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. 1 (File No. 333-67595) [X]
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 3 (File No. 811-7195) [X]
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(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) 671-3678
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Mary Ellyn Minenko, 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 April 30, 1999 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>
Prospectus
April 30, 1999
Goldman Sachs Variable Annuity
Individual flexible premium deferred combination fixed/variable annuity
American Enterprise Variable Annuity Account
Issued 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 that you should know before investing. You
also will receive the prospectuses relating to all investment series of the
Goldman Sachs Variable Insurance Trust. Please read the prospectuses carefully
and keep them for future reference. This contract is available for nonqualified
annuities, IRAs (including Roth IRAs) and Simplified Employee Pensions Plans
(SEPs).
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy of this prospectus. Any representation to
the contrary is a criminal offense.
An investment in this annuity is not a deposit of a bank or financial
institution and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. An investment in this annuity
involves investment risk including the possible loss of principal.
A Statement of Additional Information (SAI), dated April 30, 1999, 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 3
THE ANNUITY IN BRIEF 4
EXPENSE SUMMARY 5
FINANCIAL STATEMENTS 8
PERFORMANCE INFORMATION 8
THE VARIABLE ACCOUNT 9
THE FUNDS 10
Goldman Sachs Conservative Strategy Portfolio 10
Goldman Sachs Balanced Strategy Portfolio 10
Goldman Sachs Growth and Income Strategy Portfolio 10
Goldman Sachs Growth Strategy Portfolio 10
Goldman Sachs Aggressive Growth Strategy Portfolio 10
Goldman Sachs Growth and Income Fund 10
Goldman Sachs CORE Large Cap Value Fund 10
Goldman Sachs CORE U.S. Equity Fund 10
Goldman Sachs CORE Large Cap Growth Fund 10
Goldman Sachs CORE Small Cap Equity Fund 10
Goldman Sachs Capital Growth Fund 10
Goldman Sachs Mid Cap Value Fund 10
(formerly "Mid Cap Equity Fund")
Goldman Sachs CORE International Equity Fund 10
Goldman Sachs International Equity Fund 10
Goldman Sachs Short Duration Government Fund 10
Goldman Sachs Global Income Fund 10
THE FIXED ACCOUNT 12
BUYING YOUR ANNUITY 12
The retirement date 13
Beneficiary 13
Purchase payment amounts 13
How to make payments 13
CHARGES 14
Contract administrative charge 14
Variable account administrative charge 14
Mortality and expense risk fee 14
Withdrawal charge 14
Waiver of withdrawal charge 15
Premium taxes 16
VALUING YOUR INVESTMENT 16
Number of units 16
Accumulation unit value 16
Net investment factor 17
Factors that affect variable subaccount
accumulation units 17
MAKING THE MOST OF YOUR ANNUITY 18
Automated dollar-cost averaging 18
Asset rebalancing 18
Transferring money between subaccounts 18
Transfer policies 19
Three ways to request a transfer or a withdrawal 19
WITHDRAWALS FROM YOUR CONTRACT 21
Withdrawal policies 21
Receiving payment when you request a withdrawal 21
CHANGING OWNERSHIP 21
BENEFITS IN CASE OF DEATH 22
THE ANNUITY PAYOUT PERIOD 23
Annuity payout plans 23
Death after annuity payouts begin 24
TAXES 24
Tax qualification 26
VOTING RIGHTS 26
SUBSTITUTION OF INVESTMENTS 27
DISTRIBUTION OF THE CONTRACT 27
ABOUT AMERICAN ENTERPRISE LIFE 28
Legal proceedings 28
Year 2000 28
REGULAR AND SPECIAL REPORTS 29
Services 29
APPENDIX A --
EXAMPLE OF DOLLAR COST AVERAGING 30
TABLE OF CONTENTS OF THE
STATEMENT OF ADDITIONAL INFORMATION 31
<PAGE>
Key terms
These terms can help you understand details about your annuity.
Accumulation unit -- An accounting unit of measure used to calculate the
variable account contract value before annuity payouts begin.
American Enterprise Life -- In this prospectus, "we," "us," "our" and "American
Enterprise Life" refer to American Enterprise Life Insurance Company.
Annuitant -- The person on whose life or life expectancy the annuity payouts are
based.
Annuity payouts -- An amount paid at regular intervals under one of several
plans available to the owner and/or any other payee. We can pay this amount on a
variable or fixed basis or a combination of both.
Annuity unit -- An accounting unit of measure used to calculate the value of
annuity payments from the variable account on or after annuity payouts begin.
Beneficiary -- The person you designate to receive benefits in case of the
owner's or annuitant's death while the contract is in force and before annuity
payouts begin.
Close of business -- When the New York Stock Exchange (NYSE) closes, normally 4
p.m. Eastern time.
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
you allocate to this account earn interest at rates that we declare
periodically.
Funds -- Funds that are investment options under your annuity. You may allocate
your purchase payments into variable subaccounts investing in shares of any or
all of these funds. Each fund is an investment series of Goldman Sachs Variable
Insurance Trust, an open-end management investment company.
o Five of the funds are asset allocation funds (Goldman Sachs Strategy
Portfolios). Each Goldman Sachs Strategy Portfolio seeks to achieve its
investment objectives by investing in a combination of underlying equity,
fixed income and/or money market mutual funds for which Goldman Sachs or
its affiliates serve as investment adviser or principal underwriter
(underlying mutual funds).
o Each of the other funds seeks to achieve its investment objectives by
investing directly in fixed income securities, in equity securities or in a
combination of both. (See "The funds").
Owner (you, your) -- The person who controls the annuity (decides on investment
allocations, transfers, payout options, etc.). Usually, but not always, the
owner is also the annuitant. The owner is responsible for taxes, regardless of
whether he or she receives the annuity's benefits.
Qualified annuity -- An annuity that you purchase 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 nonqualified annuities.
Retirement date -- The date when annuity payouts are scheduled to begin.
Trust -- Goldman Sachs Variable Insurance Trust.
Valuation date -- Any normal business day, Monday through Friday, that the NYSE
is open. Each valuation date ends at the close of business. We calculate the
value of each variable subaccount at the close of business on each valuation
date.
Variable account -- Consists of separate subaccounts to which you may allocate
purchase payments; each subaccount invests in shares of one fund (See "The
variable account"). The value of your investment in each variable subaccount
changes with the performance of the fund.
Withdrawal value -- The amount you are entitled to receive if you make a full
withdrawal from your annuity. It is the contract value minus any applicable
withdrawal charge and contract administrative charge.
<PAGE>
The annuity in brief
Purpose: The purpose of the annuity is 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. The annuity
provides lifetime or other forms of payouts to you or to anyone you designate
beginning at a specified date (the retirement date). As in the case of other
annuities, it may not be advantageous for you to purchase this annuity as a
replacement for, or in addition to an existing annuity.
Issuer: American Enterprise Life Insurance Company, the issuer of the annuity,
is a subsidiary of IDS Life Insurance Company (IDS Life), which is a subsidiary
of American Express Financial Corporation (AEFC).
Free look period: You may return your annuity to your financial advisor or to
our Minneapolis administrative offices within the time stated on the first page
of your contract and receive a full refund of the contract value. We will not
deduct any charges. However, you bear the investment risk from the time of
purchase until you return the contract; the refund amount may be more or less
than the payment you made. (Exception: If the law requires, we will refund all
of your purchase payments.)
Accounts: Currently, you may allocate your purchase payments among any or all
of:
o the subaccounts of the variable account, each of which invests in a fund
with a particular investment objective. The value of each variable
subaccount varies with the performance of the particular fund in which it
invests. We cannot guarantee that the value at the retirement date will
equal or exceed the total of purchase payments allocated to the variable
subaccounts. (p. 10)
o the fixed account, which earns interest at a rate that we adjust
periodically. (p. 12)
Buying the annuity: Your financial advisor 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. You must make an initial lump-sum payment. You have the option of
making additional payments in the future. Some states have time limitations for
making additional payments. (p. 12)
o Minimum initial purchase payment -- $1,000
o Minimum additional purchase payment -- $100
o Maximum first-year purchase payments (without prior approval) --
$2,000,000 (for issue ages 0 to 85)
$50,000 (for issue ages 86 to 90)
o Maximum additional annual purchase payments (without prior approval) --
$50,000
Transfers: Subject to certain restrictions you currently may redistribute your
money among accounts without charge at any time until annuity payouts begin, and
once per contract year among the variable subaccounts after annuity payouts
begin. You may establish automated transfers among the fixed account and
variable subaccount(s). Fixed account transfers are subject to special
restrictions. (p. 18)
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 591/2) and
may have other tax consequences; also, certain restrictions apply. (p. 21)
Changing ownership: You may change ownership of a nonqualified annuity by
written instruction, but this may have federal income tax consequences.
Restrictions apply to changes of ownership of a qualified annuity. (p. 21)
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. 22)
Annuity payouts: You can apply the contract value 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 you like. If you purchased a qualified
annuity, the payout schedule must meet the requirements of the qualified plan.
We can make payouts on a fixed or variable basis, or both. Total monthly payouts
may include amounts from each variable subaccount and the fixed account. (p. 23)
<PAGE>
Taxes: Generally, your annuity grows tax-deferred until you make withdrawals
from 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 and be
distributed tax free if you meet certain distribution requirements. (p. 24)
Charges: Your annuity is subject to a:
o $30 annual contract administrative charge;
o 0.15% variable account administrative charge;
o 1.25% mortality and expense risk fee; withdrawal charge;
o any premium taxes that may be imposed on us by state or local governments.
Currently, we deduct any applicable premium tax when you make a total
withdrawal or when annuity payouts begin, but we reserve the right to
deduct this tax at other times such as when you make purchase payments. (p.
14); and
o the operating expenses of the funds.
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. We show all costs that
you bear directly or indirectly for the variable subaccounts and funds below.
Some expenses may vary as we explain under "Charges."
Contract owner expenses:
Withdrawal charge (contingent deferred sales charge as a percentage of purchase
payment withdrawn)
Years from Withdrawal charge
payment receipt percentage
1 6%
2 6%
3 5%
4 5%
5 4%
6 3%
7 2%
Thereafter 0%
Annual contract administrative charge $30
Variable account annual expenses
Variable account administrative charge
(as a percentage of average daily net assets) 0.15%
Mortality and expense risk fee
(as a percentage of average daily net assets) 1.25%
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Total variable account annual expenses 1.40%
<PAGE>
Annual operating expenses of the funds
(management fees and other expenses deducted as a percentage of average net
assets as follows:)
<TABLE>
<CAPTION>
Growth and Aggressive CORE
Conservative Balanced Income Growth Growth Growth and Large Cap CORE U.S.
Strategy Strategy Strategy Strategy Strategy Income Value Equity
Portfolio+(1)Portfolio+(1)Portfolio+(1)Portfolio+(1) Portfolio+(1) Fund(2) Fund(1) Fund(2)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 0.15% 0.15% 0.15% 0.15% 0.15% 0.75% 0.70% 0.70%
Other expenses
(after applicable limitations)* 0.10 0.10 0.10 0.10 0.10 0.15 0.10 0.10
Underlying mutual fund expenses+ 0.73 0.83 0.87 0.90 0.95 -- -- --
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Total
(after applicable limitations)* 0.98% 1.08% 1.12% 1.15% 1.20% 0.90% 0.80% 0.80%
CORE CORE Short
Large Cap CORE Small Capital Mid Cap InternationalInternationalDuration Global
Growth Cap Equity Growth Value Equity Equity Government Income
Fund(2) Fund(2) Fund(1) Fund(1) Fund(1) Fund(2) Fund(1) Fund(2)
Management fees 0.70% 0.75% 0.75% 0.80% 0.85% 1.00% 0.55% 0.90%
Other expenses
(after applicable limitations)* 0.10 0.15 0.15 0.15 0.25 0.25 0.15 0.15
Underlying mutual fund expenses+ -- -- -- -- -- -- -- --
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Total
(after applicable limitations)* 0.80% 0.90% 0.90% 0.95% 1.10% 1.25% 0.70% 1.05%
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* Goldman Sachs Asset Management and Goldman Sachs Asset Management
International, the investment advisers, have voluntarily agreed to reduce or
limit certain other expenses (excluding management fees, taxes, interest,
brokerage fees, litigation, indemnification and other extraordinary expenses)
to the extent such expenses exceed the percentage stated in the above table
(as calculated per annum) of each fund's respective average daily net assets.
The investment advisers may modify or discontinue any of the limitations set
forth above in the future at their discretion. Without the limitations
described above, "Other expenses" and "Total" of the funds would be as
follows:
Growth and Aggressive CORE
Conservative Balanced Income Growth Growth Growth and Large Cap CORE U.S.
Strategy Strategy Strategy Strategy Strategy Income Value Equity
Portfolio+(1)Portfolio+(1)Portfolio+(1)Portfolio+(1)Portfolio+(1)Fund(2) Fund(1) Fund(2)
Other expenses 0.40% 0.27% -- -- 0.24% 1.94% 0.18% 2.13%
Total 1.28% 1.25% -- -- 1.34% 2.69% 0.88% 2.83%
CORE CORE Short
Large Cap CORE Small Capital Mid Cap InternationalInternationalDuration Global
Growth Cap Equity Growth Value Equity Equity Government Income
Fund(2) Fund(2) Fund(1) Fund(1) Fund(1) Fund(2) Fund(1) Fund(2)
Other expenses 2.17% 3.17% 1.03% 0.57% 0.50% 1.97% 0.39% 2.40%
Total 2.87% 3.92% 1.78% 1.37% 1.35% 2.97% 0.94% 3.30%
+ Underlying mutual fund expenses for each Goldman Sachs Strategy Portfolio
are based upon the strategic allocation of each Portfolio's investment in the
underlying mutual funds and upon the total operating expenses of the
underlying mutual funds as in effect on December 31, 1998. Actual underlying
mutual fund expenses incurred by each Goldman Sachs Strategy Portfolio may
vary with changes in the allocation of each Portfolio's assets among the
underlying mutual funds and with other events that directly affect the
expenses of the underlying mutual funds. For additional information on the
total operating expenses of each underlying mutual fund, please refer to the
prospectus for the Goldman Sachs Strategy Portfolios.
(1) The fund's expenses are estimated due to the fund not being operational as
of December 31, 1998 or being in existence for less than 10 months as of
December 31, 1998.
(2) The fund's expenses are based on actual expenses for fiscal year ended
December 31, 1998.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Example: #
Growth and Aggressive CORE
Conservative Balanced Income Growth Growth Growth and Large Cap CORE U.S.
Strategy Strategy Strategy Strategy Strategy Income Value Equity
Portfolio Portfolio Portfolio Portfolio Portfolio Fund Fund Fund
You would pay the following expenses on a $1,000 investment, assuming 5%
annual return and full withdrawal at the end of each time period:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 year $ 85.07 $ 86.10 $ 86.51 $ 86.81 $ 87.33 $ 84.25 $ 83.23 $ 83.23
3 years 127.10 130.17 131.40 132.32 133.85 124.64 121.56 121.56
5 years 171.71 176.87 178.90 180.43 182.97 167.66 162.51 162.51
10 years 280.78 290.89 294.91 297.91 302.89 272.62 262.33 262.33
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 $ 25.07 $ 26.10 $ 26.51 $ 26.81 $ 27.33 $ 24.25 $ 23.23 $ 23.23
3 years 77.10 80.17 81.40 82.32 83.85 74.64 71.56 71.56
5 years 131.76 136.87 138.90 140.43 142.97 127.66 122.51 122.51
10 years 280.78 290.89 294.91 297.91 302.89 272.62 262.33 262.33
CORE CORE Short
Large Cap CORE Small Capital Mid Cap InternationalInternationalDuration Global
Growth Cap Equity Growth Value Equity Equity Government Income
Fund Fund Fund Fund Fund Fund Fund Fund
You would pay the following expenses on a $1,000 investment, assuming 5%
annual return and full withdrawal at the end of each time period:
1 year $ 83.23 $ 84.25 $ 84.25 $ 84.76 $ 86.30 $ 87.84 $ 82.20 $ 85.79
3 years 121.56 124.64 124.64 126.18 130.79 135.38 118.47 129.25
5 years 162.51 167.66 167.66 170.22 177.88 185.50 157.35 175.34
10 years 262.33 272.62 272.62 277.73 292.90 307.85 251.94 287.87
You would pay the following expenses on the same investment assuming no
withdrawal or selection of an annuity payout plan at the end of each time
period:
1 year $ 23.23 $ 24.25 $ 24.25 $ 24.76 $ 26.30 $ 27.84 $ 22.20 $ 25.79
3 years 71.56 74.64 74.64 76.18 80.79 85.38 68.47 79.25
5 years 122.51 127.66 127.66 130.22 137.88 145.50 117.35 135.34
10 years 262.33 272.62 272.62 277.73 292.90 307.85 251.94 287.87
# In this example, the $30 annual contract administrative charge is
approximated as a 0.066% charge based on the average estimated contract size.
Premium taxes imposed by some state and local governments are not reflected
in this example.
You should not consider this example to be a representation of past or future
expenses. Actual expenses may be more or less than those shown.
</TABLE>
<PAGE>
Financial statements
The SAI contains the audited financial statements of American Enterprise Life.
The SAI does not include financial statements of the subaccounts because they
are new and do not have any assets.
Performance information
In the future, performance information for the variable subaccounts may appear
from time to time in advertisements or sales literature. In all cases, this
information will reflect the performance of a hypothetical investment in a
particular subaccount during a particular time period. Currently, we do not
provide any performance information for the subaccounts because they are new and
have not had any activity to date. Past performance does not guarantee future
results. We perform calculations as follows:
Yield -- for subaccounts investing in income funds: We divide net investment
income (income less expenses) per accumulation unit during a given 30-day period
by the value of the unit on the last day of the period. We convert the result to
an annual percentage.
