<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 12 (File No. 33-54471) [X]
---------
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 13 (File No. 811-7195) [X]
---------
(Check appropriate box or boxes)
AMERICAN ENTERPRISE VARIABLE ANNUITY ACCOUNT
- --------------------------------------------------------------------------------
(Exact Name of Registrant)
American Enterprise Life Insurance Company
- -------------------------------------------------------------------------------
(Name of Depositor)
80 South 8th Street, P.O. Box 534, Minneapolis, MN 55440-0534
- --------------------------------------------------------------------------------
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (612) 671-3678
- --------------------------------------------------------------------------------
Mary Ellyn Minenko, IDS Tower 10, Minneapolis, MN 55440-0010
- --------------------------------------------------------------------------------
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on April 30, 1999 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[ ] on (date) pursuant to paragraph (a)(1) of Rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
<PAGE>
PROSPECTUS
APRIL 30, 1999
AEL PERSONAL PORTFOLIO PLUS(2)/AEL PERSONAL PORTFOLIO PLUS/AEL PERSONAL
PORTFOLIO-SM-
Individual flexible premium deferred combination fixed/variable annuity.
AMERICAN ENTERPRISE VARIABLE ANNUITY ACCOUNT
Issued by: American Enterprise Life Insurance Company
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 following prospectuses:
For AEL Personal Portfolio Plus(2):
- -----------------------------------
- -AIM Variable Insurance Funds, Inc.;
- -American Century Variable Portfolios, Inc.;
- -IDS Life Retirement Annuity Mutual Funds;
- -Janus Aspen Series;
- -OCC Accumulation Trust;
- -Oppenheimer Variable Account Funds; and
- -Putnam Variable Trust
For AEL Personal Portfolio Plus/AEL Personal Portfolio-SM-:
- -----------------------------------------------------------
- -AIM Variable Insurance Funds, Inc.;
- -GT Global Variable Investment Series;
- -GT Global Variable Investment Trust;
- -Janus Aspen Series;
- -OCC Accumulation Trust;
- -Oppenheimer Variable Account Funds; and
- -Putnam Variable Trust
Please read the prospectuses carefully and keep them for future reference. This
contract is available for qualified and nonqualified retirement plans.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
AN INVESTMENT IN THIS CONTRACT IS NOT A DEPOSIT OF A BANK OR FINANCIAL
INSTITUTION AND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN THIS CONTRACT
INVOLVES INVESTMENT RISK INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
A Statement of Additional Information (SAI), dated the same date as this
prospectus, is incorporated by reference into this prospectus. It is filed with
the 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.
1
<PAGE>
TABLE OF CONTENTS
KEY TERMS 3
THE CONTRACT IN BRIEF 4
EXPENSE SUMMARY 6
CONDENSED FINANCIAL INFORMATION (UNAUDITED) 10
FINANCIAL STATEMENTS 16
PERFORMANCE INFORMATION 16
THE VARIABLE ACCOUNT 18
THE FUNDS 20
THE FIXED ACCOUNT 24
BUYING YOUR CONTRACT 25
CHARGES 27
VALUING YOUR INVESTMENT 31
MAKING THE MOST OF YOUR CONTRACT 33
WITHDRAWALS 37
CHANGING OWNERSHIP 38
BENEFITS IN CASE OF DEATH 39
THE ANNUITY PAYOUT PERIOD 42
TAXES 44
VOTING RIGHTS 47
SUBSTITUTION OF INVESTMENTS 48
ABOUT THE SERVICE PROVIDERS 49
YEAR 2000 50
TABLE OF CONTENTS OF THE STATEMENT OF
ADDITIONAL INFORMATION 51
2
<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
Mutual funds and/or portfolios that are investment options
under your contract, each with a different investment
objective. You may allocate your purchase payments into
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 controls
the contract.
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:
- Individual Retirement Annuities (IRAs)
- Roth IRAs
- Simplified Employee Pension (SEP) plans
All other contracts are considered NONQUALIFIED ANNUITIES.
RETIREMENT DATE
The date when annuity payouts are scheduled to begin.
VALUATION DATE
Any normal business day, Monday through Friday, that the NYSE
is open. Each valuation date ends at the close of business. We
calculate the value of each subaccount at the close of business
on each valuation date.
VARIABLE ACCOUNT
Consists of separate subaccounts to which you may allocate
purchase payments; each invests in shares of one fund. The
value of your investment in each subaccount changes with the
performance of the particular fund.
WITHDRAWAL VALUE
The amount you are entitled to receive if you make a full
withdrawal from your contract. It is the contract value minus
any applicable charges.
3
<PAGE>
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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 agent or to our office
within 10 days after it is delivered to you and receive a full refund of the
contract value. No charges will be deducted. 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:
- the subaccounts, each of which invests in a fund with a particular
investment objective. The value of each subaccount varies with the
performance of the particular fund in which it invests. We cannot
guarantee that the value at the retirement date will equal or exceed
the total purchase payments you allocate to the subaccounts.(p. 18)
- the fixed account, which earns interest at a rate that we adjust
periodically. (p. 24)
BUYING YOUR CONTRACT: Your agent 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 purchase
payments. (p. 25)
- Minimum initial purchase payment - $2,000 (without prior approval)
- Minimum additional purchase payment - $50
- Maximum total purchase payments - $1,000,000 (without prior
approval)
TRANSFERS: Subject to certain restrictions you currently may redistribute your
money among the subaccounts and the fixed account 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. 34)
WITHDRAWALS: You may withdraw all or part of your contract value at any time
before the retirement date. You also may establish automated partial
withdrawals. Withdrawals may be subject to charges and tax penalties (including
a 10% IRS penalty if withdrawals are made prior to your reaching age 59 1/2) and
may have other tax consequences; also, certain restrictions apply. (p. 37)
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. 38)
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. 39)
ANNUITY PAYOUTS: You can apply your contract value to an annuity payout plan
that begins on the retirement date. You may choose from a variety of plans to
make sure that payouts continue as long as you like. If you purchased a
qualified annuity, the payout schedule must meet the requirements of the
qualified plan. We can make payouts on a fixed or variable basis, or both. Total
monthly payouts may include amounts from each subaccount and the fixed account.
(p. 42)
4
<PAGE>
TAXES: Generally, your contract grows tax-deferred until you make withdrawals
from it or begin to receive payouts. (Under certain circumstances, IRS penalty
taxes may apply.) Even if you direct payouts to someone else, you will be taxed
on the income if you are the owner. Roth IRAs, however, may grow and be
distributed tax-free, if you meet certain distribution requirements. (p. 44)
CHARGES:
- $30 annual contract administrative charge;
- 0.15% variable account administrative charge;
- 1.25% mortality and expense risk fee;
- withdrawal charge;
- 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); and
- the operating expenses of the funds.
5
<PAGE>
- -------------------------------
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 subaccounts and funds below. Some
expenses may vary as we explained under "Charges."
ANNUAL CONTRACT OWNER EXPENSES:
WITHDRAWAL CHARGE (contingent deferred sales charge as a percentage of
purchase payment)
<TABLE>
<CAPTION>
CONTRACT YEARS FROM WITHDRAWAL CHARGE
PAYMENT RECEIPT PERCENTAGE
<S> <C>
1 7%
2 6
3 5
4 4
5 3
6 2
7 1
Thereafter 0
</TABLE>
CONTRACT ADMINISTRATIVE CHARGE $30
ANNUAL SUBACCOUNT EXPENSES
(as a percentage of average daily net assets of the subaccounts):
VARIABLE ACCOUNT ADMINISTRATIVE CHARGE 0.15%
MORTALITY AND EXPENSE RISK FEE 1.25%
--------
TOTAL ANNUAL SUBACCOUNT EXPENSES 1.40%
ANNUAL OPERATING EXPENSES OF THE FUNDS
(as a percentage of average daily net assets):
<TABLE>
<CAPTION>
GT GLOBAL
AIM V.I. AIM V.I. AMERICAN VARIABLE LATIN
GROWTH AND INTERNATIONAL AIM V.I. CENTURY VP AMERICAN AMERICA FUND
INCOME EQUITY VALUE INCOME AND CENTURY VP (AFTER EXPENSE
FUND FUND FUND GROWTH VALUE REIMBURSEMENT)
<S> <C> <C> <C> <C> <C> <C>
Management fees .61% .75% .61% .70% 1.00% 1.00%
12b-1 fees -- -- -- -- -- --
Other expenses .04 .16 .05 -- -- .39
Total .65%(1) .91%(1) .66%(1) .70%(1) 1.00%(1) 1.39%(6)
<CAPTION>
GT GLOBAL
VARIABLE NEW
PACIFIC FUND IDS LIFE
(AFTER EXPENSE AGGRESSIVE
REIMBURSEMENT) GROWTH
<S> <C> <C>
Management fees 1.00% .59%
12b-1 fees -- --
Other expenses .28 .09
Total 1.28%(6) .68%(2)
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
JANUS ASPEN
JANUS ASPEN SERIES
SERIES WORLDWIDE
IDS LIFE IDS LIFE IDS LIFE IDS LIFE BALANCED GROWTH
CAPITAL GROWTH INTERNATIONAL IDS LIFE IDS LIFE SPECIAL (AFTER FEE (AFTER FEE
RESOURCE DIMENSION EQUITY MANAGED MONEYSHARE INCOME REDUCTIONS) REDUCTIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .59% .61% .83% .59% .50% .60% .72% .65%
12b-1 fees -- -- -- -- -- -- -- --
Other expenses .07 .06 .15 .04 .06 .07 .02 .07
Total .66%(2) .67%(2) .98%(2) .63%(2) .56%(2) .67%(2) .74%(4) .72%(4)
</TABLE>
<TABLE>
<CAPTION>
OCC OCC
OCC OCC ACCUMULATION ACCUMULATION PUTNAM VT
ACCUMULATION ACCUMULATION TRUST SMALL TRUST U.S. GOV- OPPENHEIMER DIVERSIFIED
TRUST EQUITY TRUST MANAGED CAP ERNMENT INCOME CAPITAL OPPENHEIMER INCOME
(AFTER EXPENSE (AFTER EXPENSE (AFTER EXPENSE (AFTER EXPENSE APPRECIATION HIGH INCOME FUND -
LIMITATIONS) LIMITATIONS) LIMITATIONS) LIMITATIONS) FUND/VA FUND/VA CLASS IA
<S> <C> <C> <C> <C> <C> <C> <C>
Management fees .80% .78% .80% .60% .72% .74% .67%
12b-1 fees -- -- -- -- -- -- --
Other expenses .14 .04 .08 .40 .03 .04 .11
Total .94%(3) .82%(3) .88%(3) 1.00%(3) .75%(1) .78%(1) .78%(1)
<CAPTION>
PUTNAM VT
DIVERSIFIED
INCOME
FUND -
CLASS IB
<S> <C>
Management fees .67%
12b-1 fees .15
Other expenses .11
Total .93%(5)
</TABLE>
<TABLE>
<CAPTION>
PUTNAM VT PUTNAM VT PUTNAM VT PUTNAM VT PUTNAM VT PUTNAM VT
GROWTH AND GROWTH AND HIGH YIELD HIGH YIELD NEW OPPORTUNITIES VOYAGER
INCOME FUND - INCOME FUND - FUND - FUND - FUND - FUND -
CLASS IA CLASS IB CLASS IA CLASS IB CLASS IA CLASS IB
<S> <C> <C> <C> <C> <C> <C>
Management fees .46% .46% .64% .64% .56% .54%
12b-1 fees -- .15 -- .15 -- .15
Other expenses .04 .04 .07 .07 .05 .04
Total .50%(1) .65%(5) .71%(1) .86%(5) .61%(1) .73%(5)
</TABLE>
(1) Operating expenses of the underlying funds at Dec. 31, 1998.
(2) Annualized operating expenses of underlying mutual funds at Dec. 31, 1998.
(3) Total Portfolio Expenses of the OCC Accumulation Trust Portfolios are
limited by OpCap Advisors so that their respective annualized operating
expenses (net of any expense offsets) do not exceed 1.00% of average daily
net assets for the Equity, Managed, Small Cap and U.S. Government Income
Portfolios. Without such limitation and without giving effect to any
expense offsets, the Management Fees, Other expenses and Total Portfolio
Expenses for U.S. Government Income Portfolio would have been: .60%, .60%,
and 1.20%, respectively.
(4) The figures given above are based on gross expenses before expense offset
arrangements, if any, for the year ended Dec. 31, 1998, for these funds. As
of the date of this prospectus, certain fees are being reduced by the
respective investment managers or service providers for certain of the
underlying funds, in each case on a voluntary basis. Without such
reductions, the "Management fees," "Other expenses" and "Total" that would
have been incurred for the last completed fiscal year would be: 0.72%.
0.02%, and 0.74%, respectively, for Janus Aspen Series Balanced Portfolio,
and 0.67%, 0.07% and 0.74%, respectively for Janus Aspen Series Worldwide
Growth Portfolio. See the Portfolio' prospectus for a discussion of fee
reductions.
(5) Based on estimated expenses.
(6) Figures in the "Other Expenses" and "Total" columns are restated from the
amounts you would have incurred in 1998 to reflect fee and reimbursement or
waiver arrangements. If there had been no reimbursement of expenses by
A I M Advisors, Inc. no expense reductions, the actual expenses of each
fund, expressed as a percentage of net assets, with "Management fees"
stated first, the "Other expenses" followed by "Total," would have been as
follows: GT Global Variable Latin America Fund, 1.00%, 0.66%, 1.86%; and GT
Global Variable New Pacific Fund, 1.00%, 0.78%, 1.78%.
7
<PAGE>
EXPENSE SUMMARY
EXAMPLE:*
<TABLE>
<CAPTION>
AIM V.I. AIM V.I. AMERICAN
GROWTH AND INTERNATIONAL AIM V.I. CENTURY VP AMERICAN GT GLOBAL GT GLOBAL
INCOME EQUITY VALUE INCOME AND CENTURY VP VARIABLE LATIN VARIABLE NEW
FUND FUND FUND GROWTH VALUE AMERICA FUND PACIFIC FUND
<S> <C> <C> <C> <C> <C> <C> <C>
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 $ 92.31 $ 94.98 $ 92.42 $ 92.83 $ 95.90 $ 98.46 $ 98.26
3 Years 118.81 126.83 119.12 120.36 129.59 137.24 136.63
5 Years 147.92 161.30 148.44 150.51 165.90 178.58 177.58
10 Years 253.10 279.88 254.14 258.30 288.99 313.87 311.90
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 $ 22.31 $ 24.98 $ 22.42 $ 22.83 $ 25.90 $ 28.46 $ 28.26
3 Years 68.81 76.83 69.12 70.36 79.59 87.24 86.63
5 Years 117.92 131.30 118.44 120.51 135.90 148.58 147.58
10 Years 253.10 279.88 254.14 258.30 288.99 313.87 311.90
<CAPTION>
IDS LIFE
AGGRESSIVE
GROWTH
<S> <C>
1 Year $ 92.62
3 Years 119.74
5 Years 149.47
10 Years 256.22
1 Year $ 22.62
3 Years 69.74
5 Years 119.47
10 Years 256.22
</TABLE>
<TABLE>
<CAPTION>
JANUS ASPEN
IDS LIFE IDS LIFE IDS LIFE IDS LIFE JANUS ASPEN SERIES
CAPITAL GROWTH INTERNATIONAL IDS LIFE IDS LIFE SPECIAL SERIES WORLDWIDE
RESOURCE DIMENSION EQUITY MANAGED MONEYSHARE INCOME BALANCED GROWTH
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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 $ 92.42 $ 92.52 $ 95.70 $ 92.11 $ 91.39 $ 92.52 $ 93.24 $ 93.03
3 Years 119.12 119.43 128.98 118.19 116.03 119.43 121.59 120.98
5 Years 148.44 148.96 164.88 146.89 143.26 148.96 152.57 151.54
10 Years 254.14 255.18 286.97 251.01 243.67 255.18 262.45 260.38
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 $ 22.42 $ 22.52 $ 25.70 $ 22.11 $ 21.39 $ 22.52 $ 23.24 $ 23.03
3 Years 69.12 69.43 78.98 68.19 66.03 69.43 71.59 70.98
5 Years 118.44 118.96 134.88 116.89 113.26 118.96 122.57 121.54
10 Years 254.14 255.18 286.97 251.01 243.67 255.18 262.45 260.38
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
PUTNAM VT
OCC OCC OPPENHEIMER DIVERSIFIED
OCC OCC ACCUMULATION ACCUMULATION CAPITAL OPPENHEIMER INCOME
ACCUMULATION ACCUMULATION TRUST SMALL TRUST U.S. GOV- APPRECIATION HIGH INCOME FUND -
TRUST EQUITY TRUST MANAGED CAP ERNMENT INCOME FUND/VA FUND/VA CLASS IA
<S> <C> <C> <C> <C> <C> <C> <C>
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 $ 95.29 $ 94.06 $ 94.67 $ 95.90 $ 93.34 $ 93.65 $ 93.65
3 Years 127.75 124.06 125.91 129.59 121.90 122.83 122.83
5 Years 162.84 156.69 159.77 165.90 153.09 154.63 154.63
10 Years 282.92 270.69 276.82 288.99 263.48 266.57 266.57
You would pay the following expenses on the same investment assuming no withdrawal or selection of an
annuity payout plan at the end of each time period:
1 Year $ 25.29 $ 24.06 $ 24.67 $ 25.90 $ 23.34 $ 23.65 $ 23.65
3 Years 77.75 74.06 75.91 79.59 71.90 72.83 72.83
5 Years 132.84 126.69 129.77 135.90 123.09 124.63 124.63
10 Years 282.92 270.69 276.82 288.99 263.48 266.57 266.57
<CAPTION>
PUTNAM VT
DIVERSIFIED
INCOME
FUND -
CLASS IB
<S> <C>
1 Year $ 95.18
3 Years 127.44
5 Years 162.33
10 Years 281.91
1 Year $ 25.18
3 Years 77.44
5 Years 132.33
10 Years 281.91
</TABLE>
<TABLE>
<CAPTION>
PUTNAM VT PUTNAM VT PUTNAM VT PUTNAM VT PUTNAM VT PUTNAM VT
GROWTH AND GROWTH AND HIGH YIELD HIGH YIELD NEW OPPORTUNITIES VOYAGER
INCOME FUND - INCOME FUND - FUND - FUND - FUND - FUND -
CLASS IA CLASS IB CLASS IA CLASS IB CLASS IA CLASS IB
<S> <C> <C> <C> <C> <C> <C>
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 $ 90.78 $ 92.31 $ 92.93 $ 94.47 $ 91.90 $ 93.13
3 Years 114.17 118.81 120.67 125.29 117.58 121.28
5 Years 140.14 147.92 151.02 158.74 145.85 152.06
10 Years 237.33 253.10 259.34 274.78 248.92 261.41
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 $ 20.78 $ 22.31 $ 22.93 $ 24.47 $ 21.90 $ 23.13
3 Years 64.17 68.81 70.67 75.29 67.58 71.28
5 Years 110.14 117.92 121.02 128.74 115.85 122.06
10 Years 237.33 253.10 259.34 274.78 248.92 261.41
</TABLE>
* In this example, the $30 annual contract administrative charge is approximated
as a 0.127% charge based on our average contract size. Premium taxes imposed
by some state and local governments are not reflected in this table. We
entered into certain arrangements under which we are compensated by the funds'
advisers and/ or distributors for the administrative services we provide to
the funds.
YOU SHOULD NOT CONSIDER THIS EXAMPLE AS A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
9
<PAGE>
- -------------------------------
CONDENSED FINANCIAL INFORMATION (UNAUDITED)
The following tables give per-unit information about the financial
history of each subaccount.
YEAR ENDED DEC. 31,
<TABLE>
<CAPTION>
1998 1997 1996 1995
<S> <C> <C> <C> <C>
SUBACCOUNT EGN(3) (INVESTING IN SHARES OF AIM V.I. GROWTH AND INCOME
FUND)
Accumulation unit value at
beginning of period $1.03 $1.00 -- --
Accumulation unit value at
end of period $1.30 $1.03 -- --
Number of accumulation units
outstanding at end of period
(000 omitted) 2,495 69 -- --
Ratio of operating expense to
average net assets 1.40% 1.40% -- --
SUBACCOUNT EIN(3) (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 EVA(3) (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 EIG(4) (INVESTING IN SHARES OF AMERICAN CENTURY VP INCOME
AND GROWTH FUND)
Accumulation unit value at
beginning of period $1.00 -- -- --
Accumulation unit value at
end of period $1.25 -- -- --
Number of accumulation units
outstanding at end of period
(000 omitted) 137 -- -- --
Ratio of operating expense to
average net assets 1.40% -- -- --
SUBACCOUNT EVL(4) (INVESTING IN SHARES OF AMERICAN CENTURY VP VALUE
FUND)
Accumulation unit value at
beginning of period $1.00 -- -- --
Accumulation unit value at
end of period $1.12 -- -- --
Number of accumulation units
outstanding at end of period
(000 omitted) 157 -- -- --
Ratio of operating expense to
average net assets 1.40% -- -- --
SUBACCOUNT ELA(1) (INVESTING IN SHARES OF GT GLOBAL VARIABLE LATIN
AMERICA FUND)
Accumulation unit value at
beginning of period $1.34 $1.19 $0.98 $1.00
Accumulation unit value at
end of period $0.77 $1.34 $1.19 $0.98
Number of accumulation units
outstanding at end of period
(000 omitted) 1,115 1,004 663 303
Ratio of operating expense to
average net assets 1.40% 1.40% 1.50% 1.50%
</TABLE>
10
<PAGE>
YEAR ENDED DEC. 31,
<TABLE>
<CAPTION>
1998 1997 1996 1995
SUBACCOUNT EPA(1) (INVESTING IN SHARES OF GT GLOBAL VARIABLE NEW
PACIFIC FUND)
<S> <C> <C> <C> <C>
Accumulation unit value at
beginning of period $0.80 $1.38 $1.07 $1.00
Accumulation unit value at
end of period $0.67 $0.80 $1.38 $1.07
Number of accumulation units
outstanding at end of period
(000 omitted) 1,442 980 530 193
Ratio of operating expense to
average net assets 1.40% 1.40% 1.50% 1.50%
SUBACCOUNT EAG(1) (INVESTING IN SHARES OF IDS LIFE AGGRESSIVE GROWTH
FUND)
Accumulation unit value at
beginning of period $1.63 $1.47 $1.28 $1.00
Accumulation unit value at
end of period $1.65 $1.63 $1.47 $1.28
Number of accumulation units
outstanding at end of period
(000 omitted) 3,453 2,434 1,324 473
Ratio of operating expense to
average net assets 1.40% 1.40% 1.50% 1.50%
SUBACCOUNT ECR(1) (INVESTING IN SHARES OF IDS LIFE CAPITAL RESOURCE
FUND)
Accumulation unit value at
beginning of period $1.56 $1.27 $1.20 $1.00
Accumulation unit value at
end of period $1.91 $1.56 $1.27 $1.20
Number of accumulation units
outstanding at end of period
(000 omitted) 5,163 3,813 2,350 818
Ratio of operating expense to
average net assets 1.40% 1.40% 1.50% 1.50%
SUBACCOUNT EGD(2) (INVESTING IN SHARES OF IDS LIFE GROWTH 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 EIE(1) (INVESTING IN SHARES OF IDS LIFE INTERNATIONAL
EQUITY FUND)
Accumulation unit value at
beginning of period $1.28 $1.26 $1.17 $1.00
Accumulation unit value at
end of period $1.46 $1.28 $1.26 $1.17
Number of accumulation units
outstanding at end of period
(000 omitted) 2,181 1,413 675 220
Ratio of operating expense to
average net assets 1.40% 1.40% 1.50% 1.50%
SUBACCOUNT EMG(1) (INVESTING IN SHARES OF IDS LIFE MANAGED FUND,
INC.)
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%
</TABLE>
11
<PAGE>
CONDENSED FINANCIAL INFORMATION (UNAUDITED)
YEAR ENDED DEC. 31,
<TABLE>
<CAPTION>
1998 1997 1996 1995
SUBACCOUNT EMS(1) (INVESTING IN SHARES OF IDS LIFE MONEYSHARE FUND,
INC.)
<S> <C> <C> <C> <C>
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 yield(5) 3.24% 3.71% 3.26% 3.53%
Compound yield(5) 3.29% 3.78% 3.32% 3.59%
SUBACCOUNT ESI(1) (INVESTING IN SHARES OF IDS LIFE SPECIAL INCOME
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%
SUBACCOUNT ESB(3) (INVESTING IN SHARES OF JANUS ASPEN SERIES BALANCED
PORTFOLIO)
Accumulation unit value at
beginning of period $1.02 $1.00 -- --
Accumulation unit value at
end of period $1.35 $1.02 -- --
Number of accumulation units
outstanding at end of period
(000 omitted) 2,680 69 -- --
Ratio of operating expense to
average net assets 1.40% 1.40% -- --
SUBACCOUNT EWG(3) (INVESTING IN SHARES OF JANUS ASPEN SERIES
WORLDWIDE GROWTH PORTFOLIO)
Accumulation unit value at
beginning of period $1.03 $1.00 -- --
Accumulation unit value at
end of period $1.30 $1.03 -- --
Number of accumulation units
outstanding at end of period
(000 omitted) 1,721 62 -- --
Ratio of operating expense to
average net assets 1.40% 1.40% -- --
SUBACCOUNT EEQ(3) (INVESTING IN SHARES OF OCC ACCUMULATION TRUST
EQUITY PORTFOLIO)
Accumulation unit value at
beginning of period $1.07 $1.00 -- --
Accumulation unit value at
end of period $1.19 $1.07 -- --
Number of accumulation units
outstanding at end of period
(000 omitted) 1,059 63 -- --
Ratio of operating expense to
average net assets 1.40% 1.40% -- --
</TABLE>
12
<PAGE>
YEAR ENDED DEC. 31,
<TABLE>
<CAPTION>
1998 1997 1996 1995
SUBACCOUNT EMD(1) (INVESTING IN SHARES OF OCC ACCUMULATION TRUST
MANAGED PORTFOLIO)
<S> <C> <C> <C> <C>
Accumulation unit value at
beginning of period $1.91 $1.58 $1.31 $1.00
Accumulation unit value at
end of period $2.02 $1.91 $1.58 $1.31
Number of accumulation units
outstanding at end of period
(000 omitted) 5,686 4,134 2,462 436
Ratio of operating expense to
average net assets 1.40% 1.40% 1.50% 1.50%
SUBACCOUNT ESC(3) (INVESTING IN SHARES OF OCC ACCUMULATION TRUST
SMALL CAP PORTFOLIO)
Accumulation unit value at
beginning of period $1.01 $1.00 -- --
Accumulation unit value at
end of period $0.91 $1.01 -- --
Number of accumulation units
outstanding at end of period
(000 omitted) 1,413 87 -- --
Ratio of operating expenses
to average net assets 1.40% 1.40% -- --
SUBACCOUNT EUS(1) (INVESTING IN SHARES OF OCC ACCUMULATION TRUST U.S.
