485BPOS 1 partabc.txt IDS LIFE VARIABLE ACCOUNT 10 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Pre-Effective Amendment No. [ ] Post-Effective Amendment No. 6 (File No. 333-79311) [X] and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. 8 (File No. 811-07355) [X] --------- (Check appropriate box or boxes) IDS LIFE VARIABLE ACCOUNT 10 -------------------------------------------------------------------------------- (Exact Name of Registrant) IDS Life Insurance Company -------------------------------------------------------------------------------- (Name of Depositor) 70100 AXP Financial Center, Minneapolis, MN 55474 -------------------------------------------------------------------------------- (Address of Depositor's Principal Executive Offices) (Zip Code) Depositor's Telephone Number, including Area Code (612) 671-3678 -------------------------------------------------------------------------------- Mary Ellyn Minenko, 50607 AXP Financial Center, Minneapolis, MN 55474 -------------------------------------------------------------------------------- (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 Aug. 9, 2001 pursuant to paragraph (b) of Rule 485 [ ] 60 days after filing pursuant to paragraph (a)(i) of Rule 485 [ ] on Aug. 6, 2001 pursuant to paragraph (a)(i) of Rule 485 If appropriate, check the following box: [ ] this post-effective amendment designates a new effective date for a previously filed post-effective amendment. The prospectuses and Statements of Additional Information filed electronically herewith are not intended to supersede the prospectuses and Statements of Additional Information filed with Post-Effective Amendment No. 3 to Registration Statement No. 333-79311, filed on or about May 1, 2001. American Express Retirement Advisor Advantage(SM) Variable Annuity (icon of) American Express(R) Logo Issued by: IDS Life Insurance Company American Express Retirement Advisor Advantage(SM) Variable Annuity Prospectus Aug. 9, 2001 INDIVIDUAL FLEXIBLE PREMIUM DEFERRED COMBINATION FIXED/VARIABLE ANNUITY IDS Life Variable Account 10 Issued by: IDS Life Insurance Company (IDS Life) 70100 AXP Financial Center Minneapolis, MN 55474 Telephone: (800) 862-7919 americanexpress.com/advisors This prospectus contains information that you should know before investing. You also will receive the prospectuses for: o American Express(R) Variable Portfolio Funds o AIM Variable Insurance Funds o Alliance Variable Products Series Fund o American Century Variable Portfolios, Inc. o Calvert Variable Series, Inc. o Evergreen Variable Annuity Trust o Fidelity Variable Insurance Products - Service Class 2 o Franklin(R) Templeton(R) Variable Insurance Products Trust (FTVIPT) - Class 2 o Goldman Sachs Variable Insurance Trust (VIT) o INVESCO Variable Investment Funds, Inc. o Janus Aspen Series: Service Shares o Lazard Retirement Series, Inc. o MFS(R) Variable Insurance Trust(SM) o Pioneer Variable Contracts Trust (VCT), Class II Shares o Putnam Variable Trust - IB Shares o Strong Opportunity Fund II, Inc. o Wanger Advisors Trust o Wells Fargo Variable Trust Funds Please read the prospectuses carefully and keep them for future reference. The contract provides for purchase payment credits which we may reverse under certain circumstances. Surrender charges from contracts with purchase payment credits may be higher than surrender charges for contracts without such credits. The amount of the credit may be more than offset by additional surrender charges associated with the credit. The Securities and Exchange Commission (SEC) has not approved or disapproved these securities or passed upon the accuracy or adequacy 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 SEC and is available without charge by contacting IDS Life at the telephone number and address listed above. The table of contents of the SAI is on the last page of this prospectus. The SEC maintains an Internet site. This prospectus, the SAI and other information about the product are available on the EDGAR Database on the SEC's Internet site at (http://www.sec.gov). Variable annuities are complex investment vehicles. Before you invest, be sure to ask your sales representative about the variable annuity's features, benefits, risks and fees, and whether the variable annuity is appropriate for you, based upon your financial situation and objectives. IDS Life and its affiliated insurance companies offer several different annuities which your sales representative may be authorized to offer to you. Each annuity has different features and benefits that may be appropriate for you based on your financial situation and needs, your age and how you intend to use the annuity. The different features and benefits may include the investment and fund manager options, variations in interest rate amount and guarantees, credits, surrender charge schedules and access to annuity account values. The fees and charges may also be different between each annuity. Table of Contents Key Terms 3 The Contract in Brief 4 Expense Summary 5 Condensed Financial Information (Unaudited) 49 Financial Statements 54 Performance Information 54 The Variable Account and the Funds 55 The Fixed Account 62 Buying Your Contract 63 Charges 64 Valuing Your Investment 68 Making the Most of Your Contract 69 Surrenders 72 TSA -- Special Surrender Provisions 72 Changing Ownership 73 Benefits in Case of Death 73 Optional Benefits 74 The Annuity Payout Period 80 Taxes 82 Voting Rights 84 Substitution of Investments 84 About the Service Providers 84 Table of Contents of the Statement of Additional Information 85 ---------------------------------------------------------------------- 2 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY Key Terms 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. Assumed investment rate: The rate of return we assume your investments will earn when we calculate your initial annuity payout amount using the annuity table in your contract. The standard assumed investment rate we use is 5% but you may request we substitute an assumed investment rate of 3.5%. Beneficiary: The person you designate to receive benefits in case of the owner's or annuitant's death while the contract is in force and before annuity payouts begin. Close of business: When the New York Stock Exchange (NYSE) closes, normally 4 p.m. Eastern time. Contract: A deferred annuity contract that permits you to accumulate money for retirement by making one or more purchase payments. It provides for lifetime or other forms of payouts beginning at a specified time in the future. Contract value: The total value of your contract before we deduct any applicable charges. Contract year: A period of 12 months, starting on the effective date of your contract and on each anniversary of the effective date. Fixed account: An account to which you may allocate purchase payments. Amounts you allocate to this account earn interest at rates that we declare periodically. Funds: Investment options under your contract. You may allocate your purchase payments into 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 receives the contract's benefits. Purchase payment credits: An addition we make to your contract value. We base the amount of the credit on the surrender charge schedule* you elect and/or total purchase payments. Qualified annuity: A contract that you purchase to fund one of the following tax-deferred retirement plans that is subject to applicable federal law and any rules of the plan itself: o Individual Retirement Annuities (IRAs) under Section 408(b) of the Internal Revenue Code of 1986, as amended (the Code) o Roth IRAs under Section 408 A of the Code o SIMPLE IRAs under Section 408(p) of the Code o Simplified Employee Pension (SEP) plans under Section 408(k) of the Code o Plans under Section 401(k) of the Code o Custodial and trusteed plans under Section 401(a) of the Code o Tax-Sheltered Annuities (TSAs) under Section 403(b) of the Code A qualified annuity will not provide any necessary or additional tax deferral if it is used to fund a retirement plan that is already tax-deferred. All other contracts are considered nonqualified annuities. Rider effective date: The date you add a rider to your contract. Settlement date: The date when annuity payouts are scheduled to begin. 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 invests in shares of one fund. The value of your investment in each subaccount changes with the performance of the particular fund * The ten-year surrender charge is not available in Oregon. Contracts purchased in Oregon are only eligible for a 1% purchase payment credit if the initial purchase payment is at least $100,000. ---------------------------------------------------------------------- 3 PROSPECTUS -- AUG. 9, 2001 The Contract in Brief Purpose: The purpose of the contract is to allow you to accumulate money for retirement. You do this by making one or more purchase payments. You may allocate your purchase payments to the fixed accounts and/or subaccounts under the contract. These accounts, in turn, may earn returns that increase the value of the contract. Beginning at a specified time in the future called the settlement date, the contract provides lifetime or other forms of payouts of your contract value (less any applicable premium tax). 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 or life insurance contract. Most annuities have a tax-deferred feature. So do many retirement plans under the Internal Revenue Code. As a result, when you use an annuity to fund a retirement plan that is tax-deferred, your annuity will not provide any necessary or additional tax deferral for that retirement plan. But annuities do have features other than tax deferral that may help you reach your retirement goals. You should consult your tax advisor prior to making a purchase for an explanation of the tax implications to you. Free look period: You may return your contract to your sales representative or to our office within the time stated on the first page of your contract and receive a full refund of the contract value, less any purchase payment credits. (See "Valuing Your Investment -- Purchase payment credits.") We will not deduct any other charges. However, you bear the investment risk from the time of purchase until you return the contract; the refund amount may be more or less than the payment you made. (Exception: If the law requires, we will refund all of your purchase payments.) Accounts: Currently, you may allocate your purchase payments among any or all of: o the 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 settlement date will equal or exceed the total purchase payments you allocate to the subaccounts. (p. 55) o the fixed account, which earns interest at a rate that we adjust periodically. (p. 62) Buying your contract: Your sales representative will help you complete and submit an application. Applications are subject to acceptance at our office. You may buy a nonqualified annuity or a qualified annuity. After your initial purchase payment, you have the option of making additional purchase payments in the future. (p. 63) o Minimum initial purchase payment -- $2,000 ($1,000 for qualified annuities) unless you pay in installments by means of a bank authorization or under a group billing arrangement such as a payroll deduction. o Minimum additional purchase payment -- $50. o Minimum installment purchase payment -- $50 monthly; $23.08 biweekly (scheduled payment plan billing). o Maximum first-year purchase payments -- $100,000 to $1,000,000 depending on your age. o Maximum purchase payment for each subsequent year -- $50,000 to $100,000 depending upon your age. Transfers: Subject to certain restrictions, you currently may redistribute your contract value among the accounts without charge at any time until annuity payouts begin, and once per contract year among the subaccounts after annuity payouts begin. You may establish automated transfers among the accounts. Fixed account transfers are subject to special restrictions. (p. 70) Surrenders: You may surrender all or part of your contract value at any time before the settlement date. You also may establish automated partial surrenders. Surrenders may be subject to charges and tax penalties (including a 10% IRS penalty if you surrender prior to your reaching age 59 1/2) and may have other tax consequences; also, certain restrictions apply. (p. 72) 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. 73) Benefits in case of death: If you or the annuitant die before annuity payouts begin, we will pay the beneficiary an amount at least equal to the contract value. (p. 73) Optional benefits: This contract offers optional features that are available for additional charges if you meet certain criteria. (p. 74) Annuity payouts: You can apply your contract value to an annuity payout plan that begins on the settlement date. You may choose from a variety of plans to make sure that payouts continue as long as you like. If you purchased a qualified annuity, the payout schedule must meet the requirements of the tax-deferred retirement plan. We can make payouts on a fixed or variable basis, or both. Total monthly payouts may include amounts from each subaccount and the fixed account. During the annuity payout period, you cannot be invested in more than five subaccounts at any one time unless we agree otherwise. (p. 80) 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. 82) Charges: We assess certain charges in connection with your contract: o $30 annual contract administrative charge; o for nonqualified annuities a 0.95% mortality and expense risk fee (if you allocate money to one or more subaccounts); -------------------------------------------------------------------------------- 4 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY o for qualified annuities a 0.75% mortality and expense risk fee (if you allocate money to one or more subaccounts); o surrender charge; o any premium taxes that may be imposed on us by state or local governments (currently, we deduct any applicable premium tax when annuity payouts begin but we reserve the right to deduct this tax at other times such as when you make purchase payments or when you surrender your contract); o the operating expenses of the funds in which the subaccounts invest; o if you select the Maximum Anniversary Value Death Benefit (MAV) , an annual fee of 0.15% of the contract value; o if you select the Enhanced Earnings Death Benefit (EEB) , an annual fee of 0.30% of the contract value; and o if you select the Enhanced Earnings Plus Death Benefit (EEP) , an annual fee of 0.40% of the contract value. Expense Summary The purpose of the following information 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 we deduct directly from your contract or indirectly from the subaccounts and funds below. Some expenses may vary as we explain under "Charges." Please see the funds' prospectuses for more information on the operating expenses for each fund. CONTRACT OWNER EXPENSES Surrender charge: Contingent deferred sales charge as a percentage of purchase payment surrendered. The owner selects either a seven-year or ten-year surrender charge schedule at the time of application.* Seven-year schedule Ten-year schedule* Years from purchase Surrender charge Years from purchase Surrender charge payment receipt percentage payment receipt percentage 1 7% 1 8% 2 7 2 8 3 7 3 8 4 6 4 7 5 5 5 7 6 4 6 6 7 2 7 5 Thereafter 0 8 4 9 3 10 2 Thereafter 0 * Ten-year surrender charge schedule is not available for contracts issued in Oregon. For contracts issued in Massachusetts, Oregon and Washington, surrender charges are waived after the tenth contract anniversary. A surrender charge also applies to payouts under certain annuity payout plans (see "Charges -- Surrender Charge" and "The Annuity Payout Period -- Annuity Payout Plans"). Annual contract administrative charge: $30** ** We will waive this charge when your contract value, or total purchase payments less any payments surrendered, is $50,000 or more on the current contract anniversary, except at full surrender. Maximum Anniversary Value Death Benefit Rider (MAV) fee: 0.15% (As a percentage of the contract value charged annually at the contract anniversary. This is an optional expense) Enhanced Earnings Death Benefit Rider (EEB) fee: 0.30% (As a percentage of the contract value charged annually at the contract anniversary. This is an optional expense) Enhanced Earnings Plus Death Benefit Rider (EEP) fee: 0.40% (As a percentage of the contract value charged annually at the contract anniversary. This is an optional expense) ANNUAL VARIABLE ACCOUNT EXPENSES (as a percentage of average subaccount value) Mortality and expense risk fee: 0.95% for nonqualified annuities 0.75% for qualified annuities ---------------------------------------------------------------------- 5 PROSPECTUS -- AUG. 9, 2001
Annual operating expenses of the funds (after fee waivers and/or expense reimbursements, if applicable, as a percentage of average daily net assets) Management 12b-1 Other fees fees expenses Total AXP(R) Variable Portfolio - Blue Chip Advantage Fund .56% .13% .26% .95%(1) Bond Fund .60 .13 .06 .79(2) Capital Resource Fund .60 .13 .04 .77(2) Cash Management Fund .51 .13 .04 .68(2) Diversified Equity Income Fund .56 .13 .26 .95(1) Emerging Markets Fund 1.13 .13 .43 1.69(1) Equity Select Fund .65 .13 .32 1.10(3) Extra Income Fund .62 .13 .07 .82(2) Federal Income Fund .61 .13 .13 .87(1) Global Bond Fund .84 .13 .10 1.07(2) Growth Fund .64 .13 .18 .95(1) International Fund .82 .13 .07 1.02(2) Managed Fund .59 .13 .03 .75(2) New Dimensions Fund(R) .60 .13 .05 .78(2) Partners Small Cap Value Fund 1.10 .13 .27 1.50(3) S&P 500 Index Fund .28 .13 .07 .48(1) Small Cap Advantage Fund .75 .13 .31 1.19(1) Stock Fund .60 .13 .37 1.10(3) Strategy Aggressive Fund .59 .13 .05 .77(2) AIM V.I. Capital Appreciation Fund, Series II .61 .25 .21 1.07(4) Capital Development Fund, Series II .75 .25 .43 1.43(4) Alliance VP AllianceBernstein International Value Portfolio (Class B) .01 .25 .94 1.20(5) Growth & Income Portfolio (Class B) .63 .25 .07 .95(6) American Century VP International, Class II 1.40 .25 -- 1.65(7) Value, Class II .90 .25 -- 1.15(7) Calvert Variable Series, Inc. Social Balanced Portfolio .70 -- .16 .86(8) Evergreen VA Capital Growth Fund, Class L Shares .80 .25 .05 1.10(9) Fidelity VIP III Growth & Income Portfolio (Service Class 2) .48 .25 .12 .85(10) III Mid Cap Portfolio (Service Class 2) .57 .25 .17 .99(11) Overseas Portfolio (Service Class 2) .72 .25 .18 1.15(12) Franklin Templeton VIP Trust Franklin Real Estate Fund - Class 2 .58 .25 .02 .85(13),(14) Franklin Value Securities Fund - Class 2 .58 .25 .26 1.09(14),(15) Mutual Shares Securities Fund - Class 2 .60 .25 .20 1.05(14) Goldman Sachs VIT CORE(SM) U.S. Equity Fund .70 -- .20 .90(16) Mid Cap Value Fund .80 -- .25 1.05(16)
---------------------------------------------------------------------- 6 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY
Annual operating expenses of the funds (after fee waivers and/or expense reimbursements, if applicable, as a percentage of average daily net assets) (continued) Management 12b-1 Other fees fees expenses Total INVESCO VIF Dynamics Fund .75% --% .34% 1.09%(17),(18) Financial Services Fund .75 -- .34 1.09(17),(18) Technology Fund .72 -- .30 1.02(17),(18) Telecommunications Fund .75 -- .31 1.06(17),(18) Janus Aspen Series Global Technology Portfolio: Service Shares .65 .25 .04 .94(19) International Growth Portfolio: Service Shares .65 .25 .06 .96(19) Lazard Retirement Series International Equity Portfolio .75 .25 .25 1.25(20) MFS(R) Investors Growth Stock Series - Service Class (Previously MFS(R) Growth Series) .75 .20 .16 1.11(21),(22),(23) New Discovery Series - Service Class .90 .20 .16 1.26(21),(22),(23) Utilities Series - Service Class .75 .20 .16 1.11(21),(22) Pioneer VCT Pioneer Equity-Income VCT Portfolio - Class II Shares .65 .25 .06 .96(24) Pioneer Europe VCT Portfolio - Class II Shares .90 .25 .55 1.70(25) Putnam Variable Trust Putnam VT Health Sciences Fund - Class IB Shares .70 .25 .09 1.04(26) Putnam VT International Growth Fund - Class IB Shares .76 .25 .18 1.19(26) Putnam VT Vista Fund - Class IB Shares .60 .25 .07 .92(26) Strong Funds Strong Opportunity Fund II - Advisor Class .75 .15 .35 1.25(27) Wanger International Small Cap 1.20 -- .21 1.41(6),(28) U.S. Small Cap .95 -- .05 1.00(6),(28) Wells Fargo VT Asset Allocation Fund .57 .25 .18 1.00(29) International Equity Fund .15 .25 .60 1.00(27) Small Cap Growth Fund .15 .25 .80 1.20(27)
(1) The fund's expense figures are based on actual expenses, after fee waivers and expense reimbursements, for the fiscal year ending Aug. 31, 2000. Without fee waivers and expense reimbursements "Other Expenses" and "Total" would be 0.27% and 0.96% for AXP Variable Portfolio - Blue Chip Advantage Fund, 0.80% and 1.49% for AXP Variable Portfolio - Diversified Equity Income Fund, 1.16% and 2.42% for AXP Variable Portfolio - Emerging Markets Fund, 0.15% and 0.89% for AXP Variable Portfolio - Federal Income Fund, 0.20% and 0.97% for AXP Variable Portfolio - Growth Fund, 1.16% and 1.57% for AXP Variable Portfolio - S&P 500 Index Fund and 0.55% and 1.43% for AXP Variable Portfolio - Small Cap Advantage Fund. (2) The fund's expense figures are based on actual expenses for the fiscal year ended Aug. 31, 2000. (3) The fund's expense figures are based on estimated expenses after fee waivers and expense reimbursements. Without fee waivers and expense reimbursements "Other Expenses" and "Total" would be 0.68% and 1.46% for AXP VP Equity Select Fund, 0.57% and 1.80% for AXP VP Partners Small Cap Value Fund and 0.44% and 1.17% for AXP VP Stock Fund. (4) Management and other expenses are based on estimated amounts for the current fiscal year. (5) The Portfolio's expense figures are based on estimated expenses after advisory fee waiver. Absent such waiver, "Management fees" and "Total" would be 1.00% and 2.19%. (6) "Management Fees," "12b-1 Fees," "Other Expenses" and "Total" are based on actual expenses for the fiscal year ended Dec. 31, 2000. (7) Annual expenses estimated as of inception date of July 16, 2001. The fund has a stepped fee schedule. As a result, the fund's management fee generally decreases as fund assets increase. (8) Net fund operating expenses before reductions for fees paid indirectly would be 0.88% for Social Balanced. (9) Expenses are estimated for the year ending Dec. 31, 2001. From time to time, the Fund's investment advisory may, at its discretion, reduce or waive its fees or reimburse the Fund for certain of its expenses in order to reduce expense ratios. The Fund's investment advisory may cease these waivers at any time. The estimated Annual Fund Operating Expenses reflect fee waivers and expense reimbursements. Excluding current fee waivers and expense reimbursements, Total Fund Operating Expenses are 1.24% for Class L shares. (10) Effective Jan. 12, 2000, FMR has voluntarily agreed to reimburse Service Class 2 of the fund to the extent that total operating expenses (excluding interest, taxes, certain securities lending costs, brokerage commissions, and extraordinary expenses), as a percentage of its net assets, exceed 1.25% This arrangement can be discontinued by FMR at any time. ---------------------------------------------------------------------- 7 PROSPECTUS -- AUG. 9, 2001 (11) There were no reimbursements or expense reductions for the period ended Dec. 31, 2000. Actual annual class operating expenses were lower because a portion of the brokerage commissions that the fund paid was used to reduce the fund's expenses, and/or because through arrangements with the fund's custodian, credits realized as a result of uninvested cash balances were used to reduce a portion of the fund's custodian expenses. See the accompanying fund prospectus for details. (12) Effective Jan. 12, 2000, FMR has voluntarily agreed to reimburse Service Class 2 of the fund to the extent that total operating expenses (excluding interest, taxes, certain securities lending costs, brokerage commissions, and extraordinary expenses), as a percentage of its net assets, exceed 1.75%. This arrangement can be discontinued by FMR at any time. (13) The Fund administration fee is paid indirectly through the management fee. (14) The Fund's class 2 distribution plan or "Rule 12b-1 plan" is described in the fund's prospectus. (15) The manager has agreed in advance to reduce its fee to reflect reduced services resulting from the Fund's investment in a Franklin Templeton money fund. This reduction is required by the Fund's Board of Trustees and an order of the Securities and Exchange Commission. Absent fee waivers and/or reimbursements. "Management Fees" and "Total" would have been 0.60% and 1.11% for Franklin Value Securities Fund - Class 2. (16) Expense ratios are shown after fee waivers and expense reimbursements by the Investment advisor. The expense ratios before the waivers and reimbursements would have been: 0.70%, 0.17%, and 0.87% for CORE(SM) U.S. Equity Fund, and 0.80%, 0.42% and 1.22% for Mid Cap Value Fund. CORE(SM) is a service mark of Goldman Sachs & Co. (17) The Fund's actual Other Expenses and Total Annual Fund Operating Expenses were lower than the figures shown because its custodian fees were reduced under an expense offset arrangement. (18) Certain expenses of the Fund were absorbed voluntarily by INVESCO pursuant to a commitment between the Fund and INVESCO. This commitment may be changed at any time following consultation with the board of directors. After absorption, but excluding any expense offset arrangements, the Fund's Other Expenses and Total Annual Fund Operating Expenses for the fiscal year ended December 31,2000 were insignificant. (19) Expenses are based upon expenses for the fiscal year ended Dec. 31, 2000, restated to reflect a reduction in the management fee for International Growth Portfolio. All expenses are shown without the effect of expense offset arrangements. (20) Absent fee waivers and/or reimbursements, "Other Expenses" and "Total" expenses for the year ended Dec. 31, 2000 would have been 1.32% and 2.32% for International Equity Portfolio. (21) Each series has adopted a distribution plan under Rule 12b-1 that permits it to pay marketing and other fees to support the sales and distribution of service class shares (these fees are referred to as distribution fees). (22) Each series has an expense offset arrangement which reduces the series' custodian fee based upon the amount of cash maintained by the series with its custodian and dividend disbursing agent. The series may enter into other similar arrangements and directed brokerage arrangements, which would also have the effect of reducing the series' expenses. "Other Expenses" do not take into account these expense reductions, and are therefore higher than the actual expenses of the series. Had these fee reductions been taken into account, "Net Expenses" would be lower, and for service class shares would be estimated to be: 1.10% for Investors Growth Stock Series and 1.25% for New Discovery Series and 1.10% for Utilities Series. (23) MFS has contractually agreed, subject to reimbursement, to bear expenses for the series' expenses such that "Other Expenses" (after taking into account the expense offset arrangement described above), do not exceed 0.15% annually. Without this agreement, "Other Expenses" and "Total" would be 0.17% and 1.12% for Investors Growth Stock Series and 0.19% and 1.29% for New Discovery Series. These contractual fee arrangements will continue until at least May 1, 2002, Unless changed with the consent of the board of trustees which oversees the series. (24) The portfolio's expense figures are based on actual expenses for the fiscal year ended Dec. 31, 2000. (25) The portfolio's expense figures are based on estimated expenses for the fiscal year ending Dec. 31, 2001 after management fee waiver. Without the fee waiver "Management fees" and "Total" would be 1.00% and 1.80% for the portfolio. (26) Restated to reflect an increase in 12b-1 fees currently payable to Putnam Investment Management, LLC ("Putnam Management"). The Trustees currently limit payments on class IB shares to 0.25% of average net assets. Actual 12b-1 fees during the most recent fiscal year were 0.15% of average net assets. (27) The fund's distributor has voluntarily agreed to waive a portion of the 12b-1 fee. Absent this waiver, "12b-1 fees" would be 0.25% and it is estimated that "Total" expenses would be 1.35%. (28) Liberty Wanger Asset Management, L.P. will reimburse the Fund if its annual ordinary operating expenses exceed 2.00% of average daily net assets. This commitment expires on Sept. 30, 2002. (29) Amounts represent expenses as of Dec. 31, 2000. Expenses are shown after fee waivers and expense reimbursements. Without fee waivers and expense reimbursements "Management Fees," "Other Expenses" and "Total" would be 0.70%, 0.18% and 1.13% for Wells Fargo VT Asset Allocation Fund, 0.90%, 1.25% and 2.40% for Wells Fargo VT International Equity Fund and 0.90%, 1.26% and 2.41% for Wells Fargo VT Small Cap Growth Fund. ---------------------------------------------------------------------- 8 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY Examples:* In order to provide a more meaningful discussion about the contract and its options, we provide expense examples for each fund showing every available optional contract feature combination. These examples assume that the applicable fund fee waivers and/or expense reimbursements will continue for the periods shown. Under each fund you will find an example showing: 1) the base contract with no optional riders, 2) the contract with selection of the Maximum Anniversary Value Death Benefit Rider, 3) the contract with the selection of the Enhanced Earnings Death Benefit Rider, 4) the contract with the selection of the Enhanced Earnings Plus Death Benefit Rider, 5) the contract with the selection of both the Maximum Anniversary Value Death Benefit and the Enhanced Earning Death Benefit Riders, and 6) the contract with the selection of both the Maximum Anniversary Value Death Benefit Rider and the Enhanced Earnings Plus Death Benefit Riders. You would pay the following expenses on a $1,000 investment in a nonqualified annuity with a ten-year surrender charge schedule+ and a 0.95% mortality and expense risk fee assuming a 5% annual return and ...
no surrender or selection full surrender at the of an annuity payout plan at the end of each time period end of each time period 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years AXP(R) VP - Blue Chip Advantage Fund base contract with no optional riders $100.02 $141.87 $176.28 $249.47 $20.02 $61.87 $106.28 $229.47 optional MAV 101.56 146.52 184.09 265.35 21.56 66.52 114.09 245.35 optional EEB 103.09 151.16 191.85 281.00 23.09 71.16 121.85 261.00 optional EEP 104.12 154.24 197.00 291.30 24.12 74.24 127.00 271.30 optional MAV and EEB 104.63 155.78 199.56 296.42 24.63 75.78 129.56 276.42 optional MAV and EEP 105.66 158.86 204.68 306.57 25.66 78.86 134.68 286.57 AXP(R) VP - Bond Fund base contract with no optional riders 98.38 136.90 167.89 232.27 18.38 56.90 97.89 212.27 optional MAV 99.92 141.56 175.75 248.40 19.92 61.56 105.75 228.40 optional EEB 101.45 146.21 183.57 264.30 21.45 66.21 113.57 244.30 optional EEP 102.48 149.31 188.75 274.77 22.48 69.31 118.75 254.77 optional MAV and EEB 102.99 150.85 191.33 279.96 22.99 70.85 121.33 259.96 optional MAV and EEP 104.02 153.94 196.48 290.28 24.02 73.94 126.48 270.28 AXP(R) VP - Capital Resource Fund base contract with no optional riders 98.17 136.27 166.84 230.10 18.17 56.27 96.84 210.10 optional MAV 99.71 140.94 174.71 246.26 19.71 60.94 104.71 226.26 optional EEB 101.25 145.60 182.53 262.19 21.25 65.60 112.53 242.19 optional EEP 102.27 148.69 187.72 272.68 22.27 68.69 117.72 252.68 optional MAV and EEB 102.79 150.23 190.30 277.89 22.79 70.23 120.30 257.89 optional MAV and EEP 103.81 153.32 195.46 288.22 23.81 73.32 125.46 268.22 AXP(R) VP - Cash Management Fund base contract with no optional riders 97.25 133.47 162.09 220.28 17.25 53.47 92.09 200.28 optional MAV 98.79 138.14 169.99 236.59 18.79 58.14 99.99 216.59 optional EEB 100.33 142.80 177.84 252.66 20.33 62.80 107.84 232.66 optional EEP 101.35 145.90 183.05 263.25 21.35 65.90 113.05 243.25 optional MAV and EEB 101.86 147.45 185.64 268.50 21.86 67.45 115.64 248.50 optional MAV and EEP 102.89 150.54 190.82 278.92 22.89 70.54 120.82 258.92 AXP(R) VP - Diversified Equity Income Fund base contract with no optional riders 100.02 141.87 176.28 249.47 20.02 61.87 106.28 229.47 optional MAV 101.56 146.52 184.09 265.35 21.56 66.52 114.09 245.35 optional EEB 103.09 151.16 191.85 281.00 23.09 71.16 121.85 261.00 optional EEP 104.12 154.24 197.00 291.30 24.12 74.24 127.00 271.30 optional MAV and EEB 104.63 155.78 199.56 296.42 24.63 75.78 129.56 276.42 optional MAV and EEP 105.66 158.86 204.68 306.57 25.66 78.86 134.68 286.57
---------------------------------------------------------------------- 9 PROSPECTUS -- AUG. 9, 2001
You would pay the following expenses on a $1,000 investment in a nonqualified annuity with a ten-year surrender charge schedule+ and a 0.95% mortality and expense risk fee assuming a 5% annual return and ...(continued) no surrender or selection full surrender at the of an annuity payout plan at the end of each time period end of each time period 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years AXP(R) VP - Emerging Markets Fund base contract with no optional riders $107.60 $164.68 $214.34 $325.58 $27.60 $ 84.68 $144.34 $305.58 optional MAV 109.14 169.26 221.91 340.34 29.14 89.26 151.91 320.34 optional EEB 110.68 173.82 229.43 354.88 30.68 93.82 159.43 334.88 optional EEP 111.70 176.86 234.42 364.45 31.70 96.86 164.42 355.45 optional MAV and EEB 112.22 178.38 236.91 369.20 32.22 98.38 166.91 349.20 optional MAV and EEP 113.24 181.40 241.87 378.63 33.24 101.40 171.87 358.63 AXP(R) VP - Equity Select Fund base contract with no optional riders 101.56 146.52 184.09 265.35 21.56 66.52 114.09 245.35 optional MAV 103.09 151.16 191.85 281.00 23.09 71.16 121.85 261.00 optional EEB 104.63 155.78 199.56 296.42 24.63 75.78 129.56 276.42 optional EEP 105.66 158.86 204.68 306.57 25.66 78.86 134.68 286.57 optional MAV and EEB 106.17 160.39 207.23 311.61 26.17 80.39 137.23 291.61 optional MAV and EEP 107.19 163.45 212.31 321.61 27.19 83.45 142.31 301.61 AXP(R) VP - Extra Income Fund base contract with no optional riders 98.69 137.83 169.47 235.51 18.69 57.83 99.47 215.51 optional MAV 100.22 142.49 177.32 251.60 20.22 62.49 107.32 231.60 optional EEB 101.76 147.14 185.12 267.45 21.76 67.14 115.12 247.45 optional EEP 102.79 150.23 190.30 277.89 22.79 70.23 120.30 257.89 optional MAV and EEB 103.30 151.78 192.88 283.07 23.30 71.78 122.88 263.07 optional MAV and EEP 104.32 154.86 198.02 293.35 24.32 74.86 128.02 273.35 AXP(R) VP - Federal Income Fund base contract with no optional riders 99.20 139.39 172.09 240.90 19.20 59.39 102.09 220.90 optional MAV 100.74 144.05 179.93 256.91 20.74 64.05 109.93 236.91 optional EEB 102.27 148.69 187.72 272.68 22.27 68.69 117.72 252.68 optional EEP 103.30 151.78 192.88 283.07 23.30 71.78 122.88 263.07 optional MAV and EEB 103.81 153.32 195.46 288.22 23.81 73.32 125.46 268.22 optional MAV and EEP 104.84 156.40 200.59 298.45 24.84 76.40 130.59 278.45 AXP(R) VP - Global Bond Fund base contract with no optional riders 101.25 145.60 182.53 262.19 21.25 65.60 112.53 242.19 optional MAV 102.79 150.23 190.30 277.89 22.79 70.23 120.30 257.89 optional EEB 104.32 154.86 198.02 293.35 24.32 74.86 128.02 273.35 optional EEP 105.35 157.93 203.15 303.53 25.35 77.93 133.15 283.53 optional MAV and EEB 105.86 159.47 205.70 308.59 25.86 79.47 135.70 288.59 optional MAV and EEP 106.89 162.54 210.79 318.62 26.89 82.54 140.79 298.62 AXP(R) VP - Growth Fund base contract with no optional riders 100.02 141.87 176.28 249.47 20.02 61.87 106.28 229.47 optional MAV 101.56 146.52 184.09 265.35 21.56 66.52 114.09 245.35 optional EEB 103.09 151.16 191.85 281.00 23.09 71.16 121.85 261.00 optional EEP 104.12 154.24 197.00 291.30 24.12 74.24 127.00 271.30 optional MAV and EEB 104.63 155.78 199.56 296.42 24.63 75.78 129.56 276.42 optional MAV and EEP 105.66 158.86 204.68 306.57 25.66 78.86 134.68 286.57
---------------------------------------------------------------------- 10 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY
You would pay the following expenses on a $1,000 investment in a nonqualified annuity with a ten-year surrender charge schedule+ and a 0.95% mortality and expense risk fee assuming a 5% annual return and ...(continued) no surrender or selection full surrender at the of an annuity payout plan at the end of each time period end of each time period 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years AXP(R) VP - International Fund base contract with no optional riders $100.74 $144.05 $179.93 $256.91 $20.74 $64.05 $109.93 $236.91 optional MAV 102.27 148.69 187.72 272.68 22.27 68.69 117.72 252.68 optional EEB 103.81 153.32 195.46 288.22 23.81 73.32 125.46 268.22 optional EEP 104.84 156.40 200.59 298.45 24.84 76.40 130.59 278.45 optional MAV and EEB 105.35 157.93 203.15 303.53 25.35 77.93 133.15 283.53 optional MAV and EEP 106.37 161.00 208.25 313.61 26.37 81.00 138.25 293.61 AXP(R) VP - Managed Fund base contract with no optional riders 97.97 135.65 165.78 227.92 17.97 55.65 95.87 207.92 optional MAV 99.51 140.32 173.66 244.12 19.51 60.32 103.66 224.12 optional EEB 101.04 144.98 181.49 260.08 21.04 64.98 111.49 240.08 optional EEP 102.07 148.07 186.68 270.59 22.07 68.07 116.68 250.59 optional MAV and EEB 102.58 149.62 189.27 275.81 22.58 69.62 119.27 255.81 optional MAV and EEP 103.61 152.70 194.43 286.16 23.61 72.70 124.43 266.16 AXP(R) VP - New Dimensions Fund(R) base contract with no optional riders 98.28 136.58 167.36 231.18 18.28 56.58 97.36 211.18 optional MAV 99.81 141.25 175.23 247.33 19.81 61.25 105.23 227.33 optional EEB 101.35 145.90 183.05 263.25 21.35 65.90 113.05 243.25 optional EEP 102.38 149.00 188.23 273.72 22.38 69.00 118.23 253.72 optional MAV and EEB 102.89 150.54 190.82 278.92 22.89 70.54 120.82 258.92 optional MAV and EEP 103.91 153.63 195.97 289.25 23.91 73.63 125.97 269.25 AXP(R) VP - Partners Small Cap Value Fund base contract with no optional riders 105.66 158.86 204.68 306.57 25.66 78.86 134.68 286.57 optional MAV 107.19 163.45 212.31 321.61 27.19 83.45 142.31 301.61 optional EEB 108.73 168.04 219.90 336.43 28.73 88.04 149.90 316.43 optional EEP 109.76 171.09 224.93 346.18 29.76 91.09 154.93 326.18 optional MAV and EEB 110.27 172.61 227.43 351.02 30.27 92.61 157.43 331.02 optional MAV and EEP 111.29 175.65 232.43 360.63 31.29 95.65 162.43 340.63 AXP(R) VP - S&P 500 Index Fund base contract with no optional riders 95.20 127.21 151.48 198.16 15.20 47.21 81.48 178.16 optional MAV 96.74 131.90 159.45 214.79 16.74 51.90 89.45 194.79 optional EEB 98.28 136.58 167.36 231.18 18.28 56.58 97.36 211.18 optional EEP 99.30 139.70 172.61 241.98 19.30 59.70 102.61 221.98 optional MAV and EEB 99.81 141.25 175.23 247.33 19.81 61.25 105.23 227.33 optional MAV and EEP 100.84 144.36 180.45 257.97 20.84 64.36 110.45 237.97 AXP(R) VP - Small Cap Advantage Fund base contract with no optional riders 102.48 149.31 188.75 274.77 22.48 69.31 118.75 254.77 optional MAV 104.02 153.94 196.48 290.28 24.02 73.94 126.48 270.28 optional EEB 105.55 158.55 204.17 305.56 25.55 78.55 134.17 285.56 optional EEP 106.58 161.62 209.26 315.62 26.58 81.62 139.26 295.62 optional MAV and EEB 107.09 163.15 211.80 320.61 27.09 83.15 141.80 300.61 optional MAV and EEP 108.12 166.21 216.87 330.53 28.12 86.21 146.87 310.53
---------------------------------------------------------------------- 11 PROSPECTUS -- AUG. 9, 2001
You would pay the following expenses on a $1,000 investment in a nonqualified annuity with a ten-year surrender charge schedule+ and a 0.95% mortality and expense risk fee assuming a 5% annual return and ...(continued) no surrender or selection full surrender at the of an annuity payout plan at the end of each time period end of each time period 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years AXP(R) VP - Stock Fund base contract with no optional riders $101.56 $146.52 $184.09 $265.35 $21.56 $66.52 $114.09 $245.35 optional MAV 103.09 151.16 191.85 281.00 23.09 71.16 121.85 261.00 optional EEB 104.63 155.78 199.56 296.42 24.63 75.78 129.56 276.42 optional EEP 105.66 158.86 204.68 305.57 25.66 78.86 134.68 286.57 optional MAV and EEB 106.17 160.39 207.23 311.61 26.17 80.39 137.23 291.61 optional MAV and EEP 107.19 163.45 212.31 321.61 27.19 83.45 142.31 301.61 AXP(R) VP - Strategy Aggressive Fund base contract with no optional riders 98.17 136.27 166.84 230.10 18.17 56.27 96.84 210.10 optional MAV 99.71 140.94 174.71 246.26 19.71 60.94 104.71 226.26 optional EEB 101.25 145.60 182.53 262.19 21.25 65.60 112.53 242.19 optional EEP 102.27 148.69 187.72 272.68 22.27 68.69 117.72 252.68 optional MAV and EEB 102.79 150.23 190.30 277.89 22.79 70.23 120.30 257.89 optional MAV and EEP 103.81 153.32 195.46 288.22 23.81 73.32 125.46 268.22 AIM V. I. Capital Appreciation Fund, Series II base contract with no optional riders 101.25 145.60 182.53 262.19 21.25 65.60 112.53 242.19 optional MAV 102.79 150.23 190.30 277.89 22.79 70.23 120.30 257.89 optional EEB 104.32 154.86 198.02 293.35 24.32 74.86 128.02 273.55 optional EEP 105.35 157.93 203.15 303.53 25.35 77.93 133.15 283.53 optional MAV and EEB 105.86 159.47 205.70 308.59 25.86 79.47 135.70 288.59 optional MAV and EEP 106.89 162.54 210.79 318.62 26.89 82.54 140.79 298.62 AIM V.I. Capital Development Fund Series II base contract 104.94 156.71 201.10 299.47 24.94 76.71 131.10 279.47 optional MAV 106.48 161.31 208.76 314.62 26.48 81.31 138.76 294.62 optional EEB 108.01 165.90 216.36 329.54 28.01 85.90 146.36 309.54 optional EEP 109.04 168.95 221.41 339.36 29.04 88.95 151.41 319.36 optional MAV and EEB 109.55 170.48 223.92 344.24 29.55 90.48 153.92 324.24 optional MAV and EEP 110.58 173.52 228.93 353.92 30.58 93.52 158.93 333.92 Alliance VP AllianceBernstein International Value Portfolio (Class B) base contract with no optional riders 102.58 149.62 189.27 275.81 22.58 69.62 119.27 255.81 optional MAV 104.12 154.24 197.00 291.30 24.12 74.24 127.00 271.30 optional EEB 105.66 158.86 204.68 306.57 25.66 78.86 134.68 286.57 optional EEP 106.68 161.92 209.77 316.62 26.68 81.92 139.77 296.62 optional MAV and EEB 107.19 163.45 212.31 321.61 27.19 83.45 142.31 301.61 optional MAV and EEP 108.22 166.51 217.37 331.51 28.22 86.51 147.37 311.51 Alliance VP Growth & Income Portfolio (Class B) base contract with no optional riders 100.02 141.87 176.28 249.47 20.02 61.87 106.28 229.47 optional MAV 101.56 146.52 184.09 265.35 21.56 66.52 114.09 245.35 optional EEB 103.09 151.16 191.85 281.00 23.09 71.16 121.85 261.00 optional EEP 104.12 154.24 197.00 291.30 24.12 74.24 127.00 271.30 optional MAV and EEB 104.63 155.78 199.56 296.42 24.63 75.78 129.56 276.42 optional MAV and EEP 105.66 158.86 204.68 306.57 25.66 78.86 134.68 286.57
---------------------------------------------------------------------- 12 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY
You would pay the following expenses on a $1,000 investment in a nonqualified annuity with a ten-year surrender charge schedule+ and a 0.95% mortality and expense risk fee assuming a 5% annual return and ...(continued) no surrender or selection full surrender at the of an annuity payout plan at the end of each time period end of each time period 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years American Century VP International, Class II base contract with no optional riders $107.19 $163.45 $212.31 $321.61 $27.19 $ 83.45 $142.31 $301.61 optional MAV 108.73 168.04 219.90 336.43 28.73 88.04 149.90 316.43 optional EEB 110.27 172.61 227.43 351.02 30.27 92.61 157.43 331.02 optional EEP 111.29 175.65 232.43 360.63 31.29 95.65 162.43 340.63 optional MAV and EEB 111.81 177.16 234.92 365.40 31.81 97.16 164.92 345.40 optional MAV and EEP 112.83 180.19 239.89 374.87 32.83 100.19 169.89 354.87 American Century VP Value, Class II base contract with no optional riders 102.07 148.07 186.68 270.59 22.07 68.07 116.68 250.59 optional MAV 103.61 152.70 194.43 286.16 23.61 72.70 124.43 266.16 optional EEB 105.14 157.32 202.12 301.50 25.14 77.32 132.12 281.50 optional EEP 106.17 160.39 207.23 311.61 26.17 80.39 137.23 291.61 optional MAV and EEB 106.68 161.92 209.77 316.62 26.68 81.92 139.77 296.62 optional MAV and EEP 107.71 164.98 214.84 326.57 27.71 84.98 144.84 306.57 Calvert Variable Series, Inc. Social Balanced Portfolio base contract with no optional riders 99.10 139.08 171.57 239.83 19.10 59.08 101.57 219.83 optional MAV 100.63 143.74 179.41 255.85 20.63 63.74 109.41 235.85 optional EEB 102.17 148.38 187.20 271.64 22.17 68.38 117.20 251.64 optional EEP 103.20 151.47 192.37 282.03 23.20 71.47 122.37 262.03 optional MAV and EEB 103.71 153.01 194.94 287.19 23.71 73.01 124.94 267.19 optional MAV and EEP 104.73 156.09 200.08 297.44 24.73 76.09 130.08 277.44 Evergreen VA Capital Growth Fund, Class L Shares base contract with no optional riders 101.56 146.52 184.09 265.35 21.56 66.52 114.09 245.35 optional MAV 103.09 151.16 191.85 281.00 23.09 71.16 121.85 261.00 optional EEB 104.63 155.78 199.56 296.42 24.63 75.78 129.56 276.42 optional EEP 105.66 158.86 204.68 306.57 25.66 78.86 134.68 286.57 optional MAV and EEB 106.17 160.39 207.23 311.61 26.17 80.39 137.23 291.61 optional MAV and EEP 107.19 163.45 212.31 321.61 27.19 83.45 142.31 301.61 Fidelity VIP III Growth & Income Portfolio (Service Class 2) base contract with no optional riders 98.99 138.76 171.04 238.75 18.99 58.76 101.04 218.75 optional MAV 100.53 143.43 178.88 254.79 20.53 63.43 108.88 234.79 optional EEB 102.07 148.07 186.68 270.59 22.07 68.07 116.68 250.59 optional EEP 103.09 151.16 191.85 281.00 23.09 71.16 121.85 261.00 optional MAV and EEB 103.61 152.70 194.43 286.16 23.61 72.70 124.43 266.16 optional MAV and EEP 104.63 155.78 199.56 296.42 24.63 75.78 129.56 276.42 Fidelity VIP III Mid Cap Portfolio (Service Class 2) base contract with no optional riders 100.43 143.11 178.36 253.73 20.43 63.11 108.36 233.73 optional MAV 101.97 147.76 186.16 269.54 21.97 67.76 116.16 249.54 optional EEB 103.50 152.39 193.91 285.13 23.50 72.39 123.91 265.13 optional EEP 104.53 155.47 199.05 295.39 24.53 75.47 129.05 275.39 optional MAV and EEB 105.04 157.01 201.61 300.49 25.04 77.01 131.61 280.49 optional MAV and EEP 106.07 160.08 206.72 310.60 26.07 80.08 136.72 290.60
---------------------------------------------------------------------- 13 PROSPECTUS -- AUG. 9, 2001
You would pay the following expenses on a $1,000 investment in a nonqualified annuity with a ten-year surrender charge schedule+ and a 0.95% mortality and expense risk fee assuming a 5% annual return and ...(continued) no surrender or selection full surrender at the of an annuity payout plan at the end of each time period end of each time period 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years Fidelity VIP Overseas Portfolio (Service Class 2) base contract with no optional riders $102.07 $148.07 $186.68 $270.59 $22.07 $68.07 $116.68 $250.59 optional MAV 130.61 152.70 194.43 286.16 23.61 72.70 124.43 266.16 optional EEB 105.14 157.32 202.12 301.50 25.14 77.32 132.12 281.50 optional EEP 106.17 160.39 207.23 311.61 26.17 80.39 137.23 291.61 optional MAV and EEB 106.68 161.92 209.77 316.62 26.68 81.92 139.77 296.62 optional MAV and EEP 107.71 164.98 214.84 326.57 27.71 84.98 144.84 306.57 FTVIPT Franklin Real Estate Fund - Class 2 base contract with no optional riders 98.99 138.76 171.04 238.75 18.99 58.76 101.04 218.75 optional MAV 100.53 143.43 178.88 254.79 20.53 63.43 108.88 234.79 optional EEB 102.07 148.07 186.68 270.59 22.07 68.07 116.68 250.59 optional EEP 103.09 151.16 191.85 281.00 23.09 71.16 121.85 261.00 optional MAV and EEB 103.61 152.70 194.43 286.16 23.61 72.70 124.43 266.16 optional MAV and EEP 104.63 155.78 199.56 296.42 24.63 75.78 129.56 276.42 FTVIPT Franklin Value Securities Fund - Class 2 base contract with no optional riders 101.45 146.21 183.57 264.30 21.45 66.21 113.57 244.30 optional MAV 102.99 150.85 191.33 279.96 22.99 70.85 121.33 259.96 optional EEB 104.53 155.47 199.05 295.39 24.53 75.47 129.05 275.39 optional EEP 105.55 158.55 204.17 305.56 25.55 78.55 134.17 285.56 optional MAV and EEB 106.07 160.08 206.72 310.60 26.07 80.08 136.72 290.60 optional MAV and EEP 107.09 163.15 211.80 320.61 27.09 82.15 141.80 300.61 FTVIPT Mutual Shares Securities Fund - Class 2 base contract with no optional riders 101.04 144.98 181.49 260.08 21.04 64.98 111.49 240.08 optional MAV 102.58 149.62 189.27 275.81 22.58 69.62 119.27 255.81 optional EEB 104.12 154.24 197.00 291.30 24.12 74.24 127.00 271.30 optional EEP 105.14 157.32 202.12 301.50 25.14 77.32 132.12 281.50 optional MAV and EEB 105.66 158.86 204.68 306.57 25.66 78.86 134.68 286.57 optional MAV and EEP 106.68 161.92 209.77 316.62 26.68 81.92 139.77 296.62 Goldman Sachs VIT CORE(SM) U.S. Equity Fund base contract with no optional riders 99.51 140.32 173.66 244.12 19.51 60.32 103.66 224.12 optional MAV 101.04 144.98 181.49 260.08 21.04 64.98 111.49 240.08 optional EEB 102.58 149.62 189.27 275.81 22.58 69.62 119.27 255.81 optional EEP 103.61 152.70 194.43 286.16 23.61 72.70 124.43 266.16 optional MAV and EEB 104.12 154.24 197.00 291.30 24.12 74.24 127.00 271.30 optional MAV and EEP 105.14 157.32 202.12 301.50 25.14 77.32 132.12 281.50 Goldman Sachs VIT Mid Cap Value Fund base contract with no optional riders 101.04 144.98 181.49 260.08 21.04 64.98 111.49 240.08 optional MAV 102.58 149.62 189.27 275.81 22.58 69.62 119.27 255.81 optional EEB 104.12 154.24 197.00 291.30 24.12 74.24 127.00 271.30 optional EEP 105.14 157.32 202.12 301.50 25.14 77.32 132.12 281.50 optional MAV and EEB 105.66 158.86 204.68 306.57 25.66 78.86 134.68 286.57 optional MAV and EEP 106.68 161.92 209.77 316.62 26.68 81.92 139.77 296.62
---------------------------------------------------------------------- 14 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY
You would pay the following expenses on a $1,000 investment in a nonqualified annuity with a ten-year surrender charge schedule+ and a 0.95% mortality and expense risk fee assuming a 5% annual return and ...(continued) no surrender or selection full surrender at the of an annuity payout plan at the end of each time period end of each time period 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years INVESCO VIF - Dynamics Fund base contract with no optional riders $101.45 $146.21 $183.57 $264.30 $21.45 $66.21 $113.57 $244.30 optional MAV 102.99 150.85 191.33 279.96 22.99 70.85 121.33 259.96 optional EEB 104.53 155.47 199.05 295.39 24.53 75.47 129.05 275.39 optional EEP 105.55 158.55 204.17 305.56 25.55 78.55 134.17 285.56 optional MAV and EEB 106.07 160.08 206.72 310.60 26.07 80.08 136.72 290.60 optional MAV and EEP 107.09 163.15 211.80 320.61 27.09 83.15 141.80 300.61 INVESCO VIF - Financial Services Fund base contract with no optional riders 101.45 146.21 183.57 264.30 21.45 66.21 113.57 244.30 optional MAV 102.99 150.85 191.33 279.96 22.99 70.85 121.33 259.96 optional EEB 104.53 155.47 199.05 295.39 24.53 75.47 129.05 275.39 optional EEP 105.55 158.55 204.17 305.56 25.55 78.55 134.17 285.56 optional MAV and EEB 106.07 160.08 206.72 310.60 26.07 80.08 136.72 290.60 optional MAV and EEP 107.09 163.15 211.80 320.61 27.09 83.15 141.80 300.61 INVESCO VIF - Technology Fund base contract with no optional riders 100.74 144.05 179.93 256.91 20.74 64.05 109.93 236.91 optional MAV 102.27 148.69 187.72 272.68 22.27 68.69 117.72 252.68 optional EEB 103.81 153.32 195.46 288.22 23.81 73.32 125.46 268.22 optional EEP 104.84 156.40 200.59 298.45 24.84 76.40 130.59 278.45 optional MAV and EEB 105.35 157.93 203.15 303.53 25.35 77.93 133.15 283.53 optional MAV and EEP 106.37 161.00 208.25 313.61 26.37 81.00 138.25 293.61 INVESCO VIF - Telecommunications Fund base contract with no optional riders 101.15 145.29 182.01 261.14 21.15 65.29 112.01 241.14 optional MAV 102.68 149.93 189.78 276.85 22.68 69.93 119.78 256.85 optional EEB 104.22 154.55 197.51 292.33 24.22 74.55 127.51 272.33 optional EEP 105.25 157.63 202.63 302.52 25.25 77.63 132.63 282.52 optional MAV and EEB 105.76 159.16 205.19 307.58 25.76 79.16 135.19 287.58 optional MAV and EEP 106.78 162.23 210.28 317.62 26.78 82.23 140.28 297.62 Janus Aspen Series Global Technology Portfolio: Service Shares base contract with no optional riders 99.92 141.56 175.75 248.40 19.92 61.56 105.75 228.40 optional MAV 101.45 146.21 183.57 264.30 21.45 66.21 113.57 244.30 optional EEB 102.99 150.85 191.33 279.96 22.99 70.85 121.33 259.96 optional EEP 104.02 153.94 196.48 290.28 24.02 73.94 126.48 270.28 optional MAV and EEB 104.53 155.47 199.05 295.39 24.53 75.47 129.05 275.39 optional MAV and EEP 105.55 158.55 204.17 305.56 25.55 78.55 134.17 285.56 Janus Aspen Series International Growth Portfolio: Service Shares base contract with no optional riders 100.12 142.18 176.80 250.53 20.12 62.18 106.80 230.53 optional MAV 101.66 146.83 184.61 266.40 21.66 66.83 114.61 246.40 optional EEB 103.20 151.47 192.37 282.03 23.20 71.47 122.37 262.03 optional EEP 104.22 154.55 197.51 292.33 24.22 74.55 127.51 272.33 optional MAV and EEB 104.73 156.09 200.08 297.44 24.73 76.09 130.08 277.44 optional MAV and EEP 105.76 159.16 205.19 307.58 25.76 79.16 135.19 287.58
---------------------------------------------------------------------- 15 PROSPECTUS -- AUG. 9, 2001
You would pay the following expenses on a $1,000 investment in a nonqualified annuity with a ten-year surrender charge schedule+ and a 0.95% mortality and expense risk fee assuming a 5% annual return and ...(continued) no surrender or selection full surrender at the of an annuity payout plan at the end of each time period end of each time period 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years Lazard Retirement Series International Equity Portfolio base contract with no optional riders $103.09 $151.16 $191.85 $281.00 $23.09 $ 71.16 $121.85 $261.00 optional MAV 104.63 155.78 199.56 296.42 24.63 75.78 129.56 276.42 optional EEB 106.17 160.39 207.23 311.61 26.17 80.39 137.23 291.61 optional EEP 107.19 163.45 212.31 321.61 27.19 83.45 142.31 301.61 optional MAV and EEB 107.71 164.98 214.84 326.57 27.71 84.98 144.84 306.57 optional MAV and EEP 108.73 168.04 219.90 336.43 28.73 88.04 149.90 316.43 MFS(R) Investors Growth Stock Series - Service Class (previously MFS(R) Growth Series) base contract with no optional riders 101.66 146.83 184.61 266.40 21.66 66.83 114.61 246.40 optional MAV 103.20 151.47 192.37 282.03 23.20 71.47 122.37 262.03 optional EEB 104.73 156.09 200.08 297.44 24.73 76.09 130.08 277.44 optional EEP 105.76 159.16 205.19 307.58 25.76 79.16 135.19 287.58 optional MAV and EEB 106.27 160.70 207.74 312.61 26.27 80.70 137.74 292.61 optional MAV and EEP 107.30 163.76 212.82 322.60 27.30 83.76 142.82 302.60 MFS(R) New Discovery Series - Service Class base contract with no optional riders 103.20 151.47 192.37 282.03 23.20 71.47 122.37 262.03 optional MAV 104.73 156.09 200.08 297.44 24.73 76.09 130.08 277.44 optional EEB 106.27 160.70 207.74 312.61 26.27 80.70 137.74 292.61 optional EEP 107.30 163.76 212.82 322.60 27.30 83.76 142.82 302.60 optional MAV and EEB 107.81 165.29 215.35 327.56 27.81 85.29 145.35 307.56 optional MAV and EEP 108.83 168.34 220.40 337.41 28.83 88.34 150.40 317.41 MFS(R) Utilities Series - Service Class base contract with no optional riders 101.66 146.83 184.61 266.40 21.66 66.83 114.61 246.40 optional MAV 103.20 151.47 192.37 282.03 23.20 71.47 122.37 262.03 optional EEB 104.73 156.09 200.08 297.44 24.73 76.09 130.08 277.44 optional EEP 105.76 159.16 205.19 307.58 25.76 79.16 135.19 287.58 optional MAV and EEB 106.27 160.70 207.74 312.61 26.27 80.70 137.74 292.61 optional MAV and EEP 107.30 163.76 212.82 322.60 27.30 83.76 142.82 302.60 Pioneer Equity-Income VCT Portfolio - Class II Shares base contract with no optional riders 100.12 142.18 176.80 250.53 20.12 62.18 106.80 230.53 optional MAV 101.66 146.83 184.61 266.40 21.66 66.83 114.61 246.40 optional EEB 103.20 151.47 192.37 282.03 23.20 71.47 122.37 262.03 optional EEP 104.22 154.55 197.51 292.33 24.22 74.55 127.51 272.33 optional MAV and EEB 104.73 156.09 200.08 297.44 24.73 76.09 130.08 277.44 optional MAV and EEP 105.76 159.16 205.19 307.58 25.76 79.16 315.19 287.58 Pioneer Europe VCT Portfolio - Class II Shares base contract with no optional riders 107.71 164.98 214.84 326.57 27.71 84.98 144.84 306.57 optional MAV 109.24 169.56 222.41 341.32 29.24 89.56 152.41 321.32 optional EEB 110.78 174.13 229.93 355.84 30.78 94.13 159.93 335.84 optional EEP 111.81 177.16 234.92 365.40 31.81 97.16 164.92 345.40 optional MAV and EEB 112.32 178.68 237.41 370.15 32.32 98.68 167.41 350.15 optional MAV and EEP 113.34 181.71 242.36 379.57 33.34 101.71 172.36 359.57
---------------------------------------------------------------------- 16 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY
You would pay the following expenses on a $1,000 investment in a nonqualified annuity with a ten-year surrender charge schedule+ and a 0.95% mortality and expense risk fee assuming a 5% annual return and ...(continued) no surrender or selection full surrender at the of an annuity payout plan at the end of each time period end of each time period 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years Putnam VT Health Sciences Fund: Class IB Shares base contract with no optional riders $100.94 $144.67 $180.97 $259.02 $20.94 $64.67 $110.97 $239.02 optional MAV 102.48 149.31 188.75 274.77 22.48 69.31 118.75 254.77 optional EEB 104.02 153.94 196.48 290.28 24.02 73.94 126.48 270.28 optional EEP 105.04 157.01 201.61 300.49 25.04 77.01 131.61 280.49 optional MAV and EEB 105.55 158.55 204.17 305.56 25.55 78.55 134.17 285.56 optional MAV and EEP 106.58 161.62 209.26 315.62 26.58 81.62 139.26 295.62 Putnam VT International Growth Fund: Class IB Shares base contract with no optional riders 102.48 149.31 188.75 274.77 22.48 69.31 118.75 254.77 optional MAV 104.02 153.94 196.48 290.28 24.02 73.94 126.48 270.28 optional EEB 105.55 158.55 204.17 305.56 25.55 78.55 134.17 285.56 optional EEP 106.58 161.62 209.26 315.62 26.58 81.62 139.26 295.62 optional MAV and EEB 107.09 163.15 211.80 320.61 27.09 83.15 141.80 300.61 optional MAV and EEP 108.12 166.21 216.87 330.53 28.12 86.21 146.87 310.53 Putnam VT Vista Fund - Class IB Shares base contract with no optional riders 99.71 140.94 174.71 246.26 19.71 60.94 104.71 226.26 optional MAV 101.25 145.60 182.53 262.19 21.25 65.60 112.53 242.19 optional EEB 102.79 150.23 190.30 277.89 22.79 70.23 120.30 257.89 optional EEP 103.81 153.32 195.46 288.22 23.81 73.32 125.46 268.22 optional MAV and EEB 104.32 154.86 198.02 293.35 24.32 74.86 128.02 273.35 optional MAV and EEP 103.35 157.93 203.15 303.53 25.35 77.93 133.15 283.53 Strong Opportunity Fund II - Advisor Class base contract with no optional riders 103.09 151.16 191.85 281.00 23.09 71.16 121.85 261.00 optional MAV 104.63 155.78 199.56 296.42 24.63 75.78 129.56 276.42 optional EEB 106.17 160.39 207.23 311.61 26.17 80.39 137.23 291.61 optional EEP 107.19 163.45 212.31 321.61 27.19 83.45 142.31 301.61 optional MAV and EEB 107.71 164.98 214.84 326.57 22.71 84.98 144.84 306.57 optional MAV and EEP 108.73 168.04 219.90 336.43 28.73 88.04 149.90 316.43 Wanger International Small Cap base contract with no optional riders 104.73 156.09 200.08 297.44 24.73 76.09 130.08 277.44 optional MAV 106.27 160.70 207.74 312.61 26.27 80.70 137.74 292.61 optional EEB 107.81 165.29 215.35 327.56 27.81 85.29 145.35 307.56 optional EEP 108.83 168.34 220.40 337.41 28.83 88.34 150.40 317.41 optional MAV and EEB 109.35 169.87 222.92 342.29 29.35 89.87 152.92 322.29 optional MAV and EEP 110.37 172.91 227.93 351.99 30.37 92.91 157.93 331.99 Wanger U.S. Small Cap base contract with no optional riders 100.53 143.43 178.88 254.79 20.53 63.43 108.88 234.79 optional MAV 102.07 148.07 186.68 270.59 22.07 68.07 116.68 250.59 optional EEB 103.61 152.70 194.43 286.16 23.61 72.70 124.43 266.16 optional EEP 104.63 155.78 199.56 296.42 24.63 75.78 129.56 276.42 optional MAV and EEB 105.14 157.32 202.12 301.50 25.14 77.32 132.12 281.50 optional MAV and EEP 106.17 160.39 207.23 311.61 26.17 80.39 137.23 291.61
---------------------------------------------------------------------- 17 PROSPECTUS -- AUG. 9, 2001
You would pay the following expenses on a $1,000 investment in a nonqualified annuity with a ten-year surrender charge schedule+ and a 0.95% mortality and expense risk fee assuming a 5% annual return and ...(continued) no surrender or selection full surrender at the of an annuity payout plan at the end of each time period end of each time period 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years Wells Fargo VT Asset Allocation Fund base contract with no optional riders $100.53 $143.43 $178.88 $254.79 $20.53 $63.43 $108.88 $234.79 optional MAV 102.07 148.07 186.68 270.59 22.07 68.07 116.68 250.59 optional EEB 103.61 152.70 194.43 286.16 23.61 72.70 124.43 266.16 optional EEP 104.63 155.78 199.56 296.42 24.63 75.78 129.56 276.42 optional MAV and EEB 105.14 157.32 202.12 301.50 25.14 77.32 132.12 281.50 optional MAV and EEP 106.17 160.39 207.23 311.61 26.17 80.39 137.23 291.61 Wells Fargo VT International Equity Fund base contract with no optional riders 100.53 143.43 178.88 254.79 20.53 63.43 108.88 234.79 optional MAV 102.07 148.07 186.68 270.59 22.07 68.07 116.68 250.59 optional EEB 103.61 152.70 194.43 286.16 23.61 72.70 124.43 266.16 optional EEP 104.63 155.78 199.56 296.42 24.63 75.78 129.56 276.42 optional MAV and EEB 105.14 157.32 202.12 301.50 25.14 77.32 132.12 281.50 optional MAV and EEP 106.17 160.39 207.23 311.61 26.17 80.39 137.23 291.61 Wells Fargo VT Small Cap Growth Fund base contract with no optional riders 102.58 149.62 189.27 275.81 22.58 69.62 119.27 255.81 optional MAV 104.12 154.24 197.00 291.30 24.12 74.24 127.00 271.30 optional EEB 105.66 158.86 204.68 306.57 25.66 78.86 134.68 286.57 optional EEP 106.68 161.92 209.77 316.62 26.68 81.92 139.77 296.62 optional MAV and EEB 107.19 163.45 212.31 321.61 27.19 83.45 142.31 301.61 optional MAV and EEP 108.22 166.51 217.37 331.51 28.22 86.51 147.37 311.51
-------------------------------------------------------------------------------- 18 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY
You would pay the following expenses on a $1,000 investment in a qualified annuity with a ten-year surrender charge schedule+ and a 0.75% mortality and expense risk fee assuming a 5% annual return and ... no surrender or selection full surrender at the of an annuity payout plan at the end of each time period end of each time period 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years AXP(R) VP - Blue Chip Advantage Fund base contract with no optional riders $ 97.97 $135.65 $165.78 $227.92 $17.97 $55.65 $ 95.78 $207.92 optional MAV 99.51 140.32 173.66 244.12 19.51 60.32 103.66 224.12 optional EEB 101.04 144.98 181.49 260.08 21.04 64.98 111.49 240.08 optional EEP 102.07 148.07 186.68 270.59 22.07 68.07 116.68 250.59 optional MAV and EEB 102.58 149.62 189.27 275.81 22.58 69.62 119.27 255.81 optional MAV and EEP 103.61 152.70 194.43 286.16 23.61 72.70 124.43 266.16 AXP(R) VP - Bond Fund base contract with no optional riders 96.33 130.65 157.33 210.38 16.33 50.65 87.33 190.38 optional MAV 97.87 135.34 165.26 226.84 17.87 55.34 95.26 206.84 optional EEB 99.40 140.01 173.14 243.05 19.40 60.01 103.14 233.05 optional EEP 100.43 143.11 178.36 253.73 20.43 63.11 108.36 233.73 optional MAV and EEB 100.94 144.67 180.97 259.02 20.94 64.67 110.97 239.02 optional MAV and EEP 101.97 147.76 186.16 269.54 21.97 67.76 116.16 249.54 AXP(R) VP - Capital Resource Fund base contract with no optional riders 96.12 130.03 156.27 208.17 16.12 50.03 86.27 188.17 optional MAV 97.66 134.71 164.20 224.66 17.66 54.71 94.20 204.66 optional EEB 99.20 139.39 172.09 240.90 19.20 59.39 102.09 220.90 optional EEP 100.22 142.49 177.32 251.60 20.22 62.49 107.32 231.60 optional MAV and EEB 100.74 144.05 179.93 256.91 20.74 64.05 109.93 236.91 optional MAV and EEP 101.76 147.14 185.12 267.45 21.76 67.14 115.12 247.45 AXP(R) VP - Cash Management Fund base contract with no optional riders 95.20 127.21 151.48 198.16 15.20 47.21 81.48 178.16 optional MAV 96.74 131.91 159.45 214.79 16.74 51.90 89.45 194.79 optional EEB 98.28 136.58 167.36 231.18 18.28 56.58 97.36 211.18 optional EEP 99.30 139.70 172.61 241.98 19.30 59.70 102.61 221.98 optional MAV and EEB 99.81 141.25 175.23 247.33 19.81 61.25 105.23 227.33 optional MAV and EEP 100.84 144.36 180.45 257.97 20.84 64.36 110.45 237.97 AXP(R) VP - Diversified Equity Income Fund base contract with no optional riders 97.97 135.65 165.78 227.92 17.97 55.65 95.78 207.92 optional MAV 99.51 140.32 173.66 244.12 19.51 60.32 103.66 224.12 optional EEB 101.04 144.98 181.49 260.08 21.04 64.98 111.49 240.08 optional EEP 102.07 148.07 186.68 270.59 22.07 68.07 116.68 250.59 optional MAV and EEB 102.58 149.62 189.27 275.81 22.58 69.62 119.27 255.81 optional MAV and EEP 103.61 152.70 194.43 286.16 23.61 72.70 124.43 266.16 AXP(R) VP - Emerging Markets Fund base contract with no optional riders 105.55 158.55 204.17 305.56 25.55 78.55 134.17 285.56 optional MAV 107.09 163.15 211.80 320.61 27.09 83.15 141.80 300.61 optional EEB 108.63 167.73 219.39 335.44 28.63 87.73 149.39 315.44 optional EEP 109.65 170.78 224.42 345.21 29.65 90.78 154.42 325.21 optional MAV and EEB 110.17 172.30 226.93 350.06 30.17 92.30 156.93 330.06 optional MAV and EEP 111.19 175.34 231.93 359.68 31.19 95.34 161.93 339.68
---------------------------------------------------------------------- 19 PROSPECTUS -- AUG. 9, 2001
You would pay the following expenses on a $1,000 investment in a qualified annuity with a ten-year surrender charge schedule+ and a 0.75% mortality and expense risk fee assuming a 5% annual return and ...(continued) no surrender or selection full surrender at the of an annuity payout plan at the end of each time period end of each time period 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years AXP(R) VP - Equity Select Fund base contract with no optional riders $ 99.51 $140.32 $173.66 $244.12 $19.51 $60.32 $103.66 $224.12 optional MAV 101.04 144.98 181.49 260.08 21.04 64.98 111.49 240.08 optional EEB 102.58 149.62 189.27 275.81 22.58 69.62 119.27 255.81 optional EEP 103.61 152.70 194.43 286.16 23.61 72.70 124.43 266.16 optional MAV and EEB 104.12 154.24 197.00 291.30 24.12 74.24 127.00 271.30 optional MAV and EEP 105.14 157.32 202.12 301.50 25.14 77.32 132.12 281.50 AXP(R) VP - Extra Income Fund base contract with no optional riders 96.64 131.59 158.92 213.69 16.64 51.59 88.92 193.69 optional MAV 98.17 136.27 166.84 230.10 18.17 56.27 96.84 210.10 optional EEB 99.71 140.94 174.71 246.26 19.71 60.94 104.71 226.26 optional EEP 100.74 144.05 179.93 256.91 20.74 64.05 109.93 236.91 optional MAV and EEB 101.25 145.60 182.53 262.19 21.25 65.60 112.53 242.19 optional MAV and EEP 102.27 148.69 187.72 272.68 22.27 68.69 117.72 252.68 AXP(R) VP - Federal Income Fund base contract with no optional riders 97.15 133.15 161.56 219.19 17.15 53.15 91.56 199.19 optional MAV 98.69 137.83 169.47 235.51 18.69 57.83 99.47 215.51 optional EEB 100.22 142.49 177.32 251.60 20.22 62.49 107.32 231.60 optional EEP 101.25 145.60 182.53 262.19 21.25 65.60 112.53 242.19 optional MAV and EEB 101.76 147.14 185.12 267.45 21.76 67.14 115.12 247.45 optional MAV and EEP 102.79 150.23 190.30 277.89 22.79 70.23 120.30 257.89 AXP(R) VP - Global Bond Fund base contract with no optional riders 99.20 139.39 172.09 240.90 19.20 59.39 102.09 220.90 optional MAV 100.74 144.05 179.93 256.91 20.74 64.05 109.93 236.91 optional EEB 102.27 148.69 187.72 272.68 22.27 68.69 117.72 252.68 optional EEP 103.30 151.78 192.88 283.07 23.30 71.78 122.88 263.07 optional MAV and EEB 103.81 153.32 195.46 288.22 23.81 73.32 125.46 268.22 optional MAV and EEP 104.84 156.40 200.59 298.45 24.84 76.40 130.59 278.45 AXP(R) VP - Growth Fund base contract with no optional riders 97.97 135.65 165.78 227.92 17.97 55.65 95.78 207.92 optional MAV 99.51 140.32 173.66 244.12 19.51 60.32 103.66 224.12 optional EEB 101.04 144.98 181.49 260.08 21.04 64.98 111.49 240.08 optional EEP 102.07 148.07 186.68 270.59 22.07 68.07 116.68 250.59 optional MAV and EEB 102.58 149.62 189.27 275.81 22.58 69.62 119.27 255.81 optional MAV and EEP 103.61 152.70 194.43 286.16 23.61 72.70 124.43 266.16 AXP(R) VP - International Fund base contract with no optional riders 98.69 137.83 169.47 235.51 18.69 57.83 99.47 215.51 optional MAV 100.22 142.49 177.32 251.60 20.22 62.49 107.32 231.60 optional EEB 101.76 147.14 185.12 267.45 21.76 67.14 115.12 247.45 optional EEP 102.79 150.23 190.30 277.89 22.79 70.23 120.30 257.89 optional MAV and EEB 103.30 151.78 192.88 283.07 23.30 71.78 122.88 263.07 optional MAV and EEP 104.32 154.86 198.02 293.35 24.32 74.86 128.02 273.35
---------------------------------------------------------------------- 20 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY
You would pay the following expenses on a $1,000 investment in a qualified annuity with a ten-year surrender charge schedule+ and a 0.75% mortality and expense risk fee assuming a 5% annual return and ...(continued) no surrender or selection full surrender at the of an annuity payout plan at the end of each time period end of each time period 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years AXP(R) VP - Managed Fund base contract with no optional riders $ 95.92 $129.40 $155.20 $205.95 $15.92 $49.40 $ 85.20 $185.95 optional MAV 97.46 134.09 163.15 222.47 17.46 54.09 93.15 202.47 optional EEB 98.99 138.76 171.04 238.75 18.99 58.76 101.04 218.75 optional EEP 100.02 141.87 176.28 249.47 20.02 61.87 106.28 229.47 optional MAV and EEB 100.53 143.43 178.88 254.79 20.53 63.43 108.88 234.79 optional MAV and EEP 101.56 146.52 184.09 265.35 21.56 66.52 114.09 245.35 AXP(R) VP - New Dimensions Fund(R) base contract with no optional riders 96.23 130.34 156.80 209.28 16.23 50.34 86.80 189.28 optional MAV 97.76 135.03 164.73 225.75 17.76 55.03 94.73 205.75 optional EEB 99.30 139.70 172.61 241.98 19.30 59.70 102.61 221.98 optional EEP 100.33 142.80 177.84 252.66 20.33 62.80 107.84 232.66 optional MAV and EEB 100.84 144.36 180.45 257.97 20.84 64.36 110.45 237.97 optional MAV and EEP 101.86 147.45 185.64 268.50 21.86 67.45 115.64 248.50 AXP(R) VP - Partners Small Cap Value Fund base contract with no optional riders 103.61 152.70 194.43 286.16 23.61 72.70 124.43 266.16 optional MAV 105.14 157.32 202.12 301.50 25.14 77.32 132.12 281.50 optional EEB 106.68 161.92 209.77 316.62 26.68 81.92 139.77 296.62 optional EEP 107.71 164.98 214.84 326.57 27.71 84.98 144.84 306.57 optional MAV and EEB 108.22 166.51 217.37 331.51 28.22 86.51 147.37 311.51 optional MAV and EEP 109.24 169.56 222.41 321.32 29.24 89.56 152.41 321.32 AXP(R) VP - S&P 500 Index Fund base contract with no optional riders 93.15 120.92 140.78 175.60 13.15 40.92 70.78 155.60 optional MAV 94.69 125.64 148.81 192.56 14.69 45.64 78.81 172.56 optional EEB 96.23 130.34 156.80 209.28 16.23 50.34 86.80 189.28 optional EEP 97.25 133.47 162.09 220.28 17.25 53.47 92.09 200.28 optional MAV and EEB 97.76 135.03 164.73 225.75 17.76 55.03 94.73 205.75 optional MAV and EEP 98.79 138.14 169.99 236.59 18.79 58.14 99.99 216.59 AXP(R) VP - Small Cap Advantage Fund base contract with no optional riders 100.43 143.11 178.36 253.73 20.43 63.11 108.36 233.73 optional MAV 101.97 147.76 186.16 269.54 21.97 67.76 116.16 249.54 optional EEB 103.50 152.39 193.91 285.13 23.50 72.39 123.91 265.13 optional EEP 104.53 155.47 199.05 295.39 24.53 75.47 129.05 275.39 optional MAV and EEB 105.04 157.01 201.61 300.49 25.04 77.01 131.61 280.49 optional MAV and EEP 106.07 160.08 206.72 310.60 26.07 80.08 136.72 290.60 AXP(R) VP - Stock Fund base contract with no optional riders 99.51 140.32 173.66 244.12 19.51 60.32 103.66 224.12 optional MAV 101.04 144.98 181.49 260.08 21.04 64.98 111.49 240.08 optional EEB 102.58 149.62 189.27 275.81 22.58 69.62 119.27 255.81 optional EEP 103.61 152.70 194.43 286.16 23.61 72.70 124.43 266.16 optional MAV and EEB 104.12 154.24 197.00 291.30 24.12 74.24 127.00 271.30 optional MAV and EEP 105.14 157.32 202.12 301.50 25.14 77.32 132.12 281.50
---------------------------------------------------------------------- 21 PROSPECTUS -- AUG. 9, 2001
You would pay the following expenses on a $1,000 investment in a qualified annuity with a ten-year surrender charge schedule+ and a 0.75% mortality and expense risk fee assuming a 5% annual return and ...(continued) no surrender or selection full surrender at the of an annuity payout plan at the end of each time period end of each time period 1 year 3 years 5 years 10 years year 3 years 5 years 10 years AXP(R) VP - Strategy Aggressive Fund base contract with no optional riders $ 96.12 $130.03 $156.27 $208.17 $16.12 $50.03 $ 86.27 $188.17 optional MAV 97.66 134.71 164.20 224.66 17.66 54.71 94.20 204.66 optional EEB 99.20 139.39 172.09 240.90 19.20 59.39 102.09 220.90 optional EEP 100.22 142.49 177.32 251.60 20.22 62.49 107.32 231.60 optional MAV and EEB 100.74 144.05 179.93 256.91 20.74 64.05 109.93 236.91 optional MAV and EEP 101.76 147.14 185.12 267.45 21.76 67.14 115.12 247.45 AIM V. I. Capital Appreciation Fund, Series II base contract with no optional riders 99.20 139.39 172.09 240.90 19.20 59.39 102.09 220.90 optional MAV 100.74 144.05 179.93 256.91 20.74 64.05 109.93 236.91 optional EEB 102.27 148.69 187.72 272.68 22.27 68.69 117.72 252.68 optional EEP 103.30 151.78 192.88 283.07 23.30 71.78 122.88 263.07 optional MAV and EEB 103.81 153.32 195.46 288.22 23.81 73.32 125.46 268.22 optional MAV and EEP 104.84 156.40 200.59 298.45 24.84 76.40 130.59 278.45 AIM V.I. Capital Development Fund Series II base contract 102.89 150.54 190.82 278.92 22.89 70.54 120.82 258.92 optional MAV 104.43 155.17 198.54 294.37 24.43 75.17 128.54 274.37 optional EEB 105.96 159.78 206.21 309.59 25.96 79.78 136.21 289.59 optional EEP 106.99 162.84 211.30 319.62 26.99 82.84 141.30 299.62 optional MAV and EEB 107.50 164.37 213.83 324.59 27.50 84.37 143.83 304.59 optional MAV and EEP 108.53 167.43 218.89 334.46 28.53 87.43 148.89 314.46 Alliance VP AllianceBernstein International Value Portfolio (Class B) base contract with no optional riders 100.53 143.43 178.88 254.79 20.53 63.43 108.88 234.79 optional MAV 102.07 148.07 186.68 270.59 22.07 68.07 116.68 250.59 optional EEB 103.61 152.70 194.43 286.16 23.61 72.70 124.43 266.16 optional EEP 104.63 155.78 199.56 296.42 24.63 75.78 129.56 276.42 optional MAV and EEB 105.14 157.32 202.12 301.50 25.14 77.32 132.12 281.50 optional MAV and EEP 106.17 160.39 207.23 311.61 26.17 80.39 137.23 291.61 Alliance VP Growth and Income Portfolio (Class B) base contract with no optional riders 97.97 135.65 165.78 227.92 17.97 55.65 95.78 207.92 optional MAV 99.51 140.32 173.66 244.12 19.51 60.32 103.66 224.12 optional EEB 101.04 144.98 181.49 260.08 21.04 64.98 111.49 240.08 optional EEP 102.07 148.07 186.68 270.59 22.07 68.07 116.68 250.59 optional MAV and EEB 102.58 149.62 189.27 275.81 22.58 69.62 119.27 255.81 optional MAV and EEP 103.61 152.70 194.43 286.16 23.61 72.70 124.43 266.16 American Century VP International, Class II base contract with no optional riders 105.14 157.32 202.12 301.50 25.14 77.32 132.12 281.50 optional MAV 106.68 161.92 209.77 316.62 26.68 81.92 139.77 296.62 optional EEB 108.22 166.51 217.37 331.51 28.22 86.51 147.37 311.51 optional EEP 109.24 169.56 222.41 341.32 29.24 89.56 152.41 321.32 optional MAV and EEB 109.76 171.09 224.93 346.18 29.76 91.09 154.93 326.18 optional MAV and EEP 110.78 174.13 229.93 355.84 30.78 94.13 159.93 335.84
---------------------------------------------------------------------- 22 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY
You would pay the following expenses on a $1,000 investment in a qualified annuity with a ten-year surrender charge schedule+ and a 0.75% mortality and expense risk fee assuming a 5% annual return and ...(continued) no surrender or selection full surrender at the of an annuity payout plan at the end of each time period end of each time period 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years American Century VP Value, Class II base contract with no optional riders $100.02 $141.87 $176.28 $249.47 $20.02 $61.87 $106.28 $229.47 optional MAV 101.56 146.52 184.09 265.35 21.56 66.52 114.09 245.35 optional EEB 103.09 151.16 191.85 281.00 23.09 71.16 121.85 261.00 optional EEP 104.12 154.24 197.00 291.30 24.12 74.24 127.00 271.30 optional MAV and EEB 104.63 155.78 199.56 296.42 24.63 75.78 129.56 276.42 optional MAV and EEP 105.66 158.86 204.68 306.57 25.66 78.86 134.68 286.57 Calvert Variable Series, Inc. Social Balanced Portfolio base contract with no optional riders 97.05 132.84 161.03 218.09 17.05 52.84 91.03 198.09 optional MAV 98.58 137.52 168.94 234.43 18.58 57.52 98.94 214.43 optional EEB 100.12 142.18 176.80 250.53 20.12 62.18 106.80 230.53 optional EEP 101.15 145.29 182.01 261.14 21.15 65.29 112.01 241.14 optional MAV and EEB 101.66 146.83 184.61 266.40 21.66 66.83 114.61 246.40 optional MAV and EEP 102.68 149.93 189.78 276.85 22.68 69.93 119.78 256.85 Evergreen VA Capital Growth Fund, Class L Shares base contract with no optional riders 99.51 140.32 173.66 244.12 19.51 60.32 103.66 224.12 optional MAV 101.04 144.98 181.49 260.08 21.04 64.98 111.49 240.08 optional EEB 102.58 149.62 189.27 275.81 22.58 69.62 119.27 255.81 optional EEP 103.61 152.70 194.43 286.16 23.61 72.70 124.43 266.16 optional MAV and EEB 104.12 154.24 197.00 291.30 24.12 74.24 127.00 271.30 optional MAV and EEP 105.14 157.32 202.12 301.50 25.14 77.32 132.12 281.50 Fidelity VIP III Growth & Income Portfolio (Service Class 2) base contract with no optional riders 96.94 132.53 160.51 216.99 16.94 52.53 90.51 196.99 optional MAV 98.48 137.21 168.42 233.35 18.48 57.21 98.42 213.35 optional EEB 100.02 141.87 176.28 249.47 20.02 61.87 106.28 229.47 optional EEP 101.04 144.98 181.49 260.08 21.04 64.98 111.49 240.08 optional MAV and EEB 101.56 146.52 184.09 265.35 21.56 66.52 114.09 245.35 optional MAV and EEP 102.58 149.62 189.27 275.81 22.58 69.62 119.27 255.81 Fidelity VIP III Mid Cap Portfolio (Service Class 2) base contract with no optional riders 98.38 136.90 167.89 232.27 18.38 56.90 97.89 212.27 optional MAV 99.92 141.56 175.75 248.40 19.92 61.56 105.75 228.40 optional EEB 101.45 146.21 183.57 264.30 21.45 66.21 113.57 244.30 optional EEP 102.48 149.31 188.75 274.77 22.48 69.31 118.75 254.77 optional MAV and EEB 102.99 150.85 191.33 279.96 22.99 70.85 121.33 259.96 optional MAV and EEP 104.02 153.94 196.48 290.28 24.02 73.94 126.48 270.28 Fidelity VIP Overseas Portfolio (Service Class 2) base contract with no optional riders 100.02 141.87 176.28 249.47 20.02 61.87 106.28 229.47 optional MAV 101.56 146.52 184.09 265.35 21.56 66.52 114.09 245.35 optional EEB 103.09 151.16 191.85 281.00 23.09 71.16 121.85 261.00 optional EEP 104.12 154.24 197.00 291.30 24.12 74.24 127.00 271.30 optional MAV and EEB 104.63 155.78 199.56 296.42 24.63 75.78 129.56 276.42 optional MAV and EEP 105.66 158.86 204.68 306.57 25.66 78.86 134.68 286.57
---------------------------------------------------------------------- 23 PROSPECTUS -- AUG. 9, 2001
You would pay the following expenses on a $1,000 investment in a qualified annuity with a ten-year surrender charge schedule+ and a 0.75% mortality and expense risk fee assuming a 5% annual return and ...(continued) no surrender or selection full surrender at the of an annuity payout plan at the end of each time period end of each time period 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years FTVIPT Franklin Real Estate Fund - Class 2 base contract with no optional riders $ 96.94 $132.53 $160.51 $216.99 $16.94 $52.53 $ 90.51 $196.99 optional MAV 98.48 137.21 168.42 233.35 18.48 57.21 98.42 213.35 optional EEB 100.02 141.87 176.28 249.47 20.02 61.87 106.28 229.47 optional EEP 101.04 144.98 181.49 260.08 21.04 64.98 111.49 240.08 optional MAV and EEB 101.56 146.52 184.09 265.35 21.56 66.52 114.09 245.35 optional MAV and EEP 102.58 149.62 189.27 275.81 22.58 69.62 119.27 255.81 FTVIPT Franklin Value Securities Fund - Class 2 base contract with no optional riders 99.40 140.01 173.14 243.05 19.40 60.01 103.14 223.05 optional MAV 100.94 144.67 180.97 259.02 20.94 64.67 110.97 239.02 optional EEB 102.48 149.31 188.75 274.77 22.48 69.31 118.75 254.77 optional EEP 103.50 152.39 193.91 285.13 23.50 72.39 123.91 265.13 optional MAV and EEB 104.02 153.94 196.48 290.28 24.02 73.94 126.48 270.28 optional MAV and EEP 105.04 157.01 201.61 300.49 25.04 77.01 131.61 280.49 FTVIPT Mutual Shares Securities Fund - Class 2 base contract with no optional riders 98.99 138.76 171.04 238.75 18.99 58.76 101.04 218.75 optional MAV 100.53 143.43 178.88 254.79 20.53 63.43 108.88 234.79 optional EEB 102.07 148.07 186.68 270.59 22.07 68.07 116.68 250.59 optional EEP 103.09 151.16 191.85 281.00 23.09 71.16 121.85 261.00 optional MAV and EEB 103.61 152.70 194.43 286.16 23.61 72.70 124.43 266.16 optional MAV and EEP 104.63 155.78 199.56 296.42 24.63 75.78 129.56 276.42 Goldman Sachs VIT CORE(SM) U.S. Equity Fund base contract with no optional riders 97.46 134.09 163.15 222.47 17.46 54.09 93.15 202.47 optional MAV 98.99 138.76 171.04 238.75 18.99 58.76 101.04 218.75 optional EEB 100.53 143.43 178.88 254.79 20.53 63.43 108.88 234.79 optional EEP 101.56 146.52 184.09 265.35 21.56 66.52 114.09 245.35 optional MAV and EEB 102.07 148.07 186.68 270.59 22.07 68.07 116.68 250.59 optional MAV and EEP 103.09 151.16 191.85 281.00 23.09 71.16 121.85 261.00 Goldman Sachs VIT Mid Cap Value Fund base contract with no optional riders 98.99 138.76 171.04 238.75 18.99 58.76 101.04 218.75 optional MAV 100.53 143.43 178.88 254.79 20.53 63.43 108.88 234.79 optional EEB 102.07 148.07 186.68 270.59 22.07 68.07 116.68 250.59 optional EEP 103.09 151.16 191.85 281.00 23.09 71.16 121.85 261.00 optional MAV and EEB 103.61 152.70 194.43 286.16 23.61 72.70 124.43 266.16 optional MAV and EEP 104.63 155.78 199.56 296.42 24.63 75.78 129.56 276.42 INVESCO VIF - Dynamics Fund base contract with no optional riders 99.40 140.01 173.14 243.05 19.40 60.01 103.14 223.05 optional MAV 100.94 144.67 180.97 259.02 20.94 64.67 110.97 239.02 optional EEB 102.48 149.31 188.75 274.77 22.48 69.31 118.75 254.77 optional EEP 103.50 152.39 193.91 285.13 23.50 72.39 123.91 265.13 optional MAV and EEB 104.02 153.94 196.48 290.28 24.02 73.94 126.48 270.28 optional MAV and EEP 105.04 157.01 201.61 300.49 25.04 77.01 131.61 280.49
---------------------------------------------------------------------- 24 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY
You would pay the following expenses on a $1,000 investment in a qualified annuity with a ten-year surrender charge schedule+ and a 0.75% mortality and expense risk fee assuming a 5% annual return and ...(continued) no surrender or selection full surrender at the of an annuity payout plan at the end of each time period end of each time period 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years INVESCO VIF - Financial Services Fund base contract with no optional riders $ 99.40 $140.01 $173.14 $243.05 $19.40 $60.01 $103.14 $223.05 optional MAV 100.94 144.67 180.97 259.02 20.94 64.67 110.97 239.02 optional EEB 102.48 149.31 188.75 274.77 22.48 69.31 118.75 254.77 optional EEP 103.50 152.39 193.91 285.13 23.50 72.39 123.91 265.13 optional MAV and EEB 104.02 153.94 196.48 290.28 24.02 73.94 126.48 270.28 optional MAV and EEP 105.04 157.01 201.61 300.49 25.04 77.01 131.61 280.49 INVESCO VIF - Technology Fund base contract with no optional riders 98.69 137.83 169.47 235.51 18.69 57.83 99.47 215.51 optional MAV 100.22 142.49 177.32 251.60 20.22 62.49 107.32 231.60 optional EEB 101.76 147.14 185.12 267.45 21.76 67.14 115.12 247.45 optional EEP 102.79 150.23 190.30 277.89 22.79 70.23 120.30 257.89 optional MAV and EEB 103.30 151.78 192.88 283.07 23.30 71.78 122.88 263.07 optional MAV and EEP 104.32 154.86 198.02 293.35 24.32 74.86 128.02 273.35 INVESCO VIF - Telecommunications Fund base contract with no optional riders 99.10 139.08 171.57 239.83 19.10 59.08 101.57 219.83 optional MAV 100.63 143.74 179.41 255.85 20.63 63.74 109.41 235.85 optional EEB 102.17 148.38 187.20 271.64 22.17 68.38 117.20 251.64 optional EEP 103.20 151.47 192.37 282.03 23.20 71.47 122.37 262.03 optional MAV and EEB 103.71 153.01 194.94 287.19 23.71 73.01 124.94 267.19 optional MAV and EEP 104.73 156.09 200.08 297.44 24.73 76.09 130.08 277.44 Janus Aspen Series Global Technology Portfolio: Service Shares base contract with no optional riders 97.87 135.34 165.26 226.84 17.87 55.34 95.26 206.84 optional MAV 99.40 140.01 173.14 243.05 19.40 60.01 103.14 223.05 optional EEB 100.94 144.67 180.97 259.02 20.94 64.67 110.97 239.02 optional EEP 101.97 147.76 186.16 269.54 21.97 67.76 116.16 249.54 optional MAV and EEB 102.48 149.31 188.75 274.77 22.48 69.31 118.75 254.77 optional MAV and EEP 103.50 152.39 193.91 285.13 23.50 72.39 123.91 265.13 Janus Aspen Series International Growth Portfolio: Service Shares base contract with no optional riders 98.07 135.96 166.31 229.01 18.07 55.96 96.31 209.01 optional MAV 99.61 140.63 174.18 245.19 19.61 60.63 104.18 225.19 optional EEB 101.15 145.29 182.01 261.14 21.15 65.29 112.01 241.14 optional EEP 102.17 148.38 187.20 271.64 22.17 68.38 117.20 251.64 optional MAV and EEB 102.68 149.93 189.78 276.85 22.68 69.93 119.78 256.85 optional MAV and EEP 103.71 153.01 194.94 287.19 23.71 73.01 124.94 267.19 Lazard Retirement Series International Equity Portfolio base contract with no optional riders 101.04 144.98 181.49 260.08 21.04 64.98 111.49 240.08 optional MAV 102.58 149.62 189.27 275.81 22.58 69.62 119.27 255.81 optional EEB 104.12 115.24 197.00 291.30 24.12 74.24 127.00 271.30 optional EEP 105.14 157.32 202.12 301.50 25.14 77.32 132.12 281.50 optional MAV and EEB 105.66 158.86 204.68 306.57 25.66 78.86 134.68 286.57 optional MAV and EEP 106.68 161.92 209.77 316.62 26.68 81.92 139.77 296.62
---------------------------------------------------------------------- 25 PROSPECTUS -- AUG. 9, 2001
You would pay the following expenses on a $1,000 investment in a qualified annuity with a ten-year surrender charge schedule+ and a 0.75% mortality and expense risk fee assuming a 5% annual return and ...(continued) no surrender or selection full surrender at the of an annuity payout plan at the end of each time period end of each time period 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years MFS(R) Investors Growth Stock Series - Service Class (previously MFS(R) Growth Series) base contract with no optional riders $ 99.61 $140.63 $174.18 $245.19 $19.61 $60.63 $104.18 $225.19 optional MAV 101.15 145.29 182.01 261.14 21.15 65.29 112.01 241.14 optional EEB 102.68 149.93 189.78 276.85 22.68 69.93 119.78 256.85 optional EEP 103.71 153.01 194.94 287.19 23.71 73.01 124.94 267.19 optional MAV and EEB 104.22 154.55 197.51 292.33 24.22 74.55 127.51 272.33 optional MAV and EEP 105.25 157.63 202.63 302.52 25.25 77.63 132.63 282.52 MFS(R) New Discovery Series - Service Class base contract with no optional riders 101.15 145.29 182.01 261.14 21.15 65.29 112.01 241.14 optional MAV 102.68 149.93 189.78 276.85 22.68 69.93 119.78 256.85 optional EEB 104.22 154.55 197.51 292.33 24.22 74.55 127.51 272.33 optional EEP 105.25 157.63 202.63 305.52 25.25 77.63 132.63 282.52 optional MAV and EEB 105.76 159.16 205.19 307.58 25.76 79.16 135.19 287.58 optional MAV and EEP 106.78 162.23 210.28 317.62 26.78 82.23 140.28 297.62 MFS(R) Utilities Series - Service Class base contract with no optional riders 99.61 140.63 174.18 245.19 19.61 60.63 104.18 225.19 optional MAV 101.15 145.29 182.01 261.14 21.15 65.29 112.01 241.14 optional EEB 102.68 149.93 189.78 276.85 22.68 69.93 119.78 256.85 optional EEP 103.71 153.01 194.94 287.19 23.71 73.01 124.94 267.19 optional MAV and EEB 104.22 154.55 197.51 292.33 24.22 74.55 127.51 272.33 optional MAV and EEP 105.25 157.63 202.63 302.52 25.25 77.63 132.63 282.52 Pioneer Equity-Income VCT Portfolio - Class II Shares base contract with no optional riders 98.07 135.96 166.31 229.01 18.07 55.96 96.31 209.01 optional MAV 99.61 140.63 174.18 245.19 19.61 60.63 104.18 225.19 optional EEB 101.15 145.29 182.01 261.14 21.15 65.29 112.01 241.14 optional EEP 102.17 148.38 187.20 271.64 22.17 68.38 117.20 251.64 optional MAV and EEB 102.68 149.93 189.78 276.85 22.68 69.93 119.78 256.85 optional MAV and EEP 103.71 153.01 194.94 287.19 23.71 73.01 124.94 267.19 Pioneer Europe VCT Portfolio - Class II Shares base contract with no optional riders 105.66 158.86 204.68 306.57 25.66 78.86 134.68 286.57 optional MAV 107.19 163.45 212.31 321.61 27.19 83.45 142.31 301.61 optional EEB 108.73 168.04 219.90 336.43 28.73 88.04 149.90 316.43 optional EEP 109.76 171.09 224.93 346.18 29.76 91.09 154.93 326.18 optional MAV and EEB 110.27 172.61 227.43 351.02 30.27 92.61 157.43 331.02 optional MAV and EEP 111.29 175.65 232.43 360.63 31.29 95.65 162.43 340.63 Putnam VT Health Sciences Fund: Class IB Shares base contract with no optional riders 98.89 138.45 170.52 237.67 18.89 58.45 100.52 217.67 optional MAV 100.43 143.11 178.36 253.73 20.43 63.11 108.36 233.73 optional EEB 101.97 147.76 186.16 269.54 21.97 67.76 116.16 249.54 optional EEP 102.99 150.85 191.33 279.96 22.99 70.85 121.33 259.96 optional MAV and EEB 103.50 152.39 193.91 285.13 23.50 72.39 123.91 265.13 optional MAV and EEP 104.53 155.47 199.05 295.39 24.53 75.47 129.05 275.39
---------------------------------------------------------------------- 26 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY
You would pay the following expenses on a $1,000 investment in a qualified annuity with a ten-year surrender charge schedule+ and a 0.75% mortality and expense risk fee assuming a 5% annual return and ...(continued) no surrender or selection full surrender at the of an annuity payout plan at the end of each time period end of each time period 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years Putnam VT International Growth Fund: Class IB Shares base contract with no optional riders $100.43 $143.11 $178.36 $253.73 $20.43 $63.11 $108.36 $233.73 optional MAV 101.97 147.76 186.16 269.54 21.97 67.76 116.16 249.54 optional EEB 103.50 152.39 193.91 285.13 23.50 72.39 123.91 265.13 optional EEP 104.53 155.47 199.05 295.39 24.53 75.47 129.05 275.39 optional MAV and EEB 105.04 157.01 201.61 300.49 25.04 77.01 131.61 280.49 optional MAV and EEP 106.07 160.08 206.72 310.60 26.07 80.08 136.72 290.60 Putnam VT Vista Fund - Class IB Shares base contract with no optional riders 97.66 134.71 164.20 224.66 17.66 54.71 94.20 204.66 optional MAV 99.20 139.39 172.09 240.90 19.20 53.39 102.09 220.90 optional EEB 100.74 144.05 179.93 256.91 20.74 64.05 109.93 236.91 optional EEP 101.76 147.14 185.12 267.45 21.76 67.14 115.12 247.45 optional MAV and EEB 102.27 148.69 187.72 272.68 22.27 68.69 117.72 252.68 optional MAV and EEP 103.30 151.78 192.88 283.07 23.30 71.78 122.88 263.07 Strong Opportunity Fund II - Advisor Class base contract with no optional riders 101.04 144.98 181.49 260.08 21.04 64.98 111.49 240.08 optional MAV 102.58 149.62 189.27 275.81 22.58 69.62 119.27 255.81 optional EEB 104.12 154.24 197.00 291.30 24.12 74.24 127.00 271.30 optional EEP 105.14 157.32 202.12 301.50 25.14 77.32 132.12 281.50 optional MAV and EEB 105.66 158.86 204.68 306.57 25.66 78.86 134.68 286.57 optional MAV and EEP 106.68 161.92 209.77 316.62 26.68 81.92 139.77 296.62 Wanger International Small Cap base contract with no optional riders 102.68 149.93 189.78 276.85 22.68 69.93 119.78 256.85 optional MAV 104.22 154.55 197.51 292.33 24.22 74.55 127.51 272.33 optional EEB 105.76 159.16 205.19 307.58 25.76 79.16 135.19 287.58 optional EEP 106.78 162.23 210.28 317.62 26.78 82.23 140.28 297.62 optional MAV and EEB 107.30 163.76 212.82 322.60 27.30 83.76 142.82 302.60 optional MAV and EEP 108.32 166.82 217.88 332.50 28.32 86.82 147.88 312.50 Wanger U.S. Small Cap base contract with no optional riders 98.48 137.21 168.42 233.35 18.48 57.21 98.42 213.35 optional MAV 100.02 141.87 176.28 249.47 20.02 61.87 106.28 229.47 optional EEB 101.56 146.52 184.09 265.35 21.56 66.52 114.09 245.35 optional EEP 102.58 149.62 189.27 275.81 22.58 69.62 119.27 255.81 optional MAV and EEB 103.09 151.16 191.85 281.00 23.09 71.16 121.85 261.00 optional MAV and EEP 104.12 154.24 197.00 291.30 24.12 74.24 127.00 271.30 Wells Fargo VT Asset Allocation Fund base contract with no optional riders 98.48 137.21 168.42 233.35 18.48 57.21 98.42 213.35 optional MAV 100.02 141.87 176.28 249.47 20.02 61.87 106.28 229.47 optional EEB 101.56 146.52 184.09 265.35 21.56 66.52 114.09 245.35 optional EEP 102.58 149.62 189.27 275.81 22.58 69.62 119.27 255.81 optional MAV and EEB 103.09 151.16 191.85 281.00 23.09 71.16 121.85 261.00 optional MAV and EEP 104.12 154.24 197.00 291.30 24.12 74.24 127.00 271.30
---------------------------------------------------------------------- 27 PROSPECTUS -- AUG. 9, 2001
You would pay the following expenses on a $1,000 investment in a qualified annuity with a ten-year surrender charge schedule+ and a 0.75% mortality and expense risk fee assuming a 5% annual return and ...(continued) no surrender or selection full surrender at the of an annuity payout plan at the end of each time period end of each time period 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years Wells Fargo VT International Equity Fund base contract with no optional riders $ 98.48 $137.21 $168.42 $233.35 $18.48 $57.21 $ 98.42 $213.35 optional MAV 100.02 141.87 176.28 249.47 20.02 61.87 106.28 229.47 optional EEB 101.56 146.52 184.09 265.35 21.56 66.52 114.09 245.35 optional EEP 102.58 149.62 189.27 275.81 22.58 69.62 119.27 255.81 optional MAV and EEB 103.09 151.16 191.85 281.00 23.09 71.16 121.85 261.00 optional MAV and EEP 104.12 154.24 197.00 291.30 24.12 74.24 127.00 271.30 Wells Fargo VT Small Cap Growth Fund base contract with no optional riders 100.53 143.43 178.88 254.79 20.53 63.43 108.88 234.79 optional MAV 102.07 148.07 186.68 270.59 22.07 68.07 116.68 250.59 optional EEB 103.61 152.70 194.43 286.16 23.61 72.70 124.43 266.16 optional EEP 104.63 155.78 199.56 296.42 24.63 75.78 129.56 276.42 optional MAV and EEB 105.14 157.32 202.12 301.50 25.14 77.32 132.12 281.50 optional MAV and EEP 106.17 160.39 207.23 311.61 26.17 80.39 137.23 291.61
---------------------------------------------------------------------- 28 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY
You would pay the following expenses on a $1,000 investment in a nonqualified annuity with a seven-year surrender charge schedule and a 0.95% mortality and expense risk fee assuming a 5% annual return and ... no surrender or selection full surrender at the of an annuity payout plan at the end of each time period end of each time period 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years AXP(R) VP - Blue Chip Advantage Fund base contract with no optional riders $ 90.02 $131.87 $156.28 $229.47 $20.02 $ 61.87 $106.28 $229.47 optional MAV 91.56 136.52 164.09 245.35 21.56 66.52 114.09 245.35 optional EEB 93.09 141.16 171.85 261.00 23.09 71.16 121.85 261.00 optional EEP 94.12 144.24 177.00 271.30 24.12 74.24 127.00 271.30 optional MAV and EEB 94.63 145.78 179.56 276.42 24.63 75.78 129.56 276.42 optional MAV and EEP 95.66 148.86 184.68 286.57 25.66 78.86 134.68 286.57 AXP(R) VP - Bond Fund base contract with no optional riders 88.38 126.90 147.89 212.27 18.38 56.90 97.89 212.27 optional MAV 89.92 131.56 155.75 228.40 19.92 61.56 105.75 228.40 optional EEB 91.45 136.21 163.57 244.30 21.45 66.21 113.57 244.30 optional EEP 92.48 139.31 168.75 254.77 22.48 69.31 118.75 254.77 optional MAV and EEB 92.99 140.85 171.33 259.96 22.99 70.85 121.33 259.96 optional MAV and EEP 94.02 143.94 176.48 270.28 24.02 73.94 126.48 270.28 AXP(R) VP - Capital Resource Fund base contract with no optional riders 88.17 126.27 146.84 210.10 18.17 56.27 96.84 210.10 optional MAV 89.71 130.94 154.71 226.26 19.71 60.94 104.71 226.26 optional EEB 91.25 135.60 162.53 242.19 21.25 65.60 112.53 242.19 optional EEP 92.27 138.69 167.72 252.68 22.27 68.69 117.72 252.68 optional MAV and EEB 92.79 140.23 170.30 257.89 22.79 70.23 120.30 257.89 optional MAV and EEP 93.81 143.32 175.46 268.22 23.81 73.32 125.46 268.22 AXP(R) VP - Cash Management Fund base contract with no optional riders 87.25 123.47 142.09 200.28 17.25 53.47 92.09 200.28 optional MAV 88.79 128.14 149.99 216.59 18.79 58.14 99.99 216.59 optional EEB 90.33 132.80 157.84 232.66 20.33 62.80 107.84 232.66 optional EEP 91.35 135.90 163.05 243.25 21.35 65.90 113.05 243.25 optional MAV and EEB 91.86 137.45 165.64 248.50 21.86 67.45 115.64 248.50 optional MAV and EEP 92.89 140.54 170.82 258.02 22.89 70.54 120.82 258.92 AXP(R) VP - Diversified Equity Income Fund base contract with no optional riders 90.02 131.87 156.28 229.47 20.02 61.87 106.28 229.47 optional MAV 91.56 136.52 164.09 245.35 21.56 66.52 114.09 245.35 optional EEB 93.09 141.16 171.85 261.00 23.09 71.16 121.85 261.00 optional EEP 94.12 144.24 177.00 271.30 24.12 74.24 127.00 271.30 optional MAV and EEB 94.63 145.78 179.56 276.42 24.63 75.78 129.56 276.42 optional MAV and EEP 95.66 148.86 184.68 286.57 25.66 78.86 134.68 286.57 AXP(R) VP - Emerging Markets Fund base contract with no optional riders 97.60 154.68 194.34 305.58 27.60 84.68 144.34 305.58 optional MAV 99.14 159.26 201.91 320.34 29.14 89.26 151.91 320.34 optional EEB 100.68 163.82 209.43 334.88 30.68 93.82 159.43 334.88 optional EEP 101.70 166.86 214.42 344.45 31.70 96.86 164.42 344.45 optional MAV and EEB 102.22 168.38 216.91 349.20 32.22 98.38 166.91 349.20 optional MAV and EEP 103.24 171.40 221.87 358.63 33.24 101.40 171.87 358.63
---------------------------------------------------------------------- 29 PROSPECTUS -- AUG. 9, 2001
You would pay the following expenses on a $1,000 investment in a nonqualified annuity with a seven-year surrender charge schedule and a 0.95% mortality and expense risk fee assuming a 5% annual return and ...(continued) no surrender or selection full surrender at the of an annuity payout plan at the end of each time period end of each time period 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years AXP(R) VP - Equity Select Fund base contract with no optional riders $ 91.56 $136.52 $164.09 $245.35 $21.56 $66.52 $114.09 $245.35 optional MAV 93.09 141.16 171.85 261.00 23.09 71.16 121.85 261.00 optional EEB 94.63 145.78 179.56 276.42 24.63 75.78 129.56 276.42 optional EEP 95.66 148.86 184.68 286.57 25.66 78.86 134.68 286.57 optional MAV and EEB 96.17 150.39 187.23 291.61 26.17 80.39 137.23 291.61 optional MAV and EEP 97.19 153.45 192.31 301.61 27.19 83.45 142.31 301.61 AXP(R) VP - Extra Income Fund base contract with no optional riders 88.69 127.83 149.47 215.51 18.69 57.83 99.47 215.51 optional MAV 90.22 132.49 157.32 231.60 20.22 62.49 107.32 231.60 optional EEB 91.76 137.14 165.12 247.45 21.76 67.14 115.12 247.45 optional EEP 92.79 140.23 170.30 257.89 22.79 70.23 120.30 257.89 optional MAV and EEB 93.30 141.78 172.88 263.07 23.30 71.78 122.88 263.07 optional MAV and EEP 94.32 144.86 178.02 273.35 24.32 74.86 128.02 273.35 AXP(R) VP - Federal Income Fund base contract with no optional riders 89.20 129.39 152.09 220.90 19.20 59.39 102.09 220.90 optional MAV 90.74 134.05 159.93 236.91 20.74 64.05 109.93 236.91 optional EEB 92.27 138.69 167.72 252.68 22.27 68.69 117.72 252.68 optional EEP 93.30 141.78 172.88 263.07 23.30 71.78 122.88 263.07 optional MAV and EEB 93.81 143.32 175.46 268.22 23.81 73.32 125.46 268.22 optional MAV and EEP 94.84 146.40 180.59 278.45 24.84 76.40 130.59 278.45 AXP(R) VP - Global Bond Fund base contract with no optional riders 91.25 135.60 162.53 242.19 21.25 65.60 112.53 242.19 optional MAV 92.79 140.23 170.30 257.89 22.79 70.23 120.30 257.89 optional EEB 94.32 144.86 178.02 273.35 24.32 74.86 128.02 273.35 optional EEP 95.35 147.93 183.15 283.53 25.35 77.93 133.15 283.53 optional MAV and EEB 95.86 149.47 185.70 288.59 25.86 79.47 135.70 288.59 optional MAV and EEP 96.89 152.54 190.79 298.62 26.89 82.54 140.79 298.62 AXP(R) VP - Growth Fund base contract with no optional riders 90.02 131.87 156.28 229.47 20.02 61.87 106.28 229.47 optional MAV 91.56 136.52 164.09 245.35 21.56 66.52 114.09 245.35 optional EEB 93.09 141.16 171.85 261.00 23.09 71.16 121.85 261.00 optional EEP 94.12 144.24 177.00 271.30 24.12 74.24 127.00 271.30 optional MAV and EEB 94.63 145.78 179.56 276.42 24.63 75.78 129.56 276.42 optional MAV and EEP 95.66 148.86 184.68 286.57 25.66 78.86 134.68 286.57 AXP(R) VP - International Fund base contract with no optional riders 90.74 134.05 159.93 236.91 20.74 64.05 109.93 236.91 optional MAV 92.27 138.69 167.72 252.68 22.27 68.69 117.72 252.68 optional EEB 93.81 143.32 175.46 268.22 23.81 73.32 125.46 268.22 optional EEP 94.84 146.40 180.59 278.45 24.84 76.40 130.59 278.45 optional MAV and EEB 95.35 147.93 183.15 283.53 25.35 77.93 133.15 283.53 optional MAV and EEP 96.37 151.00 188.25 293.61 26.37 81.00 138.25 293.61
---------------------------------------------------------------------- 30 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY
You would pay the following expenses on a $1,000 investment in a nonqualified annuity with a seven-year surrender charge schedule and a 0.95% mortality and expense risk fee assuming a 5% annual return and ...(continued) no surrender or selection full surrender at the of an annuity payout plan at the end of each time period end of each time period 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years AXP(R) VP - Managed Fund base contract with no optional riders $ 87.97 $125.65 $145.78 $207.92 $17.97 $55.65 $ 95.78 $207.92 optional MAV 89.51 130.32 153.66 224.12 19.51 60.32 103.66 224.12 optional EEB 91.04 134.98 161.49 240.08 21.04 64.98 111.49 240.08 optional EEP 92.07 138.07 166.68 250.59 22.07 68.07 116.68 250.59 optional MAV and EEB 92.58 139.62 169.27 255.81 22.58 69.62 119.27 255.81 optional MAV and EEP 93.61 142.70 174.43 266.16 23.61 72.70 124.43 266.16 AXP(R) VP - New Dimensions Fund(R) base contract with no optional riders 88.28 126.58 147.36 211.18 18.28 56.58 97.36 211.18 optional MAV 89.81 131.25 155.23 227.33 19.81 61.25 105.23 227.33 optional EEB 91.35 135.90 163.05 243.25 21.35 65.90 113.05 243.25 optional EEP 92.38 139.00 168.23 253.72 22.38 69.00 118.23 253.72 optional MAV and EEB 92.89 140.54 170.82 258.92 22.89 70.54 120.82 258.92 optional MAV and EEP 93.91 143.63 175.97 269.25 23.91 73.63 125.97 269.25 AXP(R) VP - Partners Small Cap Value Fund base contract with no optional riders 95.66 148.86 184.68 286.57 25.66 78.86 134.68 286.57 optional MAV 97.19 153.45 192.31 301.61 27.19 83.45 142.31 301.61 optional EEB 98.73 158.04 199.90 316.43 28.73 88.04 149.90 316.43 optional EEP 99.76 161.09 204.93 326.18 29.76 91.09 154.93 326.18 optional MAV and EEB 100.27 162.61 207.43 331.02 30.27 92.61 157.43 331.02 optional MAV and EEP 101.29 165.65 212.43 340.63 31.29 95.65 162.43 340.63 AXP(R) VP - S&P 500 Index Fund base contract with no optional riders 85.20 117.21 131.48 178.16 15.20 47.21 81.48 178.16 optional MAV 86.74 121.90 139.45 194.79 16.74 51.90 89.45 194.79 optional EEB 88.28 126.58 147.36 211.18 18.28 56.58 97.36 211.18 optional EEP 89.30 129.70 152.61 221.98 19.30 59.70 102.61 221.98 optional MAV and EEB 89.81 131.25 155.23 227.33 19.81 61.25 105.23 227.33 optional MAV and EEP 90.84 134.36 160.45 237.97 20.84 64.36 110.45 237.97 AXP(R) VP - Small Cap Advantage Fund base contract with no optional riders 92.48 139.31 168.75 254.77 22.48 69.31 118.75 254.77 optional MAV 94.02 143.94 176.48 270.28 24.02 73.94 126.48 270.28 optional EEB 95.55 148.55 184.17 285.56 25.55 78.55 134.17 285.56 optional EEP 96.58 151.62 189.26 295.62 26.58 81.62 139.26 295.62 optional MAV and EEB 97.09 153.15 191.80 300.61 27.09 83.15 141.80 300.61 optional MAV and EEP 98.12 156.21 196.87 310.53 28.12 86.21 146.87 310.53 AXP(R) VP - Stock Fund base contract with no optional riders 91.56 136.52 164.09 245.35 21.56 66.52 114.09 245.35 optional MAV 93.09 141.16 171.85 261.00 23.09 71.16 121.85 261.00 optional EEB 94.63 145.78 179.56 276.42 24.63 75.78 129.56 276.42 optional EEP 95.66 148.86 184.68 286.57 25.66 78.86 134.68 286.57 optional MAV and EEB 96.17 150.39 187.23 291.61 26.17 80.39 137.23 291.61 optional MAV and EEP 97.19 153.45 192.31 301.61 27.19 83.45 142.31 301.61
---------------------------------------------------------------------- 31 PROSPECTUS -- AUG. 9, 2001
You would pay the following expenses on a $1,000 investment in a nonqualified annuity with a seven-year surrender charge schedule and a 0.95% mortality and expense risk fee assuming a 5% annual return and ...(continued) no surrender or selection full surrender at the of an annuity payout plan at the end of each time period end of each time period 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years AXP(R) VP - Strategy Aggressive Fund base contract with no optional riders $ 88.17 $126.27 $146.84 $210.10 $18.17 $ 56.27 $ 96.84 $210.10 optional MAV 89.71 130.94 154.71 226.26 19.71 60.94 104.71 226.26 optional EEB 91.25 135.60 162.53 242.19 21.25 65.60 112.53 242.19 optional EEP 92.27 138.69 167.72 252.68 22.27 68.69 117.72 252.68 optional MAV and EEB 92.79 140.23 170.30 257.89 22.79 70.23 120.30 257.89 optional MAV and EEP 93.81 143.32 175.46 268.22 23.81 73.32 125.46 268.22 AIM V. I. Capital Appreciation Fund, Series II base contract with no optional riders 91.25 135.60 162.53 242.19 21.25 65.60 112.53 242.19 optional MAV 92.79 140.23 170.30 257.89 22.79 70.23 120.30 257.89 optional EEB 94.32 144.86 178.02 273.35 24.32 74.86 128.02 273.35 optional EEP 95.35 147.93 183.15 283.53 25.35 77.93 133.15 283.53 optional MAV and EEB 95.86 149.47 185.70 288.59 25.86 79.47 135.70 288.59 optional MAV and EEP 96.89 152.54 190.79 298.62 26.89 82.54 140.79 298.62 AIM V.I. Capital Development Fund Series II base contract 94.94 146.71 181.10 279.47 24.94 76.71 131.10 279.47 optional MAV 96.48 151.31 188.76 294.62 26.48 81.31 138.76 294.62 optional EEB 98.01 155.90 196.36 309.54 28.01 85.90 146.36 309.54 optional EEP 99.04 158.95 201.41 319.36 29.04 88.95 151.41 319.36 optional MAV and EEB 99.55 160.48 203.92 324.24 29.55 90.48 153.92 324.24 optional MAV and EEP 100.58 163.52 208.93 333.92 30.58 93.52 158.93 333.92 Alliance VP AllianceBernstein International Value Portfolio (Class B) base contract with no optional riders 92.58 139.62 169.27 255.81 22.58 69.62 119.27 255.81 optional MAV 94.12 144.24 177.00 271.30 24.12 74.24 127.00 271.30 optional EEB 95.66 148.86 184.68 286.57 25.66 78.86 134.68 286.57 optional EEP 96.68 151.92 189.77 296.62 26.68 81.92 139.77 296.62 optional MAV and EEB 97.19 153.45 192.31 301.61 27.19 83.45 142.31 301.61 optional MAV and EEP 98.22 156.51 197.37 311.51 28.22 86.51 147.37 311.51 Alliance VP Growth & Income Portfolio (Class B) base contract with no optional riders 90.02 131.87 156.28 229.47 20.02 61.87 106.28 229.47 optional MAV 91.56 136.52 164.09 245.35 21.56 66.52 114.09 245.35 optional EEB 93.09 141.16 171.85 261.00 23.09 71.16 121.85 261.00 optional EEP 94.12 144.24 177.00 271.30 24.12 74.24 127.00 271.30 optional MAV and EEB 94.63 145.78 179.56 276.42 24.63 75.78 129.56 276.42 optional MAV and EEP 95.66 148.86 184.68 286.57 25.66 78.86 134.68 286.57 American Century VP International, Class II base contract with no optional riders 97.19 153.45 192.31 301.61 27.19 83.45 142.31 301.61 optional MAV 98.73 158.04 199.90 316.43 28.73 88.04 149.90 316.43 optional EEB 100.27 162.61 207.43 331.02 30.27 92.61 157.43 331.02 optional EEP 101.29 165.65 212.43 340.63 31.29 95.65 162.43 340.63 optional MAV and EEB 101.81 167.16 214.92 345.40 31.81 97.16 164.92 345.40 optional MAV and EEP 102.83 170.19 219.89 354.87 32.83 100.19 169.89 354.87
---------------------------------------------------------------------- 32 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY
You would pay the following expenses on a $1,000 investment in a nonqualified annuity with a seven-year surrender charge schedule and a 0.95% mortality and expense risk fee assuming a 5% annual return and ...(continued) no surrender or selection full surrender at the of an annuity payout plan at the end of each time period end of each time period 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years American Century VP Value, Class II base contract with no optional riders $92.07 $138.07 $166.68 $250.59 $22.07 $68.07 $116.68 $250.59 optional MAV 93.61 142.70 174.43 266.16 23.61 72.70 124.43 266.16 optional EEB 95.14 147.32 182.12 281.50 25.14 77.32 132.12 281.50 optional EEP 96.17 150.39 187.23 291.61 26.17 80.39 137.23 291.61 optional MAV and EEB 96.68 151.92 189.77 296.62 26.68 81.92 139.77 296.62 optional MAV and EEP 97.71 154.98 194.84 306.57 27.71 84.98 144.84 306.57 Calvert Variable Series, Inc. Social Balanced Portfolio base contract with no optional riders 89.10 129.08 151.57 219.83 19.10 59.08 101.57 219.83 optional MAV 90.63 133.74 159.41 235.85 20.63 63.74 109.41 235.85 optional EEB 92.17 138.38 167.20 251.64 22.17 68.38 117.20 251.64 optional EEP 93.20 141.47 172.37 262.03 23.20 71.47 122.37 262.03 optional MAV and EEB 93.71 143.01 174.94 267.19 23.71 73.01 124.94 267.19 optional MAV and EEP 94.73 146.09 180.08 277.44 24.73 76.09 130.08 277.44 Evergreen VA Capital Growth Fund, Class L Shares base contract with no optional riders 91.56 136.52 164.09 245.35 21.56 66.52 114.09 245.35 optional MAV 93.09 141.16 171.85 261.00 23.09 71.16 121.85 261.00 optional EEB 94.63 145.78 179.56 276.42 24.63 75.78 129.56 276.42 optional EEP 95.66 148.86 184.68 286.57 25.66 78.86 134.68 286.57 optional MAV and EEB 96.17 150.39 187.23 291.61 26.17 80.39 137.23 291.61 optional MAV and EEP 97.19 153.45 192.31 301.61 27.19 83.45 142.31 301.61 Fidelity VIP III Growth & Income Portfolio (Service Class 2) base contract with no optional riders 88.99 128.76 151.04 218.75 18.99 58.76 101.04 218.75 optional MAV 90.53 133.43 158.88 234.79 20.53 63.43 108.88 234.79 optional EEB 92.07 138.07 166.68 250.59 22.07 68.07 116.68 250.59 optional EEP 93.09 141.16 171.85 261.00 23.09 71.16 121.85 261.00 optional MAV and EEB 93.61 142.70 174.43 266.16 23.61 72.70 124.43 266.16 optional MAV and EEP 94.63 145.78 179.56 276.42 24.63 75.78 129.56 276.42 Fidelity VIP III Mid Cap Portfolio (Service Class 2) base contract with no optional riders 90.43 133.11 158.36 233.73 20.43 63.11 108.36 233.73 optional MAV 91.97 137.76 166.16 249.54 21.97 67.76 116.16 249.54 optional EEB 93.50 142.39 173.91 265.13 23.50 72.39 123.91 265.13 optional EEP 94.53 145.47 179.05 275.39 24.53 75.47 129.05 275.39 optional MAV and EEB 95.04 147.01 181.61 280.49 25.04 77.01 131.61 280.49 optional MAV and EEP 96.07 150.08 186.72 290.60 26.07 80.08 136.72 290.60 Fidelity VIP Overseas Portfolio (Service Class 2) base contract with no optional riders 92.07 138.07 166.68 250.59 22.07 68.07 116.68 250.59 optional MAV 93.61 142.70 174.43 266.16 23.61 72.70 124.43 266.16 optional EEB 95.14 147.32 182.12 281.50 25.14 77.32 132.12 281.50 optional EEP 96.17 150.39 187.23 291.61 26.17 80.39 137.23 291.61 optional MAV and EEB 96.68 151.92 189.77 296.62 26.68 81.92 139.77 296.62 optional MAV and EEP 97.71 154.98 194.84 306.57 27.71 84.98 144.84 306.57
