SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 5 (File No. 33-57731) [x]
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 6 (File No. 811-07247) [x]
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(Check appropriate box or boxes)
APL VARIABLE ANNUITY ACCOUNT 1
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(Exact Name of Registrant)
American Partners Life Insurance Company
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(Name of Depositor)
80 South 8th Street, P.O. Box 59197, Minneapolis, MN 55459-0197
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(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (612) 671-3678
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Mary Ellyn Minenko, IDS Tower 10, Minneapolis, MN 55440-0010
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(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on April 30, 1999 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[ ] on (date) pursuant to paragraph (a)(1) of Rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
<PAGE>
PRIVILEGED ASSETS-REGISTERED TRADEMARK- SELECT ANNUITY
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Prospectus
April 30, 1999
Individual flexible premium deferred combination fixed/variable annuity.
APL VARIABLE ANNUITY ACCOUNT 1
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Issued by: American Partners Life Insurance Company
(American Partners Life)
80 South Eighth Street
P.O. Box 59197
Minneapolis, MN 55459-0197
Telephone: 1-800-AXP-SERV
(1-800-297-7378)
This prospectus contains information that you should know before investing. You
also will receive the following prospectuses:
- - American Century Variable Portfolios, Inc.,
- - IDS Life Retirement Annuity Mutual Funds,
- - INVESCO Variable Investment Funds, Inc.,
- - Janus Aspen Series, and
- - Warburg Pincus Trust -- Post-Venture Capital Portfolio.
Please read the prospectuses carefully and keep them for future reference. This
contract is available for qualified and nonqualified retirement plans.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
AN INVESTMENT IN THIS CONTRACT IS NOT A DEPOSIT OF A BANK OR FINANCIAL
INSTITUTION AND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN THIS CONTRACT
INVOLVES INVESTMENT RISK INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
A Statement of Additional Information (SAI), dated the same date as this
prospectus, is incorporated by reference into this prospectus. It is filed with
the Securities and Exchange Commission (SEC), and is available without charge by
contacting American Partners Life at the telephone number above or by completing
and sending the order form on page 31 of this prospectus. The table of contents
of the SAI is on page 30 of this prospectus.
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Privileged Assets-Registered Trademark- Select Annuity
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<S> <C>
Key Terms.................................................. 3
The Contract in Brief...................................... 4
Expense Summary............................................ 5
Condensed Financial Information (Unaudited)................ 7
Financial Statements....................................... 10
Performance Information.................................... 10
The Variable Account....................................... 11
The Funds.................................................. 12
The Fixed Account.......................................... 14
Buying Your Contract....................................... 14
Charges.................................................... 17
Valuing Your Investment.................................... 18
Making the Most of Your Contract........................... 20
Surrenders................................................. 23
Changing Ownership......................................... 23
Benefits in Case of Death.................................. 24
The Annuity Payout Period.................................. 24
Taxes...................................................... 26
Voting Rights.............................................. 28
Substitution of Investments................................ 28
About the Service Providers................................ 29
Year 2000.................................................. 29
Table of Contents of the Statement of Additional
Information................................................ 30
</TABLE>
2
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<PAGE>
KEY TERMS
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These terms can help you understand details about your contract.
ACCUMULATION UNIT -- A measure of the value of each subaccount before annuity
payouts begin.
ANNUITANT -- The person on whose life or life expectancy the annuity payouts are
based.
ANNUITY PAYOUTS -- An amount paid at regular intervals under one of several
plans.
ANNUITY START DATE -- The date when annuity payouts are scheduled to begin. This
date is established when you start your contract. You can change it in the
future.
BENEFICIARY -- The person you designate to receive annuity benefits in case of
the owner's or annuitant's death while the contract is in force and before
annuity payouts begin.
CLOSE OF BUSINESS -- When the New York Stock Exchange (NYSE) closes, normally 4
p.m. Eastern time.
CONTRACT VALUE -- The total value of your contract before we deduct any
applicable charges.
CONTRACT YEAR -- A period of 12 months, starting on the effective date of your
contract and on each anniversary of the effective date.
FIXED ACCOUNT -- An account to which you may allocate purchase payments. Amounts
you allocate to this account earn interest at rates that we declare
periodically.
FUNDS -- Mutual funds and/or portfolios that are investment options under your
contract, each with a different investment objective. You may allocate your
purchase payments into subaccounts investing in shares of any or all of these
funds.
OWNER (YOU, YOUR) -- The person who controls the contract (decides on investment
allocations, transfers, payout options, etc.). Usually, but not always, the
owner is also the annuitant. The owner is responsible for taxes, regardless of
whether he or she controls the contract.
QUALIFIED ANNUITY -- A contract that you purchase for one of the following
retirement plans that is subject to applicable federal law and any rules of the
plan itself:
- - Individual Retirement Annuities (IRAs), including rollovers from qualified
plans
- - Simplified Employee Pension (SEP) plans
All other contracts are considered NONQUALIFIED ANNUITIES.
SURRENDER VALUE -- The amount you are entitled to receive if you make
a full surrender from your contract. It is the contract value minus any
applicable charges.
VALUATION DATE -- Any normal business day, Monday through Friday, that the NYSE
is open. Each valuation date ends at the close of business. We calculate the
value of each subaccount at the close of business on each valuation date.
VARIABLE ACCOUNT -- Consists of separate subaccounts to which you may allocate
purchase payments; each subaccount invests in shares of one fund. The value of
your investment in each subaccount changes with the performance of the
particular fund.
3
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Privileged Assets-Registered Trademark- Select Annuity
<PAGE>
THE CONTRACT IN BRIEF
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PURPOSE: The purpose of the contract is to allow you to accumulate money for
retirement. You do this by making one or more investments (purchase payments)
that may earn returns that increase the value of the contract. The contract
provides lifetime or other forms of payouts beginning at a specified date (the
retirement date). As in the case of other annuities, it may not be advantageous
for you to purchase this contract as a replacement for, or in addition to an
existing annuity.
FREE LOOK PERIOD: You may return your contract for a refund within 10 days after
you receive it. (If the law requires, we will extend your free look period; see
your contract for details). You must invest the portion of the purchase payment
you allocate to the variable account 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. We will cancel the contract and we promptly will refund the greater of
(1) your purchase payment without investment earnings, or (2) your contract
value plus any amount we deducted from your payment prior to allocation to the
variable account or the fixed account.
ACCOUNTS: Currently, you may allocate your purchase payments among any or all
of:
- - the subaccounts, each of which invests in a fund with a particular investment
objective. The value of each subaccount varies with the performance of the
particular fund in which it invests. We cannot guarantee that the value at the
annuity start date will equal or exceed the total purchase payments you
allocate to the subaccounts. (p. 11)
- - the fixed account, which earns interest at a rate that we adjust periodically.
(p. 14)
BUYING YOUR CONTRACT: You can purchase a contract by submitting a complete
application. Applications are subject to acceptance at our office. You may buy a
nonqualified annuity or a qualified annuity. You must make an initial lump-sum
purchase payment. You have the option of making additional purchase payments in
the future.
- - 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.
- - Minimum additional purchase payment -- $100.
- - Maximum first-year purchase payments -- $50,000 to $1,000,000 depending on
your age.
- - Maximum purchase payment for each subsequent year -- $50,000. (p. 14)
TRANSFERS: Subject to certain restrictions you currently may redistribute your
money among the subaccounts and fixed account without charge at any time until
annuity payouts begin. You may establish automated transfers among the fixed
account and subaccounts. (p. 21)
SURRENDERS: You may surrender all or part of your contract value at any time
before the annuity start date. You may also establish systematic surrenders.
There is no surrender charge. Surrenders may be taxable (and include a 10% IRS
penalty if made prior to your reaching age 59 1/2) and may have other tax
consequences; also, certain restrictions apply. (p. 23)
CHANGING OWNERSHIP: You may change ownership of a nonqualified annuity by
written instruction, but this may have federal income tax consequences.
Restrictions apply to changing ownership of a qualified annuity. (p. 23)
4
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<PAGE>
BENEFITS IN CASE OF DEATH: If you or the annuitant die before annuity payouts
begin, we will pay the beneficiary the greater of the contract value or total
purchase payments made less partial surrenders. (p. 24)
ANNUITY PAYOUTS: You can apply your contract value 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 you like. 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. 24)
TAXES: Generally, your contract 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 be taxed on the
income if you are the owner. (p. 26)
CHARGES:
- - $30 annual contract administrative charge;
- - 1.00% mortality and expense risk fee;
- - any premium taxes that may be imposed on us by state or local governments
(currently, we deduct any applicable premium tax when you make a full
surrender or when annuity payouts begin); and
- - expenses of the funds.
EXPENSE SUMMARY
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The purpose of this table is to help you understand the various costs and
expenses associated with your contract.
You pay no sales charge when you purchase your contract. We show all costs that
you bear directly or indirectly for the subaccounts and funds below. Some
expenses may vary as we explain under "Charges."
<TABLE>
<S> <C>
ANNUAL CONTRACT OWNER EXPENSES:
SURRENDER CHARGE 0%
CONTRACT ADMINISTRATIVE CHARGE* $30
</TABLE>
<TABLE>
<S> <C>
ANNUAL SUBACCOUNT EXPENSES (as a percentage of
average daily net assets of the subaccounts):
MORTALITY AND EXPENSE RISK FEE 1%
</TABLE>
* If total purchase payments (less partial surrenders) is at least $10,000 we
will waive the charge.
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Privileged Assets-Registered Trademark- Select Annuity
<PAGE>
ANNUAL OPERATING EXPENSES OF THE FUNDS (as a percentage of average daily net
assets):
<TABLE>
<CAPTION>
AMERICAN AMERICAN IDS LIFE IDS LIFE IDS LIFE IDS
CENTURY CENTURY AGGRESSIVE CAPITAL INTERNATIONAL LIFE
VP CAPITAL VP GROWTH RESOURCE EQUITY MANAGED
APPRECIATION VALUE FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C>
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Management fees 1.00% 1.00% .59% .59% .83% .59%
Other expenses -- -- .09 .07 .15 .04
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Total 1.00%(1) 1.00%(1) .68%(2) .66%(2) .98%(2) .63%(2)
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</TABLE>
<TABLE>
<CAPTION>
WARBURG PINCUS
TRUST - POST-
VENTURE
INVESCO JANUS ASPEN CAPITAL
IDS LIFE VIF -- JANUS ASPEN SERIES PORTFOLIO
IDS LIFE SPECIAL EQUITY SERIES WORLDWIDE (AFTER WAIVERS
MONEYSHARE INCOME INCOME GROWTH GROWTH AND/OR
FUND FUND FUND PORTFOLIO PORTFOLIO REIMBURSEMENTS)
<S> <C> <C> <C> <C> <C> <C>
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Management fees .50% .60% .75% .65% .65% 1.08%
Other expenses .06 .07 .18 .03 .07 .32
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Total .56%(2) .67%(2) .93%(3) .68%(4) .72%(4) 1.40%(5)
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</TABLE>
(1) Operating expenses of the funds at Dec. 31, 1998.
(2) Annualized operating expenses of funds at Dec. 31, 1998.
(3) Certain expenses of each Fund are being voluntarily absorbed by INVESCO.
Accordingly, without such waivers, "Other Expenses" and "Total" that would
have been incurred for the fiscal year ended December 31, 1998 would be
0.42% and 1.17% respectively.
(4) The figures given above are based on gross expenses before expense offset
arrangements, if any, during 1998, for these funds. As of the date of this
prospectus, certain fees are being reduced by the respective investment
managers or service providers for certain of the funds, in each case on a
voluntary basis. Without such reductions, the "Management fees", "Other
expenses" and "Total" that would have been incurred for the last completed
fiscal year would be: 0.67%, 0.07%, 0.74%, respectively for Janus Aspen
Series Worlwide Growth Portfolio and 0.72%, 0.03%, and 0.75%, respectively,
for Janus Aspen Series Growth Portfolio. See the Portfolio's prospectuses
for a discussion of fee waiver and expense reimbursements.
(5) Absent the waiver of fees by the Portfolio's investment advisor and
co-administrator, Management Fees would equal 1.25%, Other Expenses would
equal .45%, and Total portfolio operating expenses would equal 1.70%.
Management fees, Other expenses and Total operating expenses for the
Portfolio is based on actual expenses for the fiscal year ending Dec. 31,
1998. Fee waivers and expense reimbursements may be discontinued at any
time.
EXAMPLE: * You would pay the following expenses on a $1,000 investment, assuming
a 5% annual return and selection of an annuity payout plan at the end of each
time period:
<TABLE>
<CAPTION>
AMERICAN AMERICAN IDS LIFE IDS LIFE IDS LIFE
CENTURY CENTURY AGGRESSIVE CAPITAL INTERNATIONAL IDS LIFE
VP CAPITAL VP GROWTH RESOURCE EQUITY MANAGED
APPRECIATION VALUE FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
1 Year $ 21.30 $ 21.30 $ 18.02 $ 17.81 $ 21.09 $ 17.51
3 Years 65.75 65.75 55.81 55.18 65.13 54.25
5 Years 112.79 112.79 96.05 94.99 111.75 93.41
10 Years 242.72 242.72 208.47 206.29 240.61 203.02
</TABLE>
<TABLE>
<CAPTION>
INVESCO JANUS ASPEN WARBURG PINCUS
IDS LIFE VIF -- JANUS ASPEN SERIES TRUST - POST-
IDS LIFE SPECIAL EQUITY SERIES WORLDWIDE VENTURE
MONEYSHARE INCOME INCOME GROWTH GROWTH CAPITAL
FUND FUND FUND PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
1 Year $ 16.79 $ 17.92 $ 20.58 $ 18.02 $ 18.43 $ 25.40
3 Years 52.06 55.49 63.58 55.81 57.05 78.09
5 Years 89.71 95.52 109.15 96.05 98.15 133.40
10 Years 195.34 207.38 235.32 208.47 212.81 284.04
</TABLE>
* In this example, the $30 contract administrative charge is approximated as a
0.078% charge based on our average contract size. Premium taxes imposed by
some state and local governments are not reflected in this table. We entered
into certain arrangements under which we are compensated by the funds'
advisors and/or distributors for the administrative services we provide to the
funds.
YOU SHOULD NOT CONSIDER THIS EXAMPLE AS A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
6
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CONDENSED FINANCIAL INFORMATION (UNAUDITED)
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The following table gives per-unit information about the financial history of
each subaccount.