GOVERNMENT INCOME PORTFOLIO)
Accumulation unit value at
beginning of period $1.17 $1.10 $1.09 $1.00
Accumulation unit value at
end of period $1.24 $1.17 $1.10 $1.09
Number of accumulation units
outstanding at end of period
(000 omitted) 3,585 2,253 1,252 413
Ratio of operating expense to
average net assets 1.40% 1.40% 1.50% 1.50%
SUBACCOUNT EGR(3) (INVESTING IN SHARES OF OPPENHEIMER CAPITAL
APPRECIATION FUND/VA)
Accumulation unit value at
beginning of period $1.02 $1.00 -- --
Accumulation unit value at
end of period $1.24 $1.02 -- --
Number of accumulation units
outstanding at end of period
(000 omitted) 1,867 67 -- --
Ratio of operating expense to
average net assets 1.40% 1.40% -- --
SUBACCOUNT EHI(3) (INVESTING IN SHARES OF OPPENHEIMER HIGH INCOME
FUND/VA)
Accumulation unit value at
beginning of period $1.01 $1.00 -- --
Accumulation unit value at
end of period $1.00 $1.01 -- --
Number of accumulation units
outstanding at end of period
(000 omitted) 2,185 77 -- --
Ratio of operating expense to
average net assets 1.40% 1.40% -- --
SUBACCOUNT EDI(1) (INVESTING IN SHARES OF PUTNAM VT DIVERSIFIED
INCOME FUND--CLASS IA SHARES)
Accumulation unit value at
beginning of period $1.30 $1.23 $1.15 $1.00
Accumulation unit value at
end of period $1.27 $1.30 $1.23 $1.15
Number of accumulation units
outstanding at end of period
(000 omitted) 5,963 3,151 1,824 601
Ratio of operating expense to
average net assets 1.40% 1.40% 1.50% 1.50%
</TABLE>
13
<PAGE>
CONDENSED FINANCIAL INFORMATION (UNAUDITED)
YEAR ENDED DEC. 31,
<TABLE>
<CAPTION>
1998 1997 1996 1995
SUBACCOUNT EPD(4) (INVESTING IN SHARES OF PUTNAM VT DIVERSIFIED
INCOME FUND--CLASS IB SHARES)
<S> <C> <C> <C> <C>
Accumulation unit value at
beginning of period $1.00 -- -- --
Accumulation unit value at
end of period $1.00 -- -- --
Number of accumulation units
outstanding at end of period
(000 omitted) 344 -- -- --
Ratio of operating expense to
average net assets 1.40% -- -- --
SUBACCOUNT EGI(1) (INVESTING IN SHARES OF PUTNAM VT GROWTH AND INCOME
FUND--CLASS IA SHARES)
Accumulation unit value at
beginning of period $1.88 $1.53 $1.27 $1.00
Accumulation unit value at
end of period $2.14 $1.88 $1.53 $1.27
Number of accumulation units
outstanding at end of period
(000 omitted) 9,161 6,452 3,655 1,152
Ratio of operating expense to
average net assets 1.40% 1.40% 1.50% 1.50%
SUBACCOUNT EPG(4) (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% -- -- --
SUBACCOUNT EHY(1) (INVESTING IN SHARES OF PUTNAM VT HIGH YIELD
FUND--CLASS IA SHARES)
Accumulation unit value at
beginning of period $1.43 $1.27 $1.14 $1.00
Accumulation unit value at
end of period $1.33 $1.43 $1.27 $1.14
Number of accumulation units
outstanding at end of period
(000 omitted) 3,846 2,321 1,270 480
Ratio of operating expense to
average net assets 1.40% 1.40% 1.50% 1.50%
SUBACCOUNT EPH(4) (INVESTING IN SHARES OF PUTNAM VT HIGH YIELD FUND--
CLASS IB SHARES)
Accumulation unit value at
beginning of period $1.00 -- -- --
Accumulation unit value at
end of period $1.01 -- -- --
Number of accumulation units
outstanding at end of period
(000 omitted) 130 -- -- --
Ratio of operating expense to
average net assets 1.40% -- -- --
SUBACCOUNT ENO(1) (INVESTING IN SHARES OF PUTNAM VT NEW OPPORTUNITIES
FUND--CLASS IA SHARES)
Accumulation unit value at
beginning of period $1.84 $1.51 $1.39 $1.00
Accumulation unit value at
end of period $2.25 $1.84 $1.51 $1.39
Number of accumulation units
outstanding at end of period
(000 omitted) 5,798 4,575 2,980 691
Ratio of operating expense to
average net assets 1.40% 1.40% 1.50% 1.50%
</TABLE>
14
<PAGE>
YEAR ENDED DEC. 31,
<TABLE>
<CAPTION>
1998 1997 1996 1995
SUBACCOUNT EPV(4) (INVESTING IN SHARES OF PUTNAM VT VOYAGER
FUND--CLASS IB SHARES)
<S> <C> <C> <C> <C>
Accumulation unit value at
beginning of period $1.00 -- -- --
Accumulation unit value at
end of period $1.37 -- -- --
Number of accumulation units
outstanding at end of period
(000 omitted) 125 -- -- --
Ratio of operating expense to
average net assets 1.40% -- -- --
</TABLE>
(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.
15
<PAGE>
- -------------------------------
FINANCIAL STATEMENTS
You can find our audited financial statements and the audited financial
statements of the subaccounts in the SAI.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
Performance information for the subaccounts may appear from time to time in
advertisements or sales literature. This information reflects the performance of
a hypothetical investment in a particular subaccount during a specified time
period. We show actual performance from the date the subaccounts began investing
in funds. We also show performance from the commencement date of the funds as if
the contract existed at that time. Although we base performance figures on
historical earnings, past performance does not guarantee future results.
We include non-recurring charges (such as withdrawal charges) in total return
figures, but not in yield quotations. Excluding non-recurring charges in yield
calculations increases the reported value.
Total return figures reflect deduction of all applicable charges, including:
- -the contract administrative charge,
- -variable account administrative charge,
- -mortality and expense risk fee, and
- -withdrawal charge (assuming a full withdrawal at the end of the illustrated
period).
We also may make optional total return quotations that do not reflect a
withdrawal charge deduction (assuming no withdrawal). Total return quotations
may be shown by means of schedules, charts or graphs.
AVERAGE ANNUAL TOTAL RETURN is the average annual compounded rate of return of
the investment over a period of one, five and 10 years (or up to the life of the
variable subaccount if it is less than ten years old).
CUMULATIVE TOTAL RETURN is the cumulative change in the value of an investment
over a specified time period. We assume that income earned by the investment is
reinvested. Cumulative total return 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 the simple yield because of
the compounding effect of the assumed reinvestment.
16
<PAGE>
ANNUALIZED YIELD (FOR SUBACCOUNTS INVESTING IN INCOME FUNDS) divides the net
investment income (income less expenses) for each accumulation unit during a
given 30-day period by the value of the unit on the last day of the period. We
then convert the result to an annual percentage.
You should consider performance information in light of the investment
objectives, policies, characteristics and quality of the fund in which the
subaccount invests and the market conditions during the specified time period.
Advertised yields and total return figures include charges that reduce
advertised performance. Therefore, you should not compare subaccount performance
to that of mutual funds that sell their shares directly to the public. (See the
SAI for a further description of methods used to determine total return and
yield.)
If you would like additional information about actual performance, please
contact us at the address or telephone number on page 1 of this prospectus.
17
<PAGE>
- -------------------------------
THE VARIABLE ACCOUNT
You may allocate payments to any or all the subaccounts of the variable account
that invest in shares of the following funds:
<TABLE>
<CAPTION>
AVAILABLE UNDER
CONTRACT AEL PERSONAL
PORTFOLIO
PLUS-SM-
AEL PERSONAL AND AEL PERSONAL
SUBACCOUNT INVESTING IN: PORTFOLIO PLUS(2) PORTFOLIO PLUS
<C> <S> <C> <C>
EGN AIM V.I. Growth and Income Fund Yes Yes
EIN AIM V.I. International Equity Fund Yes Yes
EVA AIM V.I. Value Fund Yes Yes
EIG American Century VP Income and
Growth Yes No
EVL American Century VP Value Yes No
ELA GT Global Variable Latin America
Fund No Yes
EPA GT Global Variable New Pacific Fund No Yes
EAG IDS Life Aggressive Growth Fund Yes Yes
ECR IDS Life Capital Resource Fund Yes Yes
EGD IDS Life Growth Dimensions Fund Yes Yes
EIE IDS Life International Equity Fund Yes Yes
EMG IDS Life Managed Fund Yes Yes
EMS IDS Life Moneyshare Fund Yes Yes
ESI IDS Life Special Income Fund Yes Yes
ESB Janus Aspen Series Balanced
Portfolio Yes Yes
EWG Janus Aspen Series Worldwide Growth
Portfolio Yes Yes
EEQ OCC Accumulation Trust Equity
Portfolio Yes Yes
EMD OCC Accumulation Trust Managed
Portfolio Yes Yes
ESC OCC Accumulation Trust Small Cap
Portfolio Yes Yes
EUS OCC Accumulation Trust U.S.
Government Income Portfolio Yes Yes
EGR Oppenheimer Capital Appreciation
Fund/VA Yes Yes
EHI Oppenheimer High Income Fund/VA Yes Yes
EPD Putnam VT Diversified Income Fund
-- Class IB Shares Yes No
EPG Putnam VT Growth and Income Fund --
Class IB Shares Yes No
EPH Putnam VT High Yield Fund -- Class
IB Shares Yes No
EPV Putnam VT Voyager Fund -- Class IB
Shares Yes No
EDI Putnam VT Diversified Income Fund
-- Class IA Shares No Yes
EGI Putnam VT Growth and Income Fund --
Class IA Shares No Yes
EHY Putnam VT High Yield Fund -- Class
IA Shares No Yes
ENO Putnam VT New Opportunities Fund --
Class IA Shares No Yes
</TABLE>
18
<PAGE>
The variable account meets the definition of a separate account under federal
securities laws. We credit or charge income, capital gains and capital losses of
each subaccount only to that subaccount. State insurance law prohibits us from
charging a subaccount with liabilities of any other subaccount or of our general
business. Each variable account's net assets are held in relation to the
contracts described in this prospectus as well as other contracts that we issue
that are not described in this prospectus.
The U.S. Treasury and the Internal Revenue Service (IRS) indicated that they may
provide additional guidance on investment control. This concerns how many
variable subaccounts an insurance company may offer and how many exchanges among
subaccounts it may allow before the contract owner would be currently taxed on
income earned within subaccount assets. At this time, we do not know what the
additional guidance will be or when action will be taken. We reserve the right
to modify the contract, as necessary, so that the owner will not be subject to
current taxation as the owner of the subaccount assets.
We intend to comply with all federal tax laws so that each contract continues to
qualify as an annuity for federal income tax purposes. We reserve the right to
modify the contract as necessary to comply with any new tax laws.
The 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.
19
<PAGE>
- -------------------------------
THE FUNDS
AIM V.I. GROWTH AND INCOME FUND
Objective: growth of capital with a secondary objective of current income.
Invests at least 65% of its net assets in income-producing securities, including
dividend-paying common stock, and convertible securities.
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 markets
generally. Income is a secondary objective.
AMERICAN CENTURY VP INCOME AND GROWTH
Objective: dividend growth, current income and capital appreciation. Invests
primarily in common stocks.
AMERICAN CENTURY VP VALUE
Objective: long-term capital growth, with income as a secondary objective.
Invests primarily in securities that management believes to be undervalued at
the time of purchase.
GT GLOBAL VARIABLE LATIN AMERICA FUND
Objective: capital appreciation. Invests at least 65% of its total assets in the
securities of a broad range of Latin American issuers.
GT GLOBAL VARIABLE NEW PACIFIC FUND
Objective: long-term growth of capital. Normally invests at least 65% of its
total assets in equity securities of issuers domiciled in Australia, Hong Kong,
India, Indonesia, Malaysia, New Zealand, Pakistan, the Philippines, Singapore,
South Korea, Taiwan and Thailand.
IDS LIFE AGGRESSIVE GROWTH FUND
Objective: capital appreciation. Invests primarily in common stocks of small-and
medium-size companies.
IDS LIFE CAPITAL RESOURCE FUND
Objective: capital appreciation. Invests primarily in U.S. common stocks.
IDS LIFE GROWTH DIMENSIONS FUND
Objective: long-term growth of capital. Invests primarily in common stocks of
U.S. and foreign companies showing potential for significant growth.
IDS LIFE INTERNATIONAL EQUITY FUND
Objective: capital appreciation. Invests primarily in common stocks of foreign
issuers.
20
<PAGE>
IDS LIFE 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.
IDS LIFE MONEYSHARE FUND
Objective: maximum current income consistent with liquidity and conservation of
capital. Invests in money market securities.
IDS LIFE SPECIAL INCOME FUND
Objective: high level of current income while conserving the value of the
investment for the longest time period. Invests primarily in investment-grade
bonds.
JANUS ASPEN SERIES BALANCED PORTFOLIO
Objective: long-term growth of capital, balanced by current income. The
Portfolio normally invests 40-60% of its assets in securities selected primarily
for their growth potential and 40-60% of its assets in securities selected
primarily for their income potential.
JANUS ASPEN SERIES WORLDWIDE GROWTH PORTFOLIO
Objective: long-term growth of capital in a manner consistent with the
preservation of capital. Invests primarily in common stocks of foreign and
domestic issuers.
OCC ACCUMULATION TRUST EQUITY PORTFOLIO
Objective: long term capital appreciation. Invests in a diversified portfolio of
equity securities selected on the basis of a value-oriented approach to
investing.
OCC ACCUMULATION TRUST MANAGED PORTFOLIO
Objective: growth of capital over time. Invests primarily in common stocks,
bonds and money market and cash equivalent securities, the percentages of which
will vary based on management's assessment of relative investment values.
OCC ACCUMULATION TRUST SMALL CAP PORTFOLIO
Objective: capital appreciation. Invests in a diversified portfolio of equity
securities of companies with market capitalizations of under $1 billion.
OCC ACCUMULATION TRUST U.S. GOVERNMENT INCOME PORTFOLIO
Objective: high level of current income together with protection of capital.
Invests exclusively in debt obligations, including mortgage-backed securities,
issued or guaranteed by the United States government, its agencies or
instrumentalities.
OPPENHEIMER CAPITAL APPRECIATION FUND/VA
Objective: capital appreciation. Invests in securities of well-known,
established companies.
OPPENHEIMER HIGH INCOME FUND/VA
Objective: high level of current income. Invests in high-yield, fixed-income
securities, including unrated securities or high-risk securities in the lower
rating categories, commonly known as "junk bonds". These securities are subject
to a greater risk of loss of principal and nonpayment of interest than
higher-rated securities.
21
<PAGE>
THE FUNDS
PUTNAM VT DIVERSIFIED INCOME FUND -- CLASS IA AND IB SHARES
Objective: high current income consistent with capital preservation by investing
in the following three sectors of the fixed income securities markets: a U.S.
Government and Investment Grade Sector, a High Yield Sector (which invests
primarily in lower rated, higher risk securities commonly known as "junk
bonds"), and an International Sector. See the special considerations for
investments in high yield securities described in the fund prospectus.
PUTNAM VT GROWTH AND INCOME FUND -- CLASS IA AND 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 HIGH YIELD FUND -- CLASS IA AND IB SHARES
Objective: high current income and, when consistent with this objective, a
secondary objective of capital growth, by investing primarily in high-yielding,
lower-rated fixed income securities constituting a portfolio which Putnam
Investment Management, Inc. ("Putnam Management") believes does not involve
undue risk to income or principal. See the special considerations for
investments in high yield securities described in the fund prospectus.
PUTNAM VT NEW OPPORTUNITIES FUND -- CLASS IA SHARES
Objective: long-term capital appreciation by investing principally in common
stocks of companies in sectors of the economy that Putnam Management believes
possess above average long-term growth potential.
PUTNAM VT VOYAGER FUND -- CLASS IB SHARES
Objective: capital appreciation by investing primarily in common stocks of
companies that Putnam Management believes have potential for capital
appreciation that is significantly greater than that of market averages.
The investment objectives and policies of some of the funds are similar to the
investment objectives and policies of other mutual funds that the investment
advisor or its affiliates manage. Although the objectives and policies may be
similar, each fund will have its own portfolio holdings and its own fees and
expenses. Accordingly, each fund will have its own investment results.
All funds are available to serve as the underlying investments for variable
annuities. Some funds also are available to serve as investment options for
variable life insurance policies and qualified plans. It is possible that in the
future, it may be disadvantageous for variable annuity accounts and variable
life insurance accounts and/or qualified plans to invest in the available funds
simultaneously.
Although the insurance company and the funds do not currently foresee any such
disadvantages, the boards of directors or trustees of the appropriate funds will
monitor events in order to identify any material conflicts between annuity
owners, policy owners and qualified plans and to determine what action, if any,
should be taken in response to a conflict. If a board were to conclude that it
should establish separate funds for the variable annuity, variable life
insurance and qualified plan accounts, you would not bear any expenses
associated with establishing separate funds. Please refer to the fund
prospectuses for risk disclosure regarding simultaneous investments by variable
annuity, variable life insurance and qualified plan accounts.
22
<PAGE>
The IRS issued final regulations relating to the diversification requirements
under Section 817(h) of the Internal Revenue Code of 1986, as amended (the
Code). Each fund intends to comply with these requirements.
The investment advisors or managers for the funds are as follows:
- -AIM Variable Insurance Funds, Inc. -- A I M Advisors, Inc.
- -American Century Variable Portfolios, Inc. -- American Century Investment
Management, Inc.
- -GT Global Variable Investment Series -- A I M Advisors, Inc.
- -GT Global Variable Investment Trust -- A I M Advisors, Inc.
- -IDS Life Retirement Annuity Mutual Funds -- IDS Life. AEFC is the investment
advisor for the IDS Life Retirement Annuity Mutual Funds. American Express
Asset Management International, Inc., a wholly-owned subsidiary of AEFC, is the
sub-investment advisor for IDS Life International Equity Fund.
- -Janus Aspen Series Portfolios -- Janus Capital Corporation.
- -OCC Accumulation Trust Portfolios -- OpCap Advisors.
- -Oppenheimer Variable Account Funds -- OppenheimerFunds, Inc.
- -Putnam Variable Trust -- Putnam Investment Management, Inc.
The investment managers and advisors cannot guarantee that the funds will meet
their investment objectives. Please read the funds' prospectuses for 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.
23
<PAGE>
- -------------------------------
THE FIXED ACCOUNT
You also may allocate purchase payments to the fixed account. We back the
principal and interest guarantees relating to the fixed account. The value of
the fixed account increases as we credit interest to the account. Purchase
payments and transfers to the fixed account become part of our general account,
the company's main portfolio of investments. We credit and compound interest
daily to produce an effective annual interest rate. We will change the interest
rate from time to time at our discretion.
Interests in the fixed account are not required to be registered with the SEC.
The SEC staff does not review the disclosures in this prospectus on the fixed
account. Disclosures regarding the fixed account, however, may be subject to
certain generally applicable provisions of the federal securities laws relating
to the accuracy and completeness of statements made in prospectuses. (See
"Making the Most of Your Contract--Transfer Policies" for restrictions on
transfers involving the fixed account.)
24
<PAGE>
- -------------------------------
BUYING YOUR CONTRACT
Your agent 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 nonqualified annuity or become an annuitant if you are 85 or younger (age
75 or younger for qualified annuities). (In Pennsylvania, the annuitant must be
age 80 or younger.)
When you apply, you may select:
- -the fixed account and/or subaccounts in which you want to invest;
- -how you want to make purchase payments;
- -the date you want to start receiving annuity payouts (the retirement date); and
- -a beneficiary.
If your application is complete, we will process it and apply your purchase
payment to the fixed account and subaccounts you selected within two business
days after we receive it at our office. If we accept your application, we will
send you a contract. If we cannot accept your application within five business
days, we will decline it and return your payment. We will credit 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 annuity under a Systematic Investment Plan
(SIP). To begin the SIP, you will complete and send a form and your first
payment along with your application. There is no charge for SIP. You can stop
your SIP payments at any time.
In most states, you may make additional purchase payments to nonqualified and
qualified annuities until the retirement date. In Maryland and Washington, you
may make additional purchase payments to nonqualified annuities until the later
of the annuitant's 63rd birthday or the third contract anniversary, and you may
make additional purchase payments to qualified annuities until the annuitant's
63rd birthday. In Massachusetts, you may make additional purchase payments for
ten years only.*
* All contracts described in this prospectus are not available in all states.
THE RETIREMENT DATE
Annuity payouts are to begin on the retirement date. You can align this date
with your actual retirement from a job, or it can be a different future date,
depending on your needs and goals and on certain restrictions. You also can
change the date, provided you send us written instructions at least 30 days
before annuity payouts begin.
FOR NONQUALIFIED ANNUITIES AND ROTH IRAS, the retirement date must be:
- -no earlier than the 60th day after the contract's effective date; and
- -no later than the annuitant's 85th birthday or the 10th contract anniversary,
if purchased after age 75, or
- -no later than the annuitant's 82nd birthday or the eighth contract anniversary,
if purchased after age 74, for annuities purchased in Pennsylvania.
25
<PAGE>
BUYING YOUR CONTRACT
FOR QUALIFIED ANNUITIES EXCEPT ROTH IRAS, to avoid IRS penalty taxes, the
retirement date generally must be:
- -on or after the annuitant reaches age 59 1/2; and
- -by April 1 of the year following the calendar year when the annuitant reaches
age 70 1/2.
If you take the minimum IRA distribution 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. (In Pennsylvania, annuity payouts must
start no later than the annuitant's 82nd birthday or the eighth contract
anniversary.)
BENEFICIARY
If death benefits become payable before the retirement date (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 PURCHASE PAYMENTS
Initial purchase payment (includes SIPs): $2,000 (We reserve the right to
decrease the minimum payment.)
Minimum additional purchase payments (includes SIPs): $50
MAXIMUM PURCHASE PAYMENTS: $1,000,000 of cumulative payments (We reserve the
right to increase the maximum payment.)
HOW TO MAKE PURCHASE PAYMENTS
1 BY LETTER
Send your check along with your name and contract number to:
REGULAR MAIL:
American Enterprise Life Insurance Company
80 South Eighth Street
P.O. Box 534
Minneapolis, MN 55440-0534
EXPRESS MAIL:
American Enterprise Life Insurance Company
Attention: Unit 829
733 Marquette Avenue
Minneapolis, MN 55402
2 BY SIP:
Contact your agent to complete the necessary SIP paperwork.
26
<PAGE>
- -------------------------------
CHARGES
CONTRACT ADMINISTRATIVE CHARGE
We charge this fee for establishing and maintaining your records. We deduct $30
from the contract value on your contract anniversary at the end of each contract
year. We prorate this charge among the subaccounts and the fixed account in the
same proportion your interest in each account bears to your total contract
value. We will waive this charge when your contract value is $50,000 or more on
the current contract anniversary. If you take a full withdrawal from your
contract, we will deduct the $30 annual charge at the time of withdrawal
regardless of 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 charge this fee daily to the subaccounts. The unit values of your subaccounts
reflect this fee and it totals 0.15% of their average daily net assets on an
annual basis. It covers certain administrative and operating expenses of the
subaccounts such as accounting, legal and data processing fees and expenses
involved in the preparation and distribution of reports and prospectuses. We
cannot increase the variable account administrative charge.
MORTALITY AND EXPENSE RISK FEE
We charge this fee daily to the subaccounts. The unit values of your subaccounts
reflect this fee 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 or 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:
- -first, to the extent possible, the subaccounts pay this fee from any dividends
distributed from the funds in which they invest;
- -then, if necessary, the funds redeem shares to cover any remaining fees
payable.
We may use any profits we realize from the subaccounts' payment to us of the
mortality and expense risk fee for any proper corporate purpose, including,
among others, payment of distribution (selling) expenses. We do not expect that
the withdrawal charge, discussed in the following paragraphs, will cover sales
and distribution expenses.
27
<PAGE>
CHARGES
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:
- -First, we withdraw up to 10% of your prior anniversary contract value not yet
withdrawn this contract year. There is no withdrawal charge on withdrawals
totaling up to 10% of your prior anniversary contract value each contract year.
- -Next, we withdraw any contract earnings (contract value minus all purchase
payments received and not previously withdrawn) in excess of the annual 10%
free withdrawal amount. There is no withdrawal charge on contract earnings.
- -Next, we withdraw purchase payments received eight or more contract years
before the withdrawal and not previously withdrawn. There is no withdrawal
charge on purchase payments received eight or more contract years before
withdrawal.
- -Finally, if necessary, we withdraw purchase payments received in the seven
contract years before the withdrawal on a "first-in, first-out" (FIFO) basis.
There is a withdrawal charge on these payments. We determine your withdrawal
charges by multiplying each of these payments by the applicable withdrawal
charge percentage, and then totaling the withdrawal charges.
The withdrawal charge percentage depends on the number of contract years since
you made the purchase payments.
<TABLE>
<CAPTION>
CONTRACT YEARS FROM WITHDRAWAL CHARGE
PAYMENT RECEIPT PERCENTAGE
<S> <C>
1 7%
2 6
3 5
4 4
5 3
6 2
7 1
Thereafter 0
</TABLE>
28
<PAGE>
WITHDRAWAL CHARGE CALCULATION EXAMPLE
Here is an example of the calculation we make to determine the withdrawal charge
on a contract with this history:
- -The contract date is July 1, 1998 with a contract year of July 1 through June
30 and with an anniversary date of July 1 each year; and
- -We received these payments -- $10,000 July 1, 1998; $8,000 Dec. 31, 2004; and
$6,000 Feb. 20, 2006; and
- -The owner withdraws the contract for its total withdrawal value of $38,101 on
Aug. 5, 2008 and had not made any other withdrawals during that contract year;
and
- -The prior anniversary July 1, 2008 contract value was $38,488.
<TABLE>
<CAPTION>
WITHDRAWAL CHARGE EXPLANATION
<C> <S>
$ 0 $3,848.80 is 10% of the prior anniversary contract
value withdrawn without withdrawal charge; and
0 $10,252.20 is contract earnings in excess of the
10% free withdrawal amount withdrawn without
withdrawal charge; and
0 $10,000 July 1, 1998 payment was received eight or
more contract years before withdrawal and is
withdrawn without withdrawal charge; and
240 $8,000 Dec. 31, 2004 payment is in its fifth
contract year from receipt, withdrawn with a 3%
withdrawal charge; and
240 $6,000 Feb. 20, 2006 payment is in its fourth
contract year from receipt, withdrawn with a 4%
withdrawal charge.
