<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 4 (File No. 33-57731) [x]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 5 (File No. 812-9484) [x]
(Check appropriate box or boxes)
APL VARIABLE ANNUITY ACCOUNT 1
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(Exact Name of Registrant)
American Partners Life Insurance Company
- -------------------------------------------------------------------------------
(Name of Depositor)
80 South 8th Street, P.O. Box 534, Minneapolis, MN 55440-0534
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(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (612) 671-4085
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Sherilyn K. Beck, IDS Tower 10, Minneapolis, MN 55440-0010
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(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on May 1, 1998 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[ ] on (date) pursuant to paragraph (a)(1) of Rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
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 the prospectus and Statement of Additional
Information are so indicated.
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PART A
Item No. Section in Prospectus
1 Cover page
2 Key terms
3 (a) Expense Summary
(b) The Privileged Assets Select Annuity in brief
4 (a) Condensed financial information
(b) Performance information
(c) Financial statements
5 (a) Cover page; About American Partners Life
(b) The variable account
(c) The funds
(d) Cover page; The funds
(e) Voting rights
(f) NA
(g) NA
6 (a) Charges
(b) Expense Summary; Charges
(c) Charges
(d) NA
(e) The funds
(f) NA
7 (a) Buying your annuity; Benefits in case of death; The annuity
payout 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 Privileged Assets Select Annuity in brief
12 (a) Taxes
(b) Key terms
(c) NA
13 NA
14 Table of contents of the Statement of Additional Information
PART B
Section in
Item No. Statement of Additional Information
15 (a) Cover page
(b) NA
16 Table of Contents
17 (a) Depositor
(b) NA
(c) About American Partners Life*
18 (a) NA
(b) NA
(c) Independent Auditors
(d) NA
(e) NA
(f) NA
19 (a) Distribution of the contracts*; About American Partners Life*
(b) NA
20 (a) Principal underwriter
(b) Principal underwriter
(c) NA
(d) NA
21 (a) Performance information
(b) Performance information
22 Calculating annuity payouts
23 (a) Financial statements
(b) Financial statements
*Designates section in the prospectus, which is hereby incorporated by reference
in this Statement of Additional Information.
<PAGE>
Privileged Assets(R) Select Annuity
Prospectus/May 1, 1998
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. As in the case of other annuities, it may not be advantageous to
purchase this annuity as a replacement for, or in addition to an existing
annuity.
The prospectus is accompanied or preceded by the following prospectuses: the IDS
Life Retirement Annuity Mutual Funds, 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 bank or financial institution, and the
securities it offers are not deposits or obligations of, backed or guaranteed or
endorsed by any bank or 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.
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.
<PAGE>
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.
<PAGE>
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...........................................................................
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Voting rights...................................................................
Substitution of investments.....................................................
Distribution of the contracts...................................................
About American Partners Life....................................................
Year 2000.......................................................................
Regular and special reports.....................................................
Table of contents of the Statement of Additional Information....................
<PAGE>
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.
<PAGE>
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:
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. )
<PAGE>
Ten-day free look: You may return your contract for a refund within 10 days
after you receive it, if state law requires, your free look period will be
extended (see your contract for details). The portion of your first purchase
payment allocated be extended 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. )
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. )
<PAGE>
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 1%
(as a percentage of average net assets) Mortality
and expense risk fee
* Premium taxes imposed by some state and local governments are not reflected in
this table.
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 0.60% 0.83% 0.60% 0.59% 0.60% 0.51%
Other expenses 0.07 0.11 0.07 0.05 0.07 0.06
Total** 0.67% 0.94% 0.67% 0.64% 0.67% 0.57%
INVESCO VIF Janus Aspen Warburg Pincus
Industrial Series World- Janus Aspen American Trust - Post-
Income wide Growth Series Growth Century VP American Venture
(After (After expense (After Capital Century VP Capital
expense reimbursement) expense Appreciation Value (After fee
reimbursement) reimbursement) limitation
Management Fees 0.75% 0.66% 0.65% 1.00% 1.00% 1.07%
Other expenses 0.16 0.08 0.05 -- -- .33
Total 0.91%*** 0.74%*** 0.70%*** 1.00%+ 1.00%+ 1.40%++
</TABLE>
** Annualized operating expenses of underlying mutual funds for the year ended
Dec. 31, 1997.
*** The figures given above are based on gross expenses before expense offset
arrangements, if any, during 1997, 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 0.75%, 0.22%, and
0.97%, respectively, for the INVESCO VIF-Industrial Income Portfolio; 0.72%,
0.09% and 0.81%, respectively, for Janus Aspen Series Worldwide Growth and
0.74%, .04% and 0.78% , 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, 1997.
++ Absent the waiver of fees by the Portfolio's investment adviser and
co-administrator, Management Fees would equal 1.25%, Other Expenses would equal
.33%,; and Total Portfolio Operating Expenses would equal 1.58%. Management
Fees, Other Expenses and Total Operating Expenses for the Portfolio is based on
actual expenses for the fiscal year ending Dec. 31, 1997 (net of any fee waivers
or expense reimbursements). The investment adviser has undertaken to limit the
Portfolio's Total Portfolio Operating Expenses to 1.40% through Dec. 31, 1998.
<PAGE>
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 $18.31 $21.07 $18.31 $18.00 $18.31 $17.28
3 years 56.68 65.07 56.68 55.74 56.68 53.56
5 years 97.52 111.64 97.52 95.94 97.52 92.25
10 years 211.51 240.40 211.51 208.25 211.51 200.61
American
INVESCO VIF Janus Aspen Century VP American Warburg Pincus
Industrial Series World- Janus Aspen Capital Century VP Trust - Post-
Income wide Growth Series Growth Appreciation Value Venture Capital
1 year $20.77 $19.02 $18.61 $21.69 $21.69 $25.79
3 years 64.14 58.86 57.61 66.93 66.93 79.26
5 years 110.08 101.20 99.10 114.76 114.76 135.34
10 years 237.23 219.07 214.76 246.71 246.71 287.88
</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 .116% charge based on the average contract size. 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.
Condensed Financial Information (Unaudited)
The following table gives per-unit information about the financial history of
each variable subaccount.
Year Ended Dec. 31,
1997 1996 1995
Subaccount CCR1 (Investing in shares of IDS Life Capital Resource Fund)
Accumulation unit $1.11 $1.03 $1.00
value at beginning
of period
Accumulation unit value $1.36 $1.11 $1.03
at end of period
Number of accumulation 421 197 --
units outstanding at end
of period (000 omitted)
Ratio of operating 1.00% 1.00% --
expense to average
net assets
Subaccount CIE1 ( Investing in shares of IDS Life International Equity Fund)
Accumulation unit $1.13 $1.04 $1.00
value at beginning
of period
Accumulation unit value $1.15 $1.13 $1.04
at end of period
Number of accumulation 153 75 --
units outstanding at end
of period (000 omitted)
Ratio of operating 1.00% 1.00% --
expense to average
net assets
Subaccount CAG1 (Investing in shares of IDS Life Aggressive Growth Fund)
Accumulation unit $1.15 $0.99 $1.00
value at beginning
of period
Accumulation unit value $1.28 $1.15 $0.99
at end of period
Number of accumulation 452 269 101
units outstanding at end
of period (000 omitted)
Ration of operating 1.00% 1.00% 1.00%
expense to average
net assets
Subaccount CSI1 (Investing in shares of IDS Life Special Income Fund)
Accumulation unit $1.09 $1.02 $1.00
value at beginning
of period
Accumulation unit value $1.17 $1.09 $1.02
at end of period
Number of accumulation 206 63 49
units outstanding at end
of period (000 omitted)
Ratio of operating 1.00% 1.00% 1.00%
expense to average
net assets
Subaccount CMS1 (Investing in shares of IDS Life Moneyshare Fund)
Accumulation unit $1.04 $1.00 $1.00
value at beginning
of period
Accumulation unit value $1.09 $1.04 $1.00
at end of period
Number of accumulation 151 501 2,292
units outstanding at end
of period (000 omitted)
Ratio of operating 1.00% 1.00% 1.00%
expense to average
net assets
Subaccount CMG1 (Investing in shares of IDS Life Managed Fund)
Accumulation unit $1.19 $1.02 $1.00
value at beginning
of period
Accumulation unit value $1.40 $1.19 $1.02
at end of period
Number of accumulation 584 98 49
units outstanding at end
of period (000 omitted)
Ratio of operating 1.00% 1.00% 1.00%
expense to average
net assets
Subaccount CII2 (Investing in shares of INVESCO VIF Industrial Income Portfolio)
Accumulation unit $1.28 $1.05 $1.00
value at beginning
of period
Accumulation unit value $1.61 $1.28 $1.05
at end of period
Number of accumulation 791 131 --
units outstanding at end
of period (000 omitted)
Ratio of operating 1.00% 1.00% --
expense to average
net assets
Subaccount CWG1 (Investing in shares of
Janus Aspen Series Worldwide Growth Portfolio)
Accumulation unit $1.26 $1.00 --
value at beginning
of period
Accumulation unit value $1.53 $1.26 --
at end of period
Number of accumulation 1,908 295 --
units outstanding at end
of period (000 omitted)
Ratio of operating 1.00% 1.00% --
expense to average
net assets
Subaccount CSG4 (Investing in shares of Janus Aspen Series Growth Portfolio)
Accumulation unit $1.07 $1.00 --
value at beginning
of period
Accumulation unit value $1.30 $1.07 --
at end of period
Number of accumulation 1,020 45 --
units outstanding at end
of period (000 omitted)
Ratio of operating 1.00% 1.00% --
expense to average
net assets
Subaccount CGR3 (Investing in shares of
American Century VP Capital Appreciation)
Accumulation unit $0.97 $1.00 --
value at beginning
of period
Accumulation unit value $0.93 $0.97 --
at end of period
Number of accumulation 256 156 --
units outstanding at end
of period (000 omitted)
Ratio of operating 1.00% 1.00% --
expense to average
net assets
Subaccount CVL4 (Investing in shares of American Century VP Value)
Accumulation unit $1.12 $1.00 --
value at beginning
of period
Accumulation unit value $1.40 $1.12 --
at end of period
Number of accumulation 224 9 --
units outstanding at end
of period (000 omitted)
Ratio of operating 1.00% 1.00% --
expense to average
net assets
Subaccount CVC4 (Investing in shares of
Warburg Pincus Trust--Post-Venture Capital Portfolio)
Accumulation unit $0.98 $1.00 --
value at beginning
of period
Accumulation unit value $1.09 $0.98 --
at end of period
Number of accumulation 231 42 --
units outstanding at end
of period (000 omitted)
Ratio of operating 1.00% 1.00% --
expense to average
net assets
1 For the period Nov. 10, 1995 (commencement of operations) to Dec. 31, 1995.
CCR and CIE subaccounts had no activity in this period.
