C>
Fixed maturities $1,638 $(2,888) $(1,114)
Mortgage loans (1,348) (2,370) --
Other investments (799) -- (40)
------- ------- -------
$ (509) $(5,258) $(1,154)
======= ======= =======
Changes in net unrealized appreciation (depreciation) of investments for
the years ended December 31 are summarized as follows:
1997 1996 1995
------------ ------------ --------
Fixed maturities available for sale $57,188 $(31,970) $118,134
</TABLE>
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 (benefit) for the years ended December 31, consists
of the following:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- -------
<S> <C> <C> <C>
Federal income taxes:
Current $17,668 $7,124 $11,753
Deferred (2,485) 5,084 (119)
------ ------- -------
15,183 12,208 11,634
State income taxes-current 1,462 704 58
------ ------- ------
Income tax expense $16,645 $12,912 $11,692
====== ======= ======
</TABLE>
Increases (decreases) to the federal income tax provision applicable to
pretax income based on the statutory rate, for the years ended December 31,
are attributable to:
<TABLE>
<CAPTION>
1997 1996 1995
----------- -------- ------
Provision Rate Provision Rate Provision Rate
<S> <C> <C> <C> <C> <C> <C>
Federal income taxes based
on the statutory rate $15,735 35.0% $12,507 35.0% $11,704 35.0%
Increases (decreases) are attributable to :
Tax-excluded interest (46) (0.1) (53) (0.1) (69) (0.2)
State tax, net benefit 951 2.1 459 1.3 38 0.1
Other, net 5 -- (1) -- 19 0.1
------- ---- ------- ---- ------- ----
Federal income taxes $16,645 37.0% $12,912 36.2% $11,692 35.0%
======= ==== ======= ==== ======= ====
</TABLE>
<PAGE>
3. Income taxes (continued)
Significant components of the Company's deferred income tax assets and
liabilities as of December 31 are as follows:
<TABLE>
<CAPTION>
Deferred income tax assets: 1997 1996
------- -------
<S> <C> <C>
Policy reserves $54,468 $48,321
Other 1,736 1,851
------- -------
Total deferred income tax assets 56,204 50,172
------- -------
Deferred income tax liabilities:
Deferred policy acquisition costs 63,630 59,162
Investments 28,175 9,082
------- -------
Total deferred income tax liabilities 91,805 68,244
------- -------
Net deferred income tax liabilities $35,601 $18,072
======= =======
</TABLE>
The Company is required to establish a valuation allowance for any portion
of the deferred income 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 income tax assets and,
therefore, no such valuation allowance has been established.
4. Stockholder's equity
Retained earnings available for distribution as dividends to IDS Life are
limited to the Company's surplus as determined in accordance with
accounting practices prescribed by state insurance regulatory authorities.
Statutory unassigned surplus aggregated $17,392 and $6,103 as of December
31, 1997 and 1996, respectively. In addition, dividends in excess of
$23,589 would require approval by the Insurance Department of the state of
Indiana.
Statutory net income and stockholder's equity as of December 31, are
summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- -------
<S> <C> <C> <C>
Statutory net income $ 23,589 $ 9,138 $ 15,499
Statutory stockholder's equity 302,264 250,975 187,425
</TABLE>
5. Related party transactions
On December 31, 1997, the Company purchased interest rate floors from IDS
Life and entered into an interest rate swap with IDS Life to manage its
exposure to interest rate risk. The interest rate floors had an outstanding
balance of $8,400 at December 31, 1997. The interest rate swap is an off
balance sheet transaction.
The Company has no employees. Charges by IDS Life for services and use of
other joint facilities aggregated $24,535, $17,936 and $10,380 for 1997,
1996 and 1995, respectively. Certain of these costs are included in
deferred policy acquisition costs.
6. Lines of credit
The Company has an available line of credit with AEFC aggregating $50,000.
The rate for the line of credit is the parent's cost of funds, ranging from
20 to 45 basis points over an established index. A $20,000 line of credit
with a bank expired on June 30, 1997 and the Company did not seek renewal.
There were no borrowings outstanding under these agreements at December 31,
1997 or 1996.
<PAGE>
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 risk related to
derivative financial instruments through established approval procedures,
including setting concentration limits by counterparty, 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 risk related to interest rate caps and floors 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:
<TABLE>
<CAPTION>
Notional Carrying Fair Total Credit
December 31, 1997 Amount Amount Value Exposure
----------------- ------ ------ ----- ------------
<S> <C> <C> <C> <C>
Assets:
Interest rate caps $ 900,000 $ 7,624 $ 5,340 $ 5,340
Interest rate 1,000,000 8,400 8,400 8,400
floors
Interest rate swaps 1,000,000 -- n/a n/a
------- ------- -------
$16,024 $13,740 $13,740
======= ======= =======
Notional Carrying Fair Total Credit
December 31, 1996 Amount Amount Value Exposure
----------------- ------ ------ ----- --------
Assets:
Interest rate caps $400,000 $3,056 $1,621 $ 1,621
====== ====== ======
</TABLE>
The fair values of derivative financial instruments are based on market
values, dealer quotes or pricing models. All interest rate caps, floors and
swaps expire in the year 2000.
<PAGE>
8. Derivative financial instruments (continued)
Interest rate caps, floors and swaps 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.
<TABLE>
<CAPTION>
1997 1996
------- ---------
Carrying Fair Carrying Fair
Financial Assets Amount Value Amount Value
Investments:
<S> <C> <C> <C> <C>
Fixed maturities (Note 2):
Held to maturity $1,186,682 $1,223,108 $1,256,143 $1,267,947
Available for sale 2,685,799 2,685,799 2,242,447 2,242,447
Mortgage loans on real estate
(Note 2) 738,052 775,869 582,982 597,053
Derivative financial instruments
(Note 8) 16,024 13,740 3,056 1,621
Cash and cash equivalents (Note 1) -- -- 40,829 40,829
Separate account assets (Note 1) 62,087 62,087 30,760 30,760
Financial Liabilities
Future policy benefits for fixed
annuities 4,330,173 4,152,471 3,871,682 3,702,141
Separate account liabilities 62,087 58,116 30,760 28,990
</TABLE>
At December 31, 1997 and 1996, the carrying amount and fair value of future
policy benefits for fixed annuities exclude life insurance-related
contracts carried at $13,040 and $9,657, respectively. The fair value of
these benefits is based on the status of the annuities at December 31, 1997
and 1996. The fair values of deferred annuities and separate account
liabilities are 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 1997 and 1996.
<PAGE>
10. Year 2000 Issue (unaudited)
The Year 2000 issue is the result of computer programs having been
written using two digits rather than four to define a year. Any programs that
have time-sensitive software may recognize a date using "00" as the year 1900
rather than 2000. This could result in the failure of majsystems or
miscalculations, which could have a material impact on the operations of the
Company. All of the systems used by the Company are maintained by AEFC and are
utilized by multiple subsidiaries and affiliates of AEFC. The Company's business
is heavily dependent upon AEFC's computer systems and has significant
interactions with systems of third parties.
A comprehensive review of AEFC's computer systems and business
processes, including those specific to the Company, has been conducted to
identify the major systems that could be affected by the Year 2000 issue. Steps
are being taken to resolve any potential problems including modification to
existing software and the purchase of new software. These measures are scheduled
to be completed and tested on a timely basis. AEFC's goal is to complete
internal remediation and testing of each system by the end of 1998 and to
continue compliance efforts through 1999.
AEFC is evaluating the Year 2000 readiness of advisors and other third
parties whose system failures could have an impact on the Company's operations.
The potential materiality of any such impact is not known at this time.
<PAGE>
PART C.
Item 24. Financial Statements and Exhibits
(a) Financial Statements included in Part B of this Registration Statement:
The audited financial statements of the variable account including:
-Statements of net assets as of Dec. 31, 1997;
-Statements of operations for the year ended Dec. 31, 1997; and
-Statements of changes in net assets for the years ended Dec. 31, 1997
and Dec. 31, 1996.
-Notes to Financial Statements.
-Report of Independent Auditors dated March 13, 1998.
The audited financial statements of American Enterprise Life Insurance Company
including:
-Balance sheets as of Dec. 31, 1997 and Dec. 31, 1996; and
-Related statements of income, stockholder's equity and cash flows
for the years ended Dec. 31, 1997, 1996, and 1995.
-Notes to Financial Statements.
-Report of Independent Auditors dated February 5, 1998.
(b) Exhibits:
1.1 Resolution of the Executive Committee of the Board of Directors of
American Enterprise Life establishing the American Enterprise Variable
Annuity Account dated July 15, 1987, filed electronically as Exhibit 1
to the Initial Registration Statement No. 33-54471, filed on or about
July 5, 1994, is incorporated herein by reference.
1.2 Resolution of the Executive Committee of the Board of Directors of
American Enterprise Life establishing the ten additional subaccounts
within the separate account dated Aug. 21, 1997, filed electronically
as Exhibit 1.2 to Post-Effective Amendment No. 8 to Registration
Statement No. 33-54471, is incorporated herein by reference.
2. Not applicable.
3.1 Form of Variable Annuity and Life Insurance Distribution Agreement,
filed electronically as Exhibit 3.1 to Pre-Effective Amendment
No. 1 to Registration Statement No. 33-54471, is incorporated
herein by reference.
3.2 Form of Managing General Agent Agreement, filed electronically as
Exhibit 3.2 to Pre-Effective Amendment No. 1 to Registration
Statement No. 33-54471, is incorporated herein by reference.
4.1 Form of Deferred Annuity Contract (form 34560), filed electronically as
Exhibit 4.1 to the Initial Registration Statement No. 33-54471, filed
on or about July 5, 1994, is incorporated herein by reference.
<PAGE>
4.2 Form of Tax-Qualified Endorsement (form 34563), filed electronically as
Exhibit 4.2 to the Initial Registration Statement No. 33-54471, filed
on or about July 5, 1994, is incorporated herein by reference.
4.3 Form of Annuity Endorsement (form 34562), filed electronically as
Exhibit 4.3 to the Initial Registration Statement No. 33-54471, filed
on or about July 5, 1994, is incorporated herein by reference.
5. Form of Application for American Enterprise Life Variable Annuity (form
34561), filed electronically as Exhibit 5.1 to the Initial Registration
Statement No. 33-54471, filed on or about July 5, 1994, is incorporated
herein by reference.
6.1 Amendment and Restatement of Articles of Incorporation of American
Enterprise Life dated July 29, 1986, filed electronically as Exhibit
6.1 to the Initial Registration Statement No. 33-54471, filed on or
about July 5, 1994, is incorporated herein by reference.
6.2 Amended By-Laws of American Enterprise Life, filed electronically as
Exhibit 6.2 to the Initial Registration Statement No. 33-54471, filed
on or about July 5, 1994, is incorporated herein by reference.
7. Not applicable.
8.1(a) Copy of Participation Agreement among American Enterprise Life
Insurance Company and GT Global Variable Investment Trust and GT Global
Variable Investment Series and GT Global Financial Services, Inc.,
dated February 10, 1995, filed electronically as Exhibit 8.1 to
Post-Effective Amendment No. 3 to Registration Statement No. 33-54471,
is incorporated herein by reference.
8.1(b) Form of Amendment 1 to Participation Agreement among American
Enterprise Life Insurance Company and G.T. Global Variable Investment
Trust and G.T. Global Variable Investment Series and GT Global, Inc.
(formerly G.T. Global Financial Services, Inc.), filed electronically
as Exhibit 8.1(b) to Post-Effective Amendment No. 9 to Registration
Statement No. 33-54471, is incorporated herein by reference.
8.2(a) Copy of Participation Agreement among Putnam Capital Manager Trust,
Putnam Mutual Funds Corp. and American Enterprise Life Insurance
Company, dated January 16, 1995, filed electronically as Exhibit 8.2
to Post-Effective Amendment No. 2 to Registration Statement
No. 33-54471, is incorporated herein by reference.
8.2(b) Copy of Amendment 1 to Schedule A to Participation Agreement among
Putnam Capital Manager Trust, Putnam Mutual Funds Corp. and American
Enterprise Life Insurance Company, dated April 30, 1997, filed
electronically as Exhibit 8.2(b) to Post-Effective Amendment No. 9 to
Registration Statement No. 33-54471, is incorporated herein by
reference.
8.2(c) Copy of Amendment 2 to Schedule A to Participation Agreement among
Putnam Capital Manager Trust, Putnam Mutual Funds Corp. and American
Enterprise Life Insurance Company, dated October 30, 1997, is
filed electronically herewith.
<PAGE>
8.3(a) Copy of Participation Agreement by and among Quest for Value
Accumulation Trust and American Enterprise Life Insurance Company and
Quest for Value Distributors, dated February 21, 1995, filed
electronically as Exhibit 8.3 to Post- Effective Amendment No. 2 to
Registration Statement No. 33-54471, is incorporated herein by
reference.
8.3(b) Copy of Amendment 1 to Schedule A to Participation Agreement among OCC
Accumulation Trust, American Enterprise Life Insurance Company and OCC
Distributors, dated October 15, 1997, is filed electronically herewith.
8.4 Copy of Participation Agreement among Oppenheimer Trust and American
Enterprise Life Insurance Company, dated October 30, 1997, is filed
electronically herewith.
8.5 Copy of Participation Agreement among AIM Variable Insurance Funds and
American Enterprise Life Insurance Company, dated October 30, 1997, is
filed electronically herewith.
8.6 Copy of Participation Agreement among Janus Aspen Series and American
Enterprise Life Insurance Company, dated October 8, 1997, filed
electronically as Exhibit 8.6 to Post-Effective Amendment No. 9 to
Registration Statement No. 33-54471, is incorporated herein
by reference.
8.7 Copy of Reinsurance Agreement, dated October 16, 1997, filed
electronically as Exhibit 8.7 to Post-Effective Amendment No. 9 to
Registration Statement No. 33-54471, is incorporated herein
by reference.
9. Opinion of counsel and consent to its use as to the legality of the
securities being registered is filed electronically herewith.
10. Consent of Independent Auditors is filed electronically herewith.
11. Financial Statement Schedules and Report of Independent Auditors are
filed electronically herewith.
Financial Statement Schedules:
Schedule I - Consolidated Summary Of Investments Other Than
Investments In Related Parties
Schedule V - Valuation and Qualifying Accounts
Report of Independent Auditors dated February 5, 1998.
All other schedules to the Financial Statements required by Article 7
of Regulation S-X are not required under the related instructions or
are inapplicable and, therefore, have been omitted.
12. Not applicable.
<PAGE>
13. Copy of schedule for computation of each performance quotation provided
in the Registration Statement in response to Item 21, filed
electronically as Exhibit 13 to the Initial Registration Statement No.
33-54471, filed on or about July 5, 1994, is incorporated herein by
reference.
14. Financial Data Schedules are filed electronically herewith.
15.1. Power of Attorney to sign Amendments to this Registration Statement,
dated March 28, 1997, filed electronically as Exhibit 15 to
Post-Effective Amendment No. 7 to Registration Statement No. 33-54471,
is incorporated herein by reference.
15.2. Power of Attorney to sign Amendments to this Registration Statement,
dated April 9, 1998, is filed electronically herewith.
<TABLE>
<CAPTION>
Item 25. Directors and Officers of the Depositor (American Enterprise Life Insurance Company)
Positions and Offices with Depositor
Name Principal Business Address
- ------------------------------------ -------------------------------------- -------------------------------------
<S> <C> <C>
James E. Choat IDS Tower 10 Director, President and Chief
Minneapolis, MN 55440 Executive Officer
Mark A. Ernst IDS Tower 10 Director
Minneapolis, MN 55440
Lorraine R. Hart IDS Tower 10 Vice President-Investments
Minneapolis, MN 55440
Jeffrey S. Horton IDS Tower 10 Vice President and Treasurer
Minneapolis, MN 55440
Richard W. Kling IDS Tower 10 Director and Chairman of the Board
Minneapolis, MN 55440
Bruce A. Kohn IDS Tower 10 Vice President, Group Counsel and
Minneapolis, MN 55440 Assistant Secretary
Paul S. Mannweiler Indianapolis Power and Light Director
One Monument Circle
P.O. Box 1595
Indianapolis, IN 46206-1595
Mary Ellyn Minenko IDS Tower 10 Vice President, Group Counsel and
Minneapolis, MN 55440 Assistant Secretary
<PAGE>
Item 25. Directors and Officers of the Depositor (American Enterprise Life Insurance Company)
Cont'd
Positions and Offices with Depositor
Name Principal Business Address
- ------------------------------------ -------------------------------------- -------------------------------------
Stuart A. Sedlacek IDS Tower 10 Director and Executive Vice
Minneapolis, MN 55440 President-Assured Assets
F. Dale Simmons IDS Tower 10 Vice President-Real Estate Loan
Minneapolis, MN 55440 Management
William A. Stoltzmann IDS Tower 10 Director, Vice President, General
Minneapolis, MN 55440 Counsel and Secretary
Philip C. Wentzel IDS Tower 10 Vice President and Controller
Minneapolis, MN 55440
</TABLE>
Item 26. Persons Controlled by or Under Common Control with the
Depositor or Registrant
American Enterprise Life Insurance Company is a wholly-owned
subsidiary of IDS Life Insurance Company which is a
wholly-owned subsidiary of American Express Financial
Corporation. American Express Financial Corporation is a
wholly-owned subsidiary of American Express Company (American
Express).
The following list includes the names of major subsidiaries of
American Express.
<TABLE>
<CAPTION>
Jurisdiction of
Name of Subsidiary Incorporation
<S> <C>
I. Travel Related Services
American Express Travel Related Services Company, Inc. New York
II. International Banking Services
American Express Bank Ltd. Connecticut
III. Companies engaged in Financial Services
Advisory Capital Strategies Group Inc. Minnesota
American Centurion Life Assurance Company New York
American Enterprise Investment Services Inc. Minnesota
American Enterprise Life Insurance Company Indiana
American Express Asset Management Group Inc. Minnesota
American Express Asset Management International Inc. Delaware
American Express Asset Management International (Japan) Ltd. Japan
<PAGE>
Item 26. Persons Controlled by or Under Common Control with the Depositor or Registrant (Continued)
Jurisdiction of
Name of Subsidiary Incorporation
American Express Asset Management Ltd. England
American Express Client Service Corporation Minnesota
American Express Corporation Delaware
American Express Financial Advisors Inc. Delaware
American Express Financial Corporation Minnesota
Delaware
American Express Insurance Agency of Arizona Inc. Arizona
American Express Insurance Agency of Idaho Inc. Idaho
American Express Insurance Agency of Nevada Inc. Nevada
American Express Insurance Agency of Oregon Inc. Oregon
American Express Minnesota Foundation Minnesota
American Express Property Casualty Insurance Agency of Kentucky Inc. Kentucky
American Express Property Casualty Insurance Agency of Maryland Inc. Maryland
American Express Property Casualty Insurance Agency of Pennsylvania Inc. Pennsylvania
American Express Trust Company Minnesota
American Partners Life Insurance Company Arizona
IDS Cable Corporation Minnesota
IDS Cable II Corporation Minnesota
IDS Capital Holdings Inc. Minnesota
IDS Certificate Company Delaware
IDS Futures Corporation Minnesota
IDS Insurance Agency of Alabama Inc. Alabama
IDS Insurance Agency of Arkansas Inc. Arkansas
IDS Insurance Agency of Massachusetts Inc. Massachusetts
IDS Insurance Agency of New Mexico Inc. New Mexico
IDS Insurance Agency of North Carolina Inc. North Carolina
IDS Insurance Agency of Utah Inc. Utah
IDS Insurance Agency of Wyoming Inc. Wyoming
IDS Life Insurance Company Minnesota
IDS Life Insurance Company of New York New York
IDS Management Corporation Minnesota
IDS Partnership Services Corporation Minnesota
IDS Plan Services of California, Inc. Minnesota
IDS Property Casualty Insurance Company Wisconsin
IDS Real Estate Services, Inc. Delaware
IDS Realty Corporation Minnesota
IDS Sales Support Inc. Minnesota
IDS Securities Corporation Delaware
Investors Syndicate Development Corp. Nevada
North Dakota Public Employee Payment Company Minnesota
</TABLE>
Item 27. Number of Contract owners
As of February 28, 1998, there were 1,495 contract owners of
qualified contracts and there were 1,045 owners of
non-qualified contracts.
