<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. 1 (File No. 333-74865) [X]
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Post-Effective Amendment No. [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 2 (File No. 811-7195) [X]
---------
(Check appropriate box or boxes)
AMERICAN ENTERPRISE VARIABLE ANNUITY ACCOUNT
- - --------------------------------------------------------------------------------
(Exact Name of Registrant)
American Enterprise Life Insurance Company
- - --------------------------------------------------------------------------------
(Name of Depositor)
80 South 8th Street, P.O. Box 534, Minneapolis, MN 55440-0534
- - -------------------------------------------------------------------------------
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (612) 671-3678
- - -------------------------------------------------------------------------------
Mary Ellyn Minenko, IDS Tower 10, Minneapolis, MN 55440-0010
- - -------------------------------------------------------------------------------
(Name and Address of Agent for Service)
It is proposed that this filing will become effective: July __, 1999 or as soon
as possible.
<PAGE>
Prospectus
, 1999
American Express Signature Variable AnnuitySM
Individual 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 J. P. Morgan Series Trust II
o AIM Variable Insurance Funds, Inc. o Lazard Retirement Series, Inc.
o Alliance Variable Products Series Fund o MFS(R) Variable Insurance TrustSM
o Baron Capital Funds o Putnam Variable Trust
o Fidelity Variable Insurance Products Service Class o Royce Capital Fund
o Franklin Templeton Variable Insurance Products Trust - Class II o Wanger Advisors Trust
o Goldman Sachs Variable Insurance Trust (VIT) o Warburg Pincus Trust
</TABLE>
Please read the prospectuses carefully and keep them for future reference. This
contract is available for nonqualified annuities, IRAs (including Roth IRAs),
Simplified Employee Pension (SEP) plans and Tax-Sheltered Annuity (TSA)
rollovers.
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 Account...................................................
Buying Your Contract................................................
Charges.............................................................
Valuing your Investment.............................................
Making the Most of Your Contract....................................
Withdrawals.........................................................
TSA - Special Withdrawal Provisions.................................
Changing Ownership..................................................
Benefits in Case of Death...........................................
The Annuity Payout Period...........................................
Taxes...............................................................
Voting Rights.......................................................
Substitution of Investments.........................................
About the Service Providers.........................................
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 benefits in case of the
owner's or annuitant's death while the contract is in force and before annuity
payouts begin.
Close of business - When the New York Stock Exchange (NYSE) closes, normally 4
p.m. Eastern time.
Contract value - The total value of your 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 account - An account to which you may allocate purchase payments. Amounts
you allocate to this account earn interest at rates that we declare
periodically.
Funds - Investment options under your contract. You may allocate your purchase
payments into subaccounts investing in shares of any or all of these funds.
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 nonqualified annuities.
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.
<PAGE>
Variable account - Consists of separate subaccounts to which you may allocate
purchase payments; each subaccount invests in shares of one fund. The value of
your investment in each subaccount changes with the performance of the fund.
Withdrawal value - The amount you are entitled to receive if you make a full
withdrawal from your 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). As in the case of other annuities, it may not be advantageous
for you to purchase this contract as a replacement for, or in addition to an
existing annuity.
Free look period: You may return your contract to your sales representative or
to our office within the time stated on the first page of your contract and
receive a full refund of the contract value. We will not deduct any charges.
However, you bear the investment risk from the time of purchase until you return
the contract; the refund amount may be more or less than the payment you made.
(Exception: If the law requires, we will refund all of your purchase payments.)
Accounts: Currently, you may allocate your purchase payments among any or all
of:
o the subaccounts, 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 account, which earns interest at a rate 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. Some states have time limitations for making additional payments.
o Minimum initial purchase payment - $2,000
o Minimum additional purchase payment - $100 ($50 for Systematic Investment Plan
payments)
o Maximum total purchase payments (without prior approval) -
$1,000,000 (for issue ages up to 85)
$100,000 (for issue ages 86 to 90) (p. )
Transfers: Subject to certain restrictions you currently may redistribute your
money among accounts without charge at any time until annuity payouts begin, and
once per contract year among the subaccounts after annuity payouts begin. You
may establish automated transfers among the fixed account 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. )
<PAGE>
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 fixed account.
(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. However, Roth IRAs may grow and be
distributed tax free if you meet certain distribution requirements. (p.)
Charges:
o $30 annual contract administrative charge;
o 0.15% variable account administrative charge;
o 1.25% mortality and expense risk fee;
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 for each fund.
<PAGE>
Contract owner expenses:
Withdrawal charge
(contingent deferred sales charge as a percentage of purchase payment withdrawn)
Years from purchase Withdrawal charge
payment receipt percentage
1 7.5%
2 7.5
3 7
4 6
5 5
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.
Annual variable account expenses
(as a percentage of average subaccount value)
Variable account administrative charge...................0.15%
Mortality and expense risk fee...........................1.25%
Total annual variable account expenses............................1.40%
Annual operating expenses of the funds (as a percentage of average daily net
assets)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Management 12b-1 Other
Fees Fees Expenses Total
AXPSM Variable Portfolio - Bond Fund .60% -- .07 .67%1
AXPSM Variable Portfolio - Capital Resource Fund .59% -- .07 .66%1
AXPSM Variable Portfolio - Cash Management Fund .50% -- .06 .56%1
AXPSM Variable Portfolio - Extra Income Fund .62% -- .09 .71%1
AXPSM Variable Portfolio - Managed Fund .59% -- .04 .63%1
AXPSM Variable Portfolio - New Dimensions Fund .61% -- .06 .67%1
AIM V.I. Capital Appreciation Fund .62% -- .05 .67%2
AIM V.I. Capital Development Fund (after fee --% -- 1.21 1.21%3
waivers and expense reimbursements)
AIM V.I. Value Fund (after fee waivers and expense .61% -- .05 .66%3
reimbursements)
<PAGE>
Alliance Premier Growth Portfolio (Class B) 1.00% .25 .09 1.34%4
Alliance Technology Portfolio (Class B) .81% .25 .14 1.20%4
Alliance U.S. Government/High Grade Securities .60% .25 .18 1.03%4
Portfolio (Class B)
Baron Capital Asset Fund (after fee waivers and 1.00% .25 .20 1.45%5
expense reimbursements)
Fidelity VIP III Growth & Income Portfolio (Service .49% .10 .11 .70%6
Class)
Fidelity VIP III Mid Cap Portfolio (Service Class) .59% .10 .41 1.10%1
Fidelity VIP Overseas Portfolio (Service Class) .74% .10 .13 .97%6
(after expense reimbursements)
FT VIP Mutual Shares Securities Fund - Class 2 .74% .25 .03 1.02%7
FT VIP Real Estate Securities Fund - Class 2 .52% .25 .02 .79%7
FT VIP Templeton International Smaller Companies 1.00% .25 .10 1.35%7
Fund - Class 2
Goldman Sachs Capital Growth Fund .75% -- .15 .90%
Goldman Sachs VIT COREsm U.S. Equity Fund .70% -- .10 .80%
Goldman Sachs Global Income Fund .90% -- .15 1.05%
Goldman Sachs International Equity Fund 1.00% -- .25 1.25%
J.P. Morgan U.S. Disciplined Equity Portfolio .35% -- .52 .87%8
(after fee waivers and expense reimbursements)
Lazard Retirement Equity Portfolio (after fee .75% .25 .25 1.25%9
waivers and expense reimbursements)
Lazard Retirement International Equity Portfolio .75% .25 .25 1.25%9
(after fee waivers and expense reimbursements)
MFS(R)New Discovery Series (after fee waivers and .90% -- .27 1.17%10
expense reimbursements)
MFS(R)Research Series .75% -- .11 .86%2
MFS(R)Utilities Series .75% -- .26 1.01%2
Putnam VT Growth and Income Fund - Class IB Shares .46% .15 .04 .65%11
Putnam VT International Growth Fund - Class IB .80% .15 .27 1.22%11
Shares
Putnam VT International New Opportunities Fund - 1.18% .15 .68 2.01%11
Class IB Shares
Royce Micro-Cap Portfolio (after fee waivers and 1.25% -- .10 1.35%12
expense reimbursements)
Royce Premier Portfolio (after fee waivers and 1.00% -- .35 1.35%12
expense reimbursements)
Wanger International Small Cap 1.27% -- .28 1.55%2
Wanger U.S. Small Cap .96% -- .06 1.02%2
Warburg Pincus Trust - Emerging Growth Portfolio .84% -- .41 1.25%4
</TABLE>
1Annualized operating expenses of funds at Dec. 31, 1998.
2Figures in "Management Fees," "Other Expenses" and "Total" are based on actual
expenses for the fiscal year ended Dec. 31, 1998.
3Had there been no fee waivers or expense reimbursements, expenses would have
been: 0.75%, 0.00%, 5.05% and 5.80%, respectively.
4The fund's expense figures are based on estimated expenses (before fee waivers
and expense reimbursements) for the fiscal period ended Dec. 31, 1999.
<PAGE>
5Fees are stated net of waivers and/or reimbursements. Absent fee waivers and/or
reimbursements, the Management Fee, Other Expenses and Total as a percentage of
average net assets for Baron Capital Asset Fund would be (1.00%, 6.62% and
7.62%).
6Fidelity Management & Research Company agreed to reimburse a portion of the
class' expenses during the period. Without this reimbursement, the Management
Fee, 12b-1 Fee, Other Expenses and Total as a percentage of average net assets
for the following funds would have been, Fidelity VIP Growth and Income
Portfolio (0.49%, 0.10%, 0.12% and 0.71%) and Fidelity VIP Overseas Portfolio
(Service Class) (0.74%, 0.10%, 0.17% and 1.01%).
7The figure shown under Management Fees, combines both the Management and
Portfolio Administration Fees. The Portfolio Administration Fee is a direct
expense for the Templeton International Smaller Companies Fund and 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.)
8Fees are stated net of waivers and/or reimbursements. Absent fee waivers and/or
reimbursements, the Management Fee, Other Expenses and Total as a percentage of
average net assets for J.P. Morgan U.S. Disciplined Equity Portfolio would be
(0.35%, 1.08% and 1.43%).
Effective July 1, 1999 current expenses were lowered to 0.85%.
9The portfolio's Investment Manager agrees to waive its fees and/or reimburse
the portfolios through Dec. 31, 1999 to the extent total portfolio annual
expenses exceed 1.25% of the portfolio's average daily net assets. Absent fee
waivers and/or reimbursements, the Management Fee, 12b-1 Fee, Other Expenses and
Total as a percentage of average net assets for fiscal year end Dec. 31, 1998
for the following portfolios would have been: Equity Portfolio (0.75%, 0.25%,
20.32% and 21.32%) and International Equity Portfolio (0.75%, 0.25%, 47.67% and
48.67%). Expenses are annualized for the International Equity Portfolio for the
period Sep. 1 - Dec. 31, 1998 (commencement of operations through fiscal year
end).
10Fees are stated net of waivers and/or reimbursements. Absent fee waivers
and/or reimbursements, the Management Fee, Other Expenses and Total as a
percentage of average net assets for MFS(R) New Discovery Series would have been
(0.90%, 4.32% and 5.22%).
11Based on estimated expenses.
12Expense ratios are shown after fee waivers and expense reimbursements by the
investment advisor. The expense ratios before the waivers and reimbursements
would have been: Royce Micro-Cap Portfolio (1.25%, 1.34% and 2.59%) and Royce
Premier Portfolio (1.00%, 6.05% and 7.05%).
13The Goldman Sachs VIT CORE U.S. Equity Funds' expenses are based on actual
expenses for fiscal year ended December 31, 1998. The Investment Advisor to the
Goldman Sachs CORE U.S. Equity Fund has voluntarily agreed to reduce or limit
certain "Other Expenses" of such Funds (excluding management fees, taxes,
interest and brokerage fees, litigation, indemnififcation and other
extraordinary expenses) to the extent such expenses exceed 0.15% and 0.10% per
annum of such Funds' average daily net assets, respectively. The expenses shown
include this reimbursement. If not included, the "Other Expenses" and "Total
Annual Expenses" for the Goldman Sachs CORE U.S. Equity Funds would be 3.17% and
3.92% and 2.13% and 2.83%, respectively. The reductions or limits may be
discontinued or modified by the investment adviser in their discretion at any
time.
<PAGE>
Example:*
You would pay the following expenses on a $1,000 investment assuming a 5% annual
return and full withdrawal at the end of each time period.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1 year 3 years 5 years 10 years
AXPSM Variable Portfolio - Bond Fund $ 96.90 $137.56 $165.83 $248.87
AXPSM Variable Portfolio - Capital Resource Fund 96.80 137.25 165.31 247.83
AXPSM Variable Portfolio - Cash Management Fund 95.77 134.16 160.11 237.29
AXPSM Variable Portfolio - Extra Income Fund 97.31 138.80 167.90 253.06
AXPSM Variable Portfolio - Managed Fund 96.49 136.33 163.75 244.68
AXPSM Variable Portfolio - New Dimensions Fund 96.90 137.56 165.83 248.87
AIM V.I. Capital Appreciation Fund 96.90 137.56 165.83 248.87
AIM V.I. Capital Development Fund 102.44 154.18 -- --
AIM V.I. Value Fund 96.80 137.25 165.31 247.83
Alliance Premier Growth Portfolio (Class B) 103.77 158.15 -- --
Alliance Technology Portfolio (Class B) 102.33 153.87 -- --
Alliance U.S. Government/High Grade Securities 100.59 148.66 -- --
Portfolio (Class B)
Baron Capital Asset Fund 104.90 161.50 -- --
Fidelity VIP III Growth & Income Portfolio
(Service Class) 97.21 138.49 -- --
Fidelity VIP III Mid Cap Portfolio (Service Class) 101.31 150.81 -- --
Fidelity VIP Overseas Portfolio (Service Class) 99.98 146.82 -- --
FT VIP Mutual Shares Securities Fund - Class 2 100.49 148.35 -- --
FT VIP Real Estate Securities Fund - Class 2 98.13 141.27 -- --
FT VIP Templeton International Smaller Companies Fund 103.87 158.45 -- --
- - - Class 2
Goldman Sachs Capital Growth Fund 99.26 144.66 177.70 272.70
Goldman Sachs VIT COREsm U.S. Equity Fund 98.23 141.58 172.55 262.41
Goldman Sachs Global Income Fund 100.80 149.27 185.37 287.94
Goldman Sachs International Equity Fund 102.85 155.40 195.53 307.92
J.P. Morgan U.S. Disciplined Equity Portfolio 98.95 143.74 -- --
Lazard Retirement Equity Portfolio 102.85 155.40 -- --
Lazard Retirement International Equity Portfolio 102.85 155.40 -- --
MFS(R)New Discovery Series 102.03 152.95 -- --
MFS(R)Research Series 98.85 143.43 -- --
MFS(R)Utilities Series 100.39 148.05 -- --
Putnam VT Growth and Income Fund - Class IB Shares 96.70 136.95 164.79 246.78
Putnam VT International Growth Fund - Class IB Shares 102.54 154.48 -- --
Putnam VT International New Opportunities Fund - Class 110.64 178.45 -- --
IB Shares
Royce Micro-Cap Portfolio 103.87 158.45 -- --
Royce Premier Portfolio 103.87 158.45 -- --
Wanger International Small Cap 105.92 164.54 -- --
Wanger U.S. Small Cap 100.49 148.35 -- --
Warburg Pincus Trust - Emerging Growth Portfolio 102.85 155.40 -- --
</TABLE>
<PAGE>
You would pay the following expenses on a $1,000 investment assuming a 5% annual
return and no withdrawal or selection of an annuity payout plan at the end of
each time period.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1 year 3 years 5 years 10 years
AXPSM Variable Portfolio - Bond Fund $21.90 $67.56 $115.83 $248.87
AXPSM Variable Portfolio - Capital Resource Fund 21.80 67.25 115.31 247.83
AXPSM Variable Portfolio - Cash Management Fund 20.77 64.16 110.11 237.29
AXPSM Variable Portfolio - Extra Income Fund 22.31 68.80 117.90 253.06
AXPSM Variable Portfolio - Managed Fund 21.49 66.33 113.75 244.68
AXPSM Variable Portfolio - New Dimensions Fund 21.90 67.56 115.83 248.87
AIM V.I. Capital Appreciation Fund 21.90 67.56 115.83 248.87
AIM V.I. Capital Development Fund 27.44 84.18 -- --
AIM V.I. Value Fund 21.80 67.25 115.31 247.83
Alliance Premier Growth Portfolio (Class B) 28.77 88.15 -- --
Alliance Technology Portfolio (Class B) 27.33 83.87 -- --
Alliance U.S. Government/High Grade Securities 25.59 78.66 -- --
Portfolio (Class B)
Baron Capital Asset Fund 29.90 91.50 -- --
Fidelity VIP III Growth & Income Portfolio
(Service Class) 22.21 68.49 -- --
Fidelity VIP III Mid Cap Portfolio (Service Class) 26.31 80.81 -- --
Fidelity VIP Overseas Portfolio (Service Class) 24.98 76.82 -- --
FT VIP Mutual Shares Securities Fund - Class 2 25.49 78.35 -- --
FT VIP Real Estate Securities Fund - Class 2 23.13 71.27 -- --
FT VIP Templeton International Smaller Companies Fund 28.87 88.45 -- --
- - - Class 2
Goldman Sachs Capital Growth Fund 24.26 74.66 127.70 272.70
Goldman Sachs VIT COREsm U.S. Equity Fund 23.23 71.58 122.55 262.41
Goldman Sachs Global Income Fund 25.80 79.27 135.37 287.94
Goldman Sachs International Equity Fund 27.85 85.40 145.53 307.92
J.P. Morgan U.S. Disciplined Equity Portfolio 23.95 73.74 -- --
Lazard Retirement Equity Portfolio 27.85 85.40 -- --
Lazard Retirement International Equity Portfolio 27.85 85.40 -- --
MFS(R)New Discovery Series 27.03 82.95 -- --
MFS(R)Research Series 23.85 73.43 -- --
MFS(R)Utilities Series 25.39 78.05 -- --
Putnam VT Growth and Income Fund - Class IB Shares 21.70 66.95 114.79 246.78
Putnam VT International Growth Fund - Class IB Shares 27.54 84.48 -- --
Putnam VT International New Opportunities Fund - Class 35.64 108.45 -- --
IB Shares
Royce Micro-Cap Portfolio 28.87 88.45 -- --
Royce Premier Portfolio 28.87 88.45 -- --
Wanger International Small Cap 30.92 94.54 -- --
Wanger U.S. Small Cap 25.49 78.35 -- --
Warburg Pincus Trust - Emerging Growth Portfolio 27.85 85.40 -- --
</TABLE>
In this example, the $30 annual contract administrative charge is approximated
as a 0.067% charge based on the estimated average contract size. Premium taxes
imposed by some state and local governments are not reflected in this example.
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 this example as a representation 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 of the
subaccounts because they are new and do not have any history.
Year ended Dec. 31,
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1998 1997 1996 1995
Subaccount EVA2 (Investing in shares of AIM V.I. Value Fund)
Accumulation unit value at beginning of period $1.03 $1.00 -- --
Accumulation unit value at end of period $1.34 $1.03 -- --
Number of accumulation units outstanding at end of period (000 1,779 66 -- --
omitted)
Ratio of operating expense to average net assets 1.40% 1.40% -- --
Subaccount ECR1 (Investing in shares of AXPSM Variable Portfolio -
Capital Resource Fund)
Accumulation unit value at beginning of period $1.56 $1.27 $1.20 $1.00
Accumulation unit value at end of period $1.91 $1.56 $1.27 $1.20
Number of accumulation units outstanding at end of period (000 5,163 3,813 2,350 818
omitted)
Ratio of operating expense to average net assets 1.40% 1.40% 1.50% 1.50%
Subaccount EGD2 (Investing in shares of AXPSM Variable Portfolio
- - - New Dimensions Fund)
Accumulation unit value at beginning of period $1.05 $1.00 -- --
Accumulation unit value at end of period $1.32 $1.05 -- --
Number of accumulation units outstanding at end of period (000 1,108 69 -- --
omitted)
Ratio of operating expense to average net assets 1.40% 1.40% -- --
Subaccount EMG1 (Investing in shares of AXPSM Variable Portfolio -
Managed Fund)
Accumulation unit value at beginning of period $1.60 $1.36 $1.18 $1.00
Accumulation unit value at end of period $1.83 $1.60 $1.36 $1.18
Number of accumulation units outstanding at end of period (000 4,684 2,944 1,546 589
omitted)
Ratio of operating expense to average net assets 1.40% 1.40% 1.50% 1.50%
Subaccount EMS1 (Investing in shares of AXPSM Variable Portfolio -
Cash Management Fund)
Accumulation unit value at beginning of period $1.11 $1.07 $1.03 $1.00
<PAGE>
Accumulation unit value at end of period $1.15 $1.11 $1.07 $1.03
Number of accumulation units outstanding at end of period (000 749 231 241 132
omitted)
Ratio of operating expense to average net assets 1.40% 1.40% 1.50% 1.50%
Simple yield4 3.24% 3.71% 3.26% 3.53%
Compound yield4 3.29% 3.78% 3.32% 3.59%
Subaccount ESI1 (Investing in shares of AXPSM Variable Portfolio -
Bond Fund
Accumulation unit value at beginning of period $1.33 $1.24 $1.17 $1.00
Accumulation unit value at end of period $1.33 $1.33 $1.24 $1.17
Number of accumulation units outstanding at end of period (000 5,689 2,544 1,377 414
omitted)
Ratio of operating expense to average net assets 1.40% 1.40% 1.50% 1.50%
Subaccount EPG3 (Investing in shares of Putnam VT Growth and Income Fund --
Class IB Shares)
Accumulation unit value at beginning of period $1.00 -- -- --
Accumulation unit value at end of period $1.18 -- -- --
Number of accumulation units outstanding at end of period (000 239 -- -- --
omitted)
Ratio of operating expense to average net assets 1.40% -- -- --
1Operations commenced on Feb. 21, 1995.
2Operations commenced on Oct. 30, 1997.
3Operations commenced on Oct. 5, 1998.
4Net of annual contract administrative charge and mortality and expense risk
fee.
</TABLE>
<PAGE>
Financial Statements
You can find our audited financial statements with financial history in the SAI.
The SAI does not include audited financial statements for some of the
subaccounts because they are new and do not have any assets with financial
history in the SAI.
Performance Information
Performance information for the variable 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 the deduction of all applicable charges including:
o contract administrative charge;
o mortality and expense risk fee;
o variable account administrative charge; and
o withdrawal charge (assuming a withdrawal at the end of the illustrated
period)
We also show optional total return quotations that do not reflect a withdrawal
charge deduction (assuming no withdrawal). We may show total return quotations
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 the 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 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 and policies, characteristics and quality of the fund in which the
subaccount invests and the market conditions during the given time period.
Advertised yields and total return figures include charges that reduce the
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, contact us at
the address or telephone number on the first page of this prospectus.
The Variable Account and the Funds
You may allocate purchase payments to any or all of the subaccounts of the
variable account that invest in shares of the following funds:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- - ------------------------------------------------------------------------------------------------------------------------------
Investment Advisor or
Subaccount Investing in Investment Objectives and Policies: Manager
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
ESI AXPSM Variable Portfolio - Objective: high level of current income while IDS Life Insurance Company
Bond Fund conserving the value of the investment for the (IDS Life), investment
longest time period. Invests primarily in manager; American Express
investment-grade bonds. Financial Corporation
(AEFC) investment advisor.
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
ECR AXPSM Variable Portfolio - Objective: capital appreciation. Invests primarily IDS Life, investment
Capital Resource Fund in U.S. common stocks. manager; AEFC investment
advisor.
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
EMS AXPSM Variable Portfolio - Objective: maximum current income consistent with IDS Life, investment
Cash Management Fund liquidity and conservation of capital. Invests in manager; AEFC investment
money market securities. advisor.
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
EIA AXPSM Variable Portfolio - Objective: high current income, with capital growth IDS Life, investment
Extra Income Fund as a secondary objective. Invests primarily in manager; AEFC investment
long-term, high-yielding, high-risk debt securities advisor.
below investment grade issued by U.S. and foreign
corporations.
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
EMG AXPSM Variable Portfolio - Objective: maximum total investment return through IDS Life, investment
Managed Fund a combination of capital growth and current income. manager; AEFC investment
Invests primarily in stocks, convertible advisor.
securities, bonds and money market instruments.
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
EGD AXPSM Variable Portfolio - Objective: long-term growth of capital. Invests IDS Life, investment
New Dimensions Fund primarily in common stocks of U.S. and foreign manager; AEFC investment
companies showing potential for significant growth. advisor.
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
ECA AIM V.I. Capital Objective: growth of capital. Invests primarily in A I M Advisors, Inc.
Appreciation Fund common stocks, with emphasis on medium- or
small-sized growth companies.
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
ECD AIM V.I. Capital Objective: long term growth of capital. Invests A I M Advisors, Inc.
Development Fund primarily in securities (including common stocks,
convertible securities bond bonds) of small- and
medium-sized companies.
- - ------------------------------------------------------------------------------------------------------------------------------
EVA AIM V.I. Value Fund Objective: long-term growth of capital with income A I M Advisors, Inc.
as a secondary objective. Invests primarily in
equity securities judged to be undervalued relative
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.
- - ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- - ------------------------------------------------------------------------------------------------------------------------------
EPP Alliance Premier Growth Objective: long-term growth of capital. Invests Alliance Capital
Portfolio (Class B) primarily in equity securities of a limited number Management, L.P.
of large, carefully selected, high-quality U.S.
companies that are judged likely to achieve superior
earnings growth.
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
ETC Alliance Technology Objective: growth of capital. Invests primarily in Alliance Capital
Portfolio (Class B) securities of companies expected to benefit from Management, L.P.
technological advances and improvements.
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
EHG Alliance U.S. Objective: high level of current income consistent Alliance Capital
Government/High Grade with preservation of capital. Invest primarily in Management, L.P.
Securities Portfolio (1) U.S. Government securities and (2) other
(Class B) high-grade debt securities or, if unrated, of
equivalent quality.
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
EAS Baron Capital Asset Fund Objective: capital appreciation. Invests primarily BAMCO, Inc.
in securities of small and medium sized companies
with undervalued assets or favorable growth
prospects.
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
EFG Fidelity VIP III Growth & Objective: high total return through a combination Fidelity Management &
Income Portfolio (Service of current income and capital appreciation. Invests Research Company (FMR),
Class) primarily in common stocks with a focus on those investment manager; FMR
that pay current dividends and show potential for U.K. and FMR Far East,
capital appreciation. sub-investment advisors.
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
EFM Fidelity VIP III Mid Cap Objective: long-term growth of capital. Invests FMR, investment manager;
Portfolio (Service Class) primarily in medium market capitalization common FMR U.K. and FMR Far East,
stocks. sub-investment advisors.
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
EFO Fidelity VIP Overseas Objective: long-term growth of capital. Invests FMR, investment manager;
Portfolio (Service Class) primarily in common stocks of foreign securities. FMR U.K., FMR Far East,
Fidelity
International
Investment
Advisors
(FIIA)
and
FIIA
U.K.,
sub-investment
advisors.
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
EMU Franklin Templeton VIP Objective: capital appreciation with income as a Franklin Mutual Advisers,
Mutual Shares Securities secondary goal. Invests primarily in equity LLC
Fund - Class 2 securities of companies that the manager believes
are available at market prices less than their
actual value based on certain recognized or objective
criteria (intrinsic value).
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
ERE Franklin Templeton VIP Trust Objective: capital appreciation with a secondary Franklin Advisers, Inc.
Real Estate Securities goal to earn current income. Invests primarily in
Fund - Class 2 securities of companies operating in the real
estate industry, primarily equity real estate
investment trusts (REITS).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
EIS Franklin Templeton VIP Trust Objective: long-term capital appreciation. Invests Templeton Investment
Templeton International primarily in equity securities of smaller Counsel Inc.
Smaller Companies Fund - companies located outside the U.S., including
Class 2 in emerging markets.
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
JCG Goldman Sachs Capital Objective: long-term growth of capital. Invest Goldman Sachs Asset
Growth Fund primarily in equity securities considered by the Management
Investment Advisor to have long-term
capital appreciation potential.
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
JUS Goldman Sachs VIT COREsm U.S. Objective: long-term growth of capital and dividend Goldman Sachs Asset
Equity Fund income. Invests primarily in a broadly diversified Management
portfolio of large-cap and blue chip equity
securities representing all major sectors
of the U.S. economy.
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
JGL Goldman Sachs Global Objective: high total return, emphasizing current Goldman Sachs Asset
Income Fund income, and, to a lesser extent, providing Management International
opportunities for capital appreciation. Invests
primarily in a portfolio of high quality
fixed-income securities of U.S. and foreign issuers
and enters into transactions in foreign currencies.
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
JIF Goldman Sachs Objective: long-term capital appreciation. Invests Goldman Sachs Asset
International Equity Fund primarily in equity securities of companies that Management International
are organized outside the U.S., or whose securities
are principally traded outside the U.S.
- - ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- - ------------------------------------------------------------------------------------------------------------------------------
EDE J.P. Morgan U.S. Objective: outperform U.S. stock markets over the J.P. Morgan
Disciplined Equity long term through a disciplined management
Portfolio approach. Invests primarily in large- and
medium-capitalization U.S. companies.
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
ERQ Lazard Retirement Equity Objective: long-term capital appreciation. Invests Lazard Asset Management
Portfolio primarily in equity securities, principally common
stocks of relatively large U.S. companies (those
whose total market value is more than $1 billion)
that the Investment Manager believes are
undervalued based on their earnings, cash flow or
asset values.
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
ERI Lazard Retirement Objective: long-term capital appreciation. Invests Lazard Asset Management
International Equity primarily in equity securities, principally common
Portfolio stocks of relatively large non-U.S. companies
(those whose total market value is more than $1
billion) that the Investment Manager believes are
undervalued based on their earnings, cash flow or
asset values.
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
END MFS(R) New Discovery Series Objective: capital appreciation. Invests primarily Massachusetts Financial
in equity securities of emerging growth companies. Service Company (MFS) Investment
Management (R)
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
ERS MFS(R) Research Series Objective: long-term growth of capital and future MFS Investment Management(R)
income. Invests primarily in common
stocks and related securities that
have favorable prospects for long-term
growth, attractive valuations based on
current and expected earnings or cash flow,
dominant or growing market share, and superior
management.
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
EUT MFS(R) Utilities Series Objective: capital growth and current income. MFS Investment
Invests primarily in equity and debt securities of Management(R)
domestic and foreign companies in the utilities
industry.
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
EPG Putnam VT Growth and Objective: capital growth and current income. Putnam Investment
Income Fund -- Class IB Invests primarily in common stocks that offer Management, Inc.
Shares potential for capital growth, current income or
both.
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
EPL Putnam VT International Objective: capital appreciation. Invests primarily Putnam Investment
Growth Fund -- Class IB in growth stocks outside the U.S. Management, Inc.
Shares
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
EPN Putnam VT International Objective: long-term capital appreciation by Putnam Investment
New Opportunities Fund -- investing in companies that have above-average Management, Inc.
Class IB Shares growth prospects due to the fundamental growth of
their market sector. Invests primarily in growth
stocks outside the U.S.
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
EMC Royce Micro-Cap Portfolio Objective: long-term growth of capital. Invests Royce & Associates, Inc.
primarily in a broadly diversified portfolio of
equity securities issued by micro-cap companies
(companies with stock market capitalizations below
$300 million).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
EPR Royce Premier Portfolio Objective: long-term growth of capital with current Royce & Associates, Inc.
income as a secondary objective. Invests primarily
in a limited number of equity securities issued by
small companies with stock market capitalization
between $300 million and $1.5 billion.
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
EIC Wanger International Small Objective: long-term growth of capital. Invests Wanger Asset Management,
Cap primarily in stocks of small- and medium-size L.P.
non-U.S. companies.
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
EUC Wanger U.S. Small Cap Objective: long-term growth of capital. Invests Wanger Asset Management,
primarily in stocks of small- and medium-size U.S. L.P.
companies.
- - ------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------
EEG Warburg Pincus Trust Objective: maximum capital appreciation. Invests Warburg Pincus Asset
Emerging Growth Portfolio primarily in equity securities of small to Management, Inc.
medium sized U.S.emerging-growth
companies.
- - ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The investment objectives and policies of some of the funds are similar to the
investment objectives and policies of other mutual funds that the 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.
<PAGE>
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 not described in this prospectus.
The U.S. Treasury and the Internal Revenue Service (IRS) said that they may
provide additional guidance on investment control. This concerns how many
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 contract 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 Account
You also may allocate purchase payments to the fixed account. We back the
principal and interest guarantees relating to the fixed account. The value of
the fixed account increases as we credit interest to the account. Purchase
payments and transfers to the fixed account become part of our general account.
We credit and compound interest daily. We will change the interest rates from
time to time at our discretion.
Interests in the fixed account are not required to be registered with the SEC.
The SEC staff does not review the disclosures in this prospectus on the fixed
account. Disclosures regarding the fixed account, however, may be subject to
certain generally applicable provisions of the federal securities laws relating
to the accuracy and completeness of statements made in prospectuses. (See
"Making the Most of Your Contract -- Transfer policies" for restrictions on
transfers involving the fixed account.)
Buying Your Contract
Your sales representative will help you prepare and submit your application, and
send it 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 90 or younger.
When you apply, you may select:
o the fixed account and/or subaccounts in which you want to invest;
o how you want to make purchase payments;
o the date you want to start receiving annuity payouts (the retirement date);
o a death benefit option; and
o a beneficiary.
The contract provides for allocation of purchase payments to the subaccounts of
the variable account and/or to the fixed account in even 1% increments.
If your application is complete, we will process it and apply your purchase
payment to the fixed account 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 Systematic Investment
Plan (SIP). You must make an initial purchase payment of at least $2,000. Then,
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. You can align
this date with your actual retirement from a job, or it can be a different
future date, depending on your needs and goals and on certain restrictions. You
also can change the date, provided you send us written instructions at least 30
days before annuity payouts begin.
For nonqualified annuities and Roth IRAs, the retirement date must be:
o no earlier than the 60th day after the contract's effective date; and o no
later than the annuitant's 85th birthday (or the 10th contract anniversary, if
later).
For qualified annuities (except Roth IRAs), to avoid IRS penalty taxes, the
retirement date generally must be:
o on or after the 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 are taking 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 10th contract anniversary, if later.
Beneficiary
If death benefits become payable before the retirement date (while the contract
is in force and before annuity payouts begin), we will pay your named
beneficiary all or part of the contract value. If there is no named beneficiary,
then you or your estate will be the beneficiary. (See "Benefits in Case of
Death" for more about beneficiaries.)
Purchase payments
Minimum initial purchase payment (includes SIPs): $2,000
Minimum additional purchase payments:
$ 50 for SIPs
$100 for regular payments
Maximum total purchase payments*:
$ 100,000 (for ages 86 to 90 without prior approval)
$1,000,000 (for ages up to 85 without prior approval)
* These limits apply in total to all American Enterprise Life annuities you
own. We reserve the right to increase maximum limits. 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 account in the
same proportion your interest in each account bears to your total contract
value.
We will waive this charge when the contract value is $50,000 or more on the
current contract anniversary.
If you take a full withdrawal from your contract, we will deduct the charge at
the time of withdrawal regardless of the contract value. 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.
<PAGE>
Mortality and expense risk fee
We charge this fee daily to the subaccounts. The unit values of your subaccounts
reflect this fee and it totals 1.25% of their average daily net assets on an
annual basis. This fee covers the mortality and expense risk that we assume.
Approximately two-thirds of this amount is for our assumption of mortality risk,
and one-third is for our assumption of expense risk. This fee does not apply to
the fixed account.
Mortality risk arises because of our guarantee to pay a death benefit and our
guarantee to make annuity payouts according to the terms of the contract, no
matter how long a specific annuitant lives and no matter how long 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 and variable account administrative charge and these charges may not
cover our expenses. We would have to make up any deficit from our general
assets.
The subaccounts pay us the mortality and expense risk fee they 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.
Withdrawal charge
If you withdraw all or part of your contract, you may be subject to a withdrawal
charge. We calculate the withdrawal charge by drawing from your total contract
value in the following order:
o After the first contract year, we withdraw up to 10% of your prior
anniversary contract value that you have not yet withdrawn during that
contract year. We do not assess a withdrawal charge on this amount.
o During the first contract year, we withdraw contract earnings, if any.
After the first contract year, we withdraw those contract earnings that are
greater than any applicable 10% free withdrawal amount described above.
Contract earnings are contract value minus all purchase payments received
and not previously withdrawn. We determine contract earnings by looking at
the entire contract value, not the earnings of any particular subaccount or
the fixed account. We do not assess a withdrawal charge on this amount.
o Next, we withdraw purchase payments we received eight or more years before
the withdrawal and not previously withdrawn. We do not assess a withdrawal
charge on these purchase payments.
<PAGE>
o Finally, if necessary, we withdraw purchase payments received in the seven
years before the withdrawal on a "first-in, first-out" (FIFO) basis. There
is a withdrawal charge on these payments. We determine your withdrawal
charge by multiplying each of these payments by the applicable withdrawal
charge percentage, and then totaling the withdrawal charges.
The withdrawal charge percentage depends on the number of years since you made
the payments that are withdrawn.
Years from purchase Withdrawal charge
payment receipt percentage
1 7.5%
2 7.5
3 7
4 6
5 5
6 4
7 2
Thereafter 0
Withdrawal charge calculation example
The following is an example of the calculation we would make to determine the
withdrawal charge on a contract with this history:
o The contract date is July 1, 1999 with a contract year of July 1 through
June 30 and with an anniversary date of July 1 each year; and
o We received these payments:
- $10,000 July 1, 1999;
- $8,000 Dec. 31, 2004;
- $6,000 Feb. 20, 2007; and
o The owner withdraws the contract for its total withdrawal value of
$38,101 on Aug. 5, 2009 and had not made any other withdrawals during
that contract year; and
o The prior anniversary July 1, 2008 contract value was $38,488.
<PAGE>
<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 July 1, 1999 payment was received eight or more years before
withdrawal and is withdrawn without withdrawal charge; and
$400 $8,000 Dec. 31, 2004 payment is in its fifth year from receipt,
withdrawn with a 5% withdrawal charge; and
$420 $6,000 Feb. 20, 2007 payment is in its third year from receipt,
withdrawn with a 7% withdrawal charge.
- - -------------------------------------
$820
</TABLE>
For a partial withdrawal that is subject to a withdrawal charge, the amount we
actually withdraw from your contract value will be the amount you request plus
any applicable withdrawal charge. We apply the withdrawal charge to this total
amount. We pay you the amount you requested. If you take a full withdrawal from
your contract, we also will deduct the $30 contract administrative charge.
Waiver of withdrawal charge
We do not assess a withdrawal charge for:
o withdrawals of any contract earnings during the first contract year;
o withdrawals during each contract year after the first totaling the greater
of 10% of your prior contract anniversary
contract value or contract earnings;
o required minimum distributions from a qualified annuity (for those amounts
required to be distributed from the contract described in this prospectus);
o contracts settled using an annuity payout plan;
o death benefits;
o withdrawals you make under your contract's "Waiver of Withdrawal Charges"
provision. To the extent permitted by state law, your contract will include
this provision when the owner and annuitant are under age 76 on the date we
issue the contract. We will waive withdrawal charges that we normally
assess 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); and
<PAGE>
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.
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. Currently, we deduct any applicable premium tax when you make a full
withdrawal from your contract or when annuity payouts begin, but we reserve the
right to deduct this tax at other times such as when you make purchase payments.
Valuing your Investment
We value your fixed account and subaccounts as follows:
Fixed account: We value the amounts you allocated to the fixed account directly
in dollars. The fixed account value equals:
o the sum of your purchase payments and transfer amounts allocated to the
fixed account;
o any contract value credits allocated to the fixed account;
o plus interest credited;
o minus the sum of amounts withdrawn (including any applicable withdrawal
charges) and amounts transferred out; and
o minus any prorated contract administrative charge.
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 or we apply any contract value credits to a
subaccount, 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, 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:
<PAGE>
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 and the variable account administrative charge 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 contract value credits allocated to the subaccounts;
o transfers into or out of the subaccounts;
o partial withdrawals;
o withdrawal charges; and/or
o prorated portions of the contract administrative charge.
Accumulation unit values will fluctuate due to:
o changes in funds' net asset value;
o dividends distributed to the subaccounts;
o capital gains or losses of funds;
o fund operating expenses;
o mortality and expense risk fees; and/or
o variable account administrative charges.
<PAGE>
Contract value credits
Before annuity payouts begin, and starting in the eighth contract year while
this contract is in force, we periodically will apply a "contract value credit"
to your contract value if:
o you chose death benefit Option A at the time of application (see "Benefits in
Case of Death"); and
o there are "eligible purchase payments" at the time we calculate the credit.
"Eligible purchase payments" means payments you made to the contract that you
have not withdrawn and that are no longer subject to a withdrawal charge.
On an annual basis, the contract value credit is 0.50% of an amount we calculate
by multiplying (a) times (b) where:
(a) is the contract value at the time we make the calculation; and
(b) is the ratio of "eligible purchase payments" to total purchase
payments.
We reserve the right to calculate and apply the contract value credit on a
quarterly or monthly basis. If we calculate the credit on a quarterly basis, the
percentage will be 0.125% instead of 0.50%. If we calculate the credit on a
monthly basis, the percentage will be 0.04167% instead of 0.50%.
We will apply the contract value credit to your contract value according to your
fixed account and subaccount allocation instructions that are in effect at the
time. We will continue to apply the contract value credit, if applicable, for
the life of your contract until full withdrawal or until annuity payouts begin.
The contract value credit will be taxable when we distribute it to you.
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 fixed account to one or
more subaccounts. You also can obtain the benefits of dollar-cost averaging by
setting up regular automatic SIP payments. There is no charge for dollar-cost
averaging.
This systematic approach can help you benefit from fluctuations in accumulation
unit values caused by fluctuations in the market values of the 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>
How dollar-cost averaging works
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Month Amount Accumulation Number of units
Invested unit value purchased
By investing an Jan $100 $20 5.00
equal number of
dollars each month... Feb 100 18 5.56
Mar 100 17 5.88
you automatically Apr 100 15 6.67
buy more units
when the per unit May 100 16 6.25
market price is low...
Jun 100 18 5.56
Jul 100 17 5.88
Aug 100 19 5.26
and fewer units Sept 100 21 4.76
when the per unit
market price is high. Oct 100 20 5.00
</TABLE>
You have paid an average price of only $17.91 per unit over the 10 months, while
the average market price actually was $18.10.
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 your sales
representative.
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 account.
There is no charge for asset rebalancing.
You can change your percentage allocations or your rebalancing period at any
time by contacting us in writing. We will restart the rebalancing period you
selected as of the date we record your change. You also can ask us in writing to
stop rebalancing your contract value. You must allow 30 days for us to change
any instructions that currently are in place. For more information on asset
rebalancing, contact your sales representative.
<PAGE>
Transferring money between accounts
You may transfer money from any one subaccount, or the fixed account, to another
subaccount before annuity payouts begin. (Certain restrictions apply to
transfers involving the 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.
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. These modifications could include, but not
be limited to:
o requiring a minimum time period between each transfer;
o not accepting transfer requests of an agent acting under power of attorney on
behalf of more than one contract owner; or
o limiting the dollar amount that a contract owner may transfer at any one time.
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 account at any
time. However, if you made a transfer from the fixed account to the
subaccounts, you may not make a transfer from any subaccount back to
the fixed account for six months following that transfer.
o You may transfer contract values from the fixed account to the
subaccounts on or within 30 days before or after the contract
anniversary (except for automated transfers, which can be set up for
certain transfer periods subject to certain minimums). The transfer
from the fixed account to the subaccounts will be effective on the
valuation date we receive it.
o We will not accept requests for transfers from the fixed account at
any other time.
o Once annuity payouts begin, you may not make transfers to or from the
fixed account, but you may make transfers once per contract year among
the subaccounts. During the annuity payout period, we reserve the right
to limit the number of subaccounts in which you may invest.
<PAGE>
How to request a transfer or a withdrawal
1 By letter
Send your name, contract number, Social Security Number or Taxpayer
Identification Number and signed request for a transfer or withdrawal to:
Regular mail:
American Enterprise Life Insurance Company
80 South Eighth Street
P.O. Box 534
Minneapolis, MN 55440-0534
Express mail:
American Enterprise Life Insurance Company
Attention: Unit 829
733 Marquette Avenue
Minneapolis, MN 55402
Minimum amount
Transfers or withdrawals: $500 or entire account balance
Maximum amount
Transfers or withdrawals: Contract value or the entire account balance
2 By automated transfers and automated partial withdrawals
Your sales representative can help you set up automated transfers among your
subaccounts or fixed account or partial withdrawals from the accounts.
You can start or stop this service by written request or other method acceptable
to us. You must allow 30 days for us to change any instructions that are
currently in place.
o Automated transfers may not exceed an amount that, if continued, would
deplete the fixed account or subaccounts within 12 months unless we
agree otherwise.
o Automated transfers and automated partial withdrawals are subject to
all of the contract provisions and terms, including transfer of
contract values between accounts.
o Automated withdrawals may be restricted by applicable law under some
contracts.
o Automated partial withdrawals may result in IRS taxes and penalties on
all or part of the amount withdrawn.
<PAGE>
Minimum amount
Transfers or withdrawals: $100 monthly/$250 quarterly,
semiannually or annually
Maximum amount
Transfers or withdrawals: Contract value (except for
automated transfers from the
fixed account)
3 By Phone
Call between 8 a.m. and 6 p.m. Central time:
1-800-333-3437 or
(612) 671-7700 (Minneapolis/St. Paul area)
Minimum amount
Transfers or withdrawals: $500 or entire account balance
Maximum amount
Transfers: Contract value or the entire account balance
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 withdrawal charges (see "Charges - Withdrawal charge") and
IRS taxes and penalties (see "Taxes"). You cannot make withdrawals after annuity
payouts begin.
<PAGE>
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
account in the same proportion as your value in each account correlates to your
total contract value, unless you request otherwise.
Receiving payment when you request a withdrawal By regular or express mail:
o payable to you.
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 though a distribution may be permitted under the above rules, it may
be subject 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.
<PAGE>
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
There are two death benefit options under this contract. If either you or the
annuitant are age 79 or older on the contract date, Option A will apply. If both
you and the annuitant are under age 79 on the contract date, you can elect
either Option A or Option B on your application. Once you elect an option, you
cannot change it. We show the option that applies in your contract.
Under either option, we will pay the death benefit to your beneficiary upon the
earlier of your death or the annuitant's death. 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. Other rules apply to qualified annuities. (See "Taxes").
Option A
We will pay the beneficiary the greater of:
1. the contract value; or
2. the total purchase payments paid minus "adjusted partial withdrawals."
Contract value credits may apply if you choose Option A at the time of
application (see "Valuing your Investment - Contract value credits").
Option B
We will pay the beneficiary the greatest of:
1. the contract value; or
2. the total purchase payments paid minus 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.
<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 payments made to the contract minus "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".
Adjusted partial withdrawals: Under either Option A or Option B, we calculate
"adjusted partial withdrawals" for each partial withdrawal as the product of (a)
times
(b) where:
(a) is the ratio of the amount of the partial withdrawal (including any
applicable withdrawal charge) to the contract value on the date of (but
prior to) the partial withdrawal; and
(b)is the death benefit on the date of (but prior to) the partial
withdrawal.
Example:
Option A
o The contract is purchased with a payment of $20,000 on Jan. 1, 1999.
o On Jan. 1, 2000 an additional premium payment of $5,000 is made.
o On March 1, 2000 the contract value has grown to $27,000 ($25,000 in
premium payments and $2,000 in earnings). The owner takes a $1,500 partial
withdrawal.
o On March 1, 2001 the contract value has fallen to $23,000.
The death benefit on March 1, 2001 is calculated as follows:
Total premiums paid: $25,000.00
minus any "adjusted partial withdrawals"
calculated as: 1,500 x 25,000 = - 1,388.89
-------------- ------------
27,000
for a death benefit of: $23,611.11
<PAGE>
Option B
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.
The death benefit on March 1, 2000 is calculated as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
The highest contract value on any prior contract anniversary: $24,000.00
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
</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. To do
this your spouse must, within 60 days after we receive proof of death, give us
written instructions to keep the contract in force.
Under a qualified annuity, if the annuitant dies before the Code requires
distributions to begin, and the spouse is the only beneficiary, the spouse may
keep the 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.
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 will pay interest, if any, from the date of
death at a rate no less than required by law. We will mail payment to the
beneficiary within seven days after our death claim requirements are fulfilled.
Other rules may apply to qualified annuities. (See "Taxes.")
<PAGE>
The Annuity Payout Period
As owner of the contract, you have the right to decide how and to whom annuity
payouts will be made starting at the retirement date. You may select one of the
annuity payout plans outlined below, or we may mutually agree on other payout
arrangements.
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
withdrawal charges under the payout plans listed below.
You also decide whether we will make annuity payouts on a fixed or variable
basis, or a combination of fixed and variable. The amount available to purchase
payouts under the plan you select is the contract value on your retirement date
(less any applicable premium tax). You may reallocate this contract value to the
fixed account to provide fixed dollar payouts and/or among the subaccounts to
provide variable annuity payouts. During the annuity payout period, we reserve
the right to limit the number of subaccounts in which you may invest.
Amounts of fixed and variable payouts depend on:
o the annuity payout plan you select;
o the annuitant's age and, in most cases, sex;
o the annuity table in the contract; and
o the amounts you allocated to the 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."
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 are rising 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 to be used to purchase
the payout plan:
o Plan A - Life annuity - no refund: We make monthly payouts until the
annuitant's death. Payouts end with the last payout before the annuitant's
death. We will not make any further payouts. This means that if the annuitant
dies after we have made only one monthly payout, we will not make any more
payouts.
o Plan B - Life annuity with five, 10 or 15 years certain: We make monthly
payouts for a guaranteed payout period of five, 10 or 15 years that you elect.
This election will determine the length of the payout period to the beneficiary
if the annuitant should die before the elected period 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 10 to 30 years that you elect. We will make payouts
only for the number of years specified whether the annuitant is living or not.
Depending on the selected time period, it is foreseeable that an annuitant can
outlive the payout period selected. 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. 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.
<PAGE>
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 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 the owner in a lump sum or to change
the frequency of the payouts.
Death after annuity payouts begin
If you or the annuitant die after annuity payouts begin, we will pay any amount
payable to the beneficiary as provided in the annuity payout plan in effect.
Taxes
Generally, under current law, any increase in your contract value is taxable to
you only when you receive a payout or withdrawal (see detailed discussion
below). Any portion of the annuity payouts and any withdrawals you request that
represent ordinary income normally are taxable. We will send you a tax
information reporting form for any year in which we made a taxable distribution
according to our records. Roth IRAs may grow and be distributed tax free if you
meet certain distribution requirements.
Qualified annuities: We designed this contract for use with 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 these distribution rules.
Annuity payouts under nonqualified annuities: A portion of each payout will be
ordinary income and subject to tax, and a portion of each payout will be
considered a return of part of your investment and will not be taxed. All
amounts you receive after your investment in the contract is fully recovered
will be subject to tax.
Tax law requires that all nonqualified deferred annuity contracts issued by the
same company (and possibly its affiliates) to the same owner during a calendar
year be taxed as a single, unified contract when you take distributions from any
one of those contracts.
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.
<PAGE>
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 make withdrawals from 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.
<PAGE>
Some states also may impose withholding requirements similar to the federal
withholding described above. If this should be the case, we may deduct state
withholding from any payment from which we deduct federal withholding. The
withholding requirements may differ if we are making payment to a non-U.S.
citizen or if we deliver the payment outside the United States.
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.
<PAGE>
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; divided by
o the net asset value of one share of the applicable fund.
As we make annuity payouts, the reserve for the contract decreases; therefore,
the number of votes also will decrease.
We calculate votes separately for each 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 the funds 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.
<PAGE>
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 Coporation (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.
American Enterprise Life 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 American Enterprise Life pays 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 7.0% of purchase payments).
In addition, American Enterprise Life may pay certain sellers additional
compensation for selling and distribution activities under certain
circumstances. From time to time, American Enterprise Life will pay or permit
other promotional incentives, in cash or credit or other compensation.
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>
Year 2000
The Year 2000 issue is the result of computer programs having been written using
two digits rather than four to define a year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than 2000. This could result in the failure of major systems or miscalculations,
which could have a material impact on the operations of American Enterprise Life
and the Variable Account. All of the major systems used by American Enterprise
Life and by Variable Account are maintained by AEFC and are utilized by multiple
subsidiaries and affiliates of AEFC. American Enterprise Life's and the Variable
Accounts 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 December 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.
<PAGE>
Table of Contents of the Statement of Additional Information
Performance Information................................................
Calculating Annuity Payouts............................................
Rating Agencies........................................................
Principal Underwriter..................................................
Independent Auditors...................................................
Financial Statements...................................................
- - -------------------------------------------------------------------------------
Please check the appropriate box to receive a copy of the Statement of
Additional Information for:
American Express Signature Variable AnnuitySM
American Express Variable Portfolio Funds
AIM Variable Insurance Funds, Inc.
Alliance Variable Products Series Fund
Baron Capital Funds
Fidelity Variable Insurance Products Service Class
Franklin Templeton Variable Insurance Products Trust
Goldman Sachs Variable Insurance Trust
J. P. Morgan Series Trust II
Lazard Retirement Series, Inc.
MFS(R) Variable Insurance TrustSM
Putnam Variable Trust
Royce Capital Fund
Wanger Advisors Trust
Warburg Pincus Trust
Mail your request to:
American Enterprise Life Insurance Company
80 South Eighth Street
P.O. Box 534
Minneapolis, MN 55440-0534
800-333-3437
We will mail your request to:
Your name
Address
City State Zip
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
for
AMERICAN EXPRESS SIGNATURE 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 you can
obtain from your sales representative or by writing or calling us at the address
or telephone number below. The prospectus is incorporated into 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........................................
Calculating Annuity Payouts....................................
Rating Agencies................................................
Principal Underwriter..........................................
Independent Auditors...........................................
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
EVR = 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>
<TABLE>
<CAPTION>
Average Annual Total Return With Withdrawal For Periods Ending Dec. 31. 1998
Performance Since
Commencement of the Performance Since
Subaccount** Commencement of the 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
ESI Bond Fund (2/95;10/81)* -6.73% 6.39% -6.73% 4.35% 7.27% 9.57%
ECR Capital Resource Fund (2/95;10/81) 14.83% 17.23% 14.83% 14.23% 14.05% 13.78%
EMS Cash Management Fund (2/95;10/81) -3.41% 2.13% -3.41% 2.42% 3.70% 5.05%
EIA Extra Income Fund (7/99;5/96) N/A N/A -19.87% N/A N/A -6.99%
EMG Managed Fund (2/95;4/86) 6.62% 16.03% 6.62% 11.58% 12.81% 11.01%
EGD New Dimensions Fund (10/97;5/96) 19.29% 20.67% 19.29% N/A N/A 20.57%
AIM V.I.
ECA Capital Appreciation Fund (7/99;5/93) N/A N/A 10.09% 14.97% N/A 16.70%
ECD Capital Development Fund (8/99;5/98) N/A N/A N/A N/A N/A -14.59%
EVA Value Fund (10/97;5/93) 23.00% 22.42% 23.00% 19.40% N/A 19.76%
ALLIANCE
EPP Premier Growth Portfolio (Class B) N/A N/A N/A N/A N/A N/A
(8/99;6/99)
ETC Technology Portfolio (Class B) (8/99;6/99) N/A N/A N/A N/A N/A N/A
EHG U.S. Government/High Grade Securities N/A N/A N/A N/A N/A N/A
Portfolio (Class B) (8/99;6/99)
BARON
EAS Capital Asset Fund (8/99;10/98) N/A N/A N/A N/A N/A 25.72%
FIDELITY VIP
EFG Growth & Income Portfolio (Service Class) N/A N/A 19.91% N/A N/A 24.19%
(8/99;12/96)
EFM Mid Cap Portfolio (Service Class) N/A N/A N/A N/A N/A -3.96%
(8/99;12/98)
EFO Overseas Portfolio (Service Class) N/A N/A -2.19% 4.17% 6.87% 6.97%
(8/99;1/87)
FRANKLIN TEMPLETON VIP Trust
WMU Mutual Shares Securities Fund - Class 2 N/A N/A N/A N/A N/A N/A
(8/99;1/99)
ERE Real Estate Securities Fund - Class 2 N/A N/A N/A N/A N/A N/A
(8/99;1/99)
EIS Templeton International Smaller Companies N/A N/A N/A N/A N/A N/A
Fund - Class 2 (8/99;1/99)
GOLDMAN SACHS Variable Insurance Trust (VIT)
JCG Capital Growth Fund (5/99;4/98) N/A N/A N/A N/A N/A 4.77%
JUS COREsm U.S. Equity Fund (5/99;2/98) N/A N/A N/A N/A N/A 5.65%
JGL Global Income Fund (5/99;1/98) N/A N/A N/A N/A N/A -0.49%
JIF International Equity Fund (5/99;1/98) N/A N/A N/A N/A N/A 10.89%
J.P. MORGAN SERIES TRUST II
EDE U.S. Disciplined Equity Portfolio N/A N/A 13.53% N/A N/A 23.56%
(8/99;12/94)
LAZARD RETIREMENT SERIES INC.
ERQ Equity Portfolio (8/99;3/98) N/A N/A N/A N/A N/A 2.13%
ERI International Equity Portfolio (8/99;9/98) N/A N/A N/A N/A N/A 4.23%
MFS INVESTMENT MANAGEMENT(R)
END New Discovery Series (7/99;5/98) N/A N/A N/A N/A N/A -5.67%
ERS Research Series (7/99;7/95) N/A N/A 14.12% N/A N/A 19.72%
RUT Utilities Series (7/99;1/95) N/A N/A 8.87% N/A N/A 22.79%
PUTNAM VARIABLE TRUST
EPG Putnam VT Growth and Income Fund - Class IB*** 6.12% 10.50% 6.12% 16.61% 14.10% 14.57%
(10/98;2/88)
EPL Putnam VT International Growth Fund - Class IB***N/A N/A 9.25% N/A N/A 12.29%
(8/99;1/97)
EPN Putnam VT International New Opportunities Fund - N/A N/A -6.80% N/A N/A -7.73%
Class IB*** (8/99;1/97)
ROYCE
EMC Micro-Cap Portfolio (8/99;12/96) N/A N/A -4.48% N/A N/A 7.21%
EPR Premier Portfolio (8/99;12/96) N/A N/A -0.05% N/A N/A 7.83%
WANGER
EIC International Small Cap (8/99;5/95) N/A N/A 7.15% N/A N/A 18.63%
EUC U.S. Small Cap (8/99;5/95) N/A N/A -0.18% N/A N/A -0.30%
WARBURG PINCUS TRUST
EEG Emerging Growth Portfolio (8/99;7/99) N/A N/A N/A N/A N/A N/A
*(Commencement date of the subaccount; Commencement date of the fund)
**Current applicable charges deducted from fund performance include a $30 annual
contract administrative charge, a 1.25% mortality and expense risk fee, a
0.15% variable account administrative charge and applicable withdrawal charge.