2 For the period Nov. 13, 1995 (commencement of operations) to Dec. 31, 1995.
CII subaccount had no activity in this period.
3 For the period Jan. 29,1996 (commencement of operations) to Dec. 31, 1996.
4 For the period Sept. 3, 1996 (commencement of operations) to Dec. 31, 1996.
Financial statements
The SAI dated May 1, 1998, contains:
audited financial statements of the variable account including:
- statements of net assets as of Dec. 31, 1997;
- statements of operations for year ended Dec. 31, 1997;
<PAGE>
- - statements of changes in net assets for the years ended Dec. 31, 1997
and Dec. 31, 1996, except for subaccounts CGR and CWG which are for
the year ended Dec. 31, 1997 and the period Jan. 29, 1996
(commencement of operations) to Dec. 31, 1996 and subaccounts CSG, CVL
and CVC which are for the year ended Dec. 31, 1997 and 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, 1997 and Dec. 31, 1996 and
- - related statements of income, stockholder's equity and cash flows for
the years ended Dec. 31, 1997, 1996, and 1995.
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.
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
<PAGE>
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 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.
<PAGE>
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 an additional
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. The remainder
assets are invested in other income-producing securities, such as corporate
bonds and other straight debt securities.
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.
<PAGE>
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. Please
refer to the fund prospectuses for risk disclosure regarding mixed and shared
funding.
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.
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. American
Express Asset Management 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 Asset Management, Inc. is the
investment adviser of Warburg Pincus Trust-Post-Venture Capital Portfolio. The
investment managers and
<PAGE>
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 also may 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.
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 your payments at our
service office.
<PAGE>
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 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
<PAGE>
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:
Regular mail:
American Partners Life Insurance Company
80 South Eighth Street
I8/Unit 1751
P.O. Box 59197
Minneapolis, MN 55459-0197
Express mail:
American Partners Life Insurance Company
80 South Eighth Street
I8/Unit 1751
Minneapolis, MN 55402
<PAGE>
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.
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.
<PAGE>
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.
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.
<PAGE>
Net investment factor
o Determined 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 will 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.
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 or from the fixed
account to one or more variable accounts. There is no charge for dollar-cost
averaging.
This systematic approach can help you benefit from fluctuations in accumulation
unit values caused by fluctuations in the market 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.
<PAGE>
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. We will process your transfer request
at the next close of business after we receive it. Before making a transfer, you
should consider the risks involved in switching investments.
We may suspend or modify transfer privileges at any time.
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.
<PAGE>
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
I8/Unit 1751
P.O. Box 59197
Minneapolis, MN 55459-0197
Express mail:
American Partners Life Insurance Company
80 South Eighth Street
I8/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 8 a.m. and 6 p.m. Central time:
1-800-AXP-SERV (toll free)
(1-800-633-4003)
TTY service for the hearing impaired:
1-800-710-5260 (toll free)
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.
<PAGE>
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
next 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.
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.
<PAGE>
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.
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.
<PAGE>
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.
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.
<PAGE>
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 that you elect. 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.
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.
<PAGE>
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.
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.
<PAGE>
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.
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.
<PAGE>
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.
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, another
registered open-end management investment company may be substituted for fund
shares held in the subaccounts when American Partners Life believes it would be
in the best interest of persons having voting rights under the contract.
American Partners Life also reserves the right to change the funds in which the
subaccounts invest and to create new subaccounts that invest in additional
funds. 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.
<PAGE>
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 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.
Year 2000
The Year 2000 issue is the result of computer programs having been written using
two digits rather than four to define a year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than 2000. This could result in the failure of major systems or miscalculations,
which could have a material impact on the operations of the Separate Account.
The Separate Account has no computer systems of its own but is dependent upon
the systems maintained by AEFC and certain other third parties.
<PAGE>
A comprehensive review of AEFC's computer systems and business processes has
been conducted to identify the major systems that could be affected by the Year
2000 issue. Steps are being taken to resolve any potential problems including
modification of existing software and the purchase of new software. These
measures are scheduled to be completed and tested on a timely basis. AEFC's goal
is to complete internal remediation and testing of each system by the end of
1998 and to continue compliance efforts through 1999. The Year 2000 readiness of
unaffiliated investment managers and other third parties whose system failures
could have an impact on the Separate Account's operations currently is being
evaluated. The potential materiality of any such impact is not known at this
time.
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>
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>
STATEMENT OF ADDITIONAL INFORMATION
for
PRIVILEGED ASSETS SELECT ANNUITY
APL VARIABLE ANNUITY ACCOUNT 1
May 1, 1998
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, 1998, is not a
prospectus. It should be read together with the account's prospectus, dated May
1, 1998, 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>
TABLE OF CONTENTS
Performance Information...............................................p. 3
Calculating Annuity Payouts...........................................p. 6
Rating Agency.........................................................p. 6
Depositor.............................................................p. 6
Principal Underwriter.................................................p. 6
Independent Auditors..................................................p. 7
Retirement Planning...................................................p. 7
Prospectus............................................................p. 7
Financial Statements
- APL Variable Annuity Account 1
- American Partners Life Insurance Company
<PAGE>
PERFORMANCE INFORMATION
We show actual performance from the date the subaccounts began investing in
funds. We also show performance from the commencement date of the funds as if
the annuity had existed at that time.
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) x (365/7)] - 1
On December 31, 1997, the account's annualized simple yield was 4.12% and its
compound yield was 4.21%.
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.
<PAGE>
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:
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, 1997
Subaccount investing in: Yield
IDS Life Special Income Fund 6.83%
INVESCO VIF-Industrial Income Portfolio 6.54%
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>
Average Annual Total Return Period Ended Dec. 31, 1997
Average Annual Total Return with or without Surrender
<TABLE>
<CAPTION>
Performance Since
Commencement of the
Subaccount Performance Since Commencement of the Fund
Since Since
Commencement Commencement
Subaccount investing in: 1 year (Subaccount) 1 Year 5 Years 10 Years (Fund)
<S> <C> <C> <C> <C> <C> <C>
IDS Life
Aggressive Growth Fund (11/95; 11.39% 11.98% 11.39% 11.59% -- 11.11%
1/92)*
Capital Resource Fund (11/95; 10/81) 22.76% 15.29% 22.76% 11.17% 13.42% --
International Equity Fund (11/95; 1.57% 6.52% 1.57% 9.12% -- 7.22%
1/92)
Managed Fund (11/95; 4/86) 18.18% 17.02% 18.18% 12.02% 12.66% --
Moneyshare Fund (11/95; 10/81) 3.99% 3.81% 3.99% 3.29% 4.40% --
Special Income Fund (11/95; 10/81) 7.62% 7.50% 7.62% 8.39% 8.63% --
INVESCO VIF
Industrial Income Portfolio (11/95; 26.75% 24.94% 26.75% -- -- 22.00%
8/94)
Janus Aspen Series
Worldwide Growth Portfolio (1/96; 20.80% 24.32% 20.80% -- -- 21.54%
9/93)
Growth Portfolio (9/96; 9/93) 21.38% 21.69% 21.38% -- -- 16.36%
American Century
VP Capital Appreciation (1/96; -4.33% -4.06% -4.33% 4.56% 7.47% --
11/87)
VP Value (9/96; 5/96) 24.68% 28.27% 24.68% -- -- 21.80%
Warburg Pincus Trust
Post-Venture Capital Portfolio 12.08% 6.73% 12.08% -- -- 6.73%
(9/96; 9/96)
</TABLE>
* commencement date of the subaccount; commencement date of the fund.
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.
<PAGE>
Performance of the subaccounts may be quoted or compared to rankings, yields, or
returns or used in variable annuity accumulation or settlement illustrations 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.
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.
<PAGE>
INDEPENDENT AUDITORS
The financial statements of APL Variable Annuity Account 1 including the
statements of net assets as of Dec. 31, 1997, and the related statements of
operations for the year then ended, and the statements of changes in net assets
for the year ended Dec. 31, 1997 and Dec. 31, 1996 except for the 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 financial
statements of American Partners Life Insurance Company (a wholly owned
subsidiary of IDS Life Insurance Company) as of Dec. 31, 1997 and 1996, and for
each of the three years in the period then ended Dec. 31, 1997, 1996, and 1995,
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. From
1995 to 1996, variable annuity sales climbed 47 percent to $72.5 billion,
shattering the previous high of $51.7 billion in 1994. **
Sources:
* Social Security Administration
** LIMRA 1996 Individual Annuity Market Report
PROSPECTUS
The prospectus dated May 1, 1998, is hereby incorporated in this Statement of
Additional Information by reference.
