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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 1 (File No. 811-7195) [X]
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(Check appropriate box or boxes)
AMERICAN ENTERPRISE VARIABLE ANNUITY ACCOUNT
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(Exact Name of Registrant)
American Enterprise Life Insurance Company
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(Name of Depositor)
80 South 8th Street, P.O. Box 534, Minneapolis, MN 55440-0534
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(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (612) 671-3678
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Mary Ellyn Minenko, IDS Tower 10, Minneapolis, MN 55440-0010
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(Name and Address of Agent for Service)
It is proposed that this filing will become effective: As soon as possible
The Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8 (a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission acting pursuant to Section 8 (a) may
determine.
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Prospectus
, 1999
Variable Annuitysm
Individual flexible premium deferred combination fixed/variable annuity
American Enterprise Variable Annuity Account
Issued by: American Enterprise Life Insurance Company
Administrative Offices: 80 South Eighth Street, P.O. Box 534,
Minneapolis, MN 55440-0534
Telephone: 800-333-3437
This prospectus contains information that you should know before investing. You
also can receive the prospectuses for:
o AIM Variable Insurance Funds, Inc.
o IDS Life Retirement Annuity Funds
o Oppenheimer Variable Account Funds
o Putnam Variable Trust
o New Fund
o New Fund
Please read the prospectuses carefully and keep them for future reference. This
contract is available for nonqualified annuities, IRAs (including Roth IRAs),
Simplified Employee Pensions Plans (SEPs) and tax-sheltered annuity rollovers.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy of this prospectus. Any representation to
the contrary is a criminal offense.
An investment in this annuity is not a deposit of a bank or financial
institution and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. An investment in this annuity
involves investment risk including the possible loss of principal.
A Statement of Additional Information (SAI), dated the same date as this
prospectus, incorporated by reference into this prospectus and filed with the
Securities and Exchange Commission (SEC), is available without charge by
contacting American Enterprise Life at the telephone number above or by
completing and sending the order form on the last page of this prospectus. The
table of contents of the SAI is on the last page of this prospectus.
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Table of contents
Key Terms...............................................................
The Contract in Brief...................................................
Expense Summary.........................................................
Condensed Financial Information (unaudited).............................
Financial Statements....................................................
Performance Information.................................................
The Variable Account....................................................
The Funds...............................................................
The Fixed Account.......................................................
Buying your Contract....................................................
Charges.................................................................
Valuing your Investment.................................................
Making the Most of your Contract........................................
Withdrawals from your Contract..........................................
TSA - Special Withdrawal Provisions.....................................
Changing Ownership......................................................
Benefits in Case of Death...............................................
The Annuity Payout Period...............................................
Taxes...................................................................
Voting Rights...........................................................
Substitution of Investments.............................................
Distribution of the Contract............................................
About American Enterprise Life..........................................
Table of Contents of the Statement of Additional Information............
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Key terms
These terms can help you understand details about your contract.
Accumulation unit - A measure of the value of each variable subaccount before
annuity payouts begin.
Annuitant - The person on whose life or life expectancy the annuity payouts are
based.
Annuity payouts - An amount paid at regular intervals under one of several
plans.
Beneficiary - The person you designate to receive benefits in case of the
owner's or annuitant's death while the contract is in force and before annuity
payouts begin.
Close of business - When the New York Stock Exchange (NYSE) closes, normally 4
p.m. Eastern time.
Contract value - The total value of your contract before we deduct any
applicable charges.
Contract year - A period of 12 months, starting on the effective date of your
contract and on each anniversary of the effective date.
Fixed account - An account to which you may allocate purchase payments. Amounts
you allocate to this account earn interest at rates that we declare
periodically.
Funds- Investment options under your contract. You may allocate your purchase
payments into variable subaccounts investing in shares of any or all of these
funds.
Owner (you, your) - The person who controls the annuity (decides on investment
allocations, transfers, payout options, etc.). Usually, but not always, the
owner is also the annuitant. The owner is responsible for taxes, regardless of
whether he or she receives the contract's benefits.
Qualified annuity - An annuity that you purchase for one of the following
retirement plans that is subject to applicable federal law and any rules of the
plan itself:
o Individual Retirement Annuities (IRAs), including Roth IRAs
o Simplified Employee Pension Plans (SEPs)
o Tax-sheltered annuity (TSA) rollovers
All other contracts are nonqualified annuities.
Retirement date - The date when annuity payouts are scheduled to begin.
Valuation date - Any normal business day, Monday through Friday, that the NYSE
is open. Each valuation date ends at the close of business. We calculate the
value of each variable subaccount at the close of business on each valuation
date.
Variable account - Consists of separate subaccounts to which you may allocate
purchase payments; each subaccount invests in shares of one fund. The value of
your investment in each variable subaccount changes with the performance of the
fund.
Withdrawal value - The amount you are entitled to receive if you make a full
withdrawal from your contract. It is the contract value minus any applicable
withdrawal charge and contract administrative charge.
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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 annuity. The contract
provides lifetime or other forms of payouts beginning at a specified date (the
retirement date). As in the case of other annuities, it may not be advantageous
for you to purchase this contract as a replacement for, or in addition to an
existing annuity.
Free look period: You may return your contract to your sales representative or
to our Minneapolis administrative offices within the time stated on the first
page of your contract and receive a full refund of the contract value. We will
not deduct any charges. However, you bear the investment risk from the time of
purchase until you return the contract; the refund amount may be more or less
than the payment you made. (Exception: If the law requires, we will refund all
of your purchase payments.)
Accounts: Currently,you may allocate your purchase payments among any or all of:
o the variable subaccounts, each of which invests in a fund with a particular
investment objective. The value of each variable subaccount varies with the
performance of the particular fund in which it invests. We cannot guarantee
that the value at the retirement date will equal or exceed the total of
purchase payments allocated to the variable subaccounts. (p. )
o the fixed account, which earns interest at a rate that we adjust
periodically. (p. )
Buying the contract: Your sales representative will help you complete and submit
an application. Applications are subject to acceptance at our Minneapolis
administrative offices. You may buy a nonqualified annuity or a qualified
annuity. You must make an initial lump-sum purchase payment. You have the option
of making additional purchase payments in the future. Some states have time
limitations for making additional payments.
o Minimum initial purchase payment - $2,000
o Minimum additional purchase payment - $100 ($50 for Systematic
Investment Plan payments)
o Maximum total purchase payments (without prior approval)-
$1,000,000 (for issue ages up to 85)
$100,000 (for issue ages 86 to 90) (p.)
Transfers: Subject to certain restrictions you currently may redistribute your
money among accounts without charge at any time until annuity payouts begin, and
once per contract year among the variable subaccounts after annuity payouts
begin. You may establish automated transfers among the fixed account and
variable subaccount(s). Fixed account transfers are subject to special
restrictions. (p. )
Withdrawals: You may withdraw all or part of your contract value at any time
before the retirement date. You also may establish automated partial
withdrawals. Withdrawals may be subject to charges and tax penalties (including
a 10% IRS penalty if you make withdrawals prior to your reaching age 59 1/2) and
may have other tax consequences; also, certain restrictions apply. (p. )
Changing ownership: You may change ownership of a nonqualified annuity by
written instruction, but this may have federal income tax consequences.
Restrictions apply to changes of ownership of a qualified annuity. (p. )
Payment in case of death: If you or the annuitant die before annuity payouts
begin, we will pay the beneficiary an amount at least equal to the contract
value. (p. )
Annuity payouts: You can apply the contract value to an annuity payout plan that
begins on the retirement date. You may choose from a variety of plans to make
sure that payouts continue as long as you like. If you purchased a qualified
annuity, the payout schedule must meet the requirements of the qualified plan.
We can make payouts on a fixed or variable basis, or both. Total monthly payouts
may include amounts from each variable subaccount and the fixed account. (p. )
Taxes: Generally, your contract grows tax-deferred until you make withdrawals
from it or begin to receive payouts. (Under certain circumstances, IRS penalty
taxes may apply.) Even if you direct payouts to someone else, you will be taxed
on the income if you are the owner. However, Roth IRAs may grow and be
distributed tax free if you meet certain distribution requirements. (p.)
Charges:
o $30 annual contract administrative charge;
o 0.15% variable account administrative charge;
o 1.25% mortality and expense risk fee;
o withdrawal charge; and
o any premium taxes that may be imposed on us by state or local governments.
Currently, we deduct any applicable premium tax when you make a total
withdrawal or when annuity payouts begin, but we reserve the right to
deduct this tax at other times such as when you make purchase payments.;
and
o the operating expenses of the funds (p. )
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Expense Summary
The purpose of this table is to help you understand the various costs and
expenses associated with your contract.
You pay no sales charge when you purchase your contract. We show all costs that
you bear directly or indirectly for the variable subaccounts and funds below.
Some expenses may vary as we explain under "Charges."