<TABLE>
<CAPTION>
YEAR ENDED DEC. 31, 1998 1997 1996 1995
<S> <C> <C> <C> <C>
SUBACCOUNT CGR(1) (INVESTING IN SHARES OF AMERICAN CENTURY VP
CAPITAL APPRECIATION)
Accumulation unit value at beginning of period....................................... $0.93 $0.97 $1.00 --
Accumulation unit value at end of period............................................. $0.90 $0.93 $0.97 --
Number of accumulation units outstanding at end of period (000 omitted).............. 303 256 156 --
Ratio of operating expense to average net assets..................................... 1.00% 1.00% 1.00% --
SUBACCOUNT CVL(2) (INVESTING IN SHARES OF AMERICAN CENTURY VP VALUE)
Accumulation unit value at beginning of period....................................... $1.40 $1.12 $1.00 --
Accumulation unit value at end of period............................................. $1.45 $1.40 $1.12 --
Number of accumulation units outstanding at end of period (000 omitted).............. 410 224 9 --
Ratio of operating expense to average net assets..................................... 1.00% 1.00% 1.00% --
SUBACCOUNT CAG(3) (INVESTING IN SHARES OF IDS LIFE AGGRESSIVE GROWTH FUND)
Accumulation unit value at beginning of period....................................... $1.28 $1.15 $0.99 $1.00
Accumulation unit value at end of period............................................. $1.30 $1.28 $1.15 $0.99
Number of accumulation units outstanding at end of period (000 omitted).............. 694 452 269 101
Ratio of operating expense to average net assets..................................... 1.00% 1.00% 1.00% $1.00
SUBACCOUNT CCR(3) (INVESTING IN SHARES OF IDS LIFE CAPITAL RESOURCE FUND)
Accumulation unit value at beginning of period....................................... $1.36 $1.11 $1.03 $1.00
Accumulation unit value at end of period............................................. $1.67 $1.36 $1.11 $1.03
Number of accumulation units outstanding at end of period (000 omitted).............. 738 421 197 --
Ratio of operating expense to average net assets..................................... 1.00% 1.00% 1.00% --
SUBACCOUNT CIE(3) (INVESTING IN SHARES OF IDS LIFE INTERNATIONAL EQUITY FUND)
Accumulation unit value at beginning of period....................................... $1.15 $1.13 $1.04 $1.00
Accumulation unit value at end of period............................................. $1.32 $1.15 $1.13 $1.04
Number of accumulation units outstanding at end of period (000 omitted).............. 178 153 75 --
Ratio of operating expense to average net assets..................................... 1.00% 1.00% 1.00% --
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DEC. 31, 1998 1997 1996 1995
<S> <C> <C> <C> <C>
SUBACCOUNT CMG(3) (INVESTING IN SHARES OF IDS LIFE MANAGED FUND)
Accumulation unit value at beginning of period....................................... $1.40 $1.19 $1.02 $1.00
Accumulation unit value at end of period............................................. $1.61 $1.40 $1.19 $1.02
Number of accumulation units outstanding at end of period (000 omitted).............. 745 584 98 49
Ratio of operating expense to average net assets..................................... 1.00% 1.00% 1.00% 1.00%
SUBACCOUNT CMS(3) (INVESTING IN SHARES OF IDS LIFE MONEYSHARE FUND)
Accumulation unit value at beginning of period....................................... $1.09 $1.04 $1.00 $1.00
Accumulation unit value at end of period............................................. $1.13 $1.09 $1.04 $1.00
Number of accumulation units outstanding at end of period (000 omitted).............. 977 151 501 2,292
Ratio of operating expense to average net assets..................................... 1.00% 1.00% 1.00% 1.00%
Simple yield(5)...................................................................... 3.68% 4.13% 3.77% --
Compound yield(5).................................................................... 3.75% 4.22% 3.85% --
SUBACCOUNT CSI(3) (INVESTING IN SHARES OF IDS LIFE SPECIAL INCOME FUND)
Accumulation unit value at beginning of period....................................... $1.17 $1.09 $1.02 $1.00
Accumulation unit value at end of period............................................. $1.18 $1.17 $1.09 $1.02
Number of accumulation units outstanding at end of period (000 omitted).............. 339 206 63 49
Ratio of operating expense to average net assets..................................... 1.00% 1.00% 1.00% 1.00%
SUBACCOUNT CII(4) (INVESTING IN SHARES OF INVESCO VIF -- EQUITY INCOME FUND)
Accumulation unit value at beginning of period....................................... $1.61 $1.28 $1.05 $1.00
Accumulation unit value at end of period............................................. $1.84 $1.61 $1.28 $1.05
Number of accumulation units outstanding at end of period (000 omitted).............. 1,205 791 131 --
Ratio of operating expense to average net assets..................................... 1.00% 1.00% 1.00% --
SUBACCOUNT CSG(2) (INVESTING IN SHARES OF JANUS ASPEN SERIES GROWTH PORTFOLIO)
Accumulation unit value at beginning of period....................................... $1.30 $1.07 $1.00 --
Accumulation unit value at end of period............................................. $1.75 $1.30 $1.07 --
Number of accumulation units outstanding at end of period (000 omitted).............. 1,631 1,020 45 --
Ratio of operating expense to average net assets..................................... 1.00% 1.00% 1.00% --
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DEC. 31, 1998 1997 1996 1995
<S> <C> <C> <C> <C>
SUBACCOUNT CWG(1) (INVESTING IN SHARES OF JANUS ASPEN SERIES WORLDWIDE GROWTH PORTFOLIO)
Accumulation unit value at beginning of period....................................... $1.53 $1.26 $1.00 --
Accumulation unit value at end of period............................................. $1.95 $1.53 $1.26 --
Number of accumulation units outstanding at end of period (000 omitted).............. 2,190 1,908 295 --
Ratio of operating expense to average net assets..................................... 1.00% 1.00% 1.00% --
SUBACCOUNT CVC(2) (INVESTING IN SHARES OF WARBURG PINCUS TRUST--POST-VENTURE CAPITAL PORTFOLIO)
Accumulation unit value at beginning of period....................................... $1.09 $0.98 $1.00 --
Accumulation unit value at end of period............................................. $1.15 $1.09 $0.98 --
Number of accumulation units outstanding at end of period (000 omitted).............. 290 231 42 --
Ratio of operating expense to average net assets..................................... 1.00% 1.00% 1.00% --
</TABLE>
(1) For the period Jan. 29, 1996 (commencement of operations) to Dec. 31, 1996.
(2) For the period Sept. 3, 1996 (commencement of operations) to Dec. 31, 1996.
(3) For the period Nov. 10, 1995 (commencement of operations) to Dec. 31, 1995.
CCR and CIE subaccounts had no activity in this period.
(4) For the period Nov. 13, 1995 (commencement of operations) to Dec. 31, 1995.
CII subaccount had no activity in this period.
(5) Net of annual contract administrative charge and mortality and expense risk
fee.
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<PAGE>
FINANCIAL STATEMENTS
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You can find our audited financial statements and the audited financial
statements of the subaccounts in the SAI.
PERFORMANCE INFORMATION
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Performance information for the subaccounts may appear from time to time in
advertisements or sales literature. This information reflects the performance of
a hypothetical investment in a particular subaccount during a specified time
period. We show actual performance from the date the subaccounts began investing
in funds. We also show performance from the commencement date of the funds as if
the contract existed at that time. Although we base performance figures on
historical earnings, past performance does not guarantee future results.
Total return figures reflect deduction of all applicable charges, including:
- - the contract administrative charge, and
- - mortality and expense risk fee.
Total return quotations may be shown by means of schedules, charts or graphs.
AVERAGE ANNUAL TOTAL RETURN is the average annual compounded rate of return of
the investment over a period of one, five and 10 years (or up to the life of the
subaccount if it is less than ten years old).
CUMULATIVE TOTAL RETURN is the cumulative change in the value of an investment
over a specified time period. We assume that income earned by the investment is
reinvested. Cumulative total return will be higher than average annual total
return because it is not averaged.
ANNUALIZED SIMPLE YIELD (FOR SUBACCOUNTS INVESTING IN MONEY MARKET FUNDS)
"annualizes" the income generated by the investment over a given seven-day
period. That is, we assume the amount of income generated by the investment
during the period will be generated each seven-day period for a year. We show
this as a percentage of the investment.
ANNUALIZED COMPOUND YIELD (FOR SUBACCOUNTS INVESTING IN MONEY MARKET FUNDS) is
calculated like simple yield except that we assume the income is reinvested when
we annualize it. Compound yield will be higher than the simple yield because of
the compounding effect of the assumed reinvestment.
ANNUALIZED YIELD (FOR SUBACCOUNTS INVESTING IN INCOME FUNDS) divides the net
investment income (income less expenses) for each accumulation unit during a
given 30-day period by the value of the unit on the last day of the period. We
then convert the result to an annual percentage.
You should consider performance information in light of the investment
objectives, policies, characteristics and quality of the fund in which the
subaccount invests and the market conditions during the specified time period.
Advertised yields and total return figures include charges that reduce
advertised performance. Therefore, you should not compare subaccount performance
to that of mutual funds that sell their shares directly to the public. (See the
SAI for a further description of methods used to determine total return and
yield.)
If you would like additional information about actual performance, please
contact us at the address or telephone number on the first page of this
prospectus.
10
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<PAGE>
THE VARIABLE ACCOUNT
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You may allocate payments to any or all the subaccounts of the variable account
that invest in shares of the following funds:
<TABLE>
<CAPTION>
SUBACCOUNT INVESTING IN:
<S> <C>
CGR American Century VP Capital Appreciation
CVL American Century VP Value
CAG IDS Life Aggressive Growth Fund
CCR IDS Life Capital Resource Fund
CIE IDS Life International Equity Fund
CMG IDS Life Managed Fund
CMS IDS Life Moneyshare Fund
CSI IDS Life Special Income Fund
CII INVESCO VIF -- Equity Income Fund
CSG Janus Aspen Series Growth Portfolio
CWG Janus Aspen Series Worldwide Growth Portfolio
CVC Warburg Pincus Trust -- Post-Venture Capital
Portfolio
</TABLE>
The variable account meets the definition of a separate account under federal
securities laws. We credit or charge income, capital gains and capital losses of
each subaccount only to that subaccount. State insurance law prohibits us from
charging a subaccount with liabilities of any other subaccount or of our general
business.
The U.S. Treasury and the Internal Revenue Service (IRS) indicated that they may
provide additional guidance on investment control. This concerns how many
variable subaccounts an insurance company may offer and how many exchanges among
subaccounts it may allow before the contract owner would be currently taxed on
income earned within subaccount assets. At this time, we do not know what the
additional guidance will be or when action will be taken. We reserve the right
to modify the contract, as necessary, so that the owner will not be subject to
current taxation as the owner of the subaccount assets.
We intend to comply with all federal tax laws so that each contract continues to
qualify as an annuity for federal income tax purposes. We reserve the right to
modify the contract as necessary to comply with any new tax laws.
The variable account was established under Arizona law on Feb. 9, 1995 and the
subaccounts are registered together as a single unit investment trust under the
Investment Company Act of 1940 (the 1940 Act). This registration does not
involve any supervision of our management or investment practices and policies
by the SEC. The obligations arising under the contracts are general obligations
of American Partners Life.
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<PAGE>
THE FUNDS
- --------------------------------------------------------------------------------
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.
IDS LIFE AGGRESSIVE GROWTH FUND
Objective: capital appreciation. Invests primarily in common stocks of small-and
medium-size companies.
IDS LIFE CAPITAL RESOURCE FUND
Objective: capital appreciation. Invests primarily in U.S. common stocks.
IDS LIFE INTERNATIONAL EQUITY FUND
Objective: capital appreciation. Invests primarily in common stock of foreign
issuers.
IDS LIFE MANAGED FUND
Objective: maximum total investment return through a combination of capital
growth and current income. Invests primarily in stocks, convertible securities,
bonds and money market instruments.
IDS LIFE MONEYSHARE FUND
Objective: maximum current income consistent with liquidity and conservation of
capital. Invests in money market securities.
IDS LIFE SPECIAL INCOME FUND
Objective: high level of current income while conserving the value
of the investment for the longest time period. Invests primarily in
investment-grade bonds.
INVESCO VIF -- EQUITY INCOME FUND
Objective: high current income, with growth of capital as a secondary objective.
The Fund normally invests at least 65% of its assets in dividend-paying common
and preferred stocks, although in recent years that percentage has been somewhat
higher. Stocks held by the Fund generally are expected to produce a relatively
high level of income and a consistent, stable return. Although it focuses on the
stocks of larger companies with a strong record of paying dividends, the Fund
also may invest in companies that have not paid regular dividends. The Fund's
equity investments are limited to stocks that can be traded easily in the United
States; it may, however, invest in foreign securities in the form of American
Depository Receipts (ADRs). The rest of the Fund's assets are invested in debt
securities, generally corporate bonds that are rated investment grade or better.
The Fund also may invest up to 15% of its assets in lower-grade debt securities
commonly known as "junk bonds," which generally offer higher interest rates, but
are riskier investment grade securities.
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<PAGE>
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.
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.
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.
The investment objectives and policies of some of the funds are similar to the
investment objectives and policies of other mutual funds that the investment
advisor or its affiliates manage. Although the objectives and policies may be
similar, each fund will have its own portfolio holdings and its own fees and
expenses. Accordingly, each fund will have its own investment results.
All funds are available to serve as the underlying investments for variable
annuities. Some funds also are available to serve as investment options for
variable life insurance policies and qualified plans. It is possible that in the
future, it may be disadvantageous for variable annuity accounts and variable
life insurance accounts and/or qualified plans to invest in the available funds
simultaneously.
Although the insurance company and the funds do not currently foresee any such
disadvantages, the boards of directors or trustees of the appropriate funds will
monitor events in order to identify any material conflicts between annuity
owners, policy owners and qualified plans and to determine what action, if any,
should be taken in response to a conflict. If a board were to conclude that it
should establish separate funds for the variable annuity, variable life
insurance and qualified plan accounts, you would not bear any expenses
associated with establishing separate funds. Please refer to the fund
prospectuses for risk disclosure regarding simultaneous investments by variable
annuity, variable life insurance and qualified plan accounts.
The IRS issued final regulations relating to the diversification requirements
under Section 817(h) of the Internal Revenue Code of 1986, as amended (the
Code). Each fund intends to comply with these requirements.
The investment advisors or managers for the funds are as follows:
- - American Century Variable Portfolios, Inc. -- American Century Investment
Management, Inc.
- - IDS Life Retirement Annuity Mutual Funds -- IDS Life. AEFC is the investment
advisor for the IDS Life Retirement Annuity Mutual Funds. American Express
Asset Management International, Inc., a wholly-owned subsidiary of AEFC, is
the sub-investment advisor for IDS Life International Equity Fund.
- - INVESCO VIF -- Equity Income Fund -- INVESCO Funds Group, Inc.
- - Janus Aspen Series Portfolios -- Janus Capital Corporation.
- - Warburg Pincus Trust -- Warburg Pincus Asset Management, Inc.
The investment managers and advisors cannot guarantee that the funds will meet
their investment objectives. Please read the funds' prospectuses for facts you
should know before investing. These prospectuses are available by contacting us
at the address or telephone number on first page of this prospectus.
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<PAGE>
THE FIXED ACCOUNT
- --------------------------------------------------------------------------------
You also may allocate purchase payments to the fixed account. We back the
principal and interest guarantees relating to the fixed account. The value of
the fixed account increases as we credit interest to the account. Purchase
payments and transfers to the fixed account become part of our general account.
We credit interest daily and compound it annually. We may change the interest
rates from time to time at our discretion.
Interests in the fixed account are not required to be registered with the SEC.
The SEC staff does not review the disclosures in this prospectus on the fixed
account. Disclosures regarding the fixed account, however, may be subject to
certain generally applicable provisions of the federal securities laws relating
to the accuracy and completeness of statements made in prospectuses. (See
"Making the Most of Your Contract -- Transfer policies" for restrictions on
transfers involving the fixed account.)
BUYING YOUR CONTRACT
- --------------------------------------------------------------------------------
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. You
can own a nonqualified annuity in joint tenancy with rights of survivorship only
in spousal situations. You cannot own a qualified annuity in joint tenancy.
When you apply, you may select:
- - the fixed account and/or subaccounts in which you want to invest;
- - how you want to make purchase payments;
- - the date you want to start receiving annuity payouts (the annuity start); and
- - a beneficiary.
If your application is complete, we will process it and apply your purchase
payment to the fixed account and subaccounts you selected within two business
days after we receive it at our office. If we accept your application, we will
send you a contract. If we cannot accept your application within five business
days, we will decline it and return your payment. We will credit additional
purchase payments you make to your accounts on the valuation date we receive
them. We will value the additional payments at the next accumulation unit value
calculated after we receive your payments at our office.
THE ANNUITY START DATE
Annuity payouts are to begin on the annuity start date. You can align this date
with your actual retirement from a job, or it can be a different future date,
depending on your needs and goals and on certain restrictions. You also can
change the date, provided you send us written instructions at least 30 days
before annuity payouts begin.
FOR NONQUALIFIED ANNUITIES, the annuity start date must be:
- - no earlier than the 60th day after the contract's effective date; and
- - no later than the annuitant's 85th birthday or 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.)
