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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
--
(File No. 33-57731)
Post-Effective Amendment No. 3
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940 X
Amendment No. 4 (File No. 812-9484)
APL VARIABLE ANNUITY ACCOUNT 1
-------------------------------------------------------------------
(Exact Name of Registrant)
American Partners Life Insurance Company
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(Name of Depositor)
80 South 8th Street, P.O. Box 534, Minneapolis, MN 55440-0534
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (612) 671-3678
Mary Ellyn Minenko, IDS Tower 10, Minneapolis, MN 55440-0010
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering
It is proposed that this filing will become effective (check
appropriate box)
immediately upon filing pursuant to paragraph (b) of Rule 485
X on May 1, 1997 pursuant to paragraph (b) of Rule 485
60 days after filing pursuant to paragraph (a)(i) of Rule 485
on (date) pursuant to paragraph (a)(i) of Rule 485
If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Calculation of Registration Fee Under the Securities Act of 1933
DECLARATION REQUIRED BY RULE 24f-2(a)(1)
The Registrant has registered an indefinite number or amount of securities under
the Securities Act of 1933 pursuant to Section 24-f of the Investment Company
Act of 1940. Registrant's Rule 24f- 2 Notice for its most recent fiscal year was
filed on or about February 19, 1997.
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CROSS REFERENCE SHEET
Cross reference sheet showing location in the prospectus and Statement of
Additional Information of the information called for by the items enumerated in
Part A and B of Form N-4.
Negative answers omitted from prospectus and Statement of Additional Information
are so indicated.
PART A PART B
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Section in
Section Statement of
Item No. in Prospectus Item No. Additional Information
1 Cover page 15 Cover page
2 Key terms 16 Table of contents
3(a) Expense summary 17(a) Depositor
(b) The Annuity in brief (b) NA
(c) About American Partners Life*
4(a) Condensed financial
information 18(a) NA
(b) Performance information (b) NA
(c) Financial statements (c) Independent auditors
(d) NA
5(a) Cover page; About (e) NA
American Partners Life (f) NA
(b) The variable account
(c) The funds 19(a) Distribution of the contracts*
(d) Cover page; The funds About American Partners Life*
(e) Voting rights (b) NA
(f) NA
20(a) Principal underwriter
6(a) Charges (b) Principal underwriter
(b) Charges (c) NA
(c) Charges (d) NA
(d) NA
(e) The funds 21(a) Performance information
(f) NA (b) Performance information
7(a) Buying your annuity; 22 Calculating Annuity Payouts
Benefits in case of
death; 23(a) Financial Statements
The annuity payout (b) Financial Statements
period
(b) The variable account;
Making the most of your
annuity
(c) The funds; Charges
(d) Cover page
8(a) The annuity payout period
(b) Buying the annuity
(c) The annuity payout period
(d) The annuity payout period
(e) The annuity payout period
(f) The annuity payout period
9(a) Benefits in case of death
(b) Benefits in case of death
10(a) Buying your annuity;
Valuing your investment
(b) Valuing your investment
(c) Buying your annuity; Valuing
your investment
(d) About American Partners Life
11(a) Surrendering your contract
(b) NA
(c) Surrendering your contract
(d) Buying your annuity
(e) The annuity in brief
12(a) Taxes
(b) Key terms
(c) NA
</TABLE>
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13 NA
14 Table of contents of the
Statement of Additional Information
*Designates section in the prospectus, which is hereby incorporated by reference
in this Statement of Additional Information.
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Privileged Assets(R) Select Annuity
Prospectus/May 1, 1997
The Privileged Assets(R) Select Annuity is a flexible premium deferred
fixed/variable annuity contract.
The annuity is available for non-qualified and certain qualified retirement
plans.
APL Variable Annuity Account 1
Sold by: American Partners Life Insurance Company (American
Partners Life),
Service Office: 80 South Eighth Street, P.O. Box 59197,
Minneapolis, MN 55459-0197.
Telephone: 1-800-AXP-SERV (toll free)
(1-800-297-7378).
This prospectus contains the information about the variable
accounts that you should know before investing. Refer to "The
variable accounts" in this prospectus.
The prospectus is accompanied or preceded by the following
prospectuses: the IDS Life Investment Series, Inc., IDS Life
Managed Fund, Inc., IDS Life Special Income Fund, Inc. and IDS Life
Moneyshare Fund, Inc., INVESCO Variable Investment Funds, Inc.,
Janus Aspen Series, American Century Variable Portfolios, Inc. and
Warburg Pincus Trust. Please read these documents carefully and
keep them for future reference.
These securities have not been approved or disapproved by the Securities and
Exchange Commission, or any state securities commission, nor has the Securities
and Exchange Commission or any state securities commission passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
American Partners Life is not a financial institution, and the securities it
offers are not deposits or obligations of, or guaranteed or endorsed by any
financial institution nor are they insured by the Federal Deposit Insurance
Corporation, the Federal
Reserve Board or any other agency.
A Statement of Additional Information (SAI) (incorporated by reference into this
prospectus), has been filed with the Securities and Exchange Commission (SEC)
and is available for reference, along with other related materials, on the SEC
Internet website (http://www.sec.gov). The SAI is available without charge by
contacting American Partners 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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Purchase payments may be allocated among different accounts, providing variable
and/or fixed returns. Through the subaccounts of the variable account, you can
invest in mutual funds that are managed to meet a variety of investment
objectives. The contract value invested in the subaccounts will vary according
to the investment performance of the funds you select and you bear the
investment risk.
The annuity offers tax-deferred asset accumulation. This may be particularly
attractive to investors in high federal and state tax brackets who have made
maximum contributions to employer-sponsored retirement programs and IRAs.
The annuity has no front-end sales charge, nor does it have a redemption or
surrender charge.
The Privileged Assets Select Annuity is designed to allow you to build up funds
for retirement. When you need to access your money, such as at retirement, you
may do so in several ways including the following: you may take a monthly fixed
annuity payout for the lifetime of the annuitant(s) you have designated, or you
may take a lump-sum or a fixed amount per month on the earnings on the annuity.
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Table of contents
Key terms.....................................................
The Privileged Assets(R) Select
Annuity in brief..............................................
Expense summary...............................................
Financial statements..........................................
Performance information.......................................
The variable account..........................................
The funds.....................................................
IDS Life Aggressive Growth Fund..........................
IDS Life International Equity Fund.......................
IDS Life Capital Resource Fund...........................
IDS Life Managed Fund....................................
IDS Life Special Income Fund.............................
IDS Life Moneyshare Fund.................................
INVESCO VIF-Industrial Income Portfolio..................
Janus Aspen Series Worldwide Growth Portfolio............
Janus Aspen Series Growth Portfolio......................
American Century VP Capital Appreciation.................
American Century VP Value................................
Warburg Pincus Trust - Post-Venture Capital Portfolio....
The fixed account.............................................
Buying your annuity...........................................
Setting the annuity start date...........................
Beneficiary..............................................
Minimum purchase payments................................
Three ways to make purchase payments.....................
Charges.......................................................
Contract administrative charge...........................
Mortality and expense risk fee...........................
Premium taxes............................................
Other information on charges.............................
Valuing your investment.......................................
Number of units..........................................
Accumulation unit value..................................
Net investment factor....................................
Factors that affect variable subaccount
accumulation units...................................
Making the most of your annuity...............................
Automated dollar-cost averaging..........................
Transferring money between accounts......................
Transfer policies........................................
Three ways to request a transfer or a surrender..........
Surrendering your contract....................................
Surrender policies.......................................
Receiving payment when you request a surrender...........
Changing ownership............................................
Benefits in case of death.....................................
The annuity payout period.....................................
Annuity payout plans.....................................
Death after annuity payouts begin........................
Taxes.........................................................
Voting rights.................................................
Substitution of investments...................................
Distribution of the contracts.................................
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About American Partners Life..................................
Regular and special reports...................................
Table of contents of the Statement of Additional
Information..............................................
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Key terms
These terms can help you understand details about your annuity.
American Partners Life - In this prospectus, "we," "us," "our" and
"American Partners Life" refer to American Partners Life Insurance
Company.
Annuity - A contract purchased from an insurance company that offers
tax-deferred growth of the contract owner's investment until earnings are
withdrawn, and that can be tailored to meet the specific needs of the individual
during retirement.
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 payout - An amount paid at regular intervals under one of
several plans available to the owner and/or any other payee. This
amount is paid on a fixed basis.
Annuity start date - The date when annuity payouts are scheduled to begin. This
date is established when you start your contract. As your financial goals
change, you may change the annuity start date.
Beneficiary - The person designated to receive annuity benefits in case of the
owner's or annuitant's death.
Close of business - When the New York Stock Exchange (NYSE) closes, normally 3
p.m. Central time.
Code - Internal Revenue Code of 1986, as amended.
Contract value - Your total purchase payments, plus investment return, less any
contract administrative charges, premium tax charges and prior withdrawals.
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
allocated to this account earn interest at rates that are declared periodically
by American Partners Life.
Mutual funds (funds) - Mutual funds or portfolios, each with a different
investment objective. (See "The funds.") 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 annuity's benefits.
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Purchase payments - Payments made to American Partners Life for an annuity.
Qualified annuity - An annuity purchased for a retirement plan that is subject
to applicable federal law and any rules of the plan itself. These plans include:
o Individual Retirement Annuities (IRAs), including rollovers from qualified
plans o Simplified Employee Pension Plans (SEPs)
All other annuities are considered nonqualified annuities.
Surrender value - The amount you are entitled to receive if you surrender your
annuity. It is the contract value minus any applicable state premium taxes. No
surrender charge will apply.
Valuation date - Any normal business day, Monday through Friday, that the NYSE
is open. The value of each variable subaccount is calculated at the close of
business on each valuation date.
Variable account - An account consisting of separate subaccounts to which you
may allocate purchase payments; each invests in shares of one mutual fund. (See
"The variable account.") The value of your investment in each variable
subaccount changes with the performance of the particular fund.
The Privileged Assets(R) Select Annuity in brief
Purpose: The Privileged Assets(R) Select Annuity is designed to allow you to
build up funds for retirement. You do this by making one or more investments
(purchase payments), which may earn returns that increase the value of the
annuity. Beginning at a specified future date (the annuity start date), the
annuity provides lifetime or other forms of payouts to you or to anyone you
designate.
Accounts: You may allocate your purchase payments among any or all
of:
o variable subaccounts, each of which invests in a mutual fund
with a particular investment objective. The value of each
variable subaccount varies with the performance of the
particular fund. Therefore, the contract value at the annuity
start date may be more or less than the total of purchase
payments allocated to the variable subaccounts. (p. )
o a fixed account, which earns interest at rates that are
declared periodically by American Partners Life. The
guaranteed minimum interest rate is 3%. (p. )
Buying the annuity: You can purchase an annuity contract by submitting a
complete application. Applications are subject to acceptance at our service
office. You may buy a nonqualified annuity or a qualified annuity. Payment may
be made either in a lump sum with the option of additional payments in the
future or installments:
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o Minimum purchase payment - $2,000 ($1,000 for qualified annuities)
unless you pay in installments by means of a bank authorization at a
rate of $100/month, or more or other payment plan acceptable to us.
o Minimum additional payment - $100.
o Maximum first-year payment(s) - $50,000 to $1,000,000
depending on your age.
o Maximum payment for each subsequent year - $50,000. (p. )
Ten-day free look: You may return your contract for a refund within 10 days
after you receive it (see your contract for details). The portion of your first
purchase payment allocated to the variable account must be invested initially in
the IDS Life Moneyshare subaccount for the period we estimate or calculate your
free look right to be in existence (generally 15 days after the contract date or
25 days if you are replacing an existing annuity).
If you choose not to keep your contract, return it to us within the free look
period. The contract will be canceled and we will refund promptly the greater of
(1) your purchase payment without investment earnings, or (2) your contract
value plus any amount deducted from your payment prior to allocation to the
variable account or the fixed account.
Transfers: Subject to certain restrictions you may re-allocate
your money among accounts without charge at any time until annuity
payouts begin. You may establish automated transfers among the
fixed account and variable subaccount(s) and you may request a
transfer by telephone. (p. )
Surrenders: You may surrender all or part of your contract value
at any time before the annuity start date. You also may establish
systematic surrenders. There is no surrender charge. Amounts you
surrender may be taxable (and include a 10% penalty if surrenders
are made prior to your reaching age 59 1/2); and have other tax
consequences; also, certain restrictions apply. (p. )
Changing ownership: You may change ownership of a nonqualified
annuity by written instruction, however, such changes of
nonqualified annuities may have federal income tax consequences.
Certain restrictions apply concerning change of ownership of a
qualified annuity. (p. )
Benefits in case of death: If you or the annuitant dies before
annuity payouts begin, we will pay the beneficiary the greater of
the contract value or total purchase payments made less partial
surrenders. (p. )
Annuity payouts: The contract value of your investment can be applied to an
annuity payout plan that begins on the annuity start date. You may choose from a
variety of plans to make sure that payouts continue as long as they are needed.
If you purchased a qualified annuity, the payout schedule must meet requirements
of the qualified plan. Payouts will be made on a fixed basis. (p. )
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Taxes: Generally, your annuity grows tax-deferred until you
surrender it or begin to receive payouts. (Under certain
circumstances, IRS penalty taxes may apply.) Even if you direct
payouts to someone else, you will still be taxed on the income if
you are the owner. (p. )
Charges: Your Privileged Assets Select Annuity is subject to a $30 annual
contract administrative charge (this fee could be waived, see "Contract
administrative charge" under "Charges"), a 1% mortality and expense risk charge
against the variable subaccounts and any premium taxes that may be imposed by
state or local governments. Premium taxes are deducted either from your purchase
payments, upon full surrender or when annuity payments begin. (p. )
Expense summary
The purpose of this summary is to help you understand the various costs and
expenses associated with the Privileged Assets Select Annuity.
Owner expenses*
Surrender charge 0%
Annual contract administrative charge $30 (If the total purchase payments (less
partial surrenders) is at least $10,000, we will waive the charge.)
Separate account annual expense
(as a percentage of average net assets)
Mortality and expense risk fee 1%
Annual operating expenses of underlying mutual funds: management fees and other
expenses deducted as a percentage of average net assets as follows:
<TABLE>
<CAPTION>
IDS Life IDS Life IDS Life IDS Life
Aggressive International Capital IDS Life Special IDS Life
Growth Equity Resource Managed Income Moneyshare
<S> <C> <C> <C> <C> <C> <C>
Management fees .60% .82% .60% .59% .59% .50%
Other expenses .09 .16 .08 .07 .10 .06
Total** .69% .98% .68% .66% .69% .56%
</TABLE>
<TABLE>
<CAPTION>
INVESCO VIF Janus Aspen Warburg Pincus
Industrial Series World- Janus Aspen American Trust - Post-
Income wide Growth Series Growth Century VP American Venture Capital
(After expense (After expense (After expense Capital Century VP (After fee
reimbursement) reimbursement) reimbursement) Appreciation Value limitation)
<S> <C> <C> <C> <C> <C> <C>
Management fees .75% .66% .65% 1.00% 1.00% .62%
Other expenses .20 .14 .04 -- -- .78
Total .95%***+++ .80%*** .69%*** 1.00%+ 1.00%+ 1.40%++
</TABLE>
* Premium taxes imposed by some state and local governments are not reflected in
this table. American Partners Life has entered into certain arrangements under
which it is compensated by the funds' advisors and/or distributors for the
administrative services it provides to the funds.
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** Annualized operating expenses of underlying mutual funds for the year ended
Dec. 31, 1996.
*** The figures given above are based on gross expenses before expense offset
arrangements, if any, during 1996, for these funds. As of the date of this
prospectus, certain fees are being waived or expenses are being assumed by the
respective investment managers or service providers for certain of the
underlying mutual funds, in each case on a voluntary basis. Without such waivers
or reimbursements, the "Management fees," "Other expenses" and "Total" that
would have been incurred for the last completed fiscal year would be: .75%, 0.44
and 1.19%, respectively, for the INVESCO VIF - Industrial Income Portfolios;
.77%, .14 and .91%, respectively, for Janus Aspen Series Worldwide Growth and
.79%, .04 and .83%, respectively, for Janus Aspen Series Growth. See the
Portfolios' prospectuses for a discussion of fee waiver and expense
reimbursements.
+ Operating expenses of the underlying funds at Dec. 31, 1996.
++ Absent the waiver of fees by the Portfolio's investment adviser and
co-administrator, Management Fees would equal 1.25%; other expenses for the
Portfolio is based on annualized estimates of expenses for the fiscal year
ending Dec. 31, 1997 net of any fee waivers or expense reimbursements. Other
Expenses would equal 0.82%; and Total Portfolio Operating Expenses would equal
2.07%. The investment adviser has undertaken to limit the Portfolio's Total
Portfolio Operating Expenses to 1.40% through Dec. 31, 1997.
+++It should be noted that the Fund's actual operating expenses were lower than
the figures shown because the Fund's custodian fees were reduced under an
expense offset arrangement. However, as a result of an SEC requirement for
mutual funds to state their total operating expenses without crediting any such
expenses offset arrangements, the figures shown above do not reflect these
reductions. In comparing expenses for different years, please note the Ratios of
Expenses to Average Net Assets shown under "Financial Highlights", in the Fund's
prospectus, do reflect any reductions prior to the fiscal year ended Dec. 31,
1996.
Example:* You would pay the following expenses on a $1,000 investment, assuming
5% annual return and surrender, no surrender or selection of an annuity payout
plan at the end of each time period:
<TABLE>
<CAPTION>
IDS Life IDS Life IDS Life IDS Life
Aggressive International Capital IDS Life Special IDS Life
Growth Equity Resource Managed Income Moneyshare
<S> <C> <C> <C> <C> <C> <C>
1 year $ 19.17 $ 22.14 $ 19.07 $ 18.86 $ 19.17 $ 17.84
3 years 59.29 68.29 58.98 58.32 59.29 55.24
5 years 101.93 117.04 101.41 100.36 101.93 95.10
10 years 220.58 251.32 219.50 217.35 220.58 206.51
</TABLE>
<TABLE>
<CAPTION>
INVESCO VIF Janus Aspen American Century American Warburg Pincus
Industrial Series World- Janus Aspen VP Capital Century VP Trust - Post-Venture
Income wide Growth Series Growth Appreciation Value Capital
<S> <C> <C> <C> <C> <C> <C>
1 year $ 21.83 $ 20.29 $ 19.17 $ 22.35 $ 22.35 $ 26.45
3 years 67.36 62.71 59.29 68.91 68.91 81.22
5 years 115.49 107.69 101.93 118.08 118.08 138.60
10 years 248.18 232.34 220.58 253.41 253.41 294.32
</TABLE>
This example should not be considered a representation of past or future
expenses. Actual expenses may be more or less than those shown.
* In this example, the $30 annual contract administrative charge is approximated
as a .180% charge based on the average contract size.
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Financial statements
The SAI dated May 1, 1997, contains:
audited financial statements of the variable account including:
- - statements of net assets as of Dec. 31, 1996;
- - statements of operations for year ended Dec. 31, 1996 except for
subaccounts CGR and CWG which are for the period Jan. 29, 1996
(commencement of operations) to Dec. 31, 1996 and subaccounts
CSG, CVL and CVC which are for the period Sept. 3, 1996
(commencement of operations) to Dec, 31, 1996; and
- - statements of changes in net assets for the year ended Dec. 31,
1996 and the period from Dec. 5, 1995 (commencement of
operations) to Dec. 31, 1995 except for subaccounts CGR and CWG
which are for the period Jan. 29, 1996 (commencement of
operations) to Dec. 31, 1996 and subaccounts CSG, CVL and CVC
which are for the period Sept. 3, 1996 (commencement of
operations) to Dec. 31, 1996.
audited financial statements of American Partners Life including:
- - balance sheets as of Dec. 31, 1996 and Dec. 31, 1995 and
- - related statements of income and cash flows for the years ended
Dec. 31, 1996 and 1995 and the period from Feb. 18, 1994
(commencement of operations) to Dec. 31, 1994.
Performance information
Performance information for the variable subaccounts may appear from time to
time in advertisements or sales literature. In all cases, such information
reflects the performance of a hypothetical investment in a particular account
during a particular time period.
Calculations are performed as follows:
Simple yield - IDS Life Moneyshare Subaccount: Income over a given seven-day
period (not counting any change in the capital value of the investment) is
annualized (multiplied by 52) by assuming that the same income is received for
52 weeks. This annual income is then stated as an annual percentage return on
the investment.
Compound yield - IDS Life Moneyshare Subaccount: Calculated like simple yield,
except that, when annualized, the income is assumed to be reinvested.
Compounding of reinvested returns increases the yield as compared to a simple
yield.
Yield - For accounts investing in income funds: Net investment income (income
less expenses) per accumulation unit during a given 30-day period is divided by
the value of the unit on the last day of the period. The result is converted to
an annual percentage.
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PAGE 14
Average annual total return: Expressed as an average annual compounded rate of
return of a hypothetical 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). This figure
reflects deduction of all applicable charges, including the contract
administrative charge, and mortality and expense risk fee.
Aggregate total return: Represents the cumulative change in the value of an
investment for a specified period of time (reflecting change in a subaccount's
accumulation unit value). The calculation assumes reinvestment of investment
earnings and reflects the deduction of all applicable charges, including the
contract administrative charge and mortality and expense risk fee. Aggregate
total return may be shown by means of schedules, charts or graphs.
Performance information should be considered 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. Such
information is not intended to indicate future performance. Because advertised
yields and total return figures include all charges attributable to the annuity,
which has the effect of decreasing advertised performance, subaccount
performance should not be compared to that of mutual funds that sell their
shares directly to the public. (See the SAI for a further description of methods
used to determine yield and total return for the subaccounts.)
If you would like additional information about actual performance, contact
American Partners Life.
