485BPOS 1 rava-partc.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. 10 (File No. 333-79311) [X] and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. 12 (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 May 1, 2002 pursuant to paragraph (b) of Rule 485 [ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485 [ ] on (date) pursuant to paragraph (a)(1) of Rule 485 If appropriate, check the following box: [ ] this post-effective amendment designates a new effective date for a previously filed post-effective amendment. AMERICAN EXPRESS RETIREMENT ADVISOR VARIABLE ANNUITY(R) ISSUED BY: IDS LIFE INSURANCE COMPANY PROSPECTUS MAY 1, 2002 INDIVIDUAL FLEXIBLE PREMIUM DEFERRED COMBINATION FIXED/VARIABLE ANNUITY NEW AMERICAN EXPRESS RETIREMENT ADVISOR VARIABLE ANNUITY(R) CONTRACTS ARE NOT CURRENTLY BEING OFFERED. 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 This prospectus contains information that you should know before investing. Prospectuses are also available for: - American Express(R) Variable Portfolio Funds - Janus Aspen Series: Service Shares - AIM Variable Insurance Funds - Lazard Retirement Series, Inc. - American Century(R) Variable Portfolios, Inc. - MFS(R) Variable Insurance Trust(SM) - Calvert Variable Series, Inc. - Putnam Variable Trust - Class IB Shares - Credit Suisse Trust (previously Credit Suisse Warburg Pincus Trust) - Royce Capital Fund - Fidelity(R) Variable Insurance Products - Service Class - Third Avenue Variable Series Trust - Franklin(R) Templeton(R) Variable Insurance Products Trust (FTVIPT) - Class 2 - Wanger Advisors Trust - Goldman Sachs Variable Insurance Trust (VIT) - 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. Be sure to ask your sales representative about the variable annuity's features, benefits, risks and fees. 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. 1 TABLE OF CONTENTS KEY TERMS 3 THE CONTRACT IN BRIEF 4 EXPENSE SUMMARY 6 CONDENSED FINANCIAL INFORMATION (UNAUDITED) 30 FINANCIAL STATEMENTS 39 PERFORMANCE INFORMATION 39 THE VARIABLE ACCOUNT AND THE FUNDS 40 THE FIXED ACCOUNT 46 BUYING YOUR CONTRACT 47 CHARGES 49 VALUING YOUR INVESTMENT 52 MAKING THE MOST OF YOUR CONTRACT 53 SURRENDERS 56 TSA-- SPECIAL SURRENDER PROVISIONS 57 CHANGING OWNERSHIP 57 BENEFITS IN CASE OF DEATH-- STANDARD DEATH BENEFIT 58 OPTIONAL BENEFITS 59 THE ANNUITY PAYOUT PERIOD 62 TAXES 64 VOTING RIGHTS 66 SUBSTITUTION OF INVESTMENTS 66 ABOUT THE SERVICE PROVIDERS 66 TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION 67 2 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. 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. * 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. 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: - Individual Retirement Annuities (IRAs) under Section 408(b) of the Internal Revenue Code of 1986, as amended (the Code) - Roth IRAs under Section 408A of the Code - SIMPLE IRAs under Section 408(p) of the Code - Simplified Employee Pension (SEP) plans under Section 408(k) of the Code - Plans under Section 401(k) of the Code - Custodial and trusteed plans under Section 401(a) of the Code - 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 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 account 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). Most annuities have a tax-deferred feature. So do many retirement plans under the 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 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: - 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. 40) - the fixed account, which earns interest at a rate that we adjust periodically. (p. 46) BUYING YOUR CONTRACT: We no longer offer new contracts. However, you have the option of making additional purchase payments in the future. (p. 47) 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: $50 MAXIMUM ALLOWABLE ANNUAL PURCHASE PAYMENTS 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 to 90 4 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. 54) 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 an IRS penalty if you surrender prior to your reaching age 59 1/2) and may have other tax consequences; also, certain restrictions apply.(p. 56) 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. 57) 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. 58) OPTIONAL BENEFITS:* This contract offers optional features that are available for additional charges if you meet certain criteria. (p.59) 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. 62) 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. 64) CHARGES: We assess certain charges in connection with your contract: - $30 annual contract administrative charge; - for nonqualified annuities a 0.95% mortality and expense risk fee (if you make allocations to one or more subaccounts); - for qualified annuities a 0.75% mortality and expense risk fee (if you make allocations to one or more subaccounts); - surrender charge; - 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); - the operating expenses of the funds in which the subaccounts invest; - if you select the Maximum Anniversary Value Death Benefit (MAV), an annual fee of 0.15% of the contract value; and - if you select the Enhanced Earnings Death Benefit (EEB), an annual fee of 0.30% of the contract value. * Available June 10, 2002. 5 EXPENSE SUMMARY The purpose of the following information is to help you understand the various costs and expenses associated with your contract. You paid no sales charge when you purchased 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" p. 50 and "The Annuity Payout Period-- Annuity Payout Plans" p. 63). 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.) 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 6 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 .54% .13% .11% .78%(1) Bond Fund .60 .13 .07 .80(2) Capital Resource Fund .61 .13 .04 .78(2) Cash Management Fund .51 .13 .04 .68(2) Diversified Equity Income Fund .55 .13 .23 .91(1) Emerging Markets Fund 1.16 .13 .46 1.75(1) Equity Select Fund .64 .13 .33 1.10(1) Extra Income Fund .62 .13 .07 .82(2) Federal Income Fund .61 .13 .10 .84(1) Global Bond Fund .84 .13 .10 1.07(2) Growth Fund .62 .13 .15 .90(1) International Fund .83 .13 .08 1.04(2) Managed Fund .59 .13 .04 .76(2) NEW DIMENSIONS FUND(R) .60 .13 .06 .79(2) S&P 500 Index Fund .29 .13 .07 .49(1) Small Cap Advantage Fund .73 .13 .30 1.16(1) Strategy Aggressive Fund .60 .13 .05 .78(2) AIM V.I. Capital Appreciation Fund, Series I .61 -- .24 .85(3) Capital Development Fund, Series I .75 -- .41 1.16(3) American Century(R) Variable Portfolios, Inc. VP International 1.26 -- -- 1.26(4),(5) VP Value .97 -- -- .97(4),(5) Calvert Variable Series, Inc. Social Balanced Portfolio .70 -- .17 .87(6) Credit Suisse Trust Emerging Growth Portfolio .86 -- .39 1.25(7) Fidelity VIP Growth & Income Portfolio (Service Class) .48 .10 .10 .68(8) Mid Cap Portfolio (Service Class) .58 .10 .11 .79(8) Overseas Portfolio (Service Class) .73 .10 .20 1.03(8) FTVIPT Franklin Real Estate Fund - Class 2 .56 .25 .03 .84(9),(10) Franklin Small Cap Value Securities Fund - Class 2 .57 .25 .20 1.02(10),(11) (previously FTVIPT Franklin Value Securities Fund - Class 2) Templeton Foreign Securities Fund - Class 2 .68 .25 .22 1.15(10),(11),(12) (previously FTVIPT Templeton International Securities Fund - Class 2) Goldman Sachs VIT CORE(SM) Small Cap Equity Fund .75 -- .25 1.00(13) CORE(SM) U.S. Equity Fund .70 -- .11 .81(13) Mid Cap Value Fund .80 -- .13 .93(13)
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MANAGEMENT 12b-1 OTHER FEES FEES EXPENSES TOTAL Janus Aspen Series Aggressive Growth Portfolio: Service Shares .65% .25% .02% .92%(14) Global Technology Portfolio: Service Shares .65 .25 .05 .95(14) International Growth Portfolio: Service Shares .65 .25 .06 .96(14) Lazard Retirement Series International Equity Portfolio .75 .25 .25 1.25(15) MFS(R) Investors Growth Stock Series - Service Class .75 .25 .17 1.17(16),(17),(18) New Discovery Series - Service Class .90 .25 .16 1.31(16),(17),(18) Putnam Variable Trust Putnam VT International New Opportunities Fund - Class IB Shares 1.00 .25 .24 1.49(19) Putnam VT Vista Fund - Class IB Shares .61 .25 .06 .92(19) Royce Capital Fund Micro-Cap Portfolio 1.25 -- .10 1.35(20) Third Avenue Value Portfolio .90 -- .40 1.30(21) Wanger International Small Cap 1.24 -- .19 1.43(22) U.S. Smaller Companies .94 -- .05 .99(22) (previously Wanger U.S. Small Cap) Wells Fargo VT Asset Allocation Fund .49 .25 .26 1.00(23) International Equity Fund -- .25 .75 1.00(23) Small Cap Growth Fund .63 .25 .32 1.20(23)
(1) The fund's expense figures are based on actual expenses, after fee waivers and expense reimbursements, for the fiscal year ending Aug. 31, 2001. Without fee waivers and expense reimbursements "Other expenses" and "Total" would be 0.29% and 0.96% for AXP(R) Variable Portfolio - Blue Chip Advantage Fund, 0.49% and 1.17% for AXP(R) Variable Portfolio - Diversified Equity Income Fund, 2.20% and 3.49% for AXP(R) Variable Portfolio - Emerging Markets Fund, 2.22%and 2.99% for AXP(R) Variable Portfolio - Equity Select Fund, 0.13% and 0.87% for AXP(R) Variable Portfolio - Federal Income Fund, 0.16% and 0.91% for AXP(R) Variable Portfolio - Growth Fund, 0.89% and 1.31% for AXP(R) Variable Portfolio - S&P 500 Index Fund, and 0.40% and 1.26% for AXP(R) Variable Portfolio - Small Cap Advantage Fund. (2) The fund's expense figures are based on actual expenses for the fiscal year ended Aug. 31, 2001. (3) The fund's expense figures are for the year ended Dec. 31, 2001 and are expressed as a percentage of Fund average daily net assets. There is no guarantee that actual expenses will be the same as those shown in the table. (4) Annualized operating expenses of funds at Dec. 31, 2001. (5) The fund has a stepped fee schedule. As a result, the fund's management fee generally decreases as fund assets increase. (6) Management fees include an administrative fee paid by the Fund to Calvert Administrative Services Company, an affiliate of Calvert. "Other expenses" reflect an indirect fee resulting from the Portfolio's offset arrangement with the custodian bank whereby the custodian's and transfer agent's fees may be paid indirectly by credits earned on the portfolio's uninvested cash balances. These credits are used to reduce the Portfolio's expenses. Net operating expenses before reductions for fees paid indirectly would be 0.88% for Social Balanced. (7) Expense ratios are shown after fee waivers and expenses reimbursements by the investment advisor. The total expense ratios before the waivers and reimbursements would have been: Credit Suisse Trust Emerging Growth Portfolio (0.90%, 0%, 0.39% and 1.29%). (8) 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. In addition, 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. These offsets may be discontinued at any time. See the accompanying fund prospectus for details. (9) The Fund administration fee is paid indirectly through the management fee. (10) The Fund's Class 2 distribution plan or "Rule 12b-1 plan" is described in the fund's prospectus. (11) 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 1.05% for Franklin Small Cap Value Securities Fund - Class 2 and 0.69% and 1.16% for Templeton Foreign Securities Fund - Class 2. (12) FTVIPT Templeton International Smaller Companies Fund - Class 2 merged into this fund as of April 30, 2002. (13) Expenses ratios are shown after fee waivers and expense reimbursements by the investment adviser. The expense ratios before the waivers and reimbursements would have been: 0.75%, 0.47% and 1.22% for CORE(SM) Small Cap Equity Fund, 0.70%, 0.12%, and 0.82% for CORE(SM) U.S. Equity Fund, and 0.80%, 0.14% and 0.94% for Mid Cap Value Fund. CORE(SM) U.S. Equity and Mid Cap Value Funds were under their respective expense caps of 0.20% and 0.25% in 2001. CORE(SM) is a service mark of Goldman, Sachs & Co. 8 (14) Expenses are based upon expenses for the fiscal year ended Dec. 31, 2001. All expenses are shown without the effect of expense offset arrangements. (15) Total annual expenses for the Lazard International Equity Portfolio have been reimbursed through Dec. 31, 2001 to the extent that they exceed in any fiscal year 1.25% of the Portfolios' average daily net assets. Absent fee waivers and/or reimbursements, "Other expenses" and "Total" expenses for the year ended Dec. 31, 2001 would have been 0.94% and 1.94% for International Equity Portfolio. (16) 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). (17) 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: 1.15% for Investors Growth Stock Series and 1.30% for New Discovery Series. (18) 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 0.19% and 1.34% for New Discovery Series. These contractual fee arrangements will continue until at least May 1, 2003, unless changed with the consent of the board of trustees which oversees the series. (19) 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 0.22% of average net assets. (20) Royce has contractually agreed to waive its fees and reimburse expenses to the extent necessary to maintain the Funds Net Annual Operating Expense ratio at or below 1.35% through Dec. 31, 2002 and 1.99% through Dec. 31, 2010. Absent fee waivers "Other expenses" and "Total" would be 0.17% and 1.42% for Royce Micro-Cap Portfolio. (21) The fund's expenses figures are based on actual expenses for the fiscal year ending Dec. 31, 2001. (22) Figures in "Management fees," "12b-1 fees," "Other expenses," and "Total" are based on actual expenses for the fiscal year ended Dec. 31, 2001. 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. (23) Amounts are based on estimated expenses for 2002. The advisor has contractually undertaken to waive its fee and to reimburse the funds for certain expenses. Without such and arrangement the "Management fees," and "Total" would be 0.55% and 1.06% for Wells Fargo VT Asset Allocation Fund, 0.75% and 3.40% for Wells Fargo VT International Equity Fund and 0.75% and 1.32% for Wells Fargo VT Small Cap Growth Fund. 9 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 the selection of the Enhanced Earnings Death Benefit Rider (EEB), 3) the contract with selection of the Maximum Anniversary Value Death Benefit Rider (MAV), and 4) the contract with the selection of both the MAV and the EEB 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 ...
FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE 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 $ 98.36 $136.83 $167.78 $232.05 $18.36 $56.83 $ 97.78 $212.05 optional EEB 101.43 146.15 183.46 264.09 21.43 66.15 113.46 244.09 optional MAV 99.90 141.50 175.65 248.19 19.90 61.50 105.65 228.19 optional MAV and EEB 102.97 150.79 191.23 279.75 22.97 70.79 121.23 259.75 AXP(R) VP - Bond Fund base contract with no optional riders 98.56 137.46 168.84 234.22 18.56 57.46 98.84 214.22 optional EEB 101.64 146.77 184.50 266.19 21.64 66.77 114.50 246.19 optional MAV 100.10 142.12 176.69 250.32 20.10 62.12 106.69 230.32 optional MAV and EEB 103.18 151.41 192.26 281.83 23.18 71.41 122.26 261.83 AXP(R) VP - Capital Resource Fund base contract with no optional riders 98.36 136.83 167.78 232.05 18.36 56.83 97.78 212.05 optional EEB 101.43 146.15 183.46 264.09 21.43 66.15 113.46 244.09 optional MAV 99.90 141.50 175.65 248.19 19.90 61.50 105.65 228.19 optional MAV and EEB 102.97 150.79 191.23 279.75 22.97 70.79 121.23 259.75 AXP(R) VP - Cash Management Fund base contract with no optional riders 97.33 133.72 162.51 221.16 17.33 53.72 92.51 201.16 optional EEB 100.41 143.05 178.26 253.51 20.41 63.05 108.26 233.51 optional MAV 98.87 138.39 170.41 237.46 18.87 58.39 100.41 217.46 optional MAV and EEB 101.95 147.70 186.06 269.34 21.95 67.70 116.06 249.34 AXP(R) VP - Diversified Equity Income Fund base contract with no optional riders 99.69 140.88 174.60 246.05 19.69 60.88 104.60 226.05 optional EEB 102.77 150.17 190.20 277.68 22.77 70.17 120.20 257.68 optional MAV 101.23 145.53 182.42 261.98 21.23 65.53 112.42 241.98 optional MAV and EEB 104.30 154.80 197.92 293.15 24.30 74.80 127.92 273.15 AXP(R) VP - Emerging Markets Fund base contract with no optional riders 108.30 166.76 217.78 332.30 28.30 86.76 147.78 312.30 optional EEB 111.38 175.89 232.83 361.40 31.38 95.89 162.83 341.40 optional MAV 109.84 171.33 225.33 346.96 29.84 91.33 155.33 326.96 optional MAV and EEB 112.91 180.44 240.28 375.62 32.91 100.44 170.28 355.62 AXP(R) VP - Equity Select Fund base contract with no optional riders 101.64 146.77 184.50 266.19 21.64 66.77 114.50 246.19 optional EEB 104.71 156.03 199.97 297.23 24.71 76.03 129.97 277.23 optional MAV 103.18 151.41 192.26 281.83 23.18 71.41 122.26 261.83 optional MAV and EEB 106.25 160.64 207.64 312.41 26.25 80.64 137.64 292.41
10
FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE END OF EACH TIME PERIOD 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS AXP(R) VP - Extra Income Fund base contract with no optional riders $ 98.77 $138.08 $169.89 $236.38 $18.77 $58.08 $ 99.89 $216.38 optional EEB 101.84 147.39 185.54 268.29 21.84 67.39 115.54 248.29 optional MAV 100.31 142.74 177.74 252.45 20.31 62.74 107.74 232.45 optional MAV and EEB 103.38 152.02 193.29 283.89 23.38 72.02 123.29 263.89 AXP(R) VP - Federal Income Fund base contract with no optional riders 98.97 138.70 170.94 238.53 18.97 58.70 100.94 218.53 optional EEB 102.05 148.01 186.58 270.38 22.05 68.01 116.58 250.38 optional MAV 100.51 143.36 178.78 254.58 20.51 63.36 108.78 234.58 optional MAV and EEB 103.59 152.64 194.32 285.96 23.59 72.64 124.32 265.96 AXP(R) VP - Global Bond Fund base contract with no optional riders 101.33 145.84 182.94 263.03 21.33 65.84 112.94 243.03 optional EEB 104.41 155.11 198.43 294.17 24.41 75.11 128.43 274.17 optional MAV 102.87 150.48 190.71 278.72 22.87 70.48 120.71 258.72 optional MAV and EEB 105.94 159.72 206.11 309.39 25.94 79.72 136.11 289.39 AXP(R) VP - Growth Fund base contract with no optional riders 99.59 140.57 174.08 244.98 19.59 60.57 104.08 224.98 optional EEB 102.66 149.86 189.68 276.64 22.66 69.86 119.68 256.64 optional MAV 101.13 145.22 181.90 260.93 21.13 65.22 111.90 240.93 optional MAV and EEB 104.20 154.49 197.41 292.12 24.20 74.49 127.41 272.12 AXP(R) VP - International Fund base contract with no optional riders 101.02 144.91 181.38 259.87 21.02 64.91 111.38 239.87 optional EEB 104.10 154.18 196.89 291.10 24.10 74.18 126.89 271.10 optional MAV 102.56 149.55 189.16 275.60 22.56 69.55 119.16 255.60 optional MAV and EEB 105.64 158.79 204.58 306.37 25.64 78.79 134.58 286.37 AXP(R) VP - Managed Fund base contract with no optional riders 98.15 136.21 166.73 229.88 18.15 56.21 96.73 209.88 optional EEB 101.23 145.53 182.42 261.98 21.23 65.53 112.42 241.98 optional MAV 99.69 140.88 174.60 246.05 19.69 60.88 104.60 226.05 optional MAV and EEB 102.77 150.17 190.20 277.68 22.77 70.17 120.20 257.68 AXP(R) VP - New Dimensions Fund(R) base contract with no optional riders 98.46 137.15 168.31 233.13 18.46 57.15 98.31 213.13 optional EEB 101.54 146.46 183.98 265.14 21.54 66.46 113.98 245.14 optional MAV 100.00 141.81 176.17 249.25 20.00 61.81 106.17 229.25 optional MAV and EEB 103.07 151.10 191.75 280.79 23.07 71.10 121.75 260.79 AXP(R) VP - S&P 500 Index Fund base contract with no optional riders 95.39 127.77 152.44 200.17 15.39 47.77 82.44 180.17 optional EEB 98.46 137.15 168.31 233.13 18.46 57.15 98.31 213.13 optional MAV 96.92 132.47 160.40 216.77 16.92 52.47 90.40 196.77 optional MAV and EEB 100.00 141.81 176.17 249.25 20.00 61.81 106.17 229.25
11
FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE END OF EACH TIME PERIOD 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS AXP(R) VP - Small Cap Advantage Fund base contract with no optional riders $102.25 $148.63 $187.61 $272.47 $22.25 $68.63 $117.61 $252.47 optional EEB 105.33 157.87 203.04 303.33 25.33 77.87 133.04 283.33 optional MAV 103.79 153.26 195.35 288.02 23.79 73.26 125.35 268.02 optional MAV and EEB 106.87 162.47 210.69 318.42 26.87 82.47 140.69 298.42 AXP(R) VP - Strategy Aggressive Fund base contract with no optional riders 98.36 136.83 167.78 232.05 18.36 56.83 97.78 212.05 optional EEB 101.43 146.15 183.46 264.09 21.43 66.15 113.46 244.09 optional MAV 99.90 141.50 175.65 248.19 19.90 61.50 105.65 228.19 optional MAV and EEB 102.97 150.79 191.23 279.75 22.97 70.79 121.23 259.75 AIM V.I. Capital Appreciation Fund, Series I base contract with no optional riders 99.08 139.01 171.46 239.61 19.08 59.01 101.46 219.61 optional EEB 102.15 148.32 187.09 271.43 22.15 68.32 117.09 251.43 optional MAV 100.61 143.67 179.30 255.64 20.61 63.67 109.30 235.64 optional MAV and EEB 103.69 152.95 194.84 286.99 23.69 72.95 124.84 266.99 AIM V.I. Capital Development Fund, Series I base contract with no optional riders 102.25 148.63 187.61 272.47 22.25 68.63 117.61 252.47 optional EEB 105.33 157.87 203.04 303.33 25.33 77.87 133.04 283.33 optional MAV 103.79 153.26 195.35 288.02 23.79 73.26 125.35 268.02 optional MAV and EEB 106.87 162.47 210.69 318.42 26.87 82.47 140.69 298.42 American Century(R) VP International base contract with no optional riders 103.28 151.72 192.78 282.86 23.28 71.72 122.78 262.86 optional EEB 106.35 160.94 208.14 313.41 26.35 80.94 138.14 293.41 optional MAV 104.82 156.34 200.49 298.25 24.82 76.34 130.49 278.25 optional MAV and EEB 107.89 165.53 215.76 328.35 27.89 85.53 145.76 308.35 American Century(R) VP Value base contract with no optional riders 100.31 142.74 177.74 252.45 20.31 62.74 107.74 232.45 optional EEB 103.38 152.02 193.29 283.89 23.38 72.02 123.29 263.89 optional MAV 101.84 147.39 185.54 268.29 21.84 67.39 115.54 248.29 optional MAV and EEB 104.92 156.64 201.00 299.27 24.92 76.64 131.00 279.27 Calvert Variable Series, Inc. Social Balanced Portfolio base contract with no optional riders 99.28 139.64 172.51 241.76 19.28 59.64 102.51 221.76 optional EEB 102.36 148.94 188.13 273.52 22.36 68.94 118.13 253.52 optional MAV 100.82 144.29 180.34 257.76 20.82 64.29 110.34 237.76 optional MAV and EEB 103.89 153.57 195.87 289.04 23.89 73.57 125.87 269.04 Credit Suisse Trust - Emerging Growth Portfolio base contract with no optional riders 103.18 151.41 192.26 281.83 23.18 71.41 122.26 261.83 optional EEB 106.25 160.64 207.64 312.41 26.25 80.64 137.64 292.41 optional MAV 104.71 156.03 199.97 297.23 24.71 76.03 129.97 277.23 optional MAV and EEB 107.79 165.23 215.25 327.36 27.79 85.23 145.25 307.36
12
FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE END OF EACH TIME PERIOD 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS Fidelity VIP Growth & Income Portfolio (Service Class) base contract with no optional riders $ 97.33 $133.72 $162.51 $221.16 $17.33 $53.72 $ 92.51 $201.16 optional EEB 100.41 143.05 178.26 253.51 20.41 63.05 108.26 233.51 optional MAV 98.87 138.39 170.41 237.46 18.87 58.39 100.41 217.46 optional MAV and EEB 101.95 147.70 186.06 269.34 21.95 67.70 116.06 249.34 Fidelity VIP Mid Cap Portfolio (Service Class) base contract with no optional riders 98.46 137.15 168.31 233.13 18.46 57.15 98.31 213.13 optional EEB 101.54 146.46 183.98 265.14 21.54 66.46 113.98 245.14 optional MAV 100.00 141.81 176.17 249.25 20.00 61.81 106.17 229.25 optional MAV and EEB 103.07 151.10 191.75 280.79 23.07 71.10 121.75 260.79 Fidelity VIP Overseas Portfolio (Service Class) base contract with no optional riders 100.92 144.60 180.86 258.81 20.92 64.60 110.86 238.81 optional EEB 104.00 153.87 196.38 290.07 24.00 73.87 126.38 270.07 optional MAV 102.46 149.25 188.65 274.56 22.46 69.25 118.65 254.56 optional MAV and EEB 105.53 158.49 204.07 305.35 25.53 78.49 134.07 285.35 FTVIPT Franklin Real Estate Fund - Class 2 base contract with no optional riders 98.97 138.70 170.94 238.53 18.97 58.70 100.94 218.53 optional EEB 102.05 148.01 186.58 270.38 22.05 68.01 116.58 250.38 optional MAV 100.51 143.36 178.78 254.58 20.51 63.36 108.78 234.58 optional MAV and EEB 103.59 152.64 194.32 285.96 23.59 72.64 124.32 265.96 FTVIPT Franklin Small Cap Value Securities Fund - Class 2 (previously FTVIPT Franklin Value Securities Fund - Class 2) base contract with no optional riders 100.82 144.29 180.34 257.76 20.82 64.29 110.34 237.76 optional EEB 103.89 153.57 195.87 289.04 23.89 73.57 125.87 269.04 optional MAV 102.36 148.94 188.13 273.52 22.36 68.94 118.13 253.52 optional MAV and EEB 105.43 158.18 203.55 304.34 25.43 78.18 133.55 284.34 FTVIPT Templeton Foreign Securities Fund - Class 2 (previously FTVIPT Templeton International Securities Fund - Class 2) base contract with no optional riders 102.15 148.32 187.09 271.43 22.15 68.32 117.09 251.43 optional EEB 105.23 157.57 202.53 302.32 25.23 77.57 132.53 282.32 optional MAV 103.69 152.95 194.84 286.99 23.69 72.95 124.84 266.99 optional MAV and EEB 106.76 162.17 210.18 317.42 26.76 82.17 140.18 297.42 Goldman Sachs VIT CORE(SM) Small Cap Equity Fund base contract with no optional riders 100.61 143.67 179.30 255.64 20.61 63.67 109.30 235.64 optional EEB 103.69 152.95 194.84 286.99 23.69 72.95 124.84 266.99 optional MAV 102.15 148.32 187.09 271.43 22.15 68.32 117.09 251.43 optional MAV and EEB 105.23 157.57 202.53 302.32 25.23 77.57 132.53 282.32 Goldman Sachs VIT CORE(SM) U.S. Equity Fund base contract with no optional riders 98.67 137.77 169.36 235.30 18.67 57.77 99.36 215.30 optional EEB 101.74 147.08 185.02 267.24 21.74 67.08 115.02 247.24 optional MAV 100.20 142.43 177.22 251.39 20.20 62.43 107.22 231.39 optional MAV and EEB 103.28 151.72 192.78 282.86 23.28 71.72 122.78 262.86
13
FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE END OF EACH TIME PERIOD 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS Goldman Sachs VIT Mid Cap Value Fund base contract with no optional riders $ 99.90 $141.50 $175.65 $248.19 $19.90 $61.50 $105.65 $228.19 optional EEB 102.97 150.79 191.23 279.75 22.97 70.79 121.23 259.75 optional MAV 101.43 146.15 183.46 264.09 21.43 66.15 113.46 244.09 optional MAV and EEB 104.51 155.41 198.95 295.19 24.51 75.41 128.95 275.19 Janus Aspen Series Aggressive Growth Portfolio: Service Shares base contract with no optional riders 99.79 141.19 175.13 247.12 19.79 61.19 105.13 227.12 optional EEB 102.87 150.48 190.71 278.72 22.87 70.48 120.71 258.72 optional MAV 101.33 145.84 182.94 263.03 21.33 65.84 112.94 243.03 optional MAV and EEB 104.41 155.11 198.43 294.17 24.41 75.11 128.43 274.17 Janus Aspen Series Global Technology Portfolio: Service Shares base contract with no optional riders 100.10 142.12 176.69 250.32 20.10 62.12 106.69 230.32 optional EEB 103.18 151.41 192.26 281.83 23.18 71.41 122.26 261.83 optional MAV 101.64 146.77 184.50 266.19 21.64 66.77 114.50 246.19 optional MAV and EEB 104.71 156.03 199.97 297.23 24.71 76.03 129.97 277.23 Janus Aspen Series International Growth Portfolio: Service Shares base contract with no optional riders 100.20 142.43 177.22 251.39 20.20 62.43 107.22 231.39 optional EEB 103.28 151.72 192.78 282.86 23.28 71.72 122.78 262.86 optional MAV 101.74 147.08 185.02 267.24 21.74 67.08 115.02 247.24 optional MAV and EEB 104.82 156.34 200.49 298.25 24.82 76.34 130.49 278.25 Lazard Retirement International Equity Portfolio base contract with no optional riders 103.18 151.41 192.26 281.83 23.18 71.41 122.26 261.83 optional EEB 106.25 160.64 207.64 312.41 26.25 80.64 137.64 292.41 optional MAV 104.71 156.03 199.97 297.23 24.71 76.03 129.97 277.23 optional MAV and EEB 107.79 165.23 215.25 327.36 27.79 85.23 145.25 307.36 MFS(R) Investors Growth Stock Series - Service Class base contract with no optional riders 102.36 148.94 188.13 273.52 22.36 68.94 118.13 253.52 optional EEB 105.43 158.18 203.55 304.34 25.43 78.18 133.55 284.34 optional MAV 103.89 153.57 195.87 289.04 23.89 73.57 125.87 269.04 optional MAV and EEB 106.97 162.78 211.19 319.42 26.97 82.78 141.19 299.42 MFS(R) New Discovery Series - Service Class base contract with no optional riders 103.79 153.26 195.35 288.02 23.79 73.26 125.35 268.02 optional EEB 106.87 162.47 210.69 318.42 26.87 82.47 140.69 298.42 optional MAV 105.33 157.87 203.04 303.33 25.33 77.87 133.04 283.33 optional MAV and EEB 108.40 167.06 218.28 333.28 28.40 87.06 148.28 313.28 Putnam VT International New Opportunities Fund - Class IB Shares base contract with no optional riders 105.64 158.79 204.58 306.37 25.64 78.79 134.58 286.37 optional EEB 108.71 167.98 219.80 336.23 28.71 87.98 149.80 316.23 optional MAV 107.17 163.39 212.21 321.41 27.17 83.39 142.21 301.41 optional MAV and EEB 110.25 172.55 227.33 350.83 30.25 92.55 157.33 330.83
14
FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE END OF EACH TIME PERIOD 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS Putnam VT Vista Fund - Class IB Shares base contract with no optional riders $ 99.79 $141.19 $175.13 $247.12 $19.79 $61.19 $105.13 $227.12 optional EEB 102.87 150.48 190.71 278.72 22.87 70.48 120.71 258.72 optional MAV 101.33 145.84 182.94 263.03 21.33 65.84 112.94 243.03 optional MAV and EEB 104.41 155.11 198.43 294.17 24.41 75.11 128.43 274.17 Royce Micro-Cap Portfolio base contract with no optional riders 104.20 154.49 197.41 292.12 24.20 74.49 127.41 272.12 optional EEB 107.28 163.70 212.72 322.40 27.28 83.70 142.72 302.40 optional MAV 105.74 159.10 205.09 307.38 25.74 79.10 135.09 287.38 optional MAV and EEB 108.81 168.28 220.30 337.21 28.81 88.28 150.30 317.21 Third Avenue Value Portfolio base contract with no optional riders 103.69 152.95 194.84 286.99 23.69 72.95 124.84 266.99 optional EEB 106.76 162.17 210.18 317.42 26.76 82.17 140.18 297.42 optional MAV 105.23 157.57 202.53 302.32 25.23 77.57 132.53 282.32 optional MAV and EEB 108.30 166.76 217.78 332.30 28.30 86.76 147.78 312.30 Wanger International Small Cap base contract with no optional riders 105.02 156.95 201.51 300.29 25.02 76.95 131.51 280.29 optional EEB 108.10 166.15 216.77 330.33 28.10 86.15 146.77 310.33 optional MAV 106.56 161.56 209.16 315.42 26.56 81.56 139.16 295.42 optional MAV and EEB 109.63 170.72 224.32 345.02 29.63 90.72 154.32 325.02 Wanger U.S. Smaller Companies (previously Wanger U.S. Small Cap) base contract with no optional riders 100.51 143.36 178.78 254.58 20.51 63.36 108.78 234.58 optional EEB 103.59 152.64 194.32 285.96 23.59 72.64 124.32 265.96 optional MAV 102.05 148.01 186.58 270.38 22.05 68.01 116.58 250.38 optional MAV and EEB 105.12 157.26 202.02 301.30 25.12 77.26 132.02 281.30 Wells Fargo VT Asset Allocation Fund base contract with no optional riders 100.61 143.67 179.30 255.64 20.61 63.67 109.30 235.64 optional EEB 103.69 152.95 194.84 286.99 23.69 72.95 124.84 266.99 optional MAV 102.15 148.32 187.09 271.43 22.15 68.32 117.09 251.43 optional MAV and EEB 105.23 157.57 202.53 302.32 25.23 77.57 132.53 282.32 Wells Fargo VT International Equity Fund base contract with no optional riders 100.61 143.67 179.30 255.64 20.61 63.67 109.30 235.64 optional EEB 103.69 152.95 194.84 286.99 23.69 72.95 124.84 266.99 optional MAV 102.15 148.32 187.09 271.43 22.15 68.32 117.09 251.43 optional MAV and EEB 105.23 157.57 202.53 302.32 25.23 77.57 132.53 282.32 Wells Fargo VT Small Cap Growth Fund base contract with no optional riders 102.66 149.86 189.68 276.64 22.66 69.86 119.68 256.64 optional EEB 105.74 159.10 205.09 307.38 25.74 79.10 135.09 287.38 optional MAV 104.20 154.49 197.41 292.12 24.20 74.49 127.41 272.12 optional MAV and EEB 107.28 163.70 212.72 322.40 27.28 83.70 142.72 302.40
15 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 ...
FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE 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 $ 96.31 $130.59 $157.22 $210.16 $16.31 $50.59 $ 87.22 $190.16 optional MAV 97.85 135.28 165.15 226.62 17.85 55.28 95.15 206.62 AXP(R) VP - Bond Fund base contract with no optional riders 96.51 131.22 158.28 212.37 16.51 51.22 88.28 192.37 optional MAV 98.05 135.90 166.21 228.79 18.05 55.90 96.21 208.79 AXP(R) VP - Capital Resource Fund base contract with no optional riders 96.31 130.59 157.22 210.16 16.31 50.59 87.22 190.16 optional MAV 97.85 135.28 165.15 226.62 17.85 55.28 95.15 206.62 AXP(R) VP - Cash Management Fund base contract with no optional riders 95.28 127.46 151.91 199.05 15.28 47.46 81.91 179.05 optional MAV 96.82 132.15 159.87 215.67 16.82 52.15 89.87 195.67 AXP(R) VP - Diversified Equity Income Fund base contract with no optional riders 97.64 134.65 164.10 224.44 17.64 54.65 94.10 204.44 optional MAV 99.18 139.32 171.98 240.69 19.18 59.32 101.98 220.69 AXP(R) VP - Emerging Markets Fund base contract with no optional riders 106.25 160.64 207.64 312.41 26.25 80.64 137.64 292.41 optional MAV 107.79 165.23 215.25 327.36 27.79 85.23 145.25 307.36 AXP(R) VP - Equity Select Fund base contract with no optional riders 99.59 140.57 174.08 244.98 19.59 60.57 104.08 224.98 optional MAV 101.13 145.22 181.90 260.93 21.13 65.22 111.90 240.93 AXP(R) VP - Extra Income Fund base contract with no optional riders 96.72 131.84 159.34 214.57 16.72 51.84 89.34 194.57 optional MAV 98.26 136.52 167.26 230.97 18.26 56.52 97.26 210.97 AXP(R) VP - Federal Income Fund base contract with no optional riders 96.92 132.47 160.40 216.77 16.92 52.47 90.40 196.77 optional MAV 98.46 137.15 168.31 233.13 18.46 57.15 98.31 213.13 AXP(R) VP - Global Bond Fund base contract with no optional riders 99.28 139.64 172.51 241.76 19.28 59.64 102.51 221.76 optional MAV 100.82 144.29 180.34 257.76 20.82 64.29 110.34 237.76 AXP(R) VP - Growth Fund base contract with no optional riders 97.54 134.34 163.57 223.35 17.54 54.34 93.57 203.35 optional MAV 99.08 139.01 171.46 239.61 19.08 59.01 101.46 219.61 AXP(R) VP - International Fund base contract with no optional riders 98.97 138.70 170.94 238.53 18.97 58.70 100.94 218.53 optional MAV 100.51 143.36 178.78 254.58 20.51 63.36 108.78 234.58 AXP(R) VP - Managed Fund base contract with no optional riders 96.10 129.96 156.16 207.95 16.10 49.96 86.16 187.95 optional MAV 97.64 134.65 164.10 224.44 17.64 54.65 94.10 204.44 AXP(R) VP - NEW DIMENSIONS FUND(R) base contract with no optional riders 96.41 130.90 157.75 211.27 16.41 50.90 87.75 191.27 optional MAV 97.95 135.59 165.68 227.71 17.95 55.59 95.68 207.71
16
FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE END OF EACH TIME PERIOD 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS AXP(R) VP - S&P 500 Index Fund base contract with no optional riders $ 93.34 $121.49 $141.75 $177.65 $13.34 $41.49 $ 71.75 $157.65 optional MAV 94.87 126.20 149.77 194.58 14.87 46.20 79.77 174.58 AXP(R) VP - Small Cap Advantage Fund base contract with no optional riders 100.20 142.43 177.22 251.39 20.20 62.43 107.22 231.39 optional MAV 101.74 147.08 185.02 267.24 21.74 67.08 115.02 247.24 AXP(R) VP - Strategy Aggressive Fund base contract with no optional riders 96.31 130.59 157.22 210.16 16.31 50.59 87.22 190.16 optional MAV 97.85 135.28 165.15 226.62 17.85 55.28 95.15 206.62 AIM V.I. Capital Appreciation Fund, Series I base contract with no optional riders 97.03 132.78 160.93 217.87 17.03 52.78 90.93 197.87 optional MAV 98.56 137.46 168.84 234.22 18.56 57.46 98.84 214.22 AIM V.I. Capital Development Fund, Series I base contract with no optional riders 100.20 142.43 177.22 251.39 20.20 62.43 107.22 231.39 optional MAV 101.74 147.08 185.02 267.24 21.74 67.08 115.02 247.24 American Century(R) VP International base contract with no optional riders 101.23 145.53 182.42 261.98 21.23 65.53 112.42 241.98 optional MAV 102.77 150.17 190.20 277.68 22.77 70.17 120.20 257.68 American Century(R) VP Value base contract with no optional riders 98.26 136.52 167.26 230.97 18.26 56.52 97.26 210.97 optional MAV 99.79 141.19 175.13 247.12 19.79 61.19 105.13 227.12 Calvert Variable Series, Inc. Social Balanced Portfolio base contract with no optional riders 97.23 133.40 161.99 220.06 17.23 53.40 91.99 200.06 optional MAV 98.77 138.08 169.89 236.38 18.77 58.08 99.89 216.38 Credit Suisse Trust - Emerging Growth Portfolio base contract with no optional riders 101.13 145.22 181.90 260.93 21.13 65.22 111.90 240.93 optional MAV 102.66 149.86 189.68 276.64 22.66 69.86 119.68 256.64 Fidelity VIP Growth & Income Portfolio (Service Class) base contract with no optional riders 95.28 127.46 151.91 199.05 15.28 47.46 81.91 179.05 optional MAV 96.82 132.15 159.87 215.67 16.82 52.15 89.87 195.67 Fidelity VIP Mid Cap Portfolio (Service Class) base contract with no optional riders 96.41 130.90 157.75 211.27 16.41 50.90 87.75 191.27 optional MAV 97.95 135.59 165.68 227.71 17.95 55.59 95.68 207.71 Fidelity VIP Overseas Portfolio (Service Class) base contract with no optional riders 98.87 138.39 170.41 237.46 18.87 58.39 100.41 217.46 optional MAV 100.41 143.05 178.26 253.51 20.41 63.05 108.26 233.51 FTVIPT Franklin Real Estate Fund - Class 2 base contract with no optional riders 96.92 132.47 160.40 216.77 16.92 52.47 90.40 196.77 optional MAV 98.46 137.15 168.31 233.13 18.46 57.15 98.31 213.13 FTVIPT Franklin Small Cap Value Securities Fund - Class 2 (previously FTVIPT Franklin Value Securities Fund - Class 2) base contract with no optional riders 98.77 138.08 169.89 236.38 18.77 58.08 99.89 216.38 optional MAV 100.31 142.74 177.74 252.45 20.31 62.74 107.74 232.45
17
FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE END OF EACH TIME PERIOD 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS FTVIPT Templeton Foreign Securities Fund - Class 2 (previously FTVIPT Templeton International Securities Fund - Class 2) base contract with no optional riders $100.10 $142.12 $176.69 $250.32 $20.10 $62.12 $106.69 $230.32 optional MAV 101.64 146.77 184.50 266.19 21.64 66.77 114.50 246.19 Goldman Sachs VIT CORE(SM) Small Cap Equity Fund base contract with no optional riders 98.56 137.46 168.84 234.22 18.56 57.46 98.84 214.22 optional MAV 100.10 142.12 176.69 250.32 20.10 62.12 106.69 230.32 Goldman Sachs VIT CORE(SM) U.S. Equity Fund base contract with no optional riders 96.62 131.53 158.81 213.47 16.62 51.53 88.81 193.47 optional MAV 98.15 136.21 166.73 229.88 18.15 56.21 96.73 209.88 Goldman Sachs VIT Mid Cap Value Fund base contract with no optional riders 97.85 135.28 165.15 226.62 17.85 55.28 95.15 206.62 optional MAV 99.38 139.95 173.03 242.83 19.38 59.95 103.03 222.83 Janus Aspen Series Aggressive Growth Portfolio: Service Shares base contract with no optional riders 97.74 134.96 164.62 225.53 17.74 54.96 94.62 205.53 optional MAV 99.28 139.64 172.51 241.76 19.28 59.64 102.51 221.76 Janus Aspen Series Global Technology Portfolio: Service Shares base contract with no optional riders 98.05 135.90 166.21 228.79 18.05 55.90 96.21 208.79 optional MAV 99.59 140.57 174.08 244.98 19.59 60.57 104.08 224.98 Janus Aspen Series International Growth Portfolio: Service Shares base contract with no optional riders 98.15 136.21 166.73 229.88 18.15 56.21 96.73 209.88 optional MAV 99.69 140.88 174.60 246.05 19.69 60.88 104.60 226.05 Lazard Retirement International Equity Portfolio base contract with no optional riders 101.13 145.22 181.90 260.93 21.13 65.22 111.90 240.93 optional MAV 102.66 149.86 189.68 276.64 22.66 69.86 119.68 256.64 MFS(R) Investors Growth Stock Series - Service Class base contract with no optional riders 100.31 142.74 177.74 252.45 20.31 62.74 107.74 232.45 optional MAV 101.84 147.39 185.54 268.29 21.84 67.39 115.54 248.29 MFS(R) New Discovery Series - Service Class base contract with no optional riders 101.74 147.08 185.02 267.24 21.74 67.08 115.02 247.24 optional MAV 103.28 151.72 192.78 282.86 23.28 71.72 122.78 262.86 Putnam VT International New Opportunities Fund - Class IB Shares base contract with no optional riders 103.59 152.64 194.32 285.96 23.59 72.64 124.32 265.96 optional MAV 105.12 157.26 202.02 301.30 25.12 77.26 132.02 281.30 Putnam VT Vista Fund - Class IB Shares base contract with no optional riders 97.74 134.96 164.62 225.53 17.74 54.96 94.62 205.53 optional MAV 99.28 139.64 172.51 241.76 19.28 59.64 102.51 221.76 Royce Micro-Cap Portfolio base contract with no optional riders 102.15 148.32 187.09 271.43 22.15 68.32 117.09 251.43 optional MAV 103.69 152.95 194.84 286.99 23.69 72.95 124.84 266.99 Third Avenue Value Portfolio base contract with no optional riders 101.64 146.77 184.50 266.19 21.64 66.77 114.50 246.19 optional MAV 103.18 151.41 192.26 281.83 23.18 71.41 122.26 261.83
18
FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE END OF EACH TIME PERIOD 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS Wanger International Small Cap base contract with no optional riders $102.97 $150.79 $191.23 $279.75 $22.97 $70.79 $121.23 $259.75 optional MAV 104.51 155.41 198.95 295.19 24.51 75.41 128.95 275.19 Wanger U.S. Smaller Companies (previously Wanger U.S. Small Cap) base contract with no optional riders 98.46 137.15 168.31 233.13 18.46 57.15 98.31 213.13 optional MAV 100.00 141.81 176.17 249.25 20.00 61.81 106.17 229.25 Wells Fargo VT Asset Allocation Fund base contract with no optional riders 98.56 137.46 168.84 234.22 18.56 57.46 98.84 214.22 optional MAV 100.10 142.12 176.69 250.32 20.10 62.12 106.69 230.32 Wells Fargo VT International Equity Fund base contract with no optional riders 98.56 137.46 168.84 234.22 18.56 57.46 98.84 214.22 optional MAV 100.10 142.12 176.69 250.32 20.10 62.12 106.69 230.32 Wells Fargo VT Small Cap Growth Fund base contract with no optional riders 100.61 143.67 179.30 255.64 20.61 63.67 109.30 235.64 optional MAV 102.15 148.32 187.09 271.43 22.15 68.32 117.09 251.43
19 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 ...
FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE 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 $ 88.36 $126.83 $147.78 $212.05 $18.36 $56.83 $ 97.78 $212.05 optional EEB 91.43 136.15 163.46 244.09 21.43 66.15 113.46 244.09 optional MAV 89.90 131.50 155.65 228.19 19.90 61.50 105.65 228.19 optional MAV and EEB 92.97 140.79 171.23 259.75 22.97 70.79 121.23 259.75 AXP(R) VP - Bond Fund base contract with no optional riders 88.56 127.46 148.84 214.22 18.56 57.46 98.84 214.22 optional EEB 91.64 136.77 164.50 246.19 21.64 66.77 114.50 246.19 optional MAV 90.10 132.12 156.69 230.32 20.10 62.12 106.69 230.32 optional MAV and EEB 93.18 141.41 172.26 261.83 23.18 71.41 122.26 261.83 AXP(R) VP - Capital Resource Fund base contract with no optional riders 88.36 126.83 147.78 212.05 18.36 56.83 97.78 212.05 optional EEB 91.43 136.15 163.46 244.09 21.43 66.15 113.46 244.09 optional MAV 89.90 131.50 155.65 228.19 19.90 61.50 105.65 228.19 optional MAV and EEB 92.97 140.79 171.23 259.75 22.97 70.79 121.23 259.75 AXP(R) VP - Cash Management Fund base contract with no optional riders 87.33 123.72 142.51 201.16 17.33 53.72 92.51 201.16 optional EEB 90.41 133.05 158.26 233.51 20.41 63.05 108.26 233.51 optional MAV 88.87 128.39 150.41 217.46 18.87 58.39 100.41 217.46 optional MAV and EEB 91.95 137.70 166.06 249.34 21.95 67.70 116.06 249.34 AXP(R) VP - Diversified Equity Income Fund base contract with no optional riders 89.69 130.88 154.60 226.05 19.69 60.88 104.60 226.05 optional EEB 92.77 140.17 170.20 257.68 22.77 70.17 120.20 257.68 optional MAV 91.23 135.53 162.42 241.98 21.23 65.53 112.42 241.98 optional MAV and EEB 94.30 144.80 177.92 273.15 24.30 74.80 127.92 273.15 AXP(R) VP - Emerging Markets Fund base contract with no optional riders 98.30 156.76 197.78 312.30 28.30 86.76 147.78 312.30 optional EEB 101.38 165.89 212.83 341.40 31.38 95.89 162.83 341.40 optional MAV 99.84 161.33 205.33 326.96 29.84 91.33 155.33 326.96 optional MAV and EEB 102.91 170.44 220.28 355.62 32.91 100.44 170.28 355.62 AXP(R) VP - Equity Select Fund base contract with no optional riders 91.64 136.77 164.50 246.19 21.64 66.77 114.50 246.19 optional EEB 94.71 146.03 179.97 277.23 24.71 76.03 129.97 277.23 optional MAV 93.18 141.41 172.26 261.83 23.18 71.41 122.26 261.83 optional MAV and EEB 96.25 150.64 187.64 292.41 26.25 80.64 137.64 292.41 AXP(R) VP - Extra Income Fund base contract with no optional riders 88.77 128.08 149.89 216.38 18.77 58.08 99.89 216.38 optional EEB 91.84 137.39 165.54 248.29 21.84 67.39 115.54 248.29 optional MAV 90.31 132.74 157.74 232.45 20.31 62.74 107.74 232.45 optional MAV and EEB 93.38 142.02 173.29 263.89 23.38 72.02 123.29 263.89
20
FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE END OF EACH TIME PERIOD 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS AXP(R) VP - Federal Income Fund base contract with no optional riders $88.97 $128.70 $150.94 $218.53 $18.97 $58.70 $100.94 $218.53 optional EEB 92.05 138.01 166.58 250.38 22.05 68.01 116.58 250.38 optional MAV 90.51 133.36 158.78 234.58 20.51 63.36 108.78 234.58 optional MAV and EEB 93.59 142.64 174.32 265.96 23.59 72.64 124.32 265.96 AXP(R) VP - Global Bond Fund base contract with no optional riders 91.33 135.84 162.94 243.03 21.33 65.84 112.94 243.03 optional EEB 94.41 145.11 178.43 274.17 24.41 75.11 128.43 274.17 optional MAV 92.87 140.48 170.71 258.72 22.87 70.48 120.71 258.72 optional MAV and EEB 95.94 149.72 186.11 289.39 25.94 79.72 136.11 289.39 AXP(R) VP - Growth Fund base contract with no optional riders 89.59 130.57 154.08 224.98 19.59 60.57 104.08 224.98 optional EEB 92.66 139.86 169.68 256.64 22.66 69.86 119.68 256.64 optional MAV 91.13 135.22 161.90 240.93 21.13 65.22 111.90 240.93 optional MAV and EEB 94.20 144.49 177.41 272.12 24.20 74.49 127.41 272.12 AXP(R) VP - International Fund base contract with no optional riders 91.02 134.91 161.38 239.87 21.02 64.91 111.38 239.87 optional EEB 94.10 144.18 176.89 271.10 24.10 74.18 126.89 271.10 optional MAV 92.56 139.55 169.16 255.60 22.56 69.55 119.16 255.60 optional MAV and EEB 95.64 148.79 184.58 286.37 25.64 78.79 134.58 286.37 AXP(R) VP - Managed Fund base contract with no optional riders 88.15 126.21 146.73 209.88 18.15 56.21 96.73 209.88 optional EEB 91.23 135.53 162.42 241.98 21.23 65.53 112.42 241.98 optional MAV 89.69 130.88 154.60 226.05 19.69 60.88 104.60 226.05 optional MAV and EEB 92.77 140.17 170.20 257.68 22.77 70.17 120.20 257.68 AXP(R) VP - NEW DIMENSIONS FUND(R) base contract with no optional riders 88.46 127.15 148.31 213.13 18.46 57.15 98.31 213.13 optional EEB 91.54 136.46 163.98 245.14 21.54 66.46 113.98 245.14 optional MAV 90.00 131.81 156.17 229.25 20.00 61.81 106.17 229.25 optional MAV and EEB 93.07 141.10 171.75 260.79 23.07 71.10 121.75 260.79 AXP(R) VP - S&P 500 Index Fund base contract with no optional riders 85.39 117.77 132.44 180.17 15.39 47.77 82.44 180.17 optional EEB 88.46 127.15 148.31 213.13 18.46 57.15 98.31 213.13 optional MAV 86.92 122.47 140.40 196.77 16.92 52.47 90.40 196.77 optional MAV and EEB 90.00 131.81 156.17 229.25 20.00 61.81 106.17 229.25 AXP(R) VP - Small Cap Advantage Fund base contract with no optional riders 92.25 138.63 167.61 252.47 22.25 68.63 117.61 252.47 optional EEB 95.33 147.87 183.04 283.33 25.33 77.87 133.04 283.33 optional MAV 93.79 143.26 175.35 268.02 23.79 73.26 125.35 268.02 optional MAV and EEB 96.87 152.47 190.69 298.42 26.87 82.47 140.69 298.42
21
FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE 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 $88.36 $126.83 $147.78 $212.05 $18.36 $56.83 $ 97.78 $212.05 optional EEB 91.43 136.15 163.46 244.09 21.43 66.15 113.46 244.09 optional MAV 89.90 131.50 155.65 228.19 19.90 61.50 105.65 228.19 optional MAV and EEB 92.97 140.79 171.23 259.75 22.97 70.79 121.23 259.75 AIM V.I. Capital Appreciation Fund, Series I base contract with no optional riders 89.08 129.01 151.46 219.61 19.08 59.01 101.46 219.61 optional EEB 92.15 138.32 167.09 251.43 22.15 68.32 117.09 251.43 optional MAV 90.61 133.67 159.30 235.64 20.61 63.67 109.30 235.64 optional MAV and EEB 93.69 142.95 174.84 266.99 23.69 72.95 124.84 266.99 AIM V.I. Capital Development Fund, Series I base contract with no optional riders 92.25 138.63 167.61 252.47 22.25 68.63 117.61 252.47 optional EEB 95.33 147.87 183.04 283.33 25.33 77.87 133.04 283.33 optional MAV 93.79 143.26 175.35 268.02 23.79 73.26 125.35 268.02 optional MAV and EEB 96.87 152.47 190.69 298.42 26.87 82.47 140.69 298.42 American Century(R) VP International base contract with no optional riders 93.28 141.72 172.78 262.86 23.28 71.72 122.78 262.86 optional EEB 96.35 150.94 188.14 293.41 26.35 80.94 138.14 293.41 optional MAV 94.82 146.34 180.49 278.25 24.82 76.34 130.49 278.25 optional MAV and EEB 97.89 155.53 195.76 308.35 27.89 85.53 145.76 308.35 American Century(R) VP Value base contract with no optional riders 90.31 132.74 157.74 232.45 20.31 62.74 107.74 232.45 optional EEB 93.38 142.02 173.29 263.89 23.38 72.02 123.29 263.89 optional MAV 91.84 137.39 165.54 248.29 21.84 67.39 115.54 248.29 optional MAV and EEB 94.92 146.64 181.00 279.27 24.92 76.64 131.00 279.27 Calvert Variable Series, Inc. Social Balanced Portfolio base contract with no optional riders 89.28 129.64 152.51 221.76 19.28 59.64 102.51 221.76 optional EEB 92.36 138.94 168.13 253.52 22.36 68.94 118.13 253.52 optional MAV 90.82 134.29 160.34 237.76 20.82 64.29 110.34 237.76 optional MAV and EEB 93.89 143.57 175.87 269.04 23.89 73.57 125.87 269.04 Credit Suisse Trust - Emerging Growth Portfolio base contract with no optional riders 93.18 141.41 172.26 261.83 23.18 71.41 122.26 261.83 optional EEB 96.25 150.64 187.64 292.41 26.25 80.64 137.64 292.41 optional MAV 94.71 146.03 179.97 277.23 24.71 76.03 129.97 277.23 optional MAV and EEB 97.79 155.23 195.25 307.36 27.79 85.23 145.25 307.36 Fidelity VIP Growth & Income Portfolio (Service Class) base contract with no optional riders 87.33 123.72 142.51 201.16 17.33 53.72 92.51 201.16 optional EEB 90.41 133.05 158.26 233.51 20.41 63.05 108.26 233.51 optional MAV 88.87 128.39 150.41 217.46 18.87 58.39 100.41 217.46 optional MAV and EEB 91.95 137.70 166.06 249.34 21.95 67.70 116.06 249.34
22
FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE END OF EACH TIME PERIOD 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS Fidelity VIP Mid Cap Portfolio (Service Class) base contract with no optional riders $88.46 $127.15 $148.31 $213.13 $18.46 $57.15 $ 98.31 $213.13 optional EEB 91.54 136.46 163.98 245.14 21.54 66.46 113.98 245.14 optional MAV 90.00 131.81 156.17 229.25 20.00 61.81 106.17 229.25 optional MAV and EEB 93.07 141.10 171.75 260.79 23.07 71.10 121.75 260.79 Fidelity VIP Overseas Portfolio (Service Class) base contract with no optional riders 90.92 134.60 160.86 238.81 20.92 64.60 110.86 238.81 optional EEB 94.00 143.87 176.38 270.07 24.00 73.87 126.38 270.07 optional MAV 92.46 139.25 168.65 254.56 22.46 69.25 118.65 254.56 optional MAV and EEB 95.53 148.49 184.07 285.35 25.53 78.49 134.07 285.35 FTVIPT Franklin Real Estate Fund - Class 2 base contract with no optional riders 88.97 128.70 150.94 218.53 18.97 58.70 100.94 218.53 optional EEB 92.05 138.01 166.58 250.38 22.05 68.01 116.58 250.38 optional MAV 90.51 133.36 158.78 234.58 20.51 63.36 108.78 234.58 optional MAV and EEB 93.59 142.64 174.32 265.96 23.59 72.64 124.32 265.96 FTVIPT Franklin Small Cap Value Securities Fund - Class 2 (previously FTVIPT Franklin Value Securities Fund - Class 2) base contract with no optional riders 90.82 134.29 160.34 237.76 20.82 64.29 110.34 237.76 optional EEB 93.89 143.57 175.87 269.04 23.89 73.57 125.87 269.04 optional MAV 92.36 138.94 168.13 253.52 22.36 68.94 118.13 253.52 optional MAV and EEB 95.43 148.18 183.55 284.34 25.43 78.18 133.55 284.34 FTVIPT Templeton Foreign Securities Fund - Class 2 (previously FTVIPT Templeton International Securities Fund - Class 2) base contract with no optional riders 92.15 138.32 167.09 251.43 22.15 68.32 117.09 251.43 optional EEB 95.23 147.57 182.53 282.32 25.23 77.57 132.53 282.32 optional MAV 93.69 142.95 174.84 266.99 23.69 72.95 124.84 266.99 optional MAV and EEB 96.76 152.17 190.18 297.42 26.76 82.17 140.18 297.42 Goldman Sachs VIT CORE(SM) Small Cap Equity Fund base contract with no optional riders 90.61 133.67 159.30 235.64 20.61 63.67 109.30 235.64 optional EEB 93.69 142.95 174.84 266.99 23.69 72.95 124.84 266.99 optional MAV 92.15 138.32 167.09 251.43 22.15 68.32 117.09 251.43 optional MAV and EEB 95.23 147.57 182.53 282.32 25.23 77.57 132.53 282.32 Goldman Sachs VIT CORE(SM) U.S. Equity Fund base contract with no optional riders 88.67 127.77 149.36 215.30 18.67 57.77 99.36 215.30 optional EEB 91.74 137.08 165.02 247.24 21.74 67.08 115.02 247.24 optional MAV 90.20 132.43 157.22 231.39 20.20 62.43 107.22 231.39 optional MAV and EEB 93.28 141.72 172.78 262.86 23.28 71.72 122.78 262.86 Goldman Sachs VIT Mid Cap Value Fund base contract with no optional riders 89.90 131.50 155.65 228.19 19.90 61.50 105.65 228.19 optional EEB 92.97 140.79 171.23 259.75 22.97 70.79 121.23 259.75 optional MAV 91.43 136.15 163.46 244.09 21.43 66.15 113.46 244.09 optional MAV and EEB 94.51 145.41 178.95 275.19 24.51 75.41 128.95 275.19
23
FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE END OF EACH TIME PERIOD 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS Janus Aspen Series Aggressive Growth Portfolio: Service Shares base contract with no optional riders $89.79 $131.19 $155.13 $227.12 $19.79 $61.19 $105.13 $227.12 optional EEB 92.87 140.48 170.71 258.72 22.87 70.48 120.71 258.72 optional MAV 91.33 135.84 162.94 243.03 21.33 65.84 112.94 243.03 optional MAV and EEB 94.41 145.11 178.43 274.17 24.41 75.11 128.43 274.17 Janus Aspen Series Global Technology Portfolio: Service Shares base contract with no optional riders 90.10 132.12 156.69 230.32 20.10 62.12 106.69 230.32 optional EEB 93.18 141.41 172.26 261.83 23.18 71.41 122.26 261.83 optional MAV 91.64 136.77 164.50 246.19 21.64 66.77 114.50 246.19 optional MAV and EEB 94.71 146.03 179.97 277.23 24.71 76.03 129.97 277.23 Janus Aspen Series International Growth Portfolio: Service Shares base contract with no optional riders 90.20 132.43 157.22 231.39 20.20 62.43 107.22 231.39 optional EEB 93.28 141.72 172.78 262.86 23.28 71.72 122.78 262.86 optional MAV 91.74 137.08 165.02 247.24 21.74 67.08 115.02 247.24 optional MAV and EEB 94.82 146.34 180.49 278.25 24.82 76.34 130.49 278.25 Lazard Retirement International Equity Portfolio base contract with no optional riders 93.18 141.41 172.26 261.83 23.18 71.41 122.26 261.83 optional EEB 96.25 150.64 187.64 292.41 26.25 80.64 137.64 292.41 optional MAV 94.71 146.03 179.97 277.23 24.71 76.03 129.97 277.23 optional MAV and EEB 97.79 155.23 195.25 307.36 27.79 85.23 145.25 307.36 MFS(R) Investors Growth Stock Series - Service Class base contract with no optional riders 92.36 138.94 168.13 253.52 22.36 68.94 118.13 253.52 optional EEB 95.43 148.18 183.55 284.34 25.43 78.18 133.55 284.34 optional MAV 93.89 143.57 175.87 269.04 23.89 73.57 125.87 269.04 optional MAV and EEB 96.97 152.78 191.19 299.42 26.97 82.78 141.19 299.42 MFS(R) New Discovery Series - Service Class base contract with no optional riders 93.79 143.26 175.35 268.02 23.79 73.26 125.35 268.02 optional EEB 96.87 152.47 190.69 298.42 26.87 82.47 140.69 298.42 optional MAV 95.33 147.87 183.04 283.33 25.33 77.87 133.04 283.33 optional MAV and EEB 98.40 157.06 198.28 313.28 28.40 87.06 148.28 313.28 Putnam VT International New Opportunities Fund - Class IB Shares base contract with no optional riders 95.64 148.79 184.58 286.37 25.64 78.79 134.58 286.37 optional EEB 98.71 157.98 199.80 316.23 28.71 87.98 149.80 316.23 optional MAV 97.17 153.39 192.21 301.41 27.17 83.39 142.21 301.41 optional MAV and EEB 100.25 162.55 207.33 330.83 30.25 92.55 157.33 330.83 Putnam VT Vista Fund - Class IB Shares base contract with no optional riders 89.79 131.19 155.13 227.12 19.79 61.19 105.13 227.12 optional EEB 92.87 140.48 170.71 258.72 22.87 70.48 120.71 258.72 optional MAV 91.33 135.84 162.94 243.03 21.33 65.84 112.94 243.03 optional MAV and EEB 94.41 145.11 178.43 274.17 24.41 75.11 128.43 274.17
24
FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE END OF EACH TIME PERIOD 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS Royce Micro-Cap Portfolio base contract with no optional riders $94.20 $144.49 $177.41 $272.12 $24.20 $74.49 $127.41 $272.12 optional EEB 97.28 153.70 192.72 302.40 27.28 83.70 142.72 302.40 optional MAV 95.74 149.10 185.09 287.38 25.74 79.10 135.09 287.38 optional MAV and EEB 98.81 158.28 200.30 317.21 28.81 88.28 150.30 317.21 Third Avenue Value Portfolio base contract with no optional riders 93.69 142.95 174.84 266.99 23.69 72.95 124.84 266.99 optional EEB 96.76 152.17 190.18 297.42 26.76 82.17 140.18 297.42 optional MAV 95.23 147.57 182.53 282.32 25.23 77.57 132.53 282.32 optional MAV and EEB 98.30 156.76 197.78 312.30 28.30 86.76 147.78 312.30 Wanger International Small Cap base contract with no optional riders 95.02 146.95 181.51 280.29 25.02 76.95 131.51 280.29 optional EEB 98.10 156.15 196.77 310.33 28.10 86.15 146.77 310.33 optional MAV 96.56 151.56 189.16 295.42 26.56 81.56 139.16 295.42 optional MAV and EEB 99.63 160.72 204.32 325.02 29.63 90.72 154.32 325.02 Wanger U.S. Smaller Companies (previously Wanger U.S. Small Cap) base contract with no optional riders 90.51 133.36 158.78 234.58 20.51 63.36 108.78 234.58 optional EEB 93.59 142.64 174.32 265.96 23.59 72.64 124.32 265.96 optional MAV 92.05 138.01 166.58 250.38 22.05 68.01 116.58 250.38 optional MAV and EEB 95.12 147.26 182.02 281.30 25.12 77.26 132.02 281.30 Wells Fargo VT Asset Allocation Fund base contract with no optional riders 90.61 133.67 159.30 235.64 20.61 63.67 109.30 235.64 optional EEB 93.69 142.95 174.84 266.99 23.69 72.95 124.84 266.99 optional MAV 92.15 138.32 167.09 251.43 22.15 68.32 117.09 251.43 optional MAV and EEB 95.23 147.57 182.53 282.32 25.23 77.57 132.53 282.32 Wells Fargo VT International Equity Fund base contract with no optional riders 90.61 133.67 159.30 235.64 20.61 63.67 109.30 235.64 optional EEB 93.69 142.95 174.84 266.99 23.69 72.95 124.84 266.99 optional MAV 92.15 138.32 167.09 251.43 22.15 68.32 117.09 251.43 optional MAV and EEB 95.23 147.57 182.53 282.32 25.23 77.57 132.53 282.32 Wells Fargo VT Small Cap Growth Fund base contract with no optional riders 92.66 139.86 169.68 256.64 22.66 69.86 119.68 256.64 optional EEB 95.74 149.10 185.09 287.38 25.74 79.10 135.09 287.38 optional MAV 94.20 144.49 177.41 272.12 24.20 74.49 127.41 272.12 optional MAV and EEB 97.28 153.70 192.72 302.40 27.28 83.70 142.72 302.40
25 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 ...
FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE 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 no additional riders $86.31 $120.59 $137.22 $190.16 $16.31 $50.59 $ 87.22 $190.16 optional MAV 87.85 125.28 145.15 206.62 17.85 55.28 95.15 206.62 AXP(R) VP - Bond Fund no additional riders 86.51 121.22 138.28 192.37 16.51 51.22 88.28 192.37 optional MAV 88.05 125.90 146.21 208.79 18.05 55.90 96.21 208.79 AXP(R) VP - Capital Resource Fund no additional riders 86.31 120.59 137.22 190.16 16.31 50.59 87.22 190.16 optional MAV 87.85 125.28 145.15 206.62 17.85 55.28 95.15 206.62 AXP(R) VP - Cash Management Fund no additional riders 85.28 117.46 131.91 179.05 15.28 47.46 81.91 179.05 optional MAV 86.82 122.15 139.87 195.67 16.82 52.15 89.87 195.67 AXP(R) VP - Diversified Equity Income Fund no additional riders 87.64 124.65 144.10 204.44 17.64 54.65 94.10 204.44 optional MAV 89.18 129.32 151.98 220.69 19.18 59.32 101.98 220.69 AXP(R) VP - Emerging Markets Fund no additional riders 96.25 150.64 187.64 292.41 26.25 80.64 137.64 292.41 optional MAV 97.79 155.23 195.25 307.36 27.79 85.23 145.25 307.36 AXP(R) VP - Equity Select Fund no additional riders 89.59 130.57 154.08 224.98 19.59 60.57 104.08 224.98 optional MAV 91.13 135.22 161.90 240.93 21.13 65.22 111.90 240.93 AXP(R) VP - Extra Income Fund no additional riders 86.72 121.84 139.34 194.57 16.72 51.84 89.34 194.57 optional MAV 88.26 126.52 147.26 210.97 18.26 56.52 97.26 210.97 AXP(R) VP - Federal Income Fund no additional riders 86.92 122.47 140.40 196.77 16.92 52.47 90.40 196.77 optional MAV 88.46 127.15 148.31 213.13 18.46 57.15 98.31 213.13 AXP(R) VP - Global Bond Fund no additional riders 89.28 129.64 152.51 221.76 19.28 59.64 102.51 221.76 optional MAV 90.82 134.29 160.34 237.76 20.82 64.29 110.34 237.76 AXP(R) VP - Growth Fund no additional riders 87.54 124.34 143.57 203.35 17.54 54.34 93.57 203.35 optional MAV 89.08 129.01 151.46 219.61 19.08 59.01 101.46 219.61 AXP(R) VP - International Fund no additional riders 88.97 128.70 150.94 218.53 18.97 58.70 100.94 218.53 optional MAV 90.51 133.36 158.78 234.58 20.51 63.36 108.78 234.58 AXP(R) VP - Managed Fund no additional riders 86.10 119.96 136.16 187.95 16.10 49.96 86.16 187.95 optional MAV 87.64 124.65 144.10 204.44 17.64 54.65 94.10 204.44 AXP(R) VP - NEW DIMENSIONS FUND(R) no additional riders 86.41 120.90 137.75 191.27 16.41 50.90 87.75 191.27 optional MAV 87.95 125.59 145.68 207.71 17.95 55.59 95.68 207.71
26
FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE END OF EACH TIME PERIOD 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS AXP(R) VP - S&P 500 Index Fund no additional riders $83.34 $111.49 $121.75 $157.65 $13.34 $41.49 $ 71.75 $157.65 optional MAV 84.87 116.20 129.77 174.58 14.87 46.20 79.77 174.58 AXP(R) VP - Small Cap Advantage Fund no additional riders 90.20 132.43 157.22 231.39 20.20 62.43 107.22 231.39 optional MAV 91.74 137.08 165.02 247.24 21.74 67.08 115.02 247.24 AXP(R) VP - Strategy Aggressive Fund no additional riders 86.31 120.59 137.22 190.16 16.31 50.59 87.22 190.16 optional MAV 87.85 125.28 145.15 206.62 17.85 55.28 95.15 206.62 AIM V.I. Capital Appreciation Fund, Series I no additional riders 87.03 122.78 140.93 197.87 17.03 52.78 90.93 197.87 optional MAV 88.56 127.46 148.84 214.22 18.56 57.46 98.84 214.22 AIM V.I. Capital Development Fund, Series I no additional riders 90.20 132.43 157.22 231.39 20.20 62.43 107.22 231.39 optional MAV 91.74 137.08 165.02 247.24 21.74 67.08 115.02 247.24 American Century(R) VP International no additional riders 91.23 135.53 162.42 241.98 21.23 65.53 112.42 241.98 optional MAV 92.77 140.17 170.20 257.68 22.77 70.17 120.20 257.68 American Century(R) VP Value no additional riders 88.26 126.52 147.26 210.97 18.26 56.52 97.26 210.97 optional MAV 89.79 131.19 155.13 227.12 19.79 61.19 105.13 227.12 Calvert Variable Series, Inc. Social Balanced Portfolio no additional riders 87.23 123.40 141.99 200.06 17.23 53.40 91.99 200.06 optional MAV 88.77 128.08 149.89 216.38 18.77 58.08 99.89 216.38 Credit Suisse Trust - Emerging Growth Portfolio no additional riders 91.13 135.22 161.90 240.93 21.13 65.22 111.90 240.93 optional MAV 92.66 139.86 169.68 256.64 22.66 69.86 119.68 256.64 Fidelity VIP Growth & Income Portfolio (Service Class) no additional riders 85.28 117.46 131.91 179.05 15.28 47.46 81.91 179.05 optional MAV 86.82 122.15 139.87 195.67 16.82 52.15 89.87 195.67 Fidelity VIP Mid Cap Portfolio (Service Class) no additional riders 86.41 120.90 137.75 191.27 16.41 50.90 87.75 191.27 optional MAV 87.95 125.59 145.68 207.71 17.95 55.59 95.68 207.71 Fidelity VIP Overseas Portfolio (Service Class) no additional riders 88.87 128.39 150.41 217.46 18.87 58.39 100.41 217.46 optional MAV 90.41 133.05 158.26 233.51 20.41 63.05 108.26 233.51 FTVIPT Franklin Real Estate Fund - Class 2 no additional riders 86.92 122.47 140.40 196.77 16.92 52.47 90.40 196.77 optional MAV 88.46 127.15 148.31 213.13 18.46 57.15 98.31 213.13 FTVIPT Franklin Small Cap Value Securities Fund - Class 2 (previously FTVIPT Franklin Value Securities Fund - Class 2) no additional riders 88.77 128.08 149.89 216.38 18.77 58.08 99.89 216.38 optional MAV 90.31 132.74 157.74 232.45 20.31 62.74 107.74 232.45
27
FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE END OF EACH TIME PERIOD 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS FTVIPT Templeton Foreign Securities Fund - Class 2 (previously FTVIPT Templeton International Securities Fund - Class 2) no additional riders $90.10 $132.12 $156.69 $230.32 $20.10 $62.12 $106.69 $230.32 optional MAV 91.64 136.77 164.50 246.19 21.64 66.77 114.50 246.19 Goldman Sachs VIT CORE(SM) Small Cap Equity Fund no additional riders 88.56 127.46 148.84 214.22 18.56 57.46 98.84 214.22 optional MAV 90.10 132.12 156.69 230.32 20.10 62.12 106.69 230.32 Goldman Sachs VIT CORE(SM) U.S. Equity Fund no additional riders 86.62 121.53 138.81 193.47 16.62 51.53 88.81 193.47 optional MAV 88.15 126.21 146.73 209.88 18.15 56.21 96.73 209.88 Goldman Sachs VIT Mid Cap Value Fund no additional riders 87.85 125.28 145.15 206.62 17.85 55.28 95.15 206.62 optional MAV 89.38 129.95 153.03 222.83 19.38 59.95 103.03 222.83 Janus Aspen Series Aggressive Growth Portfolio: Service Shares no additional riders 87.74 124.96 144.62 205.53 17.74 54.96 94.62 205.53 optional MAV 89.28 129.64 152.51 221.76 19.28 59.64 102.51 221.76 Janus Aspen Series Global Technology Portfolio: Service Shares no additional riders 88.05 125.90 146.21 208.79 18.05 55.90 96.21 208.79 optional MAV 89.59 130.57 154.08 224.98 19.59 60.57 104.08 224.98 Janus Aspen Series International Growth Portfolio: Service Shares no additional riders 88.15 126.21 146.73 209.88 18.15 56.21 96.73 209.88 optional MAV 89.69 130.88 154.60 226.05 19.69 60.88 104.60 226.05 Lazard Retirement International Equity Portfolio no additional riders 91.13 135.22 161.90 240.93 21.13 65.22 111.90 240.93 optional MAV 92.66 139.86 169.68 256.64 22.66 69.86 119.68 256.64 MFS(R) Investors Growth Stock Series - Service Class no additional riders 90.31 132.74 157.74 232.45 20.31 62.74 107.74 232.45 optional MAV 91.84 137.39 165.54 248.29 21.84 67.39 115.54 248.29 MFS(R) New Discovery Series - Service Class no additional riders 91.74 137.08 165.02 247.24 21.74 67.08 115.02 247.24 optional MAV 93.28 141.72 172.78 262.86 23.28 71.72 122.78 262.86 Putnam VT International New Opportunities Fund - Class IB Shares no additional riders 93.59 142.64 174.32 265.96 23.59 72.64 124.32 265.96 optional MAV 95.12 147.26 182.02 281.30 25.12 77.26 132.02 281.30 Putnam VT Vista Fund - Class IB Shares no additional riders 87.74 124.96 144.62 205.53 17.74 54.96 94.62 205.53 optional MAV 89.28 129.64 152.51 221.76 19.28 59.64 102.51 221.76 Royce Micro-Cap Portfolio no additional riders 92.15 138.32 167.09 251.43 22.15 68.32 117.09 251.43 optional MAV 93.69 142.95 174.84 266.99 23.69 72.95 124.84 266.99 Third Avenue Value Portfolio no additional riders 91.64 136.77 164.50 246.19 21.64 66.77 114.50 246.19 optional MAV 93.18 141.41 172.26 261.83 23.18 71.41 122.26 261.83
28
FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE END OF EACH TIME PERIOD 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS Wanger International Small Cap no additional riders $92.97 $140.79 $171.23 $259.75 $22.97 $70.79 $121.23 $259.75 optional MAV 94.51 145.41 178.95 275.19 24.51 75.41 128.95 275.19 Wanger U.S. Smaller Companies (previously Wanger U.S. Small Cap) no additional riders 88.46 127.15 148.31 213.13 18.46 57.15 98.31 213.13 optional MAV 90.00 131.81 156.17 229.25 20.00 61.81 106.17 229.25 Wells Fargo VT Asset Allocation Fund no additional riders 88.56 127.46 148.84 214.22 18.56 57.46 98.84 214.22 optional MAV 90.10 132.12 156.69 230.32 20.10 62.12 106.69 230.32 Wells Fargo VT International Equity Fund no additional riders 88.56 127.46 148.84 214.22 18.56 57.46 98.84 214.22 optional MAV 90.10 132.12 156.69 230.32 20.10 62.12 106.69 230.32 Wells Fargo VT Small Cap Growth Fund no additional riders 90.61 133.67 159.30 235.64 20.61 63.67 109.30 235.64 optional MAV 92.15 138.32 167.09 251.43 22.15 68.32 117.09 251.43
* In these examples, the $30 contract administrative charge is approximated as a 0.061% charge based on our average contract size. Premium taxes imposed by some state and local governments are not reflected in this table. We entered into certain arrangements under which we are compensated by the funds' advisors and/or distributors for the administrative services we provide to the funds. + 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. 29 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 did not have any activity as of the date of the financial statement.
YEAR ENDED DEC. 31, 2001 2000 1999 ------------------------------------------------------------------------------------------------------------------------------ SUBACCOUNT BC1(1) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - BLUE CHIP ADVANTAGE FUND) Accumulation unit value at beginning of period $0.98 $1.11 $1.00 Accumulation unit value at end of period $0.81 $0.98 $1.11 Number of accumulation units outstanding at end of period (000 omitted) 49,897 43,161 8,145 Ratio of operating expense to average net assets 0.95% 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 $0.99 $1.11 $1.00 Accumulation unit value at end of period $0.82 $0.99 $1.11 Number of accumulation units outstanding at end of period (000 omitted) 41,083 32,624 7,503 Ratio of operating expense to average net assets 0.75% 0.75% 0.75% SUBACCOUNT BD1(1) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - BOND FUND) Accumulation unit value at beginning of period $1.06 $1.01 $1.00 Accumulation unit value at end of period $1.13 $1.06 $1.01 Number of accumulation units outstanding at end of period (000 omitted) 106,760 43,920 11,675 Ratio of operating expense to average net assets 0.95% 0.95% 0.95% SUBACCOUNT BD2(1) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - BOND FUND) Accumulation unit value at beginning of period $1.06 $1.01 $1.00 Accumulation unit value at end of period $1.13 $1.06 $1.01 Number of accumulation units outstanding at end of period (000 omitted) 83,968 30,783 7,186 Ratio of operating expense to average net assets 0.75% 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 $0.93 $1.14 $1.00 Accumulation unit value at end of period $0.76 $0.93 $1.14 Number of accumulation units outstanding at end of period (000 omitted) 26,779 22,159 3,227 Ratio of operating expense to average net assets 0.95% 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 $0.93 $1.14 $1.00 Accumulation unit value at end of period $0.76 $0.93 $1.14 Number of accumulation units outstanding at end of period (000 omitted) 26,327 24,003 5,333 Ratio of operating expense to average net assets 0.75% 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 $1.06 $1.01 $1.00 Accumulation unit value at end of period $1.09 $1.06 $1.01 Number of accumulation units outstanding at end of period (000 omitted) 265,455 203,922 87,424 Ratio of operating expense to average net assets 0.95% 0.95% 0.95% Simple yield(2) 0.65% 4.96% 5.03% Compound yield(2) 0.65% 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 $1.06 $1.01 $1.00 Accumulation unit value at end of period $1.09 $1.06 $1.01 Number of accumulation units outstanding at end of period (000 omitted) 243,870 171,785 65,522 Ratio of operating expense to average net assets 0.75% 0.75% 0.75% Simple yield(2) 0.82% 5.16% 5.26% Compound yield(2) 0.82% 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 $1.01 $1.03 $1.00 Accumulation unit value at end of period $1.02 $1.01 $1.03 Number of accumulation units outstanding at end of period (000 omitted) 41,299 14,227 3,441 Ratio of operating expense to average net assets 0.95% 0.95% 0.95%
30
YEAR ENDED DEC. 31, 2001 2000 1999 ------------------------------------------------------------------------------------------------------------------------------ SUBACCOUNT DE2(1) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - DIVERSIFIED EQUITY INCOME FUND) Accumulation unit value at beginning of period $1.01 $1.03 $1.00 Accumulation unit value at end of period $1.02 $1.01 $1.03 Number of accumulation units outstanding at end of period (000 omitted) 43,328 12,124 3,149 Ratio of operating expense to average net assets 0.75% 0.75% 0.75% SUBACCOUNT EM1(3) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - EMERGING MARKETS FUND) Accumulation unit value at beginning of period $0.74 $1.00 -- Accumulation unit value at end of period $0.72 $0.74 -- Number of accumulation units outstanding at end of period (000 omitted) 1,542 693 -- Ratio of operating expense to average net assets 0.95% 0.95% -- SUBACCOUNT EM2(3) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - EMERGING MARKETS FUND) Accumulation unit value at beginning of period $0.74 $1.00 -- Accumulation unit value at end of period $0.72 $0.74 -- Number of accumulation units outstanding at end of period (000 omitted) 1,789 906 -- Ratio of operating expense to average net assets 0.75% 0.75% -- SUBACCOUNT ES1(4) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - EQUITY SELECT FUND) Accumulation unit value at beginning of period $1.00 -- -- Accumulation unit value at end of period $0.99 -- -- Number of accumulation units outstanding at end of period (000 omitted) 2,238 -- -- Ratio of operating expense to average net assets 0.95% -- -- SUBACCOUNT ES2(4) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - EQUITY SELECT FUND) Accumulation unit value at beginning of period $1.00 -- -- Accumulation unit value at end of period $1.00 -- -- Number of accumulation units outstanding at end of period (000 omitted) 2,489 -- -- 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 $0.91 $1.01 $1.00 Accumulation unit value at end of period $0.94 $0.91 $1.01 Number of accumulation units outstanding at end of period (000 omitted) 88,813 52,655 10,137 Ratio of operating expense to average net assets 0.95% 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 $0.91 $1.01 $1.00 Accumulation unit value at end of period $0.95 $0.91 $1.01 Number of accumulation units outstanding at end of period (000 omitted) 58,348 31,722 7,774 Ratio of operating expense to average net assets 0.75% 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 $1.08 $1.00 $1.00 Accumulation unit value at end of period $1.13 $1.08 $1.00 Number of accumulation units outstanding at end of period (000 omitted) 56,966 24,654 12,796 Ratio of operating expense to average net assets 0.95% 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 $1.08 $1.00 $1.00 Accumulation unit value at end of period $1.14 $1.08 $1.00 Number of accumulation units outstanding at end of period (000 omitted) 50,510 16,258 11,135 Ratio of operating expense to average net assets 0.75% 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 $1.02 $1.00 $1.00 Accumulation unit value at end of period $1.03 $1.02 $1.00 Number of accumulation units outstanding at end of period (000 omitted) 23,970 14,137 2,368 Ratio of operating expense to average net assets 0.95% 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 $1.03 $1.00 $1.00 Accumulation unit value at end of period $1.03 $1.03 $1.00 Number of accumulation units outstanding at end of period (000 omitted) 16,572 8,968 1,552 Ratio of operating expense to average net assets 0.75% 0.75% 0.75%
31
YEAR ENDED DEC. 31, 2001 2000 1999 ------------------------------------------------------------------------------------------------------------------------------ SUBACCOUNT GR1(1) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - GROWTH FUND) Accumulation unit value at beginning of period $0.94 $1.18 $1.00 Accumulation unit value at end of period $0.64 $0.94 $1.18 Number of accumulation units outstanding at end of period (000 omitted) 130,764 106,410 13,813 Ratio of operating expense to average net assets 0.95% 0.95% 0.95% SUBACCOUNT GR2(1) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - GROWTH FUND) Accumulation unit value at beginning of period $0.95 $1.18 $1.00 Accumulation unit value at end of period $0.65 $0.95 $1.18 Number of accumulation units outstanding at end of period (000 omitted) 129,186 97,754 16,891 Ratio of operating expense to average net assets 0.75% 0.75% 0.75% SUBACCOUNT IE1(1) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - INTERNATIONAL FUND) Accumulation unit value at beginning of period $0.95 $1.27 $1.00 Accumulation unit value at end of period $0.67 $0.95 $1.27 Number of accumulation units outstanding at end of period (000 omitted) 18,664 15,670 2,173 Ratio of operating expense to average net assets 0.95% 0.95% 0.95% SUBACCOUNT IE2(1) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - INTERNATIONAL FUND) Accumulation unit value at beginning of period $0.95 $1.27 $1.00 Accumulation unit value at end of period $0.67 $0.95 $1.27 Number of accumulation units outstanding at end of period (000 omitted) 15,821 13,967 2,575 Ratio of operating expense to average net assets 0.75% 0.75% 0.75% SUBACCOUNT MF1(1) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - MANAGED FUND) Accumulation unit value at beginning of period $1.05 $1.09 $1.00 Accumulation unit value at end of period $0.93 $1.05 $1.09 Number of accumulation units outstanding at end of period (000 omitted) 53,096 39,810 6,539 Ratio of operating expense to average net assets 0.95% 0.95% 0.95% SUBACCOUNT MF2(1) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - MANAGED FUND) Accumulation unit value at beginning of period $1.05 $1.09 $1.00 Accumulation unit value at end of period $0.94 $1.05 $1.09 Number of accumulation units outstanding at end of period (000 omitted) 37,760 28,348 5,220 Ratio of operating expense to average net assets 0.75% 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 $1.07 $1.19 $1.00 Accumulation unit value at end of period $0.88 $1.07 $1.19 Number of accumulation units outstanding at end of period (000 omitted) 307,320 219,316 32,483 Ratio of operating expense to average net assets 0.95% 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 $1.07 $1.19 $1.00 Accumulation unit value at end of period $0.89 $1.07 $1.19 Number of accumulation units outstanding at end of period (000 omitted) 276,054 177,036 31,537 Ratio of operating expense to average net assets 0.75% 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 $0.91 $1.00 -- Accumulation unit value at end of period $0.79 $0.91 -- Number of accumulation units outstanding at end of period (000 omitted) 40,575 14,084 -- Ratio of operating expense to average net assets 0.95% 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 $0.91 $1.00 -- Accumulation unit value at end of period $0.79 $0.91 -- Number of accumulation units outstanding at end of period (000 omitted) 35,957 9,812 -- Ratio of operating expense to average net assets 0.75% 0.75% -- SUBACCOUNT SC1(1) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - SMALL CAP ADVANTAGE FUND) Accumulation unit value at beginning of period $1.16 $1.12 $1.00 Accumulation unit value at end of period $1.07 $1.16 $1.12 Number of accumulation units outstanding at end of period (000 omitted) 24,346 16,349 3,029 Ratio of operating expense to average net assets 0.95% 0.95% 0.95%
32
YEAR ENDED DEC. 31, 2001 2000 1999 ------------------------------------------------------------------------------------------------------------------------------ SUBACCOUNT SC2(1) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - SMALL CAP ADVANTAGE FUND) Accumulation unit value at beginning of period $1.16 $1.12 $1.00 Accumulation unit value at end of period $1.08 $1.16 $1.12 Number of accumulation units outstanding at end of period (000 omitted) 22,792 14,830 2,970 Ratio of operating expense to average net assets 0.75% 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 $1.21 $1.51 $1.00 Accumulation unit value at end of period $0.81 $1.21 $1.51 Number of accumulation units outstanding at end of period (000 omitted) 65,574 58,414 3,901 Ratio of operating expense to average net assets 0.95% 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 $1.22 $1.51 $1.00 Accumulation unit value at end of period $0.81 $1.22 $1.51 Number of accumulation units outstanding at end of period (000 omitted) 58,748 46,978 4,470 Ratio of operating expense to average net assets 0.75% 0.75% 0.75% SUBACCOUNT 1CA(1) (INVESTING IN SHARES OF AIM V.I. CAPITAL APPRECIATION FUND, SERIES I) Accumulation unit value at beginning of period $1.16 $1.31 $1.00 Accumulation unit value at end of period $0.88 $1.16 $1.31 Number of accumulation units outstanding at end of period (000 omitted) 55,044 46,419 5,160 Ratio of operating expense to average net assets 0.95% 0.95% 0.95% SUBACCOUNT 2CA(1) (INVESTING IN SHARES OF AIM V.I. CAPITAL APPRECIATION FUND, SERIES I) Accumulation unit value at beginning of period $1.16 $1.31 $1.00 Accumulation unit value at end of period $0.88 $1.16 $1.31 Number of accumulation units outstanding at end of period (000 omitted) 49,574 37,379 4,337 Ratio of operating expense to average net assets 0.75% 0.75% 0.75% SUBACCOUNT 1CD(1) (INVESTING IN SHARES OF AIM V.I. CAPITAL DEVELOPMENT FUND, SERIES I) Accumulation unit value at beginning of period $1.37 $1.26 $1.00 Accumulation unit value at end of period $1.25 $1.37 $1.26 Number of accumulation units outstanding at end of period (000 omitted) 25,531 19,878 1,892 Ratio of operating expense to average net assets 0.95% 0.95% 0.95% SUBACCOUNT 2CD(1) (INVESTING IN SHARES OF AIM V.I. CAPITAL DEVELOPMENT FUND, SERIES I) Accumulation unit value at beginning of period $1.37 $1.26 $1.00 Accumulation unit value at end of period $1.25 $1.37 $1.26 Number of accumulation units outstanding at end of period (000 omitted) 23,324 16,977 1,678 Ratio of operating expense to average net assets 0.75% 0.75% 0.75% SUBACCOUNT 1IF(1) (INVESTING IN SHARES OF AMERICAN CENTURY(R) VP INTERNATIONAL) Accumulation unit value at beginning of period $1.18 $1.44 $1.00 Accumulation unit value at end of period $0.83 $1.18 $1.44 Number of accumulation units outstanding at end of period (000 omitted) 32,127 20,591 2,094 Ratio of operating expense to average net assets 0.95% 0.95% 0.95% SUBACCOUNT 2IF(1) (INVESTING IN SHARES OF AMERICAN CENTURY(R) VP INTERNATIONAL) Accumulation unit value at beginning of period $1.19 $1.44 $1.00 Accumulation unit value at end of period $0.83 $1.19 $1.44 Number of accumulation units outstanding at end of period (000 omitted) 25,459 15,533 1,791 Ratio of operating expense to average net assets 0.75% 0.75% 0.75% SUBACCOUNT 1VA(1) (INVESTING IN SHARES OF AMERICAN CENTURY(R) VP VALUE) Accumulation unit value at beginning of period $1.08 $0.92 $1.00 Accumulation unit value at end of period $1.20 $1.08 $0.92 Number of accumulation units outstanding at end of period (000 omitted) 41,460 21,041 4,775 Ratio of operating expense to average net assets 0.95% 0.95% 0.95% SUBACCOUNT 2VA(1) (INVESTING IN SHARES OF AMERICAN CENTURY(R) VP VALUE) Accumulation unit value at beginning of period $1.08 $0.92 $1.00 Accumulation unit value at end of period $1.21 $1.08 $0.92 Number of accumulation units outstanding at end of period (000 omitted) 35,248 14,536 3,657 Ratio of operating expense to average net assets 0.75% 0.75% 0.75%
33
YEAR ENDED DEC. 31, 2001 2000 1999 ------------------------------------------------------------------------------------------------------------------------------ SUBACCOUNT 1SR(3) (INVESTING IN SHARES OF CALVERT VARIABLE SERIES, INC. SOCIAL BALANCED PORTFOLIO) Accumulation unit value at beginning of period $0.96 $1.00 -- Accumulation unit value at end of period $0.89 $0.96 -- Number of accumulation units outstanding at end of period (000 omitted) 6,090 1,693 -- Ratio of operating expense to average net assets 0.95% 0.95% -- SUBACCOUNT 2SR(3) (INVESTING IN SHARES OF CALVERT VARIABLE SERIES, INC. SOCIAL BALANCED PORTFOLIO) Accumulation unit value at beginning of period $0.96 $1.00 -- Accumulation unit value at end of period $0.89 $0.96 -- Number of accumulation units outstanding at end of period (000 omitted) 4,490 1,283 -- Ratio of operating expense to average net assets 0.75% 0.75% -- SUBACCOUNT 1EG(5) (INVESTING IN SHARES OF CREDIT SUISSE TRUST - EMERGING GROWTH PORTFOLIO) Accumulation unit value at beginning of period $1.28 $1.32 $1.00 Accumulation unit value at end of period $1.06 $1.28 $1.32 Number of accumulation units outstanding at end of period (000 omitted) 24,697 22,624 2,872 Ratio of operating expense to average net assets 0.95% 0.95% 0.95% SUBACCOUNT 2EG(5) (INVESTING IN SHARES OF CREDIT SUISSE TRUST - EMERGING GROWTH PORTFOLIO) Accumulation unit value at beginning of period $1.29 $1.32 $1.00 Accumulation unit value at end of period $1.07 $1.29 $1.32 Number of accumulation units outstanding at end of period (000 omitted) 20,158 17,825 1,838 Ratio of operating expense to average net assets 0.75% 0.75% 0.75% SUBACCOUNT 1GI(1) (INVESTING IN SHARES OF FIDELITY VIP GROWTH & INCOME PORTFOLIO (SERVICE CLASS)) Accumulation unit value at beginning of period $1.00 $1.04 $1.00 Accumulation unit value at end of period $0.90 $1.00 $1.04 Number of accumulation units outstanding at end of period (000 omitted) 119,736 77,558 18,137 Ratio of operating expense to average net assets 0.95% 0.95% 0.95% SUBACCOUNT 2GI(1) (INVESTING IN SHARES OF FIDELITY VIP GROWTH & INCOME PORTFOLIO (SERVICE CLASS)) Accumulation unit value at beginning of period $1.00 $1.05 $1.00 Accumulation unit value at end of period $0.90 $1.00 $1.05 Number of accumulation units outstanding at end of period (000 omitted) 103,719 63,414 15,603 Ratio of operating expense to average net assets 0.75% 0.75% 0.75% SUBACCOUNT 1MP(1) (INVESTING IN SHARES OF FIDELITY VIP MID CAP PORTFOLIO (SERVICE CLASS)) Accumulation unit value at beginning of period $1.64 $1.24 $1.00 Accumulation unit value at end of period $1.57 $1.64 $1.24 Number of accumulation units outstanding at end of period (000 omitted) 67,132 48,251 6,945 Ratio of operating expense to average net assets 0.95% 0.95% 0.95% SUBACCOUNT 2MP(1) (INVESTING IN SHARES OF FIDELITY VIP MID CAP PORTFOLIO (SERVICE CLASS)) Accumulation unit value at beginning of period $1.65 $1.24 $1.00 Accumulation unit value at end of period $1.58 $1.65 $1.24 Number of accumulation units outstanding at end of period (000 omitted) 59,393 38,193 5,709 Ratio of operating expense to average net assets 0.75% 0.75% 0.75% SUBACCOUNT 1OS(1) (INVESTING IN SHARES OF FIDELITY VIP OVERSEAS PORTFOLIO (SERVICE CLASS)) Accumulation unit value at beginning of period $0.98 $1.23 $1.00 Accumulation unit value at end of period $0.77 $0.98 $1.23 Number of accumulation units outstanding at end of period (000 omitted) 32,758 22,910 3,612 Ratio of operating expense to average net assets 0.95% 0.95% 0.95% SUBACCOUNT 2OS(1) (INVESTING IN SHARES OF FIDELITY VIP OVERSEAS PORTFOLIO (SERVICE CLASS)) Accumulation unit value at beginning of period $0.98 $1.23 $1.00 Accumulation unit value at end of period $0.77 $0.98 $1.23 Number of accumulation units outstanding at end of period (000 omitted) 27,850 18,802 3,421 Ratio of operating expense to average net assets 0.75% 0.75% 0.75% SUBACCOUNT 1RE(1) (INVESTING IN SHARES OF FTVIPT FRANKLIN REAL ESTATE FUND - CLASS 2) Accumulation unit value at beginning of period $1.25 $0.96 $1.00 Accumulation unit value at end of period $1.33 $1.25 $0.96 Number of accumulation units outstanding at end of period (000 omitted) 19,803 6,181 683 Ratio of operating expense to average net assets 0.95% 0.95% 0.95%
34
YEAR ENDED DEC. 31, 2001 2000 1999 ------------------------------------------------------------------------------------------------------------------------------ SUBACCOUNT 2RE(1) (INVESTING IN SHARES OF FTVIPT FRANKLIN REAL ESTATE FUND - CLASS 2) Accumulation unit value at beginning of period $1.25 $0.96 $1.00 Accumulation unit value at end of period $1.34 $1.25 $0.96 Number of accumulation units outstanding at end of period (000 omitted) 24,477 6,879 885 Ratio of operating expense to average net assets 0.75% 0.75% 0.75% SUBACCOUNT 1SI(1) (INVESTING IN SHARES OF FTVIPT FRANKLIN SMALL CAP VALUE SECURITIES FUND - CLASS 2) (PREVIOUSLY FTVIPT FRANKLIN VALUE SECURITIES FUND - CLASS 2) Accumulation unit value at beginning of period $1.19 $0.96 $1.00 Accumulation unit value at end of period $1.34 $1.19 $0.96 Number of accumulation units outstanding at end of period (000 omitted) 9,584 2,897 590 Ratio of operating expense to average net assets 0.95% 0.95% 0.95% SUBACCOUNT 2SI(1) (INVESTING IN SHARES OF FTVIPT FRANKLIN SMALL CAP VALUE SECURITIES FUND - CLASS 2) (PREVIOUSLY FTVIPT FRANKLIN VALUE SECURITIES FUND - CLASS 2) Accumulation unit value at beginning of period $1.19 $0.96 $1.00 Accumulation unit value at end of period $1.35 $1.19 $0.96 Number of accumulation units outstanding at end of period (000 omitted) 10,800 2,846 586 Ratio of operating expense to average net assets 0.75% 0.75% 0.75% SUBACCOUNT 1IS(1),(6) (INVESTING IN SHARES OF FTVIPT TEMPLETON INTERNATIONAL SMALLER COMPANIES FUND - CLASS 2) Accumulation unit value at beginning of period $0.99 $1.02 $1.00 Accumulation unit value at end of period $0.96 $0.99 $1.02 Number of accumulation units outstanding at end of period (000 omitted) 7,075 5,682 1,053 Ratio of operating expense to average net assets 0.95% 0.95% 0.95% SUBACCOUNT 2IS(1),(6) (INVESTING IN SHARES OF FTVIPT TEMPLETON INTERNATIONAL SMALLER COMPANIES FUND - CLASS 2) Accumulation unit value at beginning of period $1.00 $1.02 $1.00 Accumulation unit value at end of period $0.96 $1.00 $1.02 Number of accumulation units outstanding at end of period (000 omitted) 5,897 3,340 897 Ratio of operating expense to average net assets 0.75% 0.75% 0.75% SUBACCOUNT 1SE(1) (INVESTING IN SHARES OF GOLDMAN SACHS VIT CORE(SM) SMALL CAP EQUITY FUND) Accumulation unit value at beginning of period $1.14 $1.13 $1.00 Accumulation unit value at end of period $1.18 $1.14 $1.13 Number of accumulation units outstanding at end of period (000 omitted) 18,974 14,809 2,665 Ratio of operating expense to average net assets 0.95% 0.95% 0.95% SUBACCOUNT 2SE(1) (INVESTING IN SHARES OF GOLDMAN SACHS VIT CORE(SM) SMALL CAP EQUITY FUND) Accumulation unit value at beginning of period $1.14 $1.13 $1.00 Accumulation unit value at end of period $1.19 $1.14 $1.13 Number of accumulation units outstanding at end of period (000 omitted) 14,153 10,252 1,876 Ratio of operating expense to average net assets 0.75% 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 $0.99 $1.10 $1.00 Accumulation unit value at end of period $0.86 $0.99 $1.10 Number of accumulation units outstanding at end of period (000 omitted) 71,185 55,239 9,951 Ratio of operating expense to average net assets 0.95% 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 $0.99 $1.10 $1.00 Accumulation unit value at end of period $0.86 $0.99 $1.10 Number of accumulation units outstanding at end of period (000 omitted) 60,343 42,626 8,981 Ratio of operating expense to average net assets 0.75% 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 $1.23 $0.95 $1.00 Accumulation unit value at end of period $1.37 $1.23 $0.95 Number of accumulation units outstanding at end of period (000 omitted) 24,711 10,265 2,023 Ratio of operating expense to average net assets 0.95% 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 $1.23 $0.95 $1.00 Accumulation unit value at end of period $1.37 $1.23 $0.95 Number of accumulation units outstanding at end of period (000 omitted) 23,748 7,622 1,634 Ratio of operating expense to average net assets 0.75% 0.75% 0.75%
35
YEAR ENDED DEC. 31, 2001 2000 1999 ------------------------------------------------------------------------------------------------------------------------------ SUBACCOUNT 1AG(3) (INVESTING IN SHARES OF JANUS ASPEN SERIES AGGRESSIVE GROWTH PORTFOLIO: SERVICE SHARES) Accumulation unit value at beginning of period $0.70 $1.00 -- Accumulation unit value at end of period $0.42 $0.70 -- Number of accumulation units outstanding at end of period (000 omitted) 51,500 33,689 -- Ratio of operating expense to average net assets 0.95% 0.95% -- SUBACCOUNT 2AG(3) (INVESTING IN SHARES OF JANUS ASPEN SERIES AGGRESSIVE GROWTH PORTFOLIO: SERVICE SHARES) Accumulation unit value at beginning of period $0.70 $1.00 -- Accumulation unit value at end of period $0.42 $0.70 -- Number of accumulation units outstanding at end of period (000 omitted) 54,805 29,626 -- 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 $0.68 $1.00 -- Accumulation unit value at end of period $0.42 $0.68 -- Number of accumulation units outstanding at end of period (000 omitted) 34,050 22,949 -- Ratio of operating expense to average net assets 0.95% 0.95% -- SUBACCOUNT 2GT(3) (INVESTING IN SHARES OF JANUS ASPEN SERIES GLOBAL TECHNOLOGY PORTFOLIO: SERVICE SHARES) Accumulation unit value at beginning of period $0.68 $1.00 -- Accumulation unit value at end of period $0.43 $0.68 -- Number of accumulation units outstanding at end of period (000 omitted) 34,767 20,288 -- Ratio of operating expense to average net assets 0.75% 0.75% -- SUBACCOUNT 1IG(3) (INVESTING IN SHARES OF JANUS ASPEN SERIES INTERNATIONAL GROWTH PORTFOLIO: SERVICE SHARES) Accumulation unit value at beginning of period $0.80 $1.00 -- Accumulation unit value at end of period $0.61 $0.80 -- Number of accumulation units outstanding at end of period (000 omitted) 64,147 29,251 -- Ratio of operating expense to average net assets 0.95% 0.95% -- SUBACCOUNT 2IG(3) (INVESTING IN SHARES OF JANUS ASPEN SERIES INTERNATIONAL GROWTH PORTFOLIO: SERVICE SHARES) Accumulation unit value at beginning of period $0.80 $1.00 -- Accumulation unit value at end of period $0.61 $0.80 -- Number of accumulation units outstanding at end of period (000 omitted) 60,527 25,763 -- Ratio of operating expense to average net assets 0.75% 0.75% -- SUBACCOUNT 1IP(1) (INVESTING IN SHARES OF LAZARD RETIREMENT INTERNATIONAL EQUITY PORTFOLIO) Accumulation unit value at beginning of period $0.96 $1.07 $1.00 Accumulation unit value at end of period $0.72 $0.96 $1.07 Number of accumulation units outstanding at end of period (000 omitted) 19,727 10,774 2,504 Ratio of operating expense to average net assets 0.95% 0.95% 0.95% SUBACCOUNT 2IP(1) (INVESTING IN SHARES OF LAZARD RETIREMENT INTERNATIONAL EQUITY PORTFOLIO) Accumulation unit value at beginning of period $0.96 $1.07 $1.00 Accumulation unit value at end of period $0.72 $0.96 $1.07 Number of accumulation units outstanding at end of period (000 omitted) 15,860 7,958 1,981 Ratio of operating expense to average net assets 0.75% 0.75% 0.75% SUBACCOUNT 1MG(3) (INVESTING IN SHARES OF MFS(R) INVESTORS GROWTH STOCK SERIES - SERVICE CLASS) Accumulation unit value at beginning of period $0.90 $1.00 -- Accumulation unit value at end of period $0.67 $0.90 -- Number of accumulation units outstanding at end of period (000 omitted) 51,051 21,973 -- Ratio of operating expense to average net assets 0.95% 0.95% -- SUBACCOUNT 2MG(3) (INVESTING IN SHARES OF MFS(R) INVESTORS GROWTH STOCK SERIES - SERVICE CLASS) Accumulation unit value at beginning of period $0.91 $1.00 -- Accumulation unit value at end of period $0.68 $0.91 -- Number of accumulation units outstanding at end of period (000 omitted) 50,212 19,521 -- Ratio of operating expense to average net assets 0.75% 0.75% -- SUBACCOUNT 1MD(3) (INVESTING IN SHARES OF MFS(R) NEW DISCOVERY SERIES - SERVICE CLASS) Accumulation unit value at beginning of period $0.96 $1.00 -- Accumulation unit value at end of period $0.90 $0.96 -- Number of accumulation units outstanding at end of period (000 omitted) 36,822 15,060 -- Ratio of operating expense to average net assets 0.95% 0.95% --
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YEAR ENDED DEC. 31, 2001 2000 1999 ------------------------------------------------------------------------------------------------------------------------------ SUBACCOUNT 2MD(3) (INVESTING IN SHARES OF MFS(R) NEW DISCOVERY SERIES - SERVICE CLASS) Accumulation unit value at beginning of period $0.96 $1.00 -- Accumulation unit value at end of period $0.90 $0.96 -- Number of accumulation units outstanding at end of period (000 omitted) 34,072 12,308 -- Ratio of operating expense to average net assets 0.75% 0.75% -- SUBACCOUNT 1IN(1) (INVESTING IN SHARES OF PUTNAM VT INTERNATIONAL NEW OPPORTUNITIES FUND - CLASS IB SHARES) Accumulation unit value at beginning of period $0.92 $1.51 $1.00 Accumulation unit value at end of period $0.65 $0.92 $1.51 Number of accumulation units outstanding at end of period (000 omitted) 90,196 80,679 8,200 Ratio of operating expense to average net assets 0.95% 0.95% 0.95% SUBACCOUNT 2IN(1) (INVESTING IN SHARES OF PUTNAM VT INTERNATIONAL NEW OPPORTUNITIES FUND - CLASS IB SHARES) Accumulation unit value at beginning of period $0.92 $1.51 $1.00 Accumulation unit value at end of period $0.65 $0.92 $1.51 Number of accumulation units outstanding at end of period (000 omitted) 78,901 62,964 6,079 Ratio of operating expense to average net assets 0.75% 0.75% 0.75% SUBACCOUNT 1VS(1) (INVESTING IN SHARES OF PUTNAM VT VISTA FUND - CLASS IB SHARES) Accumulation unit value at beginning of period $1.29 $1.36 $1.00 Accumulation unit value at end of period $0.85 $1.29 $1.36 Number of accumulation units outstanding at end of period (000 omitted) 87,722 68,407 7,245 Ratio of operating expense to average net assets 0.95% 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 $1.29 $1.36 $1.00 Accumulation unit value at end of period $0.85 $1.29 $1.36 Number of accumulation units outstanding at end of period (000 omitted) 74,819 49,764 5,084 Ratio of operating expense to average net assets 0.75% 0.75% 0.75% SUBACCOUNT 1MI(1) (INVESTING IN SHARES OF ROYCE MICRO-CAP PORTFOLIO) Accumulation unit value at beginning of period $1.35 $1.15 $1.00 Accumulation unit value at end of period $1.74 $1.35 $1.15 Number of accumulation units outstanding at end of period (000 omitted) 23,583 11,880 1,886 Ratio of operating expense to average net assets 0.95% 0.95% 0.95% SUBACCOUNT 2MI(1) (INVESTING IN SHARES OF ROYCE MICRO-CAP PORTFOLIO) Accumulation unit value at beginning of period $1.36 $1.15 $1.00 Accumulation unit value at end of period $1.75 $1.36 $1.15 Number of accumulation units outstanding at end of period (000 omitted) 20,056 8,005 1,228 Ratio of operating expense to average net assets 0.75% 0.75% 0.75% SUBACCOUNT 1SV(5) (INVESTING IN SHARES OF THIRD AVENUE VALUE PORTFOLIO) Accumulation unit value at beginning of period $1.50 $1.08 $1.00 Accumulation unit value at end of period $1.69 $1.50 $1.08 Number of accumulation units outstanding at end of period (000 omitted) 31,848 11,524 2,043 Ratio of operating expense to average net assets 0.95% 0.95% 0.95% SUBACCOUNT 2SV(5) (INVESTING IN SHARES OF THIRD AVENUE VALUE PORTFOLIO) Accumulation unit value at beginning of period $1.51 $1.08 $1.00 Accumulation unit value at end of period $1.70 $1.51 $1.08 Number of accumulation units outstanding at end of period (000 omitted) 27,040 8,231 1,873 Ratio of operating expense to average net assets 0.75% 0.75% 0.75% SUBACCOUNT 1IT(1) (INVESTING IN SHARES OF WANGER INTERNATIONAL SMALL CAP) Accumulation unit value at beginning of period $1.08 $1.51 $1.00 Accumulation unit value at end of period $0.84 $1.08 $1.51 Number of accumulation units outstanding at end of period (000 omitted) 30,297 21,844 1,343 Ratio of operating expense to average net assets 0.95% 0.95% 0.95% SUBACCOUNT 2IT(1) (INVESTING IN SHARES OF WANGER INTERNATIONAL SMALL CAP) Accumulation unit value at beginning of period $1.08 $1.51 $1.00 Accumulation unit value at end of period $0.85 $1.08 $1.51 Number of accumulation units outstanding at end of period (000 omitted) 27,818 18,245 1,234 Ratio of operating expense to average net assets 0.75% 0.75% 0.75%
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YEAR ENDED DEC. 31, 2001 2000 1999 ------------------------------------------------------------------------------------------------------------------------------ SUBACCOUNT 1SP(1) (INVESTING IN SHARES OF WANGER U.S. SMALLER COMPANIES) (PREVIOUSLY WANGER U.S. SMALL CAP) Accumulation unit value at beginning of period $1.05 $1.15 $1.00 Accumulation unit value at end of period $1.15 $1.05 $1.15 Number of accumulation units outstanding at end of period (000 omitted) 46,456 29,881 2,723 Ratio of operating expense to average net assets 0.95% 0.95% 0.95% SUBACCOUNT 2SP(1) (INVESTING IN SHARES OF WANGER U.S. SMALLER COMPANIES) (PREVIOUSLY WANGER U.S. SMALL CAP) Accumulation unit value at beginning of period $1.05 $1.15 $1.00 Accumulation unit value at end of period $1.16 $1.05 $1.15 Number of accumulation units outstanding at end of period (000 omitted) 40,791 23,813 2,476 Ratio of operating expense to average net assets 0.75% 0.75% 0.75% SUBACCOUNT 1AA(4) (INVESTING IN SHARES OF WELLS FARGO VT ASSET ALLOCATION FUND) Accumulation unit value at beginning of period $1.00 -- -- Accumulation unit value at end of period $0.97 -- -- Number of accumulation units outstanding at end of period (000 omitted) 3,224 -- -- Ratio of operating expense to average net assets 0.95% -- -- SUBACCOUNT 2AA(4) (INVESTING IN SHARES OF WELLS FARGO VT ASSET ALLOCATION FUND) Accumulation unit value at beginning of period $1.00 -- -- Accumulation unit value at end of period $0.97 -- -- Number of accumulation units outstanding at end of period (000 omitted) 3,799 -- -- Ratio of operating expense to average net assets 0.75% -- -- SUBACCOUNT 1WI(4) (INVESTING IN SHARES OF WELLS FARGO VT INTERNATIONAL EQUITY 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) 1,031 -- -- Ratio of operating expense to average net assets 0.95% -- -- SUBACCOUNT 2WI(4) (INVESTING IN SHARES OF WELLS FARGO VT INTERNATIONAL EQUITY 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) 1,200 -- -- Ratio of operating expense to average net assets 0.75% -- -- SUBACCOUNT 1SG(4) (INVESTING IN SHARES OF WELLS FARGO VT SMALL CAP GROWTH FUND) Accumulation unit value at beginning of period $1.00 -- -- Accumulation unit value at end of period $0.94 -- -- Number of accumulation units outstanding at end of period (000 omitted) 2,230 -- -- Ratio of operating expense to average net assets 0.95% -- -- SUBACCOUNT 2SG(4) (INVESTING IN SHARES OF WELLS FARGO VT SMALL CAP GROWTH FUND) Accumulation unit value at beginning of period $1.00 -- -- Accumulation unit value at end of period $0.94 -- -- Number of accumulation units outstanding at end of period (000 omitted) 2,060 -- -- Ratio of operating expense to average net assets 0.75% -- --
(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 May 1, 2001. (5) Operations commenced on Sept. 21, 1999. (6) FTVIPT Templeton International Smaller Companies Fund - Class 2 merged into FTVIPT Templeton Foreign Securities Fund - Class 2 as of April 30, 2002. 38 FINANCIAL STATEMENTS You can find our audited financial statements of the subaccounts in the SAI. The SAI does not include the audited financial statements for some subaccounts because they are new and did not have any activity as of the date of the financial statements. 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. For some subaccounts we do not provide any performance information because they are new and did not have any activity. However, we show performance from the commencement date of the funds as if the subaccount invested in them at that time, which, in some cases, they 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. Total return figures do not reflect any purchase payment credits. We may show total return quotations by means of schedules, charts or graphs. Total return figures reflect deduction of the following charges: - contract administrative charge, - applicable mortality and expense risk fee, - Maximum Anniversary Value Death Benefit fee, - Enhanced Earnings Death Benefit Rider fee, and - 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 MAV or EEB 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. 39 THE VARIABLE ACCOUNT AND THE FUNDS You may allocate purchase payments and transfers 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 ADVISER OR MANAGER ------------------------------------------------------------------------------------------------------------------------------------ BC1 AXP(R) Variable Portfolio - Objective: long-term total return exceeding IDS Life, investment manager; American BC2 Blue Chip Advantage Fund that of the U.S. stock market. Invests Express Financial Corporation (AEFC), primarily in blue chip stocks. Blue chip stocks investment adviser. are issued by companies with a market capitalization of at least $1 billion, an established management, a history of consistent earnings and a leading position within their respective industries. BD1 AXP(R) Variable Portfolio - Objective: high level of current income while IDS Life, investment manager; AEFC, BD2 Bond Fund conserving the value of the investment and investment adviser. continuing a high level of income for the longest time period. Invests primarily in bonds and other debt obligations. CR1 AXP(R) Variable Portfolio - Objective: capital appreciation. Invests IDS Life, investment manager; AEFC, CR2 Capital Resource Fund primarily in U.S. common stocks and other investment adviser. securities convertible into common stocks. CM1 AXP(R) Variable Portfolio - Objective: maximum current income consistent IDS Life, investment manager; AEFC, CM2 Cash Management Fund with liquidity and stability of principal. investment adviser. Invests primarily in money market securities. DE1 AXP(R) Variable Portfolio - Objective: a high level of current income and, IDS Life, investment manager; AEFC, DE2 Diversified Equity Income as a secondary goal, steady growth of capital. investment adviser. Fund Invests primarily in dividend-paying common and preferred stocks. EM1 AXP(R) Variable Portfolio - Objective: long-term capital growth. Invests IDS Life, investment manager; AEFC, EM2 Emerging Markets Fund primarily in equity securities of companies in investment adviser; American Express emerging market countries. Asset Management International, Inc., a wholly-owned subsidiary of AEFC, is the sub-adviser. ES1 AXP(R) Variable Portfolio - Objective: growth of capital. Invests primarily IDS Life, investment manager; AEFC, ES2 Equity Select Fund in equity securities of medium-sized companies. investment adviser. EI1 AXP(R) Variable Portfolio - Objective: high current income, with capital IDS Life, investment manager; AEFC, EI2 Extra Income Fund growth as a secondary objective. Invests investment adviser. primarily in high-yielding, high-risk corporate bonds (junk bonds) issued by U.S. and foreign companies and governments. FI1 AXP(R) Variable Portfolio - Objective: a high level of current income and IDS Life, investment manager; AEFC, FI2 Federal Income Fund safety of principal consistent with an investment adviser. investment in U.S. government and government agency securities. Invests primarily in debt obligations issued or guaranteed as to principal and interest by the U.S. government, its agencies or instrumentalities.
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SUBACCOUNT INVESTING IN INVESTMENT OBJECTIVES AND POLICIES INVESTMENT ADVISER OR MANAGER ------------------------------------------------------------------------------------------------------------------------------------ GB1 AXP(R) Variable Portfolio - Objective: high total return through income and IDS Life, investment manager; AEFC, GB2 Global Bond Fund growth of capital. Non-diversified fund that investment adviser. invests primarily in debt obligations of U.S. and foreign issuers. GR1 AXP(R) Variable Portfolio - Objective: long-term capital growth. Invests IDS Life, investment manager; AEFC, GR2 Growth Fund primarily in common stocks and securities investment adviser. convertible into common stocks that appear to offer growth opportunities. IE1 AXP(R) Variable Portfolio - Objective: capital appreciation. Invests IDS Life, investment manager; AEFC, IE2 International Fund primarily in common stocks or convertible investment adviser. American Express securities of foreign issuers that offer growth Asset Management International, Inc., a potential. wholly-owned subsidiary of AEFC, is the sub-adviser. MF1 AXP(R) Variable Portfolio - Objective: maximum total investment return IDS Life, investment manager; AEFC, MF2 Managed Fund through a combination of capital growth and investment adviser. current income. Invests primarily in a combination of common and preferred stocks, convertible securities, bonds and other debt securities. ND1 AXP(R) Variable Portfolio - Objective: long-term growth of capital. IDS Life, investment manager; AEFC, ND2 New Dimensions Fund(R) Invests primarily in common stocks of U.S. and investment adviser. foreign companies showing potential for significant growth. IV1 AXP(R) Variable Portfolio - Objective: long-term capital appreciation. IDS Life, investment manager; AEFC, IV2 S&P 500 Index Fund Non-diversified fund that invests primarily investment adviser. in securities that are expected to provide investment results that correspond to the performance of the S&P 500 Index. SC1 AXP(R) Variable Portfolio - Objective: long-term capital growth. Invests IDS Life, investment manager; AEFC, SC2 Small Cap Advantage Fund primarily in equity stocks of small companies investment adviser; Kenwood Capital that are often included in the Russell 2000 Management LLC, sub-adviser. Index and/or have market capitalization under $2 billion. SA1 AXP(R) Variable Portfolio - Objective: capital appreciation. Invests IDS Life, investment manager; AEFC, SA2 Strategy Aggressive Fund primarily in common stocks of small- and investment adviser. medium-size companies. 1CA AIM V.I. Capital Objective: growth of capital. Invests A I M Advisors, Inc. 2CA Appreciation Fund, Series I principally in common stocks of companies likely to benefit from new or innovative products, services or processes as well as those with above-average growth and excellent prospects for future growth. 1CD AIM V.I. Capital Development Objective: long-term growth of capital. Invests A I M Advisors, Inc. 2CD Fund, Series I primarily in securities (including common stocks, convertible securities and bonds) of small- and medium-sized companies.
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SUBACCOUNT INVESTING IN INVESTMENT OBJECTIVES AND POLICIES INVESTMENT ADVISER OR MANAGER ------------------------------------------------------------------------------------------------------------------------------------ 1IF American Century(R) VP Objective: long-term capital growth. Invests American Century Investment Management, 2IF International primarily in stocks of growing foreign Inc. companies in developed countries. 1VA American Century(R) VP Value Objective: long-term capital growth, with American Century Investment Management, 2VA income as a secondary objective. Invests Inc. primarily in stocks of companies that management believes to be undervalued at the time of purchase. 1SR Calvert Variable Series, Objective: income and capital growth. Invests Calvert Asset Management Company, Inc. 2SR Inc. Social Balanced primarily in stocks, bonds and money market (CAMCO), investment adviser. SSgA Portfolio instruments which offer income and capital Funds Management, Inc. and Brown growth opportunity and which satisfy the Capital Management are the investment investment and social criteria. subadvisers. 1EG Credit Suisse Trust - Objective: maximum capital appreciation. Credit Suisse Asset Management, LLC 2EG Emerging Growth Portfolio Invests in U.S. equity securities of emerging-growth companies with growth characteristics such as positive earnings and potential for accelerated growth. 1GI Fidelity VIP Growth & Income Strategy: high total return through a Fidelity Management & Research Company 2GI Portfolio (Service Class) combination of current income and capital (FMR), investment manager; FMR U.K. and appreciation. Normally invests a majority of FMR Far East, sub-investment advisers. assets in common stocks with a focus on those that pay current dividends and show potential for capital appreciation. 1MP Fidelity VIP Mid Cap Strategy: long-term growth of capital. FMR, investment manager; FMR U.K., and 2MP Portfolio (Service Class) Normally invests at least 80% of assets in FMR Far East, sub-investment advisers. securities of companies with medium market capitalization common stocks. 1OS Fidelity VIP Overseas Strategy: long-term growth of capital. FMR, investment manager; FMR U.K., FMR 2OS Portfolio (Service Class) Invests primarily in common stocks of foreign Far East, Fidelity International securities. Investment Advisors (FIIA) and FIIA U.K., sub-investment advisers. 1RE FTVIPT Franklin Real Estate Objective: capital appreciation with a Franklin Advisers, Inc. 2RE Fund - Class 2 secondary goal to earn current income. Invests at least 80% of its net assets in investments of companies operating in the real estate industry. The Fund invests primarily in equity real estate investment trusts (REITs).
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SUBACCOUNT INVESTING IN INVESTMENT OBJECTIVES AND POLICIES INVESTMENT ADVISER OR MANAGER ------------------------------------------------------------------------------------------------------------------------------------ 1SI FTVIPT Franklin Small Cap Objective: long-term total return. Invests at Franklin Advisory Services, LLC 2SI Value Securities Fund - least 80% of its net assets in investments of Class 2 (previously FTVIPT small capitalization companies. For this Fund, Franklin Value Securities small capitalization companies are those that Fund - Class 2) have a market cap not exceeding $2.5 billion, at the time of purchase. Invests primarily in equity securities of companies the manager believes are selling substantially below the underlying value of their assets or their private market value. 1TF FTVIPT Templeton Foreign Objective: long-term capital growth. Invests at Templeton Investment Counsel, LLC 2TF Securities Fund - Class 2 least 80% of its net assets in foreign (previously FTVIPT Templeton securities, including those in emerging markets. International Securities Fund - Class 2. FTVIPT Templeton International Smaller Companies Fund - Class 2 merged into this Fund as of April 30, 2002) 1SE Goldman Sachs VIT CORE(SM) Objective: seeks long-term growth of capital. Goldman Sachs Asset Management 2SE Small Cap Equity Fund Invests, under normal circumstances, at least 80% of its net assets plus any borrowing for investment purposes (measured at the time of purchase) in a broadly diversified portfolio of equity investments of U.S. issuers which are included in the Russell 2000 Index at the time of investment. 1UE Goldman Sachs VIT CORE(SM) Objective: seeks long-term growth of capital Goldman Sachs Asset Management 2UE U.S. Equity Fund and dividend income. Invests, under normal circumstances, at least 90% of its total assets (not including securities lending collateral and any investment of that collateral) measured at time of purchase in a broadly diversified portfolio of large-cap and blue chip equity investments representing all major sectors of the U.S. economy. 1MC Goldman Sachs VIT Mid Cap Objective: seeks long-term capital Goldman Sachs Asset Management 2MC Value Fund appreciation. Invests, under normal circumstances, at least 80% of its net assets plus any borrowing for investment purposes (measured at time of purchase) in a diversified portfolio of equity investments in mid-capitalization issuers within the range of the market capitalization of companies constituting the Russell Midcap Value Index at the time of investment.
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SUBACCOUNT INVESTING IN INVESTMENT OBJECTIVES AND POLICIES INVESTMENT ADVISER OR MANAGER ------------------------------------------------------------------------------------------------------------------------------------ 1AG Janus Aspen Series Objective: long-term growth of capital. Janus Capital 2AG Aggressive Growth Portfolio: Non-diversified mutual fund that primarily Service Shares invests in common stocks selected for their growth potential and normally invests at least 50% of its equity assets in medium-sized companies. 1GT Janus Aspen Series Global Objective: long-term growth of capital. Janus Capital 2GT Technology Portfolio: Non-diversified mutual fund that invests, under Service Shares normal circumstances, at least 80% of its net assets in securities of companies that the portfolio manager believes will benefit significantly from advances or improvements in technology. It implements this policy by investing primarily in equity securities of U.S. and foreign companies selected for their growth potential. 1IG Janus Aspen Series Objective: long-term growth of capital. Janus Capital 2IG International Growth Invests, under normal circumstances, at least Portfolio: Service Shares 80% of its net assets in securities of issuers from at least five different countries, excluding the United States. Although the Portfolio intends to invest substantially all of its assets in issuers located outside the United States, it may at times invest in U.S. issuers and it may at times invest all of its assets in fewer than five countries or even a single country. 1IP Lazard Retirement Objective: long-term capital appreciation. Lazard Asset Management 2IP International Equity Invests primarily in equity securities, Portfolio principally common stocks, of relatively large non-U.S. 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. 1MG MFS(R) Investors Growth Stock Objective: long-term growth of capital and MFS Investment Management(R) 2MG Series - Service Class future income. Invests at least 80% of its total assets in common stocks and related securities of companies which MFS believes offer better than average prospects for long-term growth. 1MD MFS(R) New Discovery Series - Objective: capital appreciation. Invests MFS Investment Management(R) 2MD Service Class primarily in equity securities of emerging growth companies. 1IN Putnam VT International New Objective: long-term capital appreciation. The Putnam Investment Management, LLC 2IN Opportunities Fund - Class fund seeks its goal by investing in common IB Shares stock of companies outside the United States with a focus on growth stocks.
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SUBACCOUNT INVESTING IN INVESTMENT OBJECTIVES AND POLICIES INVESTMENT ADVISER OR MANAGER ------------------------------------------------------------------------------------------------------------------------------------ 1VS Putnam VT Vista Fund - Class Objective: capital appreciation. The fund seeks Putnam Investment Management, LLC 2VS IB Shares its goal by investing mainly in common stocks of U.S. companies with a focus on growth stocks. 1MI Royce Micro-Cap Portfolio Objective: long-term growth of capital. Invests Royce & Associates, LLC 2MI primarily in a broadly diversified portfolio of equity securities issued by micro-cap companies (companies with stock market capitalizations below $400 million). 1SV Third Avenue Value Portfolio Objective: long-term capital appreciation. EQSF Advisers, Inc. 2SV Invests primarily in common stocks of well financed, well managed companies at a substantial discount to what the Adviser believes is their true value. 1IT Wanger International Small Objective: long-term growth of capital. Invests Liberty Wanger Asset Management, L.P. 2IT Cap primarily in stocks of small- and medium-size non-U.S. companies with capitalizations of less than $2 billion. 1SP Wanger U.S. Smaller Objective: long-term growth of capital. Invests Liberty Wanger Asset Management, L.P. 2SP Companies (previously Wanger primarily in stocks of small- and medium-size U.S. Small Cap) U.S. companies with capitalizations of less than $5 billion. 1AA Wells Fargo VT Asset Objective: long-term total return, consistent Wells Fargo Funds Management, LLC, 2AA Allocation Fund with reasonable risk. Invests primarily in the adviser; Wells Capital Management securities of various indexes to replicate the Incorporated, sub-adviser. 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+ Treasury Bond Index) and money market instruments, operating from a target allocation of 60% stocks and 40% bonds. 1WI Wells Fargo VT International Objective: total return with an emphasis on Wells Fargo Funds Management, LLC, 2WI Equity Fund long-term capital appreciation. Invests adviser; Wells Capital Management primarily in equity securities of non-U.S. Incorporated, sub-adviser. companies based in developed foreign countries or emerging markets. 1SG Wells Fargo VT Small Cap Objective: long-term capital appreciation. Wells Fargo Funds Management, LLC, 2SG Growth Fund Invests primarily in companies with above- adviser; Wells Capital Management average growth potential and whose market Incorporated, sub-adviser. capitalization falls within the range of the Russell 2000 Index, which is considered a small capitalization index.
45 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 advisers 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. 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 and transfers 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. 29). The interest rate we apply to each purchase payment or transfer to the fixed account is guaranteed for one year. Thereafter, we will change the 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.) 46 BUYING YOUR CONTRACT New contracts are not currently being offered. 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 become an owner or an annuitant if you are 90 or younger. 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. We applied your initial purchase payment within two business days after we received it at our office. However, we will credit additional purchase payments you make to your accounts on the valuation date we receive them. We will value 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: - no earlier than the 60th day after the contract's effective date; and - 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: - on or after the date the annuitant reaches age 59 1/2; and - 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 - 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.) 47 PURCHASE PAYMENTS MINIMUM ALLOWABLE PURCHASE PAYMENTS(1) If paying by installments under a scheduled payment plan: $23.08 biweekly, or $50 per month If paying by any other method: $50 (1) 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 ANNUAL PURCHASE PAYMENTS(2) 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 to 90 (2) 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. Except for TSAs, purchase payments are limited and may not be made after the third contract anniversary in Massachusetts, Washington and Oregon. 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: - an automatic payroll deduction, salary reduction or other group billing arrangement; or - a bank authorization. 48 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. 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: - first, to the extent possible, the subaccounts pay this fee from any dividends distributed from the funds in which they invest; - then, if necessary, the funds redeem shares to cover any remaining fees payable. We may use any profits we realize from the subaccounts' payment to us of the mortality and expense risk fee for any proper corporate purpose, including, among others, payment of distribution (selling) expenses. We do not expect that the 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 or 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 a 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. 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 or 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 a change in ownership. If you chose 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. (1) You may select either the MAV Death Benefit or EEB rider (both available June 10, 2002). Or you may select the MAV Death Benefit and the EEB. Riders may not be available in all states. The MAV Death Benefit and EEB are only available if you and the annuitant are 75 or younger at contract issue. EEB is only available on non-qualified contracts. 49 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 $1,075.27. We determine this amount as follows: AMOUNT REQUESTED $1,000 ----------------------- OR ------ = $1,075.27 1.00 - SURRENDER CHARGE .93 By applying the 7% surrender charge to $1,075.27, the surrender charge is $75.27. 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 applicable prorated MAV Death Benefit or EEB 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. 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 50 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: - The contract date is July 1, 2002 with a contract year of July 1 through June 30 and with an anniversary date of July 1 each year; and - We received these payments: -- $10,000 July 1, 2002; -- $ 8,000 Dec. 31, 2007; -- $ 6,000 Feb. 20, 2010; and - The owner surrenders the contract for its total surrender value of $26,500 on Aug. 5, 2011 and had not made any other surrenders during that contract year; and - 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's 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, 2002 purchase payment was received eight or more years before surrender and is surrendered without surrender charge; and 480 $8,000 Dec. 31, 2007 purchase payment is in its fourth year from receipt, surrendered with a 6% surrender charge; and 420 $6,000 Feb. 20, 2010 purchase 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: - surrenders of any contract earnings; - surrenders of amounts totaling up to 10% of your prior contract anniversary contract value to the extent it exceeds contract earnings; - amounts surrendered after the tenth contract anniversary in Massachusetts, Washington and Oregon. - required minimum distributions from a qualified annuity (for those amounts required to be distributed from the contract described in this prospectus); - contracts settled using an annuity payout plan, unless an annuity payout Plan E is later surrendered; - amounts we refund to you during the free look period*; - death benefits*; and - 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 at contract issue. 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. 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. 51 VALUING YOUR INVESTMENT We value your accounts as follows: FIXED ACCOUNT We value the amounts allocated to the fixed account directly in dollars. The fixed account value equals: - the sum of your purchase payments and transfer amounts allocated to the fixed account; - plus any purchase payment credits allocated to the fixed account; - plus interest credited; - minus the sum of amounts surrendered (including any applicable surrender charges) and amounts transferred out; - minus any prorated portion of the contract administrative charge; - minus any prorated portion of the Maximum Anniversary Value Death Benefit Rider fee (if applicable); and - minus any prorated portion of the Enhanced Earnings 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 an administrative charge, surrender charge or any applicable charge for an optional benefit, 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: - 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 - dividing that sum by the previous adjusted net asset value per share; and - 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: - additional purchase payments you allocate to the subaccounts; - any purchase payment credits allocated to the subaccounts; - transfers into or out of the subaccounts; - partial surrenders; - surrender charges; - a prorated portion of the contract administrative charge; - a prorated portion of the Maximum Anniversary Value Death Benefit Rider fee (if selected); and/or - a prorated portion of the Enhanced Earnings Death Benefit Rider fee (if selected). Accumulation unit values will fluctuate due to: - changes in funds' net asset value; - dividends distributed to the subaccounts; - capital gains or losses of funds; - fund operating expenses; and/or - mortality and expense risk fees. 52 PURCHASE PAYMENT CREDITS We add a credit* to your contract in the amount of: - 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. - 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. The amount returned to you under the free look provision also will not include any credits applied to your contract. (See "The Contract in Brief -- Free look period.") 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. This credit is available because of lower costs associated with larger sized contracts and lower compensation paid on the sales of these contracts. We reserve the right to increase the amount of the credit for the certain groups of contract owners. The increase will not be greater than 8% of total net payments. Increases in credit amounts are funded by reduced expenses expected from such groups. * 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 AMOUNT ACCUMULATION OF UNITS MONTH INVESTED UNIT VALUE PURCHASED By investing an equal number of dollars each month... 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 Jun 100 18 5.56 and fewer units Jul 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. 53 ASSET REBALANCING 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. The contract is not designed for use by individuals, professional market timing organizations, or other entities that do "market timing," programmed transfers, frequent transfers, or transfers that are large in relation to the total assets of any fund underlying the contract. These and similar activities may adversely affect a fund's ability to invest effectively in accordance with its investment objectives and policies, may increase expenses and may harm other contract owners who allocated purchase payments to the fund regardless of their transfer activity. Accordingly, individuals and organizations that use market-timing investment strategies and make frequent transfers should not own this contract. We monitor the frequency of transfers, including the size of transfers in relation to fund assets in each underlying fund, and we take appropriate action as necessary. In order to prevent market timing activities that may harm or disadvantage other contract owners, we may apply modifications or restrictions in any reasonable manner to prevent a transfer. We may suspend transfer privileges at any time. We may also reject or restrict any specific payment or transfer request and impose specific limitations with respect to market timers, including restricting transfers by market timers to certain underlying funds. We may also apply other restrictions or modifications that could include, but not be limited to: - not accepting telephone or electronic transfer requests; - requiring a minimum time period between each transfer; - not accepting transfer requests of an agent acting under power of attorney on behalf of more than one contract owner; or - limiting the dollar amount that a contract owner may transfer at any one time. We agree to provide notice of our intent to restrict transfer privileges to contract owners who have engaged in disruptive activity. In addition, some of the underlying funds have reserved the right to temporarily or permanently refuse payments or transfer requests from us if, in the judgment of the fund's investment adviser, the fund would be unable to invest effectively in accordance with its investment objective or policies, or would otherwise potentially be adversely affected. Accordingly, we may not be in a position to effect certain allocations or transfers requested by market timers and may refuse such requests without prior notice. Subject to state law, we reserve the right to impose, without prior notice, restrictions on allocations and transfers that we determine, in our sole discretion, will disadvantage or potentially hurt the rights or interests of other contract owners. For information on transfers after annuity payouts begin, see "Transfer Policies" below. 54 TRANSFER POLICIES - 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. - 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). - 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. - 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. - We will not accept requests for transfers from the fixed account at any other time. - 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: 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. - 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. - Automated surrenders may be restricted by applicable law under some contracts. - You may not make additional purchase payments if automated partial surrenders are in effect. - Automated partial surrenders may result in IRS taxes and penalties on all or part of the amount surrendered. - The balance in any account from which you make an automated transfer or automated partial surrender must be sufficient to satisfy your instructions. If not, we will suspend your entire automated arrangement until the balance is adequate. - If we must suspend your automated transfer or automated partial surrender arrangement for six months, we reserve the right to discontinue the arrangement in its entirety. MINIMUM AMOUNT Transfers or surrenders: $50 MAXIMUM AMOUNT Transfers or surrenders: None (except for automated transfers from the fixed account) 55 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 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"), 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 1 BY REGULAR OR EXPRESS MAIL: - payable to you; - mailed to address of record. NOTE: We will charge you a fee if you request express mail delivery. 2 BY WIRE: - request that payment be wired to your bank; - bank account must be in the same ownership as your contract; and - pre-authorization required. NOTE: We will charge you a fee if you request that payment be wired to your bank. For instructions, please 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. 56 TSA -- SPECIAL SURRENDER PROVISIONS PARTICIPANTS IN TAX-SHELTERED ANNUITIES The Code imposes certain restrictions on your right to receive early distributions from a TSA: - 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. - If you encounter a financial hardship (as provided by the Code), you may be eligible to receive a distribution of all contract values attributable to salary reduction contributions made after Dec. 31, 1988, but not the earnings on them. - Even though a distribution may be permitted under the above rules, it may be subject to IRS taxes and penalties (see "Taxes"). - 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. - 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. - 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 or EEB.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 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 a similar capacity, ownership of the contract may be transferred to the annuitant. 57 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: - contract value; - purchase payments minus adjusted partial surrenders; or - the contract value as of the most recent sixth contract anniversary, preceding the date of death, plus any purchase payments since that anniversary, minus adjusted partial surrenders since that anniversary. If either you or the annuitant are age 81 or older on the date of death, the beneficiary receives the greater of: - contract value; or - purchase payments minus adjusted partial surrenders. ADJUSTED PARTIAL SURRENDERS PS x DB ------- CV PS = the partial surrender including any applicable surrender charge. DB = the death benefit on the date of (but prior to) the partial surrender. CV = the contract value on the date of (but prior to) the partial surrender. EXAMPLE OF STANDARD DEATH BENEFIT CALCULATION WHEN YOU AND ANNUITANT ARE AGE 80 OR YOUNGER - You purchase the contract with a payment of $20,000 on Jan. 1, 2002. - On Jan 1, 2008 (the sixth contract anniversary) the contract value grows to $30,000. - March 1, 2008 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, 2008 as follows: The contract value on the most recent sixth contract anniversary: $30,000.00 plus purchase payments made since that anniversary: +0.00 minus adjusted partial surrenders taken since that anniversary calculated as: $1,500 x $30,000 -1,607.14 ---------------- ---------- $28,000 for a death benefit of: $28,392.86
IF YOU DIE BEFORE YOUR RETIREMENT DATE When paying the beneficiary, we will process the death claim on the valuation date our death claim requirements are fulfilled. We will determine the contract's value at the next accumulation unit value calculated after our death claim requirements are fulfilled. We 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: - the beneficiary asks us in writing within 60 days after we receive proof of death; and - payouts begin no later than one year after your death, or other date as permitted by the Code; and - the payout period does not extend beyond the beneficiary's life or life expectancy. 58 QUALIFIED ANNUITIES The IRS has issued proposed regulations to take effect Jan. 1, 2002 which may affect distributions from your qualified annuity. Contact your tax advisor if you have any questions as to the impact of the new proposed rules on your situation. - SPOUSE BENEFICIARY: If you have not elected an annuity payout plan, and if your spouse is the sole beneficiary, your spouse may elect to receive payouts, or elect to treat the contract as his/her own. If your spouse elects a payout option, the payouts must begin no later than the year in which the annuitant would have reached age 70 1/2. If the annuitant attained age 70 1/2 at the time of death, payouts must begin no later than Dec. 31 of the year following the year of the annuitant's death. - NON-SPOUSE BENEFICIARY: If you have not elected an annuity payout plan, and if death occurs prior to the year the annuitant would have attained age 70 1/2, the beneficiary may elect to receive payouts from the contract over a five year period. If the annuitant's death occurs after attaining age 70 1/2, we will pay the beneficiary in a single sum unless the beneficiary elects to receive payouts under any annuity payout plan available under this contract if: - the beneficiary asks us in writing within 60 days after we receive proof of death; and - payouts begin no later than one year following the year of your death; and - the payout period does not extend beyond the beneficiary's life or life expectancy. - ANNUITY PAYOUT PLAN: If you elect an annuity payout plan, the payouts to your beneficiary will continue pursuant to the annuity payout plan you elect. OPTIONAL BENEFITS MAXIMUM ANNIVERSARY VALUE DEATH BENEFIT (AVAILABLE JUNE 10, 2002) 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 the rider effective date, you may choose to add the MAV Death Benefit to your contract. We will determine the rider effective date for the MAV Death Benefit added after we issue the contract according to terms determined by us and at our sole discretion. On the first contract anniversary after the rider effective date, 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 - You may terminate the rider within 30 days of the first contract anniversary after the rider effective date. - You may terminate the rider within 30 days of any contract anniversary beginning with the seventh contract anniversary after the rider effective date. - The rider will terminate when you make a full surrender from the contract or when annuity payouts begin. - The rider will terminate in the case of spousal continuation or ownership change if the new owner is age 76 or older. EXAMPLE - You add the MAV Death Benefit on Jan. 1, 2003 when your contract value is $20,000. - On Jan. 1, 2004 (the first contract anniversary after the rider effective date) the contract value grows to $24,000. - On March 1, 2004 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, 2004 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
59 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 he or she elects to continue the contract has reached age 76, the MAV Death Benefit rider will terminate. If your spouse at the time he or she elects to continue the contract 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 under the MAV Death Benefit rider. If, at the time he or she elects to continue the contract, your spouse has not yet reached age 76 and chooses not to continue the MAV Death Benefit rider, the contract value will be increased to the MAV death benefit amount if it is greater than the contract value on the death benefit valuation date. 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. 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 he or she elects to continue the contract has reached age 76, the MAV death benefit rider will terminate. If your spouse at the time he or she elects to continue the contract 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 under the MAV Death Benefit rider. If, at the time he or she elects to continue the contract, your spouse has not yet reached age 76 and chooses not to continue the MAV Death Benefit rider, the contract value will be increased to the MAV death benefit amount if it is greater than the contract value on the death benefit valuation date. ENHANCED EARNINGS DEATH BENEFIT (EEB) (AVAILABLE JUNE 10, 2002) 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 the rider effective date, you may choose to add the EEB to your contract. THIS RIDER IS ONLY AVAILABLE UNDER A NONQUALIFIED ANNUITY CONTRACT. We will determine the rider effective date for the EEB added 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 after the rider effective date, but before annuity payouts begin, and while this contract is in force, we will pay the beneficiary: - the standard death benefit (see "Benefits in Case of Death - Standard Benefit") or the MAV death benefit, if applicable, PLUS - 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 - 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 rider, 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. 60 TERMINATING THE EEB - You may terminate the rider within 30 days of the first contract anniversary after the rider effective date. - You may terminate the rider within 30 days of any contract anniversary beginning with the seventh contract anniversary after the rider effective date. - The rider will terminate when you make a full surrender from the contract or when annuity payouts begin. - The rider will terminate in the case of spousal continuation or ownership change if the new owner is age 76 or older. EXAMPLE OF THE ENHANCED EARNINGS DEATH BENEFIT - You purchased a RAVA contract on Jan. 1, 2001 with a purchase payment of $100,000. You add the EEB rider Jan. 1, 2003 when your contract value is $100,000 and you and the annuitant are under age 70. You selected the seven-year surrender charge schedule, the MAV Death Benefit and the EEB. - On July 1, 2003 the contract value grows to $105,000. The death benefit on July 1, 2003 equals the standard death benefit, which is the contract value, or $105,000. You have not reached the first contract anniversary after the rider effective date so the EEB does not provide any additional benefit at this time. - On Jan. 1, 2004 the contract value grows to $110,000. The death benefit on Jan. 1, 2004 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
- On Jan. 1, 2005 the contract value falls to $105,000. The death benefit on Jan. 1, 2005 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
- On Feb. 1, 2005 the contract value remains at $105, 000 and you request a partial surrender, including the applicable 5% 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 5% surrender charge because your payment is four years old, so we will surrender $39,500 ($37,525 + $1,975 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, 2005 equals: MAV death benefit (MAV adjusted for partial surrenders): ($50,000 x $110,000) $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
- On Jan. 1, 2006 the contract value falls by $40,000. The death benefit on Jan. 1, 2006 equals the death benefit paid on Feb. 1, 2005. The reduction in contract value has no effect. - On Jan. 1, 2012 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, 2012 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
61 - On July 1, 2012 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, 2012 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
- On July 1, 2013 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, 2013 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 he or she elects to continue the contract has reached age 76, the EEB rider will terminate. If your spouse at the time he or she elects to continue the contract has not yet reached age 76, he or she may choose to continue the EEB. In this case, the following conditions will apply: - the rider will continue, but we will treat the new contract value on the date the ownership of the contract changes to your spouse (after the additional amount is paid into the contract) as if it is a purchase payment in calculating future values of "earnings at death." - the percentages of "earnings at death " payable will be based on your spouse's age at the time he or she elects to continue the contract. - 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 under the EEB rider. NOTE: For special tax considerations associated with the EEB, 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: - the annuity payout plan you select; - the annuitant's age and, in most cases, sex; - the annuity table in the contract; and - 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." 62 ANNUITY TABLES The annuity tables in your contract show the amount of the monthly payout 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. For example, annuity payouts will increase if the investment return is above the assumed investment rate and payouts will decrease if the return is below the assumed investment rate. 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: - 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. - 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. - PLAN C: LIFE ANNUITY -- INSTALLMENT REFUND: We make monthly payouts until the annuitant's death, with our guarantee that payouts will continue for some period of time. We will make payouts for at least the number of months determined by dividing the amount applied under this option by the first monthly payout, whether or not the annuitant is living. - PLAN D: JOINT AND LAST SURVIVOR LIFE ANNUITY -- NO REFUND: We make monthly payouts while both the annuitant and a joint annuitant are living. If either annuitant dies, we will continue to make monthly payouts at the full amount until the death of the surviving annuitant. Payouts end with the death of the second annuitant. - PLAN E: PAYOUTS FOR A SPECIFIED PERIOD: We make monthly payouts for a specific payout period of 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. An 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 annuity 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: - 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 - 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 - 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. 63 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. If the annuitant dies before your investment in the contract is fully recovered, the remaining portion of the unrecovered investment can be taken as a federal income tax deduction for the last taxable year of the annuitant. 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 non-deductible contributions or with after-tax dollars rolled from a retirement plan. 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 an 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 OR EEB): 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 IRS 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. 64 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: - because of your death; - because you become disabled (as defined in the Code); - if the distribution is part of a series of substantially equal periodic payments, made at least annually, over your life or life expectancy (or joint lives or life expectancies of you and your beneficiary); or - if it is allocable to an investment before Aug. 14, 1982 (except for qualified annuities). For 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: - instead of receiving the distribution check, you elect to have the distribution rolled over directly to an IRA or another eligible plan; - 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; - the payout is a minimum distribution required under the Code; or - the payout is made on account of an eligible hardship. 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 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. You may not collaterally assign or pledge your qualified contracts. 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. IDS LIFE'S TAX STATUS: IDS Life is taxed as a life insurance company under the Code. For federal income tax purposes, the subaccounts are considered a part of IDS Life, although their operations are treated separately in accounting and financial statements. Investment income from the subaccounts is reinvested and becomes part of the subaccounts' value. This investment income, including realized capital 65 gains, is not taxed to IDS Life, and therefore no charge is made against the subaccounts for federal income taxes. IDS Life reserves the right to make such a charge in the future if there is a change in the tax treatment of variable annuities. 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: - the reserve held in each subaccount for your contract; divided by - 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: - laws or regulations change; - the existing funds become unavailable; or - in our judgment, the funds no longer are suitable for the subaccounts. If any of these situations occur, and if we believe it is in the best interest of persons having voting rights under the contract, we have the right to substitute the funds currently listed in this prospectus for other funds. We may also: - add new subaccounts; - combine any two or more subaccounts; - make additional subaccounts investing in additional funds; - transfer assets to and from the subaccounts or the variable account; and - 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 10,200 advisors. 66 IDS Life pays commissions of up to 7% of the total purchase payments for sales of the contracts it receives. 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 involving insurance sales practices, alleged agent misconduct, failure to properly supervise agents and other matters relating to life insurance policies and annuity contracts have been filed against life and health insurers in jurisdictions in which IDS Life and its affiliates do business. IDS Life and its affiliates, like other life and health insurers, are involved in such litigation. IDS Life was a named defendant in three class action lawsuits of this nature. 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. 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. 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. These three class action lawsuits included allegations of improper insurance and annuity sales practices including improper replacement of existing annuity contracts and insurance policies, improper use of annuities to fund tax deferred contributory retirement plans, alleged agent misconduct, failure to properly supervise agents and other matters relating to life insurance policies and annuity contracts. In January 2000, AEFC and its subsidiaries 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 in exchange for a 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 May 2001, the United States District Court for the District of Minnesota and the District Court, Fourth Judicial District for the State of Minnesota, Hennepin County entered orders approving the settlement as tentatively reached in January 2000. Appeals were filed in both federal and state court but subsequently dismissed by the parties filing the appeals. The orders approving the settlement were final as of September 24, 2001. Implementation of the settlement commenced October 15, 2001. Numerous individuals opted out of the settlement described above and therefore did not release their claims against AEFC and its subsidiaries. Some of these class members who opted out were represented by counsel and presented separate claims. Most of their claims have been settled. The outcome of any litigation or threatened litigation cannot be predicted with any certainty. However, in the aggregate, IDS Life does not consider any lawsuits in which it is named as a defendant to be material. TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION Performance Information p. 3 Calculating Annuity Payouts p. 41 Rating Agencies p. 42 Principal Underwriter p. 42 Independent Auditors p. 42 Financial Statements 67 [AMERICAN EXPRESS (R) LOGO] IDS LIFE INSURANCE COMPANY 70100 AXP FINANCIAL CENTER MINNEAPOLIS, MN 55474 (800) 862-7919 S-6467 F (5/02) AMERICAN EXPRESS RETIREMENT ADVISOR VARIABLE ANNUITY(R) - BAND 3 ISSUED BY: IDS LIFE INSURANCE COMPANY PROSPECTUS MAY 1, 2002 INDIVIDUAL FLEXIBLE PREMIUM DEFERRED COMBINATION FIXED/VARIABLE ANNUITY FOR: - current or retired employees of American Express Financial Corporation or its subsidiaries and their spouses (employees), - current or retired American Express financial advisors and their spouses (advisors), and - individuals investing an initial purchase payment of $1 million (other individuals). NEW AMERICAN EXPRESS RETIREMENT ADVISOR VARIABLE ANNUITY(R) - BAND 3 CONTRACTS ARE NOT CURRENTLY BEING OFFERED. 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 This prospectus contains information that you should know before investing. - American Express(R) Variable Portfolio Funds - Janus Aspen Series: Service Shares - AIM Variable Insurance Funds - Lazard Retirement Series, Inc. - American Century(R) Variable Portfolios, Inc. - MFS(R) Variable Insurance Trust(SM) - Calvert Variable Series, Inc. - Putnam Variable Trust - Class IB Shares - Credit Suisse Trust (previously Credit Suisse Warburg Pincus Trust) - Royce Capital Fund - Fidelity(R) Variable Insurance Products Funds - Service Class - Third Avenue Variable Series Trust - Franklin(R) Templeton(R) Variable Insurance Products Trust (FTVIPT) - Class 2 - Wanger Advisors Trust - Goldman Sachs Variable Insurance Trust (VIT) - 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. Be sure to ask your sales representative about the variable annuity's features, benefits, risks and fees. 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. 1 TABLE OF CONTENTS KEY TERMS 3 THE CONTRACT IN BRIEF 4 EXPENSE SUMMARY 5 CONDENSED FINANCIAL INFORMATION (UNAUDITED) 15 FINANCIAL STATEMENTS 20 PERFORMANCE INFORMATION 20 THE VARIABLE ACCOUNT AND THE FUNDS 21 THE FIXED ACCOUNT 27 BUYING YOUR CONTRACT 28 CHARGES 30 VALUING YOUR INVESTMENT 31 MAKING THE MOST OF YOUR CONTRACT 32 SURRENDERS 35 TSA -- SPECIAL SURRENDER PROVISIONS 35 CHANGING OWNERSHIP 36 BENEFITS IN CASE OF DEATH -- STANDARD DEATH BENEFIT 36 OPTIONAL BENEFITS 38 THE ANNUITY PAYOUT PERIOD 41 TAXES 43 VOTING RIGHTS 45 SUBSTITUTION OF INVESTMENTS 45 ABOUT THE SERVICE PROVIDERS 45 TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION 47 2 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. 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: - Individual Retirement Annuities (IRAs) under Section 408(b) of the Internal Revenue Code of 1986, as amended (the Code) - Roth IRAs under Section 408A of the Code - SIMPLE IRAs under Section 408(p) of the Code - Simplified Employee Pension (SEP) plans under Section 408(k) of the Code - Plans under Section 401(k) of the Code - Custodial and trusteed plans under Section 401(a) of the Code - 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 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 account 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). Most annuities have a tax-deferred feature. So do many retirement plans under the 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 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: - 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. 21) - the fixed account, which earns interest at a rate that we adjust periodically. (p. 27) BUYING YOUR CONTRACT: We no longer offer new contracts. However, you have the option of making additional purchase payments in the future. (p. 28) 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: $50 MAXIMUM ALLOWABLE ANNUAL PURCHASE PAYMENTS 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 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. 33) 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 an IRS penalty if you surrender prior to your reaching age 59 1/2) and may have other tax consequences; also, certain restrictions apply. (p. 35) 4 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. 36) 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. 36) OPTIONAL BENEFITS: This contract offers optional features that are available for additional charges if you meet certain criteria. (p. 36) 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. 41) 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. 43) CHARGES: We assess certain charges in connection with your contract: - $30 annual contract administrative charge; - a 0.55% mortality and expense risk fee (if you make allocations to one or more subaccounts); - 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); - the operating expenses of the funds in which the subaccounts invest; - if you select the Maximum Anniversary Value Death Benefit (MAV), an annual fee of 0.15% of the contract value; and - if you select the Enhanced Earnings Death Benefit (EEB), an annual fee of 0.30% of the contract value. * Available June 10, 2002. EXPENSE SUMMARY The purpose of the following information is to help you understand the various costs and expenses associated with your contract. You paid no sales charge when you purchased 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, 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 contact anniversary. This is an optional expense) ANNUAL VARIABLE ACCOUNT EXPENSES (as a percentage of average subaccount value) MORTALITY AND EXPENSE RISK FEE: 0.55%
5 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 .54% .13% .11% .78%(1) Bond Fund .60 .13 .07 .80(2) Capital Resource Fund .61 .13 .04 .78(2) Cash Management Fund .51 .13 .04 .68(2) Diversified Equity Income Fund .55 .13 .23 .91(1) Emerging Markets Fund 1.16 .13 .46 1.75(1) Equity Select Fund .64 .13 .33 1.10(1) Extra Income Fund .62 .13 .07 .82(2) Federal Income Fund .61 .13 .10 .84(1) Global Bond Fund .84 .13 .10 1.07(2) Growth Fund .62 .13 .15 .90(1) International Fund .83 .13 .08 1.04(2) Managed Fund .59 .13 .04 .76(2) New Dimensions Fund(R) .60 .13 .06 .79(2) S&P 500 Index Fund .29 .13 .07 .49(1) Small Cap Advantage Fund .73 .13 .30 1.16(1) Strategy Aggressive Fund .60 .13 .05 .78(2) AIM V.I. Capital Appreciation Fund, Series I .61 -- .24 .85(3) Capital Development Fund, Series I .75 -- .41 1.16(3) American Century(R) Variable Portfolios, Inc. VP International 1.26 -- -- 1.26(4),(5) VP Value .97 -- -- .97(4),(5) Calvert Variable Series, Inc. Social Balanced Portfolio .70 -- .17 .87(6) Credit Suisse Trust Emerging Growth Portfolio .86 -- .39 1.25(7) Fidelity VIP Growth & Income Portfolio (Service Class) .48 .10 .10 .68(8) Mid Cap Portfolio (Service Class) .58 .10 .11 .79(8) Overseas Portfolio (Service Class) .73 .10 .20 1.03(8) FTVIPT Franklin Real Estate Fund - Class 2 .56 .25 .03 .84(9),(10) Franklin Small Cap Value Securities Fund - Class 2 .57 .25 .20 1.02(10),(11) (previously FTVIPT Franklin Value Securities Fund - Class 2) Templeton Foreign Securities Fund - Class 2 .68 .25 .22 1.15(10),(11),(12) (previously FTVIPT Templeton International Securities Fund - Class 2) Goldman Sachs VIT CORE(SM) Small Cap Equity Fund .75 -- .25 1.00(13) CORE(SM) U.S. Equity Fund .70 -- .11 .81(13) Mid Cap Value Fund .80 -- .13 .93(13)
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MANAGEMENT 12b-1 OTHER FEES FEES EXPENSES TOTAL ---- ---- -------- ----- Janus Aspen Series Aggressive Growth Portfolio: Service Shares .65% .25% .02% .92%(14) Global Technology Portfolio: Service Shares .65 .25 .05 .95(14) International Growth Portfolio: Service Shares .65 .25 .06 .96(14) Lazard Retirement Series International Equity Portfolio .75 .25 .25 1.25(15) MFS(R) Investors Growth Stock Series - Service Class .75 .25 .17 1.17(16),(17),(18) New Discovery Series - Service Class .90 .25 .16 1.31(16),(17),(18) Putnam Variable Trust Putnam VT International New Opportunities Fund - Class IB Shares 1.00 .25 .24 1.49(19) Putnam VT Vista Fund - Class IB Shares .61 .25 .06 .92(19) Royce Capital Fund Micro-Cap Portfolio 1.25 -- .10 1.35(20) Third Avenue Value Portfolio .90 -- .40 1.30(21) Wanger International Small Cap 1.24 -- .19 1.43(22) U.S. Smaller Companies .94 -- .05 .99(22) (previously Wanger U.S. Small Cap) Wells Fargo VT Asset Allocation Fund .49 .25 .26 1.00(23) International Equity Fund -- .25 .75 1.00(23) Small Cap Growth Fund .63 .25 .32 1.20(23)
(1) The fund's expense figures are based on actual expenses, after fee waivers and expense reimbursements, for the fiscal year ending Aug. 31, 2001. Without fee waivers and expense reimbursements "Other expenses" and "Total" would be 0.29% and 0.96% for AXP(R) Variable Portfolio - Blue Chip Advantage Fund, 0.49% and 1.17% for AXP(R) Variable Portfolio - Diversified Equity Income Fund, 2.20% and 3.49% for AXP(R) Variable Portfolio - Emerging Markets Fund, 2.22%and 2.99% for AXP(R) Variable Portfolio - Equity Select Fund, 0.13% and 0.87% for AXP(R) Variable Portfolio - Federal Income Fund, 0.16% and 0.91% for AXP(R) Variable Portfolio - Growth Fund, 0.89% and 1.31% for AXP(R) Variable Portfolio - S&P 500 Index Fund, and 0.40% and 1.26% for AXP(R) Variable Portfolio - Small Cap Advantage Fund. (2) The fund's expense figures are based on actual expenses for the fiscal year ended Aug. 31, 2001. (3) The fund's expense figures are for the year ended Dec. 31, 2001 and are expressed as a percentage of Fund average daily net assets. There is no guarantee that actual expenses will be the same as those shown in the table. (4) Annualized operating expenses of funds at Dec. 31, 2001. (5) The fund has a stepped fee schedule. As a result, the fund's management fee generally decreases as fund assets increase. (6) Management fees include an administrative fee paid by the Fund to Calvert Administrative Services Company, an affiliate of Calvert. "Other expenses" reflect an indirect fee resulting from the Portfolio's offset arrangement with the custodian bank whereby the custodian's and transfer agent's fees may be paid indirectly by credits earned on the portfolio's uninvested cash balances. These credits are used to reduce the Portfolio's expenses. Net operating expenses before reductions for fees paid indirectly would be 0.88% for Social Balanced. (7) Expense ratios are shown after fee waivers and expenses reimbursements by the investment advisor. The total expense ratios before the waivers and reimbursements would have been: Credit Suisse Trust Emerging Growth Portfolio (0.90%, 0%, 0.39% and 1.29%). (8) 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. In addition, 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. These offsets may be discontinued at any time. See the accompanying fund prospectus for details. (9) The Fund administration fee is paid indirectly through the management fee. (10) The Fund's Class 2 distribution plan or "Rule 12b-1 plan" is described in the fund's prospectus. (11) 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 1.05% for Franklin Small Cap Value Securities Fund - Class 2 and 0.69% and 1.16% for Templeton Foreign Securities Fund - Class 2. (12) FTVIPT Templeton International Smaller Companies Fund - Class 2 merged into this fund as of April 30, 2002. (13) Expenses ratios are shown after fee waivers and expense reimbursements by the investment adviser. The expense ratios before the waivers and reimbursements would have been: 0.75%, 0.47% and 1.22% for CORE(SM) Small Cap Equity Fund, 0.70%, 0.12%, and 0.82% for CORE(SM) U.S. Equity Fund, and 0.80%, 0.14% and 0.94% for Mid Cap Value Fund. CORE(SM) U.S. Equity and Mid Cap Value Funds were under their respective expense caps of 0.20% and 0.25% in 2001. CORE(SM) is a service mark of Goldman, Sachs & Co. 7 (14) Expenses are based upon expenses for the fiscal year ended Dec. 31, 2001. All expenses are shown without the effect of expense offset arrangements. (15) Total annual expenses for the Lazard International Equity Portfolio have been reimbursed through Dec. 31, 2001 to the extent that they exceed in any fiscal year 1.25% of the Portfolios' average daily net assets. Absent fee waivers and/or reimbursements, "Other expenses" and "Total" expenses for the year ended Dec. 31, 2001 would have been 0.94% and 1.94% for International Equity Portfolio. (16) 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). (17) 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: 1.15% for Investors Growth Stock Series and 1.30% for New Discovery Series. (18) 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 0.19% and 1.34% for New Discovery Series. These contractual fee arrangements will continue until at least May 1, 2003, unless changed with the consent of the board of trustees which oversees the series. (19) 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 0.22% of average net assets. (20) Royce has contractually agreed to waive its fees and reimburse expenses to the extent necessary to maintain the Funds Net Annual Operating Expense ratio at or below 1.35% through Dec. 31, 2002 and 1.99% through Dec. 31, 2010. Absent fee waivers "Other expenses" and "Total" would be 0.17% and 1.42% for Royce Micro-Cap Portfolio. (21) The fund's expenses figures are based on actual expenses for the fiscal year ending Dec. 31, 2001. (22) Figures in "Management fees," "12b-1 fees," "Other expenses," and "Total" are based on actual expenses for the fiscal year ended Dec. 31, 2001. 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. (23) Amounts are based on estimated expenses for 2002. The advisor has contractually undertaken to waive its fee and to reimburse the funds for certain expenses. Without such arrangement the "Management fees," and "Total" would be 0.55% and 1.06% for Wells Fargo VT Asset Allocation Fund, 0.75% and 3.40% for Wells Fargo VT International Equity Fund and 0.75% and 1.32% for Wells Fargo VT Small Cap Growth Fund. 8 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. 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 the selection of the Enhanced Earnings Death Benefit Rider (EEB), 3) the contract with selection of the Maximum Anniversary Value Death Benefit Rider (MAV), and 4) the contract with the selection of both the MAV and the EEB 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) Variable Portfolio - Blue Chip Advantage Fund base contract with no optional riders $14.26 $44.32 $ 76.57 $167.84 optional EEB 17.33 53.72 92.51 201.16 optional MAV 15.80 49.03 84.57 184.62 optional MAV and EEB 18.87 58.39 100.41 217.46 AXP(R) Variable Portfolio - Bond Fund base contract with no optional riders 14.46 44.95 77.64 170.09 optional EEB 17.54 54.34 93.57 203.35 optional MAV 16.00 49.65 85.63 186.84 optional MAV and EEB 19.08 59.01 101.46 219.61 AXP(R) Variable Portfolio - Capital Resource Fund base contract with no optional riders 14.26 44.32 76.57 167.84 optional EEB 17.33 53.72 92.51 201.16 optional MAV 15.80 49.03 84.57 184.62 optional MAV and EEB 18.87 58.39 100.41 217.46 AXP(R) Variable Portfolio - Cash Management Fund base contract with no optional riders 13.23 41.18 71.21 156.51 optional EEB 16.31 50.59 87.22 190.16 optional MAV 14.77 45.89 79.24 173.46 optional MAV and EEB 17.85 55.28 95.15 206.62 AXP(R) Variable Portfolio - Diversified Equity Income Fund base contract with no optional riders 15.59 48.40 83.50 182.40 optional EEB 18.67 57.77 99.36 215.30 optional MAV 17.13 53.09 91.46 198.97 optional MAV and EEB 20.20 62.43 107.22 231.39 AXP(R) Variable Portfolio - Emerging Markets base contract with no optional riders 24.20 74.49 127.41 272.12 optional EEB 27.28 83.70 142.72 302.40 optional MAV 25.74 79.10 135.09 287.38 optional MAV and EEB 28.81 88.28 150.30 317.21 AXP(R) Variable Portfolio - Equity Select Fund base contract with no optional riders 17.54 54.34 93.57 203.35 optional EEB 20.61 63.67 109.30 235.64 optional MAV 19.08 59.01 101.46 219.61 optional MAV and EEB 22.15 68.32 117.09 251.43
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1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ ------- ------- -------- AXP(R) Variable Portfolio - Extra Income Fund base contract with no optional riders $14.67 $45.58 $ 78.71 $172.34 optional EEB 17.74 54.96 94.62 205.53 optional MAV 16.21 50.28 86.69 189.05 optional MAV and EEB 19.28 59.64 102.51 221.76 AXP(R) Variable Portfolio - Federal Income Fund base contract with no optional riders 14.87 46.20 79.77 174.58 optional EEB 17.95 55.59 95.68 207.71 optional MAV 16.41 50.90 87.75 191.27 optional MAV and EEB 19.49 60.26 103.56 223.91 AXP(R) Variable Portfolio - Global Bond Fund base contract with no optional riders 17.23 53.40 91.99 200.06 optional EEB 20.31 62.74 107.74 232.45 optional MAV 18.77 58.08 99.89 216.38 optional MAV and EEB 21.84 67.39 115.54 248.29 AXP(R) Variable Portfolio - Growth Fund base contract with no optional riders 15.49 48.09 82.97 181.28 optional EEB 18.56 57.46 98.84 214.22 optional MAV 17.03 52.78 90.93 197.87 optional MAV and EEB 20.10 62.12 106.69 230.32 AXP(R) Variable Portfolio - International Fund base contract with no optional riders 16.92 52.47 90.40 196.77 optional EEB 20.00 61.81 106.17 229.25 optional MAV 18.46 57.15 98.31 213.13 optional MAV and EEB 21.54 66.46 113.98 245.14 AXP(R) Variable Portfolio - Managed Fund base contract with no optional riders 14.05 43.69 75.50 165.58 optional EEB 17.13 53.09 91.46 198.97 optional MAV 15.59 48.40 83.50 182.40 optional MAV and EEB 18.67 57.77 99.36 215.30 AXP(R)Variable Portfolio - New Dimensions Fund(R) base contract with no optional riders 14.36 44.63 77.10 168.96 optional EEB 17.44 54.03 93.04 202.25 optional MAV 15.90 49.34 85.10 185.73 optional MAV and EEB 18.97 58.70 100.94 218.53 AXP(R) Variable Portfolio - S&P 500 Index Fund base contract with no optional riders 11.29 35.18 60.97 134.69 optional EEB 14.36 44.63 77.10 168.96 optional MAV 12.82 39.92 69.06 151.95 optional MAV and EEB 15.90 49.34 85.10 185.73 AXP(R) Variable Portfolio - Small Cap Advantage Fund base contract with no optional riders 18.15 56.21 96.73 209.88 optional EEB 21.23 65.53 112.42 241.98 optional MAV 19.69 60.88 104.60 226.05 optional MAV and EEB 22.77 70.17 120.20 257.68
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1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ ------- ------- -------- AXP(R) Variable Portfolio - Strategy Aggressive Fund base contract with no optional riders $14.26 $44.32 $ 76.57 $167.84 optional EEB 17.33 53.72 92.51 201.16 optional MAV 15.80 49.03 84.57 184.62 optional MAV and EEB 18.87 58.39 100.41 217.46 AIM V.I. Capital Appreciation Fund, Series I base contract with no optional riders 14.98 46.52 80.31 175.70 optional EEB 18.05 55.90 96.21 208.79 optional MAV 16.51 51.22 88.28 192.37 optional MAV and EEB 19.59 60.57 104.08 224.98 AIM V.I. Capital Development Fund, Series I base contract with no optional riders 18.15 56.21 96.73 209.88 optional EEB 21.23 65.53 112.42 241.98 optional MAV 19.69 60.88 104.60 226.05 optional MAV and EEB 22.77 70.17 120.20 257.68 American Century(R) VP International base contract with no optional riders 19.18 59.32 101.98 220.69 optional EEB 22.25 68.63 117.61 252.47 optional MAV 20.72 63.98 109.82 236.70 optional MAV and EEB 23.79 73.26 125.35 268.02 American Century(R) VP Value base contract with no optional riders 16.21 50.28 86.69 189.05 optional EEB 19.28 59.64 102.51 221.76 optional MAV 17.74 54.96 94.62 205.53 optional MAV and EEB 20.82 64.29 110.34 237.76 Calvert Variable Series, Inc. Social Balanced Portfolio base contract with no optional riders 15.18 47.14 81.37 177.94 optional EEB 18.26 56.52 97.26 210.97 optional MAV 16.72 51.84 89.34 194.57 optional MAV and EEB 19.79 61.19 105.13 227.12 Credit Suisse Trust Emerging Growth Portfolio base contract with no optional riders 19.08 59.01 101.46 219.61 optional EEB 22.15 68.32 117.09 251.43 optional MAV 20.61 63.67 109.30 235.64 optional MAV and EEB 23.69 72.95 124.84 266.99 Fidelity VIP Growth & Income Portfolio (Service Class) base contract with no optional riders 13.23 41.18 71.21 156.51 optional EEB 16.31 50.59 87.22 190.16 optional MAV 14.77 45.89 79.24 173.46 optional MAV and EEB 17.85 55.28 95.15 206.62 Fidelity VIP Mid Cap Portfolio (Service Class) base contract with no optional riders 14.36 44.63 77.10 168.96 optional EEB 17.44 54.03 93.04 202.25 optional MAV 15.90 49.34 85.10 185.73 optional MAV and EEB 18.97 58.70 100.94 218.53
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1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ ------- ------- -------- Fidelity VIP Overseas Portfolio (Service Class) base contract with no optional riders $16.82 $52.15 $ 89.87 $195.67 optional EEB 19.90 61.50 105.65 228.19 optional MAV 18.36 56.83 97.78 212.05 optional MAV and EEB 21.43 66.15 113.46 244.09 FTVIPT Franklin Real Estate Fund - Class 2 base contract with no optional riders 14.87 46.20 79.77 174.58 optional EEB 17.95 55.59 95.68 207.71 optional MAV 16.41 50.90 87.75 191.27 optional MAV and EEB 19.49 60.26 103.56 223.91 FTVIPT Franklin Small Cap Value Securities Fund - Class 2 (previously FTVIPT Franklin Value Securities Fund - Class 2) base contract with no optional riders 16.72 51.84 89.34 194.57 optional EEB 19.79 61.19 105.13 227.12 optional MAV 18.26 56.52 97.26 210.97 optional MAV and EEB 21.33 65.84 112.94 243.03 FTVIPT Templeton Foreign Securities Fund - Class 2 (previously FTVIPT Templeton International Securities Fund - Class 2) base contract with no optional riders 18.05 55.90 96.21 208.79 optional EEB 21.13 65.22 111.90 240.93 optional MAV 19.59 60.57 104.08 224.98 optional MAV and EEB 22.66 69.86 119.68 256.64 Goldman Sachs VIT CORE(SM) Small Cap Equity Fund base contract with no optional riders 16.51 51.22 88.28 192.37 optional EEB 19.59 60.57 104.08 224.98 optional MAV 18.05 55.90 96.21 208.79 optional MAV and EEB 21.13 65.22 111.90 240.93 Goldman Sachs VIT CORE(SM) U.S. Equity Fund base contract with no optional riders 14.57 45.26 78.17 171.21 optional EEB 17.64 54.65 94.10 204.44 optional MAV 16.10 49.96 86.16 187.95 optional MAV and EEB 19.18 59.32 101.98 220.69 Goldman Sachs VIT Mid Cap Value Fund base contract with no optional riders 15.80 49.03 84.57 184.62 optional EEB 18.87 58.39 100.41 217.46 optional MAV 17.33 53.72 92.51 201.16 optional MAV and EEB 20.41 63.05 108.26 233.51 Janus Aspen Series Aggressive Growth Portfolio: Service Shares base contract with no optional riders 15.69 48.71 84.04 183.51 optional EEB 18.77 58.08 99.89 216.38 optional MAV 17.23 53.40 91.99 200.06 optional MAV and EEB 20.31 62.74 107.74 232.45
12
1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ ------- ------- -------- Janus Aspen Series Global Technology Portfolio: Service Shares base contract with no optional riders $16.00 $49.65 $ 85.63 $186.84 optional EEB 19.08 59.01 101.46 219.61 optional MAV 17.54 54.34 93.57 203.35 optional MAV and EEB 20.61 63.67 109.30 235.64 Janus Aspen Series International Growth Portfolio: Service Shares base contract with no optional riders 16.10 49.96 86.16 187.95 optional EEB 19.18 59.32 101.98 220.69 optional MAV 17.64 54.65 94.10 204.44 optional MAV and EEB 20.72 63.98 109.82 236.70 Lazard Retirement International Equity Portfolio base contract with no optional riders 19.08 59.01 101.46 219.61 optional EEB 22.15 68.32 117.09 251.43 optional MAV 20.61 63.67 109.30 235.64 optional MAV and EEB 23.69 72.95 124.84 266.99 MFS(R) Investors Growth Stock Series - Service Class base contract with no optional riders 18.26 56.52 97.26 210.97 optional EEB 21.33 65.84 112.94 243.03 optional MAV 19.79 61.19 105.13 227.12 optional MAV and EEB 22.87 70.48 120.71 258.72 MFS(R) New Discovery Series - Service Class base contract with no optional riders 19.69 60.88 104.60 226.05 optional EEB 22.77 70.17 120.20 257.68 optional MAV 21.23 65.53 112.42 241.98 optional MAV and EEB 24.30 74.80 127.92 273.15 Putnam VT International New Opportunities Fund - Class IB Shares base contract with no optional riders 21.54 66.46 113.98 245.14 optional EEB 24.61 75.72 129.46 276.21 optional MAV 23.07 71.10 121.75 260.79 optional MAV and EEB 26.15 80.33 137.13 291.41 Putnam VT Vista Fund - Class IB Shares base contract with no optional riders 15.69 48.71 84.04 183.51 optional EEB 18.77 58.08 99.89 216.38 optional MAV 17.23 53.40 91.99 200.06 optional MAV and EEB 20.31 62.74 107.74 232.45 Royce Micro-Cap Portfolio base contract with no optional riders 20.10 62.12 106.69 230.32 optional EEB 23.18 71.41 122.26 261.83 optional MAV 21.64 66.77 114.50 246.19 optional MAV and EEB 24.71 76.03 129.97 277.23 Third Avenue Value Portfolio base contract with no optional riders 19.59 60.57 104.08 224.98 optional EEB 22.66 69.86 119.68 256.64 optional MAV 21.13 65.22 111.90 240.93 optional MAV and EEB 24.20 74.49 127.41 272.12
13
1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ ------- ------- -------- Wanger International Small Cap base contract with no optional riders $20.92 $64.60 $110.86 $238.81 optional EEB 24.00 73.87 126.38 270.07 optional MAV 22.46 69.25 118.65 254.56 optional MAV and EEB 25.53 78.49 134.07 285.35 Wanger U.S. Smaller Companies (previously Wanger U.S. Small Cap) base contract with no optional riders 16.41 50.90 87.75 191.27 optional EEB 19.49 60.26 103.56 223.91 optional MAV 17.95 55.59 95.68 207.71 optional MAV and EEB 21.02 64.91 111.38 239.87 Wells Fargo VT Asset Allocation Fund base contract with no optional riders 16.51 51.22 88.28 192.37 optional EEB 19.59 60.57 104.08 224.98 optional MAV 18.05 55.90 96.21 208.79 optional MAV and EEB 21.13 65.22 111.90 240.93 Wells Fargo VT International Equity Fund base contract with no optional riders 16.51 51.22 88.28 192.37 optional EEB 19.59 60.57 104.08 224.98 optional MAV 18.05 55.90 96.21 208.79 optional MAV and EEB 21.13 65.22 111.90 240.93 Wells Fargo VT Small Cap Growth Fund base contract with no optional riders 18.56 57.46 98.84 214.22 optional EEB 21.64 66.77 114.50 246.19 optional MAV 20.10 62.12 106.69 230.32 optional MAV and EEB 23.18 71.41 122.26 261.83
* In these examples, the $30 contract administrative charge is approximated as a 0.061% charge based on our average contract size. Premium taxes imposed by some state and local governments are not reflected in this table. We entered into certain arrangements under which we are compensated by the funds' advisors and/or distributors for the administrative services we provide to the funds. YOU SHOULD NOT CONSIDER THESE EXAMPLES AS REPRESENTATIONS OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN. 14 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 did not have any activity as of the date of the financial statements.