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<PAGE>
FOR QUALIFIED ANNUITIES, to avoid IRS penalty taxes, the annuity start date
generally must be:
- - on or after the date the annuitant reaches age 59 1/2; and
- - 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 take the minimum IRA distributions as required by the Code from another
tax-qualified investment, or in the form of partial surrenders from this
contract, annuity payouts can start as late as the annuitant's 85th birthday or
the 10th contract anniversary, if later. (In Pennsylvania, annuity payouts must
start no later than the annuitant's 85th birthday.)
BENEFICIARY
If death benefits become payable before the annuity start date (while the
contract is in force and before annuity payouts begin), we will pay your named
beneficiary all or part of the contract value. If there is no named beneficiary,
then you or your estate will be the beneficiary. (See "Benefits in Case of
Death" for more about beneficiaries.)
PURCHASE PAYMENT AMOUNTS
MINIMUM PURCHASE PAYMENTS
<TABLE>
<S> <C>
IF SINGLE PURCHASE PAYMENT:
Nonqualified: $2,000
Qualified: $1,000
IF INSTALLMENT PURCHASE PAYMENTS:
- -Minimum installment purchase payments: $100 monthly; $50.00 biweekly
Installments must total at least $1,000 in the first year.*
</TABLE>
* If you do not make any 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 PAYMENTS: $100
MAXIMUM FIRST-YEAR PURCHASE PAYMENTS:
This maximum is based on your age or the age of the annuitant (whomever is
older) on the effective date of the contract.
<TABLE>
<S> <C>
Up to age 75 $1 million
76 to 85 $500,000
86 to 90 $50,000
MAXIMUM PURCHASE PAYMENT FOR EACH SUBSEQUENT YEAR**: $50,000
</TABLE>
** 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.
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<PAGE>
HOW TO MAKE PURCHASE PAYMENTS
1 BY LETTER
Send your check along with your name and contract 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
733 Marquette Ave
I8/Unit 1751
Minneapolis, MN 55402
2 BY SCHEDULED PAYMENT PLAN
Through:
- - a bank authorization.
3 OTHER
- - wire transfer; or
- - other method acceptable to us.
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<PAGE>
CHARGES
- --------------------------------------------------------------------------------
CONTRACT ADMINISTRATIVE CHARGE
We charge this fee for establishing and maintaining your records. We deduct $30
from the contract value on your contract anniversary at the end of each contract
year. We prorate this charge among the subaccounts and the fixed account in the
same proportion your interest in each account bears to your total contract
value.
We will waive this contract charge for any contract year where:
- - the total purchase payments (less partial surrenders) on the current contract
anniversary is $10,000 or more, or
- - a death benefit is payable, or
- - you surrender the contract in full.
This charge does not apply after annuity payouts begin.
We reserve the right to increase the contract administrative charge in the
future, but we guarantee that it will never exceed $50 per year. Also, we
reserve the right to impose the contract administrative 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. We charge this fee
daily to the subaccounts. The unit values of your subaccounts reflect this fee
and it totals 1% of their average daily net assets on an annual basis.
Approximately two-thirds of this amount is for our assumption of mortality risk,
and one-third is for our assumption of expense risk. This fee does not apply to
the fixed account.
Mortality risk arises because of our guarantee to pay a death benefit and our
guarantee to make annuity payouts according to the terms of the contract, no
matter how long a specific annuitant lives and no matter how long our entire
group of annuitants live. If, as a group, annuitants outlive the life expectancy
we assumed in our actuarial tables, then we must take money from our general
assets to meet our obligations. If, as a group, annuitants do not live as long
as expected, we could profit from the mortality risk fee.
Expense risk arises because the contract administrative charge may not cover our
expenses. We would have to make up any deficit from our general assets.
We may use any profits we realize from the subaccounts' payment to us of the
mortality and expense risk fee for any proper corporate purpose, including,
among others, payment of distribution (selling) expenses.
OTHER INFORMATION ON CHARGES
There is no surrender charge if you take a total or a partial surrender from
your contract.
In some cases, we may incur lower sales and administrative expenses. In those
cases, we may, at our discretion, reduce or eliminate the contract
administrative charge. However, we expect this to occur infrequently.
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<PAGE>
PREMIUM TAXES
Certain state and local governments impose premium taxes (up to 3.5%). These
taxes depend upon the state of residence or the state in which the contract was
sold. In some cases, we deduct premium taxes from your purchase payments before
we allocate them. In other cases, we deduct them when you surrender your
contract or when annuity payouts begin.
VALUING YOUR INVESTMENT
- --------------------------------------------------------------------------------
We value your fixed account and subaccounts as follows:
FIXED ACCOUNT: We value the amounts allocated to the fixed account directly in
dollars. The fixed account value equals:
- - the sum of your purchase payments;
- - plus interest credited;
- - minus the sum of amounts surrendered and amounts transferred out; and
- - minus any prorated contract administrative charge.
SUBACCOUNTS: We convert amounts you allocated to the subaccounts into
accumulation units. Each time you make a purchase payment or transfer amounts
into one of the subaccounts, we credit a certain number of accumulation units to
your contract for that account. Conversely, each time you take a partial
surrender, transfer amounts out of a subaccount or we assess a contract
administrative charge, we subtract a certain number of accumulation units from
your contract.
The accumulation units are the true measure of investment value in each
subaccount during the accumulation period. They are related to, but not the same
as, the net asset value of the fund in which the subaccount invests.
The dollar value of each accumulation unit can rise or fall daily depending on
the subaccount expenses, performance of the fund and on certain fund expenses.
Here is how we calculate accumulation unit values:
NUMBER OF UNITS
To calculate the number of accumulation units for a particular subaccount, we
divide your investment, after deduction of any premium taxes, by the current
accumulation unit value.
ACCUMULATION UNIT VALUE
The current accumulation unit value for each subaccount equals the last value
times the subaccount's current net investment factor.
NET INVESTMENT FACTOR
We determine the net investment factor by:
- - adding the fund's current net asset value per share, plus the per share amount
of any capital gain dividends; then
- - dividing that sum by the previous net asset value per share; and
- - subtracting the percentage factor representing the mortality and expense risk
fee from the result.
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<PAGE>
Because the net asset value of the fund may fluctuate, the accumulation unit
value may increase or decrease. You bear all the investment risk in a
subaccount.
FACTORS THAT AFFECT SUBACCOUNT ACCUMULATION UNITS
Accumulation units may change in two ways: in number and in value. Here are the
factors that influence those changes:
The number of accumulation units you own may fluctuate due to:
- - additional purchase payments you allocate to the subaccounts;
- - transfers into or out of the subaccounts;
- - partial surrenders; and/or
- - prorated portions of the contract administrative charge.
Accumulation unit values will fluctuate due to:
- - changes in funds' net asset value;
- - dividends distributed to the subaccounts;
- - capital gains or losses of funds;
- - fund operating expenses; and/or
- - mortality and expense risk fees.
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<PAGE>
MAKING THE MOST OF YOUR CONTRACT
- --------------------------------------------------------------------------------
AUTOMATED DOLLAR-COST AVERAGING
Currently, you can use automated transfers to take advantage of dollar-cost
averaging (investing a fixed amount at regular intervals). For example, you
might transfer a set amount monthly from a relatively conservative subaccount to
a more aggressive one, or to several others, or from the fixed account to one or
more subaccounts. There is no charge for dollar-cost averaging.
This systematic approach can help you benefit from fluctuations in accumulation
unit values caused by fluctuations in the market values of the funds. Since you
invest the same amount each period, you automatically acquire more units when
the market value falls and fewer units when it rises. The potential effect is to
lower your average cost per unit.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HOW DOLLAR-COST AVERAGING WORKS
Amount Accumulation Number of units
Month invested unit value purchased
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------
By investing an Jan $100 $20 5.00
equal number of Feb 100 18 5.56
dollars each month.... March 100 17 5.88
you automatically April 100 15 6.67
buy more units May 100 16 6.25
when the per unit June 100 18 5.56
market price is low.... July 100 17 5.88
Aug 100 19 5.26
and fewer units Sept 100 21 4.76
when the per unit Oct 100 20 5.00
market price is high.
</TABLE>
You paid an average price of only $17.91 per unit over the 10 months, while the
average market price actually was $18.10.
Dollar-cost averaging does not guarantee that any subaccount will gain in value
nor will it protect against a decline in value if market prices fall. Because
dollar-cost averaging involves continuous investing, your success with this
strategy will depend upon your willingness to continue to invest regularly
through periods of low price levels. Dollar-cost averaging can be an effective
way to help meet your long-term goals. For specific features contact our office.
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<PAGE>
TRANSFERRING MONEY BETWEEN ACCOUNTS
You may transfer money from any one subaccount, or the fixed account, to another
subaccount before annuity payouts begin. We will process your transfer request
on the valuation date we receive your request. We will value your transfer at
the next accumulation unit value calculated after we receive your request. There
is no charge for transfers. Before making a transfer, you should consider the
risks involved in switching investments.
We may suspend or modify transfer privileges at any time. Excessive trading
activity can disrupt fund management strategy and increase expenses, which are
borne by all contract owners who allocated purchase payments to the fund
regardless of their transfer activity. We may apply modifications or
restrictions in any reasonable manner to prevent transfers we believe will
disadvantage other contract owners. (For information on transfers after annuity
payouts begin, see "Transfer policies.")
TRANSFER POLICIES
- - You may transfer contract values at any time between the subaccounts, from the
subaccounts to the fixed account or from the fixed account to the subaccounts.
- - The amount transferred to any one account must be at least $100.
- - If you make more than 12 transfers in a contract year, we will charge $25 for
each transfer in excess of 12.
- - We reserve the right to limit the number of transfers to twelve per contract
year.
HOW TO REQUEST A TRANSFER OR 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
733 Marquette Ave.
I8/Unit 1751
Minneapolis, MN 55402
MINIMUM AMOUNT
Transfers or surrenders: $100 or entire account balance
MAXIMUM AMOUNT
Transfers or surrenders: Contract value
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<PAGE>
2 BY AUTOMATED TRANSFERS AND AUTOMATED PARTIAL SURRENDERS
You can set up automated transfers among your subaccounts or fixed account or
partial surrenders from the accounts.
You can start or stop this service by written request or other method acceptable
to us. You must allow 30 days for us to change any instructions that are
currently in place.
- - 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.
- - Automated partial surrenders may result in IRS taxes and penalties on all or
part of the amount surrendered.
MINIMUM AMOUNT
Transfers or surrenders: $100
3 BY PHONE
Call between 8 a.m. and 6 p.m. Central time:
1-800-AXP-SERV
(1-800-297-7378)
TTY service for the hearing impaired:
1-800-710-5260
MINIMUM AMOUNT
Transfers or surrenders: $100 or entire account balance
MAXIMUM AMOUNT
Transfers: Contract value
Surrenders: $50,000
We answer telephone requests promptly, but you may experience delays when the
call volume is unusually high. If you are unable to get through, use the mail
procedure as an alternative.
We will honor any telephone transfer or surrender requests that we believe are
authentic and we will use reasonable procedures to confirm that they are. This
includes asking identifying questions and tape recording calls. We will not
allow a telephone surrender within 30 days of a phoned-in address change. As
long as we follow the procedures, we (and our affiliates) will not be liable for
any loss resulting from fraudulent requests.
Telephone transfers or surrenders are automatically available. You may request
that telephone transfers or surrenders NOT be authorized from your account by
writing to us.
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<PAGE>
SURRENDERS
- --------------------------------------------------------------------------------
You may surrender all or part of your contract at any time before annuity
payouts begin by sending us a written request or calling us. We will process
your surrender request on the valuation date we receive it. For total
surrenders, we will compute the value of your contract at the next accumulation
unit value calculated after we receive your request. We may ask you to return
the contract. You may have to pay IRS taxes and penalties (see "Taxes"). You
cannot make surrenders after annuity payouts begin.
SURRENDER POLICIES
If you have a balance in more than one account and you request a partial
surrender, we will surrender money from all your subaccounts and/or the fixed
account in the same proportion as your value in each account correlates to your
total contract value, unless you request otherwise.
RECEIVING PAYMENT
By regular or express mail:
- - payable to you.
- - mailed to address of record within seven days after receiving your request.
However, we may postpone the payment if:
-- the 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: We will charge you a fee if you request express mail delivery.
CHANGING OWNERSHIP
- --------------------------------------------------------------------------------
You may change ownership of your nonqualified annuity at any time by completing
a change of ownership form we approve and sending it to our office. The change
will become binding upon us when we receive and record it. We will honor any
change of ownership request that we believe is authentic and we will use
reasonable procedures to confirm authenticity. If we follow these procedures, we
will not take any responsibility for the validity of the change.
If you have a nonqualified annuity, you may incur income tax liability by
transferring, assigning or pledging any part of it. (See "Taxes.")
If you have a qualified annuity, you may not sell, assign, transfer, discount or
pledge your contract as collateral for a loan, or as security for the
performance of an obligation or for any other purpose except as required or
permitted
by the Code.
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<PAGE>
BENEFITS IN CASE OF DEATH
- --------------------------------------------------------------------------------
If you or the annuitant die before annuity payouts begin while the contract is
in force, we will pay the beneficiary the greater of:
- - the contract value; or
- - purchase payments, minus any partial surrenders.
IF YOUR SPOUSE IS SOLE BENEFICIARY under a nonqualified annuity and you die
before the annuity start date, your spouse may keep the contract as owner. To do
this your spouse must, within 60 days after we receive proof of death, give us
written instructions to keep the contract in force.
Under a qualified annuity, if the annuitant dies before the Code requires
distributions to begin, and the spouse is the only beneficiary, the spouse may
keep the contract as owner until the date on which the annuitant would have
reached 70 1/2 or any other date permitted by the Code. To do this, the spouse
must give us written instructions within 60 days after we receive proof of
death.
PAYMENTS: Under a nonqualified annuity we will pay the beneficiary in a single
lump sum unless you give us other written instructions. We must fully distribute
the death benefit within five years of your death. However, the beneficiary may
receive payouts under any annuity payout plan available under this contract if:
- - the beneficiary asks us in writing within 60 days after we receive proof of
death;
- - payouts begin no later than one year after your death, or other date as
permitted by the Code; and
- - the payout period does not extend beyond the beneficiary's life or life
expectancy.
When paying the beneficiary, we will process the death claim on the valuation
date our death claim requirements are fulfilled. We will determine the
contract's value at the next accumulation unit value calculated after our death
claim requirements are fulfilled. We will pay interest, if any, from the date of
death at a rate no less than required by law. We will mail payment to the
beneficiary within seven days after our death claim requirements are fulfilled.
Other rules may apply to qualified annuities (see "Taxes").
THE ANNUITY PAYOUT PERIOD
- --------------------------------------------------------------------------------
As owner of the contract, you have the right to decide how and to who annuity
payouts will be made starting at the annuity start date. You may select one of
the annuity payout plans outlined below, or we may 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:
- - the annuity payout plan you select;
- - the annuitant's age and, in most cases, sex; and
- - the annuity table in the contract.
For information with respect to transfers between accounts after annuity payouts
begin, see "Making the Most of Your Contract -- Transfer policies."
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<PAGE>
ANNUITY PAYOUT PLANS
You may choose any one of these annuity payout plans by giving us written
instructions at least 30 days before contract values are used to purchase the
payout plan:
- - PLAN A -- LIFE ANNUITY -- NO REFUND: We make monthly payouts until the
annuitant's death. Payouts end with the last payout before the annuitant's
death. We will not make any further payouts. This means that if the annuitant
dies after we have made only one monthly payout, we will not make any more
payouts.
- - PLAN B -- LIFE ANNUITY WITH FIVE, 10 OR 15 YEARS CERTAIN: We make monthly
payouts for a guaranteed payout period of five, 10 or 15 years that you elect.
This election will determine the length of the payout period to the
beneficiary if the annuitant should die before the elected period expires. We
calculate the guaranteed payout period from the annuity start date. If the
annuitant outlives the elected guaranteed payout period, we will continue to
make payouts until the annuitant's death.