***Performance information for Class IB shares are based on Class IA shares
adjusted to reflect payments made under the Class IB distribution plan.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Average Annual Total Return Without Withdrawal For Periods Ending Dec. 31. 1998
Performance Since
Commencement of the Performance Since
Subaccount** Commencement of the 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
ESI Bond Fund (2/95;10/81)* 0.03% 7.67% 0.03% 5.18% 7.27% 9.57%
ECR Capital Resource Fund (2/95;10/81) 22.33% 18.21% 22.33% 14.81% 14.05% 13.78%
EMS Cash Management Fund (2/95;10/81) 3.61% 3.57% 3.61% 3.31% 3.70% 5.05%
EIA Extra Income Fund (7/99;5/96) N/A N/A -14.19% N/A N/A -4.72%
EMG Managed Fund (2/95;4/86) 14.12% 17.04% 14.12% 12.22% 12.81% 11.01%
EGD New Dimensions Fund (10/97;5/96) 26.79% 26.83% 26.79% N/A N/A 22.47%
AIM V.I.
ECA Capital Appreciation Fund (7/99;5/93) N/A N/A 17.59% 15.53% N/A 17.04%
ECD Capital Development Fund (8/99;5/98) N/A N/A N/A N/A N/A -8.48%
EVA Value Fund (10/97;5/93) 30.50% 28.59% 30.50% 19.89% N/A 20.06%
ALLIANCE
EPP Premier Growth Portfolio (Class B) N/A N/A N/A N/A N/A N/A
(8/99;6/99)
ETC Technology Portfolio (Class B) (8/99;6/99) N/A N/A N/A N/A N/A N/A
EHG U.S. Government/High Grade Securities N/A N/A N/A N/A N/A N/A
Portfolio (Class B) (8/99;6/99)
BARON
EAS Capital Asset Fund (8/99;10/98) N/A N/A N/A N/A N/A 33.22%
FIDELITY VIP
EFG Growth & Income Portfolio (Service Class) N/A N/A 27.41% N/A N/A 27.17%
(8/99;12/96)
EFM Mid Cap Portfolio (Service Class) N/A N/A N/A N/A N/A 3.02%
(8/99;12/98)
EFO Overseas Portfolio (Service Class) N/A N/A 4.93% 5.01% 6.87% 6.97%
(8/99;1/87)
FRANKLIN TEMPLETON VIP
WMU Mutual Shares Securities Fund - Class 2 N/A N/A N/A N/A N/A N/A
(8/99;1/99)
ERE Real Estate Securities Fund - Class 2 N/A N/A N/A N/A N/A N/A
(8/99;1/99)
EIS Templeton International Smaller Companies N/A N/A N/A N/A N/A N/A
Fund - Class 2 (8/99;1/99)
GOLDMAN SACHS Variable Insurance Trust (VIT)
JCG Capital Growth Fund (5/99;4/98) N/A N/A N/A N/A N/A 12.27%
JUS COREsm U.S. Equity Fund (5/99;2/98) N/A N/A N/A N/A N/A 13.15%
JGL Global Income Fund (5/99;1/98) N/A N/A N/A N/A N/A 6.76%
JIF International Equity Fund (5/99;1/98) N/A N/A N/A N/A N/A 18.39%
J.P. MORGAN SERIES TRUST II
EDE U.S. Disciplined Equity Portfolio N/A N/A 21.03% N/A N/A 24.22%
(8/99;12/94)
LAZARD RETIREMENT SERIES INC.
ERQ Equity Portfolio (8/99;3/98) N/A N/A N/A N/A N/A 9.61%
ERI International Equity Portfolio (8/99;9/98) N/A N/A N/A N/A N/A 11.73%
MFS INVESTMENT MANAGEMENT(R)
END New Discovery Series (7/99;5/98) N/A N/A N/A N/A N/A 1.17%
ERS Research Series (7/99;7/95) N/A N/A 21.62% N/A N/A 20.84%
RUT Utilities Series (7/99;1/95) N/A N/A 16.37% N/A N/A 23.59%
PUTNAM VARIABLE TRUST
EPG Putnam VT Growth and Income Fund - Class IB*** 13.62% 18.00% 13.62% 17.14% 14.10% 14.57%
(10/98;2/88)
EPL Putnam VT International Growth Fund - Class IB***N/A N/A 16.75% N/A N/A 15.59%
(8/99;1/97)
EPN Putnam VT International New Opportunities Fund - N/A N/A -0.05% N/A N/A -1.06%
Class IB*** (8/99;1/97)
ROYCE
EMC Micro-Cap Portfolio (8/99;12/96) N/A N/A 2.46% N/A N/A 10.65%
EPR Premier Portfolio (8/99;12/96) N/A N/A 7.24% N/A N/A 11.25%
WANGER
EIC International Small Cap (8/99;5/95) N/A N/A 14.65% N/A N/A 19.66%
EUC U.S. Small Cap (8/99;5/95) N/A N/A 7.11% N/A N/A 1.00%
WARBURG PINCUS TRUST
EEG Emerging Growth Portfolio (8/99;7/99) N/A N/A N/A N/A N/A N/A
* (Commencement date of the subaccount; Commencement date of the fund)
** Current applicable charges deducted from fund performance include a $30
annual contract administrative charge, a 1.25% mortality and expense risk fee
and a 0.15% variable account administrative charge.
***Performance information for Class IB shares are based on Class IA shares
adjusted to reflect payments made under the Class IB distribution plan.
</TABLE>
<PAGE>
Cumulative Total Return
Cumulative total return represents the cumulative change in value of an
investment for a given period (reflecting change in a subaccount's accumulation
unit value). We compute cumulative total return using the following formula:
ERV - P
P
where: P = a hypothetical initial payment of $1,000
ERV = Ending Redeemable Value of a hypothetical $1,000 payment
made at the beginning of the 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 may also
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 annual contract administrative charge, the variable
account administrative charge and the mortality and expense risk fee.
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.
<PAGE>
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
<TABLE>
<CAPTION>
Annualized Yields Based on the Seven-Day Period Ending Dec. 31, 1998
<S> <C> <C> <C>
Subaccount Investing In Simple Yield Compound Yield
EMS AXPSM VP - Cash Management Fund 3.24% 3.29%
</TABLE>
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.
Annualized Yield Based on 30-Day Period Ended Dec. 31, 1998
Subaccount Investing In Yield
ESI AXPSM Variable Portfolio - Bond Fund 7.20%
The yield on the subaccount's accumulation unit may fluctuate daily and does not
provide a basis for determining future yields.
<PAGE>
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 & 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 the closest 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.
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 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 value we multiply the last annuity value by the product of:
o the net investment factor; and
o the neutralizing factor.
The purpose of the neutralizing factor is to offset the effect of the assumed
investment rate built into the annuity table. With an assumed investment rate of
5%, the neutralizing factor is 0.999866 for a one day valuation period.
<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 and the variable account administrative charge 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 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 fixed account at the retirement date or the date you
have selected to begin receiving your annuity payouts; then
o using an annuity table, we apply the value according to the annuity payout
plan you select.
The annuity payout table we use will be the one in effect at the time you choose
to begin your annuity payouts. The values in the table will be equal to or
greater than the table in your contract.
RATING AGENCIES
The following chart reflects the ratings given to 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 the fixed account and reflects
our ability to make annuity payouts and to pay death benefits and other
distributions from the annuities.
Rating agency Rating
A.M. Best A+
(Superior)
Duff & Phelps AAA
Moody's Aa2
PRINCIPAL UNDERWRITER
The principal underwriter for the contract is American Express Financial
Advisors Inc. 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
<PAGE>
American Enterprise Variable Annuity Account
Annual Financial Information
Report of Independent Auditors
The Board of Directors
American Enterprise Life Insurance Company
We have audited the individual and combined statements of net assets of the
segregated asset subaccounts of American Enterprise Variable Annuity Account
(comprised of subaccounts EVA, ECR, EGD, EMG, EMS, ESI and EPG ) as of December
31, 1998, and the related statements of operations for the year then ended,
except for subaccount EPG, which is for the period October 5, 1998 (commencement
of operations) to December 31, 1998, and the statements of changes in net assets
for each of the two years in the period then ended, except for subaccounts EVA
and EGD which are for the year ended December 31, 1998 and for the period
October 30, 1997 (commencement of operations) to December 31, 1997 and
subaccount EPG, which is for the period October 5, 1998 (commencement of
operations) to December 31, 1998. These financial statements are the
responsibility of the management of American Enterprise Life Insurance Company.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned at December 31, 1998 with the affiliated and
unaffiliated mutual fund managers. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the individual and combined financial position of the
segregated asset subaccounts of American Enterprise Variable Annuity Account at
December 31, 1998, and the individual and combined results of their operations
and the changes in their net assets for the periods described above, in
conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Ernst & Young LLP
Minneapolis, Minnesota
March 12, 1999
<PAGE>
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
Notes to Financial Statements
1. Organization
American Enterprise Variable Annuity Account (the Account) was established under
Indiana law on July 15, 1987 and the subaccounts are registered together as a
single unit investment trust of American Enterprise Life Insurance Company
(American Enterprise Life) under the Investment Company Act of 1940, as amended
(the 1940 Act). Operations of the Account commenced on Feb. 21, 1995.
The Account is comprised of various subaccounts. Each subaccount invests
exclusively in shares of the following mutual funds (collectively, the Funds),
which are registered under the 1940 Act as diversified, open-end management
investment companies and have the following investment managers.
<S> <C> <C>
Subaccount Invests exclusively in shares of Investment Manager
EVA AIM V.I. Value Fund A I M Advisors, Inc.
ECR AXPSM Variable Portfolio - Capital Resource Fund IDS Life Insurance Company 1
EGD AXPSM Variable Portfolio - New Dimensions Fund IDS Life Insurance Company 1
EMG AXPSM Variable Portfolio - Managed Fund IDS Life Insurance Company 1
EMS AXPSM Variable Portfolio - Cash Management Fund IDS Life Insurance Company 1
ESI AXPSM Variable Portfolio - Bond Fund IDS Life Insurance Company 1
EPG Putnam VT Growth and Income Fund-- Class IB Shares Putnam Investment Management, Inc.
1 American Express Financial Corporation (AEFC) is the investment advisor.
The assets of each subaccount of the Account are not chargeable with liabilities
arising out of the business conducted by any other segregated asset account or
by American Enterprise Life.
American Enterprise Life issues the contracts that are distributed by banks and
financial institutions either directly or through a network of third-party
marketers.
</TABLE>
<PAGE>
2. Summary of Significant Accounting Policies
Investments in the Funds
Investments in shares of the Funds are stated at market value which is the net
asset value per share as determined by the respective Funds. Investment
transactions are accounted for on the date the shares are purchased and sold.
The cost of investments sold and redeemed is determined on the average cost
method. Dividend distributions received from the Funds are reinvested in
additional shares of the Funds and are recorded as income by the subaccounts on
the ex-dividend date.
Unrealized appreciation or depreciation of investments in the accompanying
financial statements represents the subaccounts' share of the Funds'
undistributed net investment income, undistributed realized gain or loss and the
unrealized appreciation or depreciation on their investment securities.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of increase and decrease in net assets from operations
during the period. Actual results could differ from those estimates.
Federal Income Taxes
American Enterprise Life is taxed as a life insurance company. The Account is
treated as part of American Enterprise Life for federal income tax purposes.
Under existing federal income tax law, no income taxes are payable with respect
to any investment income of the Account.
3. Mortality and Expense Risk Fee
American Enterprise Life makes contractual assurances to the Account that
possible future adverse changes in administrative expenses and mortality
experience of the contract owners and annuitants will not affect the Account.
The mortality and expense risk fee paid to American Enterprise Life is computed
daily and is equal, on an annual basis, to 1.25% of the average daily net assets
of the subaccounts.
4. Administrative Charge
American Enterprise Life deducts a daily charge equal, on an annual basis, to
0.15% of the average daily net assets of each subaccount as an administrative
charge. This charge covers certain administrative and operating expenses of the
subaccounts incurred by American Enterprise Life such as accounting, legal and
data processing fees, and expenses involved in the preparation and distribution
of reports and prospectuses. This charge cannot be increased.
5. Contract Administrative Charge
American Enterprise Life deducts a contract administrative charge of $30 per
year on each contract anniversary. This charge cannot be increased and does not
apply after annuity payouts begin. American Enterprise Life does not expect to
profit from this charge. This charge reimburses American Enterprise Life for
expenses incurred in establishing and maintaining the annuity records. This
charge is waived when the contract value is $50,000 or more on the current
contract anniversary. The $30 annual charge is deducted at the time of any full
surrender.
6. Withdrawal Charge
American Enterprise Life will use a withdrawal charge to help it recover certain
expenses relating to the sale of the annuity. The withdrawal charge is deducted
for withdrawals up to the first seven payment years following a purchase
payment. Charges by American Enterprise Life for withdrawals are not identified
on an individual segregated asset account basis. Charges for all segregated
asset accounts amounted to $199,062 in 1998 and $79,195 in 1997. Such charges
are not treated as a separate expense of the subaccounts. They are ultimately
deducted from contract withdrawal benefits paid by American Enterprise Life.
This charge is waived if the withdrawal meets certain provisions as stated in
the contract.
<PAGE>
<TABLE>
<CAPTION>
7. Investment in Shares
The subaccounts' investment in shares of the Funds as of Dec. 31, 1998 were as
follows:
Subaccount Investment Shares NAV
<S> <C> <C> <C>
EVA AIM V.I. Value Fund 91,112 $26.25
ECR AXPSM Variable Portfolio - Capital Resource Fund 301,499 32.65
EGD AXPSM Variable Portfolio - New Dimensions Fund 83,670 17.52
EMG AXPSM Variable Portfolio - Managed Fund 462,427 18.52
EMS AXPSM Variable Portfolio - Cash Management Fund 858,872 1.00
ESI AXPSM Variable Portfolio - Bond Fund 680,095 11.11
EPG Putnam VT Growth and Income Fund-- Class IB Shares 9,822 28.75
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
8. Investment Transactions
The subaccounts' purchases of Funds' shares, including reinvestment of dividend
distributions, were as follows:
Year ended Dec. 31,
Subaccount Investment 1998 1997
<S> <C> <C> <C>
EVA1 AIM V.I. Value Fund $2,077,208 $ 68,804
ECR AXPSM Variable Portfolio - Capital Resource Fund 3,205,569 2,325,297
EGD1 AXPSM Variable Portfolio - New Dimensions Fund 1,222,554 70,723
EMG AXPSM Variable Portfolio - Managed Fund 3,919,323 2,585,442
EMS AXPSM Variable Portfolio - Cash Management Fund 1,567,312 543,283
ESI AXPSM Variable Portfolio - Bond Fund 4,647,272 1,813,929
EPG2 Putnam VT Growth and Income Fund-- Class IB Shares 269,558 --
------- ------
Combined Variable Account $16,908,796 $7,407,478
1 Operations commenced on Oct. 30, 1997.
2 Operations commenced on Oct. 5, 1998.
9. Year 2000 Issue (unaudited)
The Year 2000 issue is the result of computer programs having been written using
two digits rather than four to define a year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than 2000. This could result in the failure of major systems or miscalculations,
which could have a material impact on the operations of American Enterprise Life
and the Variable Account. All of the major systems used by the 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.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
Statements of Net Assets Dec. 31, 1998
Segregated Asset Subaccounts
Assets EVA ECR EGD EMG EMS
Investments in shares of mutual funds:
<S> <C> <C> <C> <C> <C>
at cost $2,129,905 $8,367,712 $1,273,181 $ 8,289,853 $858,797
---------- ---------- ---------- ----------- --------
at market value $2,391,678 $9,845,123 $1,465,483 $ 8,564,185 $858,800
Dividends receivable - - - - 3,497
Accounts receivable from American Enterprise Life for
contract purchase payments 1,237 12,759 6,154 21,217 -
----- ------ ----- ------
Total assets 2,392,915 9,857,882 1,471,637 8,585,402 862,297
--------- --------- --------- --------- -------
Liabilities
Payable to American Enterprise Life for:
Mortality and expense risk fee 2,413 10,405 1,513 8,984 918
Issue and administrative fee 290 1,249 182 1,078 110
Payable to mutual funds
for investments purchased 1,237 1,105 4,459 11,155 2,469
----- ----- ----- ------ -----
Total liabilities 3,940 12,759 6,154 21,217 3,497
----- ------ ----- ------ -----
Net assets applicable to contracts in
accumulation period 2,388,975 9,839,380 1,465,483 8,559,908 858,800
Net assets applicable to contracts in
payment period - 5,743 - 4,277 -
---- ----- ---- ----- ----
Total net assets $2,388,975 $9,845,123 $1,465,483 $ 8,564,185 $858,800
========== ========== ========== =========== ========
Accumulation units outstanding 1,778,901 5,163,185 1,108,323 4,684,466 749,301
--------- --------- --------- --------- -------
Net asset value per accumulation unit $ 1.34 $ 1.91 $ 1.32 $ 1.83 $ 1.15
------ ------ ------ ------ ------
Combined
Variable
Assets ESI EPG Account
Investments in shares of mutual funds:
at cost $7,944,815 $ 269,558 $ 29,133,821
---------- --------- ------------
at market value $7,553,609 $ 282,397 $ 30,961,275
Dividends receivable 45,255 - 48,752
Accounts receivable from American Enterprise Life for
contract purchase payments 16,799 2,714 60,880
------ ----- ------
Total assets 7,615,663 285,111 31,070,907
--------- ------- ----------
Liabilities
Payable to American Enterprise Life for:
Mortality and expense risk fee 7,851 237 32,321
Issue and administrative fee 942 29 3,880
Payable to mutual funds
for investments purchased 53,261 2,714 76,400
------ ----- ------
Total liabilities 62,054 2,980 112,601
------ ----- -------
Net assets applicable to contracts in
accumulation period 7,550,694 282,131 30,945,371
Net assets applicable to contracts in
payment period 2,915 - 12,935
----- ---- ------
Total net assets $7,553,609 $ 282,131
========== =========
Accumulation units outstanding 5,688,915 238,893
--------- -------
Net asset value per accumulation unit $ 1.33 $ 1.18
------ ------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
Statements of Operations Year ended Dec. 31, 1998
Segregated Asset Subaccounts
Investment income EVA ECR EGD EMG EMS
<S> <C> <C> <C> <C> <C>
Dividend income from mutual funds $104,609 $704,897 $ 4,537 $ 886,695 $ 30,212
-------- -------- ------- --------- --------
Expenses:
Mortality and expense risk fee 12,205 95,285 8,135 82,016 7,605
Administrative charge 1,464 11,434 976 9,842 912
----- ------ --- ----- ---
Total expenses 13,669 106,719 9,111 91,858 8,517
------ ------- ----- ------ -----
Investment income (loss) - net 90,940 598,178 (4,574) 794,837 21,695
------ ------- ------ ------- ------
Realized and unrealized gain (loss) on investments - net
Realized gain (loss) on sales of investments in mutual funds:
Proceeds from sales 16,585 297,921 20,854 135,373 967,780
Cost of investments sold 16,107 266,065 20,096 129,027 967,779
------ ------- ------ ------- -------
Net realized gain (loss) on investments 478 31,856 758 6,346 1
Net change in unrealized appreciation or
depreciation of investments 262,764 957,259 190,924 55,365 3
------- ------- ------- ------ -
Net gain (loss) on investments 263,242 989,115 191,682 61,711 4
------- ------- ------- ------ -
Net increase (decrease) in net assets
resulting from operations $354,182 $1,587,293 $ 187,108 $ 856,548 $ 21,699
======== ========== ========= ========= ========
Combined
Variable
Investment income ESI EPG* Account
Dividend income from mutual funds $415,320 $ - $ 2,146,270
-------- -- -----------
Expenses:
Mortality and expense risk fee 68,547 367 274,160
Administrative charge 8,226 44 32,898
----- -- ------
Total expenses 76,773 411 307,058
------ --- -------
Investment income (loss) - net 338,547 (411) 1,839,212
------- ---- ---------
Realized and unrealized gain (loss) on investments - net
Realized gain (loss) on sales of investments in mutual funds:
Proceeds from sales 86,664 - 1,525,177
Cost of investments sold 89,531 - 1,488,605
------ --- ---------
Net realized gain (loss) on investments (2,867) - 36,572
Net change in unrealized appreciation or
depreciation of investments (378,318) 12,839 1,100,836
-------- ------ ---------
Net gain (loss) on investments (381,185) 12,839 1,137,408
-------- ------ ---------
Net increase (decrease) in net assets
resulting from operations $(42,638) $ 12,428 $ 2,976,620
========= ======== ===========
*For the period Oct. 5, 1998 (commencement of operations) to Dec. 31, 1998.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
Statements of Changes in Net Assets Year ended Dec. 31, 1998
Segregated Asset Subaccounts
Operations EVA ECR EGD EMG EMS
<S> <C> <C> <C> <C> <C>
Investment income (loss) - net $ 90,940 $598,178 $ (4,574) $ 794,837 $ 21,695
Net realized gain (loss) on investments 478 31,856 758 6,346 1
Net change in unrealized appreciation or
depreciation of investments 262,764 957,259 190,924 55,365 3
------- ------- ------- ------ -
Net increase (decrease) in net assets
resulting from operations 354,182 1,587,293 187,108 856,548 21,699
------- --------- ------- ------- ------
Contract transactions
Contract purchase payments 1,616,894 3,114,006 1,111,110 3,376,704 691,275
Net transfers** 381,890 (245,243) 126,930 (21,220) (85,043)
Annuity payments - (385) - (118) -
Contract terminations:
Surrender benefits and contract charges (25,796) (529,563) (25,802) (335,067) (28,396)
Death benefits (5,952) (21,950) (5,911) (25,390) -
------ ------- ------ ------- ------
Increase (decrease) from contract transactions 1,967,036 2,316,865 1,206,327 2,994,909 577,836
--------- --------- --------- --------- -------
Net assets at beginning of year 67,757 5,940,965 72,048 4,712,728 259,265
------ --------- ------ --------- -------
Net assets at end of year $2,388,975 $9,845,123 $1,465,483 $ 8,564,185 $858,800
---------- ---------- ---------- ----------- --------
Accumulation unit activity
Units outstanding at beginning of year 65,875 3,812,754 68,572 2,944,208 231,256
Contracts purchase payments 1,418,576 1,848,700 965,321 2,000,537 635,551
Net transfers** 327,920 (146,994) 108,613 (16,062) (79,775)
Contract terminations:
Surrender benefits and contract charges (28,544) (338,414) (29,255) (229,369) (37,731)
Death benefits (4,926) (12,861) (4,928) (14,848) -
------ ------- ------ -------
Units outstanding at end of year 1,778,901 5,163,185 1,108,323 4,684,466 749,301
========= ========= ========= ========= =======
Combined
Variable
Operations ESI EPG* Account
Investment income (loss) - net $338,547 $ (411) $ 1,839,212
Net realized gain (loss) on investments (2,867) - 36,572
Net change in unrealized appreciation or
depreciation of investments (378,318) 12,839 1,100,836
-------- ------ ---------
Net increase (decrease) in net assets
resulting from operations (42,638) 12,428 2,976,620
------- ------ ---------
Contract transactions
Contract purchase payments 4,304,628 217,969 14,432,586
Net transfers** 243,040 53,032 453,386
Annuity payments (74) - (577)
Contract terminations:
Surrender benefits and contract charges (297,229) (1,298) (1,243,151)
Death benefits (28,304) - (87,507)
------- ---- -------
Increase (decrease) from contract transactions 4,222,061 269,703 13,554,737
--------- ------- ----------
Net assets at beginning of year 3,374,186 - 14,426,949
--------- ----- ----------
Net assets at end of year $7,553,609 $ 282,131 $ 30,958,306
---------- --------- ------------
Accumulation unit activity
Units outstanding at beginning of year 2,543,718 -
Contracts purchase payments 3,245,320 194,565
Net transfers** 183,324 45,511
Contract terminations:
Surrender benefits and contract charges (262,248) (1,183)
Death benefits (21,199) -
------- -----
Units outstanding at end of year 5,688,915 238,893
========= =======
*For the period Oct. 5, 1998 (commencement of operations) to Dec. 31, 1998.
**Includes transfer activity from (to) other subaccounts and transfers from (to)
American Enterprise Life's fixed account.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
Statements of Changes in Net Assets Year ended Dec. 31, 1997
Segragated Asset Subaccount
Operations EVA* ECR EGD* EMG EMS
<S> <C> <C> <C> <C> <C>
Investment income (loss) - net $ 1,408 $ 89,908 $ (27) $ 375,811 $ 10,527
Net realized gain (loss) on investments - 8,855 - 9,422 -
Net change in unrealized appreciation or
depreciation of investments (991) 780,121 1,378 110,879 (2)
---- ------- ----- ------- --
Net increase (decrease) in net assets
resulting from operations 417 878,884 1,351 496,112 10,525
--- ------- ----- ------- ------
Contract transactions
Contract purchase payments 66,156 2,409,335 70,697 2,390,284 327,812
Net transfers** 1,184 (33,041) - (72,853) (234,808)
Annuity payments - (138) - - -
Contract terminations:
Surrender benefits and contract charges - (297,350) - (192,773) (100,987)
Death benefits - (5,701) - (7,254) -
--- ------ --- ------ ---
Increase (decrease) from contract transactions 67,340 2,073,105 70,697 2,117,404 (7,983)
------ --------- ------ --------- ------
Net assets at beginning of year - 2,988,976 - 2,099,212 256,723
---- --------- ----- --------- -------
Net assets at end of year $ 67,757 $5,940,965 $ 72,048 $4,712,728 $259,265
-------- ---------- -------- ---------- --------
Accumulation unit activity
Units outstanding at beginning of year - 2,350,045 - 1,545,535 240,823
Contract purchase payments 64,716 1,696,748 68,572 1,581,579 302,938
Net transfers** 1,159 (18,567) - (49,221) (215,723)
Contract terminations:
Surrender benefits and contract charges - (211,339) - (128,743) (96,782)
Death benefits - (4,133) - (4,942) -
---- ------ ---- ------ ----
Units outstanding at end of year 65,875 3,812,754 68,572 2,944,208 231,256
====== ========= ====== ========= =======
Statements of Changes in Net Assets
Combined
Variable
Operations ESI Account
Investment income (loss) - net $ 206,530 $ 684,157
Net realized gain (loss) on investments 956 19,233
Net change in unrealized appreciation or
depreciation of investments (31,454) 859,931
------- -------
Net increase (decrease) in net assets
resulting from operations 176,032 1,563,321
------- ---------
Contract transactions
Contract purchase payments 1,670,135 6,934,419
Net transfers** (29,630) (369,148)
Annuity payments - (138)
Contract terminations:
Surrender benefits and contract charges (139,046) (730,156)
Death benefits (6,105) (19,060)
------ -------
Increase (decrease) from contract transactions 1,495,354 5,815,917
--------- ---------
Net assets at beginning of year 1,702,800 7,047,711
--------- ---------
Net assets at end of year $3,374,186 $14,426,949
---------- -----------
Accumulation unit activity
Units outstanding at beginning of year 1,377,190
Contract purchase payments 1,304,174
Net transfers** (24,030)
Contract terminations:
Surrender benefits and contract charges (108,787)
Death benefits (4,829)
------
Units outstanding at end of year 2,543,718
=========
*For the period Oct. 30, 1997 (commencement of operations) to Dec. 31, 1997.
**Includes transfer activity from (to) other subaccounts and transfers from (to)
American Enterprise Life's fixed account.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Report of Independent Auditors
The Board of Directors
American Enterprise Life Insurance Company
We have audited the accompanying balance sheets of American Enterprise Life
Insurance Company (a wholly owned subsidiary of IDS Life Insurance Company) as
of December 31, 1998 and 1997, and the related statements of income,
stockholder's equity and cash flows for each of the three years in the period
ended December 31, 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American Enterprise Life
Insurance Company at December 31, 1998 and 1997, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Ernst & Young LLP
February 4, 1999
Minneapolis, Minnesota
<PAGE>
<TABLE>
<CAPTION>
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
BALANCE SHEETS
December 31,
($ thousands, except share amounts)
ASSETS 1998 1997
- - ------ - ----------- - -------
Investments:
Fixed maturities:
Held to maturity, at amortized cost (fair value:
<S> <C> <C>
1998, $1,126,732 ; 1997, $1,223,108) $1,081,193 $1,186,682
Available for sale, at fair value (amortized cost:
1998, $2,526,712; 1997, $2,609,621) 2,594,858 2,685,799
----------- -----------
3,676,051 3,872,481
Mortgage loans on real estate 815,806 738,052
Other investments 12,103 16,024
------------- -------------
Total investments 4,503,960 4,626,557
Accounts receivable 214 563
Accrued investment income 61,740 59,588
Deferred policy acquisition costs 196,479 224,501
Other assets 43 117
Separate account assets 123,185 62,087
------------ -------------
Total assets $4,885,621 $4,973,413
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Future policy benefits for fixed annuities $4,166,852 $4,343,213
Policy claims and other policyholders' funds 7,389 11,328
Deferred income taxes 23,199 35,601
Amounts due to brokers 54,347 34,935
Other liabilities 24,500 16,905
Separate account liabilities 123,185 62,087
----------- ------------
Total liabilities 4,399,472 4,504,069
Stockholder's equity:
Capital stock, $100 par value per share;
100,000 shares authorized,
20,000 shares issued and outstanding 2,000 2,000
Additional paid-in capital 282,872 282,872
Accumulated other comprehensive income:
Net unrealized securities gains 44,295 49,516
Retained earnings 156,982 134,956
------------ ------------
Total stockholder's equity 486,149 469,344
------------ ------------
Total liabilities and stockholder's equity $4,885,621 $4,973,413
========== ==========
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
STATEMENTS OF INCOME
Years ended December 31,
($ thousands)
1998 1997 1996
--- ------ --- ------ --- ----
Revenues:
<S> <C> <C> <C>
Net investment income $340,219 $332,268 $271,719
Contractholder charges 6,387 5,688 5,450
Mortality and expense risk fees 1,275 641 303
Net realized loss on investments (4,788) (509) (5,258)
---------- ---------- -----------
Total revenues 343,093 338,088 272,214
--------- --------- ----------
Benefits and expenses:
Interest credited on investment contracts 228,533 231,437 191,672
Amortization of deferred policy acquisition costs 53,663 36,803 30,674
Other operating expenses 24,476 24,890 14,133
---------- ---------- --------
Total benefits and expenses 306,672 293,130 236,479
--------- --------- -------
Income before income taxes 36,421 44,958 35,735
Income taxes 14,395 16,645 12,912
---------- ---------- ---------
Net income $ 22,026 $ 28,313 $ 22,823
========= ========= ========
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
STATEMENTS OF STOCKHOLDER'S EQUITY
Three years ended December 31, 1998
($ thousands)
Accumulated Other
Comprehensive
Total Additional
Stockholder's Capital Paid-In Income, Retained
Equity Stock Capital Net of Tax Earnings
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995 $296,816 $2,000 $177,872 $ 33,124 $83,820
Comprehensive income:
Net income 22,823 -- -- -- 22,823
Unrealized holding losses arising
during the year, net of taxes of
$12,282 (22,810) -- -- (22,810) --
Reclassification adjustment for losses
included in net income, net of tax
of $(1,093) 2,029 -- -- 2,029 --
-------------------
-----------------
Other comprehensive loss (20,781) -- -- (20,781) --
-----------------
Comprehensive income 2,042
Capital contribution from parent 65,000 -- 65,000 -- --
---------------------------------------------------------------------------
Balance, December 31, 1996 363,858 2,000 242,872 12,343 106,643
Comprehensive income:
Net income 28,313 -- -- -- 28,313
Unrealized holding gains arising
during the year, net of taxes of
$(19,891) 36,940 -- -- 36,940 --
Reclassification adjustment for losses
included in net income, net of tax
of $(126) 233 -- -- 233 --
-------------------
-----------------
Other comprehensive income 37,173 -- -- 37,173 --
-----------------
Comprehensive income 65,486
Capital contribution from parent 40,000 40,000
---------------------------------------------------------------------------
Balance, December 31, 1997 469,344 2,000 282,872 49,516 134,956
Comprehensive income:
Net income 22,026 -- -- -- 22,026
Unrealized holding losses arising
during the year, net of taxes of $3,400 (6,314) -- -- (6,314) --
Reclassification adjustment for losses
included in net income, net of tax 1,093
of $(588) -- -- 1,093 --
----------------- -------------------
-------------------
Other comprehensive loss (5,221) -- -- (5,221) --
-----------------
-----------------
Comprehensive income 16,805
---------------------------------------------------------------------------
Balance, December 31, 1998 $486,149 $2,000 $282,872 $44,295 $156,982
===========================================================================
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
Years ended December 31,
($ thousands)
1998 1997 1996__
- -------- - -------- --------
Cash flows from operating activities:
<S> <C> <C> <C>
Net income $ 22,026 $ 28,313 $ 22,823
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Change in accrued investment income (2,152) (8,017) (9,692)
Change in accounts receivable 349 9,304 --
Change in deferred policy acquisition costs, net 28,022 (21,276) (32,651)
Change in other assets 74 4,840 (10,007)
Change in policy claims and other policyholders' funds (3,939) (16,099) 15,786
Deferred income tax (benefit) provision (9,591) (2,485) 5,084
Change in other liabilities 7,595 1,255 8,621
Amortization of premium (accretion of discount), net 122 (2,316) (2,091)
Net realized loss on investments 4,788 509 5,258
Other, net 2,544 959 (129)
------------- --------- ----------
Net cash provided by (used in) operating activities 49,838 (5,013) 3,002
Cash flows from investing activities: Fixed maturities held to maturity:
Purchases -- (1,996) (16,967)
Maturities 73,601 41,221 26,190
Sales 31,117 30,601 27,944
Fixed maturities available for sale:
Purchases (298,885) (688,050) (921,914)
Maturities 335,357 231,419 212,212
Sales 48,492 73,366 47,542
Other investments:
Purchases (161,252) (199,593) (212,182)
Sales 78,681 29,139 19,850
Change in amounts due to brokers 19,412 (53,796) 88,568
---------- ----------- ----------
Net cash provided by (used in) investing activities 126,523 (537,689) (728,757)
Cash flows from financing activities: Activity related to investment contracts:
Considerations received 302,158 783,339 846,378
Surrenders and other benefits (707,052) (552,903) (312,362)
Interest credited to account balances 228,533 231,437 191,672
Change in securities sold under repurchase agreements -- -- (67,000)
Capital contribution from parent -- 40,000 65,000
--------------- ---------- ---------
Net cash (used in) provided by financing activities (176,361) 501,873 723,688
----------- --------- --------
Net decrease in cash and cash equivalents -- (40,829) (2,067)
Cash and cash equivalents at beginning of year -- 40,829 42,896
--------------- ---------- ---------
Cash and cash equivalents at end of year $ -- $ -- $ 40,829
============== ============== ==========
See accompanying notes.
</TABLE>
1. Summary of significant accounting policies
Nature of business
American Enterprise Life Insurance Company (the Company) is a stock life
insurance company that is domiciled in Indiana and is licensed to transact
insurance business in 48 states. The Company's principal product is
deferred annuities, which are issued primarily to individuals. It offers
single premium and annual premium deferred annuities on both a fixed and
variable dollar basis.
Immediate annuities are offered as well.
Basis of presentation
The Company is a wholly owned subsidiary of IDS Life Insurance Company (IDS
Life), which is a wholly owned subsidiary of American Express Financial
Corporation (AEFC). AEFC is a wholly owned subsidiary of American Express
Company. The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles which vary in
certain respects from reporting practices prescribed or permitted by the
Indiana Department of Insurance (see Note 4).
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Investments
Fixed maturities that the Company has both the positive intent and the
ability to hold to maturity are classified as held to maturity and carried
at amortized cost. All other fixed maturities are classified as available
for sale and carried at fair value. Unrealized gains and losses on
securities classified as available for sale are reported as a separate
component of accumulated other comprehensive income, net of deferred income
taxes.
Realized investment gain or loss is determined on an identified cost basis.
Prepayments are anticipated on certain investments in mortgage-backed
securities in determining the constant effective yield used to recognize
interest income. Prepayment estimates are based on information received
from brokers who deal in mortgage-backed securities.
Mortgage loans on real estate are carried at amortized cost less an
allowance for mortgage loan losses. The estimated fair value of the
mortgage loans is determined by a discounted cash flow analysis using
mortgage interest rates currently offered for mortgages of similar
maturities.
<PAGE>
1. Summary of significant accounting policies (continued)
Impairment of mortgage loans is measured as the excess of the loan's
recorded investment over its present value of expected principal and
interest payments discounted at the loan's effective interest rate, or the
fair value of collateral. The amount of the impairment is recorded in an
allowance for mortgage loan losses. The allowance for mortgage loan losses
is maintained at a level that management believes is adequate to absorb
estimated losses in the portfolio. The level of the allowance account is
determined based on several factors, including historical experience,
expected future principal and interest payments, estimated collateral
values, and current and anticipated economic and political conditions.
Management regularly evaluates the adequacy of the allowance for mortgage
loan losses.
The Company generally stops accruing interest on mortgage loans for which
interest payments are delinquent more than three months. Based on
management's judgment as to the ultimate collectibility of principal,
interest payments received are either recognized as income or applied to
the recorded investment in the loan.
The cost of interest rate caps and floors is amortized to investment income
over the life of the contracts and payments received as a result of these
agreements are recorded as investment income when realized. The amortized
cost of interest rate caps and floors is included in other investments.
When evidence indicates a decline, which is other than temporary, in the
underlying value or earning power of individual investments, such
investments are written down to the fair value by a charge to income.
Statements of cash flows
The Company considers investments with a maturity at the date of their
acquisition of three months or less to be cash equivalents. These
securities are carried principally at amortized cost which approximates
fair value.
Supplementary information to the statements of cash flows for the years
ended December 31, is summarized as follows:
1998 1997 1996
---- ----- ----
Cash paid during the year for:
Income taxes $19,035 $19,456 $10,317
Interest on borrowings 5,437 1,832 998
Contractholder charges
Contractholder charges include surrender charges and fees collected
regarding the issue and administration of annuity contracts.
<PAGE>
1. Summary of significant accounting policies (continued)
Deferred policy acquisition costs
The costs of acquiring new business, principally sales compensation, policy
issue costs, and certain sales expenses, have been deferred on annuity
contracts. These costs are amortized using primarily the interest method.
Liabilities for future policy benefits
Liabilities for deferred annuities are accumulation values. Liabilities for
fixed annuities in a benefit status are based on the established industry
mortality tables with various interest rates ranging from 5.5 percent to
8.75 percent, depending on year of issue.
Federal income taxes
The Company's taxable income is included in the consolidated federal income
tax return of American Express Company. The Company provides for income
taxes on a separate return basis, except that, under an agreement between
AEFC and American Express Company, tax benefit is recognized for losses to
the extent they can be used on the consolidated tax return. It is the
policy of AEFC and its subsidiaries that AEFC will reimburse subsidiaries
for all tax benefits.
Included in other liabilities at December 31, 1998 and 1997 are $3,504
payable to and $1,289, receivable from , respectively, IDS Life for federal
income taxes.
Separate account business
The separate account assets and liabilities represent funds held for the
exclusive benefit of the variable annuity contract owners. The Company
receives mortality and expense risk fees from the variable annuity separate
accounts.
The Company makes contractual mortality assurances to the variable annuity
contract owners that the net assets of the separate accounts will not be
affected by future variations in the actual life expectancy experience of
the annuitants and beneficiaries from the mortality assumptions implicit in
the annuity contracts. The Company makes periodic fund transfers to, or
withdrawals from, the separate account assets for such actuarial
adjustments for variable annuities that are in the benefit payment period.
The Company also guarantees that the rates at which administrative fees are
deducted from contract funds will not exceed contractual maximums.
Accounting Changes
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income." SFAS
No. 130 requires the reporting and display of comprehensive income and its
components. Comprehensive income is defined as the aggregate change in
stockholder's equity excluding changes in ownership interests. For the
Company, it is net income and the unrealized gains or losses on
available-for-sale securities net of taxes and reclassification adjustment.
<PAGE>
1. Summary of significant accounting policies (continued)
In March 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) 98-1, "Accounting for Costs of
Computer Software Developed or obtained for Internal Use." The SOP, which
is effective January 1, 1999, requires the capitalization of certain costs
incurred after the date of adoption to develop or obtain software for
internal use. Software utilized by the Company is owned by AEFC and will be
capitalized on AEFC's financial statements. As a result, the new rule will
not have a material impact on the Company's results of operations or
financial condition.
In December 1997, the AICPA issued SOP 97-3, "Accounting by Insurance and
Other Enterprises for Insurance-Related Assessments", providing guidance
for the timing of recognition of liabilities related to guaranty fund
assessments. The Company will adopt the SOP on January 1, 1999. The Company
has historically carried a balance in other liabilities on the balance
sheet for potential guaranty fund assessment exposure. Adoption of the SOP
will not have a material impact on the Company's results of operations or
financial condition
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which is
effective January 1, 2000. This Statement establishes accounting and
reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the balance sheet and measure those instruments at
fair value. The accounting for changes in the fair value of a derivative
depends on the intended use of the derivative and the resulting
designation. Earlier application of all of the provisions of this Statement
is encouraged, but it is permitted only as of the beginning of any fiscal
quarter that begins after issuance of the Statement. This Statement cannot
be applied retroactively. The ultimate financial impact of the new rule
will be measured based on the derivatives in place at adoption and cannot
be estimated at this time.
Reclassification
Certain 1997 and 1996 amounts have been reclassified to conform to the 1998
presentation.
<PAGE>
2. Investments
Fair values of investments in fixed maturities represent quoted market
prices and estimated values when quoted prices are not available. Estimated
values are determined by established procedures involving, among other
things, review of market indices, price levels of current offerings of
comparable issues, price estimates and market data from independent brokers
and financial files.
The amortized cost, gross unrealized gains and losses and fair value of
investments in fixed maturities at December 31, 1998 are as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Held to maturity Cost Gains Losses Value
---------------- -------------- ---- ------- ------ ---- -----
<S> <C> <C> <C> <C>
U.S. Government agency obligations $ 8,652 $ 423 $ -- $ 9,075
State and municipal obligations 3,003 149 -- 3,152
Corporate bonds and obligations 877,140 48,822 6,670 919,292
Mortgage-backed securities 192,398 2,844 29 195,213
------------ ---------- ---------- -----------
$1,081,193 $ 52,238 $ 6,699 $1,126,732
========== ======== ======= ==========
Available for sale
U.S. Government agency obligations $ 2,062 $ 116 $ -- $ 2,178
Corporate bonds and obligations 1,472,814 69,990 34,103 1,508,701
Mortgage-backed securities 1,051,836 32,232 89 1,083,979
----------- ---------- ----------- ---------
$2,526,712 $102,338 $34,192 $2,594,858
========== ======== ======= ==========
The amortized cost, gross unrealized gains and losses and fair value of
investments in fixed maturities at December 31, 1997 are as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Held to maturity Cost Gains Losses Value
---------------- -------------- ---- ------- -- ------ ---- -----
U.S. Government agency obligations $ 11,120 $ 710 $ -- $ 11,830
State and municipal obligations 3,003 173 -- 3,176
Corporate bonds and obligations 970,498 38,176 2,763 1,005,911
Mortgage-backed securities 202,061 1,497 1,367 202,191
------------ --------- ------- -----------
$1,186,682 $40,556 $4,130 $1,223,108
========== ======= ====== ==========
Available for sale
U.S. Government agency obligations $ 2,077 $ 13 $ -- $ 2,090
Corporate bonds and obligations 1,273,217 52,207 8,020 1,317,404
Mortgage-backed securities 1,334,327 33,017 1,039 1,366,305
----------- -------- ------- ----------
$2,609,621 $85,237 $9,059 $2,685,799
========== ======= ====== ==========
</TABLE>
<PAGE>
2. Investments (continued)
The amortized cost and fair value of investments in fixed maturities at
December 31, 1998 by contractual maturity are shown below. Expected
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
Amortized Fair
Held to maturity Cost Value
Due in one year or less $ 33,208 $ 33,499
Due from one to five years 215,010 227,139
Due from five to ten years 539,917 562,708
Due in more than ten years 100,660 108,173
Mortgage-backed securities 192,398 195,213
------------ ------------
$1,081,193 $1,126,732
Amortized Fair
Available for sale Cost Value
Due in one year or less $ 350 $ 358
Due from one to five years 96,412 101,441
Due from five to ten years 981,556 1,021,961
Due in more than ten years 396,558 387,119
Mortgage-backed securities 1,051,836 1,083,979
--------- ---------
$2,526,712 $2,594,858
During the years ended December 31, 1998, 1997 and 1996, fixed maturities
classified as held to maturity were sold with amortized cost of $31,117,
$29,561 and $27,969, respectively. Net gains and losses on these sales were
not significant. The sales of these fixed maturities were due to
significant deterioration in the issuers' creditworthiness.
In addition, fixed maturities available for sale were sold during 1998 with
proceeds of $48,492 and gross realized gains and losses of $2,835 and
$4,516, respectively. Fixed maturities available for sale were sold during
1997 with proceeds of $73,366 and gross realized gains and losses of $1,081
and $1,440, respectively. Fixed maturities available for sale were sold
during 1996 with proceeds of $47,542 and gross realized gains and losses of
$17 and $3,139, respectively.
At December 31, 1998, bonds carried at $3,292 were on deposit with various
states as required by law.
<PAGE>
2. Investments (continued)
At December 31, 1998, investments in fixed maturities comprised 82 percent
of the Company's total invested assets. These securities are rated by
Moody's and Standard & Poor's (S&P), except for securities carried at
approximately $480 million which are rated by AEFC internal analysts using
criteria similar to Moody's and S&P. A summary of investments in fixed
maturities, at amortized cost, by rating on December 31 is as follows:
Rating 1998 1997
---------------------- -- -------- -- ------
Aaa/AAA $1,242,301 $1,531,588
Aa/AA 45,526 34,167
Aa/A 60,019 69,775
A/A 422,725 421,733
A/BBB 228,656 222,022
Baa/BBB 1,030,874 954,962
Baa/BB 79,687 84,053
Below investment grade 498,117 478,003
------------ ------------
$3,607,905 $3,796,303
At December 31, 1998, approximately 94 percent of the securities rated
Aaa/AAA are GNMA, FNMA and FHLMC mortgage-backed securities. No holdings of
any other issuer are greater than one percent of the Company's total
investments in fixed maturities.
At December 31, 1998, approximately 18 percent of the Company's invested
assets were mortgage loans on real estate. Summaries of mortgage loans by
region of the United States and by type of real estate are as follows:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
----------------------- ---------------------
On Balance Commitments On Balance Commitments
Region Sheet to Purchase Sheet to Purchase
<S> <C> <C> <C> <C>
South Atlantic $198,552 $ 651 $186,714 $ 9,199
Middle Atlantic 129,284 520 128,239 10,167
East North Central 134,165 2,211 125,018 6,294
Mountain 113,581 -- 94,061 11,620
West North Central 119,380 9,626 96,701 11,135
New England 46,103 -- 50,932 --
Pacific 43,706 -- 33,052 --
West South Central 32,086 -- 19,573 --
East South Central 7,449 -- 7,480 --
--------- ------------ --------- ------------
824,306 13,008 741,770 48,415
Less allowance for losses 8,500 -- 3,718 --
---------- ------------ ---------- ------------
$815,806 $13,008 $738,052 $48,415
======== ======= ======== =======
</TABLE>
<PAGE>
2. Investments (continued)
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
------------------- -------------------
On Balance Commitments On Balance Commitments
Property type Sheet to Purchase Sheet to Purchase
<S> <C> <C> <C> <C>
Department/retail stores $253,380 $ 781 $242,307 $ 9,683
Apartments 186,030 2,211 189,752 10,167
Office buildings 206,285 9,496 169,177 7,262
Industrial buildings 82,857 520 60,195 17,430
Hotels/Motels 45,552 -- 33,508 --
Medical buildings 33,103 -- 30,103 3,873
Nursing/retirement homes 6,731 -- 9,552 --
Mixed Use 10,368 -- 7,176 --
---------- ------------ ----------- ------------
824,306 13,008 741,770 48,415
Less allowance for losses 8,500 -- 3,718 --
----------- ----------- ----------- -----------
$815,806 $13,008 $738,052 $48,415
======== ======= ======== =======
</TABLE>
Mortgage loan fundings are restricted by state insurance regulatory
authorities to 80 percent or less of the market value of the real estate at
the time of origination of the loan. The Company holds the mortgage
document, which gives it the right to take possession of the property if
the borrower fails to perform according to the terms of the agreement.
Commitments to purchase mortgages are made in the ordinary course of
business. The fair value of the mortgage commitments is $nil.
At December 31, 1998, the Company's recorded investment in impaired loans
was $1,932 with an allowance of $500. At December 31, 1997, the Company's
recorded investment in impaired loans was $4,443 with an allowance of $718.
During 1998 and 1997, the average recorded investment in impaired loans was
$2,736 and $6,473, respectively.
The Company recognized $251, $nil and $nil of interest income related to
impaired loans for the years ended December 31, 1998, 1997 and 1996,
respectively.
The following table presents changes in the allowance for investment losses
related to all loans:
<TABLE>
<CAPTION>
1998 1997 1996
- ---- - ---- - ----
<S> <C> <C> <C>
Balance, January 1 $3,718 $2,370 $ --
Provision for investment losses 4,782 1,805 2,370
Loan payoffs -- (457) --
---------- ------- ---------
Balance, December 31 $8,500 $3,718 $2,370
====== ====== ======
Net investment income for the years ended December 31 is summarized as
follows:
1998 1997 1996
- ----- -- ----- - ----
Interest on fixed maturities $285,260 $278,736 $230,559
Interest on mortgage loans 65,351 55,085 41,010
Interest on cash equivalents 137 704 1,402
Other (2,493) 1,544 1,194
----------- ------------- -----------
348,255 336,069 274,165
Less investment expenses 8,036 3,801 2,446
----------- ----------- -----------
$340,219 $332,268 $271,719
======== ======== ========
</TABLE>
<PAGE>
2. Investments (continued)
Net realized gain (loss) on investments for the years ended December 31 is
summarized as follows:
1998 1997 1996
-- ---- -- ---- -- ----
Fixed maturities $ 863 $ 1,638 $(2,888)
Mortgage loans (4,816) (1,348) (2,370)
Other investments (835) (799) --
-------- ------ ----------
$(4,788) $ (509) $(5,258)
======= ======= =======
Changes in net unrealized appreciation (depreciation) of investments for
the years ended December 31 are summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-- ---- -- ---- -- ----
<S> <C> <C> <C>
Fixed maturities available for sale $(8,032) $57,188 $(31,970)
</TABLE>
3. Income taxes
The Company qualifies as a life insurance company for federal income tax
purposes. As such, the Company is subject to the Internal Revenue Code
provisions applicable to life insurance companies.
The income tax expense (benefit) for the years ended December 31, consists
of the following:
1998 1997 1996
-- ---- -- ---- -- ----
Federal income taxes:
Current $ 23,227 $17,668 $7,124
Deferred (9,591) (2,485) 5,084
--------- -------- -------
13,636 15,183 12,208
State income taxes-current 759 1,462 704
----------- --------- --------
Income tax expense $ 14,395 $16,645 $12,912
======== ======= =======
Increases (decreases) to the federal income tax provision applicable to
pretax income based on the statutory rate, for the years ended December 31,
are attributable to:
<TABLE>
<CAPTION>
1998 1997 1996
----------- -------- -------
Provision Rate Provision Rate Provision Rate
Federal income taxes based
<S> <C> <C> <C> <C> <C> <C>
on the statutory rate $13,972 35.0% $15,735 35.0% $12,507 35.0%
Increases (decreases) are attributable to :
Tax-excluded interest (35) (0.1) (41) (0.1) (53) (0.1)
State tax, net of federal benefit 493 1.2 956 2.1 459 1.3
Other, net (35) -- (5) -- (1) --
------ ------ ------- ------ ------ ------
Federal income taxes $14,395 36.1% $16,645 37.0% $12,912 36.2%
======= ==== ======= ==== ======= ====
</TABLE>
<PAGE>
3. Income taxes (continued)
Significant components of the Company's deferred income tax assets and
liabilities as of December 31 are as follows:
Deferred income tax assets: 1998 1997
-------- -------
Policy reserves $51,298 $54,468
Other 2,214 1,736
--------- -------
Total deferred income tax assets 53,512 56,204
-------- ------
Deferred income tax liabilities:
Deferred policy acquisition costs 52,908 63,630
Investments 23,803 28,175
-------- ------
Total deferred income tax liabilities _76,711 91,805
------- --------
Net deferred income tax liabilities $23,199 $35,601
======= =======
The Company is required to establish a valuation allowance for any portion
of the deferred income tax assets that management believes will not be
realized. In the opinion of management, it is more likely than not that the
Company will realize the benefit of the deferred income tax assets and,
therefore, no such valuation allowance has been established.
4. Stockholder's equity
Retained earnings available for distribution as dividends to IDS Life are
limited to the Company's surplus as determined in accordance with
accounting practices prescribed by state insurance regulatory authorities.
Statutory unassigned surplus aggregated $45,716 and $17,392 as of December
31, 1998 and 1997, respectively. In addition, dividends in excess of
$37,902 would require approval by the Insurance Department of the state of
Indiana.
Statutory net income and stockholder's equity as of December 31, are
summarized as follows:
1998 1997 1996
-------- --------- -------
Statutory net income $ 37,902 $ 23,589 $ 9,138
Statutory stockholder's equity 330,588 302,264 250,975
5. Related party transactions
On December 31, 1998, the Company purchased interest rate floors from IDS
Life and entered into an interest rate swap with IDS Life to manage its
exposure to interest rate risk. The interest rate floors had a carrying
amount of $6,651 and $8,400 at December 31, 1998 and 1997, respectively.
The interest rate swap is an off balance sheet transaction.
The Company has no employees. Charges by IDS Life for services and use of
other joint facilities aggregated $28,482, $24,535 and $17,936 for the
years ended December 31, 1998, 1997 and 1996, respectively. Certain of
these costs are included in deferred policy acquisition costs.
<PAGE>
6. Lines of credit
The Company has an available line of credit with AEFC aggregating $50,000.
The rate for the line of credit is the parent's cost of funds, established
by reference to various indices plus 20 to 45 basis points, depending on
the term. There were no borrowings outstanding under this agreement at
December 31, 1998 or 1997.
7. Derivative financial instruments
The Company enters into transactions involving derivative financial
instruments to manage its exposure to interest rate risk, including hedging
specific transactions. The Company does not hold derivative instruments for
trading purposes. The Company manages risks associated with these
instruments as described below.
Market risk is the possibility that the value of the derivative financial
instruments will change due to fluctuations in a factor from which the
instrument derives its value, primarily an interest rate. The Company is
not impacted by market risk related to derivatives held for non-trading
purposes beyond that inherent in cash market transactions. Derivatives are
largely used to manage risk and, therefore, the cash flow and income
effects of the derivatives are inverse to the effects of the underlying
transactions.
Credit risk is the possibility that the counterparty will not fulfill the
terms of the contract. The Company monitors credit risk related to
derivative financial instruments through established approval procedures,
including setting concentration limits by counterparty, and requiring
collateral, where appropriate. A vast majority of the Company's
counterparties are rated A or better by Moody's and Standard & Poor's.
Credit risk related to interest rate caps and floors is measured by
replacement cost of the contracts. The replacement cost represents the fair
value of the instruments.
The notional or contract amount of a derivative financial instrument is
generally used to calculate the cash flows that are received or paid over
the life of the agreement. Notional amounts are not recorded on the balance
sheet. Notional amounts far exceed the related credit exposure.
The Company's holdings of derivative financial instruments are as follows:
<TABLE>
<CAPTION>
Notional Carrying Fair Total Credit
December 31, 1998 Amount Amount Value Exposure
----------------- ------ - ------ -- ----- --------
Assets:
<S> <C> <C> <C> <C>
Interest rate caps $ 900,000 $ 5,452 $ 1,518 $ 1,518
Interest rate floors 1,000,000 6,651 17,798 17,798
Interest rate swaps 1,000,000 -- -- --
------------- ------------ -------------
$12,103 $19,316 $19,316
= ======= ======= =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
7. Derivative financial instruments (continued)
Notional Carrying Fair Total Credit
December 31, 1997 Amount Amount Value Exposure
----------------- - ------ -- ------ -- ----- -- --------
Assets:
<S> <C> <C> <C> <C>
Interest rate caps $ 900,000 $ 7,624 $ 5,340 $ 5,340
Interest rate floors 1,000,000 8,400 8,400 8,400
Interest rate swaps 1,000,000 -- -- --
------------- ------------ ------------
$16,024 $13,740 $13,740
======= ======= =======
</TABLE>
The fair values of derivative financial instruments are based on market
values, dealer quotes or pricing models. All interest rate caps, floors and
swaps will expire on various dates from 2000 to 2003.
Interest rate caps, floors and swaps are used to manage the Company's
exposure to interest rate risk. These instruments are used primarily to
protect the margin between interest rates earned on investments and the
interest rates credited to related annuity contract holders.
8. Fair values of financial instruments
The Company discloses fair value information for most on- and off-balance
sheet financial instruments for which it is practicable to estimate that
value. Fair value of life insurance obligations, receivables and all
non-financial instruments, such as deferred acquisition costs are excluded.
Off-balance sheet intangible assets are also excluded. Management believes
the value of excluded assets and liabilities is significant. The fair value
of the Company, therefore, cannot be estimated by aggregating the amounts
presented.
<TABLE>
<CAPTION>
December 31,
1998 1997
-------- --------
Carrying Fair Carrying Fair
Financial Assets Amount Value Amount Value
Investments:
Fixed maturities (Note 2):
<S> <C> <C> <C> <C>
Held to maturity $1,081,193 $1,126,732 $1,186,682 $1,223,108
Available for sale 2,594,858 2,594,858 2,685,799 2,685,799
Mortgage loans on real estate (Note 2) 815,806 874,064 738,052 775,869
Derivative financial instruments (Note 7) 12,103 19,316 16,024 13,740
Separate account assets (Note 1) 123,185 123,185 62,087 62,087
Financial Liabilities
Future policy benefits for fixed annuities $4,152,059 $4,000,789 $4,330,173 $4,152,471
Separate account liabilities 123,185 115,879 62,087 58,116
</TABLE>
At December 31, 1998 and 1997, the carrying amount and fair value of future
policy benefits for fixed annuities exclude life insurance-related
contracts carried at $14,793 and $13,040, respectively. The fair value of
these benefits is based on the status of the annuities at December 31, 1998
and 1997.
<PAGE>
8. Fair values of financial instruments (continued)
The fair values of deferred annuities and separate account liabilities are
estimated as the carrying amount less applicable surrender charges. The
fair value for annuities in non-life contingent payout status is estimated
as the present value of projected benefit payments at rates appropriate for
contracts issued in 1998 and 1997.