---------------------------------------------------------------------- 33 PROSPECTUS -- AUG. 9, 2001
You would pay the following expenses on a $1,000 investment in a nonqualified annuity with a seven-year surrender charge schedule and a 0.95% mortality and expense risk fee assuming a 5% annual return and ...(continued) no surrender or selection full surrender at the of an annuity payout plan at the end of each time period end of each time period 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years FTVIPT Franklin Real Estate Fund - Class 2 base contract with no optional riders $88.99 $128.76 $151.04 $218.75 $18.99 $58.76 $101.04 $218.75 optional MAV 90.53 133.43 158.88 234.79 20.53 63.43 108.88 234.79 optional EEB 92.07 138.07 166.68 250.59 22.07 68.07 116.68 250.59 optional EEP 93.09 141.16 171.85 261.00 23.09 71.16 121.85 261.00 optional MAV and EEB 93.61 142.70 174.43 266.16 23.61 72.70 124.43 266.16 optional MAV and EEP 94.63 145.78 179.56 276.42 24.63 75.78 129.56 276.42 FTVIPT Franklin Value Securities Fund - Class 2 base contract with no optional riders 91.45 136.21 163.57 244.30 21.45 66.21 113.57 244.30 optional MAV 92.99 140.85 171.33 259.96 22.99 70.85 121.33 259.96 optional EEB 94.53 145.47 179.05 275.39 24.53 75.47 129.05 275.39 optional EEP 95.55 148.55 184.17 285.56 25.55 78.55 134.17 285.56 optional MAV and EEB 96.07 150.08 186.72 290.60 26.07 80.08 136.72 290.60 optional MAV and EEP 97.09 153.15 191.80 300.61 27.09 83.15 141.80 300.61 FTVIPT Mutual Shares Securities Fund - Class 2 base contract with no optional riders 91.04 134.98 161.49 240.08 21.04 64.98 111.49 240.08 optional MAV 92.58 139.62 169.27 255.81 22.58 69.62 119.27 255.81 optional EEB 94.12 144.24 177.00 271.30 24.12 74.24 127.00 271.30 optional EEP 95.14 147.32 182.12 281.50 25.14 77.32 132.12 281.50 optional MAV and EEB 95.66 148.86 184.68 286.57 25.66 78.86 134.68 286.57 optional MAV and EEP 96.68 151.92 189.77 296.62 26.68 81.92 139.77 296.62 Goldman Sachs VIT CORE(SM) U.S. Equity Fund base contract with no optional riders 89.51 130.32 153.66 224.12 19.51 60.32 103.66 224.12 optional MAV 91.04 134.98 161.49 240.08 21.04 64.98 111.49 240.08 optional EEB 92.58 139.62 169.27 255.81 22.58 69.62 119.27 255.81 optional EEP 93.61 142.70 174.43 266.16 23.61 72.70 124.43 266.16 optional MAV and EEB 94.12 144.24 177.00 271.30 24.12 74.24 127.00 271.30 optional MAV and EEP 95.14 147.32 182.12 281.50 25.14 77.32 132.12 281.50 Goldman Sachs VIT Mid Cap Value Fund base contract with no optional riders 91.04 134.98 161.49 240.08 21.04 64.98 111.49 240.08 optional MAV 92.58 139.62 169.27 255.81 22.58 69.62 119.27 255.81 optional EEB 94.12 144.24 177.00 271.30 24.12 74.24 127.00 271.30 optional EEP 95.14 147.32 182.12 281.50 25.14 77.32 132.12 281.50 optional MAV and EEB 95.66 148.86 184.68 286.57 25.66 78.86 134.68 286.57 optional MAV and EEP 96.68 151.92 189.77 296.62 26.68 81.92 139.77 296.62 INVESCO VIF - Dynamics Fund base contract with no optional riders 91.45 136.21 163.57 244.30 21.45 66.21 113.57 244.30 optional MAV 92.99 140.85 171.33 259.96 22.99 70.85 121.33 259.96 optional EEB 94.53 145.47 179.05 275.39 24.53 75.47 129.05 275.39 optional EEP 95.55 148.55 184.17 285.56 25.55 78.55 134.17 285.56 optional MAV and EEB 96.07 150.08 186.72 290.60 26.07 80.08 136.72 290.60 optional MAV and EEP 97.09 153.15 191.80 300.61 27.09 83.15 141.80 300.61
---------------------------------------------------------------------- 34 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY
You would pay the following expenses on a $1,000 investment in a nonqualified annuity with a seven-year surrender charge schedule and a 0.95% mortality and expense risk fee assuming a 5% annual return and ...(continued) no surrender or selection full surrender at the of an annuity payout plan at the end of each time period end of each time period 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years INVESCO VIF - Financial Services Fund base contract with no optional riders $91.45 $136.21 $163.57 $244.30 $21.45 $66.21 $113.57 $244.30 optional MAV 92.99 140.85 171.33 259.96 22.99 70.85 121.33 259.96 optional EEB 94.53 145.47 179.05 275.39 24.53 75.47 129.05 275.39 optional EEP 95.55 148.55 184.17 285.56 25.55 78.55 134.17 285.56 optional MAV and EEB 96.07 150.08 186.72 290.60 26.07 80.08 136.72 290.60 optional MAV and EEP 97.09 153.15 191.80 300.61 27.09 83.15 141.80 300.61 INVESCO VIF - Technology Fund base contract with no optional riders 90.74 134.05 159.93 236.91 20.74 64.05 109.93 236.91 optional MAV 92.27 138.69 167.72 252.68 22.27 68.69 117.72 252.68 optional EEB 93.81 143.32 175.46 268.22 23.81 73.32 125.46 268.22 optional EEP 94.84 146.40 180.59 278.45 24.84 76.40 130.59 278.45 optional MAV and EEB 95.35 147.93 183.15 283.53 25.35 77.93 133.15 283.53 optional MAV and EEP 96.37 151.00 188.25 293.61 26.37 81.00 138.25 293.61 INVESCO VIF - Telecommunications Fund base contract with no optional riders 91.15 135.29 162.01 241.14 21.15 65.29 112.01 241.14 optional MAV 92.68 139.93 169.78 256.85 22.68 69.93 119.78 256.85 optional EEB 94.22 144.55 177.51 272.33 24.22 74.55 127.51 272.33 optional EEP 95.25 147.63 182.63 282.52 25.25 77.63 132.63 282.52 optional MAV and EEB 95.76 149.16 185.19 287.58 25.76 79.16 135.19 287.58 optional MAV and EEP 96.78 152.23 190.28 297.62 26.78 82.23 140.28 297.62 Janus Aspen Series Global Technology Portfolio: Service Shares base contract with no optional riders 89.92 131.56 155.75 228.40 19.92 61.56 105.75 228.40 optional MAV 91.45 136.21 163.57 244.30 21.45 66.21 113.57 244.30 optional EEB 92.99 140.85 171.33 259.96 22.99 70.85 121.33 259.96 optional EEP 94.02 143.94 176.48 270.28 24.02 73.94 126.48 270.28 optional MAV and EEB 94.53 145.47 179.05 275.39 24.53 75.47 129.05 275.39 optional MAV and EEP 95.55 148.55 184.17 285.56 25.55 78.55 134.17 285.56 Janus Aspen Series International Growth Portfolio: Service Shares base contract with no optional riders 90.12 132.18 156.80 230.53 20.12 62.18 106.80 230.53 optional MAV 91.66 136.83 164.61 246.40 21.66 66.83 114.61 246.40 optional EEB 93.20 141.47 172.37 262.03 23.20 71.47 122.37 262.03 optional EEP 94.22 144.55 177.51 272.33 24.22 74.55 127.51 272.33 optional MAV and EEB 94.73 146.09 180.08 277.44 24.73 76.09 130.08 277.44 optional MAV and EEP 95.76 149.16 185.19 287.58 25.76 79.16 135.19 287.58 Lazard Retirement Series International Equity Portfolio base contract with no optional riders 93.09 141.16 171.85 261.00 23.09 71.16 121.85 261.00 optional MAV 94.63 145.78 179.56 276.42 24.63 75.78 129.56 276.42 optional EEB 96.17 150.39 187.23 291.61 26.17 80.39 137.23 291.61 optional EEP 97.19 153.45 192.31 301.61 27.19 83.45 142.31 301.61 optional MAV and EEB 97.71 154.98 194.84 306.57 27.71 84.98 144.84 306.57 optional MAV and EEP 98.73 158.04 199.90 316.43 28.73 88.04 149.90 316.43
---------------------------------------------------------------------- 35 PROSPECTUS -- AUG. 9, 2001
You would pay the following expenses on a $1,000 investment in a nonqualified annuity with a seven-year surrender charge schedule and a 0.95% mortality and expense risk fee assuming a 5% annual return and ...(continued) no surrender or selection full surrender at the of an annuity payout plan at the end of each time period end of each time period 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years MFS(R) Investors Growth Stock Series - Service Class (previously MFS(R) Growth Series) base contract with no optional riders $ 91.66 $136.83 $164.61 $246.40 $21.66 $ 66.83 $114.61 $246.40 optional MAV 93.20 141.47 172.37 262.03 23.20 71.47 122.37 262.03 optional EEB 94.73 146.09 180.08 277.44 24.73 76.09 130.08 277.44 optional EEP 95.76 149.16 185.19 287.58 25.76 79.16 135.19 287.58 optional MAV and EEB 96.27 150.70 187.74 292.61 26.27 80.70 137.74 292.61 optional MAV and EEP 97.30 153.76 192.82 302.60 27.30 83.76 142.82 302.60 MFS(R) New Discovery Series - Service Class base contract with no optional riders 93.20 141.47 172.37 262.03 23.20 71.47 122.37 262.03 optional MAV 94.73 146.09 180.08 277.44 24.73 76.09 130.08 277.44 optional EEB 96.27 150.70 187.74 292.61 26.27 80.70 137.74 292.61 optional EEP 97.30 153.76 192.82 302.60 27.30 83.76 142.82 302.60 optional MAV and EEB 97.81 155.29 195.35 307.56 27.81 85.29 145.35 307.56 optional MAV and EEP 98.83 158.34 200.40 317.41 28.83 88.34 150.40 317.41 MFS(R) Utilities Series - Service Class base contract with no optional riders 91.66 136.83 164.61 246.40 21.66 66.83 114.61 246.40 optional MAV 93.20 141.47 172.37 262.03 23.20 71.47 122.37 262.03 optional EEB 94.73 146.09 180.08 277.44 24.73 76.09 130.08 277.44 optional EEP 95.76 149.16 185.19 287.58 25.76 79.16 135.19 287.58 optional MAV and EEB 96.27 150.70 187.74 292.61 26.27 80.70 137.74 292.61 optional MAV and EEP 97.30 153.76 192.82 302.60 27.30 83.76 142.82 302.60 Pioneer Equity-Income VCT Portfolio - Class II Shares base contract with no optional riders 90.12 132.18 156.80 230.53 20.12 62.18 106.80 230.53 optional MAV 91.66 136.83 164.61 246.40 21.66 66.83 114.61 246.40 optional EEB 93.20 141.47 172.37 262.03 23.20 71.47 122.37 262.03 optional EEP 94.22 144.55 177.51 272.33 24.22 74.55 127.51 272.33 optional MAV and EEB 94.73 146.09 180.08 277.44 24.73 76.09 130.08 277.44 optional MAV and EEP 95.76 149.16 185.19 287.58 25.76 79.16 135.19 287.58 Pioneer Europe VCT Portfolio - Class II Shares base contract with no optional riders 97.71 154.98 194.84 306.57 27.71 84.98 144.84 306.57 optional MAV 99.24 159.56 202.41 321.32 29.24 89.56 152.41 321.32 optional EEB 100.78 164.13 209.93 335.84 30.78 94.13 159.93 335.84 optional EEP 101.81 167.16 214.92 345.40 31.81 97.16 164.92 345.40 optional MAV and EEB 102.32 168.68 217.41 350.15 32.32 98.68 167.41 350.15 optional MAV and EEP 103.34 171.71 222.36 359.57 33.34 101.71 172.36 359.57 Putnam VT Health Sciences Fund: Class IB Shares base contract with no optional riders 90.94 134.67 160.97 239.02 20.94 64.67 110.97 239.02 optional MAV 92.48 139.31 168.75 254.77 22.48 69.31 118.75 254.77 optional EEB 94.02 143.94 176.48 270.28 24.02 73.94 126.48 270.28 optional EEP 95.04 147.01 181.61 280.49 25.04 77.01 131.61 280.49 optional MAV and EEB 95.55 148.55 184.17 285.56 25.55 78.55 134.17 285.56 optional MAV and EEP 96.58 151.62 189.26 295.62 26.58 81.62 139.26 295.62
---------------------------------------------------------------------- 36 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY
You would pay the following expenses on a $1,000 investment in a nonqualified annuity with a seven-year surrender charge schedule and a 0.95% mortality and expense risk fee assuming a 5% annual return and ...(continued) no surrender or selection full surrender at the of an annuity payout plan at the end of each time period end of each time period 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years Putnam VT International Growth Fund: Class IB Shares base contract with no optional riders $ 92.48 $139.31 $168.75 $254.77 $22.48 $69.31 $118.75 $254.77 optional MAV 94.02 143.94 176.48 270.28 24.02 73.94 126.48 270.28 optional EEB 95.55 148.55 184.17 285.56 25.55 78.55 134.17 285.56 optional EEP 96.58 151.62 189.26 295.62 26.58 81.62 139.26 295.62 optional MAV and EEB 97.09 153.15 191.80 300.61 27.09 83.15 141.80 300.61 optional MAV and EEP 98.12 156.21 196.87 310.53 28.12 86.21 146.87 310.53 Putnam VT Vista Fund - Class IB Shares base contract with no optional riders 89.71 130.94 154.71 226.26 19.71 60.94 104.71 226.26 optional MAV 91.25 135.60 162.53 242.19 21.25 65.60 112.53 242.19 optional EEB 92.79 140.23 170.30 257.89 22.79 70.23 120.30 257.89 optional EEP 93.81 143.32 175.46 268.22 23.81 73.32 125.46 268.22 optional MAV and EEB 94.32 144.86 178.02 273.35 24.32 74.86 128.02 273.35 optional MAV and EEP 95.35 147.93 183.15 283.53 25.35 77.93 133.15 283.53 Strong Opportunity Fund II - Advisor Class base contract with no optional riders 93.09 141.16 171.85 261.00 23.09 71.16 121.85 261.00 optional MAV 94.63 145.78 179.56 276.42 24.63 75.78 129.56 276.42 optional EEB 96.17 150.39 187.23 291.61 26.17 80.39 137.23 291.61 optional EEP 97.19 153.45 192.31 301.61 27.19 83.45 142.31 301.61 optional MAV and EEB 97.71 154.98 194.84 306.57 27.71 84.98 144.84 306.57 optional MAV and EEP 98.73 158.04 199.90 316.43 28.73 88.04 149.90 316.43 Wanger International Small Cap base contract with no optional riders 94.73 146.09 180.08 277.44 24.73 76.09 130.08 277.44 optional MAV 96.27 150.70 187.74 292.61 26.27 80.70 137.74 292.61 optional EEB 97.81 155.29 195.35 307.56 27.81 85.29 145.35 307.56 optional EEP 98.83 158.34 200.40 317.41 28.83 88.34 150.40 317.41 optional MAV and EEB 99.35 159.87 202.92 322.29 29.35 89.87 152.92 322.29 optional MAV and EEP 100.37 162.91 207.93 331.99 30.37 92.91 157.93 331.99 Wanger U.S. Small Cap base contract with no optional riders 90.53 133.43 158.88 234.79 20.53 63.43 108.88 234.79 optional MAV 92.07 138.07 166.68 250.59 22.07 68.07 116.68 250.59 optional EEB 93.61 142.70 174.43 266.16 23.61 72.70 124.43 266.16 optional EEP 94.63 145.78 179.56 276.42 24.63 75.78 129.56 276.42 optional MAV and EEB 95.14 147.32 182.12 281.50 25.14 77.32 132.12 281.50 optional MAV and EEP 96.17 150.39 187.23 291.61 26.17 80.39 137.23 291.61 Wells Fargo VT Asset Allocation Fund base contract with no optional riders 90.53 133.43 158.88 234.79 20.53 63.43 108.88 234.79 optional MAV 92.07 138.07 166.68 250.59 22.07 68.07 116.68 250.59 optional EEB 93.61 142.70 174.43 266.16 23.61 72.70 124.43 266.16 optional EEP 94.63 145.78 179.56 276.42 24.63 75.78 129.56 276.42 optional MAV and EEB 95.14 147.32 182.12 281.50 25.14 77.32 132.12 281.50 optional MAV and EEP 96.17 150.39 187.23 291.61 26.17 80.39 137.23 291.61
---------------------------------------------------------------------- 37 PROSPECTUS -- AUG. 9, 2001
You would pay the following expenses on a $1,000 investment in a nonqualified annuity with a seven-year surrender charge schedule and a 0.95% mortality and expense risk fee assuming a 5% annual return and ...(continued) no surrender or selection full surrender at the of an annuity payout plan at the end of each time period end of each time period 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years Wells Fargo VT International Equity Fund base contract with no optional riders $90.53 $133.43 $158.88 $234.79 $20.53 $63.43 $108.88 $234.79 optional MAV 92.07 138.07 166.68 250.59 22.07 68.07 116.68 250.59 optional EEB 93.61 142.70 174.43 266.16 23.61 72.70 124.43 266.16 optional EEP 94.63 145.78 179.56 276.42 24.63 75.78 129.56 276.42 optional MAV and EEB 95.14 147.32 182.12 281.50 25.14 77.32 132.12 281.50 optional MAV and EEP 96.17 150.39 187.23 291.61 26.17 80.39 137.23 291.61 Wells Fargo VT Small Cap Growth Fund base contract with no optional riders 92.58 139.62 169.27 255.81 22.58 69.62 119.27 255.81 optional MAV 94.12 144.24 177.00 271.30 24.12 74.24 127.00 271.30 optional EEB 95.66 148.86 184.68 286.57 25.66 78.86 134.68 286.57 optional EEP 96.68 151.92 189.77 296.62 26.68 81.92 139.77 296.62 optional MAV and EEB 97.19 153.45 192.31 301.61 27.19 83.45 142.31 301.61 optional MAV and EEP 98.22 156.51 197.37 311.51 28.22 86.51 147.37 311.51
---------------------------------------------------------------------- 38 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY
You would pay the following expenses on a $1,000 investment in a qualified annuity with a seven-year surrender charge schedule and a 0.75% mortality and expense risk fee assuming a 5% annual return and ... no surrender or selection full surrender at the of an annuity payout plan at the end of each time period end of each time period 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years AXP(R) VP - Blue Chip Advantage Fund base contract with no optional riders $ 87.97 $125.65 $145.78 $207.92 $17.97 $55.65 $ 95.78 $207.92 optional MAV 89.51 130.32 153.66 224.12 19.51 60.32 103.66 224.12 optional EEB 91.04 134.98 161.49 240.08 21.04 64.98 111.49 240.08 optional EEP 92.07 138.07 166.68 250.59 22.07 68.07 116.68 250.59 optional MAV and EEB 92.58 139.62 169.27 255.81 22.58 69.62 119.27 255.81 optional MAV and EEP 93.61 142.70 174.43 266.16 23.61 72.70 124.43 266.16 AXP(R) VP - Bond Fund base contract with no optional riders 86.33 120.65 137.33 190.38 16.33 50.65 87.33 190.38 optional MAV 87.87 125.34 145.26 206.84 17.87 55.34 95.26 206.84 optional EEB 89.40 130.01 153.14 223.05 19.40 60.01 103.14 223.05 optional EEP 90.43 133.11 158.36 233.73 20.43 63.11 108.36 233.73 optional MAV and EEB 90.94 134.67 160.97 239.02 20.94 64.67 110.97 239.02 optional MAV and EEP 91.97 137.76 166.16 249.54 21.97 67.76 116.16 249.54 AXP(R) VP - Capital Resource Fund base contract with no optional riders 86.12 120.03 136.27 188.17 16.12 50.03 86.27 188.17 optional MAV 87.66 124.71 144.20 204.66 17.66 54.71 94.20 204.66 optional EEB 89.20 129.39 152.09 220.90 19.20 59.39 102.09 220.90 optional EEP 90.22 132.49 157.32 231.60 20.22 64.49 107.32 231.60 optional MAV and EEB 90.74 134.05 159.93 236.91 20.74 64.05 109.93 236.91 optional MAV and EEP 91.76 137.14 165.12 247.45 21.76 67.14 115.12 247.45 AXP(R) VP - Cash Management Fund base contract with no optional riders 85.20 117.21 131.48 178.16 15.20 47.21 81.48 178.16 optional MAV 86.74 121.90 139.45 194.79 16.74 51.90 89.45 194.79 optional EEB 88.28 126.58 147.36 211.18 18.28 56.58 97.36 211.18 optional EEP 89.30 129.70 152.61 221.98 19.30 59.70 102.61 221.98 optional MAV and EEB 89.81 131.25 155.23 227.33 19.81 61.25 105.23 227.33 optional MAV and EEP 90.84 134.36 160.45 237.97 20.84 64.36 110.45 237.97 AXP(R) VP - Diversified Equity Income Fund base contract with no optional riders 87.97 125.65 145.78 207.92 17.97 55.65 95.78 207.92 optional MAV 89.51 130.32 153.66 224.12 19.51 60.32 103.66 224.12 optional EEB 91.04 134.98 161.49 240.08 21.04 64.98 111.49 240.08 optional EEP 92.07 138.07 166.68 250.59 22.07 68.07 116.68 250.59 optional MAV and EEB 92.58 139.62 169.27 255.81 22.58 69.62 119.27 255.81 optional MAV and EEP 93.61 142.70 174.43 266.16 23.61 72.70 124.43 266.16 AXP(R) VP - Emerging Markets Fund base contract with no optional riders 95.55 148.55 184.17 285.56 25.55 78.55 134.17 285.56 optional MAV 97.09 153.15 191.80 300.61 27.09 83.15 141.80 300.61 optional EEB 98.63 157.73 199.39 315.44 28.63 87.73 149.39 315.44 optional EEP 99.65 160.78 204.42 325.21 29.65 90.78 154.42 325.21 optional MAV and EEB 100.17 162.30 206.93 330.06 30.17 92.30 156.93 330.06 optional MAV and EEP 101.19 165.34 211.93 339.68 31.19 95.34 161.93 339.68
---------------------------------------------------------------------- 39 PROSPECTUS -- AUG. 9, 2001
You would pay the following expenses on a $1,000 investment in a qualified annuity with a seven-year surrender charge schedule and a 0.75% mortality and expense risk fee assuming a 5% annual return and ...(continued) no surrender or selection full surrender at the of an annuity payout plan at the end of each time period end of each time period 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years AXP(R) VP - Equity Select Fund base contract with no optional riders $89.51 $130.32 $153.66 $224.12 $19.51 $60.32 $103.66 $224.12 optional MAV 91.04 134.98 161.49 240.08 21.04 64.98 111.49 240.08 optional EEB 92.58 139.62 169.27 255.81 22.58 69.62 119.27 255.81 optional EEP 93.61 142.70 174.43 266.16 23.61 72.70 124.43 266.16 optional MAV and EEB 94.12 144.24 177.00 271.30 24.12 74.24 127.00 271.30 optional MAV and EEP 95.14 147.32 182.12 281.50 25.14 77.32 132.12 281.50 AXP(R) VP - Extra Income Fund base contract with no optional riders 86.64 121.59 138.92 193.69 16.64 51.59 88.92 193.69 optional MAV 88.17 126.27 146.84 210.10 18.17 56.27 96.84 210.10 optional EEB 89.71 130.94 154.71 226.26 19.71 60.94 104.71 226.26 optional EEP 90.74 134.05 159.93 236.91 20.74 64.05 109.93 236.91 optional MAV and EEB 91.25 135.60 162.53 242.19 21.25 65.60 112.53 242.19 optional MAV and EEP 92.27 138.69 167.72 252.68 22.27 68.68 117.72 252.68 AXP(R) VP - Federal Income Fund base contract with no optional riders 87.15 123.15 141.56 199.19 17.15 53.15 91.56 199.19 optional MAV 88.69 127.83 149.47 215.51 18.69 57.83 99.47 215.51 optional EEB 90.22 132.49 157.32 231.60 20.22 62.49 107.32 231.60 optional EEP 91.25 135.60 162.53 242.19 21.25 65.60 112.53 242.19 optional MAV and EEB 91.76 137.14 165.12 247.45 21.76 67.14 115.12 247.45 optional MAV and EEP 92.79 140.23 170.30 257.89 22.79 70.23 120.30 257.89 AXP(R) VP - Global Bond Fund base contract with no optional riders 89.20 129.39 152.09 220.90 19.20 59.39 102.09 220.90 optional MAV 90.74 134.05 159.93 236.91 20.74 64.05 109.93 236.91 optional EEB 92.27 138.69 167.72 252.68 22.27 68.69 117.72 252.68 optional EEP 93.30 141.78 172.88 263.07 23.30 71.78 122.88 263.07 optional MAV and EEB 93.81 143.32 175.46 268.22 23.81 73.32 125.46 268.22 optional MAV and EEP 94.84 146.40 180.48 278.45 24.84 76.40 130.59 278.45 AXP(R) VP - Growth Fund base contract with no optional riders 87.97 125.65 145.78 207.92 17.97 55.65 95.78 207.92 optional MAV 89.51 130.32 153.66 224.12 19.51 60.32 103.66 224.12 optional EEB 91.04 134.98 161.49 240.08 21.04 64.98 111.49 240.08 optional EEP 92.07 138.07 166.68 250.59 22.07 68.07 116.68 250.59 optional MAV and EEB 92.58 139.62 169.27 255.81 22.58 69.62 119.27 255.81 optional MAV and EEP 93.61 142.70 174.43 266.16 23.61 72.70 124.43 266.16 AXP(R) VP - International Fund base contract with no optional riders 88.69 127.83 149.47 215.51 18.69 57.83 99.47 215.51 optional MAV 90.22 132.49 157.32 231.60 20.22 62.49 107.32 231.60 optional EEB 91.76 137.14 165.12 247.45 21.76 67.14 115.12 247.45 optional EEP 92.79 140.23 170.30 257.89 22.79 70.23 120.30 257.89 optional MAV and EEB 93.30 141.78 172.88 263.07 23.30 71.78 122.88 263.07 optional MAV and EEP 94.32 144.86 178.02 273.35 24.32 74.86 128.02 273.35
---------------------------------------------------------------------- 40 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY
You would pay the following expenses on a $1,000 investment in a qualified annuity with a seven-year surrender charge schedule and a 0.75% mortality and expense risk fee assuming a 5% annual return and ...(continued) no surrender or selection full surrender at the of an annuity payout plan at the end of each time period end of each time period 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years AXP(R) VP - Managed Fund base contract with no optional riders $85.92 $119.40 $135.20 $185.95 $15.92 $49.40 $ 85.20 $185.95 optional MAV 87.46 124.09 143.15 202.47 17.46 54.09 93.15 202.47 optional EEB 88.99 128.76 151.04 218.75 18.99 58.76 101.04 218.75 optional EEP 90.02 131.87 156.28 229.47 20.02 61.87 106.28 229.47 optional MAV and EEB 90.53 133.43 158.43 234.79 20.53 63.43 108.88 234.79 optional MAV and EEP 91.56 136.52 164.09 245.35 21.56 66.52 114.09 245.35 AXP(R) VP - New Dimensions Fund(R) base contract with no optional riders 86.23 120.34 136.80 189.28 16.23 50.34 86.80 189.28 optional MAV 87.76 125.03 144.73 205.75 17.76 55.03 94.73 205.75 optional EEB 89.30 129.70 152.61 221.98 19.30 59.70 102.61 221.98 optional EEP 90.33 132.80 157.84 232.66 20.33 62.80 107.84 232.66 optional MAV and EEB 90.84 134.36 160.45 237.97 20.84 64.36 110.45 237.97 optional MAV and EEP 91.86 137.45 165.64 248.50 21.86 67.45 115.64 248.50 AXP(R) VP - Partners Small Cap Value Fund base contract with no optional riders 93.61 142.70 174.43 266.16 23.61 72.70 124.43 266.16 optional MAV 95.14 147.32 182.12 281.50 25.14 77.32 132.12 281.50 optional EEB 96.68 151.92 189.77 296.62 26.68 81.92 139.77 296.62 optional EEP 97.71 154.98 194.84 306.57 27.71 84.98 144.84 306.57 optional MAV and EEB 98.22 156.51 197.37 311.51 28.22 86.51 147.37 311.51 optional MAV and EEP 99.24 159.56 202.41 321.32 29.24 89.56 152.41 321.32 AXP(R) VP - S&P 500 Index Fund base contract with no optional riders 83.15 110.92 120.78 155.60 13.15 40.92 70.78 155.60 optional MAV 84.69 115.64 128.81 172.56 14.69 45.64 78.81 172.56 optional EEB 86.23 120.34 136.80 189.28 16.23 50.34 86.80 189.28 optional EEP 87.25 123.47 142.09 200.28 17.25 53.47 92.09 200.28 optional MAV and EEB 87.76 125.03 144.73 205.75 17.76 55.03 94.73 205.75 optional MAV and EEP 88.79 128.14 149.99 216.59 18.79 58.14 99.99 216.59 AXP(R) VP - Small Cap Advantage Fund base contract with no optional riders 90.43 133.11 158.36 233.73 20.43 63.11 108.36 233.73 optional MAV 91.97 137.76 166.16 249.54 21.97 67.76 116.16 249.54 optional EEB 93.50 142.39 173.91 265.13 23.50 72.39 123.91 265.13 optional EEP 94.53 145.47 179.05 275.39 24.53 75.47 129.05 275.39 optional MAV and EEB 95.04 147.01 181.61 280.49 25.04 77.01 131.61 280.49 optional MAV and EEP 96.07 150.08 186.72 290.60 26.07 80.08 136.72 290.60 AXP(R) VP - Stock Fund base contract with no optional riders 89.51 130.32 153.66 224.12 19.51 60.32 103.66 224.12 optional MAV 91.04 134.98 161.49 240.08 21.04 64.98 111.49 240.08 optional EEB 92.58 139.62 169.27 255.81 22.58 69.62 119.27 255.81 optional EEP 93.61 142.70 174.43 266.16 23.61 72.70 124.43 266.16 optional MAV and EEB 94.12 144.24 177.00 271.30 24.12 74.24 127.00 271.30 optional MAV and EEP 95.14 147.32 182.12 281.50 25.14 77.32 132.12 281.50
---------------------------------------------------------------------- 41 PROSPECTUS -- AUG. 9, 2001
You would pay the following expenses on a $1,000 investment in a qualified annuity with a seven-year surrender charge schedule and a 0.75% mortality and expense risk fee assuming a 5% annual return and ...(continued) no surrender or selection full surrender at the of an annuity payout plan at the end of each time period end of each time period 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years AXP(R) VP - Strategy Aggressive Fund base contract with no optional riders $ 86.12 $120.03 $136.27 $188.17 $16.12 $50.03 $ 86.27 $188.17 optional MAV 87.66 124.71 144.20 204.66 17.66 54.71 94.20 204.66 optional EEB 89.20 129.39 152.09 220.90 19.20 59.39 102.09 220.90 optional EEP 90.22 132.49 157.32 231.60 20.22 62.49 107.32 231.60 optional MAV and EEB 90.74 134.05 159.93 236.91 20.74 64.05 109.93 236.91 optional MAV and EEP 91.76 137.14 165.12 247.45 21.76 67.14 115.12 247.45 AIM V. I. Capital Appreciation Fund, Series II base contract with no optional riders 89.20 129.39 152.09 220.90 19.20 59.39 102.09 220.90 optional MAV 90.74 134.05 159.93 236.91 20.74 64.05 109.93 236.91 optional EEB 92.27 138.69 167.72 252.68 22.27 68.69 117.72 252.68 optional EEP 93.30 141.78 172.88 263.07 23.30 71.78 122.88 263.07 optional MAV and EEB 93.81 143.32 175.46 268.22 23.81 73.32 125.46 268.22 optional MAV and EEP 94.84 146.40 180.59 278.45 24.84 76.40 130.59 278.45 AIM V.I. Capital Development Fund Series II base contract 92.89 140.54 170.82 258.92 22.89 70.54 120.82 258.92 optional MAV 94.43 145.17 178.54 274.37 24.43 75.17 128.54 274.37 optional EEB 95.96 149.78 186.21 289.59 25.96 79.78 136.21 289.59 optional EEP 96.99 152.84 191.30 299.62 26.99 82.84 141.30 299.62 optional MAV and EEB 97.50 154.37 193.83 304.59 27.50 84.37 143.83 304.59 optional MAV and EEP 98.53 157.43 198.89 314.46 28.53 87.43 148.89 314.46 Alliance VP AllianceBernstein International Value Portfolio (Class B) base contract with no optional riders 90.53 133.43 158.88 234.79 20.53 63.43 108.88 234.79 optional MAV 92.07 138.07 166.68 250.59 22.07 68.07 116.68 250.59 optional EEB 93.61 142.70 174.43 266.16 23.61 72.70 124.43 266.16 optional EEP 94.63 145.78 179.56 276.42 24.63 75.78 129.56 276.42 optional MAV and EEB 95.14 147.32 182.12 281.50 25.14 77.32 132.12 281.50 optional MAV and EEP 96.17 150.39 187.23 291.61 26.17 80.39 137.23 291.61 Alliance VP Growth & Income Portfolio (Class B) base contract with no optional riders 87.97 125.65 145.78 207.92 17.97 55.65 95.78 207.92 optional MAV 89.51 130.32 153.66 224.12 19.51 60.32 103.66 224.12 optional EEB 91.04 134.98 161.49 240.08 21.04 64.98 111.49 240.08 optional EEP 92.07 138.07 166.68 250.59 22.07 68.07 116.68 250.59 optional MAV and EEB 92.58 139.62 169.27 255.81 22.58 69.62 119.27 255.81 optional MAV and EEP 93.61 142.70 174.43 266.16 23.61 72.70 124.43 266.16 American Century VP International, Class II base contract with no optional riders 95.14 147.32 182.12 281.50 25.14 77.32 132.12 281.50 optional MAV 96.68 151.92 189.77 296.62 26.68 81.92 139.77 296.62 optional EEB 98.22 156.51 197.37 311.51 28.22 86.51 147.37 311.51 optional EEP 99.24 159.56 202.41 321.32 29.24 89.56 152.41 321.32 optional MAV and EEB 99.76 161.09 204.93 326.18 29.76 91.09 154.93 326.18 optional MAV and EEP 100.78 164.13 209.93 335.84 30.78 94.13 159.93 335.84
---------------------------------------------------------------------- 42 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY
You would pay the following expenses on a $1,000 investment in a qualified annuity with a seven-year surrender charge schedule and a 0.75% mortality and expense risk fee assuming a 5% annual return and ...(continued) no surrender or selection full surrender at the of an annuity payout plan at the end of each time period end of each time period 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years American Century VP Value, Class II base contract with no optional riders $90.02 $131.87 $156.28 $229.47 $20.02 $61.87 $106.28 $229.47 optional MAV 91.56 136.52 164.09 245.35 21.56 66.52 114.09 245.35 optional EEB 93.09 141.16 171.85 261.00 23.09 71.16 121.85 261.00 optional EEP 94.12 144.24 177.00 271.30 24.12 74.24 127.00 271.30 optional MAV and EEB 94.63 145.78 179.56 276.42 24.63 75.78 129.56 276.42 optional MAV and EEP 95.66 148.86 184.68 286.57 25.66 78.86 134.68 286.57 Calvert Variable Series, Inc. Social Balanced Portfolio base contract with no optional riders 87.05 122.84 141.03 198.09 17.05 52.84 91.03 198.09 optional MAV 88.58 127.52 148.94 214.43 18.58 57.52 98.94 214.43 optional EEB 90.12 132.18 156.80 230.53 20.12 62.18 106.80 230.53 optional EEP 91.15 135.29 162.01 241.14 21.15 65.29 112.01 241.14 optional MAV and EEB 91.66 136.83 164.61 246.40 21.66 66.83 114.61 246.40 optional MAV and EEP 92.68 139.93 169.78 256.85 22.68 69.93 119.78 256.85 Evergreen VA Capital Growth Fund, Class L Shares base contract with no optional riders 89.51 130.32 153.66 224.12 19.51 60.32 103.66 224.12 optional MAV 91.04 134.98 161.49 240.08 21.04 64.98 111.49 240.08 optional EEB 92.58 139.62 169.27 255.81 22.58 69.62 119.27 255.81 optional EEP 93.61 142.70 174.43 266.16 23.61 72.70 124.43 266.16 optional MAV and EEB 94.12 144.24 177.00 271.30 24.12 74.24 127.00 271.30 optional MAV and EEP 95.14 147.32 182.12 281.50 25.14 77.32 132.12 281.50 Fidelity VIP III Growth & Income Portfolio (Service Class 2) base contract with no optional riders 86.94 122.53 140.51 196.99 16.94 52.53 90.51 196.99 optional MAV 88.48 127.21 148.42 213.35 18.48 57.21 98.42 213.35 optional EEB 90.02 131.87 156.28 229.47 20.02 61.87 106.28 229.47 optional EEP 91.04 134.98 161.49 240.08 21.04 64.98 111.49 240.08 optional MAV and EEB 91.56 136.52 164.09 245.35 21.56 66.52 114.09 245.35 optional MAV and EEP 92.58 139.62 169.27 255.81 22.58 69.62 119.27 255.81 Fidelity VIP III Mid Cap Portfolio (Service Class 2) base contract with no optional riders 88.38 126.90 147.89 212.27 18.38 56.90 97.89 212.27 optional MAV 89.92 131.56 155.75 228.40 19.92 61.56 105.75 228.40 optional EEB 91.45 136.21 163.57 244.30 21.45 66.21 113.57 244.30 optional EEP 92.48 139.31 168.75 254.77 22.48 69.31 118.75 254.77 optional MAV and EEB 92.99 140.85 171.33 259.96 22.99 70.85 121.33 259.96 optional MAV and EEP 94.02 143.94 176.48 270.28 24.02 73.94 126.48 270.28 Fidelity VIP Overseas Portfolio (Service Class 2) base contract with no optional riders 90.02 131.87 156.28 229.47 20.02 61.87 106.28 229.47 optional MAV 91.56 136.52 164.09 245.35 21.56 66.52 114.09 245.35 optional EEB 93.09 141.16 171.85 261.00 23.09 71.16 121.85 261.00 optional EEP 94.12 144.24 177.00 271.30 24.12 74.24 127.00 271.30 optional MAV and EEB 94.63 145.78 179.56 276.42 24.63 75.78 129.56 276.42 optional MAV and EEP 95.66 148.86 184.68 286.57 25.66 78.86 134.68 286.57
---------------------------------------------------------------------- 43 PROSPECTUS -- AUG. 9, 2001
You would pay the following expenses on a $1,000 investment in a qualified annuity with a seven-year surrender charge schedule and a 0.75% mortality and expense risk fee assuming a 5% annual return and ...(continued) no surrender or selection full surrender at the of an annuity payout plan at the end of each time period end of each time period 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years FTVIPT Franklin Real Estate Fund - Class 2 base contract with no optional riders $86.94 $122.53 $140.51 $196.99 $16.94 $52.53 $ 90.51 $196.99 optional MAV 88.48 127.21 148.42 213.35 18.48 57.21 98.42 213.35 optional EEB 90.02 131.87 156.28 229.47 20.02 61.87 106.28 229.47 optional EEP 91.04 134.98 161.49 240.08 21.04 64.98 111.49 240.08 optional MAV and EEB 91.56 136.52 164.09 245.35 21.56 66.52 114.09 245.35 optional MAV and EEP 92.58 139.62 169.27 255.81 22.58 69.62 119.27 255.81 FTVIPT Franklin Value Securities Fund - Class 2 base contract with no optional riders 89.40 130.01 153.14 223.05 19.40 60.01 103.14 223.05 optional MAV 90.94 134.67 160.97 239.02 20.94 64.67 110.97 239.02 optional EEB 92.48 139.31 168.75 254.77 22.48 69.31 118.75 254.77 optional EEP 93.50 142.39 173.91 265.13 23.50 72.39 123.91 265.13 optional MAV and EEB 94.02 143.94 176.48 270.28 24.02 73.94 126.48 270.28 optional MAV and EEP 95.04 147.01 181.61 280.49 25.04 77.01 131.61 280.49 FTVIPT Mutual Shares Securities Fund - Class 2 base contract with no optional riders 88.89 128.76 151.04 218.75 18.99 58.76 101.04 218.75 optional MAV 90.53 133.43 158.88 234.79 20.53 63.43 108.88 234.79 optional EEB 92.07 138.07 166.68 250.59 22.07 68.07 116.68 250.59 optional EEP 93.09 141.16 171.85 261.00 23.09 71.16 121.85 261.00 optional MAV and EEB 93.61 142.70 174.43 266.16 23.61 72.70 124.43 266.16 optional MAV and EEP 94.63 145.78 179.56 276.42 24.63 75.78 129.56 276.42 Goldman Sachs VIT CORE(SM) U.S. Equity Fund base contract with no optional riders 87.46 124.09 143.15 200.47 17.46 54.09 93.15 202.47 optional MAV 88.99 128.76 151.04 218.75 18.99 58.76 101.04 218.75 optional EEB 90.53 133.43 158.88 234.79 20.53 63.43 108.88 234.79 optional EEP 91.56 136.52 164.09 245.35 21.56 66.52 114.09 245.35 optional MAV and EEB 92.07 138.07 166.68 250.59 22.07 68.07 116.68 250.59 optional MAV and EEP 93.09 141.16 171.85 261.00 23.09 71.16 121.85 261.00 Goldman Sachs VIT Mid Cap Value Fund base contract with no optional riders 88.99 128.76 151.04 218.75 18.99 58.76 101.04 218.75 optional MAV 90.53 133.43 158.88 234.79 20.53 63.43 108.88 234.79 optional EEB 92.07 138.07 166.68 250.59 22.07 68.07 116.68 250.59 optional EEP 93.09 141.16 171.85 261.00 23.09 71.16 121.85 261.00 optional MAV and EEB 93.61 142.70 174.43 266.16 23.61 72.70 124.43 266.16 optional MAV and EEP 94.63 145.78 179.56 276.42 24.63 75.78 129.56 276.42 INVESCO VIF - Dynamics Fund base contract with no optional riders 89.40 130.01 153.14 223.05 19.40 60.01 103.14 223.05 optional MAV 90.94 134.67 160.97 239.02 20.94 64.67 110.97 239.02 optional EEB 92.48 139.31 168.75 254.77 22.48 69.31 118.75 254.77 optional EEP 93.50 142.39 173.91 265.13 23.50 72.39 123.91 265.13 optional MAV and EEB 94.02 143.94 176.48 270.28 24.02 73.94 126.48 270.28 optional MAV and EEP 95.04 147.01 181.61 280.49 25.04 77.01 131.61 280.49
---------------------------------------------------------------------- 44 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY
You would pay the following expenses on a $1,000 investment in a qualified annuity with a seven-year surrender charge schedule and a 0.75% mortality and expense risk fee assuming a 5% annual return and ...(continued) no surrender or selection full surrender at the of an annuity payout plan at the end of each time period end of each time period 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years INVESCO VIF - Financial Services Fund base contract with no optional riders $89.40 $130.01 $153.14 $223.05 $19.40 $60.01 $103.14 $223.05 optional MAV 90.94 134.67 160.97 239.02 20.94 64.67 110.97 239.02 optional EEB 92.48 139.31 168.75 254.77 22.48 69.31 118.75 254.77 optional EEP 93.50 142.39 173.91 265.13 23.50 72.39 123.91 265.13 optional MAV and EEB 94.02 143.94 176.48 270.28 24.02 73.94 126.48 270.28 optional MAV and EEP 95.04 147.01 181.61 280.49 25.04 77.01 131.61 280.49 INVESCO VIF - Technology Fund base contract with no optional riders 88.69 127.83 149.47 215.51 18.69 57.83 99.47 215.51 optional MAV 90.22 132.49 157.32 231.60 20.22 62.49 107.32 231.60 optional EEB 91.76 137.14 165.12 247.45 21.76 67.14 115.12 247.45 optional EEP 92.79 140.23 170.30 257.89 22.79 70.23 120.30 257.89 optional MAV and EEB 93.30 141.78 172.88 263.07 23.30 71.78 122.88 263.07 optional MAV and EEP 94.32 144.86 178.02 273.35 24.32 74.86 128.02 273.35 INVESCO VIF - Telecommunications Fund base contract with no optional riders 89.10 129.08 151.57 219.83 19.10 59.08 101.57 219.83 optional MAV 90.63 133.74 159.41 235.85 20.63 63.74 109.41 235.85 optional EEB 92.17 138.38 167.20 251.64 22.17 68.38 117.20 251.64 optional EEP 93.20 141.47 172.37 262.03 23.20 71.47 122.37 262.03 optional MAV and EEB 93.71 143.01 174.94 267.19 23.71 73.01 124.94 267.19 optional MAV and EEP 94.73 146.09 180.08 277.44 24.73 76.09 130.08 277.44 Janus Aspen Series Global Technology Portfolio: Service Shares base contract with no optional riders 87.87 125.34 145.26 206.84 17.87 55.34 95.26 206.84 optional MAV 89.40 130.01 153.14 223.05 19.40 60.01 103.14 223.05 optional EEB 90.94 134.67 160.97 239.02 20.94 64.67 110.97 239.02 optional EEP 91.97 137.76 166.16 249.54 21.97 67.76 116.16 249.54 optional MAV and EEB 92.48 139.31 168.75 254.77 22.48 69.31 118.75 254.77 optional MAV and EEP 93.50 142.39 173.91 265.13 23.50 72.39 123.91 265.13 Janus Aspen Series International Growth Portfolio: Service Shares base contract with no optional riders 88.07 125.96 146.31 209.01 18.07 55.96 96.31 209.01 optional MAV 89.61 130.63 154.18 225.19 19.61 60.63 104.18 225.19 optional EEB 91.15 135.29 162.01 241.14 21.15 65.29 112.01 241.14 optional EEP 92.17 138.38 167.20 251.64 22.17 68.38 117.20 251.64 optional MAV and EEB 92.68 139.93 169.78 256.85 22.68 69.93 119.78 256.85 optional MAV and EEP 93.71 143.01 174.94 267.19 23.71 73.01 124.94 267.19 Lazard Retirement Series International Equity Portfolio base contract with no optional riders 91.04 134.98 161.49 240.08 21.04 64.98 111.49 240.08 optional MAV 92.58 139.62 169.27 255.81 22.58 69.62 119.27 255.81 optional EEB 94.12 144.24 177.00 271.30 24.12 74.24 127.00 271.30 optional EEP 95.14 147.32 182.12 281.50 25.14 77.32 132.12 81.50 optional MAV and EEB 95.66 148.86 184.68 286.57 25.66 78.86 134.68 286.57 optional MAV and EEP 96.68 151.92 189.77 296.62 26.68 81.92 139.77 296.62
---------------------------------------------------------------------- 45 PROSPECTUS -- AUG. 9, 2001
You would pay the following expenses on a $1,000 investment in a qualified annuity with a seven-year surrender charge schedule and a 0.75% mortality and expense risk fee assuming a 5% annual return and ...(continued) no surrender or selection full surrender at the of an annuity payout plan at the end of each time period end of each time period 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years MFS(R) Investors Growth Stock Series - Service Class (previously MFS(R) Growth Series) base contract with no optional riders $ 89.61 $130.63 $154.18 $225.19 $19.61 $60.63 $104.18 $225.19 optional MAV 91.15 135.29 162.01 241.14 21.15 65.29 112.01 241.14 optional EEB 92.68 139.93 169.78 256.85 22.68 69.93 119.78 256.85 optional EEP 93.71 143.01 174.94 267.19 23.71 73.01 124.94 267.19 optional MAV and EEB 94.22 144.55 177.51 272.33 24.22 74.55 127.51 272.33 optional MAV and EEP 95.25 147.63 182.63 282.52 25.25 77.63 132.63 282.52 MFS(R) New Discovery Series - Service Class base contract with no optional riders 91.15 135.29 162.01 241.14 21.15 65.29 112.01 241.14 optional MAV 92.68 139.93 169.78 265.85 22.68 69.93 119.78 256.85 optional EEB 94.22 144.55 177.51 272.33 24.22 74.55 127.51 272.33 optional EEP 95.25 147.63 182.63 282.52 25.25 77.63 132.63 282.52 optional MAV and EEB 95.76 149.16 185.19 287.58 25.76 79.16 135.19 287.58 optional MAV and EEP 96.78 152.23 190.28 297.62 26.78 82.23 140.28 297.62 MFS(R) Utilities Series - Service Class base contract with no optional riders 89.61 130.63 154.18 225.19 19.61 60.63 104.18 225.19 optional MAV 91.15 135.29 162.01 241.14 21.15 65.29 112.01 241.14 optional EEB 92.68 139.93 169.78 256.85 22.68 69.93 119.78 256.85 optional EEP 93.71 143.01 174.94 267.19 23.71 73.01 124.94 267.19 optional MAV and EEB 94.22 144.55 177.51 272.33 24.22 74.55 127.51 272.33 optional MAV and EEP 95.25 147.63 182.63 282.52 25.25 77.63 132.63 282.52 Pioneer Equity-Income VCT Portfolio - Class II Shares base contract with no optional riders 88.07 125.96 146.31 209.01 18.07 55.96 96.31 209.01 optional MAV 89.61 130.63 154.18 225.19 19.61 60.63 104.18 225.19 optional EEB 91.15 135.29 162.01 241.14 21.15 65.29 112.01 241.14 optional EEP 92.17 138.38 167.20 251.64 22.17 68.38 117.20 251.64 optional MAV and EEB 92.68 139.93 169.78 256.85 22.68 69.93 119.78 256.85 optional MAV and EEP 93.71 143.01 178.94 267.19 23.71 73.01 124.94 267.19 Pioneer Europe VCT Portfolio - Class II Shares base contract with no optional riders 95.66 148.86 184.68 286.57 25.66 78.86 134.68 286.57 optional MAV 97.19 153.45 192.31 301.61 27.19 83.45 142.31 301.61 optional EEB 98.73 158.04 199.90 316.43 28.73 88.04 149.90 316.43 optional EEP 99.76 161.09 204.93 326.18 29.76 91.09 154.93 326.18 optional MAV and EEB 100.27 162.61 207.43 331.02 30.27 92.61 157.43 331.02 optional MAV and EEP 101.29 165.65 212.43 340.63 31.29 96.65 162.43 340.63 Putnam VT Health Sciences Fund: Class IB Shares base contract with no optional riders 88.89 128.45 150.52 217.67 18.89 58.45 100.52 217.67 optional MAV 90.43 133.11 158.36 233.73 20.43 63.11 108.36 233.73 optional EEB 91.97 137.76 166.16 249.54 21.97 67.76 116.16 249.54 optional EEP 92.99 140.85 171.33 259.96 22.99 70.85 121.33 259.96 optional MAV and EEB 93.50 142.39 173.91 265.13 23.50 72.39 123.91 265.13 optional MAV and EEP 94.53 145.47 179.05 276.39 24.53 75.47 129.05 275.39
---------------------------------------------------------------------- 46 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY
You would pay the following expenses on a $1,000 investment in a qualified annuity with a seven-year surrender charge schedule and a 0.75% mortality and expense risk fee assuming a 5% annual return and ...(continued) no surrender or selection full surrender at the of an annuity payout plan at the end of each time period end of each time period 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years Putnam VT International Growth Fund: Class IB Shares base contract with no optional riders $90.43 $133.11 $158.36 $233.73 $20.43 $63.11 $108.36 $233.73 optional MAV 91.97 137.76 166.16 249.54 21.97 67.76 116.16 249.54 optional EEB 93.50 142.39 173.91 265.13 23.50 72.39 123.91 265.13 optional EEP 94.53 145.47 179.05 275.39 24.53 75.47 129.05 275.39 optional MAV and EEB 95.04 147.01 181.61 280.49 25.04 77.01 131.61 280.49 optional MAV and EEP 96.07 150.08 186.72 290.60 26.07 80.08 136.72 290.60 Putnam VT Vista Fund - Class IB Shares base contract with no optional riders 87.66 124.71 144.20 204.66 17.66 54.71 94.20 204.66 optional MAV 89.20 129.39 152.09 220.90 19.20 59.39 102.09 220.90 optional EEB 90.74 134.05 159.93 236.91 20.74 64.05 109.93 236.91 optional EEP 91.76 137.14 165.12 247.45 21.76 67.14 115.12 247.45 optional MAV and EEB 92.27 138.69 167.72 252.68 22.27 68.69 117.72 252.68 optional MAV and EEP 93.30 141.78 172.88 263.07 23.30 71.78 122.88 263.07 Strong Opportunity Fund II - Advisor Class base contract with no optional riders 91.04 134.98 161.49 240.08 21.04 64.98 111.49 240.08 optional MAV 92.58 139.62 169.27 255.81 22.58 69.62 119.27 255.81 optional EEB 94.12 144.24 177.00 271.30 24.12 74.24 127.00 271.30 optional EEP 95.14 147.32 182.12 281.50 25.14 77.32 132.12 281.50 optional MAV and EEB 95.66 148.86 184.68 286.57 25.66 78.86 134.68 286.57 optional MAV and EEP 96.68 151.92 189.77 296.62 26.68 81.92 139.77 296.62 Wanger International Small Cap base contract with no optional riders 92.68 139.93 169.78 256.85 22.68 69.93 119.78 256.85 optional MAV 94.22 144.55 177.51 272.33 24.22 74.55 127.51 272.33 optional EEB 95.76 149.16 185.19 287.58 25.76 79.16 135.19 287.58 optional EEP 96.78 152.23 190.28 297.62 26.78 82.23 140.28 297.62 optional MAV and EEB 97.30 153.76 192.82 302.60 27.30 83.76 142.82 302.60 optional MAV and EEP 98.32 156.82 197.88 312.50 28.32 86.82 147.88 312.50 Wanger U.S. Small Cap base contract with no optional riders 88.48 127.21 148.42 213.35 18.48 57.21 98.42 213.35 optional MAV 90.02 131.87 156.28 229.47 20.02 61.87 106.28 229.47 optional EEB 91.56 136.52 164.09 245.35 21.56 66.52 114.09 245.35 optional EEP 92.58 139.62 169.27 255.81 22.58 69.62 119.27 255.81 optional MAV and EEB 93.09 141.16 171.85 261.00 23.09 71.16 121.85 261.00 optional MAV and EEP 94.12 144.24 177.00 271.30 24.12 74.24 127.00 271.30 Wells Fargo VT Asset Allocation Fund base contract with no optional riders 88.48 127.21 148.42 213.35 18.48 57.21 98.42 213.35 optional MAV 90.02 131.87 156.28 229.47 20.02 61.87 106.28 229.47 optional EEB 91.56 136.52 164.09 245.35 21.56 66.52 114.09 245.35 optional EEP 92.58 139.62 169.27 255.81 22.58 69.62 119.27 255.81 optional MAV and EEB 93.09 141.16 171.85 261.00 23.09 71.16 121.85 261.00 optional MAV and EEP 94.12 144.24 177.00 271.30 24.12 74.24 127.00 271.30
---------------------------------------------------------------------- 47 PROSPECTUS -- AUG. 9, 2001
You would pay the following expenses on a $1,000 investment in a qualified annuity with a seven-year surrender charge schedule and a 0.75% mortality and expense risk fee assuming a 5% annual return and ...(continued) no surrender or selection full surrender at the of an annuity payout plan at the end of each time period end of each time period 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years Wells Fargo VT International Equity Fund base contract with no optional riders $88.48 $127.21 $148.42 $213.35 $18.48 $57.21 $ 98.42 $213.35 optional MAV 90.02 131.87 156.28 229.47 20.02 61.87 106.28 229.47 optional EEB 91.56 136.52 164.09 245.35 21.56 66.52 114.09 245.35 optional EEP 92.58 139.62 169.27 255.81 22.58 69.62 119.27 255.81 optional MAV and EEB 93.09 141.16 171.85 261.00 23.09 71.16 121.85 261.00 optional MAV and EEP 94.12 144.24 177.00 271.30 24.12 74.24 127.00 271.30 Wells Fargo VT Small Cap Growth Fund base contract with no optional riders 90.53 133.43 158.88 234.79 20.53 63.43 108.88 234.79 optional MAV 92.07 138.07 166.68 250.59 22.07 68.07 116.68 250.59 optional EEB 93.61 142.70 174.43 266.16 23.61 72.70 124.43 266.16 optional EEP 94.63 145.78 179.56 276.42 24.63 75.78 129.56 276.42 optional MAV and EEB 95.14 147.32 182.12 281.50 25.14 77.32 132.12 281.50 optional MAV and EEP 96.17 150.39 187.23 291.61 26.17 80.39 137.23 291.61
* In these examples, the $30 contract administrative charge is approximated as a 0.053% charge based on our estimated 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. + The ten-year surrender charge schedule is not available in Oregon. You should not consider these examples as representations of past or future expenses. Actual expenses may be more or less than those shown. ---------------------------------------------------------------------- 48 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY Condensed Financial Information (Unaudited)
The following tables give per-unit information about the financial history of each subaccount. We have not provided this information for some subaccounts because they are new and do not have any history. Year ended Dec. 31, 2000 1999 Subaccount BC1(1) (Investing in shares of AXP(R) Variable Portfolio - Blue Chip Advantage Fund) Accumulation unit value at beginning of period $1.11 $1.00 Accumulation unit value at end of period $0.98 $1.11 Number of accumulation units outstanding at end of period (000 omitted) 43,161 8,145 Ratio of operating expense to average net assets 0.95% 0.95% ------------------------------------------------------------------------------------------------------------------------------------ Subaccount BC2(1) (Investing in shares of AXP(R) Variable Portfolio - Blue Chip Advantage Fund) Accumulation unit value at beginning of period $1.11 $1.00 Accumulation unit value at end of period $0.99 $1.11 Number of accumulation units outstanding at end of period (000 omitted) 32,624 7,503 Ratio of operating expense to average net assets 0.75% 0.75% ------------------------------------------------------------------------------------------------------------------------------------ Subaccount BD1(1) (Investing in shares of AXP(R) Variable Portfolio - Bond Fund) Accumulation unit value at beginning of period $1.01 $1.00 Accumulation unit value at end of period $1.06 $1.01 Number of accumulation units outstanding at end of period (000 omitted) 43,920 11,675 Ratio of operating expense to average net assets 0.95% 0.95% ------------------------------------------------------------------------------------------------------------------------------------ Subaccount BD2(1) (Investing in shares of AXP(R) Variable Portfolio - Bond Fund) Accumulation unit value at beginning of period $1.01 $1.00 Accumulation unit value at end of period $1.06 $1.01 Number of accumulation units outstanding at end of period (000 omitted) 30,783 7,186 Ratio of operating expense to average net assets 0.75% 0.75% ------------------------------------------------------------------------------------------------------------------------------------ Subaccount CR1(1) (Investing in shares of AXP(R) Variable Portfolio - Capital Resource Fund) Accumulation unit value at beginning of period $1.14 $1.00 Accumulation unit value at end of period $0.93 $1.14 Number of accumulation units outstanding at end of period (000 omitted) 22,159 3,227 Ratio of operating expense to average net assets 0.95% 0.95% ------------------------------------------------------------------------------------------------------------------------------------ Subaccount CR2(1) (Investing in shares of AXP(R) Variable Portfolio - Capital Resource Fund) Accumulation unit value at beginning of period $1.14 $1.00 Accumulation unit value at end of period $0.93 $1.14 Number of accumulation units outstanding at end of period (000 omitted) 24,003 5,333 Ratio of operating expense to average net assets 0.75% 0.75% ------------------------------------------------------------------------------------------------------------------------------------ Subaccount CM1(1) (Investing in shares of AXP(R) Variable Portfolio - Cash Management Fund) Accumulation unit value at beginning of period $1.01 $1.00 Accumulation unit value at end of period $1.06 $1.01 Number of accumulation units outstanding at end of period (000 omitted) 203,922 87,424 Ratio of operating expense to average net assets 0.95% 0.95% Simple yield(2) 4.96% 5.03% Compound yield(2) 5.08% 5.16% ------------------------------------------------------------------------------------------------------------------------------------ Subaccount CM2(1) (Investing in shares of AXP(R) Variable Portfolio - Cash Management Fund) Accumulation unit value at beginning of period $1.01 $1.00 Accumulation unit value at end of period $1.06 $1.01 Number of accumulation units outstanding at end of period (000 omitted) 171,785 65,522 Ratio of operating expense to average net assets 0.75% 0.75% Simple yield(2) 5.16% 5.26% Compound yield(1) 5.29% 5.40% ------------------------------------------------------------------------------------------------------------------------------------ Subaccount DE1(1) (Investing in shares of AXP(R) Variable Portfolio - Diversified Equity Income Fund) Accumulation unit value at beginning of period $1.03 $1.00 Accumulation unit value at end of period $1.01 $1.03 Number of accumulation units outstanding at end of period (000 omitted) 14,227 3,441 Ratio of operating expense to average net assets 0.95% 0.95% ------------------------------------------------------------------------------------------------------------------------------------ Subaccount DE2(1) (Investing in shares of AXP(R) Variable Portfolio - Diversified Equity Income Fund) Accumulation unit value at beginning of period $1.03 $1.00 Accumulation unit value at end of period $1.01 $1.03 Number of accumulation units outstanding at end of period (000 omitted) 12,124 3,149 Ratio of operating expense to average net assets 0.75% 0.75% ------------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------- 49 PROSPECTUS -- AUG. 9, 2001
Year ended Dec. 31, 2000 1999 Subaccount EM1(3) (Investing in shares of AXP(R) Variable Portfolio - Emerging Markets Fund) Accumulation unit value at beginning of period $1.00 -- Accumulation unit value at end of period $0.74 -- Number of accumulation units outstanding at end of period (000 omitted) 693 -- Ratio of operating expense to average net assets 0.95% -- ------------------------------------------------------------------------------------------------------------------------------------ Subaccount EM2(3) (Investing in shares of AXP(R) Variable Portfolio - Emerging Markets Fund) Accumulation unit value at beginning of period $1.00 -- Accumulation unit value at end of period $0.74 -- Number of accumulation units outstanding at end of period (000 omitted) 906 -- Ratio of operating expense to average net assets 0.75% -- ------------------------------------------------------------------------------------------------------------------------------------ Subaccount EI1(1) (Investing in shares of AXP(R) Variable Portfolio - Extra Income Fund) Accumulation unit value at beginning of period $1.01 $1.00 Accumulation unit value at end of period $0.91 $1.01 Number of accumulation units outstanding at end of period (000 omitted) 52,655 10,137 Ratio of operating expense to average net assets 0.95% 0.95% ------------------------------------------------------------------------------------------------------------------------------------ Subaccount EI2(1) (Investing in shares of AXP(R) Variable Portfolio - Extra Income Fund) Accumulation unit value at beginning of period $1.01 $1.00 Accumulation unit value at end of period $0.91 $1.01 Number of accumulation units outstanding at end of period (000 omitted) 31,722 7,774 Ratio of operating expense to average net assets 0.75% 0.75% ------------------------------------------------------------------------------------------------------------------------------------ Subaccount FI1(1) (Investing in shares of AXP(R) Variable Portfolio - Federal Income Fund) Accumulation unit value at beginning of period $1.00 $1.00 Accumulation unit value at end of period $1.08 $1.00 Number of accumulation units outstanding at end of period (000 omitted) 24,654 12,796 Ratio of operating expense to average net assets 0.95% 0.95% ------------------------------------------------------------------------------------------------------------------------------------ Subaccount FI2(1) (Investing in shares of AXP(R) Variable Portfolio - Federal Income Fund) Accumulation unit value at beginning of period $1.00 $1.00 Accumulation unit value at end of period $1.08 $1.00 Number of accumulation units outstanding at end of period (000 omitted) 16,258 11,135 Ratio of operating expense to average net assets 0.75% 0.75% ------------------------------------------------------------------------------------------------------------------------------------ Subaccount GB1(1) (Investing in shares of AXP(R) Variable Portfolio - Global Bond Fund) Accumulation unit value at beginning of period $1.00 $1.00 Accumulation unit value at end of period $1.02 $1.00 Number of accumulation units outstanding at end of period (000 omitted) 14,137 2,368 Ratio of operating expense to average net assets 0.95% 0.95% ------------------------------------------------------------------------------------------------------------------------------------ Subaccount GB2(1) (Investing in shares of AXP(R) Variable Portfolio - Global Bond Fund) Accumulation unit value at beginning of period $1.00 $1.00 Accumulation unit value at end of period $1.03 $1.00 Number of accumulation units outstanding at end of period (000 omitted) 8,968 1,552 Ratio of operating expense to average net assets 0.75% 0.75% ------------------------------------------------------------------------------------------------------------------------------------ Subaccount GR1(1) (Investing in shares of AXP(R) Variable Portfolio - Growth Fund) Accumulation unit value at beginning of period $1.18 $1.00 Accumulation unit value at end of period $0.94 $1.18 Number of accumulation units outstanding at end of period (000 omitted) 106,410 13,813 Ratio of operating expense to average net assets 0.95% 0.95% ------------------------------------------------------------------------------------------------------------------------------------ Subaccount GR2(1) (Investing in shares of AXP(R) Variable Portfolio - Growth Fund) Accumulation unit value at beginning of period $1.18 $1.00 Accumulation unit value at end of period $0.95 $1.18 Number of accumulation units outstanding at end of period (000 omitted) 97,754 16,891 Ratio of operating expense to average net assets 0.75% 0.75% ------------------------------------------------------------------------------------------------------------------------------------ Subaccount IE1(1) (Investing in shares of AXP(R) Variable Portfolio - International Fund) Accumulation unit value at beginning of period $1.27 $1.00 Accumulation unit value at end of period $0.95 $1.27 Number of accumulation units outstanding at end of period (000 omitted) 15,670 2,173 Ratio of operating expense to average net assets 0.95% 0.95% ------------------------------------------------------------------------------------------------------------------------------------ Subaccount IE2(1) (Investing in shares of AXP(R) Variable Portfolio - International Fund) Accumulation unit value at beginning of period $1.27 $1.00 Accumulation unit value at end of period $0.95 $1.27 Number of accumulation units outstanding at end of period (000 omitted) 13,967 2,575 Ratio of operating expense to average net assets 0.75% 0.75% ------------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------- 50 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY
Year ended Dec. 31, 2000 1999 Subaccount MF1(1) (Investing in shares of AXP(R) Variable Portfolio - Managed Fund) Accumulation unit value at beginning of period $1.09 $1.00 Accumulation unit value at end of period $1.05 $1.09 Number of accumulation units outstanding at end of period (000 omitted) 39,810 6,539 Ratio of operating expense to average net assets 0.95% 0.95% ------------------------------------------------------------------------------------------------------------------------------------ Subaccount MF2(1) (Investing in shares of AXP(R) Variable Portfolio - Managed Fund) Accumulation unit value at beginning of period $1.09 $1.00 Accumulation unit value at end of period $1.05 $1.09 Number of accumulation units outstanding at end of period (000 omitted) 28,348 5,220 Ratio of operating expense to average net assets 0.75% 0.75% ------------------------------------------------------------------------------------------------------------------------------------ Subaccount ND1(1) (Investing in shares of AXP(R) Variable Portfolio - New Dimensions Fund(R)) Accumulation unit value at beginning of period $1.19 $1.00 Accumulation unit value at end of period $1.07 $1.19 Number of accumulation units outstanding at end of period (000 omitted) 219,316 32,483 Ratio of operating expense to average net assets 0.95% 0.95% ------------------------------------------------------------------------------------------------------------------------------------ Subaccount ND2(1) (Investing in shares of AXP(R) Variable Portfolio - New Dimensions Fund(R)) Accumulation unit value at beginning of period $1.19 $1.00 Accumulation unit value at end of period $1.07 $1.19 Number of accumulation units outstanding at end of period (000 omitted) 177,036 31,537 Ratio of operating expense to average net assets 0.75% 0.75% ------------------------------------------------------------------------------------------------------------------------------------ Subaccount IV1(3) (Investing in shares of AXP(R) Variable Portfolio - S&P 500 Index Fund) Accumulation unit value at beginning of period $1.00 -- Accumulation unit value at end of period $0.91 -- Number of accumulation units outstanding at end of period (000 omitted) 14,084 -- Ratio of operating expense to average net assets 0.95% -- ------------------------------------------------------------------------------------------------------------------------------------ Subaccount IV2(3) (Investing in shares of AXP(R) Variable Portfolio - S&P 500 Index Fund) Accumulation unit value at beginning of period $1.00 -- Accumulation unit value at end of period $0.91 -- Number of accumulation units outstanding at end of period (000 omitted) 9,812 -- Ratio of operating expense to average net assets 0.75% -- ------------------------------------------------------------------------------------------------------------------------------------ Subaccount SC1(1) (Investing in shares of AXP(R) Variable Portfolio - Small Cap Advantage Fund) Accumulation unit value at beginning of period $1.12 $1.00 Accumulation unit value at end of period $1.16 $1.12 Number of accumulation units outstanding at end of period (000 omitted) 16,349 3,029 Ratio of operating expense to average net assets 0.95% 0.95% ------------------------------------------------------------------------------------------------------------------------------------ Subaccount SC2(1) (Investing in shares of AXP(R) Variable Portfolio - Small Cap Advantage Fund) Accumulation unit value at beginning of period $1.12 $1.00 Accumulation unit value at end of period $1.16 $1.12 Number of accumulation units outstanding at end of period (000 omitted) 14,830 2,970 Ratio of operating expense to average net assets 0.75% 0.75% ------------------------------------------------------------------------------------------------------------------------------------ Subaccount SA1(1) (Investing in shares of AXP(R) Variable Portfolio - Strategy Aggressive Fund) Accumulation unit value at beginning of period $1.51 $1.00 Accumulation unit value at end of period $1.21 $1.51 Number of accumulation units outstanding at end of period (000 omitted) 58,414 3,901 Ratio of operating expense to average net assets 0.95% 0.95% ------------------------------------------------------------------------------------------------------------------------------------ Subaccount SA2(1) (Investing in shares of AXP(R) Variable Portfolio - Strategy Aggressive Fund) Accumulation unit value at beginning of period $1.51 $1.00 Accumulation unit value at end of period $1.22 $1.51 Number of accumulation units outstanding at end of period (000 omitted) 46,978 4,470 Ratio of operating expense to average net assets 0.75% 0.75% ------------------------------------------------------------------------------------------------------------------------------------ Subaccount 1SR(3) (Investing in shares of Calvert Variable Series, Inc. Social Balanced Portfolio) Accumulation unit value at beginning of period $1.00 -- Accumulation unit value at end of period $0.96 -- Number of accumulation units outstanding at end of period (000 omitted) 1,693 -- Ratio of operating expense to average net assets 0.95% -- ------------------------------------------------------------------------------------------------------------------------------------ Subaccount 2SR(3) (Investing in shares of Calvert Variable Series, Inc. Social Balanced Portfolio) Accumulation unit value at beginning of period $1.00 -- Accumulation unit value at end of period $0.96 -- Number of accumulation units outstanding at end of period (000 omitted) 1,283 -- Ratio of operating expense to average net assets 0.75% -- ------------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------- 51 PROSPECTUS -- AUG. 9, 2001
Year ended Dec. 31, 2000 1999 Subaccount 1RE(1) (Investing in shares of FTVIPT Franklin Real Estate Fund - Class 2) Accumulation unit value at beginning of period $0.96 $1.00 Accumulation unit value at end of period $1.25 $0.96 Number of accumulation units outstanding at end of period (000 omitted) 6,181 683 Ratio of operating expense to average net assets 0.95% 0.95% ------------------------------------------------------------------------------------------------------------------------------------ Subaccount 2RE(1) (Investing in shares of FTVIPT Franklin Real Estate Fund - Class 2) Accumulation unit value at beginning of period $0.96 $1.00 Accumulation unit value at end of period $1.25 $0.96 Number of accumulation units outstanding at end of period (000 omitted) 6,879 885 Ratio of operating expense to average net assets 0.75% 0.75% ------------------------------------------------------------------------------------------------------------------------------------ Subaccount 1SI(1) (Investing in shares of FTVIPT Franklin Value Securities Fund - Class 2) Accumulation unit value at beginning of period $0.96 $1.00 Accumulation unit value at end of period $1.19 $0.96 Number of accumulation units outstanding at end of period (000 omitted) 2,897 590 Ratio of operating expense to average net assets 0.95% 0.95% ------------------------------------------------------------------------------------------------------------------------------------ Subaccount 2SI(1) (Investing in shares of FTVIPT Franklin Value Securities Fund - Class 2) Accumulation unit value at beginning of period $0.96 $1.00 Accumulation unit value at end of period $1.19 $0.96 Number of accumulation units outstanding at end of period (000 omitted) 2,846 586 Ratio of operating expense to average net assets 0.75% 0.75% ------------------------------------------------------------------------------------------------------------------------------------ Subaccount 1UE(1) (Investing in shares of Goldman Sachs VIT CORE(SM) U.S. Equity Fund) Accumulation unit value at beginning of period $1.10 $1.00 Accumulation unit value at end of period $0.99 $1.10 Number of accumulation units outstanding at end of period (000 omitted) 55,239 9,951 Ratio of operating expense to average net assets 0.95% 0.95% ------------------------------------------------------------------------------------------------------------------------------------ Subaccount 2UE(1) (Investing in shares of Goldman Sachs VIT CORE(SM) U.S. Equity Fund) Accumulation unit value at beginning of period $1.10 $1.00 Accumulation unit value at end of period $0.99 $1.10 Number of accumulation units outstanding at end of period (000 omitted) 42,626 8,981 Ratio of operating expense to average net assets 0.75% 0.75% ------------------------------------------------------------------------------------------------------------------------------------ Subaccount 1MC(1) (Investing in shares of Goldman Sachs VIT Mid Cap Value Fund) Accumulation unit value at beginning of period $0.95 $1.00 Accumulation unit value at end of period $1.23 $0.95 Number of accumulation units outstanding at end of period (000 omitted) 10,265 2,023 Ratio of operating expense to average net assets 0.95% 0.95% ------------------------------------------------------------------------------------------------------------------------------------ Subaccount 2MC(1) (Investing in shares of Goldman Sachs VIT Mid Cap Value Fund) Accumulation unit value at beginning of period $0.95 $1.00 Accumulation unit value at end of period $1.23 $0.95 Number of accumulation units outstanding at end of period (000 omitted) 7,622 1,634 Ratio of operating expense to average net assets 0.75% 0.75% ------------------------------------------------------------------------------------------------------------------------------------ Subaccount 1GT(3)(Investing in shares of Janus Aspen Series Global Technology Portfolio: Service Shares) Accumulation unit value at beginning of period $1.00 -- Accumulation unit value at end of period $0.68 -- Number of accumulation units outstanding at end of period (000 omitted) 22,949 -- Ratio of operating expense to average net assets 0.95% -- ------------------------------------------------------------------------------------------------------------------------------------ Subaccount 2GT(3)(Investing in shares of Janus Aspen Series Global Technology Portfolio: Service Shares) Accumulation unit value at beginning of period $1.00 -- Accumulation unit value at end of period $0.68 -- Number of accumulation units outstanding at end of period (000 omitted) 20,288 -- Ratio of operating expense to average net assets 0.75% -- ------------------------------------------------------------------------------------------------------------------------------------ Subaccount 1IG(3) (Investing in shares of Janus Aspen Series International Growth Portfolio: Service Shares) Accumulation unit value at beginning of period $1.00 -- Accumulation unit value at end of period $0.80 -- Number of accumulation units outstanding at end of period (000 omitted) 29,251 -- Ratio of operating expense to average net assets 0.95% -- ------------------------------------------------------------------------------------------------------------------------------------ Subaccount 2IG(3) (Investing in shares of Janus Aspen Series International Growth Portfolio: Service Shares) Accumulation unit value at beginning of period $1.00 -- Accumulation unit value at end of period $0.80 -- Number of accumulation units outstanding at end of period (000 omitted) 25,763 -- Ratio of operating expense to average net assets 0.75% -- ------------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------- 52 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY
Year ended Dec. 31, 2000 1999 Subaccount 1IP(1) (Investing in shares of Lazard Retirement International Equity Portfolio) Accumulation unit value at beginning of period $1.07 $1.00 Accumulation unit value at end of period $0.96 $1.07 Number of accumulation units outstanding at end of period (000 omitted) 10,774 2,504 Ratio of operating expense to average net assets 0.95% 0.95% ------------------------------------------------------------------------------------------------------------------------------------ Subaccount 2IP(1) (Investing in shares of Lazard Retirement International Equity Portfolio) Accumulation unit value at beginning of period $1.07 $1.00 Accumulation unit value at end of period $0.96 $1.07 Number of accumulation units outstanding at end of period (000 omitted) 7,958 1,981 Ratio of operating expense to average net assets 0.75% 0.75% ------------------------------------------------------------------------------------------------------------------------------------ Subaccount 1MG(3) (Investing in shares of MFS(R) Investors Growth Stock Series - Service Class (previously MFS(R) Growth Series)) Accumulation unit value at beginning of period $1.00 -- Accumulation unit value at end of period $0.90 -- Number of accumulation units outstanding at end of period (000 omitted) 21,973 -- Ratio of operating expense to average net assets 0.95% -- ------------------------------------------------------------------------------------------------------------------------------------ Subaccount 2MG(3) (Investing in shares of MFS(R) Investors Growth Stock Series - Service Class (previously MFS(R) Growth Series)) Accumulation unit value at beginning of period $1.00 -- Accumulation unit value at end of period $0.91 -- Number of accumulation units outstanding at end of period (000 omitted) 19,521 -- Ratio of operating expense to average net assets 0.75% -- ------------------------------------------------------------------------------------------------------------------------------------ Subaccount 1MD(3) (Investing in shares of MFS(R) New Discovery Series - Service Class) Accumulation unit value at beginning of period $1.00 -- Accumulation unit value at end of period $0.96 -- Number of accumulation units outstanding at end of period (000 omitted) 15,060 -- Ratio of operating expense to average net assets 0.95% -- ------------------------------------------------------------------------------------------------------------------------------------ Subaccount 2MD(3) (Investing in shares of MFS(R) New Discovery Series - Service Class) Accumulation unit value at beginning of period $1.00 -- Accumulation unit value at end of period $0.96 -- Number of accumulation units outstanding at end of period (000 omitted) 12,308 -- Ratio of operating expense to average net assets 0.75% -- ------------------------------------------------------------------------------------------------------------------------------------ Subaccount 1VS(1) (Investing in shares of Putnam VT Vista Fund - Class IB Shares) Accumulation unit value at beginning of period $1.36 $1.00 Accumulation unit value at end of period $1.29 $1.36 Number of accumulation units outstanding at end of period (000 omitted) 68,407 7,245 Ratio of operating expense to average net assets 0.95% 0.95% ------------------------------------------------------------------------------------------------------------------------------------ Subaccount 2VS(1) (Investing in shares of Putnam VT Vista Fund - Class IB Shares) Accumulation unit value at beginning of period $1.36 $1.00 Accumulation unit value at end of period $1.29 $1.36 Number of accumulation units outstanding at end of period (000 omitted) 49,764 5,084 Ratio of operating expense to average net assets 0.75% 0.75% ------------------------------------------------------------------------------------------------------------------------------------ Subaccount 1IT(1) (Investing in shares of Wanger International Small Cap) Accumulation unit value at beginning of period $1.51 $1.00 Accumulation unit value at end of period $1.08 $1.51 Number of accumulation units outstanding at end of period (000 omitted) 21,844 1,343 Ratio of operating expense to average net assets 0.95% 0.95% ------------------------------------------------------------------------------------------------------------------------------------ Subaccount 2IT(1) (Investing in shares of Wanger International Small Cap) Accumulation unit value at beginning of period $1.51 $1.00 Accumulation unit value at end of period $1.08 $1.51 Number of accumulation units outstanding at end of period (000 omitted) 18,245 1,234 Ratio of operating expense to average net assets 0.75% 0.75% ------------------------------------------------------------------------------------------------------------------------------------ Subaccount 1SP(1) (Investing in shares of Wanger U.S. Small Cap) Accumulation unit value at beginning of period $1.15 $1.00 Accumulation unit value at end of period $1.05 $1.15 Number of accumulation units outstanding at end of period (000 omitted) 29,881 2,723 Ratio of operating expense to average net assets 0.95% 0.95% ------------------------------------------------------------------------------------------------------------------------------------ Subaccount 2SP(1) (Investing in shares of Wanger U.S. Small Cap) Accumulation unit value at beginning of period $1.15 $1.00 Accumulation unit value at end of period $1.05 $1.15 Number of accumulation units outstanding at end of period (000 omitted) 23,813 2,476 Ratio of operating expense to average net assets 0.75% 0.75% ------------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------- 53 PROSPECTUS -- AUG. 9, 2001 (1) Operations commenced on Sept. 15, 1999. (2) Net of annual contract administrative charge and mortality and expense risk fee. (3) Operations commenced on May 1, 2000. (4) Operations commenced on Sept. 21, 1999. Financial Statements You can find our audited financial statements and the audited financial statements of the subaccounts in the SAI. The SAI does not include the audited financial statements for some of the subaccounts because they are new and do not have any assets. Performance Information Performance information for the subaccounts may appear from time to time in advertisements or sales literature. This information reflects the performance of a hypothetical investment in a particular subaccount during a specified time period. We show actual performance from the date the subaccounts began investing in funds. We also show performance from the commencement date of the funds as if the contract existed at that time, which it did not. Although we base performance figures on historical earnings, past performance does not guarantee future results. We include non-recurring charges (such as surrender charges) in total return figures, but not in yield quotations. Excluding non-recurring charges in yield calculations increases the reported value. We may show total return quotations by means of schedules, charts or graphs. Total return figures reflect deduction of the following charges: o contract administrative charge, o applicable mortality and expense risk fee, o Maximum Anniversary Value Death Benefit Rider fee, o Enhanced Earnings Plus Death Benefit Rider fee, and o applicable surrender charge (assuming a surrender at the end of the illustrated period). We may also show optional total return quotations that reflect deduction of the Enhanced Earnings Death Benefit Rider fee. We also show optional total return quotations that do not reflect a surrender charge deduction (assuming no surrender), or fees for any of the optional features. Average annual total return is the average annual compounded rate of return of the investment over a period of one, five and ten 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 generally will be higher than average annual total return. 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. ---------------------------------------------------------------------- 54 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY The Variable Account and the Funds
You may allocate payments to any or all of the subaccounts of the variable account that invest in shares of the following funds: ---------------- --------------- ----------------------------------------- ---------------------------------- Subaccount Investing In Investment Objectives and Policies Investment Advisor or Manager ---------------- --------------- ----------------------------------------- ---------------------------------- BC1 BC2 AXP(R) Objective: long-term total return IDS Life, investment manager; Variable exceeding that of the U.S. stock American Express Financial Portfolio - market. Invests primarily in common Corporation (AEFC), investment Blue Chip stocks of companies included in the advisor. Advantage Fund unmanaged S&P 500 Index. ---------------- --------------- ----------------------------------------- ---------------------------------- BD1 BD2 AXP(R) Objective: high level of current income IDS Life, investment manager; Variable while conserving the value of the AEFC, investment advisor. Portfolio - investment and continuing a high level Bond Fund of income for the longest time period. Invests primarily in bonds and other debt obligations. ---------------- --------------- ----------------------------------------- ---------------------------------- CR1 CR2 AXP(R) Objective: capital appreciation. IDS Life, investment manager; Variable Invests primarily in U.S. common stocks AEFC, investment advisor. Portfolio - and other securities convertible into Capital common stocks. Resource Fund ---------------- --------------- ----------------------------------------- ---------------------------------- CM1 CM2 AXP(R) Objective: maximum current income IDS Life, investment manager; Variable consistent with liquidity and stability AEFC, investment advisor. Portfolio - of principal. Invests in money market Cash securities. Management Fund ---------------- --------------- ----------------------------------------- ---------------------------------- DE1 DE2 AXP(R) Objective: a high level of current IDS Life, investment manager; Variable income and, as a secondary goal, steady AEFC, investment advisor. Portfolio - growth of capital. Invests primarily in Diversified dividend-paying common and preferred Equity Income stocks. Fund ---------------- --------------- ----------------------------------------- ---------------------------------- EM1 EM2 AXP(R) Objective: long-term capital growth. IDS Life, investment manager; Variable Invests primarily in equity securities AEFC, investment advisor; Portfolio - of companies in emerging markets. American Express Asset Emerging Management International, Inc., Markets Fund a wholly-owned subsidiary of AEFC, is the sub-investment advisor. ---------------- --------------- ----------------------------------------- ---------------------------------- ES1 ES2 AXP(R) Objective: growth of capital. Invests IDS Life, investment manager; Variable primarily in growth of medium-sized AEFC, investment advisor. Portfolio - companies. Equity Select Fund ---------------- --------------- ----------------------------------------- ---------------------------------- EI1 EI2 AXP(R) Objective: high current income, with IDS Life, investment manager; Variable capital growth as a secondary AEFC, investment advisor. Portfolio - objective. Invests primarily in Extra Income high-yielding, high-risk corporate Fund bonds issued by U.S. and foreign companies and governments. ---------------- --------------- ----------------------------------------- ---------------------------------- FI1 FI2 AXP(R) Objective: a high level of current IDS Life, investment manager; Variable income and safety of principal AEFC, investment advisor. Portfolio - consistent with an investment in U.S. Federal government and government agency Income Fund securities. Invests primarily in debt obligations issued or guaranteed as to principal and interest by the U.S. government, its agencies or instrumentalities. ---------------- --------------- ----------------------------------------- ---------------------------------- GB1 GB2 AXP(R) Objective: high total return through IDS Life, investment manager; Variable income and growth of capital. AEFC, investment advisor. Portfolio - Non-diversified fund that invests Global Bond primarily in debt obligations of U.S. Fund and foreign issuers. ---------------- --------------- ----------------------------------------- ----------------------------------
-------------------------------------------------------------------------------- 55 PROSPECTUS -- AUG. 9, 2001
---------------- --------------- ----------------------------------------- ---------------------------------- Subaccount Investing In Investment Objectives and Policies Investment Advisor or Manager ---------------- --------------- ----------------------------------------- ---------------------------------- GR1 GR2 AXP(R) Objective: long-term capital growth. IDS Life, investment manager; Variable Invests primarily in common stocks and AEFC, investment advisor. Portfolio - securities convertible into common Growth Fund stocks that appear to offer growth opportunities. ---------------- --------------- ----------------------------------------- ---------------------------------- IE1 IE2 AXP(R) Objective: capital appreciation. IDS Life, investment manager; Variable Invests primarily in common stocks or AEFC, investment advisor. Portfolio - convertible securities of foreign American Express Asset International issuers that offer growth potential. Management International, Inc., Fund a wholly-owned subsidiary of AEFC, is the sub-investment advisor. ---------------- --------------- ----------------------------------------- ---------------------------------- MF1 MF2 AXP(R) Objective: maximum total investment IDS Life, investment manager; Variable return through a combination of capital AEFC, investment advisor. Portfolio - growth and current income. Invests Managed Fund primarily in a combination of common and preferred stocks, convertible securities, bonds and other debt securities. ---------------- --------------- ----------------------------------------- ---------------------------------- ND1 ND2 AXP(R) Objective: long-term growth of capital. IDS Life, investment manager; Variable Invests primarily in common stocks of AEFC, investment advisor. Portfolio - U.S. and foreign companies showing New potential for significant growth. Dimensions Fund(R) ---------------- --------------- ----------------------------------------- ---------------------------------- SV1 SV2 AXP(R) Objective: long term capital IDS Life, investment manager; Variable appreciation. Non-diversified fund that AEFC, investment advisor; Royce Portfolio - invests primarily in equity securities. & Associates, Inc and EQSF Partners Advisers, Inc., sub-investment Small Cap advisors. Value Fund* ---------------- --------------- ----------------------------------------- ---------------------------------- IV1 IV2 AXP(R) Objective: long-term capital IDS Life, investment manager; Variable appreciation. Invests primarily in AEFC, investment advisor. Portfolio - securities that are expected to provide S&P 500 Index investment results that correspond to Fund the performance of the S&P 500 Index. ---------------- --------------- ----------------------------------------- ---------------------------------- SC1 SC2 AXP(R) Objective: long-term capital growth. IDS Life, investment manager; Variable Invests primarily in equity stocks of AEFC, investment advisor. Portfolio - small companies that are often included Small Cap in the S&P SmallCap 600 Index or the Advantage Fund Russell 2000 Index. ---------------- --------------- ----------------------------------------- ---------------------------------- ST1 ST2 AXP(R) Objective: current income and growth of IDS Life, investment manager; Variable capital. Invests primarily in common AEFC, investment advisor. Portfolio - stocks and securities convertible into Stock Fund common stock. ---------------- --------------- ----------------------------------------- ---------------------------------- SA1 SA2 AXP(R) Objective: capital appreciation. IDS Life, investment manager; Variable Invests primarily in common stocks of AEFC, investment advisor; Portfolio - small- and medium-size companies. Kenwood Capital Management LLC, Strategy sub-investment advisor. Aggressive Fund ---------------- --------------- ----------------------------------------- ---------------------------------- 1AC 2AC AIM V.I. Objective: growth of capital. Invests A I M Advisors, Inc. Capital principally in common stocks of Appreciation companies likely to benefit from new or Fund, Series innovative products, services or II processes as well as those with above-average growth and excellent prospects for future growth. ---------------- --------------- ----------------------------------------- ----------------------------------
---------------------------------------------------------------------- 56 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY
---------------- ----------------- ----------------------------------------- ---------------------------------- Subaccount Investing In Investment Objectives and Policies Investment Advisor or Manager ---------------- ----------------- ----------------------------------------- ---------------------------------- 1AD 2AD AIM V.I. Objective: long term growth of capital. A I M Advisors, Inc. Capital Invests primarily in securities Development (including common stocks, convertible Fund, Series securities and bonds) of small- and II medium-sized companies. ---------------- ----------------- ----------------------------------------- ---------------------------------- 1AB 2AB Alliance VP Objective: long-term growth of capital. Alliance Capital Management, L.P. AllianceBernstein Invests primarily in a diversified International portfolio of foreign equity securities. Value Portfolio (Class B) ---------------- --------------- ----------------------------------------- ---------------------------------- 1AL 2AL Alliance VP Objective: reasonable current income Alliance Capital Management, L.P. Growth & and reasonable appreciation. Invests Income primarily in dividend-paying common Portfolio stocks of good quality. (Class B) ---------------- --------------- ----------------------------------------- ---------------------------------- 1AI 2AI American Objective: long term capital growth. American Century Investment Century VP Invests primarily in stocks of growing Management, Inc. International, foreign companies. Class II ---------------- --------------- ----------------------------------------- ---------------------------------- 1AV 2AV American Objective: long-term capital growth, American Century Investment Century VP with income as a secondary objective. Management, Inc. Value, Class Invests primarily in stocks of II companies that management believes to be undervalued at the time of purchase. ---------------- --------------- ----------------------------------------- ---------------------------------- 1SR 2SR Calvert Objective: income and capital growth. Calvert Asset Management Variable Invests primarily in stocks, bonds and Company, Inc. (CAMCO), Series, Inc. money market instruments which offer investment advisor. NCM Capital Social income and capital growth opportunity Management Group, Inc. is the Balanced and which satisfy the investment and investment subadvisor. Portfolio social criteria. ---------------- --------------- ----------------------------------------- ---------------------------------- 1CG 2CG Evergreen VA Objective: long-term capital growth. Evergreen Investment Management Capital The fund seeks to achieve its goal by Company, LLC. Sub Advisor is Growth Fund, investing primarily in common stocks of Pilgrim Baxter Value Investors, Class L Shares large U.S. companies, which the Inc. portfolio managers believe have the potential for capital growth over the intermediate- and long-term. ---------------- --------------- ----------------------------------------- ---------------------------------- 1FG 2FG Fidelity VIP Objective: high total return through a Fidelity Management & Research III Growth & combination of current income and Company (FMR), investment Income capital appreciation. Invests primarily manager; FMR U.K. and FMR Far Portfolio in common stocks with a focus on those East, sub-investment advisors. (Service that pay current dividends and show Class 2) potential for capital appreciation. ---------------- --------------- ----------------------------------------- ---------------------------------- 1FM 2FM Fidelity VIP Objective: long-term growth of capital. FMR, investment manager; FMR III Mid Cap Invests primarily in medium market U.K. and FMR Far East, Portfolio capitalization common stocks. sub-investment advisors. (Service Class 2) ---------------- --------------- ----------------------------------------- ---------------------------------- 1FO 2FO Fidelity VIP Objective: long-term growth of capital. FMR, investment manager; FMR Overseas Invests primarily in common stocks of U.K., FMR Far East, Fidelity Portfolio foreign securities. International Investment (Service Advisors (FIIA) and FIIA U.K., Class 2) sub-investment advisors. ---------------- --------------- ----------------------------------------- ----------------------------------
---------------------------------------------------------------------- 57 PROSPECTUS -- AUG. 9, 2001
---------------- --------------- ----------------------------------------- ---------------------------------- Subaccount Investing In Investment Objectives and Policies Investment Advisor or Manager ---------------- --------------- ----------------------------------------- ---------------------------------- 1RE 2RE FTVIPT Objective: capital appreciation with a Franklin Advisers, Inc. Franklin Real secondary goal to earn current income. Estate Fund - Invests primarily in equity securities Class 2 of companies operating in the real estate industry, primarily equity real estate investment trusts (REITS). ---------------- --------------- ----------------------------------------- ---------------------------------- 1SI 2SI FTVIPT Objective: long-term total return. Franklin Advisory Services, LLC Franklin Invests primarily in equity securities Value of companies the manager believes are Securities selling substantially below the Fund - Class 2 underlying value of their assets or their private market value. ---------------- --------------- ----------------------------------------- ---------------------------------- 1MS 2MS FTVIPT Mutual Objective: capital appreciation with Franklin Mutual Advisers, LLC Shares income as a secondary goal. Invests Securities primarily in equity securities of Fund - Class 2 companies that the manager believes are available at market prices less than their value based on certain recognized or objective criteria (intrinsic value). ---------------- --------------- ----------------------------------------- ---------------------------------- 1UE 2UE Goldman Sachs Objective: seeks long-term growth of Goldman Sachs Asset Management VIT CORE(SM) capital and dividend income. Invests U.S. Equity primarily in a broadly diversified Fund portfolio of large-cap and blue chip equity securities representing all major sectors of the U.S. economy. ---------------- --------------- ----------------------------------------- ---------------------------------- 1MC 2MC Goldman Sachs Objective: seeks long-term capital Goldman Sachs Asset Management VIT Mid Cap appreciation. Invests primarily in Value Fund mid-capitalization companies within the range of the market capitalization of companies constituting the Russell Midcap Value index at the time of investment. ---------------- --------------- ----------------------------------------- ---------------------------------- 1ID 2ID INVESCO VIF - Objective: long-term growth of capital. INVESCO Funds Group, Inc. Dynamics Fund Invests primarily in common stocks of mid-sized companies - those with market capitalizations between $2 billion and $15 billion, but also has the flexibility to invest in other types of securities, including preferred stocks, convertible securities and bonds. ---------------- --------------- ----------------------------------------- ---------------------------------- 1FS 2FS INVESCO VIF - Objective: long-term growth of capital. INVESCO Funds Group, Inc. Financial Aggressively managed. Invests primarily Services Fund in equity securities of companies involved in the financial services sector. These companies include, among others, banks, insurance companies, and investment and miscellaneous industries (asset managers, brokerage firms, and government-sponsored agencies). ---------------- --------------- ----------------------------------------- ----------------------------------
---------------------------------------------------------------------- 58 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY
---------------- --------------- ----------------------------------------- ---------------------------------- Subaccount Investing In Investment Objectives and Policies Investment Advisor or Manager ---------------- --------------- ----------------------------------------- ---------------------------------- 1TC 2TC INVESCO VIF - Objective: long-term growth of capital. INVESCO Funds Group, Inc. Technology Invests primarily in equity securities Fund of companies engaged in technology-related industries. These include, but are not limited to, applied technology, biotechnology, communications, computers, electronics, Internet, IT services and consulting, software, telecommunications equipment and services, IT infrastructure, networking, robotics, and video. Many of these products and services are subject to rapid obsolescence, which may lower the market value of securities of the companies in this sector. ---------------- --------------- ----------------------------------------- ---------------------------------- 1TL 2TL INVESCO VIF - Objective: long-term growth of capital. INVESCO Funds Group, Inc. TelecommunicatioAggressively managed. Invests primarily Fund in equity securities of companies involved in the design, development, manufacture, distribution or sale of communications services and equipment, and companies that are involved in supplying equipment or services to such companies. The telecommunications sector includes companies that offer telephone services, wireless communications, satellite communications, television and movie programming, broadcasting and Internet access. ---------------- --------------- ----------------------------------------- ---------------------------------- 1GT 2GT Janus Aspen Objective: long-term growth of capital. Janus Capital Series Global Non-diversified mutual fund that Technology invests primarily in equity securities Portfolio: of U.S. and foreign companies selected Service Shares for their growth potential. Normally invests at least 65% of assets in securities of companies that the manager believes will benefit significantly from advancements or improvements in technology. ---------------- --------------- ----------------------------------------- ---------------------------------- 1IG 2IG Janus Aspen Objective: long-term growth of capital. Janus Capital Series Invests at least 65%of its total assets International in securities of issuers from at least Growth five different countries, excluding the Portfolio: U.S. It may at times invest all of its Service Shares assets in fewer than five countries or even a single country. ---------------- --------------- ----------------------------------------- ---------------------------------- 1IP 2IP Lazard Objective: long-term capital Lazard Asset Management Retirement appreciation. Invests primarily in Series equity securities, principally common International stocks of relatively large non-U.S. Equity companies with market capitalizations Portfolio in the range of the Morgan Stanley Capital International (MSCI) Europe, Australia and Far East (EAFE(R)) Index that the Investment Manager believes are undervalued based on their earnings, cash flow or asset values. ---------------- --------------- ----------------------------------------- ----------------------------------
---------------------------------------------------------------------- 59 PROSPECTUS -- AUG. 9, 2001
---------------- --------------- ----------------------------------------- ---------------------------------- Subaccount Investing In Investment Objectives and Policies Investment Advisor or Manager ---------------- --------------- ----------------------------------------- ---------------------------------- 1MG 2MG MFS(R) Objective: long-term growth of capital MFS Investment Management(R) Investors and future income. Invests at least 80% Growth Stock of its total assets in common stocks Series - and related securities of companies Service Class which MFS believes offer better than (previously average prospects for long-term growth. MFS(R) Growth Series) ---------------- --------------- ----------------------------------------- ---------------------------------- 1MD 2MD MFS(R) New Objective: capital appreciation. MFS Investment Management(R) Discovery Invests primarily in equity securities Series - of emerging growth companies. Service Class ---------------- --------------- ----------------------------------------- ---------------------------------- 1UT 2UT MFS(R) Objective: capital growth and current MFS Investment Management(R) Utilities income. Invests primarily in equity and Series - debt securities of domestic and foreign Service Class companies in the utilities industry. ---------------- --------------- ----------------------------------------- ---------------------------------- 1PE 2PE Pioneer Objective: current income and long-term Pioneer Equity-Income growth of capital from a portfolio VCT Portfolio consisting primarily of income - Class II producing equity securities of U.S. Shares corporations. Invests primarily in common stocks, preferred stocks and interests in real estate investment trusts (REITS). Normally, the portfolio invests at least 80% of its total assets in income producing equity securities. The remainder of the portfolio may be invested in debt securities, most of which are expected to be convertible into common stocks. ---------------- --------------- ----------------------------------------- ---------------------------------- 1EU 2EU Pioneer Objective: long-term growth of capital. Pioneer Europe VCT Invests primarily in equity securities Portfolio - of European issuers including common Class II stocks, rights, depositary receipts, Shares warrants and debt securities convertible into common stock. Normally, the portfolio invests 80% of its total assets in equity securities of European issuers. The portfolio may also purchase forward foreign currency contracts in connection with its investments. ---------------- --------------- ----------------------------------------- ---------------------------------- 1HS 2HS Putnam VT Objective: capital appreciation. Putnam Investment Management, LLC Health Invests primarily in common stocks of Sciences Fund U.S. companies in the health sciences - Class IB industries, with a focus on growth Shares stocks. ---------------- --------------- ----------------------------------------- ---------------------------------- 1PI 2PI Putnam VT Objective: capital appreciation. Putnam Investment Management, LLC International Invests mainly in stocks outside the Growth Fund - United States that reflect a value Class IB lower than that which Putnam Management Shares places on the company or whose earnings we believe are likely to grow over time. ---------------- --------------- ----------------------------------------- ---------------------------------- 1VS 2VS Putnam VT Objective: capital appreciation. Putnam Investment Management, LLC Vista Fund - Invests mainly in common stocks of Class IB mid-sized U.S. companies with a focus Shares on growth stocks. ---------------- --------------- ----------------------------------------- ----------------------------------
---------------------------------------------------------------------- 60 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY
---------------- --------------- ----------------------------------------- ---------------------------------- Subaccount Investing In Investment Objectives and Policies Investment Advisor or Manager ---------------- --------------- ----------------------------------------- ---------------------------------- 1SO 2SO Strong Objective: seeks capital growth. Strong Capital Management, Inc. Opportunity Invests primarily in common stocks of Fund II - medium capitalization companies that Advisor Class the Fund's manager believes are underpriced, yet have attractive growth prospects. ---------------- --------------- ----------------------------------------- ---------------------------------- 1IT 2IT Wanger Objective: long-term growth of capital. Liberty Wanger Asset Management, International Invests primarily in stocks of small- L.P. Small Cap and medium-size non-U.S. companies with capitalizations of less than $2 billion. ---------------- --------------- ----------------------------------------- ---------------------------------- 1SP 2SP Wanger U.S. Objective: long-term growth of capital. Liberty Wanger Asset Management, Small Cap Invests primarily in stocks of small- L.P. and medium-size U.S. companies with capitalizations of less than $2 billion. ---------------- --------------- ----------------------------------------- ---------------------------------- 1AA 2AA Wells Fargo Objective: long-term total return, Wells Fargo Funds Management, VT Asset consistent with reasonable risk. LLC, advisor; Barclays Global Allocation Invests primarily in the securities of Fund Advisors, sub-advisor. Fund various indexes to replicate the total return of the index. We use an asset allocation model to allocate and reallocate assets among common stocks (S&P 500 Index), U.S. Treasury bonds (Lehman Brothers 20+ Bond Index) and money market instruments, operating from a target allocation of 60% stocks and 40% bonds. ---------------- --------------- ----------------------------------------- ---------------------------------- 1WI 2WI Wells Fargo Objective: total return with an Wells Fargo Funds Management, VT emphasis on capital appreciation over LLC, advisor; Wells Capital International the long-term. Invests primarily in Management Incorporated, Equity Fund equity securities of non-U.S. companies. sub-advisor. ---------------- --------------- ----------------------------------------- ---------------------------------- 1SG 2SG Wells Fargo Objective: long-term capital Wells Fargo Funds Management, VT Small Cap appreciation. Invests primarily in LLC, advisor; Wells Capital Growth Fund common stocks issued by companies whose Management Incorporated, market capitalization falls within the sub-advisor. range of the Russell 2000 Index, which is considered a small capitalization index. ---------------- --------------- ----------------------------------------- ----------------------------------