- - PLAN C -- LIFE ANNUITY -- INSTALLMENT REFUND: We make monthly payouts until
the annuitant's death, with our guarantee that payouts will continue for some
period of time. We will make payouts for at least the number of months
determined by dividing the amount applied under this option by the first
monthly payout, whether or not the annuitant is living.
- - PLAN D -- JOINT AND LAST SURVIVOR LIFE ANNUITY -- NO REFUND: We make monthly
payouts while both the annuitant and a joint annuitant are living. If either
annuitant dies, we will continue to make monthly payouts at the full amount
until the death of the surviving annuitant. Payouts end with the death of the
second annuitant.
- - PLAN E -- PAYOUTS FOR A SPECIFIED PERIOD: We make monthly payouts for a
specific payout period of 10 to 30 years that you elect. We will make payouts
only for the number of years specified whether the annuitant is living or not.
Depending on the selected time period, it is foreseeable that an annuitant can
outlive the payout period selected. In addition, a 10% IRS penalty tax could
apply under this payout plan. (See "Taxes.")
RESTRICTIONS FOR SOME QUALIFIED PLANS: If you purchased a qualified annuity, you
may be required to select a payout plan that provides for payouts:
- - over the life of the annuitant;
- - over the joint lives of the annuitant and a designated beneficiary;
- - for a period not exceeding the life expectancy of the annuitant; or
- - for a period not exceeding the joint life expectancies of the annuitant and a
designated beneficiary.
You have the responsibility for electing a payout plan that complies with your
contract and with applicable law.
IF WE DO NOT RECEIVE INSTRUCTIONS: You must give us written instructions for the
annuity payouts at least 30 days before the annuitant's 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 you in a lump sum or to change the
frequency of the payouts.
25
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Privileged Assets-Registered Trademark- Select Annuity
<PAGE>
DEATH AFTER ANNUITY PAYOUTS BEGIN
If you or the annuitant die after annuity payouts begin, we will pay any amount
payable to the beneficiary as provided in the annuity payout plan in effect.
TAXES
- --------------------------------------------------------------------------------
Generally, under current law, any increase in your contract value is taxable to
you only when you receive a payout or surrender (see detailed discussion below).
Any portion of the annuity payouts and any surrenders you request that represent
ordinary income are normally taxable. We will send you a tax information
reporting form for any year in which we made a taxable distribution according to
our records.
QUALIFIED ANNUITIES: We designed this contract for use with qualified retirement
plans. Special rules apply to these retirement plans. Your rights to benefits
may be subject to terms and conditions of these retirement plans regardless of
the terms of the contract.
Adverse tax consequences may result if you do not ensure that contributions,
distribution and other transactions under the contract comply with the law.
Qualified annuities have minimum distribution rules that govern the timing and
amount of distributions during your life and after your death. You should refer
to your retirement plan or adoption agreement or consult a tax advisor for more
information about your distribution rules.
ANNUITY PAYOUTS UNDER NONQUALIFIED ANNUITIES: A portion of each payout will be
ordinary income and subject to tax, and a portion of each payout will be
considered a return of part of your investment and will not be taxed. All
amounts you receive after your investment in the contract is fully recovered
will be subject to tax.
Tax law requires that all nonqualified deferred annuities issued by the same
company (and possibly its affiliates) to the same owner during a calendar year
be taxed as a single, unified contract when you take distributions from any one
of those contracts.
ANNUITY PAYOUTS UNDER QUALIFIED ANNUITIES: Under a qualified annuity, the entire
payout generally is includable as ordinary income and is subject to tax except
to the extent that contributions were made with after-tax dollars. If you or
your employer invested in your contract with deductible or pre-tax dollars as
part of a qualified retirement plan, such amounts are not considered to be part
of your investment in the contract and will be taxed when paid to you.
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 you make before reaching
age 59 1/2 unless certain exceptions apply. For qualified annuities, other
penalties may apply if you surrender your contract before your plan specifies
that you can receive payouts.
DEATH BENEFITS TO BENEFICIARIES: The death benefit under a contract is not
tax-exempt. Any amount your beneficiary receives that represents previously
deferred earnings within the contract is taxable as ordinary income to the
beneficiary in the years he or she receives the payments.
ANNUITIES OWNED BY CORPORATIONS, PARTNERSHIPS OR TRUSTS: For nonqualified
annuities any annual increase in the value of annuities held by such entities
generally will be treated as ordinary income received during that year. This
provision is effective for purchase payments made after Feb. 28, 1986. However,
if the trust was set up for the benefit of a natural person only, the income
will remain tax-deferred.
26
- --------------------------------------------------------------------------------
<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:
- - because of your death;
- - because you become disabled (as defined in the Code);
- - if the distribution is part of a series of substantially equal periodic
payments, made at least annually, over your life or life expectancy (or joint
lives or life expectancies of you and your beneficiary); or
- - if it is allocable to an investment before Aug. 14, 1982 (except for qualified
annuities).
For a qualified annuity, other penalties or exceptions may apply if you
surrender your contract before your plan specifies that payouts can be made.
WITHHOLDING, GENERALLY: If you receive all or part of the contract value, we may
deduct withholding against the taxable income portion of the payment. Any
withholding represents a prepayment of your tax due for the year. You take
credit for these amounts on your annual tax return.
If the payment is part of an annuity payout plan, we generally compute the
amount of withholding using payroll tables. You may provide us with a statement
of how many exemptions to use in calculating the withholding. As long as you've
provided us with a valid Social Security Number or Taxpayer Identification
Number, you can elect not to have any withholding occur.
If the distribution is any other type of payment (such as a partial or full
surrender), we compute withholding using 10% of the taxable portion. Similar to
above, as long as you have provided us with a valid Social Security Number or
Taxpayer Identification Number, you can elect not to have this withholding
occur.
Some states also impose withholding requirements similar to the federal
withholding described above. If this should be the case, we may deduct state
withholding from any payment from which we deduct federal withholding. The
withholding requirements may differ if we are making payment to a non-U.S.
citizen or if we deliver the payment outside the United States.
TRANSFER OF OWNERSHIP OF A NONQUALIFIED ANNUITY: If you transfer a nonqualified
annuity without receiving adequate consideration, the transfer is a gift and
also may be a surrender for federal income tax purposes. If the gift is a
currently taxable event for income tax purposes, the original owner will be
taxed on the amount of deferred earnings at the time of the transfer and also
may be subject to the 10% IRS penalty discussed earlier. In this case, the new
owner's investment in the contract will be the value of the contract at the time
of the transfer.
COLLATERAL ASSIGNMENT OF A NONQUALIFIED ANNUITY: If you collaterally assign or
pledge your contract, earnings on purchase payments you made after Aug. 13, 1982
will be taxed to you like a surrender.
IMPORTANT: Our discussion of federal tax laws is based upon our understanding of
current interpretations of these laws. Federal tax laws or current
interpretations of them may change. For this reason and because tax consequences
are complex and highly individual and cannot always be anticipated, you should
consult a tax advisor if you have any questions about taxation of your contract.
TAX QUALIFICATION: We intend that the contract qualify as an annuity for federal
income tax purposes. To that end, the provisions of the contract are to be
interpreted to ensure or maintain such tax qualification, in spite of any other
provisions of the contract. We reserve the right to amend the
27
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Privileged Assets-Registered Trademark- Select Annuity
<PAGE>
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
amendment.
VOTING RIGHTS
- --------------------------------------------------------------------------------
As an owner with investments in the subaccounts, you may vote on important 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 subaccount to the total number of votes allowed to the subaccount.
We calculate votes separately for each subaccount. We will send notice of these
meetings, proxy materials and a statement of the number of votes to which the
voter is entitled.
We will vote shares for which we have not received instructions in the same
proportion as the votes for which we have received instructions. We also will
vote the shares for which we have voting rights in the same proportion as the
votes for which we have received instructions.
SUBSTITUTION OF INVESTMENTS
- --------------------------------------------------------------------------------
We may substitute the funds in which the subaccounts invest if:
- - laws or regulations change,
- - existing funds become unavailable, or
- - in our judgment, the funds no longer are suitable for the subaccounts.
If any of these situations occur and if we believe it is in the best interest of
persons having voting rights under the contract, we have the right to substitute
funds other than those currently listed in this prospectus.
We may also:
- - change the funds in which the subaccounts invest, and
- - add additional subaccounts investing in other funds.
In the event of substitution of any of these changes, we may amend the contract
and take whatever action is necessary and appropriate without your consent or
approval. However, we will not make any substitution or change without the
necessary approval of the SEC and state insurance departments. We will notify
you of any substitution or change.
28
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<PAGE>
ABOUT THE SERVICE PROVIDERS
- --------------------------------------------------------------------------------
PRINCIPAL UNDERWRITER
American Express Service Corporation (AESC) is the principal underwriter for the
contracts. Its offices are located at 80 South Eighth Street, Minneapolis, MN
55402. AESC is a wholly-owned subsidiary of American Express Travel Related
Services Company, which is a wholly-owned subsidiary of American Express
Company, a financial services company headquartered in New York City.
ISSUER
American Partners Life issues the contracts. American Partners Life is a
wholly-owned subsidiary of IDS Life, which is a wholly-owned subsidiary of AEFC.
AEFC is a wholly-owned subsidiary of American Express Company. The AEFC family
of companies offers not only insurance and annuities, but also mutual funds,
investment certificates and a broad range of financial management services.
American Partners Life is a stock life insurance company organized in 1988 under
the laws of the State of Arizona and is located at 80 South Eighth Street,
Minneapolis, MN 55402. Its statutory address is 3225 North Central Avenue,
Phoenix, AZ 85012. American Partners Life conducts a conventional life insurance
business in New York.
LEGAL PROCEEDINGS
A number of lawsuits have been filed against life and health insurers in
jurisdictions in which we do business involving insurers' sales practices,
alleged agent misconduct, failure to properly supervise agents, and other
matters. We, like other life and health insurers, from time to time are involved
in such litigation. On October 13, 1998, an action entitled Richard W. And
Elizabeth J. Thoresen vs. American Express Financial Corporation, American
Centurion Life Assurance Company, American Enterprise Life Insurance Company,
American Partners Life Insurance Company, IDS Life Insurance Company and IDS
Life Insurance Company of New York was commenced in Minnesota state court. The
action was brought by individuals who purchased an annuity in a qualified plan.
They allege that the sale of annuities in tax-deferred contributory retirement
investment plans (E.G., IRAs) is never appropriate. The plaintiffs purport to
represent a class consisting of all persons who made similar purchases. The
plaintiffs seek damages in an unspecified amount. We also are defendants in
various other lawsuits. In our opinion, none of these lawsuits will have a
material adverse effect on our financial condition.
YEAR 2000
- --------------------------------------------------------------------------------
The Year 2000 issue is the result of computer programs having been written using
two digits rather than four to define a year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than 2000. This could result in the failure of major systems or miscalculations,
which could have a material impact on the operations of American Partners Life
and the variable account. American Partners Life and the variable account have
no computer systems of their own but are dependent upon the systems of AEFC and
certain other third parties.
A comprehensive review of AEFC's computer systems and business processes has
been conducted to identify the major systems that could be affected by the Year
2000 issue. Steps are being taken to resolve any potential problems including
modification to existing software and the purchase of new software. These
measures are scheduled to be completed and tested on a timely basis. AEFC's
target date for substantially completing corrective measures on business
critical systems was Dec. 31, 1998. Substantial testing of these systems was
targeted for completion early in 1999. AEFC currently is on
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Privileged Assets-Registered Trademark- Select Annuity
<PAGE>
track with this schedule and also is on track to finish the work on non-critical
systems by June 30, 1999. The Year 2000 readiness of unaffiliated investment
managers and other third parties whose system failures could have an impact on
American Partners Life's and the variable account's operations continues to be
evaluated. The potential materiality of any such impact is not known at this
time.
AEFC's Year 2000 project includes establishing Year 2000 contingency plans for
all key business units. Business continuation plans, which address business
continuation in the event of a system disruption, are in place for all key
business units. These plans are being amended to include specific Year 2000
considerations and will continue to be refined throughout 1999 as additional
information related to potential Year 2000 exposure is gathered.
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Performance Information........................... p.3
Calculating Annuity Payouts....................... p.6
Rating Agencies................................... p.6
Principal Underwriter............................. p.6
Independent Auditors.............................. p.6
</TABLE>
Financial Statements
30
- --------------------------------------------------------------------------------
<PAGE>
Please check the box to receive a copy of the Statement of Additional
Information:
- ------------ Privileged Assets-Registered Trademark- Select Annuity
- ------------ American Century Variable Portfolios, Inc.
- ------------ IDS Life Retirement Annuity Mutual Funds
- ------------ INVESCO Variable Investment Funds, Inc.
- ------------ Janus Aspen Series
- ------------ Warburg Pincus Trust -- Post-Venture Capital Portfolio
MAIL YOUR REQUEST TO:
American Partners Life Insurance Company
80 South Eighth Street
P.O. Box 59197
Minneapolis, MN 55459-0197
<TABLE>
<S> <C> <C>
WE WILL MAIL YOUR REQUEST TO:
</TABLE>
<TABLE>
<S> <C> <C>
Your name ---------------------
Address ---------------------
City --------------------- State ------------ Zip ------------
</TABLE>
31
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Privileged Assets-Registered Trademark- Select Annuity
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
for
PRIVILEGED ASSETS(R) SELECT ANNUITY
APL VARIABLE ANNUITY ACCOUNT 1
April 30, 1999
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 (SAI) is not a prospectus. It should be
read together with the prospectus dated the same date as this SAI, which may be
obtained by writing or calling us at the address and telephone number below. The
prospectus is incorporated in this SAI by reference.
American Partners Life Insurance Company
80 South Eighth Street
P.O. Box 59197
Minneapolis, MN 55459-0197
Phone #1-800-AXP-SERV
800-297-7378
<PAGE>
TABLE OF CONTENTS
Performance Information.............................................p.3
Calculating Annuity Payouts.........................................p.6
Rating Agencies.....................................................p.6
Principal Underwriter...............................................p.6
Independent Auditors................................................p.6
Financial Statements
<PAGE>
PERFORMANCE INFORMATION
The subaccounts may quote various performance figures to illustrate past
performance. We base total return and current yield quotations (if applicable)
on standardized methods of computing performance as required by the Securities
and Exchange Commission (SEC). An explanation of the methods used to compute
performance follows below.
Average Annual Total Return
We will express quotations of average annual total return for the subaccounts in
terms of the average annual compounded rate of return of a hypothetical
investment in the contract over a period of one, five and 10 years (or, if less,
up to the life of the subaccounts), calculated according to the following
formula:
P(1+T)n = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = Ending Redeemable Value of a hypothetical $1,000 payment
made at the beginning of the period, at the end of the
period (or fractional portion thereof)
We calculated the following performance figures on the basis of historical
performance of each fund. We show actual performance from the date the
subaccounts began investing in the funds. We also show performance from the
commencement date of the funds as if the contract existed at that time. Past
performance does not guarantee future results.