9. Commitments and contingencies
A number of lawsuits have been filed against life and health insurers in
jurisdictions in which the Company conducts business involving insurers'
sales practices, alleged agent misconduct, failure to properly supervise
agents, and other matters. The Company, along with AEFC and its insurance
subsidiaries, has been named as a defendant in one of these types of
actions.
The plaintiffs purport to represent a class consisting of all persons who
purchased policies or contracts from IDS Life and its subsidiaries. The
complaint puts at issue various alleged sales practices and
misrepresentations, alleged breaches of fiduciary duties and alleged
violations of consumer fraud statutes. IDS Life and its subsidiaries
believe they have meritorious defenses to the claims raised in this
lawsuit.
The outcome of any litigation cannot be predicted with certainty. In the
opinion of management, however, the ultimate resolution of this lawsuit
should not have a material adverse effect on the Company's financial
position.
10. Year 2000 Issue (Unaudited)
The Year 2000 issue is the result of computer programs having been written
using two digits rather than four to define a year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900
rather than 2000. This could result in the failure of major systems or
miscalculations, which could have a material impact on the operations of
the Company. All of the major systems used by the Company are maintained by
AEFC and are utilized by multiple subsidiaries and affiliates of AEFC. The
Company's business is heavily dependent upon AEFC's computer systems and
has significant interactions with systems of third parties.
A comprehensive review of AEFC's computer systems and business processes,
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 December 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 the Company'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 or the company.
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 20000 considerations and will contine to be refined throughout 1999 as
additional information related to potential Year 2000 exposure is gathered.
<PAGE>
PART C.
Item 24. Financial Statements and Exhibits
(a) Financial Statements included in Part B of this Registration Statement:
The audited financial statements of the variable account including:
Statements of net assets as of Dec. 31, 1998;
Statements of operations for the year ended Dec. 31, 1998; and
Statements of changes in net assets for the years ended Dec. 31, 1998
and 1997.
Notes to Financial Statements.
Report of Independent Auditors dated March 12, 1999.
The audited financial statements of American Enterprise Life Insurance Company
including:
Balance sheets as of Dec. 31, 1998 and 1997; and
Related statements of income, stockholder's equity and cash flows for
the years ended Dec. 31, 1998, 1997, and 1996.
Notes to Financial Statements.
Report of Independent Auditors dated Feb. 4, 1999.
(b) Exhibits:
1.1 Resolution of the Executive Committee of the Board of Directors of American
Enterprise Life establishing the American Enterprise Variable Annuity
Account dated July 15, 1987, filed electronically as Exhibit 1 to the
Initial Registration Statement No. 33-54471, filed on or about July 5,
1994, is incorporated herein by reference.
1.2 Resolution of the Board of Directors of American Enterprise Life
establishing 37 additional subaccounts within the separate account dated
June 29, 1999, filed electronically as Exhibit 1.2 to Pre-Effective
Amendment No. 1 to American Enterprise Variable Annuity Account
Registration Statement No. 333-67595, filed on or about July 8, 1999, is
incorporated herein by reference.
2. Not applicable.
3. Form of Master General Agent Agreement for American Enterprise Life
Insurance Company Variable Annuities (form 9802B) is filed electronically
herewith.
4.1 Form of Deferred Annuity Contract (form 43431) is filed electronically
herewith.
4.2 Form of Roth IRA Endorsement (form 43094) is filed electronically herewith.
4.3 Form of SEP-IRA Endorsement (form 43433) is filed electronically herewith.
4.4 Form of TSA Endorsement (form 43413) filed electronically as Exhibit 4.4 to
Pre-Effective Amendment No. 1 to American Enterprise Variable Annuity
Account Registration Statement No. 333-67595, filed on or about July 8,
1999, is incorporated herein by reference.
5. Form of Variable Annuity Application (form 43432) is filed electronically
herewith.
<PAGE>
6.1 Amendment and Restatement of Articles of Incorporation of American
Enterprise Life dated July 29, 1986, filed electronically as Exhibit 6.1 to
the Initial Registration Statement No. 33-54471, filed on or about July 5,
1994, is incorporated herein by reference.
6.2 Amended By-Laws of American Enterprise Life, filed electronically as
Exhibit 6.2 to the Initial Registration Statement No. 33-54471, filed on or
about July 5, 1994, is incorporated herein by reference.
7. Not applicable.
8.1 Form of Participation Agreement among Royce Capital Fund, Royce &
Associates, Inc. and American Enterprise Life Insurance Company is
filed electronically herewith.
8.2(a) Copy of Participation Agreement among Putnam Capital Manager Trust,
Putnam Mutual Funds Corp. and American Enterprise Life Insurance Company,
dated January 16, 1995, filed electronically as Exhibit 8.2 to
Post-Effective Amendment No. 2 to Registration Statement No. 33-54471, is
incorporated herein by reference.
8.2(b) Form of Amendment No. 4 to Participation Agreement among Putnam Capital
Manager Trust, Putnam Mutual Funds Corp. and American Enterprise Life
Insurance Company dated June 15, 1999 is filed electronically herewith.
8.3 Form of Participation Agreement among Templeton Variable Products
Series Fund, Franklin Templeton Variable Insurance Products Trust, Franklin
Templeton Distributors, Inc. and American Enterprise Life Insurance Company
is filed electronically herewith.
8.4(a) Copy of Participation Agreement among Goldman Sachs Variable Insurance
Trust, Goldman Sachs & Co. and American Enterprise Life Insurance Company,
dated April 1, 1999, is filed electronically herewith.
8.4(b) Form of Amendment 1 to Schedule 2 to Participation Agreement among
Goldman Sachs Variable Insurance Trust, Goldman Sachs & Co. and American
Enterprise Life Insurance Company is filed electronically herewith.
8.4(c) Form of Amendment 1 to Schedule 3 to Participation Agreement among
Goldman Sachs Variable Insurance Trust, Goldman Sachs & Co. and American
Enterprise Life Insurance Company is filed electronically herewith.
9. Opinion of counsel and consent to its use as to the legality of the
securities being registered filed electronically herewith.
10. Consent of Independent Auditors filed electronically herewith.
11. None.
12. Not applicable.
13. Copy of schedule for computation of each performance quotation provided in
the Registration Statement in response to Item 21, filed electronically as
Exhibit 13 to the Initial Registration Statement No. 33-54471, filed on or
about July 5, 1994, is incorporated herein by reference.
14. Not applicable.
15.1 Power of Attorney to sign this Registration Statement, dated March 28,
1997, filed electronically as Exhibit 15 to Post-Effective Amendment No. 7
to Registration Statement No. 33-54471, is incorporated herein by
reference.
15.2 Power of Attorney to sign this Registration Statement, dated April 9, 1998,
filed electronically as Exhibit 15.2 to Post-Effective Amendment No. 10 to
Registration Statement No. 33-54471, is incorporated herein by reference.
15.3 Power of Attorney to sign this Pre-Effective Amendment, dated July 29,
1999, is filed electronically herewith.
<PAGE>
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
<PAGE>
IDS Insurance Agency of North Carolina Inc. North Carolina
IDS Insurance Agency of Utah Inc. Utah
IDS Insurance Agency of Wyoming Inc. Wyoming
IDS Life Insurance Company Minnesota
IDS Life Insurance Company of New York New York
IDS Management Corporation Minnesota
IDS Partnership Services Corporation Minnesota
IDS Plan Services of California, Inc. Minnesota
IDS Property Casualty Insurance Company Wisconsin
IDS Real Estate Services, Inc. Delaware
IDS Realty Corporation Minnesota
IDS Sales Support Inc. Minnesota
IDS Securities Corporation Delaware
Investors Syndicate Development Corp. Nevada
Public Employee Payment Company Minnesota
</TABLE>
Item 27. Number of Contract owners
Not applicable.
Item 28. Indemnification
The By-Laws of the depositor provide that the Corporation
shall have the power to indemnify a director, officer, agent
or employee of the Corporation pursuant to the provisions of
applicable statues or pursuant to contract.
The Corporation may purchase and maintain insurance on behalf
of any director, officer, agent or employee of the Corporation
against any liability asserted against or incurred by the
director, officer, agent or employee in such capacity or
arising out of the director's, officer's, agent's or
employee's status as such, whether or not the Corporation
would have the power to indemnify the director, officer, agent
or employee against such liability under the provisions of
applicable law.
The By-Laws of the depositor provide that it shall indemnify a
director, officer, agent or employee of the depositor pursuant
to the provisions of applicable statutes or pursuant to
contract.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it
is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
<PAGE>
Item 29 Principal Underwriters
(a) American Express Financial Advisors acts as principal underwriter
for the following investment companies:
AXP Bond Fund, Inc.; AXP California Tax-Exempt Trust; AXP Discovery
Fund, Inc.; AXP Equity Select Fund, Inc.; AXP Extra Income Fund, Inc.;
AXP Federal Income Fund, Inc.; AXP Global Series, Inc.; AXP Growth
Fund, Inc.; AXP High Yield Tax-Exempt Fund, Inc.; AXP International
Fund, Inc.; AXP Investment Series, Inc.; AXP Managed Retirement Fund,
Inc.; AXP Market Advantage Series, Inc.; AXP Money Market Series, Inc.;
AXP New Dimensions Fund, AXP.; AXP Precious Metals Fund, Inc.; AXP
Progressive Fund, Inc.; AXP Selective Fund, Inc.; AXP Special
Tax-Exempt Series Trust; AXP Stock Fund, Inc.; AXP Strategy Fund, Inc.;
AXP Tax-Exempt Bond Fund, Inc.; AXP Tax-Free Money Fund, Inc.; AXP
Utilities Income Fund, Inc., Growth Trust; Growth and Income Trust;
Income Trust, Tax-Free Income Trust, World Trust and IDS Certificate
Company.
(b) As to each director, officer or partner of the principal underwriter:
<TABLE>
<CAPTION>
<S> <C> <C>
Name and Principal Business Address Position and Offices with Positions with Offices with
Underwriter Registrant
- - ------------------------------------------ ------------------------------------ -----------------------------
Ronald. G. Abrahamson Vice President - Service Quality None
IDS Tower 10 and Reengineering
Minneapolis, MN 55440
Douglas A. Alger Senior Vice President - Human None
IDS Tower 10 Resources
Minneapolis, MN 55440
Peter J. Anderson Senior Vice President - Investment Vice President
IDS Tower 10 Operations
Minneapolis, MN 55440
Ward D. Armstrong Vice President-American Express None
IDS Tower 10 Retirement Services
Minneapolis, MN 55440
John M. Baker Vice President - Plan Sponsor None
IDS Tower 10 Services
Minneapolis, MN 55440
Joseph M. Barksy, III Vice President - Senior Portfolio None
IDS Tower 10 Manager
Minneapolis, MN 55440
Timothy V. Bechtold Vice President - Risk Management None
IDS Tower 10 Products
Minneapolis, MN 55440
John D. Begley Group Vice President - Ohio/Indiana None
Suite 100
7760 Olentangy River Rd.
Columbus, OH 43235
Brent L. Bisson Group Vice President - Los Angeles None
Suite 900 Metro
E. Westside Twr
11835 West Olympic Blvd.
Los Angeles, CA 90064
<PAGE>
John C. Boeder Vice President - Nonproprietary None
IDS Tower 10 Products
Minneapolis, MN 55440
Walter K. Booker Group Vice President - New Jersey None
IDS Tower 10
Minneapolis, MN 55440
Bruce J. Bordelon Group Vice President - Gulf States None
Galleria One Suite 1900
Galleria Blvd.
Metairie, LA 70001
Charles R. Branch Group Vice President - Northwest None
Suite 200
West 111 North River Dr.
Spokane, WA 99201
<PAGE>
Douglas W. Brewers Vice President - Sales Support None
IDS Tower 10
Minneapolis, MN 55440
Karl J. Breyer Corporate Senior Vice President None
IDS Tower 10
Minneapolis, MN 55440
Cynthia M. Carlson Vice President - American Express None
IDS Tower 10 Securities Services
Minneapolis, MN 55440
Mark W. Carter Senior Vice President and Chief None
IDS Tower 10 Marketing Officer
Minneapolis, MN 55440
James E. Choat Senior Vice President - Director, President and
IDS Tower 10 Institutional Products Group Chief Executive Officer
Minneapolis, MN 55440
Kenneth J. Ciak Vice President and General Manager None
IDS Property Casualty - IDS Property Casualty
1400 Lombardi Avenue
Green Bay, WI 54304
Paul A. Connolly Vice President - Advisor Staffing, None
IDS Tower 10 Training and Support
Minneapolis, MN 55440
Henry J. Cormier Group Vice President - Connecticut None
Commerce Center One
333 East River Drive
East Hartford, CT 06108
John M. Crawford Group Vice President - None
Suite 200 Arkansas/Springfield/Memphis
10800 Financial Ctr Pkwy
Little Rock, AR 72211
Kevin F. Crowe Group Vice President - None
Suite 312 Carolinas/Eastern Georgia
7300 Carmel Executive Pk
Charlotte, NC 28226
<PAGE>
Colleen Curran Vice President and Assistant None
IDS Tower 10 General Counsel
Minneapolis, MN 55440
Luz Maria Davis Vice President - Communications None
IDS Tower 10
Minneapolis, MN 55440
Scott M. DiGiammarino Group Vice President - None
Suite 500 Washington/Baltimore
8045 Leesburg Pike
Vienna, VA 22182
Bradford L. Drew Group Vice President - Eastern None
Two Datran Center Florida
Penthouse One B
9130 S. Dadeland Blvd.
Miami, FL 33156
Douglas K. Dunning Vice President - Assured Assets None
IDS Tower 10 Product Development and Management
Minneapolis, MN 55440
James P. Egge Group Vice President - Western None
4305 South Louise, Suite 202 Iowa, Nebraska, Dakotas
Sioux Falls, SD 57103
Gordon L. Eid Senior Vice President, General None
IDS Tower 10 Counsel and Chief Compliance
Minneapolis, MN 55440 Officer
Robert M. Elconin Vice President - Government None
IDS Tower 10 Relations
Minneapolis, MN 55440
Phillip W. Evans, Group Vice President - Rocky None
Suite 600 Mountain
6985 Union Park Center
Midvale, UT 84047-4177
Gordon M. Fines Vice President - Mutual Fund None
IDS Tower 10 Equity Investments
Minneapolis, MN 55440
Douglas L. Forsberg Vice President - Institutional None
IDS Tower 10 Products Group
Minneapolis, MN 55440
Jeffrey P. Fox Vice President and Corporate None
IDS Tower 10 Controller
Minneapolis, MN 55440
William P. Fritz Group Vice President - Gateway None
Suite 160
12855 Flushing Meadows Dr.
St. Louis, MO 63131
Carl W. Gans Group Vice President - Twin City None
8500 Tower Suite 1770 Metro
8500 Normandale Lake Blvd.
Bloomington, MN 55437
<PAGE>
David A. Hammer Vice President and Marketing None
IDS Tower 10 Controller
Minneapolis, MN 55440
Teresa A. Hanratty Group Vice President - Northern None
Suites 6&7 New England
169 South River Road
Bedford, NH 03110
Robert L. Harden Group Vice President - Boston Metro None
Two Constitution Plaza
Boston, MA 02129
Lorraine R. Hart Vice President - Insurance Vice President, Investments
IDS Tower 10 Investments
Minneapolis, MN 55440
Scott A. Hawkinson Vice President and Controller - None
IDS Tower 10 Private Client Group
Minneapolis, MN 55440
Brian M. Heath Group Vice President - North Texas None
Suite 150
801 E. Campbell Road
Richardson, TX 75081
Janis K. Heaney Vice President - Incentive None
IDS Tower 10 Management
Minneapolis, MN 55440
James G. Hirsh Vice President and Assistant None
IDS Tower 10 General Counsel
Minneapolis, MN 55440
Jon E. Hjelm Group Vice President - Rhode None
310 Southbridge Street Island/Central - Western
Auburn, MA 01501 Massachusetts
David J. Hockenberry Group Vice President - Tennessee None
30 Burton Hills Blvd. Valley
Suite 175
Nashville, TN 37215
Jeffrey S. Horton Vice President and Treasurer None
IDS Tower 10
Minneapolis, MN 55440
David R. Hubers Chairman, President and Chief Board member
IDS Tower 10 Executive Officer
Minneapolis, MN 55440
Martin G. Hurwitz Vice President - Senior Portfolio None
IDS Tower 10 Manager
Minneapolis, MN 55440
James M. Jensen Vice President - Insurance Product None
IDS Tower 10 Development and Management
Minneapolis, MN 55440
<PAGE>
Marietta L. Johns Senior Vice President - Field None
IDS Tower 10 Management
Minneapolis, MN 55440
Nancy E. Jones Vice President - Business None
IDS Tower 10 Development
Minneapolis, MN 55440
Ora J. Kaine Vice President - Financial None
IDS Tower 10 Advisory Services
Minneapolis, MN 55440
Linda B. Keene Vice President - Market Development None
IDS Tower 10
Minneapolis, MN 55440
G. Michael Kennedy Vice President - Investment None
IDS Tower 10 Services and Investment Research
Minneapolis, MN 55440
Susan D. Kinder Senior Vice President - None
IDS Tower 10 Distribution Services
Minneapolis, MN 55440
Richard W. Kling Senior Vice President - Products Director and Chairman of
IDS Tower 10 the Board
Minneapolis, MN 55440
John M. Knight Vice President - Investment Treasurer
IDS Tower 10 Accounting
Minneapolis, MN 55440
Paul F. Kolkman Vice President - Actuarial Finance None
IDS Tower 10
Minneapolis, MN 55440
Claire Kolmodin Vice President - Service Quality None
IDS Tower 10
Minneapolis, MN 55440
David S. Kreager Group Vice President - Greater None
Suite 108 Michigan
Trestle Bridge V
5126 Lovers Lane
Kalamazoo, MI 49002
Steven C. Kumagai Director and Senior Vice President None
IDS Tower 10 - Field Management and Business
Minneapolis, MN 55440 Systems
Mitre Kutanovski Group Vice President - Chicago None
Suite 680 Metro
8585 Broadway
Merrillville, IN 48410
Kurt A. Larson Vice President - Senior Portfolio None
IDS Tower 10 Manager
Minneapolis, MN 55440
<PAGE>
Lori J. Larson Vice President - Brokerage and None
IDS Tower 10 Direct Services
Minneapolis, MN 55440
Daniel E. Laufenberg Vice President and Chief U.S. None
IDS Tower 10 Economist
Minneapolis, MN 55440
Peter A. Lefferts Senior Vice President - Corporate None
IDS Tower 10 Strategy and Development
Minneapolis, MN 55440
Douglas A. Lennick Director and Executive Vice None
IDS Tower 10 President - Private Client Group
Minneapolis, MN 55440
Mary J. Malevich Vice President - Senior Portfolio None
IDS Tower 10 Manager
Minneapolis, MN 55440
Fred A. Mandell Vice President - Field Marketing None
IDS Tower 10 Readiness
Minneapolis, MN 55440
Daniel E. Martin Group Vice President - Pittsburgh None
Suite 650 Metro
5700 Corporate Drive
Pittsburgh, PA 15237
Sarah A. Mealey Vice President - Mutual Funds None
IDS Tower 10
Minneapolis, MN 55440
Paula R. Meyer Vice President - Assured Assets Director and Executive Vice
IDS Tower 10 President - Assured Assets
Minneapolis, MN 55440
William P. Miller Vice President and Senior None
IDS Tower 10 Portfolio Manager
Minneapolis, MN 55440
James A. Mitchell Executive Vice President - None
IDS Tower 10 Marketing and Products
Minneapolis, MN 55440
Pamela J. Moret Vice President - Variable Assets None
IDS Tower 10
Minneapolis, MN 55440
Alan D. Morgenstern Group Vice President - Central None
Suite 200 California/Western Nevada
3500 Market Street
Camp Hill, NJ 17011
Barry J. Murphy Senior Vice President - Client None
IDS Tower 10 Service
Minneapolis, MN 55440
Mary Owens Neal Vice President - Mature Market None
IDS Tower 10 Segment
Minneapolis, MN 55440
<PAGE>
Thomas V. Nicolosi Group Vice President - New York None
Suite 220 Metro Area
500 Mamaroneck Avenue
Harrison, NY 10528
Michael J. O'Keefe Vice President - Advisory Business None
IDS Tower 10 Systems
Minneapolis, MN 55440
James R. Palmer Vice President - Taxes None
IDS Tower 10
Minneapolis, MN 55440
Marc A. Parker Group Vice President - None
10200 SW Greenburg Road Portland/Eugene
Suite 110
Portland, OR 97223
Carla P. Pavone Vice President - Compensation and None
IDS Tower 10 Field Administration
Minneapolis, MN 55440
Thomas P. Perrine Senior Vice President - Group None
IDS Tower 10 Relationship Leader/American
Minneapolis, MN 55440 Express Technologies Financial
Services
Susan B. Plimpton Vice President - Marketing Services None
IDS Tower 10
Minneapolis, MN 55440
Larry M. Post Group Vice President - None
One Tower Bridge Philadelphia Metro
100 Front Street, 8th Fl
West Conshohocken, PA 19428
Ronald W. Powell Vice President and Assistant None
IDS Tower 10 General Counsel
Minneapolis, MN 55440
Diana R. Prost Group Vice President - None
3030 N.W. Expressway Kansas/Oklahoma
Suite 900
Oklahoma City, OK 73112
James M. Punch Vice President and Project Manager None
IDS Tower 10 - Platform I Value Enhanced
Minneapolis, MN 55440
Frederick C. Quirsfeld Senior Vice President - Fixed None
IDS Tower 10 Income
Minneapolis, MN 55440
Rollyn C. Renstrom Vice President - Corporate None
IDS Tower 10 Planning and Analysis
Minneapolis, MN 55440
R. Daniel Richardson Group Vice President - Southern None
Suite 800 Texas
Arboretum Plaza One
9442 Capital of Texas Hwy. N
Austin, TX 78759
<PAGE>
ReBecca K. Roloff Senior Vice President - Field None
IDS Tower 10 Management and Financial Advisory
Minneapolis, MN 55440 Service
Stephen W. Roszell Senior Vice President - None
IDS Tower 10 Institutional
Minneapolis, MN 55440
Max G. Roth Group Vice President - None
Suite 201 S. IDS Ctr Wisconsin/Upper Michigan
1400 Lombardi Avenue
Green Bay, WI 54304
Erven A. Samsel Senior Vice President - Field None
45 Braintree Hill Park Management
Suite 402
Braintree, MA 02184
Russell L. Scalfano Group Vice President - None
Suite 201 Illinois/Indiana/Kentucky
101 Plaza East Blvd.
Evansville, IN 47715
William G. Scholz Group Vice President - Arizona/Las None
Suite 205 Vegas
7333 E. Doubletree Ranch Rd
Scottsdale, AZ 85258
Stuart A. Sedlacek Senior Vice President and Chief Executive Vice President
IDS Tower 10 Financial Officer
Minneapolis, MN 55440
Donald K. Shanks Vice President - Property Casualty None
IDS Tower 10
Minneapolis, MN 55440
F. Dale Simmons Vice President - Senior Portfolio Vice President, Real Estate
IDS Tower 10 Manager, Insurance Investments Loan Management
Minneapolis, MN 55440
Judy P. Skoglund Vice President - Quality and None
IDS Tower 10 Service Support
Minneapolis, MN 55440
James B. Solberg Group Vice President - Eastern None
466 Westdale Mall Iowa Area
Cedar Rapids, IA 52404
Bridget Sperl Vice President - Geographic None
IDS Tower 10 Service Teams
Minneapolis, MN 55440
Paul J. Stanislaw Group Vice President - Southern None
Suite 1100 California
Two Park Plaza
Irvine, CA 92714
Lisa A. Steffes Vice President - Cardmember None
IDS Tower 10 Initiatives
Minneapolis, MN 55440
<PAGE>
Lois A. Stilwell Group Vice President - Outstate None
Suite 433 Minnesota Area/North
9900 East Bren Road Dakota/Western Wisconsin
Minnetonka, MN 55343
William A. Stoltzmann Vice President and Assistant Director, Vice President,
IDS Tower 10 General Counsel General Counsel and
Minneapolis, MN 55440 Secretary
James J. Strauss Vice President and General Auditor None
IDS Tower 10
Minneapolis, MN 55440
Jeffrey J. Stremcha Vice President - Information None
IDS Tower 10 Resource Management/ISD
Minneapolis, MN 55440
Barbara Stroup Stewart Vice President - Channel None
IDS Tower 10 Development
Minneapolis, MN 55440
Craig P. Taucher Group Vice President - None
Suite 150 Orlando/Jacksonville
4190 Belfort Road
Jacksonville, FL 32216
Neil G. Taylor Group Vice President - None
Suite 425 Seattle/Tacoma/Hawaii
101 Elliott Avenue West
Seattle, WA 98119
John R. Thomas Senior Vice President None
IDS Tower 10
Minneapolis, MN 55440
Peter S. Velardi Group Vice President - None
Suite 180 Atlanta/Birmingham
1200 Ashwood Parkway
Atlanta, GA 30338
Charles F. Wachendorfer Group Vice President - Detroit None
Suite 100 Metro
Stanford Plaza II
7979 East Tufts Ave. Pkwy
Denver, CO 80237
Wesley W. Wadman Vice President - Senior Portfolio None
IDS Tower 10 Manager
Minneapolis, MN 55440
Donald F. Weaver Group Vice President - Greater None
3500 Market Street, Suite 200 Pennsylvania
Camp Hill, PA 17011
Norman Weaver Jr. Senior Vice President - Field None
1010 Main St., Suite 2B Management
Huntington Beach, CA 92648
Michael L. Weiner Vice President - Tax Research and None
IDS Tower 10 Audit
Minneapolis, MN 55440
<PAGE>
Lawrence J. Welte Vice President - Investment None
IDS Tower 10 Administration
Minneapolis, MN 55440
Jeffry M. Welter Vice President - Equity and Fixed None
IDS Tower 10 Income Trading
Minneapolis, MN 55440
Thomas L. White Group Vice President - Cleveland None
Suite 200 Metro
28601 Chagrin Blvd.
Woodmere, OH 44122
Eric S. Williams Group Vice President - Virginia None
Suite 250
3951 Westerre Parkway
Richmond, VA 23233
William J. Williams Group Vice President - Western None
Two North Tamiami Trail Florida
Suite 702
Sarasota, FL 34236
<PAGE>
Edwin M. Wistrand Vice President and Assistant None
IDS Tower 10 General Counsel
Minneapolis, MN 55440
Michael D. Wolf Vice President - Senior Portfolio None
IDS Tower 10 Manager
Minneapolis, MN 55440
Michael R. Woodward Senior Vice President - Field None
32 Ellicott St. Management
Suite 100
Batavia, NY 14020
Item 29(c)
Net Underwriting
Name of Principal Discounts and Compensation on Brokerage
Underwriter Commissions Redemption Commissions Compensation
American Express $4,415,795 $199,062 None None
Financial Advisors
Inc.
</TABLE>
<PAGE>
Item 30. Location of Accounts and Records
American Enterprise Life Insurance Company
IDS Tower 10
Minneapolis, MN 55402
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) Registrant undertakes that it will file a post-effective
amendment to this registration statement as frequently as is
necessary to ensure that the audited financial statements in
the registration statement are never more than 16 months old
for so long as payments under the variable annuity contracts
may be accepted.
(b) Registrant undertakes that it will include either (1) as part
of any application to purchase a contract offered by the
prospectus, a space that an applicant can check to request a
Statement of Additional Information, or (2) a post card or
similar written communication affixed to or included in the
prospectus that the applicant can remove to send for a
Statement of Additional Information.
(c) Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made
available under this Form promptly upon written or oral
request to American Enterprise Life Contract Owner Service at
the address or phone number listed in the prospectus.
(d) 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 4th 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 4th 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* Director and Chairman of the Board
Richard W. Kling
/s/ Paul S. Mannweiler* Director
Paul S. Mannweiler
/s/ Paula R. Meyer*** Executive Vice President, Assured Assets
Paula R. Meyer
/s/ William A. Stoltzmann* Director, Vice President, General
William A. Stoltzmann Counsel and Secretary
/s/ Philip C. Wentzel** Vice President and Controller
Philip C. Wentzel
<PAGE>
*Signed pursuant to Power of Attorney, dated March 28, 1997, filed
electronically as Exhibit 15 to Post-Effective Amendment No. 7 to Registration
Statement No. 33-54471, filed on or about April 23, 1997, incorporated herein by
reference.
**Signed pursuant to Power of Attorney, dated April 9, 1998, filed
electronically as Exhibit 15.2 to Post-Effective Amendment No. 10 to
Registration Statement No. 33-54471, filed on or about April 30, 1998,
incorporated herein by reference.
***Signed pursuant to Power of Attorney, dated July 29, 1999, filed
electronically as Exhibit 15.3 herewith.
By: /s/ Eileen Newhouse
Eileen Newhouse
<PAGE>
CONTENTS OF PRE-EFFECTIVE AMENDMENT NO. 1 TO REGISTRATION STATEMENT
This Pre-Effective Amendment is comprised of the following papers and documents:
The Cover Page.
Part A.
The prospectus.
Part B.
Statement of Additional Information.
Financial Statements
Part C.
Other Information.
The signatures.
Exhibits.
<PAGE>
American Express Signature Variable Annuity
File No.333-74865/811-07195
EXHIBIT INDEX
Exhibit 3 Master General Agent
Exhibit 4.1 Deferred Annuity Contract (form 43431)
Exhibit 4.2 Roth IRA Endorsement (form 43094)
Exhibit 4.3 SEP-IRA Endorsement (form 43433)
Exhibit 5 Variable Annuity Application (form 43432)
Exhibit 8.1 Participation Agreement (Royce)
Exhibit 8.2 (b) Participation Agreement (Putnam)
Exhibit 8.3 Participation Agreement (Templeton)
Exhibit 8.4 (a) Participation Agreement (Goldman)
Exhibit 8.4 (b) Amendment 1 to Schedule 2 (Goldman)
Exhibit 8.4 (c) Amendment 1 to Schedule 3 (Goldman)
Exhibit 9 Opinion of Counsel
Exhibit 10 Consent of Independent Auditors
Exhibit 15.3 Power of Attorney
Master General Agent Agreement
for American Enterprise Life Insurance Company
Variable Annuities
This MASTER GENERAL AGENT AGREEMENT ("Agreement") is entered into by
and between American Enterprise Life Insurance Company ("Company"), American
Express Financial Advisors Inc. ("Distributor"), Securities America, Inc.
("Master General Agent" or "MGA"), and Securities America, Inc., (the
broker-dealer for MGA, for purposes of this Agreement, "Master General Agent's
Broker" or "MGA's Broker"), effective as of June 1, 1998 (the "Effective Date").
MGA's affiliates which have executed an Affiliate Participation Agreement set
forth in Exhibit B of this Agreement or a substantially similar agreement
acceptable to Company and Distributor ("Participation Agreement") will also be
parties to this Agreement, as of the effective date of the Participation
Agreement.
Recitals
The purpose of this Agreement is to establish the terms and conditions
under which MGA and MGA's Broker will arrange for banks and insurance agencies
affiliated and/or under contract with banks to market and sell Company's
variable annuities. Company, Distributor, MGA and MGA's Broker intend that MGA
and MGA's Broker will be responsible for managing and supervising the marketing
and sales of Company's variable annuities pursuant to this Agreement, unless
Company, Distributor, MGA and MGA's Broker agree that some or all of MGA's
and/or MGA's Broker's duties may be delegated to a particular bank or insurance
agency affiliated or under contract with a bank and its broker-dealer ("General
Agent") and/or to General Agent's introducing broker-dealer ("General Agent's
Broker").
In consideration of the mutual covenants contained herein, the parties agree as
follow:
1. DEFINITIONS. As used in this Agreement, the following terms shall have the
following meanings:
1.1 "Affiliate" is an entity which is affiliated with MGA, which
performs all or a portion of MGA's duties, and which is duly
licensed or otherwise qualified as an insurance agency in one
or more of the states in the Territory.
1.2 "Distributor" is an affiliate of Company which Company has
engaged to serve as principal underwriter and distributor for
Company's variable annuities.
1.3 "General Agent" is a financial institution or an insurance
agency affiliated and/or under contract with a financial
institution, duly licensed or otherwise qualified as an
insurance agency, which itself or through Producers who are
its employees or independent contractors, solicits and sells
Products to the general public.
1.4 "General Agent's Broker" is a broker-dealer affiliated or
under contract with a General Agent to act as broker-dealer
with respect to the sale of variable annuities by General
Agent and Producers of General Agent, and which is duly
registered as a broker-dealer with the Securities and Exchange
Commission ("SEC"), the National Association of Securities
Dealers ("NASD"), and states where required. General Agent may
also be GA's Broker if properly registered as a broker-dealer.
1.5 "Master General Agent" or "MGA" is the party to this Agreement
which Company desires to have recruit Affiliates, General
Agents and Producers, as defined herein.
<PAGE>
1.6 "Master General Agent's Broker" or "MGA's Broker" is an entity
affiliated and/or under contract with MGA and any Affiliates
to act as broker-dealer with respect to the sale of variable
annuities by Producers of MGA and General Agents and which is
duly registered as a broker-dealer with the SEC, the NASD, and
any states where required. MGA may also be MGA's Broker for
purposes of this Agreement, if properly registered as a
broker-dealer as required hereunder.
1.7 "Producer" is a duly licensed individual who sells Products as
an employee or independent contractor of the MGA, an Affiliate
or a General Agent, and who is appropriately registered with
the NASD as a representative of MGA's Broker, except that a
Producer may be registered with the NASD as a representative
of General Agent's Broker, but only if Company, Distributor,
MGA and MGA's Broker agree that some or all of MGA's Broker's
duties may be modified and delegated to General Agent and
General Agent's Broker in accordance with Section 4, "Duties,
Obligations and Limitations of MGA and MGA's Broker".
1.8 "Products" are those variable annuity products issued by
Company which will be marketed or sold by MGA, MGA's Broker,
General Agents, General Agents' Brokers, and their Producers
under this Agreement, and which are set forth in Exhibit A and
its Addenda attached hereto.
1.9 "Replacement" is the sale of a Product which is funded by the
annuity purchaser with money obtained from the liquidation of
another life insurance policy or annuity contract issued
either by Company or by any other life insurance company.
1.10 "Territory" is those states and jurisdictions in which MGA and
MGA's Broker are permitted to market and sell the Products,
either directly through MGA and MGA's Broker or through
General Agents and Producers, and which states are listed on
Exhibit A.
2. TERM OF AGREEMENT. Unless otherwise terminated pursuant to Section 8,
"Termination" hereof, the term of this Agreement shall be for a period
of one-year commencing immediately upon the Effective Date (the
"Term"). This Agreement shall automatically renew thereafter for
successive one-year periods (each, a "Renewal Period"), unless any
party (1) notifies all other parties within 30 days of the expiration
of the Term or of any Renewal Period of the intention not to renew, or
(2) otherwise terminates this Agreement pursuant to the terms hereof.
3. APPOINTMENT OF MGA AND MGA'S BROKER.
3.1 Appointment of MGA and MGA's Broker. Company and Distributor
hereby appoint and authorize MGA and MGA's Broker to perform
the services and responsibilities as set forth in this
Agreement on behalf of Company in accordance with the terms
and conditions of this Agreement, and MGA and MGA's Broker
hereby accept the appointment. MGA's and MGA's Broker's
authority will be nonexclusive, and will be limited to the
performance of the services and responsibilities set forth in
this Agreement.
3.2 Territory. Such appointment shall only extend to those states
and jurisdictions within the Territory in which, and only for
so long as MGA and MGA's Broker are licensed or otherwise duly
qualified to sell the Products, and which are shown on Exhibit
A.
<PAGE>
3.3 Selection and Appointment of Affiliates. In those states
within the Territory in which MGA is not licensed or otherwise
qualified to act as an insurance agency, or for General Agents
for which MGA desires to have a particular affiliate perform
some of the duties of MGA, MGA shall be permitted to designate
a duly licensed insurance agency affiliate of MGA as an
Affiliate to perform MGA's duties under this Agreement. No
Affiliate shall be authorized to act as such until Affiliate
has executed a Participation Agreement and Company,
Distributor, MGA and MGA's Broker have authorized Affiliate to
act as such. MGA and Affiliate shall be jointly and severally
responsible and liable to Company for the faithful performance
of all the obligations and duties of MGA and Affiliate as set
forth in this Agreement. References in this Agreement to MGA
will include Affiliate with respect to the states and
Producers as to which Affiliate has been authorized to act and
has agreed to act as MGA.
4. DUTIES, OBLIGATIONS AND LIMITATIONS OF MGA AND MGA'S BROKER. Commencing on
the Effective Date, MGA and MGA's Broker will faithfully perform all of
MGA's and MGA's Broker's duties within the scope of the agency relationship
created under this Agreement, to the best of MGA's and MGA's Broker's
knowledge, skill and judgment. MGA and MGA's Broker shall be jointly and
severally responsible and liable to Company and Distributor for the
faithful performance of all obligations or duties except those which this
Agreement specifically identifies as duties of MGA's Broker. Company,
Distributor, MGA and MGA's Broker may agree that some or all of MGA's or an
Affiliate's or MGA's Broker's duties and responsibilities may be modified
with respect to one or more General Agents and such General Agent's
Producers, by delegating such duties and responsibilities to such General
Agent and such General Agent's Broker, when the Company, Distributor,
General Agent and General Agent's Broker have executed an agreement between
themselves, in a form acceptable to Company and Distributor, and Company,
Distributor, MGA and MGA's Broker have amended this Agreement to provide
for such modification and delegation. The duties of MGA and MGA's Broker,
respectively, shall include but not be limited to the following:
4.1 Recruitment of Producers. MGA, itself or through an Affiliate,
and MGA's Broker may recruit Producers to sell under the
supervision of MGA and MGA's Broker. Alternatively, MGA may
allow a General Agent or General Agent's Broker to recruit
Producers who are employees or independent contractors of
General Agent and MGA's Broker. A Producer so recruited may
not solicit or sell Products prior to that Producer's
obtaining the required state insurance license(s) in the
states in the Territory where such Producer will solicit and
sell Products; being registered with the NASD as
representatives of either MGA's Broker or General Agent's
Broker; being appointed as an agent by Company; and completing
training conducted by MGA and MGA's Broker on the Products,
Product marketing methods, and on regulatory and Company
policy and compliance requirements.
4.2 Recruitment of General Agents. MGA and MGA's Broker shall use
their best efforts to recruit General Agents. General Agents so
recruited may not solicit the sale or allow their Producers to
solicit the sale of Products, or receive commission for sales of
Products by Producers, until Company, Distributor, General Agent
and General Agent's Broker have executed an agreement between
themselves, in a form acceptable to Company and Distributor, and
Company and Distributor have appointed General Agent as an agent
of Company.
<PAGE>
4.3 Licensing and Appointment of General Agents and Producers. MGA shall be
responsible for the preparation and submission of proper appointment and
licensing forms, and the assurance that all Producers recruited by MGA,
MGA's Broker and General Agents are appropriately licensed as insurance
agents in the states where such Producers will solicit and sell Products.
MGA's Broker shall be responsible for the preparation and submission to the
NASD of proper representative registration forms, and the assurance that
all Producers are properly registered as representatives of MGA's Broker
with the NASD. MGA and MGA's Broker shall recommend Producers for
appointment with Company, but Company shall retain sole authority to make
appointments and may, by written notice to MGA and MGA's Broker, refuse to
permit any Producer to solicit contracts for the sale of the Products.
4.4 Compliance with Company Policies and Applicable Laws. MGA and MGA's Broker
will use reasonable efforts to comply with all instructions, rules
bulletins, manuals and underwriting guides issued in writing by Company to
MGA and MGA's Broker ("Company Rules"), and with all applicable federal and
state laws and regulations.
4.5 Supervision and Administration.
4.5.1MGA and MGA's Broker shall be responsible for supervision and
administration of the marketing, sales and customer service activities of
MGA, MGA's Broker, General Agents, General Agent's Broker and Producers.
MGA and MGA's Broker shall be responsible for all acts or omissions of each
General Agent, General Agent's Broker and Producer. MGA and MGA's Broker's
supervisory and administrative responsibilities include, but are not
limited to:
(a) ensuring that General Agents and Producers comply with Company Rules and
all federal and state laws and regulations applicable to the Products;
(b) training General Agents and Producers on Product features, Product
marketing methods, requirements for compliance with applicable laws and
regulations and Company Rules prior to allowing a General Agent or Producer
to sell a Product;
(c) providing General Agents and Producers advice and assistance with regard to
marketing and advertising of Products, and ensuring that no advertising is
used unless approved by Company in accordance with Section 4.11, "Approved
Advertising";
(d) supplying sales literature and application forms approved by Company to
General Agents and Producers;
(e) assisting General Agents and Producers in responding to customer inquiries;
(f) promptly delivering to General Agents and Producers relevant Company
communications and Company Rules concerning Products, such as changes in
rates, regulatory notices or new Product announcements;
<PAGE>
(g) ensuring that Producers:
(i) submit premium payments directly and immediately to Company in accordance
with Section 4.6, "Collection and Submission of Premiums";
(ii) deliver Products to purchasers on a timely basis;
(iii)document transactions, including the fact of delivery, and maintain any
other documentation reasonably requested by Company;
(iv) have obtained and continuously will maintain the required state insurance
licenses in the state where such Producers will solicit and sell Products;
and
(vii)have been appointed by Company in accordance with the laws of the state(s)
in which the sale(s) occur and the customer resides;
(h) on all Replacement sales, ensuring that Producers provide sufficient
information to prospective annuity contract-holders as to the suitability
of the Replacement sale. Such information includes but may not be limited
to:
(i) the amount of the surrender charge to be incurred on the investment to be
liquidated;
(ii) all fees and possible charges, such as surrender charges, on the new
investment;
(iii)any change in the investment risk to the prospective annuity
contract-holder;
(iv) any change in the nature or the provider of any guarantees associated with
the Product and/or the surrendered product;
(v) any changes in the expenses associated with the Product and/or the
surrendered product; and
(vi) for life insurance-to-annuity Replacements, the difference in amount and
tax status of the death benefit, and the implications of surrendering this
insurance.
All such information will be retained by MGA for seven years counting from the
date of the initial solicitation, whether or not the Product was ever sold,
and will be made available to Company as is shown in Section 4.10,
"Accurate Record; Audit," herein.
(i) timely obtaining and maintaining all required state insurance licenses, and
notifying Company if MGA, any General Agent or Producer fails to maintain
the required state insurance license or becomes inactive;
<PAGE>
(j) promptly informing Company of any violation of law or Company Rules by a
MGA, MGA's Broker, General Agent, General Agent's Broker or Producer; or of
any allegation by an annuity contract-holder or regulatory agency of
wrongdoing as regards the activities of MGA, MGA's Broker, General Agent,
General Agent's Broker or a Producer with respect to the Products; and
(k) any other duties necessary or appropriate to perform MGA's and MGA's
Broker's obligations under this Agreement.
4.5.2MGA's Broker will fully comply with, and will ensure MGA's, General
Agents' and Producers' compliance with the requirements of the NASD, the
SEC and all other applicable federal and state laws, and, with MGA, will
establish and maintain such rules and procedures as may be necessary to
cause diligent supervision of the securities activities of MGA's General
Agents and Producers. MGA's Broker's duties with respect to MGA's, General
Agents' and Producers' securities activities include but are not limited
to:
(a) in accordance with the requirements of the laws of the several states, and
rules of the NASD and SEC: (i) delivering a prospectus to each person
submitting an application; (ii) maintaining complete records indicating the
manner and extent of distribution of prospectuses, sales literature and
advertising; and; (iii) maintain and preserve books as required. MGA's
Broker agrees to make the aforementioned records and files available to
staff of Company and Distributor and personnel of state insurance
departments, the NASD, the SEC, or other regulatory agencies which have
regulatory authority over Company or Distributor;
(b) timely obtaining registrations as representatives of MGA's Broker with
the NASD;
(c) ensuring that all sales literature or advertising relating to Products
or the Company or Distributor, used by MGA, MGA's Broker, General
Agents or Producers hereunder has been approved in writing by Company
and/or Distributor;
(d) reviewing all Product applications for accuracy and completeness, and
to determine the suitability of the sale;
(e) delivering all contracts for Products transmitted to MGA, MGA's
Broker, General Agent or Producers by Company within ten days of
MGA's, MGA's Broker, General Agent or Producers' receipt of such
contracts; and
(f) any commissions and fees relating to the Products will be reflected in
the quarterly FOCUS reports and the fee assessment reports filed by
MGA's Broker with the NASD in accordance with the NASD Rules of Fair
Practice.
<PAGE>
4.6 Collection and Submission of Premiums. Company and MGA will agree
which of the following provisions will govern MGA's duties related to
collection and submission of premiums with respect to each General
Agent, by specifying on Exhibit A the applicable provision for each
General Agent.
4.6.1Net Wire. MGA will assure General Agent's and its Producers'
collection of the premiums due on all Products --------------- and the
timely accounting for and submission of the premiums directly and
immediately to Company. A General Agent and its Producers may remit
premium payments to Company net of General Agent's share of
commissions payable pursuant to Exhibit A only if Company and MGA
agree on the specific procedures used by General Agent, and the
arrangement is reflected in Exhibit A. Premium payments shall be wired
from a settlement account or other account established by General
Agent for the benefit of Company, at a bank approved by Company, into
Company's account no later than the second business day after the
application has been signed by the customer.
4.6.2Check with Application. MGA will assure General Agent's and its
Producers' collection and timely remittance of the premiums due on all
Products to Company as specified herein. Company will receive premium
payments no later than the second business day after the application
has been signed by the customer.
4.6.3Gross Sweep. MGA will assure General Agent's and its Producers'
collection of the premium due on all Products and will timely account
for such premiums, directly depositing them into an account
established by General Agent for the benefit of Company, at a bank
approved by Company, and notifying Company immediately of the gross
receipts. Upon receipt of notification from General Agent or MGA,
Company will sweep the settlement account.
4.7 MGA and MGA's Broker Expenses. Except as otherwise provided in this
Agreement, or subsequently agreed to in writing by the Company, MGA
and MGA's Broker will be responsible for all costs and expenses of any
kind and nature incurred by MGA and MGA's Broker in the performance of
their duties under this Agreement.
4.8 Solicitation. MGA and MGA's Broker, through Producers, will solicit
applicants who appear to meet Company's and Distributor's underwriting
and suitability standards, provided that nothing in this Agreement
shall be deemed to require MGA or MGA's Broker to solicit any
particular customer's or customers' applications for an annuity.
4.9 Company Property. MGA and MGA's Broker will safeguard, maintain and
account for all policies, forms, manuals, equipment, supplies,
advertising and sales literature furnished to MGA, MGA's Broker and
Producers by Company and Distributor, and will destroy or return the
same to Company and Distributor promptly upon request.
<PAGE>
4.10 Accurate Record; Audit. As required by applicable laws and Company's
policies and procedures, MGA and MGA's Broker will keep identifiable
and accurate records and accounts of all business and transactions
effected pursuant to this Agreement. Upon reasonable notice and at
reasonable times, continuing during a period of one year following the
termination or expiration of this Agreement, MGA and MGA's Broker will
permit Company or Distributor to visit, inspect, examine, audit, and
verify, at MGA's or MGA's Broker's offices or elsewhere, any of the
properties, accounts, files, documents, books, reports, work papers
and other records belonging to or in the possession or control of MGA
or MGA's Broker relating to the business covered by this Agreement,
and to make copies thereof and extracts therefrom, provided that such
audit shall not unreasonably interfere with MGA's or MGA's Broker's
normal course of business.
4.11 Approved Advertising. No sales promotions, promotional materials, nor
any advertising relating to the Products or the Company or
Distributor, shall be used by MGA, MGA's Broker or any General Agent,
General Agent's Broker or Producer unless the specific item has been
approved in writing by Company and/or Distributor.
4.12 Payment of Commission. MGA and MGA's Broker shall be responsible for
assuring that commission is paid or properly netted from an account of
Company.
4.13 Chargeback of Commissions. MGA will be charged back for MGA's portion
of commissions relating to certain surrenders of annuity products as
specified in Exhibit A and its addenda, as amended from time to time.
. 4.14 Fidelity Bond. MGA and MGA's Broker represent and warrant that
all directors, officers, employees and representatives of MGA, and
General Agents who are appointed pursuant to this Agreement as
Producers for Company or who have access to funds of Company,
including but not limited to funds submitted with applications for
Products or funds being returned to owners, are and shall be covered
by a blanket fidelity bond, including coverage for larceny and
embezzlement, issued by a reputable bonding company acceptable to
Company. The bond shall be maintained by MGA's Broker at MGA's
Broker's and/or MGA's expense, provided that, subject to Company's
agreement, the bond covering a General Agent and the Producers may be
maintained by General Agent at General Agent's expense. Company may
require evidence, satisfactory to it, that such coverage is in force.
MGA shall give prompt written notice to Company of cancellation or
change of coverage.
4.15 Limitations. MGA and MGA's Broker shall have no authority with respect
to Company, nor shall either represent itself as having such
authority, other than that specifically set forth in this Agreement.
Without limiting the foregoing, neither MGA nor MGA's Broker shall,
without the express written consent of Company and/or Distributor, as
applicable:
4.15.1 make, waive, alter or change any term, rate or condition stated in
any Company contract or Company- or Distributor-approved form, or
discharge any contract in the name of Company;
4.15.2 waive a forfeiture;
4.15.3 extend the time for the payment of premiums or other monies due to
Company;
4.15.4 institute, prosecute or maintain any legal proceedings on behalf of
Company or Distributor in connection with any matter pertaining to
Company's business, or accept service of process on behalf of Company
or Distributor;
<PAGE>
4.15.5 transact business in contravention of the rules and regulations of
any insurance department and/or other governmental authorities having
jurisdiction over any subject matter embraced by this Agreement;
4.15.6 make, accept or endorse notes, or endorse checks payable to Company
or Distributor, or otherwise incur any expense or liability on behalf
of Company or Distributor;
4.15.7 offer to pay or pay, directly or indirectly, any rebate of premium
or any other inducement not specified in the Products to any owner or
annuitant;
4.15.8 misrepresent the Products for the purpose of inducing an annuity
contract-holder in any other company to lapse, forfeit or surrender
his/her insurance therewith;
4.15.9 give or offer to give any advice or opinion regarding the taxation
of any customer's income or estate in connection with the purchase of
any Product;
4.15.10 enter into an agreement with any person or entity to market or sell
the Products without the written consent of Company and Distributor;
or
4.15.11 use Company's or Distributor's names, logos, trademarks, service
marks or any other proprietary designation without the prior written
permission of Company.
5. COMPANY AND DISTRIBUTOR REPRESENTATIONS AND RESPONSIBILITIES.
5.1 Representations.
5.1.1Company represents and warrants that it is duly incorporated in the
state of Indiana and licensed in all states in the Territory, that all
Products have been filed with and approved by appropriate state
insurance departments, and that all sales literature has been filed
and approved with the insurance departments where required.
5.1.2Distributor represents and warrants that it is duly registered as a
broker-dealer with the SEC, the NASD, all fifty states and the
District of Columbia, and is qualified to do business in all states in
which Company is licensed and qualified to do business.
5.1.3Distributor and Company represent and warrant that Company, as issuer
and on behalf of the underlying investment account(s), has registered
the underlying investment account(s) of the variable contracts with
the SEC as a security under the Securities Act of 1933 ("1933 Act"),
and as a unit investment trust under the Investment Company Act of
1940.
5.1.4Company represents and warrants that the prospectus(es) and
registration statement(s) relating to the Products contain no untrue
statements of material fact or omission to state a material fact, the
omission of which makes any statement contained in the prospectus(es)
and registration statement(s) misleading.
<PAGE>
5.1.5Company represents and warrants that Company will meet any
requirements of the state departments of insurance in the
jurisdictions in which the Products are available for sale regarding
both the filing and approval of advertising and sales literature and
the filing and approval for review with the NASD to ensure consistency
with the applicable rules of the 1933 Act and the Conduct Rules of the
NASD.
5.2 Prospectuses, Sales Literature and Advertising. Company and
Distributor will provide to MGA, MGA's Broker, General Agents and
General Agents' Broker, without any expense to MGA, MGA's Broker,
General Agents or General Agents' Brokers, prospectuses relating to
the Products, and such other sales literature and advertising as
Company determines is necessary or desirable for use in connection
with sales of the Products.
5.3 Transmission of Contracts for Delivery to Contract Owners. Company
will transmit contracts for Products for delivery to annuity contract
owners in accordance with administrative procedures acceptable to MGA,
MGA's Broker and Company.
5.4 Confirmations. Upon Company's acceptance of any payment for a Product,
Distributor will deliver to each contract owner a statement confirming
the transaction in accordance with Rule 10b-10 under the 1934 Act.
5.5 Annuity Contract-holder Services. Company shall provide
administrative, accounting and other services to annuity
contract-holders as necessary and appropriate in the same manner as
such services are provided to Company's other annuity
contract-holders.
5.6 Reservation of Rights. Notwithstanding any other provision of this
Agreement or any other agreement between Company and/or Distributor
and MGA and/or MGA's Broker, Company reserves the unconditional right
to modify any of the Products in any respect whatsoever or to suspend
the sale of any Products in whole or in part at any time and without
prior notice. Company reserves the unconditional rights to refuse to
accept applications procured by MGA and MGA's Broker which fail to
meet underwriting or other standards of Company.
5.7 Company Rules. Company shall provide MGA and MGA's Broker with Company
Rules as soon as is practicable. All revisions, modifications and
replacements of such Company Rules shall be provided by Company and
Distributor to MGA and MGA's Broker promptly after issuance by Company
and/or Distributor.
5.8 Compensation. Company shall pay a total commission on premiums
collected pursuant to this Agreement based on the rates of commission
set forth on the attached Exhibit A and its Addenda, as such may be
amended from time to time by Company in accordance with Section 12,
"Amendment of Agreement". Company shall divide commissions among MGA
and General Agents in accordance with Exhibit A. Company has the right
to charge back MGA for MGA's portion of commissions paid in the event
of certain surrenders of annuity contracts as specified in Exhibit A
and its addenda, as amended from time to time. No commissions shall be
paid unless all of the following conditions precedent have been met to
Company's satisfaction:
5.8.1Licensing of Producer. Prior to the time of any solicitation of a
sale or a sale to a policy owner, any Producer making such
solicitation and sale shall be licensed and appointed with Company in
accordance with the laws of the state(s) where the sale was made and
the customer resides.
<PAGE>
5.8.2Licenses and Contracts. No person or entity, except Producers
satisfying the provisions of Section 5.8.1, "Licensing of Producer,"
shall in any way share in any commissions payable hereunder unless
such person or entity is licensed in accordance with the laws of the
state(s) in which the sale was made and the customer resides; and
unless such person or entity shall have entered into an agreement with
Company or with MGA which specifies such person's or entity's rights
and obligations and which makes provision for payment, including
splitting, of commissions. Notwithstanding the preceding sentence, in
those states which permit payment of a commission to an entity which
is not licensed as an insurance agency, Company will pay commissions
to such an entity which is a party to this Agreement, but only after
such entity has provided evidence satisfactory to Company as to how
Company may make such payments in accordance with applicable state
insurance laws.
5.8.3Termination of General Agent. In the event a particular General Agent
informs Company, MGA or MGA's Broker that it will cease to be a
General Agent under this Agreement, Company and MGA agree that Company
will cease paying MGA's portion of commissions to MGA on Products sold
by General Agent's Producers hereunder as of the effective date of
General Agent's termination as such. Company will continue to pay
commissions on add-on investments and to charge back MGA's portion of
commissions to MGA for surrenders of Products sold by General Agent's
Producers hereunder prior to the effective date of such termination in
accordance with Exhibit A and its Addenda, unless MGA, General Agent
and Company agree on another method of payment of such amounts.
6. INDEMNIFICATION.
6.1 Indemnification of Company. MGA and MGA's Broker shall indemnify,
defend and hold harmless Company and Distributor from and against any
and all losses, claims, damages, liabilities, actions, costs or
expenses to which Company or Distributor may become subject (including
any legal or other expenses incurred by either of them in connection
with investigating any claim against them and defending any action
and, provided MGA and MGA's Broker will have given prior written
approval of such settlement or compromise, which consent will not be
unreasonably withheld or delayed, any amounts paid in settlement or
compromise) insofar as such losses, claims, damages, liabilities,
actions, costs or expenses arise out of or are based upon:
6.1.1The acts or omissions of MGA, an Affiliate, MGA's Broker or any
employee, agent or Producer of any of these entities while acting
(whether under actual or apparent authority, or otherwise) on behalf
of MGA, MGA's Broker, Company or Distributor in connection with this
Agreement;
6.1.2Any breach of any covenant or agreement made by MGA or MGA's Broker
under this Agreement; or
6.1.3The inaccuracy or breach of any representation or warranty made by
MGA or MGA's Broker under this Agreement.
This indemnification obligation shall not apply to the extent that such
alleged act or omission is attributable to Company and/or Distributor
either because (1) Company and/or Distributor directed the act or
omission, or (2) MGA's, an Affiliate's, MGA Broker's, General Agent's,
General Agent's Broker or a Producer's act or omission was the result
of its compliance with Company Rules.
<PAGE>
6.2 Indemnification of MGA and MGA's Broker. Company and Distributor shall
indemnify, defend and hold harmless MGA and MGA's Broker from and
against any and all losses, claims, damages, liabilities, actions,
costs or expenses to which MGA and MGA's Broker may become subject
(including any legal or other expenses incurred by it in connection
with investigating any claim against it and defending any action and,
provided Company and Distributor will have given prior written
approval of such settlement or compromise, which consent will not be
unreasonably withheld or delayed, any amounts paid in settlement or
compromise) insofar as such losses, claims, damages, liabilities,
actions, costs or expenses arise out of or are based upon:
6.2.1The acts or omissions of Company and/or Distributor, or any employee
or agent of Company and/or Distributor (excluding MGA, MGA's Broker,
General Agents or Producers) while acting (whether under actual or
apparent authority, or otherwise) on behalf of Company or Distributor
in connection with this Agreement;
6.2.2Any breach of any covenant or agreement made by Company or
Distributor under this Agreement; or
6.2.3The inaccuracy or breach of any representation or warranty made by
Company or Distributor under this Agreement.
7. ARBITRATION. The parties agree to attempt to settle any
misunderstandings or disputes arising out of this Agreement through
consultation and negotiation in good faith and a spirit of mutual
cooperation. However, if those attempts fail, the parties agree that
any misunderstandings or disputes arising from this Agreement will be
decided by arbitration which will be conducted, upon request of either
party, before three arbitrators (unless both parties agree on one
arbitrator) designated by the American Arbitration Association located
in the city of Company's principal place of business. The parties
further agree that the arbitrator(s) will decide which party must bear
the expenses of the arbitration. This agreement to arbitrate shall not
preclude either party from obtaining provisional remedies such as
injunctive relief or the appointment of a receiver from a court having
jurisdiction, either before, during or after the pendency of the
arbitration. The institution and maintenance of such provisional
remedies shall not constitute a waiver of the right of a party to
submit a dispute to arbitration.