The variable account
Purchase payments can be allocated to any or all of the subaccounts of the
variable account that invest in shares of the following funds:
Subaccount
IDS Life Aggressive Growth Fund CAG
IDS Life International Equity Fund CIE
IDS Life Capital Resource Fund CCR
IDS Life Managed Fund CMG
IDS Life Special Income Fund CSI
IDS Life Moneyshare Fund CMS
INVESCO VIF - Industrial Income Portfolio CII
Janus Aspen Series Worldwide Growth Portfolio CWG
Janus Aspen Series Growth Portfolio CSG
American Century VP Capital Appreciation CGR
American Century VP Value CVL
Warburg Pincus Trust-Post-Venture Capital Portfolio CVC
Each variable subaccount meets the definition of a separate account under
federal securities laws. Income, capital gains and capital losses of each
subaccount are credited or charged to that account alone. No subaccount will be
charged with liabilities of any other
<PAGE>
PAGE 15
variable account or of our general business. The obligations arising under the
contracts are general obligations of American Partners Life.
The variable account was established under Arizona law and is registered as a
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.
The funds
IDS Life Aggressive Growth Fund
Objective: capital appreciation. Invests primarily in common stock
of small- and medium-size companies.
IDS Life International Equity Fund
Objective: capital appreciation. Invests primarily in common stock
of foreign issuers and foreign securities convertible into common
stock.
IDS Life Capital Resource Fund
Objective: capital appreciation. Invests primarily in U.S. common
stocks and other securities convertible into common stock,
diversified over many different companies in a variety of
industries.
IDS Life Managed Fund
Objective: maximum total investment return. Invests primarily in
U.S. common stocks, securities convertible into common stock,
warrants, fixed income securities (primarily high-quality corporate
bonds) and money market instruments.
IDS Life Special Income Fund
Objective: to provide 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.
IDS Life Moneyshare Fund
Objective: 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.
INVESCO VIF - Industrial Income Portfolio
Objective: to seek the best possible current income while following sound
investment practices with capital growth potential as a secondary consideration.
The Fund normally invests at least 65% of the total assets in dividend-paying
common stocks. Up to 10% of the Funds total assets may be invested in equity
securities that do not pay regular dividends.
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PAGE 16
Janus Aspen Series Worldwide Growth Portfolio
Objective: long-term growth of capital in a manner consistent with
the preservation of capital. Invests primarily in common stocks of
foreign and domestic issuers.
Janus Aspen Series Growth Portfolio
Objective: long-term growth of capital in a manner consistent with
the preservation of capital. Invests primarily in common stocks,
with an emphasis on companies with larger market capitalizations.
American Century VP Capital Appreciation
Objective: capital growth. Invests primarily in common stocks that
are considered by management to have better-than-average prospects
for appreciation.
American Century VP Value
Objective: long-term capital growth, with income as a secondary
objective. Invests primarily in securities that management
believes to be undervalued at the time of purchase.
Warburg Pincus Trust-Post-Venture Capital Portfolio
Objective: long-term growth of capital. Invests primarily in
equity securities of issuers in their post-venture capital stage of
development.
More comprehensive information regarding each fund is contained in the funds'
prospectuses. You should read the fund prospectuses and consider carefully, and
on a continuing basis, which fund or combination of funds is best suited to your
long-term investment needs. There is no assurance that the investment objectives
of the funds will be attained nor is there any guarantee that the contract value
will equal or exceed the total purchase payments made. Some funds may involve
more risk than others--please monitor your investments accordingly.
All funds are available to serve as the underlying investment for variable
annuities, and some funds are available to serve as the underlying investment
for variable annuities and variable life insurance contracts and qualified
plans. It is conceivable that in the future it may be disadvantageous for
variable annuity separate accounts, variable life insurance separate accounts
and/or qualified plans to invest in the available funds simultaneously. Although
American Partners Life and the funds do not currently foresee any such
disadvantages, the boards of directors or trustees of the appropriate funds will
monitor events in order to identify any material conflicts between such contract
owners, policyowners and qualified plans to determine what action, if any,
should be taken in response to a conflict. If a board were to conclude that
separate funds should be established for variable life insurance, variable
annuities and qualified plan separate accounts, the variable contract holders
would not bear any expenses associated with establishing separate funds.
The Internal Revenue Service (IRS) has issued final regulations relating to the
diversification requirements under Section 817(h) of the Code. Each mutual fund
intends to comply with these requirements.
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PAGE 17
The U.S. Treasury and the IRS have indicated that they may provide additional
guidance concerning how many variable subaccounts may be offered and how many
exchanges among variable subaccounts may be allowed before the owner is
considered to have investment control, and thus is currently taxed on income
earned within variable subaccount assets. We do not know at this time what the
additional guidance will be or when action will be taken. We reserve the right
to modify the contract, as necessary, to ensure that the owner will not be
subject to current taxation as the owner of the variable subaccount assets.
We intend to comply with all federal tax laws to ensure 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.
IDS Life is the investment manager and American Express Financial Corporation
(AEFC) is the investment advisor for each of the IDS Life Funds. IDS
International, Inc., a wholly owned subsidiary of AEFC, is the sub-investment
advisor for IDS Life International Equity Fund. INVESCO Funds Group, Inc. is the
investment advisor for the INVESCO VIF - Industrial Income Portfolio. Janus
Capital Corporation is the investment manager for Janus Aspen Series Worldwide
Growth Portfolio and Janus Aspen Series Growth Portfolio. American Century
Investment Management Inc. serves as the investment manager of American Century
Variable Portfolios, Inc. Warburg Pincus Counsellors, Inc. is the investment
adviser of Warburg Pincus Trust-Post-Venture Capital Portfolio. The investment
managers and advisors for the funds cannot guarantee that the funds will meet
their investment objectives. Please read the prospectuses for the funds for
complete information on investment risks, deductions, expenses and other facts
you should know before investing. They are available by contacting American
Partners Life at the address or telephone number on the front of this
prospectus.
The fixed account
Purchase payments may also be allocated to the fixed account. The cash value of
the fixed account increases as interest is credited to the account. Purchase
payments and transfers to the fixed account become part of the general account
of American Partners Life, the company's main portfolio of investments. Interest
is credited daily and compounded annually. We guarantee a minimum interest rate
of 3%. We may declare interest rates above the guaranteed rate from time to
time.
Because of exemptive and exclusionary provisions, interests in the fixed account
have not been registered under the Securities Act of 1933 (1933 Act), nor is the
fixed account registered as an investment company under the 1940 Act.
Accordingly, neither the fixed account nor any interests in it are generally
subject to the provisions of the 1933 or 1940 Acts, and we have been advised
that the staff of the SEC has not reviewed the disclosures in this prospectus
that relate to 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.
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PAGE 18
Buying your annuity
Our representative can help you prepare and submit your application.
Alternatively, you may ask us for the forms and prepare them yourself. As the
owner, you have all rights and may receive all benefits under the contract. The
annuity can be owned in joint tenancy only in spousal situations (but not IRAs
or SEPs). Please remember that investment performance, expenses and deduction of
certain charges affect accumulation unit value.
When you apply, you can select:
o the account(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
annuity start date); and
o a beneficiary.
If your application is complete, we will process it and apply your purchase
payment to your account(s) within two business days after we receive it at our
service office. If your application is accepted, we will send you a contract. If
we cannot accept your application within five business days, we will decline it
and return your payment. We will credit additional purchase payments to your
account(s) at the next close of business after we receive and accept your
payments at our service office.
Setting the annuity start date
Annuity payouts will be scheduled to begin on the annuity start date. This date
can be aligned 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
can also change the date, provided you send us written instructions at least 30
days before annuity payouts begin.
For nonqualified annuities, the annuity start 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 before the 10th contract
anniversary, if purchased after age 75. (In Pennsylvania, the annuity
start date must be no later than the annuitant's 85th birthday.)
For qualified annuities, to avoid IRS penalty taxes, the annuity start date
generally must be:
o on or after the date the annuitant reaches age 59 1/2; and
o for qualified annuities, 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 distributions as required by the Code from
another tax-qualified investment, or in the form of partial surrenders from this
annuity, annuity payouts can start as
<PAGE>
PAGE 19
late as the annuitant's 85th birthday or the 10th contract anniversary. (In
Pennsylvania, annuity payouts must start no later than the annuitant's 85th
birthday.)
Beneficiary
If death benefits become payable before the annuity start date, your named
beneficiary will receive all or part of the contract value. If there is no named
beneficiary, then you or your estate will be the beneficiary. (See "Payment in
case of death" for more about beneficiaries.)
Minimum purchase payments
If single payment:
Nonqualified: $2,000
Qualified: $1,000
If installment payments:
$100 monthly; $50.00 biweekly
Installments must total at least $1,000 in the first year.*
*If you make no purchase payments for the most recent 24 months, and your
previous payments total $1,000 or less, we have the right to give you 30 days'
written notice and pay you the total value of your contract in a lump sum. This
right does not apply to contracts sold to New Jersey residents.
Minimum additional purchase payment(s): $100
Maximum first-year payment(s):
This maximum is based on your age or age of the annuitant (whomever is older) on
the effective date of the contract.
Up to age 75 $1 million
76 to 85 $500,000
86 to 90 $50,000
Maximum payment for each subsequent year: $50,000**
**These limits apply in total to all American Partners Life annuities you own.
We reserve the right to increase maximum limits or reduce age limits. For
qualified annuities the qualified plan's or the Code's limits on annual
contributions also apply.
Three ways to make purchase payments
1 By letter
Send your check along with your name and account number to:
<PAGE>
PAGE 20
Regular mail:
American Partners Life Insurance Company
80 South Eighth Street
P6/Unit 1751
P.O. Box 59197
Minneapolis, MN 55459-0197
Express mail:
American Partners Life Insurance Company
80 South Eighth Street
P6/Unit 1751
Minneapolis, MN 55402
2 By scheduled payment plan
Through:
o a bank authorization.
3 Other
o wire transfer; or
o other method acceptable to us.
Charges
Contract administrative charge
This charge is for establishing and maintaining your records. On each contract
anniversary we will deduct $30 from the contract value. The deduction will be
allocated among the subaccounts on a pro-rata basis.
This charge will be waived for any contract year where the total purchase
payments (less partial surrenders) on the current contract anniversary is
$10,000 or more, or if, during the contract year, a death benefit is payable or
the contract is surrendered in full. This charge does not apply after annuity
payouts begin.
We do not expect to profit from the contract administrative charge. While we do
not currently plan to increase the charge, we reserve the right to increase the
charge in the future. In no event will the charge exceed $50 per year. Also, we
reserve the right to impose the charge on all contracts, including those with
purchase payments equal to or greater than $10,000.
Mortality and expense risk fee
This fee is to cover the mortality risk and expense risk and is applied daily to
the variable subaccounts and reflected in the unit values of the accounts.
Annually it totals 1% of their average daily net assets. 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.
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PAGE 21
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 the entire
group of American Partners Life annuitants live. If, as a group, American
Partners Life 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, American Partners Life annuitants do not live as
long as expected, we could profit from the mortality risk fee.
Expense risk arises because the contract administrative charge may not cover our
expenses. Any deficit would have to be made up from our general assets.
We may use any profits realized from the mortality and expense risk fee for any
proper corporate purpose, including, among others, payment of distribution
(selling) expenses.
Premium taxes
Certain state and local governments impose premium taxes of up to 3.5%. These
taxes are dependent upon the state of residence or the state in which the
contract was sold and are deducted as applicable. In some cases, premium taxes
are deducted from your purchase payments before they are allocated. In other
cases, the deduction is made when you surrender your contract or when annuity
payouts begin.
Other information on charges
There is no surrender charge if you take a total or a partial surrender from
your contract.
In some cases lower sales and administrative expenses may be incurred. In such
cases, we may be able to reduce or eliminate the contract administrative charge.
However, we expect this to occur infrequently.
Valuing your investment
Here is how your accounts are valued:
Fixed account: The amounts allocated to the fixed account are valued directly in
dollars and equal the sum of your purchase payments plus interest earned, less
any amounts surrendered or transferred (including the contract administrative
charge).
Variable subaccounts: Amounts allocated to the variable subaccounts are
converted into accumulation units. Each time you make a purchase payment or
transfer amounts into one of the variable subaccounts, a certain number of
accumulation units are credited to your contract for that account. Conversely,
each time you take a partial surrender, transfer amounts out of a variable
subaccount or are assessed a contract administrative charge, a certain number of
accumulation units are subtracted from your contract.
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PAGE 22
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 underlying fund.
The dollar value of each accumulation unit can rise or fall daily depending on
the performance of the underlying mutual fund and on certain fund expenses. Here
is how unit values are calculated:
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
o Determined each business day by adding the underlying mutual fund's
current net asset value per share, plus per share amount of any current
dividend or capital gain distribution; then
o dividing that sum by the previous net asset value per share;
and
o subtracting the percentage factor representing the mortality
and expense risk fee from the result.
Because the net asset value of the underlying mutual fund may fluctuate, the
accumulation unit value may increase or decrease. You bear this 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 allocated to the variable
subaccounts;
o transfers into or out of the variable subaccount(s);
o partial surrenders; and/or
o contract administrative charges.
Accumulation unit values may fluctuate due to:
o changes in underlying mutual fund(s) net asset value; o dividends distributed
to the variable subaccount(s); o capital gains or losses of underlying mutual
funds; o mutual fund operating expenses; and/or o mortality and expense risk
fees.
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PAGE 23
Making the most of your annuity
Automated dollar-cost averaging
You can use automated transfers to take advantage of dollar-cost averaging
(investing a fixed amount at regular intervals). For example, you might have a
set amount transferred monthly from a relatively conservative variable
subaccount to a more aggressive one, or to several others.
This systematic approach can help you benefit from fluctuations in accumulation
unit values caused by fluctuations in the market value(s) of the underlying
mutual fund(s). Since you invest the same amount each period, you automatically
acquire more units when the market value falls, fewer units when it rises. The
potential effect is to lower your average cost per unit. Contact our service
office for more information.
How dollar-cost averaging works
<TABLE>
<CAPTION>
Month Amount Accumulation Number of units
invested unit value purchased
<S> <C> <C> <C> <C>
By investing an Jan $100 $20 5.00
equal number of
dollars each month.... Feb 100 18 5.56
March 100 17 5.88
you automatically April 100 15 6.67
buy more units
when the per unit May 100 16 6.25
market price is low....
June 100 18 5.56
July 100 17 5.88
Aug 100 19 5.26
and fewer units Sept 100 21 4.76
when the per unit
market price is high. Oct 100 20 5.00
</TABLE>
You have paid an average price of only $17.91 per unit over the 10 months, while
the average market price actually was $18.10.
Dollar-cost averaging does not guarantee that any variable subaccount will gain
in value, nor will it protect against a decline in value if market prices fall.
Because this strategy involves continuous investing, your success with
dollar-cost averaging will depend upon your willingness to continue to invest
regularly through periods of low price levels. Dollar-cost averaging can be an
effective strategy to help meet your long term goals.
Transferring money between accounts
You may transfer money from any one subaccount or the fixed account to another
at any time before annuity payouts begin. If we receive your request before the
close of business, we will process it that day. Requests received after the
close of business will be processed the next business day. Before making a
transfer, you should consider the risks involved in switching investments. We
may suspend or modify transfer privileges at any time.
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PAGE 24
Transfer policies
o You may transfer contract values at any time between the variable
subaccounts, from the variable subaccount(s) to the fixed account or
from the fixed account to the variable subaccount(s).
o The amount being transferred to any one account must be at
least $100.
o If you make more than 12 transfers in a contract year, we will charge
$25 for each transfer in excess of 12.
o Excessive trading activity can disrupt mutual fund management strategy
and increase expenses, which are borne by all contract owners
participating in the mutual fund regardless of their transfer activity.
Therefore, we reserve the right to limit the number of transfers
permitted, but not to fewer than twelve per contract year.
Three ways to request a transfer or a surrender
1 By letter
Send your name, contract number, Social Security Number or Taxpayer
Identification Number and signed request for a transfer or surrender to:
Regular mail:
American Partners Life Insurance Company
P6/Unit 1751
P.O. Box 59197
Minneapolis, MN 55459-0197
Express mail:
American Partners Life Insurance Company
80 South Eighth Street
P6/Unit 1751
Minneapolis, MN 55402
Minimum amount
Mail transfers: $100 or entire account balance
Mail surrenders: $100 or entire account balance
Maximum amount
Mail transfers: None (up to contract value)
Mail surrenders: None (up to contract value)
2 By phone
Call between 7 a.m. and 6 p.m. Central time:
1-800-AXP-SERV (toll free)
(1-800-297-7378)
TTY service for the hearing impaired:
1-800-710-5260 (toll free)
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PAGE 25
Minimum amount
Phone transfers: $100 or entire account balance
Phone surrenders: $100 or entire account balance
Maximum amount
Phone transfers: None (up to contract value)
Phone surrenders: $50,000
We answer phone 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 surrender request believed to be
authentic and will use reasonable procedures to confirm that they are. This
includes asking identifying questions and tape recording calls. A telephone
surrender will not be allowed within 30 days of a phoned-in address change. As
long as the procedures are followed, neither American Partners Life nor its
affiliates will be liable for any loss resulting from fraudulent requests.
Telephone transfers or surrenders are automatically available. You may request
that telephone transfers or surrenders not be authorized from your account by
writing American Partners Life.
3 By automated transfers and automated partial surrenders
o You can set up automated transfers among your accounts or
partial surrenders from the accounts.
You can start or stop this service by written request or other method acceptable
to American Partners Life. You must allow 30 days for American Partners Life to
change any instructions that are currently in place.
o Automated transfers and automated partial surrenders are subject to all
of the contract provisions and terms, including transfer of contract
values between accounts. Automated surrenders may be restricted by
applicable law under some contracts.
o Automated partial surrenders may result in IRS taxes and
penalties on all or part of the amount surrendered.
Minimum amount
Automated transfers or surrenders: $100
Maximum amount
Automated transfers or surrenders: None
Surrendering your contract
As owner, you may surrender all or part of your contract at any time before
annuity payouts begin by sending a written request or calling American Partners
Life. For total surrenders we will compute the value of your contract at the
close of business after we receive your request. We may ask you to return the
contract. You may have to pay IRS taxes and penalties (see "Taxes"). No
surrenders may be made after annuity payouts begin.
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PAGE 26
Surrender policies
If you have a balance in more than one account and request a partial surrender,
we will surrender money from all your accounts in the same proportion as your
value in each account correlates to your total contract value, unless you
request otherwise.
Receiving payment when you request a surrender
By regular or express mail:
o Payable to owner.
o Normally mailed to address of record within seven days after
receiving your request. However, we may postpone the payment
if:
-the surrender amount includes a purchase payment check that
has not cleared;
-the NYSE is closed, except for normal holiday and weekend
closings;
-trading on the NYSE is restricted, according to SEC rules;
-an emergency, as defined by SEC rules, makes it impractical
to sell securities or value the net assets of the accounts; or
-the SEC permits us to delay payment for the protection of
security holders.
NOTE: You will be charged a fee if you request express mail
delivery.
Changing ownership
You may change ownership of your non-qualified annuity at any time by filing a
change of ownership with us at our service office. The change will become
binding upon us when we receive and record it. We will honor any change of
ownership request believed to be authentic and will use reasonable procedures to
confirm that it is. If these procedures are followed, we take no responsibility
for the validity of the change.
If you have a nonqualified annuity, you may lose your tax advantages 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 to any person except
American Partners Life. However, if the owner is a trust or custodian, or an
employer acting in a similar capacity, ownership of a contract may be
transferred to the annuitant.
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PAGE 27
Benefits in case of death
If you or the annuitant dies (or, for qualified annuities, if the annuitant
dies) before annuity payouts begin, we will pay the beneficiary the greater of:
o the contract value; or
o purchase payments, minus any partial surrenders.
If your spouse is sole beneficiary under a non-qualified annuity and you die
before the annuity start date, your spouse may keep the annuity 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 annuity payouts begin,
and the spouse is the only beneficiary, the spouse may keep the annuity in force
as owner until the date on which the spouse reaches 70 1/2 or 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.
Payouts: We will pay the beneficiary in a single sum unless you
have given us other written instructions, or 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;
o payouts begin no later than one year after 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 determine the contract's value
at the next close of business after our death claim requirements
are fulfilled. Interest, if any, will be paid 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. (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 annuity start date. You may select one of
the annuity payout plans outlined below, or we will mutually agree on other
payout arrangements. The amount available for payouts under the plan you select
is the contract value on your annuity start date. Annuity payouts will be made
on a fixed basis.
Amounts of payouts depend on:
o the annuity payout plan you select;
o the annuitant's age and, in most cases, sex; and
o the annuity table in the contract.
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PAGE 28
For information with respect to transfers between accounts after annuity payouts
begin, see Transfer policies.
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: Monthly payouts are made until the
annuitant's death. Payouts end with the last payout before the annuitant's
death; no further payouts will be made. This means that if the annuitant dies
after only one monthly payout has been made, no more payouts will be made.
o Plan B - Life annuity with five, 10 or 15 years certain: Monthly payouts are
made for a guaranteed payout period of five, 10 or 15 years that the annuitant
elects. This election will determine the length of the payout period to the
beneficiary if the annuitant should die before the elected period has expired.
The guaranteed payout period is calculated from the annuity start date. If the
annuitant outlives the elected guaranteed payout period, payouts will continue
until the annuitant's death.
o Plan C - Life annuity - installment refund: Monthly payouts are made until the
annuitant's death, with our guarantee that payouts will continue for some period
of time. Payouts will be made 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: Monthly payouts are
made while both the annuitant and a joint annuitant are living. If either
annuitant dies, monthly payouts continue 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: Monthly payouts are
made for a specific payout period of 10 to 30 years chosen by the
annuitant. Payouts will be made only for the number of years
specified whether the annuitant is living or not. Depending on the
time period selected, 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
must 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.