Average Annual Total Return For Periods Ending Dec. 31, 1998
<TABLE>
<CAPTION>
Performance since
commencement of the Performance since
subaccount commencement of the Fund**
Since Since
Subaccount ------------------------------------ 1 Year commencement --------- --------- --------- commencement
Investing in: 1 Year 5 Years 10 Years
AMERICAN CENTURY
<S> <C> <C> <C> <C> <C>
CGR VP Capital Appreciation (1/96; -3.13% -3.67% -3.13% 2.20% 7.61% -- %
11/87)*
CVL VP Value (9/96; 5/96) 3.77 17.16 3.77 -- -- 14.79
IDS LIFE
CAG Aggressive Growth Fund (11/95; 1.60 8.70 1.60 9.54 -- 9.73
1/92)
CCR Capital Resource Fund (11/95; 22.88 17.94 22.88 15.40 14.67 --
10/81)
CIE International Equity Fund (11/95; 14.67 9.51 14.67 6.29 -- 8.30
1/92)
CMG Managed Fund (11/95; 4/86) 14.64 16.59 14.64 12.80 13.42 --
CMS Moneyshare Fund (11/95; 10/81) 4.09 4.07 4.09 3.89 4.28 --
CSI Special Income Fund (11/95; 10/81) 0.49 5.64 0.49 5.72 7.85 --
INVESCO VIF
CII Equity Income Fund (11/95; 8/94) 14.16 21.47 14.16 -- -- 20.28
JANUS ASPEN SERIES
CSG Growth Portfolio (9/96; 9/93) 34.31 27.06 34.31 20.21 -- 19.66
CWG Worldwide Growth Portfolio (1/96; 27.64 25.54 27.64 20.11 -- 22.78
9/93)
WARBURG PINCUS TRUST
CVC Post-Venture Capital Portfolio 5.45 6.25 5.45 -- -- 6.24
(9/96; 9/96)
* (Commencement dates of the subaccounts; Commencement dates of the Funds)
** Current applicable charges deducted from fund performance include a $30
contract administrative charge and a 1% mortality and expense risk fee.
</TABLE>
<PAGE>
Cumulative Total Return
Cumulative total return represents the cumulative change in the value of an
investment for a given period (reflecting change in a subaccount's accumulation
unit value). We compute cumulative total return by using the following formula:
ERV - P
P
where: P = a hypothetical initial payment of $1,000
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the period, at the
end of the period (or fractional portion thereof).
The SEC requires that we assume that you surrender the entire contract at the
end of the one, five and ten year periods (or, if less, up to the life of the
subaccount). All total return figures reflect the deduction of all applicable
charges including the contract administrative charge and mortality and expense
risk fee.
Calculation of Yield for Subaccounts Investing in Money Market Funds
Simple Yield:
For the subaccounts investing in money market funds, we base quotations of
simple yield on:
(a) the change in the value of a hypothetical subaccount (exclusive of
capital changes and income other than investment income) at the
beginning of a particular seven-day period;
(b) less a pro rata share of the subaccount expenses accrued over the
period;
(c) dividing this difference by the value of the subaccount at the
beginning of the period to obtain the base period return; and
(d) multiplying the base period return by 365/7.
The subaccount's value includes:
o any declared dividends,
o the value of any shares purchased with dividends paid during the
period, and
o any dividends declared for such shares.
It does not include any realized or unrealized gains or losses.
Annualized Compound Yield:
We calculate compound yield using the base period return described above, which
we then compound according to the following formula:
Compound Yield = [(Base Period Return + 1)365/7] -1
<TABLE>
<CAPTION>
Annualized Yields Based on the Seven-Day Period Ending Dec. 31, 1998
Subaccount Investing In: Simple Yield Compound Yield
<S> <C> <C> <C>
CMS IDS Life Moneyshare Fund 3.68% 3.75%
</TABLE>
<PAGE>
You must consider (when comparing an investment in subaccounts investing in
money market funds with fixed annuities) that fixed annuities often provide an
agreed-to or guaranteed yield for a stated period of time, whereas the
subaccount's yield fluctuates. In comparing the yield of the subaccount to a
money market fund, you should consider the different services that the contract
provides.
Annualized Yield for Subaccounts Investing in Income Funds
For the subaccounts investing in income funds, we base quotations of yield on
all investment income earned during a particular 30-day period, less expenses
accrued during the period (net investment income) and compute it by dividing net
investment income per accumulation unit by the value of an accumulation unit on
the last day of the period, according to the following formula:
YIELD = 2[( a-b + 1)6 - 1]
cd
where: a = dividends and investment income earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of accumulation units outstanding
during the period that were entitled to receive dividends
d = the maximum offering price per accumulation unit on the last day
of the period
The subaccount earns yield from the increase in the net asset value of shares of
the fund in which it invests and from dividends declared and paid by the fund,
which are automatically invested in shares of the fund.
<TABLE>
<CAPTION>
Annualized Yield Based on the 30-Day Period Ended Dec. 31, 1998
Subaccount Investing in: Yield
<S> <C>
CSI IDS Life Special Income Fund 7.20%
</TABLE>
The yield on the subaccount's accumulation unit may fluctuate daily and does not
provide a basis for determining future yields.
Independent rating or statistical services or publishers or publications such as
those listed below may quote subaccount performance, compare it to rankings,
yields or returns, or use it in variable annuity accumulation or settlement
illustrations they publish or prepare.
The Bank Rate Monitor National Index, Barron's, Business Week, CDA
Technologies, Donoghue's Money Market Fund Report, Financial Services
Week, Financial Times, Financial World, Forbes, Fortune, Global
Investor, Institutional Investor, Investor's Daily, Kiplinger's
Personal Finance, Lipper Analytical Services, Money, Morningstar,
Mutual Fund Forecaster, Newsweek, The New York Times, Personal
Investor, Stanger Report, Sylvia Porter's Personal Finance, USA Today,
U.S. News and World Report, The Wall Street Journal and Wiesenberger
Investment Companies Service.
<PAGE>
CALCULATING ANNUITY PAYOUTS
We guarantee the fixed annuity payout amounts. Once calculated, the payout will
remain the same and never change. To calculate annuity payouts we:
o take the total value of the fixed account and the subaccounts at the
annuity start date or the date selected to begin receiving annuity payouts;
then
o using an annuity table we apply the value according to the annuity payout
plan selected.
The annuity payout table we use will be the one in effect at the time chosen to
begin annuity payouts. The table will be equal to or greater than the table in
the contract.
RATING AGENCIES
The following chart reflects the ratings given to us by independent rating
agencies. These agencies evaluate the financial soundness and claims-paying
ability of insurance companies based on a number of different factors. This
information does not relate to the management or performance of the subaccounts
of the contract. This information relates only to the fixed account and reflects
our ability to make annuity payouts and to pay death benefits and other
distributions from the contract.
Rating agency Rating
A.M. Best A+
(Superior)
Duff & Phelps AAA
PRINCIPAL UNDERWRITER
The principal underwriter for the contract is American Express Service
Corporation (AESC) which offers the contract on a continuous basis.
INDEPENDENT AUDITORS
The financial statements appearing in this SAI have been audited by Ernst &
Young LLP (1400 Pillsbury Center, 200 South Sixth Street, Minneapolis, MN
55402), independent auditors, as stated in their report appearing herein.
FINANCIAL STATEMENTS
<PAGE>
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 CGR, CVL, CAG, CCR, CIE, CMG, CMS, CSI, CII, CSG, CWG,
and CVC) as of December 31, 1998, 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. 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, 1998 with the affiliated and
unaffiliated mutual fund managers. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the individual and combined financial position of the
segregated asset subaccounts of APL Variable Annuity Account 1 at December 31,
1998, 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 12, 1999
<PAGE>
<TABLE>
<CAPTION>
APL Variable Annuity Account 1
Statements of Net Assets Dec. 31, 1998
Segregated Asset Subaccount
Assets CGR CVL CAG CCR
Investments in shares of mutual
funds and portfolios:
<S> <C> <C> <C> <C>
at cost $295,890 $596,054 $ 900,947 $1,057,934
-------- -------- --------- ----------
at market value $272,397 $596,476 $ 900,884 $1,233,046
Dividends receivable - - - -
Accounts receivable from American Partners Life for
contract purchase payments 10 - 762 1,044
-- --- -----
Total assets 272,407 596,476 901,646 1,234,090
======= ======= ======= =========
Liabilities
Payable to American Partners Life for
mortality and expense risk fee 230 505 760 1,044
Payable to mutual funds and portfolios
for investments purchased 10 - - -
-- --- --- -----
Total liabilities 240 505 760 1,044
--- --- --- -----
Net assets applicable to contracts in
accumulation period $272,167 $595,971 $ 900,886 $1,233,046
Accumulation units outstanding 303,145 410,444 694,351 738,225
======= ======= ======= =======
Net asset value per accumulation unit $ 0.90 $ 1.45 $ 1.30 $ 1.67
====== ====== ====== ======
Assets CIE CMG
Investments in shares of mutual
funds and portfolios:
at cost $ 213,536 $1,168,461
--------- ----------
at market value $ 234,416 $1,198,131
Dividends receivable - -
Accounts receivable from American Partners Life for
contract purchase payments 199 1,012
--- -----
Total assets 234,615 1,199,143
======= =========
Liabilities
Payable to American Partners Life for
mortality and expense risk fee 199 1,012
Payable to mutual funds and portfolios
for investments purchased - -
--- -----
Total liabilities 199 1,012
--- -----
Net assets applicable to contracts in
accumulation period $ 234,416 $1,198,131
--------- ----------
Accumulation units outstanding 178,119 744,719
======= =======
Net asset value per accumulation unit $ 1.32 $ 1.61
====== ======
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
APL Variable Annuity Account 1
Statements of Net Assets (continued) Dec. 31, 1998
Segregated Asset Subaccount
Assets CMS CSI CII CSG
Investments in shares of mutual funds and portfolios:
<S> <C> <C> <C> <C>
at cost $1,104,329 $ 413,650 $2,008,862 $2,273,499
---------- --------- ---------- ----------
at market value $1,104,333 $ 398,625 $2,221,746 $2,850,410
Dividends receivable 4,350 2,214 - -
Accounts receivable from American Partners Life
for contract purchase payments - - - 400
------ ------ ------- ---
Total assets 1,108,683 400,839 2,221,746 2,850,810
========= ======= ========= =========
Liabilities
Payable to American Partners Life for
mortality and expense risk fee 914 308 1,899 2,384
Payable to mutual funds and portfolios
for investments purchased 3,436 1,906 - 400
----- ----- ----- ---
Total liabilities 4,350 2,214 1,899 2,784
----- ----- ----- -----
Net assets applicable to contracts in
accumulation period $1,104,333 $ 398,625 $2,219,847 $2,848,026
---------- --------- ---------- ----------
Accumulation units outstanding 977,371 338,792 1,204,843 1,630,632
======= ======= ========= =========
Net asset value per accumulation unit $ 1.13 $ 1.18 $ 1.84 $ 1.75
====== ====== ====== ======
Combined
Variable
Assets CWG CVC Account
Investments in shares of mutual funds and portfolios:
at cost $3,481,745 $ 299,738 $ 13,814,645
---------- --------- ------------
at market value $4,268,449 $ 335,351 $ 15,614,264
Dividends receivable - - 6,564
Accounts receivable from American Partners Life -
for contract purchase payments - - 3,427
------- ------- -----
Total assets 4,268,449 335,351 15,624,255
========= ======= ==========
Liabilities
Payable to American Partners Life for
mortality and expense risk fee 3,592 282 13,129
Payable to mutual funds and portfolios
for investments purchased - - 5,752
----- --- -----
Total liabilities 3,592 282 18,881
----- --- ------
Net assets applicable to contracts in
accumulation period $4,264,857 $ 335,069 $ 15,605,374
---------- --------- ------------
Accumulation units outstanding 2,190,421 290,287 9,701,349
========= ======= =========
Net asset value per accumulation unit $ 1.95 $ 1.15
====== ======
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
APL Variable Annuity Account 1
Statements of Operations Year ended Dec. 31, 1998
Segregated Asset Subaccount
Investment income CGR CVL CAG CCR
<S> <C> <C> <C> <C>
Dividend income from mutual funds and portfolios $ 12,632 $ 29,853 $ 56,281 $ 87,881
Mortality and expense risk fee 2,545 5,240 7,018 8,644
----- ----- ----- -----
Investment income (loss) - net 10,087 24,613 49,263 79,237
------ ------ ------ ------
Realized and unrealized gain (loss)
on investments - net
Realized gain (loss) on sales of investments
in mutual funds and portfolios:
Proceeds from sales 71,912 201,599 204,167 193,737
Cost of investments sold 79,896 201,944 237,682 195,161
------ ------- ------- -------
Net realized gain (loss) on investments (7,984) (345) (33,515) (1,424)
Net change in unrealized appreciation or
depreciation of investments (8,000) (22,277) (325) 109,613
------ ------- ---- -------
Net gain (loss) on investments (15,984) (22,622) (33,840) 108,189
------- ------- ------- -------
Net increase (decrease) in net assets
resulting from operations $ (5,897) $ 1,991 $ 15,423 $ 187,426
======== ======= ======== =========
Investment income CIE CMG
Dividend income from mutual funds and portfolios $ 2,845 $ 126,893
Mortality and expense risk fee 2,090 10,018
----- ------
Investment income (loss) - net 755 116,875
--- -------
Realized and unrealized gain (loss)
on investments - net
Realized gain (loss) on sales of investments
in mutual funds and portfolios:
Proceeds from sales 26,634 412,019
Cost of investments sold 25,239 431,351
------ -------
Net realized gain (loss) on investments 1,395 (19,332)
Net change in unrealized appreciation or
depreciation of investments 22,767 23,653
------ ------
Net gain (loss) on investments 24,162 4,321
------ -----
Net increase (decrease) in net assets
resulting from operations $24,917 $ 121,196
======= =========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
APL Variable Annuity Account 1
Statements of Operations (continued) Year ended Dec. 31, 1998
Segregated Asset Subaccount
Investment income CMS CSI CII CSG
<S> <C> <C> <C> <C>
Dividend income from mutual funds and portfolios $ 37,254 $21,624 $ 112,126 $ 130,049
Mortality and expense risk fee 7,491 2,864 17,363 20,329
----- ----- ------ ------
Investment income (loss) - net 29,763 18,760 94,763 109,720
------ ------ ------ -------
Realized and unrealized gain (loss)
on investments - net
Realized gain (loss) on sales of investments
in mutual funds and portfolios:
Proceeds from sales 4,653,213 429,056 237,641 807,611
Cost of investments sold 4,653,213 434,301 214,546 755,499
--------- ------- ------- -------
Net realized gain (loss) on investment - (5,245) 23,095 52,112
Net change in unrealized appreciation or
depreciation of investments 4 (12,582) 113,404 474,587
- ------- ------- -------
Net gain (loss) on investments 4 (17,827) 136,499 526,699
- ------- ------- -------
Net increase (decrease) in net assets
resulting from operations $ 29,767 $ 933 $ 231,262 $ 636,419
======== ===== ========= =========
Combined
Variable
Investment income CWG CVC Account
Dividend income from mutual funds and portfolios $137,462 $ - $ 754,900
Mortality and expense risk fee 35,765 2,586 121,953
------ ----- -------
Investment income (loss) - net 101,697 (2,586) 632,947
------- ------ -------
Realized and unrealized gain (loss)
on investments - net
Realized gain (loss) on sales of investments
in mutual funds and portfolios:
Proceeds from sales 1,592,371 116,680 8,946,640
Cost of investments sold 1,412,964 110,890 8,752,686
--------- ------- ---------
Net realized gain (loss) on investment 179,407 5,790 193,954
Net change in unrealized appreciation or
depreciation of investments 526,147 14,049 1,241,040
------- ------ ---------
Net gain (loss) on investments 705,554 19,839 1,434,994
------- ------ ---------
Net increase (decrease) in net assets
resulting from operations $807,251 $17,253 $ 2,067,941
======== ======= ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
APL Variable Annuity Account 1
Statements of Changes in Net Assets Year ended Dec. 31, 1998
Segregated Asset Subaccount
Operations CGR CVL CAG CCR
<S> <C> <C> <C> <C>
Investment income (loss) - net $ 10,087 $ 24,613 $ 49,263 $ 79,237
Net realized gain (loss) on investments (7,984) (345) (33,515) (1,424)
Net change in unrealized appreciation or
depreciation of investments (8,000) (22,277) (325) 109,613
------ ------- ---- -------
Net increase (decrease) in net assets
resulting from operations (5,897) 1,991 15,423 187,426
====== ===== ====== =======
Contract transactions
Contract purchase payments 26,303 59,206 82,351 58,625
Net transfers* 22,431 241,250 242,318 439,077
Contract charges (206) (241) (844) (605)
Contract terminations:
