SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. _______ [X]
Post-Effective Amendment No. [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 1 (File No. 811-7195) [X]
---------
(Check appropriate box or boxes)
AMERICAN ENTERPRISE VARIABLE ANNUITY ACCOUNT
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(Exact Name of Registrant)
American Enterprise Life Insurance Company
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(Name of Depositor)
80 South 8th Street, P.O. Box 534, Minneapolis, MN 55440-0534
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(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (612) 671-3678
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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: as soon as possible.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8 (a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission acting pursuant to Section 8 (a) may
determine.
<PAGE>
Prospectus
[_____], 1999
American Express Wells Fargo Variable AnnuitySM
Individual or group flexible premium deferred combination fixed/variable
annuity.
American Enterprise Variable Annuity Account
Issued by: American Enterprise Life Insurance Company (American
Enterprise Life)
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 for:
<TABLE>
<CAPTION>
<S> <C>
o American Express Variable Portfolio Funds o Goldman Sachs Variable Insurance Trust (VIT)
o AIM Variable Insurance Funds, Inc. o MFS(R) Variable Insurance Trust SM
o Dreyfus Socially Responsible Growth Fund, Inc. o Putnam Variable Trust
o Franklin Templeton Variable Insurance Products Trust o Wells Fargo_____________
- Class 2
</TABLE>
Please read the prospectuses carefully and keep them for future reference. This
contract is available for qualified and nonqualified plans.
The Securities and Exchange Commission (SEC) has not approved or disapproved
these securities or passed upon the adequacy or accuracy of this prospectus. Any
representation to the contrary is a criminal offense.
An investment in this contract 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 contract
involves investment risk including the possible loss of principal.
A Statement of Additional Information (SAI), dated the same date as this
prospectus, is incorporated by reference into this prospectus. It is filed with
the SEC and is available without charge by contacting American Enterprise Life
at the telephone number above or by completing and sending the order form on the
last page of this prospectus. The table of contents of the SAI is on the last
page of this prospectus.
<PAGE>
Table of Contents
Key Terms
The Contract in Brief
Expense Summary
Condensed Financial Information (Unaudited)
Financial Statements
Performance Information
The Variable Account and the Funds
The Fixed Accounts
Buying Your Contract
Charges
Valuing Your Investment
Making the Most of Your Contract
Withdrawals
TSA -- Special Surrender Provisions
Changing Ownership
Benefits in Case of Death
The Annuity Payout Period
Taxes
Voting Rights
Substitution of Investments
About the Service Providers
Additional Information About American Enterprise Life
Directors and Executive Officers
Experts
American Enterprise Life Financial Information
Table of Contents of the Statement of Additional Information
<PAGE>
Key Terms
These terms can help you understand details about your contract.
Accumulation unit -- A measure of the value of each subaccount before annuity
payouts begin.
Annuitant -- The person on whose life or life expectancy the annuity payouts are
based.
Annuity payouts -- An amount paid at regular intervals under one of several
plans.
Beneficiary -- The person you designate to receive annuity 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 - An individual annuity contract or a certificate showing your interest
under a group annuity contract.
Contract value -- The total value of your contract before we deduct any
applicable charges.
Contract year -- A period of 12 months, starting on the effective date of your
contract and on each anniversary of the effective date.
Fixed accounts - The one-year fixed account is an account to which you may
allocate purchase payments. Amounts you allocate to this account earn interest
at rates that we declare periodically. Guarantee Period Accounts are fixed
accounts to which you may also allocate purchase payments. These accounts have
guaranteed interest rates declared for periods ranging from two to ten years.
Withdrawals from these accounts prior to the end of the term specified will
receive a Market Value Adjustment, which may result in a gain or loss of
principal.
Funds -- Mutual funds and/or portfolios that are investment options under your
contract, each with a different investment objective. You may allocate your
purchase payments into subaccounts investing in shares of any or all of these
funds.
Guarantee Period -- The number of years that a guaranteed interest rate is
credited.
Market Value Adjustment (MVA) -- A positive or negative adjustment assessed if
any portion of a Guarantee Period Account is withdrawn or transferred prior to
the end of its Guarantee Period.
Owner (you, your) -- The person who controls the contract (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 contract's benefits.
Qualified annuity -- A contract 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 (SEP) plans
o Tax-Sheltered Annuity (TSA) rollovers
All other contracts are considered nonqualified annuities.
<PAGE>
Retirement date -- The date when annuity payouts are scheduled to begin.
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 subaccount at the close of business on each valuation date.
Variable account -- Consists of separate subaccounts to which you may allocate
purchase payments; each invests in shares of one fund. The value of your
investment in each subaccount changes with the performance of the particular
fund.
Withdrawal value -- The amount you are entitled to receive if you make a full
withdrawal from your contract. It is the contract value minus any applicable
charges.
<PAGE>
The Contract in Brief
Purpose: The purpose of the contract 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 contract. The
contract provides lifetime or other forms of
payouts beginning at a specified date (the
retirement date).
Free look period: You may return your contract to
our office within 10 days after it is
delivered to you and receive a full refund
of the contract value. 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, each of which invests
in a fund with a particular investment
objective. The value of each 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 purchase payments you allocate to
the subaccounts. (p. __)
o the fixed accounts, which earn interest
at rates that we adjust periodically.
(p. __)
Buying your contract: Your sales representative
will help you complete and submit an
application. Applications are subject to
acceptance at our office. You may buy a
nonqualified annuity or a qualified annuity.
After your initial purchase payment, you
have the option of making additional
purchase payments in the future.
o Minimum initial purchase payment --
$2,000. This minimum does not apply if
you enroll in the Systematic Investment
Program (SIP). The Guaranteed Period
Accounts require a minimum investment of
$1,000.
o Minimum additional purchase payment --
$100 ($50 with SIP payments).
o Maximum total purchase payments (without
prior approval) -- $1,000,000.
Transfers: Subject to certain restrictions you currently may redistribute your
money among the subaccounts and the fixed accounts without charge at any time
until annuity payouts begin, and once per contract year among the subaccounts
after annuity payouts begin. Transfers out of the Guarantee Period Accounts
before the end of the Guarantee Period will be subject to a MVA. You may
establish automated transfers among the fixed accounts and subaccounts. Fixed
account transfers are subject to special restrictions. (p. __)
<PAGE>
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 you make withdrawals prior to your reaching age 59 1/2) and
may have other tax consequences; also, certain restrictions apply. (p. __)
Changing ownership: You may change ownership of a nonqualified annuity by
written instruction, but this may have federal income tax consequences.
Restrictions apply to changing ownership of a qualified annuity. (p. __)
Benefits in case of death: If you or the annuitant die before annuity payouts
begin, we will pay the beneficiary an amount at least equal to the contract
value. (p. __)
Annuity payouts: You can apply your 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 subaccount and the one-year fixed
account. During the annuity payout period, your choices for subaccounts may be
limited. The Guarantee Period Accounts are not available during the payout
period. (p. __)
Taxes: Generally, your contract 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. __)
Charges:
o $30 annual contract administrative charge;
o a 0.15% variable account administrative charge;
o with a five-year withdrawal charge schedule a 1.30% mortality and expense
risk fee applies;
o with a seven-year withdrawal charge schedule a 1.05% mortality and expense
risk fee applies;
o if the Enhanced Death Benefit Rider is selected, an additional 0.20%
mortality and expense risk fee;
o if the Guaranteed Minimum Income Benefit Rider is selected, an annual fee
based on the Guaranteed Income Benefit Base (currently at 0.30%);
o 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);
and
o the operating expenses of the funds.
<PAGE>
Expense Summary
The purpose of the following information is to help you understand the various
costs and expenses associated with your contract.
You pay no sales charge when you purchase your contract. We show all costs that
you bear directly or indirectly for the subaccounts and funds below. Some
expenses may vary as we explain under "Charges." Please see the funds'
prospectuses for more information on the operating expenses of each fund.
Contract owner expenses:
Withdrawal charge: contingent deferred sales charge as a percentage of
purchase payment withdrawn. You select either a five-year or seven-year
withdrawal charge schedule at the time of application.
<TABLE>
<CAPTION>
Five-year schedule Seven-year schedule
<S> <C> <C> <C>
Years from purchase Withdrawal charge Years from purchase Withdrawal charge
payment receipt percentage payment receipt percentage
1 8% 1 8%
2 8 2 8
3 6 3 7
4 4 4 6
5 2 5 5
Thereafter 0 6 4
7 2
Thereafter 0
Annual contract administrative charge $30*
* We will waive this charge when your contract value is $50,000 or more
on the current contract anniversary.
Guaranteed Minimum Income Benefit Rider fee:
as a percentage of the Guaranteed Income Benefit
Base charged annually. This is an optional expense. 0.30%
</TABLE>
Annual variable account expenses: as a percentage of average subaccount value.
You can choose the length of your contract's withdrawal charge and the death
benefit guarantee provided. The combination you choose determines the fees you
pay. The table below shows the combinations available to you and their cost.
<TABLE>
<CAPTION>
- - - --------------------------------------------------------------- ------------------------- ---------------------------
Five-year withdrawal Seven-year withdrawal
schedule schedule
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<S> <C> <C>
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Variable account administrative charge 0.15% 0.15%
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Mortality and expense risk fee 1.30% 1.05%
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Enhanced Death Benefit Rider fee as part of the 0.20% 0.20%
----- -----
mortality and expense risk fee (optional)
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Total annual variable account expenses without the optional 1.45% 1.20%
Enhanced Death Benefit Rider fee
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- - - --------------------------------------------------------------- ------------------------- ---------------------------
Total annual variable account expenses with the optional 1.65% 1.40%
Enhanced Death Benefit Rider fee
- - - --------------------------------------------------------------- ------------------------- ---------------------------
</TABLE>
<PAGE>
Annual operating expenses of the funds (as a percentage of average daily net
assets)
<TABLE>
<CAPTION>
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Management 12b-1 Other
Fees Fees Expenses Total
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<S> <C> <C> <C> <C>
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AXPSM Variable Portfolio - Blue Chip Advantage Fund .56% -- .39 .95%1
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AXPSM Variable Portfolio - Capital Resource Fund .59% -- .07 .66%1
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AXPSM Variable Portfolio - Diversified Equity Income Fund .56% -- .39 .95%1
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AXPSM Variable Portfolio - Extra Income Fund .62% -- .09 .71%1
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AXPSM Variable Portfolio - Federal Income Fund .61% -- .265 .875%1
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AXPSM Variable Portfolio - New Dimensions Fund .61% -- .06 .67%1
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AXPSM Variable Portfolio - Small Cap Advantage Fund .79% -- .435 1.225%1
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AIM V.I. Capital Appreciation Fund .62% -- .05 .67%2
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AIM V.I. Value Fund (after expense waivers/reimbursements) .61% -- .05 .66%3
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Dreyfus Socially Responsible Growth Fund .75% -- .05 .80%
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FT VIP Income Securities Fund - Class 2
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FT VIP Mutual Shares Securities Fund - Class 2 .74% .25 .03 1.02%4
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FT VIP Real Estate Securities Fund - Class 2 .52% .25 .02 .79%4
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FT VIP Small Cap Fund Class - 2
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Goldman Sachs VIT CORESM U.S. Equity Fund (after expense reimbursement) .70% -- .10 .80%
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Goldman Sachs VIT Global Income Fund .90% -- .15 1.05%
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Goldman Sachs VIT Mid Cap Value Fund (after expense reimbursement) .80% -- .15 .95%
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MFS(R) Growth with Income Series
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MFS(R)Utilities Series .75% -- .26 1.01%2
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Putnam VT International Growth Fund - Class IB Shares .80% .15 .27 1.22%5
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Putnam VT Vista Fund - Class IB Shares .65% .15 .12 .92%
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Wells Fargo Asset Allocation Fund
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Wells Fargo Corporate Bond Fund
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Wells Fargo Equity Income Fund
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Wells Fargo Equity Value Fund
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Wells Fargo Growth Fund
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Wells Fargo International Equity Fund
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Wells Fargo Large Company Growth Fund
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Wells Fargo Money Market Fund
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Wells Fargo Small Cap Growth Fund
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</TABLE>
1 Annualized operating expenses of funds at Dec. 31, 1998.
2 Figures in "Management Fees," "Other Expenses" and "Total" are based on actual
expenses for the fiscal year ended Dec. 31, 1998.
3 Had there been no fee waivers or expense reimbursements, expenses would have
been: 0.75%, 0.00%, 5.05% and 5.80%
<PAGE>
4 The figure shown under Management Fees, combines both the Management and
Portfolio Administration Fees. The Portfolio Administration Fee is a direct
expense for the Mutual Shares Securities Fund; the Real Estate Securities Fund
pays for similar services indirectly through the Management Fee. Because no
Class 2 shares were issued as of Dec. 31, 1998, figures (other than Rule 12b-1
Fees) are based on the Portfolios' Class 1 actual expenses for the fiscal year
ended Dec. 31, 1998 plus Class 2's annual Rule 12b-1 Fee of 0.25% (While the
maximum amount payable under each Portfolio's Class 2 Rule 12b-1 Plan is 0.35%
per year of the Portfolio's average daily net assets, the Board of Trustees of
Franklin Templeton Variable Insurance Products Trust has set the current rate
at 0.25% per year.)
5 Based on estimated expenses
<PAGE>
Examples: *
You would pay the following expenses on a $1,000 investment if you selected a
five-year withdrawal charge schedule without any optional riders and assuming a
5% annual return and....
<TABLE>
<CAPTION>
- - - -----------------------------------------------------------------------------------------------------------------------
a total withdrawal at no withdrawal or selection
the end of each time of an annuity payout plan
period at the end of each time
period
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<S> <C> <C> <C> <C>
- - - -------------------------------------------------------------------------------------------------------------------------
1 year 3 years 1 year 3 years
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AXPSM Variable Portfolio - Blue Chip Advantage Fund $105.12 $137.26 $25.12 $77.26
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AXPSM Variable Portfolio - Capital Resource Fund 102.15 128.32 22.15 68.32
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AXPSM Variable Portfolio - Diversified Equity Income Fund 105.12 137.26 25.12 77.26
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AXPSM Variable Portfolio - Extra Income Fund 102.66 129.86 22.66 69.86
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AXPSM Variable Portfolio - Federal Income Fund 104.35 134.95 24.35 74.95
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AXPSM Variable Portfolio - New Dimensions Fund 102.25 128.63 22.25 68.63
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AXPSM Variable Portfolio - Small Cap Advantage Fund 107.94 145.69 27.94 85.69
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AIM V.I. Capital Appreciation Fund 102.25 128.63 22.25 68.63
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AIM V.I. Value Fund 102.15 128.32 22.15 68.32
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Dreyfus Socially Responsible Growth Fund
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FT VIP Income Securities Fund - Class 2
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FT VIP Mutual Shares Securities Fund - Class 2 105.84 139.41 25.84 79.41
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FT VIP Real Estate Securities Fund - Class 2 103.48 132.33 23.48 72.33
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FT VIP Small Cap Fund Class - 2 103.48 132.33 23.48 72.33
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Goldman Sachs VIT CORESM U.S. Equity Fund 103.59 132.64 23.59 72.64
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Goldman Sachs VIT Global Income Fund 106.15 140.33 26.15 80.33
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Goldman Sachs VIT Mid Cap Value Fund 105.12 137.26 25.12 77.26
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MFS(R) Growth with Income Series
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MFS(R)Utilities Series 105.74 139.1 25.74 79.10
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Putnam VT International Growth Fund - Class IB Shares 107.89 145.53 27.89 85.53
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Putnam VT Vista Fund - Class IB Shares 104.82 136.34 24.82 76.34
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Wells Fargo Asset Allocation Fund
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Wells Fargo Corporate Bond Fund
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Wells Fargo Equity Income Fund
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Wells Fargo Equity Value Fund
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Wells Fargo Growth Fund
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Wells Fargo International Equity Fund
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Wells Fargo Large Company Growth Fund
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Wells Fargo Money Market Fund
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Wells Fargo Small Cap Growth Fund
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</TABLE>
<PAGE>
You would pay the following expenses on a $1,000 investment if you selected a
five-year withdrawal charge schedule with the optional 0.20% Enhanced Death
Benefit Rider and the 0.30% Guaranteed Minimum Income Benefit Rider and assuming
a 5% annual return and....
<TABLE>
<CAPTION>
- - - ------------------------------------------------------------------------------------------------------------------
a total withdrawal at no withdrawal or selection
the end of each time of an annuity payout plan
period at the end of each time
period
- - - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- - - ---------------------------------------------------------------------------------------------------------------------
1 year 3 years 1 year 3 years
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AXPSM Variable Portfolio - Blue Chip Advantage Fund $107.17 $143.39 $27.17 $83.39
- - - ----------------------------------------------------------------------------------------------------------------------
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AXPSM Variable Portfolio - Capital Resource Fund 104.20 134.49 24.20 74.49
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AXPSM Variable Portfolio - Diversified Equity Income Fund 107.17 143.39 27.17 83.39
- - - ----------------------------------------------------------------------------------------------------------------------
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AXPSM Variable Portfolio - Extra Income Fund 104.71 136.03 24.71 76.03
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AXPSM Variable Portfolio - Federal Income Fund 106.40 141.10 26.40 81.10
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AXPSM Variable Portfolio - New Dimensions Fund 104.30 134.80 24.30 74.80
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AXPSM Variable Portfolio - Small Cap Advantage Fund 109.99 151.79 29.99 91.79
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AIM V.I. Capital Appreciation Fund 104.30 134.80 24.30 74.80
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AIM V.I. Value Fund 104.20 134.49 24.20 74.49
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Dreyfus Socially Responsible Growth Fund
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FT VIP Income Securities Fund - Class 2
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FT VIP Mutual Shares Securities Fund - Class 2 107.89 145.53 27.89 85.53
- - - ----------------------------------------------------------------------------------------------------------------------
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FT VIP Real Estate Securities Fund - Class 2 105.53 138.49 25.53 78.49
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FT VIP Small Cap Fund Class - 2 105.53 138.49 25.53 78.49
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Goldman Sachs VIT CORESM U.S. Equity Fund 105.64 138.79 25.64 78.79
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Goldman Sachs VIT Global Income Fund 108.20 146.45 28.20 86.45
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Goldman Sachs VIT Mid Cap Value Fund 107.17 143.39 27.17 83.39
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MFS(R) Growth with Income Series
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MFS(R)Utilities Series 107.79 145.23 27.79 85.23
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Putnam VT International Growth Fund - Class IB Shares 109.94 151.63 29.94 91.63
- - - ----------------------------------------------------------------------------------------------------------------------
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Putnam VT Vista Fund - Class IB Shares 106.87 142.47 26.87 82.47
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Wells Fargo Asset Allocation Fund
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Wells Fargo Corporate Bond Fund
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Wells Fargo Equity Income Fund
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Wells Fargo Equity Value Fund
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Wells Fargo Growth Fund
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Wells Fargo International Equity Fund
- - - ----------------------------------------------------------------------------------------------------------------------
- - - ----------------------------------------------------------------------------------------------------------------------
Wells Fargo Large Company Growth Fund
- - - ----------------------------------------------------------------------------------------------------------------------
- - - ----------------------------------------------------------------------------------------------------------------------
Wells Fargo Money Market Fund
- - - ----------------------------------------------------------------------------------------------------------------------
- - - ----------------------------------------------------------------------------------------------------------------------
Wells Fargo Small Cap Growth Fund
- - - ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
You would pay the following expenses on a $1,000 investment if you selected a
seven-year withdrawal charge schedule without any optional riders and assuming a
5% annual return and....
<TABLE>
<CAPTION>
- - - ------------------------------------------------------------------------------------------------------------------
a total withdrawal at no withdrawal or selection
the end of each time of an annuity payout plan
period at the end of each time
period
- - - ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- - - ------------------------------------------------------------------------------------------------------------------
1 year 3 years 1 year 3 years
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
AXPSM Variable Portfolio - Blue Chip Advantage Fund $102.56 $139.55 $22.56 $69.55
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
AXPSM Variable Portfolio - Capital Resource Fund 99.59 130.57 19.59 60.57
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
AXPSM Variable Portfolio - Diversified Equity Income Fund 102.56 139.55 22.56 69.55
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
AXPSM Variable Portfolio - Extra Income Fund 100.10 132.12 20.10 62.12
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
AXPSM Variable Portfolio - Federal Income Fund 101.79 137.24 21.79 67.24
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
AXPSM Variable Portfolio - New Dimensions Fund 99.69 130.88 19.69 60.88
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
AXPSM Variable Portfolio - Small Cap Advantage Fund 105.38 148.03 25.38 78.03
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation Fund 99.69 130.88 19.69 60.88
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
AIM V.I. Value Fund 99.69 130.57 19.59 60.57
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
Dreyfus Socially Responsible Growth Fund
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
FT VIP Income Securities Fund - Class 2
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
FT VIP Mutual Shares securities Fund - Class 2 103.28 141.72 23.28 71.72
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
FT VIP Real Estate Securities Fund - Class 2 100.92 134.60 20.92 64.60
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
FT VIP Small Cap Fund Class - 2 100.92 134.60 20.92 64.60
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT CORESM U.S. Equity Fund 100.92 134.60 20.92 64.60
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT Global Income Fund 101.02 134.91 21.02 64.91
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT Mid Cap Value Fund 103.59 142.64 23.59 72.64
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
MFS(R)Growth with Income Series 102.56 139.55 22.56 69.55
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
MFS(R) Utilities Series
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
Putnam VT International Growth Fund - Class IB Shares 103.18 141.41 23.18 71.41
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
Putnam VT Vista Fund - Class IB Shares 105.33 147.87 25.38 77.87
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
Wells Fargo Asset Allocation Fund
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
Wells Fargo Corporate Bond Fund
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
Wells Fargo Equity Income Fund
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
Wells Fargo Equity Value Fund
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
Wells Fargo Growth Fund
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
Wells Fargo International Equity Fund
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
Wells Fargo Large Company Growth Fund
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
Wells Fargo Money Market Fund
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
Wells Fargo Small Cap Growth Fund
- - - ------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
You would pay the following expenses on a $1,000 investment if you selected a
seven-year withdrawal charge schedule with the optional 0.20% Enhanced Death
Benefit Rider and 0.30% Guaranteed Minimum Income Benefit Rider and assuming a
5% annual return and....
<TABLE>
<CAPTION>
- - - ---------------------------------------------------------------------------------------------------------------------
a total withdrawal at no withdrawal or selection
the end of each time of an annuity payout plan
period at the end of each time
period
- - - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- - - ---------------------------------------------------------------------------------------------------------------------
1 year 3 years 1 year 3 years
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
AXPSM Variable Portfolio - Blue Chip Advantage Fund $104.61 $145.72 $24.61 $75.72
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
AXPSM Variable Portfolio - Capital Resource Fund 101.64 136.77 21.64 66.77
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
AXPSM Variable Portfolio - Diversified Equity Income Fund 104.61 145.72 24.61 75.72
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
AXPSM Variable Portfolio - Extra Income Fund 102.15 138.32 22.15 68.32
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
AXPSM Variable Portfolio - Federal Income Fund 103.84 143.41 23.84 73.41
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
AXPSM Variable Portfolio - New Dimensions Fund 101.74 137.08 21.74 67.08
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
AXPSM Variable Portfolio - Small Cap Advantage Fund 107.43 154.16 27.43 84.16
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation Fund 101.74 137.08 21.74 67.08
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
AIM V.I. Value Fund 101.64 136.77 21.64 66.77
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
Dreyfus Socially Responsible Growth Fund
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
FT VIP Income Securities Fund - Class 2
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
FT VIP Mutual Shares securities Fund - Class 2 105.33 147.87 25.33 77.87
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
FT VIP Real Estate Securities Fund - Class 2 102.97 140.79 22.97 70.79
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
FT VIP Small Cap Fund Class - 2 102.97 140.79 22.97 70.79
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT CORESM U.S. Equity Fund 103.07 141.10 23.07 71.10
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT Global Income Fund 105.64 148.79 25.64 78.79
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT Mid Cap Value Fund 104.61 145.72 24.61 75.72
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
MFS(R) Growth with Income Series
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
MFS(R)Utilities Series 105.23 147.57 25.23 77.57
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
Putnam VT International Growth Fund - Class IB Shares 107.38 154.01 27.38 84.01
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
Putnam VT Vista Fund - Class IB Shares 104.3 144.80 24.30 74.80
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
Wells Fargo Asset Allocation Fund
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
Wells Fargo Corporate Bond Fund
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
Wells Fargo Equity Income Fund
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
Wells Fargo Equity Value Fund
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
Wells Fargo Growth Fund
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
Wells Fargo International Equity Fund
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
Wells Fargo Large Company Growth Fund
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
Wells Fargo Money Market Fund
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
Wells Fargo Small Cap Growth Fund
- - - ---------------------------------------------------------------------------------------------------------------------
</TABLE>
* In these examples, the $30 contract administrative charge is approximated as a
[___]% charge based on our estimated average contract size. Premium taxes
imposed by some state and local governments are not reflected in these examples.
We entered into certain arrangements under which we are compensated by the
funds' advisors and/or distributors for the administrative services we provide
to the funds.
You should not consider these examples as representations of past or future
expenses. Actual expenses may be more or less than those shown.
<PAGE>
Condensed Financial Information (Unaudited)
The following tables give per-unit information about the financial history of
each subaccount. We have not provided this information for some subaccounts
because they are new and do not have any history.
[To be filed by amendment]
<PAGE>
Financial Statements
You can find the audited financial statements of the subaccounts with financial
history in the SAI. The SAI does not include the audited financial statements
for some of the subaccounts because they are new and do not have any assets. You
can find our audited financial statements later in this prospectus.
Performance Information
Performance information for the subaccounts may appear from time to time in
advertisements or sales literature. This information reflects the performance of
a hypothetical investment in a particular subaccount during a specified time
period. We show actual performance from the date the subaccounts began investing
in the funds. For some subaccounts, we do not provide any performance
information because they are new and have not had any activity to date. We also
show performance from the commencement date of the funds as if the contract
existed at that time, which it did not. Although we base performance figures on
historical earnings, past performance does not guarantee future results.
We include non-recurring charges (such as withdrawal charges) in total return
figures, but not in yield quotations. Excluding non-recurring charges in yield
calculations increases the reported value.
Total return figures reflect deduction of all applicable charges, including:
o the contract administrative charge,
o the variable account administrative charge,
o the Enhanced Death Benefit Rider fee,
o the Guaranteed Minimum Income Benefit Rider fee,
o mortality and expense risk fee, and
o withdrawal charge (assuming a withdrawal at the end of the illustrated
period).
We also may make optional total return quotations that do not reflect deduction
of the withdrawal charge (assuming no withdrawal), the Enhanced Death Benefit
Rider fee and the Guaranteed Minimum Income Benefit Rider fee. Total return
quotations may be shown by means of schedules, charts or graphs.
Average annual total return is the average annual compounded rate of return of
the investment over a period of one, five and ten years (or up to the life of
the subaccount if it is less than ten years old).
Cumulative total return is the cumulative change in the value of an investment
over a specified time period. We assume that income earned by the investment is
reinvested. Cumulative total return generally will be higher than average annual
total return.
Annualized simple yield (for subaccounts investing in money market funds)
"annualizes" the income generated by the investment over a given seven-day
period. That is, we assume the amount of income generated by the investment
during the period will be generated each seven-day period for a year. We show
this as a percentage of the investment.
Annualized compound yield (for subaccounts investing in money market funds) is
calculated like simple yield except that we assume the income is reinvested when
we annualize it. Compound yield will be higher than the simple yield because of
the compounding effect of the assumed reinvestment.
<PAGE>
Annualized yield (for subaccounts investing in income funds) divides the net
investment income (income less expenses) for each accumulation unit during a
given 30-day period by the value of the unit on the last day of the period. We
then convert the result to an annual percentage. You should consider performance
information in light of the investment objectives, policies, characteristics and
quality of the fund in which the subaccount invests and the market conditions
during the specified time period. Advertised yields and total return figures
include charges that reduce advertised performance. Therefore, 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 and yield.)
If you would like additional information about actual performance, please
contact us at the address or telephone number on the first page of this
prospectus.
<PAGE>
The Variable Account and the Funds
You may allocate payments to any or all the subaccounts of the variable account
that invest in shares of the following funds:
<TABLE>
<CAPTION>
- - - ---------------------------------------------------------------------------------------------------------------------------------
Subaccount Investing in Investment Objectives and Policies Investment Advisor or Manager
- - - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- - - --------------------------------------------------------------------------------------------------------------------------------
WBCA 2 AXPSM Variable Portfolio - Objective: long-term total return exceeding that of IDS Life Insurance Company
WBCA 4 Blue Chip Advantage Fund the U.S. stock market. Invests primarily in common (IDS Life), investment
WBCA 5 stocks of companies included in the unmanaged S&P manager; American Express
WBCA 7 500 Index. Financial Corporation (AEFC)
investment advisor.
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
ECR AXPSM Variable Portfolio - Objective: capital appreciation. Invests primarily IDS Life, investment
WCAR 2 Capital Resource Fund in U.S. common stocks. manager; AEFC investment
WCAR 4 advisor.
WCAR 7
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
WDEI 2 AXPSM Variable Portfolio - Objective: a high level of current income, and IDS Life, investment
Diversified Equity Income as a secondary goal, steady growth of capital. manager; AEFC investment
WDEI 4 Fund Invests primarily in dividend-paying common and advisor.
WDEI 5 preferred stocks.
WDEI 7
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
EIA AXPSM Variable Portfolio - Objective: high current income, with capital growth IDS Life, investment
WEXI 2 Extra Income Fund as a secondary objective. Invests primarily in manager; AEFC investment
WEXI 4 long-term, high-yielding, high-risk debt securities advisor.
WEXI 7 below investment grade issued by U.S. and foreign
corporations.
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
WFDI 2 AXPSM Variable Portfolio - Objective: a high level of current income and safety IDS Life, investment
WFDI 4 Federal Income Fund of principal consistent with an investment in U.S. manager; AEFC investment
WFDI 5 government and government agency securities. Invests advisor.
WFDI 7 primarily in debt obligations issued or guaranteed
as to principal and interest by the U.S. government,
its agencies or instrumentalities.
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
EGD AXPSM Variable Portfolio - Objective: long-term growth of capital. Invests IDS Life, investment
WNDM 2 New Dimensions Fund primarily in common stocks of U.S. and foreign manager; AEFC investment
WNDM 4 companies showing potential for significant growth. advisor.
WNDM 7
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
WSCA 2 AXPSM Variable Portfolio - Objective: long-term capital growth. Invests IDS Life, investment
WSCA 4 Small Cap Advantage Fund primarily in equity stocks of small companies that manager; AEFC investment
WSCA 5 are often included in the S&P SmallCap 600 Index or advisor.
WSCA 7 the Russell 2000 Index.
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
ECA AIM V.I. Capital Objective: growth of capital. Invests primarily in A I M Advisors, Inc.
WCAP 2 Appreciation Fund common stocks, with emphasis on medium- or
WCAP 4 small-sized growth companies.
WCAP 7
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
EVA AIM V.I. Value Fund Objective: long-term growth of capital with income A I M Advisors, Inc.
WVAL 2 as a secondary objective. Invests primarily in
WVAL 4 equity securities judged to be undervalued relative
WVAL 7 to the investment advisor's appraisal of the current
or projected earnings of the
companies issuing the securities,
or relative to current market
values of assets owned by the
companies issuing the securities,
or relative to the equity market
generally.
- - - ---------------------------------------------------------------------------------------------------------------------------------
ESR Dreyfus Socially Objective: capital growth, with current income as a The Dreyfus Corporation,
WSRG 2 Responsible Growth Fund secondary objective. Invests primarily in the common investment advisor; NCM
WSRG 4 stocks of companies that, in the opinion of the Capital Management Group,
WSRG 7 fund's management, meet traditional investment Inc., sub-investment advisor.
standards and conduct their business in a manner
that contributes to the enhancement of the quality
of life in America.
- - - ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- - - ---------------------------------------------------------------------------------------------------------------------------------
Subaccount Investing in Investment Objectives and Policies Investment Advisor or Manager
- - - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- - - --------------------------------------------------------------------------------------------------------------------------------
WISE 2 Franklin Templeton VIP
WISE 4 Trust Income Securities
WISE 5 Fund - Class 2
WISE 7
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
EMU Franklin Templeton VIP Objective: capital appreciation with income as a Franklin Mutual Advisers, LLC
WMSI 2 Trust Mutual Shares secondary goal. Invests primarily in equity
WMSI 4 Securities Fund - Class 2 securities of companies that the manager believes are
WMSI 7 available at market prices less than their actual
value based on certain recognized or objective
criteria (intrinsic value).
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
ERE Franklin Templeton VIP Objective: capital appreciation with a secondary goal Franklin Advisers, Inc.
WRES 2 Trust Real Estate to earn current income. Invests primarily in
WRES 4 Securities Fund - Class 2 securities of companies operating in the real estate
WRES 7 industry, primarily equity real estate investment
trusts (REITS).
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
WSMC 2 Franklin Templeton VIP Objective: long-term capital growth. Invests Franklin Advisers, Inc.
WSMC 4 Trust Small Cap Fund - primarily in equity securities of U.S. small
WSMC 5 Class 2 capitalization (small cap) growth companies.
WSMC 7
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
JUS Goldman Sachs VIT Objective: long-term growth of capital and dividend Goldman Sachs Asset
WUSE 2 CORE SM U.S. Equity Fund income. Primarily invests in a broadly diversified Management
WUSE 4 portfolio of large-cap and blue chip equity
WUSE 7 securities representing all major sectors of the U.S.
economy.
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
JGL Goldman Sachs VIT Global Objective: high total return, emphasizing current Goldman Sachs Asset
WGLI 2 Income Fund income, and, to a lesser extent, providing Management International
WGLI 4 opportunities for capital appreciation. Invests
WGLI 7 primarily in a portfolio of high quality fixed-income
securities of U.S. and foreign issuers and enters
into transactions in foreign currencies.
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
JMC Goldman Sachs VIT Mid Cap Objective: long-term capital appreciation. Invests Goldman Sachs Asset
WMCE 2 Value Fund primarily in mid-capitalization U.S. stocks that are Management
WMCE 4 believed to be undervalued or undiscovered by the
WMCE 7 marketplace.
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
WGIS 2 MFS(R)Growth with Income Massachusetts Financial
WGIS 4 Series Service Company (MFS)
WGIS 5
WGIS 7
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
EUT MFS(R) Utilities Series Objective: capital growth and current income. Invests MFS Investment Management(R)
WUTS 2 primarily in equity and debt securities of domestic
WUTS 4 and foreign companies in the utilities industry.
WUTS 7
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
EPL Putnam VT International Objective: long-term capital appreciation. Invests Putnam Investment
WIGR 2 Growth Fund - Class IB primarily in growth stocks outside the U.S. Management, Inc.
WIGR 4 Shares
WIGR 7
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
EPT Putnam VT Vista Fund - Objective: capital appreciation. Invests primarily in Putnam Investment
WVIS 2 Class IB Shares growth stocks that Putnam Management believes have Management, Inc.
WVIS 4 above-average potential for capital appreciation.
WVIS 7
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
WAAL 2 Wells Fargo Asset
WAAL 4 Allocation Fund
WAAL 5
WAAL 7
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
WCBD 2 Wells Fargo Corporate Bond
WCBD 4 Fund
WCBD 5
WCBD 7
- - - ---------------------------------------------------------------------------------------------------------------------------------
<PAGE>
- - - ---------------------------------------------------------------------------------------------------------------------------------
WEQI 2 Wells Fargo Equity Income
WEQI 4 Fund
WEQI 5
WEQI 7
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
WEQV 2 Wells Fargo Equity Value
WEQV 4 Fund
WEQV 5 WEQV 7
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
WGRO 2 Wells Fargo Growth Fund
WGRO 4
WGRO 5
WGRO 7
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
WIEQ 2 Wells Fargo International
WIEQ 4 Equity Fund
WIEQ 5
WIEQ 7
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
WLCG 2 Wells Fargo Large Company
WLCG 4 Growth Fund
WLCG 5
WLCG 7
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
WMMK 2 Wells Fargo Money Market
WMMK 4 Fund
WMMK 5
WMMK 7
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
WSCG 2 Wells Fargo Small Cap
WSCG 4 Growth Fund
WSCG 5
WSCG 7
- - - ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
[Investment objectives and Managers for some new funds to be filed by
amendment.]
The investment objectives and policies of some of the funds are similar to the
investment objectives and policies of other mutual funds that an investment
advisor or its affiliates manage. Although the objectives and policies may be
similar, each fund will have its own portfolio holdings and its own fees and
expenses. Accordingly, each fund will have its own investment results.
The investment managers and advisors cannot guarantee that the funds will meet
their investment objectives. Please read the funds' prospectuses for facts you
should know before investing. These prospectuses are available by contacting us
at the address or telephone number on the first page of this prospectus.
All funds are available to serve as the underlying investments for variable
annuities. Some funds also are available to serve as investment options for
variable life insurance policies and qualified plans. It is possible that in the
future, it may be disadvantageous for variable annuity accounts and variable
life insurance accounts and/or qualified plans to invest in the available funds
simultaneously.
Although the insurance company and the funds do not currently foresee any such
disadvantages, the boards of directors or trustees of the appropriate funds will
monitor events in order to identify any material conflicts between annuity
owners, policy owners and qualified plans and to determine what action, if any,
should be taken in response to a conflict. If a board were to conclude that it
should establish separate funds for the variable annuity, variable life
insurance and qualified plan accounts, you would not bear any expenses
associated with establishing separate funds. Please refer to the fund
prospectuses for risk disclosure regarding simultaneous investments by variable
annuity, variable life insurance and qualified plan accounts.
<PAGE>
The IRS issued final regulations relating to the diversification requirements
under Section 817(h) of the Internal Revenue Code of 1986, as amended (the
Code). Each fund intends to comply with these requirements.
The variable account was established under Indiana law on July 15, 1987, and the
subaccounts are registered together as a single unit investment trust under the
Investment Company Act of 1940 (the 1940 Act). This registration does not
involve any supervision of our management or investment practices and policies
by the SEC. All obligations arising under the contracts are general obligations
of American Enterprise Life.
The 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 prohibits us from
charging a subaccount with liabilities of any other subaccount or of our general
business. The variable account includes other subaccounts that are available
under contracts that are not described in this prospectus.
The U.S. Treasury and the Internal Revenue Service (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
subaccounts it may allow before the contract owner would be currently taxed on
income earned within 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 contract, as necessary, so that the owner will not be subject to
current taxation as the owner of the subaccount assets.
We intend to comply with all federal tax laws so that the contract continues to
qualify as an annuity for federal income tax purposes. We reserve the right to
modify the contract as necessary to comply with any new tax laws.
The Fixed Accounts
Guarantee Period Accounts
You may also allocate purchase payments to one or more of the Guarantee Period
Accounts with Guarantee Periods ranging from two to ten years. The minimum
required investment in each Guarantee Period Account is $1,000. Each Guarantee
Period Account pays an interest rate that is declared when you allocate money to
that account. That interest rate is then fixed for the Guarantee Period that you
chose. We will periodically change the declared interest rate for any future
allocations to these accounts, but we will not change the rate paid on money
currently in a Guarantee Period Account.
We have no specific formula for determining the rate of interest that we declare
as future interest rates on the Guarantee Period Accounts. We will declare the
interest rates from time to time based on our analysis of current market
conditions. In addition, we also may consider various other factors in
determining the interest rates for a given Guarantee Period including regulatory
and tax requirements; sales commissions and administrative expenses we bear;
general economic trends; and competitive factors.
You may transfer money out of the Guarantee Period Accounts within 30 days
before the end of the Guarantee Period without receiving a MVA (see "Market
Value Adjustment (MVA)" below.) At that time you may choose to start a new
Guarantee Period of the same length, transfer the money to another Guarantee
Period Account, transfer the money to any of the subaccounts, or withdraw the
money from the contract (subject to applicable withdrawal provisions). If we do
not receive any instructions at the end of your Guarantee Period, we will
automatically transfer the money into the one-year fixed account. These accounts
are not available in all states and are not offered after annuity payouts begin.
We hold amounts you allocate to the Guarantee Period Accounts in a "nonunitized"
separate account we have established under the Indiana Insurance Code. This
separate account provides an additional measure of assurance that we will make
full payment of amounts due under the Guarantee Period Accounts. State insurance
law prohibits us from charging this separate account with liabilities of any
other separate account or of our general business. We own the assets of this
separate account as well as any favorable investment performance of those
assets. You do not participate in the performance of the assets held in this
separate account. We guarantee all benefits relating to your value in the
Guarantee Period Accounts.
<PAGE>
We intend to construct and manage the investment portfolio relating to the
separate account using a strategy known as "immunization." Immunization seeks to
lock in a defined return on the pool of assets versus the pool of liabilities
over a specified time horizon. Since the return on the assets versus the
liabilities is locked in, it is "immune" to any potential fluctuations in
interest rates during the given time. We achieve immunization by constructing a
portfolio of assets with a price sensitivity to interest rate changes (i.e.,
price duration) that is essentially equal to the price duration of the
corresponding portfolio of liabilities. Portfolio immunization provides us with
flexibility and efficiency in creating and managing the asset portfolio, while
still assuring safety and soundness for funding liability obligations.
We must invest this portfolio of assets in accordance with requirements
established by applicable state laws regarding the nature and quality of
investments that life insurance companies may make and the percentage of their
assets that they may commit to any particular type of investment. Our investment
strategy will incorporate the use of a variety of debt instruments having price
durations tending to match the applicable Guarantee Periods. These instruments
include, but are not necessarily limited to, the following:
o Securities issued by the U.S. government or its agencies or
instrumentalities, which issues may or may not be guaranteed by the U.S.
government;
o Debt securities that have an investment grade, at the time of purchase,
within the four highest grades assigned by any of three nationally
recognized rating agencies - Standard & Poor's, Moody's Investors Service
or Duff and Phelp's - or are rated in the two highest grades by the
National Association of Insurance Commissioners;
o Other debt instruments which are unrated or rated below investment grade,
limited to 10% of assets at the time of purchase; and
o Real estate mortgages, limited to 45% of portfolio assets at the time of
acquisition.