<PAGE>
APL Variable Annuity Account 1
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, 1997, and the related statements of operations for
the year then ended, and statements of changes in net assets for each of the two
years in the period then ended, except for the CGR and CWG subaccounts which are
for the year ended December 31, 1997 and the period January 29, 1996
(commencement of operations) to December 31, 1996 and subaccounts CSG, CVL and
CVC which are for the year ended December 31, 1997 and 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, 1997 with the affiliated and
unaffiliated mutual fund managers. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the individual and combined financial position of the
segregated asset subaccounts of APL Variable Annuity Account 1 at December 31,
1997, 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 13, 1998
<PAGE>
<TABLE>
<CAPTION>
APL Variable Annuity Account 1
- ------------------------------------------------------------------------------------------------------------------------------------
Statements of Net Assets Dec. 31, 1997
Segregated Asset Subaccount
-----------------------------------------------------------------------------------------
Assets CCR CIE CAG CSI CMS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investments in shares of mutual funds,
at market value:
IDS Life Capital Resource Fund
20,040 shares at net asset value
of $28.58 per share (cost $507,178) $ 572,677 $ - $ - $ - $ -
IDS Life International Equity Fund
12,904 shares at net asset value
of $13.63 per share (cost $177,750) - 175,863 - - -
IDS Life Aggressive Growth Fund
35,973 shares at net asset value
of $16.07 per share (cost $577,854) - - 578,116 - -
IDS Life Special Income Fund
20,453 shares at net asset value
of $11.80 per share (cost $243,686) - - - 241,243 -
IDS Life Moneyshare Fund, Inc.
164,316 shares at net asset value
of $1.00 per share (cost $164,302) - - - - 164,302
IDS Life Managed Fund, Inc.
45,482 shares at net asset value
of $18.04 per share (cost $814,371) - - - - -
INVESCO VIF - Industrial
Income Portfolio
74,991 shares at net asset value
of $17.04 per share (cost $1,178,358) - - - - -
Janus Aspen Series Worldwide Growth Portfolio
124,564 shares at net asset value
of $23.39 per share (cost $2,652,989) - - - - -
Janus Aspen Series Growth Portfolio
71,890 shares at net asset value
of $18.48 per share (cost $1,226,200) - - - - -
American Century VP
Capital Appreciation
24,486 shares at net asset value
of $9.68 per share (cost $252,514) - - - - -
American Century VP Value
45,258 shares at net asset value
of $6.93 per share (cost $290,937) - - - - -
Warburg Pincus Trust--Post-Venture Capital Portfolio
22,901 shares at net asset value
of $11.06 per share (cost $231,719) - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
572,677 175,863 578,116 241,243 164,302
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends receivable - - - 1,458 816
Accounts receivable from American Partners Life for
contract purchase payments 30 - 20 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets 572,707 175,863 578,136 242,701 165,118
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities
- ------------------------------------------------------------------------------------------------------------------------------------
Payable to American Partners Life for
mortality and expense risk fee 513 158 524 213 157
Payable to mutual funds for investments
purchased 30 - 20 2,145 659
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 543 158 544 1,458 816
- ------------------------------------------------------------------------------------------------------------------------------------
Total net assets applicable to contracts
in accumulation period $ 572,164 $ 175,705 $ 577,592 $ 241,243 $ 164,302
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding 420,942 153,093 452,304 206,048 151,325
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value per accumulation unit $ 1.36 $ 1.15 $ 1.28 $ 1.17 $ 1.09
- ------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
APL Variable Annuity Account 1
- ------------------------------------------------------------------------------------------------------------------------------------
Statements of Net Assets - continued Dec. 31,1997
Segregated Asset Subaccount
--------------------------------------------------------------------------------------
Assets CMG CII CWG CSG CGR
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investments in shares of mutual funds,
at market value:
IDS Life Capital Resource Fund
20,040 shares at net asset value
of $28.58 per share (cost $507,178) $ - $ - $ - $ - $ -
IDS Life International Equity Fund
12,904 shares at net asset value
of $13.63 per share (cost $177,750) - - - - -
IDS Life Aggressive Growth Fund
35,973 shares at net asset value
of $16.07 per share (cost $577,854) - - - - -
IDS Life Special Income Fund
20,453 shares at net asset value
of $11.80 per share (cost $243,686) - - - - -
IDS Life Moneyshare Fund, Inc.
164,316 shares at net asset value
of $1.00 per share (cost $164,302) - - - - -
IDS Life Managed Fund, Inc.
45,482 shares at net asset value
of $18.04 per share (cost $814,371) 820,388 - - - -
INVESCO VIF - Industrial
Income Portfolio
74,991 shares at net asset value
of $17.04 per share (cost $1,178,358) - 1,277,838 - - -
Janus Aspen Series Worldwide Growth Portfolio
124,564 shares at net asset value
of $23.39 per share (cost $2,652,989)
Janus Aspen Series Growth Portfolio - - 2,913,546 - -
71,890 shares at net asset value
of $18.48 per share (cost $1,226,200)
American Century VP - - - 1,328,524 -
Capital Appreciation
24,486 shares at net asset value
of $9.68 per share (cost $252,514) - - - - 237,021
American Century VP Value
45,258 shares at net asset value
of $6.93 per share (cost $290,937) - - - - -
Warburg Pincus Trust--Post-Venture Capital Portfolio
22,901 shares at net asset value
of $11.06 per share (cost $231,719) - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
820,388 1,277,838 2,913,546 1,328,524 237,021
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends receivable - - - - -
Accounts receivable from American Partners Life for
contract purchase payments 30 - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets 82,018 1,277,838 2,913,546 1,328,524 237,021
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities
- ------------------------------------------------------------------------------------------------------------------------------------
Payable to American Partners Life for
mortality and expense risk fee 733 1,130 2,596 1,181 217
Payable to mutual funds for investments
purchased 30 - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 763 1,130 2,596 1,181 217
- ------------------------------------------------------------------------------------------------------------------------------------
Total net assets applicable to contracts
in accumulation period $ 819,655 $ 1,276,708 $ 2,910,950 $ 1,327,343 $ 236,804
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding 584,073 790,904 1,908,118 1,019,902 255,509
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value per accumulation unit $ 1.40 $ 1.61 $ 1.53 $ 1.30 $ 0.93
- ------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
APL Variable Annuity Account 1
- ----------------------------------------------------------------------------------------------------------------------------
Statements of Net Assets - continued Dec. 31, 1997
Segregated Asset Subaccount
------------------------------- Combined
Assets CVL CVC Variable
Account
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investments in shares of mutual funds,
at market value:
IDS Life Capital Resource Fund
20,040 shares at net asset value
of $28.58 per share (cost $507,178) $ - $ - $ 572,677
IDS Life International Equity Fund
12,904 shares at net asset value
of $13.63 per share (cost $177,750) - - 175,863
IDS Life Aggressive Growth Fund
35,973 shares at net asset value
of $16.07 per share (cost $577,854) - - 578,116
IDS Life Special Income Fund
20,453 shares at net asset value
of $11.80 per share (cost $243,686) - - 241,243
IDS Life Moneyshare Fund, Inc.
164,316 shares at net asset value
of $1.00 per share (cost $164,302) - - 164,302
IDS Life Managed Fund, Inc.