YEAR ENDED DEC. 31, 2001 2000 1999 ------------------- ---- ---- ---- SUBACCOUNT BC3(1) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - BLUE CHIP ADVANTAGE FUND) Accumulation unit value at beginning of period $0.99 $1.11 $1.00 Accumulation unit value at end of period $0.82 $0.99 $1.11 Number of accumulation units outstanding at end of period (000 omitted) 729 454 211 Ratio of operating expense to average net assets 0.55% 0.55% 0.55% SUBACCOUNT BD3(1) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - BOND FUND) Accumulation unit value at beginning of period $1.06 $1.02 $1.00 Accumulation unit value at end of period $1.14 $1.06 $1.02 Number of accumulation units outstanding at end of period (000 omitted) 985 410 47 Ratio of operating expense to average net assets 0.55% 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 $0.94 $1.14 $1.00 Accumulation unit value at end of period $0.76 $0.94 $1.14 Number of accumulation units outstanding at end of period (000 omitted) 291 266 872 Ratio of operating expense to average net assets 0.55% 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 $1.07 $1.01 $1.00 Accumulation unit value at end of period $1.10 $1.07 $1.01 Number of accumulation units outstanding at end of period (000 omitted) 5,658 6,615 2,266 Ratio of operating expense to average net assets 0.55% 0.55% 0.55% Simple yield(2) 1.04% 5.31% 5.51% Compound yield(2) 1.05% 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 $1.01 $1.02 $1.00 Accumulation unit value at end of period $1.02 $1.01 $1.02 Number of accumulation units outstanding at end of period (000 omitted) 281 218 23 Ratio of operating expense to average net assets 0.55% 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 $0.75 $1.00 -- Accumulation unit value at end of period $0.73 $0.75 -- Number of accumulation units outstanding at end of period (000 omitted) 3 1 -- Ratio of operating expense to average net assets 0.55% 0.55% -- SUBACCOUNT ES3(4) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - EQUITY SELECT FUND) Accumulation unit value at beginning of period $1.00 -- -- Accumulation unit value at end of period $1.01 -- -- Number of accumulation units outstanding at end of period (000 omitted) 38 -- -- 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 $0.91 $1.01 $1.00 Accumulation unit value at end of period $0.95 $0.91 $1.01 Number of accumulation units outstanding at end of period (000 omitted) 1,549 1,186 48 Ratio of operating expense to average net assets 0.55% 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 $1.09 $1.01 $1.00 Accumulation unit value at end of period $1.15 $1.09 $1.01 Number of accumulation units outstanding at end of period (000 omitted) 592 1 10 Ratio of operating expense to average net assets 0.55% 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 $1.03 $1.00 $1.00 Accumulation unit value at end of period $1.04 $1.03 $1.00 Number of accumulation units outstanding at end of period (000 omitted) 249 4 3 Ratio of operating expense to average net assets 0.55% 0.55% 0.55%
15
YEAR ENDED DEC. 31, 2001 2000 1999 ------------------- ---- ---- ---- SUBACCOUNT GR3(1) (INVESTING IN SHARES OF AXP(R)VARIABLE PORTFOLIO - GROWTH FUND) Accumulation unit value at beginning of period $0.94 $1.17 $1.00 Accumulation unit value at end of period $0.64 $0.94 $1.17 Number of accumulation units outstanding at end of period (000 omitted) 1,285 1,762 401 Ratio of operating expense to average net assets 0.55% 0.55% 0.55% SUBACCOUNT IE3(1) (INVESTING IN SHARES OF AXP(R)VARIABLE PORTFOLIO - INTERNATIONAL FUND) Accumulation unit value at beginning of period $0.95 $1.27 $1.00 Accumulation unit value at end of period $0.67 $0.95 $1.27 Number of accumulation units outstanding at end of period (000 omitted) 65 81 133 Ratio of operating expense to average net assets 0.55% 0.55% 0.55% SUBACCOUNT MF3(1) (INVESTING IN SHARES OF AXP(R)VARIABLE PORTFOLIO - MANAGED FUND) Accumulation unit value at beginning of period $1.06 $1.09 $1.00 Accumulation unit value at end of period $0.94 $1.06 $1.09 Number of accumulation units outstanding at end of period (000 omitted) 296 145 10 Ratio of operating expense to average net assets 0.55% 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 $1.08 $1.19 $1.00 Accumulation unit value at end of period $0.89 $1.08 $1.19 Number of accumulation units outstanding at end of period (000 omitted) 3,252 3,919 426 Ratio of operating expense to average net assets 0.55% 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 $0.90 $1.00 -- Accumulation unit value at end of period $0.79 $0.90 -- Number of accumulation units outstanding at end of period (000 omitted) 770 285 -- Ratio of operating expense to average net assets 0.55% 0.55% -- SUBACCOUNT SC3(1) (INVESTING IN SHARES OF AXP(R)VARIABLE PORTFOLIO - SMALL CAP ADVANTAGE FUND) Accumulation unit value at beginning of period $1.16 $1.12 $1.00 Accumulation unit value at end of period $1.08 $1.16 $1.12 Number of accumulation units outstanding at end of period (000 omitted) 378 286 28 Ratio of operating expense to average net assets 0.55% 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 $1.22 $1.52 $1.00 Accumulation unit value at end of period $0.81 $1.22 $1.52 Number of accumulation units outstanding at end of period (000 omitted) 607 798 33 Ratio of operating expense to average net assets 0.55% 0.55% 0.55% SUBACCOUNT 3CA(1) (INVESTING IN SHARES OF AIM V.I. CAPITAL APPRECIATION FUND, SERIES I) Accumulation unit at end of period $1.17 $1.31 $1.00 Accumulation unit value at end of period $0.89 $1.17 $1.31 Number of accumulation units outstanding at end of period (000 omitted) 1,358 1,343 185 Ratio of operating expense to average net assets 0.55% 0.55% 0.55% SUBACCOUNT 3CD(1) (INVESTING IN SHARES OF AIM V.I. CAPITAL DEVELOPMENT FUND, SERIES I) Accumulation unit value at beginning of period $1.38 $1.27 $1.00 Accumulation unit value at end of period $1.26 $1.38 $1.27 Number of accumulation units outstanding at end of period (000 omitted) 394 318 4 Ratio of operating expense to average net assets 0.55% 0.55% 0.55% SUBACCOUNT 3IF(1) (INVESTING IN SHARES OF AMERICAN CENTURY(R)VP INTERNATIONAL) Accumulation unit value at beginning of period $1.19 $1.44 $1.00 Accumulation unit value at end of period $0.84 $1.19 $1.44 Number of accumulation units outstanding at end of period (000 omitted) 781 532 9 Ratio of operating expense to average net assets 0.55% 0.55% 0.55% SUBACCOUNT 3VA(1) (INVESTING IN SHARES OF AMERICAN CENTURY(R)VP VALUE) Accumulation unit value at beginning of period $1.08 $0.92 $1.00 Accumulation unit value at end of period $1.21 $1.08 $0.92 Number of accumulation units outstanding at end of period (000 omitted) 506 435 59 Ratio of operating expense to average net assets 0.55% 0.55% 0.55%
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YEAR ENDED DEC. 31, 2001 2000 1999 ------------------- ---- ---- ---- SUBACCOUNT 3SR(3) (INVESTING IN SHARES OF CALVERT VARIABLE SERIES, INC. SOCIAL BALANCED PORTFOLIO) Accumulation unit value at beginning of period $0.96 $1.00 -- Accumulation unit value at end of period $0.89 $0.96 -- Number of accumulation units outstanding at end of period (000 omitted) 6 5 -- Ratio of operating expense to average net assets 0.55% 0.55% -- SUBACCOUNT 3EG(5) (INVESTING IN SHARES OF CREDIT SUISSE TRUST - EMERGING GROWTH PORTFOLIO) Accumulation unit value at beginning of period $1.29 $1.32 $1.00 Accumulation unit value at end of period $1.07 $1.29 $1.32 Number of accumulation units outstanding at end of period (000 omitted) 467 891 17 Ratio of operating expense to average net assets 0.55% 0.55% 0.55% SUBACCOUNT 3GI(1) (INVESTING IN SHARES OF FIDELITY VIP GROWTH & INCOME PORTFOLIO (SERVICE CLASS)) Accumulation unit value at beginning of period $1.00 $1.05 $1.00 Accumulation unit value at end of period $0.91 $1.00 $1.05 Number of accumulation units outstanding at end of period (000 omitted) 1,090 764 445 Ratio of operating expense to average net assets 0.55% 0.55% 0.55% SUBACCOUNT 3MP(1) (INVESTING IN SHARES OF FIDELITY VIP MID CAP PORTFOLIO (SERVICE CLASS)) Accumulation unit value at beginning of period $1.65 $1.24 $1.00 Accumulation unit value at end of period $1.59 $1.65 $1.24 Number of accumulation units outstanding at end of period (000 omitted) 781 616 102 Ratio of operating expense to average net assets 0.55% 0.55% 0.55% SUBACCOUNT 3OS(1) (INVESTING IN SHARES OF FIDELITY VIP OVERSEAS PORTFOLIO (SERVICE CLASS)) Accumulation unit value at beginning of period $0.99 $1.23 $1.00 Accumulation unit value at end of period $0.77 $0.99 $1.23 Number of accumulation units outstanding at end of period (000 omitted) 114 116 25 Ratio of operating expense to average net assets 0.55% 0.55% 0.55% SUBACCOUNT 3RE(1) (INVESTING IN SHARES OF FTVIPT FRANKLIN REAL ESTATE FUND - CLASS 2) Accumulation unit value at beginning of period $1.26 $0.96 $1.00 Accumulation unit value at end of period $1.35 $1.26 $0.96 Number of accumulation units outstanding at end of period (000 omitted) 211 148 4 Ratio of operating expense to average net assets 0.55% 0.55% 0.55% SUBACCOUNT 3SI(1) (INVESTING IN SHARES OF FTVIPT FRANKLIN SMALL CAP VALUE SECURITIES FUND - CLASS 2) (PREVIOUSLY FTVIPT FRANKLIN VALUE SECURITIES FUND - CLASS 2) Accumulation unit value at beginning of period $1.20 $0.96 $1.00 Accumulation unit value at end of period $1.35 $1.20 $0.96 Number of accumulation units outstanding at end of period (000 omitted) 150 9 2 Ratio of operating expense to average net assets 0.55% 0.55% 0.55% SUBACCOUNT 3IS(1),(6) (INVESTING IN SHARES OF FTVIPT TEMPLETON INTERNATIONAL SMALLER COMPANIES FUND - CLASS 2) Accumulation unit value at beginning of period $1.00 $1.02 $1.00 Accumulation unit value at end of period $0.97 $1.00 $1.02 Number of accumulation units outstanding at end of period (000 omitted) 71 43 9 Ratio of operating expense to average net assets 0.55% 0.55% 0.55% SUBACCOUNT 3SE(1) (INVESTING IN SHARES OF GOLDMAN SACHS VIT CORE(SM) SMALL CAP EQUITY FUND) Accumulation unit value at beginning of period $1.15 $1.13 $1.00 Accumulation unit value at end of period $1.19 $1.15 $1.13 Number of accumulation units outstanding at end of period (000 omitted) 97 100 41 Ratio of operating expense to average net assets 0.55% 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 $0.99 $1.10 $1.00 Accumulation unit value at end of period $0.87 $0.99 $1.10 Number of accumulation units outstanding at end of period (000 omitted) 943 577 170 Ratio of operating expense to average net assets 0.55% 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 $1.24 $0.95 $1.00 Accumulation unit value at end of period $1.38 $1.24 $0.95 Number of accumulation units outstanding at end of period (000 omitted) 200 15 8 Ratio of operating expense to average net assets 0.55% 0.55% 0.55%
17
YEAR ENDED DEC. 31, 2001 2000 1999 ------------------- ---- ---- ---- SUBACCOUNT 3AG(3) (INVESTING IN SHARES OF JANUS ASPEN SERIES AGGRESSIVE GROWTH PORTFOLIO: SERVICE SHARES) Accumulation unit value at beginning of period $0.70 $1.00 -- Accumulation unit value at end of period $0.42 $0.70 -- Number of accumulation units outstanding at end of period (000 omitted) 280 343 -- Ratio of operating expense to average net assets 0.55% 0.55% -- SUBACCOUNT 3GT(3) (INVESTING IN SHARES OF JANUS ASPEN SERIES GLOBAL TECHNOLOGY PORTFOLIO: SERVICE SHARES) Accumulation unit value at beginning of period $0.68 $1.00 -- Accumulation unit value at end of period $0.43 $0.68 -- Number of accumulation units outstanding at end of period (000 omitted) 202 310 -- Ratio of operating expense to average net assets 0.55% 0.55% -- SUBACCOUNT 3IG(3) (INVESTING IN SHARES OF JANUS ASPEN SERIES INTERNATIONAL GROWTH PORTFOLIO: SERVICE SHARES) Accumulation unit value at beginning of period $0.80 $1.00 -- Accumulation unit value at end of period $0.61 $0.80 -- Number of accumulation units outstanding at end of period (000 omitted) 606 556 -- Ratio of operating expense to average net assets 0.55% 0.55% -- SUBACCOUNT 3IP(1) (INVESTING IN SHARES OF LAZARD RETIREMENT INTERNATIONAL EQUITY PORTFOLIO) Accumulation unit value at beginning of period $0.96 $1.07 $1.00 Accumulation unit value at end of period $0.73 $0.96 $1.07 Number of accumulation units outstanding at end of period (000 omitted) 253 57 8 Ratio of operating expense to average net assets 0.55% 0.55% 0.55% SUBACCOUNT 3MG(3) (INVESTING IN SHARES OF MFS(R) INVESTORS GROWTH STOCK SERIES - SERVICE CLASS) Accumulation unit value at beginning of period $0.91 $1.00 -- Accumulation unit value at end of period $0.68 $0.91 -- Number of accumulation units outstanding at end of period (000 omitted) 913 533 -- Ratio of operating expense to average net assets 0.55% 0.55% -- SUBACCOUNT 3MD(3) (INVESTING IN SHARES OF MFS(R) NEW DISCOVERY SERIES - SERVICE CLASS) Accumulation unit value at beginning of period $0.96 $1.00 -- Accumulation unit value at end of period $0.90 $0.96 -- Number of accumulation units outstanding at end of period (000 omitted) 548 352 -- Ratio of operating expense to average net assets 0.55% 0.55% -- SUBACCOUNT 3IN(1) (INVESTING IN SHARES OF PUTNAM VT INTERNATIONAL NEW OPPORTUNITIES FUND - CLASS IB SHARES) Accumulation unit value at beginning of period $0.92 $1.52 $1.00 Accumulation unit value at end of period $0.66 $0.92 $1.52 Number of accumulation units outstanding at end of period (000 omitted) 1,347 1,802 87 Ratio of operating expense to average net assets 0.55% 0.55% 0.55% SUBACCOUNT 3VS(1) (INVESTING IN SHARES OF PUTNAM VT VISTA FUND - CLASS IB SHARES) Accumulation unit value at beginning of period $1.29 $1.36 $1.00 Accumulation unit value at end of period $0.86 $1.29 $1.36 Number of accumulation units outstanding at end of period (000 omitted) 1,092 1,330 183 Ratio of operating expense to average net assets 0.55% 0.55% 0.55% SUBACCOUNT 3MI(1) (INVESTING IN SHARES OF ROYCE MICRO-CAP PORTFOLIO) Accumulation unit value at beginning of period $1.36 $1.15 $1.00 Accumulation unit value at end of period $1.75 $1.36 $1.15 Number of accumulation units outstanding at end of period (000 omitted) 344 193 19 Ratio of operating expense to average net assets 0.55% 0.55% 0.55% SUBACCOUNT 3SV(5) (INVESTING IN SHARES OF THIRD AVENUE VALUE PORTFOLIO) Accumulation unit value at beginning of period $1.51 $1.08 $1.00 Accumulation unit value at end of period $1.71 $1.51 $1.08 Number of accumulation units outstanding at end of period (000 omitted) 314 70 120 Ratio of operating expense to average net assets 0.55% 0.55% 0.55% SUBACCOUNT 3IT(1) (INVESTING IN SHARES OF WANGER INTERNATIONAL SMALL CAP) Accumulation unit value at beginning of period $1.09 $1.51 $1.00 Accumulation unit value at end of period $0.85 $1.09 $1.51 Number of accumulation units outstanding at end of period (000 omitted) 769 599 112 Ratio of operating expense to average net assets 0.55% 0.55% 0.55%
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YEAR ENDED DEC. 31, 2001 2000 1999 ------------------- ---- ---- ---- SUBACCOUNT 3SP(1) (INVESTING IN SHARES OF WANGER U.S. SMALLER COMPANIES) (PREVIOUSLY WANGER U.S. SMALL CAP) Accumulation unit value at beginning of period $1.05 $1.15 $1.00 Accumulation unit value at end of period $1.17 $1.05 $1.15 Number of accumulation units outstanding at end of period (000 omitted) 820 990 125 Ratio of operating expense to average net assets 0.55% 0.55% 0.55% SUBACCOUNT 3AA(4) (INVESTING IN SHARES OF WELLS FARGO VT ASSET ALLOCATION FUND) Accumulation unit value at beginning of period $1.00 -- -- Accumulation unit value at end of period $0.97 -- -- Number of accumulation units outstanding at end of period (000 omitted) 8 -- -- Ratio of operating expense to average net assets 0.55% -- -- SUBACCOUNT 3WI(4) (INVESTING IN SHARES OF WELLS FARGO VT INTERNATIONAL EQUITY 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) 1 -- -- Ratio of operating expense to average net assets 0.55% -- -- SUBACCOUNT 3SG(4) (INVESTING IN SHARES OF WELLS FARGO VT SMALL CAP GROWTH FUND) Accumulation unit value at beginning of period $1.00 -- -- Accumulation unit value at end of period $0.94 -- -- Number of accumulation units outstanding at end of period (000 omitted) 2 -- -- Ratio of operating expense to average net assets 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 May 1, 2001. (5) Operations commenced on Sept. 21, 1999. (6) FTVIPT Templeton International Smaller Companies Fund - Class 2 merged into FTVIPT Foreign Securities Fund - Class 2 as of April 30, 2002. 19 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 subaccounts because they are new and did not have any activity as of the date of the financial statements. 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. For some subaccounts we do not provide any performance information because they are new and did not have any activity. However, we show performance from the commencement date of the funds as if the subaccounts invested in them existed at that time, which, in some cases, they 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: - contract administrative charge, - mortality and expense risk fee, - Maximum Anniversary Value Death Benefit Rider fee (MAV fee), and - Enhanced Earnings Death Benefit Rider fee (EEB fee). We may also show optional total return quotations that reflect deduction of the MAV and/or EEB 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. 20 THE VARIABLE ACCOUNT AND THE FUNDS You may allocate purchase payments and transfers 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 ADVISER OR MANAGER ---------- ------------ ---------------------------------- ----------------------------- BC3 AXP(R) Variable Portfolio - Objective: long-term total return IDS Life, investment manager; Blue Chip Advantage Fund exceeding that of the U.S. stock American Express Financial market. Invests primarily in blue Corporation (AEFC), investment chip stocks. Blue chip stocks are adviser. issued by companies with a market capitalization of at least $1 billion, an established management, a history of consistent earnings and a leading position within their respective industries. BD3 AXP(R) Variable Portfolio - Objective: high level of current IDS Life, investment manager; Bond Fund income while conserving the value of AEFC, investment adviser. the investment and continuing a high level of income for the longest time period. Invests primarily in bonds and other debt obligations. CR3 AXP(R) Variable Portfolio - Objective: capital appreciation. IDS Life, investment manager; Capital Resource Fund Invests primarily in U.S. common AEFC, investment adviser. stocks and other securities convertible into common stocks. CM3 AXP(R) Variable Portfolio - Objective: maximum current income IDS Life, investment manager; Cash Management Fund consistent with liquidity and AEFC, investment adviser. stability of principal. Invests primarily in money market securities. DE3 AXP(R) Variable Portfolio - Objective: a high level of current IDS Life, investment manager; Diversified Equity Income income and, as a secondary goal, AEFC, investment adviser. Fund steady growth of capital. Invests primarily in dividend-paying common and preferred stocks. EM3 AXP(R) Variable Portfolio - Objective: long-term capital growth. IDS Life, investment manager; Emerging Markets Fund Invests primarily in equity AEFC, investment adviser; securities of companies in emerging American Express Asset market countries. Management International, Inc., a wholly-owned subsidiary of AEFC, is the sub-adviser. ES3 AXP(R) Variable Portfolio - Objective: growth of capital. IDS Life, investment manager; Equity Select Fund Invests primarily in equity AEFC, investment adviser. securities of medium-sized companies. EI3 AXP(R) Variable Portfolio - Objective: high current income, with IDS Life, investment manager; Extra Income Fund capital growth as a secondary AEFC, investment adviser. objective. Invests primarily in high-yielding, high-risk corporate bonds (junk bonds) issued by U.S. and foreign companies and governments. FI3 AXP(R) Variable Portfolio - Objective: a high level of current IDS Life, investment manager; Federal Income Fund income and safety of principal AEFC, investment adviser. consistent with an investment in U.S. government and government agency securities. Invests primarily in debt obligations issued or guaranteed as to principal and interest by the U.S. government, its agencies or instrumentalities.
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SUBACCOUNT INVESTING IN INVESTMENT OBJECTIVES AND POLICIES INVESTMENT ADVISER OR MANAGER ---------- ------------ ---------------------------------- ----------------------------- GB3 AXP(R) Variable Portfolio - Objective: high total return through IDS Life, investment manager; Global Bond Fund income and growth of capital. AEFC, investment adviser. Non-diversified fund that invests primarily in debt obligations of U.S. and foreign issuers. GR3 AXP(R) Variable Portfolio - Objective: long-term capital growth. IDS Life, investment manager; Growth Fund Invests primarily in common stocks AEFC, investment adviser. and securities convertible into common stocks that appear to offer growth opportunities. IE3 AXP(R) Variable Portfolio - Objective: capital appreciation. IDS Life, investment manager; International Fund Invests primarily in common stocks AEFC, investment adviser. or convertible securities of foreign American Express Asset issuers that offer strong growth Management International, Inc., potential. a wholly-owned subsidiary of AEFC, is the sub-adviser. MF3 AXP(R) Variable Portfolio - Objective: maximum total investment IDS Life, investment manager; Managed Fund return through a combination of AEFC, investment adviser. capital growth and current income. Invests primarily in a combination of common and preferred stocks, convertible securities, bonds and other debt securities. ND3 AXP(R) Variable Portfolio - Objective: long-term growth of IDS Life, investment manager; NEW DIMENSIONS FUND(R) capital. Invests primarily in AEFC, investment adviser. common stocks showing potential for significant growth. IV3 AXP(R) Variable Portfolio - Objective: long-term capital IDS Life, investment manager; S&P 500 Index Fund appreciation. Non-diversified AEFC, investment adviser. fund that invests primarily in securities that are expected to provide investment results that correspond to the performance of the S&P 500 Index. SC3 AXP(R) Variable Portfolio - Objective: long-term capital growth. IDS Life, investment manager; Small Cap Advantage Fund Invests primarily in equity stocks AEFC, investment adviser; of small companies that are often Kenwood Capital Management LLC, included in the Russell 2000 Index sub-adviser. and/or have market capitalization under $2 billion. SA3 AXP(R) Variable Portfolio - Objective: capital appreciation. IDS Life, investment manager; Strategy Aggressive Fund Invests primarily in equity AEFC, investment adviser. securities of growth companies. 3CA AIM V.I. Capital Objective: growth of capital. A I M Advisors, Inc. Appreciation Fund, Series I Invests principally in common stocks of companies likely to benefit from new or innovative products, services or processes as well as those with above-average growth and excellent prospects for future growth. 3CD AIM V.I. Capital Development Objective: long-term growth of A I M Advisors, Inc. Fund, Series I capital. Invests primarily in securities (including common stocks, convertible securities and bonds) of small- and medium-sized companies.
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SUBACCOUNT INVESTING IN INVESTMENT OBJECTIVES AND POLICIES INVESTMENT ADVISER OR MANAGER ---------- ------------ ---------------------------------- ----------------------------- 3IF American Century(R) VP Objective: long-term capital growth. American Century Investment International Invests primarily in stocks of Management, Inc. growing foreign companies in developed countries. 3VA American Century(R) VP Value Objective: long-term capital growth, American Century Investment with income as a secondary Management, Inc. objective. Invests primarily in stocks of companies that management believes to be undervalued at the time of purchase. 3SR Calvert Variable Series, Objective: income and capital Calvert Asset Management Inc. Social Balanced growth. Invests primarily in stocks, Company, Inc. (CAMCO), Portfolio bonds and money market instruments investment adviser. SSgA which offer income and capital Funds Management, Inc. and growth opportunity and which satisfy Brown Capital Management are the investment and social criteria. the investment subadvisers. 3EG Credit Suisse Trust - Objective: maximum capital Credit Suisse Asset Management, Emerging Growth Portfolio appreciation. Invests in U.S. equity LLC securities of emerging-growth companies with growth characteristics such as positive earnings and potential for accelerated growth. 3GI Fidelity VIP Growth & Income Strategy: high total return through Fidelity Management & Research Portfolio (Service Class) a combination of current income and Company (FMR), investment capital appreciation. Normally manager; FMR U.K. and FMR Far invests a majority of assets in East, sub-investment advisers. common stocks with a focus on those that pay current dividends and show potential for capital appreciation. 3MP Fidelity VIP Mid Cap Strategy: long-term growth of FMR, investment manager; FMR Portfolio (Service Class) capital. Normally invests at least U.K. and FMR Far East, 80% of assets in securities of sub-investment advisers. companies with medium market capitalization common stocks. 3OS Fidelity VIP Overseas Strategy: long-term growth of FMR, investment manager; FMR Portfolio (Service Class) capital. Invests primarily in U.K., FMR Far East, Fidelity common stocks of foreign securities. International Investment Advisors (FIIA) and FIIA U.K., sub-investment advisers. 3RE FTVIPT Franklin Real Estate Objective: capital appreciation with Franklin Advisers, Inc. Fund - Class 2 a secondary goal to earn current income. Invests at least 80% of its net assets in investments of companies operating in the real estate industry. The Fund invests primarily in equity real estate investment trusts (REITs).
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SUBACCOUNT INVESTING IN INVESTMENT OBJECTIVES AND POLICIES INVESTMENT ADVISER OR MANAGER ---------- ------------ ---------------------------------- ----------------------------- 3SI FTVIPT Franklin Small Cap Objective: long-term total return. Franklin Advisory Services, LLC Value Securities Fund - Invests at least 80% of its net Class 2 (previously FTVIPT assets in investments of small Franklin Value Securities capitalization companies. For this Fund - Class 2) Fund, small capitalization companies are those that have a market cap not exceeding $2.5 billion, at the time of purchase. Invests primarily in equity securities of companies the manager believes are selling substantially below the underlying value of their assets or their private market value. 3TF FTVIPT Templeton Foreign Objective: long-term capital growth. Templeton Investment Counsel, LLC Securities Fund - Class 2 Invests at least 80% of its net (previously FTVIPT Templeton assets in foreign securities, International Securities including those in emerging markets. Fund - Class 2. FTVIPT Templeton International Smaller Companies Fund - Class 2 merged into this fund as of April 30, 2002) 3SE Goldman Sachs VIT CORE(SM) Objective: seeks long-term growth of Goldman Sachs Asset Management Small Cap Equity Fund capital. Invests, under normal circumstances, at least 80% of its net assets plus any borrowing for investment purposes (measured at the time of purchase) in a broadly diversified portfolio of equity investments of U.S. issuers which are included in the Russell 2000 Index at the time of investment. 3UE Goldman Sachs VIT CORE(SM) Objective: seeks long-term growth of Goldman Sachs Asset Management U.S. Equity Fund capital and dividend income. Invests, under normal circumstances, at least 90% of its total assets (not including securities lending collateral and any investment of that collateral) measured at time of purchase in a broadly diversified portfolio of large-cap and blue chip equity investments representing all major sectors of the U.S. economy. 3MC Goldman Sachs VIT Mid Cap Objective: seeks long-term capital Goldman Sachs Asset Management Value Fund appreciation. Invests, under normal circumstances, at least 80% of its net assets plus any borrowing for investment purposes (measured at time of purchase) in a diversified portfolio of equity investments in mid-capitalization issuers within the range of the market capitalization of companies constituting the Russell Midcap Value Index at the time of investment. 3AG Janus Aspen Series Objective: long-term growth of Janus Capital Aggressive Growth Portfolio: capital. Non-diversified mutual fund Service Shares that primarily invests in common stocks selected for their growth potential and normally invests at least 50% of its equity assets in medium-sized companies.
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SUBACCOUNT INVESTING IN INVESTMENT OBJECTIVES AND POLICIES INVESTMENT ADVISER OR MANAGER ---------- ------------ ---------------------------------- ----------------------------- 3GT Janus Aspen Series Global Objective: long-term growth of Janus Capital Technology Portfolio: capital. Non-diversified mutual Service Shares fund that invests, under normal circumstances, at least 80% of its net assets in securities of companies that the portfolio manager believes will benefit significantly from advances or improvements in technology. It implements this policy by investing primarily in equity securities of U.S. and foreign companies selected for their growth potential. 3IG Janus Aspen Series Objective: long-term growth of Janus Capital International Growth capital. Invests, under normal Portfolio: Service Shares circumstances, at least 80% of its net assets in securities of issuers from at least five different countries, excluding the United States. Although the Portfolio intends to invest substantially all of its assets in issuers located outside the United States, it may at times invest in U.S. issuers and it may at times invest all of its assets in fewer than five countries or even a single country. 3IP Lazard Retirement Objective: long-term capital Lazard Asset Management International Equity appreciation. Invests primarily in Portfolio equity securities, principally common stocks, of relatively large non-U.S. 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. 3MG MFS(R) Investors Growth Stock Objective: long-term growth of MFS Investment Management(R) Series - Service Class capital and future income. Invests at least 80% of its total assets in common stocks and related securities of companies which MFS believes offer better than average prospects for long-term growth. 3MD MFS(R) New Discovery Series - Objective: capital appreciation. MFS Investment Management(R) Service Class Invests primarily in equity securities of emerging growth companies. 3IN Putnam VT International New Objective: long-term capital Putnam Investment Management, Opportunities Fund - Class appreciation. The fund seeks its LLC IB Shares goal by investing in common stock of companies outside the United States with a focus on growth stocks. 3VS Putnam VT Vista Fund - Class Objective: capital appreciation. The Putnam Investment Management, IB Shares fund seeks its goal by investing LLC mainly in common stocks of U.S. companies with a focus on growth stocks.
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SUBACCOUNT INVESTING IN INVESTMENT OBJECTIVES AND POLICIES INVESTMENT ADVISER OR MANAGER ---------- ------------ ---------------------------------- ----------------------------- 3MI Royce Micro-Cap Portfolio Objective: long-term growth of Royce & Associates, LLC. capital. Invests primarily in a broadly diversified portfolio of equity securities issued by micro-cap companies (companies with stock market capitalizations below $400 million). 3SV Third Avenue Value Portfolio Objective: long-term capital EQSF Advisers, Inc. appreciation. Invests primarily in common stocks of well financed, well managed companies at a substantial discount to what the Adviser believes is their true value. 3IT Wanger International Small Objective: long-term growth of Liberty Wanger Asset Cap capital. Invests primarily in stocks Management, L.P. of small- and medium-size non-U.S. companies with capitalizations of less than $2 billion.. 3SP Wanger U.S. Smaller Objective: long-term growth of Liberty Wanger Asset Companies (previously Wanger capital. Invests primarily in stocks Management, L.P. U.S. Small Cap) of small- and medium-size U.S. companies with capitalizations of less than $5 billion. 3AA Wells Fargo VT Asset Objective: long-term total return, Wells Fargo Funds Management, Allocation Fund consistent with reasonable risk. LLC, adviser; Wells Capital Invests primarily in the Management Incorporated, securities Fund Advisors, sub-adviser. sub-adviser. of 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+ Treasury Bond Index) and money market instruments, operating from a target allocation of 60% stocks and 40% bonds. 3WI Wells Fargo VT International Objective: total return with an Wells Fargo Funds Management, Equity Fund emphasis on long-term capital LLC, adviser; Wells Capital appreciation. Invests primarily Management Incorporated, in equity securities of non-U.S. sub-adviser. companies based in developed foreign countries or emerging markets. 3SG Wells Fargo VT Small Cap Objective: long-term capital Wells Fargo Funds Management, Growth Fund appreciation. Invests primarily in LLC, adviser; Wells Capital companies with above-average growth Management Incorporated, potential and whose market sub-adviser. capitalization falls within the range of the Russell 2000 Index, which is considered a small capitalization index.
26 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 advisers 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. 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 and transfers 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. 29). The interest rate we apply to each purchase payment or transfer to the fixed account is guaranteed for one year. Thereafter, we will change the 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.) 27 BUYING YOUR CONTRACT New contracts are not currently being offered. 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 become an owner or an annuitant if you are 90 or younger. 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. We applied your initial purchase payment within two business days after we received it at our office. However, we will credit additional purchase payments you make to your accounts on the valuation date we receive them. We will value additional purchase 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: - no earlier than the 60th day after the contract's effective date; and - 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: - on or after the date the annuitant reaches age 59 1/2; and - 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 - 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(1) If paying by installments under a scheduled payment plan: $23.08 biweekly, or $50 per month If paying by any other method: $50 (1) 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. 28 MAXIMUM ALLOWABLE ANNUAL PURCHASE PAYMENTS(2) 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 (2) 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: - an automatic payroll deduction, salary reduction or other group billing arrangement; or - a bank authorization. 29 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. 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: - first, to the extent possible, the subaccounts pay this fee from any dividends distributed from the funds in which they invest; - then, if necessary, the funds redeem shares to cover any remaining fees payable. We may use any profits we realize from the subaccounts' payment to us of the mortality and expense risk fee for any proper corporate purpose, including, among others, payment of distribution (selling) expenses. 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 or, 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 a 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. 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 or, 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 a change in ownership. If you chose 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. (1) You may select either the MAV Death Benefit or EEB riders (both available June 10, 2002). Or you may select the MAV Death Benefit and the EEB. Riders may not be available in all states. The MAV Death Benefit and EEB are only available if you and the annuitant are 75 or younger at contract issue. EEB is only available on non-qualified contracts. 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 (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. 30 PREMIUM TAXES Certain state and local governments impose premium taxes on us (up to 3.5%). These taxes depend upon the 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 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: - the sum of your purchase payments and transfer amounts allocated to the fixed account; - plus interest credited; - minus the sum of amounts surrendered and amounts transferred out; - minus any prorated portion of the contract administrative charge; - minus any prorated portion of the Maximum Anniversary Value Death Benefit Rider fee (if applicable); and - minus any prorated portion of the Enhanced Earnings 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 or any applicable charge for an optional benefit, 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: - 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 - dividing that sum by the previous adjusted net asset value per share; and - 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: - additional purchase payments you allocate to the subaccounts; - transfers into or out of the subaccounts; - partial surrenders; - a prorated portion of the contract administrative charge; - a prorated portion of the Maximum Anniversary Value Death Benefit Rider fee (if selected); and/or - a prorated portion of the Enhanced Earnings Death Benefit Rider fee (if selected). Accumulation unit values will fluctuate due to: - changes in funds' net asset value; - dividends distributed to the subaccounts; - capital gains or losses of funds; - fund operating expenses; and/or - mortality and expense risk fees. 31 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 Jun 100 18 5.56 and fewer units Jul 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 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. 32 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. The contract is not designed for use by individuals, professional market timing organizations, or other entities that do "market timing," programmed transfers, frequent transfers, or transfers that are large in relation to the total assets of any fund underlying the contract. These and similar activities may adversely affect a fund's ability to invest effectively in accordance with its investment objectives and policies, may increase expenses and may harm other contract owners who allocated purchase payments to the fund regardless of their transfer activity. Accordingly, individuals and organizations that use market-timing investment strategies and make frequent transfers should not own this contract. We monitor the frequency of transfers, including the size of transfers in relation to fund assets in each underlying fund, and we take appropriate action as necessary. In order to prevent market timing activities that may harm or disadvantage other contract owners, we may apply modifications or restrictions in any reasonable manner to prevent a transfer. We may suspend transfer privileges at any time. We may also reject or restrict any specific payment or transfer request and impose specific limitations with respect to market timers, including restricting transfers by market timers to certain underlying funds. We may also apply other restrictions or modifications that could include, but not be limited to: - not accepting telephone or electronic transfer requests; - requiring a minimum time period between each transfer; - not accepting transfer requests of an agent acting under power of attorney on behalf of more than one contract owner; or - limiting the dollar amount that a contract owner may transfer at any one time. We agree to provide notice of our intent to restrict transfer privileges to contract owners who have engaged in disruptive activity. In addition, some of the underlying funds have reserved the right to temporarily or permanently refuse payments or transfer requests from us if, in the judgment of the fund's investment adviser, the fund would be unable to invest effectively in accordance with its investment objective or policies, or would otherwise potentially be adversely affected. Accordingly, we may not be in a position to effect certain allocations or transfers requested by market timers and may refuse such requests without prior notice. Subject to state law, we reserve the right to impose, without prior notice, restrictions on allocations and transfers that we determine, in our sole discretion, will disadvantage or potentially hurt the rights or interests of other contract owners. For information on transfers after annuity payouts begin, see "Transfer Policies" below. TRANSFER POLICIES - 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. - 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). - 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. - 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. - We will not accept requests for transfers from the fixed account at any other time. - 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. 33 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: IDS LIFE INSURANCE COMPANY 70100 AXP FINANCIAL CENTER MINNEAPOLIS, MN 55474 MINIMUM AMOUNT Transfers or surrenders: $250 or entire contract 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. - 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. - Automated surrenders may be restricted by applicable law under some contracts. - You may not make additional purchase payments if automated partial surrenders are in effect. - Automated partial surrenders may result in IRS taxes and penalties on all or part of the amount surrendered. - The balance in any account from which you make an automated transfer or automated partial surrender must be sufficient to satisfy your instructions. If not, we will suspend your entire automated arrangement until the balance is adequate. - If we must suspend your automated transfer or automated partial surrender arrangement for six months, we reserve the right to discontinue the arrangement in its entirety. 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. 34 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"), 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 1 BY REGULAR OR EXPRESS MAIL: - payable to you; - mailed to address of record. NOTE: We will charge you a fee if you request express mail delivery. 2 BY WIRE: - request that payment be wired to your bank; - bank account must be in the same ownership as your contract; and - pre-authorization required. NOTE: We will charge you a fee if you request that payment be wired to your bank. For instructions, please 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-SHELTERED ANNUITIES The Code imposes certain restrictions on your right to receive early distributions from a TSA: - 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. - If you encounter a financial hardship (as provided by the Code), you may be eligible to receive a distribution of all contract values attributable to salary reduction contributions made after Dec. 31, 1988, but not the earnings on them. - Even though a distribution may be permitted under the above rules, it may be subject to IRS taxes and penalties (see "Taxes"). - 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. - 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. - If the contract has a loan provision, the right to receive a loan is described in detail in your contract. 35 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 or EEB. 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 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 a 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: - contract value; - purchase payments minus adjusted partial surrenders; or - the contract value as of the most recent sixth contract anniversary, preceding the date of death, plus any purchase payments since that anniversary, minus adjusted partial surrenders since that anniversary. If either you or the annuitant are age 81 or older on the date of death, the beneficiary receives the greater of: - contract value; or - purchase payments minus adjusted partial surrenders. ADJUSTED PARTIAL SURRENDERS PS x DB ------- CV PS = the partial surrender including any applicable surrender charge. DB = is the death benefit on the date of (but prior to) the partial surrender. CV = the contract value on the date of (but prior to) the partial surrender. 36 EXAMPLE OF STANDARD DEATH BENEFIT CALCULATION WHEN YOU AND ANNUITANT ARE AGE 80 OR YOUNGER: - You purchase the contract with a payment of $20,000 on Jan. 1, 2002. - On Jan 1, 2008 (the sixth contract anniversary) the contract value grows to $30,000. - March 1, 2008 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, 2008 as follows: The contract value on the most recent sixth contract anniversary: $30,000.00 plus purchase payments made since that anniversary: +0.00 minus adjusted partial surrenders taken since that anniversary calculated as: $1,500 x $30,000 -1,607.14 ---------------- ---------- $28,000 for a death benefit of: $28,392.86 IF YOU DIE BEFORE YOUR RETIREMENT DATE When paying the beneficiary, we will process the death claim on the valuation date our death claim requirements are fulfilled. We will determine the contract's value at the next accumulation unit value calculated after our death claim requirements are fulfilled. We 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: - the beneficiary asks us in writing within 60 days after we receive proof of death; and - payouts begin no later than one year after your death, or other date as permitted by the Code; and - the payout period does not extend beyond the beneficiary's life or life expectancy. QUALIFIED ANNUITIES The IRS has issued proposed regulations to take effect Jan. 1, 2002 which may affect distributions from your qualified annuity. Contact your tax advisor if you have any questions as to the impact of the new proposed rules on your situation. - SPOUSE BENEFICIARY: If you have not elected an annuity payout plan, and if your spouse is the sole beneficiary, your spouse may elect to receive payouts, or elect to treat the contract as his/her own. If your spouse elects a payout option, the payouts must begin no later than the year in which the annuitant would have reached age 70 1/2. If the annuitant attained age 70 1/2 at the time of death, payouts must begin no later than Dec. 31 of the year following the year of the annuitant's death. - NON-SPOUSE BENEFICIARY: If you have not elected an annuity payout plan, and if death occurs prior to the year the annuitant would have attained age 70 1/2, the beneficiary may elect to receive payouts from the contract over a five year period. If the annuitant's death occurs after attaining age 70 1/2, we will pay the beneficiary in a single sum unless the beneficiary elects to receive payouts under any annuity payout plan available under this contract if: - the beneficiary asks us in writing within 60 days after we receive proof of death; and - payouts begin no later than one year following the year of your death; and - the payout period does not extend beyond the beneficiary's life or life expectancy. - ANNUITY PAYOUT PLAN: If you elect an annuity payout plan, the payouts to your beneficiary will continue pursuant to the annuity payout plan you elect. 37 OPTIONAL BENEFITS MAXIMUM ANNIVERSARY VALUE DEATH BENEFIT (AVAILABLE JUNE 10, 2002) 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 the rider effective date, you may choose to add the MAV Death Benefit to your contract. We will determine the rider effective date for the MAV Death Benefit added after we issue the contract according to terms determined by us and at our sole discretion. On the first contract anniversary after the rider effective date 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 - You may terminate the rider within 30 days of the first contract anniversary after the rider effective date. - You may terminate the rider within 30 days of any contract anniversary beginning with the seventh contract anniversary after the rider effective date. - The rider will terminate when you make a full surrender from the contract or when annuity payouts begin. - The rider will terminate in the case of spousal continuation or ownership change if the new owner is age 76 or older. EXAMPLE - You add the MAV Death Benefit on Jan. 1, 2003 when your contract value is $20,000. - On Jan. 1, 2004 (the first contract anniversary after the rider effective date) the contract value grows to $24,000. - On March 1, 2004 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, 2004 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 he or she elects to continue the contract has reached age 76, the MAV Death Benefit rider will terminate. If your spouse at the time he or she elects to continue the contract 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 under the MAV Death Benefit rider. If, at the time he or she elects to continue the contract, your spouse has not yet reached age 76 and chooses not to continue MAV Death Benefit rider, the contract value will be increased to the MAV death benefit amount if it is greater than the contract value on the death benefit. 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. 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 he or she elects to continue the contract has reached age 76, the MAV death benefit rider will terminate. If your spouse at the time he or she elects to continue the contract 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 38 total contract value on the anniversary, including the additional amounts paid into the contract under the MAV Death Benefit rider. If, at the time he or she elects to continue the contract, your spouse has not yet reached age 76 and chooses not to continue MAV Death Benefit rider, the contract value will be increased to the MAV death benefit amount if it is greater than the contract value on the death benefit. ENHANCED EARNINGS DEATH BENEFIT (EEB) (AVAILABLE JUNE 10, 2002) 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 D2eath 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 the rider effective date, you may choose to add the EEB to your contract. THIS RIDER IS ONLY AVAILABLE UNDER A NONQUALIFIED ANNUITY CONTRACT. We will determine the rider effective date for the EEB added 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 after the rider effective date, but before annuity payouts begin, and while this contract is in force, we will pay the beneficiary: - the standard death benefit (see "Benefits in Case of Death -- Standard Benefit") or the MAV death benefit, if applicable, PLUS - 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 - 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 rider, 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 - You may terminate the rider within 30 days of the first contract anniversary after the rider effective date. - You may terminate the rider within 30 days of any contract anniversary beginning with the seventh contract anniversary after the rider effective date. - The rider will terminate when you make a full surrender from the contract or when annuity payouts begin. - The rider will terminate in the case of spousal continuation or ownership change if the new owner is age 76 or older. EXAMPLE OF THE ENHANCED EARNINGS DEATH BENEFIT - You purchased a RAVA contract on Jan. 1, 2001 with a purchase payment of $100,000. You add the EEB rider on Jan. 1, 2003 and you and the annuitant are under age 70. You selected the MAV Death Benefit and the EEB. 2003 the contract value grows to $105,000. The death benefit on July 1, 2003 equals the standard death benefit, which is the contract value, or $105,000. You have not reached the first contract anniversary after the rider effective date, so the EEB does not provide any additional benefit at this time. - On Jan. 1, 2004 the contract value grows to $110,000. The death benefit on Jan. 1, 2004 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 39 - On Jan. 1, 2005 the contract value falls to $105,000. The death benefit on Jan. 1, 2005 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 - On Feb. 1, 2005 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, 2005 equals: MAV death benefit (MAV adjusted for partial surrenders): ($50,000 x $110,000) $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 - On Jan. 1, 2006 the contract value falls by $40,000. The death benefit on Jan. 1, 2006 equals the death benefit paid on Feb. 1, 2006. The reduction in contract value has no effect. - On Jan. 1, 2012 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, 2012 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 - On July 1, 2012 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, 2012 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 - On July 1, 2013 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, 2013 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 40 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 he or she elects to continue the contract has reached age 76, the EEB rider will terminate. If your spouse at the time he or she elects to continue the contract has not yet reached age 76, he or she may choose to continue the EEB. In this case, the following conditions will apply: - the rider will continue, but we will treat the new contract value on the date the ownership of the contract changes to your spouse (after the additional amount is paid into the contract) as if it is a purchase payment in calculating future values of "earnings at death." - the percentages of "earnings at death " payable will be based on your spouse's age at the time he or she elects to continue the contract. - 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 under the EEB rider. NOTE: For special tax considerations associated with the EEB, 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: - the annuity payout plan you select; - the annuitant's age and, in most cases, sex; - the annuity table in the contract; and - 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 payout 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. For example, annuity payouts will increase if the investment return is above the assumed investment rate and payouts will decrease if the return is below the assumed investment rate. 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. 41 ANNUITY PAYOUT PLANS You may choose any one of these annuity payout plans by giving us written instructions at least 30 days before contract values are used to purchase the payout plan: - PLAN A: LIFE ANNUITY -- NO REFUND: We make monthly payouts until the annuitant's death. Payouts end with the last payout before the annuitant's death. We will not make any further payouts. This means that if the annuitant dies after we made only one monthly payout, we will not make any more payouts. - 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. - PLAN C: LIFE ANNUITY -- INSTALLMENT REFUND: We make monthly payouts until the annuitant's death, with our guarantee that payouts will continue for some period of time. We will make payouts for at least the number of months determined by dividing the amount applied under this option by the first monthly payout, whether or not the annuitant is living. - PLAN D: JOINT AND LAST SURVIVOR LIFE ANNUITY -- NO REFUND: We make monthly payouts while both the annuitant and a joint annuitant are living. If either annuitant dies, we will continue to make monthly payouts at the full amount until the death of the surviving annuitant. Payouts end with the death of the second annuitant. - PLAN E: PAYOUTS FOR A SPECIFIED PERIOD: We make monthly payouts for a specific payout period of 10 to 30 years that you elect. We will make payouts only for the number of years specified whether the annuitant is living or not. Depending on the selected time period, it is foreseeable that an annuitant can outlive the payout period selected. 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. An 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 annuity 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: - 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 - 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 - 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. 42 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. If the annuitant dies before your investment in the contract is fully recovered, the remaining portion of the unrecovered investment can be taken as a federal income tax deduction for the last taxable year of the annuitant. 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 non-deductible contributions or with after-tax dollars rolled from a retirement plan. 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 an 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 OR EEB): 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 IRS 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. 43 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: - because of your death; - because you become disabled (as defined in the Code); - if the distribution is part of a series of substantially equal periodic payments, made at least annually, over your life or life expectancy (or joint lives or life expectancies of you and your beneficiary); or - if it is allocable to an investment before Aug. 14, 1982 (except for qualified annuities). For 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: - instead of receiving the distribution check, you elect to have the distribution rolled over directly to an IRA or another eligible plan; - 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 - 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 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. You may not collaterally assign or pledge your qualified contracts. 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. 44 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: - the reserve held in each subaccount for your contract; divided by - 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: - laws or regulations change; - the existing funds become unavailable; or - in our judgment, the funds no longer are suitable for the subaccounts. If any of these situations occur, and if we believe it is in the best interest of persons having voting rights under the contract, we have the right to substitute the funds currently listed in this prospectus for other funds. We may also: - add new subaccounts; - combine any two or more subaccounts; - make additional subaccounts investing in additional funds; - transfer assets to and from the subaccounts or the variable account; and - 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 10,200 advisors. IDS Life pays commissions of up to 7% of the total purchase payments for sales of the contracts it receives. 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. 45 LEGAL PROCEEDINGS A number of lawsuits involving insurance sales practices, alleged agent misconduct, failure to properly supervise agents and other matters relating to life insurance policies and annuity contracts have been filed against life and health insurers in jurisdictions in which IDS Life and its affiliates do business. IDS Life and its affiliates, like other life and health insurers, are involved in such litigation. IDS Life was a named defendant in three class action lawsuits of this nature. 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. 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. 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. These three class action lawsuits included allegations of improper insurance and annuity sales practices including improper replacement of existing annuity contracts and insurance policies, improper use of annuities to fund tax deferred contributory retirement plans, alleged agent misconduct, failure to properly supervise agents and other matters relating to life insurance policies and annuity contracts. In January 2000, AEFC and its subsidiaries 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 in exchange for a 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 May 2001, the United States District Court for the District of Minnesota and the District Court, Fourth Judicial District for the State of Minnesota, Hennepin County entered orders approving the settlement as tentatively reached in January 2000. Appeals were filed in both federal and state court but subsequently dismissed by the parties filing the appeals. The orders approving the settlement were final as of September 24, 2001. Implementation of the settlement commenced October 15, 2001. Numerous individuals opted out of the settlement described above and therefore did not release their claims against AEFC and its subsidiaries. Some of these class members who opted out were represented by counsel and presented separate claims. Most of their claims have been settled. The outcome of any litigation or threatened litigation cannot be predicted with any certainty. However, in the aggregate, IDS Life does not consider any lawsuits in which it is named as a defendant to be material. 46 TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION Performance Information p. 3 Calculating Annuity Payouts p. 11 Rating Agencies p. 12 Principal Underwriter p. 12 Independent Auditors p. 12 Financial Statements 47 [AMERICAN EXPRESS LOGO] IDS LIFE INSURANCE COMPANY 70100 AXP FINANCIAL CENTER MINNEAPOLIS, MN 55474 (800) 862-7919 S-6477 F (5/02) AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE(SM) VARIABLE ANNUITY AMERICAN EXPRESS RETIREMENT ADVISOR SELECT(SM) VARIABLE ANNUITY ISSUED BY: IDS LIFE INSURANCE COMPANY PROSPECTUS MAY 1, 2002 INDIVIDUAL FLEXIBLE PREMIUM DEFERRED COMBINATION FIXED/VARIABLE ANNUITIES 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 This prospectus contains information that you should know before investing in the Retirement Advisor Advantage(SM) Variable Annuity (RAVA Advantage) or the Retirement Advisor Select(SM) Variable Annuity (RAVA Select). Prospectuses are also available for: - American Express(R) Variable Portfolio Funds - AIM Variable Insurance Funds - Alliance Variable Products Series Fund - American Century(R) Variable Portfolios, Inc. - Calvert Variable Series, Inc. - Evergreen Variable Annuity Trust - Fidelity(R) Variable Insurance Products - Service Class - Franklin(R) Templeton(R) Variable Insurance Products Trust (FTVIPT) - Class 2 - Goldman Sachs Variable Insurance Trust (VIT) - INVESCO Variable Investment Funds, Inc. - Janus Aspen Series: Service Shares - Lazard Retirement Series, Inc. - MFS(R) Variable Insurance Trust(SM) - Pioneer Variable Contracts Trust (VCT), Class II Shares - Putnam Variable Trust - Class IB Shares - Strong Opportunity Fund II, Inc. - Wanger Advisors Trust - Wells Fargo Variable Trust Funds Please read the prospectuses carefully and keep them for future reference. The contracts provide for purchase payment credits which we may reverse under certain circumstances. Expenses and surrender charges from contracts with purchase payment credits may be higher than those for contracts without such credits. The amount of the credit may be more than offset by additional 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). 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. 1 TABLE OF CONTENTS KEY TERMS 3 THE CONTRACT IN BRIEF 4 EXPENSE SUMMARY 5 CONDENSED FINANCIAL INFORMATION (UNAUDITED) 54 FINANCIAL STATEMENTS 63 PERFORMANCE INFORMATION 64 THE VARIABLE ACCOUNT AND THE FUNDS 65 THE FIXED ACCOUNT 74 BUYING YOUR CONTRACT 74 CHARGES 76 VALUING YOUR INVESTMENT 80 MAKING THE MOST OF YOUR CONTRACT 82 SURRENDERS 85 TSA -- SPECIAL SURRENDER PROVISIONS 85 CHANGING OWNERSHIP 86 BENEFITS IN CASE OF DEATH -- STANDARD DEATH BENEFIT 86 OPTIONAL BENEFITS 88 THE ANNUITY PAYOUT PERIOD 94 TAXES 96 VOTING RIGHTS 98 SUBSTITUTION OF INVESTMENTS 98 ABOUT THE SERVICE PROVIDERS 98 TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION 99
2 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. 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: - Individual Retirement Annuities (IRAs) under Section 408(b) of the Internal Revenue Code of 1986, as amended (the Code) - Roth IRAs under Section 408A of the Code - SIMPLE IRAs under Section 408(p) of the Code - Simplified Employee Pension (SEP) plans under Section 408(k) of the Code - Plans under Section 401(k) of the Code - Custodial and trusteed plans under Section 401(a) of the Code - 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 under RAVA Advantage 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 under RAVA Advantage; $250,000 for RAVA Select. 3 THE CONTRACT IN BRIEF This prospectus describes two contracts. RAVA Advantage offers a choice of a seven-year or a ten-year surrender charge schedule and relatively lower expenses. RAVA Select offers a three-year surrender charge schedule and relatively higher expenses. PURPOSE: The purpose of each 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 one of these contracts 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 Code. As a result, when you use one of these contracts to fund a retirement plan that is tax-deferred, your contract will not provide any necessary or additional tax deferral for that retirement plan. But the contracts 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. Under RAVA Advantage you will receive a full refund of the contract value, less the amount of 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. Under RAVA Select you will receive a refund of your contract value less the value of the purchase payment credit. (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: - 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. 65) - the fixed account, which earns interest at a rate that we adjust periodically. (p. 74) 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. 74) MINIMUM ALLOWABLE PURCHASE PAYMENTS If paying by installments under a scheduled payment plan: $23.08 biweekly, or $50 per month
RAVA ADVANTAGE RAVA SELECT If paying by any other method: initial payment for qualified annuities $ 1,000 $ 2,000 initial payment for nonqualified annuities 2,000 10,000 for any additional payments 50 50
MAXIMUM ALLOWABLE PURCHASE PAYMENTS based on the age of you or the annuitant, whoever is older, on the effective date of the contract:
RAVA ADVANTAGE RAVA SELECT For the first year: up to age 85 $ 1,000,000 $ 999,999 for ages 86 to 90 100,000 100,000 For each subsequent year: up to age 85 100,000 100,000 for ages 86-90 50,000 50,000
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. 83) 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 an IRS penalty if you surrender prior to your reaching age 59 1/2) and may have other tax consequences; also, certain restrictions apply. (p. 85) 4 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. 86) 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. 86) OPTIONAL BENEFITS: This contract offers optional features that are available for additional charges if you meet certain criteria. (p. 88) 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. 94) 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. 96) CHARGES: We assess certain charges in connection with your contract: - $30 annual contract administrative charge; - for nonqualified annuities a 0.95% mortality and expense risk fee for RAVA Advantage and a 1.20% mortality and expense risk fee for RAVA Select (if you allocate money to one or more subaccounts); - for qualified annuities a 0.75% mortality and expense risk fee for RAVA Advantage and a 1.00% mortality and expense risk fee for RAVA Select (if you allocate money to one or more subaccounts); - surrender charge; - 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); - the operating expenses of the funds in which the subaccounts invest; - if you select the Maximum Anniversary Value Death Benefit (MAV), an annual fee of 0.15% of the contract value; - if you select the Enhanced Earnings Death Benefit (EEB), an annual fee of 0.30% of the contract value; and - 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 FOR RAVA ADVANTAGE: 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. 5 A surrender charge also applies to payouts under certain annuity payout plans (see "Charges -- Surrender Charge" p. 77 and "The Annuity Payout Period -- Annuity Payout Plans") p. 95. SURRENDER CHARGE FOR RAVA SELECT: Contingent deferred sales charge as a percentage of purchase payment surrendered.
SURRENDER CHARGE SCHEDULE YEARS FROM SURRENDER CHARGE CONTRACT DATE PERCENTAGE 1 7% 2 7 3 7 Thereafter 0
A surrender charge also applies to payouts under certain annuity payout plans (see "Charges -- Surrender Charge" p. __ and "The Annuity Payout Period -- Annuity Payout Plans" p. __).
RAVA ADVANTAGE RAVA SELECT ANNUAL CONTRACT ADMINISTRATIVE CHARGE: $ 30** $ 30** MAXIMUM ANNIVERSARY VALUE DEATH BENEFIT RIDER (MAV) FEE: 0.15% 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% 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% 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: RAVA ADVANTAGE RAVA SELECT for nonqualified annuities 0.95% 1.20% for qualified annuities 0.75% 1.00%
** 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. 6 ANNUAL OPERATING EXPENSES OF THE FUNDS UNDERLYING RAVA ADVANTAGE AND RAVA SELECT (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 .54% .13% .11% .78%(1) Bond Fund .60 .13 .07 .80(2) Capital Resource Fund .61 .13 .04 .78(2) Cash Management Fund .51 .13 .04 .68(2) Diversified Equity Income Fund .55 .13 .23 .91(1) Emerging Markets Fund 1.16 .13 .46 1.75(1) Equity Select Fund .64 .13 .33 1.10(1) Extra Income Fund .62 .13 .07 .82(2) Federal Income Fund .61 .13 .10 .84(1) Global Bond Fund .84 .13 .10 1.07(2) Growth Fund .62 .13 .15 .90(1) International Fund .83 .13 .08 1.04(2) Managed Fund .59 .13 .04 .76(2) NEW DIMENSIONS FUND(R) .60 .13 .06 .79(2) Partners Small Cap Value Fund 1.02 .13 .35 1.50(1) S&P 500 Index Fund .29 .13 .07 .49(1) Small Cap Advantage Fund .73 .13 .30 1.16(1) Stock Fund .56 .13 .41 1.10(1) Strategy Aggressive Fund .60 .13 .05 .78(2) AIM V.I. Capital Appreciation Fund, Series II .61 .25 .24 1.10(3) Capital Development Fund, Series II .75 .25 .41 1.41(3) Alliance VP AllianceBernstein International Value Portfolio (Class B) -- .25 .95 1.20(4) Growth and Income Portfolio (Class B) .63 .25 .04 .92(5) American Century(R) Variable Portfolios, Inc. VP International, Class II 1.19 .25 -- 1.44(6),(7) VP Value, Class II .86 .25 -- 1.11(6),(8) Calvert Variable Series, Inc. Social Balanced Portfolio .70 -- .17 .87(9) Evergreen VA Capital Growth Fund, Class L Shares .80 .25 .08 1.13(10) Fidelity VIP Growth & Income Portfolio (Service Class 2) .48 .25 .11 .84(11) Mid Cap Portfolio (Service Class 2) .58 .25 .11 .94(11) Overseas Portfolio (Service Class 2) .73 .25 .20 1.18(11) FTVIPT Franklin Real Estate Fund - Class 2 .56 .25 .03 .84(12),(13) Franklin Small Cap Value Securities Fund - Class 2 .57 .25 .20 1.02(13),(14) (previously FTVIPT Franklin Value Securities Fund - Class 2) Mutual Shares Securities Fund - Class 2 .60 .25 .19 1.04(13) Goldman Sachs VIT CORE(SM) U.S. Equity Fund .70 -- .11 .81(15) Mid Cap Value Fund .80 -- .13 .93(15) 7 MANAGEMENT 12b-1 OTHER FEES FEES EXPENSES TOTAL INVESCO VIF Dynamics Fund .75% --% .33% 1.08%(16),(17) Financial Services Fund .75 -- .32 1.07(16),(17) Technology Fund .75 -- .32 1.07(16),(17) Telecommunications Fund .75 -- .34 1.09(16),(17) Janus Aspen Series Global Technology Portfolio: Service Shares .65 .25 .05 .95(18) International Growth Portfolio: Service Shares .65 .25 .06 .96(18) Lazard Retirement Series International Equity Portfolio .75 .25 .25 1.25(19) MFS(R) Investors Growth Stock Series - Service Class .75 .25 .17 1.17(20),(21) New Discovery Series - Service Class .90 .25 .16 1.31(20),(21),(22) Utilities Series - Service Class .75 .25 .18 1.18(20),(21) Pioneer VCT Pioneer Equity Income VCT Portfolio - Class II Shares .65 .25 .12 1.02(5) Pioneer Europe VCT Portfolio - Class II Shares .51 .25 2.46 3.22(23) Putnam Variable Trust Putnam VT Health Sciences Fund - Class IB Shares .70 .25 .09 1.04(24) Putnam VT International Growth Fund - Class IB Shares .76 .25 .18 1.19(24) Putnam VT Vista Fund - Class IB Shares .61 .25 .06 .92(24) Strong Funds Strong Opportunity Fund II - Advisor Class .75 .25 .54 1.54(25) Wanger International Small Cap 1.24 -- .19 1.43(26) U.S. Smaller Companies .94 -- .05 .99(26) (previously Wanger U.S. Small Cap) Wells Fargo VT Asset Allocation Fund .49 .25 .26 1.00(27) International Equity Fund -- .25 .75 1.00(27) Small Cap Growth Fund .63 .25 .32 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, 2001. Without fee waivers and expense reimbursements "Other expenses" and "Total" would be 0.29% and 0.96% for AXP(R) Variable Portfolio - Blue Chip Advantage Fund, 0.49% and 1.17% for AXP(R) Variable Portfolio - Diversified Equity Income Fund, 2.20% and 3.49% for AXP(R) Variable Portfolio - Emerging Markets Fund, 2.22% and 2.99% for AXP(R) Variable Portfolio - Equity Select Fund, 0.13% and 0.87% for AXP(R) Variable Portfolio - Federal Income Fund, 0.16% and 0.91% for AXP(R) Variable Portfolio - Growth Fund, 5.71% and 6.86% for AXP(R) Variable Portfolio - Partners Small Cap Value Fund, 0.89% and 1.31% for AXP(R) Variable Portfolio - S&P 500 Index Fund, 0.40% and 1.26% for AXP(R) Variable Portfolio - Small Cap Advantage Fund and 10.67% and 11.36% for AXP(R) Variable Portfolio - Stock Fund. (2) The fund's expense figures are based on actual expenses for the fiscal year ended Aug. 31, 2001. (3) The fund's expense figures are for the year ended Dec. 31, 2001 and are expressed as a percentage of Fund average daily net assets. There is no guarantee that actual expenses will be the same as those shown in the table. (4) From 5/1/01 through 4/30/02, Fund was capped at 1.20%. From 5/1/02 on, Fund will be capped at 1.45%. Absent such waiver, "Management fees," "Other expenses," and "Total" would be 1.00%, 8.06% and 9.31%. (5) "Management Fees," "12b-1 Fees," "Other Expenses" and "Total" are based on actual expenses for the fiscal year ended Dec. 31, 2001. (6) Annualized operating expenses of funds at Dec. 31, 2001. (7) Aug. 15, 2001 (commencement of sale) through Dec. 31, 2001. The fund has a stepped fee schedule. As a result, the fund's management fee generally decreases as fund assets increase. (8) Aug. 15, 2001 (commencement of sale) through Dec. 31, 2001. The fund has a stepped fee schedule. As a result, the fund's management fee generally decreases as fund assets increase. 8 (9) Management fees include an administrative fee paid by the Fund to Calvert Administrative Services Company, an affiliate of Calvert. "Other expenses" reflect an indirect fee resulting from the Portfolio's offset arrangement with the custodian bank whereby the custodian's and transfer agent's fees may be paid indirectly by credits earned on the portfolio's uninvested cash balances. These credits are used to reduce the Portfolio's expenses. Net operating expenses before reductions for fees paid indirectly would be 0.88% for Social Balanced. (10) The Total ratio of expenses to average net assets excludes expense reductions but includes fee waivers. 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 or reimbursements at any time. Without 12b-1 fee waivers, "Other Expenses" and "Total" were 0.24% and 1.29% for Evergreen VA Capital Growth Fund, Class L Shares. (11) 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. In addition, 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. These offsets may be discontinued at any time. See the accompanying fund prospectus for details. (12) The Fund administration fee is paid indirectly through the management fee. (13) The Fund's class 2 distribution plan or "rule 12b-1 plan" is described in the Fund's prospectus. (14) 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 1.05% for Franklin Small Cap Value Securities Fund - Class 2. (15) Expense ratios are shown after fee waivers and expense reimbursements by the investment adviser. The expense ratios before the waivers and reimbursements would have been: 0.70%, 0.12%, and 0.82% for CORE(SM) U.S. Equity Fund, and 0.80%, 0.14% and 0.94% for Mid Cap Value Fund. CORE(SM) U.S. Equity and Mid Cap Value Funds were under their respective expense caps of 0.20% and 0.25% in 2001. CORE(SM) is a service mark of Goldman, Sachs & Co. (16) 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. (17) 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 Dec. 31, 2001 were insignificant. (18) Expenses are based upon expenses for the fiscal year ended Dec. 31, 2001. All expenses are shown without the effect of expense offset arrangements. (19) Total annual expenses for the Lazard International Equity Portfolio have been reimbursed through Dec. 31, 2001 to the extent that they exceed in any fiscal year 1.25% of the Portfolios' average daily net assets. Absent fee waivers and/or reimbursements, "Other expenses" and "Total" expenses for the year ended Dec. 31, 2001 would have been 0.94% and 1.94% for International Equity Portfolio. (20) 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). (21) 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: 1.15% for Investors Growth Stock Series, 1.30% for New Discovery Series and 1.17% for Utilities Series. (22) 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 0.19% and 1.34% for New Discovery Series. These contractual fee arrangements will continue until at least May 1, 2003, unless changed with the consent of the board of trustees which oversees the series. (23) The Portfolio's expense figures are based on actual expenses for the fiscal year ending Dec. 31, 2001 after management fee waiver and expense reimbursements. Absent this arrangement, "Management fees," "Other expenses" and "Total" would be 1.00%, 3.32% and 4.57% for Pioneer Europe VCT Portfolio. (24) 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 0.22% of average net assets. (25) The fund has adopted a Rule 12b-1 distribution plan for the Advisor Class shares. Under the distribution plan, the fund may make monthly payments to the fund's distributor at the annual rate of 1.00% of the average daily net assets of the fund attributable to its Advisor Class shares. However, under the Distribution Agreement for the Advisor Class shares, payments to the fund's distributor under the distribution plan are currently limited to payment at an annual rate equal to 0.25% of average daily net assets attributable to Advisor Class shares. Shareholder approval is required to increase the distribution fee from 0.25% to 1.00%. The 12b-1 payments may be made for distribution-related services and other services that are primarily intended to result in the sale of Advisor Class shares of the fund. Because Rule 12b-1 fees are ongoing, over time they will increase the cost of an investment in the Advisor Class shares of the fund and may cost more than other types of sales charges. The fund's distributor has voluntarily agreed to waive a portion of the fees. Absent this waiver, "Total" expenses would be 1.55%. (26) Figures in "Management fees," "12b-1 fees," "Other expenses," and "Total" are based on actual expenses for the fiscal year ended Dec. 31, 2001. 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. (27) Amounts are based on estimated expenses for 2002. The advisor has contractually undertaken to waive its fee and to reimburse the funds for certain expenses. Without such an arrangement the "Management fees," and "Total" would be 0.55% and 1.06% for Wells Fargo VT Asset Allocation Fund, 0.75% and 3.40% for Wells Fargo VT International Equity Fund and 0.75% and 1.32% for Wells Fargo VT Small Cap Growth Fund. 9 EXAMPLES:* In order to provide a more meaningful discussion about each 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 the selection of the Enhanced Earnings Death Benefit Rider (EEB), 3) the contract with the selection of the Enhanced Earnings Plus Death Benefit Rider (EEP), 4) the contract with selection of the Maximum Anniversary Value Death Benefit Rider (MAV), 5) the contract with the selection of both the MAV and the EEB Riders, and 6) the contract with the selection of both the MAV and the EEP Riders. You would pay the following expenses on a $1,000 investment in a RAVA ADVANTAGE nonqualified annuity with a ten-year surrender charge schedule(+) and a 0.95% mortality and expense risk fee assuming a 5% annual return and . . .
FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE 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 $ 98.26 $136.52 $167.26 $230.97 $ 18.26 $ 56.52 $ 97.26 $210.97 optional EEB 101.33 145.84 182.94 263.03 21.33 65.84 112.94 243.03 optional EEP 102.36 148.94 188.13 273.52 22.36 68.94 118.13 253.52 optional MAV 99.79 141.19 175.13 247.12 19.79 61.19 105.13 227.12 optional MAV and EEB 102.87 150.48 190.71 278.72 22.87 70.48 120.71 258.72 optional MAV and EEP 103.89 153.57 195.87 289.04 23.89 73.57 125.87 269.04 AXP(R) VP - Bond Fund base contract with no optional riders 98.46 137.15 168.31 233.13 18.46 57.15 98.31 213.13 optional EEB 101.54 146.46 183.98 265.14 21.54 66.46 113.98 245.14 optional EEP 102.56 149.55 189.16 275.60 22.56 69.55 119.16 255.60 optional MAV 100.00 141.81 176.17 249.25 20.00 61.81 106.17 229.25 optional MAV and EEB 103.07 151.10 191.75 280.79 23.07 71.10 121.75 260.79 optional MAV and EEP 104.10 154.18 196.89 291.10 24.10 74.18 126.89 271.10 AXP(R) VP - Capital Resource Fund base contract with no optional riders 98.26 136.52 167.26 230.97 18.26 56.52 97.26 210.97 optional EEB 101.33 145.84 182.94 263.03 21.33 65.84 112.94 243.03 optional EEP 102.36 148.94 188.13 273.52 22.36 68.94 118.13 253.52 optional MAV 99.79 141.19 175.13 247.12 19.79 61.19 105.13 227.12 optional MAV and EEB 102.87 150.48 190.71 278.72 22.87 70.48 120.71 258.72 optional MAV and EEP 103.89 153.57 195.87 289.04 23.89 73.57 125.87 269.04 AXP(R) VP - Cash Management Fund base contract with no optional riders 97.23 133.40 161.99 220.06 17.23 53.40 91.99 200.06 optional EEB 100.31 142.74 177.74 252.45 20.31 62.74 107.74 232.45 optional EEP 101.33 145.84 182.94 263.03 21.33 65.84 112.94 243.03 optional MAV 98.77 138.08 169.89 236.38 18.77 58.08 99.89 216.38 optional MAV and EEB 101.84 147.39 185.54 268.29 21.84 67.39 115.54 248.29 optional MAV and EEP 102.87 150.48 190.71 278.72 22.87 70.48 120.71 258.72 10 FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE END OF EACH TIME PERIOD 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS AXP(R) VP - Diversified Equity Income Fund base contract with no optional riders $ 99.59 $140.57 $174.08 $244.98 $19.59 $ 60.57 $104.08 $224.98 optional EEB 102.66 149.86 189.68 276.64 22.66 69.86 119.68 256.64 optional EEP 103.69 152.95 194.84 286.99 23.69 72.95 124.84 266.99 optional MAV 101.13 145.22 181.90 260.93 21.13 65.22 111.90 240.93 optional MAV and EEB 104.20 154.49 197.41 292.12 24.20 74.49 127.41 272.12 optional MAV and EEP 105.23 157.57 202.53 302.32 25.23 77.57 132.53 282.32 AXP(R) VP - Emerging Markets Fund base contract with no optional riders 108.20 166.45 217.27 331.31 28.20 86.45 147.27 311.31 optional EEB 111.27 175.59 232.33 360.44 31.27 95.59 162.33 340.44 optional EEP 112.30 178.62 237.31 369.96 32.30 98.62 167.31 349.96 optional MAV 109.74 171.03 224.83 345.99 29.74 91.03 154.83 325.99 optional MAV and EEB 112.81 180.13 239.79 374.68 32.81 100.13 169.79 354.68 optional MAV and EEP 113.84 183.16 244.73 384.06 33.84 103.16 174.73 364.06 AXP(R) VP - Equity Select Fund base contract with no optional riders 101.54 146.46 183.98 265.14 21.54 66.46 113.98 245.14 optional EEB 104.61 155.72 199.46 296.21 24.61 75.72 129.46 276.21 optional EEP 105.64 158.79 204.58 306.37 25.64 78.79 134.58 286.37 optional MAV 103.07 151.10 191.75 280.79 23.07 71.10 121.75 260.79 optional MAV and EEB 106.15 160.33 207.13 311.41 26.15 80.33 137.13 291.41 optional MAV and EEP 107.17 163.39 212.21 321.41 27.17 83.39 142.21 301.41 AXP(R) VP - Extra Income Fund base contract with no optional riders 98.67 137.77 169.36 235.30 18.67 57.77 99.36 215.30 optional EEB 101.74 147.08 185.02 267.24 21.74 67.08 115.02 247.24 optional EEP 102.77 150.17 190.20 277.68 22.77 70.17 120.20 257.68 optional MAV 100.20 142.43 177.22 251.39 20.20 62.43 107.22 231.39 optional MAV and EEB 103.28 151.72 192.78 282.86 23.28 71.72 122.78 262.86 optional MAV and EEP 104.30 154.80 197.92 293.15 24.30 74.80 127.92 273.15 AXP(R) VP - Federal Income Fund base contract with no optional riders 98.87 138.39 170.41 237.46 18.87 58.39 100.41 217.46 optional EEB 101.95 147.70 186.06 269.34 21.95 67.70 116.06 249.34 optional EEP 102.97 150.79 191.23 279.75 22.97 70.79 121.23 259.75 optional MAV 100.41 143.05 178.26 253.51 20.41 63.05 108.26 233.51 optional MAV and EEB 103.48 152.33 193.81 284.93 23.48 72.33 123.81 264.93 optional MAV and EEP 104.51 155.41 198.95 295.19 24.51 75.41 128.95 275.19 AXP(R) VP - Global Bond Fund base contract with no optional riders 101.23 145.53 182.42 261.98 21.23 65.53 112.42 241.98 optional EEB 104.30 154.80 197.92 293.15 24.30 74.80 127.92 273.15 optional EEP 105.33 157.87 203.04 303.33 25.33 77.87 133.04 283.33 optional MAV 102.77 150.17 190.20 277.68 22.77 70.17 120.20 257.68 optional MAV and EEB 105.84 159.41 205.60 308.38 25.84 79.41 135.60 288.38 optional MAV and EEP 106.87 162.47 210.69 318.42 26.87 82.47 140.69 298.42 11 FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE END OF EACH TIME PERIOD 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS AXP(R) VP - Growth Fund base contract with no optional riders $ 99.49 $140.26 $173.56 $243.91 $19.49 $60.26 $103.56 $223.91 optional EEB 102.56 149.55 189.16 275.60 22.56 69.55 119.16 255.60 optional EEP 103.59 152.64 194.32 285.96 23.59 72.64 124.32 265.96 optional MAV 101.02 144.91 181.38 259.87 21.02 64.91 111.38 239.87 optional MAV and EEB 104.10 154.18 196.89 291.10 24.10 74.18 126.89 271.10 optional MAV and EEP 105.12 157.26 202.02 301.30 25.12 77.26 132.02 281.30 AXP(R) VP - International Fund base contract with no optional riders 100.92 144.60 180.86 258.81 20.92 64.60 110.86 238.81 optional EEB 104.00 153.87 196.38 290.07 24.00 73.87 126.38 270.07 optional EEP 105.02 156.95 201.51 300.29 25.02 76.95 131.51 280.29 optional MAV 102.46 149.25 188.65 274.56 22.46 69.25 118.65 254.56 optional MAV and EEB 105.53 158.49 204.07 305.35 25.53 78.49 134.07 285.35 optional MAV and EEP 106.56 161.56 209.16 315.42 26.56 81.56 139.16 295.42 AXP(R) VP - Managed Fund base contract with no optional riders 98.05 135.90 166.21 228.79 18.05 55.90 96.21 208.79 optional EEB 101.13 145.22 181.90 260.93 21.13 65.22 111.90 240.93 optional EEP 102.15 148.32 187.09 271.43 22.15 68.32 117.09 251.43 optional MAV 99.59 140.57 174.08 244.98 19.59 60.57 104.08 224.98 optional MAV and EEB 102.66 149.86 189.68 276.64 22.66 69.86 119.68 256.64 optional MAV and EEP 103.69 152.95 194.84 286.99 23.69 72.95 124.84 266.99 AXP(R) VP - NEW DIMENSIONS FUND(R) base contract with no optional riders 98.36 136.83 167.78 232.05 18.36 56.83 97.78 212.05 optional EEB 101.43 146.15 183.46 264.09 21.43 66.15 113.46 244.09 optional EEP 102.46 149.25 188.65 274.56 22.46 69.25 118.65 254.56 optional MAV 99.90 141.50 175.65 248.19 19.90 61.50 105.65 228.19 optional MAV and EEB 102.97 150.79 191.23 279.75 22.97 70.79 121.23 259.75 optional MAV and EEP 104.00 153.87 196.38 290.07 24.00 73.87 126.38 270.07 AXP(R) VP - Partners Small Cap Value Fund base contract with no optional riders 105.64 158.79 204.58 306.37 25.64 78.79 134.58 286.37 optional EEB 108.71 167.98 219.80 336.23 28.71 87.98 149.80 316.23 optional EEP 109.74 171.03 224.83 345.99 29.74 91.03 154.83 325.99 optional MAV 107.17 163.39 212.21 321.41 27.17 83.39 142.21 301.41 optional MAV and EEB 110.25 172.55 227.33 350.83 30.25 92.55 157.33 330.83 optional MAV and EEP 111.27 175.59 232.33 360.44 31.27 95.59 162.33 340.44 AXP(R) VP - S&P 500 Index Fund base contract with no optional riders 95.28 127.46 151.91 199.05 15.28 47.46 81.91 179.05 optional EEB 98.36 136.83 167.78 232.05 18.36 56.83 97.78 212.05 optional EEP 99.38 139.95 173.03 242.83 19.38 59.95 103.03 222.83 optional MAV 96.82 132.15 159.87 215.67 16.82 52.15 89.87 195.67 optional MAV and EEB 99.90 141.50 175.65 248.19 19.90 61.50 105.65 228.19 optional MAV and EEP 100.92 144.60 180.86 258.81 20.92 64.60 110.86 238.81 12 FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE END OF EACH TIME PERIOD 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS AXP(R) VP - Small Cap Advantage Fund base contract with no optional riders $102.15 $148.32 $187.09 $271.43 $22.15 $68.32 $117.09 $251.43 optional EEB 105.23 157.57 202.53 302.32 25.23 77.57 132.53 282.32 optional EEP 106.25 160.64 207.64 312.41 26.25 80.64 137.64 292.41 optional MAV 103.69 152.95 194.84 286.99 23.69 72.95 124.84 266.99 optional MAV and EEB 106.76 162.17 210.18 317.42 26.76 82.17 140.18 297.42 optional MAV and EEP 107.79 165.23 215.25 327.36 27.79 85.23 145.25 307.36 AXP(R) VP - Stock Fund base contract with no optional riders 101.54 146.46 183.98 265.14 21.54 66.46 113.98 245.14 optional EEB 104.61 155.72 199.46 296.21 24.61 75.72 129.46 276.21 optional EEP 105.64 158.79 204.58 306.37 25.64 78.79 134.58 286.37 optional MAV 103.07 151.10 191.75 280.79 23.07 71.10 121.75 260.79 optional MAV and EEB 106.15 160.33 207.13 311.41 26.15 80.33 137.13 291.41 optional MAV and EEP 107.17 163.39 212.21 321.41 27.17 83.39 142.21 301.41 AXP(R) VP - Strategy Aggressive Fund base contract with no optional riders 98.26 136.52 167.26 230.97 18.26 56.52 97.26 210.97 optional EEB 101.33 145.84 182.94 263.03 21.33 65.84 112.94 243.03 optional EEP 102.36 148.94 188.13 273.52 22.36 68.94 118.13 253.52 optional MAV 99.79 141.19 175.13 247.12 19.79 61.19 105.13 227.12 optional MAV and EEB 102.87 150.48 190.71 278.72 22.87 70.48 120.71 258.72 optional MAV and EEP 103.89 153.57 195.87 289.04 23.89 73.57 125.87 269.04 AIM V.I. Capital Appreciation Fund, Series II base contract with no optional riders 101.54 146.46 183.98 265.14 21.54 66.46 113.98 245.14 optional EEB 104.61 155.72 199.46 296.21 24.61 75.72 129.46 276.21 optional EEP 105.64 158.79 204.58 306.37 25.64 78.79 134.58 286.37 optional MAV 103.07 151.10 191.75 280.79 23.07 71.10 121.75 260.79 optional MAV and EEB 106.15 160.33 207.13 311.41 26.15 80.33 137.13 291.41 optional MAV and EEP 107.17 163.39 212.21 321.41 27.17 83.39 142.21 301.41 AIM V.I. Capital Development Fund, Series II base contract with no optional riders 104.71 156.03 199.97 297.23 24.71 76.03 129.97 277.23 optional EEB 107.79 165.23 215.25 327.36 27.79 85.23 145.25 307.36 optional EEP 108.81 168.28 220.30 337.21 28.81 88.28 150.30 317.21 optional MAV 106.25 160.64 207.64 312.41 26.25 80.64 137.64 292.41 optional MAV and EEB 109.33 169.81 222.82 342.10 29.33 89.81 152.82 322.10 optional MAV and EEP 110.35 172.85 227.83 351.80 30.35 92.85 157.83 331.80 Alliance VP AllianceBernstein International Value Portfolio (Class B) base contract with no optional riders 102.56 149.55 189.16 275.60 22.56 69.55 119.16 255.60 optional EEB 105.64 158.79 204.58 306.37 25.64 78.79 134.58 286.37 optional EEP 106.66 161.86 209.67 316.42 26.66 81.86 139.67 296.42 optional MAV 104.10 154.18 196.89 291.10 24.10 74.18 126.89 271.10 optional MAV and EEB 107.17 163.39 212.21 321.41 27.17 83.39 142.21 301.41 optional MAV and EEP 108.20 166.45 217.27 331.31 28.20 86.45 147.27 311.31 13 FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE END OF EACH TIME PERIOD 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS Alliance VP Growth and Income Portfolio (Class B) base contract with no optional riders $ 99.69 $140.88 $174.60 $246.05 $19.69 $60.88 $104.60 $226.05 optional EEB 102.77 150.17 190.20 277.68 22.77 70.17 120.20 257.68 optional EEP 103.79 153.26 195.35 288.02 23.79 73.26 125.35 268.02 optional MAV 101.23 145.53 182.42 261.98 21.23 65.53 112.42 241.98 optional MAV and EEB 104.30 154.80 197.92 293.15 24.30 74.80 127.92 273.15 optional MAV and EEP 105.33 157.87 203.04 303.33 25.33 77.87 133.04 283.33 American Century(R) VP International, Class II base contract with no optional riders 105.02 156.95 201.51 300.29 25.02 76.95 131.51 280.29 optional EEB 108.10 166.15 216.77 330.33 28.10 86.15 146.77 310.33 optional EEP 109.12 169.20 221.81 340.14 29.12 89.20 151.81 320.14 optional MAV 106.56 161.56 209.16 315.42 26.56 81.56 139.16 295.42 optional MAV and EEB 109.63 170.72 224.32 345.02 29.63 90.72 154.32 325.02 optional MAV and EEP 110.66 173.76 229.33 354.69 30.66 93.76 159.33 334.69 American Century(R) VP Value, Class II base contract with no optional riders 101.64 146.77 184.50 266.19 21.64 66.77 114.50 246.19 optional EEB 104.71 156.03 199.97 297.23 24.71 76.03 129.97 277.23 optional EEP 105.74 159.10 205.09 307.38 25.74 79.10 135.09 287.38 optional MAV 103.18 151.41 192.26 281.83 23.18 71.41 122.26 261.83 optional MAV and EEB 106.25 160.64 207.64 312.41 26.25 80.64 137.64 292.41 optional MAV and EEP 107.28 163.70 212.72 322.40 27.28 83.70 142.72 302.40 Calvert Variable Series, Inc. Social Balanced Portfolio base contract with no optional riders 99.18 139.32 171.98 240.69 19.18 59.32 101.98 220.69 optional EEB 102.25 148.63 187.61 272.47 22.25 68.63 117.61 252.47 optional EEP 103.28 151.72 192.78 282.86 23.28 71.72 122.78 262.86 optional MAV 100.72 143.98 179.82 256.70 20.72 63.98 109.82 236.70 optional MAV and EEB 103.79 153.26 195.35 288.02 23.79 73.26 125.35 268.02 optional MAV and EEP 104.82 156.34 200.49 298.25 24.82 76.34 130.49 278.25 Evergreen VA Capital Growth Fund, Class L Shares base contract with no optional riders 101.84 147.39 185.54 268.29 21.84 67.39 115.54 248.29 optional EEB 104.92 156.64 201.00 299.27 24.92 76.64 131.00 279.27 optional EEP 105.94 159.72 206.11 309.39 25.94 79.72 136.11 289.39 optional MAV 103.38 152.02 193.29 283.89 23.38 72.02 123.29 263.89 optional MAV and EEB 106.46 161.25 208.65 314.42 26.46 81.25 138.65 294.42 optional MAV and EEP 107.48 164.31 213.73 324.39 27.48 84.31 143.73 304.39 Fidelity VIP Growth & Income Portfolio (Service Class 2) base contract with no optional riders 98.87 138.39 170.41 237.46 18.87 58.39 100.41 217.46 optional EEB 101.95 147.70 186.06 269.34 21.95 67.70 116.06 249.34 optional EEP 102.97 150.79 191.23 279.75 22.97 70.79 121.23 259.75 optional MAV 100.41 143.05 178.26 253.51 20.41 63.05 108.26 233.51 optional MAV and EEB 103.48 152.33 193.81 284.93 23.48 72.33 123.81 264.93 optional MAV and EEP 104.51 155.41 198.95 295.19 24.51 75.41 128.95 275.19 14 FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE END OF EACH TIME PERIOD 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS Fidelity VIP Mid Cap Portfolio (Service Class 2) base contract with no optional riders $ 99.90 $141.50 $175.65 $248.19 $19.90 $61.50 $105.65 $228.19 optional EEB 102.97 150.79 191.23 279.75 22.97 70.79 121.23 259.75 optional EEP 104.00 153.87 196.38 290.07 24.00 73.87 126.38 270.07 optional MAV 101.43 146.15 183.46 264.09 21.43 66.15 113.46 244.09 optional MAV and EEB 104.51 155.41 198.95 295.19 24.51 75.41 128.95 275.19 optional MAV and EEP 105.53 158.49 204.07 305.35 25.53 78.49 134.07 285.35 Fidelity VIP Overseas Portfolio (Service Class 2) base contract with no optional riders 102.36 148.94 188.13 273.52 22.36 68.94 118.13 253.52 optional EEB 105.43 158.18 203.55 304.34 25.43 78.18 133.55 284.34 optional EEP 106.46 161.25 208.65 314.42 26.46 81.25 138.65 294.42 optional MAV 103.89 153.57 195.87 289.04 23.89 73.57 125.87 269.04 optional MAV and EEB 106.97 162.78 211.19 319.42 26.97 82.78 141.19 299.42 optional MAV and EEP 107.99 165.84 216.26 329.34 27.99 85.84 146.26 309.34 FTVIPT Franklin Real Estate Fund - Class 2 base contract with no optional riders 98.87 138.39 170.41 237.46 18.87 58.39 100.41 217.46 optional EEB 101.95 147.70 186.06 269.34 21.95 67.70 116.06 249.34 optional EEP 102.97 150.79 191.23 279.75 22.97 70.79 121.23 259.75 optional MAV 100.41 143.05 178.26 253.51 20.41 63.05 108.26 233.51 optional MAV and EEB 103.48 152.33 193.81 284.93 23.48 72.33 123.81 264.93 optional MAV and EEP 104.51 155.41 198.95 295.19 24.51 75.41 128.95 275.19 FTVIPT Franklin Small Cap Value Securities Fund - Class 2 (previously FTVIPT Franklin Value Securities Fund - Class 2) base contract with no optional riders 100.72 143.98 179.82 256.70 20.72 63.98 109.82 236.70 optional EEB 103.79 153.26 195.35 288.02 23.79 73.26 125.35 268.02 optional EEP 104.82 156.34 200.49 298.25 24.82 76.34 130.49 278.25 optional MAV 102.25 148.63 187.61 272.47 22.25 68.63 117.61 252.47 optional MAV and EEB 105.33 157.87 203.04 303.33 25.33 77.87 133.04 283.33 optional MAV and EEP 106.35 160.94 208.14 313.41 26.35 80.94 138.14 293.41 FTVIPT Mutual Shares Securities Fund - Class 2 base contract with no optional riders 100.92 144.60 180.86 258.81 20.92 64.60 110.86 238.81 optional EEB 104.00 153.87 196.38 290.07 24.00 73.87 126.38 270.07 optional EEP 105.02 156.95 201.51 300.29 25.02 76.95 131.51 280.29 optional MAV 102.46 149.25 188.65 274.56 22.46 69.25 118.65 254.56 optional MAV and EEB 105.53 158.49 204.07 305.35 25.53 78.49 134.07 285.35 optional MAV and EEP 106.56 161.56 209.16 315.42 26.56 81.56 139.16 295.42 Goldman Sachs VIT CORE(SM) U.S. Equity Fund base contract with no optional riders 98.56 137.46 168.84 234.22 18.56 57.46 98.84 214.22 optional EEB 101.64 146.77 184.50 266.19 21.64 66.77 114.50 246.19 optional EEP 102.66 149.86 189.68 276.64 22.66 69.86 119.68 256.64 optional MAV 100.10 142.12 176.69 250.32 20.10 62.12 106.69 230.32 optional MAV and EEB 103.18 151.41 192.26 281.83 23.18 71.41 122.26 261.83 optional MAV and EEP 104.20 154.49 197.41 292.12 24.20 74.49 127.41 272.12 15 FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE END OF EACH TIME PERIOD 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS Goldman Sachs VIT Mid Cap Value Fund base contract with no optional riders $ 99.79 $141.19 $175.13 $247.12 $19.79 $61.19 $105.13 $227.12 optional EEB 102.87 150.48 190.71 278.72 22.87 70.48 120.71 258.72 optional EEP 103.89 153.57 195.87 289.04 23.89 73.57 125.87 269.04 optional MAV 101.33 145.84 182.94 263.03 21.33 65.84 112.94 243.03 optional MAV and EEB 104.41 155.11 198.43 294.17 24.41 75.11 128.43 274.17 optional MAV and EEP 105.43 158.18 203.55 304.34 25.43 78.18 133.55 284.34 INVESCO VIF - Dynamics Fund base contract with no optional riders 101.33 145.84 182.94 263.03 21.33 65.84 112.94 243.03 optional EEB 104.41 155.11 198.43 294.17 24.41 75.11 128.43 274.17 optional EEP 105.43 158.18 203.55 304.34 25.43 78.18 133.55 284.34 optional MAV 102.87 150.48 190.71 278.72 22.87 70.48 120.71 258.72 optional MAV and EEB 105.94 159.72 206.11 309.39 25.94 79.72 136.11 289.39 optional MAV and EEP 106.97 162.78 211.19 319.42 26.97 82.78 141.19 299.42 INVESCO VIF - Financial Services Fund base contract with no optional riders 101.23 145.53 182.42 261.98 21.23 65.53 112.42 241.98 optional EEB 104.30 154.80 197.92 293.15 24.30 74.80 127.92 273.15 optional EEP 105.33 157.87 203.04 303.33 25.33 77.87 133.04 283.33 optional MAV 102.77 150.17 190.20 277.68 22.77 70.17 120.20 257.68 optional MAV and EEB 105.84 159.41 205.60 308.38 25.84 79.41 135.60 288.38 optional MAV and EEP 106.87 162.47 210.69 318.42 26.87 82.47 140.69 298.42 INVESCO VIF - Technology Fund base contract with no optional riders 101.23 145.53 182.42 261.98 21.23 65.53 112.42 241.98 optional EEB 104.30 154.80 197.92 293.15 24.30 74.80 127.92 273.15 optional EEP 105.33 157.87 203.04 303.33 25.33 77.87 133.04 283.33 optional MAV 102.77 150.17 190.20 277.68 22.77 70.17 120.20 257.68 optional MAV and EEB 105.84 159.41 205.60 308.38 25.84 79.41 135.60 288.38 optional MAV and EEP 106.87 162.47 210.69 318.42 26.87 82.47 140.69 298.42 INVESCO VIF - Telecommunications Fund base contract with no optional riders 101.43 146.15 183.46 264.09 21.43 66.15 113.46 244.09 optional EEB 104.51 155.41 198.95 295.19 24.51 75.41 128.95 275.19 optional EEP 105.53 158.49 204.07 305.35 25.53 78.49 134.07 285.35 optional MAV 102.97 150.79 191.23 279.75 22.97 70.79 121.23 259.75 optional MAV and EEB 106.05 160.02 206.62 310.40 26.05 80.02 136.62 290.40 optional MAV and EEP 107.07 163.09 211.70 320.41 27.07 83.09 141.70 300.41 Janus Aspen Series Global Technology Portfolio: Service Shares base contract with no optional riders 100.00 141.81 176.17 249.25 20.00 61.81 106.17 229.25 optional EEB 103.07 151.10 191.75 280.79 23.07 71.10 121.75 260.79 optional EEP 104.10 154.18 196.89 291.10 24.10 74.18 126.89 271.10 optional MAV 101.54 146.46 183.98 265.14 21.54 66.46 113.98 245.14 optional MAV and EEB 104.61 155.72 199.46 296.21 24.61 75.72 129.46 276.21 optional MAV and EEP 105.64 158.79 204.58 306.37 25.64 78.79 134.58 286.37 16 FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE END OF EACH TIME PERIOD 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS Janus Aspen Series International Growth Portfolio: Service Shares base contract with no optional riders $100.10 $142.12 $176.69 $250.32 $20.10 $62.12 $106.69 $230.32 optional EEB 103.18 151.41 192.26 281.83 23.18 71.41 122.26 261.83 optional EEP 104.20 154.49 197.41 292.12 24.20 74.49 127.41 272.12 optional MAV 101.64 146.77 184.50 266.19 21.64 66.77 114.50 246.19 optional MAV and EEB 104.71 156.03 199.97 297.23 24.71 76.03 129.97 277.23 optional MAV and EEP 105.74 159.10 205.09 307.38 25.74 79.10 135.09 287.38 Lazard Retirement International Equity Portfolio base contract with no optional riders 103.07 151.10 191.75 280.79 23.07 71.10 121.75 260.79 optional EEB 106.15 160.33 207.13 311.41 26.15 80.33 137.13 291.41 optional EEP 107.17 163.39 212.21 321.41 27.17 83.39 142.21 301.41 optional MAV 104.61 155.72 199.46 296.21 24.61 75.72 129.46 276.21 optional MAV and EEB 107.69 164.92 214.74 326.37 27.69 84.92 144.74 306.37 optional MAV and EEP 108.71 167.98 219.80 336.23 28.71 87.98 149.80 316.23 MFS(R) Investors Growth Stock Series - Service Class base contract with no optional riders 102.25 148.63 187.61 272.47 22.25 68.63 117.61 252.47 optional EEB 105.33 157.87 203.04 303.33 25.33 77.87 133.04 283.33 optional EEP 106.35 160.94 208.14 313.41 26.35 80.94 138.14 293.41 optional MAV 103.79 153.26 195.35 288.02 23.79 73.26 125.35 268.02 optional MAV and EEB 106.87 162.47 210.69 318.42 26.87 82.47 140.69 298.42 optional MAV and EEP 107.89 165.53 215.76 328.35 27.89 85.53 145.76 308.35 MFS(R) New Discovery Series - Service Class base contract with no optional riders 103.69 152.95 194.84 286.99 23.69 72.95 124.84 266.99 optional EEB 106.76 162.17 210.18 317.42 26.76 82.17 140.18 297.42 optional EEP 107.79 165.23 215.25 327.36 27.79 85.23 145.25 307.36 optional MAV 105.23 157.57 202.53 302.32 25.23 77.57 132.53 282.32 optional MAV and EEB 108.30 166.76 217.78 332.30 28.30 86.76 147.78 312.30 optional MAV and EEP 109.33 169.81 222.82 342.10 29.33 89.81 152.82 322.10 MFS(R) Utilities Series - Service Class base contract with no optional riders 102.36 148.94 188.13 273.52 22.36 68.94 118.13 253.52 optional EEB 105.43 158.18 203.55 304.34 25.43 78.18 133.55 284.34 optional EEP 106.46 161.25 208.65 314.42 26.46 81.25 138.65 294.42 optional MAV 103.89 153.57 195.87 289.04 23.89 73.57 125.87 269.04 optional MAV and EEB 106.97 162.78 211.19 319.42 26.97 82.78 141.19 299.42 optional MAV and EEP 107.99 165.84 216.26 329.34 27.99 85.84 146.26 309.34 Pioneer Equity Income VCT Portfolio - Class II Shares base contract with no optional riders 100.72 143.98 179.82 256.70 20.72 63.98 109.82 236.70 optional EEB 103.79 153.26 195.35 288.02 23.79 73.26 125.35 268.02 optional EEP 104.82 156.34 200.49 298.25 24.82 76.34 130.49 278.25 optional MAV 102.25 148.63 187.61 272.47 22.25 68.63 117.61 252.47 optional MAV and EEB 105.33 157.87 203.04 303.33 25.33 77.87 133.04 283.33 optional MAV and EEP 106.35 160.94 208.14 313.41 26.35 80.94 138.14 293.41 17 FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE END OF EACH TIME PERIOD 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS Pioneer Europe VCT Portfolio - Class II Shares base contract with no optional riders $123.27 $210.67 $289.26 $466.00 $43.27 $130.67 $219.26 $446.00 optional EEB 126.34 219.53 303.40 491.11 46.34 139.53 233.40 471.11 optional EEP 127.37 222.47 308.08 499.31 47.37 142.47 238.08 479.31 optional MAV 124.80 215.11 296.35 478.65 44.80 135.11 226.35 458.65 optional MAV and EEB 127.88 223.94 310.41 503.38 47.88 143.94 240.41 483.38 optional MAV and EEP 128.90 226.87 315.05 511.45 48.90 146.87 245.05 491.45 Putnam VT Health Sciences Fund - Class IB Shares base contract with no optional riders 100.92 144.60 180.86 258.81 20.92 64.60 110.86 238.81 optional EEB 104.00 153.87 196.38 290.07 24.00 73.87 126.38 270.07 optional EEP 105.02 156.95 201.51 300.29 25.02 76.95 131.51 280.29 optional MAV 102.46 149.25 188.65 274.56 22.46 69.25 118.65 254.56 optional MAV and EEB 105.53 158.49 204.07 305.35 25.53 78.49 134.07 285.35 optional MAV and EEP 106.56 161.56 209.16 315.42 26.56 81.56 139.16 295.42 Putnam VT International Growth Fund - Class IB Shares base contract with no optional riders 102.46 149.25 188.65 274.56 22.46 69.25 118.65 254.56 optional EEB 105.53 158.49 204.07 305.35 25.53 78.49 134.07 285.35 optional EEP 106.56 161.56 209.16 315.42 26.56 81.56 139.16 295.42 optional MAV 104.00 153.87 196.38 290.07 24.00 73.87 126.38 270.07 optional MAV and EEB 107.07 163.09 211.70 320.41 27.07 83.09 141.70 300.41 optional MAV and EEP 108.10 166.15 216.77 330.33 28.10 86.15 146.77 310.33 Putnam VT Vista Fund - Class IB Shares base contract with no optional riders 99.69 140.88 174.60 246.05 19.69 60.88 104.60 226.05 optional EEB 102.77 150.17 190.20 277.68 22.77 70.17 120.20 257.68 optional EEP 103.79 153.26 195.35 288.02 23.79 73.26 125.35 268.02 optional MAV 101.23 145.53 182.42 261.98 21.23 65.53 112.42 241.98 optional MAV and EEB 104.30 154.80 197.92 293.15 24.30 74.80 127.92 273.15 optional MAV and EEP 105.33 157.87 203.04 303.33 25.33 77.87 133.04 283.33 Strong Opportunity Fund II - Advisor Class base contract with no optional riders 106.05 160.02 206.62 310.40 26.05 80.02 136.62 290.40 optional EEB 109.12 169.20 221.81 340.14 29.12 89.20 151.81 320.14 optional EEP 110.15 172.24 226.83 349.86 30.15 92.24 156.83 329.86 optional MAV 107.58 164.62 214.24 325.38 27.58 84.62 144.24 305.38 optional MAV and EEB 110.66 173.76 229.33 354.69 30.66 93.76 159.33 334.69 optional MAV and EEP 111.68 176.80 234.32 364.26 31.68 96.80 164.32 344.26 Wanger International Small Cap base contract with no optional riders 104.92 156.64 201.00 299.27 24.92 76.64 131.00 279.27 optional EEB 107.99 165.84 216.26 329.34 27.99 85.84 146.26 309.34 optional EEP 109.02 168.89 221.31 339.17 29.02 88.89 151.31 319.17 optional MAV 106.46 161.25 208.65 314.42 26.46 81.25 138.65 294.42 optional MAV and EEB 109.53 170.42 223.82 344.04 29.53 90.42 153.82 324.04 optional MAV and EEP 110.56 173.46 228.83 353.72 30.56 93.46 158.83 333.72 18 FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE END OF EACH TIME PERIOD 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS Wanger U.S. Smaller Companies (previously Wanger U.S. Small Cap) base contract with no optional riders $100.41 $143.05 $178.26 $253.51 $20.41 $63.05 $108.26 $233.51 optional EEB 103.48 152.33 193.81 284.93 23.48 72.33 123.81 264.93 optional EEP 104.51 155.41 198.95 295.19 24.51 75.41 128.95 275.19 optional MAV 101.95 147.70 186.06 269.34 21.95 67.70 116.06 249.34 optional MAV and EEB 105.02 156.95 201.51 300.29 25.02 76.95 131.51 280.29 optional MAV and EEP 106.05 160.02 206.62 310.40 26.05 80.02 136.62 290.40 Wells Fargo VT Asset Allocation Fund base contract with no optional riders 100.51 143.36 178.78 254.58 20.51 63.36 108.78 234.58 optional EEB 103.59 152.64 194.32 285.96 23.59 72.64 124.32 265.96 optional EEP 104.61 155.72 199.46 296.21 24.61 75.72 129.46 276.21 optional MAV 102.05 148.01 186.58 270.38 22.05 68.01 116.58 250.38 optional MAV and EEB 105.12 157.26 202.02 301.30 25.12 77.26 132.02 281.30 optional MAV and EEP 106.15 160.33 207.13 311.41 26.15 80.33 137.13 291.41 Wells Fargo VT International Equity Fund base contract with no optional riders 100.51 143.36 178.78 254.58 20.51 63.36 108.78 234.58 optional EEB 103.59 152.64 194.32 285.96 23.59 72.64 124.32 265.96 optional EEP 104.61 155.72 199.46 296.21 24.61 75.72 129.46 276.21 optional MAV 102.05 148.01 186.58 270.38 22.05 68.01 116.58 250.38 optional MAV and EEB 105.12 157.26 202.02 301.30 25.12 77.26 132.02 281.30 optional MAV and EEP 106.15 160.33 207.13 311.41 26.15 80.33 137.13 291.41 Wells Fargo VT Small Cap Growth Fund base contract with no optional riders 102.56 149.55 189.16 275.60 22.56 69.55 119.16 255.60 optional EEB 105.64 158.79 204.58 306.37 25.64 78.79 134.58 286.37 optional EEP 106.66 161.86 209.67 316.42 26.66 81.86 139.67 296.42 optional MAV 104.10 154.18 196.89 291.10 24.10 74.18 126.89 271.10 optional MAV and EEB 107.17 163.39 212.21 321.41 27.17 83.39 142.21 301.41 optional MAV and EEP 108.20 166.45 217.27 331.31 28.20 86.45 147.27 311.31
19 You would pay the following expenses on a $1,000 investment in a RAVA ADVANTAGE qualified annuity with a ten-year surrender charge schedule(+) and a 0.75% mortality and expense risk fee assuming a 5% annual return and ...
FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE 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 $ 96.21 $130.28 $156.69 $209.05 $ 16.21 $ 50.28 $ 86.69 $189.05 optional MAV 97.74 134.96 164.62 225.53 17.74 54.96 94.62 205.53 AXP(R) VP - Bond Fund base contract with no optional riders 96.41 130.90 157.75 211.27 16.41 50.90 87.75 191.27 optional MAV 97.95 135.59 165.68 227.71 17.95 55.59 95.68 207.71 AXP(R) VP - Capital Resource Fund base contract with no optional riders 96.21 130.28 156.69 209.05 16.21 50.28 86.69 189.05 optional MAV 97.74 134.96 164.62 225.53 17.74 54.96 94.62 205.53 AXP(R) VP - Cash Management Fund base contract with no optional riders 95.18 127.14 151.37 197.94 15.18 47.14 81.37 177.94 optional MAV 96.72 131.84 159.34 214.57 16.72 51.84 89.34 194.57 AXP(R) VP - Diversified Equity Income Fund base contract with no optional riders 97.54 134.34 163.57 223.35 17.54 54.34 93.57 203.35 optional MAV 99.08 139.01 171.46 239.61 19.08 59.01 101.46 219.61 AXP(R) VP - Emerging Markets Fund base contract with no optional riders 106.15 160.33 207.13 311.41 26.15 80.33 137.13 291.41 optional MAV 107.69 164.92 214.74 326.37 27.69 84.92 144.74 306.37 AXP(R) VP - Equity Select Fund base contract with no optional riders 99.49 140.26 173.56 243.91 19.49 60.26 103.56 223.91 optional MAV 101.02 144.91 181.38 259.87 21.02 64.91 111.38 239.87 AXP(R) VP - Extra Income Fund base contract with no optional riders 96.62 131.53 158.81 213.47 16.62 51.53 88.81 193.47 optional MAV 98.15 136.21 166.73 229.88 18.15 56.21 96.73 209.88 AXP(R) VP - Federal Income Fund base contract with no optional riders 96.82 132.15 159.87 215.67 16.82 52.15 89.87 195.67 optional MAV 98.36 136.83 167.78 232.05 18.36 56.83 97.78 212.05 AXP(R) VP - Global Bond Fund base contract with no optional riders 99.18 139.32 171.98 240.69 19.18 59.32 101.98 220.69 optional MAV 100.72 143.98 179.82 256.70 20.72 63.98 109.82 236.70 AXP(R) VP - Growth Fund base contract with no optional riders 97.44 134.03 163.04 222.25 17.44 54.03 93.04 202.25 optional MAV 98.97 138.70 170.94 238.53 18.97 58.70 100.94 218.53 AXP(R) VP - International Fund base contract with no optional riders 98.87 138.39 170.41 237.46 18.87 58.39 100.41 217.46 optional MAV 100.41 143.05 178.26 253.51 20.41 63.05 108.26 233.51 AXP(R) VP - Managed Fund base contract with no optional riders 96.00 129.65 155.63 206.84 16.00 49.65 85.63 186.84 optional MAV 97.54 134.34 163.57 223.35 17.54 54.34 93.57 203.35 AXP(R) VP - NEW DIMENSIONS FUND(R) base contract with no optional riders 96.31 130.59 157.22 210.16 16.31 50.59 87.22 190.16 optional MAV 97.85 135.28 165.15 226.62 17.85 55.28 95.15 206.62 20 FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE END OF EACH TIME PERIOD 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS AXP(R) VP - Partners Small Cap Value Fund base contract with no optional riders $103.59 $152.64 $194.32 $285.96 $ 23.59 $ 72.64 $124.32 $265.96 optional MAV 105.12 157.26 202.02 301.30 25.12 77.26 132.02 281.30 AXP(R) VP - S&P 500 Index Fund base contract with no optional riders 93.23 121.18 141.21 176.51 13.23 41.18 71.21 156.51 optional MAV 94.77 125.89 149.24 193.46 14.77 45.89 79.24 173.46 AXP(R) VP - Small Cap Advantage Fund base contract with no optional riders 100.10 142.12 176.69 250.32 20.10 62.12 106.69 230.32 optional MAV 101.64 146.77 184.50 266.19 21.64 66.77 114.50 246.19 AXP(R) VP - Stock Fund base contract with no optional riders 99.49 140.26 173.56 243.91 19.49 60.26 103.56 223.91 optional MAV 101.02 144.91 181.38 259.87 21.02 64.91 111.38 239.87 AXP(R) VP - Strategy Aggressive Fund base contract with no optional riders 96.21 130.28 156.69 209.05 16.21 50.28 86.69 189.05 optional MAV 97.74 134.96 164.62 225.53 17.74 54.96 94.62 205.53 AIM V.I. Capital Appreciation Fund, Series II base contract with no optional riders 99.49 140.26 173.56 243.91 19.49 60.26 103.56 223.91 optional MAV 101.02 144.91 181.38 259.87 21.02 64.91 111.38 239.87 AIM V.I. Capital Development Fund, Series II base contract with no optional riders 102.66 149.86 189.68 276.64 22.66 69.86 119.68 256.64 optional MAV 104.20 154.49 197.41 292.12 24.20 74.49 127.41 272.12 Alliance VP AllianceBernstein International Value Portfolio (Class B) base contract with no optional riders 100.51 143.36 178.78 254.58 20.51 63.36 108.78 234.58 optional MAV 102.05 148.01 186.58 270.38 22.05 68.01 116.58 250.38 Alliance VP Growth and Income Portfolio (Class B) base contract with no optional riders 97.64 134.65 164.10 224.44 17.64 54.65 94.10 204.44 optional MAV 99.18 139.32 171.98 240.69 19.18 59.32 101.98 220.69 American Century(R) VP International, Class II base contract with no optional riders 102.97 150.79 191.23 279.75 22.97 70.79 121.23 259.75 optional MAV 104.51 155.41 198.95 295.19 24.51 75.41 128.95 275.19 American Century(R) VP Value, Class II base contract with no optional riders 99.59 140.57 174.08 244.98 19.59 60.57 104.08 224.98 optional MAV 101.13 145.22 181.90 260.93 21.13 65.22 111.90 240.93 Calvert Variable Series, Inc. Social Balanced Portfolio base contract with no optional riders 97.13 133.09 161.46 218.97 17.13 53.09 91.46 198.97 optional MAV 98.67 137.77 169.36 235.30 18.67 57.77 99.36 215.30 Evergreen VA Capital Growth Fund, Class L Shares base contract with no optional riders 99.79 141.19 175.13 247.12 19.79 61.19 105.13 227.12 optional MAV 101.33 145.84 182.94 263.03 21.33 65.84 112.94 243.03 Fidelity VIP Growth & Income Portfolio (Service Class 2) base contract with no optional riders 96.82 132.15 159.87 215.67 16.82 52.15 89.87 195.67 optional MAV 98.36 136.83 167.78 232.05 18.36 56.83 97.78 212.05 21 FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE END OF EACH TIME PERIOD 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS Fidelity VIP Mid Cap Portfolio (Service Class 2) base contract with no optional riders $ 97.85 $135.28 $165.15 $226.62 $ 17.85 $ 55.28 $ 95.15 $206.62 optional MAV 99.38 139.95 173.03 242.83 19.38 59.95 103.03 222.83 Fidelity VIP Overseas Portfolio (Service Class 2) base contract with no optional riders 100.31 142.74 177.74 252.45 20.31 62.74 107.74 232.45 optional MAV 101.84 147.39 185.54 268.29 21.84 67.39 115.54 248.29 FTVIPT Franklin Real Estate Fund - Class 2 base contract with no optional riders 96.82 132.15 159.87 215.67 16.82 52.15 89.87 195.67 optional MAV 98.36 136.83 167.78 232.05 18.36 56.83 97.78 212.05 FTVIPT Franklin Small Cap Value Securities Fund - Class 2 (previously FTVIPT Franklin Value Securities Fund - Class 2) base contract with no optional riders 98.67 137.77 169.36 235.30 18.67 57.77 99.36 215.30 optional MAV 100.20 142.43 177.22 251.39 20.20 62.43 107.22 231.39 FTVIPT Mutual Shares Securities Fund - Class 2 base contract with no optional riders 98.87 138.39 170.41 237.46 18.87 58.39 100.41 217.46 optional MAV 100.41 143.05 178.26 253.51 20.41 63.05 108.26 233.51 Goldman Sachs VIT CORE(SM) U.S. Equity Fund base contract with no optional riders 96.51 131.22 158.28 212.37 16.51 51.22 88.28 192.37 optional MAV 98.05 135.90 166.21 228.79 18.05 55.90 96.21 208.79 Goldman Sachs VIT Mid Cap Value Fund base contract with no optional riders 97.74 134.96 164.62 225.53 17.74 54.96 94.62 205.53 optional MAV 99.28 139.64 172.51 241.76 19.28 59.64 102.51 221.76 INVESCO VIF Dynamics Fund base contract with no optional riders 99.28 139.64 172.51 241.76 19.28 59.64 102.51 221.76 optional MAV 100.82 144.29 180.34 257.76 20.82 64.29 110.34 237.76 INVESCO VIF Financial Services Fund base contract with no optional riders 99.18 139.32 171.98 240.69 19.18 59.32 101.98 220.69 optional MAV 100.72 143.98 179.82 256.70 20.72 63.98 109.82 236.70 INVESCO VIF Technology Fund base contract with no optional riders 99.18 139.32 171.98 240.69 19.18 59.32 101.98 220.69 optional MAV 100.72 143.98 179.82 256.70 20.72 63.98 109.82 236.70 INVESCO VIF Telecommunications Fund base contract with no optional riders 99.38 139.95 173.03 242.83 19.38 59.95 103.03 222.83 optional MAV 100.92 144.60 180.86 258.81 20.92 64.60 110.86 238.81 Janus Aspen Series Global Technology Portfolio: Service Shares base contract with no optional riders 97.95 135.59 165.68 227.71 17.95 55.59 95.68 207.71 optional MAV 99.49 140.26 173.56 243.91 19.49 60.26 103.56 223.91 Janus Aspen Series International Growth Portfolio: Service Shares base contract with no optional riders 98.05 135.90 166.21 228.79 18.05 55.90 96.21 208.79 optional MAV 99.59 140.57 174.08 244.98 19.59 60.57 104.08 224.98 Lazard Retirement International Equity Portfolio base contract with no optional riders 101.02 144.91 181.38 259.87 21.02 64.91 111.38 239.87 optional MAV 102.56 149.55 189.16 275.60 22.56 69.55 119.16 255.60 22 FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE 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 base contract with no optional riders $100.20 $142.43 $177.22 $251.39 $ 20.20 $ 62.43 $107.22 $231.39 optional MAV 101.74 147.08 185.02 267.24 21.74 67.08 115.02 247.24 MFS(R) New Discovery Series - Service Class base contract with no optional riders 101.64 146.77 184.50 266.19 21.64 66.77 114.50 246.19 optional MAV 103.18 151.41 192.26 281.83 23.18 71.41 122.26 261.83 MFS(R) Utilities Series - Service Class base contract with no optional riders 100.31 142.74 177.74 252.45 20.31 62.74 107.74 232.45 optional MAV 101.84 147.39 185.54 268.29 21.84 67.39 115.54 248.29 Pioneer Equity Income VCT Portfolio - Class II Shares base contract with no optional riders 98.67 137.77 169.36 235.30 18.67 57.77 99.36 215.30 optional MAV 100.20 142.43 177.22 251.39 20.20 62.43 107.22 231.39 Pioneer Europe VCT Portfolio - Class II Shares base contract with no optional riders 121.22 204.74 279.73 448.83 41.22 124.74 209.73 428.83 optional MAV 122.75 209.19 286.88 461.74 42.75 129.19 216.88 441.74 Putnam VT Health Sciences Fund - Class IB Shares base contract with no optional riders 98.87 138.39 170.41 237.46 18.87 58.39 100.41 217.46 optional MAV 100.41 143.05 178.26 253.51 20.41 63.05 108.26 233.51 Putnam VT International Growth Fund - Class IB Shares base contract with no optional riders 100.41 143.05 178.26 253.51 20.41 63.05 108.26 233.51 optional MAV 101.95 147.70 186.06 269.34 21.95 67.70 116.06 249.34 Putnam VT Vista Fund - Class IB Shares base contract with no optional riders 97.64 134.65 164.10 224.44 17.64 54.65 94.10 204.44 optional MAV 99.18 139.32 171.98 240.69 19.18 59.32 101.98 220.69 Strong Opportunity Fund II - Advisor Class base contract with no optional riders 104.00 153.87 196.38 290.07 24.00 73.87 126.38 270.07 optional MAV 105.53 158.49 204.07 305.35 25.53 78.49 134.07 285.35 Wanger International Small Cap base contract with no optional riders 102.87 150.48 190.71 278.72 22.87 70.48 120.71 258.72 optional MAV 104.41 155.11 198.43 294.17 24.41 75.11 128.43 274.17 Wanger U.S. Smaller Companies (previously Wanger U.S. Small Cap) base contract with no optional riders 98.36 136.83 167.78 232.05 18.36 56.83 97.78 212.05 optional MAV 99.90 141.50 175.65 248.19 19.90 61.50 105.65 228.19 Wells Fargo VT Asset Allocation Fund base contract with no optional riders 98.46 137.15 168.31 233.13 18.46 57.15 98.31 213.13 optional MAV 100.00 141.81 176.17 249.25 20.00 61.81 106.17 229.25 Wells Fargo VT International Equity Fund base contract with no optional riders 98.46 137.15 168.31 233.13 18.46 57.15 98.31 213.13 optional MAV 100.00 141.81 176.17 249.25 20.00 61.81 106.17 229.25 Wells Fargo VT Small Cap Growth Fund base contract with no optional riders 100.51 143.36 178.78 254.58 20.51 63.36 108.78 234.58 optional MAV 102.05 148.01 186.58 270.38 22.05 68.01 116.58 250.38
23 You would pay the following expenses on a $1,000 investment in a RAVA ADVANTAGE nonqualified annuity with a seven-year surrender charge schedule and a 0.95% mortality and expense risk fee assuming a 5% annual return and . . .
FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE 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 $ 88.26 $126.52 $147.26 $210.97 $ 18.26 $ 56.52 $ 97.26 $210.97 optional EEB 91.33 135.84 162.94 243.03 21.33 65.84 112.94 243.03 optional EEP 92.36 138.94 168.13 253.52 22.36 68.94 118.13 253.52 optional MAV 89.79 131.19 155.13 227.12 19.79 61.19 105.13 227.12 optional MAV and EEB 92.87 140.48 170.17 258.72 22.87 70.48 120.71 258.72 optional MAV and EEP 93.89 143.57 175.87 269.04 23.89 73.57 125.87 269.04 AXP(R) VP - Bond Fund base contract with no optional riders 88.46 127.15 148.31 213.13 18.46 57.15 98.31 213.13 optional EEB 91.54 136.46 163.98 245.14 21.54 66.46 113.98 245.14 optional EEP 92.56 139.55 169.16 255.60 22.56 69.55 119.16 255.60 optional MAV 90.00 131.81 156.17 229.25 20.00 61.81 106.17 229.25 optional MAV and EEB 93.07 141.10 171.75 260.79 23.07 71.10 121.75 260.79 optional MAV and EEP 94.10 144.18 176.89 271.10 24.10 74.18 126.89 271.10 AXP(R) VP - Capital Resource Fund base contract with no optional riders 88.26 126.52 147.26 210.97 18.26 56.52 97.26 210.97 optional EEB 91.33 135.84 162.94 243.03 21.33 65.84 112.94 243.03 optional EEP 92.36 138.94 168.13 253.52 22.36 68.94 118.13 253.52 optional MAV 89.79 131.19 155.13 227.12 19.79 61.19 105.13 227.12 optional MAV and EEB 92.87 140.48 170.71 258.72 22.87 70.48 120.71 258.72 optional MAV and EEP 93.89 143.57 175.87 269.04 23.89 73.57 125.87 269.04 AXP(R) VP - Cash Management Fund base contract with no optional riders 87.23 123.40 141.99 200.06 17.23 53.40 91.99 200.06 optional EEB 90.31 132.74 157.74 232.45 20.31 62.74 107.74 232.45 optional EEP 91.33 135.84 162.94 243.03 21.33 65.84 112.94 243.03 optional MAV 88.77 128.08 149.89 216.38 18.77 58.08 99.89 216.38 optional MAV and EEB 91.84 137.39 165.54 248.29 21.84 67.39 115.54 248.29 optional MAV and EEP 92.87 140.48 170.71 258.72 22.87 70.48 120.71 258.72 AXP(R) VP - Diversified Equity Income Fund base contract with no optional riders 89.59 130.57 154.08 224.98 19.59 60.57 104.08 224.98 optional EEB 92.66 139.86 169.68 256.64 22.66 69.86 119.68 256.64 optional EEP 93.69 142.95 174.84 266.99 23.69 72.95 124.84 266.99 optional MAV 91.13 135.22 161.90 240.93 21.13 65.22 111.90 240.93 optional MAV and EEB 94.20 144.49 177.41 272.12 24.20 74.49 127.41 272.12 optional MAV and EEP 95.23 147.57 182.53 282.32 25.23 77.57 132.53 282.32 AXP(R) VP - Emerging Markets Fund base contract with no optional riders 98.20 156.45 197.27 311.31 28.20 86.45 147.27 311.31 optional EEB 101.27 165.59 212.33 340.44 31.27 95.59 162.33 340.44 optional EEP 102.30 168.62 217.31 349.96 32.30 98.62 167.31 349.96 optional MAV 99.74 161.03 204.83 325.99 29.74 91.03 154.83 325.99 optional MAV and EEB 102.81 170.13 219.79 354.68 32.81 100.13 169.79 354.68 optional MAV and EEP 103.84 173.16 224.73 364.06 33.84 103.16 174.73 364.06 24 FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE 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 $ 91.54 $136.46 $163.98 $245.14 $ 21.54 $ 66.46 $113.98 $245.14 optional EEB 94.61 145.72 179.46 276.21 24.61 75.72 129.46 276.21 optional EEP 95.64 148.79 184.58 286.37 25.64 78.79 134.58 286.37 optional MAV 93.07 141.10 171.75 260.79 23.07 71.10 121.75 260.79 optional MAV and EEB 96.15 150.33 187.13 291.41 26.15 80.33 137.13 291.41 optional MAV and EEP 97.17 153.39 192.21 301.41 27.17 83.39 142.21 301.41 AXP(R) VP - Extra Income Fund base contract with no optional riders 88.67 127.77 149.36 215.30 18.67 57.77 99.36 215.30 optional EEB 91.74 137.08 165.02 247.24 21.74 67.08 115.02 247.24 optional EEP 92.77 140.17 170.20 257.68 22.77 70.17 120.20 257.68 optional MAV 90.20 132.43 157.22 231.39 20.20 62.43 107.22 231.39 optional MAV and EEB 93.28 141.72 172.78 262.86 23.28 71.72 122.78 262.86 optional MAV and EEP 94.30 144.80 177.92 273.15 24.30 74.80 127.92 273.15 AXP(R) VP - Federal Income Fund base contract with no optional riders 88.87 128.39 150.41 217.46 18.87 58.39 100.41 217.46 optional EEB 91.95 137.70 166.06 249.34 21.95 67.70 116.06 249.34 optional EEP 92.97 140.79 171.23 259.75 22.97 70.79 121.23 259.75 optional MAV 90.41 133.05 158.26 233.51 20.41 63.05 108.26 233.51 optional MAV and EEB 93.48 142.33 173.81 264.93 23.48 72.33 123.81 264.93 optional MAV and EEP 94.51 145.41 178.95 275.19 24.51 75.41 128.95 275.19 AXP(R) VP - Global Bond Fund base contract with no optional riders 91.23 135.53 162.42 241.98 21.23 65.53 112.42 241.98 optional EEB 94.30 144.80 177.92 273.15 24.30 74.80 127.92 273.15 optional EEP 95.33 147.87 183.04 283.33 25.33 77.87 133.04 283.33 optional MAV 92.77 140.17 170.20 257.68 22.77 70.17 120.20 257.68 optional MAV and EEB 95.84 149.41 185.60 288.38 25.84 79.41 135.60 288.38 optional MAV and EEP 96.87 152.47 190.69 298.42 26.87 82.47 140.69 298.42 AXP(R) VP - Growth Fund base contract with no optional riders 89.49 130.26 153.56 223.91 19.49 60.26 103.56 223.91 optional EEB 92.56 139.55 169.16 255.60 22.56 69.55 119.16 255.60 optional EEP 93.59 142.64 174.32 265.96 23.59 72.64 124.32 265.96 optional MAV 91.02 134.91 161.38 239.87 21.02 64.91 111.38 239.87 optional MAV and EEB 94.10 144.18 176.89 271.10 24.10 74.18 126.89 271.10 optional MAV and EEP 95.12 147.26 182.02 281.30 25.12 77.26 132.02 281.30 AXP(R) VP - International Fund base contract with no optional riders 90.92 134.60 160.86 238.81 20.92 64.60 110.86 238.81 optional EEB 94.00 143.87 176.38 270.07 24.00 73.87 126.38 270.07 optional EEP 95.02 146.95 181.51 280.29 25.02 76.95 131.51 280.29 optional MAV 92.46 139.25 168.65 254.56 22.46 69.25 118.65 254.56 optional MAV and EEB 95.53 148.49 184.07 285.35 25.53 78.49 134.07 285.35 optional MAV and EEP 96.56 151.56 189.16 295.42 26.56 81.56 139.16 295.42 25 FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE 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 $ 88.05 $125.90 $146.21 $208.79 $ 18.05 $ 55.90 $ 96.21 $208.79 optional EEB 91.13 135.22 161.90 240.93 21.13 65.22 111.90 240.93 optional EEP 92.15 138.32 167.09 251.43 22.15 68.32 117.09 251.43 optional MAV 89.59 130.57 154.08 224.98 19.59 60.57 104.08 224.98 optional MAV and EEB 92.66 139.86 169.68 256.64 22.66 69.86 119.68 256.64 optional MAV and EEP 93.69 142.95 174.84 266.99 23.69 72.95 124.84 266.99 AXP(R) VP - NEW DIMENSIONS FUND(R) base contract with no optional riders 88.36 126.83 147.78 212.05 18.36 56.83 97.78 212.05 optional EEB 91.43 136.15 163.46 244.09 21.43 66.15 113.46 244.09 optional EEP 92.46 139.25 168.65 254.56 22.46 69.25 118.65 254.56 optional MAV 89.90 131.50 155.65 228.19 19.90 61.50 105.65 228.19 optional MAV and EEB 92.97 140.79 171.23 259.75 22.97 70.79 121.23 259.75 optional MAV and EEP 94.00 143.87 176.38 270.07 24.00 73.87 126.38 270.07 AXP(R) VP - Partners Small Cap Value Fund base contract with no optional riders 95.64 148.79 184.58 286.37 25.64 78.79 134.58 286.37 optional EEB 98.71 157.98 199.80 316.23 28.71 87.98 149.80 316.23 optional EEP 99.74 161.03 204.83 325.99 29.74 91.03 154.83 325.99 optional MAV 97.17 153.39 192.21 301.41 27.17 83.39 142.21 301.41 optional MAV and EEB 100.25 162.55 207.33 330.83 30.25 92.55 157.33 330.83 optional MAV and EEP 101.27 165.59 212.33 340.44 31.27 95.59 162.33 340.44 AXP(R) VP - S&P 500 Index Fund base contract with no optional riders 85.28 117.46 131.91 179.05 15.28 47.46 81.91 179.05 optional EEB 88.36 126.83 147.78 212.05 18.36 56.83 97.78 212.05 optional EEP 89.38 129.95 153.03 222.83 19.38 59.95 103.03 222.83 optional MAV 86.82 122.15 139.87 195.67 16.82 52.15 89.87 195.67 optional MAV and EEB 89.90 131.50 155.65 228.19 19.90 61.50 105.65 228.19 optional MAV and EEP 90.92 134.60 160.86 238.81 20.92 64.60 110.86 238.81 AXP(R) VP - Small Cap Advantage Fund base contract with no optional riders 92.15 138.32 167.09 251.43 22.15 68.32 117.09 251.43 optional EEB 95.23 147.57 182.53 282.32 25.23 77.57 132.53 282.32 optional EEP 96.25 150.64 187.64 292.41 26.25 80.64 137.64 292.41 optional MAV 93.69 142.95 174.84 266.99 23.69 72.95 124.84 266.99 optional MAV and EEB 96.76 152.17 190.18 297.42 26.76 82.17 140.18 297.42 optional MAV and EEP 97.79 155.23 195.25 307.36 27.79 85.23 145.25 307.36 AXP(R) VP - Stock Fund base contract with no optional riders 91.54 136.46 163.98 245.14 21.54 66.46 113.98 245.14 optional EEB 94.61 145.72 179.46 276.21 24.61 75.72 129.46 276.21 optional EEP 95.64 148.79 184.58 286.37 25.64 78.79 134.58 286.37 optional MAV 93.07 141.10 171.75 260.79 23.07 71.10 121.75 260.79 optional MAV and EEB 96.15 150.33 187.13 291.41 26.15 80.33 137.13 291.41 optional MAV and EEP 97.17 153.39 192.21 301.41 27.17 83.39 142.21 301.41 26 FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE 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 $ 88.26 $126.52 $147.26 $210.97 $ 18.26 $ 56.52 $ 97.26 $210.97 optional EEB 91.33 135.84 162.94 243.03 21.33 65.84 112.94 243.03 optional EEP 92.36 138.94 168.13 253.52 22.36 68.94 118.13 253.52 optional MAV 89.79 131.19 155.13 227.12 19.79 61.19 105.13 227.12 optional MAV and EEB 92.87 140.48 170.71 258.72 22.87 70.48 120.71 258.72 optional MAV and EEP 93.89 143.57 175.87 269.04 23.89 73.57 125.87 269.04 AIM V.I. Capital Appreciation Fund, Series II base contract with no optional riders 91.54 136.46 163.98 245.14 21.54 66.46 113.98 245.14 optional EEB 94.61 145.72 179.46 276.21 24.61 75.72 129.46 276.21 optional EEP 95.64 148.79 184.58 286.37 25.64 78.79 134.58 286.37 optional MAV 93.07 141.10 171.75 260.79 23.07 71.10 121.75 260.79 optional MAV and EEB 96.15 150.33 187.13 291.41 26.15 80.33 137.13 291.41 optional MAV and EEP 97.17 153.39 192.21 301.41 27.17 83.39 142.21 301.41 AIM V.I. Capital Development Fund, Series II base contract with no optional riders 94.71 146.03 179.97 277.23 24.71 76.03 129.97 277.23 optional EEB 97.79 155.23 195.25 307.36 27.79 85.23 145.25 307.36 optional EEP 98.81 158.28 200.30 317.21 28.81 88.28 150.30 317.21 optional MAV 96.25 150.64 187.64 292.41 26.25 80.64 137.64 292.41 optional MAV and EEB 99.33 159.81 202.82 322.10 29.33 89.81 152.82 322.10 optional MAV and EEP 100.35 162.85 207.83 331.80 30.35 92.85 157.83 331.80 Alliance VP AllianceBernstein International Value Portfolio (Class B) base contract with no optional riders 92.56 139.55 169.16 255.60 22.56 69.55 119.16 255.60 optional EEB 95.64 148.79 184.58 286.37 25.64 78.79 134.58 286.37 optional EEP 96.66 151.86 189.67 296.42 26.66 81.86 139.67 296.42 optional MAV 94.10 144.18 176.89 271.10 24.10 74.18 126.89 271.10 optional MAV and EEB 97.17 153.39 192.21 301.41 27.17 83.39 142.21 301.41 optional MAV and EEP 98.20 156.45 197.27 311.31 28.20 86.45 147.27 311.31 Alliance VP Growth and Income Portfolio (Class B) base contract with no optional riders 89.69 130.88 154.60 226.05 19.69 60.88 104.60 226.05 optional EEB 92.77 140.17 170.20 257.68 22.77 70.17 120.20 257.68 optional EEP 93.79 143.26 175.35 268.02 23.79 73.26 125.35 268.02 optional MAV 91.23 135.53 162.42 241.98 21.23 65.53 112.42 241.98 optional MAV and EEB 94.30 144.80 177.92 273.15 24.30 74.80 127.92 273.15 optional MAV and EEP 95.33 147.87 183.04 283.33 25.33 77.87 133.04 283.33 American Century(R) VP International, Class II base contract with no optional riders 95.02 146.95 181.51 280.29 25.02 76.95 131.51 280.29 optional EEB 98.10 156.15 196.77 310.33 28.10 86.15 146.77 310.33 optional EEP 99.12 159.20 201.81 320.14 29.12 89.20 151.81 320.14 optional MAV 96.56 151.56 189.16 295.42 26.56 81.56 139.16 295.42 optional MAV and EEB 99.63 160.72 204.32 325.02 29.63 90.72 154.32 325.02 optional MAV and EEP 100.66 163.76 209.33 334.69 30.66 93.76 159.33 334.69 27 FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE END OF EACH TIME PERIOD 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS American Century(R) VP Value, Class II base contract with no optional riders $ 91.64 $136.77 $164.50 $246.19 $ 21.64 $ 66.77 $114.50 $246.19 optional EEB 94.71 146.03 179.97 277.23 24.71 76.03 129.97 277.23 optional EEP 95.74 149.10 185.09 287.38 25.74 79.10 135.09 287.38 optional MAV 93.18 141.41 172.26 261.83 23.18 71.41 122.26 261.83 optional MAV and EEB 96.25 150.64 187.64 292.41 26.25 80.64 137.64 292.41 optional MAV and EEP 97.28 153.70 192.72 302.40 27.28 83.70 142.72 302.40 Calvert Variable Series, Inc. Social Balanced Portfolio base contract with no optional riders 89.18 129.32 151.98 220.69 19.18 59.32 101.98 220.69 optional EEB 92.25 138.63 167.61 252.47 22.25 68.63 117.61 252.47 optional EEP 93.28 141.72 172.78 262.86 23.28 71.72 122.78 262.86 optional MAV 90.72 133.98 159.82 236.70 20.72 63.98 109.82 236.70 optional MAV and EEB 93.79 143.26 175.35 268.02 23.79 73.26 125.35 268.02 optional MAV and EEP 94.82 146.34 180.49 278.25 24.82 76.34 130.49 278.25 Evergreen VA Capital Growth Fund, Class L Shares base contract with no optional riders 91.84 137.39 165.54 248.29 21.84 67.39 115.54 248.29 optional EEB 94.92 146.64 181.00 279.27 24.92 76.64 131.00 279.27 optional EEP 95.94 149.72 186.11 289.39 25.94 79.72 136.11 289.39 optional MAV 93.38 142.02 173.29 263.89 23.38 72.02 123.29 263.89 optional MAV and EEB 96.46 151.25 188.65 294.42 26.46 81.25 138.65 294.42 optional MAV and EEP 97.48 154.31 193.73 304.39 27.48 84.31 143.73 304.39 Fidelity VIP Growth & Income Portfolio (Service Class 2) base contract with no optional riders 88.87 128.39 150.41 217.46 18.87 58.39 100.41 217.46 optional EEB 91.95 137.70 166.06 249.34 21.95 67.70 116.06 249.34 optional EEP 92.97 140.79 171.23 259.75 22.97 70.79 121.23 259.75 optional MAV 90.41 133.05 158.26 233.51 20.41 63.05 108.26 233.51 optional MAV and EEB 93.48 142.33 173.81 264.93 23.48 72.33 123.81 264.93 optional MAV and EEP 94.51 145.41 178.95 275.19 24.51 75.41 128.95 275.19 Fidelity VIP Mid Cap Portfolio (Service Class 2) base contract with no optional riders 89.90 131.50 155.65 228.19 19.90 61.50 105.65 228.19 optional EEB 92.97 140.79 171.23 259.75 22.97 70.79 121.23 259.75 optional EEP 94.00 143.87 176.38 270.07 24.00 73.87 126.38 270.07 optional MAV 91.43 136.15 163.46 244.09 21.43 66.15 113.46 244.09 optional MAV and EEB 94.51 145.41 178.95 275.19 24.51 75.41 128.95 275.19 optional MAV and EEP 95.53 148.49 184.07 285.35 25.53 78.49 134.07 285.35 Fidelity VIP Overseas Portfolio (Service Class 2) base contract with no optional riders 92.36 138.94 168.13 253.52 22.36 68.94 118.13 253.52 optional EEB 95.43 148.18 183.55 284.34 25.43 78.18 133.55 284.34 optional EEP 96.46 151.25 188.65 294.42 26.46 81.25 138.65 294.42 optional MAV 93.89 143.57 175.87 269.04 23.89 73.57 125.87 269.04 optional MAV and EEB 96.97 152.78 191.19 299.42 26.97 82.78 141.19 299.42 optional MAV and EEP 97.99 155.84 196.26 309.34 27.99 85.84 146.26 309.34 28 FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE 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 $ 88.87 $128.39 $150.41 $217.46 $ 18.87 $ 58.39 $100.41 $217.46 optional EEB 91.95 137.70 166.06 249.34 21.95 67.70 116.06 249.34 optional EEP 92.97 140.79 171.23 259.75 22.97 70.79 121.23 259.75 optional MAV 90.41 133.05 158.26 233.51 20.41 63.05 108.26 233.51 optional MAV and EEB 93.48 142.33 173.81 264.93 23.48 72.33 123.81 264.93 optional MAV and EEP 94.51 145.41 178.95 275.19 24.51 75.41 128.95 275.19 FTVIPT Franklin Small Cap Value Securities Fund - Class 2 (previously FTVIPT Franklin Value Securities Fund - Class 2) base contract with no optional riders 90.72 133.98 159.82 236.70 20.72 63.98 109.82 236.70 optional EEB 93.79 143.26 175.35 268.02 23.79 73.26 125.35 268.02 optional EEP 94.82 146.34 180.49 278.25 24.82 76.34 130.49 278.25 optional MAV 92.25 138.63 167.61 252.47 22.25 68.63 117.61 252.47 optional MAV and EEB 95.33 147.87 183.04 283.33 25.33 77.87 133.04 283.33 optional MAV and EEP 96.35 150.94 188.14 293.41 26.35 80.94 138.14 293.41 FTVIPT Mutual Shares Securities Fund - Class 2 base contract with no optional riders 90.92 134.60 160.86 238.81 20.92 64.60 110.86 238.81 optional EEB 94.00 143.87 176.38 270.07 24.00 73.87 126.38 270.07 optional EEP 95.02 146.95 181.51 280.29 25.02 76.95 131.51 280.29 optional MAV 92.46 139.25 168.65 254.56 22.46 69.25 118.65 254.56 optional MAV and EEB 95.53 148.49 184.07 285.35 25.53 78.49 134.07 285.35 optional MAV and EEP 96.56 151.56 189.16 295.42 26.56 81.56 139.16 295.42 Goldman Sachs VIT CORE(SM) U.S. Equity Fund base contract with no optional riders 88.56 127.46 148.84 214.22 18.56 57.46 98.84 214.22 optional EEB 91.64 136.77 164.50 246.19 21.64 66.77 114.50 246.19 optional EEP 92.66 139.86 169.68 256.64 22.66 69.86 119.68 256.64 optional MAV 90.10 132.12 156.69 230.32 20.10 62.12 106.69 230.32 optional MAV and EEB 93.18 141.41 172.26 261.83 23.18 71.41 122.26 261.83 optional MAV and EEP 94.20 144.49 177.41 272.12 24.20 74.49 127.41 272.12 Goldman Sachs VIT Mid Cap Value Fund base contract with no optional riders 89.79 131.19 155.13 227.12 19.79 61.19 105.13 227.12 optional EEB 92.87 140.48 170.71 258.72 22.87 70.48 120.71 258.72 optional EEP 93.89 143.57 175.87 269.04 23.89 73.57 125.87 269.04 optional MAV 91.33 135.84 162.94 243.03 21.33 65.84 112.94 243.03 optional MAV and EEB 94.41 145.11 178.43 274.17 24.41 75.11 128.43 274.17 optional MAV and EEP 95.43 148.18 183.55 284.34 25.43 78.18 133.55 284.34 INVESCO VIF - Dynamics Fund base contract with no optional riders 91.33 135.84 162.94 243.03 21.33 65.84 112.94 243.03 optional EEB 94.41 145.11 178.43 274.17 24.41 75.11 128.43 274.17 optional EEP 95.43 148.18 183.55 284.34 25.43 78.18 133.55 284.34 optional MAV 92.87 140.48 170.71 258.72 22.87 70.48 120.71 258.72 optional MAV and EEB 95.94 149.72 186.11 289.39 25.94 79.72 136.11 289.39 optional MAV and EEP 96.97 152.78 191.19 299.42 26.97 82.78 141.19 299.42 29 FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE 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 $ 91.23 $135.53 $162.42 $241.98 $ 21.23 $ 65.53 $112.42 $241.98 optional EEB 94.30 144.80 177.92 273.15 24.30 74.80 127.92 273.15 optional EEP 95.33 147.87 183.04 283.33 25.33 77.87 133.04 283.33 optional MAV 92.77 140.17 170.20 257.68 22.77 70.17 120.20 257.68 optional MAV and EEB 95.84 149.41 185.60 288.38 25.84 79.41 135.60 288.38 optional MAV and EEP 96.87 152.47 190.69 298.42 26.87 82.47 140.69 298.42 INVESCO VIF - Technology Fund base contract with no optional riders 91.23 135.53 162.42 241.98 21.23 65.53 112.42 241.98 optional EEB 94.30 144.80 177.92 273.15 24.30 74.80 127.92 273.15 optional EEP 95.33 147.87 183.04 283.33 25.33 77.87 133.04 283.33 optional MAV 92.77 140.17 170.20 257.68 22.77 70.17 120.20 257.68 optional MAV and EEB 95.84 149.41 185.60 288.38 25.84 79.41 135.60 288.38 optional MAV and EEP 96.87 152.47 190.69 298.42 26.87 82.47 140.69 298.42 INVESCO VIF - Telecommunications Fund base contract with no optional riders 91.43 136.15 163.46 244.09 21.43 66.15 113.46 244.09 optional EEB 94.51 145.41 178.95 275.19 24.51 75.41 128.95 275.19 optional EEP 95.53 148.49 184.07 285.35 25.53 78.49 134.07 285.35 optional MAV 92.97 140.79 171.23 259.75 22.97 70.79 121.23 259.75 optional MAV and EEB 96.05 150.02 186.62 290.40 26.05 80.02 136.62 290.40 optional MAV and EEP 97.07 153.09 191.70 300.41 27.07 83.09 141.70 300.41 Janus Aspen Series Global Technology Portfolio: Service Shares base contract with no optional riders 90.00 131.81 156.17 229.25 20.00 61.81 106.17 229.25 optional EEB 93.07 141.10 171.75 260.79 23.07 71.10 121.75 260.79 optional EEP 94.10 144.18 176.89 271.10 24.10 74.18 126.89 271.10 optional MAV 91.54 136.46 163.98 245.14 21.54 66.46 113.98 245.14 optional MAV and EEB 94.61 145.72 179.46 276.21 24.61 75.72 129.46 276.21 optional MAV and EEP 95.64 148.79 184.58 286.37 25.64 78.79 134.58 286.37 Janus Aspen Series International Growth Portfolio: Service Shares base contract with no optional riders 90.10 132.12 156.69 230.32 20.10 62.12 106.69 230.32 optional EEB 93.18 141.41 172.26 261.83 23.18 71.41 122.26 261.83 optional EEP 94.20 144.49 177.41 272.12 24.20 74.49 127.41 272.12 optional MAV 91.64 136.77 164.50 246.19 21.64 66.77 114.50 246.19 optional MAV and EEB 94.71 146.03 179.97 277.23 24.71 76.03 129.97 277.23 optional MAV and EEP 95.74 149.10 185.09 287.38 25.74 79.10 135.09 287.38 Lazard Retirement International Equity Portfolio base contract with no optional riders 93.07 141.10 171.75 260.79 23.07 71.10 121.75 260.79 optional EEB 96.15 150.33 187.13 291.41 26.15 80.33 137.13 291.41 optional EEP 97.17 153.39 192.21 301.41 27.17 83.39 142.21 301.41 optional MAV 94.61 145.72 179.46 276.21 24.61 75.72 129.46 276.21 optional MAV and EEB 97.69 154.92 194.74 306.37 27.69 84.92 144.74 306.37 optional MAV and EEP 98.71 157.98 199.80 316.23 28.71 87.98 149.80 316.23 30 FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE 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 base contract with no optional riders $ 92.25 $138.63 $167.61 $252.47 $ 22.25 $ 68.63 $117.61 $252.47 optional EEB 95.33 147.87 183.04 283.33 25.33 77.87 133.04 283.33 optional EEP 96.35 150.94 188.14 293.41 26.35 80.94 138.14 293.41 optional MAV 93.79 143.26 175.35 268.02 23.79 73.26 125.35 268.02 optional MAV and EEB 96.87 152.47 190.69 298.42 26.87 82.47 140.69 298.42 optional MAV and EEP 97.89 155.53 195.76 308.35 27.89 85.53 145.76 308.35 MFS(R) New Discovery Series - Service Class base contract with no optional riders 93.69 142.95 174.84 266.99 23.69 72.95 124.84 266.99 optional EEB 96.76 152.17 190.18 297.42 26.76 82.17 140.18 297.42 optional EEP 97.79 155.23 195.25 307.36 27.79 85.23 145.25 307.36 optional MAV 95.23 147.57 182.53 282.32 25.23 77.57 132.53 282.32 optional MAV and EEB 98.30 156.76 197.78 312.30 28.30 86.76 147.78 312.30 optional MAV and EEP 99.33 159.81 202.82 322.10 29.33 89.81 152.82 322.10 MFS(R) Utilities Series - Service Class base contract with no optional riders 92.36 138.94 168.13 253.52 22.36 68.94 118.13 253.52 optional EEB 95.43 148.18 183.55 284.34 25.43 78.18 133.55 284.34 optional EEP 96.46 151.25 188.65 294.42 26.46 81.25 138.65 294.42 optional MAV 93.89 143.57 175.87 269.04 23.89 73.57 125.87 269.04 optional MAV and EEB 96.97 152.78 191.19 299.42 26.97 82.78 141.19 299.42 optional MAV and EEP 97.99 155.84 196.26 309.34 27.99 85.84 146.26 309.34 Pioneer Equity Income VCT Portfolio - Class II Shares base contract with no optional riders 90.72 133.98 159.82 236.70 20.72 63.98 109.82 236.70 optional EEB 93.79 143.26 175.35 268.02 23.79 73.26 125.35 268.02 optional EEP 94.82 146.34 180.49 278.25 24.82 76.34 130.49 278.25 optional MAV 92.25 138.63 167.61 252.47 22.25 68.63 117.61 252.47 optional MAV and EEB 95.33 147.87 183.04 283.33 25.33 77.87 133.04 283.33 optional MAV and EEP 96.35 150.94 188.14 293.41 26.35 80.94 138.14 293.41 Pioneer Europe VCT Portfolio - Class II Shares base contract with no optional riders 113.27 200.67 269.26 446.00 43.27 130.67 219.26 446.00 optional EEB 116.34 209.53 283.40 471.11 46.34 139.53 233.40 471.11 optional EEP 117.37 212.47 288.08 479.31 47.37 142.47 238.08 479.31 optional MAV 114.80 205.11 276.35 458.65 44.80 135.11 226.35 458.65 optional MAV and EEB 117.88 213.94 290.41 483.38 47.88 143.94 240.41 483.38 optional MAV and EEP 118.90 216.87 295.05 491.45 48.90 146.87 245.05 491.45 Putnam VT Health Sciences Fund - Class IB Shares base contract with no optional riders 90.92 134.60 160.86 238.81 20.92 64.60 110.86 238.81 optional EEB 94.00 143.87 176.38 270.07 24.00 73.87 126.38 270.07 optional EEP 95.02 146.95 181.51 280.29 25.02 76.95 131.51 280.29 optional MAV 92.46 139.25 168.65 254.56 22.46 69.25 118.65 254.56 optional MAV and EEB 95.53 148.49 184.07 285.35 25.53 78.49 134.07 285.35 optional MAV and EEP 96.56 151.56 189.16 295.42 26.56 81.56 139.16 295.42 31 FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE 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 $ 92.46 $139.25 $168.65 $254.56 $ 22.46 $ 69.25 $118.65 $254.56 optional EEB 95.53 148.49 184.07 285.35 25.53 78.49 134.07 285.35 optional EEP 96.56 151.56 189.16 295.42 26.56 81.56 139.16 295.42 optional MAV 94.00 143.87 176.38 270.07 24.00 73.87 126.38 270.07 optional MAV and EEB 97.07 153.09 191.70 300.41 27.07 83.09 141.70 300.41 optional MAV and EEP 98.10 156.15 196.77 310.33 28.10 86.15 146.77 310.33 Putnam VT Vista Fund - Class IB Shares base contract with no optional riders 89.69 130.88 154.60 226.05 19.69 60.88 104.60 226.05 optional EEB 92.77 140.17 170.20 257.68 22.77 70.17 120.20 257.68 optional EEP 93.79 143.26 175.35 268.02 23.79 73.26 125.35 268.02 optional MAV 91.23 135.53 162.42 241.98 21.23 65.53 112.42 241.98 optional MAV and EEB 94.30 144.80 177.92 273.15 24.30 74.80 127.92 273.15 optional MAV and EEP 95.33 147.87 183.04 283.33 25.33 77.87 133.04 283.33 Strong Opportunity Fund II - Advisor Class base contract with no optional riders 96.05 150.02 186.62 290.40 26.05 80.02 136.62 290.40 optional EEB 99.12 159.20 201.81 320.14 29.12 89.20 151.81 320.14 optional EEP 100.15 162.24 206.83 329.86 30.15 92.24 156.83 329.86 optional MAV 97.58 154.62 194.24 305.38 27.58 84.62 144.24 305.38 optional MAV and EEB 100.66 163.76 209.33 334.69 30.66 93.76 159.33 334.69 optional MAV and EEP 101.68 166.80 214.32 344.26 31.68 96.80 164.32 344.26 Wanger International Small Cap base contract with no optional riders 94.92 146.64 181.00 279.27 24.92 76.64 131.00 279.27 optional EEB 97.99 155.84 196.26 309.34 27.99 85.84 146.26 309.34 optional EEP 99.02 158.89 201.31 319.17 29.02 88.89 151.31 319.17 optional MAV 96.46 151.25 188.65 294.42 26.46 81.25 138.65 294.42 optional MAV and EEB 99.53 160.42 203.82 324.04 29.53 90.42 153.82 324.04 optional MAV and EEP 100.56 163.46 208.83 333.72 30.56 93.46 158.83 333.72 Wanger U.S. Smaller Companies (previously Wanger U.S. Small Cap) base contract with no optional riders 90.41 133.05 158.26 233.51 20.41 63.05 108.26 233.51 optional EEB 93.48 142.33 173.81 264.93 23.48 72.33 123.81 264.93 optional EEP 94.51 145.41 178.95 275.19 24.51 75.41 128.95 275.19 optional MAV 91.95 137.70 166.06 249.34 21.95 67.70 116.06 249.34 optional MAV and EEB 95.02 146.95 181.51 280.29 25.02 76.95 131.51 280.29 optional MAV and EEP 96.05 150.02 186.62 290.40 26.05 80.02 136.62 290.40 Wells Fargo VT Asset Allocation Fund base contract with no optional riders 90.51 133.36 158.78 234.58 20.51 63.36 108.78 234.58 optional EEB 93.59 142.64 174.32 265.96 23.59 72.64 124.32 265.96 optional EEP 94.61 145.72 179.46 276.21 24.61 75.72 129.46 276.21 optional MAV 92.05 138.01 166.58 250.38 22.05 68.01 116.58 250.38 optional MAV and EEB 95.12 147.26 182.02 281.30 25.12 77.26 132.02 281.30 optional MAV and EEP 96.15 150.33 187.13 291.41 26.15 80.33 137.13 291.41 32 FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE 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 $ 90.51 $133.36 $158.78 $234.58 $ 20.51 $ 63.36 $108.78 $234.58 optional EEB 93.59 142.64 174.32 265.96 23.59 72.64 124.32 265.96 optional EEP 94.61 145.72 179.46 276.21 24.61 75.72 129.46 276.21 optional MAV 92.05 138.01 166.58 250.38 22.05 68.01 116.58 250.38 optional MAV and EEB 95.12 147.26 182.02 281.30 25.12 77.26 132.02 281.30 optional MAV and EEP 96.15 150.33 187.13 291.41 26.15 80.33 137.13 291.41 Wells Fargo VT Small Cap Growth Fund base contract with no optional riders 92.56 139.55 169.16 255.60 22.56 69.55 119.16 255.60 optional EEB 95.64 148.79 184.58 286.37 25.64 78.79 134.58 286.37 optional EEP 96.66 151.86 189.67 296.42 26.66 81.86 139.67 296.42 optional MAV 94.10 144.18 176.89 271.10 24.10 74.18 126.89 271.10 optional MAV and EEB 97.17 153.39 192.21 301.41 27.17 83.39 142.21 301.41 optional MAV and EEP 98.20 156.45 197.27 311.31 28.20 86.45 147.27 311.31
33 You would pay the following expenses on a $1,000 investment in a RAVA ADVANTAGE qualified annuity with a seven-year surrender charge schedule and a 0.75% mortality and expense risk fee assuming a 5% annual return and ...
FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE 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 $ 86.21 $120.28 $136.69 $189.05 $ 16.21 $ 50.28 $ 86.69 $189.05 optional MAV 87.74 124.96 144.62 205.53 17.74 54.96 94.62 205.53 AXP(R) VP - Bond Fund base contract with no optional riders 86.41 120.90 137.75 191.27 16.41 50.90 87.75 191.27 optional MAV 87.95 125.59 145.68 207.71 17.95 55.59 95.68 207.71 AXP(R) VP - Capital Resource Fund base contract with no optional riders 86.21 120.28 136.69 189.05 16.21 50.28 86.69 189.05 optional MAV 87.74 124.96 144.62 205.53 17.74 54.96 94.62 205.53 AXP(R) VP - Cash Management Fund base contract with no optional riders 85.18 117.14 131.37 177.94 15.18 47.14 81.37 177.94 optional MAV 86.72 121.84 139.34 194.57 16.72 51.84 89.34 194.57 AXP(R) VP - Diversified Equity Income Fund base contract with no optional riders 87.54 124.34 143.57 203.35 17.54 54.34 93.57 203.35 optional MAV 89.08 129.01 151.46 219.61 19.08 59.01 101.46 219.61 AXP(R) VP - Emerging Markets Fund base contract with no optional riders 96.15 150.33 187.13 291.41 26.15 80.33 137.13 291.41 optional MAV 97.69 154.92 194.74 306.37 27.69 84.92 144.74 306.37 AXP(R) VP - Equity Select Fund base contract with no optional riders 89.49 130.26 153.56 223.91 19.49 60.26 103.56 223.91 optional MAV 91.02 134.91 161.38 239.87 21.02 64.91 111.38 239.87 AXP(R) VP - Extra Income Fund base contract with no optional riders 86.62 121.53 138.81 193.47 16.62 51.53 88.81 193.47 optional MAV 88.15 126.21 146.73 209.88 18.15 56.21 96.73 209.88 AXP(R) VP - Federal Income Fund base contract with no optional riders 86.82 122.15 139.87 195.67 16.82 52.15 89.87 195.67 optional MAV 88.36 126.83 147.78 212.05 18.36 56.83 97.78 212.05 AXP(R) VP - Global Bond Fund base contract with no optional riders 89.18 129.32 151.98 220.69 19.18 59.32 101.98 220.69 optional MAV 90.72 133.98 159.82 236.70 20.72 63.98 109.82 236.70 AXP(R) VP - Growth Fund base contract with no optional riders 87.44 124.03 143.04 202.25 17.44 54.03 93.04 202.25 optional MAV 88.97 128.70 150.94 218.53 18.97 58.70 100.94 218.53 AXP(R) VP - International Fund base contract with no optional riders 88.87 128.39 150.41 217.46 18.87 58.39 100.41 217.46 optional MAV 90.41 133.05 158.26 233.51 20.41 63.05 108.26 233.51 AXP(R) VP - Managed Fund base contract with no optional riders 86.00 119.65 135.63 186.84 16.00 49.65 85.63 186.84 optional MAV 87.54 124.34 143.57 203.35 17.54 54.34 93.57 203.35 34 FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE END OF EACH TIME PERIOD 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS AXP(R) VP - NEW DIMENSIONS FUND(R) base contract with no optional riders $ 86.31 $120.59 $137.22 $190.16 $ 16.31 $ 50.59 $ 87.22 $190.16 optional MAV 87.85 125.28 145.15 206.62 17.85 55.28 95.15 206.62 AXP(R) VP - Partners Small Cap Value Fund base contract with no optional riders 93.59 142.64 174.32 265.96 23.59 72.64 124.32 265.96 optional MAV 95.12 147.26 182.02 281.30 25.12 77.26 132.02 281.30 AXP(R) VP - S&P 500 Index Fund base contract with no optional riders 83.23 111.18 121.21 156.51 13.23 41.18 71.21 156.51 optional MAV 84.77 115.89 129.24 173.46 14.77 45.89 79.24 173.46 AXP(R) VP - Small Cap Advantage Fund base contract with no optional riders 90.10 132.12 156.69 230.32 20.10 62.12 106.69 230.32 optional MAV 91.64 136.77 164.50 246.19 21.64 66.77 114.50 246.19 AXP(R) VP - Stock Fund base contract with no optional riders 89.49 130.26 153.56 223.91 19.49 60.26 103.56 223.91 optional MAV 91.02 134.91 161.38 239.87 21.02 64.91 111.38 239.87 AXP(R) VP - Strategy Aggressive Fund base contract with no optional riders 86.21 120.28 136.69 189.05 16.21 50.28 86.69 189.05 optional MAV 87.74 124.96 144.62 205.53 17.74 54.96 94.62 205.53 AIM V.I. Capital Appreciation Fund, Series II base contract with no optional riders 89.49 130.26 153.56 223.91 19.49 60.26 103.56 223.91 optional MAV 91.02 134.91 161.38 239.87 21.02 64.91 111.38 239.87 AIM V.I. Capital Development Fund, Series II base contract with no optional riders 92.66 139.86 169.68 256.64 22.66 69.86 119.68 256.64 optional MAV 94.20 144.49 177.41 272.12 24.20 74.49 127.41 272.12 Alliance VP AllianceBernstein International Value Portfolio (Class B) base contract with no optional riders 90.51 133.36 158.78 234.58 20.51 63.36 108.78 234.58 optional MAV 92.05 138.01 166.58 250.38 22.05 68.01 116.58 250.38 Alliance VP Growth and Income Portfolio (Class B) base contract with no optional riders 87.64 124.65 144.10 204.44 17.64 54.65 94.10 204.44 optional MAV 89.18 129.32 151.98 220.69 19.18 59.32 101.98 220.69 American Century(R) VP International, Class II base contract with no optional riders 92.97 140.79 171.23 259.75 22.97 70.79 121.23 259.75 optional MAV 94.51 145.41 178.95 275.19 24.51 75.41 128.95 275.19 American Century(R) VP Value, Class II base contract with no optional riders 89.59 130.57 154.08 224.98 19.59 60.57 104.08 224.98 optional MAV 91.13 135.22 161.90 240.93 21.13 65.22 111.90 240.93 Calvert Variable Series, Inc. Social Balanced Portfolio base contract with no optional riders 87.13 123.09 141.46 198.97 17.13 53.09 91.46 198.97 optional MAV 88.67 127.77 149.36 215.30 18.67 57.77 99.36 215.30 35 FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE END OF EACH TIME PERIOD 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS Evergreen VA Capital Growth Fund, Class L Shares base contract with no optional riders $ 89.79 $131.19 $155.13 $227.12 $ 19.79 $ 61.19 $105.13 $227.12 optional MAV 91.33 135.84 162.94 243.03 21.33 65.84 112.94 243.03 Fidelity VIP Growth & Income Portfolio (Service Class 2) base contract with no optional riders 86.82 122.15 139.87 195.67 16.82 52.15 89.87 195.67 optional MAV 88.36 126.83 147.78 212.05 18.36 56.83 97.78 212.05 Fidelity VIP Mid Cap Portfolio (Service Class 2) base contract with no optional riders 87.85 125.28 145.15 206.62 17.85 55.28 95.15 206.62 optional MAV 89.38 129.95 153.03 222.83 19.38 59.95 103.03 222.83 Fidelity VIP Overseas Portfolio (Service Class 2) base contract with no optional riders 90.31 132.74 157.74 232.45 20.31 62.74 107.74 232.45 optional MAV 91.84 137.39 165.54 248.29 21.84 67.39 115.54 248.29 FTVIPT Franklin Real Estate Fund - Class 2 base contract with no optional riders 86.82 122.15 139.87 195.67 16.82 52.15 89.87 195.67 optional MAV 88.36 126.83 147.78 212.05 18.36 56.83 97.78 212.05 FTVIPT Franklin Small Cap Value Securities Fund - Class 2 (previously FTVIPT Franklin Value Securities Fund - Class 2) base contract with no optional riders 88.67 127.77 149.36 215.30 18.67 57.77 99.36 215.30 optional MAV 90.20 132.43 157.22 231.39 20.20 62.43 107.22 231.39 FTVIPT Mutual Shares Securities Fund - Class 2 base contract with no optional riders 88.87 128.39 150.41 217.46 18.87 58.39 100.41 217.46 optional MAV 90.41 133.05 158.26 233.51 20.41 63.05 108.26 233.51 Goldman Sachs VIT Mid Cap Value Fund base contract with no optional riders 87.74 124.96 144.62 205.53 17.74 54.96 94.62 205.53 optional MAV 89.28 129.64 152.51 221.76 19.28 59.64 102.51 221.76 Goldman Sachs VIT CORE(SM) U.S. Equity Fund base contract with no optional riders 86.51 121.22 138.28 192.37 16.51 51.22 88.28 192.37 optional MAV 88.05 125.90 146.21 208.79 18.05 55.90 96.21 208.79 INVESCO VIF Dynamics Fund base contract with no optional riders 89.28 129.64 152.51 221.76 19.28 59.64 102.51 221.76 optional MAV 90.82 134.29 160.34 237.76 20.82 64.29 110.34 237.76 INVESCO VIF Financial Services Fund base contract with no optional riders 89.18 129.32 151.98 220.69 19.18 59.32 101.98 220.69 optional MAV 90.72 133.98 159.82 236.70 20.72 63.98 109.82 236.70 INVESCO VIF Technology Fund base contract with no optional riders 89.18 129.32 151.98 220.69 19.18 59.32 101.98 220.69 optional MAV 90.72 133.98 159.82 236.70 20.72 63.98 109.82 236.70 INVESCO VIF Telecommunications Fund base contract with no optional riders 89.38 129.95 153.03 222.83 19.38 59.95 103.03 222.83 optional MAV 90.92 134.60 160.86 238.81 20.92 64.60 110.86 238.81 36 FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE END OF EACH TIME PERIOD 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS Janus Aspen Series Global Technology Portfolio: Service Shares base contract with no optional riders $ 87.95 $125.59 $145.68 $207.71 $ 17.95 $ 55.59 $ 95.68 $207.71 optional MAV 89.49 130.26 153.56 223.91 19.49 60.26 103.56 223.91 Janus Aspen Series International Growth Portfolio: Service Shares base contract with no optional riders 88.05 125.90 146.21 208.79 18.05 55.90 96.21 208.79 optional MAV 89.59 130.57 154.08 224.98 19.59 60.57 104.08 224.98 Lazard Retirement International Equity Portfolio base contract with no optional riders 91.02 134.91 161.38 239.87 21.02 64.91 111.38 239.87 optional MAV 92.56 139.55 169.16 255.60 22.56 69.55 119.16 255.60 MFS(R) Investors Growth Stock Series - Service Class base contract with no optional riders 90.20 132.43 157.22 231.39 20.20 62.43 107.22 231.39 optional MAV 91.74 137.08 165.02 247.24 21.74 67.08 115.02 247.24 MFS(R) New Discovery Series - Service Class base contract with no optional riders 91.64 136.77 164.50 246.19 21.64 66.77 114.50 246.19 optional MAV 93.18 141.41 172.26 261.83 23.18 71.41 122.26 261.83 MFS(R) Utilities Series - Service Class base contract with no optional riders 90.31 132.74 157.74 232.45 20.31 62.74 107.74 232.45 optional MAV 91.84 137.39 165.54 248.29 21.84 67.39 115.54 248.29 Pioneer Equity Income VCT Portfolio - Class II Shares base contract with no optional riders 88.67 127.77 149.36 215.30 18.67 57.77 99.36 215.30 optional MAV 90.20 132.43 157.22 231.39 20.20 62.43 107.22 231.39 Pioneer Europe VCT Portfolio - Class II Shares base contract with no optional riders 111.22 194.74 259.73 428.83 41.22 124.74 209.73 428.83 optional MAV 112.75 199.19 266.88 441.74 42.75 129.19 216.88 441.74 Putnam VT Health Sciences Fund - Class IB Shares base contract with no optional riders 88.87 128.39 150.41 217.46 18.87 58.39 100.41 217.46 optional MAV 90.41 133.05 158.26 233.51 20.41 63.05 108.26 233.51 Putnam VT International Growth Fund - Class IB Shares base contract with no optional riders 90.41 133.05 158.26 233.51 20.41 63.05 108.26 233.51 optional MAV 91.95 137.70 166.06 249.34 21.95 67.70 116.06 249.34 Putnam VT Vista Fund - Class IB Shares base contract with no optional riders 87.64 124.65 144.10 204.44 17.64 54.65 94.10 204.44 optional MAV 89.18 129.32 151.98 220.69 19.18 59.32 101.98 220.69 Strong Opportunity Fund II - Advisor Class base contract with no optional riders 94.00 143.87 176.38 270.07 24.00 73.87 126.38 270.07 optional MAV 95.53 148.49 184.07 285.35 25.53 78.49 134.07 285.35 Wanger International Small Cap base contract with no optional riders 92.87 140.48 170.71 258.72 22.87 70.48 120.71 258.72 optional MAV 94.41 145.11 178.43 274.17 24.41 75.11 128.43 274.17 Wanger U.S. Smaller Companies (previously Wanger U.S. Small Cap) base contract with no optional riders 88.36 126.83 147.78 212.05 18.36 56.83 97.78 212.05 optional MAV 89.90 131.50 155.65 228.19 19.90 61.50 105.65 228.19 37 FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE 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 $ 88.46 $127.15 $148.31 $213.13 $ 18.46 $ 57.15 $ 98.31 $213.13 optional MAV 90.00 131.81 156.17 229.25 20.00 61.81 106.17 229.25 Wells Fargo VT International Equity Fund base contract with no optional riders 88.46 127.15 148.31 213.13 18.46 57.15 98.31 213.13 optional MAV 90.00 131.81 156.17 229.25 20.00 61.81 106.17 229.25 Wells Fargo VT Small Cap Growth Fund base contract with no optional riders 90.51 133.36 158.78 234.58 20.51 63.36 108.78 234.58 optional MAV 92.05 138.01 166.58 250.38 22.05 68.01 116.58 250.38
* In these examples for RAVA Advantage, the $30 contract administrative charge is approximated as a 0.051% charge based on our average contract size. Premium taxes imposed by some state and local governments are not reflected in this table. We entered into certain arrangements under which we are compensated by the funds' advisers 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. 38 You would pay the following expenses on a $1,000 investment in a RAVA SELECT nonqualified annuity with a 1.20% mortality and expense risk fee assuming a 5% annual return and ...
FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE 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 $ 90.60 $133.64 $109.25 $235.53 $ 20.60 $ 63.64 $109.25 $235.53 optional EEB 93.68 142.92 124.79 266.88 23.68 72.92 124.79 266.88 optional EEP 94.70 146.00 129.92 277.13 24.70 76.00 129.92 277.13 optional MAV 92.14 138.29 117.04 251.32 22.14 68.29 117.04 251.32 optional MAV and EEB 95.22 147.54 132.48 282.21 25.22 77.54 132.48 282.21 optional MAV and EEP 96.24 150.61 137.58 292.31 26.24 80.61 137.58 292.31 AXP(R) VP - Bond Fund base contract with no optional riders 90.81 134.26 110.29 237.65 20.81 64.26 110.29 237.65 optional EEB 93.88 143.54 125.82 268.94 23.88 73.54 125.82 268.94 optional EEP 94.91 146.61 130.95 279.17 24.91 76.61 130.95 279.17 optional MAV 92.35 138.91 118.08 253.41 22.35 68.91 118.08 253.41 optional MAV and EEB 95.42 148.15 133.50 284.24 25.42 78.15 133.50 284.24 optional MAV and EEP 96.45 151.22 138.60 294.32 26.45 81.22 138.60 294.32 AXP(R) VP - Capital Resource Fund base contract with no optional riders 90.60 133.64 109.25 235.53 20.60 63.64 109.25 235.53 optional EEB 93.68 142.92 124.79 266.88 23.68 72.92 124.79 266.88 optional EEP 94.70 146.00 129.92 277.13 24.70 76.00 129.92 277.13 optional MAV 92.14 138.29 117.04 251.32 22.14 68.29 117.04 251.32 optional MAV and EEB 95.22 147.54 132.48 282.21 25.22 77.54 132.48 282.21 optional MAV and EEP 96.24 150.61 137.58 292.31 26.24 80.61 137.58 292.31 AXP(R) VP - Cash Management Fund base contract with no optional riders 89.58 130.54 104.03 224.87 19.58 60.54 104.03 224.87 optional EEB 92.65 139.83 119.63 256.54 22.65 69.83 119.63 256.54 optional EEP 93.68 142.92 124.79 266.88 23.68 72.92 124.79 266.88 optional MAV 91.12 135.19 111.85 240.82 21.12 65.19 111.85 240.82 optional MAV and EEB 94.19 144.46 127.36 272.02 24.19 74.46 127.36 272.02 optional MAV and EEP 95.22 147.54 132.48 282.21 25.22 77.54 132.48 282.21 AXP(R) VP - Diversified Equity Income Fund base contract with no optional riders 91.94 137.67 116.01 249.23 21.94 67.67 116.01 249.23 optional EEB 95.01 146.92 131.46 280.18 25.01 76.92 131.46 280.18 optional EEP 96.04 149.99 136.57 290.30 26.04 79.99 136.57 290.30 optional MAV 93.47 142.30 123.76 264.82 23.47 72.30 123.76 264.82 optional MAV and EEB 96.55 151.52 139.11 295.32 26.55 81.52 139.11 295.32 optional MAV and EEP 97.57 154.59 144.19 305.28 27.57 84.59 144.19 305.28 AXP(R) VP - Emerging Markets Fund base contract with no optional riders 100.55 163.43 158.78 333.63 30.55 93.43 158.78 333.63 optional EEB 103.62 172.52 173.70 362.10 33.62 102.52 173.70 362.10 optional EEP 104.65 175.54 178.63 371.40 34.65 105.54 178.63 371.40 optional MAV 102.08 167.98 166.26 347.97 32.08 97.98 166.26 347.97 optional MAV and EEB 105.16 177.05 181.08 376.01 35.16 107.05 181.08 376.01 optional MAV and EEP 106.18 180.05 185.98 385.17 36.18 110.05 185.98 385.17 39 FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE 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 $ 93.88 $143.54 $125.82 $268.94 $ 23.88 $ 73.54 $125.82 $268.94 optional EEB 96.96 152.75 141.14 299.32 26.96 82.75 141.14 299.32 optional EEP 97.98 155.81 146.21 309.24 27.98 85.81 146.21 309.24 optional MAV 95.42 148.15 133.50 284.24 25.42 78.15 133.50 284.24 optional MAV and EEB 98.50 157.34 148.74 314.17 28.50 87.34 148.74 314.17 optional MAV and EEP 99.52 160.39 153.77 323.95 29.52 90.39 153.77 323.95 AXP(R) VP - Extra Income Fund base contract with no optional riders 91.01 134.88 111.33 239.76 21.01 64.88 111.33 239.76 optional EEB 94.09 144.15 126.84 270.99 24.09 74.15 126.84 270.99 optional EEP 95.11 147.23 131.97 281.20 25.11 77.23 131.97 281.20 optional MAV 92.55 139.52 119.11 255.50 22.55 69.52 119.11 255.50 optional MAV and EEB 95.63 148.76 134.53 286.26 25.63 78.76 134.53 286.26 optional MAV and EEP 96.65 151.83 139.62 296.32 26.65 81.83 139.62 296.32 AXP(R) VP - Federal Income Fund base contract with no optional riders 91.22 135.50 112.37 241.88 21.22 65.50 112.37 241.88 optional EEB 94.29 144.77 127.87 273.04 24.29 74.77 127.87 273.04 optional EEP 95.32 147.84 132.99 283.23 25.32 77.84 132.99 283.23 optional MAV 92.76 140.14 120.15 257.58 22.76 70.14 120.15 257.58 optional MAV and EEB 95.83 149.38 135.55 288.28 25.83 79.38 135.55 288.28 optional MAV and EEP 96.86 152.44 140.64 298.32 26.86 82.44 140.64 298.32 AXP(R) VP - Global Bond Fund base contract with no optional riders 93.58 142.61 124.27 265.85 23.58 72.61 124.27 265.85 optional EEB 96.65 151.83 139.62 296.32 26.65 81.83 139.62 296.32 optional EEP 97.68 154.89 144.69 306.27 27.68 84.89 144.69 306.27 optional MAV 95.11 147.23 131.97 281.20 25.11 77.23 131.97 281.20 optional MAV and EEB 98.19 156.42 147.22 311.22 28.19 86.42 147.22 311.22 optional MAV and EEP 99.21 159.47 152.26 321.02 29.21 89.47 152.26 321.02 AXP(R) VP - Growth Fund base contract with no optional riders 91.83 137.36 115.49 248.18 21.83 67.36 115.49 248.18 optional EEB 94.91 146.61 130.95 279.17 24.91 76.61 130.95 279.17 optional EEP 95.93 149.68 136.06 289.29 25.93 79.68 136.06 289.29 optional MAV 93.37 141.99 123.24 263.79 23.37 71.99 123.24 263.79 optional MAV and EEB 96.45 151.22 138.60 294.32 26.45 81.22 138.60 294.32 optional MAV and EEP 97.47 154.28 143.68 304.29 27.47 84.28 143.68 304.29 AXP(R) VP - International Fund base contract with no optional riders 93.27 141.69 122.73 262.76 23.27 71.69 122.73 262.76 optional EEB 96.34 150.91 138.09 293.31 26.34 80.91 138.09 293.31 optional EEP 97.37 153.97 143.17 303.30 27.37 83.97 143.17 303.30 optional MAV 94.81 146.31 130.43 278.15 24.81 76.31 130.43 278.15 optional MAV and EEB 97.88 155.50 145.71 308.25 27.88 85.50 145.71 308.25 optional MAV and EEP 98.91 158.56 150.75 318.09 28.91 88.56 150.75 318.09 40 FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE 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 $ 90.40 $133.02 $108.21 $233.41 $ 20.40 $ 63.02 $108.21 $233.41 optional EEB 93.47 142.30 123.76 264.82 23.47 72.30 123.76 264.82 optional EEP 94.50 145.38 128.90 275.09 24.50 75.38 128.90 275.09 optional MAV 91.94 137.67 116.01 249.23 21.94 67.67 116.01 249.23 optional MAV and EEB 95.01 146.92 131.46 280.18 25.01 76.92 131.46 280.18 optional MAV and EEP 96.04 149.99 136.57 290.30 26.04 79.99 136.57 290.30 AXP(R) VP - NEW DIMENSIONS FUND(R) base contract with no optional riders 90.71 133.95 109.77 236.59 20.71 63.95 109.77 236.59 optional EEB 93.78 143.23 125.30 267.91 23.78 73.23 125.30 267.91 optional EEP 94.81 146.31 130.43 278.15 24.81 76.31 130.43 278.15 optional MAV 92.24 138.60 117.56 252.37 22.24 68.60 117.56 252.37 optional MAV and EEB 95.32 147.84 132.99 283.23 25.32 77.84 132.99 283.23 optional MAV and EEP 96.34 150.91 138.09 293.31 26.34 80.91 138.09 293.31 AXP(R) VP - Partners Small Cap Value Fund base contract with no optional riders 97.98 155.81 146.21 309.24 27.98 85.81 146.21 309.24 optional EEB 101.06 164.95 161.28 338.43 31.06 94.95 161.28 338.43 optional EEP 102.08 167.98 166.26 347.97 32.08 97.98 166.26 347.97 optional MAV 99.52 160.39 153.77 323.95 29.52 90.39 153.77 323.95 optional MAV and EEB 102.60 169.50 168.75 352.70 32.60 99.50 168.75 352.70 optional MAV and EEP 103.62 172.52 173.70 362.10 33.62 102.52 173.70 362.10 AXP(R) VP - S&P 500 Index Fund base contract with no optional riders 87.63 124.62 94.04 204.33 17.63 54.62 94.04 204.33 optional EEB 90.71 133.95 109.77 236.59 20.71 63.95 109.77 236.59 optional EEP 91.73 137.05 114.97 247.13 21.73 67.05 114.97 247.13 optional MAV 89.17 129.29 101.93 220.58 19.17 59.29 101.93 220.58 optional MAV and EEB 92.24 138.60 117.56 252.37 22.24 68.60 117.56 252.37 optional MAV and EEP 93.27 141.69 122.73 262.76 23.27 71.69 122.73 262.76 AXP(R) VP - Small Cap Advantage Fund base contract with no optional riders 94.50 145.38 128.90 275.09 24.50 75.38 128.90 275.09 optional EEB 97.57 154.59 144.19 305.28 27.57 84.59 144.19 305.28 optional EEP 98.60 157.64 149.24 315.15 28.60 87.64 149.24 315.15 optional MAV 96.04 149.99 136.57 290.30 26.04 79.99 136.57 290.30 optional MAV and EEB 99.11 159.17 151.76 320.05 29.11 89.17 151.76 320.05 optional MAV and EEP 100.14 162.21 156.78 329.77 30.14 92.21 156.78 329.77 AXP(R) VP - Stock Fund base contract with no optional riders 93.88 143.54 125.82 268.94 23.88 73.54 125.82 268.94 optional EEB 96.96 152.75 141.14 299.32 26.96 82.75 141.14 299.32 optional EEP 97.98 155.81 146.21 309.24 27.98 85.81 146.21 309.24 optional MAV 95.42 148.15 133.50 284.24 25.42 78.15 133.50 284.24 optional MAV and EEB 98.50 157.34 148.74 314.17 28.50 87.34 148.74 314.17 optional MAV and EEP 99.52 160.39 153.77 323.95 29.52 90.39 153.77 323.95 41 FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE 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 $ 90.60 $133.64 $109.25 $235.53 $ 20.60 $ 63.64 $109.25 $235.53 optional EEB 93.68 142.92 124.79 266.88 23.68 72.92 124.79 266.88 optional EEP 94.70 146.00 129.92 277.13 24.70 76.00 129.92 277.13 optional MAV 92.14 138.29 117.04 251.32 22.14 68.29 117.04 251.32 optional MAV and EEB 95.22 147.54 132.48 282.21 25.22 77.54 132.48 282.21 optional MAV and EEP 96.24 150.61 137.58 292.31 26.24 80.61 137.58 292.31 AIM V.I. Capital Appreciation Fund, Series II base contract with no optional riders 93.88 143.54 125.82 268.94 23.88 73.54 125.82 268.94 optional EEB 96.96 152.75 141.14 299.32 26.96 82.75 141.14 299.32 optional EEP 97.98 155.81 146.21 309.24 27.98 85.81 146.21 309.24 optional MAV 95.42 148.15 133.50 284.24 25.42 78.15 133.50 284.24 optional MAV and EEB 98.50 157.34 148.74 314.17 28.50 87.34 148.74 314.17 optional MAV and EEP 99.52 160.39 153.77 323.95 29.52 90.39 153.77 323.95 AIM V.I. Capital Development Fund, Series II base contract with no optional riders 97.06 153.06 141.65 300.31 27.06 83.06 141.65 300.31 optional EEB 100.14 162.21 156.78 329.77 30.14 92.21 156.78 329.77 optional EEP 101.16 165.25 161.78 339.39 31.16 95.25 161.78 339.39 optional MAV 98.60 157.64 149.24 315.15 28.60 87.64 149.24 315.15 optional MAV and EEB 101.67 166.77 164.27 344.17 31.67 96.77 164.27 344.17 optional MAV and EEP 102.70 169.80 169.24 353.64 32.70 99.80 169.24 353.64 Alliance VP AllianceBernstein International Value Portfolio (Class B) base contract with no optional riders 94.91 146.61 130.95 279.17 24.91 76.61 130.95 279.17 optional EEB 97.98 155.81 146.21 309.24 27.98 85.81 146.21 309.24 optional EEP 99.01 158.86 151.26 319.07 29.01 88.86 151.26 319.07 optional MAV 96.45 151.22 138.60 294.32 26.45 81.22 138.60 294.32 optional MAV and EEB 99.52 160.39 153.77 323.95 29.52 90.39 153.77 323.95 optional MAV and EEP 100.55 163.43 158.78 333.63 30.55 93.43 158.78 333.63 Alliance VP Growth and Income Portfolio (Class B) base contract with no optional riders 92.04 137.98 116.52 250.28 22.04 67.98 116.52 250.28 optional EEB 95.11 147.23 131.97 281.20 25.11 77.23 131.97 281.20 optional EEP 96.14 150.30 137.08 291.30 26.14 80.30 137.08 291.30 optional MAV 93.58 142.61 124.27 265.85 23.58 72.61 124.27 265.85 optional MAV and EEB 96.65 151.83 139.62 296.32 26.65 81.83 139.62 296.32 optional MAV and EEP 97.68 154.89 144.69 306.27 27.68 84.89 144.69 306.27 American Century(R) VP International, Class II base contract with no optional riders 97.37 153.97 143.17 303.30 27.37 83.97 143.17 303.30 optional EEB 100.44 163.13 158.28 332.66 30.44 93.13 158.28 332.66 optional EEP 101.47 166.16 163.28 342.26 31.47 96.16 163.28 342.26 optional MAV 98.91 158.56 150.75 318.09 28.91 88.56 150.75 318.09 optional MAV and EEB 101.98 167.68 165.77 347.02 31.98 97.68 165.77 347.02 optional MAV and EEP 103.01 170.71 170.73 356.47 33.01 100.71 170.73 356.47 42 FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE END OF EACH TIME PERIOD 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS American Century(R) VP Value, Class II base contract with no optional riders $ 93.99 $143.84 $126.33 $269.97 $ 23.99 $ 73.84 $126.33 $269.97 optional EEB 97.06 153.06 141.65 300.31 27.06 83.06 141.65 300.31 optional EEP 98.09 156.11 146.72 310.23 28.09 86.11 146.72 310.23 optional MAV 95.52 148.46 134.01 285.25 25.52 78.46 134.01 285.25 optional MAV and EEB 98.60 157.64 149.24 315.15 28.60 87.64 149.24 315.15 optional MAV and EEP 99.62 160.69 154.27 324.92 29.62 90.69 154.27 324.92 Calvert Variable Series, Inc. Social Balanced Portfolio base contract with no optional riders 91.53 136.43 113.93 245.03 21.53 66.43 113.93 245.03 optional EEB 94.60 145.69 129.41 276.11 24.60 75.69 129.41 276.11 optional EEP 95.63 148.76 134.53 286.26 25.63 78.76 134.53 286.26 optional MAV 93.06 141.07 121.69 260.69 23.06 71.07 121.69 260.69 optional MAV and EEB 96.14 150.30 137.08 291.30 26.14 80.30 137.08 291.30 optional MAV and EEP 97.16 153.36 142.16 301.31 27.16 83.36 142.16 301.31 Evergreen VA Capital Growth Fund, Class L Shares base contract with no optional riders 94.19 144.46 127.36 272.02 24.19 74.46 127.36 272.02 optional EEB 97.27 153.67 142.67 302.30 27.27 83.67 142.67 302.30 optional EEP 98.29 156.73 147.73 312.20 28.29 86.73 147.73 312.20 optional MAV 95.73 149.07 135.04 287.27 25.73 79.07 135.04 287.27 optional MAV and EEB 98.80 158.25 150.25 317.11 28.80 88.25 150.25 317.11 optional MAV and EEP 99.83 161.30 155.28 326.86 29.83 91.30 155.28 326.86 Fidelity VIP Growth & Income Portfolio (Service Class 2) base contract with no optional riders 91.22 135.50 112.37 241.88 21.22 65.50 112.37 241.88 optional EEB 94.29 144.77 127.87 273.04 24.29 74.77 127.87 273.04 optional EEP 95.32 147.84 132.99 283.23 25.32 77.84 132.99 283.23 optional MAV 92.76 140.14 120.15 257.58 22.76 70.14 120.15 257.58 optional MAV and EEB 95.83 149.38 135.55 288.28 25.83 79.38 135.55 288.28 optional MAV and EEP 96.86 152.44 140.64 298.32 26.86 82.44 140.64 298.32 Fidelity VIP Mid Cap Portfolio (Service Class 2) base contract with no optional riders 92.24 138.60 117.56 252.37 22.24 68.60 117.56 252.37 optional EEB 95.32 147.84 132.99 283.23 25.32 77.84 132.99 283.23 optional EEP 96.34 150.91 138.09 293.31 26.34 80.91 138.09 293.31 optional MAV 93.78 143.23 125.30 267.91 23.78 73.23 125.30 267.91 optional MAV and EEB 96.86 152.44 140.64 298.32 26.86 82.44 140.64 298.32 optional MAV and EEP 97.88 155.50 145.71 308.25 27.88 85.50 145.71 308.25 Fidelity VIP Overseas Portfolio (Service Class 2) base contract with no optional riders 94.70 146.00 129.92 277.13 24.70 76.00 129.92 277.13 optional EEB 97.78 155.20 145.20 307.26 27.78 85.20 145.20 307.26 optional EEP 98.80 158.25 150.25 317.11 28.80 88.25 150.25 317.11 optional MAV 96.24 150.61 137.58 292.31 26.24 80.61 137.58 292.31 optional MAV and EEB 99.32 159.78 152.77 322.00 29.32 89.78 152.77 322.00 optional MAV and EEP 100.34 162.82 157.78 331.70 30.34 92.82 157.78 331.70 43 FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE 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 $ 91.22 $135.50 $112.37 $241.88 $ 21.22 $ 65.50 $112.37 $241.88 optional EEB 94.29 144.77 127.87 273.04 24.29 74.77 127.87 273.04 optional EEP 95.32 147.84 132.99 283.23 25.32 77.84 132.99 283.23 optional MAV 92.76 140.14 120.15 257.58 22.76 70.14 120.15 257.58 optional MAV and EEB 95.83 149.38 135.55 288.28 25.83 79.38 135.55 288.28 optional MAV and EEP 96.86 152.44 140.64 298.32 26.86 82.44 140.64 298.32 FTVIPT Franklin Small Cap Value Securities Fund - Class 2 (previously FTVIPT Franklin Value Securities Fund - Class 2) base contract with no optional riders 93.06 141.07 121.69 260.69 23.06 71.07 121.69 260.69 optional EEB 96.14 150.30 137.08 291.30 26.14 80.30 137.08 291.30 optional EEP 97.16 153.36 142.16 301.31 27.16 83.36 142.16 301.31 optional MAV 94.60 145.69 129.41 276.11 24.60 75.69 129.41 276.11 optional MAV and EEB 97.68 154.89 144.69 306.27 27.68 84.89 144.69 306.27 optional MAV and EEP 98.70 157.95 149.74 316.13 28.70 87.95 149.74 316.13 FTVIPT Mutual Shares Securities Fund - Class 2 base contract with no optional riders 93.27 141.69 122.73 262.76 23.27 71.69 122.73 262.76 optional EEB 96.34 150.91 138.09 293.31 26.34 80.91 138.09 293.31 optional EEP 97.37 153.97 143.17 303.30 27.37 83.97 143.17 303.30 optional MAV 94.81 146.31 130.43 278.15 24.81 76.31 130.43 278.15 optional MAV and EEB 97.88 155.50 145.71 308.25 27.88 85.50 145.71 308.25 optional MAV and EEP 98.91 158.56 150.75 318.09 28.91 88.56 150.75 318.09 Goldman Sachs VIT CORE(SM) U.S. Equity Fund base contract with no optional riders 90.91 134.57 110.81 238.71 20.91 64.57 110.81 238.71 optional EEB 93.99 143.84 126.33 269.97 23.99 73.84 126.33 269.97 optional EEP 95.01 146.92 131.46 280.18 25.01 76.92 131.46 280.18 optional MAV 92.45 139.22 118.60 254.45 22.45 69.22 118.60 254.45 optional MAV and EEB 95.52 148.46 134.01 285.25 25.52 78.46 134.01 285.25 optional MAV and EEP 96.55 151.52 139.11 295.32 26.55 81.52 139.11 295.32 Goldman Sachs VIT Mid Cap Value Fund base contract with no optional riders 92.14 138.29 117.04 251.32 22.14 68.29 117.04 251.32 optional EEB 95.22 147.54 132.48 282.21 25.22 77.54 132.48 282.21 optional EEP 96.24 150.61 137.58 292.31 26.24 80.61 137.58 292.31 optional MAV 93.68 142.92 124.79 266.88 23.68 72.92 124.79 266.88 optional MAV and EEB 96.75 152.14 140.13 297.32 26.75 82.14 140.13 297.32 optional MAV and EEP 97.78 155.20 145.20 307.26 27.78 85.20 145.20 307.26 INVESCO VIF - Dynamics Fund base contract with no optional riders 93.68 142.92 124.79 266.88 23.68 72.92 124.79 266.88 optional EEB 96.75 152.14 140.13 297.32 26.75 82.14 140.13 297.32 optional EEP 97.78 155.20 145.20 307.26 27.78 85.20 145.20 307.26 optional MAV 95.22 147.54 132.48 282.21 25.22 77.54 132.48 282.21 optional MAV and EEB 98.29 156.73 147.73 312.20 28.29 86.73 147.73 312.20 optional MAV and EEP 99.32 159.78 152.77 322.00 29.32 89.78 152.77 322.00 44 FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE 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 $ 93.58 $142.61 $124.27 $265.85 $ 23.58 $ 72.61 $124.27 $265.85 optional EEB 96.65 151.83 139.62 296.32 26.65 81.83 139.62 296.32 optional EEP 97.68 154.89 144.69 306.27 27.68 84.89 144.69 306.27 optional MAV 95.11 147.23 131.97 281.20 25.11 77.23 131.97 281.20 optional MAV and EEB 98.19 156.42 147.22 311.22 28.19 86.42 147.22 311.22 optional MAV and EEP 99.21 159.47 152.26 321.02 29.21 89.47 152.26 321.02 INVESCO VIF - Technology Fund base contract with no optional riders 93.58 142.61 124.27 265.85 23.58 72.61 124.27 265.85 optional EEB 96.65 151.83 139.62 296.32 26.65 81.83 139.62 296.32 optional EEP 97.68 154.89 144.69 306.27 27.68 84.89 144.69 306.27 optional MAV 95.11 147.23 131.97 281.20 25.11 77.23 131.97 281.20 optional MAV and EEB 98.19 156.42 147.22 311.22 28.19 86.42 147.22 311.22 optional MAV and EEP 99.21 159.47 152.26 321.02 29.21 89.47 152.26 321.02 INVESCO VIF - Telecommunications Fund base contract with no optional riders 93.78 143.23 125.30 267.91 23.78 73.23 125.30 267.91 optional EEB 96.86 152.44 140.64 298.32 26.86 82.44 140.64 298.32 optional EEP 97.88 155.50 145.71 308.25 27.88 85.50 145.71 308.25 optional MAV 95.32 147.84 132.99 283.23 25.32 77.84 132.99 283.23 optional MAV and EEB 98.39 157.03 148.23 313.18 28.39 87.03 148.23 313.18 optional MAV and EEP 99.42 160.08 153.27 322.97 29.42 90.08 153.27 322.97 Janus Aspen Series Global Technology Portfolio: Service Shares base contract with no optional riders 92.35 138.91 118.08 253.41 22.35 68.91 118.08 253.41 optional EEB 95.42 148.15 133.50 284.24 25.42 78.15 133.50 284.24 optional EEP 96.45 151.22 138.60 294.32 26.45 81.22 138.60 294.32 optional MAV 93.88 143.54 125.82 268.94 23.88 73.54 125.82 268.94 optional MAV and EEB 96.96 152.75 141.14 299.32 26.96 82.75 141.14 299.32 optional MAV and EEP 97.98 155.81 146.21 309.24 27.98 85.81 146.21 309.24 Janus Aspen Series International Growth Portfolio: Service Shares base contract with no optional riders 92.45 139.22 118.60 254.45 22.45 69.22 118.60 254.45 optional EEB 95.52 148.46 134.01 285.25 25.52 78.46 134.01 285.25 optional EEP 96.55 151.52 139.11 295.32 26.55 81.52 139.11 295.32 optional MAV 93.99 143.84 126.33 269.97 23.99 73.84 126.33 269.97 optional MAV and EEB 97.06 153.06 141.65 300.31 27.06 83.06 141.65 300.31 optional MAV and EEP 98.09 156.11 146.72 310.23 28.09 86.11 146.72 310.23 Lazard Retirement International Equity Portfolio base contract with no optional riders 95.42 148.15 133.50 284.24 25.42 78.15 133.50 284.24 optional EEB 98.50 157.34 148.74 314.17 28.50 87.34 148.74 314.17 optional EEP 99.52 160.39 153.77 323.95 29.52 90.39 153.77 323.95 optional MAV 96.96 152.75 141.14 299.32 26.96 82.75 141.14 299.32 optional MAV and EEB 100.03 161.91 156.28 328.80 30.03 91.91 156.28 328.80 optional MAV and EEP 101.06 164.95 161.28 338.43 31.06 94.95 161.28 338.43 45 FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE 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 base contract with no optional riders $ 94.60 $145.69 $129.41 $276.11 $ 24.60 $ 75.69 $129.41 $276.11 optional EEB 97.68 154.89 144.69 306.27 27.68 84.89 144.69 306.27 optional EEP 98.70 157.95 149.74 316.13 28.70 87.95 149.74 316.13 optional MAV 96.14 150.30 137.08 291.30 26.14 80.30 137.08 291.30 optional MAV and EEB 99.21 159.47 152.26 321.02 29.21 89.47 152.26 321.02 optional MAV and EEP 100.24 162.52 157.28 330.73 30.24 92.52 157.28 330.73 MFS(R) New Discovery Series - Service Class base contract with no optional riders 96.04 149.99 136.57 290.30 26.04 79.99 136.57 290.30 optional EEB 99.11 159.17 151.76 320.05 29.11 89.17 151.76 320.05 optional EEP 100.14 162.21 156.78 329.77 30.14 92.21 156.78 329.77 optional MAV 97.57 154.59 144.19 305.28 27.57 84.59 144.19 305.28 optional MAV and EEB 100.65 163.73 159.28 334.59 30.65 93.73 159.28 334.59 optional MAV and EEP 101.67 166.77 164.27 344.17 31.67 96.77 164.27 344.17 MFS(R) Utilities Series - Service Class base contract with no optional riders 94.70 146.00 129.92 277.13 24.70 76.00 129.92 277.13 optional EEB 97.78 155.20 145.20 307.26 27.78 85.20 145.20 307.26 optional EEP 98.80 158.25 150.25 317.11 28.80 88.25 150.25 317.11 optional MAV 96.24 150.61 137.58 292.31 26.24 80.61 137.58 292.31 optional MAV and EEB 99.32 159.78 152.77 322.00 29.32 89.78 152.77 322.00 optional MAV and EEP 100.34 162.82 157.78 331.70 30.34 92.82 157.78 331.70 Pioneer Equity Income VCT Portfolio - Class II Shares base contract with no optional riders 93.06 141.07 121.69 260.69 23.06 71.07 121.69 260.69 optional EEB 96.14 150.30 137.08 291.30 26.14 80.30 137.08 291.30 optional EEP 97.16 153.36 142.16 301.31 27.16 83.36 142.16 301.31 optional MAV 94.60 145.69 129.41 276.11 24.60 75.69 129.41 276.11 optional MAV and EEB 97.68 154.89 144.69 306.27 27.68 84.89 144.69 306.27 optional MAV and EEP 98.70 157.95 149.74 316.13 28.70 87.95 149.74 316.13 Pioneer Europe VCT Portfolio - Class II Shares base contract with no optional riders 115.61 207.44 230.07 465.24 45.61 137.44 230.07 465.24 optional EEB 118.69 216.25 244.08 489.76 48.69 146.25 244.08 489.76 optional EEP 119.71 219.18 248.71 497.77 49.71 149.18 248.71 497.77 optional MAV 117.15 211.85 237.10 477.59 47.15 141.85 237.10 477.59 optional MAV and EEB 120.23 220.64 251.01 501.74 50.23 150.64 251.01 501.74 optional MAV and EEP 121.25 223.56 255.61 509.63 51.25 153.56 255.61 509.63 Putnam VT Health Sciences Fund - Class IB Shares base contract with no optional riders 93.27 141.69 122.73 262.76 23.27 71.69 122.73 262.76 optional EEB 96.34 150.91 138.09 293.31 26.34 80.91 138.09 293.31 optional EEP 97.37 153.97 143.17 303.30 27.37 83.97 143.17 303.30 optional MAV 94.81 146.31 130.43 278.15 24.81 76.31 130.43 278.15 optional MAV and EEB 97.88 155.50 145.71 308.25 27.88 85.50 145.71 308.25 optional MAV and EEP 98.91 158.56 150.75 318.09 28.91 88.56 150.75 318.09 46 FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE 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 $ 94.81 $146.31 $130.43 $278.15 $ 24.81 $ 76.31 $130.43 $278.15 optional EEB 97.88 155.50 145.71 308.25 27.88 85.50 145.71 308.25 optional EEP 98.91 158.56 150.75 318.09 28.91 88.56 150.75 318.09 optional MAV 96.34 150.91 138.09 293.31 26.34 80.91 138.09 293.31 optional MAV and EEB 99.42 160.08 153.27 322.97 29.42 90.08 153.27 322.97 optional MAV and EEP 100.44 163.13 158.28 332.66 30.44 93.13 158.28 332.66 Putnam VT Vista Fund - Class IB Shares base contract with no optional riders 92.04 137.98 116.52 250.28 22.04 67.98 116.52 250.28 optional EEB 95.11 147.23 131.97 281.20 25.11 77.23 131.97 281.20 optional EEP 96.14 150.30 137.08 291.30 26.14 80.30 137.08 291.30 optional MAV 93.58 142.61 124.27 265.85 23.58 72.61 124.27 265.85 optional MAV and EEB 96.65 151.83 139.62 296.32 26.65 81.83 139.62 296.32 optional MAV and EEP 97.68 154.89 144.69 306.27 27.68 84.89 144.69 306.27 Strong Opportunity Fund II - Advisor Class base contract with no optional riders 98.39 157.03 148.23 313.18 28.39 87.03 148.23 313.18 optional EEB 101.47 166.16 163.28 342.26 31.47 96.16 163.28 342.26 optional EEP 102.49 169.19 168.25 351.76 32.49 99.19 168.25 351.76 optional MAV 99.93 161.60 155.78 327.83 29.93 91.60 155.78 327.83 optional MAV and EEB 103.01 170.71 170.73 356.47 33.01 100.71 170.73 356.47 optional MAV and EEP 104.03 173.73 175.67 365.83 34.03 103.73 175.67 365.83 Wanger International Small Cap base contract with no optional riders 97.27 153.67 142.67 302.30 27.27 83.67 142.67 302.30 optional EEB 100.34 162.82 157.78 331.70 30.34 92.82 157.78 331.70 optional EEP 101.37 165.86 162.78 341.30 31.37 95.86 162.78 341.30 optional MAV 98.80 158.25 150.25 317.11 28.80 88.25 150.25 317.11 optional MAV and EEB 101.88 167.38 165.27 346.07 31.88 97.38 165.27 346.07 optional MAV and EEP 102.90 170.40 170.24 355.53 32.90 100.40 170.24 355.53 Wanger U.S. Smaller Companies (previously Wanger U.S. Small Cap) base contract with no optional riders 92.76 140.14 120.15 257.58 22.76 70.14 120.15 257.58 optional EEB 95.83 149.38 135.55 288.28 25.83 79.38 135.55 288.28 optional EEP 96.86 152.44 140.64 298.32 26.86 82.44 140.64 298.32 optional MAV 94.29 144.77 127.87 273.04 24.29 74.77 127.87 273.04 optional MAV and EEB 97.37 153.97 143.17 303.30 27.37 83.97 143.17 303.30 optional MAV and EEP 98.39 157.03 148.23 313.18 28.39 87.03 148.23 313.18 Wells Fargo VT Asset Allocation Fund base contract with no optional riders 92.86 140.45 120.66 258.61 22.86 70.45 120.66 258.61 optional EEB 95.93 149.68 136.06 289.29 25.93 79.68 136.06 289.29 optional EEP 96.96 152.75 141.14 299.32 26.96 82.75 141.14 299.32 optional MAV 94.40 145.07 128.38 274.07 24.40 75.07 128.38 274.07 optional MAV and EEB 97.47 154.28 143.68 304.29 27.47 84.28 143.68 304.29 optional MAV and EEP 98.50 157.34 148.74 314.17 28.50 87.34 148.74 314.17 47 FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE 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 $ 92.86 $140.45 $120.66 $258.61 $ 22.86 $ 70.45 $120.66 $258.61 optional EEB 95.93 149.68 136.06 289.29 25.93 79.68 136.06 289.29 optional EEP 96.96 152.75 141.14 299.32 26.96 82.75 141.14 299.32 optional MAV 94.40 145.07 128.38 274.07 24.40 75.07 128.38 274.07 optional MAV and EEB 97.47 154.28 143.68 304.29 27.47 84.28 143.68 304.29 optional MAV and EEP 98.50 157.34 148.74 314.17 28.50 87.34 148.74 314.17 Wells Fargo VT Small Cap Growth Fund base contract with no optional riders 94.91 146.61 130.95 279.17 24.91 76.61 130.95 279.17 optional EEB 97.98 155.81 146.21 309.24 27.98 85.81 146.21 309.24 optional EEP 99.01 158.86 151.26 319.07 29.01 88.86 151.26 319.07 optional MAV 96.45 151.22 138.60 294.32 26.45 81.22 138.60 294.32 optional MAV and EEB 99.52 160.39 153.77 323.95 29.52 90.39 153.77 323.95 optional MAV and EEP 100.55 163.43 158.78 333.63 30.55 93.43 158.78 333.63
48 You would pay the following expenses on a $1,000 investment in a RAVA SELECT qualified annuity with a 1.00% mortality and expense risk fee assuming a 5% annual return and ...
FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE 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 $ 88.55 $127.43 $ 98.78 $214.11 $ 18.55 $ 57.43 $ 98.78 $214.11 optional MAV 90.09 132.09 106.64 230.21 20.09 62.09 106.64 230.21 AXP(R) VP - Bond Fund base contract with no optional riders 88.76 128.05 99.83 216.27 18.76 58.05 99.83 216.27 optional MAV 90.30 132.71 107.69 232.34 20.30 62.71 107.69 232.34 AXP(R) VP - Capital Resource Fund base contract with no optional riders 88.55 127.43 98.78 214.11 18.55 57.43 98.78 214.11 optional MAV 90.09 132.09 106.64 230.21 20.09 62.09 106.64 230.21 AXP(R) VP - Cash Management Fund base contract with no optional riders 87.53 124.31 93.52 203.24 17.53 54.31 93.52 203.24 optional MAV 89.07 128.98 101.41 219.50 19.07 58.98 101.41 219.50 AXP(R) VP - Diversified Equity Income Fund base contract with no optional riders 89.89 131.47 105.60 228.08 19.89 61.47 105.60 228.08 optional MAV 91.42 136.12 113.41 243.98 21.42 66.12 113.41 243.98 AXP(R) VP - Emerging Markets Fund base contract with no optional riders 98.50 157.34 148.74 314.17 28.50 87.34 148.74 314.17 optional MAV 100.03 161.91 156.28 328.80 30.03 91.91 156.28 328.80 AXP(R) VP - Equity Select Fund base contract with no optional riders 91.83 137.36 115.49 248.18 21.83 67.36 115.49 248.18 optional MAV 93.37 141.99 123.24 263.79 23.37 71.99 123.24 263.79 AXP(R) VP - Extra Income Fund base contract with no optional riders 88.96 128.67 100.88 218.43 18.96 58.67 100.88 218.43 optional MAV 90.50 133.33 108.73 234.47 20.50 63.33 108.73 234.47 AXP(R) VP - Federal Income Fund base contract with no optional riders 89.17 129.29 101.93 220.58 19.17 59.29 101.93 220.58 optional MAV 90.71 133.95 109.77 236.59 20.71 63.95 109.77 236.59 AXP(R) VP - Global Bond Fund base contract with no optional riders 91.53 136.43 113.93 245.03 21.53 66.43 113.93 245.03 optional MAV 93.06 141.07 121.69 260.69 23.06 71.07 121.69 260.69 AXP(R) VP - Growth Fund base contract with no optional riders 89.78 131.16 105.07 227.01 19.78 61.16 105.07 227.01 optional MAV 91.32 135.81 112.89 242.93 21.32 65.81 112.89 242.93 AXP(R) VP - International Fund base contract with no optional riders 91.22 135.50 112.37 241.88 21.22 65.50 112.37 241.88 optional MAV 92.76 140.14 120.15 257.58 22.76 70.14 120.15 257.58 AXP(R) VP - Managed Fund base contract with no optional riders 88.35 126.80 97.73 211.94 18.35 56.80 97.73 211.94 optional MAV 89.89 131.47 105.60 228.08 19.89 61.47 105.60 228.08 49 FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE END OF EACH TIME PERIOD 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS AXP(R) VP - New Dimensions Fund(R) base contract with no optional riders $ 88.66 $127.74 $ 99.31 $215.19 $ 18.66 $ 57.74 $ 99.31 $215.19 optional MAV 90.19 132.40 107.16 231.28 20.19 62.40 107.16 231.28 AXP(R) VP - Partners Small Cap Value Fund base contract with no optional riders 95.93 149.68 136.06 289.29 25.93 79.68 136.06 289.29 optional MAV 97.47 154.28 143.68 304.29 27.47 84.28 143.68 304.29 AXP(R) VP - S&P 500 Index Fund base contract with no optional riders 85.58 118.37 83.45 182.29 15.58 48.37 83.45 182.29 optional MAV 87.12 123.06 91.40 198.86 17.12 53.06 91.40 198.86 AXP(R) VP - Small Cap Advantage Fund base contract with no optional riders 92.45 139.22 118.60 254.45 22.45 69.22 118.60 254.45 optional MAV 93.99 143.84 126.33 269.97 23.99 73.84 126.33 269.97 AXP(R) VP - Stock Fund base contract with no optional riders 91.83 137.36 115.49 248.18 21.83 67.36 115.49 248.18 optional MAV 93.37 141.99 123.24 263.79 23.37 71.99 123.24 263.79 AXP(R) VP - Strategy Aggressive Fund base contract with no optional riders 88.55 127.43 98.78 214.11 18.55 57.43 98.78 214.11 optional MAV 90.09 132.09 106.64 230.21 20.09 62.09 106.64 230.21 AIM V.I. Capital Appreciation Fund, Series II base contract with no optional riders 91.83 137.36 115.49 248.18 21.83 67.36 115.49 248.18 optional MAV 93.37 141.99 123.24 263.79 23.37 71.99 123.24 263.79 AIM V.I. Capital Development Fund, Series II base contract with no optional riders 95.01 146.92 131.46 280.18 25.01 76.92 131.46 280.18 optional MAV 96.55 151.52 139.11 295.32 26.55 81.52 139.11 295.32 Alliance VP AllianceBernstein International Value Portfolio (Class B) base contract with no optional riders 92.86 140.45 120.66 258.61 22.86 70.45 120.66 258.61 optional MAV 94.40 145.07 128.38 274.07 24.40 75.07 128.38 274.07 Alliance VP Growth and Income Portfolio (Class B) base contract with no optional riders 89.99 131.78 106.12 229.15 19.99 61.78 106.12 229.15 optional MAV 91.53 136.43 113.93 245.03 21.53 66.43 113.93 245.03 American Century(R) VP International, Class II base contract with no optional riders 95.32 147.84 132.99 283.23 25.32 77.84 132.99 283.23 optional MAV 96.86 152.44 140.64 298.32 26.86 82.44 140.64 298.32 American Century(R) VP Value, Class II base contract with no optional riders 91.94 137.67 116.01 249.23 21.94 67.67 116.01 249.23 optional MAV 93.47 142.30 123.76 264.82 23.47 72.30 123.76 264.82 Calvert Variable Series, Inc. Social Balanced Portfolio base contract with no optional riders 89.48 130.23 103.50 223.80 19.48 60.23 103.50 223.80 optional MAV 91.01 134.88 111.33 239.76 21.01 64.88 111.33 239.76 50 FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE END OF EACH TIME PERIOD 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS Evergreen VA Capital Growth Fund, Class L Shares base contract with no optional riders $ 92.14 $138.29 $117.04 $251.32 $ 22.14 $ 68.29 $117.04 $251.32 optional MAV 93.68 142.92 124.79 266.88 23.68 72.92 124.79 266.88 Fidelity VIP Growth & Income Portfolio (Service Class 2) base contract with no optional riders 89.17 129.29 101.93 220.58 19.17 59.29 101.93 220.58 optional MAV 90.71 133.95 109.77 236.59 20.71 63.95 109.77 236.59 Fidelity VIP Mid Cap Portfolio (Service Class 2) base contract with no optional riders 90.19 132.40 107.16 231.28 20.19 62.40 107.16 231.28 optional MAV 91.73 137.05 114.97 247.13 21.73 67.05 114.97 247.13 Fidelity VIP Overseas Portfolio (Service Class 2) base contract with no optional riders 92.65 139.83 119.63 256.54 22.65 69.83 119.63 256.54 optional MAV 94.19 144.46 127.36 272.02 24.19 74.46 127.36 272.02 FTVIPT Franklin Real Estate Fund - Class 2 base contract with no optional riders 89.17 129.29 101.93 220.58 19.17 59.29 101.93 220.58 optional MAV 90.71 133.95 109.77 236.59 20.71 63.95 109.77 236.59 FTVIPT Franklin Small Cap Value Securities Fund - Class 2 (previously FTVIPT Franklin Value Securities Fund - Class 2) base contract with no optional riders 91.01 134.88 111.33 239.76 21.01 64.88 111.33 239.76 optional MAV 92.55 139.52 119.11 255.50 22.55 69.52 119.11 255.50 FTVIPT Mutual Shares Securities Fund - Class 2 base contract with no optional riders 91.22 135.50 112.37 241.88 21.22 65.50 112.37 241.88 optional MAV 92.76 140.14 120.15 257.58 22.76 70.14 120.15 257.58 Goldman Sachs VIT CORE(SM) U.S. Equity Fund base contract with no optional riders 88.86 128.36 100.36 217.35 18.86 58.36 100.36 217.35 optional MAV 90.40 133.02 108.21 233.41 20.40 63.02 108.21 233.41 Goldman Sachs VIT Mid Cap Value Fund base contract with no optional riders 90.09 132.09 106.64 230.21 20.09 62.09 106.64 230.21 optional MAV 91.63 136.74 114.45 246.08 21.63 66.74 114.45 246.08 INVESCO VIF - Dynamics Fund base contract with no optional riders 91.63 136.74 114.45 246.08 21.63 66.74 114.45 246.08 optional MAV 93.17 141.38 122.21 261.72 23.17 71.38 122.21 261.72 INVESCO VIF - Financial Services Fund base contract with no optional riders 91.53 136.43 113.93 245.03 21.53 66.43 113.93 245.03 optional MAV 93.06 141.07 121.69 260.69 23.06 71.07 121.69 260.69 INVESCO VIF - Technology Fund base contract with no optional riders 91.53 136.43 113.93 245.03 21.53 66.43 113.93 245.03 optional MAV 93.06 141.07 121.69 260.69 23.06 71.07 121.69 260.69 INVESCO VIF - Telecommunications Fund base contract with no optional riders 91.73 137.05 114.97 247.13 21.73 67.05 114.97 247.13 optional MAV 93.27 141.69 122.73 262.76 23.27 71.69 122.73 262.76 51 FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE END OF EACH TIME PERIOD 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS Janus Aspen Series Global Technology Portfolio: Service Shares base contract with no optional riders $ 90.30 $132.71 $107.69 $232.34 $ 20.30 $ 62.71 $107.69 $232.34 optional MAV 91.83 137.36 115.49 248.18 21.83 67.36 115.49 248.18 Janus Aspen Series International Growth Portfolio: Service Shares base contract with no optional riders 90.40 133.02 108.21 233.41 20.40 63.02 108.21 233.41 optional MAV 91.94 137.67 116.01 249.23 21.94 67.67 116.01 249.23 Lazard Retirement International Equity Portfolio base contract with no optional riders 93.37 141.99 123.24 263.79 23.37 71.99 123.24 263.79 optional MAV 94.91 146.61 130.95 279.17 24.91 76.61 130.95 279.17 MFS(R) Investors Growth Stock Series - Service Class base contract with no optional riders 92.55 139.52 119.11 255.50 22.55 69.52 119.11 255.50 optional MAV 94.09 144.15 126.84 270.99 24.09 74.15 126.84 270.99 MFS(R) New Discovery Series - Service Class base contract with no optional riders 93.99 143.84 126.33 269.97 23.99 73.84 126.33 269.97 optional MAV 95.52 148.46 134.01 285.25 25.52 78.46 134.01 285.25 MFS(R) Utilities Series - Service Class base contract with no optional riders 92.65 139.83 119.63 256.54 22.65 69.83 119.63 256.54 optional MAV 94.19 144.46 127.36 272.02 24.19 74.46 127.36 272.02 Pioneer Equity Income VCT Portfolio - Class II Shares base contract with no optional riders 91.01 134.88 111.33 239.76 21.01 64.88 111.33 239.76 optional MAV 92.55 139.52 119.11 255.50 22.55 69.52 119.11 255.50 Pioneer Europe VCT Portfolio - Class II Shares base contract with no optional riders 113.56 201.53 220.63 448.46 43.56 131.53 220.63 448.46 optional MAV 115.10 205.96 227.72 461.08 45.10 135.96 227.72 461.08 Putnam VT Health Sciences Fund - Class IB Shares base contract with no optional riders 91.22 135.50 112.37 241.88 21.22 65.50 112.37 241.88 optional MAV 92.76 140.14 120.15 257.58 22.76 70.14 120.15 257.58 Putnam VT International Growth Fund - Class IB Shares base contract with no optional riders 92.76 140.14 120.15 257.58 22.76 70.14 120.15 257.58 optional MAV 94.29 144.77 127.87 273.04 24.29 74.77 127.87 273.04 Putnam VT Vista Fund - Class IB Shares base contract with no optional riders 89.99 131.78 106.12 229.15 19.99 61.78 106.12 229.15 optional MAV 91.53 136.43 113.93 245.03 21.53 66.43 113.93 245.03 Strong Opportunity Fund II - Advisor Class base contract with no optional riders 96.34 150.91 138.09 293.31 26.34 80.91 138.09 293.31 optional MAV 97.88 155.50 145.71 308.25 27.88 85.50 145.71 308.25 Wanger International Small Cap base contract with no optional riders 95.22 147.54 132.48 282.21 25.22 77.54 132.48 282.21 optional MAV 96.75 152.14 140.13 297.32 26.75 82.14 140.13 297.32 Wanger U.S. Smaller Companies (previously Wanger U.S. Small Cap) base contract with no optional riders 90.71 133.95 109.77 236.59 20.71 63.95 109.77 236.59 optional MAV 92.24 138.60 117.56 252.37 22.24 68.60 117.56 252.37 52 FULL SURRENDER AT THE NO SURRENDER OR SELECTION OF AN ANNUITY END OF EACH TIME PERIOD PAYOUT PLAN AT THE 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 $ 90.81 $134.26 $110.29 $237.65 $ 20.81 $ 64.26 $110.29 $237.65 optional MAV 92.35 138.91 118.08 253.41 22.35 68.91 118.08 253.41 Wells Fargo VT International Equity Fund base contract with no optional riders 90.81 134.26 110.29 237.65 20.81 64.26 110.29 237.65 optional MAV 92.35 138.91 118.08 253.41 22.35 68.91 118.08 253.41 Wells Fargo VT Small Cap Growth Fund base contract with no optional riders 92.86 140.45 120.66 258.61 22.86 70.45 120.66 258.61 optional MAV 94.40 145.07 128.38 274.07 24.40 75.07 128.38 274.07
* In these examples for RAVA Select, the $30 contract administrative charge is approximated as a 0.030% charge based on our average contract size. Premium taxes imposed by some state and local governments are not reflected in this table. We entered into certain arrangements under which we are compensated by the funds' advisers and/or distributors for the administrative services we provide to the funds. YOU SHOULD NOT CONSIDER THESE EXAMPLES AS REPRESENTATIONS OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN. 53 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 did not have any activity as of the date of this financial statement.
YEAR ENDED DEC. 31, 2001 2000 1999 ------------------------------------------------------------------------------------------------------------------------------------ SUBACCOUNT BC1(1) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - BLUE CHIP ADVANTAGE FUND) Accumulation unit value at beginning of period $ 0.98 $ 1.11 $ 1.00 Accumulation unit value at end of period $ 0.81 $ 0.98 $ 1.11 Number of accumulation units outstanding at end of period (000 omitted) 49,897 43,161 8,145 Ratio of operating expense to average net assets 0.95% 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 $ 0.99 $ 1.11 $ 1.00 Accumulation unit value at end of period $ 0.82 $ 0.99 $ 1.11 Number of accumulation units outstanding at end of period (000 omitted) 41,083 32,624 7,503 Ratio of operating expense to average net assets 0.75% 0.75% 0.75% ---------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT BD1(1) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - BOND FUND) Accumulation unit value at beginning of period $ 1.06 $ 1.01 $ 1.00 Accumulation unit value at end of period $ 1.13 $ 1.06 $ 1.01 Number of accumulation units outstanding at end of period (000 omitted) 106,760 43,920 11,675 Ratio of operating expense to average net assets 0.95% 0.95% 0.95% ---------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT BD2(1) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - BOND FUND) Accumulation unit value at beginning of period $ 1.06 $ 1.01 $ 1.00 Accumulation unit value at end of period $ 1.13 $ 1.06 $ 1.01 Number of accumulation units outstanding at end of period (000 omitted) 83,968 30,783 7,186 Ratio of operating expense to average net assets 0.75% 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 $ 0.93 $ 1.14 $ 1.00 Accumulation unit value at end of period $ 0.76 $ 0.93 $ 1.14 Number of accumulation units outstanding at end of period (000 omitted) 26,779 22,159 3,227 Ratio of operating expense to average net assets 0.95% 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 $ 0.93 $ 1.14 $ 1.00 Accumulation unit value at end of period $ 0.76 $ 0.93 $ 1.14 Number of accumulation units outstanding at end of period (000 omitted) 26,327 24,003 5,333 Ratio of operating expense to average net assets 0.75% 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 $ 1.06 $ 1.01 $ 1.00 Accumulation unit value at end of period $ 1.09 $ 1.06 $ 1.01 Number of accumulation units outstanding at end of period (000 omitted) 265,455 203,922 87,424 Ratio of operating expense to average net assets 0.95% 0.95% 0.95% Simple yield(2) 0.66% -- -- Compound yield(2) 0.66% -- -- ---------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT CM2(1) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - CASH MANAGEMENT FUND) Accumulation unit value at beginning of period $ 1.06 $ 1.01 $ 1.00 Accumulation unit value at end of period $ 1.09 $ 1.06 $ 1.01 Number of accumulation units outstanding at end of period (000 omitted) 243,870 171,785 65,522 Ratio of operating expense to average net assets 0.75% 0.75% 0.75% Simple yield(2) 0.83% -- -- Compound yield(2) 0.83% -- -- ---------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT DE1(1) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - DIVERSIFIED EQUITY INCOME FUND) Accumulation unit value at beginning of period $ 1.01 $ 1.03 $ 1.00 Accumulation unit value at end of period $ 1.02 $ 1.01 $ 1.03 Number of accumulation units outstanding at end of period (000 omitted) 41,299 14,227 3,441 Ratio of operating expense to average net assets 0.95% 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 $ 1.01 $ 1.03 $ 1.00 Accumulation unit value at end of period $ 1.02 $ 1.01 $ 1.03 Number of accumulation units outstanding at end of period (000 omitted) 43,328 12,124 3,149 Ratio of operating expense to average net assets 0.75% 0.75% 0.75% ----------------------------------------------------------------------------------------------------------------------------------- 54 YEAR ENDED DEC. 31, 2001 2000 1999 ----------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT EM1(3) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - EMERGING MARKETS FUND) Accumulation unit value at beginning of period $ 0.74 $ 1.00 -- Accumulation unit value at end of period $ 0.72 $ 0.74 -- Number of accumulation units outstanding at end of period (000 omitted) 1,542 693 -- Ratio of operating expense to average net assets 0.95% 0.95% -- ----------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT EM2(3) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - EMERGING MARKETS FUND) Accumulation unit value at beginning of period $ 0.74 $ 1.00 -- Accumulation unit value at end of period $ 0.72 $ 0.74 -- Number of accumulation units outstanding at end of period (000 omitted) 1,789 906 -- Ratio of operating expense to average net assets 0.75% 0.75% -- ----------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT ES1(4) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - EQUITY SELECT FUND) Accumulation unit value at beginning of period $ 1.00 -- -- Accumulation unit value at end of period $ 0.99 -- -- Number of accumulation units outstanding at end of period (000 omitted) 2,238 -- -- Ratio of operating expense to average net assets 0.95% -- -- ----------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT ES2(4) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - EQUITY SELECT FUND) Accumulation unit value at beginning of period $ 1.00 -- -- Accumulation unit value at end of period $ 1.00 -- -- Number of accumulation units outstanding at end of period (000 omitted) 2,489 -- -- 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 $ 0.91 $ 1.01 $ 1.00 Accumulation unit value at end of period $ 0.94 $ 0.91 $ 1.01 Number of accumulation units outstanding at end of period (000 omitted) 88,813 52,655 10,137 Ratio of operating expense to average net assets 0.95% 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 $ 0.91 $ 1.01 $ 1.00 Accumulation unit value at end of period $ 0.95 $ 0.91 $ 1.01 Number of accumulation units outstanding at end of period (000 omitted) 58,348 31,722 7,774 Ratio of operating expense to average net assets 0.75% 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 $ 1.08 $ 1.00 $ 1.00 Accumulation unit value at end of period $ 1.13 $ 1.08 $ 1.00 Number of accumulation units outstanding at end of period (000 omitted) 56,966 24,654 12,796 Ratio of operating expense to average net assets 0.95% 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 $ 1.08 $ 1.00 $ 1.00 Accumulation unit value at end of period $ 1.14 $ 1.08 $ 1.00 Number of accumulation units outstanding at end of period (000 omitted) 50,510 16,258 11,135 Ratio of operating expense to average net assets 0.75% 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 $ 1.02 $ 1.00 $ 1.00 Accumulation unit value at end of period $ 1.03 $ 1.02 $ 1.00 Number of accumulation units outstanding at end of period (000 omitted) 23,970 14,137 2,368 Ratio of operating expense to average net assets 0.95% 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 $ 1.03 $ 1.00 $ 1.00 Accumulation unit value at end of period $ 1.03 $ 1.03 $ 1.00 Number of accumulation units outstanding at end of period (000 omitted) 16,572 8,968 1,552 Ratio of operating expense to average net assets 0.75% 0.75% 0.75% ----------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT GR1(1) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - GROWTH FUND) Accumulation unit value at beginning of period $ 0.94 $ 1.18 $ 1.00 Accumulation unit value at end of period $ 0.64 $ 0.94 $ 1.18 Number of accumulation units outstanding at end of period (000 omitted) 130,764 106,410 13,813 Ratio of operating expense to average net assets 0.95% 0.95% 0.95% ----------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT GR2(1) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - GROWTH FUND) Accumulation unit value at beginning of period $ 0.95 $ 1.18 $ 1.00 Accumulation unit value at end of period $ 0.65 $ 0.95 $ 1.18 Number of accumulation units outstanding at end of period (000 omitted) 129,186 97,754 16,891 Ratio of operating expense to average net assets 0.75% 0.75% 0.75% ----------------------------------------------------------------------------------------------------------------------------------- 55 YEAR ENDED DEC. 31, 2001 2000 1999 ---------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT IE1(1) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - INTERNATIONAL FUND) Accumulation unit value at beginning of period $ 0.95 $ 1.27 $ 1.00 Accumulation unit value at end of period $ 0.67 $ 0.95 $ 1.27 Number of accumulation units outstanding at end of period (000 omitted) 18,664 15,670 2,173 Ratio of operating expense to average net assets 0.95% 0.95% 0.95% ---------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT IE2(1) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - INTERNATIONAL FUND) Accumulation unit value at beginning of period $ 0.95 $ 1.27 $ 1.00 Accumulation unit value at end of period $ 0.67 $ 0.95 $ 1.27 Number of accumulation units outstanding at end of period (000 omitted) 15,821 13,967 2,575 Ratio of operating expense to average net assets 0.75% 0.75% 0.75% --------------------------------------------------------------------------------------------------------------------------- ------ SUBACCOUNT MF1(1) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - MANAGED FUND) Accumulation unit value at beginning of period $ 1.05 $ 1.09 $ 1.00 Accumulation unit value at end of period $ 0.93 $ 1.05 $ 1.09 Number of accumulation units outstanding at end of period (000 omitted) 53,096 39,810 6,539 Ratio of operating expense to average net assets 0.95% 0.95% 0.95% ---------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT MF2(1) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - MANAGED FUND) Accumulation unit value at beginning of period $ 1.05 $ 1.09 $ 1.00 Accumulation unit value at end of period $ 0.94 $ 1.05 $ 1.09 Number of accumulation units outstanding at end of period (000 omitted) 37,760 28,348 5,220 Ratio of operating expense to average net assets 0.75% 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 $ 1.07 $ 1.19 $ 1.00 Accumulation unit value at end of period $ 0.88 $ 1.07 $ 1.19 Number of accumulation units outstanding at end of period (000 omitted) 307,320 219,316 32,483 Ratio of operating expense to average net assets 0.95% 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 $ 1.07 $ 1.19 $ 1.00 Accumulation unit value at end of period $ 0.89 $ 1.07 $ 1.19 Number of accumulation units outstanding at end of period (000 omitted) 276,054 177,036 31,537 Ratio of operating expense to average net assets 0.75% 0.75% 0.75% ---------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT SV1(5) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - PARTNERS SMALL CAP VALUE FUND) Accumulation unit value at beginning of period $ 1.00 -- -- Accumulation unit value at end of period $ 1.07 -- -- Number of accumulation units outstanding at end of period (000 omitted) 6,314 -- -- Ratio of operating expense to average net assets 0.95% -- -- ---------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT SV2(5) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - PARTNERS SMALL CAP VALUE FUND) Accumulation unit value at beginning of period $ 1.00 -- -- Accumulation unit value at end of period $ 1.07 -- -- Number of accumulation units outstanding at end of period (000 omitted) 6,885 -- -- Ratio of operating expense to average net assets 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 $ 0.91 $ 1.00 -- Accumulation unit value at end of period $ 0.79 $ 0.91 -- Number of accumulation units outstanding at end of period (000 omitted) 40,575 14,084 -- Ratio of operating expense to average net assets 0.95% 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 $ 0.91 $ 1.00 -- Accumulation unit value at end of period $ 0.79 $ 0.91 -- Number of accumulation units outstanding at end of period (000 omitted) 35,957 9,812 -- Ratio of operating expense to average net assets 0.75% 0.75% -- ---------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT SC1(1) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - SMALL CAP ADVANTAGE FUND) Accumulation unit value at beginning of period $ 1.16 $ 1.12 $ 1.00 Accumulation unit value at end of period $ 1.07 $ 1.16 $ 1.12 Number of accumulation units outstanding at end of period (000 omitted) 24,346 16,349 3,029 Ratio of operating expense to average net assets 0.95% 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 $ 1.16 $ 1.12 $ 1.00 Accumulation unit value at end of period $ 1.08 $ 1.16 $ 1.12 Number of accumulation units outstanding at end of period (000 omitted) 22,792 14,830 2,970 Ratio of operating expense to average net assets 0.75% 0.75% 0.75% ---------------------------------------------------------------------------------------------------------------------------------- 56 YEAR ENDED DEC. 31, 2001 2000 1999 ----------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT ST1(6) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - STOCK FUND) 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) 517 -- -- Ratio of operating expense to average net assets 0.95% -- -- ----------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT ST2(6) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - STOCK FUND) Accumulation unit value at beginning of period $ 1.00 -- -- Accumulation unit value at end of period $ 0.97 -- -- Number of accumulation units outstanding at end of period (000 omitted) 628 -- -- Ratio of operating expense to average net assets 0.75% -- -- ----------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT SA1(1) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - STRATEGY AGGRESSIVE FUND) Accumulation unit value at beginning of period $ 1.21 $ 1.51 $ 1.00 Accumulation unit value at end of period $ 0.81 $ 1.21 $ 1.51 Number of accumulation units outstanding at end of period (000 omitted) 65,574 58,414 3,901 Ratio of operating expense to average net assets 0.95% 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 $ 1.22 $ 1.51 $ 1.00 Accumulation unit value at end of period $ 0.81 $ 1.22 $ 1.51 Number of accumulation units outstanding at end of period (000 omitted) 58,748 46,978 4,470 Ratio of operating expense to average net assets 0.75% 0.75% 0.75% ----------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 1AC(6) (INVESTING IN SHARES OF AIM V.I. CAPITAL APPRECIATION FUND, SERIES II) Accumulation unit value at beginning of period $ 1.00 -- -- Accumulation unit value at end of period $ 0.98 -- -- Number of accumulation units outstanding at end of period (000 omitted) 1,711 -- -- Ratio of operating expense to average net assets 0.95% -- -- ----------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 2AC(6) (INVESTING IN SHARES OF AIM V.I. CAPITAL APPRECIATION FUND, SERIES II) Accumulation unit value at beginning of period $ 1.00 -- -- Accumulation unit value at end of period $ 0.98 -- -- Number of accumulation units outstanding at end of period (000 omitted) 1,710 -- -- Ratio of operating expense to average net assets 0.75% -- -- ----------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 1AD(6) (INVESTING IN SHARES OF AIM V.I. CAPITAL DEVELOPMENT FUND, SERIES II) Accumulation unit value at beginning of period $ 1.00 -- -- Accumulation unit value at end of period $ 0.98 -- -- Number of accumulation units outstanding at end of period (000 omitted) 1,224 -- -- Ratio of operating expense to average net assets 0.95% -- -- ----------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 2AD(6) (INVESTING IN SHARES OF AIM V.I. CAPITAL DEVELOPMENT FUND, SERIES II) Accumulation unit value at beginning of period $ 1.00 -- -- Accumulation unit value at end of period $ 0.98 -- -- Number of accumulation units outstanding at end of period (000 omitted) 1,459 -- -- Ratio of operating expense to average net assets 0.75% -- -- ----------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 1AB(6) (INVESTING IN SHARES OF ALLIANCE VP ALLIANCEBERNSTEIN INTERNATIONAL VALUE PORTFOLIO (CLASS B)) Accumulation unit value at beginning of period $ 1.00 -- -- Accumulation unit value at end of period $ 0.98 -- -- Number of accumulation units outstanding at end of period (000 omitted) 790 -- -- Ratio of operating expense to average net assets 0.95% -- -- ----------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 2AB(6) (INVESTING IN SHARES OF ALLIANCE VP ALLIANCEBERNSTEIN INTERNATIONAL VALUE PORTFOLIO (CLASS B)) Accumulation unit value at beginning of period $ 1.00 -- -- Accumulation unit value at end of period $ 0.98 -- -- Number of accumulation units outstanding at end of period (000 omitted) 805 -- -- Ratio of operating expense to average net assets 0.75% -- -- ----------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 1AL(6) (INVESTING IN SHARES OF ALLIANCE VP GROWTH AND INCOME PORTFOLIO (CLASS B)) 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) 4,363 -- -- Ratio of operating expense to average net assets 0.95% -- -- ----------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 2AL(6) (INVESTING IN SHARES OF ALLIANCE VP GROWTH AND INCOME PORTFOLIO (CLASS B)) 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) 5,550 -- -- Ratio of operating expense to average net assets 0.75% -- -- ----------------------------------------------------------------------------------------------------------------------------------- 57 YEAR ENDED DEC. 31, 2001 2000 1999 --------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 1AI(6) (INVESTING IN SHARES OF AMERICAN CENTURY(R) VP INTERNATIONAL, CLASS II) Accumulation unit value at beginning of period $ 1.00 -- -- Accumulation unit value at end of period $ 0.93 -- -- Number of accumulation units outstanding at end of period (000 omitted) 1,927 -- -- Ratio of operating expense to average net assets 0.95% -- -- --------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 2AI(6) (INVESTING IN SHARES OF AMERICAN CENTURY(R) VP INTERNATIONAL, CLASS II) Accumulation unit value at beginning of period $ 1.00 -- -- Accumulation unit value at end of period $ 0.93 -- -- Number of accumulation units outstanding at end of period (000 omitted) 1,950 -- -- Ratio of operating expense to average net assets 0.75% -- -- --------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 1AV(6) (INVESTING IN SHARES OF AMERICAN CENTURY(R) VP VALUE, CLASS II) Accumulation unit value at beginning of period $ 1.00 -- -- Accumulation unit value at end of period $ 1.04 -- -- Number of accumulation units outstanding at end of period (000 omitted) 7,298 -- -- Ratio of operating expense to average net assets 0.95% -- -- --------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 2AV(6) (INVESTING IN SHARES OF AMERICAN CENTURY(R) VP VALUE, CLASS II) Accumulation unit value at beginning of period $ 1.00 -- -- Accumulation unit value at end of period $ 1.04 -- -- Number of accumulation units outstanding at end of period (000 omitted) 7,356 -- -- Ratio of operating expense to average net assets 0.75% -- -- --------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 1SR(3) (INVESTING IN SHARES OF CALVERT VARIABLE SERIES, INC. SOCIAL BALANCED PORTFOLIO) Accumulation unit value at beginning of period $ 0.96 $ 1.00 -- Accumulation unit value at end of period $ 0.89 $ 0.96 -- Number of accumulation units outstanding at end of period (000 omitted) 6,090 1,693 -- Ratio of operating expense to average net assets 0.95% 0.95% -- --------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 2SR(3) (INVESTING IN SHARES OF CALVERT VARIABLE SERIES, INC. SOCIAL BALANCED PORTFOLIO) Accumulation unit value at beginning of period $ 0.96 $ 1.00 -- Accumulation unit value at end of period $ 0.89 $ 0.96 -- Number of accumulation units outstanding at end of period (000 omitted) 4,490 1,283 -- Ratio of operating expense to average net assets 0.75% 0.75% -- --------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 1CG(6) (INVESTING IN SHARES OF EVERGREEN VA CAPITAL GROWTH FUND, CLASS L SHARES) Accumulation unit value at beginning of period $ 1.00 -- -- Accumulation unit value at end of period $ 0.95 -- -- Number of accumulation units outstanding at end of period (000 omitted) 1,015 -- -- Ratio of operating expense to average net assets 0.95% -- -- --------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 2CG(6) (INVESTING IN SHARES OF EVERGREEN VA CAPITAL GROWTH FUND, CLASS L SHARES) Accumulation unit value at beginning of period $ 1.00 -- -- Accumulation unit value at end of period $ 0.95 -- -- Number of accumulation units outstanding at end of period (000 omitted) 1,570 -- -- Ratio of operating expense to average net assets 0.75% -- -- --------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 1FG(6) (INVESTING IN SHARES OF FIDELITY VIP GROWTH & INCOME PORTFOLIO (SERVICE CLASS 2)) Accumulation unit value at beginning of period $ 1.00 -- -- Accumulation unit value at end of period $ 1.00 -- -- Number of accumulation units outstanding at end of period (000 omitted) 8,177 -- -- Ratio of operating expense to average net assets 0.95% -- -- --------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 2FG(6) (INVESTING IN SHARES OF FIDELITY VIP GROWTH & INCOME PORTFOLIO (SERVICE CLASS 2)) Accumulation unit value at beginning of period $ 1.00 -- -- Accumulation unit value at end of period $ 1.00 -- -- Number of accumulation units outstanding at end of period (000 omitted) 6,363 -- -- Ratio of operating expense to average net assets 0.75% -- -- --------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 1FM(6) (INVESTING IN SHARES OF FIDELITY VIP MID CAP PORTFOLIO (SERVICE CLASS 2)) Accumulation unit value at beginning of period $ 1.00 -- -- Accumulation unit value at end of period $ 1.04 -- -- Number of accumulation units outstanding at end of period (000 omitted) 6,689 -- -- Ratio of operating expense to average net assets 0.95% -- -- --------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 2FM(6) (INVESTING IN SHARES OF FIDELITY VIP MID CAP PORTFOLIO (SERVICE CLASS 2)) Accumulation unit value at beginning of period $ 1.00 -- -- Accumulation unit value at end of period $ 1.04 -- -- Number of accumulation units outstanding at end of period (000 omitted) 6,903 -- -- Ratio of operating expense to average net assets 0.75% -- -- --------------------------------------------------------------------------------------------------------------------------------- 58 YEAR ENDED DEC. 31, 2001 2000 1999 ----------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 1FO(6) (INVESTING IN SHARES OF FIDELITY VIP OVERSEAS PORTFOLIO (SERVICE CLASS 2)) Accumulation unit value at beginning of period $ 1.00 -- -- Accumulation unit value at end of period $ 0.94 -- -- Number of accumulation units outstanding at end of period (000 omitted) 2,157 -- -- Ratio of operating expense to average net assets 0.95% -- -- ----------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 2FO(6) (INVESTING IN SHARES OF FIDELITY VIP OVERSEAS PORTFOLIO (SERVICE CLASS 2)) Accumulation unit value at beginning of period $ 1.00 -- -- Accumulation unit value at end of period $ 0.95 -- -- Number of accumulation units outstanding at end of period (000 omitted) 2,147 -- -- Ratio of operating expense to average net assets 0.75% -- -- ----------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 1RE(1) (INVESTING IN SHARES OF FTVIPT FRANKLIN REAL ESTATE FUND - CLASS 2) Accumulation unit value at beginning of period $ 1.25 $ 0.96 $ 1.00 Accumulation unit value at end of period $ 1.33 $ 1.25 $ 0.96 Number of accumulation units outstanding at end of period (000 omitted) 19,803 6,181 683 Ratio of operating expense to average net assets 0.95% 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 $ 1.25 $ 0.96 $ 1.00 Accumulation unit value at end of period $ 1.34 $ 1.25 $ 0.96 Number of accumulation units outstanding at end of period (000 omitted) 24,477 6,879 885 Ratio of operating expense to average net assets 0.75% 0.75% 0.75% ----------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 1SI(1) (INVESTING IN SHARES OF FTVIPT FRANKLIN SMALL CAP VALUE SECURITIES FUND - CLASS 2) (PREVIOUSLY FTVIPT FRANKLIN VALUE SECURITIES FUND - CLASS 2) Accumulation unit value at beginning of period $ 1.19 $ 0.96 $ 1.00 Accumulation unit value at end of period $ 1.34 $ 1.19 $ 0.96 Number of accumulation units outstanding at end of period (000 omitted) 9,584 2,897 590 Ratio of operating expense to average net assets 0.95% 0.95% 0.95% ----------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 2SI(1) (INVESTING IN SHARES OF FTVIPT FRANKLIN SMALL CAP VALUE SECURITIES FUND - CLASS 2) (PREVIOUSLY FTVIPT FRANKLIN VALUE SECURITIES FUND - CLASS 2) Accumulation unit value at beginning of period $ 1.19 $ 0.96 $ 1.00 Accumulation unit value at end of period $ 1.35 $ 1.19 $ 0.96 Number of accumulation units outstanding at end of period (000 omitted) 10,800 2,846 586 Ratio of operating expense to average net assets 0.75% 0.75% 0.75% ----------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 1MS(6) (INVESTING IN SHARES OF FTVIPT MUTUAL SHARES SECURITIES FUND - CLASS 2) 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) 1,114 -- -- Ratio of operating expense to average net assets 0.95% -- -- ----------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 2MS(6) (INVESTING IN SHARES OF FTVIPT MUTUAL SHARES SECURITIES FUND - CLASS 2) Accumulation unit value at beginning of period $ 1.00 -- -- Accumulation unit value at end of period $ 0.97 -- -- Number of accumulation units outstanding at end of period (000 omitted) 942 -- -- Ratio of operating expense to average net assets 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 $ 0.99 $ 1.10 $ 1.00 Accumulation unit value at end of period $ 0.86 $ 0.99 $ 1.10 Number of accumulation units outstanding at end of period (000 omitted) 71,185 55,239 9,951 Ratio of operating expense to average net assets 0.95% 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 $ 0.99 $ 1.10 $ 1.00 Accumulation unit value at end of period $ 0.86 $ 0.99 $ 1.10 Number of accumulation units outstanding at end of period (000 omitted) 60,343 42,626 8,981 Ratio of operating expense to average net assets 0.75% 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 $ 1.23 $ 0.95 $ 1.00 Accumulation unit value at end of period $ 1.37 $ 1.23 $ 0.95 Number of accumulation units outstanding at end of period (000 omitted) 24,711 10,265 2,023 Ratio of operating expense to average net assets 0.95% 0.95% 0.95% ----------------------------------------------------------------------------------------------------------------------------------- 59 YEAR ENDED DEC. 31, 2001 2000 1999 ----------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 2MC(1) (INVESTING IN SHARES OF GOLDMAN SACHS VIT MID CAP VALUE FUND) Accumulation unit value at beginning of period $ 1.23 $ 0.95 $ 1.00 Accumulation unit value at end of period $ 1.37 $ 1.23 $ 0.95 Number of accumulation units outstanding at end of period (000 omitted) 23,748 7,622 1,634 Ratio of operating expense to average net assets 0.75% 0.75% 0.75% ----------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 1ID(6) (INVESTING IN SHARES OF INVESCO VIF - DYNAMICS FUND) 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) 1,426 -- -- Ratio of operating expense to average net assets 0.95% -- -- ----------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 2ID(6) (INVESTING IN SHARES OF INVESCO VIF - DYNAMICS FUND) 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) 1,550 -- -- Ratio of operating expense to average net assets 0.75% -- -- ----------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 1FS(6) (INVESTING IN SHARES OF INVESCO VIF - FINANCIAL SERVICES FUND) 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) 901 -- -- Ratio of operating expense to average net assets 0.95% -- -- ----------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 2FS(6) (INVESTING IN SHARES OF INVESCO VIF - FINANCIAL SERVICES FUND) Accumulation unit value at beginning of period $ 1.00 -- -- Accumulation unit value at end of period $ 0.97 -- -- Number of accumulation units outstanding at end of period (000 omitted) 1,081 -- -- Ratio of operating expense to average net assets 0.75% -- -- ----------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 1TC(6) (INVESTING IN SHARES OF INVESCO VIF - TECHNOLOGY 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) 911 -- -- Ratio of operating expense to average net assets 0.95% -- -- ----------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 2TC(6) (INVESTING IN SHARES OF INVESCO VIF - TECHNOLOGY 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) 490 -- -- Ratio of operating expense to average net assets 0.75% -- -- ----------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 1TL(6) (INVESTING IN SHARES OF INVESCO VIF - TELECOMMUNICATIONS FUND) Accumulation unit value at beginning of period $ 1.00 -- -- Accumulation unit value at end of period $ 0.84 -- -- Number of accumulation units outstanding at end of period (000 omitted) 614 -- -- Ratio of operating expense to average net assets 0.95% -- -- ----------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 2TL(6) (INVESTING IN SHARES OF INVESCO VIF - TELECOMMUNICATIONS FUND) Accumulation unit value at beginning of period $ 1.00 -- -- Accumulation unit value at end of period $ 0.84 -- -- Number of accumulation units outstanding at end of period (000 omitted) 404 -- -- Ratio of operating expense to average net assets 0.75% -- -- ----------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 1GT(3) (INVESTING IN SHARES OF JANUS ASPEN SERIES GLOBAL TECHNOLOGY PORTFOLIO: SERVICE SHARES) Accumulation unit value at beginning of period $ 0.68 $ 1.00 -- Accumulation unit value at end of period $ 0.42 $ 0.68 -- Number of accumulation units outstanding at end of period (000 omitted) 34,050 22,949 -- Ratio of operating expense to average net assets 0.95% 0.95% -- ----------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 2GT(3) (INVESTING IN SHARES OF JANUS ASPEN SERIES GLOBAL TECHNOLOGY PORTFOLIO: SERVICE SHARES) Accumulation unit value at beginning of period $ 0.68 $ 1.00 -- Accumulation unit value at end of period $ 0.43 $ 0.68 -- Number of accumulation units outstanding at end of period (000 omitted) 34,767 20,288 -- Ratio of operating expense to average net assets 0.75% 0.75% -- ----------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 1IG(3) (INVESTING IN SHARES OF JANUS ASPEN SERIES INTERNATIONAL GROWTH PORTFOLIO: SERVICE SHARES) Accumulation unit value at beginning of period $ 0.80 $ 1.00 -- Accumulation unit value at end of period $ 0.61 $ 0.80 -- Number of accumulation units outstanding at end of period (000 omitted) 64,147 29,251 -- Ratio of operating expense to average net assets 0.95% 0.95% -- ----------------------------------------------------------------------------------------------------------------------------------- 60 YEAR ENDED DEC. 31, 2001 2000 1999 --------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 2IG(3) (INVESTING IN SHARES OF JANUS ASPEN SERIES INTERNATIONAL GROWTH PORTFOLIO: SERVICE SHARES) Accumulation unit value at beginning of period $ 0.80 $ 1.00 -- Accumulation unit value at end of period $ 0.61 $ 0.80 -- Number of accumulation units outstanding at end of period (000 omitted) 60,527 25,763 -- Ratio of operating expense to average net assets 0.75% 0.75% -- --------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 1IP(1) (INVESTING IN SHARES OF LAZARD RETIREMENT INTERNATIONAL EQUITY PORTFOLIO) Accumulation unit value at beginning of period $ 0.96 $ 1.07 $ 1.00 Accumulation unit value at end of period $ 0.72 $ 0.96 $ 1.07 Number of accumulation units outstanding at end of period (000 omitted) 19,727 10,774 2,504 Ratio of operating expense to average net assets 0.95% 0.95% 0.95% --------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 2IP(1) (INVESTING IN SHARES OF LAZARD RETIREMENT INTERNATIONAL EQUITY PORTFOLIO) Accumulation unit value at beginning of period $ 0.96 $ 1.07 $ 1.00 Accumulation unit value at end of period $ 0.72 $ 0.96 $ 1.07 Number of accumulation units outstanding at end of period (000 omitted) 15,860 7,958 1,981 Ratio of operating expense to average net assets 0.75% 0.75% 0.75% --------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 1MG(3) (INVESTING IN SHARES OF MFS(R) INVESTORS GROWTH STOCK SERIES - SERVICE CLASS) Accumulation unit value at beginning of period $ 0.90 $ 1.00 -- Accumulation unit value at end of period $ 0.67 $ 0.90 -- Number of accumulation units outstanding at end of period (000 omitted) 51,051 21,973 -- Ratio of operating expense to average net assets 0.95% 0.95% -- --------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 2MG(3) (INVESTING IN SHARES OF MFS(R) INVESTORS GROWTH STOCK SERIES - SERVICE CLASS) Accumulation unit value at beginning of period $ 0.91 $ 1.00 -- Accumulation unit value at end of period $ 0.68 $ 0.91 -- Number of accumulation units outstanding at end of period (000 omitted) 50,212 19,521 -- Ratio of operating expense to average net assets 0.75% 0.75% -- --------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 1MD(3) (INVESTING IN SHARES OF MFS(R) NEW DISCOVERY SERIES - SERVICE CLASS) Accumulation unit value at beginning of period $ 0.96 $ 1.00 -- Accumulation unit value at end of period $ 0.90 $ 0.96 -- Number of accumulation units outstanding at end of period (000 omitted) 36,822 15,060 -- Ratio of operating expense to average net assets 0.95% 0.95% -- --------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 2MD(3) (INVESTING IN SHARES OF MFS(R) NEW DISCOVERY SERIES - SERVICE CLASS) Accumulation unit value at beginning of period $ 0.96 $ 1.00 -- Accumulation unit value at end of period $ 0.90 $ 0.96 -- Number of accumulation units outstanding at end of period (000 omitted) 34,072 12,308 -- Ratio of operating expense to average net assets 0.75% 0.75% -- --------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 1UT(6) (INVESTING IN SHARES OF MFS(R) UTILITIES SERIES - SERVICE CLASS) Accumulation unit value at beginning of period $ 1.00 -- -- Accumulation unit value at end of period $ 0.89 -- -- Number of accumulation units outstanding at end of period (000 omitted) 2,778 -- -- Ratio of operating expense to average net assets 0.95% -- -- --------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 2UT(6) (INVESTING IN SHARES OF MFS(R) UTILITIES SERIES - SERVICE CLASS) Accumulation unit value at beginning of period $ 1.00 -- -- Accumulation unit value at end of period $ 0.89 -- -- Number of accumulation units outstanding at end of period (000 omitted) 2,997 -- -- Ratio of operating expense to average net assets 0.75% -- -- --------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 1PE(6) (INVESTING IN SHARES OF PIONEER EQUITY INCOME VCT PORTFOLIO - CLASS II SHARES) Accumulation unit value at beginning of period $ 1.00 -- -- Accumulation unit value at end of period $ 0.97 -- -- Number of accumulation units outstanding at end of period (000 omitted) 1,106 -- -- Ratio of operating expense to average net assets 0.95% -- -- --------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 2PE(6) (INVESTING IN SHARES OF PIONEER EQUITY INCOME VCT PORTFOLIO - CLASS II SHARES) Accumulation unit value at beginning of period $ 1.00 -- -- Accumulation unit value at end of period $ 0.98 -- -- Number of accumulation units outstanding at end of period (000 omitted) 1,316 -- -- Ratio of operating expense to average net assets 0.75% -- -- --------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 1EU(6) (INVESTING IN SHARES OF PIONEER EUROPE VCT PORTFOLIO - CLASS II SHARES) Accumulation unit value at beginning of period $ 1.00 -- -- Accumulation unit value at end of period $ 0.98 -- -- Number of accumulation units outstanding at end of period (000 omitted) 143 -- -- Ratio of operating expense to average net assets 0.95% -- -- --------------------------------------------------------------------------------------------------------------------------------- 61 YEAR ENDED DEC. 31, 2001 2000 1999 --------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 2EU(6) (INVESTING IN SHARES OF PIONEER EUROPE VCT PORTFOLIO - CLASS II SHARES) Accumulation unit value at beginning of period $ 1.00 -- -- Accumulation unit value at end of period $ 0.98 -- -- Number of accumulation units outstanding at end of period (000 omitted) 121 -- -- Ratio of operating expense to average net assets 0.75% -- -- --------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 1HS(6) (INVESTING IN SHARES OF PUTNAM VT HEALTH SCIENCES FUND - CLASS IB SHARES) Accumulation unit value at beginning of period $ 1.00 -- -- Accumulation unit value at end of period $ 0.98 -- -- Number of accumulation units outstanding at end of period (000 omitted) 1,743 -- -- Ratio of operating expense to average net assets 0.95% -- -- --------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 2HS(6) (INVESTING IN SHARES OF PUTNAM VT HEALTH SCIENCES FUND - CLASS IB SHARES) Accumulation unit value at beginning of period $ 1.00 -- -- Accumulation unit value at end of period $ 0.98 -- -- Number of accumulation units outstanding at end of period (000 omitted) 2,137 -- -- Ratio of operating expense to average net assets 0.75% -- -- --------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 1PI(6) (INVESTING IN SHARES OF PUTNAM VT INTERNATIONAL GROWTH FUND - CLASS IB SHARES) 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) 2,180 -- -- Ratio of operating expense to average net assets 0.95% -- -- --------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 2PI(6) (INVESTING IN SHARES OF PUTNAM VT INTERNATIONAL GROWTH FUND - CLASS IB SHARES) 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) 2,460 -- -- 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 $ 1.29 $ 1.36 $ 1.00 Accumulation unit value at end of period $ 0.85 $ 1.29 $ 1.36 Number of accumulation units outstanding at end of period (000 omitted) 87,722 68,407 7,245 Ratio of operating expense to average net assets 0.95% 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 $ 1.29 $ 1.36 $ 1.00 Accumulation unit value at end of period $ 0.85 $ 1.29 $ 1.36 Number of accumulation units outstanding at end of period (000 omitted) 74,819 49,764 5,084 Ratio of operating expense to average net assets 0.75% 0.75% 0.75% --------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 1SO(6) (INVESTING IN SHARES OF STRONG OPPORTUNITY FUND II - ADVISOR CLASS) Accumulation unit value at beginning of period $ 1.00 -- -- Accumulation unit value at end of period $ 0.99 -- -- Number of accumulation units outstanding at end of period (000 omitted) 3,747 -- -- Ratio of operating expense to average net assets 0.95% -- -- --------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 2SO(6) (INVESTING IN SHARES OF STRONG OPPORTUNITY FUND II - ADVISOR CLASS) Accumulation unit value at beginning of period $ 1.00 -- -- Accumulation unit value at end of period $ 0.99 -- -- Number of accumulation units outstanding at end of period (000 omitted) 3,701 -- -- Ratio of operating expense to average net assets 0.75% -- -- --------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 1IT(1) (INVESTING IN SHARES OF WANGER INTERNATIONAL SMALL CAP) Accumulation unit value at beginning of period $ 1.08 $ 1.51 $ 1.00 Accumulation unit value at end of period $ 0.84 $ 1.08 $ 1.51 Number of accumulation units outstanding at end of period (000 omitted) 30,297 21,844 1,343 Ratio of operating expense to average net assets 0.95% 0.95% 0.95% --------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 2IT(1) (INVESTING IN SHARES OF WANGER INTERNATIONAL SMALL CAP) Accumulation unit value at beginning of period $ 1.08 $ 1.51 $ 1.00 Accumulation unit value at end of period $ 0.85 $ 1.08 $ 1.51 Number of accumulation units outstanding at end of period (000 omitted) 27,818 18,245 1,234 Ratio of operating expense to average net assets 0.75% 0.75% 0.75% --------------------------------------------------------------------------------------------------------------------------------- 62 YEAR ENDED DEC. 31, 2001 2000 1999 --------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 1SP(1) (INVESTING IN SHARES OF WANGER U.S. SMALLER COMPANIES) (PREVIOUSLY WANGER U.S. SMALL CAP) Accumulation unit value at beginning of period $ 1.05 $ 1.15 $ 1.00 Accumulation unit value at end of period $ 1.15 $ 1.05 $ 1.15 Number of accumulation units outstanding at end of period (000 omitted) 46,456 29,881 2,723 Ratio of operating expense to average net assets 0.95% 0.95% 0.95% --------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 2SP(1) (INVESTING IN SHARES OF WANGER U.S. SMALLER COMPANIES) (PREVIOUSLY WANGER U.S. SMALL CAP) Accumulation unit value at beginning of period $ 1.05 $ 1.15 $ 1.00 Accumulation unit value at end of period $ 1.16 $ 1.05 $ 1.15 Number of accumulation units outstanding at end of period (000 omitted) 40,791 23,813 2,476 Ratio of operating expense to average net assets 0.75% 0.75% 0.75% --------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 1AA(4) (INVESTING IN SHARES OF WELLS FARGO VT ASSET ALLOCATION FUND) Accumulation unit value at beginning of period $ 1.00 -- -- Accumulation unit value at end of period $ 0.97 -- -- Number of accumulation units outstanding at end of period (000 omitted) 3,224 -- -- Ratio of operating expense to average net assets 0.95% -- -- --------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 2AA(4) (INVESTING IN SHARES OF WELLS FARGO VT ASSET ALLOCATION FUND) Accumulation unit value at beginning of period $ 1.00 -- -- Accumulation unit value at end of period $ 0.97 -- -- Number of accumulation units outstanding at end of period (000 omitted) 3,799 -- -- Ratio of operating expense to average net assets 0.75% -- -- --------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 1WI(4) (INVESTING IN SHARES OF WELLS FARGO VT INTERNATIONAL EQUITY 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) 1,031 -- -- Ratio of operating expense to average net assets 0.95% -- -- --------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 2WI(4) (INVESTING IN SHARES OF WELLS FARGO VT INTERNATIONAL EQUITY 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) 1,200 -- -- Ratio of operating expense to average net assets 0.75% -- -- --------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 1SG(4) (INVESTING IN SHARES OF WELLS FARGO VT SMALL CAP GROWTH FUND) Accumulation unit value at beginning of period $ 1.00 -- -- Accumulation unit value at end of period $ 0.94 -- -- Number of accumulation units outstanding at end of period (000 omitted) 2,230 -- -- Ratio of operating expense to average net assets 0.95% -- -- --------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 2SG(4) (INVESTING IN SHARES OF WELLS FARGO VT SMALL CAP GROWTH FUND) Accumulation unit value at beginning of period $ 1.00 -- -- Accumulation unit value at end of period $ 0.94 -- -- Number of accumulation units outstanding at end of period (000 omitted) 2,060 -- -- Ratio of operating expense to average net assets 0.75% -- -- ---------------------------------------------------------------------------------------------------------------------------------
(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 May 1, 2001. (5) Operations commenced on Aug. 14, 2001. (6) Operations commenced on Aug. 13, 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 subaccounts because they are new and did not have any activity as of the date of the financial statements. 63 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. For some subaccounts we do not provide any performance information because they are new and did not have any activity. However, we show performance from the commencement date of the funds as if the subaccounts invested in them at that time, which, in some cases, they 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. Total return figures do not reflect any purchase payment credits. We may show total return quotations by means of schedules, charts or graphs. Total return figures reflect deduction of the following charges: - contract administrative charge, - applicable mortality and expense risk fee, - Maximum Anniversary Value Death Benefit Rider fee, - Enhanced Earnings Plus Death Benefit Rider fee, and - 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. 64 THE VARIABLE ACCOUNT AND THE FUNDS You may allocate purchase payments and transfers to any or all of the subaccounts of the variable account that invest in shares of the following funds:
SUBACCOUNT FOR SUBACCOUNT FOR INVESTMENT OBJECTIVES AND INVESTMENT ADVISER OR RAVA ADVANTAGE RAVA SELECT INVESTING IN POLICIES MANAGER -------------- ----------- ------------ -------- ------- BC1 BC4 AXP(R) Variable Objective: long-term total IDS Life, investment BC2 BC5 Portfolio - Blue Chip return exceeding that of the manager; American Express Advantage Fund U.S. stock market. Invests Financial Corporation primarily in blue chip stocks. (AEFC), investment Blue chip stocks are issued by adviser. companies with a market capitalization of at least $1 billion, an established management, a history of consistent earnings and a leading position within their respective industries. BD1 BD4 AXP(R) Variable Objective: high level of IDS Life, investment BD2 BD5 Portfolio - Bond Fund current income while manager; AEFC, conserving the value of the investment adviser. investment and continuing a high level of income for the longest time period. Invests primarily in bonds and other debt obligations. CR1 CR4 AXP(R) Variable Objective: capital IDS Life, investment CR2 CR5 Portfolio - Capital appreciation. Invests manager; AEFC, Resource Fund primarily in U.S. common investment adviser. stocks and other securities convertible into common stocks. CM1 CM4 AXP(R) Variable Objective: maximum current IDS Life, investment CM2 CM5 Portfolio - Cash income consistent with manager; AEFC, Management Fund liquidity and stability of investment adviser. principal. Invests primarily in money market securities. DE1 DE4 AXP(R) Variable Objective: a high level of IDS Life, investment DE2 DE5 Portfolio - current income and, as a manager; AEFC, Diversified Equity secondary goal, steady growth investment adviser. Income Fund of capital. Invests primarily in dividend-paying common and preferred stocks. EM1 EM4 AXP(R) Variable Objective: long-term capital IDS Life, investment EM2 EM5 Portfolio - Emerging growth. Invests primarily in manager; AEFC, investment Markets Fund equity securities of companies advisor; American Express in emerging market countries. Asset Management International, Inc., a wholly-owned subsidiary of AEFC, is the sub-adviser. ES1 ES4 AXP(R) Variable Objective: growth of capital. IDS Life, investment ES2 ES5 Portfolio - Equity Invests primarily in equity manager; AEFC, Select Fund securities of medium-sized investment adviser. companies. EI1 EI4 AXP(R) Variable Objective: high current IDS Life, investment EI2 EI5 Portfolio - Extra income, with capital growth as manager; AEFC, Income Fund a secondary objective. Invests investment adviser. primarily in high-yielding, high-risk corporate bonds (junk bonds) issued by U.S. and foreign companies and governments. 65 SUBACCOUNT FOR SUBACCOUNT FOR INVESTMENT OBJECTIVES AND INVESTMENT ADVISER OR RAVA ADVANTAGE RAVA SELECT INVESTING IN POLICIES MANAGER -------------- ----------- ------------ -------- ------- FI1 FI4 AXP(R) Variable Objective: a high level of IDS Life, investment FI2 FI5 Portfolio - Federal current income and safety of manager; AEFC, Income Fund principal consistent with an investment adviser. investment in U.S. government and government agency securities. Invests primarily in debt obligations issued or guaranteed as to principal and interest by the U.S. government, its agencies or instrumentalities. GB1 GB4 AXP(R) Variable Objective: high total return IDS Life, investment GB2 GB5 Portfolio - Global through income and growth of manager; AEFC, Bond Fund capital. Non-diversified fund investment adviser. that invests primarily in debt obligations of U.S. and foreign issuers. GR1 GR4 AXP(R) Variable Objective: long-term capital IDS Life, investment GR2 GR5 Portfolio - Growth growth. Invests primarily in manager; AEFC, Fund common stocks and securities investment adviser. convertible into common stocks that appear to offer growth opportunities. IE1 IE4 AXP(R) Variable Objective: capital IDS Life, investment IE2 IE5 Portfolio - appreciation. Invests manager; AEFC, investment International Fund primarily in common stocks or advisor. American Express convertible securities of Asset Management foreign issuers that offer International, Inc., a strong growth potential. wholly-owned subsidiary of AEFC, is the sub-adviser. MF1 MF4 AXP(R) Variable Objective: maximum total IDS Life, investment MF2 MF5 Portfolio - Managed investment return through a manager; AEFC, Fund combination of capital growth investment adviser. and current income. Invests primarily in a combination of common and preferred stocks, convertible securities, bonds and other debt securities. ND1 ND4 AXP(R) Variable Objective: long-term growth of IDS Life, investment ND2 ND5 Portfolio - NEW capital. Invests primarily in manager; AEFC, DIMENSIONS FUND(R) common stocks showing investment adviser. potential for significant growth. SV1 SV4 AXP(R) Variable Objective: long term capital IDS Life, investment SV2 SV5 Portfolio - Partners appreciation. Non-diversified manager; AEFC, Small Cap Value Fund fund that invests primarily in investment advisor; Royce equity securities. & Associates, LLC and EQSF Advisers, Inc., sub-advisers. IV1 IV4 AXP(R) Variable Objective: long-term capital IDS Life, investment IV2 IV5 Portfolio - S&P 500 appreciation. Non-diversified manager; AEFC, Index Fund fund that invests primarily in investment adviser. securities that are expected to provide investment results that correspond to the performance of the S&P 500 Index. 66 SUBACCOUNT FOR SUBACCOUNT FOR INVESTMENT OBJECTIVES AND INVESTMENT ADVISER OR RAVA ADVANTAGE RAVA SELECT INVESTING IN POLICIES MANAGER -------------- ----------- ------------ -------- ------- SC1 SC4 AXP(R) Variable Objective: long-term capital IDS Life, investment SC2 SC5 Portfolio - Small Cap growth. Invests primarily in manager; AEFC, Advantage Fund equity stocks of small investment advisor; companies that are often Kenwood Capital included in the Russell 2000 Management LLC, Index and/or have market sub-adviser. capitalization under $2 billion. ST1 ST4 AXP(R) Variable Objective: current income and IDS Life, investment ST2 ST5 Portfolio - Stock Fund growth of capital. Invests manager; AEFC, primarily in common stocks and investment adviser. securities convertible into common stock. SA1 SA4 AXP(R) Variable Objective: capital IDS Life, investment SA2 SA5 Portfolio - Strategy appreciation. Invests manager; AEFC, Aggressive Fund primarily in equity securities investment adviser. of growth companies. 1AC 4AC AIM V.I. Capital Objective: growth of capital. A I M Advisors, Inc. 2AC 5AC Appreciation Fund, Invests principally in common Series II stocks of companies likely to benefit from new or innovative products, services or processes as well as those with above-average growth and excellent prospects for future growth. 1AD 4AD AIM V.I. Capital Objective: long term growth of A I M Advisors, Inc. 2AD 5AD Development Fund, capital. Invests primarily in Series II securities (including common stocks, convertible securities and bonds) of small- and medium-sized companies. 1AB 4AB Alliance VP Objective: long-term growth of Alliance Capital 2AB 5AB AllianceBernstein capital. Invests primarily in Management, L.P. International Value a diversified portfolio of Portfolio (Class B) foreign equity securities. 1AL 4AL Alliance VP Growth Objective: reasonable current Alliance Capital 2AL 5AL and Income Portfolio income and reasonable Management, L.P. (Class B) appreciation. Invests primarily in dividend-paying common stocks of good quality. 1AI 4AI American Century(R) VP Objective: long term capital American Century 2AI 5AI International, Class II growth. Invests primarily in Investment Management, stocks of growing foreign Inc. companies in developed countries. 1AV 4AV American Century(R) VP Objective: long-term capital American Century 2AV 5AV Value, Class II growth, with income as a Investment Management, secondary objective. Invests Inc. primarily in stocks of companies that management believes to be undervalued at the time of purchase. 67 SUBACCOUNT FOR SUBACCOUNT FOR INVESTMENT OBJECTIVES AND INVESTMENT ADVISER OR RAVA ADVANTAGE RAVA SELECT INVESTING IN POLICIES MANAGER -------------- ----------- ------------ -------- ------- 1SR 4SR Calvert Variable Objective: income and capital Calvert Asset Management 2SR 5SR Series, Inc. Social growth. Invests primarily in Company, Inc. (CAMCO), Balanced Portfolio stocks, bonds and money market investment adviser. SSgA instruments which offer income Funds Management, Inc. and and capital growth opportunity Brown Capital Management are and which satisfy the the investment subadvisers. investment and social criteria. 1CG 4CG Evergreen VA Capital Objective: long-term capital Evergreen Investment 2CG 5CG Growth Fund, Class L growth. The fund seeks to Management Company, LLC. Shares achieve its goal by investing Pilgrim Baxter Value primarily in common stocks of Investors, Inc. is the large U.S. companies, which sub-investment adviser. the portfolio managers believe have the potential for capital growth over the intermediate- and long-term. 1FG 4FG Fidelity VIP Growth & Strategy: high total return Fidelity Management & 2FG 5FG Income Portfolio through a combination of Research Company (FMR), (Service Class 2) current income and capital investment manager; FMR appreciation. Normally invests U.K. and FMR Far East, a majority of assets in common sub-investment advisers. stocks with a focus on those that pay current dividends and show potential for capital appreciation. 1FM 4FM Fidelity VIP Mid Cap Strategy: long-term growth of FMR, investment manager; 2FM 5FM Portfolio (Service capital. Normally invests at FMR U.K. and FMR Far Class 2) least 80% of assets in East, sub-investment companies with medium market advisers. capitalization common stocks. 1FO 4FO Fidelity VIP Overseas Strategy: long-term growth of FMR, investment manager; 2FO 5FO Portfolio (Service capital. Invests primarily in FMR U.K., FMR Far East, Class 2) common stocks of foreign Fidelity International securities. Investment Advisors (FIIA) and FIIA U.K., sub-investment advisers. 1RE 4RE FTVIPT Franklin Real Objective: capital Franklin Advisers, Inc. 2RE 5RE Estate Fund - Class 2 appreciation with a secondary goal to earn current income. Invests at least 80% of its net assets in investments of companies operating in the real estate industry. The Fund invests primarily in equity real estate investment trusts (REITs). 1SI 4SI FTVIPT Franklin Objective: long-term total Franklin Advisory 2SI 5SI Small Cap Value return. Invests at least 80% Services, LLC Securities Fund - of its net assets in Class 2 (previously investments of small FTVIPT Franklin Value capitalization companies. For Securities Fund - this Fund, small Class 2) capitalization companies are those that have a market cap not exceeding $2.5 billion, at the time of purchase. Invests primarily in equity securities of companies manager believes are selling substantially below the underlying value of their assets or their private market value. 68 SUBACCOUNT FOR SUBACCOUNT FOR INVESTMENT OBJECTIVES AND INVESTMENT ADVISER OR RAVA ADVANTAGE RAVA SELECT INVESTING IN POLICIES MANAGER -------------- ----------- ------------ -------- ------- 1MS 4MS FTVIPT Mutual Shares Objective: capital Franklin Mutual Advisers, 2MS 5MS Securities Fund - appreciation with income as a LLC Class 2 secondary goal. Invests primarily in equity securities of companies that the manager believes are available at market prices less than their value based on certain recognized or objective criteria (intrinsic value). 1UE 4UE Goldman Sachs VIT Objective: seeks long-term Goldman Sachs Asset 2UE 5UE CORE(SM) U.S. Equity growth of capital and dividend Management Fund income. Invests, under normal circumstances, at least 90% of its total assets (not including securities lending collateral and any investment of that collateral) measured at time of purchase, in a broadly diversified portfolio of large-cap and blue chip equity investments representing all major sectors of the U.S. economy. 1MC 4MC Goldman Sachs VIT Objective: seeks long-term Goldman Sachs Asset 2MC 5MC Mid Cap Value Fund capital appreciation. Invests, Management under normal circumstances, at least 80% of its net assets plus any borrowing for investment purposes (measured at time of purchase) in a diversified portfolio of equity investments in mid-capitalization issuers within the range of the market capitalization of companies constituting the Russell Midcap Value index at the time of investment. 1ID 4ID INVESCO VIF - Objective: long-term growth of INVESCO Funds Group, Inc. 2ID 5ID Dynamics Fund capital. Invests primarily in common stocks of mid-sized companies - companies included in the Russell Mid-Cap Growth Index at the time of purchase, or if not included in that Index, those with market capitalizations between $2.5 billion and $15 billion at the time of purchase. The Fund also has the flexibility to invest in other types of securities, including preferred stocks, convertible securities and bonds. 69 SUBACCOUNT FOR SUBACCOUNT FOR INVESTMENT OBJECTIVES AND INVESTMENT ADVISER OR RAVA ADVANTAGE RAVA SELECT INVESTING IN POLICIES MANAGER -------------- ----------- ------------ -------- ------- 1FS 4FS INVESCO VIF - Objective: long-term growth of INVESCO Funds Group, Inc. 2FS 5FS Financial Services capital. Aggressively managed. Fund Invests at least 80% of its assets in the equity securities and equity-related instruments of companies involved in the financial services sector. These companies include but are not limited to, banks, insurance companies, and investment and miscellaneous industries (asset managers, brokerage firms, government-sponsored agencies and suppliers to financial services companies). 1TC 4TC INVESCO VIF - Objective: long-term growth of INVESCO Funds Group, Inc. 2TC 5TC Technology Fund capital. The Fund is aggressively managed. Invests at least 80% of its assets in equity securities and equity-related instruments 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, and networking companies. 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 4TL INVESCO VIF - Objective: long-term growth of INVESCO Funds Group, Inc. 2TL 5TL Telecommunications capital. Current income is a Fund secondary objective. The Fund is aggressively managed. 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. 70 SUBACCOUNT FOR SUBACCOUNT FOR INVESTMENT OBJECTIVES AND INVESTMENT ADVISER OR RAVA ADVANTAGE RAVA SELECT INVESTING IN POLICIES MANAGER -------------- ----------- ------------ -------- ------- 1GT 4GT Janus Aspen Series Objective: long-term growth of Janus Capital 2GT 5GT Global Technology capital. Non-diversified Portfolio: Service mutual fund that invests, Shares under normal circumstances, at least 80% of its net assets in securities of companies that the portfolio manager believes will benefit significantly from advances or improvements in technology. It implements this policy by investing primarily in equity securities of U.S. and foreign companies selected for their growth potential. 1IG 4IG Janus Aspen Series Objective: long-term growth of Janus Capital 2IG 5IG International Growth capital. Invests, under normal Portfolio: Service circumstances, at least 80% of Shares its net assets in securities of issuers from at least five different countries, excluding the United States. Although the Portfolio intends to invest substantially all of its assets in issuers located outside the United States, it may at times invest in U.S. issuers and it may at times invest all of its assets in fewer than five countries or even a single country. 1IP 4IP Lazard Retirement Objective: long-term capital Lazard Asset Management 2IP 5IP International Equity appreciation. Invests Portfolio primarily in equity securities, principally common stocks of relatively large non-U.S. 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. 1MG 4MG MFS(R) Investors Growth Objective: long-term growth of MFS Investment Management(R) 2MG 5MG Stock Series - capital and future income. Service Class Invests at least 80% of its total assets in common stocks and related securities of companies which MFS believes offer better than average prospects for long-term growth. 1MD 4MD MFS(R) New Discovery Objective: capital MFS Investment Management(R) 2MD 5MD Series - Service Class appreciation. Invests primarily in equity securities of emerging growth companies. 1UT 4UT MFS(R) Utilities Series Objective: capital growth and MFS Investment Management(R) 2UT 5UT - Service Class current income. Invests primarily in equity and debt securities of domestic and foreign companies in the utilities industry. 71 SUBACCOUNT FOR SUBACCOUNT FOR INVESTMENT OBJECTIVES AND INVESTMENT ADVISER OR RAVA ADVANTAGE RAVA SELECT INVESTING IN POLICIES MANAGER -------------- ----------- ------------ -------- ------- 1PE 4PE Pioneer Equity Income Objective: current income and Pioneer 2PE 5PE VCT Portfolio - long-term growth of capital Class II Shares from a portfolio consisting primarily of 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. 1EU 4EU Pioneer Europe VCT Objective: long-term growth of Pioneer 2EU 5EU Portfolio - Class II capital. Invests primarily in Shares equity securities of European issuers including common stocks, preferred 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. 1HS 4HS Putnam VT Health Objective: capital Putnam Investment 2HS 5HS Sciences Fund - appreciation. The fund seeks Management, LLC Class IB Shares its goal by investing at least 80% of its net assets in common stocks of U.S. companies in the health sciences industries, with a focus on growth stocks. 1PI 4PI Putnam VT Objective: capital Putnam Investment 2PI 5PI International Growth appreciation. The fund seeks Management, LLC Fund - Class IB Shares its goal by investing mainly in common stocks of companies outside the United States. 1VS 4VS Putnam VT Vista Fund Objective: capital Putnam Investment 2VS 5VS - Class IB Shares appreciation. The fund seeks Management, LLC its goal by investing mainly in common stocks of U.S. companies with a focus on growth stocks. 1SO 4SO Strong Opportunity Objective: seeks capital Strong Capital 2SO 5SO Fund II - Advisor growth. Invests primarily in Management, Inc. Class common stocks of medium capitalization companies that the Fund's managers believe are underpriced, yet have attractive growth prospects. 72 SUBACCOUNT FOR SUBACCOUNT FOR INVESTMENT OBJECTIVES AND INVESTMENT ADVISER OR RAVA ADVANTAGE RAVA SELECT INVESTING IN POLICIES MANAGER -------------- ----------- ------------ -------- ------- 1IT 4IT Wanger International Objective: long-term growth of Liberty Wanger Asset 2IT 5IT Small Cap capital. Invests primarily in Management, L.P. stocks of small- and medium-size non-U.S. companies with capitalizations of less than $2 billion. 1SP 4SP Wanger U.S. Smaller Objective: long-term growth of Liberty Wanger Asset 2SP 5SP Companies capital. Invests primarily in Management, L.P. (previously Wanger stocks of small- and U.S. Small Cap) medium-size U.S. companies with capitalizations of less than $5 billion. 1AA 4AA Wells Fargo VT Asset Objective: long-term total Wells Fargo Funds 2AA 5AA Allocation Fund return, consistent with Management, LLC, adviser; reasonable risk. Invests Wells Capital Management primarily in the securities of Incorporated, sub-adviser. 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+ Treasury Index) and money market instruments, operating from a target allocation of 60% stocks and 40% bonds. 1WI 4WI Wells Fargo VT Objective: total return with Wells Fargo Funds 2WI 5WI International Equity an emphasis on capital Management, LLC, adviser; Fund appreciation over the Wells Capital Management long-term. Invests primarily Incorporated, sub-adviser. in equity securities of non-U.S. companies. 1SG 4SG Wells Fargo VT Small Objective: long-term capital Wells Fargo Funds 2SG 5SG Cap Growth Fund appreciation. Invests Management, LLC, adviser; primarily in common stocks Wells Capital Management issued by companies whose Incorporated, sub-adviser. market capitalization falls within the range of the Russell 2000 Index, which is considered a small capitalization index.
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 advisers 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. 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 73 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 and transfers 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 29). 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.) 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: - the optional Maximum Anniversary Value Death Benefit Rider;(1) - the optional Enhanced Earnings Death Benefit Rider;(1) - the optional Enhanced Earnings Plus Death Benefit Rider;(1) - the fixed account and/or subaccounts in which you want to invest; - how you want to make purchase payments; - a beneficiary; and - under RAVA Advantage, the length of the surrender charge period (seven or ten years).(2) (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. (2) The ten-year surrender charge schedule under RAVA Advantage is not available for contracts issued in Oregon. For RAVA Advantage contracts issued in Massachusetts, Oregon and Washington, we waive surrender charges after the tenth contract anniversary. 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. 74 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 your application is not complete, you must give us the information to complete it within five business days. If we cannot accept your application within five business days, we will decline it and return your payment unless you specifically ask us to keep the payment and apply it once your application is complete. 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: - no earlier than the 60th day after the contract's effective date; and - no later than the annuitant's 85th birthday or the tenth contract anniversary, if purchased after age 75. FOR QUALIFIED ANNUITIES EXCEPT ROTH IRAS, to avoid IRS penalty taxes, the settlement date generally must be: - on or after the date the annuitant reaches age 59 1/2; and - 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 - 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. 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* If paying by installments under a scheduled payment plan: $23.08 biweekly, or $50 per month
RAVA ADVANTAGE RAVA SELECT If paying by any other method: initial payment for qualified annuities $ 1,000 $ 2,000 initial payment for nonqualified annuities 2,000 10,000 for any additional payments 50 50
* 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 in New Jersey. MAXIMUM ALLOWABLE PURCHASE PAYMENTS** based on the age of you or the annuitant, whoever is older, on the effective date of the contract:
RAVA ADVANTAGE RAVA SELECT For the first year: up to age 85 $1,000,000 $999,999 for ages 86 to 90 100,000 100,000 For each subsequent year: up to age 85 100,000 100,000 for ages 86-90 50,000 50,000
** 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. Except for TSAs, purchase payments are limited and may not be made after the third contract anniversary in Massachusetts, Washington and Oregon. 75 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: - an automatic payroll deduction, salary reduction or other group billing arrangement; or - a bank authorization. CHARGES CONTRACT ADMINISTRATIVE CHARGE We charge this fee for establishing and maintaining your records. We deduct $30 from the contract value of RAVA Advantage or RAVA Select 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. 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% for RAVA Advantage and 1.20% for RAVA Select of the average daily net assets on an annual basis. For qualified annuities the fee totals 0.75% for RAVA Advantage and 1.00% for RAVA Select 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: - first, to the extent possible, the subaccounts pay this fee from any dividends distributed from the funds in which they invest; - then, if necessary, the funds redeem shares to cover any remaining fees payable. We may use any profits we realize from the subaccounts' payment to us of the mortality and expense risk fee for any proper corporate purpose, including, among others, payment of distribution (selling) expenses. We do not expect that the surrender charge, discussed in the following paragraphs, will cover sales and distribution expenses. 76 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 of RAVA Advantage or RAVA Select 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 a 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 of RAVA Advantage or RAVA Select 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 a change in 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 0.90%. 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 of RAVA Advantage or RAVA Select 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 a change in 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 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 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 nonqualified contracts. EEP is only available on contracts purchased through a transfer or exchange. SURRENDER CHARGE If you surrender all or part of your contract, you may be subject to a surrender charge. For RAVA Advantage, 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.* For RAVA Select, a surrender charge applies if you surrender all or part of your purchase payments in the first three (3) contract years. The surrender charge percentages that apply to you are shown in your contract. * The ten-year surrender charge schedule under RAVA Advantage is not available in Oregon. SURRENDER CHARGE UNDER RAVA ADVANTAGE: For purposes of calculating any surrender charge under RAVA Advantage, 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. 77 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
SURRENDER CHARGE UNDER RAVA SELECT For purposes of calculating any surrender charge under RAVA Select, 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. We do not assess a surrender charge on this amount. (Your initial purchase payment is considered the prior contract anniversary contract value during the first contract year.) 3. Finally, if necessary, we surrender purchase payments. We do assess a surrender charge on these payments during the first three contract years as follows:
CONTRACT YEAR SURRENDER CHARGE PERCENTAGE 1 7% 2 7 3 7 Thereafter 0
PARTIAL SURRENDERS UNDER RAVA ADVANTAGE AND RAVA SELECT 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 $1,075.27. We determine this amount as follows: AMOUNT REQUESTED $1,000 ---------------------------- OR ------ = $1,075.27 1.00 - SURRENDER CHARGE .93 By applying the 7% surrender charge to $1,075.27, the surrender charge is $75.27. 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 under RAVA Advantage is not available in Oregon. For contracts issued in Massachusetts, Oregon and Washington, we waive surrender charges after the tenth contract anniversary. 78 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 RAVA Advantage contract that contains a seven-year surrender charge schedule with this history: - The contract date is July 1, 2002 with a contract year of July 1 through June 30 and with an anniversary date of July 1 each year; and - We received these payments: -- $10,000 July 1, 2002; -- $ 8,000 Dec. 31, 2007; -- $ 6,000 Feb. 20, 2010; and - The owner surrenders the contract for its total surrender value of $26,500 on Aug. 5, 2011 and had not made any other surrenders during that contract year; and - The prior anniversary July 1, 2011 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, 2002 payment was received eight or more years before surrender and is surrendered without surrender charge; and 480 $8,000 Dec. 31, 2007 payment is in its fourth year from receipt, surrendered with a 6% surrender charge; and 420 $6,000 Feb. 20, 2010 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 under RAVA Advantage or RAVA Select for: - surrenders of any contract earnings; - surrenders of amounts totaling up to 10% of your prior contract anniversary contract value to the extent it exceeds contract earnings; - amounts surrendered after the tenth contract anniversary in Massachusetts, Washington and Oregon. - required minimum distributions from a qualified annuity (for those amounts required to be distributed from the contract described in this prospectus); - contracts settled using an annuity payout plan, unless an annuity payout Plan E is later surrendered; - amounts we refund to you during the free look period*; - death benefits*; and - 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. Under this provision, we will waive surrender charges that we normally assess upon full or partial surrender. Under RAVA Advantage, you must 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. Under RAVA Select, you must provide proof satisfactory to us that, as of the date you request the surrender, you or your spouse are confined to a nursing home or hospital 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). 79 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. 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: - the sum of your purchase payments and transfer amounts allocated to the fixed account; - plus any purchase payment credits allocated to the fixed account; - plus interest credited; - minus the sum of amounts surrendered (including any applicable surrender charges) and amounts transferred out; - minus any prorated portion of the contract administrative charge; - minus any prorated portion of the Maximum Anniversary Value Death Benefit Rider fee (if applicable); - minus any prorated portion of the Enhanced Earnings Death Benefit Rider fee (if applicable); and - 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 or a surrender charge, or any applicable charge for an optional death benefit, 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: - 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 - dividing that sum by the previous adjusted net asset value per share; and - 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. 80 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: - additional purchase payments you allocate to the subaccounts; - any purchase payment credits allocated to the subaccounts; - transfers into or out of the subaccounts; - partial surrenders; - surrender charges; - a prorated portion of the contract administrative charge; - a prorated portion of the Maximum Anniversary Value Death Benefit Rider fee (if selected); - a prorated portion of the Enhanced Earnings Death Benefit Rider fee (if selected); and/or - a prorated portion of the Enhanced Earnings Plus Death Benefit Rider fee (if selected). Accumulation unit values will fluctuate due to: - changes in funds' net asset value; - dividends distributed to the subaccounts; - capital gains or losses of funds; - fund operating expenses; and/or - mortality and expense risk fees. PURCHASE PAYMENT CREDITS UNDER RAVA ADVANTAGE For RAVA Advantage, we add a credit* to your contract in the amount of: - 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. - 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 credits 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. The amount returned to you under the free look provision also will not include any credits applied to your contract. (See "The Contract in Brief - Free look period.") 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. This credit is available because of lower costs associated with larger sized contracts and lower compensation paid on the sales of these contracts. We reserve the right to increase the amount of the credit for certain groups of contract owners. The increase will not be greater than 8% of total net payments. Increases in credit amounts are funded by reduced expenses expected from such groups. * The ten-year surrender charge under RAVA Advantage is not available in Oregon. RAVA Advantage contracts purchased in Oregon are only eligible for a 1% purchase payment credit if the initial purchase payment is at least $100,000. PURCHASE PAYMENT CREDITS UNDER RAVA SELECT For RAVA Select, we add a credit to your contract in the amount of 1% of each purchase payment received in the first contract year if your initial purchase payment to the contract is at least $250,000. We fund the credits 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. The amount returned to you under the free look provision also will not include any credits applied to your contract. (See "The Contract in Brief - Free look period.") We will not assess a charge equal to the amount of the purchase payment credits upon payment of a death benefit or surrender. 81 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 AMOUNT ACCUMULATION OF UNITS MONTH INVESTED UNIT VALUE PURCHASED By investing an equal number Of dollars each month 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 Subject to availability, you can ask 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. 82 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. The contract is not designed for use by individuals, professional market timing organizations, or other entities that do "market timing," programmed transfers, frequent transfers or excessive trading, or transfers that are large in relation to the total assets of any fund underlying the contract. These and similar activities may adversely affect a fund's ability to invest effectively in accordance with its investment objectives and policies, may increase expenses and may harm other contract owners who allocated purchase payments to the fund regardless of their transfer activity. Accordingly, individuals and organizations that use market-timing investment strategies and make frequent transfers should not own this contract. We monitor the frequency of transfers, including the size of transfers in relation to fund assets in each underlying fund, and we take appropriate action as necessary. In order to prevent market timing activities that may harm or disadvantage other contract owners, we may apply modifications or restrictions in any reasonable manner to prevent a transfer. We may suspend transfer privileges at any time. We may also reject or restrict any specific payment or transfer request and impose specific limitations with respect to market timers, including restricting transfers by market timers to certain underlying funds. We may also apply other restrictions or modifications that could include, but not be limited to: - not accepting telephone or electronic transfer requests; - requiring a minimum time period between each transfer; - not accepting transfer requests of an agent acting under power of attorney on behalf of more than one contract owner; or - limiting the dollar amount that a contract owner may transfer at any one time. We agree to provide notice of our intent to restrict transfer privileges to contract owners who have engaged in disruptive activity. In addition, some of the underlying funds have reserved the right to temporarily or permanently refuse payments or transfer requests from us if, in the judgment of the fund's investment adviser, the fund would be unable to invest effectively in accordance with its investment objective or policies, or would otherwise potentially be adversely affected. Accordingly, we may not be in a position to effect certain allocations or transfers requested by market timers and may refuse such requests without prior notice. Subject to state law, we reserve the right to impose, without prior notice, restrictions on allocations and transfers that we determine, in our sole discretion, will disadvantage or potentially hurt the rights or interests of other contract owners. For information on transfers after annuity payouts begin, see "Transfer policies" below. TRANSFER POLICIES - 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. - 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). - 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. - 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. - We will not accept requests for transfers from the fixed account at any other time. - 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. 83 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. - 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. - Automated surrenders may be restricted by applicable law under some contracts. - You may not make additional purchase payments if automated partial surrenders are in effect. - Automated partial surrenders may result in IRS taxes and penalties on all or part of the amount surrendered. - The balance in any account from which you make an automated transfer or automated partial surrender must be sufficient to satisfy your instructions. If not, we will suspend your entire automated arrangement until the balance is adequate. - If we must suspend your automated transfer or automated partial surrender arrangement for six months, we reserve the right to discontinue the arrangement in its entirety. 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. 84 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 1 BY REGULAR OR EXPRESS MAIL: - payable to you; - mailed to address of record. NOTE: We will charge you a fee if you request express mail delivery. 2 BY WIRE: - request that payment be wired to your bank; - bank account must be in the same ownership as your contract; and - pre-authorization required. NOTE: We will charge you a fee if you request that payment be wired to your bank. For instructions, please 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-SHELTERED ANNUITIES The Code imposes certain restrictions on your right to receive early distributions from a TSA: - 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 severed employment with the employer who purchased the contract; or -- the distribution is because of your death. - If you encounter a financial hardship (as provided by the Code), you may be eligible to receive a distribution of all contract values attributable to salary reduction contributions made after Dec. 31, 1988, but not the earnings on them. - Even though a distribution may be permitted under the above rules, it may be subject to IRS taxes and penalties (see "Taxes"). - 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. - 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. - If the contract has a loan provision, the right to receive a loan is described in detail in your contract. 85 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 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: - contract value; - purchase payments minus adjusted partial surrenders; or - 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 are age 81 or older on the date of death, the beneficiary receives the greater of: - contract value; or - purchase payments minus adjusted partial surrenders. ADJUSTED PARTIAL SURRENDERS: PS X DB ------- CV PS = the partial surrender including any applicable surrender charge. DB = the death benefit on the date of (but prior to) the partial surrender. CV = the contract value on the date of (but prior to) the partial surrender. 86 EXAMPLE OF STANDARD DEATH BENEFIT CALCULATION WHEN THE OWNER AND ANNUITANT ARE AGE 80 OR YOUNGER: - You purchase the contract with a payment of $20,000 on Jan. 1, 2002. - On Jan 1, 2008 (the sixth contract anniversary) the contract value grows to $30,000. - March 1, 2008 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, 2008 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: - the beneficiary asks us in writing within 60 days after we receive proof of death; and - payouts begin no later than one year after your death, or other date as permitted by the Code; and - the payout period does not extend beyond the beneficiary's life or life expectancy. QUALIFIED ANNUITIES The IRS has issued proposed regulations to take effect Jan. 1, 2002 which may affect distributions from your qualified annuity. Contact your tax advisor if you have any questions as to the impact of the new proposed rules on your situation. - SPOUSE BENEFICIARY: If you have not elected an annuity payout plan, and if your spouse is the sole beneficiary, your spouse may elect to receive payouts, or elect to treat the contract as his/her own. If your spouse elects a payout option, the payouts must begin no later than the year in which the annuitant would have reached age 70 1/2. If the annuitant attained age 70 1/2 at the time of death, payouts must begin no later than Dec. 31 of the year following the year of the annuitant's death. - NON-SPOUSE BENEFICIARY: If you have not elected an annuity payout plan, and if death occurs prior to the year the annuitant would have attained age 70 1/2, the beneficiary may elect to receive payouts from the contract over a five year period. If the annuitant's death occurs after attaining age 70 1/2, we will pay the beneficiary in a single sum unless the beneficiary elects to receive payouts under any annuity payout plan available under this contract if: - the beneficiary asks us in writing within 60 days after we receive proof of death; and - payouts begin no later than one year following the year of your death; and - the payout period does not extend beyond the beneficiary's life or life expectancy. - ANNUITY PAYOUT PLAN: If you elect an annuity payout plan, the payouts to your beneficiary will continue pursuant to the annuity payout plan you elect. 87 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. 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. We reserve the right to discontinue offering the MAV Death Benefit for new contracts. 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 - You may terminate the rider within 30 days of the first contract anniversary after the rider effective date. - You may terminate the rider within 30 days of any contract anniversary beginning with the seventh contract anniversary. - The rider will terminate when you make a full surrender from the contract or when annuity payouts begin. - The rider will terminate in the case of spousal continuation or ownership change if the new owner is age 76 or older. EXAMPLE - You purchase the contract with a payment of $20,000 on Jan. 1, 2002. - On Jan. 1, 2003 (the first contract anniversary) the contract value grows to $24,000. - On March 1, 2003 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, 2003 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 he or she elects to continue the contract has reached age 76, the MAV Death Benefit rider will terminate. If your spouse at the time he or she elects to continue the contract 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 under the MAV Death Benefit rider. If, at the time he or she elects to continue the contract, your spouse has not yet reached age 76 and chooses not to continue the MAV Death Benefit rider, the contract value will be increased to the MAV death benefit amount if it is greater than the contract value on the death benefit valuation date. 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. 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 he or she elects to continue the contract has reached age 76, the MAV death benefit rider will terminate. If your spouse at the time he or she elects to continue the contract 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 under the MAV Death Benefit rider. If, at 88 the time he or she elects to continue the contract, your spouse has not yet reached age 76 and chooses not to continue the MAV Death Benefit rider, the contract value will be increased to the MAV death benefit amount if it is greater than the contract value on the death benefit valuation date. 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 the rider effective date, 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. 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. 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. 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: - the standard death benefit (see "Benefits in Case of Death - Standard Benefit") or the MAV death benefit, if applicable, PLUS - 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 - 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 - You may terminate the rider within 30 days of the first contract anniversary after the rider effective date. - You may terminate the rider within 30 days of any contract anniversary beginning with the seventh contract anniversary after the rider effective date. - The rider will terminate when you make a full surrender from the contract or when annuity payouts begin. - The rider will terminate in the case of spousal continuation or ownership change if the new owner is age 76 or older. EXAMPLE OF THE ENHANCED EARNINGS DEATH BENEFIT - You purchase the contract with a payment of $100,000 on Jan. 01, 2002 and you and the annuitant are under age 70. You select the seven-year surrender charge schedule, the MAV death benefit and the EEB. - On July 1, 2002 the contract value grows to $105,000. The death benefit on July 1, 2002 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. - On Jan. 1, 2003 the contract value grows to $110,000. The death benefit on Jan. 1, 2003 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
89 - On Jan. 1, 2004 the contract value falls to $105,000. The death benefit on Jan. 1, 2004 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
- On Feb. 1, 2004 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, 2004 equals: MAV death benefit (MAV adjusted for partial surrenders): ($50,000 X $110,000) $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
- On Jan. 1, 2005 the contract value falls by $40,000. The death benefit on Jan. 1, 2005 equals the death benefit paid on Feb. 1, 2004. The reduction in contract value has no effect. - On Jan. 1, 2011 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, 2011 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
- On July 1, 2011 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, 2011 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
- On July 1, 2012 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, 2012 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
90 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 he or she elects to continue the contract has reached age 76, the EEB rider will terminate. If your spouse at the time he or she elects to continue the contract has not yet reached age 76, he or she may choose to continue the EEB. In this case, the following conditions will apply: - the rider will continue, but we will treat the new contract value on the date the ownership of the contract changes to your spouse (after the additional amount is paid into the contract) as if it is a purchase payment in calculating future values of "earnings at death." - the percentages of "earnings at death" payable will be based on your spouse's age at the time he or she elects to continue the contract. - 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 under the EEB rider. 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. 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: - EEP Part I benefits, which equal the benefits payable under the EEB described above; PLUS - 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 ANNUITANT ARE PERCENTAGE IF YOU OR THE ANNUITANT ARE CONTRACT YEAR UNDER AGE 70 ON THE RIDER EFFECTIVE DATE 70 OR OLDER 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. Another way to describe the benefits payable under the EEP rider is as follows: - 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 exchange 15% X (earnings at death + 25% of exchange purchase payment*) purchase payment*) 5+ 40% X (earnings at death + 50% of exchange 15% X (earnings at death + 50% of exchange purchase payment*) 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 exchange purchase payments if we did not receive proper notification from the company from which the purchase payments are exchanged. 91 TERMINATING THE EEP - You may terminate the rider within 30 days of the first contract anniversary after the rider effective date. - You may terminate the rider within 30 days of any contract anniversary beginning with the seventh contract anniversary. - The rider will terminate when you make a full surrender from the contract or when annuity payouts begin. - The rider will terminate in the case of spousal continuation or ownership change. EXAMPLE OF THE ENHANCED EARNINGS PLUS DEATH BENEFIT - You purchase the contract with an exchange purchase payment of $100,000 on Jan. 01, 2002 and you and the annuitant are under age 70. You select the seven-year surrender charge schedule, the MAV death benefit and the EEP. - On July 1, 2002 the contract value grows to $105,000. The death benefit on July 1, 2002 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. - On Jan. 1, 2003 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 Jan. 1, 2003 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
- On Jan. 1, 2004 the contract value falls to $105,000. The death benefit on Jan. 1, 2004 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
- On Feb. 1, 2004 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, 2004 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
- On Jan. 1, 2005 the contract value falls by $40,000. The death benefit on Jan. 1, 2005 equals the death benefit paid on Feb. 1, 2004. The reduction in contract value has no effect. 92 - On Jan. 1, 2011 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, 2011 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
- On July 1, 2011 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, 2011 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
- On July 1, 2012 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, 2012 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 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 EEP. If your spouse at the time he or she elects to continue the contract has reached age 76, the EEP rider will terminate. If your spouse at the time he or she elects to continue the contract has not yet reached age 76, he or she may choose to convert the EEP rider into an EEB. In this case, the following conditions will apply: - the EEB rider will treat the new contract value on the date the ownership of the contract changes to your spouse (after the additional amount is paid into the contract) as if it is a purchase payment in calculating future values of "earnings at death." - the percentages of "earnings at death" payable will be based on your spouse's age at the time he or she elects to continue the contract. - 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 EEB 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 under the EEB rider. If your spouse chooses not to convert the EEB rider into an EEB, the standard death benefit (or the MAV death benefit, if applicable) will apply. NOTE: For special tax considerations associated with the EEP, see "Taxes." 93 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: - the annuity payout plan you select; - the annuitant's age and, in most cases, sex; - the annuity table in the contract; and - 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 payout 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. For example, annuity payouts will increase if the investment return is above the assumed investment rate and payouts will decrease if the return is below the assumed investment rate. 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. 94 ANNUITY PAYOUT PLANS You may choose any one of these annuity payout plans by giving us written instructions at least 30 days before contract values are used to purchase the payout plan: - PLAN A: LIFE ANNUITY -- NO REFUND: We make monthly payouts until the annuitant's death. Payouts end with the last payout before the annuitant's death. We will not make any further payouts. This means that if the annuitant dies after we made only one monthly payout, we will not make any more payouts. - 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. - PLAN C: LIFE ANNUITY -- INSTALLMENT REFUND: We make monthly payouts until the annuitant's death, with our guarantee that payouts will continue for some period of time. We will make payouts for at least the number of months determined by dividing the amount applied under this option by the first monthly payout, whether or not the annuitant is living. - PLAN D: JOINT AND LAST SURVIVOR LIFE ANNUITY -- NO REFUND: We make monthly payouts while both the annuitant and a joint annuitant are living. If either annuitant dies, we will continue to make monthly payouts at the full amount until the death of the surviving annuitant. Payouts end with the death of the second annuitant. - PLAN E: PAYOUTS FOR A SPECIFIED PERIOD: We make monthly payouts for a specific payout period of 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. An 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: - 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 - 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 - 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. 95 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. If the annuitant dies before your investment in the contract is fully recovered, the remaining portion of the unrecovered investment can be taken as a federal income tax deduction for the last taxable year of the annuitant. 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 non-deductible contributions or with after-tax dollars rolled from a retirement plan. 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 an 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 IRS 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. 96 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: - because of your death; - because you become disabled (as defined in the Code); - if the distribution is part of a series of substantially equal periodic payments, made at least annually, over your life or life expectancy (or joint lives or life expectancies of you and your beneficiary); or - if it is allocable to an investment before Aug. 14, 1982 (except for qualified annuities). For 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: - instead of receiving the distribution check, you elect to have the distribution rolled over directly to an IRA or another eligible plan; - 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; - the payout is a minimum distribution required under the Code; or - the payout is made on account of an eligible hardship. 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 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. You may not collaterally assign or pledge your qualified contracts. 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. IDS LIFE'S TAX STATUS: IDS Life is taxed as a life insurance company under the Code. For federal income tax purposes, the subaccounts are considered a part of IDS Life, although their operations are treated separately in accounting and financial statements. Investment income from the subaccounts is reinvested and becomes part of the subaccounts' value. This investment income, including realized capital gains, is not taxed to IDS Life, and therefore no charge is made against the subaccounts for federal income taxes. IDS Life reserves the right to make such a charge in the future if there is a change in the tax treatment of variable annuities. 97 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: - the reserve held in each subaccount for your contract; divided by - 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: - laws or regulations change; - the existing funds become unavailable; or - in our judgment, the funds no longer are suitable for the subaccounts. If any of these situations occur, and if we believe it is in the best interest of persons having voting rights under the contract, we have the right to substitute the funds currently listed in this prospectus for other funds. We may also: - add new subaccounts; - combine any two or more subaccounts; - make additional subaccounts investing in additional funds; - transfer assets to and from the subaccounts or the variable account; and - 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 10,200 advisors. IDS Life pays commissions for sales of the contracts of up to 7% of the total purchase payments received. 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. 98 LEGAL PROCEEDINGS A number of lawsuits involving insurance sales practices, alleged agent misconduct, failure to properly supervise agents and other matters relating to life insurance policies and annuity contracts have been filed against life and health insurers in jurisdictions in which IDS Life and its affiliates do business. IDS Life and its affiliates, like other life and health insurers, are involved in such litigation. IDS Life was a named defendant in three class action lawsuits of this nature. 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. 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. On October 13, 1998, and 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. These three class action lawsuits included allegations of improper insurance and annuity sales practices including improper replacement of existing annuity contracts and insurance policies, improper use of annuities to fund tax deferred contributory retirement plans, alleged agent misconduct, failure to properly supervise agents and other matters relating to life insurance policies and annuity contracts. In January 2000, AEFC and its subsidiaries 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 in exchange for a 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 May 2001, the United States District Court for the District of Minnesota and the District Court, Fourth Judicial District for the State of Minnesota, Hennepin County entered orders approving the settlement as tentatively reached in January 2000. Appeals were filed in both federal and state court but subsequently dismissed by the parties filing the appeals. The orders approving the settlement were final as of September 24, 2001. Implementation of the settlement commenced October 15, 2001. Numerous individuals opted out of the settlement described above and therefore did not release their claims against AEFC and its subsidiaries. Some of these class members who opted out were represented by counsel and presented separate claims. Most of their claims have been settled. The outcome of any litigation or threatened litigation cannot be predicted with any certainty. However, in the aggregate, IDS Life does not consider any lawsuits in which it is named as a defendant to be material. TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION Performance Information p. 3 Calculating Annuity Payouts p. 66 Rating Agencies p. 67 Principal Underwriter p. 67 Independent Auditors p. 67 Financial Statements
99 [AMERICAN EXPRESS LOGO] IDS LIFE INSURANCE COMPANY 70100 AXP FINANCIAL CENTER MINNEAPOLIS, MN 55474 (800) 862-7919 S-6406 D (5/02) 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 MAY 1, 2002 INDIVIDUAL FLEXIBLE PREMIUM DEFERRED COMBINATION FIXED/VARIABLE ANNUITY FOR: - current or retired employees of American Express Financial Corporation or its subsidiaries and their spouses (employees), - current or retired American Express financial advisors and their spouses (advisors), and - individuals investing an initial purchase 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 This prospectus contains information that you should know before investing. Prospectuses are also available for: - American Express(R) Variable Portfolio Funds - INVESCO Variable Investment Funds, Inc. - AIM Variable Insurance Funds - Janus Aspen Series: Service Shares - Alliance Variable Products Series Fund - Lazard Retirement Series, Inc. - American Century(R) Variable Portfolios, Inc. - MFS(R) Variable Insurance Trust(SM) - Calvert Variable Series, Inc. - Pioneer Variable Contracts Trust (VCT), Class II Shares - Evergreen Variable Annuity Trust - Putnam Variable Trust - Class IB Shares - Fidelity(R) Variable Insurance Products - Service Class 2 - Strong Opportunity Fund II, Inc. - Franklin(R) Templeton(R) Variable Insurance - Wanger Advisors Trust Products Trust (FTVIPT) - Class 2 - Wells Fargo Variable Trust Funds - Goldman Sachs Variable Insurance Trust (VIT)
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. 1 TABLE OF CONTENTS KEY TERMS 3 THE CONTRACT IN BRIEF 4 EXPENSE SUMMARY 5 CONDENSED FINANCIAL INFORMATION (UNAUDITED) 19 FINANCIAL STATEMENTS 24 PERFORMANCE INFORMATION 25 THE VARIABLE ACCOUNT AND THE FUNDS 26 THE FIXED ACCOUNT 34 BUYING YOUR CONTRACT 34 CHARGES 36 VALUING YOUR INVESTMENT 38 MAKING THE MOST OF YOUR CONTRACT 39 SURRENDERS 42 TSA--SPECIAL SURRENDER PROVISIONS 42 CHANGING OWNERSHIP 43 BENEFITS IN CASE OF DEATH--STANDARD DEATH BENEFIT 43 OPTIONAL BENEFITS 45 THE ANNUITY PAYOUT PERIOD 51 TAXES 53 VOTING RIGHTS 55 SUBSTITUTION OF INVESTMENTS 55 ABOUT THE SERVICE PROVIDERS 55 TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION 57
2 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. 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: - Individual Retirement Annuities (IRAs) under Section 408(b) of the Internal Revenue Code of 1986, as amended (the Code) - Roth IRAs under Section 408A of the Code - SIMPLE IRAs under Section 408(p) of the Code - Simplified Employee Pension (SEP) plans under Section 408(k) of the Code - Plans under Section 401(k) of the Code - Custodial and trusteed plans under Section 401(a) of the Code - 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 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 account 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 payout 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 contract or life insurance policy. Most annuities have a tax-deferred feature. So do many retirement plans under the 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: - 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. 26) - the fixed account, which earns interest at a rate that we adjust periodically. (p. 34) 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. 34) 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 MAXIMUM ALLOWABLE PURCHASE PAYMENTS FOR EMPLOYEES/ADVISORS: For the first year: $2,000,000 for issue ages up to 85 $100,000 for issue ages 86 to 90 For each subsequent year: $100,000 for issue ages up to 85 $50,000 for issue ages 86 to 90 FOR OTHER INDIVIDUALS: For the first year: $2,000,000 for issue ages up to 85 $1,000,000 for issue ages 86 to 90 For each subsequent year: $100,000 4 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. 40) 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 an IRS penalty if you surrender prior to your reaching age 59 1/2) and may have other tax consequences; also, certain restrictions apply. (p. 42) 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. 43) 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. 43) OPTIONAL BENEFITS: This contract offers optional features that are available for additional charges if you meet certain criteria. (p. 45) 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. 51) 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. 53) CHARGES: We assess certain charges in connection with your contract: - $30 annual contract administrative charge; - a 0.55% mortality and expense risk fee (if you make allocations to one or more subaccounts); - 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); - the operating expenses of the funds in which the subaccounts invest; - if you select the Maximum Anniversary Death Benefit (MAV), an annual fee of 0.15% of the contract value; - if you select the Enhanced Earnings Death Benefit (EEB), an annual fee of 0.30% of the contract value; and - 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: 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, 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.)