<PAGE>
Item 28. Indemnification
The By-Laws of the depositor provide that the Corporation
shall have the power to indemnify a director, officer, agent
or employee of the Corporation pursuant to the provisions of
applicable statues or pursuant to contract.
The Corporation may purchase and maintain insurance on behalf
of any director, officer, agent or employee of the Corporation
against any liability asserted against or incurred by the
director, officer, agent or employee in such capacity or
arising out of the director's, officer's, agent's or
employee's status as such, whether or not the Corporation
would have the power to indemnify the director, officer, agent
or employee against such liability under the provisions of
applicable law.
The By-Laws of the depositor provide that it shall indemnify a
director, officer, agent or employee of the depositor pursuant
to the provisions of applicable statutes or pursuant to
contract.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it
is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
<PAGE>
Item 29. Principal Underwriters.
(a) American Express Financial Advisors acts as principal underwriter for
the following investment companies:
IDS Bond Fund, Inc.; IDS California Tax-Exempt Trust; IDS Discovery
Fund, Inc.; IDS Equity Select Fund, Inc.; IDS Extra Income Fund, Inc.;
IDS Federal Income Fund, Inc.; IDS Global Series, Inc.; IDS Growth
Fund, Inc.; IDS High Yield Tax-Exempt Fund, Inc.; IDS International
Fund, Inc.; IDS Investment Series, Inc.; IDS Managed Retirement Fund,
Inc.; IDS Market Advantage Series, Inc.; IDS Money Market Series, Inc.;
IDS New Dimensions Fund, Inc.; IDS Precious Metals Fund, Inc.; IDS
Progressive Fund, Inc.; IDS Selective Fund, Inc.; IDS Special
Tax-Exempt Series Trust; IDS Stock Fund, Inc.; IDS Strategy Fund, Inc.;
IDS Tax-Exempt Bond Fund, Inc.; IDS Tax-Free Money Fund, Inc.; IDS
Utilities Income Fund, Inc., Growth Trust; Growth and Income Trust;
Income Trust, Tax-Free Income Trust, World Trust and IDS Certificate
Company.
(b) As to each director, officer or partner of the principal underwriter:
<TABLE>
<CAPTION>
Name and Principal Business Address Position and Offices with Positions with Offices with
Underwriter Registrant
- ----------------------------------------- ------------------------------------ -----------------------------
<S> <C> <C>
Ronald. G. Abrahamson Vice President - Service Quality None
IDS Tower 10 and Reengineering
Minneapolis, MN 55440
Douglas A. Alger Senior Vice President - Human None
IDS Tower 10 Resources
Minneapolis, MN 55440
Peter J. Anderson Senior Vice President - Investment Vice President
IDS Tower 10 Operations
Minneapolis, MN 55440
Ward D. Armstrong Vice President - American Express None
IDS Tower 10 Retirement Services
Minneapolis, MN 55440
John M. Baker Vice President - Plan Sponsor None
IDS Tower 10 Services
Minneapolis, MN 55440
Joseph M. Barksy, III Vice President - Senior Portfolio None
IDS Tower 10 Manager
Minneapolis, MN 55440
Robert C. Basten Vice President - Tax and Business None
IDS Tower 10 Services
Minneapolis, MN 55440
<PAGE>
Item 29(b). As to each director, officer or partner of the principal underwriter (American Express
Financial Advisors):
(cont.)
Name and Principal Business Address Position and Offices with Positions with Offices with
Underwriter Registrant
- ----------------------------------------- ------------------------------------ -----------------------------
Timothy V. Bechtold Vice President - Risk Management None
IDS Tower 10 Products
Minneapolis, MN 55440
John D. Begley Group Vice President - Ohio/Indiana None
Suite 100
7760 Olentangy River Rd.
Columbus, OH 43235
Jack A. Benjamin Group Vice President - Greater None
Suite 200 Pennsylvania
3500 Market Street
Camp Hill, PA 17011
Brent L. Bisson Group Vice President - Los Angeles None
Suite 900 Metro
E. Westside Twr
11835 West Olympic Blvd.
Los Angeles, CA 90064
John C. Boeder Vice President - Mature Market None
IDS Tower 10 Group
Minneapolis, MN 55440
Walter K. Booker Group Vice President - New Jersey None
IDS Tower 10
Minneapolis, MN 55440
Bruce J. Bordelon Group Vice President - Gulf States None
Galleria One Suite 1900
Galleria Blvd.
Metairie, LA 70001
Charles R. Branch Group Vice President - Northwest None
Suite 200
West 111 North River Dr.
Spokane, WA 99201
Douglas W. Brewers Vice President - Sales Support None
IDS Tower 10
Minneapolis, MN 55440
Karl J. Breyer Senior Vice President - Law and None
IDS Tower 10 Corporate Affairs
Minneapolis, MN 55440
<PAGE>
Item 29(b). As to each director, officer or partner of the principal underwriter (American Express
Financial Advisors):
(cont.)
Name and Principal Business Address Position and Offices with Positions with Offices with
Underwriter Registrant
- ----------------------------------------- ------------------------------------ -----------------------------
Daniel J. Candura Vice President - Marketing Support None
IDS Tower 10
Minneapolis, MN 55440
Cynthia M. Carlson Vice President - American Express None
IDS Tower 10 Securities Services
Minneapolis, MN 55440
Mark W. Carter Senior Vice President and Chief None
IDS Tower 10 Marketing Officer
Minneapolis, MN 55440
James E. Choat Senior Vice President - Director, President and
IDS Tower 10 Institutional Products Group Chief Executive Officer
Minneapolis, MN 55440
Kenneth J. Ciak Vice President and General Manager None
IDS Property Casualty - DS Property Casualty
1400 Lombardi Avenue
Green Bay, WI 54304
Paul A. Connolly Vice President - Advisor Staffing, None
IDS Tower 10 Training and Support
Minneapolis, MN 55440
Roger C. Corea Group Vice President - Upstate New None
290 Woodcliff Drive York
Fairport, NY 14450
Henry J. Cormier Group Vice President - Connecticut None
Commerce Center One
333 East River Drive
East Hartford, CT 06108
John M. Crawford Group Vice President - None
Suite 200 Arkansas/Springfield/Memphis
10800 Financial Ctr Pkwy
Little Rock, AR 72211
Kevin F. Crowe Group Vice President - None
Suite 312 Carolinas/Eastern Georgia
7300 Carmel Executive Pk
Charlotte, NC 28226
Colleen Curran Vice President and General Counsel None
IDS Tower 10
Minneapolis, MN 55440
<PAGE>
Item 29(b). As to each director, officer or partner of the principal underwriter (American Express
Financial Advisors):
(cont.)
Name and Principal Business Address Position and Offices with Positions with Offices with
Underwriter Registrant
- ----------------------------------------- ------------------------------------ -----------------------------
Regenia David Vice President - Systems Services None
IDS Tower 10
Minneapolis, MN 55440
Luz Maria Davis Vice President - Communications None
IDS Tower 10
Minneapolis, MN 55440
Scott M. DiGiammarino Group Vice President - None
Suite 500 Washington/Baltimore
8045 Leesburg Pike
Vienna, VA 22182
Bradford L. Drew Group Vice President - Eastern None
Two Datran Center Florida
Penthouse One B
9130 S. Dadeland Blvd.
Miami, FL 33156
Gordon L. Eid Senior Vice President, General None
IDS Tower 10 Counsel and Chief Compliance
Minneapolis, MN 55440 Officer
Robert M. Elconin Vice President - Government None
IDS Tower 10 Relations
Minneapolis, MN 55440
Mark A. Ernst Senior Vice President - Third Director
IDS Tower 10 Party Distribution
Minneapolis, MN 55440
Joseph Evanovich Jr. Group Vice President - None
One Old Mill Nebraska/Iowa/Dakotas
101 South 108th Avenue
Omaha, NE 68154
Louise P. Evenson Group Vice President - San None
Suite 200 Francisco Bay Area
1333 N. California Blvd.
Walnut Creek, CA 94596
Gordon M. Fines Vice President - Mutual Fund None
IDS Tower 10 Equity Investments
Minneapolis, MN 55440
Douglas L. Forsberg Vice President - Institutional None
IDS Tower 10 Products Group
Minneapolis, MN 55440
<PAGE>
Item 29(b). As to each director, officer or partner of the principal underwriter (American Express
Financial Advisors):
(cont.)
Name and Principal Business Address Position and Offices with Positions with Offices with
Underwriter Registrant
- ----------------------------------------- ------------------------------------ -----------------------------
Jeffrey P. Fox Vice President and Corporate None
IDS Tower 10 Controller
Minneapolis, MN 55440
William P. Fritz Group Vice President - Northern None
Suite 160 Missouri
12855 Flushing Meadows Dr.
St. Louis, MO 63131
Carl W. Gans Group Vice President - Twin City None
8500 Tower Suite 1770 Metro
8500 Normandale Lake Blvd.
Bloomington, MN 55437
David A. Hammer Vice President and Marketing None
IDS Tower 10 Controller
Minneapolis, MN 55440
Teresa A. Hanratty Group Vice President - Northern None
Suites 6&7 New England
169 South River Road
Bedford, NH 03110
Robert L. Harden Group Vice President - Boston Metro None
Two Constitution Plaza
Boston, MA 02129
Lorraine R. Hart Vice President - Insurance Vice President, Investments
IDS Tower 10 Investments
Minneapolis, MN 55440
Scott A. Hawkinson Vice President - Assured Assets None
IDS Tower 10 Product Development and Management
Minneapolis, MN 55440
Brian M. Heath Group Vice President - North Texas None
Suite 150
801 E. Campbell Road
Richardson, TX 75081
Janis K. Heaney Vice President - Incentive None
IDS Tower 10 Compensation
Minneapolis, MN 55440
James G. Hirsh Vice President and Assistant None
IDS Tower 10 General Counsel
Minneapolis, MN 55440
<PAGE>
Item 29(b). As to each director, officer or partner of the principal underwriter (American Express
Financial Advisors):
(cont.)
Name and Principal Business Address Position and Offices with Positions with Offices with
Underwriter Registrant
- ----------------------------------------- ------------------------------------ -----------------------------
Jon E. Hjelm Group Vice President - Rhode None
310 Southbridge Street Island/Central - Western
Auburn, MA 01501 Massachusetts
David J. Hockenberry Group Vice President - Eastern None
30 Burton Hills Blvd. Tennessee
Suite 175
Nashville, TN 37215
Jeffrey S. Horton Vice President and Treasurer None
IDS Tower 10
Minneapolis, MN 55440
David R. Hubers Chairman, President and Chief Board member
IDS Tower 10 Executive Officer
Minneapolis, MN 55440
Martin G. Hurwitz Vice President - Senior Portfolio None
IDS Tower 10 Manager
Minneapolis, MN 55440
James M. Jensen Vice President - Insurance Product None
IDS Tower 10 Development and Management
Minneapolis, MN 55440
Marietta L. Johns Senior Vice President - Field None
IDS Tower 10 Management
Minneapolis, MN 55440
Nancy E. Jones Vice President - Business None
IDS Tower 10 Development
Minneapolis, MN 55440
James E. Kaarre Vice President - Marketing None
IDS Tower 10 Promotions
Minneapolis, MN 55440
Matthew N. Karstetter Vice President - Investment None
IDS Tower 10 Accounting
Minneapolis, MN 55440
Linda B. Keene Vice President - Market Development None
IDS Tower 10
Minneapolis, MN 55440
G. Michael Kennedy Vice President - Investment None
IDS Tower 10 Services and Investment Research
Minneapolis, MN 55440
<PAGE>
Item 29(b). As to each director, officer or partner of the principal underwriter (American Express
Financial Advisors):
(cont.)
Name and Principal Business Address Position and Offices with Positions with Offices with
Underwriter Registrant
- ----------------------------------------- ------------------------------------ -----------------------------
Susan D. Kinder Senior Vice President - None
IDS Tower 10 Distribution Services
Minneapolis, MN 55440
Brian Kleinberg Executive Vice President - None
IDS Tower 10 Financial Direct
Minneapolis, MN 55440
Richard W. Kling Senior Vice President - Risk Director and Chairman of
IDS Tower 10 Management Products the Board
Minneapolis, MN 55440
Paul F. Kolkman Vice President - Actuarial Finance None
IDS Tower 10
Minneapolis, MN 55440
Claire Kolmodin Vice President - Service Quality None
IDS Tower 10
Minneapolis, MN 55440
David S. Kreager Group Vice President - Greater None
Suite 108 Michigan
Trestle Bridge V
5126 Lovers Lane
Kalamazoo, MI 49002
Steven C. Kumagai Director and Senior Vice President None
IDS Tower 10 - Field Management and Business
Minneapolis, MN 55440 Systems
Mitre Kutanovski Group Vice President - Chicago None
Suite 680 Metro
8585 Broadway
Merrillville, IN 48410
Edward Labenski Jr. Vice President - Senior Portfolio None
IDS Tower 10 Manager
Minneapolis, MN 55440
Kurt A. Larson Vice President - Senior Portfolio None
IDS Tower 10 Manager
Minneapolis, MN 55440
Lori J. Larson Vice President - Brokerage and None
IDS Tower 10 Direct Services
Minneapolis, MN 55440
<PAGE>
Item 29(b). As to each director, officer or partner of the principal underwriter (American Express
Financial Advisors):
(cont.)
Name and Principal Business Address Position and Offices with Positions with Offices with
Underwriter Registrant
- ----------------------------------------- ------------------------------------ -----------------------------
Daniel E. Laufenberg Vice President and Chief U.S. None
IDS Tower 10 Economist
Minneapolis, MN 55440
Richard J. Lazarchic Vice President - Senior Portfolio None
IDS Tower 10 Manager
Minneapolis, MN 55440
Peter A. Lefferts Senior Vice President - Corporate None
IDS Tower 10 Strategy and Development
Minneapolis, MN 55440
Douglas A. Lennick Director and Executive Vice None
IDS Tower 10 President - Private Client Group
Minneapolis, MN 55440
Mary J. Malevich Vice President - Senior Portfolio None
IDS Tower 10 Manager
Minneapolis, MN 55440
Fred A. Mandell Vice President - Field Marketing None
IDS Tower 10 Readiness
Minneapolis, MN 55440
Daniel E. Martin Group Vice President - Pittsburgh None
Suite 650 Metro
5700 Corporate Drive
Pittsburgh, PA 15237
Thomas W. Medcalf Vice President - Senior Portfolio None
IDS Tower 10 Manager
Minneapolis, MN 55440
William C. Melton Vice President - International None
IDS Tower 10 Research and Chief International
Minneapolis, MN 55440 Economist
William P. Miller Vice President and Senior None
IDS Tower 10 Portfolio Manager
Minneapolis, MN 55440
James A. Mitchell Executive Vice President - None
IDS Tower 10 Marketing and Products
Minneapolis, MN 55440
Pamela J. Moret Vice President - Variable Assets None
IDS Tower 10
Minneapolis, MN 55440
<PAGE>
Item 29(b). As to each director, officer or partner of the principal underwriter (American Express
Financial Advisors):
(cont.)
Name and Principal Business Address Position and Offices with Positions with Offices with
Underwriter Registrant
- ----------------------------------------- ------------------------------------ -----------------------------
Alan D. Morgenstern Group Vice President - Central None
Suite 200 California/Western Nevada
3500 Market Street
Camp Hill, NJ 17011
Barry J. Murphy Senior Vice President - Client None
IDS Tower 10 Service
Minneapolis, MN 55440
Mary Owens Neal Vice President - Mature Market None
IDS Tower 10 Segment
Minneapolis, MN 55440
Robert J. Neis Vice President - Technology None
IDS Tower 10 Services
Minneapolis, MN 55440
Thomas V. Nicolosi Group Vice President - New York None
Suite 220 Metro Area
500 Mamaroneck Avenue
Harrison, NY 10528
James R. Palmer Vice President - Taxes None
IDS Tower 10
Minneapolis, MN 55440
Carla P. Pavone Vice President - Compensation and None
IDS Tower 10 Field Administration
Minneapolis, MN 55440
Thomas P. Perrine Senior Vice President - Group None
IDS Tower 10 Relationship Leader / AXP
Minneapolis, MN 55440 Technologies Financial Services
Susan B. Plimpton Vice President - Marketing Services None
IDS Tower 10
Minneapolis, MN 55440
Larry M. Post Group Vice President - None
One Tower Bridge Philadelphia Metro
100 Front Street, 8th Fl
West Conshohocken, PA 19428
Ronald W. Powell Vice President and Assistant None
IDS Tower 10 General Counsel
Minneapolis, MN 55440
<PAGE>
Item 29(b). As to each director, officer or partner of the principal underwriter (American Express
Financial Advisors):
(cont.)
Name and Principal Business Address Position and Offices with Positions with Offices with
Underwriter Registrant
- ----------------------------------------- ------------------------------------ -----------------------------
James M. Punch Vice President - Special Projects None
IDS Tower 10
Minneapolis, MN 55440
Frederick C. Quirsfeld Senior Vice President - Fixed None
IDS Tower 10 Income
Minneapolis, MN 55440
Debra J. Rabe Vice President - Financial Planning None
IDS Tower 10
Minneapolis, MN 55440
R. Daniel Richardson Group Vice President - Southern None
Suite 800 Texas
Arboretum Plaza One
9442 Capital of Texas Hwy. N
Austin, TX 78759
ReBecca K. Roloff Senior Vice President - Field None
IDS Tower 10 Management and Financial Advisor
Minneapolis, MN 55440 Service
Stephen W. Roszell Senior Vice President - None
IDS Tower 10 Institutional
Minneapolis, MN 55440
Max G. Roth Group Vice President - None
Suite 201 S. IDS Ctr Wisconsin/Upper Michigan
1400 Lombardi Avenue
Green Bay, WI 54304
John P. Ryan Vice President and General Auditor None
IDS Tower 10
Minneapolis, MN 55440
Erven A. Samsel Senior Vice President - Field None
45 Braintree Hill Park Management
Suite 402
Braintree, MA 02184
Russell L. Scalfano Group Vice President - None
Suite 201 Illinois/Indiana/Kentucky
101 Plaza East Blvd.
Evansville, IN 47715
<PAGE>
Item 29(b). As to each director, officer or partner of the principal underwriter (American Express
Financial Advisors):
(cont.)