Annual contract owner expenses:
Withdrawal charge (contingent deferred sales charge as a percentage of purchase
payment withdrawn)
Years from Withdrawal charge
payment receipt percentage
1 8.5%
2 8.5%
3 8%
4 7%
5 5%
6 4%
7 2%
Thereafter 0%
Contract administrative charge $30
Variable account annual expenses
(as a percentage of average daily net assets of the funds)
Variable account administrative charge...................0.15%
Mortality and expense risk fee...........................1.25%
Total annual variable account expenses............................1.40%
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<TABLE>
<CAPTION>
Annual operating expenses of the funds
(as a percentage of average net assets)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AIM V.I. AIM V.I. AIM V.I. New Fund 1 New Fund 2 New Fund 3 IDS Life IDS Life
Fund Fund Fund Growth Income
Dimensions Advantage
Fund Fund
Management fees 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
12b-1 fees 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Other expenses 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Total 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
IDS Life IDS Life IDS Life Oppenheimer Oppenheimer Oppenheimer Putnam Fund Putnam Fund
Managed Fund Moneyshare Special Fund Fund Fund
Fund Income Fund
Management fees 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
12b-1 fees 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Other expenses 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Total 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Putnam Fund New Fund 4 New Fund 5 New Fund 6 New Fund 7 New Fund 8 New Fund 9
Management fees 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
12b-1 fees 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Other expenses 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Total 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Example:*
AIM V.I. Fund AIM V.I. Fund AIM V.I. New Fund 1 New Fund 2 New Fund 3 IDS Life IDS Life
Fund Growth Income
Dimensions Advantage
Fund Fund
You would pay the following expenses on a $1,000 investment, assuming 5% annual
return and full withdrawal at the end of each time period:
1 year $ 00.00 $ 00.00 $ 00.00 $ 00.00 $ 00.00 $ 00.00 $ 00.00 $ 00.00
3 years 000.00 000.00 000.00 000.00 000.00 000.00 000.00 000.00
5 years 000.00 000.00 000.00 000.00 000.00 000.00 000.00 000.00
10 years 000.00 000.00 000.00 000.00 000.00 000.00 000.00 000.00
</TABLE>
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<TABLE>
<CAPTION>
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:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 year $ 00.00 $ 00.00 $ 00.00 $ 00.00 $ 00.00 $ 00.00 $ 00.00 $ 00.00
3 years 00.00 00.00 00.00 00.00 00.00 00.00 00.00 00.00
5 years 000.00 000.00 000.00 000.00 000.00 000.00 000.00 000.00
10 years 000.00 000.00 000.00 000.00 000.00 000.00 000.00 000.00
IDS Life IDS Life IDS Life Oppenheimer Oppenheimer Oppenheimer Putnam Fund Putnam
Managed Fund Moneyshare Special Fund Fund Fund Fund
Fund Income Fund
You would pay the following expenses on a $1,000 investment, assuming 5% annual
return and full withdrawal at the end of each time period:
1 year $ 00.00 $ 00.00 $ 00.00 $ 00.00 $ 00.00 $ 00.00 $ 00.00 $ 00.00
3 years 000.00 000.00 000.00 000.00 000.00 000.00 000.00 000.00
5 years 000.00 000.00 000.00 000.00 000.00 000.00 000.00 000.00
10 years 000.00 000.00 000.00 000.00 000.00 000.00 000.00 000.00
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 $ 00.00 $ 00.00 $ 00.00 $ 00.00 $ 00.00 $ 00.00 $ 00.00 $ 00.00
3 years 00.00 00.00 00.00 00.00 00.00 00.00 00.00 00.00
5 years 000.00 000.00 000.00 000.00 000.00 000.00 000.00 000.00
10 years 000.00 000.00 000.00 000.00 000.00 000.00 000.00 000.00
Putnam Fund New Fund 4 New Fund 5 New Fund 6 New Fund 7 New Fund 8 New Fund 9
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 $ 00.00 $ 00.00 $ 00.00 $ 00.00 $ 00.00 $ 00.00 $ 00.00
3 years 000.00 000.00 000.00 000.00 000.00 000.00 000.00
5 years 000.00 000.00 000.00 000.00 000.00 000.00 000.00
10 years 000.00 000.00 000.00 000.00 000.00 000.00 000.00
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 $ 00.00 $ 00.00 $ 00.00 $ 00.00 $ 00.00 $ 00.00 $ 00.00
3 years 00.00 00.00 00.00 00.00 00.00 00.00 00.00
5 years 000.00 000.00 000.00 000.00 000.00 000.00 000.00
10 years 000.00 000.00 000.00 000.00 000.00 000.00 000.00
</TABLE>
* In this example, the $30 annual contract administrative charge is approximated
as a 0.066% charge based on the average estimated contract size. Premium taxes
imposed by some state and local governments are not reflected in this example.
You should not consider this example to be a representation of past or future
expenses. Actual expenses may be more or less than those shown
Condensed Financial Information (unaudited)
The following tables give per-unit information about the financial history of
each variable subaccount. We have not provided this information for some of the
subaccounts because they are new and do not have any history.
[To be filed by amendment]
Financial Statements
[To be filed by amendment]
Performance Information
Performance information for the variable subaccounts may appear from time to
time in advertisements or sales literature. This information reflects the
performance of a hypothetical investment in a particular subaccount during a
specified time period. We show actual performance from the date the subaccounts
began investing in the funds. For some subaccounts, we do not provide any
performance information because they are new and have not had any activity to
date. We also show performance from the commencement date of the funds as if the
contract had existed at that time. Past performance does not guarantee future
results.
We include non-recurring charges (such as withdrawal charges) in total return
figures, but not in yield quotations. Excluding non-recurring charges in yield
calculations increases the reported value.
Total return figures reflect the deduction of all applicable charges including:
o contract administrative charge;
o mortality and expense risk fee;
o variable account administrative charge; and
o withdrawal charge (assuming a withdrawal at the end of the illustrated period)
We also show optional total return quotations that do not reflect a withdrawal
charge deduction (assuming no withdrawal). We may show total return quotations
by means of schedules, charts or graphs.
Average annual total return is the average annual compounded rate of return of
the investment over a period of one, five and 10 years (or up to the life of the
subaccount if it is less than 10 years old).
Cumulative total return is the cumulative change in the value of the investment
over a specified time period. We assume that income earned by the investment is
reinvested. Cumulative total return will be higher than average annual total
return because it is not averaged.
Annualized simple yield (for subaccounts investing in money market funds)
"annualizes" the income generated by the investment over a given seven day
period. That is, we assume the amount of income generated by the investment
during the period will be generated each seven-day period for a year.
We show this as a percentage of the investment.
Annualized compound yield (for subaccounts investing in money market funds) is
calculated like simple yield except that we assume the income is reinvested when
we annualize it. Compound yield will be higher than simple yield because of the
compounding effect of the assumed reinvestment.
Annualized yield (for subaccounts investing in income funds) divides the net
investment income (income less expenses) for each accumulation unit during a
given 30-day period by the value of the unit on the last day of the period. We
then convert the result to an annual percentage.
You should consider performance information in light of the investment
objectives and policies, characteristics and quality of the fund in which the
subaccount invests and the market conditions during the given time period. If
you would like additional information about actual performance, contact us at
the address or telephone number on the cover.
The Variable Account
You may allocate purchase payments to any or all of the subaccounts of the
variable account that invest in shares of the following funds:
Subaccount Investing In:
AIM V.I. Fund
AIM V.I. Fund
AIM V.I. Fund
New Fund 1
New Fund 2
New Fund 3
IDS Life Growth Dimensions Fund
IDS Life Income Advantage Fund
IDS Life Managed Fund
IDS Life Moneyshare Fund
IDS Life Special Income Fund
Oppenheimer Fund
Oppenheimer Fund
Oppenheimer Fund
Putnam Fund
Putnam Fund
Putnam Fund
New Fund 4
New Fund 5
New Fund 6
New Fund 7
New Fund 8
New Fund 9
We reserve the right to limit the maximum number of subaccounts to which you can
allocate purchase payments or contract value at any time.
The variable account also includes other subaccounts that are available under
contracts not described in this prospectus. The variable account meets the
definition of a separate account under federal securities laws. We credit or
charge income, capital gains and capital losses of each subaccount only to that
subaccount. State insurance law provides that we will not charge a subaccount
with liabilities of any other variable subaccount or of our general business.
The U.S. Treasury and the Internal Revenue Service (IRS) said that they may
provide additional guidance on investment control. This concerns how many
variable subaccounts an insurance company may offer and how many exchanges among
variable subaccounts it may allow before the contract owner would be currently
taxed on income earned within subaccount assets. At this time, we do not know
what the additional guidance will be or when action will be taken. We reserve
the right to modify the contract, as necessary, so that the contract owner will
not be subject to current taxation as the owner of the subaccount assets.
We intend to comply with all federal tax laws so that the contract continues to
qualify as an annuity for federal income tax purposes. We reserve the right to
modify the contract as necessary to comply with any new tax laws.
The variable account was established under Indiana law on July 15, 1987, and the
subaccounts are registered together as a single unit investment trust under the
Investment Company Act of 1940 (the 1940 Act). This registration does not
involve any supervision of our management or investment practices and policies
by the SEC. All obligations arising under the contracts are general obligations
of American Enterprise Life.
<PAGE>
The Funds
AIM V.I. Fund
AIM V.I. Fund
AIM V.I. Fund [To be filed by amendment]
New Fund 1
New Fund 2
New Fund 3
IDS Life Growth Dimensions Fund seeks long-term growth of capital. Invests
primarily in common stocks of U.S. and foreign companies showing potential for
significant growth.
IDS Life Income Advantage Fund seeks high current income, with capital growth as
a secondary objective. Invests primarily in long-term, high-yielding, high-risk
debt securities below investment grade issued by U.S. and foreign corporations.
IDS Life Managed Fund seeks maximum total investment return. Invests primarily
in U.S. common stocks, securities convertible into commons stock, warrants,
fixed income securities (primarily high-quality corporate bonds) and money
market instruments.
IDS Life Moneyshare Fund seeks maximum current income consistent with liquidity
and conservation of capital. Invests in high-quality money market securities
with remaining maturities of 13 months or less. The fund also will maintain a
dollar-weighted average portfolio maturity not exceeding 90 days. The fund
attempts to maintain a constant net asset value of $1 per share.
IDS Life Special Income Fund seeks a high level of current income while
conserving the value of the investment for the longest time period. Invests
primarily in high-quality, lower-risk corporate bonds issued by many different
companies in a variety of industries, and in government bonds.
Oppenheimer Fund
Oppenheimer Fund
Oppenheimer Fund
Putnam Fund
Putnam Fund
Putnam Fund [To be filed by amendment]
New Fund 4
New Fund 5
New Fund 6
New Fund 7
New Fund 8
New Fund 9
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
advisers and their affiliates manage. Although the objectives and policies may
be similar, each fund will have its own portfolio holdings and its own fees and
expenses. Accordingly, each fund will have its own investment results.
The investment managers for the funds are as follows:
o AIM Variable Insurance Funds - A I M Advisors, Inc.
o IDS Life Funds - IDS Life. American Express Financial Corporation (AEFC) is
the investment advisor for the IDS Life Funds.
o Oppenhiemer Variable Account Funds - OppenheimerFunds, Inc.
o Putnam Variable Trust - Putnam Investment Management, Inc.
[Managers for the new funds to be filed by amendment]
The investment advisers cannot guarantee that the funds will meet their
investment objectives. Also, there is not any guarantee that your contract value
will equal or exceed the total purchase payments you made. Please read the fund
prospectuses for complete information on investment risks, deductions, expenses
and other facts you should know before investing. You should consider carefully,
and on a continuing basis, which funds are best suited to your long-term
investment needs. Some funds involve more risk than others, so please monitor
your investment. The fund prospectuses are available by contacting us at our
administrative offices address or telephone number on the front of this
prospectus.
All funds are available to serve as investment options under variable annuities,
and some funds also are available to serve as underlying investments for
variable life insurance policies and qualified plans. It is possible that in the
future it may be disadvantageous for variable annuity accounts, variable life
insurance accounts and/or qualified plans to invest in the available funds
simultaneously. Although the insurance company and the funds currently do not
foresee any such disadvantages, the boards of directors or trustees of the
appropriate funds will monitor events in order to identify any material
conflicts between such annuity owners, policy owners and qualified plans and to
determine what action, if any, should be taken in response to a conflict. If a
board were to conclude that it should establish separate funds for the variable
annuity, variable life insurance and qualified plan accounts, you would not bear
any expenses associated with establishing separate funds. Please refer to the
fund prospectuses for risk disclosure regarding simultaneous investments by
variable annuity, variable life insurance and qualified plan accounts.