Average annual total return: Expressed as an average annual compounded rate of
return of a hypothetical investment over a period of one, five and 10 years (or
up to the life of the subaccount if it is less than 10 years old).
Cumulative 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.
Average annual and cumulative total return figures reflect 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). We also may show
optional average annual and cumulative total return quotations that do not
reflect a withdrawal charge deduction (assuming no withdrawal). We may show
average annual and cumulative total return by means of schedules, charts or
graphs.
You should consider performance information 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. This
information does not indicate future performance. Because advertised yields and
total return figures include all annuity charges that have the effect of
decreasing advertised performance, you should not compare subaccount performance
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 total return for the
subaccounts.)
If you would like additional information about actual performance, contact us at
the address or telephone number on the cover.
<PAGE>
The variable account
You may allocate purchase payments to any or all of the subaccounts of the
variable account that invest in shares of the following funds, each an
investment series of the Goldman Sachs Variable Insurance Trust:
Goldman Sachs Conservative Strategy Portfolio
Goldman Sachs Balanced Strategy Portfolio
Goldman Sachs Growth and Income Strategy Portfolio
Goldman Sachs Growth Strategy Portfolio
Goldman Sachs Aggressive Growth Strategy Portfolio
Goldman Sachs Growth and Income Fund
Goldman Sachs CORE Large Cap Value Fund
Goldman Sachs CORE U.S. Equity Fund
Goldman Sachs CORE Large Cap Growth Fund
Goldman Sachs CORE Small Cap Equity Fund
Goldman Sachs Capital Growth Fund
Goldman Sachs Mid Cap Value Fund
Goldman Sachs CORE International Equity Fund
Goldman Sachs International Equity Fund
Goldman Sachs Short Duration Government Fund
Goldman Sachs Global Income Fund
We reserve the right to limit the maximum number of subaccounts to which you can
allocate purchase payments or contract value at any time.
The variable account also includes other subaccounts that are available under
annuities not described in this prospectus. The variable account meets the
definition of a separate account under federal securities laws. We credit or
charge income, capital gains and capital losses of each subaccount only to that
subaccount. State insurance law provides that we will not charge a variable
subaccount with liabilities of any other variable subaccount or of our general
business.
The U.S. Treasury and the IRS indicated that they may provide additional
guidance on investment control. This concerns how many variable subaccounts an
insurance company may offer and how many exchanges among variable subaccounts it
may allow before the owner would be currently taxed on income earned within
variable subaccount assets. At this time, we do not know what the additional
guidance will be or when action will be taken. We reserve the right to modify
the annuity, as necessary, so that the contract 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 so that the annuity continues to
qualify as an annuity for federal income tax purposes. We reserve the right to
modify the annuity as necessary to comply with any new tax laws.
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.
<PAGE>
The funds
Goldman Sachs Conservative Strategy Portfolio seeks current income, consistent
with the preservation of capital and secondarily also considers the potential
for capital appreciation.
Goldman Sachs Balanced Strategy Portfolio seeks current income and long-term
capital appreciation.
Goldman Sachs Growth and Income Strategy Portfolio seeks long-term capital
appreciation and current income.
Goldman Sachs Growth Strategy Portfolio seeks capital appreciation and
secondarily current income.
Goldman Sachs Aggressive Growth Strategy Portfolio seeks capital appreciation.
Goldman Sachs Growth and Income Fund seeks long-term growth of capital and
growth of income through investments in equity securities that are considered to
have favorable prospects for capital appreciation and/or dividend paying
ability.
Goldman Sachs CORE Large Cap Value Fund seeks long-term growth of capital and
dividend income through a broadly diversified portfolio of equity securities of
large cap
U.S. issuers that are selling at low to modest valuations relative to general
market measures and that are expected to have favorable prospects for capital
appreciation and/or dividend-paying ability.
Goldman Sachs CORE U.S. Equity Fund seeks long-term growth of capital and
dividend income through a broadly diversified portfolio of large cap and blue
chip equity securities representing all major sectors of the U.S. economy.
Goldman Sachs CORE Large Cap Growth Fund seeks long-term growth of capital
through a broadly diversified portfolio of equity securities of large cap U.S.
issuers that are expected to have better prospects for earnings growth than the
growth rate of the general domestic economy. Dividend income is a secondary
consideration.
Goldman Sachs CORE Small Cap Equity Fund seeks long-term growth of capital
through a broadly diversified portfolio of equity securities of U.S. issuers
which are included in the Russell 2000 Index at the time of investment.
Goldman Sachs Capital Growth Fund seeks long-term growth of capital through
diversified investments in equity securities of companies that are considered to
have long-term capital appreciation potential.
Goldman Sachs Mid Cap Value Fund seeks long-term appreciation primarily through
investments in equity securities of companies with public stock market
capitalizations within the range of the market capitalization of companies
constituting the Russell Midcap Index at the time of investment (currently
between $400 million and $16 billion).
Goldman Sachs CORE International Equity Fund seeks long-term growth of capital
through a broadly diversified portfolio of equity securities of large cap
companies that are organized outside the U.S. or whose securities are
principally traded outside the U.S.
Goldman Sachs International Equity Fund seeks long-term capital appreciation
through investments in equity securities of companies that are organized outside
the U.S. or whose securities are principally traded outside the U.S.
Goldman Sachs Short Duration Government Fund seeks a high level of current
income and secondarily, in seeking current income, may also consider the
potential for capital appreciation. The Fund invests primarily in securities
issued or guaranteed by the U.S. government, its agencies, instrumentalities or
sponsored enterprises.
Goldman Sachs Global Income Fund seeks a high total return, emphasizing current
income, and, to a lesser extent, providing opportunities for capital
appreciation. The Fund invests primarily in a portfolio of high quality
fixed-income securities of U.S. and foreign issuers and foreign currencies.
The investment objectives and policies of some of the funds are similar to the
investment objectives and policies of other mutual funds that GSAM, GSAMI and
their affiliates manage. Although the objectives and policies may be similar,
the investment results of the funds may be higher or lower than the results of
such other mutual funds. GSAM, GSAMI and their affiliates cannot guarantee, and
make no representation, that the investment results of similar funds will be
comparable even though the funds have the same investment adviser, manager or
sponsor.
<PAGE>
The five Goldman Sachs Strategy Portfolios are asset allocation funds. The
assets of each Goldman Sachs Strategy Portfolio are invested in underlying
mutual funds for which Goldman Sachs or its affiliates serve as investment
adviser or principal underwriter (underlying mutual funds). For this reason, the
investment performance of each Goldman Sachs Strategy Portfolio is directly
related to the investment performance of the underlying mutual funds in which it
invests. The ability of each Goldman Sachs Strategy Portfolio to meet its
investment objectives is directly related to the ability of the underlying
mutual funds to meet their objectives as well as to the allocation among those
underlying mutual funds.
Goldman Sachs Asset Management (GSAM), New York, New York, serves as the
investment adviser to all funds except the Goldman Sachs International Equity
and Global Income Funds. Goldman Sachs Asset Management International (GSAMI),
London, England, serves as the investment adviser to the Goldman Sachs
International Equity and Global Income Funds. As of February 28, 1999, GSAM,
together with its affiliates, acted as investment adviser or distributor for
assets in excess of $199 billion. The investment advisers cannot guarantee that
the funds (or any of the underlying mutual funds in which the Goldman Sachs
Strategy Portfolios invest) will meet their investment objectives. Also, there
is not any guarantee that your contract value will equal or exceed the total
purchase payments you made. Please read the Goldman Sachs Variable Insurance
Trust prospectuses relating to the funds for complete information on investment
risks, deductions, expenses and other facts you should know before investing.
You should consider carefully, and on a continuing basis, which funds are best
suited to your long-term investment needs. Some funds involve more risk than
others, so please monitor your investment. The Goldman Sachs Variable Insurance
Trust prospectuses are available by contacting us at our administrative offices
address or telephone number on the front of this prospectus.
All funds are available to serve as investment options under variable annuities,
variable life insurance policies and qualified plans. It is possible that in the
future it may be disadvantageous for variable annuity accounts, variable life
insurance accounts and/or qualified plans to invest in the available funds
simultaneously. Although American Enterprise Life and the funds currently do not
foresee any such disadvantages, the trust's Board of Trustees will monitor
events in order to identify any material conflicts between such annuity owners,
policy owners and qualified plans and to determine what action, if any, should
be taken in response to a conflict. If the Board were to conclude that it should
establish separate funds for the variable annuity, variable life insurance and
qualified plan accounts, the variable annuity contract holders would not bear
any expenses associated with establishing separate funds. Please refer to the
Goldman Sachs Variable Insurance Trust prospectuses for risk disclosure
regarding simultaneous investments by variable annuity, variable life insurance
and qualified plan accounts.
The Internal Revenue Service (IRS) has issued final regulations relating to the
diversification requirements under Section 817(h) of the Internal Revenue Code
of 1986, as amended (Code). Each fund intends to comply with these requirements.
<PAGE>
The fixed account
You also may allocate purchase payments to the fixed account. We back the
principal and interest guarantees relating to the fixed account. The value of
the fixed account increases as we credit interest 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. We
credit and compound interest daily to produce an effective annual interest rate.
We may change the interest rate from time to time. However, we guarantee that
the rate will not be less than a 3% effective annual interest rate. We will not
change the rate we credit to any portion of the fixed account contract value
more than once each year.
Because of exemptive and exclusionary provisions, interests in the fixed account
have not been registered under the Securities Act of 1933 (1933 Act), and the
fixed account is not 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. 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. (See "Transfer policies" for restrictions on transfers involving
the fixed account).
Buying your annuity
Your financial advisor 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. You can own a nonqualified annuity in joint tenancy
with rights of survivorship only in spousal situations. You cannot own a
qualified annuity in joint tenancy. You can buy an annuity or become an
annuitant if you are 90 or younger (63 or younger for qualified annuities
purchased in Maryland and Washington).
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);
o and a beneficiary.
If your application is complete, we will process it and apply your purchase
payment to the fixed account and subaccount(s) you selected within two business
days after we receive it at our Minneapolis administrative offices. If we accept
your application, 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 you make to your accounts
on the valuation date we receive them. We will value the additional payments at
the next accumulation unit value calculated 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, you may make additional purchase payments to nonqualified and
qualified annuities until the retirement date.
The retirement date
Annuity payouts are scheduled to begin on the retirement date. You can align
this date 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
also can 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 later).
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 591/2; and
o by April 1 of the year following the calendar year when the annuitant
reaches age 701/2.
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, if later.
Beneficiary
If death benefits become payable before the retirement date while the contract
is in force and before annuity payouts begin, we will pay your named beneficiary
all or part of the contract value. If there is no named beneficiary, then you or
your estate will be the beneficiary. (See "Benefits in case of death" for more
about beneficiaries.)
Purchase payment amounts
Minimum initial purchase payment (includes SIPs): $1,000
Minimum additional purchase payment (includes SIPs): $100
Maximum first-year purchase payments:
$2,000,000 (for issue ages 0 to 85 without prior approval)
$50,000 (for issue ages 86 to 90 without prior approval)
Maximum annual purchase payments after the first year: $50,000 (without prior
approval)
How to make payments
By letter
Send your check along with your name and contract number to:
Regular mail:
American Enterprise Life Insurance Company
80 South Eighth Street
P.O. Box 534
Minneapolis, MN 55440-0534
Express mail:
American Enterprise Life Insurance Company
Attention: Unit 829
733 Marquette Avenue
Minneapolis, MN 55402
By SIP:
Contact your financial advisor to complete the necessary SIP paperwork.
<PAGE>
Charges
Contract administrative charge
We charge this fee 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 prorate this charge among the subaccounts and the fixed account in the
same proportion your interest in each account bears to your total contract
value. We will waive this charge when the contract value is $50,000 or more on
the current contract anniversary. If you take a full withdrawal from your
contract, we will deduct the $30 annual charge at the time of withdrawal
regardless of contract value. We cannot increase the annual contract charge and
it does not apply after annuity payouts begin or when we pay death benefits.
Variable account administrative charge
We apply this charge daily to the variable subaccounts. It is reflected in the
unit values of the subaccounts and it totals 0.15% of their average daily net
assets on an annual basis. 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. We cannot increase the variable account administrative charge.
Mortality and expense risk fee
We charge this fee daily to the variable subaccounts. The unit values of your
subaccounts reflect this charge and it totals 1.25% of their average daily net
assets on an annual basis. This fee covers the mortality and expense risk that
we assume. 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 we cannot increase the contract administrative charge and
variable account administrative charge and these charges may not cover our
expenses. We would have to make up any deficit from our general assets.
The subaccounts pay us the mortality and expense risk fee they have accrued as
follows: first, to the extent possible, the subaccounts pay this fee from any
dividends distributed from the funds in which they invest; then, if necessary,
the funds redeem shares to cover any remaining fees payable. We may use any
profits we realize from the subaccounts' payment to us of 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. We calculate the withdrawal charge by drawing from your total contract
value in the following order:
1. First, we withdraw up to 10% of your prior anniversary contract value that
you have not yet withdrawn during this contract year. There is no
withdrawal charge on this amount.
2. Next, we withdraw contract earnings, if any, that are greater than the
annual 10% free withdrawal amount described in number 1 above. Contract
earnings are contract value minus all purchase payments received and not
previously withdrawn. There is no withdrawal charge on this amount.
3. Next, we withdraw purchase payments we received eight or more years before
the withdrawal and not previously withdrawn. There is no withdrawal charge
on purchase payments received eight or more years before withdrawal.
4. Finally, if necessary, we withdraw purchase payments received in the seven
years before the withdrawal on a "first-in, first-out" (FIFO) basis. There
is a withdrawal charge on these payments. We determine your withdrawal
charge by multiplying each of these payments by the applicable withdrawal
charge percentage, and then totaling the withdrawal charges.
<PAGE>
The withdrawal charge percentage depends on the number of years since you made
the payment(s) withdrawn.
Years from Withdrawal charge
payment receipt percentage
1 6%
2 6%
3 5%
4 5%
5 4%
6 3%
7 2%
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, 1999 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, 1999, $8,000 Dec. 31, 2005
and $6,000 Feb. 20, 2007; and
o The owner withdraws the contract for its total withdrawal value of $38,101
on Aug. 5, 2009 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, 1999 payment was received eight or more
years before withdrawal and is withdrawn without
withdrawal charge; and
400 $8,000 Dec. 31, 2005 payment is in its fourth year from
receipt, withdrawn with a 5% withdrawal charge; and
300 $6,000 Feb. 20, 2007 payment is in its third year from
receipt withdrawn with a 5% withdrawal charge.
-------
$700
For a partial withdrawal that is subject to a withdrawal charge, the amount we
actually withdraw from your contract value will be the amount you request plus
any applicable withdrawal charge. We apply the withdrawal charge to this total
amount. We pay you the amount you requested. If you take a full withdrawal from
your contract, we also will deduct the $30 contract charge.
Waiver of withdrawal charge
There are no withdrawal charges for:
o withdrawals during the year totaling the greater of 10% of your prior
contract anniversary contract value or contract earnings;
o required minimum distributions from a qualified annuity (for those amounts
required to be distributed from the annuity described in this prospectus);
o contracts settled using an annuity payout plan;
o death benefits;
o withdrawals you make under your contract's "Waiver of Withdrawal Charges"
provision. To the extent permitted by state law, your contract will include
this provision when the owner and annuitant are under age 76 on the date we
issue the contract. We will waive withdrawal charges that normally are
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. (See your annuity contract for additional conditions and restrictions
on this waiver.)
o withdrawals you make if you or the annuitant are diagnosed in the second or
later contract years as disabled with a medical condition that with
reasonable medical certainty will result in death within 12 months or less
from the date of the licensed physician's statement. You must provide us
with a licensed physician's statement containing the terminal illness
diagnosis and the date the terminal illness was initially diagnosed.
<PAGE>
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 depend upon your state of residence or the state in which the contract was
sold. Currently, we deduct any applicable premium tax when you make a full
withdrawal from your contract or when annuity payouts begin, but we reserve the
right to deduct this tax at other times such as when you make purchase payments.
Valuing your investment
Here is how we value your fixed account and variable subaccounts:
Fixed account: We value the amounts allocated to the fixed account directly in
dollars. The fixed account value equals:
o the sum of your purchase payments and transfer amounts allocated to the
fixed account; plus
o interest credited; minus
o the sum of amounts withdrawn (including any applicable withdrawal charges)
and amounts transferred out; and minus
o any prorated contract administrative charge.
Variable subaccounts: We convert amounts you allocated to the variable
subaccounts into accumulation units. Each time you make a purchase payment or
transfer amounts into one of the variable subaccounts, we credit a certain
number of accumulation units to your contract for that subaccount. Conversely,
each time you take a partial withdrawal, transfer amounts out of a variable
subaccount or we assess a contract administrative charge, we subtract a certain
number of accumulation units from your contract.
The accumulation units are the true measure of investment value in each
subaccount during the accumulation period. They are related to, but not the same
as, the net asset value of the fund in which the subaccount invests. The dollar
value of each accumulation unit can rise or fall daily depending on the variable
account expenses, performance of the fund and on certain fund expenses. Here is
how we calculate accumulation unit values:
Number of units
To calculate the number of accumulation units for a particular subaccount, we
divide your investment by the current accumulation unit value.
Accumulation unit value
The current accumulation unit value for each variable subaccount equals the last
value times the subaccount's current net investment factor.