45,482 shares at net asset value
of $18.04 per share (cost $814,371) - - 820,388
INVESCO VIF - Industrial
Income Portfolio
74,991 shares at net asset value
of $17.04 per share (cost $1,178,358) - - 1,277,838
Janus Aspen Series Worldwide Growth Portfolio
124,564 shares at net asset value
of $23.39 per share (cost $2,652,989)
Janus Aspen Series Growth Portfolio - - 2,913,546
71,890 shares at net asset value
of $18.48 per share (cost $1,226,200)
American Century VP - - 1,328,524
Capital Appreciation
24,486 shares at net asset value
of $9.68 per share (cost $252,514) - - 237,021
American Century VP Value
45,258 shares at net asset value
of $6.93 per share (cost $290,937) 313,636 - 313,636
Warburg Pincus Trust--Post-Venture Capital Portfolio
22,901 shares at net asset value
of $11.06 per share (cost $231,719) - 253,283 253,283
- ----------------------------------------------------------------------------------------------------------------------------
313,636 253,283 8,876,437
- ----------------------------------------------------------------------------------------------------------------------------
Dividends receivable - - 2,274
Accounts receivable from American Partners Life for
contract purchase payments - - 80
- ----------------------------------------------------------------------------------------------------------------------------
Total assets 313,636 253,283 8,878,791
- ----------------------------------------------------------------------------------------------------------------------------
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Payable to American Partners Life for
mortality and expense risk fee 274 226 7,922
Payable to mutual funds for investments
purchased - - 1,984
- ----------------------------------------------------------------------------------------------------------------------------
Total liabilities 274 226 9,906
- ----------------------------------------------------------------------------------------------------------------------------
Total net assets applicable to contracts
in accumulation period $ 313,362 $ 253,057 $ 8,868,885
- ----------------------------------------------------------------------------------------------------------------------------
Accumulation units outstanding 224,384 231,194
- ---------------------------------------------------------------------------------------------------------
Net asset value per accumulation unit $ 1.40 $ 1.09
- ---------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
APL Variable Annuity Account 1
- ------------------------------------------------------------------------------------------------------------------------------------
Statements of Operations For the year ended Dec. 31, 1997
Segregated Asset Subaccount
----------------------------------------------------------------------------------
CCR CIE CAG CSI CMS
Investment income
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Dividend income from mutual funds $ 15,010 $ 6,166 $ 50,743 $ 16,627 $ 17,491
Mortality and expense risk fee 4,477 1,580 4,921 1,646 3,509
- ------------------------------------------------------------------------------------------------------------------------------------
Investment income (loss) - net 10,533 4,586 45,822 14,981 13,982
- ------------------------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investments - net
- ------------------------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on sales of investments in mutual funds:
Proceeds from sales 33,676 39,354 153,406 47,691 4,784,530
Cost of investments sold 34,145 36,985 153,979 47,283 4,784,535
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments (469) 2,369 (573) 408 (5)
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or
depreciation of investments 85,557 (3,196) 12,319 (2,977) (2)
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments 85,088 (827) 11,746 (2,569) (7)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $ 95,621 $ 3,759 $ 57,568 $ 12,412 $ 13,975
- ------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
APL Variable Annuity Account 1
- ------------------------------------------------------------------------------------------------------------------------------------
Statements of Operations - continued For the year ended Dec. 31, 1997
Segregated Asset Subaccount
--------------------------------------------------------------------------------------
CMG CII CWG CSG CGR
Investment income
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Dividend income from mutual funds $ 74,507 $ 88,993 $ 32,903 $ 23,962 $ 3,716
Mortality and expense risk fee 5,188 8,542 18,719 7,806 1,970
- ------------------------------------------------------------------------------------------------------------------------------------
Investment income (loss) - net 69,319 80,451 14,184 16,156 1,746
- ------------------------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investments - net
- ------------------------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on sales of investments in mutual funds:
Proceeds from sales 38,681 119,391 157,216 75,684 77,404
Cost of investments sold 35,859 108,694 141,108 68,787 83,016
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments 2,822 10,697 16,108 6,897 (5,612)
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or
depreciation of investments 4,151 101,399 247,519 102,483 (8,816)
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments 6,973 112,096 263,627 109,380 (14,428)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $ 76,292 $ 192,547 $ 277,811 $ 125,536 $ (12,682)
- ------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
APL Variable Annuity Account 1
- -----------------------------------------------------------------------------------------------------------------------------------
Statements of Operations - continued For the year ended Dec. 31, 1997
Segregated Asset Subaccount
---------------------------------------- Combined
CVL CVC Variable
Investment income Account
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dividend income from mutual funds $ 902 $ 36 $ 331,056
Mortality and expense risk fee 1,345 1,874 61,577
- ----------------------------------------------------------------------------------------------------------------------------
Investment income (loss) - net (443) (1,838) 269,479
- ----------------------------------------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investments - net
- ----------------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on sales of investments in mutual funds:
Proceeds from sales 38,167 43,474 5,608,674
Cost of investments sold 36,201 40,277 5,570,869
- ----------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments 1,966 3,197 37,805
- ----------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or
depreciation of investments 22,614 21,432 582,483
- ----------------------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments 24,580 24,629 620,288
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $ 24,137 $ 22,791 $ 889,767
- ----------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
APL Variable Annuity Account 1
- ------------------------------------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets For the year ended Dec. 31, 1997
Segregated Asset Subaccount
-------------------------------------------------------------------------------------------
Operations CCR CIE CAG CSI CMS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment income (loss) - net $ 10,533 $ 4,586 $ 45,822 $ 14,981 $ 13,982
Net realized gain (loss) on investments (469) 2,369 (573) 408 (5)
Net change in unrealized appreciation or
depreciation of investments 85,557 (3,196) 12,319 (2,977) (2)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 95,621 3,759 57,568 12,412 13,975
- ------------------------------------------------------------------------------------------------------------------------------------
Contract Transactions
- ------------------------------------------------------------------------------------------------------------------------------------
Contract purchase payments 44,335 29,308 73,176 40,157 5,497,039
Net transfers* 231,118 65,250 226,592 160,244 (5,843,180)
Contract charges (387) (125) (620) (300) (19)
Surrender benefits (16,378) (7,265) (87,321) (39,766) (26,101)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) from
contract transactions 258,688 87,168 211,827 160,335 (372,261)
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at beginning of year 217,855 84,778 308,197 68,496 522,588
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 572,164 $ 175,705 $ 577,592 $ 241,243 $ 164,302
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Activity
- ------------------------------------------------------------------------------------------------------------------------------------
Units outstanding at beginning of year 197,010 75,121 269,153 63,034 501,037
Contract purchase payments 35,692 25,051 61,888 35,583 5,192,040
Net transfers* 202,032 59,250 198,210 143,043 (5,517,471)
Contract charges (317) (110) (521) (270) (17)
Surrender benefits (13,475) (6,219) (76,426) (35,342) (24,264)
- ------------------------------------------------------------------------------------------------------------------------------------
Units outstanding at end of year 420,942 153,093 452,304 206,048 151,325
- ------------------------------------------------------------------------------------------------------------------------------------
*Includes transfer activity from (to) other subaccounts 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
- ------------------------------------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets - continued For the year ended Dec. 31, 1997
Segregated Asset Subaccount
---------------------------------------------------------------------------------------
Operations CMG CII CWG CSG CGR
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment income (loss) - net $ 69,319 $ 80,451 $ 14,184 $ 16,156 $ 1,746
Net realized gain (loss) on investments 2,822 10,697 16,108 6,897 (5,612)
Net change in unrealized appreciation or
depreciation of investments 4,151 101,399 247,519 102,483 (8,816)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 76,292 192,547 277,811 125,536 (12,682)
- ------------------------------------------------------------------------------------------------------------------------------------
Contract Transactions
- ------------------------------------------------------------------------------------------------------------------------------------
Contract purchase payments 114,463 97,700 270,597 68,425 33,336
Net transfers* 536,133 918,536 2,139,100 1,107,632 89,819
Contract charges (264) (432) (811) (187) (223)
Surrender benefits (22,626) (98,905) (147,765) (21,985) (24,843)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) from contract transactions 627,706 916,899 2,261,121 1,153,885 98,089
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at beginning of year 115,657 167,262 372,018 47,922 151,397
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 819,655 $ 1,276,708 $ 2,910,950 $ 1,327,343 $ 236,804
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Activity
- ------------------------------------------------------------------------------------------------------------------------------------
Units outstanding at beginning of year 97,509 130,956 294,951 44,785 156,491
Contract purchase payments 87,659 67,914 186,068 56,707 37,321
Net transfers* 415,741 658,203 1,530,546 935,902 91,110
Contract charges (203) (293) (543) (146) (232)
Surrender benefits (16,633) (65,876) (102,904) (17,346) (29,181)
- ------------------------------------------------------------------------------------------------------------------------------------
Units outstanding at end of year 584,073 790,904 1,908,118 1,019,902 255,509
- ------------------------------------------------------------------------------------------------------------------------------------
*Includes transfer activity from (to) other subaccounts 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
- ---------------------------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets - continued For the year ended Dec. 31, 1997
Segregated Asset Subaccount
---------------------------------------- Combined
Operations CVL CVC Variable
Account
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment income (loss) - net $ (443) $ (1,838) $ 269,479
Net realized gain (loss) on investments 1,966 3,197 37,805
Net change in unrealized appreciation or
depreciation of investments 22,614 21,432 582,483
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 24,137 22,791 889,767
- ----------------------------------------------------------------------------------------------------------------------------
Contract Transactions
- ----------------------------------------------------------------------------------------------------------------------------
Contract purchase payments 17,909 25,521 6,311,966
Net transfers* 262,522 183,411 77,177
Contract charges (37) (136) (3,541)
Surrender benefits (1,336) (19,783) (514,074)
- ----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) from contract transactions 279,058 189,013 5,871,528
- ----------------------------------------------------------------------------------------------------------------------------
Net assets at beginning of year 10,167 41,253 2,107,590
- ----------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 313,362 $ 253,057 $ 8,868,885
- ----------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Activity
- ---------------------------------------------------------------------------------------------------------
Units outstanding at beginning of year 9,088 42,296
Contract purchase payments 13,674 24,945
Net transfers* 202,815 181,340
Contract charges (27) (129)
Surrender benefits (1,166) (17,258)
- ---------------------------------------------------------------------------------------------------------
Units outstanding at end of year 224,384 231,194
- ---------------------------------------------------------------------------------------------------------
*Includes transfer activity from (to) other subaccounts 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
- ------------------------------------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets For the year ended Dec. 31, 1996
Segregated Asset Subaccount
-------------------------------------------------------------------------------------------
Operations CCR CIE CAG CSI CMS CMG CII
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income (loss) - net $ 29,361 $ 1,410 $ 25,375 $ 2,068 $ 3,728 $ 7,009 $ 10,927
Net realized gain (loss) on investments 545 262 654 153 2 481 877
Net change in unrealized appreciation or
depreciation of investments (20,058) 1,309 (12,057) 534 - 1,866 (1,919)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 9,848 2,981 13,972 2,755 3,730 9,356 9,885
- ------------------------------------------------------------------------------------------------------------------------------------
Contract Transactions
- ------------------------------------------------------------------------------------------------------------------------------------
Contract purchase payments 27,700 9,768 49,636 20,244 1,941,526 28,846 17,486
Net transfers* 192,677 75,853 267,594 54,290 (1,396,957) 86,980 150,785
Contract charges (64) (9) (110) (60) - (31) (20)
Contract terminations
Surrender benefits (12,306) (3,815) (22,995) (8,783) (28,011) (9,544) (10,874)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) from
contract transactions 208,007 81,797 294,125 65,691 516,558 106,251 157,377
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at beginning of year - - 100 50 2,300 50 -
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 217,855 $ 84,778 $ 308,197 $ 68,496 $ 522,588 $ 115,657 $ 167,262
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Activity
- ------------------------------------------------------------------------------------------------------------------------------------
Units outstanding at beginning of year - - 101 49 2,292 49 -
Contract purchase payments 25,628 8,817 45,054 19,611 1,881,097 25,807 14,826
Net transfers* 182,748 69,727 244,676 51,767 (1,355,419) 79,891 125,010
Contract charges (58) (8) (98) (55) - (26) (15)
Contract terminations:
Surrender benefits (11,308) (3,415) (20,580) (8,338) (26,933) (8,212) (8,865)
- ------------------------------------------------------------------------------------------------------------------------------------
Units outstanding at end of year 197,010 75,121 269,153 63,034 501,037 97,509 130,956
- ------------------------------------------------------------------------------------------------------------------------------------
*Includes transfer activity from (to) other subaccounts 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
- ------------------------------------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets - continued For the year ended Dec. 31, 1996
Segregated Asset Subaccount Combined
----------------------------------------------------------------------- Variable
Operations CWG** CSG*** CGR** CVL*** CVC*** Account
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment income (loss) - net $ 1,383 $ 232 $ 1,027 $ (2) $ (10) $ 82,508
Net realized gain (loss) on investments 858 (11) (70) - (44) 3,707
Net change in unrealized appreciation or
depreciation of investments 13,038 (159) (6,677) 85 132 (23,906)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 15,279 62 (5,720) 83 78 62,309
- ------------------------------------------------------------------------------------------------------------------------------------
Contract Transactions
- ------------------------------------------------------------------------------------------------------------------------------------
Contract purchase payments 29,873 3,142 19,058 - 512 2,147,791
Net transfers* 334,988 44,718 139,174 10,084 40,663 849
Contract charges - - - - - (294)
Contract terminations
Surrender benefits (8,122) - (1,115) - - (105,565)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) from
contract transactions 356,739 47,860 157,117 10,084 41,175 2,042,781
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at beginning of year - - - - - 2,500
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 372,018 $ 47,922 $ 151,397 $ 10,167 $ 41,253 $ 2,107,590
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulation Unit Activity
- ----------------------------------------------------------------------------------------------------------------------------
Units outstanding at beginning of year - - - - -
Contract purchase payments 24,778 2,959 18,817 - 530
Net transfers* 276,866 41,826 138,767 9,088 41,766
Contract charges - - - - -
Contract terminations:
Surrender benefits (6,693) - (1,093) - -
- ----------------------------------------------------------------------------------------------------------------------------
Units outstanding at end of year 294,951 44,785 156,491 9,088 42,296
- ----------------------------------------------------------------------------------------------------------------------------
*Includes transfer activity from (to) other subaccounts 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>
APL Variable Annuity Account 1
Notes to Financial Statements
- -------------------------------------------------------------------
1. Organization
APL Variable Annuity Account 1 (the 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 Life
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 segregated asset subaccount
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 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 amended, as
a diversified, open-end management investment company or series of an 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) Industrial Income Portfolio commenced operations Aug. 10, 1994. 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.