5 ANNUAL VARIABLE ACCOUNT EXPENSES (as a percentage of average subaccount value) 0.55% 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 .54% .13% .11% .78%(1) Bond Fund .60 .13 .07 .80(2) Capital Resource Fund .61 .13 .04 .78(2) Cash Management Fund .51 .13 .04 .68(2) Diversified Equity Income Fund .55 .13 .23 .91(1) Emerging Markets Fund 1.16 .13 .46 1.75(1) Equity Select Fund .64 .13 .33 1.10(1) Extra Income Fund .62 .13 .07 .82(2) Federal Income Fund .61 .13 .10 .84(1) Global Bond Fund .84 .13 .10 1.07(2) Growth Fund .62 .13 .15 .90(1) International Fund .83 .13 .08 1.04(2) Managed Fund .59 .13 .04 .76(2) NEW DIMENSIONS FUND(R) .60 .13 .06 .79(2) Partners Small Cap Value Fund 1.02 .13 .35 1.50(1) S&P 500 Index Fund .29 .13 .07 .49(1) Small Cap Advantage Fund .73 .13 .30 1.16(1) Stock Fund .56 .13 .41 1.10(1) Strategy Aggressive Fund .60 .13 .05 .78(2) AIM V.I. Capital Appreciation Fund, Series II .61 .25 .24 1.10(3) Capital Development Fund, Series II .75 .25 .41 1.41(3) Alliance VP AllianceBernstein International Value Portfolio (Class B) -- .25 .95 1.20(4) Growth and Income Portfolio (Class B) .63 .25 .04 .92(5) American Century(R) Variable Portfolios, Inc. VP International, Class II 1.19 .25 -- 1.44(6),(7) VP Value, Class II .86 .25 -- 1.11(6),(8) Calvert Variable Series, Inc. Social Balanced Portfolio .70 -- .17 .87(9) Evergreen VA Capital Growth Fund, Class L Shares .80 .25 .08 1.13(10) Fidelity VIP Growth & Income Portfolio (Service Class 2) .48 .25 .11 .84(11) Mid Cap Portfolio (Service Class 2) .58 .25 .11 .94(11) Overseas Portfolio (Service Class 2) .73 .25 .20 1.18(11) FTVIPT Franklin Real Estate Fund - Class 2 .56 .25 .03 .84(12),(13) Franklin Small Cap Value Securities Fund - Class 2 .57 .25 .20 1.02(13),(14) (previously FTVIPT Franklin Value Securities Fund - Class 2) Mutual Shares Securities Fund - Class 2 .60 .25 .19 1.04(13)
6
MANAGEMENT 12b-1 OTHER FEES FEES EXPENSES TOTAL ---- ---- -------- ----- Goldman Sachs VIT CORE(SM) U.S. Equity Fund .70% --% .11% .81%(15) Mid Cap Value Fund .80 -- .13 .93(15) INVESCO VIF Dynamics Fund .75 -- .33 1.08(16),(17) Financial Services Fund .75 -- .32 1.07(16),(17) Technology Fund .75 -- .32 1.07(16),(17) Telecommunications Fund .75 -- .34 1.09(16),(17) Janus Aspen Series Global Technology Portfolio: Service Shares .65 .25 .05 .95(18) International Growth Portfolio: Service Shares .65 .25 .06 .96(18) Lazard Retirement Series International Equity Portfolio .75 .25 .25 1.25(19) MFS(R) Investors Growth Stock Series - Service Class .75 .25 .17 1.17(20),(21) New Discovery Series - Service Class .90 .25 .16 1.31(20),(21),(22) Utilities Series - Service Class .75 .25 .18 1.18(20),(21) Pioneer VCT Pioneer Equity Income VCT Portfolio - Class II Shares .65 .25 .12 1.02(5) Pioneer Europe VCT Portfolio - Class II Shares .51 .25 2.46 3.22(23) Putnam Variable Trust Putnam VT Health Sciences Fund - Class IB Shares .70 .25 .09 1.04(24) Putnam VT International Growth Fund - Class IB Shares .76 .25 .18 1.19(24) Putnam VT Vista Fund - Class IB Shares .61 .25 .06 .92(24) Strong Funds Strong Opportunity Fund II - Advisor Class .75 .25 .54 1.54(25) Wanger International Small Cap 1.24 -- .19 1.43(26) U.S. Smaller Companies .94 -- .05 .99(26) (previously Wanger U.S. Small Cap) Wells Fargo VT Asset Allocation Fund .49 .25 .26 1.00(27) International Equity Fund -- .25 .75 1.00(27) Small Cap Growth Fund .63 .25 .32 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, 2001. Without fee waivers and expense reimbursements "Other expenses" and "Total" would be 0.29% and 0.96% for AXP(R) Variable Portfolio - Blue Chip Advantage Fund, 0.49% and 1.17% for AXP(R) Variable Portfolio - Diversified Equity Income Fund, 2.20% and 3.49% for AXP(R) Variable Portfolio - Emerging Markets Fund, 2.22%and 2.99% for AXP(R) Variable Portfolio - Equity Select Fund, 0.13% and 0.87% for AXP(R) Variable Portfolio - Federal Income Fund, 0.16% and 0.91% for AXP(R) Variable Portfolio - Growth Fund, 5.71% and 6.86% for AXP(R) Variable Portfolio - Partners Small Cap Value Fund, 0.89% and 1.31% for AXP(R) Variable Portfolio - S&P 500 Index Fund, 0.40% and 1.26% for AXP(R) Variable Portfolio - Small Cap Advantage Fund and 10.67% and 11.36% for AXP(R) Variable Portfolio - Stock Fund. (2) The fund's expense figures are based on actual expenses for the fiscal year ended Aug. 31, 2001. (3) The fund's expense figures are for the year ended Dec. 31, 2001 and are expressed as a percentage of Fund average daily net assets. There is no guarantee that actual expenses will be the same as those shown in the table. (4) From 5/1/01 through 4/30/02, Fund was capped at 1.20%. From 5/1/02 on, Fund will be capped at 1.45%. Absent such waiver, "Management fees", "Other expenses," and "Total" would be 1.00%, 8.06% and 9.31%. (5) "Management Fees," "12b-1 Fees," "Other Expenses" and "Total" are based on actual expenses for the fiscal year ended Dec. 31, 2001. (6) Annualized operating expenses of funds at Dec. 31, 2001. (7) Aug. 15, 2001 (commencement of sale) through Dec. 31, 2001. The fund has a stepped fee schedule. As a result, the fund's management fee generally decreases as fund assets increase. 7 (8) Aug. 15, 2001 (commencement of sale) through Dec. 31, 2001. The fund has a stepped fee schedule. As a result, the fund's management fee generally decreases as fund assets increase. (9) Management fees include an administrative fee paid by the Fund to Calvert Administrative Services Company, an affiliate of Calvert. "Other expenses" reflect an indirect fee resulting from the Portfolio's offset arrangement with the custodian bank whereby the custodian's and transfer agent's fees may be paid indirectly by credits earned on the portfolio's uninvested cash balances. These credits are used to reduce the Portfolio's expenses. Net operating expenses before reductions for fees paid indirectly would be 0.88% for Social Balanced. (10) The Total ratio of expenses to average net assets excludes expense reductions but includes fee waivers. 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 or reimbursements at any time. Without 12b-1 fee waivers, "Other Expenses" and "Total" were 0.24% and 1.29% for Evergreen VA Capital Growth Fund, Class L Shares. (11) 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. In addition, 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. These offsets may be discontinued at any time. See the accompanying fund prospectus for details. (12) The Fund administration fee is paid indirectly through the management fee. (13) The Fund's class 2 distribution plan or "rule 12b-1 plan" is described in the Fund's prospectus. (14) 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 1.05% for Franklin Small Cap Value Securities Fund - Class 2. (15) Expense ratios are shown after fee waivers and expense reimbursements by the investment adviser. The expense ratios before the waivers and reimbursements would have been: 0.70%, 0.12%, and 0.82% for CORE(SM) U.S. Equity Fund, and 0.80%, 0.14% and 0.94% for Mid Cap Value Fund. CORE(SM) U.S. Equity and Mid Cap Value Funds were under their respective expense caps of 0.20% and 0.25% in 2001. CORE(SM) is a service mark of Goldman, Sachs & Co. (16) 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. (17) 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 Dec. 31,2001 were insignificant. (18) Expenses are based upon expenses for the fiscal year ended Dec. 31, 2001. All expenses are shown without the effect of expense offset arrangements. (19) Total annual expenses for the Lazard International Equity Portfolio have been reimbursed through Dec. 31, 2001 to the extent that they exceed in any fiscal year 1.25% of the Portfolios' average daily net assets. Absent fee waivers and/or reimbursements, "Other expenses" and "Total" expenses for the year ended Dec. 31, 2001 would have been 0.94% and 1.94% for International Equity Portfolio. (20) 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). (21) 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: 1.15% for Investors Growth Stock Series, 1.30% for New Discovery Series and 1.17% for Utilities Series. (22) 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 0.19% and 1.34% for New Discovery Series. These contractual fee arrangements will continue until at least May 1, 2003, unless changed with the consent of the board of trustees which oversees the series. (23) The Portfolio's expense figures are based on actual expenses for the fiscal year ending Dec. 31, 2001 after management fee waiver and expense reimbursements. Absent this arrangement, "Management fees," "Other expenses" and "Total" would be 1.00%, 3.32% and 4.57% for Pioneer Europe VCT Portfolio. (24) 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 0.22% of average net assets. (25) The fund has adopted a Rule 12b-1 distribution plan for the Advisor Class shares. Under the distribution plan, the fund may make monthly payments to the fund's distributor at the annual rate of 1.00% of the average daily net assets of the fund attributable to its Advisor Class shares. However, under the Distribution Agreement for the Advisor Class shares, payments to the fund's distributor under the distribution plan are currently limited to payment at an annual rate equal to 0.25% of average daily net assets attributable to Advisor Class shares. Shareholder approval is required to increase the distribution fee from 0.25% to 1.00%. The 12b-1 payments may be made for distribution-related services and other services that are primarily intended to result in the sale of Advisor Class shares of the fund. Because Rule 12b-1 fees are ongoing, over time they will increase the cost of an investment in the Advisor Class shares of the fund and may cost more than other types of sales charges. The fund's distributor has voluntarily agreed to waive a portion of the fees. Absent this waiver, "Total" expenses would be 1.55%. (26) Figures in "Management fees," "12b-1 fees," "Other expenses," and "Total" are based on actual expenses for the fiscal year ended Dec. 31, 2001. 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. (27) Amounts are based on estimated expenses for 2002. The advisor has contractually undertaken to waive its fee and to reimburse the funds for certain expenses. Without such arrangement the "Management fees," and "Total" would be 0.55% and 1.06% for Wells Fargo VT Asset Allocation Fund, 0.75% and 3.40% for Wells Fargo VT International Equity Fund and 0.75% and 1.32% for Wells Fargo VT Small Cap Growth Fund. 8 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 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 the selection of the Enhanced Earnings Death Benefit Rider (EEB), 3) the contract with the selection of the Enhanced Earnings Plus Death Benefit Rider (EEP), 4) the contract with selection of the Maximum Anniversary Value Death Benefit Rider (MAV), 5) the contract with the selection of both the MAV and the EEB Riders, and 6) the contract with the selection of both the MAV and the EEP 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 $14.16 $44.01 $ 76.04 $166.71 optional EEB 17.23 53.40 91.99 200.06 optional EEP 18.26 56.52 97.26 210.97 optional MAV 15.69 48.71 84.04 183.51 optional MAV and EEB 18.77 58.08 99.89 216.38 optional MAV and EEP 19.79 61.19 105.13 227.12 AXP(R) VP - Bond Fund base contract with no optional riders 14.36 44.63 77.10 168.96 optional EEB 17.44 54.03 93.04 202.25 optional EEP 18.46 57.15 98.31 213.13 optional MAV 15.90 49.34 85.10 185.73 optional MAV and EEB 18.97 58.70 100.94 218.53 optional MAV and EEP 20.00 61.81 106.17 229.25 AXP(R) VP - Capital Resource Fund base contract with no optional riders 14.16 44.01 76.04 166.71 optional EEB 17.23 53.40 91.99 200.06 optional EEP 18.26 56.52 97.26 210.97 optional MAV 15.69 48.71 84.04 183.51 optional MAV and EEB 18.77 58.08 99.89 216.38 optional MAV and EEP 19.79 61.19 105.13 227.12 AXP(R) VP - Cash Management Fund base contract with no optional riders 13.13 40.86 70.67 155.37 optional EEB 16.21 50.28 86.69 189.05 optional EEP 17.23 53.40 91.99 200.06 optional MAV 14.67 45.58 78.71 172.34 optional MAV and EEB 17.74 54.96 94.62 205.53 optional MAV and EEP 18.77 58.08 99.89 216.38 AXP(R) VP - Diversified Equity Income Fund base contract with no optional riders 15.49 48.09 82.97 181.28 optional EEB 18.56 57.46 98.84 214.22 optional EEP 19.59 60.57 104.08 224.98 optional MAV 17.03 52.78 90.93 197.87 optional MAV and EEB 20.10 62.12 106.69 230.32 optional MAV and EEP 21.13 65.22 111.90 240.93
9 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 $24.10 $74.18 $126.89 $271.10 optional EEB 27.17 83.39 142.21 301.41 optional EEP 28.20 86.45 147.27 311.31 optional MAV 25.64 78.79 134.58 286.37 optional MAV and EEB 28.71 87.98 149.80 316.23 optional MAV and EEP 29.74 91.03 154.83 325.99 AXP(R) VP - Equity Select Fund base contract with no optional riders 17.44 54.03 93.04 202.25 optional EEB 20.51 63.36 108.78 234.58 optional EEP 21.54 66.46 113.98 245.14 optional MAV 18.97 58.70 100.94 218.53 optional MAV and EEB 22.05 68.01 116.58 250.38 optional MAV and EEP 23.07 71.10 121.75 260.79 AXP(R) VP - Extra Income Fund base contract with no optional riders 14.57 45.26 78.17 171.21 optional EEB 17.64 54.65 94.10 204.44 optional EEP 18.67 57.77 99.36 215.30 optional MAV 16.10 49.96 86.16 187.95 optional MAV and EEB 19.18 59.32 101.98 220.69 optional MAV and EEP 20.20 62.43 107.22 231.39 AXP(R) VP - Federal Income Fund base contract with no optional riders 14.77 45.89 79.24 173.46 optional EEB 17.85 55.28 95.15 206.62 optional EEP 18.87 58.39 100.41 217.46 optional MAV 16.31 50.59 87.22 190.16 optional MAV and EEB 19.38 59.95 103.03 222.83 optional MAV and EEP 20.41 63.05 108.26 233.51 AXP(R) VP - Global Bond Fund base contract with no optional riders 17.13 53.09 91.46 198.97 optional EEB 20.20 62.43 107.22 231.39 optional EEP 21.23 65.53 112.42 241.98 optional MAV 18.67 57.77 99.36 215.30 optional MAV and EEB 21.74 67.08 115.02 247.24 optional MAV and EEP 22.77 70.17 120.20 257.68 AXP(R) VP - Growth Fund base contract with no optional riders 15.39 47.77 82.44 180.17 optional EEB 18.46 57.15 98.31 213.13 optional EEP 19.49 60.26 103.56 223.91 optional MAV 16.92 52.47 90.40 196.77 optional MAV and EEB 20.00 61.81 106.17 229.25 optional MAV and EEP 21.02 64.91 111.38 239.87
10 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 $16.82 $52.15 $ 89.87 $195.67 optional EEB 19.90 61.50 105.65 228.19 optional EEP 20.92 64.60 110.86 238.81 optional MAV 18.36 56.83 97.78 212.05 optional MAV and EEB 21.43 66.15 113.46 244.09 optional MAV and EEP 22.46 69.25 118.65 254.56 AXP(R) VP - Managed Fund base contract with no optional riders 13.95 43.38 74.96 164.45 optional EEB 17.03 52.78 90.93 197.87 optional EEP 18.05 55.90 96.21 208.79 optional MAV 15.49 48.09 82.97 181.28 optional MAV and EEB 18.56 57.46 98.84 214.22 optional MAV and EEP 19.59 60.57 104.08 224.98 AXP(R) VP - NEW DIMENSIONS FUND(R) base contract with no optional riders 14.26 44.32 76.57 167.84 optional EEB 17.33 53.72 92.51 201.16 optional EEP 18.36 56.83 97.78 212.05 optional MAV 15.80 49.03 84.57 184.62 optional MAV and EEB 18.87 58.39 100.41 217.46 optional MAV and EEP 19.90 61.50 105.65 228.19 AXP(R) VP - Partners Small Cap Value Fund base contract with no optional riders 21.54 66.46 113.98 245.14 optional EEB 24.61 75.72 129.46 276.21 optional EEP 25.64 78.79 134.58 286.37 optional MAV 23.07 71.10 121.75 260.79 optional MAV and EEB 26.15 80.33 137.13 291.41 optional MAV and EEP 27.17 83.39 142.21 301.41 AXP(R) VP - S&P 500 Index Fund base contract with no optional riders 11.18 34.87 60.43 133.53 optional EEB 14.26 44.32 76.57 167.84 optional EEP 15.28 47.46 81.91 179.05 optional MAV 12.72 39.60 68.52 150.81 optional MAV and EEB 15.80 49.03 84.57 184.62 optional MAV and EEP 16.82 52.15 89.87 195.67 AXP(R) VP - Small Cap Advantage Fund base contract with no optional riders 18.05 55.90 96.21 208.79 optional EEB 21.13 65.22 111.90 240.93 optional EEP 22.15 68.32 117.09 251.43 optional MAV 19.59 60.57 104.08 224.98 optional MAV and EEB 22.66 69.86 119.68 256.64 optional MAV and EEP 23.69 72.95 124.84 266.99
11 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 $17.44 $54.03 $ 93.04 $202.25 optional EEB 20.51 63.36 108.78 234.58 optional EEP 21.54 66.46 113.98 245.14 optional MAV 18.97 58.70 100.94 218.53 optional MAV and EEB 22.05 68.01 116.58 250.38 optional MAV and EEP 23.07 71.10 121.75 260.79 AXP(R) VP - Strategy Aggressive Fund base contract with no optional riders 14.16 44.01 76.04 166.71 optional EEB 17.23 53.40 91.99 200.06 optional EEP 18.26 56.52 97.26 210.97 optional MAV 15.69 48.71 84.04 183.51 optional MAV and EEB 18.77 58.08 99.89 216.38 optional MAV and EEP 19.79 61.19 105.13 227.12 AIM V.I. Capital Appreciation Fund, Series II base contract with no optional riders 17.44 54.03 93.04 202.25 optional EEB 20.51 63.36 108.78 234.58 optional EEP 21.54 66.46 113.98 245.14 optional MAV 18.97 58.70 100.94 218.53 optional MAV and EEB 22.05 68.01 116.58 250.38 optional MAV and EEP 23.07 71.10 121.75 260.79 AIM V.I. Capital Development Fund, Series II base contract with no optional riders 20.61 63.67 109.30 235.64 optional EEB 23.69 72.95 124.84 266.99 optional EEP 24.71 76.03 129.97 277.23 optional MAV 22.15 68.32 117.09 251.43 optional MAV and EEB 25.23 77.57 132.53 282.32 optional MAV and EEP 26.25 80.64 137.64 292.41 Alliance VP AllianceBernstein International Value Portfolio (Class B) base contract with no optional riders 18.46 57.15 98.31 213.13 optional EEB 21.54 66.46 113.98 245.14 optional EEP 22.56 69.55 119.16 255.60 optional MAV 20.00 61.81 106.17 229.25 optional MAV and EEB 23.07 71.10 121.75 260.79 optional MAV and EEP 24.10 74.18 126.89 271.10 Alliance VP Growth and Income Portfolio (Class B) base contract with no optional riders 15.59 48.40 83.50 182.40 optional EEB 18.67 57.77 99.36 215.30 optional EEP 19.69 60.88 104.60 226.05 optional MAV 17.13 53.09 91.46 198.97 optional MAV and EEB 20.20 62.43 107.22 231.39 optional MAV and EEP 21.23 65.53 112.42 241.98
12 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(R) VP International, Class II base contract with no optional riders $20.92 $64.60 $110.86 $238.81 optional EEB 24.00 73.87 126.38 270.07 optional EEP 25.02 76.95 131.51 280.29 optional MAV 22.46 69.25 118.65 254.56 optional MAV and EEB 25.53 78.49 134.07 285.35 optional MAV and EEP 26.56 81.56 139.16 295.42 American Century(R) VP Value, Class II base contract with no optional riders 17.54 54.34 93.57 203.35 optional EEB 20.61 63.67 109.30 235.64 optional EEP 21.64 66.77 114.50 246.19 optional MAV 19.08 59.01 101.46 219.61 optional MAV and EEB 22.15 68.32 117.09 251.43 optional MAV and EEP 23.18 71.41 122.26 261.83 Calvert Variable Series, Inc. Social Balanced Portfolio base contract with no optional riders 15.08 46.83 80.84 176.82 optional EEB 18.15 56.21 96.73 209.88 optional EEP 19.18 59.32 101.98 220.69 optional MAV 16.62 51.53 88.81 193.47 optional MAV and EEB 19.69 60.88 104.60 226.05 optional MAV and EEP 20.72 63.98 109.82 236.70 Evergreen VA Capital Growth Fund, Class L Shares base contract with no optional riders 17.74 54.96 94.62 205.53 optional EEB 20.82 64.29 110.34 237.76 optional EEP 21.84 67.39 115.54 248.29 optional MAV 19.28 59.64 102.51 221.76 optional MAV and EEB 22.36 68.94 118.13 253.52 optional MAV and EEP 23.38 72.02 123.29 263.89 Fidelity VIP Growth & Income Portfolio (Service Class 2) base contract with no optional riders 14.77 45.89 79.24 173.46 optional EEB 17.85 55.28 95.15 206.62 optional EEP 18.87 58.39 100.41 217.46 optional MAV 16.31 50.59 87.22 190.16 optional MAV and EEB 19.38 59.95 103.03 222.83 optional MAV and EEP 20.41 63.05 108.26 233.51 Fidelity VIP Mid Cap Portfolio (Service Class 2) base contract with no optional riders 15.80 49.03 84.57 184.62 optional EEB 18.87 58.39 100.41 217.46 optional EEP 19.90 61.50 105.65 228.19 optional MAV 17.33 53.72 92.51 201.16 optional MAV and EEB 20.41 63.05 108.26 233.51 optional MAV and EEP 21.43 66.15 113.46 244.09
13 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 $18.26 $56.52 $ 97.26 $210.97 optional EEB 21.33 65.84 112.94 243.03 optional EEP 22.36 68.94 118.13 253.52 optional MAV 19.79 61.19 105.13 227.12 optional MAV and EEB 22.87 70.48 120.71 258.72 optional MAV and EEP 23.89 73.57 125.87 269.04 FTVIPT Franklin Real Estate Fund - Class 2 base contract with no optional riders 14.77 45.89 79.24 173.46 optional EEB 17.85 55.28 95.15 206.62 optional EEP 18.87 58.39 100.41 217.46 optional MAV 16.31 50.59 87.22 190.16 optional MAV and EEB 19.38 59.95 103.03 222.83 optional MAV and EEP 20.41 63.05 108.26 233.51 FTVIPT Franklin Small Cap Value Securities Fund - Class 2 (previously FTVIPT Franklin Value Securities Fund - Class 2) base contract with no optional riders 16.62 51.53 88.81 193.47 optional EEB 19.69 60.88 104.60 226.05 optional EEP 20.72 63.98 109.82 236.70 optional MAV 18.15 56.21 96.73 209.88 optional MAV and EEB 21.23 65.53 112.42 241.98 optional MAV and EEP 22.25 68.63 117.61 252.47 FTVIPT Mutual Shares Securities Fund - Class 2 base contract with no optional riders 16.82 52.15 89.87 195.67 optional EEB 19.90 61.50 105.65 228.19 optional EEP 20.92 64.60 110.86 238.81 optional MAV 18.36 56.83 97.78 212.05 optional MAV and EEB 21.43 66.15 113.46 244.09 optional MAV and EEP 22.46 69.25 118.65 254.56 Goldman Sachs VIT CORE(SM) U.S. Equity Fund base contract with no optional riders 14.46 44.95 77.64 170.09 optional EEB 17.54 54.34 93.57 203.35 optional EEP 18.56 57.46 98.84 214.22 optional MAV 16.00 49.65 85.63 186.84 optional MAV and EEB 19.08 59.01 101.46 219.61 optional MAV and EEP 20.10 62.12 106.69 230.32 Goldman Sachs VIT Mid Cap Value Fund base contract with no optional riders 15.69 48.71 84.04 183.51 optional EEB 18.77 58.08 99.89 216.38 optional EEP 19.79 61.19 105.13 227.12 optional MAV 17.23 53.40 91.99 200.06 optional MAV and EEB 20.31 62.74 107.74 232.45 optional MAV and EEP 21.33 65.84 112.94 243.03
14 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 $17.23 $53.40 $ 91.99 $200.06 optional EEB 20.31 62.74 107.74 232.45 optional EEP 21.33 65.84 112.94 243.03 optional MAV 18.77 58.08 99.89 216.38 optional MAV and EEB 21.84 67.39 115.54 248.29 optional MAV and EEP 22.87 70.48 120.71 258.72 INVESCO VIF - Financial Services Fund base contract with no optional riders 17.13 53.09 91.46 198.97 optional EEB 20.20 62.43 107.22 231.39 optional EEP 21.23 65.53 112.42 241.98 optional MAV 18.67 57.77 99.36 215.30 optional MAV and EEB 21.74 67.08 115.02 247.24 optional MAV and EEP 22.77 70.17 120.20 257.68 INVESCO VIF - Technology Fund base contract with no optional riders 17.13 53.09 91.46 198.97 optional EEB 20.20 62.43 107.22 231.39 optional EEP 21.23 65.53 112.42 241.98 optional MAV 18.67 57.77 99.36 215.30 optional MAV and EEB 21.74 67.08 115.02 247.24 optional MAV and EEP 22.77 70.17 120.20 257.68 INVESCO VIF - Telecommunications Fund base contract with no optional riders 17.33 53.72 92.51 201.16 optional EEB 20.41 63.05 108.26 233.51 optional EEP 21.43 66.15 113.46 244.09 optional MAV 18.87 58.39 100.41 217.46 optional MAV and EEB 21.95 67.70 116.06 249.34 optional MAV and EEP 22.97 70.79 121.23 259.75 Janus Aspen Series Global Technology Portfolio: Service Shares base contract with no optional riders 15.90 49.34 85.10 185.73 optional EEB 18.97 58.70 100.94 218.53 optional EEP 20.00 61.81 106.17 229.25 optional MAV 17.44 54.03 93.04 202.25 optional MAV and EEB 20.51 63.36 108.78 234.58 optional MAV and EEP 21.54 66.46 113.98 245.14 Janus Aspen Series International Growth Portfolio: Service Shares base contract with no optional riders 15.49 48.09 82.97 181.28 optional EEB 18.56 57.46 98.84 214.22 optional EEP 19.59 60.57 104.08 224.98 optional MAV 17.03 52.78 90.93 197.87 optional MAV and EEB 20.10 62.12 106.69 230.32 optional MAV and EEP 21.13 65.22 111.90 240.93
15 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 International Equity Portfolio base contract with no optional riders $18.97 $ 58.70 $100.94 $218.53 optional EEB 22.05 68.01 116.58 250.38 optional EEP 23.07 71.10 121.75 260.79 optional MAV 20.51 63.36 108.78 234.58 optional MAV and EEB 23.59 72.64 124.32 265.96 optional MAV and EEP 24.61 75.72 129.46 276.21 MFS(R) Investors Growth Stock Series - Service Class base contract with no optional riders 18.15 56.21 96.73 209.88 optional EEB 21.23 65.53 112.42 241.98 optional EEP 22.25 68.63 117.61 252.47 optional MAV 19.69 60.88 104.60 226.05 optional MAV and EEB 22.77 70.17 120.20 257.68 optional MAV and EEP 23.79 73.26 125.35 268.02 MFS(R) New Discovery Series - Service Class base contract with no optional riders 19.59 60.57 104.08 224.98 optional EEB 22.66 69.86 119.68 256.64 optional EEP 23.69 72.95 124.84 266.99 optional MAV 21.13 65.22 111.90 240.93 optional MAV and EEB 24.20 74.49 127.41 272.12 optional MAV and EEP 25.23 77.57 132.53 282.32 MFS(R) Utilities Series - Service Class base contract with no optional riders 18.26 56.52 97.26 210.97 optional EEB 21.33 65.84 112.94 243.03 optional EEP 22.36 68.94 118.13 253.52 optional MAV 19.79 61.19 105.13 227.12 optional MAV and EEB 22.87 70.48 120.71 258.72 optional MAV and EEP 23.89 73.57 125.87 269.04 Pioneer Equity Income VCT Portfolio - Class II Shares base contract with no optional riders 16.62 51.53 88.81 193.47 optional EEB 19.69 60.88 104.60 226.05 optional EEP 20.72 63.98 109.82 236.70 optional MAV 18.15 56.21 96.73 209.88 optional MAV and EEB 21.23 65.53 112.42 241.98 optional MAV and EEP 22.25 68.63 117.61 252.47 Pioneer Europe VCT Portfolio - Class II Shares base contract with no optional riders 39.17 118.77 200.12 411.31 optional EEB 42.24 127.71 214.50 437.46 optional EEP 43.27 130.67 219.26 446.00 optional MAV 40.70 123.25 207.33 424.49 optional MAV and EEB 43.78 132.15 221.63 450.24 optional MAV and EEP 44.80 135.11 226.35 458.65
16 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 $16.82 $52.15 $ 89.87 $195.67 optional EEB 19.90 61.50 105.65 228.19 optional EEP 20.92 64.60 110.86 238.81 optional MAV 18.36 56.83 97.78 212.05 optional MAV and EEB 21.43 66.15 113.46 244.09 optional MAV and EEP 22.46 69.25 118.65 254.56 Putnam VT International Growth Fund - Class IB Shares base contract with no optional riders 18.36 56.83 97.78 212.05 optional EEB 21.43 66.15 113.46 244.09 optional EEP 22.46 69.25 118.65 254.56 optional MAV 19.90 61.50 105.65 228.19 optional MAV and EEB 22.97 70.79 121.23 259.75 optional MAV and EEP 24.00 73.87 126.38 270.07 Putnam VT Vista Fund - Class IB Shares base contract with no optional riders 15.59 48.40 83.50 182.40 optional EEB 18.67 57.77 99.36 215.30 optional EEP 19.69 60.88 104.60 226.05 optional MAV 17.13 53.09 91.46 198.97 optional MAV and EEB 20.20 62.43 107.22 231.39 optional MAV and EEP 21.23 65.53 112.42 241.98 Strong Opportunity Fund II - Advisor Class base contract with no optional riders 21.95 67.70 116.06 249.34 optional EEB 25.02 76.95 131.51 280.29 optional EEP 26.05 80.02 136.62 290.40 optional MAV 23.48 72.33 123.81 264.93 optional MAV and EEB 26.56 81.56 139.16 295.42 optional MAV and EEP 27.58 84.62 144.24 305.28 Wanger International Small Cap base contract with no optional riders 20.82 64.29 110.34 237.76 optional EEB 23.89 73.57 125.87 269.04 optional EEP 24.92 76.64 131.00 279.27 optional MAV 22.36 68.94 118.13 253.52 optional MAV and EEB 25.43 78.18 133.55 284.34 optional MAV and EEP 26.46 81.25 138.65 294.42 Wanger U.S. Smaller Companies (previously Wanger U.S. Small Cap) base contract with no optional riders 16.31 50.59 87.22 190.16 optional EEB 19.38 59.95 103.03 222.83 optional EEP 20.41 63.05 108.26 233.51 optional MAV 17.85 55.28 95.15 206.62 optional MAV and EEB 20.92 64.60 110.86 238.81 optional MAV and EEP 21.95 67.70 116.06 249.34
17 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 $16.41 $50.90 $ 87.75 $191.27 optional EEB 19.49 60.26 103.56 223.91 optional EEP 20.51 63.36 108.78 234.58 optional MAV 17.95 55.59 95.68 207.71 optional MAV and EEB 21.02 64.91 111.38 239.87 optional MAV and EEP 22.05 68.01 116.58 250.38 Wells Fargo VT International Equity Fund base contract with no optional riders 16.41 50.90 87.75 191.27 optional EEB 19.49 60.26 103.56 223.91 optional EEP 20.51 63.36 108.78 234.58 optional MAV 17.95 55.59 95.68 207.71 optional MAV and EEB 21.02 64.91 111.38 239.87 optional MAV and EEP 22.05 68.01 116.58 250.38 Wells Fargo VT Small Cap Growth Fund base contract with no optional riders 18.46 57.15 98.31 213.13 optional EEB 21.54 66.46 113.98 245.14 optional EEP 22.56 69.55 119.16 255.60 optional MAV 20.00 61.81 106.17 229.25 optional MAV and EEB 23.07 71.10 121.75 260.79 optional MAV and EEP 24.10 74.18 126.89 271.10
* In these examples, the $30 contract administrative charge is approximated as a 0.051% charge based on our average contract size. Premium taxes imposed by some state and local governments are not reflected in this table. We entered into certain arrangements under which we are compensated by the funds' advisers and/or distributors for the administrative services we provide to the funds. YOU SHOULD NOT CONSIDER THESE EXAMPLES AS REPRESENTATIONS OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN. 18 CONDENSED FINANCIAL INFORMATION (UNAUDITED) The following tables give per-unit information about the financial history of each subaccount.
YEAR ENDED DEC. 31, 2001 2000 1999 ------------------- ---- ---- ---- SUBACCOUNT BC3(1) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - BLUE CHIP ADVANTAGE FUND) Accumulation unit value at beginning of period $0.99 $1.11 $1.00 Accumulation unit value at end of period $0.82 $0.99 $1.11 Number of accumulation units outstanding at end of period (000 omitted) 729 454 211 Ratio of operating expense to average net assets 0.55% 0.55% 0.55% SUBACCOUNT BD3(1) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - BOND FUND) Accumulation unit value at beginning of period $1.06 $1.02 $1.00 Accumulation unit value at end of period $1.14 $1.06 $1.02 Number of accumulation units outstanding at end of period (000 omitted) 985 410 47 Ratio of operating expense to average net assets 0.55% 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 $0.94 $1.14 $1.00 Accumulation unit value at end of period $0.76 $0.94 $1.14 Number of accumulation units outstanding at end of period (000 omitted) 291 266 872 Ratio of operating expense to average net assets 0.55% 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 $1.07 $1.01 $1.00 Accumulation unit value at end of period $1.10 $1.07 $1.01 Number of accumulation units outstanding at end of period (000 omitted) 5,658 6,615 2,266 Ratio of operating expense to average net assets 0.55% 0.55% 0.55% Simple yield(2) 1.05% -- -- Compound yield(2) 1.06% -- -- SUBACCOUNT DE3(1) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - DIVERSIFIED EQUITY INCOME FUND) Accumulation unit value at beginning of period $1.01 $1.02 $1.00 Accumulation unit value at end of period $1.02 $1.01 $1.02 Number of accumulation units outstanding at end of period (000 omitted) 281 218 23 Ratio of operating expense to average net assets 0.55% 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 $0.75 $1.00 -- Accumulation unit value at end of period $0.73 $0.75 -- Number of accumulation units outstanding at end of period (000 omitted) 3 1 -- Ratio of operating expense to average net assets 0.55% 0.55% -- SUBACCOUNT ES3(4) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - EQUITY SELECT FUND) Accumulation unit value at beginning of period $1.00 -- -- Accumulation unit value at end of period $1.01 -- -- Number of accumulation units outstanding at end of period (000 omitted) 38 -- -- 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 $0.91 $1.01 $1.00 Accumulation unit value at end of period $0.95 $0.91 $1.01 Number of accumulation units outstanding at end of period (000 omitted) 1,549 1,186 48 Ratio of operating expense to average net assets 0.55% 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 $1.09 $1.01 $1.00 Accumulation unit value at end of period $1.15 $1.09 $1.01 Number of accumulation units outstanding at end of period (000 omitted) 592 1 10 Ratio of operating expense to average net assets 0.55% 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 $1.03 $1.00 $1.00 Accumulation unit value at end of period $1.04 $1.03 $1.00 Number of accumulation units outstanding at end of period (000 omitted) 249 4 3 Ratio of operating expense to average net assets 0.55% 0.55% 0.55%
19
YEAR ENDED DEC. 31, 2001 2000 1999 ------------------- ---- ---- ---- SUBACCOUNT GR3(1) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - GROWTH FUND) Accumulation unit value at beginning of period $0.94 $1.17 $1.00 Accumulation unit value at end of period $0.64 $0.94 $1.17 Number of accumulation units outstanding at end of period (000 omitted) 1,285 1,762 401 Ratio of operating expense to average net assets 0.55% 0.55% 0.55% SUBACCOUNT IE3(1) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - INTERNATIONAL FUND) Accumulation unit value at beginning of period $0.95 $1.27 $1.00 Accumulation unit value at end of period $0.67 $0.95 $1.27 Number of accumulation units outstanding at end of period (000 omitted) 65 81 133 Ratio of operating expense to average net assets 0.55% 0.55% 0.55% SUBACCOUNT MF3(1) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - MANAGED FUND) Accumulation unit value at beginning of period $1.06 $1.09 $1.00 Accumulation unit value at end of period $0.94 $1.06 $1.09 Number of accumulation units outstanding at end of period (000 omitted) 296 145 10 Ratio of operating expense to average net assets 0.55% 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 $1.08 $1.19 $1.00 Accumulation unit value at end of period $0.89 $1.08 $1.19 Number of accumulation units outstanding at end of period (000 omitted) 3,252 3,919 426 Ratio of operating expense to average net assets 0.55% 0.55% 0.55% SUBACCOUNT SV3(5) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - PARTNERS SMALL CAP VALUE FUND) Accumulation unit value at beginning of period $1.00 -- -- Accumulation unit value at end of period $1.07 -- -- Number of accumulation units outstanding at end of period (000 omitted) 411 -- -- Ratio of operating expense to average net assets 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 $0.90 $1.00 -- Accumulation unit value at end of period $0.79 $0.90 -- Number of accumulation units outstanding at end of period (000 omitted) 770 285 -- Ratio of operating expense to average net assets 0.55% 0.55% -- SUBACCOUNT SC3(1) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - SMALL CAP ADVANTAGE FUND) Accumulation unit value at beginning of period $1.16 $1.12 $1.00 Accumulation unit value at end of period $1.08 $1.16 $1.12 Number of accumulation units outstanding at end of period (000 omitted) 378 286 28 Ratio of operating expense to average net assets 0.55% 0.55% 0.55% SUBACCOUNT ST3(6) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - STOCK FUND) Accumulation unit value at beginning of period $1.00 -- -- Accumulation unit value at end of period $0.95 -- -- Number of accumulation units outstanding at end of period (000 omitted) -- -- -- Ratio of operating expense to average net assets 0.55% -- -- SUBACCOUNT SA3(1) (INVESTING IN SHARES OF AXP(R) VARIABLE PORTFOLIO - STRATEGY AGGRESSIVE FUND) Accumulation unit value at beginning of period $1.22 $1.52 $1.00 Accumulation unit value at end of period $0.81 $1.22 $1.52 Number of accumulation units outstanding at end of period (000 omitted) 607 798 33 Ratio of operating expense to average net assets 0.55% 0.55% 0.55% SUBACCOUNT 3AC(6) (INVESTING IN SHARES OF AIM V.I. CAPITAL APPRECIATION FUND, SERIES II) Accumulation unit value at beginning of period $1.00 -- -- Accumulation unit value at end of period $0.98 -- -- Number of accumulation units outstanding at end of period (000 omitted) 6 -- -- Ratio of operating expense to average net assets 0.55% -- -- SUBACCOUNT 3AD(6) (INVESTING IN SHARES OF AIM V.I. CAPITAL DEVELOPMENT FUND, SERIES II) Accumulation unit value at beginning of period $1.00 -- -- Accumulation unit value at end of period $0.98 -- -- Number of accumulation units outstanding at end of period (000 omitted) 3 -- -- Ratio of operating expense to average net assets 0.55% -- --
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YEAR ENDED DEC. 31, 2001 2000 1999 ------------------- ---- ---- ---- SUBACCOUNT 3AB(6) (INVESTING IN SHARES OF ALLIANCE VP ALLIANCEBERNSTEIN INTERNATIONAL VALUE PORTFOLIO (CLASS B)) Accumulation unit value at beginning of period $1.00 -- -- Accumulation unit value at end of period $0.98 -- -- Number of accumulation units outstanding at end of period (000 omitted) 210 -- -- Ratio of operating expense to average net assets 0.55% -- -- SUBACCOUNT 3AL(6) (INVESTING IN SHARES OF ALLIANCE VP GROWTH AND INCOME PORTFOLIO (CLASS B)) Accumulation unit value at beginning of period $1.00 -- -- Accumulation unit value at end of period $0.97 -- -- Number of accumulation units outstanding at end of period (000 omitted) 136 -- -- Ratio of operating expense to average net assets 0.55% -- -- SUBACCOUNT 3AI(6) (INVESTING IN SHARES OF AMERICAN CENTURY(R) VP INTERNATIONAL (CLASS II)) Accumulation unit value at beginning of period $1.00 -- -- Accumulation unit value at end of period $0.93 -- -- Number of accumulation units outstanding at end of period (000 omitted) 1 -- -- Ratio of operating expense to average net assets 0.55% -- -- SUBACCOUNT 3AV(6) (INVESTING IN SHARES OF AMERICAN CENTURY(R) VP VALUE, CLASS II) Accumulation unit value at beginning of period $1.00 -- -- Accumulation unit value at end of period $1.04 -- -- Number of accumulation units outstanding at end of period (000 omitted) 146 -- -- Ratio of operating expense to average net assets 0.55% -- -- SUBACCOUNT 3SR(3) (INVESTING IN SHARES OF CALVERT VARIABLE SERIES, INC. SOCIAL BALANCED PORTFOLIO) Accumulation unit value at beginning of period $0.96 $1.00 -- Accumulation unit value at end of period $0.89 $0.96 -- Number of accumulation units outstanding at end of period (000 omitted) 6 5 -- Ratio of operating expense to average net assets 0.55% 0.55% -- SUBACCOUNT 3CG(6) (INVESTING IN SHARES OF EVERGREEN VA CAPITAL GROWTH FUND, CLASS L SHARES) Accumulation unit value at beginning of period $1.00 -- -- Accumulation unit value at end of period $0.95 -- -- Number of accumulation units outstanding at end of period (000 omitted) -- -- -- Ratio of operating expense to average net assets 0.55% -- -- SUBACCOUNT 3FG(6) (INVESTING IN SHARES OF FIDELITY VIP GROWTH & INCOME PORTFOLIO (SERVICE CLASS 2)) Accumulation unit value at beginning of period $1.00 -- -- Accumulation unit value at end of period $1.00 -- -- Number of accumulation units outstanding at end of period (000 omitted) 132 -- -- Ratio of operating expense to average net assets 0.55% -- -- SUBACCOUNT 3FM(6) (INVESTING IN SHARES OF FIDELITY VIP MID CAP PORTFOLIO (SERVICE CLASS 2)) Accumulation unit value at beginning of period $1.00 -- -- Accumulation unit value at end of period $1.04 -- -- Number of accumulation units outstanding at end of period (000 omitted) 132 -- -- Ratio of operating expense to average net assets 0.55% -- -- SUBACCOUNT 3FO(6) (INVESTING IN SHARES OF FIDELITY VIP OVERSEAS PORTFOLIO (SERVICE CLASS 2)) Accumulation unit value at beginning of period $1.00 -- -- Accumulation unit value at end of period $0.95 -- -- Number of accumulation units outstanding at end of period (000 omitted) 7 -- -- 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 $1.26 $0.96 $1.00 Accumulation unit value at end of period $1.35 $1.26 $0.96 Number of accumulation units outstanding at end of period (000 omitted) 211 148 4 Ratio of operating expense to average net assets 0.55% 0.55% 0.55% SUBACCOUNT 3SI(1) (INVESTING IN SHARES OF FTVIPT FRANKLIN SMALL CAP VALUE SECURITIES FUND - CLASS 2) (PREVIOUSLY FTVIPT FRANKLIN VALUE SECURITIES FUND - CLASS 2) Accumulation unit value at beginning of period $1.20 $0.96 $1.00 Accumulation unit value at end of period $1.35 $1.20 $0.96 Number of accumulation units outstanding at end of period (000 omitted) 150 9 2 Ratio of operating expense to average net assets 0.55% 0.55% 0.55%
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YEAR ENDED DEC. 31, 2001 2000 1999 ------------------- ---- ---- ---- SUBACCOUNT 3MS(6) (INVESTING IN SHARES OF FTVIPT MUTUAL SHARES SECURITIES FUND - CLASS 2) Accumulation unit value at beginning of period $1.00 -- -- Accumulation unit value at end of period $0.97 -- -- Number of accumulation units outstanding at end of period (000 omitted) -- -- -- Ratio of operating expense to average net assets 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 $0.99 $1.10 $1.00 Accumulation unit value at end of period $0.87 $0.99 $1.10 Number of accumulation units outstanding at end of period (000 omitted) 943 577 170 Ratio of operating expense to average net assets 0.55% 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 $1.24 $0.95 $1.00 Accumulation unit value at end of period $1.38 $1.24 $0.95 Number of accumulation units outstanding at end of period (000 omitted) 200 15 8 Ratio of operating expense to average net assets 0.55% 0.55% 0.55% SUBACCOUNT 3ID(6) (INVESTING IN SHARES OF INVESCO VIF - DYNAMICS FUND) 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 -- -- Ratio of operating expense to average net assets 0.55% -- -- SUBACCOUNT 3FS(6) (INVESTING IN SHARES OF INVESCO VIF - FINANCIAL SERVICES FUND) Accumulation unit value at beginning of period $1.00 -- -- Accumulation unit value at end of period $0.97 -- -- Number of accumulation units outstanding at end of period (000 omitted) -- -- -- Ratio of operating expense to average net assets 0.55% -- -- SUBACCOUNT 3TC(6) (INVESTING IN SHARES OF INVESCO VIF - TECHNOLOGY 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) -- -- -- Ratio of operating expense to average net assets 0.55% -- -- SUBACCOUNT 3TL(6) (INVESTING IN SHARES OF INVESCO VIF - TELECOMMUNICATIONS FUND) Accumulation unit value at beginning of period $1.00 -- -- Accumulation unit value at end of period $0.84 -- -- Number of accumulation units outstanding at end of period (000 omitted) -- -- -- Ratio of operating expense to average net assets 0.55% -- -- SUBACCOUNT 3GT(3) (INVESTING IN SHARES OF JANUS ASPEN SERIES GLOBAL TECHNOLOGY PORTFOLIO: SERVICE SHARES) Accumulation unit value at beginning of period $0.68 $1.00 -- Accumulation unit value at end of period $0.43 $0.68 -- Number of accumulation units outstanding at end of period (000 omitted) 202 310 -- Ratio of operating expense to average net assets 0.55% 0.55% -- SUBACCOUNT 3IG(3) (INVESTING IN SHARES OF JANUS ASPEN SERIES INTERNATIONAL GROWTH PORTFOLIO: SERVICE SHARES) Accumulation unit value at beginning of period $0.80 $1.00 -- Accumulation unit value at end of period $0.61 $0.80 -- Number of accumulation units outstanding at end of period (000 omitted) 606 556 -- Ratio of operating expense to average net assets 0.55% 0.55% -- SUBACCOUNT 3IP(1) (INVESTING IN SHARES OF LAZARD RETIREMENT INTERNATIONAL EQUITY PORTFOLIO) Accumulation unit value at beginning of period $0.96 $1.07 $1.00 Accumulation unit value at end of period $0.73 $0.96 $1.07 Number of accumulation units outstanding at end of period (000 omitted) 253 57 8 Ratio of operating expense to average net assets 0.55% 0.55% 0.55% SUBACCOUNT 3MG(3) (INVESTING IN SHARES OF MFS(R) INVESTORS GROWTH STOCK SERIES - SERVICE CLASS) Accumulation unit value at beginning of period $0.91 $1.00 -- Accumulation unit value at end of period $0.68 $0.91 -- Number of accumulation units outstanding at end of period (000 omitted) 913 533 -- Ratio of operating expense to average net assets 0.55% 0.55% --
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YEAR ENDED DEC. 31, 2001 2000 1999 ------------------- ---- ---- ---- SUBACCOUNT 3MD(3) (INVESTING IN SHARES OF MFS(R) NEW DISCOVERY SERIES - SERVICE CLASS) Accumulation unit value at beginning of period $0.96 $1.00 -- Accumulation unit value at end of period $0.90 $0.96 -- Number of accumulation units outstanding at end of period (000 omitted) 548 352 -- Ratio of operating expense to average net assets 0.55% 0.55% -- SUBACCOUNT 3UT(6) (INVESTING IN SHARES OF MFS(R) UTILITIES SERIES - SERVICE CLASS) Accumulation unit value at beginning of period $1.00 -- -- Accumulation unit value at end of period $0.89 -- -- Number of accumulation units outstanding at end of period (000 omitted) 138 -- -- Ratio of operating expense to average net assets 0.55% -- -- SUBACCOUNT 3PE(6) (INVESTING IN SHARES OF PIONEER EQUITY INCOME VCT PORTFOLIO - CLASS II SHARES) Accumulation unit value at beginning of period $1.00 -- -- Accumulation unit value at end of period $0.98 -- -- Number of accumulation units outstanding at end of period (000 omitted) -- -- -- Ratio of operating expense to average net assets 0.55% -- -- SUBACCOUNT 3EU(6) (INVESTING IN SHARES OF PIONEER EUROPE VCT PORTFOLIO - CLASS II SHARES) Accumulation unit value at beginning of period $1.00 -- -- Accumulation unit value at end of period $0.98 -- -- Number of accumulation units outstanding at end of period (000 omitted) -- -- -- Ratio of operating expense to average net assets 0.55% -- -- SUBACCOUNT 3HS(6) (INVESTING IN SHARES OF PUTNAM VT HEALTH SCIENCES FUND - CLASS IB SHARES) Accumulation unit value at beginning of period $1.00 -- -- Accumulation unit value at end of period $0.98 -- -- Number of accumulation units outstanding at end of period (000 omitted) 129 -- -- Ratio of operating expense to average net assets 0.55% -- -- SUBACCOUNT 3PI(6) (INVESTING IN SHARES OF PUTNAM VT INTERNATIONAL GROWTH FUND - CLASS IB SHARES) 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) 418 -- -- 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 $1.29 $1.36 $1.00 Accumulation unit value at end of period $0.86 $1.29 $1.36 Number of accumulation units outstanding at end of period (000 omitted) 1,092 1,330 183 Ratio of operating expense to average net assets 0.55% 0.55% 0.55% SUBACCOUNT 3SO(6) (INVESTING IN SHARES OF STRONG OPPORTUNITY FUND II - ADVISOR CLASS) Accumulation unit value at beginning of period $1.00 -- -- Accumulation unit value at end of period $0.99 -- -- Number of accumulation units outstanding at end of period (000 omitted) 136 -- -- Ratio of operating expense to average net assets 0.55% -- -- SUBACCOUNT 3IT(1) (INVESTING IN SHARES OF WANGER INTERNATIONAL SMALL CAP) Accumulation unit value at beginning of period $1.09 $1.51 $1.00 Accumulation unit value at end of period $0.85 $1.09 $1.51 Number of accumulation units outstanding at end of period (000 omitted) 769 599 112 Ratio of operating expense to average net assets 0.55% 0.55% 0.55% SUBACCOUNT 3SP(1) (INVESTING IN SHARES OF WANGER U.S. SMALLER COMPANIES) (PREVIOUSLY WANGER U.S. SMALL CAP) Accumulation unit value at beginning of period $1.05 $1.15 $1.00 Accumulation unit value at end of period $1.17 $1.05 $1.15 Number of accumulation units outstanding at end of period (000 omitted) 820 990 125 Ratio of operating expense to average net assets 0.55% 0.55% 0.55% SUBACCOUNT 3AA(4) (INVESTING IN SHARES OF WELLS FARGO VT ASSET ALLOCATION FUND) Accumulation unit value at beginning of period $1.00 -- -- Accumulation unit value at end of period $0.97 -- -- Number of accumulation units outstanding at end of period (000 omitted) 8 -- -- Ratio of operating expense to average net assets 0.55% -- --
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YEAR ENDED DEC. 31, 2001 2000 1999 ------------------- ---- ---- ---- SUBACCOUNT 3WI(4) (INVESTING IN SHARES OF WELLS FARGO VT INTERNATIONAL EQUITY 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) 1 -- -- Ratio of operating expense to average net assets 0.55% -- -- SUBACCOUNT 3SG(4) (INVESTING IN SHARES OF WELLS FARGO VT SMALL CAP GROWTH FUND) Accumulation unit value at beginning of period $1.00 -- -- Accumulation unit value at end of period $0.94 -- -- Number of accumulation units outstanding at end of period (000 omitted) 2 -- -- Ratio of operating expense to average net assets 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 May 1, 2001. (5) Operations commenced on Aug. 14, 2001. (6) Operations commenced on Aug. 13, 2001. FINANCIAL STATEMENTS You can find our audited financial statements and the audited financial statements of the subaccounts in the SAI. 24 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 subaccounts invested in them at that time, which, in some cases, they 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: - contract administrative charge, - applicable mortality and expense risk fee, - Maximum Anniversary Value Death Benefit Rider fee, and - 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. 25 THE VARIABLE ACCOUNT AND THE FUNDS You may allocate purchase payments and transfers 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 ADVISER OR MANAGER ---------------- ------------------------------ ------------------------------------------- ----------------------------- BC3 AXP(R) Variable Portfolio - Objective: long-term total return IDS Life, investment manager; Blue Chip Advantage Fund exceeding that of the U.S. stock market. American Express Financial Invests primarily in blue chip Corporation (AEFC), stocks. Blue chip stocks are issued by investment adviser. companies with a market capitalization of at least $1 billion, an established management, a history of consistent earnings and a leading position within their respective industries. BD3 AXP(R) Variable Portfolio - Objective: high level of current income IDS Life, investment Bond Fund while conserving the value of the manager; AEFC, investment investment and continuing a high level of adviser. income for the longest time period. Invests primarily in bonds and other debt obligations. CR3 AXP(R) Variable Portfolio - Objective: capital appreciation. Invests IDS Life, investment Capital Resource Fund primarily in U.S. common stocks and other manager; AEFC, investment securities convertible into common stocks. adviser. CM3 AXP(R) Variable Portfolio - Objective: maximum current income IDS Life, investment Cash Management Fund consistent with liquidity and stability manager; AEFC, investment of principal. Invests primarily in money adviser. market securities. DE3 AXP(R) Variable Portfolio - Objective: a high level of current income IDS Life, investment Diversified Equity Income and, as a secondary goal, steady growth manager; AEFC, investment Fund of capital. Invests primarily in adviser. dividend-paying common and preferred stocks. EM3 AXP(R) Variable Portfolio - Objective: long-term capital growth. IDS Life, investment Emerging Markets Fund Invests primarily in equity securities of manager; AEFC, investment companies in emerging market countries. adviser; American Express Asset Management International, Inc., a wholly-owned subsidiary of AEFC, is the sub-adviser. ES3 AXP(R) Variable Portfolio - Objective: growth of capital. Invests IDS Life, investment Equity Select Fund primarily in equity securities of manager; AEFC, investment medium-sized companies. adviser. EI3 AXP(R) Variable Portfolio - Objective: high current income, with IDS Life, investment Extra Income Fund capital growth as a secondary objective. manager; AEFC, investment Invests primarily in high-yielding, adviser. high-risk corporate bonds (junk bonds) issued by U.S. and foreign companies and governments. FI3 AXP(R) Variable Portfolio - Objective: a high level of current income IDS Life, investment Federal Income Fund and safety of principal consistent with manager; AEFC, investment an investment in U.S. government and adviser. government agency 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) Variable Portfolio - Objective: high total return through IDS Life, investment Global Bond Fund income and growth of capital. manager; AEFC, investment Non-diversified mutual fund that invests adviser. primarily in debt obligations of U.S. and foreign issuers.
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SUBACCOUNT INVESTING IN INVESTMENT OBJECTIVES AND POLICIES INVESTMENT ADVISER OR MANAGER ---------------- ------------------------------ ------------------------------------------- ----------------------------- GR3 AXP(R) Variable Portfolio - Objective: long-term capital growth. IDS Life, investment Growth Fund Invests primarily in common stocks and manager; AEFC, investment securities convertible into common stocks adviser. that appear to offer growth opportunities. IE3 AXP(R) Variable Portfolio - Objective: capital appreciation. Invests IDS Life, investment International Fund primarily in common stocks or convertible manager; AEFC, investment securities of foreign issuers that offer adviser. American Express strong growth potential. Asset Management International, Inc., a wholly-owned subsidiary of AEFC, is the sub-adviser. MF3 AXP(R) Variable Portfolio - Objective: maximum total investment IDS Life, investment Managed Fund return through a combination of capital manager; AEFC, investment growth and current income. Invests adviser. primarily in a combination of common and preferred stocks, convertible securities, bonds and other debt securities. ND3 AXP(R) Variable Portfolio - Objective: long-term growth of capital. IDS Life, investment NEW DIMENSIONS FUND(R) Invests primarily in common stocks manager; AEFC, investment showing potential for significant growth. adviser. SV3 AXP(R) Variable Portfolio - Objective: long-term capital IDS Life, investment Partners Small Cap Value appreciation. Non-diversified fund that manager; AEFC, investment Fund invests primarily in equity securities. adviser; Royce & Associates, LLC and EQSF Advisers, Inc., sub-advisers. IV3 AXP(R) Variable Portfolio - Objective: long-term capital IDS Life, investment S&P 500 Index Fund appreciation. Non-diversified fund that manager; AEFC, investment invests primarily in securities that are adviser. expected to provide investment results that correspond to the performance of the S&P 500 Index. SC3 AXP(R) Variable Portfolio - Objective: long-term capital growth. IDS Life, investment Small Cap Advantage Fund Invests primarily in equity stocks of manager; AEFC, investment small companies that are often included adviser; Kenwood Capital in the Russell 2000 Index and/or have Management LLC, sub-adviser. market capitalization under $2 billion. ST3 AXP(R) Variable Portfolio - Objective: current income and growth of IDS Life, investment Stock Fund capital. Invests primarily in common manager; AEFC, investment stocks and securities convertible into adviser. common stock. SA3 AXP(R) Variable Portfolio - Objective: capital appreciation. Invests IDS Life, investment Strategy Aggressive Fund primarily in equity securities of growth manager; AEFC, investment companies. adviser. 3AC AIM V.I. Capital Objective: growth of capital. Invests A I M Advisors, Inc. Appreciation Fund, Series II principally in common stocks of companies likely to benefit from new or innovative products, services or processes as well as those with above-average growth and excellent prospects for future growth.
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SUBACCOUNT INVESTING IN INVESTMENT OBJECTIVES AND POLICIES INVESTMENT ADVISER OR MANAGER ---------------- ------------------------------ ------------------------------------------- ----------------------------- 3AD AIM V.I. Capital Development Objective: long term growth of capital. A I M Advisors, Inc. Fund, Series II Invests primarily in securities (including common stocks, convertible securities and bonds) of small- and medium-sized companies. 3AB Alliance VP Objective: long-term growth of capital. Alliance Capital AllianceBernstein Invests primarily in a diversified Management, L.P. International Value portfolio of foreign equity securities. Portfolio (Class B) 3AL Alliance VP Growth and Objective: reasonable current income and Alliance Capital Income Portfolio (Class B) reasonable appreciation. Invests Management, L.P. primarily in dividend-paying common stocks of good quality. 3AI American Century(R) VP Objective: long term capital growth. American Century Investment International, Class II Invests primarily in stocks of growing Management, Inc. foreign companies in developed countries. 3AV American Century(R) VP Objective: long-term capital growth, with American Century Investment Value, Class II income as a secondary objective. Invests Management, Inc. primarily in stocks of companies that management believes to be undervalued at the time of purchase. 3SR Calvert Variable Series Inc. Objective: income and capital growth. Calvert Asset Management Social Balanced Portfolio Invests primarily in stocks, bonds and Company, Inc. (CAMCO), money market instruments which offer investment advisor. SSgA Funds income and capital growth opportunity and Management, Inc. and Brown which satisfy the investment and social Capital Management are the criteria. investment subadvisers. 3CG Evergreen VA Capital Growth Objective: long-term capital growth. The Evergreen Investment Fund, Class L Shares fund seeks to achieve its goal by Management Company, LLC. investing primarily in common stocks of Pilgrim Baxter Value large U.S. companies, which the portfolio Investors, Inc. is the managers believe have the potential for sub-investment adviser. capital growth over the intermediate- and long-term. 3FG Fidelity VIP Growth & Income Strategy: high total return through a Fidelity Management & Portfolio (Service Class 2) combination of current income and capital Research Company (FMR), appreciation. Normally invests a majority investment manager; FMR of assets in common stocks with a focus U.K. and FMR Far East, on those that pay current dividends and sub-investment advisers. show potential for capital appreciation. 3FM Fidelity VIP Mid Cap Strategy: long-term growth of capital. FMR, investment manager; Portfolio (Service Class 2) Normally invests at least 80% of assets FMR U.K. and FMR Far East, in securities of companies with medium sub-investment advisers. market capitalization common stocks. 3FO Fidelity VIP Overseas Strategy: long-term growth of capital. FMR, investment manager; Portfolio (Service Class 2) Invests primarily in common stocks of FMR U.K., FMR Far East, foreign securities. Fidelity International Investment Advisors (FIIA) and FIIA U.K., sub-investment advisers.
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SUBACCOUNT INVESTING IN INVESTMENT OBJECTIVES AND POLICIES INVESTMENT ADVISER OR MANAGER ---------------- ------------------------------ ------------------------------------------- ----------------------------- 3RE FTVIPT Franklin Real Estate Objective: capital appreciation with a Franklin Advisers, Inc. Fund - Class 2 secondary goal to earn current income. Invests at least 80% of its net assets in investments of companies operating in the real estate industry. The Fund invests, primarily in equity real estate investment trusts (REITs). 3SI FTVIPT Franklin Small Cap Objective: long-term total return. Franklin Advisory Services, Value Securities Fund - Invests at least 80% of its net assets in LLC Class 2 (previously FTVIPT investments of small capitalization Franklin Value Securities companies. For this fund, small Fund - Class 2) capitalization companies are those that have a market cap not exceeding $2.5 billion, at the time of purchase. Invests primarily in equity securities of companies the manager believes are selling substantially below the underlying value of their assets or their private market value. 3MS FTVIPT Mutual Shares Objective: capital appreciation with Franklin Mutual Advisers, Securities Fund - Class 2 income as a secondary goal. Invests LLC primarily in equity securities of 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 VIT CORE(SM) Objective: seeks long-term growth of Goldman Sachs Asset U.S. Equity Fund capital and dividend income. Invests, Management under normal circumstances, at least 90% of its total assets (not including securities lending collateral and any investment of that collateral) measured at time of purchase in a broadly diversified portfolio of large-cap and blue chip equity investments representing all major sectors of the U.S. economy. 3MC Goldman Sachs VIT Mid Cap Objective: seeks long-term capital Goldman Sachs Asset Value Fund appreciation. Invests, under normal Management circumstances, at least 80% of its net assets plus any borrowing for investment purposes (measured at time of purchase) in a diversified portfolio of equity investments in mid-capitalization issuers within the range of the market capitalization of companies constituting the Russell Midcap Value Index at the time of investment. 3ID INVESCO VIF - Dynamics Fund Objective: long-term growth of capital. INVESCO Funds Group, Inc. Invests primarily in common stocks of mid-sized companies-- companies included in the Russell Mid-Cap Growth Index at the time of purchase, or if not included in that Index, those with market capitalizations between $2.5 billion and $15 billion at the time of purchase. The Fund also has the flexibility to invest in other types of securities, including preferred stocks, convertible securities and bonds.
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SUBACCOUNT INVESTING IN INVESTMENT OBJECTIVES AND POLICIES INVESTMENT ADVISER OR MANAGER ---------------- ------------------------------ ------------------------------------------- ----------------------------- 3FS INVESCO VIF - Financial Objective: long-term growth of capital. INVESCO Funds Group, Inc. Services Fund Aggressively managed. Invests at least 80% of its assets in the equity securities and equity related instruments of companies involved in the financial services sector. These companies include, but are not limited to, banks, insurance companies, and investment and miscellaneous industries (asset managers, brokerage firms, and government-sponsored agencies and suppliers to financial services companies). 3TC INVESCO VIF - Technology Objective: long-term growth of capital. INVESCO Funds Group, Inc. Fund The Fund is aggressively managed. Invests at least 80% of its assets in equity securities and equity related instruments 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, and networking companies. 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 capital. INVESCO Funds Group, Inc. Telecommunications Fund Current income is a secondary objective. The Fund is aggressively managed. 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 Series Global Objective: long-term growth of capital. Janus Capital Technology Portfolio: Non-diversified mutual fund that invests, Service Shares under normal circumstances, at least 80% of its net assets in securities of companies that the portfolio manager believes will benefit significantly from advances or improvements in technology. It implements this policy by investing primarily in equity securities of U.S. and foreign companies selected for their growth potential.
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SUBACCOUNT INVESTING IN INVESTMENT OBJECTIVES AND POLICIES INVESTMENT ADVISER OR MANAGER ---------------- ------------------------------ ------------------------------------------- ----------------------------- 3IG Janus Aspen Series Objective: long-term growth of capital. Janus Capital International Growth Invests, under normal circumstances, at Portfolio: Service Shares least 80% of its net assets in securities of issuers from at least five different countries, excluding the United States. Although the Portfolio intends to invest substantially all of its assets in issuers located outside the United States, it may at times invest in U.S. issuers and it may at times invest all of its assets in fewer than five countries or even a single country. 3IP Lazard Retirement Objective: long-term capital Lazard Asset Management International Equity appreciation. Invests primarily in Portfolio equity securities, principally common stocks of relatively large non-U.S. 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. 3MG MFS(R) Investors Growth Objective: long-term growth of capital MFS Investment Management(R) Stock Series - Service Class and future income. Invests at least 80% of its total assets in common stocks and related securities of companies which MFS believes offer better than average prospects for long-term growth. 3MD MFS(R) New Discovery Series Objective: capital appreciation. Invests MFS Investment Management(R) - Service Class primarily in equity securities of emerging growth companies. 3UT MFS(R) Utilities Series - Objective: capital growth and current MFS Investment Management(R) Service Class income. Invests primarily in equity and debt securities of domestic and foreign companies in the utilities industry. 3PE Pioneer Equity Income VCT Objective: current income and long-term Pioneer Portfolio - Class II Shares growth of capital from a portfolio consisting primarily of 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.
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SUBACCOUNT INVESTING IN INVESTMENT OBJECTIVES AND POLICIES INVESTMENT ADVISER OR MANAGER ---------------- ------------------------------ ------------------------------------------- ----------------------------- 3EU Pioneer Europe VCT Objective: long-term growth of capital. Pioneer Portfolio - Class II Shares Invests primarily in equity securities of European issuers including common stocks, preferred 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 Health Sciences Objective: capital appreciation. The fund Putnam Investment Fund - Class IB Shares seeks its goal by investing at least 80% Management, LLC of its net assets in common stocks of U.S. companies in the health sciences industries, with a focus on growth stocks. 3PI Putnam VT International Objective: capital appreciation. The fund Putnam Investment Growth Fund - Class IB seeks its goal by investing mainly in Management, LLC Shares common stocks outside the United States. 3VS Putnam VT Vista Fund - Class Objective: capital appreciation. The fund Putnam Investment IB Shares seeks its goal by investing mainly in Management, LLC common stocks of U.S. companies with a focus on growth stocks. 3SO Strong Opportunity Fund II - Objective: seeks capital growth. Invests Strong Capital Management, Advisor Class primarily in common stocks of medium Inc. capitalization companies that the Fund's managers believe are underpriced, yet have attractive growth prospects. 3IT Wanger International Small Objective: long-term growth of capital. Liberty Wanger Asset Cap Invests primarily in stocks of small- and Management, L.P. medium-size non-U.S. companies with capitalizations of less than $2 billion. 3SP Wanger U.S. Smaller Objective: long-term growth of capital. Liberty Wanger Asset Companies (previously Wanger Invests primarily in stocks of small- and Management, L.P. U.S. Small Cap) medium-size U.S. companies with capitalizations of less than $5 billion. 3AA Wells Fargo VT Asset Objective: long-term total return, Wells Fargo Funds Allocation Fund consistent with reasonable risk. Invests Management, LLC, adviser; primarily in the securities of various Wells Capital Management indexes to replicate the total return of Incorporated, sub-adviser. 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+ Treasury Index) and money market instruments, operating from a target allocation of 60% stocks and 40% bonds.
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SUBACCOUNT INVESTING IN INVESTMENT OBJECTIVES AND POLICIES INVESTMENT ADVISER OR MANAGER ---------------- ------------------------------ ------------------------------------------- ----------------------------- 3WI Wells Fargo VT International Objective: total return with an emphasis Wells Fargo Funds Equity Fund on capital appreciation over the Management, LLC, adviser; long-term. Invests primarily in equity Wells Capital Management securities of non-U.S. companies. Incorporated, sub-adviser. 3SG Wells Fargo VT Small Cap Objective: long-term capital Wells Fargo Funds Growth Fund appreciation. Invests primarily in Management, LLC, adviser; common stocks issued by companies whose Wells Capital Management market capitalization falls within the Incorporated, sub-adviser. range of the Russell 2000 Index, which is considered a small capitalization index.
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 advisers 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. 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. 33 THE FIXED ACCOUNT You also may allocate purchase payments and transfers 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. 29). The interest rate we apply to each purchase payment or transfer to the fixed account is guaranteed for one year. Thereafter, we will change the 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: - the optional Maximum Anniversary Value Death Benefit Rider*; - the optional Enhanced Earnings Death Benefit Rider*; - the optional Enhanced Earnings Plus Death Benefit Rider*; - the fixed account and/or subaccounts in which you want to invest; - how you want to make purchase payments; and - a beneficiary. * You may select any one of the following: MAV, 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 your application is not complete, you must give us the information to complete it within five business days. If we cannot accept your application within five business days, we will decline it and return your payment unless you specifically ask us to keep the payment and apply it once your application is complete. 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: - no earlier than the 60th day after the contract's effective date; and - 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: - on or after the date the annuitant reaches age 59 1/2; and - 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 - 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). 34 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(1) 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 (1) 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(2) FOR EMPLOYEES/ADVISORS For the first year: $2,000,000 for issue ages up to 85 $100,000 for issue ages 86 to 90 For each subsequent year: $100,000 for issue ages up to 85 $50,000 for issue ages 86 to 90 FOR OTHER INDIVIDUALS For the first year: $2,000,000 for issue ages up to 85 $1,000,000 for issue ages 86 to 90 For each subsequent year: $100,000 (2) 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. 35 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: - an automatic payroll deduction, salary reduction or other group billing arrangement; or - 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. 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: - first, to the extent possible, the subaccounts pay this fee from any dividends distributed from the funds in which they invest; - then, if necessary, the funds redeem shares to cover any remaining fees payable. We may use any profits we realize from the subaccounts' payment to us of the mortality and expense risk fee for any proper corporate purpose, including, among others, payment of distribution (selling) expenses. 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 account in the same proportion your interest in each account bears to your total contract value. When annuity payouts begin, or 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 a 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%. 36 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 account 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 a 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 0.90%. 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 account in the same proportion your interest in each account bears to your total contract value. When annuity payouts begin, or 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 a change in 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 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. PREMIUM TAXES Certain state and local governments impose premium taxes on us (up to 3.5%). These taxes depend upon the 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 make purchase payments or when you surrender your contract. 37 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: - the sum of your purchase payments and transfer amounts allocated to the fixed account; - plus interest credited; - minus the sum of amounts surrendered and amounts transferred out; - minus any prorated portion of the contract administrative charge; - minus any prorated portion of the Maximum Anniversary Value Death Benefit Rider fee (if applicable); - minus any prorated portion of the Enhanced Earnings Death Benefit Rider fee (if applicable); and - 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, we subtract a certain number of accumulation units from your contract each time you take a partial surrender, transfer amounts out of a subaccount, or we assess a contract administrative charge or an applicable charge for optional benefits. 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: - 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 - dividing that sum by the previous adjusted net asset value per share; and - 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: - additional purchase payments you allocate to the subaccounts; - transfers into or out of the subaccounts; - partial surrenders; - a prorated portion of the contract administrative charge; - a prorated portion of the MAV Death Benefit Rider fee (if selected); - a prorated portion of the EEB fee (if selected); and - a prorated portion of the EEP fee (if selected). Accumulation unit values will fluctuate due to: - changes in funds' net asset value; - dividends distributed to the subaccounts; - capital gains or losses of funds; - fund operating expenses; and/or - mortality and expense risk fees. 38 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 Jun 100 18 5.56 and fewer units Jul 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 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, semiannually, 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 sales representative. 39 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. The contract is not designed for use by individuals, professional market timing organizations, or other entities that do "market timing," programmed transfers, frequent transfers, or transfers that are large in relation to the total assets of any fund underlying the contract. These and similar activities may adversely affect a fund's ability to invest effectively in accordance with its investment objectives and policies, may increase expenses and may harm other contract owners who allocated purchase payments to the fund regardless of their transfer activity. Accordingly, individuals and organizations that use market-timing investment strategies and make frequent transfers should not own this contract. We monitor the frequency of transfers, including the size of transfers in relation to fund assets in each underlying fund, and we take appropriate action as necessary. In order to prevent market timing activities that may harm or disadvantage other contract owners, we may apply modifications or restrictions in any reasonable manner to prevent a transfer. We may suspend transfer privileges at any time. We may also reject or restrict any specific payment or transfer request and impose specific limitations with respect to market timers, including restricting transfers by market timers to certain underlying funds. We may also apply other restrictions or modifications that could include, but not be limited to: - not accepting telephone or electronic transfer requests; - requiring a minimum time period between each transfer; - not accepting transfer requests of an agent acting under power of attorney on behalf of more than one contract owner; or - limiting the dollar amount that a contract owner may transfer at any one time. We agree to provide notice of our intent to restrict transfer privileges to contract owners who have engaged in disruptive activity. In addition, some of the underlying funds have reserved the right to temporarily or permanently refuse payments or transfer requests from us if, in the judgment of the fund's investment adviser, the fund would be unable to invest effectively in accordance with its investment objective or policies, or would otherwise potentially be adversely affected. Accordingly, we may not be in a position to effect certain allocations or transfers requested by market timers and may refuse such requests without prior notice. Subject to state law, we reserve the right to impose, without prior notice, restrictions on allocations and transfers that we determine, in our sole discretion, will disadvantage or potentially hurt the rights or interests of other contract owners. For information on transfers after annuity payouts begin, see "Transfer Policies" below. TRANSFER POLICIES - 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. - 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). - 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. - 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. - We will not accept requests for transfers from the fixed account at any other time. - 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. 40 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: 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. - 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. - Automated surrenders may be restricted by applicable law under some contracts. - You may not make additional purchase payments if automated partial surrenders are in effect. - Automated partial surrenders may result in IRS taxes and penalties on all or part of the amount surrendered. - The balance in any account from which you make an automated transfer or automated partial surrender must be sufficient to satisfy your instructions. If not, we will suspend your entire automated arrangement until the balance is adequate. - If we must suspend your automated transfer or automated partial surrender arrangement for six months, we reserve the right to discontinue the arrangement in its entirety. 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. 41 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 1 BY REGULAR OR EXPRESS MAIL: - payable to you; - mailed to address of record. NOTE: We will charge you a fee if you request express mail delivery. 2 BY WIRE: - request that payment be wired to your bank; - bank account must be in the same ownership as your contract; and - pre-authorization required. NOTE: We will charge you a fee if you request that payment be wired to your bank. For instructions, please 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-SHELTERED ANNUITIES The Code imposes certain restrictions on your right to receive early distributions from a TSA: - 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. - If you encounter a financial hardship (as provided by the Code), you may be eligible to receive a distribution of all contract values attributable to salary reduction contributions made after Dec. 31, 1988, but not the earnings on them. - Even though a distribution may be permitted under the above rules, it may be subject to IRS taxes and penalties (see "Taxes"). - 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. - 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. - If the contract has a loan provision, the right to receive a loan is described in detail in your contract. 42 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 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: - contract value; - purchase payments minus adjusted partial surrenders; or - 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: - contract value; or - purchase payments minus adjusted partial surrenders. ADJUSTED PARTIAL SURRENDERS PS X DB ------- CV 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. 43 EXAMPLE OF STANDARD DEATH BENEFIT CALCULATION WHEN THE OWNER AND ANNUITANT ARE AGE 80 OR YOUNGER - You purchase the contract with a payment of $20,000 on Jan. 1, 2002. - On Jan 1, 2008 (the sixth contract anniversary) the contract value grows to $30,000. - March 1, 2008 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, 2008 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 our death claim requirements are fulfilled. We will determine the contract's value at the next accumulation unit value calculated after our death claim requirements are fulfilled. We 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: - the beneficiary asks us in writing within 60 days after we receive proof of death; and - payouts begin no later than one year after your death, or other date as permitted by the Code; and - the payout period does not extend beyond the beneficiary's life or life expectancy. QUALIFIED ANNUITIES The IRS has issued proposed regulations to take effect Jan. 1, 2002 which may affect distributions from your qualified annuity. Contact your tax advisor if you have any questions as to the impact of the new proposed rules on your situation. - SPOUSE BENEFICIARY: If you have not elected an annuity payout plan, and if your spouse is the sole beneficiary, your spouse may elect to receive payouts, or elect to treat the contract as his/her own. If your spouse elects a payout option, the payouts must begin no later than the year in which the annuitant would have reached age 70 1/2. If the annuitant attained age 70 1/2 at the time of death, payouts must begin no later than Dec. 31 of the year following the year of the annuitant's death. - NON-SPOUSE BENEFICIARY: If you have not elected an annuity payout plan, and if death occurs prior to the year the annuitant would have attained age 70 1/2, the beneficiary may elect to receive payouts from the contract over a five year period. If the annuitant's death occurs after attaining age 70 1/2, we will pay the beneficiary in a single sum unless the beneficiary elects to receive payouts under any annuity payout plan available under this contract if: - the beneficiary asks us in writing within 60 days after we receive proof of death; and - payouts begin no later than one year following the year of your death; and - the payout period does not extend beyond the beneficiary's life or life expectancy. - ANNUITY PAYOUT PLAN: If you elect an annuity payout plan, the payouts to your beneficiary will continue pursuant to the annuity payout plan you elect. 44 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. 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. We reserve the right to discontinue offering the MAV Death Benefit for new contracts. 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 - You may terminate the rider within 30 days of the first contract anniversary after the rider effective date. - You may terminate the rider within 30 days of any contract anniversary beginning with the seventh contract anniversary. - The rider will terminate when you make a full surrender from the contract or when annuity payouts begin. - The rider will terminate in the case of spousal continuation or ownership change if the new owner is age 76 or older. EXAMPLE - You purchase the contract with a payment of $20,000 on Jan. 1, 2002. - On Jan. 1, 2003 (the first contract anniversary) the contract value grows to $24,000. - On March 1, 2003 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, 2003 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 he or she elects to continue the contract has reached age 76, the MAV Death Benefit rider will terminate. If your spouse at the time he or she elects to continue the contract 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 under the MAV Death Benefit rider. If, at the time he or she elects to continue the contract, your spouse has not yet reached age 76 and chooses not to continue the MAV Death Benefit rider, the contract value will be increased to the MAV death benefit amount if it is greater than the contract value on the death benefit valuation date. 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. 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 he or she elects to continue the contract has reached age 76, the MAV death benefit rider will terminate. If your spouse at the time he or she elects to continue the contract 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 under the MAV Death Benefit rider. If, at 45 the time he or she elects to continue the contract, your spouse has not yet reached age 76 and chooses not to continue the MAV Death Benefit rider, the contract value will be increased to the MAV death benefit amount if it is greater than the contract value on the death benefit valuation date. 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 the rider effective date, 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. 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. 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. 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: - the standard death benefit (see "Benefits in Case of Death -- Standard Death Benefit") or the MAV death benefit, if applicable, PLUS - 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 - 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 - You may terminate the rider within 30 days of the first contract anniversary after the rider effective date. - You may terminate the rider within 30 days of any contract anniversary beginning with the seventh contract anniversary after the rider effective date. - The rider will terminate when you make a full surrender from the contract or when annuity payouts begin. - The rider will terminate in the case of spousal continuation or ownership change if the new owner is age 76 or older. EXAMPLE OF THE ENHANCED EARNINGS DEATH BENEFIT - You purchase the contract with a payment of $100,000 on Jan. 1, 2002 and you and the annuitant are under age 70. You select the MAV death benefit and the EEB. - On July 1, 2002 the contract value grows to $105,000. The death benefit on July 1, 2002 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. - On Jan. 1, 2003 the contract value grows to $110,000. The death benefit on Jan. 1, 2003 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
46 - On Jan. 1, 2004 the contract value falls to $105,000. The death benefit on Jan. 1, 2004 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
- On Feb. 1, 2004 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, 2004 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
- On Jan. 1, 2005 the contract value falls by $40,000. The death benefit on Jan. 1, 2005 equals the death benefit paid on Feb. 1, 2004. The reduction in contract value has no effect. - On Jan. 1, 2011 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, 2011 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
- On July 1, 2011 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, 2011 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
- On July 1, 2012 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, 2012 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
47 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 he or she elects to continue the contract has reached age 76, the EEB rider will terminate. If your spouse at the time he or she elects to continue the contract has not yet reached age 76, he or she may choose to continue the EEB. In this case, the following conditions will apply: - the rider will continue, but we will treat the new contract value on the date the ownership of the contract changes to your spouse (after the additional amount is paid into the contract) as if it is a purchase payment in calculating future values of "earnings at death." - the percentages of "earnings at death " payable will be based on your spouse's age at the time he or she elects to continue the contract. - 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 under the EEB rider. 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. 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: - EEP Part I benefits, which equal the benefits payable under the EEB described above; PLUS - 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 ANNUITANT ARE PERCENTAGE IF YOU OR THE ANNUITANT ARE CONTRACT YEAR UNDER AGE 70 ON THE RIDER EFFECTIVE DATE 70 OR OLDER 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. Another way to describe the benefits payable under the EEP rider is as follows: - 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 exchange 15% x (earnings at death + 3.75% of exchange purchase payments*) purchase payments*) 5+ 40% x (earnings at death + 20% of exchange 15% x (earnings at death + 7.5% of exchange purchase payments*) 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 exchange purchase payments if we did not receive proper notification from the company from which the purchase payments are exchanged. 48 TERMINATING THE EEP - You may terminate the rider within 30 days of the first contract anniversary after the rider effective date. - You may terminate the rider within 30 days of any contract anniversary beginning with the seventh contract anniversary. - The rider will terminate when you make a full surrender from the contract or when annuity payouts begin. - The rider will terminate in the case of spousal continuation or ownership change. EXAMPLE OF THE ENHANCED EARNINGS PLUS DEATH BENEFIT - You purchase the contract with an exchange purchase payment of $100,000 on Jan. 1, 2002 and you and the annuitant are under age 70. You select the MAV death benefit and the EEP. - On July 1, 2002 the contract value grows to $105,000. The death benefit on July 1, 2002 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. - On Jan. 1, 2003 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 Jan. 1, 2003 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
- On Jan. 1, 2004 the contract value falls to $105,000. The death benefit on Jan. 1, 2004 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
- On Feb. 1, 2004 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, 2004 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
- On Jan. 1, 2005 the contract value falls by $40,000. The death benefit on Jan. 1, 2005 equals the death benefit paid on Feb. 1, 2004. The reduction in contract value has no effect. 49 - On Jan. 1, 2011 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, 2011 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
- On July 1, 2011 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, 2011 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
- On July 1, 2012 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, 2012 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 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 EEP. If your spouse at the time he or she elects to continue the contract has reached age 76, the EEP rider will terminate. If your spouse at the time he or she elects to continue the contract has not yet reached age 76, he or she may choose to convert the EEP rider into an EEB. In this case, the following conditions will apply: - the EEB rider will treat the new contract value on the date the ownership of the contract changes to your spouse (after the additional amount is paid into the contract) as if it is a purchase payment in calculating future values of "earnings at death." - the percentages of "earnings at death" payable will be based on your spouse's age at the time he or she elects to continue the contract. - 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 EEB 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 under the EEB rider. If your spouse chooses not to convert the EEB rider into an EEB, the standard death benefit (or the MAV death benefit, if applicable) will apply. NOTE: For special tax considerations associated with the EEP, see "Taxes." 50 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: - the annuity payout plan you select; - the annuitant's age and, in most cases, sex; - the annuity table in the contract; and - 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 payout 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. For example, annuity payouts will increase if the investment return is above the assumed investment rate and payouts will decrease if the return is below the assumed investment rate. 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. 51 ANNUITY PAYOUT PLANS You may choose any one of these annuity payout plans by giving us written instructions at least 30 days before contract values are used to purchase the payout plan: - PLAN A: LIFE ANNUITY -- NO REFUND: We make monthly payouts until the annuitant's death. Payouts end with the last payout before the annuitant's death. We will not make any further payouts. This means that if the annuitant dies after we made only one monthly payout, we will not make any more payouts. - 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. - PLAN C: LIFE ANNUITY -- INSTALLMENT REFUND: We make monthly payouts until the annuitant's death, with our guarantee that payouts will continue for some period of time. We will make payouts for at least the number of months determined by dividing the amount applied under this option by the first monthly payout, whether or not the annuitant is living. - PLAN D: JOINT AND LAST SURVIVOR LIFE ANNUITY -- NO REFUND: We make monthly payouts while both the annuitant and a joint annuitant are living. If either annuitant dies, we will continue to make monthly payouts at the full amount until the death of the surviving annuitant. Payouts end with the death of the second annuitant. - PLAN E: PAYOUTS FOR A SPECIFIED PERIOD: We make monthly payouts for a specific payout period of 10 to 30 years that you elect. We will make payouts only for the number of years specified whether the annuitant is living or not. Depending on the selected time period, it is foreseeable that an annuitant can outlive the payout period selected. 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. An 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 annuity 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: - 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 - 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 - 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. 52 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. If the annuitant dies before your investment in the contract is fully recovered, the remaining portion of the unrecovered investment can be taken as a federal income tax deduction for the last taxable year of the annuitant. 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 non-deductible contributions or with after-tax dollars rolled from a retirement plan. 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 an 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 IRS 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. 53 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: - because of your death; - because you become disabled (as defined in the Code); - if the distribution is part of a series of substantially equal periodic payments, made at least annually, over your life or life expectancy (or joint lives or life expectancies of you and your beneficiary); or - if it is allocable to an investment before Aug. 14, 1982 (except for qualified annuities). For 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: - instead of receiving the distribution check, you elect to have the distribution rolled over directly to an IRA or another eligible plan; - 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; - the payout is a minimum distribution required under the Code; or - the payout is made on account of an eligible hardship. 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 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. You may not collaterally assign or pledge your qualified contracts. 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. IDS LIFE'S TAX STATUS: IDS Life is taxed as a life insurance company under the Code. For federal income tax purposes, the subaccounts are considered a part of IDS Life, although their operations are treated separately in accounting and financial statements. Investment income from the subaccounts is reinvested and becomes part of the subaccounts' value. This investment income, including realized capital gains, is not taxed to IDS Life, and therefore no charge is made against the subaccounts for federal income taxes. IDS Life reserves the right to make such a charge in the future if there is a change in the tax treatment of variable annuities. 54 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: - the reserve held in each subaccount for your contract; divided by - 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: - laws or regulations change; - the existing funds become unavailable; or - in our judgment, the funds no longer are suitable for the subaccounts. If any of these situations occur, and if we believe it is in the best interest of persons having voting rights under the contract, we have the right to substitute the funds currently listed in this prospectus for other funds. We may also: - add new subaccounts; - combine any two or more subaccounts; - make additional subaccounts investing in additional funds; - transfer assets to and from the subaccounts or the variable account; and - 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 10,200 advisors. IDS Life pays commissions of up to 7% of the total purchase payments for sales of the contracts it receives. 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 55 LEGAL PROCEEDINGS A number of lawsuits involving insurance sales practices, alleged agent misconduct, failure to properly supervise agents and other matters relating to life insurance policies and annuity contracts have been filed against life and health insurers in jurisdictions in which IDS Life and its affiliates do business. IDS Life and its affiliates, like other life and health insurers, are involved in such litigation. IDS Life was a named defendant in three class action lawsuits of this nature. 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. 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. On October 13, 1998, and 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. These three class action lawsuits included allegations of improper insurance and annuity sales practices including improper replacement of existing annuity contracts and insurance policies, improper use of annuities to fund tax deferred contributory retirement plans, alleged agent misconduct, failure to properly supervise agents and other matters relating to life insurance policies and annuity contracts. In January 2000, AEFC and its subsidiaries 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 in exchange for a 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 May 2001, the United States District Court for the District of Minnesota and the District Court, Fourth Judicial District for the State of Minnesota, Hennepin County entered orders approving the settlement as tentatively reached in January 2000. Appeals were filed in both federal and state court but subsequently dismissed by the parties filing the appeals. The orders approving the settlement were final as of September 24, 2001. Implementation of the settlement commenced October 15, 2001. Numerous individuals opted out of the settlement described above and therefore did not release their claims against AEFC and its subsidiaries. Some of these class members who opted out were represented by counsel and presented separate claims. Most of their claims have been settled. The outcome of any litigation or threatened litigation cannot be predicted with any certainty. However, in the aggregate, IDS Life does not consider any lawsuits in which it is named as a defendant to be material. 56 TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION Performance Information p. 3 Calculating Annuity Payouts p. 11 Rating Agencies p. 12 Principal Underwriter p. 12 Independent Auditors p. 12 Financial Statements 57 [LOGO] AMERICAN EXPRESS(R) IDS LIFE INSURANCE COMPANY 70100 AXP FINANCIAL CENTER MINNEAPOLIS, MN 55474 (800) 862-7919 S-6407 C (5/02) STATEMENT OF ADDITIONAL INFORMATION FOR AMERICAN EXPRESS RETIREMENT ADVISOR VARIABLE ANNUITY(R) IDS Life Variable Account 10 May 1, 2002 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 VARIABLE ANNUITY(R) 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 Independent Auditors p. 42 Financial Statements
2 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. For some subaccounts we do not provide any performance information because they are new and have not had any activity as of the date of the financial statements. We also show performance from the commencement date of the funds as if the subaccounts invested in them at that time, which, in some cases, they did not. Although we base performance figures on historical earnings, past performance does not guarantee future results. 3 AVERAGE ANNUAL TOTAL RETURN(a) FOR NONQUALIFIED ANNUITIES (WITHOUT PURCHASE PAYMENT CREDITS) WITH SURRENDER AND SELECTION OF MAV AND EEB DEATH BENEFIT RIDERS AND THE TEN-YEAR SURRENDER CHARGE SCHEDULE FOR PERIODS ENDING DEC. 31, 2001
PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND 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) (23.66%) (11.35%) (23.66%) --% --% (11.35%) BD1 Bond Fund (9/99; 10/81) (1.65) 1.57 (1.65) 2.12 5.60 8.62 CR1 Capital Resource Fund (9/99; 10/81) (25.14) (14.09) (25.14) 2.35 5.09 10.40 CM1 Cash Management Fund (9/99; 10/81) (5.23) (0.09) (5.23) 2.06 2.73 4.78 DE1 Diversified Equity Income Fund (9/99; 9/99) (6.69) (2.21) (6.69) -- -- (2.21) EM1 Emerging Markets Fund (5/00; 5/00) (9.92) (22.10) (9.92) -- -- (22.10) ES1 Equity Select Fund (5/01; 5/01) -- (9.30)(c) -- -- -- (9.30)(d) EI1 Extra Income Fund (9/99; 5/96) (4.10) (6.05) (4.10) (1.02) -- 0.08 FI1 Federal Income Fund (9/99; 9/99) (2.83) 1.68 (2.83) -- -- 1.68 GB1 Global Bond Fund (9/99; 5/96) (7.41) (2.57) (7.41) (0.54) -- 0.86 GR1 Growth Fund (9/99; 9/99) (36.84) (20.08) (36.84) -- -- (20.08) IE1 International Fund (9/99; 1/92) (34.77) (18.90) (34.77) (4.22) -- 2.10 MF1 Managed Fund (9/99; 4/86) (18.29) (6.16) (18.29) 3.99 7.06 8.55 ND1 NEW DIMENSIONS FUND(R)(9/99; 5/96) (23.86) (8.11) (23.86) 7.16 -- 8.40 IV1 S&P 500 Index Fund (5/00; 5/00) (20.00) (18.35) (20.00) -- -- (18.35) SC1 Small Cap Advantage Fund (9/99; 9/99) (14.59) (0.56) (14.59) -- -- (0.56) SA1 Strategy Aggressive Fund (9/99; 1/92) (38.62) (11.91) (38.62) (1.34) -- 4.92 AIM V.I. 1CA Capital Appreciation Fund, Series I (9/99; 5/93) (29.85) (8.55) (29.85) 3.18 -- 9.90 1CD Capital Development Fund, Series I (9/99; 5/98) (16.00) 6.64 (16.00) -- -- 1.68 AMERICAN CENTURY(R) VARIABLE PORTFOLIOS, INC. 1IF VP International (9/99; 5/94) (35.22) (10.93) (35.22) 1.81 -- 3.63 1VA VP Value (9/99; 5/96) 3.14 5.09 3.14 9.16 -- 10.27 CALVERT VARIABLE SERIES, INC. 1SR Social Balanced Portfolio (5/00; 9/86) (14.83) (11.79) (14.83) 4.38 7.05 7.68 CREDIT SUISSE TRUST 1EG Emerging Growth Portfolio (9/99; 9/99)(b) (23.59) (0.28) (23.59) -- -- (1.26) FIDELITY VIP 1GI Growth & Income Portfolio (Service Class) (9/99; 12/96)(e) (16.70) (7.38) (16.70) 7.31 -- 7.45 1MP Mid Cap Portfolio (Service Class) (9/99; 12/98)(e) (11.70) 19.41 (11.70) -- -- 22.17 1OS Overseas Portfolio (Service Class) (9/99; 1/87)(e) (28.02) (14.17) (28.02) (0.20) 4.09 4.40 FTVIPT 1RE Franklin Real Estate Fund - Class 2 (9/99; 1/89)(f) (1.45) 10.47 (1.45) 3.12 9.70 8.56 1SI Franklin Small Cap Value Securities Fund - Class 2 (9/99; 5/98)(f) 4.10 11.40 4.10 -- -- (0.14) (previously FTVIPT Franklin Value Securities Fund - Class 2) 1TF Templeton Foreign Securities Fund - Class 2 (3/02; 5/92)(g) -- -- (23.21) 1.76 -- 7.89 (previously FTVIPT Templeton International Securities Fund - Class 2) 1IS Templeton International Smaller Companies Fund - Class 2 (9/99; 5/96)(f) (11.04) (4.85) (11.04) (2.22) -- 0.10 4 PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND SINCE SINCE SUBACCOUNT INVESTING IN: 1 YEAR COMMENCEMENT 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT GOLDMAN SACHS VIT 1SE CORE(SM) Small Cap Equity Fund (9/99; 2/98)(h)(4.50%) (4.50%) 4.08% (4.50%) --% --% (0.02%) 1UE CORE(SM) U.S. Equity Fund (9/99; 2/98)(h) (19.52) (9.28) (19.52) -- -- 0.03 1MC Mid Cap Value Fund (9/99; 5/98) 2.39 11.60 2.39 -- -- 3.08 JANUS ASPEN SERIES 1AG Aggressive Growth Portfolio: Service Shares (5/00; 9/93)(i) (44.71) (44.92) (44.71) 4.02 -- 10.38 1GT Global Technology Portfolio: Service Shares (5/00; 1/00)(j) (42.64) (43.79) (42.64) -- -- (39.63) 1IG International Growth Portfolio: Service Shares (5/00; 5/94)(i) (29.99) (30.17) (29.99) 7.20 -- 11.70 LAZARD RETIREMENT SERIES 1IP International Equity Portfolio (9/99; 9/98) (30.56) (16.47) (30.56) -- -- (5.37) MFS(R) 1MG Investors Growth Stock Series - Service Class (5/00; 5/99)(k) (31.26) (25.51) (31.26) -- -- (4.73) 1MD New Discovery Series - Service Class (5/00; 5/98)(k) (13.42) (12.44) (13.42) -- -- 11.40 PUTNAM VARIABLE TRUST 1IN Putnam VT International New Opportunities Fund - Class IB Shares (9/99; 1/97)(l) (34.77) (20.10) (34.77) -- -- (2.56) 1VS Putnam VT Vista Fund - Class IB Shares (9/99; 1/97)(l) (39.17) (10.26) (39.17) -- -- 4.71 ROYCE CAPITAL FUND 1MI Micro-Cap Portfolio (9/99; 12/96) 19.87 23.84 19.87 17.48 -- 17.58 THIRD AVENUE 1SV Value Portfolio (9/99; 9/99) 4.00 22.75 4.00 -- -- 22.75 WANGER 1IT International Small Cap (9/99; 5/95) (27.92) (10.59) (27.92) 5.33 -- 13.47 1SP U.S. Smaller Companies (9/99; 5/95) (previously Wanger U.S. Small Cap) 1.74 2.61 1.74 9.82 -- 16.20 WELLS FARGO VT 1AA Asset Allocation Fund (5/01; 4/94)(m) -- (11.72)(c) (14.98) 6.54 -- 9.22 1WI International Equity Fund (5/01; 7/00) -- (17.83)(c) (23.30) -- -- (22.65) 1SG Small Cap Growth Fund (5/01; 5/95)(n) -- (13.82)(c) (30.84) (4.47) -- 2.92
5 (a) Current applicable charges deducted from fund performance include a $30 annual contract administrative charge, a 0.15% annual MAV fee, a 0.30% annual EEB fee, a 0.95% annual mortality and expense risk fee, and applicable surrender charges. Premium taxes and purchase payment credits 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) Initial offering of the Service Class of each fund took place on Nov. 3, 1997 (except VIP Mid Cap which took place on Dec. 28, 1998). Returns prior to Nov. 3, 1997 (or Dec. 28, 1998 for VIP Mid Cap) are those of the Initial Class, which has no 12b-1 fee. If Service Class's 12b-1 fee of 0.10% had been reflected, returns prior to Nov. 3, 1997 would have been lower. (f) Ongoing stock market volatility can dramatically change the fund's short term performance; current results may differ. Because no Class 2 shares were issued until Jan. 6, 1999 standardized Class 2 Fund performance for prior periods represents the 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 all future performance. (g) Subaccount had not commenced operations as of Dec. 31, 2001. Ongoing stock market volatility can dramatically change the fund's short-term performance; current results may differ. Performance prior to the May 1, 2000 merger reflects the historical performance of the Templeton International Fund. In addition, for periods beginning on May 1, 1997, Class 2 Fund performance reflects an additional 12b-1 fee expense which also affects future performance. FTVIPT Templeton International Smaller Companies Fund - Class 2 merged into this fund as of April 30, 2002. (h) CORE(SM) is a service mark of Goldman, Sachs & Co. (i) The returns shown for Service Shares for periods prior to their inception (December 31, 1999) are derived from the historical performance of the Institutional Shares adjusted to reflect the higher operating expenses of Service Shares. In recent years returns have sustained significant gains and losses due to market volatility in the technology sector. (j) In recent years returns have sustained significant gains and losses due to market volatility in the technology sector. (k) 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. (l) Performance information for Class IB shares for periods prior to April 30, 1998 for Putnam VT International New Opportunities 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 0.25%. Restated to reflect an increase in 12b-1 fees effective April 30, 2001. Actual 12b-1 fees during the most recent fiscal year were 0.22% (m) Performance for periods prior to Sept. 20, 1999, reflects performance of the Life and Annuity Trust Asset Allocation Fund, its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust Funds were reorganized into the Wells Fargo Variable Trust Funds. (n) Performance for periods prior to Sept. 20, 1999, reflects performance of the Norwest Select Small Company Stock Fund (the accounting survivor of a merger of the Life and Annuity Trust Strategic Growth Fund and the Norwest Select Small Company Stock Fund), its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust and Norwest Select Funds were reorganized into the Wells Fargo Variable Trust Funds. 6 AVERAGE ANNUAL TOTAL RETURN(a) FOR NONQUALIFIED ANNUITIES (WITHOUT PURCHASE PAYMENT CREDITS) WITH SURRENDER AND SELECTION OF MAV AND EEB DEATH BENEFIT RIDERS AND THE SEVEN-YEAR SURRENDER CHARGE SCHEDULE FOR PERIODS ENDING DEC. 31, 2001
PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND 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) (22.94%) (10.97%) (22.94%) --% --% (10.97%) BD1 Bond Fund (9/99; 10/81) (0.69) 1.99 (0.69) 2.49 5.73 8.62 CR1 Capital Resource Fund (9/99; 10/81) (24.44) (13.73) (24.44) 2.71 5.22 10.40 CM1 Cash Management Fund (9/99; 10/81) (4.31) 0.33 (4.31) 2.42 2.89 4.78 DE1 Diversified Equity Income Fund (9/99; 9/99) (5.78) (1.79) (5.78) -- -- (1.79) EM1 Emerging Markets Fund (5/00; 5/00) (9.05) (21.65) (9.05) -- -- (21.65) ES1 Equity Select Fund (5/01; 5/01) -- (8.42)(c) -- -- -- (8.42) EI1 Extra Income Fund (9/99; 5/96) (3.17) (5.66) (3.17) (0.64) -- 0.41 FI1 Federal Income Fund (9/99; 9/99) (1.88) 2.11 (1.88) -- -- 2.11 GB1 Global Bond Fund (9/99; 5/96) (6.51) (2.17) (6.51) (0.17) -- 1.20 GR1 Growth Fund (9/99; 9/99) (36.26) (19.74) (36.26) -- -- (19.74) IE1 International Fund (9/99; 1/92) (34.17) (18.56) (34.17) (3.88) -- 2.26 MF1 Managed Fund (9/99; 4/86) (17.51) (5.76) (17.51) 4.33 7.17 8.55 ND1 NEW DIMENSIONS FUND(R)(9/99; 5/96) (23.14) (7.72) (23.14) 7.46 -- 8.64 IV1 S&P 500 Index Fund (5/00; 5/00) (19.24) (17.88) (19.24) -- -- (17.88) SC1 Small Cap Advantage Fund (9/99; 9/99) (13.77) (0.14) (13.77) -- -- (0.14) SA1 Strategy Aggressive Fund (9/99; 1/92) (38.06) (11.53) (38.06) (0.99) -- 5.05 AIM V.I. 1CA Capital Appreciation Fund, Series I (9/99; 5/93) (29.20) (8.16) (29.20) 3.53 -- 10.07 1CD Capital Development Fund, Series I (9/99; 5/98) (15.20) 7.04 (15.20) -- -- 1.94 AMERICAN CENTURY(R) VARIABLE PORTFOLIOS, INC. 1IF VP International (9/99; 5/94) (34.63) (10.56) (34.63) 2.18 -- 4.03 1VA VP Value (9/99; 5/96) 4.14 5.49 4.14 9.44 -- 10.50 CALVERT VARIABLE SERIES, INC. 1SR Social Balanced Portfolio (5/00; 9/86) (14.01) (11.28) (14.01) 4.72 7.15 7.68 CREDIT SUISSE TRUST 1EG Emerging Growth Portfolio (9/99; 9/99) (22.87) 0.15 (22.87) -- -- (0.84) FIDELITY VIP 1GI Growth & Income Portfolio (Service Class) (9/99; 12/96)(e) (15.90) (6.99) (15.90) 7.61 -- 7.75 1MP Mid Cap Portfolio (Service Class) (9/99; 12/98)(e) (10.85) 19.76 (10.85) -- -- 22.39 1OS Overseas Portfolio (Service Class) (9/99; 1/87)(e) (27.35) (13.81) (27.35) 0.17 4.23 4.40 FTVIPT 1RE Franklin Real Estate Fund - Class 2 (9/99; 1/89)(f) (0.49) 10.86 (0.49) 3.47 9.79 8.56 1SI Franklin Small Cap Value Securities Fund - Class 2 (9/99; 5/98)(f) 5.10 11.77 5.10 -- -- 0.12 (previously FTVIPT Franklin Value Securities Fund - Class 2) 1TF Templeton Foreign Securities Fund - Class 2 (3/02; 5/92)(g) -- -- (22.49) 2.13 -- 8.00 (previously FTVIPT Templeton International Securities Fund - Class 2) 1IS Templeton International Smaller Companies Fund - Class 2 (9/99; 5/96)(f) (10.18) (4.44) (10.18) (1.85) -- 0.43 7 PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND SINCE SINCE SUBACCOUNT INVESTING IN: 1 YEAR COMMENCEMENT 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT GOLDMAN SACHS VIT 1SE CORE(SM) Small Cap Equity Fund (9/99; 2/98)(h) (3.58%) 4.49% (3.58%) --% --% 0.23% 1UE CORE(SM) U.S. Equity Fund (9/99; 2/98)(h) (18.75) (8.89) (18.75) -- -- 0.28 1MC Mid Cap Value Fund (9/99; 5/98) 3.39 11.97 3.39 -- -- 3.33 JANUS ASPEN SERIES 1AG Aggressive Growth Portfolio: Service Shares (5/00; 9/93)(i) (44.22) (44.61) (44.22) 4.36 -- 10.56 1GT Global Technology Portfolio: Service Shares (5/00; 1/00)(j) (42.13) (43.48) (42.13) -- -- (39.36) 1IG International Growth Portfolio: Service Shares (5/00; 5/94)(i) (29.34) (29.77) (29.34) 7.50 -- 11.95 LAZARD RETIREMENT SERIES 1IP International Equity Portfolio (9/99; 9/98) (29.92) (16.12) (29.92) -- -- (5.09) MFS(R) 1MG Investors Growth Stock Series - Service Class (5/00; 5/99)(k) (30.63) (25.09) (30.63) -- -- (4.39) 1MD New Discovery Series - Service Class (5/00; 5/98)(k) (12.59) (11.94) (12.59) -- -- 11.60 PUTNAM VARIABLE TRUST 1IN Putnam VT International New Opportunities Fund - Class IB Shares (9/99; 1/97)(l) (34.17) (19.76) (34.17) -- -- (2.15) 1VS Putnam VT Vista Fund - Class IB Shares (9/99; 1/97)(l) (38.62) (9.87) (38.62) -- -- 5.04 ROYCE CAPITAL FUND 1MI Micro-Cap Portfolio (9/99; 12/96) 20.87 24.17 20.87 17.69 -- 17.79 THIRD AVENUE 1SV Value Portfolio (9/99; 9/99) 5.00 23.09 5.00 -- -- 23.09 WANGER 1IT International Small Cap (9/99; 5/95) (27.24) (10.21) (27.24) 5.66 -- 13.69 1SP U.S. Smaller Companies (9/99; 5/95) 2.73 3.03 2.73 10.10 -- 16.39 (previously Wanger U.S. Small Cap) WELLS FARGO VT 1AA Asset Allocation Fund (5/01; 4/94)(m) -- (10.87)(c) (14.16) 6.85 -- 9.50 1WI International Equity Fund (5/01; 7/00) -- (17.05)(c) (22.58) -- -- (22.16) 1SG Small Cap Growth Fund (5/01; 5/95)(n) -- (12.99)(c) (30.20) (4.12) -- 3.30
8 (a) Current applicable charges deducted from fund performance include a $30 annual contract administrative charge, a 0.15% annual MAV fee, a 0.30% annual EEB fee, a 0.95% annual mortality and expense risk fee, and applicable surrender charges. Premium taxes and purchase payment credits 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) Initial offering of the Service Class of each fund took place on Nov. 3, 1997 (except VIP Mid Cap which took place on Dec. 28, 1998). Returns prior to Nov. 3, 1997 (or Dec. 28, 1998 for VIP Mid Cap) are those of the Initial Class, which has no 12b-1 fee. If Service Class's 12b-1 fee of 0.10% had been reflected, returns prior to Nov. 3, 1997 would have been lower. (f) Ongoing stock market volatility can dramatically change the fund's short term performance; current results may differ. Because no Class 2 shares were issued until Jan. 6, 1999 standardized Class 2 Fund performance for prior periods represents the 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 all future performance. (g) Subaccount had not commenced operations as of Dec. 31, 2001. Ongoing stock market volatility can dramatically change the fund's short-term performance; current results may differ. Performance prior to the May 1, 2000 merger reflects the historical performance of the Templeton International Fund. In addition, for periods beginning on May 1, 1997, Class 2 Fund performance reflects an additional 12b-1 fee expense which also affects future performance. FTVIPT Templeton International Smaller Companies Fund - Class 2 merged into this fund as of April 30, 2002. (h) CORE(SM) is a service mark of Goldman, Sachs & Co. (i) The returns shown for Service Shares for periods prior to their inception (December 31, 1999) are derived from the historical performance of the Institutional Shares adjusted to reflect the higher operating expenses of Service Shares. In recent years returns have sustained significant gains and losses due to market volatility in the technology sector. (j) In recent years returns have sustained significant gains and losses due to market volatility in the technology sector. (k) 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. (l) Performance information for Class IB shares for periods prior to April 30, 1998 for Putnam VT International New Opportunities 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 0.25%. Restated to reflect an increase in 12b-1 fees effective April 30, 2001. Actual 12b-1 fees during the most recent fiscal year were 0.22% (m) Performance for periods prior to Sept. 20, 1999, reflects performance of the Life and Annuity Trust Asset Allocation Fund, its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust Funds were reorganized into the Wells Fargo Variable Trust Funds. (n) Performance for periods prior to Sept. 20, 1999, reflects performance of the Norwest Select Small Company Stock Fund (the accounting survivor of a merger of the Life and Annuity Trust Strategic Growth Fund and the Norwest Select Small Company Stock Fund), its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust and Norwest Select Funds were reorganized into the Wells Fargo Variable Trust Funds. 9 AVERAGE ANNUAL TOTAL RETURN(a) FOR NONQUALIFIED ANNUITIES (WITHOUT PURCHASE PAYMENT CREDITS) WITHOUT SURRENDER AND SELECTION OF MAV AND EEB DEATH BENEFIT RIDERS FOR PERIODS ENDING DEC. 31, 2001
PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND 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) (17.89%) (8.39%) (17.89%) --% --% (8.39%) BD1 Bond Fund (9/99; 10/81) 6.04 4.91 6.04 3.38 5.73 8.62 CR1 Capital Resource Fund (9/99; 10/81) (19.50) (11.22) (19.50) 3.60 5.22 10.40 CM1 Cash Management Fund (9/99; 10/81) 2.14 3.21 2.14 3.31 2.89 4.78 DE1 Diversified Equity Income Fund (9/99; 9/99) 0.56 1.06 0.56 -- -- 1.06 EM1 Emerging Markets Fund (5/00; 5/00) (2.96) (18.55) (2.96) -- -- (18.55) ES1 Equity Select Fund (5/01; 5/01) -- (2.28)(c) -- -- -- (2.28)(d) EI1 Extra Income Fund (9/99; 5/96) 3.36 (2.93) 3.36 0.28 -- 1.06 FI1 Federal Income Fund (9/99; 9/99) 4.75 5.02 4.75 -- -- 5.02 GB1 Global Bond Fund (9/99; 5/96) (0.22) 0.64 (0.22) 0.75 -- 1.85 GR1 Growth Fund (9/99; 9/99) (32.22) (17.40) (32.22) -- -- (17.40) IE1 International Fund (9/99; 1/92) (29.97) (16.21) (29.97) (3.04) -- 2.26 MF1 Managed Fund (9/99; 4/86) (12.05) (3.03) (12.05) 5.16 7.17 8.55 ND1 NEW DIMENSIONS FUND(R)(9/99; 5/96) (18.11) (5.04) (18.11) 8.20 -- 9.11 IV1 S&P 500 Index Fund (5/00; 5/00) (13.91) (14.66) (13.91) -- -- (14.66) SC1 Small Cap Advantage Fund (9/99; 9/99) (8.03) 2.78 (8.03) -- -- 2.78 SA1 Strategy Aggressive Fund (9/99; 1/92) (34.15) (8.95) (34.15) (0.13) -- 5.05 AIM V.I. 1CA Capital Appreciation Fund, Series I (9/99; 5/93) (24.62) (5.48) (24.62) 4.39 -- 10.07 1CD Capital Development Fund, Series I (9/99; 5/98) (9.57) 9.78 (9.57) -- -- 3.46 AMERICAN CENTURY(R) VARIABLE PORTFOLIOS, INC. 1IF VP International (9/99; 5/94) (30.46) (7.98) (30.46) 3.07 -- 4.03 1VA VP Value (9/99; 5/96) 11.14 8.29 11.14 10.13 -- 10.93 CALVERT VARIABLE SERIES, INC. 1SR Social Balanced Portfolio (5/00; 9/86) (8.30) (7.78) (8.30) 5.54 7.15 7.68 CREDIT SUISSE TRUST 1EG Emerging Growth Portfolio (9/99; 9/99) (17.82) 3.11 (17.82) -- -- 2.06 FIDELITY VIP 1GI Growth & Income Portfolio (Service Class) (9/99; 12/96)(e) (10.33) (4.29) (10.33) 8.34 -- 8.34 1MP Mid Cap Portfolio (Service Class) (9/99; 12/98)(e) (4.89) 22.14 (4.89) -- -- 23.70 1OS Overseas Portfolio (Service Class) (9/99; 1/87) (22.63) (11.31) (22.63) 1.06 4.23 4.40 FTVIPT 1RE Franklin Real Estate Fund - Class 2 (9/99; 1/89)(f) 6.25 13.48 6.25 4.33 9.79 8.56 1SI Franklin Small Cap Value Securities Fund - Class 2 (9/99; 5/98)(f) 12.10 14.37 12.10 -- -- 1.63 (previously FTVIPT Franklin Value Securities Fund - Class 2) 1TF Templeton Foreign Securities Fund - Class 2 (3/02; 5/92)(g) -- -- (17.41) 3.03 -- 8.00 (previously FTVIPT Templeton International Securities Fund - Class 2) 1IS Templeton International Smaller Companies Fund - Class 2 (9/99; 5/96)(f) (4.17) (1.66) (4.17) (0.95) -- 1.07 10 PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND SINCE SINCE SUBACCOUNT INVESTING IN: 1 YEAR COMMENCEMENT 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT GOLDMAN SACHS VIT 1SE CORE(SM) Small Cap Equity Fund (9/99; 2/98)(h) 2.93% 7.33% 2.93% --% --% 1.68% 1UE CORE(SM) U.S. Equity Fund (9/99; 2/98)(h) (13.39) (6.25) (13.39) -- -- 1.70 1MC Mid Cap Value Fund (9/99; 5/98) 10.39 14.57 10.39 -- -- 4.80 JANUS ASPEN SERIES 1AG Aggressive Growth Portfolio: Service Shares (5/00; 9/93)(i) (40.78) (42.49) (40.78) 5.19 -- 10.56 1GT Global Technology Portfolio: Service Shares (5/00; 1/00)(j) (38.53) (41.31) (38.53) -- -- (37.50) 1IG International Growth Portfolio: Service Shares (5/00; 5/94)(i) (24.77) (27.04) (24.77) 8.24 -- 11.95 LAZARD RETIREMENT SERIES 1IP International Equity Portfolio (9/99; 9/98) (25.40) (13.70) (25.40) -- -- (3.50) MFS(R) 1MG Investors Growth Stock Series - Service Class (5/00; 5/99)(k) (26.16) (22.17) (26.16) -- -- (2.08) 1MD New Discovery Series - Service Class (5/00; 5/98)(k) (6.77) (8.45) (6.77) -- -- 12.80 PUTNAM VARIABLE TRUST 1IN Putnam VT International New Opportunities Fund - Class IB Shares (9/99; 1/97)(l) (29.97) (17.44) (29.97) -- -- (1.14) 1VS Putnam VT Vista Fund - Class IB Shares (9/99; 1/97)(l) (34.75) (7.22) (34.75) -- -- 5.85 ROYCE CAPITAL FUND 1MI Micro-Cap Portfolio (9/99; 12/96) 27.87 26.44 27.87 18.21 -- 18.20 THIRD AVENUE 1SV Value Portfolio (9/99; 9/99) 12.00 25.42 12.00 -- -- 25.42 WANGER 1IT International Small Cap (9/99; 5/95) (22.52) (7.60) (22.52) 6.45 -- 13.83 1SP U.S. Smaller Companies (9/99; 5/95) 9.71 5.91 9.71 10.77 -- 16.52 (previously Wanger U.S. Small Cap) WELLS FARGO VT 1AA Asset Allocation Fund (5/01; 4/94)(m) -- (4.91)(c) (8.45) 7.61 -- 9.50 1WI International Equity Fund (5/01; 7/00) -- (11.55)(c) (17.50) -- -- (18.72) 1SG Small Cap Growth Fund (5/01; 5/95)(n) -- (7.20)(c) (25.70) (3.27) -- 3.55
11 (a) Current applicable charges deducted from fund performance include a $30 annual contract administrative charge, a 0.15% annual MAV fee, a 0.30% annual EEB fee, a 0.95% annual mortality and expense risk fee, and applicable surrender charges. Premium taxes and purchase payment credits 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) Initial offering of the Service Class of each fund took place on Nov. 3, 1997 (except VIP Mid Cap which took place on Dec. 28, 1998). Returns prior to Nov. 3, 1997 (or Dec. 28, 1998 for VIP Mid Cap) are those of the Initial Class, which has no 12b-1 fee. If Service Class's 12b-1 fee of 0.10% had been reflected, returns prior to Nov. 3, 1997 would have been lower. (f) Ongoing stock market volatility can dramatically change the fund's short term performance; current results may differ. Because no Class 2 shares were issued until Jan. 6, 1999 standardized Class 2 Fund performance for prior periods represents the 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 all future performance. (g) Subaccount had not commenced operations as of Dec. 31, 2001. Ongoing stock market volatility can dramatically change the fund's short-term performance; current results may differ. Performance prior to the May 1, 2000 merger reflects the historical performance of the Templeton International Fund. In addition, for periods beginning on May 1, 1997, Class 2 Fund performance reflects an additional 12b-1 fee expense which also affects future performance. FTVIPT Templeton International Smaller Companies Fund - Class 2 merged into this fund as of April 30, 2002. (h) CORE(SM) is a service mark of Goldman, Sachs & Co. (i) The returns shown for Service Shares for periods prior to their inception (December 31, 1999) are derived from the historical performance of the Institutional Shares adjusted to reflect the higher operating expenses of Service Shares. In recent years returns have sustained significant gains and losses due to market volatility in the technology sector. (j) In recent years returns have sustained significant gains and losses due to market volatility in the technology sector. (k) 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. (l) Performance information for Class IB shares for periods prior to April 30, 1998 for Putnam VT International New Opportunities 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 0.25%. Restated to reflect an increase in 12b-1 fees effective April 30, 2001. Actual 12b-1 fees during the most recent fiscal year were 0.22% (m) Performance for periods prior to Sept. 20, 1999, reflects performance of the Life and Annuity Trust Asset Allocation Fund, its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust Funds were reorganized into the Wells Fargo Variable Trust Funds. (n) Performance for periods prior to Sept. 20, 1999, reflects performance of the Norwest Select Small Company Stock Fund (the accounting survivor of a merger of the Life and Annuity Trust Strategic Growth Fund and the Norwest Select Small Company Stock Fund), its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust and Norwest Select Funds were reorganized into the Wells Fargo Variable Trust Funds. 12 AVERAGE ANNUAL TOTAL RETURN(a) FOR NONQUALIFIED ANNUITIES (WITHOUT PURCHASE PAYMENT CREDITS) WITH SURRENDER AND SELECTION OF A TEN-YEAR SURRENDER CHARGE SCHEDULE FOR PERIODS ENDING DEC. 31, 2001
PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND 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) (23.15%) (10.75%) (23.15%) --% --% (10.75%) BD1 Bond Fund (9/99; 10/81) (1.13) 2.14 (1.13) 2.71 6.18 9.22 CR1 Capital Resource Fund (9/99; 10/81) (24.63) (13.46) (24.63) 2.95 5.67 11.00 CM1 Cash Management Fund (9/99; 10/81) (4.72) 0.40 (4.72) 2.65 3.30 5.36 DE1 Diversified Equity Income Fund (9/99; 9/99) (6.17) (1.67) (6.17) -- -- (1.67) EM1 Emerging Markets Fund (5/00; 5/00) (9.41) (21.85) (9.41) -- -- (21.85) ES1 Equity Select Fund (5/01; 5/01) -- (8.78)(c) -- -- -- (8.78)(d) EI1 Extra Income Fund (9/99; 5/96) (3.59) (5.51) (3.59) (0.47) -- 0.62 FI1 Federal Income Fund (9/99; 9/99) (2.32) 2.25 (2.32) -- -- 2.25 GB1 Global Bond Fund (9/99; 5/96) (6.89) (2.07) (6.89) 0.00 -- 1.45 GR1 Growth Fund (9/99; 9/99) (36.33) (19.39) (36.33) -- -- (19.39) IE1 International Fund (9/99; 1/92) (34.26) (18.25) (34.26) (3.71) -- 2.68 MF1 Managed Fund (9/99; 4/86) (17.77) (5.60) (17.77) 4.58 7.64 9.13 ND1 NEW DIMENSIONS FUND(R)(9/99; 5/96) (23.35) (7.52) (23.35) 7.75 -- 8.99 IV1 S&P 500 Index Fund (5/00; 5/00) (19.48) (17.75) (19.48) -- -- (17.75) SC1 Small Cap Advantage Fund (9/99; 9/99) (14.08) (0.01) (14.08) -- -- (0.01) SA1 Strategy Aggressive Fund (9/99; 1/92) (38.11) (11.28) (38.11) (0.87) -- 5.51 AIM V.I. 1CA Capital Appreciation Fund, Series I (9/99; 5/93) (29.34) (7.95) (29.34) 3.78 -- 10.50 1CD Capital Development Fund, Series I (9/99; 5/98) (15.49) 7.22 (15.49) -- -- 2.26 AMERICAN CENTURY(R) VARIABLE PORTFOLIOS, INC. 1IF VP International (9/99; 5/94) (34.71) (10.35) (34.71) 2.40 -- 4.21 1VA VP Value (9/99; 5/96) 3.70 5.66 3.70 9.75 -- 10.87 CALVERT VARIABLE SERIES, INC. 1SR Social Balanced Portfolio (5/00; 9/86) (14.32) (11.24) (14.32) 4.98 7.62 8.26 CREDIT SUISSE TRUST 1EG Emerging Growth Portfolio (9/99; 9/99) (23.08) 0.28 (23.08) -- -- (0.69) FIDELITY VIP 1GI Growth & Income Portfolio (Service Class) (9/99; 12/96)(e) (16.19) (6.81) (16.19) 7.90 -- 7.90 1MP Mid Cap Portfolio (Service Class) (9/99; 12/98)(e) (11.19) 20.01 (11.19) -- -- 22.78 1OS Overseas Portfolio (Service Class) (9/99; 1/87) (27.51) (13.55) (27.51) 0.31 4.67 4.98 FTVIPT 1RE Franklin Real Estate Fund - Class 2 (9/99; 1/89)(f) (0.94) 11.06 (0.94) 3.71 10.28 9.15 1SI Franklin Small Cap Value Securities Fund - Class 2 (9/99; 5/98)(f) 4.66 11.97 4.66 -- -- 0.37 (previously FTVIPT Franklin Value Securities Fund - Class 2) 1TF Templeton Foreign Securities Fund - Class 2 (3/02; 5/92)(g) -- -- (22.71) 2.33 -- 8.44 (previously FTVIPT Templeton International Securities Fund - Class 2) 1IS Templeton International Smaller Companies Fund - Class 2 (9/99; 5/96)(f) (10.53) (4.28) (10.53) (1.67) -- 0.63 13 PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND SINCE SINCE SUBACCOUNT INVESTING IN: 1 YEAR COMMENCEMENT 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT GOLDMAN SACHS VIT 1SE CORE(SM) Small Cap Equity Fund (9/99; 2/98)(h) (3.99%) 4.65% (3.99%) --% --% 0.52% 1UE CORE(SM) U.S. Equity Fund (9/99; 2/98)(h) (19.00) (8.69) (19.00) -- -- 0.55 1MC Mid Cap Value Fund (9/99; 5/98) 2.95 12.18 2.95 -- -- 3.66 JANUS ASPEN SERIES 1AG Aggressive Growth Portfolio: Service Shares (5/00; 9/93)(i) (44.20) (44.08) (44.20) 4.62 -- 10.98 1GT Global Technology Portfolio: Service Shares (5/00; 1/00)(j) (42.13) (42.96) (42.13) -- -- (38.92) 1IG International Growth Portfolio: Service Shares (5/00; 5/94)(i) (31.41) (31.93) (31.41) 7.90 -- 12.32 LAZARD RETIREMENT SERIES 1IP International Equity Portfolio (9/99; 9/98) (30.05) (15.85) (30.05) -- -- (4.80) MFS(R) 1MG Investors Growth Stock Series - Service Class (5/00; 5/99)(k) (30.75) (24.86) (30.75) -- -- (4.23) 1MD New Discovery Series - Service Class (5/00; 5/98)(k) (12.91) (11.87) (12.91) -- -- 11.99 PUTNAM VARIABLE TRUST 1IN Putnam VT International New Opportunities Fund - Class IB Shares (9/99; 1/97)(l) (34.26) (19.42) (34.26) -- -- (1.85) 1VS Putnam VT Vista Fund - Class IB Shares (9/99; 1/97)(l) (38.65) (9.62) (38.65) -- -- 5.31 ROYCE CAPITAL FUND 1MI Micro-Cap Portfolio (9/99; 12/96) 20.43 24.44 20.43 18.07 -- 18.17 THIRD AVENUE 1SV Value Portfolio (9/99; 9/99) 4.55 23.35 4.55 -- -- 23.35 WANGER 1IT International Small Cap (9/99; 5/95) (27.41) (9.99) (27.41) 5.93 -- 14.08 1SP U.S. Smaller Companies (9/99; 5/95) 2.27 3.18 2.27 10.41 -- 16.80 (previously Wanger U.S. Small Cap) WELLS FARGO VT 1AA Asset Allocation Fund (5/01; 4/94)(m) -- (11.20)(c) (14.46) 7.14 -- 9.81 1WI International Equity Fund (5/01; 7/00) -- (17.32)(c) (22.79) -- -- (22.01) 1SG Small Cap Growth Fund (5/01; 5/95)(n) -- (13.31)(c) (30.33) (3.95) -- 3.55
14 (a) Current applicable charges deducted from fund performance include a $30 annual contract administrative charge, a 0.95% annual mortality and expense risk fee, and applicable surrender charges. Premium taxes and purchase payment credits 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) Initial offering of the Service Class of each fund took place on Nov. 3, 1997 (except VIP Mid Cap which took place on Dec. 28, 1998). Returns prior to Nov. 3, 1997 (or Dec. 28, 1998 for VIP Mid Cap) are those of the Initial Class, which has no 12b-1 fee. If Service Class's 12b-1 fee of 0.10% had been reflected, returns prior to Nov. 3, 1997 would have been lower. (f) Ongoing stock market volatility can dramatically change the fund's short term performance; current results may differ. Because no Class 2 shares were issued until Jan. 6, 1999 standardized Class 2 Fund performance for prior periods represents the 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 all future performance. (g) Subaccount had not commenced operations as of Dec. 31, 2001. Ongoing stock market volatility can dramatically change the fund's short-term performance; current results may differ. Performance prior to the May 1, 2000 merger reflects the historical performance of the Templeton International Fund. In addition, for periods beginning on May 1, 1997, Class 2 Fund performance reflects an additional 12b-1 fee expense which also affects future performance. FTVIPT Templeton International Smaller Companies Fund - Class 2 merged into this fund as of April 30, 2002. (h) CORE(SM) is a service mark of Goldman, Sachs & Co. (i) The returns shown for Service Shares for periods prior to their inception (December 31, 1999) are derived from the historical performance of the Institutional Shares adjusted to reflect the higher operating expenses of Service Shares. In recent years returns have sustained significant gains and losses due to market volatility in the technology sector. (j) In recent years returns have sustained significant gains and losses due to market volatility in the technology sector. (k) 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. (l) Performance information for Class IB shares for periods prior to April 30, 1998 for Putnam VT International New Opportunities 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 0.25%. Restated to reflect an increase in 12b-1 fees effective April 30, 2001. Actual 12b-1 fees during the most recent fiscal year were 0.22% (m) Performance for periods prior to Sept. 20, 1999, reflects performance of the Life and Annuity Trust Asset Allocation Fund, its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust Funds were reorganized into the Wells Fargo Variable Trust Funds. (n) Performance for periods prior to Sept. 20, 1999, reflects performance of the Norwest Select Small Company Stock Fund (the accounting survivor of a merger of the Life and Annuity Trust Strategic Growth Fund and the Norwest Select Small Company Stock Fund), its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust and Norwest Select Funds were reorganized into the Wells Fargo Variable Trust Funds. 15 AVERAGE ANNUAL TOTAL RETURN(a) FOR NONQUALIFIED ANNUITIES (WITHOUT PURCHASE PAYMENT CREDITS) WITH SURRENDER AND SELECTION OF A SEVEN-YEAR SURRENDER CHARGE SCHEDULE FOR PERIODS ENDING DEC. 31, 2001
PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND 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) (22.42%) (10.38%) (22.42%) --% --% (10.38%) BD1 Bond Fund (9/99; 10/81) (0.17) 2.56 (0.17) 3.07 6.30 9.22 CR1 Capital Resource Fund (9/99; 10/81) (23.92) (13.11) (23.92) 3.31 5.79 11.00 CM1 Cash Management Fund (9/99; 10/81) (3.79) 0.83 (3.79) 3.00 3.45 5.36 DE1 Diversified Equity Income Fund (9/99; 9/99) (5.26) (1.26) (5.26) -- -- (1.26) EM1 Emerging Markets Fund (5/00; 5/00) (8.53) (21.42) (8.53) -- -- (21.42) ES1 Equity Select Fund (5/01; 5/01) -- (7.90)(c) -- -- -- (7.90)(d) EI1 Extra Income Fund (9/99; 5/96) (2.65) (5.11) (2.65) (0.09) -- 0.96 FI1 Federal Income Fund (9/99; 9/99) (1.37) 2.68 (1.37) -- -- 2.68 GB1 Global Bond Fund (9/99; 5/96) (5.99) (1.66) (5.99) 0.38 -- 1.77 GR1 Growth Fund (9/99; 9/99) (35.74) (19.07) (35.74) -- -- (19.07) IE1 International Fund (9/99; 1/92) (33.65) (17.92) (33.65) (3.35) -- 2.84 MF1 Managed Fund (9/99; 4/86) (16.99) (5.20) (16.99) 4.92 7.75 9.13 ND1 NEW DIMENSIONS FUND(R)(9/99; 5/96) (22.62) (7.14) (22.62) 8.05 -- 9.23 IV1 S&P 500 Index Fund (5/00; 5/00) (18.72) (17.29) (18.72) -- -- (17.29) SC1 Small Cap Advantage Fund (9/99; 9/99) (13.25) 0.41 (13.25) -- -- 0.41 SA1 Strategy Aggressive Fund (9/99; 1/92) (37.54) (10.92) (37.54) (0.49) -- 5.63 AIM V.I. 1CA Capital Appreciation Fund, Series I (9/99; 5/93) (28.68) (7.56) (28.68) 4.12 -- 10.66 1CD Capital Development Fund, Series I (9/99; 5/98) (14.68) 7.61 (14.68) -- -- 2.52 AMERICAN CENTURY(R) VARIABLE PORTFOLIOS, INC. 1IF VP International (9/99; 5/94) (34.11) (9.98) (34.11) 2.76 -- 4.61 1VA VP Value (9/99; 5/96) 4.70 6.06 4.70 10.02 -- 11.08 CALVERT VARIABLE SERIES, INC. 1SR Social Balanced Portfolio (5/00; 9/86) (13.50) (10.73) (13.50) 5.31 7.73 8.26 CREDIT SUISSE TRUST 1EG Emerging Growth Portfolio (9/99; 9/99) (22.35) 0.71 (22.35) -- -- (0.27) FIDELITY VIP 1GI Growth & Income Portfolio (Service Class) (9/99; 12/96)(e) (15.39) (6.42) (15.39) 8.20 -- 8.20 1MP Mid Cap Portfolio (Service Class) (9/99; 12/98)(e) (10.33) 20.36 (10.33) -- -- 23.00 1OS Overseas Portfolio (Service Class) (9/99; 1/87)(e) (26.83) (13.20) (26.83) 0.69 4.81 4.98 FTVIPT 1RE Franklin Real Estate Fund - Class 2 (9/99; 1/89)(f) 0.03 11.44 0.03 4.05 10.37 9.15 1SI Franklin Small Cap Value Securities Fund - Class 2 (9/99; 5/98)(f) 5.66 12.35 5.66 -- -- 0.64 (previously FTVIPT Franklin Value Securities Fund - Class 2) 1TF Templeton Foreign Securities Fund - Class 2 (3/02; 5/92)(g) -- -- (21.98) 2.70 -- 8.55 (previously FTVIPT Templeton International Securities Fund - Class 2) 1IS Templeton International Smaller Companies Fund - Class 2 (9/99; 5/96)(f) (9.66) (3.88) (9.66) (1.30) -- 0.97 16 PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND SINCE SINCE SUBACCOUNT INVESTING IN: 1 YEAR COMMENCEMENT 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT GOLDMAN SACHS VIT 1SE CORE(SM) Small Cap Equity Fund (9/99; 2/98)(h) (3.06%) 5.06% (3.06%) --% --% 0.77% 1UE CORE(SM) U.S. Equity Fund (9/99; 2/98)(h) (18.23) (8.31) (18.23) -- -- 0.80 1MC Mid Cap Value Fund (9/99; 5/98) 3.95 12.55 3.95 -- -- 3.90 JANUS ASPEN SERIES 1AG Aggressive Growth Portfolio: Service Shares (5/00; 9/93)(i) (43.70) (43.81) (43.70) 4.95 -- 11.14 1GT Global Technology Portfolio: Service Shares (5/00; 1/00)(j) (41.61) (42.69) (41.61) -- -- (38.67) 1IG International Growth Portfolio: Service Shares (5/00; 5/94)(i) (28.82) (29.10) (28.82) 8.09 -- 12.54 LAZARD RETIREMENT SERIES 1IP International Equity Portfolio (9/99; 9/98) (29.40) (15.51) (29.40) (4.53) MFS(R) 1MG Investors Growth Stock Series - Service Class (5/00; 5/99)(k) (30.11) (24.45) (30.11) -- -- (3.89) 1MD New Discovery Series - Service Class (5/00; 5/98)(k) (12.07) (11.37) (12.07) -- -- 12.19 PUTNAM VARIABLE TRUST 1IN Putnam VT International New Opportunities Fund - Class IB Shares (9/99; 1/97)(l) (33.65) (19.11) (33.65) -- -- (1.48) 1VS Putnam VT Vista Fund - Class IB Shares (9/99; 1/97)(l) (38.10) (9.25) (38.10) -- -- 5.64 ROYCE CAPITAL FUND 1MI Micro-Cap Portfolio (9/99; 12/96) 21.43 24.77 21.43 18.27 -- 18.38 THIRD AVENUE 1SV Value Portfolio (9/99; 9/99) 5.55 23.69 5.55 -- -- 23.69 WANGER 1IT International Small Cap (9/99; 5/95) (26.72) (9.62) (26.72) 6.25 -- 14.29 1SP U.S. Smaller Companies (9/99; 5/95) 3.27 3.60 3.27 10.68 -- 16.99 (previously Wanger U.S. Small Cap) WELLS FARGO VT 1AA Asset Allocation Fund (5/01; 4/94)(m) -- (10.35)(c) (13.64) 7.44 -- 10.08 1WI International Equity Fund (5/01; 7/00) -- (16.53)(c) (22.06) -- -- (21.53) 1SG Small Cap Growth Fund (5/01; 5/95)(n) -- (12.47)(c) (29.68) (3.59) -- 3.92
17 (a) Current applicable charges deducted from fund performance include a $30 annual contract administrative charge, a 0.95% annual mortality and expense risk fee, and applicable surrender charges. Premium taxes and purchase payment credits 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) Initial offering of the Service Class of each fund took place on Nov. 3, 1997 (except VIP Mid Cap which took place on Dec. 28, 1998). Returns prior to Nov. 3, 1997 (or Dec. 28, 1998 for VIP Mid Cap) are those of the Initial Class, which has no 12b-1 fee. If Service Class's 12b-1 fee of 0.10% had been reflected, returns prior to Nov. 3, 1997 would have been lower. (f) Ongoing stock market volatility can dramatically change the fund's short term performance; current results may differ. Because no Class 2 shares were issued until Jan. 6, 1999 standardized Class 2 Fund performance for prior periods represents the 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 all future performance. (g) Subaccount had not commenced operations as of Dec. 31, 2001. Ongoing stock market volatility can dramatically change the fund's short-term performance; current results may differ. Performance prior to the May 1, 2000 merger reflects the historical performance of the Templeton International Fund. In addition, for periods beginning on May 1, 1997, Class 2 Fund performance reflects an additional 12b-1 fee expense which also affects future performance. FTVIPT Templeton International Smaller Companies Fund - Class 2 merged into this fund as of April 30, 2002. (h) CORE(SM) is a service mark of Goldman, Sachs & Co. (i) The returns shown for Service Shares for periods prior to their inception (December 31, 1999) are derived from the historical performance of the Institutional Shares adjusted to reflect the higher operating expenses of Service Shares. In recent years returns have sustained significant gains and losses due to market volatility in the technology sector. (j) In recent years returns have sustained significant gains and losses due to market volatility in the technology sector. (k) 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. (l) Performance information for Class IB shares for periods prior to April 30, 1998 for Putnam VT International New Opportunities 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 0.25%. Restated to reflect an increase in 12b-1 fees effective April 30, 2001. Actual 12b-1 fees during the most recent fiscal year were 0.22% (m) Performance for periods prior to Sept. 20, 1999, reflects performance of the Life and Annuity Trust Asset Allocation Fund, its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust Funds were reorganized into the Wells Fargo Variable Trust Funds. (n) Performance for periods prior to Sept. 20, 1999, reflects performance of the Norwest Select Small Company Stock Fund (the accounting survivor of a merger of the Life and Annuity Trust Strategic Growth Fund and the Norwest Select Small Company Stock Fund), its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust and Norwest Select Funds were reorganized into the Wells Fargo Variable Trust Funds. 18 AVERAGE ANNUAL TOTAL RETURN(a) FOR NONQUALIFIED ANNUITIES (WITHOUT PURCHASE PAYMENT CREDITS) WITHOUT SURRENDER FOR PERIODS ENDING DEC. 31, 2001
PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND 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) (17.34%) (7.86%) (17.34%) --% --% (7.86%) BD1 Bond Fund (9/99; 10/81) 6.60 5.46 6.60 3.94 6.30 9.22 CR1 Capital Resource Fund (9/99; 10/81) (18.94) (10.69) (18.94) 4.17 5.79 11.00 CM1 Cash Management Fund (9/99; 10/81) 2.70 3.76 2.70 3.88 3.45 5.36 DE1 Diversified Equity Income Fund (9/99; 9/99) 1.12 1.60 1.12 -- -- 1.60 EM1 Emerging Markets Fund (5/00; 5/00) (2.40) (18.44) (2.40) -- -- (18.44 ES1 Equity Select Fund (5/01; 5/01) -- (1.72)(c) -- -- -- (1.72)(d) EI1 Extra Income Fund (9/99; 5/96) 3.92 (2.40) 3.92 0.84 -- 1.62 FI1 Federal Income Fund (9/99; 9/99) 5.31 5.57 5.31 -- -- 5.57 GB1 Global Bond Fund (9/99; 5/96) 0.33 1.18 0.33 1.32 -- 2.41 GR1 Growth Fund (9/99; 9/99) (31.66) (16.89) (31.66) -- -- (16.89) IE1 International Fund (9/99; 1/92) (29.41) (15.69) (29.41) (2.47) -- 2.84 MF1 Managed Fund (9/99; 4/86) (11.49) (2.49) (11.49) 5.73 7.75 9.13 ND1 NEW DIMENSIONS FUND(R)(9/99; 5/96) (17.55) (4.50) (17.55) 8.77 -- 9.69 IV1 S&P 500 Index Fund (5/00; 5/00) (13.35) (14.11) (13.35) -- -- (14.11) SC1 Small Cap Advantage Fund (9/99; 9/99) (7.48) 3.33 (7.48) -- -- 3.33 SA1 Strategy Aggressive Fund (9/99; 1/92) (33.60) (8.42) (33.60) 0.44 -- 5.63 AIM V.I. 1CA Capital Appreciation Fund, Series I (9/99; 5/93) (24.06) (4.94) (24.06) 4.96 -- 10.66 1CD Capital Development Fund, Series I (9/99; 5/98) (9.01) 10.34 (9.01) -- -- 4.02 AMERICAN CENTURY(R) VARIABLE PORTFOLIOS, INC. 1IF VP International (9/99; 5/94) (29.90) (7.45) (29.90) 3.64 -- 4.61 1VA VP Value (9/99; 5/96) 11.70 8.84 11.70 10.70 -- 11.51 CALVERT VARIABLE SERIES, INC. 1SR Social Balanced Portfolio (5/00; 9/86) (7.74) (7.24) (7.74) 6.11 7.73 8.26 CREDIT SUISSE TRUST 1EG Emerging Growth Portfolio (9/99; 9/99) (17.26) 3.66 (17.26) -- -- 2.61 FIDELITY VIP 1GI Growth & Income Portfolio (Service Class) (9/99; 12/96)(e) (9.77) (3.76) (9.77) 8.92 -- 8.92 1MP Mid Cap Portfolio (Service Class) (9/99; 12/98)(e) (4.34) 22.73 (4.34) -- -- 24.30 1OS Overseas Portfolio (Service Class) (9/99; 1/87)(e) (22.07) (10.79) (22.07) 1.63 4.81 4.98 FTVIPT 1RE Franklin Real Estate Fund - Class 2 (9/99; 1/89)(f) 6.81 14.05 6.81 4.89 10.37 9.15 1SI Franklin Small Cap Value Securities Fund - Class 2 (9/99; 5/98)(f) 12.66 14.94 12.66 -- -- 2.18 (previously FTVIPT Franklin Value Securities Fund - Class 2) 1TF Templeton Foreign Securities Fund - Class 2 (3/02; 5/92)(g) -- -- (16.86) 3.58 -- 8.55 (previously FTVIPT Templeton International Securities Fund - Class 2) 1IS Templeton International Smaller Companies Fund - Class 2 (9/99; 5/96)(f) (3.62) (1.12) (3.62) (0.39) -- 1.63 19 PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND SINCE SINCE SUBACCOUNT INVESTING IN: 1 YEAR COMMENCEMENT 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT GOLDMAN SACHS VIT 1SE CORE(SM) Small Cap Equity Fund (9/99; 2/98)(h) 3.49% 7.88% 3.49% --% --% 2.23% 1UE CORE(SM) U.S. Equity Fund (9/99; 2/98)(h) (12.83) (5.72) (12.83) -- -- 2.27 1MC Mid Cap Value Fund (9/99; 5/98) 10.95 15.13 10.95 -- -- 5.35 JANUS ASPEN SERIES 1AG Aggressive Growth Portfolio: Service Shares (5/00; 9/93)(i) (40.22) (41.96) (40.22) 5.76 -- 11.14 1GT Global Technology Portfolio: Service Shares (5/00; 1/00)(j) (37.97) (40.78) (37.97) -- -- (36.96) 1IG International Growth Portfolio: Service Shares (5/00; 5/94)(i) (24.21) (26.50) (24.21) 8.81 -- 12.54 LAZARD RETIREMENT SERIES 1IP International Equity Portfolio (9/99; 9/98) (24.84) (13.18) (24.84) -- -- (2.95) MFS(R) 1MG Investors Growth Stock Series - Service Class (5/00; 5/99)(k) (25.60) (21.63) (25.60) -- -- (1.52) 1MD New Discovery Series - Service Class (5/00; 5/98)(k) (6.21) (7.91) (6.21) -- -- 13.38 PUTNAM VARIABLE TRUST 1IN Putnam VT International New Opportunities Fund - Class IB Shares (9/99; 1/97)(l) (29.41) (16.92) (29.41) -- -- (0.57) 1VS Putnam VT Vista Fund - Class IB Shares (9/99; 1/97)(l) (34.19) (6.69) (34.19) -- -- 6.43 ROYCE CAPITAL FUND 1MI Micro-Cap Portfolio (9/99; 12/96) 28.43 27.03 28.43 18.78 -- 18.78 THIRD AVENUE 1SV Value Portfolio (9/99; 9/99) 12.55 26.01 12.55 -- -- 26.01 WANGER 1IT International Small Cap (9/99; 5/95) (21.96) (7.07) (21.96) 7.02 -- 14.43 1SP U.S. Smaller Companies (9/99; 5/95) 10.27 6.46 10.27 11.34 -- 17.11 (previously Wanger U.S. Small Cap) WELLS FARGO VT 1AA Asset Allocation Fund (5/01; 4/94)(m) -- (4.35)(c) (7.89) 8.18 -- 10.08 1WI International Equity Fund (5/01; 7/00) -- (11.00)(c) (16.94) -- -- (18.18) 1SG Small Cap Growth Fund (5/01; 5/95)(n) -- (6.64)(c) (25.14) (2.71) -- 4.16
20 (a) Current applicable charges deducted from fund performance include a $30 annual contract administrative charge and a 0.95% annual mortality and expense risk fee. Premium taxes and purchase payment credits 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) Initial offering of the Service Class of each fund took place on Nov. 3, 1997 (except VIP Mid Cap which took place on Dec. 28, 1998). Returns prior to Nov. 3, 1997 (or Dec. 28, 1998 for VIP Mid Cap) are those of the Initial Class, which has no 12b-1 fee. If Service Class's 12b-1 fee of 0.10% had been reflected, returns prior to Nov. 3, 1997 would have been lower. (f) Ongoing stock market volatility can dramatically change the fund's short term performance; current results may differ. Because no Class 2 shares were issued until Jan. 6, 1999 standardized Class 2 Fund performance for prior periods represents the 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 all future performance. (g) Subaccount had not commenced operations as of Dec. 31, 2001. Ongoing stock market volatility can dramatically change the fund's short-term performance; current results may differ. Performance prior to the May 1, 2000 merger reflects the historical performance of the Templeton International Fund. In addition, for periods beginning on May 1, 1997, Class 2 Fund performance reflects an additional 12b-1 fee expense which also affects future performance. FTVIPT Templeton International Smaller Companies Fund - Class 2 merged into this fund as of April 30, 2002. (h) CORE(SM) is a service mark of Goldman, Sachs & Co. (i) The returns shown for Service Shares for periods prior to their inception (December 31, 1999) are derived from the historical performance of the Institutional Shares adjusted to reflect the higher operating expenses of Service Shares. In recent years returns have sustained significant gains and losses due to market volatility in the technology sector. (j) In recent years returns have sustained significant gains and losses due to market volatility in the technology sector. (k) 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. (l) Performance information for Class IB shares for periods prior to April 30, 1998 for Putnam VT International New Opportunities 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 0.25%. Restated to reflect an increase in 12b-1 fees effective April 30, 2001. Actual 12b-1 fees during the most recent fiscal year were 0.22% (m) Performance for periods prior to Sept. 20, 1999, reflects performance of the Life and Annuity Trust Asset Allocation Fund, its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust Funds were reorganized into the Wells Fargo Variable Trust Funds. (n) Performance for periods prior to Sept. 20, 1999, reflects performance of the Norwest Select Small Company Stock Fund (the accounting survivor of a merger of the Life and Annuity Trust Strategic Growth Fund and the Norwest Select Small Company Stock Fund), its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust and Norwest Select Funds were reorganized into the Wells Fargo Variable Trust Funds. 21 AVERAGE ANNUAL TOTAL RETURN(a) FOR QUALIFIED ANNUITIES (WITHOUT PURCHASE PAYMENT CREDITS) WITH SURRENDER AND SELECTION OF MAV DEATH BENEFIT RIDER AND THE TEN-YEAR SURRENDER CHARGE SCHEDULE FOR PERIODS ENDING DEC. 31, 2001
PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND 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) (23.23%) (10.88%) (23.23%) --% --% (10.88%) BD2 Bond Fund (9/99; 10/81) (1.17) 2.10 (1.17) 2.65 6.12 9.14 CR2 Capital Resource Fund (9/99; 10/81) (24.72) (13.63) (24.72) 2.89 5.61 10.92 CM2 Cash Management Fund (9/99; 10/81) (4.77) 0.40 (4.77) 2.59 3.25 5.29 DE2 Diversified Equity Income Fund (9/99; 9/99) (6.22) (1.72) (6.22) -- -- (1.72) EM2 Emerging Markets Fund (5/00; 5/00) (9.46) (22.07) (9.46) -- -- (22.07) ES2 Equity Select Fund (5/01; 5/01) -- (8.92)(c) -- -- -- (8.92)(d) EI2 Extra Income Fund (9/99; 5/96) (3.64) (5.58) (3.64) (0.53) -- 0.57 FI2 Federal Income Fund (9/99; 9/99) (2.36) 2.22 (2.36) -- -- 2.22 GB2 Global Bond Fund (9/99; 5/96) (6.94) (2.09) (6.94) (0.05) -- 1.39 GR2 Growth Fund (9/99; 9/99) (36.44) (19.64) (36.44) -- -- (19.64) IE2 International Fund (9/99; 1/92) (34.37) (18.45) (34.37) (3.74) -- 2.61 MF2 Managed Fund (9/99; 4/86) (17.85) (5.68) (17.85) 4.52 7.58 9.06 ND2 NEW DIMENSIONS FUND(R)(9/99; 5/96) (23.43) (7.64) (23.43) 7.70 -- 8.93 IV2 S&P 500 Index Fund (5/00; 5/00) (19.56) (17.90) (19.56) -- -- (17.90) SC2 Small Cap Advantage Fund (9/99; 9/99) (14.14) (0.07) (14.14) -- -- (0.07) SA2 Strategy Aggressive Fund (9/99; 1/92) (38.22) (11.44) (38.22) (0.85) -- 5.44 AIM V.I. 2CA Capital Appreciation Fund, Series I (9/99; 5/93) (29.44) (8.08) (29.44) 3.72 -- 10.43 2CD Capital Development Fund, Series I (9/99; 5/98) (15.56) 7.18 (15.56) -- -- 2.21 AMERICAN CENTURY(R) VARIABLE PORTFOLIOS, INC. 2IF VP International (9/99; 5/94) (34.82) (10.47) (34.82) 2.33 -- 4.15 2VA VP Value (9/99; 5/96) 3.66 5.63 3.66 9.70 -- 10.81 CALVERT VARIABLE SERIES, INC. 2SR Social Balanced Portfolio (5/00; 9/86) (14.39) (11.33) (14.39) 4.92 7.57 8.19 CREDIT SUISSE TRUST 2EG Emerging Growth Portfolio (9/99; 9/99) (23.16) 0.21 (23.16) -- -- (0.77) FIDELITY VIP 2GI Growth & Income Portfolio (Service Class) (9/99; 12/96)(e) (16.26) (6.91) (16.26) 7.85 -- 7.99 2MP Mid Cap Portfolio (Service Class) (9/99; 12/98)(e) (11.25) 19.98 (11.25) -- -- 22.73 2OS Overseas Portfolio (Service Class) (9/99; 1/87)(e) (27.60) (13.71) (27.60) 0.30 4.61 4.91 FTVIPT 2RE Franklin Real Estate Fund - Class 2 (9/99; 1/89)(f) (0.98) 11.02 (0.98) 3.66 10.23 9.08 2SI Franklin Small Cap Value Securities Fund - Class 2 (9/99; 5/98)(f) 4.63 12.07 4.63 -- -- 0.35 (previously FTVIPT Franklin Value Securities Fund - Class 2) 2TF Templeton Foreign Securities Fund - Class 2 (3/02; 5/92)(g) -- -- (22.78) 2.29 -- 8.41 (previously FTVIPT Templeton International Securities Fund - Class 2) 2IS Templeton International Smaller Companies Fund - Class 2 (9/99; 5/96)(f) (10.59) (4.37) (10.59) (1.73) -- 0.59 22 PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND SINCE SINCE SUBACCOUNT INVESTING IN: 1 YEAR COMMENCEMENT 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT GOLDMAN SACHS VIT 2SE CORE(SM) Small Cap Equity Fund (9/99; 2/98)(h) (4.04%) 4.61% (4.04%) --% --% 0.47% 2UE CORE(SM) U.S. Equity Fund (9/99; 2/98)(h) (19.08) (8.81) (19.08) -- -- 0.53 2MC Mid Cap Value Fund (9/99; 5/98) 2.91 12.15 2.91 -- -- 3.61 JANUS ASPEN SERIES 2AG Aggressive Growth Portfolio: Service Shares (5/00; 9/93)(i) (44.33) (44.53) (44.33) 4.55 -- 10.91 2GT Global Technology Portfolio: Service Shares(5/00; 1/00)(j) (42.25) (43.40) (42.25) -- -- (39.22) 2IG International Growth Portfolio: Service Shares(5/00; 5/94)(i) (29.57) (29.74) (29.57) 7.73 -- 12.23 LAZARD RETIREMENT SERIES 2IP International Equity Portfolio (9/99; 9/98) (30.15) (16.02) (30.15) -- -- (4.88) MFS(R) 2MG Investors Growth Stock Series - Service Class (5/00; 5/99)(k) (30.85) (25.08) (30.85) -- -- (4.25) 2MD New Discovery Series - Service Class (5/00; 5/98)(k) (12.97) (11.98) (12.97) -- -- 11.94 PUTNAM VARIABLE TRUST 2IN Putnam VT International New Opportunities Fund - Class IB Shares (9/99; 1/97)(l) (34.36) (19.65) (34.36) -- -- (2.07) 2VS Putnam VT Vista Fund - Class IB Shares (9/99; 1/97)(l) (38.77) (9.79) (38.77) -- -- 5.25 ROYCE CAPITAL FUND 2MI Micro-Cap Portfolio (9/99; 12/96) 20.43 24.41 20.43 18.04 -- 18.13 THIRD AVENUE 2SV Value Portfolio (9/99; 9/99) 4.52 23.32 4.52 -- -- 23.32 WANGER 2IT International Small Cap (9/99; 5/95) (27.50) (10.12) (27.50) 5.87 -- 14.01 2SP U.S. Smaller Companies (9/99; 5/95) 2.24 3.15 2.24 10.36 -- 16.74 (previously Wanger U.S. Small Cap) WELLS FARGO VT 2AA Asset Allocation Fund (5/01; 4/94)(m) -- (11.32)(c) (14.53) 7.08 -- 9.75 2WI International Equity Fund (5/01; 7/00) -- (17.45)(c) (22.87) -- -- (22.22) 2SG Small Cap Growth Fund (5/01; 5/95)(n) -- (13.43)(c) (30.44) (4.02) -- 3.40
23 (a) Current applicable charges deducted from fund performance include a $30 annual contract administrative charge, a 0.15% annual MAV fee, a 0.75% annual mortality and expense risk fee, and applicable surrender charges. Premium taxes and purchase payment credits 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) Initial offering of the Service Class of each fund took place on Nov. 3, 1997 (except VIP Mid Cap which took place on Dec. 28, 1998). Returns prior to Nov. 3, 1997 (or Dec. 28, 1998 for VIP Mid Cap) are those of the Initial Class, which has no 12b-1 fee. If Service Class's 12b-1 fee of 0.10% had been reflected, returns prior to Nov. 3, 1997 would have been lower. (f) Ongoing stock market volatility can dramatically change the fund's short term performance; current results may differ. Because no Class 2 shares were issued until Jan. 6, 1999 standardized Class 2 Fund performance for prior periods represents the 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 all future performance. (g) Subaccount had not commenced operations as of Dec. 31, 2001. Ongoing stock market volatility can dramatically change the fund's short-term performance; current results may differ. Performance prior to the May 1, 2000 merger reflects the historical performance of the Templeton International Fund. In addition, for periods beginning on May 1, 1997, Class 2 Fund performance reflects an additional 12b-1 fee expense which also affects future performance. FTVIPT Templeton International Smaller Companies Fund - Class 2 merged into this fund as of April 30, 2002. (h) CORE(SM) is a service mark of Goldman, Sachs & Co. (i) The returns shown for Service Shares for periods prior to their inception (December 31, 1999) are derived from the historical performance of the Institutional Shares adjusted to reflect the higher operating expenses of Service Shares. In recent years returns have sustained significant gains and losses due to market volatility in the technology sector. (j) In recent years returns have sustained significant gains and losses due to market volatility in the technology sector. (k) 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. (l) Performance information for Class IB shares for periods prior to April 30, 1998 for Putnam VT International New Opportunities 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 0.25%. Restated to reflect an increase in 12b-1 fees effective April 30, 2001. Actual 12b-1 fees during the most recent fiscal year were 0.22% (m) Performance for periods prior to Sept. 20, 1999, reflects performance of the Life and Annuity Trust Asset Allocation Fund, its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust Funds were reorganized into the Wells Fargo Variable Trust Funds. (n) Performance for periods prior to Sept. 20, 1999, reflects performance of the Norwest Select Small Company Stock Fund (the accounting survivor of a merger of the Life and Annuity Trust Strategic Growth Fund and the Norwest Select Small Company Stock Fund), its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust and Norwest Select Funds were reorganized into the Wells Fargo Variable Trust Funds. 24 AVERAGE ANNUAL TOTAL RETURN(a) FOR QUALIFIED ANNUITIES (WITHOUT PURCHASE PAYMENT CREDITS) WITH SURRENDER AND SELECTION OF MAV DEATH BENEFIT RIDER AND THE SEVEN-YEAR SURRENDER CHARGE SCHEDULE FOR PERIODS ENDING DEC. 31, 2001
PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND 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) (22.51%) (10.50%) (22.51%) --% --% (10.50%) BD2 Bond Fund (9/99; 10/81) (0.21) 2.52 (0.21) 3.01 6.24 9.14 CR2 Capital Resource Fund (9/99; 10/81) (24.01) (13.26) (24.01) 3.24 5.73 10.92 CM2 Cash Management Fund (9/99; 10/81) (3.84) 0.82 (3.84) 2.95 3.40 5.29 DE2 Diversified Equity Income Fund (5.31) (1.30) (5.31) -- -- (1.30) (9/99; 9/99) EM2 Emerging Markets Fund (5/00; 5/00) (8.58) (21.62) (8.58) -- -- (21.62) ES2 Equity Select Fund (5/01; 5/01) -- (8.04)(c) -- -- -- (8.04)(d) EI2 Extra Income Fund (9/99; 5/96) (2.70) (5.18) (2.70) (0.15) -- 0.91 FI2 Federal Income Fund (9/99; 9/99) (1.41) 2.64 (1.41) -- -- 2.64 GB2 Global Bond Fund (9/99; 5/96) (6.04) (1.68) (6.04) 0.33 -- 1.72 GR2 Growth Fund (9/99; 9/99) (35.86) (19.29) (35.86) -- -- (19.29) IE2 International Fund (9/99; 1/92) (33.76) (18.10) (33.76) (3.39) -- 2.77 MF2 Managed Fund (9/99; 4/86) (17.07) (5.28) (17.07) 4.86 7.69 9.06 ND2 NEW DIMENSIONS FUND(R)(9/99; 5/96) (22.71) (7.25) (22.71) 7.99 -- 9.17 IV2 S&P 500 Index Fund (5/00; 5/00) (18.80) (17.43) (18.80) -- -- (17.43) SC2 Small Cap Advantage Fund (9/99; 9/99) (13.32) 0.36 (13.32) -- -- 0.36 SA2 Strategy Aggressive Fund (9/99; 1/92) (37.66) (11.06) (37.66) (0.50) -- 5.56 AIM V.I. 2CA Capital Appreciation Fund, Series I (9/99; 5/93) (28.78) (7.69) (28.78) 4.06 -- 10.59 2CD Capital Development Fund, Series I (9/99; 5/98) (14.75) 7.57 (14.75) -- -- 2.46 AMERICAN CENTURY(R) VARIABLE PORTFOLIOS, INC. 2IF VP International (9/99; 5/94) (34.22) (10.09) (34.22) 2.70 -- 4.54 2VA VP Value (9/99; 5/96) 4.66 6.03 4.66 9.98 -- 11.03 CALVERT VARIABLE SERIES, INC. 2SR Social Balanced Portfolio (5/00; 9/86) (13.57) (10.82) (13.57) 5.25 7.67 8.19 CREDIT SUISSE TRUST 2EG Emerging Growth Portfolio (9/99; 9/99) (22.43) 0.64 (22.43) -- -- (0.35) FIDELITY VIP 2GI Growth & Income Portfolio (Service Class) (9/99; 12/96)(e) (15.46) (6.51) (15.46) 8.14 -- 8.28 2MP Mid Cap Portfolio (Service Class) (10.39) 20.32 (10.39) -- -- 22.95 (9/99; 12/98)(e) 2OS Overseas Portfolio (Service Class) (26.92) (13.35) (26.92) 0.67 4.74 4.91 (9/99; 1/87)(e) FTVIPT 2RE Franklin Real Estate Fund - Class 2 (0.01) 11.40 (0.01) 4.00 10.31 9.08 (9/99; 1/89)(f) 2SI Franklin Small Cap Value Securities Fund - Class 2 (9/99; 5/98)(f) 5.63 12.45 5.63 -- -- 0.61 (previously FTVIPT Franklin Value Securities Fund - Class 2) 2TF Templeton Foreign Securities Fund - Class 2 (3/02; 5/92)(g) -- -- (22.05) 2.65 -- 8.51 (previously FTVIPT Templeton International Securities Fund - Class 2) 2IS Templeton International Smaller Companies Fund - Class 2 (9/99; 5/96)(f) (9.72) (3.96) (9.72) (1.36) -- 0.92 25 PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND SINCE SINCE SUBACCOUNT INVESTING IN: 1 YEAR COMMENCEMENT 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT GOLDMAN SACHS VIT 2SE CORE(SM) Small Cap Equity Fund (3.10%) 5.02% (3.10%) --% --% 0.72% (9/99; 2/98)(h) 2UE CORE(SM) U.S. Equity Fund (9/99; 2/98)(h) (18.31) (8.42) (18.31) -- -- 0.77 2MC Mid Cap Value Fund (9/99; 5/98) 3.91 12.52 3.91 -- -- 3.86 JANUS ASPEN SERIES 2AG Aggressive Growth Portfolio: Service Shares (5/00; 9/93)(i) (43.83) (44.21) (43.83) 4.88 -- 11.07 2GT Global Technology Portfolio: Service Shares (5/00; 1/00)(j) (41.73) (43.08) (41.73) -- -- (38.95) 2IG International Growth Portfolio: Service Shares (5/00; 5/94)(i) (28.91) (29.34) (28.91) 8.03 -- 12.47 LAZARD RETIREMENT SERIES 2IP International Equity Portfolio (29.50) (15.66) (29.50) -- -- (4.61) (9/99; 9/98) MFS(R) 2MG Investors Growth Stock Series - Service Class (5/00; 5/99)(k) (30.21) (24.65) (30.21) -- -- (3.91) 2MD New Discovery Series - Service Class (5/00; 5/98)(k) (12.14) (11.48) (12.14) -- -- 12.14 PUTNAM VARIABLE TRUST 2IN Putnam VT International New Opportunities Fund - Class IB Shares (9/99; 1/97)(l) (33.76) (19.31) (33.76) -- -- (1.65) 2VS Putnam VT Vista Fund - Class IB Shares (9/99; 1/97)(l) (38.21) (9.40) (38.21) -- -- 5.57 ROYCE CAPITAL FUND 2MI Micro-Cap Portfolio (9/99; 12/96) 21.43 24.74 21.43 18.24 -- 18.34 THIRD AVENUE 2SV Value Portfolio (9/99; 9/99) 5.52 23.66 5.52 -- -- 23.66 WANGER 2IT International Small Cap (9/99; 5/95) (26.82) (9.74) (26.82) 6.19 -- 14.22 2SP U.S. Smaller Companies (9/99; 5/95) 3.24 3.56 3.24 10.63 -- 16.93 (previously Wanger U.S. Small Cap) WELLS FARGO VT 2AA Asset Allocation Fund (5/01; 4/94)(m) -- (10.47)(c) (13.71) 7.38 -- 10.02 2WI International Equity Fund (5/01; 7/00) -- (16.66)(c) (22.14) -- -- (21.71) 2SG Small Cap Growth Fund (5/01; 5/95)(n) -- (12.60)(c) (29.79) (3.67) -- 3.77
26 (a) Current applicable charges deducted from fund performance include a $30 annual contract administrative charge,a 0.15% annual MAV fee, a 0.75% annual mortality and expense risk fee, and applicable surrender charges. Premium taxes and purchase payment credits 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) Initial offering of the Service Class of each fund took place on Nov. 3, 1997 (except VIP Mid Cap which took place on Dec. 28, 1998). Returns prior to Nov. 3, 1997 (or Dec. 28, 1998 for VIP Mid Cap) are those of the Initial Class, which has no 12b-1 fee. If Service Class's 12b-1 fee of 0.10% had been reflected, returns prior to Nov. 3, 1997 would have been lower. (f) Ongoing stock market volatility can dramatically change the fund's short term performance; current results may differ. Because no Class 2 shares were issued until Jan. 6, 1999 standardized Class 2 Fund performance for prior periods represents the 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 all future performance. (g) Subaccount had not commenced operations as of Dec. 31, 2001. Ongoing stock market volatility can dramatically change the fund's short-term performance; current results may differ. Performance prior to the May 1, 2000 merger reflects the historical performance of the Templeton International Fund. In addition, for periods beginning on May 1, 1997, Class 2 Fund performance reflects an additional 12b-1 fee expense which also affects future performance. FTVIPT Templeton International Smaller Companies Fund - Class 2 merged into this fund as of April 30, 2002. (h) CORE(SM) is a service mark of Goldman, Sachs & Co. (i) The returns shown for Service Shares for periods prior to their inception (December 31, 1999) are derived from the historical performance of the Institutional Shares adjusted to reflect the higher operating expenses of Service Shares. In recent years returns have sustained significant gains and losses due to market volatility in the technology sector. (j) In recent years returns have sustained significant gains and losses due to market volatility in the technology sector. (k) 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. (l) Performance information for Class IB shares for periods prior to April 30, 1998 for Putnam VT International New Opportunities 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 0.25%. Restated to reflect an increase in 12b-1 fees effective April 30, 2001. Actual 12b-1 fees during the most recent fiscal year were 0.22% (m) Performance for periods prior to Sept. 20, 1999, reflects performance of the Life and Annuity Trust Asset Allocation Fund, its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust Funds were reorganized into the Wells Fargo Variable Trust Funds. (n) Performance for periods prior to Sept. 20, 1999, reflects performance of the Norwest Select Small Company Stock Fund (the accounting survivor of a merger of the Life and Annuity Trust Strategic Growth Fund and the Norwest Select Small Company Stock Fund), its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust and Norwest Select Funds were reorganized into the Wells Fargo Variable Trust Funds. 27 AVERAGE ANNUAL TOTAL RETURN(a) FOR QUALIFIED ANNUITIES (WITHOUT PURCHASE PAYMENT CREDITS) WITHOUT SURRENDER AND SELECTION OF MAV BENEFIT RIDER FOR PERIODS ENDING DEC. 31, 2001
PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND 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) (17.43%) (7.90%) (17.43%) --% --% (7.90%) BD2 Bond Fund (9/99; 10/81) 6.55 5.42 6.55 3.89 6.24 9.14 CR2 Capital Resource Fund (9/99; 10/81) (19.04) (10.74) (19.04) 4.11 5.73 10.92 CM2 Cash Management Fund (9/99; 10/81) 2.65 3.72 2.65 3.82 3.40 5.29 DE2 Diversified Equity Income Fund (9/99; 9/99) 1.06 1.56 1.06 -- -- 1.56 EM2 Emerging Markets Fund (5/00; 5/00) (2.46) (18.51) (2.46) -- -- (18.51) ES2 Equity Select Fund (5/01; 5/01) -- (1.87)(c) -- -- -- (1.87)(d) EI2 Extra Income Fund (9/99; 5/96) 3.87 (2.44) 3.87 0.78 -- 1.56 FI2 Federal Income Fund (9/99; 9/99) 5.26 5.53 5.26 -- -- 5.53 GB2 Global Bond Fund (9/99; 5/96) 0.28 1.14 0.28 1.26 -- 2.36 GR2 Growth Fund (9/99; 9/99) (31.78) (16.93) (31.78) -- -- (16.93) IE2 International Fund (9/99; 1/92) (29.53) (15.74) (29.53) (2.54) -- 2.77 MF2 Managed Fund (9/99; 4/86) (11.58) (2.54) (11.58) 5.67 7.69 9.06 ND2 NEW DIMENSIONS FUND(R)(9/99; 5/96) (17.64) (4.55) (17.64) 8.72 -- 9.63 IV2 S&P 500 Index Fund (5/00; 5/00) (13.44) (14.19) (13.44) -- -- (14.19) SC2 Small Cap Advantage Fund (9/99; 9/99) (7.54) 3.29 (7.54) -- -- 3.29 SA2 Strategy Aggressive Fund (9/99; 1/92) (33.72) (8.47) (33.72) 0.37 -- 5.56 AIM V.I. 2CA Capital Appreciation Fund, Series I (9/99; 5/93) (24.17) (4.99) (24.17) 4.90 -- 10.59 2CD Capital Development Fund, Series I (9/99; 5/98) (9.09) 10.30 (9.09) -- -- 3.97 AMERICAN CENTURY(R) VARIABLE PORTFOLIOS, INC. 2IF VP International (9/99; 5/94) (30.02) (7.50) (30.02) 3.58 -- 4.54 2VA VP Value (9/99; 5/96) 11.66 8.81 11.66 10.65 -- 11.46 CALVERT VARIABLE SERIES, INC. 2SR Social Balanced Portfolio (5/00; 9/86) (7.81) (7.30) (7.81) 6.05 7.67 8.19 CREDIT SUISSE TRUST 2EG Emerging Growth Portfolio (9/99; 9/99) (17.35) 3.62 (17.35) -- -- 2.57 FIDELITY VIP 2GI Growth & Income Portfolio (Service Class) (9/99; 12/96)(e) (9.85) (3.80) (9.85) 8.86 -- 8.86 2MP Mid Cap Portfolio (Service Class) (9/99; 12/98)(e) (4.40) 22.69 (4.40) -- -- 24.25 2OS Overseas Portfolio (Service Class) (9/99; 1/87)(e) (22.18) (10.83) (22.18) 1.57 4.74 4.91 FTVIPT 2RE Franklin Real Estate Fund - Class 2 (9/99; 1/89)(f) 6.76 14.01 6.76 4.84 10.31 9.08 2SI Franklin Small Cap Value Securities Fund - Class 2 (9/99; 5/98)(f) 12.63 15.06 12.63 -- -- 2.14 (previously FTVIPT Franklin Value Securities Fund - Class 2) 2TF Templeton Foreign Securities Fund - Class 2 (3/02; 5/92)(g) -- -- (16.94) 3.54 -- 8.51 (previously FTVIPT Templeton International Securities Fund - Class 2) 2IS Templeton International Smaller Companies Fund - Class 2 (9/99; 5/96)(f) (3.68) (1.16) (3.68) (0.45) -- 1.57 28 PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND SINCE SINCE SUBACCOUNT INVESTING IN: 1 YEAR COMMENCEMENT 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT GOLDMAN SACHS VIT 2SE CORE(SM) Small Cap Equity Fund 3.44% 7.84% 3.44% --% --% 2.18% (9/99; 2/98)(h) 2UE CORE(SM) U.S. Equity Fund (9/99; 2/98)(h) (12.91) (5.76) (12.91) -- -- 2.21 2MC Mid Cap Value Fund (9/99; 5/98) 10.91 15.10 10.91 -- -- 5.31 JANUS ASPEN SERIES 2AG Aggressive Growth Portfolio: Service Shares (5/00; 9/93)(i) (40.36) (42.07) (40.36) 5.70 -- 11.07 2GT Global Technology Portfolio: Service Shares (5/00; 1/00)(j) (38.10) (40.89) (38.10) -- -- (37.08) 2IG International Growth Portfolio: Service Shares (5/00; 5/94)(i) (24.32) (26.59) (24.32) 8.75 -- 12.47 LAZARD RETIREMENT SERIES 2IP International Equity Portfolio (9/99; 9/98) (24.95) (13.23) (24.95) -- -- (3.00) MFS(R) 2MG Investors Growth Stock Series - Service Class (5/00; 5/99)(k) (25.71) (21.71) (25.71) -- -- (1.58) 2MD New Discovery Series - Service Class (5/00; 5/98)(k) (6.28) (7.97) (6.28) -- -- 13.33 PUTNAM VARIABLE TRUST 2IN Putnam VT International New Opportunities Fund - Class IB Shares (9/99; 1/97)(l) (29.52) (16.97) (29.52) -- -- (0.64) 2VS Putnam VT Vista Fund - Class IB Shares (9/99; 1/97)(l) (34.31) (6.73) (34.31) -- -- 6.37 ROYCE CAPITAL FUND 2MI Micro-Cap Portfolio (9/99; 12/96) 28.43 27.00 28.43 18.75 -- 18.74 THIRD AVENUE 2SV Value Portfolio (9/99; 9/99) 12.52 25.97 12.52 -- -- 25.97 WANGER 2IT International Small Cap (9/99; 5/95) (22.06) (7.12) (22.06) 6.96 -- 14.36 2SP U.S. Smaller Companies (9/99; 5/95) 10.24 6.43 10.24 11.29 -- 17.05 (previously Wanger U.S. Small Cap) WELLS FARGO VT 2AA Asset Allocation Fund (5/01; 4/94)(m) -- (4.48)(c) (7.97) 8.13 -- 10.02 2WI International Equity Fund (5/01; 7/00) -- (11.14)(c) (17.03) -- -- (18.25) 2SG Small Cap Growth Fund (5/01; 5/95)(n) -- (6.77)(c) (25.26) (2.82) -- 4.01
29 (a) Current applicable charges deducted from fund performance include a $30 annual contract administrative charge, a 0.15% annual MAV fee, and a 0.75% annual mortality and expense risk fee. Premium taxes and purchase payment credits 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) Initial offering of the Service Class of each fund took place on Nov. 3, 1997 (except VIP Mid Cap which took place on Dec. 28, 1998). Returns prior to Nov. 3, 1997 (or Dec. 28, 1998 for VIP Mid Cap) are those of the Initial Class, which has no 12b-1 fee. If Service Class's 12b-1 fee of 0.10% had been reflected, returns prior to Nov. 3, 1997 would have been lower. (f) Ongoing stock market volatility can dramatically change the fund's short term performance; current results may differ. Because no Class 2 shares were issued until Jan. 6, 1999 standardized Class 2 Fund performance for prior periods represents the 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 all future performance. (g) Subaccount had not commenced operations as of Dec. 31, 2001. Ongoing stock market volatility can dramatically change the fund's short-term performance; current results may differ. Performance prior to the May 1, 2000 merger reflects the historical performance of the Templeton International Fund. In addition, for periods beginning on May 1, 1997, Class 2 Fund performance reflects an additional 12b-1 fee expense which also affects future performance. FTVIPT Templeton International Smaller Companies Fund - Class 2 merged into this fund as of April 30, 2002. (h) CORE(SM) is a service mark of Goldman, Sachs & Co. (i) The returns shown for Service Shares for periods prior to their inception (December 31, 1999) are derived from the historical performance of the Institutional Shares adjusted to reflect the higher operating expenses of Service Shares. In recent years returns have sustained significant gains and losses due to market volatility in the technology sector. (j) In recent years returns have sustained significant gains and losses due to market volatility in the technology sector. (k) 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. (l) Performance information for Class IB shares for periods prior to April 30, 1998 for Putnam VT International New Opportunities 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 0.25%. Restated to reflect an increase in 12b-1 fees effective April 30, 2001. Actual 12b-1 fees during the most recent fiscal year were 0.22% (m) Performance for periods prior to Sept. 20, 1999, reflects performance of the Life and Annuity Trust Asset Allocation Fund, its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust Funds were reorganized into the Wells Fargo Variable Trust Funds. (n) Performance for periods prior to Sept. 20, 1999, reflects performance of the Norwest Select Small Company Stock Fund (the accounting survivor of a merger of the Life and Annuity Trust Strategic Growth Fund and the Norwest Select Small Company Stock Fund), its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust and Norwest Select Funds were reorganized into the Wells Fargo Variable Trust Funds. 30 AVERAGE ANNUAL TOTAL RETURN(a) FOR QUALIFIED ANNUITIES (WITHOUT PURCHASE PAYMENT CREDITS) WITH SURRENDER AND SELECTION OF A TEN-YEAR SURRENDER CHARGE SCHEDULE FOR PERIODS ENDING DEC. 31, 2001
PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND 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) (23.00%) (10.57%) (23.00%) --% --% (10.57%) BD2 Bond Fund (9/99; 10/81) 6.81 5.67 6.81 4.15 6.51 9.44 BD2 Bond Fund (9/99; 10/81) (0.94) 2.36 (0.94) 2.93 6.40 9.44 CR2 Capital Resource Fund (9/99; 10/81) (24.48) (13.29) (24.48) 3.17 5.88 11.22 CM2 Cash Management Fund (9/99; 10/81) (4.53) 0.60 (4.53) 2.86 3.52 5.57 DE2 Diversified Equity Income Fund (9/99; 9/99) (5.98) (1.48) (5.98) -- -- (1.48) EM2 Emerging Markets Fund (5/00; 5/00) (9.22) (21.69) (9.22) -- -- (21.69) ES2 Equity Select Fund (5/01; 5/01) -- (8.66)(c) -- -- -- (8.66)(d) EI2 Extra Income Fund (9/99; 5/96) (3.40) (5.32) (3.40) (0.28) -- 0.83 FI2 Federal Income Fund (9/99; 9/99) (2.13) 2.47 (2.13) -- -- 2.47 GB2 Global Bond Fund (9/99; 5/96) (6.71) (1.88) (6.71) 0.19 -- 1.66 GR2 Growth Fund (9/99; 9/99) (36.20) (19.23) (36.20) -- -- (19.23) IE2 International Fund (9/99; 1/92) (34.13) (18.08) (34.13) (3.52) -- 2.89 MF2 Managed Fund (9/99; 4/86) (17.61) (5.41) (17.61) 4.81 7.86 9.35 ND2 NEW DIMENSIONS FUND(R)(9/99; 5/96) (23.19) (7.34) (23.19) 7.98 -- 9.22 IV2 S&P 500 Index Fund (5/00; 5/00) (19.32) (17.59) (19.32) -- -- (17.59) SC2 Small Cap Advantage Fund (9/99; 9/99) (13.90) 0.19 (13.90) -- -- 0.19 SA2 Strategy Aggressive Fund (9/99; 1/92) (37.98) (11.10) (37.98) (0.67) -- 5.72 AIM V.I. 2CA Capital Appreciation Fund, Series I (29.20) (7.76) (29.20) 4.00 -- 10.72 (9/99; 5/93) 2CD Capital Development Fund, Series I (9/99; 5/98) (15.32) 7.45 (15.32) -- -- 2.48 AMERICAN CENTURY(R) VARIABLE PORTFOLIOS, INC. 2IF VP International (9/99; 5/94) (34.58) (10.17) (34.58) 2.62 -- 4.43 2VA VP Value (9/99; 5/96) 3.92 5.88 3.92 9.98 -- 11.09 CALVERT VARIABLE SERIES, INC. 2SR Social Balanced Portfolio (5/00; 9/86) (14.15) (11.06) (14.15) 5.20 7.84 8.48 CREDIT SUISSE TRUST 2EG Emerging Growth Portfolio (9/99; 9/99) (22.92) 0.48 (22.92) -- -- (0.49) FIDELITY VIP 2GI Growth & Income Portfolio (Service Class) (9/99; 12/96)(e) (16.02) (6.63) (16.02) 8.13 -- 8.13 2MP Mid Cap Portfolio (Service Class) (9/99; 12/98)(e) (11.01) 20.27 (11.01) -- -- 23.04 2OS Overseas Portfolio (Service Class) (9/99; 1/87)(e) (27.36) (13.38) (27.36) 0.50 4.89 5.19 FTVIPT 2RE Franklin Real Estate Fund - Class 2 (9/99; 1/89)(f) (0.74) 11.29 (0.74) 3.93 10.51 9.37 2SI Franklin Small Cap Value Securities Fund - Class 2 (9/99; 5/98)(f) 4.88 12.21 4.88 -- -- 0.57 (previously FTVIPT Franklin Value Securities Fund - Class 2) 2TF Templeton Foreign Securities Fund - Class 2 (3/02; 5/92)(g) -- -- (22.55) 2.55 -- 8.66 (previously FTVIPT Templeton International Securities Fund - Class 2) 2IS Templeton International Smaller Companies Fund - Class 2 (9/99; 5/96)(f) (10.35) (4.09) (10.35) (1.48) -- 0.84 31 PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND SINCE SINCE SUBACCOUNT INVESTING IN: 1 YEAR COMMENCEMENT 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT GOLDMAN SACHS VIT 2SE CORE(SM) Small Cap Equity Fund (3.80%) 4.87% (3.80%) --% --% 0.72% (9/99; 2/98)(h) 2UE CORE(SM) U.S. Equity Fund (9/99; 2/98)(h) (18.84) (8.51) (18.84) -- -- 0.75 2MC Mid Cap Value Fund (9/99; 5/98) 3.17 12.42 3.17 -- -- 3.88 JANUS ASPEN SERIES 2AG Aggressive Growth Portfolio: Service Shares (5/00; 9/93)(i) (44.09) (43.97) (44.09) 4.84 -- 11.20 2GT Global Technology Portfolio: Service Shares (5/00; 1/00)(j) (42.01) (42.85) (42.01) -- -- (38.80) 2IG International Growth Portfolio: Service Shares (5/00; 5/94)(i) (29.33) (29.33) (29.33) 8.02 -- 12.52 LAZARD RETIREMENT SERIES 2IP International Equity Portfolio (9/99; 9/98) (29.91) (15.68) (29.91) -- -- (4.62) MFS(R) 2MG Investors Growth Stock Series - Service Class (5/00; 5/99)(k) (30.61) (24.72) (30.61) -- -- (4.04) 2MD New Discovery Series - Service Class (5/00; 5/98)(k) (12.74) (11.70) (12.74) -- -- 12.22 PUTNAM VARIABLE TRUST 2IN Putnam VT International New Opportunities Fund - Class IB Shares (9/99; 1/97)(l) (34.12) (19.26) (34.12) -- -- (1.66) 2VS Putnam VT Vista Fund - Class IB Shares (9/99; 1/97)(l) (38.53) (9.44) (38.53) -- -- 5.54 ROYCE CAPITAL FUND 2MI Micro-Cap Portfolio (9/99; 12/96) 20.69 24.70 20.69 18.32 -- 18.42 THIRD AVENUE 2SV Value Portfolio (9/99; 9/99) 4.78 23.61 4.78 -- -- 23.61 WANGER 2IT International Small Cap (9/99; 5/95) (27.26) (9.81) (27.26) 6.15 -- 14.31 2SP U.S. Smaller Companies (9/99; 5/95) 2.49 3.40 2.49 10.64 -- 17.04 (previously Wanger U.S. Small Cap) WELLS FARGO VT 2AA Asset Allocation Fund (5/01; 4/94)(m) -- (11.09)(c) (14.29) 7.36 -- 10.03 2WI International Equity Fund (5/01; 7/00) -- (17.21)(c) (22.63) -- -- (21.86) 2SG Small Cap Growth Fund (5/01; 5/95)(n) -- (13.19)(c) (30.20) (3.80) -- 3.72
32 (a) Current applicable charges deducted from fund performance include a $30 annual contract administrative charge, a 0.75% annual mortality and expense risk fee, and applicable surrender charges. Premium taxes and purchase payment credits 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) Initial offering of the Service Class of each fund took place on Nov. 3, 1997 (except VIP Mid Cap which took place on Dec. 28, 1998). Returns prior to Nov. 3, 1997 (or Dec. 28, 1998 for VIP Mid Cap) are those of the Initial Class, which has no 12b-1 fee. If Service Class's 12b-1 fee of 0.10% had been reflected, returns prior to Nov. 3, 1997 would have been lower. (f) Ongoing stock market volatility can dramatically change the fund's short term performance; current results may differ. Because no Class 2 shares were issued until Jan. 6, 1999 standardized Class 2 Fund performance for prior periods represents the 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 all future performance. (g) Subaccount had not commenced operations as of Dec. 31, 2001. Ongoing stock market volatility can dramatically change the fund's short-term performance; current results may differ. Performance prior to the May 1, 2000 merger reflects the historical performance of the Templeton International Fund. In addition, for periods beginning on May 1, 1997, Class 2 Fund performance reflects an additional 12b-1 fee expense which also affects future performance. FTVIPT Templeton International Smaller Companies Fund - Class 2 merged into this fund as of April 30, 2002. (h) CORE(SM) is a service mark of Goldman, Sachs & Co. (i) The returns shown for Service Shares for periods prior to their inception (December 31, 1999) are derived from the historical performance of the Institutional Shares adjusted to reflect the higher operating expenses of Service Shares. In recent years returns have sustained significant gains and losses due to market volatility in the technology sector. (j) In recent years returns have sustained significant gains and losses due to market volatility in the technology sector. (k) 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. (l) Performance information for Class IB shares for periods prior to April 30, 1998 for Putnam VT International New Opportunities 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 0.25%. Restated to reflect an increase in 12b-1 fees effective April 30, 2001. Actual 12b-1 fees during the most recent fiscal year were 0.22% (m) Performance for periods prior to Sept. 20, 1999, reflects performance of the Life and Annuity Trust Asset Allocation Fund, its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust Funds were reorganized into the Wells Fargo Variable Trust Funds. (n) Performance for periods prior to Sept. 20, 1999, reflects performance of the Norwest Select Small Company Stock Fund (the accounting survivor of a merger of the Life and Annuity Trust Strategic Growth Fund and the Norwest Select Small Company Stock Fund), its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust and Norwest Select Funds were reorganized into the Wells Fargo Variable Trust Funds. 33 AVERAGE ANNUAL TOTAL RETURN(a) FOR QUALIFIED ANNUITIES (WITHOUT PURCHASE PAYMENT CREDITS) WITH SURRENDER AND SELECTION OF A SEVEN-YEAR SURRENDER CHARGE SCHEDULE FOR PERIODS ENDING DEC. 31, 2001
PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND 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) (22.27%) (10.20%) (22.27%) --% --% (10.20%) BD2 Bond Fund (9/99; 10/81) 0.03 2.78 0.03 3.28 6.51 9.44 CR2 Capital Resource Fund (9/99; 10/81) (23.77) (12.94) (23.77) 3.52 6.00 11.22 CM2 Cash Management Fund (9/99; 10/81) (3.60) 1.03 (3.60) 3.22 3.66 5.57 DE2 Diversified Equity Income Fund (9/99; 9/99) (5.07) (1.06) (5.07) -- -- (1.06) EM2 Emerging Markets Fund (5/00; 5/00) (8.34) (21.69) (8.34) -- -- (21.69) ES2 Equity Select Fund (5/01; 5/01) -- (7.78)(c) -- -- -- (7.78)(d) EI2 Extra Income Fund (9/99; 5/96) (2.46) (4.92) (2.46) 0.11 -- 1.16 FI2 Federal Income Fund (9/99; 9/99) (1.17) 2.90 (1.17) -- -- 2.90 GB2 Global Bond Fund (9/99; 5/96) (5.80) (1.46) (5.80) 0.58 -- 1.98 GR2 Growth Fund (9/99; 9/99) (35.62) (18.91) (35.62) -- -- (18.91) IE2 International Fund (9/99; 1/92) (33.52) (17.76) (33.52) (3.16) -- 3.04 MF2 Managed Fund (9/99; 4/86) (16.83) (5.01) (16.83) 5.14 7.96 9.35 ND2 NEW DIMENSIONS FUND(R)(9/99; 5/96) (22.47) (6.95) (22.47) 8.27 -- 9.45 IV2 S&P 500 Index Fund (5/00; 5/00) (18.56) (17.13) (18.56) -- -- (17.13) SC2 Small Cap Advantage Fund (9/99; 9/99) (13.08) 0.61 (13.08) -- -- 0.61 SA2 Strategy Aggressive Fund (9/99; 1/92) (37.42) (10.74) (37.42) (0.29) -- 5.84 AIM V.I. 2CA Capital Appreciation Fund, Series I (9/99; 5/93) (28.54) (7.38) (28.54) 4.34 -- 10.88 2CD Capital Development Fund, Series I (9/99; 5/98) (14.51) 7.84 (14.51) -- -- 2.73 AMERICAN CENTURY(R) VARIABLE PORTFOLIOS, INC. 2IF VP International (9/99; 5/94) (33.98) (9.80) (33.98) 2.98 -- 4.82 2VA VP Value (9/99; 5/96) 4.92 6.29 4.92 10.25 -- 11.31 CALVERT VARIABLE SERIES, INC. 2SR Social Balanced Portfolio (5/00; 9/86) (13.33) (10.55) (13.33) 5.52 7.94 8.48 CREDIT SUISSE TRUST 2EG Emerging Growth Portfolio (9/99; 9/99) (22.19) 0.91 (22.19) -- -- (0.07) FIDELITY VIP 2GI Growth & Income Portfolio (Service Class) (9/99; 12/96)(e) (15.22) (6.24) (15.22) 8.42 -- 8.42 2MP Mid Cap Portfolio (Service Class) (9/99; 12/98)(e) (10.15) 20.61 (10.15) -- -- 23.26 2OS Overseas Portfolio (Service Class) (9/99; 1/87)(e) (26.68) (13.03) (26.68) 0.89 5.02 5.19 FTVIPT 2RE Franklin Real Estate Fund - Class 2 (9/99; 1/89)(f) 0.23 11.67 0.23 4.27 10.59 9.37 2SI Franklin Small Cap Value Securities Fund - Class 2 (9/99; 5/98)(f) 5.88 12.59 5.88 -- -- 0.84 (previously FTVIPT Franklin Value Securities Fund - Class 2) 2TF Templeton Foreign Securities Fund - Class 2 (3/02; 5/92)(g) -- -- (21.82) 2.91 -- 8.76 (previously FTVIPT Templeton International Securities Fund - Class 2) 2IS Templeton International Smaller Companies Fund - Class 2 (9/99; 5/96)(f) (9.48) (3.69) (9.48) (1.11) -- 1.18 34 PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND SINCE SINCE SUBACCOUNT INVESTING IN: 1 YEAR COMMENCEMENT 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT GOLDMAN SACHS VIT 2SE CORE(SM) Small Cap Equity Fund (9/99; 2/98)(h) (2.86%) 5.28% (2.86%) --% --% 0.97% 2UE CORE(SM) U.S. Equity Fund (9/99; 2/98)(h) (18.07) (8.13) (18.07) -- -- 1.00 2MC Mid Cap Value Fund (9/99; 5/98) 4.17 12.79 4.17 -- -- 4.12 JANUS ASPEN SERIES 2AG Aggressive Growth Portfolio: Service Shares (5/00; 9/93)(i) (43.59) (43.70) (43.59) 5.17 -- 11.36 2GT Global Technology Portfolio: Service Shares (5/00; 1/00)(j) (41.49) (42.57) (41.49) -- -- (38.55) 2IG International Growth Portfolio: Service Shares (5/00; 5/94)(i) (28.67) (28.96) (28.67) 8.31 -- 12.76 LAZARD RETIREMENT SERIES 2IP International Equity Portfolio (9/99; 9/98) (29.26) (15.34) (29.26) -- -- (4.34) MFS(R) 2MG Investors Growth Stock Series - Service Class (5/00; 5/99)(k) (29.97) (24.30) (29.97) -- -- (3.70) 2MD New Discovery Series - Service Class (5/00; 5/98)(k) (11.90) (11.20) (11.90) -- -- 12.42 PUTNAM VARIABLE TRUST 2IN Putnam VT International New Opportunities Fund - Class IB Shares (9/99; 1/97)(l) (33.52) (18.94) (33.52) -- -- (1.28) 2VS Putnam VT Vista Fund - Class IB Shares (9/99; 1/97)(l) (37.97) (9.07) (37.97) -- -- 5.86 ROYCE CAPITAL FUND 2MI Micro-Cap Portfolio (9/99; 12/96) 21.69 25.03 21.69 18.52 -- 18.62 THIRD AVENUE 2SV Value Portfolio (9/99; 9/99) 5.78 23.95 5.78 -- -- 23.95 WANGER 2IT International Small Cap (9/99; 5/95) (26.58) (9.44) (26.58) 6.46 -- 14.52 2SP U.S. Smaller Companies (9/99; 5/95) 3.49 3.82 3.49 10.91 -- 17.23 (previously Wanger U.S. Small Cap) WELLS FARGO VT 2AA Asset Allocation Fund (5/01; 4/94)(m) -- (10.23)(c) (13.47) 7.66 -- 10.31 2WI International Equity Fund (5/01; 7/00) -- (16.42)(c) (21.90) -- -- (21.37) 2SG Small Cap Growth Fund (5/01; 5/95)(n) -- (12.36)(c) (29.55) (3.43) -- 4.08
35 (a) Current applicable charges deducted from fund performance include a $30 annual contract administrative charge, a 0.75% annual mortality and expense risk fee, and applicable surrender charges. Premium taxes and purchase payment credits 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) Initial offering of the Service Class of each fund took place on Nov. 3, 1997 (except VIP Mid Cap which took place on Dec. 28, 1998). Returns prior to Nov. 3, 1997 (or Dec. 28, 1998 for VIP Mid Cap) are those of the Initial Class, which has no 12b-1 fee. If Service Class's 12b-1 fee of 0.10% had been reflected, returns prior to Nov. 3, 1997 would have been lower. (f) Ongoing stock market volatility can dramatically change the fund's short term performance; current results may differ. Because no Class 2 shares were issued until Jan. 6, 1999 standardized Class 2 Fund performance for prior periods represents the 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 all future performance. (g) Subaccount had not commenced operations as of Dec. 31, 2001. Ongoing stock market volatility can dramatically change the fund's short-term performance; current results may differ. Performance prior to the May 1, 2000 merger reflects the historical performance of the Templeton International Fund. In addition, for periods beginning on May 1, 1997, Class 2 Fund performance reflects an additional 12b-1 fee expense which also affects future performance. FTVIPT Templeton International Smaller Companies Fund - Class 2 merged into this fund as of April 30, 2002. (h) CORE(SM) is a service mark of Goldman, Sachs & Co. (i) The returns shown for Service Shares for periods prior to their inception (December 31, 1999) are derived from the historical performance of the Institutional Shares adjusted to reflect the higher operating expenses of Service Shares. In recent years returns have sustained significant gains and losses due to market volatility in the technology sector. (j) In recent years returns have sustained significant gains and losses due to market volatility in the technology sector. (k) 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. (l) Performance information for Class IB shares for periods prior to April 30, 1998 for Putnam VT International New Opportunities 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 0.25%. Restated to reflect an increase in 12b-1 fees effective April 30, 2001. Actual 12b-1 fees during the most recent fiscal year were 0.22% (m) Performance for periods prior to Sept. 20, 1999, reflects performance of the Life and Annuity Trust Asset Allocation Fund, its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust Funds were reorganized into the Wells Fargo Variable Trust Funds. (n) Performance for periods prior to Sept. 20, 1999, reflects performance of the Norwest Select Small Company Stock Fund (the accounting survivor of a merger of the Life and Annuity Trust Strategic Growth Fund and the Norwest Select Small Company Stock Fund), its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust and Norwest Select Funds were reorganized into the Wells Fargo Variable Trust Funds. 36 AVERAGE ANNUAL TOTAL RETURN(a) FOR QUALIFIED ANNUITIES (WITHOUT PURCHASE PAYMENT CREDITS) WITHOUT SURRENDER FOR PERIODS ENDING DEC. 31, 2001
PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND 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) (17.17%) (7.67%) (17.17%) --% --% (7.67%) BD2 Bond Fund (9/99; 10/81) 6.81 5.67 6.81 4.15 6.51 9.44 CR2 Capital Resource Fund (9/99; 10/81) (18.78) (10.51) (18.78) 4.38 6.00 11.22 CM2 Cash Management Fund (9/99; 10/81) 2.90 3.97 2.90 4.08 3.66 5.57 DE2 Diversified Equity Income Fund (9/99; 9/99) 1.32 1.80 1.32 -- -- 1.80 EM2 Emerging Markets Fund (5/00; 5/00) (2.20) (18.27) (2.20) -- -- (18.27) ES2 Equity Select Fund (5/01; 5/01) -- (1.59)(c) -- -- -- (1.59)(d) EI2 Extra Income Fund (9/99; 5/96) 4.13 (2.20) 4.13 1.04 -- 1.82 FI2 Federal Income Fund (9/99; 9/99) 5.52 5.78 5.52 -- -- 5.78 GB2 Global Bond Fund (9/99; 5/96) 0.54 1.39 0.54 1.52 -- 2.62 GR2 Growth Fund (9/99; 9/99) (31.52) (16.72) (31.52) -- -- (16.72) IE2 International Fund (9/99; 1/92) (29.27) (15.52) (29.27) (2.27) -- 3.04 MF2 Managed Fund (9/99; 4/86) (11.32) (2.30) (11.32) 5.94 7.96 9.35 ND2 NEW DIMENSIONS FUND(R)(9/99; 5/96) (17.38) (4.31) (17.38) 8.99 -- 9.91 IV2 S&P 500 Index Fund (5/00; 5/00) (13.18) (13.94) (13.18) -- -- (13.94) SC2 Small Cap Advantage Fund (9/99; 9/99) (7.29) 3.54 (7.29) -- -- 3.54 SA2 Strategy Aggressive Fund (9/99; 1/92) (33.46) (8.23) (33.46) 0.64 -- 5.84 AIM V.I. 2CA Capital Appreciation Fund, Series I (9/99; 5/93) (23.91) (4.75) (23.91) 5.17 -- 10.88 2CD Capital Development Fund, Series I (9/99; 5/98) (8.83) 10.57 (8.83) -- -- 4.23 AMERICAN CENTURY(R) VARIABLE PORTFOLIOS, INC. 2IF VP International (9/99; 5/94) (29.76) (7.26) (29.76) 3.85 -- 4.82 2VA VP Value (9/99; 5/96) 11.92 9.06 11.92 10.92 -- 11.73 CALVERT VARIABLE SERIES, INC. 2SR Social Balanced Portfolio (5/00; 9/86) (7.55) (7.05) (7.55) 6.32 7.94 8.48 CREDIT SUISSE TRUST 2EG Emerging Growth Portfolio (9/99; 9/99) (17.09) 3.87 (17.09) -- -- 2.82 FIDELITY VIP 2GI Growth & Income Portfolio (Service Class) (9/99; 12/96)(e) (9.59) (3.57) (9.59) 9.14 -- 9.14 2MP Mid Cap Portfolio (Service Class) (9/99; 12/98)(e) (4.14) 22.98 (4.14) -- -- 24.55 2OS Overseas Portfolio (Service Class) (9/99; 1/87)(e) (21.92) (10.61) (21.92) 1.83 5.02 5.19 FTVIPT 2RE Franklin Real Estate Fund - Class 2 (9/99; 1/89)(f) 7.02 14.28 7.02 5.10 10.59 9.37 2SI Franklin Small Cap Value Securities Fund - Class 2 (9/99; 5/98)(f) 12.88 15.17 12.88 -- -- 2.39 (previously FTVIPT Franklin Value Securities Fund - Class 2) 2TF Templeton Foreign Securities Fund - Class 2 (3/02; 5/92)(g) -- -- (16.69) 3.79 -- 8.76 (previously FTVIPT Templeton International Securities Fund - Class 2) 2IS Templeton International Smaller Companies Fund - Class 2 (9/99; 5/96)(f) (3.42) (0.92) (3.42) (0.19) -- 1.84 37 PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND SINCE SINCE SUBACCOUNT INVESTING IN: 1 YEAR COMMENCEMENT 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT GOLDMAN SACHS VIT 2SE CORE(SM) Small Cap Equity Fund (9/99; 2/98)(h) 3.69% 8.09% 3.69% --% --% 2.44% 2UE CORE(SM) U.S. Equity Fund (9/99; 2/98)(h) (12.65) (5.53) (12.65) -- -- 2.47 2MC Mid Cap Value Fund (9/99; 5/98) 11.17 15.36 11.17 -- -- 5.57 JANUS ASPEN SERIES 2AG Aggressive Growth Portfolio: Service Shares (5/00; 9/93)(i) (40.10) (41.84) (40.10) 5.97 -- 11.36 2GT Global Technology Portfolio: Service Shares (5/00; 1/00)(j) (37.84) (40.66) (37.84) -- -- (36.83) 2IG International Growth Portfolio: Service Shares (5/00; 5/94)(i) (24.06) (26.35) (24.06) 9.03 -- 12.76 LAZARD RETIREMENT SERIES 2IP International Equity Portfolio (9/99; 9/98) (24.69) (13.01) (24.69) -- -- (2.75) MFS(R) 2MG Investors Growth Stock Series - Service Class (5/00; 5/99)(k) (25.45) (21.47) (25.45) -- -- (1.32) 2MD New Discovery Series - Service Class (5/00; 5/98)(k) (6.02) (7.72) (6.02) -- -- 13.60 PUTNAM VARIABLE TRUST 2IN Putnam VT International New Opportunities Fund - Class IB Shares (9/99; 1/97)(l) (29.27) (16.75) (29.27) -- -- (0.37) 2VS Putnam VT Vista Fund - Class IB Shares (9/99; 1/97)(l) (34.06) (6.50) (34.06) -- -- 6.64 ROYCE CAPITAL FUND 2MI Micro-Cap Portfolio (9/99; 12/96) 28.69 27.29 28.69 19.02 -- 19.02 THIRD AVENUE 2SV Value Portfolio (9/99; 9/99) 12.78 26.26 12.78 -- -- 26.26 WANGER 2IT International Small Cap (9/99; 5/95) (21.80) (6.88) (21.80) 7.23 -- 14.66 2SP U.S. Smaller Companies (9/99; 5/95) 10.49 6.68 10.49 11.56 -- 17.35 (previously Wanger U.S. Small Cap) WELLS FARGO VT 2AA Asset Allocation Fund (5/01; 4/94)(m) -- (4.22)(c) (7.71) 8.40 -- 10.31 2WI International Equity Fund (5/01; 7/00) -- (10.88)(c) (16.78) -- -- (18.02) 2SG Small Cap Growth Fund (5/01; 5/95)(n) -- (6.51)(c) (25.00) (2.56) -- 4.32
38 (a) Current applicable charges deducted from fund performance include a $30 annual contract administrative charge and a 0.75% annual mortality and expense risk fee. Premium taxes and purchase payment credits 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) Initial offering of the Service Class of each fund took place on Nov. 3, 1997 (except VIP Mid Cap which took place on Dec. 28, 1998). Returns prior to Nov. 3, 1997 (or Dec. 28, 1998 for VIP Mid Cap) are those of the Initial Class, which has no 12b-1 fee. If Service Class's 12b-1 fee of 0.10% had been reflected, returns prior to Nov. 3, 1997 would have been lower. (f) Ongoing stock market volatility can dramatically change the fund's short term performance; current results may differ. Because no Class 2 shares were issued until Jan. 6, 1999 standardized Class 2 Fund performance for prior periods represents the 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 all future performance. (g) Subaccount had not commenced operations as of Dec. 31, 2001. Ongoing stock market volatility can dramatically change the fund's short-term performance; current results may differ. Performance prior to the May 1, 2000 merger reflects the historical performance of the Templeton International Fund. In addition, for periods beginning on May 1, 1997, Class 2 Fund performance reflects an additional 12b-1 fee expense which also affects future performance. FTVIPT Templeton International Smaller Companies Fund - Class 2 merged into this fund as of April 30, 2002. (h) CORE(SM) is a service mark of Goldman, Sachs & Co. (i) The returns shown for Service Shares for periods prior to their inception (December 31, 1999) are derived from the historical performance of the Institutional Shares adjusted to reflect the higher operating expenses of Service Shares. In recent years returns have sustained significant gains and losses due to market volatility in the technology sector. (j) In recent years returns have sustained significant gains and losses due to market volatility in the technology sector. (k) 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. (l) Performance information for Class IB shares for periods prior to April 30, 1998 for Putnam VT International New Opportunities 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 0.25%. Restated to reflect an increase in 12b-1 fees effective April 30, 2001. Actual 12b-1 fees during the most recent fiscal year were 0.22% (m) Performance for periods prior to Sept. 20, 1999, reflects performance of the Life and Annuity Trust Asset Allocation Fund, its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust Funds were reorganized into the Wells Fargo Variable Trust Funds. (n) Performance for periods prior to Sept. 20, 1999, reflects performance of the Norwest Select Small Company Stock Fund (the accounting survivor of a merger of the Life and Annuity Trust Strategic Growth Fund and the Norwest Select Small Company Stock Fund), its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust and Norwest Select Funds were reorganized into the Wells Fargo Variable Trust Funds. 39 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 the following charges: the contract administrative charge, the variable account administrative charge, the Maximum Anniversary Value Death Benefit Rider fee, the Enhanced Earnings Death Benefit Rider fee and the applicable mortality and expense risk fee. We also show return figures without deduction of the Maximum Anniversary Value Death Benefit Rider fee and the Enhanced Earnings Death Benefit Rider fee. ANNUALIZED 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) raising the base period return to the power of 365/7. The subaccount's value includes: - any declared dividends, - the value of any shares purchased with dividends paid during the period, and - any dividends declared for such shares. It does not include: - the effect of any applicable surrender charge, or - 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 YIELD BASED ON THE SEVEN-DAY PERIOD ENDING DEC. 31, 2001
SUBACCOUNT INVESTING IN: SIMPLE YIELD COMPOUND YIELD CM1 AXP(R) Variable Portfolio - Cash Management Fund 0.65% 0.65% CM2 AXP(R) Variable Portfolio - Cash Management Fund 0.82 0.82
40 ANNUALIZED YIELD FOR A SUBACCOUNT INVESTING IN AN INCOME FUND 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. ANNUALIZED YIELD BASED ON THE 30-DAY PERIOD ENDED DEC. 31, 2001
SUBACCOUNT INVESTING IN: YIELD BD1 AXP(R) Variable Portfolio - Bond Fund 5.68% BD2 AXP(R) Variable Portfolio - Bond Fund 5.70 EI1 AXP(R) Variable Portfolio - Extra Income Fund 11.09 EI2 AXP(R) Variable Portfolio - Extra Income Fund 11.12 FI1 AXP(R) Variable Portfolio - Federal Income Fund 5.72 FI2 AXP(R) Variable Portfolio - Federal Income Fund 5.68 GB1 AXP(R) Variable Portfolio - Global Bond Fund 9.81 GB2 AXP(R) Variable Portfolio - Global Bond Fund 9.79
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: - determine the dollar value of your contract on the valuation date and then deduct any applicable premium tax; then - 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: - the annuity unit value on the valuation date; by - the fixed number of annuity units credited to you. 41 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: - the net investment factor; and - 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: - 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 - dividing that sum by the previous adjusted net asset value per share; and - 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: - take the value of your fixed account at the retirement date or the date you selected to begin receiving your annuity payouts; then - 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 We receive ratings from 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. For detailed information on the agency ratings given to IDS Life, refer to the American Express Web site at (americanexpress.com/advisors) or contact your financial advisor. Or view our current ratings by visiting the agency Web sites directly at: A.M. Best www.ambest.com Fitch www.fitchratings.com Moody's www.moodys.com/insurance
A.M. Best -- Rates insurance companies for their financial strength. Fitch (formerly Duff & Phelps) -- Rates insurance companies for their claims-paying ability. Moody's -- Rates insurance companies for their financial strength. PRINCIPAL UNDERWRITER IDS Life serves as principal underwriter for the contract, which it offers on a continuous basis. IDS Life is registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934 as a broker-dealer and is a member of the National Association of Securities Dealers, Inc. IDS Life is ultimately controlled by American Express Company. IDS Life currently pays underwriting commissions for its role as principal underwriter of all variable annuities associated with this variable account. For the past three years, the aggregate dollar amount of underwriting commissions paid in its role as principal underwriter for the variable account has been: 2001: $41,792,624; 2000: $56,851,815; and 1999: $21,517,281. IDS Life retains no underwriting commission from the sale of the contract. INDEPENDENT AUDITORS The financial statements appearing in this SAI have been audited by Ernst & Young LLP (1400 Pillsbury Center, 220 South Sixth Street, Minneapolis, MN 55402) independent auditors, as stated in their report appearing herein. 42 REPORT OF INDEPENDENT AUDITORS THE BOARD OF DIRECTORS IDS LIFE INSURANCE COMPANY We have audited the accompanying individual statements of assets and liabilities of the segregated asset subaccounts of IDS Life Variable Account 10 - American Express Retirement Advisor Variable Annuity(R) (comprised of subaccounts BC1, BC2, BD1, BD2, CR1, CR2, CM1, CM2, DE1, DE2, EM1, EM2, ES1, ES2, EI1, EI2, FI1, FI2, GB1, GB2, GR1, GR2, IE1, IE2, MF1, MF2, ND1, ND2, IV1, IV2, SC1, SC2, SA1, SA2, 1CA, 2CA, 1CD, 2CD, 1IF, 2IF, 1VA, 2VA, 1SR, 2SR, 1EG, 2EG, 1GI, 2GI, 1MP, 2MP, 1OS, 2OS, 1RE, 2RE, 1SI, 2SI, 1IS, 2IS, 1SE, 2SE, 1UE, 2UE, 1MC, 2MC, 1AG, 2AG, 1GT, 2GT, 1IG, 2IG, 1IP, 2IP, 1MG, 2MG, 1MD, 2MD, 1IN, 2IN, 1VS, 2VS, 1MI, 2MI, 1SV, 2SV, 1IT, 2IT, 1SP, 2SP, 1AA, 2AA, 1WI, 2WI, 1SG and 2SG) as of December 31, 2001, 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, 2001 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 Variable Annuity(R) at December 31, 2001, 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 22, 2002 43 STATEMENTS OF ASSETS AND LIABILITIES
SEGREGATED ASSET SUBACCOUNTS ---------------------------------------------------------------- DECEMBER 31, 2001 BC1 BC2 BD1 BD2 ASSETS Investments in shares of mutual funds and portfolios: at cost $ 51,712,882 $ 42,380,833 $ 119,640,679 $ 95,301,277 ---------------------------------------------------------------- at market value $ 40,781,852 $ 33,783,781 $ 119,883,329 $ 95,430,437 Dividends receivable -- -- 554,670 438,531 Accounts receivable from IDS Life for contract purchase payments -- 815 493,198 101,163 Receivable from mutual funds and portfolios for share redemptions -- -- -- -- ---------------------------------------------------------------------------------------------------------------- Total assets 40,781,852 33,784,596 120,931,197 95,970,131 ================================================================================================================ LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 32,827 21,476 96,034 59,932 Contract terminations 1,095 -- -- -- Payable to mutual funds and portfolios for investments purchased -- -- -- -- ---------------------------------------------------------------------------------------------------------------- Total liabilities 33,922 21,476 96,034 59,932 ---------------------------------------------------------------------------------------------------------------- Net assets applicable to contracts in accumulation period 40,635,657 33,613,030 120,576,095 95,271,576 Net assets applicable to contracts in payment period 112,273 150,090 259,068 638,623 ================================================================================================================ Total net assets $ 40,747,930 $ 33,763,120 $ 120,835,163 $ 95,910,199 ================================================================================================================ Accumulation units outstanding 49,897,109 41,082,633 106,759,873 83,968,345 ================================================================================================================ Net asset value per accumulation unit $ 0.81 $ 0.82 $ 1.13 $ 1.13 ================================================================================================================ SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------- DECEMBER 31, 2001 CR1 CR2 CM1 ASSETS Investments in shares of mutual funds and portfolios: at cost $ 29,069,661 $ 29,328,288 $ 287,243,453 ----------------------------------------------- at market value $ 20,382,565 $ 20,250,827 $ 287,213,633 Dividends receivable -- -- 429,903 Accounts receivable from IDS Life for contract purchase payments 7,999 5,830 2,316,455 Receivable from mutual funds and portfolios for share redemptions -- -- -- ----------------------------------------------------------------------------------------------- Total assets 20,390,564 20,256,657 289,959,991 =============================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 16,540 12,818 230,715 Contract terminations -- -- -- Payable to mutual funds and portfolios for investments purchased -- -- -- ----------------------------------------------------------------------------------------------- Total liabilities 16,540 12,818 230,715 ----------------------------------------------------------------------------------------------- Net assets applicable to contracts in accumulation period 20,251,907 20,002,759 289,076,487 Net assets applicable to contracts in payment period 122,117 241,080 652,789 =============================================================================================== Total net assets $ 20,374,024 $ 20,243,839 $ 289,729,276 =============================================================================================== Accumulation units outstanding 26,778,956 26,326,833 265,455,463 =============================================================================================== Net asset value per accumulation unit $ 0.76 $ 0.76 $ 1.09 =============================================================================================== See accompanying notes to financial statements. 44 SEGREGATED ASSET SUBACCOUNTS ---------------------------------------------------------------- DECEMBER 31, 2001 (CONTINUED) CM2 DE1 DE2 EM1 ASSETS Investments in shares of mutual funds and portfolios: at cost $ 266,241,664 $ 41,405,512 $ 44,105,970 $ 1,156,628 ---------------------------------------------------------------- at market value $ 266,220,564 $ 42,020,724 $ 44,767,626 $ 1,106,334 Dividends receivable 402,299 -- -- -- Accounts receivable from IDS Life for contract purchase payments 608,322 193,243 74,277 2,941 Receivable from mutual funds and portfolios for share redemptions -- -- -- -- ---------------------------------------------------------------------------------------------------------------- Total assets 267,231,185 42,213,967 44,841,903 1,109,275 ================================================================================================================ LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 170,470 32,977 27,680 874 Contract terminations -- -- -- -- Payable to mutual funds and portfolios for investments purchased -- -- -- -- ---------------------------------------------------------------------------------------------------------------- Total liabilities 170,470 32,977 27,680 874 ---------------------------------------------------------------------------------------------------------------- Net assets applicable to contracts in accumulation period 266,792,790 42,124,684 44,399,283 1,108,401 Net assets applicable to contracts in payment period 267,925 56,306 414,940 -- ================================================================================================================ Total net assets $ 267,060,715 $ 42,180,990 $ 44,814,223 $ 1,108,401 ================================================================================================================ Accumulation units outstanding 243,869,987 41,299,277 43,328,168 1,541,506 ================================================================================================================ Net asset value per accumulation unit $ 1.09 $ 1.02 $ 1.02 $ 0.72 ================================================================================================================ SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------- DECEMBER 31, 2001 (CONTINUED) EM2 ES1 ES2 ASSETS Investments in shares of mutual funds and portfolios: at cost $ 1,397,705 $ 2,064,313 $ 2,307,874 ----------------------------------------------- at market value $ 1,291,337 $ 2,209,551 $ 2,473,989 Dividends receivable -- -- -- Accounts receivable from IDS Life for contract purchase payments 506 16,536 4,000 Receivable from mutual funds and portfolios for share redemptions -- -- -- ----------------------------------------------------------------------------------------------- Total assets 1,291,843 2,226,087 2,477,989 =============================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 811 1,656 1,428 Contract terminations -- -- -- Payable to mutual funds and portfolios for investments purchased -- -- -- ----------------------------------------------------------------------------------------------- Total liabilities 811 1,656 1,428 ----------------------------------------------------------------------------------------------- Net assets applicable to contracts in accumulation period 1,291,032 2,224,431 2,476,561 Net assets applicable to contracts in payment period -- -- -- =============================================================================================== Total net assets $ 1,291,032 $ 2,224,431 $ 2,476,561 =============================================================================================== Accumulation units outstanding 1,789,442 2,238,352 2,488,770 =============================================================================================== Net asset value per accumulation unit $ 0.72 $ 0.99 $ 1.00 =============================================================================================== See accompanying notes to financial statements. 45 SEGREGATED ASSET SUBACCOUNTS ---------------------------------------------------------------- DECEMBER 31, 2001 (CONTINUED) EI1 EI2 FI1 FI2 ASSETS Investments in shares of mutual funds and portfolios: at cost $ 94,997,466 $ 62,094,057 $ 63,806,682 $ 56,635,681 ---------------------------------------------------------------- at market value $ 83,448,589 $ 54,961,666 $ 64,725,633 $ 57,202,596 Dividends receivable 745,664 493,147 301,175 265,220 Accounts receivable from IDS Life for contract purchase payments -- 65,827 -- 520,532 Receivable from mutual funds and portfolios for share redemptions -- -- -- -- ---------------------------------------------------------------------------------------------------------------- Total assets 84,194,253 55,520,640 65,026,808 57,988,348 ================================================================================================================ LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 66,749 34,857 52,153 36,263 Contract terminations 110,756 -- 148,256 -- Payable to mutual funds and portfolios for investments purchased -- -- -- -- ---------------------------------------------------------------------------------------------------------------- Total liabilities 177,505 34,857 200,409 36,263 ---------------------------------------------------------------------------------------------------------------- Net assets applicable to contracts in accumulation period 83,871,968 55,368,288 64,646,155 57,583,266 Net assets applicable to contracts in payment period 144,780 117,495 180,244 368,819 ================================================================================================================ Total net assets $ 84,016,748 $ 55,485,783 $ 64,826,399 $ 57,952,085 ================================================================================================================ Accumulation units outstanding 88,813,366 58,348,189 56,965,798 50,509,732 ================================================================================================================ Net asset value per accumulation unit $ 0.94 $ 0.95 $ 1.13 $ 1.14 ================================================================================================================ SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------- DECEMBER 31, 2001 (CONTINUED) GB1 GB2 GR1 ASSETS Investments in shares of mutual funds and portfolios: at cost $ 24,366,512 $ 16,925,641 $ 143,524,031 ----------------------------------------------- at market value $ 24,402,941 $ 16,942,628 $ 84,467,319 Dividends receivable 194,445 134,224 -- Accounts receivable from IDS Life for contract purchase payments 41,592 33,156 36,007 Receivable from mutual funds and portfolios for share redemptions -- -- -- ----------------------------------------------------------------------------------------------- Total assets 24,638,978 17,110,008 84,503,326 =============================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 19,563 10,673 67,985 Contract terminations -- -- -- Payable to mutual funds and portfolios for investments purchased -- -- -- ----------------------------------------------------------------------------------------------- Total liabilities 19,563 10,673 67,985 ----------------------------------------------------------------------------------------------- Net assets applicable to contracts in accumulation period 24,619,415 17,099,335 84,330,906 Net assets applicable to contracts in payment period -- -- 104,435 =============================================================================================== Total net assets $ 24,619,415 $ 17,099,335 $ 84,435,341 =============================================================================================== Accumulation units outstanding 23,970,170 16,572,087 130,763,635 =============================================================================================== Net asset value per accumulation unit $ 1.03 $ 1.03 $ 0.64 =============================================================================================== See accompanying notes to financial statements. 46 SEGREGATED ASSET SUBACCOUNTS ---------------------------------------------------------------- DECEMBER 31, 2001 (CONTINUED) GR2 IE1 IE2 MF1 ASSETS Investments in shares of mutual funds and portfolios: at cost $ 138,142,853 $ 19,947,944 $ 18,457,675 $ 60,292,437 ---------------------------------------------------------------- at market value $ 83,907,072 $ 12,566,903 $ 10,654,939 $ 49,957,880 Dividends receivable -- -- -- -- Accounts receivable from IDS Life for contract purchase payments 65,898 -- 4,994 7,470 Receivable from mutual funds and portfolios for share redemptions -- -- -- -- ---------------------------------------------------------------------------------------------------------------- Total assets 83,972,970 12,566,903 10,659,933 49,965,350 ================================================================================================================ LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 53,115 10,130 6,733 40,181 Contract terminations -- 6,237 -- -- Payable to mutual funds and portfolios for investments purchased -- -- -- -- ---------------------------------------------------------------------------------------------------------------- Total liabilities 53,115 16,367 6,733 40,181 ---------------------------------------------------------------------------------------------------------------- Net assets applicable to contracts in accumulation period 83,696,603 12,477,568 10,625,560 49,466,612 Net assets applicable to contracts in payment period 223,252 72,968 27,640 458,557 ================================================================================================================ Total net assets $ 83,919,855 $ 12,550,536 $ 10,653,200 $ 49,925,169 ================================================================================================================ Accumulation units outstanding 129,185,546 18,664,324 15,821,074 53,096,445 ================================================================================================================ Net asset value per accumulation unit $ 0.65 $ 0.67 $ 0.67 $ 0.93 ================================================================================================================ SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------- DECEMBER 31, 2001 (CONTINUED) MF2 ND1 ND2 ASSETS Investments in shares of mutual funds and portfolios: at cost $ 43,249,885 $ 356,139,473 $ 313,080,767 ----------------------------------------------- at market value $ 35,998,816 $ 272,960,324 $ 245,919,901 Dividends receivable -- -- -- Accounts receivable from IDS Life for contract purchase payments 21,008 139,340 342,906 Receivable from mutual funds and portfolios for share redemptions -- -- -- ----------------------------------------------------------------------------------------------- Total assets 36,019,824 273,099,664 246,262,807 =============================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 22,756 218,157 154,416 Contract terminations -- -- -- Payable to mutual funds and portfolios for investments purchased -- -- -- ----------------------------------------------------------------------------------------------- Total liabilities 22,756 218,157 154,416 ----------------------------------------------------------------------------------------------- Net assets applicable to contracts in accumulation period b 35,351,244 271,620,420 245,113,267 Net assets applicable to contracts in payment period 645,824 1,261,087 995,124 =============================================================================================== Total net assets $ 35,997,068 $ 272,881,507 $ 246,108,391 =============================================================================================== Accumulation units outstanding 37,760,282 307,319,932 276,053,946 =============================================================================================== Net asset value per accumulation unit $ 0.94 $ 0.88 $ 0.89 =============================================================================================== See accompanying notes to financial statements. 47 SEGREGATED ASSET SUBACCOUNTS --------------------------------------------------------------- DECEMBER 31, 2001 (CONTINUED) IV1 IV2 SC1 SC2 ASSETS Investments in shares of mutual funds and portfolios: at cost $ 35,318,036 $ 30,720,504 $ 27,372,382 $ 25,644,608 ---------------------------------------------------------------- at market value $ 31,838,244 $ 28,188,801 $ 26,178,664 $ 24,598,807 Dividends receivable -- -- -- -- Accounts receivable from IDS Life for contract purchase payments 199,065 157,436 -- 10,422 Receivable from mutual funds and portfolios for share redemptions -- -- -- -- ---------------------------------------------------------------------------------------------------------------- Total assets 32,037,309 28,346,237 26,178,664 24,609,229 ================================================================================================================ LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 24,967 17,498 20,933 15,505 Contract terminations -- -- 248 -- Payable to mutual funds and portfolios for investments purchased -- -- -- -- ---------------------------------------------------------------------------------------------------------------- Total liabilities 24,967 17,498 21,181 15,505 ---------------------------------------------------------------------------------------------------------------- Net assets applicable to contracts in accumulation period 31,867,060 28,328,739 26,144,365 24,588,882 Net assets applicable to contracts in payment period 145,282 -- 13,118 4,842 ================================================================================================================ Total net assets $ 32,012,342 $ 28,328,739 $ 26,157,483 $ 24,593,724 ================================================================================================================ Accumulation units outstanding 40,574,978 35,957,387 24,346,498 22,792,239 ================================================================================================================ Net asset value per accumulation unit $ 0.79 $ 0.79 $ 1.07 $ 1.08 ================================================================================================================ SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------- DECEMBER 31, 2001 (CONTINUED) SA1 SA2 1CA ASSETS Investments in shares of mutual funds and portfolios: at cost $ 114,824,545 $ 98,709,563 $ 75,971,959 ----------------------------------------------- at market value $ 53,077,901 $ 47,772,232 $ 48,599,509 Dividends receivable -- -- -- Accounts receivable from IDS Life for contract purchase payments 9,685 22,576 -- Receivable from mutual funds and portfolios for share redemptions -- -- 68,418 ----------------------------------------------------------------------------------------------- Total assets 53,087,586 47,794,808 48,667,927 =============================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 42,782 30,224 38,883 Contract terminations -- -- 29,535 Payable to mutual funds and portfolios for investments purchased -- -- -- ----------------------------------------------------------------------------------------------- Total liabilities 42,782 30,224 68,418 ----------------------------------------------------------------------------------------------- Net assets applicable to contracts in accumulation period 52,913,871 47,624,819 48,480,854 Net assets applicable to contracts in payment period 130,933 139,765 118,655 =============================================================================================== Total net assets $ 53,044,804 $ 47,764,584 $ 48,599,509 =============================================================================================== Accumulation units outstanding 65,574,383 58,747,770 55,044,029 =============================================================================================== Net asset value per accumulation unit $ 0.81 $ 0.81 $ 0.88 =============================================================================================== See accompanying notes to financial statements. 48 SEGREGATED ASSET SUBACCOUNTS ---------------------------------------------------------------- DECEMBER 31, 2001 (CONTINUED) 2CA 1CD 2CD 1IF ASSETS Investments in shares of mutual funds and portfolios: at cost $ 67,037,666 $ 34,074,085 $ 31,173,862 $ 40,111,083 ---------------------------------------------------------------- at market value $ 43,948,211 $ 31,796,487 $ 29,214,698 $ 26,705,659 Dividends receivable -- -- -- -- Accounts receivable from IDS Life for contract purchase payments 25,782 -- 18,047 -- Receivable from mutual funds and portfolios for share redemptions 27,619 44,415 18,432 28,895 ---------------------------------------------------------------------------------------------------------------- Total assets 44,001,612 31,840,902 29,251,177 26,734,554 ================================================================================================================ LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 27,619 25,502 18,432 21,320 Contract terminations -- 18,913 -- 7,575 Payable to mutual funds and portfolios for investments purchased 25,782 -- 18,047 -- ---------------------------------------------------------------------------------------------------------------- Total liabilities 53,401 44,415 36,479 28,895 ---------------------------------------------------------------------------------------------------------------- Net assets applicable to contracts in accumulation period 43,863,896 31,789,723 29,181,170 26,696,457 Net assets applicable to contracts in payment period 84,315 6,764 33,528 9,202 ================================================================================================================ Total net assets $ 43,948,211 $ 31,796,487 $ 29,214,698 $ 26,705,659 ================================================================================================================ Accumulation units outstanding 49,574,479 25,531,321 23,323,646 32,127,131 ================================================================================================================ Net asset value per accumulation unit $ 0.88 $ 1.25 $ 1.25 $ 0.83 ================================================================================================================ SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------- DECEMBER 31, 2001 (CONTINUED) 2IF 1VA 2VA ASSETS Investments in shares of mutual funds and at cost $ 31,518,192 $ 42,485,788 $ 36,919,704 ----------------------------------------------- at market value $ 21,368,405 $ 50,146,100 $ 42,781,569 Dividends receivable -- -- -- Accounts receivable from IDS Life for contract purchase payments 9,219 79,994 62,910 Receivable from mutual funds and portfolios for share redemptions 13,466 39,862 26,823 ----------------------------------------------------------------------------------------------- Total assets 21,391,090 50,265,956 42,871,302 =============================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 13,466 39,862 26,823 Contract terminations -- -- -- Payable to mutual funds and portfolios for investments purchased 9,219 79,994 62,910 ----------------------------------------------------------------------------------------------- Total liabilities 22,685 119,856 89,733 ----------------------------------------------------------------------------------------------- Net assets applicable to contracts in accumulation period 21,253,409 49,876,302 42,598,419 Net assets applicable to contracts in payment period 114,996 269,798 183,150 =============================================================================================== Total net assets $ 21,368,405 $ 50,146,100 $ 42,781,569 =============================================================================================== Accumulation units outstanding 25,459,465 41,459,867 35,247,543 =============================================================================================== Net asset value per accumulation unit $ 0.83 $ 1.20 $ 1.21 =============================================================================================== See accompanying notes to financial statements. 49 SEGREGATED ASSET SUBACCOUNTS ---------------------------------------------------------------- DECEMBER 31, 2001 (CONTINUED) 1SR 2SR 1EG 2EG ASSETS Investments in shares of mutual funds and portfolios: at cost $ 6,022,179 $ 4,466,224 $ 32,988,164 $ 26,958,707 ---------------------------------------------------------------- at market value $ 5,403,539 $ 3,996,635 $ 26,257,930 $ 21,527,548 Dividends receivable -- -- -- -- Accounts receivable from IDS Life for contract purchase payments 11,155 4,509 -- 1,994 Receivable from mutual funds and portfolios for share redemptions 4,314 2,477 35,106 13,541 ---------------------------------------------------------------------------------------------------------------- Total assets 5,419,008 4,003,621 26,293,036 21,543,083 ================================================================================================================ LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 4,314 2,477 20,966 13,541 Contract terminations -- -- 14,140 -- Payable to mutual funds and portfolios for investments purchased 11,155 4,509 -- 1,994 ---------------------------------------------------------------------------------------------------------------- Total liabilities 15,469 6,986 35,106 15,535 ---------------------------------------------------------------------------------------------------------------- Net assets applicable to contracts in accumulation period 5,403,539 3,996,635 26,244,049 21,519,844 Net assets applicable to contracts in payment period -- -- 13,881 7,704 ================================================================================================================ Total net assets $ 5,403,539 $ 3,996,635 $ 26,257,930 $ 21,527,548 ================================================================================================================ Accumulation units outstanding 6,090,449 4,489,864 24,696,701 20,157,745 ================================================================================================================ Net asset value per accumulation unit $ 0.89 $ 0.89 $ 1.06 $ 1.07 ================================================================================================================ SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------- DECEMBER 31, 2001 (CONTINUED) 1GI 2GI 1MP ASSETS Investments in shares of mutual funds and portfolios: at cost $ 122,813,494 $ 106,044,910 $ 98,234,180 ----------------------------------------------- at market value $ 107,966,481 $ 93,831,915 $ 105,787,927 Dividends receivable -- -- -- Accounts receivable from IDS Life for contract purchase payments 44,765 64,684 -- Receivable from mutual funds and portfolios for share redemptions 85,870 58,898 192,059 ----------------------------------------------------------------------------------------------- Total assets 108,097,116 93,955,497 105,979,986 =============================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 85,870 58,898 85,138 Contract terminations -- -- 106,921 Payable to mutual funds and portfolios for investments purchased 44,765 64,684 -- ----------------------------------------------------------------------------------------------- Total liabilities 130,635 123,582 192,059 ----------------------------------------------------------------------------------------------- Net assets applicable to contracts in accumulation period 107,710,471 93,732,787 105,560,988 Net assets applicable to contracts in payment period 256,010 99,128 226,939 =============================================================================================== Total net assets $ 107,966,481 $ 93,831,915 $ 105,787,927 =============================================================================================== Accumulation units outstanding 119,735,641 103,718,607 67,131,837 =============================================================================================== Net asset value per accumulation unit $ 0.90 $ 0.90 $ 1.57 =============================================================================================== See accompanying notes to financial statements. 50 SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------------------------------------------- DECEMBER 31, 2001 (CONTINUED) 2MP 1OS 2OS 1RE 2RE 1SI 2SI ASSETS Investments in shares of mutual funds and portfolios: at cost $ 87,291,413 $ 37,270,649 $ 31,651,663 $ 24,877,313 $ 31,061,372 $ 11,564,627 $ 13,199,978 ------------------------------------------------------------------------------------------------- at market value $ 94,014,379 $ 25,154,450 $ 21,590,846 $ 26,463,745 $ 32,992,245 $ 12,869,436 $ 14,607,898 Dividends receivable -- -- -- -- -- -- -- Accounts receivable from IDS Life for contract purchase payments 35,503 6,694 -- 28,669 75,529 31,093 59,417 Receivable from mutual funds and portfolios for share redemptions 59,429 20,156 35,389 20,756 20,246 10,088 8,938 ------------------------------------------------------------------------------------------------------------------------------------ Total assets 94,109,311 25,181,300 21,626,235 26,513,170 33,088,020 12,910,617 14,676,253 ==================================================================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 59,429 20,156 13,569 20,756 20,246 10,088 8,938 Contract terminations -- -- 21,820 -- -- -- -- Payable to mutual funds and portfolios for investments purchased 35,503 6,694 -- 28,669 75,529 31,093 59,417 ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 94,932 26,850 35,389 49,425 95,775 41,181 68,355 ------------------------------------------------------------------------------------------------------------------------------------ Net assets applicable to contracts in accumulation period 93,821,066 25,092,352 21,430,626 26,422,937 32,809,529 12,865,426 14,565,877 Net assets applicable to contracts in payment period 193,313 62,098 160,220 40,808 182,716 4,010 42,021 ==================================================================================================================================== Total net assets $ 94,014,379 $ 25,154,450 $ 21,590,846 $ 26,463,745 $ 32,992,245 $ 12,869,436 $ 14,607,898 ==================================================================================================================================== Accumulation units outstanding 59,392,864 32,758,196 27,849,994 19,803,454 24,476,850 9,583,606 10,800,259 ==================================================================================================================================== Net asset value per accumulation unit $ 1.58 $ 0.77 $ 0.77 $ 1.33 $ 1.34 $ 1.34 $ 1.35 ==================================================================================================================================== See accompanying notes to financial statements. 51 SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------------------------------------------- DECEMBER 31, 2001 (CONTINUED) 1IS 2IS 1SE 2SE 1UE 2UE 1MC ASSETS Investments in shares of mutual funds and portfolios: at cost $ 7,249,439 $ 5,991,464 $ 21,773,563 $ 16,260,997 $ 73,400,041 $ 61,773,879 $ 30,860,705 ------------------------------------------------------------------------------------------------- at market value $ 6,779,128 $ 5,675,790 $ 22,428,493 $ 16,792,552 $ 61,360,603 $ 52,274,999 $ 33,835,944 Dividends receivable -- -- -- -- -- -- -- Accounts receivable from IDS Life for contract purchase payments -- 1,112 1,558 12,166 -- 67,150 115,507 Receivable from mutual funds and portfolios for share redemptions 9,593 3,554 17,939 10,564 148,136 32,680 26,237 ------------------------------------------------------------------------------------------------------------------------------------ Total assets 6,788,721 5,680,456 22,447,990 16,815,282 61,508,739 52,374,829 33,977,688 ==================================================================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 5,427 3,554 17,939 10,564 49,094 32,680 26,237 Contract terminations 4,166 -- -- -- 99,042 -- -- Payable to mutual funds and portfolios for investments purchased -- 1,112 1,558 12,166 -- 67,150 115,507 ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 9,593 4,666 19,497 22,730 148,136 99,830 141,744 ------------------------------------------------------------------------------------------------------------------------------------ Net assets applicable to contracts in accumulation period 6,779,128 5,675,790 22,415,632 16,792,552 61,189,234 52,108,194 33,759,106 Net assets applicable to contracts in payment period -- -- 12,861 -- 171,369 166,805 76,838 ==================================================================================================================================== Total net assets $ 6,779,128 $ 5,675,790 $ 22,428,493 $ 16,792,552 $ 61,360,603 $ 52,274,999 $ 33,835,944 ==================================================================================================================================== Accumulation units outstanding 7,075,404 5,897,395 18,973,755 14,152,524 71,184,706 60,342,746 24,711,163 ==================================================================================================================================== Net asset value per accumulation unit $ 0.96 $ 0.96 $ 1.18 $ 1.19 $ 0.86 $ 0.86 $ 1.37 ==================================================================================================================================== See accompanying notes to financial statements. 52 SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------------------------------------------- DECEMBER 31, 2001 (CONTINUED) 2MC 1AG 2AG 1GT 2GT 1IG 2IG ASSETS Investments in shares of mutual funds and portfolios: at cost $ 30,232,493 $ 41,783,164 $ 41,386,033 $ 27,038,087 $ 26,763,306 $ 50,942,233 $ 47,396,787 ------------------------------------------------------------------------------------------------- at market value $ 32,636,756 $ 21,660,325 $ 23,116,070 $ 14,436,141 $ 14,783,844 $ 38,964,943 $ 36,904,470 Dividends receivable -- -- -- -- -- -- -- Accounts receivable from IDS Life for contract purchase payments 62,837 -- 16,823 6,509 18,094 52,449 53,395 Receivable from mutual funds and portfolios for share redemptions 20,096 58,807 14,391 11,473 9,217 30,825 22,988 ------------------------------------------------------------------------------------------------------------------------------------ Total assets 32,719,689 21,719,132 23,147,284 14,454,123 14,811,155 39,048,217 36,980,853 ==================================================================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 20,096 17,207 14,391 11,473 9,217 30,825 22,988 Contract terminations -- 41,600 -- -- -- -- -- Payable to mutual funds and portfolios for investments purchased 62,837 -- 16,823 6,509 18,094 52,449 53,395 ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 82,933 58,807 31,214 17,982 27,311 83,274 76,383 ------------------------------------------------------------------------------------------------------------------------------------ Net assets applicable to contracts in accumulation period 32,593,270 21,649,557 23,114,288 14,432,566 14,779,685 38,863,547 36,794,077 Net assets applicable to contracts in payment period 43,486 10,768 1,782 3,575 4,159 101,396 110,393 ==================================================================================================================================== Total net assets $ 32,636,756 $ 21,660,325 $ 23,116,070 $ 14,436,141 $ 14,783,844 $ 38,964,943 $ 36,904,470 ==================================================================================================================================== Accumulation units outstanding 23,748,152 51,499,504 54,804,774 34,050,475 34,766,823 64,147,250 60,527,027 ==================================================================================================================================== Net asset value per accumulation unit $ 1.37 $ 0.42 $ 0.42 $ 0.42 $ 0.43 $ 0.61 $ 0.61 ==================================================================================================================================== See accompanying notes to financial statements. 53 SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------------------------------------------- DECEMBER 31, 2001 (CONTINUED) 1IP 2IP 1MG 2MG 1MD 2MD 1IN ASSETS Investments in shares of mutual funds and portfolios: at cost $ 18,014,621 $ 14,451,831 $ 43,105,535 $ 42,029,185 $ 34,514,429 $ 32,053,073 $108,953,178 ------------------------------------------------------------------------------------------------- at market value $ 14,291,834 $ 11,604,651 $ 34,386,783 $ 34,000,110 $ 33,044,416 $ 30,681,980 $ 58,577,640 Dividends receivable -- -- -- -- -- -- -- Accounts receivable from IDS Life for contract purchase payments 55,148 8,842 18,488 93,779 21,217 62,180 -- Receivable from mutual funds and portfolios for share redemptions 11,157 7,115 26,927 20,924 25,840 18,823 106,017 ------------------------------------------------------------------------------------------------------------------------------------ Total assets 14,358,139 11,620,608 34,432,198 34,114,813 33,091,473 30,762,983 58,683,657 ==================================================================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 11,157 7,115 26,927 20,924 25,840 18,823 46,975 Contract terminations -- -- -- -- -- -- 59,042 Payable to mutual funds and portfolios for investments purchased 55,148 8,842 18,488 93,779 21,217 62,180 -- ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 66,305 15,957 45,415 114,703 47,057 81,003 106,017 ------------------------------------------------------------------------------------------------------------------------------------ Net assets applicable to contracts in accumulation period 14,226,389 11,490,301 34,354,362 33,902,717 33,042,178 30,677,400 58,577,640 Net assets applicable to contracts in payment period 65,445 114,350 32,421 97,393 2,238 4,580 -- ==================================================================================================================================== Total net assets $ 14,291,834 $ 11,604,651 $ 34,386,783 $ 34,000,110 $ 33,044,416 $ 30,681,980 $ 58,577,640 ==================================================================================================================================== Accumulation units outstanding 19,727,365 15,860,418 51,051,303 50,211,519 36,822,197 34,072,333 90,195,890 ==================================================================================================================================== Net asset value per accumulation unit $ 0.72 $ 0.72 $ 0.67 $ 0.68 $ 0.90 $ 0.90 $ 0.65 ==================================================================================================================================== See accompanying notes to financial statements. 54 SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------------------------------------------- DECEMBER 31, 2001 (CONTINUED) 2IN 1VS 2VS 1MI 2MI 1SV 2SV ASSETS Investments in shares of mutual funds and portfolios: at cost $ 91,864,048 $126,567,533 $104,162,888 $ 33,922,690 $ 29,588,912 $ 46,901,088 $ 40,699,347 ------------------------------------------------------------------------------------------------- at market value $ 51,535,271 $ 74,483,171 $ 63,852,496 $ 41,016,510 $ 35,033,177 $ 53,964,613 $ 46,234,801 Dividends receivable -- -- -- -- -- -- -- Accounts receivable from IDS Life for contract purchase payments 18,573 -- 54,125 19,128 53,100 59,306 47,635 Receivable from mutual funds and portfolios for share redemptions 32,408 69,014 39,863 32,550 21,817 42,775 28,976 ------------------------------------------------------------------------------------------------------------------------------------ Total assets 51,586,252 74,552,185 63,946,484 41,068,188 35,108,094 54,066,694 46,311,412 ==================================================================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 32,408 59,448 39,863 32,550 21,817 42,775 28,976 Contract terminations -- 9,566 -- -- -- -- -- Payable to mutual funds and portfolios for investments purchased 18,573 -- 54,125 19,128 53,100 59,306 47,635 ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 50,981 69,014 93,988 51,678 74,917 102,081 76,611 ------------------------------------------------------------------------------------------------------------------------------------ Net assets applicable to contracts in accumulation period 51,485,588 74,384,443 63,734,762 41,004,237 35,027,584 53,951,546 46,018,459 Net assets applicable to contracts in payment period 49,683 98,728 117,734 12,273 5,593 13,067 216,342 ==================================================================================================================================== Total net assets $ 51,535,271 $ 74,483,171 $ 63,852,496 $ 41,016,510 $ 35,033,177 $ 53,964,613 $ 46,234,801 ==================================================================================================================================== Accumulation units outstanding 78,900,884 87,722,365 74,818,967 23,583,246 20,055,994 31,847,840 27,040,430 ==================================================================================================================================== Net asset value per accumulation unit $ 0.65 $ 0.85 $ 0.85 $ 1.74 $ 1.75 $ 1.69 $ 1.70 ==================================================================================================================================== See accompanying notes to financial statements. 55 SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------------------------------------------- DECEMBER 31, 2001 (CONTINUED) 1IT 2IT 1SP 2SP 1AA 2AA 1WI ASSETS Investments in shares of mutual funds and portfolios: at cost $ 47,805,554 $ 42,426,921 $ 50,142,172 $ 44,060,106 $ 3,149,106 $ 3,723,685 $ 922,365 ------------------------------------------------------------------------------------------------- at market value $ 25,663,389 $ 23,627,517 $ 53,762,660 $ 47,363,850 $ 3,110,295 $ 3,682,381 $ 927,595 Dividends receivable -- -- -- -- -- -- -- Accounts receivable from IDS Life for contract purchase payments 54,413 42,996 -- 102,437 9,847 54,585 9,976 Receivable from mutual funds and portfolios for share redemptions 20,390 14,808 66,470 29,052 15,824 2,198 669 ------------------------------------------------------------------------------------------------------------------------------------ Total assets 25,738,192 23,685,321 53,829,130 47,495,339 3,135,966 3,739,164 938,240 ==================================================================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 20,390 14,808 42,149 29,052 2,364 2,198 669 Contract terminations -- -- 24,321 -- 13,460 -- -- Payable to mutual funds and portfolios for investments purchased 54,413 42,996 -- 102,437 -- 54,585 9,976 ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 74,803 57,804 66,470 131,489 15,824 56,783 10,645 ------------------------------------------------------------------------------------------------------------------------------------ Net assets applicable to contracts in accumulation period 25,552,121 23,569,698 53,632,104 47,310,776 3,120,142 3,682,381 927,595 Net assets applicable to contracts in payment period 111,268 57,819 130,556 53,074 -- -- -- ==================================================================================================================================== Total net assets $ 25,663,389 $ 23,627,517 $ 53,762,660 $ 47,363,850 $ 3,120,142 $ 3,682,381 $ 927,595 ==================================================================================================================================== Accumulation units outstanding 30,296,994 27,817,713 46,456,080 40,791,482 3,223,573 3,799,139 1,030,776 ==================================================================================================================================== Net asset value per accumulation unit $ 0.84 $ 0.85 $ 1.15 $ 1.16 $ 0.97 $ 0.97 $ 0.90 ==================================================================================================================================== See accompanying notes to financial statements. 56 SEGREGATED ASSET SUBACCOUNTS ------------------------------------------ DECEMBER 31, 2001 (CONTINUED) 2WI 1SG 2SG ASSETS Investments in shares of mutual funds and portfolios: at cost $ 1,075,272 $ 1,917,328 $ 1,843,295 ------------------------------------------ at market value $ 1,080,049 $ 2,095,392 $ 1,939,030 Dividends receivable -- -- -- Accounts receivable from IDS Life for contract purchase payments 6,562 13,562 45,521 Receivable from mutual funds and portfolios for share redemptions 643 1,538 1,094 ------------------------------------------------------------------------------------------- Total assets 1,087,254 2,110,492 1,985,645 =========================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 643 1,538 1,094 Contract terminations -- -- -- Payable to mutual funds and portfolios for investments purchased 6,562 13,562 45,521 ------------------------------------------------------------------------------------------- Total liabilities 7,205 15,100 46,615 ------------------------------------------------------------------------------------------- Net assets applicable to contracts in accumulation period 1,080,049 2,095,392 1,939,030 Net assets applicable to contracts in payment period -- -- -- =========================================================================================== Total net assets $ 1,080,049 $ 2,095,392 $ 1,939,030 =========================================================================================== Accumulation units outstanding 1,199,580 2,229,738 2,060,286 =========================================================================================== Net asset value per accumulation unit $ 0.90 $ 0.94 $ 0.94 ===========================================================================================
See accompanying notes to financial statements. 57 STATEMENTS OF OPERATIONS
SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 BC1 BC2 BD1 BD2 CR1 CR2 CM1 INVESTMENT INCOME Dividend income from mutual funds and portfolios $ 311,275 $ 246,283 $ 5,262,706 $ 3,983,855 $ 63,642 $ 62,571 $ 9,256,118 Variable account expenses 393,817 246,860 790,194 472,628 194,218 153,981 2,478,864 ------------------------------------------------------------------------------------------------------------------------------------ Investment income (loss) -- net (82,542) (577) 4,472,512 3,511,227 (130,576) (91,410) 6,777,254 ==================================================================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 3,465,560 1,644,705 987,617 1,356,308 2,225,725 2,810,088 62,081,735 Cost of investments sold 4,379,260 2,064,152 977,009 1,344,769 3,239,602 4,256,896 62,087,959 ------------------------------------------------------------------------------------------------------------------------------------ Net realized gain (loss) on sales of investments (913,700) (419,447) 10,608 11,539 (1,013,877) (1,446,808) (6,224) Distributions from capital gains -- -- -- -- -- -- -- Net change in unrealized appreciation or depreciation of investments (7,186,847) (5,811,752) 125,819 21,829 (3,287,133) (3,108,462) (1,569) ------------------------------------------------------------------------------------------------------------------------------------ Net gain (loss) on investments (8,100,547) (6,231,199) 136,427 33,368 (4,301,010) (4,555,270) (7,793) ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $ (8,183,089) $ (6,231,776) $ 4,608,939 $ 3,544,595 $ (4,431,586) $ (4,646,680) $ 6,769,461 ==================================================================================================================================== SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) CM2 DE1 DE2 EM1 EM2 ES1(1) ES2(1) INVESTMENT INCOME Dividend income from mutual funds and portfolios $ 8,505,982 $ 316,604 $ 325,184 $ 168 $ 198 $ -- $ -- Variable account expenses 1,812,773 241,031 194,378 7,990 7,638 5,336 4,556 ------------------------------------------------------------------------------------------------------------------------------------ Investment income (loss) -- net 6,693,209 75,573 130,806 (7,822) (7,440) (5,336) (4,556) ==================================================================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS-- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 71,342,713 383,077 637,244 139,767 158,567 202,151 22,141 Cost of investments sold 71,347,828 376,840 655,823 163,737 190,955 205,456 22,896 ------------------------------------------------------------------------------------------------------------------------------------ Net realized gain (loss) on sales of investments (5,115) 6,237 (18,579) (23,970) (32,388) (3,305) (755) Distributions from capital gains -- -- -- -- -- -- -- Net change in unrealized appreciation or depreciation of investments (2,181) 318,919 400,925 24,439 30,375 145,238 166,115 ------------------------------------------------------------------------------------------------------------------------------------ Net gain (loss) on investments (7,296) 325,156 382,346 469 (2,013) 141,933 165,360 ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $ 6,685,913 $ 400,729 $ 513,152 $ (7,353) $ (9,453) $ 136,597 $ 160,804 ====================================================================================================================================
(1) For the period May 1, 2001 (commencement of operations) to Dec. 31, 2001. See accompanying notes to financial statements. 58
SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 (CONTINUED) EI1 EI2 FI1 FI2 GB1 GB2 GR1 INVESTMENT INCOME Dividend income from mutual funds and portfolios $ 7,432,607 $ 4,719,306 $ 2,028,921 $ 1,664,446 $ 702,551 $ 472,508 $ -- Variable account expenses 650,179 326,209 426,601 278,143 187,551 98,400 854,224 ------------------------------------------------------------------------------------------------------------------------------------ Investment income (loss) -- net 6,782,428 4,393,097 1,602,320 1,386,303 515,000 374,108 (854,224) ==================================================================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 2,146,282 1,316,626 5,050,151 6,096,911 547,705 761,222 3,602,416 Cost of investments sold 2,450,259 1,477,509 4,934,807 5,991,077 539,962 752,421 6,173,622 ------------------------------------------------------------------------------------------------------------------------------------ Net realized gain (loss) on sales of investments (303,977) (160,883) 115,344 105,834 7,743 8,801 (2,571,206) Distributions from capital gains -- -- -- -- -- -- -- Net change in unrealized appreciation or depreciation of investments (4,672,141) (3,021,874) 303,044 183,508 (374,661) (248,055) (33,312,633) ------------------------------------------------------------------------------------------------------------------------------------ Net gain (loss) on investments (4,976,118) (3,182,757) 418,388 289,342 (366,918) (239,254) (35,883,839) ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $ 1,806,310 $ 1,210,340 $ 2,020,708 $ 1,675,645 $ 148,082 $ 134,854 $(36,738,063) ==================================================================================================================================== SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 (CONTINUED) GR2 IE1 IE2 MF1 MF2 ND1 ND2 INVESTMENT INCOME Dividend income from mutual funds and portfolios $ -- $ 164,645 $ 141,730 $ 1,191,376 $ 861,143 $ 579,907 $ 503,017 Variable account expenses 644,742 126,794 86,102 448,189 256,064 2,352,130 1,580,237 ------------------------------------------------------------------------------------------------------------------------------------ Investment income (loss) -- net (644,742) 37,851 55,628 743,187 605,079 (1,772,223) (1,077,220) ==================================================================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 3,271,396 5,065,193 2,391,380 2,463,875 2,581,055 4,254,895 2,528,479 Cost of investments sold 5,327,863 8,195,035 4,162,922 2,996,402 3,194,827 5,704,930 3,354,907 ------------------------------------------------------------------------------------------------------------------------------------ Net realized gain (loss) on sales of investments (2,056,467) (3,129,842) (1,771,542) (532,527) (613,772) (1,450,035) (826,428) Distributions from capital gains -- -- -- -- -- -- -- Net change in unrealized appreciation or depreciation of investments (31,681,624) (1,774,706) (2,564,164) (5,943,562) (4,117,880) (43,582,529) (36,023,903) ------------------------------------------------------------------------------------------------------------------------------------ Net gain (loss) on investments (33,738,091) (4,904,548) (4,335,706) (6,476,089) (4,731,652) (45,032,564) (36,850,331) ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $(34,382,833) $ (4,866,697) $ (4,280,078) $ (5,732,902) $ (4,126,573) $(46,804,787) $(37,927,551) ==================================================================================================================================== See accompanying notes to financial statements. 59 SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 (CONTINUED) IV1 IV2 SC1 SC2 SA1 SA2 1CA INVESTMENT INCOME Dividend income from mutual funds and portfolios $ 202,523 $ 167,667 $ -- $ -- $ 121,255 $ 104,694 $ -- Variable account expenses 211,482 134,876 209,229 151,301 549,231 370,030 472,913 ------------------------------------------------------------------------------------------------------------------------------------ Investment income (loss) -- net (8,959) 32,791 (209,229) (151,301) (427,976) (265,336) (472,913) ==================================================================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 1,480,912 838,952 1,027,216 915,840 3,823,757 2,351,519 2,386,313 Cost of investments sold 1,747,542 955,838 1,105,230 1,018,265 8,310,817 4,938,937 3,685,351 ------------------------------------------------------------------------------------------------------------------------------------ Net realized gain (loss) on sales of investments (266,630) (116,886) (78,014) (102,425) (4,487,060) (2,587,418) (1,299,038) Distributions from capital gains -- -- -- -- -- -- 3,910,723 Net change in unrealized appreciation or depreciation of investments (2,445,276) (1,793,989) (950,703) (831,931) (20,948,920) (18,639,966) (16,687,993) ------------------------------------------------------------------------------------------------------------------------------------ Net gain (loss) on investments (2,711,906) (1,910,875) (1,028,717) (934,356) (25,435,980) (21,227,384) (14,076,308) ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $ (2,720,865) $ (1,878,084) $ (1,237,946) $ (1,085,657) $(25,863,956) $(21,492,720) $(14,549,221) ==================================================================================================================================== SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 (CONTINUED) 2CA 1CD 2CD 1IF 2IF 1VA 2VA INVESTMENT INCOME Dividend income from mutual funds and portfolios $ -- $ -- $ -- $ 20,219 $ 15,568 $ 290,216 $ 208,623 Variable account expenses 319,093 286,740 202,653 244,729 150,681 341,538 212,999 ------------------------------------------------------------------------------------------------------------------------------------ Investment income (loss) -- net (319,093) (286,740) (202,653) (224,510) (135,113) (51,322) (4,376) ==================================================================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 1,329,042 1,378,735 988,025 943,950 738,843 246,943 50,311 Cost of investments sold 2,046,559 1,544,489 1,106,499 1,436,114 1,101,620 233,228 48,358 ------------------------------------------------------------------------------------------------------------------------------------ Net realized gain (loss) on sales of investments (717,517) (165,754) (118,474) (492,164) (362,777) 13,715 1,953 Distributions from capital gains 3,518,641 -- -- 2,232,436 1,718,964 -- -- Net change in unrealized appreciation or depreciation of investments (14,555,868) (2,317,737) (2,074,736) (10,672,533) (8,262,861) 4,391,063 3,617,419 ------------------------------------------------------------------------------------------------------------------------------------ Net gain (loss) on investments (11,754,744) (2,483,491) (2,193,210) (8,932,261) (6,906,674) 4,404,778 3,619,372 ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $(12,073,837) $ (2,770,231) $ (2,395,863) $ (9,156,771) $ (7,041,787) $ 4,353,456 $ 3,614,996 ==================================================================================================================================== See accompanying notes to financial statements. 60 SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 (CONTINUED) 1SR 2SR 1EG 2EG 1GI 2GI 1MP INVESTMENT INCOME Dividend income from mutual funds and portfolios $ 203,131 $ 150,549 $ -- $ -- $ 976,398 $ 798,796 $ -- Variable account expenses 33,063 19,366 244,800 154,115 889,009 590,964 868,573 ------------------------------------------------------------------------------------------------------------------------------------ Investment income (loss) -- net 170,068 131,183 (244,800) (154,115) 87,389 207,832 (868,573) ==================================================================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 409,607 167,099 2,024,226 1,214,371 924,962 843,164 2,341,347 Cost of investments sold 442,522 182,321 2,714,572 1,633,821 1,114,013 993,771 2,276,437 ------------------------------------------------------------------------------------------------------------------------------------ Net realized gain (loss) on sales of investments (32,915) (15,222) (690,346) (419,450) (189,051) (150,607) 64,910 Distributions from capital gains 98,967 73,349 -- -- 3,308,903 2,707,030 -- Net change in unrealized appreciation or depreciation of investments (464,785) (348,450) (4,339,346) (3,479,378) (11,895,140) (9,677,207) (1,608,347) ------------------------------------------------------------------------------------------------------------------------------------ Net gain (loss) on investments (398,733) (290,323) (5,029,692) (3,898,828) (8,775,288) (7,120,784) (1,543,437) ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $ (228,665) $ (159,140) $ (5,274,492) $ (4,052,943) $ (8,687,899) $ (6,912,952) $ (2,412,010) ==================================================================================================================================== SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 (CONTINUED) 2MP 1OS 2OS 1RE 2RE 1SI 2SI INVESTMENT INCOME Dividend income from mutual funds and portfolios $ -- $ 1,096,697 $ 920,313 $ 592,285 $ 687,350 $ 27,749 $ 31,830 Variable account expenses 577,666 231,855 152,829 153,949 143,861 73,504 63,295 ------------------------------------------------------------------------------------------------------------------------------------ Investment income (loss) -- net (577,666) 864,842 767,484 438,336 543,489 (45,755) (31,465) ==================================================================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 566,979 860,361 1,037,515 218,140 144,064 727,623 579,286 Cost of investments sold 568,381 1,278,368 1,507,211 207,662 136,774 623,580 527,306 ------------------------------------------------------------------------------------------------------------------------------------ Net realized gain (loss) on sales of investments (1,402) (418,007) (469,696) 10,478 7,290 104,043 51,980 Distributions from capital gains -- 1,752,330 1,470,501 -- -- 160,532 184,139 Net change in unrealized appreciation or depreciation of investments (761,682) (8,407,070) (6,881,035) 906,281 1,105,161 774,134 856,927 ------------------------------------------------------------------------------------------------------------------------------------ Net gain (loss) on investments (763,084) (7,072,747) (5,880,230) 916,759 1,112,451 1,038,709 1,093,046 ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $ (1,340,750) $ (6,207,905) $ (5,112,746) $ 1,355,095 $ 1,655,940 $ 992,954 $ 1,061,581 ==================================================================================================================================== See accompanying notes to financial statements. 61 SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 (CONTINUED) 1IS 2IS 1SE 2SE 1UE 2UE 1MC INVESTMENT INCOME Dividend income from mutual funds and portfolios $ 197,009 $ 144,889 $ 63,315 $ 47,257 $ 277,763 $ 234,560 $ 293,669 Variable account expenses 58,711 33,758 188,111 107,626 551,464 354,012 204,646 ------------------------------------------------------------------------------------------------------------------------------------ Investment income (loss) -- net 138,298 111,131 (124,796) (60,369) (273,701) (119,452) 89,023 ==================================================================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 771,162 196,864 854,849 510,251 1,734,426 1,078,996 682,917 Cost of investments sold 844,618 221,440 917,388 554,163 2,147,916 1,305,575 595,269 ------------------------------------------------------------------------------------------------------------------------------------ Net realized gain (loss) on sales of investments (73,456) (24,576) (62,539) (43,912) (413,490) (226,579) 87,648 Distributions from capital gains -- -- -- -- -- -- 1,516,830 Net change in unrealized appreciation or depreciation of investments (290,146) (221,948) 928,975 723,121 (7,282,490) (5,877,468) 906,258 ------------------------------------------------------------------------------------------------------------------------------------ Net gain (loss) on investments (363,602) (246,524) 866,436 679,209 (7,695,980) (6,104,047) 2,510,736 ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $ (225,304) $ (135,393) $ 741,640 $ 618,840 $ (7,969,681) $ (6,223,499) $ 2,599,759 ==================================================================================================================================== SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 (CONTINUED) 2MC 1AG 2AG 1GT 2GT 1IG 2IG INVESTMENT INCOME Dividend income from mutual funds and portfolios $ 284,333 $ -- $ -- $ 98,213 $ 93,750 $ 239,566 $ 219,706 Variable account expenses 142,383 213,967 165,701 136,304 103,871 301,564 216,992 ------------------------------------------------------------------------------------------------------------------------------------ Investment income (loss) -- net 141,950 (213,967) (165,701) (38,091) (10,121) (61,998) 2,714 ==================================================================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 193,877 965,140 1,150,704 833,472 465,669 151,145 24,431 Cost of investments sold 176,217 1,919,634 2,162,777 1,690,080 859,123 202,661 34,484 ------------------------------------------------------------------------------------------------------------------------------------ Net realized gain (loss) on sales of investments 17,660 (954,494) (1,012,073) (856,608) (393,454) (51,516) (10,053) Distributions from capital gains 1,468,606 -- -- -- -- -- -- Net change in unrealized appreciation or depreciation of investments 801,503 (11,163,908) (10,418,749) (6,499,353) (6,655,709) (8,186,408) (7,319,717) ------------------------------------------------------------------------------------------------------------------------------------ Net gain (loss) on investments 2,287,769 (12,118,402) (11,430,822) (7,355,961) (7,049,163) (8,237,924) (7,329,770) ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $ 2,429,719 $(12,332,369) $(11,596,523) $ (7,394,052) $ (7,059,284) $ (8,299,922) $ (7,327,056) ==================================================================================================================================== See accompanying notes to financial statements. 62 SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 (CONTINUED) 1IP 2IP 1MG 2MG 1MD 2MD 1IN INVESTMENT INCOME Dividend income from mutual funds and portfolios $ 621 $ 491 $ 16,777 $ 15,999 $ -- $ -- $ -- Variable account expenses 113,110 70,563 253,463 190,580 217,120 155,358 601,574 ------------------------------------------------------------------------------------------------------------------------------------ Investment income (loss) -- net (112,489) (70,072) (236,686) (174,581) (217,120) (155,358) (601,574) ==================================================================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 199,927 234,481 588,344 225,405 296,925 201,209 4,457,917 Cost of investments sold 250,127 273,202 751,767 288,065 333,288 227,973 8,277,627 ------------------------------------------------------------------------------------------------------------------------------------ Net realized gain (loss) on sales of investments (50,200) (38,721) (163,423) (62,660) (36,363) (26,764) (3,819,710) Distributions from capital gains 40,919 32,329 202,473 193,086 641,417 576,479 -- Net change in unrealized appreciation or depreciation of investments (3,156,967) (2,476,219) (6,873,424) (6,415,382) (884,200) (833,867) (19,249,673) ------------------------------------------------------------------------------------------------------------------------------------ Net gain (loss) on investments (3,166,248) (2,482,611) (6,834,374) (6,284,956) (279,146) (284,152) (23,069,383) ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $ (3,278,737) $ (2,552,683) $ (7,071,060) $ (6,459,537) $ (496,266) $ (439,510) $(23,670,957) ==================================================================================================================================== SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 (CONTINUED) 2IN 1VS 2VS 1MI 2MI 1SV 2SV INVESTMENT INCOME Dividend income from mutual funds and portfolios $ -- $ -- $ -- $ -- $ -- $ 53,264 $ 43,192 Variable account expenses 396,643 718,809 448,604 272,589 167,060 344,405 220,764 ------------------------------------------------------------------------------------------------------------------------------------ Investment income (loss) -- net (396,643) (718,809) (448,604) (272,589) (167,060) (291,141) (177,572) ==================================================================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 1,959,367 2,651,781 542,205 3,429,772 1,076,496 300,680 369,370 Cost of investments sold 3,624,342 4,662,836 991,473 2,989,764 974,857 280,506 336,515 ------------------------------------------------------------------------------------------------------------------------------------ Net realized gain (loss) on sales of investments (1,664,975) (2,011,055) (449,268) 440,008 101,639 20,174 32,855 Distributions from capital gains -- 8,994,193 6,840,074 620,862 525,881 349,655 283,542 Net change in unrealized appreciation or depreciation of investments (17,170,818) (40,243,494) (31,629,377) 5,905,089 4,691,716 3,775,980 3,093,640 ------------------------------------------------------------------------------------------------------------------------------------ Net gain (loss) on investments (18,835,793) (33,260,356) (25,238,571) 6,965,959 5,319,236 4,145,809 3,410,037 ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $(19,232,436) $(33,979,165) $(25,687,175) $ 6,693,370 $ 5,152,176 $ 3,854,668 $ 3,232,465 ==================================================================================================================================== See accompanying notes to financial statements. 63 SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 1IT 2IT 1SP 2SP 1AA(1) 2AA(1) 1WI(1) INVESTMENT INCOME Dividend income from mutual funds and portfolios $ -- $ -- $ 23,230 $ 18,864 $ 19,272 $ 23,704 $ 68 Variable account expenses 234,391 163,619 387,234 256,502 8,855 8,456 2,383 ------------------------------------------------------------------------------------------------------------------------------------ Investment income (loss) -- net (234,391) (163,619) (364,004) (237,638) 10,417 15,248 (2,315) ==================================================================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 929,055 332,956 362,776 106,588 49,546 28,557 89,046 Cost of investments sold 1,624,256 593,399 365,233 112,204 50,500 30,697 94,762 ------------------------------------------------------------------------------------------------------------------------------------ Net realized gain (loss) on sales of investments (695,201) (260,443) (2,457) (5,616) (954) (2,140) (5,716) Distributions from capital gains 7,477,081 6,456,348 -- -- 30,669 37,877 -- Net change in unrealized appreciation or depreciation of investments (12,695,973) (11,400,356) 4,610,313 3,898,993 (38,811) (41,304) 5,230 ------------------------------------------------------------------------------------------------------------------------------------ Net gain (loss) on investments (5,914,093) (5,204,451) 4,607,856 3,893,377 (9,096) (5,567) (486) ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $ (6,148,484) $ (5,368,070) $ 4,243,852 $ 3,655,739 $ 1,321 $ 9,681 $ (2,801) ==================================================================================================================================== (1) For the period May 1, 2001 (commencement of operations) to Dec. 31, 2001. SEGREGATED ASSET SUBACCOUNTS -------------------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 2WI(1) 1SG(1) 2SG(1) INVESTMENT INCOME Dividend income from mutual funds and portfolios $ 86 $ -- $ -- Variable account expenses 2,250 4,217 3,924 ------------------------------------------------------------------------------------------ Investment income (loss) -- net (2,164) (4,217) (3,924) ========================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 101,259 20,642 248,552 Cost of investments sold 112,404 22,448 317,243 ------------------------------------------------------------------------------------------ Net realized gain (loss) on sales of investments (11,145) (1,806) (68,691) Distributions from capital gains -- -- -- Net change in unrealized appreciation or depreciation of investments 4,777 178,064 95,735 ------------------------------------------------------------------------------------------ Net gain (loss) on investments (6,368) 176,258 27,044 ------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $ (8,532) $ 172,041 $ 23,120 ==========================================================================================
(1) For the period May 1, 2001 (commencement of operations) to Dec. 31, 2001. See accompanying notes to financial statements. 64 STATEMENTS OF CHANGES IN NET ASSETS
SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 BC1 BC2 BD1 BD2 CR1 CR2 CM1 OPERATIONS Investment income (loss) -- net $ (82,542) $ (577) $ 4,472,512 $ 3,511,227 $ (130,576) $ (91,410) $ 6,777,254 Net realized gain (loss) on sales of investments (913,700) (419,447) 10,608 11,539 (1,013,877) (1,446,808) (6,224) Distributions from capital gains -- -- -- -- -- -- -- Net change in unrealized appreciation or depreciation of investments (7,186,847) (5,811,752) 125,819 21,829 (3,287,133) (3,108,462) 1,569) ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations (8,183,089) (6,231,776) 4,608,939 3,544,595 (4,431,586) (4,646,680) 6,769,461 ==================================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 6,713,990 6,771,370 49,725,069 42,970,829 4,389,778 4,776,551 342,222,386 Net transfers(1) 1,293,753 1,958,191 21,962,987 18,805,553 594,595 (1,587,827) (263,139,059) Transfers for policy loans -- (40,036) -- (70,196) -- (16,136) -- Annuity payments (9,583) (10,278) (16,215) (29,070) (8,738) (14,795) (8,031) Contract charges (17,721) (23,153) (14,674) (11,523) (8,792) (11,664) (36,516) Contract terminations: Surrender benefits (805,610) (769,340) (1,194,952) (1,777,156) (673,922) (674,343) (8,710,090) Death benefits (884,333) (220,527) (879,328) (426,007) (292,495) (79,495) (3,529,330) ------------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) from contract transactions 6,290,496 7,666,227 69,582,887 59,462,430 4,000,426 2,392,291 66,799,360 ------------------------------------------------------------------------------------------------------------------------------------ Net assets at beginning of year 42,640,523 32,328,669 46,643,337 32,903,174 20,805,184 22,498,228 216,160,455 ------------------------------------------------------------------------------------------------------------------------------------ Net assets at end of year $ 40,747,930 $ 33,763,120 $120,835,163 $ 95,910,199 $ 20,374,024 $20,243,839 $289,729,276 ==================================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 43,160,879 32,624,409 43,919,764 30,783,302 22,158,834 24,003,237 203,921,835 Contract purchase payments 7,625,134 7,686,234 45,045,501 38,716,653 5,314,026 5,867,959 317,770,845 Net transfers(1) 1,058,740 2,014,717 19,675,405 16,518,832 574,720 (2,553,526) (244,865,486) Transfers for policy loans -- (46,285) -- (59,966) -- (19,854) -- Contract charges (20,805) (27,391) (13,229) (10,334) (11,157) (14,838) (33,798) Contract terminations: Surrender benefits (929,594) (904,763) (1,077,005) (1,594,166) (874,065) (848,811) (8,070,470) Death benefits (997,245) (264,288) (790,563) (385,976) (383,402) (107,334) (3,267,463) ------------------------------------------------------------------------------------------------------------------------------------ Units outstanding at end of year 49,897,109 41,082,633 106,759,873 83,968,345 26,778,956 26,326,833 265,455,463 ====================================================================================================================================
(1) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 65
SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) CM2 DE1 DE2 EM1 EM2 ES1(1) ES2(1) OPERATIONS Investment income (loss) -- net $ 6,693,209 $ 75,573 $ 130,806 $ (7,822) $ (7,440) $ (5,336) $ (4,556) Net realized gain (loss) on sales of investments (5,115) 6,237 (18,579) (23,970) (32,388) (3,305) (755) Distributions from capital gains -- -- -- -- -- -- -- Net change in unrealized appreciation or depreciation of investments (2,181) 318,919 400,925 24,439 30,375 145,238 166,115 ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations 6,685,913 400,729 513,152 (7,353) (9,453) 136,597 160,804 ==================================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 369,657,167 14,054,361 13,752,558 340,551 423,682 1,223,750 1,104,678 Net transfers(2) (281,078,216) 14,212,636 19,259,054 306,917 224,616 865,376 1,222,298 Transfers for policy loans (646,854) -- (45,235) -- 6 -- (2,271) Annuity payments (10,821) (4,776) (15,001) -- -- -- -- Contract charges (34,717) (6,393) (7,748) (325) (388) (51) (93) Contract terminations: Surrender benefits (9,225,653) (479,935) (909,530) (38,486) (15,340) (821) (8,855) Death benefits (913,821) (378,637) (47,949) (3,324) -- (420) -- ------------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) from contract transactions 77,747,085 27,397,256 31,986,149 605,333 632,576 2,087,834 2,315,757 ------------------------------------------------------------------------------------------------------------------------------------ Net assets at beginning of year 182,627,717 14,383,005 12,314,922 510,421 667,909 -- -- ------------------------------------------------------------------------------------------------------------------------------------ Net assets at end of year $267,060,715 $ 42,180,990 $ 44,814,223 $ 1,108,401 $ 1,291,032 $ 2,224,431 $ 2,476,561 ==================================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 171,785,378 14,226,644 12,123,600 693,177 905,842 -- -- Contract purchase payments 341,825,045 13,856,380 13,564,035 474,542 610,461 1,328,039 1,194,587 Net transfers(2) (259,751,737) 14,080,483 18,634,557 437,651 296,013 911,692 1,306,648 Transfers for policy loans (603,310) -- (44,661) -- 8 -- 2,764) Contract charges (31,998) (6,381) (7,724) (495) (585) (55) (98) Contract terminations: Surrender benefits (8,515,673) (485,399) (894,796) (58,645) (22,297) (829) (9,603) Death benefits (837,718) (372,450) (46,843) (4,724) -- (495) -- ------------------------------------------------------------------------------------------------------------------------------------ Units outstanding at end of year 243,869,987 41,299,277 43,328,168 1,541,506 1,789,442 2,238,352 2,488,770 ====================================================================================================================================
(1) For the period May 1, 2001 (commencement of operations) to Dec. 31, 2001. (2) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 66
SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 (CONTINUED) EI1 EI2 FI1 FI2 GB1 GB2 GR1 OPERATIONS Investment income (loss) -- net $ 6,782,428 $ 4,393,097 $ 1,602,320 $ 1,386,303 $ 515,000 $ 374,108 $ (854,224) Net realized gain (loss) on sales of investments (303,977) (160,883) 115,344 105,834 7,743 8,801 (2,571,206) Distributions from capital gains -- -- -- -- -- -- -- Net change in unrealized appreciation or depreciation of investments (4,672,141) (3,021,874) 303,044 183,508 (374,661) (248,055) (33,312,633) ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations 1,806,310 1,210,340 2,020,708 1,675,645 148,082 134,854 (36,738,063) ==================================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 26,521,344 17,068,500 41,951,942 45,451,233 6,302,051 3,913,988 16,856,244 Net transfers(1) 9,620,050 9,900,374 (3,649,829) (5,340,773) 4,226,401 4,150,291 6,551,337 Transfers for policy loans -- (18,715) -- 13,336 -- (7,782) -- Annuity payments (9,476) (7,176) (17,845) (21,104) -- (223) (8,261) Contract charges (12,818) (7,504) (5,991) (4,504) (3,360) (2,027) (50,870) Contract terminations: Surrender benefits (1,051,390) (1,163,675) (1,083,884) (1,246,093) (251,279) (238,993) (1,763,967) Death benefits (777,077) (412,002) (1,132,180) (132,028) (265,966) (49,779) (876,449) ------------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) from contract transactions 34,290,633 25,359,802 36,062,213 38,720,067 10,007,847 7,765,475 20,708,034 ------------------------------------------------------------------------------------------------------------------------------------ Net assets at beginning of year 47,919,805 28,915,641 26,743,478 17,556,373 14,463,486 9,199,006 100,465,370 ------------------------------------------------------------------------------------------------------------------------------------ Net assets at end of year $ 84,016,748 $ 55,485,783 $ 64,826,399 $ 57,952,085 $ 24,619,415 $ 17,099,335 $ 84,435,341 ==================================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 52,654,863 31,722,406 24,654,215 16,257,973 14,136,694 8,967,857 106,410,129 Contract purchase payments 28,119,894 18,004,587 37,617,335 40,630,026 6,194,256 3,840,138 21,363,294 Net transfers(1) 9,999,258 10,328,772 (3,318,511) (5,159,591) 4,148,142 4,053,818 6,683,732 Transfers for policy loans -- (33,737) -- 14,016 -- (6,265) -- Contract charges (13,626) (7,970) (5,337) (4,001) (3,291) (1,972) (71,973) Contract terminations: Surrender benefits (1,120,170) (1,230,737) (970,409) (1,110,127) (245,710) (233,242) (2,419,809) Death benefits (826,853) (435,132) (1,011,495) (118,564) (259,921) (48,247) (1,201,738) ------------------------------------------------------------------------------------------------------------------------------------ Units outstanding at end of year 88,813,366 58,348,189 56,965,798 50,509,732 23,970,170 16,572,087 130,763,635 ====================================================================================================================================
(1) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 67
SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 (CONTINUED) GR2 IE1 IE2 MF1 MF2 ND1 ND2 OPERATIONS Investment income (loss) -- net $ (644,742) $ 37,851 $ 55,628 $ 743,187 $ 605,079 $ (1,772,223) $ (1,077,220) Net realized gain (loss) on sales of investments (2,056,467) (3,129,842) (1,771,542) (532,527) (613,772) (1,450,035) (826,428) Distributions from capital gains -- -- -- -- -- -- -- Net change in unrealized appreciation or depreciation of investments (31,681,624) (1,774,706) (2,564,164) (5,943,562) (4,117,880) (43,582,529) (36,023,903) ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations (34,382,833) (4,866,697) (4,280,078) (5,732,902) (4,126,573) (46,804,787) (37,927,551) ==================================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 22,672,049 2,526,895 3,347,153 12,432,772 10,904,709 59,630,863 69,607,526 Net transfers(1) 5,300,049 322,065 (1,055,780) 2,859,791 436,226 31,815,657 30,242,168 Transfers for policy loans (73,853) -- (2,785) -- (62,185) -- (300,355) Annuity payments (13,230) (5,487) (1,816) (32,558) (28,440) (106,582) (64,007) Contract charges (82,403) (5,833) (7,519) (16,001) (18,959) (122,887) (209,732) Contract terminations: Surrender benefits (1,542,695) (208,700) (528,184) (883,015) (1,016,110) (4,269,471) (4,656,885) Death benefits (577,553) (134,254) (79,529) (1,023,983) (251,211) (3,154,328) (1,242,509) ------------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) from contract transactions 25,682,364 2,494,686 1,671,540 13,337,006 9,964,030 83,793,252 93,376,206 ------------------------------------------------------------------------------------------------------------------------------------ Net assets at beginning of year 92,620,324 14,922,547 13,261,738 42,321,065 30,159,611 235,893,042 190,659,736 ------------------------------------------------------------------------------------------------------------------------------------ Net assets at end of year $ 83,919,855 $ 12,550,536 $ 10,653,200 $ 49,925,169 $ 35,997,068 $272,881,507 $246,108,391 ==================================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 97,753,895 15,669,531 13,967,274 39,809,954 28,347,806 219,315,532 177,036,037 Contract purchase payments 29,129,404 3,247,058 4,307,312 12,624,783 10,883,619 63,685,877 75,517,249 Net transfers(1) 5,493,506 239,461 (1,622,539) 2,672,442 (71,035) 32,657,262 30,544,238 Transfers for policy loans (91,133) -- (4,766) -- (62,503) -- (327,660) Contract charges (119,314) (7,867) (10,211) (16,866) (19,991) (135,276) (234,162) Contract terminations: Surrender benefits (2,109,768) (289,347) (707,757) (933,490) (1,055,709) (4,683,672) (5,097,329) Death benefits (871,044) (194,512) (108,239) (1,060,378) (261,905) (3,519,791) (1,384,427) ------------------------------------------------------------------------------------------------------------------------------------ Units outstanding at end of year 129,185,546 18,664,324 15,821,074 53,096,445 37,760,282 307,319,932 276,053,946 ====================================================================================================================================
(1) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 68
SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 (CONTINUED) IV1 IV2 SC1 SC2 SA1 SA2 1CA OPERATIONS Investment income (loss) -- net $ (8,959) $ 32,791 $ (209,229) $ (151,301) $ (427,976) $ (265,336) $ (472,913) Net realized gain (loss) on sales of investments (266,630) (116,886) (78,014) (102,425) (4,487,060) (2,587,418) (1,299,038) Distributions from capital gains -- -- -- -- -- -- 3,910,723 Net change in unrealized appreciation or depreciation of investments (2,445,276) (1,793,989) (950,703) (831,931) (20,948,920) (18,639,966) (16,687,993) ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations (2,720,865) (1,878,084) (1,237,946) (1,085,657) (25,863,956) (21,492,720) (14,549,221) ==================================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 13,255,005 11,375,665 5,853,998 5,837,161 9,246,850 12,570,125 7,690,204 Net transfers(1) 9,098,862 10,347,928 3,157,833 3,277,581 1,648 887,054 2,731,030 Transfers for policy loans -- (8,382) -- (22,951) -- (42,648) -- Annuity payments (12,768) (4,371) (2,360) (151) (10,453) (9,925) (12,036) Contract charges (5,261) (6,867) (9,334) (10,559) (33,125) (48,827) (25,718) Contract terminations: Surrender benefits (298,965) (302,197) (385,481) (501,925) (913,800) (1,190,958) (777,703) Death benefits (171,996) (92,554) (199,328) (146,546) (471,176) (242,645) (431,767) ------------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) from contract transactions 21,864,877 21,309,222 8,415,328 8,432,610 7,819,944 11,922,176 9,174,010 ------------------------------------------------------------------------------------------------------------------------------------ Net assets at beginning of year 12,868,330 8,897,601 18,980,101 17,246,771 71,088,816 57,335,128 53,974,720 ------------------------------------------------------------------------------------------------------------------------------------ Net assets at end of year $ 32,012,342 $ 28,328,739 $ 26,157,483 $ 24,593,724 $ 53,044,804 $ 47,764,584 $ 48,599,509 ==================================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 14,083,617 9,811,519 16,348,580 14,830,157 58,413,697 46,977,698 46,419,120 Contract purchase payments 16,088,251 13,932,671 5,556,365 5,537,409 9,712,757 13,376,509 7,709,478 Net transfers(1) 11,020,795 12,722,058 3,010,893 3,075,969 (929,954) 114,697 2,267,123 Transfers for policy loans -- (10,599) -- (22,722) -- (51,536) -- Contract charges (6,709) (8,769) (9,009) (10,209) (37,329) (55,627) (27,760) Contract terminations: Surrender benefits (389,780) (375,218) (373,745) (478,787) (1,025,427) (1,350,333) (849,736) Death benefits (221,196) (114,275) (186,586) (139,578) (559,361) (263,638) (474,196) ------------------------------------------------------------------------------------------------------------------------------------ Units outstanding at end of year 40,574,978 35,957,387 24,346,498 22,792,239 65,574,383 58,747,770 55,044,029 ====================================================================================================================================
(1) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 69
SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 (CONTINUED) 2CA 1CD 2CD 1IF 2IF 1VA 2VA OPERATIONS Investment income (loss) -- net $ (319,093) $ (286,740) $ (202,653) $ (224,510) $ (135,113) $ (51,322) $ (4,376) Net realized gain (loss) on sales of investments (717,517) (165,754) (118,474) (492,164) (362,777) 13,715 1,953 Distributions from capital gains 3,518,641 -- -- 2,232,436 1,718,964 -- -- Net change in unrealized appreciation or depreciation of investments (14,555,868) (2,317,737) (2,074,736) (10,672,533) (8,262,861) 4,391,063 3,617,419 ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations (12,073,837) (2,770,231) (2,395,863) (9,156,771) (7,041,787) 4,353,456 3,614,996 ==================================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 10,182,621 4,877,152 6,209,574 6,841,721 6,196,555 9,373,909 8,151,214 Net transfers(1) 3,337,537 3,113,595 2,776,531 5,033,317 3,956,767 14,631,349 15,797,982 Transfers for policy loans (56,341) -- (18,364) -- (2,931) -- (21,749) Annuity payments (2,287) (292) (1,480) (1,865) (3,157) (12,063) (8,386) Contract charges (31,564) (12,121) (15,272) (8,588) (10,169) (11,882) (12,727) Contract terminations: Surrender benefits (707,699) (428,838) (502,045) (263,832) (244,305) (764,491) (464,585) Death benefits (247,349) (182,651) (121,454) (144,706) (38,458) (201,368) (81,108) ------------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) from contract transactions 12,474,918 7,366,845 8,327,490 11,456,047 9,854,302 23,015,454 23,360,641 ------------------------------------------------------------------------------------------------------------------------------------ Net assets at beginning of year 43,547,130 27,199,873 23,283,071 24,406,383 18,555,890 22,777,190 15,805,932 ------------------------------------------------------------------------------------------------------------------------------------ Net assets at end of year $ 43,948,211 $ 31,796,487 $ 29,214,698 $ 26,705,659 $ 21,368,405 $ 50,146,100 $ 42,781,569 ==================================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 37,378,870 19,877,962 16,976,713 20,591,294 15,533,280 21,040,614 14,535,588 Contract purchase payments 10,282,799 3,779,002 4,825,376 6,890,407 6,235,095 8,381,412 7,266,112 Net transfers(1) 3,012,223 2,367,215 2,040,836 5,099,341 4,018,278 12,914,041 13,961,417 Transfers for policy loans (54,006) -- (12,601) -- (3,773) -- (19,521) Contract charges (34,516) (9,871) (12,447) (9,391) (11,085) (10,636) (11,312) Contract terminations: Surrender benefits (753,372) (338,522) (397,070) (284,773) (266,718) (687,343) (412,115) Death benefits (257,519) (144,465) (97,161) (159,747) (45,612) (178,221) (72,626) ------------------------------------------------------------------------------------------------------------------------------------ Units outstanding at end of year 49,574,479 25,531,321 23,323,646 32,127,131 25,459,465 41,459,867 35,247,543 ====================================================================================================================================
(1) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 70
SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 (CONTINUED) 1SR 2SR 1EG 2EG 1GI 2GI 1MP OPERATIONS Investment income (loss) -- net $ 170,068 $ 131,183 $ (244,800) $ (154,115) $ 87,389 $ 207,832 $ (868,573) Net realized gain (loss) on sales of investments (32,915) (15,222) (690,346) (419,450) (189,051) (150,607) 64,910 Distributions from capital gains 98,967 73,349 -- -- 3,308,903 2,707,030 -- Net change in unrealized appreciation or depreciation of investments (464,785) (348,450) (4,339,346) (3,479,378) (11,895,140) (9,677,207) (1,608,347) ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations (228,665) (159,140) (5,274,492) (4,052,943) (8,687,899) (6,912,952) (2,412,010) ==================================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 2,027,795 1,627,761 2,784,232 3,209,162 21,849,736 22,071,084 17,800,677 Net transfers(1) 2,100,155 1,370,419 511,716 (160,835) 19,392,288 17,179,871 13,238,006 Transfers for policy loans -- (15,288) -- (26,465) -- (106,025) -- Annuity payments -- -- (3,369) (2,379) (16,674) (5,716) (9,375) Contract charges (1,091) (2,458) (13,005) (15,474) (38,195) (44,174) (39,447) Contract terminations: Surrender benefits (107,149) (57,223) (531,243) (312,171) (1,258,842) (1,400,193) (1,422,167) Death benefits (14,150) (2,099) (282,676) (55,282) (781,638) (359,374) (830,436) ------------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) from contract transactions 4,005,560 2,921,112 2,465,655 2,636,556 39,146,675 37,335,473 28,737,258 ------------------------------------------------------------------------------------------------------------------------------------ Net assets at beginning of year 1,626,644 1,234,663 29,066,767 22,943,935 77,507,705 63,409,394 79,462,679 ------------------------------------------------------------------------------------------------------------------------------------ Net assets at end of year $ 5,403,539 $ 3,996,635 $ 26,257,930 $ 21,527,548 $107,966,481 $ 93,831,915 $105,787,927 ==================================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 1,692,742 1,282,907 22,624,259 17,824,986 77,558,155 63,413,963 48,251,254 Contract purchase payments 2,218,817 1,779,788 2,537,478 2,979,859 23,565,185 23,874,057 11,734,699 Net transfers(1) 2,315,274 1,513,134 338,353 (259,517) 20,913,598 18,522,930 8,657,167 Transfers for policy loans -- (16,900) -- (22,969) -- (118,042) -- Contract charges (1,219) (2,766) (12,549) (15,003) (42,374) (48,930) (26,201) Contract terminations: Surrender benefits (119,334) (63,819) (514,879) (297,333) (1,390,052) (1,536,185) (937,092) Death benefits (15,831) (2,480) (275,961) (52,278) (868,871) (389,186) (547,990) ------------------------------------------------------------------------------------------------------------------------------------ Units outstanding at end of year 6,090,449 4,489,864 24,696,701 20,157,745 119,735,641 103,718,607 67,131,837 ====================================================================================================================================
(1) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 71
SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 (CONTINUED) 2MP 1OS 2OS 1RE 2RE 1SI 2SI OPERATIONS Investment income (loss) -- net $ (577,666) $ 864,842 $ 767,484 $ 438,336 $ 543,489 $ (45,755) $ (31,465) Net realized gain (loss) on sales of investments (1,402) (418,007) (469,696) 10,478 7,290 104,043 51,980 Distributions from capital gains -- 1,752,330 1,470,501 -- -- 160,532 184,139 Net change in unrealized appreciation or depreciation of investments (761,682) (8,407,070) (6,881,035) 906,281 1,105,161 774,134 856,927 ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations (1,340,750) (6,207,905) (5,112,746) 1,355,095 1,655,940 992,954 1,061,581 ==================================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 19,002,624 5,586,708 5,331,508 8,885,161 10,446,964 4,041,752 4,522,531 Net transfers(1) 15,112,119 3,744,119 3,077,853 8,981,834 12,674,981 4,664,868 5,794,604 Transfers for policy loans (106,082) -- (13,698) -- (27,212) -- (2,027) Annuity payments (9,316) (3,901) (7,819) (1,844) (3,884) (1,810) (1,529) Contract charges (52,074) (9,996) (11,851) (3,956) (3,675) (2,243) (2,860) Contract terminations: Surrender benefits (1,277,979) (321,025) (289,373) (213,105) (294,970) (193,616) (151,486) Death benefits (366,454) (191,769) (47,121) (261,009) (67,577) (82,052) (12,078) ------------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) from contract transactions 32,302,838 8,804,136 8,039,499 17,387,081 22,724,627 8,426,899 10,147,155 ------------------------------------------------------------------------------------------------------------------------------------ Net assets at beginning of year 63,052,291 22,558,219 18,664,093 7,721,569 8,611,678 3,449,583 3,399,162 ------------------------------------------------------------------------------------------------------------------------------------ Net assets at end of year $ 94,014,379 $ 25,154,450 $ 21,590,846 $ 26,463,745 $ 32,992,245 $ 12,869,436 $ 14,607,898 ==================================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 38,192,652 22,910,417 18,802,071 6,181,452 6,879,005 2,896,941 2,846,415 Contract purchase payments 12,501,923 6,296,418 6,055,827 6,986,100 8,159,536 3,191,589 3,562,029 Net transfers(1) 9,889,187 4,192,235 3,414,587 7,011,251 9,745,835 3,715,737 4,524,344 Transfers for policy loans (70,653) -- (15,380) -- (21,550) -- (1,530) Contract charges (34,501) (11,955) (14,238) (3,111) (2,877) (1,779) (2,263) Contract terminations: Surrender benefits (844,541) (394,669) (337,786) (166,798) (230,473) (151,482) (119,134) Death benefits (241,203) (234,250) (55,087) (205,440) (52,626) (67,400) (9,602) ------------------------------------------------------------------------------------------------------------------------------------ Units outstanding at end of year 59,392,864 32,758,196 27,849,994 19,803,454 24,476,850 9,583,606 10,800,259 ====================================================================================================================================
(1) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 72
SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 (CONTINUED) 1IS 2IS 1SE 2SE 1UE 2UE 1MC OPERATIONS Investment income (loss) -- net $ 138,298 $ 111,131 $ (124,796) $ (60,369) $ (273,701) $ (119,452) $ 89,023 Net realized gain (loss) on sales of investments (73,456) (24,576) (62,539) (43,912) (413,490) (226,579) 87,648 Distributions from capital gains -- -- -- -- -- -- 1,516,830 Net change in unrealized appreciation or depreciation of investments (290,146) (221,948) 928,975 723,121 (7,282,490) (5,877,468) 906,258 ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations (225,304) (135,393) 741,640 618,840 (7,969,681) (6,223,499) 2,599,759 ==================================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 987,533 980,296 3,296,460 3,043,608 11,247,637 11,891,552 9,032,982 Net transfers(1) 768,821 1,577,133 1,997,432 1,648,679 5,103,333 5,262,528 10,002,095 Transfers for policy loans -- (7,139) -- (14,568) -- (24,460) -- Annuity payments -- (548) (537) -- (15,794) (7,300) (4,549) Contract charges (2,211) (2,958) (7,533) (8,902) (21,579) (25,706) (6,832) Contract terminations: Surrender benefits (378,557) (54,330) (286,178) (199,741) (953,975) (660,399) (232,786) Death benefits (16,091) (8,169) (209,537) (21,949) (656,027) (223,897) (209,063) ------------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) from contract transactions 1,359,495 2,484,285 4,790,107 4,447,127 14,703,595 16,212,318 18,581,847 ------------------------------------------------------------------------------------------------------------------------------------ Net assets at beginning of year 5,644,937 3,326,898 16,896,746 11,726,585 54,626,689 42,286,180 12,654,338 ------------------------------------------------------------------------------------------------------------------------------------ Net assets at end of year $ 6,779,128 $ 5,675,790 $ 22,428,493 $ 16,792,552 $ 61,360,603 $ 52,274,999 $ 33,835,944 ==================================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 5,681,762 3,340,062 14,808,616 10,251,699 55,239,000 42,626,277 10,264,919 Contract purchase payments 1,018,727 1,010,628 2,907,518 2,694,624 12,436,157 13,184,883 7,058,847 Net transfers(1) 776,253 1,621,994 1,714,386 1,429,810 5,367,228 5,578,691 7,737,981 Transfers for policy loans -- (6,802) -- (13,367) -- (27,757) -- Contract charges (2,331) (3,119) (6,803) (8,050) (24,432) (29,269) (5,370) Contract terminations: Surrender benefits (382,374) (56,800) (256,228) (181,709) (1,083,166) (742,451) (180,113) Death benefits (16,633) (8,568) (193,734) (20,483) (750,081) (247,628) (165,101) ------------------------------------------------------------------------------------------------------------------------------------ Units outstanding at end of year 7,075,404 5,897,395 18,973,755 14,152,524 71,184,706 60,342,746 24,711,163 ====================================================================================================================================
(1) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 73
SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 (CONTINUED) 2MC 1AG 2AG 1GT 2GT 1IG 2IG OPERATIONS Investment income (loss) -- net $ 141,950 $ (213,967) $ (165,701) $ (38,091) $ (10,121) $ (61,998) $ 2,714 Net realized gain (loss) on sales of investments 17,660 (954,494) (1,012,073) (856,608) (393,454) (51,516) (10,053) Distributions from capital gains 1,468,606 -- -- -- -- -- -- Net change in unrealized appreciation or depreciation of investments 801,503 (11,163,908) (10,418,749) (6,499,353) (6,655,709) (8,186,408) (7,319,717) ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations 2,429,719 (12,332,369) (11,596,523) (7,394,052) (7,059,284) (8,299,922) (7,327,056) ==================================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 9,221,589 7,070,397 9,595,746 4,011,029 5,730,228 14,980,212 14,291,665 Net transfers(1) 12,104,964 3,786,959 4,825,193 2,542,755 2,603,897 9,522,379 9,953,694 Transfers for policy loans (15,381) -- (32,177) -- (23,450) -- (49,143) Annuity payments (1,322) (901) (154) (1,091) (2,178) (6,037) (3,479) Contract charges (8,207) (12,507) (24,701) (8,500) (16,036) (11,672) (17,536) Contract terminations: Surrender benefits (329,366) (362,811) (374,946) (315,933) (227,404) (409,006) (388,797) Death benefits (170,149) (182,528) (133,877) (81,265) (101,131) (243,905) (214,976) ------------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) from contract transactions 20,802,128 10,298,609 13,855,084 6,146,995 7,963,926 23,831,971 23,571,428 ------------------------------------------------------------------------------------------------------------------------------------ Net assets at beginning of year 9,404,909 23,694,085 20,857,509 15,683,198 13,879,202 23,432,894 20,660,098 ------------------------------------------------------------------------------------------------------------------------------------ Net assets at end of year $ 32,636,756 $ 21,660,325 $ 23,116,070 $ 14,436,141 $ 14,783,844 $ 38,964,943 $ 36,904,470 ==================================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 7,621,857 33,689,463 29,626,246 22,949,067 20,288,328 29,250,538 25,763,066 Contract purchase payments 7,185,335 12,849,122 17,792,852 7,706,877 10,839,841 22,128,762 21,190,994 Net transfers(1) 9,348,264 6,204,542 8,533,285 4,322,817 4,385,598 13,809,533 14,582,951 Transfers for policy loans (12,103) -- (62,762) -- (45,348) -- (69,969) Contract charges (6,403) (28,129) (56,824) (19,122) (37,533) (19,189) (29,188) Contract terminations: Surrender benefits (256,934) (815,876) (771,506) (733,212) (469,230) (631,010) (598,637) Death benefits (131,864) (399,618) (256,517) (175,952) (194,833) (391,384) (312,190) ------------------------------------------------------------------------------------------------------------------------------------ Units outstanding at end of year 23,748,152 51,499,504 54,804,774 34,050,475 34,766,823 64,147,250 60,527,027 ====================================================================================================================================
(1) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 74
SEGREGATED ASSET SUBACCOUNTS -------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 (CONTINUED) 1IP 2IP 1MG 2MG 1MD 2MD 1IN OPERATIONS Investment income (loss) -- net $ (112,489) $ (70,072) $ (236,686) $ (174,581) $ (217,120) $ (155,358) $ (601,574) Net realized gain (loss) on sales of investments (50,200) (38,721) (163,423) (62,660) (36,363) (26,764) (3,819,710) Distributions from capital gains 40,919 32,329 202,473 193,086 641,417 576,479 -- Net change in unrealized appreciation or depreciation of investments (3,156,967) (2,476,219) (6,873,424) (6,415,382) (884,200) (833,867) (19,249,673) --------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (3,278,737) (2,552,683) (7,071,060) (6,459,537) (496,266) (439,510) (23,670,957) ================================================================================================================================= CONTRACT TRANSACTIONS Contract purchase payments 4,029,595 3,536,625 12,812,258 13,407,756 10,978,441 11,309,994 9,437,729 Net transfers(1) 3,406,698 3,104,721 9,300,911 9,808,312 8,706,484 8,326,647 790,471 Transfers for policy loans -- (4,243) -- (11,334) -- (21,488) -- Annuity payments (5,591) (3,743) (2,646) (3,017) (817) (1,028) (1,783) Contract charges (3,291) (4,305) (8,618) (11,958) (7,125) (11,665) (39,464) Contract terminations: Surrender benefits (154,209) (110,735) (393,028) (308,843) (328,860) (250,725) (1,136,863) Death benefits (127,739) (38,890) (140,271) (129,532) (214,216) (33,747) (967,839) --------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 7,145,463 6,479,430 21,568,606 22,751,384 19,133,907 19,317,988 8,082,251 --------------------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year 10,425,108 7,677,904 19,889,237 17,708,263 14,406,775 11,803,502 74,166,346 --------------------------------------------------------------------------------------------------------------------------------- Net assets at end of year $14,291,834 $ 11,604,651 $34,386,783 $34,000,110 $33,044,416 $30,681,980 $ 58,577,640 ================================================================================================================================= ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 10,774,085 7,957,614 21,973,127 19,520,956 15,060,304 12,307,954 80,679,206 Contract purchase payments 5,051,786 4,394,123 17,264,583 18,104,083 12,549,526 12,741,013 12,591,546 Net transfers(1) 4,255,381 3,706,041 12,582,742 13,220,164 9,841,991 9,389,635 (122,723) Transfers for policy loans -- (5,825) -- (16,378) -- (25,357) -- Contract charges (4,139) (5,461) (12,803) (18,019) (8,555) (14,113) (55,754) Contract terminations: Surrender benefits (188,758) (135,186) (561,954) (428,241) (378,057) (289,439) (1,630,013) Death benefits (160,990) (50,888) (194,392) (171,046) (243,012) (37,360) (1,266,372) --------------------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 19,727,365 15,860,418 51,051,303 50,211,519 36,822,197 34,072,333 90,195,890 =================================================================================================================================
(1) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 75
SEGREGATED ASSET SUBACCOUNTS -------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 (CONTINUED) 2IN 1VS 2VS 1MI 2MI 1SV 2SV OPERATIONS Investment income (loss) -- net $ (396,643) $ (718,809) $ (448,604) $ (272,589) $ (167,060) $ (291,141) $ (177,572) Net realized gain (loss) on sales of investments (1,664,975) (2,011,055) (449,268) 440,008 101,639 20,174 32,855 Distributions from capital gains -- 8,994,193 6,840,074 620,862 525,881 349,655 283,542 Net change in unrealized appreciation or depreciation of investments (17,170,818) (40,243,494) (31,629,377) 5,905,089 4,691,716 3,775,980 3,093,640 --------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (19,232,436) (33,979,165) (25,687,175) 6,693,370 5,152,176 3,854,668 3,232,465 ================================================================================================================================= CONTRACT TRANSACTIONS Contract purchase payments 13,282,018 15,797,036 19,660,439 7,432,765 6,421,377 12,826,643 11,979,830 Net transfers(1) 632,344 6,556,174 6,897,008 11,452,571 13,000,937 20,560,924 19,160,797 Transfers for policy loans (41,201) -- (33,928) -- (885) -- (30,428) Annuity payments (3,578) (11,857) (6,159) (2,751) (410) (2,698) (7,767) Contract charges (51,727) (42,306) (55,900) (8,265) (9,370) (9,272) (9,554) Contract terminations: Surrender benefits (920,580) (1,205,261) (1,021,512) (327,653) (337,469) (496,806) (444,119) Death benefits (215,922) (866,383) (290,696) (300,678) (54,893) (110,826) (91,586) --------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 12,681,354 20,227,403 25,149,252 18,245,989 19,019,287 32,767,965 30,557,173 --------------------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year 58,086,353 88,234,933 64,390,419 16,077,151 10,861,714 17,341,980 12,445,163 --------------------------------------------------------------------------------------------------------------------------------- Net assets at end of year $51,535,271 $ 74,483,171 $63,852,496 $41,016,510 $35,033,177 $53,964,613 $ 46,234,801 ================================================================================================================================= ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 62,963,558 68,406,853 49,764,177 11,880,279 8,005,237 11,523,873 8,231,436 Contract purchase payments 17,778,451 15,971,024 20,196,251 4,797,887 4,123,741 7,984,023 7,418,754 Net transfers(1) (117,182) 5,571,397 6,352,975 7,308,697 8,185,514 12,726,240 11,748,836 Transfers for policy loans (57,262) -- (34,193) -- (889) -- (19,116) Contract charges (73,574) (47,229) (63,132) (5,344) (6,049) (5,797) (5,957) Contract terminations: Surrender benefits (1,298,380) (1,323,108) (1,112,370) (208,089) (215,504) (311,879) (276,236) Death benefits (294,727) (856,572) (284,741) (190,184) (36,056) (68,620) (57,287) --------------------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 78,900,884 87,722,365 74,818,967 23,583,246 20,055,994 31,847,840 27,040,430 =================================================================================================================================
(1) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 76
SEGREGATED ASSET SUBACCOUNTS -------------------------------------------------------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 1IT 2IT 1SP 2SP 1AA(1) 2AA(1) 1WI(1) OPERATIONS Investment income (loss) -- net $ (234,391) $ (163,619) $ (364,004) $ (237,638) $ 10,417 $ 15,248 $ (2,315) Net realized gain (loss) on sales of investments (695,201) (260,443) (2,457) (5,616) (954) (2,140) (5,716) Distributions from capital gains 7,477,081 6,456,348 -- -- 30,669 37,877 -- Net change in unrealized appreciation or depreciation of investments (12,695,973) (11,400,356) 4,610,313 3,898,993 (38,811) (41,304) 5,230 --------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (6,148,484) (5,368,070) 4,243,852 3,655,739 1,321 9,681 (2,801) ================================================================================================================================= CONTRACT TRANSACTIONS Contract purchase payments 5,516,656 6,525,652 10,704,962 10,940,739 1,257,831 1,426,856 602,610 Net transfers(2) 3,132,241 3,196,285 8,497,550 8,429,669 1,871,651 2,273,572 328,552 Transfers for policy loans -- (22,174) -- (29,819) -- (25,507) -- Annuity payments (3,039) (2,146) (7,788) (1,601) -- -- -- Contract charges (11,914) (15,572) (16,721) (20,088) (51) (126) (24) Contract terminations: Surrender benefits (284,371) (385,501) (498,756) (519,636) (9,704) (2,095) (641) Death benefits (232,447) (132,811) (541,875) (112,238) (906) -- (101) --------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 8,117,126 9,163,733 18,137,372 18,687,026 3,118,821 3,672,700 930,396 --------------------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year 23,694,747 19,831,854 31,381,436 25,021,085 -- -- -- --------------------------------------------------------------------------------------------------------------------------------- Net assets at end of year $25,663,389 $ 23,627,517 $53,762,660 $47,363,850 $ 3,120,142 $ 3,682,381 $ 927,595 ================================================================================================================================= ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 21,844,002 18,245,122 29,881,218 23,812,549 -- -- -- Contract purchase payments 5,822,402 6,894,850 9,799,940 10,053,634 1,304,764 1,475,852 668,859 Net transfers(2) 3,201,244 3,288,789 7,725,129 7,550,055 1,929,862 2,352,845 362,750 Transfers for policy loans -- (31,299) -- (28,015) -- (27,305) -- Contract charges (12,672) (16,769) (15,497) (18,584) (53) (133) (28) Contract terminations: Surrender benefits (305,412) (416,135) (452,233) (474,882) (10,000) (2,120) (687) Death benefits (252,570) (146,845) (482,477) (103,275) (1,000) -- (118) -------------------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 30,296,994 27,817,713 46,456,080 40,791,482 3,223,573 3,799,139 1,030,776 ================================================================================================================================
(1) For the period May 1, 2001 (commencement of operations) to Dec. 31, 2001. (2) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 77
SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 2WI(1) 1SG(1) 2SG(1) OPERATIONS Investment income (loss) -- net $ (2,164) $ (4,217) $ (3,924) Net realized gain (loss) on sales of investments (11,145) (1,806) (68,691) Distributions from capital gains -- -- -- Net change in unrealized appreciation or depreciation of investments 4,777 178,064 95,735 ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations (8,532) 172,041 23,120 ==================================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 490,980 1,068,838 856,426 Net transfers(2) 606,011 856,358 1,082,956 Transfers for policy loans (96) -- (113) Annuity payments -- -- -- Contract charges (59) (75) (69) Contract terminations: Surrender benefits (8,255) (1,770) (23,290) Death benefits -- -- -- ------------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) from contract transactions 1,088,581 1,923,351 1,915,910 ------------------------------------------------------------------------------------------------------------------------------------ Net assets at beginning of year -- -- -- ------------------------------------------------------------------------------------------------------------------------------------ Net assets at end of year $ 1,080,049 $ 2,095,392 $ 1,939,030 ==================================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year -- -- -- Contract purchase payments 550,610 1,263,608 986,305 Net transfers(2) 657,790 968,011 1,098,757 Transfers for policy loans (103) -- (120) Contract charges (65) (87) (79) Contract terminations: Surrender benefits (8,652) (1,794) (24,577) Death benefits -- -- -- ------------------------------------------------------------------------------------------------------------------------------------ Units outstanding at end of year 1,199,580 2,229,738 2,060,286 ====================================================================================================================================
(1) For the period May 1, 2001 (commencement of operations) to Dec. 31, 2001. (2) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 78
SEGREGATED ASSET SUBACCOUNTS --------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2000 BC1 BC2 BD1 BD2 CR1 CR2 CM1 CM2 OPERATIONS Investment income (loss) -- net $ (137,750) $ (60,637) $ 1,635,869 $ 1,166,578 $ 2,107,911 $ 2,304,831 $ 7,988,540 $ 6,306,032 Net realized gain (loss) on investments 1,846 4,093 (14,942) (30,866) (8,779) (14,895) (1,787) 337 Net change in unrealized appreciation or depreciation of investments (4,326,209) (3,289,069) 140,047 117,104 (5,529,484) (6,169,309) (28,231) (18,902) ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations (4,462,113) (3,345,613) 1,760,974 1,252,816 (3,430,352) (3,879,373) 7,958,522 6,287,467 ==================================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 23,764,569 18,282,228 33,992,470 23,933,966 16,185,787 17,174,666 511,338,942 408,824,307 Net transfers(1) 15,006,059 9,555,230 (573,143) 921,634 4,552,730 3,703,203 (387,101,335) (295,705,552) Transfers for policy loans -- (43,196) -- (39,684) -- (44,308) -- (357,950) Annuity payments (8,284) (9,634) (7,412) (9,278) (4,315) (5,431) (3,736) (2,452) Contract charges (4,344) (6,375) (2,242) (1,616) (1,749) (2,168) (4,257) (3,949) Contract terminations: Surrender benefits (397,610) (377,266) (214,333) (370,137) (121,324) (468,016) (2,137,918) (2,499,187) Death benefits (301,039) (62,993) (153,983) (76,919) (55,916) (117,983) (2,269,079) (192,508) ------------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) from contract transactions 38,059,351 27,337,994 33,041,357 24,357,966 20,555,213 20,239,963 119,822,617 110,062,709 ------------------------------------------------------------------------------------------------------------------------------------ Net assets at beginning of year 9,043,285 8,336,288 11,841,006 7,292,392 3,680,323 6,137,638 88,379,316 66,277,541 ------------------------------------------------------------------------------------------------------------------------------------ Net assets at end of year $42,640,523 $32,328,669 $46,643,337 $32,903,174 $20,805,184 $22,498,228 $216,160,455 $182,627,717 ==================================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 8,144,701 7,503,378 11,675,134 7,185,953 3,227,001 5,332,889 87,424,293 65,522,124 Contract purchase payments 21,932,154 16,870,196 33,382,251 23,455,801 15,014,134 15,801,556 493,785,128 393,971,272 Net transfers(1) 13,756,565 8,712,061 (777,547) 616,059 4,090,977 3,461,259 (373,059,223) (284,786,220) Transfers for policy loans -- (39,819) -- (40,717) -- (41,192) -- (345,711) Contract charges (4,269) (6,264) (2,154) (1,549) (1,811) (2,226) (4,041) (3,739) Contract terminations: Surrender benefits (376,074) (355,689) (209,562) (359,100) (117,462) (438,756) (2,060,595) (2,389,429) Death benefits (292,198) (59,454) (148,358) (73,145) (54,005) (110,293) (2,163,727) (182,919) ------------------------------------------------------------------------------------------------------------------------------------ Units outstanding at end of year 43,160,879 32,624,409 43,919,764 30,783,302 22,158,834 24,003,237 203,921,835 171,785,378 ====================================================================================================================================
(1) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 79
SEGREGATED ASSET SUBACCOUNTS -------------------------------------------------------------------------------------------------------- PERIOD ENDED DECEMBER 31, 2000 (CONTINUED) DE1 DE2 EM1(1) EM2(1) EI1 EI2 FI1 FI2 OPERATIONS Investment income (loss) -- net $ 10,219 $ 26,795 $ (1,617) $ (1,802) $ 3,021,440 $ 1,850,388 $ 902,715 $ 712,167 Net realized gain (loss) on investments (7,564) 13,048 (19,466) (3,573) (78,559) (40,375) (10,748) 1,548 Net change in unrealized appreciation or depreciation of investments 198,443 186,759 (74,733) (136,743) (6,946,096) (4,125,416) 680,388 434,232 ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations 201,098 226,602 (95,816) (142,118) (4,003,215) (2,315,403) 1,572,355 1,147,947 ==================================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 6,919,030 6,425,243 406,609 493,078 33,322,614 19,626,411 30,478,995 24,330,508 Net transfers(2) 3,947,485 2,650,660 205,089 318,565 8,727,073 4,202,350 (17,694,324) (18,749,417) Transfers for policy loans -- (12,156) -- -- -- (40,312) -- (62,016) Annuity payments (2,039) (3,322) -- -- (4,146) (2,457) (13,079) -- Contract charges (1,629) (1,974) -- (2) (2,270) (1,400) (1,178) (962) Contract terminations: Surrender benefits (93,143) (202,440) (5,461) (1,614) (277,002) (410,034) (288,372) (233,890) Death benefits (117,603) -- -- -- (92,960) (10,754) (137,937) (44,818) ------------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) from contract transactions 10,652,101 8,856,011 606,237 810,027 41,673,309 23,363,804 12,344,105 5,239,405 ------------------------------------------------------------------------------------------------------------------------------------ Net assets at beginning of year 3,529,806 3,232,309 -- -- 10,249,711 7,867,240 12,827,018 11,169,021 ------------------------------------------------------------------------------------------------------------------------------------ Net assets at end of year $14,383,005 $12,314,922 $ 510,421 $ 667,909 $47,919,805 $28,915,641 $ 26,743,478 $ 17,556,373 ==================================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 3,440,938 3,149,027 -- -- 10,137,005 7,774,094 12,795,965 11,135,246 Contract purchase payments 7,046,083 6,576,869 463,728 538,949 34,115,644 20,141,925 29,733,980 23,745,241 Net transfers(2) 3,956,159 2,616,404 236,623 368,853 8,792,036 4,289,699 (17,462,716) (18,292,659) Transfers for policy loans -- (12,444) -- -- -- (40,782) -- (58,306) Contract charges (1,666) (2,013) -- (2) (2,443) (1,505) (1,113) (905) Contract terminations: Surrender benefits (95,073) (204,243) (7,174) (1,958) (287,825) (429,253) (279,782) (226,176) Death benefits (119,797) -- -- -- (99,554) (11,772) (132,119) (44,468) ------------------------------------------------------------------------------------------------------------------------------------ Units outstanding at end of year 14,226,644 12,123,600 693,177 905,842 52,654,863 31,722,406 24,654,215 16,257,973 ====================================================================================================================================
(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. 80
SEGREGATED ASSET SUBACCOUNTS -------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2000 (CONTINUED) GB1 GB2 GR1 GR2 IE1 IE2 MF1 MF2 OPERATIONS Investment income (loss) -- net $ 125,084 $ 89,811 $ (589,709) $ (440,666) $ 2,777,536 $ 2,549,160 $ 2,914,309 $ 2,185,907 Net realized gain (loss) on investments (14,792) (4,110) (55,924) (57,656) (41,065) (29,675) 2,918 (2,345) Net change in unrealized appreciation or depreciation of investments 440,640 283,081 (27,219,777) (24,275,703) (5,770,944) (5,409,322) (4,600,109) (3,305,313) ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations 550,932 368,782 (27,865,410) (24,774,025) (3,034,473) (2,889,837) (1,682,882) (1,121,751) ==================================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 8,373,656 4,266,881 76,168,425 67,703,884 10,964,924 9,515,063 28,761,252 20,835,146 Net transfers(1) 3,272,943 3,126,228 36,726,326 30,903,431 4,338,169 3,743,160 8,456,160 5,311,056 Transfers for policy loans -- (9,285) -- (228,830) -- (22,923) -- (63,667) Annuity payments -- -- (6,268) (13,812) (5,000) (542) (16,368) (12,213) Contract charges (661) (358) (10,584) (15,418) (1,176) (1,739) (3,127) (3,548) Contract terminations: Surrender benefits (68,686) (99,557) (527,907) (814,895) (88,501) (345,711) (215,184) (387,327) Death benefits (33,277) (7,312) (311,855) (95,668) (17,295) (15,270) (86,982) (76,094) ------------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) from contract transactions 11,543,975 7,276,597 112,038,137 97,438,692 15,191,121 12,872,038 36,895,751 25,603,353 ------------------------------------------------------------------------------------------------------------------------------------ Net assets at beginning of year 2,368,579 1,553,627 16,292,643 19,955,657 2,765,899 3,279,537 7,108,196 5,678,009 ------------------------------------------------------------------------------------------------------------------------------------ Net assets at end of year $14,463,486 $ 9,199,006 $100,465,370 $92,620,324 $14,922,547 $13,261,738 $42,321,065 $ 30,159,611 ==================================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 2,367,731 1,552,116 13,812,928 16,891,257 2,173,305 2,575,364 6,539,086 5,220,299 Contract purchase payments 8,539,237 4,344,433 62,897,160 56,097,853 9,834,975 8,407,740 26,215,669 19,010,662 Net transfers(1) 3,334,507 3,191,297 30,424,453 25,747,329 3,764,831 3,328,678 7,337,223 4,604,463 Transfers for policy loans -- (10,534) -- (191,381) -- (20,274) -- (58,186) Contract charges (670) (366) (10,101) (14,707) (1,221) (1,802) (2,943) (3,339) Contract terminations: Surrender benefits (70,326) (101,723) (448,836) (689,722) (84,922) (308,955) (196,871) (355,255) Death benefits (33,785) (7,366) (265,475) (86,734) (17,437) (13,477) (82,210) (70,838) ------------------------------------------------------------------------------------------------------------------------------------ Units outstanding at end of year 14,136,694 8,967,857 106,410,129 97,753,895 15,669,531 13,967,274 39,809,954 28,347,806 ====================================================================================================================================
(1) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 81
SEGREGATED ASSET SUBACCOUNTS ---------------------------------------------------------------------------------------------------------- PERIOD ENDED DECEMBER 31, 2000 (CONTINUED) ND1 ND2 IV1(1) IV2(1) SC1 SC2 SA1 SA2 OPERATIONS Investment income (loss) -- net $ 15,073,832 $ 12,412,760 $ 18,131 $ 19,676 $ 434,218 $ 419,360 $ 22,074,227 $ 17,896,272 Net realized gain (loss) on investments 9,959 (852) 2,457 (10,979) 14,831 8,262 (83,288) (19,881) Net change in unrealized appreciation or depreciation of investments (42,940,933) (34,388,546) (1,034,516) (737,714) (488,462) (440,495) (41,540,687) (33,274,335) ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations (27,857,142) (21,976,638) (1,013,928) (729,017) (39,413) (12,873) (19,549,748) (15,397,944) ==================================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 153,264,585 126,490,526 9,090,510 6,059,805 8,877,713 8,424,738 58,379,023 47,198,948 Net transfers(2) 74,382,380 52,424,517 4,821,117 3,595,378 6,905,822 5,706,614 26,788,613 19,917,539 Transfers for policy loans -- (426,171) -- (3,120) -- (37,004) -- (149,340) Annuity payments (62,960) (946,600) (1,927) (2,270) (2,054) -- (9,183) (10,261) Contract charges (27,473) (42,218) (166) (106) (2,791) (3,019) (4,331) (4,867) Contract terminations: Surrender benefits (1,593,217) (2,118,910) (27,276) (23,069) (127,250) (168,626) (262,343) (845,251) Death benefits (844,012) (299,859) -- -- (36,700) (3,904) (159,428) (145,553) ------------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) from contract transactions 225,119,303 175,081,285 13,882,258 9,626,618 15,614,740 13,918,799 84,732,351 65,961,215 ------------------------------------------------------------------------------------------------------------------------------------ Net assets at beginning of year 38,630,881 37,555,089 3,404,774 3,340,845 5,906,213 6,771,857 ------------------------------------------------------------------------------------------------------------------------------------ Net assets at end of year $235,893,042 $190,659,736 $12,868,330 $8,897,601 $18,980,101 $17,246,771 $ 71,088,816 $ 57,335,128 ==================================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 32,482,584 31,537,411 -- -- 3,029,109 2,970,291 3,901,133 4,470,245 Contract purchase payments 128,097,615 104,560,427 9,341,110 6,182,669 7,571,974 7,192,984 37,493,016 30,484,412 Net transfers(2) 60,852,100 43,380,357 4,771,871 3,656,757 5,893,700 4,846,964 17,308,002 12,777,015 Transfers for policy loans -- (356,486) -- (3,152) -- (31,736) -- (98,284) Contract charges (24,795) (38,035) (177) (114) (2,453) (2,646) (3,286) (3,725) Contract terminations: Surrender benefits (1,369,867) (1,790,099) (29,187) (24,641) (111,932) (142,338) (180,704) (554,374) Death benefits (722,105) (257,538) -- -- (31,818) (3,362) (104,464) (97,591) ------------------------------------------------------------------------------------------------------------------------------------ Units outstanding at end of year 219,315,532 177,036,037 14,083,617 9,811,519 16,348,580 14,830,157 58,413,697 46,977,698 ====================================================================================================================================
(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. 82
SEGREGATED ASSET SUBACCOUNTS ---------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2000 (CONTINUED) 1CA 2CA 1CD 2CD 1IF 2IF 1VA 2VA OPERATIONS Investment income (loss) -- net $ 1,145,796 $ 982,215 $ (132,792) $ (87,998) $ (5,937) $ 16,451 $ 209,425 $ 206,145 Net realized gain (loss) on investments 14,965 18,187 32,541 5,716 31,803 (6,740) 1,654 15,454 Net change in unrealized appreciation or depreciation of investments (11,543,606) (9,214,814) (249,937) (141,104) (3,316,489) (2,372,235) 3,278,126 2,265,702 ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations (10,382,845) (8,214,412) (350,188) (223,386) (3,290,623) (2,362,524) 3,489,205 2,487,301 ==================================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 37,912,325 30,892,917 15,536,354 13,107,126 15,852,365 11,574,676 9,988,940 7,290,732 Net transfers(1) 20,329,123 15,602,473 9,802,190 8,451,514 9,008,192 6,944,215 5,199,931 2,846,034 Transfers for policy loans -- (83,117) -- (39,352) -- (29,818) -- (13,999) Annuity payments (7,327) (2,869) (154) -- (1,579) (2,002) (4,460) (4,866) Contract charges (4,760) (5,243) (1,399) (1,888) (1,299) (1,636) (2,926) (3,357) Contract terminations: Surrender benefits (460,999) (276,127) (65,051) (112,956) (87,274) (101,312) (86,689) (160,625) Death benefits (187,626) (65,552) (113,843) (20,015) (83,522) (41,645) (199,111) (1,171) ------------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) from contract transactions 57,580,736 46,062,482 25,158,097 21,384,429 24,686,883 18,342,478 14,895,685 9,952,748 ------------------------------------------------------------------------------------------------------------------------------------ Net assets at beginning of year 6,776,829 5,699,060 2,391,964 2,122,028 3,010,123 2,575,936 4,392,300 3,365,883 ------------------------------------------------------------------------------------------------------------------------------------ Net assets at end of year $ 53,974,720 $43,547,130 $27,199,873 $23,283,071 $24,406,383 $18,555,890 $22,777,190 $15,805,932 ==================================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 5,159,901 4,336,748 1,892,365 1,677,796 2,093,734 1,790,650 4,774,965 3,656,963 Contract purchase payments 27,171,093 22,178,403 11,120,131 9,364,434 11,872,533 8,717,556 11,015,541 8,081,439 Net transfers(1) 14,559,087 11,180,551 6,993,951 6,060,848 6,762,730 5,160,036 5,548,598 2,983,811 Transfers for policy loans -- (60,989) -- (29,595) -- (22,984) -- (15,419) Contract charges (3,760) (4,159) (1,031) (1,401) (1,107) (1,388) (2,928) (3,332) Contract terminations: Surrender benefits (342,005) (201,712) (46,998) (80,608) (69,423) (75,709) (95,856) (166,719) Death benefits (125,196) (49,972) (80,456) (14,761) (67,173) (34,881) (199,706) (1,155) ------------------------------------------------------------------------------------------------------------------------------------ Units outstanding at end of year 46,419,120 37,378,870 19,877,962 16,976,713 20,591,294 15,533,280 21,040,614 14,535,588 ====================================================================================================================================
(1) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 83
SEGREGATED ASSET SUBACCOUNTS ---------------------------------------------------------------------------------------------------------- PERIOD ENDED DECEMBER 31, 2000 (CONTINUED) 1SR(1) 2SR(1) 1EG 2EG 1GI 2GI 1MP 2MP OPERATIONS Investment income (loss) -- net $ 71,489 $ 56,082 $ (154,398) $ (87,302) $ 1,654,030 $ 1,540,132 $ (95,441) $ (3,269) Net realized gain (loss) on investments (6,456) 465 13,480 (646) (21,625) (1,135) 314,381 133,298 Net change in unrealized appreciation or depreciation of investments (153,855) (121,139) (2,905,126) (2,277,864) (3,505,242) (3,027,281) 8,021,374 6,512,946 ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations (88,822) (64,592) (3,046,044) (2,365,812) (1,872,837) (1,488,284) 8,240,314 6,642,975 ==================================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 1,289,161 687,688 17,397,125 14,390,785 39,036,308 33,200,601 40,221,667 32,453,353 Net transfers(2) 430,428 613,750 11,082,905 8,685,599 22,575,239 16,147,865 23,081,209 17,416,208 Transfers for policy loans -- -- -- (34,648) -- (94,679) -- (70,428) Annuity payments -- -- (1,925) (1,109) (7,884) (3,946) (3,655) (5,343) Contract charges (58) (10) (2,039) (2,282) (11,499) (14,692) (6,720) (8,147) Contract terminations: Surrender benefits (4,065) (2,173) (136,034) (139,176) (426,957) (554,084) (423,862) (428,239) Death benefits -- -- (4,835) (9,481) (722,620) (88,912) (262,480) (57,712) ------------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) from contract transactions 1,715,466 1,299,255 28,335,197 22,889,688 60,442,587 48,592,153 62,606,159 49,299,692 ------------------------------------------------------------------------------------------------------------------------------------ Net assets at beginning of year -- -- 3,777,614 2,420,059 18,937,955 16,305,525 8,616,206 7,109,624 ------------------------------------------------------------------------------------------------------------------------------------ Net assets at end of year $1,626,644 $1,234,663 $29,066,767 $22,943,935 $77,507,705 $63,409,394 $79,462,679 $63,052,291 ==================================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year -- -- 2,872,085 1,838,182 18,137,421 15,602,831 6,945,013 5,709,401 Contract purchase payments 1,279,827 679,859 12,101,902 10,099,410 38,489,150 32,732,730 26,656,014 21,491,707 Net transfers(2) 417,159 605,264 7,751,555 6,018,658 22,063,107 15,817,982 15,096,260 11,356,558 Transfers for policy loans -- -- -- (24,964) -- (93,147) -- (48,549) Contract charges (60) (11) (1,563) (1,738) (11,371) (14,494) (4,256) (5,151) Contract terminations: Surrender benefits (4,184) (2,205) (96,207) (97,156) (419,641) (543,389) (276,529) (275,464) Death benefits -- -- (3,513) (7,406) (700,511) (88,550) (165,248) (35,850) ------------------------------------------------------------------------------------------------------------------------------------ Units outstanding at end of year 1,692,742 1,282,907 22,624,259 17,824,986 77,558,155 63,413,963 48,251,254 38,192,652 ====================================================================================================================================
(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. 84
SEGREGATED ASSET SUBACCOUNTS ---------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2000 (CONTINUED) 1OS 2OS 1RE 2RE 1SI 2SI 1IS 2IS OPERATIONS Investment income (loss) -- net $ 520,266 $ 526,853 $ 199,972 $ 227,293 $ (13,442) $ (9,939) $ 23,905 $ 16,080 Net realized gain (loss) on investments (10,090) (26,779) 17,458 3,282 7,701 13,754 (4,572) 16,236 Net change in unrealized appreciation or depreciation of investments (4,223,086) (3,655,445) 661,796 803,098 513,025 529,496 (226,320) (125,910) ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations (3,712,910) (3,155,371) 879,226 1,033,673 507,284 533,311 (206,987) (93,594) ==================================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 13,014,175 11,503,716 3,952,923 3,899,779 1,442,777 1,828,647 2,953,260 1,802,817 Net transfers(1) 9,061,377 6,293,089 2,258,641 2,874,014 959,546 527,889 1,857,992 742,507 Transfers for policy loans -- (40,353) -- (10,828) -- (1,443) -- (987) Annuity payments (2,445) (5,235) (267) -- (819) -- -- (157) Contract charges (2,794) (3,226) (449) (396) (316) (672) (585) (820) Contract terminations: Surrender benefits (117,876) (109,296) (12,250) (30,402) (19,536) (52,353) (19,576) (22,571) Death benefits (111,023) (17,184) (10,858) (2,465) (6,520) -- (8,453) (11,865) ------------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) from contract transactions 21,841,414 17,621,511 6,187,740 6,729,702 2,375,132 2,302,068 4,782,638 2,508,924 ------------------------------------------------------------------------------------------------------------------------------------ Net assets at beginning of year 4,429,715 4,197,953 654,603 848,303 567,167 563,783 1,069,286 911,568 ------------------------------------------------------------------------------------------------------------------------------------ Net assets at end of year $22,558,219 $18,664,093 $7,721,569 $8,611,678 $3,449,583 $3,399,162 $5,644,937 $3,326,898 ==================================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 3,611,816 3,420,658 683,371 885,005 589,712 585,846 1,052,855 897,107 Contract purchase payments 11,538,119 10,132,251 3,508,774 3,524,645 1,403,557 1,815,524 2,855,730 1,749,169 Net transfers(1) 7,978,406 5,402,392 2,009,204 2,508,608 928,982 495,490 1,801,276 729,339 Transfers for policy loans -- (35,553) -- (9,747) -- (1,658) -- (947) Contract charges (2,766) (3,190) (381) (335) (283) (599) (599) (839) Contract terminations: Surrender benefits (110,698) (98,778) (10,637) (26,504) (18,847) (48,188) (19,045) (22,141) Death benefits (104,460) (15,709) (8,879) (2,667) (6,180) -- (8,455) (11,626) ------------------------------------------------------------------------------------------------------------------------------------ Units outstanding at end of year 22,910,417 18,802,071 6,181,452 6,879,005 2,896,941 2,846,415 5,681,762 3,340,062 ====================================================================================================================================
(1) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 85
SEGREGATED ASSET SUBACCOUNTS -------------------------------------------------------------------------------------------------------- PERIOD ENDED DECEMBER 31, 2000 (CONTINUED) 1SE 2SE 1UE 2UE 1MC 2MC 1AG(1) 2AG(1) OPERATIONS Investment income (loss) -- net $ 452,915 $ 329,908 $ 290,460 $ 279,759 $ 328,682 $ 253,753 $ 565,126 $ 503,283 Net realized gain (loss) on investments 41,688 9,711 1,951 4,031 5,022 27,521 (640) (22,454) Net change in unrealized appreciation or depreciation of investments (565,608) (395,443) (5,350,726) (4,153,158) 2,037,404 1,576,246 (8,958,931) (7,851,214) ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations (71,005) (55,824) (5,058,315) (3,869,368) 2,371,108 1,857,520 (8,394,445) (7,370,385) ==================================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 8,556,361 6,187,997 31,450,468 23,356,744 5,581,765 4,323,098 19,719,536 17,792,313 Net transfers(2) 5,656,386 3,574,181 18,054,876 13,324,785 2,934,164 1,801,312 12,414,037 10,545,108 Transfers for policy loans -- (12,055) -- (54,607) -- (4,651) -- (8,212) Annuity payments -- -- (14,132) (8,973) (1,478) -- (315) (72) Contract charges (1,869) (2,228) (6,259) (8,594) (1,365) (2,090) (394) (519) Contract terminations: Surrender benefits (63,060) (86,356) (460,586) (279,402) (47,829) (72,494) (41,357) (100,576) Death benefits (197,137) (3,897) (292,486) (87,361) (99,129) (47,254) (2,977) (148) ------------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) from contract transactions 13,950,681 9,657,642 48,731,881 36,242,592 8,366,128 5,997,921 32,088,530 28,227,894 ------------------------------------------------------------------------------------------------------------------------------------ Net assets at beginning of year 3,017,070 2,124,767 10,953,123 9,912,956 1,917,102 1,549,468 -- -- ------------------------------------------------------------------------------------------------------------------------------------ Net assets at end of year $16,896,746 $11,726,585 $54,626,689 $42,286,180 $12,654,338 $9,404,909 $23,694,085 $20,857,509 ==================================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 2,665,253 1,876,209 9,951,016 8,980,927 2,022,724 1,633,700 -- -- Contract purchase payments 7,433,137 5,389,993 29,410,374 21,760,426 5,578,158 4,347,757 20,701,093 18,660,005 Net transfers(2) 4,929,761 3,074,477 16,601,824 12,292,142 2,807,401 1,763,950 13,039,697 11,083,574 Transfers for policy loans -- (9,771) -- (54,229) -- (5,399) -- (6,571) Contract charges (1,681) (2,001) (6,140) (8,424) (1,210) (1,846) (506) (657) Contract terminations: Surrender benefits (55,438) (73,794) (440,143) (262,271) (46,056) (70,045) (47,050) (109,930) Death benefits (162,416) (3,414) (277,931) (82,294) (96,098) (46,260) (3,771) (175) ------------------------------------------------------------------------------------------------------------------------------------ Units outstanding at end of year 14,808,616 10,251,699 55,239,000 42,626,277 10,264,919 7,621,857 33,689,463 29,626,246 ====================================================================================================================================
(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. 86
SEGREGATED ASSET SUBACCOUNTS -------------------------------------------------------------------------------------------------------- PERIOD ENDED DECEMBER 31, 2000 (CONTINUED) 1GT(1) 2GT(1) 1IG(1) 2IG(1) 1IP 2IP 1MG(1) 2MG(1) OPERATIONS Investment income (loss) -- net $ 32,980 $ 43,385 $ 281,509 $ 218,277 $ 78,010 $ 67,728 $ (53,060) $ (36,190) Net realized gain (loss) on investments (350) (296) (769) (1,343) (13,861) 2,785 1,462 911 Net change in unrealized appreciation or depreciation of investments (6,102,593) (5,323,753) (3,790,882) (3,172,600) (696,508) (488,384) (1,845,328) (1,613,693) ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations (6,069,963) (5,280,664) (3,510,142) (2,955,666) (632,359) (417,871) (1,896,926) (1,648,972) ==================================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 13,079,329 12,016,400 17,043,299 14,453,043 5,063,347 3,525,833 13,529,884 11,502,788 Net transfers(2) 8,703,686 7,224,295 9,951,347 9,246,483 3,368,099 2,526,300 8,298,424 7,899,234 Transfers for policy loans -- (6,137) -- (16,973) -- (16,787) -- (3,324) Annuity payments (510) (2,036) (2,015) (962) (4,560) (718) (1,210) (678) Contract charges (363) (497) (402) (436) (1,125) (1,479) (312) (320) Contract terminations: Surrender benefits (28,981) (72,012) (39,014) (65,089) (36,673) (59,555) (28,853) (40,299) Death benefits -- (147) (10,179) (302) (12,522) -- (11,770) (166) ------------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) from contract transactions 21,753,161 19,159,866 26,943,036 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 $15,683,198 $13,879,202 $23,432,894 $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 13,879,649 12,717,378 18,615,165 15,860,027 5,054,668 3,552,383 13,664,336 11,627,815 Net transfers(2) 9,104,508 7,659,033 10,691,941 9,997,949 3,267,413 2,504,169 8,350,749 7,941,404 Transfers for policy loans -- (5,110) -- (19,123) -- (16,540) -- (6,030) Contract charges (456) (626) (474) (519) (1,200) (1,575) (334) (337) Contract terminations: Surrender benefits (34,634) (82,173) (44,984) (74,917) (38,291) (61,941) (29,061) (41,724) Death benefits -- (174) (11,110) (351) (12,908) -- (12,563) (172) ------------------------------------------------------------------------------------------------------------------------------------ Units outstanding at end of year 22,949,067 20,288,328 29,250,538 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. 87
SEGREGATED ASSET SUBACCOUNTS ---------------------------------------------------------------------------------------------------------- PERIOD ENDED DECEMBER 31, 2000 (CONTINUED) 1MD(1) 2MD(1) 1IN 2IN 1VS 2VS 1MI 2MI OPERATIONS Investment income (loss) -- net $ (33,251) $ (23,336) $ 1,234,781 $ 924,636 $ (184,812) $ (58,688) $ 359,397 $ 256,448 Net realized gain (loss) on investments 6,802 (19) 91,156 (6,751) 36,979 4,936 4,295 922 Net change in unrealized appreciation or depreciation of investments (585,813) (537,226) (33,589,774) (25,001,224) (12,849,879) (9,356,658) 1,127,185 722,335 ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations (612,262) (560,581) (32,263,837) (24,083,339) (12,997,712) (9,410,410) 1,490,877 979,705 ==================================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 9,057,790 7,183,959 63,237,946 50,474,223 61,158,735 46,135,956 8,045,911 5,024,496 Net transfers(2) 5,971,464 5,213,858 31,481,372 23,090,908 30,908,317 21,375,164 4,485,978 3,516,553 Transfers for policy loans -- (8,708) -- (104,938) -- (125,709) -- (7,681) Annuity payments (314) (207) (2,401) (2,563) (10,343) (9,344) (201) -- Contract charges (121) (116) (5,719) (6,920) (6,219) (8,801) (1,124) (1,087) Contract terminations: Surrender benefits (9,782) (24,703) (516,501) (440,486) (401,214) (469,221) (55,480) (65,737) Death benefits -- -- (173,202) (45,334) (233,972) (15,237) (62,242) -- ------------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) from contract transactions 15,019,037 12,364,083 94,021,495 72,964,890 91,415,304 66,882,808 12,412,842 8,466,544 ------------------------------------------------------------------------------------------------------------------------------------ Net assets at beginning of year -- -- 12,408,688 9,204,802 9,817,341 6,918,021 2,173,432 1,415,465 ------------------------------------------------------------------------------------------------------------------------------------ Net assets at end of year $14,406,775 $11,803,502 $ 74,166,346 $ 58,086,353 $ 88,234,933 $64,390,419 $16,077,151 $10,861,714 ==================================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year -- -- 8,199,597 6,078,883 7,245,003 5,083,557 1,886,045 1,227,570 Contract purchase payments 9,129,121 7,166,706 48,279,810 39,098,739 40,890,381 30,821,933 6,491,856 4,035,458 Net transfers(2) 5,941,258 5,173,774 24,802,025 18,294,616 20,708,656 14,282,651 3,593,857 2,800,365 Transfers for policy loans -- (7,506) -- (83,680) -- (86,365) -- (6,195) Contract charges (128) (120) (5,866) (7,144) (4,539) (6,448) (866) (836) Contract terminations: Surrender benefits (9,947) (24,900) (446,560) (380,476) (276,589) (320,332) (43,314) (51,125) Death benefits -- -- (149,800) (37,380) (156,059) (10,819) (47,299) -- ------------------------------------------------------------------------------------------------------------------------------------ Units outstanding at end of year 15,060,304 12,307,954 80,679,206 62,963,558 68,406,853 49,764,177 11,880,279 8,005,237 ====================================================================================================================================
(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. 88
SEGREGATED ASSET SUBACCOUNTS --------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2000 (CONTINUED) 1SV 2SV 1IT 2IT 1SP 2SP OPERATIONS Investment income (loss) -- net $ (63,657) $ (34,417) $ 758,460 $ 638,937 $ 1,024,343 $ 799,548 Net realized gain (loss) on investments 14,185 11,000 (22,743) (950) (15,012) (8,450) Net change in unrealized appreciation or depreciation of investments 3,163,520 2,303,581 (9,801,825) (7,734,272) (1,188,467) (774,100) ---------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 3,114,048 2,280,164 (9,066,108) (7,096,285) (179,136) 16,998 ============================================================================================================================ CONTRACT TRANSACTIONS Contract purchase payments 7,507,153 4,735,494 20,661,018 16,690,783 19,601,878 15,451,815 Net transfers(1) 4,594,336 3,445,060 10,197,285 8,651,164 9,008,521 6,975,569 Transfers for policy loans -- (5,716) -- (41,721) -- (49,608) Annuity payments (91) (373) (646) (2,482) (3,039) (378) Contract charges (1,505) (1,696) (1,302) (1,354) (1,702) (2,074) Contract terminations: Surrender benefits (63,956) (26,542) (96,455) (229,843) (144,237) (202,261) Death benefits (16,738) (7,287) (31,021) (6,304) (32,873) (18,991) ---------------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 12,019,199 8,138,940 30,728,879 25,060,243 28,428,548 22,154,072 ---------------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year 2,208,733 2,026,059 2,031,976 1,867,896 3,132,024 2,850,015 ---------------------------------------------------------------------------------------------------------------------------- Net assets at end of year $17,341,980 $12,445,163 $23,694,747 $19,831,854 $ 31,381,436 $25,021,085 ============================================================================================================================ ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 2,043,367 1,873,052 1,342,920 1,233,713 2,723,041 2,476,379 Contract purchase payments 5,872,170 3,722,888 13,655,035 11,277,668 18,816,189 14,915,435 Net transfers(1) 3,670,340 2,658,892 6,943,900 5,948,499 8,519,816 6,688,350 Transfers for policy loans -- (5,142) -- (32,453) -- (48,680) Contract charges (1,082) (1,214) (1,154) (1,195) (1,694) (2,067) Contract terminations: Surrender benefits (47,544) (12,025) (71,362) (175,205) (142,955) (198,038) Death benefits (13,378) (5,015) (25,337) (5,905) (33,179) (18,830) ---------------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 11,523,873 8,231,436 21,844,002 18,245,122 29,881,218 23,812,549 ============================================================================================================================
(1) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 89 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 open-end management investment companies and have the following investment managers.