8. TERMINATION.
8.1 Termination for Cause. At any time during the Term of this
Agreement and any Renewal Period, Company and Distributor or
MGA and MGA's Broker may terminate this Agreement immediately
for cause upon written notice of such termination to the other
party. Such written notice shall state the cause with
specificity. As used in this Section, the term "cause" shall
include any one or more of the following:
8.1.1 the conviction of any party, its officers or
supervisory personnel of any felony, of fraud, or of
any crime involving dishonesty;
8.1.2 the intentional misappropriation by a party of funds
or property of any other party, or of funds received
for it or for annuity contract-holders by such other
party;
8.1.3 the cancellation, or the refusal to renew by the
issuing insurance regulatory authority, of any
license, certificate or other regulatory approval
required in order for any party to perform its duties
under this Agreement;
<PAGE>
8.1.4 any action by a regulatory authority with
jurisdiction over the activities of a party that
would place the party in receivership or
conservatorship or otherwise substantially interfere
or prevent such party from continuing to engage in
the lines of business relevant to the subject matter
hereof; or
8.1.5 a party becoming a debtor in bankruptcy (whether
voluntary or involuntary) or the subject of an
insolvency proceeding.
8.2 Termination without Cause. Company or Distributor or MGA or
MGA's Broker may terminate this Agreement without cause upon
30 days prior written notice to the other parties.
8.3 Post Termination Limitations. Upon termination of this
Agreement, Company's obligation to pay commissions to MGA,
MGA's Broker, or Producers shall immediately cease; provided:
8.3.1 Company will pay commissions, as the same become due
and payable, upon Products for which the application
has been taken and the required premium has been
collected (or collectable from a third party) as of
the date of termination, and for which the Company
subsequently issues a policy.
8.3.2 Company will charge back against those commissions
identified in Exhibit A and Section 8.3.1 for
surrender of Products sold by MGA's and MGA's
Broker's or General Agent's or General Agent's
Broker's Producers prior to the termination of this
Agreement. Company will invoice MGA and MGA's Broker
for chargebacks unless Company and MGA agree upon
another method of payment of such amounts.
8.3.3 For a period of one year after termination, MGA,
MGA's Broker, Affiliates, General Agents and
Producers shall not in any way promote, recommend or
encourage the termination, surrender, or cancellation
of any Product sold pursuant to this Agreement.
9. INDEPENDENT CONTRACTOR. This Agreement is not a contract of employment.
Nothing contained in this Agreement shall be construed or deemed to
create the relationship of joint venture, partnership, or employer and
employee between Company and Distributor and MGA and MGA's Broker. Each
party is an independent contractor and shall be free, subject to the
terms and conditions of this Agreement, to exercise judgment and
discretion with regard to the conduct of business.
10. CONFIDENTIALITY. Each party agrees that, during the term of this
Agreement and at all times thereafter, it will not disclose to any
unaffiliated person, firm, corporation or other entity, nor use for its
own account, any of the other parties' trade secrets or confidential
information, including, without limitation, the terms of this
Agreement; non-public program materials; member or customer lists;
proprietary information; information as to the other party's business
methods, operations or affairs, or the processes and systems used in
its operations and affairs, or the processes and systems used in any
aspect of the operation of its business; all whether now known or
subsequently learned by it. Nothing in this Agreement shall require a
party to keep confidential any information that:
10.1 the party can prove was known to it prior to any disclosure by any
other party;
10.2 is or becomes publicly available through no fault of the party;
<PAGE>
10.3 the party can prove was independently developed by it
outside the scope of this Agreement and with no
access to any confidential or proprietary information
of any other party;
10.4 is required to be disclosed to governmental
regulators or pursuant to judicial or administrative
process or subpoena;
10.5 is required in order to perform that party's obligation
under this Agreement;
10.6 is required to be disclosed by any applicable law; or
10.7 is mutually agreed upon by all parties to this Agreement.
If this Agreement is terminated, each party, within 60 days after such
termination will return to the other parties, respectively, any and all
copies, in whatever form or medium, of any material disclosing any of
the other parties' trade secrets or confidential information as
described above.
11. ASSIGNMENT. The parties to this Agreement may not assign, either wholly
or partially, this Agreement or any of the benefits accrued or to
accrue under it, or subcontract their interests or obligations under
this Agreement, without the written approval of all parties.
12. AMENDMENT OF AGREEMENT. Company and Distributor reserve the right to
amend this Agreement at any time, but no amendment shall be effective
until approved in writing by MGA and MGA's Broker, subject to the
provisions of Section 5.6, "Reservation of Rights," and Section 11,
"Assignment," herein. MGA and MGA's Broker hereby consent to amendment
of Exhibit A to remove a General Agent upon Company's receipt of a
written request of an authorized representative of a General Agent for
termination of that General Agent's status under this Agreement.
13. MISCELLANEOUS.
13.1 Applicable Law. This Agreement shall be governed by and interpreted
under the laws of the State of Minnesota.
13.2 Severability. Should any part of this Agreement be declared
invalid, the remainder of this Agreement shall remain in full
force and effect as if the Agreement had originally been
executed without the invalid provisions.
13.3 Notice. Any notice hereunder shall be in writing and shall be
deemed to have been duly given if sent by certified or
registered mail, postage prepaid, or via a national courier
service with the capacity to track its shipments, to the
following addresses:
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
If to Company: If to Distributor:
American Centurion Life Assurance Company American Express Financial Advisors Inc.
80 South 8th Street 80 South 8th Street
Minneapolis, MN 55440 Minneapolis, MN 55440
Attn: Compliance Officer (Unit 1818) Attn: Compliance Officer (Unit 1818)
If to MGA: If to MGA's Broker:
Securities America, Inc. Securities America, Inc.
7100 West Center Road 7100 West Center Road
Suite 500 Suite 500
Omaha, NE 68106 Omaha, NE 68106
Attn: Tom Cross, President of Attn: Tom Cross, President of
Insurance Operations Insurance Operations
</TABLE>
13.4 Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective
successors and assigns, subject to the provisions of this
Agreement limiting assignment.
13.5 Headings. The headings in this Agreement are for convenience
only and are not intended to have any legal effect.
13.6 Defined Terms. The terms defined in this Agreement are to be
interpreted in accordance with this Agreement. Such defined
terms are not intended to conform to specific statutory
definitions of any state.
13.7 Entire Agreement. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter
hereof and supersedes all previous communications,
representations, understandings and agreements, either oral or
written, between the parties or any official representatives
thereof. As of the Effective Date, except as set forth on
Exhibit A, any and all prior consents by Company to any entity
or individual acting as an MGA or General Agent are withdrawn.
13.8 Survival. All terms and conditions of Section 6,
"Indemnification"; Section 8.3, "Post Termination
Limitations"; and Section 10, "Confidentiality"; will survive
termination of this Agreement.
13.9 No Waiver. No failure to enforce, nor any breach of any term
or condition of this Agreement shall operate as a waiver of
such term or condition, or of any other term or condition, nor
constitute nor be deemed a waiver or release of any other
rights at law or in equity, or of claims which any party may
have against any other party for anything arising out of,
connected with, or based upon this Agreement. Any waiver,
including a waiver of this Section, must be in writing and
signed by the parties hereto.
<PAGE>
IN WITNESS WHEREOF the parties hereto, intending to be legally bound, have
caused this Agreement to be executed by their duly authorized officers.
American Enterprise Life Insurance Company Securities America, Inc.
Company Master General Agent and
MGA's Broker
By: By:
Title: Title:
Date: Date:
American Express Financial Advisors Inc.
Distributor
By:
Title:
Date:
<PAGE>
EXHIBIT A
Master General Agent: Products, Territory and Commissions
This Exhibit is intended to summarize the contents of Exhibit A and its Addenda,
and of the various Exhibits identifying the Affiliates and/or General Agents, as
they are added to the arrangements with Securities America, Inc. ("Master
General Agent"), Securities America, Inc. ("MGA's Broker"), Company and
Distributor under this Agreement.
If any discrepancy is found between this Exhibit and any agreements with General
Agents, the individual agreements will prevail over this Exhibit.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- - -------------------------------------- ------------------------------ ---------------------------- ---------------------------------
Master General Agent (MGA) or Remittance of Premiums Territory Products & Commission Split: MGA/GA
Affiliate, & MGA's Broker (see Paragraph 4.6) (See MGA Exhibit A addenda for
specific breakdowns based on ages)
- - -------------------------------------- ------------------------------ ---------------------------- ---------------------------------
- - -------------------------------------- ------------------------------ ---------------------------- --------------------------------
Securities America, Inc. Gross Sweep AZ. CA, CO, FL, IL, MI, Personal Portfolio Plus: Option I.
(MGA's Broker: Securities America, TN, WI only. See Addendum A
INC.)
Personal Portfolio Plus 2
Product redesign effective July 1,
1999. See Addendum B.
Personal Portfolio Plus 2
Temporary commission increase, July 23,
1999 through December 31, 1999. See
Addendum C.
- - -------------------------------------- ------------------------------ ---------------------------- --------------------------------
Securities America Insurance Agency, Gross Sweep TX only. Personal Portfolio Plus: Option I.
See Addendum A
Inc.
Personal Portfolio Plus 2
Product redesign effective July 1, 1999.
See Addendum B.
Personal Portfolio Plus 2
Temporary commission increase, July 23, 1999
through December 31, 1999. See Addendum C.
- - -------------------------------------- ------------------------------ ---------------------------- --------------------------------
American Enterprise Life Insurance Company Securities America, Inc.
Company Master General Agent and MGA's Broker
By: By:
Title: Title:
Date: Date:
(Signatures continued on next page.)
</TABLE>
<PAGE>
EXHIBIT A
Master General Agent: Products, Territory and Commissions
American Express Financial Advisors Inc.
Distributor
By:
Title:
Date:
Last Revision Date: July 22, 1999 Effective Revision Date: July 23, 1999
Purpose of Last Revision: Temporary commission increase effective July 23, 1999
lapses on December 31, 1999. Florida and Wisconsin have been added to your
selling Territory.
<PAGE>
Addendum A: Schedule of Commissions
Addendum to the Master General Agent Agreement for Variable Annuity Sales
between American Enterprise Life Insurance Company ("Company") and the American
Express Financial Advisors Inc. ("Distributor") and Securities America, Inc.
("Master General Agent") and Securities America, Inc. ("Master General Agent's
Broker") dated June 1, 1998 ("Agreement"). This Addendum is effective June 1,
1998. The Products to be offered through the Master General Agent are Flexible
Premium Variable Annuities (AEL Personal Portfolio Plus) and they are to be
offered only in the Territories shown on Exhibit A.
This Addendum shows the three options for compensation available to this Master
General Agent and Master General Agent's Broker.
<TABLE>
<CAPTION>
COMMISSION
- - ----------------------- --------------------- -------------------- ---------------------
<S> <C> <C> <C>
AGE OPTION I OPTION II OPTION III
Up to 75 6.0% 5.0% 5.0%
- - ----------------------- --------------------- -------------------- ---------------------
- - ----------------------- --------------------- -------------------- ---------------------
76-85 3.0% 2.5% 2.5%
- - ----------------------- --------------------- -------------------- ---------------------
</TABLE>
<TABLE>
<CAPTION>
SUPPLEMENTAL TRAIL COMMISSION (Applicable to Options II and III only)
- - ------------------------------------ ------------- ----------------------------- ----------------------------
OPTION I OPTION II OPTION III
------------- ----------------------------- ----------------------------
------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
QTRLY ANNUAL QTRLY ANNUAL
- - ------------------------------------
------------- -------------- -------------- -------------- --------------
Trail rate where contract in N/A 3.75bp 15bp 2.5bp 10bp
surrender charge period
- - ------------------------------------ ------------- -------------- -------------- -------------- --------------
- - ------------------------------------ ------------- -------------- -------------- -------------- --------------
Trail rate where contract outside N/A 8.75bp 35bp 12.5bp 50bp
surrender charge period
- - ------------------------------------ ------------- -------------- -------------- -------------- --------------
</TABLE>
The Master General Agent selects Option ________________________ (Choose
only one option. This same option will apply to any and all
------------------------- Affiliates.)
CHARGEBACK: In the event of the surrender of an annuity within twelve months of
the issue date, there will be a chargeback of commissions paid with respect to
premium received in accordance with the following schedule. The chargeback
schedule applies separately to each payment upon cancellation or withdrawal.
Time Elapsed Since Payment Date Commission Chargeback
0-6 months 100%
7-18 months 50%
Thereafter 0%
The chargeback will be waived in the event of the death of the annuitant or
owner.
Agreed to on ______________________, 1998.
American Enterprise Life Insurance Company Securities America, Inc.
Company Master General Agent and
Master General Agent's
Broker
By: By:
Title: Title:
Date: Date:
<PAGE>
Addendum B to Exhibit A: Products, Territory and Commissions
Addendum to Exhibit A of the Master General Agent Agreement between American
Enterprise Life Insurance Company ("Company"), American Express Financial
Advisors Inc. ("Distributor"), Securities America, Inc. ("Master General Agent")
and Securities America, Inc. (the broker-dealer for Master General Agent; for
purposes of this Agreement, "Master General Agent's Broker") dated June 1, 1998.
This Addendum is effective July 1, 1999. The Products to be offered through the
Master General Agent are Flexible Premium Variable Annuities (AEL Personal
Portfolio Plus2), and they are to be offered only in the Territory shown in
Exhibit A.
COMMISSION:
The commission payable for contracts described in this Addendum will be as
follows:
(a) 6.00% of all premiums for issue ages of both owner and annuitant not
exceeding 80 (qualified and non-qualified).
(b) 3.00% of all premiums for issue ages of either owner or annuitant of 81-85,
but neither may exceed 85 (qualified and non-qualified).
(c) No commission is payable for contracts described in this Addendum where
the age of the annuitant or owner exceeds age 85. No commission
will be paid on sales outside the Territory. No commission will be
paid on the sale of an annuity under this Agreement if that sale
involves replacement of an asset or investment issued by Company or
by any other insurance company owned or controlled by American Express
Company.
In all cases, the amount of commission shown above is the total commission
available for distribution from Company, whether under this Agreement or under
any other agreement between or among Company, Master General Agent, and any
other parties.
CHARGEBACK:
In the event of the surrender of an annuity, there will be a chargeback of all
commissions paid with respect to premium received in accordance with the
following schedule.
ISSUE AGES TO 75:
Time Elapsed Since Payment Date Commission Chargeback
0-3 months 100%
4-6 months 50%
Thereafter 0%
ISSUE AGES 76-80:
Time Elapsed Since Payment Date Commission Chargeback
0-6 months 100%
7-12 months 50%
Thereafter 0%
ISSUE AGES 81-85:
Time Elapsed Since Payment Date Commission Chargeback
0-3 months 100%
4-6 months 50%
Thereafter 0%
<PAGE>
Addendum B to Exhibit A: Products, Territory and Commissions
(continued)
The chargeback will be waived in the event of the death of the annuitant or
owner. The chargeback schedules apply separately to each payment upon
cancellation or withdrawal.
Agreed to on , 1999.
American Enterprise Life Insurance Company Securities America, Inc.
Company Master General Agent and
MGA's Broker
By: ________________________________ By: ___________________
Title: _______________________________ Title: ________________
American Express Financial Advisors Inc.
Company
By: ________________________________
Title: _______________________________
<PAGE>
Addendum C to Exhibit A:
Products, Territory and Commissions
Addendum to Exhibit A of the Master General Agent Agreement between
American Enterprise Life Insurance Company ("Company"), American Express
Financial Advisors Inc. ("Distributor"), Securities America, Inc. ("Master
General Agent") and Securities America, Inc. (the broker-dealer for Master
General Agent; for purposes of this Agreement, "Master General Agent's
Broker") dated June 1, 1998. This Addendum is effective July 23, 1999. This
Addendum lapses on December 31, 1999.
The Products to be offered through the Master General Agent are Flexible Premium
Variable Annuities (AEL Personal Portfolio Plus2), and they are to be offered
only in the Territory shown in Exhibit A.
COMMISSION:
The commission payable for contracts described in this Addendum will be as
follows:
(a) 6.50% of all premiums for issue ages of both owner and annuitant
not exceeding 80 (qualified and non-qualified).
(b) 3.25% of all premiums for issue ages of either owner or annuitant
of 81-85, but neither may exceed 85 (qualified and non-qualified).
(c) No commission is payable for contracts described in this Addendum
where the age of the annuitant or owner exceeds age 85. No
commission will be paid on sales outside the Territory. No
commission will be paid on the sale of an annuity under this
Agreement if that sale involves replacement of an asset or
investment issued by Company or by any other insurance company
owned or controlled by American Express Company.
In all cases, the amount of commission shown above is the total commission
available for distribution from Company, whether under this Agreement or under
any other agreement between or among Company, Master General Agent, any General
Agent, and any other parties.
CHARGEBACK:
In the event of the surrender of an annuity within six months of the issue date,
there will be a chargeback of all commissions paid with respect to premium
received in accordance with the following schedule.
ISSUE AGES TO 75:
Time Elapsed Since Payment Date Commission Chargeback
0-3 months 100%
4-6 months 50%
Thereafter 0%
ISSUE AGES 76-80:
Time Elapsed Since Payment Date Commission Chargeback
0-6 months 100%
7-12 months 50%
Thereafter 0%
ISSUE AGES 81-85:
Time Elapsed Since Payment Date Commission Chargeback
0-3 months 100%
4-6 months 50%
Thereafter 0%
<PAGE>
Addendum C to Exhibit A:
Products, Territory and Commissions
(continued)
The chargeback will be waived in the event of the death of the annuitant or
owner. The chargeback schedules apply separately to each payment upon
cancellation or withdrawal.
Agreed to on , 1999.
American Enterprise Life Insurance Company Securities America, Inc.
Company Master General Agent and
MGA's Broker
By: By:
Title: Title:
American Express Financial Advisors Inc.
MGA's Broker
By:
Title: ______________________________________
<PAGE>
EXHIBIT B
Affiliate Participation Agreement
Securities America Insurance Agency, Inc. ("Affiliate") agrees to act as an
Affiliate of Securities America, Inc. ("MGA") and American Enterprise Life
Insurance Company ("Company") in the following states for the following annuity
products issued by Company, in accordance with the terms and conditions of the
Agreement between MGA and MGA's Broker and Company and Distributor dated June 1,
1998 ("Agreement"), incorporated herein by this reference, as it may be amended
from time to time.
TERRITORY: Texas
PRODUCTS: Personal Portfolio Plus
Affiliate acknowledges, warrants, covenants and agrees that:
1. All terms used herein shall have the definitions used in the
Agreement.
2. Affiliate assumes all of the duties and responsibilities of
MGA under the Agreement except: (a) Affiliate may not appoint
other Affiliates; and (b) Affiliate's rights, duties and
responsibilities shall only extend to the Territory and
Products listed above.
<PAGE>
3. Affiliate and MGA are jointly and severally liable for the
performance of MGA's duties and responsibilities under the
Agreement with respect to the activities of each other and the
General Agents and Producers in the Territory shown above.
4. Affiliate warrants that it has the licenses required to sell
annuities and perform the duties and responsibilities of MGA
in the Territory shown above.
5. MGA, by this appointment, agrees that it will forward to
Affiliate any notices from Company which affect Affiliate.
Affiliate agrees that notice from Company to MGA is valid and
effective notice to it.
6. Company and MGA appoint Affiliate, as defined in the
Agreement, in the Territory and for the Products listed above.
Affiliate accepts such appointment.
7. All other provisions of the Agreement will apply to and govern
Affiliate's activities pursuant to this Agreement, including,
but not limited to the provisions concerning amendments to
this Agreement.
8. This Affiliate Participation Agreement may be terminated in
accordance with the termination provision of the main
Agreement.
<PAGE>
IN WITNESS WHEREOF Affiliate and MGA have signed this Affiliate Participation
Agreement as of ___________________________, 1998.
Securities America Insurance Agency, Inc. Securities America, Inc.
Affiliate Master General Agent
By: By:
Title: Title:
Send complete form to:
American Enterprise Life Insurance Company
80 South 8th Street
Minneapolis, MN 55402
Attn: Contract Manager
T8 / Unit 1818
Accepted and appointment of Affiliate made on
By: .
For American Enterprise Life Insurance Company
<PAGE>
Addendum A to Exhibit A: Products, Territory and Commissions
Addendum to Exhibit A of the Master General Agent Agreement between American
Enterprise Life Insurance Company ("Company"), American Express Financial
Advisors Inc. ("Distributor"), Securities America, Inc. ("Master General
Agent"), and Securities America, Inc. ("MGA's Broker") dated Effective_Date.
This Addendum is effective Addendum_Effective_d.
The Products to be offered through Master General Agent are Flexible Premium
Variable Annuities (AEL Signature Variable Annuity), and they are to be offered
only in the Territory shown in Exhibit A.
COMMISSION:
The commission payable for a given contract described in this Addendum will be
paid according to one of the following tables. For each separate annuity
contract sold, one of the following three options can be selected. During the
life of each such contract, the selected option cannot be changed. If no
election is shown on the application when it is submitted to Company, commission
will be paid according to Option B.
OPTION A:
- - --------------------------------------- -------------------------------
Age of Older of Annuitant or Owner Per Cent of Premium Payable
at Sale
- - --------------------------------------- -------------------------------
- - --------------------------------------- -------------------------------
Ages 0 - 75 6.25%
- - --------------------------------------- -------------------------------
- - --------------------------------------- -------------------------------
Ages 76 - 80 4.75%
- - --------------------------------------- -------------------------------
- - --------------------------------------- -------------------------------
Ages 81 - 90 3.25%
- - --------------------------------------- -------------------------------
<TABLE>
<CAPTION>
OPTION B:
- - -------------------------------- --------------------------- ---------------------------------------
Supplemental Trail Commission:
Age of Older of Annuitant or Per Cent of Premium (Annual rate;
Owner Payable at Sale payable quarterly at 1/4 of value
shown)
<S> <C> <C>
- - -------------------------------- --------------------------- ---------------------------------------
- - -------------------------------- --------------------------- ---------------------------------------
Ages 0 - 75 5.25% 25 basis points
- - -------------------------------- --------------------------- ---------------------------------------
- - -------------------------------- --------------------------- ---------------------------------------
Ages 76 - 80 4.00% 25 basis points
- - -------------------------------- --------------------------- ---------------------------------------
- - -------------------------------- --------------------------- ---------------------------------------
Ages 81 - 90 2.75% 25 basis points
- - -------------------------------- --------------------------- ---------------------------------------
OPTION C:
- - ------------------------------ ------------------------ ----------------------------------- -----------------------------
Supplemental Trail Supplemental Trail
Age of Older of Annuitant or Per Cent of Premium Commission: Years 2-7. Commission: Years 8 +.
Owner Payable at Sale (Annual rate; (Annual rate;
payable quarterly at 1/4 of value payable quarterly at 1/4 of
shown) value shown)
- - ------------------------------ ------------------------ ----------------------------------- -----------------------------
- - ------------------------------ ------------------------ ----------------------------------- -----------------------------
Ages 0 - 75 4.25% 25 basis points 75 basis points
- - ------------------------------ ------------------------ ----------------------------------- -----------------------------
- - ------------------------------ ------------------------ ----------------------------------- -----------------------------
Ages 76 - 80 3.25% 25 basis points 75 basis points
- - ------------------------------ ------------------------ ----------------------------------- -----------------------------
- - ------------------------------ ------------------------ ----------------------------------- -----------------------------
Ages 81 - 90 2.25% 25 basis points 75 basis points
- - ------------------------------ ------------------------ ----------------------------------- -----------------------------
</TABLE>
Conditions of payment of the Supplemental Trail Commission are attached hereto.
In no event will Supplemental Trail Commission be paid on a contract less than
one year old.
<PAGE>
No commission will be paid on sales outside the states shown in the Territory on
Exhibit A. No commission will be paid on the sale of an annuity under this
Agreement if that sale involves replacement of an asset or investment issued by
Company or by any other insurance company owned or controlled by American
Express Company. In all cases, the amount of commission described above is the
total compensation available for distribution from Company, or any of its
subsidiaries, affiliates, or other related entities owned or controlled by
American Express Company, whether under this Agreement or under any other
agreement between or among Company, Master General Agent, or any other party.
See Addendum B, below, for details of payment of Supplemental Trail Commission.
CHARGEBACK:
In the event of the surrender of an annuity within six months of the payment
date, there will be a charge- back of commissions paid with respect to premiums
received in accordance with the following schedule:
Time Elapsed Since Payment Date Commission Chargeback
0-3 months 100%
Over 3 months to 6 months 50%
Over 6 months 0%
Chargebacks will be assessed in their entirety against Master General Agent. The
chargeback will be waived in the events of death of an annuitant or owner, or in
case of annuitization or partial withdrawal. The chargeback schedule applies
separately to each payment upon cancellation or withdrawal. The chargeback
schedule applies during the free look period, or for any full withdrawal.
Agreed to on , 199__.
American Enterprise Life Insurance Company SAI Insurance Agency, Inc.
Company Master General Agent
By: By:
Title: Title:
American Express Financial Advisors Inc. SAI Securities, Inc.
Distributor Broker-Dealer
By: By:
Title: Title:
<PAGE>
ADDENDUM B TO
SELLING AGREEMENT
by and between American Enterprise Life Insurance Company ("Company"), American
Express Service Corporation (Distributor), SAI Insurance Agency, Inc. ("Master
General Agent") and SAI Securities, Inc. ("MGA's Broker") dated ___________,
1999. This Addendum is effective ________________, 1999.
Supplemental Trail Commission:
1. In addition to the compensation shown in other Addenda to this Agreement,
Company agrees to pay to Master General Agent a Supplemental Trail Commission as
shown in #2, below, subject to all the conditions in #3 below.
2. Payment. At the end of each calendar quarter, Company shall calculate and pay
the Supplemental Trail Commission as follows:
Supplemental Trail Compensation = Eligible Value x Annual Rate
4
Where:
A. Annual Rate of the Supplemental Trail Commission as shown in one of
the Compensation Options tables appended here:
<TABLE>
<CAPTION>
OPTION B:
- - -------------------------------- --------------------------- ---------------------------------------
Supplemental Trail Commission:
Age of Older of Annuitant or Per Cent of Premium (Annual rate;
Owner Payable at Sale payable quarterly at 1/4 of value
shown)
<S> <C> <C>
- - -------------------------------- --------------------------- ---------------------------------------
- - -------------------------------- --------------------------- ---------------------------------------
Ages 0 - 75 5.25% 25 basis points
- - -------------------------------- --------------------------- ---------------------------------------
- - -------------------------------- --------------------------- ---------------------------------------
Ages 76 - 80 4.00% 25 basis points
- - -------------------------------- --------------------------- ---------------------------------------
- - -------------------------------- --------------------------- ---------------------------------------
Ages 81 - 90 2.75% 25 basis points
- - -------------------------------- --------------------------- ---------------------------------------
OPTION C:
- - ------------------------------ ------------------------ ----------------------------------- -----------------------------
Supplemental Trail Supplemental Trail
Age of Older of Annuitant or Per Cent of Premium Commission: Years 2-7. Commission: Years 8 +.
Owner Payable at Sale (Annual rate; (Annual rate;
payable quarterly at 1/4 of value payable quarterly at 1/4 of
shown) value shown)
- - ------------------------------ ------------------------ ----------------------------------- -----------------------------
- - ------------------------------ ------------------------ ----------------------------------- -----------------------------
Ages 0 - 75 4.25% 25 basis points 75 basis points
- - ------------------------------ ------------------------ ----------------------------------- -----------------------------
- - ------------------------------ ------------------------ ----------------------------------- -----------------------------
Ages 76 - 80 3.25% 25 basis points 75 basis points
- - ------------------------------ ------------------------ ----------------------------------- -----------------------------
- - ------------------------------ ------------------------ ----------------------------------- -----------------------------
Ages 81 - 90 2.25% 25 basis points 75 basis points
- - ------------------------------ ------------------------ ----------------------------------- -----------------------------
</TABLE>
B. Eligible Contracts means contracts sold to customers under this
Agreement, which have reached their first contract anniversary as of the
calendar quarter end.
C. Eligible Value means accumulation value (including earnings
accrued), as of the quarter end for which the Supplemental Trail Commission is
being calculated, of all Eligible Contracts for which Option B or C, above, has
been selected. Each option's trail will be calculated separately. Trail checks
will be made payable to the Master General Agent, and will be sent directly to
Master General Agent for distribution.
<PAGE>
3. Conditions of Payment:
A. Payment for each quarter's Supplemental Trail Commission shall be
final, and no credits or additions or adjustments shall be made to it. Each
quarter is evaluated independently. Chargebacks will be accounted for in the
quarter in which the contract is returned to the Company.
B. Company will supply supporting information for the calculation,
along with payment, to Master General Agent within 45 business days of the end
of each calendar quarter.
C. The Supplemental Trail Commission does not apply to sales outside
the Territory or to sales which are otherwise excluded from normal commission
payments under Exhibit A and/or any other Addenda to this Agreement (e.g.,
unlicensed sales, sales for which Master General Agent could not otherwise be
compensated, etc.).
D. In the event that notice of termination of this entire Agreement is
given by any party hereto, the obligation to pay the Supplemental Trail
Commission will survive for three years from the effective date of such
termination. No Supplemental Trail Commission will be payable for the quarter in
which that third anniversary of termination occurs, or thereafter.
E. Subject to Condition D above, Supplemental Trail Commission will be
paid to the Master General Agent for as long as each Eligible Contract continues
to remain an Eligible Contract as herein defined, and for as long as the Master
General Agent continues to be licensed as an insurance agency and appointed with
Company.
F. The obligation to pay Supplemental Trail Commission runs from
Company to Master General Agent only. All distribution of Supplemental Trail
Commission is the Master General Agent's responsibility. No claim made by or on
behalf of any individual representative for Supplemental Trail Commission will
be honored by Company, and no expense, including (without limitation) attorney
fees, that an Master General Agent or a representative may incur to determine
the individual representative's entitlement to Supplemental Trail Commission,
will be absorbed by or reimbursed by Company.
G. In all cases, the amount of commission described above is the total
compensation available for distribution from Company, or any of its
subsidiaries, affiliates, or other related entities owned or controlled by
American Express Company, whether under this Agreement or under any other
agreement between or among Company, Master General Agent, or any other party.
See Addendum A, above, for details of payment of commission at time of sale.
CHARGEBACK:
In the event of the surrender of an annuity within six months of the issue date,
there will be a chargeback of all commissions paid with respect to premium
received in accordance with the following schedule.
Time Elapsed Since Payment Date Commission Chargeback
0-3 months 100%
4-6 months 50%
Thereafter 0%
Chargebacks will be assessed in their entirety against Master General Agent. The
chargeback will be waived in the events of death of an annuitant or owner, or in
case of annuitization or partial withdrawal. The chargeback schedule applies
separately to each payment upon cancellation or withdrawal. The chargeback
schedule applies during the free look period, or for any full withdrawal.
<PAGE>
Agreed to on , 1999.
American Enterprise Life Insurance Company SAI Insurance Agency, Inc.
Company Master General Agent
By: By:
Title: Title:
American Express Financial Advisors Inc. SAI Securities, Inc.
Distributor MGA's Broker
By: By:
Title: Title:
Deferred Annuity Contract
Administrative Offices:
80 South Eighth Street
P.O. Box 534
Minneapolis, MN 55440
American
Enterprise
Life
This is a deferred annuity contract. It is a legal contract between you, as
the owner, and us, American Enterprise Life Insurance Company, a Stock
Company, Indianapolis, Indiana. PLEASE READ YOUR CONTRACT CAREFULLY.
If the annuitant is living on the Retirement Date, we will begin to pay you
monthly annuity payments. Any payments made by us are subject to the terms
of this contract. The owner and beneficiary are as named in the application
unless they are changed as provided for in this contract.
We issue this contract in consideration of your application and the payment
of the purchase payments.
Signed for and issued by American Enterprise Life Insurance Company of
Indianapolis, Indiana, as of the contract date.
ACCUMULATION VALUES AND ANNUITY PAYMENTS, WHEN BASED ON THE INVESTMENT
RESULTS OF THE SEPARATE ACCOUNT, ARE VARIABLE AND NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT. SEE PAGE 11 FOR VARIABLE PROVISIONS.
NOTICE OF YOUR RIGHT TO EXAMINE THIS CONTRACT FOR 10 DAYS. If for any
reason you are not satisfied with this contract, return it to us or our
agent within 10 days after you receive it. We will then cancel this
contract. Upon such cancellation we will refund an amount equal to the sum
of: (1) the contract value; and (2) any premium tax charges paid. This
contract will then be considered void from its start.
Secretary President
| Flexible Purchase Payments
| Optional Fixed Dollar or Variable Accumulation Values and Annuity Payments
| Annuity Payments to Begin on the Retirement Date
| This Contract is Nonparticipating -- Dividends Are Not Payable
<PAGE>
<TABLE>
<CAPTION>
Guide to Contract Provisions
<S> <C> <C>
Definitions Important words and meanings ................................................... Page 3
General Provisions Entire contract; Annuity tax qualification; Contract modification;
Incontestability; Benefits based on incorrect data; State laws;
Reports to owner; Evidence of survival; Protection of proceeds;
Payments by us; Voting rights .................................................. Page 4
Ownership and Beneficiary Owner rights; Change of ownership; Beneficiary;
Change of Beneficiary; Assignment .............................................. Page 5
Payments to Beneficiary Describes options and amounts payable upon death ............................... Page 6
Purchase Payments Purchase payments amounts; Payment limits; Allocations of
purchase payments .............................................................. Page 8
Contract Value Describes the fixed and variable
account contract values; Interest to be
credited; Contract value credits; Contract
administrative charge; Premium taxes;
Transfers of contract values ................................................... Page 9
Fixed and Variable Accounts Describes the fixed account; Describes the variable subaccounts,
accumulation units and values; Net investment factor;
Mortality and expense risk charge; Variable account
administrative charge; Annuity unit value .......................................Page 11
Withdrawal Provisions Contract withdrawal for its withdrawal value;
Rules for withdrawal .......................................................... Page 13
Annuity Provisions When annuity payments begin; Different ways to receive
annuity payments; Determination of payment amounts ............................ Page 15
Tables of Annuity Rates Tables showing the amount of the first variable annuity
payment and the guaranteed fixed annuity payments
for the various payment plans ................................................. Page 17
</TABLE>
<PAGE>
Definitions
The following words are used often in this contract. When we use these words,
this is what we mean:
<PAGE>
Accumulation Unit
An accumulation unit is an accounting unit of measure. It is used to calculate
the variable account contract value prior to annuitization.
Annuitant
The person or persons on whose life monthly annuity payments depend.
Annuitization
The application of the contract value of this contract to provide annuity
payments.
Annuity Unit
An annuity unit is an accounting unit of measure. It is used to calculate the
value of annuity payments from the variable account on and after annuitization.
Code
The Internal Revenue Code of 1986, as amended.
Contract Anniversary
The same day and month as the contract date each year that the contract remains
in force.
Contract Date
It is the date from which contract anniversaries, contract years, and contract
months are determined. Your contract date is shown under Contract Data.
Contract Value
The sum of the: (1) fixed account contract value; and (2) variable account
contract value.
Fixed Account
The fixed account is made up of all our assets other than those in any separate
account.
Fixed Annuity
A fixed annuity is an annuity with payments which are guaranteed by us as to
dollar amount during the annuity payment period.
IRA Contract
A contract used in or under a retirement plan or program that is intended to
qualify as an Individual Retirement Annuity under Section 408(b) of the Code.
IRA Required Minimum Distributions
The minimum distributions Code Section 408(b)(3) requires to be distributed from
an IRA, beginning not later than the April 1 following the calendar year you
reach age 70 1/2 (Required Beginning Date).
Nonqualified Contract
A contract used primarily for retirement purposes that is not intended to
qualify as an IRA contract.
Retirement Date
The date shown under Contract Data on which annuity payments are to begin. This
date may be changed as provided in this contract. You will be notified prior to
the retirement date in order to select an appropriate annuity payment plan.
Valuation Date
A valuation date is each day the New York Stock Exchange is open for trading.
Valuation Period
A valuation period is the interval of time commencing at the close of business
on each valuation date and ending at the close of business on the next valuation
date.
Variable Account
The variable account is a separate investment account of ours. It consists of
several subaccounts. Each subaccount is named under Contract Data.
Variable Annuity
A variable annuity is an annuity with payments which are not predetermined or
guaranteed as to dollar amount and vary in amount with the investment experience
of one or more of the variable subaccounts.
We, Us, Our
American Enterprise Life Insurance Company
Written Request
A request in writing signed by you and delivered to us at our administrative
office.
You, Your
The owner of this contract. In a non-qualified contract, the owner may be
someone other than the annuitant. The owner is shown in the application unless
the owner has been changed as provided in this contract.
<PAGE>
General Provisions
Entire Contract
This contract form, any endorsements and the copy of the application attached to
it are the entire contract between you and us.
No one except one of our corporate officers (President, Vice President,
Secretary or Assistant Secretary) can change or waive any of our rights or
requirements under this contract. That person must do so in writing. None of our
other representatives or other persons has the authority to change or waive any
of our rights or requirements under this contract.
Annuity Tax Qualification
This contract is intended to qualify as an annuity contract under Section 72 of
the Code for federal income tax purposes. To that end, the provisions of this
contract are to be interpreted to ensure or maintain such tax-qualification,
notwithstanding any other provisions to the contrary.
Contract Modification
We reserve the right to modify this contract to the extent necessary to:
1. qualify this contract as an annuity contract under Section 72 of the Code
and all related laws and regulations which are in effect during the term of
this contract; and
2. if this contract is purchased as an IRA contract, to qualify this contract
as such an IRA contract under Section 408 of the Code and all related laws
and regulations which are in effect during the term of this contract.
We will obtain any necessary approval of any regulatory authority for the
modifications.
Incontestable
This contract is incontestable from its date of issue.
Benefits Based on Incorrect Data
Payments under the contract will be based on the annuitant's birthdate and sex.
If the annuitant's birthdate or sex or your birthdate has been misstated,
payments under this contract will be adjusted. They will be based on what would
have been provided at the correct birthdate and sex. Any underpayments made by
us will be made up immediately. Any overpayments made by us will be subtracted
from the future payments.
State Laws
This contract is governed by the law of the state in which it is delivered. The
values and benefits of this contract are at least equal to those required by
such state. Any paid up annuity, cash withdrawal or death benefits available
under the contract are not less than the minimum benefits required by any
statute of the state in which the contract is delivered.
Reports to Owner
At least once a year we will send you a statement showing the contract value and
the cash withdrawal value of this contract. This statement will be based on any
laws or regulations that apply to contracts of this type.
Evidence of Survival
Where any payments under this contract depend on the recipient or annuitant
being alive on a certain date, proof that such condition has been met may be
required by us. Such proof may be required prior to making the payments.
Protection of Proceeds
Payments under this contract are not assignable by any beneficiary prior to the
time they are due. To the extent allowed by law, payments are not subject to the
claims of creditors or to legal process.
Payments by Us
All sums payable by us are payable at our administrative office. Any payment or
withdrawal from a variable annuity is based on the variable contract value.
Voting Rights
So long as federal law requires, we will give certain voting rights to
contractowners. As contractowner, if you have voting rights we will send a
notice to you telling you the time and place of a shareholder meeting. The
notice will also explain matters to be voted upon and how many votes you get.
<PAGE>
Ownership and Beneficiary
Owner Rights
As long as the annuitant is living and unless otherwise provided in this
contract, you may exercise all rights and privileges provided in this contract
or allowed by us.
If this is an IRA contract, you shall be the annuitant, and during your life you
will have the sole and absolute power to receive and enjoy all rights under the
contract. Your entire interest is nonforfeitable. Joint ownership is not
permitted.
Change of Ownership
If this is an IRA contract, your right to change the ownership is restricted.
This contract may not be sold, assigned, transferred, discounted or pledged as
collateral for a loan or as security for the performance of an obligation or for
any other purpose to any person other than as may be required or permitted under
Section 408 of the Code, or under any other applicable section of the Code. Your
interest in this contract may be transferred to your former spouse, if any,
under a divorce decree or a written instrument incidental to such divorce.
If this is a nonqualified contract, you may change the ownership.
Any change of ownership as provided above must be made by written request on a
form approved by us. The change must be made while the annuitant is living. Once
the change is recorded by us, it will take effect as of the date of your
request, subject to any action taken or payment made by us before the recording.
Beneficiary
Beneficiaries are those you have named in the application or later changed as
provided below, to receive benefits of this contract if you or the annuitant die
while this contract is in force.
Only those beneficiaries who are living when death benefits become payable may
share in the benefits, if any. If no beneficiary is then living, we will pay the
benefits to you, if living, otherwise to your estate.
Change of Beneficiary
You may change the beneficiary anytime while the annuitant is living by
satisfactory written request to us. Once the change is recorded by us, it will
take effect as of the date of your request, subject to any action taken or
payment made by us before the recording.
Assignment
If this is an IRA contract, you may not assign this contract as collateral.
If this is a nonqualified contract, you can assign this contract or any interest
in it while the annuitant is living. Your interest and the interest of any
beneficiary is subject to the interest of the assignee. An assignment is not a
change of ownership and an assignee is not an owner as these terms are used in
this contract. Any amounts payable to the assignee will be paid in a single sum.
A copy of any assignment must be submitted to us at our administrative office.
Any assignment is subject to any action taken or payment made by us before the
assignment was recorded at our administrative office. We are not responsible for
the validity of any assignment.
<PAGE>
Payments to Beneficiary
Death Benefits Before Annuitization
A death benefit is payable to the beneficiary upon the earlier death of you or
the annuitant while this contract is in force and prior to annuitization.
The death benefit shall be either Option A or Option B (described below) as you
elected in your application and as is shown under Contract Data. Option A shall
apply if you or the annuitant are age 76 or older as of the contract date. The
death benefit option cannot be changed.
Option A - We will pay the beneficiary the greater of the following amounts:
1. the contract value; or
2. the total payments made to the contract minus adjustments for partial
withdrawals.
Option B - We will pay the beneficiary the greatest of the following amounts:
1. the contract value; or
2. the total payments made to the contract minus adjustments
for partial withdrawals; or
3. the highest contract value on any prior contract anniversary before either
your or the annuitant's 81st birthday, plus any purchase payments made since
that contract anniversary and less any "adjustments for partial withdrawals"
since that contract anniversary. After either your or the annuitant's 81st
birthday, this value will only change due to additional payments or
"adjustments for partial withdrawals".
Adjustments for Partial Withdrawals
Under either death benefit Option A or B, adjustments for partial withdrawals
are calculated 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
withdrawal charges) 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.
Any amounts payable or applied by us as described in the sections below will be
based on the contract values as of the valuation date on or next following the
date on which due proof of death is received at our administrative office.
Payment of Nonqualified Contract Death Benefit Before Annuitization
The above death benefit will be payable in a lump sum upon the receipt of due
proof of death of you or the annuitant, whichever first occurs. The beneficiary
may elect to receive payment any time within five years after the date of death.
The above death benefit will also be made upon the first to die if ownership is
in a joint tenancy except where spouses are joint owners with right of
survivorship and the surviving joint spouse elects to continue the contract.
In lieu of a lump sum, payments may be made under an Annuity Payment Plan,
provided:
1. the beneficiary elects the plan within 60 days after we receive due proof
of death; and
2. the plan provides payments over a period which does not exceed the life or
life expectancy of the beneficiary; and
3. payments must begin no later than one year after the date of death.
For Annuity Payment Plans, the reference to "annuitant" in the Annuity
Provisions shall apply to the beneficiary.
Payment of IRA Contract Death Benefit Before Annuitization
The above death benefit will be payable in a lump sum upon the receipt of due
proof of death. Under tax law, distributions are considered to have begun if
they are made when you reach your IRA required beginning date or if you have
annuitized according to applicable Treasury Regulations.
If distributions from your IRA have begun but you have not annuitized before
your death, your beneficiary must continue using the same method, or a faster
method, than you were using for your required minimum distributions, to receive
the death benefit.
If distributions from your IRA have not begun and you have not annuitized before
your death, your beneficiary may take one or more distributions so that the
entire death benefit is received within five years of the year in which your
death occurs. In lieu of taking payments within five years, payments may be made
under an Annuity Payment Plan, provided:
1. the beneficiary elects the plan within 60 days after we receive due proof of
death; and
2. the plan provides payments over a period which does not exceed the life or
life expectancy of the beneficiary; and
3. payments must begin no later than one year after the year your death occurs,
in the case of a non-spouse beneficiary, or by December 31 of the year in
which you would have turned age 701/2, in the case of a spouse beneficiary.
Payment amounts, durations and life expectancy calculations must comply with
Section 401(a)(9) of the Code and regulations thereunder.
For purposes of the foregoing provisions, life expectancy and joint and last
survivor expectancy shall be determined by use of the expected return multiples
in Table V and VI of Treasury Regulation Section 1.72-9 in accordance with Code
Section 408(b)(3) and the regulations thereunder. Life expectancy will be
initially determined on the basis of your beneficiary's attained age in the year
distributions are required to commence. Unless you (or your spouse) elects
otherwise prior to the time distributions are required to commence, your life
expectancy and, if applicable, your spouse's life expectancy will be
recalculated annually based on your attained ages in the year for which the
required distribution is being determined. The life expectancy of a nonspouse
beneficiary will not be recalculated. Instead, life expectancy will be
calculated using the attained age of such beneficiary during the calendar year
in which the individual attains age 701/2, and payments for subsequent years
shall be calculated based on such life expectancy reduced by one for each
calendar year which has elapsed since the calendar year life expectancy was
first calculated.
You or your beneficiary, as applicable, shall have the sole responsibility for
requesting a distribution that complies with this Contract and applicable law.
For Annuity Payment Plans, the reference to "annuitant" in the Annuity
Provisions shall apply to the beneficiary.
Spouse's Option to Continue Contract
For nonqualified contracts: If you die prior to annuitization and your spouse is
the sole beneficiary or co-owner of the contract, your spouse may keep the
contract in force as owner and may make additional purchase payments to the
contract.
For IRA contracts: If you die prior to your required beginning date and your
spouse is the sole beneficiary, your spouse may keep the contract in force as
his or her own IRA. As owner, your spouse may make additional payments to the
contract. As owner, your spouse's life will determine the IRA required beginning
date and minimum distribution amounts. If you die after your required beginning
date, spousal continuation of this contract is not available.
Death After Annuitization
If you or the annuitant die after annuitization, the amount payable to the
beneficiary, if any, will be as provided in the Annuity Payment Plan then in
effect.
Purchase Payments
Purchase Payments
Purchase payments are the payments you make for this contract and the benefits
it provides. Purchase payments must be paid or mailed to us at our
administrative office or to an authorized agent. If requested, we'll give you a
receipt for your purchase payments.
Net purchase payments are that part of your purchase payments applied to the
contract value. A net purchase payment is equal to the purchase payment less any
applicable premium tax charge.
Additional Purchase Payments
Additional purchase payments may be made until the earlier of:
1. the date this contract terminates by withdrawal or otherwise; or
2. the date on which annuity payments begin.
Additional purchase payments are subject to the "Payment Limits Provision"
below.
Payment Limits Provision
Maximum Purchase Payments -- The maximum total contract purchase payments may
not exceed the amounts shown under Contract Data. We reserve the right to
increase the maximums.
Additional Purchase Payments -- You may make additional purchase payments of at
least $100.
In addition, if this is an IRA contract, except as otherwise provided in this
paragraph, the total purchase payments for any taxable year may not exceed
$2,000 or as otherwise provided in the Code and all related laws and regulations
which are in effect during the term of this contract. In the case of a rollover
contribution described in Sections 402(c), 403(a)(4), 403(b)(8) or 408(d)(3) of
the Code, there is no limit on the amount of your purchase payment.
No contribution will be accepted under a SIMPLE plan established by any employer
pursuant to Code Section 408(p). No transfer or rollover of funds attributable
to contributions made by a particular employer under its SIMPLE plan will be
accepted from a SIMPLE IRA prior to the expiration of the two-year period
beginning on the date the individual first participated in that employer's
SIMPLE plan.
You shall have the sole responsibility for determining whether purchase payments
meet applicable income tax requirements.
All purchase payments must be made in cash. If you die before the entire
interest in this contract has been distributed to you, and your beneficiary is
other than your surviving spouse, no additional purchase payments will be
accepted from your beneficiary under this contract.
Allocation of Purchase Payments
You instruct us on how you want your purchase payments allocated among the fixed
account and variable subaccounts. Your choice for the fixed account and each
variable subaccount may be made in any whole percent from 0% to 100%. Your
allocation instructions as of the contract date are shown under Contract Data.
We reserve the right to limit the maximum number of accounts and/or subaccounts
to which you can allocate purchase payments or contract value at any time.
By written request, or by another method agreed to by us, you may change your
choice of accounts or percentages. The first net purchase payment will be
allocated as of the end of the valuation period during which we make an
affirmative decision to issue this contract. Net purchase payments after the
first will be allocated as of the end of the valuation period during which we
receive the payment at our administrative office.
Contract Value
Contract Value
The contract value at any time is the sum of:
1. the fixed account contract value; and
2. the variable account contract value.
If:
1. part or all of the contract value is withdrawn; or
2. charges described herein are made against the contract value;
then a number of accumulation units from the variable subaccounts and an amount
from the fixed account will be deducted to equal such amount. For withdrawals,
deductions will be made from the fixed or variable subaccounts that you specify.
Otherwise, the number of units from the variable subaccounts and the amount from
the fixed account will be deducted in the same proportion that your interest in
each bears to the total contract value.
Variable Account Contract Value
The variable account contract value at any time will be:
1. the sum of the value of all variable subaccount accumulation units under
this contract resulting from purchase payments and any contract value
credits so allocated, or transfers among the variable and fixed accounts;
less
2. the value of any units deducted for charges or withdrawals.
Fixed Account Contract Value
The fixed account contract value at any time will be:
1. the sum of all purchase payments and any contract value credits allocated
to the fixed account, plus interest credited; plus
2. any amounts transferred to the fixed account from any variable subaccount,
plus interest credited; less
3. any amounts transferred from the fixed account to any variable subaccount;
less
4. any amounts deducted for charges or withdrawals.
Interest to be Credited
We will credit interest to the fixed account contract value. Interest will begin
to accrue daily on the date the purchase payments which are received in our
administrative office become available for us to use. Such interest will be
credited at rates that we determine from time to time. However, we guarantee
that the rate will not be less than a 3% effective annual interest rate.
Table of Fixed Account Guaranteed
Minimum Values
Per $2,000 Annual Payments
Allocated 100% to the Fixed Account
Based on the 3% Minimum Interest Rate
Guaranteed Guaranteed
End of Minimum Minimum
Contract Fixed Account Fixed Account
Year Contract Values Withdrawal Values
1 2,030.00 1,880.00
2 4,120.90 3,827.06
3 6,274.53 5,844.84
4 8,492.76 7,942.86
5 10,777.55 10,122.93
6 13,130.87 12,390.87
7 15,554.80 14,774.80
8 18,051.44 17,271.44
9 20,622.99 19,842.99
10 23,271.68 22,491.68
11 25,999.83 25,219.83
12 28,809.82 28,029.82
13 31,704.11 30,924.11
14 34,685.24 33,905.24
15 37,755.80 36,975.80
16 40,918.47 40,138.47
17 44,176.02 43,396.02
18 47,531.30 46,751.30
19 51,017.24 50,237.24
20 54,607.76 53,827.76
If there are any additional payments, contract value credits, transfers to or
from the variable subaccounts, withdrawals or premium tax adjustments, the above
values will be adjusted as described in this contract.
Variable subaccount contract and withdrawal values are not guaranteed and cannot
be projected.
<PAGE>
Contract Value Credits
This provision applies only if you have elected death benefit Option A as shown
under Contract Data.
Prior to annuitization and beginning in the 8th contract year while this
contract is in force, we will periodically apply a Contract Value Credit to your
contract value. The amount of the Credit is dependent on whether there are
"eligible purchase payments" at the time the Credit is calculated.
"Eligible purchase payments" means purchase payments you have made to this
contract that have not been withdrawn and are no longer subject to a withdrawal
charge.
On an annual basis, the Contract Value Credit is .50% of an amount determined by
multiplying (a) times (b) where:
(a) is the contract value at the time the calculation is made; and
(b) is the ratio of "eligible purchase payments" to total purchase payments.
We reserve the right to calculate and apply the Contract Value Credit on a
quarterly or monthly basis in which case the Credit percentage shall be .125% or
..04167% respectively in lieu of .50%.
The Contract Value Credit amount shall be applied to the contract value
according to allocation instructions then in effect for your purchase payments.
Contract Administrative Charge
We charge a fee for establishing and maintaining our records for this contract.
The charge is $30 per year and is deducted from the contract value at the end of
each contract year. The charge deducted will be prorated among the variable
subaccounts and the fixed account in the same proportion your interest in each
bears to the total contract value.
We waive the annual contract administrative charge for any contract year where
the contract value immediately prior to the deduction of the contract
administrative charge is $50,000 or more.
If you make a full withdrawal of this contract, we deduct the full $30 contract
administrative charge at the time of full withdrawal regardless of contract
value.
The charge does not apply at or after annuitization of this contract or at the
time a death benefit is paid.
Premium Tax Charges
We reserve the right to assess a charge against the contract value of this
contract for any applicable premium tax assessed to us by a state or local
government. This charge could be deducted when you make purchase payments, or
make a full withdrawal of the contract value or at the time of annuitization.
Transfers of Contract Values
While this contract is in force prior to annuitization, transfers of contract
values may be made as outlined below.
1. You may transfer all or a part of the values held in one or more of the
variable subaccounts to another one or more of the variable subaccounts.
Subject to Item 2, you may also transfer values held in one or more of the
variable subaccounts to the fixed account.
2. On or within the 30 days before or after a contract anniversary you may
transfer values from the fixed account to one or more of the variable
subaccounts. If such a transfer is made, no transfers from any variable
subaccount to the fixed account may be made for six months after such a
transfer.
You may make a transfer by written request. Telephone transfers may also be made
according to telephone procedures that are then currently in effect, if any.
There is no fee or charge for these transfers. However, the minimum transfer
amount is $500, or if less, the entire value in the subaccount or in the fixed
account from which the transfer is being made, or other such minimum amounts
agreed to by us.
We may suspend or modify transfer privileges at any time. The right to transfer
contract values between the subaccounts is also subject to modification if we
determine, in our sole discretion, that the exercise of that right by one or
more contract owners is, or would be, to the disadvantage of other contract
owners. Any modification could be applied to transfers to or from some or all of
the subaccounts. These modifications could include, but not be limited to, the
requirements of a minimum time period between each transfer, not accepting
transfer requests of an agent acting under a power of attorney on behalf of more
than one contract owner or limiting the dollar amount that may be transferred
between the subaccounts and the fixed account by a contract owner at any one
time. We may apply these modifications or restrictions in any manner reasonably
designed to prevent any use of the transfer right we consider to be to the
disadvantage of other contract owners.
<PAGE>
Fixed and Variable Accounts
The Fixed Account
The fixed account is our general account. It is made up of all our assets other
than
1. those in the variable account; and
2. those in any other segregated asset account.
The Variable Account
The variable account is a separate investment account of ours. It consists of
several subaccounts which are named under Contract Data. We have allocated a
part of our assets for this and certain other contracts to the variable account.
Such assets remain our property. However, they may not be charged with the
liabilities from any other business in which we may take part.
Investments of the Variable Account
Purchase payments applied to the variable account will be allocated as specified
by the owner. Each variable subaccount will buy, at net asset value, shares of
the fund shown for that subaccount under Contract Data or as later added or
changed.
We may change the funds the variable subaccounts buy shares from if laws or
regulations change, the existing funds become unavailable or, in the judgment of
American Enterprise Life, the funds are no longer suitable for the subaccounts.
We have the right to substitute any funds for those shown under Contract Data,
including funds other than those shown under Contract Data.
We may also:
add new subaccounts,
combine any two or more subaccounts,
make additional subaccounts investing in additional funds,
transfer assets to and from the subaccounts or the variable account, and
eliminate or close any subaccounts.
We would first seek approval of the Securities and Exchange Commission if
necessary, and, where required, the insurance regulator of the state where this
contract is delivered.
Valuation of Assets
Fund shares in the variable subaccounts will be valued at their net asset value.
Variable Account Accumulation Units
The number of accumulation units for each of the variable subaccounts is found
by adding the number of accumulation units resulting from:
1. purchase payments and any contract value credits allocated to the
subaccount; and
2. transfers to the subaccount;
and subtracting the number of accumulation units resulting from:
1. transfers from the subaccount; and
2. withdrawals (including withdrawal charges) from the subaccount; and
3. contract administrative charge deductions from the subaccount.
The number of accumulation units added or subtracted for each of the above
transactions is found by dividing (1) by (2) where:
1. is the amount allocated to or deducted from the subaccount; and
2. is the accumulation unit value for the subaccount for the respective
valuation period during which we received the purchase payment or transfer
value, or during which we deducted transfers, withdrawals, withdrawal
charges or contract administrative charges.
<PAGE>
Variable Account Accumulation Unit Value
The value of an accumulation unit for each of the variable subaccounts was set
at $1 when the first fund shares were bought. The value for any later valuation
period is found as follows:
The accumulation unit value for each variable subaccount for the last prior
valuation period is multiplied by the net investment factor for the same
subaccount for the next following valuation period. The result is the
accumulation unit value. The value of an accumulation unit may increase or
decrease from one valuation period to the next.
Net Investment Factor
The net investment factor is an index applied to measure the investment
performance of a variable subaccount from one valuation period to the next. The
net investment factor may be greater or less than one; therefore, the value of
an accumulation or annuity unit may increase or decrease.
The net investment factor for any such subaccount for any valuation period is
determined by: dividing (1) by (2) and subtracting (3) and (4) from the result.
This is done where:
1. is the sum of:
a. the net asset value per share of the fund held in the variable subaccount
determined at the end of the current valuation period; plus
b. the per share amount of any dividend or capital gain distribution made by
the fund held in the variable subaccount, if the "ex-dividend" date occurs
during the current valuation period; and
2. is the net asset value per share of the fund held in the variable
subaccount, determined at the end of the last prior valuation period; and
3. is a factor representing the mortality and expense risk charge; and
4. is a factor representing the variable account administrative charge.
Mortality and Expense Risk Charge
In calculating unit values we will deduct a mortality and expense risk charge
from the variable subaccounts equal, on an annual basis, to 1.25% of the daily
net asset value. This deduction is made to compensate us for assuming the
mortality and expense risks under contracts of this type. We estimate that
approximately 2/3 of this charge is for assumption of mortality risk and 1/3 is
for assumption of expense risk. The deduction will be:
1. made from each variable subaccount; and
2. computed on a daily basis.
Variable Account Administrative Charge
In calculating unit values, we will deduct a variable account administrative
charge from the variable subaccounts equal, on an annual basis, to 0.15% of the
daily net asset value. This deduction is made to compensate us for certain
administrative and operating expenses for contracts of this type. The deduction
will be:
1. made from each variable subaccount; and
2. computed on a daily basis.
Annuity Unit Value
The value of an annuity unit for each variable subaccount was arbitrarily set at
$1 when the first fund shares were bought. The value for any later valuation
period is found as follows:
1. the annuity unit value for each variable subaccount for the last prior
valuation period is multiplied by the net investment factor for the
subaccount for the valuation period for which the annuity unit value is
being calculated.