<PAGE>
Net investment factor
The net investment factor is determined by:
o adding the fund's current net asset value per share, plus per-share amount
of any accrued income or capital gain dividends to obtain a current
adjusted net asset value per share; then
o dividing that sum by the previous adjusted 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 fund may fluctuate, the unit value may
increase or decrease. You bear all the investment risk in a variable subaccount.
<PAGE>
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 you allocate to the variable subaccount(s);
o transfers into or out of the variable subaccount(s); partial withdrawals;
o withdrawal charges; and/or
o prorated portions of the contract administrative charge.
Accumulation unit values will fluctuate due to:
o changes in net asset value of fund(s);
o dividends distributed to the variable subaccount(s);
o capital gains or losses of fund(s);
o fund operating expenses;
o mortality and expense risk fees; and/or
o variable account administrative charges.
<PAGE>
Making the most of your annuity
Automated dollar-cost averaging
Currently, 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. You also can obtain the
benefits of dollar-cost averaging 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 values of the underlying funds.
Since you invest the same amount each period, you automatically acquire more
units when the market value falls and fewer units when it rises. The potential
effect is to lower your average cost per unit.
Dollar-cost averaging does not guarantee that any variable subaccount will gain
in value nor will it protect against a decline in value if market prices fall.
Because this strategy involves continuous investing, your success with
dollar-cost averaging will depend upon your willingness to continue to invest
regularly through periods of low price levels. Dollar-cost averaging can be an
effective way to help meet your long-term goals. For specific features contact
your financial advisor. Some restrictions may apply. (See Appendix A for an
example of how dollar cost averaging works.)
Asset rebalancing
You can ask us in writing to automatically rebalance the variable subaccount
portion of your contract value either quarterly, semi-annually or annually. The
period you select will start to run on the date we record your request. On the
first valuation date of each of these periods, we automatically will rebalance
your contract value so that the value in each variable subaccount matches your
current variable subaccount percentage allocations. These percentage allocations
must be in whole numbers. Asset rebalancing does not apply to the fixed account.
There is no charge for asset rebalancing.
You can change your percentage allocations or your rebalancing period at any
time by contacting us in writing. We will restart the rebalancing period you
selected as of the date we record your change. You also can ask us in writing to
stop rebalancing your contract value. You must allow 30 days for us to change
any instructions that currently are in place. For more information on asset
rebalancing, contact your financial advisor.
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 on the valuation date
we receive it. We will value your transfer at the next accumulation unit value
calculated after we receive your request. 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. In addition, we may
modify or restrict the right to transfer contract values between the subaccounts
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:
o the requirement of a minimum time period between each transfer;
o not accepting transfer requests of a financial advisor acting under a power
of attorney on behalf of more than one contract owner; or
o limiting the dollar amount that a contract owner can transfer between the
subaccounts and the fixed account at any one time.
We may apply these modifications or restrictions in any reasonable manner to
prevent transfers we consider to be to the disadvantage of other contract
owners. (For information on transfers after annuity payouts begin, see "Transfer
policies.")
<PAGE>
Transfer policies
o You may transfer contract values between the variable subaccounts or from
the subaccount(s) to the fixed account at any time. However, if you have
made a transfer from the fixed account to the subaccount(s), you may not
make a transfer from any subaccount back to the fixed account for six
months following that transfer.
o You may transfer contract values from the fixed account to the variable
subaccount(s) on or within 30 days before or after the contract anniversary
(except for automated transfers, which can be set up for 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.
o Once annuity payouts begin, you may not make transfers to or from the fixed
account, but you may make transfers once per contract year among the
variable subaccounts. During the annuity payout period, we reserve the
right to limit the number of subaccounts in which you may invest.
THREE 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: $100 or entire variable subaccount or fixed
account balance
Maximum amount
Transfers or withdrawals: Contract value or the entire variable subaccount
or fixed account balance
2 By automated transfers and automated partial withdrawals
Your financial advisor 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 us. You must allow 30 days for us 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 unless we agree otherwise.
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)
<PAGE>
3 By Phone
Call between 8 a.m. and 6 p.m. Central time:
1-800-333-3437 or
(612) 671-7700 (Minneapolis/St. Paul area)
Minimum amount
For transfers or withdrawals:$500 or entire subaccount or fixed account
balance
Maximum amount
For transfers: Contract value or the entire subaccount or fixed account balance
For withdrawals: $25,000
We answer telephone requests promptly, but you may experience delays when the
call volume is unusually high. If you are unable to get through, use the mail
procedure as an alternative.
We will honor any telephone transfer or withdrawal requests that we believe are
authentic and we will use reasonable procedures to confirm that they are. This
includes asking identifying questions and tape recording calls. We will not
allow a telephone surrender within 30 days of an address change. As long as we
follow the procedures, we (and our affiliates) will not be liable for any loss
resulting from fraudulent requests.
Telephone transfers and withdrawals are automatically available. You may request
that telephone transfers and withdrawals not be authorized from your account by
writing to us.
<PAGE>
Withdrawals from your contract
As owner, you may withdraw all or part of your contract at any time before
annuity payouts begin by sending us a written request or calling us. We will
process your withdrawal request on the valuation date we receive it. We will
compute the value of your contract at the next accumulation unit value
calculated after we receive your request. For total withdrawals 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"). You cannot make withdrawals
after annuity payouts begin.
Withdrawal policies
If you have a balance in more than one account and request a partial withdrawal,
we will withdraw money from all your subaccounts and/or the fixed account in the
same proportion as your value in each correlates to your total contract value,
unless you request otherwise.
Receiving payment when you request a withdrawal
By regular or express mail:
o Payable to owner.
o Normally mailed to address of record within seven days after receiving your
request. However, we may postpone the payment if:
- -- the withdrawal amount includes a purchase payment check that has not
cleared;
- -- the NYSE is closed, except for normal holiday and weekend closings;
- -- trading on the NYSE is restricted, according to SEC rules;
- -- an emergency, as defined by SEC rules, makes it impractical to sell
securities or value the net assets of the accounts; or
- -- the SEC permits us to delay payment for the protection of security holders.
NOTE: We will charge you 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 do not take responsibility for the validity of the
change.
If you have a nonqualified annuity, you may incur income tax liability 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 except as required or
permitted by the Code.
Benefits in case of death
If you or the annuitant die before annuity payouts begin while this contract is
in force, we will pay the beneficiary the greatest of:
1. the contract value; or
2. the total purchase payments paid less any "adjustments for partial
withdrawals;" or
3. the "maximum anniversary value" immediately preceding the date of death
increased by the dollar amount of any payments since that anniversary and
reduced by any adjustments for partial withdrawals since that anniversary.
If you own the contract in joint tenancy with rights of survivorship, we will
pay benefits upon the first to die of either owner or of the annuitant.
We calculate "adjustments for partial withdrawals" for each partial withdrawal
as the product of (a) times (b) where:
(a) is the ratio of the amount of the partial withdrawal (including any
applicable withdrawal charge) to the contract value on the date of (but
prior to) the partial withdrawal; and
(b) is the death benefit on the date of (but prior to) the partial withdrawal.
Each contract anniversary prior to the earlier of your or the annuitant's 81st
birthday, we calculate the anniversary value which is the greater of:
(a) the contract value on that anniversary; or
(b) total payments made to the contract minus adjustments for partial
withdrawals.
The "maximum anniversary value" is equal to the greatest of these anniversary
values.
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.
<PAGE>
The death benefit on March 1, 2000 is calculated as follows:
The "maximum anniversary value:" $24,000.00
(the greatest of the anniversary values
which was the contract value on
January 1, 2000)
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
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 the Code requires distributions to 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 701/2 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: Under a nonqualified annuity, we will pay the beneficiary in a single
sum unless you have given us other written instructions. We must fully
distribute the death benefit within five years of your death. However, 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 your 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 process the death claim on the valuation
date that our death claim requirements are fulfilled. We will determine the
contract's value at the next accumulation unit value calculated after our death
claim requirements are fulfilled. We will pay interest, if any, 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.
Other rules may apply to qualified annuities. (See "Taxes.")
<PAGE>
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 may mutually agree on other payout
arrangements. We do not deduct withdrawal charges under the payout plans listed
below.
You also decide whether we will make annuity payouts on a fixed or variable
basis, or a combination of fixed and variable. The amount available to purchase
payouts under the plan you select is the contract value on your retirement date
(less any applicable premium tax). You may reallocate this contract value to the
fixed account to provide fixed dollar payouts and/or among the subaccounts to
provide variable annuity payouts. During the annuity payout period, we reserve
the right to limit the number of subaccounts in which you may invest.
Amounts of fixed and variable payouts depend on:
o the annuity payout plan you select;
o the annuitant's age and, in most cases, sex;
o the annuity table in the contract; and
o the amounts you allocated to the account(s) at settlement.
In addition, for variable payouts only, amounts depend on the investment
performance of the subaccount(s) you select. These payouts will vary from month
to month because the performance of the underlying funds will fluctuate. (In the
case of fixed annuities, payouts remain the same from month to month.) For
information with respect to transfers between accounts after annuity payouts
begin, see "Transfer policies."
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: We make monthly payouts until the
annuitant's death. Payouts end with the last payout before the annuitant's
death; we will not make any further payouts. This means that if the
annuitant dies after we have made only one monthly payout, we will not make
any more payouts.
o Plan B -- Life annuity with five, 10 or 15 years certain: We make monthly
payouts 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. We calculate the guaranteed payout period from the retirement
date. If the annuitant outlives the elected guaranteed payout period, we
will continue to make payouts until the annuitant's death.
o Plan C -- Life annuity -- installment refund: We make monthly payouts until
the annuitant's death, with our guarantee that payouts will continue for
some period of time. We will make payouts 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: We make
monthly payouts while both the annuitant and a joint annuitant are living.
If either annuitant dies, we will continue to make monthly payouts 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: We make monthly payouts for a
specific payout period of 10 to 30 years that you elect. We will make
payouts only for the number of years specified whether the annuitant is
living or not. Depending on the selected time period, 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
may be required to 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.
You have the responsibility for electing a payout plan the complies with your
contract and with applicable law.
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.
Contract values that you have allocated to the fixed account will provide fixed
dollar payouts and contract values that you have allocated among the subaccounts
will provide variable annuity payouts.
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, we will pay any amount
payable to the beneficiary as 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 normally are taxable. We will send you a
tax information reporting form for any year in which we made a taxable
distribution according to our records. Roth IRAs may grow and be distributed tax
free if you meet certain distribution requirements.
Qualified annuities: We designed this contract for use with an IRA, Roth IRA or
SEP. Special rules apply to these retirement plans. Your rights to benefits may
be subject to the terms and conditions of these retirement plans regardless of
the terms of the contract.
o An IRA permits eligible individuals to make deductible and non-deductible
contributions of up to $2,000 annually that will grow on a tax-deferred
basis.
o A Roth IRA allows eligible individuals to make after-tax contributions of
up to $2,000 and, if certain holding period and distribution rules are met,
permits the contributions to grow and be distributed tax-free.
o A SEP permits employers to make IRA contributions on behalf of their
employees, subject to certain limitations.
Adverse tax consequences may result if you do not ensure that contributions,
distributions and other transactions under the contract comply with the law.
Qualified annuities have minimum distribution rules that govern the timing and
amount of distributions during your life (except for Roth IRAs) and after your
death. You should refer to your retirement plan or adoption agreement, or
consult a tax adviser for more information about these distribution rules.
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 you receive 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 (and possibly its affiliates) to the same owner during a calendar
year be taxed as a single, unified contract when you take distributions from any
one of those contracts.
<PAGE>
Annuity payouts under qualified annuities (except Roth IRAs): Under a qualified
annuity, the entire payout generally is 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 deductible or
pre-tax dollars as part of an IRA or SEP, 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 you make
prior to age 591/2 unless certain exceptions apply. 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 your beneficiary receives 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 if certain distribution requirements are met.
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
591/2, you may have to pay a 10% IRS penalty on the amount includable in your
ordinary income. However, this penalty will not apply to any amount received
by you or your beneficiary:
o because of your death;
o because you become disabled (as defined in the Code);
o if the distribution is part of a series of substantially equal periodic
payments, made at least annually, over your life or life expectancy (or
joint lives or life expectancies of you and your beneficiary); or
o if it is allocable to an investment before Aug. 14, 1982 (except for
qualified annuities). For a qualified annuity, other penalties or
exceptions may apply if you make withdrawals from your annuity before your
plan specifies that payouts can be made.
Withholding, generally: If you receive all or part of the contract value from an
annuity, we may deduct withholding against the taxable income portion of the
payment. Any withholding represents a prepayment of your tax due for the year.
You take credit for these amounts on your annual tax return.
If the payment is part of an annuity payout plan, we generally compute the
amount of withholding 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) we compute withholding 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, we may deduct state
withholding from any payment from which we deduct federal withholding. The
withholding requirements may differ if we are making payment to a non-U.S.
citizen or if we deliver the payment outside the United States.
<PAGE>
Transfer of ownership of a nonqualified annuity: If you transfer a nonqualified
annuity without receiving adequate consideration, the transfer is a gift, and
also may be a withdrawal for federal income tax purposes. If the gift is a
currently taxable event for income tax purposes, the original owner will be
taxed on the amount of deferred earnings at the time of the transfer and also
may be subject to the 10% IRS penalty 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
current interpretations of these laws. Federal tax laws or current
interpretations of them may change. For this reason and because tax consequences
are complex and highly individual and cannot always be anticipated, you should
consult a tax adviser if you have any questions about taxation of your contract.
Tax qualification
We intend that the contract qualify as an annuity for federal income tax
purposes. To that end, the provisions of the contract are to be interpreted to
ensure or maintain such tax qualification, in spite of any other provisions of
the contract. We reserve the right to amend the contract to reflect any
clarifications that may be needed or are appropriate to maintain such
qualification or to conform the contract to any applicable changes in the tax
qualification requirements. We will send you a copy of any amendments.
Voting rights
As a contract owner with investments in the variable subaccount(s), you may vote
on important fund policies until annuity payouts begin. Once they begin, the
person receiving them has voting rights. We will vote fund shares according to
the instructions of the person with voting rights.
Before annuity payouts begin, the number of votes you have is determined by
applying your percentage interest in each variable subaccount to the total
number of votes allowed to the subaccount.
After annuity payouts begin, the number of votes you have is equal to:
o the reserve held in each subaccount for your contract; divided by
o the net asset value of one share of the applicable 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. We will send notice of these
meetings, proxy materials and a statement of the number of votes to which the
voter is entitled. 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.
<PAGE>
Substitution of investments
We may change the funds from which the subaccounts buy shares if:
o laws or regulations change;
o the existing funds become unavailable; or
o in the judgment of American Enterprise Life, the funds no longer are
suitable for the subaccounts.
If any of these situations occur, we have the right to substitute the funds held
in the subaccounts for other registered open-end management investment companies
when American Enterprise Life believes it would be in the best interest of
persons having voting rights under the contracts.
We may also:
o add new subaccounts;
o combine any two or more subaccounts;
o make additional subaccounts investing in additional funds;
o transfer assets to and from the subaccounts or the variable account; and
o eliminate or close any subaccounts.
In the event of substitution or any of these changes, American Enterprise Life,
without the consent or approval of the owners, may amend the contract and take
whatever action is necessary and appropriate. However, we will not make any
substitution or change 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 contract
American Express Service Corporation (AESC), serves as the principal underwriter
for the contract. Its administrative offices are located at 80 South Eighth
Street, Minneapolis, MN 55402. AESC is a wholly-owned subsidiary of American
Express Travel Related Services Company which is a wholly-owned subsidiary of
American Express Company.
The contracts will be distributed by broker-dealers which have entered into
distribution agreements with AESC and American Enterprise Life. AESC and
American Enterprise Life have contracted with Goldman Sachs & Co. to provide
marketing and wholesaling services and they will compensate Goldman Sachs & Co.
for these services.
<PAGE>
American Enterprise Life will pay commissions for sales of the contracts of up
to 6.5% of purchase payments to the broker-dealers, or the insurance agencies
affiliated with the broker-dealers, which have entered into distribution
agreements with AESC and American Enterprise Life. Sometimes AESC and American
Enterprise Life will enter into an agreement with a broker-dealer and its
affiliated insurance agencies to pay the commissions as a combination of a
certain amount of the commission at the time of sale and a trail commission
(which, when totaled, could exceed 6.5% of purchase payments). In addition,
American Enterprise Life may pay certain sellers additional compensation for
selling and distribution activities under certain circumstances. From time to
time, American Enterprise Life will pay or permit other promotional incentives,
in cash or credit or other compensation.
<PAGE>
About American Enterprise Life
American Enterprise Life issues the annuities. 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.
Legal Proceedings
A number of lawsuits have been filed against life and health insurers in
jurisdictions in which American Enterprise Life and AEFC do business involving
insurers' sales practices, alleged agent misconduct, failure to properly
supervise agents and other matters. American Enterprise Life and AEFC, like
other life and health insurers, from time to time are involved in such
litigation. On October 13, 1998, an action entitled Richard W. And Elizabeth J.
Thoresen vs. American Express Financial Corporation, American Centurion Life
Assurance Company, American Enterprise Life Insurance Company, American Partners
Life Insurance Company, IDS Life Insurance Company and IDS Life Insurance
Company of New York was commenced in Minnesota State Court. The action was
brought by individuals who purchased an annuity in a qualified plan. They allege
that the sale of annuities in tax-deferred contributory retirement investment
plans (e.g., IRAs) is never appropriate. The plaintiffs purport to represent a
class consisting of all persons who made similar purchases. The plaintiffs seek
damages in an unspecified amount. American Enterprise Life also is a defendant
in various other lawsuits. In American Enterprise Life's opinion, none of these
lawsuits will have a material adverse effect on our financial condition.