<PAGE>
PAGE 29
If we do not receive instructions: You must give us written instructions for the
annuity payouts at least 30 days before the annuitant's annuity start date. If
you do not, we will make payouts under Plan B, with 120 monthly payouts
guaranteed.
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.
Death after annuity payouts begin
If you or the annuitant dies after annuity payouts begin, any amount payable to
the beneficiary will be 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 surrender. (However, see detailed
discussion below.) Any portion of the annuity payouts and any surrenders you
request that represent ordinary income are normally taxable. You will receive a
1099 tax information form for any year in which a taxable distribution was made
according to our records.
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 received after your investment in the annuity is fully recovered will be
subject to tax.
Tax law requires that all nonqualified deferred annuity contracts issued by the
same company to the same owner during a calendar year are to be taxed as a
single, unified contract when distributions are taken from any one of such
contracts.
Annuity payouts under qualified annuities: Under a qualified annuity, the entire
payout generally will be includable as ordinary income and subject to tax except
to the extent that contributions were made with after-tax dollars. If you
invested in your contract with 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.
Surrenders: If you surrender part or all of your contract before your annuity
payouts begin, your surrender payment will be taxed to the extent that the value
of your contract immediately before the surrender exceeds your investment. You
also may have to pay a 10% IRS penalty for surrenders before reaching age 59
1/2. For qualified annuities, other penalties may apply if you surrender your
annuity before your plan specifies that you can receive payouts.
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PAGE 30
Death benefits to beneficiaries: The death benefit under an annuity is not
tax-exempt. Any amount received by the beneficiary that represents previously
deferred income earnings within the contract, is taxable as ordinary income to
the beneficiary in the year(s) he or she receives the payments.
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 increase
in value will be 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 after separation from service, 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
surrender your annuity before your plan specifies that payouts can be made.
Withholding, generally: If you receive all or part of the contract value from an
annuity, withholding may be imposed against the taxable income portion of the
payment. Any withholding that is done represents a prepayment of your tax due
for the year. You take credit for such amounts on the annual tax return that you
file.
If the payment is part of an annuity payout plan, the amount of withholding
generally is computed using payroll tables. You can provide us with a statement
of how many exemptions to use in calculating the withholding. As long as you've
provided us with a valid Social Security Number or Taxpayer Identification
Number, you
can elect not to have any withholding occur.
If the distribution is any other type of payment (such as a partial or total
surrender) withholding is computed using 10% of the taxable portion. Similar to
above, as long as you've provided us with a valid Social Security Number or
Taxpayer Identification Number, you can elect not to have this withholding
occur.
Some states also impose withholding requirements similar to the federal
withholding described above. If this should be the case, any payment from which
federal withholding is deducted may also have state withholding deducted.
<PAGE>
PAGE 31
The withholding requirements may differ if payment is being made to a non-U.S.
citizen or if the payment is being delivered outside the United States.
Transfer of ownership of a nonqualified annuity: If you make such a transfer
without receiving adequate consideration, the transfer is considered a gift, and
also may be considered a surrender for federal income tax purposes. If the gift
is a currently taxable event for income tax purposes, the amount of deferred
earnings at the time of the transfer will be taxed to the original owner, who
also may be subject to a 10% IRS penalty as discussed earlier. In this case, the
new owner's investment in the annuity will be the value of the annuity 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 surrender.
Important: Our discussion of federal tax laws is based upon our
understanding of these laws as they are currently interpreted.
Federal tax laws or current interpretations of them may change.
For this reason and because tax consequences are complex and highly individual
and cannot always be anticipated, you should consult a tax advisor if you have
any questions about taxation of your contract.
Tax qualification: The contract is intended to 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, notwithstanding any
other provisions of the contract. We reserve the right to amend the contract to
reflect any clarifications that may be needed or are appropriate to maintain
such qualification or to conform the contract to any applicable changes in the
tax qualification requirements. We will send you a copy of any such amendments.
Voting rights
As a contract owner with investments in the variable account(s), you may vote on
important mutual fund policies. We will vote fund shares according to your
instructions.
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.
We calculate votes separately for each subaccount not more than 60 days before a
shareholders' meeting. Notice of these meetings, proxy materials and a statement
of the number of votes to which the voter is entitled, will be sent.
<PAGE>
PAGE 32
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
If shares of any fund should not be available for purchase by the appropriate
variable subaccount or if, in the judgment of American Partners Life's
Management, further investment in such shares is no longer appropriate in view
of the purposes of the subaccount, investment in the subaccount may be
discontinued or another registered open-end management investment company may be
substituted for fund shares held in the subaccounts if American Partners Life
believes it would be in the best interest of persons having voting rights under
the contract. The variable account may be operated as a management company under
the 1940 Act or it may be deregistered under this Act if the registration is no
longer required. In the event of any such substitution or change, American
Partners Life, without the consent or approval of the owners, may amend the
contract and take whatever action is necessary and appropriate. However, no such
substitution or change will be made without the necessary approval of the SEC
and state insurance departments. American Partners Life will notify owners of
any substitution or change.
Distribution of the Contracts
The contracts will be distributed by American Express Service Corporation, the
principal underwriter for the variable account.
About American Partners Life
The Privileged Assets Select Annuity is issued by American Partners Life.
American Partners Life is a wholly owned subsidiary of IDS Life Insurance
Company, which is a wholly owned subsidiary of AEFC. AEFC is a wholly owned
subsidiary of the 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 Partners Life is a stock life insurance company organized in 1988 under
the laws of the State of Arizona. Its service office is located at 80 South
Eighth Street, Minneapolis, MN 55402. Its statutory address is 3225 North
Central Avenue, Phoenix, AZ 85012. American Partners Life is licensed in the
state of Arizona, and it conducts a conventional life insurance business.
American Express Service Corporation is the principal underwriter
for the variable account. Its service office is located at 80
South 8th Street, Minneapolis, MN 55440-0010. American Express
Service Corporation is registered with the SEC under the Securities
Exchange Act of 1934 as a broker-dealer and is a member of the
National Association of Securities Dealers, Inc. American Express
<PAGE>
PAGE 33
Service Corporation is a wholly owned subsidiary of American Express Travel
Related Service Company which is a wholly owned subsidiary of American Express
Company.
The AEFC family of companies also offers mutual funds, investment certificates
and a broad range of financial management services.
Other subsidiaries provide investment management and related services for
pension, profit-sharing, employee savings and endowment funds of businesses and
institutions.
Regular and special reports
Services
To help you track and evaluate the performance of your annuity, American
Partners Life provides:
Quarterly statements showing the value of your investment.
Annual reports containing required information on the annuity and its underlying
investments.
<PAGE>
PAGE 34
Table of contents of the Statement of Additional Information
Performance information...............................
Calculating annuity payouts...........................
Rating agency.........................................
Depositor.............................................
Principal underwriter.................................
Independent auditors..................................
Retirement planning...................................
Prospectus............................................
Financial statements -
APL Variable Annuity Account 1
American Partners Life Insurance Company
- -------------------------------------------------------------------
Please check the appropriate box to receive a copy of the Statement of
Additional Information for:
____ Privileged Assets Select Annuity
____ IDS Life Retirement Annuity Mutual Funds
____ INVESCO Variable Investment Funds, Inc.
____ Janus Aspen Series
____ American Century Variable Portfolios, Inc.
____ Warburg Pincus Trust-Post-Venture Capital Portfolio
Please return this request to:
American Partners Life Insurance Company
80 South Eighth Street
P.O. Box 59197
Minneapolis, MN 55459-0197
Your name _____________________________________________________
Address _______________________________________________________
City __________________________ State ____________ Zip ________
<PAGE>
PAGE 35
STATEMENT OF ADDITIONAL INFORMATION
for
PRIVILEGED ASSETS SELECT ANNUITY
APL VARIABLE ANNUITY ACCOUNT 1
May 1, 1997
APL Variable Annuity Account 1 is a separate account established and maintained
by American Partners Life Insurance Company
(American Partners Life).
This Statement of Additional Information, dated May 1, 1997, is not a
prospectus. It should be read together with the account's prospectus, dated May
1, 1997, which may be obtained by writing or calling American Partners Life at
the address or telephone number below.
American Partners Life Insurance Company
80 South Eighth Street
P.O. Box 59197
Minneapolis, MN 55459-0197
Phone #1-800-AXP-SERV (toll free)
(1-800-297-7378)
<PAGE>
PAGE 36
TABLE OF CONTENTS
Performance Information......................................p. 3
Calculating Annuity Payouts..................................p. 5
Rating Agency................................................p. 6
Depositor....................................................p. 6
Principal Underwriter........................................p. 6
Independent Auditors.........................................p. 6
Retirement Planning..........................................p. 6
Prospectus...................................................p. 7
Financial Statements
- APL Variable Annuity Account 1
- American Partners Life Insurance Company
<PAGE>
PAGE 37
PERFORMANCE INFORMATION
Performance figures are calculated on the basis of historical performance of the
funds. The performance figures relating to the funds assume that the contract
was offered prior to Sept. 15, 1995, which it was not. Before the subaccounts
began investing in these funds, the figures show what the subaccount performance
would have been if these subaccounts had existed during the illustrated periods.
Once these subaccounts began investing in these funds, actual values are used
for the calculations.
Calculation of Yield for the Subaccount investing in IDS Life Moneyshare Fund.
Simple yield for the subaccount investing in the IDS Life Moneyshare Fund will
be based on the: (a) change in the value of a hypothetical investment (exclusive
of capital changes) at the beginning of a seven-day period for which yield is to
be quoted; (b) subtracting a pro rata share of subaccount expenses accrued over
the seven-day period; (c) dividing the difference by the value of the subaccount
at the beginning of the period to obtain the base period return; and (d)
annualizing the results (i.e., multiplying the base period return by 365/7).
The value of the hypothetical subaccount includes the amount of any declared
dividends, the value of any shares purchased with any dividend paid during the
period and any dividends declared for such shares. The variable subaccount's
yield does not include any realized or unrealized gains or losses, nor does it
include the effect of any applicable surrender charge.
Calculation of compound yield begins with the same base period return used in
the calculation of yield, which is then annualized to reflect compounding
according to the following formula:
Compound Yield = [(Base Period Return + 1) 365/7 ] -1
On December 31, 1996, the account's annualized simple yield was 3.77% and its
compound yield was 3.84%.
The rate of return, or yield, on the subaccount's accumulation unit may
fluctuate daily and does not provide a basis for determining future yields.
Investors must consider, when comparing an investment in the subaccount with
fixed annuities, that fixed annuities often provide an agreed-to or guaranteed
fixed yield for a stated period of time, whereas the variable subaccount's yield
fluctuates. In comparing the yield of the subaccount to a money market fund, you
should consider the different services that the annuity provides.
Calculation of Yield for subaccounts investing in income funds.
Quotations of yield will be based on all investment income earned during a
particular 30-day period, less expenses accrued during the period (net
investment income) and will be computed 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:
<PAGE>
PAGE 38
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.
Yield on the subaccount is earned from the increase in the net asset value of
shares of the fund in which the subaccount invests and from dividends declared
and paid by the fund, which are automatically invested in shares of the fund.
Annualized yield based on 30-Day Period ended Dec. 31, 1996
Subaccount investing in: yield
IDS Life Special Income Fund 8.04%
Calculation of average annual total return
Quotations of average annual total return for a subaccount will be expressed in
terms of the average annual compounded rate of return of a hypothetical
investment in the annuity contract over a period of one, five and ten years (or,
if less, up to the life of the account), calculated according to the following
formula:
P(1+T)n = ERV
where: P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = Ending Redeemable Value of a hypothetical $1,000 payment made
at the beginning of the one, five, or ten year (or other) period
at the end of the one, five, or ten year (or other) period (or
fractional portion thereof).
<PAGE>
PAGE 39
Average Annual Total Return Period Ended Dec. 31, 1996
Average Annual Total Return with or without Surrender
<TABLE>
<CAPTION>
Since
Subaccount investing in: 1 Year 5 Years 10 Years Inception
- -----------------------
<S> <C> <C> <C> <C>
IDS LIFE
Aggressive Growth Fund (1/92)* 15.05% -- % -- % 11.03%
Capital Resource Fund (10/81) 6.79 7.32 12.38 --
International Equity Fund (1/92) 8.38 -- -- 8.35
Managed Fund (4/86) 15.82 9.70 11.25 --
Moneyshare Fund (10/81) 3.90 2.88 4.50 --
Special Income Fund (10/81) 5.81 8.58 7.84 --
INVESCO VIF
Industrial Income Portfolio (8/94) 21.10 -- -- 20.28
Janus Aspen Series
Worldwide Growth Portfolio (9/93) 27.86 -- -- 22.02
Growth Portfolio (9/93) 17.27 -- -- 15.04
American Century
VP Capital Appreciation (11/87) -5.50 4.99 -- 9.63
VP Value (5/96) 8.09 -- -- 11.10
Warburg Pincus Trust
Post-Venture Capital Portfolio (9/95) -- -- -- -3.58
</TABLE>
*inception dates of the funds are shown in parentheses.
Aggregate Total Return
Aggregate total return represents the cumulative change in the value of an
investment over a specified period of time (reflecting change in a subaccount's
accumulation unit value) and is computed by 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 ten year (or
other) period at the end of the one, five, or ten year (or other)
period (or fractional portion thereof).
The Securities and Exchange Commission requires that an assumption be made that
the contract owner surrenders the entire contract at the end of the one, five
and ten year periods (or, if less, up to the life of the subaccount) for which
performance is required to be calculated. Subaccount total return figures
reflect the deduction of the contract administrative charge and mortality and
expense risk fee.
Performance of the subaccounts may be quoted or compared to rankings, yields, or
returns as published or prepared by independent rating or statistical services
or publishers or publications such as 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>
PAGE 40
CALCULATING ANNUITY PAYOUTS
Your fixed annuity payout amounts are guaranteed. Once calculated, your payout
will remain the same and never change. To calculate your annuity payouts we:
o take the total value of your fixed account and the subaccounts at the annuity
start 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. o The annuity payout table we use will be the
one in effect at the time you choose to begin your annuity payouts. The table
will be equal to or greater than the table in your contract.
RATING AGENCY
The following chart reflects the rating given to American Partners Life by an
independent rating agency. This agency evaluates 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 Privileged Assets Select Annuity. This
information relates only to the fixed account and reflects American Partners
Life's ability to make annuity payouts and to pay death benefits and other
distributions from the annuity.
Rating agency Rating
A.M. Best A+
(Superior)
Duff & Phelps AAA
DEPOSITOR
National Pension Life Insurance Company was established on October 14, 1988 and
changed its name to American Partners Life Insurance Company on February 18,
1994.
PRINCIPAL UNDERWRITER
The principal underwriter for the accounts is American Express Service
Corporation which offers the variable contracts on a continuous basis.
INDEPENDENT AUDITORS
The financial statements of APL Variable Annuity Account 1
including the statements of net assets as of Dec. 31, 1996, and the
related statements of operations for the year then ended, except
for CGR and CWG subaccounts which are for the period Jan. 29, 1996
(commencement of operations) to Dec. 31, 1996 and subaccounts CSG,
CVL and CVC which are for the period Sept. 3, 1996 (commencement of
operations) to Dec. 31, 1996, and the statements of changes in net
assets for the year ended Dec. 31, 1996 and the period from Dec. 5,
1995 (commencement of operations) to Dec. 31, 1995, except for the
CGR and CWG subaccounts which are for the period Jan. 29, 1996
<PAGE>
PAGE 41
(commencement of operations) to Dec. 31, 1996 and subaccounts CSG,
CVL and CVC which are for the period Sept. 3, 1996 (commencement of
operations) to Dec. 31, 1996, and the financial statements of
American Partners Life Insurance Company (a wholly owned subsidiary
of IDS Life Insurance Company) as of Dec. 31, 1996 and 1995, and
for the years ended Dec. 31, 1996 and 1995 and the period from Feb.
18, 1994 (commencement of operations) to Dec. 31, 1994, appearing
in this SAI, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon appearing elsewhere
herein.
RETIREMENT PLANNING
You may have to save more for retirement because social security and employee
savings plans are estimated to cover only 40% of your retirement savings. The
remaining 60% must come from personal investments, savings and other income.*
One way to help save for retirement is by purchasing a variable annuity.
Variable annuity sales have almost tripled in the last 4 years to over $52
billion dollars.**
Sources:
* Social Security Administration
**LIMRA 1994 Individual Annuity Market Report
PROSPECTUS
The prospectus dated May 1, 1997, is hereby incorporated in this Statement of
Additional Information by reference.
<PAGE>
<TABLE>
<CAPTION>
APL Variable Annuity Account 1
- -----------------------------------------------------------------------------------------------------------------------------------
Statements of Net Assets Dec. 31, 1996
Segregated Asset Subaccounts
---------------------------------------------------------------------------------------
Assets CCR CSI CMS CMG CIE CAG CII
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investments in shares of mutual funds,
at market value:
IDS Life Capital Resource Fund -
9,208 shares at net asset value
of $23.68 per share (cost $238,091) $ 218,033 $ $ - $ - $ - $ - $ -
IDS Life Special Income Fund -
5,758 shares at net asset value
of $11.90 per share (cost $67,963) - 68,497 - - - - -
IDS Life Moneyshare Fund, Inc -
522,630 shares at net asset value
of $1.00 per share (cost $522,586) - - 522,588 - - - -
IDS Life Managed Fund, Inc -
6,901 shares at net asset value
of $16.77 per share (cost $113,886) - - - 115,752 - - -
IDS Life International Equity Fund -
6,161 shares at net asset value
of $13.77 per share (cost $83,541) - - - - 84,850 - -
IDS Life Aggressive Growth Fund -
19,695 shares at net asset value
of $15.66 per share (cost $320,490) - - - - - 308,433 -
INVESCO VIF - Industrial Income Portfolio -
11,631 shares at net asset value
of $14.39 per share (cost $169,290) - - - - - - 167,371
American Century VP Capital Appreciation -
14,799 shares at net asset value
of $10.24 per share (cost $158,207) - - - - - - -
Janus Aspen Series Worldwide Growth Portfolio -
19,149 shares at net asset value
of $19.44 per share (cost $359,219) - - - - - - -
American Century VP Value -
1,822 shares at net asset value
of $5.58 per share (cost $10,084) - - - - - - -
Janus Aspen Series Growth Portfolio -
3,091 shares at net asset value
of $15.51 per share (cost $48,094) - - - - - - -
Warburg Pincus Trust--Post-Venture Capital
Portfolio - 4,228 shares at net asset value
of $9.76 per share (cost $41,131) - - - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
218,033 68,497 522,588 115,752 84,850 308,433 167,371
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends receivable - 339 1,976 - - - -
Accounts receivable from American Partners
Life for contract purchase payments 2,113 - - 30 1,790 3,144 -
Receivable from mutual funds for
share redemptions - - 13,425 - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets 220,146 68,836 537,989 115,782 86,640 311,577 167,371
- -----------------------------------------------------------------------------------------------------------------------------------
<PAGE>
Liabilities
- -----------------------------------------------------------------------------------------------------------------------------------
Payable to American Partners Life for:
Mortality and expense risk fee 178 48 403 95 72 236 109
Contract terminations - - 13,425 - - - -
Payable to mutual funds for investments
purchased 2,113 292 1,573 30 1,790 3,144 -
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 2,291 340 15,401 125 1,862 3,380 109
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to contracts in
accumulation period 217,855 68,474 522,588 115,657 84,778 308,197 167,262
Net assets applicable to contracts in
payment period - 22 - - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Total net assets $ 217,855 $ 68,496 $ 522,588 $ 115,657 $ 84,778 $ 308,197 $ 167,262
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding 197,010 63,034 501,037 97,509 75,121 269,153 130,956
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value per accumulation unit $ 1.11 $ 1.09 $ 1.04 $ 1.19 $ 1.13 $ 1.15 $ 1.28
- -----------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
APL Variable Annuity Account 1
- -----------------------------------------------------------------------------------------------------------------------
Statements of Net Assets - continued Dec. 31, 1996
Segregated Asset Subaccounts Combined
----------------------------------------------------------- Variable
Assets CGR CWG CVL CSG CVC Account
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investments in shares of mutual funds,
at market value:
IDS Life Capital Resource Fund -
9,208 shares at net asset value
of $23.68 per share (cost $238,091) $ - $ - $ - $ - $ - $ 218,033
IDS Life Special Income Fund -
5,758 shares at net asset value
of $11.90 per share (cost $67,963) - - - - - 68,497
IDS Life Moneyshare Fund, Inc -
522,630 shares at net asset value
of $1.00 per share (cost $522,586) - - - - - 522,588
IDS Life Managed Fund, Inc -
6,901 shares at net asset value
of $16.77 per share (cost $113,886) - - - - - 115,752
IDS Life International Equity Fund -
6,161 shares at net asset value
of $13.77 per share (cost $83,541) - - - - - 84,850
IDS Life Aggressive Growth Fund -
19,695 shares at net asset value
of $15.66 per share (cost $320,490) - - - - - 308,433
INVESCO VIF - Industrial Income Portfolio -
11,631 shares at net asset value
of $14.39 per share (cost $169,290) - - - - - 167,371
American Century VP Capital Appreciation -
14,799 shares at net asset value
of $10.24 per share (cost $158,207) 151,530 - - - - 151,530
Janus Aspen Series Worldwide Growth Portfolio -
19,149 shares at net asset value
of $19.44 per share (cost $359,219) - 372,257 - - - 372,257
American Century VP Value -
1,822 shares at net asset value
of $5.58 per share (cost $10,084) - - 10,169 - - 10,169
Janus Aspen Series Growth Portfolio -
3,091 shares at net asset value
of $15.51 per share (cost $48,094) - - - 47,935 - 47,935
Warburg Pincus Trust--Post-Venture Capital
Portfolio - 4,228 shares at net asset value
of $9.76 per share (cost $41,131) - - - - 41,263 41,263
- -----------------------------------------------------------------------------------------------------------------------
151,530 372,257 10,169 47,935 41,263 2,108,678
- -----------------------------------------------------------------------------------------------------------------------
Dividends receivable - - - - - 2,315
Accounts receivable from American Partners
Life for contract purchase payments 10 5,510 2,083 6,249 - 20,929
Receivable from mutual funds for
share redemptions - - - - - 13,425
- -----------------------------------------------------------------------------------------------------------------------
Total assets 151,540 377,767 12,252 54,184 41,263 2,145,347
- -----------------------------------------------------------------------------------------------------------------------
<PAGE>
Liabilities
- -----------------------------------------------------------------------------------------------------------------------
Payable to American Partners Life for:
Mortality and expense risk fee 133 239 2 13 10 1,538
Contract terminations - - - - - 13,425
Payable to mutual funds for investments
purchased 10 5,510 2,083 6,249 - 22,794
- -----------------------------------------------------------------------------------------------------------------------
Total liabilities 143 5,749 2,085 6,262 10 37,757
- -----------------------------------------------------------------------------------------------------------------------
Net assets applicable to contracts in
accumulation period 151,397 372,018 10,167 47,922 41,253 2,107,568
Net assets applicable to contracts in
payment period - - - - - 22
- -----------------------------------------------------------------------------------------------------------------------
Total net assets $ 151,397 $ 372,018 $ 10,167 $ 47,922 $ 41,253 $ 2,107,590
- -----------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding 156,491 294,951 9,088 44,785 42,296
- -----------------------------------------------------------------------------------------------------------------------
Net asset value per accumulation unit $ 0.97 $ 1.26 $ 1.12 $ 1.07 $ 0.98
- -----------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
APL Variable Annuity Account 1
- -----------------------------------------------------------------------------------------------------------------------------
Statements of Operations Year ended Dec. 31, 1996
Segregated Asset Subaccounts
--------------------------------------------------------------------------------
CCR CSI CMS CMG CIE CAG CII
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Income:
Dividend income from mutual funds $ 30,210 $ 2,371 $ 4,686 $7,567 $1,740 $ 26,554 $11,406
- -----------------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk fee 849 303 958 558 330 1,179 479
- -----------------------------------------------------------------------------------------------------------------------------
Investment income (loss) - net 29,361 2,068 3,728 7,009 1,410 25,375 10,927
- -----------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments - net
- -----------------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on sales of investments
in mutual funds:
Proceeds from sales 44,409 12,660 1,262,024 13,446 11,804 34,265 23,699
Cost of investments sold 43,864 12,507 1,262,022 12,965 11,542 33,611 22,822
- -----------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments 545 153 2 481 262 654 877
- -----------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation
or depreciation of investments (20,058) 534 - 1,866 1,309 (12,057) (1,919)
- -----------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments (19,513) 687 2 2,347 1,571 (11,403) (1,042)
- -----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations $ 9,848 $2,755 $ 3,730 $ 9,356 $ 2,981 $ 13,972 $ 9,885
- -----------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
APL Variable Annuity Account 1
- ----------------------------------------------------------------------------------------------------------------------
Statement of Operations - continued Year ended Dec. 31, 1996
Segregated Asset Subaccounts Combined
-------------------------------------------------------- Variable
Operations CGR** CWG** CVL*** CSG*** CVC*** Account
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment Income:
Dividend income from mutual funds $1,552 $2,123 $ - $246 $ - $ 88,455
- ----------------------------------------------------------------------------------------------------------------------
Expenses:
Mortality and expense risk fee 525 740 2 14 10 5,947
- ----------------------------------------------------------------------------------------------------------------------
Investment income (loss) - net 1,027 1,383 (2) 232 (10) 82,508
- ----------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments - net
- ----------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on sales
of investments in mutual funds:
Proceeds from sales 17,980 32,125 - 1,477 2,240 1,456,129
Cost of investments sold 18,050 31,267 - 1,488 2,284 1,452,422
- ----------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments (70) 858 - (11) (44) 3,707
- ----------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation
or depreciation of investments (6,677) 13,038 85 (159) 132 (23,906)
- ----------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments (6,747) 13,896 85 (170) 88 (20,199)
- ----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations $ (5,720) $ 15,279 $ 83 $ 62 $78 $ 62,309
- ----------------------------------------------------------------------------------------------------------------------