The IRS has issued final regulations relating to the diversification
requirements under Section 817(h) of the Internal Revenue Code of 1986, as
amended (Code). Each fund intends to comply with these requirements.
The Fixed Account
You also may allocate purchase payments to the fixed account. We back the
principal and interest guarantees relating to the fixed account. The value of
the fixed account increases as we credit interest to the account. Purchase
payments and transfers to the fixed account become part of the general account
of American Enterprise Life, the company's main portfolio of investments. We
credit and compound interest daily to produce an effective annual interest rate.
We may change the interest rate from time to time. However, we guarantee that
the rate will not be less than a 3% effective annual interest rate. We will not
change the rate we credit to any portion of the fixed account contract value
more than once each year.
Interests in the fixed account are not required to be registered with the SEC.
The SEC staff does not review the disclosures in this prospectus on the fixed
account. Disclosures regarding the fixed account, however, may be subject to
certain generally applicable provisions of the federal securities laws relating
to the accuracy and completeness of statements made in prospectuses. (See
"Transfer policies" for restrictions on transfers involving the fixed account).
Buying your Contract
Your sales representative will help you prepare and submit your application, and
send it along with your initial purchase payment to our Minneapolis
administrative office. As the owner, you have all rights and may receive all
benefits under the contract. You can own a nonqualified annuity in joint tenancy
with rights of survivorship only in spousal situations. You cannot own a
qualified annuity in joint tenancy. You can buy a contract or become an
annuitant if you are 90 or younger.
When you apply, you may select:
o the fixed account and/or subaccount(s) in which you want to invest;
o how you want to make purchase payments;
o the date you want to start receiving annuity payouts (the retirement date);
and
o a beneficiary.
The contract provides for allocation of purchase payments to the subaccounts
and/or to the fixed account in even 1% increments.
If your application is complete, we will process it and apply your purchase
payment to the fixed account and subaccount(s) you selected within two business
days after we receive it at our Minneapolis administrative offices. If we accept
your application, we will send you a contract. If we cannot accept your
application within five business days, we will decline the application and
return your payment. We will credit the additional purchase payments you make to
your accounts on the valuation date we receive them. We will value the
additional payments at the next accumulation unit value calculated after we
receive your payments at our Minneapolis administrative offices.
You may make monthly payments to your contract under a Systematic Investment
Plan (SIP). You must make an initial purchase payment of at least $2,000. Then,
to begin the SIP, you will complete and send a form and your first SIP payment
along with your application. There is no charge for SIP. You can stop your SIP
payments at any time.
In most states, you may make additional purchase payments to nonqualified and
qualified annuities until the retirement date.
The retirement date
Annuity payouts are scheduled to begin on the retirement date. You can align
this date with your actual retirement from a job, or it can be a different
future date, depending on your needs and goals and on certain restrictions. You
also can change the date, provided you send us written instructions at least 30
days before annuity payouts begin.
For nonqualified annuities and Roth IRAs, the retirement date must be:
o no earlier than the 60th day after the contract's effective date; and
o no later than the annuitant's 85th birthday (or the 10th contract
anniversary, if later).
For qualified annuities (except Roth IRAs), to avoid IRS penalty taxes, the
retirement date generally must be:
o on or after the annuitant reaches age 59 1/2; and
o for IRAs and SEPs, by April 1 of the year following the calendar year when
the annuitant reaches age 70 1/2; or
o for TSAs:
- by April 1 of the year following the calendar year when the annuitant
reaches age 70 1/2, or,
- if later, retires (except that 5% business owners may not select a
retirement date that is later than April 1 of the year following the
calendar year when they reach age 70 1/2.)
If you are taking the minimum IRA or TSA distributions as required by the Code
from another tax-qualified investment, or in the form of partial withdrawals
from this contract, annuity payouts can start as late as the annuitant's 85th
birthday or the 10th contract anniversary, if later.
Beneficiary
If death benefits become payable before the retirement date while the contract
is in force and before annuity payouts begin, we will pay your named beneficiary
all or part of the contract value. If there is no named beneficiary, then you or
your estate will be the beneficiary. (See "Benefits in case of death" for more
about beneficiaries.)
Purchase payment amounts
Minimum initial purchase payment (includes SIPs): $2,000
Minimum additional purchase payment:
$100 for regular purchase payments
$ 50 for SIPs
Maximum total purchase payments:
$1,000,000 (for issue ages up to 85 without prior approval)
$100,000 (for issue ages 86 to 90 without prior approval)
How to make purchase payments
By letter
Send your check along with your name and contract number to:
Regular mail:
American Enterprise Life Insurance Company
80 South Eighth Street
P.O. Box 534
Minneapolis, MN 55440-0534
Express mail:
American Enterprise Life Insurance Company
Attention: Unit 829
733 Marquette Avenue
Minneapolis, MN 55402
By SIP:
Contact your sales representative to complete the necessary SIP paperwork.
Charges
Contract administrative charge
We charge this fee for establishing and maintaining your records. We deduct $30
from the contract value on your contract anniversary at the end of each contract
year. We prorate this charge among the subaccounts and the fixed account in the
same proportion your interest in each account bears to your total contract
value. We will waive this charge when the contract value is $50,000 or more on
the current contract anniversary. If you take a full withdrawal from your
contract, we will deduct the $30 annual charge at the time of withdrawal
regardless of contract value. We cannot increase the annual contract charge and
it does not apply after annuity payouts begin or when we pay death benefits.
Variable account administrative charge
We apply this charge daily to the variable subaccounts. It is reflected in the
unit values of the subaccounts and it totals 0.15% of their average daily net
assets on an annual basis. It covers certain administrative and operating
expenses of the subaccounts such as accounting, legal and data processing fees
and expenses involved in the preparation and distribution of reports and
prospectuses. We cannot increase the variable account administrative charge.
Mortality and expense risk fee
We charge this fee daily to the variable subaccounts. The unit values of your
subaccounts reflect this 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 have assumed in our actuarial tables, then we must take money from
our general assets to meet our obligations. If, as a group, annuitants do not
live as long as expected, we could profit from the mortality risk fee.
Expense risk arises because we cannot increase the contract administrative
charge and variable account administrative charge and these charges may not
cover our expenses. We would have to make up any deficit from our general
assets.
The subaccounts pay us the mortality and expense risk fee they have accrued as
follows: first, to the extent possible, the subaccounts pay this fee from any
dividends distributed from the funds in which they invest; then, if necessary,
the funds redeem shares to cover any remaining fees payable. We may use any
profits we realize from the subaccounts' payment to us of the mortality and
expense risk fee for any proper corporate purpose, including, among others,
payment of distribution (selling) expenses. We do not expect that the withdrawal
charge, discussed in the following paragraphs, will cover sales and distribution
expenses.
Withdrawal charge
If you withdraw part or all of your contract, you may be subject to a withdrawal
charge. We calculate the withdrawal charge by drawing from your total contract
value in the following order:
o First, we withdraw up to 15% of your prior anniversary contract value that
you have not yet withdrawn during this contract year. There is no
withdrawal charge on this amount.
o Next, we withdraw contract earnings, if any, that are greater than the
annual 15% free withdrawal amount described above. Contract
earnings are contract value minus all purchase payments received and not
previously withdrawn. We determine contract earnings by looking at the
entire contract value, not the earnings of any particular subaccount or the
fixed account. There is no withdrawal charge on this amount.
o Next, we withdraw purchase payments we received eight or more years before
the withdrawal and not previously withdrawn. There is no withdrawal charge
on purchase payments received eight or more years before withdrawal.
o Finally, if necessary, we withdraw purchase payments received in the seven
years before the withdrawal on a "first-in, first-out" (FIFO) basis. There
is a withdrawal charge on these payments. We determine your withdrawal
charge by multiplying each of these payments by the applicable withdrawal
charge percentage, and then totaling the withdrawal charges.
The withdrawal charge percentage depends on the number of years since you made
the payment(s) withdrawn.
Years from Withdrawal charge
payment receipt percentage
1 8.5%
2 8.5%
3 8%
4 7%
5 5%
6 4%
7 2%
Thereafter 0%
Withdrawal charge calculation example
The following is an example of the calculation we would make to determine the
withdrawal charge on a contract with this history:
o The contract date is July 1, 1999 with a contract year of July 1 through
June 30 and with an anniversary date of July 1 each year; and
<PAGE>
o We received these payments:
- $10,000 July 1, 1999;
- $8,000 Dec. 31, 2004; and
- $6,000 Feb. 20, 2007; and
o The owner withdraws the contract for its total withdrawal value of $38,101
on Aug. 5, 2009 and had not made any other withdrawals during that contract
year; and
o The prior anniversary July 1, 2008 contract value was $38,488.
Withdrawal charge Explanation
$0 $5,773.20 is 15% of the prior anniversary contrac
value withdrawn without withdrawal charge; and
0 $8,327.80 is contract earnings in excess of the
15% free withdrawal amount withdrawn without
withdrawal charge; and
0 $10,000 July 1, 1999 payment was received eight or
more years before withdrawal and is withdrawn
without withdrawal charge; and
$400 $8,000 Dec. 31, 2004 payment is in its fifth year
from receipt, withdrawn with a 5% withdrawal
charge; and
$480 $6,000 Feb. 20, 2007 payment is in its third year
from receipt withdrawn with a 8% withdrawal
charge.
- ---------------------------
$880
For a partial withdrawal that is subject to a withdrawal charge, the amount we
actually withdraw from your contract value will be the amount you request plus
any applicable withdrawal charge. We apply the withdrawal charge to this total
amount. We pay you the amount you requested. If you take a full withdrawal from
your contract, we also will deduct the $30 contract charge.
Waiver of withdrawal charge There are no withdrawal charges for:
o withdrawals during the year totaling the greater of 15% of your prior
contract anniversary contract value or contract earnings;
o required minimum distributions from a qualified annuity (for those amounts
required to be distributed from the contract described in this prospectus);
o contracts settled using an annuity payout plan;
o death benefits;
o withdrawals you make under your contract's "Waiver of Withdrawal Charges"
provision. To the extent permitted by state law, your contract will include
this provision when the owner and annuitant are under age 76 on the date we
issue the contract. We will waive withdrawal charges that normally are
assessed upon full or partial withdrawal if you provide proof satisfactory
to us that, as of the date you request the withdrawal, you or the annuitant
are confined to a hospital or nursing home and have been for the prior 60
days. (See your contract for additional conditions and restrictions on this
waiver); and
o withdrawals you make if you or the annuitant are diagnosed in the second or
later contract years as disabled with a medical condition that with
reasonable medical certainty will result in death within 12 months or less
from the date of the licensed physician's statement. You must provide us
with a licensed physician's statement containing the terminal illness
diagnosis and the date the terminal illness was initially diagnosed.