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 American Enterprise Life
and the variable account. American Enterprise Life and the variable account have
no computer systems of their own but are dependent upon the systems of 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
target date for substantially completing corrective measures on business
critical systems was December 31, 1998. Substantial testing of these systems was
targeted for completion early in 1999. AEFC currently is on track with this
schedule and also is on track to finish the work on non-critical systems by June
30, 1999. The Year 2000 readiness of unaffiliated investment managers and other
third parties whose system failures could have an impact on American Enterprise
Life's and the variable account's operations continues to be evaluated. The
potential materiality of any such impact is not known at this time.
AEFC's Year 2000 project includes establishing Year 2000 contingency plans for
all key business units. Business continuation plans, which address business
continuation in the event of a system disruption, are in place for all key
business units. These plans are being amended to include specific Year 2000
considerations and will continue to be refined throughout 1999 as additional
information related to potential Year 2000 exposure is gathered.
<PAGE>
Regular and special reports
Services
To help you track and evaluate the performance of your annuity, American
Enterprise Life provides:
Quarterly statements showing the value of your investment.
Annual reports containing required information on the annuity and its underlying
investments.
<PAGE>
Appendix A
Example of Dollar Cost Averaging
How dollar-cost averaging works
Number
Amount Accumulation of units
Month invested unit value purchased
By investing an Jan $100 $20 5.00
equal number of
dollars each month ... Feb 100 18 5.56
Mar 100 17 5.88
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 dollar-cost averaging involves continuous investing, your success will
depend upon your willingness to continue to invest regularly through periods of
low price levels. Dollar-cost averaging can be an effective way to help meet
your long-term goals.
<PAGE>
Table of contents of the Statement of Additional Information
Performance Information 3
Calculating Annuity Payouts 4
Rating Agencies 6
Principal Underwriter 6
Independent Auditors 7
Prospectus 7
Financial Statements --
American Enterprise Life Insurance Company 7
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Please check the appropriate box to receive a copy of the Statement of
Additional Information for:
_______ Goldman Sachs Variable Annuity
_______ Goldman Sachs Variable Insurance 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 _____________
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This page is not part of the prospectus.
<PAGE>
American Enterprise Life Insurance Company
Administrative Offices:
80 South Eighth Street
P.O. Box 534
Minneapolis, MN 55440-0534
800-333-3437
American Express Financial Advisors Inc., member NASD
(C) 1999 American Enterprise Life Insurance Company
All rights reserved.
VAPRO / 50K / 4-99
43356 C (4/99)>
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
for
GOLDMAN SACHS VARIABLE ANNUITY
AMERICAN ENTERPRISE VARIABLE ANNUITY ACCOUNT
April 30, 1999
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 April 30, 1999, is not a
prospectus. It should be read together with the prospectus dated April 30, 1999,
which you can obtain from your financial advisor, 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>
TABLE OF CONTENTS
Performance Information ...............................p.3
Calculating Annuity Payouts ...........................p.4
Rating Agencies........................................p.6
Principal Underwriter..................................p.6
Independent Auditors...................................p.7
Prospectus.............................................p.7
Financial Statements -
American Enterprise Life Insurance Company
<PAGE>
PERFORMANCE INFORMATION
Calculation of yield for the subaccounts investing in income funds
For the subaccounts investing in income funds, we base quotations of yield on
all investment income earned during a particular 30-day period, less expenses
accrued during the period (net investment income) and compute it by dividing net
investment income per accumulation unit by the value of an accumulation unit on
the last day of the period, according to the following formula:
YIELD = 2[(a-b + 1)6 - 1]
cd
where: a = dividends and investment income earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of accumulation units
outstanding during the period that were
entitled to receive dividends
d = the maximum offering price per accumulation unit on the
last day of the period
The subaccount earns yield 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.
Calculation of Average Annual Total Return
We will express quotations of average annual total return for a subaccount in
terms of the average annual compounded rate of return of a hypothetical
investment in the annuity over a period of one, five and 10 years (or, if less,
up to the life of the account), calculated according to the following formula:
P(1+T)n = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = Ending Redeemable Value of a hypothetical $1,000 payment
made at the beginning of the one-, five-, or 10-year (or
other) period at the end of the one-, five-, or 10-year
(or other) period (or fractional portion thereof)
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). We compute aggregate total return using the following formula:
ERV - P
P
where: P = a hypothetical initial payment of $1,000
ERV = Ending Redeemable Value of a hypothetical $1,000 payment
made at the beginning of the one-, five-, or 10- year (or
other) period at the end of the one-, five-, or 10-
year (or other) period (or fractional portion thereof)
When we calculate average annual or aggregate total return, the Securities and
Exchange Commission (SEC) requires that we make an assumption 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). In addition, we may
show performance
<PAGE>
figures without the deduction of a withdrawal charge. All total return figures
reflect the deduction of all applicable charges including the contract
administrative charge, the variable account administrative charge and the
mortality and expense risk fee.
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 may quote subaccount performance, compare it to rankings,
yields or returns, or use it in variable annuity accumulation or settlement
illustrations they publish or prepare.
CALCULATING ANNUITY PAYOUTS
The Variable Account
We do the following calculations 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 on (or
next day preceding) the seventh calendar day before the retirement date and
then deduct any applicable premium tax; then
o apply the result to the annuity table contained in the contract or another
table at least as favorable. The annuity table shows the amount of the
first monthly payment for each $1,000 of value which depends on factors
built into the table, as described below.
Annuity Units: We then convert the value of your subaccount to annuity units. To
compute the number of units credited to you, we divide the first monthly payment
by the annuity unit value (see below) on the valuation date on (or next day
preceding) the seventh calendar day before the retirement date. The number of
units in your subaccount is fixed. The value of the units fluctuates with the
performance of the underlying fund.
Subsequent Payouts: To compute later payouts, we multiply:
o the annuity unit value on the valuation date on (or next day 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 4% rate of return, which is reinvested
and helps to support future payouts.
Annuity Unit Values: This value originally was 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 4%, the neutralizing factor is
0.999893 for a one day valuation period.
<PAGE>
Net Investment Factor: We determine this value by:
o adding the underlying fund's current net asset value per share plus
per-share amount of any current dividend or capital gain distribution; then
o dividing that sum by the previous net asset value per share; and
o subtracting the percentage factor representing the mortality and expense
risk fee and the variable account administrative charge from the result.
Because the net asset value of the underlying fund may fluctuate, the net
investment factor may be greater or less than one, and the annuity unit value
may increase or decrease. You bear this investment risk in a variable
subaccount.
The Fixed Account
Your fixed annuity payout amounts are guaranteed by American Enterprise Life.
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.
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 annuity. 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 Service
Corporation which offers the variable contracts on a continuous basis.
<PAGE>
INDEPENDENT AUDITORS
The financial statements of American Enterprise Life Insurance Company (a
wholly-owned subsidiary of IDS Life Insurance Company) appearing in this
Statement of Additional Information have been audited by Ernst & Young LLP (1400
Pillsbury Center, 200 South Sixth Street, Minneapolis, MN 55402), independent
auditors, as stated in their report appearing herein.
PROSPECTUS
The prospectus, dated April 30, 1999, is hereby incorporated in this SAI by
reference.
<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, 1998 and 1997, and the related statements of income,
stockholder's equity and cash flows for each of the three years in the period
ended December 31, 1998. 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, 1998 and 1997, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
February 4, 1999
Minneapolis, Minnesota
<PAGE>
<TABLE>
<CAPTION>
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
BALANCE SHEETS
December 31,
($ thousands, except share amounts)
ASSETS 1998 1997
- ------ - ----------- - -------
Investments:
Fixed maturities:
Held to maturity, at amortized cost (fair value:
<S> <C> <C>
1998, $1,126,732 ; 1997, $1,223,108) $1,081,193 $1,186,682
Available for sale, at fair value (amortized cost:
1998, $2,526,712; 1997, $2,609,621) 2,594,858 2,685,799
----------- -----------
3,676,051 3,872,481
Mortgage loans on real estate 815,806 738,052
Other investments 12,103 16,024
------------- -------------
Total investments 4,503,960 4,626,557
Accounts receivable 214 563
Accrued investment income 61,740 59,588
Deferred policy acquisition costs 196,479 224,501
Other assets 43 117
Separate account assets 123,185 62,087
------------ -------------
Total assets $4,885,621 $4,973,413
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Future policy benefits for fixed annuities $4,166,852 $4,343,213
Policy claims and other policyholders' funds 7,389 11,328
Deferred income taxes 23,199 35,601
Amounts due to brokers 54,347 34,935
Other liabilities 24,500 16,905
Separate account liabilities 123,185 62,087
----------- ------------
Total liabilities 4,399,472 4,504,069
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 282,872 282,872
Accumulated other comprehensive income:
Net unrealized securities gains 44,295 49,516
Retained earnings 156,982 134,956
------------ ------------
Total stockholder's equity 486,149 469,344
------------ ------------
Total liabilities and stockholder's equity $4,885,621 $4,973,413
========== ==========
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
STATEMENTS OF INCOME
Years ended December 31,
($ thousands)
1998 1997 1996
--- ------ --- ------ --- ----
Revenues:
<S> <C> <C> <C>
Net investment income $340,219 $332,268 $271,719
Contractholder charges 6,387 5,688 5,450
Mortality and expense risk fees 1,275 641 303
Net realized loss on investments (4,788) (509) (5,258)
---------- ---------- -----------
Total revenues 343,093 338,088 272,214
--------- --------- ----------
Benefits and expenses:
Interest credited on investment contracts 228,533 231,437 191,672
Amortization of deferred policy acquisition costs 53,663 36,803 30,674
Other operating expenses 24,476 24,890 14,133
---------- ---------- --------
Total benefits and expenses 306,672 293,130 236,479
--------- --------- -------
Income before income taxes 36,421 44,958 35,735
Income taxes 14,395 16,645 12,912
---------- ---------- ---------
Net income $ 22,026 $ 28,313 $ 22,823
========= ========= ========
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
STATEMENTS OF STOCKHOLDER'S EQUITY
Three years ended December 31, 1998
($ thousands)
Accumulated Other
Comprehensive
Total Additional
Stockholder's Capital Paid-In Income, Retained
Equity Stock Capital Net of Tax Earnings
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995 $296,816 $2,000 $177,872 $ 33,124 $83,820
Comprehensive income:
Net income 22,823 -- -- -- 22,823
Unrealized holding losses arising
during the year, net of taxes of
$12,282 (22,810) -- -- (22,810) --
Reclassification adjustment for losses
included in net income, net of tax
of $(1,093) 2,029 -- -- 2,029 --
-------------------
-----------------
Other comprehensive loss (20,781) -- -- (20,781) --
-----------------
Comprehensive income 2,042
Capital contribution from parent 65,000 -- 65,000 -- --
---------------------------------------------------------------------------
Balance, December 31, 1996 363,858 2,000 242,872 12,343 106,643
Comprehensive income:
Net income 28,313 -- -- -- 28,313
Unrealized holding gains arising
during the year, net of taxes of
$(19,891) 36,940 -- -- 36,940 --
Reclassification adjustment for losses
included in net income, net of tax
of $(126) 233 -- -- 233 --
-------------------
-----------------
Other comprehensive income 37,173 -- -- 37,173 --
-----------------
Comprehensive income 65,486
Capital contribution from parent 40,000 40,000
---------------------------------------------------------------------------
Balance, December 31, 1997 469,344 2,000 282,872 49,516 134,956
Comprehensive income:
Net income 22,026 -- -- -- 22,026
Unrealized holding losses arising
during the year, net of taxes of $3,400 (6,314) -- -- (6,314) --
Reclassification adjustment for losses
included in net income, net of tax 1,093
of $(588) -- -- 1,093 --
----------------- -------------------
-------------------
Other comprehensive loss (5,221) -- -- (5,221) --
-----------------
-----------------
Comprehensive income 16,805
---------------------------------------------------------------------------
Balance, December 31, 1998 $486,149 $2,000 $282,872 $44,295 $156,982
===========================================================================
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
Years ended December 31,
($ thousands)
1998 1997 1996__
- -------- - -------- --------
Cash flows from operating activities:
<S> <C> <C> <C>
Net income $ 22,026 $ 28,313 $ 22,823
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Change in accrued investment income (2,152) (8,017) (9,692)
Change in accounts receivable 349 9,304 --
Change in deferred policy acquisition costs, net 28,022 (21,276) (32,651)
Change in other assets 74 4,840 (10,007)
Change in policy claims and other policyholders' funds (3,939) (16,099) 15,786
Deferred income tax (benefit) provision (9,591) (2,485) 5,084
Change in other liabilities 7,595 1,255 8,621
Amortization of premium (accretion of discount), net 122 (2,316) (2,091)
Net realized loss on investments 4,788 509 5,258
Other, net 2,544 959 (129)
------------- --------- ----------
Net cash provided by (used in) operating activities 49,838 (5,013) 3,002
Cash flows from investing activities: Fixed maturities held to maturity:
Purchases -- (1,996) (16,967)
Maturities 73,601 41,221 26,190
Sales 31,117 30,601 27,944
Fixed maturities available for sale:
Purchases (298,885) (688,050) (921,914)
Maturities 335,357 231,419 212,212
Sales 48,492 73,366 47,542
Other investments:
Purchases (161,252) (199,593) (212,182)
Sales 78,681 29,139 19,850
Change in amounts due to brokers 19,412 (53,796) 88,568
---------- ----------- ----------
Net cash provided by (used in) investing activities 126,523 (537,689) (728,757)
Cash flows from financing activities: Activity related to investment contracts:
Considerations received 302,158 783,339 846,378
Surrenders and other benefits (707,052) (552,903) (312,362)
Interest credited to account balances 228,533 231,437 191,672
Change in securities sold under repurchase agreements -- -- (67,000)
Capital contribution from parent -- 40,000 65,000
--------------- ---------- ---------
Net cash (used in) provided by financing activities (176,361) 501,873 723,688
----------- --------- --------
Net decrease in cash and cash equivalents -- (40,829) (2,067)
Cash and cash equivalents at beginning of year -- 40,829 42,896
--------------- ---------- ---------
Cash and cash equivalents at end of year $ -- $ -- $ 40,829
============== ============== ==========
See accompanying notes.
</TABLE>
<PAGE>
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 48 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 accumulated other comprehensive income, 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.
<PAGE>
1. Summary of significant accounting policies (continued)
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.
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:
1998 1997 1996
---- ----- ----
Cash paid during the year for:
Income taxes $19,035 $19,456 $10,317
Interest on borrowings 5,437 1,832 998
Contractholder charges
Contractholder charges include surrender charges and fees collected
regarding the issue and administration of annuity contracts.
<PAGE>
1. Summary of significant accounting policies (continued)
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 using primarily the interest method.
Liabilities for future policy benefits
Liabilities for deferred annuities are accumulation values. Liabilities for
fixed annuities in a benefit status are based on the established industry
mortality tables with various interest rates ranging from 5.5 percent to
8.75 percent, depending on year of issue.
Federal income taxes
The Company's taxable income is included in the consolidated federal income
tax return of American Express Company. The Company provides for income
taxes on a separate return basis, except that, under an agreement between
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, 1998 and 1997 are $3,504
payable to and $1,289, receivable from , respectively, 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 beneficiaries from the mortality assumptions implicit in
the annuity contracts. The Company makes periodic fund transfers to, or
withdrawals from, the separate account assets for such actuarial
adjustments for variable annuities that are in the benefit payment period.
The Company also guarantees that the rates at which administrative fees are
deducted from contract funds will not exceed contractual maximums.
Accounting Changes
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income." SFAS
No. 130 requires the reporting and display of comprehensive income and its
components. Comprehensive income is defined as the aggregate change in
stockholder's equity excluding changes in ownership interests. For the
Company, it is net income and the unrealized gains or losses on
available-for-sale securities net of taxes and reclassification adjustment.
<PAGE>
1. Summary of significant accounting policies (continued)
In March 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) 98-1, "Accounting for Costs of
Computer Software Developed or obtained for Internal Use." The SOP, which
is effective January 1, 1999, requires the capitalization of certain costs
incurred after the date of adoption to develop or obtain software for
internal use. Software utilized by the Company is owned by AEFC and will be
capitalized on AEFC's financial statements. As a result, the new rule will
not have a material impact on the Company's results of operations or
financial condition.
In December 1997, the AICPA issued SOP 97-3, "Accounting by Insurance and
Other Enterprises for Insurance-Related Assessments", providing guidance
for the timing of recognition of liabilities related to guaranty fund
assessments. The Company will adopt the SOP on January 1, 1999. The Company
has historically carried a balance in other liabilities on the balance
sheet for potential guaranty fund assessment exposure. Adoption of the SOP
will not have a material impact on the Company's results of operations or
financial condition
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which is
effective January 1, 2000. This Statement establishes accounting and
reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the balance sheet and measure those instruments at
fair value. The accounting for changes in the fair value of a derivative
depends on the intended use of the derivative and the resulting
designation. Earlier application of all of the provisions of this Statement
is encouraged, but it is permitted only as of the beginning of any fiscal
quarter that begins after issuance of the Statement. This Statement cannot
be applied retroactively. The ultimate financial impact of the new rule
will be measured based on the derivatives in place at adoption and cannot
be estimated at this time.
Reclassification
Certain 1997 and 1996 amounts have been reclassified to conform to the 1998
presentation.