In addition, options and futures contracts on fixed income securities will be
used from time to time to achieve and maintain appropriate investment and
liquidity characteristics on the overall asset portfolio.
While this information generally describes our investment strategy, we are not
obligated to follow any particular strategy except as may be required by federal
law and Indiana and other state insurance laws.
Market Value Adjustment (MVA)
You may choose to transfer or withdraw money out of the Guarantee Period
Accounts prior to the end of the Guarantee Period. The amount transferred or
withdrawn will receive a MVA which will increase or decrease the actual amount
transferred or withdrawn. We calculate the MVA using the formula shown below and
we base it on the current level of interest rates compared to the rate of your
Guarantee Period Account.
Amount transferred x ( l + i ) n/12
--------------------
( l + j + .001 )
Where: i = rate earned in the account from which funds
are being transferred
j = current rate for a new Guarantee Period
equal to the remaining term in the
current Guarantee Period
n = number of months remaining in the current
Guarantee Period (rounded up)
We will not make MVAs for amounts withdrawn for withdrawal charges, the annual
contract administrative charge or paid out as a death claim. We also will not
make MVAs on automatic transfers in the Guarantee Period Account. We determine
any applicable withdrawal charges based on the market value adjusted
withdrawals. In some states, the MVA is limited.
<PAGE>
The one-year fixed account
You may allocate purchase payments to the one-year fixed account. We back the
principal and interest guarantees relating to the one-year fixed account. The
value of the one-year fixed account increases as we credit interest to the
account. Purchase payments and transfers to the one-year fixed account become
part of our general account. We credit interest daily and compound it annually.
We will change the interest rates from time to time at our discretion.
Interest in the one-year fixed account is not required to be registered with the
SEC. However, the Market Value Adjustment interests under the contracts are
registered with the SEC. The SEC staff does not review the disclosures in this
prospectus on the one-year fixed account (but the SEC does review the
disclosures in this prospectus on the Market Value Adjustment interests).
Disclosures regarding the one-year 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
"Making the Most of Your Contract -- Transfer policies" for restrictions on
transfers involving the one-year fixed account.)
Buying Your Contract
You or your sales representative will send an application along with your
initial purchase payment to our 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 a contract or
become an annuitant if you are 85 or younger. (The age limit may be younger for
qualified annuities in some states.)
When you apply, you may select:
o the length of the withdrawal charge period (five or seven years);
o the optional Enhanced Death Benefit Rider;
o the optional Guaranteed Minimum Income Benefit Rider;
o the one-year fixed account, Guarantee Period Accounts and/or subaccounts in
which you want to invest;
o how you want to make purchase payments; and
o a beneficiary.
The contract provides for allocation of purchase payments to the subaccounts of
the variable account and/or to the fixed accounts in even 1% increments.
If your application is complete, we will process it and apply your purchase
payment to the fixed accounts and subaccounts you selected within two business
days after we receive it at our office. 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 office.
You may make monthly payments to your contract under a SIP. To begin the SIP,
you will complete and send a form and your first SIP 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.
<PAGE>
The retirement date
Annuity payouts are scheduled to begin on the retirement date. When we process
your application, we will establish the retirement date to the maximum age or
date described below. You can also select a date within the maximum limits. 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 tenth contract
anniversary, if purchased after age 75. (In Pennsylvania, the maximum
retirement date ranges from age 85 to 96 based on the annuitant's age when
we issue the contract. See contract for details.)
For qualified annuities (except Roth IRAs), to avoid IRS penalty taxes, the
retirement date generally must be:
o on or after the date the annuitant reaches age 59 1/2; and
o for IRAs and SEPs, by April 1 of the year following the calendar year when
the annuitant reaches age 70 1/2; or
o for TSAs, by April 1 of the year following the calendar year when the
annuitant reaches age 70 1/2, or, if later retires (except that 5% business
owners may not select a retirement date that is later than April 1 of the
year following the calendar year when they reach age 70 1/2).
If you take the minimum IRA or TSA distributions as required by the Code from
another tax-qualified investment, or in the form of partial withdrawals from
this contract, annuity payouts can start as late as the annuitant's 85th
birthday or the tenth contract anniversary, if later. (In Pennsylvania, the
annuity payout ranges from age 85 to 96 based on the annuitant's age when
we issue the contract. See contract for details.)
Beneficiary
We will pay your named beneficiary the death benefit if it becomes payable
before the retirement date (while the contract is in force and before annuity
payouts begin). 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 payments
Minimum allowable purchase payments
If paying by SIP*: If paying by any other method**:
$50 $2,000 initial payment
$100 for any additional payments
* Payments made using SIP must total $2,000 before you can make partial
withdrawals.
** The Guarantee Period Accounts require a minimum $1,000
initial payment.
Maximum total allowable purchase payments*** (without prior approval):
$1,000,000
*** This limit applies in total to all American Enterprise Life annuities
you own. We reserve the right to increase the maximum limit. For
qualified annuities, the qualified plan's limits on annual contributions
also apply.
<PAGE>
How to make purchase payments
1
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
2
By SIP: Contact your sales representative to complete the necessary
SIP paperwork
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 accounts in the
same proportion your interest in each account bears to your total contract
value.
We will waive this charge when your 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 charge at
the time of withdrawal regardless of the contract value or purchase payments
made. We cannot increase the annual contract administrative 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 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 subaccounts. The unit values of your subaccounts
reflect this fee. For contracts with a five-year withdrawal charge schedule,
this fee totals 1.30% of their average daily net assets on an annual basis. For
contracts with a seven-year withdrawal charge schedule, this fee totals 1.05% 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. If you choose the optional Enhanced Death Benefit Rider, we will charge an
additional 0.20% of the average daily net assets on annual basis (see "Enhanced
Death Benefit Rider fee" below.) These fees do not apply to the fixed accounts.
We cannot increase these fees.
<PAGE>
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 our entire
group of annuitants live. If, as a group, annuitants outlive the life expectancy
we assumed in our actuarial tables, then we must take money from our general
assets to meet our obligations. If, as a group, 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 or the 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 accrued as
follows:
o first, to the extent possible, the subaccounts pay this fee from any
dividends distributed from the funds in which they invest;
o 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.
Enhanced Death Benefit Rider fee
We charge a fee for this optional feature only if you choose this option. If
selected, we apply this fee daily to the subaccounts as part of the mortality
and expense risk fee. It is reflected in the unit values of the subaccounts and
it totals 0.20% of their average daily net assets on an annual basis. We cannot
increase the Enhanced Death Benefit Rider fee.
Guaranteed Minimum Income Benefit Rider fee
We charge a fee for this optional feature only if you choose this option. If
selected, we deduct the fee (currently 0.30%) from the contract value on your
contract anniversary at the end of each contract year. We prorate this fee among
the subaccounts and fixed accounts in the same proportion your interest in each
account bears to your total contract value.
We apply the fee on an adjusted benefit base calculated as the result of (a) +
(b) - (c), where:
(a) is the Guaranteed Income Benefit Base,
(b) is the adjusted transfers from the subaccounts to the fixed accounts
made in the last six months, and
(c) is the total contract value in the fixed accounts.
The result of (b) minus (c) cannot be greater than zero. It allows us to base
the charge largely on the subaccounts, and not on the fixed accounts.
We will deduct the fee, adjusted for the number of calendar days coverage was in
place, if the contract is terminated for any reason or when annuity payouts
begin. We cannot increase the Guaranteed Minimum Income Benefit Rider fee after
the rider effective date and it does not apply after annuity payouts begin. We
can increase the Guaranteed Minimum Income Benefit Rider fee on new contracts up
to a maximum of 0.75%.
Withdrawal charge
If you withdraw all or part of your contract, you may be subject to a withdrawal
charge. A withdrawal charge applies if all or part of the withdrawal amount is
from purchase payments we received within five or seven years before withdrawal.
You select the withdrawal charge period at the time of your application for the
contract. The withdrawal charge percentages that apply to you are shown in your
contract. In addition, amounts withdrawn from a Guarantee Period Account prior
to the end of the applicable Guarantee Period will be subject to a MVA. (See
"The Fixed Accounts - Market Value Adjustment (MVA)".)
<PAGE>
For purposes of calculating any withdrawal charge, we treat amounts withdrawn
from your contract value in the following order:
1. First, in each contract year, we withdraw amounts totaling up to 15% of
your prior anniversary contract value. (Your initial purchase payment is
considered the prior anniversary contract value during the first
contract year.) We do not assess a withdrawal charge on this amount.
2. Next, we withdraw contract earnings, if any, that are greater than the
annual 15% free withdrawal amount described in number 1 above. Contract
earnings equal contract value less purchase payments received and not
previously withdrawn. We do not assess a withdrawal charge on contract
earnings.
NOTE: We determine contract earnings by looking at the entire contract value,
not the earnings of any particular subaccount or the fixed accounts.
3. Next we withdraw purchase payments received prior to the withdrawal charge
period you selected and shown in your contract. We do not assess a
withdrawal charge on these purchase payments.
4. Finally, if necessary, we withdraw purchase payments received that are
still within the withdrawal charge period you selected and shown in your
contract. We withdraw these payments on a first-in, first-out (FIFO) basis.
We do assess a withdrawal charge on these payments.
We determine your withdrawal charge by multiplying each of your payments
withdrawn by the applicable withdrawal charge percentage, and then adding the
total withdrawal charges.
The withdrawal charge percentage depends on the number of years since you made
the payments that are withdrawn, depending on the schedule you selected:
<TABLE>
<CAPTION>
Five-year schedule Seven-year schedule
<S> <C> <C> <C>
Years from purchase payment Surrender charge percentage Years from purchase Surrender charge percentage
receipt payment receipt
1 8% 1 8%
2 8 2 8
3 6 3 7
4 4 4 6
5 2 5 5
Thereafter 0 6 4
7 2
Thereafter 0
</TABLE>
Withdrawal charge calculation example:
The following is an example of the calculation we would make to determine the
withdrawal charge on a contract with a seven-year withdrawal charge schedule
with this history:
o The contract date is Nov. 1, 1999 with a contract year of Nov. 1 through
Oct. 30 and with an anniversary date of Nov. 1 each year; and
<PAGE>
o We received these payments
- $10,000 Nov. 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 Nov. 1, 2008 contract value was $38,488.
<TABLE>
<CAPTION>
<S> <C>
Withdrawal Charge Explanation
$ 0 $5,773.20 is 15% of the prior anniversary contract value withdrawn
without withdrawal charge; and
$ 0 $8,327.80 is contract earnings in excess of the 15% free withdrawal
amount withdrawn without withdrawal charge; and
$ 0 $10,000 Nov. 1, 1999 payment was received eight or more years before
withdrawal and is withdrawn without withdrawal charge; and
$480 $8,000 Dec. 31, 2005 payment is in its fourth year from receipt,
withdrawn with a 6% withdrawal charge; and
$420 $6,000 Feb. 20, 2007 payment is in its third year from receipt
withdrawn with a 7% withdrawal charge.
$900
</TABLE>
For a partial withdrawal that is subject to a withdrawal charge, the amount we
actually withdraw from your contract 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 make a full withdrawal of
your contract, we also will deduct the $30 contract administrative charge.
Waiver of withdrawal charges
We do not assess withdrawal charges for:
o withdrawals of any contract earnings;
o amounts totaling up to 15% of your prior contract anniversary contract
value to the extent it exceeds contract earnings;
o required minimum distributions from a qualified annuity (for those amounts
required to be distributed from the contract described in this prospectus);
o contracts settled using an annuity payout plan;
o withdrawals made as a result of one of the "Contingent events" described
below to the extent permitted by state law (see your contract for
additional conditions and restrictions);
o amounts we refund to you during the free look period; and
o death benefits.
<PAGE>
Contingent events
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 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.
o Withdrawals you make if you or the annuitant become disabled within the
meaning of IRC Section 72(m)(7) after your contract date. The disabled
person must also be receiving Social Security disability or state long term
disability benefits. The disabled person must be age 70 or younger at the
time of withdrawal. You must provide us with a signed letter from the
disabled person stating that he or she meets the above criteria, a legible
photocopy of Social Security disability or state long term disability
benefit payments and the application for such payments.
o Withdrawals you make once a year if you or the annuitant become unemployed
at least one year after your contract's date, up to the following amounts
each year:
(a)25% of your prior anniversary contract value (or $10,000
if greater) if the unemployment condition is met for at
least 30 straight days; or
(b)50% of your prior anniversary contract value (or $10,000
if greater) if the unemployment condition is met for at
least 180 straight days.
The unemployment condition is met if the unemployed person is currently
receiving unemployment compensation from a government unit of the United
States, whether federal or state. You must provide us with a signed letter
from the unemployed person stating that he or she meets the above criteria
and a legible photocopy of the unemployment payment benefits meeting the
above criteria with regard to dates.
Possible group reductions: In some cases we may incur lower sales and
administrative expenses 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. In some cases, we deduct premium taxes from your purchase payments before
we allocate them. In other cases, we deduct them when you make a full withdrawal
from your contract or when annuity payouts begin.
Valuing Your Investment
We value your fixed accounts and subaccounts as follows:
Fixed accounts: We value the amounts you allocated to the fixed accounts
directly in dollars. The value of a fixed account equals:
o the sum of your purchase payments and transfer amounts allocated to the
one-year fixed account and the Guarantee Period Accounts;
o plus interest credited;
o minus the sum of amounts withdrawn after the MVA (including any applicable
withdrawal charges) and amounts transferred out;
o minus any prorated contract administrative charge; and
o minus any prorated portion of the Guaranteed Minimum Income Benefit Rider
fee (if applicable).
<PAGE>
Subaccounts: We convert amounts you allocated to the subaccounts into
accumulation units. Each time you make a purchase payment or transfer amounts
into one of the 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 subaccount, or we assess a contract
administrative charge or the Guaranteed Minimum Income Benefit Rider fee, 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 after deduction of any premium taxes by the current
accumulation unit value.
Accumulation unit value
The current accumulation unit value for each subaccount equals the last value
times the subaccount's current net investment factor.
Net investment factor
We determine the net investment factor by:
o adding the fund's current net asset value per share, plus the 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, the variable account administrative charge and the Enhanced Death
Benefit Rider fee (if selected) from the result.
Because the net asset value of the fund may fluctuate, the accumulation unit
value may increase or decrease. You bear all the investment risk in a
subaccount.
Factors that affect 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 subaccounts;
o transfers into or out of the subaccounts;
o partial withdrawals;
o withdrawal charges;
o prorated portions of the contract administrative charge; and/or
o prorated portions of the Guaranteed Minimum Income Benefit Rider fee
(if selected).
Accumulation unit values will fluctuate due to:
o changes in funds' net asset value;
o dividends distributed to the subaccounts;
o capital gains or losses of funds;
o fund operating expenses; and/or
o mortality and expense risk fee, the variable account administrative
charge and the Enhanced Death Benefit Rider fee (if selected).
<PAGE>
Making the Most of Your Contract
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 transfer a set amount monthly from a relatively conservative subaccount to
a more aggressive one, or to several others, or from the one-year fixed account
or the Guarantee Period Accounts (two year only) to one or more subaccounts. The
three to ten year Guarantee Period Accounts are not available for automated
transfers. 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 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.
<TABLE>
<CAPTION>
How dollar-cost averaging works
<S> <C> <C> <C> <C>
By investing an Amount Accumulation unit Number of units
equal number of Month invested value purchased
dollars each month... Jan $100 $20 5.00
Feb 100 18 5.56
you automatically buy Mar 100 17 5.88
more units when the Apr 100 15 6.67
per unit market price May 100 16 6.25
is low... Jun 100 18 5.56
Jul 100 17 5.88
and fewer units when Aug 100 19 5.26
the per unit market Sept 100 21 4.76
price is high. Oct 100 20 5.00
</TABLE>
You 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 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 with this
strategy 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 us.
Asset Rebalancing
You can ask us in writing to automatically rebalance the 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 subaccount matches your current
subaccount percentage allocations. These percentage allocations must be in whole
numbers. Asset rebalancing does not apply to the fixed accounts. There is no
charge for asset rebalancing. The contract value must be at least $2,000.
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 sales representative.
<PAGE>
Transferring money between accounts
You may transfer money from any one subaccount, or the fixed accounts, to
another subaccount before annuity payouts begin. (Certain restrictions apply to
transfers involving the one-year fixed account.) We will process your transfer
on the valuation date we receive your request. 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. Transfers out of the Guarantee Period
Accounts will be subject to a MVA if done more than 30 days before the end of
the Guarantee Period.
We may suspend or modify transfer privileges at any time. Excessive trading
activity can disrupt fund management strategy and increase expenses, which are
borne by all contract owners who allocated purchase payments to the fund
regardless of their transfer activity. We may apply modifications or
restrictions in any reasonable manner to prevent transfers we believe will
disadvantage other contract owners. (For information on transfers after annuity
payouts begin, see "Transfer policies" below.)
Transfer policies
o Before annuity payouts begin, you may transfer contract values between the
subaccounts, or from the subaccounts to the fixed accounts at any time.
However, if you made a transfer from the one-year fixed account to the
subaccounts, you may not make a transfer from any subaccount back to the
one-year fixed account for six months following that transfer.
o You may transfer contract values from the one-year fixed account to the
subaccounts or the Guarantee Period Accounts once a year on or within 30
days before or after the contract anniversary (except for automated
transfers, which can be set up at any time for certain transfer periods
subject to certain minimums).
o You may transfer contract values from the Guaranteed Period Accounts at any
time. Transfers made before the end of the Guaranteed Period will receive a
MVA, which may result in a gain or loss of contract value.
o If we receive your request on or within 30 days before or after the
contract anniversary date, the transfer from the one-year fixed account to
the subaccounts or the Guarantee Period Accounts will be effective on the
valuation date we receive it.
o We will not accept requests for transfers from the one-year fixed account
at any other time.
o Once annuity payouts begin, you may not make transfers to or from the
one-year fixed account, but you may make transfers once per contract year
among the subaccounts. During the annuity payout period, your choices of
subaccounts may be limited.
o Once annuity payouts begin, you may not make any transfers to the Guarantee
Period Accounts.
<PAGE>
How to request a transfer or withdrawal
1 Send your name, contract number, Social Security
By Letter: Number or Taxpayer Identification Number and signed
request for a transfer or withdrawal to:
Regular mail:
American Enterprise Life Insurance Company
80 South Eighth Street
P.O. Box 534
Minneapolis, MN 55440-0534
Express mail:
American Enterprise Life Insurance Company
Attention: Unit 829
733 Marquette Avenue
Minneapolis, MN 55402
Minimum amount
Transfers or
withdrawals: $500 or entire account balance
Maximum amount
Transfers or
withdrawals: Contract value
2
By automated Your sales representative can help you set up
transfers and automated transfers or partial withdrawals among
automated partial your subaccounts or fixed accounts.
withdrawals:
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 from the one-year fixed account to any one of the
subaccounts may not exceed an amount that, if continued, would deplete the
one-year fixed account within 12 months.
o Automated withdrawals may be restricted by applicable law under some
contracts.
o You may not make additional purchase payments if automated partial
withdrawals are in effect.
o Automated partial withdrawals may result in IRS taxes and penalties on all
or part of the amount withdrawn.
Minimum amount
Transfers or
withdrawals: $100 monthly
$250 quarterly, semi-
annually or annually
<PAGE>
3 Call between 7 a.m. and 6 p.m. Central time:
By phone:
800-333-3437 or
(612) 671-7700 (Minneapolis/St. Paul area)
Minimum amount
Transfers or
withdrawals: $500 or entire account balance
Maximum amount
Transfers: Contract value
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 withdrawal within 30 days of a phoned-in 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.
Withdrawals
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. For total withdrawals,
we will compute the value of your contract at the next accumulation unit value
calculated after we receive your request. We may ask you to return the contract.
You may have to pay charges (see "Charges") 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 you request a partial
withdrawal, we will withdraw money from all your subaccounts and/or the fixed
accounts in the same proportion as your value in each account correlates to your
total contract value, unless you request otherwise.
Receiving payment
By regular or express mail:
o payable to owner;
o mailed to address of record.
NOTE: We will charge you a fee if you request express mail delivery.
<PAGE>
Normally, we will send the payment 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.
TSA Special Surrender Provisions
Participants in Tax-Sheltered Annuities: The Code imposes certain restrictions
on your right to receive early distributions from a TSA:
o Distributions attributable to salary reduction contributions (plus
earnings) made after Dec. 31, 1988, or to .transfers or rollovers from
other contracts, may be made from the TSA only if:
- you are at least age 59 1/2;
- you are disabled as defined in the Code;
- you separated from the service of the employer who
purchased the contract; or
- the distribution is because of your death.
o If you encounter a financial hardship (as defined by the Code), you may
receive a distribution of all contract values attributable to salary
reduction contributions made after Dec. 31, 1988, but not the earnings on
them.
o Even through a distribution may be permitted under the above rules, it may
be subjected to IRS taxes and penalties (see "Taxes").
o The above restrictions on distributions do not affect the availability of
the amount credited to the contract as of Dec. 31, 1988. The restrictions
also do not apply to transfers or exchanges of contract value within the
contract, or to another registered variable annuity contract or investment
vehicle available through the employer.
Changing Ownership
You may change ownership of your nonqualified annuity at any time by completing
a change of ownership form we approve and sending it to our office. The change
will become binding upon us when we receive and record it. We will honor any
change of ownership request that we believe is authentic and we will use
reasonable procedures to confirm authenticity. If we follow these procedures, we
will not take any 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. However, if the owner is a trust or custodian, or an
employer acting in a similar capacity, ownership of a contract may be
transferred to the annuitant.
<PAGE>
Benefits in Case of Death
We will pay the death benefit to your beneficiary upon the earlier of your death
or the annuitant's death. The benefit paid will be based on the death benefit
coverage you select when you purchased the contract. If a contract has more than
one person as the owner, we will pay benefits upon the first to die of any owner
or the annuitant.
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 "adjusted partial
withdrawals"; or
3. the "maximum anniversary value" immediately preceding the date of death
plus the dollar amount of any payments since that anniversary and minus
any "adjusted 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 you or the annuitant.
Adjusted partial withdrawals:
We calculate an "adjusted partial withdrawal " 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.
Maximum anniversary value: 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 purchase payments made to the contract minus any "adjusted partial
withdrawals".
The "maximum anniversary value" is equal to the greatest of these anniversary
values.
After your or the annuitant's 81st birthday, the death benefit continues to be
the death benefit value as of that date, plus any subsequent payments and minus
any "adjusted partial withdrawals".
Example:
o The contract is purchased with a payment of $20,000 on Jan. 1, 1999.
o On Jan. 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 Jan. 1, 2000)
plus any purchase payments paid since that anniversary: +0.00
minus 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
Enhanced Death Benefit Rider
If this rider is available in your state and either you or the annuitant are age
79 or younger on the contract date, you may choose to add this benefit to you
contract. This rider provides that 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 "adjusted partial
withdrawals"; or
3. the "maximum anniversary value" immediately preceding the date of death
plus the dollar amount of any payments since that anniversary and minus
any "adjusted partial withdrawals" since that anniversary; or
4. the Variable Account 5% Floor
The Variable Account 5% Floor
On or before the contract anniversary after the earlier of your or the
annuitant's 81st birthday, the Variable Account 5% Floor is the sum of the value
in the fixed accounts plus the variable account floor. After the contract
anniversary immediately following either you or the annuitant's 81st birthday,
the Variable Account 5% Floor is the floor on that anniversary increased by
additional purchase payments made since that anniversary and reduced by any
"adjusted partial withdrawals" since that anniversary.
On each contract anniversary prior to the earlier of your or the annuitant's
81st birthday, we increase the variable account floor by accumulating the prior
anniversary's floor at 5%. On the first contract anniversary, the floor is
increased by 5% of the accumulated initial purchase payments allocated to the
subaccounts. On any day that you allocate additional amounts to, or withdraw or
transfer from the subaccounts, we adjust the floor by adding the additional
amounts and subtracting the "adjusted partial withdrawals" or adjusted
transfers.
For the Variable Account 5% Floor, we calculate the "adjusted partial
withdrawals" or transfer as the result of (a) times (b) where
(a) is the ratio of the amount of withdrawal (including any withdrawal charges)
or transfer from the subaccounts to the total value in the subaccounts on
the date of (but prior to) the withdrawal or transfer.
(b) is the variable account floor on the date of (but prior to) the withdrawal
or transfer.
<PAGE>
Example:
o The contract is purchased with a payment of $20,000 on Jan. 1, 1999 with
$5,000 allocated to the one-year fixed account and $15,000 allocated to the
subaccounts.
o On Jan. 1, 2000 (the first contract anniversary), the one-year fixed
account value is $5,200 and the subaccount value is $12,000. Total contract
value is $17, 200.
o On March 1, 2000, the one-year fixed account value is $5,300 and the
subaccount value is $14,000. Total contract value is $19,300. The owner
takes a $1,500 partial withdrawal all from the subaccounts, leaving the
contract value at $17,800.
The death benefit on March 1, 2000 is calculated as follows:
<TABLE>
<CAPTION>
<S> <C>
The "maximum anniversary value" (the purchase payment): $ 20,000.00
plus any purchase payment paid since that anniversary: + 0.00
Minus any "adjusted partial withdrawal" taken since that anniversary,
Calculated as: 1,500 x 20,000 =
------------------------- - 1,554.40
19,300 ----------
Maximum Anniversary Value Benefit $ 18,445.60
===========
The variable account floor on Jan. 1, 2000,
calculated as: 1.05 x 15,000 = $ 15,750.00
plus any purchase payments paid since that anniversary: + 0.00
minus any "adjusted partial withdrawals" from the subaccounts,
calculated as: 1,500 x 15,750 =
------------------- -$ 1,687.50
14,000 -----------
Variable Account Floor Benefit $ 14,062.50
plus the one year fixed account value + 5,300.00
----------
Variable Account 5% Floor, calculated as the one-year fixed account
plus the Variable Account Floor Benefit $ 19,362.50
===========
Enhanced Death Benefit, calculated as the greater of the Maximum Anniversary
Value Benefit and the Variable Account 5% Floor $ 19,362.50
</TABLE>
If your spouse is sole beneficiary under a nonqualified annuity and you die
before the retirement date, your spouse may keep the contract as owner with the
contract value equal to the death benefit that would have otherwise been paid.
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. There will be no
withdrawal charges on the contract from that point forward unless additional
purchase payments are made. The Guaranteed Minimum Income Benefit Rider, if
selected, is then terminated.
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 contract as owner until the date on which the annuitant would have
reached age 70 1/2 or any other date permitted by the Code. To do this, the
spouse must give us written instructions within 60 days after we receive proof
of death. The contract value is equal to the death benefit that would otherwise
have been paid. There will be no withdrawal charges on the contract from that
point forward unless additional purchase payments are made. The Guaranteed
Minimum Income Benefit Rider, if selected, is then terminated.
<PAGE>
Payments: Under a nonqualified annuity, we will pay the beneficiary in a single
sum unless you give 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 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 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").
Guaranteed Minimum Income Benefit Rider
An optional Guaranteed Minimum Income Benefit Rider may be available in many
jurisdictions for a separate annual charge, (see "Charges - Guaranteed Minimum
Income Rider fee"). The rider guarantees a minimum amount of fixed annuity
lifetime income during the annuity payout period if your contract has been in
force for at least ten years, subject to the conditions described below. The
rider also provides you the option of variable annuity payouts, with a
guaranteed minimum initial payment. This rider is only available at the time you
purchase your contract if you also select the Enhanced Death Benefit Rider
option.
In some instances, we may allow you to add this rider if it was not available
when you initially purchased your contract. In these instances, we would add
this rider at the next contract anniversary and all conditions of the rider
would use this date as the effective date.
This rider does not create contract value or guarantee the performance of any
investment option. Fixed annuity payouts under the terms of this rider will
occur at the guaranteed annuity purchase rates stated in the contract. We base
first year payments from the variable annuity payout option offered under this
rider on the same factors as the fixed annuity payout option. We base subsequent
payments on the initial payment and an assumed annual return of 5%. Because this
rider is based on guaranteed actuarial factors for the fixed option, the level
of fixed lifetime income it guarantees may be less than the level that would be
provided by applying the then current annuity factors. Likewise, for the
variable annuity payout option, we base the rider on more conservative factors
resulting in a lower initial payment and lower lifetime payments than those
provided otherwise if the same benefit base were used. However, the Guaranteed
Income Benefit Base described below establishes a floor, which when higher than
the contract value, can result in a higher annuity payout level. Thus, the rider
is a guarantee of a minimum amount of annuity income.
The Guaranteed Income Benefit Base is equal to the Enhanced Death Benefit if:
o the Guaranteed Minimum Income Rider became effective on the contract
date, and
o all payments are recognized in the benefit base.
We reserve the right to not recognize any additional payments made in the five
years prior to rider exercise. The Guaranteed Income Benefit Base, less any
applicable premium tax, is the value that will be used to determine minimum
annuity payouts if the rider is exercised.
Conditions on election of the rider: The following conditions apply to the
election of the rider:
o you must elect the rider at the time you purchase your contract along with
the Enhanced Death Benefit Rider option, and
o the annuitant must be age 75 or younger on the contract date.
<PAGE>
Fund selection to continue the rider: You may allocate your purchase payments to
any of the subaccounts or the fixed accounts. However, we reserve the right to
limit the amount in the Wells Fargo Money Market Fund to 10% of the total amount
in the subaccounts. If we are required to activate this restriction, and you
have more than 10% of your subaccount value in this fund, we will send you
notice and ask that you reallocate your contract value so that the limitation is
satisfied within 60 days. If after 60 days the limitation is not satisfied, the
rider will be terminated.
Exercising the rider: The following conditions apply to the exercise of the
rider:
o you may only exercise the rider within 30 days after any contract
anniversary following the expiration of a ten-year waiting period from the
effective date of the rider, and
o the annuitant on the retirement date must be between 50 and 86 years old,
and
o you can only take an annuity payout in one of the following annuity payout
plans:
- Plan A -- Life Annuity - no refund -
- Plan B -- Life Annuity with ten years certain
- Plan D -- Joint and last survivor life annuity - no refund
Contingent event benefits: If the annuitant satisfies the conditions for the
waiver of withdrawal charges in the event of disability, terminal illness or a
confinement in a nursing home or hospital (see "Charges- Waiver of withdrawal
charges") you can exercise the rider at any time. In this event, you can take up
to 50% of the Guaranteed Income Benefit Base in cash. You can use the balance of
the Guaranteed Income Benefit Base for annuity payouts under the terms above
with regard to annuitant age at retirement date, the annuity payout plans and
the more conservative annuity factors. You can also change the annuitant for the
payouts.
Terminating the rider: The following conditions apply to the termination of the
rider:
o you may terminate the rider within 30 days after the first and fifth
anniversary after the effective date of the rider.
o you may terminate the rider any time after the 10th anniversary after the
effective date of the rider.
o the rider will terminate on the date you make a full withdrawal from the
contract, or annuity payouts begin, or on the date that a death benefit is
payable.
o the rider will terminate on the contract anniversary after the annuitant's
86th birthday.
Example:
o The contract is purchased with a payment of $100,000 on Jan. 1, 2000.
o There are no additional purchase payments and no partial withdrawals.
o The money is fully allocated to the subaccounts.
o The annuitant is age 55 on the contract date. For the joint and last
survivor option (annuity payout plan D), the joint annuitant is age 55 on
the contract date.
o The Guaranteed Income Benefit Base is based on the Variable Account 5%
Floor.
o The contract is within 30 days after contract anniversary.
<PAGE>
If the Guaranteed Minimum Income Benefit Rider is exercised, the minimum fixed
annuity payout or the first year variable annuity payout would be:
<TABLE>
<CAPTION>
Fixed Annuity Payout Options
Minimum Guaranteed Annual Income
<S> <C> <C> <C> <C>
Contract Anniversary At Minimum Guaranteed Benefit Plan A -- Plan B -- Plan D --
- - - ------------------------ ---------------------------
Exercise Base Life Annuity Life Annuity Joint and last
- no refund with ten years survivor life
certain annuity - no refund
10 $162,889 $ $ $
15 $207,893 $ $ $
</TABLE>
After the initial payment, lifetime income payments on a variable annuity payout
option will depend on the investment performance of the subaccounts you select.
The payments will be higher if investment performance is greater than a 5%
annual return and lower if investment performance is less than a 5% annual
return.
[Figures to be updated on amendment.]
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.
The amount available for payouts under the plan you select is the contract value
on your retirement date (less any applicable premium tax). We do not deduct any
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 amounts 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
one-year 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. The Guarantee Period Accounts are not available during this payout
period.
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 accounts at settlement.
In addition, for variable payouts only, amounts depend on the investment
performance of the subaccounts you select. These payouts will vary from month to
month because the performance of the 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 "Making the Most of Your Contract -- Transfer policies."
<PAGE>
Annuity table
The annuity table in your contract shows the amount of the first monthly payment
for each $1,000 of contract value according to the age and, when applicable, the
sex of the annuitant. (Where required by law, we will use a unisex table of
settlement rates.) The table assumes that the contract value is invested at the
beginning of the annuity payout period and earns a 5% rate of return, which is
reinvested and helps to support future payouts.
Substitution of 3.5% table
If you ask us at least 30 days before the retirement date, we will substitute an
annuity table based on an assumed 3.5% investment rate for the 5% table in the
contract. The assumed investment rate affects both the amount of the first
payout and the extent to which subsequent payouts increase or decrease. Using
the 5% table results in a higher initial payment, but later payouts will
increase more slowly when annuity unit values rise and decrease more rapidly
when they decline.
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 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, ten or 15 years certain: We make monthly
payouts for a guaranteed payout period of five, ten or 15 years that you
elect. This election will determine the length of the payout period to the
beneficiary if the annuitant should die before the elected period expires.
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 ten 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. During the payout
period, you can elect to have us determine the present value of any
remaining variable payouts and pay it to you in a lump sum. The present
value is determined separately for each subacccount from which you are
currently scheduled to receive payments. The present value for each
subaccount is equal to the discounted value of the remaining annuity
payments which are assumed to remain level. The discount rate used in the
calculation will vary between 5.05% and 7.15% depending on the applicable
assumed investment rate (AIR) and the fund management fees. A 10% IRS
penalty tax could apply under this payout plan. (See "Taxes").
<PAGE>
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 that 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 allocated to the one-year fixed account will provide
fixed dollar payouts and contract values that you 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 you 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 (see detailed discussion
below). Any portion of the annuity payouts and any withdrawals you request that
represent ordinary income are normally 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 qualified retirement
plans. 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.
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 advisor for more information about your 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 contract is fully recovered
will be subject to tax.
Tax law requires that all nonqualified deferred annuities 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 is
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 a qualified retirement plan, such amounts are not
considered to be part of your investment in the contract and will be taxed when
paid to you.
Withdrawals: If you withdraw part or all of your contract before your annuity
payouts begin, your withdrawal payment will be taxed to the extent that the
value of your contract immediately before the withdrawal exceeds your
investment. You also may have to pay a 10% IRS penalty for withdrawals you make
before reaching age 59 1/2 unless certain exceptions apply. For qualified
annuities, other penalties may apply if you withdraw your contract before your
plan specifies that you can receive payouts.
Death benefits to beneficiaries: The death benefit under a contract (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 years 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 59 1/2,
you may have to pay a 10% IRS penalty on the amount includable in your ordinary
income. However, this penalty will not apply to any amount received by you or
your beneficiary:
o because of your death;
o because you become disabled (as defined in the Code);
o if the distribution is part of a series of substantially equal periodic
payments, made at least annually, over your life or life expectancy (or
joint lives or life expectancies of you and your beneficiary); or
o if it is allocable to an investment before Aug. 14, 1982 (except for
qualified annuities).
For a qualified annuity, other penalties or exceptions may apply if you make
withdrawals from your contract before your plan specifies that payouts can be
made.
Withholding, generally: If you receive all or part of the contract value, 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 can 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 can elect not to have this withholding
occur.
Some states also impose withholding requirements similar to the federal
withholding described above. If this should be the case, 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>
Withholding from TSAs: If you receive directly all or part of the contract value
from your TSA, mandatory 20% federal income tax withholding (and possibly state
income tax withholding) generally will be imposed at the time we make the
payout. This mandatory withholding is in place of the elective withholding
discussed above. This mandatory withholding will not be imposed if:
o instead of receiving the distribution check, you elect to have the
distribution rolled over directly to an IRA or another eligible plan;
o the payout is one in a series of substantially equal periodic payouts, made
at least annually, over your life or life expectancy (or the joint lives or
life expectancies of you and your designated beneficiary) or over a
specified period of 10 years or more; or
o the payout is a minimum distribution required under the Code.
Payments we make to a surviving spouse instead of being directly rolled over to
an IRA also may be subject to mandatory 20% income tax withholding.
State withholding also may be imposed on taxable distributions.
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 contract will be the value of the contract 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 advisor 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 subaccounts, 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 subaccount to the total number of
votes allowed to the subaccount.
After annuity payouts begin, the number of votes you have is equal to:
o the reserve held in each subaccount for your contract;
o divided by the net asset value of one share of the applicable fund.
<PAGE>
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 subaccount. We will send notice of
shareholders' 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 received
instructions. We also will vote the shares for which we have voting rights in
the same proportion as the votes for which we received instructions.
Substitution of Investments
We may substitute the funds in which the subaccounts invest if:
o laws or regulations change,
o existing funds become unavailable, or
o in our judgment, the funds no longer are suitable for the subaccounts.
If any of these situations occur and if we believe it is in the best interest of
persons having voting rights under the contract, we have the right to substitute
funds other than those currently listed in this prospectus for other funds.
We may also:
o add new subaccounts;
o combine any two or more subaccounts;
o add 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, we may amend the contract
and take whatever action is necessary and appropriate without your consent or
approval. However, we will not make any substitution or change without the
necessary approval of the SEC and state insurance departments. We will notify
you of any substitution or change.
About the Service Providers
Principal Underwriter
American Express Financial Advisors Inc. (AEFA) serves as the principal
underwriter for the contract. Its office are located at IDS Tower 10,
Minneapolis, MN 55440. AEFA is a wholly-owned subsidiary of American Express
Financial Corporation (AEFC) 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 AEFA and American Enterprise Life.
We will pay commissions for sales of the contracts of up to 7% of purchase
payments to insurance agencies or broker-dealers that are also insurance
agencies. Sometimes we 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 7% of purchase payments). In addition, we may pay
certain sellers additional compensation for selling and distribution activities
under certain circumstances. From time to time, we will pay or permit other
promotional incentives, in cash or credit or other compensation.
<PAGE>
Issuer
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 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.
Additional Information About American Enterprise Life
Selected financial data
The following selected financial data for American Enterprise Life should be
read in conjunction with the consolidated financial statements and notes.
[To be filed on amendment.]
Management's discussion and analysis of consolidated financial condition and
results of operations
1998 compared to 1997
[To be filed on amendment.]
1997 compared to 1996
[To be filed on amendment.]
Risk management
[To be filed on amendment.]
Liquidity and capital resources
[To be filed on amendment.]
Risk management
[To be filed on amendment.]
<PAGE>
Year 2000 issue
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. All of the major systems used by American Enterprise
Life and by the Variable Account are maintained by AEFC and are utilized by
multiple subsidiaries and affiliates of AEFC. American Enterprise Life's and the
Variable Account's businesses are heavily dependent upon AEFC's computer systems
and have significant interactions with systems of 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 have been taken to resolve potential problems including
modification to existing software and the purchase of new software. AEFC's
target date for substantially completing its program of corrective measures on
internal business critical systems was Dec. 31, 1998. As of June 30, 1999, AEFC
completed its program of corrective measures on its internal systems and
applications, including Year 2000 compliance testing. 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 failure of external parties to resolve
their own Year 2000 issues in a timely manner could result in a material
financial risk to AEFC, American Enterprise Life or the Variable Account.
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.
[This information will be updated in amendment]
Reserves
In accordance with the insurance laws and regulations under which we operate, we
are obligated to carry on our books, as liabilities, actuarially determined
reserves to meet our obligations on our outstanding annuity contracts. We base
our reserves for deferred annuity contracts on accumulation value and for fixed
annuity contracts in a benefit status on established industry mortality tables.
These reserves are computed amounts that will be sufficient to meet our policy
obligations at their maturities.
Investments
Of our consolidated total investments of $4,503,960,000 at Dec. 31, 1998, 28%
was invested in mortgage-backed securities, 53% in corporate and other bonds,
18% in primary mortgage loans on real estate and the remaining 1% in other
investments.
<PAGE>
Competition
We are engaged in a business that is highly competitive due to the large number
of stock and mutual life insurance companies and other entities marketing
insurance products. There are over 1,600 stock, mutual and other types of
insurers in the life insurance business. Best's Insurance Reports, Life-Health
edition 1998, assigned us one of its highest classifications, A+ (Superior).
Employees
As of Dec. 31, 1998, we had no employees.
Properties
We occupy office space in Minneapolis, MN, which is rented by AEFC. We reimburse
AEFC for rent based on direct and indirect allocation methods. Facilities
occupied by us are believed to be adequate for the purposes for which they are
used and well maintained.
State regulation
[To be filed on amendment.]
Directors and Executive Officers*
The directors and principal executive officers of American Enterprise Life and
the principal occupation of each during the last five years is as follows:
Directors
James E. Choat
Born in 1947
Director and chief executive officer since 1996; Senior vice president -
Institutional Products Group, AEFA, 1994 to 1997.
Richard W. Kling
Born 1940
Director and chairman of the board since March 1989.
Paul S. Mannweiler**
Born in 1949
Director since 1986; Partner at Locke Reynolds Boyd & Weisell since 1980.
Paula R. Meyer
Born in 1954
Director and executive vice president since 1998; vice president, AEFC since
1998; Piper Capital Management (PCM) President from Oct. 1997 to May 1998; PCM
Director of Marketing from June 1995 to Oct. 1997; PCM Director of Retail
Marketing from Dec. 1993 to June 1995.
William A. Stoltzmann
Born in 1948
Director since Sept. 1989; vice president, general counsel and secretary since
1985.
