<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. 333-72777) [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]
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(Check appropriate box or boxes)
AMERICAN ENTERPRISE VARIABLE ANNUITY ACCOUNT
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(Exact Name of Registrant)
American Enterprise Life Insurance Company
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(Name of Depositor)
80 South 8th Street, P.O. Box 534, Minneapolis, MN 55440-0534
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(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (612) 671-3678
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Mary Ellyn Minenko, IDS Tower 10, Minneapolis, MN 55440-0010
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(Name and Address of Agent for Service)
It is proposed that this filing will become effective July 8, 1999 or as soon as
possible.
<PAGE>
Prospectus
, 1999
American Express Platinum Variable AnnuitySM
Individual flexible premium deferred combination fixed/variable annuity
American Enterprise Variable Annuity Account
Issued by: American Enterprise Life Insurance Company
Administrative Offices: 80 South Eighth Street, P.O. Box 534,
Minneapolis, MN 55440-0534
Telephone: 800-333-3437
This prospectus contains information that you should know before investing. You
also will receive the prospectuses for:
o AIM Variable Insurance Funds, Inc.
o American Express(R) Variable Portfolio Funds
o Dreyfus Variable Investment Funds
o Oppenheimer Variable Account Funds
o Putnam Variable Trust
o Wright Managed Blue Chip Series Trust
Please read the prospectuses carefully and keep them for future reference. This
contract is available for nonqualified annuities, IRAs (including Roth IRAs),
Simplified Employee Pensions Plans (SEPs) and Tax-Sheltered Annuity (TSA)
rollovers.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
An investment in this annuity is not a deposit of a bank or financial
institution and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. An investment in this annuity
involves investment risk including the possible loss of principal.
A Statement of Additional Information (SAI), dated the same date as this
prospectus is incorporated by reference into this prospectus. It is filed with
the Securities and Exchange Commission (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.....................................................
The Funds................................................................
The Fixed Account........................................................
Buying your Contract.....................................................
Charges..................................................................
Valuing your Investment..................................................
Making the Most of your Contract.........................................
Withdrawals from your Contract...........................................
TSA - Special Withdrawal Provisions......................................
Changing Ownership.......................................................
Benefits in Case of Death................................................
The Annuity Payout Period................................................
Taxes....................................................................
Voting Rights............................................................
Substitution of Investments..............................................
Distribution of the Contract.............................................
About the Service Providers..............................................
Year 2000................................................................
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 variable 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 variable 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 Plans (SEPs)
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 variable subaccount at the close of business on each valuation
date.
Variable account - Consists of separate subaccounts to which you may allocate
purchase payments; each subaccount invests in shares of one fund. The value of
your investment in each variable subaccount changes with the performance of the
fund.
Withdrawal value - The amount you are entitled to receive if you make a full
withdrawal from your contract. It is the contract value minus any applicable
withdrawal charge and contract administrative charge.
<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 variable 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 of
purchase payments you allocate to the variable subaccounts. (p. )
o the fixed account, which earns interest at a rate that we adjus
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. You must make an initial
lump-sum 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. )
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. )
<PAGE>
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 variable 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. (p.)
Expense Summary
The purpose of this table 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 variable subaccounts and funds below.
Some expenses may vary as we explain under "Charges."
Contract owner expenses:
Withdrawal charge (contingent deferred sales charge as a percentage of purchase
payment withdrawn)
Years from purchase Withdrawal charge
payment receipt percentage
1 8.5%
2 8.5%
3 8%
4 7%
5 5%
6 4%
7 2%
Thereafter 0%
Annual contract administrative charge $30
<PAGE>
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> <C> <C> <C> <C>
AXP
AXP Variable Variable AXP Variable AXP Variable
AIM V.I. Portfolio- Portfolio- Portfolio- Portfolio-
Capital AIM V.I. AXP Variable Cash Extra Managed New
Appreciation International AIM V.I. Portfolio-Bond Management Income Fund* Fund* Dimensions
Fund Equity Fund Value Fund Fund* Fund* Fund*
Management fees 0.62% 0.75% 0.61% 0.60% 0.50% 0.62% 0.59% 0.61%
12b-1 fees -- -- -- -- -- -- -- --
Other expenses 0.05 0.16 0.05 0.07 0.06 0.09 0.04 0.06
Total 0.67%1 0.91%1 0.66%1 0.67%2 0.56%2 0.71%2 0.63%2 0.67%2
Dreyfus Oppenheimer Putnam VT
Dreyfus Small Dreyfus Oppenheimer Main Street Oppenheimer Putnam VT International
Disciplined Company Socially Global Growth & Strategic Growth and Growth and
Stock Stock Responsible Securities Income Bond Income Income
Portfolio Portfolio Growth Fund Fund/VA Fund/VA Fund/VA Fund-Class IB Fund-Class IB
Shares Shares
Management fees 0.75% 0.75% 0.75% 0.68% 0.74% 0.74% 0.46% 0.80%
12b-1 fees -- -- -- -- -- -- 0.15 0.15
Other expenses 0.13 0.23 0.05 0.06 0.05 0.06 0.04 0.19
Total 0.88% 0.98% 0.80% 0.74% 0.79% 0.80% 0.65% 1.14%
Wright
Catholic
Putnam VT Values Wright Wright
Vista Fund - Equity International Selected
Class IB Investment Blue Chip Blue Chip
Shares Portfolio Portfolio Portfolio
Management fees 0.65% 0.75% 0.75% 0.55%
12b-1 fees 0.15 -- -- --
Other expenses 0.12 0.50 1.10 0.60
Total 0.92% 1.25% 1.85% 1.15%
Please read the fund prospectuses for more information about fund operating
expenses.
1 Operating expenses of the underlying funds as of Dec. 31, 1998.
2 Annualized operating expenses of underlying mutual funds at Dec. 31, 1998.
*AXP is a service mark of American Express Company.
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Example:*
AXP
AXP Variable Variable AXP Variable AXP Variable
AIM V.I. Portfolio- Portfolio- Portfolio- Portfolio-
Capital AIM V.I. AXP Variable Cash Extra Managed New
Appreciation International AIM V.I. Portfolio-Bond Management Income Fund Fund Dimensions
Fund Equity Fund Value Fund Fund* Fund Fund
You would pay the following expenses on a $1,000 investment, assuming 5% annual
return and full withdrawal at the end of each time period:
1 year $ 107.22 $109.68 $ 107.12 $ 107.22 $ 106.09 $ 107.63 $ 106.81 $ 107.22
3 years 148.53 155.94 148.23 148.53 145.13 149.77 147.30 148.53
5 years 167.46 179.82 166.94 167.46 161.75 -- 165.38 167.46
10 years 252.16 276.93 251.11 252.16 240.61 -- 247.97 252.16
You would pay the following expenses on the same investment assuming no
withdrawal or selection of an annuity payout plan at the end of each time
period:
1 year $ 22.22 $24.68 $ 22.12 $ 22.22 $ 21.09 $ 22.63 $ 21.81 $ 22.22
3 years 68.53 75.94 68.23 68.53 65.13 69.77 67.30 68.53
5 years 117.46 129.82 116.94 117.46 111.75 -- 115.38 117.46
10 years 252.16 276.93 251.11 252.16 240.61 -- 247.97 252.16
Dreyfus Dreyfus Dreyfus Oppenheimer Putnam VT
Disciplined Small Socially Oppenheimer Main Street Putnam VT International
Stock Company Responsible Global Growth & Income Oppenheimer Growth and Growth and Income
Portfolio Stock Growth Fund Securities Fund/VA Strategic Income Fund Fund-Class IB
Portfolio Fund/VA Bond Fund/VA -Class IB Shares
Shares
You would pay the following expenses on a $1,000 investment, assuming 5% annual
return and full withdrawal at the end of each time period:
1 year $ 109.37 $ 110.40 $ 108.55 $ 107.94 $ 108.45 $ 108.55 $ 107.12 $ 113.37
3 years 155.01 158.09 152.55 150.70 152.24 152.55 148.23 166.97
5 years -- -- -- -- -- -- 166.94 --
10 years -- -- -- -- -- -- 251.11 --
You would pay the following expenses on the same investment assuming no
withdrawal or selection of an annuity payout plan at the end of each time
period:
1 year $ 24.37 $ 25.40 $ 23.55 $ 22.94 $ 23.45 $ 23.55 $ 22.12 $ 28.37
3 years 75.01 78.09 72.55 70.70 72.24 72.55 68.23 86.97
5 years -- -- -- -- -- -- 116.94 --
10 years -- -- -- -- -- -- 251.11 --
<PAGE>
Wright
Catholic
Values Wright Wright
Putnam VT Equity International Selected
Vista Fund - Investment Blue Chip Blue Chip
Class IB Portfolio Portfolio Portfolio
Shares
You would pay the following expenses on a $1,000 investment, assuming 5% annual
return and full withdrawal at the end of each time period:
1 year $ 110.81 $ 120.34 $ 119.32 $ 112.14
3 years 159.32 187.59 184.57 163.30
5 years -- -- -- --
10 years -- -- -- --
You would pay the following expenses on the same investment assuming no
withdrawal or selection of an annuity payout plan at the end of each time
period:
1 year $ 25.81 $ 35.34 $ 34.32 $ 27.14
3 years 79.32 107.59 104.57 83.30
5 years -- -- -- --
10 years -- -- -- --
* In this example, the $30 annual contract administrative charge is approximated
as a .098% charge based on the average estimated contract size. Premium taxes
imposed by some state and local governments are not reflected in this example.
</TABLE>
You should not consider this example to be a representation of past or future
expenses. Actual expenses may be more or less than those shown.
Condensed Financial Information (unaudited)
The following tables give per-unit information about the financial history of
each variable subaccount. We have not provided this information for some of the
subaccounts because they are new and do not have any history.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1998 1997 1996 1995
Subaccount EIN3 (Investing in shares of AIM V.I. International Equity Fund)
Accumulation unit value at beginning of period $1.02 $1.00 -- --
Accumulation unit value at end of period $1.16 $1.02 -- --
Number of accumulation units outstanding at end of period (000 omitted) 866 57 -- --
Ratio of operating expense to average net assets 1.40% 1.40% -- --
Subaccount EVA3 (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 omitted) 1,779 66 -- --
Ratio of operating expense to average net assets 1.40% 1.40% -- --
Subaccount ESI1 (Investing in shares of AXP 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 omitted) 5,689 2,544 1,377 414
Ratio of operating expense to average net assets 1.40% 1.40% 1.50% 1.50%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1998 1997 1996 1995
Subaccount EMS1 (Investing in shares of AXP Variable Portfolio-Cash
Management Fund)
Accumulation unit value at beginning of period $1.11 $1.07 $1.03 $1.00
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 omitted) 749 231 241 132
Ratio of operating expense to average net assets 1.40% 1.40% 1.50% 1.50%
Simple yield5 3.24% 3.71% 3.26% 3.53%
Compound yield5 3.29% 3.78% 3.32% 3.59%
Subaccount EMG1 (Investing in shares of AXP 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 omitted) 4,684 2,944 1,546 589
Ratio of operating expense to average net assets 1.40% 1.40% 1.50% 1.50%
Subaccount EGD2 (Investing in shares of AXP 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 omitted) 1,108 69 -- --
Ratio of operating expense to average net assets 1.40% 1.40% -- --
Subaccount EPG4 (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 omitted) 239 -- -- --
Ratio of operating expense to average net assets 1.40% -- -- --
1 Operations commenced on Feb. 21, 1995.
2 Operations commenced on Oct. 29, 1997.
3 Operations commenced on Oct. 30, 1997.
4 Operations commenced on Oct. 5, 1998.
5 Net of annual contract administrative charge and mortality and expense risk
fee.
</TABLE>
Financial Statements
You can find our audited financial statements and the audited financial
statements of the subaccounts in the SAI. We have not provided audited financial
statements for some of the subaccounts because they are new.
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.
<PAGE>
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 10 years (or up to the life of the
subaccount if it is less than 10 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 will be higher than average annual total
return because it is not averaged.
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.
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 page 1 of the prospectus.
<PAGE>
The Variable Account
You may allocate purchase payments to any or all of the subaccounts of the
variable account that invest in shares of the following funds:
Subaccount Investing In:
ECA AIM V.I. Capital Appreciation Fund
EIN AIM V.I. International Equity Fund
EVA AIM V.I. Value Fund
ESI AXP Variable Portfolio-Bond Fund
EMS AXP Variable Portfolio-Cash Management Fund
EIA AXP Variable Portfolio-Extra Income Fund
EMG AXP Variable Portfolio-Managed Fund
EGD AXP Variable Portfolio-New Dimensions Fund
EDS Dreyfus Variable Investment Fund, Disciplined Stock Portfolio
ECO Dreyfus Variable Investment Fund, Small Company Stock Portfolio
ESR Dreyfus Socially Responsible Growth Fund
EGS Oppenheimer Global Securities Fund/VA
EGC Oppenheimer Main Street Growth & Income Fund/VA
EST Oppenheimer Strategic Bond Fund/VA
EPG Putnam VT Growth and Income Fund-Class IB Shares
EPI Putnam VT International Growth and Income Fund-Class IB Shares
EPT Putnam VT Vista Fund-Class IB Shares
ECV Catholic Values Equity Investment Portfolio
EIB Wright International Blue Chip Portfolio
EBC Wright Selected Blue Chip Portfolio
We reserve the right to limit the maximum number of subaccounts to which you can
allocate purchase payments or contract value at any time.
The variable account also includes other subaccounts that are available under
contracts not described in this prospectus. The variable account meets the
definition of a separate account under federal securities laws. We credit or
charge income, capital gains and capital losses of each subaccount only to that
subaccount. State insurance law prohibits us from charging a subaccount with
liabilities of any other variable subaccount or of our general business.
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.
The variable account was established under Indiana law on July 15, 1987, and the
subaccounts are registered together as a single unit investment trust under the
Investment Company Act of 1940 (the 1940 Act). This registration does not
involve any supervision of our management or investment practices and policies
by the SEC. All obligations arising under the contracts are general obligations
of American Enterprise Life.
<PAGE>
The Funds
AIM V.I. Capital Appreciation Fund
Objective: growth of capital. Invests in common stocks, with emphasis on
medium- and small-sized growth companies.
AIM V.I. International Equity Fund
Objective: long-term growth of capital. Invests in a diversified portfolio of
international equity securities whose issuers are considered to have strong
earnings momentum.
AIM V.I. Value Fund
Objective: long-term growth of capital. Invests primarily in equity securities
judged by the fund's investment advisor 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. Income is a secondary objective.
AXP Variable Portfolio-Bond Fund
Objective: high level of current income while conserving the value of the
investment for the longest time period. Invests primarily in investment-grade
bonds.
AXP Variable Portfolio-Cash Management Fund
Objective: maximum current income consistent with liquidity and conservation of
capital. Invests in money market securities.
AXP Variable Portfolio-Extra Income Fund
Objective: high current income, with capital growth as a secondary objective.
Invests primarily in long-term, high yielding, high-risk debt securities below
investment grade issued by U.S. and foreign corporations.
AXP Variable Portfolio-Managed Fund
Objective: maximum total investment return through a combination of capital
growth and current income. Invests primarily in stocks, convertible securities,
bonds and money market instruments.
AXP Variable Portfolio-New Dimensions Fund
Objective: long-term growth of capital. Invests primarily in common stocks of
U.S. and foreign companies showing potential for significant growth.
Dreyfus Variable Investment Fund, Disciplined Stock Portfolio
Objective: investment returns (consisting of capital appreciation and income)
that are greater than the total return performance of stocks represented by the
Standard & Poor's 500 Composite Stock Index. Invests primarily in a blended
portfolio of growth and value stocks chosen through a disciplined investment
process.
<PAGE>
Dreyfus Variable Investment Fund, Small Company Stock Portfolio
Objective: investment returns (consisting of capital appreciation and income)
that are greater than the total return performance of stocks represented by the
Russell 2500 (tm) Stock Index (Russell 2500). Invests primarily in a blended
portfolio of growth and value stocks of small and midsize domestic companies,
whose market values generally range between $100 million and $3 billion.
The Dreyfus Socially Responsible Growth Fund, Inc.
Objective: capital growth, with current income as a secondary goal. Invests
primarily in the common stocks of companies that, in the opinion of the fund's
management, meet traditional investment standards and conduct their business in
a manner that contributes to the enhancement of the quality of life in America.
Oppenheimer Global Securities Fund/VA
Objective: long-term capital appreciation. Invests a substantial portion of
assets in securities of foreign issuers, "growth-type" companies, cyclical
industries and special situations that are considered to have appreciation
possibilities.
Oppenheimer Main Street Growth & Income Fund/VA
Objective: high total return (which includes growth in the value of its shares
as well as current income). Invests in equity and debt securities.
Oppenheimer Strategic Bond Fund/VA
Objective: high level of current income principally derived from interest on
debt securities. The Fund seeks to enhance that income by writing covered call
option on debt securities.
Putnam VT Growth and Income Fund - Class IB Shares
Objective: capital growth and current income by investing primarily in
common stocks that offer potential for capital growth, current income or both.
Putnam VT International Growth and Income Fund - Class IB Shares
Objective: capital growth with high current income as a secondary objective by
investing primarily in common stocks that Putnam Investment Management Inc.
("Putnam Management") believes offer potential for capital growth, and may,
consistent with its investment objectives, invest in common stocks that Putnam
Management believes offer potential for current income.
Putnam VT Vista Fund - Class IB Shares
Objective: capital appreciation by investing in a diversified portfolio of
common stocks which Putnam Management believes have the potential for
above-average capital appreciation.
Wright Catholic Values Equity Investment Portfolio
Objective: long-term growth of capital and reasonable current income from
investments consistent with the core values of the Catholic Church. Reasonable
income means the income that can be achieved from an equity portfolio. Invests
at least 80% of its net assets in the equity securities of well-established
companies on the quality oriented Approved Wright Investment Lists (AWIL).
<PAGE>
Wright International Blue Chip Portfolio
Objective: long-term capital appreciation. Invests at least 80% of its net
assets in the equity securities of well-established non-U.S. companies on the
International Approved Wright Investment List (IAWIL).
Wright Selected Blue Chip Portfolio
Objective: long-term capital appreciation, with current income as a secondary
objective. Invests at least 80% of its net assets in the equity securities of
well-established quality companies on the Approved Wright Investment List
(AWIL).
The investment objectives and policies of some of the funds may be similar to
the investment objectives and policies of other mutual funds that the investment
advisors or their 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.
All funds are available to serve as investment options for variable annuities.
Some funds also are available to serve as underlying investments for variable
life insurance policies and qualified plans. It is possible that in the future
it may be disadvantageous for variable annuity accounts, variable life insurance
accounts and/or qualified plans to invest in the available funds simultaneously.
Although the insurance company and the funds currently do not 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 has issued final regulations relating to the diversification
requirements under Section 817(h) of the Internal Revenue Code of 1986, as
amended (Code). Each fund intends to comply with these requirements.