<PAGE>
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, 1998 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 $ 8,652 $ 423 $ -- $ 9,075
State and municipal obligations 3,003 149 -- 3,152
Corporate bonds and obligations 877,140 48,822 6,670 919,292
Mortgage-backed securities 192,398 2,844 29 195,213
------------ ---------- ---------- -----------
$1,081,193 $ 52,238 $ 6,699 $1,126,732
========== ======== ======= ==========
Available for sale
U.S. Government agency obligations $ 2,062 $ 116 $ -- $ 2,178
Corporate bonds and obligations 1,472,814 69,990 34,103 1,508,701
Mortgage-backed securities 1,051,836 32,232 89 1,083,979
----------- ---------- ----------- ---------
$2,526,712 $102,338 $34,192 $2,594,858
========== ======== ======= ==========
The amortized cost, gross unrealized gains and losses and fair value of
investments in fixed maturities at December 31, 1997 are as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Held to maturity Cost Gains Losses Value
---------------- -------------- ---- ------- -- ------ ---- -----
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 and fair value of investments in fixed maturities at
December 31, 1998 by contractual maturity are shown below. Expected
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
Amortized Fair
Held to maturity Cost Value
Due in one year or less $ 33,208 $ 33,499
Due from one to five years 215,010 227,139
Due from five to ten years 539,917 562,708
Due in more than ten years 100,660 108,173
Mortgage-backed securities 192,398 195,213
------------ ------------
$1,081,193 $1,126,732
Amortized Fair
Available for sale Cost Value
Due in one year or less $ 350 $ 358
Due from one to five years 96,412 101,441
Due from five to ten years 981,556 1,021,961
Due in more than ten years 396,558 387,119
Mortgage-backed securities 1,051,836 1,083,979
--------- ---------
$2,526,712 $2,594,858
During the years ended December 31, 1998, 1997 and 1996, fixed maturities
classified as held to maturity were sold with amortized cost of $31,117,
$29,561 and $27,969, 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' creditworthiness.
In addition, fixed maturities available for sale were sold during 1998 with
proceeds of $48,492 and gross realized gains and losses of $2,835 and
$4,516, respectively. 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.
At December 31, 1998, bonds carried at $3,292 were on deposit with various
states as required by law.
<PAGE>
2. Investments (continued)
At December 31, 1998, investments in fixed maturities comprised 82 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 $480 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:
Rating 1998 1997
---------------------- -- -------- -- ------
Aaa/AAA $1,242,301 $1,531,588
Aa/AA 45,526 34,167
Aa/A 60,019 69,775
A/A 422,725 421,733
A/BBB 228,656 222,022
Baa/BBB 1,030,874 954,962
Baa/BB 79,687 84,053
Below investment grade 498,117 478,003
------------ ------------
$3,607,905 $3,796,303
At December 31, 1998, approximately 94 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, 1998, approximately 18 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, 1998 December 31, 1997
----------------------- ---------------------
On Balance Commitments On Balance Commitments
Region Sheet to Purchase Sheet to Purchase
<S> <C> <C> <C> <C>
South Atlantic $198,552 $ 651 $186,714 $ 9,199
Middle Atlantic 129,284 520 128,239 10,167
East North Central 134,165 2,211 125,018 6,294
Mountain 113,581 -- 94,061 11,620
West North Central 119,380 9,626 96,701 11,135
New England 46,103 -- 50,932 --
Pacific 43,706 -- 33,052 --
West South Central 32,086 -- 19,573 --
East South Central 7,449 -- 7,480 --
--------- ------------ --------- ------------
824,306 13,008 741,770 48,415
Less allowance for losses 8,500 -- 3,718 --
---------- ------------ ---------- ------------
$815,806 $13,008 $738,052 $48,415
======== ======= ======== =======
</TABLE>
<PAGE>
2. Investments (continued)
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
------------------- -------------------
On Balance Commitments On Balance Commitments
Property type Sheet to Purchase Sheet to Purchase
<S> <C> <C> <C> <C>
Department/retail stores $253,380 $ 781 $242,307 $ 9,683
Apartments 186,030 2,211 189,752 10,167
Office buildings 206,285 9,496 169,177 7,262
Industrial buildings 82,857 520 60,195 17,430
Hotels/Motels 45,552 -- 33,508 --
Medical buildings 33,103 -- 30,103 3,873
Nursing/retirement homes 6,731 -- 9,552 --
Mixed Use 10,368 -- 7,176 --
---------- ------------ ----------- ------------
824,306 13,008 741,770 48,415
Less allowance for losses 8,500 -- 3,718 --
----------- ----------- ----------- -----------
$815,806 $13,008 $738,052 $48,415
======== ======= ======== =======
</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.
Commitments to purchase mortgages are made in the ordinary course of
business. The fair value of the mortgage commitments is $nil.
At December 31, 1998, the Company's recorded investment in impaired loans
was $1,932 with an allowance of $500. At December 31, 1997, the Company's
recorded investment in impaired loans was $4,443 with an allowance of $718.
During 1998 and 1997, the average recorded investment in impaired loans was
$2,736 and $6,473, respectively.
The Company recognized $251, $nil and $nil of interest income related to
impaired loans for the years ended December 31, 1998, 1997 and 1996,
respectively.
The following table presents changes in the allowance for investment losses
related to all loans:
<TABLE>
<CAPTION>
1998 1997 1996
- ---- - ---- - ----
<S> <C> <C> <C>
Balance, January 1 $3,718 $2,370 $ --
Provision for investment losses 4,782 1,805 2,370
Loan payoffs -- (457) --
---------- ------- ---------
Balance, December 31 $8,500 $3,718 $2,370
====== ====== ======
Net investment income for the years ended December 31 is summarized as
follows:
1998 1997 1996
- ----- -- ----- - ----
Interest on fixed maturities $285,260 $278,736 $230,559
Interest on mortgage loans 65,351 55,085 41,010
Interest on cash equivalents 137 704 1,402
Other (2,493) 1,544 1,194
----------- ------------- -----------
348,255 336,069 274,165
Less investment expenses 8,036 3,801 2,446
----------- ----------- -----------
$340,219 $332,268 $271,719
======== ======== ========
</TABLE>
<PAGE>
2. Investments (continued)
Net realized gain (loss) on investments for the years ended December 31 is
summarized as follows:
1998 1997 1996
-- ---- -- ---- -- ----
Fixed maturities $ 863 $ 1,638 $(2,888)
Mortgage loans (4,816) (1,348) (2,370)
Other investments (835) (799) --
-------- ------ ----------
$(4,788) $ (509) $(5,258)
======= ======= =======
Changes in net unrealized appreciation (depreciation) of investments for
the years ended December 31 are summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-- ---- -- ---- -- ----
<S> <C> <C> <C>
Fixed maturities available for sale $(8,032) $57,188 $(31,970)
</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:
1998 1997 1996
-- ---- -- ---- -- ----
Federal income taxes:
Current $ 23,227 $17,668 $7,124
Deferred (9,591) (2,485) 5,084
--------- -------- -------
13,636 15,183 12,208
State income taxes-current 759 1,462 704
----------- --------- --------
Income tax expense $ 14,395 $16,645 $12,912
======== ======= =======
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>
1998 1997 1996
----------- -------- -------
Provision Rate Provision Rate Provision Rate
Federal income taxes based
<S> <C> <C> <C> <C> <C> <C>
on the statutory rate $13,972 35.0% $15,735 35.0% $12,507 35.0%
Increases (decreases) are attributable to :
Tax-excluded interest (35) (0.1) (41) (0.1) (53) (0.1)
State tax, net of federal benefit 493 1.2 956 2.1 459 1.3
Other, net (35) -- (5) -- (1) --
------ ------ ------- ------ ------ ------
Federal income taxes $14,395 36.1% $16,645 37.0% $12,912 36.2%
======= ==== ======= ==== ======= ====
</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:
Deferred income tax assets: 1998 1997
-------- -------
Policy reserves $51,298 $54,468
Other 2,214 1,736
--------- -------
Total deferred income tax assets 53,512 56,204
-------- ------
Deferred income tax liabilities:
Deferred policy acquisition costs 52,908 63,630
Investments 23,803 28,175
-------- ------
Total deferred income tax liabilities _76,711 91,805
------- --------
Net deferred income tax liabilities $23,199 $35,601
======= =======
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 $45,716 and $17,392 as of December
31, 1998 and 1997, respectively. In addition, dividends in excess of
$37,902 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:
1998 1997 1996
-------- --------- -------
Statutory net income $ 37,902 $ 23,589 $ 9,138
Statutory stockholder's equity 330,588 302,264 250,975
5. Related party transactions
On December 31, 1998, 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 a carrying
amount of $6,651 and $8,400 at December 31, 1998 and 1997, respectively.
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 $28,482, $24,535 and $17,936 for the
years ended December 31, 1998, 1997 and 1996, respectively. Certain of
these costs are included in deferred policy acquisition costs.
<PAGE>
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, established
by reference to various indices plus 20 to 45 basis points, depending on
the term. There were no borrowings outstanding under this agreement at
December 31, 1998 or 1997.
7. 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 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, 1998 Amount Amount Value Exposure
----------------- ------ - ------ -- ----- --------
Assets:
<S> <C> <C> <C> <C>
Interest rate caps $ 900,000 $ 5,452 $ 1,518 $ 1,518
Interest rate floors 1,000,000 6,651 17,798 17,798
Interest rate swaps 1,000,000 -- -- --
------------- ------------ -------------
$12,103 $19,316 $19,316
= ======= ======= =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
7. Derivative financial instruments (continued)
Notional Carrying Fair Total Credit
December 31, 1997 Amount Amount Value Exposure
----------------- - ------ -- ------ -- ----- -- --------
Assets:
<S> <C> <C> <C> <C>
Interest rate caps $ 900,000 $ 7,624 $ 5,340 $ 5,340
Interest rate floors 1,000,000 8,400 8,400 8,400
Interest rate swaps 1,000,000 -- -- --
------------- ------------ ------------
$16,024 $13,740 $13,740
======= ======= =======
</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 will expire on various dates from 2000 to 2003.
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.
8. 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>
December 31,
1998 1997
-------- --------
Carrying Fair Carrying Fair
Financial Assets Amount Value Amount Value
Investments:
Fixed maturities (Note 2):
<S> <C> <C> <C> <C>
Held to maturity $1,081,193 $1,126,732 $1,186,682 $1,223,108
Available for sale 2,594,858 2,594,858 2,685,799 2,685,799
Mortgage loans on real estate (Note 2) 815,806 874,064 738,052 775,869
Derivative financial instruments (Note 7) 12,103 19,316 16,024 13,740
Separate account assets (Note 1) 123,185 123,185 62,087 62,087
Financial Liabilities
Future policy benefits for fixed annuities $4,152,059 $4,000,789 $4,330,173 $4,152,471
Separate account liabilities 123,185 115,879 62,087 58,116
</TABLE>
At December 31, 1998 and 1997, the carrying amount and fair value of future
policy benefits for fixed annuities exclude life insurance-related
contracts carried at $14,793 and $13,040, respectively. The fair value of
these benefits is based on the status of the annuities at December 31, 1998
and 1997.
<PAGE>
8. Fair values of financial instruments (continued)
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 1998 and 1997.
9. Commitments and contingencies
A number of lawsuits have been filed against life and health insurers in
jurisdictions in which the Company conducts business involving insurers'
sales practices, alleged agent misconduct, failure to properly supervise
agents, and other matters. The Company, along with AEFC and its insurance
subsidiaries, has been named as a defendant in one of these types of
actions.
The plaintiffs purport to represent a class consisting of all persons who
purchased policies or contracts from IDS Life and its subsidiaries. The
complaint puts at issue various alleged sales practices and
misrepresentations, alleged breaches of fiduciary duties and alleged
violations of consumer fraud statutes. IDS Life and its subsidiaries
believe they have meritorious defenses to the claims raised in this
lawsuit.
The outcome of any litigation cannot be predicted with certainty. In the
opinion of management, however, the ultimate resolution of this lawsuit
should not have a material adverse effect on the Company's financial
position.
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 major systems or
miscalculations, which could have a material impact on the operations of
the Company. All of the major systems used by the Company are maintained by
AEFC and are utilized by multiple subsidiaries and affiliates of the AEFC.
The Company's business is heavily dependent upon the 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 target date
for substantially completing corrective measures on business critical
systems was December 31, 1998. Substantial testing of these systems is
targeted for completion early in 1999. AEFC is currently on track with this
schedule and is also on track to finish the work on non-critical systems by
June 30, 1999.
AEFC continues to evaluate 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.
10. Year 2000 Issue (Unaudited) (continued)
AEFC's Year 2000 project includes establishing Year 2000 contingency plans
for all key business units. Business continuation plans, which address
business continuation in the event of a system disruption, are in place for
all key business units. These plans are being amended to include specific
Year 2000 considerations and will continue to be refined throughout 1999 as
additional information related to potential Year 2000 exposure is gathered.
<PAGE>
PART C.
Item 24. Financial Statements and Exhibits
(a) Financial Statements included in Part B of this Registration Statement:
The audited financial statements of American Enterprise Life Insurance
Company including:
- Balance sheets as of Dec. 31, 1998 and 1997; and
- Related statements of income, stockholder's equity and cash
flows for the years ended Dec. 31, 1998, 1997 and 1996.
- Notes to Financial Statements.
- Report of Independent Auditors dated February 4, 1999.
(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 Board of Directors of American Enterprise Life
establishing sixteen additional subaccounts within the separate
account dated January 20, 1999, filed as Exhibit 1.2 to Pre-Effective
Amendment No. 1 to Registration Statement No. 333-67595, filed on or
about February 19, 1999, is incorporated herein by reference.
2. Not applicable.
3.1 Form of Selling Agreement among American Enterprise Life Insurance
Company, American Express Service Corporation and Goldman, Sachs & Co.
and Goldman Sachs Insurance Agency, Inc. is filed electronically
herewith.
3.2 Form of General Agent Agreement to be filed by amendment.
3.3 Copy of Variable Annuity Principal Underwriting Agreement by and
between American Express Life Insurance Company and American Express
Service Corporation dated February 1, 1999 is filed electronically
herewith.
4.1 Form of Deferred Annuity Contract (form 43350) filed as Exhibit 4.1 to
the Registration Statement No. 333-6795, filed on or about November
20, 1998, is incorporated herein by reference.
4.2 Form of Roth IRA Endorsement (form 43353) filed as Exhibit 4.2 to the
Registration Statement No. 333-6795, filed on or about November 20,
1998, is incorporated herein by reference.
4.3 Form of SEP-IRA Endorsement (form 43352) filed as Exhibit 4.3 to the
Registration Statement No. 333-6795, filed on or about November 20,
1998, is incorporated herein by reference.
5. Form of Variable Annuity Application (form 43351) filed as Exhibit 5
to the Registration Statement No. 333-6795, filed on or about November
20, 1998, 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. Copy of Participation Agreement to be filed by amendment.
<PAGE>
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. None.
12. Not applicable.
13. Copy of schedule for computation of each performance quotation
provided in the Registration Statement in response to Item 21, filed
electronically as Exhibit 13 to the Initial Registration Statement No.
33-54471, filed on or about July 5, 1994, is incorporated herein by
reference.
14.1 Power of Attorney to sign this Registration Statement, dated March 28,
1997, filed electronically as Exhibit 15 to Post-Effective Amendment
No. 7 to Registration Statement No. 33-54471, is incorporated herein
by reference.
14.2 Power of Attorney to sign this Registration Statement, dated April 9,
1998, filed electronically as Exhibit 15.2 to Post-Effective Amendment
No. 10 to Registration Statement No. 33-54471, is incorporated herein
by reference.
<TABLE>
<CAPTION>
Item 25. Directors and Officers of the Depositor (American Enterprise Life Insurance Company)
Name Principal Business Address Positions and Offices with Depositor
- ------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
James E. Choat IDS Tower 10 Director, President and Chief
Minneapolis, MN 55440 Executive Officer
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
Paula R. Meyer IDS Tower 10 Director and Executive Vice
Minneapolis, MN 55440 President, Assured Assets
Mary Ellyn Minenko IDS Tower 10 Vice President, Group Counsel and
Minneapolis, MN 55440 Assistant Secretary
Stuart A. Sedlacek IDS Tower 10 Executive Vice President
Minneapolis, MN 55440
F. Dale Simmons IDS Tower 10 Vice President, Real Estate Loan
Minneapolis, MN 55440 Management
<PAGE>
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>
<TABLE>
<CAPTION>
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.
<S> <C>
Jurisdiction of
Name of Subsidiary Incorporation
I. Travel Related Services
American Express Travel Related Services Company, Inc. New York
II. International Banking Services
American Express Bank Ltd. Connecticut
III. Companies engaged in Financial Services
Advisory Capital Partners LLC Delaware
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
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 Advisors Japan Inc. Delaware
American Express Financial Corporation 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 Mississippi Inc. Mississippi
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 Brokerage Group Minnesota
IDS Futures Corporation Minnesota
<PAGE>
IDS Insurance Agency of Alabama Inc. Alabama
IDS Insurance Agency of Arkansas Inc. Arkansas
IDS Insurance Agency of Massachusetts Inc. Massachusetts
IDS Insurance Agency of Mississippi Ltd. Mississippi
IDS Insurance Agency of New Mexico Inc. New Mexico
IDS Insurance Agency of North Carolina Inc. North Carolina
IDS Insurance Agency of Ohio Inc. Ohio
IDS Insurance Agency of Texas Inc. Texas
IDS Insurance Agency of Utah Inc. Utah
IDS Insurance Agency of Wyoming Inc. Wyoming
IDS 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
Investors Syndicate Development Corp. Nevada
Public Employee Payment Company Minnesota
</TABLE>
Item 27. Number of Contract owners
Not applicable.
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>
<TABLE>
<CAPTION>
Item 29. Principal Underwriters.