**For the period Jan. 29, 1996 (commencement of operations) to Dec. 31, 1996.
***For the period Sept. 3, 1996 (commencement of operations) to Dec. 31, 1996.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
APL Variable Annuity Account 1
- -----------------------------------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets Year ended Dec. 31, 1996
Segregated Asset Subaccounts
------------------------------------------------------------------------------------
Operations CCR CSI CMS CMG CIE CAG CII
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income (loss) - net $ 29,361 $ 2,068 $ 3,728 $ 7,009 $ 1,410 $ 25,375 $ 10,927
Net realized gain (loss) on investments 545 153 2 481 262 654 877
Net change in unrealized appreciation or
depreciation of investments (20,058) 534 - 1,866 1,309 (12,057) (1,919)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations 9,848 2,755 3,730 9,356 2,981 13,972 9,885
- -----------------------------------------------------------------------------------------------------------------------------------
Contract Transactions
- -----------------------------------------------------------------------------------------------------------------------------------
Variable annuity contract purchase payments 27,700 20,244 1,941,526 28,846 9,768 49,636 17,486
Net transfers* 192,677 54,290 (1,396,957) 86,980 75,853 267,594 150,785
Contract charges (64) (60) - (31) (9) (110) (20)
Contract terminations:
Surrender benefits (12,306) (8,783) (28,011) (9,544) (3,815) (22,995) (10,874)
- -----------------------------------------------------------------------------------------------------------------------------------
Increase from contract transactions 208,007 65,691 516,558 106,251 81,797 294,125 157,377
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at beginning of year - 50 2,300 50 - 100 -
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 217,855 $ 68,496 $ 522,588 $ 115,657 $ 84,778 $ 308,197 $ 167,262
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Activity
- -----------------------------------------------------------------------------------------------------------------------------------
Units outstanding at beginning of year - 49 2,292 49 - 101 -
Contract purchase payments 25,628 19,611 1,881,097 25,807 8,817 45,054 14,826
Net transfers* 182,748 51,767 (1,355,419) 79,891 69,727 244,676 125,010
Contract charges (58) (55) - (26) (8) (98) (15)
Contract terminations:
Surrender benefits (11,308) (8,338) (26,933) (8,212) (3,415) (20,580) (8,865)
- -----------------------------------------------------------------------------------------------------------------------------------
Units outstanding at end of year 197,010 63,034 501,037 97,509 75,121 269,153 130,956
- -----------------------------------------------------------------------------------------------------------------------------------
*Includes transfer activity from (to) other Accounts and transfers (from) to American Partners Life for conversion from (to)
Fixed Account.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
APL Variable Annuity Account 1
- --------------------------------------------------------------------------------------------------------------------------
Statement of Changes in Net Assets - continued Year ended Dec. 31, 1996
Segregated Asset Subaccounts
-------------------------------------------------------------- Combined
Operations CGR** CWG** CVL*** CSG*** CVC*** Variable
Account
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment income (loss) - net $ 1,027 $ 1,383 $ (2) $ 232 $ (10) $ 82,508
Net realized gain (loss) on investments (70) 858 - (11) (44) 3,707
Net change in unrealized appreciation or
depreciation of investments (6,677) 13,038 85 (159) 132 (23,906)
- --------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from operations (5,720) 15,279 83 62 78 62,309
- --------------------------------------------------------------------------------------------------------------------------
Contract Transactions
- --------------------------------------------------------------------------------------------------------------------------
Variable annuity contract purchase payments 19,058 29,873 - 3,142 512 2,147,791
Net transfers* 139,174 334,988 10,084 44,718 40,663 849
Contract charges - - - - - (294)
Contract terminations:
Surrender benefits (1,115) (8,122) - - - (105,565)
- --------------------------------------------------------------------------------------------------------------------------
Increase from contract transactions 157,117 356,739 10,084 47,860 41,175 2,042,781
- --------------------------------------------------------------------------------------------------------------------------
Net assets at beginning of year - - - - - 2,500
- --------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 151,397 $ 372,018 $ 10,167 $ 47,922 $ 41,253 $ 2,107,590
- --------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Activity
- ------------------------------------------------------------------------------------------------------------
Units outstanding at beginning of year - - - - -
Contract purchase payments 18,817 24,778 - 2,959 530
Net transfers* 138,767 276,866 9,088 41,826 41,766
Contract charges - - - - -
Contract terminations:
Surrender benefits (1,093) (6,693) - - -
- ------------------------------------------------------------------------------------------------------------
Units outstanding at end of year 156,491 294,951 9,088 44,785 42,296
- ------------------------------------------------------------------------------------------------------------
*Includes transfer activity from (to) other Accounts and transfers (from) to American Partners Life for conversion
from (to) Fixed Account.
**For the period Jan. 29, 1996 (commencement of operations) to Dec. 31, 1996.
***For the period Sept. 3, 1996 (commencement of operations) to Dec. 31, 1996.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
APL Variable Annuity Account 1
- ------------------------------------------------------------------------------------------
Statements of Changes in Net Assets* Period ended Dec. 31, 1995
Combined
Segregated Asset Subaccounts Variable
Operations CAG CSI CMS CMG Account
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment income -- net $ -- $ -- $ 6 $ -- $ 6
Net change in unrealized
appreciation or
depreciation of
investments............. -- -- 2 -- 2
- ------------------------------------------------------------------------------------------
Net increase
from operations......... -- -- 8 -- 8
- ------------------------------------------------------------------------------------------
Contract Transactions _
- ------------------------------------------------------------------------------------------
Variable annuity
contract purchase
payments................ -- -- 2,492 -- 2,492
Net transfers**.......... 100 50 (200) 50 --
- ------------------------------------------------------------------------------------------
Increase from
contract transactions... 100 50 2,292 50 2,492
- ------------------------------------------------------------------------------------------
Net assets at beginning
of period............... -- -- -- -- --
- ------------------------------------------------------------------------------------------
Net assets at end of
period.................. $100 $50 $2,300 $50 $2,500
- ------------------------------------------------------------------------------------------
Accumulation Unit Activity
- ------------------------------------------------------------------------------------------
Units outstanding at
beginning of period..... -- -- -- --
Contract purchase
payments................ -- -- 2,492 --
Net transfers**......... 101 49 (200) 49
- -----------------------------------------------------------------------------
Units outstanding at end
of period............... 101 49 2,292 49
- -----------------------------------------------------------------------------
* For the period Dec. 5, 1995 (commencement of operations) to Dec. 31, 1995. The CCR, CIE and
CII subaccounts had no activity in 1995.
**Includes transfer activity from (to) other subaccounts.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
- ----------------------------------------------------------------
1. Organization
APL Variable Annuity Account 1 (Account) was established as a segregated asset
account of American Partners Life Insurance Company (American Partners Life)
under Arizona law and is registered as a unit investment trust under the
Investment Company Act of 1940. APL Variable Annuity Account 1 was established
on Feb. 9, 1995 and commenced operations on Dec. 5, 1995. American Partners is a
wholly owned subsidiary of IDS Life Insurance Company (IDS Life).
The assets of the Account are held for the exclusive benefit of the Privileged
Assets Select Annuity contract owners and are not chargeable with liabilities
arising out of the business conducted by any other account or by American
Partners Life. Contract owners allocate their variable purchase payments to one
or more of the twelve segregated asset subaccounts. Such funds are then invested
in shares of six mutual funds organized by IDS Life as the investment vehicles
for variable annuity contracts issued by IDS Life and its subsidiaries; or in
shares of one mutual fund portfolio organized by INVESCO Funds Group, Inc.; or
in shares of two mutual fund portfolios organized by American Century Investment
Management Inc.; or in shares of two mutual fund portfolios organized by Janus
Capital Corporation or in shares of one mutual fund portfolio organized by
Warburg Pincus Counsellors, Inc.
Each Fund is registered under the Investment Company Act of 1940 as a
diversified, open-end management investment company. IDS Life Capital Resource
Fund, IDS Life Special Income Fund and IDS Life Moneyshare Fund, Inc. commenced
operations Oct. 13, 1981. IDS Life Managed Fund, Inc. commenced operations April
30, 1986. IDS Life Aggressive Growth Fund and IDS Life International Equity Fund
commenced operations on Jan. 13, 1992. INVESCO Variable Investment Funds, Inc.
(INVESCO - VIF) commenced operations Dec. 16, 1993. American Century VP Capital
Appreciation commenced operations on Nov. 20, 1987. American Century VP Value
commenced operations on May 1, 1996. Janus Aspen Series Worldwide Growth
Portfolio and Janus Aspen Series Growth Portfolio commenced operations on Sept.
13, 1993. Warburg Pincus Trust -- Post-Venture Capital Portfolio commenced
operations on Sept. 30, 1996. Funds allocated to the CCR Subaccount are invested
in shares of IDS Life Capital Resource Fund; Subaccount CIE invests in the
shares of IDS Life International Equity Fund; Subaccount CAG invests in the
shares of IDS Life Aggressive Growth Fund; Subaccount CSI invests in the shares
of IDS Life Special Income Fund; Subaccount CMS invests in the shares of IDS
Life Moneyshare Fund, Inc.; Subaccount CMG invests in the shares of IDS Life
Managed Fund, Inc.; Subaccount CII invests in shares of INVESCO VIF - Industrial
Income Portfolio; Subaccount CWG invests in shares of Janus Aspen Series
Worldwide Growth Portfolio; Subaccount CSG invests in shares of Janus Aspen
Series Growth Portfolio; Subaccount CGR invests in shares of American Century VP
Capital Appreciation; Subaccount CVL invests in shares of American Century VP
Value and Subaccount CVC invests in shares of Warburg Pincus Trust --
Post-Venture Capital Portfolio.
<PAGE>
IDS Life is the investment manager and American Express Financial Corporation
(AEFC) is the investment advisor for each of the IDS Life Funds. IDS
International, Inc., a wholly owned subsidiary of AEFC, is the sub-investment
advisor for IDS Life International Equity Fund. INVESCO Funds Group, Inc. is the
investment advisor for the INVESCO VIF - Industrial Income Portfolio. Janus
Capital Corporation is the investment manager for Janus Aspen Series Worldwide
Growth Portfolio and Janus Aspen Series Growth Portfolio. American Century
Investment Management Inc. serves as the investment manager of American Century
Variable Portfolios, Inc. Warburg Pincus Counsellors, Inc. is the investment
advisor of Warburg Pincus Trust -- Post-Venture Capital Portfolio. American
Partners Life serves as issuer for the Account.
- -------------------------------------------------------------------
2. Summary of Significant Accounting Policies
Investments in Mutual Funds
Investments in shares of the IDS Life Funds, The INVESCO VIF Portfolio, the
Janus Aspen Series Portfolios, the American Century Portfolios, or the Warburg
Pincus Portfolio are stated at market value, which is the net asset value per
share as determined by the respective fund or portfolio. Investment transactions
are accounted for on the date the shares are purchased and sold. The cost of
investments sold and redeemed is determined on the average cost method. Dividend
distributions received from the Funds or Portfolios are reinvested, net of any
expenses payable to American Partners Life, in additional shares of the Funds or
Portfolios and are recorded as income by the subaccounts on the ex-dividend
date.
Unrealized appreciation or depreciation of investments in the accompanying
financial statements represents the subaccounts' share of the Funds' or
Portfolios' undistributed net investment income, undistributed realized gain or
loss and the unrealized appreciation or depreciation on their investment
securities.
Federal Income Taxes
American Partners Life is taxed as a life insurance company. The Account is
treated as part of American Partners Life for federal income tax purposes. Under
existing tax law, no income taxes are payable with respect to any income of the
Account.
- -------------------------------------------------------------------
3. Mortality and Expense Risk Fee and Contract Charges
American Partners Life makes contractual assurances to the Account that possible
future adverse changes in administrative expenses and mortality experience of
the annuitants and beneficiaries will not affect the Account. The mortality and
expense risk fee paid to American Partners Life is computed daily and is equal,
on an annual basis, to 1 percent of the average daily net assets of the
subaccounts.
An annual charge of $30 is deducted from the contract value of each Privileged
Assets Select Annuity contract. The annual charges are deducted at contract year
end during the accumulation period, for administrative services provided to the
Account by American Partners Life. The deduction will be allocated to the
subaccounts on a pro-rata basis. If the total purchase payments (less partial
surrenders) are at least $10,000 the charge will be waived. American Partners
Life reserves the right to increase the charge in the future, however, in no
event will the charge exceed $50 per year.
<PAGE>
- -------------------------------------------------------------------
4. Investment Transactions
The subaccounts' purchases of Fund or Portfolio shares (net of charges),
including reinvestment of dividend distributions, were as follows:
<TABLE>
<CAPTION>
Year ended Dec. 31,
Subaccount Investment 1996 1995*
---------------------------------------------------------------------------------
<S> <C> <C>
CCR IDS Life Capital Resource Fund....................$ 281,955 $ --*
CIE IDS Life International Equity Fund................ 95,083 --*
CAG IDS Life Aggressive Growth Fund................... 354,001 100*
CSI IDS Life Special Income Fund...................... 80,420 50*
CMS IDS Life Moneyshare Fund, Inc..................... 1,782,310 2,599*
CMG IDS Life Managed Fund, Inc........................ 126,801 50*
CII INVESCO VIF - Industrial Income Portfolio......... 192,113 --*
CWG Janus Aspen Series Worldwide Growth Portfolio..... 390,486** --
CSG Janus Aspen Series Growth Portfolio............... 49,582*** --
CGR American Century VP Capital Appreciation.......... 176,257** --
CVL American Century VP Value......................... 10,084*** --
CVC Warburg-Pincus Trust-- Post-Venture
Capital Portfolio............................... 43,415*** --
--------------------------------------------------------------------------------
$3,582,507 $2,799
--------------------------------------------------------------------------------
*For the period Dec. 5, 1995 (commencement of operations) to Dec. 31, 1995.
The CCR, CIE and CII subaccounts had no activity in this period.
**For the period Jan. 29, 1996 (commencement of operations) to Dec. 31, 1996.
***For the period Sept. 3, 1996 (commencement of operations) to Dec. 31, 1996.
</TABLE>
<PAGE>
Annual Financial Information
Report of Independent Auditors
The Board of Directors
American Partners Life Insurance Company
We have audited the accompanying individual and combined statements of net
assets of the segregated asset subaccounts of APL Variable Annuity Account 1
(comprised of subaccounts CCR, CIE, CAG, CSI, CMS, CMG, CII, CWG, CSG, CGR, CVL
and CVC) as of December 31, 1996, and the related statements of operations for
the year then ended, except for subaccounts CGR and CWG which are for the period
January 29, 1996 (commencement of operations) to December 31, 1996 and
subaccounts CSG, CVL and CVC which are for the period September 3, 1996
(commencement of operations) to December 31, 1996, and statements of changes in
net assets for the year ended December 31, 1996 and the period from December 5,
1995 (commencement of operations) to December 31, 1995, except for the CGR and
CWG subaccounts which are for the period January 29, 1996 (commencement of
operations) to December 31, 1996 and subaccounts CSG, CVL and CVC which are for
the period September 3, 1996 (commencement of operations) to December 31, 1996.
These financial statements are the responsibility of the management of American
Partners Life Insurance Company. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned at December 31, 1996 with the mutual fund
managers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the individual and combined financial position of the
segregated asset subaccounts of APL Variable Annuity Account 1 at December 31,
1996, and the individual and combined results of their operations and changes in
their net assets for the periods described above, in conformity with generally
accepted accounting principles.
Ernst & Young LLP
Minneapolis, Minnesota
March 21, 1997
<PAGE>
American Partners Life Financial Information
The financial statements shown below are those of the insurance company and not
those of any other entity. They are included for the purpose of informing the
investor as to the financial condition of the insurance company and its ability
to carry out its obligations under its variable contracts.
AMERICAN PARTNERS LIFE INSURANCE COMPANY
BALANCE SHEETS
Dec. 31, Dec. 31,
ASSETS 1996 1995
- ------ --------- -------
(thousands)
Investments:
Fixed maturities:
Held to maturity, at amortized cost (Fair value:
1996, $71,217; 1995, $78,867) $ 67,544 $ 72,281
Available for sale, at fair value (Amortized cost:
1996, $72,171; 1995, $33,527) 73,152 35,637
-------- --------
140,696 107,918
Cash and cash equivalents 315 9,007
Accrued investment income 2,760 2,388
Deferred policy acquisition costs 15,035 5,809
Due from broker 1,100 --
State licenses 1,000 1,462
Goodwill 350 512
Other assets -- 389
Separate account assets 2,145 3
--------- ------------
Total assets $163,401 $127,488
======= ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Future policy benefits for fixed annuities $130,088 $106,985
Policy claims and other policyholders' funds 112 934
Deferred income taxes 3,392 713
Amount due to brokers 2,001 --
Other liabilities 1,524 1,208
Separate account liabilities 2,145 3
------ -----------
Total liabilities 139,262 109,843
Stockholder's equity:
Capital stock, $100 par value per share;
30,000 shares authorized,
25,000 shares issued and outstanding 2,500 2,500
Additional paid-in capital 21,327 11,327
Net unrealized gain on investments 599 1,371
(Accumulated deficit) retained earnings (287) 2,447
------ -------
Total stockholder's equity 24,139 17,645
------- ------
Total liabilities and stockholder's equity $163,401 $127,488
======= =======
See accompanying notes.