---
$480
</TABLE>
For a partial withdrawal that is subject to a withdrawal charge, the amount we
actually withdraw from your contract will be the amount you request plus any
applicable withdrawal charge. We apply the withdrawal charge to this total
amount. We pay you the amount you requested. If you make a full withdrawal of
your contract, we also will deduct the $30 contract administrative charge.
WAIVER OF WITHDRAWAL CHARGE
There are no withdrawal charges for:
- -withdrawals during the year totaling up to 10% of your prior contract
anniversary contract value;
- -contract earnings -- if any -- in excess of the annual 10% free withdrawal
amount;
- -minimum required distributions from a qualified annuity (for those amounts
required to be distributed from the contract described in this prospectus);
- -contracts settled using an annuity payout plan;
- -death benefits; and
- -withdrawals you make under your contract's "Waiver of Withdrawal Charges"
Annuity Endorsement or provision. To the extent permitted by state law, we will
include this endorsement or provision in contracts issued when you and the
annuitant are under age 76 on the date that 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,
29
<PAGE>
CHARGES
you or the annuitant are confined to a hospital or nursing home and have been
for the prior 60 days. (See your endorsement or contract for additional
conditions and restrictions on this waiver.)
POSSIBLE GROUP REDUCTIONS: In some cases, we may incur lower sales and
administrative expenses due to the size of the group, the average contribution
and the use of group enrollment procedures. In such cases, we may be able to
reduce or eliminate the contract administrative and withdrawal charges. However,
we expect this to occur infrequently.
PREMIUM TAXES
Certain state and local governments impose premium taxes (up to 3.5%). These
taxes depend upon your state of residence or the state in which the contract was
sold. We make the deduction when you fully withdraw your contract or when
annuity payouts begin.
30
<PAGE>
- -------------------------------
VALUING YOUR INVESTMENT
We value your fixed account and subaccounts as follows:
FIXED ACCOUNT: We value the amounts you allocated to the fixed account directly
in dollars. The fixed account value equals:
- -the sum of your purchase payments and transfer amounts allocated to the fixed
account;
- -plus interest credited;
- -minus the sum of amounts withdrawn (including any applicable withdrawal
charges) and amounts transferred out; and
- -minus any prorated contract administrative charge.
SUBACCOUNTS: We convert amounts you allocated to the subaccounts into
accumulation units. Each time you make a purchase payment or transfer amounts
into one of the subaccounts, we credit a certain number of accumulation units to
your contract for that subaccount. Conversely, each time you take a partial
withdrawal, transfer amounts out of a subaccount or we assess a contract
administrative charge, we subtract a certain number of accumulation units from
your contract.
The accumulation units are the true measure of investment value in each
subaccount during the accumulation period. They are related to, but not the same
as, the net asset value of the fund in which the subaccount invests.
The dollar value of each accumulation unit can rise or fall daily depending on
the subaccount expenses, performance of the fund and on certain fund expenses.
Here is how we calculate accumulation unit values:
NUMBER OF UNITS
To calculate the number of accumulation units for a particular subaccount, we
divide your investment, after deduction of any premium taxes, by the current
accumulation unit value.
ACCUMULATION UNIT VALUE
The current accumulation unit value for each subaccount equals the last value
times the subaccount's current net investment factor.
NET INVESTMENT FACTOR
We determine the net investment factor by:
- -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
- -dividing that sum by the previous adjusted net asset value per share; and
- -subtracting the percentage factor representing the mortality and expense risk
fee and the variable account administrative charge from the result.
Because the net asset value of the fund may fluctuate, the accumulation unit
value may increase or decrease. You bear all the investment risk in a
subaccount.
31
<PAGE>
VALUING YOUR INVESTMENT
FACTORS THAT AFFECT SUBACCOUNT ACCUMULATION UNITS
Accumulation units may change in two ways: in number and in value. Here are the
factors that influence those changes:
The number of accumulation units you own may fluctuate due to:
- -additional purchase payments you allocated to the subaccounts;
- -transfers into or out of the subaccounts;
- -partial withdrawals;
- -withdrawal charges; and/or
- -prorated portions of contract administrative charge.
Accumulation unit values will fluctuate due to:
- -changes in funds' net asset value;
- -dividends distributed to the subaccounts;
- -capital gains or losses of funds;
- -fund operating expenses;
- -mortality and expense risk fees; and/or
- -variable account administrative charges.
32
<PAGE>
- -------------------------------
MAKING THE MOST OF YOUR CONTRACT
AUTOMATED DOLLAR-COST AVERAGING
Currently, you can use automated transfers to take advantage of dollar-cost
averaging (investing a fixed amount at regular intervals). For example, you
might transfer a set amount monthly from a relatively conservative subaccount to
a more aggressive one, or to several others, or from the fixed account to one or
more subaccounts. You also can obtain the benefits of dollar-cost averaging by
setting up regular automatic SIP payments. There is no charge for dollar-cost
averaging.
This systematic approach can help you benefit from fluctuations in accumulation
unit values caused by fluctuations in the market values of the funds. Since you
invest the same amount each period, you automatically acquire more units when
the market value falls and fewer units when it rises. The potential effect is to
lower your average cost per unit.
HOW DOLLAR-COST AVERAGING WORKS
<TABLE>
<CAPTION>
AMOUNT ACCUMULATION NUMBER OF UNITS
MONTH INVESTED UNIT VALUE PURCHASED
<S> <C> <C> <C>
Jan $100 $20 5.00
Feb 100 18 5.56
Mar 100 17 5.88
Apr 100 15 6.67
May 100 16 6.25
Jun 100 18 5.56
Jul 100 17 5.88
Aug 100 19 5.26
Sept 100 21 4.76
Oct 100 20 5.00
</TABLE>
You paid an average price of only $17.91 per unit over the 10 months, while the
average market price actually was $18.10.
Dollar-cost averaging does not guarantee that any subaccount will gain in value
nor will it protect against a decline in value if market prices fall. Because
dollar-cost averaging involves continuous investing, your success with this
strategy will depend upon your willingness to continue to invest regularly
through periods of low price levels. Dollar-cost averaging can be an effective
way to help meet your long-term goals. For specific features contact your agent.
Some restrictions may apply.
By investing an
equal number of
dollars each month...
you automatically-->
buy more units
when the per unit
market price is low...
and fewer units-->
when the per unit
market price is high.
33
<PAGE>
MAKING THE MOST OF YOUR CONTRACT
TRANSFERRING MONEY BETWEEN ACCOUNTS
You may transfer money from any one subaccount, or the fixed account, to another
subaccount before annuity payouts begin. (Certain restrictions apply to
transfers involving the fixed account.) We will process your transfer on the
valuation date we receive your request. We will value your transfer at the next
accumulation unit value calculated after we receive your request. There is no
charge for transfers. Before making a transfer, you should consider the risks
involved in switching investments.
We may suspend or modify transfer privileges at any time. In addition, we may
modify or restrict the right to transfer contract values between the subaccounts
if we determine (in our sole discretion) that the exercise of that right by one
or more contract owners would disadvantage other contract owners. We could apply
any modification to transfers to or from some or all of the subaccounts. These
modifications may include:
- -the requirement of a minimum time period between each transfer,
- -not accepting transfer requests of a sales representative 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 reasonable manner to
prevent transfers we believe disadvantage other contract owners. (For
information on transfers after annuity payouts begin, see "Transfer policies.")
TRANSFER POLICIES
- -You may transfer contract values between the subaccounts or from the
subaccounts to the fixed account at any time. However, if you made a transfer
from the fixed account to the subaccounts, you may not make a transfer from any
subaccount back to the fixed account for six months following that transfer.
- -You may transfer contract values from the fixed account to the subaccounts on
or within 30 days before or after the contract anniversary (except for
automated transfers, which can be set up for certain transfer periods subject
to certain minimums).
- -If we receive your request on or within 30 days before or after the contract
anniversary date, the transfer from the fixed account to the subaccounts will
be effective on the valuation date we receive it.
- -We will not accept requests for transfers from the fixed account at any other
time.
- -Once annuity payouts begin, you may not make transfers to or from the fixed
account, but you may make transfers once per contract year among the
subaccounts.
34
<PAGE>
HOW TO REQUEST A TRANSFER OR WITHDRAWAL
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------
Send your name, contract number, Social Security number or Taxpayer Identification
1 Number and signed request for a transfer or withdrawal to:
BY LETTER
REGULAR MAIL:
American Enterprise Life Insurance Company
80 South Eighth Street
P.O. Box 534
Minneapolis, MN 55440-0534
EXPRESS MAIL:
American Enterprise Life Insurance Company
Attention: Unit 829
733 Marquette Avenue
Minneapolis, MN 55402
MINIMUM AMOUNT
Transfers or withdrawals: $500 or entire subaccount or fixed account balance
MAXIMUM AMOUNT
Transfers or withdrawals: Contract value or the entire variable subaccount or fixed
account balance
- -------------------------------------------------------------------------------------------------------
Your agent can help you set up automated transfers among your subaccounts or fixed
2 account or partial withdrawals from the accounts.
BY AUTOMATED You can start or stop this service by written request or other method acceptable to us.
TRANSFERS AND You must allow 30 days for us to change any instructions that are currently in place.
AUTOMATED
PARTIAL
WITHDRAWALS
-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.
-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.
-Automated partial withdrawals may result in IRS taxes and penalties on all or part of
the amount withdrawn.
MINIMUM AMOUNT
Transfers or withdrawals: $100 monthly/$250 quarterly, semiannually or annually
MAXIMUM AMOUNT
Transfers or withdrawals: Contract value (except for automated transfers from the fixed
account)
</TABLE>
35
<PAGE>
MAKING THE MOST OF YOUR CONTRACT
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------
Call between 8 a.m. and 6 p.m. Central time:
3 1-800-333-3437 or
BY PHONE (612) 671-7700 (Minneapolis/St. Paul area)
MINIMUM AMOUNT
For transfers or withdrawals: $500 or entire subaccount or fixed account balance
MAXIMUM AMOUNT
For transfers: Contract value or the entire subaccount or fixed account
balance
For withdrawals: $25,000
We answer telephone requests promptly, but you may experience delays when the call
volume is unusually high. If you are unable to get through, use the mail procedure as
an alternative.
We will honor any telephone transfer or withdrawal requests that we believe are
authentic and we will use reasonable procedures to confirm that they are. This includes
asking identifying questions and tape recording calls. We will not allow a telephone
surrender within 30 days of an address change. As long as we follow the procedures, we
(and our affiliates) will not be liable for any loss resulting from fraudulent
requests.
Telephone transfers and withdrawals are automatically available. You may request that
telephone transfers and withdrawals NOT be authorized from your account by writing to
us.
</TABLE>
36
<PAGE>
- -------------------------------
WITHDRAWALS
You may withdraw all or part of your contract value 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 the 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") and IRS
taxes and penalties (see "Taxes"). You cannot make withdrawals after annuity
payouts begin.
WITHDRAWAL POLICIES
If you have a balance in more than one account and you request a partial
withdrawal, we will withdraw money from all your subaccounts and/or the fixed
account in the same proportion as your value in each correlates to your total
contract value, unless you request otherwise.
RECEIVING PAYMENT
By regular or express mail:
- -payable to you.
- -mailed to address of record within seven days after receiving your request.
However, we may postpone the payment if:
- -- the withdrawal amount includes a purchase payment check that has not cleared;
- -- the NYSE is closed, except for normal holiday and weekend closings;
- -- trading on the NYSE is restricted, according to SEC rules;
- -- an emergency, as defined by SEC rules, makes it impractical to sell
securities or value the net assets of the accounts; or
- -- the SEC permits us to delay payment for the protection of security holders.
NOTE: We will charge you a fee if you request express mail delivery.
37
<PAGE>
- -------------------------------
CHANGING OWNERSHIP
You may change ownership of your nonqualified annuity at any time by completing
a change of ownership form we approve and sending it to our office. The change
will become binding upon us when we receive and record it. We will honor any
change of ownership request that we believe is authentic and we will use
reasonable procedures to confirm authenticity. If we follow these procedures, we
will not take any responsibility for the validity of the change.
If you have a nonqualified annuity, you may incur income tax liability by
transferring, assigning or pledging any part of it. (See "Taxes.")
If you have a qualified annuity, you may not sell, assign, transfer, discount or
pledge your contract as collateral for a loan, or as security for the
performance of an obligation or for any other purpose except as required or
permitted by the Code.
38
<PAGE>
- -------------------------------
BENEFITS IN CASE OF DEATH
THE AEL PERSONAL PORTFOLIO PLUS AND AEL PERSONAL PORTFOLIO PLUS(2) CONTRACTS
INCLUDE THE DEATH BENEFIT DESCRIBED BELOW.
If you or the annuitant die before annuity payouts begin while this contract is
in force, we will pay the beneficiary as follows:
If either you or the annuitant is (are) age 81 or older on the date of death, we
will pay the beneficiary the contract value. If both you and the annuitant are
age 80 or younger on the date of death, we will pay the beneficiary the greatest
of:
- -the contract value;
- -the total purchase payments less any "adjusted partial withdrawals"; or
- -the highest contract value on any prior contract anniversary, plus any purchase
payments and less any "adjusted partial withdrawals" since that contract
anniversary.
If a contract has more than one person as owner, we will pay benefits upon the
first to die of any owner or the annuitant.
We calculate the "adjusted partial withdrawal" for each partial withdrawal by
multiplying (a) times (b) where:
(a) = the ratio of the partial withdrawal to the contract value immediately
before the partial withdrawal; and
(b) = the death benefit immediately before the partial withdrawal.
EXAMPLE:
- -You purchase a contract for $20,000 on January 1, 1999.
- -On January 1, 2000 (the first contract anniversary) the contract value reaches
$24,000.
- -On March 1, 2000 the contract value falls to $22,000. You then take a $1,500
partial withdrawal, leaving a contract value of $20,500.
We calculate the death benefit on March 1, 2000 as follows:
<TABLE>
<S> <C>
The highest contract value on any prior contract anniversary: $24,000.00
plus any purchase payments paid since that anniversary: + 0.00
less any "adjusted partial withdrawal" taken since that
anniversary:
1,500 X 24,000 = -1,636.36
- -----
22,000
---------
resulting in a death benefit of: $22,363.64
</TABLE>
39
<PAGE>
BENEFITS IN CASE OF DEATH
THE AEL PERSONAL PORTFOLIO-SM- CONTRACT INCLUDES THE DEATH BENEFIT DESCRIBED
BELOW.
If you or the annuitant die before annuity payouts begin while this contract is
in force, we will pay the beneficiary as follows:
For contracts where both you and the annuitant were 75 or younger on the date we
issued the contract and you made withdrawals subject to withdrawal charges, we
will pay the beneficiary the contract value.
For annuities where either you or the annuitant were 76 or older on the date we
issue the contract, we will pay the beneficiary the contract value.
If both you and the annuitant were age 75 or younger on the date the contract
was issued and if all withdrawals from this contract have been without
withdrawal charges, we will pay the beneficiary the greatest of:
- -the contract value;
- -the total purchase payments less any amounts withdrawn; or
- -on or after the fifth contract anniversary, the death benefit as of the most
recent fifth contract anniversary adjusted by:
- -- adding any purchase payments made since that most recent fifth contract
anniversary, and
- -- subtracting any amounts withdrawn since that most recent fifth contract
anniversary.
EXAMPLE:
- -You purchase contract for $20,000 on January 1, 1999.
- -On June 1, 2004 the contract value reaches $33,000.
- -On June 1, 2004 you take a $1,500 partial withdrawal, leaving a contract value
of $31,500.
- -On July 15, 2004 you make an additional payment of $1,000.
- -On March 1, 2005 the contract value falls to $31,000.
We calculate the death benefit on March 1, 2005 as follows:
<TABLE>
<S> <C>
The closest fifth anniversary contract value: $33,000.00
plus any purchase payments paid since that anniversary: + 1,000.00
less any partial withdrawals taken since that anniversary: - 1,500.00
----------
resulting in a death benefit of: $32,500.00
</TABLE>
40
<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 annuity as owner until the date on which the annuitant would have
reached 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:
- -the beneficiary asks us in writing within 60 days after we receive proof of
death; and
- -payouts begin no later than one year after your death, or other date as
permitted by the Code; and
- -the payout period does not extend beyond the beneficiary's life or life
expectancy.
When paying the beneficiary, we will process the death claim on the valuation
date that our death claim requirements are fulfilled. We will determine the
contract's value at the next accumulation unit value calculated after our death
claim requirements 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").
41
<PAGE>
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THE ANNUITY PAYOUT PERIOD
As owner of the contract, you have the right to decide how and to whom annuity
payouts will be made starting at the retirement date. You may select one of the
annuity payout plans outlined below, or we may mutually agree on other payout
arrangements.
The amount available to purchase payouts under the plan you select is the
contract value on your retirement date (less any applicable premium tax). We do
not deduct any withdrawal charges under the payout plans listed below.
You also decide whether we will make annuity payouts on a fixed or variable
basis, or a combination of fixed and variable. The amounts available to purchase
payouts under the plan you select is the contract value on your retirement date
(less any applicable premium tax). You may reallocate this contract value to the
fixed account to provide fixed dollar payouts and/or among the subaccounts to
provide variable annuity payouts. During the annuity payout period, you cannot
invest in more than five subaccounts at any one time unless we agree otherwise.
Amounts of fixed and variable payouts depend on:
- -the annuity payout plan you select;
- -the annuitant's age and, in most cases, sex;
- -the annuity table in the contract; and
- -the amounts you allocated to the account(s) at settlement.
In addition, for variable payouts only, amounts depend on the investment
performance of the subaccounts you select. These payouts will vary from month to
month because the performance of the funds will fluctuate. (In the case of fixed
annuities, payouts remain the same from month to month.)
For information with respect to transfers between accounts after annuity payouts
begin, see "Making the Most of Your Contract -- Transfer Policies."
ANNUITY TABLE
The annuity table in your contract shows the amount of the first monthly payment
for each $1,000 of contract value according to the age and, when applicable, the
sex of the annuitant. (Where required by law, we will use a unisex table of
settlement rates.) The table assumes that the contract value is invested at the
beginning of the annuity payout period and earns a 5% rate of return, which is
reinvested and helps to support future payouts.
SUBSTITUTION OF 3.5% TABLE
If you ask us at least 30 days before the retirement date, we will substitute an
annuity table based on an assumed 3.5% investment rate for the 5% table in the
contract. The assumed investment rate affects both the amount of the first
payout and the extent to which subsequent payouts increase or decrease. Using
the 5% table results in a higher initial payment, but later payouts will
increase more slowly when annuity unit values rise and decrease more rapidly
when they decline.
ANNUITY PAYOUT PLANS
You may choose any one of these annuity payout plans by giving us written
instructions at least 30 days before contract values are used to purchase the
payout plan:
- -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.
42
<PAGE>
- -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.
- -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.
- -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.
- -PLAN E -- PAYOUTS FOR A SPECIFIED PERIOD (AVAILABLE AS A FIXED PAYOUT ONLY): We
make monthly payouts for a specific payout period of 10 to 30 years that you
elect. We will make payouts only for the number of years specified whether the
annuitant is living or not. Depending on the selected time period, it is
foreseeable that an annuitant can outlive the payout period selected. In
addition, a 10% IRS penalty tax could apply under this payout plan. (See
"Taxes.")
RESTRICTIONS FOR SOME QUALIFIED PLANS: If you purchased a qualified annuity, you
may be required to select a payout plan that provides for payouts:
- -over the life of the annuitant;
- -over the joint lives of the annuitant and a designated beneficiary;
- -for a period not exceeding the life expectancy of the annuitant; or
- -for a period not exceeding the joint life expectancies of the annuitant and a
designated beneficiary.
You have the responsibility for electing a payout plan that complies with your
contract and with applicable law.
IF WE DO NOT RECEIVE INSTRUCTIONS: You must give us written instructions for the
annuity payouts at least 30 days before the annuitant's retirement date. If you
do not, we will make payouts under Plan B, with 120 monthly payouts guaranteed.
Contract values that you allocated to the fixed account will provide fixed
dollar payouts and contract values that you allocated among the subaccounts will
provide variable annuity payouts.
IF MONTHLY PAYOUTS WOULD BE LESS THAN $20: We will calculate the amount of
monthly payouts at the time the contract value is used to purchase a payout
plan. If the calculations show that monthly payouts would be less than $20, we
have the right to pay the contract value to the owner in a lump sum or to change
the frequency of the payouts.
DEATH AFTER ANNUITY PAYOUTS BEGIN
If you or the annuitant die after annuity payouts begin, we will pay any amount
payable to the beneficiary as provided in the annuity payout plan in effect.
43
<PAGE>
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TAXES
Generally, under current law, any increase in your contract value is taxable to
you only when you receive a payout or withdrawal (see detailed discussion
below). Any portion of the annuity payouts and any withdrawals you request that
represent ordinary income are normally taxable. We will send you a tax
information reporting form for any year in which we made a taxable distribution
according to our records. Roth IRAs may grow 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 IRA's) and after your
death. You should refer to your retirement plan or adoption agreement, or
consult a tax advisor for more information about these distribution rules.
ANNUITY PAYOUTS UNDER NONQUALIFIED ANNUITIES: A portion of each payout will be
ordinary income and subject to tax, and a portion of each payout will be
considered a return of part of your investment and will not be taxed. All
amounts you receive after your investment in the contract is fully recovered
will be subject to tax.
Tax law requires that all nonqualified deferred annuity contracts issued by the
same company (and possibly its affiliates) to the same owner during a calendar
year be taxed as a single, unified contract when you take distributions from any
one of those contracts.
ANNUITY PAYOUTS UNDER QUALIFIED ANNUITIES (EXCEPT ROTH IRAS): Under a qualified
annuity, the entire payout generally is includable as ordinary income and is
subject to tax except to the extent that contributions were made with after-tax
dollars. If you or your employer invested in your contract with deductible or
pre-tax dollars as part of a qualified retirement plan, such amounts are not
considered to be part of your investment in the contract and will be taxed when
paid to you.
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 year(s) he or she receives the
payments. The death benefit under a Roth IRA generally is not taxable as
ordinary income to the beneficiary if certain distribution requirements are met.
44
<PAGE>
TAXES
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:
- -because of your death;
- -because you become disabled (as defined in the Code);
- -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
- -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.
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
45
<PAGE>
TAXES
this reason and because tax consequences are complex and highly individual and
cannot always be anticipated, you should consult a tax advisor if you have any
questions about taxation of your contract.
TAX QUALIFICATION
We intend that the contract qualify as an annuity for federal income tax
purposes. To that end, the provisions of the contract are to be interpreted to
ensure or maintain such tax qualification, in spite of any other provisions of
the contract. We reserve the right to amend the contract to reflect any
clarifications that may be needed or are appropriate to maintain such
qualification or to conform the contract to any applicable changes in the tax
qualification requirements. We will send you a copy of any such amendments.
46
<PAGE>
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VOTING RIGHTS
As a contract owner with investments in the subaccounts, you may vote on
important fund policies until annuity payouts begin. Once they begin, the person
receiving them has voting rights. We will vote fund shares according to the
instructions of the person with voting rights.
Before annuity payouts begin, the number of votes you have is determined by
applying your percentage interest in each subaccount to the total number of
votes allowed to the subaccount.
After annuity payouts begin, the number of votes you have is equal to:
- -the reserve held in each subaccount for your contract; divided by
- -the net asset value of one share of the applicable fund.
As we make annuity payouts, the reserve for the contract decreases; therefore,
the number of votes also will decrease.
We calculate votes separately for each subaccount. We will send notice of
shareholders' meetings, proxy materials and a statement of the number of votes
to which the voter is entitled. We will vote shares for which we have not
received instructions in the same proportion as the votes for which we received
instructions. We also will vote the shares for which we have voting rights in
the same proportion as the votes for which we received instructions.
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<PAGE>
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SUBSTITUTION OF INVESTMENTS
We may substitute the funds in which the subaccounts invest if:
- -laws or regulations change,
- -existing funds become unavailable, or
- -in our judgment, the funds no longer are suitable for the subaccounts.
If any of these situations occur and if we believe it is in the best interest of
persons having voting rights under the contract, we have the right to substitute
funds other than those currently listed in this prospectus.
We may also:
- -change the funds in which the subaccounts invest, and
- -add additional subaccounts investing in other funds.
In the event of substitution of 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.
48
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ABOUT THE SERVICE PROVIDERS
PRINCIPAL UNDERWRITER
American Express Financial Advisors Inc. (AEFA) is the principal underwriter for
the contracts. Its offices are located at IDS Tower 10, Minneapolis, MN
55440-0010. AEFA is a wholly-owned subsidiary of AEFC. The contracts are
distributed either directly or through third party marketers by insurance
agencies and broker-dealers who may also be associated with financial
institutions such as banks. AEL will pay commission for the sales of contracts
to the insurance agencies who have entered into distribution agreements with AEL
and AEFA. These commissions will not be more than 7.5% of purchase payments it
receives on the contracts. From time to time, we will pay or permit other
promotional incentives, in cash or credit or other compensation.
The AEFC family of companies offers not only insurance and annuities, but also
mutual funds, investment certificates and a broad range of financial management
services.
ISSUER
American Enterprise Life issues the contracts. 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, a financial
services company headquartered in New York City.
American Enterprise Life is a stock life insurance company organized in 1981
under the laws of the State of Indiana and is located at 80 South Eighth Street,
Minneapolis, MN 55402. Its statutory address is 100 Capitol Center South, 201
North Illinois Street, Indianapolis, IN 46204. American Enterprise Life conducts
a conventional life insurance business.
LEGAL PROCEEDINGS
A number of lawsuits have been filed against life and health insurers in
jurisdictions in which we do business involving insurers' sales practices,
alleged agent misconduct, failure to properly supervise agents, and other
matters. We, 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. We also are defendants in
various other lawsuits. In our opinion, none of these lawsuits will have a
material adverse effect on our financial condition.
49
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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 AEL and the variable
account. AEL and the variable account have no computer systems of their own but
are dependent upon the systems of AEFC and certain other third parties.
A comprehensive review of AEFC's computer systems and business processes has
been conducted to identify the major systems that could be affected by the Year
2000 issue. Steps are being taken to resolve any potential problems including
modification to existing software and the purchase of new software. These
measures are scheduled to be completed and tested on a timely basis. AEFC's
target date for substantially completing corrective measures on business
critical systems was Dec. 31, 1998. Substantial testing of these systems was
targeted for completion early in 1999. AEFC currently is on track with this
schedule and also is on track to finish the work on non-critical systems by June
30, 1999. The Year 2000 readiness of unaffiliated investment managers and other
third parties whose system failures could have an impact on AEL's and the
variable account's operations continues to be evaluated. The potential
materiality of any such impact is not known at this time.
AEFC's Year 2000 project includes establishing Year 2000 contingency plans for
all key business units. Business continuation plans, which address business
continuation in the event of a system disruption, are in place for all key
business units. These plans are being amended to include specific Year 2000
considerations and will continue to be refined throughout 1999 as additional
information related to potential Year 2000 exposure is gathered.