(a) American Express Service Corporation acts as principal underwriter for
the following investment companies:
Strategist Income Fund, Inc.; Strategist Growth Fund, Inc.; Strategist
Growth and Income Fund, Inc.; Strategist World Fund, Inc.; Strategist
Tax-Free Income Fund, Inc., APL Variable Annuity Account 1, ACL
Variable Annuity Account 1 and IDS Certificate Company.
(b) As to each director, officer or partner of the principal underwriter:
Name and Principal Business Address Position and Offices with Underwriter Offices with Registrant
- ------------------------------------------ --------------------------------------- ---------------------------
<S> <C> <C>
Ward D. Armstrong Vice President None
IDS Tower 10
Minneapolis, MN 55440
John C. Boeder Vice President None
IDS Tower 10
Minneapolis, MN 55440
Cynthia M. Carlson Vice President None
IDS Tower 10
Minneapolis, MN 55440
John R. Cattau Vice President None
American Express Tower
World Financial Center
New York, NY 10285
Colleen Curran Vice President and Chief Legal Counsel None
IDS Tower 10
Minneapolis, MN 55440
David R. Hubers Director and President None
IDS Tower 10
Minneapolis, MN 55440
James A. Jacobs Vice President None
IDS Tower 10
Minneapolis, MN 55440
Nancy E. Jones Vice President None
IDS Tower 10
Minneapolis, MN 55440
Verna J. Kaufman Vice President None
IDS Tower 10
Minneapolis, MN 55440
Richard W. Kling Vice President None
IDS Tower 10
Minneapolis, MN 55440
Timothy S. Meehan Secretary None
IDS Tower 10
Minneapolis, MN 55440
<PAGE>
James A. Mitchell Director and Senior Vice President Board member and President
IDS Tower 10
Minneapolis, MN 55440
Julia K. Morton Vice President and Chief Financial None
IDS Tower 10 Officer
Minneapolis, MN 55440
Ann M. Richter Vice President and Chief Compliance None
IDS Tower 10 Officer
Minneapolis, MN 55440
</TABLE>
<TABLE>
<CAPTION>
Item 29(c).
Net Underwriting
Name of Principal Discounts and Compensation Brokerage
Underwriter Commissions Redemption Commissions Compensation
- ----------------------- --------------------- -------------------- --------------------- --------------------
<S> <C> <C> <C> <C>
American Express None None None None
Service Corporation
</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 28th day
of April, 1999.
AMERICAN ENTERPRISE VARIABLE ANNUITY ACCOUNT
(Registrant)
By American Enterprise Life Insurance Company
(Sponsor)
By /s/ James E. Choat*
James E. Choat
Director, 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 28th day of April, 1999.
Signature Title
/s/ James E. Choat* Director, President and
James E. Choat Chief Executive Officer
/s/ Jeffrey S. Horton** Vice President and Treasurer
Jeffrey S. Horton
/s/ Richard W. Kling* Director and Chairman of the Board
Richard W. Kling
/s/ Paul S. Mannweiler* Director
Paul S. Mannweiler
/s/ William A. Stoltzmann* Director, Vice President, General
William A. Stoltzmann Counsel and Secretary
/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 as Exhibit 15.2 to Post-Effective Amendment No. 10 to
Registration Statement No. 33-54471, filed on or about April 30, 1998,
incorporated herein by reference.
By:
Mary Ellyn Minenko
<PAGE>
CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 1 TO REGISTRATION STATEMENT NO.
333-67595
This Amendment to the Registration Statement is comprised of the following
papers and documents:
The Cover Page.
Part A.
The prospectus.
Part B.
Statement of Additional Information.
Financial Statements
Part C.
Other Information.
The signatures.
Exhibits.
Goldman Sachs Variable Annuity
Registration Number 333-67595
EXHIBIT INDEX
Exhibit 3.1 Form of Selling Agreement.
Exhibit 3.3 Copy of Variable Annuity Principal Underwriting Agreement
dated Feb. 1, 1999.
Exhibit 9 Opinion of Counsel.
Exhibit 10 Consent of Independent Auditors
SELLING AGREEMENT
- -----------------------
[Identify broker/dealer firm]
("Your Broker/Dealer")
- -------------------------------
[and associated insurance agency(ies)]
("Your Agency")
Ladies and Gentlemen:
Pursuant to a Wholesaling Agreement entered into on ___________ , 1999,
by American Enterprise Life Insurance Company (the "Company"), American Express
Service Corporation (the "Distributor," together with Company, "American
Express") and Goldman, Sachs & Co. and Goldman Sachs Insurance Agency, Inc.
(together, "Wholesaler"), Your Broker/Dealer and Your Agency have been
recommended to us to be a selling firm authorized to offer and sell certain
variable annuity contracts ("Authorized Selling Firm or "You") issued by Company
and distributed by Distributor (the "Variable Contracts"). The Variable
Contracts are described on Schedule A, including contracts that may be added to
Schedule A to this Agreement from time to time in accordance with Section 13,
and may be designated with a marketing name including the term "Goldman Sachs."
This agreement (hereafter the "Selling Agreement" or "Agreement")
confirms our mutual agreement as to the terms and conditions applicable to your
activities as an Authorized Selling Firm. In executing this Agreement, You
understand that (1) Distributor or its affiliates may, at any time at its or
their option, act as an Authorized Selling Firm; (2) American Express may enter
into agreements, which may or may not be the same as this Agreement, with other
Authorized Selling Firms; (3) Company or Distributor may modify, suspend,
terminate or withdraw entirely the offering of Variable Contracts at any time
without notice to You and without incurring any liability or obligation to You;
(4) Company may, upon notice, change the sales charge applicable to any Variable
Contract; and (5) American Express shall have no liability to You or to your
customers except for lack of good faith and for obligations expressly assumed by
American Express pursuant to this Selling Agreement.
1. Authorization. Company hereby appoints Your Agency and Distributor
and hereby authorizes Your Broker/Dealer to solicit sales of and to sell
Variable Contracts pursuant to the terms of this Agreement as an Authorized
Selling Firm. You hereby accept such appointment and authorization. Company will
file all necessary appointment forms with state insurance regulators, subject to
your compliance with the obligations related to such appointments under Sections
2(b) and (c). Unless otherwise terminated, this Agreement shall last one year,
beginning upon the date of its execution by American Express ("Effective Date").
This Agreement automatically renews on its anniversary for successive, one-year
periods, unless any party gives notice of non-renewal.
2. Your Duties and Obligations. As an Authorized Selling Firm, You
undertake to perform the following duties and obligations.
(a) Supervision of Representatives. Your Agency and Your
Broker/Dealer shall have full, joint and several responsibility for the training
and supervision of all of your associated persons ("Representatives") who are
engaged directly or indirectly in the offer or sale of the Variable Contracts,
and all such Representatives shall be subject to your control with respect to
their securities and insurance regulated activities in connection with the
Variable Contracts. Authorized Selling Firm shall be responsible for ensuring
that their Representatives who market and sell the Variable Contracts are
trained on (i) the product specifications and features, (ii) requirements that
Company has adopted to satisfy insurance laws and regulations regarding
replacements, and (iii) standards that Company has established for Authorized
Selling Firms and their Representatives to use in meeting their respective
duties to ensure suitable sales of the Variable Contracts. The training material
regarding product specifications and features, and the requirements described in
(ii) and (iii) above shall either be the training material for the Variable
Contract provided by the Company to the Authorized Selling Firm that is
contained in the new sales representative kit ("Procedures and Resource
Manual"), or if different training material is used by the Authorized Selling
Firm it shall be provided to American Express prior to the execution of this
Agreement. After the execution of this Agreement, to the extent that Authorized
Selling Firm uses training material related to the sale of the Variable
Contracts that is materially different from that contained in the Procedures and
Resource Manual or other training material provided to American Express in
accordance with the preceding sentence, Authorized Selling Firm must provide
that training material to American Express. Authorized Selling Firm shall be
responsible for assuring that its Representatives complete the training before
they begin to sell the Variable Contracts. Authorized Selling Firm shall also be
responsible for assuring that their Representatives satisfy the minimum
requirements of the Company and Distributor described in (ii) and (iii) above,
and the suitability requirements of the National Association of Securities
Dealers, Inc. ("NASD"), Securities and Exchange Commission ("SEC") and any state
law, as amended from time to time, in selling the Variable Contracts. You will
establish and maintain such rules and procedures as may be necessary to cause
diligent supervision of the securities and insurance activities of your
Representatives as required by applicable law or regulation. You will provide
your Representatives advice and assistance with regard to marketing and
advertising of Variable Contracts, and will assist Representatives in responding
to customer inquiries. You will promptly deliver to Representatives relevant
Company communications and instructions, bulletins, manuals and underwriting
guides issued in writing by Company ("Company Rules") concerning the Variable
Contracts. With regard to sales solicitations by your Representatives, You will
review all Variable Contract applications for accuracy and completeness, and to
determine and ensure the suitability of the sale and will ensure that You and
your Representatives document transactions, including the fact of policy
delivery, and maintain any other documentation reasonably requested by Company.
(b) Licensing, Registration and Appointment. You will not
allow any of your Representatives to solicit or sell Variable Contracts unless
such Representative is qualified under applicable federal and state securities
laws to engage in the sale of the Variable Contracts, is a registered person of
Your Broker/Dealer and is validly insurance licensed and appointed by Company as
a variable contract agent in accordance with the jurisdictional requirements of
the place where the solicitations and sales take place as well as in accordance
with the solicited person's or entity's place of residence. You will assist
Company in the appointment of your Representatives under applicable insurance
laws and will fulfill all Company Rules in conjunction with the submission of
appointment papers for Representatives as insurance agents of Company. Company
will be responsible for the filing of appointments with the state insurance
departments. Notwithstanding such submission, as between the parties, Company
shall have sole discretion to appoint, refuse to appoint, discontinue, or
terminate the appointment of any Representative as an insurance agent of
Company. Your Broker/Dealer will be solely responsible for securities
registrations of Representatives. Your Broker/Dealer and Your Agency will be
responsible for continuously maintaining for each of your Representatives the
required federal and state securities registrations and insurance licenses in
the state(s) where such Representatives will solicit and sell Variable Contracts
and have been appointed by Company in accordance with the laws of the state in
which the sale(s) occur and the customer resides. You will notify Company if any
Representative fails to maintain the required NASD registration, or state
insurance license, becomes inactive, is terminated or no longer employed by You,
or is no longer authorized to sell Variable Contracts. You will limit the
Variable Contracts solicitation activities of each of your Representatives to
the jurisdictions where American Express has authorized such solicitation. These
jurisdictions (and any applicable Affiliated Agencies, as defined in Section
8(a)) are listed on Schedule A to this Agreement.
(c) Representative Background Checks. Authorized Selling Firm
is responsible for performing background checks on any Representative prior to
his or her appointment with Company. You warrant that such background check will
comply with all applicable regulations of the departments of insurance and
securities in the states in which the Representative will solicit and sell
Variable Contracts, and with the requirements of the NASD. You further warrant
and represent that copies of such background check reports will be made
available in a timely manner to any regulator who may request them from Company,
and that Company will receive confirmation that such materials have been timely
delivered to any such regulator. Company will not require copies of the reports
themselves, but only the assurance that they have been timely delivered as
requested, unless such reports relate or may relate to a customer inquiry or
complaint about the Variable Contract or its sale, or unless such report relates
to Company's internal investigation of a Representative's sales practices with
regard to the Variable Contracts. You further warrant and agree that You will
provide to the Company a copy of your procedures and requirements for background
checks upon request, and acknowledge that Company is entitled to rely on You for
compliance with regulations as indicated above. With regard to Representatives
who will be soliciting sales of Variable Contracts in the states of Alabama or
Mississippi, Company retains the right to conduct background checks on
Representatives at its own initiative and expense.
(d) Use and Delivery of Prospectus and Marketing Materials. In
offering the Variable Contracts, You and your Representatives shall rely solely
on representations contained in the prospectus and registration statements as
most recently amended or supplemented for the Variable Contracts. You shall not
furnish or communicate to any person any information relating to the Variable
Contracts, the Company, Distributor, or Wholesaler, that is inconsistent with
information contained in the relevant prospectus or registration statements or
in marketing materials supplied by the Company or the Wholesaler. You will
ensure that your Representatives deliver to each person submitting an
application for a Variable Contract the applicable prospectus as prescribed by
applicable securities laws and regulations.
(e) Preparation of Marketing Materials and Use of Trademarks.
You will not publish or use any marketing materials relating to the Variable
Contracts, the Company, Distributor or Wholesaler without prior written consent
from each of the aforementioned entities. You jointly and severally agree to
indemnify and hold harmless, Company, Distributor, and Wholesaler, against any
liabilities (including costs of investigation and defense) to which any of these
entities may become subject in respect of any such materials that is furnished
to any person, published or used without the above-described prior written
consent. You shall not use the names, logos, trademarks, service marks or any
proprietary designation of American Express or Wholesaler without their
respective prior written permission. In the event that You are notified by the
Company, Distributor or Wholesaler, that any marketing or sales material is no
longer to be used or distributed, You shall immediately cease to use any such
material and follow Company Rules and direction as to its disposal. All
prospectuses, sales promotion material, advertising, circulars, documents and
software relating to the sale of Variable Contracts are property of Company and
Wholesaler, as applicable. You will safeguard, maintain and account for these
materials and will destroy them upon termination of this Agreement, according to
Company Rules.
(f) Acceptance/Rejection of Applications, Premiums and other
Requests. All applications, premiums and other orders are to be submitted to
Company in accordance with Company Rules, as provided from time to time. All
applications and premiums for the Variable Contracts are subject to acceptance
or rejection by the Company in its sole discretion. All other requests are
subject to the satisfaction of relevant conditions set forth in the applicable
prospectus or contract form.
(g) Collection and Submission of Premiums. Company and
Authorized Selling Firm will agree on which of the following provisions will
govern Authorized Selling Firm's duties related to collection and submission of
premiums:
(i) Check with Application. You will assure your Representatives'
collection and timely remittance to Company of the premiums due on all
Variable Contracts. Company will receive premiums no later than the second
business day after the application has been signed by the customer.
(ii) Gross Sweep. You will assure your Representatives' collection of
the premiums due on all Variable Contracts and will timely account for such
premiums, directly depositing them no later than the next business day into
a Company-owned bank account and notifying Company immediately of the gross
deposits for the business day. Upon receipt of notification from You,
Company will sweep the settlement account. Additional specific procedures
governing the movement of money pursuant to this paragraph will be
established by Your Agency, Your Broker/Dealer, Company and Distributor and
will become part of the Company Rules.
(h) Policy Delivery. Company will transmit Variable Contracts
directly to contract holders.
(i) Replacements. In the event a prospective purchaser is
considering the surrender or exchange of an existing insurance policy or
variable annuity contract in order to purchase a Variable Contract from You or
any of your Representatives (hereafter a "Replacement Sale"), You shall ensure
that Representatives provide sufficient information to prospective annuity
contract-holders as to the suitability of the Replacement Sale. Such information
includes but may not be limited to: completion of the Company's "Annuity to
Variable Annuity Replacement Form;" the amount of the surrender charge to be
incurred on the investment to be liquidated; all fees and possible charges, such
as surrender charges, on the new investment(s); any change in the investment
risk to the prospective annuity contract-holder; any change in the nature or the
provider of any guarantees associated with the surrendered annuity contract; any
changes in the expenses associated with the surrendered annuity contract; and
loss of favorable tax treatment of annuity contracts issued prior to October 22,
1988. Sales of annuities under this Agreement which are funded by the surrender
of cash value life insurance policies will not be accepted by Company. You shall
retain all such information for seven years counting from the date of the
initial solicitation, whether or not the Variable Contract was ever sold, and
shall make such information available to the Company upon request.
(j) Compliance with NASD Rules and Federal and State
Securities Laws. You will fully comply with the requirements of the NASD, the
Securities Exchange Act of 1934 (the "1934 Act") and all other applicable
federal and state laws, as well as Company Rules, as amended from time to time,
and provided to You.
(k) Violation of Law; Complaints. You will promptly notify
American Express in writing of any complaint, violation of law or Company Rules
by Authorized Selling Firm or any of your Representatives, or of any allegation
by a customer or regulatory agency with respect to the activities of Authorized
Selling Firm or a Representative with respect to the Variable Contracts. For
purposes of this Section, "complaint" means oral or written notice, as required
by law, received by Authorized Selling Firm (without regard to who was the
original receiver or addressee) expressing dissatisfaction either with the
Variable Contract or with representations which induced its purchase.
(l) Limitations. Authorized Selling Firm shall have no
authority with respect to Company, nor shall either represent themselves as
having such authority, other than as is specifically set forth in this
Agreement. Specifically, and without limiting the foregoing, Authorized Selling
Firm shall not, without the express written consent of Company and/or
Distributor, as applicable:
i. make, waive, alter or change any term, rate or
condition stated in any Company contract or Company- or
Distributor-approved form, or discharge any contract in
the name of Company;
ii. waive a forfeiture;
iii. extend the time for the payment of premiums or other
monies due Company;
iv. institute, prosecute or maintain any legal proceedings
on behalf of Company or Distributor in connection with
any matter pertaining to Company's business, nor accept
service of process on behalf of Company or Distributor;
v. transact business in contravention of the rules and
regulations of any insurance department and/or other
governmental authorities having jurisdiction over any
subject matter embraced by this Agreement;
vi. make, accept or endorse notes, or endorse checks
payable to Company or Distributor, or otherwise incur
any expense or liability on behalf of Company or
Distributor;
vii. offer to pay or pay, directly or indirectly, any rebate
of premium or any other inducement not specified in the
Variable Contract to any owner or annuitant;
viii.misrepresent the Variable Contract for the purpose of
inducing an annuity contract-holder in any other
company to lapse, forfeit or surrender his/her
insurance therewith;
ix. give or offer to give any advice or opinion regarding
the taxation of any customer's income or estate in
connection with the purchase of any Variable Contract;
x. use Company's, Distributor's or Wholesaler's names,
logos, trademarks, service marks or any other
proprietary designation except as provided in Section
2(e) herein;
xi. engage in any program designed to replace Variable
Contracts sold hereunder with any annuity products of
other companies, at any time while this Agreement is in
force; or provide data to any other person or
organization which would allow or facilitate such
replacement of Company's Variable Contracts.