Surrender benefits (7,268) (19,597) (15,954) (23,641)
Death benefits - - - -
----- ------ ------ ------
Increase (decrease) from contract transactions 41,260 280,618 307,871 473,456
------ ------- ------- -------
Net assets at beginning of year 236,804 313,362 577,592 572,164
------- ------- ------- -------
Net assets at end of year $272,167 $595,971 $ 900,886 $1,233,046
======== ======== ========= ==========
Accumulation unit activity
Units outstanding at beginning of year 255,509 224,384 452,304 420,942
Contracts purchase payments 30,984 40,632 65,635 40,481
Net transfers* 24,563 159,100 192,895 296,075
Contract charges (239) (171) (659) (410)
Contract terminations:
Surrender benefits (7,672) (13,501) (15,824) (18,863)
Death benefits - - - -
------ ------ ------ ------
Units outstanding at end of year 303,145 410,444 694,351 738,225
======= ======= ======= =======
Operations CIE CMG
Investment income (loss) - net $ 755 $ 116,875
Net realized gain (loss) on investments 1,395 (19,332)
Net change in unrealized appreciation or
depreciation of investments 22,767 23,653
------ ------
Net increase (decrease) in net assets
resulting from operations 24,917 121,196
====== =======
Contract transactions
Contract purchase payments 16,222 85,483
Net transfers* 20,460 196,273
Contract charges (199) (446)
Contract terminations:
Surrender benefits (2,689) (24,030)
Death benefits - -
----- ------
Increase (decrease) from contract transactions 33,794 257,280
------ -------
Net assets at beginning of year 175,705 819,655
------- -------
Net assets at end of year $ 234,416 $1,198,131
========= ==========
Accumulation unit activity
Units outstanding at beginning of year 153,093 584,073
Contracts purchase payments 12,907 57,400
Net transfers* 14,387 122,381
Contract charges (158) (298)
Contract terminations:
Surrender benefits (2,110) (18,837)
Death benefits - -
----- -----
Units outstanding at end of year 178,119 744,719
======= =======
*Includes transfer activity from (to) other subaccounts and transfers from (to)
American Partners Life's fixed account.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
APL Variable Annuity Account 1
Statements of Changes in Net Assets (continued) Year ended Dec. 31, 1998
Segregated Asset Subaccounts
Operations CMS CSI CII CSG
<S> <C> <C> <C> <C>
Investment income (loss) - net $ 29,763 $18,760 $ 94,763 $ 109,720
Net realized gain (loss) on investments - (5,245) 23,095 52,112
Net change in unrealized appreciation or
depreciation of investments 4 (12,582) 113,404 474,587
- ------- ------- -------
Net increase (decrease) in net assets
resulting from operations 29,767 933 231,262 636,419
====== === ======= =======
Contract transactions
Contract purchase payments 4,519,714 39,820 146,362 167,251
Net transfers* (3,349,014) 176,255 653,322 817,246
Contract charges (75) (325) (932) (1,295)
Contract terminations:
Surrender benefits (260,361) (59,301) (86,875) (96,895)
Death benefits - - - (2,043)
------ ------ ------ ------
Increase (decrease) from contract transactions 910,264 156,449 711,877 884,264
======= ======= ======= =======
Net assets at beginning of year 164,302 241,243 1,276,708 1,327,343
------- ------- --------- ---------
Net assets at end of year $1,104,333 $ 398,625 $2,219,847 $2,848,026
========== ========= ========== ==========
Accumulation unit activity
Units outstanding at beginning of year 151,325 206,048 790,904 1,019,902
Contracts purchase payments 4,087,136 33,728 85,140 115,718
Net transfers* (3,028,744) 148,915 379,365 564,725
Contract charges (67) (274) (548) (902)
Contract terminations:
Surrender benefits (232,279) (49,625) (50,018) (67,506)
Death benefits - - - (1,305)
------- ------- ------- ------
Units outstanding at end of year 977,371 338,792 1,204,843 1,630,632
======= ======= ========= =========
Combined
Variable
Operations CWG CVC Account
Investment income (loss) - net $101,697 $ (2,586) $ 632,947
Net realized gain (loss) on investments 179,407 5,790 193,954
Net change in unrealized appreciation or
depreciation of investments 526,147 14,049 1,241,040
------- ------ ---------
Net increase (decrease) in net assets
resulting from operations 807,251 17,253 2,067,941
======= ====== =========
Contract transactions
Contract purchase payments 312,579 37,152 5,551,068
Net transfers* 414,957 31,654 (93,771)
Contract charges (2,877) (209) (8,254)
Contract terminations:
Surrender benefits (178,003) (3,838) (778,452)
Death benefits - - (2,043)
------- ----- ------
Increase (decrease) from contract transactions 546,656 64,759 4,668,548
------- ------ ---------
Net assets at beginning of year 2,910,950 253,057 8,868,885
--------- ------- ---------
Net assets at end of year $4,264,857 $ 335,069 $ 15,605,374
========== ========= ============
Accumulation unit activity
Units outstanding at beginning of year 1,908,118 231,194
Contracts purchase payments 177,701 34,723
Net transfers* 208,210 28,148
Contract charges (1,646) (196)
Contract terminations:
Surrender benefits (101,962) (3,582)
Death benefits - -
----- -----
Units outstanding at end of year 2,190,421 290,287
========= =======
*Includes transfer activity from (to) other subaccounts and transfers from (to)
American Partners Life's fixed account.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
APL Variable Annuity Account 1
Statements of Changes in Net Assets Year ended Dec. 31, 1997
Segregated Asset Subaccount
Operations CGR CVL CAG
<S> <C> <C> <C>
Investment income (loss) - net $ 1,746 $ (443) $45,822
Net realized gain (loss) on investments (5,612) 1,966 (573)
Net change in unrealized appreciation or
depreciation of investments (8,816) 22,614 12,319
------ ------ ------
Net increase (decrease) in net assets
resulting from operations (12,682) 24,137 57,568
======= ====== ======
Contract transactions
Contract purchase payments 33,336 17,909 73,176
Net transfers* 89,819 262,522 226,592
Contract charges (223) (37) (620)
Surrender benefits (24,843) (1,336) (87,321)
------- ------ -------
Increase (decrease) from contract transactions 98,089 279,058 211,827
------ ------- -------
Net assets at beginning of year 151,397 10,167 308,197
------- ------ -------
Net assets at end of year $236,804 $313,362 $577,592
======== ======== ========
Accumulation unit activity
Units outstanding at beginning of year 156,491 9,088 269,153
Contract purchase payments 37,321 13,674 61,888
Net transfers* 91,110 202,815 198,210
Contract charges (232) (27) (521)
Surrender benefits (29,181) (1,166) (76,426)
------- ------ -------
Units outstanding at end of year 255,509 224,384 452,304
======= ======= =======
Operations CCR CIE CMG
Investment income (loss) - net $10,533 $ 4,586 $69,319
Net realized gain (loss) on investments (469) 2,369 2,822
Net change in unrealized appreciation or
depreciation of investments 85,557 (3,196) 4,151
------ ------ -----
Net increase (decrease) in net assets
resulting from operations 95,621 3,759 76,292
====== ===== ======
Contract transactions
Contract purchase payments 44,335 29,308 114,463
Net transfers* 231,118 65,250 536,133
Contract charges (387) (125) (264)
Surrender benefits (16,378) (7,265) (22,626)
------- ------ -------
Increase (decrease) from contract transactions 258,688 87,168 627,706
------- ------ -------
Net assets at beginning of year 217,855 84,778 115,657
------- ------ -------
Net assets at end of year $572,164 $175,705 $819,655
======== ======== ========
Accumulation unit activity
Units outstanding at beginning of year 197,010 75,121 97,509
Contract purchase payments 35,692 25,051 87,659
Net transfers* 202,032 59,250 415,741
Contract charges (317) (110) (203)
Surrender benefits (13,475) (6,219) (16,633)
------- ------ -------
Units outstanding at end of year 420,942 153,093 584,073
======= ======= =======
*Includes transfer activity from (to) other subaccounts and transfers from (to)
American Partners Life's fixed account.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
APL Variable Annuity Account 1
Statements of Changes in Net Assets (continued) Year ended Dec. 31, 1997
Segregated Asset Subaccount
Operations CMS CSI CII CSG
<S> <C> <C> <C> <C>
Investment income (loss) - net $ 13,982 $14,981 $ 80,451 $ 16,156
Net realized gain (loss) on investments (5) 408 10,697 6,897
Net change in unrealized appreciation or
depreciation of investments (2) (2,977) 101,399 102,483
-- ------ ------- -------
Net increase (decrease) in net assets
resulting from operations 13,975 12,412 192,547 125,536
====== ====== ======= =======
Contract transactions
Contract purchase payments 5,497,039 40,157 97,700 68,425
Net transfers* (5,843,180) 160,244 918,536 1,107,632
Contract charges (19) (300) (432) (187)
Surrender benefits (26,101) (39,766) (98,905) (21,985)
------- ------- ------- -------
Increase (decrease) from contract transactions (372,261) 160,335 916,899 1,153,885
-------- ------- ------- ---------
Net assets at beginning of year 522,588 68,496 167,262 47,922
------- ------ ------- ------
Net assets at end of year $164,302 $ 241,243 $ 1,276,708 $1,327,343
======== ========= =========== ==========
Accumulation unit activity
Units outstanding at beginning of year 501,037 63,034 130,956 44,785
Contract purchase payments 5,192,040 35,583 67,914 56,707
Net transfers* (5,517,471) 143,043 658,203 935,902
Contract charges (17) (270) (293) (146)
Surrender benefits (24,264) (35,342) (65,876) (17,346)
------- ------- ------- -------
Units outstanding at end of year 151,325 206,048 790,904 1,019,902
======= ======= ======= =========
Combined
Variable
Operations CWG CVC Account
Investment income (loss) - net $ 14,184 $ (1,838) $ 269,479
Net realized gain (loss) on investments 16,108 3,197 37,805
Net change in unrealized appreciation or
depreciation of investments 247,519 21,432 582,483
------- ------ -------
Net increase (decrease) in net assets
resulting from operations 277,811 22,791 889,767
------- ------ -------
Contract transactions
Contract purchase payments 270,597 25,521 6,311,966
Net transfers* 2,139,100 183,411 77,177
Contract charges (811) (136) (3,541)
Surrender benefits (147,765) (19,783) (514,074)
-------- ------- --------
Increase (decrease) from contract transactions 2,261,121 189,013 5,871,528
--------- ------- ---------
Net assets at beginning of year 372,018 41,253 2,107,590
------- ------ ---------
Net assets at end of year $ 2,910,950 $253,057 $8,868,885
=========== ======== ==========
Accumulation unit activity
Units outstanding at beginning of year 294,951 42,296
Contract purchase payments 186,068 24,945
Net transfers* 1,530,546 181,340
Contract charges (543) (129)
Surrender benefits (102,904) (17,258)
-------- -------
Units outstanding at end of year 1,908,118 231,194
========= =======
*Includes transfer activity from (to) other subaccounts and transfers from (to)
American Partners Life's fixed account. See accompanying notes to financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
APL Variable Annuity Account 1
Notes to Financial Statements
1. Organization
APL Variable Annuity Account 1 (the Account) was established under Arizona law
on Feb. 9, 1995 and the subaccounts are registered together as a single unit
investment trust of American Partners Life Insurance Company (American Partners
Life) under the Investment Company Act of 1940, as amended (the 1940 Act).
Operations of the Account commenced on Dec. 5, 1995.
The Account is comprised of various subaccounts. Each subaccount invests
exclusively in shares of the following funds or portfolios (collectively, the
Funds), which are registered under the 1940 Act as diversified, open-end
management investment companies and have the following investment managers.
Subaccount Invests exclusively in shares of Investment Manager
<S> <C> <C>
CGR American Century VP Capital Appreciation American Century Investment Management Inc.
CVL American Century VP Value American Century Investment Management Inc.
CAG IDS Life Aggressive Growth Fund IDS Life Insurance Company 1
CCR IDS Life Capital Resource Fund IDS Life Insurance Company 1
CIE IDS Life International Equity Fund IDS Life Insurance Company 2
CMG IDS Life Managed Fund IDS Life Insurance Company 1
CMS IDS Life Moneyshare Fund IDS Life Insurance Company 1
CSI IDS Life Special Income Fund IDS Life Insurance Company 1
CII INVESCO VIF - Equity Income Fund INVESCO Funds Group, Inc.
CSG Janus Aspen Series Growth Portfolio Janus Capital Corporation
CWG Janus Aspen Series Worldwide Growth Portfolio Janus Capital Corporation
CVC Warburg Pincus Trust--Post-Venture Capital Portfolio Warburg Pincus Counselors, Inc.
1 American Express Financial Corporation (AEFC) is the investment advisor.
2 AEFC is the investment advisor. American Express Asset Management
International Inc. is the sub-investment advisor.
The assets of each subaccount of the Account are not chargeable with liabilities
arising out of the business conducted by any other segregated asset account or
by American Partners Life.
American Partners Life serves as issuer of the contracts.
2. Summary of Significant Accounting Policies
Investments in the Funds
Investments in shares of the Funds are stated at market value which is the net
asset value per share as determined by the respective Funds. Investment
transactions are accounted for on the date the shares are purchased and sold.
The cost of investments sold and redeemed is determined on the average cost
method. Dividend distributions received from the Funds are reinvested in
additional shares of the Funds and are recorded as income by the subaccounts on
the ex-dividend date.
Unrealized appreciation or depreciation of investments in the accompanying
financial statements represents the subaccounts' share of the Funds'
undistributed net investment income, undistributed realized gain or loss and the
unrealized appreciation or depreciation on their investment securities.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of increase and decrease in net assets from operations
during the period. Actual results could differ from those estimates.
Federal Income Taxes
American 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
American Partners Life makes contractual assurances to the Account that possible
future adverse changes in administrative expenses and mortality experience of
the contract owners and
annuitants will not affect the Account. The mortality and expense risk fee paid
to American Partners Life is computed daily and is equal, on an annual basis, to
1% of the average daily net assets of the subaccounts.
4. Contract Administrative Charges
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 is allocated to the subaccounts on a pro-rata
basis. American Partners Life does not anticipate that it will make any profit
on this charge. If the total purchase payments (less partial surrenders) on a
contract anniversary are at least $10,000, the charge is 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.
5. Investment in Shares
The subaccounts' investment in shares of the Funds as of Dec. 31, 1998 were as follows:
Subaccount Investment Shares NAV
<S> <C> <C> <C>
CGR American Century VP Capital Appreciation 30,199 $ 9.02
CVL American Century VP Value 88,629 6.73
CAG IDS Life Aggressive Growth Fund 58,753 15.33
CCR IDS Life Capital Resource Fund 37,761 32.65
CIE IDS Life International Equity Fund 15,049 15.58
CMG IDS Life Managed Fund 64,694 18.52
CMS IDS Life Moneyshare Fund 1,104,427 1.00
CSI IDS Life Special Income Fund 35,890 11.17
CII INVESCO VIF - Equity Income Fund 119,383 18.61
CSG Janus Aspen Series Growth Portfolio 121,088 23.54
CWG Janus Aspen Series Worldwide Growth Portfolio 146,733 29.09
CVC Warburg Pincus Trust--Post-Venture Capital Portfolio 28,468 11.78
6. Investment Transactions
The subaccounts' purchases of Funds' shares, including reinvestment of dividend
distributions, were as follows:
Year ended Dec. 31,
Subaccount Investment 1998 1997
CGR American Century VP Capital Appreciation $ 123,272 $ 177,323
CVL American Century VP Value 507,061 317,054
CAG IDS Life Aggressive Growth Fund 560,775 411,343
CCR IDS Life Capital Resource Fund 745,917 303,232
CIE IDS Life International Equity Fund 61,025 131,194
CMG IDS Life Managed Fund 785,441 736,344
CMS IDS Life Moneyshare Fund 5,593,240 4,426,251
CSI IDS Life Special Income Fund 604,265 223,006
CII INVESCO VIF - Equity Income Fund 1,045,050 1,117,762
CSG Janus Aspen Series Growth Portfolio 1,802,798 1,246,893
CWG Janus Aspen Series Worldwide Growth Portfolio 2,241,720 2,434,878
CVC Warburg Pincus Trust--Post-Venture Capital Portfolio 178,909 230,865
Combined Variable Account $14,249,473 $11,756,145
7. Year 2000 Issue (unaudited)
The Year 2000 issue is the result of computer programs having been written using
two digits rather than four to define a year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than 2000. This could result in the failure of major systems or miscalculations,
which could have a material impact on the operations of American Partners Life
and the Account. American Partners Life and the Account have no computer systems
of their own but are dependent upon the systems of AEFC and certain other third
parties.