Name and Principal Business Address Position and Offices with Positions with Offices with
Underwriter Registrant
- ----------------------------------------- ------------------------------------ -----------------------------
William G. Scholz Group Vice President - Arizona/Las None
Suite 205 Vegas
7333 E. Doubletree Ranch Rd
Scottsdale, AZ 85258
Stuart A. Sedlacek Senior Vice President and Chief Director and Executive Vice
IDS Tower 10 Financial Officer President, Assured Assets
Minneapolis, MN 55440
Donald K. Shanks Vice President - Property Casualty None
IDS Tower 10
Minneapolis, MN 55440
F. Dale Simmons Vice President - Senior Portfolio Vice President, Real Estate
IDS Tower 10 Manager, Insurance Investments Loan Management
Minneapolis, MN 55440
Judy P. Skoglund Vice President - Human Resources None
IDS Tower 10 and Organization Development
Minneapolis, MN 55440
Ben C. Smith Vice President - Workplace None
IDS Tower 10 Marketing
Minneapolis, MN 55440
William A. Smith Vice President and Controller - None
IDS Tower 10 Private Client Group
Minneapolis, MN 55440
James B. Solberg Group Vice President - Eastern None
466 Westdale Mall Iowa Area
Cedar Rapids, IA 52404
Bridget Sperl Vice President - Geographic None
IDS Tower 10 Service Teams
Minneapolis, MN 55440
Paul J. Stanislaw Group Vice President - Southern None
Suite 1100 California
Two Park Plaza
Irvine, CA 92714
Lois A. Stilwell Group Vice President - Outstate None
Suite 433 Minnesota Area/North
9900 East Bren Road Dakota/Western Wisconsin
Minnetonka, MN 55343
<PAGE>
Item 29(b). As to each director, officer or partner of the principal underwriter (American Express
Financial Advisors):
(cont.)
Name and Principal Business Address Position and Offices with Positions with Offices with
Underwriter Registrant
- ----------------------------------------- ------------------------------------ -----------------------------
William A. Stoltzmann Vice President and Assistant Director, Vice President,
IDS Tower 10 General Counsel General Counsel and
Minneapolis, MN 55440 Secretary
James J. Strauss Vice President - Corporate None
IDS Tower 10 Planning and Analysis
Minneapolis, MN 55440
Jeffrey J. Stremcha Vice President - Information None
IDS Tower 10 Resource Management/ISD
Minneapolis, MN 55440
Barbara Stroup Stewart Vice President - Channel None
IDS Tower 10 Development
Minneapolis, MN 55440
Craig P. Taucher Group Vice President - None
Suite 150 Orlando/Jacksonville
4190 Belfort Road
Jacksonville, FL 32216
Neil G. Taylor Group Vice President - None
Suite 425 Seattle/Tacoma
101 Elliott Avenue West
Seattle, WA 98119
Peter S. Velardi Group Vice President - None
Suite 180 Atlanta/Birmingham
1200 Ashwood Parkway
Atlanta, GA 30338
Charles F. Wachendorfer Group Vice President - Denver/Salt None
Suite 100 Lake City/Albuquerque
Stanford Plaza II
7979 East Tufts Ave. Pkwy
Denver, CO 80237
Wesley W. Wadman Vice President - Senior Portfolio None
IDS Tower 10 Manager
Minneapolis, MN 55440
Norman Weaver Jr. Senior Vice President - Field None
1010 Main St, Suite 2B Management
Huntington Beach, CA 92648
Michael L. Weiner Vice President - Tax Research and None
IDS Tower 10 Audit
Minneapolis, MN 55440
<PAGE>
Item 29(b). As to each director, officer or partner of the principal underwriter (American Express
Financial Advisors):
(cont.)
Name and Principal Business Address Position and Offices with Positions with Offices with
Underwriter Registrant
- ----------------------------------------- ------------------------------------ -----------------------------
Lawrence J. Welte Vice President - Investment None
IDS Tower 10 Administration
Minneapolis, MN 55440
Jeffrey M. Welter Vice President - Equity and Fixed None
IDS Tower 10 Income Trading
Minneapolis, MN 55440
Thomas L. White Group Vice President - Cleveland None
Suite 200 Metro
28601 Chagrin Blvd.
Woodmere, OH 44122
Eric S. Williams Group Vice President - Virginia None
Suite 250
3951 Westerre Parkway
Richmond, VA 23233
William J. Williams Group Vice President - Western None
Two North Tamiami Trail Florida
Suite 702
Sarasota, FL 34236
Edwin M. Wistrand Vice President and Assistant None
IDS Tower 10 General Counsel
Minneapolis, MN 55440
Michael D. Wolf Vice President - Senior Portfolio None
IDS Tower 10 Manager
Minneapolis, MN 55440
Michael R. Woodward Senior Vice President - Field None
32 Ellicott St. Management
Suite 100
Batavia, NY 14020
</TABLE>
<PAGE>
Item 29(c).
<TABLE>
<CAPTION>
Net Underwriting
Name of Principal Discounts and Compensation on Brokerage
Underwriter Commissions Redemption Commissions Compensation
<S> <C> <C> <C> <C>
American Express $1,798,969 $79,195 None None
Financial Advisors
Inc.
</TABLE>
Item 30. Location of Accounts and Records
American Enterprise Life Insurance Company
IDS Tower 10
Minneapolis, MN 55402
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) Registrant undertakes that it will file a post-effective
amendment to this registration statement as frequently as is
necessary to ensure that the audited financial statements in
the registration statement are never more than 16 months old
for so long as payments under the variable annuity contracts
may be accepted.
(b) Registrant undertakes that it will include either (1) as part
of any application to purchase a contract offered by the
prospectus, a space that an applicant can check to request a
Statement of Additional Information, or (2) a post card or
similar written communication affixed to or included in the
prospectus that the applicant can remove to send for a
Statement of Additional Information.
(c) Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made
available under this Form promptly upon written or oral
request to American Enterprise Life Contract Owner Service at
the address or phone number listed in the prospectus.
(d) The sponsoring insurance company represents that the fees and
charges deducted under the contract, in the aggregate, are
reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by the
insurance company.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, American Enterprise Life Insurance Company, on behalf of the Registrant
certifies that it meets all of the requirements for effectiveness of this
Amendment to its Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Minneapolis, and State of Minnesota, on the 30th day
of April, 1998.
AMERICAN ENTERPRISE VARIABLE ANNUITY ACCOUNT
(Registrant)
By American Enterprise Life Insurance Company
(Sponsor)
By /s/ James E. Choat*
James E. Choat
President and Chief Executive Officer
As required by the Securities Act of 1933, this Amendment to the Registration
Statement has been signed by the following persons in the capacities indicated
on the 30th day of April, 1998.
Signature Title
/s/ James E. Choat* Director, President and
James E. Choat Chief Executive Officer
_____________________ Director
Mark A. Ernst
/s/ Jeffrey S. Horton** Vice President and Treasurer
Jeffrey S. Horton
/s/ Richard W. Kling* Chairman of the Board
Richard W. Kling
/s/ Paul S. Mannweiler* Director
Paul S. Mannweiler
/s/ Stuart A. Sedlacek* Director and Executive Vice
Stuart A. Sedlacek President-Assured Assets
/s/ William A. Stoltzmann* Director, Vice President, General
William A. Stoltzmann Counsel and Secretary
<PAGE>
Signature Title
/s/ Philip C. Wentzel** Vice President and Controller
Philip C. Wentzel
*Signed pursuant to Power of Attorney, dated March 28, 1997, filed
electronically as Exhibit 15 to Post-Effective Amendment No. 7 to Registration
Statement No. 33-54471, filed on or about April 23, 1997, incorporated herein by
reference.
**Signed pursuant to Power of Attorney, dated April 9, 1998, filed
electronically herewith.
By: _________________________
Colin M. Lancaster
<PAGE>
CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 10 TO REGISTRATION
STATEMENT NO. 33-54471
This Amendment to the Registration Statement is comprised of the following
papers and documents:
The Cover Page.
Cross-reference sheet.
Part A.
The prospectus.
Part B.
Statement of Additional Information.
Financial Statements.
Part C.
Other Information.
The signatures.
Exhibits.
American Enterprise Variable Annuity Account
File No. 33-54471/811-7195
EXHIBIT INDEX
Exhibit 8.2(c) Copy of Amendment 2 to Schedule A to Participation
Agreement among Putnam Capital Manager Trust, Putnam Mutual
Funds Corp. and American Enterprise Life Insurance Company
Exhibit 8.3(b) Copy of Amendment 1 to Schedule A to Participation
Agreement among OCC Accumulation Trust, American
Enterprise Life Insurance Company and OCC Distributors
Exhibit 8.4 Copy of Participation Agreement among Oppenheimer Trust
and American Enterprise Life Insurance Company
Exhibit 8.5 Copy of Participation Agreement among AIM Variable
Insurance Funds and American Enterprise Life Insurance
Company
Exhibit 9 Opinion of counsel and consent to its use as to the
legality of the securities being registered
Exhibit 10 Consent of Independent Auditors
Exhibit 11 Financial Statement Schedules and Report of Independent
Auditors
Exhibit 14 Financial Data Schedules
Exhibit 15.2 Power of Attorney to sign Amendments to this Registration
Statement, dated April 9, 1998
AMENDMENT 2 TO SCHEDULE A TO
PARTICIPATION AGREEMENT
Among
PUTNAM CAPITAL MANAGER TRUST
(now known as Putnam Variable Trust)
PUTNAM MUTUAL FUNDS CORP.
and
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
THIS AMENDMENT 2 TO SCHEDULE A TO PARTICIPATION AGREEMENT (Amendment 2 to
Schedule A) is made and entered into this 30th day of October, 1997 by and among
Putnam Variable Trust (formerly Putnam Capital Manager Trust) (the "Fund");
Putnam Mutual Funds Corp. (the "Distributor"); and American Enterprise Life
Insurance Company (the "Company").
WHEREAS, the Company, the Fund and the Distributor are parties to the
Participation Agreement dated January 16th, 1995, as amended April 30th, 1997
(the "Agreement"); and
WHEREAS, the parties now desire to amend Schedule A to the Agreement so that an
enhanced flexible premium variable annuity contract may invest in the Authorized
Funds;
NOW, THEREFORE, in consideration of their mutual promises, the Company, the Fund
and the Distributor agree as follows:
<PAGE>
1. Amendment to Schedule A. In accordance with the terms of the Agreement, the
parties hereby amend Schedule A to read as follows:
Schedule A
Contracts
American Enterprise Variable Annuity Account, established July 15, 1987.
AEL Personal Portfoliosm and AEL Personal Portfolio Plus offer the
following Authorized Funds as investment options:
Putnam VT Diversified Income Fund
Putnam VT Growth and Income fund
Putnam VT New Opportunities Fund
Putnam VT High Yield Fund
AEL Preferredsm, distributed through TCF, offers the following
Authorized Funds as investment options:
Putnam VT Diversified Income Fund
Putnam VT Growth and Income Fund
Putnam VT New Opportunities Fund
Putnam VT Voyager Fund
Putnam VT Global Growth Fund
2. Counterparts. This Amendment 2 to Schedule A may be executed simultaneously
in two or more counterparts, each of which taken together will constitute
one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment 2 to
Schedule A to be executed in its name and behalf by its duly authorized
representatives as of the date specified above.
PUTNAM VARIABLE TRUST PUTNAM MUTUAL FUNDS CORP.
By:/s/ John R. Vereni By:/s/ Jeffrey M. Miller
Name: John R. Vereni Name: Jeffrey M. Miller
Title: Vice President Title: Managing Director
AMERICAN ENTERPRISE LIFE
INSURANCE COMPANY ATTEST:
By:/s/ Stuart A. Sedlacek By:/s/ William A. Stoltzmann
Name: Stuart A. Sedlacek Name: William A. Stoltzmann
Title: Executive Vice President Title: Vice President
AMENDMENT NO. 1 TO PARTICIPATION AGREEMENT
by and among
OCC ACCUMULATION TRUST,
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY and
OCC DISTRIBUTORS
This is an amendment to the February 21, 1995 Participation Agreement
("Agreement") among OCC Accumulation Trust (formerly Quest for Value
Accumulation Trust), American Enterprise Life Insurance Company and OCC
Distributors (formerly Quest for Value Distributors).
Schedule 1 to the Agreement is amended to read as follows:
The following separate accounts of American Enterprise Life Insurance
Company are permitted in accordance with the provisions of this
Agreement to invest in Portfolios of the Fund shown in Schedule 2:
American Enterprise Variable Annuity Account, established July 15, 1987
as used to fund the flexible premium variable annuity contracts known
as the AEL Personal Portfoliosm and AEL Personal Portfolio Plus.
Schedule 2 to the Agreement is amended to read as follows:
The separate account(s) shown on Schedule 1 may invest in the following
Portfolios of the OCC Accumulation Trust:
Managed Portfolio
U.S. Government Income Portfolio
Small Cap Portfolio
Equity Portfolio
OCC ACCUMULATION TRUST OCC DISTRIBUTORS
Signature: /s/ Deborah Kuback Signature: /s/ Thomas E. Duggan
By: Deborah Kuback By: Thomas E. Duggan
Title: Secretary Title: Secretary
<PAGE>
AMERICAN ENTERPRISE LIFE ATTEST:
INSURANCE COMPANY
Signature: /s/ Ryan Larson Signature: /s/ William A. Stoltzmann
By: Ryan Larson By: William A. Stoltzmann
Title: VP - Product Development Title: Vice President
------------------------------ --------------------------
Date: Oct. 15 , 1997
----------------------
Exhibit 8.4
PARTICIPATION AGREEMENT
Among
OPPENHEIMER VARIABLE ACCOUNT FUNDS,
OPPENHEIMERFUNDS, INC.
and
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
THIS AGREEMENT (the "Agreement") made and entered into as of the 30th
day of October, 1997 by and among American Enterprise Life Insurance Company
(hereinafter the "Company"), on its own behalf and on behalf of each separate
account of the Company named in Schedule 1 to this Agreement, as may be amended
from time to time by mutual consent (hereinafter collectively the "Accounts"),
Oppenheimer Variable Account Funds (hereinafter the "Fund") and
OppenheimerFunds, Inc.
(hereinafter the "Adviser").
WHEREAS, the Fund is an open-end management investment company
and is available to act as the investment vehicle for separate accounts now in
existence or to be established at any date hereafter for variable life insurance
policies and variable annuity contracts (collectively, the "Variable Insurance
Products") offered by insurance companies (hereinafter "Participating Insurance
Companies");
WHEREAS, the beneficial interest in the Fund is divided into
several series of shares, each designated a "Portfolio", and each representing
the interests in a particular managed pool of securities and other assets;
WHEREAS, the Fund has obtained an order from the Securities
and Exchange commission, dated July 16, 1986 (File No. 812-6324) granting
Participating Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of sections 9(a),
13(a), 15(a) and 15(b) of the Investment Company Act of 1940, as amended,
(hereinafter the "1940 Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15)
thereunder, to the extent necessary to permit shares of the Fund to be sold to
and held by variable annuity and variable life insurance separate accounts of
both affiliated and unaffiliated life insurance companies (hereinafter the
"Mixed and Shared Funding Exemptive Order");
<PAGE>
WHEREAS, the Fund is registered as an open-end management
investment company under the 1940 Act and its shares are registered under the
Securities Act of 1933, as amended (hereinafter the "1933 Act");
WHEREAS, the Adviser is duly registered as an investment
adviser under the federal Investment Advisers Act of 1940;
WHEREAS, the Company has registered or will register certain
variable annuity and/or life insurance contracts under the 1933 Act (hereinafter
"Contracts") (unless an exemption from registration is available);
WHEREAS, the Accounts are or will be duly organized, validly
existing segregated asset accounts, established by resolution of the Board of
Directors of the Company, to set aside and invest assets attributable to the
aforesaid variable contracts (the Contract(s) covered by this Agreement are
specified in Schedule 2 attached hereto, as may be modified by mutual consent
from time to time);
WHEREAS, the Company has registered or will register the
Accounts as unit investment trusts under the 1940 Act (unless an exemption from
registration is available);
WHEREAS, to the extent permitted by applicable insurance laws
and regulations, the Company intends to purchase shares in the Portfolios (the
Portfolios covered by this Agreement are specified in Schedule 3 attached hereto
as may be modified by mutual consent from time to time), on behalf of the
Accounts to fund the Contracts named in Schedule 2, as may be amended from time
to time by mutual consent, and the Fund is authorized to sell such shares to
unit investment trusts such as the Accounts at net asset value; and
NOW, THEREFORE, in consideration of their mutual promises, the
Fund, the Adviser and the Company agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Fund agrees to sell to the Company those shares of
the Fund which the Company orders on behalf of the Account, executing such
orders on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the order for the shares of the Fund. For purposes
of this Section 1.1, the Company shall be the designee of the Fund for receipt
of such orders from each Account and receipt by such designee shall constitute
receipt by the Fund; provided that the Fund receives written (or facsimile)
notice of such order by 10:00 a.m. New York time on the next following Business
Day. "Business Day" shall mean any day on which the New York Stock Exchange is
open for trading and on which the Fund calculates its net asset value pursuant
to the rules of the Securities and Exchange Commission.
<PAGE>
1.2. The Company shall pay for Fund shares on the next
Business Day after it places an order to purchase Fund shares in accordance with
Section 1.1 hereof. Payment shall be in federal funds transmitted by wire
pursuant to the instructions of the Fund's treasurer or by a credit for any
shares redeemed or by any other method agreed to by the parties.
1.3. The Fund agrees to make Fund shares available
indefinitely for purchase at the applicable net asset value per share by the
Company for its Accounts listed in Schedule 1 on those days on which the Fund
calculates its net asset value pursuant to rules of the SEC; provided, however,
that the Board of Trustees of the Fund (hereinafter the "Trustees") may refuse
to sell shares of any Portfolio to any person, or suspend or terminate the
offering of shares of any Portfolio if such action is required by law or by
regulatory authorities having jurisdiction or is, in the sole discretion of the
Trustees, acting in good faith and in light of their fiduciary duties under
federal and any applicable state laws, in the best interests of the shareholders
of any Portfolio.
1.4. The Fund agrees to redeem, upon the Company's request,
any full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.4, the Company shall be the designee of the Fund for receipt of
requests for redemption and receipt by such designee shall constitute receipt by
the Fund; provided that the Fund receives written (or facsimile) notice of such
request for redemption by 10:00 a.m. New York time on the next following
Business Day.
1.5. The Fund shall endeavor to pay for the Fund shares
redeemed on the same Business Day the Fund receives notice of the redemption
order in accordance with Section 1.4 hereof, but in no event shall payment be
made beyond the time period specified in the Fund's prospectus or statement of
additional information. Payment shall be in federal funds transmitted by wire to
the Company's account as designated by the Company in writing from time to time
or by any other method agreed to by the parties.
1.6. The Company agrees to purchase and redeem the shares of
the Portfolios named in Schedule 3 offered by the then current prospectus and
statement of additional information of the Fund in accordance with the
provisions of such prospectus and statement of additional information
1.7. The Fund shall furnish same-day notice (by wire or
telephone followed by written confirmation) to the Company of any income
dividends or capital gain distributions payable on the Portfolios' shares. The
Company hereby elects to receive all such income dividends and capital gain
distributions as are payable on a Portfolio's shares in additional shares of
that Portfolio. The Company reserves the right to revoke this election on ten
Business Days' notice to the Fund and the Adviser and
<PAGE>
thereafter to receive all such dividends and distributions in cash. The Fund
will notify the Company of the number of shares so issued as payment of such
dividends and distributions.
1.8. The Fund shall make the net asset value per share for
each Portfolio available to the Company on a daily basis as soon as reasonably
practicable after the net asset value per share is calculated and will use its
best efforts to make such net asset value per share available by 6:00 p.m. New
York time, but in no event later than 7:00 p.m. New York time each Business Day.
1.9. The Fund agrees that its shares will be sold only to
Participating Insurance Companies and their separate accounts or to such other
persons permitted under applicable tax laws and/or regulations, a Revenue Ruling
or private letter ruling granted by the Internal Revenue Service on which the
Fund may rely.
ARTICLE II. Sales Material, Prospectuses and Other Reports
2.1. The Company shall furnish, or shall cause to be
furnished, to the Fund or its designee a copy of each Contract prospectus or
statement of additional information in which the Fund or the Adviser is named
prior to the filing of such document with the Securities and Exchange
Commission. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or the Adviser is named, at least ten Business Days
prior to its use. No such material shall be used if the Fund or its designee
reasonably object to such use within ten Business Days after receipt of such
material.