* This fund is available Aug. 13, 2001. A fund underlying your contract in which a subaccount invests may have a name, portfolio manager, objectives, strategies and characteristics that are the same or substantially similar to those of a publicly-traded retail mutual fund. Despite these similarities, an underlying fund is not the same as any publicly-traded retail mutual fund. Each underlying fund will have its own unique portfolio holdings, fees, operating expenses and operating results. The results of each underlying fund may differ significantly from any publicly-traded retail mutual fund. 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 also available by contacting us at the address or telephone number on the first page of this prospectus. ---------------------------------------------------------------------- 61 PROSPECTUS -- AUG. 9, 2001 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 tax-deferred retirement plans. It is possible that in the future, it may be disadvantageous for variable annuity accounts and variable life insurance accounts and/or tax-deferred retirement 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 tax-deferred retirement 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 tax-deferred retirement plan accounts, you would not bear any expenses associated with establishing separate funds. Please refer to the funds' prospectuses for risk disclosure regarding simultaneous investments by variable annuity, variable life insurance and tax-deferred retirement plan accounts. The Internal Revenue Service (IRS) issued final regulations relating to the diversification requirements under Section 817(h) of the Code. Each fund intends to comply with these requirements. The variable account was established under Minnesota law on Aug. 23, 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. All obligations arising under the contracts are general obligations of IDS Life. 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 variable account includes other subaccounts that are available under contracts that are not described in this prospectus. The U.S. Treasury and the 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 the contract continues to qualify as an annuity for federal income tax purposes. We reserve the right to modify the contract as necessary to comply with any new tax laws. The Fixed Account You also may allocate purchase payments to the fixed account. We back the principal and interest guarantees relating to the fixed account. These guarantees are based on the continued claims-paying ability of the company. 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. Interest is calculated and compounded daily based on a 365-day year so as to produce the annual effective rate which we declare. We do not credit interest on leap days (Feb 29th). The interest rate we apply to each purchase payment or transfer to the fixed account is guaranteed for one year. Thereafter, we will change rates from time to time at our discretion. These rates will be based on various factors including, but not limited to, the interest rate environment, returns earned on investments backing these annuities, the rates currently in effect for new and existing company annuities, product design, competition, and the company's revenues and expenses. 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.) ---------------------------------------------------------------------- 62 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY Buying Your Contract You can fill out an application and send it along with your initial purchase payment to our office. As the owner, you have all rights and may receive all benefits under the contract. You can own a nonqualified annuity in joint tenancy with rights of survivorship only in spousal situations. You cannot own a qualified annuity in joint tenancy. You can buy a contract or become an annuitant if you are 90 or younger. When you apply, you may select: o the length of the surrender charge period (seven or ten years); (1) o the optional Maximum Anniversary Value Death Benefit Rider; (2) o the optional Enhanced Earnings Death Benefit Rider; (2) o the optional Enhanced Earnings Plus Death Benefit Rider; (2) o the fixed account and/or subaccounts in which you want to invest; o how you want to make purchase payments; and o a beneficiary. (1) The ten-year surrender charge schedule is not available for contracts issued in Oregon. For contracts issued in Massachusetts, Oregon and Washington, we waive surrender charges after the tenth contract anniversary. (2) You may select any one of the MAV Death Benefit, EEB or EEP riders. Or you may select the MAV Death Benefit and either the EEB or the EEP. However, you cannot select both the EEB and EEP. Riders may not be available in all states. The MAV Death Benefit, EEB and EEP are only available if you and the annuitant are 75 or younger at contract issue. EEB and EEP are only available on non-qualified contracts. EEP is only available on contracts purchased through a transfer or exchange. The contract provides for allocation of purchase payments to the subaccounts of the variable account and/or to the fixed account in even 1% increments. If your application is complete, we will process it and apply your purchase payment to the fixed account and 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 SETTLEMENT DATE Annuity payouts are scheduled to begin on the settlement date. When we process your application, we will establish the settlement date to the maximum age or date described below. You can also select a date within the maximum limits. You can align this date with your actual retirement from a job, or it can be a different future date, depending on your needs and goals and on certain restrictions. You also can change the date, provided you send us written instructions at least 30 days before annuity payouts begin. For nonqualified annuities and Roth IRAs, the settlement date must be: o no earlier than the 60th day after the contract's effective date; and o no later than the annuitant's 85th birthday or the tenth contract anniversary, if purchased after age 75. (In Pennsylvania, the maximum settlement date ranges from age 85 to 96 based on the annuitant's age when we issue the contract. See contract for details.) For qualified annuities except Roth IRAs, to avoid IRS penalty taxes, the settlement date generally must be: o on or after the date the annuitant reaches age 59 1/2; and o for IRAs, SIMPLE IRAs and SEPs, by April 1 of the year following the calendar year when the annuitant reaches age 70 1/2; or o for all other 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 settlement 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 or TSA 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 tenth contract anniversary, if later. (In Pennsylvania, the annuity payout ranges from age 85 to 96 based on the annuitant's age when the contract is issued. See contract for details.) BENEFICIARY If death benefits become payable before the settlement 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.) ---------------------------------------------------------------------- 63 PROSPECTUS -- AUG. 9, 2001 PURCHASE PAYMENTS Except for TSAs, purchase payments are limited and may not be made after the third contract anniversary in Massachusetts, Washington and Oregon. Minimum allowable purchase payments* If paying by installments under a scheduled payment plan: $23.08 biweekly, or $50 per month If paying by any other method: $1,000 initial payment for qualified annuities $2,000 initial payment for nonqualified annuities $50 for any additional payments * Installments must total at least $600 in the first year. If you do not make any purchase payments for 24 months, and your previous payments total $600 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. Maximum allowable purchase payments** based on the age of you or the annuitant, whoever is older, on the effective date of the contract: For the first year: $1,000,000 up to age 85 $100,000 for ages 86 to 90 For each subsequent year: $100,000 up to age 85 $50,000 for ages 86-90 ** These limits apply in total to all IDS Life annuities you own. We reserve the right to increase maximum limits. For qualified annuities the tax-deferred retirement plan's or the Code's limits on annual contributions also apply. We reserve the right to not accept purchase payments allocated to the fixed account for twelve months following either: 1. a partial surrender from the fixed account; or 2. a lump sum transfer from the fixed account to a subaccount. HOW TO MAKE PURCHASE PAYMENTS 1 By letter: Send your check along with your name and contract number to: IDS Life Insurance Company 70200 AXP Financial Center Minneapolis, MN 55474 2 By scheduled payment plan: We can help you set up: o an automatic payroll deduction, salary reduction or other group billing arrangement; or o a bank authorization. Charges CONTRACT ADMINISTRATION CHARGE We charge this fee for establishing and maintaining your records. We deduct $30 from the contract value on your contract anniversary at the end of each contract year. We prorate this charge among the subaccounts and the fixed account in the same proportion your interest in each account bears to your total contract value. We will waive this charge when your contract value, or total purchase payments less any payments surrendered, is $50,000 or more on the current contract anniversary. If you surrender your contract, we will deduct the charge at the time of surrender regardless of the contract value or purchase payments made. We cannot increase the annual contract administrative charge and it does not apply after annuity payouts begin or when we pay death benefits. ---------------------------------------------------------------------- 64 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY MORTALITY AND EXPENSE RISK FEE We charge this fee daily to the subaccounts. The unit values of your subaccounts reflect this fee. For nonqualified annuities the fee totals 0.95% of the average daily net assets on an annual basis. For qualified annuities the fee totals 0.75% of the average daily net assets on an annual basis. This fee covers the mortality and expense risk that we assume. Approximately two-thirds of this amount is for our assumption of mortality risk, and one-third is for our assumption of expense risk. This fee does not apply to the fixed account. Mortality risk arises because of our guarantee to pay a death benefit and our guarantee to make annuity payouts according to the terms of the contract, no matter how long a specific annuitant lives and no matter how long our entire group of annuitants live. If, as a group, annuitants outlive the life expectancy we assumed in our actuarial tables, then we must take money from our general assets to meet our obligations. If, as a group, annuitants do not live as long as expected, we could profit from the mortality risk fee. Expense risk arises because we cannot increase the contract administrative charge and this charge may not cover our expenses. We would have to make up any deficit from our general assets. We could profit from the expense risk fee if future expenses are less than expected. The subaccounts pay us the mortality and expense risk fee they accrued as follows: o first, to the extent possible, the subaccounts pay this fee from any dividends distributed from the funds in which they invest; o then, if necessary, the funds redeem shares to cover any remaining fees payable. We may use any profits we realize from the subaccounts' payment to us of the mortality and expense risk fee for any proper corporate purpose, including, among others, payment of distribution (selling) expenses. We do not expect that the surrender charge, discussed in the following paragraphs, will cover sales and distribution expenses. Maximum Anniversary Value Death Benefit Rider (MAV Death Benefit) Fee We charge a fee for the optional feature only if you select it(1). If selected, we deduct 0.15% of your contract value on your contract anniversary at the end of each contract year. We prorate this fee among the subaccounts and fixed accounts in the same proportion your interest in each account bears to your total contract value. When annuity payouts begin, if you terminate the contract for any reason other than death, we will deduct this fee, adjusted for the number of calendar days coverage was in place. We reserve the right to assess charges for the number of days the rider was in force for any rider that is terminated due to change of ownership. If you choose to drop this rider on an anniversary (subject to the restrictions given in "Optional Benefits"), we will deduct this fee on that anniversary. We cannot increase this annual fee after the rider effective date and it does not apply after annuity payouts begin or when we pay death benefits. We can increase this fee on new contracts up to a maximum of 0.45%. Enhanced Earnings Death Benefit Rider (EEB) Fee We charge a fee for the optional feature only if you select it(1). If selected, we deduct 0.30% of your contract value on your contract anniversary at the end of each contract year. We prorate this fee among the subaccounts and fixed accounts in the same proportion your interest in each account bears to your total contract value. When annuity payouts begin, if you terminate the contract for any reason other than death or if we terminate this rider due to a change of ownership, we will deduct this fee, adjusted for the number of calendar days coverage was in place. If you choose to drop this rider on an anniversary (subject to the restrictions given in "Optional Benefits"), we will deduct this fee on that anniversary. We cannot increase this annual fee after the rider effective date and it does not apply after annuity payouts begin or when we pay death benefits. We can increase this fee on new contracts up to a maximum of 0.90%. Enhanced Earnings Plus Death Benefit Rider (EEP) Fee We charge a fee for the optional feature only if you select it(1). If selected, we deduct 0.40% of your contract value on your contract anniversary at the end of each contract year. We prorate this fee among the subaccounts and fixed accounts in the same proportion your interest in each account bears to your total contract value. When annuity payouts begin, if you terminate the contract for any reason other than death, or if we terminate this rider due to a change of ownership, we will deduct this fee, adjusted for the number of calendar days coverage was in place. If you choose to drop this rider on an anniversary (subject to the restrictions given in "Optional Benefits"), we will deduct this fee on that anniversary. We cannot increase this annual fee after the rider effective date and it does not apply after annuity payouts begin or when we pay death benefits. We can increase this fee on new contracts up to a maximum of 1.25%. (1) You may select any one of the MAV Death Benefit, EEB or EEP riders. Or you may select the MAV Death Benefit and either the EEB or the EEP. Hoewever, you cannot select both the EEB and the EEP. Riders may not be available in all states. The MAV Death Benefit, EEB and EEP are only available if you and the annuitant are 75 or younger at contract issue. EEB and EEP are only available on non-qualified contracts. EEP is only available on contracts purchased through a transfer or exchange. ---------------------------------------------------------------------- 65 PROSPECTUS -- AUG. 9, 2001 SURRENDER CHARGE If you surrender all or part of your contract, you may be subject to a surrender charge. A surrender charge applies if all or part of the surrender amount is from purchase payments we received within seven (7) or ten (10) years before surrender. You select the surrender charge period at the time of your application for the contract.* The surrender charge percentages that apply to you are shown in your contract. * The ten-year surrender charge schedule is not available in Oregon. For purposes of calculating any surrender charge, we treat amounts surrendered from your contract value in the following order: 1. First, we surrender any contract earnings (contract value less purchase payments received and not previously surrendered). We do not assess a surrender charge on contract earnings. NOTE:We determine contract earnings by looking at the entire contract value, not the earnings of any particular subaccount or the fixed account. 2. Next, in each contract year, we surrender amounts totaling up to 10% of your prior contract anniversary contract value, but only to the extent not included and surrendered in number one above. (Your initial purchase payment is considered the prior contract anniversary contract value during the first contract year.) We do not assess a surrender charge on this amount. 3. Next we surrender purchase payments received prior to the surrender charge period you selected and shown in your contract. We do not assess a surrender charge on these purchase payments. 4. Finally, if necessary, we surrender purchase payments received that are still within the surrender charge period you selected and shown in your contract. We surrender these payments on a "first-in, first-out" (FIFO) basis. We do assess a surrender charge on these payments. We determine your surrender charge by multiplying each of your payments surrendered by the applicable surrender charge percentage, and then adding the total surrender charges. The surrender charge percentage depends on the number of years since you made the payments that are surrendered, depending on the schedule you selected*: Seven-year schedule Ten-year schedule* Years from purchase Surrender charge Years from purchase Surrender charge payment receipt percentage payment receipt percentage 1 7% 1 8% 2 7 2 8 3 7 3 8 4 6 4 7 5 5 5 7 6 4 6 6 7 2 7 5 Thereafter 0 8 4 9 3 10 2 Thereafter 0 For a partial surrender that is subject to a surrender charge, the amount we actually deduct from your contract value will be the amount you request plus any applicable surrender charge. The surrender charge percentage is applied to this total amount. We pay you the amount you requested. Example: Assume you requested a surrender of $1,000 and there is a surrender charge of 7%. The total amount we actually deduct from your contract is $1,075.26. We determine this amount as follows: Amount requested $1,000 ------------------------- or ------ = $1,075.26 1.00 - surrender charge .93 By applying the 7% surrender charge to $1,075.26, the surrender charge is $75.26. We pay you the $1,000 you requested. If you make a full surrender of your contract, we also will deduct the applicable contract administrative charge and the applicable prorated MAV Death Benefit, EEB or EEP charge. * The ten-year surrender charge schedule is not available in Oregon. For contracts issued in Massachusetts, Oregon and Washington, we waive surrender charges after the tenth contract anniversary. ---------------------------------------------------------------------- 66 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY Surrender charge under Annuity Payout Plan E -- Payouts for a specified period: Under this payout plan, you can choose to take a surrender. The amount that you can surrender is the present value of any remaining variable payouts. For qualified contracts, the discount rate we use in the calculation will be 4.72% if the assumed investment rate is 3.5% and 6.22% if the assumed investment rate is 5%. For nonqualified contracts, the discount rate we use in the calculation will be 4.92% if the assumed investment rate is 3.5% and 6.42% if the assumed investment rate is 5%. The surrender charge equals the present value of the remaining payouts using the assumed investment rate minus the present value of the remaining payouts using the discount rate. In no event would your surrender charge exceed 9% of the amount available for payouts under the plan. Surrender charge calculation example The following is an example of the calculation we would make to determine the surrender charge on a contract that contains a seven-year surrender charge schedule with this history: o The contract date is July 1, 2001 with a contract year of July 1 through June 30 and with an anniversary date of July 1 each year; and o We received these payments: -- $10,000 July 1, 2001; -- $ 8,000 Dec.31, 2006; -- $ 6,000 Feb. 20, 2009; and o The owner surrenders the contract for its total surrender value of $26,500 on Aug. 5, 2010 and had not made any other surrenders during that contract year; and o The prior anniversary July 1, 2010 contract value was $28,000. Surrender charge Explanation $ 0 $2,500 is contract earnings surrendered without charge; and 0 $300 is 10% of the prior anniversary contract value that is in excess of contract earnings surrendered without charge (from above). 10% of $28,000 = $2,800 - $2,500 = $300 0 $10,000 July 1, 2001 payment was received eight or more years before surrender and is surrendered without surrender charge; and 480 $8,000 Dec. 31, 2006 payment is in its fourth year from receipt, surrendered with a 6% surrender charge; and 420 $6,000 Feb. 20, 2009 payment is in its second year ------ from receipt, surrendered with a 7% surrender charge. $900 Waiver of surrender charges We do not assess surrender charges for: o surrenders of any contract earnings; o surrenders of amounts totaling up to 10% of your prior contract anniversary contract value to the extent it exceeds contract earnings; o amounts surrendered after the tenth contract anniversary in Massachusetts, Washington and Oregon. o required minimum distributions from a qualified annuity (for those amounts required to be distributed from the contract described in this prospectus); o contracts settled using an annuity payout plan; o amounts we refund to you during the free look period*; o death benefits*; and o surrenders you make under your contract's "Waiver of Surrender Charges for Nursing Home Confinement" provision*. To the extent permitted by state law, this provision applies when you are under age 76 on the date that we issue the contract. We will waive surrender charges that we normally assess upon full or partial surrender if you provide proof satisfactory to us that, as of the date you request the surrender, you or the annuitant are confined to a nursing home and have been for the prior 90 days and the confinement began after the contract date. (See your contract for additional conditions and restrictions on this waiver.) * However, we will reverse certain purchase payment credits. (See "Valuing Your Investment -- Purchase payment credits.") Other information on charges: AEFC makes certain custodial services available to some profit sharing, money purchase and target benefit plans funded by our annuities. Fees for these services start at $30 per calendar year per participant. AEFC will charge a termination fee for owners under age 59 1/2 (fee waived in case of death or disability). Possible group reductions: In some cases we may incur lower sales and administrative expenses due to the size of the group, the average contribution and the use of group enrollment procedures. In such cases, we may be able to reduce or eliminate the contract administrative and surrender charges. However, we expect this to occur infrequently. ---------------------------------------------------------------------- 67 PROSPECTUS -- AUG. 9, 2001 Premium Taxes Certain state and local governments impose premium taxes on us (up to 3.5%). These taxes depend upon your state of residence or the state in which the contract was sold. Currently, we deduct any applicable premium tax when annuity payouts begin, but we reserve the right to deduct this tax at other times such as when you surrender your contract. Valuing Your Investment We value your accounts as follows: Fixed Account We value the amounts you allocated to the fixed account directly in dollars. The fixed account value equals: o the sum of your purchase payments and transfer amounts allocated to the fixed account; o plus any purchase payment credits allocated to the fixed account; o plus interest credited; o minus the sum of amounts surrendered (including any applicable surrender charges) and amounts transferred out; o minus any prorated contract administrative charge; o minus any prorated portion of the Maximum Anniversary Value Death Benefit Rider fee (if applicable); o minus any prorated portion of the Enhanced Earnings Death Benefit Rider fee (if applicable); and o minus any prorated portion of the Enhanced Earnings Plus Death Benefit Rider fee (if applicable). 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 or we apply any purchase payment credits to a subaccount, we credit a certain number of accumulation units to your contract for that subaccount. 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 variable account expenses, performance of the fund and on certain fund expenses. Here is how we calculate accumulation unit values: Number of units: to calculate the number of accumulation units for a particular subaccount we divide your investment 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. We determine the net investment factor by: o adding the fund's current net asset value per share, plus the per share amount of any accrued income or capital gain dividends to obtain a current adjusted net asset value per share; then o dividing that sum by the previous adjusted net asset value per share; and o subtracting the percentage factor representing the mortality and expense risk fee from the result. Because the net asset value of the fund may fluctuate, the accumulation unit value may increase or decrease. You bear all the investment risk in a subaccount. Factors that affect subaccount accumulation units: accumulation units may change in two ways -- in number and in value. The number of accumulation units you own may fluctuate due to: o additional purchase payments you allocate to the subaccounts; o any purchase payment credits allocated to the subaccounts; o transfers into or out of the subaccounts; o partial surrenders; o surrender charges; and/or o prorated portions of the contract administrative charge; o prorated portions of the Maximum Anniversary Value Death Benefit Rider fee (if selected); o prorated portions of the Enhanced Earnings Death Benefit Rider fee (if selected); and o prorated portions of the Enhanced Earnings Plus Death Benefit Rider fee (if selected). ---------------------------------------------------------------------- 68 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY Accumulation unit values will fluctuate due to: o changes in funds' net asset value; o dividends distributed to the subaccounts; o capital gains or losses of funds; o fund operating expenses; and/or o mortality and expense risk fees. Purchase payment credits We add a credit* to your contract in the amount of: o 1% of each purchase payment received: -- if you elect the ten-year surrender charge schedule for your contract; or -- if you elect the seven-year surrender charge schedule for your contract and your initial purchase payment to the contract is at least $100,000. o 2% of each purchase payment received if you elect the ten-year surrender charge schedule for your contract and your initial purchase payment to the contract is at least $100,000. We fund the credit from our general account. We do not consider credits to be "investments" for income tax purposes. (See "Taxes.") We allocate each credit to your contract value when the applicable purchase payment is applied to your contract value. We allocate such credits to your contract value according to allocation instructions in effect for your purchase payments. We will reverse credits from the contract value for any purchase payment that is not honored. To the extent a death benefit or surrender payment includes purchase payment credits applied within twelve months preceding: (1) the date of death that results in a lump sum death benefit under this contract; or (2) a request for surrender charge waiver due to Nursing Home Confinement, we will assess a charge, similar to a surrender charge, equal to the amount of the purchase payment credits. The amount we pay to you under these circumstances will always equal or exceed your surrender value. The amount returned to you under the free look provision also will not include any credits applied to your contract. * The ten-year surrender charge is not available in Oregon. Contracts purchased in Oregon are only eligible for a 1% purchase payment credit if the initial purchase payment is at least $100,000. 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. How dollar-cost averaging works Number By investing an equal number Amount Accumulation of units of dollars each month... Month invested unit value purchased Jan $100 $20 5.00 you automatically buy Feb 100 18 5.56 more units when the Mar 100 17 5.88 per unit market price is low... Apr 100 15 6.67 May 100 16 6.25 June 100 18 5.56 and fewer units July 100 17 5.88 when the per unit Aug 100 19 5.26 market price is high. Sept 100 21 4.76 Oct 100 20 5.00 You paid an average price of only $17.91 per unit over the 10 months, while the average market price actually was $18.10. ---------------------------------------------------------------------- 69 PROSPECTUS -- AUG. 9, 2001 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 will depend upon your willingness to continue to invest regularly through periods of low price levels. Dollar-cost averaging can be an effective way to help meet your long-term goals. For specific features contact your sales representative. ASSET REBALANCING (AVAILABLE NOV. 30, 2001) Subject to availability, you can ask us in writing to have the variable subaccount portion of your contract value allocated according to the percentages (in whole percentage amounts ) that you choose. We automatically will rebalance the variable subaccount portion of your contract value either quarterly, semi-annually, or annually. The period you select will start to run on the date we record your request. On the first valuation date of each of these periods, we automatically will rebalance your contract value so that the value in each subaccount matches your current subaccount percentage allocations. These percentage allocations must be in whole numbers. Asset rebalancing does not apply to the fixed account. There is no charge for asset rebalancing. The contract value must be at least $2,000. You can change your percentage allocations or your rebalancing period at any time by contacting us in writing. We will restart the rebalancing period you selected as of the date we record your change. You also can ask us in writing to stop rebalancing your contract value. You must allow 30 days for us to change any instructions that currently are in place. For more information on asset rebalancing, contact your financial advisor . Transferring Between Accounts You may transfer contract value from any one subaccount, or the fixed account, to another subaccount before annuity payouts begin. (Certain restrictions apply to transfers involving the fixed account.) We will process your transfer on the valuation date we receive your request. We will value your transfer at the next accumulation unit value calculated after we receive your request. There is no charge for transfers. Before making a transfer, you should consider the risks involved in changing 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. These modifications could include, but not be limited to: o requiring a minimum time period between each transfer; o not accepting transfer requests of an agent acting under power of attorney on behalf of more than one contract owner; or o limiting the dollar amount that a contract owner may transfer at any one time. For information on transfers after annuity payouts begin, see "Transfer policies" below. Transfer policies o Before annuity payouts begin, you may transfer contract values between the subaccounts, or from the subaccounts to the fixed account at any time. However, if you made a transfer from the fixed account to the subaccounts, you may not make a transfer from any subaccount back to the fixed account until the next contract anniversary. o You may transfer contract values from the fixed account to the subaccounts once a year during a 31-day transfer period starting on each contract anniversary (except for automated transfers, which can be set up at any time for certain transfer periods subject to certain minimums). o If we receive your request within 30 days before the contract anniversary date, the transfer from the fixed account to the subaccounts will be effective on the anniversary. o If we receive your request on or within 30 days after the contract anniversary date, the transfer from the fixed account to the subaccounts will be effective on the valuation date we receive it. o We will not accept requests for transfers from the fixed account at any other time. o Once annuity payouts begin, you may not make transfers to or from the fixed account, but you may make transfers once per contract year among the subaccounts. During the annuity payout period, you cannot invest in more than five subaccounts at any one time unless we agree otherwise. ---------------------------------------------------------------------- 70 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY 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: IDS Life Insurance Company 70100 AXP Financial Center Minneapolis, MN 55474 Minimum amount Transfers or surrenders: $250 or entire account balance Maximum amount Transfers or surrenders: Contract value or entire account balance 2 By automated transfers and automated partial surrenders: Your sales representative can help you 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. o Automated transfers from the fixed account to any one of the subaccounts may not exceed an amount that, if continued, would deplete the fixed account within 12 months. o Automated surrenders may be restricted by applicable law under some contracts. o You may not make additional purchase payments if automated partial surrenders are in effect. o Automated partial surrenders may result in IRS taxes and penalties on all or part of the amount surrendered. Minimum amount Transfers or surrenders: $50 Maximum amount Transfers or surrenders: None (except for automated transfers from the fixed account) 3 By phone: Call between 7 a.m. and 10 p.m. Central time: (800) 862-7919 TTY service for the hearing impaired: (800) 285-8846 Minimum amount Transfers or surrenders: $250 or entire account balance Maximum amount Transfers: Contract value or entire account balance Surrenders: $100,000 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. ---------------------------------------------------------------------- 71 PROSPECTUS -- AUG. 9, 2001 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 surrender charges (see "Charges -- Surrender Charge, ") MAV Death Benefit charges (see "Charges - Maximum Anniversary Value Death Benefit Rider Fee"), EEB charges (see "Charges - Enhanced Earnings Death Benefit Rider Fee"), EEP charges (see "Charges - Enhanced Earnings Plus Death Benefit Fee"), and IRS taxes and penalties (see "Taxes"). You cannot make surrenders after annuity payouts begin except under Plan E (see "The Annuity Payout Period -- Annuity Payout Plans"). Surrender Policies If you have a balance in more than one account and you request a partial surrender, we will withdraw 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. The minimum contract value after partial surrender is $600. Receiving Payment By regular or express mail: o payable to you; o mailed to address of record. NOTE: We will charge you a fee if you request express mail delivery. By wire: o request that payment be wired to your bank; o bank account must be in the same ownership as your contract; and o pre-authorization required. For instructions, contact your sales representative. Normally, we will send the payment 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. TSA -- Special Surrender Provisions Participants in Tax-Sheletered Annuities The Code imposes certain restrictions on your right to receive early distributions from a TSA: o Distributions attributable to salary reduction contributions (plus earnings) made after Dec. 31, 1988, or to transfers or rollovers from other contracts, may be made from the TSA only if: -- you are at least age 59 1/2; -- you are disabled as defined in the Code; -- you separated from the service of the employer who purchased the contract; or -- the distribution is because of your death. o If you encounter a financial hardship (as defined by the Code), you may receive a distribution of all contract values attributable to salary reduction contributions made after Dec. 31, 1988, but not the earnings on them. o Even though a distribution may be permitted under the above rules, it may be subject to IRS taxes and penalties (see "Taxes"). o The employer must comply with certain nondiscrimination requirements for certain types of contributions under a TSA contract to be excluded from taxable income. You should consult your employer to determine whether the nondiscrimination rules apply to you. o The above restrictions on distributions do not affect the availability of the amount credited to the contract as of Dec. 31, 1988. The restrictions also do not apply to transfers or exchanges of contract value within the contract, or to another registered variable annuity contract or investment vehicle available through the employer. o If the contract has a loan provision, the right to receive a loan is described in detail in your contract. ---------------------------------------------------------------------- 72 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY 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. Please consider carefully whether or not you wish to change ownership of your nonqualified annuity if you have elected the MAV Death Benefit, EEB or EEP. If you change ownership of your contract, we will terminate the EEP. This includes both the EEP Part I benefits and the EEP Part II benefits. (See the description of these terms in "Optional Benefits".) In addition, the terms of the EEB and the MAV Death Benefit will change due to a change of ownership. If the attained age of the older of the new owner and the annuitant is greater than 75, the EEB will terminate. Otherwise, we will effectively "start over" the EEB. We will treat the EEB as if it is issued on the day the change of ownership is made, using the attained age of the new owner as the "issue age" to determine the benefit levels. The account value on the date of the ownership change will be treated as a "purchase payment" in determining future values of "earnings at death" under the EEB. If the attained age of the older of the new owner and the annuitant is greater than 75, the MAV Death Benefit will terminate. If the MAV Death Benefit on the date of ownership change is greater than the account value on the date of the ownership change, the MAV Death Benefit will be set equal to the account value. Otherwise, the MAV Death Benefit value will not change due to a change in ownership. Please see the descriptions of these riders in "Optional Death Benefits." The rider charges described in "Charges" will be assessed at the next contract anniversary (and all future anniversaries when the rider is in force) for any rider that continues after a change of ownership. We reserve the right to assess charges for the number of days the rider was in force for any rider that is terminated due to a change of ownership. 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. However, if the owner is a trust or custodian, or an employer acting in similar capacity, ownership of the contract may be transferred to the annuitant. Benefits in Case of Death - Standard Death Benefit We will pay the death benefit to your beneficiary upon the earlier of your death or the annuitant's death. If a contract has more than one person as the owner, we will pay benefits upon the first to die of any owner or the annuitant. If you or the annuitant die before annuity payouts begin while this contract is in force, we will pay the beneficiary as follows: If both you and the annuitant are age 80 or younger on the date of death, the beneficiary receives the greatest of: o contract value; o purchase payments minus "adjusted partial surrenders"; or o the contract value as of the most recent sixth contract anniversary, plus purchase payments and minus "adjusted partial surrenders" since that anniversary. If either you or the annuitant is age 81 or older on the date of death, the beneficiary receives the greater of: o contract value; or o purchase payments minus "adjusted partial surrenders." Adjusted partial surrenders = We calculate an "adjusted partial surrender" for each partial surrender as the following: PS x DB ------- CV Where PS = the partial surrender including any applicable surrender charge. DB = the death benefit on the date of (but prior to) the partial surrender. CV = contract value on the date of (but prior to) the partial surrender. Example of standard death benefit calculation when the owner and annuitant are age 80 or younger: o You purchase the contract with a payment of $20,000 on Jan. 1, 2001. o On Jan 1, 2007 (the sixth contract anniversary) the contract value grows to $30,000. o March 1, 2007 the contract value falls to $28,000 at which point you take a $1,500 partial surrender, leaving a contract value of $26,500. ---------------------------------------------------------------------- 73 PROSPECTUS -- AUG. 9, 2001 We calculate the death benefit on March 1, 2007 as follows: The contract value on the most recent sixth contract anniversary: $30,000 plus purchase payments made since that anniversary: 0 minus "adjusted partial surrenders" taken since that anniversary calculated as: $1,500 x $30,000 -1,607 ------------------- = ------- $28,000 for a death benefit of: $28,393 If you die before your retirement date: When paying the beneficiary, we will process the death claim on the valuation date that our death claim requirements are fulfilled. We will determine the contract's value using the next accumulation unit value. We pay interest, if any, 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. Nonqualified annuities: If your spouse is sole beneficiary and you die before the retirement date, your spouse may keep the contract as owner. To do this your spouse must, within 60 days after we receive proof of death, give us written instructions to keep the contract in force. If your beneficiary is not your spouse, we will pay the beneficiary in a single sum unless you give us other written instructions. We must fully distribute the death benefit within five years of your death. However, the beneficiary may receive payouts under any annuity payout plan available under this contract if: o the beneficiary asks us in writing within 60 days after we receive proof of death; and o payouts begin no later than one year after your death, or other date as permitted by the Code; and o the payout period does not extend beyond the beneficiary's life or life expectancy. Qualified annuities: The IRS has issued proposed regulations that will affect distributions from your qualified annuity. These are proposed regulations that may take effect Jan. 1, 2002. The information below is an explanation based on existing law. Contact your tax advisor if you have any questions as to the impact of the new proposed rules on your situation. If your spouse is the sole beneficiary, your spouse may keep the contract as owner until the date on which the annuitant would have reached age 70 1/2 , or any other date permitted by the Code. To do this your spouse must, within 60 days after we receive proof of death, give us written instructions to keep the contract in force. If your beneficiary is not your spouse, we will pay the beneficiary in a single sum unless you give us other written instructions. We must fully distribute the death benefit within five years of your death. However, the beneficiary may receive payouts under any annuity payout plan available under this contract if: o the beneficiary asks us in writing within 60 days after we receive proof of death; and o payouts begin no later than one year after your death; and o the payout period does not extend beyond the beneficiary's life or life expectancy. Optional Benefits Maximum Anniversary Value Death Benefit The Maximum Anniversary Value Death Benefit (MAV Death Benefit) is intended to provide additional death benefit protection in the event of fluctuating fund values. This is an optional benefit that you may select for an additional annual charge (see "Charges"). If this rider is available in your state and both you and the annuitant are 75 or younger at contract issue, you may choose to add the MAV Death Benefit to your contract. Generally, you must elect the MAV Death Benefit at the time you purchase your contract and your rider effective date will be the contract issue date. We reserve the right to discontinue offering the MAV Death Benefit for new contracts. In some instances the rider effective date for the MAV Death Benefit may be after we issue the contract according to terms determined by us and at our sole discretion. On the first contract anniversary we set the Maximum Anniversary Value (MAV) equal to the highest of your (a) current contract value, or (b) total purchase payments minus adjusted partial surrenders. Every contract anniversary after that, through age 80, we compare the previous anniversary's MAV plus subsequent purchase payments less subsequent adjusted partial surrenders to the current contract value and we reset the MAV if the current contract value is higher. We stop resetting the MAV after you or the annuitant reach age 81. However, we continue to add subsequent purchase payments and subtract adjusted partial surrenders from the MAV. When annuity payouts begin, or if you terminate the contract for any reason other than death, this rider will terminate. Terminating the MAV: o You may terminate the rider within 30 days of the first contract anniversary after the rider effective date. o You may terminate the rider within 30 days of any contract anniversary beginning with the seventh contract anniversary. ---------------------------------------------------------------------- 74 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY o The rider will terminate when you make a full surrender from the contract or when annuity payouts begin. o The rider will terminate in the case of spousal continuation or ownership change if the new owner is age 76 or older. Example: o You purchase the contract with a payment of $20,000 on Jan. 1, 2001. o On Jan. 1, 2002 (the first contract anniversary) the contract value grows to $24,000. o On March 1, 2002 the contract value falls to $22,000, at which point you take a $1,500 partial surrender, leaving a contract value of $20,500. We calculate the death benefit on March 1, 2002 as follows: The MAV immediately preceding the date of death plus any payments made since that anniversary minus adjusted partial surrenders: Greatest of your contract anniversary contract values: $24,000 plus purchase payments made since that anniversary: +0 minus adjusted partial surrenders, calculated as: $1,500 x $24,000 = -1,636 ----------------- ------- $22,000 for a death benefit of: $22,364 Nonqualified Annuities: If your spouse is the sole beneficiary and you die before the retirement date, your spouse may keep the contract as owner with the contract value equal to the death benefit that would otherwise have been paid under the MAV Death Benefit. 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. If your spouse at the time of your death has reached age 76, the MAV Death Benefit rider will terminate. If your spouse at the time of your death has not yet reached age 76, he or she may choose to continue the MAV Death Benefit rider. In this case, the rider charges described in "Charges" will be assessed at the next contract anniversary (and all future anniversaries when the rider is in force). These charges will be based on the total contract value on the anniversary, including the additional amounts paid into the contract at your death. Qualified Annuities: If your spouse is the sole beneficiary, your spouse may keep the contract as owner until the date on which the annuitant would have reached age 70 1/2 , or any other date permitted by the Code. The contract value will be equal to the death benefit that would otherwise have been paid under the MAV Death Benefit. If your spouse at the time of your death has reached age 76, the MAV death benefit rider will terminate. If your spouse at the time of your death has not yet reached age 76, he or she may choose to continue the MAV Death Benefit rider. In this case, the rider charges described in "Charges" will be assessed at the next contract anniversary (and all future anniversaries when the rider is in force). These charges will be based on the total contract value on the anniversary, including the additional amounts paid into the contract at your death. Enhanced Earnings Death Benefit (EEB) The Enhanced Earnings Death Benefit is intended to provide an additional benefit to your beneficiary to help offset expenses after your death such as funeral expenses or federal and state taxes. This is an optional benefit that you may select for an additional annual charge (see "Charges - Enhanced Earnings Death Benefit Rider Fee"). The EEB provides reduced benefits if you or the annuitant is 70 or older at the rider effective date and it does not provide any additional benefit before the first contract anniversary. Be sure to discuss with your sales representative whether or not the EEB is appropriate for your situation. If this rider is available in your state and both you and the annuitant are 75 or younger at contract issue, you may choose to add the EEB to your contract. Generally, you must elect the EEB at the time you purchase your contract and your rider effective date will be the contract issue date. This rider is only available under a nonqualified annuity contract. You may not select this rider if you select the EEP. We reserve the right to discontinue offering the EEB for new contracts. In some instances the rider effective date for the EEB may be after we issue the contract according to terms determined by us and at our sole discretion. When annuity payouts begin, or if you terminate the contract for any reason other than death, this rider will terminate. The EEB provides that if you or the annuitant dies after the first contract anniversary, but before annuity payouts begin, and while this contract is in force, we will pay the beneficiary: o the standard death benefit (see "Benefits in Case of Death - Standard Benefit") or the MAV death benefit, if applicable, PLUS o 40% of your earnings at death if you and the annuitant were under age 70 on the rider effective date, up to a maximum of 100% of purchase payments not previously surrendered that are one or more years old; or o 15% of your earnings at death if you or the annuitant were 70 or older on the rider effective date, up to a maximum of 37.5% of purchase payments not previously surrendered that are one or more years old. Additional death benefits payable under EEB are not included in the adjusted partial surrender calculation. ---------------------------------------------------------------------- 75 PROSPECTUS -- AUG. 9, 2001 Earnings at death: for purposes of the EEB and EEP riders, this is an amount equal to the standard death benefit (or the MAV death benefit, if applicable) minus purchase payments not previously surrendered. The earnings at death may not be less than zero and may not be more than 250% of the purchase payments not previously surrendered that are one or more years old. Terminating the EEB: o You may terminate the rider within 30 days of the first contract anniversary after the rider effective date. o You may terminate the rider within 30 days of any contract anniversary beginning with the seventh contract anniversary. o The rider will terminate when you make a full surrender from the contract or when annuity payouts begin. o The rider will terminate in the case of spousal continuation or ownership change if the new owner is age 76 or older. o For an example of how we calculate the death benefit under the EEB, see below. Example of the Enhanced Earnings Death Benefit: o You purchase the contract with a payment of $100,000 on Jan. 01, 2001 and you and the annuitant are under age 70. You select the seven-year surrender charge schedule, the MAV death benefit and the EEB. o On July 1, 2001 the contract value grows to $105,000. The death benefit on July 1, 2001 equals the standard death benefit, which is the contract value, or $105,000. You have not reached the first contract anniversary so the EEB does not provide any additional benefit at this time. o On Jan. 1, 2002 the contract value grows to $110,000. The death benefit on July 1, 2001 equals: MAV death benefit (contract value): $110,000 plus the EEB benefit which equals 40% of earnings at death (MAV death benefit minus payments not previously surrendered): 0.40 x ($110,000 - $100,000) = +4,000 --------- Total death benefit of: $114,000 o On Jan. 1, 2003 the contract value falls to $105,000. The death benefit on Jan. 1, 2003 equals: MAV death benefit (MAV): $110,000 plus the EEB benefit (40% of earnings at death): 0.40 x ($110,000 - $100,000) = +4,000 -------- Total death benefit of: $114,000 o On Feb. 1, 2003 the contract value remains at $105, 000 and you request a partial surrender, including the applicable 7% surrender charge, of $50,000. We will surrender $10,500 from your contract value free of charge (10% of your prior anniversary's contract value). The remainder of the surrender is subject to a 7% surrender charge because your payment is two years old, so we will surrender $39,500 ($36,735 + $2,765 in surrender charges) from your contract value. Altogether, we will surrender $50,000 and pay you $47,235. We calculate purchase payments not previously surrendered as $100,000 - $45,000 = $55,000 (remember that $5,000 of the partial surrender is contract earnings). The death benefit on Feb. 1, 2003 equals: MAV death benefit (MAV adjusted for partial surrenders): $110,000 - ($50,000 x $110,000) = 57,619 $105,000 plus the EEB benefit (40% of earnings at death): 0.40 x ($57,619 - $55,000) = +1,048 ------ Total death benefit of: $58,667 o On Jan. 1, 2004 the contract value falls by $40,000. The death benefit on Jan. 1, 2004 equals the death benefit paid on Feb. 1, 2003. The reduction in contract value has no effect. o On Jan. 1, 2010 the contract value grows to a new high of $200,000. Earnings at death reaches its maximum of 250% of purchase payments not previously surrendered that are one or more years old. The death benefit on Jan. 1, 2010 equals: MAV death benefit (contract value): $200,000 plus the EEB (40% of earnings at death, up to a maximum of 100% of purchase payments not previously surrendered that are one or more years old) 0.40 x 2.50 x ($55,000) = +55,000 ------- Total death benefit of: $255,000 ---------------------------------------------------------------------- 76 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY o On July 1, 2010 you make an additional purchase payment of $50,000 and your contract value grows to $250,000. The new purchase payment is less than one year old and so it has no effect on the EEB value. The death benefit on July 1, 2010 equals: MAV death benefit (contract value): $250,000 plus the EEB (40% of earnings at death, up to a maximum of 100% of purchase payments not previously surrendered that are one or more years old) 0.40 x 2.50 x ($55,000) = +55,000 ------- Total death benefit of: $305,000 o On July 1, 2011 the contract value remains $250,000 and the "new" purchase payment is one year old. The value of the EEB changes. The death benefit on July 1, 2011 equals: MAV death benefit (contract value): $250,000 plus the EEB benefit which equals 40% of earnings at death (the standard death benefit minus payments not previously surrendered): 0.40 x ($250,000 - $105,000) = +58,000 ------- Total death benefit of: $308,000 If your spouse is the sole beneficiary and your spouse elects to continue the contract, we will pay an amount into the contract so that the contract value equals the total death benefit payable under the EEB. If your spouse at the time of your death has reached age 76, the EEB rider will terminate. If your spouse at the time of your death has not yet reached age 76, he or she may choose to continue the EEB. In this case, the following conditions will apply: o the rider will continue, but we will treat the new contract value on the date of death (after the additional amount is paid into the contract) as if it is a purchase payment in calculating future values of "earnings at death." o the percentages of "earnings at death " payable will be based on your spouse's age at the time of your death. o the rider charges described in "Charges - Enhanced Earnings Death Benefit Rider Fee" will be assessed at the next contract anniversary (and all future anniversaries when the rider is in force) . These charges will be based on the total contract value on the anniversary, including the additional amounts paid into the contract at your death. NOTE: For special tax considerations associated with the EEB, see "Taxes." Enhanced Earnings Plus Death Benefit (EEP) The EEP is intended to provide an additional benefit to your beneficiary to help offset expenses after your death such as funeral expenses or federal and state taxes. This is an optional benefit that you may select for an additional annual charge (see "Charges"). The EEP provides reduced benefits if you or the annuitant are 70 or older at the rider effective date, it does not provide any additional benefit before the first contract anniversary and it does not provide any benefit beyond what is offered under the EEB during the second contract year. Be sure to discuss with your sales representative whether or not the EEP is appropriate for your situation. If this rider is available in your state and both you and the annuitant are 75 or younger at contract issue, you may choose to add the EEP to your contract. You must elect the EEP at the time you purchase your contract and your rider effective date will be the contract issue date. This rider is only available under nonqualified annuities purchased through an exchange. You may not select this rider if you select the EEB. We reserve the right to discontinue offering the EEP for new contracts. When annuity payouts begin, or if you terminate the contract for any reason other than death, this rider will terminate. ---------------------------------------------------------------------- 77 PROSPECTUS -- AUG. 9, 2001 The EEP provides that if you or the annuitant dies after the first contract anniversary, but before annuity payouts begin, and while this contract is in force, we will pay the beneficiary: o EEP Part I benefits, which equal the benefits payable under the EEB described above; PLUS o EEP Part II benefits, which equal a percentage of exchanged purchase payments identified at issue not previously surrendered as follows: Percentage if you and the Percentage if you or the annuitant are under age 70 annuitant are 70 or older Contract year on the rider effective date on the rider effective date One and Two 0% 0% Three and Four 10% 3.75% Five or more 20% 7.5% Additional death benefits payable under EEP are not included in the adjusted partial surrender calculation. If after 6 months, no exchange purchase payments have been received, we will contact you and you will have an additional 30 days to follow-up on exchange purchase payments identified at issue but not received by us. If after these 30 days, we have not received any exchange purchase payments, we will convert the EEP rider into an EEB. Terminating the EEP: o You may terminate the rider within 30 days of the first contract anniversary after the rider effective date. o You may terminate the rider within 30 days of any contract anniversary beginning with the seventh contract anniversary. o The rider will terminate when you make a full surrender from the contract or when annuity payouts begin. o The rider will terminate in the case of spousal continuation or ownership change. Another way to describe the benefits payable under the EEP rider is as follows: o the standard death benefit (see "Benefits in Case of Death - Standard Death Benefit") or the MAV death benefit, if applicable PLUS
If you and the annuitant are under age 70 If you or the annuitant are age 70 Contract year on the rider effective date, add... or older on the rider effective date, add... 1 Zero Zero 2 40% x earnings at death (see above) 15% x earnings at death 3 & 4 40% x (earnings at death + 25% of 15% x (earnings at death + 25% of initial purchase payment*) initial purchase payment*) 5+ 40% x (earnings at death + 50% of 15% x (earnings at death + 50% of initial purchase payment*) initial purchase payment*)
* Exchange purchase payments are purchase payments exchanged from another contract that are identified at issue and not previously surrendered. The company is not responsible for identifying exchanged purchase payments if we did not receive proper notification from the company from which the purchase payments are exchanged. Example of the Enhanced Earnings Plus Death Benefit: o You purchase the contract with an exchanged purchase payment of $100,000 on Jan. 01, 2001 and you and the annuitant are under age 70. You select the seven-year surrender charge schedule, the MAV death benefit and the EEP. o On July 1, 2001 the contract value grows to $105,000. The death benefit on July 1, 2001 equals the standard death benefit, which is the contract value, or $105,000. You have not reached the first contract anniversary so neither the EEP Part I nor Part II provides any additional benefit at this time. o On Jan. 1, 2002 the contract value grows to $110,000. You have not reached the second contract anniversary so the EEP-Part II does not provide any additional benefit at this time. The death benefit on July 1, 2001 equals: MAV death benefit (contract value): $110,000 plus the EEP Part I benefit which equals 40% of earnings at death (the MAV death benefit minus purchase payments not previously surrendered): 0.40 x ($110,000 - $100,000) = +4,000 ------ Total death benefit of: $114,000 ---------------------------------------------------------------------- 78 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY o On Jan. 1, 2003 the contract value falls to $105,000. The death benefit on Jan. 1, 2003 equals: MAV death benefit (MAV): $110,000 plus the EEP Part I benefit (40% of earnings at death): 0.40 x ($110,000 - $100,000) = +4,000 plus the EEP Part II which in the third contract year equals 10% of exchange purchase payments identified at issue and not previously surrendered: 0.10 x $100,000 = +10,000 ------- Total death benefit of: $124,000 o On Feb. 1, 2003 the contract value remains at $105, 000 and you request a partial surrender, including the applicable 7% surrender charge, of $50,000. We will surrender $10,500 from your contract value free of charge (10% of your prior anniversary's contract value). The remainder of the surrender is subject to a 7% surrender charge because your payment is two years old, so we will surrender $39,500 ($36,735 + $2,765 in surrender charges) from your contract value. Altogether, we will surrender $50,000 and pay you $47,235. We calculate purchase payments not previously surrendered as $100,000 - $45,000 = $55,000 (remember that $5,000 of the partial surrender is contract earnings). The death benefit on Feb. 1, 2003 equals: MAV death benefit (MAV adjusted for partial surrenders): $110,000 - ($50,000 x $110,000) = $57,619 $105,000 plus the EEP Part I benefit (40% of earnings at death): 0.40 x ($57,619 - $55,000) = +1,048 plus the EEP Part II which in the third contract year equals 10% of exchange purchase payments identified at issue and not previously surrendered: 0.10 x $55,000 = +5,500 ------ Total death benefit of: $64,167 o On Jan. 1, 2004 the contract value falls by $40,000. The death benefit on Jan. 1, 2004 equals the death benefit paid on Feb. 1, 2003. The reduction in contract value has no effect. o On Jan. 1, 2010 the contract value grows to a new high of $200,000. Earnings at death reaches its maximum of 250% of purchase payments not previously surrendered that are one or more years old. Because we are beyond the fourth contract anniversary the EEP also reaches its maximum of 20%. The death benefit on Jan. 1, 2010 equals: MAV death benefit (contract value): $200,000 plus the EEP Part I (40% of earnings at death, up to a maximum of 100% of purchase payments not previously surrendered that are one or more years old) .40 x (2.50 x $55,000)= +55,000 plus the EEP Part II which after the fourth contract year equals 20% of exchange purchase payments identified at issue and not previously surrendered: 0.20 x $55,000 = +11,000 ------- Total death benefit of: $266,000 o On July 1, 2010 you make an additional purchase payment of $50,000 and your contract value grows to $250,000. The new purchase payment is less than one year old and so it has no effect on either the EEP Part I or EEP Part II values. The death benefit on July 1, 2010 equals: MAV death benefit (contract value): $250,000 plus the EEP Part I (40% of earnings at death, up to a maximum of 100% of purchase payments not previously surrendered that are one or more years old) .40 x (2.50 x $55,000)= +55,000 plus the EEP Part II, which after the fourth contract year equals 20% of exchange purchase payments identified at issue and not previously surrendered: 0.20 x $55,000 = +11,000 ------- Total death benefit of: $316,000 ---------------------------------------------------------------------- 79 PROSPECTUS -- AUG. 9, 2001 o On July 1, 2011 the contract value remains $250,000 and the "new" purchase payment is one year old. The value of the EEP Part I changes but the value of the EEP Part II remains constant. The death benefit on July 1, 2011 equals: MAV death benefit (contract value): $250,000 plus the EEP Part I benefit which equals 40% of earnings at death (the MAV death benefit minus payments not previously surrendered): 0.40 x ($250,000 - $105,000) = +58,000 plus the EEP Part II, which after the fourth contract year equals 20% of exchange purchase payments identified at issue and not previously surrendered: 0.20 x $55,000 = +11,000 ------- Total death benefit of: $319,000 If your spouse is sole beneficiary and your spouse elects to continue the contract, we pay an amount into the contract so that the contract value equals the total death benefit payable under the EEP. The rider will terminate, but the standard death benefit (or the MAV death benefit, if applicable) will apply. NOTE: For special tax considerations associated with the EEP, see "Taxes." The Annuity Payout Period As owner of the contract, you have the right to decide how and to whom annuity payouts will be made starting at the settlement date. You may select one of the annuity payout plans outlined below, or we may mutually agree on other payout arrangements. We do not deduct any surrender charges under the payout plans listed below. You also decide whether we will make annuity payouts on a fixed or variable basis, or a combination of fixed and variable. The amount available to purchase payouts under the plan you select is the contract value on your settlement date (less any applicable premium tax). You may reallocate this contract value to the fixed account to provide fixed dollar payouts and/or among the subaccounts to provide variable annuity payouts. During the annuity payout period, you cannot invest in more than five subaccounts at any one time unless we agree otherwise. Amounts of fixed and variable payouts depend on: o the annuity payout plan you select; o the annuitant's age and, in most cases, sex; o the annuity table in the contract; and o the amounts you allocated to the accounts at settlement. In addition, for variable payouts only, amounts depend on the investment performance of the subaccounts you select. These payouts will vary from month to month because the performance of the funds will fluctuate. (In the case of fixed annuities, payouts remain the same from month to month.) For information with respect to transfers between accounts after annuity payouts begin, see "Making the Most of Your Contract -- Transfer policies." Annuity Tables The annuity tables in your contract show the amount of the monthly payment for each $1,000 of contract value according to the age and, when applicable, the sex of the annuitant. (Where required by law, we will use a unisex table of settlement rates.) Table B shows the minimum amount of each fixed payout. Amounts in Table B are based on the guaranteed annual effective interest rate shown in your contract. We declare current payout rates that we use in determining the actual amount of your fixed payout. The current payout rates will equal or exceed the guaranteed payout rates shown in Table B. We will furnish these rates to you upon request. Table A shows the amount of the first variable payout assuming that the contract value is invested at the beginning of the annuity payout period and earns a 5% rate of return, which is reinvested and helps to support future payouts. If you ask us at least 30 days before the settlement date, we will substitute an annuity table based on an assumed 3.5% investment rate for the 5% Table A in the contract. The assumed investment rate affects both the amount of the first payout and the extent to which subsequent payouts increase or decrease. Using the 5% Table A results in a higher initial payment, but later payouts will increase more slowly when annuity unit values rise and decrease more rapidly when they decline. ---------------------------------------------------------------------- 80 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY 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: o Plan A: Life annuity -- no refund: We make monthly payouts until the annuitant's death. Payouts end with the last payout before the annuitant's death. We will not make any further payouts. This means that if the annuitant dies after we made only one monthly payout, we will not make any more payouts. o Plan B: Life annuity with five, ten or 15 years certain: We make monthly payouts for a guaranteed payout period of five, ten 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 settlement date. If the annuitant outlives the elected guaranteed payout period, we will continue to make payouts until the annuitant's death. o Plan C: Life annuity -- installment refund: We make monthly payouts until the annuitant's death, with our guarantee that payouts will continue for some period of time. We will make payouts for at least the number of months determined by dividing the amount applied under this option by the first monthly payout, whether or not the annuitant is living. o Plan D: Joint and last survivor life annuity -- no refund: We make monthly payouts while both the annuitant and a joint annuitant are living. If either annuitant dies, we will continue to make monthly payouts at the full amount until the death of the surviving annuitant. Payouts end with the death of the second annuitant. o Plan E: Payouts for a specified period: We make monthly payouts for a specific payout period of ten 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. During the payout period, you can elect to have us determine the present value of any remaining variable payouts and pay it to you in a lump sum. We determine the present value of the remaining annuity payouts which are assumed to remain level at the initial payout. For qualified annuities, the discount rate we use in the calculation will vary between 4.72% and 6.22%, depending on the applicable assumed investment rate. For nonqualified annuities, the discount rate we use in the calculation will vary between 4.92% and 6.42%, depending on the applicable assumed investment rate. (See "Charges -- Surrender charge under Annuity Payout Plan E.") You can also take a portion of the discounted value once a year. If you do so, your monthly payouts will be reduced by the proportion of your surrender to the full discounted value. A 10% IRS penalty tax could apply if you take a surrender. (See "Taxes.") Annuity payout plan requirements for qualified annuities: If you purchased a qualified annuity, you have the responsibility for electing a payout plan that complies with your contract and with applicable law. The payout plan options will meet certain IRS regulations governing required minimum distributions if the payout plan meets the incidental distribution benefit requirements, if any, and the payouts are made: o in equal or substantially equal payments over a period not longer than the life of the annuitant or over the life of the annuitant and designated beneficiary; or o in equal or substantially equal payments over a period not longer than the life expectancy of the annuitant or over the life expectancy of the annuitant and designated beneficiary; or o over a period certain not longer than the life expectancy of the annuitant or over the life expectancy of the annuitant and designated beneficiary. If we do not receive instructions: You must give us written instructions for the annuity payouts at least 30 days before the annuitant's retirement date. If you do not, we will make payouts under Plan B, with 120 monthly payouts guaranteed. Contract values that you allocated to the fixed account will provide fixed dollar payouts and contract values that you allocated among the subaccounts will provide variable annuity payouts. If monthly payouts would be less than $20: We will calculate the amount of monthly payouts at the time the contract value is used to purchase a payout plan. If the calculations show that monthly payouts would be less than $20, we have the right to pay the contract value to the owner in a lump sum or to change the frequency of the payouts. Death after annuity payouts begin: If you or the annuitant die after annuity payouts begin, we will pay any amount payable to the beneficiary as provided in the annuity payout plan in effect. ---------------------------------------------------------------------- 81 PROSPECTUS -- AUG. 9, 2001 Taxes Generally, under current law, your contract has a tax deferral feature. This means any increase in the value of the fixed account and/or subaccounts in which you invest 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. Roth IRAs may grow and be distributed tax free if you meet certain distribution requirements. 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. Qualified annuities: When your contract is used to fund a retirement plan that is already tax deferred under the Code, the contract will not provide any necessary or additional tax deferral for that retirement plan. If your contract is used to fund a 401(k) plan, your rights to benefits may be subject to the terms and conditions of the plan regardless of the terms of the contract. Adverse tax consequences may result if you do not ensure that contributions, distributions and other transactions under the contract comply with the law. Qualified annuities have minimum distribution rules that govern the timing and amount of distributions. 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 qualified annuities (except Roth IRAs): Under a qualified annuity, the entire payout generally is includable as ordinary income and is subject to tax except to the extent that contributions were made with after-tax dollars. If you or your employer invested in your contract with deductible or pre-tax dollars as part of a tax-deferred retirement plan, such amounts are not considered to be part of your investment in the contract and will be taxed when paid to you from the plan. Purchase payment credits: These are considered earnings and are taxed accordingly. Surrenders: For qualified annuities under 401(a) and 401(k) plans, we will surrender your annuity to the plan's trustee for the benefit of your account. For other qualified annuities and nonqualified annuities, 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. Death benefits to beneficiaries under nonqualified annuities: 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 year he or she receives the payments. Death benefits to beneficiaries under qualified annuities: The entire death benefit generally is taxable as ordinary income to the beneficiary in the year he or she receives the payments from the plan. If, under your 401(k) plan you or your employer made after-tax contributions to your contract, the portion of any distribution from the plan that represents after-tax contributions are not taxable as ordinary income to your beneficiary. Death benefits under a Roth IRA generally are not taxable as ordinary income to the beneficiary if certain distribution requirements are met. Special Considerations if you select one of the death benefit riders (MAV, EEB or EEP): As of the date of this prospectus, we believe that charges related to these riders are not subject to current taxation. Therefore, we will not report these charges as partial surrenders from your contract. However, the IRS may determine that these charges should be treated as partial surrenders subject to taxation to the extent of any gain as well as the 10% tax penalty for surrenders before the age of 59 1/2, if applicable. We reserve the right to report charges for these riders as partial surrenders if we, as a withholding and reporting agent, believe that we are required to report them. In addition, we will report the benefits attributable to these riders on the death of you or annuitant as an annuity death benefit distribution, not as proceeds for life insurance. 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. ---------------------------------------------------------------------- 82 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY Penalties: If you receive amounts from your contract (or, if applicable, from the plan) before reaching age 59 1/2, you may have to pay a 10% IRS penalty on the amount includable in your ordinary income. If you receive amounts from your SIMPLE IRA before reaching age 59 1/2, generally the IRS penalty provisions apply. However, if you receive these amounts before age 59 1/2 and within the first two years of your participation in the SIMPLE IRA plan, the IRS penalty will be assessed at a rate of 25% instead of 10%. However, this penalty will not apply to any amount received by you: o because of your death; o because you become disabled (as defined in the Code); o if the distribution is part of a series of substantially equal periodic payments, made at least annually, over your life or life expectancy (or joint lives or life expectancies of you and your beneficiary); or o if it is allocable to an investment before Aug. 14, 1982 (except for qualified annuities). For qualified annuities under 401(a), 401(k) plans or TSA's, other 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. Withholding from qualified annuities: If you receive directly all or part of the contract value from a qualified annuity (except an IRA, Roth IRA, SIMPLE IRA or SEP), mandatory 20% federal income tax withholding (and possibly state income tax withholding) generally will be imposed at the time the payout is made from the plan. This mandatory withholding is in place of the elective withholding discussed above. This mandatory withholding will not be imposed if: o instead of receiving the distribution check, you elect to have the distribution rolled over directly to an IRA or another eligible plan; o the payout is one in a series of substantially equal periodic payouts, made at least annually, over your life or life expectancy (or the joint lives or life expectancies of you and your designated beneficiary) or over a specified period of 10 years or more; or o the payout is a minimum distribution required under the Code. Payments we make to a surviving spouse instead of being directly rolled over to an IRA also may be subject to mandatory 20% income tax withholding. State withholding also may be imposed on taxable distributions. Transfer of ownership of a nonqualified annuity: If you transfer a nonqualified annuity without receiving adequate consideration, the transfer is a gift and also may be a 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 contract to reflect any clarifications that may be needed or are appropriate to maintain such qualification or to conform the contract to any applicable changes in the tax qualification requirements. We will send you a copy of any amendments. ---------------------------------------------------------------------- 83 PROSPECTUS -- AUG. 9, 2001 Voting Rights As a contract owner with investments in the subaccounts, you may vote on important fund policies until annuity payouts begin. Once they begin, the person receiving them has voting rights. We will vote fund shares according to the instructions of the person with voting rights. Before annuity payouts begin, the number of votes you have is determined by applying your percentage interest in each subaccount to the total number of votes allowed to the subaccount. After annuity payouts begin, the number of votes you have is equal to: o the reserve held in each subaccount for your contract; divided by o the net asset value of one share of the applicable fund. As we make annuity payouts, the reserve for the contract decreases; therefore, the number of votes also will decrease. We calculate votes separately for each subaccount. We will send notice of shareholders' meetings, proxy materials and a statement of the number of votes to which the voter is entitled. We will vote shares for which we have not received instructions in the same proportion as the votes for which we received instructions. We also will vote the shares for which we have voting rights in the same proportion as the votes for which we received instructions. Substitution of Investments We may substitute the funds in which the subaccounts invest if: o laws or regulations change; o the existing funds become unavailable; or o in our judgment, the funds no longer are suitable for the subaccounts. If any of these situations occur, and if we believe it is in the best interest of persons having voting rights under the contract, we have the right to substitute the funds currently listed in this prospectus for other funds. We may also: o add new subaccounts; o combine any two or more subaccounts; o make additional subaccounts investing in additional funds; o transfer assets to and from the subaccounts or the variable account; and o eliminate or close any subaccounts. In the event of substitution or any of these changes, we may amend the contract and take whatever action is necessary and appropriate without your consent or approval. However, we will not make any substitution or change without the necessary approval of the SEC and state insurance departments. We will notify you of any substitution or change. About the Service Providers Issuer and Principal Underwriter IDS Life issues and is the principal underwriter for the contracts. IDS Life is a stock life insurance company organized in 1957 under the laws of the State of Minnesota and is located at 70100 AXP Financial Center, Minneapolis, MN 55474. IDS Life conducts a conventional life insurance business. IDS Life is a wholly-owned subsidiary of AEFC, which itself is a wholly-owned subsidiary of American Express Company, a financial services company headquartered in New York City. 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 Express Financial Advisors Inc. (AEFA) serves individuals and businesses through its nationwide network of more than 600 supervisory offices, more than 3,800 branch offices and more than 10,700 advisors. IDS Life pays commissions for sales of the contracts of up to 7% of the total purchase payments to AEFA. This revenue is used to cover distribution costs that include compensation to advisors and field leadership for the selling advisors. These commissions consist of a combination of time of sale and on-going service/trail commissions (which, when totaled, could exceed 7% of purchase payments). From time to time, IDS Life will pay or permit other promotional incentives, in cash or credit or other compensation Legal Proceedings A number of lawsuits have been filed against life and health insurers in jurisdictions in which IDS Life and AEFC do business involving insurers' sales practices, alleged agent misconduct, failure to properly supervise agents and other matters. IDS Life and AEFC, like other life and health insurers, from time to time are involved in such litigation. On December 13, 1996, an action entitled Lesa Benacquisto and ---------------------------------------------------------------------- 84 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY Daniel Benacquisto v. IDS Life Insurance Company and American Express Financial Corporation was commenced in Minnesota state court. The action is brought by individuals who replaced an existing IDS Life insurance policy with a new IDS Life policy. The plaintiffs purport to represent a class consisting of all persons who replaced existing IDS Life policies with new IDS Life policies from and after January 1, 1985. The complaint puts at issue various alleged sales practices and misrepresentations, alleged breaches of fiduciary duties and alleged violations of consumer fraud statutes. Plaintiffs seek damages in an unspecified amount and also seek to establish a claims resolution facility for the determination of individual issues. IDS Life and AEFC filed an answer to the complaint on February 18, 1997, denying the allegations. A second action, entitled Arnold Mork, Isabella Mork, Ronald Melchert and Susan Melchert v. IDS Life Insurance Company and American Express Financial Corporation was commenced in the same court on March 21, 1997. In addition to claims that are included in the Benacquisto lawsuit, the second action includes an allegation of improper replacement of an existing IDS Life annuity contract. It seeks similar relief to the initial lawsuit. On October 13, 1998, an action entitled Richard W. and Elizabeth J. Thoresen v. 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 also 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, including restitution of allegedly lost investment earnings and restoration of contract values. In January 2000, AEFC reached an agreement in principle to settle the three class-action lawsuits described above. It is expected the settlement will provide $215 million of benefits to more than two million participants and for release by class members of all insurance and annuity market conduct claims dating back to 1985. In August, 2000 an action entitled Lesa Benacquisto, Daniel Benacquisto, Richard Thoresen, Elizabeth Thoresen, Arnold Mork, Isabella Mork, Ronald Melchert and Susan Melchert v. American Express Financial Corporation, American Express Financial Advisors, 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 the United States District Court for the District of Minnesota. The complaint put at issue various alleged sales practices and misrepresentations and allegations of violations of federal laws. In September, 2000 the plaintiffs filed a consolidated complaint in State Court alleging the same claims as the previous actions. On October 2, 2000 the District Court, Fourth Judicial District for the State of Minnesota, County of Hennepin and the United States District Court for the District of Minnesota entered an order conditionally certifying a class for settlement purposes, preliminarily approving the class settlement, directing the issuance of a class notice to the class and scheduling a hearing to determine the fairness of settlement for March, 2001. On March 6, 2001 the District Court, Fourth Judicial District for the State of Minnesota, County of Hennepin and the United States District Court for the District of Minnesota heard oral arguments on plaintiffs' motions for final approval of the class action settlement. On May 16, 2001 the state court filed its Final Order and Judgment Approving Class Action Settlement. On May 15, 2001 the federal court entered its Final Order and Judgment Approving Class Action Settlement. An appeal has been filed with the Minnesota Court of Appeals and the United States Court of Appeals for the Eighth Circuit. Table of Contents of the Statement of Additional Information Performance Information 3 Calculating Annuity Payouts 41 Rating Agencies 42 Principal Underwriter 42 Financial Statements ---------------------------------------------------------------------- 85 PROSPECTUS -- AUG. 9, 2001 (icon of) American Express(R) Logo IDS Life Insurance Company 70100 AXP Financial Center Minneapolis, MN 55474 (800) 862-7919 americanexpress.com S-6406 A (8/01) American Express Retirement Advisor Advantage(SM) Variable Annuity -- Band 3 Issued by: IDS Life Insurance Company American Express Retirement Advisor Advantage(SM) Variable Annuity -- Band 3 Prospectus Aug. 9, 2001 INDIVIDUAL FLEXIBLE PREMIUM DEFERRED COMBINATION FIXED/VARIABLE ANNUITY FOR: o current or retired employees of American Express Financial Corporation or its subsidiaries and their spouses (employees), o current or retired American Express financial advisors and their spouses (advisors), and o individuals investing an initial payment of $1 million (other individuals). IDS Life Variable Account 10 Issued by: IDS Life Insurance Company (IDS Life) 70100 AXP Financial Center Minneapolis, MN 55474 Telephone: (800) 862-7919 americanexpress.com/advisors This prospectus contains information that you should know before investing. You also will receive the prospectuses for: o American Express(R) Variable Portfolio Funds o AIM Variable Insurance Funds o Alliance Variable Products Series Fund o American Century Variable Portfolios, Inc. o Calvert Variable Series, Inc. o Evergreen Variable Annuity Trust o Fidelity Variable Insurance Products - Service Class 2 o Franklin(R) Templeton(R) Variable Insurance o Goldman Sachs Variable Insurance Trust (VIT) o INVESCO Variable Investment Funds, Inc. o Janus Aspen Series: Service Shares o Lazard Retirement Series, Inc. o MFS(R) Variable Insurance Trust(SM) o Pioneer Variable Contracts Trust (VCT), Class II Shares o Putnam Variable Trust - IB Shares o Strong Opportunity Fund II, Inc. o Wanger Advisors Trust Products Trust (FTVIPT) - Class 2 o Wells Fargo Variable Trust Funds Please read the prospectuses carefully and keep them for future reference. The Securities and Exchange Commission (SEC) has not approved or disapproved these securities or passed upon the accuracy or adequacy 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 SEC and is available without charge by contacting IDS Life at the telephone number and address listed above. The table of contents of the SAI is on the last page of this prospectus. The SEC maintains an Internet site. This prospectus, the SAI and other information about the product are available on the EDGAR Database on the SEC's Internet site at (http://www.sec.gov). Variable annuities are complex investment vehicles. Before you invest, be sure to ask your sales representative about the variable annuity's features, benefits, risks and fees, and whether the variable annuity is appropriate for you, based upon your financial situation and objectives. IDS Life and its affiliated insurance companies offer several different annuities which your sales representative may be authorized to offer to you. Each annuity has different features and benefits that may be appropriate for you based on your financial situation and needs, your age and how you intend to use the annuity. The different features and benefits may include the investment and fund manager options, variations in interest rate amount and guarantees, credits and access to annuity account values. The fees and charges may also be different between each annuity. Table of Contents Key Terms 3 The Contract in Brief 4 Expense Summary 5 Condensed Financial Information (Unaudited) 19 Financial Statements 22 Performance Information 22 The Variable Account and the Funds 23 The Fixed Account 30 Buying Your Contract 30 Charges 32 Valuing Your Investment 34 Making the Most of Your Contract 35 Surrenders 37 TSA-- Special Surrender Provisions 38 Changing Ownership 38 Benefits in Case of Death 39 Optional Benefits 40 The Annuity Payout Period 45 Taxes 47 Voting Rights 49 Substitution of Investments 49 About the Service Providers 50 Table of Contents of the Statement of Additional Information 51 -------------------------------------------------------------------------------- 2 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY -- BAND 3 Key Terms 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. Assumed investment rate: The rate of return we assume your investments will earn when we calculate your initial annuity payout amount using the annuity table in your contract. The standard assumed investment rate we use is 5% but you may request we substitute an assumed investment rate of 3.5%. Beneficiary: The person you designate to receive benefits in case of the owner's or annuitant's death while the contract is in force and before annuity payouts begin. Close of business: When the New York Stock Exchange (NYSE) closes, normally 4 p.m. Eastern time. Contract: A deferred annuity contract that permits you to accumulate money for retirement by making one or more purchase payments. It provides for lifetime or other forms of payouts beginning at a specified time in the future. Contract value: The total value of your contract before we deduct any applicable charges. Contract year: A period of 12 months, starting on the effective date of your contract and on each anniversary of the effective date. Fixed account: An account to which you may allocate purchase payments. Amounts you allocate to this account earn interest at rates that we declare periodically. Funds: Investment options under your contract. You may allocate your purchase payments into 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 receives the contract's benefits. Qualified annuity: A contract that you purchase to fund one of the following tax-deferred retirement plans that is subject to applicable federal law and any rules of the plan itself: o Individual Retirement Annuities (IRAs) under Section 408(b) of the Internal Revenue Code of 1986, as amended (the Code) o Roth IRAs under Section 408A of the Code o SIMPLE IRAs under Section 408(p) of the Code o Simplified Employee Pension (SEP) plans under Section 408(k) of the Code o Plans under Section 401(k) of the Code o Custodial and trusteed plans under Section 401(a) of the Code o Tax-Sheltered Annuities (TSAs) under Section 403(b) of the Code A qualified annuity will not provide any necessary or additional tax deferral if it is used to fund a retirement plan that is already tax-deferred. All other contracts are considered nonqualified annuities. Rider effective date: The date you add a rider to your contract. Settlement date: The date when annuity payouts are scheduled to begin. 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 invests in shares of one fund. The value of your investment in each subaccount changes with the performance of the particular fund. -------------------------------------------------------------------------------- 3 PROSPECTUS -- AUG. 9, 2001 The Contract in Brief Purpose: The purpose of the contract is to allow you to accumulate money for retirement. You do this by making one or more purchase payments. You may allocate your purchase payments to the fixed accounts and/or subaccounts under the contract. These accounts, in turn, may earn returns that increase the value of the contract. Beginning at a specified time in the future called the settlement date; the contract provides lifetime or other forms of payouts of your contract value (less any applicable premium tax). 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 or life insurance contract. Most annuities have a tax-deferred feature. So do many retirement plans under the Internal Revenue Code. As a result, when you use an annuity to fund a retirement plan that is tax-deferred; your annuity will not provide any necessary or additional tax deferral for that retirement plan. But annuities do have features other than tax deferral that may help you reach your retirement goals. You should consult your tax advisor prior to making a purchase for an explanation of the tax implications to you. Free look period: You may return your contract to your sales representative or to our office within the time stated on the first page of your contract and receive a full refund of the contract value. We will not deduct any charges. However, you bear the investment risk from the time of purchase until you return the contract; the refund amount may be more or less than the payment you made. (Exception: If the law requires, we will refund all of your purchase payments.) Accounts: Currently, you may allocate your purchase payments among any or all of: o the 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 settlement date will equal or exceed the total purchase payments you allocate to the subaccounts. (p. 23) o the fixed account, which earns interest at a rate that we adjust periodically. (p. 30) Buying your contract: Your sales representative will help you complete and submit an application. Applications are subject to acceptance at our office. You may buy a nonqualified annuity or a qualified annuity. After your initial purchase payment, you have the option of making additional purchase payments in the future. (p. 30) o Minimum initial purchase payment -- $2,000 ($1,000 for qualified annuities) unless you pay in installments by means of a bank authorization or under a group billing arrangement such as a payroll deduction. o Minimum additional purchase payment -- $50. o Minimum installment purchase payment -- $50 monthly; $23.08 biweekly (scheduled payment plan billing). o Maximum first-year purchase payments -- $100,000 to $2,000,000 depending on your age. o Maximum purchase payment for each subsequent year -- $50,000 to $100,000 depending upon your age. Transfers: Subject to certain restrictions, you currently may redistribute your contract value among the accounts without charge at any time until annuity payouts begin, and once per contract year among the subaccounts after annuity payouts begin. You may establish automated transfers among the accounts. Fixed account transfers are subject to special restrictions. (p. 35) Surrenders: You may surrender all or part of your contract value at any time before the settlement date. You also may establish automated partial surrenders. Surrenders may be subject to charges and tax penalties (including a 10% IRS penalty if you surrender prior to your reaching age 59 1/2) and may have other tax consequences; also, certain restrictions apply. (p. 37) Changing ownership: You may change ownership of a nonqualified annuity by written instruction, but this may have federal income tax consequences. Restrictions apply to changing ownership of a qualified annuity. (p. 38) Benefits in case of death: If you or the annuitant die before annuity payouts begin, we will pay the beneficiary an amount at least equal to the contract value. (p. 39) Optional benefits: This contract offers optional features that are available for additional charges if you meet certain criteria (p. 40). Annuity payouts: You can apply your contract value to an annuity payout plan that begins on the settlement date. You may choose from a variety of plans to make sure that payouts continue as long as you like. If you purchased a qualified annuity, the payout schedule must meet the requirements of the tax-deferred retirement plan. We can make payouts on a fixed or variable basis, or both. Total monthly payouts may include amounts from each subaccount and the fixed account. During the annuity payout period, you cannot be invested in more than five subaccounts at any one time unless we agree otherwise. (p. 45) 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. 47) -------------------------------------------------------------------------------- 4 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY -- BAND 3 Charges: We assess certain charges in connection with your contract: o $30 annual contract administrative charge; o a 0.55% mortality and expense risk fee (if you allocate money to one or more subaccounts); o any premium taxes that may be imposed on us by state or local governments (currently, we deduct any applicable premium tax when annuity payouts begin but we reserve the right to deduct this tax at other times such as when you make purchase payments or when you surrender your contract); and o the operating expenses of the funds in which the subaccounts invest. Expense Summary The purpose of the following information 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 we deduct directly from your contract or indirectly from the subaccounts and funds below. Some expenses may vary as we explain under "Charges." Please see the funds' prospectuses for more information on the operating expenses for each fund. Contract Owner Expenses Surrender charge: 0% Annual contract administrative charge: $30* * We will waive this charge when your contract value, or total purchase payments less any payments surrendered, is $50,000 or more on the current contract anniversary. Maximum Anniversary Value Death Benefit Rider (MAV) fee: 0.15% (As a percentage of the contract value charged annually at the contract anniversary. This is an optional expense) Earning Enhancement Death Benefit Rider (EEB) fee: 0.30% (As a percentage of the contract value charged annually at the contract anniversary. This is an optional expense) Earning Enhancement Plus Death Benefit Rider (EEP) fee: 0.40% (As a percentage of the contract value charged annually at the contract anniversary. This is an optional expense) Annual Variable Account Expenses (as a percentage of average subaccount value) 0.55% -------------------------------------------------------------------------------- 5 PROSPECTUS -- AUG. 9, 2001
Annual operating expenses of the funds (after fee waivers and/or expense reimbursements, if applicable, as a percentage of average daily net assets) Management 12b-1 Other fees fees expenses Total AXP(R) Variable Portfolio - Blue Chip Advantage Fund .56% .13% .26% .95%(1) Bond Fund .60 .13 .06 .79(2) Capital Resource Fund .60 .13 .04 .77(2) Cash Management Fund .51 .13 .04 .68(2) Diversified Equity Income Fund .56 .13 .26 .95(1) Emerging Markets Fund 1.13 .13 .43 1.69(1) Equity Select Fund .65 .13 .32 1.10(3) Extra Income Fund .62 .13 .07 .82(2) Federal Income Fund .61 .13 .13 .87(1) Global Bond Fund .84 .13 .10 1.07(2) Growth Fund .64 .13 .18 .95(1) International Fund .82 .13 .07 1.02(2) Managed Fund .59 .13 .03 .75(2) New Dimensions Fund(R) .60 .13 .05 .78(2) Partners Small Cap Value Fund 1.10 .13 .27 1.50(3) S&P 500 Index Fund .28 .13 .07 .48(1) Small Cap Advantage Fund .75 .13 .31 1.19(1) Stock Fund .60 .13 .37 1.10(3) Strategy Aggressive Fund .59 .13 .05 .77(2) AIM V.I. Capital Appreciation Fund, Series II .61 .25 .21 1.07(4) Capital Development Fund, Series II .75 .25 .43 1.43(4) Alliance VP AllianceBernstein International Value Portfolio (Class B) .01 .25 .94 1.20(5) Growth & Income Portfolio (Class B) .63 .25 .07 .95(6) American Century VP International, Class II 1.40 .25 -- 1.65(7) Value, Class II .90 .25 -- 1.15(7) Calvert Variable Series, Inc. Social Balanced Portfolio .70 -- .16 .86(8) Evergreen VA Capital Growth Fund, Class L Shares .80 .25 .05 1.10(9) Fidelity VIP III Growth & Income Portfolio (Service Class 2) .48 .25 .12 .85(10) III Mid Cap Portfolio (Service Class 2) .57 .25 .17 .99(11) Overseas Portfolio (Service Class 2) .72 .25 .18 1.15(12) Franklin Templeton VIP Trust Franklin Real Estate Fund - Class 2 .58 .25 .02 .85(13),(14) Franklin Value Securities Fund - Class 2 .58 .25 .26 1.09(14),(15) Mutual Shares Securities Fund - Class 2 .60 .25 .20 1.05(14) Goldman Sachs VIT CORE(SM) U.S. Equity Fund .70 -- .20 .90(16) Mid Cap Value Fund .80 -- .25 1.05(16)
-------------------------------------------------------------------------------- 6 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY -- BAND 3
Annual operating expenses of the funds (after fee waivers and/or expense reimbursements, if applicable, as a percentage of average daily net assets) (continued) Management 12b-1 Other fees fees expenses Total INVESCO VIF Dynamics Fund .75% --% .34% 1.09%(17),(18) Financial Services Fund .75 -- .34 1.09(17),(18) Technology Fund .72 -- .30 1.02(17),(18) Telecommunications Fund .75 -- .31 1.06(17),(18) Janus Aspen Series Global Technology Portfolio: Service Shares .65 .25 .04 .94(19) International Growth Portfolio: Service Shares .65 .25 .06 .96(19) Lazard Retirement Series International Equity Portfolio .75 .25 .25 1.25(20) MFS(R) Investors Growth Stock Series - Service Class (Previously MFS(R) Growth Series) .75 .20 .16 1.11(21),(22),(23) New Discovery Series - Service Class .90 .20 .16 1.26(21),(22),(23) Utilities Series - Service Class .75 .20 .16 1.11(21),(22) Pioneer VCT Pioneer Equity-Income VCT Portfolio - Class II Shares .65 .25 .06 .96(24) Pioneer Europe VCT Portfolio - Class II Shares .90 .25 .55 1.70(25) Putnam Variable Trust Putnam VT Health Sciences Fund - Class IB Shares .70 .25 .09 1.04(26) Putnam VT International Growth Fund - Class IB Shares .76 .25 .18 1.19(26) Putnam VT Vista Fund - Class IB Shares .60 .25 .07 .92(26) Strong Funds Strong Opportunity Fund II - Advisor Class .75 .15 .35 1.25(27) Wanger International Small Cap 1.20 -- .21 1.41(6),(28) U.S. Small Cap .95 -- .05 1.00(6),(28) Wells Fargo VT Asset Allocation Fund .57 .25 .18 1.00(29) International Equity Fund .15 .25 .60 1.00(29) Small Cap Growth Fund .15 .25 .80 1.20(29)
(1) The fund's expense figures are based on actual expenses, after fee waivers and expense reimbursements, for the fiscal year ending Aug. 31, 2000. Without fee waivers and expense reimbursements "Other Expenses" and "Total" would be 0.27% and 0.96% for AXP Variable Portfolio - Blue Chip Advantage Fund, 0.80% and 1.49% for AXP Variable Portfolio - Diversified Equity Income Fund, 1.16% and 2.42% for AXP Variable Portfolio - Emerging Markets Fund, 0.15% and 0.89% for AXP Variable Portfolio - Federal Income Fund, 0.20% and 0.97% for AXP Variable Portfolio - Growth Fund, 1.16% and 1.57% for AXP Variable Portfolio - S&P 500 Index Fund and 0.55% and 1.43% for AXP Variable Portfolio - Small Cap Advantage Fund. (2) The fund's expense figures are based on actual expenses for the fiscal year ended Aug. 31, 2000. (3) The fund's expense figures are based on estimated expenses after fee waivers and expense reimbursements. Without fee waivers and expense reimbursements "Other Expenses" and "Total" would be 0.68% and 1.46% for AXP VP Equity Select Fund, 0.57% and 1.80% for AXP VP Partners Small Cap Value Fund and 0.44% and 1.17% for AXP VP Stock Fund. (4) Management and other expenses are based on estimated amounts for the current fiscal year. (5) The Portfolio's expense figures are based on estimated expenses after advisory fee waiver. Absent such waiver, "Management fees" and "Total" would be 1.00% and 2.19%. (6) Figures in "Management Fees," "12b-1 Fees," "Other Expenses" and "Total" are based on actual expenses for the fiscal year ended Dec. 31, 2000. (7) Annual expenses estimated as of inception date of July 16, 2001. The fund has a stepped fee schedule. As a result, the fund's management fee generally decreases as fund assets increase. (8) Net fund operating expenses before reductions for fees paid indirectly would be 0.88% for Social Balanced. (9) Expenses are estimated for the year ending Dec. 31, 2001. From time to time, the Fund's investment advisory may, at its discretion, reduce or waive its fees or reimburse the Fund for certain of its expenses in order to reduce expense ratios. The Fund's investment advisory may cease these waivers at any time. The estimated Annual Fund Operating Expenses reflect fee waivers and expense reimbursements. Excluding current fee waivers and expense reimbursements, Total Fund Operating Expenses are 1.24% for Class L shares. (10) Effective Jan. 12, 2000, FMR has voluntarily agreed to reimburse Service Class 2 of the fund to the extent that total operating expenses (excluding interest, taxes, certain securities lending costs, brokerage commissions, and extraordinary expenses), as a percentage of its net assets, exceed 1.25% This arrangement can be discontinued by FMR at any time. -------------------------------------------------------------------------------- 7 PROSPECTUS -- AUG. 9, 2001 (11) There were no reimbursements or expense reductions for the period ended Dec. 31, 2000. Actual annual class operating expenses were lower because a portion of the brokerage commissions that the fund paid was used to reduce the fund's expenses, and/or because through arrangements with the fund's custodian, credits realized as a result of uninvested cash balances were used to reduce a portion of the fund's custodian expenses. See the accompanying fund prospectus for details. (12) Effective Jan. 12, 2000, FMR has voluntarily agreed to reimburse Service Class 2 of the fund to the extent that total operating expenses (excluding interest, taxes, certain securities lending costs, brokerage commissions, and extraordinary expenses), as a percentage of its net assets, exceed 1.75%. This arrangement can be discontinued by FMR at any time. (13) The Fund administration fee is paid indirectly through the management fee. (14) The Fund's class 2 distribution plan or "Rule 12b-1 plan" is described in the fund's prospectus. (15) The manager has agreed in advance to reduce its fee to reflect reduced services resulting from the Fund's investment in a Franklin Templeton money fund. This reduction is required by the Fund's Board of Trustees and an order of the Securities and Exchange Commission. Absent fee waivers and/or reimbursements. "Management Fees" and "Total" would have been 0.60% and 1.11% for Franklin Value Securities Fund - Class 2. (16) Expense ratios are shown after fee waivers and expense reimbursements by the Investment advisor. The expense ratios before the waivers and reimbursements would have been: 0.70%, 0.17%, and 0.87% for CORE(SM) U.S. Equity Fund, and 0.80%, 0.42% and 1.22% for Mid Cap Value Fund. CORE(SM) is a service mark of Goldman Sachs & Co. (17) The Fund's actual Other Expenses and Total Annual Fund Operating Expenses were lower than the figures shown because its custodian fees were reduced under an expense offset arrangement. (18) Certain expenses of the Fund were absorbed voluntarily by INVESCO pursuant to a commitment between the Fund and INVESCO. This commitment may be changed at any time following consultation with the board of directors. After absorption, but excluding any expense offset arrangements, the Fund's Other Expenses and Total Annual Fund Operating Expenses for the fiscal year ended December 31,2000 were insignificant. (19) Expenses are based upon expenses for the fiscal year ended Dec. 31, 2000, restated to reflect a reduction in the management fee for International Growth Portfolio. All expenses are shown without the effect of expense offset arrangements. (20) Absent fee waivers and/or reimbursements, "Other Expenses" and "Total" expenses for the year ended Dec. 31, 2000 would have been 1.32% and 2.32% for International Equity Portfolio. (21) Each series has adopted a distribution plan under Rule 12b-1 that permits it to pay marketing and other fees to support the sales and distribution of service class shares (these fees are referred to as distribution fees). (22) Each series has an expense offset arrangement which reduces the series' custodian fee based upon the amount of cash maintained by the series with its custodian and dividend disbursing agent. The series may enter into other similar arrangements and directed brokerage arrangements, which would also have the effect of reducing the series' expenses. "Other Expenses" do not take into account these expense reductions, and are therefore higher than the actual expenses of the series. Had these fee reductions been taken into account, "Net Expenses" would be lower, and for service class shares would be estimated to be: 1.10% for Investors Growth Stock Series and 1.25% for New Discovery Series and 1.10% for Utilities Series. (23) MFS has contractually agreed, subject to reimbursement, to bear expenses for the series' expenses such that "Other Expenses" (after taking into account the expense offset arrangement described above), do not exceed 0.15% annually. Without this agreement, "Other Expenses" and "Total" would be 0.17% and 1.12% for Investors Growth Stock Series and 0.19% and 1.29% for New Discovery Series. These contractual fee arrangements will continue until at least May 1, 2002, Unless changed with the consent of the board of trustees which oversees the series. (24) The portfolio's expense figures are based on actual expenses for the fiscal year ended Dec. 31, 2000. (25) The portfolio's expense figures are based on estimated expenses for the fiscal year ending Dec. 31, 2001 after management fee waiver. Without the fee waiver "Management fees" and "Total" would be 1.00% and 1.80% for the portfolio. (26) Restated to reflect an increase in 12b-1 fees currently payable to Putnam Investment Management, LLC ("Putnam Management"). The Trustees currently limit payments on class IB shares to 0.25% of average net assets. Actual 12b-1 fees during the most recent fiscal year were 0.15% of average net assets. (27) The fund's distributor has voluntarily agreed to waive a portion of the 12b-1 fee. Absent this waiver, "12b-1 fees" would be 0.25% and it is estimated that "Total" expenses would be 1.35%. (28) Liberty Wanger Asset Management, L.P. will reimburse the Fund if its annual ordinary operating expenses exceed 2.00% of average daily net assets. This commitment expires on Sept. 30, 2002. (29) Amounts represent expenses as of Dec. 31, 2000. Expenses are shown after fee waivers and expense reimbursements. Without fee waivers and expense reimbursements "Management Fees," "Other Expenses" and "Total" would be 0.70%, 0.18% and 1.13% for Wells Fargo VT Asset Allocation Fund, 0.90%, 1.25% and 2.40% for Wells Fargo VT International Equity Fund and 0.90%, 1.26% and 2.41% for Wells Fargo VT Small Cap Growth Fund. -------------------------------------------------------------------------------- 8 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY -- BAND 3 Example:* In order to provide a more meaningful discussion about the contract and its options, we provide expense examples for each fund showing every available optional contract feature combination. This example assumes that the applicable fund fee waivers and/or expense reimbursements will continue for the periods shown. Under each fund you will find an example showing: 1) the base contract with no optional riders, 2) the contract with selection of the Maximum Anniversary Value Death Benefit Rider, 3) the contract with the selection of the Enhanced Earnings Death Benefit Rider, 4) the contract with the selection of the Enhanced Earnings Plus Death Benefit Rider, 5) the contract with the selection of both the Maximum Anniversary Value Death Benefit and the Enhanced Earning Death Benefit Riders, and 6) the contract with the selection of both the Maximum Anniversary Value Death Benefit Rider and the Enhanced Earnings Plus Death Benefit Riders.