<PAGE>
Officers other than directors
Jeffrey S. Horton
Born 1961
Vice president and treasurer since Dec. 1997; vice president and corporate
treasurer, AEFC, since Dec. 1997; controller, American Express Technologies -
Financial Services, AEFC, from July 1997 to Dec. 1997; controller, Risk
Management Products, AEFC, from May 1994 to July 1997; director of finance and
analysis, Corporate Treasury, AEFC, from June 1990 to May 1994.
Philip C. Wentzel
Born in 1961
Vice president and controller since 1998; vice president - Finance, Risk
Management Products, AEFC since 1997; and director of financial reporting and
analysis from 1992 to 1997.
*The address for all of the directors and principal officers is: IDS Tower 10,
Minneapolis, MN 55440-0010 except for Mr. Mannweiler who is an independent
director.
**Mr. Mannweiler's address is: 201 No. Illinois Street, Indianapolis, IN 46204
Executive compensation
Our executive officers also may serve one or more affiliated companies. The
following table reflects cash compensation paid to the five most highly
compensated executive officers as a group for services rendered in the most
recent year to us and our affiliates. The table also shows the total cash
compensation paid to all our executive officers, as a group, who were executive
officers at any time during the most recent year.
<TABLE>
<CAPTION>
<S> <C> <C>
Name of individual or
number in group Position held Cash compensation
Five most highly compensated $4,476,367
executive officers as a group:
Richard W. Kling Chairman of the Board
James E. Choat President and CEO
Stuart A. Sedlacek Executive Vice President
Lorraine R. Hart Vice President, Investments
Deborah L. Pederson Assistant Vice President, Investments
All executive officers as a group $7,925,328
(12)
[Information to be updated on amendment.]
</TABLE>
Security ownership of management
Our directors and officers do not beneficially own any outstanding shares of
stock of the company. All of our outstanding shares of stock are beneficially
owned by IDS Life. The percentage of shares of IDS Life owned by any director,
and by all our directors and officers as a group, does not exceed 1% of the
class outstanding. [To be updated on amendment.]
<PAGE>
Experts
Ernst & Young LLP, independent auditors, have audited the consolidated financial
statements of American Enterprise Life Insurance Company at Dec. 31, 1998 and
1997, and for each of the three years in the period ended Dec. 31, 1998, as set
forth in their report. We've included our consolidated financial statements in
the prospectus and elsewhere in the registration statement in reliance on Ernst
& Young LLP's report, given on their authority as experts in accounting and
auditing.
American Enterprise Life Financial Information
[To be filed on amendment.]
<PAGE>
Table of Contents of the Statement of Additional Information
Performance Information p.
Calculating Annuity Payouts p.
Rating Agencies p.
Principal Underwriter p.
Independent Auditors p.
Financial Statements
<PAGE>
Please check the box to receive a copy of the Statement of Additional
Information for:
- - - -- American Express Wells Fargo Variable AnnuitySM
- - - -- American Express Variable Portfolio Funds
- - - -- AIM Variable Insurance Funds, Inc.
- - - -- Dreyfus Socially Responsible Growth Fund, Inc.
- - - -- Franklin Templeton Variable Insurance Products Trust - Class 2
- - - -- Goldman Sachs Variable Insurance Trust (VIT)
- - - -- MFG(R) Variable Insurance Trust sm
- - - -- Putnam Variable Trust
- - - -- Wells Fargo ________________
Mail your request to:
American Enterprise Life Insurance Company
80 South Eighth Street
P.O. Box 534
Minneapolis, MN 55440-534
We will mail your request to:
Your name _____________________________________________
Address _______________________________________________
City _____________________ State _________ Zip ________
<PAGE>
Prospectus
[_____], 1999
American Express Wells Fargo Extra Credit Variable AnnuitySM
Individual or group flexible premium deferred combination fixed/variable
annuity.
American Enterprise Variable Annuity Account
Issued by: American Enterprise Life Insurance Company (American
Enterprise Life)
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 for:
<TABLE>
<CAPTION>
<S> <C>
o American Express Variable Portfolio Funds o Goldman Sachs Variable Insurance Trust (VIT)
o AIM Variable Insurance Funds, Inc. o MFS(R) Variable Insurance Trust SM
o Dreyfus Socially Responsible Growth Fund, Inc. o Putnam Variable Trust
o Franklin Templeton Variable Insurance Products Trust o Wells Fargo_____________
- Class 2
</TABLE>
Please read the prospectuses carefully and keep them for future reference. This
contract is available for qualified and nonqualified plans.
The Securities and Exchange Commission (SEC) has not approved or disapproved
these securities or passed upon the adequacy or accuracy of this prospectus. Any
representation to the contrary is a criminal offense.
An investment in this contract 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 contract
involves investment risk including the possible loss of principal.
A Statement of Additional Information (SAI), dated the same date as this
prospectus, is incorporated by reference into this prospectus. It is filed with
the SEC and is available without charge by contacting American Enterprise Life
at the telephone number above or by completing and sending the order form on the
last page of this prospectus. The table of contents of the SAI is on the last
page of this prospectus.
<PAGE>
Table of Contents
Key Terms
The Contract in Brief
Expense Summary
Condensed Financial Information (Unaudited)
Financial Statements
Performance Information
The Variable Account and the Funds
The Fixed Accounts
Buying Your Contract
Charges
Valuing Your Investment
Making the Most of Your Contract
Withdrawals
TSA -- Special Surrender Provisions
Changing Ownership
Benefits in Case of Death
The Annuity Payout Period
Taxes
Voting Rights
Substitution of Investments
About the Service Providers
Additional Information About American Enterprise Life
Directors and Executive Officers
Experts
American Enterprise Life Financial Information
Table of Contents of the Statement of Additional Information
<PAGE>
Key Terms
These terms can help you understand details about your contract.
Accumulation unit -- A measure of the value of each subaccount before annuity
payouts begin.
Annuitant -- The person on whose life or life expectancy the annuity payouts are
based.
Annuity payouts -- An amount paid at regular intervals under one of several
plans.
Beneficiary -- The person you designate to receive annuity 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 - An individual annuity contract or a certificate showing your interest
under a group annuity contract.
Contract value -- The total value of your contract before we deduct any
applicable charges.
Contract year -- A period of 12 months, starting on the effective date of your
contract and on each anniversary of the effective date.
Fixed accounts - The one-year fixed account is an account to which you may
allocate purchase payments. Amounts you allocate to this account earn interest
at rates that we declare periodically. Guarantee Period Accounts are fixed
accounts to which you may also allocate purchase payments. These accounts have
guaranteed interest rates declared for periods ranging from two to ten years.
Withdrawals from these accounts prior to the end of the term specified will
receive a Market Value Adjustment, which may result in a gain or loss of
principal.
Funds -- Mutual funds and/or portfolios that are investment options under your
contract, each with a different investment objective. You may allocate your
purchase payments into subaccounts investing in shares of any or all of these
funds.
Guarantee Period -- The number of years that a guaranteed interest rate is
credited.
Market Value Adjustment (MVA) -- A positive or negative adjustment assessed if
any portion of a Guarantee Period Account is withdrawn or transferred prior to
the end of its Guarantee Period.
Owner (you, your) -- The person who controls the contract (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 contract's benefits.
Purchase payment credits -- An addition we make to your contract value based on
your purchase payments less partial withdrawals.
Qualified annuity -- A contract 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 (SEP) plans
o Tax-Sheltered Annuity (TSA) rollovers
All other contracts are considered nonqualified annuities.
<PAGE>
Retirement date -- The date when annuity payouts are scheduled to begin.
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 subaccount at the close of business on each valuation date.
Variable account -- Consists of separate subaccounts to which you may allocate
purchase payments; each invests in shares of one fund. The value of your
investment in each subaccount changes with the performance of the particular
fund.
Withdrawal value -- The amount you are entitled to receive if you make a full
withdrawal from your contract. It is the contract value minus any applicable
charges.
<PAGE>
The Contract in Brief
Purpose: The purpose of the contract 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 contract. The
contract provides lifetime or other forms of
payouts beginning at a specified date (the
retirement date).
Free look period: You may return your contract to our office within 10 days
after it is delivered to you and receive a full refund of the contract value,
less any purchase payment credits up to the maximum withdrawal charges. (See
"Buying Your Contract - Purchase payment credits.") 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, each of which invests
in a fund with a particular investment
objective. The value of each 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 purchase payments you allocate to
the subaccounts. (p. __)
o the fixed accounts, which earn
interest at rates that we adjust
periodically. (p. __)
Buying your contract: Your sales representative
will help you complete and submit an
application. Applications are subject to
acceptance at our office. You may buy a
nonqualified annuity or a qualified annuity.
After your initial purchase payment, you
have the option of making additional
purchase payments in the future.
o Minimum initial purchase payment --
$2,000. This minimum does not apply if
you enroll in the Systematic Investment
Program (SIP). The Guaranteed Period
Accounts require a minimum investment of
$1,000.
o Minimum additional purchase payment --
$100 ($50 with SIP payments).
o Maximum total purchase payments (without
prior approval) -- $1,000,000.
We will add a purchase payment credit to
your contract with every purchase payment
you make. The credit is a percentage of the
purchase payments less partial withdrawals.
The percentage increases with total purchase
payments, less partial withdrawals.
<PAGE>
Transfers: Subject to certain restrictions you currently may redistribute your
money among the subaccounts and the fixed accounts without charge at any time
until annuity payouts begin, and once per contract year among the subaccounts
after annuity payouts begin. Transfers out of the Guarantee Period Accounts
before the end of the Guarantee Period will be subject to a MVA. You may
establish automated transfers among the fixed accounts and subaccounts. Fixed
account transfers are subject to special restrictions. (p. __)
Withdrawals: You may withdraw all or part of your contract value at any time
before the retirement date. You also may establish automated partial
withdrawals. Withdrawals may be subject to charges and tax penalties (including
a 10% IRS penalty if you make withdrawals prior to your reaching age 59 1/2) and
may have other tax consequences; also, certain restrictions apply. (p. __)
Changing ownership: You may change ownership of a nonqualified annuity by
written instruction, but this may have federal income tax consequences.
Restrictions apply to changing ownership of a qualified annuity. (p. __)
Benefits in case of death: If you or the annuitant die before annuity payouts
begin, we will pay the beneficiary an amount at least equal to the contract
value. (p. __)
Annuity payouts: You can apply your 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 subaccount and the one-year fixed
account. During the annuity payout period, your choices for subaccounts may be
limited. The Guarantee Period Accounts are not available during the payout
period. (p. __)
Taxes: Generally, your contract 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. __)
Charges:
o $30 annual contract administrative charge;
o a 0.15% variable account administrative charge;
o with a six-year withdrawal charge schedule a 1.35% mortality and expense
risk fee applies;
o with an eight-year withdrawal charge schedule a 1.10% mortality and expense
risk fee applies;
o if the Enhanced Death Benefit Rider is selected, an additional 0.20%
mortality and expense risk fee;
<PAGE>
o if the Guaranteed Minimum Income Benefit Rider is selected, an annual fee
based on the Guaranteed Income Benefit Base (currently at 0.30%);
o 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);
and
o the operating expenses of the funds.
Expense Summary
The purpose of the following information is to help you understand the various
costs and expenses associated with your contract.
You pay no sales charge when you purchase your contract. We show all costs that
you bear directly or indirectly for the subaccounts and funds below. Some
expenses may vary as we explain under "Charges." Please see the funds'
prospectuses for more information on the operating expenses of each fund.
Contract owner expenses:
Withdrawal charge: contingent deferred sales charge as a percentage of
purchase payment withdrawn. You select either a six-year or eight-year
withdrawal charge schedule at the time of application.
<TABLE>
<CAPTION>
Six-year schedule Eight-year schedule
<S> <C> <C> <C>
Years from purchase Withdrawal charge Years from purchase Withdrawal charge
payment receipt percentage payment receipt percentage
1 8% 1 8%
2 8 2 8
3 8 3 8
4 6 4 8
5 4 5 8
6 2 6 6
Thereafter 0 7 4
8 2
Thereafter 0
Annual contract administrative charge $30*
* We will waive this charge when your contract value is $50,000 or more
on the current contract anniversary.
Guaranteed Minimum Income Benefit Rider fee:
as a percentage of the Guaranteed Income Benefit
Base charged annually. This is an optional expense. 0.30%
</TABLE>
<PAGE>
Annual variable account expenses: as a percentage of average subaccount value.
You can choose the length of your contract's withdrawal charge and the death
benefit guarantee provided. The combination you choose determines the fees you
pay. The table below shows the combinations available to you and their cost.
<TABLE>
<CAPTION>
- - - --------------------------------------------------------------- ------------------------- ---------------------------
Six-year withdrawal Eight-year withdrawal
schedule schedule
- - - --------------------------------------------------------------- ------------------------- ---------------------------
<S> <C> <C>
- - - -------------------------------------------------------------- ------------------------- ---------------------------
Variable account administrative charge 0.15% 0.15%
- - - --------------------------------------------------------------- ------------------------- ---------------------------
- - - --------------------------------------------------------------- ------------------------- ---------------------------
Mortality and expense risk fee 1.35% 1.10%
- - - --------------------------------------------------------------- ------------------------- ---------------------------
- - - --------------------------------------------------------------- ------------------------- ---------------------------
Enhanced Death Benefit Rider fee as part of the 0.20% 0.20%
----- -----
mortality and expense risk fee (optional)
- - - --------------------------------------------------------------- ------------------------- ---------------------------
- - - --------------------------------------------------------------- ------------------------- ---------------------------
Total annual variable account expenses without the optional 1.50% 1.25%
Enhanced Death Benefit Rider fee
- - - --------------------------------------------------------------- ------------------------- ---------------------------
- - - --------------------------------------------------------------- ------------------------- ---------------------------
Total annual variable account expenses with the optional 1.70% 1.45%
Enhanced Death Benefit Rider fee
- - - --------------------------------------------------------------- ------------------------- ---------------------------
</TABLE>
Annual operating expenses of the funds (as a percentage of average daily net
assets)
<TABLE>
<CAPTION>
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
Management 12b-1 Other
Fees Fees Expenses Total
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
<S> <C> <C> <C> <C>
- - - -------------------------------------------------------------------------- ---------------- --------- ----------- -----------
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
AXPSM Variable Portfolio - Blue Chip Advantage Fund .56% -- .39 .95%1
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
AXPSM Variable Portfolio - Capital Resource Fund .59% -- .07 .66%1
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
AXPSM Variable Portfolio - Diversified Equity Income Fund .56% -- .39 .95%1
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
AXPSM Variable Portfolio - Extra Income Fund .62% -- .09 .71%1
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
AXPSM Variable Portfolio - Federal Income Fund .61% -- .265 .875%1
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
AXPSM Variable Portfolio - New Dimensions Fund .61% -- .06 .67%1
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
AXPSM Variable Portfolio - Small Cap Advantage Fund .79% -- .435 1.225%1
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
AIM V.I. Capital Appreciation Fund .62% -- .05 .67%2
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
AIM V.I. Value Fund (after expense waivers/reimbursements) .61% -- .05 .66%3
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
Dreyfus Socially Responsible Growth Fund .75% -- .05 .80%
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
FT VIP Income Securities Fund - Class 2
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
FT VIP Mutual Shares Securities Fund - Class 2 .74% .25 .03 1.02%4
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
FT VIP Real Estate Securities Fund - Class 2 .52% .25 .02 .79%4
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
FT VIP Small Cap Fund Class - 2
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
Goldman Sachs VIT CORESM U.S. Equity Fund (after expense reimbursement) .70% -- .10 .80%
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
Goldman Sachs VIT Global Income Fund .90% -- .15 1.05%
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
Goldman Sachs VIT Mid Cap Value Fund (after expense reimbursement) .80% -- .15 .95%
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
MFS(R) Growth with Income Series
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
MFS(R)Utilities Series .75% -- .26 1.01%2
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
Putnam VT International Growth Fund - Class IB Shares .80% .15 .27 1.22%5
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
Putnam VT Vista Fund - Class IB Shares .65% .15 .12 .92%
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
Wells Fargo Asset Allocation Fund
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
Wells Fargo Corporate Bond Fund
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
Wells Fargo Equity Income Fund
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
Wells Fargo Equity Value Fund
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
Wells Fargo Growth Fund
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
Wells Fargo International Equity Fund
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
Wells Fargo Large Company Growth Fund
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
Wells Fargo Money Market Fund
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
Wells Fargo Small Cap Growth Fund
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
</TABLE>
<PAGE>
1 Annualized operating expenses of funds at Dec. 31, 1998.
2 Figures in "Management Fees," "Other Expenses" and "Total" are based on actual
expenses for the fiscal year ended Dec. 31, 1998.
3 Had there been no fee waivers or expense reimbursements, expenses would have
been: 0.75%, 0.00%, 5.05% and 5.80%
4 The figure shown under Management Fees, combines both the Management and
Portfolio Administration Fees. The Portfolio Administration Fee is a direct
expense for the Mutual Shares Securities Fund; the Real Estate Securities Fund
pays for similar services indirectly through the Management Fee. Because no
Class 2 shares were issued as of Dec. 31, 1998, figures (other than Rule 12b-1
Fees) are based on the Portfolios' Class 1 actual expenses for the fiscal year
ended Dec. 31, 1998 plus Class 2's annual Rule 12b-1 Fee of 0.25% (While the
maximum amount payable under each Portfolio's Class 2 Rule 12b-1 Plan is 0.35%
per year of the Portfolio's average daily net assets, the Board of Trustees of
Franklin Templeton Variable Insurance Products Trust has set the current rate
at 0.25% per year.)
5 Based on estimated expenses
<PAGE>
Examples: *
You would pay the following expenses on a $1,000 investment if you selected a
six-year withdrawal charge schedule without any optional riders and assuming a
5% annual return and....
<TABLE>
<CAPTION>
- - - ------------------------------------------------------------------------------------------------------------------
a total withdrawal at no withdrawal or selection
the end of each time of an annuity payout plan
period at the end of each time
period
- - - ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- - - -----------------------------------------------------------------------------------------------------------------
1 year 3 years 1 year 3 years
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
AXPSM Variable Portfolio - Blue Chip Advantage Fund
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
AXPSM Variable Portfolio - Capital Resource Fund
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
AXPSM Variable Portfolio - Diversified Equity Income Fund
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
AXPSM Variable Portfolio - Extra Income Fund
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
AXPSM Variable Portfolio - Federal Income Fund
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
AXPSM Variable Portfolio - New Dimensions Fund
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
AXPSM Variable Portfolio - Small Cap Advantage Fund
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation Fund
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
AIM V.I. Value Fund
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
Dreyfus Socially Responsible Growth Fund
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
FT VIP Income Securities Fund - Class 2
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
FT VIP Mutual Shares Securities Fund - Class 2
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
FT VIP Real Estate Securities Fund - Class 2
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
FT VIP Small Cap Fund Class - 2
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT CORESM U.S. Equity Fund
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT Global Income Fund
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT Mid Cap Value Fund
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
MFS(R) Growth with Income Series
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
MFS(R) Utilities Series
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
Putnam VT International Growth Fund - Class IB Shares
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
Putnam VT Vista Fund - Class IB Shares
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
Wells Fargo Asset Allocation Fund
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
Wells Fargo Corporate Bond Fund
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
Wells Fargo Equity Income Fund
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
Wells Fargo Equity Value Fund
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
Wells Fargo Growth Fund
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
Wells Fargo International Equity Fund
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
Wells Fargo Large Company Growth Fund
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
Wells Fargo Money Market Fund
- - - ------------------------------------------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------------------------------------------
Wells Fargo Small Cap Growth Fund
- - - ------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
You would pay the following expenses on a $1,000 investment if you selected a
six-year withdrawal charge schedule with the optional 0.20% Enhanced Death
Benefit Rider and the 0.30% Guaranteed Minimum Income Benefit Rider and assuming
a 5% annual return and....
<TABLE>
<CAPTION>
- - - ---------------------------------------------------------------------------------------------------------------------
a total withdrawal at no withdrawal or selection
the end of each time of an annuity payout plan
period at the end of each time
period
- - - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- - - ---------------------------------------------------------------------------------------------------------------------
1 year 3 years 1 year 3 years
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
AXPSM Variable Portfolio - Blue Chip Advantage Fund
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
AXPSM Variable Portfolio - Capital Resource Fund
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
AXPSM Variable Portfolio - Diversified Equity Income Fund
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
AXPSM Variable Portfolio - Extra Income Fund
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
AXPSM Variable Portfolio - Federal Income Fund
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
AXPSM Variable Portfolio - New Dimensions Fund
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
AXPSM Variable Portfolio - Small Cap Advantage Fund
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation Fund
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
AIM V.I. Value Fund
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
Dreyfus Socially Responsible Growth Fund
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
FT VIP Income Securities Fund - Class 2
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
FT VIP Mutual Shares Securities Fund - Class 2
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
FT VIP Real Estate Securities Fund - Class 2
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
FT VIP Small Cap Fund Class - 2
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT CORESM U.S. Equity Fund
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT Global Income Fund
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT Mid Cap Value Fund
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
MFS(R) Growth with Income Series
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
MFS(R) Utilities Series
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
Putnam VT International Growth Fund - Class IB Shares
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
Putnam VT Vista Fund - Class IB Shares
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
Wells Fargo Asset Allocation Fund
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
Wells Fargo Corporate Bond Fund
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
Wells Fargo Equity Income Fund
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
Wells Fargo Equity Value Fund
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
Wells Fargo Growth Fund
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
Wells Fargo International Equity Fund
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
Wells Fargo Large Company Growth Fund
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
Wells Fargo Money Market Fund
- - - ---------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------
Wells Fargo Small Cap Growth Fund
- - - ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
You would pay the following expenses on a $1,000 investment if you selected an
eight-year withdrawal charge schedule without any optional riders and assuming a
5% annual return and....
<TABLE>
<CAPTION>
- - - -------------------------------------------------------------------------------------------------------------------
a total withdrawal at no withdrawal or selection
the end of each time of an annuity payout plan
period at the end of each time
period
- - - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- - - -------------------------------------------------------------------------------------------------------------------
1 year 3 years 1 year 3 years
- - - -------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------
AXPSM Variable Portfolio - Blue Chip Advantage Fund
- - - -------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------
AXPSM Variable Portfolio - Capital Resource Fund
- - - -------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------
AXPSM Variable Portfolio - Diversified Equity Income Fund
- - - -------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------
AXPSM Variable Portfolio - Extra Income Fund
- - - -------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------
AXPSM Variable Portfolio - Federal Income Fund
- - - -------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------
AXPSM Variable Portfolio - New Dimensions Fund
- - - -------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------
AXPSM Variable Portfolio - Small Cap Advantage Fund
- - - -------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation Fund
- - - -------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------
AIM V.I. Value Fund
- - - -------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------
Dreyfus Socially Responsible Growth Fund
- - - -------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------
FT VIP Income Securities Fund - Class 2
- - - -------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------
FT VIP Mutual Shares securities Fund - Class 2
- - - -------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------
FT VIP Real Estate Securities Fund - Class 2
- - - -------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------
FT VIP Small Cap Fund Class - 2
- - - -------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT CORESM U.S. Equity Fund
- - - -------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT Global Income Fund
- - - -------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT Mid Cap Value Fund
- - - -------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------
MFS(R) Growth with Income Series
- - - -------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------
MFS(R) Utilities Series
- - - -------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------
Putnam VT International Growth Fund - Class IB Shares
- - - -------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------
Putnam VT Vista Fund - Class IB Shares
- - - -------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------
Wells Fargo Asset Allocation Fund
- - - -------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------
Wells Fargo Corporate Bond Fund
- - - -------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------
Wells Fargo Equity Income Fund
- - - -------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------
Wells Fargo Equity Value Fund
- - - -------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------
Wells Fargo Growth Fund
- - - -------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------
Wells Fargo International Equity Fund
- - - -------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------
Wells Fargo Large Company Growth Fund
- - - -------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------
Wells Fargo Money Market Fund
- - - -------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------
Wells Fargo Small Cap Growth Fund
- - - -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
You would pay the following expenses on a $1,000 investment if you selected an
eight-year withdrawal charge schedule with the optional 0.20% Enhanced
Death Benefit Rider and 0.30% Guaranteed Minimum Income Benefit Rider and
assuming a 5% annual return and....
<TABLE>
<CAPTION>
- - - -----------------------------------------------------------------------------------------------------------------
a total withdrawal at no withdrawal or selection
the end of each time of an annuity payout plan
period at the end of each time
period
- - - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- - - -----------------------------------------------------------------------------------------------------------------
1 year 3 years 1 year 3 years
- - - -----------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------
AXPSM Variable Portfolio - Blue Chip Advantage Fund
- - - -----------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------
AXPSM Variable Portfolio - Capital Resource Fund
- - - -----------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------
AXPSM Variable Portfolio - Diversified Equity Income Fund
- - - -----------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------
AXPSM Variable Portfolio - Extra Income Fund
- - - -----------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------
AXPSM Variable Portfolio - Federal Income Fund
- - - -----------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------
AXPSM Variable Portfolio - New Dimensions Fund
- - - -----------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------
AXPSM Variable Portfolio - Small Cap Advantage Fund
- - - -----------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation Fund
- - - -----------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------
AIM V.I. Value Fund
- - - -----------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------
Dreyfus Socially Responsible Growth Fund
- - - -----------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------
FT VIP Income Securities Fund - Class 2
- - - -----------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------
FT VIP Mutual Shares securities Fund - Class 2
- - - -----------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------
FT VIP Real Estate Securities Fund - Class 2
- - - -----------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------
FT VIP Small Cap Fund Class - 2
- - - -----------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT CORESM U.S. Equity Fund
- - - -----------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT Global Income Fund
- - - -----------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------
Goldman Sachs VIT Mid Cap Value Fund
- - - -----------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------
MFS(R) Growth with Income Series
- - - -----------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------
MFS(R) Utilities Series
- - - -----------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------
Putnam VT International Growth Fund - Class IB Shares
- - - -----------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------
Putnam VT Vista Fund - Class IB Shares
- - - -----------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------
Wells Fargo Asset Allocation Fund
- - - -----------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------
Wells Fargo Corporate Bond Fund
- - - -----------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------
Wells Fargo Equity Income Fund
- - - -----------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------
Wells Fargo Equity Value Fund
- - - -----------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------
Wells Fargo Growth Fund
- - - -----------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------
Wells Fargo International Equity Fund
- - - -----------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------
Wells Fargo Large Company Growth Fund
- - - -----------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------
Wells Fargo Money Market Fund
- - - -----------------------------------------------------------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------
Wells Fargo Small Cap Growth Fund
- - - -----------------------------------------------------------------------------------------------------------------
</TABLE>
* In these examples, the $30 contract administrative charge is approximated as a
[___]% charge based on our estimated average contract size. In determining the
above charges, the purchase payment credit is approximated at 2% based on our
estimated average contract size. Premium taxes imposed by some state and local
governments are not reflected in these examples. We entered into certain
arrangements under which we are compensated by the funds' advisors and/or
distributors for the administrative services we provide to the funds.
You should not consider these examples as representations of past or future
expenses. Actual expenses may be more or less than those shown.
<PAGE>
Condensed Financial Information (Unaudited)
We have not provided any condensed financial information for the subaccounts
because they are new and do not have any history.
<PAGE>
Financial Statements
You can find our audited financial statements later in this prospectus. The SAI
does not include the audited financial statements of the subaccounts because
they are new and do not have any assets.
Performance Information
Performance information for the subaccounts may appear from time to time in
advertisements or sales literature. This information reflects the performance of
a hypothetical investment in a particular subaccount during a specified time
period. We show actual performance from the date the subaccounts began investing
in the funds. Currently, we do not provide any performance information because
they are new and have not had any activity to date. However, we show performance
from the commencement date of the funds as if the contract existed at that time,
which it did not. Although we base performance figures on historical earnings,
past performance does not guarantee future results.
We include non-recurring charges (such as withdrawal charges) in total return
figures, but not in yield quotations. Excluding non-recurring charges in yield
calculations increases the reported value.
Total return figures reflect deduction of all applicable charges, including:
o the contract administrative charge,
o the variable account administrative charge,
o the Enhanced Death Benefit Rider fee,
o the Guaranteed Minimum Income Benefit Rider fee,
o mortality and expense risk fee, and
o withdrawal charge (assuming a withdrawal at the end of the
illustrated period).
We also may make optional total return quotations that do not reflect deduction
of the withdrawal charge (assuming no withdrawal), the Enhanced Death Benefit
Rider fee and the Guaranteed Minimum Income Benefit Rider fee. Total return
quotations may be shown by means of schedules, charts or graphs.
Average annual total return is the average annual compounded rate of return of
the investment over a period of one, five and ten years (or up to the life of
the subaccount if it is less than ten years old).
Cumulative total return is the cumulative change in the value of an investment
over a specified time period. We assume that income earned by the investment is
reinvested. Cumulative total return generally will be higher than average annual
total return.
Annualized simple yield (for subaccounts investing in money market funds)
"annualizes" the income generated by the investment over a given seven-day
period. That is, we assume the amount of income generated by the investment
during the period will be generated each seven-day period for a year. We show
this as a percentage of the investment.
Annualized compound yield (for subaccounts investing in money market funds) is
calculated like simple yield except that we assume the income is reinvested when
we annualize it. Compound yield will be higher than the simple yield because of
the compounding effect of the assumed reinvestment.
<PAGE>
Annualized yield (for subaccounts investing in income funds) divides the net
investment income (income less expenses) for each accumulation unit during a
given 30-day period by the value of the unit on the last day of the period. We
then convert the result to an annual percentage. You should consider performance
information in light of the investment objectives, policies, characteristics and
quality of the fund in which the subaccount invests and the market conditions
during the specified time period. Advertised yields and total return figures
include charges that reduce advertised performance. Therefore, 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 and yield.)
If you would like additional information about actual performance, please
contact us at the address or telephone number on the first page of this
prospectus.
<PAGE>
The Variable Account and the Funds
You may allocate payments to any or all the subaccounts of the variable account
that invest in shares of the following funds:
<TABLE>
<CAPTION>
- - - ---------------------------------------------------------------------------------------------------------------------------------
Subaccount Investing in Investment Objectives and Policies Investment Advisor or Manager
- - - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- - - --------------------------------------------------------------------------------------------------------------------------------
PBCA 1 AXPSM Variable Portfolio - Objective: long-term total return exceeding that of IDS Life Insurance Company
WBCA 1 Blue Chip Advantage Fund the U.S. stock market. Invests primarily in common (IDS Life), investment
WBCA 3 stocks of companies included in the unmanaged S&P manager; American Express
WBCA 4 500 Index. Financial Corporation (AEFC)
WBCA 7 investment advisor.
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
WCAR 1 AXPSM Variable Portfolio - Objective: capital appreciation. Invests primarily IDS Life, investment
WCAR 3 Capital Resource Fund in U.S. common stocks. manager; AEFC investment
WCAR 4 advisor.
WCAR 6
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
PDEI 1 AXPSM Variable Portfolio - Objective: a high level of current income IDS Life, investment
Diversified Equity Income and, as a secondary goal, steady growth of capital. manager; AEFC investment
WDEI 1 Fund Invests primarily in dividend-paying common advisor.
and preferred stocks.
WDEI 3
WDEI 4
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
PEXI 1 AXPSM Variable Portfolio - Objective: high current income, with capital growth IDS Life, investment
WEXI 1 Extra Income Fund as a secondary objective. Invests primarily in manager; AEFC investment
WEXI 3 long-term, high-yielding, high-risk debt securities advisor.
WEXI 4 below investment grade issued by U.S. and foreign
corporations.
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
WFDI 1 AXPSM Variable Portfolio - Objective: a high level of current income and safety IDS Life, investment
WFDI 3 Federal Income Fund of principal consistent with an investment in U.S. manager; AEFC investment
WFDI 4 government and government agency securities. Invests advisor.
WFDI 6 primarily in debt obligations issued or guaranteed
as to principal and interest by the U.S. government,
its agencies or instrumentalities.
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
PNDM 1 AXPSM Variable Portfolio - Objective: long-term growth of capital. Invests IDS Life, investment
WNDM 1 New Dimensions Fund primarily in common stocks of U.S. and foreign manager; AEFC investment
WNDM 3 companies showing potential for significant growth. advisor.
WNDM 4
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
PSCA 1 AXPSM Variable Portfolio - Objective: long-term capital growth. Invests IDS Life, investment
WSCA 1 Small Cap Advantage Fund primarily in equity stocks of small companies that manager; AEFC investment
WSCA 3 are often included in the S&P SmallCap 600 Index or advisor.
WSCA 4 the Russell 2000 Index.
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
PCAP 1 AIM V.I. Capital Objective: growth of capital. Invests primarily in A I M Advisors, Inc.
WCAP 1 Appreciation Fund common stocks, with emphasis on medium- or
WCAP 3 small-sized growth companies.
WCAP 4
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
PVAL 1 AIM V.I. Value Fund Objective: long-term growth of capital with income A I M Advisors, Inc.
WVAL 1 as a secondary objective. Invests primarily in
WVAL 3 equity securities judged to be undervalued relative
WVAL 4 to the investment advisor's appraisal of the current
or projected earnings of the
companies issuing the securities,
or relative to current market
values of assets owned by the
companies issuing the securities,
or relative to the equity market
generally.
- - - ---------------------------------------------------------------------------------------------------------------------------------
WSRG 1 Dreyfus Socially Objective: capital growth, with current income as a The Dreyfus Corporation,
WSRG 3 Responsible Growth Fund secondary objective. Invests primarily in the common investment advisor; NCM
WSRG 4 stocks of companies that, in the opinion of the Capital Management Group,
WSRG 6 fund's management, meet traditional investment Inc., sub-investment advisor.
standards and conduct their business in a manner
that contributes to the enhancement of the quality
of life in America.
- - - ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- - - ---------------------------------------------------------------------------------------------------------------------------------
Subaccount Investing in Investment Objectives and Policies Investment Advisor or Manager
- - - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- - - --------------------------------------------------------------------------------------------------------------------------------
WISE 1 Franklin Templeton VIP
WISE 3 Trust Income Securities
WISE 4 Fund - Class 2
WISE 6
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
WMSI 1 Franklin Templeton VIP Objective: capital appreciation with income as a Franklin Mutual Advisers, LLC
WMSI 3 Trust Mutual Shares secondary goal. Invests primarily in equity
WMSI 4 Securities Fund - Class 2 securities of companies that the manager believes are
WMSI 6 available at market prices less than their actual
value based on certain recognized or objective
criteria (intrinsic value).
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
WRES 1 Franklin Templeton VIP Objective: capital appreciation with a secondary goal Franklin Advisers, Inc.
WRES 3 Trust Real Estate to earn current income. Invests primarily in
WRES 4 Securities Fund - Class 2 securities of companies operating in the real estate
WRES 6 industry, primarily equity real estate investment
trusts (REITS).
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
PSMC 1 Franklin Templeton VIP Objective: long-term capital growth. Invests Franklin Advisers, Inc.
WSMC 1 Trust Small Cap Fund - primarily in equity securities of U.S. small
WSMC 3 Class 2 capitalization (small cap) growth companies.
WSMC 4
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
WUSE 1 Goldman Sachs VIT Objective: long-term growth of capital and dividend Goldman Sachs Asset
WUSE 3 CORE SM U.S. Equity Fund income. Primarily invests in a broadly diversified Management
WUSE 4 portfolio of large-cap and blue chip equity
WUSE 6 securities representing all major sectors of the U.S.
economy.
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
WGLI 1 Goldman Sachs VIT Global Objective: high total return, emphasizing current Goldman Sachs Asset
WGLI 3 Income Fund income, and, to a lesser extent, providing Management International
WGLI 4 opportunities for capital appreciation. Invests
WGLI 6 primarily in a portfolio of high quality fixed-income
securities of U.S. and foreign issuers and enters
into transactions in foreign currencies.
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
WMCE 1 Goldman Sachs VIT Mid Cap Objective: long-term capital appreciation. Invests Goldman Sachs Asset
WMCE 3 Value Fund primarily in mid-capitalization U.S. stocks that are Management
WMCE 4 believed to be undervalued or undiscovered by the
WMCE 6 marketplace.
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
PGIS 1 MFS(R)Growth with Income Massachusetts Financial
WGIS 1 Series Service Company (MFS)
WGIS 3
WGIS 4
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
PUTS 1 MFS(R) Utilities Series Objective: capital growth and current income. Invests MFS Investment Management(R)
WUTS 1 primarily in equity and debt securities of domestic
WUTS 3 and foreign companies in the utilities industry.
WUTS 4
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
PIGR 1 Putnam VT International Objective: long-term capital appreciation. Invests Putnam Investment
WIGR 1 Growth Fund - Class IB primarily in growth stocks outside the U.S. Management, Inc.
WIGR 3 Shares
WIGR 4
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
PVIS 1 Putnam VT Vista Fund - Objective: capital appreciation. Invests primarily in Putnam Investment
WVIS 1 Class IB Shares growth stocks that Putnam Management believes have Management, Inc.
WVIS 3 above-average potential for capital appreciation.
WVIS 4
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
WAAL 1 Wells Fargo Asset
WAAL 3 Allocation Fund
WAAL 4
WAAL 6
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
WCBD 1 Wells Fargo Corporate Bond
WCBD 3 Fund
WCBD 4
WCBD 6
- - - ---------------------------------------------------------------------------------------------------------------------------------
<PAGE>
- - - ---------------------------------------------------------------------------------------------------------------------------------
WEQI 1 Wells Fargo Equity Income
WEQI 3 Fund
WEQI 4
WEQI 6
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
WEQV 1 Wells Fargo Equity Value
WEQV 3 Fund
WEQV 4 WEQV 6
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
WGRO 1 Wells Fargo Growth Fund
WGRO 3
WGRO 4
WGRO 6
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
WIEQ 1 Wells Fargo International
WIEQ 3 Equity Fund
WIEQ 4
WIEQ 6
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
WLCG 1 Wells Fargo Large Company
WLCG 3 Growth Fund
WLCG 4
WLCG 6
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
WMMK 1 Wells Fargo Money Market
WMMK 3 Fund
WMMK 4
WMMK 6
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
WSCG 1 Wells Fargo Small Cap
WSCG 3 Growth Fund
WSCG 4
WSCG 6
- - - ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
[Investment objectives and Managers for some new funds to be filed by
amendment.]
The investment objectives and policies of some of the funds are similar to the
investment objectives and policies of other mutual funds that an investment
advisor or its affiliates manage. Although the objectives and policies may be
similar, each fund will have its own portfolio holdings and its own fees and
expenses. Accordingly, each fund will have its own investment results.
The investment managers and advisors cannot guarantee that the funds will meet
their investment objectives. Please read the funds' prospectuses for facts you
should know before investing. These prospectuses are available by contacting us
at the address or telephone number on the first page of this prospectus.
All funds are available to serve as the underlying investments for variable
annuities. Some funds also are available to serve as investment options for
variable life insurance policies and qualified plans. It is possible that in the
future, it may be disadvantageous for variable annuity accounts and variable
life insurance accounts and/or qualified plans to invest in the available funds
simultaneously.
Although the insurance company and the funds do not currently foresee any such
disadvantages, the boards of directors or trustees of the appropriate funds will
monitor events in order to identify any material conflicts between annuity
owners, policy owners and qualified plans and to determine what action, if any,
should be taken in response to a conflict. If a board were to conclude that it
should establish separate funds for the variable annuity, variable life
insurance and qualified plan accounts, you would not bear any expenses
associated with establishing separate funds. Please refer to the fund
prospectuses for risk disclosure regarding simultaneous investments by variable
annuity, variable life insurance and qualified plan accounts.
The IRS issued final regulations relating to the diversification requirements
under Section 817(h) of the Internal Revenue Code of 1986, as amended (the
Code). Each fund intends to comply with these requirements.
The variable account was established under Indiana law on July 15, 1987, and the
subaccounts are registered together as a single unit investment trust under the
Investment Company Act of 1940 (the 1940 Act). This registration does not
involve any supervision of our management or investment practices and policies
by the SEC. All obligations arising under the contracts are general obligations
of American Enterprise Life.
The 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 prohibits us from
charging a subaccount with liabilities of any other subaccount or of our general
business. The variable account includes other subaccounts that are available
under contracts that are not described in this prospectus.
The U.S. Treasury and the Internal Revenue Service (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
subaccounts it may allow before the contract owner would be currently taxed on
income earned within 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 contract, as necessary, so that the owner will not be subject to
current taxation as the owner of the subaccount assets.
We intend to comply with all federal tax laws so that the contract continues to
qualify as an annuity for federal income tax purposes. We reserve the right to
modify the contract as necessary to comply with any new tax laws.
<PAGE>
The Fixed Accounts
Guarantee Period Accounts
You may also allocate purchase payments to one or more of the Guarantee Period
Accounts with Guarantee Periods ranging from two to ten years. The minimum
required investment in each Guarantee Period Account is $1,000. Each Guarantee
Period Account pays an interest rate that is declared when you allocate money to
that account. That interest rate is then fixed for the Guarantee Period that you
chose. We will periodically change the declared interest rate for any future
allocations to these accounts, but we will not change the rate paid on money
currently in a Guarantee Period Account.
We have no specific formula for determining the rate of interest that we declare
as future interest rates on the Guarantee Period Accounts. We will declare the
interest rates from time to time based on our analysis of current market
conditions. In addition, we also may consider various other factors in
determining the interest rates for a given Guarantee Period including regulatory
and tax requirements; sales commissions and administrative expenses we bear;
general economic trends; and competitive factors.
You may transfer money out of the Guarantee Period Accounts within 30 days
before the end of the Guarantee Period without receiving a MVA (see "Market
Value Adjustment (MVA)" below.) At that time you may choose to start a new
Guarantee Period of the same length, transfer the money to another Guarantee
Period Account, transfer the money to any of the subaccounts, or withdraw the
money from the contract (subject to applicable withdrawal provisions). If we do
not receive any instructions at the end of your Guarantee Period, we will
automatically transfer the money into the one-year fixed account. These accounts
are not available in all states and are not offered after annuity payouts begin.
We hold amounts you allocate to the Guarantee Period Accounts in a "nonunitized"
separate account we have established under the Indiana Insurance Code. This
separate account provides an additional measure of assurance that we will make
full payment of amounts due under the Guarantee Period Accounts. State insurance
law prohibits us from charging this separate account with liabilities of any
other separate account or of our general business. We own the assets of this
separate account as well as any favorable investment performance of those
assets. You do not participate in the performance of the assets held in this
separate account. We guarantee all benefits relating to your value in the
Guarantee Period Accounts.