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TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<S> <C>
Performance Information............................................................ 3
Calculating Annuity Payouts........................................................ 7
Rating Agencies.................................................................... 9
Principal Underwriter.............................................................. 9
Independent Auditors............................................................... 9
Financial Statements
</TABLE>
51
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Please check the box to receive a copy of the Statement of Additional
Information for:
/ / AEL Personal Portfolio-SM-/AEL Personal Portfolio Plus/AEL Personal
Portfolio Plus 2
/ / AIM Variable Insurance Funds, Inc.
/ / American Century Variable Portfolios, Inc.
/ / GT Global Variable Investment Funds
/ / IDS Life Retirement Annuity Mutual Funds
/ / Janus Aspen Series Portfolios
/ / OCC Accumulation Trust Portfolios
/ / Oppenheimer Variable Account Funds
/ / Putnam Variable Trust
MAIL YOUR REQUEST TO:
American Enterprise Life Insurance
80 South Eighth Street
P.O. Box 534
Minneapolis, MN 55440-0534
WE WILL MAIL YOUR REQUEST TO:
Your name ______________________________________________________________________
Address ________________________________________________________________________
City __________________________________ State ______________ Zip _______________
<PAGE>
- ------------------------------
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
Administrative Offices:
80 South Eighth Street
P.O. Box 534
Minneapolis, MN 55440-0534
800-333-3437
American Express Financial Advisors Inc., member NASD
- -C- 1999 American Enterprise Life Insurance Company
All rights reserved.
37301 J (4/99)
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
for
AEL PERSONAL PORTFOLIO PLUS2
and
AEL PERSONAL PORTFOLIOSM/AEL Personal Portfolio Plus
AMERICAN ENTERPRISE VARIABLE ANNUITY ACCOUNT
April 30, 1999
American Enterprise Variable Annuity Account is a separate account established
and maintained by American Enterprise Life Insurance Company (American
Enterprise Life).
This Statement of Additional Information (SAI) is not a prospectus. It should be
read together with the prospectus dated the same date as this SAI, which may be
obtained from your agent, or by writing or calling us at the address and
telephone number below. The prospectus is incorporated in this SAI by reference.
American Enterprise Life Insurance Company
80 South Eighth Street
P.O. Box 534
Minneapolis, MN 55440-0534
800-333-3437
<PAGE>
TABLE OF CONTENTS
Performance Information.......................................p.3
Calculating Annuity Payouts...................................p.7
Rating Agencies...............................................p.8
Principal Underwriter.........................................p.8
Independent Auditors..........................................p.8
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 variable subaccounts), calculated according
to the following formula:
P(1+T)n = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = Ending Redeemable Value of a hypothetical $1,000 payment
made at the beginning of the period, at the end of the
period (or fractional portion thereof)
We calculated the following performance figures on the basis of historical
performance of each fund. We show actual performance from the date the
subaccounts began investing in the funds. We also show performance from the
commencement date of the funds as if the contract existed at that time. Past
performance does not guarantee future results.
Average Annual Total Return With Withdrawal For Periods Ending Dec. 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Performance since
commencement of the Performance since
subaccount commencement of the Fund**
Since Since
Subaccount ----------------------------------------- 1 Year commencement --------- -------- --------- commencement
Investing in: 1 Year 5 Years 10 Years
-----------------------------------------
AIM V.I.
EGN Growth and Income Fund (10/97; 5/94)* 18.80% 20.08% 18.80% --% --% 20.29
EIN International Equity Fund (10/97; 5/93) 6.77 8.40 6.77 9.19 -- 11.39
EVA Value Fund (10/97; 5/93) 23.45 23.61 23.45 19.55 -- 19.86
-----------------------------------------
AMERICAN CENTURY
EIG VP Income and Growth (10/98; 10/97) -- 17.97 17.70 -- -- 23.57
EVL VP Value (10/98; 5/96) -- 5.24 -3.29 -- -- 12.67
GT GLOBAL
ELA Variable Latin America Fund (2/95; -45.95 -7.55 -45.95 -9.47 -- -2.26
2/93)
EPA Variable New Pacific Fund (2/95; 2/93) -21.04 -10.75 -21.04 -12.39 -- -7.14
IDS LIFE
EAG Aggressive Growth Fund (2/95; 1/92) -5.29 13.00 -5.29 8.50 -- 9.01
ECR Capital Resource Fund (2/95; 10/81) 15.28 17.51 15.28 14.41 14.01 --
EGD Growth Dimensions Fund (10/97; 4/96) 19.74 21.86 19.74 -- -- 21.07
EIE International Equity Fund (2/95; 1/92) 7.10 9.32 7.10 5.16 -- 7.55
EMG Managed Fund (2/95; 4/86) 7.07 16.33 7.07 11.79 12.77 --
EMS Moneyshare Fund (2/95; 10/81) -2.99 2.57 -2.99 2.73 3.65 --
ESI Special Income Fund (2/95; 10/81) -6.32 6.78 -6.32 4.64 7.23 --
<PAGE>
Performance since
commencement of the Performance since
subaccount commencement of the Fund**
Since Since
Subaccount --------------------------------------- 1 Year commencement ---------- -------- -------- commencement
Investing in: 1 Year 5 Years 10 Years
---------------------------------------
JANUS ASPEN SERIES
ESB Balanced Portfolio (10/97; 9/93) 25.31% 24.34% 25.31% 16.96% --% 17.46%
EWG Worldwide Growth Portfolio (10/97; 20.02 20.35 20.02 19.16 -- 21.95
9/93)
---------------------------------------
OCC ACCUMULATION TRUST
EEQ Equity Portfolio (10/97; 8/88) 3.19 10.50 3.19 18.14 15.72 --
EMG Managed Portfolio (2/95; 8/88) -1.17 19.34 -1.17 17.00 17.49 --
ESC Small Cap Portfolio (10/97; 8/88) -15.98 -12.48 -15.98 6.39 11.44 --
EUS U.S. Government Income Portfolio -0.23 4.79 -0.23 -- -- 5.21
(2/95; 1/95)
OPPENHEIMER VARIABLE ACCOUNT
EGR Capital Appreciation Fund/VA (10/97; 15.16 15.24 15.16 19.94 15.03 --
4/85)
EHI High Income Fund/VA (10/97; 4/86) -7.42 -4.55 -7.42 6.48 10.95 --
PUTNAM VT
EDI Diversified Income Fund Class IA -8.95 5.33 -8.95 3.46 -- 3.79
(2/95; 9/93)
EGI Growth and Income Fund Class IA 6.70 21.02 6.70 16.94 14.22 --
(2/95; 2/88)
EHY High Yield Fund Class IA (2/95; 2/88) -13.07 6.58 -13.07 5.16 8.17 --
ENO New Opportunities Fund (2/95; 5/94) 15.54 22.74 15.54 -- -- 20.98
PUTNAM VT
EPD Diversified Income Fund Class IB -- -6.27 -9.16 3.28 -- 3.61
(10/98; 9/93)
EPG Growth and Income Fund Class IB -- 10.95 6.58 16.78 14.05 --
(10/98; 2/88)
EPH High Yield Fund Class IB (10/98; -- -5.59 -13.11 5.02 8.02 --
2/88)
EPV Voyager Fund Class IB (10/98; 2/88) -- 29.83 15.35 18.02 18.10 --
* (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 fee, a 0.15%
variable account administrative charge and applicable withdrawal charges.
</TABLE>
Average Annual Total Return Without Withdrawal For Periods Ending Dec. 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Performance since
commencement of the Performance since
subaccount commencement of the Fund**
Since Since
Subaccount ----------------------------------------- 1 Year commencement --------- -------- --------- commencement
Investing in: 1 Year 5 Years 10 Years
-----------------------------------------
AIM V.I.
EGN Growth and Income Fund (10/97; 5/94)* 25.80% 25.03% 25.80% --% --% 20.61%
EIN International Equity Fund (10/97; 5/93) 13.77 13.44 13.77 9.61 -- 11.60
EVA Value Fund (10/97; 5/93) 30.45 28.55 30.45 19.84 -- 20.02
-----------------------------------------
AMERICAN CENTURY
EIG VP Income and Growth (10/98; 10/97) -- 24.97 24.70 -- -- 28.50
EVL VP Value (10/98; 5/96) -- 12.24 3.24 -- -- 14.18
GT GLOBAL
ELA Variable Latin America Fund (2/95; -42.63 -6.65 -42.63 -9.01 -- -1.94
2/93)
EPA Variable New Pacific Fund (2/95; 2/93) -15.85 -9.88 -15.85 -11.91 -- -6.85
<PAGE>
Performance since
commencement of the Performance since
subaccount commencement of the Fund**
Since Since
Subaccount --------------------------------------- 1 Year commencement ---------- -------- -------- commencement
Investing in: 1 Year 5 Years 10 Years
---------------------------------------
IDS LIFE
EAG Aggressive Growth Fund (2/95; 1/92) 1.08% 13.73% 1.08% 8.93% --% 9.10%
ECR Capital Resource Fund (2/95; 10/81) 22.28 18.16 22.28 14.76 14.01 --
EGD Growth Dimensions Fund (10/97; 4/96) 26.74 26.78 26.74 -- -- 22.42
EIE International Equity Fund (2/95; 14.10 10.12 14.10 5.64 -- 7.64
1/92)
EMG Managed Fund (2/95; 4/86) 14.07 16.99 14.07 12.17 12.77 --
EMS Moneyshare Fund (2/95; 10/81) 3.56 3.52 3.56 3.27 3.65 --
ESI Special Income Fund (2/95; 10/81) -0.02 7.62 -0.02 5.13 7.23 --
---------------------------------------
JANUS ASPEN SERIES
ESB Balanced Portfolio (10/97; 9/93) 32.31 29.26 32.31 17.28 -- 17.65
EWG Worldwide Growth Portfolio (10/97; 27.02 25.30 27.02 19.46 -- 22.11
9/93)
OCC ACCUMULATION TRUST
EEQ Equity Portfolio (10/97; 8/88) 10.19 15.53 10.19 18.45 15.72 --
EMG Managed Portfolio (2/95; 8/88) 5.52 19.96 5.52 17.32 17.49 --
ESC Small Cap Portfolio (10/97; 8/88) -10.41 -8.18 -10.41 6.86 11.44 --
EUS U.S. Government Income Portfolio 6.53 5.69 6.53 -- -- 6.06
(2/95; 1/95)
OPPENHEIMER VARIABLE ACCOUNT
EGR Capital Appreciation Fund/VA (10/97; 22.16 20.22 22.16 20.23 15.03 --
4/85)
EHI High Income Fund/VA (10/97; 4/86) -1.20 0.13 -1.20 6.95 10.95 --
PUTNAM VT
EDI Diversified Income Fund Class IA -2.85 6.21 -2.85 3.98 -- 4.11
(2/95; 9/93)
EGI Growth and Income Fund Class IA 13.70 21.62 13.70 17.26 14.22 --
(2/95; 2/88)
EHY High Yield Fund Class IA (2/95; 2/88) -7.28 7.44 -7.28 5.65 8.17 --
ENO New Opportunities Fund (2/95; 5/94) 22.54 23.31 22.54 -- -- 21.30
PUTNAM VT
EPD Diversified Income Fund Class IB -- 0.03 -3.08 3.81 -- 3.93
(10/98; 9/93)
EPG Growth and Income Fund Class IB -- 17.95 13.58 17.10 14.05 --
(10/98; 2/88)
EPH High Yield Fund Class IB (10/98; -- 0.76 -7.33 5.51 8.02 --
2/88)
EPV Voyager Fund Class IB (10/98; 2/88) -- 36.83 22.35 18.33 18.10 --
* (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 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 period, at the
end of the period (or fractional period thereof)
The SEC requires that we assume that you withdraw the entire contract at the end
of the one-, five-, and 10- year periods (or, if less, up to the life of the
variable subaccount). In addition, we may show performance figures without the
deduction of a withdrawal charge. All total return figures reflect the deduction
of all applicable charges including the contract administrative charge, the
variable account administrative charge and the mortality and expense risk fee.
Calculation of Yield for Subaccounts Investing in Money Market Funds
Annualized Simple Yield:
For the subaccounts investing in money market funds, we base quotations of
simple yield on:
(a) the change in the value of a hypothetical subaccount (exclusive of
capital changes and income other than investment income) at the
beginning of a particular seven-day period;
(b) less a pro rata share of the subaccount expenses accrued over the
period;
(c) dividing this difference by the value of the subaccount at the
beginning of the period to obtain the base period return; and
(d) multiplying the base period return by 365/7.
The subaccount's value includes:
o any declared dividends,
o the value of any shares purchased with dividends paid during the period, and
o any dividends declared for such shares.
It does not include:
o the effect of any applicable withdrawal charge, or
o any realized or unrealized gains or losses.
Annualized Compound Yield:
We calculate compound yield using the base period return described above, which
we then compound according to the following formula:
Compound Yield = [(Base Period Return + 1) 365/7] -1
Annualized Yields Based on the Seven-Day Period Ending Dec. 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Subaccount Investing In: Simple Yield Compound Yield
EMS IDS Life Moneyshare Fund 3.24% 3.29%
</TABLE>
<PAGE>
Annualized Yield for Subaccounts Investing in Income Funds
For the subaccounts investing in income funds, we base quotations of yield on
all investment income earned during a particular 30-day period, less expenses
accrued during the period (net investment income) and compute it by dividing net
investment income per accumulation unit by the value of an accumulation unit on
the last day of the period, according to the following formula:
YIELD = 2[( a-b + 1)6 - 1]
cd
where: a = dividends and investment income earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of accumulation units
outstanding during the period that were entitled to
receive dividends
d = the maximum offering price per accumulation unit on the
last day of the period
The subaccount earns yield from the increase in the net asset value of shares of
the fund in which it invests and from dividends declared and paid by the fund,
which are automatically invested in shares of the fund.
Annualized Yield Based on the 30-Day Period Ended Dec. 31, 1998
Subaccount Investing In: Yield
ESI IDS Life Special Income 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 Daily, Kiplinger's
Personal Finance, Lipper Analytical Services, Money, Morningstar,
Mutual Fund Forecaster, Newsweek, The New York Times, Personal
Investor, Stanger Report, Sylvia Porter's Personal Finance, USA Today,
U.S. News and World Report, The Wall Street Journal and Wiesenberger
Investment Companies Service.
CALCULATING ANNUITY PAYOUTS
The Variable Account
We do the following calculations separately for each of the subaccounts of the
variable account. The separate monthly payouts, added together, make up your
total variable annuity payout.
Initial Payout: To compute your first monthly payment, we:
o determine the dollar value of your contract as of the valuation date that
falls on (or closest to the valuation date that falls before) the seventh
calendar day before the retirement date and then deduct any applicable
premium tax; then
o apply the result to the annuity table contained in the contract or another
table at least as favorable.
The annuity table shows the amount of the first monthly payment for each $1,000
of value which depends on factors built into the table, as described below.
<PAGE>
Annuity Units: We then convert the value of your subaccount to annuity units. To
compute the number of units credited to you, we divide the first monthly payment
by the annuity unit value (see below) on the valuation date that falls on (or
closest to the valuation date that falls before) the seventh calendar day before
the retirement date. The number of units in your subaccount is fixed. The value
of the units fluctuates with the performance of the underlying fund.
Subsequent Payouts: To compute later payouts, we multiply:
o the annuity unit value on the valuation date that falls on (or closest to
the valuation date that falls before) the seventh calendar day before the
payout is due; by
o the fixed number of annuity units credited to you.
Annuity Unit Values: We originally set this value at $1 for each subaccount. To
calculate later values we multiply the last annuity value by the product of:
o the net investment factor; and
o the neutralizing factor.
The purpose of the neutralizing factor is to offset the effect of the assumed
rate built into the annuity table. With an assumed investment rate of 5%, the
neutralizing factor is 0.999866 for a one day valuation period.
Net Investment Factor: We determine the net investment factor by:
o adding the fund's current net asset value per share plus the per share
amount of any accrued income or capital gain dividends to obtain a current
adjusted net asset value per share; then
o dividing that sum by the previous adjusted net asset value per share; and
o subtracting the percentage factor representing the mortality and expense
risk fee 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 your
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 contract. This information relates only to the fixed account
and reflects our ability to make annuity payouts and to pay death benefits and
other distributions from the contract.
Rating Agency Rating
A.M. Best A+
(Superior)
- -----------------------
Duff & Phelps AAA
- -----------------------
Moody's Aa2
PRINCIPAL UNDERWRITER
The principal underwriter for the contracts is American Express Financial
Advisors Inc. (AEFA) which offers them on a continuous basis.
Withdrawal charges received by AEFA for the last three years aggregated total
$199,062, $79,195, and $34,957, respectively.
Commissions paid by AEL for the last three years aggregated total $4,415,795,
$1,798,969, and $1,243,420, respectively.
INDEPENDENT AUDITORS
The financial statements appearing in this SAI have been audited by Ernst &
Young LLP (1400 Pillsbury Center, 200 South Sixth Street, Minneapolis, MN 55402)
independent auditors, as stated in their report appearing herein.
FINANCIAL STATEMENTS
<PAGE>
American Enterprise Variable Annuity Account
Annual Financial Information
Report of Independent Auditors
The Board of Directors
American Enterprise Life Insurance Company
We have audited the individual and combined statements of net assets of the
segregated asset subaccounts of American Enterprise Variable Annuity Account
(comprised of subaccounts 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 Net Assets Dec. 31, 1998
Segregated Asset Subaccounts
Assets EGN EIN EVA
Investments in shares of mutual funds and portfolios:
<S> <C> <C> <C>
at cost $2,838,209 $982,557 $2,129,905
---------- -------- ----------
at market value $3,246,822 $1,005,337 $2,391,678
Dividends receivable - - -
Accounts receivable from American Enterprise Life for
contract purchase payments 7,057 880 1,237
Receivable from mutual funds and portfolios
for share redemptions - - -
----- ----- -----
Total assets 3,253,879 1,006,217 2,392,915
========= ========= =========
Liabilities
Payable to American Enterprise Life for:
Mortality and expense risk fee 3,316 1,020 2,413
Contract terminations - - -
Issue and administrative fee 398 122 290
Payable to mutual funds and portfolios
for investments purchased 7,057 880 1,237
----- --- -----
Total liabilities 10,771 2,022 3,940
------ ----- -----
Net assets applicable to contracts in
accumulation period 3,243,108 1,004,195 2,388,975
Net assets applicable to contracts in
payment period - - -
------- ------ -------
Total net assets $3,243,108 $1,004,195 $2,388,975
========== ========== ==========
Accumulation units outstanding 2,495,182 865,556 1,778,901
========= ======= =========
Net asset value per accumulation unit $ 1.30 $ 1.16 $ 1.34
====== ====== ======
Assets EIG EVL ELA
Investments in shares of mutual funds and portfolios:
at cost $ 159,983 $ 174,742 $ 1,247,718
--------- --------- -----------
at market value $ 171,254 $ 176,789 $ 861,071
Dividends receivable - - -
Accounts receivable from American Enterprise Life for
contract purchase payments 3,281 2,218 -
Receivable from mutual funds and portfolios
for share redemptions - - 52,571
----- ----- ------
Total assets 174,535 179,007 913,642
======= ======= =======
Liabilities
Payable to American Enterprise Life for:
Mortality and expense risk fee 145 155 964
Contract terminations - - 52,571
Issue and administrative fee 18 19 116
Payable to mutual funds and portfolios
for investments purchased 3,281 2,218 -
----- ----- -----
Total liabilities 3,444 2,392 53,651
----- ----- ------
Net assets applicable to contracts in
accumulation period 171,091 176,615 859,991
Net assets applicable to contracts in
payment period - - -
Total net assets $ 171,091 $ 176,615 $ 859,991
Accumulation units outstanding 136,768 157,078 1,115,043
Net asset value per accumulation unit $ 1.25 $ 1.12 $ 0.77
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
Statements of Net Assets (continued) Dec. 31, 1998
Segregated Asset Subaccounts
Assets EPA EAG ECR
Investments in shares of mutual funds and portfolios:
<S> <C> <C> <C>
at cost $1,416,097 $5,868,100 $8,367,712
---------- ---------- ----------
at market value $971,930 $5,696,833 $9,845,123
Dividends receivable - - -
Accounts receivable from American Enterprise Life
for contract purchase payments 268 8,047 12,759
Receivable from mutual funds and portfolios
for share redemptions - - -
----- ----- -----
Total assets 972,198 5,704,880 9,857,882
======= ========= =========
Liabilities
Payable to American Enterprise Life for:
Mortality and expense risk fee 1,039 6,004 10,405
Contact terminations - - -
Issue and administrative fee 125 721 1,249
Payable to mutual funds and portfolios
for investments purchased 268 1,322 1,105
--- ----- -----
Total liabilities 1,432 8,047 12,759
----- ----- ------
Net assets applicable to contracts in
accumulation period 970,766 5,692,498 9,839,380
Net assets applicable to contracts in
payment period - 4,335 5,743
----- ----- -----
Total net assets $970,766 $5,696,833 $9,845,123
======== ========== ==========
Accumulation units outstanding 1,441,794 3,452,898 5,163,185
========= ========= =========
Net asset value per accumulation unit $ 0.67 $ 1.65 $ 1.91
====== ====== ======
Assets EGD EIE EMG
Investments in shares of mutual funds and portfolios:
at cost $ 1,273,181 $ 2,950,051 $8,289,853
----------- ----------- ----------
at market value $ 1,465,483 $ 3,182,165 $8,564,185
Dividends receivable - - -
Accounts receivable from American Enterprise Life
for contract purchase payments 6,154 816 21,217
Receivable from mutual funds and portfolios
for share redemptions - 1,950 -
----- ----- -----
Total assets 1,471,637 3,184,931 8,585,402
========= ========= =========
Liabilities
Payable to American Enterprise Life for:
Mortality and expense risk fee 1,513 3,351 8,984
Contact terminations - - -
Issue and administrative fee 182 402 1,078
Payable to mutual funds and portfolios
for investments purchased 4,459 - 11,155
----- ----- ------
Total liabilities 6,154 3,753 21,217
----- ----- ------
Net assets applicable to contracts in
accumulation period 1,465,483 3,175,932 8,559,908
Net assets applicable to contracts in
payment period - 5,246 4,277
----- ----- -----
Total net assets $ 1,465,483 $ 3,181,178 $8,564,185
=========== =========== ==========
Accumulation units outstanding 1,108,323 2,181,192 4,684,466
========= ========= =========
Net asset value per accumulation unit $ 1.32 $ 1.46 $ 1.83
====== ====== ======
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
Statements of Net Assets (continued) Dec. 31, 1998
Segregated Asset Subaccounts
Assets EMS ESI ESB
Investments in shares of mutual funds and portfolios:
<S> <C> <C> <C>
at cost $ 858,797 $ 7,944,815 $3,141,366
--------- ----------- ----------
at market value $ 858,800 $ 7,553,609 $3,626,390
Dividends receivable 3,497 45,255 -
Accounts receivable from American Enterprise Life
for contract purchase payments - 16,799 4,397
Receivable from mutual funds and portfolios
for share redemptions - - -
----- ----- -----
Total assets 862,297 7,615,663 3,630,787
======= ========= =========
Liabilities
Payable to American Enterprise Life for:
Mortality and expense risk fee 918 7,851 3,647
Contract terminations - - -
Issue and administrative fee 110 942 437
Payable to mutual funds and portfolios
for investments purchased 2,469 53,261 4,397
----- ------ -----
Total liabilities 3,497 62,054 8,481
----- ------ -----
Net assets applicable to contracts in
accumulation period 858,800 7,550,694 3,622,306
Net assets applicable to contracts in
payment period - 2,915 -
------ ----- ------
Total net assets $ 858,800 $ 7,553,609 $3,622,306
========= =========== ==========
Accumulation units outstanding 749,301 5,688,915 2,679,665
======= ========= =========
Net asset value per accumulation unit $ 1.15 $ 1.33 $ 1.35
====== ====== ======
Assets EWG EEQ EMD
Investments in shares of mutual funds and portfolios:
at cost $2,129,867 $1,228,483 $10,028,179
---------- ---------- -----------
at market value $2,245,768 $1,256,568 $11,478,356
Dividends receivable - - -
Accounts receivable from American Enterprise Life
for contract purchase payments - 967 7,121
Receivable from mutual funds and portfolios
for share redemptions 2,923 - -
----- ----- -----
Total assets 2,248,691 1,257,535 11,485,477
========= ========= ==========
Liabilities
Payable to American Enterprise Life for:
Mortality and expense risk fee 2,324 1,303 12,111
Contract terminations 2,923 - -
Issue and administrative fee 279 157 1,453
Payable to mutual funds and portfolios
for investments purchased - 967 7,121
--- --- -----
Total liabilities 5,526 2,427 20,685
----- ----- ------
Net assets applicable to contracts in
accumulation period 2,243,165 1,255,108 11,458,221
Net assets applicable to contracts in
payment period - - 6,571
----- ----- -----
Total net assets $2,243,165 $1,255,108 $11,464,792
========== ========== ===========
Accumulation units outstanding 1,721,007 1,058,768 5,686,310
========= ========= =========
Net asset value per accumulation unit $ 1.30 $ 1.19 $ 2.02
====== ====== ======
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
Statements of Net Assets (continued) Dec. 31, 1998
Segregated Asset Subaccounts
Assets ESC EUS EGR
Investments in shares of mutual funds and portfolios:
<S> <C> <C> <C>
at cost $1,366,751 $4,398,463 $2,069,858
---------- ---------- ----------
at market value $1,282,385 $4,461,745 $2,320,601
Dividends receivable - 7,664 -
Accounts receivable from American Enterprise Life
for contract purchase payments 1,797 3 825
Receivable from mutual funds and portfolios
for share redemptions - 2,157 -
---- ----- -----
Total assets 1,284,182 4,471,569 2,321,426
========= ========= =========
Liabilities
Payable to American Enterprise Life for:
Mortality and expense risk fee 1,315 4,627 2,392
Contract terminations - 2,157 -
Issue and administrative fee 158 555 287
Payable to mutual funds and portfolios
for investments purchased 1,797 3 825
----- - ---
Total liabilities 3,270 7,342 3,504
----- ----- -----
Net assets applicable to contracts in
accumulation period 1,280,912 4,454,472 2,317,922
Net assets applicable to contracts in
payment period - 9,755 -
----- ----- -----
Total net assets $1,280,912 $4,464,227 $2,317,922
========== ========== ==========
Accumulation units outstanding 1,413,306 3,585,201 1,866,603
========= ========= =========