2.2. The Fund and/or the Adviser shall furnish, or shall cause
to be furnished, to the Company or its designee a copy of each Fund prospectus
or statement of additional information in which the Company is named prior to
the filing of such document with the Securities and Exchange Commission. The
Fund shall furnish, or shall cause to be furnished, to the Company or its
designee, each piece of sales literature or other promotional material in which
the Company is named, at least ten Business Days prior to its use. No such
material shall be used if the Company or its designee reasonably object to such
use within ten Business Days after receipt of such material.
2.3. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund or
the Adviser in connection with the sale of the Contracts other than the
information or representations contained in the registration statement,
prospectus or statement of additional information for the Fund shares, as such
registration statement, prospectus and statement of additional information may
be amended or supplemented from time to time, or in reports or proxy statements
for the Fund, or in sales literature, published reports in the public domain or
other promotional materials approved by the Fund or its designee, except as
required by
<PAGE>
legal process or regulatory authorities or with the permission of the Fund.
Nothing in this Section 2.3 will be construed as preventing the Company or its
agents from giving advice on investments in the Fund.
2.4. The Fund and/or the Adviser shall not give any
information or make any representations or statements on behalf of the Company
or concerning the Company, the Accounts or the Contracts other than the
information or representations contained in the registration statement,
prospectus or statement of additional information for the Contracts, as such
registration statement, prospectus and statement of additional information may
be amended or supplemented from time to time, in reports or proxy statements for
the Company, or in materials approved by the Company for distribution including
sales literature or other promotional materials, except as required by legal
process or regulatory authorities or with the permission of the Company.
2.5. For purposes of this Article II, the phrase "sales
literature or other promotional material" includes, without limitation,
advertisements (such as material published, or designed for use in, a newspaper,
magazine, or other periodical, radio, television, telephone or tape recording,
videotape display, signs or billboard or electronic media), and sales literature
(such as brochures, circulars, market letters and form letters), distributed or
made generally available to customers or the public.
2.6. The Fund and the Adviser hereby consent to the Company's
use of the names "Oppenheimer Variable Account Funds" and OppenheimerFunds" in
connection with the marketing of the Contracts, subject to the terms of Sections
2.1 and 2.3 of this Agreement. Such consent will terminate with the termination
of this Agreement.
2.7. The Fund or the Adviser shall provide a camera-ready copy
of and/or a computer diskette containing its current prospectus within a
reasonable period of its filing date, and provide other assistance as is
reasonably necessary in order for the Company once each year (or more frequently
if the prospectus for the Fund is supplemented or amended) to have the
prospectus for the Fund and the prospectuses for the other investment options
under the Contracts printed together in one document. The Adviser shall be
permitted to review and approve the typeset form of the Fund's prospectus prior
to such printing provided the prospectus has been provided within a reasonable
period.
2.8. At the option of the Company, the Fund or the Adviser
shall either: (i) provide the Company with as many copies of the Fund's
statement of additional information, reports to shareholders, other information
relating to the Fund necessary to prepare financial reports, and other
communications to shareholders as the Company shall reasonably require for
distribution to existing and/or prospective Contract owners; or (ii)
camera-ready, computer diskette and/or a printed copy, if appropriate, of such
materials for printing and distribution to existing and/or prospective Contract
owners, within a
<PAGE>
reasonable period of the filing date for definitive copies of such material. The
Adviser shall be permitted to review and approve the typeset form of such
materials prior to such printing provided such materials have been provided
within a reasonable period.
ARTICLE III. Fees and Expenses
3.1. The Fund and Adviser shall pay no fee or other
compensation to the Company under this Agreement, and the Company shall pay no
fee or other compensation to the Fund or Adviser under this Agreement, except as
provided herein.
3.2. All expenses incident to performance by each party of its
respective duties under this Agreement shall be paid by that party. The Fund
shall see to it that all its shares are registered and authorized for issuance
in accordance with applicable federal law and, if and to the extent advisable by
the Fund, in accordance with applicable state laws prior to their sale. The Fund
shall bear the expenses for the cost of registration and qualification of the
Fund's shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, and the preparation of all statements
and notices required by any federal or state law. The Fund shall bear the
expenses of printing the Fund's statement of additional information and proxy
materials.
3.3. The Company shall bear the expenses of printing and
distributing to existing and prospective Contract owners the Fund's prospectus
and reports to owners of Contracts issued by the Company and the expenses of
distributing the Fund's statement of additional information to existing and
prospective Contract owners, distributing proxy materials to existing Contract
owners and tabulation of proxy votes.
3.4. In the event the Fund adds one or more additional
Portfolios and the parties desire to make such Portfolios available to the
respective Contract owners as an underlying investment medium, the parties may
agree to execute a new Schedule 3 or an amendment to this Agreement authorizing
the issuance of shares of the new Portfolios to the particular Account. The
amendment may also provide for the sharing of expenses for the establishment of
new Portfolios among Participating Insurance Companies desiring to invest in
such Portfolios and the provision of funds as the initial investment in the new
Portfolios.
ARTICLE IV. Representations and Warranties
4.1. The Company represents and warrants that it is an
insurance company duly organized and in good standing under the laws of the
State of Indiana.
4.2. The Fund represents and warrants that it is duly
organized and validly existing under the laws of the State of Massachusetts.
<PAGE>
4.3. The Fund represents and warrants that the investments of
each Portfolio will comply with the diversification requirements set forth in
Section 817(h) of the Internal Revenue Code of 1986, as amended (hereinafter the
"Code"), and the rules and regulations thereunder, or any successor or similar
provision, or Revenue Ruling or private letter ruling granted by the Internal
Revenue Service on which the Fund may rely. In the event the Fund fails to
comply with these diversification requirements, the Fund shall take all
reasonable steps to notify the Company of such noncompliance and to adequately
diversify the Fund so as to achieve compliance within the grace period afforded
by Treasury Regulation 1.817-5, or any successor or similar provision, or
Revenue Ruling or private letter ruling granted by the Internal Revenue Service
on which the Fund may rely.
4.4. The Fund represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the Code, and that it will
make every effort to maintain such qualification (under Subchapter M or any
successor or similar provision) and that it will notify the Company immediately
upon having a reasonable basis for believing that it has ceased to so qualify or
that it might not so qualify in the future.
4.5. The Fund represents that its investment objectives,
policies and restrictions comply in all material respects with any applicable
state laws of which the Fund is aware as they may apply to the Fund. The Fund
agrees that it will endeavor to furnish the information required by state
insurance laws and requested by the Company to assist the Company in obtaining
the authority needed to issue the Contracts in the various states.
4.6. The Fund represents and warrants that all of its
Trustees, officers, employees, investment advisers and other
individuals/entities having access to the funds and/or securities of the Fund
are and continue to be at all times covered by a blanket fidelity bond or
similar coverage (which may, at the Fund's election, be in the form of a joint
insured bond) for the benefit of the Fund in an amount not less than the minimal
coverage as required by Rule 17g-(1) of the 1940 Act or related provisions as
may be promulgated from time to time. The aforesaid bond includes coverage for
larceny and embezzlement and is issued by a reputable bonding or insurance
company.
ARTICLE V. Potential Conflicts
5.1. The Board of Trustees of the Fund (the "Board") will
monitor the Fund for the existence of any material irreconcilable conflict
between the interests of the Contract owners of all separate accounts investing
in the Fund. An irreconcilable material conflict may arise for a variety of
reasons, including: (a) an action by any state insurance regulatory authority;
(b) a change in applicable federal or state insurance, tax, or securities laws
or regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of any Portfolio
are being managed; (e) a difference in
<PAGE>
voting instructions given by variable annuity contract and variable life
insurance contract owners; or (f) a decision by an insurer to disregard the
voting instructions of Contract owners. The Board shall promptly inform the
Company if it determines that an irreconcilable material conflict exists and the
implications thereof.
5.2. The Company has reviewed a copy of the Mixed and Shared
Funding Exemptive Order, and in particular, has reviewed the conditions to the
requested relief set forth therein. The Company agrees to be bound by the
responsibilities of a participating insurance company as set forth in the Mixed
and Shared Funding Exemptive Order, including without limitation the requirement
that the Company report any potential or existing conflicts of which it is aware
to the Board. The Company will assist the Board in carrying out its
responsibilities in monitoring such conflicts under the Mixed and Shared Funding
Exemptive Order, by providing the Board in a timely manner with all information
reasonably necessary for the Board to consider any issues raised. This includes,
but is not limited to, an obligation by the Company to inform the Board whenever
Contract owner voting instructions are disregarded and by confirming in writing,
at the Fund's request, that the Company is unaware of any such potential or
existing material irreconcilable conflicts.
5.3. If it is determined by a majority of the Board, or a
majority of its disinterested Trustees, that a material irreconcilable conflict
exists, the Company shall, at its expense and to the extent reasonably
practicable (as determined by a majority of the disinterested Trustees), take
whatever steps are necessary to remedy or eliminate the irreconcilable material
conflict up to and including: (1) withdrawing the assets allocable to some or
all of the subaccounts of the Accounts from the Fund or any Portfolio and
reinvesting such assets in a different investment medium, including (but not
limited to) another Portfolio of the Fund, or submitting the question whether
such segregation should be implemented to a vote of all affected Contract owners
and, as appropriate, segregating the assets of any appropriate group (i.e.,
annuity contract owners, life insurance contract owners, or variable contract
owners of one or more Participating Insurance Companies) that votes in favor of
such segregation, or offering to the affected Contract owners the option of
making such a change; and (2) establishing a new registered management
investment company or managed separate account.
5.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard Contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the subaccount of
the Account's investment in the Fund and terminate this Agreement; provided,
however, that such withdrawal and termination shall be limited to the extent
required by the foregoing material irreconcilable conflict as determined by a
majority of the disinterested members of the Board. No charge or penalty will be
imposed as a result of such withdrawal. Any such withdrawal and termination must
take place within six (6) months after the Fund gives written notice that this
<PAGE>
provision is being implemented, and until the end of the six month period the
Fund shall continue to accept and implement orders by the Company for the
purchase and redemption of shares of the Fund.
5.5. If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to the Company
conflicts with the majority of other state regulators, then the Company will
withdraw the subaccount of the Account's investment in the Fund and terminate
this Agreement within six months after the Board informs the Company in writing
that it has determined that such decision has created an irreconcilable material
conflict; provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board. No charge
or penalty will be imposed as a result of such withdrawal. Until the end of the
foregoing six month period, the Fund shall continue to accept and implement
orders by the Company for the purchase and redemption of shares of the Fund,
subject to applicable regulatory limitation.
5.6. For purposes of Sections 5.3 through 5.6 of this
Agreement, a majority of the disinterested members of the Board shall determine
whether any proposed action adequately remedies any irreconcilable material
conflict, but in no event will the Fund be required to establish a new funding
medium for the Contracts. The Company shall not be required by Section 5.3 to
establish a new funding medium for Contracts if an offer to do so has been
declined by vote of a majority of Contract owners materially adversely affected
by the irreconcilable material conflict. In the event that the Board determines
that any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the particular subaccount of the
Account's investment in the Fund and terminate this Agreement within six (6)
months after the Board informs the Company in writing of the foregoing
determination, provided, however, that such withdrawal and termination shall be
limited to the extent required by any such material irreconcilable conflict as
determined by a majority of the disinterested members of the Board. No charge or
penalty will be imposed as a result of such withdrawal.
ARTICLE VI. Indemnification
6.1. The Company agrees to indemnify and hold harmless the
Fund and the Adviser and each person, if any, who controls or is associated with
the Fund and the Adviser within the meaning of such terms under applicable
federal securities laws and any Trustees, officers, employees and agents of the
foregoing (collectively, the "Indemnified Parties" for purposes of this Article
VI) against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Company) or expenses
(including the reasonable costs of investigating or defending any alleged loss,
claim, damage, liability or expense and reasonable legal counsel fees
<PAGE>
incurred in connection therewith) (collectively, the "Losses"), to which the
Indemnified Parties may become subject under any statute or regulation, or at
common law or otherwise, insofar as such Losses:
(a) arise out of or are based upon any
untrue statements or alleged untrue statements of
material fact contained in a registration statement,
prospectus or statement of additional information for
the Contracts or in the Contracts themselves or in
sales literature generated by the Company on behalf
of the Contracts or Accounts (or any amendment or
supplement to any of the foregoing) (collectively,
the "Company Documents" for purposes of this Article
VI), or arise out of or are based upon the omission
or the alleged omission to state therein a material
fact required to be stated therein or necessary to
make the statements therein not misleading, provided
that this indemnity shall not apply as to any
Indemnified Party if such statement or omission or
such alleged statement or omission was made in
reliance upon and was accurately derived from
information furnished to the Company by or on behalf
of the Fund or the Adviser for use in Company
Documents or otherwise for use in connection with the
sale of the Contracts or Fund shares; or
(b) arise out of or result from statements
or representations (other than statements or
representations contained in and accurately derived
from Fund Documents as defined in Section 6.2(a)) or
wrongful conduct of the Company or persons under its
control, with respect to the sale or acquisition of
the Contracts or Fund shares; or
(c) arise out of or result from any untrue
statement or alleged untrue statement of a material
fact contained in Fund Documents as defined in
Section 6.2(a) or the omission or alleged omission to
state therein a material fact required to be stated
therein or necessary to make the statements therein
not misleading if such statement or omission was made
in reliance upon and accurately derived from
information furnished to the Fund or the Adviser by
or on behalf of the Company; or
(d) arise out of or result from any
material breach of any representation and/or warranty
made by the Company in this Agreement or arise out of
or result from any other material breach of this
Agreement by the Company.
<PAGE>
6.2. The Fund and the Adviser agree to indemnify and hold
harmless the Company and each person, if any, who controls or is associated with
the Company within the meaning of such terms under applicable federal securities
laws and any directors, trustees, officers, employees and agents of the
foregoing (collectively, the "Indemnified Parties" for purposes of this Article
VI) against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Fund and/or the Adviser) or
expenses (including the reasonable costs of investigating or defending any
alleged loss, claim, damage, liability or expense and reasonable legal counsel
fees incurred in connection therewith) (collectively, the "Losses"), to which
the Indemnified Parties may become subject under any statute or regulation, or
at common law or otherwise, insofar as such Losses:
(a) arise out of or are based upon any
untrue statements or alleged untrue statements of
material fact contained in a registration statement,
prospectus or statement of additional information for
the Fund or in sales literature generated by the Fund
and/or the Adviser (or any amendment or supplement to
any of the foregoing) (collectively, the "Fund
Documents" for purposes of this Article VI), or arise
out of or are based upon the omission or the alleged
omission to state therein a material fact required to
be stated therein or necessary to make the statements
therein not misleading, provided that this indemnity
shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or
omission was made in reliance upon and was accurately
derived from information furnished to the Fund or the
Adviser by or on behalf of the Company for use in
Fund Documents or otherwise for use in connection
with the sale of the Contracts or Fund shares; or
(b) arise out of or result from statements
or representations (other than statements or
representations contained in and accurately derived
from Company Documents) or wrongful conduct of the
Fund or the Adviser or persons under their control,
with respect to the sale or acquisition of the
Contracts or Fund shares; or
(c) arise out of or result from any untrue
statement or alleged untrue statement of a material
fact contained in Company Documents or the omission
or alleged omission to state therein a material fact
required to be stated therein or necessary to make
the statements therein not misleading if such
statement or omission was made in reliance upon and
accurately derived from written information furnished
to the Company by or on behalf of the Fund; or
<PAGE>
(d) arise out of or result from any material
breach of any representation and/or warranty made by
the Fund in this Agreement or arise out of or result
from any other material breach of this Agreement by
the Fund or the Adviser.
6.3. Neither the Company nor the Fund or the Adviser shall be
liable under the indemnification provisions of Sections 6.1 or 6.2, as
applicable, with respect to any Losses incurred or assessed against an
Indemnified Party that arise from such Indemnified Party's willful misfeasance,
bad faith or gross negligence in the performance of such Indemnified Party's
duties or by reason of such Indemnified Party's reckless disregard of
obligations or duties under this Agreement.
6.4. Neither the Company nor the Fund or the Adviser shall be
liable under the indemnification provisions of Sections 6.1 or 6.2, as
applicable, with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the other party in writing within a
reasonable time after the summons, or other first written notification, giving
information of the nature of the claim, complaint or action by a regulatory
authority shall have been served upon or otherwise received by such Indemnified
Party (or after such Indemnified Party shall have received notice of service
upon or other notification to any designated agent), but failure to notify the
party against whom indemnification is sought of any such claim shall not relieve
that party from any liability which it may have to the Indemnified Party in the
absence of Sections 6.1 and 6.2.
6.5. In case any such action is brought against the
Indemnified Parties, the indemnifying party shall be entitled to participate, at
its own expense, in the defense of such action. The indemnifying party also
shall be entitled to assume the defense thereof, with counsel reasonably
satisfactory to the party named in the action. After notice from the
indemnifying party to the Indemnified Party of an election to assume such
defense, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the indemnifying party will not be liable
to the Indemnified Party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
ARTICLE VII. Applicable Law
7.1. This Agreement shall be construed and the provisions
hereof interpreted under and in accordance with the laws of the State of New
York.
7.2. This Agreement shall be subject to the provisions of the
1933, 1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange
<PAGE>
Commission may grant (including, but not limited to, the Mixed and Shared
Funding Exemptive Order) and the terms hereof shall be interpreted and construed
in accordance therewith.
ARTICLE VIII. Termination
8.1. This Agreement shall terminate with respect to some or
all Portfolios:
(a) at the option of any party upon six
months' advance written notice to the other parties
or as otherwise agreed in writing by all parties; or
(b) at the option of the Company to the
extent that shares of Portfolios are not reasonably
available to meet the requirements of its Contracts
or are not appropriate funding vehicles for the
Contracts, as determined by the Company reasonably
and in good faith. Prompt notice of the election to
terminate for such cause and an explanation of such
cause shall be furnished by the Company; or
(c) as provided in Article V.
8.2. It is understood and agreed that the right of any party
hereto to terminate this Agreement pursuant to Section 6.1(a) may be exercised
for cause or for no cause.
8.3. Notwithstanding any termination of this Agreement, the
Fund shall, at the option of the Company, continue to make available additional
shares of the Fund (or any Portfolio) pursuant to the terms and conditions of
this Agreement for all Contracts in effect on the effective date of termination
of this Agreement for which shares of the Fund (or any Portfolio) serve as the
underlying medium unless such further sale of additional shares of the Fund is
prohibited by law or by regulatory authorities, or as determined by the Fund's
Board to be necessary to remedy or eliminate an irreconcilable conflict pursuant
to Article V hereof.
8.4. The provisions of this Article VIII shall survive the
termination of this Agreement, and as long as shares of the Fund are held on
behalf of Contract owners in accordance with Section 8.3, the provisions of this
Agreement shall survive the termination of this Agreement with respect to those
Contract owners.
<PAGE>
ARTICLE IX. Notices
Any notice shall be sufficiently given when sent by registered
or certified mail to the other party at the address of such party set forth
below or at such other address as such party may from time to time specify to
the other party.
If to the Fund:
Oppenheimer Variable Account Funds
c/o OppenheimerFunds, Inc.
2 World Trade Center
New York, NY 10048-0203
Attn: Legal Department
If to the Adviser:
OppenheimerFunds, Inc.
2 World Trade Center
New York, NY 10048-0203
Attn: General Counsel
If to the Company:
American Enterprise Life Insurance Company
c/o American Express Financial Advisors Inc.