We intend to construct and manage the investment portfolio relating to the
separate account using a strategy known as "immunization." Immunization seeks to
lock in a defined return on the pool of assets versus the pool of liabilities
over a specified time horizon. Since the return on the assets versus the
liabilities is locked in, it is "immune" to any potential fluctuations in
interest rates during the given time. We achieve immunization by constructing a
portfolio of
<PAGE>
assets with a price sensitivity to interest rate changes (i.e., price duration)
that is essentially equal to the price duration of the corresponding portfolio
of liabilities. Portfolio immunization provides us with flexibility and
efficiency in creating and managing the asset portfolio, while still assuring
safety and soundness for funding liability obligations.
We must invest this portfolio of assets in accordance with requirements
established by applicable state laws regarding the nature and quality of
investments that life insurance companies may make and the percentage of their
assets that they may commit to any particular type of investment. Our investment
strategy will incorporate the use of a variety of debt instruments having price
durations tending to match the applicable Guarantee Periods. These instruments
include, but are not necessarily limited to, the following:
o Securities issued by the U.S. government or its agencies or
instrumentalities, which issues may or may not be guaranteed by the U.S.
government;
o Debt securities that have an investment grade, at the time of purchase,
within the four highest grades assigned by any of three nationally
recognized rating agencies - Standard & Poor's, Moody's Investors Service
or Duff and Phelp's - or are rated in the two highest grades by the
National Association of Insurance Commissioners;
o Other debt instruments which are unrated or rated below investment grade,
limited to 10% of assets at the time of purchase; and
o Real estate mortgages, limited to 45% of portfolio assets at the time of
acquisition.
In addition, options and futures contracts on fixed income securities will be
used from time to time to achieve and maintain appropriate investment and
liquidity characteristics on the overall asset portfolio.
While this information generally describes our investment strategy, we are not
obligated to follow any particular strategy except as may be required by federal
law and Indiana and other state insurance laws.
Market Value Adjustment (MVA)
You may choose to transfer or withdraw money out of the Guarantee Period
Accounts prior to the end of the Guarantee Period. The amount transferred or
withdrawn will receive a MVA which will increase or decrease the actual amount
transferred or withdrawn. We calculate the MVA using the formula shown below and
we base it on the current level of interest rates compared to the rate of your
Guarantee Period Account.
Amount transferred x ( l + i ) n/12
--------------------
( l + j + .001 )
Where: i = rate earned in the account from which funds
are being transferred
j = current rate for a new Guarantee Period
equal to the remaining term in the
current Guarantee Period
n = number of months remaining in the current
Guarantee Period (rounded up)
We will not make MVAs for amounts withdrawn for withdrawal charges, the annual
contract administrative charge or paid out as a death claim. We also will not
make MVAs on automatic transfers in the Guarantee Period Account. We determine
any applicable withdrawal charges based on the market value adjusted
withdrawals. In some states the MVA is limited.
The one-year fixed account
You may allocate purchase payments to the one-year fixed account. We back the
principal and interest guarantees relating to the one-year fixed account. The
value of the one-year fixed account increases as we credit interest to the
account. Purchase payments and transfers to the one-year fixed account become
part of our general account. We credit interest daily and compound it annually.
We will change the interest rates from time to time at our discretion.
<PAGE>
Interest in the one-year fixed account is not required to be registered with the
SEC. However, the Market Value Adjustment interests under the contracts are
registered with the SEC. The SEC staff does not review the disclosures in this
prospectus on the one-year fixed account (but the SEC does review the
disclosures in this prospectus on the Market Value Adjustment interests).
Disclosures regarding the one-year 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
"Making the Most of Your Contract -- Transfer policies" for restrictions on
transfers involving the one-year fixed account.)
Buying Your Contract
You or your sales representative will send an application along with your
initial purchase payment to our 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 a contract or
become an annuitant if you are 85 or younger. (The age limit may be younger for
qualified annuities in some states.)
When you apply, you may select:
o the length of the withdrawal charge period (six or eight years);
o the optional Enhanced Death Benefit Rider;
o the optional Guaranteed Minimum Income Benefit Rider;
o the one-year fixed account, Guarantee Period Accounts and/or subaccounts in
which you want to invest;
o how you want to make purchase payments; and
o a beneficiary.
The contract provides for allocation of purchase payments to the subaccounts of
the variable account and/or to the fixed accounts in even 1% increments.
If your application is complete, we will process it and apply your purchase
payment to the fixed accounts and subaccounts you selected within two business
days after we receive it at our office. 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 office.
You may make monthly payments to your contract under a SIP. To begin the SIP,
you will complete and send a form and your first SIP 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. When we process
your application, we will establish the retirement date to the maximum age or
date described below. You can also select a date within the maximum limits. 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.
<PAGE>
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 tenth contract
anniversary, if purchased after age 75. (In Pennsylvania, the maximum
retirement date ranges from age 85 to 96 based on the annuitant's age when
we issue the contract. See contract for details.)
For qualified annuities (except Roth IRAs), to avoid IRS penalty taxes, the
retirement date generally must be:
o on or after the date the annuitant reaches age 59 1/2; and
o for IRAs and SEPs, by April 1 of the year following the calendar year when
the annuitant reaches age 70 1/2; or
o for TSAs, by April 1 of the year following the calendar year when the
annuitant reaches age 70 1/2, or, if later retires (except that 5% business
owners may not select a retirement date that is later than April 1 of the
year following the calendar year when they reach age 70 1/2).
If you take the minimum IRA or TSA distributions as required by the Code from
another tax-qualified investment, or in the form of partial withdrawals from
this contract, annuity payouts can start as late as the annuitant's 85th
birthday or the tenth contract anniversary, if later. (In Pennsylvania, the
annuity payout ranges from age 85 to 96 based on the annuitant's age when we
issue the contract. See contract for details.)
Beneficiary
We will pay your named beneficiary the death benefit if it becomes payable
before the retirement date (while the contract is in force and before annuity
payouts begin). 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 payments
Minimum allowable purchase payments
If paying by SIP*: If paying by any other method**:
$50 $2,000 initial payment
$100 for any additional payments
* Payments made using SIP must total $2,000 before you can make partial
withdrawals.
** The Guarantee Period Accounts require a minimum $1,000
initial payment.
Maximum total allowable purchase payments*** (without prior approval):
$1,000,000
*** This limit applies in total to all American Enterprise Life annuities
you own. We reserve the right to increase the maximum limit. For
qualified annuities, the qualified plan's limits on annual contributions
also apply.
<PAGE>
How to make purchase payments
1
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
2
By SIP: Contact your sales representative to complete the necessary
SIP paperwork
Purchase payment credits
You will generally receive a purchase payment credit with every payment you make
to your contract. We apply this credit immediately. We allocate the credit to
the fixed accounts and subaccounts in the same proportions as your purchase
payment. We calculate the credit as a percentage of the net current payment
(current payment less the amount of partial withdrawals that exceed all prior
purchase payments) according to the following schedule:
<TABLE>
<CAPTION>
<S> <C>
If total net payments* made during then the amount of the purchase payment credit
the life of the contract equals....... we add to the net current payment equals.....
Less than $10,000 1%
$10,000 to less than 1 million 2
$1 million to less than 5 million 3
$5 million and over 4
*Net payments is equal to total payments less total withdrawals.
</TABLE>
If you make subsequent payments which cause the contract to become eligible for
a higher percentage credit, we will add credits to increase the credit
percentage on prior payments (less withdrawals). We allocate credits according
to the purchase payment allocation on the date we add the credits to the
contract.
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 accounts in the
same proportion your interest in each account bears to your total contract
value.
We will waive this charge when your 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 charge at
the time of withdrawal regardless of the contract value or purchase payments
made. We cannot increase the annual contract administrative charge and it does
not apply after annuity payouts begin or when we pay death benefits.
<PAGE>
Variable account administrative charge
We apply this charge daily to the 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 subaccounts. The unit values of your subaccounts
reflect this fee. For contracts with a six-year withdrawal charge schedule, this
fee totals 1.35% of their average daily net assets on an annual basis. For
contracts with an eight-year withdrawal charge schedule, this fee totals 1.10%
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. If you choose the optional Enhanced Death Benefit
Rider, we will charge an additional 0.20% of the average daily net assets on
annual basis (see "Enhanced Death Benefit Rider fee" below). These fees do not
apply to the fixed accounts. We cannot increase these fees.
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 our entire
group of annuitants live. If, as a group, annuitants outlive the life expectancy
we assumed in our actuarial tables, then we must take money from our general
assets to meet our obligations. If, as a group, 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 or the 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 accrued as
follows:
o first, to the extent possible, the subaccounts pay this fee from any
dividends distributed from the funds in which they invest;
o 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.
Enhanced Death Benefit Rider fee
We charge a fee for this optional feature only if you choose this option. If
selected, we apply this fee daily to the subaccounts as part of the mortality
and expense risk fee. It is reflected in the unit values of the subaccounts and
it totals 0.20% of their average daily net assets on an annual basis. We cannot
increase the Enhanced Death Benefit Rider fee.
Guaranteed Minimum Income Benefit Rider fee
We charge a fee for this optional feature only if you choose this option. If
selected, we deduct the fee (currently 0.30%) from the contract value on your
contract anniversary at the end of each contract year. We prorate this fee among
the subaccounts and fixed accounts in the same proportion your interest in each
account bears to your total contract value.
We apply the fee on an adjusted benefit base calculated as the result of (a) +
(b) - (c), where:
(a) is the Guaranteed Income Benefit Base,
(b) is the adjusted transfers from the subaccounts to the fixed accounts
made in the last six months, and
(c) is the total contract value in the fixed accounts.
<PAGE>
The result of (b) minus (c) cannot be greater than zero. It allows us to base
the charge largely on the subaccounts, and not on the fixed accounts.
We will deduct the fee, adjusted for the number of calendar days coverage was in
place, if the contract is terminated for any reason or when annuity payouts
begin. We cannot increase the Guaranteed Minimum Income Benefit Rider fee after
the rider effective date and it does not apply after annuity payouts begin. We
can increase the Guaranteed Minimum Income Benefit Rider fee on new contracts up
to a maximum of 0.75%.
Withdrawal charge
If you withdraw all or part of your contract, you may be subject to a withdrawal
charge. A withdrawal charge applies if all or part of the withdrawal amount is
from purchase payments we received within six or eight years before withdrawal.
You select the withdrawal charge period at the time of your application for the
contract. The withdrawal charge percentages that apply to you are shown in your
contract. In addition, amounts withdrawn from a Guarantee Period Account prior
to the end of the applicable Guarantee Period will be subject to a MVA. (See
"The Fixed Accounts - Market Value Adjustments (MVA).") For purchase payment
credits made within the last 12 months we will assess a charge, similar to a
withdrawal charge, equal to the amount of the purchase payment credits. The
amount we pay to you under these circumstances will always equal or exceed your
withdrawal value.
For purposes of calculating any withdrawal charge, we treat amounts withdrawn
from your contract value in the following order:
1. First, in each contract year, we withdraw amounts totaling up to 10% of
your prior anniversary contract value. (Your initial purchase payment is
considered the prior anniversary contract value during the first
contract year.) We do not assess a 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 equal contract value less purchase payments received and not
previously withdrawn. We do not assess a withdrawal charge on contract
earnings.
NOTE: We determine contract earnings by looking at the entire contract value,
not the earnings of any particular subaccount or the fixed accounts.
3. Next we withdraw purchase payments received prior to the withdrawal charge
period you selected and shown in your contract. We do not assess a
withdrawal charge on these purchase payments.
4. Finally, if necessary, we withdraw purchase payments received that are
still within the withdrawal charge period you selected and shown in your
contract. We withdraw these payments on a first-in, first-out (FIFO) basis.
We do assess a withdrawal charge on these payments.
We determine your withdrawal charge by multiplying each of your payments
withdrawn by the applicable withdrawal charge percentage, and then adding the
total withdrawal charges.
<PAGE>
The withdrawal charge percentage depends on the number of years since you made
the payments that are withdrawn, depending on the schedule you selected:
<TABLE>
<CAPTION>
Six-year schedule Eight-year schedule
<S> <C> <C> <C>
Years from purchase payment Surrender charge percentage Years from purchase Surrender charge percentage
receipt payment receipt
1 8% 1 8%
2 8 2 8
3 8 3 8
4 6 4 8
5 4 5 8
6 2 6 6
Thereafter 0 7 4
8 2
Thereafter 0
</TABLE>
Withdrawal charge calculation example:
The following is an example of the calculation we would make to determine the
withdrawal charge on a contract with an eight-year withdrawal charge schedule
with this history:
o The contract date is Nov. 1, 1999 with a contract year of Nov. 1 through
Oct. 30 and with an anniversary date of Nov. 1 each year; and
o We received these payments
- $10,000 Nov. 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 Nov. 1, 2008 contract value was $38,488.
<TABLE>
<CAPTION>
<S> <C>
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 Nov. 1, 1999 payment was received nine or more years before
withdrawal and is withdrawn without withdrawal charge; and
$640 $8,000 Dec. 31, 2005 payment is in its fourth year from receipt,
withdrawn with an 8% withdrawal charge; and
$480 $6,000 Feb. 20, 2007 payment is in its third year from receipt
---
withdrawn with an 8% withdrawal charge.
$1,120
</TABLE>
<PAGE>
For a partial withdrawal that is subject to a withdrawal charge, the amount we
actually withdraw from your contract 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 make a full withdrawal of
your contract, we also will deduct the $30 contract administrative charge.
Waiver of withdrawal charges
We do not assess withdrawal charges for:
o withdrawals of any contract earnings;
o amounts totaling up to 10% of your prior contract anniversary contract
value to the extent it exceeds contract earnings;
o required minimum distributions from a qualified annuity (for those amounts
required to be distributed from the contract described in this prospectus);
o contracts settled using an annuity payout plan;
o withdrawals made as a result of one of the "Contingent events" described
below to the extent permitted by state law (see your contract for
additional conditions and restrictions);
o amounts we refund to you during the free look period; and
o death benefits.
Contingent events
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 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.
o Withdrawals you make if you or the annuitant become disabled within the
meaning of IRC Section 72(m)(7) after your contract date. The disabled
person must also be receiving Social Security disability or state long term
disability benefits. The disabled person must be age 70 or younger at the
time of withdrawal. You must provide us with a signed letter from the
disabled person stating that he or she meets the above criteria, a legible
photocopy of Social Security disability or state long term disability
benefit payments and the application for such payments.
o Withdrawals you make once a year if you or the annuitant become unemployed
at least one year after your contract's date, up to the following amounts
each year:
(a)25% of your prior anniversary contract value (or $10,000
if greater) if the unemployment condition is met for at
least 30 straight days; or
(b)50% of your prior anniversary contract value (or $10,000
if greater) if the unemployment condition is met for at
least 180 straight days.
The unemployment condition is met if the unemployed person is currently
receiving unemployment compensation from a government unit of the United
States, whether federal or state. You must provide us with a signed letter
from the unemployed person stating that he or she meets the above criteria
with a legible photocopy of the unemployment benefit payments meeting the
above criteria with regard to dates.
Possible group reductions: In some cases we may incur lower sales and
administrative expenses 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.
<PAGE>
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. In some cases, we deduct premium taxes from your purchase payments before
we allocate them. In other cases, we deduct them when you make a full withdrawal
from your contract or when annuity payouts begin.
Valuing Your Investment
We value your fixed accounts and subaccounts as follows:
Fixed accounts: We value the amounts you allocated to the fixed accounts
directly in dollars. The value of a fixed account equals:
o the sum of your purchase payments and transfer amounts allocated to the
one-year fixed account and the Guarantee Period Accounts;
o plus any purchase payment credits allocated to the fixed accounts;
o plus interest credited;
o minus the sum of amounts withdrawn after the MVA (including any applicable
withdrawal charges) and amounts transferred out;
o minus any prorated contract administrative charge; and
o minus any prorated portion of the Guaranteed Minimum Income Benefit Rider
fee (if applicable).
Subaccounts: We convert amounts you allocated to the subaccounts into
accumulation units. Each time you make a purchase payment or transfer amounts
into one of the 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 subaccount, or we assess a contract
administrative charge or the Guaranteed Minimum Income Benefit Rider fee, 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 after deduction of any premium taxes by the current
accumulation unit value.
Accumulation unit value
The current accumulation unit value for each subaccount equals the last value
times the subaccount's current net investment factor.
<PAGE>
Net investment factor
We determine the net investment factor by:
o adding the fund's current net asset value per share, plus the 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, the variable account administrative charge and the Enhanced Death
Benefit Rider fee (if selected) from the result.
Because the net asset value of the fund may fluctuate, the accumulation unit
value may increase or decrease. You bear all the investment risk in a
subaccount.
Factors that affect 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 subaccounts;
o any purchase payment credits allocated to the subaccounts;
o transfers into or out of the subaccounts;
o partial withdrawals;
o withdrawal charges;
o prorated portions of the contract administrative charge; and/or
o prorated portions of the Guaranteed Minimum Income Benefit Rider fee
(if selected).
Accumulation unit values will fluctuate due to:
o changes in funds' net asset value;
o dividends distributed to the subaccounts;
o capital gains or losses of funds;
o fund operating expenses; and/or
o mortality and expense risk fee, the variable account administrative
charge and the Enhanced Death Benefit Rider fee (if selected).
Making the Most of Your Contract
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 transfer a set amount monthly from a relatively conservative subaccount to
a more aggressive one, or to several others, or from the one-year fixed account
or the Guarantee Period Accounts (two year only) to one or more subaccounts. The
three to ten year Guarantee Period Accounts are not available for automated
transfers. You can also 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 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.
<PAGE>
<TABLE>
<CAPTION>
How dollar-cost averaging works
<S> <C> <C> <C> <C>
By investing an Amount Accumulation unit Number of units
equal number of Month invested value purchased
dollars each month... Jan $100 $20 5.00
Feb 100 18 5.56
you automatically buy Mar 100 17 5.88
more units when the Apr 100 15 6.67
per unit market price May 100 16 6.25
is low... Jun 100 18 5.56
Jul 100 17 5.88
and fewer units when Aug 100 19 5.26
the per unit market Sept 100 21 4.76
price is high. Oct 100 20 5.00
</TABLE>
You 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 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 with this
strategy 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 us.
Asset Rebalancing
You can ask us in writing to automatically rebalance the 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 subaccount matches your current
subaccount percentage allocations. These percentage allocations must be in whole
numbers. Asset rebalancing does not apply to the fixed accounts. There is no
charge for asset rebalancing. The contract value must be at least $2,000.
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 sales representative.
Transferring money between accounts
You may transfer money from any one subaccount, or the fixed accounts, to
another subaccount before annuity payouts begin. (Certain restrictions apply to
transfers involving the one-year fixed account.) We will process your transfer
on the valuation date we receive your request. 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. Transfers out of the Guarantee Period
Accounts will be subject to a MVA if done more than 30 days before the end of
the Guarantee Period.
We may suspend or modify transfer privileges at any time. Excessive trading
activity can disrupt fund management strategy and increase expenses, which are
borne by all contract owners who allocated purchase payments to the fund
regardless of their transfer activity. We may apply modifications or
restrictions in any reasonable manner to prevent transfers we believe will
disadvantage other contract owners. (For information on transfers after annuity
payouts begin, see "Transfer policies" below.)
<PAGE>
Transfer policies
o Before annuity payouts begin, you may transfer contract values between the
subaccounts, or from the subaccounts to the fixed accounts at any time.
However, if you made a transfer from the one-year fixed account to the
subaccounts, you may not make a transfer from any subaccount back to the
one-year fixed account for six months following that transfer.
o You may transfer contract values from the one-year fixed account to the
subaccounts or the Guarantee Period Accounts once a year on or within 30
days before or after the contract anniversary (except for automated
transfers, which can be set up at any time for certain transfer periods
subject to certain minimums).
o You may transfer contract values from the Guaranteed Period Accounts at any
time. Transfers made before the end of the Guaranteed Period will receive a
MVA, which may result in a gain or loss of contract value.
o If we receive your request on or within 30 days before or after the
contract anniversary date, the transfer from the one-year fixed account to
the subaccounts or the Guarantee Period Accounts will be effective on the
valuation date we receive it.
o We will not accept requests for transfers from the one-year fixed account
at any other time.
o Once annuity payouts begin, you may not make transfers to or from the
one-year fixed account, but you may make transfers once per contract year
among the subaccounts. During the annuity payout period, your choices of
subaccounts may be limited.
o Once annuity payouts begin, you may not make any transfers to the Guarantee
Period Accounts.
How to request a transfer or withdrawal
1 Send your name, contract number, Social Security
By Letter: Number or Taxpayer Identification Number and signed
request for a transfer or withdrawal to:
Regular mail:
American Enterprise Life Insurance Company
80 South Eighth Street
P.O. Box 534
Minneapolis, MN 55440-0534
Express mail:
American Enterprise Life Insurance Company
Attention: Unit 829
733 Marquette Avenue
Minneapolis, MN 55402
Minimum amount
Transfers or
withdrawals: $500 or entire account balance
Maximum amount
Transfers or
withdrawals: Contract value
<PAGE>
2 Your sales representative can help you set up
By automated automated transfers or partial withdrawals among
transfers and your subaccounts or fixed accounts.
automated partial
withdrawals: 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 from the one-year fixed account to any one of the
subaccounts may not exceed an amount that, if continued, would deplete the
one-year fixed account within 12 months.
o Automated withdrawals may be restricted by applicable law under some
contracts.
o You may not make additional purchase payments if automated partial
withdrawals are in effect.
o Automated partial withdrawals may result in IRS taxes and penalties on all
or part of the amount withdrawn.
Minimum amount
Transfers or
withdrawals: $100 monthly
$250 quarterly, semi-
annually or annually
3 Call between 7 a.m. and 6 p.m. Central time:
By phone:
800-333-3437 or
(612) 671-7700 (Minneapolis/St. Paul area)
Minimum amount
Transfers or
withdrawals: $500 or entire account balance
Maximum amount
Transfers: Contract value
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 withdrawal within 30 days of a phoned-in 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
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. For total withdrawals,
we will compute the value of your contract at the next accumulation unit value
calculated after we receive your request. We may ask you to return the contract.
You may have to pay charges (see "Charges") 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 you request a partial
withdrawal, we will withdraw money from all your subaccounts and/or the fixed
accounts in the same proportion as your value in each account correlates to your
total contract value, unless you request otherwise.
Receiving payment
By regular or express mail:
o payable to owner;
o mailed to address of record.
NOTE: We will charge you a fee if you request express mail delivery.
Normally, we will send the payment 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.
TSA Special Surrender Provisions
Participants in Tax-Sheltered Annuities: The Code imposes certain restrictions
on your right to receive early distributions from a TSA:
o Distributions attributable to salary reduction contributions (plus
earnings) made after Dec. 31, 1988, or to transfers or rollovers from other
contracts, may be made from the TSA only if:
- you are at least age 59 1/2;
- you are disabled as defined in the Code;
- you separated from the service of the employer who
purchased the contract; or
- the distribution is because of your death.
o If you encounter a financial hardship (as defined by the Code), you may
receive a distribution of all contract values attributable to salary
reduction contributions made after Dec. 31, 1988, but not the earnings on
them.
o Even through a distribution may be permitted under the above rules, it may
be subjected to IRS taxes and penalties (see "Taxes").
<PAGE>
o The above restrictions on distributions do not affect the availability of
the amount credited to the contract as of Dec. 31, 1988. The restrictions
also do not apply to transfers or exchanges of contract value within the
contract, or to another registered variable annuity contract or investment
vehicle available through the employer.
Changing Ownership
You may change ownership of your nonqualified annuity at any time by completing
a change of ownership form we approve and sending it to our office. The change
will become binding upon us when we receive and record it. We will honor any
change of ownership request that we believe is authentic and we will use
reasonable procedures to confirm authenticity. If we follow these procedures, we
will not take any 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. However, if the owner is a trust or custodian, or an
employer acting in a similar capacity, ownership of a contract may be
transferred to the annuitant.
Benefits in Case of Death
We will pay the death benefit to your beneficiary upon the earlier of your death
or the annuitant's death. The benefit paid will be based on the death benefit
coverage you select when you purchased the contract. If a contract has more than
one person as the owner, we will pay benefits upon the first to die of any owner
or the annuitant.
If you or the annuitant die before annuity payouts begin while this contract is
in force, we will pay the beneficiary the greatest of the following less any
purchase payment credits added to the contract in the last 12 months:
1. the contract value; or
2. the total purchase payments paid plus purchase payment credits and less
any "adjusted partial withdrawals"; or
3. the "maximum anniversary value" immediately preceding the date of death
plus the dollar amount of any payments since that anniversary plus
purchase payment credits and minus any "adjusted 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 you or the annuitant.
<PAGE>
Adjusted partial withdrawals:
We calculate an "adjusted partial withdrawal " 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.
Maximum anniversary value: 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 purchase payments made to the contract plus purchase payment
credits and minus any "adjusted partial withdrawals".
The "maximum anniversary value" is equal to the greatest of these anniversary
values.
After your or the annuitant's 81st birthday, the death benefit continues to be
the death benefit value as of that date, plus any subsequent payments and
purchase payment credits and minus any "adjusted partial withdrawals."
Example:
o The contract is purchased with a payment of $20,000 on Jan. 1, 1999. A
purchase payment credit of $400 is added to the contract.
o On Jan. 1, 2000 (the first contract anniversary) the contract value has
grown to $24,000.
o On March 1, 2000 the contract value has fallen to $22,000, at which point
the owner takes a $1,500 partial withdrawal, leaving a contract value of
$20,500.
The death benefit on March 1, 2000 is calculated as follows:
The "maximum anniversary value": $24,000.00
(the greatest of the anniversary values which
was the contract value on Jan. 1, 2000)
plus any purchase payments paid since that anniversary: +0.00
minus 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
<PAGE>
Enhanced Death Benefit Rider
If this rider is available in your state and either you or the annuitant are age
79 or younger on the contract date, you may choose to add this benefit to you
contract. This rider provides that if you or the annuitant die before annuity
payouts begin while this contract is in force, we will pay the beneficiary the
greatest of the following amounts less any purchase payment credits added in the
last 12 months:
1. the contract value; or
2. the total purchase payments paid plus purchase payment credits and less
any "adjusted partial withdrawals"; or
3. the "maximum anniversary value" immediately preceding the date of death
plus the dollar amount of any payments since that anniversary plus
purchase payment credits and minus any "adjusted partial withdrawals"
since that anniversary; or
4. the Variable Account 5% Floor
The Variable Account 5% Floor
On or before the contract anniversary after the earlier of your or the
annuitant's 81st birthday, the Variable Account 5% Floor is the sum of the value
in the fixed accounts plus the variable account floor. After the contract
anniversary immediately following either you or the annuitant's 81st birthday,
the Variable Account 5% Floor is the floor on that anniversary increased by
additional purchase payments made since that anniversary plus purchase payment
credits and reduced by any "adjusted partial withdrawals" since that
anniversary.
On each contract anniversary prior to the earlier of your or the annuitant's
81st birthday, we increase the variable account floor by accumulating the prior
anniversary's floor at 5%. On the first contract anniversary, the floor is
increased by 5% of the accumulated initial purchase payments plus purchase
payment credits allocated to the subaccounts. On any day that you allocate
additional amounts to, or withdraw or transfer from the subaccounts, we adjust
the floor by adding the additional amounts and subtracting the "adjusted partial
withdrawals" or adjusted transfers.
For the Variable Account 5% Floor, we calculate the "adjusted partial
withdrawals" or transfer as the result of (a) times (b) where:
(a) is the ratio of the amount of withdrawal (including any withdrawal charges)
or transfer from the subaccounts to the total value in the subaccounts on
the date of (but prior to) the withdrawal or transfer.
(b) is the variable account floor on the date of (but prior to) the withdrawal
or transfer.
Example:
o The contract is purchased with a payment of $20,000 on Jan. 1, 1999 and a
$400 purchase payment credit is added to the contract with $5,100 allocated
to the one-year fixed account and $15,300 allocated to the subaccounts.
o On Jan. 1, 2000 (the first contract anniversary), the one-year fixed
account value is $5,200 and the subaccount value is $12,000. Total contract
value is $17, 200.
o On March 1, 2000, the one-year fixed account value is $5,300 and the
subaccount value is $14,000. Total contract value is $19,300. The owner
takes a $1,500 partial withdrawal all from the subaccounts, leaving the
contract value at $17,800.
<PAGE>
The death benefit on March 1, 2000 is calculated as follows:
<TABLE>
<CAPTION>
<S> <C>
The "maximum anniversary value" (the purchase payment plus purchase payment
credits): $ 20,400.00
plus any purchase payment paid since that anniversary: + 0.00
minus any "adjusted partial withdrawal" taken since that anniversary,
calculated as: 1,500 x 20,400 =
------------------- - 1,585.49
19,300 ----------
Maximum Anniversary Value Benefit $ 18,814.51
===========
The variable account floor on Jan. 1, 2000,
calculated as: 1.05 x 15,300 = $ 16,065.00
plus any purchase payments paid since that anniversary: + 0.00
minus any "adjusted partial withdrawals" from the subaccounts,
calculated as: 1,500 x 16,065 =
-------------------- -$ 1,721.25
14,000 -----------
Variable Account Floor Benefit $ 14,343.75
plus the one year fixed account value + 5,300.00
----------
Variable Account 5% Floor, calculated as the one-year fixed account
plus the Variable Account Floor Benefit $ 19,643.75
===========
Enhanced Death Benefit, calculated as the greater of the Maximum Anniversary
Value Benefit and the Variable Account 5% Floor, minus any purchase payment $ 19,643.75
credits made in the last 12 months ($0)
</TABLE>
If your spouse is sole beneficiary under a nonqualified annuity and you die
before the retirement date, your spouse may keep the contract as owner with the
contract value equal to the death benefit that would have otherwise been paid.
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. There will be no
withdrawal charges on the contract from that point forward unless additional
purchase payments are made. The Guaranteed Minimum Income Benefit Rider, if
selected, is then terminated.
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 contract as owner until the date on which the annuitant would have
reached age 70 1/2 or any other date permitted by the Code. To do this, the
spouse must give us written instructions within 60 days after we receive proof
of death. The contract value is equal to the death benefit that would otherwise
have been paid. There will be no withdrawal charges on the contract from that
point forward unless additional purchase payments are made. The Guaranteed
Minimum Income Benefit Rider, if selected, is then terminated.
Payments: Under a nonqualified annuity, we will pay the beneficiary in a single
sum unless you give 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 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 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.
<PAGE>
Other rules may apply to qualified annuities. (See "Taxes").
Guaranteed Minimum Income Benefit Rider
An optional Guaranteed Minimum Income Benefit Rider may be available in many
jurisdictions for a separate annual charge, (see "Charges - Guaranteed Minimum
Income Rider fee"). The rider guarantees a minimum amount of fixed annuity
lifetime income during the annuity payout period if your contract has been in
force for at least ten years, subject to the conditions described below. The
rider also provides you the option of variable annuity payouts, with a
guaranteed minimum initial payment. This rider is only available at the time you
purchase your contract if you also select the Enhanced Death Benefit Rider
option.
In some instances, we may allow you to add this rider if it was not available
when you initially purchased your contract. In these instances, we would add
this rider at the next contract anniversary and all conditions of the rider
would use this date as the effective date.
This rider does not create contract value or guarantee the performance of any
investment option. Fixed annuity payouts under the terms of this rider will
occur at the guaranteed annuity purchase rates stated in the contract. We base
first year payments from the variable annuity payout option offered under this
rider on the same factors as the fixed annuity payout option. We base subsequent
payments on the initial payment and an assumed annual return of 5%. Because this
rider is based on guaranteed actuarial factors for the fixed option, the level
of fixed lifetime income it guarantees may be less than the level that would be
provided by applying the then current annuity factors. Likewise, for the
variable annuity payout option, we base the rider on more conservative factors
resulting in a lower initial payment and lower lifetime payments than those
provided otherwise if the same benefit base were used. However, the Guaranteed
Income Benefit Base described below establishes a floor, which when higher than
the contract value, can result in a higher annuity payout level. Thus, the rider
is a guarantee of a minimum amount of annuity income.
The Guaranteed Income Benefit Base is equal to the Enhanced Death Benefit if:
o the Guaranteed Minimum Income Rider became effective on the contract
date, and
o all payments are recognized in the benefit base.
We reserve the right to not recognize any additional payments made in the five
years prior to rider exercise. The Guaranteed Income Benefit Base, less any
applicable premium tax, is the value that will be used to determine minimum
annuity payouts if the rider is exercised.
Conditions on election of the rider: The following conditions apply to the
election of the rider:
o you must elect the rider at the time you purchase your contract along
with the Enhanced Death Benefit Rider option, and
o the annuitant must be age 75 or younger on the contract date.
Fund selection to continue the rider: You may allocate your purchase payments to
any of the subaccounts or the fixed accounts. However, we reserve the right to
limit the amount in the Wells Fargo Money Market Fund to 10% of the total amount
in the subaccounts. If we are required to activate this restriction, and you
have more than 10% of your subaccount value in this fund, we will send you
notice and ask that you reallocate your contract value so that the limitation is
satisfied within 60 days. If after 60 days the limitation is not satisfied, the
rider will be terminated.
<PAGE>
Exercising the rider: The following conditions apply to the exercise of the
rider:
o you may only exercise the rider within 30 days after any contract
anniversary following the expiration of a ten-year waiting period from the
effective date of the rider, and
o the annuitant on the retirement date must be between 50 and 86 years old,
and
o you can only take an annuity payout in one of the following annuity payout
plans:
- Plan A -- Life Annuity - no refund
- Plan B -- Life Annuity with ten years certain
- Plan D -- Joint and last survivor life annuity - no refund
Contingent event benefits: If the annuitant satisfies the conditions for the
waiver of withdrawal charges in the event of disability, terminal illness or a
confinement in a nursing home or hospital (see "Charges- Waiver of withdrawal
charges") you can exercise the rider at any time. In this event, you can take up
to 50% of the Guaranteed Income Benefit Base in cash. You can use the balance of
the Guaranteed Income Benefit Base for annuity payouts under the terms above
with regard to annuitant age at retirement date, the annuity payout plans and
the more conservative annuity factors. You can also change the annuitant for the
payouts.
Terminating the rider: The following conditions apply to the termination of the
rider:
o you may terminate the rider within 30 days after the first and fifth
anniversary after the effective date of the rider.
o you may terminate the rider any time after the 10th anniversary after the
effective date of the rider.
o the rider will terminate on the date you make a full withdrawal from the
contract, or annuity payouts begin, or on the date that a death benefit is
payable.
o the rider will terminate on the contract anniversary after the annuitant's
86th birthday.
Example:
o The contract is purchased with a payment of $100,000 on Jan. 1, 2000, and a
$2,000 purchase payment credit is added to the contract.
o There are no additional purchase payments and no partial withdrawals.
o The money is fully allocated to the subaccounts.
o The annuitant is age 55 on the contract date. For the joint and last
survivor option (annuity payout plan D), the joint annuitant is age 55 on
the contract date.
o The Guaranteed Income Benefit Base is based on the Variable Account 5%
Floor.
o The contract is within 30 days after contract anniversary.
If the Guaranteed Minimum Income Benefit Rider is exercised, the minimum fixed
annuity payout or the first year variable annuity payout would be:
<TABLE>
<CAPTION>
Fixed Annuity Payout Options
Minimum Guaranteed Annual Income
<S> <C> <C> <C> <C>
Contract Anniversary At Minimum Guaranteed Benefit Plan A -- Plan B -- Plan D --
- - - ------------------------ ---------------------------
Exercise Base Life Annuity Life Annuity Joint and last
- no refund with ten years survivor life
certain annuity - no refund
10 $166,147 $ $ $
15 $212,051 $ $ $
</TABLE>
After the first year initial payment, lifetime income payments on a variable
annuity payout option will depend on the investment performance of the
subaccounts you select. The payments will be higher if investment performance is
greater than a 5% annual return and lower if investment performance is less than
a 5% annual return. [Figures to be updated on amendment.]
<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.
The amount available for payouts under the plan you select is the contract value
on your retirement date (less any applicable premium tax). We do not deduct any
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 amounts 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
one-year 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. The Guarantee Period Accounts are not available during this payout
period.
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 accounts at the settlement.
In addition, for variable payouts only, amounts depend on the investment
performance of the subaccounts you select. These payouts will vary from month to
month because the performance of the 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 "Making the Most of Your Contract -- Transfer policies."
Annuity table
The annuity table in your contract shows the amount of the first monthly payment
for each $1,000 of contract value according to the age and, when applicable, the
sex of the annuitant. (Where required by law, we will use a unisex table of
settlement rates.) The table assumes that the contract value is invested at the
beginning of the annuity payout period and earns a 5% rate of return, which is
reinvested and helps to support future payouts.
Substitution of 3.5% table
If you ask us at least 30 days before the retirement date, we will substitute an
annuity table based on an assumed 3.5% investment rate for the 5% table in the
contract. The assumed investment rate affects both the amount of the first
payout and the extent to which subsequent payouts increase or decrease. Using
the 5% table results in a higher initial payment, but later payouts will
increase more slowly when annuity unit values rise and decrease more rapidly
when they decline.
<PAGE>
Annuity payout plans
You may choose any one of these annuity payout plans by giving us written
instructions at least 30 days before contract values are 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, ten or 15 years certain: We make monthly
payouts for a guaranteed payout period of five, ten or 15 years that you
elect. This election will determine the length of the payout period to the
beneficiary if the annuitant should die before the elected period expires.
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 ten 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. During the payout
period, you can elect to have us determine the present value of any
remaining variable payouts and pay it to you in a lump sum. The present
value is determined separately for each subacccount from which you are
currently scheduled to receive payments. The present value for each
subaccount is equal to the discounted value of the remaining annuity
payments which are assumed to remain level. The discount rate used in the
calculation will vary between 5% and 7.50% depending on the applicable
assumed investment rate (AIR) and the fund management fees. 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 that 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 allocated to the one-year fixed account will provide
fixed dollar payouts and contract values that you 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 you in a lump sum or to change the
frequency of the payouts.
<PAGE>
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 (see detailed discussion
below). Any portion of the annuity payouts and any withdrawals you request that
represent ordinary income are normally 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 qualified retirement
plans. 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.
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 advisor for more information about your 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 contract is fully recovered
will be subject to tax.
Tax law requires that all nonqualified deferred annuities 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.
Annuity payouts under qualified annuities (except Roth IRAs): Under a qualified
annuity, the entire payout generally is includable as ordinary income and is
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 a qualified retirement plan, such amounts are not
considered to be part of your investment in the contract and will be taxed when
paid to you.
Purchase payment credits: These are considered earnings and are taxed
accordingly.
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
before reaching age 59 1/2 unless certain exceptions apply. For qualified
annuities, other penalties may apply if you withdraw your contract before your
plan specifies that you can receive payouts.
Death benefits to beneficiaries: The death benefit under a contract (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 years 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.
<PAGE>
Penalties: If you receive amounts from your contract before reaching age 59 1/2,
you may have to pay a 10% IRS penalty on the amount includable in your ordinary
income. However, this penalty will not apply to any amount received by you or
your beneficiary:
o because of your death;
o because you become disabled (as defined in the Code);
o if the distribution is part of a series of substantially equal periodic
payments, made at least annually, over your life or life expectancy (or
joint lives or life expectancies of you and your beneficiary); or
o if it is allocable to an investment before Aug. 14, 1982 (except for
qualified annuities).
For a qualified annuity, other penalties or exceptions may apply if you make
withdrawals from your contract before your plan specifies that payouts can be
made.
Withholding, generally: If you receive all or part of the contract value, 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 can 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 can elect not to have this withholding
occur.
Some states also impose withholding requirements similar to the federal
withholding described above. If this should be the case, 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.
Withholding from TSAs: If you receive directly all or part of the contract value
from your TSA, mandatory 20% federal income tax withholding (and possibly state
income tax withholding) generally will be imposed at the time we make the
payout. This mandatory withholding is in place of the elective withholding
discussed above. This mandatory withholding will not be imposed if:
o instead of receiving the distribution check, you elect to have the
distribution rolled over directly to an IRA or another eligible plan;
o the payout is one in a series of substantially equal periodic payouts, made
at least annually, over your life or life expectancy (or the joint lives or
life expectancies of you and your designated beneficiary) or over a
specified period of 10 years or more; or
o the payout is a minimum distribution required under the Code.
Payments we make to a surviving spouse instead of being directly rolled over to
an IRA also may be subject to mandatory 20% income tax withholding.
State withholding also may be imposed on taxable distributions.
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 contract will be the value of the contract at the time
of the transfer.
<PAGE>
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 advisor 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 subaccounts, 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 subaccount to the total number of
votes allowed to the subaccount.
After annuity payouts begin, the number of votes you have is equal to:
o the reserve held in each subaccount for your contract;
o divided by the net asset value of one share of the applicable 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 subaccount. We will send notice of
shareholders' 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 received
instructions. We also will vote the shares for which we have voting rights in
the same proportion as the votes for which we received instructions.
Substitution of Investments
We may substitute the funds in which the subaccounts invest if:
o laws or regulations change,
o existing funds become unavailable, or
o in our judgment, the funds no longer are suitable for the subaccounts.
If any of these situations occur and if we believe it is in the best interest of
persons having voting rights under the contract, we have the right to substitute
funds other than those currently listed in this prospectus for other funds.
We may also:
o add new subaccounts;
o combine any two or more subaccounts;
o add subaccounts investing in additional funds;
o transfer assets to and from the subaccounts or the variable account;
and
o eliminate or close any subaccounts.
<PAGE>
In the event of substitution or any of these changes, we may amend the contract
and take whatever action is necessary and appropriate without your consent or
approval. However, we will not make any substitution or change without the
necessary approval of the SEC and state insurance departments. We will notify
you of any substitution or change.
About the Service Providers
Principal Underwriter
American Express Financial Advisors Inc. (AEFA) serves as the principal
underwriter for the contract. Its office are located at IDS Tower 10,
Minneapolis, MN 55440. AEFA is a wholly-owned subsidiary of American Express
Financial Corporation (AEFC) 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 AEFA and American Enterprise Life.