2. the result is multiplied by an interest factor. This is done to neutralize
the assumed investment rate which is built into the annuity tables on Page
17.
<PAGE>
Withdrawal Provisions
Withdrawal
By written request and subject to the rules below you may:
1. withdraw this contract for the total withdrawal value; or
2. partially withdraw this contract for a part of the withdrawal value.
Rules for Withdrawal
All withdrawals will have the following conditions.
1. You must apply by written request or other method agreed to by us:
a. while this contract is in force; and
b. prior to the earlier of beginning an annuity payment plan or the death
of the annuitant or owner.
2. You must withdraw an amount equal to at least $500. Each variable subaccount
value and the fixed account value after a partial withdrawal must be either
$0 or at least $50.
3. The amount withdrawn, less any charges, will normally be mailed to you
within seven days of the receipt of your written request and this contract,
if required.
For withdrawals from the fixed account, we have the right to defer payment to
you for up to six months from the date we receive your request.
4. For partial withdrawals, if you do not specify from which account the
withdrawal is to be made, the withdrawal will be made from the variable
subaccounts and the fixed account in the same proportion as your interest in
each bears to the contract value.
5. Any amounts withdrawn and charges which may apply cannot be repaid.
Upon withdrawal for the full withdrawal value this contract will terminate. We
may require that you return the contract to us before we pay the full withdrawal
value.
Withdrawal Value
The withdrawal value at any time will be:
1. the contract value;
2. minus the full $30 contract administrative charge;
3. minus any withdrawal charge.
Withdrawal Charge
If you withdraw all or a part of your contract, you may be subject to a
withdrawal charge. A withdrawal charge applies if all or a part of the contract
value you withdraw is from payments received during the seven years before
withdrawal. Refer to Waiver of Withdrawal Charges for situations when withdrawal
charges are not deducted.
We determine your withdrawal charge by multiplying each of your payments
withdrawn by the applicable withdrawal charge percentage, and then totalling the
withdrawal charges.
For a partial withdrawal that is subject to a withdrawal charge, the amount we
actually withdraw from your contract value will be the amount you request plus
any applicable withdrawal charge. The withdrawal charge is applied to this total
amount. We pay you the amount you requested.
The withdrawal charge percentage depends upon the number of years since you made
the payment(s) withdrawn:
Number of Years Withdrawal Charge
From Payment Receipt Percentage
1 7.5%
2 7.5%
3 7.0%
4 6.0%
5 5.0%
6 4.0%
7 2.0%
Thereafter 0%
<PAGE>
Waiver of Withdrawal Charges
Withdrawal charges are waived for all of the following.
1. In the first contract year, any contract earnings. ("Contract earnings" is
defined as the contract value less purchase payments not previously
withdrawn.)
2. In the second and later contract years, the greater of:
a. Withdrawals during the year totaling up to 10% of your prior contract
anniversary contract value, or
b. Contract earnings.
3. Withdrawals made if both you and the annuitant were under age 76 on the
contract date, and you provide proof satisfactory to us that, as of the date
you request the withdrawal, you or the annuitant are confined to a hospital
or nursing home, and have been for the prior 60 days.
To qualify, the nursing home must:
a. be licensed by an appropriate licensing agency to
provide nursing services; and
b. provide 24-hour-a-day nursing services; and
c. have a doctor available for emergency situations; and
d have a nurse on duty or call at all times; and
e. maintain clinical records; and
f. have appropriate methods for administering drugs.
4. Withdrawal charges are waived 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.
5. IRA required minimum distributions, for those amounts required to be
distributed from this contract only.
6. Annuity payment plan payments.
7. Payments made in the event of the death of the owner or annuitant.
Withdrawal Order
We use this order to determine withdrawal charges.
1. First, withdrawals up to 10% of your prior contract anniversary contract
value not previously withdrawn during this contract year. This provision
(item #1) does not apply in the first contract year. (No withdrawal charge.)
2. Next, withdrawals are from amounts representing contract earnings - if any -
in excess of the annual 10% free withdrawal amount. In the first contract
year, amounts representing contract earnings - if any - shall be withdrawn
first. (No withdrawal charge.)
3. Next, withdrawals are from purchase payments received eight or more years
before the withdrawal and not previously withdrawn. (No withdrawal charge.)
4. Last, withdrawals are from purchase payments received in the seven years
before the withdrawal on a "first-in, first-out" (FIFO) basis. There is a
withdrawal charge on these payments.
Suspension or Delay in Payment of Withdrawal
We have the right to suspend or delay the date of any withdrawal payment from
the variable subaccounts for any period:
1. when the New York Stock Exchange is closed; or
2. when trading on the New York Stock Exchange is restricted; or
3. when an emergency exists as a result of which:
a. disposal of securities held in the variable subaccounts is not
reasonably practical; or
b. it is not reasonably practical to fairly determine the value of the net
assets of the variable subaccounts; or
4. during any other period when the Securities and Exchange Commission, by
order, so permits for the protection of security holders.
Rules and regulations of the Securities and Exchange Commission will govern as
to whether the conditions set forth in 2 and 3 exist.
<PAGE>
Annuity Provisions
Annuitization
When annuitization occurs, the contract value will be applied to make annuity
payments. The first payment will be made as of the retirement date. This date is
shown under Contract Data. Before payments begin we will require satisfactory
proof that the annuitant is alive. We may also require that you exchange this
contract for a supplemental contract which provides the annuity payments.
Change of Retirement Date
You may change the retirement date shown for this contract. Tell us the new date
by written request. If you select a new date, it must be at least 30 days after
we receive your written request at our administrative office.
The maximum retirement date on an IRA contract is the later of:
1. the April 1 following the calendar year in which the annuitant attains
age 70 1/2; or
2. such other date which satisfies the minimum distribution requirements under
the Code, its regulations, and/or promulgations by the Internal Revenue
Service; or
3. such other date as agreed upon by us.
Notwithstanding the above, and for all nonqualified contracts, the maximum
retirement date is the later of:
1. the annuitant's 85th birthday; or
2. the 10th contract anniversary.
Annuity Payment Plans
Annuity payments may be made on a fixed dollar basis, a variable basis or a
combination of both. You can schedule receipt of annuity payments according to
one of the Plans A through E below or another plan agreed to by us.
If this is an IRA, payment amounts, durations and life expectancy calculations
must comply with Section 401(a)(9) of the Code and the Regulations thereunder
and generally must:
1. provide for payments over your life or over your and your beneficiary's
lives; or
2. provide for payments over a period which does not exceed your life
expectancy and/or the life expectancy of you and your beneficiary; and
3. meet the minimum incidental death benefit requirements under the Code and
all related laws and regulations which are then in effect.
The rules described in the "Payment of IRA Contract Death Benefit Before
Annuitization" section for determining life expectancy will apply in determining
the amount of these distributions, except that the life expectancy of you and
your beneficiary will be initially determined on the basis of your attained ages
in the year you reach 701/2.
IRA annuity payments must be nonincreasing, or may increase only for a variable
life annuity as provided in Treasury Regulation Section 1.401(a)(9)-1, Q&A F-3.
An appropriate annuity payment plan is intended to satisfy the following
requirements that otherwise apply: the annual distribution required to be made
by your IRA required beginning date is for the calendar year in which you
reached age 70 1/2; annual payments for subsequent years, including the year in
which your IRA required beginning date occurs, must be made by December 31 of
that year.
You shall have the sole responsibility for electing an annuity payment plan that
complies with this Contract and applicable law.
Plan A -- This provides monthly annuity payments during the lifetime of the
annuitant. No payments will be made after the annuitant dies.
Plan B -- This provides monthly annuity payments during the lifetime of the
annuitant with a guarantee by us that payments will be made for a period of at
least five, 10 or 15 years. You must select the guaranteed period.
Plan C --This provides monthly annuity payments during the lifetime of the
annuitant with a guarantee by us that payments will be made for a certain number
of months. We determine the number of months by dividing the amount applied
under this plan by the amount of the first monthly annuity payment.
Plan D -- Monthly annuity payments will be paid during the lifetime of the
annuitant and joint annuitant. When either the annuitant or the joint annuitant
dies we will continue to make monthly payments during the lifetime of the
survivor. No payments will be made after the death of both the annuitant and
joint annuitant.
Plan E -- This provides monthly annuity payments for a period of years. The
period of years may be no less than 10 nor more than 30.
You may select the plan by written request to us at least 30 days before the
retirement date. If at least 30 days before the retirement date we have not
received at our administrative office your written request to select a plan, we
will make payments according to Plan B with payments guaranteed for 10 years.
If the amount to be applied to a plan would not provide a monthly payment of at
least $20, we have the right to change the frequency of the payment or to make a
lump sum payment of the contract value.
Allocation of Contract Values at Annuitization
At the time of annuitization under an Annuity Payment Plan, you may reallocate
your contract value to the Fixed Account to provide fixed dollar payments and/or
among the variable subaccounts, to provide variable annuity payments. We reserve
the right to limit the number of variable subaccounts used at any one time
during annuitization.
Fixed Annuity
A fixed annuity is an annuity with payments that are guaranteed by us as to
dollar amount. Fixed annuity payments remain the same. At annuitization the
fixed account contract value will be applied to the applicable Annuity Table.
This will be done in accordance with the payment plan chosen. The minimum amount
payable for each $1,000 so applied is shown in Table B on Page 18.
Variable Annuity
A variable annuity is an annuity with payments which:
1. are not predetermined or guaranteed as to dollar amount; and
2. vary in amount with the investment experience of the variable subaccounts.
Determination of the First Variable Annuity Payment
At annuitization, the variable account contract value will be applied to the
applicable Annuity Table. This will be done:
1. on the valuation date on or next preceding the seventh calendar day before
the retirement date; and
2. in accordance with the payment plan chosen. The amount payable for the first
payment for each $1,000 so applied is shown in Table A on Page 17.
Variable Annuity Payments After the First Payment
Variable annuity payments after the first payment vary in amount. The amount
changes with the investment performance of the variable subaccounts. The dollar
amount of variable annuity payments after the first is not fixed. It may change
from month to month. The dollar amount of such payments is determined as
follows.
1. The dollar amount of the first annuity payment is divided by the value of an
annuity unit as of the valuation date on or next preceding the seventh
calendar day before the retirement date. This result establishes the number
of annuity units for each monthly annuity payment after the first payment.
This number of annuity units remains fixed during the annuity payment
period.
2. The fixed number of annuity units is multiplied by the annuity unit value as
of the valuation date on or next preceding the seventh calendar day before
the date the payment is due. The result establishes the dollar amount of the
payment.
We guarantee that the dollar amount of each payment after the first will not be
affected by variations in expenses or mortality experience.
Exchange of Annuity Units
After annuity payments begin, annuity units of any variable subaccount may
be exchanged for units of any of the other variable subaccounts. This may be
done no more than once a year. We reserve the right to limit the number of
variable subaccounts used at any one time. Once annuity payments start no
exchanges may be made to or from any fixed annuity.
<PAGE>
Tables of Annuity Rates
Table A below shows the amount of the first monthly variable annuity payment,
based on a 5% assumed investment return, for each $1,000 of value applied under
any payment plan. The amount of the first and all subsequent monthly fixed
dollar annuity payments for each $1,000 of value applied under any payment plan
will be based on our fixed dollar Table of Annuity Rates in effect at
annuitization. Such rates are guaranteed to be not less than those shown in
Table B. The amount of such annuity payments under Plans A, B and C will depend
upon the sex and age of the annuitant at annuitization. The amount of such
annuity payments under Plan D will depend upon the sex and the age of the
annuitant and the joint annuitant at annuitization.
<TABLE>
<CAPTION>
Table A - Dollar Amount of First Monthly Variable Annuity Payment Per $1,000 Applied
- - ----------------------------------------------------------------------------------------------------------------------------------
Plan A Plan B Plan C Plan D
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Age Life Income Life Income with Life Income Joint & Survivor
at Beginning Non-Refund Five Years Ten Years Fifteen Years Installment Non-Refund
Annui- In Certain Certain Certain Refund Male & Female
tization Year Male Female Male Female Male Female Male Female Male Female Same Age
- - ----------------------------------------------------------------------------------------------------------------------------------
Age 65 2005 6.49 5.85 6.44 5.83 6.29 5.77 6.06 5.66 6.13 5.67 5.34
2010 6.40 5.78 6.35 5.76 6.22 5.71 6.00 5.61 6.06 5.61 5.30
2015 6.31 5.72 6.27 5.70 6.15 5.65 5.95 5.56 6.00 5.56 5.25
2020 6.23 5.66 6.19 5.64 6.08 5.60 5.90 5.52 5.93 5.51 5.21
2025 6.15 5.60 6.12 5.59 6.01 5.54 5.84 5.47 5.88 5.47 5.18
2030 6.08 5.55 6.05 5.53 5.95 5.50 5.80 5.43 5.82 5.43 5.14
Age 70 2005 7.41 6.54 7.29 6.50 6.98 6.36 6.54 6.14 6.79 6.22 5.85
2010 7.28 6.45 7.17 6.41 6.88 6.28 6.48 6.08 6.70 6.15 5.78
2015 7.16 6.35 7.06 6.32 6.80 6.21 6.42 6.03 6.61 6.08 5.72
2020 7.04 6.27 6.95 6.24 6.71 6.14 6.37 5.97 6.53 6.01 5.66
2025 6.93 6.19 6.85 6.16 6.63 6.07 6.31 5.92 6.45 5.95 5.61
2030 6.83 6.11 6.76 6.09 6.55 6.01 6.26 5.87 6.38 5.90 5.56
Age 75 2005 8.67 7.58 8.42 7.47 7.78 7.15 7.02 6.70 7.65 6.99 6.59
2010 8.49 7.43 8.26 7.34 7.68 7.05 6.97 6.63 7.53 6.89 6.49
2015 8.32 7.30 8.11 7.21 7.58 6.96 6.91 6.57 7.42 6.80 6.40
2020 8.16 7.18 7.97 7.10 7.48 6.87 6.86 6.51 7.31 6.71 6.31
2025 8.00 7.06 7.83 6.99 7.38 6.78 6.81 6.46 7.21 6.62 6.24
2030 7.86 6.95 7.70 6.89 7.29 6.70 6.75 6.40 7.12 6.55 6.16
Age 85 2005 13.01 11.44 11.71 10.69 9.46 9.09 7.69 7.60 10.30 9.50 9.30
2010 12.65 11.12 11.48 10.45 9.38 9.00 7.67 7.58 10.11 9.32 9.09
2015 12.31 10.82 11.26 10.23 9.30 8.90 7.66 7.56 9.93 9.15 8.90
2020 11.99 10.55 11.04 10.02 9.22 8.80 7.64 7.53 9.76 9.00 8.72
2025 11.70 10.29 10.84 9.83 9.15 8.71 7.62 7.51 9.60 8.85 8.55
2030 11.42 10.06 10.64 9.64 9.07 8.62 7.61 7.48 9.45 8.72 8.40
- - -----------------------------------------------------------------------------------------------------------------------------------
Table A above is based on the "1983 Individual Annuitant Mortality Table A" with
100% Projection Scale G and a 5% assumed investment
return. Annuity rates for any year, age, or any combination of year, age and sex not shown above, will be calculated on the same
basis as those rates shown in the Table above. Such rates will be furnished by
us upon request. Amounts shown in the Table below are based on a 5% assumed
investment return.
- - -----------------------------------------------------------------------------------------------------------------------------------
Plan E - Dollar Amount of First Monthly Variable Annuity Payment Per $1,000 Applied
- - -----------------------------------------------------------------------------------------------------------------------------------
Years Payable Monthly Payment Years Payable Monthly Payment Years Payable Monthly Payment
10 10.51 17 7.20 24 5.88
11 9.77 18 6.94 25 5.76
12 9.16 19 6.71 26 5.65
13 8.64 20 6.51 27 5.54
14 8.20 21 6.33 28 5.45
15 7.82 22 6.17 29 5.36
16 7.49 23 6.02 30 5.28
- - -----------------------------------------------------------------------------------------------------------------------------------
<PAGE>
Table B - Dollar Amounts of Each Monthly Fixed Dollar Annuity Payment Per $1,000 Applied
- - -----------------------------------------------------------------------------------------------------------------------------------
- - -----------------------------------------------------------------------------------------------------------------------------------
Plan A Plan B Plan C Plan D
- - -----------------------------------------------------------------------------------------------------------------------------------
Settlement Life Income Life Income with Life Income Joint & Survivor
Beginning Non-Refund Five Years Ten Years Fifteen Years Installment Non-Refund
Settlement In Certain Certain Certain Refund Male & Female
Age Year Male Female Male Female Male Female Male Female Male Female Same Age
- - ----------------------------------------------------------------------------------------------------------------------------------
Age 65 2005 5.30 4.68 5.26 4.66 5.15 4.62 4.95 4.53 4.84 4.43 4.20
2010 5.21 4.61 5.17 4.60 5.07 4.55 4.89 4.48 4.77 4.38 4.15
2015 5.12 4.55 5.09 4.53 4.99 4.49 4.83 4.42 4.71 4.34 4.11
2020 5.04 4.48 5.01 4.47 4.92 4.44 4.77 4.38 4.66 4.29 4.07
2025 4.96 4.43 4.94 4.42 4.86 4.39 4.72 4.33 4.60 4.25 4.03
2030 4.89 4.37 4.87 4.37 4.79 4.34 4.67 4.29 4.55 4.21 3.99
Age 70 2005 6.21 5.38 6.12 5.35 5.87 5.24 5.48 5.05 5.45 4.97 4.74
2010 6.08 5.29 6.01 5.26 5.77 5.16 5.41 4.99 5.37 4.90 4.67
2015 5.96 5.20 5.89 5.17 5.68 5.08 5.35 4.93 5.29 4.84 4.61
2020 5.85 5.11 5.79 5.09 5.59 5.01 5.29 4.87 5.22 4.78 4.55
2025 5.75 5.03 5.69 5.01 5.51 4.94 5.23 4.82 5.15 4.72 4.49
2030 5.64 4.96 5.59 4.94 5.43 4.88 5.17 4.76 5.08 4.67 4.44
Age 75 2005 7.47 6.42 7.27 6.33 6.72 6.07 6.00 5.65 6.24 5.68 5.50
2010 7.29 6.28 7.11 6.20 6.61 5.97 5.94 5.59 6.14 5.60 5.40
2015 7.12 6.15 6.96 6.08 6.50 5.87 5.88 5.52 6.04 5.51 5.31
2020 6.96 6.03 6.82 5.97 6.40 5.78 5.83 5.46 5.95 5.43 5.23
2025 6.81 5.91 6.68 5.86 6.30 5.69 5.77 5.40 5.86 5.36 5.15
2030 6.67 5.81 6.55 5.76 6.21 5.60 5.72 5.34 5.77 5.29 5.08
Age 85 2005 11.77 10.25 10.64 9.60 8.51 8.12 6.73 6.64 8.66 7.97 8.24
2010 11.42 9.94 10.40 9.37 8.42 8.02 6.71 6.61 8.50 7.82 8.03
2015 11.09 9.65 10.18 9.15 8.34 7.91 6.70 6.59 8.35 7.68 7.84
2020 10.78 9.38 9.96 8.94 8.26 7.81 6.68 6.56 8.20 7.55 7.66
2025 10.49 9.14 9.75 8.74 8.18 7.72 6.66 6.54 8.06 7.42 7.50
2030 10.22 8.91 9.56 8.56 8.09 7.62 6.65 6.51 7.94 7.31 7.35
- - ----------------------------------------------------------------------------------------------------------------------------------
Table B above is based on the "1983 Individual Annuitant Mortality Table A" at
3.0% with 100% Projection Scale G. Annuity rates for
any year, age, or any combination of year, age and sex not shown above, will be calculated on the same basis as those rates shown in
the Table above. Such rates will be furnished by us upon request. Amounts shown
in the Table below are based on a 3.0% annual effective interest rate.
- - ----------------------------------------------------------------------------------------------------------------------------------
Plan E - Dollar Amount of Each Monthly Fixed Dollar Annuity Payment Per $1,000 Applied
- - ----------------------------------------------------------------------------------------------------------------------------------
Years Payable Monthly Payment Years Payable Monthly Payment Years Payable Monthly Payment
10 9.61 17 6.23 24 4.84
11 8.86 18 5.96 25 4.71
12 8.24 19 5.73 26 4.59
13 7.71 20 5.51 27 4.47
14 7.26 21 5.32 28 4.37
15 6.87 22 5.15 29 4.27
16 6.53 23 4.99 30 4.18
- - ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Deferred Annuity Contract
- - -------------------------------------------------- ---------------------------
Administrative Offices:
80 South Eighth Street
P.O. Box 534
Minneapolis, MN 55440
American
Enterprise
Life
| Flexible Purchase Payment
| Optional Fixed Dollar or Variable Accumulation Values
and Annuity Payments
| Annuity Payments to Begin on the Retirement Date
| This Contract is Nonparticipating - Dividends Are Not Payable
<PAGE>
Roth IRA Endorsement
For the purpose of qualifying this contract as an Individual Retirement Annuity
(IRA) maintained as a Roth IRA under Public Law 105-34, this endorsement is made
part of the annuity contract to which it is attached. It modifies this contract
by adding the following Roth IRA provisions. All contract IRA provisions apply
to this Roth IRA contract, except as described in this endorsement. If there is
any conflict between contract and endorsement provisions, the endorsement
provisions take precedence.
Definitions
Here are some important definitions:
You, Your
The owner of this contract. At all times you (the owner) must be the annuitant.
You may not transfer the ownership of this Roth IRA contract except as provided
under "Change of Ownership" in the contract.
Code
The Internal Revenue Code of 1986, as amended, and all related laws and
regulations which are in effect and applicable during the term of this contract.
Roth IRA Contract
An annuity contract maintained as a Roth IRA as described in Code Section 408A.
IRA Required Minimum Distributions [Not Applicable]
The required minimum distributions at age 70 1/2 under code section 408(b)(3)
are not applicable to Roth IRA.
GENERAL PROVISIONS
Contract Modification
This contract is intended to qualify as a Roth IRA. We agree to and reserve the
right to modify this contract (and endorsement) to the extent necessary to
qualify it as a Roth IRA as described in Code Section 408A. We will obtain the
approval of any state regulatory authority for the modifications and send you a
copy of any such change.
PAYMENTS TO BENEFICIARY
Payment of Roth IRA Death Benefit Before Annuitization
The death benefit will be payable in a lump sum upon the receipt of due proof of
your death. The beneficiary may elect to receive payments any time within five
years after the date of death.
In lieu of a lump sum, payments may be made under an Annuity Payment Plan,
provided:
1. the beneficiary elects the plan within 60 days after we receive due proof
of death; and
2. the plan provides payments over a period which does not exceed the life or
life expectancy of the beneficiary; and
3. payments must begin no later than:
a. one year after the date of death in the case of a non-spouse
beneficiary; or
b. by December 31 of the year in which you would have turned age
70 1/2in the case of a spouse beneficiary.
<PAGE>
Spouse's Option to Continue Contract
If you die prior to annuitization and your spouse is the sole beneficiary of
this contract, your spouse may keep this contract in force as his or her own
Roth IRA. Owner, your spouse may make additional purchase payments to this
contract.
PURCHASE PAYMENTS
Purchase Payments
All purchase payments to a Roth IRA must be in cash and may be made even after
you are age 70 1/2.
Payment Limits Provision
Except as otherwise provided in this paragraph, total purchase payment for any
taxable year may not exceed $2,000. In the case of a rollover contribution or a
conversion of an IRA (other than a Roth IRA) to a Roth IRA as described in Code
Sections 408A(c)(6) and 408A(d)(3)(c), there is no limit on the amount of your
purchase payment.
ANNUITY PROVISIONS
Change of Retirement Date
You may change the retirement date shown for this contract. Tell us the new date
by written request. If you select a new date, it must be at least 30 days after
we receive your written request at our administrative office.
The maximum retirement date on this Roth IRA contract is the latest of:
1. the annuitant's 85th birthday; or
2. the 10th contract anniversary; or
3 such other date as agreed upon by us.
Annuity Payment Plans
Any Roth IRA annuity payment plan selected must meet the Roth IRA minimum death
distribution requirements under Code Section 401(a)(9)(B).
This endorsement is effective as of the contract date of this contract.
American Enterprise Life Insurance Company
William A. Stoltzmann
Secretary
<PAGE>
SEP-IRA Endorsement
This endorsement is made part of the annuity contract to which it is attached.
It changes certain contract terms by adding the following provisions to the
annuity contract. In the event of any conflict between contract and endorsement
provisions, the endorsement provisions take precedence over the contract
provisions.
This contract is intended to qualify as a SEP-IRA annuity contract. A SEP-IRA is
an Individual Retirement Annuity (IRA) with special features and requirements.
All contract IRA provisions apply to this SEP-IRA contract, except as described
in this endorsement.
Here are some important definitions:
Code
The Internal Revenue Code of 1986, as amended, and all related laws and
regulations which are in effect during the term of this contract.
SEP-IRA Contract
A Simplified Employee Pension under Public Law 99-514. It is used in or under a
retirement plan or program described in Code Sections 408(b) and (k).
General Provisions
Unisex Basis
Since SEP-IRA plans are employer-sponsored retirement plans, this contract is on
a unisex basis. All sex-distinct references in the contract are hereby deleted
and replaced with unisex references.
Refer to the unisex Tables of Annuity Rates in this endorsement. These unisex
tables replace the sex-distinct tables in the contract.
Contract Modification
We reserve the right to modify this contract to the extent necessary to qualify
this contract as a SEP-IRA contract as described in Code Sections 408(b) and
(k), and all related laws and regulations which are in effect during the term of
this contract.
We will obtain any necessary regulatory approvals for the modifications.
Benefits Based on Incorrect Data
Payments under the contract will be based on the annuitant's birthdate. If the
annuitant's birthdate has been misstated, payments under this contract will be
adjusted. They will be based on what would have been provided at the correct
birthdate. Any underpayments made by us will be made up immediately. Any
overpayments made by us will be subtracted from the future payments.
Purchase Payments
Payment Limits Provision
Employer purchase payments for any taxable year may not exceed the applicable
contribution limits described in section 408(k) of the Code (generally, the
lesser than 15% of your compensation or $30,000 as adjusted for cost of living
increases).
Employer purchase payments made in connection with a simplified employee pension
plan [SEP] may be made with respect to the taxable year in which the annuitant
attains age 70 1/2 or any later year.
<PAGE>
Tables of Annuity Rates
Table A below shows the amount of the first monthly variable annuity payment,
based on 5% assumed investment return, for each $1,000 of value applied under
any payment plan. The amount of the first and all subsequent monthly fixed
dollar annuity payments for each $1,000 of value applied under any payment plan
will be based on our fixed dollar Table of Annuity Rates in effect at
annuitization. Such rates are guaranteed to be not less than those shown in
Table B. The amount of such annuity payments under Plans A, B and C will depend
upon the age of the annuitant(s) at annuitization. The amount of such annuity
payments under Plan D will depend upon the ages of the annuitant and the joint
annuitant at annuitization.
<TABLE>
<CAPTION>
Table A - Dollar Amount of First Monthly Variable Annuity Payment Per $1,000 Applied
PLAN A PLAN B PLAN C PLAN D
- - ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Age Beginning Life Income with Life Income
at in Life Income Five Years Ten Years Fifteen Years Installment Joint & Survivor
Annuitization Year Non-Refund Certain Certain Certain Refund Non-Refund
- - ---------------------------------------------------------------------------------------------------
Age 65 2005 5.85 5.83 5.77 5.66 5.67 5.20
2010 5.78 5.76 5.71 5.61 5.61 5.16
2015 5.72 5.70 5.65 5.56 5.56 5.13
2020 5.66 5.64 5.60 5.52 5.51 5.09
2025 5.60 5.59 5.54 5.47 5.47 5.06
2030 5.55 5.53 5.50 5.43 5.43 5.04
- - ---------------------------------------------------------------------------------------------------
Age 70 2005 6.54 6.50 6.36 6.14 6.22 5.66
2010 6.45 6.41 6.28 6.08 6.15 5.60
2015 6.35 6.32 6.21 6.03 6.08 5.55
2020 6.27 6.24 6.14 5.97 6.01 5.50
2025 6.19 6.16 6.07 5.92 5.95 5.45
2030 6.11 6.09 6.01 5.87 5.90 5.41
- - ---------------------------------------------------------------------------------------------------
Age 75 2005 7.58 7.47 7.15 6.70 6.99 6.33
2010 7.43 7.34 7.05 6.63 6.89 6.25
2015 7.30 7.21 6.96 6.57 6.80 6.17
2020 7.18 7.10 6.87 6.51 6.71 6.09
2025 7.06 6.99 6.78 6.46 6.62 6.02
2030 6.95 6.89 6.70 6.40 6.55 5.96
- - ---------------------------------------------------------------------------------------------------
Age 85 2005 11.44 10.69 9.09 7.60 9.50 8.88
2010 11.12 10.45 9.00 7.58 9.32 8.69
2015 10.82 10.23 8.90 7.56 9.15 8.51
2020 10.55 10.02 8.80 7.53 9.00 8.34
2025 10.29 9.83 8.71 7.51 8.85 8.19
2030 10.06 9.64 8.62 7.48 8.72 8.05
- - ---------------------------------------------------------------------------------------------------
Table A above is based on the "1983 Individual Annuitant Mortality Table A" with
100% Projection Scale G and a 5% assumed investment return. Annuity rates for
any year, age, or any combination of year and age not shown above, will be
calculated on the same basis as those rates shown in the Table above. Such rates
will be furnished by us upon request. Amounts shown in the Table below are based
on a 5% assumed investment return.
<PAGE>
- - ---------------------------------------------------------------------------------------------------
Plan E - Dollar Amount of First Monthly Variable Annuity Payment Per $1,000 Applied
- - ---------------------------------------------------------------------------------------------------
Years Monthly Years Monthly Years Monthly
Payable Payments Payable Payments Payable Payments
- - ---------------------------------------------------------------------------------------------------
10 10.51 17 7.20 24 5.88
11 9.77 18 6.94 25 5.76
12 9.16 19 6.71 26 5.65
13 8.64 20 6.51 27 5.54
14 8.20 21 6.33 28 5.45
15 7.82 22 6.17 29 5.36
16 7.49 23 6.02 30 5.28
- - ---------------------------------------------------------------------------------------------------
- - ---------------------------------------------------------------------------------------------------
- - ---------------------------------------------------------------------------------------------------
- - ---------------------------------------------------------------------------------------------------
Table B - Dollar Amount of Each Monthly Fixed Dollar Annuity Payment Per $1,000 Applied
- - ---------------------------------------------------------------------------------------------------
PLAN A PLAN B PLAN C PLAN D
- - ---------------------------------------------------------------------------------------------------
Age Beginning Life Income with Life Income Joint &
at in Life Income Five Years Ten Years Fifteen Years Installment Survivor
Annuitization Year Non-Refund Certain Certain Certain Refund Non-Refund
- - ---------------------------------------------------------------------------------------------------
Age 65 2005 4.68 4.66 4.62 4.53 4.43 4.06
2010 4.61 4.60 4.55 4.48 4.38 4.02
2015 4.55 4.53 4.49 4.42 4.34 3.98
2020 4.48 4.47 4.44 4.38 4.29 3.94
2025 4.43 4.42 4.39 4.33 4.25 3.91
2030 4.37 4.37 4.34 4.29 4.21 3.88
- - ---------------------------------------------------------------------------------------------------
Age 70 2005 5.38 5.35 5.24 5.05 4.97 4.55
2010 5.29 5.26 5.16 4.99 4.90 4.49
2015 5.20 5.17 5.08 4.93 4.84 4.43
2020 5.11 5.09 5.01 4.87 4.78 4.38
2025 5.03 5.01 4.94 4.82 4.72 4.33
2030 4.96 4.94 4.88 4.76 4.67 4.29
- - ---------------------------------------------------------------------------------------------------
Age 75 2005 6.42 6.33 6.07 5.65 5.68 5.25
2010 6.28 6.20 5.97 5.59 5.60 5.16
2015 6.15 6.08 5.87 5.52 5.51 5.08
2020 6.03 5.97 5.78 5.46 5.43 5.01
2025 5.91 5.86 5.69 5.40 5.36 4.94
2030 5.81 5.76 5.60 5.34 5.29 4.88
- - ---------------------------------------------------------------------------------------------------
Age 85 2005 10.25 9.60 8.12 6.64 7.97 7.83
2010 9.94 9.37 8.02 6.61 7.82 7.64
2015 9.65 9.15 7.91 6.59 7.68 7.46
2020 9.38 8.94 7.81 6.56 7.55 7.30
2025 9.14 8.74 7.72 6.54 7.42 7.15
2030 8.91 8.56 7.62 6.51 7.31 7.01
- - ---------------------------------------------------------------------------------------------------
Table B above is based on the "1983 Individual Annuitant Mortality Table A" @
3.00% with 100% Projection Scale G. Annuity rates for any year, age, or any
combination of year and age not shown above, will be calculated on the same
basis as those rates shown in the Table above. Such rates will be furnished by
us upon request. Amounts shown in the Table below are based on a 3% annual
effective interest rate.
<PAGE>
- - ---------------------------------------------------------------------------------------------------
Plan E - Dollar Amount of Each Monthly Fixed Dollar Annuity Payment Per $1,000 Applied
- - ---------------------------------------------------------------------------------------------------
Years Monthly Years Monthly Years Monthly
Payable Payments Payable Payments Payable Payments
- - ---------------------------------------------------------------------------------------------------
10 9.61 17 6.23 24 4.84
11 8.86 18 5.96 25 4.71
12 8.24 19 5.73 26 4.59
13 7.71 20 5.51 27 4.47
14 7.26 21 5.32 28 4.37
15 6.87 22 5.15 29 4.27
16 6.53 23 4.99 30 4.18
- - ---------------------------------------------------------------------------------------------------
</TABLE>
This endorsement is effective as of the contract date of this contract.
American Enterprise Life Insurance Company
Secretary
<PAGE>
[Signature ] Variable Annuity Application
American Enterprise Life Insurance Company
Administrative Offices:
80 South Eighth Street
P.O. Box 534
Minneapolis, MN 55440
- - -------------------------------------------------------------------------------
1 Annuitant Full Name (First, Middle Initial, Last)
- - -------------------------------------------------------------------------------
Address (Street Address or P.O. Box, City, State, Zip)
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Citizenship: U.S.
Other (Country)
- - -------------------------------------------------------------------------------
Phone Number
( )
- - -------------------------------------------------------------------------------
Sex Date of Birth Social Security Number
( )M (Month/Day/Year) (Tax Identification Number)
( )F / /
- - -------------------------------------------------------------------------------
2 Owner (check one)
( ) Same as Annuitant (Do no complete owner information below)
( ) Joint with Annuitant (Spouse only)-Not Available for IRA
( ) Other
- - -------------------------------------------------------------------------------
Full Name (First, Middle Initial, Last)
- - -------------------------------------------------------------------------------
Address (Street Address or P.O. Box, City, State, Zip)
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Relationship to Annuituant
- - -------------------------------------------------------------------------------
Phone Number
( )
- - -------------------------------------------------------------------------------
Sex Date of Birth Social Security Number
(Month/Day/Year) (Tax Identification Number)
M / /
F
- - -------------------------------------------------------------------------------
For joint spousal owners, the annuitant's Social Security
number will be used for tax reporting purposes unless you
specify otherwise under Remarks.
- - -------------------------------------------------------------------------------
3 Primary Beneficiary (Name, relationship to the Annuitant;
if unrelated, include Social Security
number and date of birth)
- - -------------------------------------------------------------------------------
Contingent Beneficiary (Name, relationship to the Annuitant;
if unrelated, include Social Security
numberand date of birth)
- - -------------------------------------------------------------------------------
4 Annuity Plan (check one)
Nonqualified Traditional IRA SEP-IRA
Roth IRA TSA Rollover
If IRA (check and complete applicable types)
Traditional IRA: Amount $_______ for ______ (year)
Traditional IRA: Amount $_______ for ______ (year)
SEP-IRA: Amount $_______ for ______ (year)
SEP-IRA: Amount $_______ for ______ (year)
Roth Contributory:Amount $_______ for ______ (year)
Roth Contributory:Amount $_______ for ______ (year)
Rollover IRA: Amount $__________
Trustee to Trustee IRA: Amount $__________
Roth Conversion IRA: Amount $__________
- - --------------------------------------------------------------------------------
5 Death Benefit Option (check one)
NOTE: Option A shall apply if owner or annuitant is age 76 or older.
( ) Option A - Greater of Contract Value or Purchase Payments
( ) Option B - Highest Anniversary Value
- - --------------------------------------------------------------------------------
6 Purchase Payments
Initial Purchase Payment $______________________________
Payment Allocation*:
Fixed
______% AEL Fixed Account
Money Market
______% AXPsm VP Cash Management Fund
Low/Medium Yield Bonds
______% Alliance U.S. Gov./High Grade Portfolio
______% AXP sm VP Bond Fund
______% Goldman Sachs VIT Global Income Fund
High Yield Bonds
______% AXPsm VP Extra Income Fund
Large Cap Stocks
______% AIM V.I. Value Fund
______% Alliance Premier Growth Portfolio
______% Alliance Technology Portfolio
______% AXPsm VP Managed Fund
______% AXPsm VP New Dimensions Fund
______% Fidelity VIP Fund III Growth & Income Port
______% Franklin Templeton VIP Mutual Shares Investments Fund - Class 2
______% Goldman Sachs VIT Capital Growth Fund
______% Goldman Sachs VIT CORE U.S. Equity Fund
______% J.P. Morgan U.S. Disciplined Equity Portfolio
______% Lazard Retirement Equity Portfolio
______% Putnam VT Growth & Income Fund
Mid Cap Stocks
______% AIM V.I. Capital Appreciation Fund
______% AXPsm VP Capital Resource Fund
______% Fidelity VIP Fund III Mid Cap Portfolio
______% Franklin Templeton Real Estate Securities Fund - Class 2
______% MFS(R) Research Series
______% MFS(R) Utilities Series
______% Warburg, Pincus Trust - Emerging Growth Portfolio
Small Cap Stocks
______% AIM V.I. Capital Development Fund
______% Baron Capital Asset Fund
______% MFS(R) New Discovery Series
______% Royce Micro-cap Portfolio
______% Royce Premier Portfolio
______% Wanger U.S. Small Cap Fund
International Stocks
______% Fidelity VIP Fund Overseas Portfolio
______% Goldman Sachs VIT International Equity Fund
______% Lazard Retirement International Equity Portfolio
______% Putnam VT International Equity Portfolio
______% Putnam VT International Growth Fund
______% Putnam VT International New Opportunites Fund
______% Templeton International Smaller Companies
Fund - Class 2
______%Wanger International Small Cap Fund
*Must be whole numbers. your above payment allocation instruction will remain
in effect for any future payments you make until you change your instructions.
<PAGE>
7 Replacement
Will the annuity applied for replace any existing insurance or annuity?
( )Yes ( ) No
If Yes, provide details - company, contract number, amount,
reason - under Remarks.
8 Remarks and Special Instructions (including special mailing instructions)
9 Social Security or Taxpayer Identification Number Certification.
You certify, under the penalties of perjury as required by Form W-9 of
the Internal Revenue Service, that:
(1) The number shown on this form is your correct taxpayer identification
number (or you are waiting for a number to be issued to you), and
(2) You are not subject to backup withholding because: (a) you are exempt
from backup withholding, or (b) you have not been notified by the
Internal Revenue Service that you are subject to backup withholding as
a result of a failure to report all interest or dividends, or (c) the
IRS has notified you that you are no longer subject to backup
withholding.
You must cross out item 2 above if you have been notified by the IRS
that you are currently subject to backup withholding because of
underreporting interest of dividends on your tax return. The Internal
Revenue Service does not require your consent to any provision of this
document other than the certification required to avoid backup
withholding.
- - -------------------------------------------------------------------------------
10 It Is Agreed That:
1. All statements and answers given above are true and complete to the
best of my/our knowledge.
2. Only an officer of American Enterprise Life Insurance Company can
modify any annuity contract or waive any requirement in this
application.
3. If joint spousal owners are named, ownership will be in joint
tenancy with right of survivorship unless prohibited by state
of settlement or specified otherwise in Remarks above.
4. I/we acknowledge receipt of current prospectuses for the variable
annuity and any funds involved.
5. I/we understand that earnings and values, when based on the
investment experience of a variable fund, portfolio, account or
subaccount, are not guaranteed and may both increase or decrease.
6. Tax law requires that all non-qualified deferred annuity
contracts issued by the same company, to the same policyholder
(owner), during the same calendar year are to be treated as a
single, unified contract. The amount of income included and taxed
in a distribution (or a transaction deemed a distribution under
tax law) taken from any one of such contracts is determined by
summing all such contracts together.
Signatures
_______________________________
Location (City/State)
________________________________
Date
X______________________________
Annuitant Signature
X______________________________
Licensed Agent Signature
X______________________________
Owner Signature (if other than annuitant)
X______________________________
Joint Owner (if any) Signature
-----------------------------------------------------------------------------
11 State Specific Information / Fraud Warnings:
For applicants in Arizona:
Write to us if you want information about your annuity contract benefits
and provisions. We'll promptly send your requested information. If for any
reason you are not satisfied with the contract, you may return it to us or
our agent within 10 days after receiving it. We will refund an amount equal
to the sum of the contract value and any premium tax charges and the
contract will then be void.
For applicants in Arkansas, Kentucky, Maine, New Mexico, Ohio and Pennsylvania:
Any person who knowingly and with intent to defraud any insurance company
or other person files an application for insurance or statement of claim
containing any materially false information or conceals for the purpose of
misleading, information concerning any fact material thereto commits a
fraudulent insurance act, which is a crime and subjects such person to
criminal and civil penalties.
For applicants in Colorado:
Any person who, with intent to defraud or knowing that he or she is
facilitating a fraud against an insurer, submits an application or files a
claim containing a false or deceptive statement, may be guilty of insurance
fraud.
For applicants in Florida:
Any person who knowingly and with intent to injure, defraud, or deceive any
insurer files a statement of claim or an application containing any false,
incomplete, or misleading information is guilty of a felony or the third
degree.
Agent's Printed Name:______________________________
Agent's Florida License ID #:_______________________
For applicants in New Jersey:
Any person who knowingly files a statement of claim containing any false or
misleading information is subject to criminal and civil penalties.
<PAGE>
Please complete Agent's Report on next page.
- - -------------------------------------------------------------------------------
12 Agent's Report (Type or Print)
Agent's Name_______________________________________________________________
Agent's Social Security Number ____________________________________________
Agency Name and Number (if applicable) ____________________________________
Telephone Number ( )_____________________________________________
Fax Number ( )____________________________________________________
Branch Address_____________________________________________________________
Sale Location______________________________________________________________
I hereby certify that I personally solicited this application; that the
application and this report are complete and accurate to the best of my
knowledge and belief. To the best of my knowledge, this application does
does not involve replacement of existing life insurance or annuities. (If
replacement is involved, I have provided details - company, contract
number, amount, reason - under Remarks and have completed any state
replacement requirements including any required state replacement forms).
X_________________________________
Licensed Agent Signature
PARTICIPATION AGREEMENT
By and Among
ROYCE CAPITAL FUND
And
ROYCE & ASSOCIATES, INC.
And
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into as of this day of
, 1999, by and among ROYCE CAPITAL FUND, an open-end
management investment company organized as a Delaware business trust (the
"Fund"), ROYCE & ASSOCIATES, INC. corporation organized under the laws of New
York (the "Adviser"), and AMERICAN ENTERPRISE LIFE INSURANCE COMPANY, an Indiana
life insurance company (the "Company"), on its own behalf and on behalf of each
separate account of the Company named in Schedule 1 to this Agreement, as may be
amended from time to time, (each account referred to as the "Account").
WHEREAS, the Fund was established for the purpose of serving as the investment
vehicle for insurance company separate accounts supporting variable annuity
contracts and variable life insurance policies to be offered by insurance
companies that have entered into participation agreements with the Fund and the
Adviser (the "Participating Insurance Companies"), and
WHEREAS, beneficial interests in the Fund are divided into several series of
shares, each representing the interest in a particular managed portfolio of
securities and other assets; and
WHEREAS, the Fund has received an order from the Securities & Exchange
Commission (the "SEC") granting Participating Insurance Companies and their
separate accounts relief from the provisions of Sections 9(a), 13(a), 15(a), and
15(b) of the 1940 Act and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to
the extent necessary to permit shares of the Fund to be sold to and held by
variable annuity and variable life insurance separate accounts of both
affiliated and unaffiliated Participating Insurance Companies and certain
qualified pension and retirement plans outside of the separate account context
(the "Exemptive Order"); and
WHEREAS, the Company has registered or will register certain variable annuity
contracts and/or variable life insurance polices (the "Contracts") under the
1933 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and regulations,
the Company intends to purchase shares of the portfolios named in Schedule 2 to
this Agreement, as may be amended from time to time, (the "Portfolios") on
behalf of the Account to fund the Contracts; and
WHEREAS, under the terms and conditions set forth in this Agreement, the Adviser
desires to make shares of the Fund available as investment options under the
Contracts;
NOW, THEREFORE, in consideration of their mutual promises, the parties agree as
follows:
<PAGE>
ARTICLE I. Sale and Redemption of Fund Shares
1.1. The Fund will sell to the Company those shares of the Portfolios that each
Account orders, executing such orders on a daily basis at the net asset
value next computed after receipt and acceptance by the Fund (or its
agent). Shares of a particular Portfolio of the Fund will be ordered in
such quantities and at such times as determined by the Company to be
necessary to meet the requirements of the Contracts. The Board of Trustees
of the Fund (the "Fund Board") may refuse to sell shares of any Portfolio
to any person, or suspend or terminate the offering of shares of any
Portfolio if such action is required by law or by regulatory authorities
having jurisdiction or is, in the sole discretion of the Fund Board, acting
in good faith and in light of its fiduciary duties under federal and any
applicable state laws, necessary in the best interests of the shareholders
of such Portfolio.
1.2. The Fund will redeem any full or fractional shares of any Portfolio
when requested by the Company on behalf of an Account at the net asset
value next computed after receipt by the Fund (or its agent) of the
request for redemption, as established in accordance with the
provisions of the then current prospectus of the Fund.
1.3. For purposes of Sections 1.1 and 1.2, the Fund hereby appoints the
Company as its agent for the limited purpose of receiving and accepting
purchase and redemption orders resulting from investment in and
payments under the Contracts. Receipt by the Company will constitute
receipt by the Fund provided that: (a) such orders are received by the
Company in good order prior to the time the net asset value of each
Portfolio is priced in accordance with its prospectus; and (b) The Fund
receives notice of such orders by 10:00 a.m. Central Time on the next
following Business Day. "Business Day" will mean any day on which the
New York Stock Exchange is open for trading and on which the Fund
calculates its net asset value pursuant to the rules of the SEC.
1.4. The Company will pay for a purchase order on the same Business Day as the
Fund receives notice of the purchase order in accordance with Section 1.3.
Notwithstanding the above, if the fund receives notice of the purchase
order on a federal bank holiday, the Company will pay for the purchase
order on the next Business Day. The Fund will pay for a redemption order on
the same Business Day as the Fund receives notice of the redemption order
in accordance with Section 1.3 (or on the next Business Day if such
redemption order notice is received on a federal bank holiday) and in the
manner established from time to time by the Fund, except that the Fund
reserves the right to suspend payment consistent with Section 22(e) of the
Investment Company Act of 1940, as amended (the "1940 Act") and any rules
thereunder. In any event, absent extraordinary circumstances specified in
Section 22(e) of the 1940 Act, the Fund will make such payment within five
(5) calendar days after the date the redemption order is placed in order to
enable the Company to pay redemption proceeds within the time specified in
Section 22(e) of the 1940 Act or such shorter period of time as may be
required by law. All payments will be made in federal funds transmitted by
wire or other method agreed to by the parties.
1.5. Issuance and transfer of the Fund's shares will be by book entry only.
Stock certificates will not be issued to the Company or any Account.
Purchase and redemption orders for Fund shares will be recorded in an
appropriate title for each Account or the appropriate subaccount of each
Account.
<PAGE>
1.6. The Fund will furnish same day notice (by wire or telephone, followed by
written confirmation) to the Company of the declaration of any income,
dividends or capital gain distributions payable on each Portfolio's shares.
The Company hereby elects to receive all such dividends and distributions
as are payable on the Portfolio shares in the form of additional shares of
that Portfolio. The Fund will notify the Company of the number of shares so
issued as payment of such dividends and distributions.
1.7. The Fund will make the net asset value per share for each Portfolio
available to the Company on a daily basis as soon as reasonably practical
after the net asset value per share is calculated and will use its best
efforts to make such net asset value per share available by 5:30 p.m.
Central Time, but in no event later than 6:00 p.m. Central Time each
Business Day. The Fund will notify the Company as soon as possible if it is
determined that the net asset value per share will be available after 6:00
p.m. Central Time on any Business Day, and the Fund and the Company will
mutually agree upon a final deadline for timely receipt of the net asset
value on such Business Day.
1.8. Any material errors in the calculation of net asset value, dividends or
capital gain information will be reported immediately upon discovery to the
Company. An error will be deemed "material" based on the Fund's
interpretation of the SEC's position and policy with regard to materiality,
as it may be modified from time to time. If the Company is provided with
materially incorrect net asset value information, the Company, on behalf of
the Account, will be entitled to an adjustment to the number of shares
purchased or redeemed to reflect the correct net asset value per share.
Neither the Fund, the Adviser nor any of their affiliates will be liable
for any information provided to the Company pursuant to this Agreement
which information is based on incorrect information supplied by or on
behalf of the Company to the Fund or the Adviser.
1.9. The Fund agrees that its shares will be sold only to Participating
Insurance Companies and their separate accounts and to certain qualified
pension and retirement plans to the extent permitted by the Exemptive
Order. No shares of any Portfolio will be sold directly to the general
public. The Company agrees that Fund shares will be used only for the
purposes of funding the Contracts and Accounts listed in Schedule 1, as
amended from time to time.
1.10.The Fund agrees that all Participating Insurance Companies will have the
obligations and responsibilities regarding pass-through voting and
conflicts of interest corresponding to those contained in Section 3.4 and
Article IV of this Agreement.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that:
(a) it is an insurance company duly organized and in good standing
under applicable law;
(b) it has legally and validly established or will legally and
validly establish each Account as a separate account under
applicable state law;
(c) it has registered or will register to the extent necessary
each Account as a unit investment trust in accordance with the
provisions of the 1940 Act to serve as a segregated investment
account for the Contracts;
<PAGE>
(d) it has filed or will file to the extent necessary the
Contracts' registration statements under the Securities Act of
1933 (the "1933 Act") and these registration statements will
be declared effective by the SEC prior to the sale of any
Contracts;
(e) the Contracts will be filed and qualified and/or approved for
sale, as applicable, under the insurance laws and regulations
of the states in which the Contracts will be offered prior to
the sale of Contracts in such states; and
(f) it will amend the registration statement under the 1933 Act
for the Contracts and the registration statement under the
1940 Act for the Account from time to time as required in
order to effect the continuous offering of the Contracts or as
may otherwise be required by applicable law, but in any event
it will maintain a current effective Contracts' and Account's
registration statement for so long as the Contracts are
outstanding unless the Company has supplied the Fund with an
SEC no-action letter, opinion of counsel or other evidence
satisfactory to the Fund's counsel to the effect that
maintaining such registration statement on a current basis is
no longer required.
2.2. The Company represents and warrants that the Contracts are intended to
be treated as annuity or life insurance contracts under applicable
provisions of the Internal Revenue Code of 1986, as amended (the
"Internal Revenue Code"), and that it will make every effort to
maintain such treatment and that it will notify the Fund and the
Adviser immediately upon having a reasonable basis for believing that
the Contracts have ceased to be so treated or that they might not be so
treated in the future.
2.3. The Fund represents and warrants that:
(a) it is duly organized and validly existing under applicable
state law;
(b) it has registered with the SEC as an open-end management
investment company under the 1940 Act;
(c) Fund shares of the Portfolios offered and sold pursuant to
this Agreement will be registered under the 1933 Act and duly
authorized for issuance in accordance with applicable law;
(d) it is and will remain registered under the 1940 Act for as
long as such shares of the Portfolios are sold;
(e) it will amend the registration statement for its shares under
the 1933 Act and the 1940 Act from time to time as required in
order to effect the continuous offering of its shares;
(f) it is currently qualified as a Regulated Investment Company
under Subchapter M of the Internal Revenue Code, it will make
every effort to maintain such qualification (under Subchapter
M or any successor or similar provision) and it will notify
the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might
not so qualify in the future; and
<PAGE>
(g) its investment objectives, policies and restrictions comply
with applicable state securities laws as they may apply to the
Fund and it will register and qualify the shares of the
Portfolios for sale in accordance with the laws of the various
states only if and to the extent deemed advisable by the Fund.
The Fund makes no representation as to whether any aspect of
its operations (including, but not limited to, fees and
expenses and investment policies, objectives and restrictions)
complies with the insurance laws and regulations of any state.
The Fund and the Adviser agree that they will furnish, upon
the Company's request, the information required by state
insurance laws so that the Company can obtain the authority
needed to issue the Contracts in the various states.
2.4. The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or
otherwise, although it reserves the right to make such payments in the
future. To the extent that the Fund decides to finance distribution
expenses pursuant to Rule 12b-1, the Fund undertakes to have its Fund
Board, a majority of whom are not "interested" persons of the Fund,
formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
2.5. The Fund and the Adviser represent and warrant that they will use their
best efforts to comply at all times with Section 817(h) of the Internal
Revenue Code and Treasury Regulation 1.817-5, as amended from time to
time, relating to the diversification requirements for variable
annuity, endowment, or life insurance contracts and any amendments or
other modifications to such Section or Regulation. In the event of a
breach of this representation and warranty by the Fund and/or the
Adviser, they will take all reasonable steps:
(a) to notify the Company of such breach; and
(b) to adequately diversify the Fund so as to achieve compliance
within the grace period afforded by Treasury Regulation
1.817-5.
2.6. The Adviser represents and warrants that:
(a) it is and will remain duly registered under all applicable
federal and state securities laws; and
(b) it will perform its obligations for the Fund in accordance
with applicable state and federal securities laws and that it
will notify the Company promptly if for any reason it is
unable to perform its obligations under this Agreement.
2.7. Each party represents and warrants that, as applicable, all of its
directors, officers, employees, investment advisers, and other
individuals/entities having access to the funds and/or securities of
the Fund are and will continue to be at all times covered by a blanket
fidelity bond or similar coverage in an amount not less than the
minimal coverage as required currently by Rule 17g-(1) of the 1940 Act
or related provisions as may be promulgated from time to time. The
aforesaid bond includes coverage for larceny and embezzlement and is
issued by a reputable bonding company.
<PAGE>
ARTICLE III. Obligations of the Parties
3.1. The Fund will prepare and be responsible for filing with the SEC and
any state regulators requiring such filing all shareholder reports,
notices, proxy materials (or similar materials such as voting
instruction solicitation materials), prospectuses and statements of
additional information of the Fund. The Fund will bear the costs of
registration and qualification of its shares, preparation and filing of
documents listed in this Section 3.1 and all taxes to which an issuer
is subject on the issuance and transfer of its shares.
3.2. At the option of the Company, the Fund will either: (a) provide the
Company with as many copies of the Fund's current prospectus, statement
of additional information, annual report, semi-annual report and other
shareholder communications, including any amendments or supplements to
any of the foregoing, as the Company will reasonably request; or (b)
provide the Company with a camera-ready copy, computer disk or other
medium agreed to by the parties of such documents in a form suitable
for printing. The Fund will bear the cost of typesetting and printing
such documents and of distributing such documents to existing Contract
owners. The Company will bear the cost of distributing such documents
to prospective Contract owners and applicants as required.
3.3. The Fund, at its expense, either will:
(a) distribute its proxy materials directly to the appropriate
Contract owners; or
(b) provide the Company or its mailing agent with copies of its
proxy materials in such quantity as the Company will
reasonably require and the Company will distribute the
materials to existing Contract owners and will bill the Fund
for the reasonable cost of such distribution. The Fund will
bear the cost of tabulation of proxy votes.
3.4. If and to the extent required by law the Company will:
(a) provide for the solicitation of voting instructions
from Contract owners;
(b) vote the shares of the Portfolios held in the Account
in accordance with instructions received from
Contract owners; and
(c) vote shares of the Portfolios held in the Account for
which no timely instructions have been received, in
the same proportion as shares of such Portfolio for
which instructions have been received from the
Company's Contract owners;
so long as and to the extent that the SEC continues to interpret the
1940 Act to require pass-through voting privileges for variable
contract owners. The Company reserves the right to vote Fund shares
held in any segregated asset account in its own right, to the extent
permitted by law.
3.5. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular, the Fund either will provide
for annual meetings (except insofar as the SEC may interpret Section 16
of the 1940 Act not to require such meetings) or, as the Fund currently
intends, to comply with Section 16(c) of the 1940 Act (although the
Fund is not one of the trusts described in Section 16(c) of that Act)
as well as with Sections 16(a) and, if and when applicable, 16(b).
Further, the Fund will act in accordance with the SEC's interpretation
of the requirements of Section 16(a) with respect to periodic elections
of directors and with whatever rules the SEC may promulgate with
respect thereto.
<PAGE>
3.6 The Company will prepare and be responsible for filing with the SEC and
any state regulators requiring such filing all shareholder reports,
notices, prospectuses and statements of additional information of the
Contracts. The Company will bear the cost of registration and
qualification of the Contracts and preparation and filing of documents
listed in this Section 3.6. The Company also will bear the cost of
typesetting, printing and distributing the documents listed in this
Section 3.6 to existing and prospective Contract owners.
3.7. The Company will furnish, or will cause to be furnished, to the Fund or
the Adviser, each piece of sales literature or other promotional
material in which the Fund or the Adviser is named, at least ten (10)
Business Days prior to its use. No such material will be used if the
Fund or the Adviser reasonably objects to such use within five (5)
Business Days after receipt of such material.
3.8. The Company will not give any information or make any representations or
statements on behalf of the Fund or concerning the Fund in connection with
the sale of the Contracts other than the information or representations
contained in the registration statement, prospectus or statement of
additional information for Fund shares, as such registration statement,
prospectus and statement of additional information may be amended or
supplemented from time to time, or in reports or proxy statements for the
Fund, or in published reports for the Fund which are in the public domain
or approved by the Fund or the Adviser for distribution, or in sales
literature or other material provided by the Fund or by the Adviser, except
with permission of the Fund or the Adviser. The Fund and the Adviser agree
to respond to any request for approval on a prompt and timely basis.
Nothing in this Section 3.8 will be construed as preventing the Company or
its employees or agents from giving advice on investment in the Fund.
3.9. The Fund or the Adviser will furnish, or will cause to be furnished, to
the Company or its designee, each piece of sales literature or other
promotional material in which the Company or its separate account is
named, at least ten (10) Business Days prior to its use. No such
material will be used if the Company reasonably objects to such use
within five (5) Business Days after receipt of such material.