SUBACCOUNT INVESTS EXCLUSIVELY IN SHARES OF INVESTMENT MANAGER ------------------------------------------------------------------------------------------------------------------------ BC1 AXP(R) Variable Portfolio - Blue Chip Advantage Fund IDS Life Insurance Company(1) BC2 BD1 AXP(R) Variable Portfolio - Bond Fund IDS Life Insurance Company(1) BD2 CR1 AXP(R) Variable Portfolio - Capital Resource Fund IDS Life Insurance Company(1) CR2 CM1 AXP(R) Variable Portfolio - Cash Management Fund IDS Life Insurance Company(1) CM2 DE1 AXP(R) Variable Portfolio - Diversified Equity Income Fund IDS Life Insurance Company(1) DE2 EM1 AXP(R) Variable Portfolio - Emerging Markets Fund IDS Life Insurance Company(2) EM2 ES1 AXP(R) Variable Portfolio - Equity Select Fund IDS Life Insurance Company(1) ES2 EI1 AXP(R) Variable Portfolio - Extra Income Fund IDS Life Insurance Company(1) EI2 FI1 AXP(R) Variable Portfolio - Federal Income Fund IDS Life Insurance Company(1) FI2 GB1 AXP(R) Variable Portfolio - Global Bond Fund IDS Life Insurance Company(1) GB2 GR1 AXP(R) Variable Portfolio - Growth Fund IDS Life Insurance Company(1) GR2 IE1 AXP(R) Variable Portfolio - International Fund IDS Life Insurance Company(2) IE2 MF1 AXP(R) Variable Portfolio - Managed Fund IDS Life Insurance Company(1) MF2 ND1 AXP(R) Variable Portfolio - NEW DIMENSIONS FUND(R) IDS Life Insurance Company(1) ND2 IV1 AXP(R) Variable Portfolio - S&P 500 Index Fund IDS Life Insurance Company(1) IV2 SC1 AXP(R) Variable Portfolio - Small Cap Advantage Fund IDS Life Insurance Company(3) SC2 SA1 AXP(R) Variable Portfolio - Strategy Aggressive Fund IDS Life Insurance Company(1) SA2 1CA AIM V.I. Capital Appreciation Fund, Series I A I M Advisors, Inc. 2CA 1CD AIM V.I. Capital Development Fund, Series I A I M Advisors, Inc. 2CD 1IF American Century(R) VP International American Century Investment Management, Inc. 2IF 1VA American Century(R) VP Value American Century Investment Management, Inc. 2VA 1SR Calvert Variable Series, Inc. Social Balanced Portfolio Calvert Asset Management Company, Inc.(4) 2SR 1EG Credit Suisse Trust - Emerging Growth Portfolio Credit Suisse Asset Management, LLC 2EG 90 SUBACCOUNT INVESTS EXCLUSIVELY IN SHARES OF INVESTMENT MANAGER ------------------------------------------------------------------------------------------------------------------------------------ 1GI Fidelity VIP Growth & Income Portfolio (Service Class) Fidelity Management & Research Company (FMR)(5) 2GI 1MP Fidelity VIP Mid Cap Portfolio (Service Class) Fidelity Management & Research Company (FMR)(5) 2MP 1OS Fidelity VIP Overseas Portfolio (Service Class) Fidelity Management & Research Company (FMR)(6) 2OS 1RE FTVIPT Franklin Real Estate Fund - Class 2 Franklin Advisers, Inc. 2RE 1SI FTVIPT Franklin Small Cap Value Securities Fund - Class 2 Franklin Advisory Services, LLC 2SI (previously FTVIPT Franklin Value Securities Fund - Class 2) 1IS FTVIPT Templeton International Smaller Companies Fund - Class 2(7) Templeton Investment Counsel, LLC 2IS 1SE Goldman Sachs VIT CORE(SM) Small Cap Equity Fund Goldman Sachs Asset Management 2SE 1UE Goldman Sachs VIT CORE(SM) U.S. Equity Fund Goldman Sachs Asset Management 2UE 1MC Goldman Sachs VIT Mid Cap Value Fund Goldman Sachs Asset Management 2MC 1AG Janus Aspen Series Aggressive Growth Portfolio: Service Shares Janus Capital 2AG 1GT Janus Aspen Series Global Technology Portfolio: Service Shares Janus Capital 2GT 1IG Janus Aspen Series International Growth Portfolio: Service Shares Janus Capital 2IG 1IP Lazard Retirement International Equity Portfolio Lazard Asset Management 2IP 1MG MFS(R) Investors Growth Stock Series - Service Class MFS Investment Management(R) 2MG 1MD MFS(R) New Discovery Series - Service Class MFS Investment Management(R) 2MD 1IN Putnam VT International New Opportunities Fund - Class IB Shares Putnam Investment Management, LLC 2IN 1VS Putnam VT Vista Fund - Class IB Shares Putnam Investment Management, LLC 2VS 1MI Royce Micro-Cap Portfolio Royce & Associates, LLC 2MI 1SV Third Avenue Value Portfolio EQSF Advisers, Inc. 2SV 1IT Wanger International Small Cap Liberty Wanger Asset Management, L.P. 2IT 1SP Wanger U.S. Smaller Companies Liberty Wanger Asset Management, L.P. 2SP (previously Wanger U.S. Small Cap) 1AA Wells Fargo VT Asset Allocation Fund Wells Fargo Funds Management, LLC(8) 2AA 1WI Wells Fargo VT International Equity Fund Wells Fargo Funds Management, LLC(8) 2WI 1SG Wells Fargo VT Small Cap Growth Fund Wells Fargo Funds Management, LLC(8) 2SG
(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-adviser. (3) AEFC is the investment adviser. Kenwood Capital Management LLC is the sub-adviser. (4) SSgA Funds Management, Inc. and Brown Capital Management are the investement sub-advisers. (5) FMR U.K. and FMR Far East are the sub-investment advisers. (6) FMR U.K., FMR Far East, Fidelity International Investment Advisors (FIIA) and FIIA U.K. are the sub-investment advisers. (7) FTVIPT Templeton International Smaller Companies Fund - Class 2 merged into FTVIPT Foreign Securities Fund - Class 2 as of April 30, 2002. (8) Wells Capital Management Incorporated is the sub-adviser. 91 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. 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. VARIABLE PAYOUT Net assets allocated to contracts in the payout period are periodically compared to a computation which uses the Annuity 2000 Basic Mortality Table and which assumes future mortality improvement. The assumed investment return is 5% unless the annuitant elects otherwise, in which case the rate would be 3.5%, as regulated by the laws of the respective states. The mortality risk is fully borne by IDS Life and may result in additional amounts being transferred into the variable annuity account by IDS Life to cover greater longevity of annuitants than expected. Conversely, if amounts allocated exceed amounts required, transfers may be made to the insurance company. 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. VARIABLE ACCOUNT EXPENSES 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. IDS Life deducts a daily mortality and expense risk fee equal, on an annual basis, to 0.75% or 0.95% of the average daily net assets of each subaccount, depending on the contract option selected. 4. CONTRACT CHARGES IDS Life deducts a contract administrative charge of $30 per year. This charge reimburses IDS Life for expenses incurred in establishing and maintaining the annuity records. Certain products may waive this charge based upon the underlying contract value. 5.SURRENDER CHARGES IDS Life will use a surrender charge to help it recover certain expenses related to the sale of the annuity. A surrender charge of up to 8% may be deducted for surrenders up to the first ten payment years following a purchase payment, as depicted in the surrender charge schedule included in the applicable product's prospectus. Charges by IDS Life for surrenders are not identified on an individual segregated asset account basis. Charges for all segregated asset accounts amounted to $19,059,480 in 2001 and $18,285,051 in 2000. Such charges are not treated as a separate expense of the subaccounts. They are ultimately deducted from contract surrender benefits paid by IDS Life. 92 6. RELATED PARTY TRANSACTIONS Management fees were paid indirectly to IDS Life in its capacity as investment manager for the AXP(R) Variable Portfolio Funds. The Fund's Investment Management Agreement provides for a fee at a percentage of each Fund's average daily net assets in reducing percentages annually as follows:
FUND PERCENTAGE RANGE ----------------------------------------------------------------------------------------------------------------------- AXP(R) Variable Portfolio - Blue Chip Advantage Fund 0.560% to 0.470% AXP(R) Variable Portfolio - Bond Fund 0.610% to 0.535% AXP(R) Variable Portfolio - Capital Resource Fund 0.630% to 0.570% AXP(R) Variable Portfolio - Cash Management Fund 0.510% to 0.440% AXP(R) Variable Portfolio - Diversified Equity Income Fund 0.560% to 0.470% AXP(R) Variable Portfolio - Emerging Markets Fund 1.170% to 1.095% AXP(R) Variable Portfolio - Equity Select Fund 0.650% to 0.560% AXP(R) Variable Portfolio - Extra Income Fund 0.620% to 0.545% AXP(R) Variable Portfolio - Federal Income Fund 0.610% to 0.535% AXP(R) Variable Portfolio - Global Bond Fund 0.840% to 0.780% AXP(R) Variable Portfolio - Growth Fund 0.630% to 0.570% AXP(R) Variable Portfolio - International Fund 0.870% to 0.795% AXP(R) Variable Portfolio - Managed Fund 0.630% to 0.550% AXP(R) Variable Portfolio - NEW DIMENSIONS FUND(R) 0.630% to 0.570% AXP(R) Variable Portfolio - S&P 500 Index Fund 0.290% to 0.260% AXP(R) Variable Portfolio - Small Cap Advantage Fund 0.790% to 0.650% AXP(R) Variable Portfolio - Strategy Aggressive Fund 0.650% to 0.575% -----------------------------------------------------------------------------------------------------------------------
IDS Life, in turn, pays to AEFC, an affiliate of IDS Life, a fee based on a percentage of each Fund's average daily net assets for the year. This fee is equal to 0.35% for AXP(R) Variable Portfolio - International Fund and AXP(R) Variable Portfolio - S&P 500 Index Fund and 0.25% for each remaining Fund. The AXP(R) Variable Portfolio Funds also have an agreement with IDS Life for distribution services. Under a Plan and Agreement of Distribution, each Fund pays a distribution fee at an annual rate up to 0.125% of each Fund's average daily net assets. The AXP(R) Variable Portfolio Funds have an Administrative Services Agreement with AEFC. Under this agreement, each Fund pays AEFC a fee for administration and accounting services at a percentage of each Fund's average daily net assets in reducing percentages annually as follows:
FUND PERCENTAGE RANGE ----------------------------------------------------------------------------------------------------------------------- AXP(R) Variable Portfolio - Blue Chip Advantage Fund 0.040% to 0.020% AXP(R) Variable Portfolio - Bond Fund 0.050% to 0.025% AXP(R) Variable Portfolio - Capital Resource Fund 0.050% to 0.030% AXP(R) Variable Portfolio - Cash Management Fund 0.030% to 0.020% AXP(R) Variable Portfolio - Diversified Equity Income Fund 0.040% to 0.020% AXP(R) Variable Portfolio - Emerging Markets Fund 0.100% to 0.050% AXP(R) Variable Portfolio - Equity Select Fund 0.060% to 0.030% AXP(R) Variable Portfolio - Extra Income Fund 0.050% to 0.025% AXP(R) Variable Portfolio - Federal Income Fund 0.050% to 0.025% AXP(R) Variable Portfolio - Global Bond Fund 0.060% to 0.040% AXP(R) Variable Portfolio - Growth Fund 0.050% to 0.030% AXP(R) Variable Portfolio - International Fund 0.060% to 0.035% AXP(R) Variable Portfolio - Managed Fund 0.040% to 0.020% AXP(R) Variable Portfolio - NEW DIMENSIONS FUND(R) 0.050% to 0.030% AXP(R) Variable Portfolio - S&P 500 Index Fund 0.080% to 0.065% AXP(R) Variable Portfolio - Small Cap Advantage Fund 0.060% to 0.035% AXP(R) Variable Portfolio - Strategy Aggressive Fund 0.060% to 0.035% -----------------------------------------------------------------------------------------------------------------------
The AXP(R) Variable Portfolio Funds pay custodian fees to American Express Trust Company, an affiliate of IDS Life. 93 7. INVESTMENT IN SHARES The subaccounts' investments in shares of the Funds as of Dec. 31, 2001 were as follows:
SUBACCOUNT INVESTMENT SHARES NAV ------------------------------------------------------------------------------------------------------------------------------------ BC1 AXP(R) Variable Portfolio - Blue Chip Advantage Fund 4,978,008 $ 8.19 BC2 4,123,794 8.19 BD1 AXP(R) Variable Portfolio - Bond Fund 11,453,301 10.47 BD2 9,117,143 10.47 CR1 AXP(R) Variable Portfolio - Capital Resource Fund 939,661 21.69 CR2 933,588 21.69 CM1 AXP(R) Variable Portfolio - Cash Management Fund 287,316,788 1.00 CM2 266,316,180 1.00 DE1 AXP(R) Variable Portfolio - Diversified Equity Income Fund 4,159,687 10.10 DE2 4,431,607 10.10 EM1 AXP(R) Variable Portfolio - Emerging Markets Fund 149,388 7.41 EM2 174,369 7.41 ES1 AXP(R) Variable Portfolio - Equity Select Fund 217,462 10.16 ES2 243,488 10.16 EI1 AXP(R) Variable Portfolio - Extra Income Fund 12,697,285 6.57 EI2 8,362,801 6.57 FI1 AXP(R) Variable Portfolio - Federal Income Fund 6,263,989 10.33 FI2 5,535,927 10.33 GB1 AXP(R) Variable Portfolio - Global Bond Fund 2,556,527 9.55 GB2 1,774,962 9.55 GR1 AXP(R) Variable Portfolio - Growth Fund 12,978,972 6.51 GR2 12,892,886 6.51 IE1 AXP(R) Variable Portfolio - International Fund 1,551,751 8.10 IE2 1,315,663 8.10 MF1 AXP(R) Variable Portfolio - Managed Fund 3,239,902 15.42 MF2 2,334,619 15.42 ND1 AXP(R) Variable Portfolio - NEW DIMENSIONS FUND(R) 17,093,707 15.97 ND2 15,400,343 15.97 IV1 AXP(R) Variable Portfolio - S&P 500 Index Fund 4,073,157 7.82 IV2 3,606,273 7.82 SC1 AXP(R) Variable Portfolio - Small Cap Advantage Fund 2,500,214 10.47 SC2 2,349,328 10.47 SA1 AXP(R) Variable Portfolio - Strategy Aggressive Fund 6,360,882 8.34 SA2 5,725,049 8.34 1CA AIM V.I. Capital Appreciation Fund, Series I 2,237,546 21.72 2CA 2,023,398 21.72 1CD AIM V.I. Capital Development Fund, Series I 2,663,022 11.94 2CD 2,446,792 11.94 1IF American Century(R) VP International 4,052,452 6.59 2IF 3,242,550 6.59 1VA American Century(R) VP Value 6,740,067 7.44 2VA 5,750,211 7.44 1SR Calvert Variable Series, Inc. Social Balanced Portfolio 3,070,193 1.76 2SR 2,270,816 1.76 1EG Credit Suisse Trust - Emerging Growth Portfolio 2,442,598 10.75 2EG 2,002,563 10.75 1GI Fidelity VIP Growth & Income Portfolio (Service Class) 8,229,153 13.12 2GI 7,151,823 13.12 1MP Fidelity VIP Mid Cap Portfolio (Service Class) 5,413,916 19.54 2MP 4,811,381 19.54 1OS Fidelity VIP Overseas Portfolio (Service Class) 1,818,832 13.83 2OS 1,561,160 13.83 94 SUBACCOUNT INVESTMENT SHARES NAV ------------------------------------------------------------------------------------------------------------------------------------ 1RE FTVIPT Franklin Real Estate Fund - Class 2 1,471,025 $ 17.99 2RE 1,833,921 17.99 1SI FTVIPT Franklin Small Cap Value Securities Fund - Class 2 1,181,766 10.89 2SI (previously FTVIPT Franklin Value Securities Fund - Class 2) 1,341,405 10.89 1IS FTVIPT Templeton International Smaller Companies Fund - Class 2 669,213 10.13 2IS 560,295 10.13 1SE Goldman Sachs VIT CORE(SM) Small Cap Equity Fund 2,069,049 10.84 2SE 1,549,128 10.84 1UE Goldman Sachs VIT CORE(SM) U.S. Equity Fund 5,608,830 10.94 2UE 4,778,336 10.94 1MC Goldman Sachs VIT Mid Cap Value Fund 2,996,984 11.29 2MC 2,890,767 11.29 1AG Janus Aspen Series Aggressive Growth Portfolio: Service Shares 996,794 21.73 2AG 1,063,786 21.73 1GT Janus Aspen Series Global Technology Portfolio: Service Shares 3,538,270 4.08 2GT 3,623,491 4.08 1IG Janus Aspen Series International Growth Portfolio: Service Shares 1,672,315 23.30 2IG 1,583,883 23.30 1IP Lazard Retirement International Equity Portfolio 1,572,259 9.09 2IP 1,276,639 9.09 1MG MFS(R) Investors Growth Stock Series - Service Class 3,556,027 9.67 2MG 3,516,040 9.67 1MD MFS(R) New Discovery Series - Service Class 2,171,118 15.22 2MD 2,015,899 15.22 1IN Putnam VT International New Opportunities Fund - Class IB Shares 6,007,963 9.75 2IN 5,285,669 9.75 1VS Putnam VT Vista Fund - Class IB Shares 6,568,181 11.34 2VS 5,630,732 11.34 1MI Royce Micro-Cap Portfolio 4,557,390 9.00 2MI 3,892,575 9.00 1SV Third Avenue Value Portfolio 3,150,298 17.13 2SV 2,699,054 17.13 1IT Wanger International Small Cap 1,666,454 15.40 2IT 1,534,254 15.40 1SP Wanger U.S. Smaller Companies 2,416,299 22.25 2SP (previously Wanger U.S. Small Cap) 2,128,712 22.25 1AA Wells Fargo VT Asset Allocation Fund 252,459 12.32 2AA 298,895 12.32 1WI Wells Fargo VT International Equity Fund 123,679 7.50 2WI 144,006 7.50 1SG Wells Fargo VT Small Cap Growth Fund 266,929 7.85 2SG 247,010 7.85
95 8. INVESTMENT TRANSACTIONS The subaccounts' purchases of the Funds' shares, including reinvestment of dividend distributions, for the year ended Dec. 31, 2001 were as follows:
SUBACCOUNT INVESTMENT PURCHASES ---------------------------------------------------------------------------------------------------------------- BC1 AXP(R) Variable Portfolio - Blue Chip Advantage Fund $ 9,730,729 BC2 9,345,485 BD1 AXP(R) Variable Portfolio - Bond Fund 74,378,460 BD2 64,018,370 CR1 AXP(R) Variable Portfolio - Capital Resource Fund 6,123,203 CR2 5,205,160 CM1 AXP(R) Variable Portfolio - Cash Management Fund 136,036,279 CM2 156,169,973 DE1 AXP(R) Variable Portfolio - Diversified Equity Income Fund 27,716,708 DE2 32,691,012 EM1 AXP(R) Variable Portfolio - Emerging Markets Fund 734,933 EM2 785,812 ES1(1) AXP(R) Variable Portfolio - Equity Select Fund 2,269,769 ES2(1) 2,330,770 EI1 AXP(R) Variable Portfolio - Extra Income Fund 43,103,613 EI2 30,829,441 FI1 AXP(R) Variable Portfolio - Federal Income Fund 42,673,918 FI2 45,602,214 GB1 AXP(R) Variable Portfolio - Global Bond Fund 10,853,292 GB2 8,794,757 GR1 AXP(R) Variable Portfolio - Growth Fund 23,721,644 GR2 28,506,847 IE1 AXP(R) Variable Portfolio - International Fund 7,743,252 IE2 4,123,423 MF1 AXP(R) Variable Portfolio - Managed Fund 16,647,377 MF2 13,230,889 ND1 AXP(R) Variable Portfolio - NEW DIMENSIONS FUND(R) 86,961,867 ND2 95,031,149 IV1 AXP(R) Variable Portfolio - S&P 500 Index Fund 23,311,366 IV2 22,126,125 SC1 AXP(R) Variable Portfolio - Small Cap Advantage Fund 9,164,777 SC2 9,220,820 SA1 AXP(R) Variable Portfolio - Strategy Aggressive Fund 11,509,683 SA2 14,080,627 1CA AIM V.I. Capital Appreciation Fund, Series I 14,998,133 2CA 17,003,508 1CD AIM V.I. Capital Development Fund, Series I 8,458,840 2CD 9,112,862 1IF American Century(R) VP International 14,407,923 2IF 12,176,996 1VA American Century(R) VP Value 23,211,075 2VA 23,406,576 1SR Calvert Variable Series, Inc. Social Balanced Portfolio 4,684,202 2SR 3,292,743 1EG Credit Suisse Trust - Emerging Growth Portfolio 4,245,081 2EG 3,696,812 1GI Fidelity VIP Growth & Income Portfolio (Service Class) 43,467,929 2GI 41,093,499 1MP Fidelity VIP Mid Cap Portfolio (Service Class) 30,210,032 2MP 32,292,151 1OS Fidelity VIP Overseas Portfolio (Service Class) 12,281,669 2OS 11,314,999 96 SUBACCOUNT INVESTMENT PURCHASES 1RE FTVIPT Franklin Real Estate Fund - Class 2 $18,043,557 2RE 23,412,180 1SI FTVIPT Franklin Small Cap Value Securities Fund - Class 2 9,269,299 2SI (previously FTVIPT Franklin Value Securities Fund - Class 2) 10,879,115 1IS FTVIPT Templeton International Smaller Companies Fund - Class 2 2,268,955 2IS 2,792,280 1SE Goldman Sachs VIT CORE(SM) Small Cap Equity Fund 5,520,160 2SE 4,897,009 1UE Goldman Sachs VIT CORE(SM) U.S. Equity Fund 16,164,320 2UE 17,171,862 1MC Goldman Sachs VIT Mid Cap Value Fund 20,870,617 2MC 22,606,561 1AG Janus Aspen Series Aggressive Growth Portfolio: Service Shares 11,049,782 2AG 14,840,087 1GT Janus Aspen Series Global Technology Portfolio: Service Shares 6,942,376 2GT 8,419,474 1IG Janus Aspen Series International Growth Portfolio: Service Shares 23,921,118 2IG 23,598,573 1IP Lazard Retirement International Equity Portfolio 7,273,820 2IP 6,676,168 1MG MFS(R) Investors Growth Stock Series - Service Class 22,122,737 2MG 22,995,294 1MD MFS(R) New Discovery Series - Service Class 19,855,129 2MD 19,940,318 1IN Putnam VT International New Opportunities Fund - Class IB Shares 11,938,594 2IN 14,244,078 1VS Putnam VT Vista Fund - Class IB Shares 31,154,568 2VS 32,082,927 1MI Royce Micro-Cap Portfolio 22,024,034 2MI 20,454,604 1SV Third Avenue Value Portfolio 33,127,159 2SV 31,032,513 1IT Wanger International Small Cap 16,288,871 2IT 15,789,248 1SP Wanger U.S. Smaller Companies 18,136,144 2SP (previously Wanger U.S. Small Cap) 18,555,976 1AA(1) Wells Fargo VT Asset Allocation Fund 3,199,606 2AA(1) 3,754,382 1WI(1) Wells Fargo VT International Equity Fund 1,017,127 2WI(1) 1,187,676 1SG(1) Wells Fargo VT Small Cap Growth Fund 1,939,776 2SG(1) 2,160,538 ----------------------------------------------------------------------------------------------------------------
(1) Operations commenced on May 1, 2001. 97 9. FINANCIAL HIGHLIGHTS The table below shows certain financial information regarding the subaccounts.
BC1 BC2 BD1 BD2 CR1 CR2 CM1 CM2 DE1 DE2 ----------------------------------------------------------------------------------------------------------- AT DEC. 31, 2000 Accumulation unit value $ 0.98 $ 0.99 $ 1.06 $ 1.06 $ 0.93 $ 0.93 $ 1.06 $ 1.06 $ 1.01 $ 1.01 ----------------------------------------------------------------------------------------------------------------------------------- AT DEC. 31, 2001 Accumulation unit value $ 0.81 $ 0.82 $ 1.13 $ 1.13 $ 0.76 $ 0.76 $ 1.09 $ 1.09 $ 1.02 $ 1.02 Units (000s) 49,897 41,083 106,760 83,968 26,779 26,327 265,455 243,870 41,299 43,328 Net assets (000s) $ 40,748 $ 33,763 $120,835 $ 95,910 $ 20,374 $ 20,244 $289,729 $267,061 $42,181 $44,814 ----------------------------------------------------------------------------------------------------------------------------------- FOR THE YEAR ENDED DEC. 31, 2001 Investment income(1) 0.75% 0.75% 6.38% 6.38% 0.31% 0.30% 3.57% 3.55% 1.26% 1.26% Expense ratio(2) 0.95% 0.75% 0.95% 0.75% 0.95% 0.75% 0.95% 0.75% 0.95% 0.75% Total return(3) (17.35%) (17.17%) 6.60% 6.60% (18.28%) (18.28%) 2.83% 2.83% 0.99% 0.99% ----------------------------------------------------------------------------------------------------------------------------------- EM1 EM2 ES1(4) ES2(4) EI1 EI2 FI1 FI2 GB1 GB2 ----------------------------------------------------------------------------------------------------------- AT DEC. 31, 2000 Accumulation unit value $ 0.74 $ 0.74 -- -- $ 0.91 $ 0.91 $ 1.08 $ 1.08 $ 1.02 $ 1.03 ----------------------------------------------------------------------------------------------------------------------------------- AT DEC. 31, 2001 Accumulation unit value $ 0.72 $ 0.72 $ 0.99 $ 1.00 $ 0.94 $ 0.95 $ 1.13 $ 1.14 $ 1.03 $ 1.03 Units (000s) 1,542 1,789 2,238 2,489 88,813 58,348 56,966 50,510 23,970 16,572 Net assets (000s) $ 1,108 $ 1,291 $ 2,224 $ 2,477 $ 84,017 $ 55,486 $ 64,826 $ 57,952 $24,619 $17,099 ----------------------------------------------------------------------------------------------------------------------------------- FOR THE YEAR ENDED DEC. 31, 2001 Investment income(1) 0.02% 0.02% -- -- 10.93% 10.92% 4.55% 4.52% 3.58% 3.62% Expense ratio(2) 0.95% 0.75% 0.95% 0.75% 0.95% 0.75% 0.95% 0.75% 0.95% 0.75% Total return(3) (2.70%) (2.70%) (1.00%) 0.00% 3.30% 4.40% 4.63% 5.56% 0.98% 0.00% ----------------------------------------------------------------------------------------------------------------------------------- GR1 GR2 IE1 IE2 MF1 MF2 ND1 ND2 IV1 IV2 ----------------------------------------------------------------------------------------------------------- AT DEC. 31, 2000 Accumulation unit value $ 0.94 $ 0.95 $ 0.95 $ 0.95 $ 1.05 $ 1.05 $ 1.07 $ 1.07 $ 0.91 $ 0.91 ----------------------------------------------------------------------------------------------------------------------------------- AT DEC. 31, 2001 Accumulation unit value $ 0.64 $ 0.65 $ 0.67 $ 0.67 $ 0.93 $ 0.94 $ 0.88 $ 0.89 $ 0.79 $ 0.79 Units (000s) 130,764 129,186 18,664 15,821 53,096 37,760 307,320 276,054 40,575 35,957 Net assets (000s) $ 84,435 $ 83,920 $ 12,551 $ 10,653 $ 49,925 $ 35,997 $272,882 $246,108 $32,012 $28,329 ----------------------------------------------------------------------------------------------------------------------------------- FOR THE YEAR ENDED DEC. 31, 2001 Investment income(1) -- -- 1.23% 1.23% 2.53% 2.53% 0.23% 0.24% 0.91% 0.93% Expense ratio(2) 0.95% 0.75% 0.95% 0.75% 0.95% 0.75% 0.95% 0.75% 0.95% 0.75% Total return(3) (31.91%) (31.58%) (29.47%) (29.47%) (11.43%) (10.48%) (17.76%) (16.82%) (13.19%) (13.19%) ----------------------------------------------------------------------------------------------------------------------------------- SC1 SC2 SA1 SA2 1CA 2CA 1CD 2CD 1IF 2IF ----------------------------------------------------------------------------------------------------------- AT DEC. 31, 2000 Accumulation unit value $ 1.16 $ 1.16 $ 1.21 $ 1.22 $ 1.16 $ 1.16 $ 1.37 $ 1.37 $ 1.18 $ 1.19 ----------------------------------------------------------------------------------------------------------------------------------- AT DEC. 31, 2001 Accumulation unit value $ 1.07 $ 1.08 $ 0.81 $ 0.81 $ 0.88 $ 0.88 $ 1.25 $ 1.25 $ 0.83 $ 0.83 Units (000s) 24,346 22,792 65,574 58,748 55,044 49,574 25,531 23,324 32,127 25,459 Net assets (000s) $ 26,157 $ 24,594 $ 53,045 $ 47,765 $ 48,600 $ 43,948 $ 31,796 $ 29,215 $26,706 $21,368 ----------------------------------------------------------------------------------------------------------------------------------- FOR THE YEAR ENDED DEC. 31, 2001 Investment income(1) -- -- 0.21% 0.21% -- -- -- -- 0.08% 0.08% Expense ratio(2) 0.95% 0.75% 0.95% 0.75% 0.95% 0.75% 0.95% 0.75% 0.95% 0.75% Total return(3) (7.76%) (6.90%) (33.06%) (33.61%) (24.14%) (24.14%) (8.76%) (8.76%) (29.66%) (30.25%) ----------------------------------------------------------------------------------------------------------------------------------- 98 1VA 2VA 1SR 2SR 1EG 2EG 1GI 2GI 1MP 2MP ----------------------------------------------------------------------------------------------------------- AT DEC. 31, 2000 Accumulation unit value $ 1.08 $ 1.08 $ 0.96 $ 0.96 $ 1.28 $ 1.29 $ 1.00 $ 1.00 $ 1.64 $ 1.65 ----------------------------------------------------------------------------------------------------------------------------------- AT DEC. 31, 2001 Accumulation unit value $ 1.20 $ 1.21 $ 0.89 $ 0.89 $ 1.06 $ 1.07 $ 0.90 $ 0.90 $ 1.57 $ 1.58 Units (000s) 41,460 35,248 6,090 4,490 24,697 20,158 119,736 103,719 67,132 59,393 Net assets (000s) $ 50,146 $ 42,782 $ 5,404 $ 3,997 $ 26,258 $ 21,528 $107,966 $ 93,832 $105,788 $94,014 ----------------------------------------------------------------------------------------------------------------------------------- FOR THE YEAR ENDED DEC. 31, 2001 Investment income(1) 0.82% 0.74% 5.84% 5.83% -- -- 1.05% 1.02% -- -- Expense ratio(2) 0.95% 0.75% 0.95% 0.75% 0.95% 0.75% 0.95% 0.75% 0.95% 0.75% Total return(3) 11.11% 12.04% (7.29%) (7.29%) (17.19%) (17.05%) (10.00%) (10.00%) (4.27%) (4.24%) ----------------------------------------------------------------------------------------------------------------------------------- 1OS 2OS 1RE 2RE 1SI 2SI 1IS 2IS 1SE 2SE ----------------------------------------------------------------------------------------------------------- AT DEC. 31, 2000 Accumulation unit value $ 0.98 $ 0.98 $ 1.25 $ 1.25 $ 1.19 $ 1.19 $ 0.99 $ 1.00 $ 1.14 $ 1.14 ----------------------------------------------------------------------------------------------------------------------------------- AT DEC. 31, 2001 Accumulation unit value $ 0.77 $ 0.77 $ 1.33 $ 1.34 $ 1.34 $ 1.35 $ 0.96 $ 0.96 $ 1.18 $ 1.19 Units (000s) 32,758 27,850 19,803 24,477 9,584 10,800 7,075 5,897 18,974 14,153 Net assets (000s) $ 25,154 $ 21,591 $ 26,464 $ 32,992 $ 12,869 $ 14,608 $ 6,779 $ 5,676 $ 22,428 $16,793 ----------------------------------------------------------------------------------------------------------------------------------- FOR THE YEAR ENDED DEC. 31, 2001 Investment income(1) 4.49% 4.51% 3.69% 3.61% 0.36% 0.38% 3.21% 3.24% 0.32% 0.33% Expense ratio(2) 0.95% 0.75% 0.95% 0.75% 0.95% 0.75% 0.95% 0.75% 0.95% 0.75% Total return(3) (21.43%) (21.43%) 6.40% 7.20% 12.61% 13.45% (3.03%) (4.00%) 3.51% 4.39% ----------------------------------------------------------------------------------------------------------------------------------- 1UE 2UE 1MC 2MC 1AG 2AG 1GT 2GT 1IG 2IG ----------------------------------------------------------------------------------------------------------- AT DEC. 31, 2000 Accumulation unit value $ 0.99 $ 0.99 $ 1.23 $ 1.23 $ 0.70 $ 0.70 $ 0.68 $ 0.68 $ 0.80 $ 0.80 ----------------------------------------------------------------------------------------------------------------------------------- AT DEC. 31, 2001 Accumulation unit value $ 0.86 $ 0.86 $ 1.37 $ 1.37 $ 0.42 $ 0.42 $ 0.42 $ 0.43 $ 0.61 $ 0.61 Units (000s) 71,185 60,343 24,711 23,748 51,500 54,805 34,050 34,767 64,147 60,527 Net assets (000s) $ 61,361 $ 52,275 $ 33,836 $ 32,637 $ 21,660 $ 23,116 $ 14,436 $ 14,784 $ 38,965 $36,904 ----------------------------------------------------------------------------------------------------------------------------------- FOR THE YEAR ENDED DEC. 31, 2001 Investment income(1) 0.48% 0.50% 1.38% 1.51% -- -- 0.67% 0.67% 0.75% 0.76% Expense ratio(2) 0.95% 0.75% 0.95% 0.75% 0.95% 0.75% 0.95% 0.75% 0.95% 0.75% Total return(3) (13.13%) (13.13%) 11.38% 11.38% (40.00%) (40.00%) (38.24%) (36.76%) (23.75%) (23.75%) ----------------------------------------------------------------------------------------------------------------------------------- 1IP 2IP 1MG 2MG 1MD 2MD 1IN 2IN 1VS 2VS ----------------------------------------------------------------------------------------------------------- AT DEC. 31, 2000 Accumulation unit value $ 0.96 $ 0.96 $ 0.90 $ 0.91 $ 0.96 $ 0.96 $ 0.92 $ 0.92 $ 1.29 $ 1.29 ----------------------------------------------------------------------------------------------------------------------------------- AT DEC. 31, 2001 Accumulation unit value $ 0.72 $ 0.72 $ 0.67 $ 0.68 $ 0.90 $ 0.90 $ 0.65 $ 0.65 $ 0.85 $ 0.85 Units (000s) 19,727 15,860 51,051 50,212 36,822 34,072 90,196 78,901 87,722 74,819 Net assets (000s) $ 14,292 $ 11,605 $ 34,387 $ 34,000 $ 33,044 $ 30,682 $ 58,578 $ 51,535 $ 74,483 $63,852 ----------------------------------------------------------------------------------------------------------------------------------- FOR THE YEAR ENDED DEC. 31, 2001 Investment income(1) 0.01% 0.01% 0.06% 0.06% -- -- -- -- -- -- Expense ratio(2) 0.95% 0.75% 0.95% 0.75% 0.95% 0.75% 0.95% 0.75% 0.95% 0.75% Total return(3) (25.00%) (25.00%) (25.56%) (25.27%) (6.25%) (6.25%) (29.35%) (29.35%) (34.11%) (34.11%) ----------------------------------------------------------------------------------------------------------------------------------- 99 1MI 2MI 1SV 2SV 1IT 2IT 1SP 2SP 1AA(4) 2AA(4) ----------------------------------------------------------------------------------------------------------- AT DEC. 31, 2000 Accumulation unit value $ 1.35 $ 1.36 $ 1.50 $ 1.51 $ 1.08 $ 1.08 $ 1.05 $ 1.05 -- -- ----------------------------------------------------------------------------------------------------------------------------------- AT DEC. 31, 2001 Accumulation unit value $ 1.74 $ 1.75 $ 1.69 $ 1.70 $ 0.84 $ 0.85 $ 1.15 $ 1.16 $ 0.97 $ 0.97 Units (000s) 23,583 20,056 31,848 27,040 30,297 27,818 46,456 40,791 3,224 3,799 Net assets (000s) $ 41,017 $ 35,033 $ 53,965 $ 46,235 $ 25,663 $ 23,628 $ 53,763 $ 47,364 $ 3,120 $ 3,682 ----------------------------------------------------------------------------------------------------------------------------------- FOR THE YEAR ENDED DEC. 31, 2001 Investment income(1) -- -- 0.15% 0.15% -- -- 0.06% 0.06% 0.94% 0.95% Expense ratio(2) 0.95% 0.75% 0.95% 0.75% 0.95% 0.75% 0.95% 0.75% 0.95% 0.75% Total return(3) 28.89% 28.68% 12.67% 12.58% (22.22%) (21.30%) 9.52% 10.48% (3.00%) (3.00%) ----------------------------------------------------------------------------------------------------------------------------------- 1WI(4) 2WI(4) 1SG(4) 2SG(4) ------------------------------------------- AT DEC. 31, 2000 Accumulation unit value -- -- -- -- ----------------------------------------------------------------------------------------------------------------------------------- AT DEC. 31, 2001 Accumulation unit value $ 0.90 $ 0.90 $ 0.94 $ 0.94 Units (000s) 1,031 1,200 2,230 2,060 Net assets (000s) $ 928 $ 1,080 $ 2,095 $ 1,939 ----------------------------------------------------------------------------------------------------------------------------------- FOR THE YEAR ENDED DEC. 31, 2001 Investment income(1) 0.01% 0.01% -- -- Expense ratio(2) 0.95% 0.75% 0.95% 0.75% Total return(3) (10.00%) (10.00%) (6.00%) (6.00%) -----------------------------------------------------------------------------------------------------------------------------------
(1) These amounts represent the dividends, excluding distributions of capital gains, received by the subaccount from the underlying mutual fund, net of management fees assessed by the fund manager, divided by the average net assets. These ratios exclude variable account expenses that result in direct reductions in the unit values. The recognition of investment income by the subaccount is affected by the timing of the declaration of dividends by the underlying fund in which the subaccounts invest. (2) These ratios represent the annualized contract expenses of the separate account, consisting primarily of mortality and expense charges, for each period indicated. The ratios include only those expenses that result in a direct reduction to unit values. Charges made directly to contract owner accounts through the redemption of units and expenses of the underlying fund are excluded. (3) These amounts represent the total return for the periods indicated, including changes in the value of the underlying fund, and reflect deductions for all items included in the expense ratio. The total return does not include any expenses assessed through the redemption of units; inclusion of these expenses in the calculation would result in a reduction in the total return presented. Investment options with a date notation indicate the effective date of that investment option in the variable account. The total return is calculated for the period indicated or from the effective date through the end of the reporting period. (4) Operations commenced on May 1, 2001. 100 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, 2001 and 2000, 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, 2001. 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, 2001 and 2000, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States. Ernst & Young LLP January 28, 2002 Minneapolis, Minnesota IDS Life Insurance Company -------------------------------------------------------------------------------- Consolidated Balance Sheets
December 31, (In thousands, except share amounts) 2001 2000 Assets Investments: Fixed maturities: Held-to-maturity, at amortized cost (fair value: 2000, $6,471,798) $ -- $ 6,463,613 Available-for-sale, at fair value (amortized cost: 2001, $20,022,072; 2000, $12,929,870) 20,157,137 12,399,990 Common stocks 1,704 10,333 Mortgage loans on real estate 3,680,394 3,738,091 Policy loans 619,571 618,973 Other investments 621,897 575,551 ------- ------- Total investments 25,080,703 23,806,551 Cash and cash equivalents 1,150,251 316,974 Amounts recoverable from reinsurers 529,166 416,480 Amounts due from brokers 90,794 15,302 Other accounts receivable 46,349 42,324 Accrued investment income 278,199 334,928 Deferred policy acquisition costs 3,107,187 2,951,655 Deferred income taxes, net 156,308 136,588 Other assets 123,246 80,054 Separate account assets 27,333,697 32,349,347 ---------- ---------- Total assets $57,895,900 $60,450,203 =========== =========== Liabilities and stockholder's equity Liabilities: Future policy benefits: Fixed annuities $19,592,273 $19,417,446 Universal life-type insurance 3,433,904 3,410,871 Traditional life insurance 241,165 232,913 Disability income and long-term care insurance 1,227,172 1,012,247 Policy claims and other policyholders' funds 71,879 52,067 Amounts due to brokers 1,740,031 446,347 Other liabilities 437,017 463,561 Separate account liabilities 27,333,697 32,349,347 ---------- ---------- Total liabilities 54,077,138 57,384,799 ---------- ---------- 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 688,327 288,327 Accumulated other comprehensive income (loss), net of tax: Net unrealized securities gains (losses) 85,549 (333,734) Net unrealized derivative (losses) (774) -- ---------- ---------- Total accumulated other comprehensive income (loss) 84,775 (333,734) ---------- ---------- Retained earnings 3,042,660 3,107,811 ---------- ---------- Total stockholder's equity 3,818,762 3,065,404 ---------- ---------- Total liabilities and stockholder's equity $57,895,900 $60,450,203 =========== ===========
See notes to consolidated financial statements. IDS Life Insurance Company -------------------------------------------------------------------------------- Consolidated Statements of Income
Years ended December 31, (In thousands) 2001 2000 1999 Revenues Premiums: Traditional life insurance $ 59,415 $ 56,187 $ 53,790 Disability income and long-term care insurance 255,428 231,311 201,637 ------- ------- ------- Total premiums 314,843 287,498 255,427 Net investment income 1,485,688 1,730,605 1,919,573 Contractholder charges 489,583 438,127 411,994 Management and other fees 473,406 598,168 473,108 Net realized (loss) gain on investments (649,752) (16,975) 26,608 -------- ------- ------ Total revenues 2,113,768 3,037,423 3,086,710 --------- --------- --------- Benefits and expenses Death and other benefits: Traditional life insurance 35,519 29,042 29,819 Universal life-type insurance and investment contracts 175,247 131,467 118,561 Disability income and long-term care insurance 44,725 40,246 30,622 Increase in liabilities for future policy benefits: Traditional life insurance 7,231 5,765 7,311 Disability income and long-term care insurance 123,227 113,239 87,620 Interest credited on universal life-type insurance and investment contracts 1,137,636 1,169,641 1,240,575 Amortization of deferred policy acquisition costs 371,342 362,106 321,036 Other insurance and operating expenses 407,798 378,653 346,849 ------- ------- ------- Total benefits and expenses 2,302,725 2,230,159 2,182,393 --------- --------- --------- (Loss) income before income tax (benefit) expense a nd cumulative effect of accounting change (188,957) 807,264 904,317 Income tax (benefit) expense (145,222) 221,627 267,864 -------- ------- ------- (Loss) income before cumulative effect of accounting change (43,735) 585,637 636,453 Cumulative effect of accounting change (net of income tax benefit of $11,532) (21,416) -- -- -------- ------- ------- Net (loss) income $ (65,151) $ 585,637 $ 636,453 ---------- ---------- ----------
See notes to consolidated financial statements. IDS Life Insurance Company -------------------------------------------------------------------------------- Consolidated Statements of Stockholder's Equity
Accumulated other Additional comprehensive Total Capital paid-in income (loss), Retained stockholder's For the three years ended December 31, 2001 (In thousands) stock capital net of tax earnings equity Balance, January 1, 1999 $3,000 $288,327 $ 169,584 $2,645,721 $3,106,632 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 income taxes of $304,936 -- -- (566,311) -- (566,311) Reclassification adjustment for gains included in net income, net of income tax of $7,810 -- -- (14,503) -- (14,503) ------ -------- --------- ---------- ---------- Other comprehensive loss -- -- (580,814) -- (580,814) ------ -------- --------- ---------- ---------- Comprehensive income 55,639 Cash dividends -- -- -- (350,000) (350,000) ------ -------- --------- ---------- ---------- Balance, December 31, 1999 3,000 288,327 (411,230) 2,932,174 2,812,271 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 income taxes of ($46,921) -- -- 87,138 -- 87,138 Reclassification adjustment for gains included in net income, net of income tax of $5,192 -- -- (9,642) -- (9,642) ------ -------- --------- ---------- ---------- Other comprehensive income -- -- 77,496 -- 77,496 ------ -------- --------- ---------- ---------- Comprehensive income 663,133 Cash dividends -- -- -- (410,000) (410,000) ------ -------- --------- ---------- ---------- Balance, December 31, 2000 3,000 288,327 (333,734) 3,107,811 3,065,404 Comprehensive income: Net loss -- -- -- (65,151) (65,151) Cumulative effect of adopting SFAS No. 133, net of income tax benefit of $626 -- -- (1,162) -- (1,162) Unrealized holding losses on available-for-sale securities arising during the year, net of deferred policy acquisition costs of ($20,191) and income taxes of $15,037 -- -- (11,262) -- (11,262) Reclassification adjustment for losses on available-for-sale securities included in net loss, net of income tax benefit of $228,003 -- -- 423,434 -- 423,434 Reclassification adjustment for losses on derivatives included in net loss, net of income tax benefit of $4,038 -- -- 7,499 -- 7,499 ------ -------- --------- ---------- ---------- Other comprehensive income -- -- 418,509 -- 418,509 ------ -------- --------- ---------- ---------- Comprehensive income 353,358 Capital contribution -- 400,000 -- -- 400,000 ------ -------- --------- ---------- ---------- Balance, December 31, 2001 $3,000 $688,327 $ 84,775 $3,042,660 $3,818,762 ====== ======== ========= ========== ==========
See notes to consolidated financial statements. IDS Life Insurance Company -------------------------------------------------------------------------------- Consolidated Statements of Cash Flows
Years ended December 31, (In thousands) 2001 2000 1999 Cash flows from operating activities Net (loss) income $ (65,151) $ 585,637 $ 636,453 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Cumulative effect of accounting change, net of tax 21,416 -- -- Policy loans, excluding universal life-type insurance: Issuance (43,687) (61,313) (56,153) Repayment 54,004 56,088 54,105 Change in amounts recoverable from reinsurers (112,686) (89,312) (64,908) Change in other accounts receivable (4,025) 6,254 (615) Change in accrued investment income 56,729 8,521 23,125 Change in deferred policy acquisition costs, net (175,723) (291,634) (140,379) Change in liabilities for future policy benefits for traditional life, disability income and long-term care insurance 223,177 206,377 153,157 Change in policy claims and other policyholder's funds 19,812 27,467 (45,709) Deferred income tax (benefit) provision (246,205) 37,704 79,796 Change in other liabilities (24,509) (120,256) 169,395 Amortization of premium (accretion of discount), net 108,958 37,909 (17,907) Net realized loss (gain) on investments 649,752 16,975 (26,608) Contractholder charges, non-cash (217,496) (151,745) (175,059) Other, net (83,023) (9,279) (5,324) ------- ------ ------ Net cash provided by operating activities 161,343 259,393 583,369 ------- ------- ------- Cash flows from investing activities Held-to-maturity securities: Purchases -- (4,487) (3,030) Maturities, sinking fund payments and calls -- 589,742 741,949 Sales -- 50,067 66,547 Available-for-sale securities: Purchases (9,477,740) (1,454,010) (3,433,128) Maturities, sinking fund payments and calls 2,706,147 1,019,403 1,442,507 Sales 5,493,141 1,237,116 1,691,389 Other investments, excluding policy loans: Purchases (442,876) (706,082) (657,383) Sales 370,636 435,633 406,684 Change in amounts due from brokers (75,492) (15,157) 182 Change in amounts due to brokers 1,293,684 298,236 (47,294) --------- ------- ------- Net cash (used in) provided by investing activities (132,500) 1,450,461 208,423 -------- --------- ------- Cash flows from financing activities Activities related to universal life-type insurance and investment contracts: Considerations received 2,088,114 1,842,026 2,031,630 Surrenders and other benefits (2,810,401) (3,974,966) (3,669,759) Interest credited to account balances 1,137,636 1,169,641 1,240,575 Universal life-type insurance policy loans: Issuance (83,720) (134,107) (102,239) Repayment 72,805 82,193 67,881 Capital contribution 400,000 -- -- Dividends paid -- (410,000) (350,000) -------- --------- ------- Net cash provided by (used in) financing activities 804,434 (1,425,213) (781,912) -------- --------- ------- Net increase in cash and cash equivalents 833,277 284,641 9,880 Cash and cash equivalents at beginning of year 316,974 32,333 22,453 -------- --------- ------- Cash and cash equivalents at end of year $ 1,150,251 $ 316,974 $ 32,333 =========== ============ ============= Supplemental disclosures: Income taxes paid $ -- $ 225,704 $ 214,940 Interest on borrowings 23,688 3,299 4,521
See notes to consolidated financial statements. IDS Life Insurance Company -------------------------------------------------------------------------------- Notes to Consolidated Financial Statements (In 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. Revenue recognition Profits on fixed deferred annuities are the excess of contractholder charges and investment income earned from investment of contract considerations over interest credited to contract values, amortization of deferred acquisition costs, and other expenses. Profits on variable deferred annuities also include the excess of management and other fees over the costs of guaranteed benefits provided. Contractholder charges include policy fees and surrender charges. Management and other fees include investment management fees from underlying proprietary mutual funds, certain fee revenues from underlying nonproprietary mutual funds and mortality and expense risk fees from the variable annuity separate accounts. Profits on fixed universal life insurance are the excess of contractholder charges and investment income earned from investment of contract considerations over interest credited to contract values, death and other benefits paid in excess of contract values, amortization of deferred acquisition costs, and other expenses. Profits on variable universal life insurance also include management and other fees. 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, certain fee revenues from underlying nonproprietary mutual funds and mortality and expense risk fees received from the variable life insurance separate accounts. 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. 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). Certain prior year amounts have been reclassified to conform to the current year's presentation. 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 -- securities Debt securities 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 debt securities and marketable equity securities are classified as available-for-sale and carried at fair value. Unrealized gains and losses on securities classified as available-for-sale are carried as a separate component of accumulated other comprehensive income (loss), net of the related deferred policy acquisition costs and income taxes. When evidence indicates there is a decline in a security's value, which is other than temporary, the security is written down to fair value through a charge to current year's earnings. IDS Life Insurance Company -------------------------------------------------------------------------------- The Company's investment portfolio contains structured investments, including Collateralized Debt Obligations (CDOs) (obligations that are primarily backed by high-yield bonds), which are not readily marketable. The carrying values of these investments are based on cash flow projections and, as such, these values are subject to change. If actual cash flows are less than projected, losses would be recognized; increases in cash flows would be recognized over future periods. Realized investment gains or losses are 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. Investments -- mortgage loans on real estate Mortgage loans on real estate are carried at amortized cost less reserves for losses. The estimated fair value of the mortgage loans is determined by discounted cash flow analyses using mortgage interest rates currently offered for mortgages of similar maturities. Impairment of mortgage loans is measured as the excess of the 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 losses. The reserve for 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 collectability of principal, interest payments received are either recognized as income or applied to the recorded investment in the loan. Policy loans Policy loans are carried at the aggregate of the unpaid loan balances, which do not exceed the cash surrender values of the related policies. Cash and cash equivalents 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. 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 the interest method. The costs for universal life and variable universal life 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 fixed and variable universal life 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 prospective assumptions underlying the amortization models. 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. Unlocking adjustments resulted in a net increase in amortization of $33,600 in 2001 and net decreases in amortization of $12,300 in 2000 and $56,800 in 1999. In amortizing deferred policy acquisition costs associated with variable annuities, the Company assumes contract values will appreciate at a specified long-term annual rate. The Company may project near-term appreciation at a different rate in order to maintain the long-term rate assumption. Liabilities for future policy benefits Liabilities for fixed and variable universal life insurance and fixed and variable deferred annuities are accumulation values. Liabilities for equity indexed deferred annuities issued in 1997 and 1998 are equal to the present value of guaranteed benefits and the intrinsic value of index-based benefits. Liabilities for equity indexed deferred annuities issued in 1999 or later are equal to the accumulation of host contract values covering guaranteed benefits and the market value of embedded equity options. 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. IDS Life Insurance Company -------------------------------------------------------------------------------- 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 Reinsurance premiums and benefits paid or provided are accounted for on a basis consistent with those used in accounting for original policies issued and with the terms of the reinsurance contracts. 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 20% of the mortality risk on new variable universal life insurance policies and 10% of the risk on new term 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. 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 to be payable at the initial level regardless of investment performance so long as minimum premium payments are made. Accounting developments 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 and Retained Beneficial Interests in Securitized Financial Assets." The Company adopted the consensus as of January 1, 2001. Issue 99-20 prescribes new procedures for recording interest income and measuring impairment on retained and purchased beneficial interests. The consensus primarily affects certain high-yield investments contained in structured securities. Adoption of the consensus required the Company to adjust the carrying amount of these investments downward by $21,416, net of tax, upon adoption. See Note 2 for further discussion. Effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended (SFAS No. 133), which requires an entity to 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 are recorded in earnings or directly to equity, depending on the instrument's designated use. The adoption of SFAS No. 133 on January 1, 2001, resulted in a cumulative after-tax reduction to other comprehensive income of $1,162. The cumulative impact to earnings was not significant. See Note 8 for further discussion of the Company's derivative and hedging activities. IDS Life Insurance Company -------------------------------------------------------------------------------- SFAS No. 133 also provided a one-time opportunity to reclassify held-to-maturity security investments to available-for-sale without tainting the remaining securities in the held-to-maturity portfolio. The Company elected to take the opportunity to reclass all its held-to-maturity investments to available-for-sale. The Company adopted SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," which superseded SFAS No. 125. The Statement was effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001. The Statement was 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 impact on the Company's financial position or results of operations of adopting the Statement was not significant. 2. INVESTMENTS Securities Pursuant to the adoption of SFAS No. 133 the Company reclassified all held-to-maturity securities with a carrying value of $6,463,613 and net unrealized gains of $8,185 to available-for-sale as of January 1, 2001.
The following is a summary of securities available-for-sale at December 31, 2001: Gross Gross Amortized unrealized unrealized Fair cost gains losses value Fixed maturities: U.S. Government agency obligations $ 31,074 $ 2,190 $ 56 $ 33,208 State and municipal obligations 7,826 149 -- 7,975 Corporate bonds and obligations 11,658,888 276,332 218,365 11,716,855 Mortgage-backed securities 8,292,576 103,109 32,801 8,362,884 Foreign government bonds and obligations 31,708 4,507 -- 36,215 ----------- -------- -------- ----------- Total fixed maturity securities $20,022,072 $386,287 $251,222 $20,157,137 =========== ======== ======== =========== Common stocks $ 805 $ 899 $ -- $ 1,704 =========== ======== ======== ===========
The amortized cost and fair value of fixed maturity securities at December 31, 2001 by contractual maturity are as follows: Amortized Fair cost value Due within one year $ 1,093,557 $ 1,114,618 Due from one to five years 2,885,509 3,007,435 Due from five to ten years 5,503,284 5,519,588 Due in more than ten years 2,247,146 2,152,612 Mortgage-backed securities 8,292,576 8,362,884 --------- --------- Total $20,022,072 $20,157,137 =========== ===========
The timing of actual receipts may differ from contractual maturities because issuers may call or prepay obligations.
The following is a summary of held-to-maturity and available-for-sale securities at December 31, 2000: 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 --------- ----- ----- --------- Total fixed maturity securities $6,463,613 $124,067 $115,882 $6,471,798 ========== ======== ======== ========== Gross Gross Amortized unrealized unrealized Fair Available-for-sale cost gains losses value Fixed maturities: 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 maturity securities $12,929,870 $187,769 $717,649 $12,399,990 =========== ======== ======== =========== Common stocks $ 11,829 $ -- $ 1,496 $ 10,333 =========== ======== ======== ===========
At December 31, 2001, bonds carried at $14,639 were on deposit with various states as required by law. IDS Life Insurance Company -------------------------------------------------------------------------------- At December 31, 2001, fixed maturity securities comprised approximately 80 percent of the Company's total investments. These securities are rated by Moody's and Standard & Poor's (S&P), except for approximately $2.6 billion of securities which are rated by AEFC's internal analysts using criteria similar to Moody's and S&P. A summary of fixed maturity securities, at amortized cost, by rating on December 31, is as follows: Rating 2001 2000 Aaa/AAA $ 8,977,075 $ 6,559,188 Aaa/AA -- 32,001 Aa/AA 261,252 220,446 Aa/A 372,120 327,147 A/A 2,602,027 2,494,621 A/BBB 911,477 747,636 Baa/BBB 5,904,013 5,828,847 Baa/BB 274,228 287,583 Below investment grade 719,880 2,896,014 ------- --------- Total $20,022,072 $19,393,483 =========== =========== At December 31, 2001, approximately 93 percent of the securities rated Aaa/AAA are GNMA, FNMA and FHLMC mortgage-backed securities. No holdings of any other issuer were greater than ten percent of stockholder's equity. During the years ended December 31, 2000 and 1999, fixed maturities classified as held-to-maturity were sold with amortized cost of $53,169 and $68,470, 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. Available-for-sale securities were sold during 2001 with proceeds of $5,493,141 and gross realized gains and losses of $116,485 and $767,144, respectively. Available-for-sale securities were sold during 2000 with proceeds of $1,237,116 and gross realized gains and losses of $25,101 and $10,267, respectively. Available-for-sale securities were sold during 1999 with proceeds of $1,691,389 and gross realized gains and losses of $36,568 and $14,255, respectively. The net unrealized gain (loss) on available-for-sale securities as of December 31, 2001 and 2000, was $135,964 and ($531,376), respectively, with the $667,340 change, net of taxes and deferred policy acquisition costs, reflected as a separate component in accumulated other comprehensive income for the year ended December 31, 2001. For the year ended December 31, 2000 the change in net unrealized losses on available-for-sale securities was a decrease of $122,196. For the year ended December 31, 1999 the change in net unrealized gain on available-for-sale securities was a decrease of $921,920. During 2001, the Company recorded pretax losses of $828,175 to recognize the impact of higher default rate assumptions on certain structured investments; to write down lower rated securities (most of which were sold during 2001) in connection with the Company's decision to lower its risk profile by reducing the level of its high-yield portfolio, allocating holdings toward stronger credits, and reducing the concentration of exposure to individual companies and industry sectors; to write down certain other investments; and, to adopt EITF Issue 99-20, as previously discussed. Within the Consolidated Statements of Income, approximately $623,958 of these losses are included in Net realized (losses) gains on investments and approximately $171,269 are included in Net investment income, with the remaining losses recorded as a cumulative effect of accounting change. During 2001, the Company placed a majority of its rated Collateralized Debt Obligation (CDO) (obligations that are backed primarily by high-yield bonds) securities and related accrued interest, (collectively referred to as transferred assets), having an aggregate book value of $675,347, into a securitization trust. In return, the Company received $89,535 in cash relating to sales to unaffiliated investors and retained interests with allocated book amounts aggregating $585,812. The book amount is determined by allocating the previous carrying value of the transferred assets between assets sold and the retained interests based on their relative fair values. Fair values are based on the estimated present value of future cash flows. There was no cash flow related to this transaction other than the receipt of the initial $89,535. Cash flows on the assets sold to investors and retained interests are not scheduled to begin until March 31, 2002 in accordance with governing documents. Included in Other investments are affordable housing investment credits, trading securities, and real estate. Fair values of investments 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, estimated future cash flows and market data from independent brokers. IDS Life Insurance Company -------------------------------------------------------------------------------- Mortgages loans on real estate At December 31, 2001, approximately 15 percent of the Company's investments were mortgage loans on real estate. Concentration of credit risk by region of the United States and by type of real estate are as follows:
December 31, 2001 December 31, 2000 On balance Funding On balance Funding Region sheet commitments sheet commitments East North Central $ 670,387 $ 1,873 $ 691,694 $18,868 West North Central 549,015 -- 564,576 7,621 South Atlantic 815,837 9,490 884,723 7,667 Middle Atlantic 352,821 9,363 378,702 13,813 New England 274,486 8,700 279,147 4,604 Pacific 355,945 14,618 318,727 921 West South Central 214,000 600 173,158 28,548 East South Central 55,798 -- 49,176 2,763 Mountain 413,053 27 409,677 10,209 ---------- ------- ---------- ------- 3,701,342 44,671 3,749,580 95,014 Less reserves for losses 20,948 -- 11,489 -- ---------- ------- ---------- ------- Total $3,680,394 $44,671 $3,738,091 $95,014 ========== ======= ========== ======= December 31, 2001 December 31, 2000 On balance Funding On balance Funding Property type sheet commitments sheet commitments Department/retail stores $1,117,195 $13,200 $1,174,763 $11,130 Apartments 694,214 11,531 780,228 -- Office buildings 1,203,090 7,650 1,085,948 59,941 Industrial buildings 333,713 2,263 323,766 23,943 Hotels/motels 108,019 -- 100,680 -- Medical buildings 106,927 6,000 128,101 -- Nursing/retirement homes 39,590 -- 49,822 -- Mixed use 86,972 27 87,537 -- Other 11,622 4,000 18,735 -- ---------- ------- ---------- ------- 3,701,342 44,671 3,749,580 95,014 Less reserves for losses 20,948 -- 11,489 -- ---------- ------- ---------- ------- Total $3,680,394 $44,671 $3,738,091 $95,014 ========== ======= ========== =======
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 fund mortgages are made in the ordinary course of business. The fair value of the mortgage commitments is $nil. At December 31, 2001, 2000 and 1999, the Company's recorded investment in impaired loans was $39,601, $24,999 and $21,375, respectively, with reserves of $7,225, $4,350 and $5,750, respectively. During 2001, 2000 and 1999, the average recorded investment in impaired loans was $24,498, $27,063 and $23,815, respectively. The Company recognized $1,285, $1,033 and $1,190 of interest income related to impaired loans for the years ended December 31, 2001, 2000 and 1999, respectively. The following table presents changes in the reserves for mortgage loan losses:
2001 2000 1999 Balance, January 1 $11,489 $ 28,283 $39,795 Provision (reduction) for mortgage loan losses 14,959 (14,894) (9,512) Loan payoffs -- (1,200) (500) Foreclosures and write-offs (5,500) (700) (1,500) ------ ---- ------ Balance, December 31 $20,948 $ 11,489 $28,283 ======= ======== =======
IDS Life Insurance Company -------------------------------------------------------------------------------- Sources of investment income and realized (losses) gains on investments Net investment income for the years ended December 31 is summarized as follows: 2001 2000 1999 Interest on fixed maturities $1,276,966 $1,473,560 $1,598,059 Interest on mortgage loans 290,608 286,611 285,921 Interest on cash equivalents 2,218 8,084 5,871 Other (44,145) 1,750 70,892 ------- ----- ------ 1,525,647 1,770,005 1,960,743 Less investment expenses 39,959 39,400 41,170 ------ ------ ------ Total $1,485,688 $1,730,605 $1,919,573 ========== ========== ==========
Net realized (losses) gains on investments for the years ended December 31 is summarized as follows: 2001 2000 1999 Fixed maturities $(621,400) $(34,857) $ 8,802 Mortgage loans (22,443) 15,845 10,210 Other investments (5,909) 2,037 7,596 ------ ----- ----- $(649,752) $(16,975) $26,608 ========= ======== =======
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 (benefit) expense for the years ended December 31 consists of the following: 2001 2000 1999 Federal income taxes Current $ 88,121 $176,397 $178,444 Deferred (234,673) 37,704 79,796 -------- ------ ------ (146,552) 214,101 258,240 State income taxes-current 1,330 7,526 9,624 ----- ----- ----- Income tax (benefit) expense before cumulative effect of accounting change (145,222) 221,627 267,864 Cumulative effect of accounting change income tax benefit (11,532) -- -- ----- ----- ----- Income tax (benefit) expense $(156,754) $221,627 $267,864 ========= ======== ========
Income tax (benefit) expense before the cumulative effect of accounting change, differs from that computed by using the United States statutory rate of 35%. The principal causes of the difference in each year are shown below:
2001 2000 1999 Provision Rate Provision Rate Provision Rate Federal income taxes based on the statutory rate $ (66,136) (35.0%) $282,542 35.0% $316,511 35.0% Tax-excluded interest and dividend income (4,663) (2.5) (3,788) (0.5) (9,626) (1.1) State taxes, net of federal benefit 865 0.4 4,892 0.6 6,256 0.7 Affordable housing credits (73,200) (38.7) (54,569) (6.8) (31,000) (3.4) Other, net (2,088) (1.1) (7,450) (0.8) (14,277) (1.6) ------ ---- ------ ---- ------- ---- Total income taxes $(145,222) (76.9%) $221,627 27.5% $267,864 29.6% ========= ===== ======== ==== ======== ====
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, 2001, 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 -------------------------------------------------------------------------------- Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred income tax assets and liabilities as of December 31 are as follows:
2001 2000 Deferred income tax assets Policy reserves $ 705,637 $730,239 Unrealized loss -- available-for-sale securities -- 179,702 Investments, other 330,675 34,600 Life insurance guaranty fund assessment reserve 1,330 1,365 Other 26,492 -- --------- ------- Total deferred income tax assets 1,064,134 945,906 --------- ------- Deferred income tax liabilities Deferred policy acquisition costs 861,892 796,292 Unrealized gain -- available-for-sale securities 45,934 -- Other -- 13,026 --------- ------- Total deferred income tax liabilities 907,826 809,318 --------- ------- Net deferred income tax assets $ 156,308 $136,588 ========== ========
The Company is required to establish a valuation allowance for any portion of the deferred income tax assets that management believes will not be realized. In the opinion of management, it is more likely than not that the Company will realize the benefit of the deferred tax assets and, therefore, no such valuation allowance has been established. 4. STOCKHOLDER'S EQUITY Retained earnings available for distribution as dividends to AEFC are limited to the Company's surplus as determined in accordance with accounting practices prescribed by state insurance regulatory authorities. Statutory unassigned surplus aggregated $1,262,335 as of December 31, 2001 and $1,493,292 as of December 31, 2000 (see Note 3 with respect to the income tax effect of certain distributions). In addition, any dividend distributions in 2002 in excess of approximately $194,435 would require approval of the Department of Commerce of the State of Minnesota. Statutory net (loss) income for the years ended December 31 and capital and surplus as of December 31 are summarized as follows: 2001 2000 1999 Statutory net (loss) income $ (317,973) $ 344,973 $ 478,173 Statutory capital and surplus 1,947,350 1,778,306 1,978,406 --------- --------- --------- The National Association of Insurance Commissioners (NAIC) revised the Accounting Practices and Procedures Manual in a process referred to as Codification. The revised regulations took effect 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 resulted in changes to the accounting practices that the Company uses to prepare its statutory-basis financial statements. The impact of implementing these changes was an increase of $4,660 to the Company's statutory-basis capital and surplus as of January 1, 2001. 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, 2001 and 2000. 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 2001, 2000 and 1999. 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. Company 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 $263, $250 and $223 in 2001, 2000 and 1999, 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 2001, 2000 and 1999 were $662, $1,707 and $1,906, 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 cost of these plans charged to operations in 2001, 2000 and 1999 was $1,011, $1,136 and $1,147, respectively. IDS Life Insurance Company -------------------------------------------------------------------------------- Charges by AEFC for use of joint facilities, technology support, marketing services and other services aggregated $505,526, $582,836 and $485,177 for 2001, 2000 and 1999, respectively. Certain of these costs are included in deferred policy acquisition costs. Expenses allocated to the Company may not be reflective of expenses that would have been incurred by the Company on a stand-alone basis. Included in other liabilities at December 31, 2001 and 2000 are $68,919 and $41,059, respectively, payable to and receivable from AEFC for federal income taxes. 6. LINES OF CREDIT The Company has available lines of credit with AEFC 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 $nil and $50,000 uncommitted at December 31, 2001 and 2000, respectively. 7. COMMITMENTS AND CONTINGENCIES At December 31, 2001, 2000 and 1999, traditional life and universal life-type insurance in force aggregated $108,255,014, $98,060,472 and $89,271,957 respectively, of which $25,986,706, $17,429,851 and $8,281,576 were reinsured at the respective year ends. The Company also reinsures a portion of the risks assumed under long-term care policies. Under all reinsurance agreements, premiums ceded to reinsurers amounted to $114,534, $89,506 and $76,970 and reinsurance recovered from reinsurers amounted to $43,388, $32,500, and $27,816 for the years ended December 31, 2001, 2000 and 1999, respectively. Reinsurance contracts do not relieve the Company from its primary obligation to policyholders. At December 31, 2001, the Company had no commitments to purchase investments other than mortgage loan fundings (see Note 2). 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, both state and federal courts gave preliminary approval to the proposed settlement and AEFC mailed notices to all of the over two million class members. In May 2001, the courts entered orders approving the settlement. The orders became final in August 2001 and in October 2001 the settlement was implemented. The anticipated costs of settlement remain unchanged from prior years. The settlement as approved provides for release by class members of all insurance and annuity market conduct claims dating back to 1985. Some class members opted out of the settlement and therefore did not release their claims against AEFC or the Company. Some of these class members who opted out were represented by counsel and presented separate claims to AEFC or the Company. Most of their claims have been settled. 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. 8. DERIVATIVE FINANCIAL INSTRUMENTS The Company maintains an overall risk management strategy that incorporates the use of derivative instruments to minimize significant unplanned fluctuations in earnings caused by interest rate and equity market volatility. The Company does not enter into derivative instruments for speculative purposes. As prescribed per SFAS No. 133, derivative instruments that are designated and qualify as hedging instruments are classified as a cash flow hedge, fair value hedge, or a hedge of a net investment in a foreign operation, based upon the exposure being hedged. The Company currently has economic hedges that either do not qualify or are not designated for hedge accounting treatment under SFAS No. 133. For the year ended December 31, 2001, the net effect on earnings of accounting for the net changes in fair value of the following undesignated derivatives under SFAS No. 133 compared with prior rules was not significant. The Company enters into interest rate swaps, caps and floors to manage the Company's interest rate risk and options and futures to manage equity-based risk. The values of derivative financial instruments are based on market values, dealer quotes or pricing models. 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. IDS Life Insurance Company -------------------------------------------------------------------------------- Interest rate caps, swaps and floors are used principally to manage the Company's interest rate risk. These instruments are primarily used to protect the margin between interest rates earned on investments and the interest rates credited to related annuity contract holders. No interest rate swaps or floors were outstanding as of December 31, 2001. The interest rate caps expire by January 2003. The fair value of the interest rate caps is included in Other assets. Changes in the value of the interest rate caps are included in Other insurance and operating expenses. A purchased (written) option conveys the right (obligation) to buy or sell an instrument at a fixed price for a set period of time or on a specific date. The Company writes and purchases index options to manage the risks related to annuity products that pay interest based upon the relative change in a major stock market index between the beginning and end of the product's term. The Company views this strategy as a prudent management of equity market sensitivity, such that earnings are not exposed to undue risk presented by changes in equity market levels. The annuity products contain embedded derivatives, essentially the equity based return of the product, which must be separated from the host contract and accounted for as derivative instruments per SFAS No. 133. As a result of fluctuations in equity markets, and the corresponding changes in value of the embedded derivatives, the amount of interest credited incurred by the Company related to the annuity product will positively or negatively impact reported earnings. The purchased and written options are carried at fair value and included in Other assets and Other liabilities, respectively. The fair value of the embedded options are included in Future policy benefits for fixed annuities. The changes in fair value of the options are recognized in Other insurance and operating expenses and the embedded derivatives are recognized in Interest credited on universal life-type insurance and investment contracts. The purchased and written options expire on various dates from 2002 to 2008. The Company also purchases futures to hedge its obligations under equity indexed annuities. The futures purchased are marked-to-market daily and exchanged traded, exposing the Company to no counterparty risk. The futures contracts mature within four months. 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. There are no index options outstanding as of December 31, 2001 related to this strategy. 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.
2001 2000 Carrying Fair Carrying Fair Financial Assets value value value value Fixed maturities: Held-to-maturity securities $ -- $ -- $ 6,463,613 $ 6,471,798 Available-for-sale securities 20,157,137 20,157,137 12,399,990 12,399,990 Common stocks 1,704 1,704 10,333 10,333 Mortgage loans on real estate 3,680,394 3,845,950 3,738,091 3,821,825 Cash and cash equivalents 1,150,251 1,150,251 316,974 316,974 Other securities 75,721 75,721 1,130 1,130 Derivative financial instruments 34,477 34,477 50,387 60,615 Separate account assets 27,333,697 27,333,697 32,349,347 32,349,347 ---------- ---------- ---------- ---------- Financial Liabilities Future policy benefits for fixed annuities $18,139,462 $17,671,777 $18,020,824 $17,479,187 Derivative financial instruments 2,506 2,506 3,098 6,069 Separate account liabilities 24,280,092 23,716,854 28,791,949 27,822,667 ---------- ---------- ---------- ----------
At December 31, 2001 and 2000, the carrying amount and fair value of future policy benefits for fixed annuities exclude life insurance-related contracts carried at $1,368,254 and $1,300,018, respectively, and policy loans of $84,557 and $96,603, respectively. The fair value of these benefits is based on the status of the annuities at December 31, 2001 and 2000. 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 2001 and 2000. At December 31, 2001 and 2000, 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 $3,053,605 and $3,557,398, respectively. S-6467-20 F (5/02) STATEMENT OF ADDITIONAL INFORMATION FOR AMERICAN EXPRESS RETIREMENT ADVISOR VARIABLE ANNUITY(R)- BAND 3 IDS LIFE VARIABLE ACCOUNT 10 MAY 1, 2002 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 VARIABLE ANNUITY(R) - 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 Independent Auditors p. 12 Financial Statements
2 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. For some subaccounts we do not provide any performance information because they are new and did not have any activity as of the date of the financial statements. We also show performance from the commencement date of the funds as if the subaccounts invested in them at that time, which, in some cases, they did not. Although we base performance figures on historical earnings, past performance does not guarantee future results. 3 AVERAGE ANNUAL TOTAL RETURN(a) WITH SELECTION OF MAV AND EEB DEATH BENEFIT RIDERS FOR PERIODS ENDING DEC. 31, 2001
PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND 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) (17.50%) (7.96%) (17.50%) --% --% (7.96%) BD3 Bond Fund (9/99; 10/81) 6.53 5.39 6.53 3.85 6.21 9.12 CR3 Capital Resource Fund (9/99; 10/81) (19.11) (10.80) (19.11) 4.08 5.70 10.90 CM3 Cash Management Fund (9/99; 10/81) 2.61 3.68 2.61 3.79 3.36 5.26 DE3 Diversified Equity Income Fund (9/99; 9/99) 1.03 1.53 1.03 -- -- 1.53 EM3 Emerging Markets Fund (5/00; 5/00) (2.49) (18.58) (2.49) -- -- (18.58) ES3 Equity Select Fund (5/01; 5/01) -- (1.96)(c) -- -- -- (1.96)(d) EI3 Extra Income Fund (9/99; 5/96) 3.85 (2.48) 3.85 0.74 -- 1.53 FI3 Federal Income Fund (9/99; 9/99) 5.24 5.63 5.24 -- -- 5.63 GB3 Global Bond Fund (9/99; 5/96) 0.19 1.08 0.19 1.21 -- 2.32 GR3 Growth Fund (9/99; 9/99) (31.88) (17.00) (31.88) -- -- (17.02) IE3 International Fund (9/99; 1/92) (29.63) (15.81) (29.63) (2.58) -- 2.74 MF3 Managed Fund (9/99; 4/86) (11.64) (2.58) (11.64) 5.64 7.66 9.04 ND3 NEW DIMENSIONS FUND(R)(9/99; 5/96) (17.71) (4.59) (17.71) 8.70 -- 9.61 IV3 S&P 500 Index Fund (5/00; 5/00) (13.50) (14.25) (13.50) -- -- (14.25) SC3 Small Cap Advantage Fund (9/99; 9/99) (7.60) 3.25 (7.60) -- -- 3.25 SA3 Strategy Aggressive Fund (9/99; 1/92) (33.82) (8.52) (33.82) 0.33 -- 5.53 AIM V.I. 3CA Capital Appreciation Fund, Series I (9/99; 5/93) (24.25) (5.04) (24.25) 4.87 -- 10.58 3CD Capital Development Fund, Series I (9/99; 5/98) (9.14) 10.29 (9.14) -- -- 3.94 AMERICAN CENTURY(R) VARIABLE PORTFOLIOS, INC. 3IF VP International (9/99; 5/94) (30.11) (7.55) (30.11) 3.55 -- 4.51 3VA VP Value (9/99; 5/96) 11.65 8.79 11.65 10.63 -- 11.44 CALVERT VARIABLE SERIES, INC. 3SR Social Balanced Portfolio (5/00; 9/86) (7.86) (7.35) (7.86) 6.05 7.66 8.18 CREDIT SUISSE TRUST - 3EG Emerging Growth Portfolio (9/99; 9/99) (17.42) 3.58 (17.42) -- -- 2.54 FIDELITY VIP 3GI Growth & Income Portfolio (Service Class) (9/99; 12/96)(e) (9.90) (3.85) (9.90) 8.84 -- 8.84 3MP Mid Cap Portfolio (Service Class) (9/99; 12/98)(e) (4.45) 22.70 (4.45) -- -- 24.26 3OS Overseas Portfolio (Service Class) (9/99; 1/87)(e) (22.26) (10.89) (22.26) 1.53 4.71 4.88 FTVIPT 3RE Franklin Real Estate Fund - Class 2 (9/99; 1/89)(f) 6.74 14.00 6.74 4.81 10.29 9.06 3SI Franklin Small Cap Value Securities Fund - Class 2 (9/99; 5/98)(f) 12.61 14.90 12.61 -- -- 2.11 (previously FTVIPT Franklin Value Securities Fund - Class 2) 3TF Templeton Foreign Securities Fund - Class 2) (3/02; 5/92)(g) -- -- (17.01) 3.51 -- 8.49 (previously FTVIPT Templeton International Securities Fund - Class 2) 3IS Templeton International Smaller Companies Fund - Class 2 (9/99; 5/96)(f) (3.72) (1.20) (3.72) (0.49) -- 1.54 4 PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND SINCE SINCE SUBACCOUNT INVESTING IN: 1 YEAR COMMENCEMENT 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT GOLDMAN SACHS VIT 3SE CORE(SM) Small Cap Equity Fund (9/99; 2/98)(h) 3.41% 7.82% 3.41% --% --% 2.15% 3UE CORE(SM) U.S. Equity Fund (9/99; 2/98)(h) (12.97) (5.81) (12.97) -- -- 2.18 3MC Mid Cap Value Fund (9/99; 5/98) 10.90 15.09 10.90 -- -- 5.28 JANUS ASPEN SERIES 3AG Aggressive Growth Portfolio: Service Shares (5/00; 9/93)(i) (40.47) (42.19) (40.47) 5.67 -- 11.06 3GT Global Technology Portfolio: Service Shares (5/00; 1/00)(j) (38.21) (41.01) (38.21) -- -- (37.19) 3IG International Growth Portfolio: Service Shares (5/00; 5/94)(i) (24.40) (26.68) (24.40) 8.73 -- 12.46 LAZARD RETIREMENT SERIES 3IP International Equity Portfolio (9/99; 9/98) (25.03) (13.29) (25.03) -- -- (3.05) MFS(R) 3MG Investors Growth Stock Series - Service Class (5/00; 5/99)(k) (25.80) (21.79) (25.80) -- -- (1.62) 3MD New Discovery Series - Service Class (5/00; 5/98)(k) (6.33) (8.02) (6.33) -- -- 13.31 PUTNAM VARIABLE TRUST 3IN Putnam VT International New Opportunities Fund - Class IB Shares (9/99; 1/97)(l) (29.62) (17.04) (29.62) -- -- (0.68) 3VS Putnam VT Vista Fund - Class IB Shares (9/99; 1/97)(l) (34.42) (6.78) (34.42) -- -- 6.34 ROYCE CAPITAL FUND 3MI Micro-Cap Portfolio (9/99; 12/96) 28.45 27.01 28.45 18.75 -- 18.74 THIRD AVENUE 3SV Value Portfolio (9/99; 9/99) 12.51 25.77 12.51 -- -- 25.98 WANGER 3IT International Small Cap (9/99; 5/95) (22.14) (7.18) (22.14) 6.94 -- 14.35 3SP U.S. Smaller Companies (9/99; 5/95) 10.22 6.41 10.22 11.27 -- 17.04 (previously Wanger U.S. Small Cap) WELLS FARGO VT 3AA Asset Allocation Fund (5/01; 4/94)(m) -- (4.59)(c) (8.02) 8.10 -- 10.00 3WI International Equity Fund (5/01; 7/00) -- (11.26)(c) (17.10) -- -- (18.33) 3SG Small Cap Growth Fund (5/01; 5/95)(n) -- (6.88)(c) (25.34) (2.86) -- 3.98
5 (a) Current applicable charges deducted from fund performance include a $30 annual contract administrative charge, 0.15% annual MAV fee, 0.30% annual EEB fee and a 0.55% annual 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) Initial offering of the Service Class of each fund took place on Nov. 3, 1997 (except VIP Mid Cap which took place on Dec. 28, 1998). Returns prior to Nov. 3, 1997 (or Dec. 28, 1998 for VIP Mid Cap) are those of the Initial Class, which has no 12b-1 fee. If Service Class's 12b-1 fee of 0.10% had been reflected, returns prior to Nov. 3, 1997 would have been lower. (f) Ongoing stock market volatility can dramatically change the fund's short term performance; current results may differ. Because no Class 2 shares were issued until Jan. 6, 1999 standardized Class 2 performance for prior periods represents the 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 all future performance. (g) Subaccount had not commenced operations as of Dec. 31, 2001. Ongoing stock market volatility can drastically change the fund's short-term performance; current results may differ. Performance prior to the May 1, 2000 merger reflects the historical performance of the Templeton International Fund. In addition, for periods beginning on May 1, 1997, Class 2 Fund performance reflects an additional 12b-1 fee expense which also affects future performance. FTVIPT Templeton International Smaller Companies Fund - Class 2 merged into this fund as of April 30, 2002. (h) CORE(SM) is a service mark of Goldman, Sachs & Co. (i) The returns shown for Service Shares for periods prior to their inception (Dec. 31, 1999) are derived from the historical performance of the Institutional Shares adjusted to reflect the higher operating expenses of Service Shares. In recent years returns have sustained significant gains and losses due to market volatility in the technology sector. (j) In recent years returns have sustained significant gains and losses due to market volatility in the technology sector. (k) 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. (l) Performance information for Class IB shares for periods prior to April 30, 1998 for Putnam VT International New Opportunities 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 0.25%. Restated to reflect an increase in 12b-1 fees effective April 30, 2001. Actual 12b-1 fees during the most recent fiscal year were 0.22%. (m) Performance for periods prior to Sept. 20, 1999, reflects performance of the Life and Annuity Trust Asset Allocation Fund, its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust Funds were reorganized into the Wells Fargo Variable Trust Funds. (n) Performance for periods prior to Sept. 20, 1999, reflects performance of the Norwest Select Small Company Stock Fund (the accounting survivor of a merger of the Life and Annuity Trust Strategic Growth Fund and the Norwest Select Small Company Stock Fund), its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust and Norwest Select Funds were reorganized into the Wells Fargo Variable Trust Funds. 6 AVERAGE ANNUAL TOTAL RETURN(a) FOR PERIODS ENDING DEC. 31, 2001
PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND 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) (17.00%) (7.49%) (17.00%) --% --% (7.49%) BD3 Bond Fund (9/99; 10/81) 7.02 5.88 7.02 4.35 6.72 9.66 CR3 Capital Resource Fund (9/99; 10/81) (18.62) (10.33) (18.62) 4.59 6.21 11.44 CM3 Cash Management Fund (9/99; 10/81) 3.11 4.17 3.11 4.29 3.87 5.78 DE3 Diversified Equity Income Fund (9/99; 9/99) 1.53 2.01 1.53 -- -- 2.01 EM3 Emerging Markets Fund (5/00; 5/00) (2.00) (18.11) (2.00) -- -- (18.11) ES3 Equity Select Fund (5/01; 5/01) -- (1.46)(c) -- -- -- (1.46)(d) EI3 Extra Income Fund (9/99; 5/96) 4.35 (2.00) 4.35 1.24 -- 2.03 FI3 Federal Income Fund (9/99; 9/99) 5.73 6.12 5.73 -- -- 6.12 GB3 Global Bond Fund (9/99; 5/96) 0.69 1.57 0.69 1.71 -- 2.82 GR3 Growth Fund (9/99; 9/99) (31.38) (16.55) (31.38) -- -- (16.55) IE3 International Fund (9/99; 1/92) (29.13) (15.35) (29.13) (2.08) -- 3.25 MF3 Managed Fund (9/99; 4/86) (11.14) (2.10) (11.14) 6.15 8.18 9.57 ND3 NEW DIMENSIONS FUND(R) (9/99; 5/96) (17.21) (4.12) (17.21) 9.21 -- 10.13 IV3 S&P 500 Index Fund (5/00; 5/00) (13.00) (13.77) (13.00) -- -- (13.77) SC3 Small Cap Advantage Fund (9/99; 9/99) (7.10) 3.74 (7.10) -- -- 3.74 SA3 Strategy Aggressive Fund (9/99; 1/92) (33.33) (8.05) (33.33) 0.84 -- 6.05 AIM V.I. 3CA Capital Appreciation Fund, Series I (9/99; 5/93) (23.76) (4.56) (23.76) 5.38 -- 11.10 3CD Capital Development Fund, Series I (9/99; 5/98) (8.64) 10.79 (8.64) -- -- 4.44 AMERICAN CENTURY(R) VARIABLE PORTFOLIOS, INC. 3IF VP International (9/99; 5/94) (29.62) (7.08) (29.62) 4.06 -- 5.03 3VA VP Value (9/99; 5/96) 12.15 9.28 12.15 11.14 -- 11.96 CALVERT VARIABLE SERIES, INC. 3SR Social Balanced Portfolio (5/00; 9/86) (7.36) (6.86) (7.36) 6.56 8.18 8.71 CREDIT SUISSE TRUST - 3EG Emerging Growth Portfolio (9/99; 9/99) (16.92) 4.07 (16.92) -- -- 3.03 FIDELITY VIP 3GI Growth & Income Portfolio (Service Class) (9/99; 12/96)(e) (9.41) (3.37) (9.41) 9.35 -- 9.35 3MP Mid Cap Portfolio (Service Class) (9/99; 12/98)(e) (3.95) 23.22 (3.95) -- -- 24.80 3OS Overseas Portfolio (Service Class) (9/99; 1/87)(e) (21.76) (10.43) (21.76) 2.04 5.23 5.40 FTVIPT 3RE Franklin Real Estate Fund - Class 2 (9/99; 1/89)(f) 7.24 14.51 7.24 5.31 10.81 9.59 3SI Franklin Small Cap Value Securities Fund - Class 2 (9/99; 5/98)(f) 13.11 15.40 13.11 -- -- 2.60 (previously FTVIPT Franklin Value Securities Fund - Class 2) 3TF Templeton Foreign Securities Fund - Class 2 (3/02; 5/92)(g) -- -- (16.46) 4.06 -- 9.04 (previously FTVIPT Templeton International Securities Fund - Class 2) 3IS Templeton International Smaller Companies Fund - Class 2 (9/99; 5/96)(f) (3.23) (0.72) (3.23) 0.00 -- 2.04 7 PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND SINCE SINCE SUBACCOUNT INVESTING IN: 1 YEAR COMMENCEMENT 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT GOLDMAN SACHS VIT 3SE CORE(SM) Small Cap Equity Fund (9/99; 2/98)(h) 3.91% 8.31% 3.91% --% --% 2.64% 3UE CORE(SM) U.S. Equity Fund (9/99; 2/98)(h) (12.48) (5.34) (12.48) -- -- 2.68 3MC Mid Cap Value Fund (9/99; 5/98) 11.40 15.60 11.40 -- -- 5.78 JANUS ASPEN SERIES 3AG Aggressive Growth Portfolio: Service Shares (5/00; 9/93)(i) (39.98) (41.72) (39.98) 6.18 -- 11.58 3GT Global Technology Portfolio: Service Shares (5/00; 1/00)(j) (37.71) (40.54) (37.71) -- -- (36.70) 3IG International Growth Portfolio: Service Shares (5/00; 5/94)(i) (23.91) (26.20) (23.91) 9.24 -- 12.98 LAZARD RETIREMENT SERIES 3IP International Equity Portfolio (9/99; 9/98) (24.54) (12.83) (24.54) -- -- (2.56) MFS(R) 3MG Investors Growth Stock Series - Service Class (5/00; 5/99)(k) (25.30) (21.31) (25.30) -- -- (1.13) 3MD New Discovery Series - Service Class (5/00; 5/98)(k) (5.83) (7.54) (5.83) -- -- 13.83 PUTNAM VARIABLE TRUST 3IN Putnam VT International New Opportunities Fund - Class IB Shares (9/99; 1/97)(l) (29.12) (16.59) (29.12) -- -- (0.17) 3VS Putnam VT Vista Fund - Class IB Shares (9/99; 1/97)(l) (33.92) (6.31) (33.92) -- -- 6.86 ROYCE CAPITAL FUND 3MI Micro-Cap Portfolio (9/99; 12/96) 28.95 27.54 28.95 19.26 -- 19.26 THIRD AVENUE 3SV Value Portfolio (9/99; 9/99) 13.01 26.51 13.01 -- -- 26.51 WANGER 3IT International Small Cap (9/99; 5/95) (21.65) (6.70) (21.65) 7.45 -- 14.88 3SP U.S. Smaller Companies (9/99; 5/95) 10.72 6.89 10.72 11.78 -- 17.58 (previously Wanger U.S. Small Cap) WELLS FARGO VT 3AA Asset Allocation Fund (5/01; 4/94)(m) -- (4.10)(c) (7.52) 8.61 -- 10.53 3WI International Equity Fund (5/01; 7/00) -- (10.76)(c) (16.61) -- -- (17.85) 3SG Small Cap Growth Fund (5/01; 5/95)(n) -- (6.39)(c) (24.85) (2.36) -- 4.53
8 (a) Current applicable charges deducted from fund performance include a $30 annual contract administrative charge and a 0.55% annual 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) Initial offering of the Service Class of each fund took place on Nov. 3, 1997 (except VIP Mid Cap which took place on Dec. 28, 1998). Returns prior to Nov. 3, 1997 (or Dec. 28, 1998 for VIP Mid Cap) are those of the Initial Class, which has no 12b-1 fee. If Service Class's 12b-1 fee of 0.10% had been reflected, returns prior to Nov. 3, 1997 would have been lower. (f) Ongoing stock market volatility can dramatically change the fund's short term performance; current results may differ. Because no Class 2 shares were issued until Jan. 6, 1999 standardized Class 2 performance for prior periods represents the 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 all future performance. (g) Subaccount had not commenced operations as of Dec. 31, 2001. Ongoing stock market volatility can drastically change the fund's short-term performance; current results may differ. Performance prior to the May 1, 2000 merger reflects the historical performance of the Templeton International Fund. In addition, for periods beginning on May 1, 1997, Class 2 Fund performance reflects an additional 12b-1 fee expense which also affects future performance. FTVIPT Templeton International Smaller Companies Fund - Class 2 merged into this fund as of April 30, 2002. (h) CORE(SM) is a service mark of Goldman, Sachs & Co. (i) The returns shown for Service Shares for periods prior to their inception (Dec. 31, 1999) are derived from the historical performance of the Institutional Shares adjusted to reflect the higher operating expenses of Service Shares. In recent years returns have sustained significant gains and losses due to market volatility in the technology sector. (j) In recent years returns have sustained significant gains and losses due to market volatility in the technology sector. (k) 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. (l) Performance information for Class IB shares for periods prior to April 30, 1998 for Putnam VT International New Opportunities 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 0.25%. Restated to reflect an increase in 12b-1 fees effective April 30, 2001. Actual 12b-1 fees during the most recent fiscal year were 0.22%. (m) Performance for periods prior to Sept. 20, 1999, reflects performance of the Life and Annuity Trust Asset Allocation Fund, its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust Funds were reorganized into the Wells Fargo Variable Trust Funds. (n) Performance for periods prior to Sept. 20, 1999, reflects performance of the Norwest Select Small Company Stock Fund (the accounting survivor of a merger of the Life and Annuity Trust Strategic Growth Fund and the Norwest Select Small Company Stock Fund), its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust and Norwest Select Funds were reorganized into the Wells Fargo Variable Trust Funds. 9 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 the following charges: the contract administrative charge, the Maximum Anniversary Value Death Benefit Rider fee, the Enhanced Earnings Death Benefit Rider fee and mortality and expense risk fee. ANNUALIZED 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) raising the base period return to the power of 365/7. The subaccount's value includes: - any declared dividends, - the value of any shares purchased with dividends paid during the period, and - 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)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 YIELD BASED ON THE SEVEN-DAY PERIOD ENDING DEC. 31, 2001
VARIABLE ACCOUNT INVESTING IN: SIMPLE YIELD COMPOUND YIELD CM3 AXP(R) Variable Portfolio - Cash Management Fund 1.04% 1.05%
ANNUALIZED YIELD FOR A SUBACCOUNT INVESTING IN AN INCOME FUND 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 ANNUALIZED YIELD BASED ON 30-DAY PERIOD ENDED DEC. 31, 2001
SUBACCOUNT INVESTING IN YIELD BD3 AXP(R) Variable Portfolio - Bond Fund 2.84% EI3 AXP(R) Variable Portfolio - Extra Income Fund 11.80 FI3 AXP(R) Variable Portfolio - Federal Income Fund 5.61 GB3 AXP(R) Variable Portfolio - Global Bond Fund 9.70
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: - determine the dollar value of your contract on the valuation date and then deduct any applicable premium tax; then - 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: - the annuity unit value on the valuation date; by - 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: - the net investment factor; and - 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: - 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 - dividing that sum by the previous adjusted net asset value per share; and - 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. 11 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: - take the value of your fixed account at the retirement date or the date you selected to begin receiving your annuity payouts; then - 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 We receive ratings from 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. For detailed information on the agency ratings given to IDS Life, refer to the American Express Web site at (americanexpress.com/advisors) or contact your financial advisor. Or view our current ratings by visiting the agency Web sites directly at: A.M. Best www.ambest.com Fitch www.fitchratings.com Moody's www.moodys.com/insurance A.M. Best -- Rates insurance companies for their financial strength. Fitch (formerly Duff & Phelps) -- Rates insurance companies for their claims-paying ability. Moody's -- Rates insurance companies for their financial strength. PRINCIPAL UNDERWRITER IDS Life serves as principal underwriter for the contract, which it offers on a continuous basis. IDS Life is registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934 as a broker-dealer and is a member of the National Association of Securities Dealers, Inc. IDS Life is ultimately controlled by American Express Company. IDS Life currently pays underwriting commissions for its role as principal underwriter of all variable annuities associated with this variable account. For the past three years, the aggregate dollar amount of underwriting commissions paid in its role as principal underwriter for the variable account has been: 2001: $41,792,624; 2000: $56,851,815; and 1999: $21,517,281. IDS Life retains no underwriting commission from the sale of the contract. INDEPENDENT AUDITORS The financial statements appearing in this SAI have been audited by Ernst & Young LLP (1400 Pillsbury Center, 220 South Sixth Street, Minneapolis, MN 55402) independent auditors, as stated in their report appearing herein. 12 REPORT OF INDEPENDENT AUDITORS THE BOARD OF DIRECTORS IDS LIFE INSURANCE COMPANY We have audited the accompanying individual statements of assets and liabilities of the segregated asset subaccounts of IDS Life Variable Account 10 - American Express Retirement Advisor Variable Annuity(R) - Band 3 (comprised of subaccounts BC3, BD3, CR3, CM3, DE3, EM3, ES3, EI3, FI3, GB3, GR3, IE3, MF3, ND3, IV3, SC3, SA3, 3CA, 3CD, 3IF, 3VA, 3SR, 3EG, 3GI, 3MP, 3OS, 3RE, 3SI, 3IS, 3SE, 3UE, 3MC, 3AG, 3GT, 3IG, 3IP, 3MG, 3MD, 3IN, 3VS, 3MI, 3SV, 3IT, 3SP, 3AA, 3WI and 3SG) as of December 31, 2001, 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, 2001 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 Variable Annuity(R) - Band 3 at December 31, 2001, 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 22, 2002 13 STATEMENTS OF ASSETS AND LIABILITIES
SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------------------------------------- DECEMBER 31, 2001 BC3 BD3 CR3 CM3 DE3 EM3 ASSETS Investments in shares of mutual funds and portfolios: at cost $ 611,671 $ 365,128 $ 217,781 $ 5,443,014 $ 365,985 $ 4,225,791 ----------------------------------------------------------------------------- at market value $ 597,524 $ 362,247 $ 222,421 $ 5,443,005 $ 369,131 $ 3,676,115 Dividends receivable -- 1,777 -- 9,672 -- -- Accounts receivable from IDS Life for contract purchase payments -- 758,050 -- 769,040 -- -- Receivable from mutual funds and portfolios for share redemptions -- -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------- Total assets 597,524 1,122,074 222,421 6,221,717 369,131 3,676,115 =============================================================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 280 178 120 2,945 260 1,713 Contract terminations -- -- -- -- 80,987 4 Payable to mutual funds and portfolios for investments purchased -- -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------- Total liabilities 280 178 120 2,945 81,247 1,717 ------------------------------------------------------------------------------------------------------------------------------- Net assets applicable to contracts in accumulation period 597,244 1,121,896 222,301 6,218,772 287,884 2,401 Net assets applicable to contracts in payment period -- -- -- -- -- -- Net assets applicable to seed money -- -- -- -- -- 3,671,997 ------------------------------------------------------------------------------------------------------------------------------- Total net assets $ 597,244 $ 1,121,896 $ 222,301 $ 6,218,772 $ 287,884 $ 3,674,398 =============================================================================================================================== Accumulation units outstanding 728,975 984,546 291,207 5,658,076 281,449 3,269 =============================================================================================================================== Net asset value per accumulation unit $ 0.82 $ 1.14 $ 0.76 $ 1.10 $ 1.02 $ 0.73 =============================================================================================================================== See accompanying notes to financial statements. 14 SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------------------------------------- DECEMBER 31, 2001 (CONTINUED) ES3 EI3 FI3 GB3 GR3 IE3 ASSETS Investments in shares of mutual funds and portfolios: at cost $ 1,978,395 $ 3,013,865 $ 678,637 $ 260,404 $ 1,010,685 $ 42,871 ----------------------------------------------------------------------------- at market value $ 2,063,642 $ 2,998,820 $ 677,102 $ 256,485 $ 827,367 $ 43,891 Dividends receivable -- 15,324 3,614 2,072 -- -- Accounts receivable from IDS Life for contract purchase payments -- -- -- -- 43 -- Receivable from mutual funds and portfolios for share redemptions -- -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------- Total assets 2,063,642 3,014,144 680,716 258,557 827,410 43,891 =============================================================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 998 821 365 120 405 94 Contract terminations -- 1,537,869 -- -- -- -- Payable to mutual funds and portfolios for investments purchased -- -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------- Total liabilities 998 1,538,690 365 120 405 94 ------------------------------------------------------------------------------------------------------------------------------- Net assets applicable to contracts in accumulation period 38,163 1,475,454 680,351 258,437 827,005 43,797 Net assets applicable to contracts in payment period -- -- -- -- -- -- Net assets applicable to seed money 2,024,481 -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------- Total net assets $ 2,062,644 $ 1,475,454 $ 680,351 $ 258,437 $ 827,005 $ 43,797 =============================================================================================================================== Accumulation units outstanding 37,676 1,549,237 591,528 249,453 1,285,419 65,188 =============================================================================================================================== Net asset value per accumulation unit $ 1.01 $ 0.95 $ 1.15 $ 1.04 $ 0.64 $ 0.67 =============================================================================================================================== See accompanying notes to financial statements. 15 SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------------------------------------- DECEMBER 31, 2001 (CONTINUED) MF3 ND3 IV3 SC3 SA3 3CA ASSETS Investments in shares of mutual funds and portfolios: at cost $ 276,726 $ 3,107,828 $ 727,444 $ 538,804 $ 494,259 $ 1,781,822 ----------------------------------------------------------------------------- at market value $ 278,272 $ 3,062,864 $ 606,017 $ 541,007 $ 498,588 $ 1,206,747 Dividends receivable -- -- -- -- -- -- Accounts receivable from IDS Life for contract purchase payments 219 -- -- -- -- -- Receivable from mutual funds and portfolios for share redemptions -- -- -- -- -- 559 ------------------------------------------------------------------------------------------------------------------------------- Total assets 278,491 3,062,864 606,017 541,007 498,588 1,207,306 =============================================================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 134 1,434 288 267 283 559 Contract terminations -- 160,213 -- 132,601 3,895 -- Payable to mutual funds and portfolios for investments purchased -- -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------- Total liabilities 134 161,647 288 132,868 4,178 559 ------------------------------------------------------------------------------------------------------------------------------- Net assets applicable to contracts in accumulation period 278,357 2,901,217 605,729 408,139 494,410 1,206,747 Net assets applicable to contracts in payment period -- -- -- -- -- -- Net assets applicable to seed money -- -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------- Total net assets $ 278,357 $ 2,901,217 $ 605,729 $ 408,139 $ 494,410 $ 1,206,747 =============================================================================================================================== Accumulation units outstanding 295,986 3,252,328 770,207 378,441 607,048 1,357,788 =============================================================================================================================== Net asset value per accumulation unit $ 0.94 $ 0.89 $ 0.79 $ 1.08 $ 0.81 $ 0.89 =============================================================================================================================== See accompanying notes to financial statements. 16 SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------------------------------------- DECEMBER 31, 2001 (CONTINUED) 3CD 3IF 3VA 3SR 3EG 3GI ASSETS Investments in shares of mutual funds and portfolios: at cost $ 541,280 $ 715,637 $ 568,717 $ 6,095 $ 641,147 $ 1,047,300 ----------------------------------------------------------------------------- at market value $ 495,215 $ 654,892 $ 614,175 $ 5,638 $ 500,307 $ 989,859 Dividends receivable -- -- -- -- -- -- Accounts receivable from IDS Life for contract purchase payments -- -- -- -- -- 81 Receivable from mutual funds and portfolios for share redemptions 230 307 41,412 2 101,712 456 ------------------------------------------------------------------------------------------------------------------------------- Total assets 495,445 655,199 655,587 5,640 602,019 990,396 =============================================================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 230 304 286 2 277 456 Contract terminations -- 3 41,126 -- 101,435 -- Payable to mutual funds and portfolios for investments purchased -- -- -- -- -- 81 ------------------------------------------------------------------------------------------------------------------------------- Total liabilities 230 307 41,412 2 101,712 537 ------------------------------------------------------------------------------------------------------------------------------- Net assets applicable to contracts in accumulation period 495,215 654,892 614,175 5,638 500,307 989,859 Net assets applicable to contracts in payment period -- -- -- -- -- -- Net assets applicable to seed money -- -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------- Total net assets $ 495,215 $ 654,892 $ 614,175 $ 5,638 $ 500,307 $ 989,859 =============================================================================================================================== Accumulation units outstanding 393,985 781,411 505,918 6,328 467,439 1,090,207 =============================================================================================================================== Net asset value per accumulation unit $ 1.26 $ 0.84 $ 1.21 $ 0.89 $ 1.07 $ 0.91 =============================================================================================================================== See accompanying notes to financial statements. 17 SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------------------------------------- DECEMBER 31, 2001 (CONTINUED) 3MP 3OS 3RE 3SI 3IS 3SE ASSETS Investments in shares of mutual funds and portfolios: at cost $ 1,191,925 $ 91,790 $ 275,692 $ 196,326 $ 68,309 $ 113,285 ----------------------------------------------------------------------------- at market value $ 1,240,305 $ 88,248 $ 283,986 $ 203,677 $ 68,658 $ 115,362 Dividends receivable -- -- -- -- -- -- Accounts receivable from IDS Life for contract purchase payments 1,586 49 -- -- -- -- Receivable from mutual funds and portfolios for share redemptions 576 47 121 77 32 53 ------------------------------------------------------------------------------------------------------------------------------- Total assets 1,242,467 88,344 284,107 203,754 68,690 115,415 =============================================================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 576 47 121 77 32 53 Contract terminations -- -- -- -- -- -- Payable to mutual funds and portfolios for investments purchased 1,586 49 -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------- Total liabilities 2,162 96 121 77 32 53 ------------------------------------------------------------------------------------------------------------------------------- Net assets applicable to contracts in accumulation period 1,240,305 88,248 283,986 203,677 68,658 115,362 Net assets applicable to contracts in payment period -- -- -- -- -- -- Net assets applicable to seed money -- -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------- Total net assets $ 1,240,305 $ 88,248 $ 283,986 $ 203,677 $ 68,658 $ 115,362 =============================================================================================================================== Accumulation units outstanding 781,254 114,204 210,936 150,319 71,042 96,780 =============================================================================================================================== Net asset value per accumulation unit $ 1.59 $ 0.77 $ 1.35 $ 1.35 $ 0.97 $ 1.19 =============================================================================================================================== See accompanying notes to financial statements. 18 SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------------------------------------- DECEMBER 31, 2001 (CONTINUED) 3UE 3MC 3AG 3GT 3IG 3IP ASSETS Investments in shares of mutual funds and portfolios: at cost $ 939,179 $ 274,350 $ 167,281 $ 116,273 $ 368,567 $ 196,212 ----------------------------------------------------------------------------- at market value $ 818,177 $ 275,802 $ 118,520 $ 86,122 $ 369,605 $ 184,363 Dividends receivable -- -- -- -- -- -- Accounts receivable from IDS Life for contract purchase payments -- -- 5,145 -- 261 -- Receivable from mutual funds and portfolios for share redemptions 391 128 53 76,504 173 85 ------------------------------------------------------------------------------------------------------------------------------- Total assets 818,568 275,930 123,718 162,626 370,039 184,448 =============================================================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 386 128 53 76 173 85 Contract terminations 5 -- -- 76,428 -- -- Payable to mutual funds and portfolios for investments purchased -- -- 5,145 -- 261 -- ------------------------------------------------------------------------------------------------------------------------------- Total liabilities 391 128 5,198 76,504 434 85 ------------------------------------------------------------------------------------------------------------------------------- Net assets applicable to contracts in accumulation period 818,177 275,802 118,520 86,122 369,605 184,363 Net assets applicable to contracts in payment period -- -- -- -- -- -- Net assets applicable to seed money -- -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------- Total net assets $ 818,177 $ 275,802 $ 118,520 $ 86,122 $ 369,605 $ 184,363 =============================================================================================================================== Accumulation units outstanding 943,339 200,117 279,868 201,887 605,897 253,393 =============================================================================================================================== Net asset value per accumulation unit $ 0.87 $ 1.38 $ 0.42 $ 0.43 $ 0.61 $ 0.73 =============================================================================================================================== See accompanying notes to financial statements. 19 SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------------------------------------- DECEMBER 31, 2001 (CONTINUED) 3MG 3MD 3IN 3VS 3MI 3SV ASSETS Investments in shares of mutual funds and portfolios: at cost $ 680,483 $ 496,635 $ 934,743 $ 1,382,673 $ 522,413 $ 503,799 ----------------------------------------------------------------------------- at market value $ 617,667 $ 494,612 $ 883,132 $ 934,611 $ 603,623 $ 537,410 Dividends receivable -- -- -- -- -- -- Accounts receivable from IDS Life for contract purchase payments 348 310 -- -- 132 180 Receivable from mutual funds and portfolios for share redemptions 283 226 62,883 5,541 266 237 ------------------------------------------------------------------------------------------------------------------------------- Total assets 618,298 495,148 946,015 940,152 604,021 537,827 =============================================================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 283 226 449 435 266 237 Contract terminations -- -- 62,434 5,106 -- -- Payable to mutual funds and portfolios for investments purchased 348 310 -- -- 132 180 ------------------------------------------------------------------------------------------------------------------------------- Total liabilities 631 536 62,883 5,541 398 417 ------------------------------------------------------------------------------------------------------------------------------- Net assets applicable to contracts in accumulation period 617,667 494,612 883,132 934,611 603,623 537,410 Net assets applicable to contracts in payment period -- -- -- -- -- -- Net assets applicable to seed money -- -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------- Total net assets $ 617,667 $ 494,612 $ 883,132 $ 934,611 $ 603,623 $ 537,410 =============================================================================================================================== Accumulation units outstanding 913,438 547,539 1,346,750 1,092,048 343,988 314,283 =============================================================================================================================== Net asset value per accumulation unit $ 0.68 $ 0.90 $ 0.66 $ 0.86 $ 1.75 $ 1.71 =============================================================================================================================== See accompanying notes to financial statements. 20 SEGREGATED ASSET SUBACCOUNTS ---------------------------------------------------------------- DECEMBER 31, 2001 (CONTINUED) 3IT 3SP 3AA 3WI 3SG ASSETS Investments in shares of mutual funds and portfolios: at cost $ 690,133 $ 881,140 $ 8,274 $ 461 $ 2,066 ---------------------------------------------------------------- at market value $ 654,220 $ 958,142 $ 7,876 $ 455 $ 2,047 Dividends receivable -- -- -- -- -- Accounts receivable from IDS Life for contract purchase payments 258 -- -- -- -- Receivable from mutual funds and portfolios for share redemptions 278 442 4 -- 1 ------------------------------------------------------------------------------------------------------------------ Total assets 654,756 958,584 7,880 455 2,048 ================================================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 278 439 4 -- 1 Contract terminations -- 3 -- -- -- Payable to mutual funds and portfolios for investments purchased 258 -- -- -- -- ------------------------------------------------------------------------------------------------------------------ Total liabilities 536 442 4 -- 1 ------------------------------------------------------------------------------------------------------------------ Net assets applicable to contracts in accumulation period 654,220 955,164 7,876 455 2,047 Net assets applicable to contracts in payment period -- 2,978 -- -- -- Net assets applicable to seed money -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------ Total net assets $ 654,220 $ 958,142 $ 7,876 $ 455 $ 2,047 ================================================================================================================== Accumulation units outstanding 768,839 819,784 8,116 506 2,169 ================================================================================================================== Net asset value per accumulation unit $ 0.85 $ 1.17 $ 0.97 $ 0.90 $ 0.94 ==================================================================================================================
See accompanying notes to financial statements. 21 STATEMENTS OF OPERATIONS
SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 BC3 BD3 CR3 CM3 DE3 EM3 INVESTMENT INCOME Dividend income from mutual funds and portfolios $ 3,588 $ 38,320 $ 706 $ 272,942 $ 4,025 $ 575 Variable account expenses 2,804 3,372 1,433 40,706 2,271 20,181 ------------------------------------------------------------------------------------------------------------------------------- Investment income (loss) -- net 784 34,948 (727) 232,236 1,754 (19,606) =============================================================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 3,297,642 4,878,350 5,996,477 158,456,563 10,079,132 1,163,361 Cost of investments sold 3,396,615 4,868,565 6,152,004 158,456,743 10,063,252 1,474,157 ------------------------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on sales of investments (98,973) 9,785 (155,527) (180) 15,880 (310,796) Distributions from capital gains -- -- -- -- -- -- Net change in unrealized appreciation or depreciation of investments 8,389 (5,986) 77,338 (9) (3,401) 257,738 ------------------------------------------------------------------------------------------------------------------------------- Net gain (loss) on investments (90,584) 3,799 (78,189) (189) 12,479 (53,058) ------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ (89,800) $ 38,747 $ (78,916) $ 232,047 $ 14,233 $ (72,664) =============================================================================================================================== SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) ES3(1) EI3 FI3 GB3 GR3 IE3 INVESTMENT INCOME Dividend income from mutual funds and portfolios $ -- $ 159,665 $ 15,791 $ 3,884 $ -- $ 3,875 Variable account expenses 7,461 8,177 2,078 464 6,112 1,644 ------------------------------------------------------------------------------------------------------------------------------- Investment income (loss) -- net (7,461) 151,488 13,713 3,420 (6,112) 2,231 =============================================================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 2,452,136 10,540,175 3,245,327 875,816 1,623,107 46,796,094 Cost of investments sold 2,499,907 10,762,498 3,239,962 869,293 2,249,148 46,522,957 ------------------------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on sales of investments (47,771) (222,323) 5,365 6,523 (626,041) 273,137 Distributions from capital gains -- -- -- -- -- -- Net change in unrealized appreciation or depreciation of investments 85,247 124,421 (1,551) (3,993) 96,024 15,747 ------------------------------------------------------------------------------------------------------------------------------- Net gain (loss) on investments 37,476 (97,902) 3,814 2,530 (530,017) 288,884 ------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ 30,015 $ 53,586 $ 17,527 $ 5,950 $ (536,129) $ 291,115 ===============================================================================================================================
(1) For the period May 1, 2001 (commencement of operations) to Dec. 31, 2001. See accompanying notes to financial statements. 22
SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 (CONTINUED) MF3 ND3 IV3 SC3 SA3 3CA INVESTMENT INCOME Dividend income from mutual funds and portfolios $ 6,597 $ 7,133 $ 15,219 $ -- $ 1,492 $ -- Variable account expenses 1,454 18,642 15,350 2,670 4,256 7,139 ------------------------------------------------------------------------------------------------------------------------------- Investment income (loss) -- net 5,143 (11,509) (131) (2,670) (2,764) (7,139) =============================================================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 1,767,005 9,433,243 8,353,111 2,944,565 15,868,693 620,139 Cost of investments sold 1,801,792 10,854,634 10,118,664 2,974,915 16,539,021 805,216 ------------------------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on sales of investments (34,787) (1,421,391) (1,765,553) (30,350) (670,328) (185,077) Distributions from capital gains -- -- -- -- -- 97,097 Net change in unrealized appreciation or depreciation of investments 18,304 616,580 893,596 7,734 336,284 (276,634) ------------------------------------------------------------------------------------------------------------------------------- Net gain (loss) on investments (16,483) (804,811) (871,957) (22,616) (334,044) (364,614) ------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ (11,340) $ (816,320) $ (872,088) $ (25,286) $ (336,808) $ (371,753) =============================================================================================================================== SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 (CONTINUED) 3CD 3IF 3VA 3SR 3EG 3GI INVESTMENT INCOME Dividend income from mutual funds and portfolios $ -- $ 472 $ 5,453 $ 213 $ -- $ 9,225 Variable account expenses 2,664 3,865 3,372 15 3,953 4,714 ------------------------------------------------------------------------------------------------------------------------------- Investment income (loss) -- net (2,664) (3,393) 2,081 198 (3,953) 4,511 =============================================================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 90,525 10,936,090 2,879,190 1,364 512,675 894,695 Cost of investments sold 100,894 11,117,116 2,815,908 1,486 707,556 967,654 ------------------------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on sales of investments (10,369) (181,026) 63,282 (122) (194,881) (72,959) Distributions from capital gains -- 52,107 -- 104 -- 31,262 Net change in unrealized appreciation or depreciation of investments (28,845) (75,606) 19,701 (308) (31,110) (33,879) ------------------------------------------------------------------------------------------------------------------------------- Net gain (loss) on investments (39,214) (204,525) 82,983 (326) (225,991) (75,576) ------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ (41,878) $ (207,918) $ 85,064 $ (128) $ (229,944) $ (71,065) =============================================================================================================================== See accompanying notes to financial statements. 23 SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 (CONTINUED) 3MP 3OS 3RE 3SI 3IS 3SE INVESTMENT INCOME Dividend income from mutual funds and portfolios $ -- $ 5,317 $ 8,200 $ 410 $ 2,688 $ 325 Variable account expenses 6,422 672 1,272 577 425 646 ------------------------------------------------------------------------------------------------------------------------------- Investment income (loss) -- net (6,422) 4,645 6,928 (167) 2,263 (321) =============================================================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 2,078,878 5,266,540 3,054,846 118,743 1,589,162 76,515 Cost of investments sold 2,121,440 5,300,027 3,034,663 127,158 1,597,944 82,363 ------------------------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on sales of investments (42,562) (33,487) 20,183 (8,415) (8,782) (5,848) Distributions from capital gains -- 8,496 -- 2,370 -- -- Net change in unrealized appreciation or depreciation of investments 20,869 (298) 2,232 6,700 (80) 6,702 ------------------------------------------------------------------------------------------------------------------------------- Net gain (loss) on investments (21,693) (25,289) 22,415 655 (8,862) 854 ------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ (28,115) $ (20,644) $ 29,343 $ 488 $ (6,599) $ 533 =============================================================================================================================== SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 (CONTINUED) 3UE 3MC 3AG 3GT 3IG 3IP INVESTMENT INCOME Dividend income from mutual funds and portfolios $ 3,723 $ 2,442 $ -- $ 1,211 $ 2,384 $ 15 Variable account expenses 3,850 784 987 1,000 2,495 728 ------------------------------------------------------------------------------------------------------------------------------- Investment income (loss) -- net (127) 1,658 (987) 211 (111) (713) =============================================================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 124,760 131,032 1,071,718 1,255,971 12,443,118 1,641,608 Cost of investments sold 148,135 134,498 1,165,477 1,417,425 12,490,219 1,653,410 ------------------------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on sales of investments (23,375) (3,466) (93,759) (161,454) (47,101) (11,802) Distributions from capital gains -- 12,617 -- -- -- 953 Net change in unrealized appreciation or depreciation of investments (64,516) (676) (931) 55,614 (6,034) (9,460) ------------------------------------------------------------------------------------------------------------------------------- Net gain (loss) on investments (87,891) 8,475 (94,690) (105,840) (53,135) (20,309) ------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ (88,018) $ 10,133 $ (95,677) $ (105,629) $ (53,246) $ (21,022) =============================================================================================================================== See accompanying notes to financial statements. 24 SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 (CONTINUED) 3MG 3MD 3IN 3VS 3MI 3SV INVESTMENT INCOME Dividend income from mutual funds and portfolios $ 305 $ -- $ -- $ -- $ -- $ 706 Variable account expenses 2,594 2,118 6,829 6,355 2,693 2,310 ------------------------------------------------------------------------------------------------------------------------------- Investment income (loss) -- net (2,289) (2,118) (6,829) (6,355) (2,693) (1,604) =============================================================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 797,713 440,918 16,045,321 1,481,367 392,273 399,752 Cost of investments sold 905,354 475,192 16,419,190 1,919,692 352,588 387,367 ------------------------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on sales of investments (107,641) (34,274) (373,869) (438,325) 39,685 12,385 Distributions from capital gains 3,682 11,262 -- 163,984 8,636 4,635 Net change in unrealized appreciation or depreciation of investments (25,399) 12,810 (17,056) (303,292) 63,332 20,563 ------------------------------------------------------------------------------------------------------------------------------- Net gain (loss) on investments (129,358) (10,202) (390,925) (577,633) 111,653 37,583 ------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ (131,647) $ (12,320) $ (397,754) $ (583,988) $ 108,960 $ 35,979 =============================================================================================================================== SEGREGATED ASSET SUBACCOUNTS ---------------------------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 3IT 3SP 3AA(1) 3WI(1) 3SG(1) INVESTMENT INCOME Dividend income from mutual funds and portfolios $ -- $ 704 $ 90 $ -- $ -- Variable account expenses 3,283 5,577 32 41 7 ------------------------------------------------------------------------------------------------------------------ Investment income (loss) -- net (3,283) (4,873) 58 (41) (7) ================================================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 8,698,013 2,882,342 228,488 1,427,070 1,104 Cost of investments sold 8,970,877 2,845,513 228,827 1,427,367 1,193 ------------------------------------------------------------------------------------------------------------------ Net realized gain (loss) on sales of investments (272,864) 36,829 (339) (297) (89) Distributions from capital gains 177,936 -- 210 -- -- Net change in unrealized appreciation or depreciation of investments (26,983) 83,242 (398) (6) (19) ------------------------------------------------------------------------------------------------------------------ Net gain (loss) on investments (121,911) 120,071 (527) (303) (108) ------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $ (125,194) $ 115,198 $ (469) $ (344) $ (115) ==================================================================================================================
(1) For the period May 1, 2001 (commencement of operations) to Dec. 31, 2001. See accompanying notes to financial statements. 25 STATEMENTS OF CHANGES IN NET ASSETS
SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 BC3 BD3 CR3 CM3 DE3 EM3 OPERATIONS Investment income (loss) -- net $ 784 $ 34,948 $ (727) $ 232,236 $ 1,754 $ (19,606) Net realized gain (loss) on sales of investments (98,973) 9,785 (155,527) (180) 15,880 (310,796) Distributions from capital gains -- -- -- -- -- -- Net change in unrealized appreciation or depreciation of investments 8,389 (5,986) 77,338 (9) (3,401) 257,738 ------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (89,800) 38,747 (78,916) 232,047 14,233 (72,664) =============================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 12,629 102,774 7,965 12,532,302 23,747 9 Net transfers(1) 264,035 578,387 46,804 (4,219,613) 193,867 1,298 Transfers for policy loans -- -- -- (3,472) -- -- Contract charges (97) (18) (67) (422) (76) -- Contract terminations: Surrender benefits (36,893) (33,915) (3,000) (9,369,308) (163,632) -- Death benefits -- -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 239,674 647,228 51,702 (1,060,513) 53,906 1,307 ------------------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year 447,370 435,921 249,515 7,047,238 219,745 3,745,755 ------------------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 597,244 $ 1,121,896 $ 222,301 $ 6,218,772 $ 287,884 $ 3,674,398 =============================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 453,558 409,536 266,218 6,615,282 218,167 1,252 Contract purchase payments 15,353 93,465 9,392 11,574,554 24,242 14 Net transfers(1) 303,239 511,400 19,648 (3,894,708) 198,574 2,003 Transfers for policy loans -- -- -- (3,192) -- -- Contract charges (113) (16) (82) (385) (77) -- Contract terminations: Surrender benefits (43,062) (29,839) (3,969) (8,633,475) (159,457) -- Death benefits -- -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 728,975 984,546 291,207 5,658,076 281,449 3,269 ===============================================================================================================================
(1) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 26
SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) ES3(1) EI3 FI3 GB3 GR3 IE3 OPERATIONS Investment income (loss) -- net $ (7,461) $ 151,488 $ 13,713 $ 3,420 $ (6,112) $ 2,231 Net realized gain (loss) on sales of investments (47,771) (222,323) 5,365 6,523 (626,041) 273,137 Distributions from capital gains -- -- -- -- -- -- Net change in unrealized appreciation or depreciation of investments 85,247 124,421 (1,551) (3,993) 96,024 15,747 ------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 30,015 53,586 17,527 5,950 (536,129) 291,115 =============================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 2,001,788 28,149 47,030 4,415 87,097 8,016 Net transfers(2) 30,841 318,431 623,192 243,869 (341,843) (320,543) Transfers for policy loans -- -- (8,413) -- 383 -- Contract charges -- (81) -- (6) (391) (43) Contract terminations: Surrender benefits -- (6,983) -- -- (32,568) (11,447) Death benefits -- -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 2,032,629 339,516 661,809 248,278 (287,322) (324,017) ------------------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year -- 1,082,352 1,015 4,209 1,650,456 76,699 ------------------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 2,062,644 $ 1,475,454 $ 680,351 $ 258,437 $ 827,005 $ 43,797 =============================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year -- 1,185,569 934 4,092 1,761,529 80,621 Contract purchase payments 1,930 30,373 41,646 4,248 115,884 11,347 Net transfers(2) 35,746 340,788 556,291 241,119 (539,779) (12,152) Transfers for policy loans -- -- (7,343) -- 552 -- Contract charges -- (85) -- (6) (553) (55) Contract terminations: Surrender benefits -- (7,408) -- -- (52,214) (14,573) Death benefits -- -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 37,676 1,549,237 591,528 249,453 1,285,419 65,188 ===============================================================================================================================
(1) For the period May 1, 2001 (commencement of operations) to Dec. 31, 2001. (2) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 27
SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 (CONTINUED) MF3 ND3 IV3 SC3 SA3 3CA OPERATIONS Investment income (loss) -- net $ 5,143 $ (11,509) $ (131) $ (2,670) $ (2,764) $ (7,139) Net realized gain (loss) on sales of investments (34,787) (1,421,391) (1,765,553) (30,350) (670,328) (185,077) Distributions from capital gains -- -- -- -- -- 97,097 Net change in unrealized appreciation or depreciation of investments 18,304 616,580 893,596 7,734 336,284 (276,634) ------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (11,340) (816,320) (872,088) (25,286) (336,808) (371,753) =============================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 164,766 223,803 2,851 15,918 48,432 38,334 Net transfers(1) (18,863) (456,464) 433,418 223,978 (181,643) 514 Transfers for policy loans -- 521 -- 64 457 64 Contract charges (36) (708) (8) (73) (370) (175) Contract terminations: Surrender benefits (9,000) (270,298) (8,248,026) (138,514) (10,151) (24,415) Death benefits -- -- (3,318) -- -- -- ------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 136,867 (503,146) (7,815,083) 101,373 (143,275) 14,322 ------------------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year 152,830 4,220,683 9,292,900 332,052 974,493 1,564,178 ------------------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 278,357 $ 2,901,217 $ 605,729 $ 408,139 $ 494,410 $ 1,206,747 =============================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 144,523 3,919,497 285,103 286,198 798,425 1,342,566 Contract purchase payments 162,392 240,350 3,071 15,253 55,944 39,882 Net transfers(1) (1,215) (608,454) 513,204 205,147 (236,405) 1,476 Transfers for policy loans -- 588 -- 64 539 75 Contract charges (36) (777) (10) (74) (405) (189) Contract terminations: Surrender benefits (9,678) (298,876) (26,869) (128,147) (11,050) (26,022) Death benefits -- -- (4,292) -- -- -- ------------------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 295,986 3,252,328 770,207 378,441 607,048 1,357,788 ===============================================================================================================================
(1) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 28
SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 (CONTINUED) 3CD 3IF 3VA 3SR 3EG 3GI OPERATIONS Investment income (loss) -- net $ (2,664) $ (3,393) $ 2,081 $ 198 $ (3,953) $ 4,511 Net realized gain (loss) on sales of investments (10,369) (181,026) 63,282 (122) (194,881) (72,959) Distributions from capital gains -- 52,107 -- 104 -- 31,262 Net change in unrealized appreciation or depreciation of investments (28,845) (75,606) 19,701 (308) (31,110) (33,879) ------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (41,878) (207,918) 85,064 (128) (229,944) (71,065) =============================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 10,681 32,576 23,948 830 20,773 66,658 Net transfers(1) 103,092 227,902 119,059 340 (330,950) 307,897 Transfers for policy loans -- 64 64 -- -- 64 Contract charges (112) (104) (52) -- (154) (237) Contract terminations: Surrender benefits (13,395) (31,728) (84,589) (122) (108,530) (78,226) Death benefits -- -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 100,266 228,710 58,430 1,048 (418,861) 296,156 ------------------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year 436,827 634,100 470,681 4,718 1,149,112 764,768 ------------------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 495,215 $ 654,892 $ 614,175 $ 5,638 $ 500,307 $ 989,859 =============================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 317,679 532,486 434,968 4,896 890,661 763,574 Contract purchase payments 8,663 33,194 21,946 876 19,696 71,220 Net transfers(1) 79,200 251,300 120,400 693 (341,506) 343,016 Transfers for policy loans -- 78 56 -- -- 72 Contract charges (92) (109) (46) -- (150) (268) Contract terminations: Surrender benefits (11,465) (35,538) (71,406) (137) (101,262) (87,407) Death benefits -- -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 393,985 781,411 505,918 6,328 467,439 1,090,207 ===============================================================================================================================
(1) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 29
SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 (CONTINUED) 3MP 3OS 3RE 3SI 3IS 3SE OPERATIONS Investment income (loss) -- net $ (6,422) $ 4,645 $ 6,928 $ (167) $ 2,263 $ (321) Net realized gain (loss) on sales of investments (42,562) (33,487) 20,183 (8,415) (8,782) (5,848) Distributions from capital gains -- 8,496 -- 2,370 -- -- Net change in unrealized appreciation or depreciation of investments 20,869 (298) 2,232 6,700 (80) 6,702 ------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (28,115) (20,644) 29,343 488 (6,599) 533 =============================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 131,248 16,021 8,238 33,993 5,317 2,005 Net transfers(1) 203,801 (17,992) 68,584 164,697 56,388 27,245 Transfers for policy loans (9,443) -- -- -- -- (4) Contract charges (515) (77) (72) (20) (44) (63) Contract terminations: Surrender benefits (67,918) (3,113) (1,253) (6,564) (29,199) (29,387) Death benefits (5,150) -- (6,040) -- -- -- ------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 252,023 (5,161) 69,457 192,106 32,462 (204) ------------------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year 1,016,397 114,053 185,186 11,083 42,795 115,033 ------------------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 1,240,305 $ 88,248 $ 283,986 $ 203,677 $ 68,658 $ 115,362 =============================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 615,520 115,541 147,540 9,257 42,858 100,314 Contract purchase payments 86,538 18,365 6,495 25,689 5,745 1,803 Net transfers(1) 134,689 (15,043) 62,644 120,960 52,835 20,615 Transfers for policy loans (6,435) -- -- -- -- (1) Contract charges (342) (91) (55) (15) (47) (58) Contract terminations: Surrender benefits (45,316) (4,568) (1,036) (5,572) (30,349) (25,893) Death benefits (3,400) -- (4,652) -- -- -- ------------------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 781,254 114,204 210,936 150,319 71,042 96,780 ===============================================================================================================================
(1) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 30
SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 (CONTINUED) 3UE 3MC 3AG 3GT 3IG 3IP OPERATIONS Investment income (loss) -- net $ (127) $ 1,658 $ (987) $ 211 $ (111) $ (713) Net realized gain (loss) on sales of investments (23,375) (3,466) (93,759) (161,454) (47,101) (11,802) Distributions from capital gains -- 12,617 -- -- -- 953 Net change in unrealized appreciation or depreciation of investments (64,516) (676) (931) 55,614 (6,034) (9,460) ------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (88,018) 10,133 (95,677) (105,629) (53,246) (21,022) =============================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 29,985 81,997 29,095 20,612 61,719 5,085 Net transfers(1) 328,864 227,145 (55,427) 40,583 (46,691) 148,913 Transfers for policy loans (53) (4,996) -- -- -- 64 Contract charges (200) (83) (165) (227) (93) (74) Contract terminations: Surrender benefits (24,224) (56,438) (931) (81,420) (37,148) (3,464) Death benefits -- -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 334,372 247,625 (27,428) (20,452) (22,213) 150,524 ------------------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year 571,823 18,044 241,625 212,203 445,064 54,861 ------------------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 818,177 $ 275,802 $ 118,520 $ 86,122 $ 369,605 $ 184,363 =============================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 577,230 14,593 342,793 309,990 555,627 56,924 Contract purchase payments 32,330 65,228 51,822 40,841 74,737 6,709 Net transfers(1) 362,668 167,062 (112,480) 40,845 35,872 193,586 Transfers for policy loans (60) (3,853) -- -- -- 89 Contract charges (224) (65) (362) (508) (150) (92) Contract terminations: Surrender benefits (28,605) (42,848) (1,905) (189,281) (60,189) (3,823) Death benefits -- -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 943,339 200,117 279,868 201,887 605,897 253,393 ===============================================================================================================================
(1) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 31
SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 (CONTINUED) 3MG 3MD 3IN 3VS 3MI 3SV OPERATIONS Investment income (loss) -- net $ (2,289) $ (2,118) $ (6,829) $ (6,355) $ (2,693) $ (1,604) Net realized gain (loss) on sales of investments (107,641) (34,274) (373,869) (438,325) 39,685 12,385 Distributions from capital gains 3,682 11,262 -- 163,984 8,636 4,635 Net change in unrealized appreciation or depreciation of investments (25,399) 12,810 (17,056) (303,292) 63,332 20,563 ------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (131,647) (12,320) (397,754) (583,988) 108,960 35,979 =============================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 141,372 49,174 29,718 99,376 43,133 55,843 Net transfers(1) 125,534 127,146 (335,199) (271,807) 243,178 394,861 Transfers for policy loans (16) -- 383 383 (6,887) (3,674) Contract charges (72) (98) (436) (338) (176) (85) Contract terminations: Surrender benefits (123) (6,910) (76,127) (30,701) (48,271) (51,084) Death benefits -- -- (2,512) -- -- -- ------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 266,695 169,312 (384,173) (203,087) 230,977 395,861 ------------------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year 482,619 337,620 1,665,059 1,721,686 263,686 105,570 ------------------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 617,667 $ 494,612 $ 883,132 $ 934,611 $ 603,623 $ 537,410 =============================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 532,539 352,144 1,801,521 1,330,395 192,780 69,818 Contract purchase payments 208,754 56,265 41,032 100,690 32,221 35,992 Net transfers(1) 172,490 147,288 (377,439) (306,017) 154,369 242,084 Transfers for policy loans (23) -- 557 424 (4,429) (2,390) Contract charges (104) (115) (617) (380) (114) (53) Contract terminations: Surrender benefits (218) (8,043) (114,390) (33,064) (30,839) (31,168) Death benefits -- -- (3,914) -- -- -- ------------------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 913,438 547,539 1,346,750 1,092,048 343,988 314,283 ===============================================================================================================================
(1) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 32
SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------ PERIOD ENDED DECEMBER 31, 2001(CONTINUED) 3IT 3SP 3AA(1) 3WI(1) 3SG(1) OPERATIONS Investment income (loss) -- net $ (3,283) $ (4,873) $ 58 $ (41) $ (7) Net realized gain (loss) on sales of investments (272,864) 36,829 (339) (297) (89) Distributions from capital gains 177,936 -- 210 -- -- Net change in unrealized appreciation or depreciation of investments (26,983) 83,242 (398) (6) (19) ------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations (125,194) 115,198 (469) (344) (115) ================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 120,217 56,138 409 269 79 Net transfers(2) 23,742 (230,847) 7,936 535 2,025 Transfers for policy loans (799) -- -- -- 64 Contract charges (382) (202) -- (5) (6) Contract terminations: Surrender benefits (13,798) (23,788) -- -- -- Death benefits -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------ Increase (decrease) from contract transactions 128,980 (198,699) 8,345 799 2,162 ------------------------------------------------------------------------------------------------------------------ Net assets at beginning of year 650,434 1,041,643 -- -- -- ------------------------------------------------------------------------------------------------------------------ Net assets at end of year $ 654,220 $ 958,142 $ 7,876 $ 455 $ 2,047 ================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 599,215 990,217 -- -- -- Contract purchase payments 132,754 50,060 425 270 87 Net transfers(2) 52,731 (198,497) 7,691 242 2,016 Transfers for policy loans (1,130) -- -- -- 75 Contract charges (415) (186) -- (6) (9) Contract terminations: Surrender benefits (14,316) (21,810) -- -- -- Death benefits -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------ Units outstanding at end of year 768,839 819,784 8,116 506 2,169 ==================================================================================================================
(1) For the period May 1, 2001 (commencement of operations) to Dec. 31, 2001. (2) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 33
SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------------------------ YEAR ENDED 31, DECEMBER 2000 (CONTINUED) BC3 BD3 CR3 CM3 DE3 EM3(1) OPERATIONS Investment income (loss)-- net $ (284) $ 6,659 $ 83,919 $ 148,842 $ 1,021 $ (12,234) Net realized gain (loss) on investments (9,469) (747) (113,559) (29,829) 7,148 (419,249) Net change in unrealized appreciation or depreciation of investments (44,170) 3,200 (130,039) 1 6,069 (807,414) ----------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (53,923) 9,112 (159,679) 119,014 14,238 (1,238,897) ======================================================================================================================= CONTRACT TRANSACTIONS Contract purchase payments 58,126 192,487 265,037 7,243,061 15,668 5,000,000 Net transfers(2) 245,033 191,734 (851,504) (2,220,181) 166,784 (15,348) 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 4,984,652 ----------------------------------------------------------------------------------------------------------------------- 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 $ 3,745,755 ======================================================================================================================= 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 1,252 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 1,252 =======================================================================================================================
(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. 34
SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------------------------ YEAR ENDED 31, DECEMBER 2000 (CONTINUED) EI3 FI3 GB3 GR3 IE3 MF3 OPERATIONS Investment income (loss)-- net $ 89,792 $ 345 $ 118 $ (7,028) $ 14,347 $ 10,656 Net realized gain (loss) on investments (65,064) 27 (121) (34,905) 59,267 3,173 Net change in unrealized appreciation or depreciation of investments (139,838) 19 97 (342,081) (32,516) (17,141) ----------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (115,110) 391 94 (384,014) 41,098 (3,312) ======================================================================================================================= CONTRACT TRANSACTIONS Contract purchase payments 1,914,727 65,402 (246) 1,539,082 45,116 21,479 Net transfers(1) (756,503) (85,642) 1,549 215,652 (166,404) 124,199 Transfers for policy loans -- -- -- (1,478) -- -- Contract charges (10) -- (5) (102) (4) (4) Contract terminations: Surrender benefits (9,538) -- -- (186,378) (12,606) -- ----------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 1,148,676 (20,240) 1,298 1,566,776 (133,898) 145,674 ----------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year 48,786 20,864 2,817 467,694 169,499 10,468 ----------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 1,082,352 $ 1,015 $ 4,209 $ 1,650,456 $ 76,699 $ 152,830 ======================================================================================================================= ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 48,194 9,663 2,813 400,647 133,025 9,618 Contract purchase payments 1,949,394 61,805 (246) 1,292,730 37,299 21,284 Net transfers(1) (802,277) (70,534) 1,531 242,715 (78,891) 113,625 Transfers for policy loans -- -- -- (1,171) -- -- Contract charges (11) -- (6) (91) (4) (4) Contract terminations: Surrender benefits (9,731) -- -- (173,301) (10,808) -- ----------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 1,185,569 934 4,092 1,761,529 80,621 144,523 =======================================================================================================================
(1) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 35
SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------------------------ YEAR ENDED 31, DECEMBER 2000 (CONTINUED) ND3 IV3(1) SC3 SA3 3CA 3CD OPERATIONS Investment income (loss) -- net $ 248,067 $ 33,024 $ 8,339 $ 347,022 $ 35,506 $ (1,121) Net realized gain (loss) on investments 25,623 4,672 29,975 (315,311) 18,400 11,164 Net change in unrealized appreciation or depreciation of investments (702,359) (1,015,023) (72,468) (341,167) (323,332) (18,100) ----------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (428,669) (977,327) (34,154) (309,456) (269,426) (8,057) ======================================================================================================================= CONTRACT TRANSACTIONS Contract purchase payments 2,589,396 10,206,195 133,746 1,091,392 1,314,812 239,873 Net transfers(2) 1,831,870 64,032 185,041 391,148 310,875 201,928 Transfers for policy loans (4,040) -- -- (3,960) -- -- Contract charges (323) -- (29) (59) (38) (35) Contract terminations: Surrender benefits (275,034) -- (414,304) (244,469) (35,408) (1,764) ----------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 4,141,869 10,270,227 (95,546) 1,234,052 1,590,241 440,002 ----------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year 507,483 -- 461,752 49,897 243,363 4,882 ----------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 4,220,683 $ 9,292,900 $ 332,052 $ 974,493 $ 1,564,178 $ 436,827 ======================================================================================================================= ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 426,131 -- 27,894 32,918 185,081 3,858 Contract purchase payments 2,173,284 218,925 111,759 689,417 951,543 170,881 Net transfers(2) 1,559,162 66,178 148,062 259,388 231,368 144,222 Transfers for policy loans (3,595) -- -- (2,735) -- -- Contract charges (289) -- (25) (46) (27) (25) Contract terminations: Surrender benefits (235,196) -- (1,492) (180,517) (25,399) (1,257) ----------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 3,919,497 285,103 286,198 798,425 1,342,566 317,679 =======================================================================================================================
(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. 36
SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------------------------ YEAR ENDED 31, DECEMBER 2000 (CONTINUED) 3IF 3VA 3SR(1) 3EG 3GI 3MP OPERATIONS Investment income (loss) -- net $ 3,826 $ 24,278 $ 350 $ (3,227) $ 36,703 $ 1,127 Net realized gain (loss) on investments (47,714) 30,164 (533) 25,036 (43,348) 111,269 Net change in unrealized appreciation or depreciation of investments 13,185 25,080 (149) (113,327) (32,203) 13,084 ----------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (30,703) 79,522 (332) (91,518) (38,848) 125,480 ======================================================================================================================= CONTRACT TRANSACTIONS Contract purchase payments 738,771 470,119 4,516 1,124,886 278,264 488,214 Net transfers(2) (84,458) (19,169) 534 209,334 88,024 293,750 Transfers for policy loans -- -- -- -- -- 3,181 Contract charges (28) -- -- (30) (139) (149) Contract terminations: Surrender benefits (3,052) (114,352) -- (115,882) (27,533) (21,083) ----------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 651,233 336,598 5,050 1,218,308 338,616 763,913 ----------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year 13,570 54,561 -- 22,322 465,000 127,004 ----------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 634,100 $ 470,681 $ 4,718 $ 1,149,112 $ 764,768 $1,016,397 ======================================================================================================================= ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 9,427 59,244 -- 16,945 444,754 102,185 Contract purchase payments 523,372 517,645 4,548 800,177 272,923 318,306 Net transfers(2) 2,027 (20,233) 348 155,232 72,755 206,607 Transfers for policy loans -- -- -- -- -- 2,256 Contract charges (24) -- -- (23) (136) (94) Contract terminations: Surrender benefits (2,316) (121,688) -- (81,670) (26,722) (13,740) ----------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 532,486 434,968 4,896 890,661 763,574 615,520 =======================================================================================================================
(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. 37
SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------------------------ YEAR ENDED 31, DECEMBER 2000 (CONTINUED) 3OS 3RE 3SI 3IS 3SE 3UE OPERATIONS Investment income (loss)-- net $ 3,250 $ 29,902 $ (39) $ 335 $ 3,309 $ 4,740 Net realized gain (loss) on investments 11,835 (2,692) 7,376 24,306 (2,040) (4,937) Net change in unrealized appreciation or depreciation of investments (7,391) 6,014 592 (104) (8,720) (61,980) ----------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 7,694 33,224 7,929 24,537 (7,451) (62,177) ======================================================================================================================= CONTRACT TRANSACTIONS Contract purchase payments 75,655 154,925 7,737 40,086 62,125 469,167 Net transfers(1) 175 (5,142) (6,146) (31,219) 17,008 (19,983) Transfers for policy loans -- -- -- -- -- -- Contract charges (5) (24) -- (14) (39) (72) Contract terminations: Surrender benefits -- (1,786) -- -- (2,966) (2,822) ----------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 75,825 147,973 1,591 8,853 76,128 446,290 ----------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year 30,534 3,989 1,563 9,405 46,356 187,710 ----------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 114,053 $ 185,186 $ 11,083 $ 42,795 $ 115,033 $ 571,823 ======================================================================================================================= ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 24,865 4,160 1,623 9,250 40,902 170,333 Contract purchase payments 65,898 137,759 7,829 38,553 51,234 434,350 Net transfers(1) 24,783 7,103 (195) (4,931) 10,723 (24,837) Transfers for policy loans -- -- -- -- -- -- Contract charges (5) (20) -- (14) (35) (69) Contract terminations: Surrender benefits -- (1,462) -- -- (2,510) (2,547) ----------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 115,541 147,540 9,257 42,858 100,314 577,230 =======================================================================================================================
(1) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 38
SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------------------------------------------------- YEAR ENDED 31, DECEMBER 2000 (CONTINUED) 3MC 3AG(1) 3GT(1) 3IG(1) 3IP 3MG(1) 3MD(1) OPERATIONS Investment income (loss)-- net $ 515 $ 6,766 $ 723 $ 7,570 $ 549 $ (661) $ (486) Net realized gain (loss) on investments 1,533 (55,482) (493) (1,726) 26 (556) 1,429 Net change in unrealized appreciation or depreciation of investments 2,027 (47,830) (85,765) 7,072 (2,955) (37,417) (14,833) ----------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 4,075 (96,546) (85,535) 12,916 (2,380) (38,634) (13,890) =================================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 3,143 222,519 160,360 428,802 33,130 485,821 162,022 Net transfers(2) 3,647 115,847 139,701 6,408 15,182 35,436 191,979 Transfers for policy loans 76 -- -- -- -- -- -- Contract charges (15) (29) (28) (2) (35) (4) (1) Contract terminations: Surrender benefits (412) (166) (2,295) (3,060) -- -- (2,490) ----------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 6,439 338,171 297,738 432,148 48,277 521,253 351,510 ----------------------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year 7,530 -- -- -- 8,964 -- -- ----------------------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 18,044 $ 241,625 $ 212,203 $ 445,064 $ 54,861 $ 482,619 $ 337,620 =================================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 7,935 -- -- -- 8,363 -- -- Contract purchase payments 3,019 216,684 158,252 500,751 33,127 496,790 163,559 Net transfers(2) 3,970 126,355 154,235 58,193 15,472 35,753 191,061 Transfers for policy loans 80 -- -- -- -- -- -- Contract charges (13) (36) (29) (3) (38) (4) (1) Contract terminations: Surrender benefits (398) (210) (2,468) (3,314) -- -- (2,475) ----------------------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 14,593 342,793 309,990 555,627 56,924 532,539 352,144 ===================================================================================================================================
(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. 39
SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------------------------- YEAR ENDED 31, DECEMBER 2000 (CONTINUED) 3IN 3VS 3MI 3SV 3IT 3SP OPERATIONS Investment income (loss) -- net $ 30,031 $ 6,776 $ 5,998 $ (444) $ 64,295 $ 123,532 Net realized gain (loss) on investments (563,295) 19,640 26,137 27,659 (250,961) (212,677) Net change in unrealized appreciation or depreciation of investments (60,717) (162,052) 16,930 7,132 (39,390) (14,033) ----------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (593,981) (135,636) 49,065 34,347 (226,056) (103,178) ======================================================================================================================= CONTRACT TRANSACTIONS Contract purchase payments 1,748,710 1,524,126 301,123 34,772 635,975 1,086,657 Net transfers(1) 438,543 304,320 9,379 (83,672) 127,299 16,218 Transfers for policy loans (1,413) (1,535) 1,629 76 3,180 -- Contract charges (115) (154) (37) (18) (85) (37) Contract terminations: Surrender benefits (58,322) (217,319) (119,443) (10,292) (59,230) (101,430) ----------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 2,127,403 1,609,438 192,651 (59,134) 707,139 1,001,408 ----------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year 131,637 247,884 21,970 130,357 169,351 143,413 ----------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 1,665,059 $ 1,721,686 $ 263,686 $ 105,570 $ 650,434 $ 1,041,643 ======================================================================================================================= ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 86,882 182,717 19,042 120,448 111,791 124,538 Contract purchase payments 1,299,655 1,078,608 255,186 26,560 410,305 963,969 Net transfers(1) 468,567 221,461 10,660 (68,466) 121,611 3,491 Transfers for policy loans (780) (879) 1,362 71 2,229 -- Contract charges (115) (111) (28) (13) (71) (37) Contract terminations: Surrender benefits (52,688) (151,401) (93,442) (8,782) (46,650) (101,744) ----------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 1,801,521 1,330,395 192,780 69,818 599,215 990,217 =======================================================================================================================
(1) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 40 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 open-end management investment companies and have the following investment managers.