<PAGE>
AMERICAN PARTNERS LIFE INSURANCE COMPANY
STATEMENTS OF INCOME
Periods ended Dec. 31,
1996 1995 1994*
------- ------- -------
(thousands)
Revenues:
Net investment income $ 9,445 $3,329 $321
Policyholder and contractholder charges 327 -- --
Net realized loss on investments (125) -- --
------ -------- --------
Total revenues 9,647 3,329 321
Benefits and expenses:
Interest credited on investment contracts 6,860 2,113 --
Amortization of deferred policy
acquisition costs 625 224 --
Amortization of state licenses and goodwill 623 623 519
Other operating expenses 5,641 270 29
-------- ------ ----
Total expenses 13,749 3,230 548
-------- ------ ---
Income (loss) before income taxes (4,102) 99 (227)
Income taxes (1,380) 91 (33)
-------- ------ -------
Net income (loss) $(2,722) $ 8 $(194)
====== ==== ====
*For the period Feb. 18, 1994 to Dec. 31, 1994
See accompanying notes.
<PAGE>
AMERICAN PARTNERS LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
Periods ended Dec. 31,
1996 1995 1994*
(thousands)
Cash flows from operating activities:
Net income (loss) $ (2,722) $ 8 $ (194)
Adjustments to reconcile net income to
net cash (used in) provided by operating
activities:
Change in accrued investment income (372) (2,244) (53)
Change in deferred policy acquisition
costs, net (9,285) (5,809) --
Amortization of license agreements
and goodwill 623 623 519
Change in policy claims and other
policyholders' funds (822) 934 --
Change in deferred income taxes 3,140 (512) (155)
Change in other liabilities 316 1,194 17
(Accretion of discount)
amortization of premium, net (16) 6 70
Net realized loss on investments 125 -- --
Other, net 333 (393) --
------- ----- ---------
Net cash (used in) provided by
operating activities (8,680) (6,193) 204
-------- ------- -------
Cash flows from investing activities:
Fixed maturities held to maturity:
Purchases (250) (72,361) --
Maturities 657 53 --
Sales 2,690 -- --
Fixed maturities available for sale:
Purchases (39,839) (30,309) --
Maturities 2,445 -- 4,750
Sales 281 -- --
Change in due from broker (1,100) 2,200 (2,200)
Change in due to broker 2,001 -- --
--------- --------- ---------
Net cash (used in) provided by
investing activities $( 33,115) $(100,417) $ 2,550
--------- -------- --------
*For the period Feb. 18, 1994 to Dec. 31, 1994
See accompanying notes.
<PAGE>
AMERICAN PARTNERS LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS (continued)
Periods ended Dec. 31,
1996 1995 1994*
(thousands)
Cash flows from financing activities:
Activity related to investment contracts:
Considerations received $ 28,190 $ 108,354 $ --
Surrenders and other benefits (11,947) (3,482) --
Interest credited to account balances 6,860 2,113 --
Capital contribution from parent 10,000 5,000 --
--------- ------- --------
Net cash provided by
financing activities 33,103 111,985 -
--------- -------- --------
Net (decrease) increase in cash
and cash equivalents (8,692) 5,375 2,754
Cash and cash equivalents at
beginning of year 9,007 3,632 878
---------- --------- ------
Cash and cash equivalents at end of year $ 315 $ 9,007 $ 3,632
====== ===== ======
*For the period Feb. 18, 1994 to Dec. 31, 1994
See accompanying notes.
<PAGE>
AMERICAN PARTNERS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
($ thousands)
1. Summary of significant accounting policies
Nature of business
American Partners Life Insurance Company (the Company) is a stock life
insurance company that is domiciled in Arizona and is licensed to transact
insurance business in 46 states at Dec. 31, 1996. The Company was purchased
by IDS Life Insurance Company (IDS Life) from Mutual of America Life
Insurance Company on Feb. 18, 1994. IDS Life paid $11,193 for 100% of the
issued and outstanding common shares of the Company. The transaction was
accounted for as a purchase under generally accepted accounting principles
and the excess of the purchase price over the market value of the net
assets acquired has been recorded as goodwill on the financial statements
of the Company.
The Company's principal product is deferred annuities which are issued
primarily to individuals. It offers single premium and annual premium
deferred annuities on both a fixed and variable dollar basis. Immediate
annuities are offered as well.
Basis of presentation
The Company is a wholly owned subsidiary of IDS Life, which is a wholly
owned subsidiary of American Express Financial Corporation. American
Express Financial Corporation is a wholly owned subsidiary of American
Express Company. The accompanying financial statements have been prepared
in conformity with generally accepted accounting principles which vary in
certain respects from reporting practices prescribed or permitted by the
Arizona Department of Insurance (see Note 4). Where the year 1994 is
referenced it represents the period from Feb. 18, 1994 through Dec. 31,
1994.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Investments
Fixed maturities that the Company has both the positive intent and the
ability to hold to maturity are classified as held to maturity and carried
at amortized cost. All other fixed maturities and all marketable equity
securities are classified as available for sale and carried at fair value.
Unrealized gains and losses on securities classified as available for sale
are carried as a separate component of stockholder's equity, net of
deferred taxes.
Realized investment gain or loss is determined on an identified cost basis.
Prepayments are anticipated on certain investments in mortgage-backed
securities in determining the constant effective yield used to recognize
interest income. Prepayment estimates are based on information received
from brokers who deal in mortgage-backed securities.
When evidence indicates a decline, which is other than temporary, in the
underlying value or earning power of individual investments, such
investments are written down to the fair value by a charge to income.
Statements of cash flows
The Company considers investments with a maturity at the date of their
acquisition of three months or less to be cash equivalents. These
securities are carried principally at amortized cost which approximates
fair value.
<PAGE>
Supplementary information to the statements of cash flows for the years
ended Dec. 31 is summarized as follows:
1996 1995 1994
------- ------ -----
Cash (received) paid during the year for:
Income taxes ($3,335) $144 $104
Interest on borrowings 22 -- --
Recognition of profits on fixed annuity contracts
Profits on deferred annuities are recognized by the Company over the lives
of the contracts, using primarily the interest method. Profits represent
the excess of investment income earned from investment of contract
considerations over interest credited to contract owners and other
expenses.
Deferred policy acquisition costs
The costs of acquiring new business, principally sales compensation, policy
issue costs, and certain sales expenses, have been deferred on annuity
contracts. These costs are amortized in relation to surrender charge
revenue and a portion of the excess of investment income earned from
investment of the contract considerations over the interest credited to
contract owners.
Liabilities for future policy benefits
Liabilities for deferred annuities are accumulation values.
Federal income taxes
The Company's taxable income is included in the consolidated federal income
tax return of American Express Company. The Company provides for income
taxes on a separate return basis, except that, under an agreement between
American Express Financial Corporation and American Express Company, tax
benefit is recognized for losses to the extent they can be used on the
consolidated tax return. It is the policy of American Express Financial
Corporation to reimburse subsidiaries for all tax benefits.
Included in other liabilities at Dec. 31, 1996 and 1995 are $708 and
($476), respectively, receivable from/(payable to) IDS Life for federal
income taxes.
Separate account business
The separate account assets and liabilities represent funds held for the
exclusive benefit of the variable annuity contract owners. The Company
receives mortality and expense risk fees from the variable annuity separate
accounts.
The Company makes contractual mortality assurances to the variable annuity
contract owners that the net assets of the separate accounts will not be
affected by future variations in the actual life expectancy experience of
the annuitants and the beneficiaries from the mortality assumptions
implicit in the annuity contracts. The Company makes periodic fund
transfers to, or withdrawals from, the separate accounts for such actuarial
adjustments for variable annuities that are in the benefit payment period.
Intangible Assets
In connection with the purchase of the Company by IDS Life, $2,308 of the
purchase price was allocated to state licenses and $808 was allocated to
goodwill. These amounts are being amortized over five years using the
straight-line method.
2. Investments
Fair values of investments in fixed maturities represent quoted market
prices and estimated values when quoted prices are not available. Estimated
values are determined by established procedures involving, among other
things, review of market indices, price levels of current offerings of
comparable issues, price estimates and market data from independent brokers
and financial files.
Net realized loss on investments was $125, $nil and $nil from sales of
fixed maturities during the years ended Dec. 31, 1996, 1995 and 1994,
respectively.
<PAGE>
Changes in net unrealized appreciation (depreciation) of investments for
the years ended Dec. 31 are summarized as follows:
1996 1995 1994
-------- -------- ------
Fixed maturities:
Held to maturity $(2,913) $6,586 $ --
Available for sale (1,129) 2,283 (173)
The amortized cost, gross unrealized gains and losses and fair value of
investments in fixed maturities at Dec. 31, 1996 are as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Held to maturity Cost Gains Losses Value
<S> <C> <C> <C> <C>
Corporate bonds and obligations $67,544 $3,755 $ 82 $71,217
Available for sale
U.S. Government agency obligations $ 7,440 $ 58 $ -- $ 7,498
Corporate bonds and obligations 52,434 1,454 315 53,573
Mortgage-backed securities 12,297 11 227 12,081
-------- -------- ---- -------
Total fixed maturities $72,171 $1,523 $542 $73,152
======= ====== ==== =======
</TABLE>
The change in net unrealized loss on available for sale securities included
as a separate component of stockholder's equity, net of deferred taxes, was
$772 in 1996.
The amortized cost, gross unrealized gains and losses and fair value of
investments in fixed maturities at Dec. 31, 1995 are as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Held to maturity Cost Gains Losses Value
<S> <C> <C> <C> <C>
Corporate bonds and obligations $72,281 $6,646 $ 60 $78,867
Available for sale
U.S. Government agency obligations $ 6,193 $ 134 $ 48 $ 6,279
Corporate bonds and obligations 27,334 2,024 -- 29,358
-------- ------ ------ --------
Total fixed maturities $33,527 $2,158 $ 48 $35,637
======= ====== ==== =======
</TABLE>
The change in net unrealized gain on available for sale securities included
as a separate component of stockholder's equity, net of deferred taxes, was
$1,483 in 1995.
The amortized cost and fair value of investments in fixed maturities at
Dec. 31, 1996 by contractual maturity are shown below. Expected maturities
will differ from contractual maturities because borrowers may have the
right to call or prepay obligations with or without call or prepayment
penalties.
Amortized Fair
Held to maturity Cost Value
Due in one year or less $ 803 $ 803
Due from one to five years 15,691 16,351
Due from five to ten years 45,096 47,951
Due in more than ten years 5,954 6,112
-------- --------
$67,544 $71,217
======= =======
<PAGE>
Amortized Fair
Available for sale Cost Value
Due in one year or less $ 9,465 $ 9,592
Due from one to five years 14,374 14,835
Due from five to ten years 33,036 33,693
Due in more than ten years 2,999 2,951
Mortgage-backed securities 12,297 12,081
------- -------
$72,171 $73,152
======= =======
During the year ended Dec. 31, 1996, fixed maturities classified as held to
maturity were sold with amortized cost of $2,743. Net gains and losses on
these sales were not significant. The sale of these fixed maturities was
due to significant deterioration in the issuers' creditworthiness.
In addition, fixed maturities available for sale were sold during 1996 with
proceeds of $281 and gross realized gains and losses of $nil and $71,
respectively.
During the year ended Dec. 31, 1995 and 1994 there were no sales of fixed
maturities.
At Dec. 31, 1996, bonds carried at $6,831 were on deposit with various
states as required by law.
Net investment income for the years ended Dec. 31 is summarized as follows:
1996 1995 1994
------ -------- ------
Interest on fixed maturities $9,473 $3,077 $243
Interest on cash equivalents 146 218 81
Other 5 49 --
-------- ------ ------
9,624 3,344 324
Less investment expenses 179 15 3
------- -------- ------
$9,445 $3,329 $321
====== ====== ====
Securities are rated by Moody's and Standard & Poor's (S&P), except for
securities carried at approximately $14.7 million which are rated by
American Express Financial Corporation internal analysts using criteria
similar to Moody's and S&P. A summary of investments in fixed maturities,
at amortized cost, by rating on Dec. 31 is as follows:
Rating 1996 1995
------ ---------- -------
Aaa/AAA $ 18,722 $ 6,193
Aa/AA 4,607 2,787
Aa/A 4,193 4,191
A/A 29,485 27,392
A/BBB 9,940 4,355
Baa/BBB 53,883 55,191
Baa/BB 9,093 2,799
Below investment grade 9,792 2,900
---------- ----------
$139,715 $105,808
======== ========
At Dec. 31, 1996, 89 percent of the securities rated Aaa/AAA are GNMA,
FNMA, and FHLMC mortgage-backed securities.
3. Income taxes
The Company qualifies as a life insurance company for federal income tax
purposes. As such, the Company is subject to the Internal Revenue Code
provisions applicable to life insurance companies.
<PAGE>
The income tax expense (benefit) consists of the following:
1996 1995 1994
------- ------ -----
Federal income taxes:
Current $(4,520) $603 $122
Deferred 3,140 (512) (155)
------- ---- ----
Income tax expense (benefit) $(1,380) $ 91 $ (33)
======= ===== ======
Increases (decreases) to the federal income tax provision applicable to
pretax income based on the statutory rate are attributable to:
<TABLE>
<CAPTION>
1996 1995 1994
------- --------- ---------
Provision Rate Provision Rate Provision Rate
<S> <C> <C> <C> <C> <C> <C>
Federal income taxes based
on the statutory rate $(1,436) (35.0)% $35 35.0% $(79) (35.0)%
Increases (decreases) are
attributable to:
Goodwill amortization 56 1.4 56 56.7 46 20.8
--------- ----- --- ---- ---- ----
Federal income taxes $(1,380) (33.6)% $91 91.7% $(33) (14.2)%
======= ==== === ==== ==== ====
</TABLE>
Significant components of the Company's deferred tax assets and liabilities
as of Dec. 31 are as follows:
Deferred tax assets: 1996 1995 1994
------ ------ -----
Policy reserves $2,353 $2,445 $ --
Investments -- -- 60
Other -- -- 19
------ -------- --
Total deferred tax assets 2,353 2,445 80
----- ----- --
Deferred tax liabilities:
State licenses 350 512 673
Investments 406 739 --
Deferred policy acquisition costs 4,955 1,870 --
Other 34 37 --
-- ---- -----
Total deferred tax liabilities 5,745 3,158 673
------ ----- ----
Net deferred tax liabilities $3,392 $ 713 $593
====== ====== ====
The Company is required to establish a valuation allowance for any portion
of the deferred tax assets that management believes will not be realized.
In the opinion of management, it is more likely than not that the Company
will realize the benefit of the deferred tax assets and, therefore, no
valuation allowance has been established.
4. Stockholder's equity
Retained earnings available for distribution as dividends to the parent are
limited to the Company's surplus as determined in accordance with
accounting practices prescribed by the Arizona Department of Insurance.
Statutory unassigned (deficit) surplus aggregated ($6,696) and $2,546 as of
Dec. 31, 1996 and 1995, respectively.
Statutory net income and stockholder's equity as of Dec. 31, are summarized
as follows:
1996 1995
------ -------
Statutory net (loss) income $ (7,990) $ 897
Statutory stockholder's equity 15,351 14,589
As discussed in Note 5, the Company entered into a reinsurance agreement
with IDS Life during 1995. As a result of this transaction, a gain of $167
in 1995 was realized and reported as a direct credit to retained earnings.
<PAGE>
5. Related party transactions
The Company entered a reinsurance agreement to assume single premium
deferred annuity contracts from IDS Life. At Sept. 1, 1995, a $107,564
block of single premium deferred annuities was transferred from IDS Life to
the Company. The accompanying balance sheet includes $101,787 and $106,193
for future policy benefits related to this agreement as of Dec. 31, 1996
and 1995, respectively.
Charges by IDS Life for use of joint facilities and other services
aggregated $5,166, $381 and $nil for 1996, 1995 and 1994, respectively.
Certain of these costs are included in deferred policy acquisition costs.
6. Lines of credit
The Company has an available line of credit with American Express Financial
Corporation (AEFC) of $250 at AEFC's cost of funds. There were no
borrowings outstanding under this agreement at Dec. 31, 1996.
7. Fair values of financial instruments
The Company discloses fair value information for most on- and off-balance
sheet financial instruments for which it is practicable to estimate that
value. Fair values of life insurance obligations, receivables and all
non-financial instruments, such as deferred acquisition costs, are
excluded. Off-balance sheet intangible assets are also excluded. Management
believes the value of excluded assets is significant. The fair value of the
Company, therefore, cannot be estimated by aggregating the amounts
presented.
<TABLE>
<CAPTION>
1996 1995
-------- -----
Carrying Fair Carrying Fair
Financial Assets Value Value Value Value
<S> <C> <C> <C> <C>
Investments:
Fixed maturities (Note 2):
Held to maturity $67,544 $71,217 $72,281 $78,867
Available for sale 73,152 73,152 35,637 35,637
Cash and cash equivalents
(Note 1) 315 315 9,007 9,007
Separate account assets (Note 1) 2,145 2,145 3 3
Financial Liabilities
Future policy benefits for
fixed annuities 130,088 123,399 106,985 100,064
Separate account liabilities 2,145 2,145 3 3
</TABLE>
The fair value of future policy benefits for fixed annuities is based on
the status of the annuities at Dec. 31, 1996. The fair value of deferred
annuities is estimated as the carrying amount less applicable surrender
charges. The fair value for annuities in non-life contingent payout status
is estimated as the present value of projected benefit payments at rates
appropriate for contracts issued in 1996.
<PAGE>
Report of Independent Auditors
The Board of Directors
American Partners Life Insurance Company
We have audited the accompanying balance sheets of American Partners Life
Insurance Company (a wholly owned subsidiary of IDS Life Insurance Company) as
of December 31, 1996 and 1995, and the related statements of income and cash
flows for the years ended December 31, 1996 and 1995 and the period from
February 18, 1994 through December 31, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American Partners Life
Insurance Company at December 31, 1996 and 1995, and the results of its
operations and its cash flows for the years ended December 31, 1996 and 1995 and
the period from February 18, 1994 through December 31, 1994, in conformity with
generally accepted accounting principles.
Ernst & Young LLP
February 7, 1997
Minneapolis, Minnesota
<PAGE>
PAGE 42
PART C.
Item 24. Financial Statements and Exhibits
(a) Financial Statements included in Part B of this Registration
Statement:
APL Variable Annuity Account 1
Statements of Net Assets for year ended Dec. 31, 1996
Statements of Operations for year ended Dec. 31, 1996
Statements of Changes in Net Assets for year ended Dec. 31
1996 and 1995.
Notes to Financial Statements.
Report of Independent Auditors dated March 21, 1997.
American Partners Life Insurance Company:
Balance Sheets as of Dec. 31, 1996 and 1995;
Statements of Income for the periods ended Dec. 31, 1996, 1995
and 1994; and
Statements of Cash Flows for the periods ended Dec. 31, 1996,
1995 and 1994.
Notes to Financial Statements.
Report of Independent Auditors dated February 7, 1997.
Exhibit to Financial Statements included in Part C:
Financial Statement Schedule I as required by Regulation S-X:
Schedule I - Consolidated Summary of Investments Other
than Investments in Related Parties
All other schedules to the financial statements required by Article 7 of
Regulation S-X are not required under the related instructions or are
inapplicable and, therefore have been omitted.
(b) Exhibits:
1. Consent in Writing in Lieu of Meeting of Board of Directors establishing
the APL Variable Annuity Account 1 dated February 9, 1995, filed
electronically as Exhibit 1 to Registration Statement No. 33-57731 is
incorporated herein by reference.
2. Not applicable.
3. Form of Variable Annuity Distribution Agreement, filed
electronically as Exhibit 3 to Pre-Effective Amendment No. 1
to Registration Statement No. 33-57731 is incorporated herein
by reference.
4.1 Form of Deferred Annuity Contract for nonqualified contract
(form 32028), filed electronically as Exhibit 4.1 to Pre-
Effective Amendment No. 1 to Registration Statement No. 33-
57731 is incorporated herein by reference.
<PAGE>
PAGE 43
4.2 Form of Deferred Annuity Contract for qualified contract (form
32034-IRA), filed electronically as Exhibit 4.2 to Pre-
Effective Amendment No. 1 to Registration Statement No. 33-
57731 is incorporated herein by reference.
5.1 Form of Application for American Partners Life Variable
Annuity (form 32025), filed electronically as Exhibit 5.1 to
Pre-Effective Amendment No. 1 to Registration Statement No.
33-57731 is incorporated herein by reference.
6.1 Articles of Amendment and Restatement of National Pension Life
Insurance Company dated February 18, 1994, filed as Exhibit
6.1 to Registration Statement No. 33-57731 is incorporated
herein by reference.
6.2 Amended and Restated By-Laws of American Partners Life, filed
as Exhibit 6.2 to Registration Statement No. 33-57731 is
incorporated herein by reference.
7. Not applicable.
8.1 Participation Agreement among INVESCO Variable Investment
Funds, Inc., INVESCO Funds Group, Inc. and American Partners
Life Insurance Company, dated Oct. 31, 1995, filed
electronically as Exhibit 8.1 to Registration Statement No.
33-57731 is incorporated herein by reference.
8.2 Fund Participation Agreement, dated Dec. 19, 1995 by and among
American Partners Life Insurance Company, TCI Portfolios, Inc.
and Investors Research Corporation, filed electronically as
Exhibit 8.2 to Registration Statement No. 33-57731 is
incorporated herein by reference.
8.3 Amendment No. 1 to Fund Participation Agreement, dated April
18, 1996 by and among American Partners Life Insurance
Company, TCI Portfolios, Inc. and Investors Research
Corporation filed electronically herewith.
8.4 Fund Participation Agreement, dated Jan. 23, 1996 between
JANUS ASPEN SERIES and American Partners Life Insurance
Company, filed electronically as Exhibit 8.3 to Registration
Statement No. 33-57731 is incorporated herein by reference.
8.5 Participation Agreement dated March 1, 1996 by and among
American Partners Life Insurance Company and Warburg Pincus
Trust and Warburg, Pincus Counsellors, Inc. and Counsellors
Securities Inc., filed electronically herewith.