Possible group reductions: In some cases, we may incur lower sales and
administrative expenses due to the size of the group, the average contribution
and the use of group enrollment procedures. In such cases, we may be able to
reduce or eliminate the contract administrative and withdrawal charges. However,
we expect this to occur infrequently.
Premium taxes
Certain state and local governments impose premium taxes (up to 3.5%). These
taxes depend upon your state of residence or the state in which the contract was
sold. Currently, we deduct any applicable premium tax when you make a full
withdrawal from your contract or when annuity payouts begin, but we reserve the
right to deduct this tax at other times such as when you make purchase payments.
Valuing your Investment
We value your fixed account and variable subaccounts as follows:
Fixed account: We value the amounts you allocated to the fixed account directly
in dollars. The fixed account value equals:
o the sum of your purchase payments and transfer amounts allocated to the
fixed account; plus interest credited;
o minus the sum of amounts withdrawn (including any applicable withdrawal
charges) and amounts transferred out; and
o minus any prorated contract administrative charge.
Variable subaccounts: We convert amounts you allocated to the variable
subaccounts into accumulation units. Each time you make a purchase payment or
transfer amounts into one of the variable subaccounts, we credit a certain
number of accumulation units to your contract for that subaccount. Conversely,
each time you take a partial withdrawal, transfer amounts out of a variable
subaccount or we assess a contract administrative charge, we subtract a certain
number of accumulation units from your contract.
The accumulation units are the true measure of investment value in each
subaccount during the accumulation period. They are related to, but not the same
as, the net asset value of the fund in which the subaccount invests. The dollar
value of each accumulation unit can rise or fall daily depending on the variable
account expenses, performance of the fund and on certain fund expenses.
Here is how we calculate accumulation unit values:
Number of units
To calculate the number of accumulation units for a particular subaccount, we
divide your investment, after deduction of any premium taxes, by the current
accumulation unit value.
Accumulation unit value
The current accumulation unit value for each variable subaccount equals the last
value times the subaccount's current net investment factor.
Net investment factor
We determine the net investment factor by:
o adding the fund's current net asset value per share, plus the per-share
amount of any accrued income or capital gain dividends to obtain a current
adjusted net asset value per share; then
o dividing that sum by the previous adjusted net asset value per share; and
o subtracting the percentage factor representing the mortality and expense
risk fee and the variable account administrative charge from the result.
Because the net asset value of the fund may fluctuate, the accumulation unit
value may increase or decrease. You bear all the investment risk in a variable
subaccount.
Factors that affect variable subaccount accumulation units
Accumulation units may change in two ways; in number and in value. Here are the
factors that influence those changes:
The number of accumulation units you own may fluctuate due to:
o additional purchase payments you allocate to the variable subaccount(s);
o transfers into or out of the variable subaccount(s);
o partial withdrawals;
o withdrawal charges; and/or
o prorated portions of the contract administrative charge.
Accumulation unit values will fluctuate due to:
o changes in net asset value of fund(s);
o dividends distributed to the variable subaccount(s);
o capital gains or losses of fund(s);
o fund operating expenses;
o mortality and expense risk fees; and/or
o variable account administrative charges.
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 variable
subaccount to a more aggressive one, or to several others, or from the fixed
account to one or more variable subaccounts. You also can obtain the benefits of
dollar-cost averaging by setting up regular automatic SIP payments. There is no
charge for dollar-cost averaging.
This systematic approach can help you benefit from fluctuations in accumulation
unit values caused by fluctuations in the market values of the underlying funds.
Since you invest the same amount each period, you automatically acquire more
units when the market value falls and fewer units when it rises. The potential
effect is to lower your average cost per unit.
<TABLE>
<CAPTION>
How dollar-cost averaging works
<S> <C> <C> <C> <C>
Month Amount Accumulation Number of units
invested unit value purchased
By investing an Jan $100 $20 5.00
equal number of
dollars each month... Feb 100 18 5.56
Mar 100 17 5.88
you automatically Apr 100 15 6.67
buy more units
when the per unit May 100 16 6.25
market price is low...
Jun 100 18 5.56
Jul 100 17 5.88
Aug 100 19 5.26
and fewer units Sep 100 21 4.76
when the per unit
market price is high Oct 100 20 5.00
</TABLE>
You have paid an average price of only $17.91 per unit over the 10 months, while
the average market price actually was $18.10.
Dollar-cost averaging does not guarantee that any variable subaccount will gain
in value nor will it protect against a decline in value if market prices fall.
Because dollar-cost averaging involves continuous investing, your success will
depend upon your willingness to continue to invest regularly through periods of
low price levels. Dollar-cost averaging can be an effective way to help meet
your long-term goals. Some restrictions apply. For specific features, contact
your sales representative.
Asset allocation and rebalancing
You can ask us in writing to have the variable subaccount portion of your
contract value allocated according to the percentages (in whole percentage
amounts) that you choose. We automatically will rebalance this variable
subaccount portion of your contract value either quarterly, semi-annually or
annually. The period you select will start to run on the date we record your
request. On the first valuation date of each of these periods, we automatically
will rebalance your contract value so that the value in each variable
suabaccount account matches your current variable subaccount percentage
allocations. These percentage allocations must be in whole numbers. Asset
rebalancing does not apply to the fixed account. There is no charge for asset
rebalancing.
You can change your percentage allocations or your rebalancing period at any
time by contacting us in writing. We will restart the rebalancing period you
selected as of the date we record your change. You also can ask us in writing to
stop rebalancing your contract value. You must allow 30 days for us to change
any instructions that currently are in place. For more information on asset
rebalancing, contact your sales representative.
Transferring money between accounts
You may transfer money from any one subaccount, or the fixed account, to another
before annuity payouts begin. (Certain restrictions apply to transfers involving
the fixed account.) We will process your transfer 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, at our sole discretion, that the exercise of that right by one
or more contract owners is, or would be, to the disadvantage of other contract
owners. We could apply any modification to transfers to or from some or all of
the subaccounts. These modifications could include, but not be limited to:
o the requirement of a minimum time period between each transfer;
o not accepting transfer requests of a sales representative acting under a
power of attorney on behalf of more than one contract owner; or
o limiting the dollar amount that a contract owner can transfer between the
subaccounts and the fixed account at any one time.
We may apply these modifications or restrictions in any reasonable manner to
prevent transfers we believe will disadvantage other contract owners. (For
information on transfers after annuity payouts begin, see "Transfer policies.")
Transfer policies
o Before annuity payouts begin, you may transfer contract values between
the variable subaccounts or from the subaccount(s) to the fixed account
at any time. However, if you made a transfer from the fixed account to
the subaccount(s), you may not make a transfer from any subaccount back
to the fixed account for six months following that transfer.
o You may transfer contract values from the fixed account to the variable
subaccount(s) on or within 30 days before or after the contract
anniversary (except for automated transfers, which can be set up for
certain transfer periods subject to certain minimums). The transfer
from the fixed account to the variable subaccount(s) will be effective
on the valuation date we receive it.
o We will not accept requests for transfers from the fixed account at an
other time.
o Once annuity payouts begin, you may not make transfers to or from the
fixed account, but you may make transfers once per contract year among
the variable subaccounts. During the annuity payout period, we reserve
the right to limit the number of subaccounts in which you may invest.
How to request a transfer or a withdrawal
1 By letter
Send your name, contract number, Social Security number or Taxpayer
Identification Number and signed request for a transfer or withdrawal to:
Regular mail:
American Enterprise Life Insurance Company
80 South Eighth Street
P.O. Box 534
Minneapolis, MN 55440-0534
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 o
fixed account balance
2 By automated transfers and automated partial withdrawals
Your sales representative can help you set up automated transfers among your
subaccount(s) or fixed account or partial withdrawals from the accounts.
You can start or stop this service by written request or other method acceptable
to us. You must allow 30 days for us to change any instructions that currently
are in place.
o Automated transfers may not exceed an amount that, if continued, would
deplete the fixed account or subaccount(s) from which you are
transferring within 12 months unless we agree otherwise.
o Automated transfers and automated partial withdrawals are subject to
all of the contract provisions and terms, including transfer of
contract values between accounts. Automated withdrawals may be
restricted by applicable law under some contracts.
o Automated partial withdrawals may result in IRS taxes and penalties on
all or part of the amount withdrawn.
Minimum amount
Automated transfers or withdrawals: $100 monthly/$250 quarterly,
semiannually or annually
Maximum amount
Automated transfers or withdrawals: Contract value (except for
automated transfers from the
fixed account)
3 By Phone
Call between 8 a.m. and 6 p.m. Central time:
1-800-333-3437 or
(612) 671-7700 (Minneapolis/St. Paul area)
Minimum amount
For transfers or withdrawals: $500 or entire subaccount or fixed account balance
<PAGE>
Maximum amount
For transfers: Contract value or the entire variable 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 request that we believe is
authentic and we will use reasonable procedures to confirm that it is. This
includes asking identifying questions and tape recording calls. As long as we
follow the procedures, we (and our affiliates) will not be liable for any loss
resulting from fraudulent requests.
Telephone transfers and withdrawals are automatically available. You may request
that telephone transfers and withdrawals not be authorized from your account by
writing to us.
Withdrawals from your Contract
You may withdraw all or part of your contract at any time before annuity payouts
begin by sending us a written request. We will process your withdrawal request
on the valuation date we receive it. We will compute the value of your contract
at the next accumulation unit value calculated after we receive your request.
For total withdrawals, we may ask you to return the contract. You may have to
pay withdrawal charges (see "Withdrawal charge") and IRS taxes and penalties
(see "Taxes"). You cannot make withdrawals after annuity payouts begin.
Withdrawal policies
If you have a balance in more than one account and request a partial withdrawal,
we will withdraw money from all your subaccounts and/or the fixed account in the
same proportion as your value in each correlates to your total contract value,
unless you request otherwise.
Receiving payment when you request a withdrawal By regular or express mail:
o Payable to you.
o Mailed to address of record.
NOTE: We will charge you a fee if you request express mail delivery.
Normally, we will send the payment within seven days after receiving your
request. However, we may postpone the payment if:
-the withdrawal amount includes a purchase payment check that has not
cleared;
-the NYSE is closed, except for normal holiday and weekend
closings;
-trading on the NYSE is restricted, according to SEC rules;
-an emergency, as defined by SEC rules, makes it impractical to sell
securities or value the net assets of the accounts; or
-the SEC permits us to delay payment for the protection of security
holders.