You would pay the following expenses on a $1,000 investment assuming a 5% annual return and full surrender, no surrender or selection of an annuity payout plan at the end of each time period. 1 year 3 years 5 years 10 years AXP(R) VP - Blue Chip Advantage Fund base contract with no optional riders $15.92 $49.40 $ 85.20 $185.95 optional MAV 17.46 54.09 93.15 202.47 optional EEB 18.99 58.76 101.04 218.75 optional EEP 20.02 61.87 106.28 229.47 optional MAV and EEB 20.53 63.43 108.88 234.79 optional MAV and EEP 21.56 66.52 114.09 245.35 AXP(R) VP - Bond Fund base contract with no optional riders 14.28 44.38 76.68 168.06 optional MAV 15.82 49.09 84.67 184.84 optional EEB 17.35 53.78 92.62 201.38 optional EEP 18.38 56.90 97.89 212.27 optional MAV and EEB 18.89 58.45 100.52 217.67 optional MAV and EEP 19.92 61.56 105.75 228.40 AXP(R) VP - Capital Resource Fund base contract with no optional riders 14.07 43.75 75.61 165.81 optional MAV 15.61 48.46 83.61 182.62 optional EEB 17.15 53.15 91.56 199.19 optional EEP 18.17 56.27 96.84 210.10 optional MAV and EEB 18.69 57.83 99.47 215.51 optional MAV and EEP 19.71 60.94 104.71 226.26 AXP(R) VP - Cash Management Fund base contract with no optional riders 13.15 40.92 70.78 155.60 optional MAV 14.69 45.64 78.81 172.56 optional EEB 16.23 50.34 86.80 189.28 optional EEP 17.25 53.47 92.09 200.28 optional MAV and EEB 17.76 55.03 94.73 205.75 optional MAV and EEP 18.79 58.14 99.99 216.59 AXP(R) VP - Diversified Equity Income Fund base contract with no optional riders 15.92 49.40 85.20 185.95 optional MAV 17.46 54.09 93.15 202.47 optional EEB 18.99 58.76 101.04 218.75 optional EEP 20.02 61.87 106.28 229.47 optional MAV and EEB 20.53 63.43 108.88 234.79 optional MAV and EEP 21.56 66.52 114.09 245.35
-------------------------------------------------------------------------------- 9 PROSPECTUS -- AUG. 9, 2001
You would pay the following expenses on a $1,000 investment assuming a 5% annual return and full surrender, no surrender or selection of an annuity payout plan at the end of each time period. (continued) 1 year 3 years 5 years 10 years AXP(R) VP - Emerging Markets Fund base contract with no optional riders $23.50 $72.39 $123.91 $265.13 optional MAV 25.04 77.01 131.61 280.49 optional EEB 26.58 81.62 139.26 295.62 optional EEP 27.60 84.68 144.34 305.58 optional MAV and EEB 28.12 86.21 146.87 310.53 optional MAV and EEP 29.14 89.26 151.91 320.34 AXP(R) VP - Equity Select Fund base contract with no optional riders 17.46 54.09 93.15 202.47 optional MAV 18.99 58.76 101.04 218.75 optional EEB 20.53 63.43 108.88 234.79 optional EEP 21.56 66.52 114.09 245.35 optional MAV and EEB 22.07 68.07 116.68 250.59 optional MAV and EEP 23.09 71.16 121.85 261.00 AXP(R) VP - Extra Income Fund base contract with no optional riders 14.59 45.33 78.28 171.44 optional MAV 16.12 50.03 86.27 188.17 optional EEB 17.66 54.71 94.20 204.66 optional EEP 18.69 57.83 99.47 215.51 optional MAV and EEB 19.20 59.39 102.09 220.90 optional MAV and EEP 20.22 62.49 107.32 231.60 AXP(R) VP - Federal Income Fund base contract with no optional riders 15.10 46.89 80.95 177.04 optional MAV 16.64 51.59 88.92 193.69 optional EEB 18.17 56.27 96.84 210.10 optional EEP 19.20 59.39 102.09 220.90 optional MAV and EEB 19.71 60.94 104.71 226.26 optional MAV and EEP 20.74 64.05 109.93 236.91 AXP(R) VP - Global Bond Fund base contract with no optional riders 17.15 53.15 91.56 199.19 optional MAV 18.69 57.83 99.47 215.51 optional EEB 20.22 62.49 107.32 231.60 optional EEP 21.25 65.60 112.53 242.19 optional MAV and EEB 21.76 67.14 115.12 247.45 optional MAV and EEP 22.79 70.23 120.30 257.89 AXP(R) VP - Growth Fund base contract with no optional riders 15.92 49.40 85.20 185.95 optional MAV 17.46 54.09 93.15 202.47 optional EEB 18.99 58.76 101.04 218.75 optional EEP 20.02 61.87 106.28 229.47 optional MAV and EEB 20.53 63.43 108.88 234.79 optional MAV and EEP 21.56 66.52 114.09 245.35
-------------------------------------------------------------------------------- 10 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY -- BAND 3
You would pay the following expenses on a $1,000 investment assuming a 5% annual return and full surrender, no surrender or selection of an annuity payout plan at the end of each time period. (continued) 1 year 3 years 5 years 10 years AXP(R) VP - International Fund base contract with no optional riders $16.64 $51.59 $ 88.92 $193.69 optional MAV 18.17 56.27 96.84 210.10 optional EEB 19.71 60.94 104.71 226.26 optional EEP 20.74 64.05 109.93 236.91 optional MAV and EEB 21.25 65.60 112.53 242.19 optional MAV and EEP 22.27 68.69 117.72 252.68 AXP(R) VP - Managed Fund base contract with no optional riders 13.87 43.13 74.54 163.55 optional MAV 15.41 47.83 82.55 180.39 optional EEB 16.94 52.53 90.51 196.99 optional EEP 17.97 55.65 95.78 207.92 optional MAV and EEB 18.48 57.21 98.42 213.35 optional MAV and EEP 19.51 60.32 103.66 224.12 AXP(R) VP - New Dimensions Fund(R) base contract with no optional riders 14.18 44.07 76.14 166.94 optional MAV 15.71 48.77 84.14 183.73 optional EEB 17.25 53.47 92.09 200.28 optional EEP 18.28 56.58 97.36 211.18 optional MAV and EEB 18.79 58.14 99.99 216.59 optional MAV and EEP 19.81 61.25 105.23 227.33 AXP(R) VP - Partners Small Cap Value Fund base contract with no optional riders 21.56 66.52 114.09 245.35 optional MAV 23.09 71.16 121.85 261.00 optional EEB 24.63 75.78 129.56 276.42 optional EEP 25.66 78.86 134.68 286.57 optional MAV and EEB 26.17 80.39 137.23 291.61 optional MAV and EEP 27.19 83.45 142.31 301.61 AXP(R) VP - S&P 500 Index Fund base contract with no optional riders 11.10 34.61 59.99 132.60 optional MAV 12.64 39.35 68.09 149.89 optional EEB 14.18 44.07 76.14 166.94 optional EEP 15.20 47.21 81.48 178.16 optional MAV and EEB 15.71 48.77 84.14 183.73 optional MAV and EEP 16.74 51.90 89.45 194.79 AXP(R) VP - Small Cap Advantage Fund base contract with no optional riders 18.38 56.90 97.89 212.27 optional MAV 19.92 61.56 105.75 228.40 optional EEB 21.45 66.21 113.57 244.30 optional EEP 22.48 69.31 118.75 254.77 optional MAV and EEB 22.99 70.85 121.33 259.96 optional MAV and EEP 24.02 73.94 126.48 270.28
-------------------------------------------------------------------------------- 11 PROSPECTUS -- AUG. 9, 2001
You would pay the following expenses on a $1,000 investment assuming a 5% annual return and full surrender, no surrender or selection of an annuity payout plan at the end of each time period. (continued) 1 year 3 years 5 years 10 years AXP(R) VP - Stock Fund base contract with no optional riders $17.46 $54.09 $ 93.15 $202.47 optional MAV 18.99 58.76 101.04 218.75 optional EEB 20.53 63.43 108.88 234.79 optional EEP 21.56 66.52 114.09 245.35 optional MAV and EEB 22.07 68.07 116.68 250.59 optional MAV and EEP 23.09 71.16 121.85 261.00 AXP(R) VP - Strategy Aggressive Fund base contract with no optional riders 14.07 43.75 75.61 165.81 optional MAV 15.61 48.46 83.61 182.62 optional EEB 17.15 53.15 91.56 199.19 optional EEP 18.17 56.27 96.84 210.10 optional MAV and EEB 18.69 57.83 99.47 215.51 optional MAV and EEP 19.71 60.94 104.71 226.26 AIM V. I. Capital Appreciation Fund, Series II base contract with no optional riders 17.15 53.15 91.56 199.19 optional MAV 18.69 57.83 99.47 215.51 optional EEB 20.22 62.49 107.32 231.60 optional EEP 21.25 65.60 112.53 242.19 optional MAV and EEB 21.76 67.14 115.12 247.45 optional MAV and EEP 22.79 70.23 120.30 257.89 AIM V.I. Capital Development Fund, Series II base contract with no optional riders 20.84 64.36 110.45 237.97 optional MAV 22.38 69.00 118.23 253.72 optional EEB 23.91 73.63 125.97 269.25 optional EEP 24.94 76.71 131.10 279.47 optional MAV and EEB 25.45 78.24 133.66 284.55 optional MAV and EEP 26.48 81.31 138.76 294.62 Alliance VP AllianceBernstein International Value Portfolio (Class B) base contract with no optional riders 18.48 57.21 98.42 213.35 optional MAV 20.02 61.87 106.28 229.47 optional EEB 21.56 66.52 114.09 245.35 optional EEP 22.58 69.62 119.27 255.81 optional MAV and EEB 23.09 71.16 121.85 261.00 optional MAV and EEP 24.12 74.24 127.00 271.30 Alliance VP Growth & Income Portfolio (Class B) base contract with no optional riders 15.92 49.40 85.20 185.95 optional MAV 17.46 54.09 93.15 202.47 optional EEB 18.99 58.76 101.04 218.75 optional EEP 20.02 61.87 106.28 229.47 optional MAV and EEB 20.53 63.43 108.88 234.79 optional MAV and EEP 21.56 66.52 114.09 245.35
-------------------------------------------------------------------------------- 12 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY -- BAND 3
You would pay the following expenses on a $1,000 investment assuming a 5% annual return and full surrender, no surrender or selection of an annuity payout plan at the end of each time period. (continued) 1 year 3 years 5 years 10 years American Century VP International, Class II base contract with no optional riders $23.09 $71.16 $121.85 $261.00 optional MAV 24.63 75.78 129.56 276.42 optional EEB 26.17 80.39 137.23 291.61 optional EEP 27.19 83.45 142.31 301.61 optional MAV and EEB 27.71 84.98 144.84 306.57 optional MAV and EEP 28.73 88.04 149.90 316.43 American Century VP Value, Class II base contract with no optional riders 17.97 55.65 95.78 207.92 optional MAV 19.51 60.32 103.66 224.12 optional EEB 21.04 64.98 111.49 240.08 optional EEP 22.07 68.07 116.68 250.59 optional MAV and EEB 22.58 69.62 119.27 255.81 optional MAV and EEP 23.61 72.70 124.43 266.16 Calvert Variable Series, Inc. Social Balanced Portfolio base contract with no optional riders 15.00 46.58 80.41 175.92 optional MAV 16.53 51.28 88.39 192.59 optional EEB 18.07 55.96 96.31 209.01 optional EEP 19.10 59.08 101.57 219.83 optional MAV and EEB 19.61 60.63 104.17 225.19 optional MAV and EEP 20.63 63.74 109.41 235.85 Evergreen VA Capital Growth Fund, Class L Shares base contract with no optional riders 17.46 54.09 93.15 202.47 optional MAV 18.99 58.76 101.04 218.75 optional EEB 20.53 63.43 108.88 234.79 optional EEP 21.56 66.52 114.09 245.35 optional MAV and EEB 22.07 68.07 116.68 250.59 optional MAV and EEP 23.09 71.16 121.85 261.00 Fidelity VIP III Growth & Income Portfolio (Service Class 2) base contract with no optional riders 14.89 46.27 79.88 174.80 optional MAV 16.43 50.97 87.86 191.49 optional EEB 17.97 55.65 95.78 207.92 optional EEP 18.99 58.76 101.04 218.75 optional MAV and EEB 19.51 60.32 103.66 224.12 optional MAV and EEP 20.53 63.43 108.88 234.79 Fidelity VIP III Mid Cap Portfolio (Service Class 2) base contract with no optional riders 16.33 50.65 87.33 190.38 optional MAV 17.87 55.34 95.26 206.84 optional EEB 19.40 60.01 103.14 223.05 optional EEP 20.43 63.11 108.36 233.73 optional MAV and EEB 20.94 64.67 110.97 239.02 optional MAV and EEP 21.97 67.76 116.16 249.54
-------------------------------------------------------------------------------- 13 PROSPECTUS -- AUG. 9, 2001
You would pay the following expenses on a $1,000 investment assuming a 5% annual return and full surrender, no surrender or selection of an annuity payout plan at the end of each time period. (continued) 1 year 3 years 5 years 10 years Fidelity VIP Overseas Portfolio (Service Class 2) base contract with no optional riders $17.97 $55.65 $ 95.78 $207.92 optional MAV 19.51 60.32 103.66 224.12 optional EEB 21.04 64.98 111.49 240.08 optional EEP 22.07 68.07 116.68 250.59 optional MAV and EEB 22.58 69.62 119.27 255.81 optional MAV and EEP 23.61 72.70 124.43 266.16 FTVIPT Franklin Real Estate Fund - Class 2 base contract with no optional riders 14.89 46.27 79.88 174.80 optional MAV 16.43 50.97 87.86 191.49 optional EEB 17.97 55.65 95.78 207.92 optional EEP 18.99 58.76 101.04 218.75 optional MAV and EEB 19.51 60.32 103.66 224.12 optional MAV and EEP 20.53 63.43 108.88 234.79 FTVIPT Franklin Value Securities Fund - Class 2 base contract with no optional riders 17.35 53.78 92.62 201.38 optional MAV 18.89 58.45 100.52 217.67 optional EEB 20.43 63.11 108.36 233.73 optional EEP 21.45 66.21 113.57 244.30 optional MAV and EEB 21.97 67.76 116.16 249.54 optional MAV and EEP 22.99 70.85 121.33 259.96 FTVIPT Mutual Shares Securities Fund - Class 2 base contract with no optional riders 16.94 52.53 90.51 196.99 optional MAV 18.48 57.21 98.42 213.35 optional EEB 20.02 61.87 106.28 229.47 optional EEP 21.04 64.98 111.49 240.08 optional MAV and EEB 21.56 66.52 114.09 245.35 optional MAV and EEP 22.58 69.62 119.27 255.81 Goldman Sachs VIT CORE(SM) U.S. Equity Fund base contract with no optional riders 15.41 47.83 82.55 180.39 optional MAV 16.94 52.53 90.51 196.99 optional EEB 18.48 57.21 98.42 213.35 optional EEP 19.51 60.32 103.66 224.12 optional MAV and EEB 20.02 61.87 106.28 229.47 optional MAV and EEP 21.04 64.98 111.49 240.08 Goldman Sachs VIT Mid Cap Value Fund base contract with no optional riders 16.94 52.53 90.51 196.99 optional MAV 18.48 57.21 98.42 213.35 optional EEB 20.02 61.87 106.28 229.47 optional EEP 21.04 64.98 111.49 240.08 optional MAV and EEB 21.56 66.52 114.09 245.35 optional MAV and EEP 22.58 69.62 119.27 255.81
-------------------------------------------------------------------------------- 14 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY -- BAND 3
You would pay the following expenses on a $1,000 investment assuming a 5% annual return and full surrender, no surrender or selection of an annuity payout plan at the end of each time period. (continued) 1 year 3 years 5 years 10 years INVESCO VIF - Dynamics Fund base contract with no optional riders $17.35 $53.78 $ 92.62 $201.38 optional MAV 18.89 58.45 100.52 217.67 optional EEB 20.43 63.11 108.36 233.73 optional EEP 21.45 66.21 113.57 244.30 optional MAV and EEB 21.97 67.76 116.16 249.54 optional MAV and EEP 22.99 70.85 121.33 259.96 INVESCO VIF - Financial Services Fund base contract with no optional riders 17.35 53.78 92.62 201.38 optional MAV 18.89 58.45 100.52 217.67 optional EEB 20.43 63.11 108.36 233.73 optional EEP 21.45 66.21 113.57 244.30 optional MAV and EEB 21.97 67.76 116.16 249.54 optional MAV and EEP 22.99 70.85 121.33 259.96 INVESCO VIF - Technology Fund base contract with no optional riders 16.64 51.59 88.92 193.69 optional MAV 18.17 56.27 96.84 210.10 optional EEB 19.71 60.94 104.71 226.26 optional EEP 20.74 64.05 109.93 236.91 optional MAV and EEB 21.25 65.60 112.53 242.19 optional MAV and EEP 22.27 68.69 117.72 252.68 INVESCO VIF - Telecommunications Fund base contract with no optional riders 17.05 52.84 91.03 198.09 optional MAV 18.58 57.52 98.94 214.43 optional EEB 20.12 62.18 106.80 230.53 optional EEP 21.15 65.29 112.01 241.14 optional MAV and EEB 21.66 66.83 114.61 246.40 optional MAV and EEP 22.68 69.93 119.78 256.85 Janus Aspen Series Global Technology Portfolio: Service Shares base contract with no optional riders 15.82 49.09 84.67 184.84 optional MAV 17.35 53.78 92.62 201.38 optional EEB 18.89 58.45 100.52 217.67 optional EEP 19.92 61.56 105.75 228.40 optional MAV and EEB 20.43 63.11 108.36 233.73 optional MAV and EEP 21.45 66.21 113.57 244.30 Janus Aspen Series International Growth Portfolio: Service Shares base contract with no optional riders 16.02 49.71 85.74 187.06 optional MAV 17.56 54.40 93.68 203.56 optional EEB 19.10 59.08 101.57 219.83 optional EEP 20.12 62.18 106.80 230.53 optional MAV and EEB 20.63 63.74 109.41 235.85 optional MAV and EEP 21.66 66.83 114.61 246.40
-------------------------------------------------------------------------------- 15 PROSPECTUS -- AUG. 9, 2001
You would pay the following expenses on a $1,000 investment assuming a 5% annual return and full surrender, no surrender or selection of an annuity payout plan at the end of each time period. (continued) 1 year 3 years 5 years 10 years Lazard Retirement Series International Equity Portfolio base contract with no optional riders $18.99 $58.76 $101.04 $218.75 optional MAV 20.53 63.43 108.88 234.79 optional EEB 22.07 68.07 116.68 250.59 optional EEP 23.09 71.16 121.85 261.00 optional MAV and EEB 23.61 72.70 124.43 266.16 optional MAV and EEP 24.63 75.78 129.56 276.42 MFS(R) Investors Growth Stock Series - Service Class (previously MFS(R) Growth Series) base contract with no optional riders 17.56 54.40 93.68 203.56 optional MAV 19.10 59.08 101.57 219.83 optional EEB 20.63 63.74 109.41 235.85 optional EEP 21.66 66.83 114.61 246.40 optional MAV and EEB 22.17 68.38 117.20 251.64 optional MAV and EEP 23.20 71.47 122.37 262.03 MFS(R) New Discovery Series - Service Class base contract with no optional riders 19.10 59.08 101.57 219.83 optional MAV 20.63 63.74 109.41 235.85 optional EEB 22.17 68.38 117.20 251.64 optional EEP 23.20 71.47 122.37 262.03 optional MAV and EEB 23.71 73.01 124.94 267.19 optional MAV and EEP 24.73 76.09 130.08 277.44 MFS(R) Utilities Series - Service Class base contract with no optional riders 17.56 54.40 93.68 203.56 optional MAV 19.10 59.08 101.57 219.83 optional EEB 20.63 63.74 109.41 235.85 optional EEP 21.66 66.83 114.61 246.40 optional MAV and EEB 22.17 68.38 117.20 251.64 optional MAV and EEP 23.20 71.47 122.37 262.03 Pioneer Equity-Income VCT Portfolio - Class II Shares base contract with no optional riders 16.02 49.71 85.74 187.06 optional MAV 17.56 54.40 93.68 203.56 optional EEB 19.10 59.08 101.57 219.83 optional EEP 20.12 62.18 106.80 230.53 optional MAV and EEB 20.63 63.74 109.41 235.85 optional MAV and EEP 21.66 66.83 114.61 246.40 Pioneer Europe VCT Portfolio - Class II Shares base contract with no optional riders 23.61 72.70 124.43 266.16 optional MAV 25.14 77.32 132.12 281.50 optional EEB 26.68 81.92 139.77 296.62 optional EEP 27.71 84.98 144.84 306.57 optional MAV and EEB 28.22 86.51 147.37 311.51 optional MAV and EEP 29.24 89.56 152.41 321.32
-------------------------------------------------------------------------------- 16 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY -- BAND 3
You would pay the following expenses on a $1,000 investment assuming a 5% annual return and full surrender, no surrender or selection of an annuity payout plan at the end of each time period. (continued) 1 year 3 years 5 years 10 years Putnam VT Health Sciences Fund: Class IB Shares base contract with no optional riders $16.84 $52.22 $ 89.98 $195.89 optional MAV 18.38 56.90 97.89 212.27 optional EEB 19.92 61.56 105.75 228.40 optional EEP 20.94 64.67 110.97 239.02 optional MAV and EEB 21.45 66.21 113.57 244.30 optional MAV and EEP 22.48 69.31 118.75 254.77 Putnam VT International Growth Fund: Class IB Shares base contract with no optional riders 18.38 56.90 87.89 212.27 optional MAV 19.92 61.56 105.75 228.40 optional EEB 21.45 66.21 113.57 244.30 optional EEP 22.48 69.31 118.75 254.77 optional MAV and EEB 22.99 70.85 121.33 259.96 optional MAV and EEP 24.02 73.94 126.48 270.28 Putnam VT Vista Fund - Class IB Shares base contract with no optional riders 15.61 48.46 83.61 182.62 optional MAV 17.15 53.15 91.56 199.19 optional EEB 18.69 57.83 99.47 215.51 optional EEP 19.71 60.94 104.71 226.26 optional MAV and EEB 20.22 62.49 107.32 231.60 optional MAV and EEP 21.25 65.60 112.53 242.19 Strong Opportunity Fund II - Advisor Class base contract with no optional riders 18.99 58.76 101.04 218.75 optional MAV 20.53 63.43 108.88 234.79 optional EEB 22.07 68.07 116.68 250.59 optional EEP 23.09 71.16 121.85 261.00 optional MAV and EEB 23.61 72.70 124.43 266.16 optional MAV and EEP 24.63 75.78 129.56 276.42 Wanger International Small Cap base contract with no optional riders 20.63 63.74 109.41 235.85 optional MAV 22.17 68.38 117.20 251.64 optional EEB 23.71 73.01 124.94 267.19 optional EEP 24.73 76.09 130.08 277.44 optional MAV and EEB 25.25 77.63 132.63 282.53 optional MAV and EEP 26.27 80.70 137.74 292.61 Wanger U.S. Small Cap base contract with no optional riders 16.43 50.97 87.86 191.49 optional MAV 17.97 55.65 95.78 207.92 optional EEB 19.51 60.32 103.66 224.12 optional EEP 20.53 63.43 108.88 234.79 optional MAV and EEB 21.04 64.98 111.49 240.08 optional MAV and EEP 22.07 68.07 116.68 250.59
-------------------------------------------------------------------------------- 17 PROSPECTUS -- AUG. 9, 2001
You would pay the following expenses on a $1,000 investment assuming a 5% annual return and full surrender, no surrender or selection of an annuity payout plan at the end of each time period. (continued) 1 year 3 years 5 years 10 years Wells Fargo VT Asset Allocation Fund base contract with no optional riders $16.43 $50.97 $ 87.86 $191.49 optional MAV 17.97 55.65 95.78 207.92 optional EEB 19.51 60.32 103.66 224.12 optional EEP 20.53 63.43 108.88 234.79 optional MAV and EEB 21.04 64.98 111.49 240.08 optional MAV and EEP 22.07 68.07 116.68 250.59 Wells Fargo VT International Equity Fund base contract with no optional riders 16.43 50.97 87.86 191.49 optional MAV 17.97 55.65 95.78 207.92 optional EEB 19.51 60.32 103.66 224.12 optional EEP 20.53 63.43 108.88 234.79 optional MAV and EEB 21.04 64.98 111.49 240.08 optional MAV and EEP 22.07 68.07 116.68 250.59 Wells Fargo VT Small Cap Growth Fund base contract with no optional riders 18.48 57.21 98.42 213.55 optional MAV 20.02 61.87 106.28 229.47 optional EEB 21.56 66.52 114.09 245.35 optional EEP 22.58 69.62 119.27 255.81 optional MAV and EEB 23.09 71.16 121.85 261.00 optional MAV and EEP 24.12 74.24 127.00 271.30
* In this example, the $30 contract administrative charge is approximated as a 0.053% charge based on our estimated 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. -------------------------------------------------------------------------------- 18 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY -- BAND 3 Condensed Financial Information (Unaudited)
The following tables give per-unit information about the financial history of each subaccount. We have not provided this information for some subaccounts because they are new and do not have any history. Year ended Dec. 31, 2000 1999 Subaccount BC3(1) (Investing in shares of AXP(R) Variable Portfolio - Blue Chip Advantage Fund) Accumulation unit value at beginning of period $1.11 $1.00 Accumulation unit value at end of period $0.99 $1.11 Number of accumulation units outstanding at end of period (000 omitted) 454 211 Ratio of operating expense to average net assets 0.55% 0.55% ----------------------------------------------------------------------------------------------------------------------------------- Subaccount BD3(1) (Investing in shares of AXP(R) Variable Portfolio - Bond Fund) Accumulation unit value at beginning of period $1.02 $1.00 Accumulation unit value at end of period $1.06 $1.02 Number of accumulation units outstanding at end of period (000 omitted) 410 47 Ratio of operating expense to average net assets 0.55% 0.55% ----------------------------------------------------------------------------------------------------------------------------------- Subaccount CR3(1) (Investing in shares of AXP(R) Variable Portfolio - Capital Resource Fund) Accumulation unit value at beginning of period $1.14 $1.00 Accumulation unit value at end of period $0.94 $1.14 Number of accumulation units outstanding at end of period (000 omitted) 266 872 Ratio of operating expense to average net assets 0.55% 0.55% ----------------------------------------------------------------------------------------------------------------------------------- Subaccount CM3(1) (Investing in shares of AXP(R) Variable Portfolio - Cash Management Fund) Accumulation unit value at beginning of period $1.01 $1.00 Accumulation unit value at end of period $1.07 $1.01 Number of accumulation units outstanding at end of period (000 omitted) 6,615 2,266 Ratio of operating expense to average net assets 0.55% 0.55% Simple yield(2) 5.31% 5.51% Compound yield(2) 5.45% 5.66% ----------------------------------------------------------------------------------------------------------------------------------- Subaccount DE3(1) (Investing in shares of AXP(R) Variable Portfolio - Diversified Equity Income Fund) Accumulation unit value at beginning of period $1.02 $1.00 Accumulation unit value at end of period $1.01 $1.02 Number of accumulation units outstanding at end of period (000 omitted) 218 23 Ratio of operating expense to average net assets 0.55% 0.55% ----------------------------------------------------------------------------------------------------------------------------------- Subaccount EM3(3) (Investing in shares of AXP(R) Variable Portfolio - Emerging Markets Fund) Accumulation unit value at beginning of period $1.00 -- Accumulation unit value at end of period $0.75 -- Number of accumulation units outstanding at end of period (000 omitted) 1 -- Ratio of operating expense to average net assets 0.55% -- ----------------------------------------------------------------------------------------------------------------------------------- Subaccount EI3(1) (Investing in shares of AXP(R) Variable Portfolio - Extra Income Fund) Accumulation unit value at beginning of period $1.01 $1.00 Accumulation unit value at end of period $0.91 $1.01 Number of accumulation units outstanding at end of period (000 omitted) 1,186 48 Ratio of operating expense to average net assets 0.55% 0.55% ----------------------------------------------------------------------------------------------------------------------------------- Subaccount FI3(1) (Investing in shares of AXP(R) Variable Portfolio - Federal Income Fund) Accumulation unit value at beginning of period $1.01 $1.00 Accumulation unit value at end of period $1.09 $1.01 Number of accumulation units outstanding at end of period (000 omitted) 1 10 Ratio of operating expense to average net assets 0.55% 0.55% ----------------------------------------------------------------------------------------------------------------------------------- Subaccount GB3(1) (Investing in shares of AXP(R) Variable Portfolio - Global Bond Fund) Accumulation unit value at beginning of period $1.00 $1.00 Accumulation unit value at end of period $1.03 $1.00 Number of accumulation units outstanding at end of period (000 omitted) 4 3 Ratio of operating expense to average net assets 0.55% 0.55% ----------------------------------------------------------------------------------------------------------------------------------- Subaccount GR3(1) (Investing in shares of AXP(R) Variable Portfolio - Growth Fund) Accumulation unit value at beginning of period $1.17 $1.00 Accumulation unit value at end of period $0.94 $1.17 Number of accumulation units outstanding at end of period (000 omitted) 1,762 401 Ratio of operating expense to average net assets 0.55% 0.55% -----------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 19 PROSPECTUS -- AUG. 9, 2001
Year ended Dec. 31, 2000 1999 Subaccount IE3(1) (Investing in shares of AXP(R) Variable Portfolio - International Fund) Accumulation unit value at beginning of period $1.27 $1.00 Accumulation unit value at end of period $0.95 $1.27 Number of accumulation units outstanding at end of period (000 omitted) 81 133 Ratio of operating expense to average net assets 0.55% 0.55% ----------------------------------------------------------------------------------------------------------------------------------- Subaccount MF3(1) (Investing in shares of AXP(R) Variable Portfolio - Managed Fund) Accumulation unit value at beginning of period $1.09 $1.00 Accumulation unit value at end of period $1.06 $1.09 Number of accumulation units outstanding at end of period (000 omitted) 145 10 Ratio of operating expense to average net assets 0.55% 0.55% ----------------------------------------------------------------------------------------------------------------------------------- Subaccount ND3(1) (Investing in shares of AXP(R) Variable Portfolio - New Dimensions Fund(R)) Accumulation unit value at beginning of period )$1.19 $1.00 Accumulation unit value at end of period $1.08 $1.19 Number of accumulation units outstanding at end of period (000 omitted) 3,919 426 Ratio of operating expense to average net assets 0.55% 0.55% ----------------------------------------------------------------------------------------------------------------------------------- Subaccount IV3(3) (Investing in shares of AXP(R) Variable Portfolio - S&P 500 Index Fund) Accumulation unit value at beginning of period $1.00 -- Accumulation unit value at end of period $0.90 -- Number of accumulation units outstanding at end of period (000 omitted) 285 -- Ratio of operating expense to average net assets 0.55% -- ----------------------------------------------------------------------------------------------------------------------------------- Subaccount SC3(1) (Investing in shares of AXP(R) Variable Portfolio - Small Cap Advantage Fund) Accumulation unit value at beginning of period $1.12 $1.00 Accumulation unit value at end of period $1.16 $1.12 Number of accumulation units outstanding at end of period (000 omitted) 286 28 Ratio of operating expense to average net assets 0.55% 0.55% ----------------------------------------------------------------------------------------------------------------------------------- Subaccount SA3(1) (Investing in shares of AXP(R) Variable Portfolio - Strategy Aggressive Fund) Accumulation unit value at beginning of period $1.52 $1.00 Accumulation unit value at end of period $1.22 $1.52 Number of accumulation units outstanding at end of period (000 omitted) 798 33 Ratio of operating expense to average net assets 0.55% 0.55% ----------------------------------------------------------------------------------------------------------------------------------- Subaccount 3SR(3) (Investing in shares of Calvert Variable Series, Inc. Social Balanced Portfolio) Accumulation unit value at beginning of period $1.00 -- Accumulation unit value at end of period $0.96 -- Number of accumulation units outstanding at end of period (000 omitted) 5 -- Ratio of operating expense to average net assets 0.55% -- ----------------------------------------------------------------------------------------------------------------------------------- Subaccount 3RE(1) (Investing in shares of FTVIPT Franklin Real Estate Fund - Class 2) Accumulation unit value at beginning of period $0.96 $1.00 Accumulation unit value at end of period $1.26 $0.96 Number of accumulation units outstanding at end of period (000 omitted) 148 4 Ratio of operating expense to average net assets 0.55% 0.55% ----------------------------------------------------------------------------------------------------------------------------------- Subaccount 3SI(1) (Investing in shares of FTVIPT Franklin Value Securities Fund - Class 2) Accumulation unit value at beginning of period $0.96 $1.00 Accumulation unit value at end of period $1.20 $0.96 Number of accumulation units outstanding at end of period (000 omitted) 9 2 Ratio of operating expense to average net assets 0.55% 0.55% ----------------------------------------------------------------------------------------------------------------------------------- Subaccount 3UE(1) (Investing in shares of Goldman Sachs VIT CORE(SM) U.S. Equity Fund) Accumulation unit value at beginning of period $1.10 $1.00 Accumulation unit value at end of period $0.99 $1.10 Number of accumulation units outstanding at end of period (000 omitted) 577 170 Ratio of operating expense to average net assets 0.55% 0.55% ----------------------------------------------------------------------------------------------------------------------------------- Subaccount 3MC(1) (Investing in shares of Goldman Sachs VIT Mid Cap Value Fund) Accumulation unit value at beginning of period $0.95 $1.00 Accumulation unit value at end of period $1.24 $0.95 Number of accumulation units outstanding at end of period (000 omitted) 15 8 Ratio of operating expense to average net assets 0.55% 0.55% -----------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 20 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY -- BAND 3
Year ended Dec. 31, 2000 1999 Subaccount 3GT(3) (Investing in shares of Janus Aspen Series Global Technology Portfolio: Service Shares) Accumulation unit value at beginning of period $1.00 -- Accumulation unit value at end of period $0.68 -- Number of accumulation units outstanding at end of period (000 omitted) 310 -- Ratio of operating expense to average net assets 0.55% -- ----------------------------------------------------------------------------------------------------------------------------------- Subaccount 3IG(3) (Investing in shares of Janus Aspen Series International Growth Portfolio: Service Shares) Accumulation unit value at beginning of period $1.00 -- Accumulation unit value at end of period $0.80 -- Number of accumulation units outstanding at end of period (000 omitted) 556 -- Ratio of operating expense to average net assets 0.55% -- ----------------------------------------------------------------------------------------------------------------------------------- Subaccount 3IP(1) (Investing in shares of Lazard Retirement International Equity Portfolio) Accumulation unit value at beginning of period $1.07 $1.00 Accumulation unit value at end of period $0.96 $1.07 Number of accumulation units outstanding at end of period (000 omitted) 57 8 Ratio of operating expense to average net assets 0.55% 0.55% ----------------------------------------------------------------------------------------------------------------------------------- Subaccount 3MG(3) (Investing in shares of MFS(R) Investors Growth Stock Series - Service Class (previously MFS(R) Growth Series)) Accumulation unit value at beginning of period $1.00 -- Accumulation unit value at end of period $0.91 -- Number of accumulation units outstanding at end of period (000 omitted) 533 -- Ratio of operating expense to average net assets 0.55% -- ----------------------------------------------------------------------------------------------------------------------------------- Subaccount 3MD(3) (Investing in shares of MFS(R) New Discovery Series - Service Class) Accumulation unit value at beginning of period $1.00 -- Accumulation unit value at end of period $0.96 -- Number of accumulation units outstanding at end of period (000 omitted) 352 -- Ratio of operating expense to average net assets 0.55% -- ----------------------------------------------------------------------------------------------------------------------------------- Subaccount 3VS(1) (Investing in shares of Putnam VT Vista Fund - Class IB Shares) Accumulation unit value at beginning of period $1.36 $1.00 Accumulation unit value at end of period $1.29 $1.36 Number of accumulation units outstanding at end of period (000 omitted) 1,330 183 Ratio of operating expense to average net assets 0.55% 0.55% ----------------------------------------------------------------------------------------------------------------------------------- Subaccount 3IT(1) (Investing in shares of Wanger International Small Cap) Accumulation unit value at beginning of period $1.51 $1.00 Accumulation unit value at end of period $1.09 $1.51 Number of accumulation units outstanding at end of period (000 omitted) 599 112 Ratio of operating expense to average net assets 0.55% 0.55% ----------------------------------------------------------------------------------------------------------------------------------- Subaccount 3SP(1) (Investing in shares of Wanger U.S. Small Cap) Accumulation unit value at beginning of period $1.15 $1.00 Accumulation unit value at end of period $1.05 $1.15 Number of accumulation units outstanding at end of period (000 omitted) 990 125 Ratio of operating expense to average net assets 0.55% 0.55% -----------------------------------------------------------------------------------------------------------------------------------
(1) Operations commenced on Sept. 15, 1999. (2) Net of annual contract administrative charge and mortality and expense risk fee. (3) Operations commenced on May 1, 2000. (4) Operations commenced on Sept. 21, 1999. -------------------------------------------------------------------------------- 21 PROSPECTUS -- AUG. 9, 2001 Financial Statements You can find our audited financial statements and the audited financial statements of the subaccounts in the SAI. The SAI does not include the audited financial statements for some of the subaccounts because they are new and do not have any assets. Performance Information Performance information for the subaccounts may appear from time to time in advertisements or sales literature. This information reflects the performance of a hypothetical investment in a particular subaccount during a specified time period. We show actual performance from the date the subaccounts began investing in funds. We also show performance from the commencement date of the funds as if the contract existed at that time, which it did not. Although we base performance figures on historical earnings, past performance does not guarantee future results. We include non-recurring charges in total return figures, but not in yield quotations. Excluding non-recurring charges in yield calculations increases the reported value. We may show total return quotations by means of schedules, charts or graphs. Total return figures reflect deduction of the following charges: o contract administrative charge, o applicable mortality and expense risk fee, o Maximum Anniversary Value Death Benefit Rider fee, and o Enhanced Earnings Plus Death Benefit Rider fee. We may also show optional total return quotations that reflect deduction of the Enhanced Earnings Death Benefit Rider fee. We also show optional total return quotations that do not reflect fees for any of the optional features. Average annual total return is the average annual compounded rate of return of the investment over a period of one, five and ten 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 generally will be higher than average annual total return. 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. -------------------------------------------------------------------------------- 22 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY -- BAND 3 The Variable Account and the Funds
You may allocate payments to any or all of the subaccounts of the variable account that invest in shares of the following funds: ----------------- ---------------- --------------------------------------- ------------------------ Subaccount Investing In Investment Objectives and Policies Investment Advisor or Manager ----------------- ---------------- --------------------------------------- ------------------------ BC3 AXP(R) Objective: long-term total return IDS Life, investment Variable exceeding that of the U.S. stock manager; American Portfolio - market. Invests primarily in common Express Financial Blue Chip stocks of companies included in the Corporation (AEFC), Advantage Fund unmanaged S&P 500 Index. investment advisor. ----------------- ---------------- --------------------------------------- ------------------------ BD3 AXP(R) Objective: high level of current IDS Life, investment Variable income while conserving the value of manager; AEFC, Portfolio - the investment and continuing a high investment advisor. Bond Fund level of income for the longest time period. Invests primarily in bonds and other debt obligations. ----------------- ---------------- --------------------------------------- ------------------------ CR3 AXP(R) Objective: capital appreciation. IDS Life, investment Variable Invests primarily in U.S. common manager; AEFC, Portfolio - stocks and other securities investment advisor. Capital convertible into common stocks. Resource Fund ----------------- ---------------- --------------------------------------- ------------------------ CM3 AXP(R) Objective: maximum current income IDS Life, investment Variable consistent with liquidity and manager; AEFC, Portfolio - stability of principal. Invests in investment advisor. Cash money market securities. Management Fund ----------------- ---------------- --------------------------------------- ------------------------ DE3 AXP(R) Objective: a high level of current IDS Life, investment Variable income and, as a secondary goal, manager; AEFC, Portfolio - steady growth of capital. Invests investment advisor. Diversified primarily in dividend-paying common Equity Income and preferred stocks. Fund ----------------- ---------------- --------------------------------------- ------------------------ EM3 AXP(R) Objective: long-term capital growth. IDS Life, investment Variable Invests primarily in equity manager; AEFC, Portfolio - securities of companies in emerging investment advisor; Emerging markets. American Express Asset Markets Fund Management International, Inc., a wholly-owned subsidiary of AEFC, is the sub-investment advisor. ----------------- ---------------- --------------------------------------- ------------------------ ES3 AXP(R) Objective: growth of capital. Invests IDS Life, investment Variable primarily in growth of medium-sized manager; AEFC, Portfolio - companies. investment advisor. Equity Select Fund ----------------- ---------------- --------------------------------------- ------------------------ EI3 AXP(R) Objective: high current income, with IDS Life, investment Variable capital growth as a secondary manager; AEFC, Portfolio - objective. Invests primarily in investment advisor. Extra Income high-yielding, high-risk corporate Fund bonds issued by U.S. and foreign companies and governments. ----------------- ---------------- --------------------------------------- ------------------------ FI3 AXP(R) Objective: a high level of current IDS Life, investment Variable income and safety of principal manager; AEFC, Portfolio - consistent with an investment in U.S. investment advisor. Federal Income government and government agency Fund securities. Invests primarily in debt obligations issued or guaranteed as to principal and interest by the U.S. government, its agencies or instrumentalities. ----------------- ---------------- --------------------------------------- ------------------------ GB3 AXP(R) Objective: high total return through IDS Life, investment Variable income and growth of capital. manager; AEFC, Portfolio - Non-diversified mutual fund that investment advisor. Global Bond invests primarily in debt obligations Fund of U.S. and foreign issuers. ----------------- ---------------- --------------------------------------- ------------------------
-------------------------------------------------------------------------------- 23 PROSPECTUS -- AUG. 9, 2001
----------------- ---------------- --------------------------------------- ------------------------ Subaccount Investing In Investment Objectives and Policies Investment Advisor or Manager ----------------- ---------------- --------------------------------------- ------------------------ GR3 AXP(R) Objective: long-term capital growth. IDS Life, investment Variable Invests primarily in common stocks manager; AEFC, Portfolio - and securities convertible into investment advisor. Growth Fund common stocks that appear to offer growth opportunities. ----------------- ---------------- --------------------------------------- ------------------------ IE3 AXP(R) Objective: capital appreciation. IDS Life, investment Variable Invests primarily in common stocks or manager; AEFC, Portfolio - convertible securities of foreign investment advisor. International issuers that offer growth potential. American Express Asset Fund Management International, Inc., a wholly-owned subsidiary of AEFC, is the sub-investment advisor. ----------------- ---------------- --------------------------------------- ------------------------ MF3 AXP(R) Objective: maximum total investment IDS Life, investment Variable return through a combination of manager; AEFC, Portfolio - capital growth and current income. investment advisor. Managed Fund Invests primarily in a combination of common and preferred stocks, convertible securities, bonds and other debt securities. ----------------- ---------------- --------------------------------------- ------------------------ ND3 AXP(R) Objective: long-term growth of IDS Life, investment Variable capital.Invests primarily in common manager; AEFC, Portfolio - stocks of U.S. and foreign companies investment advisor. New Dimensions showing potential for significant Fund(R) growth. ----------------- ---------------- --------------------------------------- ------------------------ SV3 AXP(R) Objective: long term capital IDS Life, investment Variable appreciation. Non-diversified fund manager; AEFC, Portfolio - that invests primarily in equity investment advisor; Partners Small securities. Royce & Associates, Cap Value Fund* Inc and EQSF Advisers, Inc., sub-investment advisors. ----------------- ---------------- --------------------------------------- ------------------------ IV3 AXP(R) Objective: long-term capital IDS Life, investment Variable appreciation. Invests primarily in manager; AEFC, Portfolio - securities that are expected to investment advisor. S&P 500 Index provide investment results that Fund correspond to the performance of the S&P 500 Index. ----------------- ---------------- --------------------------------------- ------------------------ SC3 AXP(R) Objective: long-term capital growth. IDS Life, investment Variable Invests primarily in equity stocks of manager; AEFC, Portfolio - small companies that are often investment advisor; Small Cap included in the S&P SmallCap 600 Kenwood Capital Advantage Fund Index or the Russell 2000 Index. Management LLC, sub-investment advisor. ----------------- ---------------- --------------------------------------- ------------------------ ST3 AXP(R) Objective: current income and growth IDS Life, investment Variable of capital. Invests primarily in manager; AEFC, Portfolio - common stocks and securities investment advisor. Stock Fund convertible into common stock. ----------------- ---------------- --------------------------------------- ------------------------ SA3 AXP(R) Objective: capital appreciation. IDS Life, investment Variable Invests primarily in common stocks of manager; AEFC, Portfolio - small- and medium-size companies. investment advisor. Strategy Aggressive Fund ----------------- ---------------- --------------------------------------- ------------------------ 3AC AIM V.I. Objective: growth of capital. Invests A I M Advisors, Inc. Capital principally in common stocks of Appreciation companies likely to benefit from new Fund, Series II or innovative products, services or processes as well as those with above-average growth and excellent prospects for future growth. ----------------- ---------------- --------------------------------------- ------------------------
-------------------------------------------------------------------------------- 24 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY -- BAND 3
----------------- ---------------- --------------------------------------- ------------------------ Subaccount Investing In Investment Objectives and Policies Investment Advisor or Manager ----------------- ---------------- --------------------------------------- ------------------------ 3AD AIM V.I. Objective: long term growth of A I M Advisors, Inc. Capital capital. Invests primarily in Development securities (including common stocks, Fund, Series II convertible securities and bonds) of small- and medium-sized companies. ----------------- ---------------- --------------------------------------- ------------------------ 3AB Alliance VP Objective: long-term growth of Alliance Capital AllianceBernsteincapital. Invests primarily in a Management, L.P. International diversified portfolio of foreign Value equity securities. Portfolio (Class B) ----------------- ---------------- --------------------------------------- ------------------------ 3AL Alliance VP Objective: reasonable current income Alliance Capital Growth & and reasonable appreciation. Invests Management, L.P. Income primarily in dividend-paying common Portfolio stocks of good quality. (Class B) ----------------- ---------------- --------------------------------------- ------------------------ 3AI American Objective: long term capital growth. American Century Century VP Invests primarily in stocks of Investment Management, International, growing foreign companies. Inc. Class II ----------------- ---------------- --------------------------------------- ------------------------ 3AV American Objective: long-term capital growth, American Century Century VP with income as a secondary objective. Investment Management, Value, Class II Invests primarily in stocks of Inc. companies that management believes to be undervalued at the time of purchase. ----------------- ---------------- --------------------------------------- ------------------------ 3SR Calvert Objective: income and capital growth. Calvert Asset Variable Invests primarily in stocks, bonds Management Company, Series Inc. and money market instruments which Inc. (CAMCO), Social offer income and capital growth investment advisor. Balanced opportunity and which satisfy the NCM Capital Management Portfolio investment and social criteria. Group, Inc. is the investment subadvisor. ----------------- ---------------- --------------------------------------- ------------------------ 3CG Evergreen VA Objective: long-term capital growth. Evergreen Investment Capital Growth The fund seeks to achieve its goal by Management Company, Fund, Class L investing primarily in common stocks LLC. Sub Advisor is Shares of large U.S. companies, which the Pilgrim Baxter Value portfolio managers believe have the Investors, Inc. potential for capital growth over the intermediate- and long-term. ----------------- ---------------- --------------------------------------- ------------------------ 3FG Fidelity VIP Objective: high total return through Fidelity Management & III Growth & a combination of current income and Research Company Income capital appreciation. Invests (FMR), investment Portfolio primarily in common stocks with a manager; FMR U.K. and (Service Class focus on those that pay current FMR Far East, 2) dividends and show potential for sub-investment capital appreciation. advisors. ----------------- ---------------- --------------------------------------- ------------------------ 3FM Fidelity VIP Objective: long-term growth of FMR, investment III Mid Cap capital. Invests primarily in medium manager; FMR U.K. and Portfolio market capitalization common stocks. FMR Far East, (Service Class sub-investment 2) advisors. ----------------- ---------------- --------------------------------------- ------------------------ 3FO Fidelity VIP Objective: long-term growth of FMR, investment Overseas capital. Invests primarily in common manager; FMR U.K., FMR Portfolio stocks of foreign securities. Far East, Fidelity (Service Class International 2) Investment Advisors (FIIA) and FIIA U.K., sub-investment advisors. ----------------- ---------------- --------------------------------------- ------------------------
-------------------------------------------------------------------------------- 25 PROSPECTUS -- AUG. 9, 2001
---------------- ----------------- --------------------------------------- ------------------------ Subaccount Investing In Investment Objectives and Policies Investment Advisor or Manager ---------------- ----------------- --------------------------------------- ------------------------ 3RE FTVIPT Franklin Objective: capital appreciation with Franklin Advisers, Inc. Real Estate a secondary goal to earn current Fund - Class 2 income. Invests primarily in equity securities of companies operating in the real estate industry, primarily equity real estate investment trusts (REITS). ---------------- ----------------- --------------------------------------- ------------------------ 3SI FTVIPT Franklin Objective: long-term total return. Franklin Advisory Value Invests primarily in equity Services, LLC Securities Fund securities of companies the manager - Class 2 believes are selling substantially below the underlying value of their assets or their private market value. ---------------- ----------------- --------------------------------------- ------------------------ 3MS FTVIPT Mutual Objective: capital appreciation with Franklin Mutual Shares income as a secondary goal. Invests Advisers, LLC Securities Fund primarily in equity securities of - Class 2 companies that the manager believes are available at market prices less than their value based on certain recognized or objective criteria (intrinsic value). ---------------- ----------------- --------------------------------------- ------------------------ 3UE Goldman Sachs Objective: seeks long-term growth of Goldman Sachs Asset VIT CORE(SM) capital and dividend income. Invests Management U.S. Equity Fund primarily in a broadly diversified portfolio of large-cap and blue chip equity securities representing all major sectors of the U.S. economy. ---------------- ----------------- --------------------------------------- ------------------------ 3MC Goldman Sachs Objective: seeks long-term capital Goldman Sachs Asset VIT Mid Cap appreciation. Invests primarily in Management Value Fund mid-capitalization companies within the range of the market capitalization of companies constituting the Russell Midcap Value index at the time of investment. ---------------- ----------------- --------------------------------------- ------------------------ 3ID INVESCO VIF - Objective: long-term growth of INVESCO Funds Group, Dynamics Fund capital. Invests primarily in common Inc. stocks of mid-sized companies - those with market capitalizations between $2 billion and $15 billion, but also has the flexibility to invest in other types of securities, including preferred stocks, convertible securities and bonds. ---------------- ----------------- --------------------------------------- ------------------------ 3FS INVESCO VIF - Objective: long-term growth of INVESCO Funds Group, Financial capital. Aggressively managed. Inc. Services Fund Invests primarily in equity securities of companies involved in the financial services sector. These companies include, among others, banks, insurance companies, and investment and miscellaneous industries (asset managers, brokerage firms, and government-sponsored agencies). ---------------- ----------------- --------------------------------------- ------------------------
-------------------------------------------------------------------------------- 26 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY -- BAND 3
---------------- ----------------- --------------------------------------- ------------------------ Subaccount Investing In Investment Objectives and Policies Investment Advisor or Manager ---------------- ----------------- --------------------------------------- ------------------------ 3TC INVESCO VIF - Objective: long-term growth of INVESCO Funds Group, Technology Fund capital. Invests primarily in equity Inc. securities of companies engaged in technology-related industries. These include, but are not limited to, applied technology, biotechnology, communications, computers, electronics, Internet, IT services and consulting, software, telecommunications equipment and services, IT infrastructure, networking, robotics, and video. Many of these products and services are subject to rapid obsolescence, which may lower the market value of securities of the companies in this sector. ---------------- ----------------- --------------------------------------- ------------------------ 3TL INVESCO VIF - Objective: long-term growth of INVESCO Funds Group, Telecommunicationscapital. Aggressively managed. Inc. Fund Invests primarily in equity securities of companies involved in the design, development, manufacture, distribution or sale of communications services and equipment, and companies that are involved in supplying equipment or services to such companies. The telecommunications sector includes companies that offer telephone services, wireless communications, satellite communications, television and movie programming, broadcasting and Internet access. ---------------- ----------------- --------------------------------------- ------------------------ 3GT Janus Aspen Objectives: long-term growth of Janus Capital Series Global capital. Non-diversified mutual fund Technology that invests primarily in equity Portfolio: securities of U.S. and foreign Service Shares companies selected for their growth potential. Normally invests at least 65% of assets in securities of companies that the manager believes will benefit significantly from advancements or improvements in technology. ---------------- ----------------- --------------------------------------- ------------------------ 3IG Janus Aspen Objective: long-term growth of Janus Capital Series capital. Invests at least 65%of its International total assets in securities of issuers Growth from at least five different Portfolio: countries, excluding the U.S. It may Service Shares at times invest all of its assets in fewer than five countries or even a single country. ---------------- ----------------- --------------------------------------- ------------------------ 3IP Lazard Objective: long-term capital Lazard Asset Management Retirement appreciation. Invests primarily in Series equity securities, principally common International stocks of relatively large non-U.S. Equity Portfolio companies with market capitalizations in the range of the Morgan Stanley Capital International (MSCI) Europe, Australia and Far East (EAFE(R)) Index that the Investment Manager believes are undervalued based on their earnings, cash flow or asset values. ---------------- ----------------- --------------------------------------- ------------------------
-------------------------------------------------------------------------------- 27 PROSPECTUS -- AUG. 9, 2001
---------------- ----------------- --------------------------------------- ------------------------ Subaccount Investing In Investment Objectives and Policies Investment Advisor or Manager ---------------- ----------------- --------------------------------------- ------------------------ 3MG MFS(R) Objective: long-term growth of MFS Investment Investors capital and future income. Invests at Management(R) Growth Stock least 80% of its total assets in Series - common stocks and related securities Service Class of companies which MFS believes offer (previously better than average prospects for MFS(R) Growth long-term growth. Series) ---------------- ----------------- --------------------------------------- ------------------------ 3MD MFS(R) New Objective: capital appreciation. MFS Investment Discovery Invests primarily in equity Management(R) Series - securities of emerging growth Service Class companies. ---------------- ----------------- --------------------------------------- ------------------------ 3UT MFS(R) Objective: capital growth and current MFS Investment Utilities income. Invests primarily in equity Management(R) Series - and debt securities of domestic and Service Class foreign companies in the utilities industry. ---------------- ----------------- --------------------------------------- ------------------------ 3PE Pioneer Objective: current income and Pioneer Equity-Income long-term growth of capital from a VCT Portfolio - portfolio consisting primarily of Class II Shares income producing equity securities of U.S. corporations. Invests primarily in common stocks, preferred stocks and interests in real estate investment trusts (REITS). Normally, the portfolio invests at least 80% of its total assets in income producing equity securities. The remainder of the portfolio may be invested in debt securities, most of which are expected to be convertible into common stocks. ---------------- ----------------- --------------------------------------- ------------------------ 3EU Pioneer Europe Objective: long-term growth of Pioneer VCT Portfolio - capital. Invests primarily in equity Class II Shares securities of European issuers including common stocks, rights, depositary receipts, warrants and debt securities convertible into common stock. Normally, the portfolio invests 80% of its total assets in equity securities of European issuers. The portfolio may also purchase forward foreign currency contracts in connection with its investments. ---------------- ----------------- --------------------------------------- ------------------------ 3HS Putnam VT Objective: capital appreciation. Putnam Investment Health Sciences Invests primarily in common stocks of Management, LLC Fund - Class IB U.S. companies in the health sciences Shares industries, with a focus on growth stocks. ---------------- ----------------- --------------------------------------- ------------------------ 3PI Putnam VT Objective: capital appreciation. Putnam Investment International Invests mainly in stocks outside the Management, LLC Growth Fund - United States that reflect a value Class IB Shares lower than that which Putnam Management places on the company or whose earnings we believe are likely to grow over time. ---------------- ----------------- --------------------------------------- ------------------------ 3VS Putnam VT Vista Objective: capital appreciation. Putnam Investment Fund - Class IB Invests mainly in common stocks of Management, LLC Shares mid-sized U.S. companies with a focus on growth stocks. ---------------- ----------------- --------------------------------------- ------------------------
-------------------------------------------------------------------------------- 28 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY -- BAND 3
---------------- ----------------- --------------------------------------- ------------------------ Subaccount Investing In Investment Objectives and Policies Investment Advisor or Manager ---------------- ----------------- --------------------------------------- ------------------------ 3SO Strong Objective: seeks capital growth. Strong Capital Opportunity Invests primarily in common stocks of Management, Inc. Fund II - medium capitalization companies that Advisor Class the Fund's manager believes are underpriced, yet have attractive growth prospects. ---------------- ----------------- --------------------------------------- ------------------------ 3IT Wanger Objective: long-term growth of Liberty Wanger Asset International capital. Invests primarily in stocks Management, L.P. Small Cap of small- and medium-size non-U.S. companies with capitalizations of less than $2 billion. ---------------- ----------------- --------------------------------------- ------------------------ 3SP Wanger U.S. Objective: long-term growth of Liberty Wanger Asset Small Cap capital. Invests primarily in stocks Management, L.P. of small- and medium-size U.S. companies with capitalizations of less than $2 billion. ---------------- ----------------- --------------------------------------- ------------------------ 3AA Wells Fargo VT Objective: long-term total return, Wells Fargo Funds Asset consistent with reasonable risk. Management, LLC, Allocation Fund Invests primarily in the securities advisor; Barclays of various indexes to replicate the Global Fund Advisors, total return of the index. We use an sub-advisor. asset allocation model to allocate and reallocate assets among common stocks (S&P 500 Index), U.S. Treasury bonds (Lehman Brothers 20+ Bond Index) and money market instruments, operating from a target allocation of 60% stocks and 40% bonds. ---------------- ----------------- --------------------------------------- ------------------------ 3WI Wells Fargo VT Objective: total return with an Wells Fargo Funds International emphasis on capital appreciation over Management, LLC, Equity Fund the long-term. Invests primarily in advisor; Wells Capital equity securities of non-U.S. Management companies. Incorporated, sub-advisor. ---------------- ----------------- --------------------------------------- ------------------------ 3SG Wells Fargo VT Objective: long-term capital Wells Fargo Funds Small Cap appreciation. Invests primarily in Management, LLC, Growth Fund common stocks issued by companies advisor; Wells Capital whose market capitalization falls Management within the range of the Russell 2000 Incorporated, Index, which is considered a small sub-advisor. capitalization index. ---------------- ----------------- --------------------------------------- ------------------------
* This fund is available Aug. 13, 2001. A fund underlying your contract in which a subaccount invests may have a name, portfolio manager, objectives, strategies and characteristics that are the same or substantially similar to those of a publicly-traded retail mutual fund. Despite these similarities, an underlying fund is not the same as any publicly-traded retail mutual fund. Each underlying fund will have its own unique portfolio holdings, fees, operating expenses and operating results. The results of each underlying fund may differ significantly from any publicly-traded retail mutual fund. 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 also available by contacting us at the address or telephone number on the first page of this prospectus. 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 tax-deferred retirement plans. It is possible that in the future, it may be disadvantageous for variable annuity accounts and variable life insurance accounts and/or tax-deferred retirement plans to invest in the available funds simultaneously. -------------------------------------------------------------------------------- 29 PROSPECTUS -- AUG. 9, 2001 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 tax-deferred retirement 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 tax-deferred retirement plan accounts, you would not bear any expenses associated with establishing separate funds. Please refer to the funds' prospectuses for risk disclosure regarding simultaneous investments by variable annuity, variable life insurance and tax-deferred retirement plan accounts. The Internal Revenue Service (IRS) issued final regulations relating to the diversification requirements under Section 817(h) of the Code. Each fund intends to comply with these requirements. The variable account was established under Minnesota law on Aug. 23, 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. All obligations arising under the contracts are general obligations of IDS Life. 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 variable account includes other subaccounts that are available under contracts that are not described in this prospectus. The U.S. Treasury and the 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 the contract continues to qualify as an annuity for federal income tax purposes. We reserve the right to modify the contract as necessary to comply with any new tax laws. The Fixed Account You also may allocate purchase payments to the fixed account. We back the principal and interest guarantees relating to the fixed account. These guarantees are based on the continued claims-paying ability of the company. 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. Interest is calculated and compounded daily based on a 365-day year so as to produce the annual effective rate which we declare. We do not credit interest on leap days (Feb 29th). The interest rate for your fixed account is guaranteed for 12 months from the contract issue date. Thereafter, we will change rates from time to time at our discretion. These rates will be based on various factors including, but not limited to, the interest rate environment, returns earned on investments backing these annuities, the rates currently in effect for new and existing company annuities, product design, competition, and the company's revenues and expenses. 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 You can fill out an application and send it along with your initial purchase payment to our office. As the owner, you have all rights and may receive all benefits under the contract. You can own a nonqualified annuity in joint tenancy with rights of survivorship only in spousal situations. You cannot own a qualified annuity in joint tenancy. You can buy a contract or become an annuitant if you are 90 or younger. When you apply, you may select: o the optional Maximum Anniversary Value Death Benefit Rider*; o the optional Enhanced Earnings Death Benefit Rider*; o the optional Enhanced Earnings Plus Death Benefit Rider*; o the fixed account and/or subaccounts in which you want to invest; o how you want to make purchase payments; and o a beneficiary. * You may select any one of the MAV Death Benefit, EEB or EEP riders. Or you may select the MAV Death Benefit and either the EEB or the EEP. However, you cannot select both the EEB and EEP. Riders may not be available in all states. The MAV Death Benefit, EEB and EEP are only available if you and the annuitant are 75 or younger at contract issue. EEB and EEP are only available on non-qualified contracts. EEP is only available on contracts purchased through a transfer or exchange. -------------------------------------------------------------------------------- 30 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY -- BAND 3 The contract provides for allocation of purchase payments to the subaccounts of the variable account and/or to the fixed account in even 1% increments. If your application is complete, we will process it and apply your purchase payment to the fixed account and 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 Settlement Date Annuity payouts are scheduled to begin on the settlement date. When we process your application, we will establish the settlement date to the maximum age or date described below. You can also select a date within the maximum limits. You can align this date with your actual retirement from a job, or it can be a different future date, depending on your needs and goals and on certain restrictions. You also can change the date, provided you send us written instructions at least 30 days before annuity payouts begin. For nonqualified annuities and Roth IRAs, the settlement date must be: o no earlier than the 60th day after the contract's effective date; and o no later than the annuitant's 85th birthday or the tenth contract anniversary, if purchased after age 75. (In Pennsylvania, the maximum settlement date ranges from age 85 to 96 based on the annuitant's age when we issue the contract. See contract for details.) For qualified annuities except Roth IRAs, to avoid IRS penalty taxes, the settlement date generally must be: o on or after the date the annuitant reaches age 59 1/2; and o for IRAs, SIMPLE IRAs and SEPs, by April 1 of the year following the calendar year when the annuitant reaches age 70 1/2; or o or all other 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 settlement 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 or TSA 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 tenth contract anniversary, if later. (In Pennsylvania, the annuity payout ranges from age 85 to 96 based on the annuitant's age when the contract is issued. See contract for details). Beneficiary If death benefits become payable before the settlement 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 Payments Minimum allowable purchase payments* For employees/advisors: If paying by installments under a scheduled payment plan: $23.08 biweekly, or $50 per month If paying by any other method: $1,000 initial payment for qualified annuities $2,000 initial payment for nonqualified annuities $50 for any additional payments For other individuals: $1 million * Installments must total at least $600 in the first year. If you do not make any purchase payments for 24 months, and your previous payments total $600 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. -------------------------------------------------------------------------------- 31 PROSPECTUS -- AUG. 9, 2001 Maximum allowable purchase payments** based on the age of you or the annuitant, whoever is older, on the effective date of the contract: For employees/advisors: For the first year: $2,000,000 up to age 85 $100,000 for ages 86 to 90 For each subsequent year: $100,000 up to age 85 $50,000 for ages 86 to 90 For other individuals: For the first year: $2,000,000 up to age 85 $1,000,000 for ages 86 to 90 For each subsequent year: $100,000 ** These limits apply in total to all IDS Life annuities you own. We reserve the right to increase maximum limits. For qualified annuities the tax-deferred retirement plan's or the Code's limits on annual contributions also apply. We reserve the right to not accept purchase payments allocated to the fixed account for twelve months following either: 1. a partial surrender from the fixed account; or 2. a lump sum transfer from the fixed account to a subaccount. How to make purchase payments 1 By letter: Send your check along with your name and contract number to: IDS Life Insurance Company 70200 AXP Financial Center Minneapolis, MN 55474 2 By scheduled payment plan: For employees/advisors only We can help you set up: o an automatic payroll deduction, salary reduction or other group billing arrangement; or o a bank authorization. Charges Contract Administrative Charge We charge this fee for establishing and maintaining your records. We deduct $30 from the contract value on your contract anniversary at the end of each contract year. We prorate this charge among the subaccounts and the fixed account in the same proportion your interest in each account bears to your total contract value. We will waive this charge when your contract value, or total purchase payments less any payments surrendered, is $50,000 or more on the current contract anniversary. If you surrender your contract, we will deduct the charge at the time of surrender regardless of the contract value or purchase payments made. We cannot increase the annual contract administrative charge and it does not apply after annuity payouts begin or when we pay death benefits. -------------------------------------------------------------------------------- 32 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY -- BAND 3 Mortality and Expense Risk Fee We charge this fee daily to the subaccounts. The unit values of your subaccounts reflect this fee and it totals 0.55% of their average daily net assets on an annual basis. This fee covers the mortality and expense risk that we assume. Approximately two-thirds of this amount is for our assumption of mortality risk, and one-third is for our assumption of expense risk. This fee does not apply to the fixed account. Mortality risk arises because of our guarantee to pay a death benefit and our guarantee to make annuity payouts according to the terms of the contract, no matter how long a specific annuitant lives and no matter how long our entire group of annuitants live. If, as a group, annuitants outlive the life expectancy we assumed in our actuarial tables, then we must take money from our general assets to meet our obligations. If, as a group, annuitants do not live as long as expected, we could profit from the mortality risk fee. Expense risk arises because we cannot increase the contract administrative charge and this charge may not cover our expenses. We would have to make up any deficit from our general assets. We could profit from the expense risk fee if future expenses are less than expected. The subaccounts pay us the mortality and expense risk fee they accrued as follows: o first, to the extent possible, the subaccounts pay this fee from any dividends distributed from the funds in which they invest; o then, if necessary, the funds redeem shares to cover any remaining fees payable. We may use any profits we realize from the subaccounts' payment to us of the mortality and expense risk fee for any proper corporate purpose, including, among others, payment of distribution (selling) expenses. Maximum Anniversary Value Death Benefit Rider (MAV Death Benefit) Fee We charge a fee for the optional feature only if you select it(1). If selected, we deduct 0.15% of your contract value on your contract anniversary at the end of each contract year. We prorate this fee among the subaccounts and fixed accounts in the same proportion your interest in each account bears to your total contract value. When annuity payouts begin, if you terminate the contract for any reason other than death, or if we terminate this rider due to a change of ownership, we will deduct this fee, adjusted for the number of calendar days coverage was in place. If you choose to drop this rider on an anniversary (subject to the restrictions given in "Optional Benefits"), we will deduct this fee on that anniversary. We cannot increase this annual fee after the rider effective date and it does not apply after annuity payouts begin or when we pay death benefits. We can increase this fee on new contracts up to a maximum of 0.45%. Enhanced Earnings Death Benefit Rider (EEB) Fee We charge a fee for the optional feature only if you select it(1). If selected, we deduct 0.30% of your contract value on your contract anniversary at the end of each contract year. We prorate this fee among the subaccounts and fixed accounts in the same proportion your interest in each account bears to your total contract value. When annuity payouts begin, if you terminate the contract for any reason other than death or if we terminate this rider due to a change of ownership, we will deduct this fee, adjusted for the number of calendar days coverage was in place. If you choose to drop this rider on an anniversary (subject to the restrictions given in "Optional Benefits"), we will deduct this fee on that anniversary. We cannot increase this annual fee after the rider effective date and it does not apply after annuity payouts begin or when we pay death benefits. We can increase this fee on new contracts up to a maximum of 0.90%. Enhanced Earnings Plus Death Benefit Rider (EEP) Fee We charge a fee for the optional feature only if you select it(1). If selected, we deduct 0.40% of your contract value on your contract anniversary at the end of each contract year. We prorate this fee among the subaccounts and fixed accounts in the same proportion your interest in each account bears to your total contract value. When annuity payouts begin, if you terminate the contract for any reason other than death, or if we terminate this rider due to a change of ownership, we will deduct this fee, adjusted for the number of calendar days coverage was in place. If you choose to drop this rider on an anniversary (subject to the restrictions given in "Optional Benefits"), we will deduct this fee on that anniversary. We cannot increase this annual fee after the rider effective date and it does not apply after annuity payouts begin or when we pay death benefits. We can increase this fee on new contracts up to a maximum of 1.25%. (1) You may select any one of the MAV Death Benefit, EEB or EEP riders. Or you may select the MAV Death Benefit and either the EEB or the EEP. However, you cannot select both the EEB and EEP. Riders may not be available in all states. The MAV Death Benefit, EEB and EEP are only available if you and the annuitant are 75 or younger at contract issue. EEB and EEP are only available on non-qualified contracts. EEP is only available on contracts purchased through a transfer or exchange. Other information on charges: AEFC makes certain custodial services available to some profit sharing, money purchase and target benefit plans funded by our annuities. Fees for these services start at $30 per calendar year per participant. AEFC will charge a termination fee for owners under age 59 1/2 (fee waived in case of death or disability). Possible group reductions: In some cases we may incur lower sales and administrative expenses due to the size of the group, the average contribution and the use of group enrollment procedures. In such cases, we may be able to reduce or eliminate the contract administrative charges. However, we expect this to occur infrequently. -------------------------------------------------------------------------------- 33 PROSPECTUS -- AUG. 9, 2001 Premium Taxes Certain state and local governments impose premium taxes (up to 3.5%). These taxes depend upon your state of residence or the state in which the contract was sold. Currently, we deduct premium taxes when annuity payouts begin but we reserve the right to deduct this tax at other times such as when you make purchase payments or when you surrender your contract. Valuing Your Investment We value your accounts as follows: Fixed Account We value the amounts you allocated to the fixed account directly in dollars. The fixed account value equals: o the sum of your purchase payments and transfer amounts allocated to the fixed account; o plus interest credited; o minus the sum of amounts surrendered and amounts transferred out; o minus any prorated contract administrative charge; o minus any prorated portion of the Maximum Anniversary Value Death Benefit Rider fee (if applicable); o minus any prorated portion of the Enhanced Earnings Death Benefit Rider fee (if applicable); and o minus any prorated portion of the Enhanced Earnings Plus Death Benefit Rider fee (if applicable). Subaccounts We convert amounts you allocated to the subaccounts into accumulation units. Each time you make a purchase payment or transfer amounts into one of the subaccounts, we credit a certain number of accumulation units to your contract for that subaccount. Conversely, each time you take a partial 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 variable account expenses, performance of the fund and on certain fund expenses. Here is how we calculate accumulation unit values: Number of units: to calculate the number of accumulation units for a particular subaccount we divide your investment 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. We determine the net investment factor by: o adding the fund's current net asset value per share, plus the per share amount of any accrued income or capital gain dividends to obtain a current adjusted net asset value per share; then o dividing that sum by the previous adjusted net asset value per share; and o subtracting the percentage factor representing the mortality and expense risk fee from the result. Because the net asset value of the fund may fluctuate, the accumulation unit value may increase or decrease. You bear all the investment risk in a subaccount. Factors that affect subaccount accumulation units: accumulation units may change in two ways-- in number and in value. The number of accumulation units you own may fluctuate due to: o additional purchase payments you allocate to the subaccounts; o transfers into or out of the subaccounts; o partial surrenders; o prorated portions of the contract administrative charge; o prorated portions of the Maximum Anniversary Value Death Benefit Rider fee (if selected); o prorated portions of the Enhanced Earnings Death Benefit Rider fee (if selected); and o prorated portions of the Enhanced Earnings Plus Death Benefit Rider fee (if selected). -------------------------------------------------------------------------------- 34 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY -- BAND 3 Accumulation unit values will fluctuate due to: o changes in funds' net asset value; o dividends distributed to the subaccounts; o capital gains or losses of funds; o fund operating expenses; and/or o mortality and expense risk fees. 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. How dollar-cost averaging works Number By investing an equal number Amount Accumulation of units of dollars each month... Month invested unit value purchased Jan $100 $20 5.00 you automatically buy Feb 100 18 5.56 more units when the Mar 100 17 5.88 per unit market price is low... Apr 100 15 6.67 May 100 16 6.25 June 100 18 5.56 and fewer units July 100 17 5.88 when the per unit Aug 100 19 5.26 market price is high. Sept 100 21 4.76 Oct 100 20 5.00 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 will depend upon your willingness to continue to invest regularly through periods of low price levels. Dollar-cost averaging can be an effective way to help meet your long-term goals. For specific features contact your sales representative. Asset Rebalancing (AVAILABLE NOV. 30, 2001) Subject to availability, you can ask us in writing to have the variable subaccount portion of your contract value allocated according to the percentages (in whole percentage amounts ) that you choose. We automatically will rebalance the variable subaccount portion of your contract value either quarterly, semi-annually, or annually. The period you select will start to run on the date we record your request. On the first valuation date of each of these periods, we automatically will rebalance your contract value so that the value in each subaccount matches your current subaccount percentage allocations. These percentage allocations must be in whole numbers. Asset rebalancing does not apply to the fixed account. There is no charge for asset rebalancing. The contract value must be at least $2,000. You can change your percentage allocations or your rebalancing period at any time by contacting us in writing. We will restart the rebalancing period you selected as of the date we record your change. You also can ask us in writing to stop rebalancing your contract value. You must allow 30 days for us to change any instructions that currently are in place. For more information on asset rebalancing, contact your financial advisor . Transferring between accounts You may transfer contract value from any one subaccount, or the fixed account, to another subaccount before annuity payouts begin. (Certain restrictions apply to transfers involving the fixed account.) We will process your transfer on the valuation date we receive your request. We will value your transfer at the next accumulation unit value calculated after we receive your request. There is no charge for transfers. Before making a transfer, you should consider the risks involved in changing investments. -------------------------------------------------------------------------------- 35 PROSPECTUS -- AUG. 9, 2001 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. We may apply modifications or restrictions in any reasonable manner to prevent transfers we believe will disadvantage other contract owners. These modifications could include, but not be limited to: o requiring a minimum time period between each transfer; o not accepting transfer requests of an agent acting under power of attorney on behalf of more than one contract owner; or o limiting the dollar amount that a contract owner may transfer at any one time. For information on transfers after annuity payouts begin, see "Transfer policies" below. Transfer policies o Before annuity payouts begin, you may transfer contract values between the subaccounts, or from the subaccounts to the fixed account at any time. However, if you made a transfer from the fixed account to the subaccounts, you may not make a transfer from any subaccount back to the fixed account until the next contract anniversary. o You may transfer contract values from the fixed account to the subaccounts once a year during a 31-day transfer period starting on each contract anniversary (except for automated transfers, which can be set up at any time for certain transfer periods subject to certain minimums). o If we receive your request within 30 days before the contract anniversary date, the transfer from the fixed account to the subaccounts will be effective on the anniversary. o If we receive your request on or within 30 days after the contract anniversary date, the transfer from the fixed account to the subaccounts will be effective on the valuation date we receive it. o We will not accept requests for transfers from the fixed account at any other time. o Once annuity payouts begin, you may not make transfers to or from the fixed account, but you may make transfers once per contract year among the subaccounts. During the annuity payout period, you cannot invest in more than five subaccounts at any one time unless we agree otherwise. 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: IDS Life Insurance Company 70100 AXP Financial Center Minneapolis, MN 55474 Minimum amount Transfers or surrenders: $250 or entire account balance Maximum amount Transfers or surrenders: Contract value or entire account balance 2 By automated transfers and automated partial surrenders: Your sales representative can help you 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. o Automated transfers from the fixed account to any one of the subaccounts may not exceed an amount that, if continued, would deplete the fixed account within 12 months. o Automated surrenders may be restricted by applicable law under some contracts. o You may not make additional purchase payments if automated partial surrenders are in effect. o Automated partial surrenders may result in IRS taxes and penalties on all or part of the amount surrendered. Minimum amount Transfers or surrenders: $50 Maximum amount Transfers or surrenders: None (except for automated transfers from the fixed account) -------------------------------------------------------------------------------- 36 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY -- BAND 3 3 By phone: Call between 7 a.m. and 10 p.m. Central time: (800) 862-7919 TTY service for the hearing impaired: (800) 285-8846 Minimum amount Transfers or surrenders: $250 or entire account balance Maximum amount Transfers: Contract value or entire account balance Surrenders: $100,000 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. 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 MAV Death Benefit charges (see "Charges -- Maximum Anniversary Value Death Benefit Rider Fee"), EEB charges (see "Charges -- Enhanced Earnings Death Benefit Rider Fee"), EEP charges (see "Charges -- Enhanced Earnings Plus Death Benefit Fee"), and IRS taxes and penalties (see "Taxes"). You cannot make surrenders after annuity payouts begin except under Plan E (see "The Annuity Payout Period -- Annuity Payout Plans"). Surrender Policies If you have a balance in more than one account and you request a partial surrender, we will withdraw 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. The minimum contract value after partial surrender is $600. Receiving Payment By regular or express mail: o payable to you; o mailed to address of record. NOTE: We will charge you a fee if you request express mail delivery. By wire: o request that payment be wired to your bank; o bank account must be in the same ownership as your contract; and o pre-authorization required. For instructions, contact your sales representative. Normally, we will send the payment 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. -------------------------------------------------------------------------------- 37 PROSPECTUS -- AUG. 9, 2001 TSA -- Special Surrender Provisions Participants in tax-sheltered annuities The Code imposes certain restrictions on your right to receive early distributions from a TSA: o Distributions attributable to salary reduction contributions (plus earnings) made after Dec. 31, 1988, or to transfers or rollovers from other contracts, may be made from the TSA only if: -- you are at least age 59 1/2; -- you are disabled as defined in the Code; -- you separated from the service of the employer who purchased the contract; or -- the distribution is because of your death. o If you encounter a financial hardship (as defined by the Code), you may receive a distribution of all contract values attributable to salary reduction contributions made after Dec. 31, 1988, but not the earnings on them. o Even though a distribution may be permitted under the above rules, it may be subject to IRS taxes and penalties (see "Taxes"). o The employer must comply with certain nondiscrimination requirements for certain types of contributions under a TSA contract to be excluded from taxable income. You should consult your employer to determine whether the nondiscrimination rules apply to you. o The above restrictions on distributions do not affect the availability of the amount credited to the contract as of Dec. 31, 1988. The restrictions also do not apply to transfers or exchanges of contract value within the contract, or to another registered variable annuity contract or investment vehicle available through the employer. o If the contract has a loan provision, the right to receive a loan is described in detail in your contract. 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. Please consider carefully whether or not you wish to change ownership of your nonqualified annuity if you have elected the MAV Death Benefit, EEB or EEP. If you change ownership of your contract, we will terminate the EEP. This includes both the EEP Part I benefits and the EEP Part II benefits. (See the description of these terms in "Optional Benefits.") In addition, the terms of the EEB and the MAV Death Benefit will change due to a change of ownership. If the attained age of the older of the new owner and the annuitant is greater than 75, the EEB will terminate. Otherwise, we will effectively "start over" the EEB. We will treat the EEB as if it is issued on the day the change of ownership is made, using the attained age of the new owner as the "issue age" to determine the benefit levels. The account value on the date of the ownership change will be treated as a "purchase payment" in determining future values of "earnings at death" under the EEB. If the attained age of the older of the new owner and the annuitant is greater than 75, the MAV Death Benefit will terminate. If the MAV Death Benefit on the date of ownership change is greater than the account value on the date of the ownership change, the MAV Death Benefit will be set equal to the account value. Otherwise, the MAV Death Benefit value will not change due to a change in ownership. Please see the descriptions of these riders in "Optional Death Benefits." The rider charges described in "Charges" will be assessed at the next contract anniversary (and all future anniversaries when the rider is in force) for any rider that continues after a change of ownership. We reserve the right to assess charges for the number of days the rider was in force for any rider that is terminated due to a change of ownership. 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. However, if the owner is a trust or custodian, or an employer acting in similar capacity, ownership of the contract may be transferred to the annuitant. -------------------------------------------------------------------------------- 38 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY -- BAND 3 Benefits in Case of Death -- Standard Death Benefit We will pay the death benefit to your beneficiary upon the earlier of your death or the annuitant's death. If a contract has more than one person as the owner, we will pay benefits upon the first to die of any owner or the annuitant. If you or the annuitant die before annuity payouts begin while this contract is in force, we will pay the beneficiary as follows: If both you and the annuitant are age 80 or younger on the date of death, the beneficiary receives the greatest of: o contract value; o purchase payments minus "adjusted partial surrenders"; or o the contract value as of the most recent sixth contract anniversary, plus purchase payments and minus "adjusted partial surrenders" since that anniversary. If either you or the annuitant is age 81 or older on the date of death, the beneficiary receives the greater of: o contract value; or o purchase payments minus "adjusted partial surrenders." Adjusted partial surrenders = We calculate an "adjusted partial surrender" for each partial surrender as the following: PS x DB -------- CV Where PS = the partial surrender. DB = the death benefit on the date of (but prior to) the partial surrender. CV = contract value on the date of (but prior to) the partial surrender. Example of standard death benefit calculation when the owner and annuitant are age 80 or younger: o You purchase the contract with a payment of $20,000 on Jan. 1, 2001. o On Jan 1, 2007 (the sixth contract anniversary) the contract value grows to $30,000. o March 1, 2007 the contract value falls to $28,000 at which point you take a $1,500 partial surrender, leaving a contract value of $26,500. We calculate the death benefit on March 1, 2007 as follows: The contract value on the most recent sixth contract anniversary: $30,000 plus purchase payments made since that anniversary: +0 minus "adjusted partial surrenders" taken since that anniversary calculated as: ($1,500 x $30,000) = -1,607 ------------------ ------ $28,000 for a death benefit of: $28,393 If you die before your retirement date: When paying the beneficiary, we will process the death claim on the valuation date that our death claim requirements are fulfilled. We will determine the contract's value using the next accumulation unit value. We pay interest, if any, 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. Nonqualified annuities: If your spouse is sole beneficiary and you die before the retirement date, your spouse may keep the contract as owner. To do this your spouse must, within 60 days after we receive proof of death, give us written instructions to keep the contract in force. If your beneficiary is not your spouse, we will pay the beneficiary in a single sum unless you give us other written instructions. We must fully distribute the death benefit within five years of your death. However, the beneficiary may receive payouts under any annuity payout plan available under this contract if: o the beneficiary asks us in writing within 60 days after we receive proof of death; and o payouts begin no later than one year after your death, or other date as permitted by the Code; and o the payout period does not extend beyond the beneficiary's life or life expectancy. Qualified annuities: The IRS has issued proposed regulations that will affect distributions from your qualified annuity. These are proposed regulations that may take effect Jan. 1, 2002. The information below is an explanation based on existing law. Contact your tax advisor if you have any questions as to the impact of the new proposed rules on your situation. If your spouse is the sole beneficiary, your spouse may keep the contract as owner until the date on which the annuitant would have reached age 70 1/2 , or any other date permitted by the Code. To do this your spouse must, within 60 days after we receive proof of death, give us written instructions to keep the contract in force. -------------------------------------------------------------------------------- 39 PROSPECTUS -- AUG. 9, 2001 If your beneficiary is not your spouse, we will pay the beneficiary in a single sum unless you give us other written instructions. We must fully distribute the death benefit within five years of your death. However, the beneficiary may receive payouts under any annuity payout plan available under this contract if: o the beneficiary asks us in writing within 60 days after we receive proof of death; and o payouts begin no later than one year after your death; and o the payout period does not extend beyond the beneficiary's life or life expectancy. Optional Benefits Maximum Anniversary Value Death Benefit The Maximum Anniversary Value Death Benefit (MAV Death Benefit) is intended to provide additional death benefit protection in the event of fluctuating fund values. This is an optional benefit that you may select for an additional annual charge (see "Charges"). If this rider is available in your state and both you and the annuitant are 75 or younger at contract issue, you may choose to add the MAV Death Benefit to your contract. Generally, you must elect the MAV Death Benefit at the time you purchase your contract and your rider effective date will be the contract issue date. We reserve the right to discontinue offering the MAV Death Benefit for new contracts. In some instances the rider effective date for the MAV Death Benefit may be after we issue the contract according to terms determined by us and at our sole discretion. On the first contract anniversary we set the Maximum Anniversary Value (MAV) equal to the highest of your (a) current contract value, or (b) total purchase payments minus adjusted partial surrenders. Every contract anniversary after that, through age 80, we compare the previous anniversary's MAV plus subsequent purchase payments less subsequent adjusted partial surrenders to the current contract value and we reset the MAV if the current contract value is higher. We stop resetting the MAV after you or the annuitant reach age 81. However, we continue to add subsequent purchase payments and subtract adjusted partial surrenders from the MAV. When annuity payouts begin, or if you terminate the contract for any reason other than death, this rider will terminate. Terminating the MAV: o You may terminate the rider within 30 days of the first contract anniversary after the rider effective date. o You may terminate the rider within 30 days of any contract anniversary beginning with the seventh contract anniversary. o The rider will terminate when you make a full surrender from the contract or when annuity payouts begin. o The rider will terminate in the case of spousal continuation or ownership change if the new owner is age 765 or older. Example: o You purchase the contract with a payment of $20,000 on Jan. 1, 2001. o On Jan. 1, 2002 (the first contract anniversary) the contract value grows to $24,000. o On March 1, 2002 the contract value falls to $22,000, at which point you take a $1,500 partial surrender, leaving a contract value of $20,500. We calculate the death benefit on March 1, 2002 as follows: The MAV immediately preceding the date of death plus any payments made since that anniversary minus adjusted partial surrenders: Greatest of your contract anniversary contract values: $24,000 plus purchase payments made since that anniversary: +0 minus adjusted partial surrenders, calculated as: ($1,500 x $30,000) -1,607 ------------------- = ------ $28,000 for a death benefit of: $22,393 Nonqualified Annuities: If your spouse is the sole beneficiary and you die before the retirement date, your spouse may keep the contract as owner with the contract value equal to the death benefit that would otherwise have been paid under the MAV Death Benefit. 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. If your spouse at the time of your death has reached age 76, the MAV Death Benefit rider will terminate. If your spouse at the time of your death has not yet reached age 76, he or she may choose to continue the MAV Death Benefit rider. In this case, the rider charges described in "Charges" will be assessed at the next contract anniversary (and all future anniversaries when the rider is in force). These charges will be based on the total contract value on the anniversary, including the additional amounts paid into the contract at your death. -------------------------------------------------------------------------------- 40 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY -- BAND 3 Qualified Annuities: If your spouse is the sole beneficiary, your spouse may keep the contract as owner until the date on which the annuitant would have reached age 70 1/2, or any other date permitted by the Code. The contract value will be equal to the death benefit that would otherwise have been paid under the MAV Death Benefit. If your spouse at the time of your death has reached age 76, the MAV death benefit rider will terminate. If your spouse at the time of your death has not yet reached age 76, he or she may choose to continue the MAV Death Benefit rider. In this case, the rider charges described in "Charges" will be assessed at the next contract anniversary (and all future anniversaries when the rider is in force). These charges will be based on the total contract value on the anniversary, including the additional amounts paid into the contract at your death. Earning Enhancement Death Benefit (EEB) The Enhanced Earnings Death Benefit is intended to provide an additional benefit to your beneficiary to help offset expenses after your death such as funeral expenses or federal and state taxes. This is an optional benefit that you may select for an additional annual charge (see "Charges -- Enhanced Earnings Death Benefit Rider Fee"). The EEB provides reduced benefits if you or the annuitant is 70 or older at the rider effective date and it does not provide any additional benefit before the first contract anniversary. Be sure to discuss with your sales representative whether or not the EEB is appropriate for your situation. If this rider is available in your state and both you and the annuitant are 75 or younger at contract issue, you may choose to add the EEB to your contract. Generally, you must elect the EEB at the time you purchase your contract and your rider effective date will be the contract issue date. This rider is only available under a nonqualified annuity contract. You may not select this rider if you select the EEP. We reserve the right to discontinue offering the EEB for new contracts. In some instances the rider effective date for the EEB may be after we issue the contract according to terms determined by us and at our sole discretion. When annuity payouts begin, or if you terminate the contract for any reason other than death, this rider will terminate. The EEB provides that if you or the annuitant dies after the first contract anniversary, but before annuity payouts begin, and while this contract is in force, we will pay the beneficiary: o the standard death benefit (see "Benefits in Case of Death -- Standard Benefit") or the MAV death benefit, if applicable, PLUS o 40% of your earnings at death if you and the annuitant were under age 70 on the rider effective date, up to a maximum of 100% of purchase payments not previously surrendered that are one or more years old; or o 15% of your earnings at death if you or the annuitant were 70 or older on the rider effective date, up to a maximum of 37.5% of purchase payments not previously surrendered that are one or more years old. Additional death benefits payable under EEB are not included in the adjusted partial surrender calculation. Earnings at death: for purposes of the EEB and EEP riders, this is an amount equal to the standard death benefit (or the MAV death benefit, if applicable) minus purchase payments not previously surrendered. The earnings at death may not be less than zero and may not be more than 250% of the purchase payments not previously surrendered that are one or more years old. Terminating the EEB: o You may terminate the rider within 30 days of the first contract anniversary after the rider effective date. o You may terminate the rider within 30 days of any contract anniversary beginning with the seventh contract anniversary. o The rider will terminate when you make a full surrender from the contract or when annuity payouts begin. o The rider will terminate in the case of spousal continuation or ownership change if the new owner is age 76 or older. For an example of how we calculate the death benefit under the EEB, see below. -------------------------------------------------------------------------------- 41 PROSPECTUS -- AUG. 9, 2001 Example of the Enhanced Earnings Death Benefit: o You purchase the contract with a payment of $100,000 on Jan. 01, 2001 and you and the annuitant are under age 70. You select the MAV death benefit and the EEB. o On July 1, 2001 the contract value grows to $105,000. The death benefit on July 1, 2001 equals the standard death benefit, which is the contract value, or $105,000. You have not reached the first contract anniversary so the EEB does not provide any additional benefit at this time. o On Jan. 1, 2002 the contract value grows to $110,000. The death benefit on July 1, 2001 equals: MAV death benefit (contract value): $110,000 plus the EEB benefit which equals 40% of earnings at death (MAV death benefit minus payments not previously surrendered): 0.40 x ($110,000 - $100,000) = +4,000 ------ Total death benefit of: $114,000 o On Jan. 1, 2003 the contract value falls to $105,000. The death benefit on Jan. 1, 2003 equals: MAV death benefit (MAV): $110,000 plus the EEB benefit (40% of earnings at death): 0.40 x ($110,000 - $100,000) = +4,000 ------ Total death benefit of: $114,000 o On Feb. 1, 2003 the contract value remains at $105, 000 and you request a partial surrender of $50,000. We calculate purchase payments not previously surrendered as $100,000 - $45,000 = $55,000 (remember that $5,000 of the partial surrender is contract earnings). The death benefit on Feb. 1, 2003 equals: MAV death benefit (MAV adjusted for partial surrenders): $110,000 - ($50,000 x $110,000) = $57,619 $105,000 plus the EEB benefit (40% of earnings at death): 0.40 x ($57,619 - $55,000) = +1,048 ------ Total death benefit of: $58,667 o On Jan. 1, 2004 the contract value falls by $40,000. The death benefit on Jan. 1, 2004 equals the death benefit paid on Feb. 1, 2003. The reduction in contract value has no effect. o On Jan. 1, 2010 the contract value grows to a new high of $200,000. Earnings at death reaches its maximum of 250% of purchase payments not previously surrendered that are one or more years old. The death benefit on Jan. 1, 2010 equals: MAV death benefit (contract value): $200,000 plus the EEB (40% of earnings at death, up to a maximum of 100% of purchase payments not previously surrendered that are one or more years old) .40 x 2.50 x ($55,000) = +55,000 ------- Total death benefit of: $255,000 o On July 1, 2010 you make an additional purchase payment of $50,000 and your contract value grows to $250,000. The new purchase payment is less than one year old and so it has no effect on the EEB value. The death benefit on July 1, 2010 equals: MAV death benefit (contract value): $250,000 plus the EEB (40% of earnings at death, up to a maximum of 100% of purchase payments not previously surrendered that are one or more years old) .40 x 2.50 x ($55,000) = +55,000 ------- Total death benefit of: $305,000 -------------------------------------------------------------------------------- 42 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY -- BAND 3 o On July 1, 2011 the contract value remains $250,000 and the "new" purchase payment is one year old. The value of the EEB changes. The death benefit on July 1, 2011 equals: MAV death benefit (contract value): $250,000 plus the EEB benefit which equals 40% of earnings at death (the standard death benefit minus payments not previously surrendered): 0.40 x ($250,000 - $105,000) = +58,000 ------- Total death benefit of: $308,000 If your spouse is the sole beneficiary and your spouse elects to continue the contract, we will pay an amount into the contract so that the contract value equals the total death benefit payable under the EEB. If your spouse at the time of your death has reached age 76, the EEB rider will terminate. If your spouse at the time of your death has not yet reached age 76, he or she may choose to continue the EEB. In this case, the following conditions will apply: o the rider will continue, but we will treat the new contract value on the date of death (after the additional amount is paid into the contract) as if it is a purchase payment in calculating future values of "earnings at death." o the percentages of "earnings at death " payable will be based on your spouse's age at the time of your death. o the rider charges described in "Charges -- Enhanced Earnings Death Benefit Rider Fee" will be assessed at the next contract anniversary (and all future anniversaries when the rider is in force) . These charges will be based on the total contract value on the anniversary, including the additional amounts paid into the contract at your death. NOTE: For special tax considerations associated with the EEB, see "Taxes." Enhanced Earnings Plus Death Benefit (EEP) The EEP is intended to provide an additional benefit to your beneficiary to help offset expenses after your death such as funeral expenses or federal and state taxes. This is an optional benefit that you may select for an additional annual charge (see "Charges"). The EEP provides reduced benefits if you or the annuitant are 70 or older at the rider effective date, it does not provide any additional benefit before the first contract anniversary and it does not provide any benefit beyond what is offered under the EEB during the second contract year. Be sure to discuss with your sales representative whether or not the EEP is appropriate for your situation. If this rider is available in your state and both you and the annuitant are 75 or younger at contract issue, you may choose to add the EEP to you contract. You must elect the EEP at the time you purchase your contract and your rider effective date will be the contract issue date. This rider is only available under nonqualified annuities purchased through an exchange. You may not select this rider if you select the EEB. We reserve the right to discontinue offering the EEP for new contracts. When annuity payouts begin, or if you terminate the contract for any reason other than death, this rider will terminate. The EEP provides that if you or the annuitant dies after the first contract anniversary, but before annuity payouts begin, and while this contract is in force, we will pay the beneficiary: o EEP Part I benefits, which equal the benefits payable under the EEB described above; PLUS o EEP Part II benefits, which equal a percentage of exchange purchase payments identified at issue not previously surrendered as follows: Percentage if you and the Percentage if you or the annuitant are under age 70 annuitant are 70 or older Contract year on the rider effective date on the rider effective date One and Two 0% 0% Three and Four 10% 3.75% Five or more 20% 7.5% Additional death benefits payable under EEP are not included in the adjusted partial surrender calculation. If after 6 months, no exchange purchase payments have been received, we will contact you and you will have an additional 30 days to follow-up on exchange purchase payments identified at issue but not received by us. If after these 30 days, we have not received any exchange purchase payments, we will convert the EEP rider into an EEB. Terminating the EEP: o You may terminate the rider within 30 days of the first contract anniversary after the rider effective date. o You may terminate the rider within 30 days of any contract anniversary beginning with the seventh contract anniversary. o The rider will terminate when you make a full surrender from the contract or when annuity payouts begin. o The rider will terminate in the case of spousal continuation or ownership change. -------------------------------------------------------------------------------- 43 PROSPECTUS -- AUG. 9, 2001 Another way to describe the benefits payable under the EEP rider is as follows: o the standard death benefit (see "Benefits in Case of Death -- Standard Death Benefit") or the MAV death benefit, if applicable PLUS
If you and the annuitant are under age 70 If you or the annuitant are age 70 Contract year on the rider effective date, add... or older on the rider effective date, add... 1 Zero Zero 2 40% x earnings at death (see above) 15% x earnings at death 3 & 4 40% x (earnings at death + 10% of 15% x (earnings at death + 3.75% of exchanged purchase payments*) exchanged purchase payments*) 5+ 40% x (earnings at death + 20% of 15% x (earnings at death + 7.5% of exchanged purchase payments) exchanged purchase payments*)