SUBACCOUNT INVESTS EXCLUSIVELY IN SHARES OF INVESTMENT MANAGER ------------------------------------------------------------------------------------------------------------------------------- BC3 AXP(R) Variable Portfolio - Blue Chip Advantage Fund IDS Life Insurance Company(1) BD3 AXP(R) Variable Portfolio - Bond Fund IDS Life Insurance Company(1) CR3 AXP(R) Variable Portfolio - Capital Resource Fund IDS Life Insurance Company(1) CM3 AXP(R) Variable Portfolio - Cash Management Fund IDS Life Insurance Company(1) DE3 AXP(R) Variable Portfolio - Diversified Equity Income Fund IDS Life Insurance Company(1) EM3 AXP(R) Variable Portfolio - Emerging Markets Fund IDS Life Insurance Company(2) ES3 AXP(R) Variable Portfolio - Equity Select Fund IDS Life Insurance Company(1) EI3 AXP(R) Variable Portfolio - Extra Income Fund IDS Life Insurance Company(1) FI3 AXP(R) Variable Portfolio - Federal Income Fund IDS Life Insurance Company(1) GB3 AXP(R) Variable Portfolio - Global Bond Fund IDS Life Insurance Company(1) GR3 AXP(R) Variable Portfolio - Growth Fund IDS Life Insurance Company(1) IE3 AXP(R) Variable Portfolio - International Fund IDS Life Insurance Company(2) MF3 AXP(R) Variable Portfolio - Managed Fund IDS Life Insurance Company(1) ND3 AXP(R) Variable Portfolio - NEW DIMENSIONS FUND(R) IDS Life Insurance Company(1) IV3 AXP(R) Variable Portfolio - S&P 500 Index Fund IDS Life Insurance Company(1) SC3 AXP(R) Variable Portfolio - Small Cap Advantage Fund IDS Life Insurance Company(3) SA3 AXP(R) Variable Portfolio - Strategy Aggressive Fund IDS Life Insurance Company(1) 3CA AIM V.I. Capital Appreciation Fund, Series I A I M Advisors, Inc. 3CD AIM V.I. Capital Development Fund, Series I A I M Advisors, Inc. 3IF American Century(R) VP International American Century Investment Management, Inc. 3VA American Century(R) VP Value American Century Investment Management, Inc. 3SR Calvert Variable Series, Inc. Social Balanced Portfolio Calvert Asset Management Company, Inc.(4) 3EG Credit Suisse Trust - Emerging Growth Portfolio Credit Suisse Asset Management, LLC 3GI Fidelity VIP Growth & Income Portfolio (Service Class) Fidelity Management & Research Company (FMR)(5) 3MP Fidelity VIP Mid Cap Portfolio (Service Class) Fidelity Management & Research Company (FMR)(5) 3OS Fidelity VIP Overseas Portfolio (Service Class) Fidelity Management & Research Company (FMR)(6) 3RE FTVIPT Franklin Real Estate Fund - Class 2 Franklin Advisers, Inc. 3SI FTVIPT Franklin Small Cap Value Securities Fund - Class 2 Franklin Advisory Services, LLC (previously FTVIPT Franklin Value Securities Fund - Class 2) 3IS FTVIPT Templeton International Smaller Companies Fund - Class 2(7) Templeton Investment Counsel, LLC 3SE Goldman Sachs VIT CORE(SM) Small Cap Equity Fund Goldman Sachs Asset Management 3UE Goldman Sachs VIT CORE(SM) U.S. Equity Fund Goldman Sachs Asset Management 3MC Goldman Sachs VIT Mid Cap Value Fund Goldman Sachs Asset Management 3AG Janus Aspen Series Aggressive Growth Portfolio: Service Shares Janus Capital 3GT Janus Aspen Series Global Technology Portfolio: Service Shares Janus Capital 3IG Janus Aspen Series International Growth Portfolio: Service Shares Janus Capital 3IP Lazard Retirement International Equity Portfolio Lazard Asset Management 3MG MFS(R) Investors Growth Stock Series - Service Class MFS Investment Management(R) 3MD MFS(R) New Discovery Series - Service Class MFS Investment Management(R) 3IN Putnam VT International New Opportunities Fund - Class IB Shares Putnam Investment Management, LLC 3VS Putnam VT Vista Fund - Class IB Shares Putnam Investment Management, LLC 3MI Royce Micro-Cap Portfolio Royce & Associates, LLC 3SV Third Avenue Value Portfolio EQSF Advisers, Inc. 3IT Wanger International Small Cap Liberty Wanger Asset Management, L.P. 3SP Wanger U.S. Smaller Companies Liberty Wanger Asset Management, L.P. (previously Wanger U.S. Small Cap) 3AA Wells Fargo VT Asset Allocation Fund Wells Fargo Funds Management, LLC(8) 3WI Wells Fargo VT International Equity Fund Wells Fargo Funds Management, LLC(8) 3SG Wells Fargo VT Small Cap Growth Fund Wells Fargo Funds Management, LLC(8) -------------------------------------------------------------------------------------------------------------------------------
(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-adviser. (3) AEFC is the investment adviser. Kenwood Capital Management LLC is the sub-adviser. (4) SSgA Funds Management, Inc. and Brown Capital Management are the investment sub-advisers. 41 (5) FMR U.K. and FMR Far East are the sub-investment advisers. (6) FMR U.K., FMR Far East, Fidelity International Investment Advisors (FIIA) and FIIA U.K. are the sub-investment advisers. (7) FTVIPT Templeton International Smaller Companies Fund - Class 2 merged into FTVIPT Foreign Securities Fund - Class 2 as of April 30, 2002. (8) Wells Capital Management Incorporated is the sub-adviser. 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. 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. VARIABLE PAYOUT Net assets allocated to contracts in the payout period are periodically compared to a computation which uses the Annuity 2000 Basic Mortality Table and which assumes future mortality improvement. The assumed investment return is 5% unless the annuitant elects otherwise, in which case the rate would be 3.5%, as regulated by the laws of the respective states. The mortality risk is fully borne by IDS Life and may result in additional amounts being transferred into the variable annuity account by IDS Life to cover greater longevity of annuitants than expected. Conversely, if amounts allocated exceed amounts required, transfers may be made to the insurance company. 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. VARIABLE ACCOUNT EXPENSES 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. IDS Life deducts a daily mortality and expense risk fee equal, on an annual basis, to 0.55% of the average daily net assets of each subaccount. 4. CONTRACT CHARGES IDS Life deducts a contract administrative charge of $30 per year. This charge reimburses IDS Life for expenses incurred in establishing and maintaining the annuity records. Certain products may waive this charge based upon the underlying contract value. 42 5. RELATED PARTY TRANSACTIONS Management fees were paid indirectly to IDS Life in its capacity as investment manager for the American Express Variable Portfolio Funds. The Fund's Investment Management Agreement provides for a fee at a percentage of each Fund's average daily net assets in reducing percentages annually as follows:
FUND PERCENTAGE RANGE -------------------------------------------------------------------------------- AXP(R) Variable Portfolio - Blue Chip Advantage Fund 0.560% to 0.470% AXP(R) Variable Portfolio - Bond Fund 0.610% to 0.535% AXP(R) Variable Portfolio - Capital Resource Fund 0.630% to 0.570% AXP(R) Variable Portfolio - Cash Management Fund 0.510% to 0.440% AXP(R) Variable Portfolio - Diversified Equity Income Fund 0.560% to 0.470% AXP(R) Variable Portfolio - Emerging Markets Fund 1.170% to 1.095% AXP(R) Variable Portfolio - Equity Select Fund 0.650% to 0.560% AXP(R) Variable Portfolio - Extra Income Fund 0.620% to 0.545% AXP(R) Variable Portfolio - Federal Income Fund 0.610% to 0.535% AXP(R) Variable Portfolio - Global Bond Fund 0.840% to 0.780% AXP(R) Variable Portfolio - Growth Fund 0.630% to 0.570% AXP(R) Variable Portfolio - International Fund 0.870% to 0.795% AXP(R) Variable Portfolio - Managed Fund 0.630% to 0.550% AXP(R) Variable Portfolio - NEW DIMENSIONS FUND(R) 0.630% to 0.570% AXP(R) Variable Portfolio - S&P 500 Index Fund 0.290% to 0.260% AXP(R) Variable Portfolio - Small Cap Advantage Fund 0.790% to 0.650% AXP(R) Variable Portfolio - Strategy Aggressive Fund 0.650% to 0.575% --------------------------------------------------------------------------------
IDS Life, in turn, pays to AEFC, an affiliate of IDS Life, a fee based on a percentage of each Fund's average daily net assets for the year. This fee is equal to 0.35% for AXP Variable Portfolio - International Fund and AXP Variable Portfolio - S&P 500 Index Fund and 0.25% for each remaining Fund. The AXP(R) Variable Portfolio Funds also have an agreement with IDS Life for distribution services. Under a Plan and Agreement of Distribution, each Fund pays a distribution fee at an annual rate up to 0.125% of each Fund's average daily net assets. The AXP(R) Variable Portfolio Funds have an Administrative Services Agreement with AEFC. Under this agreement, each Fund pays AEFC a fee for administration and accounting services at a percentage of each Fund's average daily net assets in reducing percentages annually as follows:
FUND PERCENTAGE RANGE -------------------------------------------------------------------------------- AXP(R) Variable Portfolio - Blue Chip Advantage Fund 0.040% to 0.020% AXP(R) Variable Portfolio - Bond Fund 0.050% to 0.025% AXP(R) Variable Portfolio - Capital Resource Fund 0.050% to 0.030% AXP(R) Variable Portfolio - Cash Management Fund 0.030% to 0.020% AXP(R) Variable Portfolio - Diversified Equity Income Fund 0.040% to 0.020% AXP(R) Variable Portfolio - Emerging Markets Fund 0.100% to 0.050% AXP(R) Variable Portfolio - Equity Select Fund 0.060% to 0.030% AXP(R) Variable Portfolio - Extra Income Fund 0.050% to 0.025% AXP(R) Variable Portfolio - Federal Income Fund 0.050% to 0.025% AXP(R) Variable Portfolio - Global Bond Fund 0.060% to 0.040% AXP(R) Variable Portfolio - Growth Fund 0.050% to 0.030% AXP(R) Variable Portfolio - International Fund 0.060% to 0.035% AXP(R) Variable Portfolio - Managed Fund 0.040% to 0.020% AXP(R) Variable Portfolio - NEW DIMENSIONS FUND(R) 0.050% to 0.030% AXP(R) Variable Portfolio - S&P 500 Index Fund 0.080% to 0.065% AXP(R) Variable Portfolio - Small Cap Advantage Fund 0.060% to 0.035% AXP(R) Variable Portfolio - Strategy Aggressive Fund 0.060% to 0.035% --------------------------------------------------------------------------------
The AXP(R) Variable Portfolio Funds pay custodian fees to American Express Trust Company, an affiliate of IDS Life. 43 6. INVESTMENT IN SHARES The subaccounts' investments in shares of the Funds as of Dec. 31, 2001 were as follows:
SUBACCOUNT INVESTMENT SHARES NAV ------------------------------------------------------------------------------------------------------------------ BC3 AXP(R) Variable Portfolio - Blue Chip Advantage Fund 72,936 $ 8.19 BD3 AXP(R) Variable Portfolio - Bond Fund 34,608 10.47 CR3 AXP(R) Variable Portfolio - Capital Resource Fund 10,254 21.69 CM3 AXP(R) Variable Portfolio - Cash Management Fund 5,444,960 1.00 DE3 AXP(R) Variable Portfolio - Diversified Equity Income Fund 36,541 10.10 EM3 AXP(R) Variable Portfolio - Emerging Markets Fund 496,386 7.41 ES3 AXP(R) Variable Portfolio - Equity Select Fund 203,102 10.16 EI3 AXP(R) Variable Portfolio - Extra Income Fund 456,291 6.57 FI3 AXP(R) Variable Portfolio - Federal Income Fund 65,528 10.33 GB3 AXP(R) Variable Portfolio - Global Bond Fund 26,870 9.55 GR3 AXP(R) Variable Portfolio - Growth Fund 127,131 6.51 IE3 AXP(R) Variable Portfolio - International Fund 5,420 8.10 MF3 AXP(R) Variable Portfolio - Managed Fund 18,047 15.42 ND3 AXP(R) Variable Portfolio - NEW DIMENSIONS FUND(R) 191,807 15.97 IV3 AXP(R) Variable Portfolio - S&P 500 Index Fund 77,529 7.82 SC3 AXP(R) Variable Portfolio - Small Cap Advantage Fund 51,669 10.47 SA3 AXP(R) Variable Portfolio - Strategy Aggressive Fund 59,751 8.34 3CA AIM V.I. Capital Appreciation Fund, Series I 55,559 21.72 3CD AIM V.I. Capital Development Fund, Series I 41,475 11.94 3IF American Century(R) VP International 99,377 6.59 3VA American Century(R) VP Value 82,550 7.44 3SR Calvert Variable Series, Inc. Social Balanced Portfolio 3,204 1.76 3EG Credit Suisse Trust - Emerging Growth Portfolio 46,540 10.75 3GI Fidelity VIP Growth & Income Portfolio (Service Class) 75,447 13.12 3MP Fidelity VIP Mid Cap Portfolio (Service Class) 63,475 19.54 3OS Fidelity VIP Overseas Portfolio (Service Class) 6,381 13.83 3RE FTVIPT Franklin Real Estate Fund - Class 2 15,786 17.99 3SI FTVIPT Franklin Small Cap Value Securities Fund - Class 2 18,703 10.89 (previously FTVIPT Franklin Value Securities Fund - Class 2) 3IS FTVIPT Templeton International Smaller Companies Fund - Class 26,778 10.13 3SE Goldman Sachs VIT CORE(SM) Small Cap Equity Fund 10,642 10.84 3UE Goldman Sachs VIT CORE(SM) U.S. Equity Fund 74,788 10.94 3MC Goldman Sachs VIT Mid Cap Value Fund 24,429 11.29 3AG Janus Aspen Series Aggressive Growth Portfolio: Service Shares 5,454 21.73 3GT Janus Aspen Series Global Technology Portfolio: Service Shares 21,108 4.08 3IG Janus Aspen Series International Growth Portfolio: Service Shares 15,863 23.30 3IP Lazard Retirement International Equity Portfolio 20,282 9.09 3MG MFS(R) Investors Growth Stock Series - Service Class 63,875 9.67 3MD MFS(R) New Discovery Series - Service Class 32,497 15.22 3IN Putnam VT International New Opportunities Fund - Class IB Shares 90,578 9.75 3VS Putnam VT Vista Fund - Class IB Shares 82,417 11.34 3MI Royce Micro-Cap Portfolio 67,069 9.00 3SV Third Avenue Value Portfolio 31,372 17.13 3IT Wanger International Small Cap 42,482 15.40 3SP Wanger U.S. Smaller Companies 43,063 22.25 (previously Wanger U.S. Small Cap) 3AA Wells Fargo VT Asset Allocation Fund 639 12.32 3WI Wells Fargo VT International Equity Fund 61 7.50 3SG Wells Fargo VT Small Cap Growth Fund 261 7.85 ------------------------------------------------------------------------------------------------------------------
44 7. INVESTMENT TRANSACTIONS The subaccounts' purchases of the Funds' shares, including reinvestment of dividend distributions, for the period ended Dec. 31, 2001 were as follows:
SUBACCOUNT INVESTMENT PURCHASES --------------------------------------------------------------------------------------------------------------- BC3 AXP(R) Variable Portfolio - Blue Chip Advantage Fund $ 3,538,188 BD3 AXP(R) Variable Portfolio - Bond Fund 4,789,890 CR3 AXP(R) Variable Portfolio - Capital Resource Fund 6,049,408 CM3 AXP(R) Variable Portfolio - Cash Management Fund 162,965,465 DE3 AXP(R) Variable Portfolio - Diversified Equity Income Fund 10,215,947 EM3 AXP(R) Variable Portfolio - Emerging Markets Fund 1,145,148 ES3(1) AXP(R) Variable Portfolio - Equity Select Fund 4,478,302 EI3 AXP(R) Variable Portfolio - Extra Income Fund 12,564,478 FI3 AXP(R) Variable Portfolio - Federal Income Fund 3,917,603 GB3 AXP(R) Variable Portfolio - Global Bond Fund 1,125,560 GR3 AXP(R) Variable Portfolio - Growth Fund 1,335,657 IE3 AXP(R) Variable Portfolio - International Fund 46,474,368 MF3 AXP(R) Variable Portfolio - Managed Fund 1,910,866 ND3 AXP(R) Variable Portfolio - NEW DIMENSIONS FUND(R) 9,087,636 IV3 AXP(R) Variable Portfolio - S&P 500 Index Fund 534,135 SC3 AXP(R) Variable Portfolio - Small Cap Advantage Fund 2,176,922 SA3 AXP(R) Variable Portfolio - Strategy Aggressive Fund 15,726,511 3CA AIM V.I. Capital Appreciation Fund, Series I 724,419 3CD AIM V.I. Capital Development Fund, Series I 188,127 3IF American Century(R) VP International 11,213,514 3VA American Century(R) VP Value 2,939,701 3SR Calvert Variable Series, Inc. Social Balanced Portfolio 5,608 3EG Credit Suisse Trust - Emerging Growth Portfolio 89,861 3GI Fidelity VIP Growth & Income Portfolio (Service Class) 1,226,624 3MP Fidelity VIP Mid Cap Portfolio (Service Class) 2,331,104 3OS Fidelity VIP Overseas Portfolio (Service Class) 5,274,520 3RE FTVIPT Franklin Real Estate Fund - Class 2 3,131,231 3SI FTVIPT Franklin Small Cap Value Securities Fund - Class 2 313,052 (previously FTVIPT Franklin Value Securities Fund - Class 2) 3IS FTVIPT Templeton International Smaller Companies Fund - Class 2 1,623,887 3SE Goldman Sachs VIT CORE(SM) Small Cap Equity Fund 75,990 3UE Goldman Sachs VIT CORE(SM) U.S. Equity Fund 459,005 3MC Goldman Sachs VIT Mid Cap Value Fund 392,932 3AG Janus Aspen Series Aggressive Growth Portfolio: Service Shares 1,043,303 3GT Janus Aspen Series Global Technology Portfolio: Service Shares 1,235,730 3IG Janus Aspen Series International Growth Portfolio: Service Shares 12,420,794 3IP Lazard Retirement International Equity Portfolio 1,792,372 3MG MFS(R) Investors Growth Stock Series - Service Class 1,065,801 3MD MFS(R) New Discovery Series - Service Class 619,374 3IN Putnam VT International New Opportunities Fund - Class IB Shares 15,654,319 3VS Putnam VT Vista Fund - Class IB Shares 1,435,909 3MI Royce Micro-Cap Portfolio 629,193 3SV Third Avenue Value Portfolio 798,644 3IT Wanger International Small Cap 9,003,831 3SP Wanger U.S. Smaller Companies 2,678,770 (previously Wanger U.S. Small Cap) 3AA(1) Wells Fargo VT Asset Allocation Fund 237,101 3WI(1) Wells Fargo VT International Equity Fund 1,427,828 3SG(1) Wells Fargo VT Small Cap Growth Fund 3,259 --------------------------------------------------------------------------------------------------------------
(1) Operations commenced on May 1, 2001. 45 8. FINANCIAL HIGHLIGHTS The table below shows certain financial information regarding the subaccounts.
BC3 BD3 CR3 CM3 DE3 EM3 ---------------------------------------------------------- AT DEC. 31, 2000 Accumulation unit value $ 0.99 $ 1.06 $ 0.94 $ 1.07 $ 1.01 $ 0.75 -------------------------------------------------------------------------------------------------- AT DEC. 31, 2001 Accumulation unit value $ 0.82 $ 1.14 $ 0.76 $ 1.10 $ 1.02 $ 0.73 Units (000s) 729 985 291 5,658 281 3 Net assets (000s) $ 597 $ 1,122 $ 222 $ 6,219 $ 288 $ 3,674 -------------------------------------------------------------------------------------------------- FOR THE YEAR ENDED DEC. 31, 2001 Investment income(1) 0.70% 6.32% 0.27% 3.60% 0.98% 0.02% Expense ratio(2) 0.55% 0.55% 0.55% 0.55% 0.55% 0.55% Total return(3) (17.17%) 7.55% (19.15%) 2.80% 0.99% (2.67%) -------------------------------------------------------------------------------------------------- ES3(4) EI3 FI3 GB3 ----------------------------------------- AT DEC. 31, 2000 Accumulation unit value -- $ 0.91 $ 1.09 $ 1.03 --------------------------------------------------------------------------------- AT DEC. 31, 2001 Accumulation unit value $ 1.01 $ 0.95 $ 1.15 $ 1.04 Units (000s) 38 1,549 592 249 Net assets (000s) $ 2,063 $ 1,475 $ 680 $ 258 --------------------------------------------------------------------------------- FOR THE YEAR ENDED DEC. 31, 2001 Investment income(1) - 10.89% 4.22% 4.82% Expense ratio(2) 0.55% 0.55% 0.55% 0.55% Total return(3) 1.00% 4.40% 5.50% 0.97% --------------------------------------------------------------------------------- GR3 IE3 MF3 ND3 IV3 SC3 ---------------------------------------------------------- AT DEC. 31, 2000 Accumulation unit value $ 0.94 $ 0.95 $ 1.06 $ 1.08 $ 0.90 $ 1.16 -------------------------------------------------------------------------------------------------- AT DEC. 31, 2001 Accumulation unit value $ 0.64 $ 0.67 $ 0.94 $ 0.89 $ 0.79 $ 1.08 Units (000s) 1,285 65 296 3,252 770 378 Net assets (000s) $ 827 $ 44 $ 278 $ 2,901 $ 606 $ 408 -------------------------------------------------------------------------------------------------- FOR THE YEAR ENDED DEC. 31, 2001 Investment income(1) -- 1.60% 2.50% 0.21% 0.55% -- Expense ratio(2) 0.55% 0.55% 0.55% 0.55% 0.55% 0.55% Total return(3) (31.91%) (29.47%) (11.32%) (17.59%) (12.22%) (6.90%) -------------------------------------------------------------------------------------------------- SA3 3CA 3CD 3IF ----------------------------------------- AT DEC. 31, 2000 Accumulation unit value $ 1.22 $ 1.17 $ 1.38 $ 1.19 ---------------------------------------------------------------------------------- AT DEC. 31, 2001 Accumulation unit value $ 0.81 $ 0.89 $ 1.26 $ 0.84 Units (000s) 607 1,358 394 781 Net assets (000s) $ 494 $ 1,207 $ 495 $ 655 -------------------------------------------------------------------------------- FOR THE YEAR ENDED DEC. 31, 2001 Investment income(1) 0.19% -- -- 0.07% Expense ratio(2) 0.55% 0.55% 0.55% 0.55% Total return(3) (33.61%) (23.93%) (8.70%) (29.41%) -------------------------------------------------------------------------------- 3VA 3SR 3EG 3GI 3MP 3OS ---------------------------------------------------------- AT DEC. 31, 2000 Accumulation unit value $ 1.08 $ 0.96 $ 1.29 $ 1.00 $ 1.65 $ 0.99 -------------------------------------------------------------------------------------------------- AT DEC. 31, 2001 Accumulation unit value $ 1.21 $ 0.89 $ 1.07 $ 0.91 $ 1.59 $ 0.77 Units (000s) 506 6 467 1,090 781 114 Net assets (000s) $ 614 $ 6 $ 500 $ 990 $ 1,240 $ 88 -------------------------------------------------------------------------------------------------- FOR THE YEAR ENDED DEC. 31, 2001 Investment income(1) 0.90% 7.75% -- 1.08% -- 4.28% Expense ratio(2) 0.55% 0.55% 0.55% 0.55% 0.55% 0.55% Total return(3) 12.04% (7.29%) (17.05%) (9.00%) (3.64%) (22.22%) -------------------------------------------------------------------------------------------------- 3RE 3SI 3IS 3SE ---------------------------------------- AT DEC. 31, 2000 Accumulation unit value $ 1.26 $ 1.20 $ 1.00 $ 1.15 -------------------------------------------------------------------------------- AT DEC. 31, 2001 Accumulation unit value $ 1.35 $ 1.35 $ 0.97 $ 1.19 Units (000s) 211 150 71 97 Net assets (000s) $ 284 $ 204 $ 69 $ 115 -------------------------------------------------------------------------------- FOR THE YEAR ENDED DEC. 31, 2001 Investment income(1) 3.55% 0.39% 3.48% 0.28% Expense ratio(2) 0.55% 0.55% 0.55% 0.55% Total return(3) 7.14% 12.50% (3.00%) 3.48% -------------------------------------------------------------------------------- 3UE 3MC 3AG 3GT 3IG 3IP ---------------------------------------------------------- AT DEC. 31, 2000 Accumulation unit value $ 0.99 $ 1.24 $ 0.70 $ 0.68 $ 0.80 $ 0.96 -------------------------------------------------------------------------------------------------- AT DEC. 31, 2001 Accumulation unit value $ 0.87 $ 1.38 $ 0.42 $ 0.43 $ 0.61 $ 0.73 Units (000s) 943 200 280 202 606 253 Net assets (000s) $ 818 $ 276 $ 119 $ 86 $ 370 $ 184 -------------------------------------------------------------------------------------------------- FOR THE YEAR ENDED DEC. 31, 2001 Investment income(1) 0.53% 1.73% -- 0.65% 0.52% 0.01% Expense ratio(2) 0.55% 0.55% 0.55% 0.55% 0.55% 0.55% Total return(3) (12.12%) 11.29% (40.00%) (36.76%) (23.75%) (23.96%) -------------------------------------------------------------------------------------------------- 3MG 3MD 3IN 3VS ---------------------------------------- AT DEC. 31, 2000 Accumulation unit value $ 0.91 $ 0.96 $ 0.92 $ 1.29 -------------------------------------------------------------------------------- AT DEC. 31, 2001 Accumulation unit value $ 0.68 $ 0.90 $ 0.66 $ 0.86 Units (000s) 913 548 1,347 1,092 Net assets (000s) $ 618 $ 495 $ 883 $ 935 -------------------------------------------------------------------------------- FOR THE YEAR ENDED DEC. 31, 2001 Investment income(1) 0.06% -- -- -- Expense ratio(2) 0.55% 0.55% 0.55% 0.55% Total return(3) (25.27%) (6.25%) (28.26%) (33.33%) -------------------------------------------------------------------------------- 46 3MI 3SV 3IT 3SP 3AA(4) 3WI(4) 3SG(4) --------------------------------------------------------------- AT DEC. 31, 2000 Accumulation unit value $ 1.36 $ 1.51 $ 1.09 $ 1.05 -- -- -- ---------------------------------------------------------------------------------------------------------- AT DEC. 31, 2001 Accumulation unit value $ 1.75 $ 1.71 $ 0.85 $ 1.17 $ 0.97 $ 0.90 $ 0.94 Units (000s) 344 314 769 820 8 1 2 Net assets (000s) $ 604 $ 537 $ 654 $ 958 $ 8 -- $ 2 ---------------------------------------------------------------------------------------------------------- FOR THE YEAR ENDED DEC. 31, 2001 Investment income(1) -- 0.17% -- 0.07% 0.71% -- -- Expense ratio(2) 0.55% 0.55% 0.55% 0.55% 0.55% 0.55% 0.55% Total return(3) 28.68% 13.25% (22.02%) 11.43% (3.00%) (10.00%) (6.00%) ----------------------------------------------------------------------------------------------------------
(1) These amounts represent the dividends, excluding distributions of capital gains, received by the subaccount from the underlying mutual fund, net of management fees assessed by the fund manager, divided by the average net assets. These ratios exclude variable account expenses that result in direct reductions in the unit values. The recognition of investment income by the subaccount is affected by the timing of the declaration of dividends by the underlying fund in which the subaccounts invest. (2) These ratios represent the annualized contract expenses of the separate account, consisting primarily of mortality and expense charges, for each period indicated. The ratios include only those expenses that result in a direct reduction to unit values. Charges made directly to contract owner accounts through the redemption of units and expenses of the underlying fund are excluded. (3) These amounts represent the total return for the periods indicated, including changes in the value of the underlying fund, and reflect deductions for all items included in the expense ratio. The total return does not include any expenses assessed through the redemption of units; inclusion of these expenses in the calculation would result in a reduction in the total return presented. Investment options with a date notation indicate the effective date of that investment option in the variable account. The total return is calculated for the period indicated or from the effective date through the end of the reporting period. (4) Operations commenced on May 1, 2001. 47 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, 2001 and 2000, 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, 2001. 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, 2001 and 2000, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States. Ernst & Young LLP January 28, 2002 Minneapolis, Minnesota IDS Life Insurance Company -------------------------------------------------------------------------------- Consolidated Balance Sheets
December 31, (In thousands, except share amounts) 2001 2000 Assets Investments: Fixed maturities: Held-to-maturity, at amortized cost (fair value: 2000, $6,471,798) $ -- $ 6,463,613 Available-for-sale, at fair value (amortized cost: 2001, $20,022,072; 2000, $12,929,870) 20,157,137 12,399,990 Common stocks 1,704 10,333 Mortgage loans on real estate 3,680,394 3,738,091 Policy loans 619,571 618,973 Other investments 621,897 575,551 ------- ------- Total investments 25,080,703 23,806,551 Cash and cash equivalents 1,150,251 316,974 Amounts recoverable from reinsurers 529,166 416,480 Amounts due from brokers 90,794 15,302 Other accounts receivable 46,349 42,324 Accrued investment income 278,199 334,928 Deferred policy acquisition costs 3,107,187 2,951,655 Deferred income taxes, net 156,308 136,588 Other assets 123,246 80,054 Separate account assets 27,333,697 32,349,347 ---------- ---------- Total assets $57,895,900 $60,450,203 =========== =========== Liabilities and stockholder's equity Liabilities: Future policy benefits: Fixed annuities $19,592,273 $19,417,446 Universal life-type insurance 3,433,904 3,410,871 Traditional life insurance 241,165 232,913 Disability income and long-term care insurance 1,227,172 1,012,247 Policy claims and other policyholders' funds 71,879 52,067 Amounts due to brokers 1,740,031 446,347 Other liabilities 437,017 463,561 Separate account liabilities 27,333,697 32,349,347 ---------- ---------- Total liabilities 54,077,138 57,384,799 ---------- ---------- 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 688,327 288,327 Accumulated other comprehensive income (loss), net of tax: Net unrealized securities gains (losses) 85,549 (333,734) Net unrealized derivative (losses) (774) -- ---------- ---------- Total accumulated other comprehensive income (loss) 84,775 (333,734) ---------- ---------- Retained earnings 3,042,660 3,107,811 ---------- ---------- Total stockholder's equity 3,818,762 3,065,404 ---------- ---------- Total liabilities and stockholder's equity $57,895,900 $60,450,203 =========== ===========
See notes to consolidated financial statements. IDS Life Insurance Company -------------------------------------------------------------------------------- Consolidated Statements of Income
Years ended December 31, (In thousands) 2001 2000 1999 Revenues Premiums: Traditional life insurance $ 59,415 $ 56,187 $ 53,790 Disability income and long-term care insurance 255,428 231,311 201,637 ------- ------- ------- Total premiums 314,843 287,498 255,427 Net investment income 1,485,688 1,730,605 1,919,573 Contractholder charges 489,583 438,127 411,994 Management and other fees 473,406 598,168 473,108 Net realized (loss) gain on investments (649,752) (16,975) 26,608 -------- ------- ------ Total revenues 2,113,768 3,037,423 3,086,710 --------- --------- --------- Benefits and expenses Death and other benefits: Traditional life insurance 35,519 29,042 29,819 Universal life-type insurance and investment contracts 175,247 131,467 118,561 Disability income and long-term care insurance 44,725 40,246 30,622 Increase in liabilities for future policy benefits: Traditional life insurance 7,231 5,765 7,311 Disability income and long-term care insurance 123,227 113,239 87,620 Interest credited on universal life-type insurance and investment contracts 1,137,636 1,169,641 1,240,575 Amortization of deferred policy acquisition costs 371,342 362,106 321,036 Other insurance and operating expenses 407,798 378,653 346,849 ------- ------- ------- Total benefits and expenses 2,302,725 2,230,159 2,182,393 --------- --------- --------- (Loss) income before income tax (benefit) expense a nd cumulative effect of accounting change (188,957) 807,264 904,317 Income tax (benefit) expense (145,222) 221,627 267,864 -------- ------- ------- (Loss) income before cumulative effect of accounting change (43,735) 585,637 636,453 Cumulative effect of accounting change (net of income tax benefit of $11,532) (21,416) -- -- -------- ------- ------- Net (loss) income $ (65,151) $ 585,637 $ 636,453 ---------- ---------- ----------
See notes to consolidated financial statements. IDS Life Insurance Company -------------------------------------------------------------------------------- Consolidated Statements of Stockholder's Equity
Accumulated other Additional comprehensive Total Capital paid-in income (loss), Retained stockholder's For the three years ended December 31, 2001 (In thousands) stock capital net of tax earnings equity Balance, January 1, 1999 $3,000 $288,327 $ 169,584 $2,645,721 $3,106,632 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 income taxes of $304,936 -- -- (566,311) -- (566,311) Reclassification adjustment for gains included in net income, net of income tax of $7,810 -- -- (14,503) -- (14,503) ------ -------- --------- ---------- ---------- Other comprehensive loss -- -- (580,814) -- (580,814) ------ -------- --------- ---------- ---------- Comprehensive income 55,639 Cash dividends -- -- -- (350,000) (350,000) ------ -------- --------- ---------- ---------- Balance, December 31, 1999 3,000 288,327 (411,230) 2,932,174 2,812,271 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 income taxes of ($46,921) -- -- 87,138 -- 87,138 Reclassification adjustment for gains included in net income, net of income tax of $5,192 -- -- (9,642) -- (9,642) ------ -------- --------- ---------- ---------- Other comprehensive income -- -- 77,496 -- 77,496 ------ -------- --------- ---------- ---------- Comprehensive income 663,133 Cash dividends -- -- -- (410,000) (410,000) ------ -------- --------- ---------- ---------- Balance, December 31, 2000 3,000 288,327 (333,734) 3,107,811 3,065,404 Comprehensive income: Net loss -- -- -- (65,151) (65,151) Cumulative effect of adopting SFAS No. 133, net of income tax benefit of $626 -- -- (1,162) -- (1,162) Unrealized holding losses on available-for-sale securities arising during the year, net of deferred policy acquisition costs of ($20,191) and income taxes of $15,037 -- -- (11,262) -- (11,262) Reclassification adjustment for losses on available-for-sale securities included in net loss, net of income tax benefit of $228,003 -- -- 423,434 -- 423,434 Reclassification adjustment for losses on derivatives included in net loss, net of income tax benefit of $4,038 -- -- 7,499 -- 7,499 ------ -------- --------- ---------- ---------- Other comprehensive income -- -- 418,509 -- 418,509 ------ -------- --------- ---------- ---------- Comprehensive income 353,358 Capital contribution -- 400,000 -- -- 400,000 ------ -------- --------- ---------- ---------- Balance, December 31, 2001 $3,000 $688,327 $ 84,775 $3,042,660 $3,818,762 ====== ======== ========= ========== ==========
See notes to consolidated financial statements. IDS Life Insurance Company -------------------------------------------------------------------------------- Consolidated Statements of Cash Flows
Years ended December 31, (In thousands) 2001 2000 1999 Cash flows from operating activities Net (loss) income $ (65,151) $ 585,637 $ 636,453 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Cumulative effect of accounting change, net of tax 21,416 -- -- Policy loans, excluding universal life-type insurance: Issuance (43,687) (61,313) (56,153) Repayment 54,004 56,088 54,105 Change in amounts recoverable from reinsurers (112,686) (89,312) (64,908) Change in other accounts receivable (4,025) 6,254 (615) Change in accrued investment income 56,729 8,521 23,125 Change in deferred policy acquisition costs, net (175,723) (291,634) (140,379) Change in liabilities for future policy benefits for traditional life, disability income and long-term care insurance 223,177 206,377 153,157 Change in policy claims and other policyholder's funds 19,812 27,467 (45,709) Deferred income tax (benefit) provision (246,205) 37,704 79,796 Change in other liabilities (24,509) (120,256) 169,395 Amortization of premium (accretion of discount), net 108,958 37,909 (17,907) Net realized loss (gain) on investments 649,752 16,975 (26,608) Contractholder charges, non-cash (217,496) (151,745) (175,059) Other, net (83,023) (9,279) (5,324) ------- ------ ------ Net cash provided by operating activities 161,343 259,393 583,369 ------- ------- ------- Cash flows from investing activities Held-to-maturity securities: Purchases -- (4,487) (3,030) Maturities, sinking fund payments and calls -- 589,742 741,949 Sales -- 50,067 66,547 Available-for-sale securities: Purchases (9,477,740) (1,454,010) (3,433,128) Maturities, sinking fund payments and calls 2,706,147 1,019,403 1,442,507 Sales 5,493,141 1,237,116 1,691,389 Other investments, excluding policy loans: Purchases (442,876) (706,082) (657,383) Sales 370,636 435,633 406,684 Change in amounts due from brokers (75,492) (15,157) 182 Change in amounts due to brokers 1,293,684 298,236 (47,294) --------- ------- ------- Net cash (used in) provided by investing activities (132,500) 1,450,461 208,423 -------- --------- ------- Cash flows from financing activities Activities related to universal life-type insurance and investment contracts: Considerations received 2,088,114 1,842,026 2,031,630 Surrenders and other benefits (2,810,401) (3,974,966) (3,669,759) Interest credited to account balances 1,137,636 1,169,641 1,240,575 Universal life-type insurance policy loans: Issuance (83,720) (134,107) (102,239) Repayment 72,805 82,193 67,881 Capital contribution 400,000 -- -- Dividends paid -- (410,000) (350,000) -------- --------- ------- Net cash provided by (used in) financing activities 804,434 (1,425,213) (781,912) -------- --------- ------- Net increase in cash and cash equivalents 833,277 284,641 9,880 Cash and cash equivalents at beginning of year 316,974 32,333 22,453 -------- --------- ------- Cash and cash equivalents at end of year $ 1,150,251 $ 316,974 $ 32,333 =========== ============ ============= Supplemental disclosures: Income taxes paid $ -- $ 225,704 $ 214,940 Interest on borrowings 23,688 3,299 4,521
See notes to consolidated financial statements. IDS Life Insurance Company -------------------------------------------------------------------------------- Notes to Consolidated Financial Statements (In 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. Revenue recognition Profits on fixed deferred annuities are the excess of contractholder charges and investment income earned from investment of contract considerations over interest credited to contract values, amortization of deferred acquisition costs, and other expenses. Profits on variable deferred annuities also include the excess of management and other fees over the costs of guaranteed benefits provided. Contractholder charges include policy fees and surrender charges. Management and other fees include investment management fees from underlying proprietary mutual funds, certain fee revenues from underlying nonproprietary mutual funds and mortality and expense risk fees from the variable annuity separate accounts. Profits on fixed universal life insurance are the excess of contractholder charges and investment income earned from investment of contract considerations over interest credited to contract values, death and other benefits paid in excess of contract values, amortization of deferred acquisition costs, and other expenses. Profits on variable universal life insurance also include management and other fees. 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, certain fee revenues from underlying nonproprietary mutual funds and mortality and expense risk fees received from the variable life insurance separate accounts. 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. 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). Certain prior year amounts have been reclassified to conform to the current year's presentation. 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 -- securities Debt securities 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 debt securities and marketable equity securities are classified as available-for-sale and carried at fair value. Unrealized gains and losses on securities classified as available-for-sale are carried as a separate component of accumulated other comprehensive income (loss), net of the related deferred policy acquisition costs and income taxes. When evidence indicates there is a decline in a security's value, which is other than temporary, the security is written down to fair value through a charge to current year's earnings. IDS Life Insurance Company -------------------------------------------------------------------------------- The Company's investment portfolio contains structured investments, including Collateralized Debt Obligations (CDOs) (obligations that are primarily backed by high-yield bonds), which are not readily marketable. The carrying values of these investments are based on cash flow projections and, as such, these values are subject to change. If actual cash flows are less than projected, losses would be recognized; increases in cash flows would be recognized over future periods. Realized investment gains or losses are 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. Investments -- mortgage loans on real estate Mortgage loans on real estate are carried at amortized cost less reserves for losses. The estimated fair value of the mortgage loans is determined by discounted cash flow analyses using mortgage interest rates currently offered for mortgages of similar maturities. Impairment of mortgage loans is measured as the excess of the 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 losses. The reserve for 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 collectability of principal, interest payments received are either recognized as income or applied to the recorded investment in the loan. Policy loans Policy loans are carried at the aggregate of the unpaid loan balances, which do not exceed the cash surrender values of the related policies. Cash and cash equivalents 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. 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 the interest method. The costs for universal life and variable universal life 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 fixed and variable universal life 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 prospective assumptions underlying the amortization models. 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. Unlocking adjustments resulted in a net increase in amortization of $33,600 in 2001 and net decreases in amortization of $12,300 in 2000 and $56,800 in 1999. In amortizing deferred policy acquisition costs associated with variable annuities, the Company assumes contract values will appreciate at a specified long-term annual rate. The Company may project near-term appreciation at a different rate in order to maintain the long-term rate assumption. Liabilities for future policy benefits Liabilities for fixed and variable universal life insurance and fixed and variable deferred annuities are accumulation values. Liabilities for equity indexed deferred annuities issued in 1997 and 1998 are equal to the present value of guaranteed benefits and the intrinsic value of index-based benefits. Liabilities for equity indexed deferred annuities issued in 1999 or later are equal to the accumulation of host contract values covering guaranteed benefits and the market value of embedded equity options. 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. IDS Life Insurance Company -------------------------------------------------------------------------------- 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 Reinsurance premiums and benefits paid or provided are accounted for on a basis consistent with those used in accounting for original policies issued and with the terms of the reinsurance contracts. 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 20% of the mortality risk on new variable universal life insurance policies and 10% of the risk on new term 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. 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 to be payable at the initial level regardless of investment performance so long as minimum premium payments are made. Accounting developments 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 and Retained Beneficial Interests in Securitized Financial Assets." The Company adopted the consensus as of January 1, 2001. Issue 99-20 prescribes new procedures for recording interest income and measuring impairment on retained and purchased beneficial interests. The consensus primarily affects certain high-yield investments contained in structured securities. Adoption of the consensus required the Company to adjust the carrying amount of these investments downward by $21,416, net of tax, upon adoption. See Note 2 for further discussion. Effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended (SFAS No. 133), which requires an entity to 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 are recorded in earnings or directly to equity, depending on the instrument's designated use. The adoption of SFAS No. 133 on January 1, 2001, resulted in a cumulative after-tax reduction to other comprehensive income of $1,162. The cumulative impact to earnings was not significant. See Note 8 for further discussion of the Company's derivative and hedging activities. IDS Life Insurance Company -------------------------------------------------------------------------------- SFAS No. 133 also provided a one-time opportunity to reclassify held-to-maturity security investments to available-for-sale without tainting the remaining securities in the held-to-maturity portfolio. The Company elected to take the opportunity to reclass all its held-to-maturity investments to available-for-sale. The Company adopted SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," which superseded SFAS No. 125. The Statement was effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001. The Statement was 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 impact on the Company's financial position or results of operations of adopting the Statement was not significant. 2. INVESTMENTS Securities Pursuant to the adoption of SFAS No. 133 the Company reclassified all held-to-maturity securities with a carrying value of $6,463,613 and net unrealized gains of $8,185 to available-for-sale as of January 1, 2001.
The following is a summary of securities available-for-sale at December 31, 2001: Gross Gross Amortized unrealized unrealized Fair cost gains losses value Fixed maturities: U.S. Government agency obligations $ 31,074 $ 2,190 $ 56 $ 33,208 State and municipal obligations 7,826 149 -- 7,975 Corporate bonds and obligations 11,658,888 276,332 218,365 11,716,855 Mortgage-backed securities 8,292,576 103,109 32,801 8,362,884 Foreign government bonds and obligations 31,708 4,507 -- 36,215 ----------- -------- -------- ----------- Total fixed maturity securities $20,022,072 $386,287 $251,222 $20,157,137 =========== ======== ======== =========== Common stocks $ 805 $ 899 $ -- $ 1,704 =========== ======== ======== ===========
The amortized cost and fair value of fixed maturity securities at December 31, 2001 by contractual maturity are as follows: Amortized Fair cost value Due within one year $ 1,093,557 $ 1,114,618 Due from one to five years 2,885,509 3,007,435 Due from five to ten years 5,503,284 5,519,588 Due in more than ten years 2,247,146 2,152,612 Mortgage-backed securities 8,292,576 8,362,884 --------- --------- Total $20,022,072 $20,157,137 =========== ===========
The timing of actual receipts may differ from contractual maturities because issuers may call or prepay obligations.
The following is a summary of held-to-maturity and available-for-sale securities at December 31, 2000: 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 --------- ----- ----- --------- Total fixed maturity securities $6,463,613 $124,067 $115,882 $6,471,798 ========== ======== ======== ========== Gross Gross Amortized unrealized unrealized Fair Available-for-sale cost gains losses value Fixed maturities: 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 maturity securities $12,929,870 $187,769 $717,649 $12,399,990 =========== ======== ======== =========== Common stocks $ 11,829 $ -- $ 1,496 $ 10,333 =========== ======== ======== ===========
At December 31, 2001, bonds carried at $14,639 were on deposit with various states as required by law. IDS Life Insurance Company -------------------------------------------------------------------------------- At December 31, 2001, fixed maturity securities comprised approximately 80 percent of the Company's total investments. These securities are rated by Moody's and Standard & Poor's (S&P), except for approximately $2.6 billion of securities which are rated by AEFC's internal analysts using criteria similar to Moody's and S&P. A summary of fixed maturity securities, at amortized cost, by rating on December 31, is as follows: Rating 2001 2000 Aaa/AAA $ 8,977,075 $ 6,559,188 Aaa/AA -- 32,001 Aa/AA 261,252 220,446 Aa/A 372,120 327,147 A/A 2,602,027 2,494,621 A/BBB 911,477 747,636 Baa/BBB 5,904,013 5,828,847 Baa/BB 274,228 287,583 Below investment grade 719,880 2,896,014 ------- --------- Total $20,022,072 $19,393,483 =========== =========== At December 31, 2001, approximately 93 percent of the securities rated Aaa/AAA are GNMA, FNMA and FHLMC mortgage-backed securities. No holdings of any other issuer were greater than ten percent of stockholder's equity. During the years ended December 31, 2000 and 1999, fixed maturities classified as held-to-maturity were sold with amortized cost of $53,169 and $68,470, 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. Available-for-sale securities were sold during 2001 with proceeds of $5,493,141 and gross realized gains and losses of $116,485 and $767,144, respectively. Available-for-sale securities were sold during 2000 with proceeds of $1,237,116 and gross realized gains and losses of $25,101 and $10,267, respectively. Available-for-sale securities were sold during 1999 with proceeds of $1,691,389 and gross realized gains and losses of $36,568 and $14,255, respectively. The net unrealized gain (loss) on available-for-sale securities as of December 31, 2001 and 2000, was $135,964 and ($531,376), respectively, with the $667,340 change, net of taxes and deferred policy acquisition costs, reflected as a separate component in accumulated other comprehensive income for the year ended December 31, 2001. For the year ended December 31, 2000 the change in net unrealized losses on available-for-sale securities was a decrease of $122,196. For the year ended December 31, 1999 the change in net unrealized gain on available-for-sale securities was a decrease of $921,920. During 2001, the Company recorded pretax losses of $828,175 to recognize the impact of higher default rate assumptions on certain structured investments; to write down lower rated securities (most of which were sold during 2001) in connection with the Company's decision to lower its risk profile by reducing the level of its high-yield portfolio, allocating holdings toward stronger credits, and reducing the concentration of exposure to individual companies and industry sectors; to write down certain other investments; and, to adopt EITF Issue 99-20, as previously discussed. Within the Consolidated Statements of Income, approximately $623,958 of these losses are included in Net realized (losses) gains on investments and approximately $171,269 are included in Net investment income, with the remaining losses recorded as a cumulative effect of accounting change. During 2001, the Company placed a majority of its rated Collateralized Debt Obligation (CDO) (obligations that are backed primarily by high-yield bonds) securities and related accrued interest, (collectively referred to as transferred assets), having an aggregate book value of $675,347, into a securitization trust. In return, the Company received $89,535 in cash relating to sales to unaffiliated investors and retained interests with allocated book amounts aggregating $585,812. The book amount is determined by allocating the previous carrying value of the transferred assets between assets sold and the retained interests based on their relative fair values. Fair values are based on the estimated present value of future cash flows. There was no cash flow related to this transaction other than the receipt of the initial $89,535. Cash flows on the assets sold to investors and retained interests are not scheduled to begin until March 31, 2002 in accordance with governing documents. Included in Other investments are affordable housing investment credits, trading securities, and real estate. Fair values of investments 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, estimated future cash flows and market data from independent brokers. IDS Life Insurance Company -------------------------------------------------------------------------------- Mortgages loans on real estate At December 31, 2001, approximately 15 percent of the Company's investments were mortgage loans on real estate. Concentration of credit risk by region of the United States and by type of real estate are as follows:
December 31, 2001 December 31, 2000 On balance Funding On balance Funding Region sheet commitments sheet commitments East North Central $ 670,387 $ 1,873 $ 691,694 $18,868 West North Central 549,015 -- 564,576 7,621 South Atlantic 815,837 9,490 884,723 7,667 Middle Atlantic 352,821 9,363 378,702 13,813 New England 274,486 8,700 279,147 4,604 Pacific 355,945 14,618 318,727 921 West South Central 214,000 600 173,158 28,548 East South Central 55,798 -- 49,176 2,763 Mountain 413,053 27 409,677 10,209 ---------- ------- ---------- ------- 3,701,342 44,671 3,749,580 95,014 Less reserves for losses 20,948 -- 11,489 -- ---------- ------- ---------- ------- Total $3,680,394 $44,671 $3,738,091 $95,014 ========== ======= ========== ======= December 31, 2001 December 31, 2000 On balance Funding On balance Funding Property type sheet commitments sheet commitments Department/retail stores $1,117,195 $13,200 $1,174,763 $11,130 Apartments 694,214 11,531 780,228 -- Office buildings 1,203,090 7,650 1,085,948 59,941 Industrial buildings 333,713 2,263 323,766 23,943 Hotels/motels 108,019 -- 100,680 -- Medical buildings 106,927 6,000 128,101 -- Nursing/retirement homes 39,590 -- 49,822 -- Mixed use 86,972 27 87,537 -- Other 11,622 4,000 18,735 -- ---------- ------- ---------- ------- 3,701,342 44,671 3,749,580 95,014 Less reserves for losses 20,948 -- 11,489 -- ---------- ------- ---------- ------- Total $3,680,394 $44,671 $3,738,091 $95,014 ========== ======= ========== =======
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 fund mortgages are made in the ordinary course of business. The fair value of the mortgage commitments is $nil. At December 31, 2001, 2000 and 1999, the Company's recorded investment in impaired loans was $39,601, $24,999 and $21,375, respectively, with reserves of $7,225, $4,350 and $5,750, respectively. During 2001, 2000 and 1999, the average recorded investment in impaired loans was $24,498, $27,063 and $23,815, respectively. The Company recognized $1,285, $1,033 and $1,190 of interest income related to impaired loans for the years ended December 31, 2001, 2000 and 1999, respectively. The following table presents changes in the reserves for mortgage loan losses:
2001 2000 1999 Balance, January 1 $11,489 $ 28,283 $39,795 Provision (reduction) for mortgage loan losses 14,959 (14,894) (9,512) Loan payoffs -- (1,200) (500) Foreclosures and write-offs (5,500) (700) (1,500) ------ ---- ------ Balance, December 31 $20,948 $ 11,489 $28,283 ======= ======== =======
IDS Life Insurance Company -------------------------------------------------------------------------------- Sources of investment income and realized (losses) gains on investments Net investment income for the years ended December 31 is summarized as follows: 2001 2000 1999 Interest on fixed maturities $1,276,966 $1,473,560 $1,598,059 Interest on mortgage loans 290,608 286,611 285,921 Interest on cash equivalents 2,218 8,084 5,871 Other (44,145) 1,750 70,892 ------- ----- ------ 1,525,647 1,770,005 1,960,743 Less investment expenses 39,959 39,400 41,170 ------ ------ ------ Total $1,485,688 $1,730,605 $1,919,573 ========== ========== ==========
Net realized (losses) gains on investments for the years ended December 31 is summarized as follows: 2001 2000 1999 Fixed maturities $(621,400) $(34,857) $ 8,802 Mortgage loans (22,443) 15,845 10,210 Other investments (5,909) 2,037 7,596 ------ ----- ----- $(649,752) $(16,975) $26,608 ========= ======== =======
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 (benefit) expense for the years ended December 31 consists of the following: 2001 2000 1999 Federal income taxes Current $ 88,121 $176,397 $178,444 Deferred (234,673) 37,704 79,796 -------- ------ ------ (146,552) 214,101 258,240 State income taxes-current 1,330 7,526 9,624 ----- ----- ----- Income tax (benefit) expense before cumulative effect of accounting change (145,222) 221,627 267,864 Cumulative effect of accounting change income tax benefit (11,532) -- -- ----- ----- ----- Income tax (benefit) expense $(156,754) $221,627 $267,864 ========= ======== ========
Income tax (benefit) expense before the cumulative effect of accounting change, differs from that computed by using the United States statutory rate of 35%. The principal causes of the difference in each year are shown below:
2001 2000 1999 Provision Rate Provision Rate Provision Rate Federal income taxes based on the statutory rate $ (66,136) (35.0%) $282,542 35.0% $316,511 35.0% Tax-excluded interest and dividend income (4,663) (2.5) (3,788) (0.5) (9,626) (1.1) State taxes, net of federal benefit 865 0.4 4,892 0.6 6,256 0.7 Affordable housing credits (73,200) (38.7) (54,569) (6.8) (31,000) (3.4) Other, net (2,088) (1.1) (7,450) (0.8) (14,277) (1.6) ------ ---- ------ ---- ------- ---- Total income taxes $(145,222) (76.9%) $221,627 27.5% $267,864 29.6% ========= ===== ======== ==== ======== ====
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, 2001, 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 -------------------------------------------------------------------------------- Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred income tax assets and liabilities as of December 31 are as follows:
2001 2000 Deferred income tax assets Policy reserves $ 705,637 $730,239 Unrealized loss -- available-for-sale securities -- 179,702 Investments, other 330,675 34,600 Life insurance guaranty fund assessment reserve 1,330 1,365 Other 26,492 -- --------- ------- Total deferred income tax assets 1,064,134 945,906 --------- ------- Deferred income tax liabilities Deferred policy acquisition costs 861,892 796,292 Unrealized gain -- available-for-sale securities 45,934 -- Other -- 13,026 --------- ------- Total deferred income tax liabilities 907,826 809,318 --------- ------- Net deferred income tax assets $ 156,308 $136,588 ========== ========
The Company is required to establish a valuation allowance for any portion of the deferred income tax assets that management believes will not be realized. In the opinion of management, it is more likely than not that the Company will realize the benefit of the deferred tax assets and, therefore, no such valuation allowance has been established. 4. STOCKHOLDER'S EQUITY Retained earnings available for distribution as dividends to AEFC are limited to the Company's surplus as determined in accordance with accounting practices prescribed by state insurance regulatory authorities. Statutory unassigned surplus aggregated $1,262,335 as of December 31, 2001 and $1,493,292 as of December 31, 2000 (see Note 3 with respect to the income tax effect of certain distributions). In addition, any dividend distributions in 2002 in excess of approximately $194,435 would require approval of the Department of Commerce of the State of Minnesota. Statutory net (loss) income for the years ended December 31 and capital and surplus as of December 31 are summarized as follows: 2001 2000 1999 Statutory net (loss) income $ (317,973) $ 344,973 $ 478,173 Statutory capital and surplus 1,947,350 1,778,306 1,978,406 --------- --------- --------- The National Association of Insurance Commissioners (NAIC) revised the Accounting Practices and Procedures Manual in a process referred to as Codification. The revised regulations took effect 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 resulted in changes to the accounting practices that the Company uses to prepare its statutory-basis financial statements. The impact of implementing these changes was an increase of $4,660 to the Company's statutory-basis capital and surplus as of January 1, 2001. 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, 2001 and 2000. 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 2001, 2000 and 1999. 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. Company 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 $263, $250 and $223 in 2001, 2000 and 1999, 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 2001, 2000 and 1999 were $662, $1,707 and $1,906, 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 cost of these plans charged to operations in 2001, 2000 and 1999 was $1,011, $1,136 and $1,147, respectively. IDS Life Insurance Company -------------------------------------------------------------------------------- Charges by AEFC for use of joint facilities, technology support, marketing services and other services aggregated $505,526, $582,836 and $485,177 for 2001, 2000 and 1999, respectively. Certain of these costs are included in deferred policy acquisition costs. Expenses allocated to the Company may not be reflective of expenses that would have been incurred by the Company on a stand-alone basis. Included in other liabilities at December 31, 2001 and 2000 are $68,919 and $41,059, respectively, payable to and receivable from AEFC for federal income taxes. 6. LINES OF CREDIT The Company has available lines of credit with AEFC 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 $nil and $50,000 uncommitted at December 31, 2001 and 2000, respectively. 7. COMMITMENTS AND CONTINGENCIES At December 31, 2001, 2000 and 1999, traditional life and universal life-type insurance in force aggregated $108,255,014, $98,060,472 and $89,271,957 respectively, of which $25,986,706, $17,429,851 and $8,281,576 were reinsured at the respective year ends. The Company also reinsures a portion of the risks assumed under long-term care policies. Under all reinsurance agreements, premiums ceded to reinsurers amounted to $114,534, $89,506 and $76,970 and reinsurance recovered from reinsurers amounted to $43,388, $32,500, and $27,816 for the years ended December 31, 2001, 2000 and 1999, respectively. Reinsurance contracts do not relieve the Company from its primary obligation to policyholders. At December 31, 2001, the Company had no commitments to purchase investments other than mortgage loan fundings (see Note 2). 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, both state and federal courts gave preliminary approval to the proposed settlement and AEFC mailed notices to all of the over two million class members. In May 2001, the courts entered orders approving the settlement. The orders became final in August 2001 and in October 2001 the settlement was implemented. The anticipated costs of settlement remain unchanged from prior years. The settlement as approved provides for release by class members of all insurance and annuity market conduct claims dating back to 1985. Some class members opted out of the settlement and therefore did not release their claims against AEFC or the Company. Some of these class members who opted out were represented by counsel and presented separate claims to AEFC or the Company. Most of their claims have been settled. 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. 8. DERIVATIVE FINANCIAL INSTRUMENTS The Company maintains an overall risk management strategy that incorporates the use of derivative instruments to minimize significant unplanned fluctuations in earnings caused by interest rate and equity market volatility. The Company does not enter into derivative instruments for speculative purposes. As prescribed per SFAS No. 133, derivative instruments that are designated and qualify as hedging instruments are classified as a cash flow hedge, fair value hedge, or a hedge of a net investment in a foreign operation, based upon the exposure being hedged. The Company currently has economic hedges that either do not qualify or are not designated for hedge accounting treatment under SFAS No. 133. For the year ended December 31, 2001, the net effect on earnings of accounting for the net changes in fair value of the following undesignated derivatives under SFAS No. 133 compared with prior rules was not significant. The Company enters into interest rate swaps, caps and floors to manage the Company's interest rate risk and options and futures to manage equity-based risk. The values of derivative financial instruments are based on market values, dealer quotes or pricing models. 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. IDS Life Insurance Company -------------------------------------------------------------------------------- Interest rate caps, swaps and floors are used principally to manage the Company's interest rate risk. These instruments are primarily used to protect the margin between interest rates earned on investments and the interest rates credited to related annuity contract holders. No interest rate swaps or floors were outstanding as of December 31, 2001. The interest rate caps expire by January 2003. The fair value of the interest rate caps is included in Other assets. Changes in the value of the interest rate caps are included in Other insurance and operating expenses. A purchased (written) option conveys the right (obligation) to buy or sell an instrument at a fixed price for a set period of time or on a specific date. The Company writes and purchases index options to manage the risks related to annuity products that pay interest based upon the relative change in a major stock market index between the beginning and end of the product's term. The Company views this strategy as a prudent management of equity market sensitivity, such that earnings are not exposed to undue risk presented by changes in equity market levels. The annuity products contain embedded derivatives, essentially the equity based return of the product, which must be separated from the host contract and accounted for as derivative instruments per SFAS No. 133. As a result of fluctuations in equity markets, and the corresponding changes in value of the embedded derivatives, the amount of interest credited incurred by the Company related to the annuity product will positively or negatively impact reported earnings. The purchased and written options are carried at fair value and included in Other assets and Other liabilities, respectively. The fair value of the embedded options are included in Future policy benefits for fixed annuities. The changes in fair value of the options are recognized in Other insurance and operating expenses and the embedded derivatives are recognized in Interest credited on universal life-type insurance and investment contracts. The purchased and written options expire on various dates from 2002 to 2008. The Company also purchases futures to hedge its obligations under equity indexed annuities. The futures purchased are marked-to-market daily and exchanged traded, exposing the Company to no counterparty risk. The futures contracts mature within four months. 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. There are no index options outstanding as of December 31, 2001 related to this strategy. 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.
2001 2000 Carrying Fair Carrying Fair Financial Assets value value value value Fixed maturities: Held-to-maturity securities $ -- $ -- $ 6,463,613 $ 6,471,798 Available-for-sale securities 20,157,137 20,157,137 12,399,990 12,399,990 Common stocks 1,704 1,704 10,333 10,333 Mortgage loans on real estate 3,680,394 3,845,950 3,738,091 3,821,825 Cash and cash equivalents 1,150,251 1,150,251 316,974 316,974 Other securities 75,721 75,721 1,130 1,130 Derivative financial instruments 34,477 34,477 50,387 60,615 Separate account assets 27,333,697 27,333,697 32,349,347 32,349,347 ---------- ---------- ---------- ---------- Financial Liabilities Future policy benefits for fixed annuities $18,139,462 $17,671,777 $18,020,824 $17,479,187 Derivative financial instruments 2,506 2,506 3,098 6,069 Separate account liabilities 24,280,092 23,716,854 28,791,949 27,822,667 ---------- ---------- ---------- ----------
At December 31, 2001 and 2000, the carrying amount and fair value of future policy benefits for fixed annuities exclude life insurance-related contracts carried at $1,368,254 and $1,300,018, respectively, and policy loans of $84,557 and $96,603, respectively. The fair value of these benefits is based on the status of the annuities at December 31, 2001 and 2000. 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 2001 and 2000. At December 31, 2001 and 2000, 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 $3,053,605 and $3,557,398, respectively. S-6477-20 F (5/02) STATEMENT OF ADDITIONAL INFORMATION FOR AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE(SM) VARIABLE ANNUITY/AMERICAN EXPRESS RETIREMENT ADVISOR SELECT(SM) VARIABLE ANNUITY IDS LIFE VARIABLE ACCOUNT 10 MAY 1, 2002 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 RAVA ADVANTAGE / RAVA SELECT IDS LIFE VARIABLE ACCOUNT 10 TABLE OF CONTENTS Performance Information p. 3 Calculating Annuity Payouts p. 66 Rating Agencies p. 67 Principal Underwriter p. 67 Independent Auditors p. 67 Financial Statements
2 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. For some subaccounts we do not provide any performance information because they are new and have not had any activity as of the date of the financial statements. We also show performance from the commencement date of the funds as if the subaccounts invested in them at that time, which, in some cases, they did not. Although we base performance figures on historical earnings, past performance does not guarantee future results. 3 AVERAGE ANNUAL TOTAL RETURN(a) FOR NONQUALIFIED ANNUITIES UNDER RAVA ADVANTAGE (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, 2001
PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND 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) (23.66%) (11.34%) (23.66%) --% --% (11.34%) BD1 Bond Fund (9/99; 10/81) (1.64) 1.58 (1.64) 2.13 5.61 8.63 CR1 Capital Resource Fund (9/99; 10/81) (25.13) (14.08) (25.13) 2.36 5.10 10.41 CM1 Cash Management Fund (9/99; 10/81) (5.23) (0.08) (5.23) 2.06 2.74 4.78 DE1 Diversified Equity Income Fund (9/99; 9/99) (6.68) (2.20) (6.68) -- -- (2.20) EM1 Emerging Markets Fund (5/00; 5/00) (9.92) (22.09) (9.92) -- -- (22.09) ES1 Equity Select Fund (5/01; 5/01) -- (9.29)(c) -- -- -- (9.29)(d) EI1 Extra Income Fund (9/99; 5/96) (4.10) (6.05) (4.10) (1.01) -- 0.09 FI1 Federal Income Fund (9/99; 9/99) (2.82) 1.69 (2.82) -- -- 1.69 GB1 Global Bond Fund (9/99; 5/96) (7.40) (2.57) (7.40) (0.54) -- 0.87 GR1 Growth Fund (9/99; 9/99) (36.83) (20.08) (36.83) -- -- 20.08) IE1 International Fund (9/99; 1/92) (34.77) (18.89) (34.77) (4.22) -- 2.10 MF1 Managed Fund (9/99; 4/86) (18.28) (6.15) (18.28) 4.00 7.07 8.55 ND1 NEW DIMENSIONS FUND(R)(9/99; 5/96) (23.85) (8.10) (23.85) 7.17 -- 8.40 SV1 Partners Small Cap Value Fund (8/01; 8/01) -- (1.63)(c) -- -- -- 1.63)(d) IV1 S&P 500 Index Fund (5/00; 5/00) (19.99) (18.34) (19.99) -- -- (18.34) SC1 Small Cap Advantage Fund (9/99; 9/99) (14.58) (0.55) (14.58) -- -- (0.55) ST1 Stock Fund (8/01; 8/01) -- (10.93)(c) -- -- -- (10.93)(d) SA1 Strategy Aggressive Fund (9/99; 1/92) (38.61) (11.90) (38.61) (1.34) -- 4.93 AIM V.I. 1AC Capital Appreciation Fund, Series II (8/01;5/93)(e) -- (10.39)(c) (29.90) 3.17 -- 9.90 1AD Capital Development Fund, Series II (8/01; 5/98)(e) -- (10.12)(c) (16.01) -- -- 1.68 ALLIANCE VP 1AB AllianceBernstein International Value Portfolio (Class B) (8/01; 5/01)(f) -- (10.18)(c) -- -- -- 9.50)(d) 1AL Growth and Income Portfolio (Class B) (8/01; 1/91)(g) -- (11.22)(c) (8.47) 11.97 13.08 12.11 AMERICAN CENTURY(R) VARIABLE PORTFOLIOS, INC. 1AI VP International, Class II (8/01; 5/94)(h) -- (14.43)(c) (35.22) 1.82 -- 3.64 1AV VP Value, Class II (8/01; 5/96)(h) -- (4.64)(c) 3.19 9.18 -- 10.29 CALVERT VARIABLE SERIES, INC. 1SR Social Balanced Portfolio (5/00; 9/86) (14.82) (11.78) 14.82) 4.39 7.05 7.68 EVERGREEN VA 1CG Capital Growth Fund, Class L Shares (8/01; 3/98)(i) -- (12.50)(c) (20.49) -- -- 1.21 FIDELITY VIP 1FG Growth & Income Portfolio (Service Class 2) (8/01; 12/96)(j) -- (8.02)(c) (16.84) 7.25 -- 7.25 1FM Mid Cap Portfolio (Service Class 2) (8/01; 12/98)(j) -- (4.52)(c) (11.83) -- -- 22.15 1FO Overseas Portfolio (Service Class 2) (8/01; 1/87)(j) -- (12.75)(c) (27.95) (0.20) 4.10 4.49 4 PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND SINCE SINCE SUBACCOUNT INVESTING IN: 1 YEAR COMMENCEMENT 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT FTVIPT 1RE Franklin Real Estate Fund - Class 2 (9/99; 1/89)(k) (1.45%) 10.48% (1.45%) 3.13% 9.71% 8.57% 1SI Franklin Small Cap Value Securities Fund - Class 2 (9/99; 5/98)(k) 4.11 11.40 4.11 -- -- (0.14) (previously FTVIPT Franklin Value Securities Fund - Class 2) 1MS Mutual Shares Securities Fund - Class 2 (8/01; 11/96)(k) -- (11.18)(c) (2.21) 7.48 -- 7.88 GOLDMAN SACHS VIT 1UE CORE(SM) U.S. Equity Fund (9/99; 2/98)(l) (19.51) (9.27) (19.51) -- -- 0.04 1MC Mid Cap Value Fund (9/99; 5/98) 2.40 11.60 2.40 -- -- 3.08 INVESCO VIF 1ID Dynamics Fund (8/01; 8/97) -- (13.00)(c) (37.02) -- -- 2.71 1FS Financial Services Fund (8/01; 9/99) -- (11.13)(c) (17.64) -- -- 5.36 1TC Technology Fund (8/01; 5/97) -- (17.70)(c) (50.41) -- -- 7.16 1TL Telecommunications Fund (8/01; 9/99) -- (23.55)(c) (57.86) -- -- (26.39) JANUS ASPEN SERIES 1GT Global Technology Portfolio: Service Shares (5/00; 1/00)(m) (42.64) (43.79) (42.64) -- -- (39.62) 1IG International Growth Portfolio: Service Shares (5/00; 5/94)(m) (29.98) (30.16) (29.98) 7.21 -- 11.71 LAZARD RETIREMENT SERIES 1IP International Equity Portfolio (9/99; 9/98) (30.56) (16.47) (30.56) -- -- (5.36) MFS(R) 1MG Investors Growth Stock Series - Service Class (5/00; 5/99)(n) (31.26) (25.50) (31.26) -- -- (4.72) 1MD New Discovery Series - Service Class (5/00; 5/98)(n) (13.42) (12.44) (13.42) -- -- 11.40 1UT Utilities Series - Service Class (8/01; 1/95)(n) -- (17.50)(c) (30.79) 7.86 -- 12.34 PIONEER VCT 1PE Pioneer Equity Income VCT Portfolio - Class II Shares (8/01; 3/95)(o) -- (10.05)(c) (15.14) 9.49 -- 12.43 1EU Pioneer Europe VCT Portfolio - Class II Shares (8/01; 10/98)(p) -- (10.77)(c) (30.37) -- -- (8.55) PUTNAM VARIABLE TRUST 1HS Putnam VT Health Sciences Fund - Class IB Shares (8/01; 4/98)(q) -- (10.38)(c) (26.63) -- -- 1.02 1PI Putnam VT International Growth Fund - Class IB Shares (8/01; 1/97)(r) -- (11.86)(c) (27.41) -- -- 6.89 1VS Putnam VT Vista Fund - Class IB Shares (9/99; 1/97)(r) (39.16) (10.25) (39.16) -- -- 4.72 STRONG FUNDS 1SO Strong Opportunity Fund II - Advisor Class (8/01; 5/92)(s) -- (9.13)(c) (12.41) 11.57 -- 14.45 5 PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND SINCE SINCE SUBACCOUNT INVESTING IN: 1 YEAR COMMENCEMENT 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT WANGER 1IT International Small Cap (9/99; 5/95) (27.91%) (10.58%) (27.91%) 5.34% --% 13.48% 1SP U.S. Smaller Companies (9/99; 5/95) 1.74 2.62 1.74 9.83 -- 16.21 (previously Wanger U.S. Small Cap) WELLS FARGO VT 1AA Asset Allocation Fund (5/01; 4/94)(t) -- (11.71)(c) (14.97) 6.55 -- 9.23 1WI International Equity Fund (5/01; 7/00) -- (17.82)(c) (23.29) -- -- (22.65) 1SG Small Cap Growth Fund (5/01; 5/95)(u) -- (13.81)(c) (30.83) (4.46) -- 2.93
(a) Current applicable charges deducted from performance include a $30 annual contract administrative charge, a 0.15% annual MAV fee, a 0.40% annual EEP fee, a 0.95% annual mortality and expense risk fee and applicable surrender charges. Premium taxes and purchase payment credits 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) 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. (f) Because Class B shares were not offered until August 15, 2001, standardized Class A fund performance for prior periods represents historical results of Class A shares. For periods beginning August 15, 2001, Class B's results reflect an additional 12b-1 fee expense, which also affects future performance. (g) Because Class B shares were not offered until June 1, 1999, standardized Class A fund performance for prior periods represents historical results of Class A shares. For periods beginning June 1, 1999, Class B's results reflect an additional 12b-1 fee expense, which also affects future performance. (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) Initial offering of the Service Class 2 of each fund took place on Jan. 12, 2000. Returns prior to Jan. 12, 2000 through Nov. 3, 1997 are those of the Service Class, which reflect a 12b-1 fee of 0.10%. Service Class 2 returns prior to Nov. 3, 1997 are those of the Initial Class, which has no 12b-1 fee. If Service Class 2's 12b-1 fee of 0.25% had been reflected, returns prior to January 12, 2000 would have been lower. (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) 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. (p) 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. (q) The Trustees of the Putnam Variable Trust currently limit 12b-1 fee payments on Class IB shares to 0.25% of average net assets. (r) 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 0.25. Restated to reflect an increase in 12b-1 fees effective April 30, 2001. Actual 12b-1 fees during the most recent fiscal year were 0.22%. (s) 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. (t) Performance for periods prior to Sept. 20, 1999, reflects performance of the Life and Annuity Trust Asset Allocation Fund, its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust Funds were reorganized into the Wells Fargo Variable Trust Funds. (u) Performance for periods prior to Sept. 20, 1999, reflects performance of the Norwest Select Small Company Stock Fund (the accounting survivor of a merger of the Life and Annuity Trust Strategic Growth Fund and the Norwest Select Small Company Stock Fund), its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust and Norwest Select Funds were reorganized into the Wells Fargo Variable Trust Funds. 6 AVERAGE ANNUAL TOTAL RETURN(a) FOR NONQUALIFIED ANNUITIES UNDER RAVA ADVANTAGE (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, 2001
PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND 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) (22.93%) (10.96%) (22.93%) --% --% (10.96%) BD1 Bond Fund (9/99; 10/81) (0.68) 2.00 (0.68) 2.49 5.73 8.63 CR1 Capital Resource Fund (9/99; 10/81) (24.43) (13.72) (24.43) 2.72 5.22 10.41 CM1 Cash Management Fund (9/99; 10/81) (4.30) 0.34 (4.30) 2.43 2.90 4.78 DE1 Diversified Equity Income Fund (9/99; 9/99) (5.77) (1.78) (5.77) -- -- (1.78) EM1 Emerging Markets Fund (5/00; 5/00) (9.05) (21.64) (9.05) -- -- (21.64) ES1 Equity Select Fund (5/01; 5/01) -- (8.41)(c) -- -- -- (8.41)(d) EI1 Extra Income Fund (9/99; 5/96) (3.16) (5.65) (3.16) (0.64) -- 0.42 FI1 Federal Income Fund (9/99; 9/99) (1.88) 2.12 (1.88) -- -- 2.12 GB1 Global Bond Fund (9/99; 5/96) (6.50) (2.16) (6.50) (0.16) -- 1.20 GR1 Growth Fund (9/99; 9/99) (36.26) (19.74) (36.26) -- -- (19.74) IE1 International Fund (9/99; 1/92) (34.17) (18.55) (34.17) (3.87) -- 2.27 MF1 Managed Fund (9/99; 4/86) (17.50) (5.75) (17.50) 4.34 7.18 8.55 ND1 NEW DIMENSIONS FUND(R)(9/99; 5/96) (23.13) (7.71) (23.13) 7.47 -- 8.64 SV1 Partners Small Cap Value Fund (8/01; 8/01) -- (0.67)(c) -- -- -- (0.67)(d) IV1 S&P 500 Index Fund (5/00; 5/00) (19.23) (17.87) (19.23) -- -- (17.87) SC1 Small Cap Advantage Fund (9/99; 9/99) (13.76) (0.13) (13.76) -- -- (0.13) ST1 Stock Fund (8/01; 8/01) -- (10.07)(c) -- -- -- (10.07)(d) SA1 Strategy Aggressive Fund (9/99; 1/92) (38.06) (11.53) (38.06) (0.98) -- 5.06 AIM V.I. 1AC Capital Appreciation Fund, Series II (8/01; 5/93)(e) -- (9.53)(c) (29.25) 3.52 -- 10.07 1AD Capital Development Fund, Series II (8/01; 5/98)(e) -- (9.25)(c) (15.21) -- -- 1.94 ALLIANCE VP 1AB AllianceBernstein International Value Portfolio (Class B) (8/01; 5/01)(f) -- (9.31)(c) -- -- -- (8.63)(d) 1AL Growth and Income Portfolio (Class B) (8/01; 1/91)(g) -- (10.37)(c) (7.58) 12.22 13.14 12.11 AMERICAN CENTURY(R) VARIABLE PORTFOLIOS, INC. 1AI VP International, Class II (8/01; 5/94)(h) -- (13.61)(c) (34.62) 2.19 -- 4.04 1AV VP Value, Class II (8/01; 5/96)(h) -- (3.71)(c) 4.19 9.46 -- 10.51 CALVERT VARIABLE SERIES, INC. 1SR Social Balanced Portfolio (5/00; 9/86) (14.01) (11.28) (14.01) 4.73 7.16 7.68 EVERGREEN VA 1CG Capital Growth Fund, Class L Shares (8/01; 3/98)(i) -- (11.66)(c) (19.73) -- -- 1.46 FIDELITY VIP 1FG Growth & Income Portfolio (Service Class 2) (8/01; 12/96)(j) -- (7.13)(c) (16.04) 7.55 -- 7.55 1FM Mid Cap Portfolio (Service Class 2) (8/01; 12/98)(j) -- (3.59)(c) (10.98) -- -- 22.37 1FO Overseas Portfolio (Service Class 2) (8/01; 1/87)(j) -- (11.91)(c) (27.28) 0.17 4.23 4.49 7 PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND SINCE SINCE SUBACCOUNT INVESTING IN: 1 YEAR COMMENCEMENT 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT FTVIPT 1RE Franklin Real Estate Fund - Class 2 (9/99; 1/89)(k) (0.48%) 10.86% (0.48%) 3.48% 9.80% 8.57% 1SI Franklin Small Cap Value Securities Fund - Class 2 (9/99; 5/98)(k) 5.11 11.78 5.11 -- -- 0.12 (previously FTVIPT Franklin Value Securities Fund - Class 2) 1MS Mutual Shares Securities Fund - Class 2 (8/01; 11/96)(k) -- (10.33)(c) (1.26) 7.78 -- 8.16 GOLDMAN SACHS VIT 1UE CORE(SM) U.S. Equity Fund (9/99; 2/98)(l) (18.74) (8.88) (18.74) -- -- 0.29 1MC Mid Cap Value Fund (9/99; 5/98) 3.40 11.98 3.40 -- -- 3.34 INVESCO VIF 1ID Dynamics Fund (8/01; 8/97) -- (12.17)(c) (36.44) -- --` 3.13 1FS Financial Services Fund (8/01; 9/99) -- (10.27)(c) (16.85) -- -- 5.77 1TC Technology Fund (8/01; 5/97) -- (16.91)(c) (49.98) -- -- 7.50 1TL Telecommunications Fund (8/01; 9/99) -- (22.83)(c) (57.51) -- -- (26.07) JANUS ASPEN SERIES 1GT Global Technology Portfolio: Service Shares (5/00; 1/00)(m) (42.12) (43.47) (42.12) -- -- (39.35) 1IG International Growth Portfolio: Service Shares (5/00; 5/94)(m) (29.33) (29.76) (29.33) 7.51 -- 11.96 LAZARD RETIREMENT SERIES 1IP International Equity Portfolio (9/99; 9/98) (29.91) (16.11) 29.91) -- -- (5.09) MFS(R) 1MG Investors Growth Stock Series - Service Class (5/00; 5/99)(n) (30.62) (25.08) (30.62) -- -- (4.38) 1MD New Discovery Series - Service Class (5/00; 5/98)(n) (12.59) (11.93) (12.59) -- -- 11.61 1UT Utilities Series - Service Class (8/01; 1/95)(n) -- (16.72)(c) (30.14) 8.16 -- 12.55 PIONEER VCT 1PE Pioneer Equity Income VCT Portfolio - Class II Shares (8/01; 3/95)(o) -- (9.18)(c) (14.33) 9.77 -- 12.65 1EU Pioneer Europe VCT Portfolio - Class II Shares (8/01; 10/98)(p) -- (9.91)(c) (29.72) -- -- (8.28) PUTNAM VARIABLE TRUST 1HS Putnam VT Health Sciences Fund - Class IB Shares (8/01; 4/98)(q) -- (9.51)(c) (25.94) -- -- 1.28 1PI Putnam VT International Growth Fund - Class IB Shares (8/01; 1/97)(r) -- (11.01)(c) (26.73) -- -- 7.20 1VS Putnam VT Vista Fund - Class IB Shares (9/99; 1/97)(r) (38.61) (9.86) (38.61) -- -- 5.05 STRONG FUNDS 1SO Strong Opportunity Fund II - Advisor Class (8/01; 5/92)(s) -- (8.26)(c) (11.57) 11.82 -- 14.52 8 PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND SINCE SINCE SUBACCOUNT INVESTING IN: 1 YEAR COMMENCEMENT 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT WANGER 1IT International Small Cap (9/99; 5/95) (27.24%) (10.20%) (27.24%) 5.67% --% 13.70% 1SP U.S. Smaller Companies (9/99; 5/95) 2.74 3.04 2.74 10.10 -- 16.40 (previously Wanger U.S. Small Cap) WELLS FARGO VT 1AA Asset Allocation Fund (5/01; 4/94)(t) -- (10.86)(c) (14.15) 6.86 -- 9.51 1WI International Equity Fund (5/01; 7/00) -- (17.04)(c) (22.57) -- -- (22.15) 1SG Small Cap Growth Fund (5/01; 5/95)(u) -- (12.99)(c) (30.19) (4.11) -- 3.31
(a) Current applicable charges deducted from performance include a $30 annual contract administrative charge, a 0.15% annual MAV fee, a 0.40% annual EEP fee, a 0.95% annual mortality and expense risk fee and applicable surrender charges. Premium taxes and purchase payment credits 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) 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. (f) Because Class B shares were not offered until August 15, 2001, standardized Class A fund performance for prior periods represents historical results of Class A shares. For periods beginning August 15, 2001, Class B's results reflect an additional 12b-1 fee expense, which also affects future performance. (g) Because Class B shares were not offered until June 1, 1999, standardized Class A fund performance for prior periods represents historical results of Class A shares. For periods beginning June 1, 1999, Class B's results reflect an additional 12b-1 fee expense, which also affects future performance. (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) Initial offering of the Service Class 2 of each fund took place on Jan. 12, 2000. Returns prior to Jan. 12, 2000 through Nov. 3, 1997 are those of the Service Class, which reflect a 12b-1 fee of 0.10%. Service Class 2 returns prior to Nov. 3, 1997 are those of the Initial Class, which has no 12b-1 fee. If Service Class 2's 12b-1 fee of 0.25% had been reflected, returns prior to January 12, 2000 would have been lower. (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) 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. (p) 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. (q) The Trustees of the Putnam Variable Trust currently limit 12b-1 fee payments on Class IB shares to 0.25% of average net assets. (r) 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 0.25. Restated to reflect an increase in 12b-1 fees effective April 30, 2001. Actual 12b-1 fees during the most recent fiscal year were 0.22%. (s) 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. (t) Performance for periods prior to Sept. 20, 1999, reflects performance of the Life and Annuity Trust Asset Allocation Fund, its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust Funds were reorganized into the Wells Fargo Variable Trust Funds. (u) Performance for periods prior to Sept. 20, 1999, reflects performance of the Norwest Select Small Company Stock Fund (the accounting survivor of a merger of the Life and Annuity Trust Strategic Growth Fund and the Norwest Select Small Company Stock Fund), its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust and Norwest Select Funds were reorganized into the Wells Fargo Variable Trust Funds. 9 AVERAGE ANNUAL TOTAL RETURN(a) FOR NONQUALIFIED ANNUITIES UNDER RAVA ADVANTAGE (WITHOUT PURCHASE PAYMENT CREDITS) WITHOUT SURRENDER AND SELECTION OF MAV AND EEP DEATH BENEFIT RIDERS FOR PERIODS ENDING DEC. 31, 2001
PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND 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) (17.89%) (8.38%) (17.89%) --% --% (8.38%) BD1 Bond Fund (9/99; 10/81) 6.05 4.92 6.05 3.39 5.73 8.63 CR1 Capital Resource Fund (9/99; 10/81) (19.49) (11.21) (19.49) 3.60 5.22 10.41 CM1 Cash Management Fund (9/99; 10/81) 2.15 3.22 2.15 3.32 2.90 4.78 DE1 Diversified Equity Income Fund (9/99; 9/99) 0.57 1.06 0.57 -- -- 1.06 EM1 Emerging Markets Fund (5/00; 5/00) (2.95) (18.54) (2.95) -- -- (18.54) ES1 Equity Select Fund (5/01; 5/01) -- (2.27)(c) -- -- -- (2.27)(d) EI1 Extra Income Fund (9/99; 5/96) 3.37 (2.92) 3.37 0.28 -- 1.06 FI1 Federal Income Fund (9/99; 9/99) 4.76 5.03 4.76 -- -- 5.03 GB1 Global Bond Fund (9/99; 5/96) (0.22) 0.65 (0.22) 0.76 -- 1.86 GR1 Growth Fund (9/99; 9/99) (32.21) (17.39) (32.21) -- -- (17.39) IE1 International Fund (9/99; 1/92) (29.96) (16.20) (29.96) (3.03) -- 2.27 MF1 Managed Fund (9/99; 4/86) (12.04) (3.02) (12.04) 5.17 7.18 8.55 ND1 NEW DIMENSIONS FUND(R)(9/99; 5/96) (18.10) (5.03) (18.10) 8.21 -- 9.12 SV1 Partners Small Cap Value Fund (8/01; 8/01) -- 6.06(c) -- -- -- 6.06(d) IV1 S&P 500 Index Fund (5/00; 5/00) (13.90) (14.65) (13.90) -- -- (14.65) SC1 Small Cap Advantage Fund (9/99; 9/99) (8.03) 2.79 (8.03) -- -- 2.79 ST1 Stock Fund (8/01; 8/01) -- (4.05)(c) -- -- -- (4.05)(d) SA1 Strategy Aggressive Fund (9/99; 1/92) (34.15) (8.94) (34.15) (0.13) -- 5.06 AIM V.I. 1AC Capital Appreciation Fund, Series II (8/01; 5/93)(e) -- (3.47)(c) (24.68) 4.38 -- 10.07 1AD Capital Development Fund, Series II (8/01; 5/98)(e) -- (3.17)(c) (9.58) -- -- 3.46 ALLIANCE VP 1AB AllianceBernstein International Value Portfolio (Class B) (8/01; 5/01)(f) -- (3.24)(c) -- -- -- (2.51)(d) 1AL Growth and Income Portfolio (Class B) (8/01; 1/91)(g) -- (4.37)(c) (1.38) 12.84 13.14 12.11 AMERICAN CENTURY(R) VARIABLE PORTFOLIOS, INC. 1AI VP International, Class II (8/01; 5/94)(h) -- (7.86)(c) (30.45) 3.08 -- 4.04 1AV VP Value, Class II (8/01; 5/96)(h) -- 2.78(c) 11.19 10.15 -- 10.95 CALVERT VARIABLE SERIES, INC. 1SR Social Balanced Portfolio (5/00; 9/86) (8.29) (7.77) (8.29) 5.55 7.16 7.68 EVERGREEN VA 1CG Capital Growth Fund, Class L Shares (8/01; 3/98)(i) -- (5.77)(c) (14.44) -- -- 2.93 FIDELITY VIP 1FG Growth & Income Portfolio (Service Class 2) (8/01; 12/96)(j) -- (0.89)(c) (10.48) 8.29 -- 8.29 1FM Mid Cap Portfolio (Service Class 2) (8/01; 12/98)(j) -- 2.91(c) (5.04) -- -- 23.69 1FO Overseas Portfolio (Service Class 2) (8/01; 1/87)(j) -- (6.04)(c) (22.55) 1.06 4.23 4.49 10 PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND SINCE SINCE SUBACCOUNT INVESTING IN: 1 YEAR COMMENCEMENT 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT FTVIPT 1RE Franklin Real Estate Fund - Class 2 (9/99; 1/89)(k) 6.26% 13.49% 6.26% 4.34% 9.80% 8.57% 1SI Franklin Small Cap Value Securities Fund - Class 2 (9/99; 5/98)(k) 12.11 14.38 12.11 -- -- 1.64 (previously FTVIPT Franklin Value Securities Fund - Class 2) 1MS Mutual Shares Securities Fund - Class 2 (8/01; 11/96)(k) -- (4.33)(c) 5.42 8.51 -- 8.72 GOLDMAN SACHS VIT 1UE CORE(SM) U.S. Equity Fund (9/99; 2/98)(l) (13.38) (6.24) (13.38) -- -- 1.71 1MC Mid Cap Value Fund (9/99; 5/98) 10.40 14.58 10.40 -- -- 4.80 INVESCO VIF 1ID Dynamics Fund (8/01; 8/97) -- (6.31)(c) (32.41) -- -- 4.14 1FS Financial Services Fund (8/01; 9/99) -- (4.27)(c) (11.35) -- -- 8.58 1TC Technology Fund (8/01; 5/97) -- (11.41)(c) (46.97) -- -- 8.32 1TL Telecommunications Fund (8/01; 9/99) -- (17.77)(c) (55.07) -- -- (23.89) JANUS ASPEN SERIES 1GT Global Technology Portfolio: Service Shares (5/00; 1/00)(m) (38.52) (41.30) (38.52) -- -- (37.49) 1IG International Growth Portfolio: Service Shares (5/00; 5/94)(m) (24.76) (27.03) (24.76) 8.25 -- 11.96 LAZARD RETIREMENT SERIES 1IP International Equity Portfolio (9/99; 9/98) (25.39) (13.69) (25.39) -- -- (3.49) MFS(R) 1MG Investors Growth Stock Series - Service Class (5/00; 5/99)(n) (26.15) (22.16) (26.15) -- -- (2.07) 1MD New Discovery Series - Service Class (5/00; 5/98)(n) (6.76) (8.45) (6.76) -- -- 12.81 1UT Utilities Series - Service Class (8/01; 1/95)(n) -- (11.20)(c) (25.64) 8.88 -- 12.69 PIONEER VCT 1PE Pioneer Equity Income VCT Portfolio - Class II Shares (8/01; 3/95)(o) -- (3.10)(c) (8.63) 10.45 -- 12.80 1EU Pioneer Europe VCT Portfolio - Class II Shares (8/01; 10/98)(p) -- (3.88)(c) (25.18) -- -- (6.65) PUTNAM VARIABLE TRUST 1HS Putnam VT Health Sciences Fund - Class IB Shares (8/01; 4/98)(q) -- (3.46)(c) (21.12) -- -- 2.81 1PI Putnam VT International Growth Fund - Class IB Shares (8/01; 1/97)(r) -- (5.06)(c) (21.97) -- -- 7.94 1VS Putnam VT Vista Fund - Class IB Shares (9/99; 1/97)(r) (34.74) (7.21) (34.74) -- -- 5.86 STRONG FUNDS 1SO Strong Opportunity Fund II - Advisor Class (8/01; 5/92)(s) -- (2.10)(c) (5.66) 12.45 -- 14.52 11 PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND SINCE SINCE SUBACCOUNT INVESTING IN: 1 YEAR COMMENCEMENT 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT WANGER 1IT International Small Cap (9/99; 5/95) (22.51%) (7.60%) (22.51%) 6.46% --% 13.84% 1SP U.S. Smaller Companies (9/99; 5/95) 9.72 5.92 9.72 10.78 -- 16.53 (previously Wanger U.S. Small Cap) WELLS FARGO VT 1AA Asset Allocation Fund (5/01; 4/94)(t) -- (4.90)(c) (8.44) 7.62 -- 9.51 1WI International Equity Fund (5/01; 7/00) -- (11.55)(c) (17.49) -- -- (18.71) 1SG Small Cap Growth Fund (5/01; 5/95)(u) -- (7.19)(c) (25.69) (3.26) -- 3.55
(a) Current applicable charges deducted from performance include a $30 annual contract administrative charge, a 0.15% annual MAV fee, a 0.40% annual EEP fee and a 0.95% annual mortality and expense risk fee. Premium taxes and purchase payment credits 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) 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. (f) Because Class B shares were not offered until August 15, 2001, standardized Class A fund performance for prior periods represents historical results of Class A shares. For periods beginning August 15, 2001, Class B's results reflect an additional 12b-1 fee expense, which also affects future performance. (g) Because Class B shares were not offered until June 1, 1999, standardized Class A fund performance for prior periods represents historical results of Class A shares. For periods beginning June 1, 1999, Class B's results reflect an additional 12b-1 fee expense, which also affects future performance. (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) Initial offering of the Service Class 2 of each fund took place on Jan. 12, 2000. Returns prior to Jan. 12, 2000 through Nov. 3, 1997 are those of the Service Class, which reflect a 12b-1 fee of 0.10%. Service Class 2 returns prior to Nov. 3, 1997 are those of the Initial Class, which has no 12b-1 fee. If Service Class 2's 12b-1 fee of 0.25% had been reflected, returns prior to January 12, 2000 would have been lower. (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) 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. (p) 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. (q) The Trustees of the Putnam Variable Trust currently limit 12b-1 fee payments on Class IB shares to 0.25% of average net assets. (r) 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 0.25. Restated to reflect an increase in 12b-1 fees effective April 30, 2001. Actual 12b-1 fees during the most recent fiscal year were 0.22%. (s) 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. (t) Performance for periods prior to Sept. 20, 1999, reflects performance of the Life and Annuity Trust Asset Allocation Fund, its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust Funds were reorganized into the Wells Fargo Variable Trust Funds. (u) Performance for periods prior to Sept. 20, 1999, reflects performance of the Norwest Select Small Company Stock Fund (the accounting survivor of a merger of the Life and Annuity Trust Strategic Growth Fund and the Norwest Select Small Company Stock Fund), its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust and Norwest Select Funds were reorganized into the Wells Fargo Variable Trust Funds. 12 AVERAGE ANNUAL TOTAL RETURN(a) FOR NONQUALIFIED ANNUITIES UNDER RAVA ADVANTAGE (WITHOUT PURCHASE PAYMENT CREDITS) WITH SURRENDER AND SELECTION OF TEN-YEAR SURRENDER CHARGE SCHEDULE FOR PERIODS ENDING DEC. 31, 2001
PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND 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) (23.15%) (10.81%) (23.15%) --% --% (10.81%) BD1 Bond Fund (9/99; 10/81) (1.13) 2.15 (1.13) 2.71 6.17 9.18 CR1 Capital Resource Fund (9/99; 10/81) (24.63) (13.56) (24.63) 2.94 5.65 10.96 CM1 Cash Management Fund (9/99; 10/81) (4.72) 0.44 (4.72) 2.64 3.30 5.33 DE1 Diversified Equity Income Fund (9/99; 9/99) (6.17) (1.67) (6.17) -- -- (1.67) EM1 Emerging Markets Fund (5/00; 5/00) (9.41) (21.57) (9.41) -- -- (21.57) ES1 Equity Select Fund (5/01; 5/01) -- (8.78)(c) -- -- -- (8.78)(d) EI1 Extra Income Fund (9/99; 5/96) (3.59) (5.52) (3.59) (0.48) -- 0.63 FI1 Federal Income Fund (9/99; 9/99) (2.32) 2.26 (2.32) -- -- 2.26 GB1 Global Bond Fund (9/99; 5/96) (6.89) (2.04) (6.89) 0.00 -- 1.44 GR1 Growth Fund (9/99; 9/99) (36.33) (19.55) (36.33) -- -- (19.55) IE1 International Fund (9/99; 1/92) (34.26) (18.37) (34.26) (3.68) -- 2.66 MF1 Managed Fund (9/99; 4/86) (17.77) (5.62) (17.77) 4.57 7.63 .10 ND1 NEW DIMENSIONS FUND(R)(9/99; 5/96) (23.35) (7.58) (23.35) 7.74 -- 8.97 SV1 Partners Small Cap Value Fund (8/01; 8/01) -- (1.12)(c) -- -- -- (1.12)(d) IV1 S&P 500 Index Fund (5/00; 5/00) (19.48) (17.82) (19.48) -- -- (17.82) SC1 Small Cap Advantage Fund (9/99; 9/99) (14.08) (0.03) (14.08) -- -- (0.03) ST1 Stock Fund (8/01; 8/01) -- (10.42)(c) -- -- -- (10.42)(d) SA1 Strategy Aggressive Fund (9/99; 1/92) (38.11) (11.37) (38.11) (0.80) -- 5.48 AIM V.I. 1AC Capital Appreciation Fund, Series II (8/01; 5/93)(e) -- (9.89)(c) (29.40) 3.75 -- 10.46 1AD Capital Development Fund, Series II (8/01; 5/98)(e) -- (9.61)(c) (15.50) -- -- 2.25 ALLIANCE VP 1AB AllianceBernstein International Value Portfolio (Class B) (8/01; 5/01)(f) -- (9.67)(c) -- -- -- (9.00)(d) 1AL Growth and Income Portfolio (Class B) (8/01; 1/91)(g) -- (10.72)(c) (7.96) 12.53 13.63 12.66 AMERICAN CENTURY(R) VARIABLE PORTFOLIOS, INC. 1AI VP International, Class II (8/01; 5/94)(h) -- (13.93)(c) (34.71) 2.39 -- 4.20 1AV VP Value, Class II (8/01; 5/96)(h) -- (4.13)(c) 3.74 9.75 -- 10.85 CALVERT VARIABLE SERIES, INC. 1SR Social Balanced Portfolio (5/00; 9/86) (14.32) (11.26) (14.32) 4.97 7.61 8.23 EVERGREEN VA 1CG Capital Growth Fund, Class L Shares (8/01; 3/98)(i) -- (12.00)(c) (19.98) -- -- 1.78 FIDELITY VIP 1FG Growth & Income Portfolio (Service Class 2) (8/01; 12/96)(j) -- (7.51)(c) (16.33) 7.82 -- 7.82 1FM Mid Cap Portfolio (Service Class 2) (8/01; 12/98)(j) -- (4.02)(c) (11.33) -- -- 22.72 1FO Overseas Portfolio (Service Class 2) (8/01; 1/87)(j) -- (12.25)(c) (27.44) 0.34 4.65 5.04 13 PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND SINCE SINCE SUBACCOUNT INVESTING IN: 1 YEAR COMMENCEMENT 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT FTVIPT 1RE Franklin Real Estate Fund - Class 2 (9/99; 1/89)(k) (0.94%) 11.05% (0.94%) 3.71% 10.26% 9.12% 1SI Franklin Small Cap Value Securities Fund - Class 2 (9/99; 5/98)(k) 4.66 11.97 4.66 -- -- 0.40 (previously FTVIPT Franklin Value Securities Fund - Class 2) 1MS Mutual Shares Securities Fund - Class 2 (8/01; 11/96)(k) -- (10.68)(c) (1.71) 8.05 -- 8.45 GOLDMAN SACHS VIT 1UE CORE(SM) U.S. Equity Fund (9/99; 2/98)(l) (19.00) (8.74) (19.00) -- -- 0.58 1MC Mid Cap Value Fund (9/99; 5/98) 2.95 12.17 2.95 -- -- 3.66 INVESCO VIF 1ID Dynamics Fund (8/01; 8/97) -- (12.50)(c) (36.51) -- -- 3.28 1FS Financial Services Fund (8/01; 9/99) -- (10.62)(c) (17.13) -- -- 5.94 1TC Technology Fund (8/01; 5/97) -- (17.19)(c) (49.90) -- -- 7.73 1TL Telecommunications Fund (8/01; 9/99) -- (23.04)(c) (57.36) -- -- (25.86) JANUS ASPEN SERIES 1GT Global Technology Portfolio: Service Shares (5/00; 1/00)(m) (42.13) (43.27) (42.13) -- -- (39.10) 1IG International Growth Portfolio: Service Shares (5/00; 5/94)(m) (29.48) (29.64) (29.48) 7.78 -- 12.27 LAZARD RETIREMENT SERIES 1IP International Equity Portfolio (9/99; 9/98) (30.05) (15.94) (30.05) -- -- (4.82) MFS(R) 1MG Investors Growth Stock Series - Service Class (5/00; 5/99)(n) (30.75) (24.98) (30.75) -- -- (4.19) 1MD New Discovery Series - Service Class (5/00; 5/98)(n) (12.91) (11.92) (12.91) -- -- 11.97 1UT Utilities Series - Service Class (8/01; 1/95)(n) -- (17.00)(c) (30.28) 8.43 -- 12.90 PIONEER VCT 1PE Pioneer Equity Income VCT Portfolio - Class II Shares (8/01; 3/95)(o) -- (9.55)(c) (14.64) 10.06 -- 12.99 1EU Pioneer Europe VCT Portfolio - Class II Shares (8/01; 10/98)(p) -- (10.27)(c) (29.86) -- -- (8.02) PUTNAM VARIABLE TRUST 1HS Putnam VT Health Sciences Fund - Class IB Shares (8/01; 4/98)(q) -- (9.87)(c) (26.12) -- -- 1.58 1PI Putnam VT International Growth Fund - Class IB Shares (8/01; 1/97)(r) -- (11.35)(c) (26.91) -- -- 7.46 1VS Putnam VT Vista Fund - Class IB Shares (9/99; 1/97)(r) (38.65) (9.72) (38.65) -- -- 5.29 STRONG FUNDS 1SO Strong Opportunity Fund II - Advisor Class (8/01; 5/92)(s) -- (8.63)(c) (11.90) 12.13 -- 15.01 14 PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND SINCE SINCE SUBACCOUNT INVESTING IN: 1 YEAR COMMENCEMENT 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT WANGER 1IT International Small Cap (9/99; 5/95) (27.41%) (10.05%) (27.41%) 5.92% --% 14.04% 1SP U.S. Smaller Companies (9/99; 5/95) 2.27 3.19 2.27 10.40 -- 16.77 (previously Wanger U.S. Small Cap) WELLS FARGO VT 1AA Asset Allocation Fund (5/01; 4/94)(t) -- (11.20)(c) (14.46) 7.12 -- 9.79 1WI International Equity Fund (5/01; 7/00) -- (17.32)(c) (22.79) -- -- (22.13) 1SG Small Cap Growth Fund (5/01; 5/95)(u) -- (13.31)(c) (30.33) (3.92) -- 3.50
(a) Current applicable charges deducted from performance include a $30 annual contract administrative charge, a 0.95% annual mortality and expense risk fee and applicable surrender charges. Premium taxes and purchase payment credits 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) 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. (f) Because Class B shares were not offered until August 15, 2001, standardized Class A fund performance for prior periods represents historical results of Class A shares. For periods beginning August 15, 2001, Class B's results reflect an additional 12b-1 fee expense, which also affects future performance. (g) Because Class B shares were not offered until June 1, 1999, standardized Class A fund performance for prior periods represents historical results of Class A shares. For periods beginning June 1, 1999, Class B's results reflect an additional 12b-1 fee expense, which also affects future performance. (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) Initial offering of the Service Class 2 of each fund took place on Jan. 12, 2000. Returns prior to Jan. 12, 2000 through Nov. 3, 1997 are those of the Service Class, which reflect a 12b-1 fee of 0.10%. Service Class 2 returns prior to Nov. 3, 1997 are those of the Initial Class, which has no 12b-1 fee. If Service Class 2's 12b-1 fee of 0.25% had been reflected, returns prior to January 12, 2000 would have been lower. (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) 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. (p) 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. (q) The Trustees of the Putnam Variable Trust currently limit 12b-1 fee payments on Class IB shares to 0.25% of average net assets. (r) 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 0.25. Restated to reflect an increase in 12b-1 fees effective April 30, 2001. Actual 12b-1 fees during the most recent fiscal year were 0.22%. (s) 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. (t) Performance for periods prior to Sept. 20, 1999, reflects performance of the Life and Annuity Trust Asset Allocation Fund, its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust Funds were reorganized into the Wells Fargo Variable Trust Funds. (u) Performance for periods prior to Sept. 20, 1999, reflects performance of the Norwest Select Small Company Stock Fund (the accounting survivor of a merger of the Life and Annuity Trust Strategic Growth Fund and the Norwest Select Small Company Stock Fund), its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust and Norwest Select Funds were reorganized into the Wells Fargo Variable Trust Funds. 15 AVERAGE ANNUAL TOTAL RETURN(a) FOR NONQUALIFIED ANNUITIES UNDER RAVA ADVANTAGE (WITHOUT PURCHASE PAYMENT CREDITS) WITH SURRENDER AND SELECTION FOR A SEVEN-YEAR SURRENDER CHARGE SCHEDULE FOR PERIODS ENDING DEC. 31, 2001
PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND 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) (22.42%) (10.43%) (22.42%) --% --% (10.43%) BD1 Bond Fund (9/99; 10/81) (0.17) 2.57 (0.17) 3.06 6.28 9.18 CR1 Capital Resource Fund (9/99; 10/81) (23.92) (13.19) (23.92) 3.29 5.77 10.96 CM1 Cash Management Fund (9/99; 10/81) (3.79) 0.87 (3.79) 3.00 3.45 5.33 DE1 Diversified Equity Income Fund (9/99; 9/99) (5.26) (1.25) (5.26) -- -- (1.25) EM1 Emerging Markets Fund (5/00; 5/00) (8.53) (21.12) (8.53) -- -- (21.12) ES1 Equity Select Fund (5/01; 5/01) -- (7.90)(c) -- -- -- (7.90)(d) EI1 Extra Income Fund (9/99; 5/96) (2.65) (5.12) (2.65) (0.09) -- 0.96 FI1 Federal Income Fund (9/99; 9/99) (1.37) 2.69 (1.37) -- -- 2.69 GB1 Global Bond Fund (9/99; 5/96) (5.99) (1.63) (5.99) 0.38 -- 1.77 GR1 Growth Fund (9/99; 9/99) (35.74) (19.20) (35.74) -- -- (19.20) IE1 International Fund (9/99; 1/92) (33.65) (18.02) (33.65) (3.33) -- 2.82 MF1 Managed Fund (9/99; 4/86) (16.99) (5.22) (16.99) 4.90 7.73 9.10 ND1 NEW DIMENSIONS FUND(R)(9/99; 5/96) (22.62) (7.18) (22.62) 8.03 -- 9.21 SV1 Partners Small Cap Value Fund (8/01; 8/01) -- (0.16)(c) -- -- -- (0.16)(d) IV1 S&P 500 Index Fund (5/00; 5/00) (18.72) (17.35) (18.72) -- -- (17.35) SC1 Small Cap Advantage Fund (9/99; 9/99) (13.25) 0.40 (13.25) -- -- 0.40 ST1 Stock Fund (8/01; 8/01) -- (9.55)(c) -- -- -- (9.55)(d) SA1 Strategy Aggressive Fund (9/99; 1/92) (37.54) (10.99) (37.54) (0.44) -- 5.61 AIM V.I. 1AC Capital Appreciation Fund, Series II (8/01; 5/93)(e) -- (9.02)(c) (28.74) 4.09 -- 10.62 1AD Capital Development Fund, Series II (8/01; 5/98)(e) -- (8.74)(c) (14.70) -- -- 2.51 ALLIANCE VP 1AB AllianceBernstein International Value Portfolio (Class B) (8/01; 5/01)(f) -- (8.80)(c) -- -- -- (8.12)(d) 1AL Growth and Income Portfolio (Class B) (8/01; 1/91)(g) -- (9.86)(c) (7.07) 12.78 13.69 12.66 AMERICAN CENTURY(R) VARIABLE PORTFOLIOS, INC. 1AI VP International, Class II (8/01; 5/94)(h) -- (13.10)(c) (34.11) 2.75 -- 4.59 1AV VP Value, Class II (8/01; 5/96)(h) -- (3.20)(c) 4.74 10.02 -- 11.07 CALVERT VARIABLE SERIES, INC. 1SR Social Balanced Portfolio (5/00; 9/86) (13.50) (10.75) (13.50) 5.29 7.71 8.23 EVERGREEN VA 1CG Capital Growth Fund, Class L Shares (8/01; 3/98)(i) -- (11.15)(c) (19.22) -- -- 2.03 FIDELITY VIP 1FG Growth & Income Portfolio (Service Class 2) (8/01; 12/96)(j) -- (6.62)(c) (15.53) 8.11 -- 8.11 1FM Mid Cap Portfolio (Service Class 2) (8/01; 12/98)(j) -- (3.08)(c) (10.47) -- -- 22.94 1FO Overseas Portfolio (Service Class 2) (8/01; 1/87)(j) -- (11.40)(c) (26.76) 0.71 4.78 5.04 16 PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND SINCE SINCE SUBACCOUNT INVESTING IN: 1 YEAR COMMENCEMENT 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT FTVIPT 1RE Franklin Real Estate Fund - Class 2 (9/99; 1/89)(k) 0.03% 11.43% 0.03% 4.05% 10.35% 9.12% 1SI Franklin Small Cap Value Securities Fund - Class 2 (9/99; 5/98)(k) 5.66 12.35 5.66 -- -- 0.66 (previously FTVIPT Franklin Value Securities Fund - Class 2) 1MS Mutual Shares Securities Fund - Class 2 (8/01; 11/96)(k) -- (9.82)(c) (0.75) 8.35 -- 8.73 GOLDMAN SACHS VIT 1UE CORE(SM) U.S. Equity Fund (9/99; 2/98)(l) (18.23) (8.35) (18.23) -- -- 0.82 1MC Mid Cap Value Fund (9/99; 5/98) 3.95 12.55 3.95 -- -- 3.91 INVESCO VIF 1ID Dynamics Fund (8/01; 8/97) -- (11.65)(c) (35.93) -- -- 3.69 1FS Financial Services Fund (8/01; 9/99) -- (9.76)(c) (16.34) -- -- 6.34 1TC Technology Fund (8/01; 5/97) -- (16.40)(c) (49.47) -- -- 8.06 1TL Telecommunications Fund (8/01; 9/99) -- (22.32)(c) (57.00) -- -- (25.54) JANUS ASPEN SERIES 1GT Global Technology Portfolio: Service Shares (5/00; 1/00)(m) (41.61) (42.95) (41.61) -- -- (38.82) 1IG International Growth Portfolio: Service Shares (5/00; 5/94)(m) (28.82) (29.24) (28.82) 8.07 -- 12.51 LAZARD RETIREMENT SERIES 1IP International Equity Portfolio (9/99; 9/98) (29.40) (15.58) (29.40) -- -- (4.55) MFS(R) 1MG Investors Growth Stock Series - Service Class (5/00; 5/99)(n) (30.11) (24.55) (30.11) -- -- (3.85) 1MD New Discovery Series - Service Class (5/00; 5/98)(n) (12.07) (11.41) (12.07) -- -- 12.17 1UT Utilities Series - Service Class (8/01; 1/95)(n) -- (16.20)(c) (29.63) 8.72 -- 13.11 PIONEER VCT 1PE Pioneer Equity Income VCT Portfolio - Class II Shares (8/01; 3/95)(o) -- (8.67)(c) (13.82) 10.33 -- 13.21 1EU Pioneer Europe VCT Portfolio - Class II Shares (8/01; 10/98)(p) -- (9.40)(c) (29.21) -- -- (7.74) PUTNAM VARIABLE TRUST 1HS Putnam VT Health Sciences Fund - Class IB Shares (8/01; 4/98)(q) -- (9.00)(c) (25.43) -- -- 1.84 1PI Putnam VT International Growth Fund - Class IB Shares (8/01; 1/97)(r) -- (10.50)(c) (26.22) -- -- 7.76 1VS Putnam VT Vista Fund - Class IB Shares (9/99; 1/97)(r) (38.10) (9.33) (38.10) -- -- 5.62 STRONG FUNDS 1SO Strong Opportunity Fund II - Advisor Class (8/01; 5/92)(s) -- (7.74)(c) (11.05) 12.38 -- 15.07 17 PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND SINCE SINCE SUBACCOUNT INVESTING IN: 1 YEAR COMMENCEMENT 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT WANGER 1IT International Small Cap (9/99; 5/95) (26.72%) (9.67%) (26.72%) 6.23% --% 14.25% 1SP U.S. Smaller Companies (9/99; 5/95) 3.27 3.61 3.27 10.67 -- 16.95 (previously Wanger U.S. Small Cap) WELLS FARGO VT 1AA Asset Allocation Fund (5/01; 4/94)(t) -- (10.35)(c) (13.64) 7.43 -- 10.06 1WI International Equity Fund (5/01; 7/00) -- (16.53)(c) (22.06) -- -- (21.63) 1SG Small Cap Growth Fund (5/01; 5/95)(u) -- (12.47)(c) (29.68) (3.57) -- 3.86
(a) Current applicable charges deducted from performance include a $30 annual contract administrative charge, a 0.95% annual mortality and expense risk fee and applicable surrender charges. Premium taxes and purchase payment credits 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) 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. (f) Because Class B shares were not offered until August 15, 2001, standardized Class A fund performance for prior periods represents historical results of Class A shares. For periods beginning August 15, 2001, Class B's results reflect an additional 12b-1 fee expense, which also affects future performance. (g) Because Class B shares were not offered until June 1, 1999, standardized Class A fund performance for prior periods represents historical results of Class A shares. For periods beginning June 1, 1999, Class B's results reflect an additional 12b-1 fee expense, which also affects future performance. (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) Initial offering of the Service Class 2 of each fund took place on Jan. 12, 2000. Returns prior to Jan. 12, 2000 through Nov. 3, 1997 are those of the Service Class, which reflect a 12b-1 fee of 0.10%. Service Class 2 returns prior to Nov. 3, 1997 are those of the Initial Class, which has no 12b-1 fee. If Service Class 2's 12b-1 fee of 0.25% had been reflected, returns prior to January 12, 2000 would have been lower. (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) 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. (p) 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. (q) The Trustees of the Putnam Variable Trust currently limit 12b-1 fee payments on Class IB shares to 0.25% of average net assets. (r) 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 0.25. Restated to reflect an increase in 12b-1 fees effective April 30, 2001. Actual 12b-1 fees during the most recent fiscal year were 0.22%. (s) 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. (t) Performance for periods prior to Sept. 20, 1999, reflects performance of the Life and Annuity Trust Asset Allocation Fund, its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust Funds were reorganized into the Wells Fargo Variable Trust Funds. (u) Performance for periods prior to Sept. 20, 1999, reflects performance of the Norwest Select Small Company Stock Fund (the accounting survivor of a merger of the Life and Annuity Trust Strategic Growth Fund and the Norwest Select Small Company Stock Fund), its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust and Norwest Select Funds were reorganized into the Wells Fargo Variable Trust Funds. 18 AVERAGE ANNUAL TOTAL RETURN(a) FOR NONQUALIFIED ANNUITIES UNDER RAVA ADVANTAGE (WITHOUT PURCHASE PAYMENT CREDITS) WITHOUT SURRENDER FOR PERIODS ENDING DEC. 31, 2001
PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND 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) (17.34%) (7.83%) (17.34%) --% --% (7.83%) BD1 Bond Fund (9/99; 10/81) 6.60 5.47 6.60 3.94 6.28 9.18 CR1 Capital Resource Fund (9/99; 10/81) (18.94) (10.66) (18.94) 4.15 5.77 10.96 CM1 Cash Management Fund (9/99; 10/81) 2.70 3.77 2.70 3.87 3.45 5.33 DE1 Diversified Equity Income Fund (9/99; 9/99) 1.12 1.61 1.12 -- -- 1.61 EM1 Emerging Markets Fund (5/00; 5/00) (2.40) (17.99) (2.40) -- -- (17.99) ES1 Equity Select Fund (5/01; 5/01) -- (1.72)(c) -- -- -- (1.72)(d) EI1 Extra Income Fund (9/99; 5/96) 3.92 (2.37) 3.92 0.83 -- 1.61 FI1 Federal Income Fund (9/99; 9/99) 5.31 5.58 5.31 -- -- 5.58 GB1 Global Bond Fund (9/99; 5/96) 0.33 1.20 0.33 1.31 -- 2.41 GR1 Growth Fund (9/99; 9/99) (31.66) (16.84) (31.66) -- -- (16.84) IE1 International Fund (9/99; 1/92) (29.41) (15.65) (29.41) (2.48) -- 2.82 MF1 Managed Fund (9/99; 4/86) (11.49) (2.47) (11.49) 5.72 7.73 9.10 ND1 NEW DIMENSIONS FUND(R)(9/99; 5/96) (17.55) (4.48) (17.55) 8.76 -- 9.67 SV1 Partners Small Cap Value Fund (8/01; 8/01) -- 6.61(c) -- -- -- 6.61(d) IV1 S&P 500 Index Fund (5/00; 5/00) (13.35) (14.10) (13.35) -- -- (14.10) SC1 Small Cap Advantage Fund (9/99; 9/99) (7.48) 3.34 (7.48) -- -- 3.34 ST1 Stock Fund (8/01; 8/01) -- (3.50)(c) -- -- -- (3.50)(d) SA1 Strategy Aggressive Fund (9/99; 1/92) (33.60) (8.39) (33.60) 0.42 -- 5.61 AIM V.I. 1AC Capital Appreciation Fund, Series II (8/01; 5/93)(e) -- (2.92)(c) (24.13) 4.93 -- 10.62 1AD Capital Development Fund, Series II (8/01; 5/98)(e) -- (2.62)(c) (9.03) -- -- 4.01 ALLIANCE VP 1AB AllianceBernstein International Value Portfolio (Class B) (8/01; 5/01)(f) -- (2.69)(c) -- -- -- (1.96)(d) 1AL Growth and Income Portfolio (Class B) (8/01; 1/91)(g) -- (3.82)(c) (0.83) 13.39 13.69 12.66 AMERICAN CENTURY(R) VARIABLE PORTFOLIOS, INC. 1AI VP International, Class II (8/01; 5/94)(h) -- (7.31)(c) (29.90) 3.63 -- 4.59 1AV VP Value, Class II (8/01; 5/96)(h) -- 3.33(c) 11.74 10.70 -- 11.50 CALVERT VARIABLE SERIES, INC. 1SR Social Balanced Portfolio (5/00; 9/86) (7.74) (7.22) (7.74) 6.10 7.71 8.23 EVERGREEN VA 1CG Capital Growth Fund, Class L Shares (8/01; 3/98)(i) -- (5.22)(c) (13.89) -- -- 3.48 FIDELITY VIP 1FG Growth & Income Portfolio (Service Class 2) (8/01; 12/96)(j) -- (0.34)(c) (9.93) 8.84 -- 8.84 1FM Mid Cap Portfolio (Service Class 2) (8/01; 12/98)(j) -- 3.46(c) (4.49) -- -- 24.24 1FO Overseas Portfolio (Service Class 2) (8/01; 1/87)(j) -- (5.49)(c) (22.00) 1.61 4.78 5.04 19 PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND SINCE SINCE SUBACCOUNT INVESTING IN: 1 YEAR COMMENCEMENT 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT FTVIPT 1RE Franklin Real Estate Fund - Class 2 (9/99; 1/89)(k) 6.81% 14.04% 6.81% 4.89% 10.35% 9.12% 1SI Franklin Small Cap Value Securities Fund - Class 2 (9/99; 5/98)(k) 12.66 14.93 12.66 -- -- 2.19 (previously FTVIPT Franklin Value Securities Fund - Class 2) 1MS Mutual Shares Securities Fund - Class 2 (8/01; 11/96)(k) -- (3.78)(c) 5.97 9.06 -- 9.27 GOLDMAN SACHS VIT 1UE CORE(SM) U.S. Equity Fund (9/99; 2/98)(l) (12.83) (5.69) (12.83) -- -- 2.26 1MC Mid Cap Value Fund (9/99; 5/98) 10.95 15.13 10.95 -- -- 5.35 INVESCO VIF 1ID Dynamics Fund (8/01; 8/97) -- (5.76)(c) (31.86) -- -- 4.69 1FS Financial Services Fund (8/01; 9/99) -- (3.72)(c) (10.80) -- -- 9.13 1TC Technology Fund (8/01; 5/97) -- (10.86)(c) (46.42) -- -- 8.87 1TL Telecommunications Fund (8/01; 9/99) -- (17.22)(c) (54.52) -- -- (23.34) JANUS ASPEN SERIES 1GT Global Technology Portfolio: Service Shares (5/00; 1/00)(m) (37.97) (40.75) (37.97) -- -- (36.94) 1IG International Growth Portfolio: Service Shares (5/00; 5/94)(m) (24.21) (26.48) (24.21) 8.80 -- 12.51 LAZARD RETIREMENT SERIES 1IP International Equity Portfolio(9/99; 9/98) (24.84) (13.14) (24.84) -- -- (2.94) MFS(R) 1MG Investors Growth Stock Series - Service Class (5/00; 5/99)(n) (25.60) (21.61) (25.60) -- -- (1.52) 1MD New Discovery Series - Service Class (5/00; 5/98)(n) (6.21) (7.90) (6.21) -- -- 13.36 1UT Utilities Series - Service Class (8/01; 1/95)(n) -- (10.65)(c) (25.09) 9.43 -- 13.24 PIONEER VCT 1PE Pioneer Equity Income VCT Portfolio - Class II Shares (8/01; 3/95)(o) -- (2.55)(c) (8.08) 11.00 -- 13.35 1EU Pioneer Europe VCT Portfolio - Class II Shares (8/01; 10/98)(p) -- (3.33)(c) (24.63) -- -- (6.10) PUTNAM VARIABLE TRUST 1HS Putnam VT Health Sciences Fund - Class IB Shares (8/01; 4/98)(q) -- (2.91)(c) (20.57) -- -- 3.36 1PI Putnam VT International Growth Fund - Class IB Shares (8/01; 1/97)(r) -- (4.51)(c) (21.42) -- -- 8.49 1VS Putnam VT Vista Fund - Class IB Shares (9/99; 1/97)(r) (34.19) (6.66) (34.19) -- -- 6.41 STRONG FUNDS 1SO Strong Opportunity Fund II - Advisor Class (8/01; 5/92)(s) -- (1.55)(c) (5.11) 13.00 -- 15.07 20 PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND SINCE SINCE SUBACCOUNT INVESTING IN: 1 YEAR COMMENCEMENT 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT WANGER 1IT International Small Cap (9/99; 5/95) (21.96%) (7.05%) (21.96%) 7.01% --% 14.39% 1SP U.S. Smaller Companies (9/99; 5/95) 10.27 6.47 10.27 11.33 -- 17.08 (previously Wanger U.S. Small Cap) WELLS FARGO VT 1AA Asset Allocation Fund (5/01; 4/94)(t) -- (4.35)(c) (7.89) 8.17 -- 10.06 1WI International Equity Fund (5/01; 7/00) -- (11.00)(c) (16.94) -- -- (18.16) 1SG Small Cap Growth Fund (5/01; 5/95)(u) -- (6.64)(c) (25.14) (2.71) -- 4.10
(a) Current applicable charges deducted from performance include a $30 annual contract administrative charge and a 0.95% annual mortality and expense risk fee. Premium taxes and purchase payment credits 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) 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. (f) Because Class B shares were not offered until August 15, 2001, standardized Class A fund performance for prior periods represents historical results of Class A shares. For periods beginning August 15, 2001, Class B's results reflect an additional 12b-1 fee expense, which also affects future performance. (g) Because Class B shares were not offered until June 1, 1999, standardized Class A fund performance for prior periods represents historical results of Class A shares. For periods beginning June 1, 1999, Class B's results reflect an additional 12b-1 fee expense, which also affects future performance. (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) Initial offering of the Service Class 2 of each fund took place on Jan. 12, 2000. Returns prior to Jan. 12, 2000 through Nov. 3, 1997 are those of the Service Class, which reflect a 12b-1 fee of 0.10%. Service Class 2 returns prior to Nov. 3, 1997 are those of the Initial Class, which has no 12b-1 fee. If Service Class 2's 12b-1 fee of 0.25% had been reflected, returns prior to January 12, 2000 would have been lower. (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) 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. (p) 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. (q) The Trustees of the Putnam Variable Trust currently limit 12b-1 fee payments on Class IB shares to 0.25% of average net assets. (r) 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 0.25. Restated to reflect an increase in 12b-1 fees effective April 30, 2001. Actual 12b-1 fees during the most recent fiscal year were 0.22%. (s) 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. (t) Performance for periods prior to Sept. 20, 1999, reflects performance of the Life and Annuity Trust Asset Allocation Fund, its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust Funds were reorganized into the Wells Fargo Variable Trust Funds. (u) Performance for periods prior to Sept. 20, 1999, reflects performance of the Norwest Select Small Company Stock Fund (the accounting survivor of a merger of the Life and Annuity Trust Strategic Growth Fund and the Norwest Select Small Company Stock Fund), its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust and Norwest Select Funds were reorganized into the Wells Fargo Variable Trust Funds. 21 AVERAGE ANNUAL TOTAL RETURN(a) FOR QUALIFIED ANNUITIES UNDER RAVA ADVANTAGE (WITHOUT PURCHASE PAYMENT CREDITS) WITH SURRENDER AND SELECTION OF MAV DEATH BENEFIT RIDER AND THE TEN-YEAR SURRENDER CHARGE SCHEDULE FOR PERIODS ENDING DEC. 31, 2001
PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND 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) (23.13%) (10.78%) (23.13%) --% --% (10.78%) BD2 Bond Fund (9/99; 10/81) (1.07) 2.21 (1.07) 2.77 6.23 9.25 CR2 Capital Resource Fund (9/99; 10/81) (24.62) (13.53) (24.62) 3.00 5.72 11.03 CM2 Cash Management Fund (9/99; 10/81) (4.67) 0.50 (4.67) 2.70 3.36 5.39 DE2 Diversified Equity Income Fund (9/99; 9/99) (6.12) (1.62) (6.12) -- -- (1.62) EM2 Emerging Markets Fund (5/00; 5/00) (9.36) (21.97) (9.36) -- -- (21.97) ES2 Equity Select Fund (5/01; 5/01) -- (8.82)(c) -- -- -- (8.82)(d) EI2 Extra Income Fund (9/99; 5/96) (3.54) (5.47) (3.54) (0.42) -- 0.68 FI2 Federal Income Fund (9/99; 9/99) (2.26) 2.33 (2.26) -- -- 2.33 GB2 Global Bond Fund (9/99; 5/96) (6.84) (1.99) (6.84) 0.06 -- 1.50 GR2 Growth Fund (9/99; 9/99) (36.34) (19.53) (36.34) -- -- (19.53) IE2 International Fund (9/99; 1/92) (34.27) (18.35) (34.27) (3.63) -- 2.72 MF2 Managed Fund (9/99; 4/86) (17.75) (5.58) (17.75) 4.64 7.69 9.17 ND2 NEW DIMENSIONS FUND(R)(9/99; 5/96) (23.33) (7.54) (23.33) 7.81 -- 9.04 SV2 Partners Small Cap Value Fund (8/01; 8/01) -- (1.18)(c) -- -- -- (1.18)(d) IV2 S&P 500 Index Fund (5/00; 5/00) (19.46) (17.80) (19.46) -- -- (17.80) SC2 Small Cap Advantage Fund (9/99; 9/99) (14.04) 0.03 (14.04) -- -- 0.03 ST2 Stock Fund (8/01; 8/01) -- (10.49)(c) -- -- -- (10.49)(d) SA2 Strategy Aggressive Fund (9/99; 1/92) (38.12) (11.34) (38.12) (0.75) -- 5.55 AIM V.I. 2AC Capital Appreciation Fund, Series II (8/01; 5/93)(e) -- (9.96)(c) (29.43) 3.80 -- 10.52 2AD Capital Development Fund, Series II (8/01; 5/98)(e) -- (9.68)(c) (15.47) -- -- 2.32 ALLIANCE VP 2AB AllianceBernstein International Value Portfolio (Class B) (8/01; 5/01)(f) -- (9.74)(c) -- -- -- (9.02)(d) 2AL Growth and Income Portfolio (Class B) (8/01; 1/91)(g) -- (10.79)(c) (7.92) 12.61 13.71 12.73 AMERICAN CENTURY(R) VARIABLE PORTFOLIOS, INC. 2AI VP International, Class II (8/01; 5/94)(h) -- (14.00)(c) (34.75) 2.44 -- 4.25 2AV VP Value, Class II (8/01; 5/96)(h) -- (4.20)(c) 3.76 9.81 -- 10.92 CALVERT VARIABLE SERIES, INC. 2SR Social Balanced Portfolio (5/00; 9/86) (14.29) (11.23) (14.29) 5.03 7.67 8.30 EVERGREEN VA 2CG Capital Growth Fund, Class L Shares (8/01; 3/98)(i) -- (12.07)(c) (19.96) -- -- 1.84 FIDELITY VIP 2FG Growth & Income Portfolio (Service Class 2) (8/01; 12/96)(j) -- (7.58)(c) (16.30) 7.89 -- 7.89 2FM Mid Cap Portfolio (Service Class 2) (8/01; 12/98)(j) -- (4.08)(c) (11.29) -- -- 22.82 2FO Overseas Portfolio (Service Class 2) (8/01; 1/87)(j) -- (12.32)(c) (27.44) 0.39 4.71 5.10 22 PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND SINCE SINCE SUBACCOUNT INVESTING IN: 1 YEAR COMMENCEMENT 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT FTVIPT 2RE Franklin Real Estate Fund - Class 2 (9/99; 1/89)(k) (0.88%) 11.13% (0.88%) 3.77% 10.33% 9.19% 2SI Franklin Small Cap Value Securities Fund - Class 2 (9/99; 5/98)(k) 4.73 12.06 4.73 -- -- 0.46 (previously FTVIPT Franklin Value Securities Fund - Class 2) 2MS Mutual Shares Securities Fund - Class 2 (8/01; 11/96)(k) -- (10.75)(c) (1.65) 8.13 -- 8.52 GOLDMAN SACHS VIT 2UE CORE(SM) U.S. Equity Fund (9/99; 2/98)(l) (18.98) (8.70) (18.98) -- -- 0.63 2MC Mid Cap Value Fund (9/99; 5/98) 3.02 12.26 3.02 -- -- 3.72 INVESCO VIF 2ID Dynamics Fund (8/01; 8/97) -- (12.57)(c) (36.52) -- -- 3.35 2FS Financial Services Fund (8/01; 9/99) -- (10.69)(c) (17.11) -- -- 6.00 2TC Technology Fund (8/01; 5/97) -- (17.27)(c) (49.94) -- -- 7.80 2TL Telecommunications Fund (8/01; 9/99) -- (23.12)(c) (57.41) -- -- (25.86) JANUS ASPEN SERIES 2GT Global Technology Portfolio: Service Shares (5/00; 1/00)(m) (42.15) (43.29) (42.15) -- -- (39.12) 2IG International Growth Portfolio: Service Shares (5/00; 5/94)(m) (29.47) (29.64) (29.47) 7.85 -- 12.34 LAZARD RETIREMENT SERIES 2IP International Equity Portfolio (9/99; 9/98) (30.05) (15.91) (30.05) -- -- (4.78) MFS(R) 2MG Investors Growth Stock Series - Service Class (5/00; 5/99)(n) (30.75) (24.97) (30.75) -- -- (4.15) 2MD New Discovery Series - Service Class (5/00; 5/98)(n) (12.88) (11.88) (12.88) -- -- 12.05 2UT Utilities Series - Service Class (8/01; 1/95)(n) -- (17.07)(c) (30.28) 8.50 -- 12.98 PIONEER VCT 2PE Pioneer Equity Income VCT Portfolio - Class II Shares (8/01; 3/95)(o) -- (9.61)(c) (14.60) 10.13 -- 13.07 2EU Pioneer Europe VCT Portfolio - Class II Shares (8/01; 10/98)(p) -- (10.34)(c) (29.86) -- -- (7.98) PUTNAM VARIABLE TRUST 2HS Putnam VT Health Sciences Fund - Class IB Shares (8/01; 4/98)(q) -- (9.94)(c) (26.11) -- -- 1.64 2PI Putnam VT International Growth Fund - Class IB Shares (8/01; 1/97)(r) -- (11.42)(c) (26.90) -- -- 7.53 2VS Putnam VT Vista Fund - Class IB Shares (9/99; 1/97)(r) (38.67) (9.68) (38.67) -- -- 5.36 STRONG FUNDS 2SO Strong Opportunity Fund II - Advisor Class (8/01; 5/92)(s) -- (8.70)(c) (11.87) 12.21 -- 15.09 23 PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND SINCE SINCE SUBACCOUNT INVESTING IN: 1 YEAR COMMENCEMENT 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT WANGER 2IT International Small Cap (9/99; 5/95) (27.40%) (10.02%) (27.40%) 5.98% --% 14.12% 2SP U.S. Smaller Companies (9/99; 5/95) 2.34 3.26 2.34 10.47 -- 16.85 (previously Wanger U.S. Small Cap) WELLS FARGO VT 2AA Asset Allocation Fund (5/01; 4/94)(t) -- (11.22)(c) (14.43) 7.19 -- 9.86 2WI International Equity Fund (5/01; 7/00) -- (17.35)(c) (22.77) -- -- (22.11) 2SG Small Cap Growth Fund (5/01; 5/95)(u) -- (13.33)(c) (30.34) (3.92) -- 3.51
(a) Current applicable charges deducted from performance include a $30 annual contract administrative charge, a 0.15% annual MAV fee, a 0.75% annual mortality and expense risk fee and applicable surrender charges. Premium taxes and purchase payment credits 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) 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. (f) Because Class B shares were not offered until August 15, 2001, standardized Class A fund performance for prior periods represents historical results of Class A shares. For periods beginning August 15, 2001, Class B's results reflect an additional 12b-1 fee expense, which also affects future performance. (g) Because Class B shares were not offered until June 1, 1999, standardized Class A fund performance for prior periods represents historical results of Class A shares. For periods beginning June 1, 1999, Class B's results reflect an additional 12b-1 fee expense, which also affects future performance. (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) Initial offering of the Service Class 2 of each fund took place on Jan. 12, 2000. Returns prior to Jan. 12, 2000 through Nov. 3, 1997 are those of the Service Class, which reflect a 12b-1 fee of 0.10%. Service Class 2 returns prior to Nov. 3, 1997 are those of the Initial Class, which has no 12b-1 fee. If Service Class 2's 12b-1 fee of 0.25% had been reflected, returns prior to January 12, 2000 would have been lower. (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) 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. (p) 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. (q) The Trustees of the Putnam Variable Trust currently limit 12b-1 fee payments on Class IB shares to 0.25% of average net assets. (r) 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 0.25. Restated to reflect an increase in 12b-1 fees effective April 30, 2001. Actual 12b-1 fees during the most recent fiscal year were 0.22%. (s) 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. (t) Performance for periods prior to Sept. 20, 1999, reflects performance of the Life and Annuity Trust Asset Allocation Fund, its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust Funds were reorganized into the Wells Fargo Variable Trust Funds. (u) Performance for periods prior to Sept. 20, 1999, reflects performance of the Norwest Select Small Company Stock Fund (the accounting survivor of a merger of the Life and Annuity Trust Strategic Growth Fund and the Norwest Select Small Company Stock Fund), its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust and Norwest Select Funds were reorganized into the Wells Fargo Variable Trust Funds. # 24 AVERAGE ANNUAL TOTAL RETURN(a) FOR QUALIFIED ANNUITIES UNDER RAVA ADVANTAGE (WITHOUT PURCHASE PAYMENT CREDITS) WITH SURRENDER AND SELECTION OF MAV DEATH BENEFIT RIDER AND THE SEVEN-YEAR SURRENDER CHARGE SCHEDULE FOR PERIODS ENDING DEC. 31, 2001
PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND 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) (22.41%) (10.40%) (22.41%) --% --% (10.40%) BD2 Bond Fund (9/99; 10/81) (0.11) 2.64 (0.11) 3.12 6.35 9.25 CR2 Capital Resource Fund (9/99; 10/81) (23.91) (13.16) (23.91) 3.35 5.84 11.03 CM2 Cash Management Fund (9/99; 10/81) (3.74) 0.92 (3.74) 3.06 3.50 5.39 DE2 Diversified Equity Income Fund (9/99; 9/99) (5.21) (1.20) (5.21) -- -- (1.20) EM2 Emerging Markets Fund (5/00; 5/00) (8.48) (21.51) (8.48) -- -- (21.51) ES2 Equity Select Fund (5/01; 5/01) -- (7.94)(c) -- -- -- (7.94)(d) EI2 Extra Income Fund (9/99; 5/96) (2.60) (5.07) (2.60) (0.04) -- 1.01 FI2 Federal Income Fund (9/99; 9/99) (1.31) 2.75 (1.31) -- -- 2.75 GB2 Global Bond Fund (9/99; 5/96) (5.94) (1.57) (5.94) 0.44 -- 1.83 GR2 Growth Fund (9/99; 9/99) (35.76) (19.19) (35.76) -- -- (19.19) IE2 International Fund (9/99; 1/92) (33.66) (18.00) (33.66) (3.28) -- 2.88 MF2 Managed Fund (9/99; 4/86) (16.97) (5.18) (16.97) 4.97 7.79 9.17 ND2 NEW DIMENSIONS FUND(R)(9/99; 5/96) (22.61) (7.14) (22.61) 8.10 -- 9.28 SV2 Partners Small Cap Value Fund (8/01; 8/01) -- (0.22)(c) -- -- -- (0.22)(d) IV2 S&P 500 Index Fund (5/00; 5/00) (18.70) (17.33) (18.70) -- -- (17.33) SC2 Small Cap Advantage Fund (9/99; 9/99) (13.22) 0.46 (13.22) -- -- 0.46 ST2 Stock Fund (8/01; 8/01) -- (9.63)(c) -- -- -- (9.63)(d) SA2 Strategy Aggressive Fund (9/99; 1/92) (37.56) (10.96) (37.56) (0.39) -- 5.67 AIM V.I. 2AC Capital Appreciation Fund, Series II (8/01; 5/93)(e) -- (9.09)(c) (28.77) 4.14 -- 10.68 2AD Capital Development Fund, Series II (8/01; 5/98)(e) -- (8.81)(c) (14.66) -- -- 2.57 ALLIANCE VP 2AB AllianceBernstein International Value Portfolio (Class B) (8/01; 5/01)(f) -- (8.87)(c) -- -- -- (8.14)(d) 2AL Growth and Income Portfolio (Class B) (8/01; 1/91)(g) -- (9.93)(c) (7.02) 12.86 13.77 12.73 AMERICAN CENTURY(R) VARIABLE PORTFOLIOS, INC. 2AI VP International, Class II (8/01; 5/94)(h) -- (13.17)(c) (34.15) 2.80 -- 4.64 2AV VP Value, Class II (8/01; 5/96)(h) -- (3.26)(c) 4.76 10.09 -- 11.14 CALVERT VARIABLE SERIES, INC. 2SR Social Balanced Portfolio (5/00; 9/86) (13.46) (10.72) (13.46) 5.36 7.78 8.30 EVERGREEN VA 2CG Capital Growth Fund, Class L Shares (8/01; 3/98)(i) -- (11.22)(c) (19.20) -- -- 2.09 FIDELITY VIP 2FG Growth & Income Portfolio (Service Class 2) (8/01; 12/96)(j) -- (6.69)(c) (15.50) 8.18 -- 8.18 2FM Mid Cap Portfolio (Service Class 2) (8/01; 12/98)(j) -- (3.15)(c) (10.43) -- -- 23.04 2FO Overseas Portfolio (Service Class 2) (8/01; 1/87)(j) -- (11.47)(c) (26.76) 0.76 4.84 5.10 25 PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND SINCE SINCE SUBACCOUNT INVESTING IN: 1 YEAR COMMENCEMENT 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT FTVIPT 2RE Franklin Real Estate Fund - Class 2 (9/99; 1/89)(k) 0.09% 11.51% 0.09% 4.11% 10.42% 9.19% 2SI Franklin Small Cap Value Securities Fund - Class 2 (9/99; 5/98)(k) 5.73 12.43 5.73 -- -- 0.72 (previously FTVIPT Franklin Value Securities Fund - Class 2) 2MS Mutual Shares Securities Fund - Class 2 (8/01; 11/96)(k) -- (9.89)(c) (0.69) 8.42 -- 8.79 GOLDMAN SACHS VIT 2UE CORE(SM) U.S. Equity Fund (9/99; 2/98)(l) (18.21) (8.31) (18.21) -- -- 0.88 2MC Mid Cap Value Fund (9/99; 5/98) 4.02 12.63 4.02 -- -- 3.97 INVESCO VIF 2ID Dynamics Fund (8/01; 8/97) -- (11.73)(c) (35.94) -- -- 3.76 2FS Financial Services Fund (8/01; 9/99) -- (9.83)(c) (16.31) -- -- 6.41 2TC Technology Fund (8/01; 5/97) -- (16.48)(c) (49.50) -- -- 8.13 2TL Telecommunications Fund (8/01; 9/99) -- (22.40)(c) (57.05) -- -- (25.53) JANUS ASPEN SERIES 2GT Global Technology Portfolio: Service Shares (5/00; 1/00)(m) (41.63) (42.98) (41.63) -- -- (38.85) 2IG International Growth Portfolio: Service Shares (5/00; 5/94)(m) (28.81) (29.24) (28.81) 8.14 -- 12.58 LAZARD RETIREMENT SERIES 2IP International Equity Portfolio (9/99; 9/98) (29.40) (15.56) (29.40) -- -- (4.51) MFS(R) 2MG Investors Growth Stock Series - Service Class (5/00; 5/99)(n) (30.11) (24.55) (30.11) -- -- (3.81) 2MD New Discovery Series - Service Class (5/00; 5/98)(n) (12.04) (11.37) (12.04) -- -- 12.25 2UT Utilities Series - Service Class (8/01; 1/95)(n) -- (16.28)(c) (29.63) 8.79 -- 13.18 PIONEER VCT 2PE Pioneer Equity Income VCT Portfolio - Class II Shares (8/01; 3/95)(o) -- (8.74)(c) (13.78) 10.41 -- 13.28 2EU Pioneer Europe VCT Portfolio - Class II Shares (8/01; 10/98)(p) -- (9.47)(c) (29.21) -- -- (7.70) PUTNAM VARIABLE TRUST 2HS Putnam VT Health Sciences Fund - Class IB Shares (8/01; 4/98)(q) -- (9.07)(c) (25.42) -- -- 1.90 2PI Putnam VT International Growth Fund - Class IB Shares (8/01; 1/97)(r) -- (10.57)(c) (26.21) -- -- 7.83 2VS Putnam VT Vista Fund - Class IB Shares (9/99; 1/97)(r) (38.11) (9.29) (38.11) -- -- 5.68 STRONG FUNDS 2SO Strong Opportunity Fund II - Advisor Class (8/01; 5/92)(s) -- (7.81)(c) (11.02) 12.46 -- 15.15 26 PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND SINCE SINCE SUBACCOUNT INVESTING IN: 1 YEAR COMMENCEMENT 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT WANGER 2IT International Small Cap (9/99; 5/95) (26.72%) (9.63%) (26.72%) 6.30% --% 14.33% 2SP U.S. Smaller Companies (9/99; 5/95) 3.34 3.68 3.34 10.74 -- 17.03 (previously Wanger U.S. Small Cap) WELLS FARGO VT 2AA Asset Allocation Fund (5/01; 4/94)(t) -- (10.37)(c) (13.61) 7.49 -- 10.13 2WI International Equity Fund (5/01; 7/00) -- (16.56)(c) (22.04) -- -- (21.61) 2SG Small Cap Growth Fund (5/01; 5/95)(u) -- (12.50)(c) (29.69) (3.57) -- 3.88
(a) Current applicable charges deducted from performance include a $30 annual contract administrative charge, a 0.15% annual MAV fee, a 0.75% annual mortality and expense risk fee and applicable surrender charges. Premium taxes and purchase payment credits 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) 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. (f) Because Class B shares were not offered until August 15, 2001, standardized Class A fund performance for prior periods represents historical results of Class A shares. For periods beginning August 15, 2001, Class B's results reflect an additional 12b-1 fee expense, which also affects future performance. (g) Because Class B shares were not offered until June 1, 1999, standardized Class A fund performance for prior periods represents historical results of Class A shares. For periods beginning June 1, 1999, Class B's results reflect an additional 12b-1 fee expense, which also affects future performance. (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) Initial offering of the Service Class 2 of each fund took place on Jan. 12, 2000. Returns prior to Jan. 12, 2000 through Nov. 3, 1997 are those of the Service Class, which reflect a 12b-1 fee of 0.10%. Service Class 2 returns prior to Nov. 3, 1997 are those of the Initial Class, which has no 12b-1 fee. If Service Class 2's 12b-1 fee of 0.25% had been reflected, returns prior to January 12, 2000 would have been lower. (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) 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. (p) 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. (q) The Trustees of the Putnam Variable Trust currently limit 12b-1 fee payments on Class IB shares to 0.25% of average net assets. (r) 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 0.25. Restated to reflect an increase in 12b-1 fees effective April 30, 2001. Actual 12b-1 fees during the most recent fiscal year were 0.22%. (s) 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. (t) Performance for periods prior to Sept. 20, 1999, reflects performance of the Life and Annuity Trust Asset Allocation Fund, its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust Funds were reorganized into the Wells Fargo Variable Trust Funds. (u) Performance for periods prior to Sept. 20, 1999, reflects performance of the Norwest Select Small Company Stock Fund (the accounting survivor of a merger of the Life and Annuity Trust Strategic Growth Fund and the Norwest Select Small Company Stock Fund), its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust and Norwest Select Funds were reorganized into the Wells Fargo Variable Trust Funds. 27 AVERAGE ANNUAL TOTAL RETURN(a) FOR QUALIFIED ANNUITIES UNDER RAVA ADVANTAGE (WITHOUT PURCHASE PAYMENT CREDITS) WITHOUT SURRENDER AND SELECTION OF MAV BENEFIT RIDER FOR PERIODS ENDING DEC. 31, 2001
PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND 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) (17.32%) (7.80%) (17.32%) --% --% (7.80%) BD2 Bond Fund (9/99; 10/81) 6.66 5.53 6.66 3.99 6.35 9.25 CR2 Capital Resource Fund (9/99; 10/81) (18.93) (10.63) (18.93) 4.21 5.84 11.03 CM2 Cash Management Fund (9/99; 10/81) 2.75 3.82 2.75 3.93 3.50 5.39 DE2 Diversified Equity Income Fund (9/99; 9/99) 1.17 1.67 1.17 -- -- 1.67 EM2 Emerging Markets Fund (5/00; 5/00) (2.35) (18.40) (2.35) -- -- (18.40) ES2 Equity Select Fund (5/01; 5/01) -- (1.76)(c) -- -- -- (1.76)(d) EI2 Extra Income Fund (9/99; 5/96) 3.98 (2.33) 3.98 0.89 -- 1.67 FI2 Federal Income Fund (9/99; 9/99) 5.37 5.64 5.37 -- -- 5.64 GB2 Global Bond Fund (9/99; 5/96) 0.39 1.25 0.39 1.37 -- 2.47 GR2 Growth Fund (9/99; 9/99) (31.67) (16.82) (31.67) -- -- (16.82) IE2 International Fund (9/99; 1/92) (29.42) (15.63) (29.42) (2.43) -- 2.88 MF2 Managed Fund (9/99; 4/86) (11.47) (2.43) (11.47) 5.78 7.79 9.17 ND2 NEW DIMENSIONS FUND(R)(9/99; 5/96) (17.53) (4.44) (17.53) 8.82 -- 9.74 SV2 Partners Small Cap Value Fund (8/01; 8/01) -- 6.54(c) -- -- -- 6.54(d) IV2 S&P 500 Index Fund (5/00; 5/00) (13.33) (14.08) (13.33) -- -- (14.08) SC2 Small Cap Advantage Fund (9/99; 9/99) (7.44) 3.40 (7.44) -- -- 3.40 ST2 Stock Fund (8/01; 8/01) -- (3.58)(c) -- -- -- (3.58)(d) SA2 Strategy Aggressive Fund (9/99; 1/92) (33.61) (8.36) (33.61) 0.48 -- 5.67 AIM V.I. 2AC Capital Appreciation Fund, Series II (8/01; 5/93)(e) -- (3.00)(c) (24.16) 4.98 -- 10.68 2AD Capital Development Fund, Series II (8/01; 5/98)(e) -- (2.70)(c) (8.99) -- -- 4.07 ALLIANCE VP 2AB AllianceBernstein International Value Portfolio (Class B) (8/01; 5/01)(f) -- (2.76)(c) -- -- -- (1.98)(d) 2AL Growth and Income Portfolio (Class B) (8/01; 1/91)(g) -- (3.90)(c) (0.78) 13.47 13.77 12.73 AMERICAN CENTURY(R) VARIABLE PORTFOLIOS, INC. 2AI VP International, Class II (8/01; 5/94)(h) -- (7.39)(c) 29.95) 3.68 -- 4.64 2AV VP Value, Class II (8/01; 5/96)(h) -- 3.26(c) 11.76 10.76 -- 11.56 CALVERT VARIABLE SERIES, INC. 2SR Social Balanced Portfolio (5/00; 9/86) (7.70) (7.19) (7.70) 6.16 7.78 8.30 EVERGREEN VA 2CG Capital Growth Fund, Class L Shares (8/01; 3/98)(i) -- (5.29)(c) (13.87) -- -- 3.53 FIDELITY VIP 2FG Growth & Income Portfolio (Service Class 2) (8/01; 12/96)(j) -- (0.41)(c) (9.89) 8.90 -- 8.90 2FM Mid Cap Portfolio (Service Class 2) (8/01; 12/98)(j) -- 3.39(c) (4.44) -- -- 24.34 2FO Overseas Portfolio (Service Class 2) (8/01; 1/87)(j) -- (5.56)(c) (22.00) 1.66 4.84 5.10 28 PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND SINCE SINCE SUBACCOUNT INVESTING IN: 1 YEAR COMMENCEMENT 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT FTVIPT 2RE Franklin Real Estate Fund - Class 2 (9/99; 1/89)(k) 6.87% 14.12% 6.87% 4.95% 10.42% 9.19% 2SI Franklin Small Cap Value Securities Fund - Class 2 (9/99; 5/98)(k) 12.73 15.01 12.73 -- -- 2.25 (previously FTVIPT Franklin Value Securities Fund - Class 2) 2MS Mutual Shares Securities Fund - Class 2 (8/01; 11/96)(k) -- (3.86)(c) 6.04 9.13 -- 9.34 GOLDMAN SACHS VIT 2UE CORE(SM) U.S. Equity Fund (9/99; 2/98)(l) (12.80) (5.65) (12.80) -- -- 2.32 2MC Mid Cap Value Fund (9/99; 5/98) 11.02 15.21 11.02 -- -- 5.42 INVESCO VIF 2ID Dynamics Fund (8/01; 8/97) -- (5.83)(c) (31.87) -- -- 4.75 2FS Financial Services Fund (8/01; 9/99) -- (3.80)(c) (10.77) -- -- 9.20 2TC Technology Fund (8/01; 5/97) -- (10.95)(c) (46.45) -- -- 8.94 2TL Telecommunications Fund (8/01; 9/99) -- (17.31)(c) (54.57) -- -- (23.34) JANUS ASPEN SERIES 2GT Global Technology Portfolio: Service Shares (5/00; 1/00)(m) (37.99) (40.78) (37.99) -- -- (36.97) 2IG International Growth Portfolio: Service Shares (5/00; 5/94)(m) (24.21) (26.48) (24.21) 8.86 -- 12.58 LAZARD RETIREMENT SERIES 2IP International Equity Portfolio (9/99; 9/98) (24.84) (13.12) (24.84) -- -- (2.90) MFS(R) 2MG Investors Growth Stock Series - Service Class (5/00; 5/99)(n) (25.60) (21.60) (25.60) -- -- (1.47) 2MD New Discovery Series - Service Class (5/00; 5/98)(n) (6.17) (7.86) (6.17) -- -- 13.43 2UT Utilities Series - Service Class (8/01; 1/95)(n) -- (10.73)(c) (25.09) 9.50 -- 13.32 PIONEER VCT 2PE Pioneer Equity Income VCT Portfolio - Class II Shares (8/01; 3/95)(o) -- (2.62)(c) (8.05) 11.07 -- 13.42 2EU Pioneer Europe VCT Portfolio - Class II Shares (8/01; 10/98)(p) -- (3.41)(c) (24.63) -- -- (6.06) PUTNAM VARIABLE TRUST 2HS Putnam VT Health Sciences Fund - Class IB Shares (8/01; 4/98)(q) -- (2.98)(c) (20.56) -- -- 3.42 2PI Putnam VT International Growth Fund - Class IB Shares (8/01; 1/97)(r) -- (4.59)(c) (21.41) -- -- 8.56 2VS Putnam VT Vista Fund - Class IB Shares (9/99; 1/97)(r) (34.21) (6.63) (34.21) -- -- 6.47 STRONG FUNDS 2SO Strong Opportunity Fund II - Advisor Class (8/01; 5/92)(s) -- (1.63)(c) (5.07) 13.08 -- 15.15 29 PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND SINCE SINCE SUBACCOUNT INVESTING IN: 1 YEAR COMMENCEMENT 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT WANGER 2IT International Small Cap (9/99; 5/95) (21.95%) (7.01%) (21.95%) 7.07% --% 14.47% 2SP U.S. Smaller Companies (9/99; 5/95) 10.34 6.53 10.34 11.40 -- 17.16 (previously Wanger U.S. Small Cap) WELLS FARGO VT 2AA Asset Allocation Fund (5/01; 4/94)(t) -- (4.37)(c) (7.86) 8.23 -- 10.13 2WI International Equity Fund (5/01; 7/00) -- (11.03)(c) (16.93) -- -- (18.15) 2SG Small Cap Growth Fund (5/01; 5/95)(u) -- (6.66)(c) (25.15) (2.71) -- 4.12