Net asset value per accumulation unit $ 0.91 $ 1.24 $ 1.24
====== ====== ======
Assets EHI EDI EPD
Investments in shares of mutual funds and portfolios:
at cost $2,227,481 $7,853,037 $ 342,128
---------- ---------- ---------
at market value $2,193,489 $7,569,862 $ 345,324
Dividends receivable - - -
Accounts receivable from American Enterprise Life
for contract purchase payments 71,716 8,978 6,489
Receivable from mutual funds and portfolios
for share redemptions - - -
---- ----- -----
Total assets 2,265,205 7,578,840 351,813
========= ========= =======
Liabilities
Payable to American Enterprise Life for:
Mortality and expense risk fee 2,159 7,997 285
Contract terminations - - -
Issue and administrative fee 259 960 34
Payable to mutual funds and portfolios
for investments purchased 71,716 8,978 6,489
------ ----- -----
Total liabilities 74,134 17,935 6,808
------ ------ -----
Net assets applicable to contracts in
accumulation period 2,191,071 7,560,905 345,005
Net assets applicable to contracts in
payment period - - -
----- ----- -----
Total net assets $2,191,071 $7,560,905 $ 345,005
========== ========== =========
Accumulation units outstanding 2,184,723 5,962,803 344,284
========= ========= =======
Net asset value per accumulation unit $ 1.00 $ 1.27 $ 1.00
====== ====== ======
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
Statements of Net Assets (continued) Dec. 31, 1998
Segregated Asset Subaccounts
Assets EGI EPG EHY EPH
Investments in shares of mutual funds and portfolios:
<S> <C> <C> <C> <C>
at cost $17,247,341 $269,558 $5,578,406 $ 129,521
----------- -------- ---------- ---------
at market value $19,601,597 $282,397 $5,105,979 $ 131,146
Dividends receivable - - - -
Accounts receivable from American Enterprise Life
for contract purchase payments 37,894 2,714 470 3,082
Receivable from mutual funds and portfolios
for share redemptions - - - -
------ ----- ----- -----
Total assets 19,639,491 285,111 5,106,449 134,228
========== ======= ========= =======
Liabilities
Payable to American Enterprise Life for:
Mortality and expense risk fee 20,667 237 5,400 106
Contract terminations - - - -
Issue and administrative fee 2,480 29 648 13
Payable to mutual funds and portfolios
for investments purchased 37,894 2,714 470 3,082
------ ----- --- -----
Total liabilities 61,041 2,980 6,518 3,201
------ ----- ----- -----
Net assets applicable to contracts in
accumulation period 19,576,445 282,131 5,096,187 131,027
Net assets applicable to contracts in
payment period 2,005 - 3,744 -
----- ----- ----- -----
Total net assets $19,578,450 $282,131 $5,099,931 $ 131,027
=========== ======== ========== =========
Accumulation units outstanding 9,160,761 238,893 3,845,657 129,821
========= ======= ========= =======
Net asset value per accumulation unit $ 2.14 $ 1.18 $ 1.33 $ 1.01
====== ====== ====== ======
Combined
Variable
Assets ENO EPV Account
Investments in shares of mutual funds and portfolios:
at cost $ 9,465,991 $151,480 $ 112,129,630
----------- -------- -------------
at market value $13,078,393 $170,792 $ 121,141,871
Dividends receivable - - 56,416
Accounts receivable from American Enterprise Life
for contract purchase payments - 2,108 229,294
Receivable from mutual funds and portfolios
for share redemptions 34,225 - 93,826
------ ----- ------
Total Assets 13,112,618 172,900 121,521,407
========== ======= ===========
Liabilities
Payable to American Enterprise Life for:
Mortality and expense risk fee 13,815 142 126,605
Contract terminations 34,225 - 91,876
Issue and administrative fee 1,658 17 15,196
Payable to mutual funds and portfolios
for investments purchased - 2,108 237,273
----- ----- -------
Total liabilities 49,698 2,267 470,950
------ ----- -------
Net assets applicable to contracts in
accumulation period 13,062,176 170,633 121,005,122
Net assets applicable to contracts in
payment period 744 - 45,335
--- ----- ------
Total net assets $13,062,920 $170,633
=========== ========
Accumulation units outstanding 5,798,150 124,563
========= =======
Net asset value per accumulation unit $ 2.25 $ 1.37
====== ======
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 EGN EIN EVA
<S> <C> <C> <C>
Dividend income from mutual funds and portfolios $ 42,518 $ 7,628 $104,609
Expenses:
Mortality and expense risk fee 17,723 6,286 12,205
Administrative charge 2,127 754 1,464
----- --- -----
Total expenses 19,850 7,040 13,669
------ ----- ------
Investment income (loss) - net 22,668 588 90,940
------ --- ------
Realized and unrealized gain (loss)
on investments - net
Realized gain (loss) on sales of investments
in mutual funds and portfolios:
Proceeds from sales 33,010 13,508 16,585
Cost of investments sold 34,886 14,104 16,107
------ ------ ------
Net realized gain (loss) on investments (1,876) (596) 478
Net change in unrealized appreciation or
depreciation of investments 407,899 23,090 262,764
------- ------ -------
Net gain (loss) on investments 406,023 22,494 263,242
------- ------ -------
Net increase (decrease) in net assets
resulting from operations $428,691 $ 23,082 $354,182
======== ======== ========
Investment income EIG* EVL* ELA
Dividend income from mutual funds and portfolios $ 661 $ - $ 29,722
Expenses:
Mortality and expense risk fee 220 241 13,242
Administrative charge 27 29 1,589
-- -- -----
Total expenses 247 270 14,831
--- --- ------
Investment income (loss) - net 414 (270) 14,891
--- ---- ------
Realized and unrealized gain (loss)
on investments - net
Realized gain (loss) on sales of investments
in mutual funds and portfolios:
Proceeds from sales - - 152,264
Cost of investments sold - - 184,817
--- --- -------
Net realized gain (loss) on investments - - (32,553)
Net change in unrealized appreciation or
depreciation of investments 11,271 2,047 (577,580)
Net gain (loss) on investments 11,271 2,047 (610,133)
------ ----- --------
Net increase (decrease) in net assets
resulting from operations $ 11,685 $ 1,777 $ (595,242)
======== ======= ==========
*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 Operations (continued) Year ended Dec. 31, 1998
Segregated Asset Subaccounts
Investment income EPA EAG ECR
<S> <C> <C> <C>
Dividend income from mutual funds and portfolios $ 23,519 $ 354,606 $ 704,897
Expenses:
Mortality and expense risk fee 10,474 56,221 95,285
Administrative charge 1,257 6,747 11,434
----- ----- ------
Total expenses 11,731 62,968 106,719
------ ------ -------
Investment income (loss) - net 11,788 291,638 598,178
------ ------- -------
Realized and unrealized gain (loss)
on investments - net
Realized gain (loss) on sales of investments
in mutual funds and portfolios:
Proceeds from sales 110,831 226,233 297,921
Cost of investments sold 176,676 217,209 266,065
------- ------- -------
Net realized gain (loss) on investments (65,845) 9,024 31,856
Net change in unrealized appreciation or
depreciation of investments (73,104) (224,339) 957,259
------- -------- -------
Net gain (loss) on investments (138,949) (215,315) 989,115
-------- -------- -------
Net increase (decrease) in net assets
resulting from operations $ (127,161) $ 76,323 $1,587,293
========== ======== ==========
Investment income EGD EIE EMG
Dividend income from mutual funds and portfolios $ 4,537 $ 36,948 $886,695
Expenses:
Mortality and expense risk fee 8,135 32,485 82,016
Administrative charge 976 3,898 9,842
--- ----- -----
Total expenses 9,111 36,383 91,858
----- ------ ------
Investment income (loss) - net (4,574) 565 794,837
------ --- -------
Realized and unrealized gain (loss)
on investments - net
Realized gain (loss) on sales of investments
in mutual funds and portfolios:
Proceeds from sales 20,854 83,965 135,373
Cost of investments sold 20,096 81,732 129,027
------ ------ -------
Net realized gain (loss) on investments 758 2,233 6,346
Net change in unrealized appreciation or
depreciation of investments 190,924 259,084 55,365
------- ------- ------
Net gain (loss) on investments 191,682 261,317 61,711
------- ------- ------
Net increase (decrease) in net assets
resulting from operations $ 187,108 $ 261,882 $856,548
========= ========= ========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
Statements of Operations (continued) Year ended Dec. 31, 1998
Segregated Asset Subaccounts
Investment Income EMS ESI ESB
<S> <C> <C> <C>
Dividend income from mutual funds and portfolios $ 30,212 $ 415,320 $ 84,155
Expenses:
Mortality and expense risk fee 7,605 68,547 18,396
Administrative charge 912 8,226 2,207
--- ----- -----
Total expenses 8,517 76,773 20,603
----- ------ ------
Investment income (loss) - net 21,695 338,547 63,552
------ ------- ------
Realized and unrealized gain (loss)
on investments - net
Realized gain (loss) on sales of investments
in mutual funds and portfolios:
Proceeds from sales 967,780 86,664 43,264
Cost of investments sold 967,779 89,531 41,803
Net realized gain (loss) on investments 1 (2,867) 1,461
Net change in unrealized appreciation or
depreciation of investments 3 (378,318) 484,609
- -------- -------
Net gain (loss) on investments 4 (381,185) 486,070
- -------- -------
Net increase (decrease) in net assets
resulting from operations $ 21,699 $ (42,638) $549,622
======== ========= ========
Investment Income EWG EEQ EMD
Dividend income from mutual funds and portfolios $ 48,794 $ 8,308 $ 321,436
Expenses:
Mortality and expense risk fee 13,834 7,920 126,642
Administrative charge 1,660 950 15,197
----- --- ------
Total expenses 15,494 8,870 141,839
------ ----- -------
Investment income (loss) - net 33,300 (562) 179,597
------ ---- -------
Realized and unrealized gain (loss)
on investments - net
Realized gain (loss) on sales of investments
in mutual funds and portfolios:
Proceeds from sales 45,043 20,230 434,268
Cost of investments sold 32,458 21,528 382,221
------ ------ -------
Net realized gain (loss) on investments 12,585 (1,298) 52,047
Net change in unrealized appreciation or
depreciation of investments 115,011 26,311 162,352
------- ------ -------
Net gain (loss) on investments 127,596 25,013 214,399
------- ------ -------
Net increase (decrease) in net assets
resulting from operations $160,896 $ 24,451 $ 393,996
======== ======== =========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
Statements of Operations (continued) Year ended Dec. 31, 1998
Segregated Asset Subaccounts
Investment Income ESC EUS EGR
<S> <C> <C> <C>
Dividend income from mutual funds and portfolios $ 7,123 $236,931 $ 22,257
Expenses:
Mortality and expense risk fee 8,041 43,871 12,944
Administrative charge 965 5,265 1,553
--- ----- -----
Total expenses 9,006 49,136 14,497
----- ------ ------
Investment income (loss) - net (1,883) 187,795 7,760
------ ------- -----
Realized and unrealized gain (loss)
on investments - net
Realized gain (loss) on sales of investments
in mutual funds and portfolios:
Proceeds from sales 12,668 155,961 35,950
Cost of investments sold 13,669 152,365 41,795
------ ------- ------
Net realized gain (loss) on investments (1,001) 3,596 (5,845)
Net change in unrealized appreciation or
depreciation of investments (85,769) 35,291 250,221
------- ------ -------
Net gain (loss) on investments (86,770) 38,887 244,376
------- ------ -------
Net increase (decrease) in net assets
resulting from operations $ (88,653) $226,682 $252,136
========= ======== ========
Investment Income EHI EDI EPD*
Dividend income from mutual funds and portfolios $ 10,518 $ 295,632 $ -
Expenses:
Mortality and expense risk fee 11,925 76,237 420
Administrative charge 1,431 9,149 50
----- ----- --
Total expenses 13,356 85,386 470
------ ------ ---
Investment income (loss) - net (2,838) 210,246 (470)
------ ------- ----
Realized and unrealized gain (loss)
on investments - net
Realized gain (loss) on sales of investments
in mutual funds and portfolios:
Proceeds from sales 44,461 251,010 2,006
Cost of investments sold 46,912 264,273 1,987
------ ------- -----
Net realized gain (loss) on investments (2,451) (13,263) 19
Net change in unrealized appreciation or
depreciation of investments (33,388) (445,119) 3,196
------- -------- -----
Net gain (loss) on investments (35,839) (458,382) 3,215
------- -------- -----
Net increase (decrease) in net assets
resulting from operations $ (38,677) $(248,136) $ 2,745
========= ========= =======
*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 Operations (continued) Year ended Dec. 31, 1998
Segregated Asset Subaccounts
Investment Income EGI EPG* EHY EPH*
<S> <C> <C> <C> <C>
Dividend income from mutual funds and portfolios $1,807,943 $ - $ 355,346 $ -
Expenses:
Mortality and expense risk fee 199,077 367 56,225 159
Administrative charge 23,889 44 6,747 19
------ -- ----- --
Total expenses 222,966 411 62,972 178
------- --- ------ ---
Investment income (loss) - net 1,584,977 (411) 292,374 (178)
--------- ---- ------- ----
Realized and unrealized gain (loss)
on investments - net
Realized gain (loss) on sales of investments
in mutual funds and portfolios :
Proceeds from sales 612,478 - 274,195 7,010
Cost of investments sold 561,083 - 286,387 6,826
------- ------ ------- -----
Net realized gain (loss) on investments 51,395 - (12,192) 184
Net change in unrealized appreciation or
depreciation of investments 430,830 12,839 (714,913) 1,625
------- ------ -------- -----
Net gain (loss) on investments 482,225 12,839 (727,105) 1,809
------- ------ -------- -----
Net increase (decrease) in net assets
resulting from operations $2,067,202 $12,428 $(434,731) $ 1,631
========== ======= ========= =======
Combined
Variable
Investment Income ENO EPV* Account
Dividend income from mutual funds and portfolios $ 134,478 $ - $ 5,974,793
Expenses:
Mortality and expense risk fee 130,471 210 1,117,424
Administrative charge 15,656 25 134,089
------ -- -------
Total expenses 146,127 235 1,251,513
------- --- ---------
Investment income (loss) - net (11,649) (235) 4,723,280
------- ---- ---------
Realized and unrealized gain (loss)
on investments - net
Realized gain (loss) on sales of investments
in mutual funds and portfolios :
Proceeds from sales 599,790 - 4,683,322
Cost of investments sold 486,575 - 4,537,911
------- ---- ---------
Net realized gain (loss) on investments 113,215 - 145,411
Net change in unrealized appreciation or
depreciation of investments 2,107,898 19,312 3,286,671
--------- ------ ---------
Net gain (loss) on investments 2,221,113 19,312 3,432,082
--------- ------ ---------
Net increase (decrease) in net assets
resulting from operations $ 2,209,464 $19,077 $ 8,155,362
=========== ======= ===========
*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 EGN EIN EVA
<S> <C> <C> <C>
Investment income (loss) - net $ 22,668 $ 588 $ 90,940
Net realized gain (loss) on investments (1,876) (596) 478
Net change in unrealized appreciation or
depreciation of investments 407,899 23,090 262,764
------- ------ -------
Net increase (decrease) in net assets
resulting from operations 428,691 23,082 354,182
======= ====== =======
Contract transactions
Contract purchase payments 2,294,919 871,262 1,616,894
Net transfers** 507,185 73,375 381,890
Annuity payments - - -
Contract terminations:
Surrender benefits and contract charges (50,440) (20,202) (25,796)
Death benefits (8,537) (1,868) (5,952)
------ ------ ------
Increase (decrease) from contract transactions 2,743,127 922,567 1,967,036
--------- ------- ---------
Net assets at beginning of year 71,290 58,546 67,757
------ ------ ------
Net assets at end of year $3,243,108 $1,004,195 $2,388,975
========== ========== ==========
Accumulation unit activity
Units outstanding at beginning of year 69,062 57,468 65,875
Contracts purchase payments 2,053,004 768,632 1,418,576
Net transfers** 446,157 65,124 327,920
Contract terminations:
Surrender benefits and contract charges (65,823) (24,010) (28,544)
Death benefits (7,218) (1,658) (4,926)
------ ------ ------
Units outstanding at end of year 2,495,182 865,556 1,778,901
========= ======= =========
Operations EIG* EVL* ELA
Investment income (loss) - net $ 414 $ (270) 14,891
Net realized gain (loss) on investments - - (32,553)
Net change in unrealized appreciation or
depreciation of investments 11,271 2,047 (577,580)
------ ----- --------
Net increase (decrease) in net assets
resulting from operations 11,685 1,777 (595,242)
====== ===== ========
Contract transactions
Contract purchase payments 145,432 168,873 41,586
Net transfers** 13,994 5,985 160,481
Annuity payments - - -
Contract terminations:
Surrender benefits and contract charges (20) (20) (90,507)
Death benefits - - (3,746)
----- ----- ------
Increase (decrease) from contract transactions 159,406 174,838 107,814
------- ------- -------
Net assets at beginning of year - - 1,347,419
------- ------- ---------
Net assets at end of year $ 171,091 $ 176,615 $ 859,991
========= ========= =========
Accumulation unit activity
Units outstanding at beginning of year - - 1,004,189
Contracts purchase payments 125,200 151,797 37,021
Net transfers** 11,668 5,387 166,167
Contract terminations:
Surrender benefits and contract charges (100) (106) (89,384)
Death benefits - - (2,950)
----- ----- ------
Units outstanding at end of year 136,768 157,078 1,115,043
*For the period Oct. 5, 1998 (commencement of operations) to Dec. 31, 1998.
**Includes transfer activity from (to) other subaccounts and transfers from (to)
American Enterprise Life's fixed account.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
Statements of Changes in Net Assets (continued) Year ended Dec. 31, 1998
Segregated Asset Subaccounts
Operations EPA EAG ECR
<S> <C> <C> <C>
Investment income (loss) - net $ 11,788 $ 291,638 $ 598,178
Net realized gain (loss) on investments (65,845) 9,024 31,856
Net change in unrealized appreciation or
depreciation of investments (73,104) (224,339) 957,259
------- -------- -------
Net increase (decrease) in net assets
resulting from operations (127,161) 76,323 1,587,293
-------- ------ ---------
Contract transactions
Contract purchase payments 39,493 1,944,651 3,114,006
Net transfers* 367,634 11,902 (245,243)
Annuity payments - (343) (385)
Contract terminations:
Surrender benefits and contract charges (88,956) (292,481) (529,563)
Death benefits (2,828) (13,088) (21,950)
------ ------- -------
Increase (decrease) from contract transactions 315,343 1,650,641 2,316,865
------- --------- ---------
Net assets at beginning of year 782,584 3,969,869 5,940,965
------- --------- ---------
Net assets at end of year $970,766 $5,696,833 $9,845,123
======== ========== ==========
Accumulation unit activity
Units outstanding at beginning of year 979,513 2,434,211 3,812,754
Contracts purchase payments 56,556 1,189,822 1,848,700
Net transfers* 543,274 27,517 (146,994)
Contract terminations:
Surrender benefits and contract charges (133,733) (191,090) (338,414)
Death benefits (3,816) (7,562) (12,861)
------ ------ -------
Units outstanding at end of year 1,441,794 3,452,898 5,163,185
========= ========= =========
Operations EGD EIE EMG
Investment income (loss) - net $ (4,574) $ 565 $794,837
Net realized gain (loss) on investments 758 2,233 6,346
Net change in unrealized appreciation or
depreciation of investments 190,924 259,084 55,365
------- ------- ------
Net increase (decrease) in net assets
resulting from operations 187,108 261,882 856,548
======= ======= =======
Contract transactions
Contract purchase payments 1,111,110 930,453 3,376,704
Net transfers* 126,930 321,751 (21,220)
Annuity payments - (337) (118)
Contract terminations:
Surrender benefits and contract charges (25,802) (132,893) (335,067)
Death benefits (5,911) (6,075) (25,390)
------ ------ -------
Increase (decrease) from contract transactions 1,206,327 1,112,899 2,994,909
--------- --------- ---------
Net assets at beginning of year 72,048 1,806,397 4,712,728
------ --------- ---------
Net assets at end of year $ 1,465,483 $ 3,181,178 $8,564,185
=========== =========== ==========
Accumulation unit activity
Units outstanding at beginning of year 68,572 1,413,420 2,944,208
Contracts purchase payments 965,321 650,786 2,000,537
Net transfers* 108,613 223,131 (16,062)
Contract terminations:
Surrender benefits and contract charges (29,255) (101,940) (229,369)
Death benefits (4,928) (4,205) (14,848)
------ ------ -------
Units outstanding at end of year 1,108,323 2,181,192 4,684,466
========= ========= =========
*Includes transfer activity from (to) other subaccounts and transfers from (to)
American Enterprise Life's fixed account.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
Statements of Changes in Net Assets (continued) Year ended Dec. 31, 1998
Segregated Asset Subaccounts
Operations EMS ESI ESB
<S> <C> <C> <C>
Investment income (loss) - net $ 21,695 $ 338,547 $ 63,552
Net realized gain (loss) on investments 1 (2,867) 1,461
Net change in unrealized appreciation or
depreciation of investments 3 (378,318) 484,609
- -------- -------
Net increase (decrease) in net assets
resulting from operations 21,699 (42,638) 549,622
====== ======= =======
Contract transactions
Contract purchase payments 691,275 4,304,628 2,339,421
Net transfers* (85,043) 243,040 716,240
Annuity payments - (74) -
Contract terminations:
Surrender benefits and contract charges (28,396) (297,229) (50,428)
Death benefits - (28,304) (3,329)
------ ------- ------
Increase (decrease) from contract transactions 577,836 4,222,061 3,001,904
------- --------- ---------
Net assets at beginning of year 259,265 3,374,186 70,780
------- --------- ------
Net assets at end of year $ 858,800 $ 7,553,609 $3,622,306
========= =========== ==========
Accumulation unit activity
Units outstanding at beginning of year 231,256 2,543,718 69,342
Contracts purchase payments 635,551 3,245,320 2,055,777
Net transfers* (79,775) 183,324 627,096
Contract terminations:
Surrender benefits and contract charges (37,731) (262,248) (69,868)
Death benefits - (21,199) (2,682)
----- ------- ------
Units outstanding at end of year 749,301 5,688,915 2,679,665
======= ========= =========
Operations EWG EEQ EMD
Investment income (loss) - net $ 33,300 $ (562) $ 179,597
Net realized gain (loss) on investments 12,585 (1,298) 52,047
Net change in unrealized appreciation or
depreciation of investments 115,011 26,311 162,352
------- ------ -------
Net increase (decrease) in net assets
resulting from operations 160,896 24,451 393,996
======= ====== =======
Contract transactions
Contract purchase payments 1,373,607 1,090,988 3,841,529
Net transfers* 674,282 100,577 (56,698)
Annuity payments - - (398)
Contract terminations:
Surrender benefits and contract charges (23,615) (25,944) (574,790)
Death benefits (5,400) (2,161) (29,195)
------ ------ -------
Increase (decrease) from contract transactions 2,018,874 1,163,460 3,180,448
--------- --------- ---------
Net assets at beginning of year 63,395 67,197 7,890,348
------ ------ ---------
Net assets at end of year $2,243,165 $1,255,108 $11,464,792
========== ========== ===========
Accumulation unit activity
Units outstanding at beginning of year 61,836 62,532 4,133,891
Contracts purchase payments 1,137,667 948,058 1,900,213
Net transfers* 556,795 86,550 (26,926)
Contract terminations:
Surrender benefits and contract charges (30,825) (36,464) (306,457)
Death benefits (4,466) (1,908) (14,411)
------ ------ -------
Units outstanding at end of year 1,721,007 1,058,768 5,686,310
========= ========= =========
*Includes transfer activity from (to) other subaccounts and transfers from (to)
American Enterprise Life's fixed account.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
Statements of Changes in Net Assets (continued) Year ended Dec. 31, 1998
Segregated Asset Subaccounts
Operations ESC EUS EGR
<S> <C> <C> <C>
Investment income (loss) - net $ (1,883) $187,795 $ 7,760
Net realized gain (loss) on investments (1,001) 3,596 (5,845)
Net change in unrealized appreciation or
depreciation of investments (85,769) 35,291 250,221
------- ------ -------
Net increase (decrease) in net assets
resulting from operations (88,653) 226,682 252,136
======= ======= =======
Contract transactions
Contract purchase payments 1,212,619 1,445,321 1,765,902
Net transfers** 98,518 411,022 262,936
Annuity payments - (712) -
Contract terminations:
Surrender benefits and contract charges (27,460) (221,642) (28,552)
Death benefits (1,781) (30,268) (2,287)
------ ------- ------
Increase (decrease) from contract transactions 1,281,896 1,603,721 1,997,999
--------- --------- ---------
Net assets at beginning of year 87,669 2,633,824 67,787
------ --------- ------
Net assets at end of year $1,280,912 $4,464,227 $2,317,922
========== ========== ==========
Accumulation unit activity
Units outstanding at beginning of year 86,771 2,252,972 66,744
Contracts purchase payments 1,258,910 1,226,423 1,614,977
Net transfers** 108,531 335,204 230,326
Contract terminations:
Surrender benefits and contract charges (38,822) (204,011) (43,427)
Death benefits (2,084) (25,387) (2,017)
------ ------- ------
Units outstanding at end of year 1,413,306 3,585,201 1,866,603
========= ========= =========
Operations EHI EDI EPD*
Investment income (loss) - net $ (2,838) $ 210,246 $ (470)
Net realized gain (loss) on investments (2,451) (13,263) 19
Net change in unrealized appreciation or
depreciation of investments (33,388) (445,119) 3,196
------- -------- -----
Net increase (decrease) in net assets
resulting from operations (38,677) (248,136) 2,745
======= ======== =====
Contract transactions
Contract purchase payments 1,704,341 3,896,228 317,874
Net transfers** 481,070 204,479 24,457
Annuity payments - - -
Contract terminations:
Surrender benefits and contract charges (26,820) (372,930) (71)
Death benefits (6,846) (26,715) -
------ ------- -----
Increase (decrease) from contract transactions 2,151,745 3,701,062 342,260
--------- --------- -------
Net assets at beginning of year 78,003 4,107,979 -
------ --------- -------
Net assets at end of year $2,191,071 $7,560,905 $ 345,005
========== ========== =========
Accumulation unit activity
Units outstanding at beginning of year 76,928 3,150,958 -
Contracts purchase payments 1,670,612 3,003,542 320,558
Net transfers** 488,656 154,556 24,493
Contract terminations:
Surrender benefits and contract charges (44,629) (325,760) (767)
Death benefits (6,844) (20,493) -
------ ------- -----
Units outstanding at end of year 2,184,723 5,962,803 344,284
========= ========= =======
*For the period Oct. 5, 1998 (commencement of operations) to Dec. 31, 1998.