IDS Tower 10
Minneapolis, MN 55440-0010
Attn: Peter L. Slattery
Director - Variable Assets Product Management
with a copy to:
Mary Ellyn Minenko
Senior Counsel
ARTICLE X. Miscellaneous
10.1. The Fund and the Adviser acknowledge that the identities
of the customers of the Company or any of its affiliates (collectively the
"Protected Parties" for purposes of this Section 10.1), information maintained
regarding those customers, and all computer programs and procedures or other
information developed or used by the Protected Parties or any of their employees
or agents in connection with the Company's performance of its duties under this
Agreement are the valuable property of the Protected Parties. The Fund and the
Adviser agree that if they come into possession of any list or compilation of
the identities of or other information about the Protected Parties' customers,
or any other information or property of the Protected Parties, other than such
<PAGE>
information as may be independently developed or compiled by the Fund or the
Adviser from information supplied to them by the Protected Parties' customers
who also maintain accounts with the Fund, the Adviser or the Fund's transfer
agent other than as Contract owners, the Fund and the Adviser will hold such
information or property in confidence and refrain from using, disclosing or
distributing any of such information or other property except: (a) with the
Company's prior written consent; or (b) as required by legal or judicial process
or regulatory authority. The Fund and the Adviser acknowledge that any breach of
the agreements in this Section 10.1 would result in immediate and irreparable
harm to the Protected Parties for which there would be no adequate remedy at law
and agree that in the event of such a breach, the Protected Parties will be
entitled to equitable relief by way of temporary and permanent injunctions, as
well as such other relief as any court of competent jurisdiction deems
appropriate.
10.2. The captions in this Agreement are included for
convenience of reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
10.3. This Agreement may be executed simultaneously in two or
more counterparts, each of which taken together shall constitute one and the
same instrument.
10.4. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
10.5. Each party hereto shall cooperate with each other party
and all appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the NASD and state securities and insurance
regulators) and shall permit such authorities reasonable access to its books and
records in connection with any investigation or inquiry relating to this
Agreement or the transactions contemplated hereby.
10.6. The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
10.7. It is understood by the parties that this Agreement is
not an exclusive arrangement in any respect.
10.8. The Company and the Adviser each understand and agree
that the obligations of the Fund under this Agreement are not binding upon any
shareholder of the Fund personally, but bind only the Fund and the Fund's
property; the Company and the Adviser each represent that it has notice of the
provisions of the Declaration of Trust of the Fund disclaiming shareholder
liability for acts or obligations of the Fund.
<PAGE>
10.9. This Agreement shall not be assigned by any party hereto
without the prior consent of all the parties.
10.10. No provisions of this Agreement may be amended or
modified in any manner except by a written agreement properly authorized and
executed by all parties.
10.11. This Agreement sets forth the entire agreement between
the parties and supercedes all prior communications, agreements and
understandings, oral or written, between the parities regarding the subject
matter hereof.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed as of the date specified
below.
Date: October 30, 1997
AMERICAN ENTERPRISE LIFE ATTEST:
INSURANCE COMPANY
By: /s/ Stuart A. Sedlacek By: /s/ William A. Stoltzmann
------------------------------------- ---------------------------
Name: Stuart A. Sedlacek Name: William A. Stoltzmann
Title: Exec. Vice President Title: Vice President
OPPENHEIMER VARIABLE
ACCOUNT FUNDS
By: /s/ Andrew J. Donahue
Name: Andrew J. Donahue
Title: Vice President
OPPENHEIMERFUNDS, INC.
By: /s/ Wesley W. Mayer
Name: Wesley W. Mayer
Title: Vice President
<PAGE>
SCHEDULE 1
Separate Accounts
American Enterprise Variable Annuity Account
<PAGE>
SCHEDULE 2
Contracts
Contract Form 34560
Contract Form 43260
and state variations of these forms
<PAGE>
SCHEDULE 3
Portfolios
Oppenheimer Variable Account Funds/Oppenheimer Growth Fund
Oppenheimer Variable Account Funds/Oppenheimer High Income Fund
Exhibit 8.5
PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS, INC.,
A I M DISTRIBUTORS, INC.,
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS
AND
AMERICAN EXPRESS FINANCIAL ADVISORS INC.
<PAGE>
TABLE OF CONTENTS
Description Page
Section 1. Available Funds..................................................2
1.1 Availability.......................................................2
1.2 Addition, Deletion or Modification of Funds........................2
1.3 No Sales to the General Public.....................................2
Section 2. Processing Transactions..........................................2
2.1 Timely Pricing and Orders..........................................2
2.2 Timely Payments....................................................3
2.3 Applicable Price...................................................3
2.4 Dividends and Distributions........................................4
2.5 Book Entry.........................................................4
Section 3. Costs and Expenses...............................................4
3.1 General............................................................4
3.2 Registration.......................................................4
3.3 Other (Non-Sales-Related)..........................................5
3.4 Other (Sales-Related)..............................................5
3.5 Parties To Cooperate...............................................5
Section 4. Legal Compliance.................................................5
4.1 Tax Laws...........................................................5
4.2 Insurance and Certain Other Laws...................................8
4.3 Securities Laws....................................................8
4.4 Notice of Certain Proceedings and Other Circumstance...............9
4.5 American Enterprise Life To Provide Documents;
Information About AVIF.............................................10
4.6 AVIF To Provide Documents; Information About
American Enterprise Life...........................................11
Section 5. Mixed and Shared Funding.........................................12
5.1 General............................................................12
5.2 Disinterested Directors............................................12
5.3 Monitoring for Material Irreconcilable Conflicts...................13
5.4 Conflict Remedies..................................................13
5.5 Notice to American Enterprise Life.................................15
5.6 Information Requested by Board of Directors........................15
5.7 Compliance with SEC Rules..........................................15
5.8 Other Requirements.................................................15
<PAGE>
Description Page
Section 6. Termination......................................................15
6.1 Events of Termination..............................................15
6.2 Notice Requirement for Termination.................................16
6.3 Funds To Remain Available..........................................17
6.4 Survival of Warranties and Indemnifications........................17
6.5 Continuance of Agreement for Certain Purposes......................17
Section 7. Parties To Cooperate Respecting Termination......................17
Section 8. Assignment.......................................................18
Section 9. Notices..........................................................18
Section 10. Voting Procedures...............................................19
Section 11. Foreign Tax Credits.............................................19
Section 12. Indemnification.................................................20
12.1 Of AVIF and AIM by American Enterprise Life and AEFA..............20
12.2 Of American Enterprise Life and AEFA by AVIF and AIM..............22
12.3 Effect of Notice..................................................24
12.4 Successors........................................................24
Section 13. Applicable Law..................................................24
Section 14. Execution in Counterparts.......................................25
Section 15. Severability....................................................25
Section 16. Rights Cumulative...............................................25
Section 17. Headings........................................................25
Section 18. Confidentiality.................................................25
Section 19. Trademarks and Fund Names.......................................26
Section 20. Parties to Cooperate............................................27
<PAGE>
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the 30th day of October, 1997
("Agreement"), by and among AIM Variable Insurance Funds, Inc., a Maryland
corporation ("AVIF"); AIM Distributors, Inc., a Delaware corporation ("AIM");
American Enterprise Life Insurance Company, an Indiana life insurance company
("American Enterprise Life"), on behalf of itself and each of its segregated
asset accounts listed in Schedule A hereto, as the parties hereto may amend from
time to time (each, an "Account," and collectively, the "Accounts"); and
American Express Financial Advisors Inc. ("AEFA"), an affiliate of American
Enterprise Life and the principal underwriter of the Contracts (collectively,
the "Parties").
WITNESSETH THAT:
WHEREAS, AVIF is registered with the Securities and Exchange Commission
("SEC") as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, AVIF currently consists of nine separate series ("Series"), shares
("Shares") of each of which are registered under the Securities Act of 1933, as
amended (the "1933 Act") and are currently sold to one or more separate accounts
of life insurance companies to fund benefits under variable annuity contracts
and variable life insurance contracts; and
WHEREAS, AVIF will make Shares of each Series listed on Schedule A hereto
as the Parties hereto may amend from time to time (each a "Fund"; reference
herein to "AVIF" includes reference to each Fund, to the extent the context
requires) available for purchase by the Accounts; and
WHEREAS, American Enterprise Life will be the issuer of certain variable
annuity contracts and/or variable life insurance contracts ("Contracts") as set
forth on Schedule A hereto, as the Parties hereto may amend from time to time,
which Contracts (hereinafter collectively, the "Contracts"), if required by
applicable law, will be registered under the 1933 Act; and
WHEREAS, American Enterprise Life will fund the Contracts through the
Accounts, each of which may be divided into two or more subaccounts
("Subaccounts"; reference herein to an "Account" includes reference to each
Subaccount thereof to the extent the context requires); and
WHEREAS, American Enterprise Life will serve as the depositor of the
Accounts, each of which is registered as a unit investment trust investment
company under the 1940 Act (or exempt therefrom), and the security interests
deemed to be issued by the Accounts under the Contracts will be registered as
securities under the 1933 Act (or exempt therefrom); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, American Enterprise Life intends to purchase Shares in one or more
of the Funds on behalf of the Accounts to fund the Contracts; and
<PAGE>
WHEREAS, AEFA is a broker-dealer registered with the SEC under the
Securities Exchange Act of 1934 ("1934 Act") and a member in good standing of
the National Association of Securities Dealers, Inc.
("NASD");
NOW, THEREFORE, in consideration of the mutual benefits and promises
contained herein, the Parties hereto agree as follows:
Section 1. Available Funds
1.1 Availability.
AVIF will make Shares of each Fund available to American Enterprise Life
for purchase and redemption at net asset value and with no sales charges,
subject to the terms and conditions of this Agreement. The Board of Directors of
AVIF may refuse to sell Shares of any Fund to any person, or suspend or
terminate the offering of Shares of any Fund if such action is required by law
or by regulatory authorities having jurisdiction or if, in the sole discretion
of the Directors acting in good faith and in light of their fiduciary duties
under federal and any applicable state laws, such action is deemed in the best
interests of the shareholders of such Fund.
1.2 Addition, Deletion or Modification of Funds.
The Parties hereto may agree, from time to time, to add other Funds to
provide additional funding media for the Contracts, or to delete, combine, or
modify existing Funds, by amending Schedule A hereto. Upon such amendment to
Schedule A, any applicable reference to a Fund, AVIF, or its Shares herein shall
include a reference to any such additional Fund. Schedule A, as amended from
time to time, is incorporated herein by reference and is a part hereof.
1.3 No Sales to the General Public.
AVIF represents and warrants that no Shares of any Fund have been or will
be sold to the general public.
Section 2. Processing Transactions
2.1 Timely Pricing and Orders.
(a) AVIF or its designated agent will use its best efforts to provide
American Enterprise Life with the net asset value per Share for each Fund by
5:30 p.m. Central Time on each Business Day. As used herein, "Business Day"
shall mean any day on which (i) the New York Stock Exchange is open for regular
trading, (ii) AVIF calculates the Fund's net asset value, and (iii) American
Enterprise Life is open for business.
(b) American Enterprise Life will use the data provided by AVIF each
Business Day pursuant to paragraph (a) immediately above to calculate Account
unit values and to process transactions that receive that same Business Day's
Account unit values. American Enterprise Life will perform such Account
processing the same Business Day, and will place corresponding orders to
purchase or redeem Shares with AVIF by 9:00 a.m. Central Time the following
Business Day; provided, however, that AVIF shall provide additional time to
American Enterprise Life in the event that AVIF is unable to
<PAGE>
meet the 5:30 p.m. time stated in paragraph (a) immediately above. Such
additional time shall be equal to the additional time that AVIF takes to make
the net asset values available to American Enterprise Life.
(c) With respect to payment of the purchase price by American Enterprise
Life and of redemption proceeds by AVIF, American Enterprise Life and AVIF shall
net purchase and redemption orders with respect to each Fund and shall transmit
one net payment per Fund in accordance with Section 2.2, below.
(d) If AVIF provides materially incorrect Share net asset value information
(as determined under SEC guidelines), American Enterprise Life shall be entitled
to an adjustment to the number of Shares purchased or redeemed to reflect the
correct net asset value per Share. Any material error in the calculation or
reporting of net asset value per Share, dividend or capital gain information
shall be reported promptly upon discovery to American Enterprise Life.
2.2 Timely Payments.
American Enterprise Life will wire payment for net purchases to a custodial
account designated by AVIF by 1:00 p.m. Central Time on the same day as the
order for Shares is placed, to the extent practicable. AVIF will wire payment
for net redemptions to an account designated by American Enterprise Life by 1:00
p.m. Central Time on the same day as the Order is placed, to the extent
practicable, but in any event within five (5) calendar days after the date the
order is placed in order to enable American Enterprise Life to pay redemption
proceeds within the time specified in Section 22(e) of the 1940 Act or such
shorter period of time as may be required by law.
2.3 Applicable Price.
(a) Share purchase payments and redemption orders that result from purchase
payments, premium payments, surrenders and other transactions under Contracts
(collectively, "Contract transactions") and that American Enterprise Life
receives prior to the close of regular trading on the New York Stock Exchange on
a Business Day will be executed at the net asset values of the appropriate Funds
next computed after receipt by AVIF or its designated agent of the orders. For
purposes of this Section 2.3(a), American Enterprise Life shall be the
designated agent of AVIF for receipt of orders relating to Contract transactions
on each Business Day and receipt by such designated agent shall constitute
receipt by AVIF; provided that AVIF receives notice of such orders by 9:00 a.m.
Central Time on the next following Business Day or such later time as computed
in accordance with Section 2.1(b) hereof.
(b) All other Share purchases and redemptions by American Enterprise Life
will be effected at the net asset values of the appropriate Funds next computed
after receipt by AVIF or its designated agent of the order therefor, and such
orders will be irrevocable.
2.4 Dividends and Distributions.
AVIF will furnish notice by wire or telephone (followed by written
confirmation) on or prior to the payment date to American Enterprise Life of any
income dividends or capital gain distributions payable on the Shares of any
Fund. American Enterprise Life hereby elects to reinvest all dividends and
capital gains distributions in additional Shares of the corresponding Fund at
the ex-dividend date net asset values until American
<PAGE>
Enterprise Life otherwise notifies AVIF in writing, it being agreed by the
Parties that the ex-dividend date and the payment date with respect to any
dividend or distribution will be the same Business Day. American Enterprise Life
reserves the right to revoke this election and to receive all such income
dividends and capital gain distributions in cash.
2.5 Book Entry.
Issuance and transfer of AVIF Shares will be by book entry only. Stock
certificates will not be issued to American Enterprise Life. Shares ordered from
AVIF will be recorded in an appropriate title for American Enterprise Life, on
behalf of its Account.
Section 3. Costs and Expenses
3.1 General.
Except as otherwise specifically provided herein, each Party will bear all
expenses incident to its performance under this Agreement.
3.2 Registration.
(a) AVIF will bear the cost of its registering as a management investment
company under the 1940 Act and registering its Shares under the 1933 Act, and
keeping such registrations current and effective; including, without limitation,
the preparation of and filing with the SEC of Forms N-SAR and Rule 24f-2 Notices
with respect to AVIF and its Shares and payment of all applicable registration
or filing fees with respect to any of the foregoing.
(b) American Enterprise Life will bear the cost of registering, to the
extent required, each Account as a unit investment trust under the 1940 Act and
registering units of interest under the Contracts under the 1933 Act and keeping
such registrations current and effective; including, without limitation, the
preparation and filing with the SEC of Forms N-SAR and Rule 24f-2 Notices with
respect to each Account and its units of interest and payment of all applicable
registration or filing fees with respect to any of the foregoing.
3.3 Other (Non-Sales-Related).
(a) AVIF will bear, or arrange for others to bear, the costs of preparing,
filing with the SEC and setting for printing AVIF's prospectus, statement of
additional information and any amendments or supplements thereto (collectively,
the "AVIF Prospectus"), periodic reports to shareholders, AVIF proxy material
and other shareholder communications.
(b) American Enterprise Life will bear the costs of preparing, filing with
the SEC and setting for printing each Account's prospectus, statement of
additional information and any amendments or supplements thereto (collectively,
the "Account Prospectus"), any periodic reports to Contract owners, annuitants,
insureds or participants (as appropriate) under the Contracts (collectively,
"Participants"), voting instruction solicitation material, and other Participant
communications.
<PAGE>
(c) American Enterprise Life will print in quantity and deliver to existing
Participants the documents described in Section 3.3(b) above and the prospectus
provided by AVIF in camera ready or computer diskette form. AVIF will print the
AVIF statement of additional information, proxy materials relating to AVIF and
periodic reports of AVIF.
3.4 Other (Sales-Related).
American Enterprise Life will bear the expenses of distribution. These
expenses would include by way of illustration, but are not limited to, the costs
of distributing to Participants the following documents, whether they relate to
the Account or AVIF: prospectuses, statements of additional information, proxy
materials and periodic reports. These costs would also include the costs of
preparing, printing, and distributing sales literature and advertising relating
to the Funds, as well as filing such materials with, and obtaining approval
from, the SEC, NASD, any state insurance regulatory authority, and any other
appropriate regulatory authority, to the extent required.
3.5 Parties To Cooperate.
Each Party agrees to cooperate with the others, as applicable, in arranging
to print, mail and/or deliver, in a timely manner, combined or coordinated
prospectuses or other materials of AVIF and the Accounts.
Section 4. Legal Compliance
4.1 Tax Laws.
(a) AVIF represents and warrants that each Fund is currently qualified as a
regulated investment company ("RIC") under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"), and represents that it will use its best
efforts to qualify and to maintain qualification of each Fund as a RIC. AVIF
will notify American Enterprise Life immediately upon having a reasonable basis
for believing that a Fund has ceased to so qualify or that it might not so
qualify in the future.
(b) AVIF represents that it will use its best efforts to comply and to
maintain each Fund's compliance with the diversification requirements set forth
in Section 817(h) of the Code and Section 1.817-5(b) of the regulations under
the Code. AVIF will notify American Enterprise Life immediately upon having a
reasonable basis for believing that a Fund has ceased to so comply or that a
Fund might not so comply in the future. In the event of a breach of this Section
4.1(b) by AVIF, it will take all reasonable steps to adequately diversify the
Fund so as to achieve compliance within the grace period afforded by Section
1.817-5 of the regulations under the Code.