The investment managers for the funds are as follows:
o AIM Variable Insurance Funds, Inc. - A I M Advisors, Inc.
o American Express Variable Portfolio Funds. American Express Financial
Corporation (AEFC) is the investment advisor for the American Express
Variable Portfolio Funds.
o Dreyfus Variable Investment Funds - The Dreyfus Corporation
o The Dreyfus Socially Responsible Growth Fund, Inc. - The Dreyfus
Corporation, NCM (Sub-Investment Advisor)
o Oppenhiemer Variable Account Funds - OppenheimerFunds, Inc.
o Putnam Variable Trust - Putnam Investment Management, Inc.
o Wright Managed Blue Chip Series Trust - Wright Investors' Service, Inc.
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 page 1 of this prospectus.
<PAGE>
The Fixed Account
You also may allocate purchase payments to the fixed account. We back the
principal and interest guarantees relating to the fixed account. The value of
the fixed account increases as we credit interest to the account. Purchase
payments and transfers to the fixed account become part of the general account
of American Enterprise Life, the company's main portfolio of investments. We
credit and compound interest daily to produce an effective annual interest rate.
We may change the interest rate from time to time.
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
"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 be the 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
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 the application and return your payment. We will credit
the 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.
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.
<PAGE>
For nonqualified annuities and Roth IRAs, the retirement date must be:
o no earlier than the 60th day after the contract's effective date; and
o no later than the annuitant's 85th birthday (or the 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 payment amounts
Minimum initial purchase payment (includes SIPs): $2,000
Minimum additional purchase payment:
$100 for regular purchase payments
$ 50 for SIPs
Maximum total purchase payments:
$1,000,000 (for issue ages up to 85 without prior approval) $100,000
(for issue ages 86 to 90 without prior approval)
How to make purchase payments
By letter
Send your check along with your name and contract number to:
Regular mail:
American Enterprise Life Insurance Company
80 South Eighth Street
P.O. Box 534
Minneapolis, MN 55440-0534
Express mail:
American Enterprise Life Insurance Company
Attention: Unit 829
733 Marquette Avenue
Minneapolis, MN 55402
<PAGE>
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 $30 annual 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 variable subaccounts. It is reflected in the
unit values of the subaccounts and it totals 0.15% of their average daily net
assets on an annual basis. It covers certain administrative and operating
expenses of the subaccounts such as accounting, legal and data processing fees
and expenses involved in the preparation and distribution of reports and
prospectuses. We cannot increase the variable account administrative charge.
Mortality and expense risk fee
We charge this fee daily to the variable subaccounts. The unit values of your
subaccounts reflect this 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.
<PAGE>
Withdrawal charge
If you withdraw part or all of your contract, you may be subject to a withdrawal
charge. We calculate the withdrawal charge by drawing from your total contract
value in the following order:
o First, we withdraw up to 15% of your prior anniversary contract value that
you have not yet withdrawn during this contract year. We do not assess a
withdrawal charge on this amount.
o Next, we withdraw contract earnings, if any, that are greater than the
annual 15% 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 purchase payments received eight or more years before withdrawal.
o Finally, if necessary, we withdraw purchase payments received in the seven
years before the withdrawal on a "first-in, first-out" (FIFO) basis. We do
assess a withdrawal charge on these payments. We determine your withdrawal
charge by multiplying each of 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 withdrawn.
Years from purchase Withdrawal charge
payment receipt percentage
1 8.5%
2 8.5%
3 8%
4 7%
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
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
o The prior anniversary July 1, 2008 contract value was $38,488.
Withdrawal charge Explanation
$0 $5,773.20 is 15% of the prior anniversary contract value withdrawn
without withdrawal charge; and
0 $8,327.80 is contract earnings in excess of the 15% free withdrawal
amount withdrawn without withdrawal charge; and
0 $10,000 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
480 $6,000 Feb. 20, 2007 payment is in its third year from receipt
withdrawn with a 8% withdrawal charge.
- - -------------------------------------
$880
</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 withdrawal charges for:
o withdrawals during the year totaling the greater of 15% 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 normally are
assessed upon full or partial withdrawal if you provide proof satisfactory
to us that, as of the date you request the withdrawal, you or the annuitant
are confined to a hospital or nursing home and have been for the prior 60
days. (See your contract for additional conditions and restrictions on this
waiver); and
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.
<PAGE>
Premium taxes
Certain state and local governments impose premium taxes (up to 3.5%). These
taxes depend upon your state of residence or the state in which the contract was
sold. 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 variable 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 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.
Variable subaccounts: We convert amounts you allocated to the variable
subaccounts into accumulation units. Each time you make a purchase payment or
transfer amounts into one of the variable subaccounts, we credit a certain
number of accumulation units to your contract for that subaccount. Conversely,
each time you take a partial withdrawal, transfer amounts out of a variable
subaccount or we assess a contract administrative charge, we subtract a certain
number of accumulation units from your contract.
The accumulation units are the true measure of investment value in each
subaccount during the accumulation period. They are related to, but not the same
as, the net asset value of the fund in which the subaccount invests. The dollar
value of each accumulation unit can rise or fall daily depending on the variable
account expenses, performance of the fund and on certain fund expenses.
Here is how we calculate accumulation unit values:
Number of units
To calculate the number of accumulation units for a particular subaccount, we
divide your investment, after deduction of any premium taxes, by the current
accumulation unit value.
Accumulation unit value
The current accumulation unit value for each variable subaccount equals the last
value times the subaccount's current net investment factor.
Net investment factor
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 variable
subaccount.
<PAGE>
Factors that affect variable subaccount accumulation units
Accumulation units may change in two ways; in number and in value. Here are the
factors that influence those changes:
The number of accumulation units you own may fluctuate due to:
o additional purchase payments you allocate to the variable subaccounts;
o transfers into or out of the variable 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 variable 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.
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 underlying funds.
Since you invest the same amount each period, you automatically acquire more
units when the market value falls and fewer units when it rises. The potential
effect is to lower your average cost per unit.
<PAGE>
<TABLE>
<CAPTION>
How dollar-cost averaging works
<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 Sep 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 variable subaccount will gain
in value nor will it protect against a decline in value if market prices fall.
Because dollar-cost averaging involves continuous investing, your success will
depend upon your willingness to continue to invest regularly through periods of
low price levels. Dollar-cost averaging can be an effective way to help meet
your long-term goals. Some restrictions apply. For specific features, contact
your sales representative.
Asset allocation and rebalancing
You can ask us in writing to have the variable subaccount portion of your
contract value allocated according to the percentages (in whole percentage
amounts) that you choose. We automatically will rebalance this variable
subaccount portion of your contract value either quarterly, semi-annually or
annually. The period you select will start to run on the date we record your
request. On the first valuation date of each of these periods, we automatically
will rebalance your contract value so that the value in each 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.
Transferring money between accounts
You may transfer money from any one variable 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.
<PAGE>
We may suspend or modify transfer privileges at any time. In addition, we may
modify or restrict the right to transfer contract values between the subaccounts
if we determine, at 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. We could apply any modification to transfers to or from some or all of
the subaccounts. These modifications could include, but not be limited to:
o the requirement of a minimum time period between each transfer;
o not accepting transfer requests of a sales representative acting under a
power of attorney on behalf of more than one contract owner; or
o limiting the dollar amount that a contract owner can transfer between the
subaccounts and the fixed account at any one time.
We may apply these modifications or restrictions in any reasonable manner to
prevent transfers we believe will disadvantage other contract owners. (For
information on transfers after annuity payouts begin, see "Transfer policies.")
Transfer policies
o Before annuity payouts begin, you may transfer contract values between
the variable 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 variable
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 variable subaccounts. During the annuity payout period, we reserve
the right to limit the number of subaccounts in which you may invest.
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
<PAGE>
Express mail:
American Enterprise Life Insurance Company
Attention: Unit 829
733 Marquette Avenue
Minneapolis, MN 55402
Minimum amount
Transfers or withdrawals: $500 or entire subaccount or fixed account balance
Maximum amount
Transfers or withdrawals: Contract value or the entire variable subaccount
or fixed account balance
2 By automated transfers and automated partial withdrawals
Your 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 currently
are in place.
o Automated transfers may not exceed an amount that, if continued, would
deplete the fixed account or subaccounts from which you are
transferring within 12 months unless we agree otherwise.
o Automated transfers and automated partial withdrawals are subject to
all of the contract provisions and terms, including transfer of
contract values between accounts. Automated withdrawals may be
restricted by applicable law under some contracts.
o Automated partial withdrawals may result in IRS taxes and penalties on
all or part of the amount withdrawn.
Minimum amount
Automated transfers or withdrawals: $100 monthly/$250 quarterly,
semiannually or annually
Maximum amount
Automated transfers or withdrawals: Contract value (except for automated
transfers from the fixed account)
3 By Phone
Call between 8 a.m. and 6 p.m. Central time:
1-800-333-3437 or
(612) 671-7700 (Minneapolis/St. Paul area)
Minimum amount
For transfers or withdrawals: $500 or entire subaccount or fixed account balance
Maximum amount
For transfers: Contract value or the entire subaccount or fixed account balance
For withdrawals:$25,000
<PAGE>
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 an address change. As long as we
follow the procedures, we (and our affiliates) will not be liable for any loss
resulting from fraudulent requests.
Telephone transfers and withdrawals are automatically available. You may request
that telephone transfers and withdrawals not be authorized from your account by
writing to us.
Withdrawals from your Contract
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.
Withdrawal policies
If you have a balance in more than one account and request a partial withdrawal,
we will withdraw money from all your subaccounts and/or the fixed account in the
same proportion as your value in each 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.
<PAGE>
TSA Special Withdrawal 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.
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.
Benefits in Case of Death
There are two death benefit options under this contract. If both you and the
annuitant are under age 76 on the contract date, you can elect either Option A
or Option B in your application. If either you or the annuitant are age 76 or
older on the contract date, Option B will apply. 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").
<PAGE>
Option A
We will pay the beneficiary the greatest of:
1. the contract value; or
2. the total purchase payments paid less "adjustments for partial withdrawals;"
or
3. the "maximum anniversary value" immediately preceding the date of death
increased by the dollar amount of any payments since that anniversary and
reduced by any adjustments for partial withdrawals since that anniversary.
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 adjustments for 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 adjustments for partial withdrawals.
Option B
We will pay the beneficiary the greatest of:
1. the contract value; or
2. the total purchase payments paid less "adjustments for partial withdrawals;"
or
3. the maximum fifth year anniversary value immediately preceding the date of
death increased by the dollar amount of any payments since that fifth
anniversary and reduced by any adjustments for partial withdrawals since
that fifth anniversary.
Maximum fifth year anniversary value: Each fifth contract anniversary prior to
the earlier of your or the annuitant's 86th birthday, we calculate the fifth
year anniversary value which is the greater of:
(a) the contract value on that anniversary; or
(b) total payments made to the contract minus adjustments for partial
withdrawals.
The "maximum fifth year anniversary value" is equal to the greatest of these
fifth year anniversary values.
After your or the annuitant's 86th birthday, the death benefit continues to be
the death benefit value as of that date, plus any subsequent payments and minus
any adjustments for partial withdrawals.
Adjustments for partial withdrawals: Under either Option A or Option B, we
calculate "adjustments for partial withdrawals" for each partial withdrawal as
the product of (a) times (b) where:
(a) is the ratio of the amount of the partial withdrawal (including any
applicable withdrawal charge) to the contract value on the date of (but
prior to) the partial withdrawal; and
(b) is the death benefit on the date of (but prior to) the partial
withdrawal.
<PAGE>
Example:
Option A
o The contract is purchased with a payment of $20,000 on January 1, 1999.
o On January 1, 2000 (the first contract anniversary) the contract value has
grown to $24,000.
o On March 1, 2000 the contract value has fallen to $22,000, at which point th
owner takes a $1,500 partial withdrawal, leaving a contract value of $20,500.
The death benefit on March 1, 2000 is calculated as follows:
The highest contract value on any prior contract anniversary: $24,000.00
plus any purchase payments paid since that anniversary: + 0.00
less any "adjusted partial withdrawal" taken since that
anniversary, calculated as: 1,500 x 24,000 = -1,636.36
22,000
for a death benefit of: $22,363.64
Example:
Option B
o The contract is purchased with a payment of $20,000 on January 1, 1999.
o On January 1, 2004 (the fifth contract anniversary) the contract value has
grown to $35,000.
o On March 1, 2005 the contract value has fallen to $32,000, at which point the
owner takes a $1,500 partial withdrawal, leaving a contract value of $30,500.
The death benefit on March 1, 2005 is calculated as follows:
The highest contract value on any prior contract anniversary: $35,000.00
plus any purchase payments paid since that anniversary: + 0.00
less any "adjusted partial withdrawal" taken since that anniversary,
calculated as: 1,500 x 35,000 = -1,640.63
32,000
for a death benefit of: $33,359.37
<PAGE>
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").
The Annuity Payout Period
As owner of the contract, you have the right to decide how and to whom annuity
payouts will be made starting at the retirement date. You may select one of the
annuity payout plans outlined below, or we may mutually agree on other payout
arrangements. We do not deduct withdrawal charges under the payout plans listed
below.
You also decide whether we will make annuity payouts on a fixed or variable
basis, or a combination of fixed and variable. The amount available to purchase
payouts under the plan you select is the contract value on your retirement date
(less any applicable premium tax). You may reallocate this contract value to the
fixed account to provide fixed dollar payouts and/or among the subaccounts to
provide variable annuity payouts. During the annuity payout period, we reserve
the right to limit the number of subaccounts in which you may invest.
Amounts of fixed and variable payouts depend on:
o the annuity payout plan you select;
o the annuitant's age and, in most cases, sex;
o the annuity table in the contract; and
o the amounts you allocated to the 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 underlying funds will fluctuate. (In the
case of fixed annuities, payouts remain the same from month to month). For
information with respect to transfers between accounts after annuity payouts
begin, see "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.
<PAGE>
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 are declining.
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.
If we do not receive instructions: You must give us written instructions for the
annuity payouts at least 30 days before the annuitant's retirement date. If you
do not, we will make payouts under Plan B, with 120 monthly payouts guaranteed.
Contract values that you have allocated to the fixed account will provide fixed
dollar payouts and contract values that you have allocated among the subaccounts
will provide variable annuity payouts.
<PAGE>
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 adviser for more information about these distribution rules.
Annuity payouts under nonqualified annuities: A portion of each payout will be
ordinary income and subject to tax, and a portion of each payout will be
considered a return of part of your investment and will not be taxed. All
amounts you receive after your investment in the 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.
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.
<PAGE>
Annuities owned by corporations, partnerships or trusts: For nonqualified
annuities any annual increase in the value of annuities held by such entities
generally will be treated as ordinary income received during that year. This
provision is effective for purchase payments made after Feb. 28, 1986. However,
if the trust was set up for the benefit of a natural person only, the income
will remain tax deferred.
Penalties: If you receive amounts from your contract before reaching age 59 1/2,
you may have to pay a 10% IRS penalty on the amount includable in your ordinary
income. However, this penalty will not apply to any amount received by you or
your beneficiary:
o because of your death;
o because you become disabled (as defined in the Code);
o if the distribution is part of a series of substantially equal periodic
payments, made at least annually, over your life or life expectancy (or
joint lives or life expectancies of you and your beneficiary); or
o if it is allocable to an investment before Aug. 14, 1982 (except for
qualified annuities).
For a qualified annuity, other penalties or exceptions may apply if you make
withdrawals from your contract before your plan specifies that payouts can be
made.
Withholding, generally: If you receive all or part of the contract value, we may
deduct withholding against the taxable income portion of the payment. Any
withholding represents a prepayment of your tax due for the year. You take
credit for these amounts on your annual tax return.
If the payment is part of an annuity payout plan, we generally compute the
amount of withholding using payroll tables. You may provide us with a statement
of how many exemptions to use in calculating the withholding. As long as you've
provided us with a valid Social Security Number or Taxpayer Identification
Number, you can elect not to have any withholding occur.
If the distribution is any other type of payment (such as a partial or full
withdrawal) we compute withholding using 10% of the taxable portion. Similar to
above, as long as you have provided us with a valid Social Security Number or
Taxpayer Identification Number, you can elect not to have this withholding
occur.
Some states also 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% 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.
<PAGE>
Transfer of ownership of a nonqualified annuity: If you transfer a nonqualified
annuity without receiving adequate consideration, the transfer is a gift and
also may be a withdrawal for federal income tax purposes. If the gift is a
currently taxable event for income tax purposes, the original owner will be
taxed on the amount of deferred earnings at the time of the transfer and also
may be subject to the 10% IRS penalty discussed earlier. In this case, the new
owner's investment in the 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 adviser if you have any questions about taxation of your contract.
Tax qualification
We intend that the contract qualify as an annuity for federal income tax
purposes. To that end, the provisions of the contract are to be interpreted to
ensure or maintain such tax qualification, in spite of any other provisions of
the contract. We reserve the right to amend the contract to reflect any
clarifications that may be needed or are appropriate to maintain such
qualification or to conform the contract to any applicable changes in the tax
qualification requirements. We will send you a copy of any amendments.
Voting Rights
As a contract owner with investments in the variable 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 variable subaccount to the total
number of votes allowed to the subaccount.
After annuity payouts begin, the number of votes you have is equal to:
o the reserve held in each subaccount for your contract; divided by
o the net asset value of one share of the applicable fund.
As we make annuity payouts, the reserve for the contract decreases; therefore,
the number of votes also will decrease.
We calculate votes separately for each subaccount. We will send notice of these
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 have received instructions.
Substitution of Investments
We may change the funds in which the subaccounts invest if:
o laws or regulations change;
o the 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.
<PAGE>
We may also:
o add new subaccounts;
o combine any two or more subaccounts;
o make additional subaccounts investing in additional funds;
o transfer assets to and from the subaccounts or the variable
account; and
o eliminate or close any subaccounts.
In the event of substitution or any of these changes, 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.
Distribution of the Contract
American Express Financial Advisors Inc. (AEFA), serves as the principal
underwriter for the contract. Its home office is located at IDS Tower 10,
Minneapolis, Mn 55440. AEFA is a wholly-owned subsidiary of American Express
Financial Corporation (AEFC) which is a wholly-owned subsidiary of American
Express Company.
The contracts will be distributed by broker-dealers which have entered into
distribution agreements with AEFA and American Enterprise Life.
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 will pay the
commissions as a combination of a certain amount of the commission at the time
of sale and a trail commission (which, when totaled, could exceed 7% of purchase
payments). In addition, 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.
About American Enterprise Life
American Enterprise Life issues the annuities. American Enterprise Life is a
wholly-owned subsidiary of IDS Life, which is a wholly-owned subsidiary of AEFC.
AEFC is a wholly-owned subsidiary of American Express Company. American Express
Company is a financial services company principally engaged through subsidiaries
(in addition to AEFC) in travel related services, investment services and
international banking services.
American Enterprise Life is a stock life insurance company organized in 1981
under the laws of the state of Indiana. Its administrative offices are located
at 80 South Eighth Street, Minneapolis, MN 55402. Its statutory address is 100
Capitol Center South, 201 North Illinois Street, Indianapolis, IN 46204.
American Enterprise Life conducts a conventional life insurance business.
<PAGE>
Legal Proceedings
A number of lawsuits have been filed against life and health insurers in
jurisdictions in which American Enterprise Life and AEFC do business involving
insurers' sales practices, alleged agent misconduct, failure to properly
supervise agents and other matters. American Enterprise Life and AEFC, like
other life and health insurers, from time to time are involved in such
litigation. On October 13, 1998, an action entitled Richard W. and Elizabeth J.