**Includes transfer activity from (to) other subaccounts and transfers from (to)
American Enterprise Life's fixed account.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
Statements of Changes in Net Assets (continued) Year ended Dec. 31, 1998
Segregated Asset Subaccounts
Operations EGI EPG* EHY EPH*
<S> <C> <C> <C> <C>
Investment income (loss) - net $1,584,977 $ (411) $ 292,374 $ (178)
Net realized gain (loss) on investments 51,395 - (12,192) 184
Net change in unrealized appreciation or
depreciation of investments 430,830 12,839 (714,913) 1,625
------- ------ -------- -----
Net increase (decrease) in net assets
resulting from operations 2,067,202 12,428 (434,731) 1,631
========= ====== ======== =====
Contract transactions
Contract purchase payments 6,003,340 217,969 2,388,156 123,989
Net transfers** 336,195 53,032 126,428 5,437
Annuity payments (443) - (329) -
Contract terminations:
Surrender benefits and contract charges (918,096) (1,298) (271,971) (30)
Death benefits (23,141) - (25,120) -
------- ----- ------- -----
Increase (decrease) from contract transactions 5,397,855 269,703 2,217,164 129,396
--------- ------- --------- -------
Net assets at beginning of year 12,113,393 - 3,317,498 -
---------- ------ --------- -----
Net assets at end of year $19,578,450 $282,131 $5,099,931 $ 131,027
=========== ======== ========== =========
Accumulation unit activity
Units outstanding at beginning of year 6,452,046 - 2,321,011 -
Contracts purchase payments 3,037,405 194,565 1,659,150 124,704
Net transfers** 176,523 45,511 98,646 5,393
Contract terminations:
Surrender benefits and contract charges (492,893) (1,183) (215,599) (276)
Death benefits (12,320) - (17,551) -
------- ----- ------- -----
Units outstanding at end of year 9,160,761 238,893 3,845,657 129,821
========= ======= ========= =======
Operations ENO EPV* Account
Investment income (loss) - net $ (11,649) $ (235) $ 4,723,280
Net realized gain (loss) on investments 113,215 - 145,411
Net change in unrealized appreciation or
depreciation of investments 2,107,898 19,312 3,286,671
--------- ------ ---------
Net increase (decrease) in net assets
resulting from operations 2,209,464 19,077 8,155,362
========= ====== =========
Contract transactions
Contract purchase payments 3,248,421 133,430 51,754,421
Net transfers** (206,315) 19,349 5,113,670
Annuity payments (27) - (3,166)
Contract terminations:
Surrender benefits and contract charges (563,223) (1,223) (5,025,465)
Death benefits (24,012) - (303,904)
------- ----- --------
Increase (decrease) from contract transactions 2,454,844 151,556 51,535,556
--------- ------- ----------
Net assets at beginning of year 8,398,612 - 61,359,539
--------- ------ ----------
Net assets at end of year $13,062,920 $170,633 $ 121,050,457
=========== ======== =============
Accumulation unit activity
Units outstanding at beginning of year 4,575,051 -
Contracts purchase payments 1,636,811 110,435
Net transfers** (95,440) 15,147
Contract terminations:
Surrender benefits and contract charges (306,558) (1,019)
Death benefits (11,714) -
------- ------
Units outstanding at end of year 5,798,150 124,563
========= =======
*For the period Oct. 5, 1998 (commencement of operations) to Dec. 31, 1998.
**Includes transfer activity from (to) other subaccounts and transfers from (to)
American Enterprise Life's fixed account.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
Statements of Changes in Net Assets Year ended Dec. 31, 1997
Segregated Asset Subaccount
Operations EGN* EIN* EVA*
<S> <C> <C> <C>
Investment income (loss) - net $ (6) $ 660 $ 1,408
Net realized gain (loss) on investments - - -
Net change in unrealized appreciation or
depreciation of investments 714 (310) (991)
--- ---- ----
Net increase (decrease) in net assets
resulting from operations 708 350 417
=== === ===
Contract transactions
Contract purchase payments 70,582 58,196 66,156
Net transfers** - - 1,184
Annuity payments - - -
Contract terminations:
Surrender benefits and contract charges - - -
Death benefits - - -
----- ----- -----
Increase (decrease) from contract transactions 70,582 58,196 67,340
------ ------ ------
Net assets at beginning of year - - -
------ ------ ------
Net assets at end of year $ 71,290 $ 58,546 $ 67,757
======== ======== ========
Accumulation unit activity
Units outstanding at beginning of year - - -
Contract purchase payments 69,062 57,468 64,716
Net transfers** - - 1,159
Contract terminations:
Surrender benefits and contract charges - - -
Death benefits - - -
----- ----- -----
Units outstanding at end of year 69,062 57,468 65,875
====== ====== ======
Operations ELA EPA EAG
Investment income (loss) - net $ (16,595) $ (2,559) $291,712
Net realized gain (loss) on investments 10,752 8,365 5,719
Net change in unrealized appreciation or
depreciation of investments 102,825 (477,894) 52,964
------- -------- ------
Net increase (decrease) in net assets
resulting from operations 96,982 (472,088) 350,395
====== ======== =======
Contract transactions
Contract purchase payments 524,916 521,520 1,753,076
Net transfers** 20,467 50,856 110,988
Annuity payments - - (140)
Contract terminations:
Surrender benefits and contract charges (81,703) (45,870) (182,947)
Death benefits (1,371) (1,252) (3,235)
------ ------ ------
Increase (decrease) from contract transactions 462,309 525,254 1,677,742
------- ------- ---------
Net assets at beginning of year 788,128 729,418 1,941,732
------- ------- ---------
Net assets at end of year $1,347,419 $782,584 $3,969,869
========== ======== ==========
Accumulation unit activity
Units outstanding at beginning of year 663,497 530,176 1,323,955
Contract purchase payments 387,161 410,360 1,158,663
Net transfers** 16,318 79,558 75,131
Contract terminations:
Surrender benefits and contract charges (61,787) (39,670) (121,302)
Death benefits (1,000) (911) (2,236)
------ ---- ------
Units outstanding at end of year 1,004,189 979,513 2,434,211
========= ======= =========
*For the period Oct. 30, 1997 (commencement of operations) to Dec. 31, 1997.
**Includes transfer activity from (to) other subaccounts and transfers (from) to
American Enterprise Life for conversion from (to) fixed account.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
Statements of Changes in Net Assets (continued) Year ended Dec. 31, 1997
Segregated Asset Subaccount
Operations ECR EGD* EIE
<S> <C> <C> <C>
Investment income (loss) - net $ 89,908 $ (27) $ 34,998
Net realized gain (loss) on investments 8,855 - 1,875
Net change in unrealized appreciation or
depreciation of investments 780,121 1,378 (56,555)
------- ----- -------
Net increase (decrease) in net assets
resulting from operations 878,884 1,351 (19,682)
======= ===== =======
Contract transactions
Contract purchase payments 2,409,335 70,697 978,359
Net transfers* * (33,041) - 62,561
Annuity payments (138) - (133)
Contract terminations:
Surrender benefits and contract charges (297,350) - (63,562)
Death benefits (5,701) - (1,267)
------ ------ ------
Increase (decrease) from contract transactions 2,073,105 70,697 975,958
--------- ------ -------
Net assets at beginning of year 2,988,976 - 850,121
--------- ------ -------
Net assets at end of year $5,940,965 $ 72,048 $1,806,397
========== ======== ==========
Accumulation unit activity
Units outstanding at beginning of year 2,350,045 - 675,237
Contract purchase payments 1,696,748 68,572 746,548
Net transfers** (18,567) - 44,803
Contract terminations:
Surrender benefits and contract charges (211,339) - (52,181)
Death benefits (4,133) - (987)
------ ----- ----
Units outstanding at end of year 3,812,754 68,572 1,413,420
========= ====== =========
Operations EMG EMS ESI
Investment income (loss) - net $375,811 $ 10,527 $ 206,530
Net realized gain (loss) on investments 9,422 - 956
Net change in unrealized appreciation or
depreciation of investments 110,879 (2) (31,454)
------- -- -------
Net increase (decrease) in net assets
resulting from operations 496,112 10,525 176,032
======= ====== =======
Contract transactions
Contract purchase payments 2,390,284 327,812 1,670,135
Net transfers* * (72,853) (234,808) (29,630)
Annuity payments - - -
Contract terminations:
Surrender benefits and contract charges (192,773) (100,987) (139,046)
Death benefits (7,254) - (6,105)
------ ----- ------
Increase (decrease) from contract transactions 2,117,404 (7,983) 1,495,354
--------- ------ ---------
Net assets at beginning of year 2,099,212 256,723 1,702,800
--------- ------- ---------
Net assets at end of year $4,712,728 $ 259,265 $ 3,374,186
========== ========= ===========
Accumulation unit activity
Units outstanding at beginning of year 1,545,535 240,823 1,377,190
Contract purchase payments 1,581,579 302,938 1,304,174
Net transfers** (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 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 for conversion from (to) fixed account.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
Statements of Changes in Net Assets (continued) Year ended Dec. 31, 1997
Segregated Asset Subaccount
Operations ESB* EWG* EEQ*
<S> <C> <C> <C>
Investment income (loss) - net $ 531 $ 78 $ (61)
Net realized gain (loss) on investments - - -
Net change in unrealized appreciation or
depreciation of investments 415 890 1,774
--- --- -----
Net increase (decrease) in net assets
resulting from operations 946 968 1,713
=== === =====
Contract transactions
Contract purchase payments 69,834 59,091 65,484
Net transfers** - 3,336 -
Annuity payments - - -
Contract terminations:
Surrender benefits and contract charges - - -
Death benefits - - -
----- ----- -----
Increase (decrease) from contract transactions 69,834 62,427 65,484
------ ------ ------
Net assets at beginning of year - - -
------ ------ ------
Net assets at end of year $ 70,780 $ 63,395 $ 67,197
======== ======== ========
Accumulation unit activity
Units outstanding at beginning of year - - -
Contract purchase payments 69,342 58,509 62,532
Net transfers** - 3,327 -
Contract terminations:
Surrender benefits and contract charges - - -
Death benefits - - -
----- ----- -----
Units outstanding at end of year 69,342 61,836 62,532
====== ====== ======
Operations EMD ESC* EUS
Investment income (loss) - net $ 109,574 $ (80) $ 84,396
Net realized gain (loss) on investments 177,525 - (713)
Net change in unrealized appreciation or
depreciation of investments 813,585 1,403 34,690
------- ----- ------
Net increase (decrease) in net assets
resulting from operations 1,100,684 1,323 118,373
========= ===== =======
Contract transactions
Contract purchase payments 3,105,291 86,346 1,258,037
Net transfers** 106,370 - 45,942
Annuity payments (139) - (280)
Contract terminations:
Surrender benefits and contract charges (309,146) - (161,220)
Death benefits (7,479) - (9,210)
------ ----- ------
Increase (decrease) from contract transactions 2,894,897 86,346 1,133,269
--------- ------ ---------
Net assets at beginning of year 3,894,767 - 1,382,182
--------- ------ ---------
Net assets at end of year $7,890,348 $ 87,669 $2,633,824
========== ======== ==========
Accumulation unit activity
Units outstanding at beginning of year 2,462,112 - 1,252,181
Contract purchase payments 1,773,647 86,771 1,120,325
Net transfers** 58,720 - 39,842
Contract terminations:
Surrender benefits and contract charges (156,347) - (151,142)
Death benefits (4,241) - (8,234)
------ ----- ------
Units outstanding at end of year 4,133,891 86,771 2,252,972
========= ====== =========
*For the period Oct. 30, 1997 (commencement of operations) to Dec. 31, 1997.
**Includes transfer activity from (to) other subaccounts and transfers (from) to
American Enterprise Life for conversion from (to) fixed account.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
Statements of Changes in Net Assets (continued) Year ended Dec. 31, 1997
Segregated Asset Subaccount
Operations EGR* EHI* EDI EGI
<S> <C> <C> <C> <C>
Investment income (loss) - net $ (61) $ 1,031 $ 129,300 $ 369,097
Net realized gain (loss) on investments - - 1,155 18,759
Net change in unrealized appreciation or
depreciation of investments 522 (604) 63,866 1,259,777
--- ---- ------ ---------
Net increase (decrease) in net assets
resulting from operations 461 427 194,321 1,647,633
=== === ======= =========
Contract transactions
Contract purchase payments 67,326 77,576 1,907,829 5,025,579
Net transfers** - - (41,214) 294,386
Annuity payments - - - (139)
Contract terminations:
Surrender benefits and contract charges - - (193,089) (449,047)
Death benefits - - (6,062) (5,970)
----- ----- ------ ------
Increase (decrease) from contract transactions 67,326 77,576 1,667,464 4,864,809
------ ------ --------- ---------
Net assets at beginning of year - - 2,246,194 5,600,951
----- ----- --------- ---------
Net assets at end of year $ 67,787 $ 78,003 $4,107,979 $ 12,113,393
======== ======== ========== ============
Accumulation unit activity
Units outstanding at beginning of year - - 1,824,245 3,655,312
Contract purchase payments 66,744 76,928 1,520,166 2,886,258
Net transfers** - - (34,583) 174,142
Contract terminations:
Surrender benefits and contract charges - - (154,007) (260,212)
Death benefits - - (4,863) (3,454)
----- ----- ------ ------
Units outstanding at end of year 66,744 76,928 3,150,958 6,452,046
====== ====== ========= =========
Combined
Variable
Operations EHY ENO Account
Investment income (loss) - net $146,576 $ (88,022) $1,744,726
Net realized gain (loss) on investments 6,778 12,390 261,838
Net change in unrealized appreciation or
depreciation of investments 153,236 1,339,756 4,150,985
------- --------- ---------
Net increase (decrease) in net assets
resulting from operations 306,590 1,264,124 6,157,549
======= ========= =========
Contract transactions
Contract purchase payments 1,607,690 2,860,597 27,031,748
Net transfers** (64,211) 55,283 275,616
Annuity payments (141) - (1,110)
Contract terminations:
Surrender benefits and contract charges (133,971) (277,368) (2,628,079)
Death benefits (6,245) (3,272) (64,423)
------ ------ -------
Increase (decrease) from contract transactions 1,403,122 2,635,240 24,613,752
--------- --------- ----------
Net assets at beginning of year 1,607,786 4,499,248 30,588,238
--------- --------- ----------
Net assets at end of year $3,317,498 $8,398,612 $61,359,539
========== ========== ===========
Accumulation unit activity
Units outstanding at beginning of year 1,270,037 2,979,587
Contract purchase payments 1,201,158 1,731,364
Net transfers** (42,259) 30,592
Contract terminations:
Surrender benefits and contract charges (103,191) (164,430)
Death benefits (4,734) (2,062)
------ ------
Units outstanding at end of year 2,321,011 4,575,051
========= =========
*For the period Oct. 30, 1997 (commencement of operations) to Dec. 31, 1997.
**Includes transfer activity from (to) other subaccounts and transfers (from) to
American Enterprise Life for conversion from (to) fixed account.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
American Enterprise Variable Annuity Account
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
(non-diversified for GT Global Variable Latin America Fund), open-end management
investment companies and have the following investment managers.
Subaccount Invests exclusively in shares of Investment Manager
<S> <C> <C>
EGN AIM V.I. Growth and Income Fund A I M Advisors, Inc.
EIN AIM V.I. International Equity Fund A I M Advisors, Inc.
EVA AIM V.I. Value Fund A I M Advisors, Inc.
EIG American Century VP Income and Growth Fund American Century Investment Management, Inc.
EVL American Century VP Value Fund American Century Investment Management, Inc.
ELA GT Global Variable Latin America Fund A I M Advisors, Inc.
EPA GT Global Variable New Pacific Fund A I M Advisors, Inc.
EAG IDS Life Aggressive Growth Fund IDS Life Insurance Company 1
ECR IDS Life Capital Resource Fund IDS Life Insurance Company 1
EGD IDS Life Growth Dimensions Fund IDS Life Insurance Company 1
EIE IDS Life International Equity Fund IDS Life Insurance Company 2
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
ESB Janus Aspen Series Balanced Portfolio Janus Capital Corporation
EWG Janus Aspen Series Worldwide Growth Portfolio Janus Capital Corporation
EEQ OCC Accumulation Trust Equity Portfolio OpCap Advisors
EMD OCC Accumulation Trust Managed Portfolio OpCap Advisors
ESC OCC Accumulation Trust Small Cap Portfolio OpCap Advisors
EUS OCC Accumulation Trust U.S. Government Income Portfolio OpCap Advisors
EGR Oppenheimer Capital Appreciation Fund/VA OppenheimerFunds, Inc.
EHI Oppenheimer High Income Fund/VA OppenheimerFunds, Inc.
EDI Putnam VT Diversified Income Fund - Class IA Shares Putnam Investment Management, Inc.
EPD Putnam VT Diversified Income Fund - Class IB Shares Putnam Investment Management, Inc.
EGI Putnam VT Growth and Income Fund - Class IA Shares Putnam Investment Management, Inc.
EPG Putnam VT Growth and Income Fund - Class IB Shares Putnam Investment Management, Inc.
EHY Putnam VT High Yield Fund - Class IA Shares Putnam Investment Management, Inc.
EPH Putnam VT High Yield Fund - Class IB Shares Putnam Investment Management, Inc.
ENO Putnam VT New Opportunities Fund - Class IA Shares Putnam Investment Management, Inc.
EPV Putnam VT Voyager Fund - Class IB Shares Putnam Investment Management, Inc.
1 American Express Financial Corporation (AEFC) is the investment advisor.
2 AEFC is the investment advisor and American Express Asset Management
International Inc. is the sub-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>
EGN AIM V.I. Growth and Income Fund 136,708 $23.75
EIN AIM V.I. International Equity Fund 51,240 19.62
EVA AIM V.I. Value Fund 91,112 26.25
EIG American Century VP Income and Growth Fund 25,259 6.78
EVL American Century VP Value Fund 26,269 6.73
ELA GT Global Variable Latin America Fund 89,602 9.61
EPA GT Global Variable New Pacific Fund 111,460 8.72
EAG IDS Life Aggressive Growth Fund 371,528 15.33
ECR IDS Life Capital Resource Fund 301,499 32.65
EGD IDS Life Growth Dimensions Fund 83,670 17.52
EIE IDS Life International Equity Fund 204,284 15.58
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
ESB Janus Aspen Series Balanced Portfolio 161,173 22.50
EWG Janus Aspen Series Worldwide Growth Portfolio 77,201 29.09
EEQ OCC Accumulation Trust Equity Portfolio 32,469 38.70
EMD OCC Accumulation Trust Managed Portfolio 262,422 43.74
ESC OCC Accumulation Trust Small Cap Portfolio 55,514 23.10
EUS OCC Accumulation Trust U.S. Government Income Portfolio 418,550 10.66
EGR Oppenheimer Capital Appreciation Fund/VA 63,283 36.67
EHI Oppenheimer High Income Fund/VA 199,046 11.02
EDI Putnam VT Diversified Income Fund - Class IA Shares 721,626 10.49
EPD Putnam VT Diversified Income Fund - Class IB Shares 32,982 10.47
EGI Putnam VT Growth and Income Fund - Class IA Shares 681,321 28.77
EPG Putnam VT Growth and Income Fund - Class IB Shares 9,822 28.75
EHY Putnam VT High Yield Fund - Class IA Shares 436,408 11.70
EPH Putnam VT High Yield Fund - Class IB Shares 11,207 11.70
ENO Putnam VT New Opportunities Fund - Class IA Shares 501,857 26.06
EPV Putnam VT Voyager Fund - Class IB Shares 3,728 45.81
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>
EGN AIM V.I. Growth and Income Fund $ 2,802,460 $ 70,635
EIN AIM V.I. International Equity Fund 937,757 58,904
EVA AIM V.I. Value Fund 2,077,208 68,804
EIG1 American Century VP Income and Growth Fund 159,983 --
EVL1 American Century VP Value Fund 174,742 --
ELA GT Global Variable Latin America Fund 274,360 518,777
EPA GT Global Variable New Pacific Fund 438,148 639,715
EAG IDS Life Aggressive Growth Fund 2,163,591 2,056,784
ECR IDS Life Capital Resource Fund 3,205,569 2,325,297
EGD IDS Life Growth Dimensions Fund 1,222,554 70,723
EIE IDS Life International Equity Fund 1,196,195 1,107,778
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
ESB Janus Aspen Series Balanced Portfolio 3,112,745 70,424
EWG Janus Aspen Series Worldwide Growth Portfolio 2,099,769 62,556
EEQ OCC Accumulation Trust Equity Portfolio 1,184,532 65,479
EMD OCC Accumulation Trust Managed Portfolio 3,798,024 3,914,139
ESC OCC Accumulation Trust Small Cap Portfolio 1,294,082 86,338
EUS OCC Accumulation Trust U.S. Government Income Portfolio 1,941,731 1,355,577
EGR Oppenheimer Capital Appreciation Fund/VA 2,044,331 67,321
EHI Oppenheimer High Income Fund/VA 2,195,720 78,673
EDI Putnam VT Diversified Income Fund - Class IA Shares 4,166,205 2,042,776
EPD1 Putnam VT Diversified Income Fund - Class IB Shares 344,115 --
EGI Putnam VT Growth and Income Fund - Class IA Shares 7,603,531 5,363,337
EPG1 Putnam VT Growth and Income Fund - Class IB Shares 269,558 --
EHY Putnam VT High Yield Fund - Class IA Shares 2,785,671 1,935,558
EPH1 Putnam VT High Yield Fund - Class IB Shares 136,347 --
ENO Putnam VT New Opportunities Fund - Class IA Shares 3,048,046 2,723,514
EPV1 Putnam VT Voyager Fund - Class IB Shares 151,480 --
Combined Variable Account $60,962,362 $29,625,763
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 Account. American Enterprise Life and the Account have no computer
systems of their own but are dependent upon the systems of AEFC and certain
other third parties.
A comprehensive review of AEFC's computer systems and business processes has
been conducted to identify the major systems that could be affected by the Year
2000 issue. Steps are being taken to resolve any potential problems including
modification to existing software and the purchase of new software. These
measures are scheduled to be completed and tested on a timely basis. AEFC's
target date for substantially completing corrective measures on business
critical systems was Dec. 31, 1998. Substantial testing of these systems was
targeted for completion early in 1999. AEFC is currently on track with this
schedule and is also on track to finish the work on non-critical systems by June
30, 1999. 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 Account's operations continues to be evaluated. The potential
materiality of any such impact is not known at this time.
AEFC's Year 2000 project includes establishing Year 2000 contingency plans for
all key business units. Business continuation plans, which address business
continuation in the event of a system disruption, are in place for all key
business units. These plans are being amended to include specific Year 2000
considerations and will continue to be refined throughout 1999 as additional
information related to potential Year 2000 exposure is gathered.
</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
February 4, 1999
Minneapolis, Minnesota
<PAGE>
<TABLE>
<CAPTION>
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
BALANCE SHEETS
December 31,
($ thousands, except share amounts)
ASSETS 1998 1997
- ------ - ----------- - -------
Investments:
Fixed maturities:
Held to maturity, at amortized cost (fair value:
<S> <C> <C>
1998, $1,126,732 ; 1997, $1,223,108) $1,081,193 $1,186,682
Available for sale, at fair value (amortized cost:
1998, $2,526,712; 1997, $2,609,621) 2,594,858 2,685,799
----------- -----------
3,676,051 3,872,481
Mortgage loans on real estate 815,806 738,052
Other investments 12,103 16,024
------------- -------------
Total investments 4,503,960 4,626,557
Accounts receivable 214 563
Accrued investment income 61,740 59,588
Deferred policy acquisition costs 196,479 224,501
Other assets 43 117
Separate account assets 123,185 62,087
------------ -------------
Total assets $4,885,621 $4,973,413
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Future policy benefits for fixed annuities $4,166,852 $4,343,213
Policy claims and other policyholders' funds 7,389 11,328
Deferred income taxes 23,199 35,601
Amounts due to brokers 54,347 34,935
Other liabilities 24,500 16,905
Separate account liabilities 123,185 62,087
----------- ------------
Total liabilities 4,399,472 4,504,069
Stockholder's equity:
Capital stock, $100 par value per share;
100,000 shares authorized,
20,000 shares issued and outstanding 2,000 2,000
Additional paid-in capital 282,872 282,872
Accumulated other comprehensive income:
Net unrealized securities gains 44,295 49,516
Retained earnings 156,982 134,956
------------ ------------
Total stockholder's equity 486,149 469,344
------------ ------------
Total liabilities and stockholder's equity $4,885,621 $4,973,413
========== ==========
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
STATEMENTS OF INCOME
Years ended December 31,
($ thousands)
1998 1997 1996
--- ------ --- ------ --- ----
Revenues:
<S> <C> <C> <C>
Net investment income $340,219 $332,268 $271,719
Contractholder charges 6,387 5,688 5,450
Mortality and expense risk fees 1,275 641 303
Net realized loss on investments (4,788) (509) (5,258)
---------- ---------- -----------
Total revenues 343,093 338,088 272,214
--------- --------- ----------
Benefits and expenses:
Interest credited on investment contracts 228,533 231,437 191,672
Amortization of deferred policy acquisition costs 53,663 36,803 30,674
Other operating expenses 24,476 24,890 14,133
---------- ---------- --------
Total benefits and expenses 306,672 293,130 236,479
--------- --------- -------
Income before income taxes 36,421 44,958 35,735
Income taxes 14,395 16,645 12,912
---------- ---------- ---------
Net income $ 22,026 $ 28,313 $ 22,823
========= ========= ========
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
STATEMENTS OF STOCKHOLDER'S EQUITY
Three years ended December 31, 1998
($ thousands)
Accumulated Other
Comprehensive
Total Additional
Stockholder's Capital Paid-In Income, Retained
Equity Stock Capital Net of Tax Earnings
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995 $296,816 $2,000 $177,872 $ 33,124 $83,820
Comprehensive income:
Net income 22,823 -- -- -- 22,823
Unrealized holding losses arising
during the year, net of taxes of
$12,282 (22,810) -- -- (22,810) --
Reclassification adjustment for losses
included in net income, net of tax
of $(1,093) 2,029 -- -- 2,029 --
-------------------
-----------------
Other comprehensive loss (20,781) -- -- (20,781) --
-----------------
Comprehensive income 2,042
Capital contribution from parent 65,000 -- 65,000 -- --
---------------------------------------------------------------------------
Balance, December 31, 1996 363,858 2,000 242,872 12,343 106,643
Comprehensive income:
Net income 28,313 -- -- -- 28,313
Unrealized holding gains arising
during the year, net of taxes of
$(19,891) 36,940 -- -- 36,940 --
Reclassification adjustment for losses
included in net income, net of tax
of $(126) 233 -- -- 233 --
-------------------
-----------------
Other comprehensive income 37,173 -- -- 37,173 --
-----------------
Comprehensive income 65,486
Capital contribution from parent 40,000 40,000
---------------------------------------------------------------------------
Balance, December 31, 1997 469,344 2,000 282,872 49,516 134,956
Comprehensive income:
Net income 22,026 -- -- -- 22,026
Unrealized holding losses arising
during the year, net of taxes of $3,400 (6,314) -- -- (6,314) --
Reclassification adjustment for losses
included in net income, net of tax 1,093
of $(588) -- -- 1,093 --
----------------- -------------------
-------------------
Other comprehensive loss (5,221) -- -- (5,221) --
-----------------
-----------------
Comprehensive income 16,805
---------------------------------------------------------------------------
Balance, December 31, 1998 $486,149 $2,000 $282,872 $44,295 $156,982
===========================================================================
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
Years ended December 31,
($ thousands)
1998 1997 1996__
- -------- - -------- --------
Cash flows from operating activities:
<S> <C> <C> <C>
Net income $ 22,026 $ 28,313 $ 22,823
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Change in accrued investment income (2,152) (8,017) (9,692)
Change in accounts receivable 349 9,304 --
Change in deferred policy acquisition costs, net 28,022 (21,276) (32,651)
Change in other assets 74 4,840 (10,007)
Change in policy claims and other policyholders' funds (3,939) (16,099) 15,786
Deferred income tax (benefit) provision (9,591) (2,485) 5,084
Change in other liabilities 7,595 1,255 8,621
Amortization of premium (accretion of discount), net 122 (2,316) (2,091)
Net realized loss on investments 4,788 509 5,258
Other, net 2,544 959 (129)
------------- --------- ----------
Net cash provided by (used in) operating activities 49,838 (5,013) 3,002
Cash flows from investing activities: Fixed maturities held to maturity:
Purchases -- (1,996) (16,967)
Maturities 73,601 41,221 26,190
Sales 31,117 30,601 27,944
Fixed maturities available for sale:
Purchases (298,885) (688,050) (921,914)
Maturities 335,357 231,419 212,212
Sales 48,492 73,366 47,542
Other investments:
Purchases (161,252) (199,593) (212,182)
Sales 78,681 29,139 19,850
Change in amounts due to brokers 19,412 (53,796) 88,568
---------- ----------- ----------
Net cash provided by (used in) investing activities 126,523 (537,689) (728,757)
Cash flows from financing activities: Activity related to investment contracts:
Considerations received 302,158 783,339 846,378
Surrenders and other benefits (707,052) (552,903) (312,362)
Interest credited to account balances 228,533 231,437 191,672
Change in securities sold under repurchase agreements -- -- (67,000)
Capital contribution from parent -- 40,000 65,000
--------------- ---------- ---------
Net cash (used in) provided by financing activities (176,361) 501,873 723,688
----------- --------- --------
Net decrease in cash and cash equivalents -- (40,829) (2,067)
Cash and cash equivalents at beginning of year -- 40,829 42,896
--------------- ---------- ---------
Cash and cash equivalents at end of year $ -- $ -- $ 40,829
============== ============== ==========
See accompanying notes.