(c) American Enterprise Life agrees that if the Internal Revenue Service
("IRS") asserts in writing in connection with any governmental audit or review
of American Enterprise Life or, to American Enterprise Life's knowledge, of an
Participant, that any Fund has failed to comply with the diversification
requirements of Section 817(h) of the Code or American Enterprise Life otherwise
becomes aware of any facts that could give rise to any claim against AVIF or its
affiliates as a result of such a failure or alleged failure:
<PAGE>
(i) American Enterprise Life shall promptly notify AVIF of
such assertion or potential claim (subject to the
Confidentiality provisions of Section 18 as to any
Participant);
(ii) American Enterprise Life shall consult with AVIF as to how to
minimize any liability that may arise as a result of such
failure or alleged failure;
(iii) American Enterprise Life shall use its best efforts to
minimize any liability of AVIF or its affiliates resulting
from such failure, including, without limitation,
demonstrating, pursuant to Treasury Regulations Section
1.817-5(a)(2), to the Commissioner of the IRS that such
failure was inadvertent;
(iv) American Enterprise Life shall permit AVIF, its affiliates
and their legal and accounting advisors to participate in
any conferences, settlement discussions or other
administrative or judicial proceeding or contests
(including judicial appeals thereof) with the IRS, any
Participant or any other claimant regarding any claims
that could give rise to liability to AVIF or its
affiliates as a result of such a failure or alleged failure;
provided, however, that American Enterprise Life will
retain control of the conduct of such conferences
discussions, proceedings, contests or appeals;
(v) any written materials to be submitted by American Enterprise
Life to the IRS, any Participant or any other claimant in
connection with any of the foregoing proceedings or contests
(including, without limitation, any such materials to be
submitted to the IRS pursuant to Treasury Regulations Section
1.8175(a)(2)), (a) shall be provided by American Enterprise
Life to AVIF (together with any supporting information or
analysis); subject to the confidentiality provisions of
Section 18, at least ten (10) business days or such shorter
period to which the Parties hereto agree prior to the day on
which such proposed materials are to be submitted, and (b)
shall not be submitted by American Enterprise Life to any
such person without the express written consent of AVIF
which shall not be unreasonably withheld;
(vi) American Enterprise Life shall provide AVIF or its
affiliates and their accounting and legal advisors with
such cooperation as AVIF shall
reasonably request (including, without limitation, by
permitting AVIF and its accounting and legal advisors to
review the relevant books and records of American Enterprise
Life) in order to facilitate review by AVIF or its advisors of
any written submissions provided to it pursuant to the
preceding clause or its assessment of the validity or amount
of any claim against its arising from such a failure or
alleged failure;
(vii) American Enterprise Life shall not with respect to any claim
of the IRS or any Participant that would give rise to a claim
against AVIF or its affiliates (a) compromise or settle any
claim, (b) accept any adjustment on audit, or (c) forego any
allowable administrative or judicial appeals, without the
express written consent of AVIF or its affiliates, which shall
not be unreasonably withheld, provided that American
Enterprise Life shall not be required, after exhausting all
administrative penalties, to
<PAGE>
appeal any adverse judicial decision unless AVIF or its
affiliates shall have provided an opinion of independent
counsel to the effect that a reasonable basis exists for
taking such appeal; and provided further that the costs of any
such appeal shall be borne equally by the Parties hereto; and
(viii) AVIF and its affiliates shall have no liability as a result of
such failure or alleged failure if American Enterprise Life
fails to comply with any of the foregoing clauses (i) through
(vii), and such failure could be shown to have materially
contributed to the liability.
Should AVIF or any of its affiliates refuse to give its written consent to
any compromise or settlement of any claim or liability hereunder, American
Enterprise Life may, in its discretion, authorize AVIF or its affiliates to act
in the name of American Enterprise Life in, and to control the conduct of, such
conferences, discussions, proceedings, contests or appeals and all
administrative or judicial appeals thereof, and in that event AVIF or its
affiliates shall bear the fees and expenses associated with the conduct of the
proceedings that it is so authorized to control; provided, that in no event
shall American Enterprise Life have any liability resulting from AVIF's refusal
to accept the proposed settlement or compromise with respect to any failure
caused by AVIF. As used in this Agreement, the term "affiliates" shall have the
same meaning as "affiliated person" as defined in Section 2(a)(3) of the 1940
Act.
(d) American Enterprise Life represents and warrants that the Contracts
currently are and will be treated as annuity contracts or life insurance
contracts under applicable provisions of the Code and that it will use its best
efforts to maintain such treatment; American Enterprise Life will notify AVIF
immediately upon having a reasonable basis for believing that any of the
Contracts have ceased to be so treated or that they might not be so treated in
the future.
(e) American Enterprise Life represents and warrants that each Account is a
"segregated asset account" and that interests in each Account are offered
exclusively through the purchase of or transfer into a "variable contract,"
within the meaning of such terms under Section 817 of the Code and the
regulations thereunder. American Enterprise Life will use its best efforts to
continue to meet such definitional requirements, and it will notify AVIF
immediately upon having a reasonable basis for believing that such requirements
have ceased to be met or that they might not be met in the future.
4.2 Insurance and Certain Other Laws.
(a) AVIF will use its best efforts to comply with any applicable state
insurance laws or regulations, to the extent specifically requested in writing
by American Enterprise Life, including, the furnishing of information not
otherwise available to American Enterprise Life which is required by state
insurance law to enable American Enterprise Life to obtain the authority needed
to issue the Contracts in any applicable state.
(b) American Enterprise Life represents and warrants that (i) it is an
insurance company duly organized, validly existing and in good standing under
the laws of the State of Indiana and has full corporate power, authority and
legal right to execute, deliver and perform its duties and comply with its
obligations under this Agreement, (ii) it has legally and validly established
and maintains each Account as a segregated asset account
<PAGE>
under Section 27-1-51 Section 1 Class 1(c) of the Indiana Insurance Code and the
regulations thereunder, and (iii) the Contracts comply in all material respects
with all other applicable federal and state laws and regulations.
(c) AVIF represents and warrants that it is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Maryland
and has full power, authority, and legal right to execute, deliver, and perform
its duties and comply with its obligations under this Agreement.
4.3 Securities Laws.
(a) American Enterprise Life represents and warrants that (i) interests in
each Account pursuant to the Contracts will be registered under the 1933 Act to
the extent required by the 1933 Act, (ii) the Contracts will be duly authorized
for issuance and sold in compliance with all applicable federal and state laws,
including, without limitation, the 1933 Act, the 1934 Act, the 1940 Act and
Indiana law, (iii) each Account is and will remain registered under the 1940
Act, to the extent required by the 1940 Act, (iv) each Account does and will
comply in all material respects with the requirements of the 1940 Act and the
rules thereunder, to the extent required, (v) each Account's 1933 Act
registration statement relating to the Contracts, together with any amendments
thereto, will at all times comply in all material respects with the requirements
of the 1933 Act and the rules thereunder, (vi) American Enterprise Life will
amend the registration statement for its Contracts under the 1933 Act and for
its Accounts under the 1940 Act from time to time as required in order to effect
the continuous offering of its Contracts or as may otherwise be required by
applicable law, and (vii) each Account Prospectus will at all times comply in
all material respects with the requirements of the 1933 Act and the rules
thereunder.
(b) AVIF represents and warrants that (i) Shares sold pursuant to this
Agreement will be registered under the 1933 Act to the extent required by the
1933 Act and duly authorized for issuance and sold in compliance with Maryland
law, (ii) AVIF is and will remain registered under the 1940 Act to the extent
required by the 1940 Act, (iii) AVIF will amend the registration statement for
its Shares under the 1933 Act and itself under the 1940 Act from time to time as
required in order to effect the continuous offering of its Shares, (iv) AVIF
does and will comply in all material respects with the requirements of the 1940
Act and the rules thereunder, (v) AVIF's 1933 Act registration statement,
together with any amendments thereto, will at all times comply in all material
respects with the requirements of the 1933 Act and rules thereunder, and (vi)
AVIF's Prospectus will at all times comply in all material respects with the
requirements of the 1933 Act and the rules thereunder.
(c) AVIF will at its expense register and qualify its Shares for sale in
accordance with the laws of any state or other jurisdiction if and to the extent
reasonably deemed advisable by AVIF.
(d) AVIF currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it reserves the right to make such payments in the future. To the
extent that it decides to finance distribution expenses pursuant to Rule 12b-1,
AVIF undertakes to have its Board of Directors, a majority of whom are not
"interested" persons of the Fund, formulate and approve any plan under Rule
12b-1 to finance distribution expenses.
<PAGE>
(e) AVIF represents and warrants that all of its trustees, officers,
employees, investment advisers, and other individuals/entities having access to
the funds and/or securities of the Fund are and continue to be at all times
covered by a blanket fidelity bond or similar coverage for the benefit of the
Fund in an amount not less than the minimal coverage as required currently by
Rule 17g-(1) of the 1940 Act or related provisions as maybe promulgated from
time to time. The aforesaid bond includes coverage for larceny and embezzlement
and is issued by a reputable bonding company.
4.4 Notice of Certain Proceedings and Other Circumstances.
(a) AVIF will immediately notify American Enterprise Life of (i) the
issuance by any court or regulatory body of any stop order, cease and desist
order, or other similar order with respect to AVIF's registration statement
under the 1933 Act or AVIF Prospectus, (ii) any request by the SEC for any
amendment to such registration statement or AVIF Prospectus that may affect the
offering of Shares of AVIF, (iii) the initiation of any proceedings for that
purpose or for any other purpose relating to the registration or offering of
AVIF's Shares, or (iv) any other action or circumstances that may prevent the
lawful offer or sale of Shares of any Fund in any state or jurisdiction,
including, without limitation, any circumstances in which (a) such Shares are
not registered and, in all material respects, issued and sold in accordance with
applicable state and federal law, or (b) such law precludes the use of such
Shares as an underlying investment medium of the Contracts issued or to be
issued by American Enterprise Life. AVIF will make every reasonable effort to
prevent the issuance, with respect to any Fund, of any such stop order, cease
and desist order or similar order and, if any such order is issued, to obtain
the lifting thereof at the earliest possible time.
(b) American Enterprise Life will immediately notify AVIF of (i) the
issuance by any court or regulatory body of any stop order, cease and desist
order, or other similar order with respect to each Account's registration
statement under the 1933 Act relating to the Contracts or each Account
Prospectus, (ii) any request by the SEC for any amendment to such registration
statement or Account Prospectus that may affect the offering of Shares of AVIF,
(iii) the initiation of any proceedings for that purpose or for any other
purpose relating to the registration or offering of each Account's interests
pursuant to the Contracts, or (iv) any other action or circumstances that may
prevent the lawful offer or sale of said interests in any state or jurisdiction,
including, without limitation, any circumstances in which said interests are not
registered and, in all material respects, issued and sold in accordance with
applicable state and federal law. American Enterprise Life will make every
reasonable effort to prevent the issuance of any such stop order, cease and
desist order or similar order and, if any such order is issued, to obtain the
lifting thereof at the earliest possible time.
4.5 American Enterprise Life To Provide Documents; Information About AVIF.
(a) American Enterprise Life will provide to AVIF or its designated agent
at least one (1) complete copy of all SEC registration statements, Account
Prospectuses, reports, any preliminary and final voting instruction solicitation
material, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to each Account or the Contracts,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
<PAGE>
(b) American Enterprise Life will provide to AVIF or its designated agent
at least one (1) complete copy of each piece of sales literature or other
promotional material in which AVIF or any of its affiliates is named, at least
five (5) Business Days prior to its use or such shorter period as the Parties
hereto may, from time to time, agree upon. No such material shall be used if
AVIF or its designated agent objects to such use within five (5) Business Days
after receipt of such material or such shorter period as the Parties hereto may,
from time to time, agree upon. AVIF hereby designates A I M as the entity to
receive such sales literature, until such time as AVIF appoints another
designated agent by giving notice to American Enterprise Life in the manner
required by Section 9 hereof.
(c) Neither American Enterprise Life nor any of its affiliates, will give
any information or make any representations or statements on behalf of or
concerning AVIF or its affiliates in connection with the sale of the Contracts
other than (i) the information or representations contained in the registration
statement, including the AVIF Prospectus contained therein, relating to Shares,
as such registration statement and AVIF Prospectus may be amended from time to
time; or (ii) in reports or proxy materials for AVIF; or (iii) in published
reports for AVIF that are in the public domain and approved by AVIF for
distribution; or (iv) in sales literature or other promotional material approved
by AVIF, except with the express written permission of AVIF.
(d) American Enterprise Life shall adopt and implement procedures
reasonably designed to ensure that information concerning AVIF and its
affiliates that is intended for use only by brokers or agents selling the
Contracts (i.e., information that is not intended for distribution to
Participants) ("broker only materials") is so used, and neither AVIF nor any of
its affiliates shall be liable for any losses, damages or expenses relating to
the improper use of such broker only materials.
(e) For the purposes of this Section 4.5, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media, (e.g.,
on-line networks such as the Internet or other electronic messages), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials and any other material constituting sales literature or
advertising under the NASD rules, the 1933 Act or the 1940 Act.
4.6 AVIF To Provide Documents; Information About American Enterprise Life.
(a) AVIF will provide to American Enterprise Life at least one (1) complete
copy of all SEC registration statements, AVIF Prospectuses, reports, any
preliminary and final proxy material, applications for exemptions, requests for
no-action letters, and all amendments to any of the above, that relate to AVIF
or the Shares of a Fund, contemporaneously with the filing of such document with
the SEC or other regulatory authorities.
<PAGE>
(b) AVIF will provide to American Enterprise Life camera ready or computer
diskette copies of all AVIF prospectuses and printed copies, in an amount
specified by American Enterprise Life, of AVIF statements of additional
information, proxy materials, periodic reports to shareholders and other
materials required by law to be sent to Participants who have allocated any
Contract value to a Fund. AVIF will provide such copies to American Enterprise
Life in a timely manner so as to enable American Enterprise Life, to print and
distribute such materials within the time required by law to be furnished to
Participants.
(c) AVIF will provide to American Enterprise Life or its designated agent
at least one (1) complete copy of each piece of sales literature or other
promotional material in which American Enterprise Life, or any of its respective
affiliates is named, or that refers to the Contracts, at least five (5) Business
Days prior to its use or such shorter period as the Parties hereto may, from
time to time, agree upon. No such material shall be used if American Enterprise
Life or its designated agent objects to such use within five (5) Business Days
after receipt of such material or such shorter period as the Parties hereto may,
from time to time, agree upon. American Enterprise Life shall receive all such
sales literature until such time as it appoints a designated agent by giving
notice to AVIF in the manner required by Section 9 hereof.
(d) Neither AVIF nor any of its affiliates will give any information or
make any representations or statements on behalf of or concerning American
Enterprise Life, each Account, or the Contracts other than (i) the information
or representations contained in the registration statement, including each
Account Prospectus contained therein, relating to the Contracts, as such
registration statement and Account Prospectus may be amended from time to time;
or (ii) in published reports for the Account or the Contracts that are in the
public domain and approved by American Enterprise Life for distribution; or
(iii) in sales literature or other promotional material approved by American
Enterprise Life or its affiliates, except with the express written permission of
American Enterprise Life.
(e) AVIF shall cause its principal underwriter to adopt and implement
procedures reasonably designed to ensure that information concerning American
Enterprise Life, and its respective affiliates that is intended for use only by
brokers or agents selling the Contracts (i.e., information that is not intended
for distribution to Participants) ("broker only materials") is so used, and
neither American Enterprise Life, nor any of its respective affiliates shall be
liable for any losses, damages or expenses relating to the improper use of such
broker only materials.
(f) For purposes of this Section 4.6, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements (such as
material published, or designed for use in, a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, or other public media, (e.g., on-line
networks such as the Internet or other electronic messages), sales literature
(i.e., any written communication distributed or made generally available to
customers or the public, including brochures, circulars, research reports,
market letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or training
materials or other communications distributed or made generally available to
some or all agents or employees, registration statements, prospectuses,
statements of additional information, shareholder reports, and proxy materials
and any other material constituting sales literature or advertising under the
NASD rules, the 1933 Act or the 1940 Act.
<PAGE>
Section 5. Mixed and Shared Funding
5.1 General.
The SEC has granted an order to AVIF exempting it from certain provisions
of the 1940 Act and rules thereunder so that AVIF may be available for
investment by certain other entities, including, without limitation, separate
accounts funding variable annuity contracts or variable life insurance
contracts, separate accounts of insurance companies unaffiliated with American
Enterprise Life, and trustees of qualified pension and retirement plans
(collectively, "Mixed and Shared Funding"). The Parties recognize that the SEC
has imposed terms and conditions for such orders that are substantially
identical to many of the provisions of this Section 5. Sections 5.2 through 5.8
below shall apply pursuant to such an exemptive order granted to AVIF. AVIF
hereby notifies American Enterprise Life that, in the event that AVIF implements
Mixed and Shared Funding, it may be appropriate to include in the prospectus
pursuant to which a Contract is offered disclosure regarding the potential risks
of Mixed and Shared Funding.
5.2 Disinterested Directors.
AVIF agrees that its Board of Directors shall at all times consist of
directors a majority of whom (the "Disinterested Directors") are not interested
persons of AVIF within the meaning of Section 2(a)(19) of the 1940 Act and the
Rules thereunder and as modified by any applicable orders of the SEC, except
that if this condition is not met by reason of the death, disqualification, or
bona fide resignation of any director, then the operation of this condition
shall be suspended (a) for a period of forty-five (45) days if the vacancy or
vacancies may be filled by the Board; (b) for a period of sixty (60) days if a
vote of shareholders is required to fill the vacancy or vacancies; or (c) for
such longer period as the SEC may prescribe by order upon application.
5.3 Monitoring for Material Irreconcilable Conflicts.
AVIF agrees that its Board of Directors will monitor for the existence of
any material irreconcilable conflict between the interests of the Participants
in all separate accounts of life insurance companies utilizing AVIF
("Participating Insurance Companies"), including each Account, and participants
in all qualified retirement and pension plans investing in AVIF ("Participating
Plans"). American Enterprise Life agrees to inform the Board of Directors of
AVIF of the existence of or any potential for any such material irreconcilable
conflict of which it is aware. The concept of a "material irreconcilable
conflict" is not defined by the 1940 Act or the rules thereunder, but the
Parties recognize that such a conflict may arise for a variety of reasons,
including, without limitation:
(a) an action by any state insurance or other regulatory authority;
(b) a change in applicable federal or state insurance, tax or securities
laws or regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax or securities
regulatory authorities;
(c) an administrative or judicial decision in any relevant proceeding;
(d) the manner in which the investments of any Fund are being managed;
<PAGE>
(e) a difference in voting instructions given by variable annuity contract
and variable life insurance contract Participants or by Participants of
different Participating Insurance Companies;
(f) a decision by a Participating Insurance Company to disregard the voting
instructions of Participants; or
(g) a decision by a Participating Plan to disregard the voting instructions
of Plan participants.
Consistent with the SEC's requirements in connection with exemptive orders
of the type referred to in Section 5.1 hereof, American Enterprise Life will
assist the Board of Directors in carrying out its responsibilities by providing
the Board of Directors with all information reasonably necessary for the Board
of Directors to consider any issue raised, including information as to a
decision by American Enterprise Life to disregard voting instructions of
Participants.
5.4 Conflict Remedies.
(a) It is agreed that if it is determined by a majority of the members of
the Board of Directors or a majority of the Disinterested Directors that a
material irreconcilable conflict exists, American Enterprise Life will, if it is
a Participating Insurance Company for which a material irreconcilable conflict
is relevant, at its own expense and to the extent reasonably practicable (as
determined by a majority of the Disinterested Directors), take whatever steps
are necessary to remedy or eliminate the material irreconcilable conflict, which
steps may include, but are not limited to:
(i) withdrawing the assets allocable to some or all of the Accounts
from AVIF or any Fund and reinvesting such assets in a different
investment medium, including another Fund of AVIF, or submitting
the question whether such segregation should be implemented to a
vote of all affected Participants and, as appropriate, segregating
the assets of any particular group (e.g., annuity Participants,
life insurance Participants or all Participants) that votes in
favor of such segregation, or offering to the affected
Participants the option of making such a change; and
(ii) establishing a new registered investment company of the type
defined as a "management company" in Section 4(3) of the 1940 Act
or a new separate account that is operated as a management
company.
(b) If the material irreconcilable conflict arises because of American
Enterprise Life's decision to disregard Participant voting instructions and that
decision represents a minority position or would preclude a majority vote,
American Enterprise Life may be required, at AVIF's election, to withdraw each
Account's investment in AVIF or any Fund. No charge or penalty will be imposed
as a result of such withdrawal. Any such withdrawal must take place within six
(6) months after AVIF gives notice to American Enterprise Life that this
provision is being implemented, and until such withdrawal AVIF shall continue to
accept and implement orders by American Enterprise Life for the purchase and
redemption of Shares of AVIF.