3. Expenses. Except as otherwise provided in this Agreement, Authorized
Selling Firm will be responsible for all costs and expenses of any kind and
nature incurred by Authorized Selling Firm in the performance of their duties
under this Agreement.
4. Books, Records and Bonding
(a) Books and Records. As required by applicable law and
Company Rules, You will keep identifiable and accurate books, accounts and
records of all business and transactions effected under this Agreement. Upon
reasonable notice and at reasonable times, for a period continuing one year
following the termination of this Agreement, You will permit American Express to
visit or inspect, audit and verify, and to make copies of, at your offices or
elsewhere, all such documents You maintain in accordance with this Agreement,
provided such audit will not unreasonably interfere with your normal course of
business.
(b) Fidelity Bond. Authorized Selling Firm represents and
warrants that all directors, officers, employees and representatives of
Authorized Selling Firm, and Representatives who are appointed pursuant to this
Agreement as producers for Company or who have access to funds of Company,
including but not limited to funds submitted with applications for Variable
Contracts or funds being returned to owners, are and shall be covered by a
blanket fidelity bond, including coverage for larceny and embezzlement, issued
by a reputable bonding company. The bond shall be maintained by Your
Broker/Dealer at Your Broker/Dealer's expense. Company may require evidence,
satisfactory to it, that such coverage is in force. Authorized Selling Firm
shall give prompt written notice to Company of cancellation or change of
coverage.
5. Ownership of Customer and Prospect Information. The names, addresses
and other personally identifiable or account information concerning your
prospects and customers are and shall remain your sole property, and neither
American Express nor its affiliates shall use such information for any purpose
except in connection with the performance of its duties and responsibilities
hereunder and except for servicing and mailings related to the Variable
Contracts. Notwithstanding the foregoing, (a) this Section 5 shall not prohibit
American Express or any of its affiliates from utilizing for any purpose the
names, addresses or other personally identifiable or account information
concerning any of your prospects or customers if such names, addresses and other
personally identifiable or account information are obtained in the ordinary
course of business in any manner other than from You pursuant to this Selling
Agreement, and (b) in the event You, during the term of this Agreement and for a
period of one year after the effective date of its termination, engage in a
concerted effort to promote, recommend or encourage the termination, surrender,
or cancellation of any Variable Contract sold under this Agreement, without
reasonable grounds to believe that such promotion, recommendation or
encouragement is in each individual customer's best interests, then the
provisions relating to Section 11, Confidentiality, and this Section 5 shall be
void as regards American Express' right to contact present and former purchasers
of the Variable Contract sold under this Agreement with a view to retaining the
accounts. The provisions of this Section 5 shall survive the termination of this
Agreement.
6. Commissions. Company shall pay You commissions for your services
under this Agreement, based on premiums accepted by Company, as set forth in
Schedule A to this Agreement, as amended from time to time. Commissions shall be
paid to You on a monthly basis. Authorized Selling Firm will be responsible for
payment of commissions to Representatives for sales of Variable Contracts under
this Agreement. In determining the amount of commission payable to You, Company
reserves the right to exclude any sales that Company reasonably determines are
not made in accordance with the terms of the prospectus or the provisions of
this Agreement. Company will charge back the appropriate portion of your
commissions set forth on Schedule A for surrenders of Variable Contracts, also
in accordance with Schedule A.
7. Indemnification
(a) Indemnification by American Express. The Company or
Distributor shall indemnify and hold You harmless from and against any and all
losses, claims, damages, liabilities, actions, costs or expenses to which You
may become subject (including any legal or other expenses incurred by You in
connection with investigating any claim against You and defending any action
and, provided American Express has given prior written approval of such
settlement or compromise, which consent will not be unreasonably withheld or
delayed, any amounts paid in settlement or compromise) insofar as such losses,
claims, damages, liabilities, actions, costs or expenses arise out of or are
based upon:
(i) acts or omissions of American Express, or any
employee or agent of American Express (excluding
Authorized Selling Firm or its Representatives) while
acting (whether under actual or apparent authority,
or otherwise) on behalf of American Express in
connection with this Agreement;
(ii) any breach of any written promise or agreement made
by American Express under this Agreement;
(iii) any inaccuracy or breach of any representation or
warranty made by American Express under this
Agreement.
Notwithstanding the above, You shall not be entitled to
indemnification pursuant to this Section 7(a) if such loss, claim, damage,
liability, action, cost or expense is due to the willful misfeasance, bad faith,
gross negligence or reckless disregard of duty by You.
(b) Indemnification by You. You shall indemnify, defend and
hold harmless American Express from and against any and all losses, claims,
damages, liabilities, actions, costs or expenses to which You may become subject
(including any legal or other expenses incurred by You in connection with
investigating any claim against You and defending any action and, provided
American Express has given prior written approval of such settlement or
compromise, which consent will not be unreasonably withheld or delayed, any
amounts paid in settlement or compromise) insofar as such losses, claims,
damages, liabilities, actions, costs or expenses arise out of or are based upon:
(i) acts or omissions of Authorized Selling Firm or any
employee or agent of Authorized Selling Firm,
including its Representatives, while acting (whether
under actual or apparent authority, or otherwise) on
behalf of Authorized Selling Firm or American Express
in connection with this Agreement;
(ii) any breach of any written promise or agreement made
by Authorized Selling Firm under this Agreement;
(iii) any inaccuracy or breach of any representation or
warranty made by Authorized Selling Firm under this
Agreement.
This indemnification obligation shall not apply to the extent that such alleged
act or omission is attributable to American Express either because (1) American
Express directed the act or omission or (2) Authorized Selling Firm or
Representative's act or omission was the result of its compliance with the
Company Rules.
Notwithstanding the above, American Express shall not be
entitled to indemnification pursuant to this Section 7(b) if such loss, claim,
damage, liability, action, cost or expense is due to willful misfeasance, bad
faith, gross negligence or reckless disregard of duty by American Express.
(c) General. After receipt by a party, or any partner,
officer, director, employee or agent thereof, entitled to indemnification
("indemnified party") under this Section of notice of the commencement of any
action, if a claim in respect thereof is to be made against any person obligated
to provide indemnification under this Section ("indemnifying party"), such
indemnified party will notify the indemnifying party in writing of the
commencement thereof as soon as practicable after the summons or other first
written notification giving information of the nature of the claim that has been
served upon the indemnified party; provided that the failure to so notify the
indemnifying party will not relieve the indemnifying party from any liability
under this Section, except to the extent that the omission results in a failure
of actual notice to the indemnifying party and such indemnifying party is
damaged solely as a result of the failure to give such notice. The indemnifying
party, upon the request of the indemnified party, shall retain counsel
satisfactory to the indemnified party to represent the indemnified party in the
proceeding, and shall pay the fees and disbursements of such counsel related to
such proceeding. In any such proceeding, any indemnified party shall have the
right to retain its own counsel, but the fees and expenses of such counsel shall
be at the expense of such indemnified party unless (i) the indemnifying party
and the indemnified party shall have mutually agreed to the retention of such
counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them. The indemnifying
party shall not be liable for any settlement of any proceeding effected without
its written consent but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment.
8. Representations, Warranties and Undertakings.
(a) You represent and warrant to American Express and
undertake to do as follows:
(i) Your Broker/Dealer is a corporation, partnership or other
entity duly organized and validly existing in good standing under the
laws of the jurisdiction in which You are organized, and is qualified
to act as a broker/dealer in the states or other jurisdictions in
which it transacts business. Your Broker/Dealer is a member in good
standing of the NASD. Your Broker/Dealer will maintain all
registrations, qualifications and memberships required by the terms of
this Agreement in full force and effect throughout the term of this
Agreement.
(ii) Your Agency is a corporation, partnership or other entity,
duly organized and validly existing in good standing under the laws of
the jurisdiction in which it is organized, and is licensed and
otherwise qualified to act as an insurance agent in the states or
other jurisdictions in which it transacts business. If Your Agency has
to establish another organization to obtain the appropriate insurance
agency license in a state, that agency will sign the attached Schedule
B and will agree to abide by the terms thereon. Each such additional
agency will be referred to as an Affiliated Agency. Your Agency will
maintain all registrations, qualifications and licenses required by
the terms of this Agreement in full force and effect throughout the
term of this Agreement. Your Agency is associated with Your
Broker/Dealer in accordance with the terms and conditions of the SEC
no-action letter First of America Brokerage Services, Inc. (avail.
Sept. 28, 1995).
(iii) The execution and delivery of this Agreement and the
performance of the transactions contemplated hereby have been duly
authorized by all necessary action, and all other authorizations and
approvals (if any) required for your lawful execution and delivery of
this Agreement, and its performance hereunder, have been obtained.
Upon execution and delivery by You and assuming due and valid
execution by Company and Distributor, this Agreement will constitute a
valid and binding agreement, enforceable against You in accordance
with its terms.
(b) Company and Distributor, as applicable, represent and
warrant to You and undertake to do as follows:
(i) Company represents and warrants that it is duly
incorporated in the state of Indiana and licensed in all states,
jurisdictions and territories identified in Schedule A.
(ii) Distributor represents and warrants that it is duly
registered as a broker/dealer with the SEC, the NASD, all states,
jurisdictions and territories identified in Schedule A, and is
qualified to do business in all states, jurisdictions and
territories identified in Schedule A in which Company is licensed
and qualified to do business.
(iii) Company represents and warrants that the Variable
Contracts have been filed with and approved by appropriate state
insurance departments, and that all sales literature has been
filed with and approved by the insurance departments where
required.
(iv) Company and Distributor represent and warrant that the
Variable Contracts and the separate accounts supporting such
contracts shall comply in all material respects with the
applicable requirements of the Securities Act of 1933 and the
Investment Company Act of 1940.
(v) Company represents and warrants that the prospectus(es)
and registration statement(s) relating to the Variable Contracts
contain no untrue statements of material fact or omission to
state a material fact, the omission of which makes any statement
contained in the prospectus(es) and registration statement(s)
misleading.
(vi) Company represents and warrants that Company will meet
any requirements of the state departments of insurance in the
jurisdictions in which the Variable Contracts are available for
sale regarding both the filing and approval of advertising and
sales literature.
9. Termination
(a) Termination for Cause. At any time during the term of this
Agreement, American Express may terminate this Agreement immediately for cause
upon written notice of such termination to You. Such written notice shall state
the cause with specificity. As used in this Section, the term "cause" shall mean
any one or more of the following:
(i) the conviction of any party, its officers or supervisory
personnel of any felony, of fraud, or of any crime involving
dishonesty;
(ii) the intentional misappropriation by a party of funds or
property of any other party, or of funds received for it or for
annuity contract-holders by such other party;
(iii) the cancellation, or the refusal to renew by the
issuing insurance regulatory authority, of any license,
certificate or other regulatory approval required in order for
any party to perform its duties under this Agreement;
(iv) any action by a regulatory authority with jurisdiction
over the activities of a party that would place the party in
receivership or conservatorship or otherwise substantially
interfere or prevent such party from continuing to engage in the
lines of business relevant to the subject matter hereof; or
(v) a party becoming a debtor in bankruptcy (whether
voluntary or involuntary) or the subject of an insolvency,
rehabilitation or delinquency proceeding.
(b) Termination without Cause. You or American Express may
terminate this Agreement without cause upon 30 days' prior written notice to the
other party.
(c) Post Termination Obligations. Upon termination of this
Agreement, American Express' obligation to pay compensation to You shall
continue for so long as the Variable Contracts are outstanding (including any
contracts issued by the Company upon exchange, conversion, annuitization or
replacement thereof or therefor) in accordance with Schedule A.
(d) Transfer of Representative. If your Representatives are
terminated or otherwise leave your employ, compensation paid hereunder will
continue to be paid to You on any Variable Contract sold and/or serviced by such
Representative, unless You and such client notify American Express, in writing
of a change in payment procedures that is in accordance with applicable law.
10. Independent Contractor. This Agreement is not a contract of
employment. Nothing contained in this Agreement shall be construed or deemed to
create the relationship of joint venture, partnership, or employer and employee
between Company, and Distributor and You. Each party is an independent
contractor and shall be free, subject to the terms and conditions of this
Agreement, to exercise judgment and discretion with regard to the conduct of its
business.
11. Confidentiality. Each party (e.g., American Express, on the one
hand, and Authorized Selling Firm, on the other hand) to this Agreement
acknowledges that they and their affiliates may, in the course of carrying out
its responsibilities under this Agreement, be exposed to or acquire information
which is proprietary or confidential information of the other party, or third
parties to whom the other party owes a duty of confidentiality. Proprietary and
confidential information shall include, but not be limited to, each party's
non-public materials related to the Variable Contracts, information as to the
business methods, operations or affairs or the processes and systems used in
operation of a party's business, and information related to prospects and
customers of the Authorized Selling Firm as indicated in Section 5, and
confidential information shall include, but not be limited to, the terms of this
Agreement, all whether now known or subsequently learned by the other party
("Protected Information").
The parties agree to (a) hold, and ensure their employees and agents,
and any affiliates, and any employees and agents of such affiliates, hold the
Protected Information in strict confidence, (b) not give, sell or disclose the
Protected Information to third parties, or to personnel of the parties or any
affiliate for any purposes whatsoever other than as required for the provision
of services as contemplated by this Agreement, and (c) advise each of its
employees who may be exposed to the Protected Information to keep such
information confidential.
The Protected Information shall not include information which is (1) in
or becomes part of the public domain, except when such information is in the
public domain due to disclosure by a party or its affiliate in violation of this
Agreement, (2) demonstrably known to a party or their affiliates prior to
execution of this Agreement, (3) independently developed by a party or their
affiliates in the ordinary course of business outside of this Agreement, or (4)
rightfully and lawfully obtained by a party or their affiliates from third
parties.
It is understood that in the event of a breach of this Section, damages
may not be an adequate remedy and a party shall be entitled to apply for
injunctive relief to restrain any breach, threatened or actual, pending the
outcome of arbitration provided for under Section 14.
12. Assignment. The parties of this Agreement may not assign, either
wholly or partially, this Agreement or any of the benefits accrued or to accrue
under it, or subcontract their interests or obligations under this Agreement,
without the written approval of all parties.
13. Amendment of Agreement. The parties may amend this Agreement,
including any of the Schedules, at any time, but no amendment shall be effective
until approved in writing by American Express and You subject to the provisions
of: Section 12, "Assignment."
14. Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration
administered by the American Arbitration Association in accordance with its
Commercial Arbitration Rules and Title 9 of the U.S. Code. Judgment on the award
rendered by the arbitrator(s) may be entered in any court having jurisdiction
thereof. The number of arbitrators shall be three, one of whom shall be
appointed by each of the parties and the third of whom shall be selected by
mutual agreement, if possible, within 30 days of the selection of the second
arbitrator and thereafter by the administering authority and the place of
arbitration shall be Minneapolis, Minnesota. The arbitrators will have no
authority to award punitive damages or any other damages not measured by the
prevailing party's actual damages, and may not, in any event, make any ruling,
finding or award that does not conform to the terms and conditions of this
Agreement. Either party may make an application to the arbitrator(s) seeking
injunctive relief to maintain the status quo until such time as the arbitration
award is rendered or the controversy is otherwise resolved. Either party may
apply to any court having jurisdiction hereof and seek injunctive relief in
order to maintain the status quo until such time as the arbitration award is
rendered or the controversy is otherwise resolved.
15. Miscellaneous
(a) Applicable Law. This Agreement shall be governed by and
interpreted under the laws of the State of Minnesota.
(b) Severability. Should any part of this Agreement be
declared invalid, the remainder of this Agreement shall remain in
full force and effect as if the Agreement had originally been
executed without the invalid provisions.
(c) Notice. Any notice hereunder shall be in writing and
shall be deemed to have been duly given if sent by certified or
registered mail, postage prepaid, or via a national courier
service with the capacity to track its shipments, to the
following addresses:
If to Company
American Enterprise Life Insurance Company
80 South 8th Street
Minneapolis, MN 55440
Attn: Compliance Officer (Unit 1818)
If to Distributor
American Express Service Corporation
80 South 8th Street
Minneapolis, MN 55440
Attn: Compliance Officer (Unit 1818)
If to Your Broker/Dealer
Broker/Dealer
Address
Attn: Broker Contact Name
If to Your Agency
Your Agency
Address
Attn: Your Agency Contact Name
If to Goldman Sachs
One New York Plaza
New York, NY 10004
Attn: Douglas C. Grip
(d) Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns,
subject to the provisions of this Agreement limiting assignment.
(e) Headings. The headings in this Agreement are for convenience only
and are not intended to have any legal effect.
(f) Defined Terms. The terms defined in this Agreement are to be
interpreted in accordance with this Agreement. Such defined terms are not
intended to conform to specific statutory definitions of any state.