</TABLE>
<PAGE>
1. Summary of significant accounting policies
Nature of business
American Enterprise Life Insurance Company (the Company) is a stock life
insurance company that is domiciled in Indiana and is licensed to transact
insurance business in 48 states. The Company's principal product is
deferred annuities, which are issued primarily to individuals. It offers
single premium and annual premium deferred annuities on both a fixed and
variable dollar basis.
Immediate annuities are offered as well.
Basis of presentation
The Company is a wholly owned subsidiary of IDS Life Insurance Company (IDS
Life), which is a wholly owned subsidiary of American Express Financial
Corporation (AEFC). AEFC is a wholly owned subsidiary of American Express
Company. The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles which vary in
certain respects from reporting practices prescribed or permitted by the
Indiana Department of Insurance (see Note 4).
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Investments
Fixed maturities that the Company has both the positive intent and the
ability to hold to maturity are classified as held to maturity and carried
at amortized cost. All other fixed maturities are classified as available
for sale and carried at fair value. Unrealized gains and losses on
securities classified as available for sale are reported as a separate
component of accumulated other comprehensive income, net of deferred income
taxes.
Realized investment gain or loss is determined on an identified cost basis.
Prepayments are anticipated on certain investments in mortgage-backed
securities in determining the constant effective yield used to recognize
interest income. Prepayment estimates are based on information received
from brokers who deal in mortgage-backed securities.
Mortgage loans on real estate are carried at amortized cost less an
allowance for mortgage loan losses. The estimated fair value of the
mortgage loans is determined by a discounted cash flow analysis using
mortgage interest rates currently offered for mortgages of similar
maturities.
<PAGE>
1. Summary of significant accounting policies (continued)
Impairment of mortgage loans is measured as the excess of the loan's
recorded investment over its present value of expected principal and
interest payments discounted at the loan's effective interest rate, or the
fair value of collateral. The amount of the impairment is recorded in an
allowance for mortgage loan losses. The allowance for mortgage loan losses
is maintained at a level that management believes is adequate to absorb
estimated losses in the portfolio. The level of the allowance account is
determined based on several factors, including historical experience,
expected future principal and interest payments, estimated collateral
values, and current and anticipated economic and political conditions.
Management regularly evaluates the adequacy of the allowance for mortgage
loan losses.
The Company generally stops accruing interest on mortgage loans for which
interest payments are delinquent more than three months. Based on
management's judgment as to the ultimate collectibility of principal,
interest payments received are either recognized as income or applied to
the recorded investment in the loan.
The cost of interest rate caps and floors is amortized to investment income
over the life of the contracts and payments received as a result of these
agreements are recorded as investment income when realized. The amortized
cost of interest rate caps and floors is included in other investments.
When evidence indicates a decline, which is other than temporary, in the
underlying value or earning power of individual investments, such
investments are written down to the fair value by a charge to income.
Statements of cash flows
The Company considers investments with a maturity at the date of their
acquisition of three months or less to be cash equivalents. These
securities are carried principally at amortized cost which approximates
fair value.
Supplementary information to the statements of cash flows for the years
ended December 31, is summarized as follows:
1998 1997 1996
---- ----- ----
Cash paid during the year for:
Income taxes $19,035 $19,456 $10,317
Interest on borrowings 5,437 1,832 998
Contractholder charges
Contractholder charges include surrender charges and fees collected
regarding the issue and administration of annuity contracts.
<PAGE>
1. Summary of significant accounting policies (continued)
Deferred policy acquisition costs
The costs of acquiring new business, principally sales compensation, policy
issue costs, and certain sales expenses, have been deferred on annuity
contracts. These costs are amortized using primarily the interest method.
Liabilities for future policy benefits
Liabilities for deferred annuities are accumulation values. Liabilities for
fixed annuities in a benefit status are based on the established industry
mortality tables with various interest rates ranging from 5.5 percent to
8.75 percent, depending on year of issue.
Federal income taxes
The Company's taxable income is included in the consolidated federal income
tax return of American Express Company. The Company provides for income
taxes on a separate return basis, except that, under an agreement between
AEFC and American Express Company, tax benefit is recognized for losses to
the extent they can be used on the consolidated tax return. It is the
policy of AEFC and its subsidiaries that AEFC will reimburse subsidiaries
for all tax benefits.
Included in other liabilities at December 31, 1998 and 1997 are $3,504
payable to and $1,289, receivable from , respectively, IDS Life for federal
income taxes.
Separate account business
The separate account assets and liabilities represent funds held for the
exclusive benefit of the variable annuity contract owners. The Company
receives mortality and expense risk fees from the variable annuity separate
accounts.
The Company makes contractual mortality assurances to the variable annuity
contract owners that the net assets of the separate accounts will not be
affected by future variations in the actual life expectancy experience of
the annuitants and beneficiaries from the mortality assumptions implicit in
the annuity contracts. The Company makes periodic fund transfers to, or
withdrawals from, the separate account assets for such actuarial
adjustments for variable annuities that are in the benefit payment period.
The Company also guarantees that the rates at which administrative fees are
deducted from contract funds will not exceed contractual maximums.
Accounting Changes
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income." SFAS
No. 130 requires the reporting and display of comprehensive income and its
components. Comprehensive income is defined as the aggregate change in
stockholder's equity excluding changes in ownership interests. For the
Company, it is net income and the unrealized gains or losses on
available-for-sale securities net of taxes and reclassification adjustment.
<PAGE>
1. Summary of significant accounting policies (continued)
In March 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) 98-1, "Accounting for Costs of
Computer Software Developed or obtained for Internal Use." The SOP, which
is effective January 1, 1999, requires the capitalization of certain costs
incurred after the date of adoption to develop or obtain software for
internal use. Software utilized by the Company is owned by AEFC and will be
capitalized on AEFC's financial statements. As a result, the new rule will
not have a material impact on the Company's results of operations or
financial condition.
In December 1997, the AICPA issued SOP 97-3, "Accounting by Insurance and
Other Enterprises for Insurance-Related Assessments", providing guidance
for the timing of recognition of liabilities related to guaranty fund
assessments. The Company will adopt the SOP on January 1, 1999. The Company
has historically carried a balance in other liabilities on the balance
sheet for potential guaranty fund assessment exposure. Adoption of the SOP
will not have a material impact on the Company's results of operations or
financial condition
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which is
effective January 1, 2000. This Statement establishes accounting and
reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the balance sheet and measure those instruments at
fair value. The accounting for changes in the fair value of a derivative
depends on the intended use of the derivative and the resulting
designation. Earlier application of all of the provisions of this Statement
is encouraged, but it is permitted only as of the beginning of any fiscal
quarter that begins after issuance of the Statement. This Statement cannot
be applied retroactively. The ultimate financial impact of the new rule
will be measured based on the derivatives in place at adoption and cannot
be estimated at this time.
Reclassification
Certain 1997 and 1996 amounts have been reclassified to conform to the 1998
presentation.
<PAGE>
2. Investments
Fair values of investments in fixed maturities represent quoted market
prices and estimated values when quoted prices are not available. Estimated
values are determined by established procedures involving, among other
things, review of market indices, price levels of current offerings of
comparable issues, price estimates and market data from independent brokers
and financial files.
The amortized cost, gross unrealized gains and losses and fair value of
investments in fixed maturities at December 31, 1998 are as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Held to maturity Cost Gains Losses Value
---------------- -------------- ---- ------- ------ ---- -----
<S> <C> <C> <C> <C>
U.S. Government agency obligations $ 8,652 $ 423 $ -- $ 9,075
State and municipal obligations 3,003 149 -- 3,152
Corporate bonds and obligations 877,140 48,822 6,670 919,292
Mortgage-backed securities 192,398 2,844 29 195,213
------------ ---------- ---------- -----------
$1,081,193 $ 52,238 $ 6,699 $1,126,732
========== ======== ======= ==========
Available for sale
U.S. Government agency obligations $ 2,062 $ 116 $ -- $ 2,178
Corporate bonds and obligations 1,472,814 69,990 34,103 1,508,701
Mortgage-backed securities 1,051,836 32,232 89 1,083,979
----------- ---------- ----------- ---------
$2,526,712 $102,338 $34,192 $2,594,858
========== ======== ======= ==========
The amortized cost, gross unrealized gains and losses and fair value of
investments in fixed maturities at December 31, 1997 are as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Held to maturity Cost Gains Losses Value
---------------- -------------- ---- ------- -- ------ ---- -----
U.S. Government agency obligations $ 11,120 $ 710 $ -- $ 11,830
State and municipal obligations 3,003 173 -- 3,176
Corporate bonds and obligations 970,498 38,176 2,763 1,005,911
Mortgage-backed securities 202,061 1,497 1,367 202,191
------------ --------- ------- -----------
$1,186,682 $40,556 $4,130 $1,223,108
========== ======= ====== ==========
Available for sale
U.S. Government agency obligations $ 2,077 $ 13 $ -- $ 2,090
Corporate bonds and obligations 1,273,217 52,207 8,020 1,317,404
Mortgage-backed securities 1,334,327 33,017 1,039 1,366,305
----------- -------- ------- ----------
$2,609,621 $85,237 $9,059 $2,685,799
========== ======= ====== ==========
</TABLE>
<PAGE>
2. Investments (continued)
The amortized cost and fair value of investments in fixed maturities at
December 31, 1998 by contractual maturity are shown below. Expected
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
Amortized Fair
Held to maturity Cost Value
Due in one year or less $ 33,208 $ 33,499
Due from one to five years 215,010 227,139
Due from five to ten years 539,917 562,708
Due in more than ten years 100,660 108,173
Mortgage-backed securities 192,398 195,213
------------ ------------
$1,081,193 $1,126,732
Amortized Fair
Available for sale Cost Value
Due in one year or less $ 350 $ 358
Due from one to five years 96,412 101,441
Due from five to ten years 981,556 1,021,961
Due in more than ten years 396,558 387,119
Mortgage-backed securities 1,051,836 1,083,979
--------- ---------
$2,526,712 $2,594,858
During the years ended December 31, 1998, 1997 and 1996, fixed maturities
classified as held to maturity were sold with amortized cost of $31,117,
$29,561 and $27,969, respectively. Net gains and losses on these sales were
not significant. The sales of these fixed maturities were due to
significant deterioration in the issuers' creditworthiness.
In addition, fixed maturities available for sale were sold during 1998 with
proceeds of $48,492 and gross realized gains and losses of $2,835 and
$4,516, respectively. Fixed maturities available for sale were sold during
1997 with proceeds of $73,366 and gross realized gains and losses of $1,081
and $1,440, respectively. Fixed maturities available for sale were sold
during 1996 with proceeds of $47,542 and gross realized gains and losses of
$17 and $3,139, respectively.
At December 31, 1998, bonds carried at $3,292 were on deposit with various
states as required by law.
<PAGE>
2. Investments (continued)
At December 31, 1998, investments in fixed maturities comprised 82 percent
of the Company's total invested assets. These securities are rated by
Moody's and Standard & Poor's (S&P), except for securities carried at
approximately $480 million which are rated by AEFC internal analysts using
criteria similar to Moody's and S&P. A summary of investments in fixed
maturities, at amortized cost, by rating on December 31 is as follows:
Rating 1998 1997
---------------------- -- -------- -- ------
Aaa/AAA $1,242,301 $1,531,588
Aa/AA 45,526 34,167
Aa/A 60,019 69,775
A/A 422,725 421,733
A/BBB 228,656 222,022
Baa/BBB 1,030,874 954,962
Baa/BB 79,687 84,053
Below investment grade 498,117 478,003
------------ ------------
$3,607,905 $3,796,303
At December 31, 1998, approximately 94 percent of the securities rated
Aaa/AAA are GNMA, FNMA and FHLMC mortgage-backed securities. No holdings of
any other issuer are greater than one percent of the Company's total
investments in fixed maturities.
At December 31, 1998, approximately 18 percent of the Company's invested
assets were mortgage loans on real estate. Summaries of mortgage loans by
region of the United States and by type of real estate are as follows:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
----------------------- ---------------------
On Balance Commitments On Balance Commitments
Region Sheet to Purchase Sheet to Purchase
<S> <C> <C> <C> <C>
South Atlantic $198,552 $ 651 $186,714 $ 9,199
Middle Atlantic 129,284 520 128,239 10,167
East North Central 134,165 2,211 125,018 6,294
Mountain 113,581 -- 94,061 11,620
West North Central 119,380 9,626 96,701 11,135
New England 46,103 -- 50,932 --
Pacific 43,706 -- 33,052 --
West South Central 32,086 -- 19,573 --
East South Central 7,449 -- 7,480 --
--------- ------------ --------- ------------
824,306 13,008 741,770 48,415
Less allowance for losses 8,500 -- 3,718 --
---------- ------------ ---------- ------------
$815,806 $13,008 $738,052 $48,415
======== ======= ======== =======
</TABLE>
<PAGE>
2. Investments (continued)
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
------------------- -------------------
On Balance Commitments On Balance Commitments
Property type Sheet to Purchase Sheet to Purchase
<S> <C> <C> <C> <C>
Department/retail stores $253,380 $ 781 $242,307 $ 9,683
Apartments 186,030 2,211 189,752 10,167
Office buildings 206,285 9,496 169,177 7,262
Industrial buildings 82,857 520 60,195 17,430
Hotels/Motels 45,552 -- 33,508 --
Medical buildings 33,103 -- 30,103 3,873
Nursing/retirement homes 6,731 -- 9,552 --
Mixed Use 10,368 -- 7,176 --
---------- ------------ ----------- ------------
824,306 13,008 741,770 48,415
Less allowance for losses 8,500 -- 3,718 --
----------- ----------- ----------- -----------
$815,806 $13,008 $738,052 $48,415
======== ======= ======== =======
</TABLE>
Mortgage loan fundings are restricted by state insurance regulatory
authorities to 80 percent or less of the market value of the real estate at
the time of origination of the loan. The Company holds the mortgage
document, which gives it the right to take possession of the property if
the borrower fails to perform according to the terms of the agreement.
Commitments to purchase mortgages are made in the ordinary course of
business. The fair value of the mortgage commitments is $nil.
At December 31, 1998, the Company's recorded investment in impaired loans
was $1,932 with an allowance of $500. At December 31, 1997, the Company's
recorded investment in impaired loans was $4,443 with an allowance of $718.
During 1998 and 1997, the average recorded investment in impaired loans was
$2,736 and $6,473, respectively.
The Company recognized $251, $nil and $nil of interest income related to
impaired loans for the years ended December 31, 1998, 1997 and 1996,
respectively.
The following table presents changes in the allowance for investment losses
related to all loans:
<TABLE>
<CAPTION>
1998 1997 1996
- ---- - ---- - ----
<S> <C> <C> <C>
Balance, January 1 $3,718 $2,370 $ --
Provision for investment losses 4,782 1,805 2,370
Loan payoffs -- (457) --
---------- ------- ---------
Balance, December 31 $8,500 $3,718 $2,370
====== ====== ======
Net investment income for the years ended December 31 is summarized as
follows:
1998 1997 1996
- ----- -- ----- - ----
Interest on fixed maturities $285,260 $278,736 $230,559
Interest on mortgage loans 65,351 55,085 41,010
Interest on cash equivalents 137 704 1,402
Other (2,493) 1,544 1,194
----------- ------------- -----------
348,255 336,069 274,165
Less investment expenses 8,036 3,801 2,446
----------- ----------- -----------
$340,219 $332,268 $271,719
======== ======== ========
</TABLE>
<PAGE>
2. Investments (continued)
Net realized gain (loss) on investments for the years ended December 31 is
summarized as follows:
1998 1997 1996
-- ---- -- ---- -- ----
Fixed maturities $ 863 $ 1,638 $(2,888)
Mortgage loans (4,816) (1,348) (2,370)
Other investments (835) (799) --
-------- ------ ----------
$(4,788) $ (509) $(5,258)
======= ======= =======
Changes in net unrealized appreciation (depreciation) of investments for
the years ended December 31 are summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-- ---- -- ---- -- ----
<S> <C> <C> <C>
Fixed maturities available for sale $(8,032) $57,188 $(31,970)
</TABLE>
3. Income taxes
The Company qualifies as a life insurance company for federal income tax
purposes. As such, the Company is subject to the Internal Revenue Code
provisions applicable to life insurance companies.
The income tax expense (benefit) for the years ended December 31, consists
of the following:
1998 1997 1996
-- ---- -- ---- -- ----
Federal income taxes:
Current $ 23,227 $17,668 $7,124
Deferred (9,591) (2,485) 5,084
--------- -------- -------
13,636 15,183 12,208
State income taxes-current 759 1,462 704
----------- --------- --------
Income tax expense $ 14,395 $16,645 $12,912
======== ======= =======
Increases (decreases) to the federal income tax provision applicable to
pretax income based on the statutory rate, for the years ended December 31,
are attributable to:
<TABLE>
<CAPTION>
1998 1997 1996
----------- -------- -------
Provision Rate Provision Rate Provision Rate
Federal income taxes based
<S> <C> <C> <C> <C> <C> <C>
on the statutory rate $13,972 35.0% $15,735 35.0% $12,507 35.0%
Increases (decreases) are attributable to :
Tax-excluded interest (35) (0.1) (41) (0.1) (53) (0.1)
State tax, net of federal benefit 493 1.2 956 2.1 459 1.3
Other, net (35) -- (5) -- (1) --
------ ------ ------- ------ ------ ------
Federal income taxes $14,395 36.1% $16,645 37.0% $12,912 36.2%
======= ==== ======= ==== ======= ====
</TABLE>
<PAGE>
3. Income taxes (continued)
Significant components of the Company's deferred income tax assets and
liabilities as of December 31 are as follows:
Deferred income tax assets: 1998 1997
-------- -------
Policy reserves $51,298 $54,468
Other 2,214 1,736
--------- -------
Total deferred income tax assets 53,512 56,204
-------- ------
Deferred income tax liabilities:
Deferred policy acquisition costs 52,908 63,630
Investments 23,803 28,175
-------- ------
Total deferred income tax liabilities _76,711 91,805
------- --------
Net deferred income tax liabilities $23,199 $35,601
======= =======
The Company is required to establish a valuation allowance for any portion
of the deferred income tax assets that management believes will not be
realized. In the opinion of management, it is more likely than not that the
Company will realize the benefit of the deferred income tax assets and,
therefore, no such valuation allowance has been established.
4. Stockholder's equity
Retained earnings available for distribution as dividends to IDS Life are
limited to the Company's surplus as determined in accordance with
accounting practices prescribed by state insurance regulatory authorities.
Statutory unassigned surplus aggregated $45,716 and $17,392 as of December
31, 1998 and 1997, respectively. In addition, dividends in excess of
$37,902 would require approval by the Insurance Department of the state of
Indiana.
Statutory net income and stockholder's equity as of December 31, are
summarized as follows:
1998 1997 1996
-------- --------- -------
Statutory net income $ 37,902 $ 23,589 $ 9,138
Statutory stockholder's equity 330,588 302,264 250,975
5. Related party transactions
On December 31, 1998, the Company purchased interest rate floors from IDS
Life and entered into an interest rate swap with IDS Life to manage its
exposure to interest rate risk. The interest rate floors had a carrying
amount of $6,651 and $8,400 at December 31, 1998 and 1997, respectively.
The interest rate swap is an off balance sheet transaction.
The Company has no employees. Charges by IDS Life for services and use of
other joint facilities aggregated $28,482, $24,535 and $17,936 for the
years ended December 31, 1998, 1997 and 1996, respectively. Certain of
these costs are included in deferred policy acquisition costs.
<PAGE>
6. Lines of credit
The Company has an available line of credit with AEFC aggregating $50,000.
The rate for the line of credit is the parent's cost of funds, established
by reference to various indices plus 20 to 45 basis points, depending on
the term. There were no borrowings outstanding under this agreement at
December 31, 1998 or 1997.
7. Derivative financial instruments
The Company enters into transactions involving derivative financial
instruments to manage its exposure to interest rate risk, including hedging
specific transactions. The Company does not hold derivative instruments for
trading purposes. The Company manages risks associated with these
instruments as described below.
Market risk is the possibility that the value of the derivative financial
instruments will change due to fluctuations in a factor from which the
instrument derives its value, primarily an interest rate. The Company is
not impacted by market risk related to derivatives held for non-trading
purposes beyond that inherent in cash market transactions. Derivatives are
largely used to manage risk and, therefore, the cash flow and income
effects of the derivatives are inverse to the effects of the underlying
transactions.
Credit risk is the possibility that the counterparty will not fulfill the
terms of the contract. The Company monitors credit risk related to
derivative financial instruments through established approval procedures,
including setting concentration limits by counterparty, and requiring
collateral, where appropriate. A vast majority of the Company's
counterparties are rated A or better by Moody's and Standard & Poor's.
Credit risk related to interest rate caps and floors is measured by
replacement cost of the contracts. The replacement cost represents the fair
value of the instruments.
The notional or contract amount of a derivative financial instrument is
generally used to calculate the cash flows that are received or paid over
the life of the agreement. Notional amounts are not recorded on the balance
sheet. Notional amounts far exceed the related credit exposure.
The Company's holdings of derivative financial instruments are as follows:
<TABLE>
<CAPTION>
Notional Carrying Fair Total Credit
December 31, 1998 Amount Amount Value Exposure
----------------- ------ - ------ -- ----- --------
Assets:
<S> <C> <C> <C> <C>
Interest rate caps $ 900,000 $ 5,452 $ 1,518 $ 1,518
Interest rate floors 1,000,000 6,651 17,798 17,798
Interest rate swaps 1,000,000 -- -- --
------------- ------------ -------------
$12,103 $19,316 $19,316
= ======= ======= =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
7. Derivative financial instruments (continued)
Notional Carrying Fair Total Credit
December 31, 1997 Amount Amount Value Exposure
----------------- - ------ -- ------ -- ----- -- --------
Assets:
<S> <C> <C> <C> <C>
Interest rate caps $ 900,000 $ 7,624 $ 5,340 $ 5,340
Interest rate floors 1,000,000 8,400 8,400 8,400
Interest rate swaps 1,000,000 -- -- --
------------- ------------ ------------
$16,024 $13,740 $13,740
======= ======= =======
</TABLE>
The fair values of derivative financial instruments are based on market
values, dealer quotes or pricing models. All interest rate caps, floors and
swaps will expire on various dates from 2000 to 2003.
Interest rate caps, floors and swaps are used to manage the Company's
exposure to interest rate risk. These instruments are used primarily to
protect the margin between interest rates earned on investments and the
interest rates credited to related annuity contract holders.
8. Fair values of financial instruments
The Company discloses fair value information for most on- and off-balance
sheet financial instruments for which it is practicable to estimate that
value. Fair value of life insurance obligations, receivables and all
non-financial instruments, such as deferred acquisition costs are excluded.
Off-balance sheet intangible assets are also excluded. Management believes
the value of excluded assets and liabilities is significant. The fair value
of the Company, therefore, cannot be estimated by aggregating the amounts
presented.
<TABLE>
<CAPTION>
December 31,
1998 1997
-------- --------
Carrying Fair Carrying Fair
Financial Assets Amount Value Amount Value
Investments:
Fixed maturities (Note 2):
<S> <C> <C> <C> <C>
Held to maturity $1,081,193 $1,126,732 $1,186,682 $1,223,108
Available for sale 2,594,858 2,594,858 2,685,799 2,685,799
Mortgage loans on real estate (Note 2) 815,806 874,064 738,052 775,869
Derivative financial instruments (Note 7) 12,103 19,316 16,024 13,740
Separate account assets (Note 1) 123,185 123,185 62,087 62,087
Financial Liabilities
Future policy benefits for fixed annuities $4,152,059 $4,000,789 $4,330,173 $4,152,471
Separate account liabilities 123,185 115,879 62,087 58,116
</TABLE>
At December 31, 1998 and 1997, the carrying amount and fair value of future
policy benefits for fixed annuities exclude life insurance-related
contracts carried at $14,793 and $13,040, respectively. The fair value of
these benefits is based on the status of the annuities at December 31, 1998
and 1997.
<PAGE>
8. Fair values of financial instruments (continued)
The fair values of deferred annuities and separate account liabilities are
estimated as the carrying amount less applicable surrender charges. The
fair value for annuities in non-life contingent payout status is estimated
as the present value of projected benefit payments at rates appropriate for
contracts issued in 1998 and 1997.