IDS Life is the investment manager and American Express Financial Corporation
(AEFC), an affiliated company, is the investment advisor for each of the IDS
Life Funds. American Express Asset Management 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. APL serves as issuer of the contracts investing
in 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 Trust 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 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.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of increase and decrease in net assets from operations
during the period. Actual results could differ from those estimates.
Federal Income Taxes
American 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 investment
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 on each contract
anniversary 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) on a contract
anniversary 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 $50 per year.
- -------------------------------------------------------------------
4. Investment Transactions
The subaccounts' purchases of fund or portfolio shares including reinvestment of
dividend distributions, were as follows:
Year ended Dec. 31,
Subaccount Investment 1997 1996
- ------------------------------------------------------------------------------
CCR IDS Life Capital Resource Fund...................$ 303,232 $ 281,955
CIE IDS Life International Equity Fund................ 131,194 95,083
CAG IDS Life Aggressive Growth Fund................... 411,343 354,001
CSI IDS Life Special Income Fund...................... 223,006 80,420
CMS IDS Life Moneyshare Fund, Inc..................... 4,426,251 1,782,310
CMG IDS Life Managed Fund, Inc........................ 736,344 126,801
CII INVESCO VIF - Industrial Income Portfolio......... 1,117,762 192,113
CWG Janus Aspen Series Worldwide Growth Portfolio..... 2,434,878 390,486*
CSG Janus Aspen Series Growth Portfolio............... 1,246,893 49,582**
CGR American Century VP Capital Appreciation.......... 177,323 176,257*
CVL American Century VP Value......................... 317,054 10,084**
CVC Warburg-Pincus Trust-- Post-Venture
Capital Portfolio................................. 230,865 43,415**
- ------------------------------------------------------------------------------
Combined Variable Account $11,756,145 $3,582,507
- ------------------------------------------------------------------------------
*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.
- --------------------------------------------------------------------------
5. Year 2000 Issue (Unaudited)
The Year 2000 issue is the result of computer programs having been written using
two digits rather than four to define a year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than 2000. This could result in the failure of major systems or miscalculations,
which could have a material impact on the operations of the Variable Account.
The Variable Account has no computer systems of its own but is dependent upon
the systems maintained by AEFC and certain other third parties.
A comprehensive review of AEFC's computer systems and business processes has
been conducted to identify the major systems that could be affected by the Year
2000 issue. Steps are being taken to resolve any potential problems including
modification to existing software and the purchase of new software. These
measures are scheduled to be completed and tested on a timely basis. AEFC's goal
is to complete internal remediation and testing of each system by the end of
1998 and to continue compliance efforts through 1999.
The Year 2000 readiness of unaffiliated investment managers and other third
parties whose system failures could have an impact on Variable Account's
operations is currently being evaluated. The potential materiality of any such
impact is not known at this time.
<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, 1997 and 1996, and the related statements of income,
stockholder's equity and cash flows for each of the three years in the period
ended December 31, 1997. 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, 1997 and 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
Ernst & Young LLP
February 5, 1998
Minneapolis, Minnesota
<PAGE>
AMERICAN PARTNERS LIFE INSURANCE COMPANY
BALANCE SHEETS
December 31,
<TABLE><CAPTION>
ASSETS 1997 1996
- ------ --------- ------
<S> <C> <C>
(thousands)
Investments:
Fixed maturities:
Held to maturity, at amortized cost (Fair value:
1997, $68,122; 1996, $71,217) $ 63,747 $ 67,544
Available for sale, at fair value (Amortized cost:
1997, $144,344; 1996, $72,171) 147,981 73,152
------- -------
Total investments 211,728 140,696
Cash and cash equivalents -- 315
Amounts due from brokers -- 1,100
Other accounts receivables 884 --
Accrued investment income 3,591 2,760
Deferred policy acquisition costs 21,846 15,035
Other assets 726 1,350
Separate account assets 8,879 2,145
------- -------
Total assets $247,654 $163,401
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Future policy benefits for fixed annuities $184,246 $130,088
Policy claims and other policyholders' funds 222 112
Deferred income taxes 5,405 3,392
Amount due to brokers 4,946 2,001
Other liabilities 3,832 1,524
Separate account liabilities 8,879 2,145
------- -------
Total liabilities 207,530 139,262
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 36,327 21,327
Net unrealized gain on investments 1,930 599
Accumulated deficit (633) (287)
------- -------
Total stockholder's equity 40,124 24,139
------- -------
Total liabilities and stockholder's equity $247,654 $163,401
======= =======
See accompanying notes.
</TABLE>
<PAGE>
AMERICAN PARTNERS LIFE INSURANCE COMPANY
STATEMENTS OF INCOME
Years ended December 31,
<TABLE>
<CAPTION>
1997 1996 1995
--------- -------- -------
(thousands)
<S> <C> <C> <C>
Revenues:
Net investment income $ 12,609 $ 9,445 $3,329
Contractholder charges 673 321 --
Management and other fees 56 6 --
Net realized gain (loss) on investments 130 (125) --
--------- --------- ------
Total revenues 13,468 9,647 3,329
Benefits and expenses:
Interest credited on investment contracts 9,261 6,860 2,113
Amortization of deferred policy
acquisition costs 131 625 224
Amortization of state licenses and goodwill 623 623 623
Other operating expenses 3,853 5,641 270
-------- -------- ------
Total expenses 13,868 13,749 3,230
-------- -------- ------
(Loss) income before income taxes (400) (4,102) 99
Income tax (benefit) expense (54) (1,380) 91
-------- -------- ------
Net (loss) income $ (346) $(2,722) $ 8
======== ======= ======
</TABLE>
See accompanying notes.
<PAGE>
AMERICAN PARTNERS LIFE INSURANCE COMPANY
STATEMENTS OF STOCKHOLDER'S EQUITY
Three years ended December 31, 1997
(thousands)
<TABLE>
<CAPTION>
Retained
Additional Net Unrealized Earnings
Capital Paid-In Gain (Loss)on (Accumulated
Stock Capital Investments Deficit) Total
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994 $2,500 $ 6,327 $ (112) $ 2,272 $10,987
Net income -- -- -- 8 8
Change in net unrealized
gain (loss) on investments -- -- 1,483 -- 1,483
Capital contribution from parent -- 5,000 -- -- 5,000
Gain on reinsurance transaction
with parent -- -- -- 167 167
---------- ------------ ---------- -------- --------
Balance, December 31, 1995 2,500 11,327 1,371 2,447 17,645
Net loss -- -- -- (2,722) (2,722)
Change in net unrealized
gain (loss) on investments -- -- (772) -- (772)
Capital contribution from parent -- 10,000 -- -- 10,000
Loss on reinsurance transaction
with parent -- -- -- (12) (12)
---------- ------------ ---------- -------- --------
Balance, December 31, 1996 2,500 21,327 599 (287) 24,139
Net loss -- -- -- (346) (346)
Change in net unrealized
gain (loss) on investments -- -- 1,331 -- 1,331
Capital contribution from parent -- 15,000 -- -- 15,000
----------- ------------ ---------- -------- --------
Balance, December 31, 1997 $2,500 $36,327 $ 1,930 $ (633) $40,124
========== ============ ========= ======== ========
</TABLE>
See accompanying notes.