Thoresen vs. American Express Financial Corporation, American Centurion Life
Assurance Company, American Enterprise Life Insurance Company, American Partners
Life Insurance Company, IDS Life Insurance Company and IDS Life Insurance
Company of New York was commenced in Minnesota State Court. The action was
brought by individuals who purchased an annuity in a qualified plan. They allege
that the sale of annuities in tax-deferred contributory retirement investment
plans (e.g., IRAs) is never appropriate. The plaintiffs purport to represent a
class consisting of all persons who made similar purchases. The plaintiffs seek
damages in an unspecified amount. American Enterprise Life also is a defendant
in various other lawsuits. In American Enterprise Life's opinion, none of these
lawsuits will have a material adverse effect on our financial condition.
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 Amerian 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 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 Platinum Variable Annuitysm
AIM Variable Insurance Funds, Inc.
American Express Variable Portfolio Funds
Dreyfus Variable Investment Funds
Oppenheimer Variable Account Funds
Putnam Variable Trust
Wright Managed Blue Chip Series Trust
Mail your request to:
American Enterprise Life Insurance Company
80 South Eighth Street
P.O. Box 534
Minneapolis, MN 55440-0534
800-333-3437
American Enterprise Life will mail your request to:
Your name
Address
City State Zip
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
for
AMERICAN EXPRESS PLATINUM 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 variable 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 variable
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 10 years
(or, if less, up to the life of the subaccounts), calculated according to the
following formula:
P(1+T)n = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the one-, five-, or
10-year (or other) period at the end of the one-,
five-, or 10-year (or other) period (or fractional
portion thereof)
<PAGE>
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 had existed at that time, which it did not. Past
performance does not guarantee future results.
<TABLE>
<CAPTION>
Average Annual Total Return For Period Ended Dec. 31, 1998
Average Annual Total Return with Withdrawal
Performance since
Commencement of the Performance Since
Subaccount** Commencement of the Fund**
Subaccount Investing in: Since Since
1 Year Commencement 1 Year 5 Year 10 Year Commencement
------ ------------ ------ ------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
AIM V.I.
ECA Capital Appreciation Fund -- % -- % 9.06% 14.94% -- % 16.20%
(___; 5/93)*
EIN International Equity Fund 6.77 8.40 5.29 8.92 -- 10.72
(10/97; 5/93)
EVA Value Fund (10/97; 5/93) 23.45 23.61 21.97 19.37 -- 19.26
AXPSM Variable Portfolio
ESI Bond Fund (2/95; 10/81) -6.32 6.78 -7.65 4.32 7.24 --
EMS Cash Management Fund (2/95; -2.99 2.57 -4.38 2.39 3.67 --
10/81)
EIA Extra Income Fund (___; 5/96) -- -- -20.66 -- -- -7.52
EMG Managed Fund (2/95; 4/86) 7.07 16.33 5.59 11.55 12.78 --
EGD New Dimensions Fund (10/97; 19.74 21.86 18.26 -- --
5/96)
Dreyfus Variable Investment
EDS Disciplined Stock Portfolio -- -- 16.39 -- -- 25.14
(___; 5/96)
ECO Small Company Stock Portfolio -- -- -14.41 -- -- 4.04
(___; 5/96)
ESR Socially Responsible Growth -- -- 19.01 20.18 -- 20.54
Fund (___; 10/93)
OPPENHEIMER VARIABLE ACCOUNT
EGS Global Securities Fund (___; -- -- 3.93 7.31 -- 10.13
11/90)
EGC Mainstreet Growth & Income -- -- -4.93 -- -- 23.60
Fund (___; 7/95)
EST Strategic Bond Fund (___; 5/93) -- -- -6.72 4.30 -- 4.05
PUTNAM VT FUNDS
EPG Growth and Income Fund - Class -- 10.95 5.09 16.58 14.07 --
IB Shares (10/98; 2/88)
EPI International Growth and -- -- 1.10 -- -- 9.64
Income Fund - Class IB Shares
(___; 1/97)
EPT Vista Fund - Class IB Shares -- -- 9.24 -- -- --
(___; 1/97)
WRIGHT
ECV Catholic Values Equity -- -- -- -- -- --
Investment Portfolio (___; ___)
EIB International Blue Chip -- -- -5.11 -- -- 2.60
Portfolio (___; 1/94)
EBC Selected Blue Chip Portfolio -- -- -11.41 -- -- 10.65
(___; 1/94)
* (Commencement date of the subaccount; Commencement date of the fund)
** Current applicable charges deducted from fund performance include a $30
contract administrative charge, a 1.25% mortality and expense risk fee and a
0.15% variable account administrative charge and applicable withdrawal charges.
<PAGE>
Average Annual Total Return without Withdrawal
Performance since
Commencement of the Performance Since
Subaccount** Commencement of the Fund**
Subaccount Investing in: Since Since
1 Year Commencement 1 Year 5 Year 10 Year Commencement
------ ------------ ------ ------ ------- ------------
AIM V.I.
ECA Capital Appreciation Fund -- % -- % 17.56% 15.50% -- % 16.55%
(___; 5/93)*
EIN International Equity Fund 13.77 13.44 13.79 9.62 -- 11.16
(10/97; 5/93)
EVA Value Fund (10/97; 5/93) 30.45 28.55 30.47 19.86 -- 19.57
AXPSM Variable Portfolio
ESI Bond Fund (2/95; 10/81) -0.02 7.62 0.00 5.15 7.24 --
EMS Cash Management Fund (2/95; 3.56 3.52 3.58 3.28 3.67 --
10/81)
EIA Extra Income Fund (___; 5/96) -- -- -14.22 -- -- -4.87
EMG Managed Fund (2/95; 4/86) 14.07 16.99 14.09 12.18 12.78 --
EGD New Dimensions Fund (10/97; 26.74 26.78 26.76 -- -- 22.27
5/96)
Dreyfus Variable Investment
EDS Disciplined Stock Portfolio -- -- 24.89 -- -- 27.17
(___; 5/96)
ECO Small Company Stock Portfolio -- -- -7.39 -- -- 6.79
(___; 5/96)
ESR Socially Responsible Growth -- -- 27.51 20.66 -- 20.89
Fund (___; 10/93)
OPPENHEIMER VARIABLE ACCOUNT
EGS Global Securities Fund (___; -- -- 12.43 8.05 -- 10.13
11/90)
EGC Mainstreet Growth & Income -- -- 2.98 -- -- 24.77
Fund (___; 7/95)
EST Strategic Bond Fund (___; 5/93) -- -- 1.02 5.14 -- 4.63
PUTNAM VT FUNDS
EPG Growth and Income Fund - Class -- 17.95 13.59 17.11 14.07 --
IB Shares (10/98; 2/88)
EPI International Growth and -- -- 9.56 -- -- 13.46
Income Fund - Class IB Shares
(___; 1/97)
EPT Vista Fund - Class IB Shares -- -- 17.74 -- -- 19.53
(___; 1/97)
WRIGHT
ECV Catholic Values Equity -- -- -- -- -- --
Investment Portfolio (___; ___)
EIB International Blue Chip -- -- 2.78 -- -- 3.49
Portfolio (___; 1/94)
EBC Selected Blue Chip Portfolio -- -- -4.11 -- -- 11.31
(___; 1/94)
* (Commencement date of the subaccount; Commencement date of the fund)
** Current applicable charges deducted from fund performance include a $30
contract administrative charge, a 1.25% mortality and expense risk fee and a
0.15% variable account administrative charge.
</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 variable subaccount's
accumulation unit value). We compute aggregate total return using the following
formula:
ERV - P
P
where: P = a hypothetical initial payment of $1,000
ERV = Ending Redeemable Value of a hypothetical $1,000 payment
made at the beginning of the one-, five-, or 10- year (or
other) period at the end of the one-, five-, or 10- year (or
other) period (or fractional portion thereof)
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
10- year periods (or, if less, up to the life of the variable subaccount).We
also may show performance figures without the deduction of a withdrawal charge.
In addition, all total return figures reflect the deduction of all other
applicable charges including the contract administrative charge, the variable
account administrative charge and the mortality and expense risk fee.
Calculation of Yield for Variable Subaccounts Investing in Money Market Funds
Annualized Simple Yield
For variable subaccounts investing in money market funds, we base quotations of
simple yield on:
(a) the change in the value of a hypothetical variable 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 variable subaccount expenses
accrued over the period;
(c) dividing the difference by the value of the variable subaccount
at the beginning of the period to obtain the base period return;
and
(d) multiplying the base period return by 365/7.
The variable subaccount's value includes:
o any declared dividends;
o the value of any shares purchased with dividends paid during the
period; and
o any dividends declared for such shares.
It does not include:
o the effect of any applicable withdrawal charge; or
o any realized or unrealized gains or losses.
Annualized Compound Yield
We calculate compound yield using the base period return described above, which
we then compound according to the following formula:
Compound Yield = [(Base Period Return + 1)365/7] - 1
Annualized Yields Based on the Seven-Day Period Ending Dec. 31, 1998
<TABLE>
<CAPTION>
Subaccount Investing In Simple Yield Compound Yield
- - ---------- ------------ ------------ --------------
<S> <C> <C>
EMS AXPSM Variable Portfolio - Cash Management Fund 3.24% 3.29%
</TABLE>
<PAGE>
Annualized Yield for Subaccounts Investing in Income Funds
For the variable 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 variable 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 in which the
variable subaccount invests.
Annualized Yield Based on 30-Day Period Ended Dec. 31, 1998
Subaccount Investing In Yield
- - ---------- ------------ -----
ESI AXPSM Variable Portfolio - Bond Fund 7.20%
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 Business 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.
<PAGE>
CALCULATING ANNUITY PAYOUTS
The Variable Account
We do the following calculations separately for each of the subaccounts of the
variable account. The separate monthly payouts, added together, make up your
total variable annuity payout.
Initial Payout: To compute your first monthly payment, we:
o determine the dollar value of your annuity as of the valuation date
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
the closest 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 the
closest 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.
<PAGE>
RATING AGENCIES
The following chart reflects the ratings given to us by independent rating
agencies. These agencies evaluate the financial soundness and claims-paying
ability of insurance companies based on a number of different factors. This
information does not relate to the management or performance of the variable
subaccounts of the annuity. 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 contract.
Rating agency Rating
A.M. Best A+
(Superior)
Duff & Phelps AAA
Moody's Aa2
PRINCIPAL UNDERWRITER
The principal underwriter for the contract is American Express Financial
Advisors Inc. (AEFA) which offers them on a continuous basis.
INDEPENDENT AUDITORS
The financial statements appearing in this Statement of Additional Information
have been audited by Ernst & Young LLP (1400 Pillsbury Center, 200 South Sixth
Street, Minneapolis, MN 55402), independent auditors, as stated in their report
appearing herein.
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 EGN, EIN, EVA, EIG, EVL, ELA, EPA, EAG, ECR, EGD, EIE,
EMG, EMS, ESI, ESB, EWG, EEQ, EMD, ESC, EUS, EGR, EHI, EDI, EPD, EGI, EPG, EHY,
EPH, ENO and EPV) as of December 31, 1998, and the related statements of
operations for the year then ended, except for subaccounts EIG, EVL, EPD, EPG,
EPH and EPV, which are 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 EGN,
EIN, EVA, EGD, ESB, EWG, EEQ, ESC, EGR and EHI which are for the year ended
December 31, 1998 and for the period October 30, 1997 (commencement of
operations) to December 31, 1997 and subaccounts EIG, EVL, EPD, EPG, EPH and
EPV, which are 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
Statements of Changes in Net Assets Year ended Dec. 31, 1997
Segragated Asset Subaccount Combined
Variable
Operations EIN* EVA* EGD* EMG EMS ESI Account
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income (loss) - net $ 660 $ 1,408 $ (27) $375,811 $ 10,527 $206,530 $594,909
Net realized gain (loss) on investments - - - 9,422 - 956 10,378
Net change in unrealized appreciation or
depreciation of investments (310) (991) 1,378 110,879 (2) (31,454) 79,500
---- ---- ----- ------- -- ------- ------
Net increase (decrease) in net assets
resulting from operations 350 417 1,351 496,112 10,525 176,032 684,787
--- --- ----- ------- ------ ------- -------
Contract transactions
Contract purchase payments 58,196 66,156 70,697 2,390,284 327,812 1,670,135 4,583,280
Net transfers** - 1,184 - (72,853) (234,808) (29,630) (336,107)
Contract terminations:
Surrender benefits and contract charges - - - (192,773) (100,987) (139,046) (432,806)
Death benefits - - - (7,254) - (6,105) (13,359)
---- ---- ---- ------ ---- ------ -------
Increase (decrease) from contract transactions 58,196 67,340 70,697 2,117,404 (7,983) 1,495,354 3,801,008
------ ------ ------ --------- ------ --------- ---------
Net assets at beginning of year - - - 2,099,212 256,723 1,702,800 4,058,735
---- ---- ---- --------- ------- --------- ---------
Net assets at end of year $ 58,546 $ 67,757 $ 72,048 $4,712,728 $259,265 $3,374,186 $8,544,530
Accumulation unit activity
Units outstanding at beginning of year - - - 1,545,535 240,823 1,377,190
Contract purchase payments 57,468 64,716 68,572 1,581,579 302,938 1,304,174
Net transfers** - 1,159 - (49,221) (215,723) (24,030)
Contract terminations:
Surrender benefits and contract charges - - - (128,743) (96,782) (108,787)
Death benefits - - - (4,942) - (4,829)
---- ---- ---- ------ ---- ------
Units outstanding at end of year 57,468 65,875 68,572 2,944,208 231,256 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>
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
Statements of Net Assets Dec. 31, 1998
Segregated Asset Subaccounts
Assets EIN EVA EGD EMG EMS
Investments in shares of mutual funds:
<S> <C> <C> <C> <C> <C>
at cost $ 982,557 $2,129,905 $1,273,181 $ 8,289,853 $858,797
---------- ---------- ---------- ----------- --------
at market value $1,005,337 $2,391,678 $1,465,483 $ 8,564,185 $858,800
Dividends receivable - - - - 3,497
Accounts receivable from American Enterprise Life for
contract purchase payments 880 1,237 6,154 21,217 -
---- ---- ---- ---- ----
Total assets 1,006,217 2,392,915 1,471,637 8,585,402 862,297
========= ========= ========= ========= =======
Liabilities
Payable to American Enterprise Life for:
Mortality and expense risk fee 1,020 2,413 1,513 8,984 918
Issue and administrative fee 122 290 182 1,078 110
Payable to mutual funds
for investments purchased 880 1,237 4,459 11,155 2,469
--- ----- ----- ------ -----
Total liabilities 2,022 3,940 6,154 21,217 3,497
===== ===== ===== ====== =====
Net assets applicable to contracts in
accumulation period 1,004,195 2,388,975 1,465,483 8,559,908 858,800
Net assets applicable to contracts in
payment period - - - 4,277 -
---- ---- ---- ----- ----
Total net assets $1,004,195 $2,388,975 $1,465,483 $ 8,564,185 $858,800
========== ========== ========== =========== ========
Accumulation units outstanding 865,556 1,778,901 1,108,323 4,684,466 749,301
======= ========= ========= ========= =======
Net asset value per accumulation unit $ 1.16 $ 1.34 $ 1.32 $ 1.83 $ 1.15
====== ====== ====== ====== ======
American Enterprise Variable Annuity Account
Statements of Net Assets
Combined
Variable
Assets ESI EPG Account
Investments in shares of mutual funds:
at cost $7,944,815 $ 269,558 $ 21,748,666
---------- --------- ------------
at market value $7,553,609 $ 282,397 $ 22,121,489
Dividends receivable 45,255 - 48,752
Accounts receivable from American Enterprise Life for
contract purchase payments 16,799 2,714 49,001
---- ---- ----
Total assets 7,615,663 285,111 22,219,242
========= ======= ==========
Liabilities
Payable to American Enterprise Life for:
Mortality and expense risk fee 7,851 237 22,936
Issue and administrative fee 942 29 2,753
Payable to mutual funds
for investments purchased 53,261 2,714 76,175
------ ----- ------
Total liabilities 62,054 2,980 101,864
====== ===== =======
Net assets applicable to contracts in
accumulation period 7,550,694 282,131 22,110,186
Net assets applicable to contracts in
payment period 2,915 - 7,192
----- ---- -----
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 EIN EVA EGD EMG EMS
<S> <C> <C> <C> <C> <C>
Dividend income from mutual funds $ 7,628 $104,609 $ 4,537 $ 886,695 $ 30,212
------- -------- ------- --------- --------
Expenses:
Mortality and expense risk fee 6,286 12,205 8,135 82,016 7,605
Administrative charge 754 1,464 976 9,842 912
--- ----- --- ----- ---
Total expenses 7,040 13,669 9,111 91,858 8,517
----- ------ ----- ------ -----
Investment income (loss) - net 588 90,940 (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 13,508 16,585 20,854 135,373 967,780
Cost of investments sold 14,104 16,107 20,096 129,027 967,779
------ ------ ------ ------- -------
Net realized gain (loss) on investments (596) 478 758 6,346 1
Net change in unrealized appreciation or
depreciation of investments 23,090 262,764 190,924 55,365 3
------ ------- ------- ------ -
Net gain (loss) on investments 22,494 263,242 191,682 61,711 4
------ ------- ------- ------ -
Net increase (decrease) in net assets
resulting from operations $ 23,082 $354,182 $ 187,108 $ 856,548 $ 21,699
======== ======== ========= ========= ========
Combined
Variable
Investment income ESI EPG* Account
Dividend income from mutual funds $415,320 $ - $ 1,449,001
-------- -- -----------
Expenses:
Mortality and expense risk fee 68,547 367 185,161
Administrative charge 8,226 44 22,218
----- -- ------
Total expenses 76,773 411 207,379
------ --- -------
Investment income (loss) - net 338,547 (411) 1,241,622
------- ---- ---------
Realized and unrealized gain (loss) on investments - net
Realized gain (loss) on sales of investments
in mutual funds:
Proceeds from sales 86,664 - 1,240,764
Cost of investments sold 89,531 - 1,236,644
------ --- ---------
Net realized gain (loss) on investments (2,867) - 4,120
Net change in unrealized appreciation or
depreciation of investments (378,318) 12,839 166,667
-------- ------ -------
Net gain (loss) on investments (381,185) 12,839 170,787
-------- ------ -------
Net increase (decrease) in net assets
resulting from operations $ (42,638) $ 12,428 $ 1,412,409
========= ======== ===========
*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 EIN EVA EGD EMG EMS
<S> <C> <C> <C> <C> <C>
Investment income (loss) - net $ 588 $ 90,940 $ (4,574) $ 794,837 $ 21,695
Net realized gain (loss) on investments (596) 478 758 6,346 1
Net change in unrealized appreciation or
depreciation of investments 23,090 262,764 190,924 55,365 3
------ ------- ------- ------ -
Net increase (decrease) in net assets
resulting from operations 23,082 354,182 187,108 856,548 21,699
------ ------- ------- ------- ------
Contract transactions
Contract purchase payments 871,262 1,616,894 1,111,110 3,376,704 691,275
Net transfers** 73,375 381,890 126,930 (21,220) (85,043)
Annuity payments - - - (118) -
Contract terminations:
Surrender benefits and contract charges (20,202) (25,796) (25,802) (335,067) (28,396)
Death benefits (1,868) (5,952) (5,911) (25,390) -
------ ------ ------ ------- ----
Increase (decrease) from contract transactions 922,567 1,967,036 1,206,327 2,994,909 577,836
------- --------- --------- --------- -------
Net assets at beginning of year 58,546 67,757 72,048 4,712,728 259,265
------ ------ ------ --------- -------
Net assets at end of year $1,004,195 $2,388,975 $1,465,483 $ 8,564,185 $858,800
========== ========== ========== =========== ========
Accumulation unit activity
Units outstanding at beginning of year 57,468 65,875 68,572 2,944,208 231,256
Contracts purchase payments 768,632 1,418,576 965,321 2,000,537 635,551
Net transfers** 65,124 327,920 108,613 (16,062) (79,775)
Contract terminations:
Surrender benefits and contract charges (24,010) (28,544) (29,255) (229,369) (37,731)
Death benefits (1,658) (4,926) (4,928) (14,848) -
------ ------ ------ ------- ----
Units outstanding at end of year 865,556 1,778,901 1,108,323 4,684,466 749,301
======= ========= ========= ========= =======
Combined
Variable
Operations ESI EPG* Account
Investment income (loss) - net $ 338,547 $ (411) $ 1,241,622
Net realized gain (loss) on investments (2,867) - 4,120
Net change in unrealized appreciation or
depreciation of investments (378,318) 12,839 166,667
-------- ------ -------
Net increase (decrease) in net assets
resulting from operations (42,638) 12,428 1,412,409
------- ------ ---------
Contract transactions
Contract purchase payments 4,304,628 217,969 12,189,842
Net transfers** 243,040 53,032 772,004
Annuity payments (74) - (192)
Contract terminations:
Surrender benefits and contract charges (297,229) (1,298) (733,790)
Death benefits (28,304) - (67,425)
------- ---- -------
Increase (decrease) from contract transactions 4,222,061 269,703 12,160,439
--------- ------- ----------
Net assets at beginning of year 3,374,186 - 8,544,530
--------- ---- ---------
Net assets at end of year $7,553,609 $ 282,131 $ 22,117,378
========== ========= ============
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>
<TABLE>
<CAPTION>
Condensed Financial Information (Unaudited)
The following tables give per-unit information about the financial history of
each subaccount.