<PAGE>
(c) If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to American Enterprise Life conflicts
with the majority of other state regulators, then American Enterprise Life will
withdraw each Account's investment in AVIF within six (6) months after AVIF's
Board of Directors informs American Enterprise Life that it has determined that
such decision has created a material irreconcilable conflict, and until such
withdrawal AVIF shall continue to accept and implement orders by American
Enterprise Life for the purchase and redemption of Shares of AVIF. No charge or
penalty will be imposed as a result of such withdrawal.
(d) American Enterprise Life agrees that any remedial action taken by it in
resolving any material irreconcilable conflict will be carried out at its
expense and with a view only to the interests of Participants.
(e) For purposes hereof, a majority of the Disinterested Directors will
determine whether or not any proposed action adequately remedies any material
irreconcilable conflict. In no event, however, will AVIF or any of its
affiliates be required to establish a new funding medium for any Contracts.
American Enterprise Life will not be required by the terms hereof to establish a
new funding medium for any Contracts if an offer to do so has been declined by
vote of a majority of Participants materially adversely affected by the material
irreconcilable conflict.
5.5 Notice to American Enterprise Life.
AVIF will promptly make known in writing to American Enterprise Life the
Board of Directors' determination of the existence of a material irreconcilable
conflict, a description of the facts that give rise to such conflict and the
implications of such conflict.
5.6 Information Requested by Board of Directors.
American Enterprise Life and AVIF (or its investment adviser) will at least
annually submit to the Board of Directors of AVIF such reports, materials or
data as the Board of Directors may reasonably request so that the Board of
Directors may fully carry out the obligations imposed upon it by the provisions
hereof or any exemptive order granted by the SEC to permit Mixed and Shared
Funding, and said reports, materials and data will be submitted at any
reasonable time deemed appropriate by the Board of Directors. All reports
received by the Board of Directors of potential or existing conflicts, and all
Board of Directors actions with regard to determining the existence of a
conflict, notifying Participating Insurance Companies and Participating Plans of
a conflict, and determining whether any proposed action adequately remedies a
conflict, will be properly recorded in the minutes of the Board of Directors or
other appropriate records, and such minutes or other records will be made
available to the SEC upon request.
5.7 Compliance with SEC Rules.
If, at any time during which AVIF is serving as an investment medium for
variable life insurance Contracts, 1940 Act Rules 6e-3(T) or, if applicable,
6e-2 are amended or Rule 6e-3 is adopted to provide exemptive relief with
respect to Mixed and Shared Funding, AVIF agrees that it will comply with the
terms and conditions thereof and that the terms of this Section 5 shall be
deemed modified if and only to the extent required in order also to comply with
the terms and conditions of such exemptive relief that is afforded by any of
said rules that are applicable.
<PAGE>
5.8 Other Requirements.
AVIF will require that each Participating Insurance Company and
Participating Plan enter into an agreement with AVIF that contains in substance
the same provisions as are set forth in Sections 4.1(b), 4.1(d), 4.3(a), 4.4(b),
4.5(a), 5, and 10 of this Agreement.
Section 6. Termination
6.1 Events of Termination.
Subject to Section 6.4 below, this Agreement will terminate as to a Fund:
(a) at the option of any party, with or without cause with respect to the
Fund, upon six (6) months advance written notice to the other parties, or, if
later, upon receipt of any required exemptive relief from the SEC, unless
otherwise agreed to in writing by the parties; or
(b) at the option of AVIF upon institution of formal proceedings against
American Enterprise Life or its affiliates by the NASD, the SEC, any state
insurance regulator or any other regulatory body regarding American Enterprise
Life's obligations under this Agreement or related to the sale of the Contracts,
the operation of each Account, or the purchase of Shares, if, in each case, AVIF
reasonably determines that such proceedings, or the facts on which such
proceedings would be based, have a material likelihood of imposing material
adverse consequences on the Fund with respect to which the Agreement is to be
terminated; or
(c) at the option of American Enterprise Life upon institution of formal
proceedings against AVIF, its principal underwriter, or its investment adviser
by the NASD, the SEC, or any state insurance regulator or any other regulatory
body regarding AVIF's obligations under this Agreement or related to the
operation or management of AVIF or the purchase of AVIF Shares, if, in each
case, American Enterprise Life reasonably determines that such proceedings, or
the facts on which such proceedings would be based, have a material likelihood
of imposing material adverse consequences on American Enterprise Life, or the
Subaccount corresponding to the Fund with respect to which the Agreement is to
be terminated; or
(d) at the option of any Party in the event that (i) the Fund's Shares are
not registered and, in all material respects, issued and sold in accordance with
any applicable federal or state law, or (ii) such law precludes the use of such
Shares as an underlying investment medium of the Contracts issued or to be
issued by American Enterprise Life; or
(e) upon termination of the corresponding Subaccount's investment in the
Fund pursuant to Section 5 hereof; or
(f) at the option of American Enterprise Life if the Fund ceases to qualify
as a RIC under Subchapter M of the Code or under successor or similar
provisions, or if American Enterprise Life reasonably believes that the Fund may
fail to so qualify; or
(g) at the option of American Enterprise Life if the Fund fails to comply
with Section 817(h) of the Code or with successor or similar provisions, or if
American Enterprise Life reasonably believes that the Fund may fail to so
comply; or
<PAGE>
(h) at the option of AVIF if the Contracts issued by American Enterprise
Life cease to qualify as annuity contracts or life insurance contracts under the
Code (other than by reason of the Fund's noncompliance with Section 817(h) or
Subchapter M of the Code) or if interests in an Account under the Contracts are
not registered, where required, and, in all material respects, are not issued or
sold in accordance with any applicable federal or state law; or
(i) upon another Party's material breach of any provision of this
Agreement.
6.2 Notice Requirement for Termination.
No termination of this Agreement will be effective unless and until the
Party terminating this Agreement gives prior written notice to the other Party
to this Agreement of its intent to terminate, and such notice shall set forth
the basis for such termination. Furthermore:
(a) in the event that any termination is based upon the provisions of
Sections 6.1(a) or 6.1(e) hereof, such prior written notice shall be given at
least six (6) months in advance of the effective date of termination unless a
shorter time is agreed to by the Parties hereto;
(b) in the event that any termination is based upon the provisions of
Sections 6.1(b) or 6.1(c) hereof, such prior written notice shall be given at
least ninety (90) days in advance of the effective date of termination unless a
shorter time is agreed to by the Parties hereto; and
(c) in the event that any termination is based upon the provisions of
Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof, such prior written
notice shall be given as soon as possible within twenty-four (24) hours after
the terminating Party learns of the event causing termination to be required.
6.3 Funds To Remain Available.
Notwithstanding any termination of this Agreement, AVIF will, at the option
of American Enterprise Life, continue to make available additional shares of the
Fund pursuant to the terms and conditions of this Agreement, for all Contracts
in effect on the effective date of termination of this Agreement (hereinafter
referred to as "Existing Contracts."). Specifically, without limitation, the
owners of the Existing Contracts will be permitted to reallocate investments in
the Fund (as in effect on such date), redeem investments in the Fund and/or
invest in the Fund upon the making of additional purchase payments under the
Existing Contracts. The parties agree that this Section 6.3 will not apply to
any terminations under Section 5 and the effect of such terminations will be
governed by Section 5 of this Agreement.
6.4 Survival of Warranties and Indemnifications.
All warranties and indemnifications will survive the termination of this
Agreement.
6.5 Continuance of Agreement for Certain Purposes.
If any Party terminates this Agreement with respect to any Fund pursuant to
Sections 6.1(b), 6.1(c), 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof, this
Agreement shall nevertheless continue in effect as to any Shares of that Fund
that are outstanding as of the
<PAGE>
date of such termination (the "Initial Termination Date"). This continuation
shall extend to the earlier of the date as of which an Account owns no Shares of
the affected Fund or a date (the "Final Termination Date") six (6) months
following the Initial Termination Date, except that American Enterprise Life
may, by written notice shorten said six (6) month period in the case of a
termination pursuant to Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i).
Section 7. Parties To Cooperate Respecting Termination
The Parties hereto agree to cooperate and give reasonable assistance to one
another in taking all necessary and appropriate steps for the purpose of
ensuring that an Account owns no Shares of a Fund after the Final Termination
Date with respect thereto, or, in the case of a termination pursuant to Section
6.1(a), the termination date specified in the notice of termination. Such steps
may include combining the affected Account with another Account, substituting
other mutual fund shares for those of the affected Fund, or otherwise
terminating participation by the Contracts in such Fund.
Section 8. Assignment
This Agreement may not be assigned by any Party, except with the written
consent of each other Party.
Section 9. Notices
Notices and communications required or permitted by Section 9 hereof will
be given by means mutually acceptable to the Parties concerned. Each other
notice or communication required or permitted by this Agreement will be given to
the following persons at the following addresses and facsimile numbers, or such
other persons, addresses or facsimile numbers as the Party receiving such
notices or communications may subsequently direct in writing:
American Express Financial Advisors Inc.
American Enterprise Life Insurance Company
IDS Tower 10
Minneapolis, MN 55440-0010
Facsimile: 612-671-2269
Attn: Mr. Peter L. Slattery
Director, Variable Assets Product Management
cc: Mary Ellyn Minenko, Esq.
Senior Counsel
AIM Variable Insurance Funds, Inc.
11 Greenway Plaza, Suite 1919
Houston, TX 77046
Facsimile: 713-993-9185
Attn: Nancy L. Martin, Esq.
<PAGE>
AIM Distributors, Inc.
11 Greenway Plaza, Suite 1919
Houston, TX 77046
Facsimile: 713-993-9185
Attn: Mr. Gary Littlepage
cc: Nancy L. Martin, Esq.
Assistant General Counsel
Section 10. Voting Procedures
Subject to the cost allocation procedures set forth in Section 3 hereof,
American Enterprise Life will distribute all proxy material furnished by AVIF to
Participants to whom pass-through voting privileges are required to be extended
and will solicit voting instructions from Participants. American Enterprise Life
will vote Shares in accordance with timely instructions received from
Participants. American Enterprise Life will vote Shares that are (a) not
attributable to Participants to whom pass-through voting privileges are
extended, or (b) attributable to Participants, but for which no timely
instructions have been received, in the same proportion as Shares for which said
instructions have been received from Participants, so long as and to the extent
that the SEC continues to interpret the 1940 Act to require pass through voting
privileges for Participants. Neither American Enterprise Life nor any of its
affiliates will in any way recommend action in connection with or oppose or
interfere with the solicitation of proxies for the Shares held for such
Participants. American Enterprise Life reserves the right to vote shares held in
any Account in its own right, to the extent permitted by law. American
Enterprise Life shall be responsible for assuring that each of its Accounts
holding Shares calculates voting privileges in a manner consistent with that of
other Participating Insurance Companies or in the manner required by the Mixed
and Shared Funding exemptive order obtained by AVIF. AVIF will notify American
Enterprise Life of any changes of interpretations or amendments to Mixed and
Shared Funding exemptive order it has obtained. AVIF will comply with all
provisions of the 1940 Act requiring voting by shareholders, and in particular,
AVIF either will provide for annual meetings (except insofar as the SEC may
interpret Section 16 of the 1940 Act not to require such meetings) or will
comply with Section 16(c) of the 1940 Act (although AVIF is not one of the
trusts described in Section 16(c) of that Act) as well as with Sections 16(a)
and, if and when applicable, 16(b). Further, AVIF will act in accordance with
the SEC's interpretation of the requirements of Section 16(a) with respect to
periodic elections of directors and with whatever rules the SEC may promulgate
with respect thereto.
Section 11. Foreign Tax Credits
AVIF agrees to consult in advance with American Enterprise Life concerning
any decision to elect or not to elect pursuant to Section 853 of the Code to
pass through the benefit of any foreign tax credits to its shareholders.
Section 12. Indemnification
12.1 Of AVIF and AIM by American Enterprise Life and AEFA.
(a) Except to the extent provided in Sections 12.1(b) and 12.1(c), below,
American Enterprise Life and AEFA agree to indemnify and hold harmless AVIF,
AIM, their respective affiliates, and each person, if any, who controls AVIF,
AIM, or their affiliates
<PAGE>
within the meaning of Section 15 of the 1933 Act and each of their respective
directors and officers, (collectively, the "Indemnified Parties" for purposes of
this Section 12.1) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of American
Enterprise Life and AEFA) or actions in respect thereof (including, to the
extent reasonable, legal and other expenses), to which the Indemnified Parties
may become subject under any statute, regulation, at common law or otherwise;
provided, the Account owns shares of the Fund and insofar as such losses,
claims, damages, liabilities or actions:
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any Account's 1933 Act
registration statement, any Account Prospectus, the Contracts, or sales
literature or advertising for the Contracts (or any amendment or supplement
to any of the foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, that this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such alleged statement
or omission was made in reliance upon and in conformity with information
furnished to American Enterprise Life or AEFA by or on behalf of AVIF for
use in any Account's 1933 Act registration statement, any Account
Prospectus, the Contracts, or sales literature or advertising or otherwise
for use in connection with the sale of Contracts or Shares (or any
amendment or supplement to any of the foregoing); or
(ii) arise out of or as a result of any other statements or representations
(other than statements or representations contained in AVIF's 1933 Act
registration statement, AVIF Prospectus, sales literature or advertising of
AVIF, or any amendment or supplement to any of the foregoing, not supplied
for use therein by or on behalf of American Enterprise Life, AEFA or their
respective affiliates and on which such persons have reasonably relied) or
the negligent, illegal or fraudulent conduct of American Enterprise Life,
AEFA or their respective affiliates or persons under their control
(including, without limitation, their employees and "Associated Persons,"
as that term is defined in paragraph (m) of Article I of the NASD's
By-Laws), in connection with the sale or distribution of the Contracts or
Shares; or
(iii)arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in AVIF's 1933 Act registration
statement, AVIF Prospectus, sales literature or advertising of AVIF, or any
amendment or supplement to any of the foregoing, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading if such a statement
or omission was made in reliance upon and in conformity with information
furnished to AVIF, AIM or their respective affiliates by or on behalf of
American Enterprise Life, AEFA or their respective affiliates for use in
AVIF's 1933 Act registration statement, AVIF Prospectus, sales literature
or advertising of AVIF, or any amendment or supplement to any of the
foregoing; or
(iv) arise as a result of any failure by American Enterprise Life or AEFA to
perform the obligations, provide the services and furnish the materials
required of them under the terms of this Agreement, or any material breach
of
<PAGE>
any representation and/or warranty made by American Enterprise Life or
AEFA in this Agreement or arise out of or result from any other material
breach of this Agreement by American Enterprise Life or AEFA; or
(v) arise as a result of failure by the Contracts issued by American Enterprise
Life to qualify as annuity contracts or life insurance contracts under the
Code, otherwise than by reason of any Fund's failure to comply with
Subchapter M or Section 817(h) of the Code.
(b) Neither American Enterprise Life nor AEFA shall be liable under this
Section 12.1 with respect to any losses, claims, damages, liabilities or actions
to which an Indemnified Party would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance by that
Indemnified Party of its duties or by reason of that Indemnified Party's
reckless disregard of obligations or duties (i) under this Agreement, or (ii) to
AVIF.
(c) Neither American Enterprise Life nor AEFA shall be liable under this
Section 12.1 with respect to any action against an Indemnified Party unless AVIF
or AIM shall have notified American Enterprise Life and AEFA in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the action shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify American Enterprise
Life and AEFA of any such action shall not relieve American Enterprise Life and
AEFA from any liability which they may have to the Indemnified Party against
whom such action is brought otherwise than on account of this Section 12.1.
Except as otherwise provided herein, in case any such action is brought against
an Indemnified Party, American Enterprise Life and AEFA shall be entitled to
participate, at their own expense, in the defense of such action and also shall
be entitled to assume the defense thereof, with counsel approved by the
Indemnified Party named in the action, which approval shall not be unreasonably
withheld. After notice from American Enterprise Life or AEFA to such Indemnified
Party of American Enterprise Life's or AEFA's election to assume the defense
thereof, the Indemnified Party will cooperate fully with American Enterprise
Life and AEFA and shall bear the fees and expenses of any additional counsel
retained by it, and neither American Enterprise Life nor AEFA will be liable to
such Indemnified Party under this Agreement for any legal or other expenses
subsequently incurred by such Indemnified Party independently in connection with
the defense thereof, other than reasonable costs of investigation.
12.2 Of American Enterprise Life and AEFA by AVIF and AIM.
(a) Except to the extent provided in Sections 12.2(c), 12.2(d) and 12.2(e),
below, AVIF and AIM agree to indemnify and hold harmless American Enterprise
Life, AEFA, their respective affiliates, and each person, if any, who controls
American Enterprise Life, AEFA or their respective affiliates within the meaning
of Section 15 of the 1933 Act and each of their respective directors and
officers, (collectively, the "Indemnified Parties" for purposes of this Section
12.2) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of AVIF and AIM) or actions
in respect thereof (including, to the extent reasonable, legal and other
expenses), to which the Indemnified Parties may become subject under any
statute, regulation, at common law, or otherwise; provided, the Account owns
shares of the Fund and insofar as such losses, claims, damages, liabilities or
actions:
<PAGE>
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in AVIF's 1933 Act registration
statement, AVIF Prospectus or sales literature or advertising of AVIF (or
any amendment or supplement to any of the foregoing), or arise out of or
are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, that this agreement to
indemnify shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance upon
and in conformity with information furnished to AVIF, AIM or their
respective affiliates by or on behalf of American Enterprise Life, AEFA or
their respective affiliates for use in AVIF's 1933 Act registration
statement, AVIF Prospectus, or in sales literature or advertising or
otherwise for use in connection with the sale of Contracts or Shares (or
any amendment or supplement to any of the foregoing); or
(ii) arise out of or as a result of any other statements or representations
(other than statements or representations contained in any Account's 1933
Act registration statement, any Account Prospectus, sales literature or
advertising for the Contracts, or any amendment or supplement to any of the
foregoing, not supplied for use therein by or on behalf of AVIF, AIM or
their respective affiliates and on which such persons have reasonably
relied) or the negligent, illegal or fraudulent conduct of AVIF, AIM, their
respective affiliates or persons under their control (including, without
limitation, their employees and "Associated Persons" as that Term is
defined in Section (n) of Article 1 of the NASD By-Laws), in connection
with the sale or distribution of AVIF Shares; or
(iii)arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any Account's 1933 Act
registration statement, any Account Prospectus, sales literature or
advertising covering the Contracts, or any amendment or supplement to any
of the foregoing, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, if such statement or omission was made
in reliance upon and in conformity with information furnished to American
Enterprise Life, AEFA or their respective affiliates by or on behalf of
AVIF or AIM for use in any Account's 1933 Act registration statement, any
Account Prospectus, sales literature or advertising covering the Contracts,
or any amendment or supplement to any of the foregoing; or
(iv) arise as a result of any failure by AVIF or AIM to perform the obligations,
provide the services and furnish the materials required of them under the
terms of this Agreement, or any material breach of any representation
and/or warranty made by AVIF or AIM in this Agreement or arise out of or
result from any other material breach of this Agreement by AVIF or AIM.