<PAGE>
AMERICAN PARTNERS LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
Years ended December 31,
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- ------
(thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (346) $ (2,722) $ 8
Adjustments to reconcile net income to
net cash used in operating activities:
Change in accrued investment income (830) (372) (2,244)
Change in deferred policy acquisition
costs, net (7,419) (9,285) (5,809)
Change in other assets 624 623 623
Change in other accounts receivable (884) -- --
Change in policy claims and other
policyholders' funds 110 (822) 934
Deferred income tax provision (benefit) 1,296 3,140 (512)
Change in other liabilities 2,308 316 1,194
(Accretion of discount)
amortization of premium, net (41) (16) 6
Net realized (gain) loss on investments (130) 125 --
Other, net 10 333 (393)
-------- ------- ---------
Net cash used in
operating activities (5,302) (8,680) (6,193)
-------- -------- ---------
Cash flows from investing activities: Fixed maturities held to maturity:
Purchases -- (250) (72,361)
Maturities 869 657 53
Sales 3,000 2,690 --
Fixed maturities available for sale:
Purchases (82,967) (39,839) (30,309)
Maturities
10,883 2,445
Sales -- 281 --
Change in due from brokers 1,100 (1,100) 2,200
Change in due to brokers 2,945 2,001 --
--------- --------- --------
Net cash used in
investing activities $( 64,170) $( 33,115) $(100,417)
--------- --------- --------
<PAGE>
AMERICAN PARTNERS LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS (continued)
Years ended December 31,
1997 1996 1995
------- ------- ------
(thousands)
Cash flows from financing activities: Activity related to investment contracts:
Considerations received $ 68,033 $ 28,190 $ 108,354
Surrenders and other benefits (23,137) (11,947) (3,482)
Interest credited to account balances 9,261 6,860 2,113
Capital contribution from parent 15,000 10,000 5,000
-------- --------- --------
Net cash provided by
financing activities 69,157 33,103 111,985
-------- -------- --------
Net (decrease) increase in cash and cash equivalents (315) (8,692) 5,375
Cash and cash equivalents at beginning of year 315 9,007 3,632
-------- -------- ---------
Cash and cash equivalents at end of year $ -- $ 315 $ 9,007
======== ======== =========
</TABLE>
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. The Company's principal product is
deferred annuities which are issued primarily to individuals. It offers
single premium and installment 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 (AEFC). AEFC is
a wholly owned subsidiary of American Express Company. The accompanying
financial statements have been prepared in conformity with generally
accepted accounting principles which vary in certain respects from
reporting practices prescribed or permitted by the Arizona Department of
Insurance (see Note 4).
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Investments
Fixed maturities that the Company has both the positive intent and the
ability to hold to maturity are classified as held to maturity and carried
at amortized cost. All other fixed maturities are classified as available
for sale and carried at fair value. Unrealized gains and losses on
securities classified as available for sale are reported as a separate
component of stockholder's equity, net of deferred income taxes.
Realized investment gain or loss is determined on an identified cost basis.
Prepayments are anticipated on certain investments in mortgage-backed
securities in determining the constant effective yield used to recognize
interest income. Prepayment estimates are based on information received
from brokers who deal in mortgage-backed securities.
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>
1. Summary of significant accounting policies (continued)
Supplementary information to the statements of cash flows for the years
ended December 31 is summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- ------
Cash (received) paid during the year for:
<S> <C> <C> <C>
Income taxes $(2,064) $(3,335) $144
Interest on borrowings 70 22 --
</TABLE>
Recognition of profits on fixed annuity contracts
Profits on fixed 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.
Contractholder charges include fees collected regarding the issue and
administration of annuity contracts.
Deferred policy acquisition costs
The costs of acquiring new business, principally sales compensation, policy
issue costs, and certain sales expenses, including direct response
advertising costs, have been deferred on annuity contracts. The deferred
acquisition costs for installment annuities are amortized as a percentage
of the estimated gross profits expected to be realized on the policies. The
costs for single premium deferred annuities are amortized in relation to
accumulation values and surrender charge revenue.
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
AEFC and American Express Company, tax benefit is recognized for losses to
the extent they can be used on the consolidated tax return. It is the
policy of AEFC and its subsidiaries that AEFC will reimburse subsidiaries
for all tax benefits.
Included in other liabilities at December 31, 1997 and 1996 are $(2) and
$708, respectively, (payable to) / receivable from 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.
<PAGE>
1. Summary of significant accounting policies (continued)
Intangible Assets
In connection with the purchase of the Company by IDS Life in 1994, $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. At December 31, 1997 and 1996, the
accumulated amortization was $2,388 and $1,869, respectively.
Reclassifications
Certain 1996 and 1995 amounts have been reclassified to conform to
1997 presentation
2. Investments
Fair values of investments in fixed maturities represent quoted market
prices and estimated values when quoted prices are not available. Estimated
values are determined by established procedures involving, among other
things, review of market indices, price levels of current offerings of
comparable issues, price estimates and market data from independent brokers
and financial files.
The amortized cost, gross unrealized gains and losses and fair value of
investments in fixed maturities at December 31, 1997 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 $ 63,747 $4,410 $ 35 $ 68,122
========= ====== ==== =========
Available for sale
U.S. Government agency obligations $ 7,406 $ 305 $ -- $ 7,710
Corporate bonds and obligations 91,584 3,157 325 94,417
Mortgage-backed securities 45,354 510 11 45,854
-------- ------ ---- --------
$144,344 $3,973 $336 $147,981
======== ====== ==== ========
The amortized cost, gross unrealized gains and losses and fair value of
investments in fixed maturities at December 31, 1996 are as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Held to maturity Cost Gains Losses Value
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
-------- ------ ---- -------
$72,171 $1,523 $542 $73,152
======= ====== ==== =======
</TABLE>
<PAGE>
2. Investments (continued)
The amortized cost and fair value of investments in fixed maturities at
December 31, 1997 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.
<TABLE><CAPTION>
Amortized Fair
Held to maturity Cost Value
<S> <C> <C>
Due in one year or less $ 1,403 $ 1,410
Due from one to five years 12,753 13,407
Due from five to ten years 43,712 46,949
Due in more than ten years 5,879 6,356
------- -------
$63,747 $68,122
======= =======
Amortized Fair
Available for sale Cost Value
Due in one year or less $ 4,164 $ 4,198
Due from one to five years 10,278 10,742
Due from five to ten years 48,391 50,561
Due in more than ten years 36,157 36,626
Mortgage-backed securities 45,354 45,854
---------- --------
$144,344 $147,981
</TABLE>
During the year ended December 31, 1997 and 1996, fixed maturities
classified as held to maturity were sold with amortized cost of $2,879 and
$2,743, respectively. Net gains and losses on these sales were not
significant. The sales of these fixed maturities were due to significant
deterioration in the issuers' credit worthiness.
In addition, no fixed maturities available for sale were sold during 1997.
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 December 31, 1995, there were no sales of fixed
maturities.
At December 31, 1997, bonds carried at $7,221 were on deposit with various
states as required by law.
<PAGE>
2. Investments (continued)
Securities are rated by Moody's and Standard & Poor's (S&P), except for
securities carried at approximately $24.2 million which are rated by AEFC
internal analysts using criteria similar to Moody's and S&P. A summary of
investments in fixed maturities, at amortized cost, by rating on December
31 is as follows:
<TABLE><CAPTION>
Rating 1997 1996
---------------------- ---------- -------
<S> <C> <C>
Aaa/AAA $ 51,759 $ 18,722
Aa/AA 3,792 4,607
Aa/A 5,574 4,193
A/A 30,410 29,485
A/BBB 12,856 9,940
Baa/BBB 71,605 53,883
Baa/BB 6,299 9,093
Below investment grade 25,796 9,792
-------- --------
$208,091 $139,715
======== ========
</TABLE>
At December 31, 1997, 94 percent of the securities rated Aaa/AAA are GNMA,
FNMA, and FHLMC mortgage-backed securities.
Net investment income for the years ended December 31 is summarized as
follows:
<TABLE><CAPTION>
1997 1996 1995
------- ------ -----
<S> <C> <C> <C>
Interest on fixed maturities $12,893 $9,473 $3,077
Interest on cash equivalents 192 146 218
Other 1 5 49
------- ------ ------
13,086 9,624 3,344
Less investment expenses 477 179 15
------- ------ ------
$12,609 $9,445 $3,329
======= ====== ======
Net realized gain (loss) on investments was $130, $(125) and $nil for the
years ended December 31, 1997, 1996 and 1995, respectively and was entirely
due to sales of fixed maturities.
Changes in net unrealized appreciation (depreciation) of investments for
the years ended December 31 are summarized as follows:
1997 1996 1995
-------- -------- ------
Fixed maturities available for sale $2,656 $(1,129) $2,283
</TABLE>
<PAGE>
3. Income taxes
The Company qualifies as a life insurance company for federal income tax
purposes. As such, the Company is subject to the Internal Revenue Code
provisions applicable to life insurance companies.