A comprehensive review of AEFC's computer systems and business processes has
been conducted to identify the major systems that could be affected by the Year
2000 issue. Steps are being taken to resolve any potential problems including
modification to existing software and the purchase of new software. These
measures are scheduled to be completed and tested on a timely basis. AEFC's
target date for substantially completing corrective measures on business
critical systems was Dec. 31, 1998. Substantial testing of these systems was
targeted for completion early in 1999. AEFC is currently on track with this
schedule and is also on track to finish the work on non-critical systems by June
30, 1999. The Year 2000 readiness of unaffiliated investment managers and other
third parties whose system failures could have an impact on American Partners
Life's and the Account's operations continues to be evaluated. The potential
materiality of any such impact is not known at this time.
AEFC's Year 2000 project includes establishing Year 2000 contingency plans for
all key business units. Business continuation plans, which address business
continuation in the event of a system disruption, are in place for all key
business units. These plans are being amended to include specific Year 2000
considerations and will continue to be refined throughout 1999 as additional
information related to potential Year 2000 exposure is gathered.
</TABLE>
<PAGE>
Report of Independent Auditors
The Board of Directors
American 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, 1998 and 1997, and the related statements of income,
stockholder's equity and cash flows for each of the three years in the period
ended December 31, 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American Partners Life
Insurance Company at December 31, 1998 and 1997, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
February 4, 1999
Minneapolis, Minnesota
<PAGE>
<TABLE>
<CAPTION>
AMERICAN PARTNERS LIFE INSURANCE COMPANY
BALANCE SHEETS
December 31,
($ thousands, except share amounts)
ASSETS 1998 1997
- ------ - --------- - ------
<S> <C> <C>
Investments:
Fixed maturities:
Held to maturity, at amortized cost (fair value:
1998, $64,727; 1997, $68,122) $ 59,623 $ 63,747
Available for sale, at fair value (amortized cost:
1998, $200,069; 1997, $144,344) 204,005 147,981
--------- ---------
Total investments 263,628 211,728
Cash and cash equivalents 4,746 --
Accrued investment income 4,582 3,591
Deferred policy acquisition costs 27,057 21,846
Accounts receivable 268 884
Other assets 104 726
Separate account assets 15,622 8,879
----------- -----------
Total assets $316,007 $247,654
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Future policy benefits for fixed annuities $236,046 $184,246
Policy claims and other policyholders' funds 1,344 222
Deferred income taxes 5,708 5,405
Amount due to brokers -- 4,946
Other liabilities 3,693 3,832
Separate account liabilities 15,622 8,879
----------- ----------
Total liabilities 262,413 207,530
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 46,327 36,327
Accumulated other comprehensive income:
Net unrealized securities gains 1,940 1,930
Retained earnings (deficit) 2,827 (633)
------------ ------------
Total stockholder's equity 53,594 40,124
----------- -----------
Total liabilities and stockholder's equity $316,007 $247,654
======== ========
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
AMERICAN PARTNERS LIFE INSURANCE COMPANY
STATEMENTS OF INCOME
Years ended December 31,
($ thousands)
1998 1997 1996
----- ----- ----
Revenues:
<S> <C> <C> <C>
Net investment income $ 17,456 $ 12,609 $ 9,445
Contractholder charges 1,546 673 321
Mortality and expense risk fees 127 56 6
Net realized (loss) gain on investments (66) 130 (125)
---------- --------- ---------
Total revenues 19,063 13,468 9,647
Benefits and expenses:
Interest credited on investment contracts 10,663 9,261 6,860
Amortization of deferred policy acquisition costs (41) 131 625
Amortization of state licenses and goodwill 623 623 623
Other operating expenses 2,415 3,853 5,641
---------- --------- ---------
Total expenses 13,660 13,868 13,749
--------- -------- --------
Income (loss) before income taxes 5,403 (400) (4,102)
Income tax expense (benefit) 1,943 (54) (1,380)
----------- ----------- --------
Net income (loss) $ 3,460 $ (346) $(2,722)
========== ========= ========
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
AMERICAN PARTNERS LIFE INSURANCE COMPANY
STATEMENTS OF STOCKHOLDER'S EQUITY
Three years ended December 31, 1998
($ thousands)
Accumulated Other
Comprehensive
Total Additional
Stockholder's Capital Paid-In Income, Retained
Equity Stock Capital Net of Tax Earnings
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995 $17,645 $2,500 $11,327 $1,371 $2,447
Comprehensive income (loss):
Net loss (2,722) -- -- -- (2,722)
Unrealized holding losses arising
during the year, net of effect on
deferred policy acquisition costs of $59
and taxes of $440 (818) -- -- (818) --
Reclassification adjustment for losses
included in net income, net of tax
of $(25) 46 -- -- 46 --
--------------------
-----------------
Other comprehensive loss (772) -- -- (772) --
-----------------
Comprehensive loss (3,494)
Capital contribution from parent 10,000 -- 10,000 -- --
Other changes (12) -- -- -- (12)
---------------------------------------------------------------------------
Balance, December 31, 1996 24,139 2,500 21,327 599 (287)
Comprehensive income:
Net loss (346) -- -- -- (346)
Unrealized holding gains arising
during the year, net of effect on -- -- --
deferred policy acquisition costs of $(608)
and taxes of $(717) 1,331 1,331
--------------------
-----------------
Other comprehensive income 1,331 -- -- 1,331 --
-----------------
Comprehensive income 985
Capital contribution from parent 15,000 -- 15,000 -- --
---------------------------------------------------------------------------
Balance, December 31, 1997 40,124 2,500 36,327 1,930 (633)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERICAN PARTNERS LIFE INSURANCE COMPANY
STATEMENTS OF STOCKHOLDER'S EQUITY (continued)
Three years ended December 31, 1998
($ thousands)
Accumulated
Other Comprehensive
Total Additional
Stockholder's Capital Paid-In Income, Retained
Equity Stock Capital Net of Tax Earnings
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1997 40,124 2,500 36,327 1,930 (633)
Comprehensive income:
Net income 3,460 -- -- -- 3,460
Unrealized holding losses arising
during the year, net of effect on
deferred policy acquisition costs of
$283 and taxes of $18 (34) -- -- (34) --
Reclassification adjustment for losses
included in net income, net of tax
of $(24) 44 -- -- 44 --
--------------------
-----------------
Other comprehensive income 10 -- -- 10 --
-----------------
Comprehensive income 3,470
Capital contribution from parent 10,000 -- 10,000 --
---------------------------------------------------------------------------
Balance, December 31, 1998 $53,594 $2,500 $46,327 $1,940 $2,827
===========================================================================
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
AMERICAN PARTNERS LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
Years ended December 31,
($ thousands)
1998 1997 1996
----- ----- ----
Cash flows from operating activities:
<S> <C> <C> <C>
Net income (loss) $ 3,460 $ (346) $ (2,722)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Change in accrued investment income (991) (830) (372)
Change in deferred policy acquisition costs, net (5,494) (7,419) (9,285)
Change in other assets 622 624 623
Change in accounts receivable 616 (884) --
Change in policy claims and other
policyholders' funds 1,122 110 (822)
Deferred income tax provision 297 1,296 3,140
Change in other liabilities (139) 2,308 316
Amortization of premium (accretion of
discount), net 29 (41) (16)
Net realized loss (gain) on investments 66 (130) 125
Other, net (9) 10 333
----------- ---------- -------
Net cash used in operating activities (421) (5,302) (8,680)
------------ -------- --------
Cash flows from investing activities: Fixed maturities held to maturity:
Purchases -- -- (250)
Maturities 2,685 869 657
Sales 1,395 3,000 2,690
Fixed maturities available for sale:
Purchases (70,500) (82,967) (39,839)
Maturities 12,163 10,883 2,445
Sales 2,569 -- 281
Change in due from brokers -- 1,100 (1,100)
Change in due to brokers (4,946) 2,945 2,001
----------- --------- ---------
Net cash used in investing activities (56,634) (64,170) (33,115)
-------- -------- --------
Cash flows from financing activities: Activity related to investment contracts:
Considerations received 79,943 68,033 28,190
Surrenders and other benefits (38,805) (23,137) (11,947)
Interest credited to account balances 10,663 9,261 6,860
Capital contribution from parent 10,000 15,000 10,000
--------- --------- ---------
Net cash provided by financing activities 61,801 69,157 33,103
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents 4,746 (315) (8,692)
Cash and cash equivalents at beginning of year -- 315 9,007
------------- ----------- ----------
Cash and cash equivalents at end of year $ 4,746 $ -- $ 315
========= ============ ==========
See accompanying notes.
</TABLE>
<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 47 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), which 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 accumulated other comprehensive income, net of deferred policy
acquisition costs and 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>
1998 1997 1996
---- ---- ----
Cash paid (received) during the year for:
<S> <C> <C> <C>
Income taxes $424 $(2,064) $(3,335)
Interest on borrowings 270 70 22
</TABLE>
Contractholder charges
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 using the
interest method.
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, 1998 and 1997 are $1,218 and
$2, respectively, payable to IDS Life for federal income taxes.
Separate account business
The separate account assets and liabilities represent funds held for the
exclusive benefit of the variable annuity contract owners. The Company
receives mortality and expense risk fees from the variable annuity separate
accounts.
<PAGE>
1. Summary of significant accounting policies (continued)
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.
The Company also guarantees that the rates at which administrative fees are
deducted from contract funds will not exceed contractual maximums.
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, 1998 and 1997, the
accumulated amortization was $3,012 and $2,388, respectively.
Accounting Changes
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income." SFAS
No. 130 requires the reporting and display of comprehensive income and its
components. Comprehensive income is defined as the aggregate change in
stockholder's equity excluding changes in ownership interests. For the
Company, it is net income and the unrealized gains or losses on
available-for-sale securities net of effect on deferred policy acquisition
costs, taxes and reclassification adjustment.
In March 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) 98-1, "Accounting for Costs of
Computer Software Developed or Obtained for Internal Use." The SOP requires
the capitalization of certain costs incurred after the date of adoption to
develop or obtain software for internal use. All software utilized by the
Company is owned by AEFC and will be capitalized on AEFC's financial
statements. As a result, the new rule did not have a material impact on the
Company's results of operations or financial condition.
In December 1997, the AICPA issued SOP 97-3, "Accounting by Insurance and
Other Enterprises for Insurance-Related Assessments," providing guidance
for the timing of recognition of liabilities related to guaranty fund
assessments. The Company will adopt the SOP on January 1, 1999. Adoption of
the SOP will not have a material impact on the Company's results of
operations or financial condition. The ultimate financial impact of the new
rule will be measured based on the derivatives in place at adoption and
cannot be estimated at this time.
<PAGE>
1. Summary of significant accounting policies (continued)
Reclassification
Certain 1997 and 1996 amounts have been reclassified to conform to the 1998
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, 1998 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 $ 59,623 $ 5,104 $ -- $ 64,727
========== ======== ========== ==========
Available for sale
U.S. Government agency obligations $ 7,391 $ 773 $ -- $ 8,164
Corporate bonds and obligations 142,340 4,738 2,593 144,485
Mortgage-backed securities 50,338 1,045 27 51,356
----------- ----------- ---------- -----------
$ 200,069 $ 6,556 $ 2,620 $ 204,005
========= ======== ======= =========
The amortized cost, gross unrealized gains and losses and fair value of
investments in fixed maturities at December 31, 1997 are as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Held to maturity Cost Gains Losses Value
---------------- ------------- ---- -------- --- --------- --- -----
Corporate bonds and obligations $ 63,747 $ 4,410 $ 35 $ 68,122
========== ======= ====== ==========
Available for sale
U.S. Government agency obligations $ 7,406 $ 304 $ -- $ 7,710
Corporate bonds and obligations 91,584 3,158 325 94,417
Mortgage-backed securities 45,354 511 11 45,854
----------- --------- ------- -----------
$ 144,344 $ 3,973 $ 336 $ 147,981
========= ======= ===== =========
</TABLE>
<PAGE>
2. Investments (continued)
The amortized cost and fair value of investments in fixed maturities at
December 31, 1998 by contractual maturity are shown below. Expected
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
Amortized Fair
Held to maturity Cost Value
Due in one year or less $ 2,800 $ 2,817
Due from one to five years 34,462 37,229
Due from five to ten years 19,177 21,020
Due in more than ten years 3,184 3,661
--------- ------------
$ 59,623 $ 64,727
========== ==========
Amortized Fair
Available for sale Cost Value
Due in one year or less $ 2,804 $ 2,844
Due from one to five years 12,398 13,183
Due from five to ten years 85,661 88,778
Due in more than ten years 48,868 47,844
Mortgage-backed securities 50,338 51,356
----------- -----------
$ 200,069 $ 204,005
========= =========
During the year ended December 31, 1998, 1997 and 1996, fixed maturities
classified as held to maturity were sold with amortized cost of $1,398,
$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, fixed maturities available for sale were sold during 1998 with
proceeds of $2,569 and gross realized gains and losses of $151 and $219,
respectively. 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.
<PAGE>
2. Investments (continued)
At December 31, 1998, bonds carried at $7,208 were on deposit with various
states as required by law.
Securities are rated by Moody's and Standard & Poor's (S&P), except for
securities carried at approximately $41.5 million which are rated by AEFC
internal analysts using criteria similar to Moody's and S&P. A summary of
investments in fixed maturities, at amortized cost, by rating on December
31 is as follows:
Rating 1998 1997
---------------------- -------- - ------
Aaa/AAA $ 56,743 $ 51,759
Aa/AA 6,173 3,792
Aa/A 5,609 5,574
A/A 26,214 30,410
A/BBB 21,385 12,856
Baa/BBB 103,790 71,605
Baa/BB 2,743 6,299
Below investment grade 37,035 25,796
----------- -----------
$ 259,692 $ 208,091
========= =========
At December 31, 1998, 83 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:
1998 1997 1996
------ ------ ----
Interest on fixed maturities $ 17,741 $ 12,893 $ 9,473
Interest on cash equivalents 113 192 146
Other 70 1 5
----------- ------------- ---------
17,924 13,086 9,624
Less investment expenses 468 477 179
----------- ----------- ---------
$ 17,456 $ 12,609 $ 9,445
======== ======== =======
Net realized (loss) gain on investments was $(66), $130 and $(125) for the
years ended December 31, 1998, 1997 and 1996, 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:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --- ----
<S> <C> <C> <C>
Fixed maturities available for sale $ 299 $ 2,656 $ (1,129)
</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:
1998 1997 1996
- ------- --- ------- ----
Federal income taxes:
Current $ 1,560 $(1,396) $(4,520)
Deferred 297 1,296 3,140
--------- -------- --------
1,857 (100) (1,380)
State income taxes - current 86 46 --
---------- ---------- ----------
Income tax expense (benefit) $ 1,943 $ (54) $(1,380)
======= ========= =======
Increases (decreases) to the federal income tax provision applicable to
pretax income based on the statutory rate for the years ended December 31,
are attributable to:
<TABLE>
<CAPTION>
1998 1997 1996
------- --------- ----------
Provision Rate Provision Rate Provision Rate
Federal income taxes based
<S> <C> <C> <C> <C> <C> <C>
on the statutory rate $1,891 35.0% $(140) 35.0% $(1,436) 35.0%
Increases are attributable to:
State tax, net benefit 56 1.0% 30 (7.4) -- --
Other, net (4) 0.0% 56 (14.0) 56(1.4)
---------- ----- ------ ----- --------------
Income tax expense (benefit) $1,943 36.0% $(54) 13.6% $(1,380) 33.6%
------ ---- ---- ----- ======== ----
</TABLE>
Significant components of the Company's deferred income tax assets and
liabilities as of December 31 are as follows:
Deferred income tax assets: 1998 1997
------ -----
Policy reserves $ 3,978 $ 3,017
Other 155 98
-------- --------
Total deferred income tax assets 4,133 3,115
-------- ------
Deferred income tax liabilities:
State licenses 27 188
Investments 1,218 1,231
Deferred policy acquisition costs 8,596 7,101
----- -----
Total deferred income tax liabilities 9,841 8,520
----- -----
Net deferred income tax liabilities $ 5,708 $5,405
======= ======
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 $10,181 and $10,795 as of December
31, 1998 and 1997, respectively. Any payments in excess of $1,470 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:
1998 1997 1996
-------- ---------- -------
Statutory net income (loss) $ 1,470 $ (4,011) $ (7,990)
Statutory stockholder's equity 36,862 26,262 15,351
5. Related party transactions
The Company entered into 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 $90,919 and $97,070
for future policy benefits related to this agreement as of December 31,
1998 and 1997, respectively.