(b) Except to the extent provided in Sections 12.2(c), 12.2(d) and 12.2(e)
hereof, AVIF and AIM agree to indemnify and hold harmless the Indemnified
Parties from and against any and all losses, claims, damages, liabilities
(including amounts paid in settlement thereof with, the written consent of AVIF
or AIM) or actions in respect thereof (including, to the extent reasonable,
legal and other expenses) to which the Indemnified
<PAGE>
Parties may become subject directly or indirectly under any statute, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
actions directly or indirectly result from or arise out of the failure of any
Fund to operate as a regulated investment company in compliance with (i)
Subchapter M of the Code and regulations thereunder, or (ii) Section 817(h) of
the Code and regulations thereunder, including, without limitation, any income
taxes and related penalties, rescission charges, liability under state law to
Participants asserting liability against American Enterprise Life pursuant to
the Contracts, the costs of any ruling and closing agreement or other settlement
with the IRS, and the cost of any substitution by American Enterprise Life of
Shares of another investment company or portfolio for those of any adversely
affected Fund as a funding medium for each Account that American Enterprise Life
reasonably deems necessary or appropriate as a result of the noncompliance.
(c) Neither AVIF nor AIM shall be liable under this Section 12.2 with
respect to any losses, claims, damages, liabilities or actions to which an
Indemnified Party would otherwise be subject by reason of willful misfeasance,
bad faith, or gross negligence in the performance by that Indemnified Party of
its duties or by reason of such Indemnified Party's reckless disregard of its
obligations and duties (i) under this Agreement, or (ii) to American Enterprise
Life, AEFA, each Account or Participants.
(d) Neither AVIF nor AIM shall be liable under this Section 12.2 with
respect to any action against an Indemnified Party unless the Indemnified Party
shall have notified AVIF and AIM in writing within a reasonable time after the
summons or other first legal process giving information of the nature of the
action shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any designated
agent), but failure to notify AVIF and AIM of any such action shall not relieve
AVIF and AIM from any liability which they may have to the Indemnified Party
against whom such action is brought otherwise than on account of this Section
12.2. Except as otherwise provided herein, in case any such action is brought
against an Indemnified Party, AVIF and AIM will be entitled to participate, at
their own expense, in the defense of such action and also shall be entitled to
assume the defense thereof (which shall include, without limitation, the conduct
of any ruling request and closing agreement or other settlement proceeding with
the IRS), with counsel approved by the Indemnified Party named in the action,
which approval shall not be unreasonably withheld. After notice from AVIF or AIM
to such Indemnified Party of AVIF's or AIM's election to assume the defense
thereof, the Indemnified Party will cooperate fully with AVIF and AIM and shall
bear the fees and expenses of any additional counsel retained by it, and neither
AVIF nor AIM will be liable to such Indemnified Party under this Agreement for
any legal or other expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof, other than reasonable
costs of investigation.
(e) In no event shall AVIF or AIM be liable under the indemnification
provisions contained in this Agreement to any individual or entity, including,
without limitation, American Enterprise Life, AEFA or any other Participating
Insurance Company or any Participant, with respect to any losses, claims,
damages, liabilities or expenses that arise out of or result from (i) a breach
of any representation, warranty, and/or covenant made by American Enterprise
Life or AEFA hereunder or by any Participating Insurance Company under an
agreement containing substantially similar representations, warranties and
covenants; (ii) the failure by American Enterprise Life or any Participating
Insurance Company to maintain its segregated asset account (which invests in any
Fund) as a legally and validly established segregated asset account under
applicable state law and as
<PAGE>
a duly registered unit investment trust under the provisions of the 1940 Act
(unless exempt therefrom); or (iii) the failure by American Enterprise Life or
any Participating Insurance Company to maintain its variable annuity or life
insurance contracts (with respect to which any Fund serves as an underlying
funding vehicle) as annuity contracts or life insurance contracts under
applicable provisions of the Code.
12.3 Effect of Notice.
Any notice given by the indemnifying Party to an Indemnified Party referred
to in Sections 12.1(c) or 12.2(d) above of participation in or control of any
action by the indemnifying Party will in no event be deemed to be an admission
by the indemnifying Party of liability, culpability or responsibility, and the
indemnifying Party will remain free to contest liability with respect to the
claim among the Parties or otherwise.
12.4 Successors.
A successor by law of any Party shall be entitled to the benefits of the
indemnification contained in this Section 12.
Section 13. Applicable Law
This Agreement will be construed and the provisions hereof interpreted
under and in accordance with Maryland law, without regard for that state's
principles of conflict of laws.
Section 14. Execution in Counterparts
This Agreement may be executed simultaneously in two or more counterparts,
each of which taken together will constitute one and the same instrument.
Section 15. Severability
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will not
be affected thereby.
Section 16. Rights Cumulative
The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, that the Parties are entitled to under federal and state
laws.
Section 17. Headings
The Table of Contents and headings used in this Agreement are for purposes
of reference only and shall not limit or define the meaning of the provisions of
this Agreement.
<PAGE>
Section 18. Confidentiality
AVIF acknowledges that the identities of the customers of American
Enterprise Life or any of its affiliates (collectively, the "American Enterprise
Life Protected Parties" for purposes of this Section 18), information maintained
regarding those customers, and all computer programs and procedures or other
information developed by the American Enterprise Life Protected Parties or any
of their employees or agents in connection with American Enterprise Life's
performance of its duties under this Agreement are the valuable property of the
American Enterprise Life Protected Parties. AVIF agrees that if it comes into
possession of any list or compilation of the identities of or other information
about the American Enterprise Life Protected Parties' customers, or any other
information or property of the American Enterprise Life Protected Parties, other
than such information as may be independently developed or compiled by AVIF from
information supplied to it by the American Enterprise Life Protected Parties'
customers who also maintain accounts directly with AVIF, AVIF will hold such
information or property in confidence and refrain from using, disclosing or
distributing any of such information or other property except: (a) with American
Enterprise Life's prior written consent; or (b) as required by law or judicial
process. American Enterprise Life acknowledges that the identities of the
customers of AVIF or any of its affiliates (collectively the "AVIF Protected
Parties" for purposes of this Section 18), information maintained regarding
those customers, and all computer programs and procedures or other information
developed by the AVIF Protected Parties or any of their employees or agents in
connection with AVIF's performance of its duties under this Agreement are the
valuable property of the AVIF Protected Parties. American Enterprise Life agrees
that if it comes into possession of any list or compilation of the identities of
or other information about the AVIF Protected Parties' customers or any other
information or property of the AVIF Protected Parties, other than such
information as may be independently developed or compiled by American Enterprise
Life from information supplied to it by the AVIF Protected Parties' customers
who also maintain accounts directly with American Enterprise Life, American
Enterprise Life will hold such information or property in confidence and refrain
from using, disclosing or distributing any of such information or other property
except: (a) with AVIF's prior written consent; or (b) as required by law or
judicial process. Each party acknowledges that any breach of the agreements in
this Section 18 would result in immediate and irreparable harm to the other
parties for which there would be no adequate remedy at law and agree that in the
event of such a breach, the other parties will be entitled to equitable relief
by way of temporary and permanent injunctions, as well as such other relief as
any court of competent jurisdiction deems appropriate.
Section 19. Trademarks and Fund Names
(a) AIM, or its affiliates, owns all right, title and interest in and to
the name, trademark and service mark "AIM" and such other tradenames, trademarks
and service marks as may be set forth on Schedule B, as amended from time to
time by written notice from AIM to American Enterprise Life (the "AIM licensed
marks" or the "licensor's licensed marks") and is authorized to use and to
license other persons to use such marks. AIM hereby grants to American
Enterprise Life and its affiliates a non-exclusive license to use the AIM
licensed marks in connection with American Enterprise Life's performance of the
services contemplated under this Agreement, subject to the terms and conditions
set forth in this Section 19.
<PAGE>
(b) The grant of license by AIM (a "licensor") to American Enterprise Life
and its affiliates (the "licensee") shall terminate automatically upon
termination of this Agreement. Upon automatic termination, the licensee shall
cease to use the licensor's licensed marks, except that American Enterprise Life
shall have the right to continue to service any outstanding Contracts bearing
any of the AIM licensed marks. Upon AIM's elective termination of this license,
American Enterprise Life and its affiliates shall immediately cease to issue any
new annuity or life insurance contracts bearing any of the AIM licensed marks
and shall likewise cease any activity which suggests that it has any right under
any of the AIM licensed marks or that it has any association with AIM, except
that American Enterprise Life shall have the right to continue to service
outstanding Contracts bearing any of the AIM licensed marks.
(c) The licensee shall obtain the prior written approval of the licensor
for the public release by such licensee of any materials bearing the licensor's
licensed marks. The licensor's approvals shall not be unreasonably withheld.
(d) During the term of this grant of license, a licensor may request that a
licensee submit samples of any materials bearing any of the licensor's licensed
marks which were previously approved by the licensor but, due to changed
circumstances, the licensor may wish to reconsider. If, on reconsideration, or
on initial review, respectively, any such samples fail to meet with the written
approval of the licensor, then the licensee shall immediately cease distributing
such disapproved materials. The licensor's approval shall not be unreasonably
withheld, and the licensor, when requesting reconsideration of a prior approval,
shall assume the reasonable expenses of withdrawing and replacing such
disapproved materials. The licensee shall obtain the prior written approval of
the licensor for the use of any new materials developed to replace the
disapproved materials, in the manner set forth above.
(e) The licensee hereunder: (i) acknowledges and stipulates that, to the
best of the knowledge of the licensee, the licensor's licensed marks are valid
and enforceable trademarks and/or service marks and that such licensee does not
own the licensor's licensed marks and claims no rights therein other than as a
licensee under this Agreement; (ii) agrees never to contend otherwise in legal
proceedings or in other circumstances; and (iii) acknowledges and agrees that
the use of the licensor's licensed marks pursuant to this grant of license shall
inure to the benefit of the licensor.
Section 20. Parties to Cooperate
Each party to this Agreement will cooperate with each other party and all
appropriate governmental authorities (including, without limitation, the SEC,
the NASD and state insurance regulators) and will permit each other and such
authorities reasonable access to its books and records (including copies
thereof) in connection with any investigation or inquiry relating to this
Agreement or the transactions contemplated hereby.
-------------------------
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized officers
signing below.
AIM VARIABLE INSURANCE
FUNDS, INC.
Attest: /s/ Nancy L. Martin By: /s/ Robert H. Graham
Nancy L. Martin Name: Robert H. Graham
Assistant Secretary Title: President
AIM DISTRIBUTORS, INC.
Attest: /s/ Nancy L. Martin By: /s/ W. Gary Littlepage
Nancy L. Martin Name: W. Gary Littlepage
Assistant General Counsel Title: Sr. Vice President
& Assistant Secretary
AMERICAN ENTERPRISE LIFE
INSURANCE COMPANY, on
behalf of itself and its
separate accounts
Attest: /s/ William A. Stoltzmann By: /s/ Stuart A. Sedlacek
Name: William A. Stoltzmann Name: Stuart A. Sedlacek
Title: Vice President Title: Executive Vice President
AMERICAN EXPRESS FINANCIAL
ADVISORS INC.
Attest: /s/ William A. Stoltzmann By: /s/ Stuart A. Sedlacek
Name: William A. Stoltzmann Name: Stuart A. Sedlacek
Title: Vice President Title: Executive Vice President
<PAGE>
SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
o AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Growth and Income Fund
AIM V.I. International Equity Fund
AIM V.I. Value Fund
SEPARATE ACCOUNTS UTILIZING THE FUNDS
o American Enterprise Variable Annuity Account
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
o Flexible Premium Deferred Variable Annuity Contract Form
Nos. 34560, and 43260 (and any state variations thereof)
<PAGE>
SCHEDULE B
o AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Growth and Income Fund
AIM V.I. International Equity Fund
AIM V.I. Value Fund
o AIM and Design
April 30, 1998
American Enterprise Life Insurance Company
80 South Eighth Street
P.O. Box 534
Minneapolis, MN 55440-0534
RE: Registration Statement on Form N-4
File No.: 33-54471
Ladies and Gentlemen:
I am familiar with the establishment of the American Enterprise Variable Annuity
Account ("Account"), which is a separate account of American Enterprise Life
Insurance Company ("Company") established by the Company's Board of Directors
according to applicable insurance law. I also am familiar with the
above-referenced Registration Statement filed by the Company on behalf of the
Account with the Securities and Exchange Commission.
I have made such examination of law and examined such documents and records as
in my judgment are necessary and appropriate to enable me to give the following
opinion:
1. The Company is duly incorporated, validly existing and in good standing
under applicable state law and is duly licensed or qualified to do business
in each jurisdiction where it transacts business. The Company has all
corporate powers required to carry on its business and to issue the
contracts.
2. The Account is a validly created and existing separate account of the
Company and is duly authorized to issue the securities registered.
3. The contracts issued by the Company during the past fiscal year, when
offered and sold in accordance with the prospectus contained in the
Registration Statement and in compliance with applicable law, were legally
issued and represent binding obligations of the Company in accordance with
their terms.
I hereby consent to the filing of this opinion as an exhibit to the Registration
Statement.
Sincerely,
Colin M. Lancaster
Associate Counsel
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Independent Auditors"
and to the use of our reports dated February 5, 1998 on the financial statements
and schedules of American Enterprise Life Insurance Company and our report dated
March 13, 1998 on the financial statements of American Enterprise Variable
Annuity Account - AEL Personal Portfolio/AEL Personal Portfolio Plus Variable
Annuity Subaccounts in Post-Effective Amendment No. 10 to the Registration
Statement (Form N-4, No. 33-54471) and related Prospectus for the registration
of the AEL Personal Portfolio/AEL Personal Portfolio Plus for American
Enterprise Variable Annuity Account to be offered by American Enterprise
Life Insurance Company.
Ernst & Young LLP
Minneapolis, Minnesota
April 27, 1998
<PAGE>
Report of Independent Auditors
The Board of Directors
American Enterprise Life Insurance Company
We have audited the financial statements of American Enterprise Life Insurance
Company (a wholly owned subsidiary of IDS Life Insurance Company) as of December
31, 1997 and 1996, and for each of the three years in the period ended December
31, 1997, and have issued our report thereon dated February 5, 1998 (included
elsewhere in this Registration Statement). Our audits also included the
financial statement schedules listed in Item 24(b) of this Registration
Statement. These schedules are the responsibility of the Company's management.
Our responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
Ernst & Young LLP
February 5, 1998
Minneapolis, Minnesota
<PAGE>
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
SCHEDULE I - CONSOLIDATED SUMMARY OF INVESTMENTS
OTHER THAN INVESTMENTS IN RELATED PARTIES ($ thousands)
AS OF DECEMBER 31, 1997
- -----------------------------------------------------------------------------
Column A Column B Column C Column D
Type of Investment Cost Value Amount at which
shown in the
balance sheet
- -----------------------------------------------------------------------------
Fixed maturities:
Held to maturity:
United States Government and
government agencies and
authorities (a) $ 198,733 $ 199,401 $ 198,733
States, municipalities and
political subdivisions 3,003 3,176 3,003
All other corporate bonds (b) 984,946 1,020,531 984,946
---------- ----------- ----------------
Total held to maturity 1,186,682 1,223,108 1,186,682
Available for sale:
United States Government and
government agencies and
authorities (c) 1,245,323 1,274,729 1,274,729
States, municipalities and
political subdivisions 0 0 0
All other corporate bonds 1,364,298 1,411,070 1,411,070
---------- ----------- ----------------
Total available for sale 2,609,621 2,685,799 2,685,799
Mortgage loans on real estate 738,052 XXXXXXXXX 738,052
Other investments 16,024 XXXXXXXXX 16,024
---------- ----------------
Total investments $ 4,550,379 $XXXXXXXXX $ 4,626,557
========== ================
(a)- Includes mortgage-backed securities with a cost and market value of
$187,613 and $187,571, respectively.
(b)- Includes mortgage-backed securities with a cost and market value of $14,448
and $14,620, respectively.
(c)- Includes mortgage-backed securities with a cost and market value of
$1,243,246 and $1,272,639, respectively.
(d)- Includes mortgage-backed securities with a cost and market value of $91,081
and $93,666, respectively.
<PAGE>
<TABLE>
<CAPTION>
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
SCHEDULE V - VALUATION AND QUALIFYING ACCOUNTS ($ thousands)
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
- -----------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
Additions
---------------------------------
Balance at Charged to
Description Beginning Charged to Other Accounts-Deductions- Balance at End
of Period Costs & Expenses Describe Describe of Period
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
For the year ended
December 31, 1997
- ---------------------------
Reserve for Mortgage Loans . $2,370 $1,348 $ 0 $ 0 $3,718
Reserve for Fixed Maturities $ 16 $ 799 $ 0 $ 0 $ 815
For the year ended
December 31, 1996
- ---------------------------
Reserve for Mortgage Loans . $ 0 $2,370 $ 0 $ 0 $2,370
Reserve for Fixed Maturities $ 9 $ 7 $ 0 $ 0 $ 16
For the year ended
December 31, 1995
- ---------------------------
Reserve for Fixed Maturities $ 0 $ 9 $ 0 $ 0 $ 9
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> FEB-21-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 55705179
<INVESTMENTS-AT-VALUE> 61430749
<RECEIVABLES> 91221
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 61521970
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> (162431)
<TOTAL-LIABILITIES> (162431)
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 38934328
<SHARES-COMMON-PRIOR> 22149932
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 61359539
<DIVIDEND-INCOME> 2381975
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (637249)
<NET-INVESTMENT-INCOME> 1744726
<REALIZED-GAINS-CURRENT> 261838
<APPREC-INCREASE-CURRENT> 4150985
<NET-CHANGE-FROM-OPS> 6157549
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 19025325
<NUMBER-OF-SHARES-REDEEMED> (2240929)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 30771301
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (637249)
<AVERAGE-NET-ASSETS> 45973889
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLAR
<S> <C>
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<PERIOD-TYPE> YEAR
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 2685799
<DEBT-CARRYING-VALUE> 1186682
<DEBT-MARKET-VALUE> 1223108
<EQUITIES> 0
<MORTGAGE> 738052
<REAL-ESTATE> 0
<TOTAL-INVEST> 4626557
<CASH> 0
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 224501
<TOTAL-ASSETS> 4973413
<POLICY-LOSSES> 4343213
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 11328
<NOTES-PAYABLE> 0
<COMMON> 2000
0
0
<OTHER-SE> 467344
<TOTAL-LIABILITY-AND-EQUITY> 4973413
0
<INVESTMENT-INCOME> 332268
<INVESTMENT-GAINS> (509)
<OTHER-INCOME> 6329
<BENEFITS> 231437
<UNDERWRITING-AMORTIZATION> 36803
<UNDERWRITING-OTHER> 24890
<INCOME-PRETAX> 44958
<INCOME-TAX> 16645
<INCOME-CONTINUING> 28313
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28313
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
American Enterprise Variable Account
POWER OF ATTORNEY
City of Minneapolis
State of Minnesota
Each of the undersigned, as a principal financial officer and controller,
respectively, of American Enterprise Life Insurance Company (AEL), sponsor of
the unit investment trust consisting of the American Enterprise Variable Account
in connection with the filing of registration statements on Form N-4 under the
Securities Act of 1933 and the Investment Company Act of 1940, hereby
constitutes and appoints William A. Stoltzmann, Mary Ellyn Minenko, Sherilyn K.
Beck, Colin Lancaster and Timothy S. Meehan or any one of them, as his
attorney-in-fact and agent, to sign for him in his name, place and stead any and
all filings, applications (including applications for exemptive relief),
periodic reports, registration statements (with all exhibits and other documents
required or desirable in connection therewith), other documents, and amendments
thereto and to file such filings, applications, periodic reports, registration
statements, other documents, and amendments thereto with the Securities and
Exchange Commission, and any necessary states, and grants to any or all of them
the full power and authority to do and perform each and every act required or
necessary in connection therewith.
Dated the 9th day of April, 1998.
/s/ Jeffrey S. Horton April 8, 1998
- --------------------------------------------
Jeffrey S. Horton
Vice President and Treasurer
/s/ Philip C. Wentzel April 9, 1998
- --------------------------------------------
Philip C. Wentzel
Controller