Year ended Dec. 31,
<S> <C> <C> <C> <C>
1998 1997 1996 1995
Subaccount EIN2 (Investing in shares of AIM V.I. International Equity Fund)
Accumulation unit $1.02 $1.00 -- --
value at beginning
of period
Accumulation unit value $1.16 $1.02 -- --
at end of period
Number of accumulation 866 57 -- --
units outstanding at end
of period (000 omitted)
Ratio of operating 1.40% 1.40% -- --
expense to average
net assets
Subaccount EVA2 (Investing in shares of AIM V.I. Value Fund)
Accumulation unit $1.03 $1.00 -- --
value at beginning
of period
Accumulation unit value $1.34 $1.03 -- --
at end of period
Number of accumulation 1,779 66 -- --
units outstanding at end
of period (000 omitted)
Ratio of operating 1.40% 1.40% -- --
expense to average
net assets
Subaccount EGD2 (Investing in shares of IDS Life Growth Dimensions Fund)
Accumulation unit $1.05 $1.00 -- --
value at beginning
of period
Accumulation unit value $1.32 $1.05 -- --
at end of period
Number of accumulation 1,108 69 -- --
units outstanding at end
of period (000 omitted)
Ratio of operating 1.40% 1.40% -- --
expense to average
net assets
Subaccount EMG1 (Investing in shares of IDS Life Managed Fund)
Accumulation unit $1.60 $1.36 $1.18 $1.00
value at beginning
of period
Accumulation unit value $1.83 $1.60 $1.36 $1.18
at end of period
Number of accumulation 4,684 2,944 1,546 589
units outstanding at end
of period (000 omitted)
Ratio of operating 1.40% 1.40% 1.50% 1.50%
expense to average
net assets
</TABLE>
<TABLE>
<CAPTION>
Subaccount EMS1 (Investing in shares of IDS Life Moneyshare Fund)
<S> <C> <C> <C> <C>
Accumulation unit $1.11 $1.07 $1.03 $1.00
value at beginning
of period
Accumulation unit value $1.15 $1.11 $1.07 $1.03
at end of period
Number of accumulation 749 231 241 132
units outstanding at end
of period (000 omitted)
Ratio of operating 1.40% 1.40% 1.50% 1.50%
expense to average
net assets
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 IDS Life Special Income Fund)
Accumulation unit $1.33 $1.24 $1.17 $1.00
value at beginning
of period
Accumulation unit value $1.33 $1.33 $1.24 $1.17
at end of period
Number of accumulation 5,689 2,544 1,377 414
units outstanding at end
of period (000 omitted)
Ratio of operating 1.40% 1.40% 1.50% 1.50%
expense to average
net assets
Subaccount EPG3 (Investing in shares of Putnam VT Growth and Income Fund --
Class IB Shares)
Accumulation unit $1.00 -- -- --
value at beginning
of period
Accumulation unit value $1.18 -- -- --
at end of period
Number of accumulation 239 -- -- --
units outstanding at end
of period (000 omitted)
Ratio of operating 1.40% -- -- --
expense to average
net assets
1 Operations commenced on Feb. 21, 1995.
2 Operations commenced on Oct. 30, 1997.
3 Operations commenced on Oct. 5, 1998.
4 Net of annual contract administrative charge and mortality and expense
risk fee.
</TABLE>
<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 or portfolios (collectively,
the Funds), which are registered under the 1940 Act as diversified open-end
management investment companies and have the following investment managers.
Subaccount Invests exclusively in shares of Investment Manager
<S> <C> <C>
EIN AIM V.I. International Equity Fund A I M Advisors, Inc.
EVA AIM V.I. Value Fund A I M Advisors, Inc.
EGD IDS Life Growth Dimensions Fund IDS Life Insurance Company 1
EMG IDS Life Managed Fund IDS Life Insurance Company 1
EMS IDS Life Moneyshare Fund IDS Life Insurance Company 1
ESI IDS Life Special Income 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.
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.
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>
EIN AIM V.I. International Equity Fund 51,240 $19.62
EVA AIM V.I. Value Fund 91,112 26.25
EGD IDS Life Growth Dimensions Fund 83,670 17.52
EMG IDS Life Managed Fund 462,427 18.52
EMS IDS Life Moneyshare Fund 858,872 1.00
ESI IDS Life Special Income Fund 680,095 11.11
EPG Putnam VT Growth and Income Fund - Class IB Shares 9,822 28.75
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>
EIN1 AIM V.I. International Equity Fund $ 937,757 $ 58,904
EVA1 AIM V.I. Value Fund 2,077,208 68,804
EGD1 IDS Life Growth Dimensions Fund 1,222,554 70,723
EMG IDS Life Managed Fund 3,919,323 2,585,442
EMS IDS Life Moneyshare Fund 1,567,312 543,283
ESI IDS Life Special Income Fund 4,647,272 1,813,929
EPG2 Putnam VT Growth and Income Fund - Class IB Shares 269,558 --
------- ---------
Combined Variable Account $14,640,984 $5,141,085
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 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 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.
</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, is filed electronically herewith.
2. Not applicable.
3 Form of Selling Agreement for American Enterprise Life Insurance Company
Variable Annuities is filed electronically herewith.
4.1 Form of Deferred Annuity Contract (form 43410) is filed electronically
herewith.
4.2 Form of Roth IRA Endorsement (form 43353) filed as Exhibit 4.2 to the
American Enterprise Variable Annuity Account Registration Statement No.
333-67595, filed on or about November 20, 1998, is incorporated herein
by reference.
4.3 Form of SEP-IRA Endorsement (form 43412) is filed electronically
herewith.
4.4 Form of TSA Endorsement (form 43413) is filed electronically herewith.
5. Form of Variable Annuity Application (form 43411) is filed
electronically herewith.
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.
<PAGE>
8.1(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.
8.1(b) Form of Amendment 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.
8.2(a) Copy of Participation Agreement among Oppenheimer Trust and American
Enterprise Life Insurance Company, dated October 30, 1997, filed
electronically as Exhibit 8.4 to Post-Effective Amendment No. 10 to
Registration Statement No. 33-54471, is incorporated herein by
reference.
8.2(b) Copy of Amendment 1 to Participation Agreement among Oppenheimer
Variable Account Funds, OppenheimerFunds, Inc. and American Enterprise
Life Insurance Company dated June 15, 1999, is filed electronically
herewith.
8.3 Copy of Participation Agreement among AIM Variable Insurance Funds and
American Enterprise Life Insurance Company, dated October 30, 1997,
filed electronically as Exhibit 8.5 to Post-Effective Amendment No. 10
to Registration Statement No. 33-54471, is incorporated herein by
reference.
8.3(b) Form of Participation Agreement among Wright Managed Blue Chip
Series Trust, Wright Investors' Service Inc. and American Enterprise
Life Insurance Company, dated June 30, 1999, is filed electronically
herewith.
9. Opinion of counsel and consent to its use as to the legality of the
securities being registered, is filed electronically herewith.
10. Consent of Independent Auditors, is filed electronically herewith.
11. None.
12. Not applicable.
13. Copy of schedule for computation of each performance quotation provided
in the Registration Statement in response to Item 21, is filed
electronically herewith.
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.
<PAGE>
<TABLE>
<CAPTION>
Item 25 Directors and Officers of the Depositor (American Enterprise Life
Insurance Company)
<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
<PAGE>
</TABLE>
Item 26. Persons Controlled by or Under Common Control with the Depositor
or Registrant
American Enterprise Life Insurance Company is a wholly-owned
subsidiary of IDS Life Insurance Company which is a
wholly-owned subsidiary of American Express Financial
Corporation. American Express Financial Corporation is a
wholly-owned subsidiary of American Express Company (American
Express).
<TABLE>
<CAPTION>
The following list includes the names of major subsidiaries of American Express.
Jurisdiction of
Name of Subsidiary
Incorporation
<S> <C>
I. Travel Related Services
American Express Travel Related Services Company, Inc. New York
II. International Banking Services
American Express Bank Ltd.
Connecticut
III. Companies engaged in Financial Services
Advisory Capital Strategies Group Inc. Minnesota
American Centurion Life Assurance Company New York
American Enterprise Investment Services Inc. Minnesota
American Enterprise Life Insurance Company Indiana
American Express Asset Management Group Inc. Minnesota
American Express Asset Management International Inc. Delaware
American Express Asset Management International (Japan) Ltd. Japan
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:
IDS Bond Fund, Inc.; IDS California Tax-Exempt Trust; IDS Discovery
Fund, Inc.; IDS Equity Select Fund, Inc.; IDS Extra Income Fund, Inc.;
IDS Federal Income Fund, Inc.; IDS Global Series, Inc.; IDS Growth
Fund, Inc.; IDS High Yield Tax-Exempt Fund, Inc.; IDS International
Fund, Inc.; IDS Investment Series, Inc.; IDS Managed Retirement Fund,
Inc.; IDS Market Advantage Series, Inc.; IDS Money Market Series, Inc.;
IDS New Dimensions Fund, Inc.; IDS Precious Metals Fund, Inc.; IDS
Progressive Fund, Inc.; IDS Selective Fund, Inc.; IDS Special
Tax-Exempt Series Trust; IDS Stock Fund, Inc.; IDS Strategy Fund, Inc.;
IDS Tax-Exempt Bond Fund, Inc.; IDS Tax-Free Money Fund, Inc.; IDS
Utilities Income Fund, Inc., Growth Trust; Growth and Income Trust;
Income Trust, Tax-Free Income Trust, World Trust and IDS Certificate
Company.
<TABLE>
<CAPTION>
(b) As to each director, officer or partner of the principal underwriter:
Name and Principal Business Address Position and Offices with Positions with Offices with
Underwriter Registrant
- - ------------------------------------------ ------------------------------------ -----------------------------
<S> <C> <C>
Ronald. G. Abrahamson Vice President - Service Quality None
IDS Tower 10 and Reengineering
Minneapolis, MN 55440
Douglas A. Alger Senior Vice President - Human None
IDS Tower 10 Resources
Minneapolis, MN 55440
Peter J. Anderson Senior Vice President - Investment Vice President
IDS Tower 10 Operations
Minneapolis, MN 55440
Ward D. Armstrong Vice President-American Express None
IDS Tower 10 Retirement Services
Minneapolis, MN 55440
John M. Baker Vice President - Plan Sponsor None
IDS Tower 10 Services
Minneapolis, MN 55440
Joseph M. Barsky, III Vice President - Mutual Fund None
IDS Tower 10 Equities
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
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 - San None
1333 N. California Blvd., Suite 200 Francisco Bay Area
Walnut Creek, CA 94596
Charles R. Branch Group Vice President - Northwest None
Suite 200
West 111 North River Dr.
Spokane, WA 99201
Douglas W. Brewers Vice President - Sales Support None
IDS Tower 10
Minneapolis, MN 55440
Karl J. Breyer 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 - Third Director, President and
IDS Tower 10 Party Distribution 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
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
Arthur E. DeLorenzo Group Vice President - Upstate New None
4 Atrium Drive, #100 York
Albany, NY 12205
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 - International None
IDS Tower 10
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
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
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
Debra A. Hutchinson Vice President - Relationship None
IDS Tower 10 Leader
Minneapolis, MN 55440
James M. Jensen Vice President - Insurance Product None
IDS Tower 10 Development and Management
Minneapolis, MN 55440
Marietta L. Johns Senior Vice President - Field None
IDS Tower 10 Management
Minneapolis, MN 55440
Nancy E. Jones Vice President - Business None
IDS Tower 10 Development
Minneapolis, MN 55440
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 - Senior Portfolio None
IDS Tower 10 Manager
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
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
Timothy J. Masek Vice President and Director of None
IDS Tower 10 Global Research
Minneapolis, MN 55440
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
Shashank B. Modak Vice President - Technology Leader None
IDS Tower 10
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
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
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
Theresa M. Sapp Vice President - Relationship None
IDS Tower 10 Leader
Minneapolis, MN 55440
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 - Marketing Offer None
IDS Tower 10 Development
Minneapolis, MN 55440
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
Keith N. Tufte Vice President and Director of None
IDS Tower 10 Equity Research
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
Donald F. Weaver Group Vice President - Greater None
3500 Market Street, Suite 200 Pennsylvania
Camp Hill, PA 17011
Norman Weaver Jr. Senior Vice President - Alliance None
1010 Main St., Suite 2B Group
Huntington Beach, CA 92648
Michael L. Weiner Vice President - Tax Research and None
IDS Tower 10 Audit
Minneapolis, MN 55440
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
Edwin M. Wistrand Vice President and Assistant None
IDS Tower 10 General Counsel
Minneapolis, MN 55440
Michael D. Wolf Vice President - Senior Portfolio None
IDS Tower 10 Manager
Minneapolis, MN 55440
Michael R. Woodward Senior Vice President - Field None
32 Ellicott St. Management
Suite 100
Batavia, NY 14020
</TABLE>
Item 29(c)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <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, 1988). 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 8th day of July, 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 8th day of
July, 1999.
Signature Title
/s/ James E. Choat* Director, President and
James E. Choat Chief Executive Officer
/s/ Jeffrey S. Horton** Vice President and
Jeffrey S. Horton Treasurer
/s/ Richard W. Kling* Chairman of the Board
Richard W. Kling
/s/ Paul S. Mannweiler* Director
Paul S. Mannweiler
/s/ Stuart A. Sedlacek* Director and Executive
Stuart A. Sedlacek Vice President
<PAGE>
/s/ William A. Stoltzmann* Director, Vice President,
William A. Stoltzmann General Counsel and
Secretary
/s/ Philip C. Wentzel** Vice President and
Philip C. Wentzel Controller
*Signed pursuant to Power of Attorney, dated March 28, 1997, filed
electronically as Exhibit 15 to Post-Effective Amendment No. 7 to Registration
Statement No. 33-54471, filed on or about April 23, 1997, incorporated herein by
reference.
**Signed pursuant to Power of Attorney, dated April 9, 1998, filed
electronically as Exhibit 15.2 to Post-Effective Amendment No. 10 to
Registration Statement No. 33-54471, filed on or about April 30, 1998,
incorporated herein by reference.
By:/s/ Mary Ellyn Minenko
Mary Ellyn Minenko
<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
EXHIBIT INDEX
1.2 Resolution of Executive Committee (BOD)
3 Form of Selling Agreement for American Enterprise Life Insurance Company
Variable Annuities
4.1 Form of Deferred Annuity Contract (form 43410)
4.3 Form of SEP-IRA Endorsement (form 43412)
4.4 Form of TSA Endorsement (form 43413)
5. Form of Variable Annuity Application (form 43411)
8.1(b) Form of Participation Agreement (Amd #4)
8.2(b) Copy of Participation Agreement (Amd #1)
8.3(b) Form of Participation Agreement
9 Opinion of Counsel
10 Consent of Independent Auditors
13 Schedule of Computation
TO THE SECRETARY OF AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
By Resolution received by the Secretary on July 15, 1987, the Board of Directors
of American Enterprise Life Insurance Company:
RESOLVED, That American Enterprise Life Insurance Company, pursuant to
the provisions of Section 27-1-51 Section 1 Class 1(c) of the Indiana
Insurance Code, established a separate account designated American
Enterprise Variable Annuity Account, to be used for the Corporation's
Variable Annuity contracts; and
RESOLVED FURTHER, That the proper officers of the Corporation were
authorized and directed to establish such subaccounts and/or investment
divisions of the Account in the future as they determine to be
appropriate; and
RESOLVED FURTHER, That the proper officers of the Corporation were
authorized and directed to accomplish all filings, including
registration statements and applications for exemptive relief from
provisions of the securities laws as they deem necessary to carry the
foregoing into effect.