We will pay commissions for sales of the contracts of up to 7% of purchase
payments to insurance agencies or broker-dealers that are also insurance
agencies. Sometimes we 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 7% of purchase payments). In addition, we may pay
certain sellers additional compensation for selling and distribution activities
under certain circumstances. From time to time, we will pay or permit other
promotional incentives, in cash or credit or other compensation.
Issuer
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 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.
<PAGE>
Additional Information About American Enterprise Life
Selected financial data
The following selected financial data for American Enterprise Life should be
read in conjunction with the consolidated financial statements and notes.
[To be filed on amendment.]
Management's discussion and analysis of consolidated financial condition and
results of operations
1998 compared to 1997
[To be filed on amendment.]
1997 compared to 1996
[To be filed on amendment.]
Risk management
[To be filed on amendment.]
Liquidity and capital resources
[To be filed on amendment.]
Risk management
[To be filed on amendment.]
<PAGE>
Year 2000 issue
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. All of the major systems used by American Enterprise
Life and by the Variable Account are maintained by AEFC and are utilized by
multiple subsidiaries and affiliates of AEFC. American Enterprise Life's and the
Variable Account's businesses are heavily dependent upon AEFC's computer systems
and have significant interactions with systems of 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 have been taken to resolve potential problems including
modification to existing software and the purchase of new software. AEFC's
target date for substantially completing its program of corrective measures on
internal business critical systems was Dec. 31, 1998. As of June 30, 1999, AEFC
completed its program of corrective measures on its internal systems and
applications, including Year 2000 compliance testing. 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 failure of external parties to resolve
their own Year 2000 issues in a timely manner could result in a material
financial risk to AEFC, American Enterprise Life or the Variable Account.
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.
[This information will be updated in amendment]
Reserves
In accordance with the insurance laws and regulations under which we operate, we
are obligated to carry on our books, as liabilities, actuarially determined
reserves to meet our obligations on our outstanding annuity contracts. We base
our reserves for deferred annuity contracts on accumulation value and for fixed
annuity contracts in a benefit status on established industry mortality tables.
These reserves are computed amounts that will be sufficient to meet our policy
obligations at their maturities.
Investments
Of our consolidated total investments of $4,503,960,000 at Dec. 31, 1998, 28%
was invested in mortgage-backed securities, 53% in corporate and other bonds,
18% in primary mortgage loans on real estate and the remaining 1% in other
investments.
<PAGE>
Competition
We are engaged in a business that is highly competitive due to the large number
of stock and mutual life insurance companies and other entities marketing
insurance products. There are over 1,600 stock, mutual and other types of
insurers in the life insurance business. Best's Insurance Reports, Life-Health
edition 1998, assigned us one of its highest classifications, A+ (Superior).
Employees
As of Dec. 31, 1998, we had no employees.
Properties
We occupy office space in Minneapolis, MN, which is rented by AEFC. We reimburse
AEFC for rent based on direct and indirect allocation methods. Facilities
occupied by us are believed to be adequate for the purposes for which they are
used and well maintained.
State regulation
[To be filed on amendment.]
Directors and Executive Officers*
The directors and principal executive officers of American Enterprise Life and
the principal occupation of each during the last five years is as follows:
Directors
James E. Choat
Born in 1947
Director and chief executive officer since 1996; Senior vice president -
Institutional Products Group, AEFA, 1994 to 1997.
Richard W. Kling
Born 1940
Director and chairman of the board since March 1989.
Paul S. Mannweiler**
Born in 1949
Director since 1986; Partner at Locke Reynolds Boyd & Weisell since 1980.
Paula R. Meyer
Born in 1954
Director and executive vice president since 1998; vice president, AEFC since
1998; Piper Capital Management (PCM) President from Oct. 1997 to May 1998; PCM
Director of Marketing from June 1995 to Oct. 1997; PCM Director of Retail
Marketing from Dec. 1993 to June 1995.
William A. Stoltzmann
Born in 1948
Director since Sept. 1989; vice president, general counsel and secretary since
1985.
<PAGE>
Officers other than directors
Jeffrey S. Horton
Born 1961
Vice president and treasurer since Dec. 1997; vice president and corporate
treasurer, AEFC, since Dec. 1997; controller, American Express Technologies -
Financial Services, AEFC, from July 1997 to Dec. 1997; controller, Risk
Management Products, AEFC, from May 1994 to July 1997; director of finance and
analysis, Corporate Treasury, AEFC, from June 1990 to May 1994.
Philip C. Wentzel
Born in 1961
Vice president and controller since 1998; vice president - Finance, Risk
Management Products, AEFC since 1997; and director of financial reporting and
analysis from 1992 to 1997.
*The address for all of the directors and principal officers is: IDS Tower 10,
Minneapolis, MN 55440-0010 except for Mr. Mannweiler who is an independent
director.
**Mr. Mannweiler's address is: 201 No. Illinois Street, Indianapolis, IN 46204
Executive compensation
Our executive officers also may serve one or more affiliated companies. The
following table reflects cash compensation paid to the five most highly
compensated executive officers as a group for services rendered in the most
recent year to us and our affiliates. The table also shows the total cash
compensation paid to all our executive officers, as a group, who were executive
officers at any time during the most recent year.
<TABLE>
<CAPTION>
<S> <C> <C>
Name of individual or
number in group Position held Cash compensation
Five most highly compensated $4,476,367
executive officers as a group:
Richard W. Kling Chairman of the Board
James E. Choat President and CEO
Stuart A. Sedlacek Executive Vice President
Lorraine R. Hart Vice President, Investments
Deborah L. Pederson Assistant Vice President, Investments
All executive officers as a group $7,925,328
(12)
[Information to be updated on amendment.]
</TABLE>
Security ownership of management
Our directors and officers do not beneficially own any outstanding shares of
stock of the company. All of our outstanding shares of stock are beneficially
owned by IDS Life. The percentage of shares of IDS Life owned by any director,
and by all our directors and officers as a group, does not exceed 1% of the
class outstanding. [To be updated on amendment.]
<PAGE>
Experts
Ernst & Young LLP, independent auditors, have audited the consolidated financial
statements of American Enterprise Life Insurance Company at Dec. 31, 1998 and
1997, and for each of the three years in the period ended Dec. 31, 1998, as set
forth in their report. We've included our consolidated financial statements in
the prospectus and elsewhere in the registration statement in reliance on Ernst
& Young LLP's report, given on their authority as experts in accounting and
auditing.
American Enterprise Life Financial Information
[To be filed on amendment.]
<PAGE>
Table of Contents of the Statement of Additional Information
Performance Information p.
Calculating Annuity Payouts p.
Rating Agencies p.
Principal Underwriter p.
Independent Auditors p.
Financial Statements
<PAGE>
Please check the box to receive a copy of the Statement of Additional
Information for:
- - - -- American Express Wells Fargo Variable AnnuitySM
- - - -- American Express Variable Portfolio Funds
- - - -- AIM Variable Insurance Funds, Inc.
- - - -- Dreyfus Socially Responsible Growth Fund, Inc.
- - - -- Franklin Templeton Variable Insurance Products Trust - Class 2
- - - -- Goldman Sachs Variable Insurance Trust (VIT)
- - - -- MFG(R) Variable Insurance Trust sm
- - - -- Putnam Variable Trust
- - - -- Wells Fargo ________________
Mail your request to:
American Enterprise Life Insurance Company
80 South Eighth Street
P.O. Box 534
Minneapolis, MN 55440-534
We will mail your request to:
Your name _____________________________________________
Address _______________________________________________
City _____________________ State _________ Zip ________
<PAGE>
Prospectus
[_____], 1999
American Express Signature Plus Variable AnnuitySM
Individual or group flexible premium deferred combination fixed/variable
annuity.
American Enterprise Variable Annuity Account
Issued by: American Enterprise Life Insurance Company (American Enterprise Life)
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 for:
o New Fund o New Fund
o New Fund o New Fund
o New Fund o New Fund
o New Fund o New Fund
o New Fund o New Fund
Please read the prospectuses carefully and keep them for future reference. This
contract is available for qualified and nonqualified plans.
The Securities and Exchange Commission (SEC) has not approved or disapproved
these securities or passed upon the adequacy or accuracy of this prospectus. Any
representation to the contrary is a criminal offense.
An investment in this contract 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 contract
involves investment risk including the possible loss of principal.
A Statement of Additional Information (SAI), dated the same date as this
prospectus, is incorporated by reference into this prospectus. It is filed with
the SEC and is available without charge by contacting American Enterprise Life
at the telephone number above or by completing and sending the order form on the
last page of this prospectus. The table of contents of the SAI is on the last
page of this prospectus.
<PAGE>
Table of Contents
Key Terms
The Contract in Brief
Expense Summary
Condensed Financial Information (Unaudited)
Financial Statements
Performance Information
The Variable Account and the Funds
The Fixed Accounts
Buying Your Contract
Charges
Valuing Your Investment
Making the Most of Your Contract
Withdrawals
TSA -- Special Surrender Provisions
Changing Ownership
Benefits in Case of Death
The Annuity Payout Period
Taxes
Voting Rights
Substitution of Investments
About the Service Providers
Additional Information About American Enterprise Life
Directors and Executive Officers
Experts
American Enterprise Life Financial Information
Table of Contents of the Statement of Additional Information
<PAGE>
Key Terms
These terms can help you understand details about your contract.
Accumulation unit -- A measure of the value of each subaccount before annuity
payouts begin.
Annuitant -- The person on whose life or life expectancy the annuity payouts are
based.
Annuity payouts -- An amount paid at regular intervals under one of several
plans.
Beneficiary -- The person you designate to receive annuity 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 - An individual annuity contract or a certificate showing your interest
under a group annuity contract.
Contract value -- The total value of your contract before we deduct any
applicable charges.
Contract year -- A period of 12 months, starting on the effective date of your
contract and on each anniversary of the effective date.
Fixed accounts - The one-year fixed account is an account to which you may
allocate purchase payments. Amounts you allocate to this account earn interest
at rates that we declare periodically. Guarantee Period Accounts are fixed
accounts to which you may also allocate purchase payments. These accounts have
guaranteed interest rates declared for periods ranging from two to ten years.
Withdrawals from these accounts prior to the end of the term specified will
receive a Market Value Adjustment, which may result in a gain or loss of
principal.
Funds -- Mutual funds and/or portfolios that are investment options under your
contract, each with a different investment objective. You may allocate your
purchase payments into subaccounts investing in shares of any or all of these
funds.
Guarantee Period -- The number of years that a guaranteed interest rate is
credited.
Market Value Adjustment (MVA) -- A positive or negative adjustment assessed if
any portion of a Guarantee Period Account is withdrawn or transferred prior to
the end of its Guarantee Period.
Owner (you, your) -- The person who controls the contract (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 contract's benefits.
Purchase payment credits -- An addition we make to your contract value based on
your purchase payments less partial withdrawals.
Qualified annuity -- A contract 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 (SEP) plans
o Tax-Sheltered Annuity (TSA) rollovers
All other contracts are considered nonqualified annuities.
<PAGE>
Retirement date -- The date when annuity payouts are scheduled to begin.
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 subaccount at the close of business on each valuation date.
Variable account -- Consists of separate subaccounts to which you may allocate
purchase payments; each invests in shares of one fund. The value of your
investment in each subaccount changes with the performance of the particular
fund.
Withdrawal value -- The amount you are entitled to receive if you make a full
withdrawal from your contract. It is the contract value minus any applicable
charges.
<PAGE>
The Contract in Brief
Purpose: The purpose of the contract 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 contract. The
contract provides lifetime or other forms of
payouts beginning at a specified date (the
retirement date).
Free look period: You may return your contract to our office
within 10 days after it is delivered to you
and receive a full refund of the contract
value, less any purchase payment credits up
to the maximum withdrawal charges.
(See "Buying Your Contract - Purchase
payment credits.") 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, each of which invests
in a fund with a particular investment
objective. The value of each 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 purchase payments you allocate to
the subaccounts. (p. __)
o the fixed accounts, which earn interest
at rates that we adjust periodically.
(p. __)
Buying your contract: Your sales representative will help you
complete and submit an application.
Applications are subject to acceptance
at our office. You may buy a nonqualified
annuity or a qualified annuity. After your
initial purchase payment, you have the
option of making additional purchase
payments in the future.
o Minimum initial purchase payment --
$25,000. The Guaranteed Period
Accounts require a minimum investment
of $1,000.
o Minimum additional purchase payment
-- $100 ($50 with SIP payments).
o Maximum total purchase payments
(without prior approval) --
$1,000,000.
We will add a purchase payment credit to
your contract with every purchase payment
you make. The credit is a percentage of the
purchase payments less partial withdrawals.
The percentage increases with total purchase
payments, less partial withdrawals.
Transfers: Subject to certain restrictions you
currently may redistribute your money among
the subaccounts and the fixed accounts
without charge at any time until annuity
payouts begin, and once per contract year
among the subaccounts after annuity payouts
begin. Transfers out of the Guarantee Period
Accounts before the end of the Guarantee
Period will be subject to a MVA. You may
establish automated transfers among the
fixed accounts and subaccounts.Fixed account
transfers are subject to special
restrictions. (p. __)
<PAGE>
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 you make
withdrawals prior to your reaching age
59 1/2) and may have other tax consequences;
also, certain restrictions apply. (p. __)
Changing ownership: You may change ownership of a nonqualified
annuity by written instruction, but this may
have federal income tax consequences.
Restrictions apply to changing ownership of
a qualified annuity. (p. __)
Benefits in case
of death: If you or the annuitant die before annuity
payouts begin, we will pay the beneficiary
an amount at least equal to the contract
value. (p. __)
Annuity payouts: You can apply your 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 subaccount and the one-year fixed
account. During the annuity payout period,
your choices for subaccounts may be limited.
The Guarantee Period Accounts are not
available during the payout period. (p. __)
Taxes: Generally, your contract 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. __)
Charges:
o $35 annual contract administrative charge;
o a 0.15% variable account administrative
charge;
o with a six-year withdrawal charge
schedule a 1.40% mortality and expense
risk fee applies; o with an eight-year
withdrawal charge schedule a 1.25%
mortality and expense risk fee applies;
o if the Maximum Anniversary Value Death
Benefit Rider is selected, an additional
0.10% mortality and expense risk fee;
o if the Enhanced Death Benefit Rider is
selected, an additional 0.30%
mortality and expense risk fee;
o if the Guaranteed Minimum Income Benefit
Rider is selected, an annual fee based on
the Guaranteed Income Benefit Base
(currently at 0.30%);
o 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); and
o the operating expenses of the funds.
<PAGE>
Expense Summary
The purpose of the following information is to help you understand the various
costs and expenses associated with your contract.
You pay no sales charge when you purchase your contract. We show all costs that
you bear directly or indirectly for the subaccounts and funds below. Some
expenses may vary as we explain under "Charges." Please see the funds'
prospectuses for more information on the operating expenses of each fund.
Contract owner expenses:
Withdrawal charge: contingent deferred sales charge as a percentage of
purchase payment withdrawn. You select either a six-year or eight-year
withdrawal charge schedule at the time of application.
<TABLE>
<CAPTION>
Six-year schedule Eight-year schedule
<S> <C> <C> <C> <C>
Years from purchase Withdrawal charge Years from purchase Withdrawal charge
payment receipt percentage payment receipt percentage
1 8.5% 1 8.5%
2 8.5 2 8.5
3 8.5 3 8.5
4 6.5 4 8.5
5 4.5 5 8.5
6 2.5 6 6.5
Thereafter 0 7 4.5
8 2.5
Thereafter 0
</TABLE>
Annual contract administrative charge $35*
* We will waive this charge when your contract value is $100,000 or more
on the current contract anniversary.
Guaranteed Minimum Income Benefit Rider fee:
as a percentage of the Guaranteed Income Benefit
Base charged annually. This is an optional expense. 0.30%
<PAGE>
<TABLE>
<CAPTION>
Annual variable account expenses: as a percentage of average subaccount value.
You can choose the length of your contract's withdrawal charge and the death
benefit guarantee provided. The combination you choose determines the fees you
pay. The table below shows the combinations available to you and their cost.
- - - --------------------------------------------------------------- ------------------------- ---------------------------
<S> <C> <C>
Six-year withdrawal Eight-year withdrawal
schedule schedule
- - - --------------------------------------------------------------- ------------------------- ---------------------------
- - - --------------------------------------------------------------- ------------------------- ---------------------------
Variable account administrative charge 0.15% 0.15%
- - - --------------------------------------------------------------- ------------------------- ---------------------------
- - - --------------------------------------------------------------- ------------------------- ---------------------------
Mortality and expense risk fee 1.40% 1.25%
- - - --------------------------------------------------------------- ------------------------- ---------------------------
- - - --------------------------------------------------------------- ------------------------- ---------------------------
Maximum Anniversary Value Death Benefit Rider as a part of
the mortality and expense Fee (optional) 0.10% 0.10%
- - - --------------------------------------------------------------- ------------------------- ---------------------------
- - - --------------------------------------------------------------- ------------------------- ---------------------------
Enhanced Death Benefit Rider fee as part of the mortality
and expense risk fee (optional) 0.30% 0.30%
----- -----
- - - --------------------------------------------------------------- ------------------------- ---------------------------
- - - --------------------------------------------------------------- ------------------------- ---------------------------
Total annual variable account expenses without any optional
rider fees 1.55% 1.40%
- - - --------------------------------------------------------------- ------------------------- ---------------------------
- - - --------------------------------------------------------------- ------------------------- ---------------------------
Total annual variable account expenses with the optional
Maximum Anniversary Value Death Benefit Rider fee
1.65% 1.50%
- - - --------------------------------------------------------------- ------------------------- ---------------------------
- - - --------------------------------------------------------------- ------------------------- ---------------------------
Total annual variable account expenses with the optional
Enhanced Death Benefit Rider fee 1.85% 1.70%
- - - --------------------------------------------------------------- ------------------------- ---------------------------
</TABLE>
<TABLE>
<CAPTION>
Annual operating expenses of the funds (as a percentage of average daily net assets)
<S> <C> <C> <C> <C>
- - - --------------------------------------------------------------------------- ---------------- --------- ----------- -----------
Management 12b-1 Other
Fees Fees Expenses Total
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New Fund
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New Fund
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New Fund
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New Fund
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New Fund
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New Fund
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New Fund
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New Fund
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New Fund
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New Fund
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[To be updated by amendment]
</TABLE>
<PAGE>
Examples: *
<TABLE>
<CAPTION>
You would pay the following expenses on a $1,000 investment if you selected a
six-year withdrawal charge schedule without any optional riders and assuming a
5% annual return and....
<S> <C> <C>
- - - -------------------------------------------------------------------------------------------------------------------------------
a total withdrawal at no withdrawal or selection
the end of each time of an annuity payout plan
period at the end of each time
period
- - - -------------------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------------------
1 year 3 years 1 year 3 years
- - - -------------------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------------------
New Fund
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New Fund
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New Fund
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New Fund
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New Fund
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New Fund
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New Fund
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New Fund
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New Fund
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New Fund
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- - - -------------------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
You would pay the following expenses on a $1,000 investment if you selected a
six-year withdrawal charge schedule with the optional 0.30% Enhanced Death
Benefit Rider and the 0.30% Guaranteed Minimum Income Benefit Rider and assuming
a 5% annual return and....
<S> <C> <C>
- - - -------------------------------------------------------------------------------------------------------------------------------
a total withdrawal at no withdrawal or selection
the end of each time of an annuity payout plan
period at the end of each time
period
- - - -------------------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------------------
1 year 3 years 1 year 3 years
- - - -------------------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------------------
New Fund
- - - -------------------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------------------
New Fund
- - - -------------------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------------------
New Fund
- - - -------------------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------------------
New Fund
- - - -------------------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------------------
New Fund
- - - -------------------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------------------
New Fund
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- - - -------------------------------------------------------------------------------------------------------------------------------
New Fund
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- - - -------------------------------------------------------------------------------------------------------------------------------
New Fund
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New Fund
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New Fund
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- - - -------------------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
You would pay the following expenses on a $1,000 investment if you selected a
six-year withdrawal charge schedule with the optional 0.10% Maximum Anniversary
Value Death Benefit Rider and assuming a 5% annual return and....
<S> <C> <C>
- - - -------------------------------------------------------------------------------------------------------------------------------
a total withdrawal at no withdrawal or selection
the end of each time of an annuity payout plan
period at the end of each time
period
- - - -------------------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------------------
1 year 3 years 1 year 3 years
- - - -------------------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------------------
New Fund
- - - -------------------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------------------
New Fund
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- - - -------------------------------------------------------------------------------------------------------------------------------
New Fund
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New Fund
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New Fund
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New Fund
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New Fund
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New Fund
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New Fund
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New Fund
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- - - -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
You would pay the following expenses on a $1,000 investment if you selected an
eight-year withdrawal charge schedule without any optional riders and assuming a
5% annual return and....
<S> <C> <C>
- - - -------------------------------------------------------------------------------------------------------------------------------
a total withdrawal at no withdrawal or selection
the end of each time of an annuity payout plan
period at the end of each time
period
- - - -------------------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------------------
1 year 3 years 1 year 3 years
- - - -------------------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------------------
New Fund
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New Fund
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- - - -------------------------------------------------------------------------------------------------------------------------------
New Fund
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- - - -------------------------------------------------------------------------------------------------------------------------------
New Fund
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- - - -------------------------------------------------------------------------------------------------------------------------------
New Fund
- - - -------------------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------------------
New Fund
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- - - -------------------------------------------------------------------------------------------------------------------------------
New Fund
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New Fund
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New Fund
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New Fund
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- - - -------------------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
You would pay the following expenses on a $1,000 investment if you selected an eight-year withdrawal charge
schedule with the optional 0.30% Enhanced Death Benefit Rider and 0.30%
Guaranteed Minimum Income Benefit Rider and assuming a 5% annual return and....
- - - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
a total withdrawal at no withdrawal or selection
the end of each time of an annuity payout plan
period at the end of each time
period
- - - -------------------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------------------
1 year 3 years 1 year 3 years
- - - -------------------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------------------
New Fund
- - - -------------------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------------------
New Fund
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New Fund
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New Fund
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New Fund
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New Fund
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New Fund
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New Fund
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New Fund
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- - - -------------------------------------------------------------------------------------------------------------------------------
New Fund
- - - -------------------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
You would pay the following expenses on a $1,000 investment if you selected an eight-year withdrawal charge
schedule with the optional 0.10% Maximum Anniversary Value Death Benefit Rider
and assuming a 5% annual return and....
- - - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
a total withdrawal at no withdrawal or selection
the end of each time of an annuity payout plan
period at the end of each time
period
- - - -------------------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------------------
1 year 3 years 1 year 3 years
- - - -------------------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------------------
New Fund
- - - -------------------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------------------
New Fund
- - - -------------------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------------------
New Fund
- - - -------------------------------------------------------------------------------------------------------------------------------
- - - -------------------------------------------------------------------------------------------------------------------------------
New Fund
- - - -------------------------------------------------------------------------------------------------------------------------------
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New Fund
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- - - -------------------------------------------------------------------------------------------------------------------------------
New Fund
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New Fund
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New Fund
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New Fund
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New Fund
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- - - -------------------------------------------------------------------------------------------------------------------------------
o In these examples, the $35 contract administrative charge is approximated
as a [__]% charge based on our estimated average contract size. In
determining the above charges, the purchase payment credit is approximated
at 2% based on our estimated average contract size. Premium taxes imposed
by some state and local governments are not reflected in these examples. We
entered into certain arrangements under which we are compensated by the
funds' advisors and/or distributors for the administrative services we
provide to the funds.
You should not consider these examples as representations of past or future
expenses. Actual expenses may be more or less than those shown.
</TABLE>
<PAGE>
Condensed Financial Information (Unaudited)
We have not provided any condensed financial information for the subaccounts
because they are new and do not have any history.
<PAGE>
Financial Statements
You can find our audited financial statements later in this prospectus. The SAI
does not include the audited financial statements of the subaccounts because
they are new and do not have any assets.
Performance Information
Performance information for the subaccounts may appear from time to time in
advertisements or sales literature. This information reflects the performance of
a hypothetical investment in a particular subaccount during a specified time
period. We show actual performance from the date the subaccounts began investing
in the funds. Currently, we do not provide any performance information because
they are new and have not had any activity to date. However, we show performance
from the commencement date of the funds as if the contract existed at that time,
which it did not. Although we base performance figures on historical earnings,
past performance does not guarantee future results.
We include non-recurring charges (such as withdrawal charges) in total return
figures, but not in yield quotations. Excluding non-recurring charges in yield
calculations increases the reported value.
Total return figures reflect deduction of all applicable charges, including:
o the contract administrative charge,
o the variable account administrative charge,
o the Maximum Anniversary Value Death Benefit Rider fee,
o the Enhanced Death Benefit Rider fee,
o the Guaranteed Minimum Income Benefit Rider fee,
o mortality and expense risk fee, and
o withdrawal charge (assuming a withdrawal at the end of the illustrated
period).
We also may make optional total return quotations that do not reflect deduction
of the withdrawal charge (assuming no withdrawal), the Maximum Anniversary Value
Death Benefit Rider fee, the Enhanced Death Benefit Rider fee and the Guaranteed
Minimum Income Benefit Rider fee. Total return quotations may be shown by means
of schedules, charts or graphs.
Average annual total return is the average annual compounded rate of return of
the investment over a period of one, five and ten years (or up to the life of
the subaccount if it is less than ten years old).
Cumulative total return is the cumulative change in the value of an investment
over a specified time period. We assume that income earned by the investment is
reinvested. Cumulative total return generally will be higher than average annual
total return.
Annualized simple yield (for subaccounts investing in money market funds)
"annualizes" the income generated by the investment over a given seven-day
period. That is, we assume the amount of income generated by the investment
during the period will be generated each seven-day period for a year. We show
this as a percentage of the investment.
Annualized compound yield (for subaccounts investing in money market funds) is
calculated like simple yield except that we assume the income is reinvested when
we annualize it. Compound yield will be higher than the simple yield because of
the compounding effect of the assumed reinvestment.
<PAGE>
Annualized yield (for subaccounts investing in income funds) divides the net
investment income (income less expenses) for each accumulation unit during a
given 30-day period by the value of the unit on the last day of the period. We
then convert the result to an annual percentage. You should consider performance
information in light of the investment objectives, policies, characteristics and
quality of the fund in which the subaccount invests and the market conditions
during the specified time period. Advertised yields and total return figures
include charges that reduce advertised performance. Therefore, 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 and yield.)
If you would like additional information about actual performance, please
contact us at the address or telephone number on the first page of this
prospectus.
<PAGE>
<TABLE>
<CAPTION>
The Variable Account and the Funds
You may allocate payments to any or all the subaccounts of the variable account
that invest in shares of the following funds:
<S> <C> <C> <C>
- - - ---------------------------------------------------------------------------------------------------------------------------------
Subaccount Investing in Investment Objectives and Policies Investment Advisor or Manager
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
New Fund
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
New Fund
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
New Fund
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
New Fund
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
New Fund
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
New Fund
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
New Fund
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
New Fund
- - - ---------------------------------------------------------------------------------------------------------------------------------
- - - ---------------------------------------------------------------------------------------------------------------------------------
New Fund
- - - ---------------------------------------------------------------------------------------------------------------------------------
New Fund
- - - ---------------------------------------------------------------------------------------------------------------------------------
[Fund information to be filed by amendment.]
</TABLE>
The investment objectives and policies of some of the funds are similar to the
investment objectives and policies of other mutual funds that an investment
advisor or its affiliates manage. Although the objectives and policies may be
similar, each fund will have its own portfolio holdings and its own fees and
expenses. Accordingly, each fund will have its own investment results.
The investment managers and advisors cannot guarantee that the funds will meet
their investment objectives. Please read the funds' prospectuses for facts you
should know before investing. These prospectuses are available by contacting us
at the address or telephone number on the first page of this prospectus.
All funds are available to serve as the underlying investments for variable
annuities. Some funds also are available to serve as investment options for
variable life insurance policies and qualified plans. It is possible that in the
future, it may be disadvantageous for variable annuity accounts and variable
life insurance accounts and/or qualified plans to invest in the available funds
simultaneously.
Although the insurance company and the funds do not currently foresee any such
disadvantages, the boards of directors or trustees of the appropriate funds will
monitor events in order to identify any material conflicts between annuity
owners, policy owners and qualified plans and to determine what action, if any,
should be taken in response to a conflict. If a board were to conclude that it
should establish separate funds for the variable annuity, variable life
insurance and qualified plan accounts, you would not bear any expenses
associated with establishing separate funds. Please refer to the fund
prospectuses for risk disclosure regarding simultaneous investments by variable
annuity, variable life insurance and qualified plan accounts.
The IRS issued final regulations relating to the diversification requirements
under Section 817(h) of the Internal Revenue Code of 1986, as amended (the
Code). Each fund intends to comply with these requirements.
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 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 prohibits us from
charging a subaccount with liabilities of any other subaccount or of our general
business. The variable account includes other subaccounts that are available
under contracts that are not described in this prospectus.
The U.S. Treasury and the Internal Revenue Service (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
subaccounts it may allow before the contract owner would be currently taxed on
income earned within 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 contract, as necessary, so that the owner will not be subject to
current taxation as the owner of the subaccount assets.
We intend to comply with all federal tax laws so that the contract continues to
qualify as an annuity for federal income tax purposes. We reserve the right to
modify the contract as necessary to comply with any new tax laws.
The Fixed Accounts
Guarantee Period Accounts
You may also allocate purchase payments to one or more of the Guarantee Period
Accounts with Guarantee Periods ranging from two to ten years. The minimum
required investment in each Guarantee Period Account is $1,000. Each Guarantee
Period Account pays an interest rate that is declared when you allocate money to
that account. That interest rate is then fixed for the Guarantee Period that you
chose. We will periodically change the declared interest rate for any future
allocations to these accounts, but we will not change the rate paid on money
currently in a Guarantee Period Account.
We have no specific formula for determining the rate of interest that we declare
as future interest rates on the Guarantee Period Accounts. We will declare the
interest rates from time to time based on our analysis of current market
conditions. In addition, we also may consider various other factors in
determining the interest rates for a given Guarantee Period including regulatory
and tax requirements; sales commissions and administrative expenses we bear;
general economic trends; and competitive factors.
You may transfer money out of the Guarantee Period Accounts within 30 days
before the end of the Guarantee Period without receiving a MVA (see "Market
Value Adjustment (MVA)" below.) At that time you may choose to start a new
Guarantee Period of the same length, transfer the money to another Guarantee
Period Account, transfer the money to any of the subaccounts, or withdraw the
money from the contract (subject to applicable withdrawal provisions). If we do
not receive any instructions at the end of your Guarantee Period, we will
automatically transfer the money into the one-year fixed account. These accounts
are not available in all states and are not offered after annuity payouts begin.
We hold amounts you allocate to the Guarantee Period Accounts in a "nonunitized"
separate account we have established under the Indiana Insurance Code. This
separate account provides an additional measure of assurance that we will make
full payment of amounts due under the Guarantee Period Accounts. State insurance
law prohibits us from charging this separate account with liabilities of any
other separate account or of our general business. We own the assets of this
separate account as well as any favorable investment performance of those
assets. You do not participate in the performance of the assets held in this
separate account. We guarantee all benefits relating to your value in the
Guarantee Period Accounts.
We intend to construct and manage the investment portfolio relating to the
separate account using a strategy known as "immunization." Immunization seeks to
lock in a defined return on the pool of assets versus the pool of liabilities
over a specified time horizon. Since the return on the assets versus the
liabilities is locked in, it is "immune" to any
<PAGE>
potential fluctuations in interest rates during the given time. We achieve
immunization by constructing a portfolio of assets with a price sensitivity to
interest rate changes (i.e., price duration) that is essentially equal to the
price duration of the corresponding portfolio of liabilities. Portfolio
immunization provides us with flexibility and efficiency in creating and
managing the asset portfolio, while still assuring safety and soundness for
funding liability obligations.
We must invest this portfolio of assets in accordance with requirements
established by applicable state laws regarding the nature and quality of
investments that life insurance companies may make and the percentage of their
assets that they may commit to any particular type of investment. Our investment
strategy will incorporate the use of a variety of debt instruments having price
durations tending to match the applicable Guarantee Periods. These instruments
include, but are not necessarily limited to, the following:
o Securities issued by the U.S. government or its agencies or
instrumentalities, which issues may or may not be guaranteed by the U.S.
government;
o Debt securities that have an investment grade, at the time of purchase,
within the four highest grades assigned by any of three nationally
recognized rating agencies - Standard & Poor's, Moody's Investors Service
or Duff and Phelp's - or are rated in the two highest grades by the
National Association of Insurance Commissioners;
o Other debt instruments which are unrated or rated below investment grade,
limited to 10% of assets at the time of purchase; and
o Real estate mortgages, limited to 45% of portfolio assets at the time
of acquisition.
In addition, options and futures contracts on fixed income securities will be
used from time to time to achieve and maintain appropriate investment and
liquidity characteristics on the overall asset portfolio.
While this information generally describes our investment strategy, we are not
obligated to follow any particular strategy except as may be required by federal
law and Indiana and other state insurance laws.
Market Value Adjustment (MVA)
You may choose to transfer or withdraw money out of the Guarantee Period
Accounts prior to the end of the Guarantee Period. The amount transferred or
withdrawn will receive a MVA which will increase or decrease the actual amount
transferred or withdrawn. We calculate the MVA using the formula shown below and
we base it on the current level of interest rates compared to the rate of your
Guarantee Period Account.
Amount transferred x ( l + i ) n/12
--------------------
( l + j + .001 )
Where: i = rate earned in the account from which funds
are being transferred
j = current rate for a new Guarantee Period
equal to the remaining term in the current
Guarantee Period
n = number of months remaining in the current
Guarantee Period (rounded up)
We will not make MVAs for amounts withdrawn for withdrawal charges, the annual
contract administrative charge or paid out as a death claim. We also will not
make MVAs on automatic transfers in the Guarantee Period Account. We determine
any applicable withdrawal charges based on the market value adjusted
withdrawals. In some states the MVA is limited.
The one-year fixed account
You may allocate purchase payments to the one-year fixed account. We back the
principal and interest guarantees relating to the one-year fixed account. The
value of the one-year fixed account increases as we credit interest to the
account. Purchase payments and transfers to the one-year fixed account become
part of our general account. We credit interest daily and compound it annually.
We will change the interest rates from time to time at our discretion.
<PAGE>
Interest in the one-year fixed account is not required to be registered with the
SEC. However, the Market Value Adjustment interests under the contracts are
registered with the SEC. The SEC staff does not review the disclosures in this
prospectus on the one-year fixed account (but the SEC does review the
disclosures in this prospectus on the Market Value Adjustment interests).
Disclosures regarding the one-year 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
"Making the Most of Your Contract -- Transfer policies" for restrictions on
transfers involving the one-year fixed account.)
Buying Your Contract
You or your sales representative will send an application along with your
initial purchase payment to our 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 a contract or
become an annuitant if you are 85 or younger. (The age limit may be younger for
qualified annuities in some states.)
When you apply, you may select:
o the length of the withdrawal charge period (six or eight years);
o the optional Maximum Anniversary Death Benefit Rider;
o the optional Enhanced Death Benefit Rider;
o the optional Guaranteed Minimum Income Benefit Rider;
o the one-year fixed account, Guarantee Period Accounts and/or
subaccounts in which you want to invest;
o how you want to make purchase payments; and
o a beneficiary.
The contract provides for allocation of purchase payments to the subaccounts of
the variable account and/or to the fixed accounts in even 1% increments.
If your application is complete, we will process it and apply your purchase
payment to the fixed accounts and subaccounts you selected within two business
days after we receive it at our office. 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 office.
You may make monthly payments to your contract under a SIP. To begin the SIP,
you will complete and send a form and your first SIP 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. When we process
your application, we will establish the retirement date to the maximum age or
date described below. You can also select a date within the maximum limits. 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.
<PAGE>
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 tenth contract
anniversary, if purchased after age 75. (In Pennsylvania, the maximum
retirement date ranges from age 85 to 96 based on the annuitant's age when
we issue the contract. See contract for details.)
For qualified annuities (except Roth IRAs), to avoid IRS penalty taxes, the
retirement date generally must be:
o on or after the date the annuitant reaches age 59 1/2; and
o for IRAs and SEPs, by April 1 of the year following the calendar year when
the annuitant reaches age 70 1/2; or
o for TSAs, by April 1 of the year following the calendar year when the
annuitant reaches age 70 1/2, or, if later retires (except that 5% business
owners may not select a retirement date that is later than April 1 of the
year following the calendar year when they reach age 70 1/2).
If you take the minimum IRA or TSA distributions as required by the Code from
another tax-qualified investment, or in the form of partial withdrawals from
this contract, annuity payouts can start as late as the annuitant's 85th
birthday or the tenth contract anniversary, if later. (In Pennsylvania, the
annuity payout ranges from age 85 to 96 based on the annuitant's age when we
issue the contract. See contract for details.)
Beneficiary
We will pay your named beneficiary the death benefit if it becomes payable
before the retirement date (while the contract is in force and before annuity
payouts begin). 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 payments
Minimum allowable purchase payments
If paying by SIP: If paying by any other method*:
$50 $25,000 initial payment
$100 for any additional payments
* The Guarantee Period Accounts require a minimum $1,000 initial payment.
Maximum total allowable purchase payments** (without prior approval): $1,000,000
** This limit applies in total to all American Enterprise Life annuities
you own. We reserve the right to increase the maximum limit. For
qualified annuities, the qualified plan's limits on annual contributions
also apply.
<PAGE>
How to make purchase payments
1
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
2
By SIP: Contact your sales representative to complete the necessary
SIP paperwork
Purchase payment credits
You will generally receive a purchase payment credit with every payment you make
to your contract. We apply this credit immediately. We allocate the credit to
the fixed accounts and subaccounts in the same proportions as your purchase
payment. We calculate the credit as a percentage of the net current payment
(current payment less the amount of partial withdrawals that exceed all prior
purchase payments) according to the following schedule:
<TABLE>
<CAPTION>
<S> <C>
If total net payments* made during then the amount of the purchase payment credit
the life of the contract equals....... we add to the net current payment equals.....
$25,000 to less than $50,000 2%
$50,000 to less than $1 million 3
$1 million and over 4
*Net payments is equal to total payments less total withdrawals.
</TABLE>
If you make subsequent payments which cause the contract to become eligible for
a higher percentage credit, we will add credits to increase the credit
percentage on prior payments (less withdrawals). We allocate credits according
to the purchase payment allocation on the date we add the credits to the
contract.
Charges
Contract administrative charge
We charge this fee for establishing and maintaining your records. We deduct $35
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 accounts in the
same proportion your interest in each account bears to your total contract
value.
We will waive this charge when your contract value is $100,000 or more on the
current contract anniversary.
If you take a full withdrawal from your contract, we will deduct the charge at
the time of withdrawal regardless of the contract value or purchase payments
made. We cannot increase the annual contract administrative charge and it does
not apply after annuity payouts begin or when we pay death benefits.
<PAGE>
Variable account administrative charge
We apply this charge daily to the 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 subaccounts. The unit values of your subaccounts
reflect this fee. For contracts with a six-year withdrawal charge schedule, this
fee totals 1.40% of their average daily net assets on an annual basis. For
contracts with an eight-year withdrawal charge schedule, this fee 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. If you choose the optional Maximum Anniversary Value
Death Benefit Rider, we will charge an additional 0.10% of the average daily net
assets on an annual basis (see "Maximum Anniversary Value Death Benefit Rider
fee" below). If you choose the optional Enhanced Death Benefit Rider, we will
charge an additional 0.30% of the average daily net assets on annual basis (see
"Enhanced Death Benefit Rider fee" below). These fees do not apply to the fixed
accounts. We cannot increase these fees.
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 our entire
group of annuitants live. If, as a group, annuitants outlive the life expectancy
we assumed in our actuarial tables, then we must take money from our general
assets to meet our obligations. If, as a group, 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 or the 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 accrued as
follows:
o first, to the extent possible, the subaccounts pay this fee from any
dividends distributed from the funds in which they invest;
o 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.
Maximum Anniversary Value Death Benefit Rider fee
We charge a fee for this optional feature only if you choose this option. If
selected, we apply this fee daily to the subaccounts as part of the mortality
and expense risk fee. It is reflected in the unit values of the subaccounts and
it totals 0.10% of their average daily net assets on an annual basis. We cannot
increase the Maximum Anniversary Value Death Benefit Rider fee.
Enhanced Death Benefit Rider fee
We charge a fee for this optional feature only if you choose this option. If
selected, we apply this fee daily to the subaccounts as part of the mortality
and expense risk fee. It is reflected in the unit values of the subaccounts and
it totals 0.30% of their average daily net assets on an annual basis. We cannot
increase the Enhanced Death Benefit Rider fee.
<PAGE>
Guaranteed Minimum Income Benefit Rider fee
We charge a fee for this optional feature only if you choose this option. If
selected, we deduct the fee (currently 0.30%) from the contract value on your
contract anniversary at the end of each contract year. We prorate this fee among
the subaccounts and fixed accounts in the same proportion your interest in each
account bears to your total contract value.
We apply the fee on an adjusted benefit base calculated as the result of
(a) + (b) - (c), where:
(a) is the Guaranteed Income Benefit Base,
(b) is the adjusted transfers from the subaccounts to the fixed accounts
made in the last six months, and
(c) is the total contract value in the fixed accounts.
The result of (b) minus (c) cannot be greater than zero. It allows us to base
the charge largely on the subaccounts, and not on the fixed accounts.
We will deduct the fee, adjusted for the number of calendar days coverage was in
place, if the contract is terminated for any reason or when annuity payouts
begin. We cannot increase the Guaranteed Minimum Income Benefit Rider fee after
the rider effective date and it does not apply after annuity payouts begin. We
can increase the Guaranteed Minimum Income Benefit Rider fee on new contracts up
to a maximum of 0.75%.
Withdrawal charge
If you withdraw all or part of your contract, you may be subject to a withdrawal
charge. A withdrawal charge applies if all or part of the withdrawal amount is
from purchase payments we received within six or eight years before withdrawal.