9. Opinion of counsel and consent to its use as to the legality
of the securities being registered was filed with Registrant's
24f-2 Notice.
10. Consent of Independent Auditors, filed electronically
herewith.
11. Financial Statement Schedule and Report of Independent
Auditors, filed electronically herewith.
<PAGE>
PAGE 44
12. Not applicable.
13. Copy of schedule for computation of each performance quotation
provided in the Registration Statement in response to Item 21,
filed as Exhibit 13 to Registration Statement No. 33-57731 is
incorporated herein by reference.
14. Financial Data Schedules, filed electronically herewith.
15. Power of Attorney to sign Amendments to this Registration
Statement dated March 12, 1997, filed electronically herewith.
Item 25. Directors and Officers of the Depositor (American
Partners Life Insurance Company)
<TABLE>
<CAPTION>
Positions and
Name Principal Business Address Offices with Depositor
<S> <C> <C>
Morris Goodwin Jr. IDS Tower 10 Vice President and Treasurer
Minneapolis, MN 55440
Lorraine R. Hart IDS Tower 10 Director and Vice President -
Minneapolis, MN 55440 Investments
Jay C. Hatlestad IDS Tower 10 Controller
Minneapolis, MN 55440
Richard W. Kling IDS Tower 10 Director and Chairman
Minneapolis, MN 55440 of the Board
Stuart A. Sedlacek IDS Tower 10 Director and President
Minneapolis, MN 55440
F. Dale Simmons IDS Tower 10 Vice President, General Counsel
Minneapolis, MN 55440 and Secretary
William A. Stoltzmann IDS Tower 10 Director, Vice President,
Minneapolis, MN 55440 General Counsel and Secretary
Melinda S. Urion IDS Tower 10 Director and Vice President
Minneapolis, MN 55440
</TABLE>
Item 26. Persons Controlled by or Under Common Control with the
Depositor or Registrant
American Partners 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).
<PAGE>
PAGE 45
The following list includes the names of major subsidiaries of
American Express.
Jurisdiction
Name of Subsidiary of 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 Client Services Corporation Minnesota
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 Minnesota Foundation Minnesota
American Express Property Casualty Insurance
Agency of Kentucky Inc. Kentucky
American Express Property Casualty Insurance
Agency of Mississippi Inc. Mississippi
American Express Property Casualty Insurance
Agency of Pennsylvania Inc. Pennsylvania
American Express Service Corporation Delaware
American Express Tax and Business Services Inc. Minnesota
American Express Trust Company Minnesota
American Partners Life Insurance Company Arizona
AMEX Assurance Company Illinois
IDS Advisory Group Inc. Minnesota
IDS Aircraft Services Corporation Minnesota
IDS Cable Corporation Minnesota
IDS Cable II Corporation Minnesota
IDS Capital Holdings Inc. Minnesota
IDS Certificate Company Delaware
IDS Deposit Corp. Utah
IDS Fund Management Limited U.K.
IDS Futures Corporation Minnesota
IDS Insurance Agency of Alabama Inc. Alabama
IDS Insurance Agency of Arkansas Inc. Arkansas
IDS Insurance Agency of Massachusetts Inc. Massachusetts
IDS Insurance Agency of Mississippi Ltd. Mississippi
IDS Insurance Agency of New Mexico Inc. New Mexico
IDS Insurance Agency of North Carolina Inc. North Carolina
IDS Insurance Agency of Ohio Inc. Ohio
IDS Insurance Agency of Texas Inc. Texas
IDS Insurance Agency of Utah Inc. Utah
IDS Insurance Agency of Wyoming Inc. Wyoming
<PAGE>
PAGE 46
Item 26. Persons Controlled by or Under Common Control with the
Depositor or Registrant (Continued)
Jurisdiction
Name of Subsidiary of Incorporation
IDS International, Inc. Delaware
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
Item 27. Number of Contractowners
As of January 31, 1997, there were 21 contract owners of
qualified Privileged Assets select Annuity contracts. There were
211 owners of non-qualified contracts.
Item 28. Indemnification
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 director, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
<PAGE>
PAGE 47
Item 29. Principal Underwriters.
(a) American Express Service Corporation acts as principal
underwriter for the following investment companies:
Strategist Income Fund, Inc.; Strategist Growth Fund, Inc.; Strategist
Growth and Income Fund, Inc.; Strategist World Fund, Inc.; Strategist
Tax-Free Income Fund, Inc., APL Variable Annuity Account 1, ACL
Variable Annuity Account 1 and IDS Certificate Company.
(b) As to each director, officer or partner of the principal
underwriter:
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
- ----------------------------------------------------------------
Norma J. Arnold Vice President- None
American Express Company FSD Marketing
American Express Tower
World Financial Center
200 Vesey Street
New York, NY 10285-0001
Robert E. Bruers Vice President and None
IDS Tower 10 Chief Financial
Minneapolis, MN 55440 Officer
Colleen Curran Vice President and None
IDS Tower 10 Chief Legal Counsel
Minneapolis, MN 55440
George L. Farr Director None
American Express Company
American Express Tower
World Financial Center
200 Vesey Street
New York, NY 10285-0001
William J. Heron Jr. Director and President Board member
American Express Company and Vice President
American Express Tower
World Financial Center
200 Vesey Street
New York, NY 10285-0001
Kevin P. Howe Vice President and None
IDS Tower 10 Chief Compliance
Minneapolis, MN 55440 Officer
David R. Hubers Executive Vice None
IDS Tower 10 President
Minneapolis, MN 55440
<PAGE>
PAGE 48
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Service Corporation):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Richard W. Kling Vice President None
IDS Tower 10
Minneapolis, MN 55440
Timothy S. Meehan Secretary None
IDS Tower 10
Minneapolis, MN 55440
James A. Mitchell Senior Vice President Board member
IDS Tower 10 and President
Minneapolis, MN 55440
Karen L. Stone Vice President None
American Express Company
American Express Tower
World Financial Center
200 Vesey Street
New York, NY 10285-0001
<TABLE>
<CAPTION>
(c) Name of Net Underwriting
Principal Discounts and Compensation on Brokerage Other
Underwriter Commissions Redemption Commissions Compensation
<S> <C> <C> <C> <C>
American Express
Service Corporation None None None None
</TABLE>
Item 30. Location of Accounts and Records
American Partners Life Insurance Company
80 South Eighth Street
Minneapolis, MN
Item 31. Management Services
Not Applicable
Item 32. Undertakings
(a)(b)&(c) These undertakings were filed with the Registrant's
Pre-Effective Amendment No. 1, File No. 33-57731.
(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>
PAGE 49
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, American Partners Life Insurance Company, on behalf of the Registrant
certifies that it meets all of the requirements for effectiveness of this
Amendment to its Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Minneapolis, and State of Minnesota, on the 24th day
of April, 1997.
APL VARIABLE ANNUITY ACCOUNT 1
(Registrant)
By American Partners Life Insurance Company
(Sponsor)
By /s/ Stuart A. Sedlacek*
Stuart A. Sedlacek
President
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities indicated on the 24th day of
April, 1997.
Signature Title
/s/ Lorraine R. Hart* Director and Vice
Lorraine R. Hart President-Investments
/s/ Jay C. Hatlestad* Controller
Jay C. Hatlestad
/s/ Richard W. Kling* Director and Chairman of
Richard W. Kling the Board
/s/ Stuart A. Sedlacek Director and President
Stuart A. Sedlacek
/s/ William A. Stoltzmann* Director, Vice President,
William A. Stoltzmann General Counsel and
Secretary
/s/ Melinda S. Urion* Director and Vice President
Melinda S. Urion
*Signed pursuant to Power of Attorney, filed electronically
herewith.
- ------------------------------
Sherilyn K. Beck
<PAGE>
PAGE 50
CONTENTS OF THIS POST-EFFECTIVE AMENDMENT NO. 3
TO REGISTRATION STATEMENT NO. 33-57731
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.
Financial Statements.
Part C.
Other Information.
The signatures.
Exhibits.
<PAGE>
PAGE 1
APL VARIABLE ANNUITY ACCOUNT 1
Registration Number 33-57731/812-9484
EXHIBIT INDEX
8.3 Amendment No. 1 to Fund Participation Agreement, dated April
18, 1996 by and among American Partners Life Insurance
Company, TCI Portfolios, Inc. and Investors Research
Corporation.
8.5 Participation Agreement dated March 1, 1996 by and among
American Partners Life Insurance Company and Warburg Pincus
Trust and Warburg, Pincus Counsellors, Inc. and Counsellors
Securities Inc.
10. Consent of Independent Auditors.
11. Financial Statement Schedule and Report of Independent
Auditors.
14. Financial Data Schedules.
15. Power of Attorney to sign Amendments to this Registration
Statement dated March 12, 1997.
<PAGE>
PAGE 1
AMENDMENT NO. 1 TO
FUND PARTICIPATION AGREEMENT
THIS AMENDMENT NO. 1 TO FUND PARTICIPATION AGREEMENT is made as of the
18th day of April, 1996, by and among AMERICAN PARTNERS LIFE INSURANCE COMPANY
(the "Company"), TCI PORTFOLIOS, INC. (the "Issuer"), and the investment adviser
of the Issuer, INVESTORS RESEARCH CORPORATION ("Investors Research").
Capitalized terms not otherwise defined herein shall have the meaning ascribed
to them in the Agreement (defined below).
RECITALS
WHEREAS, the Company, the Issuer and Investors Research are parties to a
certain Fund Participation Agreement dated December 19, 1995 (the "Agreement");
and
WHEREAS, the Company, the Issuer and Investors Research now desire to
modify the Agreement so that shares of TCI Value, another series of shares
offered by the Issuer, may be available to serve as underlying investment media
for the Contracts offered by the Company;
NOW, THEREFORE, in consideration of the mutual promises set forth
herein, the parties hereto agree as follows:
1. Addition of TCI Value. Upon receipt of notice from Investors Research
that the Securities and Exchange Commission has allowed the registration
statement of TCI value to go effective ("Notice"), shares of TCI value shall be
made available by the Issuer to serve as underlying investment media for the
Contracts pursuant to the terms of the Agreement, as amended from time to time.
From and after the date of Notice, unless the context otherwise requires, all
references in the Agreement to the term "fund" shall be deemed to include TCI
Value.
2. Ratification and Confirmation of Agreement. After the
date hereof, all references to the term "Agreement" shall be deemed
to mean the Agreement, as amended by this Amendment No. 1. In the
event of a conflict between the terms of this Amendment No. 1 and
the Agreement, it is the intention of the parties that the terms of
this Amendment No. 1 shall control and the Agreement shall be
interpreted on that basis. To the extent the provisions of the
Agreement have not been amended by this Amendment No. 1, the
parties hereby confirm and ratify the Agreement.
3. Counterparts. This Agreement No. 1 may be executed in
two or more counterparts, each of which shall be an original and
all of which together shall constitute one instrument.
<PAGE>
PAGE 2
IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 1
as of the date first above written.
AMERICAN PARTNERS LIFE INSURANCE INVESTORS RESEARCH CORPORATION
COMPANY
By: /s/ Michael J. Hogan By: /s/ William M. Lyons
Michael J. Hogan William M. Lyons
Vice President Executive Vice President
Attest: TCI PORTFOLIOS, INC.
By: /s/ Paul D. Sand By: /s/ William M. Lyons
Paul D. Sand William M. Lyons
Assistant Secretary Executive Vice President
<PAGE>
PAGE 1
PARTICIPATION AGREEMENT
By and Among
AMERICAN PARTNERS LIFE INSURANCE COMPANY
And
WARBURG PINCUS TRUST
And
WARBURG, PINCUS COUNSELLORS, INC.
And
COUNSELLORS SECURITIES INC.
THIS AGREEMENT, made and entered into this 1st day of March, 1996 by and among
American Partners Life Insurance Company, organized under the laws of the State
of Arizona (the "Company"), on its own behalf and on behalf of each separate
account of the Company named in Schedule 1 to this Agreement, as may be amended
from time to time (each account referred to as the "Account"), Warburg Pincus
Trust, an open-end management investment company and business trust organized
under the laws of the Commonwealth of Massachusetts (the "Fund"; Warburg, Pincus
Counsellors. Inc. a corporation organized under the laws of the State of
Delaware (the "Adviser"); and Counsellors Securities Inc., a corporation
organized under the laws of the State of New York ("CSI").
WHEREAS, the Fund engages in business as an open-end management investment
company and was established for the purpose of serving as the investment vehicle
for separate accounts established for variable life insurance contracts and
variable annuity contracts to be offered by insurance companies that have
entered into participation agreements similar to this Agreement (the
"Participating Insurance Companies"), and
WHEREAS, beneficial interests in the Fund are divided into several series of
shares, each representing the interest in a particular managed portfolio of
securities and other assets (the "Portfolios"); and
WHEREAS, the Fund has received an order from the Securities & Exchange
Commission (the "SEC") granting Participating Insurance Companies and variable
annuity separate accounts and variable life insurance separate accounts relief
from the provisions of Sections 9(a), 13(a), 15(a), and 15(b) of the Investment
Company Act of 1940, as amended, (the "1940 Act") and Rules 6e-2(b)(15) and
6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares of the Fund
to be sold to and held by variable annuity separate accounts and variable life
insurance separate accounts of both affiliated and unaffiliated Participating
Insurance Companies and qualified pension and retirement plans outside of the
separate account context (the "Mixed and Shared Funding Exemptive Order"). The
parties to this Agreement agree that the conditions or undertakings specified in
the Mixed and Shared Funding Exemptive Order and that may be imposed on the
Company, the Fund, the Adviser and/or CSI by virtue of the receipt of such order
by the SEC will be incorporated herein by reference and such parties agree to
comply with such conditions and undertakings to the extent applicable to each
such party; and
<PAGE>
PAGE 2
WHEREAS, the Fund is registered as an open-end management investment company
under the 1940 Act and its shares are registered under the Securities Act of
1933 as amended (the "1933 Act"); and
WHEREAS, the Company has registered or will register certain variable annuity
contracts (the "Contracts") under the 1933 Act; and
WHEREAS, the Account is a duly organized, validly existing segregated asset
account, established by resolution of the Board of Directors of the Company
under the insurance laws of the State of Arizona, to set aside and invest assets
attributable to the Contracts; and
WHEREAS, the Company has registered the Account as a unit
investment trust under the 1940 Act; and
WHEREAS, CSI, the Fund's distributor, is registered as a broker-dealer with the
SEC under the Securities Exchange Act of 1934, as amended (the "1934 Act"), and
is a member in good standing of the National Association of Securities Dealers,
Inc. (the "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and regulations,
the Company intends to purchase shares of the Portfolios named in Schedule 2, as
such schedule may be amended from time to time (the "Designated Portfolios") on
behalf of the Account to fund the Contracts, and the Fund is authorized to sell
such shares to unit investment trusts such as the Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Fund, the Adviser and CSI agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Fund agrees to sell to the Company those shares of
the Designated Portfolios that each Account orders,
executing such orders on a daily basis at the net asset
value next computed after receipt and acceptance by the
Fund or its designee of the order for the shares of the
Fund. For purposes of this Section 1.1, the Company will
be the designee of the Fund for receipt of such orders
from each Account and receipt by such designee will
constitute receipt by the Fund; provided that the Fund
receives notice of such order by 10:00 a.m. Eastern Time
on the next following business day ("T+1"). "Business
Day" will mean any day on which the New York Stock
Exchange is open for trading and on which the Fund
calculates its net asset value pursuant to the rules of
the SEC.
1.2. The Company will pay for Fund shares on T+1 that an order
to purchase Fund shares is made in accordance with
Section 1.1 above. Payment will be in federal funds
transmitted by wire. This wire transfer will be initiated
by 12:00 p.m. Eastern Time.
<PAGE>
PAGE 3
1.3. The Fund agrees to make shares of the Designated
Portfolios available for purchase at the applicable net
asset value per share by Participating Insurance
Companies and their separate accounts on those days on
which the Fund calculates its Designated Portfolio net
asset value pursuant to rules of the SEC; provided,
however, that the Board of Trustees of the Fund (the
"Fund Board") may refuse to sell shares of any Portfolio
to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law
or by regulatory authorities having jurisdiction or is,
in the sole discretion of the Fund Board, acting in good
faith and in light of its fiduciary duties under federal
and any applicable state laws, necessary in the best
interests of the shareholders of such Portfolio.
1.4. On each Business Day on which the Fund calculates its net
asset value, the Company will aggregate and calculate the
net purchase or redemption orders for each Account
maintained by the Fund in which contractowner assets are
invested. Net orders will only reflect orders that the
Company has received prior to the close of regular
trading on the New York Stock Exchange, Inc. (the "NYSE")
(currently 4:00 p.m., Eastern Time) on that Business Day.
Orders that the Company has received after the close of
regular trading on the NYSE will be treated as though
received on the next Business Day. Each communication of
orders by the Company will constitute a representation
that such orders were received by it prior to the close
of regular trading on the NYSE on the Business Day on
which the purchase or redemption order is priced in
accordance with Rule 22c-1 under the 1940 Act. Other
procedures relating to the handling of orders will be in
accordance with the prospectus and statement of
information of the relevant Designated Portfolio or with
oral or written instructions that CSI or the Fund will
forward to the Company from time to time.
1.5. The Fund agrees that shares of the Fund will be sold only
to Participating Insurance Companies and their separate
accounts, qualified pension and retirement plans or such
other persons as are permitted under applicable
provisions of the Internal Revenue Code of 1986, as
amended, (the "Internal Revenue Code"), and regulations
promulgated thereunder, the sale to which will not impair
the tax treatment currently afforded the Contracts. No
shares of any Portfolio will be sold to the general
public except as set forth in this Section 1.5.
1.6. The Fund agrees to redeem for cash, upon the Company's
request, any full or fractional shares of the Fund held
by the Company, executing such requests on a daily basis
at the net asset value next computed after receipt and
acceptance by the Fund or its agent of the request for
redemption. For purposes of this Section 1.6, the
Company will be the designee of the Fund for receipt of
<PAGE>
PAGE 4
requests for redemption from each Account and receipt by such
designee will constitute receipt by the Fund, provided the Fund
receives notice of request for redemption by 10:00 a.m. Eastern
Time on the next following Business Day. Payment will be in
federal funds transmitted by wire to the Company's account as
designated by the Company in writing from time to time, on the
same Business Day the Fund receives notice of the redemption
order from the Company. The Fund reserves the right to delay
payment of redemption proceeds, but in no event may such payment
be delayed longer than the period permitted by the 1940 Act. The
Fund will not bear any responsibility whatsoever for the proper
disbursement or crediting of redemption proceeds; the Company
alone will be responsible for such action. If notification of
redemption is received after 10:00 a.m. Eastern Time, payment for
redeemed shares will be made on the next following Business Day.
1.7. The Company agrees to purchase and redeem the shares of the
Designated Portfolios offered by the then current prospectus of
the Fund in accordance with the provisions of such prospectus.
1.8. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any
Account. Purchase and redemption orders for Fund shares will be
recorded in an appropriate title for each Account or the
appropriate subaccount of each Account.
1.9. The Fund will furnish same day notice (by telecopier,
followed by written confirmation) to the Company of the
declaration of any income, dividends or capital gain
distributions payable on each Designated Portfolio's
shares. The Company hereby elects to receive all such
dividends and distributions as are payable on the
Designated Portfolio shares in the form of additional
shares of that Designated Portfolio. The Fund will
notify the Company of the number of shares so issued as
payment of such dividends and distributions. The Company
reserves the right to revoke this election upon
reasonable prior notice to the Fund and to receive all
such dividends and distributions in cash.
1.10. The Fund will make the net asset value per share for each
Designated Portfolio available to the Company on a daily
basis as soon as reasonably practical after the net asset
value per share is calculated and will use its best
efforts to make such net asset value per share available
by 6:00 p.m., Eastern Time, but in no event later than
7:00 p.m., Eastern Time, each business day.
1.11. In the event adjustments are required to correct any
error in the computation of the net asset value of the
Fund's shares, the Fund or CSI will notify the Company as
soon as practicable after discovering the need for those
<PAGE>
PAGE 5
adjustments that result in an aggregate reimbursement of $150 or
more to any one Account maintained by a Designated Portfolio (or,
if greater, result in an adjustment of $10 or more to each
contractowner's account). Any such notice will state for each day
for which an error occurred the incorrect price, the correct
price and, to the extent communicated to the Fund's shareholders,
the reason for the price change. The Company may send this notice
or a derivation thereof (so long as such derivation is approved
in advance by CSI or the Adviser) to contractowners whose
accounts are affected by the price change. The parties will
negotiate in good faith to develop a reasonable method for
effecting such adjustments.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Contracts
are or will be registered under the 1933 Act and that the
Contracts will be issued and sold in compliance with all
applicable federal and state laws, including state
insurance suitability requirements. The Company further
represents and warrants that it is an insurance company
duly organized and in good standing under applicable law
and that it has legally and validly established each
Account as a separate account under applicable state law
and has registered the Account as a unit investment trust
in accordance with the provisions of the 1940 Act to
serve as a segregated investment account for the
Contracts, and that it will maintain such registration
for so long as any Contracts are outstanding. The
Company will amend the registration statement under the
1933 Act for the Contracts and the registration statement
under the 1940 Act for the Account from time to time as
required in order to effect the continuous offering of
the Contracts or as may otherwise be required by
applicable law. The Company will register and qualify
the Contracts for sale in accordance with the securities
laws of the various states only if and to the extent
deemed necessary by the Company.
2.2. The Company represents that the Contracts are currently
and at the time of issuance will be treated as annuity
contracts under applicable provisions of the Internal
Revenue Code, and that it will make every effort to
maintain such treatment and that it will notify the Fund
and the Adviser immediately upon having a reasonable
basis for believing that the Contracts have ceased to be
so treated or that they might not be so treated in the
future.