TSA Special Surrender Provisions
Participants in tax-sheltered annuities: The Code imposes certain restrictions
on your right to receive early distributions from a TSA:
o Distributions attributable to salary reduction contributions (plus
earnings) made after Dec. 31, 1988, or to transfers or rollovers from other
contracts, may be made from the TSA only if:
- you are at least age 59 1/2;
- you are disabled as defined in the Code;
- you separated from the service of the employer who purchased the
contract; or
- the distribution is because of your death.
o If you encounter a financial hardship (as defined by the Code), you may
receive a distribution of all contract values attributable to salary
reduction contributions made after Dec. 31, 1988, but not the earnings on
them.
o Even though a distribution may be permitted under the above rules, it may
be subject to IRS taxes and penalties (see "Taxes").
o The above restrictions on distributions do not affect the availability of
the amount credited to the contract as of Dec. 31, 1988. The restrictions
also do not apply to transfers or exchanges of contract value within the
contract, or to another registered variable annuity contract or investment
vehicle available through the employer.
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 Minneapolis
administrative offices. 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 do not take responsibility for the validity of the
change.
If you have a nonqualified annuity, you may incur income tax liability by
transferring, assigning or pledging any part of it. (See "Taxes.")
If you have a qualified annuity, you may not sell, assign, transfer, discount or
pledge your contract as collateral for a loan, or as security for the
performance of an obligation or for any other purpose except as required or
permitted by the Code.
Benefits in Case of Death
There are two death benefit options under this contract. If both you and the
annuitant are under age 76 on the contract date, you can elect either Option A
or Option B in your application. If either you or the annuitant are age 76 or
older on the contract date, Option B will apply. We show the option that applies
in your contract.
Under either option, we will pay the death benefit to your beneficiary upon the
earlier of your death or the annuitant's death. If a contract has more than one
person as the owner, we will pay benefits upon the first to die of any owner or
the annuitant.
Option A
We will pay the beneficiary the greatest of:
1. the contract value; or
2. the total purchase payments paid less "adjustments for partial
withdrawals;" or
3. the "maximum anniversary value" immediately preceding the date of death
increased by the dollar amount of any payments since that anniversary and
reduced by any adjustments for partial withdrawals since that anniversary.
Maximum anniversary value: Each contract anniversary prior to the earlier of
your or the annuitant's 81st birthday, we calculate the anniversary value which
is the greater of:
(a) the contract value on that anniversary; or
(b) total payments made to the contract minus adjustments for partial
withdrawals.
The "maximum anniversary value" is equal to the greatest of these anniversary
values.
Option B
We will pay the beneficiary the greatest of:
1. the contract value; or
2. the total purchase payments paid less "adjustments for partial
withdrawals;" or
3. the maximum fifth year anniversary value immediately preceding the date of
death increased by the dollar amount of any payments since that fifth
anniversary and reduced by any adjustments for partial withdrawals since
that fifth anniversary.
Maximum fifth year anniversary value: Each fifth contract anniversary prior to
the earlier of your or the annuitant's 86th birthday, we calculate the fifth
year anniversary value which is the greater of:
(a) the contract value on that anniversary; or
(b) total payments made to the contract minus adjustments for partial
withdrawals.
The "maximum fifth year anniversary value" is equal to the greatest of these
fifth year anniversary values.
Adjustments for partial withdrawals: Under either Option A or Option B, we
calculate "adjustments for partial withdrawals" for each partial withdrawal as
the product of (a) times (b) where:
(a) is the ratio of the amount of the partial withdrawal (including any
applicable withdrawal charge) to the contract value on the date of (but
prior to) the partial withdrawal; and
(b) is the death benefit on the date of (but prior to) the partial
withdrawal.
Example:
[To be filed by amendment]
If your spouse is sole beneficiary under a nonqualified annuity and you die
before the retirement date, your spouse may keep the contract as owner. To do
this your spouse must, within 60 days after we receive proof of death, give us
written instructions to keep the contract in force.
Under a qualified annuity, if the annuitant dies before the Code requires
distributions to begin, and the spouse is the only beneficiary, the spouse may
keep the contract as owner until the date on which the annuitant would have
reached age 70 1/2 or any other date permitted by the Code. To do this, the
spouse must give us written instructions within 60 days after we receive proof
of death.
Payments: Under a nonqualified annuity, we will pay the beneficiary in a single
sum unless you give us other written instructions. We must fully distribute the
death benefit within five years of your death. However, the beneficiary may
receive payouts under any annuity payout plan available under this contract if:
o the beneficiary asks us in writing within 60 days after we receive proof of
death; and
o payouts begin no later than one year after your death, or other date as
permitted by the Code; and
o the payout period does not extend beyond the beneficiary's life or life
expectancy.
When paying the beneficiary, we will process the death claim on the valuation
date our death claim requirements are fulfilled. We will determine the
contract's value at the next accumulation unit value calculated after our death
claim requirements are fulfilled. We will pay interest, if any, from the date of
death at a rate no less than required by law. We will mail payment to the
beneficiary within seven days after our death claim requirements are fulfilled.
Other rules may apply to qualified annuities. (See "Taxes.")
The Annuity Payout Period
As owner of the contract, you have the right to decide how and to whom annuity
payouts will be made starting at the retirement date. You may select one of the
annuity payout plans outlined below, or we may mutually agree on other payout
arrangements. We do not deduct withdrawal charges under the payout plans listed
below.
You also decide whether we will make annuity payouts on a fixed or variable
basis, or a combination of fixed and variable. The amount available to purchase
payouts under the plan you select is the contract value on your retirement date
(less any applicable premium tax). You may reallocate this contract value to the
fixed account to provide fixed dollar payouts and/or among the subaccounts to
provide variable annuity payouts. During the annuity payout period, we reserve
the right to limit the number of subaccounts in which you may invest.
Amounts of fixed and variable payouts depend on:
o the annuity payout plan you select;
o the annuitant's age and, in most cases, sex;
o the annuity table in the contract; and
o the amounts you allocated to the account(s) at settlement.
In addition, for variable payouts only, amounts depend on the investment
performance of the subaccount(s) you select. These payouts will vary from month
to month because the performance of the underlying funds will fluctuate. (In the
case of fixed annuities, payouts remain the same from month to month.) For
information with respect to transfers between accounts after annuity payouts
begin, see "Transfer policies."
Annuity Table
The annuity table in your contract shows the amount of the first monthly payment
for each $1,000 of contract value according to the age and, when applicable, the
sex of the annuitant. (Where required by law, we will use a unisex table of
settlement rates.) The table assumes that the contract value is invested at the
beginning of the annuity payout period and earns a 5% rate of return, which is
reinvested and helps to support future payouts.
<PAGE>
Substitution of 3.5% Table
If you ask us at least 30 days before the retirement date, we will substitute an
annuity table based on an assumed 3.5% investment rate for the 5% table in the
contract. The assumed investment rate affects both the amount of the first
payout and the extent to which subsequent payouts increase or decrease. Using
the 5% table results in a higher initial payment, but later payouts will
increase more slowly when annuity unit values are rising and decrease more
rapidly when they are declining.
Annuity payout plans
You may choose any one of these annuity payout plans by giving us written
instructions at least 30 days before contract values are to be used to purchase
the payout plan:
o Plan A - Life annuity - no refund: We make monthly payouts until the
annuitant's death. Payouts end with the last payout before the annuitant's
death; we will not make any further payouts. This means that if the annuitant
dies after we have made only one monthly payout, we will not make any more
payouts.
o Plan B - Life annuity with five, 10 or 15 years certain: We make monthly
payouts for a guaranteed payout period of five, 10 or 15 years that you elect.
This election will determine the length of the payout period to the beneficiary
if the annuitant should die before the elected period has expired. We calculate
the guaranteed payout period from the retirement date. If the annuitant outlives
the elected guaranteed payout period, we will continue to make payouts until the
annuitant's death.
o Plan C - Life annuity - installment refund: We make monthly payouts until the
annuitant's death, with our guarantee that payouts will continue for some period
of time. We will make payouts for at least the number of months determined by
dividing the amount applied under this option by the first monthly payout,
whether or not the annuitant is living.
o Plan D - Joint and last survivor life annuity - no refund: We make monthly
payouts while both the annuitant and a joint annuitant are living. If either
annuitant dies, we will continue to make monthly payouts at the full amount
until the death of the surviving annuitant. Payouts end with the death of the
second annuitant.
o Plan E - Payouts for a specified period: We make monthly payouts for a
specific payout period of 10 to 30 years that you elect. We will make payouts
only for the number of years specified whether the annuitant is living or not.
Depending on the selected time period, it is foreseeable that an annuitant can
outlive the payout period selected. In addition, a 10% IRS penalty tax could
apply under this payout plan. (See "Taxes.")
Restrictions for some qualified plans: If you purchased a qualified annuity, you
may be required to select a payout plan that provides for payouts:
o over the life of the annuitant;
o over the joint lives of the annuitant and a designated beneficiary;
o for a period not exceeding the life expectancy of the annuitant; or
o for a period not exceeding the joint life expectancies of the annuitant
and a designated beneficiary.
You have the responsibility for electing a payout plan the complies with your
contract and with applicable law.
If we do not receive instructions: You must give us written instructions for the
annuity payouts at least 30 days before the annuitant's retirement date. If you
do not, we will make payouts under Plan B, with 120 monthly payouts guaranteed.
Contract values that you have allocated to the fixed account will provide fixed
dollar payouts and contract values that you have allocated among the subaccounts
will provide variable annuity payouts.
If monthly payouts would be less than $20: We will calculate the amount of
monthly payouts at the time the contract value is used to purchase a payout
plan. If the calculations show that monthly payouts would be less than $20, we
have the right to pay the contract value to the owner in a lump sum or to change
the frequency of the payouts.
Death after annuity payouts begin
If you or the annuitant die after annuity payouts begin, we will pay any amount
payable to the beneficiary as provided in the annuity payout plan in effect.
Taxes
Generally, under current law, any increase in your contract value is taxable to
you only when you receive a payout or withdrawal. (However, see detailed
discussion below.) Any portion of the annuity payouts and any withdrawals you
request that represent ordinary income normally are taxable. We will send you a
tax information reporting form for any year in which we made a taxable
distribution according to our records. Roth IRAs may grow and be distributed tax
free if you meet certain distribution requirements.
Qualified annuities: We designed this contract for use with an IRA, Roth IRA or
SEP. Special rules apply to these retirement plans. Your rights to benefits may
be subject to the terms and conditions of these retirement plans regardless of
the terms of the contract.
o An IRA permits eligible individuals to make deductible and non-deductible
contributions of up to $2,000 annually that will grow on a tax-deferred
basis.
o A Roth IRA allows eligible individuals to make after-tax contributions of
up to $2,000 and, if certain holding period and distribution rules are met,
permits the contributions to grow and be distributed tax-free.
o A SEP permits employers to make IRA contributions on behalf of their
employees, subject to certain limitations.