You select the withdrawal charge period at the time of your application for the
contract. The withdrawal charge percentages that apply to you are shown in your
contract. In addition, amounts withdrawn from a Guarantee Period Account prior
to the end of the applicable Guarantee Period will be subject to a MVA. (See
"The Fixed Accounts - Market Value Adjustments (MVA).") For purchase payment
credits made within the last 12 months we will assess a charge, similar to a
withdrawal charge, equal to the amount of the purchase payment credits. The
amount we pay to you under these circumstances will always equal or exceed your
withdrawal value.
For purposes of calculating any withdrawal charge, we treat amounts withdrawn
from your contract value in the following order:
1. First, in each contract year, we withdraw amounts totaling up to 10% of
your prior anniversary contract value. (Your initial purchase payment is
considered the prior contract anniversary contract value during the first
contract year.) We do not assess a 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 equal contract value less purchase payments received and not
previously withdrawn. We do not assess a withdrawal charge on contract
earnings.
NOTE: We determine contract earnings by looking at the entire contract value,
not the earnings of any particular subaccount or the fixed accounts.
3. Next we withdraw purchase payments received prior to the withdrawal charge
period you selected and shown in your contract. We do not assess a
withdrawal charge on these purchase payments.
4. Finally, if necessary, we withdraw purchase payments received that are
still within the withdrawal charge period you selected and shown in your
contract. We withdraw these payments on a first-in, first-out (FIFO) basis.
We do assess a withdrawal charge on these payments.
We determine your withdrawal charge by multiplying each of your payments
withdrawn by the applicable withdrawal charge percentage, and then adding the
total withdrawal charges.
<PAGE>
The withdrawal charge percentage depends on the number of years since you made
the payments that are withdrawn, depending on the schedule you selected:
<TABLE>
<CAPTION>
Six-year schedule Eight-year schedule
<S> <C> <C> <C>
Years from purchase payment Surrender charge percentage Years from purchase Surrender charge percentage
receipt payment receipt
1 8.5% 1 8.5%
2 8.5 2 8.5
3 8.5 3 8.5
4 6.5 4 8.5
5 4.5 5 8.5
6 2.5 6 6.5
Thereafter 0 7 4.5
8 2.5
Thereafter 0
</TABLE>
Withdrawal charge calculation example:
The following is an example of the calculation we would make to determine the
withdrawal charge on a contract with an eight-year withdrawal charge schedule
with this history:
o The contract date is Nov. 1, 1999 with a contract year of Nov. 1
through Oct. 30 and with an anniversary date of Nov. 1 each year; and
o We received these payments
- $10,000 Nov. 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 Nov. 1, 2008 contract value was $38,488.
<TABLE>
<CAPTION>
Withdrawal Charge Explanation
<S> <C> <C>
$ 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 Nov. 1, 1999 payment was received nine or more years before
withdrawal and is withdrawn without withdrawal charge; and
$680 $8,000 Dec. 31, 2005 payment is in its fourth year from receipt,
withdrawn with an 8.5% withdrawal charge; and
$510 $6,000 Feb. 20, 2007 payment is in its third year from receipt
withdrawn with an 8.5% withdrawal charge.
$1,190
</TABLE>
<PAGE>
For a partial withdrawal that is subject to a withdrawal charge, the amount we
actually withdraw from your contract 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 make a full withdrawal of
your contract, we also will deduct the $35 contract administrative charge.
Waiver of withdrawal charges We do not assess withdrawal charges for:
o withdrawals of any contract earnings;
o amounts totaling up to 10% of your prior contract anniversary contract
value to the extent it exceeds contract earnings;
o required minimum distributions from a qualified annuity (for those amounts
required to be distributed from the contract described in this prospectus);
o contracts settled using an annuity payout plan;
o withdrawals made as a result of one of the "Contingent events" described
below to the extent permitted by state law (see your contract for
additional conditions and restrictions);
o amounts we refund to you during the free look period; and
o death benefits.
Contingent events
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 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.
o Withdrawals you make if you or the annuitant become disabled within the
meaning of IRC Section 72(m)(7) after your contract date. The disabled
person must also be receiving Social Security disability or state long term
disability benefits. The disabled person must be age 70 or younger at the
time of withdrawal. You must provide us with a signed letter from the
disabled person stating that he or she meets the above criteria, a legible
photocopy of Social Security disability or state long term disability
benefit payments and the application for such payments.
o Withdrawals you make once a year if you or the annuitant become unemployed
at least one year after your contract's date, up to the following amounts
each year:
(a)25% of your prior anniversary contract value (or $10,000
if greater) if the unemployment condition is met for at
least 30 straight days; or
(b)50% of your prior anniversary contract value (or $10,000
if greater) if the unemployment condition is met for at
least 180 straight days.
The unemployment condition is met if the unemployed person is currently
receiving unemployment compensation from a government unit of the United
States, whether federal or state. You must provide us with a signed letter
from the unemployed person stating that he or she meets the above criteria
with a legible photocopy of the unemployment benefit payments meeting the
above criteria with regard to dates.
Possible group reductions: In some cases we may incur lower sales and
administrative expenses 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.
<PAGE>
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. In some cases, we deduct premium taxes from your purchase payments before
we allocate them. In other cases, we deduct them when you make a full withdrawal
from your contract or when annuity payouts begin.
Valuing Your Investment
We value your fixed accounts and subaccounts as follows:
Fixed accounts: We value the amounts you allocated to the fixed accounts
directly in dollars. The value of a fixed account equals:
o the sum of your purchase payments and transfer amounts allocated to the
one-year fixed account and the Guarantee Period Accounts;
o plus any purchase payment credits allocated to the fixed accounts;
o plus interest credited;
o minus the sum of amounts withdrawn after the MVA (including any applicable
withdrawal charges) and amounts transferred out;
o minus any prorated contract administrative charge; and
o minus any prorated portion of the Guaranteed Minimum Income Benefit Rider
fee (if applicable).
Subaccounts: We convert amounts you allocated to the subaccounts into
accumulation units. Each time you make a purchase payment or transfer amounts
into one of the 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 subaccount, or we assess a contract
administrative charge or the Guaranteed Minimum Income Benefit Rider fee, 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 after deduction of any premium taxes by the current
accumulation unit value.
Accumulation unit value
The current accumulation unit value for each subaccount equals the last value
times the subaccount's current net investment factor.
Net investment factor
We determine the net investment factor by:
o adding the fund's current net asset value per share, plus the 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, the variable account administrative charge and the Maximum
Anniversary Value Death Benefit Rider fee (if selected) or the Enhanced
Death Benefit Rider fee (if selected) from the result.
<PAGE>
Because the net asset value of the fund may fluctuate, the accumulation unit
value may increase or decrease. You bear all the investment risk in a
subaccount.
Factors that affect 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 subaccounts;
o any purchase payment credits allocated to the subaccounts;
o transfers into or out of the subaccounts;
o partial withdrawals;
o withdrawal charges;
o prorated portions of the contract administrative charge; and/or
o prorated portions of the Guaranteed Minimum Income Benefit Rider fee
(if selected).
Accumulation unit values will fluctuate due to:
o changes in funds' net asset value;
o dividends distributed to the subaccounts;
o capital gains or losses of funds;
o fund operating expenses; and/or
o mortality and expense risk fee, the variable account administrative charge,
the Maximum Anniversary Value Death Benefit Rider fee (if selected) and the
Enhanced Death Benefit Rider fee (if selected).
Making the Most of Your Contract
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 transfer a set amount monthly from a relatively conservative subaccount to
a more aggressive one, or to several others, or from the one-year fixed account
or the Guarantee Period Accounts (two year only) to one or more subaccounts. The
three to ten year Guarantee Period Accounts are not available for automated
transfers. You can also 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 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.
<PAGE>
<TABLE>
<CAPTION>
How dollar-cost averaging works
<S> <C> <C> <C> <C>
By investing an Amount Accumulation unit Number of units
equal number of Month invested value purchased
dollars each month... Jan $100 $20 5.00
Feb 100 18 5.56
you automatically buy Mar 100 17 5.88
more units when the Apr 100 15 6.67
per unit market price May 100 16 6.25
is low... Jun 100 18 5.56
Jul 100 17 5.88
and fewer units when Aug 100 19 5.26
the per unit market Sept 100 21 4.76
price is high. Oct 100 20 5.00
</TABLE>
You 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 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 with this
strategy 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 us.
Asset Rebalancing
You can ask us in writing to automatically rebalance the 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 subaccount matches your current
subaccount percentage allocations. These percentage allocations must be in whole
numbers. Asset rebalancing does not apply to the fixed accounts. 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 sales representative.
Transferring money between accounts
You may transfer money from any one subaccount, or the fixed accounts, to
another subaccount before annuity payouts begin. (Certain restrictions apply to
transfers involving the one-year fixed account.) We will process your transfer
on the valuation date we receive your request. 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. Transfers out of the Guarantee Period
Accounts will be subject to a MVA if done more than 30 days before the end of
the Guarantee Period.
We may suspend or modify transfer privileges at any time. Excessive trading
activity can disrupt fund management strategy and increase expenses, which are
borne by all contract owners who allocated purchase payments to the fund
regardless of their transfer activity. We may apply modifications or
restrictions in any reasonable manner to prevent transfers we believe will
disadvantage other contract owners. (For information on transfers after annuity
payouts begin, see "Transfer policies" below.)
<PAGE>
Transfer policies
o Before annuity payouts begin, you may transfer contract values between the
subaccounts, or from the subaccounts to the fixed accounts at any time.
However, if you made a transfer from the one-year fixed account to the
subaccounts, you may not make a transfer from any subaccount back to the
one-year fixed account for six months following that transfer.
o You may transfer contract values from the one-year fixed account to the
subaccounts or the Guarantee Period Accounts once a year on or within 30
days before or after the contract anniversary (except for automated
transfers, which can be set up at any time for certain transfer periods
subject to certain minimums).
o You may transfer contract values from the Guaranteed Period Accounts at any
time. Transfers made before the end of the Guaranteed Period will receive a
MVA, which may result in a gain or loss of contract value.
o If we receive your request on or within 30 days before or after the
contract anniversary date, the transfer from the one-year fixed account to
the subaccounts or the Guarantee Period Accounts will be effective on the
valuation date we receive it.
o We will not accept requests for transfers from the one-year fixed account
at any other time.
o Once annuity payouts begin, you may not make transfers to or from the
one-year fixed account, but you may make transfers once per contract year
among the subaccounts. During the annuity payout period, your choices of
subaccounts may be limited.
o Once annuity payouts begin, you may not make any transfers to the
Guarantee Period Accounts.
How to request a transfer or withdrawal
1 Send your name, contract number, Social Security Number
By letter: or Taxpayer Identification Number and signed request
for a transfer or withdrawal to:
Regular mail:
American Enterprise Life Insurance Company
80 South Eighth Street
P.O. Box 534
Minneapolis, MN 55440-0534
Express mail:
American Enterprise Life Insurance Company
Attention: Unit 829
733 Marquette Avenue
Minneapolis, MN 55402
Minimum amount
Transfers or
withdrawals: $500 or entire account balance
Maximum amount
Transfers or
withdrawals: Contract value
<PAGE>
2 By automated transfers and automated partial withdrawals: Your sales
representative can help you set up automated transfers or partial withdrawals
among your subaccounts or fixed 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 from the one-year fixed account to any one
of the subaccounts may not exceed an amount that, if continued,
would deplete the one-year fixed account within 12 months.
o Automated withdrawals may be restricted by applicable law under some
contracts.
o You may not make additional purchase payments if automated partial
withdrawals are in effect.
o Automated partial withdrawals may result in IRS taxes and penalties on
all or part of the amount withdrawn.
Minimum amount
Transfers or
withdrawals: $100 monthly
$250 quarterly, semi-annually
or annually
3 Call between 7 a.m. and 6 p.m. Central time:
By phone:
800-333-3437 or
(612) 671-7700 (Minneapolis/St. Paul area)
Minimum amount
Transfers or
withdrawals: $500 or entire account balance
Maximum amount
Transfers: Contract value
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 withdrawal within 30 days of a phoned-in 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
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. For total withdrawals,
we will compute the value of your contract at the next accumulation unit value
calculated after we receive your request. We may ask you to return the contract.
You may have to pay charges (see "Charges") 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 you request a partial
withdrawal, we will withdraw money from all your subaccounts and/or the fixed
accounts in the same proportion as your value in each account correlates to your
total contract value, unless you request otherwise.
Receiving payment By regular or express mail:
o payable to owner;
o mailed to address of record.
NOTE: We will charge you a fee if you request express mail delivery.
Normally, we will send the payment 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.
TSA Special Surrender Provisions
Participants in Tax-Sheltered Annuities: The Code imposes certain restrictions
on your right to receive early distributions from a TSA:
o Distributions attributable to salary reduction contributions (plus
earnings) made after Dec. 31, 1988, or to transfers or rollovers from other
contracts, may be made from the TSA only if:
- you are at least age 59 1/2;
- you are disabled as defined in the Code;
- you separated from the service of the employer who
purchased the contract; or
- the distribution is because of your death.
o If you encounter a financial hardship (as defined by the Code), you may
receive a distribution of all contract values attributable to salary
reduction contributions made after Dec. 31, 1988, but not the earnings on
them.
o Even through a distribution may be permitted under the above rules, it may
be subjected to IRS taxes and penalties (see "Taxes").
<PAGE>
o The above restrictions on distributions do not affect the availability of
the amount credited to the contract as of Dec. 31, 1988. The restrictions
also do not apply to transfers or exchanges of contract value within the
contract, or to another registered variable annuity contract or investment
vehicle available through the employer.
Changing Ownership
You may change ownership of your nonqualified annuity at any time by completing
a change of ownership form we approve and sending it to our office. The change
will become binding upon us when we receive and record it. We will honor any
change of ownership request that we believe is authentic and we will use
reasonable procedures to confirm authenticity. If we follow these procedures, we
will not take any 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. However, if the owner is a trust or custodian, or an
employer acting in a similar capacity, ownership of a contract may be
transferred to the annuitant.
Benefits in Case of Death
We will pay the death benefit to your beneficiary upon the earlier of your death
or the annuitant's death. The benefit paid will be based on the death benefit
coverage you select when you purchased the contract. If a contract has more than
one person as the owner, we will pay benefits upon the first to die of any owner
or the annuitant.
If you or the annuitant die before annuity payouts begin while this contract is
in force, we will pay the beneficiary the greater of the following less any
purchase payment credits added to the contract in the last 12 months:
1. the contract value; or
2. the total purchase payments paid plus purchase payment credits and less
any "adjusted partial withdrawals".
If you own the contract in joint tenancy with rights of survivorship, we will
pay benefits upon the first to die of either you or the annuitant.
<PAGE>
Adjusted partial withdrawals:
We calculate an "adjusted partial withdrawal " 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.
Example:
o The contract is purchased with a payment of 25,000 on Jan. 1, 1999. A
purchase payment credit of $500 is added to the contract.
o On Jan. 1, 2000 an additional premium payment of $5,000 is made. A purchase
payment credit of $100 is added to the contract.
o On March 1, 2000 the contract value has grown to $32,000 ($30,000 in
premium payments, $600 in purchase payment credits and $1,400 in earnings).
The owner takes a $1,500 partial withdrawal leaving a contract value of
$30,500.
o On March 1, 2001 the contract value has fallen to $28,000.
The death benefit on March 1, 2001 is calculated as follows:
Total premiums paid: $30,000.00
plus purchase payment credits: 600.00
minus any "adjusted partial withdrawals",
calculated as: 1,500 x 30,600 = - 1,434.38
-------------- --------
32,000
for a death benefit of: $29,165.62
Maximum Anniversary Value Death Benefit Rider
If this rider is available in your state and either you or the annuitant are age
79 or younger on the contract date, you may choose to add this benefit to your
contract. This rider provides that if you or the annuitant die before annuity
payouts begin while this contract is in force, we will pay the beneficiary the
greatest of the following amounts less any purchase payment credits added in the
last 12 months:
1. the contract value; or
2. the total purchase payments paid plus purchase payment credits and less
any "adjusted partial withdrawals"; or
3. the "maximum anniversary value" immediately preceding the date of death
plus the dollar amount of any payments since that anniversary plus
purchase payment credits and minus any "adjusted partial withdrawals"
since that anniversary.
<PAGE>
Maximum anniversary value: 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 purchase payments made to the contract plus purchase payment
credits and minus any "adjusted partial withdrawals".
The "maximum anniversary value" is equal to the greatest of these anniversary
values.
After your or the annuitant's 81st birthday, the death benefit continues to be
the death benefit value as of that date, plus any subsequent payments and
purchase payment credits and minus any "adjusted partial withdrawals."
Example:
o The contract is purchased with a payment of $25,000 on Jan. 1, 1999. A
purchase payment credit of $500 is added to the contract.
o On Jan. 1, 2000 (the first contract anniversary) the contract value has
grown to $29,000.
o On March 1, 2000 the contract value has fallen to $27,000, at which point
the owner takes a $1,500 partial withdrawal, leaving a contract value of
$25,500.
The death benefit on March 1, 2000 is calculated as follows:
The "maximum anniversary value": $29,000.00
(the greatest of the anniversary values which
was the contract value on Jan. 1, 2000)
plus any purchase payments paid since that anniversary: +0.00
minus any "adjusted partial withdrawal" taken since that
anniversary, calculated as: 1,500 x 29,000 = -1,611.11
---------------- ---------
27,000
for a death benefit of: $27,388.89
Enhanced Death Benefit Rider
If this rider is available in your state and either you or the annuitant are age
79 or younger on the contract date, you may choose to add this benefit to you
contract. This rider provides that if you or the annuitant die before annuity
payouts begin while this contract is in force, we will pay the beneficiary the
greatest of the following amounts less any purchase payment credits added in the
last 12 months:
1. the contract value; or
2. the total purchase payments paid plus purchase payment credits and less
any "adjusted partial withdrawals"; or
3. the "maximum anniversary value" immediately preceding the date of death
plus the dollar amount of any payments since that anniversary plus
purchase payment credits and minus any "adjusted partial withdrawals"
since that anniversary; or
4. the Variable Account 5% Floor
<PAGE>
The Variable Account 5% Floor
On or before the contract anniversary after the earlier of your or the
annuitant's 81st birthday, the Variable Account 5% Floor is the sum of the value
in the fixed accounts plus the variable account floor. After the contract
anniversary immediately following either you or the annuitant's 81st birthday,
the Variable Account 5% Floor is the floor on that anniversary increased by
additional purchase payments made since that anniversary plus purchase payment
credits and reduced by any "adjusted partial withdrawals" since that
anniversary.
On each contract anniversary prior to the earlier of your or the annuitant's
81st birthday, we increase the variable account floor by accumulating the prior
anniversary's floor at 5%. On the first contract anniversary, the floor is
increased by 5% of the accumulated initial purchase payments plus purchase
payment credits allocated to the subaccounts. On any day that you allocate
additional amounts to, or withdraw or transfer from the subaccounts, we adjust
the floor by adding the additional amounts and subtracting the "adjusted partial
withdrawals" or adjusted transfers.
For the Variable Account 5% Floor, we calculate the "adjusted partial
withdrawals" or transfer as the result of (a) times (b) where:
(a) is the ratio of the amount of withdrawal (including any withdrawal
charges) or transfer from the subaccounts to the total value in the
subaccounts on the date of (but prior to) the withdrawal or transfer.
(b) is the variable account floor on the date of (but prior to) the
withdrawal or transfer.
Example:
o The contract is purchased with a payment of $25,000 on Jan. 1, 1999 and a
$500 purchase payment credit is added to the contract with $5,100 allocated
to the one-year fixed account and $20,400 allocated to the subaccounts.
o On Jan. 1, 2000 (the first contract anniversary), the one-year fixed
account value is $5,200 and the subaccount value is $17,000. Total contract
value is $23, 200.
o On March 1, 2000, the one-year fixed account value is $5,300 and the
subaccount value is $19,000. Total contract value is $24,300. The owner
takes a $1,500 partial withdrawal all from the subaccounts, leaving the
contract value at $22,800.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
The death benefit on March 1, 2000 is calculated as follows:
The "maximum anniversary value" (the purchase payment plus purchase payment
credits): $ 25,500.00
plus any purchase payment paid since that anniversary: + 0.00
minus any "adjusted partial withdrawal" taken since that anniversary,
calculated as: 1,500 x 25,500 =
--------------------- - 1,574.07
24,300 ----------
Maximum Anniversary Value Benefit $ 23,925.93
===========
The variable account floor on Jan. 1, 2000,
calculated as: 1.05 x 20,400 = $ 21,420.00
plus any purchase payments paid since that anniversary: + 0.00
minus any "adjusted partial withdrawals" from the subaccounts,
calculated as: 1,500 x 21,420
---------------------- -$ 1,691.05
19,000 -----------
Variable Account Floor Benefit $ 19,728.95
plus the one year fixed account value + 5,300.00
----------
Variable Account 5% Floor, calculated as the one-year fixed account
plus the Variable Account Floor Benefit $ 25,028.95
===========
Enhanced Death Benefit, calculated as the greater of the Maximum Anniversary
Value Benefit and the Variable Account 5% Floor, minus any purchase payment $ 25,028.95
credits made in the last 12 months ($0)
</TABLE>
If your spouse is sole beneficiary under a nonqualified annuity and you die
before the retirement date, your spouse may keep the contract as owner with the
contract value equal to the death benefit that would have otherwise been paid.
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. There will be no
withdrawal charges on the contract from that point forward unless additional
purchase payments are made. The Guaranteed Minimum Income Benefit Rider, if
selected, is then terminated.
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 contract as owner until the date on which the annuitant would have
reached age 70 1/2 or any other date permitted by the Code. To do this, the
spouse must give us written instructions within 60 days after we receive proof
of death. The contract value is equal to the death benefit that would otherwise
have been paid. There will be no withdrawal charges on the contract from that
point forward unless additional purchase payments are made. The Guaranteed
Minimum Income Benefit Rider, if selected, is then terminated.
Payments: Under a nonqualified annuity, we will pay the beneficiary in a single
sum unless you give 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.
<PAGE>
When paying the beneficiary, we will process the death claim on the valuation
date 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 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").
Guaranteed Minimum Income Benefit Rider
An optional Guaranteed Minimum Income Benefit Rider may be available in many
jurisdictions for a separate annual charge, (see "Charges - Guaranteed Minimum
Income Rider fee"). The rider guarantees a minimum amount of fixed annuity
lifetime income during the annuity payout period if your contract has been in
force for at least ten years, subject to the conditions described below. The
rider also provides you the option of variable annuity payouts, with a
guaranteed minimum initial payment. This rider is only available at the time you
purchase your contract if you also select the Enhanced Death Benefit Rider
option.
In some instances, we may allow you to add this rider if it was not available
when you initially purchased your contract. In these instances, we would add
this rider at the next contract anniversary and all conditions of the rider
would use this date as the effective date.
This rider does not create contract value or guarantee the performance of any
investment option. Fixed annuity payouts under the terms of this rider will
occur at the guaranteed annuity purchase rates stated in the contract. We base
first year payments from the variable annuity payout option offered under this
rider on the same factors as the fixed annuity payout option. We base subsequent
payments on the initial payment and an assumed annual return of 5%. Because this
rider is based on guaranteed actuarial factors for the fixed option, the level
of fixed lifetime income it guarantees may be less than the level that would be
provided by applying the then current annuity factors. Likewise, for the
variable annuity payout option, we base the rider on more conservative factors
resulting in a lower initial payment and lower lifetime payments than those
provided otherwise if the same benefit base were used. However, the Guaranteed
Income Benefit Base described below establishes a floor, which when higher than
the contract value, can result in a higher annuity payout level. Thus, the rider
is a guarantee of a minimum amount of annuity income.
The Guaranteed Income Benefit Base is equal to the Enhanced Death Benefit if:
o the Guaranteed Minimum Income Rider became effective on the contract date, and
o all payments are recognized in the benefit base.
We reserve the right to not recognize any additional payments made in the five
years prior to rider exercise. The Guaranteed Income Benefit Base, less any
applicable premium tax, is the value that will be used to determine minimum
annuity payouts if the rider is exercised.
Conditions on election of the rider: The following conditions apply to the
election of the rider:
o you must elect the rider at the time you purchase your contract along
with the Enhanced Death Benefit Rider option, and
o the annuitant must be age 75 or younger on the contract date.
Fund selection to continue the rider: You may allocate your purchase payments to
any of the subaccounts or the fixed accounts. However, we reserve the right to
limit the amount in the Wells Fargo Money Market Fund to 10% of the total amount
in the subaccounts. If we are required to activate this restriction, and you
have more than 10% of your subaccount value in this fund, we will send you
notice and ask that you reallocate your contract value so that the limitation is
satisfied within 60 days. If after 60 days the limitation is not satisfied, the
rider will be terminated.
<PAGE>
Exercising the rider: The following conditions apply to the exercise of the
rider:
o you may only exercise the rider within 30 days after any contract
anniversary following the expiration of a ten-year waiting period
from the effective date of the rider, and
o the annuitant on the retirement date must be between 50 and 86 years
old, and
o you can only take an annuity payout in one of the following
annuity payout plans:
- Plan A -- Life Annuity - no refund
- Plan B -- Life Annuity with ten years certain
- Plan D -- Joint and last survivor life annuity - no refund
Contingent event benefits: If the annuitant satisfies the conditions for the
waiver of withdrawal charges in the event of disability, terminal illness or a
confinement in a nursing home or hospital (see "Charges- Waiver of withdrawal
charges") you can exercise the rider at any time. In this event, you can take up
to 50% of the Guaranteed Income Benefit Base in cash. You can use the balance of
the Guaranteed Income Benefit Base for annuity payouts under the terms above
with regard to annuitant age at retirement date, the annuity payout plans and
the more conservative annuity factors. You can also change the annuitant for the
payouts.
Terminating the rider: The following conditions apply to the termination of the
rider:
o you may terminate the rider within 30 days after the first and
fifth anniversary after the effective date of the rider.
o you may terminate the rider any time after the 10th anniversary
after the effective date of the rider.
o the rider will terminate on the date you make a full withdrawal
from the contract, or annuity payouts begin, or on the date that a
death benefit is payable.
o the rider will terminate on the contract anniversary after the
annuitant's 86th birthday.
Example:
o The contract is purchased with a payment of $100,000 on Jan. 1, 2000,
and a $2,000 purchase payment credit is added to the contract.
o There are no additional purchase payments and no partial withdrawals.
o The money is fully allocated to the subaccounts.
o The annuitant is age 55 on the contract date. For the joint and
last survivor option (annuity payout plan D), the joint annuitant
is age 55 on the contract date.
o The Guaranteed Income Benefit Base is based on the Variable Account 5% Floor.
o The contract is within 30 days after contract anniversary.
If the Guaranteed Minimum Income Benefit Rider is exercised, the minimum fixed
annuity payout or the first year variable annuity payout would be:
<TABLE>
<CAPTION>
Fixed Annuity Payout Options
Minimum Guaranteed Annual Income
<S> <C> <C> <C> <C>
Contract Anniversary At Minimum Guaranteed Benefit Plan A -- Plan B -- Plan D --
- - - ------------------------ ---------------------------
Exercise Base Life Annuity Life Annuity Joint and last
- no refund with ten years survivor life
certain annuity - no refund
10 $166,147 $ $ $
15 $212,051 $ $ $
</TABLE>
After the first year initial payment, lifetime income payments on a variable
annuity payout option will depend on the investment performance of the
subaccounts you select. The payments will be higher if investment performance is
greater than a 5% annual return and lower if investment performance is less than
a 5% annual return.
[Figures to be updated on amendment.]
<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.
The amount available for payouts under the plan you select is the contract value
on your retirement date (less any applicable premium tax). We do not deduct any
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 amounts 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
one-year 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. The Guarantee Period Accounts are not available during this payout
period.
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 accounts at the settlement.
In addition, for variable payouts only, amounts depend on the investment
performance of the subaccounts you select. These payouts will vary from month to
month because the performance of the 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 "Making the Most of Your Contract -- Transfer policies."
Annuity table
The annuity table in your contract shows the amount of the first monthly payment
for each $1,000 of contract value according to the age and, when applicable, the
sex of the annuitant. (Where required by law, we will use a unisex table of
settlement rates.) The table assumes that the contract value is invested at the
beginning of the annuity payout period and earns a 5% rate of return, which is
reinvested and helps to support future payouts.
Substitution of 3.5% table
If you ask us at least 30 days before the retirement date, we will substitute an
annuity table based on an assumed 3.5% investment rate for the 5% table in the
contract. The assumed investment rate affects both the amount of the first
payout and the extent to which subsequent payouts increase or decrease. Using
the 5% table results in a higher initial payment, but later payouts will
increase more slowly when annuity unit values rise and decrease more rapidly
when they decline.
<PAGE>
Annuity payout plans
You may choose any one of these annuity payout plans by giving us written
instructions at least 30 days before contract values are 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, ten or 15 years certain: We make monthly
payouts for a guaranteed payout period of five, ten or 15 years that you
elect. This election will determine the length of the payout period to the
beneficiary if the annuitant should die before the elected period expires.
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 ten 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. During the payout
period, you can elect to have us determine the present value of any
remaining variable payouts and pay it to you in a lump sum. The present
value is determined separately for each subacccount from which you are
currently scheduled to receive payments. The present value for each
subaccount is equal to the discounted value of the remaining annuity
payments which are assumed to remain level. The discount rate used in the
calculation will vary between 5% and 7.50% depending on the applicable
assumed investment rate (AIR) and the fund management fees. 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 that 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 allocated to the one-year fixed account will provide
fixed dollar payouts and contract values that you 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 you in a lump sum or to change the
frequency of the payouts.
<PAGE>
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 (see detailed discussion
below). Any portion of the annuity payouts and any withdrawals you request that
represent ordinary income are normally 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 qualified retirement
plans. 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.
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 advisor for more information about your 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 contract is fully recovered
will be subject to tax.
Tax law requires that all nonqualified deferred annuities 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.
Annuity payouts under qualified annuities (except Roth IRAs): Under a qualified
annuity, the entire payout generally is includable as ordinary income and is
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 a qualified retirement plan, such amounts are not
considered to be part of your investment in the contract and will be taxed when
paid to you.
Purchase payment credits: These are considered earnings and are taxed
accordingly.
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
before reaching age 59 1/2 unless certain exceptions apply. For qualified
annuities, other penalties may apply if you withdraw your contract before your
plan specifies that you can receive payouts.
Death benefits to beneficiaries: The death benefit under a contract (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 years 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.
<PAGE>
Penalties: If you receive amounts from your contract before reaching age 59 1/2,
you may have to pay a 10% IRS penalty on the amount includable in your ordinary
income. However, this penalty will not apply to any amount received by you or
your beneficiary:
o because of your death;
o because you become disabled (as defined in the Code);
o if the distribution is part of a series of substantially equal periodic
payments, made at least annually, over your life or life expectancy (or
joint lives or life expectancies of you and your beneficiary); or
o if it is allocable to an investment before Aug. 14, 1982 (except for
qualified annuities).
For a qualified annuity, other penalties or exceptions may apply if you make
withdrawals from your contract before your plan specifies that payouts can be
made.
Withholding, generally: If you receive all or part of the contract value, 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 can 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 can elect not to have this withholding
occur.
Some states also impose withholding requirements similar to the federal
withholding described above. If this should be the case, 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.
Withholding from TSAs: If you receive directly all or part of the contract value
from your TSA, mandatory 20% federal income tax withholding (and possibly state
income tax withholding) generally will be imposed at the time we make the
payout. This mandatory withholding is in place of the elective withholding
discussed above. This mandatory withholding will not be imposed if:
o instead of receiving the distribution check, you elect to have the
distribution rolled over directly to an IRA or another eligible plan;
o the payout is one in a series of substantially equal periodic payouts, made
at least annually, over your life or life expectancy (or the joint lives or
life expectancies of you and your designated beneficiary) or over a
specified period of 10 years or more; or
o the payout is a minimum distribution required under the Code.
Payments we make to a surviving spouse instead of being directly rolled over to
an IRA also may be subject to mandatory 20% income tax withholding.
State withholding also may be imposed on taxable distributions.
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 contract will be the value of the contract at the time
of the transfer.
<PAGE>
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 advisor 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 subaccounts, 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 subaccount to the total number of
votes allowed to the subaccount.
After annuity payouts begin, the number of votes you have is equal to:
o the reserve held in each subaccount for your contract;
o divided by the net asset value of one share of the applicable 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 subaccount. We will send notice of
shareholders' 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 received
instructions. We also will vote the shares for which we have voting rights in
the same proportion as the votes for which we received instructions.
Substitution of Investments
We may substitute the funds in which the subaccounts invest if:
o laws or regulations change,
o existing funds become unavailable, or
o in our judgment, the funds no longer are suitable for the subaccounts.
<PAGE>
If any of these situations occur and if we believe it is in the best interest of
persons having voting rights under the contract, we have the right to substitute
funds other than those currently listed in this prospectus for other funds.
We may also:
o add new subaccounts;
o combine any two or more subaccounts;
o add 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, we may amend the contract
and take whatever action is necessary and appropriate without your consent or
approval. However, we will not make any substitution or change without the
necessary approval of the SEC and state insurance departments. We will notify
you of any substitution or change.
About the Service Providers
Principal Underwriter
American Express Financial Advisors Inc. (AEFA) serves as the principal
underwriter for the contract. Its office are located at IDS Tower 10,
Minneapolis, MN 55440. AEFA is a wholly-owned subsidiary of American Express
Financial Corporation (AEFC) 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 AEFA and American Enterprise Life.
We will pay commissions for sales of the contracts of up to 7% of purchase
payments to insurance agencies or broker-dealers that are also insurance
agencies. Sometimes we 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 7% of purchase payments). In addition, we may pay certain
sellers additional compensation for selling and distribution activities under
certain circumstances. From time to time, we will pay or permit other
promotional incentives, in cash or credit or other compensation.
Issuer
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 conducts a conventional life insurance business.
<PAGE>
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.
Additional Information About American Enterprise Life
Selected financial data
The following selected financial data for American Enterprise Life should be
read in conjunction with the consolidated financial statements and notes.
[To be filed on amendment.]
Management's discussion and analysis of consolidated financial condition and
results of operations
1998 compared to 1997
[To be filed on amendment.]
1997 compared to 1996
[To be filed on amendment.]
Risk management
[To be filed on amendment.]
Liquidity and capital resources
[To be filed on amendment.]
Risk management
[To be filed on amendment.]
<PAGE>
Year 2000 issue
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. All of the major systems used by American Enterprise
Life and by the Variable Account are maintained by AEFC and are utilized by
multiple subsidiaries and affiliates of AEFC. American Enterprise Life's and the
Variable Account's businesses are heavily dependent upon AEFC's computer systems
and have significant interactions with systems of 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 have been taken to resolve potential problems including
modification to existing software and the purchase of new software. AEFC's
target date for substantially completing its program of corrective measures on
internal business critical systems was Dec. 31, 1998. As of June 30, 1999, AEFC
completed its program of corrective measures on its internal systems and
applications, including Year 2000 compliance testing. 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 failure of external parties to resolve
their own Year 2000 issues in a timely manner could result in a material
financial risk to AEFC, American Enterprise Life or the Variable Account.
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.
[This information will be updated in amendment]
Reserves
In accordance with the insurance laws and regulations under which we operate, we
are obligated to carry on our books, as liabilities, actuarially determined
reserves to meet our obligations on our outstanding annuity contracts. We base
our reserves for deferred annuity contracts on accumulation value and for fixed
annuity contracts in a benefit status on established industry mortality tables.
These reserves are computed amounts that will be sufficient to meet our policy
obligations at their maturities.
Investments
Of our consolidated total investments of $4,503,960,000 at Dec. 31, 1998, 28%
was invested in mortgage-backed securities, 53% in corporate and other bonds,
18% in primary mortgage loans on real estate and the remaining 1% in other
investments.
Competition
We are engaged in a business that is highly competitive due to the large number
of stock and mutual life insurance companies and other entities marketing
insurance products. There are over 1,600 stock, mutual and other types of
insurers in the life insurance business. Best's Insurance Reports, Life-Health
edition 1998, assigned us one of its highest classifications, A+ (Superior).
Employees
As of Dec. 31, 1998, we had no employees.
Properties
We occupy office space in Minneapolis, MN, which is rented by AEFC. We reimburse
AEFC for rent based on direct and indirect allocation methods. Facilities
occupied by us are believed to be adequate for the purposes for which they are
used and well maintained.
<PAGE>
State regulation
[To be filed on amendment.]
Directors and Executive Officers*
The directors and principal executive officers of American Enterprise Life and
the principal occupation of each during the last five years is as follows:
Directors
James E. Choat
Born in 1947
Director and chief executive officer since 1996; Senior vice president -
Institutional Products Group, AEFA, 1994 to 1997.
Richard W. Kling
Born 1940
Director and chairman of the board since March 1989.
Paul S. Mannweiler**
Born in 1949
Director since 1986; Partner at Locke Reynolds Boyd & Weisell since 1980.
Paula R. Meyer
Born in 1954
Director and executive vice president since 1998; vice president, AEFC since
1998; Piper Capital Management (PCM) President from Oct. 1997 to May 1998; PCM
Director of Marketing from June 1995 to Oct. 1997; PCM Director of Retail
Marketing from Dec. 1993 to June 1995.
William A. Stoltzmann
Born in 1948
Director since Sept. 1989; vice president, general counsel and secretary since
1985.
Officers other than directors
Jeffrey S. Horton
Born 1961
Vice president and treasurer since Dec. 1997; vice president and corporate
treasurer, AEFC, since Dec. 1997; controller, American Express Technologies -
Financial Services, AEFC, from July 1997 to Dec. 1997; controller, Risk
Management Products, AEFC, from May 1994 to July 1997; director of finance and
analysis, Corporate Treasury, AEFC, from June 1990 to May 1994.
<PAGE>
Philip C. Wentzel
Born in 1961
Vice president and controller since 1998; vice president - Finance, Risk
Management Products, AEFC since 1997; and director of financial reporting and
analysis from 1992 to 1997.
*The address for all of the directors and principal officers is: IDS Tower 10,
Minneapolis, MN 55440-0010 except for Mr. Mannweiler who is an independent
director.
**Mr. Mannweiler's address is: 201 No. Illinois Street, Indianapolis, IN 46204
Executive compensation
Our executive officers also may serve one or more affiliated companies. The
following table reflects cash compensation paid to the five most highly
compensated executive officers as a group for services rendered in the most
recent year to us and our affiliates. The table also shows the total cash
compensation paid to all our executive officers, as a group, who were executive
officers at any time during the most recent year.
<TABLE>
<CAPTION>
<S> <C> <C>
Name of individual or
number in group Position held Cash compensation
Five most highly compensated $4,476,367
executive officers as a group:
Richard W. Kling Chairman of the Board
James E. Choat President and CEO
Stuart A. Sedlacek Executive Vice President
Lorraine R. Hart Vice President, Investments
Deborah L. Pederson Assistant Vice President, Investments
All executive officers as a group $7,925,328
(12)
[Information to be updated on amendment.]
</TABLE>
Security ownership of management
Our directors and officers do not beneficially own any outstanding shares of
stock of the company. All of our outstanding shares of stock are beneficially
owned by IDS Life. The percentage of shares of IDS Life owned by any director,
and by all our directors and officers as a group, does not exceed 1% of the
class outstanding.
[To be updated on amendment.]
Experts
Ernst & Young LLP, independent auditors, have audited the consolidated financial
statements of American Enterprise Life Insurance Company at Dec. 31, 1998 and
1997, and for each of the three years in the period ended Dec. 31, 1998, as set
forth in their report. We've included our consolidated financial statements in
the prospectus and elsewhere in the registration statement in reliance on Ernst
& Young LLP's report, given on their authority as experts in accounting and
auditing.
American Enterprise Life Financial Information
[To be filed on amendment.]
<PAGE>
Table of Contents of the Statement of Additional Information
Performance Information p.
Calculating Annuity Payouts p.
Rating Agencies p.
Principal Underwriter p.
Independent Auditors p.
<PAGE>
Please check the box to receive a copy of the Statement of Additional
Information for:
New Fund
New Fund
New Fund
New Fund
New Fund
New Fund
New Fund
New Fund
New Fund
New Fund
Mail your request to:
American Enterprise Life Insurance Company
80 South Eighth Street
P.O. Box 534
Minneapolis, MN 55440-534
We will mail your request to:
Your name _____________________________________________
Address _______________________________________________
City _____________________ State _________ Zip ________
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
for
AMERICAN EXPRESS WELLS FARGO VARIABLE ANNUITYSM
American Enterprise Variable Annuity Account
__, 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) is not a prospectus. It should be
read together with the prospectus dated the same date as this SAI, which may be
obtained by writing or calling us at the address and telephone number below. The
prospectus is incorporated in this SAI by reference.
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.
Calculating Annuity Payouts..................................p.
Rating Agencies..............................................p.
Principal Underwriter........................................p.
Independent Auditors.........................................p.
Financial Statements
<PAGE>
PERFORMANCE INFORMATION
- - - ----------------------------------------------------------------------------
The subaccounts may quote various performance figures to illustrate past
performance. We base total return and current yield quotations (if applicable)
on standardized methods of computing performance as required by the Securities
and Exchange Commission (SEC). An explanation of the methods used to compute
performance follows below.
Average Annual Total Return
We will express quotations of average annual total return for the subaccounts in
terms of the average annual compounded rate of return of a hypothetical
investment in the contract over a period of one, five and ten years (or, if
less, up to the life of the subaccounts), 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 period, at the end of the
period (or fractional portion thereof)
We calculated the following performance figures on the basis of historical
performance of each fund. We show actual performance from the date the
subaccounts began investing in the funds. For some subaccounts, we do not
provide any performance information because they are new and have not had any
activity to date. We also show performance from the commencement date of the
funds as if the contract existed at that time, which it did not.
Past performance does not guarantee future results.