2.3. The Company represents and warrants that it will not purchase
shares of the Designated Portfolios with assets derived from
tax-qualified retirement plans except, indirectly, through
Contracts purchased in connection with such plans.
<PAGE>
PAGE 6
2.4. The Fund represents and warrants that Fund shares of the
Designated Portfolios sold pursuant to this Agreement
will registered under the 1933 Act and duly authorized
for issuance in accordance with applicable law and that
the Fund is and will remain registered under the 1940 Act
for as long as such shares of the Designated Portfolios
are sold. The Fund will amend the registration statement
for its shares under the 1933 Act and the 1940 Act from
time to time as required in order to effect the
continuous offering of its shares. The Fund will
register and qualify the shares of the Designated
Portfolios for sale in accordance with the laws of the
various states only if and to the extent deemed advisable
by the Fund.
2.5. The Fund represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the
Internal Revenue Code, and that it will make every effort
to maintain such qualification (under Subchapter M or any
successor or similar provision) and that it will notify
the Company immediately upon having a reasonable basis
for believing that it has ceased to so qualify or that it
might not so qualify in the future.
2.6. The Fund represents and warrants that in performing the
services described in this Agreement. The Fund will
comply with all applicable laws, rules and regulations.
The Fund makes no representation as to whether any aspect
of its operations (including, but not limited to, fees
and expenses and investment policies, objectives and
restrictions) complies with the insurance laws and
regulations of any state. The Fund and CSI agree that
upon request they will use their best efforts to furnish
the information required by state insurance laws so that
the Company can obtain the authority needed to issue the
Contracts in the various states.
2.7. The Fund currently does not intend to make any payments
to finance distribution expenses pursuant to Rule 12b-1
under the 1940 Act, although it reserves the right to
make such payments in the future. To the extent that it
decides to finance distribution expenses pursuant to Rule
12b-1, the Fund undertakes to have its Fund Board,
formulate and approve any plan under Rule 12b-1 to
finance distribution expenses in accordance with the 1940
Act.
2.8. CSI represents and warrants that it will distribute the Fund
shares of the Designated Portfolios in accordance with all
applicable federal and state securities laws including, without
limitation, the 1933 Act, the 1934 Act and the 1940 Act.
2.9. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and
that it does and will comply in all material respects with
applicable provisions of the 1940 Act.
<PAGE>
PAGE 7
2.10. CSI represents and warrants that it is and will remain duly
registered under all applicable federal and state securities laws
and that it will perform its obligations for the Fund in
accordance in all material respects with any applicable state and
federal securities laws.
2.11. The Fund and CSI represent and warrant that all of their
trustees, officers, employees, investment advisers, and
individuals/entities having access to the funds and/or
securities of the Fund are and continue to be at all
times covered by a blanket fidelity bond or similar
coverage for the benefit of the Fund in an amount not
less than the minimal coverage as required currently by
Rule 17g-(1) of the 1940 Act or related provisions as may
be promulgated from time to time. The aforesaid bond
includes coverage for larceny and embezzlement and is
issued by a reputable bonding company.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. The Fund or CSI will provide the Company, at the Fund's
or its affiliate's expense, with as many copies of the
current Fund prospectus for the Designated Portfolios as
the Company may reasonably request for distribution, at
the Company's expense, to prospective contractowners and
applicants. The Fund or CSI will provide, at the Fund's
or its affiliate's expense, as many copies of said
prospectus as necessary for distribution, at the
Company's expense, to existing contractowners. The Fund
or CSI will provide the copies of said prospectus to the
Company or to its mailing agent. If requested by the
Company in lieu thereof, the Fund or CSI will provide
such documentation, including a computer diskette or a
final copy of a current prospectus set in type at the
Fund's or its affiliate's expense, and such other
assistance as is reasonably necessary in order for the
Company at least annually (or more frequently if the Fund
prospectus is amended more frequently) to have the Fund's
prospectus and the prospectuses of other mutual funds in
which assets attributable to the Contracts may be
invested printed together in one document, in which case
the Fund or its affiliate will bear its reasonable share
of expenses as described above, allocated based on the
proportionate number of pages of the Fund's and other
funds' respective portions of the document.
3.2. The Fund or CSI will provide the Company, at the Fund's
or its affiliate's expense, with as many copies of the
statement of additional information as the Company may
reasonably request for distribution, at the Company's
expense, to prospective contractowners and applicants.
The Fund or CSI will provide, at the Fund's or its
affiliate's expense, as many copies of said statement of
additional information as necessary for distribution, at
the Company's expense, to any existing contractowner who
requests such statement or whenever state or federal law
<PAGE>
PAGE 8
otherwise requires that such statement be provided. The Fund or
CSI will provide the copies of said statement of additional
information to the Company or to its mailing agent.
3.3. The Fund or CSI, at the Fund's or its affiliate's
expense, will provide the Company or its mailing agent
with copies of its proxy material, if any, reports to
shareholders and other communications to shareholders in
such quantity as the Company will reasonably require.
The Company will distribute this proxy material, reports
and other communications to existing contractowners and
tabulate the votes.
3.4. If and to the extent required by law the Company will:
(a) solicit voting instructions from contractowners;
(b) vote the shares of the Designated Portfolios
held in the Account in accordance with
instructions received from contractowners; and
(c) vote shares of the Designated Portfolios held in the Account
for which no timely instructions have been received, as well
as shares it owns, in the same proportion as shares of such
Designated Portfolio for which instructions have been
received from the Company's contractowners;
so long as and to the extent that the SEC continues to interpret the
1940 Act to require pass-through voting privileges for variable
contractowners. Except as set forth above, the Company reserves the
right to vote Fund shares held in any segregated asset account in its
own right, to the extent permitted by law. The Company will be
responsible for assuring that each of its separate accounts
participating in the Fund calculates voting privileges in a manner
consistent with all legal requirements, including the Mixed and Shared
Funding Exemptive Order.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular, the
Fund either will provide for annual meetings (except
insofar as the SEC may interpret Section 16 of the 1940
Act not to require such meetings) or, as the Fund
currently intends, to comply with Section 16(c) of the
1940 Act (although the Fund is not one of the trusts
described in Section 16(c) of that Act) as well as with
Sections 16(a) and, if and when applicable, 16(b).
Further, the Fund will act in accordance with the SEC's
interpretation of the requirements of Section 16(a) with
respect to periodic elections of trustees and with
whatever rules the SEC may promulgate with respect
thereto.
<PAGE>
PAGE 9
ARTICLE IV. Sales Material and Information
4.1. CSI will provide the Company on a timely basis with
investment performance information for each Designated
Portfolio in which the Company maintains an Account,
including total return for the preceding calendar month
and calendar quarter, the calendar year to date, and the
prior one-year, five-year, and ten-year (or life of the
Fund) periods. The Company may, based on the
SEC-mandated information supplied by CSI, prepare
communications for contractowners ("Contractowner
Materials"). The Company will provide copies of all
Contractowner Materials concurrently with their first use
for CSI's internal recordkeeping purposes. It is
understood that neither CSI nor any Designated Portfolio
will be responsible for errors or omissions in, or the
content of, Contractowner Materials except to the extent
that the error or omission resulted from information
provided by or on behalf of CSI or the Designated
Portfolio. Any printed information that is furnished to
the Company other than each Designated Portfolio's
prospectus or statement of additional information (or
information supplemental thereto), periodic reports and
proxy solicitation materials is CSI's sole responsibility
and not the responsibility of any Designated Portfolio or
the Fund. The Company agrees that the Portfolios, the
shareholders of the Portfolios and the officers and
governing Board of the Fund will have no liability or
responsibility to the Company in these respects.
4.2. The Company will not give any information or make any
representations or statements on behalf of the Fund or
concerning the Fund in connection with the sale of the
Contracts other than the information or representations
contained in the registration statement, prospectus or
statement of additional information for Fund shares, as
such registration statement, prospectus and statement of
additional information may be amended or supplemented
from time to time, or in reports or proxy statements for
the Fund, or in published reports for the Fund which are
in the public domain or approved by the Fund or CSI for
distribution, or in sales literature or other material
provided by the Fund or by CSI, except with permission of
the Fund or CSI. The Fund and CSI agree to respond to
any request for approval on a prompt and timely basis.
Nothing in this Section 4.2 will be construed as
preventing the Company or its employees or agents from
giving advice on investment in the Fund.
4.3. The Fund, the Adviser or CSI will furnish, or will cause
to be furnished, to the Company or its designee, each
piece of sales literature or other promotional material
in which the Company or its Account is named, at least
ten (10) business days prior to its use. No such
material will be used if the Company reasonably objects
to such use within five (5) business days after receipt
of such material.
<PAGE>
PAGE 10
4.4. The Fund, the Adviser and CSI will not give any
information or make any representations or statements on
behalf of the Company or concerning the Company, each
Account, or the Contracts other than the information or
representations contained in a registration statement,
prospectus or statement of additional information for the
Contracts, as such registration statement, prospectus and
statement of additional information may be amended or
supplemented from time to time, or in published reports
for each Account or the Contracts which are in the public
domain or approved by the Company for distribution to
contractowners, or in sales literature or other material
provided by the Company, except with permission of the
Company. The Company agrees to respond to any request
for approval on a prompt and timely basis.
4.5. The Fund will provide to the Company at least one
complete copy of all registration statements,
prospectuses, statements of additional information,
reports, proxy statements, sales literature and other
promotional materials, applications for exemptions,
requests for no-action letters, and all amendments to any
of the above, that relate to the Fund or its shares,
contemporaneously with the filing of such document with
the SEC, the NASD or other regulatory authority.
4.6. The Company will provide to the Fund at least one
complete copy of all registration statements,
prospectuses, statements of additional information,
reports, solicitations for voting instructions, sales
literature and other promotional materials, applications
for exemptions, requests for no action letters, and all
amendments to any of the above, that relate to the
Contracts or each Account, contemporaneously with the
filing of such document with the SEC, the NASD or other
regulatory authority.
4.7. For purposes of this Article IV, the phrase "sales
literature or other promotional material" includes, but
is not limited to, advertisements (such as material
published, or designed for use in, a newspaper, magazine,
or other periodical, radio, television, telephone or tape
recording, videotape display, signs or billboards, motion
pictures, or other public media, (e.g., on-line networks
----
such as the Internet or other electronic messages) sales
literature (i.e., any written communication distributed
----
or made generally available to customers or the public,
including brochures, circulars, research reports, market
letters, form letters, seminar texts, reprints or
excerpts of any other advertisement, sales literature, or
published article), educational or training materials or
other communications distributed or made generally
available to some or all agents or employees,
registration statements, prospectuses, statements of
additional information, shareholder reports, and proxy
materials and any other material constituting sales
literature or advertising under the NASD rules, the 1933
Act or the 1940 Act.
<PAGE>
PAGE 11
4.8. The Fund and CSI hereby consent to the Company's use of
the names Warburg Pincus Trust - Small Company Growth
Portfolio and Warburg, Pincus Counsellors, Inc. in
connection with the marketing of the Contracts, subject
to the terms of Sections 4.1 and 4.2 of this Agreement.
Such consent will terminate with the termination of this
Agreement.
ARTICLE V. Fees and Expenses
5.1. The Fund, the Adviser and CSI will pay no fee or other
compensation to the Company under this Agreement except
if the Fund or any Designated Portfolio adopts and
implements a plan pursuant to Rule 12b-1 under the 1940
Act to finance distribution expenses, then, subject to
obtaining any required exemptive orders or other
regulatory approvals, the Fund may make payments to the
Company or to the underwriter for the Contracts if and in
such amounts agreed to by the Fund in writing.
5.2. All expenses incident to performance by the Fund of this
Agreement will be paid by the Fund to the extent
permitted by law. The Fund will bear the expenses for
the cost of registration and qualification of the Fund's
shares; preparation and filing of the Fund's prospectus,
statement of additional information and registration
statement, proxy materials and reports; setting in type
and printing the Fund's prospectus; setting in type and
printing proxy materials and reports by it to
contractowners (including the costs of printing a Fund
prospectus that constitutes an annual report); the
preparation of all statements and notices required by any
federal or state law; all taxes on the issuance or
transfer of the Fund's shares; any expenses permitted to
be paid or assumed by the Fund pursuant to a plan, if
any, under Rule 12b-1 under the 1940 Act; and all other
expenses set forth in Article III of this Agreement.
ARTICLE VI. Diversification
6.1. The Fund will at all times invest money from the
Contracts in such a manner as to ensure that the
Contracts will be treated as variable annuity contracts
under the Internal Revenue Code and the regulations
issued thereunder. Without limiting the scope of the
foregoing, the Fund will comply with Section 817(h) of
the Internal Revenue Code and Treasury Regulation
1.817-5, as amended from time to time, relating to the
diversification requirements for variable annuity,
endowment, or life insurance contracts and any amendments
or other modifications to such Section or Regulation. In
the event of a breach of this Article VI by the Fund, it
will take all reasonable steps: (a) to notify the Company
of such breach; and (b) to adequately diversify the Fund
so as to achieve compliance within the grace period
afforded by Treasury Regulation 1.817-5.
<PAGE>
PAGE 12
ARTICLE VII. Potential Conflicts
7.1. The Fund Board will monitor the Fund for the existence of
any irreconcilable material conflict among the interests
of the contractowners of all separate accounts investing
in the Fund. An irreconcilable material conflict may
arise for a variety of reasons, including: (a) an action
by any state insurance regulatory authority; (b) a change
in applicable federal or state insurance, tax, or
securities laws or regulations, or a public ruling,
private letter ruling, no action or interpretative
letter, or any similar action by insurance, tax, or
securities regulatory authorities; (c) an administrative
or judicial decision in any relevant proceeding; (d) the
manner in which the investments of any Portfolio are
being managed; (e) a difference in voting instructions
given by Participating Insurance Companies or by variable
annuity and variable life insurance contractowners; or
(f) a decision by an insurer to disregard the voting
instructions of contractowners. The Fund Board will
promptly inform the Company if it determines that an
irreconcilable material conflict exists and the
implications thereof.
7.2. The Company will report any potential or existing
conflicts of which it is aware to the Fund Board. The
Company agrees to assist the Fund Board in carrying out
its responsibilities, as delineated in the Mixed and
Shared Funding Exemptive Order, by providing the Fund
Board with all information reasonably necessary for the
Fund Board to consider any issues raised. This includes,
but is not limited to, an obligation by the Company to
inform the Fund Board whenever contractowner voting
instructions are to be disregarded. The Company's
responsibilities hereunder will be carried out with a
view only to the interest of contractowners.
7.3. If it is determined by a majority of the Fund Board, or a
majority of its disinterested directors, that an
irreconcilable material conflict exists, the Company
will, at its expense and to the extent reasonably
practicable (as determined by a majority of the
disinterested directors), take whatever steps are
necessary to remedy or eliminate the irreconcilable
material conflict, up to and including: (a) withdrawing
the assets allocable to some or all of the Accounts from
the Fund or any Portfolio and reinvesting such assets in
a different investment medium, including (but not limited
to) another Portfolio of the Fund, or submitting the
question whether such segregation should be implemented
to a vote of all affected contractowners and, as
appropriate, segregating the assets of any appropriate
group (i.e., variable annuity contractowners or variable
----
life insurance contractowners of one or more
Participating Insurance Companies) that votes in favor of
such segregation, or offering to the affected
<PAGE>
PAGE 13
contractowners the option of making such a change; and (b)
establishing a new registered management investment company or
managed separate account.
7.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard contractowner voting
instructions, and the Company's judgment represents a
minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to
withdraw the affected subaccount of the Account's
investment in the Fund and terminate this Agreement with
respect to such subaccount; provided, however, that such
withdrawal and termination will be limited to the extent
required by the foregoing irreconcilable material
conflict as determined by a majority of the disinterested
directors of the Fund Board. No charge or penalty will be
imposed as a result of such withdrawal.
7.5. If a material irreconcilable conflict arises because a
particular state insurance regulator's decision
applicable to the Company conflicts with the majority of
other state insurance regulators, then the Company will
withdraw the affected subaccount of the Account's
investment in the Fund and terminate this Agreement with
respect to such subaccount; provided, however, that such
withdrawal and termination will be limited to the extent
required by the foregoing irreconcilable material
conflict as determined by a majority of the disinterested
directors of the Fund Board. No charge or penalty will
be imposed as a result of such withdrawal.
7.6. For purposes of Sections 7.3 through 7.6 of this
Agreement, a majority of the disinterested members of the
Fund Board will determine whether any proposed action
adequately remedies any irreconcilable material conflict,
but in no event will the Fund or the Adviser (or any
other investment adviser to the Fund) be required to
establish a new funding medium for the Contracts. The
Company will not be required by Section 7.3 to establish
a new funding medium for the Contracts if an offer to do
so has been declined by vote of a majority of
contractowners materially affected by the irreconcilable
material conflict.
7.7. The Company will at least annually submit to the Fund
Board such reports, materials or data as the Fund Board
may reasonably request so that the Fund Board may fully
carry out the duties imposed upon it as delineated in the
Mixed and Shared Funding Exemptive Order, and said
reports, materials and data will be submitted more
frequently if deemed appropriate by the Fund Board.
7.8. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any
provision of the 1940 Act or the rules promulgated thereunder
with respect to mixed or shared funding (as defined in the Mixed
and Shared Funding
<PAGE>
PAGE 14
Exemptive Order) on terms and conditions materially different
from those contained in the Mixed and Shared Funding Exemptive
Order, then: (a) the Fund and/or the Participating Insurance
Companies, as appropriate, will take such steps as may be
necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and
Rule 6e-3, as adopted, to the extent such rules are applicable;
and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of this
Agreement will continue in effect only to the extent that terms
and conditions substantially identical to such Sections are
contained in such Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By The Company
(a) The Company agrees to indemnify and hold harmless the
Fund, the Adviser, CSI, and each person, if any, who
controls or is associated with the Fund, the Adviser or
CSI within the meaning of such terms under the federal
securities laws and any director, trustee, officer,
partner, employee or agent of the foregoing
(collectively, the "Indemnified Parties" for purposes of
this Section 8.1) against any and all losses, claims,
expenses, damages, liabilities (including amounts paid in
settlement with the written consent of the Company) or
litigation (including reasonable legal and other
expenses), to which the Indemnified Parties may become
subject under any statute, regulation, at common law or
otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof)
or settlements:
(1) arise out of or are based upon any untrue statements
or alleged untrue statements of any material fact
contained in the registration statement, prospectus
or statement of additional information for the
Contracts or contained in the Contracts or sales
literature or other promotional material for the
Contracts (or any amendment or supplement to any of
the foregoing), or arise out of or are based upon
the omission or the alleged omission to state
therein a material fact required to be stated or
necessary to make such statements not misleading in
light of the circumstances in which they were made;
provided that this agreement to indemnify will not
apply as to any Indemnified Party if such statement
or omission or such alleged statement or omission
was made in reliance upon and in conformity with
written information furnished to the Company by the
Fund, the Adviser or CSI for use in the registration
statement, prospectus or statement of additional
information for the Contracts or in the Contracts or
sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the
Contracts or Fund shares; or
<PAGE>
PAGE 15
(2) arise out of or as a result of statements or
representations by or on behalf of the Company or wrongful
conduct of the Company or persons under its control, with
respect to the sale or distribution of the Contracts or
Fund shares; or
(3) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the Fund
registration statement, prospectus, statement of
additional information or sales literature or other
promotional material of the Fund (or amendment or
supplement) or the omission or alleged omission to
state therein a material fact required to be stated
therein or necessary to make such statements not
misleading in light of the circumstances in which
they were made, if such a statement or omission was
made in reliance upon and in conformity with
information furbished to the Fund by or on behalf of
the Company or persons under its control; or
(4) arise as a result of any failure by the Company to
provide the services and furnish the materials under
the terms of this Agreement; or
(5) arise out of any material breach of any representation
and/or warranty made by the Company in this Agreement or
arise out of or result from any other material breach by
the Company of this Agreement;
except to the extent provided in Sections 8.1(b) and 8.4 hereof.
This indemnification will be in addition to any liability that
the Company otherwise may have.
(b) No party will be entitled to indemnification under
Section 8.1(a) to the extent such loss, claim, damage,
liability or litigation is due to the willful
misfeasance, bad faith, or gross negligence in the
performance of such party's duties under this Agreement,
or by reason of such party's reckless disregard of its
obligations or duties under this Agreement by the party
seeking indemnification.
(c) The Indemnified Parties promptly will notify the Company of the
commencement of any litigation, proceedings, complaints or
actions by regulatory authorities against them in connection with
the issuance or sale of the Fund shares or the Contracts or the
operation of the Fund.