3.10. The Fund and the Adviser will not give any information or make any
representations or statements on behalf of the Company or concerning
the Company, each Account, or the Contracts other than the information
or representations contained in a registration statement, prospectus or
statement of additional information for the Contracts, as such
registration statement, prospectus and statement of additional
information may be amended or supplemented from time to time, or in
published reports for each Account or the Contracts which are in the
public domain or approved by the Company for distribution to Contract
owners, or in sales literature or other material provided by the
Company, except with permission of the Company. The Company agrees to
respond to any request for approval on a prompt and timely basis.
3.11. The Fund will provide to the Company at least one complete copy of all
registration statements, prospectuses, statements of additional
information, reports, proxy statements, sales literature and other
promotional materials, applications for exemptions, requests for
no-action letters, and all amendments to any of the above, that relate
to the Fund or its shares, contemporaneously with the filing of such
document with the SEC or the NASD.
<PAGE>
3.12. The Company will provide to the Fund at least one complete copy of all
registration statements, prospectuses, statements of additional
information, reports, solicitations for voting instructions, sales
literature and other promotional materials, applications for
exemptions, requests for no action letters, and all amendments to any
of the above, that relate to the Contracts or each Account,
contemporaneously with the filing of such document with the SEC or the
NASD.
3.13.For purposes of this Article III, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements (such
as material published, or designed for use in, a newspaper, magazine, or
other periodical), radio, television, telephone or tape recording,
videotape display, signs or billboards, motion pictures, or other public
media, (e.g., on-line networks such as the Internet or other electronic
messages), sales literature (i.e., any written communication ----- ----
distributed or made generally available to customers or the public,
including brochures, circulars, research reports, market letters, form
letters, seminar texts, reprints or excerpts of any other advertisement,
sales literature, or published article), educational or training materials
or other communications distributed or made generally available to some or
all agents or employees, registration statements, prospectuses, statements
of additional information, shareholder reports, and proxy materials and any
other material constituting sales literature or advertising under the NASD
rules, the 1933 Act or the 1940 Act.
3.14. The Fund and the Adviser hereby consent to the Company's use of the
name Royce Capital Fund in connection with marketing the Contracts,
subject to the terms of Sections 3.7 and 3.8 of this Agreement. Such
consent will terminate with the termination of this Agreement.
3.15 The Adviser will be responsible for calculating the performance
information for the Fund. The Company will be responsible for
calculating the performance information for the Contracts. The Adviser
will be liable to the Company for any material mistakes it makes in
calculating the performance information for the Fund which cause losses
to the Company. The Company will be liable to the Adviser for any
material mistakes it makes in calculating the performance information
for the Contracts which cause losses to the Adviser. Each party will be
liable for any material mistakes it makes in reproducing the
performance information for Contracts or the Fund, as appropriate. The
Fund and the Adviser agree to provide the Company with performance
information for the Fund on a timely basis to enable the Company to
calculate performance information for the Contracts in accordance with
applicable state and federal law.
ARTICLE IV. Potential Conflicts
4.1. The Fund Board will monitor the Fund for the existence of any
irreconcilable material conflict among the interests of the contract owners
of all separate accounts investing in the Fund. An irreconcilable material
conflict may arise for a variety of reasons, including: (a) an action by
any state insurance regulatory authority; (b) a change in applicable
federal or state insurance, tax, or securities laws or regulations, or a
public ruling, private letter ruling, no-action or interpretative letter,
or any similar action by insurance, tax, or securities regulatory
authorities; (c) an administrative or judicial decision in any relevant
proceeding; (d) the manner in which the investments of any Portfolio are
being managed; (e) a difference in voting instructions given by
Participating Insurance Companies or by variable annuity and variable life
insurance contract owners; or (f) a decision by an insurer to disregard the
voting instructions of contract owners. The Fund Board will promptly inform
the Company if it determines that an irreconcilable material conflict
exists and the implications thereof. A majority of the Fund Board will
consist of persons who are not "interested" persons of the Fund.
<PAGE>
4.2. The Company will report any potential or existing conflicts of which it
is aware to the Fund Board. The Company agrees to assist the Fund Board
in carrying out its responsibilities, as delineated in the Exemptive
Order, by providing the Fund Board with all information reasonably
necessary for the Fund Board to consider any issues raised. This
includes, but is not limited to, an obligation by the Company to inform
the Fund Board whenever Contract owner voting instructions are to be
disregarded. The Fund Board will record in its minutes, or other
appropriate records, all reports received by it and all action with
regard to a conflict.
4.3. If it is determined by a majority of the Fund Board, or a majority of its
disinterested trustees, that an irreconcilable material conflict exists,
the Company and other Participating Insurance Companies will, at their
expense and to the extent reasonably practicable (as determined by a
majority of the disinterested trustees), take whatever steps are necessary
to remedy or eliminate the irreconcilable material conflict, up to and
including: (a) withdrawing the assets allocable to some or all of the
Accounts from the Fund or any Portfolio and reinvesting such assets in a
different investment medium, including (but not limited to) another
portfolio of the Fund, or submitting the question whether such segregation
should be implemented to a vote of all affected contract owners and, as
appropriate, segregating the assets of any appropriate group (i.e.,
variable annuity contract owners or variable life insurance contract owners
of one or more Participating Insurance ----- Companies) that votes in favor
of such segregation, or offering to the affected contract owners the option
of making such a change; and (b) establishing a new registered management
investment company or managed separate account.
4.4. If a material irreconcilable conflict arises because of a decision by the
Company to disregard Contract owner voting instructions, and such disregard
of voting instructions could conflict with the majority of contract owner
voting instructions, and the Company's judgment represents a minority
position or would preclude a majority vote, the Company may be required, at
the Fund's election, to withdraw the affected subaccount of the Account's
investment in the Fund and terminate this Agreement with respect to such
subaccount; provided, however, that such withdrawal and termination will be
limited to the extent required by the foregoing irreconcilable material
conflict as determined by a majority of the disinterested trustees of the
Fund Board. No charge or penalty will be imposed as a result of such
withdrawal. Any such withdrawal and termination must take place within six
(6) months after the Fund gives written notice to the Company that this
provision is being implemented. Until the end of such six-month period the
Adviser and Fund will, to the extent permitted by law and any exemptive
relief previously granted to the Fund, continue to accept and implement
orders by the Company for the purchase (and redemption) of shares of the
Fund.
4.5. If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to the Company conflicts with the
majority of other state insurance regulators, then the Company will
withdraw the affected subaccount of the Account's investment in the Fund
and terminate this Agreement with respect to such subaccount; provided,
however, that such withdrawal and termination will be limited to the extent
required by the foregoing irreconcilable material conflict as determined by
a majority of the disinterested trustees of the Fund Board. No charge or
penalty will be imposed as a result of such withdrawal. Any such withdrawal
and termination must take place within six (6) months after the Fund gives
written notice to the Company that this provision is being implemented.
Until the end of such six-month period the Adviser and Fund will, to the
extent permitted by law and any exemptive relief previously granted to the
Fund, continue to accept and implement orders by the Company for the
purchase (and redemption) of shares of the Fund.
<PAGE>
4.6. For purposes of Sections 4.3 through 4.6 of this Agreement, a majority of
the disinterested members of the Fund Board will determine whether any
proposed action adequately remedies any irreconcilable material conflict,
but in no event will the Fund be required to establish a new funding medium
for the Contracts. The Company will not be required by this Article IV to
establish a new funding medium for the Contracts if an offer to do so has
been declined by vote of a majority of Contract owners affected by the
irreconcilable material conflict.
4.7. The Company will at least annually submit to the Fund Board such
reports, materials or data as the Fund Board may reasonably request so
that the Fund Board may fully carry out the duties imposed upon it as
delineated in the Exemptive Order, and said reports, materials and data
will be submitted more frequently if deemed appropriate by the Fund
Board.
4.8. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of
the 1940 Act or the rules promulgated thereunder with respect to mixed
or shared funding (as defined in the Exemptive Order) on terms and
conditions materially different from those contained in the Exemptive
Order, then: (a) the Fund and/or the Participating Insurance Companies,
as appropriate, will take such steps as may be necessary to comply with
Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the
extent such rules are applicable; and (b) Sections 3.4, 3.5, 4.1, 4.2,
4.3, 4.4, and 4.5 of this Agreement will continue in effect only to the
extent that terms and conditions substantially identical to such
Sections are contained in such Rule(s) as so amended or adopted.
ARTICLE V. Indemnification
5.1. Indemnification By The Company
(a) The Company agrees to indemnify and hold harmless the Fund, the Adviser,
and each person, if any, who controls or is associated with the Fund or the
Adviser within the meaning of such terms under the federal securities laws
(but not any Participating Insurance Companies) and any director, trustee,
officer, partner, employee or agent of the foregoing (collectively, the
"Indemnified Parties" for purposes of this Section 5.1) against any and all
losses, claims, expenses, damages, liabilities (including amounts paid in
settlement with the written consent of the Company) or litigation
(including reasonable legal and other expenses), to which the Indemnified
Parties may become subject under any statute, regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses
(or actions in respect thereof) or settlements:
(1) arise out of or are based on any untrue statement or
alleged untrue statement of any material fact
contained in the registration statement, prospectus
or statement of additional information for the
Contracts or contained in the Contracts or sales
literature or other promotional material for the
Contracts (or any amendment or supplement to any of
the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a
material fact required to be stated or necessary to
make such statements not misleading in light
<PAGE>
of the circumstances in which they were made;
provided that this agreement to indemnify will not
apply as to any Indemnified Party if such statement
or omission or such alleged statement or omission was
made in reliance upon and in conformity with
information furnished to the Company by or on behalf
of the Adviser or the Fund for use in the
registration statement, prospectus or statement of
additional information for the Contracts or in the
Contracts or sales literature (or any amendment or
supplement) or otherwise for use in connection with
the sale of the Contracts or Fund shares; or
(2) arise out of or are based on any untrue statement or
alleged untrue statement of a material fact contained
in the Fund registration statement, prospectus,
statement of additional information or sales
literature or other promotional material of the Fund
(or any amendment or supplement to any of the
foregoing), or the omission to state therein a
material fact required to be stated therein or
necessary to make the statements therein not
misleading in light of the circumstances in which
they were made, if such statement or omission was
made in reliance upon and in conformity with
information furnished to the Fund or Adviser in
writing by or on behalf of the Company or persons
under its control; or
(3) arise out of or are based on any wrongful conduct of,
or violation of applicable federal or state law by,
the Company or persons under its control or subject
to its authorization, with respect to the purchase of
Fund shares or the sale, marketing or distribution of
the Contracts; or
(4) arise as a result of any failure by the Company to
provide the services and furnish the materials under
the terms of this Agreement; or
(5) arise out of any material breach of any
representation and/or warranty made by the Company in
this Agreement or arise out of or result from any
other material breach of this Agreement by the
Company or persons under its control or subject to
its authorization;
except to the extent provided in Sections 5.1(b) and 5.3
hereof. This indemnification will be in addition to any
liability that the Company otherwise may have.
(b) No party will be entitled to indemnification under Section
5.1(a) if such loss, claim, damage, liability or litigation is
due to the willful misfeasance, bad faith, or gross negligence
in the performance of such party's duties under this
Agreement, or by reason of such party's reckless disregard of
its obligations or duties under this Agreement by the party
seeking indemnification.
(c) The Indemnified Parties promptly will notify the Company of
the commencement of any litigation, proceedings, complaints or
actions by regulatory authorities against them in connection
with the issuance or sale of the Fund shares or the Contracts
or the operation of the Fund.
<PAGE>
5.2. Indemnification By The Adviser
(a) The Adviser agrees to indemnify and hold harmless the Company
and each person, if any, who controls or is associated with
the Company within the meaning of such terms under the federal
securities laws and any director, trustee, officer, partner,
employee or agent of the foregoing (collectively, the
"Indemnified Parties" for purposes of this Section 5.2)
against any and all losses, claims, expenses, damages,
liabilities (including amounts paid in settlement with the
written consent of the Adviser) or litigation (including
reasonable legal and other expenses), to which the Indemnified
Parties may become subject under any statute, regulation, at
common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect
thereof) or settlements:
(1) arise out of or are based on any untrue statement or
alleged untrue statement of any material fact
contained in the registration statement, prospectus
or statement of additional information for the Fund
or sales literature or other promotional material of
the Fund (or any amendment or supplement to any of
the foregoing), or arise out of or are based on the
omission or alleged omission to state therein a
material fact required to be stated or necessary to
make such statements not misleading in light of the
circumstances in which they were made; provided that
this agreement to indemnify will not apply as to any
Indemnified Party if such statement or omission or
such alleged statement or omission was made in
reliance upon and in conformity with information
furnished to the Adviser or Fund by or on behalf of
the Company for use in the registration statement,
prospectus or statement of additional information for
the Fund or in sales literature of the Fund (or any
amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Fund
shares; or
(2) arise out of or are based on any untrue statement or
alleged untrue statement of a material fact contained
in the Contract registration statement, prospectus or
statement of additional information or sales
literature or other promotional material for the
Contracts (or any amendment or supplement to any of
the foregoing), or the omission or alleged omission
to state therein a material fact required to be
stated therein or necessary to make the statements
therein not misleading in light of the circumstances
in which they were made, if such statement or
omission was made in reliance upon and in conformity
with information furnished to the Company in writing
by or on behalf of the Adviser or persons under its
control; or
(3) arise out of or are based on any wrongful conduct of,
or violation of applicable federal and state law by,
the Adviser or the Fund or persons under their
respective control or subject to their authorization
with respect to the sale of Fund shares; or
(4) arise as a result of any failure by the Fund, the
Adviser or persons under their respective control or
subject to their authorization to provide the
services and furnish the materials under the terms of
this Agreement including, but not limited to, a
failure, whether unintentional or in good faith or
otherwise, to comply with the diversification
requirements and procedures related thereto specified
in Section 2.5 of this Agreement or any material
errors in or untimely calculation or reporting of the
daily net asset value per share or dividend or
<PAGE>
capital gain distribution rate (referred to in this Section
5.2 (a)(4) as an "error"); provided, that the foregoing
will not apply where such error is the result of
incorrect information supplied by or on behalf of the
Company to the Fund or the Adviser, and will be limited
to (i) reasonable administrative costs necessary to
correct such error, and (ii) amounts which the Company
has paid out of its own resources to make Contract
owners whole as a result of such error; or
(5) arise out of or result from any material breach of
any representation and/or warranty made by the
Adviser or the Fund in this Agreement, or arise out
of or result from any other material breach of this
Agreement by the Adviser or the Fund or persons under
their respective control or subject to their
authorization;
except to the extent provided in Sections 5.2(b) and 5.3
hereof.
(b) No party will be entitled to indemnification under Section
5.2(a) if such loss, claim, damage, liability or litigation is
due to the willful misfeasance, bad faith, or gross negligence
in the performance of such party's duties under this
Agreement, or by reason of such party's reckless disregard of
its obligations or duties under this Agreement by the party
seeking indemnification.
(c) The Indemnified Parties will promptly notify the Adviser and
the Fund of the commencement of any litigation, proceedings,
complaints or actions by regulatory authorities against them
in connection with the issuance or sale of the Contracts or
the operation of the Account.
(d) It is understood that these indemnities shall have no effect
on any other agreements or arrangements between the Fund and
or its series and the Adviser.
5.3. Indemnification Procedure
Any person obligated to provide indemnification under this Article V
("Indemnifying Party" for the purpose of this Section 5.3) will not be
liable under the indemnification provisions of this Article V with
respect to any claim made against a party entitled to indemnification
under this Article V ("Indemnified Party" for the purpose of this
Section 5.3) unless such Indemnified Party will have notified the
Indemnifying Party in writing within a reasonable time after the
summons or other first legal process giving information of the nature
of the claim will have been served upon such Indemnified Party (or
after such party will have received notice of such service on any
designated agent), but failure to notify the Indemnifying Party of any
such claim will not relieve the Indemnifying Party from any liability
which it may have to the Indemnified Party against whom such action is
brought otherwise than on account of the indemnification provision of
this Article V, except to the extent that the failure to notify results
in the failure of actual notice to the Indemnifying Party and such
Indemnifying Party is damaged solely as a result of failure to give
such notice. In case any such action is brought against the Indemnified
Party, the Indemnifying Party will be entitled to participate, at its
own expense, in the defense thereof. The Indemnifying Party also will
be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Indemnifying Party
to the Indemnified Party of the Indemnifying Party's election to assume
the defense thereof, the Indemnified Party will bear the fees and
expenses of any additional counsel retained by it, and the Indemnifying
Party will not be liable to such party under this Agreement for any
legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than
reasonable costs of investigation, unless: (a) the
<PAGE>
Indemnifying Party and the Indemnified Party will have mutually agreed
to the retention of such counsel; or (b) the named parties to any such
proceeding (including any impleaded parties) include both the
Indemnifying Party and the Indemnified Party and representation of both
parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. The Indemnifying Party will
not be liable for any settlement of any proceeding effected without its
written consent but if settled with such consent or if there is a final
judgment for the plaintiff, the Indemnifying Party agrees to indemnify
the Indemnified Party from and against any loss or liability by reason
of such settlement or judgment. A successor by law of the parties to
this Agreement will be entitled to the benefits of the indemnification
contained in this Article V. The indemnification provisions contained
in this Article V will survive any termination of this Agreement.
5.4 Limitation of Liability
Except as expressly stated herein, as between the parties, in no event
will any party to this Agreement be responsible to any other party for
any incidental, indirect, consequential, punitive or exemplary damages
of any kind arising from this Agreement, including without limitation,
lost revenues, loss of profits or loss of business.
5.5 Arbitration
Any controversy or claim arising out of or relating to this Agreement,
or the breach thereof, will be settled by arbitration administered by
the American Arbitration Association in accordance with its Commercial
Arbitration Rules and Title 9 of the U.S. Code. Judgment on the award
rendered by the arbitrators may be entered in any court having
jurisdiction thereof. The number of arbitrators will be three, one of
whom will be appointed by the Company or an affiliate; one of whom will
be appointed by the Fund and/or the Adviser or an affiliate; and the
third of whom will be selected by mutual agreement, if possible, within
30 days of the selection of the second arbitrator and thereafter by the
administering authority. The place of arbitration will be Minneapolis,
Minnesota. The arbitrators will have no authority to award punitive
damages or any other damages not measured by the prevailing party's
actual damages, and may not, in any event, make any ruling, finding or
award that does not conform to the terms and conditions of this
Agreement. Any party may make an application to the arbitrators seeking
injunctive relief to maintain the status quo until such time as the
arbitration award is rendered or the controversy is otherwise resolved.
Any party may apply to any court having jurisdiction hereof and seek
injunctive relief in order to maintain the status quo until such time
as the arbitration award is rendered or the controversy is otherwise
resolved.
ARTICLE VI. Applicable Law
6.1. This Agreement will be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of Minnesota.
6.2. This Agreement will be subject to the provisions of the 1933 Act, the
Securities Exchange Act of 1934 and the 1940 Act, and the rules and
regulations and rulings thereunder, including such exemptions from
those statutes, rules and regulations as the SEC may grant (including,
but not limited to, the Exemptive Order) and the terms hereof will be
interpreted and construed in accordance therewith.
<PAGE>
ARTICLE VII. Termination
7.1. This Agreement will terminate:
(a) at the option of any party, with or without cause, with
respect to some or all of the Portfolios, upon sixty (60)
days' advance written notice to the other parties or, if
later, upon receipt of any required exemptive relief or orders
from the SEC, unless otherwise agreed in a separate written
agreement among the parties;
(b) at the option of the Company, upon receipt of the Company's
written notice by the other parties, with respect to any
Portfolio if shares of the Portfolio are not reasonably
available to meet the requirements of the Contracts as
determined in good faith by the Company; or
(c) at the option of the Company, upon receipt of the Company's
written notice by the other parties, with respect to any
Portfolio in the event any of the Portfolio's shares are not
registered, issued or sold in accordance with applicable state
and/or federal law or such law precludes the use of such
shares as the underlying investment media of the Contracts
issued or to be issued by Company; or
(d) at the option of the Fund, upon receipt of the Fund's written
notice by the other parties, upon institution of formal
proceedings against the Company by the NASD, the SEC, the
insurance commission of any state or any other regulatory body
regarding the Company's duties under this Agreement or related
to the sale of the Contracts, the administration of the
Contracts, the operation of the Account, or the purchase of
the Fund shares, provided that the Fund determines in its sole
judgment, exercised in good faith, that any such proceeding
would have a material adverse effect on the Company's ability
to perform its obligations under this Agreement; or
(e) at the option of the Company, upon receipt of the Company's
written notice by the other parties, upon institution of
formal proceedings against the Fund or the Adviser by the
NASD, the SEC, or any state securities or insurance department
or any other regulatory body, regarding the Fund's or the
Adviser's duties under this Agreement or related to the sale
of Fund shares or the administration of the Fund, provided
that the Company determines in its sole judgment, exercised in
good faith, that any such proceeding would have a material
adverse effect on the Fund's or the Adviser's ability to
perform its obligations under this Agreement; or
(f) at the option of the Company, upon receipt of the Company's
written notice by the other parties, if the Fund ceases to
qualify as a Regulated Investment Company under Subchapter M
of the Internal Revenue Code, or under any successor or
similar provision, or if the Company reasonably and in good
faith believes that the Fund may fail to so qualify; or
(g) at the option of the Company, upon receipt of the Company's
written notice by the other parties, with respect to any
Portfolio if the Fund fails to meet the diversification
requirements specified in Article II hereof or if the Company
reasonably and in good faith believes the Fund may fail to
meet such requirements; or
(h) at the option of any party to this Agreement, upon written
notice to the other parties, upon another party's material
breach of any provision of this Agreement; or
<PAGE>
(i) at the option of the Company, if the Company determines in its
sole judgment exercised in good faith, that the Fund or the
Adviser has suffered a material adverse change in its
business, operations or financial condition since the date of
this Agreement or is the subject of material adverse publicity
which is likely to have a material adverse impact upon the
business and operations of the Company, such termination to be
effective sixty (60) days' after receipt by the other parties
of written notice of the election to terminate; or
(j) at the option of the Fund, if the Fund determines in its sole
judgment exercised in good faith, that the Company has
suffered a material adverse change in its business, operations
or financial condition since the date of this Agreement or is
the subject of material adverse publicity which is likely to
have a material adverse impact upon the business and
operations of the Fund, such termination to be effective sixty
(60) days' after receipt by the other parties of written
notice of the election to terminate; or
(k) at the option of the Company or the Fund upon receipt of any
necessary regulatory approvals and/or the vote of the Contract
owners having an interest in the Account (or any subaccount)
to substitute the shares of another investment company for the
corresponding Portfolio shares of the Fund in accordance with
the terms of the Contracts for which those Portfolio shares
had been selected to serve as the underlying investment media.
The Company will give sixty (60) days' prior written notice to
the Fund of the date of any proposed vote or other action
taken to replace the Fund's shares; or
(l) at the option of the Company or the Fund upon a determination
by a majority of the Fund Board, or a majority of the
disinterested Fund Board members, that an irreconcilable
material conflict exists among the interests of: (i) all
contract owners of variable insurance products of all separate
accounts; or (ii) the interests of the Participating Insurance
Companies investing in the Fund as set forth in Article IV of
this Agreement; or
(m) at the option of the Fund in the event any of the Contracts
are not issued or sold in accordance with applicable federal
and/or state law. Termination will be effective immediately
upon such occurrence without notice.
7.2. Notwithstanding any termination of this Agreement, the
Fund and the Adviser will, at the option of the
Company, continue to make available additional shares
of the Fund pursuant to the terms and conditions of
this Agreement, for all Contracts in effect on the
effective date of termination of this Agreement
(hereinafter referred to as "Existing Contracts").
Specifically, without limitation, the owners of the
Existing Contracts will be permitted to reallocate
investments in the Portfolios (as in effect on such
date), redeem investments in the Portfolios and/or
invest in the Portfolios upon the making of additional
purchase payments under the Existing Contracts. The
parties agree that this Section 7.2 will not apply to
any terminations under Article IV and the effect of
such Article IV terminations will be governed by
Article IV of this Agreement.
7.3. The provisions of Article V will survive the termination of this
Agreement and as long as shares of the Fund are held under Existing
Contracts in accordance with Section 7.2, the provisions of this
Agreement will survive the termination of this Agreement with respect
to those Existing Contracts.
<PAGE>
ARTICLE VIII. Notices
Any notice will be deemed duly given when sent by registered or
certified mail (or other method agreed to by the parties) to each other party at
the address of such party set forth below or at such other address as such party
may from time to time specify in writing to the other parties.
If to the Company:
James E. Choat
President and Chief Executive Officer
American Enterprise Life Insurance Company
80 South 8th Street
Minneapolis, MN 55402
With a Copy to:
Law Department (Unit 52)
American Enterprise Life Insurance Company
80 South 8th Street
Minneapolis, MN 55402
If to the Fund:
John D. Diederich
Vice President
Royce Capital Fund
1414 Avenue of the Americas
New York, NY 10019
If to the Adviser:
John E. Denneen
Associate General Counsel
Royce & Associates, Inc.
1414 Avenue of the Americas
New York, NY 10019
ARTICLE IX. Miscellaneous
9.1. All persons dealing with the Fund must look solely to the property of
the Fund for the enforcement of any claims against the Fund as neither
the directors, trustees, officers, partners, employees, agents or
shareholders assume any personal liability for obligations entered into
on behalf of the Fund.
9.2. The Fund and the Adviser acknowledge that the identities of the
customers of the Company or any of its affiliates (collectively the
"Protected Parties" for purposes of this Section 9.2), information
maintained regarding those customers, and all computer programs and
procedures or other information developed or used by the Protected
Parties or any of their employees or agents in connection with the
Company's performance of its duties under this Agreement are the
valuable property of the Protected Parties. The Fund and the Adviser
agree that if they come into possession of any list or compilation of
the identities of or other information about the Protected Parties'
customers, or any other information or property of the
<PAGE>
Protected Parties, other than such information as may be independently
developed or compiled by the Fund or the Adviser from information supplied
to them by the Protected Parties' customers who also maintain accounts
directly with the Fund or the Adviser, the Fund and the Adviser will hold
such information or property in confidence and refrain from using,
disclosing or distributing any of such information or other property
except: (a) with the Company's prior written consent; or (b) as required by
law or judicial process. The Fund and the Adviser acknowledge that any
breach of the agreements in this Section 9.2 would result in immediate and
irreparable harm to the Protected Parties for which there would be no
adequate remedy at law and agree that in the event of such a breach, the
Protected Parties will be entitled to equitable relief by way of temporary
and permanent injunctions, as well as such other relief as any court of
competent jurisdiction deems appropriate.
9.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
9.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together will constitute one and the
same instrument.
9.5. If any provision of this Agreement will be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the
Agreement will not be affected thereby.
9.6. This Agreement will not be assigned by any party hereto without the
prior written consent of all the parties.
9.7. Each party to this Agreement will cooperate with each other party and
all appropriate governmental authorities (including without limitation
the SEC, the NASD and state insurance regulators) and will permit each
other and such authorities reasonable access to its books and records
in connection with any investigation or inquiry relating to this
Agreement or the transactions contemplated hereby.
9.8. Each party represents that the execution and delivery of this Agreement
and the consummation of the transactions contemplated herein have been
duly authorized by all necessary corporate or board action, as
applicable, by such party and when so executed and delivered this
Agreement will be the valid and binding obligation of such party
enforceable in accordance with its terms.
9.9. The parties to this Agreement may amend the schedules to this Agreement
from time to time to reflect changes in or relating to the Contracts,
the Accounts or the Portfolios of the Fund or other applicable terms of
this Agreement.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed in its name and behalf by its duly authorized representative as of the
date specified above.
[THE FUND] [THE ADVISER]
By: By:
Name: Name:
Title: Title:
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY ATTEST:
By: By:
Name: Name:
Title: Title:
<PAGE>
Schedule 1
PARTICIPATION AGREEMENT
By and Among
ROYCE CAPITAL FUND
And
ROYCE & ASSOCIATES, INC.
And
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
The following Accounts of American Enterprise Life Insurance Company are
permitted in accordance with the provisions of this Agreement to invest in
Portfolios of the Fund shown in Schedule 2:
American Enterprise Variable Annuity Account
<PAGE>
Schedule 2
PARTICIPATION AGREEMENT
By and Among
ROYCE CAPITAL FUND
And
ROYCE & ASSOCIATES, INC.
And
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
The Accounts shown on Schedule 1 may invest in the following Portfolios:
Royce Micro-Cap Portfolio
Royce Premier Portfolio
Royce Total Return Portfolio
AMENDMENT 4 TO
PARTICIPATION AGREEMENT
Among
PUTNAM CAPITAL MANAGER TRUST
(now known as Putnam Variable Trust)
PUTNAM MUTUAL FUNDS CORP.
and
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
THIS AMENDMENT 4 TO PARTICIPATION AGREEMENT ("Amendment 4") is made and entered
into this 15th day of June, 1999 by and among Putnam Variable Trust (formerly
Putnam Capital Manager Trust) (the "Fund"); Putnam Mutual Funds Corp. (the
"Distributor"); and American Enterprise Life Insurance Company (the "Company").
WHEREAS, the Company, the Fund and the Distributor are parties to the
Participation Agreement dated January 16, 1995, as amended April 30, 1997,
October 30, 1997 and August 21, 1998 (the "Agreement"); and
WHEREAS, the parties now desire to amend the Agreement to add Authorized Funds
and to allow new flexible premium variable annuity contracts to invest in the
Authorized Funds;
NOW, THEREFORE, in consideration of their mutual promises, the Company, the Fund
and the Distributor agree as follows:
1.
<PAGE>
Amendment to Schedule A. In accordance with the terms of the Agreement, the
parties hereby amend Schedule A to read as follows:
Schedule A
Contracts
American Enterprise Variable Annuity Account, established July 15, 1987.
AEL Personal Portfoliosm and AEL Personal Portfolio Plus offer the
following Authorized Funds as investment options:
Putnam VT Diversified Income Fund - Class IA Shares Putnam VT
Growth and Income Fund - Class IA Shares Putnam VT New
Opportunities Fund - Class IA Shares Putnam VT High Yield Fund
- Class IA Shares
AEL Personal Portfolio Plus2 offers the following Authorized Funds as
investment options:
Putnam VT Diversified Income Fund - Class IB Shares Putnam VT
Growth and Income Fund - Class IB Shares Putnam VT High Yield
Fund - Class IB Shares Putnam VT Voyager Fund - Class IB
Shares
AEL Preferredsm, distributed through TCF, offers the following
Authorized Funds as investment options:
Putnam VT Diversified Income Fund - Class IA Shares Putnam VT
Growth and Income Fund - Class IA Shares Putnam VT New
Opportunities Fund - Class IA Shares Putnam VT Voyager Fund -
Class IA Shares Putnam VT Global Growth Fund - Class IA Shares
American Express Platinum Variable Annuitysm offers the following
Authorized Funds as investment options:
Putnam VT Growth & Income Fund - Class IB Shares
Putnam VT International Growth & Income Fund - Class IB Shares
Putnam VT Vista Fund - Class IB Shares
American Express Signature Variable Annuitysm offers the following
Authorized Funds as investment options:
Putnam VT Growth and Income Fund - Class IB Shares
Putnam VT International New Opportunities Fund - Class IB
Shares
Putnam VT International Growth Fund - Class IB Shares
2. Definitions. Terms not defined in this Amendment 4 will have the
meaning as those terms defined in the Agreement.
-----------
3. Counterparts. This Amendment 4 may be executed simultaneously in two or
more counterparts, each of which taken together will constitute one and
the same instrument.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment 4 to be
executed in its name and on its behalf by its duly authorized representatives as
of the date specified above.
PUTNAM VARIABLE TRUST PUTNAM MUTUAL FUNDS CORP.
By: By:
Name: Name:
Title: Title:
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
ATTEST:
By: By:
Name: Name:
Title: Title:
PARTICIPATION AGREEMENT
By and Among
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
And
TEMPLETON VARIABLE PRODUCTS SERIES FUND
And
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
And
FRANKLIN TEMPLETON DISTRIBUTORS, INC.
THIS AGREEMENT, made and entered into this day of , 1999 by and among American
Enterprise Life Insurance Company organized under the laws of the State of
Indiana (the "Company"), on its own behalf and on behalf of each separate
account of the Company named in Schedule 1 to this Agreement, as may be amended
from time to time (each account referred to as the "Account"), Templeton
Variable Products Series Fund and Franklin Templeton Variable Insurance Products
Trust, open-end management investment companies and business trusts organized
under the laws of the State of Massachusetts [Please revise as appropriate]
(each referred to as the "Fund") and Franklin Templeton Distributors, Inc. a
corporation organized under the laws of the State of California (the
"Underwriter"), the Fund's principal underwriter.
WHEREAS, the Fund engages in business as an open-end management investment
company and was established for the purpose of serving as the investment vehicle
for separate accounts established for variable life insurance contracts and
variable annuity contracts to be offered by insurance companies that have
entered into participation agreements substantially identical to this Agreement
(the "Participating Insurance Companies"); and
WHEREAS, beneficial interests in the Fund are divided into several series of
shares, each representing the interest in a particular managed portfolio of
securities and other assets (the "Portfolios"); and
WHEREAS, the Fund has received an order from the Securities & Exchange
Commission (the "SEC") granting Participating Insurance Companies and their
variable annuity separate accounts and variable life insurance separate accounts
relief from the provisions of Sections 9(a), 13(a), 15(a), and 15(b) of the
Investment Company Act of 1940, as amended, (the "1940 Act") and Rules
6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to permit
shares of the Fund to be sold to and held by variable annuity separate accounts
and variable life insurance separate accounts of both affiliated and
unaffiliated Participating Insurance Companies and certain qualified pension and
retirement plans outside of the separate account context (the "Mixed and Shared
Funding Exemptive Order"). The parties to this Agreement agree that the
conditions or undertakings specified in the Mixed and Shared Funding Exemptive
Order and that may be imposed on the Company, the Fund and/or the Underwriter by
virtue of the receipt of such order by the SEC will be incorporated herein by
reference, and such parties agree to comply with such conditions and
undertakings to the extent applicable to each such party; and
WHEREAS, the Fund is registered as an open-end management investment company
under the 1940 Act and its shares are registered under the Securities Act of
1933, as amended (the "1933 Act"); and
WHEREAS, the Company has registered or will register certain variable annuity
and variable life insurance contracts (the "Contracts") under the 1933 Act; and
WHEREAS, the Account is a duly organized, validly existing segregated asset
account, established by resolution of the Board of Directors of the Company
under the insurance laws of the State of Indiana, to set aside and invest assets
attributable to the Contracts; and
<PAGE>
WHEREAS, the Company has registered or will register the Account as a unit
investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker-dealer with the SEC under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and is a member in
good standing of the National Association of Securities Dealers, Inc. (the
"NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and regulations,
the Company intends to purchase shares of the Portfolios named in Schedule 2, as
such schedule may be amended from time to time (the "Designated Portfolios") on
behalf of the Account to fund the Contracts, and the Fund is authorized to sell
such shares to unit investment trusts such as the Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company, the Fund
and the Underwriter agree as follows:
ARTICLE I. Sale and Redemption of Fund Shares
1.1. The Fund agrees to sell to the Company those shares of the Designated
Portfolios that each Account orders, executing such orders on a daily basis
at the net asset value next computed after receipt and acceptance by the
Fund or its designee of the order for the shares of the Fund, as
established in accordance with the provisions of the then-current
prospectus of the Fund describing purchase procedures on those days on
which the Fund calculates its net asset value pursuant to rules of the SEC,
and the Fund shall use reasonable efforts to calculate such net asset value
on each day on which the New York Stock Exchange is open for trading. For
purposes of this Section 1.1, the Company will be the designee of the Fund
for receipt of such orders from each Account and receipt by such designee
will constitute receipt by the Fund; provided that the Fund receives notice
of such order by 10:00 a.m. Eastern Time on the next following business
day. "Business Day" will mean any day on which the New York Stock Exchange
is open for trading and on which the Fund calculates its net asset value
pursuant to the rules of the SEC.
1.2. The Company will pay for Fund shares on the next Business Day after an
order to purchase Fund shares is made in accordance with Section 1.1 above.
Payment will be in federal funds transmitted by wire to the Fund.
1.3. The Fund agrees to make shares of the Designated Portfolios available for
purchase at the applicable net asset value per share by Participating
Insurance Companies and their separate accounts on those days on which the
Fund calculates its Designated Portfolio net asset value pursuant to rules
of the SEC; provided, however, that the Board of Trustees of the Fund (the
"Fund Board") may refuse to sell shares of any Portfolio to any person, or
suspend or terminate the offering of shares of any Portfolio if such action
is required by law or by regulatory authorities having jurisdiction or is,
in the sole discretion of the Fund Board, acting in good faith and in light
of its fiduciary duties under federal and any applicable state laws,
necessary in the best interests of the shareholders of such Portfolio.
1.4. The Fund agrees that shares of the Fund will be sold only to Participating
Insurance Companies and their separate accounts, qualified pension and
retirement plans or such other persons as are permitted under applicable
provisions of the Internal Revenue Code of 1986, as amended, (the "Internal
Revenue Code"), and regulations promulgated thereunder, the sale to which
will not impair the tax treatment currently afforded the Contracts. No
shares of any Portfolio will be sold to the general public. The Company
agrees that it will use Fund shares only for the purpose of funding the
Contracts through the Accounts listed on Schedule 1, as amended from time
to time.
<PAGE>
1.5. The Fund will not sell Fund shares to any insurance company or separate
account unless an agreement containing provisions substantially the same as
Articles I, III, and VII of this Agreement are in effect to govern such
sales. The Fund will make available upon written request from the Company a
list of all other Participating Insurance Companies.
1.6. The Fund agrees to redeem for cash, upon the Company's request, any full or
fractional shares of the Fund held by the Company, executing such requests
on a daily basis at the net asset value next computed after receipt and
acceptance by the Fund or its agent of the request for redemption. For
purposes of this Section 1.6, the Company will be the designee of the Fund
for receipt of requests for redemption from each Account and receipt by
such designee will constitute receipt by the Fund; provided the Fund
receives notice of request for redemption by 10:00 a.m. Eastern Time on the
next following Business Day. Payment will be in federal funds transmitted
by wire to the Company's account as designated by the Company in writing
from time to time, on the same Business Day the Fund receives notice of the
redemption order from the Company; provided the Fund receives notice of
redemption by 10:00 a.m. Eastern Time. If the Fund receives notice of the
redemption after 10:00 a.m. Eastern Time, payment for the redeemed shares
will be made on the next following Business Day. The Fund reserves the
right to delay payment of redemption proceeds, but in no event may such
payment be delayed longer than the period permitted under Section 22(e) of
the 1940 Act. The Fund will not bear any responsibility whatsoever for the
proper disbursement or crediting of redemption proceeds; the Company alone
will be responsible for such action.
1.7. The Company agrees to purchase and redeem the shares of the Designated
Portfolios offered by the then current prospectus of the Fund in accordance
with the provisions of such prospectus.
1.8. Issuance and transfer of the Fund's shares will be by book entry only.
Stock certificates will not be issued to the Company or any Account.
Purchase and redemption orders for Fund shares will be recorded in an
appropriate title for each Account or the appropriate subaccount of each
Account.
1.9. The Fund will furnish same day notice (by wire or telephone, followed by
written confirmation) to the Company of the declaration of any income,
dividends or capital gain distributions payable on each Designated
Portfolio's shares. The Company hereby elects to receive all such dividends
and distributions as are payable on the Designated Portfolio shares in the
form of additional shares of that Designated Portfolio. The Company
reserves the right to revoke this election and to receive all such
dividends and distributions in cash. The Fund will notify the Company of
the number of shares so issued as payment of such dividends and
distributions.
1.10.The Fund will make the net asset value per share for each Designated
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and will use
its best efforts to make such net asset value per share available by 6:00
p.m. Eastern Time each business day.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Contracts are or will be
registered under the 1933 Act and that the Contracts will be issued and
sold in compliance with all applicable federal and state laws, including
state insurance suitability requirements. The Company further represents
and warrants that it is an insurance company duly organized and in good
standing under applicable law and that it has legally and validly
established each Account as a separate account under applicable state law
and has registered the Account as a unit investment trust in accordance
with the provisions of the 1940 Act to serve as a segregated investment
account for the Contracts, and that it will maintain such registration for
so long as any Contracts are outstanding. The Company will amend the
registration statement under the 1933 Act for the Contracts and the
registration statement under the 1940 Act for the Account from time to time
as required in order to effect the continuous offering of the Contracts or
as may otherwise be required by applicable law. The Company will register
and qualify the Contracts for sale in accordance with the securities laws
of the various states only if and to the extent deemed necessary by the
Company.
<PAGE>
2.2. The Company represents that the Contracts are currently and at the time of
issuance will be treated as annuity or life insurance contracts under
applicable provisions of the Internal Revenue Code, and that it will make
every effort to maintain such treatment and that it will notify the Fund
and the Underwriter immediately upon having a reasonable basis for
believing that the Contracts have ceased to be so treated or that they
might not be so treated in the future.
2.3. The Company represents and warrants that it will not purchase shares of the
Designated Portfolios with assets derived from tax-qualified retirement
plans except, indirectly, through Contracts purchased in connection with
such plans.
2.4. The Fund represents and warrants that Fund shares of the Designated
Portfolios sold pursuant to this Agreement will be registered under the
1933 Act and duly authorized for issuance in accordance with applicable law
and that the Fund is and will remain registered under the 1940 Act for as
long as such shares of the Designated Portfolios are sold. The Fund will
amend the registration statement for its shares under the 1933 Act and the
1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Fund will register and qualify the shares of
the Designated Portfolios for sale in accordance with the laws of the
various states only if and to the extent deemed advisable by the Fund.
2.5. The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code, and
that it will make every effort to maintain such qualification (under
Subchapter M or any successor or similar provision) and that it will notify
the Company immediately upon having a reasonable basis for believing that
it has ceased to so qualify or that it might not so qualify in the future.
2.6. The Fund represents that its investment objectives, policies and
restrictions comply with applicable state investment laws as they may apply
to the Fund. The Fund makes no representation as to whether any aspect of
its operations (including, but not limited to, fees and expenses and
investment policies, objectives and restrictions) complies with the
insurance laws and regulations of any state. The Fund and the Underwriter
agree that they will furnish the information required by state insurance
laws so that the Company can obtain the authority needed to issue the
Contracts in the various states.
2.7. The Fund and the Underwriter shall pay no fee or other compensation to the
Company under this Agreement except as provided on Schedule 3.
Nevertheless, the Underwriter or an affiliate may make payments (other than
pursuant to a Rule 12b-1 Plan) to the Company or it affiliates or to the
Contracts' underwriter in amounts agreed to by the Underwriter in writing
and such payments may be made out of fees otherwise payable to the
Underwriter or its affiliates, profits of the Underwriter or its
affiliates, or other resources available to the Underwriter or its
affiliates.
2.8. The Fund represents that it is lawfully organized and validly existing
under the laws of the State of Massachusetts and that it does and will
comply in all material respects with applicable provisions of the 1940 Act.
2.9 The Underwriter represents and warrants that it will distribute the Fund
shares of the Designated Portfolios in accordance with all applicable
federal and state securities laws including, without limitation, the 1933
Act, the 1934 Act and the 1940 Act.
2.10.The Underwriter represents and warrants that the adviser for the Fund is
and will remain duly registered under all applicable federal and state
securities laws and that it will perform its obligations for the Fund in
accordance in all material respects with any applicable state and federal
securities laws.
<PAGE>
2.11.The Fund represents and warrants that all of its trustees, officers,
employees, investment advisers, and other individuals/entities having
access to the funds and/or securities of the Fund are and continue to be at
all times covered by a blanket fidelity bond or similar coverage for the
benefit of the Fund in an amount not less than the minimal coverage as
required currently by Rule 17g-(1) of the 1940 Act or related provisions as
may be promulgated from time to time. The aforesaid bond includes coverage
for larceny and embezzlement and is issued by a reputable bonding company.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. The Fund or the Underwriter will provide the Company, at the Company's
expense, with as many copies of the current Fund prospectus for the
Designated Portfolios, annual report, semi-annual report and other
shareholder communications, including any amendments and supplements to any
of the foregoing, as the Company may reasonably request for distribution,
at the Company's expense, to prospective contractowners and applicants. The
Fund or the Underwriter will provide the Company, at the Fund's expense,
with as many copies of said documents as necessary for distribution, at the
Company's expense, to existing contractowners. The Fund will provide the
copies of said documents to the Company or to its mailing agent. The
Company will distribute such documents to existing contractowners. If
requested by the Company in lieu thereof, the Fund will provide such
documentation, including a final copy of such documents set in type or a
computer diskette (or other medium agreed to by the parties) at the Fund's
expense, and other assistance as is reasonably necessary in order for the
Company at least annually (or more frequently if the Fund prospectus is
amended more frequently) to have the Fund's prospectus and the prospectuses
of other mutual funds printed together, in which case the Fund will pay its
share of reasonable expenses directly related to the required disclosure of
information concerning the Fund.
3.2. The Fund's prospectus will state that the statement of additional
information for the Fund is available from the Company. The Fund will
provide the Company, at the Company's expense, with as many copies of the
statement of additional information as the Company may reasonably request
for distribution, at the Company's expense, to prospective contractowners
and applicants. The Fund will provide, at the Fund's expense, as many
copies of said statement of additional information as necessary for
distribution, at the Fund's expense, to any existing contractowner who
requests such statement or whenever state or federal law otherwise requires
that such statement be provided. The Fund will provide the copies of said
statement of additional information to the Company or to its mailing agent.
The Company will distribute the statement of additional information as
requested or required and will bill the Fund for the reasonable cost of
such distribution.
3.3. The Fund, at its expense, will provide the Company or its mailing agent
with copies of its proxy material in such quantity as the Company will
reasonably require for distribution to contractowners. The Company will
distribute this proxy material to contractowners at its expense.
3.4. The Company assumes responsibility for ensuring that current prospectuses,
annual and semi-annual reports, shareholder communications and proxy
material are delivered to contractowners in accordance with applicable
securities laws provided the Company receives the required information
and/or documentation from the Fund within a reasonable time to allow for
compliance with such laws.
<PAGE>
3.5. If and to the extent required by law the Company will:
(a) solicit voting instructions from contractowners;
(b) vote the shares of the Designated Portfolios held in
the Account in accordance with instructions received
from contractowners; and
(c) vote shares of the Designated Portfolios held in the
Account for which no timely instructions have been
received, in the same proportion as shares of such
Designated Portfolio for which instructions have been
received from the Company's contractowners;
so long as and to the extent that the SEC continues to interpret the
1940 Act to require pass-through voting privileges for variable
contractowners. The Company reserves the right to vote Fund shares held
in any segregated asset account in its own right, to the extent
permitted by law. Participating Insurance Companies will be responsible
for assuring that each of their separate accounts participating in the
Fund calculates voting privileges in a manner consistent with all legal
requirements, including the Mixed and Shared Funding Exemptive Order.
3.6. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular, the Fund either will provide
for annual meetings (except insofar as the SEC may interpret Section 16
of the 1940 Act not to require such meetings) or, as the Fund currently
intends, to comply with Section 16(c) of the 1940 Act (although the
Fund is not one of the trusts described in Section 16(c) of that Act)
as well as with Sections 16(a) and, if and when applicable, 16(b).
Further, the Fund will act in accordance with the SEC's interpretation
of the requirements of Section 16(a) with respect to periodic elections
of directors and with whatever rules the SEC may promulgate with
respect thereto.
ARTICLE IV. Sales Material and Information
4.1. The Company will furnish, or will cause to be furnished, to the Fund or
the Underwriter, each piece of sales literature or other promotional
material in which the Fund, the Underwriter or the adviser of the Fund
is named, at least ten (10) business days prior to its use. No such
material will be used if the Fund or the Underwriter reasonably objects
to such use within five (5) business days after receipt of such
material.
4.2. The Company and its agents will not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund,
the Underwriter or the adviser for the Fund, in connection with the sale of
the Contracts other than the information or representations contained in
and accurately derived from the registration statement, prospectus or
statement of additional information for Fund shares, as such registration
statement, prospectus and statement of additional information may be
amended or supplemented from time to time, or in reports or proxy
statements for the Fund, or in published reports for the Fund which are in
the public domain or approved by the Fund or the Underwriter for
distribution, or in sales literature or other material provided by the Fund
or by the Underwriter, except with permission of the Fund or the
Underwriter. The Fund and the Underwriter agree to respond to any request
for approval on a prompt and timely basis. Nothing in this Section 4.2 will
be construed as preventing the Company or its employees or agents from
giving advice on investment in the Fund, subject to compliance with
applicable state and federal law.
4.3. The Fund or the Underwriter will furnish, or will cause to be furnished, to
the Company or its designee, each piece of sales literature or other
promotional material in which the Company or its Account is named, at least
ten (10) business days prior to its use. No such material will be used if
the Company reasonably objects to such use within five (5) business days
after receipt of such material.
<PAGE>
4.4. The Fund and the Underwriter will not give any information or make any
representations or statements on behalf of the Company or concerning
the Company, each Account, or the Contracts other than the information
or representations contained in and accurately derived from a
registration statement, prospectus or statement of additional
information for the Contracts, as such registration statement,
prospectus and statement of additional information may be amended or
supplemented from time to time, or in published reports for each
Account or the Contracts which are in the public domain or approved by
the Company for distribution to contractowners, or in sales literature
or other material provided by the Company, except with permission of
the Company. The Company agrees to respond to any request for approval
on a prompt and timely basis.
4.5. The Fund will provide to the Company at least one complete copy of all
registration statements, prospectuses, statements of additional
information, reports, proxy statements, sales literature and other
promotional materials, applications for exemptions, requests for
no-action letters, and all amendments to any of the above, that relate
to the Fund or its shares, contemporaneously with the filing of such
document with the SEC or the NASD.
4.6. The Company will provide to the Fund at least one complete copy of all
registration statements, prospectuses, statements of additional
information, reports, solicitations for voting instructions, sales
literature and other promotional materials, applications for
exemptions, requests for no action letters, and all amendments to any
of the above, that relate to the Contracts or each Account,
contemporaneously with the filing of such document with the SEC or the
NASD.
4.7. For purposes of this Article IV, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements (such
as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media,
(e.g., ---- on-line networks such as the Internet or other electronic
messages), sales literature (i.e., any written communication ----
distributed or made generally available to customers or the public,
including brochures, circulars, research reports, market letters, form
letters, seminar texts, reprints or excerpts of any other advertisement,
sales literature, or published article), educational or training materials
or other communications distributed or made generally available to some or
all agents or employees, registration statements, prospectuses, statements
of additional information, shareholder reports, and proxy materials and any
other material constituting sales literature or advertising under the NASD
rules, the 1933 Act or the 1940 Act.
4.8. The Company agrees and acknowledges that the Underwriter (or its
affiliates) is the sole owner of the name and mark "Franklin Templeton" and
that all use of any designation comprised in whole or part of such name or
mark under this Agreement shall inure to the benefit of the Underwriter.
Except as provided in Section 4.1, the Company shall not use any such name
or mark on its own behalf or on behalf of the Accounts or Contracts in any
registration statement, advertisement, sales literature or other materials
relating to the Accounts or Contracts without the prior written consent of
the Underwriter. Upon termination of this Agreement for any reason, the
Company shall cease all use of any such name or mark as soon as reasonably
practicable.
ARTICLE V. Fees and Expenses
5.1. The Fund will pay no fee or other compensation to the Company under this
Agreement, except: (a) if the Fund or any Designated Portfolio adopts and
implements a plan pursuant to Rule 12b-1 under the 1940 Act to finance
distribution expenses, then, subject to obtaining any required exemptive
orders or other regulatory approvals, the Fund may make payments to the
Company if and in such amounts agreed to by the Fund in writing; and (b)
the Fund may pay fees to the Company for services provided to
contractowners that are not primarily intended to result in the sale of
shares of the Designated Portfolio or of underlying contracts.
<PAGE>
5.2. All expenses incident to performance by the Fund of this Agreement will be
paid by the Fund to the extent permitted by law. All shares of the
Designated Portfolios will be duly authorized for issuance and registered
in accordance with applicable federal law and, to the extent deemed
advisable by the Fund, in accordance with applicable state law, prior to
sale. The Fund will bear the expenses for the cost of registration and
qualification of the Fund's shares; preparation and filing of the Fund's
prospectus, statement of additional information and registration statement,
proxy materials and reports; setting in type and printing the Fund's
prospectus; setting in type and printing proxy materials and reports to
contractowners (including the costs of printing a Fund prospectus that
constitutes an annual report); the preparation of all statements and
notices required by any federal or state law; all taxes on the issuance or
transfer of the Fund's shares; any expenses permitted to be paid or assumed
by the Fund pursuant to a plan, if any, under Rule 12b-1 under the 1940
Act; and all other typesetting, printing and distribution expenses set
forth in Article III of this Agreement.
ARTICLE VI. Diversification
6.1. The Fund will at all times invest money from the Contracts in such a
manner as to ensure that the Contracts will be treated as variable
annuity or life insurance contracts under the Internal Revenue Code and
the regulations issued thereunder. Without limiting the scope of the
foregoing, the Fund will comply with Section 817(h) of the Internal
Revenue Code and Treasury Regulation 1.817-5, as amended from time to
time, relating to the diversification requirements for variable
annuity, endowment, or life insurance contracts and any amendments or
other modifications to such Section or Regulation. In the event of a
breach of this Article VI by the Fund, it will take all reasonable
steps: (a) to notify the Company of such breach; and (b) to adequately
diversify the Fund so as to achieve compliance within the grace period
afforded by Treasury Regulation 1.817-5.
ARTICLE VII. Potential Conflicts
7.1. The Fund Board will monitor the Fund for the existence of any
irreconcilable material conflict among the interests of the contractowners
of all separate accounts investing in the Fund. An irreconcilable material
conflict may arise for a variety of reasons, including: (a) an action by
any state insurance regulatory authority; (b) a change in applicable
federal or state insurance, tax, or securities laws or regulations, or a
public ruling, private letter ruling, no-action or interpretative letter,
or any similar action by insurance, tax, or securities regulatory
authorities; (c) an administrative or judicial decision in any relevant
proceeding; (d) the manner in which the investments of any Portfolio are
being managed; (e) a difference in voting instructions given by
Participating Insurance Companies or by variable annuity and variable life
insurance contractowners; or (f) a decision by an insurer to disregard the
voting instructions of contractowners. The Fund Board will promptly inform
the Company if it determines that an irreconcilable material conflict
exists and the implications thereof.
7.2. The Company will report any potential or existing conflicts of which it is
aware to the Fund Board. The Company agrees to assist the Fund Board in
carrying out its responsibilities, as delineated in the Mixed and Shared
Funding Exemptive Order, by providing the Fund Board with all information
reasonably necessary for the Fund Board to consider any issues raised. This
includes, but is not limited to, an obligation by the Company to inform the
Fund Board whenever contractowner voting instructions are to be
disregarded. The Fund Board will record in its minutes, or other
appropriate records, all reports received by it and all action with regard
to a conflict.
<PAGE>
7.3. If it is determined by a majority of the Fund Board, or a majority of its
disinterested directors, that an irreconcilable material conflict exists,
the Company and other Participating Insurance Companies will, at their
expense and to the extent reasonably practicable (as determined by a
majority of the disinterested directors), take whatever steps are necessary
to remedy or eliminate the irreconcilable material conflict, up to and
including: (a) withdrawing the assets allocable to some or all of the
Accounts from the Fund or any Portfolio and reinvesting such assets in a
different investment medium, including (but not limited to) another
Portfolio of the Fund, or submitting the question whether such segregation
should be implemented to a vote of all affected contractowners and, as
appropriate, segregating the assets of any appropriate group (i.e.,
variable ---- annuity contractowners or variable life insurance
contractowners of one or more Participating Insurance Companies) that votes
in favor of such segregation, or offering to the affected contractowners
the option of making such a change; and (b) establishing a new registered
management investment company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a decision by the
Company to disregard contractowner voting instructions, and such disregard
of voting instructions could conflict with the majority of contractowner
voting instructions, and the Company's judgment represents a minority
position or would preclude a majority vote, the Company may be required, at
the Fund's election, to withdraw the affected subaccount of the Account's
investment in the Fund and terminate this Agreement with respect to such
subaccount; provided, however, that such withdrawal and termination will be
limited to the extent required by the foregoing irreconcilable material
conflict as determined by a majority of the disinterested directors of the
Fund Board. No charge or penalty will be imposed as a result of such
withdrawal. Any such withdrawal and termination must take place within six
(6) months after the Fund gives written notice to the Company that this
provision is being implemented. Until the end of such six-month period the
Underwriter and Fund will, to the extent permitted by law and any exemptive
relief previously granted to the Fund, continue to accept and implement
orders by the Company for the purchase (and redemption) of shares of the
Fund.
7.5. If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to the Company conflicts with the
majority of other state insurance regulators, then the Company will
withdraw the affected subaccount of the Account's investment in the Fund
and terminate this Agreement with respect to such subaccount; provided,
however, that such withdrawal and termination will be limited to the extent
required by the foregoing irreconcilable material conflict as determined by
a majority of the disinterested directors of the Fund Board. No charge or
penalty will be imposed as a result of such withdrawal. Any such withdrawal
and termination must take place within six (6) months after the Fund gives
written notice to the Company that this provision is being implemented.
Until the end of such six-month period the Advisor and Fund will, to the
extent permitted by law and any exemptive relief previously granted to the
Fund, continue to accept and implement orders by the Company for the
purchase (and redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a majority of
the disinterested members of the Fund Board will determine whether any
proposed action adequately remedies any irreconcilable material conflict,
but in no event will the Fund be required to establish a new funding medium
for the Contracts. The Company will not be required by Section 7.3 to
establish a new funding medium for the Contracts if an offer to do so has
been declined by vote of a majority of contractowners affected by the
irreconcilable material conflict.
7.7. The Company will at least annually submit to the Fund Board such reports,
materials or data as the Fund Board may reasonably request so that the Fund
Board may fully carry out the duties imposed upon it as delineated in the
Mixed and Shared Funding Exemptive Order, and said reports, materials and
data will be submitted more frequently if deemed appropriate by the Fund
Board.
<PAGE>
7.8. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of
the 1940 Act or the rules promulgated thereunder with respect to mixed
or shared funding (as defined in the Mixed and Shared Funding Exemptive
Order) on terms and conditions materially different from those
contained in the Mixed and Shared Funding Exemptive Order, then: (a)
the Fund and/or the Participating Insurance Companies, as appropriate,
will take such steps as may be necessary to comply with Rules 6e-2 and
6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such
rules are applicable; and (b) Sections 3.5, 3.6, 7.1, 7.2, 7.3, 7.4,
and 7.5 of this Agreement will continue in effect only to the extent
that terms and conditions substantially identical to such Sections are
contained in such Rule(s) as so amended or adopted.