<PAGE>
Average Annual Total Return For Annuities With Withdrawal and Selection of the
Five-Year Withdrawal Charge Schedule and the Optional Enhanced Death Benefit and
Guaranteed Minimum Income Benefit Riders For Periods Ending Dec. 31, 1998
<TABLE>
<CAPTION>
Performance Since
Commencement of the Performance Since Commencement of the
Subaccount Fund*
<S> <C> <C> <C> <C> <C> <C> <C>
Since Since
Subaccount Investing In: 1 Year Commencement 1 Year 5 Years 10 Years Commencement
- - - ---------- ------------- ------ ------------ ------ ------- -------- ------------
AXPSM VARIABLE PORTFOLIO
Blue Chip Advantage Fund+ --% --% --% --% --% --%
Capital Resource Fund (__; 10/81)** -- -- -- -- -- --
Diversified Equity Income Fund+ -- -- -- -- -- --
Extra Income Fund (__; 5/96) -- -- -- -- -- --
Federal Income Fund+ -- -- -- -- -- --
New Dimensions Fund (__; 5/96) -- -- -- -- -- --
Small Cap Advantage Fund + -- -- -- -- -- --
AIM V.I.
Capital Appreciation Fund (__; 5/93) -- -- -- -- -- --
Value Fund (__; 10/97) -- -- -- -- -- --
Dreyfus Variable Investment
Socially Responsible Growth Fund (__; 10/93) -- -- -- -- -- --
FRANKLIN TEMPLETON VIP TRUST
Income Securities Fund - Class 2 (__; __) -- -- -- -- -- --
***
Mutual Shares Securities Fund - Class 2 -- -- -- -- -- --
(__; __)***
Real Estate Securities Fund - Class 2 (__; -- -- -- -- -- --
1/89)***
Small Cap Fund - Class 2 (__; __) *** -- -- -- -- -- --
GOLDMAN SACHS Variable Insurance Trust (VIT)
CORESM U.S. Equity Fund (__; 2/98) -- -- -- -- -- --
Global Income Fund (__; __ ) -- -- -- -- -- --
Mid Cap Value Fund (__; 4/98) -- -- -- -- -- --
MFS Investment Management(R)
Growth with Income Series (__; __) -- -- -- -- -- --
Utilities Series (__; 1/95) -- -- -- -- -- --
PUTNAM VARIABLE TRUST
Putnam VT International Growth Fund - Class -- -- -- -- -- --
IB Shares (__; __)
Putnam VT Vista Fund - Class IB Shares (__; -- -- -- -- -- --
1/99)
WELLS FARGO
Asset Allocation Fund (__; __) -- -- -- -- -- --
Corporate Bond Fund (__; __) -- -- -- -- -- --
Equity Income Fund (__; __) -- -- -- -- -- --
Growth Fund (__; __) -- -- -- -- -- --
International Equity Fund (__; __) -- -- -- -- -- --
Large Company Growth Fund (__; __) -- -- -- -- -- --
Money Market Fund (__; __) -- -- -- -- -- --
Small Cap Growth Fund (__; __) -- -- -- -- -- --
*Current applicable charges deducted from fund performance include a $30
contract administrative charge, a 1.30% mortality and expense risk fee, a 0.15%
variable account administrative charge, a 0.20% Enhanced Death Benefit Rider
fee, a 0.30% Guaranteed Minimum Income Benefit Rider fee and applicable
withdrawal charges associated with the five-year withdrawal charge schedule.
+Fund had not commenced operations as of Dec. 31, 1998.
**(Commencement date of the subaccount; commencement date of the Fund)
***Because Class 2 shares were not offered until Jan. 6, 1999, performance
shown represents Class 1 shares. Although invested in the same portfolio of
securities as Class 1, Class 2's standardized performance will differ because
of Class 2's additional 12b-1 fee expense which affects all performance after
the inception of Class 2. Figures assume reinvestment of dividends and capital
gains.
</TABLE>
<PAGE>
Average Annual Total Return For Annuities Without Withdrawal and Selection of
the Five-Year Withdrawal Charge Schedule and the Optional Enhanced Death Benefit
and Guaranteed Minimum Income Benefit Riders For Periods Ending Dec. 31, 1998
<TABLE>
<CAPTION>
Performance Since
Commencement of the Performance Since Commencement of the
Subaccount Fund*
<S> <C> <C> <C> <C> <C> <C> <C>
Since Since
Subaccount Investing In: 1 Year Commencement 1 Year 5 Years 10 Years Commencement
- - - ---------- ------------- ------ ------------ ------ ------- -------- ------------
AXPSM VARIABLE PORTFOLIO
Blue Chip Advantage Fund+ --% --% --% --% --% --%
Capital Resource Fund (__; 10/81)** -- -- -- -- -- --
Diversified Equity Income Fund+ -- -- -- -- -- --
Extra Income Fund (__; 5/96) -- -- -- -- -- --
Federal Income Fund+ -- -- -- -- -- --
New Dimensions Fund (__; 5/96) -- -- -- -- -- --
Small Cap Advantage Fund + -- -- -- -- -- --
AIM V.I.
Capital Appreciation Fund (__; 5/93) -- -- -- -- -- --
Value Fund (__; 10/97) -- -- -- -- -- --
Dreyfus Variable Investment
Socially Responsible Growth Fund (__; 10/93) -- -- -- -- -- --
FRANKLIN TEMPLETON VIP TRUST
Income Securities Fund - Class 2 (__; __) -- -- -- -- -- --
***
Mutual Shares Securities Fund - Class 2 -- -- -- -- -- --
(__; __)***
Real Estate Securities Fund - Class 2 (__; -- -- -- -- -- --
1/89)***
Small Cap Fund - Class 2 (__; __) *** -- -- -- -- -- --
GOLDMAN SACHS Variable Insurance Trust (VIT)
CORESM U.S. Equity Fund (__; 2/98) -- -- -- -- -- --
Global Income Fund (__; __ ) -- -- -- -- -- --
Mid Cap Value Fund (__; 4/98) -- -- -- -- -- --
MFS Investment Management(R)
Growth with Income Series (__; __) -- -- -- -- -- --
Utilities Series (__; 1/95) -- -- -- -- -- --
PUTNAM VARIABLE TRUST
Putnam VT International Growth Fund - Class -- -- -- -- -- --
IB Shares (__; __)
Putnam VT Vista Fund - Class IB Shares (__; -- -- -- -- -- --
1/99)
WELLS FARGO
Asset Allocation Fund (__; __) -- -- -- -- -- --
Corporate Bond Fund (__; __) -- -- -- -- -- --
Equity Income Fund (__; __) -- -- -- -- -- --
Growth Fund (__; __) -- -- -- -- -- --
International Equity Fund (__; __) -- -- -- -- -- --
Large Company Growth Fund (__; __) -- -- -- -- -- --
Money Market Fund (__; __) -- -- -- -- -- --
Small Cap Growth Fund (__; __) -- -- -- -- -- --
*Current applicable charges deducted from fund performance include a $30
contract administrative charge, a 1.30% mortality and expense risk fee, a 0.15%
variable account administrative charge, a 0.20% Enhanced Death Benefit Rider fee
and a 0.30% Guaranteed Minimum Income Benefit Rider fee.
+ Fund had not commenced operations as of Dec. 31, 1998.
**(Commencement date of the subaccount; commencement date of the Fund)
***Because Class 2 shares were not offered until Jan. 6, 1999, performance shown
represents Class 1 shares. Although invested in the same portfolio of securities
as Class 1, Class 2's standardized performance will differ because of Class 2's
additional 12b-1 fee expense which affects all performance after the inception
of Class 2. Figures assume reinvestment of dividends and capital gains.
</TABLE>
<PAGE>
Average Annual Total Return For Annuities With Withdrawal and Selection of the
Five-Year Withdrawal Charge Schedule For Periods Ending Dec. 31, 1998
<TABLE>
<CAPTION>
Performance Since
Commencement of the Performance Since Commencement of the
Subaccount Fund*
<S> <C> <C> <C> <C> <C> <C> <C>
Since Since
Subaccount Investing In: 1 Year Commencement 1 Year 5 Years 10 Years Commencement
- - - ---------- ------------- ------ ------------ ------ ------- -------- ------------
AXPSM VARIABLE PORTFOLIO
Blue Chip Advantage Fund+ --% --% --% --% --% --%
Capital Resource Fund (__; 10/81)** -- -- -- -- -- --
Diversified Equity Income Fund+ -- -- -- -- -- --
Extra Income Fund (__; 5/96) -- -- -- -- -- --
Federal Income Fund+ -- -- -- -- -- --
New Dimensions Fund (__; 5/96) -- -- -- -- -- --
Small Cap Advantage Fund + -- -- -- -- -- --
AIM V.I.
Capital Appreciation Fund (__; 5/93) -- -- -- -- -- --
Value Fund (__; 10/97) -- -- -- -- -- --
Dreyfus Variable Investment
Socially Responsible Growth Fund (__; 10/93) -- -- -- -- -- --
FRANKLIN TEMPLETON VIP TRUST
Income Securities Fund - Class 2 (__; __) -- -- -- -- -- --
***
Mutual Shares Securities Fund - Class 2 -- -- -- -- -- --
(__; __)***
Real Estate Securities Fund - Class 2 (__; -- -- -- -- -- --
1/89)***
Small Cap Fund - Class 2 (__; __) *** -- -- -- -- -- --
GOLDMAN SACHS Variable Insurance Trust (VIT)
CORESM U.S. Equity Fund (__; 2/98) -- -- -- -- -- --
Global Income Fund (__; __ ) -- -- -- -- -- --
Mid Cap Value Fund (__; 4/98) -- -- -- -- -- --
MFS Investment Management(R)
Growth with Income Series (__; __) -- -- -- -- -- --
Utilities Series (__; 1/95) -- -- -- -- -- --
PUTNAM VARIABLE TRUST
Putnam VT International Growth Fund - Class -- -- -- -- -- --
IB Shares (__; __)
Putnam VT Vista Fund - Class IB Shares (__; -- -- -- -- -- --
1/99)
WELLS FARGO
Asset Allocation Fund (__; __) -- -- -- -- -- --
Corporate Bond Fund (__; __) -- -- -- -- -- --
Equity Income Fund (__; __) -- -- -- -- -- --
Growth Fund (__; __) -- -- -- -- -- --
International Equity Fund (__; __) -- -- -- -- -- --
Large Company Growth Fund (__; __) -- -- -- -- -- --
Money Market Fund (__; __) -- -- -- -- -- --
Small Cap Growth Fund (__; __) -- -- -- -- -- --
*Current applicable charges deducted from fund performance include a $30
contract administrative charge, a 1.30% mortality and expense risk fee, a 0.15%
variable account administrative charge and applicable withdrawal charges
associated with the five-year withdrawal charge schedule.
+ Fund had not commenced operations as of Dec. 31, 1998.
**(Commencement date of the subaccount; commencement date of the Fund)
***Because Class 2 shares were not offered until Jan. 6, 1999, performance shown
represents Class 1 shares. Although invested in the same portfolio of securities
as Class 1, Class 2's standardized performance will differ because of Class 2's
additional 12b-1 fee expense which affects all performance after the inception
of Class 2. Figures assume reinvestment of dividends and capital gains.
</TABLE>
<PAGE>
Average Annual Total Return For Annuities Without Withdrawal and Selection of
the Five-Year Withdrawal Charge Schedule For Periods Ending Dec. 31, 1998
<TABLE>
<CAPTION>
Performance Since
Commencement of the Performance Since Commencement of the
Subaccount Fund*
<S> <C> <C> <C> <C> <C> <C> <C>
Since Since
Subaccount Investing In: 1 Year Commencement 1 Year 5 Years 10 Years Commencement
- - - ---------- ------------- ------ ------------ ------ ------- -------- ------------
AXPSM VARIABLE PORTFOLIO
Blue Chip Advantage Fund+ --% --% --% --% --% --%
Capital Resource Fund (__; 10/81)** -- -- -- -- -- --
Diversified Equity Income Fund+ -- -- -- -- -- --
Extra Income Fund (__; 5/96) -- -- -- -- -- --
Federal Income Fund+ -- -- -- -- -- --
New Dimensions Fund (__; 5/96) -- -- -- -- -- --
Small Cap Advantage Fund + -- -- -- -- -- --
AIM V.I.
Capital Appreciation Fund (__; 5/93) -- -- -- -- -- --
Value Fund (__; 10/97) -- -- -- -- -- --
Dreyfus Variable Investment
Socially Responsible Growth Fund (__; 10/93) -- -- -- -- -- --
FRANKLIN TEMPLETON VIP TRUST
Income Securities Fund - Class 2 (__; __) -- -- -- -- -- --
***
Mutual Shares Securities Fund - Class 2 -- -- -- -- -- --
(__; __)***
Real Estate Securities Fund - Class 2 (__; -- -- -- -- -- --
1/89)***
Small Cap Fund - Class 2 (__; __) *** -- -- -- -- -- --
GOLDMAN SACHS Variable Insurance Trust (VIT)
CORESM U.S. Equity Fund (__; 2/98) -- -- -- -- -- --
Global Income Fund (__; __ ) -- -- -- -- -- --
Mid Cap Value Fund (__; 4/98) -- -- -- -- -- --
MFS Investment Management(R)
Growth with Income Series (__; __) -- -- -- -- -- --
Utilities Series (__; 1/95) -- -- -- -- -- --
PUTNAM VARIABLE TRUST
Putnam VT International Growth Fund - Class -- -- -- -- -- --
IB Shares (__; __)
Putnam VT Vista Fund - Class IB Shares (__; -- -- -- -- -- --
1/99)
WELLS FARGO
Asset Allocation Fund (__; __) -- -- -- -- -- --
Corporate Bond Fund (__; __) -- -- -- -- -- --
Equity Income Fund (__; __) -- -- -- -- -- --
Growth Fund (__; __) -- -- -- -- -- --
International Equity Fund (__; __) -- -- -- -- -- --
Large Company Growth Fund (__; __) -- -- -- -- -- --
Money Market Fund (__; __) -- -- -- -- -- --
Small Cap Growth Fund (__; __) -- -- -- -- -- --
*Current applicable charges deducted from fund performance include a $30
contract administrative charge, a 1.30% mortality and expense risk fee and a
0.15% variable account administrative charge.
+ Fund had not commenced operations as of Dec. 31, 1998.
**(Commencement date of the subaccount; commencement date of the Fund)
***Because Class 2 shares were not offered until Jan. 6, 1999, performance shown
represents Class 1 shares. Although invested in the same portfolio of securities
as Class 1, Class 2's standardized performance will differ because of Class 2's
additional 12b-1 fee expense which affects all performance after the inception
of Class 2. Figures assume reinvestment of dividends and capital gains.
</TABLE>
<PAGE>
Average Annual Total Return For Annuities With Withdrawal and Selection of the
Seven-Year Withdrawal Charge Schedule and the Optional Enhanced Death Benefit
and Guaranteed Minimum Income Benefit Riders For Periods Ending Dec. 31, 1998
<TABLE>
<CAPTION>
Performance Since
Commencement of the Performance Since Commencement of the
Subaccount Fund*
<S> <C> <C> <C> <C> <C> <C> <C>
Since Since
Subaccount Investing In: 1 Year Commencement 1 Year 5 Years 10 Years Commencement
- - - ---------- ------------- ------ ------------ ------ ------- -------- ------------
AXPSM VARIABLE PORTFOLIO
Blue Chip Advantage Fund+ --% --% --% --% --% --%
Capital Resource Fund (__; 10/81)** -- -- -- -- -- --
Diversified Equity Income Fund+ -- -- -- -- -- --
Extra Income Fund (__; 5/96) -- -- -- -- -- --
Federal Income Fund+ -- -- -- -- -- --
New Dimensions Fund (__; 5/96) -- -- -- -- -- --
Small Cap Advantage Fund + -- -- -- -- -- --
AIM V.I.
Capital Appreciation Fund (__; 5/93) -- -- -- -- -- --
Value Fund (__; 10/97) -- -- -- -- -- --
Dreyfus Variable Investment
Socially Responsible Growth Fund (__; 10/93) -- -- -- -- -- --
FRANKLIN TEMPLETON VIP TRUST
Income Securities Fund - Class 2 (__; __) -- -- -- -- -- --
***
Mutual Shares Securities Fund - Class 2 -- -- -- -- -- --
(__; __)***
Real Estate Securities Fund - Class 2 (__; -- -- -- -- -- --
1/89)***
Small Cap Fund - Class 2 (__; __) *** -- -- -- -- -- --
GOLDMAN SACHS Variable Insurance Trust (VIT)
CORESM U.S. Equity Fund (__; 2/98) -- -- -- -- -- --
Global Income Fund (__; __ ) -- -- -- -- -- --
Mid Cap Value Fund (__; 4/98) -- -- -- -- -- --
MFS Investment Management(R)
Growth with Income Series (__; __) -- -- -- -- -- --
Utilities Series (__; 1/95) -- -- -- -- -- --
PUTNAM VARIABLE TRUST
Putnam VT International Growth Fund - Class -- -- -- -- -- --
IB Shares (__; __)
Putnam VT Vista Fund - Class IB Shares (__; -- -- -- -- -- --
1/99)
WELLS FARGO
Asset Allocation Fund (__; __) -- -- -- -- -- --
Corporate Bond Fund (__; __) -- -- -- -- -- --
Equity Income Fund (__; __) -- -- -- -- -- --
Growth Fund (__; __) -- -- -- -- -- --
International Equity Fund (__; __) -- -- -- -- -- --
Large Company Growth Fund (__; __) -- -- -- -- -- --
Money Market Fund (__; __) -- -- -- -- -- --
Small Cap Growth Fund (__; __) -- -- -- -- -- --
</TABLE>
*Current applicable charges deducted from fund performance include a $30
contract administrative charge, a 1.05% mortality and expense risk fee, a 0.15%
variable account administrative charge, a 0.20% Enhanced Death Benefit Rider
fee, a 0.30% Guaranteed Minimum Income Benefit Rider fee and applicable
withdrawal charges associated with the seven-year withdrawal charge schedule.
+Fund had not commenced operations as of Dec. 31, 1998.
**(Commencement date of the subaccount; commencement date of the Fund)
***Because Class 2 shares were not offered until Jan. 6, 1999, performance shown
represents Class 1 shares. Although invested in the same portfolio of securities
as Class 1, Class 2's standardized performance will differ because of Class 2's
additional 12b-1 fee expense which affects all performance after the inception
of Class 2. Figures assume reinvestment of dividends and capital gains.
<PAGE>
Average Annual Total Return For Annuities Without Withdrawal and Selection of
the Seven-Year Withdrawal Charge Schedule and the Optional Enhanced Death
Benefit and Guaranteed Minimum Income Benefit Riders For Periods Ending Dec. 31,
1998
<TABLE>
<CAPTION>
Performance Since
Commencement of the Performance Since Commencement of the
Subaccount Fund*
<S> <C> <C> <C> <C> <C> <C> <C>
Since Since
Subaccount Investing In: 1 Year Commencement 1 Year 5 Years 10 Years Commencement
- - - ---------- ------------- ------ ------------ ------ ------- -------- ------------
AXPSM VARIABLE PORTFOLIO
Blue Chip Advantage Fund+ --% --% --% --% --% --%
Capital Resource Fund (__; 10/81)** -- -- -- -- -- --
Diversified Equity Income Fund+ -- -- -- -- -- --
Extra Income Fund (__; 5/96) -- -- -- -- -- --
Federal Income Fund+ -- -- -- -- -- --
New Dimensions Fund (__; 5/96) -- -- -- -- -- --
Small Cap Advantage Fund + -- -- -- -- -- --
AIM V.I.
Capital Appreciation Fund (__; 5/93) -- -- -- -- -- --
Value Fund (__; 10/97) -- -- -- -- -- --
Dreyfus Variable Investment
Socially Responsible Growth Fund (__; 10/93) -- -- -- -- -- --
FRANKLIN TEMPLETON VIP TRUST
Income Securities Fund - Class 2 (__; __) -- -- -- -- -- --
***
Mutual Shares Securities Fund - Class 2 -- -- -- -- -- --
(__; __)***
Real Estate Securities Fund - Class 2 (__; -- -- -- -- -- --
1/89)***
Small Cap Fund - Class 2 (__; __) *** -- -- -- -- -- --
GOLDMAN SACHS Variable Insurance Trust (VIT)
CORESM U.S. Equity Fund (__; 2/98) -- -- -- -- -- --
Global Income Fund (__; __ ) -- -- -- -- -- --
Mid Cap Value Fund (__; 4/98) -- -- -- -- -- --
MFS Investment Management(R)
Growth with Income Series (__; __) -- -- -- -- -- --
Utilities Series (__; 1/95) -- -- -- -- -- --
PUTNAM VARIABLE TRUST
Putnam VT International Growth Fund - Class -- -- -- -- -- --
IB Shares (__; __)
Putnam VT Vista Fund - Class IB Shares (__; -- -- -- -- -- --
1/99)
WELLS FARGO
Asset Allocation Fund (__; __) -- -- -- -- -- --
Corporate Bond Fund (__; __) -- -- -- -- -- --
Equity Income Fund (__; __) -- -- -- -- -- --
Growth Fund (__; __) -- -- -- -- -- --
International Equity Fund (__; __) -- -- -- -- -- --
Large Company Growth Fund (__; __) -- -- -- -- -- --
Money Market Fund (__; __) -- -- -- -- -- --
Small Cap Growth Fund (__; __) -- -- -- -- -- --
*Current applicable charges deducted from fund performance include a $30
contract administrative charge, a 1.05% mortality and expense risk fee, a 0.15%
variable account administrative charge, a 0.20% Enhanced Death Benefit Rider fee
and a 0.30% Guaranteed Minimum Income Benefit Rider fee.
+ Fund had not commenced operations as of Dec. 31, 1998.
**(Commencement date of the subaccount; commencement date of the Fund)
***Because Class 2 shares were not offered until Jan. 6, 1999, performance shown
represents Class 1 shares. Although invested in the same portfolio of securities
as Class 1, Class 2's standardized performance will differ because of Class 2's
additional 12b-1 fee expense which affects all performance after the inception
of Class 2. Figures assume reinvestment of dividends and capital gains.
</TABLE>
<PAGE>
Average Annual Total Return For Annuities With Withdrawal and Selection of the
Seven-Year Withdrawal Charge Schedule For Periods Ending Dec. 31, 1998
<TABLE>
<CAPTION>
Performance Since
Commencement of the Performance Since Commencement of the
Subaccount Fund*
<S> <C> <C> <C> <C> <C> <C> <C>
Since Since
Subaccount Investing In: 1 Year Commencement 1 Year 5 Years 10 Years Commencement
- - - ---------- ------------- ------ ------------ ------ ------- -------- ------------
AXPSM VARIABLE PORTFOLIO
Blue Chip Advantage Fund+ --% --% --% --% --% --%
Capital Resource Fund (__; 10/81)** -- -- -- -- -- --
Diversified Equity Income Fund+ -- -- -- -- -- --
Extra Income Fund (__; 5/96) -- -- -- -- -- --
Federal Income Fund+ -- -- -- -- -- --
New Dimensions Fund (__; 5/96) -- -- -- -- -- --
Small Cap Advantage Fund + -- -- -- -- -- --
AIM V.I.
Capital Appreciation Fund (__; 5/93) -- -- -- -- -- --
Value Fund (__; 10/97) -- -- -- -- -- --
Dreyfus Variable Investment
Socially Responsible Growth Fund (__; 10/93) -- -- -- -- -- --
FRANKLIN TEMPLETON VIP TRUST
Income Securities Fund - Class 2 (__; __) -- -- -- -- -- --
***
Mutual Shares Securities Fund - Class 2 -- -- -- -- -- --
(__; __)***
Real Estate Securities Fund - Class 2 (__; -- -- -- -- -- --
1/89)***
Small Cap Fund - Class 2 (__; __) *** -- -- -- -- -- --
GOLDMAN SACHS Variable Insurance Trust (VIT)
CORESM U.S. Equity Fund (__; 2/98) -- -- -- -- -- --
Global Income Fund (__; __ ) -- -- -- -- -- --
Mid Cap Value Fund (__; 4/98) -- -- -- -- -- --
MFS Investment Management(R)
Growth with Income Series (__; __) -- -- -- -- -- --
Utilities Series (__; 1/95) -- -- -- -- -- --
PUTNAM VARIABLE TRUST
Putnam VT International Growth Fund - Class -- -- -- -- -- --
IB Shares (__; __)
Putnam VT Vista Fund - Class IB Shares (__; -- -- -- -- -- --
1/99)
WELLS FARGO
Asset Allocation Fund (__; __) -- -- -- -- -- --
Corporate Bond Fund (__; __) -- -- -- -- -- --
Equity Income Fund (__; __) -- -- -- -- -- --
Growth Fund (__; __) -- -- -- -- -- --
International Equity Fund (__; __) -- -- -- -- -- --
Large Company Growth Fund (__; __) -- -- -- -- -- --
Money Market Fund (__; __) -- -- -- -- -- --
Small Cap Growth Fund (__; __) -- -- -- -- -- --
*Current applicable charges deducted from fund performance include a $30
contract administrative charge, a 1.05% mortality and expense risk fee, a 0.15%
variable account administrative charge and applicable withdrawal charges
associated with the seven-year withdrawal charge schedule.
+ Fund had not commenced operations as of Dec. 31, 1998.
**(Commencement date of the subaccount; commencement date of the Fund)
***Because Class 2 shares were not offered until Jan. 6, 1999, performance shown
represents Class 1 shares. Although invested in the same portfolio of securities
as Class 1, Class 2's standardized performance will differ because of Class 2's
additional 12b-1 fee expense which affects all performance after the inception
of Class 2. Figures assume reinvestment of dividends and capital gains.
</TABLE>
<PAGE>
Average Annual Total Return For Annuities Without Withdrawal and Selection of
the Seven-Year Withdrawal Charge Schedule For Periods Ending Dec. 31, 1998
<TABLE>
<CAPTION>
Performance Since
Commencement of the Performance Since Commencement of the
Subaccount Fund*
<S> <C> <C> <C> <C> <C> <C> <C>
Since Since
Subaccount Investing In: 1 Year Commencement 1 Year 5 Years 10 Years Commencement
- - - ---------- ------------- ------ ------------ ------ ------- -------- ------------
AXPSM VARIABLE PORTFOLIO
Blue Chip Advantage Fund+ --% --% --% --% --% --%
Capital Resource Fund (__; 10/81)** -- -- -- -- -- --
Diversified Equity Income Fund+ -- -- -- -- -- --
Extra Income Fund (__; 5/96) -- -- -- -- -- --
Federal Income Fund+ -- -- -- -- -- --
New Dimensions Fund (__; 5/96) -- -- -- -- -- --
Small Cap Advantage Fund + -- -- -- -- -- --
AIM V.I.
Capital Appreciation Fund (__; 5/93) -- -- -- -- -- --
Value Fund (__; 10/97) -- -- -- -- -- --
Dreyfus Variable Investment
Socially Responsible Growth Fund (__; 10/93) -- -- -- -- -- --
FRANKLIN TEMPLETON VIP TRUST
Income Securities Fund - Class 2 (__; __) -- -- -- -- -- --
***
Mutual Shares Securities Fund - Class 2 -- -- -- -- -- --
(__; __)***
Real Estate Securities Fund - Class 2 (__; -- -- -- -- -- --
1/89)***
Small Cap Fund - Class 2 (__; __) *** -- -- -- -- -- --
GOLDMAN SACHS Variable Insurance Trust (VIT)
CORESM U.S. Equity Fund (__; 2/98) -- -- -- -- -- --
Global Income Fund (__; __ ) -- -- -- -- -- --
Mid Cap Value Fund (__; 4/98) -- -- -- -- -- --
MFS Investment Management(R)
Growth with Income Series (__; __) -- -- -- -- -- --
Utilities Series (__; 1/95) -- -- -- -- -- --
PUTNAM VARIABLE TRUST
Putnam VT International Growth Fund - Class -- -- -- -- -- --
IB Shares (__; __)
Putnam VT Vista Fund - Class IB Shares (__; -- -- -- -- -- --
1/99)
WELLS FARGO
Asset Allocation Fund (__; __) -- -- -- -- -- --
Corporate Bond Fund (__; __) -- -- -- -- -- --
Equity Income Fund (__; __) -- -- -- -- -- --
Growth Fund (__; __) -- -- -- -- -- --
International Equity Fund (__; __) -- -- -- -- -- --
Large Company Growth Fund (__; __) -- -- -- -- -- --
Money Market Fund (__; __) -- -- -- -- -- --
Small Cap Growth Fund (__; __) -- -- -- -- -- --
*Current applicable charges deducted from fund performance include a $30
contract administrative charge, a 1.05% mortality and expense risk fee and a
0.15% variable account administrative charge.
+ Fund had not commenced operations as of Dec. 31, 1998.
**(Commencement date of the subaccount; commencement date of the Fund)
***Because Class 2 shares were not offered until Jan. 6, 1999, performance shown
represents Class 1 shares. Although invested in the same portfolio of securities
as Class 1, Class 2's standardized performance will differ because of Class 2's
additional 12b-1 fee expense which affects all performance after the inception
of Class 2. Figures assume reinvestment of dividends and capital gains.
</TABLE>
<PAGE>
Cumulative Total Return
Cumulative total return represents the cumulative change in the value of an
investment for a given period (reflecting change in a subaccount's accumulation
unit value). We compute cumulative total return by 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 period, at the
end of the period (or fractional portion thereof)
Total return figures reflect the deduction of the withdrawal charge which
assumes you withdraw the entire contract value at the end of the one, five and
ten year periods (or, if less, up to the life of the subaccount). We also may
show performance figures without the deduction of a withdrawal charge. In
addition, total return figures reflect the deduction of all other applicable
charges including the contract administrative charge, the variable account
administrative charge, the Enhanced Death Benefit Rider fee, the Guaranteed
Minimum Income Benefit Rider fee and the mortality and expense risk fee.
Annualized Calculation of Yield for Subaccounts Investing in Money Market Funds
Annualized Simple Yield
For the subaccounts investing in money market funds, we base quotations of
simple yield on:
(a) the change in the value of a hypothetical subaccount (exclusive of
capital changes and income other than investment income) at the
beginning of a particular seven-day period;
(b) less a pro rata share of the subaccount expenses accrued over the
period;
(c) dividing this difference by the value of the subaccount at the
beginning of the period to obtain the base period return; and
(d) multiplying the base period return by 365/7.
The subaccount's value includes:
o any declared dividends,
o the value of any shares purchased with dividends paid during the period,
and
o any dividends declared for such shares.
It does not include:
o the effect of any applicable withdrawal charge, or
o any realized or unrealized gains or losses.
Annualized Compound Yield
We calculate compound yield using the base period return described above, which
we then compound according to the following formula:
Compound Yield = [(Base Period Return + 1)365/7] -1
<PAGE>
You must consider (when comparing an investment in subaccounts investing in
money market funds with fixed annuities) that fixed annuities often provide an
agreed-to or guaranteed yield for a stated period of time, whereas the
subaccount's yield fluctuates. In comparing the yield of the subaccount to a
money market fund, you should consider the different services that the contract
provides.
Annualized Yield for 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 it invests and from dividends declared and paid by the fund,
which are automatically invested in shares of the fund.
The yield on the subaccount's accumulation unit may fluctuate daily and does not
provide a basis for determining future yields.
Independent rating or statistical services or publishers or publications such as
those listed below 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.
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 and World Report, The Wall Street Journal and Wiesenberger
Investment Companies Service.
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 contract as of the valuation date that
falls on (or closest to the valuation date that falls before) 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.
<PAGE>
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 that falls on (or
closest to the valuation date that falls before) 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 that falls on (or closest to
the valuation date that falls before) the seventh calendar day before the
payout is due; by
o the fixed number of annuity units credited to you.
Annuity Unit Values: We originally set this value at $1 for each subaccount. To
calculate later values 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
rate built into the annuity table. With an assumed investment rate of 5%, the
neutralizing factor is 0.999866 for a one day valuation period.
Net Investment Factor:
We determine the net investment factor by:
o adding the fund's current net asset value per share, plus the 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, the variable account administrative charge and the Enhanced Death
Benefit Rider fee (if selected) from the result.
Because the net asset value of the 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 One-Year Fixed Account
We guarantee your fixed annuity payout amounts. Once calculated, your payout
will remain the same and never change. To calculate your annuity payouts we:
o take the value of your one-year fixed account at the retirement date or the
date you 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.
<PAGE>
RATING AGENCIES
The following chart reflects the ratings given to us 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 subaccounts
of the contract. This information relates only to our general account and
reflects our ability to make annuity payouts and to pay death benefits and other
distributions from the contract.
Rating Agency Rating
A.M. Best A+
(Superior)
- - - -----------------------
Duff & Phelps AAA
- - - -----------------------
Moody's Aa2
PRINCIPAL UNDERWRITER
The principal underwriter for the contract is American Express Financial
Advisors Inc. (AEFA) which offers the contract on a continuous basis.
The contract is new and, therefore, we have not received any withdrawal charges
or paid any commissions.
INDEPENDENT AUDITORS
The financial statements appearing in this SAI 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.
FINANCIAL STATEMENTS
[To be filed by amendment.]
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
for
AMERICAN EXPRESS WELLS FARGO EXTRA CREDIT VARIABLE ANNUITYSM
American Enterprise Variable Annuity Account
__, 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) is not a prospectus. It should be
read together with the prospectus dated the same date as this SAI, which may be
obtained by writing or calling us at the address and telephone number below. The
prospectus is incorporated in this SAI by reference.
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.
Calculating Annuity Payouts...........................................p.
Rating Agencies.......................................................p.
Principal Underwriter.................................................p.
Independent Auditors..................................................p.
<PAGE>
PERFORMANCE INFORMATION
- - - -----------------------------------------------------------------------------
The subaccounts may quote various performance figures to illustrate past
performance. We base total return and current yield quotations (if applicable)
on standardized methods of computing performance as required by the Securities
and Exchange Commission (SEC). An explanation of the methods used to compute
performance follows below.
Average Annual Total Return
We will express quotations of average annual total return for the subaccounts in
terms of the average annual compounded rate of return of a hypothetical
investment in the contract over a period of one, five and ten years (or, if
less, up to the life of the subaccounts), 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 period, at the end of the
period (or fractional portion thereof)
We calculated the following performance figures on the basis of historical
performance of each fund. Currently, we do not show any performance information
for the subaccounts because they are new and have not had any activity to date.
However, we show performance from the commencement date of the funds as if the
contract existed at that time, which it did not. Past performance does not
guarantee future results.
<PAGE>
Average Annual Total Return For Annuities With Withdrawal and Selection of the
Six-Year Withdrawal Charge Schedule and the Optional Enhanced Death Benefit and
Guaranteed Minimum Income Benefit Riders For Periods Ending Dec. 31, 1998
<TABLE>
<CAPTION>
Performance Since Commencement of the
Fund*
<S> <C> <C> <C> <C> <C>
Since
Subaccount Investing In: 1 Year 5 Years 10 Years Commencement
- - - ---------- ------------- ------ ------- -------- ------------
AXPSM VARIABLE PORTFOLIO
Blue Chip Advantage Fund+ --% --% --% --%
Capital Resource Fund (10/81)** -- -- -- --
Diversified Equity Income Fund+ -- -- -- --
Extra Income Fund (5/96) -- -- -- --
Federal Income Fund+ -- -- -- --
New Dimensions Fund (5/96) -- -- -- --
Small Cap Advantage Fund + -- -- -- --
AIM V.I.
Capital Appreciation Fund (5/93) -- -- -- --
Value Fund (10/97) -- -- -- --
Dreyfus Variable Investment
Socially Responsible Growth Fund (10/93) -- -- -- --
FRANKLIN TEMPLETON VIP TRUST
Income Securities Fund - Class 2 (__) *** -- -- -- --
Mutual Shares Securities Fund - Class 2 -- -- -- --
(__)***
Real Estate Securities Fund - Class 2 -- -- -- --
(1/89)***
Small Cap Fund - Class 2 (__)*** -- -- -- --
GOLDMAN SACHS Variable Insurance Trust (VIT)
CORESM U.S. Equity Fund (2/98) -- -- -- --
Global Income Fund (__ ) -- -- -- --
Mid Cap Value Fund (4/98) -- -- -- --
MFS Investment Management(R)
Growth with Income Series (__) -- -- -- --
Utilities Series (1/95) -- -- -- --
PUTNAM VARIABLE TRUST
Putnam VT International Growth Fund - Class -- -- -- --
IB Shares (__)
Putnam VT Vista Fund - Class IB Shares -- -- -- --
(1/99)
WELLS FARGO
Asset Allocation Fund (__) -- -- -- --
Corporate Bond Fund (__) -- -- -- --
Equity Income Fund (__) -- -- -- --
Growth Fund (__) -- -- -- --
International Equity Fund (__) -- -- -- --
Large Company Growth Fund (__) -- -- -- --
Money Market Fund (__) -- -- -- --
Small Cap Growth Fund (__) -- -- -- --
*Current applicable charges deducted from fund performance include a $30
contract administrative charge, a 1.35% mortality and expense risk fee, a 0.15%
variable account administrative charge, a 0.20% Enhanced Death Benefit Rider
fee, a 0.30% Guaranteed Minimum Income Benefit Rider fee and applicable
withdrawal charges associated with the six-year withdrawal charge schedule.
+Fund had not commenced operations as of Dec. 31, 1998.
**(Commencement date of the Fund)
***Because Class 2 shares were not offered until Jan. 6, 1999,
performance shown represents Class 1 shares. Although invested in the same
portfolio of securities as Class 1, Class 2's standardized performance will
differ because of Class 2's additional 12b-1 fee expense which affects all
performance after the inception of Class 2. Figures assume reinvestment of
dividends and capital gains.
</TABLE>
<PAGE>
Average Annual Total Return For Annuities Without Withdrawal and Selection of
the Six-Year Withdrawal Charge Schedule and the Optional Enhanced Death Benefit
and Guaranteed Minimum Income Benefit Riders For Periods Ending Dec. 31, 1998
<TABLE>
<CAPTION>
Performance Since Commencement of the
Fund*
<S> <C> <C> <C> <C> <C>
Since
Subaccount Investing In: 1 Year 5 Years 10 Years Commencement
- - - ---------- ------------- ------ ------- -------- ------------
AXPSM VARIABLE PORTFOLIO
Blue Chip Advantage Fund+ --% --% --% --%
Capital Resource Fund (10/81)** -- -- -- --
Diversified Equity Income Fund+ -- -- -- --
Extra Income Fund (5/96) -- -- -- --
Federal Income Fund+ -- -- -- --
New Dimensions Fund (5/96) -- -- -- --
Small Cap Advantage Fund + -- -- -- --
AIM V.I.
Capital Appreciation Fund (5/93) -- -- -- --
Value Fund (10/97) -- -- -- --
Dreyfus Variable Investment
Socially Responsible Growth Fund (10/93) -- -- -- --
FRANKLIN TEMPLETON VIP TRUST
Income Securities Fund - Class 2 ( __) *** -- -- -- --
Mutual Shares Securities Fund - Class 2 ( -- -- -- --
__)***
Real Estate Securities Fund - Class 2 ( -- -- -- --
1/89)***
Small Cap Fund - Class 2 (__)*** -- -- -- --
GOLDMAN SACHS Variable Insurance Trust (VIT)
CORESM U.S. Equity Fund (2/98) -- -- -- --
Global Income Fund (__) -- -- -- --
Mid Cap Value Fund (4/98) -- -- -- --
MFS Investment Management(R)
Growth with Income Series (__) -- -- -- --
Utilities Series (1/95) -- -- -- --
PUTNAM VARIABLE TRUST
Putnam VT International Growth Fund - Class -- -- -- --
IB Shares (__)
Putnam VT Vista Fund - Class IB Shares -- -- -- --
(1/99)
WELLS FARGO
Asset Allocation Fund (__) -- -- -- --
Corporate Bond Fund (__) -- -- -- --
Equity Income Fund (__) -- -- -- --
Growth Fund (__) -- -- -- --
International Equity Fund (__) -- -- -- --
Large Company Growth Fund (__) -- -- -- --
Money Market Fund (__) -- -- -- --
Small Cap Growth Fund (__) -- -- -- --
*Current applicable charges deducted from fund performance include a $30
contract administrative charge, a 1.35% mortality and expense risk fee, a 0.15%
variable account administrative charge, a 0.20% Enhanced Death Benefit Rider fee
and a 0.30% Guaranteed Minimum Income Benefit Rider fee.
+ Fund had not commenced operations as of Dec. 31, 1998.
**(Commencement date of the Fund)
***Because Class 2 shares were not offered until Jan. 6, 1999, performance shown
represents Class 1 shares. Although invested in the same portfolio of securities
as Class 1, Class 2's standardized performance will differ because of Class 2's
additional 12b-1 fee expense which affects all performance after the inception
of Class 2. Figures assume reinvestment of dividends and capital gains.
</TABLE>
<PAGE>
Average Annual Total Return For Annuities With Withdrawal and Selection of the
Six-Year Withdrawal Charge Schedule For Periods Ending Dec. 31, 1998
<TABLE>
<CAPTION>
Performance Since Commencement of the
Fund*
<S> <C> <C> <C> <C> <C>
Since
Subaccount Investing In: 1 Year 5 Years 10 Years Commencement
- - - ---------- ------------- ------ ------- -------- ------------
AXPSM VARIABLE PORTFOLIO
Blue Chip Advantage Fund+ --% --% --% --%
Capital Resource Fund (10/81)** -- -- -- --
Diversified Equity Income Fund+ -- -- -- --
Extra Income Fund (5/96) -- -- -- --
Federal Income Fund+ -- -- -- --
New Dimensions Fund (5/96) -- -- -- --
Small Cap Advantage Fund + -- -- -- --
AIM V.I.