* Exchange purchase payments are purchase payments exchanged from another contract that are identified at issue and not previously surrendered. The company is not responsible for identifying exchanged purchase payments if we did not receive proper notification from the company from which the purchase payments are exchanged. Example of the Enhanced Earnings Plus Death Benefit: o You purchase the contract with an exchanged purchase payment of $100,000 on Jan. 01, 2001 and you and the annuitant are under age 70. You select the MAV death benefit and the EEP. o On July 1, 2001 the contract value grows to $105,000. The death benefit on July 1, 2001 equals the standard death benefit, which is the contract value, or $105,000. You have not reached the first contract anniversary so neither the EEP Part I nor Part II provides any additional benefit at this time. o On Jan. 1, 2002 the contract value grows to $110,000. You have not reached the second contract anniversary so the EEP-Part II does not provide any additional benefit at this time. The death benefit on July 1, 2001 equals: MAV death benefit (contract value): $110,000 plus the EEP Part I benefit which equals 40% of earnings at death (the MAV death benefit minus purchase payments not previously surrendered): 0.40 x ($110,000 - $100,000) = +4,000 ------ Total death benefit of: $114,000 o On Jan. 1, 2003 the contract value falls to $105,000. The death benefit on Jan. 1, 2003 equals: MAV death benefit (MAV): $110,000 plus the EEP Part I benefit (40% of earnings at death): 0.40 x ($110,000 - $100,000) = +4,000 plus the EEP Part II which in the third contract year equals 10% of exchange purchase payments identified at issue and not previously surrendered: 0.10 x $100,000 = +10,000 ------- Total death benefit of: $124,000 o On Feb. 1, 2003 the contract value remains at $105,000 and you request a partial surrender of $50,000. We calculate purchase payments not previously surrendered as $100,000 - $45,000 = $55,000 (remember that $5,000 of the partial surrender is contract earnings). The death benefit on Feb. 1, 2003 equals: MAV death benefit (MAV adjusted for partial surrenders): $110,000 - ($50,000 x $110,000) = $57,619 $105,000 plus the EEP Part I benefit (40% of earnings at death): 0.40 x ($57,619 - $55,000) = +1,048 plus the EEP Part II which in the third contract year equals 10% of exchange purchase payments identified at issue and not previously surrendered: 0.10 x $55,000 = +5,500 ------ Total death benefit of: $64,167 -------------------------------------------------------------------------------- 44 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY -- BAND 3 o On Jan. 1, 2004 the contract value falls by $40,000. The death benefit on Jan. 1, 2004 equals the death benefit paid on Feb. 1, 2003. The reduction in contract value has no effect. o On Jan. 1, 2010 the contract value grows to a new high of $200,000. Earnings at death reaches its maximum of 250% of purchase payments not previously surrendered that are one or more years old. Because we are beyond the fourth contract anniversary the EEP also reaches its maximum of 20%. The death benefit on Jan. 1, 2010 equals: MAV death benefit (contract value): $200,000 plus the EEP Part I (40% of earnings at death, up to a maximum of 100% of purchase payments not previously surrendered that are one or more years old) .40 x (2.50 x $55,000) = +55,000 plus the EEP Part II which after the fourth contract year equals 20% of exchange purchase payments identified at issue and not previously surrendered: 0.20 x $55,000 = +11,000 ------- Total death benefit of: $266,000 o On July 1, 2010 you make an additional purchase payment of $50,000 and your contract value grows to $250,000. The new purchase payment is less than one year old and so it has no effect on either the EEP Part I or EEP Part II values. The death benefit on July 1, 2010 equals: MAV death benefit (contract value): $250,000 plus the EEP Part I (40% of earnings at death, up to a maximum of 100% of purchase payments not previously surrendered that are one or more years old) .40 x (2.50 x $55,000) = +55,000 plus the EEP Part II, which after the fourth contract year equals 20% of exchange purchase payments identified at issue and not previously surrendered: 0.20 x $55,000 = +11,000 ------- Total death benefit of: $316,000 o On July 1, 2011 the contract value remains $250,000 and the "new" purchase payment is one year old. The value of the EEP Part I changes but the value of the EEP Part II remains constant. The death benefit on July 1, 2011 equals: MAV death benefit (contract value): $250,000 plus the EEP Part I benefit which equals 40% of earnings at death (the MAV death benefit minus payments not previously surrendered): 0.40 x ($250,000 - $105,000) = +58,000 plus the EEP Part II, which after the fourth contract year equals 20% of exchange purchase payments identified at issue and not previously surrendered: 0.20 x $55,000 = +11,000 ------- Total death benefit of: $319,000 If your spouse is sole beneficiary and your spouse elects to continue the contract, we pay an amount into the contract so that the contract value equals the total death benefit payable under the EEP. The rider will terminate, but the standard death benefit (or the MAV death benefit, if applicable) will apply. NOTE: For special tax considerations associated with the EEP, see "Taxes." The Annuity Payout Period As owner of the contract, you have the right to decide how and to whom annuity payouts will be made starting at the settlement date. You may select one of the annuity payout plans outlined below, or we may mutually agree on other payout arrangements. You also decide whether we will make annuity payouts on a fixed or variable basis, or a combination of fixed and variable. The amount available to purchase payouts under the plan you select is the contract value on your settlement date (less any applicable premium tax). You may reallocate this contract value to the fixed account to provide fixed dollar payouts and/or among the subaccounts to provide variable annuity payouts. During the annuity payout period, you cannot invest in more than five subaccounts at any one time unless we agree otherwise. -------------------------------------------------------------------------------- 45 PROSPECTUS -- AUG. 9, 2001 Amounts of fixed and variable payouts depend on: o the annuity payout plan you select; o the annuitant's age and, in most cases, sex; o the annuity table in the contract; and o the amounts you allocated to the accounts at settlement. In addition, for variable payouts only, amounts depend on the investment performance of the subaccounts you select. These payouts will vary from month to month because the performance of the funds will fluctuate. (In the case of fixed annuities, payouts remain the same from month to month.) For information with respect to transfers between accounts after annuity payouts begin, see "Making the Most of Your Contract -- Transfer policies." Annuity Tables The annuity tables in your contract show the amount of the monthly payment for each $1,000 of contract value according to the age and, when applicable, the sex of the annuitant. (Where required by law, we will use a unisex table of settlement rates.) Table B shows the minimum amount of each fixed payout. Amounts in Table B are based on the guaranteed annual effective interest rate shown in your contract. We declare current payout rates that we use in determining the actual amount of your fixed payout. The current payout rates will equal or exceed the guaranteed payout rates shown in Table B. We will furnish these rates to you upon request. Table A shows the amount of the first variable payout assuming that the contract value is invested at the beginning of the annuity payout period and earns a 5% rate of return, which is reinvested and helps to support future payouts. If you ask us at least 30 days before the settlement date, we will substitute an annuity table based on an assumed 3.5% investment rate for the 5% Table A in the contract. The assumed investment rate affects both the amount of the first payout and the extent to which subsequent payouts increase or decrease. Using the 5% Table A results in a higher initial payment, but later payouts will increase more slowly when annuity unit values rise and decrease more rapidly when they decline. Annuity Payout Plans You may choose any one of these annuity payout plans by giving us written instructions at least 30 days before contract values are used to purchase the payout plan: o Plan A: Life annuity -- no refund: We make monthly payouts until the annuitant's death. Payouts end with the last payout before the annuitant's death. We will not make any further payouts. This means that if the annuitant dies after we made only one monthly payout, we will not make any more payouts. o Plan B: Life annuity with five, ten or 15 years certain: We make monthly payouts for a guaranteed payout period of five, ten 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 settlement date. If the annuitant outlives the elected guaranteed payout period, we will continue to make payouts until the annuitant's death. o Plan C: Life annuity -- installment refund: We make monthly payouts until the annuitant's death, with our guarantee that payouts will continue for some period of time. We will make payouts for at least the number of months determined by dividing the amount applied under this option by the first monthly payout, whether or not the annuitant is living. o Plan D: Joint and last survivor life annuity -- no refund: We make monthly payouts while both the annuitant and a joint annuitant are living. If either annuitant dies, we will continue to make monthly payouts at the full amount until the death of the surviving annuitant. Payouts end with the death of the second annuitant. o Plan E: Payouts for a specified period: We make monthly payouts for a specific payout period of 10 to 30 years that you elect. We will make payouts only for the number of years specified whether the annuitant is living or not. Depending on the selected time period, it is foreseeable that an annuitant can outlive the payout period selected. During the payout period, you can elect to have us determine the present value of any remaining variable payouts and pay it to you in a lump sum. We determine the present value of the remaining annuity payouts which are assumed to remain level at the initial payout. The discount rate we use in the calculation will vary between 3.50% and 5.00% depending on the applicable assumed investment rate. You can also take a portion of the discounted value once a year. If you do so, your monthly payouts will be reduced by the proportion of your surrender to the full discounted value. A 10% IRS penalty tax could apply if you take a surrender. (See "Taxes.") -------------------------------------------------------------------------------- 46 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY -- BAND 3 Annuity payout plan requirements for qualified annuities: If you purchased a qualified annuity, you have the responsibility for electing a payout plan that complies with your contract and with applicable law. The payout plan options will meet certain IRS regulations governing required minimum distributions if the payout plan meets the incidental distribution benefit requirements, if any, and the payouts are made: o in equal or substantially equal payments over a period not longer than the life of the annuitant or over the life of the annuitant and designated beneficiary; or o in equal or substantially equal payments over a period not longer than the life expectancy of the annuitant or over the life expectancy of the annuitant and designated beneficiary; or o over a period certain not longer than the life expectancy of the annuitant or over the life expectancy of the annuitant and designated beneficiary. If we do not receive instructions: You must give us written instructions for the annuity payouts at least 30 days before the annuitant's retirement date. If you do not, we will make payouts under Plan B, with 120 monthly payouts guaranteed. Contract values that you allocated to the fixed account will provide fixed dollar payouts and contract values that you allocated among the subaccounts will provide variable annuity payouts. If monthly payouts would be less than $20: We will calculate the amount of monthly payouts at the time the contract value is used to purchase a payout plan. If the calculations show that monthly payouts would be less than $20, we have the right to pay the contract value to the owner in a lump sum or to change the frequency of the payouts. Death after annuity payouts begin: If you or the annuitant die after annuity payouts begin, we will pay any amount payable to the beneficiary as provided in the annuity payout plan in effect. Taxes Generally, under current law, your contract has a tax deferral feature. This means any increase in the value of the fixed account and/or subaccounts in which you invest 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. Roth IRAs may grow and be distributed tax free if you meet certain distribution requirements. 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. Qualified annuities: When your contract is used to fund a retirement plan that is already tax deferred under the Code, the contract will not provide any necessary or additional tax deferral for that retirement plan. If your contract is used to fund a 401(k) plan, your rights to benefits may be subject to the terms and conditions of the plan regardless of the terms of the contract. Adverse tax consequences may result if you do not ensure that contributions, distributions and other transactions under the contract comply with the law. Qualified annuities have minimum distribution rules that govern the timing and amount of distributions. 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 qualified annuities (except Roth IRAs): Under a qualified annuity, the entire payout generally is includable as ordinary income and is subject to tax except to the extent that contributions were made with after-tax dollars. If you or your employer invested in your contract with deductible or pre-tax dollars as part of a tax-deferred retirement plan, such amounts are not considered to be part of your investment in the contract and will be taxed when paid to you from the plan. Surrenders: For qualified annuities under 401(a) and 401(k) plans, we will surrender your annuity to the plan's trustee for the benefit of your account. For other qualified annuities and nonqualified annuities, 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. Death benefits to beneficiaries under nonqualified annuities: 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 year he or she receives the payments. -------------------------------------------------------------------------------- 47 PROSPECTUS -- AUG. 9, 2001 Death benefits to beneficiaries under qualified annuities: The entire death benefit generally is taxable as ordinary income to the beneficiary in the year he or she receives the payments from the plan. If, under your 401(k) plan you or your employer made after-tax contributions to your contract, the portion of any distribution from the plan that represents after-tax contributions are not taxable as ordinary income to your beneficiary. Death benefits under a Roth IRA generally are not taxable as ordinary income to the beneficiary if certain distribution requirements are met. Special Considerations if you select one of the death benefit riders (MAV, EEB or EEP): As of the date of this prospectus, we believe that charges related to these riders are not subject to current taxation. Therefore, we will not report these charges as partial surrenders from your contract. However, the IRS may determine that these charges should be treated as partial surrenders subject to taxation to the extent of any gain as well as the 10% tax penalty for surrenders before the age of 59 1/2, if applicable. We reserve the right to report charges for these riders as partial surrenders if we, as a withholding and reporting agent, believe that we are required to report them. In addition, we will report the benefits attributable to these riders on the death of you or annuitant as an annuity death benefit distribution, not as proceeds for life insurance. Annuities owned by corporations, partnerships or trusts: For nonqualified annuities any annual increase in the value of annuities held by such entities generally will be treated as ordinary income received during that year. This provision is effective for purchase payments made after Feb. 28, 1986. However, if the trust was set up for the benefit of a natural person only, the income will remain tax-deferred. Penalties: If you receive amounts from your contract (or, if applicable, from the plan) before reaching age 59 1/2, you may have to pay a 10% IRS penalty on the amount includable in your ordinary income. If you receive amounts from your SIMPLE IRA before reaching age 59 1/2, generally the IRS penalty provisions apply. However, if you receive these amounts before age 59 1/2 and within the first two years of your participation in the SIMPLE IRA plan, the IRS penalty will be assessed at a rate of 25% instead of 10%. However, this penalty will not apply to any amount received by you: o because of your death; o because you become disabled (as defined in the Code); o if the distribution is part of a series of substantially equal periodic payments, made at least annually, over your life or life expectancy (or joint lives or life expectancies of you and your beneficiary); or o if it is allocable to an investment before Aug. 14, 1982 (except for qualified annuities). For qualified annuities under 401(a), 401(k) plans or TSA's, other 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. Withholding from qualified annuities: If you receive directly all or part of the contract value from a qualified annuity (except an IRA, Roth IRA, SIMPLE IRA or SEP), mandatory 20% federal income tax withholding (and possibly state income tax withholding) generally will be imposed at the time payout is made from the plan. This mandatory withholding is in place of the elective withholding discussed above. This mandatory withholding will not be imposed if: o instead of receiving the distribution check, you elect to have the distribution rolled over directly to an IRA or another eligible plan; o the payout is one in a series of substantially equal periodic payouts, made at least annually, over your life or life expectancy (or the joint lives or life expectancies of you and your designated beneficiary) or over a specified period of 10 years or more; or o the payout is a minimum distribution required under the Code. Payments we make to a surviving spouse instead of being directly rolled over to an IRA also may be subject to mandatory 20% income tax withholding. State withholding also may be imposed on taxable distributions. -------------------------------------------------------------------------------- 48 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY -- BAND 3 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 contract to reflect any clarifications that may be needed or are appropriate to maintain such qualification or to conform the contract to any applicable changes in the tax qualification requirements. We will send you a copy of any amendments. Voting Rights As a contract owner with investments in the subaccounts, you may vote on important fund policies until annuity payouts begin. Once they begin, the person receiving them has voting rights. We will vote fund shares according to the instructions of the person with voting rights. Before annuity payouts begin, the number of votes you have is determined by applying your percentage interest in each subaccount to the total number of votes allowed to the subaccount. After annuity payouts begin, the number of votes you have is equal to: o the reserve held in each subaccount for your contract; divided by o the net asset value of one share of the applicable fund. As we make annuity payouts, the reserve for the contract decreases; therefore, the number of votes also will decrease. We calculate votes separately for each subaccount. We will send notice of shareholders' meetings, proxy materials and a statement of the number of votes to which the voter is entitled. We will vote shares for which we have not received instructions in the same proportion as the votes for which we received instructions. We also will vote the shares for which we have voting rights in the same proportion as the votes for which we received instructions. Substitution of Investments We may substitute the funds in which the subaccounts invest if: o laws or regulations change; o the existing funds become unavailable; or o in our judgment, the funds no longer are suitable for the subaccounts. If any of these situations occur, and if we believe it is in the best interest of persons having voting rights under the contract, we have the right to substitute the funds currently listed in this prospectus for other funds. We may also: o add new subaccounts; o combine any two or more subaccounts; o make additional subaccounts investing in additional funds; o transfer assets to and from the subaccounts or the variable account; and o eliminate or close any subaccounts. In the event of substitution or any of these changes, we may amend the contract and take whatever action is necessary and appropriate without your consent or approval. However, we will not make any substitution or change without the necessary approval of the SEC and state insurance departments. We will notify you of any substitution or change. -------------------------------------------------------------------------------- 49 PROSPECTUS -- AUG. 9, 2001 About the Service Providers Issuer and Principal Underwriter IDS Life issues and is the principal underwriter for the contracts. IDS Life is a stock life insurance company organized in 1957 under the laws of the State of Minnesota and is located at 70100 AXP Financial Center, Minneapolis, MN 55474. IDS Life conducts a conventional life insurance business. IDS Life is a wholly-owned subsidiary of AEFC, which itself is a wholly-owned subsidiary of American Express Company, a financial services company headquartered in New York City. 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 Express Financial Advisors Inc. (AEFA) serves individuals and businesses through its nationwide network of more than 600 supervisory offices, more than 3,800 branch offices and more than 10,700 advisors. IDS Life pays commissions for sales of the contracts of up to 7% of the total purchase payments to AEFA. This revenue is used to cover distribution costs that include compensation to advisors and field leadership for the selling advisors. These commissions consist of a combination of time of sale and on-going service/trail commissions (which, when totaled, could exceed 7% of purchase payments). From time to time, IDS Life will pay or permit other promotional incentives, in cash or credit or other compensation Legal Proceedings A number of lawsuits have been filed against life and health insurers in jurisdictions in which IDS Life and AEFC do business involving insurers' sales practices, alleged agent misconduct, failure to properly supervise agents and other matters. IDS Life and AEFC, like other life and health insurers, from time to time are involved in such litigation. On December 13, 1996, an action entitled Lesa Benacquisto and Daniel Benacquisto v. IDS Life Insurance Company and American Express Financial Corporation was commenced in Minnesota state court. The action is brought by individuals who replaced an existing IDS Life insurance policy with a new IDS Life policy. The plaintiffs purport to represent a class consisting of all persons who replaced existing IDS Life policies with new IDS Life policies from and after January 1, 1985. The complaint puts at issue various alleged sales practices and misrepresentations, alleged breaches of fiduciary duties and alleged violations of consumer fraud statutes. Plaintiffs seek damages in an unspecified amount and also seek to establish a claims resolution facility for the determination of individual issues. IDS Life and AEFC filed an answer to the complaint on February 18, 1997, denying the allegations. A second action, entitled Arnold Mork, Isabella Mork, Ronald Melchert and Susan Melchert v. IDS Life Insurance Company and American Express Financial Corporation was commenced in the same court on March 21, 1997. In addition to claims that are included in the Benacquisto lawsuit, the second action includes an allegation of improper replacement of an existing IDS Life annuity contract. It seeks similar relief to the initial lawsuit. On October 13, 1998, an action entitled Richard W. and Elizabeth J. Thoresen v. 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 also 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, including restitution of allegedly lost investment earnings and restoration of contract values. In January 2000, AEFC reached an agreement in principle to settle the three class-action lawsuits described above. It is expected the settlement will provide $215 million of benefits to more than two million participants and for release by class members of all insurance and annuity market conduct claims dating back to 1985. In August, 2000 an action entitled Lesa Benacquisto, Daniel Benacquisto, Richard Thoresen, Elizabeth Thoresen, Arnold Mork, Isabella Mork, Ronald Melchert and Susan Melchert v. American Express Financial Corporation, American Express Financial Advisors, 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 the United States District Court for the District of Minnesota. The complaint put at issue various alleged sales practices and misrepresentations and allegations of violations of federal laws. In September, 2000 the plaintiffs filed a consolidated complaint in State Court alleging the same claims as the previous actions. On October 2, 2000 the District Court, Fourth Judicial District for the State of Minnesota, County of Hennepin and the United States District Court for the District of Minnesota entered an order conditionally certifying a class for settlement purposes, preliminarily approving the class settlement, directing the issuance of a class notice to the class and scheduling a hearing to determine the fairness of settlement for March, 2001. -------------------------------------------------------------------------------- 50 AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE VARIABLE ANNUITY -- BAND 3 On March 6, 2001 the District Court, Fourth Judicial District for the State of Minnesota, County of Hennepin and the United States District Court for the District of Minnesota heard oral arguments on plaintiffs' motions for final approval of the class action settlement. On May 16, 2001 the state court filed its Final Order and Judgment Approving Class Action Settlement. On May 15, 2001 the federal court entered its Final Order and Judgment Approving Class Action Settlement. An appeal has been filed with the Minnesota Court of Appeals and the United States Court of Appeals for the Eighth Circuit. Table of Contents of the Statement of Additional Information Performance Information 3 Calculating Annuity Payouts 11 Rating Agencies 12 Principal Underwriter 12 Independent Auditors 12 Financial Statements -------------------------------------------------------------------------------- 51 PROSPECTUS -- AUG. 9, 2001 IDS Life Insurance Company 70100 AXP Financial Center Minneapolis, MN 55474 (800) 862-7919 americanexpress.com S-6407 A (8/01) STATEMENT OF ADDITIONAL INFORMATION for AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE(SM) VARIABLE ANNUITY IDS Life Variable Account 10 Aug. 9, 2001 IDS Life Variable Account 10 is a separate account established and maintained by IDS Life Insurance Company (IDS 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. IDS Life Insurance Company 70100 AXP Financial Center Minneapolis, MN 55474 (800)862-7919 American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 -------------------------------------------------------------------------------- TABLE OF CONTENTS Performance Information p. 3 Calculating Annuity Payouts p. 41 Rating Agencies p. 42 Principal Underwriter p. 42 -2- American Express(R) Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 -------------------------------------------------------------------------------- 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 ten years (or, if less, up to the life of the subaccounts), calculated according to the following formula: P(1 + T)(to the power of 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, which it did not. Although we base performance figures on historical earnings, past performance does not guarantee future results. -3- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Average Annual Total Return For Nonqualified Annuities (Without Purchase Payment Credits) With Surrender and Selection of MAV and EEP Death Benefit Riders and the Ten-Year Surrender Charge Schedule For Periods Ending Dec. 31, 2000 Performance since commencement of the Performance since subaccount commencement of the fund(a) ------------------------------------------------------------------------------------------------------------------------------------ Since Since Subaccount Investing In: 1 year commencement 1 year 5 years 10 years commencement AXP(R)VARIABLE PORTFOLIO - BC1 Blue Chip Advantage Fund (9/99;9/99)(b) (18.22%) (5.97%) (18.22%) --% --% (5.97%) BD1 Bond Fund (9/99;10/81) (3.74) (1.87) (3.74) 2.02 6.58 8.80 CR1 Capital Resource Fund (9/99;10/81) (24.59) (9.66) (24.59) 8.57 11.52 12.27 CM1 Cash Management Fund (9/99;10/81) (3.35) 0.78 (3.35) 2.37 2.96 4.95 DE1 Diversified Equity Income Fund (9/99;9/99) (9.38) (4.32) (9.38) -- -- (4.32) EM1 Emerging Markets Fund (5/00;5/00) -- (32.65)(c) -- -- -- (32.65)(d) ES1 Equity Select Fund (5/01;4/01)(e) -- -- -- -- -- -- EI1 Extra Income Fund (9/99;5/96) (17.16) (12.73) (17.16) -- -- (0.81) FI1 Federal Income Fund (9/99;9/99) (0.95) (0.86) (0.95) -- -- (0.86) GB1 Global Bond Fund (9/99;5/96) (5.71) (4.45) (5.71) -- -- 0.92 GR1 Growth Fund (9/99;9/99) (26.25) (9.23) (26.25) -- -- (9.23) IE1 International Fund (9/99;1/92) (31.39) (9.21) (31.39) 4.61 -- 6.49 MF1 Managed Fund (9/99;4/86) (10.77) (1.40) (10.77) 10.10 11.19 10.15 ND1 New Dimensions Fund(R)(9/99;5/96) (16.95) 0.38 (16.95) -- -- 15.18 SV1 Partners Small Cap Value Fund (8/01;8/01)(e) -- -- -- -- -- -- IV1 S&P 500 Index Fund (5/00;5/00) -- (17.37)(c) -- -- -- (17.37)(d) SC1 Small Cap Advantage Fund (9/99;9/99) (4.87) 5.96 (4.87) -- -- 5.96 ST1 Stock Fund (8/01;8/01)(e) -- -- -- -- -- -- SA1 Strategy Aggressive Fund (9/99;1/92) (26.02) 10.94 (26.02) 10.65 -- 10.54 AIM V.I. 1AC Capital Appreciation Fund, Series II (8/01;5/93)(f),(g) -- -- (18.61) 12.95 -- 15.48 1AD Capital Development Fund, Series II (8/01;5/98)(f),(g) -- -- (0.24) -- -- 6.17 ALLIANCE VP 1AB AllianceBernstein International Value Portfolio (Class B) (8/01;5/01)(e) -- -- -- -- -- -- 1AL Growth & Income Portfolio (Class B) (8/01;1/91)(f) -- -- 3.86 17.02 -- 13.45 AMERICAN CENTURY VP 1AI International, Class II (8/01;5/94)(f),(h) -- -- (24.00) 12.56 -- 10.10 1AV Value, Class II (8/01;5/96)(f),(h) -- -- 8.42 -- -- 9.89 CALVERT VARIABLE SERIES, INC. 1SR Social Balanced Portfolio (5/00;9/86) -- (16.87)(c) (11.61) 8.68 9.51 8.92 EVERGREEN VA 1CG Capital Growth Fund, Class L Shares (8/01;3/98)(f),(i) -- -- 7.98 -- -- 7.46 FIDELITY VIP 1FG III Growth & Income Portfolio (Service Class 2) (8/01;12/96)(f),(j) -- -- (12.14) -- -- 12.35 1FM III Mid Cap Portfolio (Service Class 2) (8/01;12/98)(f),(j) -- -- 23.47 -- -- 37.85 1FO Overseas Portfolio (Service Class 2) (8/01;1/87)(f),(j) -- -- 26.25) 7.69 7.49 6.76
-4- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Average Annual Total Return For Nonqualified Annuities (Without Purchase Payment Credits) With Surrender and Selection of MAV and EEP Death Benefit Riders and the Ten-Year Surrender Charge Schedule For Periods Ending Dec. 31, 2000 (continued) Performance since commencement of the Performance since subaccount commencement of the fund(a) ------------------------------------------------------------------------------------------------------------------------------------ Since Since Subaccount Investing In: 1 year commencement 1 year 5 years 10 years commencement FRANKLIN TEMPLETON VIP TRUST 1RE Franklin Real Estate Fund - Class 2 (9/99;1/89)(k) 21.74% 13.52% 21.74% 7.81% 11.75% 8.79% 1SI Franklin Value Securities Fund - Class 2 (9/99;5/98)(k) 15.23 10.22 15.23 -- -- (4.75) 1MS Mutual Shares Securities Fund - Class 2 (8/01;11/96)(f),(k) -- -- 3.52 -- -- 8.49 GOLDMAN SACHS VIT 1UE CORE(SM) U.S. Equity Fund (9/99;2/98)(l) (17.43) (5.99) (17.43) -- -- 5.10 1MC Mid Cap Value Fund (9/99;5/98) 21.23 11.98 21.23 -- -- (0.11) INVESCO VIF 1ID Dynamics Fund (8/01;8/97)(f) -- -- (11.91) -- -- 17.04 1FS Financial Services Fund (8/01;9/99)(f) -- -- 15.04 -- -- 21.34 1TC Technology Fund (8/01;5/97)(f) -- -- (30.03) -- -- 30.95 1TL Telecommunications Fund (8/01;9/99)(f) -- -- (32.53) -- -- 8.66 JANUS ASPEN SERIES 1GT Global Technology Portfolio: Service Shares (5/00;1/00)(b),(m) -- (37.83)(c) -- -- -- (39.73)(d) 1IG International Growth Portfolio: Service Shares (5/00;5/94)(m) -- (39.67)(c) (24.74) 20.79 -- 18.61 LAZARD RETIREMENT SERIES 1IP International Equity Portfolio (9/99;9/98) (17.41) (8.91) (17.41) -- -- 4.60 MFS(R) 1MG Investors Growth Stock Series - Service Class (5/00;5/99)(n),(o) -- (24.66)(c) (14.42) -- -- 11.60 1MD New Discovery Series - Service Class (5/00;5/98)(n) -- (20.34)(c) (10.59) -- -- 18.97 1UT Utilities Series - Service Class (8/01;1/95)(f),(n) -- -- (2.41) 18.22 -- 20.61 PIONEER VCT 1PE Pioneer Equity-Income VCT Portfolio - Class II Shares (8/01;3/95)(f),(p) -- -- 4.81 14.64 -- 16.54 1EU Pioneer Europe VCT Portfolio - Class II Shares (8/01;10/98)(f),(q) -- -- (25.00) -- -- 0.18 PUTNAM VARIABLE TRUST 1HS Putnam VT Health Sciences Fund - Class IB Shares (8/01;4/98)(f),(r) -- -- 29.23 -- -- 11.55 1PI Putnam VT International Growth Fund - Class IB Shares (8/01;1/97)(f),(s) -- -- (17.53) -- -- 15.78 1VS Putnam VT Vista Fund - Class IB Shares (9/99;1/97)(s) (12.39) 15.83) (12.39) -- -- 18.45 STRONG FUNDS 1SO Strong Opportunity Fund II - Advisor Class (8/01;5/92)(f),(t) -- -- (9.37) 15.41 -- 16.09 WANGER 1IT International Small Cap (9/99;5/95) (34.14) (0.20) (34.14) 17.38 -- 21.45 1SP U.S. Small Cap (9/99;5/95) (16.10) (2.80) (16.10) 16.35 -- 17.32
-5- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Average Annual Total Return For Nonqualified Annuities (Without Purchase Payment Credits) With Surrender and Selection of MAV and EEP Death Benefit Riders and the Ten-Year Surrender Charge Schedule For Periods Ending Dec. 31, 2000 (continued) Performance since commencement of the Performance since subaccount commencement of the fund(a) ------------------------------------------------------------------------------------------------------------------------------------ Since Since Subaccount Investing In: 1 year commencement 1 year 5 years 10 years commencement WELLS FARGO VT 1AA Asset Allocation Fund (5/01;4/94)(f) --% --% (7.74%) 10.70% --% 12.09% 1WI International Equity Fund (5/01;7/00)(f) -- -- -- -- -- (17.70)(d) 1SG Small Cap Growth Fund (5/01;5/95)(f) -- -- (29.19) 7.11 -- 9.20
(a) Current applicable charges deducted from fund performance include a $30 contract administrative charge, a 0.15% MAV fee, a 0.40% EEP fee, a 0.95% mortality and expense risk fee, and applicable surrender charges. Premium taxes are not reflected in these total returns. (b) (Commencement date of the subaccount; Commencement date of the fund) (c) Cumulative return (not annualized) since commencement date of the subaccount. (d) Cumulative return (not annualized) since commencement date of the fund. (e) Fund had not commenced operations as of Dec. 31, 2000. (f) Subaccount had not commenced operations as of Dec. 31, 2000. (g) The historical performance information relates to that of the Fund Series I shares and not of the Series II shares, which were first offered July 16, 2001. Additional information relating to the Series II shares can be found in the Fund prospectus or Statement of Additional Information. (h) If Class II had existed during the periods presented, its performance would have been substantially similar to that of the existing class of the fund because each represents an investment in the same portfolio of securities. However, performance of Class II would have been lower because of its higher expense ratio. (i) Historical performance shown for Class L shares prior to its inception is based on the performance of Class I shares, the original class offered. These historical returns for Class L shares have been adjusted to reflect the effect of the 0.25% 12b-1 fees for Class L shares. Class I shares do not pay 12b-1 fees. If these fees had not been reflected, returns would have been higher. (j) The returns shown above are for Initial Class of the fund, which is not available through this prospectus. Service Class 2 would have substantially similar annual returns to Initial Class because the classes are invested in the same portfolio of securities. Service Class 2's returns will be lower than Initial Class's returns to the extent that Service Class 2 has higher expenses. (k) Ongoing stock market volatility can dramatically change the fund's short term performance; current results may differ. Because Class 2 shares were not offered until Jan. 6, 1999, standardized Class 2 fund performance for prior periods represents historical results of Class 1 shares. For periods beginning Jan. 6, 1999 Class 2's results reflect an additional 12b-1 fee expense, which also affects future performance. (l) CORE(SM) is a service mark of Goldman, Sachs & Co. (m) The returns shown for the Service Shares of these Portfolios reflect the historical performance of a different class of shares (the Institutional Shares) prior to Dec. 31, 1999, restated based on the Service Shares' estimated fees and expenses (ignoring any fee and expense limitations). (n) Service Class shares commenced operations in May 2000. Service Class shares carry a 0.20% annual Rule 12b-1 fee. Service Class share performance includes the performance of the series' Initial Class shares for periods prior to the inception of Service Class shares (blended performance). These blended performance figures have not been adjusted to take into account differences in the class-specific operating expenses (such as Rule 12b-1 fees). Because operating expenses of Service Class shares are higher than those of Initial class shares, the blended Service Class share performance is higher than it would have been had the Service Class shares been offered for the entire period. (o) Previously MFS(R)Growth Series. (p) Performance of the portfolio's Class I shares are from inception date of September 14, 1999. Although Class II shares invest in the same portfolio investments as Class I shares, Class II shares would have the same investment results except for the difference in class expense. Class II shares are subject to a .25% distribution fee, which Class I shares do not pay. Consequently, the performance of Class II shares will be lower. (q) Performance of the portfolio's Class I shares are from inception date of October 30,1998. Although Class II shares invest in the same portfolio investments as Class I shares, Class II shares would have the same investment results except for the difference in class expense. Class II shares are subject to a .25% distribution fee, which Class I shares do not pay. Consequently, the performance of Class II shares will be lower. (r) The Trustees of the Putnam Variable Trust currently limit 12b-1 fee payments on Class IB shares to 0.25% of average net assets. (s) Performance information for Class IB shares for periods prior to April 30, 1998 for Putnam VT International Growth Fund and Putnam VT Vista Fund are based on the performance of the fund's Class IA shares (not offered as an investment option) adjusted to reflect the fees paid by Class IB shares, including a Rule 12b-1 fee of 0.15. Please note that as of May 1, 2001 the Rule 12b-1 fee will increase to 0.25%. (t) Performance results for Advisor Class shares, which were first offered on July 12, 2001, are based on historical performance of the fund's Investor Class shares from the inception of the fund through July, 11, 2001, recalculated to reflect the higher annual expense ratio applicable to the Advisor Class shares. -6- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Average Annual Total Return For Nonqualified Annuities (Without Purchase Payment Credits) With Surrender and Selection of MAV and EEP Death Benefit Riders and the Seven-Year Surrender Charge Schedule For Periods Ending Dec. 31, 2000 Performance since commencement of the Performance since subaccount commencement of the fund(a) ------------------------------------------------------------------------------------------------------------------------------------ Since Since Subaccount Investing In: 1 year commencement 1 year 5 years 10 years commencement AXP(R)VARIABLE PORTFOLIO - BC1 Blue Chip Advantage Fund (9/99;9/99)(b) (17.44%) (5.26%) (17.44%) --% --% (5.26%) BD1 Bond Fund (9/99;10/81) (2.79) (1.13) (2.79) 2.38 6.69 8.80 CR1 Capital Resource Fund (9/99;10/81) (23.87) (8.98) (23.87) 8.85 11.59 12.27 CM1 Cash Management Fund (9/99;10/81) (2.40) (1.14) (2.40) 2.72 3.11 4.95 DE1 Diversified Equity Income Fund (9/99;9/99) (8.50) (3.60) (8.50) -- -- (3.60) EM1 Emerging Markets Fund (5/00;5/00) -- (32.02)(c) -- -- -- (32.02)(d) ES1 Equity Select Fund (5/01;4/01)(e) -- -- -- -- -- -- EI1 Extra Income Fund (9/99;5/96) (16.37) (12.08) (16.37) -- -- (0.42) FI1 Federal Income Fund (9/99;9/99) 0.03 (0.10) 0.03 -- -- (0.10) GB1 Global Bond Fund (9/99;5/96) (4.79) (3.73) (4.79) -- -- 1.33 GR1 Growth Fund (9/99;9/99) (25.55) (8.55) (25.55) -- -- (8.55) IE1 International Fund (9/99;1/92) (30.75) (8.53) (30.75) 4.93 -- 6.69 MF1 Managed Fund (9/99;4/86) (9.90) (0.65) (9.90) 10.37 11.26 10.15 ND1 New Dimensions Fund(R)(9/99;5/96) (16.15) 1.14 (16.15) -- -- 15.43 SV1 Partners Small Cap Value Fund (8/01;8/01)(e) -- -- -- -- -- -- IV1 S&P 500 Index Fund (5/00;5/00) -- (16.58)(c) -- -- -- (16.58)(d) SC1 Small Cap Advantage Fund (9/99;9/99) (3.94) 6.72 (3.94) -- -- 6.72 ST1 Stock Fund (8/01;8/01)(e) -- -- -- -- -- -- SA1 Strategy Aggressive Fund (9/99;1/92) (25.32) 11.69 (25.32) 10.91 -- 10.68 AIM V.I. 1AC Capital Appreciation Fund, Series II (8/01;5/93)(f),(g) -- -- (17.83) 13.19 -- 15.68 1AD Capital Development Fund, Series II (8/01;5/98)(f),(g) -- -- 0.74 -- -- 6.51 ALLIANCE VP 1AB AllianceBernstein International Value Portfolio (Class B) (8/01;5/01)(e) -- -- -- -- -- -- 1AL Growth & Income Portfolio (Class B) (8/01;1/91)(f) -- -- 4.86 17.23 -- 13.51 AMERICAN CENTURY VP 1AI International, Class II (8/01;5/94)(f),(h) -- -- (23.28) 12.80 -- 10.35 1AV Value, Class II (8/01;5/96)(f),(h) -- -- 9.42 -- -- 10.18 CALVERT VARIABLE SERIES, INC. 1SR Social Balanced Portfolio (5/00;9/86) -- (15.66)(c) (10.75) 8.96 9.59 8.92 EVERGREEN VA 1CG Capital Growth Fund, Class L Shares (8/01;3/98)(f),(i) -- -- 8.98 -- -- 7.77 FIDELITY VIP 1FG III Growth & Income Portfolio (Service Class 2) (8/01;12/96)(f),(j) -- -- (11.29) -- -- 12.70 1FM III Mid Cap Portfolio (Service Class 2) (8/01;12/98)(f),(j) -- -- 24.47 -- -- 38.21 1FO Overseas Portfolio (Service Class 2) (8/01;1/87)(f),(j) -- -- (25.56) 7.98 7.59 6.76 -7-
American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Average Annual Total Return For Nonqualified Annuities (Without Purchase Payment Credits) With Surrender and Selection of MAV and EEP Death Benefit Riders and the Seven-Year Surrender Charge Schedule For Periods Ending Dec. 31, 2000 (continued) Performance since commencement of the Performance since subaccount commencement of the fund(a) ------------------------------------------------------------------------------------------------------------------------------------ Since Since Subaccount Investing In: 1 year commencement 1 year 5 years 10 years commencement FRANKLIN TEMPLETON VIP TRUST 1RE Franklin Real Estate Fund - Class 2 (9/99;1/89)(k) 22.74% 14.26% 22.74% 8.10% 11.82% 8.79% 1SI Franklin Value Securities Fund - Class 2 (9/99;5/98)(k) 16.23 10.97 16.23 -- -- (4.40) 1MS Mutual Shares Securities Fund - Class 2 (8/01;11/96)(f),(k) -- -- 4.52 -- -- 8.85 GOLDMAN SACHS VIT 1UE CORE(SM) U.S. Equity Fund (9/99;2/98)(l) (16.64) (5.28) (16.64) -- -- 5.41 1MC Mid Cap Value Fund (9/99;5/98) 22.23 12.73 22.23 -- -- 0.26 INVESCO VIF 1ID Dynamics Fund (8/01;8/97)(f) -- -- (11.05) -- -- 17.25 1FS Financial Services Fund (8/01;9/99)(f) -- -- 16.04 -- -- 22.08 1TC Technology Fund (8/01;5/97)(f) -- -- (29.37) -- -- 31.09 1TL Telecommunications Fund (8/01;9/99)(f) -- -- (31.90) -- -- 9.42 JANUS ASPEN SERIES 1GT Global Technology Portfolio: Service Shares (5/00;1/00)(b),(m) -- (37.26)(c) -- -- -- (39.18)(d) 1IG International Growth Portfolio: Service Shares (5/00;5/94)(m) -- (36.64)(c) (22.65) 20.91 -- 18.74 LAZARD RETIREMENT SERIES 1IP International Equity Portfolio (9/99;9/98) (16.61) (8.23) (16.61) -- -- 5.00 MFS(R) 1MG Investors Growth Stock Series - Service Class (5/00;5/99)(n),(o) -- (23.57)(c) (13.59) -- -- 12.16 1MD New Discovery Series - Service Class (5/00;5/98)(n) -- (19.18)(c) (9.72) -- -- 19.25 1UT Utilities Series - Service Class (8/01;1/95)(f),(n) -- -- (1.45) 18.42 -- 20.74 PIONEER VCT 1PE Pioneer Equity-Income VCT Portfolio - Class II Shares (8/01;3/95)(f),(p) -- -- 5.81 14.87 -- 16.70 1EU Pioneer Europe VCT Portfolio - Class II Shares (8/01;10/98)(f),(q) -- -- (24.29) -- -- 0.62 PUTNAM VARIABLE TRUST 1HS Putnam VT Health Sciences Fund - Class IB Shares (8/01;4/98)(f),(r) -- -- 30.23 -- -- 11.85 1PI Putnam VT International Growth Fund - Class IB Shares (8/01;1/97)(f),(s) -- -- (16.74) -- -- 15.94 1VS Putnam VT Vista Fund - Class IB Shares (9/99;1/97)(s) (11.54) 16.57 (11.54) -- -- 18.59 STRONG FUNDS 1SO Strong Opportunity Fund II - Advisor Class (8/01;5/92)(f),(t) -- -- (8.49) 15.63 -- 16.19 WANGER 1IT International Small Cap (9/99;5/95) (33.52) 0.56 (33.52) 17.59 -- 21.59 1SP U.S. Small Cap (9/99;5/95) (15.29) (2.06) (15.29) 16.56 -- 17.48
-8- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Average Annual Total Return For Nonqualified Annuities (Without Purchase Payment Credits) With Surrender and Selection of MAV and EEP Death Benefit Riders and the Seven-Year Surrender Charge Schedule For Periods Ending Dec. 31, 2000 (continued) Performance since commencement of the Performance since subaccount commencement of the fund(a) ------------------------------------------------------------------------------------------------------------------------------------ Since Since Subaccount Investing In: 1 year commencement 1 year 5 years 10 years commencement WELLS FARGO VT 1AA Asset Allocation Fund (5/01;4/94)(f) --% --% (6.84%) 10.96% --% 12.32% 1WI International Equity Fund (5/01;7/00)(f) -- -- -- -- -- (16.90)(d) 1SG Small Cap Growth Fund (5/01;5/95)(f) -- -- (28.53) 7.41 -- 9.43
(a) Current applicable charges deducted from fund performance include a $30 contract administrative charge, a 0.15% MAV fee, a 0.40% EEP fee, a 0.95% mortality and expense risk fee, and applicable surrender charges. Premium taxes are not reflected in these total returns. (b) (Commencement date of the subaccount; Commencement date of the fund) (c) Cumulative return (not annualized) since commencement date of the subaccount. (d) Cumulative return (not annualized) since commencement date of the fund. (e) Fund had not commenced operations as of Dec. 31, 2000. (f) Subaccount had not commenced operations as of Dec. 31, 2000. (g) The historical performance information relates to that of the Fund Series I shares and not of the Series II shares, which were first offered July 16, 2001. Additional information relating to the Series II shares can be found in the Fund prospectus or Statement of Additional Information. (h) If Class II had existed during the periods presented, its performance would have been substantially similar to that of the existing class of the fund because each represents an investment in the same portfolio of securities. However, performance of Class II would have been lower because of its higher expense ratio. (i) Historical performance shown for Class L shares prior to its inception is based on the performance of Class I shares, the original class offered. These historical returns for Class L shares have been adjusted to reflect the effect of the 0.25% 12b-1 fees for Class L shares. Class I shares do not pay 12b-1 fees. If these fees had not been reflected, returns would have been higher. (j) The returns shown above are for Initial Class of the fund, which is not available through this prospectus. Service Class 2 would have substantially similar annual returns to Initial Class because the classes are invested in the same portfolio of securities. Service Class 2's returns will be lower than Initial Class's returns to the extent that Service Class 2 has higher expenses. (k) Ongoing stock market volatility can dramatically change the fund's short term performance; current results may differ. Because Class 2 shares were not offered until Jan. 6, 1999, standardized Class 2 fund performance for prior periods represents historical results of Class 1 shares. For periods beginning Jan. 6, 1999 Class 2's results reflect an additional 12b-1 fee expense, which also affects future performance. (l) CORE(SM) is a service mark of Goldman, Sachs & Co. (m) The returns shown for the Service Shares of these Portfolios reflect the historical performance of a different class of shares (the Institutional Shares) prior to Dec. 31, 1999, restated based on the Service Shares' estimated fees and expenses (ignoring any fee and expense limitations). (n) Service Class shares commenced operations in May 2000. Service Class shares carry a 0.20% annual Rule 12b-1 fee. Service Class share performance includes the performance of the series' Initial Class shares for periods prior to the inception of Service Class shares (blended performance). These blended performance figures have not been adjusted to take into account differences in the class-specific operating expenses (such as Rule 12b-1 fees). Because operating expenses of Service Class shares are higher than those of Initial class shares, the blended Service Class share performance is higher than it would have been had the Service Class shares been offered for the entire period. (o) Previously MFS(R)Growth Series. (p) Performance of the portfolio's Class I shares are from inception date of September 14, 1999. Although Class II shares invest in the same portfolio investments as Class I shares, Class II shares would have the same investment results except for the difference in class expense. Class II shares are subject to a .25% distribution fee, which Class I shares do not pay. Consequently, the performance of Class II shares will be lower. (q) Performance of the portfolio's Class I shares are from inception date of October 30,1998. Although Class II shares invest in the same portfolio investments as Class I shares, Class II shares would have the same investment results except for the difference in class expense. Class II shares are subject to a .25% distribution fee, which Class I shares do not pay. Consequently, the performance of Class II shares will be lower. (r) The Trustees of the Putnam Variable Trust currently limit 12b-1 fee payments on Class IB shares to 0.25% of average net assets. (s) Performance information for Class IB shares for periods prior to April 30, 1998 for Putnam VT International Growth Fund and Putnam VT Vista Fund are based on the performance of the fund's Class IA shares (not offered as an investment option) adjusted to reflect the fees paid by Class IB shares, including a Rule 12b-1 fee of 0.15. Please note that as of May 1, 2001 the Rule 12b-1 fee will increase to 0.25%. (t) Performance results for Advisor Class shares, which were first offered on July 12, 2001, are based on historical performance of the fund's Investor Class shares from the inception of the fund through July, 11, 2001, recalculated to reflect the higher annual expense ratio applicable to the Advisor Class shares. -9- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Average Annual Total Return For Nonqualified Annuities (Without Purchase Payment Credits) Without Surrender and Selection of MAV and EEP Death Benefit Riders For Periods Ending Dec. 31, 2000 Performance since commencement of the Performance since subaccount commencement of the fund(a) ------------------------------------------------------------------------------------------------------------------------------------ Since Since Subaccount Investing In: 1 year commencement 1 year 5 years 10 years commencement AXP(R)VARIABLE PORTFOLIO - BC1 Blue Chip Advantage Fund (9/99;9/99)(b) (11.93%) (0.34%) (11.93%) --% --% (0.34%) BD1 Bond Fund (9/99;10/81) 3.81 4.04 3.81 3.25 6.69 8.80 CR1 Capital Resource Fund (9/99;10/81) (18.85) (4.28) (18.85) 9.54 11.59 12.27 CM1 Cash Management Fund (9/99;10/81) 4.23 4.03 4.23 3.59 3.11 4.95 DE1 Diversified Equity Income Fund (9/99;9/99) (2.33) 1.42 (2.33) -- -- 1.42 EM1 Emerging Markets Fund (5/00;5/00) -- (27.62)(c) -- -- -- (27.62)(d) ES1 Equity Select Fund (5/01;4/01)(e) -- -- -- -- -- -- EI1 Extra Income Fund (9/99;5/96) (10.78) (7.57) (10.78) -- -- 0.60 FI1 Federal Income Fund (9/99;9/99) 6.84 5.12 6.84 -- -- 5.12 GB1 Global Bond Fund (9/99;5/96) 1.67 1.29 1.67 -- -- 2.31 GR1 Growth Fund (9/99;9/99) (20.66) (3.83) (20.66) -- -- (3.83) IE1 International Fund (9/99;1/92) (26.24) (3.81) (26.24) 5.73 -- 6.69 MF1 Managed Fund (9/99;4/86) (3.83) 4.54 (3.83) 11.02 11.26 10.15 ND1 New Dimensions Fund(R)(9/99;5/96) (10.55) 6.44 (10.55) -- -- 16.05 SV1 Partners Small Cap Value Fund (8/01;8/01)(e) -- -- -- -- -- -- IV1 S&P 500 Index Fund (5/00;5/00) -- (11.01)(c) -- -- -- (11.01)(d) SC1 Small Cap Advantage Fund (9/99;9/99) 2.58 11.99 2.58 -- -- 11.99 ST1 Stock Fund (8/01;8/01)(e) -- -- -- -- -- -- SA1 Strategy Aggressive Fund (9/99;1/92) (20.41) 16.89 (20.41) 11.55 -- 10.68 AIM V.I. 1AC Capital Appreciation Fund, Series II (8/01;5/93)(f),(g) -- -- (12.35) 13.78 -- 15.68 1AD Capital Development Fund, Series II (8/01;5/98)(f),(g) -- -- 7.62 -- -- 8.81 ALLIANCE VP 1AB AllianceBernstein International Value Portfolio (Class B) (8/01;5/01)(e) -- -- -- -- -- -- 1AL Growth & Income Portfolio (Class B) (8/01;1/91)(f) -- -- 11.86 17.75 -- 13.51 AMERICAN CENTURY VP 1AI International, Class II (8/01;5/94)(f),(h) -- -- (18.22) 13.40 -- 10.52 1AV Value, Class II (8/01;5/96)(f),(h) -- -- 16.42 -- -- 10.91 CALVERT VARIABLE SERIES, INC. 1SR Social Balanced Portfolio (5/00;9/86) -- (7.03)(c) (4.75) 9.65 9.59 8.92 EVERGREEN VA 1CG Capital Growth Fund, Class L Shares (8/01;3/98)(f),(i) -- -- 15.98 -- -- 9.86 FIDELITY VIP 1FG III Growth & Income Portfolio (Service Class 2) (8/01;12/96)(f),(j) -- -- (5.32) -- -- 13.55 1FM III Mid Cap Portfolio (Service Class 2) (8/01;12/98)(f),(j) -- -- 31.47 -- -- 40.69 1FO Overseas Portfolio (Service Class 2) (8/01;1/87)(f),(j) -- -- (20.66) 8.69 7.59 6.76
-10- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Average Annual Total Return For Nonqualified Annuities (Without Purchase Payment Credits) Without Surrender and Selection of MAV and EEP Death Benefit Riders For Periods Ending Dec. 31, 2000 (continued) Performance since commencement of the Performance since subaccount commencement of the fund(a) ------------------------------------------------------------------------------------------------------------------------------------ Since Since Subaccount Investing In: 1 year commencement 1 year 5 years 10 years commencement FRANKLIN TEMPLETON VIP TRUST 1RE Franklin Real Estate Fund - Class 2 (9/99;1/89)(k) 29.74% 19.42% 29.74% 8.81% 11.82% 8.79% 1SI Franklin Value Securities Fund - Class 2 (9/99;5/98)(k) 23.23 16.17 23.23 -- -- (2.04) 1MS Mutual Shares Securities Fund - Class 2 (8/01;11/96)(f),(k) -- -- 11.52 -- -- 9.75 GOLDMAN SACHS VIT 1UE CORE(SM) U.S. Equity Fund (9/99;2/98)(l) (11.07) (0.36) (11.07) -- -- 7.55 1MC Mid Cap Value Fund (9/99;5/98) 29.23 17.91 29.23 -- -- 2.77 INVESCO VIF 1ID Dynamics Fund (8/01;8/97)(f) -- -- (5.07) -- -- 18.45 1FS Financial Services Fund (8/01;9/99)(f) -- -- 23.04 -- -- 27.21 1TC Technology Fund (8/01;5/97)(f) -- -- (24.77) -- -- 31.89 1TL Telecommunications Fund (8/01;9/99)(f) -- -- (27.49) -- -- 14.71 JANUS ASPEN SERIES 1GT Global Technology Portfolio: Service Shares (5/00;1/00)(b),(m) -- (33.24)(c) -- -- -- (35.32)(d) 1IG International Growth Portfolio: Service Shares (5/00;5/94)(m) -- (30.31)(c) (17.54) 21.37 -- 18.85 LAZARD RETIREMENT SERIES 1IP International Equity Portfolio (9/99;9/98) (11.05) (3.48) (11.05) -- -- 7.74 MFS(R) 1MG Investors Growth Stock Series - Service Class (5/00;5/99)(n),(o) -- (15.82)(c) (7.79) -- -- 16.00 1MD New Discovery Series - Service Class (5/00;5/98)(n) -- (10.94)(c) (3.64) -- -- 21.17 1UT Utilities Series - Service Class (8/01;1/95)(f),(n) -- -- 5.25 18.91 -- 20.99 PIONEER VCT 1PE Pioneer Equity-Income VCT Portfolio - Class II Shares (8/01;3/95)(f),(p) -- -- 12.81 15.43 -- 17.01 1EU Pioneer Europe VCT Portfolio - Class II Shares (8/01;10/98)(f),(q) -- -- (19.30) -- -- 3.66 PUTNAM VARIABLE TRUST 1HS Putnam VT Health Sciences Fund - Class IB Shares (8/01;4/98)(f),(r) -- -- 37.23 -- -- 13.97 1PI Putnam VT International Growth Fund - Class IB Shares (8/01;1/97)(f),(s) -- -- (11.18) -- -- 16.89 1VS Putnam VT Vista Fund - Class IB Shares (9/99;1/97)(s) (5.60) 21.70 (5.60) -- -- 19.47 STRONG FUNDS 1SO Strong Opportunity Fund II - Advisor Class (8/01;5/92)(f),(t) -- -- (2.31) 16.18 -- 16.19 WANGER 1IT International Small Cap (9/99;5/95) (29.23) 5.82 (29.23) 18.10 -- 21.87 1SP U.S. Small Cap (9/99;5/95) (9.63) 3.05 (9.63) 17.09 -- 17.81
-11- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Average Annual Total Return For Nonqualified Annuities (Without Purchase Payment Credits) Without Surrender and Selection of MAV and EEP Death Benefit Riders For Periods Ending Dec. 31, 2000 (continued) Performance since commencement of the Performance since subaccount commencement of the fund(a) ------------------------------------------------------------------------------------------------------------------------------------ Since Since Subaccount Investing In: 1 year commencement 1 year 5 years 10 years commencement WELLS FARGO VT 1AA Asset Allocation Fund (5/01;4/94)(f) --% --% (0.54%) 11.60% --% 12.47% 1WI International Equity Fund (5/01;7/00)(f) -- -- -- -- -- (11.36)(d) 1SG Small Cap Growth Fund (5/01;5/95)(f) -- - (23.86) 8.13 -- 9.88
(a) Current applicable charges deducted from fund performance include a $30 contract administrative charge, a 0.15% MAV fee, a 0.40% EEP fee, and a 0.95% mortality and expense risk fee. Premium taxes are not reflected in these total returns. (b) (Commencement date of the subaccount; Commencement date of the fund) (c) Cumulative return (not annualized) since commencement date of the subaccount. (d) Cumulative return (not annualized) since commencement date of the fund. (e) Fund had not commenced operations as of Dec. 31, 2000. (f) Subaccount had not commenced operations as of Dec. 31, 2000. (g) The historical performance information relates to that of the Fund Series I shares and not of the Series II shares, which were first offered July 16, 2001. Additional information relating to the Series II shares can be found in the Fund prospectus or Statement of Additional Information. (h) If Class II had existed during the periods presented, its performance would have been substantially similar to that of the existing class of the fund because each represents an investment in the same portfolio of securities. However, performance of Class II would have been lower because of its higher expense ratio. (i) Historical performance shown for Class L shares prior to its inception is based on the performance of Class I shares, the original class offered. These historical returns for Class L shares have been adjusted to reflect the effect of the 0.25% 12b-1 fees for Class L shares. Class I shares do not pay 12b-1 fees. If these fees had not been reflected, returns would have been higher. (j) The returns shown above are for Initial Class of the fund, which is not available through this prospectus. Service Class 2 would have substantially similar annual returns to Initial Class because the classes are invested in the same portfolio of securities. Service Class 2's returns will be lower than Initial Class's returns to the extent that Service Class 2 has higher expenses. (k) Ongoing stock market volatility can dramatically change the fund's short term performance; current results may differ. Because Class 2 shares were not offered until Jan. 6, 1999, standardized Class 2 fund performance for prior periods represents historical results of Class 1 shares. For periods beginning Jan. 6, 1999 Class 2's results reflect an additional 12b-1 fee expense, which also affects future performance. (l) CORE(SM) is a service mark of Goldman, Sachs & Co. (m) The returns shown for the Service Shares of these Portfolios reflect the historical performance of a different class of shares (the Institutional Shares) prior to Dec. 31, 1999, restated based on the Service Shares' estimated fees and expenses (ignoring any fee and expense limitations). (n) Service Class shares commenced operations in May 2000. Service Class shares carry a 0.20% annual Rule 12b-1 fee. Service Class share performance includes the performance of the series' Initial Class shares for periods prior to the inception of Service Class shares (blended performance). These blended performance figures have not been adjusted to take into account differences in the class-specific operating expenses (such as Rule 12b-1 fees). Because operating expenses of Service Class shares are higher than those of Initial class shares, the blended Service Class share performance is higher than it would have been had the Service Class shares been offered for the entire period. (o) Previously MFS(R)Growth Series. (p) Performance of the portfolio's Class I shares are from inception date of September 14, 1999. Although Class II shares invest in the same portfolio investments as Class I shares, Class II shares would have the same investment results except for the difference in class expense. Class II shares are subject to a .25% distribution fee, which Class I shares do not pay. Consequently, the performance of Class II shares will be lower. (q) Performance of the portfolio's Class I shares are from inception date of October 30,1998. Although Class II shares invest in the same portfolio investments as Class I shares, Class II shares would have the same investment results except for the difference in class expense. Class II shares are subject to a .25% distribution fee, which Class I shares do not pay. Consequently, the performance of Class II shares will be lower. (r) The Trustees of the Putnam Variable Trust currently limit 12b-1 fee payments on Class IB shares to 0.25% of average net assets. (s) Performance information for Class IB shares for periods prior to April 30, 1998 for Putnam VT International Growth Fund and Putnam VT Vista Fund are based on the performance of the fund's Class IA shares (not offered as an investment option) adjusted to reflect the fees paid by Class IB shares, including a Rule 12b-1 fee of 0.15. Please note that as of May 1, 2001 the Rule 12b-1 fee will increase to 0.25%. (t) Performance results for Advisor Class shares, which were first offered on July 12, 2001, are based on historical performance of the fund's Investor Class shares from the inception of the fund through July, 11, 2001, recalculated to reflect the higher annual expense ratio applicable to the Advisor Class shares. -12- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Average Annual Total Return For Nonqualified Annuities (Without Purchase Payment Credits) With Surrender and Selection of a Ten-Year Surrender Charge Schedule For Periods Ending Dec. 31, 2000 Performance since commencement of the Performance since subaccount commencement of the fund(a) ------------------------------------------------------------------------------------------------------------------------------------ Since Since Subaccount Investing In: 1 year commencement 1 year 5 years 10 years commencement AXP(R)VARIABLE PORTFOLIO - BC1 Blue Chip Advantage Fund (9/99;9/99)(b) (17.67%) (5.42%) (17.67%) --% --% (5.42%) BD1 Bond Fund (9/99;10/81) (3.19) (1.32) (3.19) 2.57 7.13 9.35 CR1 Capital Resource Fund (9/99;10/81) (24.04) (9.11) (24.04) 9.12 12.07 (12.82) CM1 Cash Management Fund (9/99;10/81) (2.80) (1.33) (2.80) 2.92 3.51 5.50 DE1 Diversified Equity Income Fund (9/99;9/99) (8.83) (3.77) (8.83) -- -- (3.77) EM1 Emerging Markets Fund (5/00;5/00) -- (32.10)(c) -- -- -- (32.10)(d) ES1 Equity Select Fund (5/01;4/01)(e) -- -- -- -- -- -- EI1 Extra Income Fund (9/99;5/96) (16.61) (12.18) (16.61) -- -- (0.26) FI1 Federal Income Fund (9/99;9/99) (0.40) (0.31) (0.40) -- -- (0.31) GB1 Global Bond Fund (9/99;5/96) (5.16) (3.90) (5.16) -- -- 1.47 GR1 Growth Fund (9/99;9/99) (25.70) (8.68) (25.70) -- -- (8.68) IE1 International Fund (9/99;1/92) (30.84) (8.66) (30.84) 5.16 -- 7.04 MF1 Managed Fund (9/99;4/86) (10.22) (0.85) (10.22) 10.65 11.74 10.70 ND1 New Dimensions Fund(R)(9/99;5/96) (16.40) 0.93 (16.40) -- -- 15.73 SV1 Partners Small Cap Value Fund (8/01;8/01)(e) -- -- -- -- -- -- IV1 S&P 500 Index Fund (5/00;5/00) -- (16.82)(c) -- -- -- (16.82)(d) SC1 Small Cap Advantage Fund (9/99;9/99) (4.32) 6.51 (4.32) -- -- 6.51 ST1 Stock Fund (8/01;8/01)(e) -- -- -- -- -- -- SA1 Strategy Aggressive Fund (9/99;1/92) (25.47) 11.49 (25.47) 11.20 -- 11.09 AIM V.I. 1AC Capital Appreciation Fund, Series II (8/01;5/93)(f),(g) -- -- (18.06) 13.50 -- 16.03 1AD Capital Development Fund, Series II (8/01;5/98)(f),(g) -- -- 0.31 -- -- 6.72 ALLIANCE VP 1AB AllianceBernstein International Value Portfolio (Class B) (8/01;5/01)(e) -- -- -- -- -- -- 1AL Growth & Income Portfolio (Class B) (8/01;1/91)(f) -- -- 4.41 17.57 -- 14.00 AMERICAN CENTURY VP 1AI International, Class II (8/01;5/94)(f),(h) -- -- (23.45) 13.11 -- 10.65 1AV Value, Class II (8/01;5/96)(f),(h) -- -- 8.97 -- -- 10.44 CALVERT VARIABLE SERIES, INC. 1SR Social Balanced Portfolio (5/00;9/86) -- (16.32)(c) (11.06) 9.23 10.06 9.47 EVERGREEN VA 1CG Capital Growth Fund, Class L Shares (8/01;3/98)(f),(i) -- -- 8.53 -- -- 8.01 FIDELITY VIP 1FG III Growth & Income Portfolio (Service Class 2)(8/01;12/96)(f),(j) -- -- (11.59) -- -- 12.90 1FM III Mid Cap Portfolio (Service Class 2) (8/01;12/98)(f),(j) -- -- 24.02 -- -- 38.40 1FO Overseas Portfolio (Service Class 2) (8/01;1/87)(f),(j) -- -- (25.70) 8.24 8.04 7.31
-13- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Average Annual Total Return For Nonqualified Annuities (Without Purchase Payment Credits) With Surrender and Selection of a Ten-Year Surrender Charge Schedule For Periods Ending Dec. 31, 2000 (continued) Performance since commencement of the Performance since subaccount commencement of the fund(a) ------------------------------------------------------------------------------------------------------------------------------------ Since Since Subaccount Investing In: 1 year commencement 1 year 5 years 10 years commencement FRANKLIN TEMPLETON VIP TRUST 1RE Franklin Real Estate Fund - Class 2 (9/99;1/89)(k) 22.29% 14.07% 22.29% 8.36% 12.30% 9.34% 1SI Franklin Value Securities Fund - Class 2 (9/99;5/98)(k) 15.78 10.77 15.78 -- -- (4.20) 1MS Mutual Shares Securities Fund - Class 2 (8/01;11/96)(f),(k) -- -- 4.07 -- -- 9.04 GOLDMAN SACHS VIT 1UE CORE(SM) U.S. Equity Fund (9/99;2/98)(l) (16.88) (5.44) (16.88) -- -- 5.65 1MC Mid Cap Value Fund (9/99;5/98) 21.78 12.53 21.78 -- -- 0.44 INVESCO VIF 1ID Dynamics Fund (8/01;8/97)(f) -- -- (11.36) -- -- 17.59 1FS Financial Services Fund (8/01;9/99)(f) -- -- 15.59 -- -- 21.89 1TC Technology Fund (8/01;5/97)(f) -- -- (29.48) -- -- 31.50 1TL Telecommunications Fund (8/01;9/99)(f) -- -- (31.98) -- -- 9.21 JANUS ASPEN SERIES 1GT Global Technology Portfolio: Service Shares (5/00;1/00)(b),(m) -- (37.28)(c) -- -- -- (39.18)(d) 1IG International Growth Portfolio: Service Shares (5/00;5/94)(m) -- (39.12)(c) (24.19) 21.34 -- 19.16 LAZARD RETIREMENT SERIES 1IP International Equity Portfolio (9/99;9/98) (16.86) (8.36) (16.86) -- -- 5.15 MFS(R) 1MG Investors Growth Stock Series - Service Class (5/00;5/99)(n),(o) -- (24.11)(c) (13.87) -- -- 12.15 1MD New Discovery Series - Service Class (5/00;5/98)(n) -- (19.79)(c) (10.04) -- -- 19.52 1UT Utilities Series - Service Class (8/01;1/95)(f),(n) -- -- (1.86) 18.77 -- 21.16 PIONEER VCT 1PE Pioneer Equity-Income VCT Portfolio - Class II Shares (8/01;3/95)(f),(p) -- -- 5.36 15.19 -- 17.09 1EU Pioneer Europe VCT Portfolio - Class II Shares (8/01;10/98)(f),(q) -- -- (24.45) -- -- 0.73 PUTNAM VARIABLE TRUST 1HS Putnam VT Health Sciences Fund - Class IB Shares (8/01;4/98)(f),(r) -- -- 29.78 -- -- 12.10 1PI Putnam VT International Growth Fund - Class IB Shares (8/01;1/97)(f),(s) -- -- (16.98) -- -- 16.33 1VS Putnam VT Vista Fund - Class IB Shares (9/99;1/97)(s) (11.84) 16.38 (11.84) -- -- 19.00 STRONG FUNDS 1SO Strong Opportunity Fund II - Advisor Class (8/01;5/92)(f),(t) -- -- (8.82) 15.96 -- 16.64 WANGER 1IT International Small Cap (9/99;5/95) (33.59) 0.35 (33.59) 17.93 -- 22.00 1SP U.S. Small Cap (9/99;5/95) (15.55) (2.25) (15.55) 16.90 -- 17.87
-14- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Average Annual Total Return For Nonqualified Annuities (Without Purchase Payment Credits) With Surrender and Selection of a Ten-Year Surrender Charge Schedule For Periods Ending Dec. 31, 2000 (continued) Performance since commencement of the Performance since subaccount commencement of the fund(a) ------------------------------------------------------------------------------------------------------------------------------------ Since Since Subaccount Investing In: 1 year commencement 1 year 5 years 10 years commencement WELLS FARGO VT 1AA Asset Allocation Fund (5/01;4/94)(f) --% --% (7.19%) 11.25% --% 12.64% 1WI International Equity Fund (5/01;7/00)(f) -- -- -- -- -- (17.15)(d) 1SG Small Cap Growth Fund (5/01;5/95)(f) -- -- (28.64) 7.66 -- 9.75
(a) Current applicable charges deducted from fund performance include a $30 contract administrative charge, a 0.95% mortality and expense risk fee, and applicable surrender charges. Premium taxes are not reflected in these total returns. (b) (Commencement date of the subaccount; Commencement date of the fund) (c) Cumulative return (not annualized) since commencement date of the subaccount. (d) Cumulative return (not annualized) since commencement date of the fund. (e) Fund had not commenced operations as of Dec. 31, 2000. (f) Subaccount had not commenced operations as of Dec. 31, 2000. (g) The historical performance information relates to that of the Fund Series I shares and not of the Series II shares, which were first offered July 16, 2001. Additional information relating to the Series II shares can be found in the Fund prospectus or Statement of Additional Information. (h) If Class II had existed during the periods presented, its performance would have been substantially similar to that of the existing class of the fund because each represents an investment in the same portfolio of securities. However, performance of Class II would have been lower because of its higher expense ratio. (i) Historical performance shown for Class L shares prior to its inception is based on the performance of Class I shares, the original class offered. These historical returns for Class L shares have been adjusted to reflect the effect of the 0.25% 12b-1 fees for Class L shares. Class I shares do not pay 12b-1 fees. If these fees had not been reflected, returns would have been higher. (j) The returns shown above are for Initial Class of the fund, which is not available through this prospectus. Service Class 2 would have substantially similar annual returns to Initial Class because the classes are invested in the same portfolio of securities. Service Class 2's returns will be lower than Initial Class's returns to the extent that Service Class 2 has higher expenses. (k) Ongoing stock market volatility can dramatically change the fund's short term performance; current results may differ. Because Class 2 shares were not offered until Jan. 6, 1999, standardized Class 2 fund performance for prior periods represents historical results of Class 1 shares. For periods beginning Jan. 6, 1999 Class 2's results reflect an additional 12b-1 fee expense, which also affects future performance. (l) CORE(SM) is a service mark of Goldman, Sachs & Co. (m) The returns shown for the Service Shares of these Portfolios reflect the historical performance of a different class of shares (the Institutional Shares) prior to Dec. 31, 1999, restated based on the Service Shares' estimated fees and expenses (ignoring any fee and expense limitations). (n) Service Class shares commenced operations in May 2000. Service Class shares carry a 0.20% annual Rule 12b-1 fee. Service Class share performance includes the performance of the series' Initial Class shares for periods prior to the inception of Service Class shares (blended performance). These blended performance figures have not been adjusted to take into account differences in the class-specific operating expenses (such as Rule 12b-1 fees). Because operating expenses of Service Class shares are higher than those of Initial class shares, the blended Service Class share performance is higher than it would have been had the Service Class shares been offered for the entire period. (o) Previously MFS(R)Growth Series. (p) Performance of the portfolio's Class I shares are from inception date of September 14, 1999. Although Class II shares invest in the same portfolio investments as Class I shares, Class II shares would have the same investment results except for the difference in class expense. Class II shares are subject to a .25% distribution fee, which Class I shares do not pay. Consequently, the performance of Class II shares will be lower. (q) Performance of the portfolio's Class I shares are from inception date of October 30,1998. Although Class II shares invest in the same portfolio investments as Class I shares, Class II shares would have the same investment results except for the difference in class expense. Class II shares are subject to a .25% distribution fee, which Class I shares do not pay. Consequently, the performance of Class II shares will be lower. (r) The Trustees of the Putnam Variable Trust currently limit 12b-1 fee payments on Class IB shares to 0.25% of average net assets. (s) Performance information for Class IB shares for periods prior to April 30, 1998 for Putnam VT International Growth Fund and Putnam VT Vista Fund are based on the performance of the fund's Class IA shares (not offered as an investment option) adjusted to reflect the fees paid by Class IB shares, including a Rule 12b-1 fee of 0.15. Please note that as of May 1, 2001 the Rule 12b-1 fee will increase to 0.25%. (t) Performance results for Advisor Class shares, which were first offered on July 12, 2001, are based on historical performance of the fund's Investor Class shares from the inception of the fund through July, 11, 2001, recalculated to reflect the higher annual expense ratio applicable to the Advisor Class shares. -15- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Average Annual Total Return For Nonqualified Annuities (Without Purchase Payment Credits) With Surrender and Selection of a Seven-Year Surrender Charge Schedule For Periods Ending Dec. 31, 2000 Performance since commencement of the Performance since subaccount commencement of the fund(a) ------------------------------------------------------------------------------------------------------------------------------------ Since Since Subaccount Investing In: 1 year commencement 1 year 5 years 10 years commencement AXP(R)VARIABLE PORTFOLIO - BC1 Blue Chip Advantage Fund (9/99;9/99)(b) (16.89%) (4.71%) (16.89%) --% --% (4.71%) BD1 Bond Fund (9/99;10/81) (2.24) (0.58) (2.24) 2.93 7.24 9.35 CR1 Capital Resource Fund (9/99;10/81) (23.32) (8.43) (23.32) 9.40 12.14 12.82 CM1 Cash Management Fund (9/99;10/81) (1.85) (0.59) (1.85) 3.27 3.66 5.50 DE1 Diversified Equity Income Fund (9/99;9/99) (7.95) (3.05) (7.95) -- -- (3.05) EM1 Emerging Markets Fund (5/00;5/00) -- (31.47)(c) -- -- -- (31.47)(d) ES1 Equity Select Fund (5/01;4/01)(e) -- -- -- -- -- -- EI1 Extra Income Fund (9/99;5/96) (15.82) (11.53) (15.82) -- -- 0.13 FI1 Federal Income Fund (9/99;9/99) 0.58 0.45 0.58 -- -- 0.45 GB1 Global Bond Fund (9/99;5/96) (4.24) (3.18) (4.24) -- -- 1.88 GR1 Growth Fund (9/99;9/99) (25.00) (8.00) (25.00) -- -- (8.00) IE1 International Fund (9/99;1/92) (30.20) (7.98) (30.20) 5.48 -- 7.24 MF1 Managed Fund (9/99;4/86) (9.35) (0.10) (9.35) 10.92 11.81 10.70 ND1 New Dimensions Fund(R)(9/99;5/96) (15.60) 1.69 (15.60) -- -- 15.98 SV1 Partners Small Cap Value Fund (8/01;8/01)(e) -- -- -- -- -- -- IV1 S&P 500 Index Fund (5/00;5/00) -- (16.03)(c) -- -- -- (16.03)(d) SC1 Small Cap Advantage Fund (9/99;9/99) (3.39) 7.27 (3.39) -- -- 7.27 ST1 Stock Fund (8/01;8/01)(e) -- -- -- -- -- -- SA1 Strategy Aggressive Fund (9/99;1/92) (24.77) 12.24 (24.77) 11.46 -- 11.23 AIM V.I. 1AC Capital Appreciation Fund, Series II (8/01;5/93)(f),(g) -- -- (17.28) 13.74 -- 16.23 1AD Capital Development Fund, Series II (8/01;5/98)(f),(g) -- -- 1.29 -- -- 7.06 ALLIANCE VP 1AB AllianceBernstein International Value Portfolio (Class B) (8/01;5/01)(e) -- -- -- -- -- -- 1AL Growth & Income Portfolio (Class B) (8/01;1/91)(f) -- -- 5.41 17.78 -- 14.06 AMERICAN CENTURY VP 1AI International, Class II (8/01;5/94)(f),(h) -- -- (22.73) 13.35 -- 10.90 1AV Value, Class II (8/01;5/96)(f),(h) -- -- 9.97 -- -- 10.73 CALVERT VARIABLE SERIES, INC. 1SR Social Balanced Portfolio (5/00;9/86) -- (15.11)(c) (10.20) 9.51 10.14 9.47 EVERGREEN VA 1CG Capital Growth Fund, Class L Shares (8/01;3/98)(f),(i) -- -- 9.53 -- -- 8.32 FIDELITY VIP 1FG III Growth & Income Portfolio (Service Class 2)(8/01;12/96)(f),(j) -- -- (10.74) -- -- 13.25 1FM III Mid Cap Portfolio (Service Class 2) (8/01;12/98)(f),(j) -- -- 25.02 -- -- 38.76 1FO Overseas Portfolio (Service Class 2) (8/01;1/87)(f),(j) -- -- (25.01) 8.53 8.14 7.31
-16- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Average Annual Total Return For Nonqualified Annuities (Without Purchase Payment Credits) With Surrender and Selection of a Seven-Year Surrender Charge Schedule For Periods Ending Dec. 31, 2000 (continued) Performance since commencement of the Performance since subaccount commencement of the fund(a) ------------------------------------------------------------------------------------------------------------------------------------ Since Since Subaccount Investing In: 1 year commencement 1 year 5 years 10 years commencement FRANKLIN TEMPLETON VIP TRUST 1RE Franklin Real Estate Fund - Class 2 (9/99;1/89)(k) 23.29% 14.81% 23.29% 8.65% 12.37% 9.34% 1SI Franklin Value Securities Fund - Class 2 (9/99;5/98)(k) 16.78 11.52 16.78 -- -- (3.85) 1MS Mutual Shares Securities Fund - Class 2 (8/01;11/96)(f),(k) -- -- 5.07 -- -- 9.40 GOLDMAN SACHS VIT 1UE CORE(SM) U.S. Equity Fund (9/99;2/98)(l) (16.09) (4.73) (16.09) -- -- 5.96 1MC Mid Cap Value Fund (9/99;5/98) 22.78 13.28 22.78 -- -- 0.81 INVESCO VIF 1ID Dynamics Fund (8/01;8/97)(f) -- -- (10.50) -- -- 17.80 1FS Financial Services Fund (8/01;9/99)(f) -- -- 16.59 -- -- 22.63 1TC Technology Fund (8/01;5/97)(f) -- -- (28.82) -- -- 31.64 1TL Telecommunications Fund (8/01;9/99)(f) -- -- (31.35) -- -- 9.97 JANUS ASPEN SERIES 1GT Global Technology Portfolio: Service Shares (5/00;1/00)(b),(m) -- (36.71)(c) -- -- -- (38.63)(d) 1IG International Growth Portfolio: Service Shares(5/00;5/94)(m) -- (36.09)(c) (22.10) 21.46 -- 19.29 LAZARD RETIREMENT SERIES 1IP International Equity Portfolio (9/99;9/98) (16.06) (7.68) (16.06) -- -- 5.55 MFS(R) 1MG Investors Growth Stock Series - Service Class(5/00;5/99)(n),(o) -- (23.02)(c) (13.04) -- -- 12.71 1MD New Discovery Series - Service Class (5/00;5/98)(n) -- (18.63)(c) (9.17) -- -- 19.80 1UT Utilities Series - Service Class (8/01;1/95)(f),(n) -- -- (0.90) 18.97 -- 21.29 PIONEER VCT 1PE Pioneer Equity-Income VCT Portfolio - Class II Shares (8/01;3/95)(f),(p) -- -- 6.36 15.42 -- 17.25 1EU Pioneer Europe VCT Portfolio - Class II Shares (8/01;10/98)(f),(q) -- -- (23.74) -- -- 1.17 PUTNAM VARIABLE TRUST 1HS Putnam VT Health Sciences Fund - Class IB Shares (8/01;4/98)(f),(r) -- -- 30.78 -- -- 12.40 1PI Putnam VT International Growth Fund - Class IB Shares (8/01;1/97)(f),(s) -- -- (16.19) -- -- 16.49 1VS Putnam VT Vista Fund - Class IB Shares (9/99;1/97)(s) (10.99) 17.12 (10.99) -- -- 19.14 STRONG FUNDS 1SO Strong Opportunity Fund II - Advisor Class (8/01;5/92)(f),(t) -- -- (7.94) 16.18 -- 16.74 WANGER 1IT International Small Cap (9/99;5/95) (32.97) 1.11 (32.97) 18.14 -- 22.14 1SP U.S. Small Cap (9/99;5/95) (14.74) (1.51) (14.74) 17.11 -- 18.03
-17- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Average Annual Total Return For Nonqualified Annuities (Without Purchase Payment Credits) With Surrender and Selection of a Seven-Year Surrender Charge Schedule For Periods Ending Dec. 31, 2000 (continued) Performance since commencement of the Performance since subaccount commencement of the fund(a) ------------------------------------------------------------------------------------------------------------------------------------ Since Since Subaccount Investing In: 1 year commencement 1 year 5 years 10 years commencement WELLS FARGO VT 1AA Asset Allocation Fund (5/01;4/94)(f) --% --% (6.29%) 11.51% --% 12.87% 1WI International Equity Fund (5/01;7/00)(f) -- -- -- -- -- (16.35)(d) 1SG Small Cap Growth Fund (5/01;5/95)(f) -- -- (27.98) 7.96 -- 9.98
(a) Current applicable charges deducted from fund performance include a $30 contract administrative charge, a 0.95% mortality and expense risk fee, and applicable surrender charges. Premium taxes are not reflected in these total returns. (b) (Commencement date of the subaccount; Commencement date of the fund) (c) Cumulative return (not annualized) since commencement date of the subaccount. (d) Cumulative return (not annualized) since commencement date of the fund. (e) Fund had not commenced operations as of Dec. 31, 2000. (f) Subaccount had not commenced operations as of Dec. 31, 2000. (g) The historical performance information relates to that of the Fund Series I shares and not of the Series II shares, which were first offered July 16, 2001. Additional information relating to the Series II shares can be found in the Fund prospectus or Statement of Additional Information. (h) If Class II had existed during the periods presented, its performance would have been substantially similar to that of the existing class of the fund because each represents an investment in the same portfolio of securities. However, performance of Class II would have been lower because of its higher expense ratio. (i) Historical performance shown for Class L shares prior to its inception is based on the performance of Class I shares, the original class offered. These historical returns for Class L shares have been adjusted to reflect the effect of the 0.25% 12b-1 fees for Class L shares. Class I shares do not pay 12b-1 fees. If these fees had not been reflected, returns would have been higher. (j) The returns shown above are for Initial Class of the fund, which is not available through this prospectus. Service Class 2 would have substantially similar annual returns to Initial Class because the classes are invested in the same portfolio of securities. Service Class 2's returns will be lower than Initial Class's returns to the extent that Service Class 2 has higher expenses. (k) Ongoing stock market volatility can dramatically change the fund's short term performance; current results may differ. Because Class 2 shares were not offered until Jan. 6, 1999, standardized Class 2 fund performance for prior periods represents historical results of Class 1 shares. For periods beginning Jan. 6, 1999 Class 2's results reflect an additional 12b-1 fee expense, which also affects future performance. (l) CORE(SM) is a service mark of Goldman, Sachs & Co. (m) The returns shown for the Service Shares of these Portfolios reflect the historical performance of a different class of shares (the Institutional Shares) prior to Dec. 31, 1999, restated based on the Service Shares' estimated fees and expenses (ignoring any fee and expense limitations). (n) Service Class shares commenced operations in May 2000. Service Class shares carry a 0.20% annual Rule 12b-1 fee. Service Class share performance includes the performance of the series' Initial Class shares for periods prior to the inception of Service Class shares (blended performance). These blended performance figures have not been adjusted to take into account differences in the class-specific operating expenses (such as Rule 12b-1 fees). Because operating expenses of Service Class shares are higher than those of Initial class shares, the blended Service Class share performance is higher than it would have been had the Service Class shares been offered for the entire period. (o) Previously MFS(R)Growth Series. (p) Performance of the portfolio's Class I shares are from inception date of September 14, 1999. Although Class II shares invest in the same portfolio investments as Class I shares, Class II shares would have the same investment results except for the difference in class expense. Class II shares are subject to a .25% distribution fee, which Class I shares do not pay. Consequently, the performance of Class II shares will be lower. (q) Performance of the portfolio's Class I shares are from inception date of October 30,1998. Although Class II shares invest in the same portfolio investments as Class I shares, Class II shares would have the same investment results except for the difference in class expense. Class II shares are subject to a .25% distribution fee, which Class I shares do not pay. Consequently, the performance of Class II shares will be lower. (r) The Trustees of the Putnam Variable Trust currently limit 12b-1 fee payments on Class IB shares to 0.25% of average net assets. (s) Performance information for Class IB shares for periods prior to April 30, 1998 for Putnam VT International Growth Fund and Putnam VT Vista Fund are based on the performance of the fund's Class IA shares (not offered as an investment option) adjusted to reflect the fees paid by Class IB shares, including a Rule 12b-1 fee of 0.15. Please note that as of May 1, 2001 the Rule 12b-1 fee will increase to 0.25%. (t) Performance results for Advisor Class shares, which were first offered on July 12, 2001, are based on historical performance of the fund's Investor Class shares from the inception of the fund through July, 11, 2001, recalculated to reflect the higher annual expense ratio applicable to the Advisor Class shares. -18- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Average Annual Total Return For Nonqualified Annuities (Without Purchase Payment Credits) Without Surrender For Periods Ending Dec. 31, 2000 Performance since Commencement of the Performance since subaccount commencement of the fund(a) ------------------------------------------------------------------------------------------------------------------------------------ Since Since Subaccount Investing In: 1 year commencement 1 year 5 years 10 years commencement AXP(R)VARIABLE PORTFOLIO - BC1 Blue Chip Advantage Fund (9/99;9/99)(b) (11.38%) 0.21% (11.38%) --% --% 0.21% BD1 Bond Fund (9/99;10/81) 4.36 4.59 4.36 3.80 7.24 9.35 CR1 Capital Resource Fund (9/99;10/81) (18.30) (3.73) (18.30) 10.09 12.14 12.82 CM1 Cash Management Fund (9/99;10/81) 4.78 4.58 4.78 4.14 3.66 5.50 DE1 Diversified Equity Income Fund (9/99;9/99) (1.78) 1.97 (1.78) -- -- 1.97 EM1 Emerging Markets Fund (5/00;5/00) -- (27.07)(c) -- -- -- (27.07)(d) ES1 Equity Select Fund (5/01;4/01)(e) -- -- -- -- -- -- EI1 Extra Income Fund (9/99;5/96) (10.23) (7.02) (10.23) -- -- 1.15 FI1 Federal Income Fund (9/99;9/99) 7.39 5.67 7.39 -- -- 5.67 GB1 Global Bond Fund (9/99;5/96) 2.22 1.84 2.22 -- -- 2.86 GR1 Growth Fund (9/99;9/99) (20.11) (3.28) (20.11) -- -- (3.28) IE1 International Fund (9/99;1/92) (25.69) (3.26) (25.69) 6.28 -- 7.24 MF1 Managed Fund (9/99;4/86) (3.28) 5.09 (3.28) 11.57 11.81 10.70 ND1 New Dimensions Fund(R)(9/99;5/96) (10.00) 6.99 (10.00) -- -- 16.60 SV1 Partners Small Cap Value Fund (8/01;8/01)(e) -- -- -- -- -- -- IV1 S&P 500 Index Fund (5/00;5/00) -- (10.46)(c) -- -- -- (10.46)(d) SC1 Small Cap Advantage Fund (9/99;9/99) 3.13 12.54 3.13 -- -- 12.54 ST1 Stock Fund (8/01;8/01)(e) -- -- -- -- -- -- SA1 Strategy Aggressive Fund (9/99;1/92) (19.86) 17.44 (19.86) 12.10 -- 11.23 AIM V.I. 1AC Capital Appreciation Fund, Series II (8/01;5/93)(f),(g) -- -- (11.80) 14.33 -- 16.23 1AD Capital Development Fund, Series II (8/01;5/98)(f),(g) -- -- 8.17 -- -- 9.36 ALLIANCE VP 1AB AllianceBernstein International Value Portfolio (Class B) (8/01;5/01)(e) -- -- -- -- -- -- 1AL Growth & Income Portfolio (Class B) (8/01;1/91)(f) -- -- 12.41 18.30 -- 14.06 AMERICAN CENTURY VP 1AI International, Class II (8/01;5/94)(f),(h) -- -- (17.67) 13.95 -- 11.07 1AV Value, Class II (8/01;5/96)(f),(h) -- -- 16.97 -- -- 11.46 CALVERT VARIABLE SERIES, INC. 1SR Social Balanced Portfolio (5/00;9/86) -- (6.48)(c) (4.20) 10.20 10.14 9.47 EVERGREEN VA 1CG Capital Growth Fund, Class L Shares (8/01;3/98)(f),(i) -- -- 16.53 -- -- 10.41 FIDELITY VIP 1FG III Growth & Income Portfolio (Service Class 2) (8/01;12/96)(f),(j) -- -- (4.77) -- -- 14.10 1FM III Mid Cap Portfolio (Service Class 2) (8/01;12/98)(f),(j) -- -- 32.02 -- -- 41.24 1FO Overseas Portfolio (Service Class 2) (8/01;1/87)(f),(j) -- -- (20.11) 9.24 8.14 7.31 -19-
American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Average Annual Total Return For Nonqualified Annuities (Without Purchase Payment Credits) Without Surrender For Periods Ending Dec. 31, 2000 (continued) Performance since commencement of the Performance since subaccount commencement of the fund(a) ------------------------------------------------------------------------------------------------------------------------------------ Since Since Subaccount Investing In: 1 year commencement 1 year 5 years 10 years commencement FRANKLIN TEMPLETON VIP TRUST 1RE Franklin Real Estate Fund - Class 2 (9/99;1/89)(k) 30.29% 19.97% 30.29% 9.36% 12.37% 9.34% 1SI Franklin Value Securities Fund - Class 2 (9/99;5/98)(k) 23.78 16.72 23.78 -- -- (1.49) 1MS Mutual Shares Securities Fund - Class 2 (8/01;11/96)(f),(k) -- -- 12.07 -- -- 10.30 GOLDMAN SACHS VIT 1UE CORE(SM) U.S. Equity Fund (9/99;2/98)(l) (10.52) 0.19 (10.52) -- -- 8.10 1MC Mid Cap Value Fund (9/99;5/98) 29.78 18.46 29.78 -- -- 3.32 INVESCO VIF 1ID Dynamics Fund (8/01;8/97)(f) -- -- (4.52) -- -- 19.00 1FS Financial Services Fund (8/01;9/99)(f) -- -- 23.59 -- -- 27.76 1TC Technology Fund (8/01;5/97)(f) -- -- (24.22) -- -- 32.44 1TL Telecommunications Fund (8/01;9/99)(f) -- -- (26.94) -- -- 15.26 JANUS ASPEN SERIES 1GT Global Technology Portfolio: Service Shares (5/00;1/00)(b),(m) -- (32.69)(c) -- -- -- (34.77)(d) 1IG International Growth Portfolio: Service Shares (5/00;5/94)(m) -- (29.76)(c) (16.99) 21.92 -- 19.40 LAZARD RETIREMENT SERIES 1IP International Equity Portfolio (9/99;9/98) (10.50) (2.93) (10.50) -- -- 8.29 MFS(R) 1MG Investors Growth Stock Series - Service Class (5/00;5/99)(n),(o) -- (15.27)(c) (7.24) -- -- 16.55 1MD New Discovery Series - Service Class (5/00;5/98)(n) -- (10.39)(c) (3.09) -- -- 21.72 1UT Utilities Series - Service Class (8/01;1/95)(f),(n) -- -- 5.80 19.46 -- 21.54 PIONEER VCT 1PE Pioneer Equity-Income VCT Portfolio - Class II Shares (8/01;3/95)(f),(p) -- -- 13.36 15.98 -- 17.56 1EU Pioneer Europe VCT Portfolio - Class II Shares (8/01;10/98)(f),(q) -- -- (18.75) -- -- 4.21 PUTNAM VARIABLE TRUST 1HS Putnam VT Health Sciences Fund - Class IB Shares (8/01;4/98)(f),(r) -- -- 37.78 -- -- 14.52 1PI Putnam VT International Growth Fund - Class IB Shares (8/01;1/97)(f),(s) -- -- (10.63) -- -- 17.44 1VS Putnam VT Vista Fund - Class IB Shares (9/99;1/97)(s) (5.05) 22.25 (5.05) -- -- 20.02 STRONG FUNDS 1SO Strong Opportunity Fund II - Advisor Class (8/01;5/92)(f),(t) -- -- (1.76) 16.73 -- 16.74 WANGER 1IT International Small Cap (9/99;5/95) (28.68) 6.37 (28.68) 18.65 -- 22.42 1SP U.S. Small Cap (9/99;5/95) (9.08) 3.60 (9.08) 17.64 -- 18.36
-20- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Average Annual Total Return For Nonqualified Annuities (Without Purchase Payment Credits) Without Surrender For Periods Ending Dec. 31, 2000 (continued) Performance since commencement of the Performance since subaccount commencement of the fund(a) ------------------------------------------------------------------------------------------------------------------------------------ Since Since Subaccount Investing In: 1 year commencement 1 year 5 years 10 years commencement WELLS FARGO VT 1AA Asset Allocation Fund (5/01;4/94)(f) --% --% 0.01% 12.15% --% 13.02% 1WI International Equity Fund (5/01;7/00)(f) -- -- -- -- -- (10.81)(d) 1SG Small Cap Growth Fund (5/01;5/95)(f) -- -- (23.31) 8.68 -- 10.43
(a) Current applicable charges deducted from fund performance include a $30 contract administrative charge and a 0.95% mortality and expense risk fee. Premium taxes are not reflected in these total returns. (b) (Commencement date of the subaccount; Commencement date of the fund) (c) Cumulative return (not annualized) since commencement date of the subaccount. (d) Cumulative return (not annualized) since commencement date of the fund. (e) Fund had not commenced operations as of Dec. 31, 2000. (f) Subaccount had not commenced operations as of Dec. 31, 2000. (g) The historical performance information relates to that of the Fund Series I shares and not of the Series II shares, which were first offered July 16, 2001. Additional information relating to the Series II shares can be found in the Fund prospectus or Statement of Additional Information. (h) If Class II had existed during the periods presented, its performance would have been substantially similar to that of the existing class of the fund because each represents an investment in the same portfolio of securities. However, performance of Class II would have been lower because of its higher expense ratio. (i) Historical performance shown for Class L shares prior to its inception is based on the performance of Class I shares, the original class offered. These historical returns for Class L shares have been adjusted to reflect the effect of the 0.25% 12b-1 fees for Class L shares. Class I shares do not pay 12b-1 fees. If these fees had not been reflected, returns would have been higher. (j) The returns shown above are for Initial Class of the fund, which is not available through this prospectus. Service Class 2 would have substantially similar annual returns to Initial Class because the classes are invested in the same portfolio of securities. Service Class 2's returns will be lower than Initial Class's returns to the extent that Service Class 2 has higher expenses. (k) Ongoing stock market volatility can dramatically change the fund's short term performance; current results may differ. Because Class 2 shares were not offered until Jan. 6, 1999, standardized Class 2 fund performance for prior periods represents historical results of Class 1 shares. For periods beginning Jan. 6, 1999 Class 2's results reflect an additional 12b-1 fee expense, which also affects future performance. (l) CORE(SM) is a service mark of Goldman, Sachs & Co. (m) The returns shown for the Service Shares of these Portfolios reflect the historical performance of a different class of shares (the Institutional Shares) prior to Dec. 31, 1999, restated based on the Service Shares' estimated fees and expenses (ignoring any fee and expense limitations). (n) Service Class shares commenced operations in May 2000. Service Class shares carry a 0.20% annual Rule 12b-1 fee. Service Class share performance includes the performance of the series' Initial Class shares for periods prior to the inception of Service Class shares (blended performance). These blended performance figures have not been adjusted to take into account differences in the class-specific operating expenses (such as Rule 12b-1 fees). Because operating expenses of Service Class shares are higher than those of Initial class shares, the blended Service Class share performance is higher than it would have been had the Service Class shares been offered for the entire period. (o) Previously MFS(R)Growth Series. (p) Performance of the portfolio's Class I shares are from inception date of September 14, 1999. Although Class II shares invest in the same portfolio investments as Class I shares, Class II shares would have the same investment results except for the difference in class expense. Class II shares are subject to a .25% distribution fee, which Class I shares do not pay. Consequently, the performance of Class II shares will be lower. (q) Performance of the portfolio's Class I shares are from inception date of October 30,1998. Although Class II shares invest in the same portfolio investments as Class I shares, Class II shares would have the same investment results except for the difference in class expense. Class II shares are subject to a .25% distribution fee, which Class I shares do not pay. Consequently, the performance of Class II shares will be lower. (r) The Trustees of the Putnam Variable Trust currently limit 12b-1 fee payments on Class IB shares to 0.25% of average net assets. (s) Performance information for Class IB shares for periods prior to April 30, 1998 for Putnam VT International Growth Fund and Putnam VT Vista Fund are based on the performance of the fund's Class IA shares (not offered as an investment option) adjusted to reflect the fees paid by Class IB shares, including a Rule 12b-1 fee of 0.15. Please note that as of May 1, 2001 the Rule 12b-1 fee will increase to 0.25%. (t) Performance results for Advisor Class shares, which were first offered on July 12, 2001, are based on historical performance of the fund's Investor Class shares from the inception of the fund through July, 11, 2001, recalculated to reflect the higher annual expense ratio applicable to the Advisor Class shares. -21- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Average Annual Total Return For Qualified Annuities (Without Purchase Payment Credits) With Surrender and Selection of MAV and EEP Death Benefit Riders and the Ten-Year Surrender Charge Schedule For Periods Ending Dec. 31, 2000 Performance since commencement of the Performance since subaccount commencement of the fund(a) ------------------------------------------------------------------------------------------------------------------------------------ Since Since Subaccount Investing In: 1 year commencement 1 year 5 years 10 years commencement AXP(R)VARIABLE PORTFOLIO - BC2 Blue Chip Advantage Fund (9/99;9/99)(b) (18.06%) (5.78%) (18.06%) --% --% (5.78%) BD2 Bond Fund (9/99;10/81) (3.55) (1.68) 2.45 2.23 6.80 9.02 CR2 Capital Resource Fund (9/99;10/81) (24.43) (9.47) (24.43) 8.80 11.75 12.50 CM2 Cash Management Fund (9/99;10/81) (3.16) (1.69) (3.16) 2.59 3.17 5.16 DE2 Diversified Equity Income Fund (9/99;9/99) (9.20) (4.13) (9.20) -- -- (4.13) EM2 Emerging Markets Fund (5/00;5/00) -- (32.56)(c) -- -- -- (32.56)(d) ES2 Equity Select Fund (5/01;4/01)(e) -- -- -- -- -- -- EI2 Extra Income Fund (9/99;5/96) (17.00) (12.56) (17.00) -- -- (0.63) FI2 Federal Income Fund (9/99;9/99) (0.75) (0.66) (0.75) -- -- (0.66) GB2 Global Bond Fund (9/99;5/96) (5.52) (4.26) (5.52) -- -- 1.14 GR2 Growth Fund (9/99;9/99) (26.11) (9.05) (26.11) -- -- (9.05) IE2 International Fund (9/99;1/92) (31.25) (9.03) (31.25) 4.83 -- 6.71 MF2 Managed Fund (9/99;4/86) (10.59) (1.20) (10.59) 10.33 11.42 10.37 ND2 New Dimensions Fund(R)(9/99;5/96) (16.78) 0.58 (16.78) -- -- 15.42 SV2 Partners Small Cap Value Fund (8/01;8/01)(e) -- -- -- -- -- -- IV2 S&P 500 Index Fund (5/00;5/00) -- (17.26)(c) -- -- -- (17.26)(d) SC2 Small Cap Advantage Fund (9/99;9/99) (4.68) 6.19 (4.68) -- -- 6.19 ST2 Stock Fund (8/01;8/01)(e) -- -- -- -- -- -- SA2 Strategy Aggressive Fund (9/99;1/92) (25.87) 11.18 (25.87) 10.88 -- 10.76 AIM V.I. 2AC Capital Appreciation Fund, Series II (8/01;5/93)(f),(g) -- -- (18.45) 13.18 -- 15.72 2AD Capital Development Fund, Series II (8/01;5/98)(f),(g) -- -- (0.04) -- -- 6.40 ALLIANCE VP 2AB AllianceBernstein International Value Portfolio (Class B) (8/01;5/01)(e) -- -- -- -- -- -- 2AL Growth & Income Portfolio (Class B) (8/01;1/91)(f) -- -- 4.09 17.27 -- 13.68 AMERICAN CENTURY VP 2AI International, Class II (8/01;5/94)(f),(h) -- -- (23.85) 12.79 -- 10.33 2AV Value, Class II (8/01;5/96)(f),(h) -- -- 8.66 -- -- 10.12 CALVERT VARIABLE SERIES, INC. 2SR Social Balanced Portfolio (5/00;9/86) -- (16.71)(c) (11.44) 8.91 9.73 9.14 EVERGREEN VA 2CG Capital Growth Fund, Class L Shares (8/01;3/98)(f),(i) -- -- 8.21 -- -- 7.69 FIDELITY VIP 2FG III Growth & Income Portfolio (Service Class 2) (8/01;12/96)(f),(j) -- -- (11.97) -- -- 12.59 2FM III Mid Cap Portfolio (Service Class 2) (8/01;12/98)(f),(j) -- -- 23.74 -- -- 38.14 2FO Overseas Portfolio (Service Class 2) (8/01;1/87)(f),(j) -- -- (26.11) 7.91 7.71 6.97
-22- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Average Annual Total Return For Qualified Annuities (Without Purchase Payment Credits) With Surrender and Selection of MAV and EEP Death Benefit Riders and the Ten-Year Surrender Charge Schedule For Periods Ending Dec. 31, 2000 (continued) Performance since commencement of the Performance since subaccount commencement of the fund(a) ------------------------------------------------------------------------------------------------------------------------------------ Since Since Subaccount Investing In: 1 year commencement 1 year 5 years 10 years commencement FRANKLIN TEMPLETON VIP TRUST 2RE Franklin Real Estate Fund - Class 2 (9/99;1/89)(k) 22.00% 13.76% 22.00% 8.04% 11.98% 9.01% 2SI Franklin Value Securities Fund - Class 2 (9/99;5/98)(k) 15.48 10.45 15.48 -- -- (4.56) 2MS Mutual Shares Securities Fund - Class 2 (8/01;11/96)(f),(k) -- -- 3.75 -- -- 8.72 GOLDMAN SACHS VIT 2UE CORE(SM) U.S. Equity Fund (9/99;2/98)(l) (17.27) (5.80) (17.27) -- -- 5.32 2MC Mid Cap Value Fund (9/99;5/98) 21.49 12.22 21.49 -- -- 0.09 INVESCO VIF 2ID Dynamics Fund (8/01;8/97)(f) -- -- (11.73) -- -- 17.29 2FS Financial Services Fund (8/01;9/99)(f) -- -- 15.28 -- -- 21.59 2TC Technology Fund (8/01;5/97)(f) -- -- (29.89) -- -- 31.22 2TL Telecommunications Fund (8/01;9/99)(f) -- -- (32.40) -- -- 8.89 JANUS ASPEN SERIES 2GT Global Technology Portfolio: Service Shares (5/00;1/00)(b),(m) -- (37.75)(c) -- -- -- (39.62)(d) 2IG International Growth Portfolio: Service Shares (5/00;5/94)(m) -- (37.40)(c) (23.23) 20.98 -- 18.82 LAZARD RETIREMENT SERIES 2IP International Equity Portfolio (9/99;9/98) (17.24) (8.73) (17.24) -- -- 4.82 MFS(R) 2MG Investors Growth Stock Series - Service Class (5/00;5/99)(n),(o) -- (24.51)(c) (14.24) -- -- 11.84 2MD New Discovery Series - Service Class (5/00;5/98)(n) -- (20.18)(c) (10.41) -- -- 19.22 2UT Utilities Series - Service Class (8/01;1/95)(f),(n) -- -- (2.22) 18.46 -- 20.85 PIONEER VCT 2PE Pioneer Equity-Income VCT Portfolio - Class II Shares (8/01;3/95)(f),(p) -- -- 5.03 14.88 -- 16.78 2EU Pioneer Europe VCT Portfolio - Class II Shares (8/01;10/98)(f),(q) -- -- (24.85) -- -- 0.38 PUTNAM VARIABLE TRUST 2HS Putnam VT Health Sciences Fund - Class IB Shares (8/01;4/98)(f),(r) -- -- 29.50 -- -- 11.78 2PI Putnam VT International Growth Fund - Class IB Shares (8/01;1/97)(f),(s) -- -- (17.37) -- -- 16.03 2VS Putnam VT Vista Fund - Class IB Shares (9/99;1/97)(s) (12.22) 16.07 (12.22) -- -- 18.70 STRONG FUNDS 2SO Strong Opportunity Fund II - Advisor Class (8/01;5/92)(f),(t) -- -- (9.20) 15.65 -- 16.32 WANGER 2IT International Small Cap (9/99;5/95) (34.00) 0.00 (34.00) 17.63 -- 21.70 2SP U.S. Small Cap (9/99;5/95) (15.93) (2.60) (15.93) 16.59 -- 17.56
-23- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Average Annual Total Return For Qualified Annuities (Without Purchase Payment Credits) With Surrender and Selection of MAV and EEP Death Benefit Riders and the Ten-Year Surrender Charge Schedule For Periods Ending Dec. 31, 2000 (continued) Performance since commencement of the Performance since subaccount commencement of the fund(a) ------------------------------------------------------------------------------------------------------------------------------------ Since Since Subaccount Investing In: 1 year commencement 1 year 5 years 10 years commencement WELLS FARGO VT 2AA Asset Allocation Fund (5/01;4/94)(f) --% --% (7.55%) 10.93% --% 12.32% 2WI International Equity Fund (5/01;7/00)(f) -- -- -- -- -- (17.61)(d) 2SG Small Cap Growth Fund (5/01;5/95)(f) -- -- (29.09) 7.28 -- 9.37
(a) Current applicable charges deducted from fund performance include a $30 contract administrative charge, a 0.15% MAV fee, 0.40% EEP fee, a 0.75% mortality and expense risk fee, and applicable surrender charges. Premium taxes are not reflected in these total returns. (b) (Commencement date of the subaccount; Commencement date of the fund) (c) Cumulative return (not annualized) since commencement date of the subaccount. (d) Cumulative return (not annualized) since commencement date of the fund. (e) Fund had not commenced operations as of Dec. 31, 2000. (f) Subaccount had not commenced operations as of Dec. 31, 2000. (g) The historical performance information relates to that of the Fund Series I shares and not of the Series II shares, which were first offered July 16, 2001. Additional information relating to the Series II shares can be found in the Fund prospectus or Statement of Additional Information. (h) If Class II had existed during the periods presented, its performance would have been substantially similar to that of the existing class of the fund because each represents an investment in the same portfolio of securities. However, performance of Class II would have been lower because of its higher expense ratio. (i) Historical performance shown for Class L shares prior to its inception is based on the performance of Class I shares, the original class offered. These historical returns for Class L shares have been adjusted to reflect the effect of the 0.25% 12b-1 fees for Class L shares. Class I shares do not pay 12b-1 fees. If these fees had not been reflected, returns would have been higher. (j) The returns shown above are for Initial Class of the fund, which is not available through this prospectus. Service Class 2 would have substantially similar annual returns to Initial Class because the classes are invested in the same portfolio of securities. Service Class 2's returns will be lower than Initial Class's returns to the extent that Service Class 2 has higher expenses. (k) Ongoing stock market volatility can dramatically change the fund's short term performance; current results may differ. Because Class 2 shares were not offered until Jan. 6, 1999, standardized Class 2 fund performance for prior periods represents historical results of Class 1 shares. For periods beginning Jan. 6, 1999 Class 2's results reflect an additional 12b-1 fee expense, which also affects future performance. (l) CORE(SM) is a service mark of Goldman, Sachs & Co. (m) The returns shown for the Service Shares of these Portfolios reflect the historical performance of a different class of shares (the Institutional Shares) prior to Dec. 31, 1999, restated based on the Service Shares' estimated fees and expenses (ignoring any fee and expense limitations). (n) Service Class shares commenced operations in May 2000. Service Class shares carry a 0.20% annual Rule 12b-1 fee. Service Class share performance includes the performance of the series' Initial Class shares for periods prior to the inception of Service Class shares (blended performance). These blended performance figures have not been adjusted to take into account differences in the class-specific operating expenses (such as Rule 12b-1 fees). Because operating expenses of Service Class shares are higher than those of Initial class shares, the blended Service Class share performance is higher than it would have been had the Service Class shares been offered for the entire period. (o) Previously MFS(R)Growth Series. (p) Performance of the portfolio's Class I shares are from inception date of September 14, 1999. Although Class II shares invest in the same portfolio investments as Class I shares, Class II shares would have the same investment results except for the difference in class expense. Class II shares are subject to a .25% distribution fee, which Class I shares do not pay. Consequently, the performance of Class II shares will be lower. (q) Performance of the portfolio's Class I shares are from inception date of October 30,1998. Although Class II shares invest in the same portfolio investments as Class I shares, Class II shares would have the same investment results except for the difference in class expense. Class II shares are subject to a .25% distribution fee, which Class I shares do not pay. Consequently, the performance of Class II shares will be lower. (r) The Trustees of the Putnam Variable Trust currently limit 12b-1 fee payments on Class IB shares to 0.25% of average net assets. (s) Performance information for Class IB shares for periods prior to April 30, 1998 for Putnam VT International Growth Fund and Putnam VT Vista Fund are based on the performance of the fund's Class IA shares (not offered as an investment option) adjusted to reflect the fees paid by Class IB shares, including a Rule 12b-1 fee of 0.15. Please note that as of May 1, 2001 the Rule 12b-1 fee will increase to 0.25%. (t) Performance results for Advisor Class shares, which were first offered on July 12, 2001, are based on historical performance of the fund's Investor Class shares from the inception of the fund through July, 11, 2001, recalculated to reflect the higher annual expense ratio applicable to the Advisor Class shares. -24- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Average Annual Total Return For Qualified Annuities (Without Purchase Payment Credits) With Surrender and Selection of MAV and EEP Death Benefit Riders and the Seven-Year Surrender Charge Schedule For Periods Ending Dec. Performance since commencement of the Performance since subaccount commencement of the fund(a) ------------------------------------------------------------------------------------------------------------------------------------ Since Since Subaccount Investing In: 1 year commencement 1 year 5 years 10 years commencement AXP(R)VARIABLE PORTFOLIO - BC2 Blue Chip Advantage Fund (9/99;9/99)(b) (17.27%) (5.07%) (17.27%) --% --% (5.07%) BD2 Bond Fund (9/99;10/81) (2.60) (0.93) (2.60) 2.59 6.90 9.02 CR2 Capital Resource Fund (9/99;10/81) (23.72) (8.79) (23.72) 9.08 11.82 12.50 CM2 Cash Management Fund (9/99;10/81) (2.21) (0.94) (2.21) 2.94 3.32 5.16 DE2 Diversified Equity Income Fund (9/99;9/99) (8.32) (3.41) (8.32) -- -- (3.41) EM2 Emerging Markets Fund (5/00;5/00) -- (31.93)(c) -- -- -- (31.93)(d) ES2 Equity Select Fund (5/01;4/01)(e) -- -- -- -- -- -- EI2 Extra Income Fund (9/99;5/96) (16.20) (11.91) (16.20) -- -- (0.22) FI2 Federal Income Fund (9/99;9/99) 0.22 0.09 0.22 -- -- 0.09 GB2 Global Bond Fund (9/99;5/96) (4.60) (3.53) (4.60) -- -- 1.54 GR2 Growth Fund (9/99;9/99) (25.41) (8.37) (25.41) -- -- (8.37) IE2 International Fund (9/99;1/92) (30.61) (8.35) (30.61) 5.15 -- 6.90 MF2 Managed Fund (9/99;4/86) (9.72) (0.45) (9.72) 10.60 11.49 10.37 ND2 New Dimensions Fund(R)(9/99;5/96) (15.98) 1.35 (15.98) -- -- 15.67 SV2 Partners Small Cap Value Fund (8/01;8/01)(e) -- -- -- -- -- -- IV2 S&P 500 Index Fund (5/00;5/00) -- (16.47)(c) -- -- -- (16.47)(d) SC2 Small Cap Advantage Fund (9/99;9/99) (3.74) 6.95 (3.74) -- -- 6.95 ST2 Stock Fund (8/01;8/01)(e) -- -- -- -- -- -- SA2 Strategy Aggressive Fund (9/99;1/92) (25.17) 11.93 (25.17) 11.14 -- 10.91 AIM V.I. 2AC Capital Appreciation Fund, Series II (8/01;5/93)(f),(g) -- -- (17.66) 13.42 -- 15.91 2AD Capital Development Fund, Series II (8/01;5/98)(f),(g) -- -- 0.95 -- -- 6.73 ALLIANCE VP 2AB AllianceBernstein International Value Portfolio (Class B) (8/01;5/01)(e) -- -- -- -- -- -- 2AL Growth & Income Portfolio (Class B) (8/01;1/91)(f) -- -- 5.09 17.47 -- 13.74 AMERICAN CENTURY VP 2AI International, Class II (8/01;5/94)(f),(h) -- -- (23.13) 13.03 -- 10.58 2AV Value, Class II (8/01;5/96)(f),(h) -- -- 9.66 -- -- 10.41 CALVERT VARIABLE SERIES, INC. 2SR Social Balanced Portfolio (5/00;9/86) -- (15.49)(c) (10.58) 9.19 9.81 9.14 EVERGREEN VA 2CG Capital Growth Fund, Class L Shares (8/01;3/98)(f),(i) -- -- 9.21 -- -- 7.99 FIDELITY VIP 2FG III Growth & Income Portfolio (Service Class 2) (8/01;12/96)(f),(j) -- -- (11.11) -- -- 12.93 2FM III Mid Cap Portfolio (Service Class 2) (8/01;12/98)(f),(j) -- -- 24.74 -- -- 38.50 2FO Overseas Portfolio (Service Class 2) (8/01;1/87)(f),(j) -- -- (25.41) 8.24 7.81 6.97
-25- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Average Annual Total Return For Qualified Annuities (Without Purchase Payment Credits) With Surrender and Selection of MAV and EEP Death Benefit Riders and the Seven-Year Surrender Charge Schedule For Periods Ending Dec. 31, 2000 (continued) Performance since commencement of the Performance since subaccount commencement of the fund(a) ------------------------------------------------------------------------------------------------------------------------------------ Since Since Subaccount Investing In: 1 year commencement 1 year 5 years 10 years commencement FRANKLIN TEMPLETON VIP TRUST 2RE Franklin Real Estate Fund - Class 2 (9/99;1/89)(k) 23.00% 14.50% 23.00% 8.32% 12.05% 9.01% 2SI Franklin Value Securities Fund - Class 2 (9/99;5/98)(k) 16.48 11.20 16.48 -- -- (4.21) 2MS Mutual Shares Securities Fund - Class 2 (8/01;11/96)(f),(k) -- -- 4.75 -- -- 9.08 GOLDMAN SACHS VIT 2UE CORE(SM) U.S. Equity Fund (9/99;2/98)(l) (16.47) (5.09) (16.47) -- -- 5.63 2MC Mid Cap Value Fund (9/99;5/98) 22.49 12.97 22.49 -- -- 0.46 INVESCO VIF 2ID Dynamics Fund (8/01;8/97)(f) -- -- (10.88) -- -- 17.49 2FS Financial Services Fund (8/01;9/99)(f) -- -- 16.28 -- -- 22.33 2TC Technology Fund (8/01;5/97)(f) -- -- (29.23) -- -- 31.35 2TL Telecommunications Fund (8/01;9/99)(f) -- -- (31.76) -- -- 9.65 JANUS ASPEN SERIES 2GT Global Technology Portfolio: Service Shares (5/00;1/00)(b),(m) -- (37.17)(c) -- -- -- (39.07)(d) 2IG International Growth Portfolio: Service Shares (5/00;5/94)(m) -- (36.51)(c) (22.50) 21.16 -- 18.98 LAZARD RETIREMENT SERIES 2IP International Equity Portfolio (9/99;9/98) (16.45) (8.04) (16.45) -- -- 5.22 MFS(R) 2MG Investors Growth Stock Series - Service Class (5/00;5/99)(n),(o) -- (23.42)(c) (13.42) -- -- 12.40 2MD New Discovery Series - Service Class (5/00;5/98)(n) -- (19.02)(c) (9.54) -- -- 19.50 2UT Utilities Series - Service Class (8/01;1/95)(f),(n) -- -- (1.26) 18.66 -- 20.98 PIONEER VCT 2PE Pioneer Equity-Income VCT Portfolio - Class II Shares (8/01;3/95)(f),(p) -- -- 6.03 15.11 -- 16.93 2EU Pioneer Europe VCT Portfolio - Class II Shares (8/01;10/98)(f),(q) -- -- (24.14) -- -- 0.83 PUTNAM VARIABLE TRUST 2HS Putnam VT Health Sciences Fund - Class IB Shares (8/01;4/98)(f),(r) -- -- 30.50 -- -- 12.09 2PI Putnam VT International Growth Fund - Class IB Shares (8/01;1/97)(f),(s) -- -- (16.57) -- -- 16.18 2VS Putnam VT Vista Fund - Class IB Shares (9/99;1/97)(s) (11.37) 16.81 (11.37) -- -- 18.84 STRONG FUNDS 2SO Strong Opportunity Fund II - Advisor Class (8/01;5/92)(f),(t) -- -- (8.32) 15.87 -- 16.42 WANGER 2IT International Small Cap (9/99;5/95) (33.39) 0.76 (33.39) 17.83 -- 21.84 2SP U.S. Small Cap (9/99;5/95) (15.12) (1.86) (15.12) 16.80 -- 17.72
-26- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Average Annual Total Return For Qualified Annuities (Without Purchase Payment Credits) With Surrender and Selection of MAV and EEP Death Benefit Riders and the Seven-Year Surrender Charge Schedule For Periods Ending Dec. 31, 2000 (continued) Performance since commencement of the Performance since subaccount commencement of the fund(a) ------------------------------------------------------------------------------------------------------------------------------------ Since Since Subaccount Investing In: 1 year commencement 1 year 5 years 10 years commencement WELLS FARGO VT 2AA Asset Allocation Fund (5/01;4/94)(f) --% --% (6.65%) 11.19% --% 12.55% 2WI International Equity Fund (5/01;7/00)(f) -- -- -- -- -- (16.82)(d) 2SG Small Cap Growth Fund (5/01;5/95)(f) -- -- (28.42) 7.57 -- 9.60
(a) Current applicable charges deducted from fund performance include a $30 contract administrative charge, a 0.15% MAV fee, a 0.40% EEP fee, a 0.75% mortality and expense risk fee, and applicable surrender charges. Premium taxes are not reflected in these total returns. (b) (Commencement date of the subaccount; Commencement date of the fund) (c) Cumulative return (not annualized) since commencement date of the subaccount. (d) Cumulative return (not annualized) since commencement date of the fund. (e) Fund had not commenced operations as of Dec. 31, 2000. (f) Subaccount had not commenced operations as of Dec. 31, 2000. (g) The historical performance information relates to that of the Fund Series I shares and not of the Series II shares, which were first offered July 16, 2001. Additional information relating to the Series II shares can be found in the Fund prospectus or Statement of Additional Information. (h) If Class II had existed during the periods presented, its performance would have been substantially similar to that of the existing class of the fund because each represents an investment in the same portfolio of securities. However, performance of Class II would have been lower because of its higher expense ratio. (i) Historical performance shown for Class L shares prior to its inception is based on the performance of Class I shares, the original class offered. These historical returns for Class L shares have been adjusted to reflect the effect of the 0.25% 12b-1 fees for Class L shares. Class I shares do not pay 12b-1 fees. If these fees had not been reflected, returns would have been higher. (j) The returns shown above are for Initial Class of the fund, which is not available through this prospectus. Service Class 2 would have substantially similar annual returns to Initial Class because the classes are invested in the same portfolio of securities. Service Class 2's returns will be lower than Initial Class's returns to the extent that Service Class 2 has higher expenses. (k) Ongoing stock market volatility can dramatically change the fund's short term performance; current results may differ. Because Class 2 shares were not offered until Jan. 6, 1999, standardized Class 2 fund performance for prior periods represents historical results of Class 1 shares. For periods beginning Jan. 6, 1999 Class 2's results reflect an additional 12b-1 fee expense, which also affects future performance. (l) CORE(SM) is a service mark of Goldman, Sachs & Co. (m) The returns shown for the Service Shares of these Portfolios reflect the historical performance of a different class of shares (the Institutional Shares) prior to Dec. 31, 1999, restated based on the Service Shares' estimated fees and expenses (ignoring any fee and expense limitations). (n) Service Class shares commenced operations in May 2000. Service Class shares carry a 0.20% annual Rule 12b-1 fee. Service Class share performance includes the performance of the series' Initial Class shares for periods prior to the inception of Service Class shares (blended performance). These blended performance figures have not been adjusted to take into account differences in the class-specific operating expenses (such as Rule 12b-1 fees). Because operating expenses of Service Class shares are higher than those of Initial class shares, the blended Service Class share performance is higher than it would have been had the Service Class shares been offered for the entire period. (o) Previously MFS(R)Growth Series. (p) Performance of the portfolio's Class I shares are from inception date of September 14, 1999. Although Class II shares invest in the same portfolio investments as Class I shares, Class II shares would have the same investment results except for the difference in class expense. Class II shares are subject to a .25% distribution fee, which Class I shares do not pay. Consequently, the performance of Class II shares will be lower. (q) Performance of the portfolio's Class I shares are from inception date of October 30,1998. Although Class II shares invest in the same portfolio investments as Class I shares, Class II shares would have the same investment results except for the difference in class expense. Class II shares are subject to a .25% distribution fee, which Class I shares do not pay. Consequently, the performance of Class II shares will be lower. (r) The Trustees of the Putnam Variable Trust currently limit 12b-1 fee payments on Class IB shares to 0.25% of average net assets. (s) Performance information for Class IB shares for periods prior to April 30, 1998 for Putnam VT International Growth Fund and Putnam VT Vista Fund are based on the performance of the fund's Class IA shares (not offered as an investment option) adjusted to reflect the fees paid by Class IB shares, including a Rule 12b-1 fee of 0.15. Please note that as of May 1, 2001 the Rule 12b-1 fee will increase to 0.25%. (t) Performance results for Advisor Class shares, which were first offered on July 12, 2001, are based on historical performance of the fund's Investor Class shares from the inception of the fund through July, 11, 2001, recalculated to reflect the higher annual expense ratio applicable to the Advisor Class shares. -27- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Average Annual Total Return For Qualified Annuities (Without Purchase Payment Credits) Without Surrender and Selection of MAV and EEP Death Benefit Riders For Periods Ending Dec. 31, 2000 Performance since commencement of the Performance since subaccount commencement of the fund(a) ------------------------------------------------------------------------------------------------------------------------------------ Since Since Subaccount Investing In: 1 year commencement 1 year 5 years 10 years commencement AXP(R)VARIABLE PORTFOLIO - BC2 Blue Chip Advantage Fund (9/99;9/99)(b) (11.76%) (0.13%) (11.76%) --% --% (0.13%) BD2 Bond Fund (9/99;10/81) 4.02 4.24 4.02 3.46 6.90 9.02 CR2 Capital Resource Fund (9/99;10/81) (18.68) (4.08) (18.68) 9.76 11.82 12.50 CM2 Cash Management Fund (9/99;10/81) 4.44 4.23 4.44 3.79 3.32 5.16 DE2 Diversified Equity Income Fund (9/99;9/99) (2.13) 1.62 (2.13) -- -- 1.62 EM2 Emerging Markets Fund (5/00;5/00) -- (27.52)(c) -- -- -- (27.52)(d) ES2 Equity Select Fund (5/01;4/01)(e) -- -- -- -- -- -- EI2 Extra Income Fund (9/99;5/96) (10.60) (7.39) (10.60) -- -- 0.78 FI2 Federal Income Fund (9/99;9/99) 7.06 5.33 7.06 -- -- 5.33 GB2 Global Bond Fund (9/99;5/96) 1.87 1.49 1.87 -- -- 2.52 GR2 Growth Fund (9/99;9/99) (20.50) (3.63) (20.50) -- -- (3.63) IE2 International Fund (9/99;1/92) (26.10) (3.61) (26.10) 5.94 -- 6.90 MF2 Managed Fund (9/99;4/86) (3.64) 4.75 (3.64) 11.25 11.49 10.37 ND2 New Dimensions Fund(R)(9/99;5/96) (10.37) 6.66 (10.37) -- -- 16.28 SV2 Partners Small Cap Value Fund (8/01;8/01)(e) -- -- -- -- -- -- IV2 S&P 500 Index Fund (5/00;5/00) -- (10.89)(c) -- -- -- (10.89)(d) SC2 Small Cap Advantage Fund (9/99;9/99) 2.79 12.21 2.79 -- -- 12.21 ST2 Stock Fund (8/01;8/01)(e) -- -- -- -- -- -- SA2 Strategy Aggressive Fund (9/99;1/92) (20.25) 17.12 (20.25) 11.78 -- 10.91 AIM V.I. 2AC Capital Appreciation Fund, Series II (8/01;5/93)(f),(g) -- -- (12.18) 14.01 -- 15.91 2AD Capital Development Fund, Series II (8/01;5/98)(f),(g) -- -- 7.83 -- -- 9.03 ALLIANCE VP 2AB AllianceBernstein International Value Portfolio (Class B) (8/01;5/01)(e) -- -- -- -- -- -- 2AL Growth & Income Portfolio (Class B) (8/01;1/91)(f) -- -- 12.09 17.98 -- 13.74 AMERICAN CENTURY VP 2AI International, Class II (8/01;5/94)(f),(h) -- -- (18.05) 13.63 -- 10.74 2AV Value, Class II (8/01;5/96)(f),(h) -- -- 16.66 -- -- 11.14 CALVERT VARIABLE SERIES, INC. 2SR Social Balanced Portfolio (5/00;9/86) -- (6.84)(c) (4.56) 9.87 9.81 9.14 EVERGREEN VA 2CG Capital Growth Fund, Class L Shares (8/01;3/98)(f),(i) -- -- 16.21 -- -- 10.08 FIDELITY VIP 2FG III Growth & Income Portfolio (Service Class 2) (8/01;12/96)(f),(j) -- -- (5.13) -- -- 13.78 2FM III Mid Cap Portfolio (Service Class 2) (8/01;12/98)(f),(j) -- -- 31.74 -- -- 40.97 2FO Overseas Portfolio (Service Class 2) (8/01;1/87)(f),(j) -- -- (20.50) 8.95 7.84 6.97
-28- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Average Annual Total Return For Qualified Annuities (Without Purchase Payment Credits) Without Surrender and Selection of MAV and EEP Death Benefit Riders For Periods Ending Dec. 31, 2000 (continued) Performance since commencement of the Performance since subaccount commencement of the fund(a) ------------------------------------------------------------------------------------------------------------------------------------ Since Since Subaccount Investing In: 1 year commencement 1 year 5 years 10 years commencement FRANKLIN TEMPLETON VIP TRUST 2RE Franklin Real Estate Fund - Class 2 (9/99;1/89)(k) 30.00% 19.66% 30.00% 9.03% 12.05% 9.01% 2SI Franklin Value Securities Fund - Class 2 (9/99;5/98)(k) 23.48 16.41 23.48 -- -- (1.84) 2MS Mutual Shares Securities Fund - Class 2 (8/01;11/96)(f),(k) -- -- 11.75 -- -- 9.97 GOLDMAN SACHS VIT 2UE CORE(SM) U.S. Equity Fund (9/99;2/98)(l) (10.90) (0.17) (10.90) -- -- 7.76 2MC Mid Cap Value Fund (9/99;5/98) 29.49 18.15 29.49 -- -- 2.98 INVESCO VIF 2ID Dynamics Fund (8/01;8/97)(f) -- -- (4.88) -- -- 18.68 2FS Financial Services Fund (8/01;9/99)(f) -- -- 23.28 -- -- 27.46 2TC Technology Fund (8/01;5/97)(f) -- -- (24.61) -- -- 32.15 2TL Telecommunications Fund (8/01;9/99)(f) -- -- (27.34) -- -- 14.94 JANUS ASPEN SERIES 2GT Global Technology Portfolio: Service Shares (5/00;1/00)(b),(m) -- (33.16)(c) -- -- -- (35.19)(d) 2IG International Growth Portfolio: Service Shares (5/00;5/94)(m) -- (30.18)(c) (17.38) 21.61 -- 19.09 LAZARD RETIREMENT SERIES 2IP International Equity Portfolio (9/99;9/98) (10.87) (3.29) (10.87) -- -- 7.96 MFS(R) 2MG Investors Growth Stock Series - Service Class (5/00;5/99)(n),(o) -- (15.65)(c) (7.61) -- -- 16.24 2MD New Discovery Series - Service Class (5/00;5/98)(n) -- (10.76)(c) (3.44) -- -- 21.41 2UT Utilities Series - Service Class (8/01;1/95)(f),(n) -- -- 5.46 19.15 -- 21.23 PIONEER VCT 2PE Pioneer Equity-Income VCT Portfolio - Class II Shares (8/01;3/95)(f),(p) -- -- 13.03 15.66 -- 17.25 2EU Pioneer Europe VCT Portfolio - Class II Shares (8/01;10/98)(f),(q) -- -- (19.14) -- -- 3.87 PUTNAM VARIABLE TRUST 2HS Putnam VT Health Sciences Fund - Class IB Shares (8/01;4/98)(f),(r) -- -- 37.50 -- -- 14.20 2PI Putnam VT International Growth Fund - Class IB Shares (8/01;1/97)(f),(s) -- -- (11.00) -- -- 17.12 2VS Putnam VT Vista Fund - Class IB Shares (9/99;1/97)(s) (5.41) 21.94 (5.41) -- -- 19.72 STRONG FUNDS 2SO Strong Opportunity Fund II - Advisor Class (8/01;5/92)(f),(t) -- -- (2.13) 16.41 -- 16.42 WANGER 2IT International Small Cap (9/99;5/95) (29.09) 6.04 (29.09) 18.33 -- 22.11 2SP U.S. Small Cap (9/99;5/95) (9.45) 3.26 (9.45) 17.32 -- 18.04
-29- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Average Annual Total Return For Qualified Annuities (Without Purchase Payment Credits) Without Surrender and Selection of MAV and EEP Death Benefit Riders For Periods Ending Dec. 31, 2000 (continued) Performance since commencement of the Performance since subaccount commencement of the fund(a) ------------------------------------------------------------------------------------------------------------------------------------ Since Since Subaccount Investing In: 1 year commencement 1 year 5 years 10 years commencement WELLS FARGO VT 2AA Asset Allocation Fund (5/01;4/94)(f) --% --% (0.34%) 11.82% --% 12.69% 2WI International Equity Fund (5/01;7/00)(f) -- -- -- -- -- (11.27)(d) 2SG Small Cap Growth Fund (5/01;5/95)(f) -- -- (23.74) 8.30 -- 10.05
(a) Current applicable charges deducted from fund performance include a $30 contract administrative charge, a 0.15% MAV fee, a 0.40% EEP fee and a 0.75% mortality and expense risk fee. Premium taxes are not reflected in these total returns. (b) (Commencement date of the subaccount; Commencement date of the fund) (c) Cumulative return (not annualized) since commencement date of the subaccount. (d) Cumulative return (not annualized) since commencement date of the fund. (e) Fund had not commenced operations as of Dec. 31, 2000. (f) Subaccount had not commenced operations as of Dec. 31, 2000. (g) The historical performance information relates to that of the Fund Series I shares and not of the Series II shares, which were first offered July 16, 2001. Additional information relating to the Series II shares can be found in the Fund prospectus or Statement of Additional Information. (h) If Class II had existed during the periods presented, its performance would have been substantially similar to that of the existing class of the fund because each represents an investment in the same portfolio of securities. However, performance of Class II would have been lower because of its higher expense ratio. (i) Historical performance shown for Class L shares prior to its inception is based on the performance of Class I shares, the original class offered. These historical returns for Class L shares have been adjusted to reflect the effect of the 0.25% 12b-1 fees for Class L shares. Class I shares do not pay 12b-1 fees. If these fees had not been reflected, returns would have been higher. (j) The returns shown above are for Initial Class of the fund, which is not available through this prospectus. Service Class 2 would have substantially similar annual returns to Initial Class because the classes are invested in the same portfolio of securities. Service Class 2's returns will be lower than Initial Class's returns to the extent that Service Class 2 has higher expenses. (k) Ongoing stock market volatility can dramatically change the fund's short term performance; current results may differ. Because Class 2 shares were not offered until Jan. 6, 1999, standardized Class 2 fund performance for prior periods represents historical results of Class 1 shares. For periods beginning Jan. 6, 1999 Class 2's results reflect an additional 12b-1 fee expense, which also affects future performance. (l) CORE(SM) is a service mark of Goldman, Sachs & Co. (m) The returns shown for the Service Shares of these Portfolios reflect the historical performance of a different class of shares (the Institutional Shares) prior to Dec. 31, 1999, restated based on the Service Shares' estimated fees and expenses (ignoring any fee and expense limitations). (n) Service Class shares commenced operations in May 2000. Service Class shares carry a 0.20% annual Rule 12b-1 fee. Service Class share performance includes the performance of the series' Initial Class shares for periods prior to the inception of Service Class shares (blended performance). These blended performance figures have not been adjusted to take into account differences in the class-specific operating expenses (such as Rule 12b-1 fees). Because operating expenses of Service Class shares are higher than those of Initial class shares, the blended Service Class share performance is higher than it would have been had the Service Class shares been offered for the entire period. (o) Previously MFS(R)Growth Series. (p) Performance of the portfolio's Class I shares are from inception date of September 14, 1999. Although Class II shares invest in the same portfolio investments as Class I shares, Class II shares would have the same investment results except for the difference in class expense. Class II shares are subject to a .25% distribution fee, which Class I shares do not pay. Consequently, the performance of Class II shares will be lower. (q) Performance of the portfolio's Class I shares are from inception date of October 30,1998. Although Class II shares invest in the same portfolio investments as Class I shares, Class II shares would have the same investment results except for the difference in class expense. Class II shares are subject to a .25% distribution fee, which Class I shares do not pay. Consequently, the performance of Class II shares will be lower. (r) The Trustees of the Putnam Variable Trust currently limit 12b-1 fee payments on Class IB shares to 0.25% of average net assets. (s) Performance information for Class IB shares for periods prior to April 30, 1998 for Putnam VT International Growth Fund and Putnam VT Vista Fund are based on the performance of the fund's Class IA shares (not offered as an investment option) adjusted to reflect the fees paid by Class IB shares, including a Rule 12b-1 fee of 0.15. Please note that as of May 1, 2001 the Rule 12b-1 fee will increase to 0.25%. (t) Performance results for Advisor Class shares, which were first offered on July 12, 2001, are based on historical performance of the fund's Investor Class shares from the inception of the fund through July, 11, 2001, recalculated to reflect the higher annual expense ratio applicable to the Advisor Class shares. -30- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Average Annual Total Return For Qualified Annuities (Without Purchase Payment Credits) With Surrender and Selection of a Ten-Year Surrender Charge Schedule For Periods Ending Dec. 31, 2000 Performance since commencement of the Performance since subaccount commencement of the fund(a) ------------------------------------------------------------------------------------------------------------------------------------ Since Since Subaccount Investing In: 1 year commencement 1 year 5 years 10 years commencement AXP(R)VARIABLE PORTFOLIO - BC2 Blue Chip Advantage Fund (9/99;9/99)(b) (17.51%) (5.23%) (17.51%) --% --% (5.23%) BD2 Bond Fund (9/99;10/81) (3.00) (1.13) (3.00) 2.78 7.35 9.57 CR2 Capital Resource Fund (9/99;10/81) (23.88) (8.92) (23.88) 9.35 12.30 13.05 CM2 Cash Management Fund (9/99;10/81) (2.61) (1.14) (2.61) 3.14 3.72 5.71 DE2 Diversified Equity Income Fund (9/99;9/99) (8.65) (3.58) (8.65) -- -- (3.58) EM2 Emerging Markets Fund (5/00;5/00) -- (32.01)(c) -- -- -- (32.01)(d) ES2 Equity Select Fund (5/01;4/01)(e) -- -- -- -- -- -- EI2 Extra Income Fund (9/99;5/96) (16.45) (12.01) (16.45) -- -- (0.08) FI2 Federal Income Fund (9/99;9/99) (0.20) (0.11) (0.20) -- -- (0.11) GB2 Global Bond Fund (9/99;5/96) (4.97) (3.71) (4.97) -- -- 1.69 GR2 Growth Fund (9/99;9/99) (25.56) (8.50) (25.56) -- -- (8.50) IE2 International Fund (9/99;1/92) (30.70) (8.48) (30.70) 5.38 -- 7.26 MF2 Managed Fund (9/99;4/86) (10.04) (0.65) (10.40) 10.88 11.97 10.92 ND2 New Dimensions Fund(R)(9/99;5/96) (16.23) 1.13 (16.23) -- -- 15.97 SV2 Partners Small Cap Value Fund (8/01;8/01)(e) -- -- -- -- -- -- IV2 S&P 500 Index Fund (5/00;5/00) -- (16.71)(c) -- -- -- (16.71)(d) SC2 Small Cap Advantage Fund (9/99;9/99) (4.13) 6.74 (4.13) -- -- 6.74 ST2 Stock Fund (8/01;8/01)(e) -- -- -- -- -- -- SA2 Strategy Aggressive Fund (9/99;1/92) (25.32) 11.73 (25.32) 11.43 -- 11.31 AIM V.I. 2AC Capital Appreciation Fund, Series II (8/01;5/93)(f),(g) -- -- (17.90) 13.73 -- 16.27 2AD Capital Development Fund, Series II (8/01;5/98)(f),(g) -- -- 0.51 -- -- 6.95 ALLIANCE VP 2AB AllianceBernstein International Value Portfolio (Class B) (8/01;5/01)(e) -- -- -- -- -- -- 2AL Growth & Income Portfolio (Class B) (8/01;1/91)(f) -- -- 4.64 17.82 -- 14.23 AMERICAN CENTURY VP 2AI International, Class II (8/01;5/94)(f),(h) -- -- (23.30) 13.34 -- 10.88 2AV Value, Class II (8/01;5/96)(f),(h) -- -- 9.21 -- -- 10.67 CALVERT VARIABLE SERIES, INC. 2SR Social Balanced Portfolio (5/00;9/86) -- (16.16)(c) (10.89) 9.46 10.28 9.69 EVERGREEN VA 2CG Capital Growth Fund, Class L Shares (8/01;3/98)(f),(i) -- -- 8.76 -- -- 8.24 FIDELITY VIP 2FG III Growth & Income Portfolio (Service Class 2) (8/01;12/96)(f),(j) -- -- (11.42) -- -- 13.14 2FM III Mid Cap Portfolio (Service Class 2) (8/01;12/98)(f),(j) -- -- 24.29 -- -- 38.69 2FO Overseas Portfolio (Service Class 2) (8/01;1/87)(f),(j) -- -- (25.56) 8.46 8.26 7.52
-31- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Average Annual Total Return For Qualified Annuities (Without Purchase Payment Credits) With Surrender and Selection of a Ten-Year Surrender Charge Schedule For Periods Ending Dec. 31, 2000 (continued) Performance since Commencement of the Performance since subaccount commencement of the fund(a) ------------------------------------------------------------------------------------------------------------------------------------ Since Since Subaccount Investing In: 1 year commencement 1 year 5 years 10 years commencement FRANKLIN TEMPLETON VIP TRUST 2RE Franklin Real Estate Fund - Class 2 (9/99;1/89)(k) 22.55% 14.31% 22.55% 8.59% 12.53% 9.56% 2SI Franklin Value Securities Fund - Class 2 (9/99;5/98)(k) 16.03 11.00 16.03 -- -- (4.01) 2MS Mutual Shares Securities Fund - Class 2 (8/01;11/96)(f),(k) -- -- 4.30 -- -- 9.27 GOLDMAN SACHS VIT 2UE CORE(SM) U.S. Equity Fund (9/99;2/98)(l) (16.72) (5.25) (16.72) -- -- 5.87 2MC Mid Cap Value Fund (9/99;5/98) 22.04 12.77 22.04 -- -- 0.64 INVESCO VIF 2ID Dynamics Fund (8/01;8/97)(f) -- -- (11.18) -- -- 17.84 2FS Financial Services Fund (8/01;9/99)(f) -- -- 15.83 -- -- 22.14 2TC Technology Fund (8/01;5/97)(f) -- -- (29.34) -- -- 31.77 2TL Telecommunications Fund (8/01;9/99)(f) -- -- (31.85) -- -- 9.44 JANUS ASPEN SERIES 2GT Global Technology Portfolio: Service Shares (5/00;1/00)(b),(m) -- (37.20)(c) -- -- -- (39.07)(d) 2IG International Growth Portfolio: Service Shares (5/00;5/94)(m) -- (36.85)(c) (22.68) 21.53 -- 19.37 LAZARD RETIREMENT SERIES 2IP International Equity Portfolio (9/99;9/98) (16.69) (8.18) (16.69) -- -- 5.37 MFS(R) 2MG Investors Growth Stock Series - Service Class (5/00;5/99)(n),(o) -- (23.96)(c) (13.69) -- -- 12.39 2MD New Discovery Series - Service Class (5/00;5/98)(n) -- (19.63)(c) (9.86) -- -- 19.77 2UT Utilities Series - Service Class (8/01;1/95)(f),(n) -- -- (1.67) 19.01 -- 21.40 PIONEER VCT 2PE Pioneer Equity-Income VCT Portfolio - Class II Shares (8/01;3/95)(f),(p) -- -- 5.58 15.43 -- 17.33 2EU Pioneer Europe VCT Portfolio - Class II Shares (8/01;10/98)(f),(q) -- -- (24.30) -- -- 0.93 PUTNAM VARIABLE TRUST 2HS Putnam VT Health Sciences Fund - Class IB Shares (8/01;4/98)(f),(r) -- -- 30.05 -- -- 12.33 2PI Putnam VT International Growth Fund - Class IB Shares (8/01;1/97)(f),(s) -- -- (16.82) -- -- 16.58 2VS Putnam VT Vista Fund - Class IB Shares (9/99;1/97)(s) (11.67) 16.62 (11.67) -- -- 19.25 STRONG FUNDS 2SO Strong Opportunity Fund II - Advisor Class (8/01;5/92)(f),(t) -- -- (8.65) 16.20 -- 16.87 WANGER 2IT International Small Cap (9/99;5/95) (33.45) 0.55 (33.45) 18.18 -- 22.25 2SP U.S. Small Cap (9/99;5/95) (15.38) (2.05) (15.38) 17.14 -- 18.11
-32- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Average Annual Total Return For Qualified Annuities (Without Purchase Payment Credits) With Surrender and Selection of a Ten-Year Surrender Charge Schedule For Periods Ending Dec. 31, 2000 (continued) Performance since commencement of the Performance since subaccount commencement of the fund(a) ------------------------------------------------------------------------------------------------------------------------------------ Since Since Subaccount Investing In: 1 year commencement 1 year 5 years 10 years commencement WELLS FARGO VT 2AA Asset Allocation Fund (5/01;4/94)(f) --% --% (7.00%) 11.48% --% 12.87% 2WI International Equity Fund (5/01;7/00)(f) -- -- -- -- -- (17.06)(d) 2SG Small Cap Growth Fund (5/01;5/95)(f) -- -- (28.54) 7.83 -- 9.92