<PAGE>
ARTICLE VIII. Indemnification
8.1. Indemnification By The Company
(a) The Company agrees to indemnify and hold harmless the Fund, the
Underwriter, and each person, if any, who controls or is associated with
the Fund or the Underwriter within the meaning of such terms under the
federal securities laws and any director, trustee, officer, partner,
employee or agent of the foregoing (collectively, the "Indemnified Parties"
for purposes of this Section 8.1) against any and all losses, claims,
expenses, damages, liabilities (including amounts paid in settlement with
the written consent of the Company) or litigation (including reasonable
legal and other expenses), to which the Indemnified Parties may become
subject under any statute, regulation, at common law or otherwise, insofar
as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements:
(1) arise out of or are based upon any untrue statements
or alleged untrue statements of any material fact
contained in the registration statement, prospectus
or statement of additional information for the
Contracts or contained in the Contracts or sales
literature or other promotional material for the
Contracts (or any amendment or supplement to any of
the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a
material fact required to be stated or necessary to
make such statements not misleading in light of the
circumstances in which they were made; provided that
this agreement to indemnify will not apply as to any
Indemnified Party if such statement or omission or
such alleged statement or omission was made in
reliance upon and in conformity with information
furnished to the Company by or on behalf of the
Underwriter or the Fund for use in the registration
statement, prospectus or statement of additional
information for the Contracts or in the Contracts or
sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the
Contracts or Fund shares; or
(2) arise out of or as a result of statements or
representations by or on behalf of the Company (other
than statements or representations contained in the
Fund registration statement, prospectus, statement of
additional information or sales literature or other
promotional material of the Fund (or any amendment or
supplement) not supplied by the Company or persons
under its control) or wrongful conduct of the Company
or persons under its control, with respect to the
sale or distribution of the Contracts or Fund shares;
or
(3) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the Fund
registration statement, prospectus, statement of
additional information or sales literature or other
promotional material of the Fund (or amendment or
supplement) or the omission or alleged omission to
state therein a material fact required to be stated
therein or necessary to make such statements not
misleading in light of the circumstances in which
they were made, if such a statement or omission was
made in reliance upon and in conformity with
information furnished to the Fund by or on behalf of
the Company or persons under its control; or
(4) arise as a result of any failure by the Company to
provide the services and furnish the materials under
the terms of this Agreement; or
<PAGE>
(5) arise out of any material breach of any
representation and/or warranty made by the Company in
this Agreement or arise out of or result from any
other material breach by the Company of this
Agreement;
except to the extent provided in Sections 8.1(b) and 8.4
hereof. This indemnification will be in addition to any
liability that the Company otherwise may have.
(b) No party will be entitled to indemnification under Section
8.1(a) if such loss, claim, damage, liability or litigation is
due to the willful misfeasance, bad faith, or gross negligence
in the performance of such party's duties under this
Agreement, or by reason of such party's reckless disregard of
its obligations or duties under this Agreement by the party
seeking indemnification.
(c) The Indemnified Parties promptly will notify the Company of
the commencement of any litigation, proceedings, complaints or
actions by regulatory authorities against them in connection
with the issuance or sale of the Fund shares or the Contracts
or the operation of the Fund.
8.2. Indemnification By The Underwriter
(a) The Underwriter agrees to indemnify and hold harmless the
Company and each person, if any, who controls or is associated
with the Company within the meaning of such terms under the
federal securities laws and any director, trustee, officer,
partner, employee or agent of the foregoing (collectively, the
"Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, expenses, damages,
liabilities (including amounts paid in settlement with the
written consent of the Underwriter) or litigation (including
reasonable legal and other expenses) to which the Indemnified
Parties may become subject under any statute, regulation, at
common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect
thereof) or settlements:
(1) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in the registration statement, prospectus
or statement of additional information for the Fund
or sales literature or other promotional material of
the Fund (or any amendment or supplement to any of
the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a
material fact required to be stated or necessary to
make such statements not misleading in light of the
circumstances in which they were made; provided that
this agreement to indemnify will not apply as to any
Indemnified Party if such statement or omission or
such alleged statement or omission was made in
reliance upon and in conformity with information
furnished to the Underwriter or Fund by or on behalf
of the Company for use in the registration statement,
prospectus or statement of additional information for
the Fund or in sales literature of the Fund (or any
amendment or supplement thereto) or otherwise for use
in connection with the sale of the Contracts or Fund
shares; or
(2) arise out of or as a result of statements or
representations (other than statements or
representations contained in the Contracts or in the
Contract or Fund registration statements,
prospectuses or statements of additional information
or sales literature or other promotional material for
the Contracts or of the Fund (or any amendment or
supplement) not supplied by the Underwriter or the
Fund or persons under the control of the Underwriter
or the Fund respectively) or wrongful conduct of the
Underwriter or the Fund or persons under the control
of the Underwriter or the Fund respectively, with
respect to the sale or distribution of the Contracts
or Fund shares; or
<PAGE>
(3) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a
registration statement, prospectus, statement of
additional information or sales literature or other
promotional material covering the Contracts (or any
amendment or supplement thereto), or the omission or
alleged omission to state therein a material fact
required to be stated or necessary to make such
statement or statements not misleading in light of
the circumstances in which they were made, if such
statement or omission was made in reliance upon and
in conformity with information furnished to the
Company by or on behalf of the Underwriter or the
Fund or persons under the control of the Underwriter
or the Fund; or
(4) arise as a result of any failure by the Fund or the
Underwriter to provide the services and furnish the
materials under the terms of this Agreement
(including a failure, whether unintentional or in
good faith or otherwise, to comply with the
diversification requirements and procedures related
thereto specified in Article VI of this Agreement);
or
(5) arise out of or result from any material breach of
any representation and/or warranty made by the
Underwriter or the Fund in this Agreement, or arise
out of or result from any other material breach of
this Agreement by the Underwriter or the Fund;
except to the extent provided in Sections 8.2(b) and 8.4
hereof.
(b) No party will be entitled to indemnification under Section
8.2(a) if such loss, claim, damage, liability or litigation is
due to the willful misfeasance, bad faith, or gross negligence
in the performance of such party's duties under this
Agreement, or by reason of such party's reckless disregard of
its obligations or duties under this Agreement by the party
seeking indemnification.
(c) The Indemnified Parties will promptly notify the Underwriter
and the Fund of the commencement of any litigation,
proceedings, complaints or actions by regulatory authorities
against them in connection with the issuance or sale of the
Contracts or the operation of the Account.
8.3. Indemnification By the Fund
(a) The Fund agrees to indemnify and hold harmless the Company and each person,
if any, who controls or is associated with the Company within the meaning
of such terms under the federal securities laws and any director, trustee,
officer, partner, employee or agent of the foregoing (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, expenses, damages, liabilities (including amounts paid in
settlement with the written consent of the Fund) or litigation (including
reasonable legal and other expenses) to which the Indemnified Parties may
become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements, are related to the operations
of the Fund and:
(1) arise as a result of any failure by the Fund to
provide the services and furnish the materials under
the terms of this Agreement (including a failure,
whether unintentional or in good faith or otherwise,
to comply with the diversification and other
qualification requirements specified in Article VI);
or
(2) arise out of or result from any material breach of
any representation and/or warranty made by the Fund
in this Agreement or arise out of or result from any
other material breach of this Agreement by the Fund;
or
<PAGE>
(3) arise out of or result from the incorrect or untimely
calculation or reporting of the daily net asset value
per share or dividend or capital gain distribution
rate;
except to the extent provided in Sections 8.3(b) and 8.4
hereof.
(b) No party will be entitled to indemnification under Section
8.3(a) if such loss, claim, damage, liability or litigation is
due to the willful misfeasance, bad faith, or gross negligence
in the performance of such party's duties under this
Agreement, or by reason of such party's reckless disregard of
its obligations and duties under this Agreement by the party
seeking indemnification.
(c) The Indemnified Parties will promptly notify the Fund of the
commencement of any litigation, proceedings, complaints or
actions by regulatory authorities against them in connection
with the issuance or sale of the Contracts or the operation of
the Account.
(d) It is understood and expressly stipulated that neither the
holders of shares of the Fund nor any Fund Board member,
officer, agent or employee of the Fund shall be personally
liable hereunder, nor shall any resort be had to other private
property for the satisfaction of any claim or obligation
hereunder, but the Fund only shall be liable.
8.4. Indemnification Procedure
Any person obligated to provide indemnification under this Article VIII
("Indemnifying Party" for the purpose of this Section 8.4) will not be
liable under the indemnification provisions of this Article VIII with
respect to any claim made against a party entitled to indemnification
under this Article VIII ("Indemnified Party" for the purpose of this
Section 8.4) unless such Indemnified Party will have notified the
Indemnifying Party in writing within a reasonable time after the
summons or other first legal process giving information of the nature
of the claim will have been served upon such Indemnified Party (or
after such party will have received notice of such service on any
designated agent), but failure to notify the Indemnifying Party of any
such claim will not relieve the Indemnifying Party from any liability
which it may have to the Indemnified Party against whom such action is
brought otherwise than on account of the indemnification provision of
this Article VIII, except to the extent that the failure to notify
results in the failure of actual notice to the Indemnifying Party and
such Indemnifying Party is damaged solely as a result of failure to
give such notice. In case any such action is brought against the
Indemnified Party, the Indemnifying Party will be entitled to
participate, at its own expense, in the defense thereof. The
Indemnifying Party also will be entitled to assume the defense thereof,
with counsel satisfactory to the party named in the action. After
notice from the Indemnifying Party to the Indemnified Party of the
Indemnifying Party's election to assume the defense thereof, the
Indemnified Party will bear the fees and expenses of any additional
counsel retained by it, and the Indemnifying Party will not be liable
to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with
the defense thereof other than reasonable costs of investigation,
unless: (a) the Indemnifying Party and the Indemnified Party will have
mutually agreed to the retention of such counsel; or (b) the named
parties to any such proceeding (including any impleaded parties)
include both the Indemnifying Party and the Indemnified Party and
representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between
them. The Indemnifying Party will not be liable for any settlement of
any proceeding effected without its written consent but if settled with
such consent or if there is a final judgment for the plaintiff, the
Indemnifying Party agrees to indemnify the Indemnified Party from and
against any loss or liability by reason of such settlement or judgment.
A successor by law of the parties to this Agreement will be entitled to
the benefits of the indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII will survive
any termination of this Agreement.
<PAGE>
ARTICLE IX. Applicable Law
9.1. This Agreement will be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of Minnesota.
9.2. This Agreement will be subject to the provisions of the 1933 Act, the
1934 Act and the 1940 Act, and the rules and regulations and rulings
thereunder, including such exemptions from those statutes, rules and
regulations as the SEC may grant (including, but not limited to, the
Mixed and Shared Funding Exemptive Order) and the terms hereof will be
interpreted and construed in accordance therewith.
ARTICLE X. Termination
10.1. This Agreement will terminate:
(a) at the option of any party, with or without cause, with
respect to some or all of the Designated Portfolios, upon
sixty (60) days advance written notice to the other parties
or, if later, upon receipt of any required exemptive relief or
orders from the SEC, unless otherwise agreed in a separate
written agreement among the parties; or
(b) at the option of the Company, upon receipt of the Company's
written notice by the other parties, with respect to any
Designated Portfolio if shares of the Designated Portfolio are
not reasonably available to meet the requirements of the
Contracts as determined in good faith by the Company; or
(c) at the option of the Company, upon receipt of the Company's
written notice by the other parties, with respect to any
Designated Portfolio in the event any of the Designated
Portfolio's shares are not registered, issued or sold in
accordance with applicable state and/or federal law or such
law precludes the use of such shares as the underlying
investment media of the Contracts issued or to be issued by
Company; or
(d) at the option of the Fund, upon receipt of the Fund's written
notice by the other parties, upon institution of formal
proceedings against the Company by the NASD, the SEC, the
insurance commission of any state or any other regulatory body
regarding the Company's duties under this Agreement or related
to the sale of the Contracts, the administration of the
Contracts, the operation of the Account, or the purchase of
the Fund shares, provided that the Fund determines in its sole
judgment, exercised in good faith, that any such proceeding
would have a material adverse effect on the Company's ability
to perform its obligations under this Agreement; or
(e) at the option of the Company, upon receipt of the Company's
written notice by the other parties, upon institution of
formal proceedings against the Fund or the Underwriter by the
NASD, the SEC, or any state securities or insurance department
or any other regulatory body, regarding the Fund's or the
Underwriter's duties under this Agreement or related to the
sale of Fund shares or the administration of the Fund,
provided that the Company determines in its sole judgment,
exercised in good faith, that any such proceeding would have a
material adverse effect on the Fund's or the Underwriter's
ability to perform its obligations under this Agreement; or
(f) at the option of the Company, upon receipt of the Company's
written notice by the other parties, if the Fund ceases to
qualify as a Regulated Investment Company under Subchapter M
of the Internal Revenue Code, or under any successor or
similar provision, or if the Company reasonably and in good
faith believes that the Fund may fail to so qualify; or
<PAGE>
(g) at the option of the Company, upon receipt of the Company's
written notice by the other parties, with respect to any
Designated Portfolio if the Fund fails to meet the
diversification requirements specified in Article VI hereof or
if the Company reasonably and in good faith believes the Fund
may fail to meet such requirements; or
(h) at the option of any party to this Agreement, upon written
notice to the other parties, upon another party's material
breach of any provision of this Agreement; or
(i) at the option of the Company, if the Company determines in its
sole judgment exercised in good faith, that either the Fund or
the Underwriter has suffered a material adverse change in its
business, operations or financial condition since the date of
this Agreement or is the subject of material adverse publicity
which is likely to have a material adverse impact upon the
business and operations of the Company, such termination to be
effective sixty (60) days' after receipt by the other parties
of written notice of the election to terminate; or
(j) at the option of the Fund or the Underwriter, if the Fund or
Underwriter respectively, determines in its sole judgment
exercised in good faith, that the Company has suffered a
material adverse change in its business, operations or
financial condition since the date of this Agreement or is the
subject of material adverse publicity which is likely to have
a material adverse impact upon the business and operations of
the Fund or the Underwriter, such termination to be effective
sixty (60) days' after receipt by the other parties of written
notice of the election to terminate; or
(k) at the option of the Company or the Fund upon receipt of any
necessary regulatory approvals and/or the vote of the
contractowners having an interest in the Account (or any
subaccount) to substitute the shares of another investment
company for the corresponding Designated Portfolio shares of
the Fund in accordance with the terms of the Contracts for
which those Designated Portfolio shares had been selected to
serve as the underlying investment media. The Company will
give sixty (60) days' prior written notice to the Fund of the
date of any proposed vote or other action taken to replace the
Fund's shares; or
(l) at the option of the Company or the Fund upon a determination
by a majority of the Fund Board, or a majority of the
disinterested Fund Board members, that an irreconcilable
material conflict exists among the interests of: (1) all
contractowners of variable insurance products of all separate
accounts; or (2) the interests of the Participating Insurance
Companies investing in the Fund as set forth in Article VII of
this Agreement; or
(m) at the option of the Fund in the event any of the Contracts
are not issued or sold in accordance with applicable federal
and/or state law. Termination will be effective immediately
upon such occurrence without notice.
10.2. Notice Requirement
(a) No termination of this Agreement will be effective unless and
until the party terminating this Agreement gives prior written
notice to all other parties of its intent to terminate, which
notice will set forth the basis for the termination.
(b) In the event that any termination of this Agreement is based
upon the provisions of Article VII, such prior written notice
will be given in advance of the effective date of termination
as required by such provisions.
<PAGE>
10.3. Effect of Termination
Notwithstanding any termination of this Agreement, the Fund and the
Underwriter will, at the option of the Company, continue to make
available additional shares of the Fund pursuant to the terms and
conditions of this Agreement, for all Contracts in effect on the
effective date of termination of this Agreement (hereinafter referred
to as "Existing Contracts.") . Specifically, without limitation, the
owners of the Existing Contracts will be permitted to reallocate
investments in the Portfolios (as in effect on such date), redeem
investments in the Portfolios and/or invest in the Portfolios upon the
making of additional purchase payments under the Existing Contracts.
The parties agree that this Section 10.3 will not apply to any
terminations under Article VII and the effect of such Article VII
terminations will be governed by Article VII of this Agreement.
10.4 Surviving Provisions
Notwithstanding any termination of this Agreement, each party's
obligations under Article VIII to indemnify other parties will survive
and not be affected by any termination of this Agreement. In addition,
with respect to Existing Contracts, all provisions of this Agreement
also will survive and not be affected by any termination of this
Agreement.
ARTICLE XI. Notices
11.1 Any notice will be deemed duly given when sent by registered or
certified mail to the other party at the address of such party set
forth below or at such other address as such party may from time to
time specify in writing to the other parties.
If to the Company:
American Enterprise Life Insurance Company
80 South 8th Street
Minneapolis, MN 55402
Minneapolis, MN 55402
Attn: James E. Choat
President
With a simultaneous copy to:
Law Department (Unit 52)
American Enterprise Life Insurance Company
80 South 8th Street
Minneapolis, MN 55402
If to the Fund or the Underwriter:
Templeton Variable Products Series Fund,
Franklin Templeton Variable Insurance Products Trust
or Franklin Templeton Distributors, Inc.
700 Central Avenue
St. Petersburg, FL 33701
Attn: Thomas M. Mistele
Secretary
<PAGE>
ARTICLE XII. Miscellaneous
12.1. All persons dealing with the Fund must look solely to the property of
the Fund for the enforcement of any claims against the Fund as neither
the directors, trustees, officers, partners, employees, agents or
shareholders assume any personal liability for obligations entered into
on behalf of the Fund.
12.2.The Fund and the Underwriter acknowledge that the identities of the
customers of the Company or any of its affiliates (collectively the
"Protected Parties" for purposes of this Section 12.2), information
maintained regarding those customers, and all computer programs and
procedures or other information developed or used by the Protected Parties
or any of their employees or agents in connection with the Company's
performance of its duties under this Agreement are the valuable property of
the Protected Parties. The Fund and the Underwriter agree that if they come
into possession of any list or compilation of the identities of or other
information about the Protected Parties' customers, or any other
information or property of the Protected Parties, other than such
information as may be independently developed or compiled by the Fund or
the Underwriter from information supplied to them by the Protected Parties'
customers who also maintain accounts directly with the Fund or the
Underwriter, the Fund and the Underwriter will hold such information or
property in confidence and refrain from using, disclosing or distributing
any of such information or other property except: (a) with the Company's
prior written consent; or (b) as required by law or judicial process. The
Fund and the Underwriter acknowledge that any breach of the agreements in
this Section 12.2 would result in immediate and irreparable harm to the
Protected Parties for which there would be no adequate remedy at law and
agree that in the event of such a breach, the Protected Parties will be
entitled to equitable relief by way of temporary and permanent injunctions,
as well as such other relief as any court of competent jurisdiction deems
appropriate.
12.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together will constitute one and the
same instrument.
12.5. If any provision of this Agreement will be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the
Agreement will not be affected thereby.
12.6.This Agreement will not be assigned by any party hereto without the prior
written consent of all the parties.
12.7. Each party to this Agreement will cooperate with each other party and
all appropriate governmental authorities (including without limitation
the SEC, the NASD and state insurance regulators) and will permit each
other and such authorities reasonable access to its books and records
in connection with any investigation or inquiry relating to this
Agreement or the transactions contemplated hereby. The Fund agrees that
the Company will have the right to inspect, audit and copy all records
pertaining to the performance of services under this Agreement pursuant
to the requirements of any state insurance department.
12.8 Each party represents that the execution and delivery of this Agreement
and the consummation of the transactions contemplated herein have been
duly authorized by all necessary corporate or board action, as
applicable, by such party and when so executed and delivered this
Agreement will be the valid and binding obligation of such party
enforceable in accordance with its terms.
12.9. The parties to this Agreement may amend the schedules to this Agreement
from time to time to reflect changes in or relating to the Contracts,
the Accounts or the Designated Portfolios of the Fund or other
applicable terms of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed hereto as of the date specified below.
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
SEAL By:
Name:
Title:
ATTEST
By:
Name:
Title:
TEMPLETON VARIABLE PRODUCTS
SERIES FUND
SEAL By:
Name:
Title:
<PAGE>
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
SEAL By:
Name:
Title:
FRANKLIN TEMPLETON DISTRIBUTORS, INC.
SEAL By:
Name:
Title:
<PAGE>
Schedule 1
PARTICIPATION AGREEMENT
By and Among
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
And
TEMPLETON VARIABLE PRODUCTS SERIES FUND
And
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
And
FRANKLIN TEMPLETON DISTRIBUTORS, INC.
The following separate accounts of American Enterprise Life Insurance Company
are permitted in accordance with the provisions of this Agreement to invest in
Designated Portfolios of the Fund shown in Schedule 2:
American Enterprise Variable Annuity Account, established July 15, 1987
American Enterprise Variable Life Account, established July 15, 1987
, 1999
<PAGE>
Schedule 2
PARTICIPATION AGREEMENT
By and Among
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
And
TEMPLETON VARIABLE PRODUCTS SERIES FUND
And
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
And
FRANKLIN TEMPLETON DISTRIBUTORS, INC.
The Separate Account(s) shown on Schedule 1 may invest in the following
Designated Portfolios of the Templeton Variable Products Series Fund:
Templeton International Fund - Class 2
The Separate Account(s) shown on Schedule 1 may invest in the following
Designated Portfolios of the Franklin Templeton Variable Insurance Products
Trust:
Income Securities Fund - Class 2
Templeton International Smaller Companies Fund - Class 2 Mutual Shares
Securities Fund - Class 2 Real Estate Securities Fund - Class 2 Small
Cap Fund - Class 2 Value Securities Fund - Class 2
, 1999
<PAGE>
Schedule 3
PARTICIPATION AGREEMENT
By and Among
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
And
TEMPLETON VARIABLE PRODUCTS SERIES FUND
And
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
And
FRANKLIN TEMPLETON DISTRIBUTORS, INC.
RULE 12b-1 PLANS
Compensation Schedule
Each portfolio named below shall pay the following amounts pursuant to the terms
and conditions referenced below under it Class 2 12b-1 Distribution Plan, stated
as a percentage per year of Class 2's average daily net assets represented by
shares of Class 2.
Portfolio Name Maximum Annual Payment Rate
TVP Templeton International Fund 0.25%
FTVIP Income Securities Fund 0.25%
FTVIP Templeton International Smaller Companies Fund
0.25%
FTVIP Mutual Shares Securities Fund 0.25%
FTVIP Real Estate Securities Fund 0.25%
FTVIP Small Cap Fund 0.25%
FTVIP Value Securities Fund 0.25%
Agreement Provisions
If the Company, on behalf of any Account, purchases Fund Portfolio shares
("Eligible Shares") which are subject to a Rule 12b-1 Plan adopted under the
1940 Act (the "Plan"), the Company may participate in the Plan.
To the extent the Company or its affiliates, agents or designees (collectively
"you") provide administrative and other services which assist in the promotion
and distribution of Eligible Shares or Variable Contracts offering Eligible
Shares, the Underwriter, the Fund or their affiliates (collectively, "we") may
pay you a Rule 12b1 fee. "Administrative and other services" may include, but
are not limited to, furnishing personal services to owners of Contracts which
may invest in Eligible Shares ("Contract Owners"), answering routine inquiries
regarding a Portfolio, coordinating responses to Contract Owner inquiries
regarding the Portfolios, maintaining such accounts or providing such other
enhanced services as a Fund Portfolio or Contract may require, maintaining
customer accounts and records, or providing other services eligible for service
fees as defined under NASD rules. Your acceptance of such compensation is your
acknowledgment that eligible services have been rendered. All Rule 12b-1 fees
shall be based on the value of Eligible Shares owned by the Company on behalf of
its Accounts, and shall be calculated on the basis and at the rates set forth in
the compensation Schedule stated above. The aggregate annual fees paid pursuant
to each Plan shall not exceed the amounts stated as the "annual maximums" in the
Portfolio's prospectus, unless an increase is approved by shareholders as
provided in the Plan. These maximums shall be a specified percent of the value
of a Portfolio's net assets attributable to Eligible Shares owned by the Company
on behalf of its Accounts (determined in the same manner as the Portfolio uses
to compute its net assets as set forth in its effective Prospectus).
<PAGE>
You shall furnish us with such information as shall reasonably be requested by
the Fund's Boards of Trustees ("Trustees") with respect to the Rule 12b-1 fees
paid to you pursuant to the Plans. We shall furnish to the Trustees, for their
review on a quarterly basis, a written report of the amounts expended under the
Plans and the purposes for which such expenditures were made.
The Plans and provisions of any agreement relating to such Plans must be
approved annually by a vote of the Trustees, including the Trustees who are not
interested persons of the Fund and who have no financial interest in the Plans
or any related agreement ("Disinterested Trustees"). Each Plan may be terminated
at any time by the vote of a majority of the disinterested Trustees, or by a
vote of a majority of the outstanding shares as provided in the Plan on sixty
(60) days' written notice, without payment of any penalty. The Plans may also be
terminated by any act that terminates the administration agreement between
Franklin advisers, Inc. or Templeton Investment Counsel, Inc. or their
affiliates and the Fund. Continuation of the Plans is also conditioned on
Disinterested Trustees being ultimately responsible for selecting and nominating
any new Disinterested Trustees. Under Rule 12b-1, the Trustees have a duty to
request and evaluate, and persons who are party to any agreement related to a
Plan have a duty to furnish, such information as may reasonably be necessary to
an informed determination of whether the Plan or any agreement should be
implemented or continued. Under Rule 12b-1, the Fund in permitted to implement
or continue Plans or the provisions of any agreement relating to such Plans from
year-to-year only if, based on certain legal considerations, the Trustees are
able to conclude that the Plans will benefit each affected Fund Portfolio and
class. Absent such yearly determination, the Plans must be terminated as set
forth above. In the event of the termination of the Plans for any reason, the
provisions of this Schedule 3 relating to the Plans will also terminate.
Any obligation assumed by the Fund pursuant to this Agreement shall be limited
in all cases to the assets of the Fund and no person shall seek satisfaction
thereof from shareholders of the Fund. You agree to waive payment of any amounts
payable to you by Underwriter under a Plan until such time as the Underwriter
has received such fee from the Fund.
The provisions of the plans shall control over the provisions of the
Participation Agreement, including this Schedule 3, in the event of any
inconsistency.
You agree to provide complete disclosure as required by all applicable statues,
rules and regulations of all 12b-1 fees received from us in the prospectus of
the contracts.
, 1999
<PAGE>
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into this 1st day of April, 1999 by
and between GOLDMAN SACHS VARIABLE INSURANCE TRUST, an unincorporated business
trust formed under the laws of Delaware (the "Trust"), GOLDMAN, SACHS & CO., a
New York limited partnership (the "Distributor"), and AMERICAN ENTERPRISE LIFE
INSURANCE COMPANY, an Indiana life insurance company (the "Company"), on its own
behalf and on behalf of each separate account of the Company identified herein.
WHEREAS, the Trust is a series-type mutual fund offering shares of
beneficial interest (the "Trust shares") consisting of one or more separate
series ("Series") of shares, each such Series representing an interest in a
particular investment portfolio of securities and other assets (a "Fund"), and
which Series may be subdivided into various classes ("Classes") with each such
Class supporting a distinct charge and expense arrangement; and
WHEREAS, the Trust was established for the purpose of serving as an
investment vehicle for insurance company separate accounts supporting variable
annuity contracts and variable life insurance policies to be offered by
insurance companies and may also be utilized by qualified retirement plans; and
WHEREAS, the Distributor has the exclusive right to distribute Trust
shares to qualifying investors; and
WHEREAS, the Company desires that the Trust serve as an investment
vehicle for a certain separate account(s) of the Company and the Distributor
desires to sell shares of certain Series and/or Class(es) to such separate
account(s);
NOW, THEREFORE, in consideration of their mutual promises, the Trust,
the Distributor and the Company agree as follows:
ARTICLE I
Additional Definitions
1.1. "Account" -- the separate account of the Company described more
specifically in Schedule 1 to this Agreement as amended by the parties from
time to time. If more than one separate account is described on Schedule 1,
the term shall refer to each separate account so described.
1.2. "Business Day" -- each day that the Trust is open for business as provided
in the Trust's Prospectus.
1.3. "Code" -- the Internal Revenue Code of 1986, as amended, and any successor
thereto.
1.4. "Contracts" -- the class or classes of variable annuity contracts and/or
variable life insurance policies issued by the Company and described more
specifically on Schedule 2 to this Agreement as amended by the parties from
time to time.
1.5. "Contract Owners" -- the owners of the Contracts, as distinguished from all
Product Owners.
1.6. "Participating Account" -- a separate account investing all or a portion of
its assets in the Trust, including the Account.
1.7. "Participating Insurance Company" -- any insurance company investing in the
Trust on its behalf or on behalf of a Participating Account, including the
Company.
1.8. "Participating Plan" -- any qualified retirement plan investing in the
Trust.
1.9. "Participating Investor" -- any Participating Account, Participating
Insurance Company or Participating Plan, including the Account and the
Company.
1.10. "Products" -- variable annuity contracts and variable life
insurance policies supported by Participating Accounts, including the
Contracts.
1.11. "Product Owners" -- owners of Products, including Contract Owners.
1.12. "Trust Board" -- the board of trustees of the Trust.
1.13."Registration Statement" -- with respect to the Trust shares or a class of
Contracts, the registration statement filed with the SEC to register such
securities under the 1933 Act, or the most recently filed amendment
thereto, in either case in the form in which it was declared or became
effective. The Contracts' Registration Statement for each class of
Contracts is described more specifically on Schedule 2 to this Agreement.
The Trust's Registration Statement is filed on Form N-1A (File No.
333-35883).
1.14."1940 Act Registration Statement" -- with respect to the Trust or the
Account, the registration statement filed with the SEC to register such
person as an investment company under the 1940 Act, or the most recently
filed amendment thereto. The Account's 1940 Act Registration Statement is
described more specifically on Schedule 1 to this Agreement. The Trust's
1940 Act Registration Statement is filed on Form N-1A (File No. 811-08361).
1.15."Prospectus" -- with respect to shares of a Series (or Class) of the Trust
or a class of Contracts, each version of the definitive prospectus or
supplement thereto filed with the SEC pursuant to Rule 497 under the 1933
Act. With respect to any provision of this Agreement requiring a party to
take action in accordance with a Prospectus, such reference thereto shall
be deemed to be to the version for the applicable Series, Class or
Contracts last so filed prior to the taking of such action. For purposes of
Article IX, the term "Prospectus" shall include any statement of additional
information incorporated therein.
1.16."Statement of Additional Information" -- with respect to the shares of the
Trust or a class of Contracts, each version of the definitive statement of
additional information or supplement thereto filed with the SEC pursuant to
Rule 497 under the 1933 Act. With respect to any provision of this
Agreement requiring a party to take action in accordance with a Statement
of Additional Information, such reference thereto shall be deemed to be the
last version so filed prior to the taking of such action.
1.17. "SEC" -- the Securities and Exchange Commission.
1.18. "NASD" -- The National Association of Securities Dealers, Inc.
1.19. "1933 Act" -- the Securities Act of 1933, as amended.
1.20. "1940 Act" -- the Investment Company Act of 1940, as amended.
ARTICLE II
Sale of Trust Shares
2.1. Availability of Shares
(a) The Trust has granted to the Distributor exclusive authority to distribute
the Trust shares and to select which Series or Classes of Trust shares
shall be made available to Participating Investors. Pursuant to such
authority, and subject to Article X hereof, the Distributor shall make
available to the Company for purchase on behalf of the Account, shares of
the Series and Classes listed on Schedule 3 to this Agreement, as amended
by the parties from time to time, such purchases to be effected at net
asset value and with no sales charge in accordance with Section 2.3 of this
Agreement. Such Series and Classes shall be made available to the Company
in accordance with the terms and provisions of this Agreement until this
Agreement is terminated pursuant to Article X or the Distributor suspends
or terminates the offering of shares of such Series or Classes in the
circumstances described in Article X.
(b) Notwithstanding clause (a) of this Section 2.1, Series or Classes of Trust
shares in existence now or that may be established in the future will be
made available to the Company, subject to the Distributor's rights set
forth in Article X to suspend or terminate the offering of shares of any
Series or Class or to terminate this Agreement.
(c) The parties acknowledge and agree that: (i) the Trust may revoke the
Distributor's authority pursuant to the terms and conditions of its
distribution agreement with the Distributor; and (ii) the Trust reserves
the right in its sole discretion, exercised in good faith, to refuse to
accept a request for the purchase of Trust shares.
2.2. Redemptions. The Trust shall redeem, at the Company's request, any full or
fractional Trust shares held by the Company on behalf of the Account, such
redemptions to be effected at net asset value and with no sales charge in
accordance with Section 2.3 of this Agreement. Notwithstanding the
foregoing, (i) the Company shall not redeem Trust shares attributable to
Contract Owners except in the circumstances permitted in Article X of this
Agreement, and (ii) the Trust may delay redemption of Trust shares of any
Series or Class to the extent permitted by the 1940 Act, any rules,
regulations or orders thereunder, or the Prospectus for such Series or
Class.
2.3. Purchase and Redemption Procedures
(a) The Trust hereby appoints the Company as an agent of the Trust for the
limited purpose of receiving purchase and redemption requests on behalf of
the Account (but not with respect to any Trust shares that may be held in
the general account of the Company) for shares of those Series or Classes
made available hereunder, based on allocations of amounts to the Account or
subaccounts thereof under the Contracts, other transactions relating to the
Contracts or the Account and customary processing of the Contracts. Receipt
of any such requests (or effectuation of such transaction or processing) on
any Business Day by the Company as such limited agent of the Trust prior to
the Trust's close of business as defined from time to time in the
applicable Prospectus for such Series or Class (which as of the date of
execution of this Agreement is defined as the close of regular trading on
the New York Stock Exchange (normally 4:00 p.m. New York Time)) shall
constitute receipt by the Trust on that same Business Day, provided that
the Trust receives actual and sufficient notice of such request by 9:30
a.m. New York time (8:30 a.m. Central Time) on the next following Business
Day. The Trust reserves discretion to extend the time by which notice must
be received in accordance with the preceding sentence on a case by case
basis if a Fund experiences a delay in calculating its net asset value
which extends past 7:00 p.m. New York time (6:00 Central time) in
accordance with Section 2.4 hereof. Such notice may be communicated by
telephone to the office or person designated for such notice by the Trust,
and shall be confirmed by facsimile.
(b) The Company shall pay for shares of each Series or Class on the same day
that it provides actual notice to the Trust of a purchase request for such
shares. Payment for Series or Class shares shall be made in Federal funds
transmitted to the Trust by wire. Such wire transfer will be initiated by
the Company's bank by 1:00 p.m. Central time and received by the Trust by
the close of business of the Federal funds wire system on the day the Trust
receives actual notice of the purchase request for Series or Class shares
(unless the Trust determines and so advises the Company that sufficient
proceeds are available from redemption of shares of other Series or Classes
effected pursuant to redemption requests tendered by the Company on behalf
of the Account). In no event may proceeds from the redemption of shares
requested pursuant to an order received by the Company after the Trust's
close of business on any Business Day be applied to the payment for shares
for which a purchase order was received prior to the Trust's close of
business on such day. If the issuance of shares is canceled because Federal
funds are not timely received when required for settlement on related
purchases of portfolio securities, the Company shall indemnify the
respective Fund and Distributor for 50% of all costs, expenses and losses
relating to failure to meet such settlement obligations. Upon the Trust's
receipt of Federal funds so wired, such funds shall cease to be the
responsibility of the Company and shall become the responsibility of the
Trust. If Federal funds are not received on time, the Series or Class
shares purchased by such payment shall be executed at the net asset value
next computed following receipt of payment.
(c) Payment for Series or Class shares redeemed by the Account or the Company
shall be made in Federal funds transmitted by wire to the Company or any
other person properly designated in writing by the Company, such funds
normally to be transmitted by 6:00 p.m. New York Time (5:00 p.m. Central
Time) on the next Business Day after the Trust receives actual notice of
the redemption order for Series or Class shares (unless redemption proceeds
are to be applied to the purchase of Trust shares of other Series or
Classes in accordance with Section 2.3(b) of this Agreement), except that
the Trust reserves the right to redeem Series or Class shares in assets
other than cash and to delay payment of redemption proceeds to the extent
permitted by the 1940 Act, any rules or regulations or orders thereunder,
or the applicable Prospectus. In any event, absent extraordinary
circumstances specified in Section 22(e) of the 1940 Act, the Trust shall
make such payment within five (5) calendar days after the date the
redemption order is placed in order to enable the Company to pay redemption
proceeds within the time specified in Section 22(e) of the 1940 Act or such
shorter period of time as may be required by law. The Trust shall not bear
any responsibility whatsoever for the proper disbursement or crediting of
redemption proceeds by the Company; the Company alone shall be responsible
for such action.
(d) Any purchase or redemption request for Series or Class shares held or to be
held in the Company's general account shall be effected at the net asset
value per share next determined after the Trust's actual receipt of such
request, provided that, in the case of a purchase request, payment for
Trust shares so requested is received by the Trust in Federal funds prior
to close of business for determination of such value, as defined from time
to time in the Prospectus for such Series or Class. If such Federal funds
are not received on time, the Series of Class shares purchased by such
payment shall be executed at the net asset value next computed following
receipt of payment.
(e) Prior to the first purchase of any Trust shares hereunder, the Company and
the Trust shall provide each other with all information necessary to effect
wire transmissions of Federal funds to the other party and all other
designated persons pursuant to such protocols and security procedures as
the parties may agree upon. Should such information change thereafter, the
Trust and the Company, as applicable, shall notify the other in writing of
such changes, observing the same protocols and security procedures, at
least three Business Days in advance of when such change is to take effect.
The Company and the Trust shall observe customary procedures to protect the
confidentiality and security of such information, but neither party shall
be liable to the other party for any breach of security.
(f) The procedures set forth herein are subject to any additional terms set
forth in the applicable Prospectus for the Series or Class or by the
requirements of applicable law.
2.4. Net Asset Value. The Trust shall make the net asset value per share for
each Series or Class available to the Company as soon as reasonably
practicable after the net asset value per share for such Series or Class is
calculated on any Business Day, and shall use its best efforts to make the
NAV available no later than 7:00 p.m. New York Time (6:00 p.m. Central
time) on such day. The Trust will notify the Company as soon as possible if
it is determined that the net asset value per share will be available after
7:00 p.m. New York Time (6:00 p.m. Central Time) on any Business Day, and
the Trust and the Company will mutually agree upon a final deadline for
timely receipt of the NAV on such Business Day. The Trust shall calculate
such net asset value in accordance with the Prospectus for such Series or
Class.
2.5. Dividends and Distributions. The Trust shall furnish same-day notice by
wire or telephone (followed by written confirmation) on or prior to the
payment date to the Company of any income dividends or capital gain
distributions payable on any Series or Class shares. The Company, on its
behalf and on behalf of the Account, hereby elects to receive all such
dividends and distributions as are payable on any Series or Class shares in
the form of additional shares of that Series or Class. The Company reserves
the right, on its behalf and on behalf of the Account, to revoke this
election and to receive all such dividends and capital gain distributions
in cash; to be effective, such revocation must be made in writing and
received by the Trust at least ten Business Days prior to a dividend or
distribution date.
2.6. Book Entry. Issuance and transfer of Trust shares shall be by book entry
only. Stock certificates will not be issued to the Company or the Account.
Purchase and redemption orders for Trust shares shall be recorded in an
appropriate ledger for the Account or the appropriate subaccount of the
Account.
2.7. Pricing Errors. Any material errors in the calculation of net asset value,
dividends or capital gain information shall be reported immediately upon
discovery to the Company. An error shall be deemed "material" based on the
Trust's interpretation of the SEC's position and policy with regard to
materiality, as it may be modified from time to time. If the Company is
provided with materially incorrect net asset value information, the Company
shall be entitled to an adjustment to the number of shares purchased or
redeemed to reflect the correct net asset value per share. Neither the
Trust, any Fund, the Distributor, nor any of their affiliates shall be
liable for any information provided to the Company pursuant to this
Agreement which information is based on incorrect information supplied by
or on behalf of the Company to the Trust or the Distributor.
2.8. Limits on Purchasers. The Distributor and the Trust shall sell Trust shares
only to insurance companies and their separate accounts and to persons or
plans ("Qualified Persons") that qualify to purchase shares of the Trust
under Section 817(h) of the Code and the regulations thereunder without
impairing the ability of the Account to consider the portfolio investments
of the Trust as constituting investments of the Account for the purpose of
satisfying the diversification requirements of Section 817(h). The
Distributor and the Trust shall not sell Trust shares to any insurance
company or separate account unless an agreement complying with Article VIII
of this Agreement is in effect to govern such sales. The Company hereby
represents and warrants that it and the Account are Qualified Persons.
ARTICLE III
Representations and Warranties
3.1. Company. The Company represents and warrants that: (i) the Company is an
insurance company duly organized and in good standing under Indiana
insurance law; (ii) the Account is a validly existing separate account,
duly established and maintained in accordance with applicable law; (iii)
each Account's 1940 Act Registration Statement has been or will be filed
with the SEC in accordance with the provisions of the 1940 Act and the
Account has been or will be duly registered as a unit investment trust
thereunder prior to the sale of the Contracts; (iv) the Contracts'
Registration Statements have been or will be filed with and declared
effective by the SEC prior to the sale of any Contracts; (v) the Contracts
will be issued in compliance in all material respects with all applicable
Federal and state laws; (vi) the Contracts will be filed, qualified and/or
approved for sale, as applicable, under the insurance laws and regulations
of the states in which the Contracts will be offered prior to the sale of
Contracts in such states; and (vii) the Account will maintain its
registration under the 1940 Act and will comply in all material respects
with the 1940 Act during the term of this Agreement. The Company will
notify the Trust promptly if for any reason it is unable to perform its
obligations under this Agreement.
3.2. Trust. The Trust represents and warrants that: (i) the Trust is an
unincorporated business trust duly formed and validly existing under the
Delaware law; (ii) the Trust's 1940 Act Registration Statement has been
filed with the SEC in accordance with the provisions of the 1940 Act and
the Trust is duly registered as an open-end management investment company
thereunder; (iii) the Trust's Registration Statement has been declared
effective by the SEC; (iv) the Trust shares will be issued in compliance in
all material respects with all applicable federal laws; (v) the Trust will
remain registered under and will comply in all material respects with the
1940 Act during the term of this Agreement; (vi) each Fund of the Trust
will maintain its qualification as a "regulated investment company" under
Subchapter M of the Code and will comply with the diversification standards
prescribed in Section 817(h) of the Code and the regulations thereunder to
the extent applicable to funds underlying insurance company separate
accounts; and (vii) the investment policies of each Fund are in material
compliance with any investment restrictions set forth on Schedule 4 to this
Agreement. The Trust, however, makes no representation as to whether any
aspect of its operations (including, but not limited to, fees and expenses
and investment policies) otherwise complies with the insurance laws or
regulations of any state. The Trust will notify the Company promptly if for
any reason it is unable to perform its obligations under this Agreement.
3.3. Distributor. The Distributor represents and warrants that: (i) the
Distributor is a limited partnership duly organized and in good standing
under New York law; (ii) the Distributor is registered as a broker-dealer
under federal and applicable state securities laws and is a member of the
NASD; and (iii) the Distributor is registered as an investment adviser
under federal securities laws. The Distributor will notify the Company
promptly if for any reason it is unable to perform its obligations under
this Agreement.
3.4. Legal Authority. Each party represents and warrants that the execution and
delivery of this Agreement and the consummation of the transactions
contemplated herein have been duly authorized by all necessary corporate,
partnership or trust action, as applicable, by such party, and, when so
executed and delivered, this Agreement will be the valid and binding
obligation of such party enforceable in accordance with its terms and will
not violate its charter documents or by-laws, rules or regulations, or any
agreement to which it is a party.
3.5. Bonding Requirement. Each party represents and warrants that all of its
directors, officers, partners and employees, as applicable, dealing with
the money and/or securities of the Trust are and shall continue to be at
all times covered by a blanket fidelity bond or similar coverage for the
benefit of the Trust in an amount not less than the amount required by the
applicable rules of the NASD and the federal securities laws. The aforesaid
bond shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company. All parties shall make all
reasonable efforts to see that this bond or another bond containing these
provisions is always in effect, shall provide evidence thereof promptly to
any other party upon written request therefor, and shall notify the other
parties promptly in the event that such coverage no longer applies.
ARTICLE IV
Regulatory Requirements
4.1. Trust Filings. The Trust shall amend the Trust's Registration Statement and
the Trust's 1940 Act Registration Statement from time to time as required
in order to effect the continuous offering of Trust shares in compliance
with applicable law and to maintain the Trust's registration under the 1940
Act for so long as Trust shares are sold.
4.2. Contracts Filings. The Company shall amend the Contracts' Registration
Statement and the Account's 1940 Act Registration Statement from time to
time as required in order to effect the continuous offering of the
Contracts in compliance with applicable law or as may otherwise be required
by applicable law, but in any event shall maintain a current effective
Contracts' Registration Statement and the Account's registration under the
1940 Act for so long as the Contracts are outstanding unless the Company
has supplied the Trust with an SEC no-action letter, opinion of counsel or
other evidence satisfactory to the Trust's counsel to the effect that
maintaining such Registration Statement on a current basis is no longer
required. The Company shall be responsible for filing all such Contract
forms, applications, marketing materials and other documents relating to
the Contracts and/or the Account with state insurance commissions, as
required or customary, and shall use its best efforts: (i) to obtain any
and all approvals thereof, under applicable state insurance law, of each
state or other jurisdiction in which Contracts are or may be offered for
sale; and (ii) to keep such approvals in effect for so long as the
Contracts are outstanding.
4.3. Voting of Trust Shares. With respect to any matter put to vote by the
holders of Trust shares ("Voting Shares"), the Company will provide
"pass-through" voting privileges to owners of Contracts registered with the
SEC as long as the 1940 Act requires such privileges in such cases. In
cases in which "pass-through" privileges apply, the Company will (i)
provide for the solicitation of voting instructions from Contract Owners of
SEC-registered Contracts; (ii) vote Voting Shares attributable to Contract
Owners in accordance with instructions or proxies timely received from such
Contract Owners; and (iii) vote Voting Shares held by it that are not
attributable to reserves for SEC-registered Contracts or for which it has
not received timely voting instructions in the same proportion as
instructions received in a timely fashion from Owners of SEC-registered
Contracts. The Company shall be responsible for ensuring that it calculates
"pass-through" votes for the Account in a manner consistent with the
provisions set forth above and with other Participating Insurance
Companies. Neither the Company nor any of its affiliates will in any way
recommend action in connection with, or oppose or interfere with, the
solicitation of proxies for the Trust shares held for such Contract Owners,
except with respect to matters as to which the Company has the right under
Rule 6e-2 or 6e-3(T) under the 1940 Act, to vote Voting Shares without
regard to voting instructions from Contract Owners. The Trust shall comply
with all provisions of the 1940 Act requiring voting by shareholders, as
they may be amended from time to time. Further, the Trust will act in
accordance with the SEC's interpretation of the requirements of Section 16
of the 1940 Act with respect to periodic elections of directors and with
whatever rules the SEC may promulgate with respect thereto.
4.4. State Insurance Restrictions. The Company: shall notify the Trust of any
applicable state insurance laws of which it becomes aware that restrict the
Trust's investments or otherwise affect the operation of the Trust or the
Distributor, shall notify the Trust of any changes in such laws and
acknowledges and agrees that neither the Trust nor the Distributor shall
bear any responsibility for determination of the applicability of such laws
to the Trust's investments or the Trust's or Distributor's operations.
Schedule 4 sets forth the investment restrictions that the Company and/or
other Participating Insurance Companies have determined are applicable to
any Fund and with which the Trust has agreed to comply as of the date of
this Agreement. The Company shall inform the Trust of any investment
restrictions imposed by state insurance law of which the Company becomes
aware that may become applicable to the Trust or a Fund from time to time
as a result of the Account's investment therein, other than those set forth
on Schedule 4 to this Agreement. Upon receipt of any such information from
the Company or any other Participating Insurance Company, the Trust shall
determine whether it is in the best interests of shareholders to comply
with any such restrictions. If the Trust determines that it is not in the
best interests of shareholders (it being understood that "shareholders" for
this purpose shall mean Product Owners) to comply with a restriction
determined to be applicable by the Company, the Trust shall so inform the
Company, and the Trust and the Company shall discuss alternative
accommodations in the circumstances up to and including giving the Company
the right to discontinue offering the Trust and/or any applicable Fund as
an investment option under the Contracts issued in a state. If the Trust
determines that it is in the best interests of shareholders to comply with
such restrictions, the Trust and the Company shall amend Schedule 4 to this
Agreement to reflect such restrictions, subject to obtaining any required
shareholder approval thereof.
4.5. Drafts of Filings. The Trust and the Company shall provide to each other
copies of draft versions of any Registration Statements, Prospectuses,
Statements of Additional Information, periodic and other shareholder or
Contract Owner reports, proxy statements, solicitations for voting
instructions, applications for exemptions, requests for no-action letters,
and all amendments or supplements to any of the above, prepared by or on
behalf of either of them and that mentions the other party by name. Such
drafts shall be provided to the other party sufficiently in advance of
filing such materials with regulatory authorities in order to allow such
other party a reasonable opportunity to review the materials.
4.6. Copies of Filings. The Trust and the Company shall provide to each other at
least one complete copy of all Registration Statements, Prospectuses,
Statements of Additional Information, periodic and other shareholder or
Contract Owner reports, proxy statements, solicitations of voting
instructions, applications for exemptions, requests for no-action letters,
and all amendments or supplements to any of the above, that relate to the
Trust, the Contracts or the Account, as the case may be, promptly after the
filing by or on behalf of each such party of such document with the SEC or
other regulatory authorities (it being understood that this provision is
not intended to require the Trust to provide to the Company copies of any
such documents prepared, filed or used by Participating Investors other
than the Company and the Account).
4.7. Regulatory Responses. Each party shall promptly provide to all other
parties copies of responses to no-action requests, notices, orders and
other rulings received by such party with respect to any filing covered by
Section 4.6 of this Agreement.
4.8. Complaints and Proceedings
(a) The Trust and/or the Distributor shall immediately notify the Company of:
(i) the issuance by any court or regulatory body of any stop order, cease
and desist order, or other similar order (but not including an order of a
regulatory body exempting or approving a proposed transaction or
arrangement) with respect to the Trust's Registration Statement or the
Prospectus of any Series or Class; (ii) any request by the SEC for any
amendment to the Trust's Registration Statement or the Prospectus of any
Series or Class; (iii) the initiation of any proceedings for that purpose
or for any other purposes relating to the registration or offering of the
Trust shares; or (iv) any other action or circumstances that may prevent
the lawful offer or sale of Trust shares or any Class or Series in any
state or jurisdiction, including, without limitation, any circumstance in
which (A) such shares are not registered and, in all material respects,
issued and sold in accordance with applicable state and federal law or (B)
such law precludes the use of such shares as an underlying investment
medium for the Contracts. The Trust will make every reasonable effort to
prevent the issuance of any such stop order, cease and desist order or
similar order and, if any such order is issued, to obtain the lifting
thereof at the earliest possible time.
(b) The Company shall immediately notify the Trust and the Distributor of: (i)
the issuance by any court or regulatory body of any stop order, cease and
desist order, or other similar order (but not including an order of a
regulatory body exempting or approving a proposed transaction or
arrangement) with respect to the Contracts' Registration Statement or the
Contracts' Prospectus; (ii) any request by the SEC for any amendment to the
Contracts' Registration Statement or Prospectus; (iii) the initiation of
any proceedings for that purpose or for any other purposes relating to the
registration or offering of the Contracts; or (iv) any other action or
circumstances that may prevent the lawful offer or sale of the Contracts or
any class of Contracts in any state or jurisdiction, including, without
limitation, any circumstance in which such Contracts are not registered,
qualified and approved, and, in all material respects, issued and sold in
accordance with applicable state and federal laws. The Company will make
every reasonable effort to prevent the issuance of any such stop order,
cease and desist order or similar order and, if any such order is issued,
to obtain the lifting thereof at the earliest possible time.
(c) Each party shall immediately notify the other parties when it receives
notice, or otherwise becomes aware of, the commencement of any litigation
or proceeding against such party or a person affiliated therewith in
connection with the issuance or sale of Trust shares or the Contracts.
(d) The Company shall provide to the Trust and the Distributor any complaints
it has received from Contract Owners pertaining to the Trust or a Fund, and
the Trust and Distributor shall each provide to the Company any complaints
it has received from Contract Owners relating to the Contracts.
4.9. Cooperation. Each party hereto shall cooperate with the other parties and
all appropriate government authorities (including without limitation the
SEC, the NASD and state securities and insurance regulators) and shall
permit such authorities reasonable access to its books and records in
connection with any investigation or inquiry by any such authority relating
to this Agreement or the transactions contemplated hereby. However, such
access shall not extend to attorney-client privileged information. The
Trust agrees to provide the Company with any information not otherwise
available to the Company which is required by state insurance law to enable
the Company to obtain the authority needed to issue the Contract in any
applicable state.
ARTICLE V
Sale, Administration and Servicing of the Contracts
5.1. Sale of the Contracts. The responsibilities of the Company and the
Distributor as to the sale of the Contracts are as set forth on Appendix A.
5.2. Administration and Servicing of the Contracts. The responsibilities of the
Company and the Distributor as to administration and servicing of the
Contracts are as set forth in Appendix A.
5.3. Customer Complaints. The Company shall promptly address all customer
complaints and resolve such complaints consistent with high ethical
standards and principles of ethical conduct.
5.4. Trust Prospectuses and Reports. The responsibilities of the Company, the
Distributor and the Trust as to the provision of Trust prospectuses and
reports are as set forth in Appendix A.
5.5. Performance Information. The Distributor shall be responsible for
calculating the performance information for the Funds. The Company shall be
responsible for calculating the performance information for the Contracts.
The Distributor shall be liable to the Company for any material mistakes it
makes in calculating the performance information for the Funds which cause
losses to the Company. The Company shall be liable to the Distributor for
any material mistakes it makes in calculating the performance information
for the Contracts which cause losses to the Distributor. Each party shall
be liable for any material mistakes it makes in reproducing the performance
information for Contracts or the Funds, as appropriate. The Trust and the
Distributor agree to provide the Company with performance information for
the Funds on a timely basis to enable the Company to calculate performance
information for the Contracts in accordance with applicable state and
federal law.
5.6. Advertising Material. The responsibilities and obligations of the parties
with respect to the Trust's and Contracts' advertising material shall be as
set forth in Appendix A.
5.7. Trademarks, Names, Logos, etc. The parties agree that the use of any
company names, tradenames, trademarks, servicemarks and logos by the
parties shall be governed by the applicable provisions of the Master
Agreement dated February 1, 1999 between the Company, the Distributor,
American Centurion Life Assurance Company, IDS Life Insurance Company, IDS
Life Insurance Company of New York, American Express Financial Advisors
Inc., and American Express Service Corporation (the "Master Agreement").
5.8. Representations by Company. Except with the prior written consent of the
Trust, the Company shall not give any information or make any
representations or statements about the Trust or the Funds nor shall it
authorize or allow any other person to do so except information or
representations contained in the Trust's Registration Statement or the
Trust's Prospectuses or in reports or proxy statements for the Trust, or in
sales literature or other promotional material approved in writing by the
Trust or its designee in accordance with this Article V, or in published
reports or statements of the Trust in the public domain.
5.9. Representations by Trust. Except with the prior written consent of the
Company, the Trust shall not give any information or make any
representations or statements on behalf of the Company or concerning the
Company, the Account or the Contracts nor shall it authorize or allow any
other person to do so other than the information or representations
contained in the Contracts' Registration Statement or Contracts' Prospectus
or in published reports of the Account which are in the public domain or in
sales literature or other promotional material approved in writing by the
Company or its designee in accordance with this Article V.
5.10.Advertising. For purposes of this Article V, the phrase "sales literature
or other promotional material" includes, but is not limited to, any
material constituting sales literature or advertising under the NASD rules,
the 1940 Act or the 1933 Act.
ARTICLE VI
Compliance with Code
6.1. Section 817(h). Each Fund of the Trust shall comply with Section 817(h) of
the Code and the regulations issued thereunder to the extent applicable to
the Fund as an investment company underlying the Account and the Trust and
the Distributor shall use their best efforts to ensure that each Fund will
continue to so comply. The Trust and the Distributor shall notify the
Company immediately upon having a reasonable basis for believing that a
Fund has ceased to so comply or that it might not so comply in the future.
In the event a Fund of the Trust fails to comply with such sections of the
Code or regulations thereunder, the Trust and the Distributor will take all
reasonable steps to adequately diversify the Fund so as to achieve
compliance within the grace period afforded by Treasury Regulation 1.817-5.
6.2. Subchapter M. Each Fund of the Trust shall maintain the qualification of
the Fund as a regulated investment company (under Subchapter M or any
successor or similar provision) and the Trust and the Distributor shall use
their best efforts to ensure that each Fund will continue to so qualify.
The Trust and the Distributor shall notify the Company immediately upon
having a reasonable basis for believing that a Fund has ceased to so
qualify or that it might not so qualify in the future.
6.3. Contracts. The Company ensures that the Contracts qualify for treatment as
annuity contracts, upon their availability, under the Code. The Company
shall use its best efforts to ensure that the Contracts continue to qualify
for such treatment. The Company shall notify the Distributor immediately
upon having a reasonable basis for believing that Contracts have ceased to
qualify for treatment as annuity contracts under the Code or that they
might not so qualify in the future.
ARTICLE VII
Expenses
7.1. Expenses. All expenses incident to each party's performance under this
Agreement (including expenses expressly assumed by such party pursuant to
this Agreement) shall be paid by such party to the extent permitted by law.
7.2. Trust Expenses. Expenses incident to the Trust's performance of its duties
and obligations under this Agreement are as set forth in Appendix A.
7.3. Company Expenses. Expenses incident to the Company's performance of its
duties and obligations under this Agreement are as set forth in Appendix A.
7.4. 12b-1 Payments. The Trust shall pay no fee or other compensation to the
Company under this Agreement, except that if the Trust or any Series or
Class adopts and implements a plan pursuant to Rule 12b-1 under the 1940
Act to finance distribution expenses, then payments may be made to the
Company in accordance with such plan. The Trust currently does not intend
to make any payments to finance distribution expenses pursuant to Rule
12b-1 under the 1940 Act or in contravention of such rule, although it may
make payments pursuant to Rule 12b-1 in the future. To the extent that it
decides to finance distribution expenses pursuant to Rule 12b-1 and such
formulation is required by the 1940 Act or any rules or order thereunder,
the Trust undertakes to have a Board of Trustees, a majority of whom are
not interested persons of the Trust, formulate and approve any plan under
Rule 12b-1 to finance distribution expenses.
ARTICLE VIII
Potential Conflicts
8.1. Exemptive Order. The parties to this Agreement acknowledge that the Trust
has filed an application with the SEC to request an order (the "Exemptive
Order") granting relief from various provisions of the 1940 Act and the
rules thereunder to the extent necessary to permit Trust shares to be sold
to and held by variable annuity and variable life insurance separate
accounts of both affiliated and unaffiliated Participating Insurance
Companies and other Qualified Persons (as defined in Section 2.8 hereof).