As President of American Enterprise Life Insurance Company, I hereby establish,
in accordance with the above resolutions and pursuant to authority granted by
the Board of Directors, 37 additional subaccounts within the separate account to
invest in the following funds or portfolios:
AIM V.I. Capital Appreciation Fund
AIM V.I. Capital Development Fund
Alliance Premier Growth Portfolio
Alliance Technology Portfolio
Alliance U.S. Government/High Grade Portfolio
AXP Variable Portfolio - Extra Income Fund
Baron Capital Asset Fund
Dreyfus Disciplined Stock Portfolio
Dreyfus Small Company Stock Portfolio
Dreyfus Socially Responsible Growth Fund
Fidelity VIP Fund III Growth & Income Portfolio
Fidelity VIP Fund III Mid Cap Portfolio
Fidelity VIP Fund Overseas Portfolio
Franklin Templeton VIP International Smaller Companies Fund-Class 2
Franklin Templeton VIP Mutual Shares Securities Fund-Class 2
Franklin Templeton VIP Real Estate Securities Fund-Class 2
J.P. Morgan U.S. Disciplined Equity Portfolio
Lazard Retirement Equity Portfolio
Lazard Retirement International Equity Portfolio
MFS New Discovery Series
MFS Research Series
MFS Utilities Series
Oppenheimer Global Securities Fund/VA
Oppenheimer Main Street Growth & Income Fund/VA
Oppenheimer Strategic Bond Fund/VA
Putnam VT International Growth Fund (IB)
Putnam VT International Growth & Income Fund (IB)
Putnam VT International New Opportunities Fund (IB)
Putnam VT Vista Fund (IB)
<PAGE>
Royce Micro-Cap Portfolio
Royce Premier Portfolio
Wanger U.S. International Small Cap Fund
Wanger U.S. Small Cap Fund
Warburg, Pincus Trust-Emerging Growth Portfolio
Wright Catholic Values Equity Investment Portfolio
Wright International Blue Chip Portfolio
Wright Selected Blue Chip Portfolio
In accordance with the above resolutions and pursuant to authority granted by
the Board of Directors of American Enterprise Life Insurance Company, the Unit
Investment Trust comprised of American Enterprise Variable Annuity Account and
consisting of 48 subaccounts is hereby reconstituted as American Enterprise
Variable Annuity Account consisting of 85 subaccounts.
/s/ James E. Choat
James E. Choat
Received by the Secretary:
/s/ William A. Stoltzmann
William A. Stoltzmann
Date: June 29, 1999
SELLING AGREEMENT
FOR
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
VARIABLE ANNUITIES
This SELLING AGREEMENT ("Agreement") is entered into as of ("Effective Date") by
and between American Enterprise Life Insurance Company ("Company"), American
Express Financial Advisors Inc. ("Distributor", together with Company, "American
Express"), GA [(or its affiliated insurance agencies who have executed an
Affiliate Participation Agreement attached as Exhibit B ("Affiliates") and are
identified on Exhibit A] ("Selling Agent") and Broker-Dealer
("Broker-Dealer").
Recitals
The purpose of this Agreement is to establish the terms and conditions under
which Selling Agent and Broker-Dealer (referred to and defined further in
Section 1.9 herein as "Authorized Selling Firm") will market and sell Company's
variable annuities. American Express and Authorized Selling Firm intend that
Authorized Selling Firm will be responsible for managing and supervising the
marketing and sales of Company's variable annuities by its Producers pursuant to
this Agreement.
In consideration of the mutual covenants contained herein, the parties agree as
follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall have
the following meanings:
1.2 "Selling Agent" is an insurance agency or an Affiliate duly
licensed or otherwise qualified as an insurance agency, which,
either itself or through Producers who are its employees or
independent contractors, solicits and sells Products to the
general public.
1.3 "Broker-Dealer" is an entity duly registered as a broker-dealer
with the Securities and Exchange Commission ("SEC"), the
National Association of Securities Dealers ("NASD"), and states
where required. Selling Agent may also be the Broker-Dealer if
properly registered as a broker-dealer.
1.4 "Producer" is a duly licensed individual who sells Products as
an employee or independent contractor of Selling Agent and who
is appropriately registered with the NASD.
1.5 "Products" are those variable annuity products issued by Company
which will be marketed or sold by Selling Agent, Broker-Dealer
and their Producers under this Agreement, and which are set
forth in Exhibit A and its Addenda attached hereto.
1.6 "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.
1.7 "Territory" is any of the 48 of the 50 United States (all states
other than New York and New Hampshire), the District of Columbia
and includes any other jurisdiction in which Selling Agent is
permitted to market and sell the Products through Producers, and
which jurisdictions are listed on Exhibit A, as amended from
time to time.
1.8 "Company Rules" mean the written instructions, bulletins,
manuals, and Agent Guide as defined in Section 4.4.14 and
underwriting guides provided by the by the Company.
1.9. "Authorized Selling Firm" means the Broker-Dealer and Selling
Agent with respect to the sale of Products under this Agreement
in accordance with the terms and conditions of the SEC no-action
letter First of America Brokerage Service, Inc. (dated Sept. 28,
1995).
2. TERM OF AGREEMENT.
2.1 This Agreement shall remain in effect beginning upon the
Effective Date, until such time it is terminated pursuant to
Section 9 "Termination."
3. APPOINTMENT AND AUTHORIZATION OF SELLING AGENT AND BROKER-DEALER.
3.1 Appointment and Authorization of Selling Agent and
Broker-Dealer. Company and Distributor hereby appoint and
authorize Selling Agent and Broker-Dealer to solicit sales of
and sell Products in accordance with the terms and conditions of
this Agreement as an Authorized Selling Firm, and Selling Agent
and Broker-Dealer hereby accept the appointment and
authorization. These two appointments, taken together,
constitute the appointment of Authorized Selling Firm.
Authorized Selling Firm's authority will be nonexclusive, and
will be limited to the performance of the services and
responsibilities set forth in this Agreement.
3.2 Selection and Appointments of Affiliates. No Affiliate shall be
authorized to act as such until the Affiliate has executed a
Participation Agreement and Company has authorized Affiliate to
act as such.
4. DUTIES, OBLIGATIONS AND LIMITATIONS OF AUTHORIZED SELLING FIRM.
Commencing on the Effective Date, Authorized Selling Firm will
faithfully perform all of Authorized Selling Firm's duties within the
scope of the agency relationship created under this Agreement to the
best of Authorized Selling Firm's knowledge, skill and judgment. As
Authorized Selling Firm, Selling Agent and Broker-Dealer shall be
jointly and severally responsible and liable to American Express for the
faithful performance of all obligations and duties except those which
this Agreement specifically identifies as duties of Broker-Dealer.
Authorized Selling Firm's duties shall include, but not be limited to
the following:
4.1 Recruitment of Producers. Authorized Selling Firm may recruit
Producers to sell under the supervision of Authorized Selling
Firm. A Producer so recruited may not solicit or sell Products
prior to acquiring any required state insurance license(s) in
the state(s) where such Producer will solicit and sell Products;
being registered with the NASD as a representative of the
Broker-Dealer; being appointed by Company as an agent; and
completing the training described in Section 4.4.14.
4.1.1. Background checks; Warranties. Authorized Selling Firm
is responsible for performing background checks on its
Producers. Authorized Selling Firm warrants that such
background check reports of Producers will comply with
all applicable regulations of the departments of
insurance and securities in the states in which said
Producers will solicit and sell Products, and with the
requirements of the NASD. Authorized Selling Firm
further warrants and guarantees that copies of such
background check reports will be made available in a
timely manner to any regulator who may request them from
Company, and that Company will receive confirmation that
such materials have been timely delivered to any such
regulator. Company will not require copies of the
reports themselves, but only the assurance that they
have been timely delivered as requested by such
regulator, unless such reports relate or may relate to a
customer inquiry or complaint about the Product or its
sale, or unless such report relates to Company's
internal investigation of a Producer's sales practices
as regard the Products. Authorized Selling Firm further
agrees that it will provide to Company a copy of their
respective procedures and requirements for background
checks to Company upon request, but Company is entitled
to rely on Authorized Selling Firm for compliance with
regulations as shown above even without actually making
such a demand. The provisions of this Section 4.1.1 do
not apply to Authorized Selling Firms who are selling
Products in the states of Alabama and Mississippi. In
those states, Company retains the right to conduct
background checks on Producers at Company's own
initiative and expense.
4.2 Licensing, Registration and Appointment of Selling Agents and
Producers. Selling Agent shall be responsible for the
preparation and submission of proper appointment and licensing
forms and the assurance that all Producers recruited by
Authorized Selling Firm are appropriately licensed as insurance
agents in the state(s) where such Producers will solicit and
sell Products. Broker-Dealer 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 Broker-Dealer with the
NASD. Authorized Selling Firm shall recommend Producers for
appointment with Company, but Company shall retain sole
authority to make appointments and may, by written notice to
Authorized Selling Firm, refuse to permit any Producer to
solicit contracts for the sale of the Products.
4.3 Compliance with Company Policies and Applicable Laws. Authorized
Selling Firm will comply with all Company Rules and with all
applicable federal and state laws and regulations.
4.4 Supervision and Administration. Authorized Selling Firm shall
have full, joint and several responsibility for the training and
supervision of all of its Producers who are engaged directly or
indirectly in the offer or sale of the Products, and all such
Producers shall be subject to the control of Authorized Selling
Firm with respect to their securities and insurance regulated
activities in connection with the Products. Authorized Selling
Firm shall be responsible for all acts or omissions of
Producers. Selling Agent's supervisory and administrative
responsibilities include, but are not limited to:
4.4.1 ensuring that Producers comply with Company Rules and
all federal and state laws and regulations applicable to
the Products;
4.4.2 training Producers prior to allowing a Producer to sell
a Product in accordance with Section 4.4.14;
4.4.3 providing advice and assistance to Producers with regard
to marketing and advertising of Products, and ensuring
that no advertising is used unless approved by Company
in accordance with Section 4.9, "Approved Advertising."
4.4.4 supplying sales literature and application forms
approved by Company to Producers;
4.4.5 ensuring that any sales literature or advertising used
on or from the premises of a financial institution be:
(a) revised to include the disclosure required by
the financial institution regulatory agencies
and the NASD;
(b) delivered by the Producer to the prospective
customer; and
(c) submitted to and approved by Company and/or
Distributor in accordance with Section 4.9
"Approved Advertising" prior to first use;
4.4.6 assisting Producers in responding to customer inquiries;
4.4.7 promptly delivering to Producers relevant Company
communications and Company Rules concerning Products,
such as changes in rates, regulatory notices or new
Product announcements;
4.4.8 ensuring that Producers:
(a) submit premium payments directly and immediately
to Company in accordance with Section 4.5,
"Collection and Submission of Premiums";
(b) deliver Products to purchasers on a timely
basis;
(c) document transactions, including the fact of
delivery, and maintain any other documentation
reasonably requested by Company;
(d) have obtained and will continuously maintain the
required state insurance licenses in the state
where such Producers will solicit and sell
Products; and
(e) have been appointed by Company in accordance
with the laws of the state in which the sale(s)
occur and the customer resides;
4.4.9 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:
(a) the amount of the surrender charge to be
incurred on the investment to be liquidated;
(b) all fees and possible charges, such as surrender
charges, on the new investment;
(c) any change in the investment risk to the
prospective annuity contract-holder;
(d) any change in the nature or the provider of any
guarantees associated with the Product and/or
the surrendered product;
(e) any changes in the expenses associated with the
Product and/or the surrendered product;
All such information, even on life-insurance-to-annuity
transactions which will necessarily be declined, will be
retained by Selling Agent 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 4.8, "Accurate Record;
Audit," herein.
4.4.10 timely obtaining and maintaining all required state
insurance licenses, and notifying Company if any Selling
Agent or Producer fails to maintain the required state
insurance license or becomes inactive;
4.4.11 promptly informing Company of any violation of law or
Company Rules by Authorized Selling Firm or Producer, or
of any allegation by an annuity contract-holder or
regulatory agency of wrongdoing as regards the
activities of Authorized Selling Firm, or a Producer
with respect to the Products; and
4.4.12 any other duties necessary or appropriate to perform
Authorized Selling Firm's obligations under this
Agreement.
4.4.13 Broker-Dealer will fully comply with and will ensure
Selling Agent's and Producers' compliance with the
requirements of the NASD, the SEC and all other
applicable federal and state laws, and, with Selling
Agent, will establish and maintain such rules and
procedures as may be necessary to cause diligent
supervision of the securities activities of Selling
Agent and Producers. Broker- Dealer's duties with
respect to Selling Agent's and Producers' securities
activities, include, but are not limited to:
(a) delivering to each person submitting an
application a prospectus to be furnished by
American Express in the form required by the
applicable federal laws or by the acts or
statutes of any applicable state, province or
country;
(b) ensuring that all sales literature or
advertising used by Authorized Selling Firm or
Producers hereunder concerning the Products or
Company or Distributor has been approved by
American Express.
(c) reviewing all Product applications for accuracy
and completeness, and to determine the
suitability of the sale;
(d) complying with all applicable requirements of
the Securities Exchange Act of 1934 ("1934 Act")
and the NASD, including the requirements to
maintain and preserve books and records pursuant
to Section 17(a) of the 1934 Act and the rules
thereunder and making such records and files
available to staff of American Express and
personnel of state insurance departments, the
NASD, SEC or other regulatory agencies which
have authority over American Express.
4.4.14. Authorized Selling Firm shall be responsible for
ensuring that their Producers who market and sell the
Products are trained on (i) the product specifications
and features, (ii) requirements that American Express
has adopted to satisfy insurance laws and regulations
regarding replacements, and (iii) standards that
American Express has established for Authorized Selling
Firms and their Producers to use in meeting their
respective duties to ensure suitable sales of the
Products (delivered together as the "Agent Guide")
before they begin to solicit or sell Products. If
Authorized Selling Firm chooses not to use the Agent
Guide in training their Representatives on (i), (ii) and
(iii), above then Authorized Selling Firm shall provide
to American Express its own form of training to be used
prior to the execution of this Agreement. After the
execution of this Agreement, to the extent that
Authorized Selling Firm uses training material related
to the sale of the Products that is materially different
from that contained in the Agent Guide or training
material other than provided to American Express in
accordance with the preceding sentence, Authorized
Selling Firm must provide that training material to
American Express. Authorized Selling Firm shall also be
responsible for assuring that its Producers comply with
Agent Guide, and the applicable suitability requirements
of the National Association of Securities Dealers, Inc.
("NASD"), and any state or federal law, as amended from
time to time, in selling the Products.
4.5 Collection and Submission of Premiums. American Express and
Authorized Selling Firm will agree which of the following
provisions will govern Authorized Selling Firm's duties related
to collection and submission of premiums, by specifying on
Exhibit A the applicable provision.
4.5.1 Check with Application. Authorized Selling Firm will
assure its Producers' collection and timely remittance
to Company of the premiums due on all Products as
specified herein. Company will receive premium payments
no later than the second business day after the
application has been signed by the customer.
4.5.2 Gross Sweep. Authorized Selling Firm will assure its
Producers' collection of the premiums due on all
Products and will timely account for such premiums,
directly depositing them into an account established by
Authorized Selling Firm for the benefit of Company, at a
bank approved by Company, and notifying Company
immediately of the gross receipts for the business day.
Upon receipt of notification from Authorized Selling
Firm, Company will sweep the settlement account.
Additional specific procedures governing movement of
money pursuant to this paragraph will be established by
Authorized Selling Firm and Company and will become part
of the Company Rules.
4.6 Solicitation. Authorized Selling Firm, 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
Authorized Selling Firm to solicit any particular customer's or
customers' applications for an annuity.
4.7 Company Property. Authorized Selling Firm will safeguard,
maintain and account for all policies, forms, manuals,
equipment, supplies, advertising and sales literature furnished
to Authorized Selling Firm and Producers by American Express and
will destroy or return the same to American Express promptly
upon request.
4.8 Accurate Record; Audit. As required by applicable laws and
Company's policies and procedures, Authorized Selling Firm 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, Authorized Selling Firm will
permit American Express to visit, inspect, examine, audit and
verify, at Authorized Selling Firms 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 Authorized Selling Firm 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 Authorized Selling Firm's normal
course of business.
4.9 Approved Advertising. No sales promotions, promotional
materials, or any advertising relating to Products or Company or
Distributor ("Sales Material") shall be used by Authorized
Selling Firm or Producers unless the specific item has been
approved in writing by Company and/or Distributor. Any
promotional material developed by Authorized Selling Firm will
become the sole property of American Express once approved. Any
modification of the promotional materials to enable the use of
such in a financial institution setting must also be approved in
accordance with this section.
4.10 Chargeback of Commissions. Selling Agent will be charged back
for Selling Agent'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.
4.11 Fidelity Bond. Authorized Selling Firm represents and warrants
that all directors, officers, employees and representatives of
Selling Agent 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
Broker-Dealer at Broker-Dealer's and/or Selling Agent's expense.
Company may require evidence, satisfactory to it, that such
coverage is in force. Authorized Selling Firm shall give prompt
written notice to Company of cancellation or change of coverage.
4.12 Limitations. Authorized Selling Firm shall have no authority
with respect to American Express, nor shall it represent itself
as having such authority, other than as is specifically set
forth in this Agreement. Without limiting the foregoing, neither
Selling Agent nor Broker-Dealer shall, without the express
written consent of Company and/or Distributor, as applicable:
4.12.1 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;
4.12.2 waive a forfeiture;
4.12.3 extend the time for the payment of premiums or other
monies due Company;
4.12.4 institute, prosecute or maintain any legal proceedings
on behalf of Company or Distributor in connection with
any matter pertaining to Company's business, nor accept
service of process on behalf of Company or Distributor;
4.12.5 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;
4.12.6 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;
4.12.7 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;
4.12.8 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;
4.12.9 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;
4.12.10 enter into an agreement with any person or entity to
market or sell the Products without the written consent
of Company and Distributor;
4.12.11 use Company's or Distributor's names, logos, trademarks,
service marks or any other proprietary designation
without the prior written permission of Company; or
4.12.12 engage in any program designed to replace Products with
any annuity products of other companies, at any time
while this Agreement is in force; or provide data to any
other person or organization which would allow or
facilitate such replacement of Company's Products.
Nothing herein shall preclude the replacement of
Company's fixed annuity products with Company's own
variable annuity products, so long as such sales are
suitable and documented according to Section 4.4.9,
Replacement Sales. (See also Section 9.3, Post
Termination Limitations, and Section 11,
Confidentiality, generally.)
4.13 Wholesaling Services. Authorized Selling Firm shall receive
certain wholesaling services under this Agreement pursuant to a
Wholesaling Agreement entered into on , 1999, by American
Enterprise Life Insurance Company (the "Company"), American
Express Financial Advisors Inc. (the "Distributor") and Talbot
Financial Services, Inc. (the "Wholesaler").
5. COMPANY AND DISTRIBUTOR REPRESENTATIONS AND RESPONSIBILITIES.
5.1 Representations.
5.1.1 Company represents and warrants that (a) it is duly
incorporated in the state of Indiana and licensed in all
states in the Territory, and (b) that all Products and
Sales Material provided by Company or Distributor have
been filed with and approved by state insurance
departments in all states in the Territory and comply
with all applicable laws and regulations and rules of
the NASD.
5.1.2 Distributor 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.
5.1.3 Distributor 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 Products 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.
5.1.4 Company represents and warrants that the prospectus(es)
and registration statement(s) relating to the Products
do not contain any 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.
5.1.5 Company represents and warrants that Company will meet
any requirements of the NASD and state departments of
insurance in the jurisdictions in which the Products are
available for sale regarding both the filing and
approval of Sales Material.
5.2 Prospectuses, Sales Literature and Advertising. American Express
will provide to Authorized Selling Firm, without any expense to
Authorized Selling Firm, prospectuses relating to the Products
and such other sales literature and advertising as American
Express 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 directly to annuity
contract-holders.
5.4 Confirmations. Upon Company's acceptance of any payment for a
Product, Company as agent for 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 Selling Agent and/or Broker-Dealer, 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 Authorized Selling Firm or Producers
which fail to meet underwriting or other standards of Company.
5.7 Company Rules. American Express shall provide Authorized Selling
Firm 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 Authorized
Selling Firm promptly after issuance by Company and/or
Distributor.