(a) Current applicable charges deducted from fund performance include a $30 contract administrative charge, a 0.75% mortality and expense risk fee, and applicable surrender charges. Premium taxes are not reflected in these total returns. (b) (Commencement date of the subaccount; Commencement date of the fund) (c) Cumulative return (not annualized) since commencement date of the subaccount. (d) Cumulative return (not annualized) since commencement date of the fund. (e) Fund had not commenced operations as of Dec. 31, 2000. (f) Subaccount had not commenced operations as of Dec. 31, 2000. (g) The historical performance information relates to that of the Fund Series I shares and not of the Series II shares, which were first offered July 16, 2001. Additional information relating to the Series II shares can be found in the Fund prospectus or Statement of Additional Information. (h) If Class II had existed during the periods presented, its performance would have been substantially similar to that of the existing class of the fund because each represents an investment in the same portfolio of securities. However, performance of Class II would have been lower because of its higher expense ratio. (i) Historical performance shown for Class L shares prior to its inception is based on the performance of Class I shares, the original class offered. These historical returns for Class L shares have been adjusted to reflect the effect of the 0.25% 12b-1 fees for Class L shares. Class I shares do not pay 12b-1 fees. If these fees had not been reflected, returns would have been higher. (j) The returns shown above are for Initial Class of the fund, which is not available through this prospectus. Service Class 2 would have substantially similar annual returns to Initial Class because the classes are invested in the same portfolio of securities. Service Class 2's returns will be lower than Initial Class's returns to the extent that Service Class 2 has higher expenses. (k) Ongoing stock market volatility can dramatically change the fund's short term performance; current results may differ. Because Class 2 shares were not offered until Jan. 6, 1999, standardized Class 2 fund performance for prior periods represents historical results of Class 1 shares. For periods beginning Jan. 6, 1999 Class 2's results reflect an additional 12b-1 fee expense, which also affects future performance. (l) CORE(SM) is a service mark of Goldman, Sachs & Co. (m) The returns shown for the Service Shares of these Portfolios reflect the historical performance of a different class of shares (the Institutional Shares) prior to Dec. 31, 1999, restated based on the Service Shares' estimated fees and expenses (ignoring any fee and expense limitations). (n) Service Class shares commenced operations in May 2000. Service Class shares carry a 0.20% annual Rule 12b-1 fee. Service Class share performance includes the performance of the series' Initial Class shares for periods prior to the inception of Service Class shares (blended performance). These blended performance figures have not been adjusted to take into account differences in the class-specific operating expenses (such as Rule 12b-1 fees). Because operating expenses of Service Class shares are higher than those of Initial class shares, the blended Service Class share performance is higher than it would have been had the Service Class shares been offered for the entire period. (o) Previously MFS(R)Growth Series. (p) Performance of the portfolio's Class I shares are from inception date of September 14, 1999. Although Class II shares invest in the same portfolio investments as Class I shares, Class II shares would have the same investment results except for the difference in class expense. Class II shares are subject to a .25% distribution fee, which Class I shares do not pay. Consequently, the performance of Class II shares will be lower. (q) Performance of the portfolio's Class I shares are from inception date of October 30,1998. Although Class II shares invest in the same portfolio investments as Class I shares, Class II shares would have the same investment results except for the difference in class expense. Class II shares are subject to a .25% distribution fee, which Class I shares do not pay. Consequently, the performance of Class II shares will be lower. (r) The Trustees of the Putnam Variable Trust currently limit 12b-1 fee payments on Class IB shares to 0.25% of average net assets. (s) Performance information for Class IB shares for periods prior to April 30, 1998 for Putnam VT International Growth Fund and Putnam VT Vista Fund are based on the performance of the fund's Class IA shares (not offered as an investment option) adjusted to reflect the fees paid by Class IB shares, including a Rule 12b-1 fee of 0.15. Please note that as of May 1, 2001 the Rule 12b-1 fee will increase to 0.25%. (t) Performance results for Advisor Class shares, which were first offered on July 12, 2001, are based on historical performance of the fund's Investor Class shares from the inception of the fund through July, 11, 2001, recalculated to reflect the higher annual expense ratio applicable to the Advisor Class shares. -33- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Average Annual Total Return For Qualified Annuities (Without Purchase Payment Credits) With Surrender and Selection of a Seven-Year Surrender Charge Schedule For Periods Ending Dec. 31, 2000 Performance since commencement of the Performance since subaccount commencement of the fund(a) ------------------------------------------------------------------------------------------------------------------------------------ Since Since Subaccount Investing In: 1 year commencement 1 year 5 years 10 years commencement AXP(R)VARIABLE PORTFOLIO - BC2 Blue Chip Advantage Fund (9/99;9/99)(b) (16.72%) (4.52%) (16.72%) --% --% (4.52%) BD2 Bond Fund (9/99;10/81) (2.05) (0.38) (2.05) 3.14 7.45 9.57 CR2 Capital Resource Fund (9/99;10/81) (23.17) (8.24) (23.17) 9.63 12.37 13.05 CM2 Cash Management Fund (9/99;10/81) (1.66) (0.39) (1.66) 3.49 3.87 5.71 DE2 Diversified Equity Income Fund (9/99;9/99) (7.77) (2.86) (7.77) -- -- (2.86) EM2 Emerging Markets Fund (5/00;5/00) -- (31.38)(c) -- -- -- (31.38)(d) ES2 Equity Select Fund (5/01;4/01)(e) -- -- -- -- -- -- EI2 Extra Income Fund (9/99;5/96) (15.65) (11.36) (15.65) -- -- 0.33 FI2 Federal Income Fund (9/99;9/99) 0.77 0.64 0.77 -- -- 0.64 GB2 Global Bond Fund (9/99;5/96) (4.05) (2.98) (4.05) -- -- 2.09 GR2 Growth Fund (9/99;9/99) (24.86) (7.82) (24.86) -- -- (7.82) IE2 International Fund (9/99;1/92) (30.06) (7.80) (30.06) 5.70 -- 7.45 MF2 Managed Fund (9/99;4/86) (9.17) 0.10 (9.17) 11.15 12.04 10.92 ND2 New Dimensions Fund(R)(9/99;5/96) (15.43) 1.90 (15.43) -- -- 16.22 SV2 Partners Small Cap Value Fund (8/01;8/01)(e) -- -- -- -- -- -- IV2 S&P 500 Index Fund (5/00;5/00) -- (15.92)(c) -- -- -- (15.92)(d) SC2 Small Cap Advantage Fund (9/99;9/99) (3.19) 7.50 (3.19) -- -- 7.50 ST2 Stock Fund (8/01;8/01)(e) -- -- -- -- -- -- SA2 Strategy Aggressive Fund (9/99;1/92) (24.62) 12.48 (24.62) 11.69 -- 11.46 AIM V.I. 2AC Capital Appreciation Fund, Series II (8/01;5/93)(f),(g) -- -- (17.11) 13.97 -- 16.46 2AD Capital Development Fund, Series II (8/01;5/98)(f),(g) -- -- 1.50 -- -- 7.28 ALLIANCE VP 2AB AllianceBernstein International Value Portfolio (Class B) (8/01;5/01)(e) -- -- -- -- -- -- 2AL Growth & Income Portfolio (Class B) (8/01;1/91)(f) -- -- 5.64 18.02 -- 14.29 AMERICAN CENTURY VP 2AI International, Class II (8/01;5/94)(f),(h) -- -- (22.58) 13.58 -- 11.13 2AV Value, Class II (8/01;5/96)(f),(h) -- -- 10.21 -- -- 10.96 CALVERT VARIABLE SERIES, INC. 2SR Social Balanced Portfolio (5/00;9/86) -- (14.94)(c) (10.03) 9.74 10.36 9.69 EVERGREEN VA 2CG Capital Growth Fund, Class L Shares (8/01;3/98)(f),(i) -- -- 9.76 -- -- 8.54 FIDELITY VIP 2FG III Growth & Income Portfolio (Service Class 2) (8/01;12/96)(f),(j) -- -- (10.56) -- -- 13.48 2FM III Mid Cap Portfolio (Service Class 2) (8/01;12/98)(f),(j) -- -- 25.29 -- -- 39.05 2FO Overseas Portfolio (Service Class 2) (8/01;1/87)(f),(j) -- -- (24.86) 8.79 8.36 7.52
-34- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Average Annual Total Return For Qualified Annuities (Without Purchase Payment Credits) With Surrender and Selection of a Seven-Year Surrender Charge Schedule For Periods Ending Dec. 31, 2000 (continued) Performance since commencement of the Performance since subaccount commencement of the fund(a) ------------------------------------------------------------------------------------------------------------------------------------ Since Since Subaccount Investing In: 1 year commencement 1 year 5 years 10 years commencement FRANKLIN TEMPLETON VIP TRUST 2RE Franklin Real Estate Fund - Class 2 (9/99;1/89)(k) 23.55% 15.05% 23.55% 8.87% 12.60% 9.56% 2SI Franklin Value Securities Fund - Class 2 (9/99;5/98)(k) 17.03 11.75 17.03 -- -- (3.66) 2MS Mutual Shares Securities Fund - Class 2 (8/01;11/96)(f),(k) -- -- 5.30 -- -- 9.63 GOLDMAN SACHS VIT 2UE CORE(SM) U.S. Equity Fund (9/99;2/98)(l) (15.92) (4.54) (15.92) -- -- 6.18 2MC Mid Cap Value Fund (9/99;5/98) 23.04 13.52 23.04 -- -- 1.01 INVESCO VIF 2ID Dynamics Fund (8/01;8/97)(f) -- -- (10.33) -- -- 18.04 2FS Financial Services Fund (8/01;9/99)(f) -- -- 16.83 -- -- 22.88 2TC Technology Fund (8/01;5/97)(f) -- -- (28.68) -- -- 31.90 2TL Telecommunications Fund (8/01;9/99)(f) -- -- (31.21) -- -- 10.20 JANUS ASPEN SERIES 2GT Global Technology Portfolio: Service Shares (5/00;1/00)(b),(m) -- (36.62)(c) -- -- -- (38.52)(d) 2IG International Growth Portfolio: Service Shares (5/00;5/94)(m) -- (35.96)(c) (21.95) 21.71 -- 19.53 LAZARD RETIREMENT SERIES 2IP International Equity Portfolio (9/99;9/98) (15.90) (7.49) (15.90) -- -- 5.77 MFS(R) 2MG Investors Growth Stock Series - Service Class (5/00;5/99)(n),(o) -- (22.87)(c) (12.87) -- -- 12.95 2MD New Discovery Series - Service Class (5/00;5/98)(n) -- (18.47)(c) (8.99) -- -- 20.05 2UT Utilities Series - Service Class (8/01;1/95)(f),(n) -- -- (0.71) 19.21 -- 21.53 PIONEER VCT 2PE Pioneer Equity-Income VCT Portfolio - Class II Shares (8/01;3/95)(f),(p) -- -- 6.58 15.66 -- 17.48 2EU Pioneer Europe VCT Portfolio - Class II Shares (8/01;10/98)(f),(q) -- -- (23.59) -- -- 1.38 PUTNAM VARIABLE TRUST 2HS Putnam VT Health Sciences Fund - Class IB Shares (8/01;4/98)(f),(r) -- -- 31.05 -- -- 12.64 2PI Putnam VT International Growth Fund - Class IB Shares (8/01;1/97)(f),(s) -- -- (16.02) -- -- 16.73 2VS Putnam VT Vista Fund - Class IB Shares (9/99;1/97)(s) (10.82) 17.36 (10.82) -- -- 19.39 STRONG FUNDS 2SO Strong Opportunity Fund II - Advisor Class (8/01;5/92)(f),(t) -- -- (7.77) 16.42 -- 16.97 WANGER 2IT International Small Cap (9/99;5/95) (32.84) 1.31 (32.84) 18.38 -- 22.39 2SP U.S. Small Cap (9/99;5/95) (14.57) (1.31) (14.57) 17.35 -- 18.27
-35- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Average Annual Total Return For Qualified Annuities (Without Purchase Payment Credits) With Surrender and Selection of a Seven-Year Surrender Charge Schedule For Periods Ending Dec. 31, 2000 (continued) Performance since commencement of the Performance since subaccount commencement of the fund(a) ------------------------------------------------------------------------------------------------------------------------------------ Since Since Subaccount Investing In: 1 year commencement 1 year 5 years 10 years commencement WELLS FARGO VT 2AA Asset Allocation Fund (5/01;4/94)(f) --% --% (6.10%) 11.74% --% 13.10% 2WI International Equity Fund (5/01;7/00)(f) -- -- -- -- -- (16.27)(d) 2SG Small Cap Growth Fund (5/01;5/95)(f) -- -- (27.87) 8.12 -- 10.15
(a) Current applicable charges deducted from fund performance include a $30 contract administrative charge, a 0.75% mortality and expense risk fee, and applicable surrender charges. Premium taxes are not reflected in these total returns. (b) (Commencement date of the subaccount; Commencement date of the fund) (c) Cumulative return (not annualized) since commencement date of the subaccount. (d) Cumulative return (not annualized) since commencement date of the fund. (e) Fund had not commenced operations as of Dec. 31, 2000. (f) Subaccount had not commenced operations as of Dec. 31, 2000. (g) The historical performance information relates to that of the Fund Series I shares and not of the Series II shares, which were first offered July 16, 2001. Additional information relating to the Series II shares can be found in the Fund prospectus or Statement of Additional Information. (h) If Class II had existed during the periods presented, its performance would have been substantially similar to that of the existing class of the fund because each represents an investment in the same portfolio of securities. However, performance of Class II would have been lower because of its higher expense ratio. (i) Historical performance shown for Class L shares prior to its inception is based on the performance of Class I shares, the original class offered. These historical returns for Class L shares have been adjusted to reflect the effect of the 0.25% 12b-1 fees for Class L shares. Class I shares do not pay 12b-1 fees. If these fees had not been reflected, returns would have been higher. (j) The returns shown above are for Initial Class of the fund, which is not available through this prospectus. Service Class 2 would have substantially similar annual returns to Initial Class because the classes are invested in the same portfolio of securities. Service Class 2's returns will be lower than Initial Class's returns to the extent that Service Class 2 has higher expenses. (k) Ongoing stock market volatility can dramatically change the fund's short term performance; current results may differ. Because Class 2 shares were not offered until Jan. 6, 1999, standardized Class 2 fund performance for prior periods represents historical results of Class 1 shares. For periods beginning Jan. 6, 1999 Class 2's results reflect an additional 12b-1 fee expense, which also affects future performance. (l) CORE(SM) is a service mark of Goldman, Sachs & Co. (m) The returns shown for the Service Shares of these Portfolios reflect the historical performance of a different class of shares (the Institutional Shares) prior to Dec. 31, 1999, restated based on the Service Shares' estimated fees and expenses (ignoring any fee and expense limitations). (n) Service Class shares commenced operations in May 2000. Service Class shares carry a 0.20% annual Rule 12b-1 fee. Service Class share performance includes the performance of the series' Initial Class shares for periods prior to the inception of Service Class shares (blended performance). These blended performance figures have not been adjusted to take into account differences in the class-specific operating expenses (such as Rule 12b-1 fees). Because operating expenses of Service Class shares are higher than those of Initial class shares, the blended Service Class share performance is higher than it would have been had the Service Class shares been offered for the entire period. (o) Previously MFS(R)Growth Series. (p) Performance of the portfolio's Class I shares are from inception date of September 14, 1999. Although Class II shares invest in the same portfolio investments as Class I shares, Class II shares would have the same investment results except for the difference in class expense. Class II shares are subject to a .25% distribution fee, which Class I shares do not pay. Consequently, the performance of Class II shares will be lower. (q) Performance of the portfolio's Class I shares are from inception date of October 30,1998. Although Class II shares invest in the same portfolio investments as Class I shares, Class II shares would have the same investment results except for the difference in class expense. Class II shares are subject to a .25% distribution fee, which Class I shares do not pay. Consequently, the performance of Class II shares will be lower. (r) The Trustees of the Putnam Variable Trust currently limit 12b-1 fee payments on Class IB shares to 0.25% of average net assets. (s) Performance information for Class IB shares for periods prior to April 30, 1998 for Putnam VT International Growth Fund and Putnam VT Vista Fund are based on the performance of the fund's Class IA shares (not offered as an investment option) adjusted to reflect the fees paid by Class IB shares, including a Rule 12b-1 fee of 0.15. Please note that as of May 1, 2001 the Rule 12b-1 fee will increase to 0.25%. (t) Performance results for Advisor Class shares, which were first offered on July 12, 2001, are based on historical performance of the fund's Investor Class shares from the inception of the fund through July, 11, 2001, recalculated to reflect the higher annual expense ratio applicable to the Advisor Class shares. -36- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Average Annual Total Return For Qualified Annuities (Without Purchase Payment Credits) Without Surrender For Periods Ending Dec. 31, 2000 Performance since commencement of the Performance since subaccount commencement of the fund(a) ------------------------------------------------------------------------------------------------------------------------------------ Since Since Subaccount Investing In: 1 year commencement 1 year 5 years 10 years commencement AXP(R)VARIABLE PORTFOLIO - BC2 Blue Chip Advantage Fund (9/99;9/99)(b) (11.21%) 0.42% (11.21%) --% --% 0.42% BD2 Bond Fund (9/99;10/81) 4.57 4.79 4.57 4.01 7.45 9.57 CR2 Capital Resource Fund (9/99;10/81) (18.13) (3.53) (18.13) 10.31 12.37 13.05 CM2 Cash Management Fund (9/99;10/81) 4.99 4.78 4.99 4.34 3.87 5.71 DE2 Diversified Equity Income Fund (9/99;9/99) (1.58) 2.17 (1.58) -- -- 2.17 EM2 Emerging Markets Fund (5/00;5/00) -- (26.97)(c) -- -- -- (26.97)(d) ES2 Equity Select Fund (5/01;4/01)(e) -- -- -- -- -- -- EI2 Extra Income Fund (9/99;5/96) (10.05) (6.84) (10.05) -- -- 1.33 FI2 Federal Income Fund (9/99;9/99) 7.61 5.88 7.61 -- -- 5.88 GB2 Global Bond Fund (9/99;5/96) 2.42 2.04 2.42 -- -- 3.07 GR2 Growth Fund (9/99;9/99) (19.95) (3.08) (19.95) -- -- (3.08) IE2 International Fund (9/99;1/92) (25.55) (3.06) (25.55) 6.49 -- 7.45 MF2 Managed Fund (9/99;4/86) (3.09) 5.30 (3.09) 11.80 12.04 10.92 ND2 New Dimensions Fund(R)(9/99;5/96) (9.82) 7.21 (9.82) -- -- 16.83 SV2 Partners Small Cap Value Fund (8/01;8/01)(e) -- -- -- -- -- -- IV2 S&P 500 Index Fund (5/00;5/00) -- (10.34)(c) -- -- -- (10.34)(d) SC2 Small Cap Advantage Fund (9/99;9/99) 3.34 12.76 3.34 -- -- 12.76 ST2 Stock Fund (8/01;8/01)(e) -- -- -- -- -- -- SA2 Strategy Aggressive Fund (9/99;1/92) (19.70) 17.67 (19.70) 12.33 -- 11.46 AIM V.I. 2AC Capital Appreciation Fund, Series II (8/01;5/93)(f),(g) -- -- (11.63) 14.56 -- 16.46 2AD Capital Development Fund, Series II (8/01;5/98)(f),(g) -- -- 8.38 -- -- 9.58 ALLIANCE VP 2AB AllianceBernstein International Value Portfolio (Class B) (8/01;5/01)(e) -- -- -- -- -- -- 2AL Growth & Income Portfolio (Class B) (8/01;1/91)(f) -- -- 12.64 18.53 -- 14.29 AMERICAN CENTURY VP 2AI International, Class II (8/01;5/94)(f),(h) -- -- (17.50) 14.18 -- 11.29 2AV Value, Class II (8/01;5/96)(f),(h) -- -- 17.21 -- -- 11.69 CALVERT VARIABLE SERIES, INC. 2SR Social Balanced Portfolio (5/00;9/86) -- (6.29)(c) (4.01) 10.42 10.36 9.69 EVERGREEN VA 2CG Capital Growth Fund, Class L Shares (8/01;3/98)(f),(i) -- -- 16.76 -- -- 10.63 FIDELITY VIP 2FG III Growth & Income Portfolio (Service Class 2) (8/01;12/96)(f),(j) -- -- (4.58) -- -- 14.33 2FM III Mid Cap Portfolio (Service Class 2) (8/01;12/98)(f),(j) -- -- 32.29 -- -- 41.52 2FO Overseas Portfolio (Service Class 2) (8/01;1/87)(f),(j) -- -- (19.95) 9.50 8.39 7.52
-37- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Average Annual Total Return For Qualified Annuities (Without Purchase Payment Credits) Without Surrender For Periods Ending Dec. 31, 2000 (continued) Performance since commencement of the Performance since subaccount commencement of the fund(a) ------------------------------------------------------------------------------------------------------------------------------------ Since Since Subaccount Investing In: 1 year commencement 1 year 5 years 10 years commencement FRANKLIN TEMPLETON VIP TRUST 2RE Franklin Real Estate Fund - Class 2 (9/99;1/89)(k) 30.55% 20.21% 30.55% 9.58% 12.60% 9.56% 2SI Franklin Value Securities Fund - Class 2 (9/99;5/98)(k) 24.03 16.96 24.03 -- -- (1.29) 2MS Mutual Shares Securities Fund - Class 2 (8/01;11/96)(f),(k) -- -- 12.30 -- -- 10.52 GOLDMAN SACHS VIT 2UE CORE(SM) U.S. Equity Fund (9/99;2/98)(l) (10.35) 0.38 (10.35) -- -- 8.31 2MC Mid Cap Value Fund (9/99;5/98) 30.04 18.70 30.04 -- -- 3.53 INVESCO VIF 2ID Dynamics Fund (8/01;8/97)(f) -- -- (4.33) -- -- 19.23 2FS Financial Services Fund (8/01;9/99)(f) -- -- 23.83 -- -- 28.01 2TC Technology Fund (8/01;5/97)(f) -- -- (24.06) -- -- 32.70 2TL Telecommunications Fund (8/01;9/99)(f) -- -- (26.79) -- -- 15.49 JANUS ASPEN SERIES 2GT Global Technology Portfolio: Service Shares (5/00;1/00)(b),(m) -- (32.61)(c) -- -- -- (34.64)(d) 2IG International Growth Portfolio: Service Shares (5/00;5/94)(m) -- (29.63)(c) (16.83) 22.16 -- 19.64 LAZARD RETIREMENT SERIES 2IP International Equity Portfolio (9/99;9/98) (10.32) (2.74) (10.32) -- -- 8.51 MFS(R) 2MG Investors Growth Stock Series - Service Class (5/00;5/99)(n),(o) -- (15.10)(c) (7.06) -- -- 16.79 2MD New Discovery Series - Service Class (5/00;5/98)(n) -- (10.21)(c) (2.89) -- -- 21.96 2UT Utilities Series - Service Class (8/01;1/95)(f),(n) -- -- 6.01 19.70 -- 21.78 PIONEER VCT 2PE Pioneer Equity-Income VCT Portfolio - Class II Shares (8/01;3/95)(f),(p) -- -- 13.58 16.21 -- 17.80 2EU Pioneer Europe VCT Portfolio - Class II Shares (8/01;10/98)(f),(q) -- -- (18.59) -- -- 4.42 PUTNAM VARIABLE TRUST 2HS Putnam VT Health Sciences Fund - Class IB Shares (8/01;4/98)(f),(r) -- -- 38.05 -- -- 14.75 2PI Putnam VT International Growth Fund - Class IB Shares (8/01;1/97)(f),(s) -- -- (10.45) -- -- 17.67 2VS Putnam VT Vista Fund - Class IB Shares (9/99;1/97)(s) (4.86) 22.49 (4.86) -- -- 20.27 STRONG FUNDS 2SO Strong Opportunity Fund II - Advisor Class (8/01;5/92)(f),(t) -- -- (1.58) 16.96 -- 16.97 WANGER 2IT International Small Cap (9/99;5/95) (28.54) 6.59 (28.54) 18.88 -- 22.66 2SP U.S. Small Cap (9/99;5/95) (8.90) 3.81 (8.90) 17.87 -- 18.59
-38- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Average Annual Total Return For Qualified Annuities (Without Purchase Payment Credits) Without Surrender For Periods Ending Dec. 31, 2000 (continued) Performance since commencement of the Performance since subaccount commencement of the fund(a) ------------------------------------------------------------------------------------------------------------------------------------ Since Since Subaccount Investing In: 1 year commencement 1 year 5 years 10 years commencement WELLS FARGO VT 2AA Asset Allocation Fund (5/01;4/94)(f) --% --% 0.21% 12.37% --% 13.24% 2WI International Equity Fund (5/01;7/00)(f) -- -- -- -- -- (10.72)(d) 2SG Small Cap Growth Fund (5/01;5/95)(f) -- -- (23.19) 8.85 -- 10.60
(a) Current applicable charges deducted from fund performance include a $30 contract administrative charge and a 0.75% mortality and expense risk fee. Premium taxes are not reflected in these total returns. (b) (Commencement date of the subaccount; Commencement date of the fund) (c) Cumulative return (not annualized) since commencement date of the subaccount. (d) Cumulative return (not annualized) since commencement date of the fund. (e) Fund had not commenced operations as of Dec. 31, 2000. (f) Subaccount had not commenced operations as of Dec. 31, 2000. (g) The historical performance information relates to that of the Fund Series I shares and not of the Series II shares, which were first offered July 16, 2001. Additional information relating to the Series II shares can be found in the Fund prospectus or Statement of Additional Information. (h) If Class II had existed during the periods presented, its performance would have been substantially similar to that of the existing class of the fund because each represents an investment in the same portfolio of securities. However, performance of Class II would have been lower because of its higher expense ratio. (i) Historical performance shown for Class L shares prior to its inception is based on the performance of Class I shares, the original class offered. These historical returns for Class L shares have been adjusted to reflect the effect of the 0.25% 12b-1 fees for Class L shares. Class I shares do not pay 12b-1 fees. If these fees had not been reflected, returns would have been higher. (j) The returns shown above are for Initial Class of the fund, which is not available through this prospectus. Service Class 2 would have substantially similar annual returns to Initial Class because the classes are invested in the same portfolio of securities. Service Class 2's returns will be lower than Initial Class's returns to the extent that Service Class 2 has higher expenses. (k) Ongoing stock market volatility can dramatically change the fund's short term performance; current results may differ. Because Class 2 shares were not offered until Jan. 6, 1999, standardized Class 2 fund performance for prior periods represents historical results of Class 1 shares. For periods beginning Jan. 6, 1999 Class 2's results reflect an additional 12b-1 fee expense, which also affects future performance. (l) CORE(SM) is a service mark of Goldman, Sachs & Co. (m) The returns shown for the Service Shares of these Portfolios reflect the historical performance of a different class of shares (the Institutional Shares) prior to Dec. 31, 1999, restated based on the Service Shares' estimated fees and expenses (ignoring any fee and expense limitations). (n) Service Class shares commenced operations in May 2000. Service Class shares carry a 0.20% annual Rule 12b-1 fee. Service Class share performance includes the performance of the series' Initial Class shares for periods prior to the inception of Service Class shares (blended performance). These blended performance figures have not been adjusted to take into account differences in the class-specific operating expenses (such as Rule 12b-1 fees). Because operating expenses of Service Class shares are higher than those of Initial class shares, the blended Service Class share performance is higher than it would have been had the Service Class shares been offered for the entire period. (o) Previously MFS(R)Growth Series. (p) Performance of the portfolio's Class I shares are from inception date of September 14, 1999. Although Class II shares invest in the same portfolio investments as Class I shares, Class II shares would have the same investment results except for the difference in class expense. Class II shares are subject to a .25% distribution fee, which Class I shares do not pay. Consequently, the performance of Class II shares will be lower. (q) Performance of the portfolio's Class I shares are from inception date of October 30,1998. Although Class II shares invest in the same portfolio investments as Class I shares, Class II shares would have the same investment results except for the difference in class expense. Class II shares are subject to a .25% distribution fee, which Class I shares do not pay. Consequently, the performance of Class II shares will be lower. (r) The Trustees of the Putnam Variable Trust currently limit 12b-1 fee payments on Class IB shares to 0.25% of average net assets. (s) Performance information for Class IB shares for periods prior to April 30, 1998 for Putnam VT International Growth Fund and Putnam VT Vista Fund are based on the performance of the fund's Class IA shares (not offered as an investment option) adjusted to reflect the fees paid by Class IB shares, including a Rule 12b-1 fee of 0.15. Please note that as of May 1, 2001 the Rule 12b-1 fee will increase to 0.25%. (t) Performance results for Advisor Class shares, which were first offered on July 12, 2001, are based on historical performance of the fund's Investor Class shares from the inception of the fund through July, 11, 2001, recalculated to reflect the higher annual expense ratio applicable to the Advisor Class shares. -39- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 -------------------------------------------------------------------------------- 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). Total return figures reflect the deduction of the surrender charge which assumes you withdraw the entire contract value at the end of the one, five and ten year periods (or, if less, up to the life of the subaccount). We also may show performance figures without the deduction of a surrender charge. In addition, total return figures reflect the deduction of all other applicable charges including the contract administrative charge and mortality and expense risk fee. CALCULATION OF YIELD FOR A SUBACCOUNT INVESTING IN A MONEY MARKET FUND Annualized Simple Yield: For a subaccount investing in a money market fund, we base quotations of simple yield on: (a) the change in the value of a hypothetical subaccount (exclusive of capital changes and income other than investment income) at the beginning of a particular seven-day period; (b) less a pro rata share of the subaccount expenses accrued over the period; (c) dividing this difference by the value of the subaccount at the beginning of the period to obtain the base period return; and (d) multiplying the base period return by 365/7. The subaccount's value includes: o any declared dividends, o the value of any shares purchased with dividends paid during the period, and o any dividends declared for such shares. It does not include: o the effect of any applicable surrender charge, or o any realized or unrealized gains or losses. Annualized Compound Yield: We calculate compound yield using the base period return described above, which we then compound according to the following formula: Compound Yield = [(Base Period Return + 1) (to the power of 365/7)] - 1 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 Yields Based on the Seven-Day Period Ending Dec. 31, 2000 Subaccount Investing In: Simple Yield Compound Yield CM1 AXP(R)Variable Portfolio - Cash Management Fund 4.96% 5.08% CM2 AXP(R)Variable Portfolio - Cash Management Fund 5.16 5.29
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)(to the power of 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 -40- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 -------------------------------------------------------------------------------- The subaccount earns yield from the increase in the net asset value of shares of the fund in which it invests and from dividends declared and paid by the fund, which are automatically invested in shares of the fund. Annualized Yield Based on the 30-Day Period Ended Dec. 31, 2000 Subaccount Investing in: Yield BD1 AXP(R)Variable Portfolio - Bond Fund 6.93% BD2 AXP(R)Variable Portfolio - Bond Fund 6.97 EI1 AXP(R)Variable Portfolio - Extra Income Fund 10.36 EI2 AXP(R)Variable Portfolio - Extra Income Fund 10.46 FI1 AXP(R)Variable Portfolio - Federal Income Fund 5.43 FI2 AXP(R)Variable Portfolio - Federal Income Fund 5.29 GB1 AXP(R)Variable Portfolio - Global Bond Fund 0.00 GB2 AXP(R)Variable Portfolio - Global Bond Fund 0.00 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 Business Daily, Kiplinger's Personal Finance, Lipper Analytical Services, Money, Morningstar, Mutual Fund Forecaster, Newsweek, The New York Times, Personal Investor, Stanger Report, Sylvia Porter's Personal Finance, USA Today, U.S. News and World Report, The Wall Street Journal and Wiesenberger Investment Companies Service. Calculating Annuity Payouts THE VARIABLE ACCOUNT We do the following calculations separately for each of the subaccounts of the variable account. The separate monthly payouts, added together, make up your total variable annuity payout. Initial Payout: To compute your first monthly payment, we: o determine the dollar value of your contract on the valuation date and then deduct any applicable premium tax; then o apply the result to the annuity table contained in the contract or another table at least as favorable. The annuity table shows the amount of the first monthly payment for each $1,000 of value which depends on factors built into the table, as described below. Annuity Units: We then convert the value of your subaccount to annuity units. To compute the number of units credited to you, we divide the first monthly payment by the annuity unit value (see below) on the valuation date. The number of units in your subaccount is fixed. The value of the units fluctuates with the performance of the underlying fund. Subsequent Payouts: To compute later payouts, we multiply: o the annuity unit value on the valuation date; by o the fixed number of annuity units credited to you. Annuity Unit Values: We originally set this value at $1 for each subaccount. To calculate later values we multiply the last annuity value by the product of: o the net investment factor; and o the neutralizing factor. The purpose of the neutralizing factor is to offset the effect of the assumed rate built into the annuity table. With an assumed investment rate of 5%, the neutralizing factor is 0.999866 for a one day valuation period. Net Investment Factor: We determine the net investment factor by: o adding the fund's current net asset value per share plus the per share amount of any accrued income or capital gain dividends to obtain a current adjusted net asset value per share; then o dividing that sum by the previous adjusted net asset value per share; and o subtracting the percentage factor representing the mortality and expense risk fee from the result. -41- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 -------------------------------------------------------------------------------- Because the net asset value of the fund may fluctuate, the net investment factor may be greater or less than one, and the annuity unit value may increase or decrease. You bear this investment risk in a subaccount. THE FIXED ACCOUNT We guarantee your fixed annuity payout amounts. Once calculated, your payout will remain the same and never change. To calculate your annuity payouts we: o take the value of your fixed account at the retirement date or the date you selected to begin receiving your annuity payouts; then o using an annuity table, we apply the value according to the annuity payout plan you select. The annuity payout table we use will be the one in effect at the time you choose to begin your annuity payouts. The values in the table will be equal to or greater than the table in your contract. 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) Fitch AA Moody's Aa3 (Excellent) A.M. Best's superior rating (second of 16 categories) reflects our strong distribution network, favorable overall balance sheet, consistently improving profitability, adequate level of capitalization and asset/liability management expertise. Fitch's (formerly Duff & Phelps) third highest rating (of 24 categories) reflects our consistently excellent profitability record, leadership position in chosen markets, stable operating leverage and effective use of asset/liability management techniques. Moody's excellent rating (fourth of 21 categories) reflects our leadership position in financial planning, strong asset, liability management and good capitalization. Principal Underwriter The principal underwriter for the contract is IDS Life which offers the contract on a continuous basis. Surrender charges we received for the last year aggregated total $18,285,051. Commissions we paid for the last year aggregated total $56,849,306. The contract is new as of 1999 and therefore, we do not have three years of history for withdrawal charges received or commission paid. 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. -42- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 -------------------------------------------------------------------------------- Annual Financial Information Report of Independent Auditors The Board of Directors IDS Life Insurance Company We have audited the accompanying individual statements of net assets of the segregated asset subaccounts of IDS Life Variable Account 10 - American Express Retirement Advisor Advantage Variable Annuity(R) (comprised of subaccounts BC1, BC2, BD1, BD2, CR1, CR2, CM1, CM2, DE1, DE2, EM1, EM2, EI1, EI2, FI1, FI2, GB1, GB2, GR1, GR2, IE1, IE2, MF1, MF2, ND1, ND2, IV1, IV2, SC1, SC2, SA1, SA2, 1SR, 2SR, 1RE, 2RE, 1SI, 2SI, 1UE, 2UE, 1MC, 2MC, 1GT, 2GT, 1IG, 2IG, 1IP, 2IP, 1MG, 2MG, 1MD, 2MD, 1VS, 2VS, 1IT, 2IT, 1SP and 2SP) as of December 31, 2000, and the related statements of operations and changes in net assets for the periods indicated therein. These financial statements are the responsibility of the management of IDS 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 auditing standards generally accepted in the United States. 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, 2000 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 financial position of the segregated asset subaccounts of IDS Life Variable Account 10 - American Express Retirement Advisor Advantage Variable Annuity(R) at December 31, 2000, and the individual results of their operations and changes in their net assets for the periods indicated therein, in conformity with accounting principles generally accepted in the United States. Ernst & Young LLP Minneapolis, Minnesota March 23, 2001 -43- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Statements of Net Assets Segregated Asset Subaccounts -------------------------------------------------------------------- December 31, 2000 BC1 BC2 BD1 BD2 CR1 Assets Investments in shares of mutual funds and portfolios: at cost ............. $ 46,361,413 $ 35,099,500 $ 46,239,228 $ 32,627,676 $ 26,186,060 ------------ ------------ ------------ ------------ ------------ at market value ..... $ 42,617,230 $ 32,314,200 $ 46,356,059 $ 32,735,007 $ 20,786,097 Dividends receivable ... -- -- 255,660 181,427 -- Accounts receivable from IDS Life for contract purchase payments ... 54,845 33,224 65,364 5,635 34,365 Receivable from mutual funds and portfolios for share redemptions ... -- -- -- -- -- ------------ ------------ ------------ ------------ ------------ Total assets ........... 42,672,075 32,347,424 46,677,083 32,922,069 20,820,462 ========== ========== ========== ========== ========== Liabilities Payable to IDS Life for: Mortality and expense risk fee .......... 31,552 18,755 33,746 18,895 15,278 Contract terminations -- -- -- -- -- Payable to mutual funds and portfolios for investments purchased -- -- -- -- -- ------------ ------------ ------------ ------------ ------------ Total liabilities ...... 31,552 18,755 33,746 18,895 15,278 ------ ------ ------ ------ ------ Net assets applicable to contracts in accumulation period 42,494,389 32,204,664 46,511,469 32,684,356 20,661,052 Net assets applicable to contracts in payment period ..... 146,134 124,005 131,868 218,818 144,132 ------- ------- ------- ------- ------- Total net assets ....... $ 42,640,523 $ 32,328,669 $ 46,643,337 $ 32,903,174 $ 20,805,184 ============ ============ ============ ============ ============ Accumulation units outstanding.......... 43,160,879 32,624,409 43,919,764 30,783,302 22,158,834 ========== ========== ========== ========== ========== Net asset value per accumulation unit.... $ 0.98 $ 0.99 $ 1.06 $ 1.06 $ 0.93 ============ ============ ============ ============ ============
Statements of Net Assets Segregated Asset Subaccounts -------------------------------------------------------------------- December 31, 2000 CR2 CM1 CM2 DE1 DE2 Assets Investments in shares of mutual funds and portfolios: at cost ............. $ 28,380,024 $213,295,133 $181,419,519 $ 14,065,644 $ 12,070,781 ------------ ------------ ------------ ------------ ------------ at market value ..... $ 22,411,025 $213,266,882 $181,400,600 $ 14,361,937 $ 12,331,512 Dividends receivable ... -- 1,002,267 841,988 -- -- Accounts receivable from IDS Life for contract purchase payments ..... 100,284 2,050,828 490,811 31,621 -- Receivable from mutual funds and portfolios for share redemptions ... -- -- -- -- -- ------------ ------------ ------------ ------------ ----------- Total assets ........... 22,511,309 216,319,977 182,733,399 14,393,558 12,331,512 ========== =========== =========== ========== ========== Liabilities Payable to IDS Life for: Mortality and expense risk fee ............ 13,081 159,522 105,682 10,553 7,165 Contract terminations -- -- -- -- 9,425 Payable to mutual funds and portfolios for investments purchased .. -- -- -- -- -- ------------ ------------ ------------ ------------ ----------- Total liabilities ...... 13,081 159,522 105,682 10,553 16,590 ------ ------- ------- ------ ------ Net assets applicable to contracts in accumulation period 22,440,170 216,124,722 182,535,192 14,343,331 12,254,838 Net assets applicable to contracts in payment period .... 58,058 35,733 92,525 39,674 60,084 ====== ====== ====== ====== ====== Total net assets ....... $ 22,498,228 $216,160,455 $182,627,717 $ 14,383,005 $ 12,314,922 ============ ============ ============ ============ ============ Accumulation units outstanding ......... 24,003,237 203,921,835 171,785,378 14,226,644 12,123,600 ========== =========== =========== ========== ========== Net asset value per accumulation unit .... $ 0.93 $ 1.06 $ 1.06 $ 1.01 $ 1.01 =========== ============ ============ ============ ============
See accompanying notes to financial statements. -44- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Statements of Net Assets Segregated Asset Subaccounts --------------------------------------------------------- December 31, 2000 (continued) EM1 EM2 EI1 EI2 FI1 Assets Investments in shares of mutual funds and portfolios: at cost ........................... $585,432 $802,848 $54,344,112 $32,742,125 $26,067,571 -------- -------- ----------- ----------- ----------- at market value ................... $510,699 $666,105 $47,467,376 $28,631,608 $26,683,478 Dividends receivable ................. -- -- 396,350 238,462 115,406 Accounts receivable from IDS Life for contract purchase payments ................. 91 2,165 91,290 62,236 -- Receivable from mutual funds and portfolios for share redemptions ................. -- -- -- -- -- -------- -------- ----------- ----------- ----------- Total assets ......................... 510,790 688,270 47,995,016 28,932,306 26,798,884 ======= ======= ========== ========== ========== Liabilities Payable to IDS Life for: Mortality and expense risk fee 369 361 35,211 16,665 19,691 Contract terminations ............. -- -- -- -- 35,715 Payable to mutual funds and portfolios for investments purchased ......... -- -- -- -- -- -------- -------- ----------- ----------- ----------- Total liabilities .................... 369 361 35,211 16,665 55,406 --- --- ------ ------ ------ Net assets applicable to contracts in accumulation period ............... 510,421 667,909 47,823,990 28,893,243 26,555,154 Net assets applicable to contracts in payment period .. ................. -- -- 95,815 22,398 188,324 ======= ======= ====== ====== ======= Total net assets ..................... $510,421 $667,909 $47,919,805 $28,915,641 $26,743,478 ======== ======== =========== =========== =========== Accumulation units outstanding ...... 693,177 905,842 52,654,863 31,722,406 24,654,215 ======= ======= ========== ========== ========== Net asset value per accumulation unit $ 0.74 $ 0.74 $ 0.91 $ 0.91 $ 1.08 ======== ======== =========== =========== ===========
Statements of Net Assets Segregated Asset Subaccounts ---------------------------------------------------------------- December 31, 2000 (continued) FI2 GB1 GB2 GR1 GR2 Assets Investments in shares of mutual funds and portfolios: at cost ........................... $17,024,544 $14,053,182 $8,883,305 $125,976,009 $114,963,869 ----------- ----------- ---------- ------------ ------------ at market value ................... $17,407,951 $14,464,272 $9,148,347 $100,231,930 $ 92,409,712 Dividends receivable ................. 73,349 -- -- -- -- Accounts receivable from IDS Life for contract purchase payments ................. 84,961 9,778 55,934 306,795 263,899 Receivable from mutual funds and portfolios for share redemptions ................. -- -- -- -- -- ----------- ----------- ---------- ------------ ------------ Total assets ......................... 17,566,261 14,474,050 9,204,281 100,538,725 92,673,611 ========== ========== ========= =========== ========== Liabilities Payable to IDS Life for: Mortality and expense risk fee 9,888 10,564 5,275 73,355 53,287 Contract terminations ............. -- -- -- -- -- Payable to mutual funds and portfolios for investments purchased ......... -- -- -- -- -- ----------- ----------- ---------- ------------ ------------ Total liabilities .................... 9,888 10,564 5,275 73,355 53,287 ----- ------ ----- ------ ------ Net assets applicable to contracts in accumulation period ............... 17,556,373 14,463,486 9,199,006 100,340,708 92,416,728 Net assets applicable to contracts in payment period ................... -- -- -- 124,662 203,596 ========== ========== ========= =========== ========== Total net assets ..................... $17,556,373 $14,463,486 $9,199,006 $100,465,370 $ 92,620,324 =========== =========== ========== ============ ============ Accumulation units outstanding ......... 16,257,973 14,136,694 8,967,857 106,410,129 97,753,895 ========== ========== ========= =========== ========== Net asset value per accumulation unit ..$ 1.08 $ 1.02 $ 1.03 $ 0.94 $ 0.95 =========== =========== ========== ============ ============
See accompanying notes to financial statements. -45- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Statements of Net Assets Segregated Asset Subaccounts ----------------------------------------------------------------- December 31, 2000 (continued) IE1 IE2 MF1 MF2 ND1 Assets Investments in shares of mutual funds and portfolios: at cost ................ $20,399,727 $18,497,174 $46,641,462 $33,213,823 $274,882,536 ----------- ----------- ----------- ----------- ------------ at market value ........ $14,793,392 $13,258,602 $42,250,467 $30,080,634 $235,285,916 Dividends receivable ...... -- -- -- -- -- Accounts receivable from IDS Life for contract purchase payments ... 140,008 10,850 101,565 96,538 779,624 Receivable from mutual funds and portfolios for share redemptions ...... -- -- -- -- -- ----------- ----------- ----------- ----------- ------------ Total assets .............. 14,933,400 13,269,452 42,352,032 30,177,172 236,065,540 ========== ========== ========== ========== =========== Liabilities Payable to IDS Life for: Mortality and expense risk fee ....... 10,853 7,714 30,967 17,561 172,498 Contract terminations .. -- -- -- -- -- Payable to mutual funds and portfolios for investments purchased -- -- -- -- -- ----------- ----------- ----------- ----------- ------------ Total liabilities ......... 10,853 7,714 30,967 17,561 172,498 ------ ----- ------ ------ ------- Net assets applicable to contracts in accumulation period ................... 14,829,504 13,252,695 41,880,072 29,899,367 234,945,931 Net assets applicable to contracts in payment period 93,043 9,043 440,993 260,244 947,111 ====== ===== ======= ======= ======= Total net assets .......... $14,922,547 $13,261,738 $42,321,065 $30,159,611 $235,893,042 =========== =========== =========== =========== ============ Accumulation units outstanding ............ 15,669,531 13,967,274 39,809,954 28,347,806 219,315,532 ========== ========== ========== ========== =========== Net asset value per accumulation unit ....... $ 0.95 $ 0.95 $ 1.05 $ 1.05 $ 1.07 =========== =========== =========== =========== ============
Statements of Net Assets Segregated Asset Subaccounts --------------------------------------------------------------- December 31, 2000 (continued) ND2 IV1 IV2 SC1 SC2 Assets Investments in shares of mutual funds and portfolios: at cost ................ $221,404,525 $13,754,212 $9,550,217 $19,312,835 $17,442,053 ------------ ----------- ---------- ----------- ----------- at market value ........ $190,267,562 $12,719,696 $8,812,503 $19,069,820 $17,228,183 Dividends receivable ...... -- -- -- -- -- Accounts receivable from IDS Life for contract purchase payments ...... 502,174 157,508 90,014 -- 28,540 Receivable from mutual funds and portfolios for share redemptions ...... -- -- -- -- -- ----------- ---------- --------- ---------- ----------- Total assets .............. 190,769,736 12,877,204 8,902,517 19,069,820 17,256,723 =========== ========== ========= ========== ========== Liabilities Payable to IDS Life for: Mortality and expense risk fee ........ 110,000 8,874 4,916 13,838 9,952 Contract terminations .. -- -- -- 75,881 -- Payable to mutual funds and portfolios for investments purchased -- -- -- -- -- ------------ ----------- ---------- ----------- ----------- Total liabilities ......... 110,000 8,874 4,916 89,719 9,952 ------- ----- ----- ------ ----- Net assets applicable to contracts in accumulation period ................. 190,146,617 12,757,813 8,897,601 18,963,421 17,246,771 Net assets applicable to contracts in payment period 513,119 110,517 -- 16,680 -- ======= ======= ======= ====== ======= Total net assets .......... $190,659,736 $12,868,330 $8,897,601 $18,980,101 $17,246,771 ============ =========== ========== =========== =========== Accumulation units outstanding ............ 177,036,037 14,083,617 9,811,519 16,348,580 14,830,157 =========== ========== ========= ========== ========== Net asset value per accumulation unit....... $ 1.07 $ 0.91 $ 0.91 $ 1.16 $ 1.16 ============ =========== ========== =========== ===========
See accompanying notes to financial statements. -46- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Statements of Net Assets Segregated Asset Subaccounts ------------------------------------------------------------ December 31, 2000 (continued) SA1 SA2 1SR 2SR 1RE Assets Investments in shares of mutual funds and portfolios: at cost ........................... $111,625,679 $89,567,873 $1,780,499 $1,355,802 $7,041,418 ------------ ----------- ---------- ---------- ---------- at market value ................... $ 70,827,955 $57,270,508 $1,626,644 $1,234,663 $7,721,569 Dividends receivable ................. -- -- -- -- -- Accounts receivable from IDS Life for contract purchase payments ................. 312,695 97,687 3,524 1,264 10,301 Receivable from mutual funds and portfolios for share redemptions .. -- -- 1,136 677 5,552 ----- --- ----- --- ----- Total assets ......................... 71,140,650 57,368,195 1,631,304 1,236,604 7,737,422 ========== ========== ========= ========= ========= Liabilities Payable to IDS Life for: Mortality and expense risk fee .................. 51,834 33,067 1,136 677 5,552 Contract terminations ............. -- -- -- -- -- Payable to mutual funds and portfolios for investments purchased ........ -- -- 3,524 1,264 10,301 ----- --- ----- ----- ------ Total liabilities .................... 51,834 33,067 4,660 1,941 15,853 ------ ------ ----- ----- ------ Net assets applicable to contracts in accumulation period ............... 70,926,728 57,188,770 1,626,644 1,234,663 7,718,328 Net assets applicable to contracts in payment period .................. 162,088 146,358 -- -- 3,241 ======= ======= ======= ====== ===== Total net assets ..................... $ 71,088,816 $57,335,128 $1,626,644 $1,234,663 $7,721,569 ============ =========== ========== ========== ========== Accumulation units outstanding ....................... 58,413,697 46,977,698 1,692,742 1,282,907 6,181,452 ========== ========== ========= ========= ========= Net asset value per accumulation unit.................. $ 1.21 $ 1.22 $ 0.96 $ 0.96 $ 1.25 ============ =========== ========== ========== ==========
Statements of Net Assets Segregated Asset Subaccounts ------------------------------------------------------------ December 31, 2000 (continued) 2RE 1SI 2SI 1UE 2UE Assets Investments in shares of mutual funds and portfolios: at cost ........................... $7,785,966 $2,918,908 $2,848,169 $59,383,637 $45,907,592 ---------- ---------- ---------- ----------- ----------- at market value ................... $8,611,678 $3,449,583 $3,399,162 $54,626,689 $42,286,180 Dividends receivable ................. -- -- -- -- -- Accounts receivable from IDS Life for contract purchase payments ................. 10,023 12,218 4,795 30,013 27,839 Receivable from mutual funds and portfolios for share redemptions .. 4,937 2,517 1,978 40,239 24,391 ----- ----- ----- ------ ------ Total assets ......................... 8,626,638 3,464,318 3,405,935 54,696,941 42,338,410 ========= ========= ========= ========== ========== Liabilities Payable to IDS Life for: Mortality and expense risk fee ............... 4,937 2,517 1,978 40,239 24,391 Contract terminations .......... -- -- -- -- -- Payable to mutual funds and portfolios for investments purchased ......... 10,023 12,218 4,795 30,013 27,839 ------ ------ ----- ------ ------ Total liabilities .................... 14,960 14,735 6,773 70,252 52,230 ------ ------ ----- ------ ------ Net assets applicable to contracts in accumulation period ............... 8,611,678 3,449,583 3,399,162 54,438,034 42,116,211 Net assets applicable to contracts in payment period ................. -- -- -- 188,655 169,969 ==== ==== ===== ======= ======= Total net assets ..................... $8,611,678 $3,449,583 $3,399,162 $54,626,689 $42,286,180 ========== ========== ========== =========== =========== Accumulation units outstanding .........6,879,005 2,896,941 2,846,415 55,239,000 42,626,277 ========= ========= ========= ========== ========== Net asset value per accumulation unit .$ 1.25 $ 1.19 $ 1.19 $ 0.99 $ 0.99 ========== ========== ========== =========== ===========
See accompanying notes to financial statements. -47- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Statements of Net Assets Segregated Asset Subaccounts -------------------------------------------------------------- December 31, 2000 (continued) 1MC 2MC 1GT 2GT 1IG Assets Investments in shares of mutual funds and portfolios: at cost ........................... $10,585,357 $7,802,149 $21,785,791 $19,202,955 $27,223,776 ----------- ---------- ----------- ----------- ----------- at market value ................... $12,654,338 $9,404,909 $15,683,198 $13,879,202 $23,432,894 Dividends receivable ................. -- -- -- -- -- Accounts receivable from IDS Life for contract purchase payments ................. 17,712 12,723 58,014 26,327 100,189 Receivable from mutual funds and portfolios for share redemptions ................. 9,234 5,476 11,588 8,109 16,611 ----- ----- ------ ----- ------ Total assets ......................... 12,681,284 9,423,108 15,752,800 13,913,638 23,549,694 ========== ========= ========== ========== ========== Liabilities Payable to IDS Life for: Mortality and expense risk fee .... 9,234 5,476 11,588 8,109 16,611 Contract terminations ............. -- -- -- -- -- Payable to mutual funds and portfolios for investments purchased ......... 17,712 12,723 58,014 26,327 100,189 ------ ------ ------ ------ ------- Total liabilities .................... 26,946 18,199 69,602 34,436 116,800 ------ ------ ------ ------ ------- Net assets applicable to contracts in accumulation period ............ 12,633,416 9,404,909 15,667,328 13,869,466 23,366,558 Net assets applicable to contracts in payment period ................. 20,922 -- 15,870 9,736 66,336 ====== ====== ====== ===== ====== Total net assets ..................... $12,654,338 $9,404,909 $15,683,198 $13,879,202 $23,432,894 =========== ========== =========== =========== =========== Accumulation units outstanding ....................... 10,264,919 7,621,857 22,949,067 20,288,328 29,250,538 ========== ========= ========== ========== ========== Net asset value per accumulation unit ................ $ 1.23 $ 1.23 $ 0.68 $ 0.68 $ 0.80 ========== =========== =========== =========== ===========
Statements of Net Assets Segregated Asset Subaccounts --------------------------------------------------------------- December 31, 2000 (continued) 2IG 1IP 2IP 1MG 2MG Assets Investments in shares of mutual funds and portfolios: at cost ............................$23,832,698 $10,990,928 $8,048,865 $21,734,565 $19,321,956 ----------- ----------- ---------- ----------- ----------- at market value ....................$20,660,098 $10,425,108 $7,677,904 $19,889,237 $17,708,263 Dividends receivable .................. -- -- -- -- -- Accounts receivable from IDS Life for contract purchase payments .................. 88,320 8,653 10,799 65,240 64,358 Receivable from mutual funds and portfolios for share redemptions .................. 11,552 7,801 4,491 13,758 9,746 ------ ----- ----- ------ ----- Total assets .......................... 20,759,970 10,441,562 7,693,194 19,968,235 17,782,367 ========== ========== ========= ========== ========== Liabilities Payable to IDS Life for: Mortality and expense risk fee ..... 11,552 7,801 4,491 13,758 9,746 Contract terminations .............. -- -- -- -- -- Payable to mutual funds and portfolios for investments purchased .......... 88,320 8,653 10,799 65,240 64,358 ------ ----- ------ ------ ------ Total liabilities ..................... 99,872 16,454 15,290 78,998 74,104 ------ ------ ------ ------ ------ Net assets applicable to contracts in accumulation period ............. 20,608,237 10,330,021 7,649,415 19,860,015 17,667,500 Net assets applicable to contracts in payment period ................... 51,861 95,087 28,489 29,222 40,763 ====== ====== ====== ====== ====== Total net assets ......................$20,660,098 $10,425,108 $7,677,904 $19,889,237 $17,708,263 =========== =========== ========== =========== =========== Accumulation units outstanding .........25,763,066 10,774,085 7,957,614 21,973,127 19,520,956 ========== ========== ========= ========== ========== Net asset value per accumulation unit .$ 0.80 $ 0.96 $ 0.96 $ 0.90 $ 0.91 =========== =========== =========== =========== ==========
See accompanying notes to financial statements. -48- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Statements of Net Assets Segregated Asset Subaccounts ------------------------------------------------------------------------------------------------------- December 31, 2000(continued) 1MD 2MD 1VS 2VS 1IT 2IT 1SP 2SP Assets Investments in shares of mutual funds and portfolios: at cost .............. $14,992,588 $12,340,728 $100,075,801 $73,071,434 $33,140,939 $27,231,072 $32,371,261 $25,616,334 ----------- ----------- ------------ ----------- ----------- ----------- ----------- ----------- at market value ...... $14,406,775 $11,803,502 $ 88,234,933 $64,390,419 $23,694,747 $19,832,024 $31,381,436 $25,021,085 Dividends receivable .... -- -- -- -- -- -- -- -- Accounts receivable from IDS Life for contract purchase payments .... 20,575 58,154 140,966 151,245 97,604 55,472 -- 68,749 Receivable from mutual funds and portfolios for share redemptions ..... 9,810 6,344 66,522 38,287 17,568 11,496 62,063 14,617 ----- ----- ------ ------ ------ ------ ------ ------ Total assets ............ 14,437,160 11,868,000 88,442,421 64,579,951 23,809,919 19,898,992 31,443,499 25,104,451 ========== ========== ========== ========== ========== ========== ========== ========== Liabilities Payable to IDS Life for: Mortality and expense risk fee ............. 9,810 6,344 66,522 38,287 17,568 11,496 23,262 14,617 Contract terminations -- -- -- -- -- -- 38,801 -- Payable to mutual funds and portfolios for investments purchase 20,575 58,154 140,966 151,245 97,604 55,642 -- 68,749 ------ ------ ------- ------- ------ ------ ------ ------ Total liabilities ....... 30,385 64,498 207,488 189,532 115,172 67,138 62,063 83,366 ------ ------ ------- ------- ------- ------ ------ ------ Net assets applicable to contracts in accumulation period . 14,400,663 11,784,620 88,069,650 64,233,112 23,591,718 19,755,921 31,268,304 24,983,150 Net assets applicable to contracts in payment period ..... 6,112 18,882 165,283 157,307 103,029 75,933 113,132 37,935 ===== ====== ======= ======= ======= ====== ======= ====== Total net assets ........ $14,406,775 $11,803,502 $ 88,234,933 $64,390,419 $23,694,747 $19,831,854 $31,381,436 $25,021,085 =========== =========== ============ =========== =========== =========== =========== =========== Accumulation units outstanding ........... 15,060,304 12,307,954 68,406,853 49,764,177 21,844,002 18,245,122 29,881,218 23,812,549 ========== ========== ========== ========== ========== ========== ========== ========== Net asset value per accumulation unit ..... $ 0.96 $ 0.96 $ 1.29 $ 1.29 $ 1.08 $ 1.08 $ 1.05 $ 1.05 =========== =========== ============ =========== =========== =========== =========== ===========
See accompanying notes to financial statements. -49- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Statements of Operations Segregated Asset Subaccounts ------------------------------------------------------------------- Year ended December 31, 2000 BC1 BC2 BD1 BD2 CR1 Investment income Dividend income from mutual funds and portfolios $ 145,109 $ 109,080 $ 1,898,906 $ 1,309,990 $ 2,241,358 Mortality and expense risk fee 282,859 169,717 263,037 143,412 133,447 ------- ------- ------- ------- ------- Investment income (loss) -- net....... (137,750) (60,637) 1,635,869 1,166,578 2,107,911 ======== ======= ========= ========= ========= Realized and unrealized gain (loss) on investments -- net Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales ....... 646,931 392,955 1,398,848 2,663,694 446,860 Cost of investments sold .. 645,085 388,862 1,413,790 2,694,560 455,639 ------- ------- --------- --------- ------- Net realized gain (loss) on investments ............... 1,846 4,093 (14,942) (30,866) (8,779) Net change in unrealized appreciation or depreciation of investments (4,326,209) (3,289,069) 140,047 117,104 (5,529,484) ---------- ---------- ------- ------- ---------- Net gain (loss) on investments ............... (4,324,363) (3,284,976) 125,105 86,238 (5,538,263) ---------- ---------- ------- ------ ---------- Net increase (decrease) in net assets resulting from operations ...... . $(4,462,113) $(3,345,613) $ 1,760,974 $ 1,252,816 $(3,430,352) =========== =========== =========== =========== ===========
tatements of Operations Segregated Asset Subaccounts --------------------------------------------------------------------- Year ended December 31, 2000 CR2 CM1 CM2 DE1 DE2 Investment income Dividend income from mutual funds and portfolios .$ 2,431,723 $ 9,563,030 $ 7,245,484 $ 97,881 $ 91,949 Mortality and expense risk fee 126,892 1,574,490 939,452 87,662 65,154 ------- --------- ------- ------ ------ Investment income (loss) -- net....... 2,304,831 7,988,540 6,306,032 10,219 26,795 ========= ========= ========= ====== ====== Realized and unrealized gain (loss) on investments -- net Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales ..... 390,338 71,773,447 53,861,201 522,698 800,871 Cost of investments sold. 405,233 71,775,234 53,860,864 530,262 787,823 ------- ---------- ---------- ------- ------- Net realized gain (loss) on investments ................. (14,895) (1,787) 337 (7,564) 13,048 Net change in unrealized appreciation or depreciation of investments .. (6,169,309) (28,231) (18,902) 198,443 186,759 ---------- ------- ------- ------- ------- Net gain (loss) on investments ............... (6,184,204) (30,018) (18,565) 190,879 199,807 ---------- ------- ------- ------- ------- Net increase (decrease) in net assets resulting from operations . .. ..... $(3,879,373) $ 7,958,522 $ 6,287,467 $ 201,098 $226,602 =========== ============ ============ ========= ========
See accompanying notes to financial statements. -50- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Statements of Operations Segregated Asset Subaccounts ------------------------------------------------------------------- Period ended December 31, 2000 (continued) EM1(1) EM2(1) EI1 EI2 FI1 Investment income Dividend income from mutual funds and portfolios ................. $ 45 $ 62 $ 3,316,893 $ 1,986,322 $1,076,795 Mortality and expense risk fee ................. 1,662 1,864 295,453 135,934 174,080 ----- ----- ------- ------- ------- Investment income (loss) -- net................. (1,617) (1,802) 3,021,440 1,850,388 902,715 ====== ====== ========= ========= ======= Realized and unrealized gain (loss) on investments -- net Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales ....................... 501,382 64,739 1,341,587 689,699 8,927,209 Cost of investments sold .................. 520,848 68,312 1,420,146 730,074 8,937,957 ------- ------ --------- ------- --------- Net realized gain (loss) on investments (19,466) (3,573) (78,559) (40,375) (10,748) Net change in unrealized appreciation or depreciation of investments ................. (74,733) (136,743) (6,946,096) (4,125,416) 680,388 ------- -------- ---------- ---------- ------- Net gain (loss) on investments ................. (94,199) (140,316) (7,024,655) (4,165,791) 669,640 ------- -------- ---------- ---------- ------- Net increase (decrease) in net assets resulting from operations ............................ $ (95,816) $(142,118) $(4,003,215) $(2,315,403) $1,572,355 ========= ========= =========== =========== ==========
Statements of Operations Segregated Asset Subaccounts ------------------------------------------------------------------- Period ended December 31, 2000 (continued) FI2 GB1 GB2 GR1 GR2 Investment income Dividend income from mutual funds and portfolios ................. $ 815,817 $ 203,973 $ 128,969 $ -- $ -- Mortality and expense risk fee ................. 103,650 78,889 39,158 589,709 440,666 ------- ------ ------ ------- ------- Investment income (loss) -- net................. 712,167 125,084 89,811 (589,709) (440,666) ======= ======= ====== ======== ======== Realized and unrealized gain (loss) on investments -- net Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales ....................... 11,590,395 500,220 287,108 1,966,301 1,226,918 Cost of investments sold .................. 11,588,847 515,012 291,218 2,022,225 1,284,574 ---------- ------- ------- --------- --------- Net realized gain (loss) on investments (1,548) (14,792) (4,110) (55,924) (57,656) Net change in unrealized appreciation or depreciation of investments ................. 434,232 440,640 283,081 (27,219,777) (24,275,703) ------- ------- ------- ----------- ----------- Net gain (loss) on investments ................. 435,780 425,848 278,971 (27,275,701) (24,333,359) ------- ------- ------- ----------- ----------- Net increase (decrease) in net assets resulting from operations ............................. $ 1,147,947 $ 550,932 $ 368,782 $(27,865,410) $(24,774,025) ============ ========= ========= ============ ============
(1) For the period May 1, 2000 (commencement of operations) to Dec. 31, 2000. See accompanying notes to financial statements. -51- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Statements of Operations Segregated Asset Subaccounts ------------------------------------------------------------------- Year ended December 31, 2000 (continued) IE1 IE2 MF1 MF2 ND1 Investment income Dividend income from mutual funds and portfolios ................. $ 2,872,026 $ 2,621,023 $ 3,151,702 $ 2,329,408 $ 16,512,509 Mortality and expense risk fee ................. 94,490 71,863 237,393 143,501 1,438,677 ------ ------ ------- ------- --------- Investment income (loss) -- net................. 2,777,536 2,549,160 2,914,309 2,185,907 15,073,832 ========= ========= ========= ========= ========== Realized and unrealized gain (loss) on investments -- net Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales ....................... 503,544 190,909 450,566 520,594 1,662,519 Cost of investments sold .................. 544,609 220,584 447,648 522,939 1,652,560 ------- ------- ------- ------- --------- Net realized gain (loss) on investments (41,065) (29,675) 2,918 (2,345) 9,959 Net change in unrealized appreciation or depreciation of investments ................. (5,770,944) (5,409,322) (4,600,109) (3,305,313) (42,940,933) ---------- ---------- ---------- ---------- ----------- Net gain (loss) on investments ................. (5,812,009) (5,438,997) (4,597,191) (3,307,658) (42,930,974) ---------- ---------- ---------- ---------- ----------- Net increase (decrease) in net assets resulting from operations ............................. $(3,034,473) $(2,889,837) $(1,682,882) $(1,121,751) $(27,857,142) =========== =========== =========== =========== ============ Statements of Operations Segregated Asset Subaccounts Year ended December 31, 2000 (continued) ND2 IV1(1) IV2(1) SC1 SC2 Investment income Dividend income from mutual funds and portfolios ................. $ 13,347,981 $ 56,822 $ 40,179 $ 545,652 $ 500,851 Mortality and expense risk fee ................. 935,221 38,691 20,503 111,434 81,491 ------- ------ ------ ------- ------ Investment income (loss) -- net................. 12,412,760 18,131 19,676 434,218 419,360 ========== ====== ====== ======= ======= Realized and unrealized gain (loss) on investments -- net Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales ....................... 920,586 166,235 135,114 287,988 175,856 Cost of investments sold .................. 921,438 163,778 146,093 273,157 167,594 ------- ------- ------- ------- ------- Net realized gain (loss) on investments (852) 2,457 (10,979) 14,831 8,262 Net change in unrealized appreciation or depreciation of investments ................. (34,388,546) (1,034,516) (737,714) (488,462) (440,495) ----------- ---------- -------- -------- -------- Net gain (loss) on investments ................. (34,389,398) (1,032,059) (748,693) (473,631) (432,233) ----------- ---------- -------- -------- -------- Net increase (decrease) in net assets resulting from operations ............................. $(21,976,638) $(1,013,928) $(729,017) $ (39,413) $ (12,873) ============ =========== ========= ========= =========
(1) For the period May 1, 2000 (commencement of operations) to Dec. 31, 2000. See accompanying notes to financial statements. -52- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Statements of Operations Segregated Asset Subaccounts ------------------------------------------------------------------------ Year ended December 31, 2000 (continued) SA1 SA2 1SR(1) 2SR(1) 1RE Investment income Dividend income from mutual funds and portfolios $ 22,529,392 $ 18,186,597 $ 76,436 $ 58,557 $231,747 Mortality and expense risk fee 455,165 290,325 4,947 2,475 31,775 ------- ------- ----- ----- ------ Investment income (loss) -- net 22,074,227 17,896,272 71,489 56,082 199,972 ========== ========== ====== ====== ======= Realized and unrealized gain (loss) on investments -- net Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 482,330 273,448 351,478 52,352 386,513 Cost of investments sold 565,618 293,329 357,934 51,887 369,055 ------- ------- ------- ------ ------- Net realized gain (loss) on investments (83,288) (19,881) (6,456) 465 17,458 Net change in unrealized appreciation or depreciation of investments (41,540,687) (33,274,335) (153,855) (121,139) 661,796 ----------- ----------- -------- -------- ------- Net gain (loss) on investments (41,623,975) (33,294,216) (160,311) (120,674) 679,254 ----------- ----------- -------- -------- ------- Net increase (decrease) in net assets resulting from operations $(19,549,748) $(15,397,944) $(88,822) $ (64,592) $879,226 ============ ============ ======== ========= ========
Statements of Operations Segregated Asset Subaccounts ----------------------------------------------------------- Year ended December 31, 2000 (continued) 2RE 1SI 2SI 1UE 2UE Investment income Dividend income from mutual funds and portfolios $ 255,473 $ 4,029 $ 4,798 $ 641,785 $ 495,161 Mortality and expense risk fee 28,180 17,471 14,737 351,325 215,402 ------ ------ ------ ------- ------- Investment income (loss) -- net 227,293 (13,442) (9,939) 290,460 279,759 ======= ======= ====== ======= ======= Realized and unrealized gain (loss) on investments -- net Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 98,925 130,487 311,298 514,953 160,079 Cost of investments sold 95,643 122,786 297,544 513,002 156,048 ------ ------- ------- ------- ------- Net realized gain (loss) on investments 3,282 7,701 13,754 1,951 4,031 Net change in unrealized appreciation or depreciation of investments 803,098 513,025 529,496 (5,350,726) (4,153,158) ------- ------- ------- ---------- ---------- Net gain (loss) on investments 806,380 520,726 543,250 (5,348,775) (4,149,127) ------- ------- ------- ---------- ---------- Net increase (decrease) in net assets resulting from operations $1,033,673 $507,284 $533,311 $(5,058,315) $(3,869,368) ========== ======== ======== =========== ===========
(1) For the period May 1, 2000 (commencement of operations) to Dec. 31, 2000. See accompanying notes to financial statements. -53- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Statements of Operations Segregated Asset Subaccounts ------------------------------------------------------------------- Period ended December 31, 2000 (continued) 1MC 2MC 1GT(1) 2GT(1) 1IG(1) Investment income Dividend income from mutual funds and portfolios $ 392,816 $ 293,954 $ 94,351 $ 83,791 $ 351,158 Mortality and expense risk fee 64,134 40,201 61,371 40,406 69,649 ------ ------ ------ ------ ------ Investment income (loss) -- net 328,682 253,753 32,980 43,385 281,509 ======= ======= ====== ====== ======= Realized and unrealized gain (loss) on investments -- net Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 149,782 297,026 80,969 6,249 9,689 Cost of investments sold 144,760 269,505 81,319 6,545 10,458 ------- ------- ------ ----- ------ Net realized gain (loss) on investments 5,022 27,521 (350) (296) (769) Net change in unrealized appreciation or depreciation of investments 2,037,404 1,576,246 (6,102,593) (5,323,753) (3,790,882) --------- --------- ---------- ---------- ---------- Net gain (loss) on investments 2,042,426 1,603,767 (6,102,943) (5,324,049) (3,791,651) --------- --------- ---------- ---------- ---------- Net increase (decrease) in net assets resulting from operations $2,371,108 $1,857,520 $(6,069,963) $(5,280,664) $(3,510,142) ========== ========== =========== =========== ===========
Statements of Operations Segregated Asset Subaccounts ---------------------------------------------------------------- Period ended December 31, 2000 (continued) 2IG(1) 1IP 2IP 1MG(1) 2MG(1) Investment income Dividend income from mutual funds and portfolios $ 263,374 $ 148,132 $ 106,922 $ -- $ -- Mortality and expense risk fee 45,097 70,122 39,194 53,060 36,190 ------ ------ ------ ------ ------ Investment income (loss) -- net 218,277 78,010 67,728 (53,060) (36,190) ======= ====== ====== ======= ======= Realized and unrealized gain (loss) on investments -- net Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 19,536 371,097 2,806,226 45,908 39,076 Cost of investments sold 20,879 384,958 2,803,441 44,446 38,165 ------ ------- --------- ------ ------ Net realized gain (loss) on investments (1,343) (13,861) 2,785 1,462 911 Net change in unrealized appreciation or depreciation of investments (3,172,600) (696,508) (488,384) (1,845,328) (1,613,693) ---------- -------- -------- ---------- ---------- Net gain (loss) on investments (3,173,943) (710,369) (485,599) (1,843,866) (1,612,782) ---------- -------- -------- ---------- ---------- Net increase (decrease) in net assets resulting from operations $(2,955,666) $(632,359) $ (417,871) $(1,896,926) $(1,648,972) =========== ========= ========== =========== ===========
(1) For the period May 1, 2000 (commencement of operations) to Dec. 31, 2000. See accompanying notes to financial statements. -54- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Statements of Operations Segregated Asset Subaccounts --------------------------------------------------- Period ended December 31, 2000 (continued) 1MD(1) 2MD(1) 1VS 2VS Investment income Dividend income from mutual funds and portfolios ...................... $ -- $ -- $ 322,756 $ 223,268 Mortality and expense risk fee ...................... 33,251 23,336 507,568 281,956 ------ ------ ------- ------- Investment income (loss) -- net...................... (33,251) (23,336) (184,812) (58,688) ======= ======= ======== ======= Realized and unrealized gain (loss) on investments -- net Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales ............................ 134,693 4,708 301,712 57,980 Cost of investments sold ....................... 127,891 4,727 264,733 53,044 ------- ----- ------- ------ Net realized gain (loss) on investments ............. 6,802 (19) 36,979 4,936 Net change in unrealized appreciation or depreciation of investments ................................... (585,813) (537,226) (12,849,879) (9,356,658) -------- -------- ----------- ---------- Net gain (loss) on investments ...................... (579,011) (537,245) (12,812,900) (9,351,722) -------- -------- ----------- ---------- Net increase (decrease) in net assets resulting from operations ........................ $(612,262) $(560,581) $(12,997,712) $(9,410,410) ========= ========= ============ ===========
Statements of Operations Segregated Asset Subaccounts --------------------------------------------------- Period ended December 31, 2000 (continued) 1IT 2IT 1SP 2SP Investment income Dividend income from mutual funds and portfolios ...................... $ 911,270 $ 735,567 $ 1,195,456 $ 904,751 Mortality and expense risk fee ...................... 152,810 96,630 171,113 105,203 ------- ------ ------- ------- Investment income (loss) -- net...................... 758,460 638,937 1,024,343 799,548 ======= ======= ========= ======= Realized and unrealized gain (loss) on investments -- net Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales ............................ 149,837 44,134 238,199 174,928 Cost of investments sold........................ 172,580 45,084 253,211 183,378 ------- ------ ------- ------- Net realized gain (loss) on investments ............. (22,743) (950) (15,012) (8,450) Net change in unrealized appreciation or depreciation of investments ................................... (9,801,825) (7,734,272) (1,188,467) (774,100) ---------- ---------- ---------- -------- Net gain (loss) on investments ...................... (9,824,568) (7,735,222) (1,203,479) (782,550) ---------- ---------- ---------- -------- Net increase (decrease) in net assets resulting from operations ........................ $(9,066,108) $(7,096,285) $ (179,136) $ 16,998 =========== =========== =========== =========
(1) For the period May 1, 2000 (commencement of operations) to Dec. 31, 2000. See accompanying notes to financial statements. -55- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Statements of Changes in Net Assets Segregated Asset Subaccounts ------------------------------------------------------------------------ Year ended December 31, 2000 BC1 BC2 BD1 BD2 CR1 Operations Investment income (loss) -- net......... $ (137,750) $ (60,637) $ 1,635,869 $ 1,166,578 $ 2,107,911 Net realized gain (loss) on investments .. ....................... 1,846 4,093 (14,942) (30,866) (8,779) Net change in unrealized appreciation or depreciation of investments ......... (4,326,209) (3,289,069) 140,047 117,104 (5,529,484) ---------- ---------- ------- ------- ---------- Net increase (decrease) in net assets resulting from operations ........... (4,462,113) (3,345,613) 1,760,974 1,252,816 (3,430,352) ========== ========== ========= ========= ========== Contract transactions Contract purchase payments ............. 23,764,569 18,282,228 33,992,470 23,933,966 16,185,787 Net transfers(1) ....................... 15,006,059 9,555,230 (573,143) 921,634 4,552,730 Transfers for policy loans ............. -- (43,196) -- (39,684) -- Annuity payments ....................... (8,284) (9,634) (7,412) (9,278) (4,315) Contract charges ....................... (4,344) (6,375) (2,242) (1,616) (1,749) Contract terminations: Surrender benefits .................. (397,610) (377,266) (214,333) (370,137) (121,324) Death benefits ...................... (301,039) (62,993) (153,983) (76,919) (55,916) -------- ------- -------- ------- ------- Increase (decrease) from contract transactions ............... 38,059,351 27,337,994 33,041,357 24,357,966 20,555,213 ---------- ---------- ---------- ---------- ---------- Net assets at beginning of year ........ 9,043,285 8,336,288 11,841,006 7,292,392 3,680,323 --------- --------- ---------- --------- --------- Net assets at end of year .............. $ 42,640,523 $ 32,328,669 $ 46,643,337 $ 32,903,174 $ 20,805,184 ============ ============ ============ ============ ============ Accumulation unit activity Units outstanding at beginning of year ............................. 8,144,701 7,503,378 11,675,134 7,185,953 3,227,001 Contract purchase payments ............. 21,932,154 16,870,196 33,382,251 23,455,801 15,014,134 Net transfers(1) ....................... 13,756,565 8,712,061 (777,547) 616,059 4,090,977 Transfers for policy loans ............. -- (39,819) -- (40,717) -- Contract charges ....................... (4,269) (6,264) (2,154) (1,549) (1,811) Contract terminations: Surrender benefits .................. (376,074) (355,689) (209,562) (359,100) (117,462) Death benefits ...................... (292,198) (59,454) (148,358) (73,145) (54,005) -------- ------- -------- ------- ------- Units outstanding at end of year ....... 43,160,879 32,624,409 43,919,764 30,783,302 22,158,834 ========== ========== ========== ========== ==========
Statements of Changes in Net Assets Segregated Asset Subaccounts -------------------------------------------------------------------------- Year ended December 31, 2000 CR2 CM1 CM2 DE1 DE2 Operations Investment income (loss) -- net......... $ 2,304,831 $ 7,988,540 $ 6,306,032 $ 10,219 $ 26,795 Net realized gain (loss) on investments ......................... (14,895) (1,787) 337 (7,564) 13,048 Net change in unrealized appreciation or depreciation of investments ......... (6,169,309) (28,231) (18,902) 198,443 186,759 ---------- ------- ------- ------- ------- Net increase (decrease) in net assets resulting from operations ........... (3,879,373) 7,958,522 6,287,467 201,098 226,602 ========== ========= ========= ======= ======= Contract transactions Contract purchase payments ............. 17,174,666 511,338,942 408,824,307 6,919,030 6,425,243 Net transfers(1) ....................... 3,703,203 (387,101,335) (295,705,552) 3,947,485 2,650,660 Transfers for policy loans ............. (44,308) -- (357,950) -- (12,156) Annuity payments ....................... (5,431) (3,736) (2,452) (2,039) (3,322) Contract charges ....................... (2,168) (4,257) (3,949) (1,629) (1,974) Contract terminations: Surrender benefits .................. (468,016) (2,137,918) (2,499,187) (93,143) (202,440) Death benefits ...................... (117,983) (2,269,079) (192,508) (117,603) -- -------- ---------- -------- -------- -------- Increase (decrease) from contract transactions ............... 20,239,963 119,822,617 110,062,709 10,652,101 8,856,011 ---------- ----------- ----------- ---------- --------- Net assets at beginning of year ........ 6,137,638 88,379,316 66,277,541 3,529,806 3,232,309 --------- ---------- ---------- --------- --------- Net assets at end of year .............. $ 22,498,228 $ 216,160,455 $ 182,627,717 $ 14,383,005 $ 12,314,922 ============ ============= ============= ============ ============ Accumulation unit activity Units outstanding at beginning of year ............................. 5,332,889 87,424,293 65,522,124 3,440,938 3,149,027 Contract purchase payments ............. 15,801,556 493,785,128 393,971,272 7,046,083 6,576,869 Net transfers(1) ....................... 3,461,259 (373,059,223) (284,786,220) 3,956,159 2,616,404 Transfers for policy loans ............. (41,192) -- (345,711) -- (12,444) Contract charges ....................... (2,226) (4,041) (3,739) (1,666) (2,013) Contract terminations: Surrender benefits .................. (438,756) (2,060,595) (2,389,429) (95,073) (204,243) Death benefits ...................... (110,293) (2,163,727) (182,919) (119,797) -- -------- ---------- -------- -------- ------- Units outstanding at end of year ....... 24,003,237 203,921,835 171,785,378 14,226,644 12,123,600 ========== =========== =========== ========== ==========
(1) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. -56- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Statements of Changes in Net Assets Segregated Asset Subaccounts ------------------------------------------------------------------ Period ended December 31, 2000 (continued) EM1(1) EM2(1) EI1 EI2 FI1 Operations Investment income (loss) -- net....... $ (1,617) $ (1,802) $ 3,021,440 $ 1,850,388 $ 902,715 Net realized gain (loss) on investments ....................... (19,466) (3,573) (78,559) (40,375) (10,748) Net change in unrealized appreciation or depreciation of investments ....................... (74,733) (136,743) (6,946,096) (4,125,416) 680,388 ------- -------- ---------- ---------- ------- Net increase (decrease) in net assets resulting from operations ........................ (95,816) (142,118) (4,003,215) (2,315,403) 1,572,355 ======= ======== ========== ========== ========= Contract transactions Contract purchase payments ........... 406,609 493,078 33,322,614 19,626,411 30,478,995 Net transfers(2) ..................... 205,089 318,565 8,727,073 4,202,350 (17,694,324) Transfers for policy loans ........... -- -- -- (40,312) -- Annuity payments ..................... -- -- (4,146) (2,457) (13,079) Contract charges ..................... -- (2) (2,270) (1,400) (1,178) Contract terminations: Surrender benefits ................ (5,461) (1,614) (277,002) (410,034) (288,372) Death benefits .................... -- -- (92,960) (10,754) (137,937) ------- ----- ------- ------- -------- Increase (decrease) from contract transactions ............. 606,237 810,027 41,673,309 23,363,804 12,344,105 ------- ------- ---------- ---------- ---------- Net assets at beginning of year ...... -- -- 10,249,711 7,867,240 12,827,018 ------- ----- ---------- --------- ---------- Net assets at end of year ............ $510,421 $ 667,909 $47,919,805 $28,915,641 $26,743,478 ========= ========= ============ ============ ============ Accumulation unit activity Units outstanding at beginning of year -- -- 10,137,005 7,774,094 12,795,965 Contract purchase payments ........... 463,728 538,949 34,115,644 20,141,925 29,733,980 Net transfers(2) ..................... 236,623 368,853 8,792,036 4,289,699 (17,462,716) Transfers for policy loans ........... -- -- -- (40,782) -- Contract charges ..................... -- (2) (2,443) (1,505) (1,113) Contract terminations: Surrender benefits ................ (7,174) (1,958) (287,825) (429,253) (279,782) Death benefits .................... -- -- (99,554) (11,772) (132,119) ------- ----- ------- ------- -------- Units outstanding at end of year ..... 693,177 905,842 52,654,863 31,722,406 24,654,215 ======= ======= ========== ========== ==========
Statements of Changes in Net Assets Segregated Asset Subaccounts ------------------------------------------------------------------------- Period ended December 31, 2000 (continued) FI2 GB1 GB2 GR1 GR2 Operations Investment income (loss) -- net....... $ 712,167 $ 125,084 $ 89,811 $ (589,709) $ (440,666) Net realized gain (loss) on investments ....................... 1,548 (14,792) (4,110) (55,924) (57,656) Net change in unrealized appreciation or depreciation of investments ....................... 434,232 440,640 283,081 (27,219,777) (24,275,703) ------- ------- ------- ----------- ----------- Net increase (decrease) in net assets resulting from operations ........................ 1,147,947 550,932 368,782 (27,865,410) (24,774,025) ========= ======= ======= =========== =========== Contract transactions Contract purchase payments ........... 24,330,508 8,373,656 4,266,881 76,168,425 67,703,884 Net transfers(2) ..................... (18,749,417) 3,272,943 3,126,228 36,726,326 30,903,431 Transfers for policy loans ........... (62,016) -- (9,285) -- (228,830) Annuity payments ..................... -- -- -- (6,268) (13,812) Contract charges ..................... (962) (661) (358) (10,584) (15,418) Contract terminations: Surrender benefits ................ (233,890) (68,686) (99,557) (527,907) (814,895) Death benefits .................... (44,818) (33,277) (7,312) (311,855) (95,668) ------- ------- ------ -------- ------- Increase (decrease) from contract transactions ............. 5,239,405 11,543,975 7,276,597 112,038,137 97,438,692 --------- ---------- --------- ----------- ---------- Net assets at beginning of year ...... 11,169,021 2,368,579 1,553,627 16,292,643 19,955,657 ---------- --------- --------- ---------- ---------- Net assets at end of year ............ $17,556,373 $14,463,486 $9,199,006 $100,465,370 $ 92,620,324 ============ ============ =========== ============= =========== Accumulation unit activity Units outstanding at beginning of year 11,135,246 2,367,731 1,552,116 13,812,928 16,891,257 Contract purchase payments ........... 23,745,241 8,539,237 4,344,433 62,897,160 56,097,853 Net transfers(2) ..................... (18,292,659) 3,334,507 3,191,297 30,424,453 25,747,329 Transfers for policy loans ........... (58,306) -- (10,534) -- (191,381) Contract charges ..................... (905) (670) (366) (10,101) (14,707) Contract terminations: Surrender benefits ................ (226,176) (70,326) (101,723) (448,836) (689,722) Death benefits .................... (44,468) (33,785) (7,366) (265,475) (86,734) ------- ------- ------ -------- ------- Units outstanding at end of year ..... 16,257,973 14,136,694 8,967,857 106,410,129 97,753,895 ========== ========== ========= =========== ==========
(1) For the period May 1, 2000 (commencement of operations) to Dec. 31, 2000. (2) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. -57- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Statements of Changes in Net Assets Segregated Asset Subaccounts ------------------------------------------------------------------------- Period ended December 31, 2000 (continued) IE1 IE2 MF1 MF2 ND1 Operations Investment income (loss) -- net $ 2,777,536 $ 2,549,160 $ 2,914,309 $ 2,185,907 $ 15,073,832 Net realized gain (loss) on investments................. (41,065) (29,675) 2,918 (2,345) 9,959 Net change in unrealized appreciation or depreciation of investments ............. (5,770,944) (5,409,322) (4,600,109) (3,305,313) (42,940,933) ---------- ---------- ---------- ---------- ----------- Net increase (decrease) in net assets resulting from operations (3,034,473) (2,889,837) (1,682,882) (1,121,751) (27,857,142) ========== ========== ========== ========== =========== Contract transactions Contract purchase payments .... 10,964,924 9,515,063 28,761,252 20,835,146 153,264,585 Net transfers(2) .............. 4,338,169 3,743,160 8,456,160 5,311,056 74,382,380 Transfers for policy loans .... -- (22,923) -- (63,667) -- Annuity payments .............. (5,000) (542) (16,368) (12,213) (62,960) Contract charges .............. (1,176) (1,739) (3,127) (3,548) (27,473) Contract terminations: Surrender benefits ......... (88,501) (345,711) (215,184) (387,327) (1,593,217) Death benefits ............. (17,295) (15,270) (86,982) (76,094) (844,012) ------- ------- ------- ------- -------- Increase (decrease) from contract transactions ...... 15,191,121 12,872,038 36,895,751 25,603,353 225,119,303 ---------- ---------- ---------- ---------- ----------- Net assets at beginning of year 2,765,899 3,279,537 7,108,196 5,678,009 38,630,881 --------- --------- --------- --------- ---------- Net assets at end of year ..... $14,922,547 $13,261,738 $42,321,065 $30,159,611 $235,893,042 ============ ============ ============ ============ ============= Accumulation unit activity Units outstanding at beginning of year .......... 2,173,305 2,575,364 6,539,086 5,220,299 32,482,584 Contract purchase payments .... 9,834,975 8,407,740 26,215,669 19,010,662 128,097,615 Net transfers(2) .............. 3,764,831 3,328,678 7,337,223 4,604,463 60,852,100 Transfers for policy loans .... -- (20,274) -- (58,186) -- Contract charges .............. (1,221) (1,802) (2,943) (3,339) (24,795) Contract terminations: Surrender benefits ......... (84,922) (308,955) (196,871) (355,255) (1,369,867) Death benefits ............. (17,437) (13,477) (82,210) (70,838) (722,105) ------- ------- ------- ------- -------- Units outstanding at end of year ................ 15,669,531 13,967,274 39,809,954 28,347,806 219,315,532 ========== ========== ========== ========== ===========
Statements of Changes in Net Assets Segregated Asset Subaccounts ------------------------------------------------------------------------ Period ended December 31, 2000 (continued) ND2 IV1(1) IV2(1) SC1 SC2 Operations Investment income (loss) -- net $ 12,412,760 $ 18,131 $ 19,676 $ 434,218 $ 419,360 Net realized gain (loss) on investments ................ (852) 2,457 (10,979) 14,831 8,262 Net change in unrealized appreciation or depreciation of investments ......... .. (34,388,546) (1,034,516) (737,714) (488,462) (440,495) ----------- ---------- -------- -------- -------- Net increase (decrease) in net assets resulting from operations (21,976,638) (1,013,928) (729,017) (39,413) (12,873) =========== ========== ======== ======= ======= Contract transactions Contract purchase payments .... 126,490,526 9,090,510 6,059,805 8,877,713 8,424,738 Net transfers(2) .............. 52,424,517 4,821,117 3,595,378 6,905,822 5,706,614 Transfers for policy loans .... (426,171) -- (3,120) -- (37,004) Annuity payments .............. (946,600) (1,927) (2,270) (2,054) -- Contract charges .............. (42,218) (166) (106) (2,791) (3,019) Contract terminations: Surrender benefits ......... (2,118,910) (27,276) (23,069) (127,250) (168,626) Death benefits ............. (299,859) -- -- (36,700) (3,904) -------- ------- ------ ------- ------ Increase (decrease) from contract transactions ...... 175,081,285 13,882,258 9,626,618 15,614,740 13,918,799 ----------- ---------- --------- ---------- ---------- Net assets at beginning of year 37,555,089 -- -- 3,404,774 3,340,845 ---------- --------- --------- --------- --------- Net assets at end of year ..... $190,659,736 $12,868,330 $8,897,601 $18,980,101 $17,246,771 ============= ============ =========== ============ ============ Accumulation unit activity Units outstanding at beginning of year .......... 31,537,411 -- -- 3,029,109 2,970,291 Contract purchase payments .... 104,560,427 9,341,110 6,182,669 7,571,974 7,192,984 Net transfers(2) .............. 43,380,357 4,771,871 3,656,757 5,893,700 4,846,964 Transfers for policy loans .... (356,486) -- (3,152) -- (31,736) Contract charges .............. (38,035) (177) (114) (2,453) (2,646) Contract terminations: Surrender benefits ......... (1,790,099) (29,187) (24,641) (111,932) (142,338) Death benefits ............. (257,538) -- -- (31,818) (3,362) -------- ------- ------ ------- ------ Units outstanding at end of year 177,036,037 14,083,617 9,811,519 16,348,580 14,830,157 =========== ========== ========= ========== ==========
(1) For the period May 1, 2000 (commencement of operations) to Dec. 31, 2000. (2) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. -58- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Statements of Changes in Net Assets Segregated Asset Subaccounts --------------------------------------------------------------------- Period ended December 31, 2000 (continued) SA1 SA2 1SR(1) 2SR(1) 1RE Operations Investment income (loss) -- net $22,074,227 $17,896,272 $ 71,489 $ 56,082 $ 199,972 Net realized gain (loss) on investments ................ (83,288) (19,881) (6,456) 465 17,458 Net change in unrealized appreciation or depreciation of investments (41,540,687) (33,274,335) (153,855) (121,139) 661,796 ----------- ----------- -------- -------- ------- Net increase (decrease) in net assets resulting from operations (19,549,748) (15,397,944) (88,822) (64,592) 879,226 =========== =========== ======= ======= ======= Contract transactions Contract purchase payments .... 58,379,023 47,198,948 1,289,161 687,688 3,952,923 Net transfers(2) .............. 26,788,613 19,917,539 430,428 613,750 2,258,641 Transfers for policy loans .... -- (149,340) -- -- -- Annuity payments .............. (9,183) (10,261) -- -- (267) Contract charges .............. (4,331) (4,867) (58) (10) (449) Contract terminations: Surrender benefits ......... (262,343) (845,251) (4,065) (2,173) (12,250) Death benefits ............. (159,428) (145,553) -- -- (10,858) -------- -------- ------- ------- ------- Increase (decrease) from contract transactions ...... 84,732,351 65,961,215 1,715,466 1,299,255 6,187,740 ---------- ---------- --------- --------- --------- Net assets at beginning of year 5,906,213 6,771,857 -- -- 654,603 ---------- ---------- --------- --------- --------- Net assets at end of year ..... $71,088,816 $57,335,128 $1,626,644 $1,234,663 $7,721,569 ============ ============ =========== =========== =========== Accumulation unit activity Units outstanding at beginning of year .......... 3,901,133 4,470,245 -- -- 683,371 Contract purchase payments .... 37,493,016 30,484,412 1,279,827 679,859 3,508,774 Net transfers(2) .............. 17,308,002 12,777,015 417,159 605,264 2,009,204 Transfers for policy loans .... -- (98,284) -- -- -- Contract charges .............. (3,286) (3,725) (60) (11) (381) Contract terminations: Surrender benefits ......... (180,704) (554,374) (4,184) (2,205) (10,637) Death benefits ............. (104,464) (97,591) -- -- (8,879) ---------- ---------- --------- --------- --------- Units outstanding at end of year .. .. ....... 58,413,697 46,977,698 1,692,742 1,282,907 6,181,452 ========== ========== ========= ========= =========
Statements of Changes in Net Assets Segregated Asset Subaccounts --------------------------------------------------------------------- Period ended December 31, 2000 (continued) 2RE 1SI 2SI 1UE 2UE Operations Investment income (loss) -- net $ 227,293 $ (13,442) $ (9,939) $ 290,460 $ 279,759 Net realized gain (loss) on investments ................ 3,282 7,701 13,754 1,951 4,031 Net change in unrealized appreciation or depreciation of investments 803,098 513,025 529,496 (5,350,726) (4,153,158) ------- ------- ------- ---------- ---------- Net increase (decrease) in net assets resulting from operations 1,033,673 507,284 533,311 (5,058,315) (3,869,368) ========= ======= ======= ========== ========== Contract transactions Contract purchase payments .... 3,899,779 1,442,777 1,828,647 31,450,468 23,356,744 Net transfers(2) .............. 2,874,014 959,546 527,889 18,054,876 13,324,785 Transfers for policy loans .... (10,828) -- (1,443) -- (54,607) Annuity payments .............. -- (819) -- (14,132) (8,973) Contract charges .............. (396) (316) (672) (6,259) (8,594) Contract terminations: Surrender benefits ......... (30,402) (19,536) (52,353) (460,586) (279,402) Death benefits ............. (2,465) (6,520) -- (292,486) (87,361) ------ ------ ------- -------- ------- Increase (decrease) from contract transactions ...... 6,729,702 2,375,132 2,302,068 48,731,881 36,242,592 --------- --------- --------- ---------- ---------- Net assets at beginning of year 848,303 567,167 563,783 10,953,123 9,912,956 ------- ------- ------- ---------- --------- Net assets at end of year ..... $8,611,678 $3,449,583 $3,399,162 $54,626,689 $42,286,180 =========== =========== =========== ============ ============ Accumulation unit activity Units outstanding at beginning of year .......... 885,005 589,712 585,846 9,951,016 8,980,927 Contract purchase payments .... 3,524,645 1,403,557 1,815,524 29,410,374 21,760,426 Net transfers(2) .............. 2,508,608 928,982 495,490 16,601,824 12,292,142 Transfers for policy loans .... (9,747) -- (1,658) -- (54,229) Contract charges .............. (335) (283) (599) (6,140) (8,424) Contract terminations: Surrender benefits ......... (26,504) (18,847) (48,188) (440,143) (262,271) Death benefits ............. (2,667) (6,180) -- (277,931) (82,294) ------ ------ ------- -------- ------- Units outstanding at end of year ............. 6,879,005 2,896,941 2,846,415 55,239,000 42,626,277 ========= ========= ========= ========== ==========
(1) For the period May 1, 2000 (commencement of operations) to Dec. 31, 2000. (2) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. -59- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Statements of Changes in Net Assets Segregated Asset Subaccounts --------------------------------------------------------------------- Period ended December 31, 2000 (continued) 1MC 2MC 1GT(1) 2GT(1) 1IG(1) Operations Investment income (loss) -- net $ 328,682 $ 253,753 $ 32,980 $ 43,385 $ 281,509 Net realized gain (loss) on investments ................... 5,022 27,521 (350) (296) (769) Net change in unrealized appreciation or depreciation of investments 2,037,404 1,576,246 (6,102,593) (5,323,753) (3,790,882) --------- --------- ---------- ---------- ---------- Net increase (decrease) in net assets resulting from operations ............ 2,371,108 1,857,520 (6,069,963) (5,280,664) (3,510,142) ========= ========= ========== ========== ========== Contract transactions Contract purchase payments .... 5,581,765 4,323,098 13,079,329 12,016,400 17,043,299 Net transfers(2) .............. 2,934,164 1,801,312 8,703,686 7,224,295 9,951,347 Transfers for policy loans .... -- (4,651) -- (6,137) -- Annuity payments .............. (1,478) -- (510) (2,036) (2,015) Contract charges .............. (1,365) (2,090) (363) (497) (402) Contract terminations: Surrender benefits ......... (47,829) (72,494) (28,981) (72,012) (39,014) Death benefits ............. (99,129) (47,254) -- (147) (10,179) ------- ------- -------- ---- ------- Increase (decrease) from contract transactions ....... 8,366,128 5,997,921 21,753,161 19,159,866 26,943,036 --------- --------- ---------- ---------- ---------- Net assets at beginning of year 1,917,102 1,549,468 -- -- -- --------- --------- ---------- ---------- ---------- Net assets at end of year ..... $12,654,338 $9,404,909 $15,683,198 $13,879,202 $23,432,894 =========== ========== =========== =========== =========== Accumulation unit activity Units outstanding at beginning of year .......... 2,022,724 1,633,700 -- -- -- Contract purchase payments .... 5,578,158 4,347,757 13,879,649 12,717,378 18,615,165 Net transfers(2) .............. 2,807,401 1,763,950 9,104,508 7,659,033 10,691,941 Transfers for policy loans .... -- (5,399) -- (5,110) -- Contract charges .............. (1,210) (1,846) (456) (626) (474) Contract terminations: Surrender benefits ......... (46,056) (70,045) (34,634) (82,173) (44,984) Death benefits ............. (96,098) (46,260) -- (174) (11,110) ------- ------- ------ ---- ------- Units outstanding at end of year................... 10,264,919 7,621,857 22,949,067 20,288,328 29,250,538 ========== ========= ========== ========== ==========
Statements of Changes in Net Assets Segregated Asset Subaccounts ----------------------------------------------------------------------- Period ended December 31, 2000 (continued) 2IG(1) 1IP 2IP 1MG(1) 2MG(1) Operations Investment income (loss) -- net $ 218,277 $ 78,010 $ 67,728 $ (53,060) $ (36,190) Net realized gain (loss) on investments ................ (1,343) (13,861) 2,785 1,462 911 Net change in unrealized appreciation or depreciation of investments . (3,172,600) (696,508) (488,384) (1,845,328) (1,613,693) ---------- -------- -------- ---------- ---------- Net increase (decrease) in net assets resulting from operations .. (2,955,666) (632,359) (417,871) (1,896,926) (1,648,972) ========== ======== ======== ========== ========== Contract transactions Contract purchase payments .... 14,453,043 5,063,347 3,525,833 13,529,884 11,502,788 Net transfers(2) .............. 9,246,483 3,368,099 2,526,300 8,298,424 7,899,234 Transfers for policy loans .... (16,973) -- (16,787) -- (3,324) Annuity payments .............. (962) (4,560) (718) (1,210) (678) Contract charges .............. (436) (1,125) (1,479) (312) (320) Contract terminations: Surrender benefits ......... (65,089) (36,673) (59,555) (28,853) (40,299) Death benefits ............. (302) (12,522) -- (11,770) (166) ---- ------- ------ ------- ---- Increase (decrease) from contract transactions ...... 23,615,764 8,376,566 5,973,594 21,786,163 19,357,235 ---------- --------- --------- ---------- ---------- Net assets at beginning of year -- 2,680,901 2,122,181 -- -- ---------- --------- --------- ---------- ---------- Net assets at end of year ..... $ 20,660,098 $ 10,425,108 $ 7,677,904 $ 19,889,237 $ 17,708,263 ============ ============ =========== ============ ============ Accumulation unit activity Units outstanding at beginning of year .......... -- 2,504,403 1,981,118 -- -- Contract purchase payments .... 15,860,027 5,054,668 3,552,383 13,664,336 11,627,815 Net transfers(2) .............. 9,997,949 3,267,413 2,504,169 8,350,749 7,941,404 Transfers for policy loans .... (19,123) -- (16,540) -- (6,030) Contract charges .............. (519) (1,200) (1,575) (334) (337) Contract terminations: Surrender benefits ......... (74,917) (38,291) (61,941) (29,061) (41,724) Death benefits ............. (351) (12,908) -- (12,563) (172) ---- ------- ------ ------- ---- Units outstanding at end of year ................ 25,763,066 10,774,085 7,957,614 21,973,127 19,520,956 ========== ========== ========= ========== ==========
(1) For the period May 1, 2000 (commencement of operations) to Dec. 31, 2000. (2) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. -60- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Statements of Changes in Net Assets Segregated Asset Subaccounts ---------------------------------------------------------- Period ended December 31, 2000 (continued) 1MD(1) 2MD(1) 1VS 2VS Operations Investment income (loss) -- net $ (33,251) $ (23,336) $ (184,812) $ (58,688) Net realized gain (loss) on investments ............. 6,802 (19) 36,979 4,936 Net change in unrealized appreciation or depreciation of investments .............. (585,813) (537,226) (12,849,879) (9,356,658) -------- -------- ----------- ---------- Net increase (decrease) in net assets resulting from operations .. (612,262) (560,581) (12,997,712) (9,410,410) ======== ======== =========== ========== Contract transactions Contract purchase payments .... 9,057,790 7,183,959 61,158,735 46,135,956 Net transfers(2) .............. 5,971,464 5,213,858 30,908,317 21,375,164 Transfers for policy loans .... -- (8,708) -- (125,709) Annuity payments .............. (314) (207) (10,343) (9,344) Contract charges .............. (121) (116) (6,219) (8,801) Contract terminations: Surrender benefits ......... (9,782) (24,703) (401,214) (469,221) Death benefits ............. -- -- (233,972) (15,237) ----- ----- -------- ------- Increase (decrease) from contract transactions ...... 15,019,037 12,364,083 91,415,304 66,882,808 ---------- ---------- ---------- ---------- Net assets at beginning of year -- -- 9,817,341 6,918,021 ------ ------ --------- --------- Net assets at end of year ..... $14,406,775 $11,803,502 $88,234,933 $64,390,419 ============ ============ ============ ============ Accumulation unit activity Units outstanding at beginning of year ............ -- -- 7,245,003 5,083,557 Contract purchase payments .... 9,129,121 7,166,706 40,890,381 30,821,933 Net transfers(2) .............. 5,941,258 5,173,774 20,708,656 14,282,651 Transfers for policy loans .... -- (7,506) -- (86,365) Contract charges .............. (128) (120) (4,539) (6,448) Contract terminations: Surrender benefits ......... (9,947) (24,900) (276,589) (320,332) Death benefits ............. -- -- (156,059) (10,819) ----- ----- -------- ------- Units outstanding at end of year ................ 15,060,304 12,307,954 68,406,853 49,764,177 ========== ========== ========== ==========
Statements of Changes in Net Assets Period ended December 31, 2000 (continued) Segregated Asset Subaccounts ---------------------------------------------------------- Period ended December 31, 2000 (continued) 1IT 2IT 1SP 2SP Operations Investment income (loss) -- net $ 758,460 $ 638,937 $ 1,024,343 $ 799,548 Net realized gain (loss) on investments ............. (22,743) (950) (15,012) (8,450) Net change in unrealized appreciation or depreciation of investments (9,801,825) (7,734,272) (1,188,467) (774,100) ---------- ---------- ---------- -------- Net increase (decrease) in net assets resulting from operations .......... (9,066,108) (7,096,285) (179,136) 16,998 ========== ========== ======== ====== Contract transactions Contract purchase payments .... 20,661,018 16,690,783 19,601,878 15,451,815 Net transfers(2) .............. 10,197,285 8,651,164 9,008,521 6,975,569 Transfers for policy loans .... -- (41,721) -- (49,608) Annuity payments .............. (646) (2,482) (3,039) (378) Contract charges .............. (1,302) (1,354) (1,702) (2,074) Contract terminations: Surrender benefits ......... (96,455) (229,843) (144,237) (202,261) Death benefits ............. (31,021) (6,304) (32,873) (18,991) ------- ------ ------- ------- Increase (decrease) from contract transactions ...... 30,728,879 25,060,243 28,428,548 22,154,072 ---------- ---------- ---------- ---------- Net assets at beginning of year 2,031,976 1,867,896 3,132,024 2,850,015 --------- --------- --------- --------- Net assets at end of year ..... $23,694,747 $19,831,854 $31,381,436 $25,021,085 ============ ============ ============ ============ Accumulation unit activity Units outstanding at beginning of year . ........ 1,342,920 1,233,713 2,723,041 2,476,379 Contract purchase payments .... 13,655,035 11,277,668 18,816,189 14,915,435 Net transfers(2) .............. 6,943,900 5,948,499 8,519,816 6,688,350 Transfers for policy loans .... -- (32,453) -- (48,680) Contract charges .............. (1,154) (1,195) (1,694) (2,067) Contract terminations: Surrender benefits ......... (71,362) (175,205) (142,955) (198,038) Death benefits ............. (25,337) (5,905) (33,179) (18,830) ------- ------ ------- ------- Units outstanding at end of year ................. 21,844,002 18,245,122 29,881,218 23,812,549 ========== ========== ========== ==========
(1) For the period May 1, 2000 (commencement of operations) to Dec. 31, 2000. (2) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. -61- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Statements of Changes in Net Assets Segregated Asset Subaccounts --------------------------------------------------------------------- Period ended December 31, 1999 BC1(1) BC2(1) BD1(1) BD2(1) CR1(1) Operations Investment income (loss) -- net $ (2,587) $ (602) $ 74,783 $ 53,580 $ 180,144 Net realized gain (loss) on investments ............... 119 138 (977) 357 228 Net change in unrealized appreciation or depreciation of investments ........... 582,026 503,769 (23,216) (9,773) 129,521 ------- ------- ------- ------ ------- Net increase (decrease) in net assets resulting from operations .. 579,558 503,305 50,590 44,164 309,893 ======= ======= ====== ====== ======= Contract transactions Contract purchase payments .... 7,433,114 7,101,931 11,484,828 6,956,813 3,111,030 Net transfers(2) .............. 1,035,077 734,585 313,214 345,360 263,751 Transfers for policy loans .... -- -- -- (4,036) -- Annuity payments .............. -- -- -- -- -- Contract terminations: Surrender benefits ......... (4,464) (3,533) (3,858) (43,861) (4,351) Death benefits ............. -- -- (3,768) (6,048) -- ------ ------ ------ ------ ------ Increase (decrease) from contract transactions ...... 8,463,727 7,832,983 11,790,416 7,248,228 3,370,430 --------- --------- ---------- --------- --------- Net assets at beginning of year -- -- -- -- -- --------- --------- ---------- --------- --------- Net assets at end of year ..... $9,043,285 $8,336,288 $11,841,006 $7,292,392 $3,680,323 =========== =========== ============ =========== =========== Accumulation unit activity Units outstanding at beginning of year .......... -- -- -- -- -- Contract purchase payments .... 7,162,609 6,810,380 11,373,968 6,895,987 2,978,006 Net transfers(2) .............. 986,160 696,257 308,700 343,400 253,016 Transfers for policy loans .... -- -- -- (4,057) -- Contract terminations: Surrender benefits ......... (4,068) (3,259) (3,810) (43,401) (4,021) Death benefits ............. -- -- (3,724) (5,976) -- ------ ------ ------ ------ ------ Units outstanding at end of year ................ 8,144,701 7,503,378 11,675,134 7,185,953 3,227,001 ========= ========= ========== ========= =========
Statements of Changes in Net Assets Segregated Asset Subaccounts ---------------------------------------------------------------------- Period ended December 31, 1999 CR2(1) CM1(1) CM2(1) DE1(1) DE2(1) Operations Investment income (loss) -- net $ 320,678 $ 420,976 $ 346,638 $ 3,436 $ 4,098 Net realized gain (loss) on investments ................ 1,799 -- -- 42 18 Net change in unrealized appreciation or depreciation of investments ............. 200,310 (20) (17) 97,850 73,972 ------- --- --- ------ ------ Net increase (decrease) in net assets resulting from operations ... 522,787 420,956 346,621 101,328 78,088 ======= ======= ======= ======= ====== Contract transactions Contract purchase payments .... 5,526,328 109,375,412 85,241,344 3,052,274 2,819,613 Net transfers(2) .............. 97,735 (21,277,400) (19,097,300) 381,448 347,588 Transfers for policy loans .... -- -- (135,836) -- (2,929) Annuity payments .............. (278) -- -- -- -- Contract terminations: Surrender benefits ......... (8,934) (24,995) (37,313) (1,452) (3,891) Death benefits ............. -- (114,657) (39,975) (3,792) (6,160) ----- -------- ------- ------ ------ Increase (decrease) from contract transactions ...... 5,614,851 87,958,360 65,930,920 3,428,478 3,154,221 --------- ---------- ---------- --------- --------- Net assets at beginning of year -- -- -- -- -- --------- ---------- ---------- --------- --------- Net assets at end of year ..... $6,137,638 $ 88,379,316 $66,277,541 $3,529,806 $3,232,309 ========== ============ =========== ========== ========== Accumulation unit activity Units outstanding at beginning of year .......... -- -- -- -- -- Contract purchase payments .... 5,287,001 108,634,311 84,680,749 3,066,645 2,814,906 Net transfers(2) .............. 99,898 (21,071,326) (18,947,088) 379,466 346,936 Transfers for policy loans .... -- -- (134,817) -- (2,892) Contract terminations: Surrender benefits ......... (54,010) (24,769) (37,017) (1,433) (3,849) Death benefits ............. -- (113,923) (39,703) (3,740) (6,074) ----- -------- ------- ------ ------ Units outstanding at end of year ................ 5,332,889 87,424,293 65,522,124 3,440,938 3,149,027 ========= ========== ========== ========= =========
(1) For the period Sept. 15, 1999 (commencement of operations) to Dec. 31, 1999. (2) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed acco unt. See accompanying notes to financial statements. -62- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Statements of Changes in Net Assets Segregated Asset Subaccounts ----------------------------------------------------------------------- Period ended December 31, 1999(continued) EI1(1) EI2(1) FI1(1) FI2(1) GB1(1) Operations Investment income (loss) -- net $ 102,421 $ 72,359 $ 72,065 $ 56,259 $ 10,861 Net realized gain (loss) on investments ............... 243 (984) (771) (1,078) (981) Net change in unrealized appreciation or depreciation of investments ............. 69,360 14,899 (64,481) (50,825) (29,550) ------ ------ ------- ------- ------- Net increase (decrease) in net assets resulting from operations ........... 172,024 86,274 6,813 4,356 (19,670) ======= ====== ===== ===== ======= Contract transactions Contract purchase payments .... 9,162,394 7,046,617 14,336,568 12,246,539 2,072,704 Net transfers(2) .............. 919,468 740,456 (1,420,267) (1,058,145) 317,070 Transfers for policy loans .... -- (1,362) -- -- -- Annuity payments .............. (167) -- -- -- -- Contract terminations: Surrender benefits ......... (4,008) (4,745) (88,589) (11,705) (1,525) Death benefits ............. -- -- (7,507) (12,024) -- ------ ------ ------ ------- ----- Increase (decrease) from contract transactions ...... 10,077,687 7,780,966 12,820,205 11,164,665 2,388,249 ---------- --------- ---------- ---------- --------- Net assets at beginning of year -- -- -- -- -- ------ ------ ------ ------- ----- Net assets at end of year ..... $10,249,711 $7,867,240 $12,827,018 $11,169,021 $2,368,579 =========== ========== =========== =========== ========== Accumulation unit activity Units outstanding at beginning of year .......... -- -- -- -- -- Contract purchase payments .... 9,219,216 7,069,480 14,318,437 12,212,010 2,054,070 Net transfers(2) .............. 932,432 710,749 (1,426,679) (1,053,115) 315,167 Transfers for policy loans .... -- (1,370) -- -- -- Contract terminations: Surrender benefits ......... (14,643) (4,765) (88,311) (11,669) (1,506) Death benefits ............. -- -- (7,482) (11,980) -- ------ ------ ------ ------- ----- Units outstanding at end of year ................ 10,137,005 7,774,094 12,795,965 11,135,246 2,367,731 ========== ========= ========== ========== =========
Statements of Changes in Net Assets Segregated Asset Subaccounts --------------------------------------------------------------------- Period ended December 31, 1999 (continued) GB2(1) GR1(1) GR2(1) IE1(1) IE2(1) Operations Investment income (loss) -- net $ 7,511 $ (5,756) $ (3,187) $ 145,773 $ 243,800 Net realized gain (loss) on investments ................ (5) 286 1,867 352 281 Net change in unrealized appreciation or depreciation of investments ........... (18,039) 1,475,698 1,721,546 164,609 170,750 ------- --------- --------- ------- ------- Net increase (decrease) in net assets resulting from operations ............ (10,533) 1,470,228 1,720,226 310,734 414,831 ======= ========= ========= ======= ======= Contract transactions Contract purchase payments .... 1,343,061 12,920,916 16,592,001 2,134,769 2,647,146 Net transfers(2) .............. 223,877 1,906,148 1,670,102 322,635 220,086 Transfers for policy loans .... (2,046) -- (17,061) -- -- Annuity payments .............. -- -- (247) -- -- Contract terminations: Surrender benefits ......... (732) (4,649) (9,364) (2,239) (2,526) Death benefits ............. -- -- -- -- -- ------- --------- --------- ------- ------- Increase (decrease) from contract transactions ...... 1,564,160 14,822,415 18,235,431 2,455,165 2,864,706 --------- ---------- ---------- --------- --------- Net assets at beginning of year -- -- -- -- -- ------- --------- --------- ------- ------- Net assets at end of year ..... $1,553,627 $16,292,643 $19,955,657 $2,765,899 $3,279,537 ========== =========== =========== ========== ========== Accumulation unit activity Units outstanding at beginning of year .......... -- -- -- -- -- Contract purchase payments .... 1,332,987 12,046,112 15,400,990 1,892,810 2,385,192 Net transfers(2) .............. 221,882 1,770,848 1,533,999 282,373 192,407 Transfers for policy loans .... (2,024) -- (15,706) -- -- Contract terminations: Surrender benefits ......... (729) (4,032) (28,026) (1,878) (2,235) Death benefits ............. -- -- -- -- -- ------- --------- --------- ------- ------- Units outstanding at end of year ................ 1,552,116 13,812,928 16,891,257 2,173,305 2,575,364 ========= ========== ========== ========= =========
(1) For the period Sept. 15, 1999 (commencement of operations) to Dec. 31, 1999. (2) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. -63- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Statements of Changes in Net Assets Segregated Asset Subaccounts ----------------------------------------------------------------- Period ended December 31, 1999 (continued) MF1(1) MF2(1) ND1(1) ND2(1) SC1(1) Operations Investment income (loss) -- net $ 183,664 $ 143,394 $ 140,012 $ 134,388 $ 9,831 Net realized gain (loss) on investments 409 (91) 1,335 363 34 Net change in unrealized appreciation or depreciation of investments 209,114 172,124 3,344,313 3,251,583 245,447 ------- ------- --------- --------- ------- Net increase (decrease) in net assets resulting from operations 393,187 315,427 3,485,660 3,386,334 255,312 ======= ======= ========= ========= ======= Contract transactions Contract purchase payments 6,071,982 5,083,910 31,310,027 30,126,003 2,653,515 Net transfers(2) 644,363 284,874 3,851,864 4,080,510 497,807 Transfers for policy loans -- -- -- (8,431) -- Annuity payments -- -- (247) (1,064) (143) Contract terminations: Surrender benefits (1,336) (6,202) (12,517) (21,866) (1,717) Death benefits -- -- (3,906) (6,397) -- ----- ------ ------ ------ ------ Increase (decrease) from contract transactions 6,715,009 5,362,582 35,145,221 34,168,755 3,149,462 --------- --------- ---------- ---------- --------- Net assets at beginning of year -- -- -- -- -- ----- ------ ------ ------- ------ Net assets at end of year $7,108,196 $5,678,009 $38,630,881 $37,555,089 $3,404,774 ========== ========== =========== =========== ========== Accumulation unit activity Units outstanding at beginning of year -- -- -- -- -- Contract purchase payments 5,922,803 4,952,443 28,968,153 27,841,928 2,555,169 Net transfers(2) 617,528 273,875 3,544,018 3,800,123 484,382 Transfers for policy loans -- -- -- (7,719) -- Contract terminations: Surrender benefits (1,245) (6,019) (25,986) (91,026) (10,442) Death benefits -- -- (3,601) (5,895) -- ----- ------ ------ ------ ------ Units outstanding at end of year 6,539,086 5,220,299 32,482,584 31,537,411 3,029,109 ========= ========= ========== ========== =========
Statements of Changes in Net Assets Segregated Asset Subaccounts ------------------------------------------------------------------ Period ended December 31, 1999 (continued) SC2(1) SA1(1) SA2(1) 1RE(1) 2RE(1) Operations Investment income (loss) -- net $ 10,709 $ 153,278 $ 198,840 $ (675) $ (727) Net realized gain (loss) on investments 17,681 2 2,772 (118) -- Net change in unrealized appreciation or depreciation of investments 226,625 742,963 976,970 18,355 22,614 ------- ------- ------- ------ ------ Net increase (decrease) in net assets resulting from operations 255,015 896,243 1,178,582 17,562 21,887 ======= ======= ========= ====== ====== Contract transactions Contract purchase payments 2,663,423 4,360,849 4,744,466 453,462 644,456 Net transfers(2) 424,091 654,792 859,140 187,577 187,834 Transfers for policy loans (1,155) -- -- -- -- Annuity payments -- -- -- -- -- Contract terminations: Surrender benefits (529) (5,671) (10,331) (303) -- Death benefits -- -- -- (3,695) (5,874) ------- ------- ------- ------ ------ Increase (decrease) from contract transactions 3,085,830 5,009,970 5,593,275 637,041 826,416 --------- --------- --------- ------- ------- Net assets at beginning of year -- -- -- -- -- ------- ------- ------- ------ ------ Net assets at end of year $3,340,845 $5,906,213 $6,771,857 $654,603 $848,303 ========== ========== ========== ======== ======== Accumulation unit activity Units outstanding at beginning of year -- -- -- -- -- Contract purchase payments 2,569,999 3,400,022 3,813,282 493,488 691,728 Net transfers(2) 401,900 505,167 664,753 194,209 199,636 Transfers for policy loans (1,113) -- -- -- -- Contract terminations: Surrender benefits (495) (4,056) (7,790) (325) -- Death benefits -- -- -- (4,001) (6,359) ----- ----- ------- ------ ------ Units outstanding at end of year 2,970,291 3,901,133 4,470,245 683,371 885,005 ========= ========= ========= ======= =======
(1) For the period Sept. 15, 1999 (commencement of operations) to Dec. 31, 1999. (2) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. -64- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Statements of Changes in Net Assets Segregated Asset Subaccounts ----------------------------------- Period ended December 31, 1999 (continued) 1SI(1) 2SI(1) 1UE(1) Operations Investment income (loss) -- net.......... $ (430) $ (467) $ 110,630 Net realized gain (loss) on investments . -- (2) 2,204 Net change in unrealized appreciation or depreciation of investments .......... 17,650 21,497 593,778 ------ ------ ------- Net increase (decrease) in net assets resulting from operations ............ 17,220 21,028 706,612 ====== ====== ======= Contract transactions Contract purchase payments .............. 390,967 443,196 8,368,472 Net transfers(2) ........................ 159,814 100,926 1,880,455 Transfers for policy loans .............. -- (1,367) -- Annuity payments ........................ -- -- -- Contract terminations: Surrender benefits ................... (834) -- (2,416) Death benefits ....................... -- -- -- ------ ------ ------- Increase (decrease) from contract transactions ................ 549,947 542,755 10,246,511 ------- ------- ---------- Net assets at beginning of year ......... -- -- -- ------ ------ ------- Net assets at end of year ............... $567,167 $563,783 $10,953,123 ======= ========= ============ Accumulation unit activity Units outstanding at beginning of year .. -- -- -- Contract purchase payments .............. 418,504 477,931 8,137,134 Net transfers(2) ........................ 172,094 109,379 1,816,102 Transfers for policy loans .............. -- (1,464) -- Contract terminations: Surrender benefits ................... (886) -- (2,220) Death benefits ....................... -- -- -- ------ ------ ------- Units outstanding at end of year ........ 589,712 585,846 9,951,016 ======= ======= =========
Statements of Changes in Net Assets Segregated Asset Subaccounts ------------------------------------------------------------------- Period ended December 31, 1999 (continued) 2UE(1) 1MC(1) 2MC(1) 1IP(1) 2IP(1) Operations Investment income (loss) -- net.......... $ 105,937 $ 9,247 $ 8,462 $ 18,140 $ 16,731 Net realized gain (loss) on investments . 792 35 (952) 194 87 Net change in unrealized appreciation or depreciation of investments .......... 531,746 31,577 26,514 130,688 117,423 ------- ------ ------ ------- ------- Net increase (decrease) in net assets resulting from operations .. ......... 638,475 40,859 34,024 149,022 134,241 ======= ====== ====== ======= ======= Contract transactions Contract purchase payments .............. 7,827,059 1,624,627 1,278,447 1,993,477 1,541,460 Net transfers(2) ........................ 1,490,338 251,809 239,262 538,601 450,491 Transfers for policy loans .............. (4,373) -- (2,265) -- -- Annuity payments ........................ (244) (193) -- (199) -- Contract terminations: Surrender benefits ................... (38,299) -- -- -- (4,011) Death benefits ....................... -- -- -- -- -- Increase (decrease) from ------- ------ ------ ------- ------- contract transactions ................ 9,274,481 1,876,243 1,515,444 2,531,879 1,987,940 Net assets at beginning of year ......... -- -- -- -- -- Net assets at end of year ............... $ 9,912,956 $ 1,917,102 $ 1,549,468 $ 2,680,901 $ 2,122,181 =========== =========== =========== =========== =========== Accumulation unit activity Units outstanding at beginning of year .. -- -- -- -- -- Contract purchase payments .............. 7,616,924 1,751,803 1,378,191 1,973,700 1,540,067 Net transfers(2) ........................ 1,423,309 284,474 257,926 543,216 445,014 Transfers for policy loans .............. (4,147) -- (2,417) -- -- Contract terminations: Surrender benefits ................... (55,159) (13,553) -- (12,513) (3,963) Death benefits ....................... -- -- -- -- -- ------- ------ ------ ------- ------- Units outstanding at end of year ........ 8,980,927 2,022,724 1,633,700 2,504,403 1,981,118 ========= ========= ========= ========= =========
(1) For the period Sept. 15, 1999 (commencement of operations) to Dec. 31, 1999. (2) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. -65- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Statements of Changes in Net Assets Segregated Asset Subaccounts ---------------------------------------------------------------------------------- Period ended December 31, 1999 (continued) 1VS(1) 2VS(1) 1IT(1) 2IT(1) 1SP(1) 2SP(1) Operations Investment income (loss) -- net......... $ 528,089 $ 421,574 $ (1,448) $ (1,112) $ (2,628) $ (1,851) Net realized gain (loss) on investments -- -- 1 -- -- -- Net change in unrealized appreciation or depreciation of investments ...... 1,009,011 675,643 355,633 335,224 198,642 178,851 --------- ------- ------- ------- ------- ------- Net increase (decrease) in net assets resulting from operations .............. 1,537,100 1,097,217 354,186 334,112 196,014 177,000 ========= ========= ======= ======= ======= ======= Contract transactions Contract purchase payments ............. 7,028,603 4,793,250 1,310,346 1,184,921 2,500,578 2,150,975 Net transfers(2) ....................... 1,252,334 1,037,971 367,444 349,599 436,774 527,819 Transfers for policy loans ............. -- (6,501) -- (706) -- (5,051) Annuity payments ....................... -- (252) -- -- -- -- Contract terminations: Surrender benefits .................. (696) (3,664) -- (30) (1,342) (728) Death benefits ...................... -- -- -- -- -- -- --------- ------- ------- ------- ------- ------- Increase (decrease) from contract transactions ............... 8,280,241 5,820,804 1,677,790 1,533,784 2,936,010 2,673,015 --------- --------- --------- --------- --------- --------- Net assets at beginning of year ........ -- -- -- -- -- -- --------- ------- ------- ------- ------- ------- Net assets at end of year .............. $9,817,341 $6,918,021 $2,031,976 $1,867,896 $3,132,024 $2,850,015 =========== =========== =========== =========== =========== =========== Accumulation unit activity Units outstanding at beginning of year . -- -- -- -- -- -- Contract purchase payments ............. 6,168,604 4,236,058 1,062,898 934,849 2,318,078 1,988,261 Net transfers(2) ....................... 1,076,943 874,498 280,022 299,511 406,223 493,274 Transfers for policy loans ............. -- (5,052) -- (626) -- (4,487) Contract terminations: Surrender benefits .................. (544) (21,947) -- (21) (1,260) (669) Death benefits ...................... -- -- -- -- -- -- --------- ------- ------- ------- ------- ------- Units outstanding at end of year ....... 7,245,003 5,083,557 1,342,920 1,233,713 2,723,041 2,476,379 ========= ========= ========= ========= ========= =========
(1) For the period Sept. 15, 1999 (commencement of operations) to Dec. 31, 1999. (2) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. -66- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 -------------------------------------------------------------------------------- Notes to Financial Statements 1. ORGANIZATION IDS Life Variable Account 10 (the Account) was established under Minnesota law on Aug. 23, 1995 as a segregated asset account of IDS Life Insurance Company (IDS Life). The Account is registered as a unit investment trust under the Investment Company Act of 1940, as amended (the 1940 Act). Operations of the Account commenced on March 5, 1996. 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 (non-diversified for AXP(R) Variable Portfolio -- Global Bond Fund and Credit Suisse Warburg Pincus Trust -- Emerging Growth Portfolio), open-end management investment companies and have the following investment managers.