8.2. Indemnification By The Adviser, the Fund and CSI
(a) The Adviser, the Fund and CSI, in each case solely to the extent
relating to such party's responsibilities hereunder, agree to
indemnify and hold harmless the Company and each person, if any,
who controls or is associated with the Company within the meaning
of such terms under the federal securities laws and any director,
<PAGE>
PAGE 16
trustee, officer, partner, employee or agent of the foregoing
(collectively, the "Indemnified Parties" for purposes of this
Section 8.2) against any and all losses, claims, expenses,
damages, liabilities (including amounts paid in settlement with
the written consent of the Adviser) or litigation (including
reasonable legal and other expenses) to which the Indemnified
Parties may become subject under any statute, regulation, at
common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or
settlements:
(1) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in the registration statement, prospectus
or statement of additional information for the Fund
or sales literature or other promotional material of
the Fund (or any amendment or supplement to any of
the foregoing), or arise out of or are based upon
the omission or the alleged omission to state
therein a material fact required to be stated or
necessary to make such statements not misleading in
light of the circumstances in which they were made;
provided that this agreement to indemnify will not
apply as to any Indemnified Party if such statement
or omission or such alleged statement or omission
was made in reliance upon and in conformity with
information furnished to the Adviser, CSI or the
Fund by or on behalf of the Company for use in the
registration statement, prospectus or statement of
additional information for the Fund or in sales
literature of the Fund (or any amendment or
supplement thereto) or otherwise for use in
connection with the sale of the Contracts or Fund
shares; or
(2) arise out of or as a result of statements or
representations or wrongful conduct of the Adviser, the
Fund or CSI or persons under the control of the Adviser,
the Fund or CSI respectively, with respect to the sale of
the Fund shares; or
(3) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a
registration statement, prospectus, statement of
additional information or sales literature or other
promotional material covering the Contracts (or any
amendment or supplement thereto), or the omission or
alleged omission to state therein a material fact
required to be stated or necessary to make such
statement or statements not misleading in light of
the circumstances in which they were made, if such
statement or omission was made in reliance upon and
in conformity with written information furnished to
the Company by the Adviser, the Fund or CSI or
persons under the control of the Adviser, the Fund
or CSI; or
<PAGE>
PAGE 17
(4) arise as a result of any failure by the Fund, the
Adviser or CSI to provide the services and furnish
the materials under the terms of this Agreement
(including a failure, whether unintentional or in
good faith or otherwise, to comply with the
diversification requirements and procedures related
thereto specified in Article VI of this Agreement);
or
(5) arise out of or result from any material breach of any
representation and/or warranty made by the Adviser, the
Fund or CSI in this Agreement, or arise out of or result
from any other material breach of this Agreement by the
Adviser, the Fund or CSI;
except to the extent provided in Sections 8.2(b) and 8.4
hereof.
(b) No party will be entitled to indemnification under
Section 8.2(a) to the extent such loss, claim, damage,
liability or litigation is due to the willful
misfeasance, bad faith, or gross negligence in the
performance of such party's duties under this Agreement,
or by reason of such party's reckless disregard of its
obligations or duties under this Agreement by the party
seeking indemnification.
(c) The Indemnified Parties will promptly notify the Adviser, the
Fund and CSI of the commencement of any litigation, proceedings,
complaints or actions by regulatory authorities against them in
connection with the issuance or sale of the Contracts or the
operation of the Account.
8.4. Indemnification Procedure
Any person obligated to provide indemnification under this Article VIII
("Indemnifying Party" for the purpose of this Section 8.4) will not be
liable under the indemnification provisions of this Article VIII with
respect to any claim made against a party entitled to indemnification
under this Article VIII ("Indemnified Party" for the purpose of this
Section 8.4) unless such Indemnified Party will have notified the
Indemnifying Party in writing within a reasonable time after the summons
or other first legal process giving information of the nature of the
claim will have been served upon such Indemnified Party (or after such
party will have received notice of such service on any designated
agent), but failure to notify the Indemnifying Party of any such claim
will not relieve the Indemnifying Party from any liability which it may
have to the Indemnified Party against whom such action is brought
otherwise than on account of the indemnification provision of this
Article VIII, except to the extent that the failure to notify results in
the failure of actual notice to the Indemnifying Party and such
Indemnifying Party is damaged solely as a result of failure to give such
notice. In case any such action is brought against the Indemnified
Party, the Indemnifying Party will be entitled to participate, at its
own
<PAGE>
PAGE 18
expense, in the defense thereof. The Indemnifying Party also will be
entitled to assume the defense thereof, with counsel satisfactory to the
party named in the action. After notice from the Indemnifying Party to
the Indemnified Party of the Indemnifying Party's election to assume the
defense thereof, the Indemnified Party will bear the fees and expenses
of any additional counsel retained by it, and the Indemnifying Party
will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation, unless: (a) the Indemnifying Party and the Indemnified
Party will have mutually agreed to the retention of such counsel; or (b)
the named parties to any such proceeding (including any impleaded
parties) include both the Indemnifying Party and the Indemnified Party
and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between
them. The Indemnifying Party will not be liable for any settlement of
any proceeding effected without its written consent but if settled with
such consent or if there is a final judgment for the plaintiff, the
Indemnifying Party agrees to indemnify the Indemnified Party from and
against any loss or liability by reason of such settlement or judgment.
A successor by law of the parties to this Agreement will be entitled to
the benefits of the indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII will survive
any termination of this Agreement.
ARTICLE IX. Applicable Law
9.1. This Agreement will be construed and the provisions
hereof interpreted under and in accordance with the laws
of the State of Minnesota.
9.2. This Agreement will be subject to the provisions of the
1933 Act, the 1934 Act and the 1940 Act, and the rules
and regulations and rulings thereunder, including such
exemptions from those statutes, rules and regulations as
the SEC may grant (including, but not limited to, the
Mixed and Shared Funding Exemptive Order) and the terms
hereof will be interpreted and construed in accordance
therewith.
ARTICLE X. Termination
10.1. This Agreement will terminate:
(a) at the option of any party, with or without cause, with
respect to some or all of the Designated Portfolios, upon
ninety (90) days' advance written notice to the other
parties or, if later, upon receipt of any required
exemptive relief or orders from the SEC, unless otherwise
agreed in a separate written agreement among the parties;
or
<PAGE>
PAGE 19
(b) at the option of the Company, upon receipt of the
Company's written notice by the other parties, with
respect to any Designated Portfolio if shares, of the
Designated Portfolio are not reasonably available to meet
the requirements of the Contracts as determined in good
faith by the Company; or
(c) at the option of the Company, upon receipt of the
Company's written notice by the other parties, with
respect to any Designated Portfolio in the event any
of the Designated Portfolio's shares are not
registered, issued or sold in accordance with
applicable state and/or federal law or such law
precludes the use of such shares as the underlying
investment media of the Contracts issued or to be
issued by Company; or
(d) at the option of the Fund, upon receipt of the
Fund's written notice by the other parties, upon
institution of formal proceedings against the
Company by the NASD, the SEC, the insurance
commission of any state or any other regulatory body
regarding the Company's duties under this Agreement
or related to the sale of the Contracts, the
administration of the Contracts, the operation of
the Account, or the purchase of the Fund shares,
provided that the Fund determines in its sole
judgment, exercised in good faith, that any such
proceeding would have a material adverse effect on
the Company's ability to perform its obligations
under this Agreement; or
(e) at the option of the Company, upon receipt of the
Company's written notice by the other parties, upon
institution of formal proceedings against the Fund
or CSI by the NASD, the SEC, or any state securities
or insurance department or any other regulatory
body, provided that the Company determines in its
sole judgment, exercised in good faith, that any
such proceeding would have a material adverse effect
on the Fund's or CSI's ability to perform its
obligations under this Agreement; or
(f) at the option of the Company, upon receipt of the
Company's written notice by the other parties, if the Fund
ceases to qualify as a Regulated Investment Company under
Subchapter M of the Internal Revenue Code, or under any
successor or similar provision, or if the Company
reasonably and in good faith believes that the Fund may
fail to so qualify; or
(g) at the option of the Company, upon receipt of the
Company's written notice by the other parties, with
respect to any Designated Portfolio if the Fund fails to
meet the diversification requirements specified in Article
VI hereof or if the Company reasonably and in good faith
believes the Fund may fail to meet such requirements; or
<PAGE>
PAGE 20
(h) at the option of any party to this Agreement, upon written
notice to the other parties, upon another party's material
breach of any provision of this Agreement; or
(i) at the option of the Company, if the Company
determines in its sole judgment exercised in good
faith, that either the Fund, the Adviser or CSI has
suffered a material adverse change in its business,
operations or financial condition since the date of
this Agreement or is the subject of material adverse
publicity which is likely to have a material adverse
impact upon the business and operations of the
Company, such termination to be effective sixty (60)
days' after receipt by the other parties of written
notice of the election to terminate; or
(j) at the option of the Fund or CSI, if the Fund or CSI
respectively, determines in its sole judgment
exercised in good faith, that the Company has
suffered a material adverse change in its business,
operations or financial condition since the date of
this Agreement or is the subject of material adverse
publicity which is likely to have a material adverse
impact upon the business and operations of the Fund
or the Adviser, such termination to be effective
sixty (60) days' after receipt by the other parties
of written notice of the election to terminate; or
(k) at the option of the Company or the Fund upon
receipt of any necessary regulatory approvals and/or
the vote of the contractowners having an interest in
the Account (or any subaccount) to substitute the
shares of another investment company for the
corresponding Designated Portfolio shares of the
Fund in accordance with the terms of the Contracts
for which those Designated Portfolio shares had been
selected to serve as the underlying investment media
The Company will give sixty (60) days' prior written
notice to the Fund of the date of any proposed vote
or other action taken to replace the Fund's shares;
or
(l) at the option of the Company or the Fund upon a
determination by a majority of the Fund Board, or a
majority of the disinterested Fund Board members,
that an irreconcilable material conflict exists
among the interests of: (1) all contractowners of
variable insurance products of all separate
accounts; or (2) the interests of the Participating
Insurance Companies investing in the Fund as set
forth in Article VII of this Agreement; or
(m) at the option of the Fund in the event any of the
Contracts are not issued or sold in accordance with
applicable federal and/or state law. Termination will be
effective immediately upon such occurrence without notice.
<PAGE>
PAGE 21
10.2. Notice Requirement
No termination of this Agreement will be effective unless and until the
party terminating this Agreement gives prior written notice to all other
parties of its intent to terminate, which notice will set forth the
basis for the termination.
10.3. Effect of Termination
Notwithstanding any termination of this Agreement, the Fund and CSI
will, at the option of the Company, continue to make available
additional shares of the Fund pursuant to the terms and conditions of
this Agreement, for all Contracts in effect on the effective date of
termination of this Agreement (hereinafter referred to as "Existing
Contracts."). Specifically, without limitation, the owners of the
Existing Contracts will be permitted to reallocate investments in the
Portfolios (as in effect on such date), redeem investments in the
Portfolios and/or invest in the Portfolios upon the making of additional
purchase payments under the Existing Contracts.
10.4 Surviving Provisions
Notwithstanding any termination of this Agreement, each party's
obligations under Article VIII to indemnify other parties will survive
and not be affected by any termination of this Agreement. In addition,
each party's obligations under Section 12.7 will survive and not be
affected by any termination of this Agreement. Finally, with respect to
Existing Contracts, all provisions of this Agreement also will survive
and not be affected by any termination of this Agreement.
ARTICLE XI. Notices
11.1 Any notice will be deemed duly given when sent by
registered or certified mail to the other party at the
address of such party set forth below or at such other
address as such party may from time to time specify in
writing to the other parties.
If to the Company:
American Partners Life Insurance Company
c/o American Express Financial Advisors Inc.
IDS Tower 10
Minneapolis, MN 55440-0010
Attn: Jim Mortensen
Manager-Product Development
With a simultaneous copy to:
American Partners Life Insurance Company
c/o American Express Financial Advisors Inc.
IDS Tower 10
Minneapolis, MN 55440-0010
Attn: Mary Ellyn Minenko
Counsel
<PAGE>
PAGE 22
If to the Fund, the Adviser and/or CSI:
466 Lexington Avenue
New York, NY 10017
Attn: Eugene P. Grace
Senior Vice President
ARTICLE XII. Miscellaneous
12.1. All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims
against the Fund as neither the directors, trustees,
officers, partners, employees, agents or shareholders
assume any personal liability for obligations entered
into on behalf of the Fund. No Portfolio or series of
the Fund will be liable for the obligations or
liabilities of any other Portfolio or series.
12.2. The Fund, the Adviser and CSI acknowledge that the
identities of the customers of the Company or any of its
affiliates (collectively the "Company Protected Parties"
for purposes of this Section 12.2), information
maintained regarding those customers, and all computer
programs and procedures or other information developed or
used by the Company Protected Parties or any of their
employees or agents in connection with the Company's
performance of its duties under this Agreement are the
valuable property of the Company Protected Parties. The
Fund, the Adviser and CSI agree that if they come into
possession of any list or compilation of the identities
of or other information about the Company Protected
Parties' customers, or any other information or property
of the Company Protected Parties, other than such
information as is publicly available or as may be
independently developed or compiled by the Fund, the
Adviser or CSI from information supplied to them by the
Company Protected Parties customers who also maintain
accounts directly with the Fund, the Adviser or CSI, the
Fund, the Adviser and CSI will hold such information or
property in confidence and refrain from using, disclosing
or distributing any of such information or other property
except: (a) with the Company's prior written consent; or
(b) as required by law or judicial process. The Company
acknowledges that the identities of the customers of the
Fund, the Adviser, CSI or any of their affiliates
(collectively the "Adviser Protected Parties" for
purposes of this Section 12.2), information maintained
regarding those customers, and all computer programs and
procedures or other information developed or used by the
Adviser Protected Parties or any of their employees or
agents in connection with the Funds', the Adviser's or
CSI's performance of their respective duties under this
Agreement are the valuable property of the Adviser
Protected Parties. The Company agrees that if it comes
into possession of any list or compilation of the
identities of or other information about the Adviser
Protected Parties' customers, or any other information or
property of the Adviser Protected Parties, other than
<PAGE>
PAGE 23
such information as is publicly available or as may be
independently developed or compiled by the Company from
information supplied to them by the Adviser Protected Parties'
customers who also maintain accounts directly with the Company,
the Company will hold such information or property in confidence
and refrain from using, disclosing or distributing any of such
information or other property except: (a) with the Fund's, the
Adviser's or CSI's prior written consent; or (b) as required by
law or judicial process. Each party acknowledges that any breach
of the agreements in this Section 12.2 would result in immediate
and irreparable harm to the other parties for which there would
be no adequate remedy at law and agree that in the event of such
a breach, the other parties will be entitled to equitable relief
by way of temporary and permanent injunctions, as well as such
other relief as any court of competent jurisdiction deems
appropriate.
12.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or
effect.
12.4. This Agreement may be executed simultaneously in two or
more counterparts, each of which taken together will
constitute one and the same instrument.
12.5. If any provision of this Agreement will be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of
the Agreement will not be affected thereby.
12.6. This Agreement will not be assigned by any party hereto
without the prior written consent of all the parties.
12.7. Each party to this Agreement will maintain all records
required by law, including records detailing the services
it provides. Such records will be preserved, maintained
and made available to the extent required by law and in
accordance with the 1940 Act and the rules thereunder.
Each party to this Agreement will cooperate with each
other party and all appropriate governmental authorities
(including without limitation the SEC, the NASD and state
insurance regulators) and will permit each other and such
authorities reasonable access to its books and records in
connection with any investigation or inquiry relating to
this Agreement or the transactions contemplated hereby.
Upon request by the Fund or CSI, the Company agrees to
promptly make copies or, if required, originals of all
records pertaining to the performance of services under
this Agreement available to the Fund or CSI, as the case
may be. The Fund agrees that the Company will have the
right to inspect, audit and copy all records pertaining
to the performance of services under this Agreement
pursuant to the requirements of any state insurance
department. Each party also agrees to promptly notify
<PAGE>
PAGE 24
the other parties if it experiences, any difficulty in
maintaining the records in an accurate and complete manner. This
provision will survive termination of this Agreement.
12.8 Each party represents that the execution and delivery of
this Agreement and the consummation of the transactions
contemplated herein have been duly authorized by all
necessary corporate or board action, as applicable, by
such party and when so executed and delivered this
Agreement will be the valid and binding obligation of
such party enforceable in accordance with its terms.
12.9 The parties to this Agreement acknowledge and agree that
all liabilities of the Fund arising, directly or
indirectly, under this agreement, will be satisfied
solely out of the assets of the Fund and that no trustee,
officer, agent or holder of shares of beneficial interest
of the Fund will be personally liable for any such
liabilities.
12.10. The parties to this Agreement may amend the schedules to this
Agreement from time to time to reflect changes in or relating to
the Contracts, the Accounts or the Designated Portfolios of the
Fund or other applicable terms of this Agreement.
<PAGE>
PAGE 25
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed hereto as of the date specified below.
AMERICAN PARTNERS LIFE INSURANCE COMPANY
SEAL By: /s/ Michael J. Hogan
Name: Michael J. Hogan
Title: VP-Variable Product Development
ATTEST:
By: /s/ Paul D. Sand
Name: Paul D. Sand
Title: Assistant Secretary
WARBURG PINCUS TRUST
SEAL By: /s/ Eugene P. Grace
Name: Eugene P. Grace
Title: Vice President and Secretary
WARBURG PINCUS COUNSELLORS, INC.
SEAL By: /s/ Eugene P. Grace
Name: Eugene P. Grace
Title: Senior Vice President and
Assistant Secretary
COUNSELLORS SECURITIES INC.
SEAL By: /s/ Eugene P. Grace
Name: Eugene P. Grace
Title: Vice President
<PAGE>
PAGE 26
Schedule 1
PARTICIPATION AGREEMENT
By and Among
AMERICAN PARTNERS LIFE INSURANCE COMPANY
And
WARBURG PINCUS TRUST
And
WARBURG, PINCUS COUNSELLORS, INC.
And
COUNSELLORS SECURITIES INC.
The following separate accounts of American Partners Life Insurance Company are
permitted in accordance with the provisions of this Agreement to invest in
Designated Portfolios of the Fund shown in Schedule 2:
APL Variable Annuity Account 1, established February 9, 1995.
March 1 , 1996
<PAGE>
PAGE 27
Schedule 2
PARTICIPATION AGREEMENT
By and Among
AMERICAN PARTNERS LIFE INSURANCE COMPANY
And
WARBURG PINCUS TRUST
And
WARBURG, PINCUS COUNSELLORS, INC.
And
COUNSELLORS SECURITIES INC.
The Separate Account(s) shown on Schedule 1 may invest in the following
Designated Portfolios of the Warburg Pincus Trust:
Small Company Growth Portfolio
March 1, 1996
<PAGE>
PAGE 1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Independent Auditors"
and to the use of our reports dated February 7, 1997 on the financial statements
and schedule of American Partners Life Insurance Company and our report dated
March 21, 1997 on the financial statements of APL Variable Annuity Account 1 in
Post-Effective Amendment No. 3 to the Registration Statement (Form N-4, No.
33-57731) and related Prospectus for the registration of the Privileged Assets
Select Annuity to be offered by American Partners Life Insurance Company.
Ernst & Young LLP
Minneapolis, Minnesota
April 21, 1997
<PAGE>
AMERICAN PARTNERS LIFE INSURANCE COMPANY
SCHEDULE I - CONSOLIDATED SUMMARY OF INVESTMENTS
OTHER THAN INVESTMENTS IN RELATED PARTIES ($ thousands)
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Column A Column B Column C Column D
Type of Investment Cost Value Amount at which
shown in the
balance sheet
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed maturities:
Held to maturity:
All other corporate bonds 67,544 71,217 67,544
------------- --------------- -----------------
Total held to maturity 67,544 71,217 67,544
Available for sale:
United States Government and
government agencies and
authorities (a) 16,697 16,528 16,528
All other corporate bonds 55,474 56,624 56,624
------------- --------------- -----------------
Total available for sale 72,171 73,152 73,152
Total investments $ 139,715 $ XXXXXXXXX $ 140,696
============= =================
</TABLE>
(a) - Includes mortgage-backed securities with a cost and market value of $9,257
and $9,030, respectively.
<PAGE>
Report of Independent Auditors
The Board of Directors
American Partners Life Insurance Company
We have audited the financial statements of American Partners Life Insurance
Company (a wholly owned subsidiary of IDS Life Insurance Company) as of December
31, 1996 and 1995, and for the years ended December 31, 1996 and 1995 and the
period from February 18, 1994 through December 31, 1994, and have issued our
report thereon dated February 7, 1997 (included elsewhere in this Registration
Statement). Our audits also included the financial statement schedule listed in
Item 24(a) of this Registration Statement. This schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion based
on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
Ernst & Young LLP
Minneapolis, Minnesota
February 7, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000937690
<NAME> APL Variable Annuity Account 1
<CURRENCY> U.S. Dollar
<S> <C>
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<PERIOD-TYPE> YEAR
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 2132582
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<PAGE>
PAGE 1
AMERICAN PARTNERS LIFE INSURANCE COMPANY
APL Variable Annuity Account 1
POWER OF ATTORNEY
City of Minneapolis
State of Minnesota
Each of the undersigned, as a director of American Partners Life Insurance
Company (APL), sponsor of the unit investment trust consisting of the APL
Variable Annuity Account 1 in connection with the filing of a registration
statement on Form N-4 under the Securities Act of 1933 and the Investment
Company Act of 1940, hereby constitutes and appoints William A. Stoltzmann, Mary
Ellyn Minenko, Sherilyn K. Beck, Colin Lancaster and Timothy S. Meehan or any
one of them, as his/her attorney-in-fact and agent, to sign for him/her in
his/her name, place and stead any and all filings, applications (including
applications for exemptive relief), periodic reports, registration statements
(with all exhibits and other documents required or desirable in connection
therewith), other documents, and amendments thereto and to file such filings,
applications periodic reports, registration statements, other documents, and
amendments thereto with the Securities and Exchange Commission, and any
necessary states, and grants to any or all of them the full power and authority
to do and perform each and every act required or necessary in connection
therewith.
/s/ Lorraine R. Hart March 11, 1997
- ----------------------------------
Lorraine R. Hart
Vice President - Investments
Director
/s/ Jay C. Hatlestad March 11, 1997
- ----------------------------------
Jay C. Hatlestad
Controller
/s/ Richard W. Kling March 12, 1997
- ----------------------------------
Richard W. Kling
Chairman of the Board
Director
/s/ Stuart A. Sedlacek March 7, 1997
- ----------------------------------
Stuart A. Sedlacek
President
Director
<PAGE>
PAGE 2
/s/ William A. Stoltzmann March 11, 1997
- ----------------------------------
William A. Stoltzmann
Vice President, General Counsel
and Secretary
Director
/s/ Melinda S. Urion March 10, 1997
- ----------------------------------
Melinda S. Urion
Vice President
Director