9. Commitments and contingencies
A number of lawsuits have been filed against life and health insurers in
jurisdictions in which the Company conducts business involving insurers'
sales practices, alleged agent misconduct, failure to properly supervise
agents, and other matters. The Company, along with AEFC and its insurance
subsidiaries, has been named as a defendant in one of these types of
actions.
The plaintiffs purport to represent a class consisting of all persons who
purchased policies or contracts from IDS Life and its subsidiaries. The
complaint puts at issue various alleged sales practices and
misrepresentations, alleged breaches of fiduciary duties and alleged
violations of consumer fraud statutes. IDS Life and its subsidiaries
believe they have meritorious defenses to the claims raised in this
lawsuit.
The outcome of any litigation cannot be predicted with certainty. In the
opinion of management, however, the ultimate resolution of this lawsuit
should not have a material adverse effect on the Company's financial
position.
10. Year 2000 Issue (Unaudited)
The Year 2000 issue is the result of computer programs having been written
using two digits rather than four to define a year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900
rather than 2000. This could result in the failure of major systems or
miscalculations, which could have a material impact on the operations of
the Company. All of the major systems used by the Company are maintained by
AEFC and are utilized by multiple subsidiaries and affiliates of the AEFC.
The Company's business is heavily dependent upon the AEFC's computer
systems and has significant interactions with systems of third parties.
A comprehensive review of AEFC's computer systems and business processes,
including those specific to the Company, has been conducted to identify the
major systems that could be affected by the Year 2000 issue. Steps are
being taken to resolve any potential problems including modification to
existing software and the purchase of new software. These measures are
scheduled to be completed and tested on a timely basis. AEFC's target date
for substantially completing corrective measures on business critical
systems was December 31, 1998. Substantial testing of these systems is
targeted for completion early in 1999. AEFC is currently on track with this
schedule and is also on track to finish the work on non-critical systems by
June 30, 1999.
AEFC continues to evaluate the Year 2000 readiness of advisors and other
third parties whose system failures could have an impact on the Company's
operations. The potential materiality of any such impact is not known at
this time.
10. Year 2000 Issue (Unaudited) (continued)
AEFC's Year 2000 project includes establishing Year 2000 contingency plans
for all key business units. Business continuation plans, which address
business continuation in the event of a system disruption, are in place for
all key business units. These plans are being amended to include specific
Year 2000 considerations and will continue to be refined throughout 1999 as
additional information related to potential Year 2000 exposure is gathered.
<PAGE>
PART C.
Item 24. Financial Statements and Exhibits
(a) Financial Statements included in Part B of this Registration Statement:
The audited financial statements of 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 February 4, 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 February 4, 1999.
(b) Exhibits:
1.1 Resolution 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 ten additional subaccounts within the separate account dated
Aug. 21, 1997, filed electronically as Exhibit 1.2 to Post-Effective
Amendment No. 8 to Registration Statement No. 33-54471, is incorporated
herein by reference.
1.3 Resolution of the Board of Directors of American Enterprise Life
establishing six additional subaccounts within the separate account
dated June 17, 1998, filed electronically as Exhibit 1.3 to
Post-Effective Amendment No. 11 to Registration Statement No. 33-54471,
filed on or about August 24, 1998, is incorporated herein by reference.
2. Not applicable.
3.1 Form of Variable Annuity and Life Insurance Distribution Agreement, filed
electronically as Exhibit 3.1 to Pre-Effective Amendment No. 1 to
Registration Statement No. 33-54471, is incorporated herein by reference.
3.2 Form of Managing General Agent Agreement, filed electronically as Exhibit
3.2 to Pre-Effective Amendment No. 1 to Registration Statement No.
33-54471, is incorporated herein by reference.
4.1 Form of Deferred Annuity Contract (form 34560), filed electronically as
Exhibit 4.1 to the Initial Registration Statement No. 33-54471, filed
on or about July 5, 1994, is incorporated herein by reference.
4.2 Form of Tax-Qualified Endorsement (form 34563), filed electronically as
Exhibit 4.2 to the Initial Registration Statement No. 33-54471, filed
on or about July 5, 1994, is incorporated herein by reference.
4.3 Form of Annuity Endorsement (form 34562), filed electronically as
Exhibit 4.3 to the Initial Registration Statement No. 33-54471, filed
on or about July 5, 1994, is incorporated herein by reference.
<PAGE>
5. Form of Application for American Enterprise Life Variable Annuity (form
34561), filed electronically as Exhibit 5.1 to the Initial Registration
Statement No. 33-54471, filed on or about July 5, 1994, is incorporated
herein by reference.
6.1 Amendment and Restatement of Articles of Incorporation of American
Enterprise Life dated July 29, 1986, filed electronically as Exhibit
6.1 to the Initial Registration Statement No. 33-54471, filed on or
about July 5, 1994, is incorporated herein by reference.
6.2 Amended By-Laws of American Enterprise Life, filed electronically as
Exhibit 6.2 to the Initial Registration Statement No. 33-54471, filed
on or about July 5, 1994, is incorporated herein by reference.
7. Not applicable.
8.1(a) Copy of Participation Agreement among American Enterprise Life
Insurance Company and GT Global Variable Investment Trust and GT Global
Variable Investment Series and GT Global Financial Services, Inc.,
dated February 10, 1995, filed electronically as Exhibit 8.1 to
Post-Effective Amendment No. 3 to Registration Statement No. 33-54471,
is incorporated herein by reference.
8.1(b) Form of Amendment 1 to Participation Agreement among American Enterprise
Life Insurance Company and G.T. Global Variable Investment Trust and G.T.
Global Variable Investment Series and GT Global, Inc. (formerly G.T. Global
Financial Services, Inc.), filed electronically as Exhibit 8.1(b) to
Post-Effective Amendment No. 9 to Registration Statement No. 33-54471, is
incorporated herein by reference.
8.2(a) Copy of Participation Agreement among Putnam Capital Manager Trust,
Putnam Mutual Funds Corp. and American Enterprise Life Insurance Company,
dated January 16, 1995, filed electronically as Exhibit 8.2 to
Post-Effective Amendment No. 2 to Registration Statement No. 33-54471, is
incorporated herein by reference.
8.2(b) Copy of Amendment 1 to Schedule A to Participation Agreement among Putnam
Capital Manager Trust, Putnam Mutual Funds Corp. and American Enterprise
Life Insurance Company, dated April 30, 1997, filed electronically as
Exhibit 8.2(b) to Post-Effective Amendment No. 9 to Registration Statement
No. 33-54471, is incorporated herein by reference.
8.2(c) Copy of Amendment 2 to Schedule A to Participation Agreement among Putnam
Capital Manager Trust, Putnam Mutual Funds Corp. and American Enterprise
Life Insurance Company, dated October 30, 1997, filed electronically as
Exhibit 8.2(c) to Post-Effective Amendment No. 10 to Registration Statement
No. 33-54471, is incorporated herein by reference.
8.2(d) Form of Amendment 3 to Schedule A to Participation Agreement among Putnam
Capital Manager Trust, Putnam Mutual Funds Corp. and American Enterprise
Life Insurance Company, filed electronically as Exhibit 8.2 to
Post-Effective Amendment No. 11 to Registration Statement No. 33-54471,
filed on or about August 24, 1998, is incorporated herein by reference.
8.3(a) Copy of Participation Agreement by and among Quest for Value
Accumulation Trust and American Enterprise Life Insurance Company and
Quest for Value Distributors, dated February 21, 1995, filed
electronically as Exhibit 8.3 to Post- Effective Amendment No. 2 to
Registration Statement No. 33-54471, is incorporated herein by
reference.
8.3(b) Copy of Amendment 1 to Schedule A to Participation Agreement among OCC
Accumulation Trust, American Enterprise Life Insurance Company and OCC
Distributors, dated October 15, 1997, filed electronically as Exhibit
8.3(b) to Post-Effective Amendment No. 10 to Registration Statement No.
33-54471, is incorporated herein by reference.
8.4 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.
<PAGE>
8.5 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.
8.6 Copy of Participation Agreement among Janus Aspen Series and American
Enterprise Life Insurance Company, dated October 8, 1997, filed
electronically as Exhibit 8.6 to Post-Effective Amendment No. 9 to
Registration Statement No. 33-54471, is incorporated herein by reference.
8.7 Form of Fund Participation Agreement among American Enterprise Life
Insurance Company, American Century Variable Portfolios, Inc. and American
Century Investment Management, Inc., filed electronically as Exhibit 8.7 to
Post-Effective Amendment No. 11 to Registration Statement No. 33-54471,
filed on or about August 24, 1998, is incorporated herein by reference.
8.8 Copy of Reinsurance Agreement, dated October 16, 1997, filed electronically
as Exhibit 8.7 to Post-Effective Amendment No. 9 to Registration Statement
No. 33-54471, is incorporated herein by reference.
9. Opinion of counsel and consent to its use as to the legality of the
securities being registered is filed electronically herewith.
10. Consent of Independent Auditors is filed electronically herewith.
11. None.
12. Not applicable.
13. Copy of schedule for computation of each performance quotation provided
in the Registration Statement in response to Item 21, filed
electronically as Exhibit 13 to the Initial Registration Statement No.
33-54471, filed on or about July 5, 1994, is incorporated herein by
reference.
14.1. Power of Attorney to sign Amendments to this Registration Statement,
dated March 28, 1997, filed electronically as Exhibit 15 to
Post-Effective Amendment No. 7 to Registration Statement No. 33-54471,
is incorporated herein by reference.
14.2. Power of Attorney to sign Amendments to this Registration Statement,
dated April 9, 1998, filed electronically as Exhibit 15.2 to
Post-Effective Amendment No. 10 to Registration Statement No. 33-54471,
is incorporated herein by reference.
<TABLE>
<CAPTION>
Item 25. Directors and Officers of the Depositor (American Enterprise Life Insurance Company)
<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
<PAGE>
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 Executive Vice President, Assured
Minneapolis, MN 55440 Assets
Mary Ellyn Minenko IDS Tower 10 Vice President, Group Counsel and
Minneapolis, MN 55440 Assistant Secretary
Stuart A. Sedlacek IDS Tower 10 Executive Vice President
Minneapolis, MN 55440
F. Dale Simmons IDS Tower 10 Vice President-Real Estate Loan
Minneapolis, MN 55440 Management
William A. Stoltzmann IDS Tower 10 Director, Vice President, General
Minneapolis, MN 55440 Counsel and Secretary
Philip C. Wentzel IDS Tower 10 Vice President and Controller
Minneapolis, MN 55440
</TABLE>
Item 26. Persons Controlled by or Under Common Control with the Depositor or
Registrant
American Enterprise Life Insurance Company is a wholly-owned
subsidiary of IDS Life Insurance Company which is a
wholly-owned subsidiary of American Express Financial
Corporation. American Express Financial Corporation is a
wholly-owned subsidiary of American Express Company (American
Express).
The following list includes the names of major subsidiaries of American Express.
Jurisdiction of
Name of Subsidiary
Incorporation
<TABLE>
<CAPTION>
<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 Partners LLC Delaware
Advisory Capital Strategies Group Inc. Minnesota
American Centurion Life Assurance Company New York
American Enterprise Investment Services Inc. Minnesota
American Enterprise Life Insurance Company Indiana
American Express Asset Management Group Inc. Minnesota
American Express Asset Management International Inc. Delaware
American Express Asset Management International (Japan) Ltd. Japan
American Express Asset Management Ltd. England
American Express Client Service Corporation Minnesota
American Express Corporation Delaware
American Express Financial Advisors Inc. Delaware
American Express Financial Advisors Japan Inc. Delaware
American Express Financial Corporation Delaware
<PAGE>
American Express Insurance Agency of Arizona Inc. Arizona
American Express Insurance Agency of Idaho Inc. Idaho
American Express Insurance Agency of Nevada Inc. Nevada
American Express Insurance Agency of Oregon Inc. Oregon
American Express Minnesota Foundation Minnesota
American Express Property Casualty Insurance Agency of Kentucky Inc. Kentucky
American Express Property Casualty Insurance Agency of Maryland Inc. Maryland
American Express Property Casualty Insurance Agency of Mississippi Inc.
Mississippi
American Express Property Casualty Insurance Agency of Pennsylvania Inc.
Pennsylvania
American Express Trust Company Minnesota
American Partners Life Insurance Company Arizona
IDS Cable Corporation Minnesota
IDS Cable II Corporation Minnesota
IDS Capital Holdings Inc. Minnesota
IDS Certificate Company Delaware
IDS Futures Brokerage Group Minnesota
IDS Futures Corporation Minnesota
IDS Insurance Agency of Alabama Inc. Alabama
IDS Insurance Agency of Arkansas Inc. Arkansas
IDS Insurance Agency of Massachusetts Inc.
Massachusetts
IDS Insurance Agency of Mississippi Ltd.
Mississippi
IDS Insurance Agency of New Mexico Inc. New Mexico
IDS Insurance Agency of North Carolina Inc. North
Carolina
IDS Insurance Agency of Ohio Inc. Ohio
IDS Insurance Agency of Texas Inc. Texas
IDS Insurance Agency of Utah Inc. Utah
IDS Insurance Agency of Wyoming Inc. Wyoming
IDS Life Insurance Company Minnesota
IDS Life Insurance Company of New York New York
IDS Management Corporation Minnesota
IDS Partnership Services Corporation Minnesota
IDS Plan Services of California, Inc. Minnesota
IDS Property Casualty Insurance Company Wisconsin
IDS Real Estate Services, Inc. Delaware
IDS Realty Corporation Minnesota
IDS Sales Support Inc. Minnesota
Investors Syndicate Development Corp. Nevada
Public Employee Payment Company Minnesota
</TABLE>
Item 27. Number of Contract owners
As of March 31, 1999, there were 2,339 contract owners of
qualified contracts and there were 2,134 owners of
non-qualified contracts.
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.
<PAGE>
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it
is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
Item 29. Principal Underwriters.
(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:
<S> <C> <C>
Name and Principal Business Address Position and Offices with Positions with Offices with
Underwriter Registrant
- ------------------------------------------ ------------------------------------ -----------------------------
Ronald. G. Abrahamson Vice President - Service Quality None
IDS Tower 10 and Reengineering
Minneapolis, MN 55440
Douglas A. Alger Senior Vice President - Human None
IDS Tower 10 Resources
Minneapolis, MN 55440
Peter J. Anderson Senior Vice President - Investment Vice President
IDS Tower 10 Operations
Minneapolis, MN 55440
Ward D. Armstrong Vice President-American Express None
IDS Tower 10 Retirement Services
Minneapolis, MN 55440
John M. Baker Vice President - Plan Sponsor None
IDS Tower 10 Services
Minneapolis, MN 55440
Joseph M. Barksy, III Vice President - Senior Portfolio None
IDS Tower 10 Manager
Minneapolis, MN 55440
<PAGE>
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 - Gulf States None
Galleria One Suite 1900
Galleria Blvd.
Metairie, LA 70001
Charles R. Branch Group Vice President - Northwest None
Suite 200
West 111 North River Dr.
Spokane, WA 99201
<PAGE>
Douglas W. Brewers Vice President - Sales Support None
IDS Tower 10
Minneapolis, MN 55440
Karl J. Breyer Corporate Senior Vice President None
IDS Tower 10
Minneapolis, MN 55440
Cynthia M. Carlson Vice President - American Express None
IDS Tower 10 Securities Services
Minneapolis, MN 55440
Mark W. Carter Senior Vice President and Chief None
IDS Tower 10 Marketing Officer
Minneapolis, MN 55440
James E. Choat Senior Vice President - Director, President and
IDS Tower 10 Institutional Products Group Chief Executive Officer
Minneapolis, MN 55440
Kenneth J. Ciak Vice President and General Manager None
IDS Property Casualty - IDS Property Casualty
1400 Lombardi Avenue
Green Bay, WI 54304
<PAGE>
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
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
<PAGE>
Gordon M. Fines Vice President - Mutual Fund None
IDS Tower 10 Equity Investments
Minneapolis, MN 55440
Douglas L. Forsberg Vice President - Institutional None
IDS Tower 10 Products Group
Minneapolis, MN 55440
Jeffrey P. Fox Vice President and Corporate None
IDS Tower 10 Controller
Minneapolis, MN 55440
William P. Fritz Group Vice President - Gateway None
Suite 160
12855 Flushing Meadows Dr.
St. Louis, MO 63131
Carl W. Gans Group Vice President - Twin City None
8500 Tower Suite 1770 Metro
8500 Normandale Lake Blvd.
Bloomington, MN 55437
David A. Hammer Vice President and Marketing None
IDS Tower 10 Controller
Minneapolis, MN 55440
Teresa A. Hanratty Group Vice President - Northern None
Suites 6&7 New England
169 South River Road
Bedford, NH 03110
Robert L. Harden Group Vice President - Boston Metro None
Two Constitution Plaza
Boston, MA 02129
Lorraine R. Hart Vice President - Insurance Vice President, Investments
IDS Tower 10 Investments
Minneapolis, MN 55440
Scott A. Hawkinson Vice President and Controller - None
IDS Tower 10 Private Client Group
Minneapolis, MN 55440
Brian M. Heath Group Vice President - North Texas None
Suite 150
801 E. Campbell Road
Richardson, TX 75081
Janis K. Heaney Vice President - Incentive None
IDS Tower 10 Management
Minneapolis, MN 55440
James G. Hirsh Vice President and Assistant None
IDS Tower 10 General Counsel
Minneapolis, MN 55440
Jon E. Hjelm Group Vice President - Rhode None
310 Southbridge Street Island/Central - Western
Auburn, MA 01501 Massachusetts
<PAGE>
David J. Hockenberry Group Vice President - Tennessee None
30 Burton Hills Blvd. Valley
Suite 175
Nashville, TN 37215
Jeffrey S. Horton Vice President and Treasurer None
IDS Tower 10
Minneapolis, MN 55440
David R. Hubers Chairman, President and Chief Board member
IDS Tower 10 Executive Officer
Minneapolis, MN 55440
Martin G. Hurwitz Vice President - Senior Portfolio None
IDS Tower 10 Manager
Minneapolis, MN 55440
James M. Jensen Vice President - Insurance Product None
IDS Tower 10 Development and Management
Minneapolis, MN 55440
Marietta L. Johns Senior Vice President - Field None
IDS Tower 10 Management
Minneapolis, MN 55440
Nancy E. Jones Vice President - Business None
IDS Tower 10 Development
Minneapolis, MN 55440
Ora J. Kaine Vice President - Financial None
IDS Tower 10 Advisory Services
Minneapolis, MN 55440
Linda B. Keene Vice President - Market Development None
IDS Tower 10
Minneapolis, MN 55440
G. Michael Kennedy Vice President - Investment None
IDS Tower 10 Services and Investment Research
Minneapolis, MN 55440
Susan D. Kinder Senior Vice President - None
IDS Tower 10 Distribution Services
Minneapolis, MN 55440
Richard W. Kling Senior Vice President - Products Director and Chairman of
IDS Tower 10 the Board
Minneapolis, MN 55440
John M. Knight Vice President - Investment Treasurer
IDS Tower 10 Accounting
Minneapolis, MN 55440
Paul F. Kolkman Vice President - Actuarial Finance None
IDS Tower 10
Minneapolis, MN 55440
<PAGE>
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
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
<PAGE>
William P. Miller Vice President and Senior None
IDS Tower 10 Portfolio Manager
Minneapolis, MN 55440
James A. Mitchell Executive Vice President - None
IDS Tower 10 Marketing and Products
Minneapolis, MN 55440
Pamela J. Moret Vice President - Variable Assets None
IDS Tower 10
Minneapolis, MN 55440
Alan D. Morgenstern Group Vice President - Central None
Suite 200 California/Western Nevada
3500 Market Street
Camp Hill, NJ 17011
Barry J. Murphy Senior Vice President - Client None
IDS Tower 10 Service
Minneapolis, MN 55440
Mary Owens Neal Vice President - Mature Market None
IDS Tower 10 Segment
Minneapolis, MN 55440
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
<PAGE>
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
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
<PAGE>
Donald K. Shanks Vice President - Property Casualty None
IDS Tower 10
Minneapolis, MN 55440
F. Dale Simmons Vice President - Senior Portfolio Vice President, Real Estate
IDS Tower 10 Manager, Insurance Investments Loan Management
Minneapolis, MN 55440
Judy P. Skoglund Vice President - Quality and None
IDS Tower 10 Service Support
Minneapolis, MN 55440
James B. Solberg Group Vice President - Eastern None
466 Westdale Mall Iowa Area
Cedar Rapids, IA 52404
Bridget Sperl Vice President - Geographic None
IDS Tower 10 Service Teams
Minneapolis, MN 55440
Paul J. Stanislaw Group Vice President - Southern None
Suite 1100 California
Two Park Plaza
Irvine, CA 92714
Lisa A. Steffes Vice President - Cardmember None
IDS Tower 10 Initiatives
Minneapolis, MN 55440
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
<PAGE>
John R. Thomas Senior Vice President None
IDS Tower 10
Minneapolis, MN 55440
Peter S. Velardi Group Vice President - None
Suite 180 Atlanta/Birmingham
1200 Ashwood Parkway
Atlanta, GA 30338
Charles F. Wachendorfer Group Vice President - Detroit None
Suite 100 Metro
Stanford Plaza II
7979 East Tufts Ave. Pkwy
Denver, CO 80237
Wesley W. Wadman Vice President - Senior Portfolio None
IDS Tower 10 Manager
Minneapolis, MN 55440
Donald F. Weaver Group Vice President - Greater None
3500 Market Street, Suite 200 Pennsylvania
Camp Hill, PA 17011
Norman Weaver Jr. Senior Vice President - Field None
1010 Main St., Suite 2B Management
Huntington Beach, CA 92648
Michael L. Weiner Vice President - Tax Research and None
IDS Tower 10 Audit
Minneapolis, MN 55440
Lawrence J. Welte Vice President - Investment None
IDS Tower 10 Administration
Minneapolis, MN 55440
Jeffry M. Welter Vice President - Equity and Fixed None
IDS Tower 10 Income Trading
Minneapolis, MN 55440
Thomas L. White Group Vice President - Cleveland None
Suite 200 Metro
28601 Chagrin Blvd.
Woodmere, OH 44122
Eric S. Williams Group Vice President - Virginia None
Suite 250
3951 Westerre Parkway
Richmond, VA 23233
William J. Williams Group Vice President - Western None
Two North Tamiami Trail Florida
Suite 702
Sarasota, FL 34236
<PAGE>
Edwin M. Wistrand Vice President and Assistant None
IDS Tower 10 General Counsel
Minneapolis, MN 55440
Michael D. Wolf Vice President - Senior Portfolio None
IDS Tower 10 Manager
Minneapolis, MN 55440
Michael R. Woodward Senior Vice President - Field None
32 Ellicott St. Management
Suite 100
Batavia, NY 14020
</TABLE>
<TABLE>
<CAPTION>
Item 29(c).
<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>
Item 30. Location of Accounts and Records
American Enterprise Life Insurance Company
IDS Tower 10
Minneapolis, MN 55402
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) Registrant undertakes that it will file a post-effective
amendment to this registration statement as frequently as is
necessary to ensure that the audited financial statements in
the registration statement are never more than 16 months old
for so long as payments under the variable annuity contracts
may be accepted.
(b) Registrant undertakes that it will include either (1) as part
of any application to purchase a contract offered by the
prospectus, a space that an applicant can check to request a
Statement of Additional Information, or (2) a post card or
similar written communication affixed to or included in the
prospectus that the applicant can remove to send for a
Statement of Additional Information.
(c) Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made
available under this Form promptly upon written or oral
request to American Enterprise Life Contract Owner Service at
the address or phone number listed in the prospectus.
(d) The sponsoring insurance company represents that the fees and
charges deducted under the contract, in the aggregate, are
reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by the
insurance company.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, American Enterprise Life Insurance Company, on behalf of the Registrant
certifies that it meets all of the requirements for effectiveness of this
Amendment to its Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Minneapolis, and State of Minnesota, on the 28th day
of April, 1999.
AMERICAN ENTERPRISE VARIABLE ANNUITY ACCOUNT
(Registrant)
By American Enterprise Life Insurance Company
(Sponsor)
By /s/ James E. Choat*
James E. Choat
Director, President and Chief Executive Officer
As required by the Securities Act of 1933, this Amendment to the Registration
Statement has been signed by the following persons in the capacities indicated
on the 28th day of April, 1999.
Signature Title
/s/ James E. Choat* Director, President and
James E. Choat Chief Executive Officer
/s/ Jeffrey S. Horton** Vice President and Treasurer
Jeffrey S. Horton
/s/ Richard W. Kling* Chairman of the Board
Richard W. Kling
/s/ Paul S. Mannweiler* Director
Paul S. Mannweiler
/s/ Stuart A. Sedlacek* Director and Executive Vice President
Stuart A. Sedlacek
/s/ William A. Stoltzmann* Director, Vice President, General
William A. Stoltzmann Counsel and Secretary
/s/ Philip C. Wentzel** Vice President and Controller
Philip C. Wentzel
<PAGE>
*Signed pursuant to Power of Attorney, dated March 28, 1997, filed
electronically as Exhibit 15 to Post-Effective Amendment No. 7 to
Registration Statement No. 33-54471, filed on or about April 23, 1997,
incorporated herein by reference.
**Signed pursuant to Power of Attorney, dated April 9, 1998, filed
electronically as Exhibit 15.2 to Post-Effective Amendment No. 10 to
Registration Statement No. 33-54471, filed on or about April 30, 1998,
incorporated herein by reference.
By: /s/Mary Ellyn Minenko
Mary Ellyn Minenko
<PAGE>
CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 12 TO REGISTRATION STATEMENT
NO. 33-54471
This Amendment to the Registration Statement is comprised of the following
papers and documents:
The Cover Page.
Part A.
The prospectus.
Part B.
Statement of Additional Information.
Financial Statements.
Part C.
Other Information.
The signatures.
Exhibits.
<PAGE>
AEL Personal Portfolio Plus 2
Registration Number 33-54471
EXHIBIT INDEX
Exhibit 9 Opinion of Counsel.
Exhibit 10 Consent of Independent Auditors.
<PAGE>
April 28, 1999
American Enterprise Life Insurance Company
80 South Eighth Street
P.O. Box 534
Minneapolis, MN 55440-0534
RE: American Enterprise Variable Annuity Account
Post-Effective Amendment No. 12
File No.: 33-54471/811-7195
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
<PAGE>
Consent of Independent Auditors
We consent to the use of our report dated February 4, 1999 on the financial
statements American Enterprise Life Insurance Company and our report dated March
12, 1999 on the financial statements of American Enterprise Variable Annuity
Account in Post-Effective Amendment No. 12 to the Registration Statement (Form
N-4, No. 33-54471) and related Prospectus for the registration of the AEL
Personal Portfolio, AEL Personal Portfolio Plus and AEL Personal Portfolio Plus
2 Annuity Contracts to be offered by American Enterprise Life Insurance Company.
/s/Ernst & Young LLP
Minneapolis, Minnesota
April 28, 1999