The Company has no employees. Charges by IDS Life and AEFC for the use of
joint facilities, marketing services and other services aggregated $4,538,
$6,447 and $5,166 for 1998, 1997 and 1996, 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 $10,000 at AEFC's
cost of funds. The interest rate for the line of credit is AEFC's cost of
funds, ranging from 20 to 45 basis points over an established index. There
were no borrowings outstanding under this agreement at December 31, 1998 or
1997.
<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>
1998 1997
---------------------- -----------------
Carrying Fair Carrying Fair
Financial Assets Amount Value Amount Value
Investments:
Fixed maturities (Note 2):
<S> <C> <C> <C> <C>
Held to maturity $ 59,623 $ 64,727 $ 63,747 $ 68,122
Available for sale 204,005 204,005 147,981 147,981
Cash and cash equivalents (Note 1) 4,746 4,746 -- --
Separate account assets (Note 1) 15,622 15,622 8,879 8,879
Financial Liabilities
Future policy benefits for fixed annuities $236,046 $225,238 $184,246 $175,950
Separate account liabilities 15,622 14,811 8,879 8,549
</TABLE>
The fair value of future policy benefits for fixed annuities is based on
the status of the annuities at December 31, 1998 and 1997. 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 1998 and 1997, respectively.
8. Commitments and contingencies
A number of lawsuits have been filed against life and health insurers in
jurisdictions in which the Company conducts business involving insurers'
sales practices, alleged agent misconduct, failure to properly supervise
agents, and other matters. The Company, along with AEFC and its insurance
subsidiaries, has been named as a defendant in one of these types of
actions.
<PAGE>
8. Commitments and contingencies (continued)
The plaintiffs purport to represent a class consisting of all persons who
purchased policies or contracts from IDS Life and its subsidiaries. The
complaint puts at issue various alleged sales practices and
misrepresentations, alleged breaches of fiduciary duties and alleged
violations of consumer fraud statutes. IDS Life and its subsidiaries
believe they have meritorious defenses to the claims raised in this
lawsuit.
The outcome of any litigation cannot be predicted with certainty. In the
opinion of management, however, the ultimate resolution of this lawsuit
should not have a material adverse effect on the Company's financial
position.
9. Year 2000 Issue (unaudited)
The Year 2000 issue is the result of computer programs having been written
using two digits rather than four to define a year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900
rather than 2000. This could result in the failure of major systems or
miscalculations, which could have a material impact on the operations of
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 target date
for substantially completing corrective measures on business critical
systems was December 31, 1998. Substantial testing of these systems was
targeted for completion early in 1999. AEFC is currently on track with this
schedule and is also on track to finish the work on non-critical systems by
June 30, 1999.
AEFC continues to evaluate the Year 2000 readiness of advisors and other
third parties whose system failures could have an impact on the Company's
operations. The potential materiality of any such impact is not known at
this time.
AEFC's Year 2000 project includes establishing Year 2000 contingency plans
for all key business units. Business continuation plans, which address
business continuation in the event of a system disruption, are in place for
all key business units. These plans are being amended to include specific
Year 2000 considerations and will continuation to be refined throughout
1999 as additional information related to potential Year 2000 exposure is
gathered.
<PAGE>
PART C.
Item 24. Financial Statements and Exhibits
(a) Financial Statements included in Part B of this Registration Statement:
APL Variable Annuity Account 1
Statements of Net Assets for year ended Dec. 31, 1998
Statements of Operations for year ended Dec. 31, 1998
Statements of Changes in Net Assets for years ended Dec. 31 1998 and 1997.
Notes to Financial Statements.
Report of Independent Auditors for APL Variable Annuity Account 1 dated
March 12, 1999.
American Partners Life Insurance Company:
Balance Sheets as of Dec. 31, 1998 and 1997;
Statements of Income for years ended Dec. 31, 1998, 1997 and 1996; and
Statements of Stockholder's Equity for years ended Dec. 31, 1998, 1997 and
1996.
Statements of Cash Flows for the years ended Dec. 31, 1998, 1997 and 1996.
Notes to Financial Statements.
Report of Independent Auditors dated February 4, 1999.
(b) Exhibits:
1. 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 Statement
No. 33-57731 is incorporated herein by reference.
2. Not applicable.
3. Form of Variable Annuity Distribution Agreement, filed electronically as
Exhibit 3 to Pre-Effective Amendment No. 1 to Registration Statement No.
33-57731 is incorporated herein by reference.
4.1 Form of Deferred Annuity Contract for nonqualified contract (form 32028),
filed electronically as Exhibit 4.1 to Pre-Effective Amendment No. 1 to
Registration Statement No. 33-57731 is incorporated herein by reference.
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 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 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.
<PAGE>
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.
9. Opinion of counsel and consent to its use as to the legality of the
securities being registered, dated April 28, 1999, filed electronically
herewith.
10. Consent of Independent Auditors, filed electronically herewith.
11. None.
12. Not applicable.
13. Copy of schedule for computation of each performance quotation provided in
the Registration Statement in response to Item 21, filed as Exhibit 13 to
Registrant's Initial Registration Statement No. 33-57731 is incorporated
herein by reference.
14. 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.
14.1.Power of Attorney to sign Amendments to the Registration Statement dated
April 8, 1998, filed electronically as Exhibit 15.1 to Post-Effective
Amendment No. 4 to Registration Statement No. 33-57731 is incorporated
herein by reference.
14.2 Power of Attorney to sign Amendments to this Registration Statement dated
April 19, 1999, filed electronically herewith.
<PAGE>
<TABLE>
<CAPTION>
Item 25. Directors and Officers of the Depositor (American Partners Life Insurance Company)
Name Principal Business Address Positions and Offices with
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
Paula R. Meyer IDS Tower 10 Director and President
Minneapolis, MN 55440
Mary Ellyn Minenko IDS Tower 10 Vice President, Group Counsel and
Minneapolis, MN 55440 Assistant Secretary
Stuart A. Sedlacek IDS Tower 10 Director and Vice President
Minneapolis, MN 55440
F. Dale Simmons IDS Tower 10 Vice President, Real Estate Loan
Minneapolis, MN 55440 Management
William A. Stoltzmann IDS Tower 10 Director, Vice President, General
Minneapolis, MN 55440 Counsel and Secretary
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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.
<S> <C>
Jurisdiction of
Name of Subsidiary Incorporation
I. Travel Related Services
American Express Travel Related Services Company, Inc. New York
II. International Banking Services
American Express Bank Ltd. Connecticut
III. Companies engaged in Financial Services
Advisory Capital Partners LLC Delaware
Advisory Capital Strategies Group Inc. Minnesota
American Centurion Life Assurance Company New York
American Enterprise Investment Services Inc. Minnesota
American Enterprise Life Insurance Company Indiana
American Express Asset Management Group Inc. Minnesota
American Express Asset Management International Inc. Delaware
American Express Asset Management International (Japan) Ltd. Japan
American Express Asset Management Ltd. England
American Express Client Service Corporation Minnesota
American Express Corporation Delaware
American Express Financial Advisors Inc. Delaware
American Express Financial Advisors Japan Inc. Delaware
American Express Financial Corporation Delaware
American Express Insurance Agency of Arizona Inc. Arizona
American Express Insurance Agency of Idaho Inc. Idaho
American Express Insurance Agency of Nevada Inc. Nevada
American Express Insurance Agency of Oregon Inc. Oregon
American Express Minnesota Foundation Minnesota
American Express Property Casualty Insurance Agency of Kentucky Inc. Kentucky
American Express Property Casualty Insurance Agency of Maryland Inc. Maryland
American Express Property Casualty Insurance Agency of Mississippi Inc. Mississippi
American Express Property Casualty Insurance Agency of Pennsylvania Inc. Pennsylvania
American Express Trust Company Minnesota
American Partners Life Insurance Company Arizona
IDS Cable Corporation Minnesota
IDS Cable II Corporation Minnesota
IDS Capital Holdings Inc. Minnesota
IDS Certificate Company Delaware
IDS Futures Brokerage Group Minnesota
IDS Futures Corporation Minnesota
IDS Insurance Agency of Alabama Inc. Alabama
IDS Insurance Agency of Arkansas Inc. Arkansas
IDS Insurance Agency of Massachusetts Inc. Massachusetts
IDS Insurance Agency of Mississippi Ltd. Mississippi
IDS Insurance Agency of New Mexico Inc. New Mexico
IDS Insurance Agency of North Carolina Inc. North Carolina
IDS Insurance Agency of Ohio Inc. Ohio
<PAGE>
IDS Insurance Agency of Texas Inc. Texas
IDS Insurance Agency of Utah Inc. Utah
IDS Insurance Agency of Wyoming Inc. Wyoming
Jurisdiction of
Name of Subsidiary Incorporation
IDS Life Insurance Company Minnesota
IDS Life Insurance Company of New York New York
IDS Management Corporation Minnesota
IDS Partnership Services Corporation Minnesota
IDS Plan Services of California, Inc. Minnesota
IDS Property Casualty Insurance Company Wisconsin
IDS Real Estate Services, Inc. Delaware
IDS Realty Corporation Minnesota
IDS Sales Support Inc. Minnesota
Investors Syndicate Development Corp. Nevada
Public Employee Payment Company Minnesota
</TABLE>
Item 27. Number of Contractowners
As of March 31, 1999, there were 47 contract owners of qualified
Privileged Assets(R) Select Annuity contracts. There were 847 owners of
non-qualified contracts.
Item 28. Indemnification
The By-Laws of the depositor provide that it shall indemnify a
director, officer, agent or employee of the depositor pursuant to the
provisions of applicable statutes or pursuant to contract.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to director, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid
by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
<PAGE>
<TABLE>
<CAPTION>
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:
Name and Principal Business Address Position and Offices with Underwriter Offices with Registrant
- ------------------------------------------ --------------------------------------- ---------------------------
<S> <C> <C>
Ward D. Armstrong Vice President None
IDS Tower 10
Minneapolis, MN 55440
John C. Boeder Vice President None
IDS Tower 10
Minneapolis, MN 55440
Cynthia M. Carlson Vice President None
IDS Tower 10
Minneapolis, MN 55440
John R. Cattau Vice President None
American Express Tower
World Financial Center
New York, NY 10285
Colleen Curran Vice President and Chief Legal Counsel None
IDS Tower 10
Minneapolis, MN 55440
David R. Hubers Director and President None
IDS Tower 10
Minneapolis, MN 55440
James A. Jacobs Vice President None
IDS Tower 10
Minneapolis, MN 55440
Nancy E. Jones Vice President None
IDS Tower 10
Minneapolis, MN 55440
Verna J. Kaufman Vice President None
IDS Tower 10
Minneapolis, MN 55440
Richard W. Kling Vice President None
IDS Tower 10
Minneapolis, MN 55440
<PAGE>
Timothy S. Meehan Secretary None
IDS Tower 10
Minneapolis, MN 55440
James A. Mitchell Director and Senior Vice President Board member and President
IDS Tower 10
Minneapolis, MN 55440
Julia K. Morton Vice President and Chief Financial None
IDS Tower 10 Officer
Minneapolis, MN 55440
Ann M. Richter Vice President and Chief Compliance None
IDS Tower 10 Officer
Minneapolis, MN 55440
</TABLE>
<TABLE>
<CAPTION>
Item 29(c).
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
Service Corporation
</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 28th day
of April, 1999.
APL VARIABLE ANNUITY ACCOUNT 1
(Registrant)
By American Partners Life Insurance Company
(Sponsor)
By /s/ Paula R. Meyer+
Paula R. Meyer
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 28th day of
April, 1999.
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/ Paula R. Meyer+ Director and President
Paula R. Meyer
/s/ Stuart A. Sedlacek* Director and Vice 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 dated April 19, 1999, filed electronically
herewith.
*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 as Exhibit 15.1 to
Post-Effective Amendment No. 4 to Registration Statement No. 33-57731,
incorporated herein by reference.
- ------------------------------
Mary Ellyn Minenko
<PAGE>
CONTENTS OF THIS POST-EFFECTIVE AMENDMENT NO. 5
TO REGISTRATION STATEMENT NO. 33-57731
This Registration Statement is comprised of the following papers and documents:
The Cover Page.
Part A.
The prospectus.
Part B.
Statement of Additional Information.
Financial Statements.
Part C.
Other Information.
The signatures.
Exhibits.
9. Opinion of counsel and consent to its use as to the legality of the
securities being registered.
10. Consent of Independent Auditors
14.2 Power of Attorney
April 28, 1999
American Partners Life Insurance Company
80 South 8th Street
P.O. Box 59197
Minneapolis, MN 55459-0197
RE: APL Variable Annuity Account 1
Post-Effective Amendment No. 5
File No.: 33-57731/811-07247
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, when offered and sold in
accordance with the prospectus contained in the Registration Statement
and in compliance with applicable law, will be legally issued and
represent binding obligations of the Company in accordance with their
terms.
I hereby consent to the filing of this opinion as an exhibit to the Registration
Statement.
Sincerely,
/s/ Mary Ellyn Minenko
Mary Ellyn Minenko
Counsel
MEM/CLGE/arw
Consent of Independent Auditors
We consent to the use of our report dated February 4, 1999 on the financial
statements American Partners Life Insurance Company and our report dated March
12, 1999 on the financial statements of APL Variable Annuity Account 1 in
Post-Effective Amendment No. 5 to the Registration Statement (Form N-4, No.
33-57731) and related Prospectus for the registration of the APL Privileged
Assets Select Annuity Contracts to be offered by American Partners Life
Insurance Company.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
April 27, 1999
AMERICAN PARTNERS LIFE INSURANCE COMPANY
APL Variable Annuity Account 1
POWER OF ATTORNEY
City of Minneapolis
State of Minnesota
The undersigned, as a Director and President 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, Eileen J. Newhouse and Timothy S. Meehan or any one of them, as
her attorney-in-fact and agent, to sign for her in her name, place and stead any
and all filings, applications (including applications for exemptive relief),
periodic reports, registration statements (with all exhibits and other documents
required or desirable in connection therewith), other documents, and amendments
thereto and to file such filings, applications periodic reports, registration
statements, other documents, and amendments thereto with the Securities and
Exchange Commission, and any necessary states, and grants to any or all of them
the full power and authority to do and perform each and every act required or
necessary in connection therewith.
Dated the 19th day of April, 1999.
/s/ Paula R. Meyer April 19, 1999
Paula R. Meyer