(g) Entire Agreement. The parties acknowledge, understand and agree
that Goldman, Sachs & Co. acts as the exclusive wholesaler of the Variable
Contract pursuant to that certain Wholesaling Agreement dated ___________, 1999,
between Company, Distributor and Goldman, Sachs & Co. The parties further
acknowledge, understand and agree that nothing described herein shall limit any
of the duties, responsibilities or authority of Goldman, Sachs & Co. under that
Wholesaling Agreement. This Agreement constitutes the entire agreement of the
parties with respect to the subject matter hereof and supersedes all previous
communications, representations, understandings and agreements either oral or
written, between the parties or any official representatives thereof. As of the
Effective Date, any and all prior consents by the Company to any entity or
individual acting as an Authorized Selling Firm are withdrawn.
(h) Survival. All terms and conditions of the following sections will
survive termination of this Agreement:
Section 5, "Ownership of Customer Information and Prospects";
Section 7, "Indemnification"; Section 9(c), "Post Termination
Obligations"; Section 11, "Confidentiality."
(i) No Waiver. No failure to enforce, nor any breach of any term or
condition of this Agreement shall operate as a waiver of such term of condition,
or of any other term of condition, nor constitute nor be deemed a waiver or
release of any other rights at law or in equity, or of claims which any party
may have against any other party for anything arising out of, connected with, or
based upon this Agreement. Any waiver, including a waiver of this Section, must
be in writing and signed by the parties hereto.
Please confirm your agreement by signing and returning to us
the two enclosed duplicate copies of the Agreement, including the Schedules.
Upon our acceptance hereof as evidenced by execution of the Agreement by Company
and Distributor, the Agreement shall constitute a valid and binding contact
between us. After our acceptance, we will deliver to You one fully executed copy
of this agreement.
Very truly yours,
American Enterprise Life Insurance Company
By:___________________________
Title:___________________________
Date:___________________________
American Express Service Corporation
By:_____________________________
Title:___________________________
Date:___________________________
Confirmed ___________, 1999
[name of broker/dealer]
Address
By:_____________________________
Title:___________________________
Date:___________________________
[name of insurance agency]
Address
By:_____________________________
Title:___________________________
Date:___________________________
VARIABLE ANNUITY PRINCIPAL
UNDERWRITING AGREEMENT
This Variable Annuity Principal Underwriting Agreement ("Agreement"),
made and entered into this 1st day of February, 1999, by and between American
Enterprise Life Insurance Company ("Company"), an Indiana corporation, and
American Express Service Corporation ("Distributor"), a Delaware corporation.
In consideration of the mutual covenants and promises contained herein,
the parties agree as follows:
1. All capitalized words or terms used in this Agreement, not otherwise
defined herein, shall have the same meaning and definition specified in the
Master Agreement dated as of February 1, 1999 between and among Goldman,
Sachs & Co. ("GS & Co."), Company, American Centurion Life Assurance
Company, IDS Life Insurance Company, IDS Life Insurance Company of New
York, American Express Financial Advisors Inc. and Distributor ("Master
Agreement").
2. Company hereby appoints and authorizes Distributor, and Distributor hereby
agrees to act as principal underwriter and distributor for the GS Annuity
Contracts that will be issued and administered by Company in accordance
with the terms and conditions of the Master Agreement and the prospectus
for the GS Annuity Contracts.
3 Company and Distributor represent and warrant to each other and undertake
to do as follows:
a. Company represents and warrants that it is duly incorporated in the
state of Indiana and licensed and qualified to do business in the
District of Columbia and all states other than New York and New
Hampshire.
b. Distributor represents and warrants that it is and shall remain during
the term of this Agreement duly registered as a broker/dealer with the
SEC, NASD, the District of Columbia and all states, and is qualified
to do business in all states where Company is qualified and licensed
to do business.
c. Company represents and warrants that the GS Annuity Contracts have
been filed with and approved by appropriate State Insurance
Departments.
d. Company represents and warrants that the prospectus(es) and
registration statement(s) relating to the GS Annuity Contracts contain
no untrue statements of material fact or omission to state a material
fact, the omissions of which makes any statement contained in the
prospectus(es) and registration statement(s) misleading.
e. Company represents and warrants that the advertising and sales
literature for the GS Annuity Contracts shall be created as specified
in the Master Agreement. Company represents and warrants that Company
will meet any requirements of the State Departments of Insurance in
the jurisdictions in which the GS Annuity Contracts are available for
sale regarding both the filing and approval of advertising and sales
literature for the GS Annuity Contracts.
f. Company and Distributor will ensure that GS & Co. meets NASD
requirements regarding the filing and approval of advertising and
sales literature for the GS Annuity Contracts, in accordance with the
terms of the Master Agreement.
g. Distributor represents and warrants that it is and shall remain during
the term of this Agreement in compliance with Section 9(a) of the 1940
Act.
4. Distributor shall not directly solicit, offer or sell GS Annuity Contracts
to applicants or prospective applicants unless Distributor has been
authorized by Company to act as an Authorized Selling Firm pursuant to a
Selling Agreement and in accordance with the terms of the Wholesaling
Agreement (defined below).
<PAGE>
5. Distributor shall have no authority with respect to Company, nor shall it
represent itself as having such authority, other than as is specifically
set forth in this Agreement. Specifically, and without limiting the
foregoing, Distributor shall not, without the express written consent of
Company, as applicable:
a. make, waive, alter or change any term, rate or condition stated in any
Company contract or Company- approved form, or discharge any contract
in the name of Company;
b. waive a forfeiture;
c. extend the time for the payment of premiums or other monies due
Company;
d. institute, prosecute or maintain any legal proceedings on behalf of
Company in connection with any matter pertaining to Company's
business, nor accept service of process on behalf of Company;
e. transact business in contravention of the rules and regulations of any
State Insurance Department and/or other governmental authorities
having jurisdiction over any subject matter embraced by this
Agreement;
f. make, accept or endorse notes, or endorse checks payable to Company,
or otherwise incur any expense or liability on behalf of Company;
g. offer to pay or pay, directly or indirectly, any rebate of premium or
any other inducement not specified in the GS Annuity Contract to any
owner or annuitant;
h. misrepresent the GS Annuity Contract for the purpose of inducing an
annuity contract-holder in any other company to lapse, forfeit or
surrender his/her insurance therewith;
i. give or offer to give any advice or opinion regarding the taxation of
any customer's income or estate in connection with the purchase of any
GS Annuity Contract;
j. use Company's names, logos, trademarks, service marks or any other
proprietary designation;
k. engage in any program designed to replace GS Annuity Contracts sold
hereunder with any annuity products of other companies, at any time
while this Agreement is in force; or provide data to any other person
or organization which would allow or facilitate such replacement of
Company's GS Annuity Contracts.
6. Company will be responsible for preparing, filing and maintaining all
necessary GS Annuity forms and related applications, registration
statements and other documents, establishing the appropriate Separate
Accounts and Subaccounts to support the GS Annuity Contracts, securing all
necessary approvals from the Indiana Insurance Department, and the State
Insurance Departments of all states other than New Hampshire and New York,
to issue the GS Annuity Contract and performing all other tasks and
obligations related to the GS Annuity Contract that Company is obligated to
perform under the Master Agreement.
7. Company and Distributor agree to enter into selling agreements with retail
broker/dealers and their insurance agency affiliates ("Authorized Selling
Firms"), to provide for solicitation and procurement by the Authorized
Selling Firms of applications for GS Annuity Contracts to be issued by
Company, in accordance with the terms and conditions of the Master
Agreement, including the standard form of Selling Agreement specified
therein, and the Wholesaling Agreement between Company, AESC, Goldman Sachs
Insurance Agency, Inc. and GS & Co. (the "Wholesaling Agreement"). No
retail broker/dealer or insurance agency shall offer or sell the GS Annuity
Contracts unless they are properly licensed and appointed, have entered
into a Selling Agreement with Company and Distributor and have complied
with the conditions that the Selling Agreement specifies must be met before
any sale of the GS Annuity Contract. Company will supply, or will ensure
that Wholesaler supplies, all materials for use by Authorized Selling Firms
in accordance with the terms of the Master Agreement and the Wholesaling
Agreement.
<PAGE>
8. No individual shall offer or sell the GS Annuity Contracts unless duly (a)
registered as a "registered representative" of a Selling Broker-Dealer in
accordance with NASD Rules and Regulations, and not subject to a bar or
suspension order thereunder, (b) licensed as an insurance agent in
accordance with the requirements of the jurisdiction(s) where the
solicitations and sales take place as well as in accordance with the
requirements of the solicited person's or entity's place of residence, (c)
appointed as an insurance agent for Company in those states where such
individual is licensed, and (d) licensed or registered, or applicable, with
State Securities Departments in accordance with the requirements of the
jurisdiction where the solicitations and sales take place as well as in
accordance with the requirements of the solicited person's or entity's
place of residence. Authorized Selling Firm shall be responsible for
"registered representative" registrations and insurance agent licensing of
their individual sales agents, and Company shall be responsible for
appointment of individual sales agents and Authorized Selling Firm's or its
affiliated insurance agencies as agents of Company, in accordance with the
Master Agreement.
9. Compensation shall be paid to Authorized Selling Firms by Company in
accordance with the terms and conditions contained in the Master Agreement,
and the Selling Agreement between Company, Distributor and the Authorized
Selling Firm.
10. Company will compensate Distributor for its services as principal
underwriter and distributor by reimbursing Distributor for its costs
associated with performing such services. It is agreed, with respect to any
services which are to be provided to Company upon an allocated cost basis
by Distributor, that any such method of allocation or classification of
expenses incurred or services rendered shall be in conformance with the
laws and regulations of the Indiana Insurance Department. If at any time
either Company or Distributor can reasonably demonstrate that any method of
allocation is more equitable and in conformance with such laws and
regulations, the current method of allocation shall then be subject to
renegotiation. In any event, review of all expenses for the year will be
made annually, to make all necessary adjustments in the amounts billed
hereunder in order to conform them with the amount of such expenses
actually incurred.
11. Distributor assumes full responsibility for the supervision of its
associated persons in all their activities covered by this Agreement.
12. Company, as agent for Distributor, shall confirm to each applicant for and
purchaser of a GS Annuity Contract in accordance with Rule 10b-10 under the
1934 Act acceptance of premiums and such other transactions as are required
by Rule 10b-10 or administrative interpretations thereunder. Company shall
maintain and preserve such books and records with respect to such
confirmations in conformity with the requirements of Rules 17a-3 and 17a-4
under the 1934 Act to the extent such requirements apply. Company shall
maintain all such books and records and hold such books and records on
behalf of and as agent for Distributor whose property they are and shall
remain, and acknowledges that such books and records are at all times
subject to inspection by the SEC in accordance with Section 17(a) of the
1934 Act.
13. This Agreement, including the terms of the Master Agreement, supersedes all
prior agreements between the parties hereto regarding the distribution of
GS Annuity Contracts.
14. This Agreement may be terminated at any time by mutual agreement of the
parties, or by thirty (30) days notice given by either to the other. This
Agreement shall automatically terminate in the event of its assignment by
either party or by operation of law. Upon termination of this Agreement all
authorizations, rights and obligations shall cease except the obligation to
settle accounts hereunder, including commissions or premiums subsequently
received for GS Annuity Contracts in effect at the time of termination or
issued pursuant to applications received by Company prior to termination.
15. This Agreement shall be governed by Indiana Law.
<PAGE>
16. a. Indemnification by Company. In addition to any indemnification
liability the Company may have otherwise (e.g., any indemnification
arising under statute or regulation applicable to the activities
conducted hereunder), and subject to Section 16-c hereof, the Company
shall indemnify and hold harmless Distributor, and any partner,
officer, director, employee, or agent against any and all losses,
claims, damages, expenses or liabilities, joint or several (including
any investigative, legal and other expenses reasonably incurred in
connection with, and any amounts paid in settlement of or defending,
any action, suit or proceeding or any claim asserted or any alleged
loss, liability, damage or expense and reasonable legal counsel fees
incurred in connection therewith), to which Distributor, and any
partner, officer, director, employee, or agent of any of the
foregoing, may become subject under any statute or regulation, at
common law or otherwise, insofar as such losses, claims, damages,
expenses or liabilities:
i. result because of a material breach by the Company, or any
officer, director, employee, agent, or subcontractor thereof, of
any provision of this Agreement;
ii. result because of the provisions of any GS Annuity Contract, or a
material breach of any provision of any GS Annuity Contract; or
iii. result from any acts or omissions of the Company, or any officer,
director, employee, agent, or subcontractor thereof, that are not
in substantial accordance with this Agreement, including, but not
limited to, any violation of any federal or state statute or
regulation.
Notwithstanding the above, no person shall be entitled to indemnification
pursuant to this Section if such loss, claim, damage, liability or expense
is due to the willful misfeasance, bad faith, gross negligence or reckless
disregard of duty by the person seeking indemnification.
b. Indemnification by Distributor. In addition to any indemnification
liability Distributor may have otherwise (e.g., any indemnification
arising under statute or regulation applicable to the activities
conducted hereunder), and subject to Section 16-c hereof, Distributor
shall indemnify and hold harmless the Company and any officer,
director, employee or agent thereof against any and all losses,
claims, damages, liabilities, or expenses, joint or several (including
any investigative, legal and other expenses reasonably incurred in
connection with, and any amounts paid in settlement of or defending,
any action, suit or proceeding or any claim asserted or any alleged
loss, liability, damage or expense and reasonable legal counsel fees
incurred in connection therewith), to which the Company and any
officer, director, employee or agent thereof may become subject under
any statute or regulation, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses:
i. result because of a material breach by Distributor or any
officer, director, employee, agent, or sub-contractor thereof, of
any provision of this Agreement; or
ii. result from any acts or omissions of Distributor, or any
officers, directors, employees, agents, or subcontractors
thereof, that are not in substantial accordance with this
Agreement, including, but not limited to, any violation of any
federal or state statute or regulation.
Notwithstanding the above, no person shall be entitled to indemnification
pursuant to this Section if such loss, claim, damage, liability or expense
is due to the willful misfeasance, bad faith, gross negligence or reckless
disregard of duty by the person seeking indemnification.
<PAGE>
c. General Provisions Governing Indemnification. After receipt by a
party, its Affiliates, or any partner, officer, director, employee or
agent thereof, entitled to indemnification ("indemnified party") under
this Section 16 of notice of the commencement of any action, if a
claim in respect thereof is to be made against any person obligated to
provide indemnification under this Section 16 ("indemnifying party"),
such indemnified party will notify the indemnifying party in writing
of the commencement thereof as soon as practicable after the summons
or other first written notification giving information of the nature
of the claim has been served upon the indemnified party; provided that
the failure to so notify the indemnifying party will not relieve the
indemnifying party from any liability under this Section 16, except to
the extent that the omission results in a failure of actual notice to
the indemnifying party and such indemnifying party is damaged solely
as a result of the failure to give such notice. The indemnifying
party, upon the request of the indemnified party, shall retain counsel
satisfactory to the indemnified party to represent the indemnified
party in the proceeding, and shall pay the fees and disbursements of
such counsel related to such proceeding. In any such proceeding, any
indemnified party shall have the right to retain its own counsel, but
the fees and expenses of such counsel shall be at the expense of such
indemnified party unless (a) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such
counsel, or (b) the named parties to any such proceeding (including
any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same
counsel would be inappropriate due to actual or potential differing
interests between them. The indemnifying party shall not be liable for
any settlement of any proceeding effected without its written consent,
but, if settled, with such consent, or if there be a final judgment
for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of
such settlement or judgment.
17. This Agreement is not a contract of employment. Nothing contained in this
Agreement shall be construed or deemed to create the relationship of joint
venture, partnership, or employer-employee between Company and Distributor.
Each party is an independent contractor and shall be free, subject to the
terms and conditions of this Agreement, to exercise judgment and discretion
with regard to the conduct of its business.
18. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, subject to the
following provision. The parties to this Agreement may not assign, either
wholly or partially, this Agreement or any of the benefits accrued or to
accrue under it, or subcontract their interests or obligations under this
Agreement, without the written approval of all parties.
19. The parties may amend this Agreement at any time, but no amendment shall be
effective until approved in writing by all parties.
20. Any notice hereunder shall be in writing and shall be deemed to have been
duly given if sent by certified or registered mail, postage prepaid, or via
a national courier service with the capacity to track its shipments, to the
following addresses:
If to Company If to Distributor
American Enterprise Life Insurance Company American Express Service Corporation
Administrative Offices 80 South 8th Street
PO Box 534 Minneapolis, MN 55440
Minneapolis, MN 55440-0534
<PAGE>
Dated the 31st day of March, 1999
ATTEST: American Enterprise Life Insurance Company
By: /s/ William A. Stoltzmann By:/s/ James E. Choat
Name: William A. Stoltzmann Name: James E. Choat
Title: Secretary Title: President and C.E.O.
Dated the 31st day of March, 1999.
ATTEST: American Express Service Corporation
By: /s/ Timothy S. Meehan By:/s/ Richard W. Kling
Name: Timothy S. Meehan Name: Richard W. Kling
Title: Secretary Title: Vice President
April 28, 1999
American Enterprise Life Insurance Company
80 South Eighth Street
P.O. Box 435
Minneapolis, MN 55440-0534
RE: American Express Variable Annuity Account
Post-Effective Amendment No. 1
File No. 333-67595/811-7195
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, when offered and sold in
accordance with the prospectus contained in the Registration Statement
and in compliance with applicable law, will be 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,
/s/ Mary Ellyn Minenko
Mary Ellyn Minenko
Senior Counsel
Consent of Independent Auditors
We consent to the use of our report dated February 4, 1999 on the financial
statements American Enterprise Life Insurance Company in Post-Effective
Amendment No. 1 to the Registration Statement (Form N-4, No. 333-67595) and
related Prospectus for the registration of the Goldman Sachs Variable Annuity
Contracts to be offered by American Enterprise Life Insurance Company.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
April 27, 1999