Invests exclusively in shares of Subaccount Investment Manager AXP(R)Variable Portfolio - Blue Chip Advantage Fund BC1, BC2 IDS Life Insurance Company(1) AXP(R)Variable Portfolio - Bond Fund BD1, BD2 IDS Life Insurance Company(1) AXP(R)Variable Portfolio - Capital Resource Fund CR1, CR2 IDS Life Insurance Company(1) AXP(R)Variable Portfolio - Cash Management Fund CM1, CM2 IDS Life Insurance Company(1) AXP(R)Variable Portfolio - Diversified Equity Income Fund DE1, DE2 IDS Life Insurance Company(1) AXP(R)Variable Portfolio - Emerging Markets Fund EM1, EM2 IDS Life Insurance Company(2) AXP(R)Variable Portfolio - Extra Income Fund EI1, EI2 IDS Life Insurance Company(1) AXP(R)Variable Portfolio - Federal Income Fund FI1, FI2 IDS Life Insurance Company(1) AXP(R)Variable Portfolio - Global Bond Fund GB1, GB2 IDS Life Insurance Company(1) AXP(R)Variable Portfolio - Growth Fund GR1, GR2 IDS Life Insurance Company(1) AXP(R)Variable Portfolio - International Fund IE1, IE2 IDS Life Insurance Company(2) AXP(R)Variable Portfolio - Managed Fund MF1, MF2 IDS Life Insurance Company(1) AXP(R)Variable Portfolio - New Dimensions Fund(R) ND1, ND2 IDS Life Insurance Company(1) AXP(R)Variable Portfolio - S&P 500 Index Fund IV1, IV2 IDS Life Insurance Company(1) AXP(R)Variable Portfolio - Small Cap Advantage Fund SC1, SC2 IDS Life Insurance Company(3) AXP(R)Variable Portfolio - Strategy Aggressive Fund SA1, SA2 IDS Life Insurance Company(1) Calvert Variable Series, Inc. Social Balanced Portfolio 1SR, 2SR Calvert Asset Management Company, Inc.(4) FTVIPT Franklin Real Estate Fund - Class 2 1RE, 2RE Franklin Advisers, Inc. FTVIPT Franklin Value Securities Fund - Class 2 1SI, 2SI Franklin Advisory Services, LLC Goldman Sachs VIT CORE(SM) U.S. Equity Fund 1UE, 2UE Goldman Sachs Asset Management Goldman Sachs VIT Mid Cap Value Fund 1MC, 2MC Goldman Sachs Asset Management Janus Aspen Series Global Technology Portfolio: Service Shares 1GT, 2GT Janus Capital Janus Aspen Series International Growth Portfolio: Service Shares 1IG, 2IG Janus Capital Lazard Retirement International Equity Portfolio 1IP, 2IP Lazard Asset Management MFS(R)Investors Growth Stock Series - Service Class 1MG, 2MG MFS Investment Management(R) MFS(R)New Discovery Series - Service Class 1MD, 2MD MFS Investment Management(R) Putnam VT Vista Fund - Class IB Shares 1VS, 2VS Putnam Investment Management, LLC Wanger International Small Cap 1IT, 2IT Liberty Wanger Asset Management, L.P. Wanger U.S. Small Cap 1SP, 2SP Liberty Wanger Asset Management, L.P.
(1) American Express Financial Corporation (AEFC) is the investment adviser. (2) AEFC is the investment adviser. American Express Asset Management International, Inc. is the sub-investment adviser. (3) AEFC is the investment adviser. Kenwood Capital Management LLC is the sub-investment adviser. (4) NCM Capital Management Group, Inc. is the investment subadviser. 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 IDS Life. IDS Life serves as issuer of the contract. 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. -67- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 -------------------------------------------------------------------------------- Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 IDS Life is taxed as a life insurance company. The Account is treated as part of IDS Life for federal income tax purposes. Under existing federal income tax law, no income taxes are payable with respect to any investment income of the Account. 3. MORTALITY AND EXPENSE RISK FEE IDS 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 IDS Life is computed daily and is equal, on an annual basis, to 0.95% of the average daily net assets of the subaccounts for nonqualified annuities, and 0.75% of the average daily net assets of the subaccounts for qualified annuities. 4. CONTRACT ADMINISTRATIVE CHARGES IDS Life deducts a contract administrative charge of $30 per year on each contract anniversary. This charge cannot be increased and does not apply after annuity payouts begin. IDS Life does not expect to profit from this charge. This charge reimburses IDS Life for expenses incurred in establishing and maintaining the annuity records. This charge is waived when the contract value, or total purchase payments less any payments surrendered, is $50,000 or more on the current contract anniversary. The $30 annual charge is deducted at the time of any full surrender. 5. SURRENDER CHARGE IDS Life will use a surrender charge to help it recover certain expenses relating to the sale of the annuity. The surrender charge applies if all or part of the surrender amount is from purchase payments received within seven or ten years before surrender (depending on surrender charge period selected at time of application). Charges by IDS Life for surrenders are not identified on an individual segregated asset account basis. Charges for all segregated asset accounts amounted to $18,285,051 in 2000 and $19,812,217 in 1999. Such charges are not treated as a separate expense of the subaccounts. They are ultimately deducted from contract surrender benefits paid by IDS Life. This charge is waived if the withdrawal meets certain provisions as stated in the contract. 6. INVESTMENT IN SHARES The subaccounts' investments in shares of the Funds as of Dec. 31, 2000 were as follows:
Investment Subaccount Shares NAV AXP(R)Variable Portfolio - Blue Chip Advantage Fund BC1 4,311,866 $ 9.88 BC2 3,269,441 9.88 AXP(R)Variable Portfolio - Bond Fund BD1 4,471,404 10.37 BD2 3,157,547 10.37 AXP(R)Variable Portfolio - Capital Resource Fund CR1 782,253 26.57 CR2 843,404 26.57 AXP(R)Variable Portfolio - Cash Management Fund CM1 213,338,529 1.00 CM2 181,461,542 1.00 AXP(R)Variable Portfolio - Diversified Equity Income Fund DE1 1,435,185 10.01 DE2 1,232,285 10.01 AXP(R)Variable Portfolio - Emerging Markets Fund EM1 67,993 7.51 EM2 88,683 7.51 AXP(R)Variable Portfolio - Extra Income Fund EI1 6,788,435 6.99 EI2 4,094,682 6.99 AXP(R)Variable Portfolio - Federal Income Fund FI1 2,622,666 10.17 FI2 1,710,993 10.17 AXP(R)Variable Portfolio - Global Bond Fund GB1 1,485,527 9.74 GB2 939,565 9.74 AXP(R)Variable Portfolio - Growth Fund GR1 10,634,428 9.43 GR2 9,804,505 9.43 AXP(R)Variable Portfolio - International Fund IE1 1,286,441 11.50 IE2 1,152,975 11.50
-68- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Investment Subaccount Shares NAV AXP(R)Variable Portfolio - Managed Fund MF1 2,389,594 $17.68 MF2 1,701,295 17.68 AXP(R)Variable Portfolio - New Dimensions Fund(R) ND1 12,245,700 19.21 ND2 9,902,673 19.21 AXP(R)Variable Portfolio - S&P 500 Index Fund IV1 1,412,776 9.00 IV2 978,804 9.00 AXP(R)Variable Portfolio - Small Cap Advantage Fund SC1 1,702,297 11.20 SC2 1,537,900 11.20 AXP(R)Variable Portfolio - Strategy Aggressive Fund SA1 5,682,910 12.46 SA2 4,595,122 12.46 Calvert Variable Series, Inc. Social Balanced Portfolio 1SR 813,322 2.00 2SR 617,331 2.00 FTVIPT Franklin Real Estate Fund - Class 2 1RE 444,791 17.36 2RE 496,064 17.36 FTVIPT Franklin Value Securities Fund - Class 2 1SI 351,281 9.82 2SI 346,147 9.82 Goldman Sachs VIT CORE(SM) U.S. Equity Fund 1UE 4,377,139 12.48 2UE 3,388,316 12.48 Goldman Sachs VIT Mid Cap Value Fund 1MC 1,185,974 10.67 2MC 881,435 10.67 Janus Aspen Series Global Technology Portfolio: Service Shares 1GT 2,394,381 6.55 2GT 2,118,962 6.55 Janus Aspen Series International Growth Portfolio: Service Shares 1IG 764,781 30.64 2IG 674,285 30.64 Lazard Retirement International Equity Portfolio 1IP 868,036 12.01 2IP 639,293 12.01 MFS(R)Investors Growth Stock Series - Service Class 1MG 1,532,299 12.98 2MG 1,364,273 12.98 MFS(R)New Discovery Series - Service Class 1MD 868,401 16.59 2MD 711,483 16.59 Putnam VT Vista Fund - Class IB Shares 1VS 4,501,782 19.60 2VS 3,285,225 19.60 Wanger International Small Cap 1IT 831,686 28.49 2IT 696,105 28.49 Wanger U.S. Small Cap 1SP 1,569,857 19.99 2SP 1,251,680 19.99
-69- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 -------------------------------------------------------------------------------- 7. INVESTMENT TRANSACTIONS The subaccounts' purchases of the Funds' shares, including reinvestment of dividend distributions, were as follows:
Year ended Dec. 31, Investment Subaccount 2000 1999 ------------------------------------------------------------------------------------------------------------------ AXP(R)Variable Portfolio - Blue Chip Advantage Fund BC1(1) $ 38,666,037 $ 8,343,972 BC2(1) 27,748,140 7,773,294 AXP(R)Variable Portfolio - Bond Fund BD1(1) 35,888,093 12,192,380 BD2(1) 28,053,428 7,451,268 AXP(R)Variable Portfolio - Capital Resource Fund CR1(1) 23,095,783 3,570,614 CR2(1) 22,914,881 5,941,556 AXP(R)Variable Portfolio - Cash Management Fund CM1(1) 199,139,286 85,974,037 CM2(1) 170,155,209 66,483,221 AXP(R)Variable Portfolio - Diversified Equity Income Fund DE1(1) 11,241,324 3,356,317 DE2(1) 9,728,189 3,131,540 AXP(R)Variable Portfolio - Emerging Markets Fund EM1(2) 1,106,280 -- EM2(2) 871,160 -- AXP(R)Variable Portfolio - Extra Income Fund EI1(1) 45,881,767 9,971,339 EI2(1) 25,725,571 7,877,322 AXP(R)Variable Portfolio - Federal Income Fund FI1(1) 22,392,901 12,892,030 FI2(1) 17,922,717 11,461,491 AXP(R)Variable Portfolio - Global Bond Fund GB1(1) 12,199,643 2,446,978 GB2(1) 7,642,568 1,532,501 AXP(R)Variable Portfolio - Growth Fund GR1(1) 113,416,671 14,587,375 GR2(1) 98,301,975 17,970,110 AXP(R)Variable Portfolio - International Fund IE1(1) 18,358,046 2,601,976 IE2(1) 15,617,581 3,147,385 AXP(R)Variable Portfolio - Managed Fund MF1(1) 40,261,585 6,852,643 MF2(1) 28,316,929 5,425,212 AXP(R)Variable Portfolio - New Dimensions Fund(R) ND1(1) 242,162,743 34,396,783 ND2(1) 188,456,955 33,878,983 AXP(R)Variable Portfolio - S&P 500 Index Fund IV1(2) 13,917,990 -- IV2(2) 9,696,310 -- AXP(R)Variable Portfolio - Small Cap Advantage Fund SC1(1) 16,522,236 3,065,285 SC2(1) 14,521,942 5,778,679 AXP(R)Variable Portfolio - Strategy Aggressive Fund SA1(1) 107,135,058 5,057,408 SA2(1) 84,141,574 5,744,273 Calvert Variable Series, Inc. Social Balanced Portfolio 1SR(2) 2,138,433 -- 2SR(2) 1,407,689 -- FTVIPT Franklin Real Estate Fund - Class 2 1RE(1) 6,774,225 647,423 2RE(1) 7,055,969 825,643 FTVIPT Franklin Value Securities Fund - Class 2 1SI(1) 2,492,177 549,517 2SI(1) 2,603,427 542,606 Goldman Sachs VIT CORE(SM) U.S. Equity Fund 1UE(1) 49,537,294 10,393,135 2UE(1) 36,682,430 9,394,850 Goldman Sachs VIT Mid Cap Value Fund 1MC(1) 8,844,592 1,887,086 2MC(1) 6,548,700 1,587,206 Janus Aspen Series Global Technology Portfolio: Service Shares 1GT(2) 21,867,110 -- 2GT(2) 19,209,500 -- Janus Aspen Series International Growth Portfolio: Service Shares 1IG(2) 27,234,234 -- 2IG(2) 23,853,577 -- Lazard Retirement International Equity Portfolio 1IP(1) 8,825,673 2,558,804 2IP(1) 8,847,548 2,009,743 MFS(R)Investors Growth Stock Series - Service Class 1MG(2) 21,779,011 -- 2MG(2) 19,360,121 --
-70- American Express Retirement Advisor Advantage Variable Annuity IDS Life Variable Account 10 --------------------------------------------------------------------------------
Year ended Dec. 31, Investment Subaccount 2000 1999 --------------------------------------------------------------------------------------------------------------------- MFS(R)New Discovery Series - Service Class 1MD(2) $ 15,120,479 $ -- 2MD(2) 12,345,455 -- Putnam VT Vista Fund - Class IB Shares 1VS(1) 91,532,204 8,808,344 2VS(1) 66,882,100 6,242,387 Wanger International Small Cap 1IT(1) 31,637,176 1,676,597 2IT(1) 25,743,536 1,532,620 Wanger U.S. Small Cap 1SP(1) 29,691,090 2,933,384 2SP(1) 23,128,548 2,671,164 .. ---------- ---------
(1) Operations commenced on Sept. 15, 1999. (2) Operations commenced on May 1, 2000. -71- IDS Life Insurance Company ------------------------------------------------------------------------------- REPORT OF INDEPENDENT AUDITORS THE BOARD OF DIRECTORS IDS LIFE INSURANCE COMPANY We have audited the accompanying consolidated balance sheets of IDS Life Insurance Company (a wholly-owned subsidiary of American Express Financial Corporation) as of December 31, 2000 and 1999, and the related consolidated statements of income, stockholder's equity and cash flows for each of the three years in the period ended December 31, 2000. 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 auditing standards generally accepted in the United States. 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 consolidated financial position of IDS Life Insurance Company at December 31, 2000 and 1999, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP Ernst & Young LLP February 8, 2001 Minneapolis, Minnesota IDS Life Insurance Company -------------------------------------------------------------------------------
IDS Life Insurance Company Consolidated balance sheets December 31, ($ thousands) 2000 1999 Assets Investments: Fixed maturities: Held to maturity, at amortized cost (fair value: 2000, $6,471,798; 1999, $7,105,743) $ 6,463,613 $ 7,156,292 Available for sale, at fair value (amortized cost: 2000, $12,929,870; 1999, $13,703,137) 12,399,990 13,049,549 ---------- ---------- 18,863,603 20,205,841 Mortgage loans on real estate 3,738,091 3,606,377 Policy loans 618,973 561,834 Other investments 635,880 506,797 ------- ------- Total investments 23,856,547 24,880,849 Cash and cash equivalents 316,974 32,333 Amounts recoverable from reinsurers 416,480 327,168 Amounts due from brokers 15,302 145 Other accounts receivable 42,324 48,578 Accrued investment income 334,928 343,449 Deferred policy acquisition costs 2,951,655 2,665,175 Deferred income taxes, net 136,588 216,020 Other assets 25,919 33,089 Separate account assets 32,349,347 35,894,732 ---------- ---------- Total assets $60,446,064 $64,441,538 =========== =========== Liabilities and stockholder's equity Liabilities: Future policy benefits: Fixed annuities $19,417,446 $20,552,159 Universal life-type insurance 3,410,871 3,391,203 Traditional life insurance 232,913 226,842 Disability income and long-term care insurance 1,012,247 811,941 Policy claims and other policyholders' funds 52,067 24,600 Amounts due to brokers 446,347 148,112 Other liabilities 459,422 579,678 Separate account liabilities 32,349,347 35,894,732 ---------- ---------- Total liabilities 57,380,660 61,629,267 ---------- ---------- Commitments and contingencies Stockholder's equity: Capital stock, $30 par value per share; 100,000 shares authorized, issued and outstanding 3,000 3,000 Additional paid-in capital 288,327 288,327 Accumulated other comprehensive loss, net of tax: Net unrealized securities losses (333,734) (411,230) Retained earnings 3,107,811 2,932,174 --------- --------- Total stockholder's equity 3,065,404 2,812,271 --------- --------- Total liabilities and stockholder's equity $60,446,064 $64,441,538 =========== =========== See accompanying notes.
IDS Life Insurance Company -------------------------------------------------------------------------------
IDS Life Insurance Company Consolidated statements of income Three years ended December 31, ($ thousands) 2000 1999 1998 Revenues Premiums: Traditional life insurance $ 56,187 $ 53,790 $ 53,132 Disability income and long-term care insurance 231,311 201,637 176,298 ------- ------- ------- Total premiums 287,498 255,427 229,430 Policyholder and contractholder charges 438,127 411,994 383,965 Management and other fees 598,168 473,108 401,057 Net investment income 1,730,605 1,919,573 1,986,485 Net realized (loss) gain on investments (16,975) 26,608 6,902 ------- ------ ----- Total revenues 3,037,423 3,086,710 3,007,839 --------- --------- --------- Benefits and expenses Death and other benefits: Traditional life insurance 29,042 29,819 29,835 Universal life-type insurance and investment contracts 131,467 118,561 108,349 Disability income and long-term care insurance 40,246 30,622 27,414 Increase in liabilities for future policy benefits: Traditional life insurance 5,765 7,311 6,052 Disability income and long-term care insurance 113,239 87,620 73,305 Interest credited on universal life-type insurance and investment contracts 1,169,641 1,240,575 1,317,124 Amortization of deferred policy acquisition costs 403,968 332,705 382,642 Other insurance and operating expenses 336,791 335,180 287,326 ------- ------- ------- Total benefits and expenses 2,230,159 2,182,393 2,232,047 --------- --------- --------- Income before income taxes 807,264 904,317 775,792 Income taxes 221,627 267,864 235,681 ------- ------- ------- Net income $ 585,637 $ 636,453 $ 540,111 ========== ========== ========== See accompanying notes.
IDS Life Insurance Company -------------------------------------------------------------------------------
IDS Life Insurance Company Consolidated statements of stockholder's equity Accumulated other Total Additional comprehensive stockholder's Capital paid-In (loss) income, Retained Three years ended December 31, ($ thousands) equity stock capital net of tax earnings Balance, January 1, 1998 $2,865,816 $3,000 $290,847 $ 226,359 $2,345,610 Comprehensive income: Net income 540,111 -- -- -- 540,111 Unrealized holding losses arising during the year, net of deferred policy acquisition costs of $6,333 and taxes of $32,826 (60,964) -- -- (60,964) -- Reclassification adjustment for losses included in net income, net of tax of ($2,254) 4,189 -- -- 4,189 -- ----- ----- ----- ----- ----- Other comprehensive loss (56,775) -- -- (56,775) -- ------- ----- ----- ------- ----- Comprehensive income 483,336 -- -- -- -- Other changes (2,520) -- (2,520) -- -- Cash dividends to parent (240,000) -- -- -- (240,000) -------- ----- ----- ----- -------- Balance, December 31, 1998 3,106,632 3,000 288,327 169,584 2,645,721 Comprehensive income: Net income 636,453 -- -- -- 636,453 Unrealized holding losses arising during the year, net of deferred policy acquisition costs of $28,444 and taxes of $304,936 (566,311) -- -- (566,311) -- Reclassification adjustment for gains included in net income, net of tax of $7,810 (14,503) -- -- (14,503) -- ------- ----- ----- ------- ----- Other comprehensive loss (580,814) -- -- (580,814) -- -------- ----- ----- -------- ----- Comprehensive income 55,639 -- -- -- -- Cash dividends to parent (350,000) -- -- -- (350,000) -------- ----- ----- ----- -------- Balance, December 31, 1999 2,812,271 3,000 288,327 (411,230) 2,932,174 Comprehensive income: Net income 585,637 -- -- -- 585,637 Unrealized holding gains arising during the year, net of deferred policy acquisition costs of ($5,154) and taxes of ($46,921) 87,138 -- -- 87,138 -- Reclassification adjustment for gains included in net income, net of tax of $5,192 (9,642) -- -- (9,642) -- ------ ----- ----- ------ ----- Other comprehensive income 77,496 -- -- 77,496 -- ------ ----- ----- ------ ----- Comprehensive income 663,133 -- -- -- -- Cash dividends to parent (410,000) -- -- -- (410,000) -------- ----- ----- ----- -------- Balance, December 31, 2000 $3,065,404 $3,000 $288,327 $(333,734) $3,107,811 === ==== ========== ====== ======== ========= ========== See accompanying notes.
IDS Life Insurance Company -------------------------------------------------------------------------------
IDS Life Insurance Company Consolidated statements of cash flows Years ended December 31, ($ thousands) 2000 1999 1998 Cash flows from operating activities Net income $ 585,637 $ 636,453 $ 540,111 Adjustments to reconcile net income to net cash provided by operating activities: Policy loans, excluding universal life-type insurance: Issuance (61,313) (56,153) (53,883) Repayment 56,088 54,105 57,902 Change in amounts recoverable from reinsurers (89,312) (64,908) (56,544) Change in other accounts receivable 6,254 (615) (10,068) Change in accrued investment income 8,521 23,125 (9,184) Change in deferred policy acquisition costs, net (291,634) (140,379) (10,443) Change in liabilities for future policy benefits for traditional life, disability income and long-term care insurance 206,377 153,157 138,826 Change in policy claims and other policyholders' funds 27,467 (45,709) 1,964 Deferred income tax provision (benefit) 37,704 79,796 (19,122) Change in other liabilities (120,256) 169,395 64,902 Amortization of premium, (accretion of discount), net 37,909 (17,907) 9,170 Net realized loss (gain) on investments 16,975 (26,608) (6,902) Policyholder and contractholder charges, non-cash (151,745) (175,059) (172,396) Other, net (9,279) (5,324) 10,786 ------ ------ ------ Net cash provided by operating activities 259,393 583,369 485,119 ------- ------- ------- Cash flows from investing activities Fixed maturities held to maturity: Purchases (4,487) (3,030) (1,020) Maturities, sinking fund payments and calls 589,742 741,949 1,162,731 Sales 50,067 66,547 236,963 Fixed maturities available for sale: Purchases (1,454,010) (3,433,128) (4,100,238) Maturities, sinking fund payments and calls 1,019,403 1,442,507 2,967,311 Sales 1,237,116 1,691,389 278,955 Other investments, excluding policy loans: Purchases (706,082) (657,383) (555,647) Sales 435,633 406,684 579,038 Change in amounts due from brokers (15,157) 182 8,073 Change in amounts due to brokers 298,236 (47,294) (186,052) ------- ------- -------- Net cash provided by investing activities 1,450,461 208,423 390,114 --------- ------- ------- Cash flows from financing activities Activity related to universal life-type insurance and investment contracts: Considerations received 1,842,026 2,031,630 1,873,624 Surrenders and other benefits (3,974,966) (3,669,759) (3,792,612) Interest credited to account balances 1,169,641 1,240,575 1,317,124 Universal life-type insurance policy loans: Issuance (134,107) (102,239) (97,602) Repayment 82,193 67,881 67,000 Dividends paid (410,000) (350,000) (240,000) -------- -------- -------- Net cash used in financing activities (1,425,213) (781,912) (872,466) ---------- -------- -------- Net increase in cash and cash equivalents 284,641 9,880 2,767 Cash and cash equivalents at beginning of year 32,333 22,453 19,686 ------ ------ ------ Cash and cash equivalents at end of year $ 316,974 $ 32,333 $ 22,453 =========== =========== =========== See accompanying notes
IDS Life Insurance Company ------------------------------------------------------------------------------- Notes to Consolidated Financial Statements ($ thousands) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of business IDS Life Insurance Company (the Company) is a stock life insurance company organized under the laws of the State of Minnesota. The Company is a wholly-owned subsidiary of American Express Financial Corporation (AEFC), which is a wholly owned subsidiary of American Express Company. The Company serves residents of all states except New York. IDS Life Insurance Company of New York is a wholly owned subsidiary of the Company and serves New York State residents. The Company also wholly owns American Enterprise Life Insurance Company, American Centurion Life Assurance Company, American Partners Life Insurance Company and American Express Corporation. The Company's principal products are deferred annuities and universal life insurance, which are issued primarily to individuals. It offers single premium and flexible premium deferred annuities on both a fixed and variable dollar basis. Immediate annuities are offered as well. The Company's insurance products include universal life (fixed and variable), whole life, single premium life and term products (including waiver of premium and accidental death benefits). The Company also markets disability income and long-term care insurance. Basis of presentation The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States which vary in certain respects from reporting practices prescribed or permitted by state insurance regulatory authorities (see Note 4). The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Investments Fixed maturities that the Company has both the positive intent and the ability to hold to maturity are classified as held to maturity and carried at amortized cost. All other fixed maturities and all marketable equity securities are classified as available for sale and carried at fair value. Unrealized gains and losses on securities classified as available for sale are reported as a separate component of accumulated other comprehensive income (loss), net of the related deferred policy acquisition costs effect and deferred taxes. The retrospective interest method is used for income recognition on investments in structured notes and residual beneficial interests in securitized financial assets. 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. Mortgage loans on real estate are carried at amortized cost less reserves for mortgage loan losses. The estimated fair value of the mortgage loans is determined by a discounted cash flow analysis using mortgage interest rates currently offered for mortgages of similar maturities. Impairment of mortgage loans is measured as the excess of a loan's recorded investment over its present value of expected principal and interest payments discounted at the loan's effective interest rate, or the fair value of collateral. The amount of the impairment is recorded in a reserve for mortgage loan losses. The reserve for mortgage loan losses is maintained at a level that management believes is adequate to absorb estimated losses in the portfolio. The level of the reserve account is determined based on several factors, including historical experience, expected future principal and interest payments, estimated collateral values, and current economic and political conditions. Management regularly evaluates the adequacy of the reserve for mortgage loan losses. The Company generally stops accruing interest on mortgage loans for which interest payments are delinquent more than three months. Based on management's judgment as to the ultimate collectibility of principal, interest payments received are either recognized as income or applied to the recorded investment in the loan. IDS Life Insurance Company ------------------------------------------------------------------------------- The cost of interest rate caps and floors is amortized to investment income over the life of the contracts and payments received as a result of these agreements are recorded as investment income when realized. The amortized cost of interest rate caps and floors is included in other investments. Amounts paid or received under interest rate swap agreements are recognized as an adjustment to investment income. The Company may purchase and write index options to hedge the fee income earned on the management of equity securities in separate accounts and the underlying mutual funds. These index options are carried at market value and are included in other investments or other liabilities, as appropriate. Gains or losses on index options that qualify as hedges are deferred and recognized in management and other fees in the same period as the hedged fee income. The Company also uses index options to manage the risks related to a certain annuity product that pays interest based upon the relative change in a major stock market index between the beginning and end of the product's term. Purchased options used in conjunction with this product are reported in other investments and written options are included in other liabilities. The amortization of the cost of purchased options, the proceeds of written options and the changes in intrinsic value of the contracts are included in net investment income. Policy loans are carried at the aggregate of the unpaid loan balances which do not exceed the cash surrender values of the related policies. Statements of cash flows The Company considers investments with a maturity at the date of their acquisition of three months or less to be cash equivalents. These securities are carried principally at amortized cost, which approximates fair value. Supplementary information to the consolidated statements of cash flows for the years ended December 31 is summarized as follows: 2000 1999 1998 Cash paid during the year for: Income taxes $225,704 $214,940 $215,003 Interest on borrowings 3,299 4,521 14,529 Recognition of profits on annuity contracts and insurance policies Profits on fixed and variable deferred annuities are recognized by the Company over the lives of the contracts, using primarily the interest method. Profits on fixed annuities represent the excess of investment income earned from investment of contract considerations over interest credited to contract owners and other expenses. Profits on variable annuities represent the excess of contractholder charges over the costs of benefits provided and other expenses. The retrospective deposit method is used in accounting for fixed and variable universal life-type insurance. Under this method, profits are recognized over the lives of the policies in proportion to the estimated gross profits expected to be realized. Premiums on traditional life, disability income and long-term care insurance policies are recognized as revenue when due, and related benefits and expenses are associated with premium revenue in a manner that results in recognition of profits over the lives of the insurance policies. This association is accomplished by means of the provision for future policy benefits and the deferral and subsequent amortization of policy acquisition costs. Policyholder and contractholder charges include the monthly cost of insurance charges, issue and administrative fees and surrender charges. These charges also include the minimum death benefit guarantee fees received from the variable life insurance separate accounts. Management and other fees include investment management fees from underlying proprietary mutual funds and mortality and expense risk fees received from the variable annuity and variable life insurance separate accounts. Deferred policy acquisition costs The costs of acquiring new business, principally sales compensation, policy issue costs, underwriting and certain sales expenses, have been deferred on insurance and annuity contracts. The deferred acquisition costs for most single premium deferred annuities and installment annuities are amortized using primarily the interest method. The costs for universal life-type insurance and certain installment annuities are amortized as a percentage of the estimated gross profits expected to be realized on the policies. For traditional life, disability income and long-term care insurance policies, the costs are amortized over an appropriate period in proportion to premium revenue. Amortization of deferred policy acquisition costs requires the use of assumptions including interest margins, mortality margins, persistency rates, maintenance expense levels and, for variable products, separate account performance. For universal life-type insurance and deferred annuities, actual experience is reflected in the Company's amortization models monthly. As actual experience differs from the current assumptions, management considers the need to change key assumptions underlying the amortization models prospectively. The impact of changing prospective assumptions is reflected in the period that such changes are made and is generally referred to as an unlocking adjustment. During 2000 and 1999, unlocking adjustments resulted in a net decrease in amortization of $12,300 and $56,800, respectively. Net unlocking adjustments in 1998 were not significant. IDS Life Insurance Company ------------------------------------------------------------------------------- Liabilities for future policy benefits Liabilities for universal-life type insurance and fixed and variable deferred annuities are accumulation values. Liabilities for equity indexed deferred annuities are determined as the present value of guaranteed benefits and the intrinsic value of index-based benefits. Liabilities for fixed annuities in a benefit status are based on established industry mortality tables and interest rates ranging from 5% to 9.5%, depending on year of issue. Liabilities for future benefits on traditional life insurance are based on the net level premium method, using anticipated mortality, policy persistency and interest earning rates. Anticipated mortality rates are based on established industry mortality tables. Anticipated policy persistency rates vary by policy form, issue age and policy duration with persistency on cash value plans generally anticipated to be better than persistency on term insurance plans. Anticipated interest rates range from 4% to 10%, depending on policy form, issue year and policy duration. Liabilities for future disability income and long-term care policy benefits include both policy reserves and claim reserves. Policy reserves are based on the net level premium method, using anticipated morbidity, mortality, policy persistency and interest earning rates. Anticipated morbidity and mortality rates are based on established industry morbidity and mortality tables. Anticipated policy persistency rates vary by policy form, issue age, policy duration and, for disability income policies, occupation class. Anticipated interest rates for disability income and long-term care policy reserves are 3% to 9.5% at policy issue and grade to ultimate rates of 5% to 7% over 5 to 10 years. Claim reserves are calculated based on claim continuance tables and anticipated interest earnings. Anticipated claim continuance rates are based on established industry tables. Anticipated interest rates for claim reserves for both disability income and long-term care range from 5% to 8%. Reinsurance The maximum amount of life insurance risk retained by the Company is $750 on any policy insuring a single life and $1,500 on any policy insuring a joint-life combination. The Company retains only 20% of the mortality risk on new variable universal life insurance policies. Risk not retained is reinsured with other life insurance companies, primarily on a yearly renewable term basis. Long-term care policies are primarily reinsured on a coinsurance basis. The Company retains all accidental death benefit, disability income and waiver of premium risk. 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, 2000 and 1999 are $41,059 and $852 receivable from, respectively, AEFC for federal income taxes. Separate account business The separate account assets and liabilities represent funds held for the exclusive benefit of the variable annuity and variable life insurance contract owners. The Company receives investment management fees from the proprietary mutual funds used as investment options for variable annuities and variable life insurance. The Company receives mortality and expense risk fees from the separate accounts. The Company makes contractual mortality assurances to the variable annuity contract owners that the net assets of the separate accounts will not be affected by future variations in the actual life expectancy experience of the annuitants and beneficiaries from the mortality assumptions implicit in the annuity contracts. The Company makes periodic fund transfers to, or withdrawals from, the separate account assets for such actuarial adjustments for variable annuities that are in the benefit payment period. The Company also guarantees that the rates at which administrative fees are deducted from contract funds will not exceed contractual maximums. For variable life insurance, the Company guarantees that the rates at which insurance charges and administrative fees are deducted from contract funds will not exceed contractual maximums. The Company also guarantees that the death benefit will continue payable at the initial level regardless of investment performance so long as minimum premium payments are made. Accounting changes In June 1998, the Financial Accounting Standards Board (FASB) issued, and subsequently amended, Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities," which the company adopted on January 1, 2001. This Statement establishes accounting and reporting standards for derivative instruments, including some embedded in other contracts, and hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities on the balance sheet and measure those instruments at fair value. Changes in the fair value of a derivative will be recorded in income or directly to equity, depending on the instrument's designated use. IDS Life Insurance Company ------------------------------------------------------------------------------- A one-time opportunity to reclassify held-to-maturity investments to available-for-sale is allowed without tainting the remaining securities in the held-to-maturity portfolio. The Company has elected to take this opportunity to reclass its held-to-maturity investments to available-for-sales. As of January 1, 2001, the cumulative impact of applying the Statement's accounting requirements will not have a significant impact on the Company's financial position or results of operations. In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," superceding SFAS No. 125. The Statement is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001. The Statement is effective for recognition and reclassification of collateral and for disclosures relating to securitization transactions and collateral for fiscal years ending after December 15, 2000. The company does not expect SFAS No. 140 to have a material impact on the company's financial position or results of operations. In July 2000, the FASB's Emerging Issues Task Force (EITF) issued a consensus on Issue 99-20, "Recognition of Interest Income and Impairment on Purchased Beneficial Interests in Securitized Financial Assets." The consensus must be adopted for fiscal quarters beginning after March 15, 2001, with earlier adoption permitted. Issue 99-20 prescribes new procedures for recording interest income and measuring impairment on retained and purchased beneficial interests. The rule primarily affects certain AEFA high-yield investments contained in off-balance sheet trusts whose cash flows have been negatively effected by credit experience. As of January 1, 2001, the rule would require AEFA to adjust the carrying amount of these investments downward by approximately $30 milllion through recognition of an impairment charge. Reclassifications Certain 1999 and 1998 amounts have been reclassified to conform to the 2000 presentations. 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 values of investments in fixed maturities and equity securities at December 31, 2000 are as follows:
Gross Gross Amortized unrealized unrealized Fair Held to maturity cost gains losses value U.S. Government agency obligations $ 38,302 $ 3,455 $ 80 $ 41,677 State and municipal obligations 7,678 16 -- 7,694 Corporate bonds and obligations 5,248,517 111,466 114,330 5,245,653 Mortgage-backed securities 1,169,116 9,130 1,472 1,176,774 --------- ----- ----- --------- $6,463,613 $124,067 $115,882 $6,471,798 ========== ======== ======== ========== Gross Gross Amortized unrealized unrealized Fair Available for sale cost gains losses value U.S. Government agency obligations $ 96,408 $ 6,134 $ 268 $ 102,274 State and municipal obligations 12,848 247 -- 13,095 Corporate bonds and obligations 7,586,423 123,691 693,303 7,016,811 Mortgage-backed securities 5,234,191 57,697 24,078 5,267,810 --------- ------ ------ --------- Total fixed maturities 12,929,870 187,769 717,649 12,399,990 Equity securities 11,829 -- 1,496 10,333 ------ ------- ----- ------ $12,941,699 $187,769 $719,145 $12,410,323 =========== ======== ======== ===========
IDS Life Insurance Company ------------------------------------------------------------------------------- The amortized cost, gross unrealized gains and losses and fair values of investments in fixed maturities and equity securities at December 31, 1999 are as follows:
Gross Gross Amortized unrealized unrealized Fair Held to maturity cost gains losses value U.S. Government agency obligations $ 37,613 $ 236 $ 2,158 $ 35,691 State and municipal obligations 9,681 150 -- 9,831 Corporate bonds and obligations 5,713,475 91,571 113,350 5,691,696 Mortgage-backed securities 1,395,523 4,953 31,951 1,368,525 --------- ----- ------ --------- $7,156,292 $96,910 $147,459 $7,105,743 ========== ======= ======== ========== Gross Gross Amortized unrealized unrealized Fair Available for sale cost gains losses value U.S. Government agency obligations $ 46,325 $ 612 $ 2,231 $ 44,706 State and municipal obligations 13,226 519 191 13,554 Corporate bonds and obligations 7,960,352 60,120 560,450 7,460,022 Mortgage-backed securities 5,683,234 9,692 161,659 5,531,267 --------- ----- ------- --------- Total fixed maturities 13,703,137 70,943 724,531 13,049,549 Equity securities 3,000 16 -- 3,016 ----- -- ----- ----- $13,706,137 $70,959 $724,531 $13,052,565 =========== ======= ======== ===========
The amortized cost and fair value of investments in fixed maturities at December 31, 2000 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 from one to five years $2,930,737 $2,935,736 Due from five to ten years 1,807,979 1,800,940 Due in more than ten years 555,781 558,348 Mortgage-backed securities 1,169,116 1,176,774 --------- --------- $6,463,613 $6,471,798 ========== ========== Amortized Fair Available for sale cost value Due from one to five years $ 420,233 $ 464,106 Due from five to ten years 4,675,249 4,266,932 Due in more than ten years 2,600,197 2,401,142 Mortgage-backed securities 5,234,191 5,267,810 --------- --------- $12,929,870 $12,399,990 =========== =========== During the years ended December 31, 2000, 1999 and 1998, fixed maturities classified as held to maturity were sold with amortized cost of $53,169, $68,470 and $230,036, respectively. Net gains and losses on these sales were not significant. The sale of these fixed maturities was due to significant deterioration in the issuers' credit worthiness. Fixed maturities available for sale were sold during 2000 with proceeds of $1,237,116 and gross realized gains and losses of $25,101 and $10,267, respectively. Fixed maturities available for sale were sold during 1999 with proceeds of $1,691,389 and gross realized gains and losses of $36,568 and $14,255, respectively. Fixed maturities available for sale were sold during 1998 with proceeds of $278,955 and gross realized gains and losses of $15,658 and $22,102, respectively. At December 31, 2000, bonds carried at $14,472 were on deposit with various states as required by law. IDS Life Insurance Company ------------------------------------------------------------------------------- IDS Life Insurance Company At December 31, 2000, investments in fixed maturities comprised 79 percent of the Company's total invested assets. These securities are rated by Moody's and Standard & Poor's (S&P), except for securities carried at approximately $3.5 billion which are rated by AEFC's 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 2000 1999 Aaa/AAA $ 6,559,188 $ 7,144,280 Aaa/AA 32,001 1,920 Aa/AA 220,446 301,728 Aa/A 327,147 314,168 A/A 2,494,621 2,598,300 A/BBB 747,636 1,014,566 Baa/BBB 5,828,847 6,319,549 Baa/BB 287,583 348,849 Below investment grade 2,896,014 2,816,069 --------- --------- $19,393,483 $20,859,429 =========== =========== At December 31, 2000, 88 percent of the securities rated Aaa/AAA are GNMA, FNMA and FHLMC mortgage-backed securities. No holdings of any other issuer are greater than one percent of the Company's total investments in fixed maturities. At December 31, 2000, approximately 16 percent of the Company's invested assets were mortgage loans on real estate. Summaries of mortgage loans by region of the United States and by type of real estate are as follows: December 31, 2000 December 31, 1999 On balance Commitments On balance Commitments Region sheet to purchase sheet to purchase East North Central $ 691,694 $18,868 $ 715,998 $ 10,380 West North Central 564,576 7,621 555,635 42,961 South Atlantic 884,723 7,667 867,838 23,317 Middle Atlantic 378,702 13,813 428,051 1,806 New England 279,147 4,604 259,243 4,415 Pacific 318,727 921 238,299 3,466 West South Central 173,158 28,548 144,607 4,516 East South Central 49,176 2,763 43,841 -- Mountain 409,677 10,209 381,148 9,380 ------- ------ ------- ----- 3,749,580 95,014 3,634,660 100,241 Less allowance for losses 11,489 -- 28,283 -- ------ ----- ------ ----- $3,738,091 $95,014 $3,606,377 $100,241 ========== ======= ========== ======== December 31, 2000 December 31, 1999 On balance Commitments On balance Commitments Property type sheet to purchase sheet to purchase Department/retail stores $1,174,763 $11,130 $1,158,712 $ 33,829 Apartments 780,228 -- 887,538 11,343 Office buildings 1,085,948 59,941 931,234 26,062 Industrial buildings 323,766 23,943 309,845 5,525 Hotels/motels 100,680 -- 103,625 -- Medical buildings 128,101 -- 114,045 -- Nursing/retirement homes 49,822 -- 45,935 -- Mixed use 87,537 -- 66,893 -- Other 18,735 -- 16,833 23,482 ------ ----- ------ ------ 3,749,580 95,014 3,634,660 100,241 Less allowance for losses 11,489 -- 28,283 -- ------ ----- ------ ----- $3,738,091 $95,014 $3,606,377 $100,241 ========== ======= ========== ======== Mortgage loan fundings are restricted by state insurance regulatory authorities to 80 percent or less of the market value of the real estate at the time of origination of the loan. The Company holds the mortgage document, which gives it the right to take possession of the property if the borrower fails to perform according to the terms of the agreement. Commitments to purchase mortgages are made in the ordinary course of business. The fair value of the mortgage commitments is $nil. At December 31, 2000 and 1999, the Company's recorded investment in impaired loans was $24,999 and $21,375, respectively, with allowances of $4,350 and $5,750, respectively. During 2000 and 1999, the average recorded investment in impaired loans was $27,063 and $23,815, respectively. IDS Life Insurance Company ------------------------------------------------------------------------------- The Company recognized $1,033, $1,190 and $1,809 of interest income related to impaired loans for the years ended December 31, 2000, 1999 and 1998 respectively. The following table presents changes in the allowance for losses related to all loans: 2000 1999 1998 Balance, January 1 $ 28,283 $39,795 $38,645 Provision (reduction) for investment losses (14,894) (9,512) 7,582 Loan payoffs (1,200) (500) (800) Foreclosures and writeoffs (700) (1,500) (5,632) ---- ------ ------ Balance, December 31 $11,489 $28,283 $39,795 ======= ======= ======= At December 31, 2000, the Company had no commitments to purchase investments other than mortgage loans. Net investment income for the years ended December 31 is summarized as follows: 2000 1999 1998 Interest on fixed maturities $1,473,560 $1,598,059 $1,676,984 Interest on mortgage loans 286,611 285,921 301,253 Other investment income 1,750 70,892 43,518 Interest on cash equivalents 8,084 5,871 5,486 ----- ----- ----- 1,770,005 1,960,743 2,027,241 Less investment expenses 39,400 41,170 40,756 ------ ------ ------ $1,730,605 $1,919,573 $1,986,485 ========== ========== ========== Net realized (loss) gain on investments for the years ended December 31 is summarized as follows: 2000 1999 1998 Fixed maturities $(34,857) $ 8,802 $ 9,946 Mortgage loans 15,845 10,211 (5,933) Other investments 2,037 7,596 2,889 ----- ----- ----- $(16,975) $26,608 $ 6,902 ======== ======= ======= Changes in net unrealized appreciation (depreciation) of investments for the years ended December 31 are summarized as follows: 2000 1999 1998 Fixed maturities available for sale $99,706 $(921,778) $(93,474) Equity securities (1,428) (142) (203) ------ ---- ---- 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: 2000 1999 1998 Federal income taxes: Current $176,397 $178,444 $244,946 Deferred 37,704 79,796 (16,602) ------ ------ ------- 214,101 258,240 228,344 State income taxes-current 7,526 9,624 7,337 ----- ----- ----- Income tax expense $221,627 $267,864 $235,681 ======== ======== ======== Increases (decreases) to the income tax provision applicable to pretax income based on the statutory rate are attributable to:
2000 1999 1998 Provision Rate Provision Rate Provision Rate Federal income taxes based on the statutory rate $282,542 35.0% $316,511 35.0% $271,527 35.0% Tax-excluded interest and dividend income (3,788) (0.5) (9,626) (1.1) (12,289) (1.6) State taxes, net of federal benefit 4,892 0.6 6,256 0.7 4,769 0.6 Affordable housing credits (54,569) (6.8) (31,000) (3.4) (19,688) (2.5) Other, net (7,450) (0.8) (14,277) (1.6) (8,638) (1.1) ------ ---- ------- ---- ------ ---- Total income taxes $221,627 27.5% $267,864 29.6% $235,681 30.4% ======== ==== ======== ==== ======== ====
A portion of life insurance company income earned prior to 1984 was not subject to current taxation but was accumulated, for tax purposes, in a policyholders' surplus account. At December 31, 2000, the Company had a policyholders' surplus account balance of $20,114. The policyholders' surplus account is only taxable if dividends to the stockholder exceed the stockholder's surplus account or if the Company is liquidated. Deferred income taxes of $7,040 have not been established because no distributions of such amounts are contemplated. IDS Life Insurance Company ------------------------------------------------------------------------------- IDS Life Insurance Company Significant components of the Company's deferred tax assets and liabilities as of December 31 are as follows: 2000 1999 Deferred tax assets: Policy reserves $730,239 $733,647 Unrealized loss on available for sale investments 179,702 221,431 Investments, other 34,600 1,873 Life insurance guaranty fund assessment reserve 1,365 4,789 ----- ----- Total deferred tax assets 945,906 961,740 ------- ------- Deferred tax liabilities: Deferred policy acquisition costs 796,292 740,837 Other 13,026 4,883 ------ ----- Total deferred tax liabilities 809,318 745,720 ------- ------- Net deferred tax assets $136,588 $216,020 ======== ======== The Company is required to establish a valuation allowance for any portion of the deferred tax assets that management believes will not be realized. In the opinion of management, it is more likely than not that the Company will realize the benefit of the deferred tax assets and, therefore, no such valuation allowance has been established. 4. STOCKHOLDER'S EQUITY Retained earnings available for distribution as dividends to the parent are limited to the Company's surplus as determined in accordance with accounting practices prescribed by state insurance regulatory authorities. Statutory unassigned surplus aggregated $1,527,543 as of December 31, 2000 and $1,693,356 as of December 31, 1999 (see Note 3 with respect to the income tax effect of certain distributions). In addition, any dividend distributions in 2001 in excess of approximately $344,973 would require approval of the Department of Commerce of the State of Minnesota. Statutory net income for the years ended December 31 and capital and surplus as of December 31 are summarized as follows: 2000 1999 1998 Statutory net income $ 344,973 $ 478,173 $ 429,903 Statutory capital and surplus 1,778,306 1,978,406 1,883,405 --------- --------- --------- The National Association of Insurance Commissioners (NAIC) revised the Accounting Practices and Procedures Manual in a process referred to as Codification. The revised manual will be effective January 1, 2001. The domiciliary states of the Company and its insurance subsidiaries have adopted the provisions of the revised manual. The revised manual has changed, to some extent, prescribed statutory accounting practices and will result in changes to the accounting practices that the Company and its insurance subsidiaries use to prepare their statutory-basis financial statements. Management believes the impact of these changes to the Company's and its subsidiaries' stautory-basis capital and surplus as of January 1, 2001 will not be significant. 5. RELATED PARTY TRANSACTIONS The Company loans funds to AEFC under a collateral loan agreement. The balance of the loan was $nil at December 31, 2000 and 1999. This loan can be increased to a maximum of $75,000 and pays interest at a rate equal to the preceding month's effective new money rate for the Company's permanent investments. Interest income on related party loans totaled $nil in 2000, 1999 and 1998. The Company participates in the American Express Company Retirement Plan which covers all permanent employees age 21 and over who have met certain employment requirements. Employer contributions to the plan are based on participants' age, years of service and total compensation for the year. Funding of retirement costs for this plan complies with the applicable minimum funding requirements specified by ERISA. The Company's share of the total net periodic pension cost was $250, $223 and $211 in 2000, 1999 and 1998, respectively. The Company also participates in defined contribution pension plans of American Express Company which cover all employees who have met certain employment requirements. Company contributions to the plans are a percent of either each employee's eligible compensation or basic contributions. Costs of these plans charged to operations in 2000, 1999 and 1998 were $1,707, $1,906 and $1,503, respectively. The Company participates in defined benefit health care plans of AEFC that provide health care and life insurance benefits to retired employees and retired financial advisors. The plans include participant contributions and service related eligibility requirements. Upon retirement, such employees are considered to have been employees of AEFC. AEFC expenses these benefits and allocates the expenses to its subsidiaries. The Company's share of postretirement benefits in 2000, 1999 and 1998 was $1,136, $1,147 and $1,352, respectively. Charges by AEFC for use of joint facilities, technology support, marketing services and other services aggregated $582,836, $485,177 and $411,337 for 2000, 1999 and 1998, respectively. Certain of these costs are included in deferred policy acquisition costs. IDS Life Insurance Company ------------------------------------------------------------------------------- 6. COMMITMENTS AND CONTINGENCIES At December 31, 2000, 1999 and 1998, traditional life insurance and universal life-type insurance in force aggregated $98,060,472, $89,271,957 and $81,074,928 respectively, of which $17,429,851, $8,281,576 and $4,912,313 were reinsured at the respective year ends. The Company also reinsures a portion of the risks assumed under disability income and long-term care policies. Under all reinsurance agreements, premiums ceded to reinsurers amounted to $89,506, $76,970 and $66,378 and reinsurance recovered from reinsurers amounted to $32,500, $27,816, and $20,982 for the years ended December 31, 2000, 1999 and 1998, respectively. Reinsurance contracts do not relieve the Company from its primary obligation to policyholders. In January 2000, AEFC reached an agreement in principle to settle three class-action lawsuits related to the sales of insurance and annuity products, anticipated to provide for approximately $215 million of benefits. The Company had been named as a co-defendant in all three of these lawsuits. In September 2000, the court gave preliminary approval to the proposed settlement and AEFC has mailed notices to all of the over two million class members. A fairness hearing is scheduled for March 2001, with final approval anticipated in the second quarter, pending any legal appeals. The anticipated costs of settlement remain unchanged from 1999. The portion of the settlement allocated to the Company did not have a material impact on the Company's financial position or results of operations. The agreement also provides for release by class members of all insurance and annuity market conduct claims dating back to 1985 and is subject to a number of contingencies, including final court approval. The Company is named as a defendant in various other lawsuits. The outcome of any litigation cannot be predicted with certainty. In the opinion of management, however, the ultimate resolution of these lawsuits, taken in aggregate should not have a material adverse effect on the Company's consolidated financial position. The IRS routinely examines the Company's federal income tax returns and is currently conducting an audit for the 1993 through 1996 tax years. Management does not believe there will be a material adverse effect on the Company's consolidated financial position as a result of these audits 7. LINES OF CREDIT The Company has available lines of credit with its parent aggregating $200,000 ($100,000 committed and $100,000 uncommitted). The interest rate for any borrowings is established by reference to various indices plus 20 to 45 basis points, depending on the term. Borrowings outstanding under this agreement were $50,000 uncommitted at December 31, 2000 and 1999, respectively. 8. DERIVATIVE FINANCIAL INSTRUMENTS The Company enters into transactions involving derivative financial instruments to manage its exposure to interest rate risk and equity market risk, including hedging specific transactions. The Company does not hold derivative instruments for trading purposes. The Company manages risks associated with these instruments as described below. Market risk is the possibility that the value of the derivative financial instruments will change due to fluctuations in a factor from which the instrument derives its value, primarily an interest rate or equity market index. The Company is not impacted by market risk related to derivatives held for non-trading purposes beyond that inherent in cash market transactions. Derivatives held for purposes other than trading are largely used to manage risk and, therefore, the cash flow and income effects of the derivatives are inverse to the effects of the underlying transactions. Credit risk is the possibility that the counterparty will not fulfill the terms of the contract. The Company monitors credit risk related to derivative financial instruments through established approval procedures, including setting concentration limits by counterparty, and requiring collateral, where appropriate. A vast majority of the Company's counterparties are rated A or better by Moody's and Standard & Poor's. Credit risk related to interest rate caps and floors and index options is measured by the replacement cost of the contracts. The replacement cost represents the fair value of the instruments. The notional or contract amount of a derivative financial instrument is generally used to calculate the cash flows that are received or paid over the life of the agreement. Notional amounts are not recorded on the balance sheet. Notional amounts far exceed the related credit risk. IDS Life Insurance Company ------------------------------------------------------------------------------- The Company's holdings of derivative financial instruments are as follows: Notional or contract Carrying Fair Total credit December 31, 2000 amount amount value exposure Assets: Interest rate caps $1,500,000 $ 6,127 $ 1,174 $ 1,174 Interest rate floors 1,000,000 121 531 531 Options purchased 265,848 44,139 51,701 51,701 Financial futures purchased 5 -- 7,209 -- Liabilities: Options written 104,324 (3,098) (4,138) -- Financial futures sold 7 -- 9,011 -- Off balance sheet: Interest rate swaps 1,000,000 -- (10,942) -- --------- ---- ------- ---- $47,289 $ 54,546 $53,406 ======= ======== ======= December 31, 1999 Assets: Interest rate caps $2,500,000 $ 9,685 $ 12,773 $12,773 Interest rate floors 1,000,000 602 319 319 Options purchased 180,897 49,789 61,745 61,745 Liabilities: Options purchased/written 43,262 (1,677) (2,402) -- Off balance sheet: Interest rate swaps 1,267,000 -- (17,582) -- --------- ---- ------- ---- $58,399 $ 54,853 $74,837 ======= ======== ======= The fair values of derivative financial instruments are based on market values, dealer quotes or pricing models. The interest rate caps, floors and swaps expire on various dates from 2001 to 2003. The purchased and written options expire on various dates from 2001 to 2006. Interest rate caps, swaps and floors are used principally to manage the Company's interest rate risk. These instruments are used to protect the margin between interest rates earned on investments and the interest rates credited to related annuity contract holders. The Company also uses interest rate swaps to manage interest rate risk related to the level of fee income earned on the management of fixed income securities in separate accounts and the underlying mutual funds. The amount of fee income received is based upon the daily market value of the separate account and mutual fund assets. As a result, changing interest rate conditions could impact the Company's fee income significantly. The Company entered into interest rate swaps to hedge anticipated fee income for 2000 related to separate accounts and mutual funds which invest in fixed income securities. Interest was reported in management and other fees. The Company offers an annuity product that pays interest based upon the relative change in a major stock market index between the beginning and end of the product's term. As a means of hedging its obligation under the provisions of this product, the Company purchases financial futures and purchases and writes options on the major stock market index. The Company also writes financial futures and purchases and writes options to manage the equity market risk related to seed money the Company has invested in certain separate accounts and the underlying mutual funds. Index options are used to manage the equity market risk related to the fee income that the Company receives from its separate accounts and the underlying mutual funds. The amount of the fee income received is based upon the daily market value of the separate account and mutual fund assets. As a result, the Company's fee income could be impacted significantly by fluctuations in the equity market. The Company entered into index option collars (combination of puts and calls) to hedge anticipated fee income for 2000 and 1999 related to separate accounts and mutual funds which invest in equity securities. Testing demonstrated the impact of these instruments on the income statement closely correlates with the amount of fee income the Company realizes. At December 31, 2000, deferred gains on purchased put and written call index options were $1,005 and $449, respectively. At December 31, 1999, there were no deferred gains or losses on purchased put or written call index options. IDS Life Insurance Company ------------------------------------------------------------------------------- 9. 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 and all non-financial instruments, such as deferred acquisition costs are excluded. Off-balance sheet intangible assets, such as the value of the field force, 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.
2000 1999 Carrying Fair Carrying Fair Financial Assets value value value value Investments: Fixed maturities (Note 2): Held to maturity $ 6,463,613 $ 6,471,798 $ 7,156,292 $ 7,105,743 Available for sale 12,399,990 12,399,990 13,049,549 13,049,549 Mortgage loans on real estate (Note 2) 3,738,091 3,821,825 3,606,377 3,541,958 Other: Equity securities (Note 2) 10,333 10,333 3,016 3,016 Derivative financial Instruments (Note 8) 50,387 60,615 60,076 74,837 Other 1,130 1,130 2,258 2,258 Cash and cash equivalents (Note 1) 316,974 316,974 32,333 32,333 Separate account assets (Note 1) 32,349,347 32,349,347 35,894,732 35,894,732 Financial Liabilities Future policy benefits for fixed annuities $18,020,824 $17,479,187 $19,189,170 $18,591,859 Derivative financial instruments (Note 8) 3,098 6,069 1,677 19,984 Separate account liabilities 28,791,949 27,822,667 31,869,184 31,016,081 ---------- ---------- ---------- ----------
At December 31, 2000 and 1999, the carrying amount and fair value of future policy benefits for fixed annuities exclude life insurance-related contracts carried at $1,300,018 and $1,270,094, respectively, and policy loans of $96,603 and $92,895, respectively. The fair value of these benefits is based on the status of the annuities at December 31, 2000 and 1999. The fair value of deferred annuities is estimated as the carrying amount less any applicable surrender charges and related loans. 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 2000 and 1999. At December 31, 2000 and 1999, the fair value of liabilities related to separate accounts is estimated as the carrying amount less any applicable surrender charges and less variable insurance contracts carried at $3,557,398 and $4,025,548, respectively. S-6406-20 A (8/01) STATEMENT OF ADDITIONAL INFORMATION for AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE(SM) VARIABLE ANNUITY - BAND 3 IDS Life Variable Account 10 Aug. 9, 2001 IDS Life Variable Account 10 is a separate account established and maintained by IDS Life Insurance Company (IDS 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. IDS Life Insurance Company 70100 AXP Financial Center Minneapolis, MN 55474 (800)862-7919 American Express Retirement Advisor Advantage Variable Annuity - Band 3 IDS Life Variable Account 10 -------------------------------------------------------------------------------- TABLE OF CONTENTS Performance Information p. 3 Calculating Annuity Payouts p. 11 Rating Agencies p. 12 Principal Underwriter p. 12 -2- American Express Retirement Advisor Advantage Variable Annuity - Band 3 IDS Life Variable Account 10 -------------------------------------------------------------------------------- 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 ten years (or, if less, up to the life of the subaccounts), calculated according to the following formula: P(1 + T)(to the power of 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, which it did not. Although we base performance figures on historical earnings, past performance does not guarantee future results. -3- American Express Retirement Advisor Advantage Variable Annuity - Band 3 IDS Life Variable Account 10 --------------------------------------------------------------------------------
Average Annual Total Return With Selection of MAV and EEP Death Benefit Riders For Periods Ending Dec. 31, 2000 Performance since commencement of the Performance since subaccount commencement of the fund(a) ------------------------------------------------------------------------------------------------------------------------------------ Since Since Subaccount Investing In: 1 year commencement 1 year 5 years 10 years commencement AXP(R)VARIABLE PORTFOLIO - BC3 Blue Chip Advantage Fund (9/99;9/99)(b) (11.58%) 0.06% (11.58%) --% --% 0.06% BD3 Bond Fund (9/99;10/81) 4.23 4.45 4.23 3.67 7.11 9.24 CR3 Capital Resource Fund (9/99;10/81) (18.52) (3.89) (18.52) 9.98 12.04 12.68 CM3 Cash Management Fund (9/99;10/81) 4.65 4.44 4.65 4.00 3.52 5.37 DE3 Diversified Equity Income Fund (9/99;9/99) (1.93) 1.83 (1.93) -- -- 1.83 EM3 Emerging Markets Fund (5/00;5/00) -- (27.42)(c) -- -- -- (27.42)(d) ES3 Equity Select Fund (4/01;4/01)(e) -- -- -- -- -- -- EI3 Extra Income Fund (9/99;5/96) (10.42) (7.20) (10.42) -- -- 0.98 FI3 Federal Income Fund (9/99;9/99) 7.36 5.85 7.36 -- -- 5.85 GB3 Global Bond Fund (9/99;5/96) 2.07 1.69 2.07 -- -- 2.72 GR3 Growth Fund (9/99;9/99) (20.34) (3.44) (20.34) -- -- (3.44) IE3 International Fund (9/99;1/92) (25.95) (3.42) (25.95) 6.16 -- 7.12 MF3 Managed Fund (9/99;4/86) (3.44) 4.96 (3.44) 11.47 11.71 10.59 ND3 New Dimensions Fund(R)(9/99;5/96) (10.19) 6.87 (10.19) -- -- 16.51 SV3 Partners Small Cap Value Fund (8/01;8/01)(e) -- -- -- -- -- -- IV3 S&P 500 Index Fund (5/00;5/00) -- (10.77)(c) -- -- -- (10.77)(d) SC3 Small Cap Advantage Fund (9/99;9/99) 2.99 12.43 (4.09) -- -- 12.43 ST3 Stock Fund (8/01;8/01) (e) -- -- -- -- -- -- SA3 Strategy Aggressive Fund (9/99;1/92) (20.09) 17.36 (20.09) 12.00 -- 11.13 AIM V.I. 3AC Capital Appreciation Fund, Series II (8/01;5/93)(f),(g) -- -- (12.00) 14.24 -- 16.14 3AD Capital Development Fund, Series II (8/01;5/98)(f),(g) -- -- 8.05 -- -- 9.25 ALLIANCE VP 3AB AllianceBernstein International Value Portfolio (Class B) (8/01;5/01) (e) -- -- -- -- -- -- 3AL Growth & Income Portfolio (Class B) (8/01;1/91)(f) -- -- 12.31 18.22 -- 13.97 American Century VP 3AI International, Class II (8/01;5/94) (f),(h) -- -- (17.89) 13.86 -- 10.96 3AV Value, Class II (8/01;5/96) (f),(h) -- -- 16.89 -- -- 11.36 CALVERT VARIABLE SERIES, INC. 3SR Social Balanced Portfolio (5/00;9/86) -- (6.66)(c) (4.23) 10.12 10.05 9.37 EVERGREEN VA 3CG Capital Growth Fund, Class L Shares (8/01;3/98)(f),(i) -- -- 16.44 -- -- 10.30 FIDELITY VIP 3FG III Growth & Income Portfolio (Service Class 2) (8/01;12/96)(f),(j) -- -- (4.94) -- -- 14.00 3FM III Mid Cap Portfolio (Service Class 2) (8/01;12/98)(f),(j) -- -- 32.00 -- -- 41.25 3FO Overseas Portfolio (Service Class 2) (8/01;1/87)(f),(j) -- -- (20.34) 9.13 8.03 7.19
-4- American Express Retirement Advisor Advantage Variable Annuity - Band 3 IDS Life Variable Account 10 --------------------------------------------------------------------------------
Average Annual Total Return With Selection of MAV and EEP Death Benefit Riders For Periods Ending Dec. 31, 2000 (continued) Performance since commencement of the Performance since subaccount commencement of the fund(a) ------------------------------------------------------------------------------------------------------------------------------------ Since Since Subaccount Investing In: 1 year commencement 1 year 5 years 10 years commencement FRANKLIN TEMPLETON VIP TRUST 3RE Franklin Real Estate Fund - Class 2 (9/99;1/89)(k) 30.26% 19.90% 30.26% 9.24% 12.27% 9.23% 3SI Franklin Value Securities Fund - Class 2 (9/99;5/98)(k) 23.73 16.64 23.83 -- -- (1.64) 3MS Mutual Shares Securities Fund - Class 2 (8/01;11/96)(f),(k) -- -- 11.97 -- -- 10.19 GOLDMAN SACHS VIT 3UE CORE(SM) U.S. Equity Fund (9/99;2/98)(l) (10.72) 0.04 (10.72) -- -- 7.98 3MC Mid Cap Value Fund (9/99;5/98) 29.75 18.39 29.75 -- -- 3.19 INVESCO VIF 3ID Dynamics Fund (8/01;8/97)(f) -- -- (4.69) -- -- 18.92 3FS Financial Services Fund (8/01;9/99)(f) -- -- 23.52 -- -- 27.71 3TC Technology Fund (8/01;5/97)(f) -- -- (24.45) -- -- 32.41 3TL Telecommunications Fund (8/01;9/99)(f) -- -- (27.19) -- -- 15.17 JANUS ASPEN SERIES 3GT Global Technology Portfolio: Service Shares (5/00;1/00)(b),(m) -- (33.07)(c) -- -- -- (35.06)(d) 3IG International Growth Portfolio: Service Shares (5/00;5/94)(m) -- (30.04)(c) (17.21) 21.85 -- 19.32 LAZARD RETIREMENT SERIES 3IP International Equity Portfolio (9/99;9/98) (10.69) (3.09) (10.69) -- -- 8.18 MFS(R) 3MG Investors Growth Stock Series - Service Class (5/00;5/99)(n),(o) -- (15.48)(c) (7.43) -- -- 16.47 3MD New Discovery Series - Service Class (5/00;5/98)(n) -- (10.59)(c) (3.25) -- -- 21.65 3UT Utilities Series - Service Class (8/01;1/95)(f),(n) -- -- 5.68 19.39 -- 21.48 PIONEER VCT 3PE Pioneer Equity-Income VCT Portfolio - Class II Shares (8/01;3/95)(f),(p) -- -- 13.26 15.89 -- 17.48 3EU Pioneer Europe VCT Portfolio - Class II Shares (8/01;10/98)(f),(q) -- -- (18.98) -- -- 4.08 PUTNAM VARIABLE TRUST 3HS Putnam VT Health Sciences Fund - Class IB Shares (8/01;4/98)(f),(r) -- -- 37.78 -- -- 14.43 3PI Putnam VT International Growth Fund - Class IB Shares (8/01;1/97)(f),(s) -- -- (10.82) -- -- 17.36 3VS Putnam VT Vista Fund - Class IB Shares (9/99;1/97)(s) (5.22) 22.19 (5.22) -- -- 19.96 STRONG FUNDS 3SO Strong Opportunity Fund II - Advisor Class (8/01;5/92)(f),(t) -- -- (1.95) 16.64 -- 16.65 WANGER 3IT International Small Cap (9/99;5/95) (28.94) 6.25 (28.94) 18.57 -- 22.35 3SP U.S. Small Cap (9/99;5/95) (9.27) 3.46 (9.27) 17.56 -- 18.28 WELLS FARGO VT 3AA Asset Allocation Fund (5/01;4/94)(f) -- -- (0.14) 12.05 -- 12.92 3WI International Equity Fund (5/01;7/00)(f) -- -- -- -- -- (11.19)(d) 3SG Small Cap Growth Fund (5/01;5/95)(f) -- -- (23.59) 8.51 -- 10.27
-5- American Express Retirement Advisor Advantage Variable Annuity - Band 3 IDS Life Variable Account 10 -------------------------------------------------------------------------------- (a) Current applicable charges deducted from fund performance include a $30 contract administrative charge, a 0.15% MAV fee, a 0.40% EEP fee, and a 0.55% mortality and expense risk fee. Premium taxes are not reflected in these total returns. (b) (Commencement date of the subaccount; Commencement date of the fund) (c) Cumulative return (not annualized) since commencement date of the subaccount. (d) Cumulative return (not annualized) since commencement date of the fund. (e) Fund had not commenced operations as of Dec. 31, 2000. (f) Subaccount had not commenced operations as of Dec. 31, 2000. (g) The historical performance information relates to that of the Fund Series I shares and not of the Series II shares, which were first offered July 16, 2001. Additional information relating to the Series II shares can be found in the Fund prospectus or Statement of Additional Information. (h) If Class II had existed during the periods presented, its performance would have been substantially similar to that of the existing class of the fund because each represents an investment in the same portfolio of securities. However, performance of Class II would have been lower because of its higher expense ratio. (i) Historical performance shown for Class L shares prior to its inception is based on the performance of Class I shares, the original class offered. These historical returns for Class L shares have been adjusted to reflect the effect of the 0.25% 12b-1 fees for Class L shares. Class I shares do not pay 12b-1 fees. If these fees had not been reflected, returns would have been higher. (j) The returns shown above are for Initial Class of the fund, which is not available through this prospectus. Service Class 2 would have substantially similar annual returns to Initial Class because the classes are invested in the same portfolio of securities. Service Class 2's returns will be lower than Initial Class's returns to the extent that Service Class 2 has higher expenses. (k) Ongoing stock market volatility can dramatically change the fund's short-term performance; current results may differ. Because Class 2 shares were not offered until Jan. 6, 1999, standardized Class 2 fund performance for prior periods represents historical results of Class 1 shares. For periods beginning Jan. 6, 1999 Class 2's results reflect an additional 12b-1 fee expense, which also affects future performance. (l) CORE(SM) is a service mark of Goldman, Sachs & Co. (m) The returns shown for the Service Shares of these Portfolios reflect the historical performance of a different class of shares (the Institutional Shares) prior to Dec. 31, 1999, restated based on the Service Shares' estimated fees and expenses (ignoring any fee and expense limitations). (n) Service Class shares commenced operations in May 2000. Service Class shares carry a 0.20% annual Rule 12b-1 fee. Service Class share performance includes the performance of the series' Initial Class shares for periods prior to the inception of Service Class shares (blended performance). These blended performance figures have not been adjusted to take into account differences in the class-specific operating expenses (such as Rule 12b-1 fees). Because operating expenses of Service Class shares are higher than those of Initial class shares, the blended Service Class share performance is higher than it would have been had the Service Class shares been offered for the entire period. (o) Previously MFS - Growth Series. (p) Performance of the portfolio's Class I shares are from inception date of September 14, 1999. Although Class II shares invest in the same portfolio investments as Class I shares, Class II shares would have the same investment results except for the difference in class expense. Class II shares are subject to a .25% distribution fee, which Class I shares do not pay. Consequently, the performance of Class II shares will be lower. (q) Performance of the portfolio's Class I shares are from inception date of October 30,1998. Although Class II shares invest in the same portfolio investments as Class I shares, Class II shares would have the same investment results except for the difference in class expense. Class II shares are subject to a .25% distribution fee, which Class I shares do not pay. Consequently, the performance of Class II shares will be lower. (r) The Trustees of the Putnam Variable Trust currently limit 12b-1 fee payments on Class IB shares to 0.25% of average net assets. (s) Performance information for Class IB shares for periods prior to April 30, 1998 for Putnam VT International Growth Fund and Putnam VT Vista Fund are based on the performance of the fund's Class IA shares (not offered as an investment option) adjusted to reflect the fees paid by Class IB shares, including a Rule 12b-1 fee of 0.15%. Please note that as of May 1, 2001 the Rule 12b-1 fee will increase to 0.25%. (t) Performance results for Advisor Class shares, which were first offered on July 12, 2001, are based on historical performance of the fund's Investor Class shares from the inception of the fund through July, 11, 2001, recalculated to reflect the higher annual expense ratio applicable to the Advisor Class shares. -6- American Express Retirement Advisor Advantage Variable Annuity - Band 3 IDS Life Variable Account 10 --------------------------------------------------------------------------------
Average Annual Total Return For Periods Ending Dec. 31, 2000 Performance since commencement of the Performance since subaccount commencement of the fund(a) ------------------------------------------------------------------------------------------------------------------------------------ Since Since Subaccount Investing In: 1 year commencement 1 year 5 years 10 years commencement AXP(R)VARIABLE PORTFOLIO - BC3 Blue Chip Advantage Fund (9/99;9/99)(b) (11.03%) 0.61% (11.03%) --% --% 0.61% BD3 Bond Fund (9/99;10/81) 4.78 5.00 4.78 4.22 7.66 9.79 CR3 Capital Resource Fund (9/99;10/81) (17.97) (3.34) (17.97) 10.53 12.59 13.28 CM3 Cash Management Fund (9/99;10/81) 5.20 4.99 5.20 4.55 4.07 5.92 DE3 Diversified Equity Income Fund (9/99;9/99) (1.38) 2.38 (1.38) -- -- 2.38 EM3 Emerging Markets Fund (5/00;5/00) -- (26.87)(c) -- -- -- (26.87)(d) ES3 Equity Select Fund (4/01;4/01)(e) -- -- -- -- -- -- EI3 Extra Income Fund (9/99;5/96) (9.87) (6.65) (9.87) -- -- 1.53 FI3 Federal Income Fund (9/99;9/99) 7.91 6.40 7.91 -- -- 6.40 GB3 Global Bond Fund (9/99;5/96) 2.62 2.24 2.62 -- -- 3.27 GR3 Growth Fund (9/99;9/99) (19.79) (2.89) (19.79) -- -- (2.89) IE3 International Fund (9/99;1/92) (25.40) (2.87) (25.40) 6.71 -- 7.67 MF3 Managed Fund (9/99;4/86) (2.89) 5.51 (2.89) 12.02 12.26 11.14 ND3 New Dimensions Fund(R)(9/99;5/96) (9.64) 7.42 (9.64) -- -- 17.06 SV3 Partners Small Cap Value Fund (8/01;8/01)(e) -- -- -- -- -- -- IV3 S&P 500 Index Fund (5/00;5/00) -- (10.22)(c) -- -- -- (10.22)(d) SC3 Small Cap Advantage Fund (9/99;9/99) 3.54 12.98 3.54 -- -- 12.98 ST3 Stock Fund (8/01;8/01)(e) -- -- -- -- -- -- SA3 Strategy Aggressive Fund (9/99;1/92) (19.54) 17.91 (19.54) 12.55 -- 11.68 AIM V.I. 3AC Capital Appreciation Fund, Series II (8/01;5/93)(f),(g) -- -- (11.45) 14.79 -- 16.69 3AD Capital Development Fund, Series II (8/01;5/98)(f),(g) -- -- 8.60 -- -- 9.80 ALLIANCE VP 3AB AllianceBernstein International Value Portfolio (Class B) (8/01;5/01)(e) -- -- -- -- -- -- 3AL Growth & Income Portfolio (Class B) (8/01;1/91)(f) -- -- 12.86 18.77 -- 14.52 American Century VP 3AI International, Class II (8/01;5/94)(f),(h) -- -- (17.34) 14.41 -- 11.51 3AV Value, Class II (8/01;5/96)(f),(h) -- -- 17.44 -- -- 11.91 CALVERT VARIABLE SERIES, INC. 3SR Social Balanced Portfolio (5/00;9/86) -- (6.11) (c) (3.68) 10.67 10.60 9.92 EVERGREEN VA 3CG Capital Growth Fund, Class L Shares (8/01;3/98)(f),(i) -- -- 16.99 -- -- 10.85 FIDELITY VIP 3FG III Growth & Income Portfolio (Service Class 2) (8/01;12/96)(f),(j) -- -- (4.39) -- -- 14.55 3FM III Mid Cap Portfolio (Service Class 2) (8/01;12/98)(f),(j) -- -- 32.55 -- -- 41.80 3FO Overseas Portfolio (Service Class 2) (8/01;1/87)(f),(j) -- -- (19.79) 9.68 8.58 7.74
-7- American Express Retirement Advisor Advantage Variable Annuity - Band 3 IDS Life Variable Account 10 --------------------------------------------------------------------------------
Average Annual Total Return For Periods Ending Dec. 31, 2000 (continued) Performance since commencement of the Performance since subaccount commencement of the fund(a) ------------------------------------------------------------------------------------------------------------------------------------ Since Since Subaccount Investing In: 1 year commencement 1 year 5 years 10 years commencement FRANKLIN TEMPLETON VIP TRUST 3RE Franklin Real Estate Fund - Class 2 (9/99;1/89)(k) 30.81% 20.45% 30.81% 9.79% 12.82% 9.78% 3SI Franklin Value Securities Fund - Class 2 (9/99;5/98)(k) 24.28 17.19 24.38 -- -- (1.09) 3MS Mutual Shares Securities Fund - Class 2 (8/01;11/96)(f),(k) -- -- 12.52 -- -- 10.74 GOLDMAN SACHS VIT 3UE CORE(SM) U.S. Equity Fund (9/99;2/98)(l) (10.17) 0.59 (10.17) -- -- 8.53 3MC Mid Cap Value Fund (9/99;5/98) 30.30 18.94 30.30 -- -- 3.74 INVESCO VIF 3ID Dynamics Fund (8/01;8/97)(f) -- -- (4.14) -- -- 19.47 3FS Financial Services Fund (8/01;9/99)(f) -- -- 24.07 -- -- 28.26 3TC Technology Fund (8/01;5/97)(f) -- -- (23.90) -- -- 32.96 3TL Telecommunications Fund (8/01;9/99)(f) -- -- (26.64) -- -- 15.72 JANUS ASPEN SERIES 3GT Global Technology Portfolio: Service Shares (5/00;1/00)(b),(m) -- (32.52)(c) -- -- -- (34.51)(d) 3IG International Growth Portfolio: Service Shares (5/00;5/94)(m) -- (29.49) (c) (16.66) 22.40 -- 19.87 LAZARD RETIREMENT SERIES 3IP International Equity Portfolio (9/99;9/98) (10.14) (2.54) (10.14) -- -- 8.73 MFS(R) 3MG Investors Growth Stock Series - Service Class (5/00;5/99)(n),(o) -- (14.93) (c) (6.88) -- -- 17.02 3MD New Discovery Series - Service Class (5/00;5/98)(n) -- (10.04) (c) (2.70) -- -- 22.20 3UT Utilities Series - Service Class (8/01;1/95)(f),(n) -- -- 6.23 19.94 -- 22.03 PIONEER VCT 3PE Pioneer Equity-Income VCT Portfolio - Class II Shares (8/01;3/95)(f),(p) -- -- 13.81 16.44 -- 18.03 3EU Pioneer Europe VCT Portfolio - Class II Shares (8/01;10/98)(f),(q) -- -- (18.43) -- -- 4.63 PUTNAM VARIABLE TRUST 3HS Putnam VT Health Sciences Fund - Class IB Shares (8/01;4/98)(f),(r) -- -- 38.33 -- -- 14.98 3PI Putnam VT International Growth Fund - Class IB Shares (8/01;1/97)(f),(s) -- -- (10.27) -- -- 17.91 3VS Putnam VT Vista Fund - Class IB Shares (9/99;1/97)(s) (4.67) 22.74 (4.67) -- -- 20.51 STRONG FUNDS 3SO Strong Opportunity Fund II - Advisor Class (8/01;5/92)(f),(t) -- -- (1.40) 17.19 -- 17.20 WANGER 3IT International Small Cap (9/99;5/95) (28.39) 6.80 (28.39) 19.12 -- 22.90 3SP U.S. Small Cap (9/99;5/95) (8.72) 4.01 (8.72) 18.11 -- 18.83 WELLS FARGO VT 3AA Asset Allocation Fund (5/01;4/94)(f) -- -- 0.41 12.60 -- 13.47 3WI International Equity Fund (5/01;7/00)(f) -- -- -- -- -- (10.64)(d) 3SG Small Cap Growth Fund (5/01;5/95)(f) -- -- (23.04) 9.06 -- 10.82
-8- American Express Retirement Advisor Advantage Variable Annuity - Band 3 IDS Life Variable Account 10 -------------------------------------------------------------------------------- (a) Current applicable charges deducted from fund performance include a $30 contract administrative charge and a 0.55% mortality and expense risk fee. Premium taxes are not reflected in these total returns. (b) (Commencement date of the subaccount; Commencement date of the fund) (c) Cumulative return (not annualized) since commencement date of the subaccount. (d) Cumulative return (not annualized) since commencement date of the fund. (e) Fund had not commenced operations as of Dec. 31, 2000. (f) Subaccount had not commenced operations as of Dec. 31, 2000. (g) The historical performance information relates to that of the Fund Series I shares and not of the Series II shares, which were first offered July 16, 2001. Additional information relating to the Series II shares can be found in the Fund prospectus or Statement of Additional Information. (h) If Class II had existed during the periods presented, its performance would have been substantially similar to that of the existing class of the fund because each represents an investment in the same portfolio of securities. However, performance of Class II would have been lower because of its higher expense ratio. (i) Historical performance shown for Class L shares prior to its inception is based on the performance of Class I shares, the original class offered. These historical returns for Class L shares have been adjusted to reflect the effect of the 0.25% 12b-1 fees for Class L shares. Class I shares do not pay 12b-1 fees. If these fees had not been reflected, returns would have been higher. (j) The returns shown above are for Initial Class of the fund, which is not available through this prospectus. Service Class 2 would have substantially similar annual returns to Initial Class because the classes are invested in the same portfolio of securities. Service Class 2's returns will be lower than Initial Class's returns to the extent that Service Class 2 has higher expenses. (k) Ongoing stock market volatility can dramatically change the fund's short-term performance; current results may differ. Because Class 2 shares were not offered until Jan. 6, 1999, standardized Class 2 fund performance for prior periods represents historical results of Class 1 shares. For periods beginning Jan. 6, 1999 Class 2's results reflect an additional 12b-1 fee expense, which also affects future performance. (l) CORE(SM) is a service mark of Goldman, Sachs & Co. (m) The returns shown for the Service Shares of these Portfolios reflect the historical performance of a different class of shares (the Institutional Shares) prior to Dec. 31, 1999, restated based on the Service Shares' estimated fees and expenses (ignoring any fee and expense limitations). (n) Service Class shares commenced operations in May 2000. Service Class shares carry a 0.20% annual Rule 12b-1 fee. Service Class share performance includes the performance of the series' Initial Class shares for periods prior to the inception of Service Class shares (blended performance). These blended performance figures have not been adjusted to take into account differences in the class-specific operating expenses (such as Rule 12b-1 fees). Because operating expenses of Service Class shares are higher than those of Initial class shares, the blended Service Class share performance is higher than it would have been had the Service Class shares been offered for the entire period. (o) Previously MFS - Growth Series. (p) Performance of the portfolio's Class I shares are from inception date of September 14, 1999. Although Class II shares invest in the same portfolio investments as Class I shares, Class II shares would have the same investment results except for the difference in class expense. Class II shares are subject to a .25% distribution fee, which Class I shares do not pay. Consequently, the performance of Class II shares will be lower. (q) Performance of the portfolio's Class I shares are from inception date of October 30,1998. Although Class II shares invest in the same portfolio investments as Class I shares, Class II shares would have the same investment results except for the difference in class expense. Class II shares are subject to a .25% distribution fee, which Class I shares do not pay. Consequently, the performance of Class II shares will be lower. (r) The Trustees of the Putnam Variable Trust currently limit 12b-1 fee payments on Class IB shares to 0.25% of average net assets. (s) Performance information for Class IB shares for periods prior to April 30, 1998 for Putnam VT International Growth Fund and Putnam VT Vista Fund are based on the performance of the fund's Class IA shares (not offered as an investment option) adjusted to reflect the fees paid by Class IB shares, including a Rule 12b-1 fee of 0.15%. Please note that as of May 1, 2001 the Rule 12b-1 fee will increase to 0.25%. (t) Performance results for Advisor Class shares, which were first offered on July 12, 2001, are based on historical performance of the fund's Investor Class shares from the inception of the fund through July, 11, 2001, recalculated to reflect the higher annual expense ratio applicable to the Advisor Class shares. -9- American Express Retirement Advisor Advantage Variable Annuity - Band 3 IDS Life Variable Account 10 -------------------------------------------------------------------------------- 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). 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 A SUBACCOUNT INVESTING IN A MONEY MARKET FUND Annualized Simple Yield: For a subaccount investing in a money market fund, 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 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 Yields Based on the Seven-Day Period Ending Dec. 31, 2000 Variable Account Investing In: Simple Yield Compound Yield CM3 AXP(R)Variable Portfolio - Cash Management Fund 5.31% 5.45%
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)(to the power of 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. -10- American Express Retirement Advisor Advantage Variable Annuity - Band 3 IDS Life Variable Account 10 -------------------------------------------------------------------------------- Annualized Yields Based on the 30-Day Period Ending Dec. 31, 2000 Subaccount Investing In: Simple Yield BD3 AXP(R)Variable Portfolio - Bond Fund 6.10% EI3 AXP(R)Variable Portfolio - Extra Income Fund 10.47 FI3 AXP(R)Variable Portfolio - Federal Income Fund 5.51 GB3 AXP(R)Variable Portfolio - Global Bond Fund 0.00 The yield on the subaccount's accumulation unit may fluctuate daily and does not provide a basis for determining future yields. Calculating Annuity Payouts THE VARIABLE ACCOUNT We do the following calculations separately for each of the subaccounts of the variable account. The separate monthly payouts, added together, make up your total variable annuity payout. Initial Payout: To compute your first monthly payment, we: o determine the dollar value of your contract on the valuation date and then deduct any applicable premium tax; then o apply the result to the annuity table contained in the contract or another table at least as favorable. The annuity table shows the amount of the first monthly payment for each $1,000 of value which depends on factors built into the table, as described below. Annuity Units: We then convert the value of your subaccount to annuity units. To compute the number of units credited to you, we divide the first monthly payment by the annuity unit value (see below) on the valuation date. The number of units in your subaccount is fixed. The value of the units fluctuates with the performance of the underlying fund. Subsequent Payouts: To compute later payouts, we multiply: o the annuity unit value on the valuation date; by o the fixed number of annuity units credited to you. Annuity Unit Values: We originally set this value at $1 for each subaccount. To calculate later values we multiply the last annuity value by the product of: o the net investment factor; and o the neutralizing factor. The purpose of the neutralizing factor is to offset the effect of the assumed rate built into the annuity table. With an assumed investment rate of 5%, the neutralizing factor is 0.999866 for a one day valuation period. Net Investment Factor: We determine the net investment factor by: o adding the fund's current net asset value per share plus the per share amount of any accrued income or capital gain dividends to obtain a current adjusted net asset value per share; then o dividing that sum by the previous adjusted net asset value per share; and o subtracting the percentage factor representing the mortality and expense risk fee from the result. Because the net asset value of the fund may fluctuate, the net investment factor may be greater or less than one, and the annuity unit value may increase or decrease. You bear this investment risk in a subaccount. THE FIXED ACCOUNT We guarantee your fixed annuity payout amounts. Once calculated, your payout will remain the same and never change. To calculate your annuity payouts we: o take the value of your fixed account at the retirement date or the date you selected to begin receiving your annuity payouts; then o using an annuity table, we apply the value according to the annuity payout plan you select. The annuity payout table we use will be the one in effect at the time you choose to begin your annuity payouts. The values in the table will be equal to or greater than the table in your contract. -11- American Express Retirement Advisor Advantage Variable Annuity - Band 3 IDS Life Variable Account 10 -------------------------------------------------------------------------------- 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) Fitch AA Moody's Aa3 (Excellent) A.M. Best's superior rating (second of 16 categories) reflects our strong distribution network, favorable overall balance sheet, consistently improving profitability, adequate level of capitalization and asset/liability management expertise. Fitch's (formerly Duff & Phelps) third highest rating (of 24 categories) reflects our consistently excellent profitability record, leadership position in chosen markets, stable operating leverage and effective use of asset/liability management techniques. Moody's excellent rating (fourth of 21 categories) reflects our leadership position in financial planning, strong asset, liability management and good capitalization. Principal Underwriter The principal underwriter for the contract is IDS Life which offers the contract on a continuous basis. Surrender charges we received for the last year aggregated total $18,285,051. Commissions we paid for the last year aggregated total $56,849,306. The contract is new as of 1999 and therefore, we do not have three years of history for withdrawal charges received or commissions paid. 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. -12- American Express Retirement Advisor Advantage Variable Annuity - Band 3 IDS Life Variable Account 10 -------------------------------------------------------------------------------- Annual Financial Information Report of Independent Auditors The Board of Directors IDS Life Insurance Company We have audited the accompanying individual statements of net assets of the segregated asset subaccounts of IDS Life Variable Account 10 - American Express Retirement Advisor Advantage Variable Annuity(R) - Band 3 (comprised of subaccounts BC3, BD3, CR3, CM3, DE3, EM3, EI3, FI3, GB3, GR3, IE3, MF3, ND3, IV3, SC3, SA3, 3SR, 3RE, 3SI, 3UE, 3MC, 3GT, 3IG, 3IP, 3MG, 3MD, 3VS, 3IT and 3SP) as of December 31, 2000, and the related statements of operations and changes in nets assets for the periods indicated therein. These financial statements are the responsibility of the management of IDS 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 auditing standards generally accepted in the United States. 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, 2000 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 financial position of the segregated asset subaccounts of IDS Life Variable Account 10 - American Express Retirement Advisor Advantage Variable Annuity(R) - Band 3 at December 31, 2000, and the individual results of their operations and changes in their net assets for the periods indicated therein, in conformity with accounting principles generally accepted in the United States. Ernst & Young LLP Minneapolis, Minnesota March 23, 2001 -13- American Express Retirement Advisor Advantage Variable Annuity - Band 3 IDS Life Variable Account 10 --------------------------------------------------------------------------------
Statements of Net Assets Segregated Asset Subaccounts December 31, 2000 ------------------------------------------------------------------------- BC3 BD3 CR3 CM3 DE3 Assets Investments in shares of mutual funds and portfolios: at cost $470,098 $443,803 $320,377 $ 934,292 $213,290 -------- -------- -------- ---------- -------- at market value $447,562 $446,908 $247,679 $ 934,292 $219,837 Dividends receivable -- 1,640 -- 18,163 -- Accounts receivable from IDS Life for contract purchase payments -- -- 2,000 6,096,527 -- Receivable from mutual funds and portfolios for share redemptions -- -- -- -- -- -------- -------- -------- ---------- -------- Total assets 447,562 448,548 249,679 7,048,982 219,837 ======= ======= ======= ========= ======= Liabilities Payable to IDS Life for: Mortality and expense risk fee 192 127 164 1,744 92 Contract terminations -- 12,500 -- -- -- Payable to mutual funds and portfolios for investments purchased -- -- -- -- -- -------- -------- -------- ---------- -------- Total liabilities 192 12,627 164 1,744 92 --- ------ --- ----- -- Net assets applicable to contracts in accumulation period 447,370 435,921 249,515 7,047,238 219,745 Net assets applicable to contracts in payment period -- -- -- -- -- -------- -------- -------- ---------- -------- Total net assets $447,370 $435,921 $249,515 $7,047,238 $219,745 ======== ======== ======== ========== ======== Accumulation units outstanding 453,558 409,536 266,218 6,615,282 218,167 ======= ======= ======= ========= ======= Net asset value per accumulation unit $ 0.99 $ 1.06 $ 0.94 $ 1.07 $ 1.01 ======== ======== ======== ========== ========
Statements of Net Assets Segregated Asset Subaccounts ------------------------------------------------------------------------- December 31, 2000 EM3 EI3 FI3 GB3 GR3 Assets Investments in shares of mutual funds and portfolios: at cost $4,554,800 $1,211,885 $ 996 $4,137 $1,924,176 ---------- ---------- ------ ------ ---------- at market value $3,747,386 $1,072,419 $1,012 $4,211 $1,644,834 Dividends receivable -- 10,489 4 -- -- Accounts receivable from IDS Life for contract purchase payments -- -- -- -- 6,367 Receivable from mutual funds and portfolios for share redemptions -- -- -- -- -- -------- -------- -------- ------ -------- Total assets 3,747,386 1,082,908 1,016 4,211 1,651,201 --------- --------- ----- ----- --------- Liabilities Payable to IDS Life for: Mortality and expense risk fee 1,631 556 1 2 745 Contract terminations -- -- -- -- -- Payable to mutual funds and portfolios for investments purchased -- -- -- -- -- -------- -------- -------- ---- -------- Total liabilities 1,631 556 1 2 745 ----- --- - - --- Net assets applicable to contracts in accumulation period 3,745,755 1,082,352 1,015 4,209 1,650,456 Net assets applicable to contracts in payment period -- -- -- -- -- ========== ========== ====== ====== ========== Total net assets $3,745,755 $1,082,352 $1,015 $4,209 $1,650,456 ========== ========== ====== ====== ========== Accumulation units outstanding 1,252 1,185,569 934 4,092 1,761,529 ===== ========= === ===== ========= Net asset value per accumulation unit $ 0.75 $ 0.91 $ 1.09 $ 1.03 $ 0.94 ========== ========== ====== ====== ==========
See accompanying notes to financial statements. -14- American Express Retirement Advisor Advantage Variable Annuity - Band 3 IDS Life Variable Account 10 --------------------------------------------------------------------------------
Statements of Net Assets Segregated Asset Subaccounts ------------------------------------------------------------------------- December 31, 2000 (continued) IE3 MF3 ND3 IV3 SC3 Assets Investments in shares of mutual funds and portfolios: at cost .......................... $ 91,460 $ 167,652 $ 4,874,826 $10,311,973 $ 1,336,797 ----------- ----------- ----------- ----------- ----------- at market value .................. $ 76,733 $ 150,894 $ 4,213,282 $ 9,296,950 $ 1,331,266 Dividends receivable ................ -- -- -- -- -- Accounts receivable from IDS Life for contract purchase payments ..... -- 2,000 9,162 -- -- Receivable from mutual funds and portfolios for share redemptions ... -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- Total assets ........................ 76,733 152,894 4,222,444 9,296,950 1,331,266 ====== ======= ========= ========= ========= Liabilities Payable to IDS Life for: Mortality and expense risk fee ... 34 64 1,761 4,050 171 Contract terminations ............ -- -- -- -- 999,043 Payable to mutual funds and portfolios for investments purchased -- -- -- -- -- ---- ---- ----- ----- ---- Total liabilities ................... 34 64 1,761 4,050 999,214 -- -- ----- ----- ------- Net assets applicable to contracts in accumulation period .............. 76,699 152,830 4,220,683 9,292,900 332,052 Net assets applicable to contracts in payment period ................... -- -- -- -- -- ---- ---- ----- ----- ---- Total net assets .................... $ 76,699 $ 152,830 $ 4,220,683 $ 9,292,900 $ 332,052 =========== =========== =========== =========== =========== Accumulation units outstanding ...... 80,621 144,523 3,919,497 285,103 286,198 ====== ======= ========= ======= ======= Net asset value per accumulation unit $ 0.95 $ 1.06 $ 1.08 $ 0.90 $ 1.16 =========== =========== =========== =========== ===========
Statements of Net Assets Segregated Asset Subaccounts ------------------------------------------------------- December 31, 2000 (continued) SA3 3SR 3RE 3SI Assets Investments in shares of mutual funds and portfolios: at cost .......................... $ 1,306,769 $ 1,973 $ 179,124 $ 10,432 ----------- ----------- ----------- ----------- at market value .................. $ 974,814 $ 1,824 $ 185,186 $ 11,083 Dividends receivable ................ -- -- -- -- Accounts receivable from IDS Life for contract purchase payments ...... 138 2,894 -- -- Receivable from mutual funds and portfolios for share redemptions .. -- 3 170 5 ---- ---- ----- ----- Total assets ........................ 974,952 4,721 185,356 11,088 ======= ===== ======= ====== Liabilities Payable to IDS Life for: Mortality and expense risk fee ... 459 3 95 5 Contract terminations ............ -- -- 75 -- Payable to mutual funds and portfolios for investments purchased -- -- -- -- ---- ---- ----- ----- Total liabilities ................... 459 3 170 5 --- - --- - Net assets applicable to contracts in accumulation period............... 974,493 4,718 185,186 11,083 Net assets applicable to contracts in payment period .................... -- -- -- -- ======= ===== ======= ===== Total net assets .................... $ 974,493 $ 4,718 $ 185,186 $ 11,083 =========== =========== =========== =========== Accumulation units outstanding ...... 798,425 4,896 147,540 9,257 ======= ===== ======= ===== Net asset value per accumulation unit $ 1.22 $ 0.96 $ 1.26 $ 1.20 =========== =========== =========== ===========
See accompanying notes to financial statements. -15- American Express Retirement Advisor Advantage Variable Annuity - Band 3 IDS Life Variable Account 10 --------------------------------------------------------------------------------
Statements of Net Assets Segregated Asset Subaccounts ------------------------------------------------------------------------- December 31, 2000 (continued) 3UE 3MC 3GT 3IG 3IP Assets Investments in shares of mutual funds and portfolios: at cost $628,309 $15,916 $297,968 $ 437,992 $57,250 -------- ------- -------- ---------- ------- at market value $571,823 $18,044 $212,203 $ 445,064 $54,861 Dividends receivable -- -- -- -- -- Accounts receivable from IDS Life for contract purchase payments 125 -- 2,165 -- 38 Receivable from mutual funds and portfolios for share redemptions 248 108 91 1,184,120 24 --- --- -- --------- -- Total assets 572,196 18,152 214,459 1,629,184 54,923 ======= ====== ======= ========= ====== Liabilities Payable to IDS Life for: Mortality and expense risk fee 248 8 91 345 24 Contract terminations -- 100 -- 1,183,775 -- Payable to mutual funds and portfolios for investments purchased 125 -- 2,165 -- 38 --- ----- ----- ----- -- Total liabilities 373 108 2,256 1,184,120 62 --- --- ----- --------- -- Net assets applicable to contracts in accumulation period 571,823 18,044 212,203 445,064 54,861 Net assets applicable to contracts in payment period -- -- -- -- -- ======== ======= ======== ========== ======= Total net assets $571,823 $18,044 $212,203 $ 445,064 $54,861 ======== ======= ======== ========== ======= Accumulation units outstanding 577,230 14,593 309,990 555,627 56,924 ======= ====== ======= ======= ====== Net asset value per accumulation unit $ 0.99 $ 1.24 $ 0.68 $ 0.80 $ 0.96 ======== ======= ======== ========== =======
Statements of Net Assets Segregated Asset Subaccounts ------------------------------------------------------------------------- December 31, 2000 (continued) 3MG 3MD 3VS 3IT 3SP Assets Investments in shares of mutual funds and portfolios: at cost $520,036 $352,453 $1,866,456 $657,179 $1,047,883 -------- -------- ---------- -------- ---------- at market value $482,619 $337,620 $1,721,686 $648,249 $1,041,643 Dividends receivable -- -- -- -- -- Accounts receivable from IDS Life for contract purchase payments -- 40 253 3,568 -- Receivable from mutual funds and portfolios for share redemptions 209 145 831 314 862,328 --- --- --- --- ------- Total assets 482,828 337,805 1,722,770 652,131 1,903,971 ======= ======= ========= ======= ========= Liabilities Payable to IDS Life for: Mortality and expense risk fee 209 145 831 314 479 Contract terminations -- -- -- -- 861,849 Payable to mutual funds and portfolios for investments purchased -- 40 253 1,383 -- ---- -- --- ----- ---- Total liabilities 209 185 1,084 1,697 862,328 --- --- ----- ----- ------- Net assets applicable to contracts in accumulation period 482,619 337,620 1,721,686 650,434 1,041,643 Net assets applicable to contracts in payment period -- -- -- -- -- ======= ======= ========= ======= ======= Total net assets $482,619 $337,620 $1,721,686 $650,434 $1,041,643 ======== ======== ========== ======== ========== Accumulation units outstanding 532,539 352,144 1,330,395 599,215 990,217 ======= ======= ========= ======= ======= Net asset value per accumulation unit $ 0.91 $ 0.96 $ 1.29 $ 1.09 $ 1.05 ======== ======== ========== ======== ==========
See accompanying notes to financial statements. -16- American Express Retirement Advisor Advantage Variable Annuity - Band 3 IDS Life Variable Account 10 --------------------------------------------------------------------------------
Statements of Operations Segregated Asset Subaccounts ------------------------------------------------------------------------- Period ended December 31, 2000 BC3 BD3 CR3 CM3 DE3 Investment income Dividend income from mutual funds and portfolios $ 1,535 $ 7,235 $ 88,375 $ 164,618 $ 1,609 Mortality and expense risk fee 1,819 576 4,456 15,776 588 ----- --- ----- ------ --- Investment income (loss) -- net (284) 6,659 83,919 148,842 1,021 ==== ===== ====== ======= ===== Realized and unrealized gain (loss) on investments -- net Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 1,287,591 396,150 1,586,681 66,072,940 2,291,601 Cost of investments sold 1,297,060 396,897 1,700,240 66,102,769 2,284,453 --------- ------- --------- ---------- --------- Net realized gain (loss) on investments (9,469) (747) (113,559) (29,829) 7,148 Net change in unrealized appreciation or depreciation of investments (44,170) 3,200 (130,039) 1 6,069 ------- ----- -------- - ----- Net gain (loss) on investments (53,639) 2,453 (243,598) (29,828) 13,217 ------- ----- -------- ------- ------ Net increase (decrease) in net assets resulting from operations $ (53,923) $ 9,112 $ (159,679) $ 119,014 $ 14,238 ========== ======== ========== =========== ==========
Statements of Operations Segregated Asset Subaccounts ------------------------------------------------------------------------- Period ended December 31, 2000 EM3(1) EI3 FI3 GB3 GR3 Investment income Dividend income from mutual funds and portfolios $ 4,166 $ 94,624 $ 376 $ 147 $ -- Mortality and expense risk fee 16,400 4,832 31 29 7,028 ------ ----- -- -- ----- Investment income (loss) -- net (12,234) 89,792 345 118 (7,028) ======= ====== === === ====== Realized and unrealized gain (loss) on investments -- net Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 5,085,551 1,087,651 80,342 4,163 1,942,292 Cost of investments sold 5,504,800 1,152,715 80,315 4,284 1,977,197 --------- --------- ------ ----- --------- Net realized gain (loss) on investments (419,249) (65,064) 27 (121) (34,905) Net change in unrealized appreciation or depreciation of investments (807,414) (139,838) 19 97 (342,081) -------- -------- -- -- -------- Net gain (loss) on investments (1,226,663) (204,902) 46 (24) (376,986) ---------- -------- -- --- -------- Net increase (decrease) in net assets resulting from operations $(1,238,897) $ (115,110) $ 391 $ 94 $ (384,014) =========== ========== ======= ====== ==========