6 COMPENSATION.
6.1 Compensation to Authorized Selling Firm. 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. No compensation shall be
paid unless all of the following conditions precedent have been
met to Company's satisfaction:
6.1.1 Licensing of Producer. Prior to the time of any
solicitation of a sale or a sale of a Product, the
Producer making such solicitation or sale shall be
licensed and appointed with Company in accordance with
the laws of the state(s) where the sale is being made
and the customer resides.
6.1.2 Licenses and Contracts. No person or entity, except
Producers satisfying the provisions of Section 6.1.1,
"Licensing of Producers," 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 Selling Agent which
specifies such person 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 an
unlicensed 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.
6.1.3 Alternative Payment Agreement. Only if shown on Exhibit
A attached hereto, Company may make commission payments
and debit commission chargebacks to Broker-Dealer, so
long as Broker-Dealer also has insurance licenses
appropriate for the sales of Products in affected
states. See also Section 4.10.
6.2 Charge Backs. Company has the right to charge back Selling Agent
for commissions paid in the event of certain surrenders of
annuity contracts as specified in Exhibit A and its Addenda.
6.3 Expenses. Except as otherwise provided in this Agreement, or
subsequently agreed to in writing by American Express,
Authorized Selling Firm will be responsible for all costs and
expenses of any kind and nature incurred by Authorized Selling
Firm in the performance of its duties under this Agreement.
6.4 Post Termination Compensation Obligations. Upon termination of
this Agreement, Company's obligation to pay commissions to
Selling Agent, or Producers shall immediately cease except that:
6.4.1 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.
6.4.2 Company will charge back against those commissions
identified in Exhibit A for surrenders of Products sold
by Authorized Selling Firm or Producers prior to the
termination of this Agreement. Company will invoice
Selling Agent unless Company and Selling Agent agree
upon another method of payment of such amounts.
6.4.3 Company shall pay commissions in accordance with
Addendum A, attached hereto, on all premiums collected
on Products issued prior to such termination.
7. INDEMNIFICATION.
7.1 Indemnification of Company. Authorized Selling Firm shall
indemnify, defend and hold harmless American Express, any of its
officers, directors and employees, from and against any and all
losses, claims, damages, liabilities, actions, costs or expenses
to which American Express, or any of its officers, directors and
employees, 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
Authorized Selling Firm 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:
7.1.1 The acts or omissions of Authorized Selling Firm or any
of its employees, agents or Producers while acting
(whether under actual or apparent authority, or
otherwise) on behalf of Authorized Selling Firm or
American Express in connection with this Agreement;
7.1.2 Any breach of any covenant or agreement made by
Authorized Selling Firm under this Agreement; or
7.1.3 The inaccuracy or breach of any representation or
warranty made by Authorized Selling Firm under this
Agreement.
This indemnification obligation shall not apply to the extent
that such alleged act or omission is attributable to American
Express either because (1) American Express directed the act or
omission, or (2) the act or omission by Authorized Selling Firm
or any of its employees, agents or Producers was the result of
their compliance with the Company Rules.
7.2 Indemnification of Selling Agent and Broker-Dealer. American
Express shall indemnify, defend and hold harmless Authorized
Selling Firm, any of its officers, directors and employees, from
and against any and all losses, claims, damages, liabilities,
actions, costs or expenses to which Authorized Selling Firm, or
any of its officers, directors and employees, 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 American Express 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:
7.2.1 The acts or omissions of American Express, or any
employee or agent of American Express, (excluding
Authorized Selling Firm or Producers) while acting
(whether under actual or apparent authority, or
otherwise) on behalf of Company in connection with this
Agreement;
7.2.2 Any breach of any covenant or agreement made by American
Express under this Agreement; or
7.2.3 The inaccuracy or breach of any representation or
warranty made by American Express under this Agreement.
7.3 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. The parties
agree that the losses and damages arising under and/or covered
by Section 7.1 and 7.2 shall be subject to this limitation.
8. 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.
9. TERMINATION.
9.1 Termination for Cause. At any time during the Term of this
Agreement, American Express or Authorized Selling Firm 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:
9.1.1 the conviction of any party, its officers or supervisory
personnel of any felony, of fraud, or of any crime
involving dishonesty;
9.1.2 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;
9.1.3 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;
9.1.4 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
9.1.5 a party becoming a debtor in bankruptcy (whether
voluntary or involuntary) or the subject of an
insolvency proceeding.
9.2 Termination without Cause. American Express or Authorized
Selling Firm may terminate this Agreement without cause upon 30
days prior written notice to the other parties.
9.3 Post Termination Limitation. For a period of one year after
termination of this Agreement, Authorized Selling Firm and
Producers shall not knowingly induce or cause, or attempt to
induce or cause, or recommend, promote, encourage or endorse any
concerted or organized effort to recommend, promote, encourage
or endorse the termination, surrender, or cancellation of any
Product sold pursuant to this Agreement.
10. INDEPENDENT CONTRACTOR. This Agreement is not a contract of employment.
Nothing contained in this Agreement shall be construed or deemed to
create the relationship of joint venture, partnership, or employer and
employee between American Express and Authorized Selling Firm. 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.
11. CONFIDENTIALITY.
11.1 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:
11.1.1 the party can prove was known to it prior to any
disclosure by any other party;
11.1.2 is or becomes publicly available through no fault of the
party;
11.1.3 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;
11.1.4 is required to be disclosed to governmental regulators
or pursuant to judicial or administrative process or
subpoena;
11.1.5 is required in order to perform that party's obligation
under this Agreement;
11.1.6 is required to be disclosed by any applicable law; or
11.1.7 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.
11.2 In the event Authorized Selling Firm during the term of this
Agreement and for a period of one year after the effective date
of its termination, engages in a concerted effort to promote,
recommend or encourage the termination, surrender, or
cancellation of any Product sold under this Agreement, without
reasonable grounds to believe that such promotion,
recommendation or encouragement is in each individual customer's
best interest, then American Express will have the right to
contact present and former purchasers of the Products sold under
this Agreement with a view to retaining the assets in their
accounts with Company without being in violation of this Section
11.
12. 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.
13. AMENDMENT OF AGREEMENT. American Express reserves the right to amend
this Agreement at any time, but no amendment shall be effective until
approved in writing by Authorized Selling Firm, subject to the
provisions of Section 5.6, "Reservation of Rights" and Section 12,
"Assignment" herein.
14. MISCELLANEOUS.
14.1 Applicable Law. This Agreement shall be governed by and
interpreted under the laws of the State of Minnesota.
14.2 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.
14.3 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:
<TABLE>
<CAPTION>
<S> <C>
If to Company: If to Distributor:
American Enterprise Life Insurance 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 Selling Agent: If to Broker-Dealer:
GA Broker-Dealer
GAaddress1 GBaddress1
GAaddress2 GBaddress2
GAcity, GAStatesName GAzip GBcity
</TABLE>
14.4 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.
14.5 Headings. The headings in this Agreement are for convenience
only and are not intended to have any legal effect.
14.6 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.
14.7 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 representative
thereof.
14.8 Survival. All terms and conditions of Section 7,
"Indemnification"; Section 9.3, "Post Termination Limitations";
and Section 11, "Confidentiality," will survive termination of
this Agreement.
14.9 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.
<TABLE>
<CAPTION>
<S> <C>
American Enterprise Life Insurance Company GA
Company Selling Agent
By: By:
Title: Title:
Date: Date:
American Express Financial Advisors Inc. Broker-Dealer
Distributor Broker-Dealer
By: By:
Title: Title:
Date: Date:
</TABLE>
<PAGE>
EXHIBIT A
Selling Agent: Products, Territory and Commissions
This Exhibit is intended to summarize the contents of Exhibit A and its Addenda,
as they are added to the arrangements with GA, ("Selling Agent"),
Broker-Dealer ("Broker-Dealer"), Company and Distributor under this
Agreement.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- - ------------------------------ ------------------------------------------------------------------------ --------------
Selling Agent & Broker-Dealer Products Product Commission Remittance of Premiums Territory
(See Section 4.5)
- - ------------------------------ ------------------------------------------------------------------------ --------------
- - ------------------------------ ------------------------------------------------------------------------ --------------
Selling Agent or Affiliate Variable B/D Product See Addendum A Money_Movement STATE1
& (Service marked name STATE2
Broker-Dealer to be determined) STATE3
STATE4
only
- - ------------------------------ ------------------------------------------------------------------------ --------------
American Enterprise Life Insurance Company GA
Company Selling Agent
By: By:
Title: Title:
Date: Date:
American Express Financial Advisors Inc. Broker-Dealer
Distributor Broker-Dealer
By: By:
Title: Title:
Date: Date:
Last Revision Date: Effective Revision Date:
Purpose of Last Revision:
</TABLE>
<PAGE>
Addendum A to Exhibit A: Products, Territory and Commissions
Addendum to the Selling Agreement between American Enterprise Life Insurance
Company ("Company") and American Express Financial Advisors Inc. ("Distributor")
and ___________ ("Broker-Dealer") and ______________ ("Selling Agent") dated
Effective_Date. This Addendum is effective Addenda_Effective_Date.
The Product being offered through Selling Agent and Broker-Dealer is the
Platinum Flexible Premium Variable Annuity (B/D Variable Annuity).
COMMISSION:
The commission payable to Selling Agent for a given contract described in this
Addendum will be paid according to one of the following tables. For each
separate contract sold, the Producer is permitted to elect one of the following
three options. 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 Premium
Owner
- - -------------------------------- ------------------
- - -------------------------------- ------------------
Ages 0 - 75 6.00%
- - -------------------------------- ------------------
- - -------------------------------- ------------------
Ages 76 - 80 4.25%
- - -------------------------------- ------------------
- - -------------------------------- ------------------
Ages 81 - 90 2.50%
- - -------------------------------- ------------------
OPTION B:
<TABLE>
<CAPTION>
<S> <C> <C>
- - -------------------------------- ------------------ ----------------------------------
Supplemental Trail
Age of Older of Annuitant or Premium Commission:
Owner (Annual rate; payable quarterly
at 1/4 of value shown)
- - -------------------------------- ------------------ ----------------------------------
- - -------------------------------- ------------------ ----------------------------------
Ages 0 - 75 5.00% 25 basis points
- - -------------------------------- ------------------ ----------------------------------
- - -------------------------------- ------------------ ----------------------------------
Ages 76 - 80 3.50% 25 basis points
- - -------------------------------- ------------------ ----------------------------------
- - -------------------------------- ------------------ ----------------------------------
Ages 81 - 90 2.00% 25 basis points
- - -------------------------------- ------------------ ----------------------------------
OPTION C:
- - -------------------------------- ------------------ ----------------------------------
Supplemental Trail
Age of Older of Annuitant or Premium Commission:
Owner (Annual rate; payable quarterly
at 1/4 of value shown)
- - -------------------------------- ------------------ ----------------------------------
- - -------------------------------- ------------------ ----------------------------------
Ages 0 - 75 1.00% 1.00%
- - -------------------------------- ------------------ ----------------------------------
- - -------------------------------- ------------------ ----------------------------------
Ages 76 - 80 1.00% 1.00%
- - -------------------------------- ------------------ ----------------------------------
- - -------------------------------- ------------------ ----------------------------------
Ages 81 - 90 1.00% 1.00%
- - -------------------------------- ------------------ ----------------------------------
</TABLE>
Company reserves the right from time to time to adjust commission upwards for
any of the options A, B, or C listed above, for a specified period of time for
this Product upon notice to Selling Agent and Broker-Dealer, without requiring
signatures on a corresponding addendum. No downward adjustment of commission
will occur without signature of all parties to the Agreement, except for the
return to commission rates identified in the options A, B, and C above.
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.
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, Broker-Dealer, any Selling Agent or Producer, or any other party.
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.
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 the Authorized Selling
Firms. 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.
Supplemental Trail Commission:
1. In addition to the compensation shown in other Addenda to this Agreement,
Company agrees to pay to Selling 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:
Annual Rate of the Supplemental Trail Commission for Option B = 25
basis points as shown in Addendum A hereto.
Annual Rate of the Supplemental Trail Commission for Option C = 100
basis points as shown in Addendum A hereto.
Eligible Contracts means contracts sold to customers under this
Agreement, which have reached their first contract anniversary as of the
calendar quarter end, and for which Options B and C were was elected as
compensation.
Eligible Value means accumulation value (including interest and/or
earnings accrued), as of the quarter end for which the Supplemental Trail
Commission is being calculated, of all Eligible Contracts for Selling Agent.
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.
Adjustments can be made in the next quarter in case of error.
b. If the Supplemental Trail Commission as calculated above is less than
$1000, Selling Agent waives payment thereof.
c. Company will supply supporting information for the calculation along
with payment within 45 days of the end of each calendar quarter.
d. 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 Selling Agent could
not otherwise be compensated, etc.).
e. In the event that Selling Agent has other agreements with Company which
contain a Supplemental Trail Commission addendum, all such Supplemental
Trail Commission addenda are merged for purposes of calculating
Eligible Value of Eligible Contracts. Supplemental Trail Commission is
paid only once per quarter per contract sold under any such
Supplemental Trail Commission addenda.
f. Subject to Condition d., above, Supplemental Trail Commission will be
paid to the Selling Agent for as long as each Eligible Contract
continues to remain an Eligible Contract as herein defined, and for as
long as the Authorized Selling Firm continues to be licensed as an
insurance agency with Company.
g. The obligation to pay Supplemental Trail Commission runs from Company
to Selling Agent only. All distribution of Supplemental Trail
Commission is the Authorized Selling Firm's responsibility. No claim
made by or on behalf of an individual Producer for Supplemental Trail
Commission will be honored by Company, and no expense, including
(without limitation) attorney fees, that an Authorized Selling Firm or
a Representative may incur to determine the individual Representative's
entitlement to Supplemental Trail Commission, will be absorbed by or
reimbursed by Company.
<TABLE>
<CAPTION>
Agreed to on , 1999.
<S> <C>
American Enterprise Life Insurance Company Selling Agent
By: ________________________________ By: ____________________________________
Date: ________________________________ Date: ___________________________________
American Express Financial Advisors Inc. Broker-Dealer
Distributor Broker-Dealer
By: By:
Title: Title:
</TABLE>
<PAGE>
AMENDMENT No. ___
TO SELLING AGENT AGREEMENT
FOR THE SALE OF VARIABLE ANNUITIES
The Selling Agent Agreement between American Enterprise Life Insurance Company
("Company"), American Express Financial Advisors Inc. ("Distributor"),
__________________ ("Selling Agent") and ____________________ ("Broker-Dealer")
dated ________ ("Agreement") is hereby amended as follows. This Amendment is
effective _________.
The purpose of this Amendment is to modify Selling Agent's and
Broker-Dealer's obligations and duties under the Agreement with respect to the
process for remitting premiums to Company to enable Authorized Selling Firm to
use the services of a third party, __________ _________________("Clearing
Broker"). To the extent there are any inconsistencies between the Agreement and
this Amendment, the provisions contained herein will supersede the Agreement.
Section 4.4, Supervision and Administration, is amended to replace subsection
4.4.8 (a) with the following:
4.4.8(a) Authorized Selling Firm will instruct customers to pay their premiums
for the Products, by check or bank draft authorization or wire transfer, with
funds to the order of Selling Agent in accordance with Section 4.5, "Collection
and Submission of Premiums."
Section 4.5, Collection and Submission of Premiums, is amended by adding this
provision, as follows:
4.5.3 Gross ACH Through Clearing Broker. Authorized Selling Firm will assure its
Producer's collection of the premiums due for all Products and the timely
accounting for and submission of all premiums directly and immediately to
Clearing Broker. Premiums must be in the form of check, bank draft
authorization, customer-approved account transfer, or wire transfer, with funds
payable to the order of Selling Agent. Clearing Broker will immediately deposit
premium payments received from Selling Agent into an account for the benefit of
Selling Agent, or into the Clearing Broker's segregated omnibus account
established for the benefit of Selling Agent (sometimes referred to as an
"Omnibus Account."). Selling Agent will notify, or will ensure that the Clearing
Broker notifies, Company immediately of the gross receipts for each business
day. Clearing Broker will, through ACH transfer, remit the gross premiums
received to a Company-owned bank account designated by Company so that the
Company receives the premiums no later than the close of business on the second
day after the application was signed by the Customer. Additional specific
procedures governing the movement of money pursuant to this paragraph will be
established by Selling Agent, Broker-Dealer, Company and Distributor, and will
become part of the Company Rules.
4.5.4 Net Wire Through Clearing Broker. Selling Agent will assure its
Representatives' collection of the premiums for all Variable Contracts and the
timely accounting for and submission of all premiums directly and immediately to
Clearing Broker. Premiums must be in the form of check, bank draft
authorization, customer-approved account transfer, or wire transfer, with funds
to the order of Selling Agent.
Clearing Broker will immediately deposit premium payments received from Selling
Agent into an account for the benefit of Selling Agent, or into the Clearing
Broker's segregated account (sometimes referred to as an "Omnibus Account")
established for the benefit of Selling Agent and any Affiliates or
Broker-Dealer. Selling Agent will notify, or will ensure that the Clearing
Broker notifies, Company immediately of the gross receipts for each business
day. Clearing Broker will, through wire transfer, remit the premiums received,
net of Selling Agent's share of commissions, subject to the conditions set forth
below, to a Company-owned bank account designated by Company so that the Company
receives the premiums no later than the close of business on the second day
after the day the application was signed by the Customer.
Clearing Broker may remit premium payments to Company net of Selling Agent's
share of commission only if shown on Exhibit A, and only if Company and Selling
Agent agree on specific procedures to be used. Such procedures will become part
of the Company Rules. "Selling Agent's share of commission" specifically
excludes supplemental trail commissions or other payments contemplated between
the parties.
Section 4.8, Accurate Record, Audit, shall be amended by adding the following,
at the end of the Section: Company will have the right to audit the books of the
Authorized Selling Firm and Authorized Selling Firm will obtain Clearing
Broker's consent for Company to audit the books of Clearing Broker, with respect
to any premium remittance, or the premium remittance process, insofar as either
involves the Clearing Broker.
Section 4 of the Agreement is hereby amended by inserting a new subsection,
4.13, Compensation to Clearing Broker: Section 4.13 Compensation to Clearing
Broker. Authorized Selling Firm agrees that they will only pay Clearing Broker
for the services authorized herein on a fixed fee basis. Such fee may be paid on
a per-transaction basis only if it is reasonable in relation to the services
rendered, and only if prior written authorization is obtained from the Company.
Authorized Selling Firm will not pay Clearing Broker a commission or use any
form of compensation where the Clearing Broker's fee is determined by the dollar
amount of any given purchase of any Product, unless Clearing Broker is
separately licensed by appropriate state insurance licensing authorities and
appointed to sell Products.