Adverse tax consequences may result if you do not ensure that contributions,
distributions and other transactions under the contract comply with the law.
Qualified annuities have minimum distribution rules that govern the timing and
amount of distributions during your life (except for Roth IRAs) and after your
death. You should refer to your retirement plan or adoption agreement, or
consult a tax adviser for more information about these distribution rules.
Annuity payouts under nonqualified annuities: A portion of each payout will be
ordinary income and subject to tax, and a portion of each payout will be
considered a return of part of your investment and will not be taxed. All
amounts you receive after your investment in the 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
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
prior to 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.
Annuities owned by corporations, partnerships or trusts: For nonqualified
annuities any annual increase in the value of annuities held by such entities
generally will be treated as ordinary income received during that year. This
provision is effective for purchase payments made after Feb. 28, 1986. However,
if the trust was set up for the benefit of a natural person only, the income
will remain tax deferred.
Penalties: If you receive amounts from your contract before reaching age 59 1/2,
you may have to pay a 10% IRS penalty on the amount includable in your ordinary
income. However, this penalty will not apply to any amount received by you or
your beneficiary:
o because of your death;
o because you become disabled (as defined in the Code);
o if the distribution is part of a series of substantially equal periodic
payments, made at least annually, over your life or life expectancy (or
joint lives or life expectancies of you and your beneficiary); or
o if it is allocable to an investment before Aug. 14, 1982 (except for
qualified annuities).
For a qualified annuity, other penalties or exceptions may apply if you make
withdrawals from your contract before your plan specifies that payouts can be
made.
Withholding, generally: If you receive all or part of the contract value, we may
deduct withholding against the taxable income portion of the payment. Any
withholding represents a prepayment of your tax due for the year. You take
credit for these amounts on your annual tax return.
If the payment is part of an annuity payout plan, we generally compute the
amount of withholding using payroll tables. You may provide us with a statement
of how many exemptions to use in calculating the withholding. As long as you've
provided us with a valid Social Security number or Taxpayer Identification
Number, you may elect not to have any withholding occur.
If the distribution is any other type of payment (such as a partial or full
withdrawal) we compute withholding using 10% of the taxable portion. Similar to
above, as long as you have provided us with a valid Social Security number or
Taxpayer Identification Number, you may elect not to have this withholding
occur.
Some states also may impose withholding requirements similar to the federal
withholding described above. If this should be the case, we may deduct state
withholding from any payment from which we deduct federal withholding. The
withholding requirements may differ if we are making payment to a non-U.S.
citizen or if we deliver the payment outside the United States.
Withholding from TSAs: If you receive directly all or part of the contract value
from your TSA, mandatory 20% income tax withholding generally will be imposed at
the time we make the payout. This mandatory withholding is in place of the
elective withholding discussed above. This mandatory withholding will not be
imposed if:
o instead of receiving the distribution check, you elect to have the
distribution rolled over directly to an IRA or another eligible plan;
o the payout is one in a series of substantially equal periodic payouts, made
at least annually, over your life or life expectancy (or the joint lives or
life expectancies of you and your designated beneficiary) or over a
specified period of 10 years or more; or
o the payout is a minimum distribution required under the Code.
Payments we make to a surviving spouse instead of being directly rolled over to
an IRA also may be subject to mandatory 20% income tax withholding.
State withholding also may be imposed on taxable distributions.
Transfer of ownership of a nonqualified annuity: If you transfer a nonqualified
annuity without receiving adequate consideration, the transfer is a gift and
also may be a withdrawal for federal income tax purposes. If the gift is a
currently taxable event for income tax purposes, the original owner will be
taxed on the amount of deferred earnings at the time of the transfer and also
may be subject to the 10% IRS penalty discussed earlier. In this case, the new
owner's investment in the contract will be the value of the contract at the time
of the transfer.
Collateral assignment of a nonqualified annuity: If you collaterally assign or
pledge your contract, earnings on purchase payments you made after Aug. 13, 1982
will be taxed to you like a withdrawal.
Important: Our discussion of federal tax laws is based upon our understanding of
current interpretations of these laws. Federal tax laws or current
interpretations of them may change. For this reason and because tax consequences
are complex and highly individual and cannot always be anticipated, you should
consult a tax adviser if you have any questions about taxation of your contract.
Tax qualification
We intend that the contract qualify as an annuity for federal income tax
purposes. To that end, the provisions of the contract are to be interpreted to
ensure or maintain such tax qualification, in spite of any other provisions of
the contract. We reserve the right to amend the contract to reflect any
clarifications that may be needed or are appropriate to maintain such
qualification or to conform the contract to any applicable changes in the tax
qualification requirements. We will send you a copy of any amendments.
Voting Rights
As a contract owner with investments in the variable subaccount(s), you may vote
on important fund policies until annuity payouts begin. Once they begin, the
person receiving them has voting rights. We will vote fund shares according to
the instructions of the person with voting rights.
Before annuity payouts begin, the number of votes you have is determined by
applying your percentage interest in each variable subaccount to the total
number of votes allowed to the subaccount.
After annuity payouts begin, the number of votes you have is equal to:
o the reserve held in each subaccount for your contract; divided by
o the net asset value of one share of the applicable fund.
As we make annuity payouts, the reserve for the contract decreases; therefore,
the number of votes also will decrease.
We calculate votes separately for each account. We will send notice of these
meetings, proxy materials and a statement of the number of votes to which the
voter is entitled. We will vote shares for which we have not received
instructions in the same proportion as the votes for which we have received
instructions. We also will vote the shares for which we have voting rights in
the same proportion as the votes for which we have received instructions.
Substitution of Investments
We may change the funds in which the subaccounts invest if:
o laws or regulations change;
o the existing funds become unavailable; or
o in our judgment, the funds no longer are suitable for the subaccounts.
If any of these situations occur, and if we believe it is in the best interest
of persons having voting rights under the contract, we have the right to
substitute the funds currently listed in this prospectus for other funds.
We may also:
o add new subaccounts;
o combine any two or more subaccounts;
o make additional subaccounts investing in additional funds;
o transfer assets to and from the subaccounts or the variable
account; and
o eliminate or close any subaccounts.
In the event of substitution or any of these changes, we may amend the contract
and take whatever action is necessary and appropriate without your consent or
approval. However, we will not make any substitution or change without the
necessary approval of the SEC and state insurance departments. We will notify
you of any substitution or change.
<PAGE>
Distribution of the Contract
American Express Financial Advisors Inc. serves as the principal underwriter for
the contract. Its home office is IDS Tower 10, Minneapolis, MN 55440. AEFA is a
wholly-owned subsidiary of AEFC which is a wholly-owned subsidiary of American
Express Company.
The contracts will be distributed by banks, financial institutions and
broker-dealers either directly or through a network of third-party marketers
which have entered into distribution agreements with AEFA and American
Enterprise Life.
[Compensation information to be filed by amendment]
About American Enterprise Life
American Enterprise Life issues the annuities. American Enterprise Life is a
wholly-owned subsidiary of IDS Life, which is a wholly-owned subsidiary of AEFC.
AEFC is a wholly-owned subsidiary of American Express Company. American Express
Company is a financial services company principally engaged through subsidiaries
(in addition to AEFC) in travel related services, investment services and
international banking services.
American Enterprise Life is a stock life insurance company organized in 1981
under the laws of the state of Indiana. Its administrative offices are located
at 80 South Eighth Street, Minneapolis, MN 55402. Its statutory address is 100
Capitol Center South, 201 North Illinois Street, Indianapolis, IN 46204.
American Enterprise Life conducts a conventional life insurance business.
Legal Proceedings
A number of lawsuits have been filed against life and health insurers in
jurisdictions in which American Enterprise Life and AEFC do business involving
insurers' sales practices, alleged agent misconduct, failure to properly
supervise agents and other matters. American Enterprise Life and AEFC, like
other life and health insurers, from time to time are involved in such
litigation. On October 13, 1998, an action entitled Richard W. and Elizabeth J.
Thoresen vs. American Express Financial Corporation, American Centurion Life
Assurance Company, American Enterprise Life Insurance Company, American Partners
Life Insurance Company, IDS Life Insurance Company and IDS Life Insurance
Company of New York was commenced in Minnesota State Court. The action was
brought by individuals who purchased an annuity in a qualified plan. They allege
that the sale of annuities in tax-deferred contributory retirement investment
plans (e.g., IRAs) is never appropriate. The plaintiffs purport to represent a
class consisting of all persons who made similar purchases. The plaintiffs seek
damages in an unspecified amount. American Enterprise Life also is a defendant
in various other lawsuits. In American Enterprise Life's opinion, none of these
lawsuits will have a material adverse effect on our financial condition.
Year 2000
The Year 2000 issue is the result of computer programs having been written using
two digits rather than four to define a year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than 2000. This could result in the failure of major systems or miscalculations,
which could have a material impact on the operations of the variable account.
The variable account has no computer systems of its own but is dependent upon
the systems of AEFC and certain other third parties.
A comprehensive review of AEFC's computer systems and business processes has
been conducted to identify the major systems that could be affected by the Year
2000 issue. Steps are being taken to resolve any potential problems including
modification to existing software and the purchase of new software. These
measures are scheduled to be completed and tested on a timely basis. AEFC's
target date for substantially completing corrective measures on business
critical systems was December 31, 1998. Testing of these systems is 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 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. These plans are being developed and are expected to be
substantially complete by the end of the first quarter of 1999. These plans will
continue to be refined throughout 1999 as additional information related to
potential Year 2000 exposure is gathered.
<PAGE>
Table of contents of the Statement of Additional Information
Performance Information................................................
Calculating Annuity Payouts............................................
Rating Agencies........................................................
Principal Underwriter..................................................
Independent Auditors...................................................
Prospectus.............................................................
Financial Statements...................................................
- -------------------------------------------------------------------------------
Please check the appropriate box to receive a copy of the Statement of
Additional Information for:
Variable Annuitysm
AIM Variable Insurance Funds, Inc.
IDS life Retirement Annuity Funds
Oppenheimer Variable Account Funds
Putnam Variable Trust
New Fund
New Fund
Mail your request to:
American Enterprise Life Insurance Company
80 South Eighth Street
P.O. Box 534
Minneapolis, MN 55440-0534
800-333-3437
American Enterprise Life will mail your request to:
Your name
Address
City State Zip
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
for
VARIABLE ANNUITYsm
AMERICAN ENTERPRISE VARIABLE ANNUITY ACCOUNT
, 1999
American Enterprise Variable Annuity Account is a separate account established
and maintained by American Enterprise Life Insurance Company (American
Enterprise Life).