(1) For the period May 1, 2000 (commencement of operations) to Dec. 31, 2000. See accompanying notes to financial statements. -17- American Express Retirement Advisor Advantage Variable Annuity - Band 3 IDS Life Variable Account 10 --------------------------------------------------------------------------------
Statements of Operations Segregated Asset Subaccounts ------------------------------------------------------------------------- Period ended December 31, 2000 (continued) IE3 MF3 ND3 IV3(1) SC3 Investment income Dividend income from mutual funds and portfolios $ 15,366 $ 11,200 $ 263,604 $ 69,633 $ 9,283 Mortality and expense risk fee 1,019 544 15,537 36,609 944 ----- --- ------ ------ --- Investment income (loss) -- net 14,347 10,656 248,067 33,024 8,339 ====== ====== ======= ====== ===== Realized and unrealized gain (loss) on investments -- net Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 10,920,769 242,939 1,527,690 271,973 1,966,904 Cost of investments sold 10,861,502 239,766 1,502,067 267,301 1,936,929 ---------- ------- --------- ------- --------- Net realized gain (loss) on investments 59,267 3,173 25,623 4,672 29,975 Net change in unrealized appreciation or depreciation of investments (32,516) (17,141) (702,359) (1,015,023) (72,468) ------- ------- -------- ---------- ------- Net gain (loss) on investments 26,751 (13,968) (676,736) (1,010,351) (42,493) ------ ------- -------- ---------- ------- Net increase (decrease) in net assets resulting from operations $ 41,098 $ (3,312)$ (428,669) $ (977,327) $ (34,154) =========== ======== ============= =========== ==========
Statements of Operations Segregated Asset Subaccounts ---------------------------------------------------------- Period ended December 31, 2000 (continued) SA3 3SR(1) 3RE 3SI Investment income Dividend income from mutual funds and portfolios $ 351,899 $ 359 $ 30,638 $ 13 Mortality and expense risk fee 4,877 9 736 52 ----- - --- -- Investment income (loss) -- net 347,022 350 29,902 (39) ======= === ====== === Realized and unrealized gain (loss) on investments -- net Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 2,739,911 10,085 6,363,894 722,010 Cost of investments sold 3,055,222 10,618 6,366,586 714,634 --------- ------ --------- ------- Net realized gain (loss) on investments (315,311) (533) (2,692) 7,376 Net change in unrealized appreciation or depreciation of investments (341,167) (149) 6,014 592 -------- ---- ----- --- Net gain (loss) on investments (656,478) (682) 3,322 7,968 -------- ---- ----- ----- Net increase (decrease) in net assets resulting from operations $ (309,456) $ (332) $ 33,224 $ 7,929 ========== ======= ========== ========
(1) For the period May 1, 2000 (commencement of operations) to Dec. 31, 2000. See accompanying notes to financial statements. -18- American Express Retirement Advisor Advantage Variable Annuity - Band 3 IDS Life Variable Account 10 --------------------------------------------------------------------------------
Statements of Operations Segregated Asset Subaccounts ------------------------------------------------------------------------- Period ended December 31, 2000 (continued) 3UE 3MC 3GT(1) 3IG(1) 3IP Investment income Dividend income from mutual funds and portfolios $ 6,792 $ 570 $ 1,276 $ 8,358 $ 789 Mortality and expense risk fee 2,052 55 553 788 240 ----- -- --- --- --- Investment income (loss) -- net 4,740 515 723 7,570 549 ===== === === ===== === Realized and unrealized gain (loss) on investments -- net Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 207,956 125,825 352,628 3,236,282 236,705 Cost of investments sold 212,893 124,292 353,121 3,238,008 236,679 ------- ------- ------- --------- ------- Net realized gain (loss) on investments (4,937) 1,533 (493) (1,726) 26 Net change in unrealized appreciation or depreciation of investments (61,980) 2,027 (85,765) 7,072 (2,955) ------- ----- ------- ----- ------ Net gain (loss) on investments (66,917) 3,560 (86,258) 5,346 (2,929) ------- ----- ------- ----- ------ Net increase (decrease) in net assets resulting from operations $(62,177) $ 4,075 $(85,535) $ 12,916 $ (2,380) ======== ======== ======== ========== ========
Statements of Operations Segregated Asset Subaccounts ------------------------------------------------------------------------- Period ended December 31, 2000 (continued) 3MG(1) 3MD(1) 3VS 3IT 3SP Investment income Dividend income from mutual funds and portfolios $ -- $ -- $ 15,052 $ 68,102 $ 128,715 Mortality and expense risk fee 661 486 8,276 3,807 5,183 --- --- ----- ----- ----- Investment income (loss) -- net (661) (486) 6,776 64,295 123,532 ==== ==== ===== ====== ======= Realized and unrealized gain (loss) on investments -- net Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 35,189 82,116 2,240,655 5,559,365 3,074,380 Cost of investments sold 35,745 80,687 2,221,015 5,810,326 3,287,057 ------ ------ --------- --------- --------- Net realized gain (loss) on investments (556) 1,429 19,640 (250,961) (212,677) Net change in unrealized appreciation or depreciation of investments (37,417) (14,833) (162,052) (39,390) (14,033) ------- ------- -------- ------- ------- Net gain (loss) on investments (37,973) (13,404) (142,412) (290,351) (226,710) ------- ------- -------- -------- -------- Net increase (decrease) in net assets resulting from operations $(38,634) $(13,890) $ (135,636) $ (226,056) $ (103,178) ======== ======== ========== ========== ==========
(1) For the period May 1, 2000 (commencement of operations) to Dec. 31, 2000. See accompanying notes to financial statements. -19- American Express Retirement Advisor Advantage Variable Annuity - Band 3 IDS Life Variable Account 10 --------------------------------------------------------------------------------
Statements of Changes in Net Assets Segregated Asset Subaccounts ------------------------------------------------------------------------- Period ended December 31, 2000 BC3 BD3 CR3 CM3 DE3 Operations Investment income (loss) -- net $ (284) $ 6,659 $ 83,919 $ 148,842 $ 1,021 Net realized gain (loss) on investments (9,469) (747) (113,559) (29,829) 7,148 Net change in unrealized appreciation or depreciation of investments (44,170) 3,200 (130,039) 1 6,069 ------- ----- -------- - ----- Net increase (decrease) in net assets resulting from operations (53,923) 9,112 (159,679) 119,014 14,238 ======= ===== ======== ======= ====== Contract transactions Contract purchase payments 58,126 192,487 265,037 7,243,061 15,668 Net transfers(2) 245,033 191,734 (851,504) (2,220,181) 166,784 Transfers for policy loans -- -- -- -- -- Contract charges (29) -- (6) (296) (33) Contract terminations: Surrender benefits (35,345) (5,581) -- (388,336) -- ------- ------ -------- -------- ------ Increase (decrease) from contract transactions 267,785 378,640 (586,473) 4,634,248 182,419 ------- ------- -------- --------- ------- Net assets at beginning of year 233,508 48,169 995,667 2,293,976 23,088 ------- ------ ------- --------- ------ Net assets at end of year $447,370 $435,921 $ 249,515 $ 7,047,238 $219,745 ======== ======== ========= =========== ======== Accumulation unit activity Units outstanding at beginning of year 210,746 47,444 871,976 2,266,486 22,622 Contract purchase payments 52,636 188,193 241,310 6,914,984 15,958 Net transfers(2) 222,598 179,315 (847,061) (2,199,449) 179,621 Transfers for policy loans -- -- -- -- -- Contract charges (28) -- (7) (280) (34) Contract terminations: Surrender benefits (32,394) (5,416) -- (366,459) -- ------- ------ ----- -------- ---- Units outstanding at end of year 453,558 409,536 266,218 6,615,282 218,167 ======= ======= ======= ========= =======
Statements of Changes in Net Assets Segregated Asset Subaccounts ------------------------------------------------------------------------- Period ended December 31, 2000 EM3(1) EI3 FI3 GB3 GR3 Operations Investment income (loss) -- net $ (12,234) $ 89,792 $ 345 $ 118 $ (7,028) Net realized gain (loss) on investments (419,249) (65,064) 27 (121) (34,905) Net change in unrealized appreciation or depreciation of investments (807,414) (139,838) 19 97 (342,081) -------- -------- -- -- -------- Net increase (decrease) in net assets resulting from operations (1,238,897) (115,110) 391 94 (384,014) ========== ======== === == ======== Contract transactions Contract purchase payments 5,000,000 1,914,727 65,402 (246) 1,539,082 Net transfers(2) (15,348) (756,503) (85,642) 1,549 215,652 Transfers for policy loans -- -- -- -- (1,478) Contract charges -- (10) -- (5) (102) Contract terminations: Surrender benefits -- (9,538) -- -- (186,378) ----- ------ ----- ----- -------- Increase (decrease) from contract transactions 4,984,652 1,148,676 (20,240) 1,298 1,566,776 --------- --------- ------- ----- --------- Net assets at beginning of year -- 48,786 20,864 2,817 467,694 ----- ------ ------ ----- ------- Net assets at end of year $ 3,745,755 $1,082,352 $ 1,015 $4,209 $1,650,456 =========== ========== ======== ====== ========== Accumulation unit activity Units outstanding at beginning of year -- 48,194 9,663 2,813 400,647 Contract purchase payments -- 1,949,394 61,805 (246) 1,292,730 Net transfers(2) 1,252 (802,277) (70,534) 1,531 242,715 Transfers for policy loans -- -- -- -- (1,171) Contract charges -- (11) -- (6) (91) Contract terminations: Surrender benefits -- (9,731) -- -- (173,301) ----- ------ ----- ----- -------- Units outstanding at end of year 1,252 1,185,569 934 4,092 1,761,529 ===== ========= === ===== =========
(1) For the period May 1, 2000 (commencement of operations) to Dec. 31, 2000. (2) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. -20- American Express Retirement Advisor Advantage Variable Annuity - Band 3 IDS Life Variable Account 10 --------------------------------------------------------------------------------
Statements of Changes in Net Assets Segregated Asset Subaccounts ------------------------------------------------------------------------- Period ended December 31, 2000 (continued) IE3 MF3 ND3 IV3(1) SC3 Operations Investment income (loss) -- net $ 14,347 $ 10,656 $ 248,067 $ 33,024 $ 8,339 Net realized gain (loss) on investments 59,267 3,173 25,623 4,672 29,975 Net change in unrealized appreciation or depreciation of investments (32,516) (17,141) (702,359) (1,015,023) (72,468) ------- ------- -------- ---------- ------- Net increase (decrease) in net assets resulting from operations 41,098 (3,312) (428,669) (977,327) (34,154) ====== ====== ======== ======== ======= Contract transactions Contract purchase payments 45,116 21,479 2,589,396 10,206,195 133,746 Net transfers(2) (166,404) 124,199 1,831,870 64,032 185,041 Transfers for policy loans -- -- (4,040) -- -- Contract charges (4) (4) (323) -- (29) Contract terminations: Surrender benefits (12,606) -- (275,034) -- (414,304) ------- ----- -------- ----- -------- Increase (decrease) from contract transactions (133,898) 145,674 4,141,869 10,270,227 (95,546) -------- ------- --------- ---------- ------- Net assets at beginning of year 169,499 10,468 507,483 -- 461,752 ------- ------ ------- ----- ------- Net assets at end of year $ 76,699 $152,830 $4,220,683 $ 9,292,900 $ 332,052 ========= ======== ========== =========== ========= Accumulation unit activity Units outstanding at beginning of year 133,025 9,618 426,131 -- 27,894 Contract purchase payments 37,299 21,284 2,173,284 218,925 111,759 Net transfers(2) (78,891) 113,625 1,559,162 66,178 148,062 Transfers for policy loans -- -- (3,595) -- -- Contract charges (4) (4) (289) -- (25) Contract terminations: Surrender benefits (10,808) -- (235,196) -- (1,492) ------- ---- -------- --- ------ Units outstanding at end of year 80,621 144,523 3,919,497 285,103 286,198 ====== ======= ========= ======= =======
Statements of Changes in Net Assets Segregated Asset Subaccounts -------------------------------------------------------- Period ended December 31, 2000 (continued) SA3 3SR(1) 3RE 3SI Operations Investment income (loss) -- net $ 347,022 $ 350 $ 29,902 $ (39) Net realized gain (loss) on investments (315,311) (533) (2,692) 7,376 Net change in unrealized appreciation or depreciation of investments (341,167) (149) 6,014 592 -------- ---- ----- --- Net increase (decrease) in net assets resulting from operations (309,456) (332) 33,224 7,929 ======== ==== ====== ===== Contract transactions Contract purchase payments 1,091,392 4,516 154,925 7,737 Net transfers(2) 391,148 534 (5,142) (6,146) Transfers for policy loans (3,960) -- -- -- Contract charges (59) -- (24) -- Contract terminations: Surrender benefits (244,469) -- (1,786) -- -------- ----- ------ ----- Increase (decrease) from contract transactions 1,234,052 5,050 147,973 1,591 --------- ----- ------- ----- Net assets at beginning of year 49,897 -- 3,989 1,563 ------ ---- ----- ----- Net assets at end of year $ 974,493 $4,718 $185,186 $11,083 ========== ====== ======== ======= Accumulation unit activity Units outstanding at beginning of year 32,918 -- 4,160 1,623 Contract purchase payments 689,417 4,548 137,759 7,829 Net transfers(2) 259,388 348 7,103 (195) Transfers for policy loans (2,735) -- -- -- Contract charges (46) -- (20) -- Contract terminations: Surrender benefits (180,517) -- (1,462) -- -------- ----- ------ ----- Units outstanding at end of year 798,425 4,896 147,540 9,257 ======= ===== ======= =====
(1) For the period May 1, 2000 (commencement of operations) to Dec. 31, 2000. (2) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. -21- American Express Retirement Advisor Advantage Variable Annuity - Band 3 IDS Life Variable Account 10 --------------------------------------------------------------------------------
Statements of Changes in Net Assets Segregated Asset Subaccounts ------------------------------------------------------------------------- Period ended December 31, 2000 (continued) 3UE 3MC 3GT(1) 3IG(1) 3IP Operations Investment income (loss) -- net $ 4,740 $ 515 $ 723 $ 7,570 $ 549 Net realized gain (loss) on investments (4,937) 1,533 (493) (1,726) 26 Net change in unrealized appreciation or depreciation of investments (61,980) 2,027 (85,765) 7,072 (2,955) ------- ----- ------- ----- ------ Net increase (decrease) in net assets resulting from operations (62,177) 4,075 (85,535) 12,916 (2,380) ======= ===== ======= ====== ====== Contract transactions Contract purchase payments 469,167 3,143 160,360 428,802 33,130 Net transfers(2) (19,983) 3,647 139,701 6,408 15,182 Transfers for policy loans -- 76 -- -- -- Contract charges (72) (15) (28) (2) (35) Contract terminations: Surrender benefits (2,822) (412) (2,295) (3,060) -- ------ ---- ------ ------ ----- Increase (decrease) from contract transactions 446,290 6,439 297,738 432,148 48,277 ------- ----- ------- ------- ------ Net assets at beginning of year 187,710 7,530 -- -- 8,964 ------- ----- ------- ------- ----- Net assets at end of year $571,823 $18,044 $212,203 $445,064 $54,861 ======== ======= ======== ======== ======= Accumulation unit activity Units outstanding at beginning of year 170,333 7,935 -- -- 8,363 Contract purchase payments 434,350 3,019 158,252 500,751 33,127 Net transfers(2) (24,837) 3,970 154,235 58,193 15,472 Transfers for policy loans -- 80 -- -- -- Contract charges (69) (13) (29) (3) (38) Contract terminations: Surrender benefits (2,547) (398) (2,468) (3,314) -- ------ ---- ------ ------ ----- Units outstanding at end of year 577,230 14,593 309,990 555,627 56,924 ======= ====== ======= ======= ======
Statements of Changes in Net Assets Segregated Asset Subaccounts ------------------------------------------------------------------------- Period ended December 31, 2000 (continued) 3MG(1) 3MD(1) 3VS 3IT 3SP Operations Investment income (loss) -- net $ (661) $ (486) $ 6,776 $ 64,295 $ 123,532 Net realized gain (loss) on investments (556) 1,429 19,640 (250,961) (212,677) Net change in unrealized appreciation or depreciation of investments (37,417) (14,833) (162,052) (39,390) (14,033) ------- ------- -------- ------- ------- Net increase (decrease) in net assets resulting from operations (38,634) (13,890) (135,636) (226,056) (103,178) ======= ======= ======== ======== ======== Contract transactions Contract purchase payments 485,821 162,022 1,524,126 635,975 1,086,657 Net transfers(2) 35,436 191,979 304,320 127,299 16,218 Transfers for policy loans -- -- (1,535) 3,180 -- Contract charges (4) (1) (154) (85) (37) Contract terminations: Surrender benefits -- (2,490) (217,319) (59,230) (101,430) ----- ------ -------- ------- -------- Increase (decrease) from contract transactions 521,253 351,510 1,609,438 707,139 1,001,408 ------- ------- --------- ------- --------- Net assets at beginning of year -- -- 247,884 169,351 143,413 ---- ---- ------- ------- ------- Net assets at end of year $482,619 $337,620 $1,721,686 $ 650,434 $1,041,643 ======== ======== ========== ========= ========== Accumulation unit activity Units outstanding at beginning of year -- -- 182,717 111,791 124,538 Contract purchase payments 496,790 163,559 1,078,608 410,305 963,969 Net transfers(2) 35,753 191,061 221,461 121,611 3,491 Transfers for policy loans -- -- (879) 2,229 -- Contract charges (4) (1) (111) (71) (37) Contract terminations: Surrender benefits -- (2,475) (151,401) (46,650) (101,744) ---- ------ -------- ------- -------- Units outstanding at end of year 532,539 352,144 1,330,395 599,215 990,217 ======= ======= ========= ======= =======
(1) For the period May 1, 2000 (commencement of operations) to Dec. 31, 2000. (2) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. -22- American Express Retirement Advisor Advantage Variable Annuity - Band 3 IDS Life Variable Account 10 --------------------------------------------------------------------------------
Statements of Changes in Net Assets Segregated Asset Subaccounts ---------------------------------------------------------------------------------------------- Period ended December 31, 1999 BC3(1) BD3(1) CR3(1) CM3(1) DE3(1) EI3(1) FI3(1) GB3(1) Operations Investment income (loss) -- net $ (266) $ 417 $ 88,061 $ 11,323 $ 4,068 $ 421 $ 114,921 $ 16 Net realized gain (loss) on investments 117,389 (209) 32 -- 11,654 7 (35,633) (8) Net change in unrealized appreciation or depreciation of investments 21,634 (95) 57,341 (1) 478 372 (3) (23) ------ --- ------ -- --- --- -- --- Net increase (decrease) in net assets resulting from operations 138,757 113 145,434 11,322 16,200 800 79,285 (15) ======= === ======= ====== ====== === ====== === Contract transactions Contract purchase payments 2,223,661 56,502 850,083 2,447,471 2,017,652 40,753 10,011,795 1,366 Net transfers(2) (428) (8,446) 150 (151,562) 4,251 7,563 (875) 1,466 Transfers for policy loans -- -- -- (7,921) -- -- -- -- Contract terminations: Surrender benefits (2,128,482) -- -- (5,334) (2,015,015) (330) (10,069,341) -- ---------- ---- ---- ------ ---------- ---- ----------- ---- Increase (decrease) from contract transactions 94,751 48,056 850,233 2,282,654 6,888 47,986 (58,421) 2,832 ------ ------ ------- --------- ----- ------ ------- ----- Net assets at beginning of year -- -- -- -- -- -- -- -- ------ ------ ------- --------- ----- ------ ------- ----- Net assets at end of year $ 233,508 $48,169 $995,667 $2,293,976 $ 23,088 $48,786 $ 20,864 $2,817 =========== ======= ======== ========== =========== ======= ============ ====== Accumulation unit activity Units outstanding at beginning of year -- -- -- -- -- -- -- -- Contract purchase payments 211,504 56,266 871,965 2,427,761 18,486 40,956 11,748 1,356 Net transfers(2) 598 (8,822) 11 (148,076) 4,136 7,565 (2,085) 1,457 Transfers for policy loans -- -- -- (7,903) -- -- -- -- Contract terminations: Surrender benefits (1,356) -- -- (5,296) -- (327) -- -- ------ ------- ----- ------ ---- ---- ---- ---- Units outstanding at end of year 210,746 47,444 871,976 2,266,486 22,622 48,194 9,663 2,813 ======= ====== ======= ========= ====== ====== ===== =====
(1) For the period Sept. 15, 1999 (commencement of operations) to Dec. 31, 1999. (2) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. -23- American Express Retirement Advisor Advantage Variable Annuity - Band 3 IDS Life Variable Account 10 --------------------------------------------------------------------------------
Statements of Changes in Net Assets Segregated Asset Subaccounts Period ended December 31, 1999 ------------------------------------------------------------------------------------------- (continued) GR3(1) IE3(1) MF3(1) ND3(1) SC3(1) SA3(1) 3RE(1) 3SI(1) Operations Investment income (loss) -- net $ (2,386) $ 1,683 $ 201 $ 822 $ 20,397 $ 1,283 $ (4) $ (2) Net realized gain (loss) on investments 188,656 116 21 646 136,433 148 (6) 35 Net change in unrealized appreciation or depreciation of investments 62,739 17,789 383 40,815 66,937 9,212 48 59 ------ ------ --- ------ ------ ----- -- -- Net increase (decrease) in net assets resulting from operations 249,009 19,588 605 42,283 223,767 10,643 38 92 ======= ====== === ====== ======= ====== == == Contract transactions Contract purchase payments 2,385,249 122,687 3,163 419,823 3,025,558 27,399 4,253 1,303 Net transfers(2) 12,026 28,149 6,700 47,188 2,427 12,050 (302) 168 Transfers for policy loans -- -- -- -- -- -- -- -- Contract terminations: Surrender benefits (2,178,590) (925) -- (1,811) (2,790,000) (195) -- -- ---------- ---- ----- ------ ---------- ---- ---- ---- Increase (decrease) from contract transactions 218,685 149,911 9,863 465,200 237,985 39,254 3,951 1,471 ------- ------- ----- ------- ------- ------ ----- ----- Net assets at beginning of year -- -- -- -- -- -- -- -- ------- ------- ----- ------- ------- ------ ----- ----- Net assets at end of year $ 467,694 $169,499 $10,468 $507,483 $ 461,752 $49,897 $3,989 $1,563 =========== ======== ======= ======== =========== ======= ====== ====== Accumulation unit activity Units outstanding at beginning of year -- -- -- -- -- -- -- -- Contract purchase payments 390,177 109,540 3,128 384,980 25,607 23,484 4,478 1,436 Net transfers(2) 10,470 24,246 6,490 42,731 2,287 9,588 (318) 187 Transfers for policy loans -- -- -- -- -- -- -- -- Contract terminations: Surrender benefits -- (761) -- (1,580) -- (154) -- -- ----- ---- ----- ------ ---- ---- ---- ----- Units outstanding at end of year 400,647 133,025 9,618 426,131 27,894 32,918 4,160 1,623 ======= ======= ===== ======= ====== ====== ===== =====
(1) For the period Sept. 15, 1999 (commencement of operations) to Dec. 31, 1999. (2) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. -24- American Express Retirement Advisor Advantage Variable Annuity - Band 3 IDS Life Variable Account 10 --------------------------------------------------------------------------------
Statements of Changes in Net Assets Segregated Asset Subaccounts Period ended December 31, 1999 -------------------------------------------------------------------------------- (continued) 3UE(1) 3MC(1) 3IP(1) 3VS(1) 3IT(1) 3SP(1) Operations Investment income (loss) -- net $ 725 $ 39 $ 74 $ 16,591 $ (66) $ (60) Net realized gain (loss) on investments 142 (12) 77 (117) 139 62 Net change in unrealized appreciation or depreciation of investments 5,494 101 566 17,282 30,460 7,793 ----- --- --- ------ ------ ----- Net increase (decrease) in net assets resulting from operations 6,361 128 717 33,756 30,533 7,795 ===== === === ====== ====== ===== Contract transactions Contract purchase payments 176,140 2,268 8,054 214,071 132,267 128,180 Net transfers(2) 5,209 5,150 193 1,301 7,240 8,005 Transfers for policy loans -- (16) -- -- (16) -- Contract terminations: Surrender benefits -- -- -- (1,244) (673) (567) ----- --- --- ------ ------ ----- Increase (decrease) from contract transactions 181,349 7,402 8,247 214,128 138,818 135,618 ------- ----- ----- ------- ------- ------- Net assets at beginning of year -- -- -- -- -- -- ----- --- --- ------ ------ ----- Net assets at end of year $187,710 $7,530 $8,964 $247,884 $169,351 $143,413 ======== ====== ====== ======== ======== ======== Accumulation unit activity Units outstanding at beginning of year -- -- -- -- -- -- Contract purchase payments 165,502 2,440 8,327 182,784 106,977 117,633 Net transfers(2) 4,831 5,512 36 899 5,308 7,426 Transfers for policy loans -- (17) -- -- (16) -- Contract terminations: Surrender benefits -- -- -- (966) (478) (521) ----- --- --- ------ ------ ----- Units outstanding at end of year 170,333 7,935 8,363 182,717 111,791 124,538 ======= ===== ===== ======= ======= =======
(1) For the period Sept. 15, 1999 (commencement of operations) to Dec. 31, 1999. (2) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. -25- American Express Retirement Advisor Advantage Variable Annuity - Band 3 IDS Life Variable Account 10 -------------------------------------------------------------------------------- Notes to Financial Statements 1. ORGANIZATION IDS Life Variable Account 10 (the Account) was established under Minnesota law on Aug. 23, 1995 as a segregated asset account of IDS Life Insurance Company (IDS Life). The Account is registered as a unit investment trust under the Investment Company Act of 1940, as amended (the 1940 Act). Operations of the Account commenced on March 5, 1996. 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 (non-diversified for AXP(R) Variable Portfolio Global Bond Fund and Credit Suisse Warburg Pincus Trust - Emerging Growth Portfolio), open-end management investment companies and have the following investment managers.
Invests exclusively in shares of Subaccount Investment Manager AXP(R) Variable Portfolio - Blue Chip Advantage Fund BC3 IDS Life Insurance Company(1) AXP(R) Variable Portfolio - Bond Fund BD3 IDS Life Insurance Company(1) AXP(R) Variable Portfolio - Capital Resource Fund CR3 IDS Life Insurance Company(1) AXP(R) Variable Portfolio - Cash Management Fund CM3 IDS Life Insurance Company(1) AXP(R) Variable Portfolio - Diversified Equity Income Fund DE3 IDS Life Insurance Company(1) AXP(R) Variable Portfolio - Emerging Markets Fund EM3 IDS Life Insurance Company(2) AXP(R) Variable Portfolio - Extra Income Fund EI3 IDS Life Insurance Company(1) AXP(R) Variable Portfolio - Federal Income Fund FI3 IDS Life Insurance Company(1) AXP(R) Variable Portfolio - Global Bond Fund GB3 IDS Life Insurance Company(1) AXP(R) Variable Portfolio - Growth Fund GR3 IDS Life Insurance Company(1) AXP(R) Variable Portfolio - International Fund IE3 IDS Life Insurance Company(2) AXP(R) Variable Portfolio - Managed Fund MF3 IDS Life Insurance Company(1) AXP(R) Variable Portfolio - New Dimensions Fund(R) ND3 IDS Life Insurance Company(1) AXP(R) Variable Portfolio - S&P 500 Index Fund IV3 IDS Life Insurance Company(1) AXP(R) Variable Portfolio - Small Cap Advantage Fund SC3 IDS Life Insurance Company(3) AXP(R) Variable Portfolio - Strategy Aggressive Fund SA3 IDS Life Insurance Company(1) Calvert Variable Series, Inc. Social Balanced Portfolio 3SR Calvert Asset Management Company, Inc.(4) FTVIPT Franklin Real Estate Fund - Class 2 3RE Franklin Advisers, Inc. FTVIPT Franklin Value Securities Fund - Class 2 3SI Franklin Advisory Services, LLC Goldman Sachs VIT CORE(SM) U.S. Equity Fund 3UE Goldman Sachs Asset Management Goldman Sachs VIT Mid Cap Value Fund 3MC Goldman Sachs Asset Management Janus Aspen Series Global Technology Portfolio: Service Shares 3GT Janus Capital Janus Aspen Series International Growth Portfolio: Service Shares 3IG Janus Capital Lazard Retirement International Equity Portfolio 3IP Lazard Asset Management MFS(R) Investors Growth Stock Series - Service Class 3MG MFS Investment Management(R) MFS(R) New Discovery Series - Service Class 3MD MFS Investment Management(R) Putnam VT Vista Fund - Class IB Shares 3VS Putnam Investment Management, LLC Wanger International Small Cap 3IT Liberty Wanger Asset Management, L.P. Wanger U.S. Small Cap 3SP Liberty Wanger Asset Management, L.P.
(1) American Express Financial Corporation (AEFC) is the investment adviser. (2) AEFC is the investment adviser. American Express Asset Management International, Inc. is the sub-investment adviser. (3) AEFC is the investment adviser. Kenwood Capital Management LLC is the sub-investment adviser. (4) NCM Capital Management Group, Inc. is the investment subadviser. 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 IDS Life. IDS Life serves as issuer of the contract. 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. -26- American Express Retirement Advisor Advantage Variable Annuity - Band 3 IDS Life Variable Account 10 -------------------------------------------------------------------------------- Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 IDS Life is taxed as a life insurance company. The Account is treated as part of IDS Life for federal income tax purposes. Under existing federal income tax law, no income taxes are payable with respect to any investment income of the Account. 3. MORTALITY AND EXPENSE RISK FEE IDS 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 IDS Life is computed daily and is equal, on an annual basis, to 0.55% of the average daily net assets. 4. CONTRACT ADMINISTRATIVE CHARGES IDS Life deducts a contract administrative charge of $30 per year on each contract anniversary. This charge cannot be increased and does not apply after annuity payouts begin. IDS Life does not expect to profit from this charge. This charge reimburses IDS Life for expenses incurred in establishing and maintaining the annuity records. This charge is waived when the contract value, or total purchase payments less any payments surrendered, is $50,000 or more on the current contract anniversary. The $30 annual charge is deducted at the time of any full surrender. 5. INVESTMENT IN SHARES The subaccounts' investments in shares of the Funds as of Dec. 31, 2000 were as follows:
Investment Subaccount Shares NAV AXP(R)Variable Portfolio - Blue Chip Advantage Fund BC3 45,283 $ 9.88 AXP(R)Variable Portfolio - Bond Fund BD3 43,108 10.37 AXP(R)Variable Portfolio - Capital Resource Fund CR3 9,321 26.57 AXP(R)Variable Portfolio - Cash Management Fund CM3 934,606 1.00 AXP(R)Variable Portfolio - Diversified Equity Income Fund DE3 21,968 10.01 AXP(R)Variable Portfolio - Emerging Markets Fund EM3 498,913 7.51 AXP(R)Variable Portfolio - Extra Income Fund EI3 153,370 6.99 AXP(R)Variable Portfolio - Federal Income Fund FI3 99 10.17 AXP(R)Variable Portfolio - Global Bond Fund GB3 432 9.74 AXP(R)Variable Portfolio - Growth Fund GR3 174,514 9.43 AXP(R)Variable Portfolio - International Fund IE3 6,673 11.50 AXP(R)Variable Portfolio - Managed Fund MF3 8,534 17.68 AXP(R)Variable Portfolio - New Dimensions Fund(R) ND3 219,285 19.21 AXP(R)Variable Portfolio - S&P 500 Index Fund IV3 1,032,612 9.00 AXP(R)Variable Portfolio - Small Cap Advantage Fund SC3 118,838 11.20 AXP(R)Variable Portfolio - Strategy Aggressive Fund SA3 78,215 12.46 Calvert Variable Series, Inc. Social Balanced Portfolio 3SR 911 2.00 FTVIPT Franklin Real Estate Fund - Class 2 3RE 10,667 17.36 FTVIPT Franklin Value Securities Fund - Class 2 3SI 1,129 9.82 Goldman Sachs VIT CORE(SM) U.S. Equity Fund 3UE 45,819 12.48 Goldman Sachs VIT Mid Cap Value Fund 3MC 1,691 10.67 Janus Aspen Series Global Technology Portfolio: Service Shares 3GT 32,397 6.55 Janus Aspen Series International Growth Portfolio: Service Shares 3IG 14,526 30.64 Lazard Retirement International Equity Portfolio 3IP 4,568 12.01 MFS(R)Investors Growth Stock Series - Service Class 3MG 37,182 12.98 MFS(R)New Discovery Series - Service Class 3MD 20,351 16.59 Putnam VT Vista Fund - Class IB Shares 3VS 87,841 19.60 Wanger International Small Cap 3IT 22,754 28.49 Wanger U.S. Small Cap 3SP 52,108 19.99
-27- American Express Retirement Advisor Advantage Variable Annuity - Band 3 IDS Life Variable Account 10 -------------------------------------------------------------------------------- 6. INVESTMENT TRANSACTIONS The subaccounts' purchases of the Funds' shares, including reinvestment of dividend distributions, were as follows:
Period ended Dec. 31, Investment Subaccount 2000 1999 AXP(R)Variable Portfolio - Blue Chip Advantage Fund BC3(1) $ 1,554,688 $ 2,227,819 AXP(R)Variable Portfolio - Bond Fund BD3(1) 792,705 90,112 AXP(R)Variable Portfolio - Capital Resource Fund CR3(1) 1,081,827 940,348 AXP(R)Variable Portfolio - Cash Management Fund CM3(1) 64,751,467 2,696,155 AXP(R)Variable Portfolio - Diversified Equity Income Fund DE3(1) 2,474,903 2,029,460 AXP(R)Variable Portfolio - Emerging Markets Fund EM3(2) 10,059,600 -- AXP(R)Variable Portfolio - Extra Income Fund EI3(1) 2,317,263 48,324 AXP(R)Variable Portfolio - Federal Income Fund FI3(1) 70,365 10,131,090 AXP(R)Variable Portfolio - Global Bond Fund GB3(1) 5,589 3,531 AXP(R)Variable Portfolio - Growth Fund GR3(1) 3,496,224 2,425,240 AXP(R)Variable Portfolio - International Fund IE3(1) 10,801,179 153,314 AXP(R)Variable Portfolio - Managed Fund MF3(1) 397,329 10,770 AXP(R)Variable Portfolio - New Dimensions Fund(R) ND3(1) 5,917,664 477,860 AXP(R)Variable Portfolio - S&P 500 Index Fund IV3(2) 10,579,274 -- AXP(R)Variable Portfolio - Small Cap Advantage Fund SC3(1) 2,677,889 3,056,429 AXP(R)Variable Portfolio - Strategy Aggressive Fund SA3(1) 4,321,286 42,140 Calvert Variable Series, Inc. Social Balanced Portfolio 3SR(2) 12,591 -- FTVIPT Franklin Real Estate Securities Fund - Class 2 3RE(1) 6,541,769 4,653 FTVIPT Franklin Value Securities Fund - Class 2 3SI(1) 723,562 2,997 Goldman Sachs VIT CORE(SM) U.S. Equity Fund 3UE(1) 658,986 184,931 Goldman Sachs VIT Mid Cap Value Fund 3MC(1) 132,779 8,255 Janus Aspen Series Global Technology Portfolio: Service Shares 3GT(2) 651,089 -- Janus Aspen Series International Growth Portfolio: Service Shares 3IG(2) 3,676,000 -- Lazard Retirement International Equity Portfolio 3IP(1) 285,531 10,093 MFS(R)Investors Growth Stock Series - Service Class 3MG(2) 555,781 -- MFS(R)New Discovery Series - Service Class 3MD(2) 433,140 -- Putnam VT Vista Fund - Class IB Shares 3VS(1) 3,856,869 236,772 Wanger International Small Cap 3IT(1) 6,328,614 139,627 Wanger U.S. Small Cap 3SP(1) 4,199,320 138,957 --------- -------
(1) Operations commenced on Sept. 15, 1999. (2) Operations commenced on May 1, 2000. -28- IDS Life Insurance Company ------------------------------------------------------------------------------- REPORT OF INDEPENDENT AUDITORS THE BOARD OF DIRECTORS IDS LIFE INSURANCE COMPANY We have audited the accompanying consolidated balance sheets of IDS Life Insurance Company (a wholly-owned subsidiary of American Express Financial Corporation) as of December 31, 2000 and 1999, and the related consolidated statements of income, stockholder's equity and cash flows for each of the three years in the period ended December 31, 2000. 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 auditing standards generally accepted in the United States. 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 consolidated financial position of IDS Life Insurance Company at December 31, 2000 and 1999, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP Ernst & Young LLP February 8, 2001 Minneapolis, Minnesota IDS Life Insurance Company -------------------------------------------------------------------------------
IDS Life Insurance Company Consolidated balance sheets December 31, ($ thousands) 2000 1999 Assets Investments: Fixed maturities: Held to maturity, at amortized cost (fair value: 2000, $6,471,798; 1999, $7,105,743) $ 6,463,613 $ 7,156,292 Available for sale, at fair value (amortized cost: 2000, $12,929,870; 1999, $13,703,137) 12,399,990 13,049,549 ---------- ---------- 18,863,603 20,205,841 Mortgage loans on real estate 3,738,091 3,606,377 Policy loans 618,973 561,834 Other investments 635,880 506,797 ------- ------- Total investments 23,856,547 24,880,849 Cash and cash equivalents 316,974 32,333 Amounts recoverable from reinsurers 416,480 327,168 Amounts due from brokers 15,302 145 Other accounts receivable 42,324 48,578 Accrued investment income 334,928 343,449 Deferred policy acquisition costs 2,951,655 2,665,175 Deferred income taxes, net 136,588 216,020 Other assets 25,919 33,089 Separate account assets 32,349,347 35,894,732 ---------- ---------- Total assets $60,446,064 $64,441,538 =========== =========== Liabilities and stockholder's equity Liabilities: Future policy benefits: Fixed annuities $19,417,446 $20,552,159 Universal life-type insurance 3,410,871 3,391,203 Traditional life insurance 232,913 226,842 Disability income and long-term care insurance 1,012,247 811,941 Policy claims and other policyholders' funds 52,067 24,600 Amounts due to brokers 446,347 148,112 Other liabilities 459,422 579,678 Separate account liabilities 32,349,347 35,894,732 ---------- ---------- Total liabilities 57,380,660 61,629,267 ---------- ---------- Commitments and contingencies Stockholder's equity: Capital stock, $30 par value per share; 100,000 shares authorized, issued and outstanding 3,000 3,000 Additional paid-in capital 288,327 288,327 Accumulated other comprehensive loss, net of tax: Net unrealized securities losses (333,734) (411,230) Retained earnings 3,107,811 2,932,174 --------- --------- Total stockholder's equity 3,065,404 2,812,271 --------- --------- Total liabilities and stockholder's equity $60,446,064 $64,441,538 =========== =========== See accompanying notes.
IDS Life Insurance Company -------------------------------------------------------------------------------
IDS Life Insurance Company Consolidated statements of income Three years ended December 31, ($ thousands) 2000 1999 1998 Revenues Premiums: Traditional life insurance $ 56,187 $ 53,790 $ 53,132 Disability income and long-term care insurance 231,311 201,637 176,298 ------- ------- ------- Total premiums 287,498 255,427 229,430 Policyholder and contractholder charges 438,127 411,994 383,965 Management and other fees 598,168 473,108 401,057 Net investment income 1,730,605 1,919,573 1,986,485 Net realized (loss) gain on investments (16,975) 26,608 6,902 ------- ------ ----- Total revenues 3,037,423 3,086,710 3,007,839 --------- --------- --------- Benefits and expenses Death and other benefits: Traditional life insurance 29,042 29,819 29,835 Universal life-type insurance and investment contracts 131,467 118,561 108,349 Disability income and long-term care insurance 40,246 30,622 27,414 Increase in liabilities for future policy benefits: Traditional life insurance 5,765 7,311 6,052 Disability income and long-term care insurance 113,239 87,620 73,305 Interest credited on universal life-type insurance and investment contracts 1,169,641 1,240,575 1,317,124 Amortization of deferred policy acquisition costs 403,968 332,705 382,642 Other insurance and operating expenses 336,791 335,180 287,326 ------- ------- ------- Total benefits and expenses 2,230,159 2,182,393 2,232,047 --------- --------- --------- Income before income taxes 807,264 904,317 775,792 Income taxes 221,627 267,864 235,681 ------- ------- ------- Net income $ 585,637 $ 636,453 $ 540,111 ========== ========== ========== See accompanying notes.
IDS Life Insurance Company -------------------------------------------------------------------------------
IDS Life Insurance Company Consolidated statements of stockholder's equity Accumulated other Total Additional comprehensive stockholder's Capital paid-In (loss) income, Retained Three years ended December 31, ($ thousands) equity stock capital net of tax earnings Balance, January 1, 1998 $2,865,816 $3,000 $290,847 $ 226,359 $2,345,610 Comprehensive income: Net income 540,111 -- -- -- 540,111 Unrealized holding losses arising during the year, net of deferred policy acquisition costs of $6,333 and taxes of $32,826 (60,964) -- -- (60,964) -- Reclassification adjustment for losses included in net income, net of tax of ($2,254) 4,189 -- -- 4,189 -- ----- ----- ----- ----- ----- Other comprehensive loss (56,775) -- -- (56,775) -- ------- ----- ----- ------- ----- Comprehensive income 483,336 -- -- -- -- Other changes (2,520) -- (2,520) -- -- Cash dividends to parent (240,000) -- -- -- (240,000) -------- ----- ----- ----- -------- Balance, December 31, 1998 3,106,632 3,000 288,327 169,584 2,645,721 Comprehensive income: Net income 636,453 -- -- -- 636,453 Unrealized holding losses arising during the year, net of deferred policy acquisition costs of $28,444 and taxes of $304,936 (566,311) -- -- (566,311) -- Reclassification adjustment for gains included in net income, net of tax of $7,810 (14,503) -- -- (14,503) -- ------- ----- ----- ------- ----- Other comprehensive loss (580,814) -- -- (580,814) -- -------- ----- ----- -------- ----- Comprehensive income 55,639 -- -- -- -- Cash dividends to parent (350,000) -- -- -- (350,000) -------- ----- ----- ----- -------- Balance, December 31, 1999 2,812,271 3,000 288,327 (411,230) 2,932,174 Comprehensive income: Net income 585,637 -- -- -- 585,637 Unrealized holding gains arising during the year, net of deferred policy acquisition costs of ($5,154) and taxes of ($46,921) 87,138 -- -- 87,138 -- Reclassification adjustment for gains included in net income, net of tax of $5,192 (9,642) -- -- (9,642) -- ------ ----- ----- ------ ----- Other comprehensive income 77,496 -- -- 77,496 -- ------ ----- ----- ------ ----- Comprehensive income 663,133 -- -- -- -- Cash dividends to parent (410,000) -- -- -- (410,000) -------- ----- ----- ----- -------- Balance, December 31, 2000 $3,065,404 $3,000 $288,327 $(333,734) $3,107,811 === ==== ========== ====== ======== ========= ========== See accompanying notes.
IDS Life Insurance Company -------------------------------------------------------------------------------
IDS Life Insurance Company Consolidated statements of cash flows Years ended December 31, ($ thousands) 2000 1999 1998 Cash flows from operating activities Net income $ 585,637 $ 636,453 $ 540,111 Adjustments to reconcile net income to net cash provided by operating activities: Policy loans, excluding universal life-type insurance: Issuance (61,313) (56,153) (53,883) Repayment 56,088 54,105 57,902 Change in amounts recoverable from reinsurers (89,312) (64,908) (56,544) Change in other accounts receivable 6,254 (615) (10,068) Change in accrued investment income 8,521 23,125 (9,184) Change in deferred policy acquisition costs, net (291,634) (140,379) (10,443) Change in liabilities for future policy benefits for traditional life, disability income and long-term care insurance 206,377 153,157 138,826 Change in policy claims and other policyholders' funds 27,467 (45,709) 1,964 Deferred income tax provision (benefit) 37,704 79,796 (19,122) Change in other liabilities (120,256) 169,395 64,902 Amortization of premium, (accretion of discount), net 37,909 (17,907) 9,170 Net realized loss (gain) on investments 16,975 (26,608) (6,902) Policyholder and contractholder charges, non-cash (151,745) (175,059) (172,396) Other, net (9,279) (5,324) 10,786 ------ ------ ------ Net cash provided by operating activities 259,393 583,369 485,119 ------- ------- ------- Cash flows from investing activities Fixed maturities held to maturity: Purchases (4,487) (3,030) (1,020) Maturities, sinking fund payments and calls 589,742 741,949 1,162,731 Sales 50,067 66,547 236,963 Fixed maturities available for sale: Purchases (1,454,010) (3,433,128) (4,100,238) Maturities, sinking fund payments and calls 1,019,403 1,442,507 2,967,311 Sales 1,237,116 1,691,389 278,955 Other investments, excluding policy loans: Purchases (706,082) (657,383) (555,647) Sales 435,633 406,684 579,038 Change in amounts due from brokers (15,157) 182 8,073 Change in amounts due to brokers 298,236 (47,294) (186,052) ------- ------- -------- Net cash provided by investing activities 1,450,461 208,423 390,114 --------- ------- ------- Cash flows from financing activities Activity related to universal life-type insurance and investment contracts: Considerations received 1,842,026 2,031,630 1,873,624 Surrenders and other benefits (3,974,966) (3,669,759) (3,792,612) Interest credited to account balances 1,169,641 1,240,575 1,317,124 Universal life-type insurance policy loans: Issuance (134,107) (102,239) (97,602) Repayment 82,193 67,881 67,000 Dividends paid (410,000) (350,000) (240,000) -------- -------- -------- Net cash used in financing activities (1,425,213) (781,912) (872,466) ---------- -------- -------- Net increase in cash and cash equivalents 284,641 9,880 2,767 Cash and cash equivalents at beginning of year 32,333 22,453 19,686 ------ ------ ------ Cash and cash equivalents at end of year $ 316,974 $ 32,333 $ 22,453 =========== =========== =========== See accompanying notes
IDS Life Insurance Company ------------------------------------------------------------------------------- Notes to Consolidated Financial Statements ($ thousands) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of business IDS Life Insurance Company (the Company) is a stock life insurance company organized under the laws of the State of Minnesota. The Company is a wholly-owned subsidiary of American Express Financial Corporation (AEFC), which is a wholly owned subsidiary of American Express Company. The Company serves residents of all states except New York. IDS Life Insurance Company of New York is a wholly owned subsidiary of the Company and serves New York State residents. The Company also wholly owns American Enterprise Life Insurance Company, American Centurion Life Assurance Company, American Partners Life Insurance Company and American Express Corporation. The Company's principal products are deferred annuities and universal life insurance, which are issued primarily to individuals. It offers single premium and flexible premium deferred annuities on both a fixed and variable dollar basis. Immediate annuities are offered as well. The Company's insurance products include universal life (fixed and variable), whole life, single premium life and term products (including waiver of premium and accidental death benefits). The Company also markets disability income and long-term care insurance. Basis of presentation The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States which vary in certain respects from reporting practices prescribed or permitted by state insurance regulatory authorities (see Note 4). The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Investments Fixed maturities that the Company has both the positive intent and the ability to hold to maturity are classified as held to maturity and carried at amortized cost. All other fixed maturities and all marketable equity securities are classified as available for sale and carried at fair value. Unrealized gains and losses on securities classified as available for sale are reported as a separate component of accumulated other comprehensive income (loss), net of the related deferred policy acquisition costs effect and deferred taxes. The retrospective interest method is used for income recognition on investments in structured notes and residual beneficial interests in securitized financial assets. 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. Mortgage loans on real estate are carried at amortized cost less reserves for mortgage loan losses. The estimated fair value of the mortgage loans is determined by a discounted cash flow analysis using mortgage interest rates currently offered for mortgages of similar maturities. Impairment of mortgage loans is measured as the excess of a loan's recorded investment over its present value of expected principal and interest payments discounted at the loan's effective interest rate, or the fair value of collateral. The amount of the impairment is recorded in a reserve for mortgage loan losses. The reserve for mortgage loan losses is maintained at a level that management believes is adequate to absorb estimated losses in the portfolio. The level of the reserve account is determined based on several factors, including historical experience, expected future principal and interest payments, estimated collateral values, and current economic and political conditions. Management regularly evaluates the adequacy of the reserve for mortgage loan losses. The Company generally stops accruing interest on mortgage loans for which interest payments are delinquent more than three months. Based on management's judgment as to the ultimate collectibility of principal, interest payments received are either recognized as income or applied to the recorded investment in the loan. IDS Life Insurance Company ------------------------------------------------------------------------------- The cost of interest rate caps and floors is amortized to investment income over the life of the contracts and payments received as a result of these agreements are recorded as investment income when realized. The amortized cost of interest rate caps and floors is included in other investments. Amounts paid or received under interest rate swap agreements are recognized as an adjustment to investment income. The Company may purchase and write index options to hedge the fee income earned on the management of equity securities in separate accounts and the underlying mutual funds. These index options are carried at market value and are included in other investments or other liabilities, as appropriate. Gains or losses on index options that qualify as hedges are deferred and recognized in management and other fees in the same period as the hedged fee income. The Company also uses index options to manage the risks related to a certain annuity product that pays interest based upon the relative change in a major stock market index between the beginning and end of the product's term. Purchased options used in conjunction with this product are reported in other investments and written options are included in other liabilities. The amortization of the cost of purchased options, the proceeds of written options and the changes in intrinsic value of the contracts are included in net investment income. Policy loans are carried at the aggregate of the unpaid loan balances which do not exceed the cash surrender values of the related policies. Statements of cash flows The Company considers investments with a maturity at the date of their acquisition of three months or less to be cash equivalents. These securities are carried principally at amortized cost, which approximates fair value. Supplementary information to the consolidated statements of cash flows for the years ended December 31 is summarized as follows: 2000 1999 1998 Cash paid during the year for: Income taxes $225,704 $214,940 $215,003 Interest on borrowings 3,299 4,521 14,529 Recognition of profits on annuity contracts and insurance policies Profits on fixed and variable deferred annuities are recognized by the Company over the lives of the contracts, using primarily the interest method. Profits on fixed annuities represent the excess of investment income earned from investment of contract considerations over interest credited to contract owners and other expenses. Profits on variable annuities represent the excess of contractholder charges over the costs of benefits provided and other expenses. The retrospective deposit method is used in accounting for fixed and variable universal life-type insurance. Under this method, profits are recognized over the lives of the policies in proportion to the estimated gross profits expected to be realized. Premiums on traditional life, disability income and long-term care insurance policies are recognized as revenue when due, and related benefits and expenses are associated with premium revenue in a manner that results in recognition of profits over the lives of the insurance policies. This association is accomplished by means of the provision for future policy benefits and the deferral and subsequent amortization of policy acquisition costs. Policyholder and contractholder charges include the monthly cost of insurance charges, issue and administrative fees and surrender charges. These charges also include the minimum death benefit guarantee fees received from the variable life insurance separate accounts. Management and other fees include investment management fees from underlying proprietary mutual funds and mortality and expense risk fees received from the variable annuity and variable life insurance separate accounts. Deferred policy acquisition costs The costs of acquiring new business, principally sales compensation, policy issue costs, underwriting and certain sales expenses, have been deferred on insurance and annuity contracts. The deferred acquisition costs for most single premium deferred annuities and installment annuities are amortized using primarily the interest method. The costs for universal life-type insurance and certain installment annuities are amortized as a percentage of the estimated gross profits expected to be realized on the policies. For traditional life, disability income and long-term care insurance policies, the costs are amortized over an appropriate period in proportion to premium revenue. Amortization of deferred policy acquisition costs requires the use of assumptions including interest margins, mortality margins, persistency rates, maintenance expense levels and, for variable products, separate account performance. For universal life-type insurance and deferred annuities, actual experience is reflected in the Company's amortization models monthly. As actual experience differs from the current assumptions, management considers the need to change key assumptions underlying the amortization models prospectively. The impact of changing prospective assumptions is reflected in the period that such changes are made and is generally referred to as an unlocking adjustment. During 2000 and 1999, unlocking adjustments resulted in a net decrease in amortization of $12,300 and $56,800, respectively. Net unlocking adjustments in 1998 were not significant. IDS Life Insurance Company ------------------------------------------------------------------------------- Liabilities for future policy benefits Liabilities for universal-life type insurance and fixed and variable deferred annuities are accumulation values. Liabilities for equity indexed deferred annuities are determined as the present value of guaranteed benefits and the intrinsic value of index-based benefits. Liabilities for fixed annuities in a benefit status are based on established industry mortality tables and interest rates ranging from 5% to 9.5%, depending on year of issue. Liabilities for future benefits on traditional life insurance are based on the net level premium method, using anticipated mortality, policy persistency and interest earning rates. Anticipated mortality rates are based on established industry mortality tables. Anticipated policy persistency rates vary by policy form, issue age and policy duration with persistency on cash value plans generally anticipated to be better than persistency on term insurance plans. Anticipated interest rates range from 4% to 10%, depending on policy form, issue year and policy duration. Liabilities for future disability income and long-term care policy benefits include both policy reserves and claim reserves. Policy reserves are based on the net level premium method, using anticipated morbidity, mortality, policy persistency and interest earning rates. Anticipated morbidity and mortality rates are based on established industry morbidity and mortality tables. Anticipated policy persistency rates vary by policy form, issue age, policy duration and, for disability income policies, occupation class. Anticipated interest rates for disability income and long-term care policy reserves are 3% to 9.5% at policy issue and grade to ultimate rates of 5% to 7% over 5 to 10 years. Claim reserves are calculated based on claim continuance tables and anticipated interest earnings. Anticipated claim continuance rates are based on established industry tables. Anticipated interest rates for claim reserves for both disability income and long-term care range from 5% to 8%. Reinsurance The maximum amount of life insurance risk retained by the Company is $750 on any policy insuring a single life and $1,500 on any policy insuring a joint-life combination. The Company retains only 20% of the mortality risk on new variable universal life insurance policies. Risk not retained is reinsured with other life insurance companies, primarily on a yearly renewable term basis. Long-term care policies are primarily reinsured on a coinsurance basis. The Company retains all accidental death benefit, disability income and waiver of premium risk. 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, 2000 and 1999 are $41,059 and $852 receivable from, respectively, AEFC for federal income taxes. Separate account business The separate account assets and liabilities represent funds held for the exclusive benefit of the variable annuity and variable life insurance contract owners. The Company receives investment management fees from the proprietary mutual funds used as investment options for variable annuities and variable life insurance. The Company receives mortality and expense risk fees from the separate accounts. The Company makes contractual mortality assurances to the variable annuity contract owners that the net assets of the separate accounts will not be affected by future variations in the actual life expectancy experience of the annuitants and beneficiaries from the mortality assumptions implicit in the annuity contracts. The Company makes periodic fund transfers to, or withdrawals from, the separate account assets for such actuarial adjustments for variable annuities that are in the benefit payment period. The Company also guarantees that the rates at which administrative fees are deducted from contract funds will not exceed contractual maximums. For variable life insurance, the Company guarantees that the rates at which insurance charges and administrative fees are deducted from contract funds will not exceed contractual maximums. The Company also guarantees that the death benefit will continue payable at the initial level regardless of investment performance so long as minimum premium payments are made. Accounting changes In June 1998, the Financial Accounting Standards Board (FASB) issued, and subsequently amended, Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities," which the company adopted on January 1, 2001. This Statement establishes accounting and reporting standards for derivative instruments, including some embedded in other contracts, and hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities on the balance sheet and measure those instruments at fair value. Changes in the fair value of a derivative will be recorded in income or directly to equity, depending on the instrument's designated use. IDS Life Insurance Company ------------------------------------------------------------------------------- A one-time opportunity to reclassify held-to-maturity investments to available-for-sale is allowed without tainting the remaining securities in the held-to-maturity portfolio. The Company has elected to take this opportunity to reclass its held-to-maturity investments to available-for-sales. As of January 1, 2001, the cumulative impact of applying the Statement's accounting requirements will not have a significant impact on the Company's financial position or results of operations. In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," superceding SFAS No. 125. The Statement is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001. The Statement is effective for recognition and reclassification of collateral and for disclosures relating to securitization transactions and collateral for fiscal years ending after December 15, 2000. The company does not expect SFAS No. 140 to have a material impact on the company's financial position or results of operations. In July 2000, the FASB's Emerging Issues Task Force (EITF) issued a consensus on Issue 99-20, "Recognition of Interest Income and Impairment on Purchased Beneficial Interests in Securitized Financial Assets." The consensus must be adopted for fiscal quarters beginning after March 15, 2001, with earlier adoption permitted. Issue 99-20 prescribes new procedures for recording interest income and measuring impairment on retained and purchased beneficial interests. The rule primarily affects certain AEFA high-yield investments contained in off-balance sheet trusts whose cash flows have been negatively effected by credit experience. As of January 1, 2001, the rule would require AEFA to adjust the carrying amount of these investments downward by approximately $30 milllion through recognition of an impairment charge. Reclassifications Certain 1999 and 1998 amounts have been reclassified to conform to the 2000 presentations. 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 values of investments in fixed maturities and equity securities at December 31, 2000 are as follows:
Gross Gross Amortized unrealized unrealized Fair Held to maturity cost gains losses value U.S. Government agency obligations $ 38,302 $ 3,455 $ 80 $ 41,677 State and municipal obligations 7,678 16 -- 7,694 Corporate bonds and obligations 5,248,517 111,466 114,330 5,245,653 Mortgage-backed securities 1,169,116 9,130 1,472 1,176,774 --------- ----- ----- --------- $6,463,613 $124,067 $115,882 $6,471,798 ========== ======== ======== ========== Gross Gross Amortized unrealized unrealized Fair Available for sale cost gains losses value U.S. Government agency obligations $ 96,408 $ 6,134 $ 268 $ 102,274 State and municipal obligations 12,848 247 -- 13,095 Corporate bonds and obligations 7,586,423 123,691 693,303 7,016,811 Mortgage-backed securities 5,234,191 57,697 24,078 5,267,810 --------- ------ ------ --------- Total fixed maturities 12,929,870 187,769 717,649 12,399,990 Equity securities 11,829 -- 1,496 10,333 ------ ------- ----- ------ $12,941,699 $187,769 $719,145 $12,410,323 =========== ======== ======== ===========
IDS Life Insurance Company ------------------------------------------------------------------------------- The amortized cost, gross unrealized gains and losses and fair values of investments in fixed maturities and equity securities at December 31, 1999 are as follows:
Gross Gross Amortized unrealized unrealized Fair Held to maturity cost gains losses value U.S. Government agency obligations $ 37,613 $ 236 $ 2,158 $ 35,691 State and municipal obligations 9,681 150 -- 9,831 Corporate bonds and obligations 5,713,475 91,571 113,350 5,691,696 Mortgage-backed securities 1,395,523 4,953 31,951 1,368,525 --------- ----- ------ --------- $7,156,292 $96,910 $147,459 $7,105,743 ========== ======= ======== ========== Gross Gross Amortized unrealized unrealized Fair Available for sale cost gains losses value U.S. Government agency obligations $ 46,325 $ 612 $ 2,231 $ 44,706 State and municipal obligations 13,226 519 191 13,554 Corporate bonds and obligations 7,960,352 60,120 560,450 7,460,022 Mortgage-backed securities 5,683,234 9,692 161,659 5,531,267 --------- ----- ------- --------- Total fixed maturities 13,703,137 70,943 724,531 13,049,549 Equity securities 3,000 16 -- 3,016 ----- -- ----- ----- $13,706,137 $70,959 $724,531 $13,052,565 =========== ======= ======== ===========
The amortized cost and fair value of investments in fixed maturities at December 31, 2000 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 from one to five years $2,930,737 $2,935,736 Due from five to ten years 1,807,979 1,800,940 Due in more than ten years 555,781 558,348 Mortgage-backed securities 1,169,116 1,176,774 --------- --------- $6,463,613 $6,471,798 ========== ========== Amortized Fair Available for sale cost value Due from one to five years $ 420,233 $ 464,106 Due from five to ten years 4,675,249 4,266,932 Due in more than ten years 2,600,197 2,401,142 Mortgage-backed securities 5,234,191 5,267,810 --------- --------- $12,929,870 $12,399,990 =========== =========== During the years ended December 31, 2000, 1999 and 1998, fixed maturities classified as held to maturity were sold with amortized cost of $53,169, $68,470 and $230,036, respectively. Net gains and losses on these sales were not significant. The sale of these fixed maturities was due to significant deterioration in the issuers' credit worthiness. Fixed maturities available for sale were sold during 2000 with proceeds of $1,237,116 and gross realized gains and losses of $25,101 and $10,267, respectively. Fixed maturities available for sale were sold during 1999 with proceeds of $1,691,389 and gross realized gains and losses of $36,568 and $14,255, respectively. Fixed maturities available for sale were sold during 1998 with proceeds of $278,955 and gross realized gains and losses of $15,658 and $22,102, respectively. At December 31, 2000, bonds carried at $14,472 were on deposit with various states as required by law. IDS Life Insurance Company ------------------------------------------------------------------------------- IDS Life Insurance Company At December 31, 2000, investments in fixed maturities comprised 79 percent of the Company's total invested assets. These securities are rated by Moody's and Standard & Poor's (S&P), except for securities carried at approximately $3.5 billion which are rated by AEFC's 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 2000 1999 Aaa/AAA $ 6,559,188 $ 7,144,280 Aaa/AA 32,001 1,920 Aa/AA 220,446 301,728 Aa/A 327,147 314,168 A/A 2,494,621 2,598,300 A/BBB 747,636 1,014,566 Baa/BBB 5,828,847 6,319,549 Baa/BB 287,583 348,849 Below investment grade 2,896,014 2,816,069 --------- --------- $19,393,483 $20,859,429 =========== =========== At December 31, 2000, 88 percent of the securities rated Aaa/AAA are GNMA, FNMA and FHLMC mortgage-backed securities. No holdings of any other issuer are greater than one percent of the Company's total investments in fixed maturities. At December 31, 2000, approximately 16 percent of the Company's invested assets were mortgage loans on real estate. Summaries of mortgage loans by region of the United States and by type of real estate are as follows: December 31, 2000 December 31, 1999 On balance Commitments On balance Commitments Region sheet to purchase sheet to purchase East North Central $ 691,694 $18,868 $ 715,998 $ 10,380 West North Central 564,576 7,621 555,635 42,961 South Atlantic 884,723 7,667 867,838 23,317 Middle Atlantic 378,702 13,813 428,051 1,806 New England 279,147 4,604 259,243 4,415 Pacific 318,727 921 238,299 3,466 West South Central 173,158 28,548 144,607 4,516 East South Central 49,176 2,763 43,841 -- Mountain 409,677 10,209 381,148 9,380 ------- ------ ------- ----- 3,749,580 95,014 3,634,660 100,241 Less allowance for losses 11,489 -- 28,283 -- ------ ----- ------ ----- $3,738,091 $95,014 $3,606,377 $100,241 ========== ======= ========== ======== December 31, 2000 December 31, 1999 On balance Commitments On balance Commitments Property type sheet to purchase sheet to purchase Department/retail stores $1,174,763 $11,130 $1,158,712 $ 33,829 Apartments 780,228 -- 887,538 11,343 Office buildings 1,085,948 59,941 931,234 26,062 Industrial buildings 323,766 23,943 309,845 5,525 Hotels/motels 100,680 -- 103,625 -- Medical buildings 128,101 -- 114,045 -- Nursing/retirement homes 49,822 -- 45,935 -- Mixed use 87,537 -- 66,893 -- Other 18,735 -- 16,833 23,482 ------ ----- ------ ------ 3,749,580 95,014 3,634,660 100,241 Less allowance for losses 11,489 -- 28,283 -- ------ ----- ------ ----- $3,738,091 $95,014 $3,606,377 $100,241 ========== ======= ========== ======== Mortgage loan fundings are restricted by state insurance regulatory authorities to 80 percent or less of the market value of the real estate at the time of origination of the loan. The Company holds the mortgage document, which gives it the right to take possession of the property if the borrower fails to perform according to the terms of the agreement. Commitments to purchase mortgages are made in the ordinary course of business. The fair value of the mortgage commitments is $nil. At December 31, 2000 and 1999, the Company's recorded investment in impaired loans was $24,999 and $21,375, respectively, with allowances of $4,350 and $5,750, respectively. During 2000 and 1999, the average recorded investment in impaired loans was $27,063 and $23,815, respectively. IDS Life Insurance Company ------------------------------------------------------------------------------- The Company recognized $1,033, $1,190 and $1,809 of interest income related to impaired loans for the years ended December 31, 2000, 1999 and 1998 respectively. The following table presents changes in the allowance for losses related to all loans: 2000 1999 1998 Balance, January 1 $ 28,283 $39,795 $38,645 Provision (reduction) for investment losses (14,894) (9,512) 7,582 Loan payoffs (1,200) (500) (800) Foreclosures and writeoffs (700) (1,500) (5,632) ---- ------ ------ Balance, December 31 $11,489 $28,283 $39,795 ======= ======= ======= At December 31, 2000, the Company had no commitments to purchase investments other than mortgage loans. Net investment income for the years ended December 31 is summarized as follows: 2000 1999 1998 Interest on fixed maturities $1,473,560 $1,598,059 $1,676,984 Interest on mortgage loans 286,611 285,921 301,253 Other investment income 1,750 70,892 43,518 Interest on cash equivalents 8,084 5,871 5,486 ----- ----- ----- 1,770,005 1,960,743 2,027,241 Less investment expenses 39,400 41,170 40,756 ------ ------ ------ $1,730,605 $1,919,573 $1,986,485 ========== ========== ========== Net realized (loss) gain on investments for the years ended December 31 is summarized as follows: 2000 1999 1998 Fixed maturities $(34,857) $ 8,802 $ 9,946 Mortgage loans 15,845 10,211 (5,933) Other investments 2,037 7,596 2,889 ----- ----- ----- $(16,975) $26,608 $ 6,902 ======== ======= ======= Changes in net unrealized appreciation (depreciation) of investments for the years ended December 31 are summarized as follows: 2000 1999 1998 Fixed maturities available for sale $99,706 $(921,778) $(93,474) Equity securities (1,428) (142) (203) ------ ---- ---- 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: 2000 1999 1998 Federal income taxes: Current $176,397 $178,444 $244,946 Deferred 37,704 79,796 (16,602) ------ ------ ------- 214,101 258,240 228,344 State income taxes-current 7,526 9,624 7,337 ----- ----- ----- Income tax expense $221,627 $267,864 $235,681 ======== ======== ======== Increases (decreases) to the income tax provision applicable to pretax income based on the statutory rate are attributable to:
2000 1999 1998 Provision Rate Provision Rate Provision Rate Federal income taxes based on the statutory rate $282,542 35.0% $316,511 35.0% $271,527 35.0% Tax-excluded interest and dividend income (3,788) (0.5) (9,626) (1.1) (12,289) (1.6) State taxes, net of federal benefit 4,892 0.6 6,256 0.7 4,769 0.6 Affordable housing credits (54,569) (6.8) (31,000) (3.4) (19,688) (2.5) Other, net (7,450) (0.8) (14,277) (1.6) (8,638) (1.1) ------ ---- ------- ---- ------ ---- Total income taxes $221,627 27.5% $267,864 29.6% $235,681 30.4% ======== ==== ======== ==== ======== ====
A portion of life insurance company income earned prior to 1984 was not subject to current taxation but was accumulated, for tax purposes, in a policyholders' surplus account. At December 31, 2000, the Company had a policyholders' surplus account balance of $20,114. The policyholders' surplus account is only taxable if dividends to the stockholder exceed the stockholder's surplus account or if the Company is liquidated. Deferred income taxes of $7,040 have not been established because no distributions of such amounts are contemplated. IDS Life Insurance Company ------------------------------------------------------------------------------- IDS Life Insurance Company Significant components of the Company's deferred tax assets and liabilities as of December 31 are as follows: 2000 1999 Deferred tax assets: Policy reserves $730,239 $733,647 Unrealized loss on available for sale investments 179,702 221,431 Investments, other 34,600 1,873 Life insurance guaranty fund assessment reserve 1,365 4,789 ----- ----- Total deferred tax assets 945,906 961,740 ------- ------- Deferred tax liabilities: Deferred policy acquisition costs 796,292 740,837 Other 13,026 4,883 ------ ----- Total deferred tax liabilities 809,318 745,720 ------- ------- Net deferred tax assets $136,588 $216,020 ======== ======== The Company is required to establish a valuation allowance for any portion of the deferred tax assets that management believes will not be realized. In the opinion of management, it is more likely than not that the Company will realize the benefit of the deferred tax assets and, therefore, no such valuation allowance has been established. 4. STOCKHOLDER'S EQUITY Retained earnings available for distribution as dividends to the parent are limited to the Company's surplus as determined in accordance with accounting practices prescribed by state insurance regulatory authorities. Statutory unassigned surplus aggregated $1,527,543 as of December 31, 2000 and $1,693,356 as of December 31, 1999 (see Note 3 with respect to the income tax effect of certain distributions). In addition, any dividend distributions in 2001 in excess of approximately $344,973 would require approval of the Department of Commerce of the State of Minnesota. Statutory net income for the years ended December 31 and capital and surplus as of December 31 are summarized as follows: 2000 1999 1998 Statutory net income $ 344,973 $ 478,173 $ 429,903 Statutory capital and surplus 1,778,306 1,978,406 1,883,405 --------- --------- --------- The National Association of Insurance Commissioners (NAIC) revised the Accounting Practices and Procedures Manual in a process referred to as Codification. The revised manual will be effective January 1, 2001. The domiciliary states of the Company and its insurance subsidiaries have adopted the provisions of the revised manual. The revised manual has changed, to some extent, prescribed statutory accounting practices and will result in changes to the accounting practices that the Company and its insurance subsidiaries use to prepare their statutory-basis financial statements. Management believes the impact of these changes to the Company's and its subsidiaries' stautory-basis capital and surplus as of January 1, 2001 will not be significant. 5. RELATED PARTY TRANSACTIONS The Company loans funds to AEFC under a collateral loan agreement. The balance of the loan was $nil at December 31, 2000 and 1999. This loan can be increased to a maximum of $75,000 and pays interest at a rate equal to the preceding month's effective new money rate for the Company's permanent investments. Interest income on related party loans totaled $nil in 2000, 1999 and 1998. The Company participates in the American Express Company Retirement Plan which covers all permanent employees age 21 and over who have met certain employment requirements. Employer contributions to the plan are based on participants' age, years of service and total compensation for the year. Funding of retirement costs for this plan complies with the applicable minimum funding requirements specified by ERISA. The Company's share of the total net periodic pension cost was $250, $223 and $211 in 2000, 1999 and 1998, respectively. The Company also participates in defined contribution pension plans of American Express Company which cover all employees who have met certain employment requirements. Company contributions to the plans are a percent of either each employee's eligible compensation or basic contributions. Costs of these plans charged to operations in 2000, 1999 and 1998 were $1,707, $1,906 and $1,503, respectively. The Company participates in defined benefit health care plans of AEFC that provide health care and life insurance benefits to retired employees and retired financial advisors. The plans include participant contributions and service related eligibility requirements. Upon retirement, such employees are considered to have been employees of AEFC. AEFC expenses these benefits and allocates the expenses to its subsidiaries. The Company's share of postretirement benefits in 2000, 1999 and 1998 was $1,136, $1,147 and $1,352, respectively. Charges by AEFC for use of joint facilities, technology support, marketing services and other services aggregated $582,836, $485,177 and $411,337 for 2000, 1999 and 1998, respectively. Certain of these costs are included in deferred policy acquisition costs. IDS Life Insurance Company ------------------------------------------------------------------------------- 6. COMMITMENTS AND CONTINGENCIES At December 31, 2000, 1999 and 1998, traditional life insurance and universal life-type insurance in force aggregated $98,060,472, $89,271,957 and $81,074,928 respectively, of which $17,429,851, $8,281,576 and $4,912,313 were reinsured at the respective year ends. The Company also reinsures a portion of the risks assumed under disability income and long-term care policies. Under all reinsurance agreements, premiums ceded to reinsurers amounted to $89,506, $76,970 and $66,378 and reinsurance recovered from reinsurers amounted to $32,500, $27,816, and $20,982 for the years ended December 31, 2000, 1999 and 1998, respectively. Reinsurance contracts do not relieve the Company from its primary obligation to policyholders. In January 2000, AEFC reached an agreement in principle to settle three class-action lawsuits related to the sales of insurance and annuity products, anticipated to provide for approximately $215 million of benefits. The Company had been named as a co-defendant in all three of these lawsuits. In September 2000, the court gave preliminary approval to the proposed settlement and AEFC has mailed notices to all of the over two million class members. A fairness hearing is scheduled for March 2001, with final approval anticipated in the second quarter, pending any legal appeals. The anticipated costs of settlement remain unchanged from 1999. The portion of the settlement allocated to the Company did not have a material impact on the Company's financial position or results of operations. The agreement also provides for release by class members of all insurance and annuity market conduct claims dating back to 1985 and is subject to a number of contingencies, including final court approval. The Company is named as a defendant in various other lawsuits. The outcome of any litigation cannot be predicted with certainty. In the opinion of management, however, the ultimate resolution of these lawsuits, taken in aggregate should not have a material adverse effect on the Company's consolidated financial position. The IRS routinely examines the Company's federal income tax returns and is currently conducting an audit for the 1993 through 1996 tax years. Management does not believe there will be a material adverse effect on the Company's consolidated financial position as a result of these audits 7. LINES OF CREDIT The Company has available lines of credit with its parent aggregating $200,000 ($100,000 committed and $100,000 uncommitted). The interest rate for any borrowings is established by reference to various indices plus 20 to 45 basis points, depending on the term. Borrowings outstanding under this agreement were $50,000 uncommitted at December 31, 2000 and 1999, respectively. 8. DERIVATIVE FINANCIAL INSTRUMENTS The Company enters into transactions involving derivative financial instruments to manage its exposure to interest rate risk and equity market risk, including hedging specific transactions. The Company does not hold derivative instruments for trading purposes. The Company manages risks associated with these instruments as described below. Market risk is the possibility that the value of the derivative financial instruments will change due to fluctuations in a factor from which the instrument derives its value, primarily an interest rate or equity market index. The Company is not impacted by market risk related to derivatives held for non-trading purposes beyond that inherent in cash market transactions. Derivatives held for purposes other than trading are largely used to manage risk and, therefore, the cash flow and income effects of the derivatives are inverse to the effects of the underlying transactions. Credit risk is the possibility that the counterparty will not fulfill the terms of the contract. The Company monitors credit risk related to derivative financial instruments through established approval procedures, including setting concentration limits by counterparty, and requiring collateral, where appropriate. A vast majority of the Company's counterparties are rated A or better by Moody's and Standard & Poor's. Credit risk related to interest rate caps and floors and index options is measured by the replacement cost of the contracts. The replacement cost represents the fair value of the instruments. The notional or contract amount of a derivative financial instrument is generally used to calculate the cash flows that are received or paid over the life of the agreement. Notional amounts are not recorded on the balance sheet. Notional amounts far exceed the related credit risk. IDS Life Insurance Company ------------------------------------------------------------------------------- The Company's holdings of derivative financial instruments are as follows: Notional or contract Carrying Fair Total credit December 31, 2000 amount amount value exposure Assets: Interest rate caps $1,500,000 $ 6,127 $ 1,174 $ 1,174 Interest rate floors 1,000,000 121 531 531 Options purchased 265,848 44,139 51,701 51,701 Financial futures purchased 5 -- 7,209 -- Liabilities: Options written 104,324 (3,098) (4,138) -- Financial futures sold 7 -- 9,011 -- Off balance sheet: Interest rate swaps 1,000,000 -- (10,942) -- --------- ---- ------- ---- $47,289 $ 54,546 $53,406 ======= ======== ======= December 31, 1999 Assets: Interest rate caps $2,500,000 $ 9,685 $ 12,773 $12,773 Interest rate floors 1,000,000 602 319 319 Options purchased 180,897 49,789 61,745 61,745 Liabilities: Options purchased/written 43,262 (1,677) (2,402) -- Off balance sheet: Interest rate swaps 1,267,000 -- (17,582) -- --------- ---- ------- ---- $58,399 $ 54,853 $74,837 ======= ======== ======= The fair values of derivative financial instruments are based on market values, dealer quotes or pricing models. The interest rate caps, floors and swaps expire on various dates from 2001 to 2003. The purchased and written options expire on various dates from 2001 to 2006. Interest rate caps, swaps and floors are used principally to manage the Company's interest rate risk. These instruments are used to protect the margin between interest rates earned on investments and the interest rates credited to related annuity contract holders. The Company also uses interest rate swaps to manage interest rate risk related to the level of fee income earned on the management of fixed income securities in separate accounts and the underlying mutual funds. The amount of fee income received is based upon the daily market value of the separate account and mutual fund assets. As a result, changing interest rate conditions could impact the Company's fee income significantly. The Company entered into interest rate swaps to hedge anticipated fee income for 2000 related to separate accounts and mutual funds which invest in fixed income securities. Interest was reported in management and other fees. The Company offers an annuity product that pays interest based upon the relative change in a major stock market index between the beginning and end of the product's term. As a means of hedging its obligation under the provisions of this product, the Company purchases financial futures and purchases and writes options on the major stock market index. The Company also writes financial futures and purchases and writes options to manage the equity market risk related to seed money the Company has invested in certain separate accounts and the underlying mutual funds. Index options are used to manage the equity market risk related to the fee income that the Company receives from its separate accounts and the underlying mutual funds. The amount of the fee income received is based upon the daily market value of the separate account and mutual fund assets. As a result, the Company's fee income could be impacted significantly by fluctuations in the equity market. The Company entered into index option collars (combination of puts and calls) to hedge anticipated fee income for 2000 and 1999 related to separate accounts and mutual funds which invest in equity securities. Testing demonstrated the impact of these instruments on the income statement closely correlates with the amount of fee income the Company realizes. At December 31, 2000, deferred gains on purchased put and written call index options were $1,005 and $449, respectively. At December 31, 1999, there were no deferred gains or losses on purchased put or written call index options. IDS Life Insurance Company ------------------------------------------------------------------------------- 9. 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 and all non-financial instruments, such as deferred acquisition costs are excluded. Off-balance sheet intangible assets, such as the value of the field force, 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.
2000 1999 Carrying Fair Carrying Fair Financial Assets value value value value Investments: Fixed maturities (Note 2): Held to maturity $ 6,463,613 $ 6,471,798 $ 7,156,292 $ 7,105,743 Available for sale 12,399,990 12,399,990 13,049,549 13,049,549 Mortgage loans on real estate (Note 2) 3,738,091 3,821,825 3,606,377 3,541,958 Other: Equity securities (Note 2) 10,333 10,333 3,016 3,016 Derivative financial Instruments (Note 8) 50,387 60,615 60,076 74,837 Other 1,130 1,130 2,258 2,258 Cash and cash equivalents (Note 1) 316,974 316,974 32,333 32,333 Separate account assets (Note 1) 32,349,347 32,349,347 35,894,732 35,894,732 Financial Liabilities Future policy benefits for fixed annuities $18,020,824 $17,479,187 $19,189,170 $18,591,859 Derivative financial instruments (Note 8) 3,098 6,069 1,677 19,984 Separate account liabilities 28,791,949 27,822,667 31,869,184 31,016,081 ---------- ---------- ---------- ----------
At December 31, 2000 and 1999, the carrying amount and fair value of future policy benefits for fixed annuities exclude life insurance-related contracts carried at $1,300,018 and $1,270,094, respectively, and policy loans of $96,603 and $92,895, respectively. The fair value of these benefits is based on the status of the annuities at December 31, 2000 and 1999. The fair value of deferred annuities is estimated as the carrying amount less any applicable surrender charges and related loans. 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 2000 and 1999. At December 31, 2000 and 1999, the fair value of liabilities related to separate accounts is estimated as the carrying amount less any applicable surrender charges and less variable insurance contracts carried at $3,557,398 and $4,025,548, respectively. S-6407-20 A (8/01) PART C. Item 24. Financial Statements and Exhibits (a) Financial statements included in Part B of this Registration Statement: The audited financial statements of the IDS Life Variable Account 10 for Retirement Advisor Variable Annuity(R) including: Statements of Net Assets for year ended Dec. 31, 2000. Statements of Operations for year ended Dec. 31, 2000. Statements of Changes in Net Assets for year ended Dec. 31, 2000. Notes to Financial Statements. Report of Independent Auditors dated March 23, 2001. The audited financial statements of the IDS Life Insurance Company for Retirement Advisor Variable Annuity(R) including: Consolidated Balance Sheets as of Dec. 31, 2000 and 1999. Consolidated Statements of Income for years ended Dec. 31, 2000, 1999 and 1998. Consolidated Statements of Stockholder's Equity for years ended Dec. 31, 2000, 1999 and 1998. Consolidated Statements of Cash Flows for years ended Dec. 31, 2000, 1999 and 1998. Notes to Consolidated Financial Statements. Report of Independent Auditors dated Feb. 8, 2001. The audited financial statements of the IDS Life Variable Account 10 for Retirement Advisor Variable Annuity(R) - Band 3 including: Statements of Net Assets for year ended Dec. 31, 2000. Statements of Operations for year ended Dec. 31, 2000. Statements of Changes in Net Assets for year ended Dec. 31, 2000. Notes to Financial Statements. Report of Independent Auditors dated March 23, 2001. The audited financial statements of the IDS Life Insurance Company for Retirement Advisor Variable Annuity(R) - Band 3 including: Consolidated Balance Sheets as of Dec. 31, 2000 and 1999. Consolidated Statements of Income for years ended Dec. 31, 2000, 1999 and 1998. Consolidated Statements of Stockholder's Equity for years ended Dec. 31, 2000, 1999 and 1998. Consolidated Statements of Cash Flows for years ended Dec. 31, 2000, 1999 and 1998. Notes to Consolidated Financial Statements. Report of Independent Auditors dated Feb. 8, 2001. (b) Exhibits: 1.1 Resolution of the Board of Directors of IDS Life Insurance Company establishing the IDS Life Variable Account 10 dated August 23, 1995, filed electronically as Exhibit 1 to Registrant's Initial Registration Statement No. 33-62407 is incorporated herein by reference. 1.2 Resolution of the Board of Directors of IDS Life Insurance Company establishing 105 additional subaccounts within the separate account, filed electronically as Exhibit 1.2 to Pre-Effective Amendment No. 1 to Registration Statement No. 333-79311 filed on or about Aug. 10, 1999, is incorporated herein by reference. 1.3 Resolution of the Board of Directors of IDS life Insurance Company establishing 25 additional subaccounts within the separate account, filed electronically as Exhibit 1.3 to Registrant's Post-Effective Amendment No. 2 to Registration Statement No. 333-79311, is incorporated herein by reference. 1.4 Resolution of the Board of Directors of IDS Life Insurance Company establishing 12 additional subaccounts within the separate account, filed electronically as Exhibit 1.3 to Registrant's Post-Effective Amendment No. 3 to Registration Statement No. 333-79311, is incorporated herein by reference. 1.5 Resolution of the Board of Directors of IDS Life Insurance Company establishing 69 additional subaccounts within the separate account, dated Aug. 2, 2001, is filed electronically herewith. 2. Not applicable. 3. Not applicable. 4.1 Form of Deferred Annuity Contract for non-qualified contracts (form 31043) filed electronically as Exhibit 4.1 to Registrant's Initial Registration Statement No. 333-79311, filed on or about May 26, 1999, is incorporated herein by reference. 4.2 Form of Deferred Annuity Contract for tax qualified contracts (form 31044) filed electronically as Exhibit 4.2 to Registrant's Initial Registration Statement No. 333-79311, filed on or about May 26, 1999, is incorporated herein by reference. 4.3 Form of Deferred Annuity Contract for IRA contracts (form 31045-IRA) filed electronically as Exhibit 4.3 to Registrant's Initial Registration Statement No. 333-79311, filed on or about May 26, 1999, is incorporated herein by reference. 4.4 Form of Deferred Annuity Contract for non-qualified contracts (form 31046) filed electronically as Exhibit 4.4 to Registrant's Initial Registration Statement No. 333-79311, filed on or about May 26, 1999, is incorporated herein by reference. 4.5 Form of Deferred Annuity Contract for tax qualified contracts (form 31047) filed electronically as Exhibit 4.5 to Registrant's Initial Registration Statement No. 333-79311, filed on or about May 26, 1999, is incorporated herein by reference. 4.6 Form of Deferred Annuity Contract for IRA contracts (form 31048-IRA) filed electronically as Exhibit 4.6 to Registrant's Initial Registration Statement No. 333-79311, filed on or about May 26, 1999, is incorporated herein by reference. 4.7 Form of TSA Endorsement (form 31049), filed electronically as Exhibit 4.7 to Pre-Effective Amendment No. 1 to Registration Statement No. 333-79311 filed on or about Aug. 10, 1999 is incorporated herein by reference. 4.8 Form of Maximum Anniversary Value Death Benefit Rider, filed electronically as Exhibit 4.8 to Post-Effective Amendment No. 4 to Registration Statement No. 333-79311, is incorporated herein by reference. 4.9 Form of Enhanced Earnings Death Benefit Rider, filed electronically as Exhibit 4.9 to Post-Effective Amendment No. 4 to Registration Statement No. 333-79311, is incorporated herein by reference. 4.10 Form of Enhanced Earnings Plus Death Benefit Rider, filed electronically as Exhibit 4.10 to Post-Effective Amendment No. 4 to Registration Statement No. 333-79311, is incorporated herein by reference. 5. Form of Variable Annuity Application (form 31063), filed electronically as Exhibit 5 to Pre-Effective Amendment No. 1 to Registration Statement No. 333-79311 filed on or about Aug. 10, 1999 is incorporated herein by reference. 6.1 Certificate of Incorporation of IDS Life dated July 24, 1957, filed electronically as Exhibit 6.1 to Registrant's Initial Registration Statement No. 33-62407 is incorporated herein by reference. 6.2 Amended By-Laws of IDS Life filed electronically as Exhibit 6.2 to Registrant's Initial Registration Statement No. 33-62407 is incorporated herein by reference. 7. Not applicable. 8.1(a) Copy of Participation Agreement between IDS Life Insurance Company and AIM Variable Insurance Funds, Inc. and AIM Distributors, Inc., dated March 4, 1996, filed electronically as Exhibit 8.4 to Post-Effective Amendment No. 2 to Registration Statement No. 33-62407, is incorporated herein by reference. 8.1(b) Copy of Participation Agreement By and Among AIM Variable Insurance Funds, Inc., AIM Distributors, Inc., and IDS Life Insurance Company, on Behalf of Itself and Its Separate Accounts, dated Oct. 7, 1996, as Exhibit 8.1(b) to Post-Effective Amendment No. 3, to Registration Statement No. 333-79311, is incorporated by reference. 8.1(c) Form of Amendment No. 1 to Participation Agreement between IDS Life Insurance Company and AIM Variable Insurance Funds, Inc. and AIM Distributors, Inc., dated Oct. 7, 1996, filed electronically as Exhibit 8.1(b) to Pre-Effective Amendment No. 1 to Registration Statement No. 333-79311 filed on or about Aug. 10, 1999 is incorporated herein by reference. 8.2(a) Copy of Participation Agreement between IDS Life Insurance Company and TCI Portfolios, Inc., dated April 24, 1996, filed electronically as Exhibit 8.5 to Post-Effective Amendment No. 2 to Registration Statement No. 33-62407, is incorporated herein by reference. 8.2(b) Form of Amendment No. 1 to Participation Agreement between IDS Life Insurance Company and American Century Investment Management, Inc. and American Century Variable Portfolios, Inc., dated April 15, 1999, filed electronically as Exhibit 8.2(b) to Pre-Effective Amendment No. 1 to Registration Statement No. 333-79311 filed on or about Aug. 10, 1999 is incorporated herein by reference. 8.3 Copy of Participation Agreement By and Between Goldman Sachs Variable Insurance Trust, Goldman, Sachs & Co. and IDS Life Insurance Company, dated Sept. 1, 1999, filed electronically as Exhibit 8.3 to Post-Effective Amendment No. 3 to Registration Statement No. 333-79311, is incorporated herein by reference. 8.4(a) Copy of Participation Agreement between IDS Life Insurance Company and Putnam Capital Manager Trust and Putnam Mutual Funds Corp., dated March 1, 1996, filed electronically as Exhibit 8.1 to Post-Effective Amendment No. 2 to Registration Statement No. 33-62407, is incorporated herein by reference. 8.4(b) Form of Amendment No. 1 to Participation Agreement between IDS Life Insurance Company and Putnam Capital Manager Trust and Putnam Mutual Funds Corp., dated April 30, 1999, filed electronically as Exhibit 8.4(b) to Pre-Effective Amendment No. 1 to Registration Statement No. 333-79311 filed on or about Aug. 10, 1999 is incorporated herein by reference. 8.5 Copy of Participation Agreement By and Among Royce Capital Fund and Royce & Associates, Inc. and IDS Life Insurance Company, dated September 1, 1999, filed electronically as Exhibit 8.5 to Post-Effective Amendment No. 3 to Registration Statement No. 333-79311, is incorporated herein by reference. 8.6(a) Copy of Participation Agreement between IDS Life Insurance Company and Warburg Pincus Trust and Warburg Pincus Counsellors, Inc. and Counsellors Securities Inc., dated March 1, 1996, filed electronically as Exhibit 8.3 to Post-Effective Amendment No. 2 to Registration Statement No. 33-62407, is incorporated herein by reference. 8.6(b) Copy of Amendment 1 to Participation Agreement By and Among IDS Life Insurance Company and Warburg Pincus Trust and Credit Suisse Asset Management, LLC and Credit Suisse Asset Management Securities, Inc., dated April 30, 1999, filed electronically as Exhibit 8.6(b) to Post-Effective Amendment No. 3 to Registration Statement No. 333-79311, is incorporated herein by reference. 8.7 Copy of Participation Agreement By and Among Calvert Variable Series, Inc. and Calvert Asset Management Co. and Calvert Distributors Inc. and IDS Life Insurance Company, dated April 14, 2000, filed electronically as Exhibit 8.7 to Post-Effective Amendment No. 3 to Registration Statement No. 333-79311, is incorporated herein by reference. 8.8(a) Copy of Participation Agreement among Variable Insurance Products Fund, Fidelity Distributors Corporation and IDS Life Insurance Company, dated Sept. 1, 1999, filed electronically as Exhibit 8.8(a) to Post-Effective Amendment No. 3 to Registration Statement No. 333-79311, is incorporated herein by reference. 8.8(b) Copy of Participation Agreement among Variable Insurance Products Fund III, Fidelity Distributors Corporation and IDS Life Insurance Company, dated Sept. 1, 1999, filed electronically as Exhibit 8.8(b) to Post-Effective Amendment No. 3 to Registration Statement No. 333-79311, is incorporated herein by reference. 8.9 Copy of Participation Agreement between IDS Life Insurance Company and Templeton Variable Products Series Fund and Franklin Templeton Distributors, Inc., dated March 1, 1996, filed electronically as Exhibit 8.2 to Post-Effective Amendment No. 2 to Registration Statement No. 33-62407 is incorporated herein by reference. 8.10 Copy of Participation Agreement Between Janus Aspen Series and IDS Life Insurance Company, dated April 21, 2000, filed electronically as Exhibit 8.10 to Post-Effective Amendment No. 3 to Registration Statement No. 333-79311, is incorporated herein by reference. 8.11 Copy of Participation Agreement by and among IDS Life Insurance Company, Lazard Asset Management, and Lazard Retirement Series, Inc., dated Sept. 1, 1999, filed electronically as Exhibit 8.11 to Post-Effective Amendment No. 3 to Registration Statement No. 333-79311, is incorporated herein by reference. 8.12 Copy of Participation Agreement Among MFS Variable Insurance Trust, IDS Life Insurance Company and Massachusetts Financial Services Company, dated March 1, 2000, filed electronically as Exhibit 8.12 to Post-Effective Amendment No. 3 to Registration Statement No. 333-79311, is incorporated herein by reference. 9. Opinion of counsel and consent to its use as the legality of the securities being registered, filed electronically herewith. 10. Consent of Independent Auditors, filed electronically herewith. 11. None. 12. Not applicable. 13. Schedule for computation of each performance quotation provided in the Registration Statement in response to Item 21 is incorporated by reference to Exhibit 13 of Registrant's Post-Effective Amendment No. 2, filed on or about May 1, 2000. 14. Power of Attorney to sign Amendment to this Registration Statement, dated April 25, 2001 filed electronically as Exhibit 14 to Post-Effective Amendment No. 3 to Registration Statement No. 333-79311, is incorporated herein by reference. Item 25. Directors and Officers of the Depositor (IDS Life Insurance Company)
Item 25. Directors and Officers of the Depositor (IDS Life Insurance Company) -------------------------------------------------------------------- Name Principal Business Address Position and Offices with Depositor ------------------------------------- ----------------------------------------- ---------------------------------------- Gumer C. Alvero 70100 AXP Financial Center Director and Executive Vice President Minneapolis, MN 55474 - Annuities 70100 AXP Financial Center Timothy V. Bechtold Minneapolis, MN 55474 Director and President 70100 AXP Financial Center Robert M. Elconin Minneapolis, MN 55474 Vice President 70100 AXP Financial Center Lorraine R. Hart Minneapolis, MN 55474 Vice President, Investments Eric L. Marhoun 70100 AXP Financial Center Vice President, Assistant General Minneapolis, MN 55474 Counsel and Assistant Secretary Timothy S. Meehan 70100 AXP Financial Center Secretary Minneapolis, MN 55474 Mary Ellyn Minenko 70100 AXP Financial Center Vice President, Assistant General Minneapolis, MN 55474 Counsel and Assistant Secretary 70100 AXP Financial Center Pamela J. Moret Minneapolis, MN 55474 Director, Chairman of the Board and Chief Executive Officer 70100 AXP Financial Center Barry J. Murphy Minneapolis, MN 55474 Director and Executive Vice President 70100 AXP Financial Center James R. Palmer Minneapolis, MN 55474 Vice President, Taxes 70100 AXP Financial Center Teresa J. Rasmussen Minneapolis, MN 55474 Vice President and General Counsel 70100 AXP Financial Center Stuart A. Sedlacek Minneapolis, MN 55474 Director and Executive Vice President Bridget Sperl 70100 AXP Financial Center Executive Vice President - Client Minneapolis, MN 55474 Service John T. Sweeny 70100 AXP Financial Center Executive Vice President - Finance Minneapolis, MN 55474 70100 AXP Financial Center Philip C. Wentzel Minneapolis, MN 55474 Vice President and Controller David L. Yowan 70100 AXP Financial Center Vice President, Treasurer and Minneapolis, MN 55474 Assistant Secretary
Item 26. Persons Controlled by or Under Common Control with the Depositor or Registrant ----------------------------------------------------------------------- IDS Life Insurance Company is a wholly-owned subsidiary of American Express Financial Corporation. American Express Financial Corporation is a wholly-owned subsidiary of American Express Company (American Express). The following list includes the names of major subsidiaries of American Express. Jurisdiction of Name of Subsidiary Incorporation 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 IDS Insurance Agency of Texas Inc. Texas IDS Insurance Agency of Utah Inc. Utah IDS Insurance Agency of Wyoming Inc. Wyoming IDS Life Insurance Company Minnesota IDS Life Insurance Company of New York New York IDS Management Corporation Minnesota IDS Partnership Services Corporation Minnesota IDS Plan Services of California, Inc. Minnesota IDS Property Casualty Insurance Company Wisconsin IDS Real Estate Services, Inc. Delaware IDS Realty Corporation Minnesota IDS Sales Support Inc. Minnesota Investors Syndicate Development Corp. Nevada Public Employee Payment Company Minnesota
Item 27. Number of Contract owners As of June 30, 2001, there were 48,003 contract owners of non-qualified contracts and 55,474 contract owners of qualified contracts. Item 28. Indemnification The By-Laws of the depositor provide that it shall indemnify any person who was or is a party or is threatened to be made a party, by reason of the fact that he is or was a director, officer, employee or agent of this Corporation, or is or was serving at the direction of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, to any threatened, pending or completed action, suit or proceeding, wherever brought, to the fullest extent permitted by the laws of the State of Minnesota, as now existing or hereafter amended, provided that this Article shall not indemnify or protect any such director, officer, employee or agent against any liability to the Corporation or its security holders to which he would otherwise be subject by reason of willful misfeasance, bad faith, or gross negligence, in the performance of his duties or by reason of his reckless disregard of his obligations and duties. Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to director, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. Item 29. Principal Underwriters (a) IDS Life is the principal underwriter for IDS Life Accounts F, IZ, JZ, G, H, N, KZ, LZ, MZ, PZ, QZ, RZ, SZ AND TZ, IDS Life Variable Annuity Fund A, IDS Life Variable Annuity Fund B, IDS Life Account MGA, IDS Life Account SBS, IDS Life Variable Account 10, IDS Life Variable Life Separate Account and IDS Life Variable Account for Smith Barney. (b) This table is the same as our response to Item 25 of this Registration Statement. (c) Name of Net Underwriting Principal Discounts and Compensation on Brokerage Underwriter Commissions Redemption Commissions Compensation ----------- ----------- ---------- ----------- ------------ IDS Life Insurance $56,849,306 $18,285,051 None None Company
Item 30. Location of Accounts and Records IDS Life Insurance Company 70100 AXP Financial Center Minneapolis, MN 55474 Item 31. Management Services Not applicable. Item 32. Undertakings (a) Registrant undertakes to file a post-effective amendment to this registration statement as frequently as is necessary to ensure that the audited financial statements in the registration statement are never more than 16 months old for so long as payments under the variable annuity contracts may be accepted. (b) Registrant undertakes to include either (1) as part of any application to purchase a contract offered by the prospectus, a space that an applicant can check to request a Statement of Additional Information, or (2) a post card or similar written communication affixed to or included in the prospectus that the applicant can remove to send for a Statement of Additional Information. (c) Registrant undertakes to deliver any Statement of Additional Information and any financial statements required to be made available under this Form promptly upon written or oral request. (d) Registrant represents that it is relying upon the no-action assurance given to the American Council of Life Insurance (pub. avail. Nov. 28, 1988). Further, Registrant represents that it has complied with the provisions of paragraphs (1)-(4) of that no-action letter. (e) 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. SIGNATURES As required by the Securities Act of 1933 and the Investment Company Act of 1940, IDS Life Insurance Company, on behalf of the Registrant, certifies that it meets all 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 7th day of June, 2001. IDS LIFE VARIABLE ANNUITY ACCOUNT 10 ------------------------------------ (Registrant) By IDS Life Insurance Company ------------------------------------ (Sponsor) By /s/ Timothy V. Bechtold* ---------------------------------- Timothy V. Bechtold 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 7th day of June, 2001. Signature Title /s/ Gumer C. Alvero* Director and Executive Vice President ------------------------------------ - Annuities Gumer C. Alvero /s/ Timothy V. Bechtold* Director and President ------------------------------------ Timothy V. Bechtold /s/ Pamela J. Moret* Director, Chairman and Chief Executive ------------------------------------ Officer Pamela J. Moret /s/ Barry J. Murphy* Director ------------------------------------ Barry J. Murphy /s/ Stuart A. Sedlacek* Director and Executive Vice President ------------------------------------ Stuart A. Sedlacek /s/ Bridget Sperl* Executive Vice President - Client ------------------------------------ Service Bridget Sperl /s/ John T. Sweeney* Executive Vice President - Finance ------------------------------------ John T. Sweeney /s/ Philip C. Wentzel* Vice President and Controller ------------------------------------ Philip C. Wentzel /s/ David L. Yowan* Vice President, Treasurer and ------------------------------------ Assistant Secretary David L. Yowan *Signed pursuant to Power of Attorney dated April 25, 2001, filed electronically as Exhibit No. 14 to Post-Effective Amendment No. 3 to registration Statement No. 333-79311, incorporated herein by reference, by: /s/ Mary Ellyn Minenko ------------------ Mary Ellyn Minenko Counsel CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 6 TO REGISTRATION STATEMENT This Post-Effective Amendment is comprised of the following papers and documents: The Cover Page. Part A. The prospectuses. Part B. Statements of Additional Information. Financial Statements Part C. Other Information. The signatures. Exhibits.