It is anticipated that the Exemptive Order, when and if issued, shall
require the Trust and each Participating Insurance Company to comply with
conditions and undertakings substantially as provided in this Article VIII.
The Trust will not enter into a participation agreement with any other
Participating Insurance Company unless it imposes the same conditions and
undertakings on that company as are imposed on the Company pursuant to this
Article VIII.
8.2. Company Monitoring Requirements. The Company will monitor its operations
and those of the Trust for the purpose of identifying any material
irreconcilable conflicts or potential material irreconcilable conflicts
between or among the interests of Participating Plans, Product Owners of
variable life insurance policies and Product Owners of variable annuity
contracts, it is being understood that the Company is assuming the
obligation to monitor the operations of the Trust solely to comply with the
explicit terms of the Exemptive Order and further, that such monitoring is
for the sole purpose of identifying any conflicts that would affect its
policyowners and would be limited to monitoring the operations of the Trust
based on information provided to the Company by the Trust.
8.3. Company Reporting Requirements. The Company shall report any conflicts or
potential conflicts of which it is aware to the Trust Board and will
provide the Trust Board, at least annually, with all information reasonably
necessary for the Trust Board to consider any issues raised by such
existing or potential conflicts or by the conditions and undertakings
required by the Exemptive Order. The Company also shall assist the Trust
Board in carrying out its obligations including, but not limited to: (a)
informing the Trust Board whenever it disregards Contract Owner voting
instructions with respect to variable life insurance policies, and (b)
providing such other information and reports as the Trust Board may
reasonably request. The Company will carry out these obligations with a
view only to the interests of Contract Owners.
8.4. Trust Board Monitoring and Determination. The Trust Board shall monitor the
Trust for the existence of any material irreconcilable conflicts between or
among the interests of Participating Plans, Product Owners of variable life
insurance policies and Product Owners of variable annuity contracts and
determine what action, if any, should be taken in response to those
conflicts. A majority vote of Trustees who are not interested persons of
the Trust as defined in the 1940 Act (the "disinterested trustees") shall
represent a conclusive determination as to the existence of a material
irreconcilable conflict between or among the interests of Product Owners
and Participating Plans and as to whether any proposed action adequately
remedies any material irreconcilable conflict. The Trust Board shall give
prompt written notice to the Company and Participating Plan of any such
determination.
8.5. Undertaking to Resolve Conflict. In the event that a material
irreconcilable conflict of interest arises between Product Owners of
variable life insurance policies or Product Owners of variable annuity
contracts and Participating Plans, the Company will, at its own expense,
take whatever action is necessary to remedy such conflict as it adversely
affects Contract Owners up to and including (1) establishing a new
registered management investment company, and (2) withdrawing assets from
the Trust attributable to reserves for the Contracts subject to the
conflict and reinvesting such assets in a different investment medium
(including another Fund of the Trust) or submitting the question of whether
such withdrawal should be implemented to a vote of all affected Contract
Owners, and, as appropriate, segregating the assets supporting the
Contracts of any group of such owners that votes in favor of such
withdrawal, or offering to such owners the option of making such a change.
The Company will carry out the responsibility to take the foregoing action
with a view only to the interests of Contract Owners.
8.6. Withdrawal. If a material irreconcilable conflict arises because of the
Company's decision to disregard the voting instructions of Contract Owners
of variable life insurance policies and that decision represents a minority
position or would preclude a majority vote at any Fund shareholder meeting,
then, at the request of the Trust Board, the Company will redeem the shares
of the Trust to which the disregarded voting instructions relate. No charge
or penalty, however, will be imposed in connection with such a redemption.
8.7. Expenses Associated with Remedial Action. In no event shall the Trust be
required to bear the expense of establishing a new funding medium for any
Contract. The Company shall not be required by this Article to establish a
new funding medium for any Contract if an offer to do so has been declined
by vote of a majority of the Contract Owners materially adversely affected
by the irreconcilable material conflict.
8.8. Successor Rules. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are
amended, or Rule 6e-3 is adopted, to provide exemptive relief from any
provisions of the 1940 Act or the rules promulgated thereunder with respect
to mixed and shared funding on terms and conditions materially different
from those contained in the Exemptive Order, then (i) the Trust and/or the
Company, as appropriate, shall take such steps as may be necessary to
comply with Rules 6e-2 and 6e-3(T), as amended, or Rule 6e-3, as adopted,
as applicable, to the extent such rules are applicable, and (ii) Sections
8.2 through 8.5 of this Agreement shall continue in effect only to the
extent that terms and conditions substantially identical to such Sections
are contained in such Rule(s) as so amended or adopted.
ARTICLE IX
Indemnification
9.1. Indemnification by the Company. The Company hereby agrees to, and shall,
indemnify and hold harmless the Trust, the Distributor and each person who
controls or is affiliated with the Trust or the Distributor within the
meaning of such terms under the 1933 Act or 1940 Act (but not any
Participating Insurance Companies or Qualified Persons) and any officer,
trustee, partner, director, employee or agent of the foregoing, against any
and all losses, claims, damages or liabilities, joint or several (including
any investigative, legal and other expenses reasonably incurred in
connection with, and with the written consent of the Company any amounts
paid in settlement of, any action, suit or proceeding or any claim
asserted), to which they or any of them may become subject under any
statute or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities:
(a) arise out of or are based upon any untrue statement of any material fact
contained in the Contracts Registration Statement, Contracts Prospectus,
sales literature or other promotional material prepared by the Company for
the Contracts or the Contracts themselves (or any amendment or supplement
to any of the foregoing), or arise out of or are based upon the omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances in
which they were made; provided that this obligation to indemnify shall not
apply if such statement or omission was made in reliance upon and in
conformity with information furnished in writing to the Company by or on
behalf of the Trust or the Distributor for use in the Contracts
Registration Statement, Contracts Prospectus or in the Contracts or sales
literature or promotional material for the Contracts (or any amendment or
supplement to any of the foregoing) or otherwise for use in connection with
the sale of the Contracts or Trust shares; or
(b) arise out of any untrue statement of a material fact contained in the Trust
Registration Statement, any Prospectus for Series or Classes or sales
literature or other promotional material of the Trust or the Contracts
(prepared by the Trust) (or any amendment or supplement to any of the
foregoing), or the omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading
in light of the circumstances in which they were made, if such statement or
omission was made in reliance upon and in conformity with information
furnished to the Trust or Distributor in writing by or on behalf of the
Company; or
(c) arise out of or are based upon conduct set forth in Section 9.1(c) of
Appendix A; or
(d) arise as a result of any failure by the Company or persons under its
control (or subject to its authorization) to provide services, furnish
materials or make payments as required under this Agreement; or
(e) arise out of any material breach by the Company or persons under its
control (or subject to its authorization) of this Agreement; or
(f) any breach of any warranties contained in Article III hereof, any failure
to transmit a request for redemption or purchase of Trust shares or payment
therefor on a timely basis in accordance with the procedures set forth in
Article II, or any unauthorized use of the names or trade names of the
Trust or the Distributor.
This indemnification is in addition to any liability that the Company may
otherwise have; provided, however, that no party shall be entitled to
indemnification if such loss, claim, damage or liability is caused by the
willful misfeasance, bad faith, gross negligence or reckless disregard of duty
by the party seeking indemnification. Any loss, claim, damage or liability that
may arise out of Sections 5.7 and 10.7 and Article XIV hereof are excluded from
indemnification under this Section 9.1.
9.2. Indemnification by the Trust. The Trust hereby agrees to, and shall,
indemnify and hold harmless the Company and each person who controls or is
affiliated with the Company within the meaning of such terms under the 1933
Act or 1940 Act and any officer, director, employee or agent of the
foregoing, against any and all losses, claims, damages or liabilities,
joint or several (including any investigative, legal and other expenses
reasonably incurred in connection with, and with the written consent of the
Trust any amounts paid in settlement of, any action, suit or proceeding or
any claim asserted), to which they or any of them may become subject under
any statute or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities:
(a) arise out of or are based upon any untrue statement of any material fact
contained in the Trust Registration Statement, any Prospectus for Series or
Classes or sales literature or other promotional material of the Trust (or
any amendment or supplement to any of the foregoing), or arise out of or
are based upon the omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading
in light of the circumstances in which they were made; provided that this
obligation to indemnify shall not apply if such statement or omission was
made in reliance upon and in conformity with information furnished to the
Trust or the Distributor in writing by or on behalf of the Company for use
in the Trust Registration Statement, Trust Prospectus or sales literature
or promotional material for the Trust (or any amendment or supplement to
any of the foregoing) or otherwise for use in connection with the sale of
the Contracts or Trust shares; or
(b) arise out of any untrue statement of a material fact contained in the
Contracts Registration Statement, Contracts Prospectus or sales literature
or other promotional material for the Contracts (or any amendment or
supplement to any of the foregoing), or the omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances in which
they were made, if such statement or omission was made in reliance upon
information furnished in writing by the Trust or on its behalf to the
Company; or
(c) arise out of or are based upon wrongful conduct of the Trust or its
Trustees or officers with respect to the sale of Trust shares; or
(d) arise as a result of any failure by the Trust to provide services, furnish
materials or make payments as required under the terms of this Agreement
including, but not limited to, any material errors in or untimely
calculation or reporting of the daily net asset value per share or dividend
or capital gain distribution rate (referred to in this Section 9.2(d) as an
"error"); provided, that the foregoing shall not apply where such error is
the result of incorrect information supplied by or on behalf of the Company
to the Trust or the Distributor, and shall be limited to (i) reasonable
administrative costs necessary to correct such error, (ii) amounts which
the Company has overpaid Contact Owners as a result of such error and which
the parties agree it is unreasonable to recoup from such Contract Owners;
and (iii) amounts which the Company has paid out of its own resources to
make Contract Owners whole as a result of such error; or
(e) arise out of any material breach by the Trust of this Agreement (including
any breach of Section 6.1 of this Agreement and any warranties contained in
Article III hereof);
it being understood that in no way shall the Trust be liable to the Company with
respect to any violation of insurance law to which it may be subject but of
which it is unaware. This indemnification is in addition to any liability that
the Trust may otherwise have; provided, however, that no party shall be entitled
to indemnification if such loss, claim, damage or liability is caused by the
willful misfeasance, bad faith, gross negligence or reckless disregard of duty
by the party seeking indemnification. Any loss, claim, damage or liability that
may arise out of Sections 5.7 and 10.7 and Article XIV hereof are excluded from
indemnification under this Section 9.2.
9.3. Indemnification by the Distributor. The Distributor hereby agrees to, and
shall, indemnify and hold harmless the Company and each person who controls
or is affiliated with the Company within the meaning of such terms under
the 1933 Act or 1940 Act and any officer, director, employee or agent of
the foregoing, against any and all losses, claims, damages or liabilities,
joint or several (including any investigative, legal and other expenses
reasonably incurred in connection with, and any amounts paid in settlement
of, any action, suit or proceeding or any claim asserted), to which they or
any of them may become subject under any statute or regulation, at common
law or otherwise, insofar as such losses, claims, damages or liabilities:
(a) arise out of or are based upon any untrue statement of any material fact
contained in the Trust Registration Statement, any Prospectus for Series or
Classes or sales literature or other promotional material of the Trust (or
any amendment or supplement to any of the foregoing), or arise out of or
are based upon the omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading
in light of the circumstances in which they were made; provided that this
obligation to indemnify shall not apply if such statement or omission was
made in reliance upon and in conformity with information furnished in
writing by the Company to the Trust or Distributor for use in the Trust
Registration Statement, Trust Prospectus or sales literature or promotional
material for the Trust (or any amendment or supplement to any of the
foregoing) or otherwise for use in connection with the sale of the
Contracts or Trust shares; or
(b) arise out of any untrue statement of a material fact contained in the
Contracts Registration Statement, Contracts Prospectus or sales literature
or other promotional material for the Contracts (or any amendment or
supplement to any of the foregoing), or the omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances in which
they were made, if such statement or omission was made in reliance upon
information furnished in writing by the Distributor or on its behalf to the
Company; or
(c) arise out of or are based upon conduct set forth in Section 9.3(c) of
Appendix A; or
(d) arise as a result of any failure by the Trust, Distributor or persons under
their respective control to provide services, furnish materials or make
payments as required under the terms of this Agreement including, but not
limited to, any material errors in or untimely calculation or reporting of
the daily net asset value per share or dividend or capital gain
distribution rate (referred to in this Section 9.3(d) as an "error");
provided, that the foregoing shall not apply where such error is the result
of incorrect information supplied by or on behalf of the Company to the
Trust or the Distributor, and shall be limited to (i) reasonable
administrative costs necessary to correct such error, (ii) amounts which
the Company has overpaid Contact Owners as a result of such error, and
which the parties agree it is unreasonable to recoup from such Contract
Owners; and (iii) amounts which the Company has paid out of its own
resources to make Contract Owners whole as a result of such error; or
(e) arise out of any material breach by the Trust, Distributor or persons under
their respective control of this Agreement (including any breach of Section
6.1 of this Agreement and any warranties contained in Article III hereof)
or any unauthorized use of the names or trade names of the Company;
it being understood that in no way shall the Distributor be liable to the
Company with respect to any violation of insurance law to which it may be
subject but of which it is unaware. This indemnification is in addition to any
liability that the Distributor may otherwise have; provided, however, that no
party shall be entitled to indemnification if such loss, claim, damage or
liability is caused by the willful misfeasance, bad faith, gross negligence or
reckless disregard of duty by the party seeking indemnification. Any loss,
claim, damage or liability that may arise out of Sections 5.7 and 10.7 and
Article XIV hereof are excluded from indemnification under this Section 9.3.
9.4. Rule of Construction. It is the parties' intention that, in the event of an
occurrence for which the Trust has agreed to indemnify the Company, the
Company shall seek indemnification from the Trust only in circumstances in
which the Trust is entitled to seek indemnification from a third party with
respect to the same event or cause thereof.
9.5. Indemnification Procedures. After receipt by a party, or any partner,
officer, director, employee or agent of any party, entitled to
indemnification under this Article IX ("indemnified party") of notice of
the commencement of any action, if a claim in respect thereof is to be made
against any person obligated to provide indemnification under this Article
IX ("indemnifying party"), such indemnified party will notify the
indemnifying party in writing of the commencement thereof as soon as
practicable after the summons or other first written notification giving
information of the nature of the claim has been served upon the indemnified
party; provided that the failure to so notify the indemnifying party will
not relieve the indemnifying party from any liability under this Article
IX, except to the extent that the omission results in a failure of actual
notice to the indemnifying party and such indemnifying party is damaged
solely as a result of the failure to give such notice. The indemnifying
party, upon the request of the indemnified party, shall retain counsel
satisfactory to the indemnified party to represent the indemnified party in
the proceeding, and shall pay the fees and disbursements of such counsel
related to such proceeding. In any such proceeding, any indemnified party
shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless
(1) the indemnifying party and the indemnified party shall have mutually
agreed to the retention of such counsel or (2) the named parties to any
such proceeding (including any impleaded parties) include both the
indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. The indemnifying party shall
not be liable for any settlement of any proceeding effected without its
written consent but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment.
A successor by law of the parties to this Agreement shall be entitled
to the benefits of the indemnification contained in this Article IX. The
indemnification provisions contained in this Article IX shall survive any
termination of this Agreement.
ARTICLE X
Relationship of the Parties; Termination
10.1.Non-Exclusivity and Non-Interference. The parties hereto acknowledge that
the arrangement contemplated by this Agreement is not exclusive; the Trust
shares may be sold to other insurance companies and investors (subject to
Section 2.8 hereof) and the cash value of the Contracts may be invested in
other investment companies; provided, however, that until this Agreement is
terminated pursuant to this Article X:
(a) the Company shall not, without prior notice to the Distributor (unless
otherwise required by applicable law), take any action to operate the
Account as a management investment company under the 1940 Act;
(b) the Company shall not, without the prior written consent of the Distributor
(unless otherwise required by applicable law), solicit, induce or encourage
Contract Owners to change or modify the Trust to change the Trust's
distributor or investment adviser, to transfer or withdraw Contract Values
allocated to a Fund, or to exchange their Contracts for contracts not
allowing for investment in the Trust;
(c) the Company shall not substitute another investment company for one or more
Funds without providing written notice to the Distributor at least 60 days
in advance of effecting any such substitution; and
(d) the Company shall not withdraw the Account's investment in the Trust or a
Fund of the Trust except as necessary to facilitate Contract Owner requests
and routine Contract processing.
10.2.Termination of Agreement. This Agreement shall not terminate until (i) the
Trust is dissolved, liquidated, or merged into another entity, or (ii) as
to any Fund that has been made available hereunder, the Account no longer
invests in that Fund and the Company has confirmed in writing to the
Distributor, if so requested by the Distributor, that it no longer intends
to invest in such Fund. After an initial term of three years from February
1, 1999 (the Effective Date of the Master Agreement), each party shall have
the right, in its sole discretion, to terminate this Agreement upon the
expiration of 180 days after the receipt by the other parties of written
notice of termination from the party terminating this Agreement. However,
certain obligations of, or restrictions on, the parties to this Agreement
may terminate as provided in Sections 10.3 through 10.5 and the Company may
be required to redeem Trust shares pursuant to Section 10.7 or in the
circumstances contemplated by Article VIII. Article IX and Sections 5.7 and
10.7 shall survive any termination of this Agreement.
10.3.Termination of Offering of Trust Shares. The obligation of the Trust and
the Distributor to make Trust shares available to the Company for purchase
pursuant to Article II of this Agreement shall terminate at the option of
the Distributor, subject to compliance with applicable law, upon written
notice to the Company as provided below:
(a) upon institution of formal proceedings against the Company, by
the NASD, the SEC, the insurance commission of any state or
any other regulatory body regarding the Company's duties under
this Agreement or related to the sale of the Contracts, the
operation of the Account, the administration of the Contracts
or the purchase of Trust shares, which would, in the
Distributor's reasonable judgment exercised in good faith,
materially impair the Company's or Trust's ability to meet and
perform the Company's or Trust's obligations and duties
hereunder, such termination effective upon 15 days prior
written notice;
(b) in the event any of the Contracts are not registered where
required and in all material respects are not issued or sold
in accordance with applicable federal and/or state law, such
termination effective immediately upon receipt of written
notice;
(c) if the Distributor shall determine, in its sole judgment
exercised in good faith, that either (1) the Company shall
have suffered a material adverse change in its business or
financial condition or (2) the Company shall have been the
subject of material adverse publicity which is likely to have
a material adverse impact upon the business and operations of
either the Trust or the Distributor, such termination
effective upon 30 days prior written notice;
(d) if the Distributor suspends or terminates the offering of
Trust shares of any Series or Class to all Participating
Investors or only designated Participating Investors, if such
action is required by law or by regulatory authorities having
jurisdiction or if, in the sole discretion of the Distributor
acting in good faith, suspension or termination is necessary
in the best interests of the shareholders of any Series or
Class (it being understood that "shareholders" for this
purpose shall mean Product Owners), such notice effective
immediately upon receipt of written notice;
(e) upon the Company's assignment of this Agreement (including,
without limitation, any transfer of the Contracts or the
Account to another insurance company pursuant to an assumption
reinsurance agreement) unless the Trust consents thereto, such
termination effective upon 30 days prior written notice;
(f) if the Company is in material breach of any provision of this
Agreement, which breach has not been cured to the satisfaction
of the Trust within 10 days after written notice of such
breach has been delivered to the Company, such termination
effective upon expiration of such 10-day period; or
(g) upon the determination of the Trust's Board to dissolve,
liquidate or merge the Trust as contemplated by Section
10.2(i), upon termination of the Agreement pursuant to Section
10.2(ii), or upon notice from the Company pursuant to Section
10.4 or 10.5, such termination pursuant hereto to be effective
upon 15 days prior written notice.
Except in the case of an option exercised under clause (b) or (d) of this
Section 10.3 or under Sections 10.2(i) or (ii), the obligations shall terminate
only as to new Contracts and the Distributor shall continue to make Trust shares
available to the extent necessary to permit owners of Contracts in effect on the
effective date of such termination (hereinafter referred to as "Existing
Contracts") to reallocate investments in the Trust, redeem investments in the
Trust and/or invest in the Trust upon the making of additional purchase payments
under the Existing Contracts.
10.4.Termination of Investment in a Fund. The Company may elect to cease
investing in a Fund, promoting a Fund as an investment option under the
Contracts, or withdraw its investment or the Account's investment in a
Fund, subject to compliance with applicable law, upon written notice to the
Trust within 15 days of the occurrence of any of the following events
(unless provided otherwise below):
(a) if the Trust informs the Company pursuant to Section 4.4 that
it will not cause such Fund to comply with investment
restrictions as requested by the Company and the Trust and the
Company are unable to agree upon any reasonable alternative
accommodations;
(b) if shares in such Fund are not reasonably available to meet
the requirements of the Contracts as determined by the Company
(including any non-availability as a result of notice given by
the Distributor pursuant to Section 10.3(d)), and the
Distributor, after receiving written notice from the Company
of such non-availability, fails to make available, within 10
days after receipt of such notice, a sufficient number of
shares in such Fund or an alternate Fund to meet the
requirements of the Contracts; or
(c) if such Fund fails to meet the diversification requirements
specified in Section 817(h) of the Code and any regulations
thereunder and the Trust, upon written request, fails to
provide reasonable assurance that it will take action to cure
or correct such failure.
Such termination shall apply only as to the affected Fund and shall not apply to
any other Fund in which the Company or the Account invests.
10.5.Termination of Investment by the Company. The Company may elect to cease
investing in all Series or Classes of the Trust made available hereunder,
promoting the Trust as an investment option under the Contracts, or
withdraw its investment or the Account's investment in the Trust, subject
to compliance with applicable law, upon written notice to the Trust within
15 days of the occurrence of any of the following events (unless provided
otherwise below):
(a) upon institution of formal proceedings against the Trust or
the Distributor (but only with regard to the Trust) by the
NASD, the SEC or any state securities or insurance commission
or any other regulatory body;
(b) if, with respect to the Trust or a Fund, the Trust or the Fund
ceases to qualify as a regulated investment company under
Subchapter M of the Code, as defined therein, or any successor
or similar provision, or if the Company reasonably believes
that the Trust may fail to so qualify, and the Trust, upon
written request, fails to provide reasonable assurance that it
will take action to cure or correct such failure within 30
days;
(c) if the Trust or Distributor is in material breach of a
provision of this Agreement, which breach has not been cured
to the satisfaction of the Company within 10 days after
written notice of such breach has been delivered to the Trust
or the Distributor, as the case may be such termination
effective upon expiration of such 10-day period;
(d) If the Company shall determine, in its sole judgment exercised
in good faith, that either (1) the Distributor shall have
suffered a material adverse change in its business or
financial condition or (2) the Distributor or the Trust shall
have been the subject of material adverse publicity (excluding
with respect to the Trust, market events impacting the Trust's
performance) which is likely to have a material adverse impact
upon the business and operations of the Company, such
termination effective upon 30 days' prior written notice;
(e) If the Company suspends or terminates the offering of the
Contracts, if such action is required by law or by regulatory
authorities have jurisdiction or if, in the sole discretion of
the Company acting in good faith, suspension or termination is
necessary in the best interest of Contract Owners, such notice
effective immediately upon receipt of written notice; or
(f) Upon the Distributor's or the Trust's assignment of this
Agreement unless the Company consents thereto, such
termination effective upon 30 days' prior written notice.
10.6.Company Required to Redeem. The parties understand and acknowledge that it
is essential for compliance with Section 817(h) of the Code that the
Contracts qualify as annuity contracts or life insurance policies, as
applicable, under the Code. Accordingly, if any of the Contracts cease to
qualify as annuity contracts or life insurance policies, as applicable,
under the Code, or if the Trust reasonably believes that any such Contracts
may fail to so qualify, the Trust shall have the right to require the
Company to redeem Trust shares attributable to such Contracts upon notice
to the Company and the Company shall so redeem such Trust shares in order
to ensure that the Trust complies with the provisions of Section 817(h) of
the Code applicable to ownership of Trust shares. Notice to the Company
shall specify the period of time the Company has to redeem the Trust shares
or to make other arrangements satisfactory to the Trust and its counsel,
such period of time to be determined with reference to the requirements of
Section 817(h) of the Code. In addition, the Company may be required to
redeem Trust shares pursuant to action taken or request made by the Trust
Board in accordance with the Exemptive Order described in Article VIII or
any conditions or undertakings set forth or referenced therein, or other
SEC rule, regulation or order that may be adopted after the date hereof.
The Company agrees to redeem shares in the circumstances described herein
and to comply with applicable terms and provisions. Also, in the event that
the Distributor suspends or terminates the offering of a Series or Class
pursuant to Section 10.3(d) of this Agreement, the Company, upon request by
the Distributor, will cooperate in taking appropriate action to withdraw
the Account's investment in the respective Fund.
10.7.Confidentiality. Each party's obligation to keep confidential any
information acquired as a result of this Agreement shall be governed by the
applicable provisions of the Master Agreement.
ARTICLE XI
Applicability to New Accounts and New Contracts
The parties to this Agreement may amend the schedules to this Agreement
from time to time to reflect, as appropriate, changes in or relating to the
Contracts, any Series or Class, additions of new classes of Contracts to be
issued by the Company and separate accounts therefor investing in the Trust.
Such amendments may be made effective by executing the form of amendment
included on each schedule attached hereto. The provisions of this Agreement
shall be equally applicable to each such class of Contracts, Series, Class or
separate account, as applicable, effective as of the date of amendment of such
Schedule, unless the context otherwise requires. The parties to this Agreement
may amend this Agreement from time to time by written agreement signed by all of
the parties.
ARTICLE XII
Notice, Request or Consent
Any notice, request or consent to be provided pursuant to this
Agreement is to be made in writing and shall be given:
If to the Trust:
Douglas C. Grip
President
Goldman Sachs Variable Insurance Trust
One New York Plaza
New York, NY 10004
If to the Distributor:
Douglas C. Grip
Vice President
Goldman Sachs & Co.
One New York Plaza
New York, NY 10004
If to the Company:
James E. Choat
President and Chief Executive Officer
American Enterprise Life Insurance Company
80 South 8th Street
Minneapolis, MN 55402
With a Copy To:
Law Department (Unit 52)
American Enterprise Life Insurance Company
80 South 8th Street
Minneapolis, MN 55402
or at such other address as such party may from time to time specify in writing
to the other party. Each such notice, request or consent to a party shall be
sent by registered or certified United States mail with return receipt requested
or by overnight delivery with a nationally recognized courier or such other
method as agreed to by the parties, and shall be effective upon receipt. Notices
pursuant to the provisions of Article II may be sent by facsimile to the person
designated in writing for such notices.
ARTICLE XIII
Miscellaneous
13.1.Interpretation. This Agreement shall be construed and the provisions
hereof interpreted under and in accordance with the laws of the state of
Delaware, without giving effect to the principles of conflicts of laws,
subject to the following rules:
(a) This Agreement shall be subject to the provisions of the 1933
Act, 1940 Act and Securities Exchange Act of 1934, as amended,
and the rules, regulations and rulings thereunder, including
such exemptions from those statutes, rules, and regulations as
the SEC may grant, and the terms hereof shall be limited,
interpreted and construed in accordance therewith.
(b) The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or
effect.
(c) If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the
remainder of the Agreement shall not be affected thereby.
(d) The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all
rights, remedies and obligations, at law or in equity, which
the parties hereto are entitled to under state and federal
laws.
13.2.Counterparts. This Agreement may be executed simultaneously in two or more
counterparts, each of which together shall constitute one and the same
instrument.
13.3.No Assignment. Neither this Agreement nor any of the rights and
obligations hereunder may be assigned by the Company, the Distributor or
the Trust without the prior written consent of the other parties.
13.4.Declaration of Trust. A copy of the Declaration of Trust of the Trust is
on file with the Secretary of State of the State of Delaware, and notice is
hereby given that this instrument is executed on behalf of the Trustees of
the Trust as trustees, and is not binding upon any of the Trustees,
officers or shareholders of the Trust individually, but binding only upon
the assets and property of the Trust. No Series of the Trust shall be
liable for the obligations of any other Series of the Trust.
ARTICLE XIV
Year 2000 Warranty
The agreement among the parties with regard to Year 2000
representations and warranties shall be as set forth in Section 10.6 of the
Master Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and behalf by its duly authorized officer
on the date specified below.
GOLDMAN SACHS VARIABLE INSURANCE TRUST
(Trust)
Date: April 1, 1999 By: /s/ ______________________________
Name: Michael J. Richman
Title: Secretary
GOLDMAN, SACHS & CO.
(Distributor)
Date: April 1, 1999 By:___/s/_____________________________
Name: Douglas C. Grip
Title: Managing Director
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
(Company)
Date: April 1, 1999___ By:___/s/______________________________________
Name: James E. Choat
Title: President
ATTEST
Date: April 1, 1999_ By:___/s/_____________________________
Name: Mary Ellyn Minenko
Title: Assistant Secretary
<PAGE>
Schedule 1
Accounts of the Company
Investing in the Trust
Effective as of the date the Agreement was executed, the following separate
accounts of the Company are subject to the Agreement:
<TABLE>
<CAPTION>
- - ------------------------------- ---------------------------- ---------------------------- ============================
<S> <C> <C> <C>
Date Established by
Name of Account Board of Directors of the SEC 1940 Act Registration Type of Product Supported
Company Number by Account
- - ------------------------------- ---------------------------- ---------------------------- ============================
American Enterprise Variable July 15, 1987 811-7195 Variable Annuities
Annuity Account
- - ------------------------------- ---------------------------- ---------------------------- ============================
- - ------------------------------- ---------------------------- ---------------------------- ============================
- - ------------------------------- ---------------------------- ---------------------------- ============================
- - ------------------------------- ---------------------------- ---------------------------- ============================
- - ------------------------------- ---------------------------- ---------------------------- ============================
============================== ============================ ===========================
Name of Subaccount Investing in Fund or Fund Date Established by Board
Series of Directors of the
Company
============================== ============================ ===========================
JCG Goldman Sachs VIT Capital January 20, 1999
Growth Fund
============================== ---------------------------- ===========================
JLG Goldman Sachs VIT CORE January 20, 1999
Large Cap Growth Fund
- - ------------------------------ ---------------------------- ===========================
JSE Goldman Sachs VIT CORE January 20, 1999
Small Cap Equity Fund
- - ------------------------------ ---------------------------- ===========================
- - ------------------------------ ---------------------------- ===========================
JUS Goldman Sachs VIT CORE January 20, 1999
U.S. Equity Fund
- - ------------------------------ ---------------------------- ===========================
- - ------------------------------ ---------------------------- ===========================
JGL Goldman Sachs VIT Global January 20, 1999
Income Fund
- - ------------------------------ ---------------------------- ===========================
- - ------------------------------ ---------------------------- ===========================
JGR Goldman Sachs VIT Growth & January 20, 1999
Income Fund
- - ------------------------------ ---------------------------- ===========================
- - ------------------------------ ---------------------------- ===========================
JIF Goldman Sachs VIT January 20, 1999
International Equity Fund
- - ------------------------------ ---------------------------- ===========================
- - ------------------------------ ---------------------------- ===========================
JMC Goldman Sachs VIT Mid Cap January 20, 1999
Equity Fund
- - ------------------------------ ---------------------------- ===========================
- - ------------------------------ ---------------------------- ===========================
JIE Goldman Sachs VIT CORE January 20, 1999
International Equity Fund
- - ------------------------------ ---------------------------- ===========================
- - ------------------------------ ---------------------------- ===========================
JLV Goldman Sachs VIT CORE January 20, 1999
Large Cap Value Fund
- - ------------------------------ ---------------------------- ===========================
- - ------------------------------ ---------------------------- ===========================
JSD Goldman Sachs VIT Short January 20, 1999
Duration Government Fund
- - ------------------------------ ---------------------------- ===========================
- - ------------------------------ ---------------------------- ===========================
JBS Goldman Sachs VIT Balanced January 20, 1999
Strategy Portfolio
- - ------------------------------ ---------------------------- ===========================
- - ------------------------------ ---------------------------- ===========================
JCS Goldman Sachs VIT January 20, 1999
Conservative Strategy
Portfolio
- - ------------------------------ ---------------------------- ===========================
- - ------------------------------ ---------------------------- ===========================
JGI Goldman Sachs VIT Growth January 20, 1999
and Income Strategy
Portfolio
- - ------------------------------ ---------------------------- ===========================
- - ------------------------------ ---------------------------- ===========================
JGS Goldman Sachs VIT Growth January 20, 1999
Strategy Portfolio
- - ------------------------------ ---------------------------- ===========================
- - ------------------------------ ---------------------------- ===========================
JAG Goldman Sachs VIT January 20, 1999
Aggressive Growth Strategy
Portfolio
- - ------------------------------ ---------------------------- ===========================
- - ---------------------------------------------------------------------------------------
[Form of Amendment to Schedule 1]
Effective as of , the following separate accounts of the Company
are hereby added to this Schedule 1 and made subject to ------------
the Agreement:
- - ------------------------------- ---------------------------- ---------------------------- ============================
Date Established by
Name of Account Board of Directors of the SEC 1940 Act Registration Type of Product Supported
Company Number by Account
- - ------------------------------- ---------------------------- ---------------------------- ============================
- - ------------------------------- ---------------------------- ---------------------------- ============================
- - ------------------------------- ---------------------------- ---------------------------- ============================
- - ------------------------------- ---------------------------- ---------------------------- ============================
- - ------------------------------- ---------------------------- ---------------------------- ============================
- - ------------------------------- ---------------------------- ---------------------------- ============================
============================== ============================ ===========================
Name of Subaccount Investing in Fund or Fund Date Established by Board
Series of Directors of the
Company
============================== ============================ ===========================
============================== ---------------------------- ===========================
- - ------------------------------ ---------------------------- ===========================
- - ------------------------------ ---------------------------- ===========================
</TABLE>
IN WITNESS WHEREOF, the Trust, the Distributor and the Company hereby
amend this Schedule 1 in accordance with Article XI of the Agreement.
Goldman Sachs Variable Insurance Trust American Enterprise
Life Insurance Company
Goldman, Sachs & Co.
Attest
<PAGE>
Schedule 2
Classes of Contracts
Supported by Separate Accounts
Listed on Schedule 1
Effective as of the date the Agreement was executed, the following classes of
Contracts are subject to the Agreement:
<TABLE>
<CAPTION>
- - ------------------------------- ---------------------------- ---------------------------- ============================
<S> <C> <C> <C>
SEC 1933 Act Registration
Contract Marketing Name Number Contract Form Number Annuity or Life
- - ------------------------------- ---------------------------- ---------------------------- ============================
Goldman Sachs Variable Annuity 333-67595 43350 and state variations Annuity
thereof
- - ------------------------------- ---------------------------- ---------------------------- ============================
- - ------------------------------- ---------------------------- ---------------------------- ============================
- - ------------------------------- ---------------------------- ---------------------------- ============================
- - ------------------------------- ---------------------------- ---------------------------- ============================
- - ------------------------------- ---------------------------- ---------------------------- ============================
- - ----------------------------------------------------------------------------------------------------------------------
</TABLE>
[Form of Amendment to Schedule 2]
Effective as of _______, the following classes of Contracts are hereby added to
this Schedule 2 and made subject to the Agreement:
<TABLE>
<CAPTION>
- - ------------------------------- ---------------------------- ---------------------------- ============================
<S> <C> <C> <C>
Contract Marketing Name SEC 1933 Act Registration
Number Contract Form Number Annuity or Life
- - ------------------------------- ---------------------------- ---------------------------- ============================
- - ------------------------------- ---------------------------- ---------------------------- ============================
- - ------------------------------- ---------------------------- ---------------------------- ============================
- - ------------------------------- ---------------------------- ---------------------------- ============================
- - ------------------------------- ---------------------------- ---------------------------- ============================
- - ------------------------------- ---------------------------- ---------------------------- ============================
</TABLE>
IN WITNESS WHEREOF, the Trust, the Distributor and the Company hereby
amend this Schedule 2 in accordance with Article XI of the Agreement.
Goldman Sachs Variable Insurance Trust American Enterprise
Life Insurance Company
Goldman, Sachs & Co.
Attest
<PAGE>
Schedule 3
Trust Classes and Series (and Corresponding Subaccount)
Available Under
Each Class of Contracts
Effective as of the date the Agreement was executed, the following Trust Classes
and Series are available under the Contracts:
<TABLE>
<CAPTION>
-------------------------------------------------- ============================================================
<S> <C>
Contract Marketing Name Trust Classes and Series (Subaccount)
-------------------------------------------------- ============================================================
Goldman Sachs Variable Annuity Goldman Sachs VIT Capital Growth Fund (JCG)
Goldman Sachs VIT CORE Large Cap Growth Fund (JLG)
Goldman Sachs VIT CORE Small Cap Equity Fund (JSE)
Goldman Sachs VIT CORE U.S. Equity Fund (JUS)
Goldman Sachs VIT Global Income Fund (JGL)
Goldman Sachs VIT Growth and Income Fund (JGR)
Goldman Sachs VIT International Equity Fund (JIF)
Goldman Sachs VIT Mid Cap Equity Fund (JMC)
Goldman Sachs VIT CORE International Equity Fund (JIE)
Goldman Sachs VIT CORE Large Cap Value Fund (JLV)
Goldman Sachs VIT Short Duration Government Fund (JSD)
Goldman Sachs VIT Balanced Strategy Portfolio (JBS)
Goldman Sachs VIT Conservative Strategy Portfolio (JCS)
Goldman Sachs VIT Growth and Income Strategy Portfolio
(JGI)
Goldman Sachs VIT Growth Strategy Portfolio (JGS)
Goldman Sachs VIT Aggressive Growth Strategy Portfolio
(JAG)
-------------------------------------------------- ============================================================
-------------------------------------------------- ============================================================
-------------------------------------------------- ============================================================
- - ----------------------------------------------------------------------------------------------------------------
</TABLE>
[Form of Amendment to Schedule 3]
Effective as of __________________, this Schedule 3 is hereby amended to reflect
the following changes in Trust Classes and Series:
<TABLE>
<CAPTION>
-------------------------------------------------- =======================================================
<S> <C>
Contract Marketing Name Trust Classes and Series (Subaccount)
-------------------------------------------------- =======================================================
-------------------------------------------------- =======================================================
-------------------------------------------------- =======================================================
-------------------------------------------------- =======================================================
-------------------------------------------------- =======================================================
-------------------------------------------------- =======================================================
</TABLE>
IN WITNESS WHEREOF, the Trust, the Distributor and the Company hereby
amend this Schedule 3 in accordance with Article XI of the Agreement.
Goldman Sachs Variable Insurance Trust American Enterprise
Life Insurance Company
Goldman, Sachs & Co.
Attest
<PAGE>
Schedule 4
Investment Restrictions
Applicable to the Trust
Effective as of the date the Agreement was executed, the following investment
restrictions are applicable to the Trust:
- - -----------------------------------------------------------------------------
[Form of Amendment to Schedule 4]
Effective as of ___________________, this Schedule 4 is hereby amended to
reflect the following changes:
IN WITNESS WHEREOF, the Trust, the Distributor and the Company hereby
amend this Schedule 4 in accordance with Article XI of the Agreement.
Goldman Sachs Variable Insurance Trust American Enterprise
Life Insurance Company
Goldman, Sachs & Co.
Attest
<PAGE>
Appendix A
"GS Annuity" and "AEFA Annuities" as used in this Appendix A shall have
the meanings set forth in the Master Agreement. The GS Annuity and AEFA Annuity
shall individually and collectively be referred to in this Appendix A as
"Contracts," as appropriate.
5.1 Sale of Contracts.
(a) GS Annuity. The Company shall be responsible for the sale of the GS Annuity
through selling broker-dealers and their affiliated insurance agencies
which have entered into a selling agreement for the GS Annuity with the
Company and American Express Service Corporation in accordance with the
terms of the Wholesaling Agreement dated February 1, 1999, by and among the
Company, the Distributor, American Express Service Corporation and Goldman
Sachs Insurance Agency, Inc. The Distributor, in its capacity as exclusive
wholesaler, shall be fully responsible for developing, implementing, and
managing the marketing program for, and marketing, the GS Annuity. The
parties will administer and service the GS Annuity as set forth in section
5.2 (a) in accordance with federal and state law and will allocate expenses
as between the Company and the Trust as set forth in Sections 7.3 and 7.4.
The Company, through its agreements with selling broker dealers, shall
ensure that each sale of a Contract satisfies applicable suitability
requirements under insurance and securities laws and regulations, including
without limitation the rules of the NASD. The Company shall adopt and
implement procedures reasonably designed to ensure that information
concerning the Trust and the Distributor that is intended for use only by
brokers or agents selling the GS Annuity (i.e., information that is not
intended for distribution to Contract Owners or offerees) is so used.
(b) AEFA Annuities: The Company shall be responsible for the sale and marketing
of the AEFA Annuities through selling broker-dealers and their affiliated
insurance agencies which have entered into a selling agreement for the AEFA
Annuities with Company and American Express Service Corporation in
accordance with the terms of the Master Agreement. The parties will
administer and service the AEFA Annuities as set forth in Section 5.2 (b)
in accordance with federal and state law and will allocate expenses as
between the Company and the Trust as set forth in Sections 7.3 and 7.4. The
Company shall ensure that all persons offering the AEFA Annuities are duly
licensed and registered under applicable insurance and securities laws. The
Company shall ensure that each sale of a Contract satisfies applicable
suitability requirements under insurance and securities laws and
regulations, including without limitation the rules of the NASD. The
Company shall adopt and implement procedures reasonably designed to ensure
that information concerning the Trust and the Distributor that is intended
for use only by brokers or agents selling the AEFA Annuities (i.e.,
information that is not intended for distribution to Contract Owners or
offerees) is so used.
5.2 Administration and Servicing of Contracts.
(a) GS Annuity: The Company shall be responsible for the issuance, service,
service forms, and administration of the GS Annuity and for the
administration of the Separate Accounts supporting such GS Annuity, such
functions to be performed in all respects commensurate with those standards
prevailing in the variable insurance industry. This administration will
include:
(1) preparing, typesetting, and printing current GS
Annuity prospectuses to be used in the solicitation
of new sales;
(2) preparing, typesetting, printing, and mailing annual
GS Annuity prospectuses to be sent to existing GS
Annuity owners;
(3) mailing annual Fund prospectuses to existing GS
Annuity owners;
(4) preparing, typesetting, printing, and mailing (where
required) supplements to existing GS Annuity
prospectuses;
(5) mailing (where required) supplements to existing Fund
prospectuses;
(6) mailing periodic reports for the Fund prospectuses;
and
(7) timely payment of Contract Owner redemption
requests and processing of GS Annuity transactions.
The Distributor shall be responsible for the following administrative tasks in
connection with the GS Annuity:
(1) distributing current GS Annuity prospectuses to be
used in solicitation of new sales; and
(2) preparing, typesetting, printing and distributing
current Fund prospectuses to be used in the
solicitation of new sales.
The Trust shall perform the following services:
(1) preparing, typesetting and printing annual Fund
prospectuses to be sent to existing GS Annuity
Owners;
(2) preparing, typesetting and printing supplements to
existing Fund prospectuses;
(3) preparing, typesetting, printing and mailing proxy
materials for the Funds; and
(4) preparing, typesetting and printing periodic reports
for the Funds.
(b) AEFA Annuities: The Company shall be responsible for the issuance, service,
and administration of the AEFA Annuities and for the administration of the
Separate Accounts supporting such AEFA Annuities, such functions to be
performed in all respects commensurate with those standards prevailing in
the variable insurance industry. This administration will include:
(1) preparing, typesetting, printing and distributing
current AEFA Annuities prospectuses to be used in the
solicitation of new sales;
(2) printing and distributing current Fund prospectuses
to be used in the solicitation of new sales;
(3) preparing, typesetting, printing, and mailing annual
AEFA Annuities prospectuses to existing AEFA
Annuities owners;
(4) printing and mailing annual Fund prospectuses to
existing AEFA Annuities owners;
(5) preparing, typesetting, printing, and mailing (where
required) supplements to existing AEFA Annuities
prospectuses;
(6) printing and mailing (where required) supplements
to existing Fund prospectuses;
(7) printing and mailing periodic reports for the Fund
prospectuses; and
(8) timely payment of Contract Owner redemption
requests and processing of AEFA Annuities
transactions.
The Distributor shall prepare and typeset current Fund prospectuses to be used
in solicitation of new AEFA Annuities sales.
The Trust shall perform the following services:
(1) preparing and typesetting annual Fund
prospectuses to be sent to existing AEFA
Annuities Owners;
(2) preparing and typesetting supplements to
existing Fund prospectuses;
(3) preparing, typesetting, printing and mailing
proxy materials for the Funds; and
(4) preparing and typesetting periodic
reports for the Funds.
5.4. Trust Prospectuses and Reports.
(a) GS Annuity: In order to enable the Company to fulfill its obligations under
this Agreement and the federal securities laws, the Trust shall provide the
Company with (a) printed copies of: (i) the Trust's Prospectus for the
Series and Classes listed on Schedule 3 and any supplement thereto; and
(ii) any Trust periodic shareholder reports; and (b) copies suitable for
duplication of each Statement of Additional Information and any supplement
thereto. The Trust shall provide the Company with advance written notice,
within reasonable time limits set by the Company, when any such material
(including supplements) shall become available; it being understood,
however, that circumstances surrounding certain supplements may not allow
for advance notice. The Company may not alter any material so provided by
the Trust or the Distributor (including without limitation presenting or
delivering such material in a different medium, e.g., electronic or
Internet) without the prior written consent of the Distributor which
consent shall not be unreasonably withheld.
(b) AEFA Annuities: In order to enable the Company to fulfill its obligations
under this Agreement and the federal securities laws, the Trust shall
provide the Company with (a) a copy, in camera-ready form, computer disk or
form otherwise suitable for printing or duplication of (i) the Trust's
Prospectus for the Series and Classes listed on Schedule 3 and any
supplement thereto; (ii) any Trust periodic shareholder reports; and (iii)
each Statement of Additional Information and any supplement thereto. The
Trust shall provide the Company with advance written notice, within
reasonable time limits set by the Company, when any such material
(including supplements) shall become available; it being understood,
however, that circumstances surrounding certain supplements may not allow
for advance notice. The Company may not alter any material so provided by
the Trust or the Distributor (including without limitation presenting or
delivering such material in a different medium, e.g., electronic or
Internet) without the prior written consent of the Distributor which
consent shall not be unreasonably withheld.
(c) Alternate Arrangements: The Trust and the Company from time to time may
agree upon alternate arrangements to those set forth in Sections 5.4 (a)
and (b). .
5.6. Advertising Material.
(a) GS Annuity: The Distributor shall be responsible for designing and paying
for all marketing materials that relate to the GS Annuity or the Funds.
However, no marketing material created by the Distributor can be used to
solicit sales of the GS Annuity without the prior written consent of the
Company, which consent shall not be unreasonably withheld. The Company
shall use its best efforts to review all marketing materials submitted by
the Distributor for approval, and provide a written response to such
marketing proposals, within 10 calendar days or a reasonable period of time
after receiving such marketing material; provided, however, that the
Distributor shall not interpret a lack of response by the Company within
such time period as approval to use such proposed, but unapproved,
marketing material to solicit sales of the GS Annuity. The Company shall be
responsible for approving and amending, if required, the annuity and
insurance related content of all GS Annuity marketing material. After such
approval by the Company, the Distributor shall be responsible for making
any required filings of such marketing material with the NASD and the
Company shall be responsible for making any required filings of such
marketing material with State Insurance Departments. The Distributor and
the Company shall cooperate to address comments from the NASD or Sate
Insurance Departments regarding marketing materials that have been filed
pursuant to this Section 5.6. The Distributor shall be responsible for the
accurate reproduction of this content.
The Company is responsible for providing the content for the annuity
application, replacement forms, "Procedures and Resource Manual" and all forms
in the new business kits for the GS Annuity. The Distributor is responsible for
obtaining the Company's approval of these forms after graphic layout, obtaining
NASD approval, as applicable, and printing these materials. The Distributor is
also responsible for providing these new business kits (including the GS Annuity
prospectus supplied by the Company to the Distributor) to agents that are
appropriately insurance licensed and appointed with the Company. The Company is
responsible for preparing, printing and mailing the GS Annuity Contract to new
contract owners and providing all on-going service forms to contract owners as
part of servicing the annuity contract.
(b) AEFA Annuities: The Company shall be responsible for designing and paying
for all marketing materials that relate to the AEFA Annuities; provided,
however, that the Company shall send copies of all marketing materials
created for the AEFA Annuities to the Distributor for approval prior to
use. The Distributor shall provide a written approval of such marketing
material within 10 calendar days or a reasonable period of time after
receiving such marketing material; provided, however, that the Company
shall not interpret a lack of response by the Distributor within such time
period as approval to use such proposed, but unapproved, marketing material
to solicit sales of the AEFA Annuities. The Company shall be responsible
for making any required filings of such marketing material with the NASD
and with State Insurance Departments
7.2. Trust Expenses. Expenses incident to the Trust's performance of its duties
and obligations under this Agreement include but are not limited to:
(a) registration and qualification of the Trust shares under
the federal securities laws, including preparation of the
Trust's Registration Statement;
(b) all costs attributable to the Trust set forth in Section
5.2 hereof;
(c) filing with the SEC of the Trust's Prospectuses, Trust's
Statement of Additional Information, Trust's Registration
Statement, Trust proxy materials and shareholder reports;
(d) preparation of all statements and notices required by any
federal or state securities law;
(e) all taxes on the issuance or transfer of Trust shares;
(f) payment of all applicable fees relating to the Trust,
including, without limitation, all fees due under Rule
24f-2 in connection with sales of Trust shares to
qualified retirement plans, custodial, auditing, transfer
agent and advisory fees, fees for insurance coverage and
Trustees' fees; and
(g) any expenses permitted to be paid or assumed by the Trust
pursuant to a plan, if any, under Rule 12b-1 under the
1940 Act.
7.3. Company Expenses. Expenses incident to the Company's performance of its
duties and obligations under this Agreement include, but are not limited
to, the costs of:
(a) registration and qualification of the Contracts under the federal
securities laws;
(b) filing with the SEC of the Contracts' Prospectus and Contracts'
Registration Statement;
(c) all costs attributable to the Company set forth in Section 5.2 hereof;
and
(d) payment of all applicable fees relating to the Contracts, including,
without limitation, all fees due under Rule 24f-2.
Section 9.1(c) Indemnification By the Company.
(1) GS Annuity: arise out of or are based on any wrongful conduct of, or
violation of applicable federal or state law by, the Company or persons
under its control or subject to its authorization, with respect to the
purchase of Trust Shares or the sale, marketing or distribution of the GS
Annuity, including, without limitation, any impermissible use of
broker-only material, unsuitable or improper sales of the GS Annuity or
unauthorized representations about the GS Annuity or the Trust. Persons
subject to Company's authorization with respect to the sale, marketing or
distribution of the GS Annuity include broker-dealers or agents authorized
to sell the GS Annuity (but excluding registered representatives of the
Distributor).
(2) AEFA Annuities: arise out of or are based on any wrongful conduct of, or
violation of applicable federal or state law by, the Company or persons
under its control or subject to its authorization, with respect to the
purchase of Trust Shares or the sale, marketing or distribution of the AEFA
Annuities including, without limitation, any impermissible use of
broker-only material, unsuitable or improper sales of the AEFA Annuity or
unauthorized representations about the AEFA Annuity or the Trust. Persons
subject to Company's authorization with respect to the sale, marketing or
distribution of the AEFA Annuities include broker-dealers or agents
authorized to sell the AEFA Annuities.
Section 9.3(c) Indemnification by the Distributor.
(1) GS Annuity: arise out of or are based on any wrongful conduct of, or
violation of applicable federal and state law by, the Distributor or the
Trust or persons under their respective control with respect to the sale of
Trust shares; or
(2) AEFA Annuities: arise out of or are based on any wrongful conduct of, or
violation of applicable federal and state law by, the Distributor or the
Trust or persons under their respective control with respect to the sale of
Trust shares.
AMENDMENT NO. 1
PARTICIPATON AGREEMENT
The Participation Agreement (the "Agreement"), dated October 30, 1997,
by and among AIM Variable Insurance Funds, Inc., a Maryland corporation, AIM
Distributors, Inc., a Delaware Corporation, American Enterprise Life Insurance
Company, an Indiana life Insurance Company and American Express Financial
Advisors, Inc., is hereby amended as follows:
Schedule A of the Agreement is hereby deleted in its entirety and
replaced with the following:
SCHEDULE A
<TABLE>
<CAPTION>
<S> <C> <C>
- - ------------------------------------------ --------------------------------- --------------------------------------
FUNDS AVAILABLE UNDER SEPARATE ACCOUNTS CONTRACTS FUNDED BY THE
THE CONTRACTS UTILIZING SOME OR SEPARATE ACCOUNTS
ALL OF THE FUNDS
- - ------------------------------------------ --------------------------------- --------------------------------------
AIM V.I. Capital Appreciation Fund American Enterprise Variable o Flexible Premium Deferred
AIM V.I. Capital Development Fund Annuity Account Variable Annuity Contract Form
AIM V.I. Growth and Income Fund American Enterprise Variable Nos. 34560, 43260, 43410,
AIM V.I. International Equity Fund Life Account 43431, 44170, 44209 and 44210
AIM V.I. Value Fund (and any state variations
thereof)
o Flexible Premium Variable
Life Insurance Policy Form No.
37022 (and any state variations
thereof)
</TABLE>
- - ------------------------------------------ ---------------------------------
All other terms and provisions of the Agreement not amended herein shall remain
in full force and effect.
Effective Date: _________________________
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: _______________________ By: _____________________________
Name: Nancy L. Martin Name: Robert H. Graham
Title: Assistant Secretary Title: President
(SEAL)
AIM DISTRIBUTORS, INC.
Attest: _______________________ By: __________________________
Name: Nancy L. Martin Name: Robert H. Graham
Title: Assistant Secretary Title: President
(SEAL)
<PAGE>
AMERICAN ENTERPRISE LIFE INSURANCE
COMPANY
Attest: ________________________ By: __________________________
Name: Mary Ellyn Minenko Name: James E Choat
Title: Assistant Secretary Title: President
(SEAL)
AMERICAN EXPRESS FINANCIAL ADVISORS
INC.
Attest: _________________________ By: __________________________
Name: William A. Stoltzmann Name: James E. Choat
Title: Vice President Title: Senior Vice President
(SEAL)
Amendment No. 1 to Schedule 2
Effective as of July __, 1999 the following classes of Contracts are
hereby added to this Schedule 2 and made subject to the Agreement:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- - ------------------------------- ---------------------------- ---------------------------- ============================
Contract Marketing Name SEC 1933 Act Registration
Number Contract Form Number Annuity or Life
- - ------------------------------- ---------------------------- ---------------------------- ============================
American Express Signature 333-74865 43431 and State variations Annuity
Variable Annuitysm thereof
- - ------------------------------- ---------------------------- ---------------------------- ============================
- - ------------------------------- ---------------------------- ---------------------------- ============================
- - ------------------------------- ---------------------------- ---------------------------- ============================
- - ------------------------------- ---------------------------- ---------------------------- ============================
- - ------------------------------- ---------------------------- ---------------------------- ============================
</TABLE>
IN WITNESS WHEREOF, the Trust, the Distributor and the Company hereby
amend this Schedule 2 in accordance with Article XI of the
Agreement.
- - --------------------------------- --------------------------------
Goldman Sachs Variable Insurance Trust American Enterprise Life Insurance
Company
- - --------------------------------- --------------------------------
Goldman, Sachs & Co. Attest
<PAGE>
Amendment No. 1 to Schedule 3
Effective as of July __, 1999, this Schedule 3 is hereby amended to reflect the
following changes in Trust Classes and Series:
<TABLE>
<CAPTION>
<S> <C>
-------------------------------------------------- =======================================================
Contract Marketing Name Trust Classes and Series (Subaccount)
-------------------------------------------------- =======================================================
American Express Signature Goldman Sachs VIT Capital Growth Fund (JCG)
Variable Annuity sm Goldman Sachs VIT CORE U.S. Equity Fund (JUS)
Goldman Sachs VIT Global Income Fund (JGL)
Goldman Sachs VIT International Equity Fund (JIF)
-------------------------------------------------- =======================================================
-------------------------------------------------- =======================================================
-------------------------------------------------- =======================================================
-------------------------------------------------- =======================================================
-------------------------------------------------- =======================================================
IN WITNESS WHEREOF, the Trust, the Distributor and the Company hereby amend this Schedule 3 in accordance with Article XI
of the Agreement.
- - --------------------------------- --------------------------------
Goldman Sachs Variable Insurance Trust American Enterprise Life Insurance Company
- - --------------------------------- --------------------------------
Goldman, Sachs & Co. Attest
</TABLE>
August 4, 1999
American Enterprise Life Insurance Company
80 South Eighth Street
P.O. Box 534
Minneapolis, MN 55440-0534
RE: American Enterprise Variable Annuity Account
Pre-Effective Amendment No. 1
File No.: 333-74865/811-7195
Ladies and Gentlemen:
I am familiar with the establishment of the American Enterprise Variable Annuity
Account ("Account"), which is a separate account of American Enterprise Life
Insurance Company ("Company") established by the Company's Board of Directors
according to applicable insurance law. I also am familiar with the
above-referenced Registration Statement filed by the Company on behalf of the
Account with the Securities and Exchange Commission.
I have made such examination of law and examined such documents and records as
in my judgment are necessary and appropriate to enable me to give the following
opinion:
1. The Company is duly incorporated, validly existing and in good standing
under applicable state law and is duly licensed or qualified to do business
in each jurisdiction where it transacts business. The Company has all
corporate powers required to carry on its business and to issue the
contracts.
2. The Account is a validly created and existing separate account of the
Company and is duly authorized to issue the securities registered.
3. The contracts issued by the Company, when offered and sold in accordance
with the prospectus contained in the Registration Statement and in
compliance with applicable law, will be legally issued and represent
binding obligations of the Company in accordance with their terms.
I hereby consent to the filing of this opinion as an exhibit to the Registration
Statement.
Sincerely,
/s/ Eileen Newhouse
Eileen Newhouse
Group Counsel
<PAGE>
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Independent Auditors"
in the Statement of Additional Information and to the use of our report dated
February 4, 1999 with respect to the financial statements of American Enterprise
Life Insurance Company and to the use of our report dated March 12, 1999 with
respect to the financial statements of American Enterprise Variable Annuity
Account, included in Pre-Effective Amendment No. 1 to the Registration Statement
(Form N-4, No. 333-74865) and related Prospectus for the registration of the
American Express Signature Variable Annuity Contracts to be offered by American
Enterprise Life Insurance Company.
/s/ Ernst & Young LLP
Ernst & Young LLP
Minneapolis, Minnesota
August 4, 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>
1933 Act 1940 Act
Reg. Number Reg. Number
------------ ------------
333-74865 811-7195
</TABLE>
American Enterprise Variable Annuity Account
American Express Signature Variable AnnuitySM (SIG-VA)
- - -------------------------------------------------------------------------
American Enterprise Variable Life Account
American Express Signature Variable Universal Life (SIG-VUL)
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