This Statement of Additional Information (SAI) is not a prospectus. It should be
read together with the prospectus dated the same date as this SAI which you can
obtain from your sales representative, or by writing or calling us at the
address or telephone number below. The prospectus is incorporated into this SAI
by reference.
American Enterprise Life Insurance Company
80 South Eighth Street
P.O. Box 534
Minneapolis, MN 55440-0534
800-333-3437
<PAGE>
TABLE OF CONTENTS
Performance Information......................................................
Calculating Annuity Payouts..................................................
Rating Agencies..............................................................
Principal Underwriter........................................................
Independent Auditors.........................................................
Prospectus...................................................................
Financial Statements
<PAGE>
PERFORMANCE INFORMATION
The variable subaccounts may quote various performance figures to illustrate
past performance. We base total return and current yield quotations (if
applicable) on standardized methods of computing performance as required by the
Securities and Exchange Commission (SEC). An explanation of the methods used to
compute performance follows below.
Average Annual Total Return
We will express quotations of average annual total return for the variable
subaccounts in terms of the average annual compounded rate of return of a
hypothetical investment in the contract over a period of one, five and 10 years
(or, if less, up to the life of the subaccounts), calculated according to the
following formula:
P(1+T)n = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
EVR = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the one-, five-, or
10-year (or other) period at the end of the one-,
five-, or 10-year (or other) period (or fractional
portion thereof)
<PAGE>
We calculated the following performance figures on the basis of historical
performance of each fund. We show actual performance from the date the
subaccounts began investing in the funds. For some subaccounts, we do not
provide any performance information because they are new and have not had any
activity to date. We also show performance from the commencement date of the
funds as if the contract had existed at that time. Past performance does not
guarantee future results.
Average Annual Total Return For Period Ended
Average Annual Total Return with Withdrawal
<TABLE>
<CAPTION>
Performance Since
Commencement of the Performance Since
Subaccount Commencement of the Fund**
<S> <C> <C> <C> <C> <C> <C>
Since Since
Commencement Commencement
Subaccount investing in: 1 Year (Subaccount) 1 Year 5 Year 10 Year (Fund)
- -----------------------
AIM V.I.
Fund ( )* --
Fund ( ) --
Fund ( ) --
New Fund 1 ( )
New Fund 2 ( )
New Fund 3 ( )
IDS LIFE
Growth Dimensions Fund (10/97;4/96)
Income Advantage Fund ( ,5/1/96)
Managed Fund (2/95;4/86)
Moneyshare Fund (2/95;10/81)
Special Income Fund (2/95;10/81)
OPPENHEIMER VARIABLE ACCOUNT
Fund ( )
Fund ( )
PUTNAM VT
Fund ( )
Fund ( )
Fund ( )
New Fund 4 ( )
New Fund 5 ( )
New Fund 6 ( )
New Fund 7 ( )
New Fund 8 ( )
New Fund 9 ( )
* (Commencement date of the subaccount; Commencement date of the fund)
** Current applicable charges deducted from fund performance include a $30
contract administrative charge, a 1.25% mortality and expense risk fee and a
0.15% variable account administrative charge and applicable withdrawal charges.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Average Annual Total Return without Withdrawal
Performance Since
Commencement of the Performance Since
Subaccount Commencement of the Fund**
<S> <C> <C> <C> <C> <C> <C>
Since Since
Commencement Commencement
Subaccount investing in: 1 Year (Subaccount) 1 Year 5 Year 10 Year (Fund)
- -----------------------
AIM V.I.
Fund ( )* --
Fund ( ) --
Fund ( ) --
New Fund 1 ( )
New Fund 2 ( )
New Fund 3 ( )
IDS LIFE
Growth Dimensions Fund (10/97;4/96)
Income Advantage Fund ( ,5/1/96)
Managed Fund (2/95;4/86)
Moneyshare Fund (2/95;10/81)
Special Income Fund (2/95;10/81)
OPPENHEIMER VARIABLE ACCOUNT
Fund ( )
Fund ( )
PUTNAM VT
Fund ( )
Fund ( )
Fund ( )
New Fund 4 ( )
New Fund 5 ( )
New Fund 6 ( )
New Fund 7 ( )
New Fund 8 ( )
New Fund 9 ( )
* (Commencement date of the subaccount; Commencement date of the fund)
** Current applicable charges deducted from fund performance include a $30
contract administrative charge, a 1.25% mortality and expense risk fee and a
0.15% variable account administrative charge.
</TABLE>
Cumulative Total Return
Cumulative total return represents the cumulative change in value of an
investment for a given period (reflecting change in a variable subaccount's
accumulation unit value). We compute aggregate total return using the following
formula:
ERV - P
P
where: P = a hypothetical initial payment of $1,000
ERV = Ending Redeemable Value of a hypothetical $1,000 payment
made at the beginning of the one-, five-, or 10- year (or
other) period at the end of the one-, five-, or 10- year (or
other) period (or fractional portion thereof)
The SEC requires that we assume that you withdraw the entire contract value at
the end of the one-, five- and 10- year periods (or, if less, up to the life of
the variable subaccount). 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 Variable Subaccounts Investing in Money Market Funds
Annualized Simple Yield
For Variable Subaccounts investing in money market funds, we base quotations of
simple yield on:
(a) the change in the value of a hypothetical variable subaccount
(exclusive of capital changes and income other than investment
income) at the beginning of a particular seven-day period:
(b) less, a pro rata share of the variable subaccount expenses
accrued over the period;
(c) dividing the difference by the value of the variable
subaccount at the beginning of the period to obtain the base
period return; and
(d) multiplying the base period return by 365/7.
The variable subaccount's value includes:
o any declared dividends;
o the value of any shares purchased with dividends paid during the period; and
o any dividends declared for such shares.
It does not include:
o the effect of any applicable withdrawal charge; or
o any realized or unrealized gains or losses.
Annualized Compound Yield
We calculate compound yield using the base period return described above, which
we then compound according to the following formula:
Compound Yield = [(Base Period Return + 1)365/7] - 1
Annualized Yields Based on the Seven-Day Period Ending Dec. 31
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Variable Subaccount Investing In Simple Yield Compound Yield
IDS Life Moneyshare Fund % %
</TABLE>
<PAGE>
Annualized Yield for Subaccounts Investing in Income Funds
For the variable subaccounts investing in income funds, we base quotations of
yield on all investment income earned during a particular 30-day period, less
expenses accrued during the period (net investment income) and compute it by
dividing net investment income per accumulation unit by the value of an
accumulation unit on the last day of the period according to the following
formula:
YIELD = 2[a-b + 1)6 - 1]
cd
where: a = dividends and investment income earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of accumulation units outstanding
during the period that were entitled to receive dividends
d = the maximum offering price per accumulation unit on the last
day of the period
The variable subaccount earns yield from the increase in the net asset value of
shares of the fund in which it invests and from dividends declared and paid by
the fund, which are automatically invested in shares of the fund in which the
variable subaccount invests.
Annualized Yield Based on 30-Day Period Ended Dec. 31,
Variable Subaccount Investing In Yield
Fund 1 %
Fund 2
Fund 3
Independent rating or statistical services or publishers or publications such as
those listed below may quote subaccount performance, compare it to rankings,
yields or returns, or use it in variable annuity accumulation or settlement
illustrations they publish or prepare:
The Bank Rate Monitor National Index, Barron's, Business Week, CDA
Technologies, Donoghue's Money Market Fund Report, Financial Services
Week, Financial Times, Financial World, Forbes, Fortune, Global
Investor, Institutional Investor, Investor's Daily, Kiplinger's
Personal Finance, Lipper Analytical Services, Money, Morningstar,
Mutual Fund Forecaster, Newsweek, The New York Times, Personal
Investor, Stanger Report, Sylvia Porter's Personal Finance, USA Today,
U.S. News & World Report, The Wall Street Journal and Wiesenberger
Investment Companies Service.
<PAGE>
CALCULATING ANNUITY PAYOUTS
The Variable Account
We do the following calculations separately for each of the subaccounts of the
variable account. The separate monthly payouts, added together, make up your
total variable annuity payout.
Initial Payout: To compute your first monthly payment, we:
o determine the dollar value of your annuity as of the valuation date
that falls on (or the closest valuation date that falls before) the
seventh calendar day before the retirement date and then deduct any
applicable premium tax; then
o apply the result to the annuity table contained in the contract or
another table at least as favorable.
The annuity table shows the amount of the first monthly payment for each $1,000
of value which depends on factors built into the table, as described below.
Annuity Units: We then convert the value of your subaccount to annuity units. To
compute the number of units credited to you, we divide the first monthly payment
by the annuity unit value (see below) on the valuation date that falls on (or
the closest valuation date that falls before) the seventh calendar before the
retirement date. The number of units in your subaccount is fixed. The value of
the units fluctuates with the performance of the underlying fund.
Subsequent Payouts: To compute later payouts, we multiply:
o the annuity unit value on the valuation date that falls on (or the
closest valuation date that falls before) the seventh calendar day
before the payout is due; by
o the fixed number of annuity units credited to you.
Annuity Unit Values: We originally set this value at $1 for each subaccount. To
calculate later value we multiply the last annuity value by the product of:
o the net investment factor; and
o the neutralizing factor.
The purpose of the neutralizing factor is to offset the effect of the assumed
investment rate built into the annuity table. With an assumed investment rate of
5%, the neutralizing factor is 0.999866 for a one day valuation period.
<PAGE>
Net Investment Factor
We determine the net investment factor by:
o adding the fund's current net asset value per share, plus the per-share
amount of any accrued income or capital gain dividends to obtain a current
adjusted net asset value per share; then
o dividing that sum by the previous adjusted net asset value per share; and
o subtracting the percentage factor representing the mortality and expense
risk fee and the variable account administrative charge from the result.
Because the net asset value of the fund may fluctuate, the net investment factor
may be greater or less than one, and the annuity unit value may increase or
decrease. You bear this investment risk in a variable subaccount.
The Fixed Account
We guarantee your fixed annuity payout amounts. Once calculated, your payout
will remain the same and never change. To calculate your annuity payouts we:
o take the value of your fixed account at the retirement date or the date
you have selected to begin receiving your annuity payouts; then
o using an annuity table, we apply the value according to the annuity
payout plan you select.
The annuity payout table we use will be the one in effect at the time you choose
to begin your annuity payouts. The values in the table will be equal to or
greater than the table in your contract.
<PAGE>
RATING AGENCIES
The following chart reflects the ratings given to us by independent rating
agencies. These agencies evaluate the financial soundness and claims-paying
ability of insurance companies based on a number of different factors. This
information does not relate to the management or performance of the variable
subaccounts of the annuity. This information relates only to the fixed account
and reflects our ability to make annuity payouts and to pay death benefits and
other distributions from the annuities.