The income tax expense (benefit) for the years ended December 31, consists
of the following:
<TABLE><CAPTION>
1997 1996 1995
-------- -------- -----
<S> <C> <C> <C>
Federal income taxes:
Current $(1,396) $(4,520) $603
Deferred 1,296 3,140 (512)
-------- ------- ----
(100) (1,380) 91
State income taxes - current 46 -- --
-------- -------- ----
Income tax expense $ (54) $(1,380) $ 91
(benefit) ======== ======== ====
</TABLE>
Increases to the federal income tax provision applicable to pretax income
based on the statutory rate for the years ended December 31, are
attributable to:
<TABLE><CAPTION>
1997 1996 1995
------- --------- -------
Provision Rate Provision Rate Provision Rate
<S> <C> <C> <C> <C> <C> <C>
Federal income taxes based
on the statutory rate $(140) 35.0% $(1,436) 35.0% $35 35.0%
Increases are
attributable to:
State tax, net benefit 30 (7.4) -- -- -- --
Goodwill amortization 56 (14.0) 56 (1.4) 56 56.7
------ ------ ------- ---- --- ----
Income tax expense (benefit) $ (54) 13.6% $(1,380) 33.6% $91 91.7%
====== ====== ======= ==== === ====
</TABLE>
<TABLE><CAPTION>
Significant components of the Company's deferred income tax assets and
liabilities as of December 31 are as follows:
<S> <C> <C>
Deferred income tax assets: 1997 1996
------ -----
Policy reserves $ 3,017 $ 2,353
Other 98 --
------ -----
Total deferred income
tax assets 3,115 2,353
------ -----
Deferred income tax liabilities:
State licenses 188 350
Investments 1,231 406
Deferred policy acquisition costs 7,101 4,955
Other -- 34
------ -----
Total deferred income
tax liabilities 8,520 5,745
------ -----
Net deferred income
tax liabilities $5,405 $3,392
====== =====
</TABLE>
The Company is required to establish a valuation allowance for any portion
of the deferred income tax assets that management believes will not be
realized. In the opinion of management, it is more likely than not that the
Company will realize the benefit of the deferred income tax assets and,
therefore, no valuation allowance has been established.
<PAGE>
4. Stockholder's equity
Retained earnings available for distribution as dividends to IDS Life are
limited to the Company's surplus as determined in accordance with
accounting practices prescribed by the Arizona Department of Insurance.
Statutory unassigned deficit aggregated $10,795 and $6,696 as of December
31, 1997 and 1996, respectively. All dividends payments would require
approval by the Insurance Department of the State of Arizona.
Statutory net income and stockholder's equity as of December 31, are
summarized as follows:
<TABLE><CAPTION>
1997 1996 1995
--------- --------- --------
<S> <C> <C> <C>
Statutory net income (loss) $ (4,011) $ (7,990) $ 897
Statutory stockholder's equity 26,262 15,351 14,589
</TABLE>
5. Related party transactions
The Company entered a reinsurance agreement to assume single premium
deferred annuity contracts from IDS Life. At September 1, 1995, a $107,564
block of single premium deferred annuities was transferred from IDS Life to
the Company. The accompanying balance sheet includes $97,070 and $101,787
for future policy benefits related to this agreement as of December 31,
1997 and 1996, respectively.
The Company has no employees. Charges by IDS Life services and use of other
joint facilities aggregated $6,447, $5,166 and $381 for 1997, 1996 and
1995, 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 AEFC of $250 at AEFC's
cost of funds. There were no borrowings outstanding under this agreement at
December 31, 1997 or 1996.
<PAGE>
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 and liabilities is significant. The
fair value of the Company, therefore, cannot be estimated by aggregating
the amounts presented.
<TABLE><CAPTION>
1997 1996
------------- --------
Carrying Fair Carrying Fair
Financial Assets Amount Value Amount Value
<S> <C> <C> <C> <C>
Investments:
Fixed maturities (Note 2):
Held to maturity $63,747 $68,122 $67,544 $71,217
Available for sale 147,981 147,981 73,152 73,152
Cash and cash equivalents
(Note 1) -- -- 315 315
Separate account assets (Note 1) 8,879 8,879 2,145 2,145
Financial Liabilities
Future policy benefits for
fixed annuities 184,246 175,950 130,088 123,399
Separate account liabilities 8,879 8,549 2,145 2,145
</TABLE>
The fair value of future policy benefits for fixed annuities is based on
the status of the annuities at December 31, 1997 and 1996. The fair value
of deferred annuities and separate account liabilities 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 1997.
8. Year 2000 Issue (unaudited)
The Year 2000 issue is the result of computer programs having been written
using two digits rather than four to define a year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900
rather than 2000. This could result in the failure of major systems or
miscalculations, which could have a material impact on the operations of
the Company. All of the systems used by the Company are maintained by AEFC
and are utilized by multiple subsidiaries and affiliates of AEFC. The
Company's business is heavily dependent upon AEFC's computer systems and
has significant interactions with systems of third parties.
A comprehensive review of AEFC's computer systems and business processes,
including those specific to the Company, has been conducted to identify the
major systems that could be affected by the Year 2000 issue. Steps are
being taken to resolve any potential problems including modification to
existing software and the purchase of new software. These measures are
scheduled to be completed and tested on a timely basis. AEFC's goal is to
complete internal remediation and testing of each system by the end of 1998
and to continue compliance efforts through 1999.
AEFC is evaluating the Year 2000 readiness of advisors and other third
parties whose system failures could have an impact on the Company's
operations. The potential materiality of any such impact is not known at
this time.
<PAGE>
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, 1997
Statements of Operations for year ended Dec. 31, 1997
Statements of Changes in Net Assets for year ended Dec. 31 1997 and
1996.
Notes to Financial Statements.
Report of Independent Auditors dated March 13, 1998.
American Partners Life Insurance Company:
Balance Sheets as of Dec. 31, 1997 and 1996;
Statements of Income for the periods ended Dec. 31, 1997, 1996 and
1995; and
Statements of Stockholder's Equity for the three years ended
Dec. 31, 1997, 1996 and 1995.
Statements of Cash Flows for the periods ended Dec. 31, 1997, 1996
and 1995.
Notes to Financial Statements.
Report of Independent Auditors dated February 5, 1998.
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 Registrant's Initial Registration
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.
<PAGE>
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.
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
Registrant's Initial Registration 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 Registrant's Initial Registration 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
Post-Effective Amendment No. 2 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
Post-Effective Amendment No. 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 as
Exhibit 8.3 to Post-Effective Amendment No. 3 to Registration
Statement No.
33-57731 is incorporated herein by reference.
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 Post-Effective Amendment No. 2 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 as Exhibit 8.5 to Post-Effective Amendment No. 3 to
Registration Statement No. 33-57731 is incorporated herein by
reference.
<PAGE>
9. Opinion of counsel and consent to its use as to the legality of the
securities being registered filed electronically herewith.
10. Consent of Independent Auditors, filed electronically herewith.
11. Financial Statement Schedule and Report of Independent Auditors, filed
electronically herewith.
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 Registrant's Initial Registration 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 as Exhibit 15 to
Post-Effective Amendment No. 3 to Registration Statement No.
33-57731 is incorporated herein by reference.
15.1. Power of Attorney to sign amendments to the Registration Statement
dated April 8, 1998, filed electronically herewith.
<PAGE>
<TABLE>
<CAPTION>
Item 25. Directors and Officers of the Depositor (American Partners Life Insurance Company)
Positions and Offices with
Name Principal Business Address Depositor
<S> <C> <C>
Lorraine R. Hart IDS Tower 10 Director and Vice President-
Minneapolis, MN 55440 Investments
Jay C. Hatlestad IDS Tower 10 Controller
Minneapolis, MN 55440
Jeffrey S. Horton IDS Tower 10 Vice President and Treasurer
Minneapolis, MN 55440
Richard W. Kling IDS Tower 10 Director and Chairman of the Board
Minneapolis, MN 55440
Bruce A. Kohn IDS Tower 10 Vice President, Group Counsel and
Minneapolis, MN 55440 Assistant Secretary
Mary Ellyn Minenko IDS Tower 10 Vice President, Group Counsel and
Minneapolis, MN 55440 Assistant Secretary
Stuart A. Sedlacek IDS Tower 10 Director and President
Minneapolis, MN 55440
F. Dale Simmons IDS Tower 10 Vice President-Real Estate Loan
Minneapolis, MN 55440 Management
William A. Stoltzmann IDS Tower 10 Director, Vice President, General
Minneapolis, MN 55440 Counsel and Secretary
</TABLE>
<PAGE>
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).
The following list includes the names of major subsidiaries of
American Express.
<TABLE>
<CAPTION>
Jurisdiction of
Name of Subsidiary Incorporation
<S> <C>
I. Travel Related Services
American Express Travel Related Services Company, New York
Inc.
II. International Banking Services
American Express Bank Ltd. Connecticut
III. Companies engaged in Financial Services
Advisory Capital Strategies Group Inc. Minnesota
Advisory Capital Strategies Group Inc. New York
American Centurion Life Assurance Company Minnesota
American Enterprise Investment Services Inc. Minnesota
American Enterprise Life Insurance Company Indiana
American Express Asset Management Group Inc. Minnesota
American Express Asset Management International Inc. Delaware
American Express Asset Management International Ltd. England
American Express Asset Management International Japan
(Japan) Ltd.
American Express Client Service Corporation Minnesota
American Express Corporation Delaware
American Express Financial Advisors Inc. 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 Kentucky
of Kentucky Inc.
American Express Property Casualty Insurance Agency Maryland
of Maryland Inc.
American Express Property Casualty Insurance Agency Pennsylvania
of Pennsylvania Inc.