Section 4 of the Agreement is hereby amended by inserting a new subsection, 4.14
Representations and Warranties of Selling Agent and Broker-Dealer: Section
4.14.1 Authorized Selling Firm represents and warrants that Clearing Broker is
the designated receiver of premium payments on variable annuity products sold by
Selling Agent. Section 4.14.2 Authorized Selling Firm represents and warrants
that Broker-Dealer has executed an agreement with the Clearing Broker for the
clearing of premiums which satisfies all requirements of the National
Association for Securities Dealers, Inc. Section 4.14.3 Authorized Selling Firm
represents and warrants that it will ensure that activities of the Clearing
Broker in connection with the Products will be limited to those specified in
this Amendment, and that all such activities will be performed in accordance
with applicable state and federal laws and regulations. Selling Agent and/or
Broker-Dealer must obtain Company's prior written agreement if the activities of
Clearing Broker are modified in any way.
Section 7.1, Indemnification of Company, is amended by adding the following
subsection: Section 7.1.4 The acts or omissions of the Clearing Broker or any
employee or agent of Clearing Broker while performing the activities covered by
this Agreement. The indemnity obligation of this paragraph will extend to any
regulatory penalties incurred by Company as a result of said activities.
IN WITNESS WHEREOF the parties hereto, intending to be legally bound, have
caused this Amendment to be executed by their duly authorized officers.
<TABLE>
<CAPTION>
<S> <C>
American Enterprise Life Insurance Company _______________________________
Company Selling Agent
By: ___________________________ By: ___________________________
Title: Vice President of Finance Title: __________________________
Date: __________________________ Date: __________________________
-------------------------------
American Express Financial Advisors Inc. Broker-Dealer
Distributor
By: ___________________________ By: ___________________________
Title: Vice President of Finance Title: __________________________
Date: __________________________ Date: __________________________
</TABLE>
<PAGE>
EXHIBIT B
Affiliate Participation Agreement
Agency_Affiliate ("Affiliate") agrees to act as an Affiliate of Selling
Agent and American Enterprise Life Insurance Company ("Company") agrees to
appoint Affiliate in the jurisdiction in the Territory identified on Exhibit A
and for the Products identified on Exhibit A in accordance with the terms and
conditions of the Selling Agreement between Selling Agent, Broker-Dealer,
Company and Distributor dated Effective_Date ("Agreement"), incorporated
herein by this reference, as it may be amended from time to time.
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
Selling Agent as an insurance agency under the Agreement except
that Affiliate's rights, duties and responsibilities shall only
extend to the jurisdictions in the Territory on Exhibit A and
Products identified on Exhibit A.
3. Affiliate and Selling Agent are jointly and severally liable for
the performance of Affiliates duties and responsibilities under
the Agreement in the jurisdictions in the Territory identified
on Exhibit A.
4. Affiliate warrants that it has the licenses required to sell
annuities and perform the duties and responsibilities of an
insurance agency in the jurisdictions in the Territory
identified on Exhibit A.
5. Selling Agent, by this appointment, agrees that it will forward
to Affiliate any notices from Company which affect Affiliate.
Affiliate agrees that notice from Company to Selling Agent is
valid and effective notice to it.
6. All other provisions of the Agreement will apply to and govern
Affiliate's activities pursuant to this Affiliate Participation
Agreement, including, but not limited to the provisions
concerning amendments to the Agreement.
7. Selling Agent is authorized to execute amendments to the
Exhibits and Addenda on behalf of Selling Agent and Affiliate
and Affiliate will accept, agree to and perform its duties as
Affiliate under the Agreement in accordance with all such
amendments upon receiving written notice thereof from Selling
Agent, provided that any term of such an amendment which would
be inconsistent with the terms of this Affiliate Participation
Agreement will require an amendment of the Affiliate
Participation Agreement in order to bind Affiliate to that term.
8. This Affiliate Participation Agreement may be terminated in
accordance with the termination provision of the main Agreement.
IN WITNESS WHEREOF Affiliate and Selling Agent have signed this Affiliate
Participation Agreement as of
- - ----------------------.
Agency_Affiliate Selling Agent
Affiliate Selling Agent
By: By:
Title: Title:
Send complete form to:
American Enterprise Life Insurance Company
80 South 8th Street, Minneapolis, MN 55402, Attn: Contract Manager, Unit 1818
Accepted and appointment of Affiliate made on
By: .
For American Enterprise Life Insurance Company
Administrative Offices:
80 South Eighth Street
P.O. Box 534
Minneapolis, MN 55440
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, 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
o Flexible Purchase Payments
o Optional Fixed Dollar or Variable Accumulation Values and Annuity Payments
o Annuity Payments to Begin on the Retirement Date
o This Contract is Nonparticipating -- Dividends Are Not Payable
<PAGE>
Guide to Contract Provisions
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 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
<PAGE>
Definitions
The following words are used often in this contract. When we use these words,
this is what we mean:
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.
<PAGE>
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.
<PAGE>
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.
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
If either you or the annuitant are age 76 or older on the contract date, death
benefit Option B below shall apply. Otherwise, the death benefit shall be Option
A or Option B as you elected in your application and shown under Contract Data.
Under either Option, the 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.
Option A - 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 Maximum Anniversary Value immediately preceding the date of death
increased by the dollar amount of any payments since that anniversary and
reduced by any adjustments for partial withdrawals since that anniversary.
The Maximum Anniversary Value is equal to the greatest Anniversary Value
attained as follows: Each contract anniversary prior to the earlier of your or
the annuitant's 81st birthday we calculate an Anniversary Value that is the
greater of (i) the contract value on such anniversary, or (ii) 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 Maximum fifth year Anniversary Value immediately preceding the date of
death increased by the dollar amount of any payments since that fifth
anniversary and reduced by any adjustments for partial withdrawals since
that fifth anniversary.
The Maximum fifth year Anniversary Value is equal to the greatest fifth year
Anniversary Value attained as follows: Every fifth contract anniversary prior to
the earlier of your or the annuitant's 86th birthday we calculate a fifth year
Anniversary Value that is the greater of (i) the contract value on such
anniversary, or (ii) total payments made to the contract minus 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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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 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 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.
<PAGE>
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>
<CAPTION>
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
<S> <C> <C>
End of contract year Guaranteed minimum fixed Guaranteed minimum fixed account
account contract values withdrawal values
1 $ 2,030.00 $ 1,882.95
2 4,120.90 3,796.51
3 6,274.53 5,803.73
4 8,492.76 7,890.88
5 10,777.55 10,079.74
6 13,130.87 12,352.16
7 15,554.80 14,730.06
8 18,051.44 17,215.39
9 20,622.99 19,770.19
10 23,271.68 22,411.68
11 25,999.83 25,139.83
12 28,809.82 27,949.82
13 31,704.11 30,844.11
14 34,685.24 33,825.24
15 37,755.80 36,895.80
16 40,918.47 40,058.47
17 44,176.02 43,316.02
18 47,531.30 46,671.30
19 50,987.24 50,127.24
20 54,546.86 53,686.86
</TABLE>
If there are any additional payments, 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.
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.
<PAGE>
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.
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.
<PAGE>
We may also:
o add new subaccounts,
o combine any two or more subaccounts,
o make additional subaccounts investing in additional funds,
o transfer assets to and from the subaccounts or the variable account, and
o eliminate or close any subaccounts.
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 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.
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.
<PAGE>
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 $100. 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 totaling the
withdrawal charges.
<PAGE>
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 From Payment Receipt Withdrawal Charge Percentage
1 8.5%
2 8.5%
3 8.0%
4 7.0%
5 5.0%
6 4.0%
7 2.0%
Thereafter 0%
Waiver of Withdrawal Charges
Withdrawal charges are waived for all of the following.
1. The greater of:
a. Withdrawals during the year totaling up to 15% of your prior contract
anniversary contract value, or
b. Contract earnings. (Contract earnings is defined as the contract value
less purchase payments not previously withdrawn.)
2. 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.
3. 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.
4. IRA required minimum distributions, for those amounts required to be
distributed from this contract only.
5. Annuity payment plan payments.
6. Payments made in the event of the death of the owner or annuitant.
<PAGE>
Withdrawal Order
We use this order to determine withdrawal charges.
1. First, withdrawals up to 15% of your prior anniversary account value not
previously withdrawn during this contract year.
(No withdrawal charge.)
2. Next, withdrawals are from contract earnings - if any - in excess of the
annual 15% free withdrawal amount.
(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 reasonabl
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.
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
<PAGE>
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 701/2; 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.
<PAGE>
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.
<PAGE>
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
taxation 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
o Flexible Purchase Payments
o Optional Fixed Dollar or Variable Accumulation Values
and Annuity Payments
o Annuity Payments to Begin on the Retirement Date
o This Contract is Nonparticipating - Dividends Are Not Payable
This is the back cover.
(a full-page bleed)
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
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
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Age 65 2005 5.85 5.83 5.77 5.66 5.67 5.34
2010 5.78 5.76 5.71 5.61 5.61 5.30
2015 5.72 5.70 5.65 5.56 5.56 5.25
2020 5.66 5.64 5.60 5.52 5.51 5.21
2025 5.60 5.59 5.54 5.47 5.47 5.18
2030 5.55 5.53 5.50 5.43 5.43 5.14
Age 70 2005 6.54 6.50 6.36 6.14 6.22 5.85
2010 6.45 6.41 6.28 6.08 6.15 5.78
2015 6.35 6.32 6.21 6.03 6.08 5.72
2020 6.27 6.24 6.14 5.97 6.01 5.66
2025 6.19 6.16 6.07 5.92 5.95 5.61
2030 6.11 6.09 6.01 5.87 5.90 5.56
Age 75 2005 7.58 7.47 7.15 6.70 6.99 6.59
2010 7.43 7.34 7.05 6.63 6.89 6.49
2015 7.30 7.21 6.96 6.57 6.80 6.40
2020 7.18 7.10 6.87 6.51 6.71 6.31
2025 7.06 6.99 6.78 6.46 6.62 6.24
2030 6.95 6.89 6.70 6.40 6.55 6.16
Age 85 2005 11.44 10.69 9.09 7.60 9.50 9.30
2010 11.12 10.45 9.00 7.58 9.32 9.09
2015 10.82 10.23 8.90 7.56 9.15 8.90
2020 10.55 10.02 8.80 7.53 9.00 8.72
2025 10.29 9.83 8.71 7.51 8.85 8.55
2030 10.06 9.64 8.62 7.48 8.72 8.40
</TABLE>
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.
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
<PAGE>
<TABLE>
<CAPTION>
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
at in Life Income Five Years Ten Years Fifteen Years Installment Joint & Survivor
Annuitization Year Non-Refund Certain Certain Certain Refund Non-Refund
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Age 65 2005 4.68 4.66 4.62 4.53 4.43 4.20
2010 4.61 4.60 4.55 4.48 4.38 4.15
2015 4.55 4.53 4.49 4.42 4.34 4.11
2020 4.48 4.47 4.44 4.38 4.29 4.07
2025 4.43 4.42 4.39 4.33 4.25 4.03
2030 4.37 4.37 4.34 4.29 4.21 3.99
Age 70 2005 5.38 5.35 5.24 5.05 4.97 4.74
2010 5.29 5.26 5.16 4.99 4.90 4.67
2015 5.20 5.17 5.08 4.93 4.84 4.61
2020 5.11 5.09 5.01 4.87 4.78 4.55
2025 5.03 5.01 4.94 4.82 4.72 4.49
2030 4.96 4.94 4.88 4.76 4.67 4.44
Age 75 2005 6.42 6.33 6.07 5.65 5.68 5.50
2010 6.28 6.20 5.97 5.59 5.60 5.40
2015 6.15 6.08 5.87 5.52 5.51 5.31
2020 6.03 5.97 5.78 5.46 5.43 5.23
2025 5.91 5.86 5.69 5.40 5.36 5.15
2030 5.81 5.76 5.60 5.34 5.29 5.08
Age 85 2005 10.25 9.60 8.12 6.64 7.97 8.24
2010 9.94 9.37 8.02 6.61 7.82 8.03
2015 9.65 9.15 7.91 6.59 7.68 7.84
2020 9.38 8.94 7.81 6.56 7.55 7.66
2025 9.14 8.74 7.72 6.54 7.42 7.50
2030 8.91 8.56 7.62 6.51 7.31 7.35
</TABLE>
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.
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
This endorsement is effective as of the contract date of this contract.
American Enterprise Life Insurance Company
/s/ William A Stoltzmann
Secretary
TSA PLAN 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 Tax-Sheltered Annuity (TSA) contract.
A Tax-Sheltered Annuity is used in or under a retirement plan or program
described in Code Section 403(b).
Code
Code means the Internal Revenue Code of 1986, as amended, and all related laws
and regulations which are in effect during the term of this contract.
GENERAL PROVISIONS
Unisex Basis
Since TSA plans are employer-sponsored retirement plans, this contract is issued
with rates on a unisex basis. All sex-distinct references in the contract are
hereby deleted and replaced with unisex references.
Minimum Distribution Requirement
Once the plan participant reaches age 70 1/2, the Code requires receipt of
certain minimum distributions from most tax-qualified plans. Generally
distributions must begin no later than April 1 following the year in which the
participant reaches age 70 1/2. The minimum distribution requirements may be
satisfied by making partial withdrawals from time to time or by settlement of
this contract using an annuity payment plan.
Consult a tax advisor to determine required minimum distributions and the method
of satisfying the minimum distribution requirements which best meets the owner's
and/or plan participant's objectives.
Contract Modification
We reserve the right to modify this contract to the extent necessary to qualify
this contract as a TSA contract as described in the applicable Code Section
403(b) and all related laws and regulations which are in effect during the term
of this contract.
We will obtain the approval of any regulatory authority 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.
<PAGE>
OWNERSHIP AND BENEFICIARY
Change of Ownership
The 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 403 of the Code,
or under any other applicable section of the Code.
However, if this contract is owned by a trustee of a tax-qualified trust or the
custodian of a tax-qualified custodial account, such trustee or custodian may
transfer ownership of the contract to the annuitant or to a qualified successor
trustee or custodian.
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.
Assignment
This contract may not be assigned as collateral.
PAYMENTS TO BENEFICIARY
Death Benefits Before the Retirement Date In lieu of a lump sum, payment of the
death benefit 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. (a)Payments begin no later than one year after the date of death, in the case
of a nonspouse beneficiary; or
(b)payments must begin no later than the date on which the annuitant would
have attained age 70 1/2, in the case of a spousal beneficiary; and
(c)amounts are calculated in accordance with the Code.
In this event, the reference to "annuitant" in the Annuity Provisions shall
apply to the beneficiary.
Spouse's Option to Continue Contract
If you are a nonnatural person such as a tax-qualified trust or a tax-qualified
custodial account, references to you and your spouse in this provision are
changed to the annuitant and the annuitant's spouse. If you die prior to
attaining age 70 1/2 and your spouse is the sole beneficiary, your spouse may
keep the contract in force as owner and defer beginning annuity payments until
you would have attained age 70 1/2 or such other date as provided in the Code.
Any annuity payment plan later elected must provide amounts calculated in
accordance with the Code.
PURCHASE PAYMENTS
Limit on Elective Deferrals
Since your contract is a Tax-Sheltered Annuity qualified under Section 403(b) of
the Code, any Elective Deferrals made under the contract may not exceed the
annual limit on elective deferrals as provided in the Code.
Elective Deferrals means employer contributions to the annuity that are
excludable from your current income as provided in the Code.
WITHDRAWAL PROVISIONS
TSA Distribution Restrictions
To meet the requirements of Section 403(b) of the Code, unless otherwise
provided in the Code, no amounts may be distributed from TSA contracts unless
you have:
1. attained age 59 1/2; or
2. separated from service; or
3. died; or
4. become disabled (as defined in Section 72(m)(7) of the Code); or
5. encountered hardship (within the meaning of Section 403(b) of the Code); and
then only such items as the Code may provide.
We will require satisfactory written proof of the event(s) in items 1 through 5
above prior to any distribution from the contract.
<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
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
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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>
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.
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
<PAGE>
<TABLE>
<CAPTION>
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
at in Life Income Five Years Ten Years Fifteen Years Installment Joint & Survivor
Annuitization Year Non-Refund Certain Certain Certain Refund Non-Refund
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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>
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.
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
This endorsement is effective as of the contract date of this contract.
American Enterprise Life Insurance Company
/s/ William A Stoltzmann
Secretary
American Express
American Enterprise Life
Platinum 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)
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 not 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 the annuitant
Phone Number ( )
Sex Date of Birth Social Security Number
_ M (Month/Day/Year) Tax Identification Number)
_ 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 number and date of birth)
4
Annuity Plan (check one)
_ Nonqualified Annuity
_ Individual Retirement Annuity (IRA)
_ Roth IRA
If IRA or Roth IRA (check and complete applicable types)
_ Regular/Contributory: Amount $______ for _____ (year)
_ Regular/Contributory: Amount $______ for _____ (year)
_ SEP-IRA: Amount $______ for _____ (year)
_ SEP-IRA: Amount $______ for _____ (year)
_ Rollover: Amount $______
_ Trustee to Trustee: Amount $______
_ Roth IRA Conversion: Amount $______
5
Death Benefit Option
If you and annuitant are under Age 76, check one. If older, Option B applies.
_ Option A - Maximum Anniversary Value
_ Option B - Maximum 5th Anniversary Value
6
Purchase Payments
Initial Purchase Payment $ ______________________________________
Payment Allocation*:
____% AEL Fixed Account
____% AIM V.I. Capital Appreciation
____% AIM V.I. International Equity
____% AIM V.I. Value
____% Dreyfus Disciplined Stock
____% Dreyfus Small Company
____% Dreyfus Socially Responsible
____% AXP SM VP New Dimensions
____% AXP SM VP Extra Income
____% AXP SM VP Managed
____% AXP SM VP Cash Management
____% AXP SM VP Bond
____% Oppenheimer Global Securities Fund/VA
____% Oppenheimer Main Street Growth & Income Fund/VA
____% Oppenheimer Strategic Bond Fund/VA
____% Putnam VT Growth & Income
____% Putnam VT International Growth & Income
____% Putnam VT Vista
____% Catholic Values Equity Investment Portfolio
____% Wright International Blue Chip
____% Wright Selected Blue Chip
*Must be whole numbers. Your above payment allocation instructions will remain
in effect for any future payments you make until you change your instructions.
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
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 and decrease.
Signatures
Location (City/State)
Annuitant Signature
Owner Signature (if other than annuitant)
Date
Licensed Agent Signature
Joint Owner (if any) Signature
Please complete agent information on reverse side.
<PAGE>
10
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 and belief, 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
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:
<PAGE>
1. Amendmentto 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:
AMENDMENT 1 TO
PARTICIPATION AGREEMENT
Among
OPPENHEIMER VARIABLE ACCOUNT FUNDS,
OPPENHEIMERFUNDS, INC.
and
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
THIS AMENDMENT 1 TO PARTICIPATION AGREEMENT ("Amendment 1") is
effective as of June 15, 1999, among OPPENHEIMER VARIABLE ACCOUNT FUNDS (the
"Fund"), OPPENHEIMERFUNDS, INC. (the "Adviser"), and AMERICAN ENTERPRISE LIFE
INSURANCE COMPANY (the "Company"). Capitalized terms not otherwise defined
herein will have the meaning ascribed to them in the Agreement (defined below).
WHEREAS, the Fund, the Adviser and the Company are parties to the
Participation Agreement dated October 30, 1997 (the "Agreement") in connection
with the participation by the Funds in Contracts offered by the Company to its
clients; and
WHEREAS, the Company now desires to expand the number of Portfolios of
the Fund made available as underlying investment media for the Contracts; and
WHEREAS, the parties to this Amendment 1 now desire to modify the
Agreement as provided herein.