Rating agency Rating
A.M. Best A+
(Superior)
Duff & Phelps AAA
Moody's Aa2
PRINCIPAL UNDERWRITER
The principal underwriter for the contract is American Express Financial
Advisors which offers the variable contracts on a continuous basis.
Withdrawal charges we received for the last three years aggregated total
$_________, $_________ and $______________ respectively.
Commissions we paid for the last three years aggregated total $_____________,
$______________and $_______________ respectively.
INDEPENDENT AUDITORS
[To be filed by amendment]
FINANCIAL STATEMENTS
[To be filed by amendment]
<PAGE>
PART C.
Item 24. Financial Statements and Exhibits
(a) Financial Statements included in Part B of this Registration Statement:
- To be filed by amendment.
(b) Exhibits:
1. Resolution of the Executive Committee of the Board of Directors of
American Enterprise Life establishing the American Enterprise Variable
Annuity Account dated July 15, 1987, filed electronically as Exhibit 1
to the Initial Registration Statement No. 33-54471, filed on or about
July 5, 1994, is incorporated herein by reference.
2. Not applicable.
3.1 Form of Master General Agent Agreement to be filed by amendment.
3.2 Form of General Agent Agreement to be filed by amendment.
4.1 Form of Deferred Annuity Contract to be filed by amendment.
4.2 Form of Roth IRA Endorsement to be filed by amendment.
4.3 Form of SEP-IRA Endorsement to be filed by amendment.
5. Form of Variable Annuity Application to be filed by amendment.
6.1 Amendment and Restatement of Articles of Incorporation of American
Enterprise Life dated July 29, 1986, filed electronically as Exhibit
6.1 to the Initial Registration Statement No. 33-54471, filed on or
about July 5, 1994, is incorporated herein by reference.
6.2 Amended By-Laws of American Enterprise Life, filed electronically as
Exhibit 6.2 to the Initial Registration Statement No. 33-54471, filed
on or about July 5, 1994, is incorporated herein by reference.
7. Not applicable.
8 Copy of Participation Agreements to be filed by amendment
9. Opinion of counsel and consent to its use as to the legality of the
securities being registered to be filed by amendment.
10. Consent of Independent Auditors to be filed by amendment.
11. Financial Statement Schedules and Report of Independent Auditors to be
filed by amendment.
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.
<PAGE>
14. Not applicable.
15.1 Power of Attorney to sign this Registration Statement, dated March 28,
1997, filed electronically as Exhibit 15 to Post-Effective Amendment No. 7
to Registration Statement No. 33-54471, is incorporated herein by
reference.
15.2 Power of Attorney to sign this Registration Statement, dated April 9, 1998,
filed electronically as Exhibit 15.2 to Post-Effective Amendment No. 10 to
Registration Statement No. 33-54471, is incorporated herein by reference.
<TABLE>
<CAPTION>
Item 25. Directors and Officers of the Depositor (American Enterprise Life Insurance
Company)
<S> <C> <C>
Name Principal Business Address Positions and Offices with Depositor
- ------------------------------------- -------------------------------------- --------------------------------------
James E. Choat IDS Tower 10 Director, President and Chief
Minneapolis, MN 55440 Executive Officer
Lorraine R. Hart IDS Tower 10 Vice President, Investments
Minneapolis, MN 55440
Jeffrey S. Horton IDS Tower 10 Vice President and Treasurer
Minneapolis, MN 55440
Richard W. Kling IDS Tower 10 Director and Chairman of the Board
Minneapolis, MN 55440
Bruce A. Kohn IDS Tower 10 Vice President, Group Counsel and
Minneapolis, MN 55440 Assistant Secretary
Paul S. Mannweiler Indianapolis Power and Light Director
One Monument Circle
P.O. Box 1595
Indianapolis, IN 46206-1595
Paula R. Meyer IDS Tower 10 Director and Executive Vice
Minneapolis, MN 55440 President, Assured Assets
Mary Ellyn Minenko IDS Tower 10 Vice President, Group Counsel and
Minneapolis, MN 55440 Assistant Secretary
Stuart A. Sedlacek IDS Tower 10 Executive Vice President
Minneapolis, MN 55440
F. Dale Simmons IDS Tower 10 Vice President, Real Estate Loan
Minneapolis, MN 55440 Management
William A. Stoltzmann IDS Tower 10 Director, Vice President, General
Minneapolis, MN 55440 Counsel and Secretary
Philip C. Wentzel IDS Tower 10 Vice President and Controller
Minneapolis, MN 55440
</TABLE>
<PAGE>
Item 26. Persons Controlled by or Under Common Control with the Depositor or
Registrant
American Enterprise Life Insurance Company is a wholly-owned
subsidiary of IDS Life Insurance Company which is a
wholly-owned subsidiary of American Express Financial
Corporation. American Express Financial Corporation is a
wholly-owned subsidiary of American Express Company (American
Express).
The following list includes the names of major subsidiaries of
American Express.
<TABLE>
<CAPTION>
<S> <C>
Jurisdiction of
Name of Subsidiary Incorporation
I. Travel Related Services
American Express Travel Related Services Company, Inc. New York
II. International Banking Services
American Express Bank Ltd.
Connecticut
III. Companies engaged in Financial Services
Advisory Capital Strategies Group Inc. Minnesota
American Centurion Life Assurance Company New York
American Enterprise Investment Services Inc. Minnesota
American Enterprise Life Insurance Company Indiana
American Express Asset Management Group Inc. Minnesota
American Express Asset Management International Inc. Delaware
American Express Asset Management International (Japan) Ltd. Japan
American Express Asset Management Ltd. England
American Express Client Service Corporation Minnesota
American Express Corporation Delaware
American Express Financial Advisors Inc. Delaware
American Express Financial Corporation Delaware
American Express Insurance Agency of Arizona Inc. Arizona
American Express Insurance Agency of Idaho Inc. Idaho
American Express Insurance Agency of Nevada Inc. Nevada
American Express Insurance Agency of Oregon Inc. Oregon
American Express Minnesota Foundation Minnesota
American Express Property Casualty Insurance Agency of Kentucky Inc. Kentucky
American Express Property Casualty Insurance Agency of Maryland Inc. Maryland
American Express Property Casualty Insurance Agency of Pennsylvania Inc.
Pennsylvania
American Express Trust Company Minnesota
American Partners Life Insurance Company Arizona
IDS Cable Corporation Minnesota
IDS Cable II Corporation Minnesota
IDS Capital Holdings Inc. Minnesota
IDS Certificate Company Delaware
IDS Futures Corporation Minnesota
IDS Insurance Agency of Alabama Inc. Alabama
IDS Insurance Agency of Arkansas Inc. Arkansas
IDS Insurance Agency of Massachusetts Inc.
Massachusetts
IDS Insurance Agency of New Mexico Inc. New Mexico
<PAGE>
IDS Insurance Agency of North Carolina Inc. North
Carolina
IDS Insurance Agency of Utah Inc. Utah
IDS Insurance Agency of Wyoming Inc. Wyoming
IDS Life Insurance Company Minnesota
IDS Life Insurance Company of New York New York
IDS Management Corporation Minnesota
IDS Partnership Services Corporation Minnesota
IDS Plan Services of California, Inc. Minnesota
IDS Property Casualty Insurance Company Wisconsin
IDS Real Estate Services, Inc. Delaware
IDS Realty Corporation Minnesota
IDS Sales Support Inc. Minnesota
IDS Securities Corporation Delaware
Investors Syndicate Development Corp. Nevada
Public Employee Payment Company Minnesota
</TABLE>
Item 27. Number of Contract owners
Not applicable.
Item 28. Indemnification
The By-Laws of the depositor provide that the Corporation
shall have the power to indemnify a director, officer, agent
or employee of the Corporation pursuant to the provisions of
applicable statues or pursuant to contract.
The Corporation may purchase and maintain insurance on behalf
of any director, officer, agent or employee of the Corporation
against any liability asserted against or incurred by the
director, officer, agent or employee in such capacity or
arising out of the director's, officer's, agent's or
employee's status as such, whether or not the Corporation
would have the power to indemnify the director, officer, agent
or employee against such liability under the provisions of
applicable law.
The By-Laws of the depositor provide that it shall indemnify a
director, officer, agent or employee of the depositor pursuant
to the provisions of applicable statutes or pursuant to
contract.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it
is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
Item 29 Principal Underwriters
To be filed by amendment
<PAGE>
Item 30. Location of Accounts and Records
American Enterprise Life Insurance Company
IDS Tower 10
Minneapolis, MN 55402
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) Registrant undertakes that it will file a post-effective
amendment to this registration statement as frequently as is
necessary to ensure that the audited financial statements in
the registration statement are never more than 16 months old
for so long as payments under the variable annuity contracts
may be accepted.
(b) Registrant undertakes that it will include either (1) as part
of any application to purchase a contract offered by the
prospectus, a space that an applicant can check to request a
Statement of Additional Information, or (2) a post card or
similar written communication affixed to or included in the
prospectus that the applicant can remove to send for a
Statement of Additional Information.
(c) Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made
available under this Form promptly upon written or oral
request to American Enterprise Life Contract Owner Service at
the address or phone number listed in the prospectus.
(d) The sponsoring insurance company represents that the fees and
charges deducted under the contract, in the aggregate, are
reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by the
insurance company.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, American Enterprise Life Insurance Company, on behalf of the Registrant,
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Minneapolis, and State of
Minnesota, on the 22nd day of February, 1999.
AMERICAN ENTERPRISE VARIABLE ANNUITY ACCOUNT
(Registrant)
By American Enterprise Life Insurance Company
(Sponsor)
By /s/ James E. Choat*
James E. Choat
President and Chief Executive Officer
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities indicated on the 22nd day of
February, 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
Director and Executive Vice
Paula R. Meyer President-Assured Assets
<PAGE>
/s/ William A. Stoltzmann* Director, Vice President, General
William A. Stoltzmann Counsel and Secretary
/s/ Philip C. Wentzel** Vice President and Controller
Philip C. Wentzel
*Signed pursuant to Power of Attorney, dated March 28, 1997, filed
electronically as Exhibit 15 to Post-Effective Amendment No. 7 to Registration
Statement No. 33-54471, filed on or about April 23, 1997, incorporated herein by
reference.
**Signed pursuant to Power of Attorney, dated April 9, 1998, filed
electronically as Exhibit 15.2 to Post-Effective Amendment No. 10 to
Registration Statement No. 33-54471, filed on or about April 30, 1998,
incorporated herein by reference.
By:/s/Mary Ellyn Minenko
Mary Ellyn Minenko
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement is comprised of the following papers and documents:
The Cover Page.
Cross-reference sheet.
Part A.
The prospectus.
Part B.
Statement of Additional Information.
Part C.
Other Information.
The signatures.