American Express Tax and Business Services Inc. Minnesota
American Express Trust Company Minnesota
American Partners Life Insurance Company Arizona
<PAGE>
Item 26. Persons Controlled by or Under Common Control with the Depositor or Registrant
(Continued)
Jurisdiction of
Name of Subsidiary Incorporation
IDS Aircraft Services Corporation Minnesota
IDS Cable Corporation Minnesota
IDS Capital Holdings Inc. Minnesota
IDS Certificate Company Delaware
IDS Futures Corporation Minnesota
IDS Insurance Agency of Alabama Inc. Alabama
IDS Insurance Agency of Arkansas Inc. Arkansas
IDS Insurance Agency of Massachusetts Inc. Massachusetts
IDS Insurance Agency of New Mexico Inc. New Mexico
IDS Insurance Agency of North Carolina Inc. North Carolina
IDS Insurance Agency of Utah Inc. Utah
IDS Insurance Agency of Wyoming Inc. Wyoming
IDS Life Insurance Company Minnesota
IDS Life Insurance Company of New York New York
IDS Management Corporation Minnesota
IDS Partnership Services Corporation Minnesota
IDS Plan Services of California, Inc. Minnesota
IDS Property Casualty Insurance Company Wisconsin
IDS Real Estate Services, Inc. Delaware
IDS Realty Corporation Minnesota
IDS Sales Support Inc. Minnesota
IDS Securities Corporation Delaware
Investors Syndicate Development Corp. Delaware
North Dakota Public Employee Payment Company Minnesota
</TABLE>
Item 27. Number of Contractowners
As of February 28, 1998, there were 25 contract
owners of qualified Privileged Assets select Annuity
contracts. There were 539 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.
<PAGE>
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.
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:
<TABLE>
<CAPTION>
Name and Principal Business Address Position and Offices with
Underwriter Offices with Registrant
- ----------------------------------------- --------------------------------- ---------------------------------
<S> <C> <C>
Ann M. Buffie Vice President and Chief None
IDS Tower 10 Compliance Officer
Minneapolis, MN 55440
Cynthia M. Carlson Vice President None
IDS Tower 10
Minneapolis, MN 55440
Colleen Curran Vice President and Chief Legal None
IDS Tower 10 Counsel
Minneapolis, MN 55440
Mark A. Ernst Senior Vice President-Third None
IDS Tower 10 Party Distribution
Minneapolis, MN 55440
David R. Hubers Director and President None
IDS Tower 10
Minneapolis, MN 55440
James A. Jacobs Vice President-Sales and Service None
IDS Tower 10
Minneapolis, MN 55440
Verna J. Kaufman Vice President None
IDS Tower 10
Minneapolis, MN 55440
Brian C. Kleinberg Director None
IDS Tower 10
Minneapolis, MN 55440
Richard W. Kling Vice President None
IDS Tower 10
Minneapolis, MN 55440
</TABLE>
<PAGE>
<TABLE><CAPTION>
Item 29(b). As to each director, officer or partner of the principal underwriter
(American Express Service Corporation): (cont'd)
Name and Principal Business Address Position and Offices with
Underwriter Offices with Registrant
- ----------------------------------------- --------------------------------- ---------------------------------
<S> <C> <C>
Timothy S. Meehan Secretary None
IDS Tower 10
Minneapolis, MN 55440
James A. Mitchell Director and Senior Vice Board member and President
IDS Tower 10 President
Minneapolis, MN 55440
Julia K. Morton Vice President and Chief None
IDS Tower 10 Financial Officer
Minneapolis, MN 55440
Richard L. Solseth Vice President and Treasurer None
IDS Tower 10
Minneapolis, MN 55440
</TABLE>
Item 29(c).
<TABLE><CAPTION>
Net Underwriting
Name of Principal Discounts and Compensation Brokerage
Underwriter Commissions Redemption Commissions Compensation
- ---------------------- -------------------- --------------------- --------------------- --------------------
<S> <C> <C> <C> <C>
American Express None None None None
Financial Advisors
Inc.
</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>
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 27th day
of April, 1998.
APL VARIABLE ANNUITY ACCOUNT 1
(Registrant)
By American Partners Life Insurance Company
(Sponsor)
By /s/ Stuart A. Sedlacek*
Stuart A. Sedlacek
Chairman and 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 27th day of
April, 1998.
Signature Title
/s/ Lorraine R. Hart* Director and Vice
Lorraine R. Hart President-Investments
/s/ Jay C. Hattlestad* Controller
Jay C. Hattlestad
/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/ Jeffrey S. Horton** Vice President and Treasurer
Jeffrey S. Horton
*Signed pursuant to Power of Attorney, filed electronically as Exhibit 15 to
Post-Effective Amendment No. 3 to Registration Statement No. 33-57731,
incorporated herein by reference.
**Signed pursuant to Power of Attorney filed electronically herewith.
__________________________________
Sherilyn K. Beck
<PAGE>
CONTENTS OF THIS POST-EFFECTIVE AMENDMENT NO. 4
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>
APL VARIABLE ANNUITY ACCOUNT 1 (PASA)
Registration No. 33-57731
EXHIBIT INDEX
Exhibit 9. Opinion of Counsel
Exhibit 10. Consent of Independent Auditors
Exhibit 11. Financial Statement Schedule
Exhibit 14. Financial Data Schedule
Exhibit 15.1 Power of Attorney dated April 8, 1998
<PAGE>
April 27, 1998
American Partners Life Insurance Company
80 South 8th Street, Box 534
Minneapolis, MN 55440-0534
RE: Registration Statement on Form N-4
File No.:33-57731
Ladies and Gentlemen:
I am familiar with the establishment of the APL Variable Annuity Account I
("Account"), which is a separate account of American Partners Life Insurance
Company ("Company") established by the Company's Board of Directors according to
applicable insurance law. I also am familiar with the above-referenced
Registration Statement filed by the Company on behalf of the Account with the
Securities and Exchange Commission.
I have made such examination of law and examined such documents and records as
in my judgment are necessary and appropriate to enable me to give the following
opinion:
1. The Company is duly incorporated, validly existing and in good
standing under applicable state law and is duly licensed or qualified
to do business in each jurisdiction where it transacts business. The
Company has all corporate powers required to carry on its business and
to issue the contracts.
2. The Account is a validly created and existing separate account of the
Company and is duly authorized to issue the securities registered.
3. The contracts issued by the Company during the past fiscal year, when
offered and sold in accordance with the prospectus contained in the
Registration Statement and in compliance with applicable law, were
legally issued and represent binding obligations of the Company in
accordance with their terms.
I hereby consent to the filing of this opinion as an exhibit to the Registration
Statement.
Sincerely,
Sherilyn K. Beck
Associate Counsel
<PAGE>
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 5, 1998 on the financial statements
and schedule of American Partners Life Insurance Company and our report dated
March 13, 1998 on the financial statements of APL Variable Annuity Account 1 in
Post-Effective Amendment No. 4 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 27, 1998
<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, 1997 and 1996, and for each of the three years in the period ended December
31, 1997, and have issued our report thereon dated February 5, 1998 (included
elsewhere in this Registration Statement). Our audits also included the
financial statement schedule listed in Item 24(b) 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
February 5, 1998
Minneapolis, Minnesota
<PAGE>
AMERICAN PARTNERS LIFE INSURANCE COMPANY
SCHEDULE I - CONSOLIDATED SUMMARY OF INVESTMENTS
OTHER THAN INVESTMENTS IN RELATED PARTIES ($ thousands)
AS OF DECEMBER 31, 1997
- -----------------------------------------------------------------------------
Column A Column B Column C Column D
Type of Investment Cost Value Amount at which
shown in the
balance sheet
- -----------------------------------------------------------------------------
Fixed maturities:
Held to maturity:
All other corporate bonds 63,747 68,122 63,747
---------- ----------- ----------------
Total held to maturity 63,747 68,122 63,747
Available for sale:
United States Government and
government agencies and
authorities (c) 48,732 49,470 49,470
All other corporate bonds 95,612 98,511 98,511
---------- ----------- ----------------
Total available for sale 144,344 147,981 147,981
Total investments $ 208,091 XXXXXXXXX $211,728
======= =======
(a)-Includes mortgage-backed securities with a cost and market value of
$41,326 and $41,760, respectively.
(b)-Includes mortgage-backed securities with a cost and market value of $4,028
and $4,094, respectively.
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 8317858
<INVESTMENTS-AT-VALUE> 8876437
<RECEIVABLES> 2354
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 8878791
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> (9906)
<TOTAL-LIABILITIES> (9906)
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 6397796
<SHARES-COMMON-PRIOR> 1881431
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 8868885
<DIVIDEND-INCOME> 331056
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (61577)
<NET-INVESTMENT-INCOME> 269479
<REALIZED-GAINS-CURRENT> 37805
<APPREC-INCREASE-CURRENT> 582483
<NET-CHANGE-FROM-OPS> 889767
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10442734
<NUMBER-OF-SHARES-REDEEMED> (5926369)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 6761295
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (61577)
<AVERAGE-NET-ASSETS> 5488238
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLAR
<S> <C>
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<PERIOD-TYPE> YEAR
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 147981
<DEBT-CARRYING-VALUE> 63747
<DEBT-MARKET-VALUE> 68122
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 211728
<CASH> 0
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 21846
<TOTAL-ASSETS> 247654
<POLICY-LOSSES> 184246
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 222
<NOTES-PAYABLE> 0
<COMMON> 2500
0
0
<OTHER-SE> 37624
<TOTAL-LIABILITY-AND-EQUITY> 247654
0
<INVESTMENT-INCOME> 12609
<INVESTMENT-GAINS> 130
<OTHER-INCOME> 729
<BENEFITS> 9261
<UNDERWRITING-AMORTIZATION> 131
<UNDERWRITING-OTHER> 4476
<INCOME-PRETAX> (400)
<INCOME-TAX> (54)
<INCOME-CONTINUING> (346)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (346)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
<PAGE>
AMERICAN PARTNERS LIFE INSURANCE COMPANY
APL Variable Annuity Account 1
POWER OF ATTORNEY
City of Minneapolis
State of Minnesota
The undersigned, as a principal financial officer 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 attorney-in-fact and agent, to sign for him in his 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.
Dated the 8th day of April, 1998.
/s/ Jeffrey S. Horton April 8, 1998
Jeffrey S. Horton
Vice President and Treasurer