Capital Appreciation Fund (5/93) -- -- -- --
Value Fund (10/97) -- -- -- --
Dreyfus Variable Investment
Socially Responsible Growth Fund (10/93) -- -- -- --
FRANKLIN TEMPLETON VIP TRUST
Income Securities Fund - Class 2 ( __) *** -- -- -- --
Mutual Shares Securities Fund - Class 2 ( -- -- -- --
__)***
Real Estate Securities Fund - Class 2 -- -- -- --
(1/89)***
Small Cap Fund - Class 2 (__)*** -- -- -- --
GOLDMAN SACHS Variable Insurance Trust (VIT)
CORESM U.S. Equity Fund (2/98) -- -- -- --
Global Income Fund (__) -- -- -- --
Mid Cap Value Fund (4/98) -- -- -- --
MFS Investment Management(R)
Growth with Income Series (__) -- -- -- --
Utilities Series (1/95) -- -- -- --
PUTNAM VARIABLE TRUST
Putnam VT International Growth Fund - Class -- -- -- --
IB Shares (__)
Putnam VT Vista Fund - Class IB Shares -- -- -- --
(1/99)
WELLS FARGO
Asset Allocation Fund (__) -- -- -- --
Corporate Bond Fund (__) -- -- -- --
Equity Income Fund (__) -- -- -- --
Growth Fund (__) -- -- -- --
International Equity Fund (__) -- -- -- --
Large Company Growth Fund (__) -- -- -- --
Money Market Fund (__) -- -- -- --
Small Cap Growth Fund (__) -- -- -- --
*Current applicable charges deducted from fund performance include a $30
contract administrative charge, a 1.35% mortality and expense risk fee, a 0.15%
variable account administrative charge and applicable withdrawal charges
associated with the six-year withdrawal charge schedule.
+ Fund had not commenced operations as of Dec. 31, 1998.
**(Commencement date of the Fund)
***Because Class 2 shares were not offered until Jan. 6, 1999, performance shown
represents Class 1 shares. Although invested in the same portfolio of securities
as Class 1, Class 2's standardized performance will differ because of Class 2's
additional 12b-1 fee expense which affects all performance after the inception
of Class 2. Figures assume reinvestment of dividends and capital gains.
</TABLE>
<PAGE>
Average Annual Total Return For Annuities Without Withdrawal and Selection of
the Six-Year Withdrawal Charge Schedule For Periods Ending Dec. 31, 1998
<TABLE>
<CAPTION>
Performance Since Commencement of the
Fund*
<S> <C> <C> <C> <C> <C>
Since
Subaccount Investing In: 1 Year 5 Years 10 Years Commencement
- - - ---------- ------------- ------ ------- -------- ------------
AXPSM VARIABLE PORTFOLIO
Blue Chip Advantage Fund+ --% --% --% --%
Capital Resource Fund (10/81)** -- -- -- --
Diversified Equity Income Fund+ -- -- -- --
Extra Income Fund (5/96) -- -- -- --
Federal Income Fund+ -- -- -- --
New Dimensions Fund (5/96) -- -- -- --
Small Cap Advantage Fund + -- -- -- --
AIM V.I.
Capital Appreciation Fund (5/93) -- -- -- --
Value Fund (10/97) -- -- -- --
Dreyfus Variable Investment
Socially Responsible Growth Fund (10/93) -- -- -- --
FRANKLIN TEMPLETON VIP TRUST
Income Securities Fund - Class 2 (__) *** -- -- -- --
Mutual Shares Securities Fund - Class 2 -- -- -- --
(__)***
Real Estate Securities Fund - Class 2 -- -- -- --
(1/89)***
Small Cap Fund - Class 2 (__) *** -- -- -- --
GOLDMAN SACHS Variable Insurance Trust (VIT)
CORESM U.S. Equity Fund (2/98) -- -- -- --
Global Income Fund (__ ) -- -- -- --
Mid Cap Value Fund (4/98) -- -- -- --
MFS Investment Management(R)
Growth with Income Series (__) -- -- -- --
Utilities Series (1/95) -- -- -- --
PUTNAM VARIABLE TRUST
Putnam VT International Growth Fund - Class -- -- -- --
IB Shares (__)
Putnam VT Vista Fund - Class IB Shares -- -- -- --
(1/99)
WELLS FARGO
Asset Allocation Fund (__) -- -- -- --
Corporate Bond Fund (__) -- -- -- --
Equity Income Fund (__) -- -- -- --
Growth Fund (__) -- -- -- --
International Equity Fund (__) -- -- -- --
Large Company Growth Fund (__) -- -- -- --
Money Market Fund (__) -- -- -- --
Small Cap Growth Fund ( __) -- -- -- --
*Current applicable charges deducted from fund performance include a $30
contract administrative charge, a 1.35% mortality and expense risk fee and a
0.15% variable account administrative charge.
+ Fund had not commenced operations as of Dec. 31, 1998.
**(Commencement date of the Fund)
***Because Class 2 shares were not offered until Jan. 6, 1999, performance shown
represents Class 1 shares. Although invested in the same portfolio of securities
as Class 1, Class 2's standardized performance will differ because of Class 2's
additional 12b-1 fee expense which affects all performance after the inception
of Class 2. Figures assume reinvestment of dividends and capital gains.
</TABLE>
<PAGE>
Average Annual Total Return For Annuities With Withdrawal and Selection of the
Eight-Year Withdrawal Charge Schedule and the Optional Enhanced Death Benefit
and Guaranteed Minimum Income Benefit Riders For Periods Ending Dec. 31, 1998
<TABLE>
<CAPTION>
Performance Since Commencement of the
Fund*
<S> <C> <C> <C> <C> <C>
Since
Subaccount Investing In: 1 Year 5 Years 10 Years Commencement
- - - ---------- ------------- ------ ------- -------- ------------
AXPSM VARIABLE PORTFOLIO
Blue Chip Advantage Fund+ --% --% --% --%
Capital Resource Fund (10/81)** -- -- -- --
Diversified Equity Income Fund+ -- -- -- --
Extra Income Fund (5/96) -- -- -- --
Federal Income Fund+ -- -- -- --
New Dimensions Fund (5/96) -- -- -- --
Small Cap Advantage Fund + -- -- -- --
AIM V.I.
Capital Appreciation Fund (5/93) -- -- -- --
Value Fund (10/97) -- -- -- --
Dreyfus Variable Investment
Socially Responsible Growth Fund (10/93) -- -- -- --
FRANKLIN TEMPLETON VIP TRUST
Income Securities Fund - Class 2 (__) *** -- -- -- --
Mutual Shares Securities Fund - Class 2 -- -- -- --
(__)***
Real Estate Securities Fund - Class 2 ( -- -- -- --
1/89)***
Small Cap Fund - Class 2 (__) *** -- -- -- --
GOLDMAN SACHS Variable Insurance Trust (VIT)
CORESM U.S. Equity Fund (2/98) -- -- -- --
Global Income Fund (__ ) -- -- -- --
Mid Cap Value Fund (4/98) -- -- -- --
MFS Investment Management(R)
Growth with Income Series (__) -- -- -- --
Utilities Series (1/95) -- -- -- --
PUTNAM VARIABLE TRUST
Putnam VT International Growth Fund - Class -- -- -- --
IB Shares (__)
Putnam VT Vista Fund - Class IB Shares -- -- -- --
(1/99)
WELLS FARGO
Asset Allocation Fund (__) -- -- -- --
Corporate Bond Fund (__) -- -- -- --
Equity Income Fund (__) -- -- -- --
Growth Fund (__) -- -- -- --
International Equity Fund (__) -- -- -- --
Large Company Growth Fund (__) -- -- -- --
Money Market Fund (__) -- -- -- --
Small Cap Growth Fund (__) -- -- -- --
*Current applicable charges deducted from fund performance include a $30
contract administrative charge, a 1.10% mortality and expense risk fee, a 0.15%
variable account administrative charge, a 0.20% Enhanced Death Benefit Rider
fee, a 0.30% Guaranteed Minimum Income Benefit Rider fee and applicable
withdrawal charges associated with the eight-year withdrawal charge schedule.
+Fund had not commenced operations as of Dec. 31, 1998.
**(Commencement date of the Fund)
***Because Class 2 shares were not offered until Jan. 6, 1999,
performance shown represents Class 1 shares. Although invested in the same
portfolio of securities as Class 1, Class 2's standardized performance will
differ because of Class 2's additional 12b-1 fee expense which affects all
performance after the inception of Class 2. Figures assume reinvestment of
dividends and capital gains.
</TABLE>
<PAGE>
Average Annual Total Return For Annuities Without Withdrawal and Selection of
the Eight-Year Withdrawal Charge Schedule and the Optional Enhanced Death
Benefit and Guaranteed Minimum Income Benefit Riders For Periods Ending Dec. 31,
1998
<TABLE>
<CAPTION>
Performance Since Commencement of the
Fund*
<S> <C> <C> <C> <C> <C>
Since
Subaccount Investing In: 1 Year 5 Years 10 Years Commencement
- - - ---------- ------------- ------ ------- -------- ------------
AXPSM VARIABLE PORTFOLIO
Blue Chip Advantage Fund+ --% --% --% --%
Capital Resource Fund (10/81)** -- -- -- --
Diversified Equity Income Fund+ -- -- -- --
Extra Income Fund (5/96) -- -- -- --
Federal Income Fund+ -- -- -- --
New Dimensions Fund (5/96) -- -- -- --
Small Cap Advantage Fund + -- -- -- --
AIM V.I.
Capital Appreciation Fund (5/93) -- -- -- --
Value Fund (10/97) -- -- -- --
Dreyfus Variable Investment
Socially Responsible Growth Fund (10/93) -- -- -- --
FRANKLIN TEMPLETON VIP TRUST
Income Securities Fund - Class 2 (__) *** -- -- -- --
Mutual Shares Securities Fund - Class 2 -- -- -- --
(__)***
Real Estate Securities Fund - Class 2 -- -- -- --
(1/89)***
Small Cap Fund - Class 2 ( __) *** -- -- -- --
GOLDMAN SACHS Variable Insurance Trust (VIT)
CORESM U.S. Equity Fund (2/98) -- -- -- --
Global Income Fund (__ ) -- -- -- --
Mid Cap Value Fund (4/98) -- -- -- --
MFS Investment Management(R)
Growth with Income Series ( __) -- -- -- --
Utilities Series (1/95) -- -- -- --
PUTNAM VARIABLE TRUST
Putnam VT International Growth Fund - Class -- -- -- --
IB Shares (__)
Putnam VT Vista Fund - Class IB Shares -- -- -- --
(1/99)
WELLS FARGO
Asset Allocation Fund (__) -- -- -- --
Corporate Bond Fund ( __) -- -- -- --
Equity Income Fund (__) -- -- -- --
Growth Fund (__) -- -- -- --
International Equity Fund (__) -- -- -- --
Large Company Growth Fund (__) -- -- -- --
Money Market Fund (__) -- -- -- --
Small Cap Growth Fund ( __) -- -- -- --
*Current applicable charges deducted from fund performance include a $30
contract administrative charge, a 1.10% mortality and expense risk fee, a 0.15%
variable account administrative charge, a 0.20% Enhanced Death Benefit Rider fee
and a 0.30% Guaranteed Minimum Income Benefit Rider fee.
+ Fund had not commenced operations as of Dec. 31, 1998.
**(Commencement date of the Fund)
***Because Class 2 shares were not offered until Jan. 6, 1999, performance shown
represents Class 1 shares. Although invested in the same portfolio of securities
as Class 1, Class 2's standardized performance will differ because of Class 2's
additional 12b-1 fee expense which affects all performance after the inception
of Class 2. Figures assume reinvestment of dividends and capital gains.
</TABLE>
<PAGE>
Average Annual Total Return For Annuities With Withdrawal and Selection of the
Eight-Year Withdrawal Charge Schedule For Periods Ending Dec. 31, 1998
<TABLE>
<CAPTION>
Performance Since Commencement of the
Fund*
<S> <C> <C> <C> <C> <C>
Since
Subaccount Investing In: 1 Year 5 Years 10 Years Commencement
- - - ---------- ------------- ------ ------- -------- ------------
AXPSM VARIABLE PORTFOLIO
Blue Chip Advantage Fund+ --% --% --% --%
Capital Resource Fund (10/81)** -- -- -- --
Diversified Equity Income Fund+ -- -- -- --
Extra Income Fund (5/96) -- -- -- --
Federal Income Fund+ -- -- -- --
New Dimensions Fund (5/96) -- -- -- --
Small Cap Advantage Fund + -- -- -- --
AIM V.I.
Capital Appreciation Fund (5/93) -- -- -- --
Value Fund (10/97) -- -- -- --
Dreyfus Variable Investment
Socially Responsible Growth Fund (10/93) -- -- -- --
FRANKLIN TEMPLETON VIP TRUST
Income Securities Fund - Class 2 (__) *** -- -- -- --
Mutual Shares Securities Fund - Class 2 -- -- -- --
(__)***
Real Estate Securities Fund - Class 2 -- -- -- --
(1/89)***
Small Cap Fund - Class 2 (__) *** -- -- -- --
GOLDMAN SACHS Variable Insurance Trust (VIT)
CORESM U.S. Equity Fund (2/98) -- -- -- --
Global Income Fund (__ ) -- -- -- --
Mid Cap Value Fund (4/98) -- -- -- --
MFS Investment Management(R)
Growth with Income Series (__) -- -- -- --
Utilities Series (1/95) -- -- -- --
PUTNAM VARIABLE TRUST
Putnam VT International Growth Fund - Class -- -- -- --
IB Shares (__)
Putnam VT Vista Fund - Class IB Shares -- -- -- --
(1/99)
WELLS FARGO
Asset Allocation Fund (__) -- -- -- --
Corporate Bond Fund (__) -- -- -- --
Equity Income Fund (__) -- -- -- --
Growth Fund (__) -- -- -- --
International Equity Fund (__) -- -- -- --
Large Company Growth Fund (__) -- -- -- --
Money Market Fund (__) -- -- -- --
Small Cap Growth Fund (__) -- -- -- --
*Current applicable charges deducted from fund performance include a $30
contract administrative charge, a 1.10% mortality and expense risk fee, a 0.15%
variable account administrative charge and applicable withdrawal charges
associated with the eight-year withdrawal charge schedule.
+ Fund had not commenced operations as of Dec. 31, 1998.
**(Commencement date of the Fund)
***Because Class 2 shares were not offered until Jan. 6, 1999, performance shown
represents Class 1 shares. Although invested in the same portfolio of securities
as Class 1, Class 2's standardized performance will differ because of Class 2's
additional 12b-1 fee expense which affects all performance after the inception
of Class 2. Figures assume reinvestment of dividends and capital gains.
</TABLE>
<PAGE>
Average Annual Total Return For Annuities Without Withdrawal and Selection of
the Eight-Year Withdrawal Charge Schedule For Periods Ending Dec. 31, 1998
<TABLE>
<CAPTION>
Performance Since Commencement of the
Fund*
<S> <C> <C> <C> <C> <C>
Since
Subaccount Investing In: 1 Year 5 Years 10 Years Commencement
- - - ---------- ------------- ------ ------- -------- ------------
AXPSM VARIABLE PORTFOLIO
Blue Chip Advantage Fund+ --% --% --% --%
Capital Resource Fund (10/81)** -- -- -- --
Diversified Equity Income Fund+ -- -- -- --
Extra Income Fund (5/96) -- -- -- --
Federal Income Fund+ -- -- -- --
New Dimensions Fund (5/96) -- -- -- --
Small Cap Advantage Fund + -- -- -- --
AIM V.I.
Capital Appreciation Fund (5/93) -- -- -- --
Value Fund (10/97) -- -- -- --
Dreyfus Variable Investment
Socially Responsible Growth Fund (10/93) -- -- -- --
FRANKLIN TEMPLETON VIP TRUST
Income Securities Fund - Class 2 (__) *** -- -- -- --
Mutual Shares Securities Fund - Class 2 -- -- -- --
(__)***
Real Estate Securities Fund - Class 2 -- -- -- --
(1/89)***
Small Cap Fund - Class 2 (__) *** -- -- -- --
GOLDMAN SACHS Variable Insurance Trust (VIT)
CORESM U.S. Equity Fund (2/98) -- -- -- --
Global Income Fund (__ ) -- -- -- --
Mid Cap Value Fund (4/98) -- -- -- --
MFS Investment Management(R)
Growth with Income Series (__) -- -- -- --
Utilities Series (1/95) -- -- -- --
PUTNAM VARIABLE TRUST
Putnam VT International Growth Fund - Class -- -- -- --
IB Shares (__)
Putnam VT Vista Fund - Class IB Shares -- -- -- --
(1/99)
WELLS FARGO
Asset Allocation Fund (__) -- -- -- --
Corporate Bond Fund (__) -- -- -- --
Equity Income Fund (__) -- -- -- --
Growth Fund (__) -- -- -- --
International Equity Fund (__) -- -- -- --
Large Company Growth Fund (__) -- -- -- --
Money Market Fund (__) -- -- -- --
Small Cap Growth Fund (__) -- -- -- --
*Current applicable charges deducted from fund performance include a $30
contract administrative charge, a 1.10% mortality and expense risk fee and a
0.15% variable account administrative charge.
+ Fund had not commenced operations as of Dec. 31, 1998.
**(Commencement date of the Fund)
***Because Class 2 shares were not offered until Jan. 6, 1999, performance shown
represents Class 1 shares. Although invested in the same portfolio of securities
as Class 1, Class 2's standardized performance will differ because of Class 2's
additional 12b-1 fee expense which affects all performance after the inception
of Class 2.
Figures assume reinvestment of dividends and capital gains.
</TABLE>
<PAGE>
Cumulative Total Return
Cumulative total return represents the cumulative change in the value of an
investment for a given period (reflecting change in a subaccount's accumulation
unit value). We compute cumulative total return by 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 period, at the
end of the period (or fractional portion thereof)
Total return figures reflect the deduction of the withdrawal charge which
assumes you withdraw the entire contract value at the end of the one, five and
ten year periods (or, if less, up to the life of the subaccount). We also may
show performance figures without the deduction of a withdrawal charge. In
addition, total return figures reflect the deduction of all other applicable
charges including the contract administrative charge, the variable account
administrative charge, the Enhanced Death Benefit Rider fee, the Guaranteed
Minimum Income Benefit Rider fee and the mortality and expense risk fee.
Annualized Calculation of Yield for Subaccounts Investing in Money Market Funds
Annualized Simple Yield
For the subaccounts investing in money market funds, we base quotations of
simple yield on:
(a) the change in the value of a hypothetical subaccount (exclusive of
capital changes and income other than investment income) at the
beginning of a particular seven-day period;
(b) less a pro rata share of the subaccount expenses accrued over the
period;
(c) dividing this difference by the value of the subaccount at the
beginning of the period to obtain the base period return; and
(d) multiplying the base period return by 365/7.
The subaccount's value includes:
o any declared dividends,
o the value of any shares purchased with dividends paid during the period,
and
o any dividends declared for such shares.
It does not include:
o the effect of any applicable withdrawal charge, or
o any realized or unrealized gains or losses.
Annualized Compound Yield
We calculate compound yield using the base period return described above, which
we then compound according to the following formula:
Compound Yield = [(Base Period Return + 1)365/7] -1
<PAGE>
You must consider (when comparing an investment in subaccounts investing in
money market funds with fixed annuities) that fixed annuities often provide an
agreed-to or guaranteed yield for a stated period of time, whereas the
subaccount's yield fluctuates. In comparing the yield of the subaccount to a
money market fund, you should consider the different services that the contract
provides.
Annualized Yield for 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 it invests and from dividends declared and paid by the fund,
which are automatically invested in shares of the fund.
The yield on the subaccount's accumulation unit may fluctuate daily and does not
provide a basis for determining future yields.
Independent rating or statistical services or publishers or publications such as
those listed below 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.
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 and World Report, The Wall Street Journal and Wiesenberger
Investment Companies Service.
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 contract as of the valuation date that
falls on (or closest to the valuation date that falls before) 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.
<PAGE>
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 that falls on (or
closest to the valuation date that falls before) 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 that falls on (or closest to
the valuation date that falls before) the seventh calendar day before the
payout is due; by
o the fixed number of annuity units credited to you.
Annuity Unit Values: We originally set this value at $1 for each subaccount. To
calculate later values 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
rate built into the annuity table. With an assumed investment rate of 5%, the
neutralizing factor is 0.999866 for a one day valuation period.
Net Investment Factor:
We determine the net investment factor by:
o adding the fund's current net asset value per share, plus the 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, the variable account administrative charge and the Enhanced Death
Benefit Rider fee (if selected) from the result.
Because the net asset value of the 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 One-Year Fixed Account
We guarantee your fixed annuity payout amounts. Once calculated, your payout
will remain the same and never change. To calculate your annuity payouts we:
o take the value of your one-year fixed account at the retirement date or the
date you 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.
<PAGE>
RATING AGENCIES
The following chart reflects the ratings given to us 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 subaccounts
of the contract. This information relates only to our general account and
reflects our ability to make annuity payouts and to pay death benefits and other
distributions from the contract.
Rating Agency Rating
A.M. Best A+
(Superior)
- - - -----------------------
Duff & Phelps AAA
- - - -----------------------
Moody's Aa2
PRINCIPAL UNDERWRITER
The principal underwriter for the contract is American Express Financial
Advisors Inc. (AEFA) which offers the contract on a continuous basis.
The contract is new and, therefore, we have not received any withdrawal charges
or paid any commissions.
INDEPENDENT AUDITORS
The financial statements appearing in this SAI 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.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
for
AMERICAN EXPRESS SIGNATURE PLUS VARIABLE ANNUITYSM
American Enterprise Variable Annuity Account
__, 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) is not a prospectus. It should be
read together with the prospectus dated the same date as this SAI, which may be
obtained by writing or calling us at the address and telephone number below. The
prospectus is incorporated in this SAI by reference.
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.
Calculating Annuity Payouts.......................................p.
Rating Agencies...................................................p.
Principal Underwriter.............................................p.
Independent Auditors..............................................p.
<PAGE>
PERFORMANCE INFORMATION
- - - -------------------------------------------------------------------------------
The subaccounts may quote various performance figures to illustrate past
performance. We base total return and current yield quotations (if applicable)
on standardized methods of computing performance as required by the Securities
and Exchange Commission (SEC). An explanation of the methods used to compute
performance follows below.
Average Annual Total Return
We will express quotations of average annual total return for the subaccounts in
terms of the average annual compounded rate of return of a hypothetical
investment in the contract over a period of one, five and ten years (or, if
less, up to the life of the subaccounts), 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 period, at the end of the
period (or fractional portion thereof)
We calculated the following performance figures on the basis of historical
performance of each fund. Currently, we do not show any performance information
for the subaccounts because they are new and have not had any activity to date.
However, we show performance from the commencement date of the funds as if the
contract existed at that time, which it did not. Past performance does not
guarantee future results.
<PAGE>
Average Annual Total Return For Annuities With Withdrawal and Selection of the
Six-Year Withdrawal Charge Schedule and the Optional Maximum Anniversary Value
Death Benefit Rider For Periods Ending Dec. 31, 1998
Performance Since Commencement of the
Fund*
Since
Subaccount Investing In: 1 Year 5 Years 10 Years Commencement
- - - ---------- ------------- ------ ------- -------- ------------
New Fund
New Fund --% --% --% --%
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
*Current applicable charges deducted from fund performance include a $35
contract administrative charge, a 1.40% mortality and expense risk fee, a 0.15%
variable account administrative charge, a 0.10% Maximum Anniversary Value Death
Benefit Rider fee and applicable withdrawal charges associated with the six-year
withdrawal charge schedule.
<PAGE>
Average Annual Total Return For Annuities With Withdrawal and Selection of the
Six-Year Withdrawal Charge Schedule and the Optional Enhanced Death Benefit and
Guaranteed Minimum Income Benefit Riders For Periods Ending Dec. 31, 1998
Performance Since Commencement of the
Fund*
Since
Subaccount Investing In: 1 Year 5 Years 10 Years Commencement
- - - ---------- ------------- ------ ------- -------- ------------
New Fund
New Fund --% --% --% --%
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
*Current applicable charges deducted from fund performance include a $35
contract administrative charge, a 1.40% mortality and expense risk fee, a 0.15%
variable account administrative charge, a 0.30% Enhanced Death Benefit Rider
fee, a 0.30% Guaranteed Minimum Income Benefit Rider fee and applicable
withdrawal charges associated with the six-year withdrawal charge schedule.
<PAGE>
Average Annual Total Return For Annuities Without Withdrawal and Selection of
the Six-Year Withdrawal Charge Schedule and the Optional Maximum Anniversary
Value Death Benefit Rider For Periods Ending Dec. 31, 1998
Performance Since Commencement of the
Fund*
Since
Subaccount Investing In: 1 Year 5 Years 10 Years Commencement
- - - ---------- ------------- ------ ------- -------- ------------
New Fund
New Fund --% --% --% --%
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
*Current applicable charges deducted from fund performance include a $35
contract administrative charge, a 1.40% mortality and expense risk fee, a 0.15%
variable account administrative charge and a 0.10% Maximum Anniversary Value
Death Benefit Rider fee.
<PAGE>
Average Annual Total Return For Annuities Without Withdrawal and Selection of
the Six-Year Withdrawal Charge Schedule and the Optional Enhanced Death Benefit
and Guaranteed Minimum Income Benefit Riders For Periods Ending Dec. 31, 1998
Performance Since Commencement of the
Fund*
Since
Subaccount Investing In: 1 Year 5 Years 10 Years Commencement
- - - ---------- ------------- ------ ------- -------- ------------
New Fund
New Fund --% --% --% --%
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
*Current applicable charges deducted from fund performance include a $35
contract administrative charge, a 1.40% mortality and expense risk fee, a 0.15%
variable account administrative charge, a 0.30% Enhanced Death Benefit Rider fee
and a 0.30% Guaranteed Minimum Income Benefit Rider fee.
<PAGE>
Average Annual Total Return For Annuities With Withdrawal and Selection of the
Six-Year Withdrawal Charge Schedule For Periods Ending Dec. 31, 1998
Performance Since Commencement of the
Fund*
Since
Subaccount Investing In: 1 Year 5 Years 10 Years Commencement
- - - ---------- ------------- ------ ------- -------- ------------
New Fund
New Fund --% --% --% --%
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
*Current applicable charges deducted from fund performance include a $35
contract administrative charge, a 1.40% mortality and expense risk fee, a 0.15%
variable account administrative charge and applicable withdrawal charges
associated with the six-year withdrawal charge schedule.
<PAGE>
Average Annual Total Return For Annuities Without Withdrawal and Selection of
the Six-Year Withdrawal Charge Schedule For Periods Ending Dec. 31, 1998
Performance Since Commencement of the
Fund*
Since
Subaccount Investing In: 1 Year 5 Years 10 Years Commencement
- - - ---------- ------------- ------ ------- -------- ------------
New Fund
New Fund --% --% --% --%
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
*Current applicable charges deducted from fund performance include a $35
contract administrative charge, a 1.40% mortality and expense risk fee and a
0.15% variable account administrative charge.
<PAGE>
Average Annual Total Return For Annuities With Withdrawal and Selection of the
Eight-Year Withdrawal Charge Schedule and the Optional Maximum Anniversary Value
Death Benefit Rider For Periods Ending Dec. 31, 1998
Performance Since Commencement of the
Fund*
Since
Subaccount Investing In: 1 Year 5 Years 10 Years Commencement
- - - ---------- ------------- ------ ------- -------- ------------
New Fund
New Fund --% --% --% --%
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
*Current applicable charges deducted from fund performance include a $35
contract administrative charge, a 1.25% mortality and expense risk fee, a 0.15%
variable account administrative charge, a 0.10% Maximum Anniversary Value Death
Benefit Rider fee and applicable withdrawal charges associated with the
eight-year withdrawal charge schedule.
<PAGE>
Average Annual Total Return For Annuities With Withdrawal and Selection of the
Eight-Year Withdrawal Charge Schedule and the Optional Enhanced Death Benefit
and Guaranteed Minimum Income Benefit Riders For Periods Ending Dec. 31, 1998
Performance Since Commencement of the
Fund*
Since
Subaccount Investing In: 1 Year 5 Years 10 Years Commencement
- - - ---------- ------------- ------ ------- -------- ------------
New Fund
New Fund --% --% --% --%
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
*Current applicable charges deducted from fund performance include a $35
contract administrative charge, a 1.25% mortality and expense risk fee, a 0.15%
variable account administrative charge, a 0.30% Enhanced Death Benefit Rider
fee, a 0.30% Guaranteed Minimum Income Benefit Rider fee and applicable
withdrawal charges associated with the eight-year withdrawal charge schedule.
<PAGE>
Average Annual Total Return For Annuities Without Withdrawal and Selection of
the Eight-Year Withdrawal Charge Schedule and the Optional Maximum Anniversary
Value Death Benefit Rider For Periods Ending Dec. 31, 1998
Performance Since Commencement of the
Fund*
Since
Subaccount Investing In: 1 Year 5 Years 10 Years Commencement
- - - ---------- ------------- ------ ------- -------- ------------
New Fund
New Fund --% --% --% --%
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
*Current applicable charges deducted from fund performance include a $35
contract administrative charge, a 1.25% mortality and expense risk fee, a 0.15%
variable account administrative charge and a 0.10% Maximum Anniversary Value
Death Benefit Rider fee.
<PAGE>
Average Annual Total Return For Annuities Without Withdrawal and Selection of
the Eight-Year Withdrawal Charge Schedule and the Optional Enhanced Death
Benefit and Guaranteed Minimum Income Benefit Riders For Periods Ending Dec. 31,
1998
Performance Since Commencement of the
Fund*
Since
Subaccount Investing In: 1 Year 5 Years 10 Years Commencement
- - - ---------- ------------- ------ ------- -------- ------------
New Fund
New Fund --% --% --% --%
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
*Current applicable charges deducted from fund performance include a $35
contract administrative charge, a 1.25% mortality and expense risk fee, a 0.15%
variable account administrative charge, a 0.30% Enhanced Death Benefit Rider fee
and a 0.30% Guaranteed Minimum Income Benefit Rider fee.
<PAGE>
Average Annual Total Return For Annuities With Withdrawal and Selection of the
Eight-Year Withdrawal Charge Schedule For Periods Ending Dec. 31, 1998
Performance Since Commencement of the
Fund*
Since
Subaccount Investing In: 1 Year 5 Years 10 Years Commencement
- - - ---------- ------------- ------ ------- -------- ------------
New Fund
New Fund --% --% --% --%
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
*Current applicable charges deducted from fund performance include a $35
contract administrative charge, a 1.25% mortality and expense risk fee, a 0.15%
variable account administrative charge and applicable withdrawal charges
associated with the eight-year withdrawal charge schedule.
<PAGE>
Average Annual Total Return For Annuities Without Withdrawal and Selection of
the Eight-Year Withdrawal Charge Schedule For Periods Ending Dec. 31, 1998
Performance Since Commencement of the
Fund*
Since
Subaccount Investing In: 1 Year 5 Years 10 Years Commencement
- - - ---------- ------------- ------ ------- -------- ------------
New Fund
New Fund --% --% --% --%
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
New Fund -- -- -- --
*Current applicable charges deducted from fund performance include a $35
contract administrative charge, a 1.25% mortality and expense risk fee and a
0.15% variable account administrative charge.
<PAGE>
Cumulative Total Return
Cumulative total return represents the cumulative change in the value of an
investment for a given period (reflecting change in a subaccount's accumulation
unit value). We compute cumulative total return by 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 period, at the
end of the period (or fractional portion thereof)
Total return figures reflect the deduction of the withdrawal charge which
assumes you withdraw the entire contract value at the end of the one, five and
ten year periods (or, if less, up to the life of the subaccount). We also may
show performance figures without the deduction of a withdrawal charge. In
addition, total return figures reflect the deduction of all other applicable
charges including the contract administrative charge, the variable account
administrative charge, the Maximum Anniversary Value Death Benefit Rider fee,
the Enhanced Death Benefit Rider fee, the Guaranteed Minimum Income Benefit
Rider fee and the mortality and expense risk fee.
Annualized Calculation of Yield for Subaccounts Investing in Money Market Funds
Annualized Simple Yield
For the subaccounts investing in money market funds, we base quotations of
simple yield on:
(a) the change in the value of a hypothetical subaccount (exclusive of
capital changes and income other than investment income) at the
beginning of a particular seven-day period;
(b) less a pro rata share of the subaccount expenses accrued over the
period;
(c) dividing this difference by the value of the subaccount at the
beginning of the period to obtain the base period return; and
(d) multiplying the base period return by 365/7.
The subaccount's value includes:
o any declared dividends,
o the value of any shares purchased with dividends paid during the period, and
o any dividends declared for such shares.
It does not include:
o the effect of any applicable withdrawal charge, or
o any realized or unrealized gains or losses.
Annualized Compound Yield
We calculate compound yield using the base period return described above, which
we then compound according to the following formula:
Compound Yield = [(Base Period Return + 1)365/7] -1
<PAGE>
You must consider (when comparing an investment in subaccounts investing in
money market funds with fixed annuities) that fixed annuities often provide an
agreed-to or guaranteed yield for a stated period of time, whereas the
subaccount's yield fluctuates. In comparing the yield of the subaccount to a
money market fund, you should consider the different services that the contract
provides.
Annualized Yield for 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 it invests and from dividends declared and paid by the fund,
which are automatically invested in shares of the fund.
The yield on the subaccount's accumulation unit may fluctuate daily and does not
provide a basis for determining future yields.
Independent rating or statistical services or publishers or publications such as
those listed below 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.
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 and World Report, The Wall Street Journal and Wiesenberger
Investment Companies Service.
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 contract as of the valuation date that
falls on (or closest to the valuation date that falls before) 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.
<PAGE>
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 that falls on (or
closest to the valuation date that falls before) 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 that falls on (or closest to
the valuation date that falls before) the seventh calendar day before the
payout is due; by
o the fixed number of annuity units credited to you.
Annuity Unit Values: We originally set this value at $1 for each subaccount. To
calculate later values 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
rate built into the annuity table. With an assumed investment rate of 5%, the
neutralizing factor is 0.999866 for a one day valuation period.
Net Investment Factor:
We determine the net investment factor by:
o adding the fund's current net asset value per share, plus the 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, the variable account administrative charge and the Maximum
Anniversary Value Death Benefit Rider fee (if selected) or the Enhanced
Death Benefit Rider fee (if selected) from the result.
Because the net asset value of the 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 One-Year Fixed Account
We guarantee your fixed annuity payout amounts. Once calculated, your payout
will remain the same and never change. To calculate your annuity payouts we:
o take the value of your one-year fixed account at the retirement date or the
date you 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.
<PAGE>
RATING AGENCIES
The following chart reflects the ratings given to us 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 subaccounts
of the contract. This information relates only to our general account and
reflects our ability to make annuity payouts and to pay death benefits and other
distributions from the contract.
Rating Agency Rating
A.M. Best A+
(Superior)
- - - -----------------------
Duff & Phelps AAA
- - - -----------------------
Moody's Aa2
PRINCIPAL UNDERWRITER
The principal underwriter for the contract is American Express Financial
Advisors Inc. (AEFA) which offers the contract on a continuous basis.
The contract is new and, therefore, we have not received any withdrawal charges
or paid any commissions.
INDEPENDENT AUDITORS
The financial statements appearing in this SAI 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.
<PAGE>
PART C.
Item 24. Financial Statements and Exhibits
(a) Financial Statements included in Part B of this Registration Statement:
-To be filed by amendment.
(b) Exhibits:
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.
2. Not applicable.
3.1 Form of Variable Annuity and Life Insurance Distribution Agreement
to be filed by amendment.
3.2 Form of Managing General Agent Agreement to be filed by amendment.
4.1 Form of Deferred Annuity Contract to be filed by amendment.
4.2 Form of Roth IRA Endorsement (form 43094) filed electronically as Exhibit
4.2 to Pre-Effective Amendment No. 1 to Registration Statement No.
333-74865, filed on or about Aug. 4, 1999, is incorporated herein by
reference.
4.3 Form of SEP-IRA (form 43412) filed electronically as Exhibit 4.3 to
Pre-Effective Amendment No. 1 to Registration Statement No. 333-72777,
filed on or about July 8, 1999, is incorporated herein by reference.
4.4 Form of TSA Endorsement (form 43413) filed electronically as Exhibit 4.4 to
Pre-Effective Amendment No. 1 to Registration Statement No. 333-72777,
filed on or about July 8, 1999, is incorporated herein by reference.
5. Form of Variable Annuity Application to be filed by amendment.
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 Agreements to be filed by amendment
9. Opinion of counsel and consent to its use as to the legality of the
securities being registered to be filed by amendment.
10. Consent of Independent Auditors to be filed by amendment.
11. None.
12. Not applicable.
<PAGE>
13. Copy of schedule for computation of each performance quotation provided
in the Registration Statement in response to Item 21 to be filed by
amendment.
14. Not applicable.
15 Power of Attorney to sign this Registration Statement, dated July 29,
1999, filed electronically herewith.
Item 25. Directors and Officers of the Depositor (American Enterprise Life
Insurance Company)
<TABLE>
<CAPTION>
<S> <C> <C>
Name Principal Business Address Positions and Offices with Depositor
- - - ------------------------------------- -------------------------------------- --------------------------------------
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
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>
<PAGE>
Item 26. Persons Controlled by or Under Common Control with the Depositor or
Registrant
American Enterprise Life Insurance Company is a wholly-owned subsidiary
of IDS Life Insurance Company which is a wholly-owned subsidiary of
American Express Financial Corporation. American Express Financial
Corporation is a wholly-owned subsidiary of American Express Company
(American Express).
The following list includes the names of major subsidiaries of American Express.
<TABLE>
<CAPTION>
<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 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 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 Pennsylvania Inc. Pennsylvania
American Express Trust Company Minnesota
American Partners Life Insurance Company Arizona
IDS Cable Corporation Minnesota
IDS Cable II Corporation Minnesota
IDS Capital Holdings Inc. Minnesota
IDS Certificate Company Delaware
IDS Futures Corporation Minnesota
IDS Insurance Agency of Alabama Inc. Alabama
IDS Insurance Agency of Arkansas Inc. Arkansas
IDS Insurance Agency of Massachusetts Inc. Massachusetts
IDS Insurance Agency of New Mexico Inc. New Mexico
IDS Insurance Agency of North Carolina Inc. North Carolina
<PAGE>
IDS Insurance Agency of Utah Inc. Utah
IDS Insurance Agency of Wyoming Inc. Wyoming
IDS Life Insurance Company Minnesota
IDS Life Insurance Company of New York New York
IDS Management Corporation Minnesota
IDS Partnership Services Corporation Minnesota
IDS Plan Services of California, Inc. Minnesota
IDS Property Casualty Insurance Company Wisconsin
IDS Real Estate Services, Inc. Delaware
IDS Realty Corporation Minnesota
IDS Sales Support Inc. Minnesota
IDS Securities Corporation Delaware
Investors Syndicate Development Corp. Nevada
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.
Item 29. Principal Underwriters
To be filed by amendment
Item 30. Location of Accounts and Records
American Enterprise Life Insurance Company
IDS Tower 10
Minneapolis, MN 55402
<PAGE>
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) Registrant represents that it is relying upon the no-action
assurance given to the American Council of Life Insurance
(pub. avail. Nov. 28, 1998). Further, Registrant represents
that it has complied with the provisions of paragraphs (1)-(4)
of that no-action letter.
(e) 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,
has duly caused this 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 19th day of August, 1999.
AMERICAN ENTERPRISE VARIABLE ANNUITY ACCOUNT
(Registrant)
By American Enterprise Life Insurance Company
(Sponsor)
By /s/ James E. Choat*
James E. Choat
President and Chief Executive Officer
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities indicated on the 19th day of
August, 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* Chairman of the Board
Richard W. Kling
_____________________ Director
Paul S. Mannweiler
/s/ Paula R. Meyer* Director and Executive Vice
Paula R. Meyer President-Assured Assets
/s/ William A. Stoltzmann* Director, Vice President,
William A. Stoltzmann General Counsel and Secretary
/s/ Philip C. Wentzel* Vice President and Controller
Philip C. Wentzel
*Signed pursuant to Power of Attorney, dated July 29, 1999, filed electronically
herewith.
By: /s/ Mary Ellyn Minenko
Mary Ellyn Minenko
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement is comprised of the following papers and documents:
The Cover Page.
Part A.
The prospectuses.
Part B.
Statements of Additional Information.
Part C.
Other Information.
The signatures.
Exhibits.
American Enterprise Variable Annuity Account
EXHIBIT INDEX
Exhibit (15): AEL Power of Attorney dated July 29, 1999.
<PAGE>
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
POWER OF ATTORNEY
City of Minneapolis
State of Minnesota
Each of the undersigned, as a director and/or officer of American Enterprise
Life Insurance Company (AEL), on behalf of the below listed registrants
previously have filed registration statements and amendments thereto pursuant to
requirements of the Securities Act of 1933 and the Investment Company Act of
1940 with the Securities and Exchange Commission:
<TABLE>
<CAPTION>
<S> <C> <C>
1933 Act 1940 Act
Reg. Number ----------------------
Reg. Number
American Enterprise Variable Annuity Account 333-74865 811-7195
American Express Signature Variable AnnuitySM (SIG-VA)
- - - -------------------------------------------------------------------------
American Enterprise Variable Life Account
American Express Signature Variable Universal Life (SIG-VUL)
</TABLE>
hereby constitutes and appoints William A. Stoltzmann, Mary Ellyn Minenko,
Christopher R. Long, Eileen J. Newhouse, Eric L. Marhoun and Timothy S. Meehan
or any one of them, as his/her attorney-in-fact and agent, to sign for him/her
in his/her name, place and stead any and all filings, applications (including
applications for exemptive relief), periodic reports, registration statements
for existing or future products (with all exhibits and other documents required
or desirable in connection therewith), other documents, and amendments thereto
and to file such filings, applications, periodic reports, registration
statements, other documents, and amendments thereto with the Securities and
Exchange Commission, and any necessary states, and grants to any or all of them
the full power and authority to do and perform each and every act required or
necessary in connection therewith.
Dated the 29th day of July, 1999.
<PAGE>
/s/ James F. Choat
James F. Choat
President and Chief Executive Officer
Director
/s/ Jeffrey S. Horton
Jeffrey S. Horton
Vice President and Treasurer
/s/ Richard W. Kling
Richard W. Kling
Chairman of the Board
Director
Paul S. Mannweiler
Director
/s/ Paula R. Meyer
Paula R. Meyer
Executive Vice President, Assured Assets
Director
/s/ William A. Stoltzmann
William A. Stoltzmann
Vice President, General Counsel and Secretary
Director
/s/ Philip C. Wentzel
Philip C. Wentzel
Vice President and Controller