NOW, THEREFORE, in consideration of the mutual promises set forth
herein, the parties hereto agree as follows:
<PAGE>
1. Amendment to Notices Provision. In Article IX, the reference under
notices "If to the Company" to Peter L. Slattery, Director-Variable Assets
Product Management, is hereby deleted in its entirety and replaced with a
reference to "President."
2. Amendment to Schedule 2. Schedule 2 of the Agreement is hereby
amended to read as follows:
Schedule 2
Contracts
Contract Form 34560 Contract Form 43410
Contract Form 43260 and state variations of this form
and state variations of these forms
3. Amendment to Schedule3. Schedule 3 of the Agreement is hereby
amended to read as follows:
Schedule 3
Portfolios
Under Contract Form 34560, 43260 and state variations of these forms:
Oppenheimer Capital Appreciation Fund/VA (formerly Oppenheimer Variable Account
Funds/Oppenheimer Growth Fund)
Oppenheimer High Income Fund/VA (formerly Oppenheimer Variable Account
Funds/Oppenheimer High Income Fund)
Under Contract Form 43410 and state variations of this form:
Oppenheimer Global Securities Fund/VA
Oppenheimer Main Street Growth & Income Fund/VA
Oppenheimer Strategic Bond Fund/VA
<PAGE>
4. Ratification and Confirmation of Agreement. In the event of a
conflict between the terms of this Amendment 1 and the Agreement, it is the
intention of the parties that the terms of this Amendment 1 will control and the
Agreement will be interpreted on that basis. To the extent the provisions of the
Agreement have not been amended by this Amendment 1, the parties hereby confirm
and ratify the Agreement.
5. Counterparts. This Amendment 1 may be executed in two or more
counterparts, each of which will be an original and all of which together will
constitute one instrument.
6. Full Force and Effect. Except as expressly supplemented, amended or
consented to hereby, all of the representations, warranties, terms, covenants
and conditions of the Agreement will remain unamended and will continue to be in
full force and effect.
IN WITNESS WHEREOF, the undersigned have executed this Amendment 1 as
of the date first above written.
AMERICAN ENTERPRISE LIFE
INSURANCE COMPANY ATTEST
By:/s/ James E. Choat By:/s/ Mary Ellyn Minenko
Name: James E. Choat Name: Mary Ellyn Minenko
Title: President Title: Assistant Secretary
OPPENHEIMER VARIABLE ACCOUNT
FUNDS OPPENHEIMERFUNDS, INC.
By:/s/ Andrew J. Donohue By:/s/ Wesley W. Mayer
Name: Andrew J. Donohue Name: Wesley W. Mayer
Title: Vice President Title: Vice President
PARTICIPATION AGREEMENT
By and Among
THE WRIGHT MANAGED BLUE CHIP SERIES TRUST
And
WRIGHT INVESTORS' SERVICE, INC.
And
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into as of this 30th day of June,
1999, by and between THE WRIGHT MANAGED BLUE CHIP SERIES TRUST, an open-end
management investment company organized as a business trust under the laws of
Massachusetts (the "Fund"), WRIGHT INVESTORS' SERVICE, INC., a corporation
organized under the laws of Connecticut (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 series of the Fund available as investment options
under the Contracts;
<PAGE>
NOW, THEREFORE, in consideration of their mutual promises, the parties agree as
follows:
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. 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 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 Trust 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 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.
1.7. 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 NAV 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 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.
<PAGE>
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;
(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 wit
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.
<PAGE>
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
(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 variou
states 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 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.
<PAGE>
2.5. The Fund and the Adviser represent and warrant that they will invest
money from the Contracts in such a manner as to ensure that the
Contracts will be treated as variable annuity contracts and variable
life insurance policies under the Internal Revenue Code and the
regulations issued thereunder. Without limiting the scope of the
foregoing, the Fund and the Adviser further represent and warrant that
they 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
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 t
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 Contrac
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.
<PAGE>
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 1 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 election of directors and with whatever
rules the SEC may promulgate with respect thereto.
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.
<PAGE>
3.10. The Fund and the Adviser will not give any information or make an
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 th
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.
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
trademarked or service marked name or names from the Fund prospectuses
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.
<PAGE>
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.
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.
<PAGE>
4.3. 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 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 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 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 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 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
Section 4.3 or 4.4 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 reasonable legal and other
expenses) or litigation (including amounts paid in settlement with the
written consent of the Company), 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),
<PAGE>
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
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 reasonable legal and other expenses)
or litigation (including amounts paid in settlement with the written
consent of the Adviser) 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
<PAGE>
(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
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.
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
<PAGE>
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 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.
<PAGE>
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.
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
<PAGE>
(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 provided such
material breach continues for ten (10) days after receipt of
such notice; or
(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
<PAGE>
(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:
The Wright Managed Blue Chip Series Trust
Mutual Fund Administration
Wright Investors' Service, Inc.
1000 Lafayette Boulevard
Bridgeport, CT 06604
If to the Adviser:
Legal Department
Wright Investors' Service, Inc.
1000 Lafayette Boulevard
Bridgeport, CT 06604
<PAGE>
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 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.
<PAGE>
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.
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 WRIGHT MANAGED BLUE WRIGHT INVESTORS' SERVICE, INC.
CHIP SERIES TRUST
By: By:
Name: A. M. Moody III Name: Peter M. Donovan
Title: Vice President Title: President
AMERICAN ENTERPRISE LIFE
INSURANCE COMPANY ATTEST:
By: By:
Name: James E. Choat Name: Mary Ellyn Minenko
Title: President Title: Assistant Secretary
<PAGE>
Schedule 1
PARTICIPATION AGREEMENT
By and Among
THE WRIGHT MANAGED BLUE CHIP SERIES TRUST
And
WRIGHT INVESTORS' SERVICE, 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
THE WRIGHT MANAGED BLUE CHIP TRUST
And
WRIGHT INVESTORS' SERVICE, INC.
And
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
The Accounts shown on Schedule 1 may invest in the following Portfolios:
Catholic Values Equity Investment Portfolio
Wright Selected Blue Chip Portfolio
Wright International Blue Chip Portfolio
July 8, 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.: 333-72777/811-7195
Ladies and Gentlemen:
I am familiar with the establishment of the American Enterprise Variable Annuity
Account ("Account"), which is a separate account of American Enterprise Life
Insurance Company ("Company") established by the Company's Board of Directors
according to applicable insurance law. I also am familiar with the
above-referenced Registration Statement filed by the Company on behalf of the
Account with the Securities and Exchange Commission.
I have made such examination of law and examined such documents and records as
in my judgment are necessary and appropriate to enable me to give the following
opinion:
1. The Company is duly incorporated, validly existing and in good standing
under applicable state law and is duly licensed or qualified to do business
in each jurisdiction where it transacts business. The Company has all
corporate powers required to carry on its business and to issue the
contracts.
2. The Account is a validly created and existing separate account of the
Company and is duly authorized to issue the securities registered.
3. The contracts issued by the Company, when offered and sold in accordance
with the prospectus contained in the Registration Statement and in
compliance with applicable law, will be legally issued and represent
binding obligations of the Company in accordance with their terms.
I hereby consent to the filing of this opinion as an exhibit to the Registration
Statement.
Sincerely,
/s/ Mary Ellyn Minenko
Mary Ellyn Minenko
Group Counsel
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. 333-72777) and related Prospectus for the registration of the
American Express Platinum Variable Annuity Contracts to be offered by American
Enterprise Life Insurance Company.
/s/ Ernst & Young LLP
Ernst & Young LLP
Minneapolis, Minnesota
July 8, 1999
AXP VP Growth Dimensions Fund
Performance Calculations
As disclosed in the Fund's prospectus, cumulative total return is the cumulative
change in the value of an investment over a specified time period. We assume
that income earned by the investment is reinvested.
Cumulative Total Return = Ending Total Value - Initial Amount Invested
Initial Amount Invested
where: Ending Total Value = Initial Investment * (1 + (Gross Total Return*
Contract Charge Factor)
Contract Charge Factor = (Gross Total Return * Average Policy Size) -
(Policy Fee * n))
(Average Policy Size * Gross Total Return)
Gross Total Return = Ending AUV - Initial AUV
Initial AUV
Average Policy Size = $30,500
Policy Fee = $30
n = number of years
Based on an initial investment of $1,000 made on May 1, 1996, and the
accumulation unit value information attached, the value of that investment at
December 31, 1998 and total return for the period, is as follows:
Gross Total Return = 1.322249 - 1.000000 = + 32.22%
1.000000
Contract Charge Factor = (32.22% * $30,500 - ($30 * 1.17) = 99.64%
($30,500 * 32.22%)
Ending Total Value = $1,000 * (1 + (32.22% * 99.64%) = $1,321.10
Total Return = $1,321.10 - $1,000 = 32.11%
$1,000
Average annual total return (T) equates the initial amount invested (P) to the
ending redeemable value (ERV) over each period (n) in accordance with the
formula prescribed by the Securities and Exchange P(1+T)n = ERV.
Average annual total return for the same period as above is as follows:
$1,000 (1 + .2678) 1.17 = $1,321.10 T = + 26.78%
AXP VP Bond Fund
Performance Calculations
As disclosed in the Fun's prospectus, cumulative total return is the cumulative
change in the value of an investment over a specified time period. We assume
that income earned by the investment is reinvested.
Cumulative Total Return = Ending Total Value - Initial Amount Invested
Initial Amount Invested
where: Ending Total Value = Initial Investment * (1 + (Gross Total Return*
Contrct Charge Factor)
Contract Charge Factor = (Gross Total Return * Average Policy Size) -
(Policy Fee * n))
(Average Policy Size * Gross Total Return)
Gross Total Return = Ending AUV - Initial AUV
Initial AUV
Average Policy Size = $30,500
Policy Fee = $30
n = number of years
Based on an initial investment of $1,000 made on May 1, 1996, and the
accumulation unit value information attached, the value of that investment at
December 31, 1998 and total return for the period, is as follows:
Gross Total Return = 1.327264 - 0.995394 = + 33.34%
0.995394
Contract Charge Factor = (33.34% * $30,500) - ($30 * 3.86) = 98.96%
($30,500 * 33.34%)
Ending Total Value = $1,000 * (1.327264 / 0.995394) * 98.96% = $1,329.61
Total Return = $1,329.61 - $1,000 = 32.96%
$1,000
Average annual total return (T) equates the initial amount invested (P) to the
ending redeemable value (ERV) over each period (n) in accordance with the
formula prescribed by the Securities and Exchange P(1+T)n = ERV.
Average annual total return for the same period as above is as follows:
$1,000 (1 + .0736) 3.86 = $1,329.61 T = + 7.36%
AXP VP Managed Fund
Performance Calculations
As disclosed in the Fund's prospectus, cumulative total return is the cumulative
change in the value of an investment over a specified time period. We assume
that income earned by the investment is reinvested.
Cumulative Total Return = Ending Total Value - Initial Amount Invested
Initial Amount Invested
where: Ending Total Value = Initial Investment * (1 + (Gross Total Return*
Contract Charge Factor)
Contract Charge Factor = (Gross Total Return * Average Policy Size) -
Policy Fee * n))
(Average Policy Size * Gross Total Return)
Gross Total Return = Ending AUV - Initial AUV
Initial AUV
Average Policy Size = $30,500
Policy Fee = $30
n = number of years
Based on an initial investment of $1,000 made on May 1, 1996, and the
accumulation unit value information attached, the value of that investment at
December 31, 1998 and total return for the period, is as follows:
Gross Total Return = 1.827258 - 0.993266 = + 83.96%
0.993266
Contract Charge Factor = (83.96% * $30,500) - ($30 * 3.86) = 99.55%
($30,500 * 83.96%)
Ending Total Value = $1,000 * (1.827258 / 0.993266) * 99.55% = $1,835.85
Total Return = $1,835.85 - $1,000 = 83.58%
$1,000
Average annual total return (T) equates the initial amount invested (P) to the
ending redeemable value (ERV) over each period (n) in accordance with the
formula prescribed by the Securities and Exchange P(1+T)n = ERV.
Average annual total return for the same period as above is as follows:
$1,000 (1 + .1673) 3.86 = $1,835.85 T = + 16.73%
AXP VP Cash Management Fund
Performance Calculations
As disclosed in the Fund's prospectus, cumulative total return is the cumulative
change in the value of an investment over a specified time period. We assume
that income earned by the investment is reinvested.
Cumulative Total Return = Ending Total Value - Initial Amount Invested
Initial Amount Invested
where: Ending Total Value = Initial Investment * (1 + (Gross Total Return*
Contract Charge Factor)
Contract Charge Factor = (Gross Total Return * Average Policy Size) -
(Policy Fee * n))
(Average Policy Size * Gross Total Return)
Gross Total Return = Ending AUV - Initial AUV
Initial AUV
Average Policy Size = $30,500
Policy Fee = $30
n = number of years
Based on an initial investment of $1,000 made on May 1, 1996, and the
accumulation unit value information attached, the value of that investment at
December 31, 1998 and total return for the period, is as follows:
Gross Total Return = 1.146121 - 0.998605 = + 14.77%
0.998605
Contract Charge Factor = (14.77% * $30,500) - ($30 * 3.86) = 97.43%
($30,500 * 14.77%)
Ending Total Value = $1,000 * (1.146121 / 0.998605) * 97.43% = $1,143.93
Total Return = $1,143.93 - $1,000 = 14.39%
$1,000
Average annual total return (T) equates the initial amount invested (P) to the
ending redeemable value (ERV) over each period (n) in accordance with the
formula prescribed by the Securities and Exchange P(1+T)n = ERV.
Average annual total return for the same period as above is as follows:
$1,000 (1 + .0325) 3.86 = $1,143.93 T = + 3.25%
AIM VI International Equity Fund
Performance Calculations
As disclosed in the Fund's prospectus, cumulative total return is the cumulative
change in the value of an investment over a specified time period. We assume
that income earned by the investment is reinvested.
Cumulative Total Return = Ending Total Value - Initial Amount Invested
Initial Amount Invested
where: Ending Total Value = Initial Investment * (1 + (Gross Total Return*
Contract Charge Factor)
Contract Charge Factor = (Gross Total Return * Average Policy Size) -
(Policy Fee * n))
(Average Policy Size * Gross Total Return)
Gross Total Return = Ending AUV - Initial AUV
Initial AUV
Average Policy Size = $30,500
Policy Fee = $30
n = number of years
Based on an initial investment of $1,000 made on May 1, 1996, and the
accumulation unit value information attached, the value of that investment at
December 31, 1998 and total return for the period, is as follows:
Gross Total Return = 1.160183 - 0.999861 = + 16.03%
0.999861
Contract Charge Factor = (16.03% * $30,500) - ($30 * 1.17) = 99.28%
($30,500 * 16.03%)
Ending Total Value = $1,000 * (1.160183 / 0.999861) * 99.28% = $1,159.19
Total Return = $1,159.19 - $1,000 = 15.92%
$1,000
Average annual total return (T) equates the initial amount invested (P) to the
ending redeemable value (ERV) over each period (n) in accordance with the
formula prescribed by the Securities and Exchange P(1+T)n = ERV.
Average annual total return for the same period as above is as follows:
$1,000 (1 + .1344) 1.17 = $1,159.19 T = + 13.44%
AIM VI Value Fund
Performance Calculations
As disclosed in the Fund's prospectus, cumulative total return is the cumulative
change in the value of an investment over a specified time period. We assume
that income earned by the investment is reinvested.
Cumulative Total Return = Ending Total Value - Initial Amount Invested
Initial Amount Invested
where: Ending Total Value = Initial Investment * (1 + (Gross Total Return*
Contract Charge Factor)
Contract Charge Factor = ((Gross Total Return * Average Policy Size) -
(Policy Fee * n))
(Average Policy Size * Gross Total Return)
Gross Total Return = Ending AUV - Initial AUV
Initial AUV
Average Policy Size = $30,500
Policy Fee = $30
n = number of years
Based on an initial investment of $1,000 made on May 1, 1996, and the
accumulation unit value information attached, the value of that investment at
December 31, 1998 and total return for the period, is as follows:
Gross Total Return = 1.342966 - 1.000075 = + 34.29%
1.000075
Contract Charge Factor = (34.29% * $30,500) - ($30 * 1.17) = 99.66%
($30,500 * 34.29%)
Ending Total Value = $1,000 * (1.342966 / 1.000075) * 99.66% = $1,341.71
Total Return = $1,341.71 - $1,000 = 34.17%
$1,000
Average annual total return (T) equates the initial amount invested (P) to the
ending redeemable value (ERV) over each period (n) in accordance with the
formula prescribed by the Securities and Exchange P(1+T)n = ERV.
Average annual total return for the same period as above is as follows:
$1,000 (1 + .2854) 1.17 = $1,341.71 T = + 28.54%
Putnam VT Growth & Income Fund, Class IB
Performance Calculations
As disclosed in the Fun's prospectus, cumulative total return is the cumulative
change in the value of an investment over a specified time period. We assume
that income earned by the investment is reinvested.
Cumulative Total Return = Ending Total Value - Initial Amount Invested
Initial Amount Invested
where: Ending Total Value = Initial Investment * (1 + (Gross Total Return*
Contract Charge Factor)
Contract Charge Factor = ((Gross Total Return * Average Policy Size) -
(Policy Fee * n))
(Average Policy Size * Gross Total Return)
Gross Total Return = Ending AUV - Initial AUV
Initial AUV
Average Policy Size = $30,500
Policy Fee = $30
n = number of years
Based on an initial investment of $1,000 made on May 1, 1996, and the
accumulation unit value information attached, the value of that investment at
December 31, 1998 and total return for the period, is as follows:
Gross Total Return = 1.181056 - 1.000538 = + 18.04%
1.000538
Contract Charge Factor = (18.04% * $30,500) - ($30 * .24) = 99.87%
($30,500 * 18.04%)
Ending Total Value = $1,000 * (1.181056 / 1.000538) * 99.87% = $1,180.19
Total Return = $1,180.19 - $1,000 = 18.02%
$1,000
Average annual total return (T) equates the initial amount invested (P) to the
ending redeemable value (ERV) over each period (n) in accordance with the
formula prescribed by the Securities and Exchange Commission: P(1+T)n = ERV.
Average annual total return for the same period as above is as follows:
$1,000 (1 + 1.0053) 0.24 = $1,180.19 T = + 100.53%
<TABLE>
<CAPTION>
<S> <C> <C>
Fund Name (Inception Date) Inception AUV 12/31/98 AUV
AXP VP Growth Dimensions Fund (5/1/96) 1.000000 1.322249
AXP VP Bond Fund (10/30/81) 0.995394 1.327264
AXP VP Managed Fund (4/30/86) 0.993266 1.827258
AXP VP Cash Management Fund (10/30/81) 0.998605 1.146121
AIM VI International Equity Fund (5/5/93) 0.999861 1.160183
AIM VI Value Fund (5/5/93) 1.000075 1.342966
Putnam VT Growth & Income Fund, Class IB (2/1/88) 1.000538 1.181056
</TABLE>