(a) Current applicable charges deducted from performance include a $30 annual contract administrative charge, a 0.15% annual MAV fee and a 0.75% annual mortality and expense risk fee. Premium taxes and purchase payment credits 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) 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. (f) Because Class B shares were not offered until August 15, 2001, standardized Class A fund performance for prior periods represents historical results of Class A shares. For periods beginning August 15, 2001, Class B's results reflect an additional 12b-1 fee expense, which also affects future performance. (g) Because Class B shares were not offered until June 1, 1999, standardized Class A fund performance for prior periods represents historical results of Class A shares. For periods beginning June 1, 1999, Class B's results reflect an additional 12b-1 fee expense, which also affects future performance. (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) Initial offering of the Service Class 2 of each fund took place on Jan. 12, 2000. Returns prior to Jan. 12, 2000 through Nov. 3, 1997 are those of the Service Class, which reflect a 12b-1 fee of 0.10%. Service Class 2 returns prior to Nov. 3, 1997 are those of the Initial Class, which has no 12b-1 fee. If Service Class 2's 12b-1 fee of 0.25% had been reflected, returns prior to January 12, 2000 would have been lower. (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) 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. (p) 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. (q) The Trustees of the Putnam Variable Trust currently limit 12b-1 fee payments on Class IB shares to 0.25% of average net assets. (r) 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 0.25. Restated to reflect an increase in 12b-1 fees effective April 30, 2001. Actual 12b-1 fees during the most recent fiscal year were 0.22%. (s) 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. (t) Performance for periods prior to Sept. 20, 1999, reflects performance of the Life and Annuity Trust Asset Allocation Fund, its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust Funds were reorganized into the Wells Fargo Variable Trust Funds. (u) Performance for periods prior to Sept. 20, 1999, reflects performance of the Norwest Select Small Company Stock Fund (the accounting survivor of a merger of the Life and Annuity Trust Strategic Growth Fund and the Norwest Select Small Company Stock Fund), its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust and Norwest Select Funds were reorganized into the Wells Fargo Variable Trust Funds. 30 AVERAGE ANNUAL TOTAL RETURN(a) FOR QUALIFIED ANNUITIES UNDER RAVA ADVANTAGE (WITHOUT PURCHASE PAYMENT CREDITS) WITH SURRENDER AND SELECTION OF A TEN-YEAR SURRENDER CHARGE SCHEDULE FOR PERIODS ENDING DEC. 31, 2001
PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND 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) (23.00%) (10.63%) (23.00%) --% --% (10.63%) BD2 Bond Fund (9/99; 10/81) (0.94) 2.37 (0.94) 2.93 6.38 9.40 CR2 Capital Resource Fund (9/99; 10/81) (24.48) (13.38) (24.48) 3.16 5.87 11.18 CM2 Cash Management Fund (9/99; 10/81) (4.53) 0.64 (4.53) 2.86 3.51 5.54 DE2 Diversified Equity Income Fund (9/99; 9/99) (5.98) (1.47) (5.98) -- -- (1.47) EM2 Emerging Markets Fund (5/00; 5/00) (9.22) (21.82) (9.22) -- -- (21.82) ES2 Equity Select Fund (5/01; 5/01) -- (8.68)(c) -- -- -- (8.68)(d) EI2 Extra Income Fund (9/99; 5/96) (3.40) (5.33) (3.40) (0.28) -- 0.83 FI2 Federal Income Fund (9/99; 9/99) (2.13) 2.48 (2.13) -- -- 2.48 GB2 Global Bond Fund (9/99; 5/96) (6.71) (1.84) (6.71) 0.20 -- 1.66 GR2 Growth Fund (9/99; 9/99) (36.20) (19.39) (36.20) -- -- (19.39) IE2 International Fund (9/99; 1/92) (34.13) (18.20) (34.13) (3.49) -- 2.87 MF2 Managed Fund (9/99; 4/86) (17.61) (5.44) (17.61) 4.79 7.84 9.32 ND2 NEW DIMENSIONS FUND(R)(9/99; 5/96) (23.19) (7.39) (23.19) 7.96 -- 9.20 SV2 Partners Small Cap Value Fund (8/01; 8/01) -- (1.05)(c) -- -- -- (1.05)(d) IV2 S&P 500 Index Fund (5/00; 5/00) (19.32) (17.66) (19.32) -- -- (17.66) SC2 Small Cap Advantage Fund (9/99; 9/99) (13.90) 0.18 (13.90) -- -- 0.18 ST2 Stock Fund (8/01; 8/01) -- (10.35)(c) -- -- -- (10.35)(d) SA2 Strategy Aggressive Fund (9/99; 1/92) (37.98) (11.20) (37.98) (0.60) -- 5.70 AIM V.I. 2AC Capital Appreciation Fund, Series II (8/01; 5/93)(e) -- (9.82)(c) (29.29) 3.96 -- 10.67 2AD Capital Development Fund, Series II (8/01; 5/98)(e) -- (9.54)(c) (15.33) -- -- 2.47 ALLIANCE VP 2AB AllianceBernstein International Value Portfolio (Class B) (8/01; 5/01)(f) -- (9.60)(c) -- -- -- (8.88)(d) 2AL Growth and Income Portfolio (Class B) (8/01; 1/91)(g) -- (10.65)(c) (7.78) 12.77 13.86 12.88 AMERICAN CENTURY(R) VARIABLE PORTFOLIOS, INC. 2AI VP International, Class II (8/01; 5/94)(h) -- (13.86)(c) (34.61) 2.59 -- 4.41 2AV VP Value, Class II (8/01; 5/96)(h) -- (4.06)(c) 3.91 9.97 -- 11.08 CALVERT VARIABLE SERIES, INC. 2SR Social Balanced Portfolio (5/00; 9/86) (14.15) (11.09) (14.15) 5.19 7.83 8.45 EVERGREEN VA 2CG Capital Growth Fund, Class L Shares (8/01; 3/98)(i) -- (11.93)(c) (19.82) -- -- 2.00 FIDELITY VIP 2FG Growth & Income Portfolio (Service Class 2) (8/01; 12/96)(j) -- (7.44)(c) (16.16) 8.05 -- 8.05 2FM Mid Cap Portfolio (Service Class 2) (8/01; 12/98)(j) -- (3.94)(c) (11.15) -- -- 22.97 2FO Overseas Portfolio (Service Class 2) (8/01;1/87)(j) -- (12.18)(c) (27.30) 0.54 4.87 5.25 31 PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND SINCE SINCE SUBACCOUNT INVESTING IN: 1 YEAR COMMENCEMENT 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT FTVIPT 2RE Franklin Real Estate Fund - Class 2 (9/99; 1/89)(k) (0.74%) 11.29% (0.74%) 3.93% 10.49% 9.34% 2SI Franklin Small Cap Value Securities Fund - Class 2 (9/99; 5/98)(k) 4.88 12.21 4.88 -- -- 0.60 (previously FTVIPT Franklin Value Securities Fund - Class 2) 2MS Mutual Shares Securities Fund - Class 2 (8/01; 11/96)(k) -- (10.61)(c) (1.51) 8.28 -- 8.67 GOLDMAN SACHS VIT 2UE CORE(SM) U.S. Equity Fund (9/99; 2/98)(l) (18.84) (8.56) (18.84) -- -- 0.78 2MC Mid Cap Value Fund (9/99; 5/98) 3.17 12.41 3.17 -- -- 3.88 INVESCO VIF 2ID Dynamics Fund (8/01; 8/97) -- (12.43)(c) (36.38) -- -- 3.50 2FS Financial Services Fund (8/01; 9/99) -- (10.56)(c) (16.97) -- -- 6.16 2TC Technology Fund (8/01; 5/97) -- (17.13)(c) (49.80) -- -- 7.96 2TL Telecommunications Fund (8/01; 9/99) -- (22.99)(c) (57.27) -- -- (25.71) JANUS ASPEN SERIES 2GT Global Technology Portfolio: Service Shares (5/00; 1/00)(m) (42.01) (43.15) (42.01) -- -- (38.98) 2IG International Growth Portfolio: Service Shares (5/00; 5/94)(m) (29.33) (29.50) (29.33) 8.00 -- 12.49 LAZARD RETIREMENT SERIES 2IP International Equity Portfolio (9/99; 9/98) (29.91) (15.77) (29.91) -- -- (4.63) MFS(R) 2MG Investors Growth Stock Series - Service Class (5/00; 5/99)(n) (30.61) (24.83) (30.61) -- -- (4.00) 2MD New Discovery Series - Service Class (5/00; 5/98)(n) (12.74) (11.74) (12.74) -- -- 12.21 2UT Utilities Series - Service Class (8/01; 1/95)(n) -- (16.94)(c) (30.14) 8.66 -- 13.13 PIONEER VCT 2PE Pioneer Equity Income VCT Portfolio - Class II Shares (8/01; 3/95)(o) -- (9.48)(c) (14.47) 10.29 -- 13.22 2EU Pioneer Europe VCT Portfolio - Class II Shares (8/01; 10/98)(p) -- (10.20)(c) (29.72) -- -- (7.83) PUTNAM VARIABLE TRUST 2HS Putnam VT Health Sciences Fund - Class IB Shares (8/01; 4/98)(q) -- (9.81)(c) (25.98) -- -- 1.79 2PI Putnam VT International Growth Fund - Class IB Shares (8/01; 1/97)(r) -- (11.29)(c) (26.76) -- -- 7.69 2VS Putnam VT Vista Fund - Class IB Shares (9/99; 1/97)(r) (38.53) (9.54) (38.53) -- -- 5.52 STRONG FUNDS 2SO Strong Opportunity Fund II - Advisor Class (8/01; 5/92)(s) -- (8.56)(c) (11.73) 12.36 -- 15.24 32 PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND SINCE SINCE SUBACCOUNT INVESTING IN: 1 YEAR COMMENCEMENT 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT WANGER 2IT International Small Cap (9/99; 5/95) (27.26%) (9.87%) 27.26%) 6.14% --% 14.27% 2SP U.S. Smaller Companies (9/99; 5/95) 2.49 3.42 2.49 10.63 -- 17.00 (previously Wanger U.S. Small Cap) WELLS FARGO VT 2AA Asset Allocation Fund (5/01; 4/94)(t) -- (11.09)(c) (14.29) 7.35 -- 10.01 2WI International Equity Fund (5/01; 7/00) -- (17.21)(c) (22.63) -- -- (21.97) 2SG Small Cap Growth Fund (5/01; 5/95)(u) -- (13.19)(c) (30.20) (3.77) -- 3.67
(a) Current applicable charges deducted from performance include a $30 annual contract administrative charge, a 0.75% annual mortality and expense risk fee and applicable surrender charges. Premium taxes and purchase payment credits 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) 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. (f) Because Class B shares were not offered until August 15, 2001, standardized Class A fund performance for prior periods represents historical results of Class A shares. For periods beginning August 15, 2001, Class B's results reflect an additional 12b-1 fee expense, which also affects future performance. (g) Because Class B shares were not offered until June 1, 1999, standardized Class A fund performance for prior periods represents historical results of Class A shares. For periods beginning June 1, 1999, Class B's results reflect an additional 12b-1 fee expense, which also affects future performance. (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) Initial offering of the Service Class 2 of each fund took place on Jan. 12, 2000. Returns prior to Jan. 12, 2000 through Nov. 3, 1997 are those of the Service Class, which reflect a 12b-1 fee of 0.10%. Service Class 2 returns prior to Nov. 3, 1997 are those of the Initial Class, which has no 12b-1 fee. If Service Class 2's 12b-1 fee of 0.25% had been reflected, returns prior to January 12, 2000 would have been lower. (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) 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. (p) 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. (q) The Trustees of the Putnam Variable Trust currently limit 12b-1 fee payments on Class IB shares to 0.25% of average net assets. (r) 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 0.25. Restated to reflect an increase in 12b-1 fees effective April 30, 2001. Actual 12b-1 fees during the most recent fiscal year were 0.22%. (s) 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. (t) Performance for periods prior to Sept. 20, 1999, reflects performance of the Life and Annuity Trust Asset Allocation Fund, its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust Funds were reorganized into the Wells Fargo Variable Trust Funds. (u) Performance for periods prior to Sept. 20, 1999, reflects performance of the Norwest Select Small Company Stock Fund (the accounting survivor of a merger of the Life and Annuity Trust Strategic Growth Fund and the Norwest Select Small Company Stock Fund), its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust and Norwest Select Funds were reorganized into the Wells Fargo Variable Trust Funds. 33 AVERAGE ANNUAL TOTAL RETURN(a) FOR QUALIFIED ANNUITIES UNDER RAVA ADVANTAGE (WITHOUT PURCHASE PAYMENT CREDITS) WITH SURRENDER AND SELECTION OF A SEVEN-YEAR SURRENDER CHARGE SCHEDULE FOR PERIODS ENDING DEC. 31, 2001
PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND 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) (22.27%) (10.25%) (22.27%) --% --% (10.25%) BD2 Bond Fund (9/99; 10/81) 0.03 2.79 0.03 3.28 6.50 9.40 CR2 Capital Resource Fund (9/99; 10/81) (23.77) (13.01) (23.77) 3.51 5.99 11.18 CM2 Cash Management Fund (9/99; 10/81) (3.60) 1.07 (3.60) 3.21 3.65 5.54 DE2 Diversified Equity Income Fund (9/99; 9/99) (5.07) (1.06) (5.07) -- -- (1.06) EM2 Emerging Markets Fund (5/00; 5/00) (8.34) (21.37) (8.34) -- -- (21.37) ES2 Equity Select Fund (5/01; 5/01) -- (7.80)(c) -- -- -- (7.80)(d) EI2 Extra Income Fund (9/99; 5/96) (2.46) (4.93) (2.46) 0.11 -- 1.16 FI2 Federal Income Fund (9/99; 9/99) (1.17) 2.91 (1.17) -- -- 2.91 GB2 Global Bond Fund (9/99; 5/96) (5.80) (1.43) (5.80) 0.58 -- 1.98 GR2 Growth Fund (9/99; 9/99) (35.62) (19.04) (35.62) -- -- (19.04) IE2 International Fund (9/99; 1/92) (33.52) (17.86) (33.52) (3.14) -- 3.03 MF2 Managed Fund (9/99; 4/86) (16.83) (5.03) (16.83) 5.12 7.94 9.32 ND2 NEW DIMENSIONS FUND(R) (9/99; 5/96) (22.47) (7.00) (22.47) 8.26 -- 9.43 SV2 Partners Small Cap Value Fund (8/01; 8/01) -- (0.08)(c) -- -- -- (0.08)(d) IV2 S&P 500 Index Fund (5/00; 5/00) (18.56) (17.19) (18.56) -- -- (17.19) SC2 Small Cap Advantage Fund (9/99; 9/99) (13.08) 0.60 (13.08) -- -- 0.60 ST2 Stock Fund (8/01; 8/01) -- (9.49)(c) -- -- -- (9.49)(d) SA2 Strategy Aggressive Fund (9/99; 1/92) (37.42) (10.82) (37.42) (0.24) -- 5.82 AIM V.I. 2AC Capital Appreciation Fund, Series II (8/01; 5/93)(e) -- (8.95)(c) (28.63) 4.30 -- 10.83 2AD Capital Development Fund, Series II (8/01; 5/98)(e) -- (8.67)(c) (14.52) -- -- 2.73 ALLIANCE VP 2AB AllianceBernstein International Value Portfolio (Class B) (8/01; 5/01)(f) -- (8.73)(c) -- -- -- (8.00)(d) 2AL Growth and Income Portfolio (Class B) (8/01; 1/91)(g) -- (9.79)(c) (6.88) 13.01 13.92 12.88 AMERICAN CENTURY(R) VARIABLE PORTFOLIOS, INC. 2AI VP International, Class II (8/01; 5/94)(h) -- (13.03)(c) (34.01) 2.95 -- 4.79 2AV VP Value, Class II (8/01; 5/96)(h) -- (3.13)(c) 4.91 10.24 -- 11.29 CALVERT VARIABLE SERIES, INC. 2SR Social Balanced Portfolio (5/00; 9/86) (13.33) (10.57) (13.33) 5.51 7.93 8.45 EVERGREEN VA 2CG Capital Growth Fund, Class L Shares (8/01; 3/98)(i) -- (11.08)(c) (19.06) -- -- 2.24 FIDELITY VIP 2FG Growth & Income Portfolio (Service Class 2) (8/01; 12/96)(j) -- (6.55)(c) (15.36) 8.34 -- 8.34 2FM Mid Cap Portfolio (Service Class 2) (8/01; 12/98)(j) -- (3.01)(c) (10.29) -- -- 23.19 2FO Overseas Portfolio (Service Class 2) (8/01; 1/87)(j) -- (11.33)(c) (26.62) 0.91 4.99 5.25 34 PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND SINCE SINCE SUBACCOUNT INVESTING IN: 1 YEAR COMMENCEMENT 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT FTVIPT 2RE Franklin Real Estate Fund - Class 2 (9/99; 1/89)(k) 0.23% 11.67% 0.23% 4.27% 10.57% 9.34% 2SI Franklin Small Cap Value Securities Fund - Class 2 (9/99; 5/98)(k) 5.88 12.59 5.88 -- -- 0.86 (previously FTVIPT Franklin Value Securities Fund - Class 2) 2MS Mutual Shares Securities Fund - Class 2 (8/01; 11/96)(k) -- (9.75)(c) (0.55) 8.57 -- 8.95 GOLDMAN SACHS VIT 2UE CORE(SM) U.S. Equity Fund (9/99; 2/98)(l) (18.07) (8.17) (18.07) -- -- 1.02 2MC Mid Cap Value Fund (9/99; 5/98) 4.17 12.79 4.17 -- -- 4.13 INVESCO VIF 2ID Dynamics Fund (8/01; 8/97) -- (11.59)(c) (35.80) -- -- 3.91 2FS Financial Services Fund (8/01; 9/99) -- (9.69)(c) (16.17) -- -- 6.57 2TC Technology Fund (8/01; 5/97) -- (16.34)(c) (49.36) -- -- 8.29 2TL Telecommunications Fund (8/01; 9/99) -- (22.26)(c) (56.91) -- -- (25.39) JANUS ASPEN SERIES 2GT Global Technology Portfolio: Service Shares (5/00; 1/00)(m) (41.49) (42.83) (41.49) -- -- (38.70) 2IG International Growth Portfolio: Service Shares (5/00; 5/94)(m) (28.67) (29.10) (28.67) 8.29 -- 12.73 LAZARD RETIREMENT SERIES 2IP International Equity Portfolio (9/99; 9/98) (29.26) (15.41) (29.26) -- -- (4.36) MFS(R) 2MG Investors Growth Stock Series - Service Class (5/00; 5/99)(n) (29.97) (24.40) (29.97) -- -- (3.66) 2MD New Discovery Series - Service Class (5/00; 5/98)(n) (11.90) (11.23) (11.90) -- -- 12.41 2UT Utilities Series - Service Class (8/01; 1/95)(n) -- (16.14)(c) (29.49) 8.95 -- 13.33 PIONEER VCT 2PE Pioneer Equity Income VCT Portfolio - Class II Shares (8/01; 3/95)(o) -- (8.60)(c) (13.64) 10.56 -- 13.43 2EU Pioneer Europe VCT Portfolio - Class II Shares (8/01; 10/98)(p) -- (9.33)(c) (29.07) -- -- (7.55) PUTNAM VARIABLE TRUST 2HS Putnam VT Health Sciences Fund - Class IB Shares (8/01; 4/98)(q) -- (8.93)(c) (25.28) -- -- 2.05 2PI Putnam VT International Growth Fund - Class IB Shares (8/01; 1/97)(r) -- (10.43)(c) (26.07) -- -- 7.98 2VS Putnam VT Vista Fund - Class IB Shares (9/99; 1/97)(r) (37.97) (9.15) (37.97) -- -- 5.84 STRONG FUNDS 2SO Strong Opportunity Fund II - Advisor Class (8/01; 5/92)(s) -- (7.67)(c) (10.88) 12.61 -- 15.30 35 PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND SINCE SINCE SUBACCOUNT INVESTING IN: 1 YEAR COMMENCEMENT 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT WANGER 2IT International Small Cap (9/99; 5/95) (26.58%) (9.49%) (26.58%) 6.45% --% 14.48% 2SP U.S. Smaller Companies (9/99; 5/95) 3.49 3.83 3.49 10.89 -- 17.19 (previously Wanger U.S. Small Cap) WELLS FARGO VT 2AA Asset Allocation Fund (5/01; 4/94)(t) -- (10.23)(c) (13.47) 7.65 -- 10.28 2WI International Equity Fund (5/01; 7/00) -- (16.42)(c) (21.90) -- -- (21.47) 2SG Small Cap Growth Fund (5/01; 5/95)(u) -- (12.36)(c) (29.55) (3.42) -- 4.03
(a) Current applicable charges deducted from performance include a $30 annual contract administrative charge, a 0.75% annual mortality and expense risk fee and applicable surrender charges. Premium taxes and purchase payment credits 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) 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. (f) Because Class B shares were not offered until August 15, 2001, standardized Class A fund performance for prior periods represents historical results of Class A shares. For periods beginning August 15, 2001, Class B's results reflect an additional 12b-1 fee expense, which also affects future performance. (g) Because Class B shares were not offered until June 1, 1999, standardized Class A fund performance for prior periods represents historical results of Class A shares. For periods beginning June 1, 1999, Class B's results reflect an additional 12b-1 fee expense, which also affects future performance. (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) Initial offering of the Service Class 2 of each fund took place on Jan. 12, 2000. Returns prior to Jan. 12, 2000 through Nov. 3, 1997 are those of the Service Class, which reflect a 12b-1 fee of 0.10%. Service Class 2 returns prior to Nov. 3, 1997 are those of the Initial Class, which has no 12b-1 fee. If Service Class 2's 12b-1 fee of 0.25% had been reflected, returns prior to January 12, 2000 would have been lower. (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) 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. (p) 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. (q) The Trustees of the Putnam Variable Trust currently limit 12b-1 fee payments on Class IB shares to 0.25% of average net assets. (r) 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 0.25. Restated to reflect an increase in 12b-1 fees effective April 30, 2001. Actual 12b-1 fees during the most recent fiscal year were 0.22%. (s) 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. (t) Performance for periods prior to Sept. 20, 1999, reflects performance of the Life and Annuity Trust Asset Allocation Fund, its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust Funds were reorganized into the Wells Fargo Variable Trust Funds. (u) Performance for periods prior to Sept. 20, 1999, reflects performance of the Norwest Select Small Company Stock Fund (the accounting survivor of a merger of the Life and Annuity Trust Strategic Growth Fund and the Norwest Select Small Company Stock Fund), its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust and Norwest Select Funds were reorganized into the Wells Fargo Variable Trust Funds. 36 AVERAGE ANNUAL TOTAL RETURN(a) FOR QUALIFIED ANNUITIES UNDER RAVA ADVANTAGE (WITHOUT PURCHASE PAYMENT CREDITS) WITHOUT SURRENDER FOR PERIODS ENDING DEC. 31, 2001
PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND 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) (17.17%) (7.65%) (17.17%) --% --% (7.65%) BD2 Bond Fund (9/99; 10/81) 6.81 5.68 6.81 4.14 6.50 9.40 CR2 Capital Resource Fund (9/99; 10/81) (18.78) (10.48) (18.78) 4.36 5.99 11.18 CM2 Cash Management Fund (9/99; 10/81) 2.90 3.97 2.90 4.08 3.65 5.54 DE2 Diversified Equity Income Fund (9/99; 9/99) 1.32 1.82 1.32 -- -- 1.82 EM2 Emerging Markets Fund (5/00; 5/00) (2.20) (18.25) (2.20) -- -- (18.25) ES2 Equity Select Fund (5/01; 5/01) -- (1.61)(c) -- -- -- (1.61)(d) EI2 Extra Income Fund (9/99; 5/96) 4.13 (2.18) 4.13 1.04 -- 1.82 FI2 Federal Income Fund (9/99; 9/99) 5.52 5.79 5.52 -- -- 5.79 GB2 Global Bond Fund (9/99; 5/96) 0.54 1.40 0.54 1.52 -- 2.62 GR2 Growth Fund (9/99; 9/99) (31.52) (16.67) (31.52) -- -- (16.67) IE2 International Fund (9/99; 1/92) (29.27) (15.48) (29.27) (2.28) -- 3.03 MF2 Managed Fund (9/99; 4/86) (11.32) (2.28) (11.32) 5.93 7.94 9.32 ND2 NEW DIMENSIONS FUND(R)(9/99; 5/96) (17.38) (4.29) (17.38) 8.97 -- 9.89 SV2 Partners Small Cap Value Fund (8/01; 8/01) -- 6.69(c) -- -- -- 6.69(d) IV2 S&P 500 Index Fund (5/00; 5/00) (13.18) (13.93) (13.18) -- -- (13.93) SC2 Small Cap Advantage Fund (9/99; 9/99) (7.29) 3.55 (7.29) -- -- 3.55 ST2 Stock Fund (8/01; 8/01) -- (3.43)(c) -- -- -- (3.43)(d) SA2 Strategy Aggressive Fund (9/99; 1/92) (33.46) (8.21) (33.46) 0.63 -- 5.82 AIM V.I. 2AC Capital Appreciation Fund, Series II (8/01; 5/93)(e) -- (2.85)(c) (24.01) 5.13 -- 10.83 2AD Capital Development Fund, Series II (8/01; 5/98)(e) -- (2.55)(c) (8.84) -- -- 4.22 ALLIANCE VP 2AB AllianceBernstein International Value Portfolio (Class B) (8/01; 5/01)(f) -- (2.61)(c) -- -- -- (1.83)(d) 2AL Growth and Income Portfolio (Class B) (8/01; 1/91)(g) -- (3.75)(c) (0.63) 13.62 13.92 12.88 AMERICAN CENTURY(R) VARIABLE PORTFOLIOS, INC. 2AI VP International, Class II (8/01; 5/94)(h) -- (7.24)(c) (29.80) 3.83 -- 4.79 2AV VP Value, Class II (8/01; 5/96)(h) -- 3.41(c) 11.91 10.91 -- 11.71 CALVERT VARIABLE SERIES, INC. 2SR Social Balanced Portfolio (5/00; 9/86) (7.55) (7.04) (7.55) 6.31 7.93 8.45 EVERGREEN VA 2CG Capital Growth Fund, Class L Shares (8/01; 3/98)(i) -- (5.14)(c) (13.72) -- -- 3.68 FIDELITY VIP 2FG Growth & Income Portfolio (Service Class 2) (8/01; 12/96)(j) -- (0.26)(c) (9.74) 9.05 -- 9.05 2FM Mid Cap Portfolio (Service Class 2) (8/01; 12/98)(j) -- 3.54(c) (4.29) -- -- 24.49 2FO Overseas Portfolio (Service Class 2) (8/01; 1/87)(j) -- (5.41)(c) (21.85) 1.81 4.99 5.25 37 PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND SINCE SINCE SUBACCOUNT INVESTING IN: 1 YEAR COMMENCEMENT 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT FTVIPT 2RE Franklin Real Estate Fund - Class 2 (9/99; 1/89)(k) 7.02% 14.27% 7.02% 5.10% 10.57% 9.34% 2SI Franklin Small Cap Value Securities Fund - Class 2 (9/99; 5/98)(k) 12.88 15.16 12.88 -- -- 2.40 (previously FTVIPT Franklin Value Securities Fund - Class 2) 2MS Mutual Shares Securities Fund - Class 2 (8/01; 11/96)(k) -- (3.71)(c) 6.19 9.28 -- 9.49 GOLDMAN SACHS VIT 2UE CORE(SM) U.S. Equity Fund (9/99; 2/98)(l) (12.65) (5.50) (12.65) -- -- 2.47 2MC Mid Cap Value Fund (9/99; 5/98) 11.17 15.36 11.17 -- -- 5.57 INVESCO VIF 2ID Dynamics Fund (8/01; 8/97) -- (5.68)(c) (31.72) -- -- 4.90 2FS Financial Services Fund (8/01; 9/99) -- (3.65)(c) (10.62) -- -- 9.35 2TC Technology Fund (8/01; 5/97) -- (10.80)(c) (46.30) -- -- 9.09 2TL Telecommunications Fund (8/01; 9/99) -- (17.16)(c) (54.42) -- -- (23.19) JANUS ASPEN SERIES 2GT Global Technology Portfolio: Service Shares (5/00; 1/00)(m) (37.84) (40.63) (37.84) -- -- (36.82) 2IG International Growth Portfolio: Service Shares (5/00; 5/94)(m) (24.06) (26.33) (24.06) 9.01 -- 12.73 LAZARD RETIREMENT SERIES 2IP International Equity Portfolio (9/99; 9/98) (24.69) (12.97) (24.69) -- -- (2.75) MFS(R) 2MG Investors Growth Stock Series - Service Class (5/00; 5/99)(n) (25.45) (21.45) (25.45) -- -- (1.32) 2MD New Discovery Series - Service Class (5/00; 5/98)(n) (6.02) (7.71) (6.02) -- -- 13.58 2UT Utilities Series - Service Class (8/01; 1/95)(n) -- (10.58)(c) (24.94) 9.65 -- 13.47 PIONEER VCT 2PE Pioneer Equity Income VCT Portfolio - Class II Shares (8/01; 3/95)(o) -- (2.47)(c) (7.90) 11.22 -- 13.57 2EU Pioneer Europe VCT Portfolio - Class II Shares (8/01; 10/98)(p) -- (3.26)(c) (24.48) -- -- (5.91) PUTNAM VARIABLE TRUST 2HS Putnam VT Health Sciences Fund - Class IB Shares (8/01; 4/98)(q) -- (2.83)(c) (20.41) -- -- 3.57 2PI Putnam VT International Growth Fund - Class IB Shares (8/01; 1/97)(r) -- (4.44)(c) (21.26) -- -- 8.71 2VS Putnam VT Vista Fund - Class IB Shares (9/99; 1/97)(r) (34.06) (6.48) (34.06) -- -- 6.62 STRONG FUNDS 2SO Strong Opportunity Fund II - Advisor Class (8/01; 5/92)(s) -- (1.48)(c) (4.92) 13.23 -- 15.30 38 PERFORMANCE PERFORMANCE OF THE SUBACCOUNT OF THE FUND SINCE SINCE SUBACCOUNT INVESTING IN: 1 YEAR COMMENCEMENT 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT WANGER 2IT International Small Cap (9/99; 5/95) (21.80%) (6.86%) (21.80%) 7.22% --% 14.62% 2SP U.S. Smaller Companies (9/99; 5/95) 10.49 6.68 10.49 11.55 -- 17.31 (previously Wanger U.S. Small Cap) WELLS FARGO VT 2AA Asset Allocation Fund (5/01; 4/94)(t) -- (4.22)(c) (7.71) 8.38 -- 10.28 2WI International Equity Fund (5/01; 7/00) -- (10.88)(c) (16.78) -- -- (18.00) 2SG Small Cap Growth Fund (5/01; 5/95)(u) -- (6.51)(c) (25.00) (2.56) -- 4.27
(a) Current applicable charges deducted from performance include a $30 annual contract administrative charge and a 0.75% annual mortality and expense risk fee. Premium taxes and purchase payment credits 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) 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. (f) Because Class B shares were not offered until August 15, 2001, standardized Class A fund performance for prior periods represents historical results of Class A shares. For periods beginning August 15, 2001, Class B's results reflect an additional 12b-1 fee expense, which also affects future performance. (g) Because Class B shares were not offered until June 1, 1999, standardized Class A fund performance for prior periods represents historical results of Class A shares. For periods beginning June 1, 1999, Class B's results reflect an additional 12b-1 fee expense, which also affects future performance. (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) Initial offering of the Service Class 2 of each fund took place on Jan. 12, 2000. Returns prior to Jan. 12, 2000 through Nov. 3, 1997 are those of the Service Class, which reflect a 12b-1 fee of 0.10%. Service Class 2 returns prior to Nov. 3, 1997 are those of the Initial Class, which has no 12b-1 fee. If Service Class 2's 12b-1 fee of 0.25% had been reflected, returns prior to January 12, 2000 would have been lower. (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) 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. (p) 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. (q) The Trustees of the Putnam Variable Trust currently limit 12b-1 fee payments on Class IB shares to 0.25% of average net assets. (r) 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 0.25. Restated to reflect an increase in 12b-1 fees effective April 30, 2001. Actual 12b-1 fees during the most recent fiscal year were 0.22%. (s) 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. (t) Performance for periods prior to Sept. 20, 1999, reflects performance of the Life and Annuity Trust Asset Allocation Fund, its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust Funds were reorganized into the Wells Fargo Variable Trust Funds. (u) Performance for periods prior to Sept. 20, 1999, reflects performance of the Norwest Select Small Company Stock Fund (the accounting survivor of a merger of the Life and Annuity Trust Strategic Growth Fund and the Norwest Select Small Company Stock Fund), its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust and Norwest Select Funds were reorganized into the Wells Fargo Variable Trust Funds. 39 AVERAGE ANNUAL TOTAL RETURN(a) FOR NONQUALIFIED ANNUITIES UNDER RAVA SELECT (WITHOUT PURCHASE PAYMENT CREDITS) WITH SURRENDER AND SELECTION OF MAV AND EEP DEATH BENEFIT RIDERS FOR PERIODS ENDING DEC. 31, 2001
PERFORMANCE OF THE FUND(b) SINCE SUBACCOUNT INVESTING IN: 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT AXP(R) VARIABLE PORTFOLIO - BC4 Blue Chip Advantage Fund (02/02; 09/99)(c) (23.11%) --% --% (11.17%) BD4 Bond Fund (02/02; 10/81) (0.91) 3.15 5.49 8.38 CR4 Capital Resource Fund (02/02; 10/81) (24.60) 3.37 4.98 10.15 CM4 Cash Management Fund (02/02; 10/81) (4.52) 3.09 2.66 4.54 DE4 Diversified Equity Income Fund (02/02; 09/99) (5.99) -- -- (2.01) EM4 Emerging Markets Fund (02/02; 05/00) (9.25) -- -- (21.82) ES4 Equity Select Fund (02/02; 05/01) -- -- -- (8.54)(d) EI4 Extra Income Fund (02/02; 05/96) (3.38) 0.05 -- 0.83 FI4 Federal Income Fund (02/02; 09/99) (2.10) -- -- 1.87 GB4 Global Bond Fund (02/02; 05/96) (6.71) 0.53 -- 1.63 GR4 Growth Fund (02/02; 09/99) (36.39) -- -- (19.91) IE4 International Fund (02/02; 01/92) (34.31) (3.25) -- 2.04 MF4 Managed Fund (02/02; 04/86) (17.69) 4.93 6.93 8.30 ND4 NEW DIMENSIONS FUND(R)(02/02; 05/96) (23.30) 7.96 -- 8.87 SV4 Partners Small Cap Value Fund (02/02; 08/01) -- -- -- (0.74)(d) IV4 S&P 500 Index Fund (02/02; 05/00) (19.41) -- -- (18.06) SC4 Small Cap Advantage Fund (02/02; 09/99) (13.96) -- -- (0.36) ST4 Stock Fund (02/02; 08/01) -- -- -- (10.13)(d) SA4 Strategy Aggressive Fund (02/02; 01/92) (38.19) (0.35) -- 4.82 AIM V.I. 4AC Capital Appreciation Fund, Series II (02/02; 05/93)(e) (29.41) 4.14 -- 9.82 4AD Capital Development Fund, Series II (02/02; 05/98)(e) (15.40) -- -- 3.22 ALLIANCE VP 4AB AllianceBernstein International Value Portfolio (Class B) (02/02; 05/01)(f) -- -- -- (8.76)(d) 4AL Growth and Income Portfolio (Class B) (02/02; 01/91)(g) (7.79) 12.58 12.88 11.85 AMERICAN CENTURY(R) VARIABLE PORTFOLIOS, INC. 4AI VP International, Class II (02/02; 05/94)(h) (34.76) 2.84 -- 3.80 4AV VP Value, Class II (02/02; 05/96)(h) 3.93 9.89 -- 10.69 CALVERT VARIABLE SERIES, INC. 4SR Social Balanced Portfolio (02/02; 09/86) (14.20) 5.30 6.91 7.44 EVERGREEN VA 4CG Capital Growth Fund, Class L Shares (02/02; 03/98)(i) (19.91) -- -- 2.69 FIDELITY VIP 4FG Growth & Income Portfolio (Service Class 2) (02/02; 12/96)(j) (16.23) 8.04 -- 8.04 4FM Mid Cap Portfolio (Service Class 2) (02/02; 12/98)(j) (11.19) -- -- 23.40 4FO Overseas Portfolio (Service Class 2) (02/02; 01/87)(j) (27.44) 0.83 4.00 4.25 40 PERFORMANCE OF THE FUND(b) SINCE SUBACCOUNT INVESTING IN: 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT FTVIPT 4RE Franklin Real Estate Fund - Class 2 (02/02; 01/89)(k) (0.71%) 4.10% 9.54% 8.32% 4SI Franklin Small Cap Value Securities Fund - Class 2 (02/02; 05/98)(k) 4.85 -- -- 1.41 (previously FTVIPT Franklin Value Securities Fund - Class 2) 4MS Mutual Shares Securities Fund - Class 2 (02/02; 11/96)(k) (1.48) 8.26 -- 8.47 GOLDMAN SACHS VIT 4UE CORE(SM) U.S. Equity Fund (02/02; 02/98)(l) (18.93) -- -- 1.48 4MC Mid Cap Value Fund (02/02; 05/98) 3.14 -- -- 4.56 INVESCO VIF 4ID Dynamics Fund (02/02; 08/97) (36.58) -- -- 3.91 4FS Financial Services Fund (02/02; 09/99) (17.04) -- -- 5.52 4TC Technology Fund (02/02; 05/97) (50.08) -- -- 8.07 4TL Telecommunications Fund (02/02; 09/99) (57.60) -- -- (26.24) JANUS ASPEN SERIES 4GT Global Technology Portfolio: Service Shares (02/02; 01/00)(m) (42.24) -- -- (39.48) 4IG International Growth Portfolio: Service Shares (02/02; 05/94)(m) (29.48) 8.00 -- 11.70 LAZARD RETIREMENT SERIES 4IP International Equity Portfolio (02/02; 09/98) (30.07) -- -- (3.71) MFS(R) 4MG Investors Growth Stock Series - Service Class (02/02; 05/99)(n) (30.77) -- -- (4.60) 4MD New Discovery Series - Service Class (02/02; 05/98)(n) (12.78) -- -- 12.55 4UT Utilities Series - Service Class (02/02; 01/95)(n) (30.30) 8.63 -- 12.43 PIONEER VCT 4PE Pioneer Equity Income VCT Portfolio - Class II Shares (02/02; 03/95)(o) (14.52) 10.19 -- 12.54 4EU Pioneer Europe VCT Portfolio - Class II Shares (02/02; 10/98)(p) (29.88) -- -- (6.86) PUTNAM VARIABLE TRUST 4HS Putnam VT Health Sciences Fund - Class IB Shares (02/02; 04/98)(q) (26.10) -- -- 2.58 4PI Putnam VT International Growth Fund - Class IB Shares (02/02; 01/97)(r) (26.90) -- -- 7.70 4VS Putnam VT Vista Fund - Class IB Shares (02/02; 01/97)(r) (38.74) -- -- 5.62 STRONG FUNDS 4SO Strong Opportunity Fund II - Advisor Class (02/02; 05/92)(s) (11.77) 12.20 -- 14.25 WANGER 4IT International Small Cap (02/02; 05/95) (27.40) 6.21 -- 13.58 4SP U.S. Smaller Companies (02/02; 05/95) 2.51 10.52 -- 16.26 (previously Wanger U.S. Small Cap) WELLS FARGO VT 4AA Asset Allocation Fund (02/02; 04/94)(t) (14.35) 7.37 -- 9.26 4WI International Equity Fund (02/02; 07/00) (22.74) -- -- (22.32) 4SG Small Cap Growth Fund (02/02; 05/95)(u) (30.34) (3.48) -- 3.33
41 (a) Current applicable charges deducted from performance include a $30 annual contract administrative charge, a 0.15% annual MAV fee, a 0.40% annual EEP fee, a 1.20% annual mortality and expense risk fee and applicable surrender charges. Premium taxes and purchase payment credits are not reflected in these total returns. (b) The subaccounts had not commenced operations as of Dec. 31, 2001 and, therefore, they have no performance. (c) (Commencement date of the subaccount; Commencement date of the fund) (d) Cumulative return (not annualized) since commencement date of the fund. (e) 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. (f) Because Class B shares were not offered until August 15, 2001, standardized Class A fund performance for prior periods represents historical results of Class A shares. For periods beginning August 15, 2001, Class B's results reflect an additional 12b-1 fee expense, which also affects future performance. (g) Because Class B shares were not offered until June 1, 1999, standardized Class A fund performance for prior periods represents historical results of Class A shares. For periods beginning June 1, 1999, Class B's results reflect an additional 12b-1 fee expense, which also affects future performance. (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) Initial offering of the Service Class 2 of each fund took place on Jan. 12, 2000. Returns prior to Jan. 12, 2000 through Nov. 3, 1997 are those of the Service Class, which reflect a 12b-1 fee of 0.10%. Service Class 2 returns prior to Nov. 3, 1997 are those of the Initial Class, which has no 12b-1 fee. If Service Class 2's 12b-1 fee of 0.25% had been reflected, returns prior to January 12, 2000 would have been lower. (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) 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. (p) 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. (q) The Trustees of the Putnam Variable Trust currently limit 12b-1 fee payments on Class IB shares to 0.25% of average net assets. (r) 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 0.25. Restated to reflect an increase in 12b-1 fees effective April 30, 2001. Actual 12b-1 fees during the most recent fiscal year were 0.22%. (s) 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. (t) Performance for periods prior to Sept. 20, 1999, reflects performance of the Life and Annuity Trust Asset Allocation Fund, its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust Funds were reorganized into the Wells Fargo Variable Trust Funds. (u) Performance for periods prior to Sept. 20, 1999, reflects performance of the Norwest Select Small Company Stock Fund (the accounting survivor of a merger of the Life and Annuity Trust Strategic Growth Fund and the Norwest Select Small Company Stock Fund), its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust and Norwest Select Funds were reorganized into the Wells Fargo Variable Trust Funds. 42 AVERAGE ANNUAL TOTAL RETURN(A) FOR NONQUALIFIED ANNUITIES UNDER RAVA SELECT (WITHOUT PURCHASE PAYMENT CREDITS) WITHOUT SURRENDER AND SELECTION OF MAV AND EEP DEATH BENEFIT RIDERS FOR PERIODS ENDING DEC. 31, 2001
PERFORMANCE OF THE FUND(b) SINCE SUBACCOUNT INVESTING IN: 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT AXP(R) VARIABLE PORTFOLIO - BC4 Blue Chip Advantage Fund (02/02; 09/99)(c) (18.07%) --% --% (8.59%) BD4 Bond Fund (02/02; 10/81) 5.80 3.15 5.49 8.38 CR4 Capital Resource Fund (02/02; 10/81) (19.68) 3.37 4.98 10.15 CM4 Cash Management Fund (02/02; 10/81) 1.91 3.09 2.66 4.54 DE4 Diversified Equity Income Fund (02/02; 09/99) 0.33 -- -- 0.83 EM4 Emerging Markets Fund (02/02; 05/00) (3.17) -- -- (18.72) ES4 Equity Select Fund (02/02; 05/01) -- -- -- (2.41)(d) EI4 Extra Income Fund (02/02; 05/96) 3.13 0.05 -- 0.83 FI4 Federal Income Fund (02/02; 09/99) 4.51 -- -- 4.79 GB4 Global Bond Fund (02/02; 05/96) (0.45) 0.53 -- 1.63 GR4 Growth Fund (02/02; 09/99) (32.36) -- -- (17.58) IE4 International Fund (02/02; 01/92) (30.12) (3.25) -- 2.04 MF4 Managed Fund (02/02; 04/86) (12.24) 4.93 6.93 8.30 ND4 NEW DIMENSIONS FUND(R)(02/02; 05/96) (18.28) 7.96 -- 8.87 SV4 Partners Small Cap Value Fund (02/02; 08/01) -- -- -- 5.98(d) IV4 S&P 500 Index Fund (02/02; 05/00) (14.10) -- -- (14.84) SC4 Small Cap Advantage Fund (02/02; 09/99) (8.24) -- -- 2.55 ST4 Stock Fund (02/02; 08/01) -- -- -- (4.12)(d) SA4 Strategy Aggressive Fund (02/02; 01/92) (34.29) (0.35) -- 4.82 AIM V.I. 4AC Capital Appreciation Fund, Series II (02/02; 05/93)(e) (24.85) 4.14 -- 9.82 4AD Capital Development Fund, Series II (02/02; 05/98)(e) (9.78) -- -- 3.22 ALLIANCE VP 4AB AllianceBernstein International Value Portfolio (Class B) (02/02; 05/01)(f) -- -- -- (2.65)(d) 4AL Growth and Income Portfolio (Class B) (02/02; 01/91)(g) (1.60) 12.58 12.88 11.85 AMERICAN CENTURY(R) VARIABLE PORTFOLIOS, INC. 4AI VP International, Class II (02/02; 05/94)(h) (30.61) 2.84 -- 3.80 4AV VP Value, Class II (02/02; 05/96)(h) 10.93 9.89 -- 10.69 CALVERT VARIABLE SERIES, INC. 4SR Social Balanced Portfolio (02/02; 09/86) (8.50) 5.30 6.91 7.44 EVERGREEN VA 4CG Capital Growth Fund, Class L Shares (02/02; 03/98)(i) (14.64) -- -- 2.69 FIDELITY VIP 4FG Growth & Income Portfolio (Service Class 2) (02/02; 12/96)(j) (10.68) 8.04 -- 8.04 4FM Mid Cap Portfolio (Service Class 2) (02/02; 12/98)(j) (5.25) -- -- 23.40 4FO Overseas Portfolio (Service Class 2) (02/02; 01/87)(j) (22.73) 0.83 4.00 4.25 43 PERFORMANCE OF THE FUND(b) SINCE SUBACCOUNT INVESTING IN: 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT FTVIPT 4RE Franklin Real Estate Fund - Class 2 (02/02; 01/89)(k) 6.01% 4.10% 9.54% 8.32% 4SI Franklin Small Cap Value Securities Fund - Class 2 (02/02; 05/98)(k) 11.85 -- -- 1.41 (previously FTVIPT Franklin Value Securities Fund - Class 2) 4MS Mutual Shares Securities Fund - Class 2 (02/02; 11/96)(k) 5.18 8.26 -- 8.47 GOLDMAN SACHS VIT 4UE CORE(SM) U.S. Equity Fund (02/02; 02/98)(l) (13.58) -- -- 1.48 4MC Mid Cap Value Fund (02/02; 05/98) 10.14 -- -- 4.56 INVESCO VIF 4ID Dynamics Fund (02/02; 08/97) (32.56) -- -- 3.91 4FS Financial Services Fund (02/02; 09/99) (11.55) -- -- 8.33 4TC Technology Fund (02/02; 05/97) (47.08) -- -- 8.07 4TL Telecommunications Fund (02/02; 09/99) (55.16) -- -- (24.06) JANUS ASPEN SERIES 4GT Global Technology Portfolio: Service Shares (02/02; 01/00)(m) (38.65) -- -- (37.63) 4IG International Growth Portfolio: Service Shares (02/02; 05/94)(m) (24.93) 8.00 -- 11.70 LAZARD RETIREMENT SERIES 4IP International Equity Portfolio (02/02; 09/98) (25.55) -- -- (3.71) MFS(R) 4MG Investors Growth Stock Series - Service Class (02/02; 05/99)(n) (26.31) -- -- (2.29) 4MD New Discovery Series - Service Class (02/02; 05/98)(n) (6.97) -- -- 12.55 4UT Utilities Series - Service Class (02/02; 01/95)(n) (25.80) 8.63 -- 12.43 PIONEER VCT 4PE Pioneer Equity Income VCT Portfolio - Class II Shares (02/02; 03/95)(o) (8.84) 10.19 -- 12.54 4EU Pioneer Europe VCT Portfolio - Class II Shares (02/02; 10/98)(p) (25.35) -- -- (6.86) PUTNAM VARIABLE TRUST 4HS Putnam VT Health Sciences Fund - Class IB Shares (02/02; 04/98)(q) (21.30) -- -- 2.58 4PI Putnam VT International Growth Fund - Class IB Shares (02/02; 01/97)(r) (22.15) -- -- 7.70 4VS Putnam VT Vista Fund - Class IB Shares (02/02; 01/97)(r) (34.88) -- -- 5.62 STRONG FUNDS 4SO Strong Opportunity Fund II - Advisor Class (02/02; 05/92)(s) (5.88) 12.20 -- 14.25 WANGER 4IT International Small Cap (02/02; 05/95) (22.69) 6.21 -- 13.58 4SP U.S. Smaller Companies (02/02; 05/95) 9.47 10.52 -- 16.26 (previously Wanger U.S. Small Cap) WELLS FARGO VT 4AA Asset Allocation Fund (02/02; 04/94)(t) (8.65) 7.37 -- 9.26 4WI International Equity Fund (02/02; 07/00) (17.68) -- -- (18.89) 4SG Small Cap Growth Fund (02/02; 05/95)(u) (25.85) (3.48) -- 3.33
44 (a) Current applicable charges deducted from performance include a $30 annual contract administrative charge, a 0.15% annual MAV fee, a 0.40% annual EEP fee and a 1.20% annual mortality and expense risk fee. Premium taxes and purchase payment credits are not reflected in these total returns. (b) The subaccounts had not commenced operations as of Dec. 31, 2001 and, therefore, they have no performance. (c) (Commencement date of the subaccount; Commencement date of the fund) (d) Cumulative return (not annualized) since commencement date of the fund. (e) 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. (f) Because Class B shares were not offered until August 15, 2001, standardized Class A fund performance for prior periods represents historical results of Class A shares. For periods beginning August 15, 2001, Class B's results reflect an additional 12b-1 fee expense, which also affects future performance. (g) Because Class B shares were not offered until June 1, 1999, standardized Class A fund performance for prior periods represents historical results of Class A shares. For periods beginning June 1, 1999, Class B's results reflect an additional 12b-1 fee expense, which also affects future performance. (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) Initial offering of the Service Class 2 of each fund took place on Jan. 12, 2000. Returns prior to Jan. 12, 2000 through Nov. 3, 1997 are those of the Service Class, which reflect a 12b-1 fee of 0.10%. Service Class 2 returns prior to Nov. 3, 1997 are those of the Initial Class, which has no 12b-1 fee. If Service Class 2's 12b-1 fee of 0.25% had been reflected, returns prior to January 12, 2000 would have been lower. (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) 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. (p) 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. (q) The Trustees of the Putnam Variable Trust currently limit 12b-1 fee payments on Class IB shares to 0.25% of average net assets. (r) 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 0.25. Restated to reflect an increase in 12b-1 fees effective April 30, 2001. Actual 12b-1 fees during the most recent fiscal year were 0.22%. (s) 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. (t) Performance for periods prior to Sept. 20, 1999, reflects performance of the Life and Annuity Trust Asset Allocation Fund, its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust Funds were reorganized into the Wells Fargo Variable Trust Funds. (u) Performance for periods prior to Sept. 20, 1999, reflects performance of the Norwest Select Small Company Stock Fund (the accounting survivor of a merger of the Life and Annuity Trust Strategic Growth Fund and the Norwest Select Small Company Stock Fund), its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust and Norwest Select Funds were reorganized into the Wells Fargo Variable Trust Funds. 45 AVERAGE ANNUAL TOTAL RETURN(a) FOR NONQUALIFIED ANNUITIES UNDER RAVA SELECT (WITHOUT PURCHASE PAYMENT CREDITS) WITH SURRENDER FOR PERIODS ENDING DEC. 31, 2001
PERFORMANCE OF THE FUND(b) SINCE SUBACCOUNT INVESTING IN: 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT AXP(R) VARIABLE PORTFOLIO - BC4 Blue Chip Advantage Fund (02/02; 09/99)(c) (22.59%) --% --% (10.64%) BD4 Bond Fund (02/02; 10/81) (0.39) 3.70 6.04 8.93 CR4 Capital Resource Fund (02/02; 10/81) (24.09) 3.92 5.53 10.70 CM4 Cash Management Fund (02/02; 10/81) (4.01) 3.64 3.21 5.09 DE4 Diversified Equity Income Fund (02/02; 09/99) (5.48) -- -- (1.48) EM4 Emerging Markets Fund (02/02; 05/00) (8.74) -- -- (21.29) ES4 Equity Select Fund (02/02; 05/01) -- -- -- (8.03)(d) EI4 Extra Income Fund (02/02; 05/96) (2.87) 0.60 -- 1.38 FI4 Federal Income Fund (02/02; 09/99) (1.59) -- -- 2.44 GB4 Global Bond Fund (02/02; 05/96) (6.20) 1.08 -- 2.18 GR4 Growth Fund (02/02; 09/99) (35.88) -- -- (19.38) IE4 International Fund (02/02; 01/92) (33.80) (2.70) -- 2.59 MF4 Managed Fund (02/02; 04/86) (17.18) 5.48 7.48 8.85 ND4 NEW DIMENSIONS FUND(R)(02/02; 05/96) (22.79) 8.51 -- 9.42 SV4 Partners Small Cap Value Fund (02/02; 08/01) -- -- -- (0.23)(d) IV4 S&P 500 Index Fund (02/02; 05/00) (18.90) -- -- (17.53) SC4 Small Cap Advantage Fund (02/02; 09/99) (13.45) -- -- 0.17 ST4 Stock Fund (02/02; 08/01) -- -- -- (9.62)(d) SA4 Strategy Aggressive Fund (02/02; 01/92) (37.68) 0.20 -- 5.37 AIM V.I. 4AC Capital Appreciation Fund, Series II (02/02; 05/93)(e) (28.89) 4.69 -- 10.37 4AD Capital Development Fund, Series II (02/02; 05/98)(e) (14.89) -- -- 3.77 ALLIANCE VP 4AB AllianceBernstein International Value Portfolio (Class B) (02/02; 05/01)(f) -- -- -- (8.25)(d) 4AL Growth and Income Portfolio (Class B) (02/02; 01/91)(g) (7.28) 13.13 13.43 12.40 AMERICAN CENTURY(R) VARIABLE PORTFOLIOS, INC. 4AI VP International, Class II (02/02; 05/94)(h) (34.25) 3.39 -- 4.35 4AV VP Value, Class II (02/02; 05/96)(h) 4.48 10.44 -- 11.24 CALVERT VARIABLE SERIES, INC. 4SR Social Balanced Portfolio (02/02; 09/86) (13.69) 5.85 7.46 7.99 EVERGREEN VA 4CG Capital Growth Fund, Class L Shares (02/02; 03/98)(i) (19.40) -- -- 3.24 FIDELITY VIP 4FG Growth & Income Portfolio (Service Class 2) (02/02; 12/96)(j) (15.72) 8.59 -- 8.59 4FM Mid Cap Portfolio (Service Class 2) (02/02; 12/98)(j) (10.67) -- -- 23.95 4FO Overseas Portfolio (Service Class 2) (02/02; 01/87)(j) (26.92) 1.38 4.55 4.80 46 PERFORMANCE OF THE FUND(b) SINCE SUBACCOUNT INVESTING IN: 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT FTVIPT 4RE Franklin Real Estate Fund - Class 2 (02/02; 01/89)(k) (0.20%) 4.65% 10.09% 8.87% 4SI Franklin Small Cap Value Securities Fund - Class 2 (02/02; 05/98)(k) 5.40 -- -- 1.96 (previously FTVIPT Franklin Value Securities Fund - Class 2) 4MS Mutual Shares Securities Fund - Class 2 (02/02; 11/96)(k) (0.97) 8.81 -- 9.02 GOLDMAN SACHS VIT 4UE CORE(SM) U.S. Equity Fund (02/02; 02/98)(l) (18.41) -- -- 2.03 4MC Mid Cap Value Fund (02/02; 05/98) 3.69 -- -- 5.11 INVESCO VIF 4ID Dynamics Fund (02/02; 08/97) (36.07) -- -- 4.46 4FS Financial Services Fund (02/02; 09/99) (16.53) -- -- 6.08 4TC Technology Fund (02/02; 05/97) (49.57) -- -- 8.62 4TL Telecommunications Fund (02/02; 09/99) (57.09) -- -- (25.71) JANUS ASPEN SERIES 4GT Global Technology Portfolio: Service Shares (02/02; 01/00)(m) (41.73) -- -- (38.95) 4IG International Growth Portfolio: Service Shares (02/02; 05/94)(m) (28.97) 8.55 -- 12.25 LAZARD RETIREMENT SERIES 4IP International Equity Portfolio (02/02; 09/98) (29.55) -- -- (3.16) MFS(R) 4MG Investors Growth Stock Series - Service Class (02/02; 05/99)(n) (30.26) -- -- (4.07) 4MD New Discovery Series - Service Class (02/02; 05/98)(n) (12.27) -- -- 13.10 4UT Utilities Series - Service Class (02/02; 01/95)(n) (29.79) 9.18 -- 12.98 PIONEER VCT 4PE Pioneer Equity Income VCT Portfolio - Class II Shares (02/02; 03/95)(o) (14.01) 10.74 -- 13.09 4EU Pioneer Europe VCT Portfolio - Class II Shares (02/02; 10/98)(p) (29.36) -- -- (6.31) PUTNAM VARIABLE TRUST 4HS Putnam VT Health Sciences Fund - Class IB Shares (02/02; 04/98)(q) (25.59) -- -- 3 13 4PI Putnam VT International Growth Fund - Class IB Shares (02/02; 01/97)(r) (26.38) -- -- 8 25 4VS Putnam VT Vista Fund - Class IB Shares (02/02; 01/97)(r) (38.23) -- -- 6.17 STRONG FUNDS 4SO Strong Opportunity Fund II - Advisor Class (02/02; 05/92)(s) (11.26) 12.75 -- 14.80 WANGER 4IT International Small Cap (02/02; 05/95) (26.89) 6.76 -- 14.13 4SP U.S. Smaller Companies (02/02; 05/95) 3.02 11.07 -- 16.81 (previously Wanger U.S. Small Cap) WELLS FARGO VT 4AA Asset Allocation Fund (02/02; 04/94)(t) (13.83) 7.92 -- 9.81 4WI International Equity Fund (02/02; 07/00) (22.23) -- -- (21.80) 4SG Small Cap Growth Fund (02/02; 05/95)(u) (29.83) (2.93) -- 3.88
47 (a) Current applicable charges deducted from performance include a $30 annual contract administrative charge, a 1.20% annual mortality and expense risk fee and applicable surrender charges. Premium taxes and purchase payment credits are not reflected in these total returns. (b) The subaccounts had not commenced operations as of Dec. 31, 2001 and, therefore, they have no performance. (c) (Commencement date of the subaccount; Commencement date of the fund) (d) Cumulative return (not annualized) since commencement date of the fund. (e) 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. (f) Because Class B shares were not offered until August 15, 2001, standardized Class A fund performance for prior periods represents historical results of Class A shares. For periods beginning August 15, 2001, Class B's results reflect an additional 12b-1 fee expense, which also affects future performance. (g) Because Class B shares were not offered until June 1, 1999, standardized Class A fund performance for prior periods represents historical results of Class A shares. For periods beginning June 1, 1999, Class B's results reflect an additional 12b-1 fee expense, which also affects future performance. (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) Initial offering of the Service Class 2 of each fund took place on Jan. 12, 2000. Returns prior to Jan. 12, 2000 through Nov. 3, 1997 are those of the Service Class, which reflect a 12b-1 fee of 0.10%. Service Class 2 returns prior to Nov. 3, 1997 are those of the Initial Class, which has no 12b-1 fee. If Service Class 2's 12b-1 fee of 0.25% had been reflected, returns prior to January 12, 2000 would have been lower. (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) 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. (p) 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. (q) The Trustees of the Putnam Variable Trust currently limit 12b-1 fee payments on Class IB shares to 0.25% of average net assets. (r) 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 0.25. Restated to reflect an increase in 12b-1 fees effective April 30, 2001. Actual 12b-1 fees during the most recent fiscal year were 0.22%. (s) 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. (t) Performance for periods prior to Sept. 20, 1999, reflects performance of the Life and Annuity Trust Asset Allocation Fund, its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust Funds were reorganized into the Wells Fargo Variable Trust Funds. (u) Performance for periods prior to Sept. 20, 1999, reflects performance of the Norwest Select Small Company Stock Fund (the accounting survivor of a merger of the Life and Annuity Trust Strategic Growth Fund and the Norwest Select Small Company Stock Fund), its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust and Norwest Select Funds were reorganized into the Wells Fargo Variable Trust Funds. 48 AVERAGE ANNUAL TOTAL RETURN(a) FOR NONQUALIFIED ANNUITIES UNDER RAVA SELECT (WITHOUT PURCHASE PAYMENT CREDITS) WITHOUT SURRENDER FOR PERIODS ENDING DEC. 31, 2001
PERFORMANCE OF THE FUND(b) SINCE SUBACCOUNT INVESTING IN: 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT AXP(R) VARIABLE PORTFOLIO -- BC4 Blue Chip Advantage Fund (02/02; 09/99)(c) (17.52%) --% --% (8.04%) BD4 Bond Fund (02/02; 10/81) 6.35 3.70 6.04 8.93 CR4 Capital Resource Fund (02/02; 10/81) (19.13) 3.92 5.53 10.70 CM4 Cash Management Fund (02/02; 10/81) 2.46 3.64 3.21 5.09 DE4 Diversified Equity Income Fund (02/02; 09/99) 0.88 -- -- 1.38 EM4 Emerging Markets Fund (02/02; 05/00) (2.62) -- -- (18.17) ES4 Equity Select Fund (02/02; 05/01) -- -- -- (1.86)(d) EI4 Extra Income Fund (02/02; 05/96) 3.68 0.60 -- 1.38 FI4 Federal Income Fund (02/02; 09/99) 5.06 -- -- 5.34 GB4 Global Bond Fund (02/02; 05/96) 0.10 1.08 -- 2.18 GR4 Growth Fund (02/02; 09/99) (31.81) -- -- (17.03) IE4 International Fund (02/02; 01/92) (29.57) (2.70) -- 2.59 MF4 Managed Fund (02/02; 04/86) (11.69) 5.48 7.48 8.85 ND4 NEW DIMENSIONS FUND(R)(02/02; 05/96) (17.73) 8.51 -- 9.42 SV4 Partners Small Cap Value Fund (02/02; 08/01) -- -- -- 6.53(d) IV4 S&P 500 Index Fund (02/02; 05/00) (13.55) -- -- (14.29) SC4 Small Cap Advantage Fund (02/02; 09/99) (7.69) -- -- 3.10 ST4 Stock Fund (02/02; 08/01) -- -- -- (3.57)(d) SA4 Strategy Aggressive Fund (02/02; 01/92) (33.74) 0.20 -- 5.37 AIM V.I. 4AC Capital Appreciation Fund, Series II (02/02; 05/93)(e) (24.30) 4.69 -- 10.37 4AD Capital Development Fund, Series II (02/02; 05/98)(e) (9.23) -- -- 3.77 ALLIANCE VP 4AB AllianceBernstein International Value Portfolio (Class B) (02/02; 05/01)(f) -- -- -- 8.25(d) 4AL Growth and Income Portfolio (Class B) (02/02; 01/91)(g) (1.05) 13.13 13.43 12.40 AMERICAN CENTURY(R) VARIABLE PORTFOLIOS, INC. 4AI VP International, Class II (02/02; 05/94)(h) (30.06) 3.39 -- 4.35 4AV VP Value, Class II (02/02; 05/96)(h) 11.48 10.44 -- 11.24 CALVERT VARIABLE SERIES, INC. 4SR Social Balanced Portfolio (02/02; 09/86) (7.95) 5.85 7.46 7.99 EVERGREEN VA 4CG Capital Growth Fund, Class L Shares (02/02; 03/98)(i) (14.09) -- -- 3.24 FIDELITY VIP 4FG Growth & Income Portfolio (Service Class 2) (02/02; 12/96)(j) (10.13) 8.59 -- 8.59 4FM Mid Cap Portfolio (Service Class 2) (02/02; 12/98)(j) (4.70) -- -- 23.95 4FO Overseas Portfolio (Service Class 2) (02/02; 01/87)(j) (22.18) 1.38 4.55 4.80 49 PERFORMANCE OF THE FUND(b) SINCE SUBACCOUNT INVESTING IN: 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT FTVIPT 4RE Franklin Real Estate Fund -- Class 2 (02/02; 01/89)(k) 6.56% 4.65% 10.09% 8.87% 4SI Franklin Small Cap Value Securities Fund -- Class 2 (02/02; 05/98)(k) 12.40 -- -- 1.96 (previously FTVIPT Franklin Value Securities Fund -- Class 2) 4MS Mutual Shares Securities Fund -- Class 2 (02/02; 11/96)(k) 5.73 8.81 -- 9.02 GOLDMAN SACHS VIT 4UE CORE(SM) U.S. Equity Fund (02/02; 02/98)(l) (13.03) -- -- 2.03 4MC Mid Cap Value Fund (02/02; 05/98) 10.69 -- -- 5.11 INVESCO VIF 4ID Dynamics Fund (02/02; 08/97) (32.01) -- -- 4.46 4FS Financial Services Fund (02/02; 09/99) (11.00) -- -- 8.88 4TC Technology Fund (02/02; 05/97) (46.53) -- -- 8.62 4TL Telecommunications Fund (02/02; 09/99) (54.61) -- -- (23.51) JANUS ASPEN SERIES 4GT Global Technology Portfolio: Service Shares (02/02; 01/00)(m) (38.10) -- -- (37.08) 4IG International Growth Portfolio: Service Shares (02/02; 05/94)(m) (24.38) 8.55 -- 12.25 LAZARD RETIREMENT SERIES 4IP International Equity Portfolio (02/02; 09/98) (25.00) -- -- (3.16) MFS(R) 4MG Investors Growth Stock Series -- Service Class (02/02; 05/99)(n) (25.76) -- -- (1.74) 4MD New Discovery Series -- Service Class (02/02; 05/98)(n) (6.42) -- -- 13.10 4UT Utilities Series -- Service Class (02/02; 01/95)(n) (25.25) 9.18 -- 12.98 PIONEER VCT 4PE Pioneer Equity Income VCT Portfolio -- Class II Shares (02/02; 03/95)(o) (8.29) 10.74 -- 13.09 4EU Pioneer Europe VCT Portfolio -- Class II Shares (02/02; 10/98)(p) (24.80) -- -- (6.31) PUTNAM VARIABLE TRUST 4HS Putnam VT Health Sciences Fund -- Class IB Shares (02/02; 04/98)(q) (20.75) -- -- 3.13 4PI Putnam VT International Growth Fund -- Class IB Shares (02/02; 01/97)(r) (21.60) -- -- 8.25 4VS Putnam VT Vista Fund -- Class IB Shares (02/02; 01/97)(r) (34.33) -- -- 6.17 STRONG FUNDS 4SO Strong Opportunity Fund II -- Advisor Class (02/02; 05/92)(s) (5.33) 12.75 -- 14.80 WANGER 4IT International Small Cap (02/02; 05/95) (22.14) 6.76 -- 14.13 4SP U.S. Smaller Companies (02/02; 05/95) 10.02 11.07 -- 16.81 (previously Wanger U.S. Small Cap) WELLS FARGO VT 4AA Asset Allocation Fund (02/02; 04/94)(t) (8.10) 7.92 -- 9.81 4WI International Equity Fund (02/02; 07/00) (17.13) -- -- (18.34) 4SG Small Cap Growth Fund (02/02; 05/95)(u) (25.30) (2.93) -- 3.88
50 (a) Current applicable charges deducted from performance include a $30 annual contract administrative charge and a 1.20% annual mortality and expense risk fee. Premium taxes and purchase payment credits are not reflected in these total returns. (b) The subaccounts had not commenced operations as of Dec. 31, 2001 and, therefore, they have no performance. (c) (Commencement date of the subaccount; Commencement date of the fund) (d) Cumulative return (not annualized) since commencement date of the fund. (e) 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. (f) Because Class B shares were not offered until August 15, 2001, standardized Class A fund performance for prior periods represents historical results of Class A shares. For periods beginning August 15, 2001, Class B's results reflect an additional 12b-1 fee expense, which also affects future performance. (g) Because Class B shares were not offered until June 1, 1999, standardized Class A fund performance for prior periods represents historical results of Class A shares. For periods beginning June 1, 1999, Class B's results reflect an additional 12b-1 fee expense, which also affects future performance. (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) Initial offering of the Service Class 2 of each fund took place on Jan. 12, 2000. Returns prior to Jan. 12, 2000 through Nov. 3, 1997 are those of the Service Class, which reflect a 12b-1 fee of 0.10%. Service Class 2 returns prior to Nov. 3, 1997 are those of the Initial Class, which has no 12b-1 fee. If Service Class 2's 12b-1 fee of 0.25% had been reflected, returns prior to January 12, 2000 would have been lower. (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) 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. (p) 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. (q) The Trustees of the Putnam Variable Trust currently limit 12b-1 fee payments on Class IB shares to 0.25% of average net assets. (r) 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 0.25. Restated to reflect an increase in 12b-1 fees effective April 30, 2001. Actual 12b-1 fees during the most recent fiscal year were 0.22%. (s) 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. (t) Performance for periods prior to Sept. 20, 1999, reflects performance of the Life and Annuity Trust Asset Allocation Fund, its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust Funds were reorganized into the Wells Fargo Variable Trust Funds. (u) Performance for periods prior to Sept. 20, 1999, reflects performance of the Norwest Select Small Company Stock Fund (the accounting survivor of a merger of the Life and Annuity Trust Strategic Growth Fund and the Norwest Select Small Company Stock Fund), its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust and Norwest Select Funds were reorganized into the Wells Fargo Variable Trust Funds. 51 AVERAGE ANNUAL TOTAL RETURN(a) FOR QUALIFIED ANNUITIES UNDER RAVA SELECT (WITHOUT PURCHASE PAYMENT CREDITS) WITH SURRENDER AND SELECTION OF MAV DEATH BENEFIT RIDER FOR PERIODS ENDING DEC. 31, 2001
PERFORMANCE OF THE FUND(b) SINCE SUBACCOUNT INVESTING IN: 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT AXP(R) VARIABLE PORTFOLIO BC5 Blue Chip Advantage Fund (02/02; 09/99)(c) (22.58%) --% --% (10.60%) BD5 Bond Fund (02/02; 10/81) (0.33) 3.76 6.10 9.00 CR5 Capital Resource Fund (02/02; 10/81) (24.07) 3.98 5.59 10.77 CM5 Cash Management Fund (02/02; 10/81) (3.96) 3.69 3.27 5.15 DE5 Diversified Equity Income Fund (02/02; 09/99) (5.43) -- -- (1.43) EM5 Emerging Markets Fund (02/02; 05/00) (8.70) -- -- (21.28) ES5 Equity Select Fund (02/02; 05/01) -- -- -- (8.05)(d) EI5 Extra Income Fund (02/02; 05/96) (2.82) 0.66 -- 1.44 FI5 Federal Income Fund (02/02; 09/99) (1.53) -- -- 2.50 GB5 Global Bond Fund (02/02; 05/96) (6.15) 1.14 -- 2.23 GR5 Growth Fund (02/02; 09/99) (35.89) -- -- (19.37) IE5 International Fund (02/02; 01/92) (33.81) (2.65) -- 2.64 MF5 Managed Fund (02/02; 04/86) (17.15) 5.54 7.55 8.92 ND5 NEW DIMENSIONS FUND(R)(02/02; 05/96) (22.78) 8.58 -- 9.49 SV5 Partners Small Cap Value Fund (02/02; 08/01) -- -- -- (0.29)(d) IV5 S&P 500 Index Fund (02/02; 05/00) (18.88) -- -- (17.51) SC5 Small Cap Advantage Fund (02/02; 09/99) (13.41) -- -- 0.23 ST5 Stock Fund (02/02; 08/01) -- -- -- (9.69)(d) SA5 Strategy Aggressive Fund (02/02; 01/92) (37.69) 0.25 -- 5.43 AIM V.I. 5AC Capital Appreciation Fund, Series II (02/02; 05/93)(e) (28.89) 4.75 -- 10.44 5AD Capital Development Fund, Series II (02/02; 05/98)(e) (14.86) -- -- 3.83 ALLIANCE VP 5AB AllianceBernstein International Value Portfolio (Class B) (02/02; 05/01)(f) -- -- -- (8.27)(d) 5AL Growth and Income Portfolio (Class B) (02/02; 01/91)(g) (7.23) 13.21 13.51 12.48 AMERICAN CENTURY(R) VARIABLE PORTFOLIOS, INC. 5AI VP International, Class II (02/02; 05/94)(h) (34.26) 3.45 -- 4.41 5AV VP Value, Class II (02/02; 05/96)(h) 4.55 10.51 -- 11.32 CALVERT VARIABLE SERIES, INC. 5SR Social Balanced Portfolio (02/02; 09/86) (13.66) 5.92 7.53 8.05 EVERGREEN VA 5CG Capital Growth Fund, Class L Shares (02/02; 03/98)(i) (19.38) -- -- 3.30 FIDELITY VIP 5FG Growth & Income Portfolio (Service Class 2) (02/02; 12/96)(j) 8.65 -- 8.65 5FM Mid Cap Portfolio (Service Class 2) (02/02; 12/98)(j) (10.63) -- -- 24.05 5FO Overseas Portfolio (Service Class 2) (02/02; 01/87)(j) (26.92) 1.43 4.61 4.86 52 PERFORMANCE OF THE FUND(b) SINCE SUBACCOUNT INVESTING IN: 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT FTVIPT 5RE Franklin Real Estate Fund Class 2 (02/02; 01/89)(k) (0.14%) 4.71% 10.16% 8.94% 5SI Franklin Small Cap Value Securities Fund Class 2 (02/02; 05/98)(k) 5.47 -- -- 2.01 (previously FTVIPT Franklin Value Securities Fund Class 2) 5MS Mutual Shares Securities Fund Class 2 (02/02; 11/96)(k) (0.91) 8.88 -- 9.09 GOLDMAN SACHS VIT 5UE CORE(SM) U.S. Equity Fund (02/02; 02/98)(l) (18.39) -- -- 2.08 5MC Mid Cap Value Fund (02/02; 05/98) 3.77 -- -- 5.17 INVESCO VIF 5ID Dynamics Fund (02/02; 08/97) (36.08) -- -- 4.52 5FS Financial Services Fund (02/02; 09/99) (16.50) -- -- 6.15 5TC Technology Fund (02/02; 05/97) (49.61) -- -- 8.69 5TL Telecommunications Fund (02/02; 09/99) (57.14) -- -- (25.70) JANUS ASPEN SERIES 5GT Global Technology Portfolio: Service Shares (02/02; 01/00)(m) (41.76) -- -- (38.98) 5IG International Growth Portfolio: Service Shares (02/02; 05/94)(m) (28.97) 8.61 -- 12.32 LAZARD RETIREMENT SERIES 5IP International Equity Portfolio (02/02; 09/98) (29.55) -- -- (3.11) MFS(R) 5MG Investors Growth Stock Series Service Class (02/02; 05/99)(n) (30.26) -- -- (4.02) 5MD New Discovery Series Service Class (02/02; 05/98)(n) (12.24) -- -- 13.18 5UT Utilities Series Service Class (02/02; 01/95)(n) (29.78) 9.25 -- 13.06 PIONEER VCT 5PE Pioneer Equity Income VCT Portfolio Class II Shares (02/02; 03/95)(o) (13.98) 10.82 -- 13.16 5EU Pioneer Europe VCT Portfolio Class II Shares (02/02; 10/98)(p) (29.36) -- -- (6.28) PUTNAM VARIABLE TRUST 5HS Putnam VT Health Sciences Fund Class IB Shares (02/02; 04/98)(q) (25.58) -- -- 3 18 5PI Putnam VT International Growth Fund Class IB Shares (02/02; 01/97)(r) (26.38) -- -- 8.31 5VS Putnam VT Vista Fund Class IB Shares (02/02; 01/97)(r) (38.25) -- -- 6.23 STRONG FUNDS 5SO Strong Opportunity Fund II Advisor Class (02/02; 05/92)(s) (11.22) 12.82 -- 14.88 WANGER 5IT International Small Cap (02/02; 05/95) (26.88) 6.83 -- 14.21 5SP U.S. Smaller Companies (02/02; 05/95) 3.09 11.14 -- 16.89 (previously Wanger U.S. Small Cap) WELLS FARGO VT 5AA Asset Allocation Fund (02/02; 04/94)(t) (13.80) 7.99 -- 9.88 5WI International Equity Fund (02/02; 07/00) (22.21) -- -- (21.79) 5SG Small Cap Growth Fund (02/02; 05/95)(u) (29.83) (2.89) -- 3.94
53 (a) Current applicable charges deducted from performance include a $30 annual contract administrative charge, a 0.15% annual MAV fee, a 1.00% annual mortality and expense risk fee and applicable surrender charges. Premium taxes and purchase payment credits are not reflected in these total returns. (b) The subaccounts had not commenced operations as of Dec. 31, 2001 and, therefore, they have no performance. (c) (Commencement date of the subaccount; Commencement date of the fund) (d) Cumulative return (not annualized) since commencement date of the fund. (e) 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. (f) Because Class B shares were not offered until August 15, 2001, standardized Class A fund performance for prior periods represents historical results of Class A shares. For periods beginning August 15, 2001, Class B's results reflect an additional 12b-1 fee expense, which also affects future performance. (g) Because Class B shares were not offered until June 1, 1999, standardized Class A fund performance for prior periods represents historical results of Class A shares. For periods beginning June 1, 1999, Class B's results reflect an additional 12b-1 fee expense, which also affects future performance. (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) Initial offering of the Service Class 2 of each fund took place on Jan. 12, 2000. Returns prior to Jan. 12, 2000 through Nov. 3, 1997 are those of the Service Class, which reflect a 12b-1 fee of 0.10%. Service Class 2 returns prior to Nov. 3, 1997 are those of the Initial Class, which has no 12b-1 fee. If Service Class 2's 12b-1 fee of 0.25% had been reflected, returns prior to January 12, 2000 would have been lower. (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) 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. (p) 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. (q) The Trustees of the Putnam Variable Trust currently limit 12b-1 fee payments on Class IB shares to 0.25% of average net assets. (r) 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 0.25. Restated to reflect an increase in 12b-1 fees effective April 30, 2001. Actual 12b-1 fees during the most recent fiscal year were 0.22%. (s) 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. (t) Performance for periods prior to Sept. 20, 1999, reflects performance of the Life and Annuity Trust Asset Allocation Fund, its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust Funds were reorganized into the Wells Fargo Variable Trust Funds. (u) Performance for periods prior to Sept. 20, 1999, reflects performance of the Norwest Select Small Company Stock Fund (the accounting survivor of a merger of the Life and Annuity Trust Strategic Growth Fund and the Norwest Select Small Company Stock Fund), its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust and Norwest Select Funds were reorganized into the Wells Fargo Variable Trust Funds. 54 AVERAGE ANNUAL TOTAL RETURN(a) FOR QUALIFIED ANNUITIES UNDER RAVA SELECT (WITHOUT PURCHASE PAYMENT CREDITS) WITHOUT SURRENDER AND SELECTION OF MAV DEATH BENEFIT RIDER FOR PERIODS ENDING DEC. 31, 2001
PERFORMANCE OF THE FUND(b) SINCE SUBACCOUNT INVESTING IN: 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT AXP(R) VARIABLE PORTFOLIO BC5 Blue Chip Advantage Fund (02/02; 09/99)(c) (17.51%) --% --% (8.00%) BD5 Bond Fund (02/02; 10/81) 6.41 3.76 6.10 9.00 CR5 Capital Resource Fund (02/02; 10/81) (19.11) 3.98 5.59 10.77 CM5 Cash Management Fund (02/02; 10/81) 2.52 3.69 3.27 5.15 DE5 Diversified Equity Income Fund (02/02; 09/99) 0.94 -- -- 1.44 EM5 Emerging Markets Fund (02/02; 05/00) (2.58) -- -- (18.16) ES5 Equity Select Fund (02/02; 05/01) -- -- -- (1.88)(d) EI5 Extra Income Fund (02/02; 05/96) 3.74 0.66 -- 1.44 FI5 Federal Income Fund (02/02; 09/99) 5.13 -- -- 5.40 GB5 Global Bond Fund (02/02; 05/96) 0.16 1.14 -- 2.23 GR5 Growth Fund (02/02; 09/99) (31.82) -- -- (17.01) IE5 International Fund (02/02; 01/92) (29.58) (2.65) -- 2.64 MF5 Managed Fund (02/02; 04/86) (11.67) 5.54 7.55 8.92 ND5 NEW DIMENSIONS FUND(R)(02/02; 05/96) (17.72) 8.58 -- 9.49 SV5 Partners Small Cap Value Fund (02/02; 08/01) -- -- -- 6.46(d) IV5 S&P 500 Index Fund (02/02; 05/00) (13.52) -- -- (14.27) SC5 Small Cap Advantage Fund (02/02; 09/99) (7.65) -- -- 3.16 ST5 Stock Fund (02/02; 08/01) -- -- -- (3.65)(d) SA5 Strategy Aggressive Fund (02/02; 01/92) (33.76) 0.25 -- 5.43 AIM V.I. 5AC Capital Appreciation Fund, Series II (02/02; 05/93)(e) (24.29) 4.75 -- 10.44 5AD Capital Development Fund, Series II (02/02; 05/98)(e) (9.20) -- -- 3.83 ALLIANCE VP 5AB AllianceBernstein International Value Portfolio (Class B) (02/02; 05/01)(f) -- -- -- (2.12)(d) 5AL Growth and Income Portfolio (Class B) (02/02; 01/91)(g) (1.00) 13.21 13.51 12.48 AMERICAN CENTURY(R) VARIABLE PORTFOLIOS, INC. 5AI VP International, Class II (02/02; 05/94)(h) (30.06) 3.45 -- 4.41 5AV VP Value, Class II (02/02; 05/96)(h) 11.55 10.51 -- 11.32 CALVERT VARIABLE SERIES, INC. 5SR Social Balanced Portfolio (02/02; 09/86) (7.91) 5.92 7.53 8.05 EVERGREEN VA 5CG Capital Growth Fund, Class L Shares (02/02; 03/98)(i) (14.06) -- -- 3.30 FIDELITY VIP 5FG Growth & Income Portfolio (Service Class 2) (02/02; 12/96)(j) (10.10) 8.65 -- 8.65 5FM Mid Cap Portfolio (Service Class 2) (02/02; 12/98)(j) (4.66) -- -- 24.05 5FO Overseas Portfolio (Service Class 2) (02/02; 01/87)(j) (22.17) 1.43 4.61 4.86 55 PERFORMANCE OF THE FUND(b) SINCE SUBACCOUNT INVESTING IN: 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT FTVIPT 5RE Franklin Real Estate Fund Class 2 (02/02; 01/89)(k) 6.62% 4.71% 10.16% 8.94% 5SI Franklin Small Cap Value Securities Fund Class 2 (02/02; 05/98)(k) 12.47 -- -- 2.01 (previously FTVIPT Franklin Value Securities Fund -- Class 2) 5MS Mutual Shares Securities Fund Class 2 (02/02; 11/96)(k) 5.79 8.88 -- 9.09 GOLDMAN SACHS VIT 5UE CORE(SM) U.S. Equity Fund (02/02; 02/98)(l) (13.00) -- -- 2.08 5MC Mid Cap Value Fund (02/02; 05/98) 10.77 -- -- 5.17 INVESCO VIF 5ID Dynamics Fund (02/02; 08/97) (32.02) -- -- 4.52 5FS Financial Services Fund (02/02; 09/99) (10.97) -- -- 8.95 5TC Technology Fund (02/02; 05/97) (46.57) -- -- 8.69 5TL Telecommunications Fund (02/02; 09/99) (54.67) -- -- (23.51) JANUS ASPEN SERIES 5GT Global Technology Portfolio: Service Shares (02/02; 01/00)(m) (38.13) -- -- (37.10) 5IG International Growth Portfolio: Service Shares (02/02; 05/94)(m) (24.38) 8.61 -- 12.32 LAZARD RETIREMENT SERIES 5IP International Equity Portfolio (02/02; 09/98) (25.00) -- -- (3.11) MFS(R) 5MG Investors Growth Stock Series Service Class (02/02; 05/99)(n) (25.76) -- -- (1.70) 5MD New Discovery Series Service Class (02/02; 05/98)(n) (6.38) -- -- 13.18 5UT Utilities Series Service Class (02/02; 01/95)(n) (25.25) 9.25 -- 13.06 PIONEER VCT 5PE Pioneer Equity Income VCT Portfolio Class II Shares (02/02; 03/95)(o) (8.26) 10.8 -- 13.16 5EU Pioneer Europe VCT Portfolio Class II Shares (02/02; 10/98)(p) (24.80) -- -- (6.28) PUTNAM VARIABLE TRUST 5HS Putnam VT Health Sciences Fund Class IB Shares (02/02; 04/9 (20.74) -- -- 3.18 5PI Putnam VT International Growth Fund Class IB Shares (02/02; 01/97)(r) (21.59) -- -- 8.31 5VS Putnam VT Vista Fund Class IB Shares (02/02; 01/97)(r) (34.35) -- -- 6.23 STRONG FUNDS 5SO Strong Opportunity Fund II Advisor Class (02/02; 05/92)(s) (5.29) 12.82 -- 14.88 WANGER 5IT International Small Cap (02/02; 05/95) (22.13) 6.83 -- 14.21 5SP U.S. Smaller Companies (02/02; 05/95) 10.09 11.14 -- 16.89 (previously Wanger U.S. Small Cap) WELLS FARGO VT 5AA Asset Allocation Fund (02/02; 04/94)(t) (8.07) 7.99 -- 9.88 5WI International Equity Fund (02/02; 07/00) (17.11) -- -- (18.33) 5SG Small Cap Growth Fund (02/02; 05/95)(u) (25.30) (2.89) -- 3.94
56 (a) Current applicable charges deducted from performance include a $30 annual contract administrative charge, a 0.15% annual MAV fee and a 1.00% annual mortality and expense risk fee. Premium taxes and purchase payment credits are not reflected in these total returns. (b) The subaccounts had not commenced operations as of Dec. 31, 2001 and, therefore, they have no performance. (c) (Commencement date of the subaccount; Commencement date of the fund) (d) Cumulative return (not annualized) since commencement date of the fund. (e) 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. (f) Because Class B shares were not offered until August 15, 2001, standardized Class A fund performance for prior periods represents historical results of Class A shares. For periods beginning August 15, 2001, Class B's results reflect an additional 12b-1 fee expense, which also affects future performance. (g) Because Class B shares were not offered until June 1, 1999, standardized Class A fund performance for prior periods represents historical results of Class A shares. For periods beginning June 1, 1999, Class B's results reflect an additional 12b-1 fee expense, which also affects future performance. (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) Initial offering of the Service Class 2 of each fund took place on Jan. 12, 2000. Returns prior to Jan. 12, 2000 through Nov. 3, 1997 are those of the Service Class, which reflect a 12b-1 fee of 0.10%. Service Class 2 returns prior to Nov. 3, 1997 are those of the Initial Class, which has no 12b-1 fee. If Service Class 2's 12b-1 fee of 0.25% had been reflected, returns prior to January 12, 2000 would have been lower. (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) 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. (p) 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. (q) The Trustees of the Putnam Variable Trust currently limit 12b-1 fee payments on Class IB shares to 0.25% of average net assets. (r) 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 0.25. Restated to reflect an increase in 12b-1 fees effective April 30, 2001. Actual 12b-1 fees during the most recent fiscal year were 0.22%. (s) 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. (t) Performance for periods prior to Sept. 20, 1999, reflects performance of the Life and Annuity Trust Asset Allocation Fund, its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust Funds were reorganized into the Wells Fargo Variable Trust Funds. (u) Performance for periods prior to Sept. 20, 1999, reflects performance of the Norwest Select Small Company Stock Fund (the accounting survivor of a merger of the Life and Annuity Trust Strategic Growth Fund and the Norwest Select Small Company Stock Fund), its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust and Norwest Select Funds were reorganized into the Wells Fargo Variable Trust Funds. 57 AVERAGE ANNUAL TOTAL RETURN(A) FOR QUALIFIED ANNUITIES UNDER RAVA SELECT (WITHOUT PURCHASE PAYMENT CREDITS) WITH SURRENDER FOR PERIODS ENDING DEC. 31, 2001
PERFORMANCE OF THE FUND(b) SINCE SUBACCOUNT INVESTING IN: 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT AXP(R) VARIABLE PORTFOLIO BC5 Blue Chip Advantage Fund (02/02; 09/99)(c) (22.44%) --% --% (10.46%) BD5 Bond Fund (02/02; 10/81) (0.20) 3.91 6.25 9.15 CR5 Capital Resource Fund (02/02; 10/81) (23.93) 4.13 5.74 10.92 CM5 Cash Management Fund (02/02; 10/81) (3.82) 3.84 3.42 5.30 DE5 Diversified Equity Income Fund (02/02; 09/99) (5.29) -- -- (1.28) EM5 Emerging Markets Fund (02/02; 05/00) (8.56) -- -- (21.14) ES5 Equity Select Fund (02/02; 05/01) -- -- -- (7.91)(d) EI5 Extra Income Fund (02/02; 05/96) (2.68) 0.81 -- 1.59 FI5 Federal Income Fund (02/02; 09/99) (1.39) -- -- 2.66 GB5 Global Bond Fund (02/02; 05/96) (6.02) 1.29 -- 2.38 GR5 Growth Fund (02/02; 09/99) (35.76) -- -- (19.22) IE5 International Fund (02/02; 01/92) (33.67) (2.50) -- 2.79 MF5 Managed Fund (02/02; 04/86) (17.01) 5.69 7.70 9.07 ND5 NEW DIMENSIONS FUND(R)(02/02; 05/96) (22.64) 8.73 -- 9.64 SV5 Partners Small Cap Value Fund (02/02; 08/01) -- -- -- (0.15)(d) IV5 S&P 500 Index Fund (02/02; 05/00) (18.74) -- -- (17.37) SC5 Small Cap Advantage Fund (02/02; 09/99) (13.27) -- -- 0.37 ST5 Stock Fund (02/02; 08/01) -- -- -- (9.55)(d) SA5 Strategy Aggressive Fund (02/02; 01/92) (37.55) 0.40 -- 5.58 AIM V.I. 5AC Capital Appreciation Fund, Series II (02/02; 05/93)(e) (28.75) 4.90 -- 10.59 5AD Capital Development Fund, Series II (02/02; 05/98)(e) (14.72) -- -- 3.98 ALLIANCE VP 5AB AllianceBernstein International Value Portfolio (Class B) (02/02; 05/01)(f) -- -- -- (8.13)(d) 5AL Growth and Income Portfolio (Class B) (02/02; 01/91)(g) (7.10) 13.36 13.66 12.63 AMERICAN CENTURY(R) VARIABLE PORTFOLIOS, INC. 5AI VP International, Class II (02/02; 05/94)(h) (34.12) 3.60 -- 4.56 5AV VP Value, Class II (02/02; 05/96)(h) 4.70 10.66 -- 11.47 CALVERT VARIABLE SERIES, INC. 5SR Social Balanced Portfolio (02/02; 09/86) (13.52) 6.07 7.68 8.20 EVERGREEN VA 5CG Capital Growth Fund, Class L Shares (02/02; 03/98)(i) (19.24) -- -- 3.45 FIDELITY VIP 5FG Growth & Income Portfolio (Service Class 2) (02/02; 12/96)(j) (15.55) 8.80 -- 8.80 5FM Mid Cap Portfolio (Service Class 2) (02/02; 12/98)(j) (10.50) -- -- 24.20 5FO Overseas Portfolio (Service Class 2) (02/02; 01/87)(j) (26.78) 1.58 4.76 5.01 58 PERFORMANCE OF THE FUND(b) SINCE SUBACCOUNT INVESTING IN: 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT FTVIPT 5RE Franklin Real Estate Fund Class 2 (02/02; 01/89)(k) 0.00% 4.86% 10.31% 9.09% 5SI Franklin Small Cap Value Securities Fund Class 2 (02/02; 05/98)(k) 5.62 -- -- 2.16 (previously FTVIPT Franklin Value Securities Fund Class 2) 5MS Mutual Shares Securities Fund Class 2 (02/02; 11/96)(k) (0.77) 9.03 -- 9.24 GOLDMAN SACHS VIT 5UE CORE(SM) U.S. Equity Fund (02/02; 02/98)(l) (18.25) -- -- 2.23 5MC Mid Cap Value Fund (02/02; 05/98) 3.92 -- -- 5.32 INVESCO VIF 5ID Dynamics Fund (02/02; 08/97) (35.94) -- -- 4.67 5FS Financial Services Fund (02/02; 09/99) (16.36) -- -- 6.31 5TC Technology Fund (02/02; 05/97) (49.47) -- -- 8.84 5TL Telecommunications Fund (02/02; 09/99) (57.00) -- -- (25.56) JANUS ASPEN SERIES 5GT Global Technology Portfolio: Service Shares (02/02; 01/00)(m) (41.62) -- -- (38.83) 5IG International Growth Portfolio: Service Shares (02/02; 05/94)(m) (28.83) 8.76 -- 12.47 LAZARD RETIREMENT SERIES 5IP International Equity Portfolio (02/02; 09/98) (29.41) -- -- (2.96) MFS(R) 5MG Investors Growth Stock Series Service Class (02/02; 05/99)(n) (30.12) -- -- (3.88) 5MD New Discovery Series Service Class (02/02; 05/98)(n) (12.10) -- -- 13.33 5UT Utilities Series Service Class (02/02; 01/95)(n) (29.65) 9.40 -- 13.21 PIONEER VCT 5PE Pioneer Equity Income VCT Portfolio Class II Shares (02/02; 03/95)(o) (13.84) 10.97 -- 13.31 5EU Pioneer Europe VCT Portfolio Class II Shares (02/02; 10/98)(p) (29.22) -- -- (6.13) PUTNAM VARIABLE TRUST 5HS Putnam VT Health Sciences Fund Class IB Shares (02/02; 04/97)(r) (25.44) -- -- 3.33 5PI Putnam VT International Growth Fund Class IB Shares (02/02; 01/97)(r) (26.24) -- -- 8.46 5VS Putnam VT Vista Fund Class IB Shares (02/02; 01/97)(r) (38.11) -- -- 6.38 STRONG FUNDS 5SO Strong Opportunity Fund II Advisor Class (02/02; 05/92)(s) (11.08) 12.97 -- 15.03 WANGER 5IT International Small Cap (02/02; 05/95) (26.74) 6.98 -- 14.36 5SP U.S. Smaller Companies (02/02; 05/95) 3.24 11.29 -- 17.04 (previously Wanger U.S. Small Cap) WELLS FARGO VT 5AA Asset Allocation Fund (02/02; 04/94)(t) (13.66) 8.14 -- 10.03 5WI International Equity Fund (02/02; 07/00) (22.07) -- -- (21.64) 5SG Small Cap Growth Fund (02/02; 05/95)(u) (29.69) (2.74) -- 4.09
59 (a) Current applicable charges deducted from performance include a $30 annual contract administrative charge, a 1.00% annual mortality and expense risk fee and applicable surrender charges. Premium taxes and purchase payment credits are not reflected in these total returns. (b) The subaccounts had not commenced operations as of Dec. 31, 2001 and, therefore, they have no performance. (c) (Commencement date of the subaccount; Commencement date of the fund) (d) Cumulative return (not annualized) since commencement date of the fund. (e) 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. (f) Because Class B shares were not offered until August 15, 2001, standardized Class A fund performance for prior periods represents historical results of Class A shares. For periods beginning August 15, 2001, Class B's results reflect an additional 12b-1 fee expense, which also affects future performance. (g) Because Class B shares were not offered until June 1, 1999, standardized Class A fund performance for prior periods represents historical results of Class A shares. For periods beginning June 1, 1999, Class B's results reflect an additional 12b-1 fee expense, which also affects future performance. (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) Initial offering of the Service Class 2 of each fund took place on Jan. 12, 2000. Returns prior to Jan. 12, 2000 through Nov. 3, 1997 are those of the Service Class, which reflect a 12b-1 fee of 0.10%. Service Class 2 returns prior to Nov. 3, 1997 are those of the Initial Class, which has no 12b-1 fee. If Service Class 2's 12b-1 fee of 0.25% had been reflected, returns prior to January 12, 2000 would have been lower. (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) 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. (p) 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. (q) The Trustees of the Putnam Variable Trust currently limit 12b-1 fee payments on Class IB shares to 0.25% of average net assets. (r) 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 0.25. Restated to reflect an increase in 12b-1 fees effective April 30, 2001. Actual 12b-1 fees during the most recent fiscal year were 0.22%. (s) 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. (t) Performance for periods prior to Sept. 20, 1999, reflects performance of the Life and Annuity Trust Asset Allocation Fund, its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust Funds were reorganized into the Wells Fargo Variable Trust Funds. (u) Performance for periods prior to Sept. 20, 1999, reflects performance of the Norwest Select Small Company Stock Fund (the accounting survivor of a merger of the Life and Annuity Trust Strategic Growth Fund and the Norwest Select Small Company Stock Fund), its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust and Norwest Select Funds were reorganized into the Wells Fargo Variable Trust Funds. 60 AVERAGE ANNUAL TOTAL RETURN(a) FOR QUALIFIED ANNUITIES UNDER RAVA SELECT (WITHOUT PURCHASE PAYMENT CREDITS) WITHOUT SURRENDER FOR PERIODS ENDING DEC. 31, 2001
PERFORMANCE OF THE FUND(b) SINCE SUBACCOUNT INVESTING IN: 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT AXP(R) VARIABLE PORTFOLIO - BC5 Blue Chip Advantage Fund (02/02; 09/99)(c) (17.36%) --% --% (7.85%) BD5 Bond Fund (02/02; 10/81) 6.56 3.91 6.25 9.15 CR5 Capital Resource Fund (02/02; 10/81) (18.96) 4.13 5.74 10.92 CM5 Cash Management Fund (02/02; 10/81) 2.67 3.84 3.42 5.30 DE5 Diversified Equity Income Fund (02/02; 09/99) 1.09 -- -- 1.59 EM5 Emerging Markets Fund (02/02; 05/00) (2.43) -- -- (18.01) ES5 Equity Select Fund (02/02; 05/01) -- -- -- (1.73)(d) EI5 Extra Income Fund (02/02; 05/96) 3.89 0.81 -- 1.59 FI5 Federal Income Fund (02/02; 09/99) 5.28 -- -- 5.55 GB5 Global Bond Fund (02/02; 05/96) 0.31 1.29 -- 2.38 GR5 Growth Fund (02/02; 09/99) (31.67) -- -- (16.86) IE5 International Fund (02/02; 01/92) (29.43) (2.50) -- 2.79 MF5 Managed Fund (02/02; 04/86) (11.52) 5.69 7.70 9.07 ND5 NEW DIMENSIONS FUND(R)(02/02; 05/96) (17.57) 8.73 -- 9.64 SV5 Partners Small Cap Value Fund (02/02; 08/01) -- -- -- 6.61(d) IV5 S&P 500 Index Fund (02/02; 05/00) (13.37) -- -- (14.12) SC5 Small Cap Advantage Fund (02/02; 09/99) (7.50) -- -- 3.31 ST5 Stock Fund (02/02; 08/01) -- -- -- (3.50)(d) SA5 Strategy Aggressive Fund (02/02; 01/92) (33.61) 0.40 -- 5.58 AIM V.I. 5AC Capital Appreciation Fund, Series II (02/02; 05/93)(e) (24.14) 4.90 -- 10.59 5AD Capital Development Fund, Series II (02/02; 05/98)(e) (9.05) -- -- 3.98 ALLIANCE VP 5AB AllianceBernstein International Value Portfolio (Class B) (02/02; 05/01)(f) -- -- -- (1.97)(d) 5AL Growth and Income Portfolio (Class B) (02/02; 01/91)(g) (0.85) 13.36 13.66 12.63 AMERICAN CENTURY(R) VARIABLE PORTFOLIOS, INC. 5AI VP International, Class II (02/02; 05/94)(h) (29.91) 3.60 -- 4.56 5AV VP Value, Class II (02/02; 05/96)(h) 11.70 10.66 -- 11.47 CALVERT VARIABLE SERIES, INC. 5SR Social Balanced Portfolio (02/02; 09/86) (7.76) 6.07 7.68 8.20 EVERGREEN VA 5CG Capital Growth Fund, Class L Shares (02/02; 03/98)(i) (13.91) -- -- 3.45 FIDELITY VIP 5FG Growth & Income Portfolio (Service Class 2) (02/02; 12/96)(j) (9.95) 8.80 -- 8.80 5FM Mid Cap Portfolio (Service Class 2) (02/02; 12/98)(j) (4.51) -- -- 24.20 5FO Overseas Portfolio (Service Class 2) (02/02; 01/87)(j) (22.02) 1.58 4.76 5.01 61 PERFORMANCE OF THE FUND(b) SINCE SUBACCOUNT INVESTING IN: 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT FTVIPT 5RE Franklin Real Estate Fund - Class 2 (02/02; 01/89)(k) 6.77% 4.86% 10.31% 9.09% 5SI Franklin Small Cap Value Securities Fund - Class 2 (02/02; 05/98)(k) 12.62 -- -- 2.16 (previously FTVIPT Franklin Value Securities Fund - Class 2) 5MS Mutual Shares Securities Fund - Class 2 (02/02; 11/96)(k) 5.94 9.03 -- 9.24 GOLDMAN SACHS VIT 5UE CORE-SM- U.S. Equity Fund (02/02; 02/98)(l) (12.85) -- -- 2.23 5MC Mid Cap Value Fund (02/02; 05/98) 10.92 -- -- 5.32 INVESCO VIF 5ID Dynamics Fund (02/02; 08/97) (31.87) -- -- 4.67 5FS Financial Services Fund (02/02; 09/99) (10.82) -- -- 9.10 5TC Technology Fund (02/02; 05/97) (46.42) -- -- 8.84 5TL Telecommunications Fund (02/02; 09/99) (54.52) -- -- (23.36) JANUS ASPEN SERIES 5GT Global Technology Portfolio: Service Shares (02/02; 01/00)(m) (37.98) -- -- (36.95) 5IG International Growth Portfolio: Service Shares (02/02; 05/94)(m) (24.23) 8.76 -- 12.47 LAZARD RETIREMENT SERIES 5IP International Equity Portfolio (02/02; 09/98) (24.85) -- -- (2.96) MFS(R) 5MG Investors Growth Stock Series - Service Class (02/02; 05/99)(n) (25.61) -- -- (1.55) 5MD New Discovery Series - Service Class (02/02; 05/98)(n) (6.23) -- -- 13.33 5UT Utilities Series - Service Class (02/02; 01/95)(n) (25.10) 9.40 -- 13.21 PIONEER VCT 5PE Pioneer Equity Income VCT Portfolio - Class II Shares (02/02; 03/95)(o) (8.11) 10.97 -- 13.31 5EU Pioneer Europe VCT Portfolio - Class II Shares (02/02; 10/98)(p) (24.65) -- -- (6.13) PUTNAM VARIABLE TRUST 5HS Putnam VT Health Sciences Fund - Class IB Shares (02/02; 04/98)(q) (20.59) -- -- 3.33 5PI Putnam VT International Growth Fund - Class IB Shares (02/02; 01/97)(r) (21.44) -- -- 8.46 5VS Putnam VT Vista Fund - Class IB Shares (02/02; 01/97)(r) (34.20) -- -- 6.38 STRONG FUNDS 5SO Strong Opportunity Fund II - Advisor Class (02/02; 05/92)(s) (5.14) 12.97 -- 15.03 WANGER 5IT International Small Cap (02/02; 05/95) (21.98) 6.98 -- 14.36 5SP U.S. Smaller Companies (02/02; 05/95) 10.24 11.29 -- 17.04 (previously Wanger U.S. Small Cap) WELLS FARGO VT 5AA Asset Allocation Fund (02/02; 04/94)(t) (7.92) 8.14 -- 10.03 5WI International Equity Fund (02/02; 07/00) (16.96) -- -- (18.18) 5SG Small Cap Growth Fund (02/02; 05/95)(u) (25.15) (2.74) -- 4.09
62 (a) Current applicable charges deducted from performance include a $30 annual contract administrative charge and a 1.00% annual mortality and expense risk fee. Premium taxes and purchase payment credits are not reflected in these total returns. (b) The subaccounts had not commenced operations as of Dec. 31, 2001 and, therefore, they have no performance. (c) (Commencement date of the subaccount; Commencement date of the fund) (d) Cumulative return (not annualized) since commencement date of the fund. (e) 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. (f) Because Class B shares were not offered until August 15, 2001, standardized Class A fund performance for prior periods represents historical results of Class A shares. For periods beginning August 15, 2001, Class B's results reflect an additional 12b-1 fee expense, which also affects future performance. (g) Because Class B shares were not offered until June 1, 1999, standardized Class A fund performance for prior periods represents historical results of Class A shares. For periods beginning June 1, 1999, Class B's results reflect an additional 12b-1 fee expense, which also affects future performance. (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) Initial offering of the Service Class 2 of each fund took place on Jan. 12, 2000. Returns prior to Jan. 12, 2000 through Nov. 3, 1997 are those of the Service Class, which reflect a 12b-1 fee of 0.10%. Service Class 2 returns prior to Nov. 3, 1997 are those of the Initial Class, which has no 12b-1 fee. If Service Class 2's 12b-1 fee of 0.25% had been reflected, returns prior to January 12, 2000 would have been lower. (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) 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. (p) 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. (q) The Trustees of the Putnam Variable Trust currently limit 12b-1 fee payments on Class IB shares to 0.25% of average net assets. (r) 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 0.25. Restated to reflect an increase in 12b-1 fees effective April 30, 2001. Actual 12b-1 fees during the most recent fiscal year were 0.22%. (s) 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. (t) Performance for periods prior to Sept. 20, 1999, reflects performance of the Life and Annuity Trust Asset Allocation Fund, its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust Funds were reorganized into the Wells Fargo Variable Trust Funds. (u) Performance for periods prior to Sept. 20, 1999, reflects performance of the Norwest Select Small Company Stock Fund (the accounting survivor of a merger of the Life and Annuity Trust Strategic Growth Fund and the Norwest Select Small Company Stock Fund), its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust and Norwest Select Funds were reorganized into the Wells Fargo Variable Trust Funds. 63 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 the following charges: the contract administrative charge, the Maximum Anniversary Value Death Benefit Rider fee, the Enhanced Earnings Death Benefit Rider fee, the Enhanced Earnings Plus Death Benefit Rider fee and mortality and expense risk fee. We also show return figures without deduction of the Maximum Anniversary Value Death Benefit Rider fee, the Enhanced Earnings Death Benefit Value Rider fee and the Enhanced Earnings Plus Death Benefit Rider fee. ANNUALIZED 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: - any declared dividends, - the value of any shares purchased with dividends paid during the period, and - any dividends declared for such shares. It does not include: - the effect of any applicable surrender charge, or - 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 YIELD FOR RAVA ADVANTAGE BASED ON THE SEVEN-DAY PERIOD ENDING DEC. 31, 2001
SUBACCOUNT INVESTING IN: SIMPLE YIELD COMPOUND YIELD CM1 AXP(R)Variable Portfolio - Cash Management Fund 0.66% 0.66% CM2 AXP(R)Variable Portfolio - Cash Management Fund 0.83 0.83
64 ANNUALIZED YIELD FOR A SUBACCOUNT INVESTING IN AN INCOME FUND 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. ANNUALIZED YIELD FOR RAVA ADVANTAGE BASED ON THE 30-DAY PERIOD ENDED DEC. 31, 2001
SUBACCOUNT INVESTING IN: YIELD BD1 AXP(R) Variable Portfolio - Bond Fund 5.68% BD2 AXP(R) Variable Portfolio - Bond Fund 5.70 EI1 AXP(R) Variable Portfolio - Extra Income Fund 11.09 EI2 AXP(R) Variable Portfolio - Extra Income Fund 11.12 FI1 AXP(R) Variable Portfolio - Federal Income Fund 5.72 FI2 AXP(R) Variable Portfolio - Federal Income Fund 5.68 GB1 AXP(R) Variable Portfolio - Global Bond Fund 9.81 GB2 AXP(R) Variable Portfolio - Global Bond Fund 9.79
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. 65 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: - determine the dollar value of your contract on the valuation date and then deduct any applicable premium tax; then - 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: - the annuity unit value on the valuation date; by - 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: - the net investment factor; and - 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: - 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 - dividing that sum by the previous adjusted net asset value per share; and - 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: - take the value of your fixed account at the retirement date or the date you selected to begin receiving your annuity payouts; then - 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. 66 RATING AGENCIES We receive ratings from 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. For detailed information on the agency ratings given to IDS Life, refer to the American Express Web site at americanexpress.com/advisors or contact your financial advisor. Or view our current ratings by visiting the agency Web sites directly at: A.M. Best www.ambest.com Fitch (formerly Duff and Phelps) www.fitchratings.com Moody's www.moodys.com/insurance A.M. Best -- Rates insurance companies for their financial strength. Fitch -- Rates insurance companies for their claims-paying ability. Moody's -- Rates insurance companies for their financial strength. PRINCIPAL UNDERWRITER IDS Life serves as principal underwriter for the contract, which it offers on a continuous basis. IDS Life is registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934 as a broker-dealer and is a member of the National Association of Securities Dealers, Inc. IDS Life is ultimately controlled by American Express Company. IDS Life currently pays underwriting commissions for its role as principal underwriter of all variable annuities associated with this variable account. For the past three years, the aggregate dollar amount of underwriting commissions paid in its role as principal underwriter for the variable account has been: 2001: $41,792,624; 2000: $56,851,815; and 1999: $21,517,281. IDS Life retains no underwriting commission from the sale of the contract. INDEPENDENT AUDITORS The financial statements appearing in this SAI have been audited by Ernst &Young LLP (1400 Pillsbury Center, 220 South Sixth Street, Minneapolis, MN 55402) independent auditors, as stated in their report appearing herein. 67 REPORT OF INDEPENDENT AUDITORS THE BOARD OF DIRECTORS IDS LIFE INSURANCE COMPANY We have audited the accompanying individual statements of assets and liabilities of the segregated asset subaccounts of IDS Life Variable Account 10 -- American Express Retirement Advisor Advantage(SM) Variable Annuity (comprised of subaccounts BC1, BC2, BD1, BD2, CR1, CR2, CM1, CM2, DE1, DE2, EM1, EM2, ES1, ES2, EI1, EI2, FI1, FI2, GB1, GB2, GR1, GR2, IE1, IE2, MF1, MF2, ND1, ND2, SV1, SV2, IV1, IV2, SC1, SC2, ST1, ST2, SA1, SA2, 1AC, 2AC, 1AD, 2AD, 1AB, 2AB, 1AL, 2AL, 1AI, 2AI, 1AV, 2AV, 1SR, 2SR, 1CG, 2CG, 1FG, 2FG, 1FM, 2FM, 1FO, 2FO, 1RE, 2RE, 1SI, 2SI, 1MS, 2MS, 1UE, 2UE, 1MC, 2MC, 1ID, 2ID, 1FS, 2FS, 1TC, 2TC, 1TL, 2TL, 1GT, 2GT, 1IG, 2IG, 1IP, 2IP, 1MG, 2MG, 1MD, 2MD, 1UT, 2UT, 1PE, 2PE, 1EU, 2EU, 1HS, 2HS, 1PI, 2PI, 1VS, 2VS, 1SO, 2SO, 1IT, 2IT, 1SP, 2SP,1AA, 2AA, 1WI, 2WI, 1SG and 2SG) as of December 31, 2001, 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, 2001 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(SM) Variable Annuity at December 31, 2001, 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 22, 2002 68 STATEMENTS OF ASSETS AND LIABILITIES
SEGREGATED ASSET SUBACCOUNTS ---------------------------------------------------------------------------------------- DECEMBER 31, 2001 BC1 BC2 BD1 BD2 CR1 CR2 ASSETS Investments in shares of mutual funds and portfolios: at cost $ 51,712,882 $ 42,380,833 $119,640,679 $ 95,301,277 $ 29,069,661 $ 29,328,288 ---------------------------------------------------------------------------------------- at market value $ 40,781,852 $ 33,783,781 $119,883,329 $ 95,430,437 $ 20,382,565 $ 20,250,827 Dividends receivable -- -- 554,670 438,531 -- -- Accounts receivable from IDS Life for contract purchase payments -- 815 493,198 101,163 7,999 5,830 Receivable from mutual funds and portfolios for share redemptions -- -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------------ Total assets 40,781,852 33,784,596 120,931,197 95,970,131 20,390,564 20,256,657 ==================================================================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 32,827 21,476 96,034 59,932 16,540 12,818 Contract terminations 1,095 -- -- -- -- -- Payable to mutual funds and portfolios for investments purchased -- -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 33,922 21,476 96,034 59,932 16,540 12,818 ------------------------------------------------------------------------------------------------------------------------------------ Net assets applicable to contracts in accumulation period 40,635,657 33,613,030 120,576,095 95,271,576 20,251,907 20,002,759 Net assets applicable to contracts in payment period 112,273 150,090 259,068 638,623 122,117 241,080 ==================================================================================================================================== Total net assets $ 40,747,930 $ 33,763,120 $120,835,163 $ 95,910,199 $ 20,374,024 $ 20,243,839 ==================================================================================================================================== Accumulation units outstanding 49,897,109 41,082,633 106,759,873 83,968,345 26,778,956 26,326,833 ==================================================================================================================================== Net asset value per accumulation unit $ 0.81 $ 0.82 $ 1.13 $ 1.13 $ 0.76 $ 0.76 ====================================================================================================================================
See accompanying notes to financial statements. 69
SEGREGATED ASSET SUBACCOUNTS ---------------------------------------------------------------------------------------- DECEMBER 31, 2001 (CONTINUED) CM1 CM2 DE1 DE2 EM1 EM2 ASSETS Investments in shares of mutual funds and portfolios: at cost $287,243,453 $266,241,664 $ 41,405,512 $ 44,105,970 $ 1,156,628 $ 1,397,705 ---------------------------------------------------------------------------------------- at market value $287,213,633 $266,220,564 $ 42,020,724 $ 44,767,626 $ 1,106,334 $ 1,291,337 Dividends receivable 429,903 402,299 -- -- -- -- Accounts receivable from IDS Life for contract purchase payments 2,316,455 608,322 193,243 74,277 2,941 506 Receivable from mutual funds and portfolios for share redemptions -- -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------------ Total assets 289,959,991 267,231,185 42,213,967 44,841,903 1,109,275 1,291,843 ==================================================================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 230,715 170,470 32,977 27,680 874 811 Contract terminations -- -- -- -- -- -- Payable to mutual funds and portfolios for investments purchased -- -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 230,715 170,470 32,977 27,680 874 811 ------------------------------------------------------------------------------------------------------------------------------------ Net assets applicable to contracts in accumulation period 289,076,487 266,792,790 42,124,684 44,399,283 1,108,401 1,291,032 Net assets applicable to contracts in payment period 652,789 267,925 56,306 414,940 -- -- ==================================================================================================================================== Total net assets $289,729,276 $267,060,715 $ 42,180,990 $ 44,814,223 $ 1,108,401 $ 1,291,032 ==================================================================================================================================== Accumulation units outstanding 265,455,463 243,869,987 41,299,277 43,328,168 1,541,506 1,789,442 ==================================================================================================================================== Net asset value per accumulation unit $ 1.09 $ 1.09 $ 1.02 $ 1.02 $ 0.72 $ 0.72 ====================================================================================================================================
See accompanying notes to financial statements. 70
SEGREGATED ASSET SUBACCOUNTS ---------------------------------------------------------------------------------------- DECEMBER 31, 2001 (CONTINUED) ES1 ES2 EI1 EI2 FI1 FI2 ASSETS Investments in shares of mutual funds and portfolios: at cost $ 2,064,313 $ 2,307,874 $ 94,997,466 $ 62,094,057 $ 63,806,682 $ 56,635,681 ---------------------------------------------------------------------------------------- at market value $ 2,209,551 $ 2,473,989 $ 83,448,589 $ 54,961,666 $ 64,725,633 $ 57,202,596 Dividends receivable -- -- 745,664 493,147 301,175 265,220 Accounts receivable from IDS Life for contract purchase payments 16,536 4,000 -- 65,827 -- 520,532 Receivable from mutual funds and portfolios for share redemptions -- -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------------ Total assets 2,226,087 2,477,989 84,194,253 55,520,640 65,026,808 57,988,348 ==================================================================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 1,656 1,428 66,749 34,857 52,153 36,263 Contract terminations -- -- 110,756 -- 148,256 -- Payable to mutual funds and portfolios for investments purchased -- -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 1,656 1,428 177,505 34,857 200,409 36,263 ------------------------------------------------------------------------------------------------------------------------------------ Net assets applicable to contracts in accumulation period 2,224,431 2,476,561 83,871,968 55,368,288 64,646,155 57,583,266 Net assets applicable to contracts in payment period -- -- 144,780 117,495 180,244 368,819 ==================================================================================================================================== Total net assets $ 2,224,431 $ 2,476,561 $ 84,016,748 $ 55,485,783 $ 64,826,399 $ 57,952,085 ==================================================================================================================================== Accumulation units outstanding 2,238,352 2,488,770 88,813,366 58,348,189 56,965,798 50,509,732 ==================================================================================================================================== Net asset value per accumulation unit $ 0.99 $ 1.00 $ 0.94 $ 0.95 $ 1.13 $ 1.14 ====================================================================================================================================
See accompanying notes to financial statements. 71
SEGREGATED ASSET SUBACCOUNTS ---------------------------------------------------------------------------------------- DECEMBER 31, 2001 (CONTINUED) GB1 GB2 GR1 GR2 IE1 IE2 ASSETS Investments in shares of mutual funds and portfolios: at cost $ 24,366,512 $ 16,925,641 $143,524,031 $138,142,853 $ 19,947,944 $ 18,457,675 ---------------------------------------------------------------------------------------- at market value $ 24,402,941 $ 16,942,628 $ 84,467,319 $ 83,907,072 $ 12,566,903 $ 10,654,939 Dividends receivable 194,445 134,224 -- -- -- -- Accounts receivable from IDS Life for contract purchase payments 41,592 33,156 36,007 65,898 -- 4,994 Receivable from mutual funds and portfolios for share redemptions -- -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------------ Total assets 24,638,978 17,110,008 84,503,326 83,972,970 12,566,903 10,659,933 ==================================================================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 19,563 10,673 67,985 53,115 10,130 6,733 Contract terminations -- -- -- -- 6,237 -- Payable to mutual funds and portfolios for investments purchased -- -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 19,563 10,673 67,985 53,115 16,367 6,733 ------------------------------------------------------------------------------------------------------------------------------------ Net assets applicable to contracts in accumulation period 24,619,415 17,099,335 84,330,906 83,696,603 12,477,568 10,625,560 Net assets applicable to contracts in payment period -- -- 104,435 223,252 72,968 27,640 ==================================================================================================================================== Total net assets $ 24,619,415 $ 17,099,335 $ 84,435,341 $ 83,919,855 $ 12,550,536 $ 10,653,200 ==================================================================================================================================== Accumulation units outstanding 23,970,170 16,572,087 130,763,635 129,185,546 18,664,324 15,821,074 ==================================================================================================================================== Net asset value per accumulation unit $ 1.03 $ 1.03 $ 0.64 $ 0.65 $ 0.67 $ 0.67 ====================================================================================================================================
See accompanying notes to financial statements. 72
SEGREGATED ASSET SUBACCOUNTS ---------------------------------------------------------------------------------------- DECEMBER 31, 2001 (CONTINUED) MF1 MF2 ND1 ND2 SV1 SV2 ASSETS Investments in shares of mutual funds and portfolios: at cost $ 60,292,437 $ 43,249,885 $356,139,473 $313,080,767 $ 5,979,425 $ 6,606,855 ---------------------------------------------------------------------------------------- at market value $ 49,957,880 $ 35,998,816 $272,960,324 $245,919,901 $ 6,615,755 $ 7,325,948 Dividends receivable -- -- -- -- -- -- Accounts receivable from IDS Life for contract purchase payments 7,470 21,008 139,340 342,906 151,707 58,511 Receivable from mutual funds and portfolios for share redemptions -- -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------------ Total assets 49,965,350 36,019,824 273,099,664 246,262,807 6,767,462 7,384,459 ==================================================================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 40,181 22,756 218,157 154,416 4,634 4,048 Contract terminations -- -- -- -- -- -- Payable to mutual funds and portfolios for investments purchased -- -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 40,181 22,756 218,157 154,416 4,634 4,048 ------------------------------------------------------------------------------------------------------------------------------------ Net assets applicable to contracts in accumulation period 49,466,612 35,351,244 271,620,420 245,113,267 6,762,828 7,380,411 Net assets applicable to contracts in payment period 458,557 645,824 1,261,087 995,124 -- -- ==================================================================================================================================== Total net assets $ 49,925,169 $ 35,997,068 $272,881,507 $246,108,391 $ 6,762,828 $ 7,380,411 ==================================================================================================================================== Accumulation units outstanding 53,096,445 37,760,282 307,319,932 276,053,946 6,314,047 6,885,287 ==================================================================================================================================== Net asset value per accumulation unit $ 0.93 $ 0.94 $ 0.88 $ 0.89 $ 1.07 $ 1.07 ====================================================================================================================================
See accompanying notes to financial statements. 73
SEGREGATED ASSET SUBACCOUNTS ---------------------------------------------------------------------------------------- DECEMBER 31, 2001 (CONTINUED) IV1 IV2 SC1 SC2 ST1 ST2 ASSETS Investments in shares of mutual funds and portfolios: at cost $ 35,318,036 $ 30,720,504 $ 27,372,382 $ 25,644,608 $ 478,915 $ 593,160 ---------------------------------------------------------------------------------------- at market value $ 31,838,244 $ 28,188,801 $ 26,178,664 $ 24,598,807 $ 496,850 $ 606,211 Dividends receivable -- -- -- -- -- -- Accounts receivable from IDS Life for contract purchase payments 199,065 157,436 -- 10,422 2,624 468 Receivable from mutual funds and portfolios for share redemptions -- -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------------ Total assets 32,037,309 28,346,237 26,178,664 24,609,229 499,474 606,679 ==================================================================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 24,967 17,498 20,933 15,505 353 324 Contract terminations -- -- 248 -- -- -- Payable to mutual funds and portfolios for investments purchased -- -- -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 24,967 17,498 21,181 15,505 353 324 ------------------------------------------------------------------------------------------------------------------------------------ Net assets applicable to contracts in accumulation period 31,867,060 28,328,739 26,144,365 24,588,882 499,121 606,355 Net assets applicable to contracts in payment period 145,282 -- 13,118 4,842 -- -- ==================================================================================================================================== Total net assets $ 32,012,342 $ 28,328,739 $ 26,157,483 $ 24,593,724 $ 499,121 $ 606,355 ==================================================================================================================================== Accumulation units outstanding 40,574,978 35,957,387 24,346,498 22,792,239 517,488 628,289 ==================================================================================================================================== Net asset value per accumulation unit $ 0.79 $ 0.79 $ 1.07 $ 1.08 $ 0.96 $ 0.97 ====================================================================================================================================
See accompanying notes to financial statements. 74
SEGREGATED ASSET SUBACCOUNTS ---------------------------------------------------------------------------------------- DECEMBER 31, 2001 (CONTINUED) SA1 SA2 1AC 2AC 1AD 2AD ASSETS Investments in shares of mutual funds and portfolios: at cost $114,824,545 $ 98,709,563 $ 1,670,776 $ 1,691,550 $ 1,116,271 $ 1,332,997 ---------------------------------------------------------------------------------------- at market value $ 53,077,901 $ 47,772,232 $ 1,669,759 $ 1,669,796 $ 1,201,714 $ 1,433,282 Dividends receivable -- -- -- -- -- -- Accounts receivable from IDS Life for contract purchase payments 9,685 22,576 24,305 8,249 24,029 2,858 Receivable from mutual funds and portfolios for share redemptions -- -- 1,179 882 857 806 ------------------------------------------------------------------------------------------------------------------------------------ Total assets 53,087,586 47,794,808 1,695,243 1,678,927 1,226,600 1,436,946 ==================================================================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 42,782 30,224 1,179 882 857 806 Contract terminations -- -- -- -- -- -- Payable to mutual funds and portfolios for investments purchased -- -- 24,305 8,249 24,029 2,858 ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 42,782 30,224 25,484 9,131 24,886 3,664 ------------------------------------------------------------------------------------------------------------------------------------ Net assets applicable to contracts in accumulation period 52,913,871 47,624,819 1,669,759 1,669,796 1,201,714 1,433,282 Net assets applicable to contracts in payment period 130,933 139,765 -- -- -- -- ==================================================================================================================================== Total net assets $ 53,044,804 $ 47,764,584 $ 1,669,759 $ 1,669,796 $ 1,201,714 $ 1,433,282 ==================================================================================================================================== Accumulation units outstanding 65,574,383 58,747,770 1,711,418 1,710,005 1,224,392 1,459,193 ==================================================================================================================================== Net asset value per accumulation unit $ 0.81 $ 0.81 $ 0.98 $ 0.98 $ 0.98 $ 0.98 ====================================================================================================================================
See accompanying notes to financial statements. 75
SEGREGATED ASSET SUBACCOUNTS ---------------------------------------------------------------------------------------- DECEMBER 31, 2001 (CONTINUED) 1AB 2AB 1AL 2AL 1AI 2AI ASSETS Investments in shares of mutual funds and portfolios: at cost $ 735,118 $ 754,189 $ 4,095,016 $ 5,215,820 $ 1,776,574 $ 1,796,754 ---------------------------------------------------------------------------------------- at market value $ 771,212 $ 786,589 $ 4,225,204 $ 5,365,775 $ 1,796,795 $ 1,817,484 Dividends receivable -- -- -- -- -- -- Accounts receivable from IDS Life for contract purchase payments 1,180 52,360 81,840 62,215 32,003 3,826 Receivable from mutual funds and portfolios for share redemptions 509 395 2,859 2,756 1,278 1,008 ------------------------------------------------------------------------------------------------------------------------------------ Total assets 772,901 839,344 4,309,903 5,430,746 1,830,076 1,822,318 ==================================================================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 509 395 2,859 2,756 1,278 1,008 Contract terminations -- -- -- -- -- -- Payable to mutual funds and portfolios for investments purchased 1,180 52,360 81,840 62,215 32,003 3,826 ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 1,689 52,755 84,699 64,971 33,281 4,834 ------------------------------------------------------------------------------------------------------------------------------------ Net assets applicable to contracts in accumulation period 771,212 786,589 4,205,611 5,353,886 1,794,144 1,817,484 Net assets applicable to contracts in payment period -- -- 19,593 11,889 2,651 -- ==================================================================================================================================== Total net assets $ 771,212 $ 786,589 $ 4,225,204 $ 5,365,775 $ 1,796,795 $ 1,817,484 ==================================================================================================================================== Accumulation units outstanding 790,198 804,909 4,363,102 5,550,035 1,926,552 1,950,094 ==================================================================================================================================== Net asset value per accumulation unit $ 0.98 $ 0.98 $ 0.96 $ 0.96 $ 0.93 $ 0.93 ====================================================================================================================================
See accompanying notes to financial statements. 76
SEGREGATED ASSET SUBACCOUNTS ---------------------------------------------------------------------------------------- DECEMBER 31, 2001 (CONTINUED) 1AV 2AV 1SR 2SR 1CG 2CG ASSETS Investments in shares of mutual funds and portfolios: at cost $ 7,269,424 $ 7,124,635 $ 6,022,179 $ 4,466,224 $ 939,408 $ 1,470,791 ---------------------------------------------------------------------------------------- at market value $ 7,740,301 $ 7,631,737 $ 5,403,539 $ 3,996,635 $ 964,458 $ 1,492,882 Dividends receivable -- -- -- -- -- -- Accounts receivable from IDS Life for contract purchase payments 97,202 72,852 11,155 4,509 31,237 11,189 Receivable from mutual funds and portfolios for share redemptions 5,462 4,275 4,314 2,477 662 800 ------------------------------------------------------------------------------------------------------------------------------------ Total assets 7,842,965 7,708,864 5,419,008 4,003,621 996,357 1,504,871 ==================================================================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 5,462 4,275 4,314 2,477 662 800 Contract terminations -- -- -- -- -- -- Payable to mutual funds and portfolios for investments purchased 97,202 72,852 11,155 4,509 31,237 11,189 ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 102,664 77,127 15,469 6,986 31,899 11,989 ------------------------------------------------------------------------------------------------------------------------------------ Net assets applicable to contracts in accumulation period 7,555,042 7,621,330 5,403,539 3,996,635 964,458 1,492,882 Net assets applicable to contracts in payment period 185,259 10,407 -- -- -- -- ==================================================================================================================================== Total net assets $ 7,740,301 $ 7,631,737 $ 5,403,539 $ 3,996,635 $ 964,458 $ 1,492,882 ==================================================================================================================================== Accumulation units outstanding 7,297,887 7,356,170 6,090,449 4,489,864 1,014,962 1,569,856 ==================================================================================================================================== Net asset value per accumulation unit $ 1.04 $ 1.04 $ 0.89 $ 0.89 $ 0.95 $ 0.95 ====================================================================================================================================
See accompanying notes to financial statements. 77
SEGREGATED ASSET SUBACCOUNTS ---------------------------------------------------------------------------------------- DECEMBER 31, 2001 (CONTINUED) 1FG 2FG 1FM 2FM 1FO 2FO ASSETS Investments in shares of mutual funds and portfolios: at cost $ 8,040,053 $ 6,128,895 $ 6,594,332 $ 6,894,504 $ 2,007,369 $ 1,983,435 ---------------------------------------------------------------------------------------- at market value $ 8,322,960 $ 6,353,602 $ 6,949,500 $ 7,245,643 $ 2,036,350 $ 2,028,833 Dividends receivable -- -- -- -- -- -- Accounts receivable from IDS Life for contract purchase payments 132,588 45,083 67,380 75,967 25,891 16,987 Receivable from mutual funds and portfolios for share redemptions 5,876 3,464 4,904 3,953 1,428 1,125 ------------------------------------------------------------------------------------------------------------------------------------ Total assets 8,461,424 6,402,149 7,021,784 7,325,563 2,063,669 2,046,945 ==================================================================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 5,876 3,464 4,904 3,953 1,428 1,125 Contract terminations -- -- -- -- -- -- Payable to mutual funds and portfolios for investments purchased 132,588 45,083 67,380 75,967 25,891 16,987 ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 138,464 48,547 72,284 79,920 27,319 18,112 ------------------------------------------------------------------------------------------------------------------------------------ Net assets applicable to contracts in accumulation period 8,159,382 6,353,602 6,949,500 7,177,856 2,036,350 2,028,833 Net assets applicable to contracts in payment period 163,578 -- -- 67,787 -- -- ==================================================================================================================================== Total net assets $ 8,322,960 $ 6,353,602 $ 6,949,500 $ 7,245,643 $ 2,036,350 $ 2,028,833 ==================================================================================================================================== Accumulation units outstanding 8,177,315 6,362,646 6,689,131 6,903,484 2,156,704 2,146,868 ==================================================================================================================================== Net asset value per accumulation unit $ 1.00 $ 1.00 $ 1.04 $ 1.04 $ 0.94 $ 0.95 ====================================================================================================================================
See accompanying notes to financial statements. 78
SEGREGATED ASSET SUBACCOUNTS ---------------------------------------------------------------------------------------- DECEMBER 31, 2001 (CONTINUED) 1RE 2RE 1SI 2SI 1MS 2MS ASSETS Investments in shares of mutual funds and portfolios: at cost $ 24,877,313 $ 31,061,372 $ 11,564,627 $ 13,199,978 $ 1,040,871 $ 878,534 ---------------------------------------------------------------------------------------- at market value $ 26,463,745 $ 32,992,245 $ 12,869,436 $ 14,607,898 $ 1,074,799 $ 909,798 Dividends receivable -- -- -- -- -- -- Accounts receivable from IDS Life for contract purchase payments 28,669 75,529 31,093 59,417 33,957 817 Receivable from mutual funds and portfolios for share redemptions 20,756 20,246 10,088 8,938 704 498 ------------------------------------------------------------------------------------------------------------------------------------ Total assets 26,513,170 33,088,020 12,910,617 14,676,253 1,109,460 911,113 ==================================================================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 20,756 20,246 10,088 8,938 704 498 Contract terminations -- -- -- -- -- -- Payable to mutual funds and portfolios for investments purchased 28,669 75,529 31,093 59,417 33,957 817 ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 49,425 95,775 41,181 68,355 34,661 1,315 ------------------------------------------------------------------------------------------------------------------------------------ Net assets applicable to contracts in accumulation period 26,422,937 32,809,529 12,865,426 14,565,877 1,074,799 909,798 Net assets applicable to contracts in payment period 40,808 182,716 4,010 42,021 -- -- ==================================================================================================================================== Total net assets $ 26,463,745 $ 32,992,245 $ 12,869,436 $ 14,607,898 $ 1,074,799 $ 909,798 ==================================================================================================================================== Accumulation units outstanding 19,803,454 24,476,850 9,583,606 10,800,259 1,114,064 942,403 ==================================================================================================================================== Net asset value per accumulation unit $ 1.33 $ 1.34 $ 1.34 $ 1.35 $ 0.96 $ 0.97 ====================================================================================================================================
See accompanying notes to financial statements. 79
SEGREGATED ASSET SUBACCOUNTS ---------------------------------------------------------------------------------------- DECEMBER 31, 2001 (CONTINUED) 1UE 2UE 1MC 2MC 1ID 2ID ASSETS Investments in shares of mutual funds and portfolios: at cost $ 73,400,041 $ 61,773,879 $ 30,860,705 $ 30,232,493 $ 1,256,406 $ 1,400,520 ---------------------------------------------------------------------------------------- at market value $ 61,360,603 $ 52,274,999 $ 33,835,944 $ 32,636,756 $ 1,368,953 $ 1,502,622 Dividends receivable -- -- -- -- -- -- Accounts receivable from IDS Life for contract purchase payments -- 67,150 115,507 62,837 6,636 8,202 Receivable from mutual funds and portfolios for share redemptions 148,136 32,680 26,237 20,096 958 761 ------------------------------------------------------------------------------------------------------------------------------------ Total assets 61,508,739 52,374,829 33,977,688 32,719,689 1,376,547 1,511,585 ==================================================================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 49,094 32,680 26,237 20,096 958 761 Contract terminations 99,042 -- -- -- -- -- Payable to mutual funds and portfolios for investments purchased -- 67,150 115,507 62,837 6,636 8,202 ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 148,136 99,830 141,744 82,933 7,594 8,963 ------------------------------------------------------------------------------------------------------------------------------------ Net assets applicable to contracts in accumulation period 61,189,234 52,108,194 33,759,106 32,593,270 1,368,953 1,488,245 Net assets applicable to contracts in payment period 171,369 166,805 76,838 43,486 -- 14,377 ==================================================================================================================================== Total net assets $ 61,360,603 $ 52,274,999 $ 33,835,944 $ 32,636,756 $ 1,368,953 $ 1,502,622 ==================================================================================================================================== Accumulation units outstanding 71,184,706 60,342,746 24,711,163 23,748,152 1,426,478 1,549,777 ==================================================================================================================================== Net asset value per accumulation unit $ 0.86 $ 0.86 $ 1.37 $ 1.37 $ 0.96 $ 0.96 ====================================================================================================================================
See accompanying notes to financial statements. 80
SEGREGATED ASSET SUBACCOUNTS ---------------------------------------------------------------------------------------- DECEMBER 31, 2001 (CONTINUED) 1FS 2FS 1TC 2TC 1TL 2TL ASSETS Investments in shares of mutual funds and portfolios: at cost $ 841,996 $ 997,125 $ 778,855 $ 417,800 $ 496,280 $ 325,974 ---------------------------------------------------------------------------------------- at market value $ 869,140 $ 1,043,826 $ 827,719 $ 445,049 $ 516,078 $ 339,573 Dividends receivable 2,873 3,438 -- -- -- -- Accounts receivable from IDS Life for contract purchase payments 2,886 7,049 12,996 4,224 10 8,005 Receivable from mutual funds and portfolios for share redemptions 631 582 573 236 392 191 ------------------------------------------------------------------------------------------------------------------------------------ Total assets 875,530 1,054,895 841,288 449,509 516,480 347,769 ==================================================================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 631 582 573 236 392 191 Contract terminations -- -- -- -- -- -- Payable to mutual funds and portfolios for investments purchased 5,759 10,487 12,996 4,224 10 8,005 ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 6,390 11,069 13,569 4,460 402 8,196 ------------------------------------------------------------------------------------------------------------------------------------ Net assets applicable to contracts in accumulation period 869,140 1,043,826 827,719 445,049 516,078 339,573 Net assets applicable to contracts in payment period -- -- -- -- -- -- ==================================================================================================================================== Total net assets $ 869,140 $ 1,043,826 $ 827,719 $ 445,049 $ 516,078 $ 339,573 ==================================================================================================================================== Accumulation units outstanding 900,903 1,081,186 911,194 489,634 613,528 403,548 ==================================================================================================================================== Net asset value per accumulation unit $ 0.96 $ 0.97 $ 0.91 $ 0.91 $ 0.84 $ 0.84 ====================================================================================================================================
See accompanying notes to financial statements. 81
SEGREGATED ASSET SUBACCOUNTS ---------------------------------------------------------------------------------------- DECEMBER 31, 2001 (CONTINUED) 1GT 2GT 1IG 2IG 1IP 2IP ASSETS Investments in shares of mutual funds and portfolios: at cost $ 27,038,087 $ 26,763,306 $ 50,942,233 $ 47,396,787 $ 18,014,621 $ 14,451,831 ---------------------------------------------------------------------------------------- at market value $ 14,436,141 $ 14,783,844 $ 38,964,943 $ 36,904,470 $ 14,291,834 $ 11,604,651 Dividends receivable -- -- -- -- -- -- Accounts receivable from IDS Life for contract purchase payments 6,509 18,094 52,449 53,395 55,148 8,842 Receivable from mutual funds and portfolios for share redemptions 11,473 9,217 30,825 22,988 11,157 7,115 ------------------------------------------------------------------------------------------------------------------------------------ Total assets 14,454,123 14,811,155 39,048,217 36,980,853 14,358,139 11,620,608 ==================================================================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 11,473 9,217 30,825 22,988 11,157 7,115 Contract terminations -- -- -- -- -- -- Payable to mutual funds and portfolios for investments purchased 6,509 18,094 52,449 53,395 55,148 8,842 ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 17,982 27,311 83,274 76,383 66,305 15,957 ------------------------------------------------------------------------------------------------------------------------------------ Net assets applicable to contracts in accumulation period 14,432,566 14,779,685 38,863,547 36,794,077 14,226,389 11,490,301 Net assets applicable to contracts in payment period 3,575 4,159 101,396 110,393 65,445 114,350 ==================================================================================================================================== Total net assets $ 14,436,141 $ 14,783,844 $ 38,964,943 $ 36,904,470 $ 14,291,834 $ 11,604,651 ==================================================================================================================================== Accumulation units outstanding 34,050,475 34,766,823 64,147,250 60,527,027 19,727,365 15,860,418 ==================================================================================================================================== Net asset value per accumulation unit $ 0.42 $ 0.43 $ 0.61 $ 0.61 $ 0.72 $ 0.72 ====================================================================================================================================
See accompanying notes to financial statements. 82
SEGREGATED ASSET SUBACCOUNTS ---------------------------------------------------------------------------------------- DECEMBER 31, 2001 (CONTINUED) 1MG 2MG 1MD 2MD 1UT 2UT ASSETS Investments in shares of mutual funds and portfolios: at cost $ 43,105,535 $ 42,029,185 $ 34,514,429 $ 32,053,073 $ 2,547,783 $ 2,706,934 ---------------------------------------------------------------------------------------- at market value $ 34,386,783 $ 34,000,110 $ 33,044,416 $ 30,681,980 $ 2,513,303 $ 2,672,004 Dividends receivable -- -- -- -- -- -- Accounts receivable from IDS Life for contract purchase payments 18,488 93,779 21,217 62,180 15,714 16,646 Receivable from mutual funds and portfolios for share redemptions 26,927 20,924 25,840 18,823 1,820 1,408 ------------------------------------------------------------------------------------------------------------------------------------ Total assets 34,432,198 34,114,813 33,091,473 30,762,983 2,530,837 2,690,058 ==================================================================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 26,927 20,924 25,840 18,823 1,820 1,408 Contract terminations -- -- -- -- -- -- Payable to mutual funds and portfolios for investments purchased 18,488 93,779 21,217 62,180 15,714 16,646 ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 45,415 114,703 47,057 81,003 17,534 18,054 ------------------------------------------------------------------------------------------------------------------------------------ Net assets applicable to contracts in accumulation period 34,354,362 33,902,717 33,042,178 30,677,400 2,474,789 2,672,004 Net assets applicable to contracts in payment period 32,421 97,393 2,238 4,580 38,514 -- ==================================================================================================================================== Total net assets $ 34,386,783 $ 34,000,110 $ 33,044,416 $ 30,681,980 $ 2,513,303 $ 2,672,004 ==================================================================================================================================== Accumulation units outstanding 51,051,303 50,211,519 36,822,197 34,072,333 2,777,731 2,996,710 ==================================================================================================================================== Net asset value per accumulation unit $ 0.67 $ 0.68 $ 0.90 $ 0.90 $ 0.89 $ 0.89 ====================================================================================================================================
See accompanying notes to financial statements. 83
SEGREGATED ASSET SUBACCOUNTS ---------------------------------------------------------------------------------------- DECEMBER 31, 2001 (CONTINUED) 1PE 2PE 1EU 2EU 1HS 2HS ASSETS Investments in shares of mutual funds and portfolios: at cost $ 1,060,326 $ 1,260,722 $ 134,340 $ 115,551 $ 1,705,244 $ 2,095,702 ---------------------------------------------------------------------------------------- at market value $ 1,078,212 $ 1,283,658 $ 139,936 $ 118,420 $ 1,710,449 $ 2,098,225 Dividends receivable -- -- -- -- -- -- Accounts receivable from IDS Life for contract purchase payments 18,367 17,414 -- 5,000 10,565 22,356 Receivable from mutual funds and portfolios for share redemptions 747 688 108 64 1,197 1,149 ------------------------------------------------------------------------------------------------------------------------------------ Total assets 1,097,326 1,301,760 140,044 123,484 1,722,211 2,121,730 ==================================================================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 747 688 108 64 1,197 1,149 Contract terminations -- -- -- -- -- -- Payable to mutual funds and portfolios for investments purchased 18,367 17,414 -- 5,000 10,565 22,356 ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 19,114 18,102 108 5,064 11,762 23,505 ------------------------------------------------------------------------------------------------------------------------------------ Net assets applicable to contracts in accumulation period 1,078,212 1,283,658 139,936 118,420 1,710,449 2,098,225 Net assets applicable to contracts in payment period -- -- -- -- -- -- ==================================================================================================================================== Total net assets $ 1,078,212 $ 1,283,658 $ 139,936 $ 118,420 $ 1,710,449 $ 2,098,225 ==================================================================================================================================== Accumulation units outstanding 1,106,491 1,316,285 143,349 121,209 1,743,428 2,136,818 ==================================================================================================================================== Net asset value per accumulation unit $ 0.97 $ 0.98 $ 0.98 $ 0.98 $ 0.98 $ 0.98 ====================================================================================================================================
See accompanying notes to financial statements. 84
SEGREGATED ASSET SUBACCOUNTS ---------------------------------------------------------------------------------------- DECEMBER 31, 2001 (CONTINUED) 1PI 2PI 1VS 2VS 1SO 2SO ASSETS Investments in shares of mutual funds and portfolios: at cost $ 2,039,603 $ 2,313,122 $126,567,533 $104,162,888 $ 3,934,593 $ 3,852,006 ---------------------------------------------------------------------------------------- at market value $ 2,092,135 $ 2,363,246 $ 74,483,171 $ 63,852,496 $ 3,711,533 $ 3,671,538 Dividends receivable -- -- -- -- -- -- Accounts receivable from IDS Life for contract purchase payments 49,060 56,660 -- 54,125 25,848 67,009 Receivable from mutual funds and portfolios for share redemptions 1,428 1,250 69,014 39,863 2,617 1,912 ------------------------------------------------------------------------------------------------------------------------------------ Total assets 2,142,623 2,421,156 74,552,185 63,946,484 3,739,998 3,740,459 ==================================================================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 1,428 1,250 59,448 39,863 2,617 1,912 Contract terminations -- -- 9,566 -- -- -- Payable to mutual funds and portfolios for investments purchased 49,060 56,660 -- 54,125 25,848 67,009 ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 50,488 57,910 69,014 93,988 28,465 68,921 ------------------------------------------------------------------------------------------------------------------------------------ Net assets applicable to contracts in accumulation period 2,092,135 2,363,246 74,384,443 63,734,762 3,711,533 3,668,157 Net assets applicable to contracts in payment period -- -- 98,728 117,734 -- 3,381 ==================================================================================================================================== Total net assets $ 2,092,135 $ 2,363,246 $ 74,483,171 $ 63,852,496 $ 3,711,533 $ 3,671,538 ==================================================================================================================================== Accumulation units outstanding 2,180,274 2,460,406 87,722,365 74,818,967 3,747,064 3,700,618 ==================================================================================================================================== Net asset value per accumulation unit $ 0.96 $ 0.96 $ 0.85 $ 0.85 $ 0.99 $ 0.99 ====================================================================================================================================
See accompanying notes to financial statements. 85
SEGREGATED ASSET SUBACCOUNTS ---------------------------------------------------------------------------------------- DECEMBER 31, 2001 (CONTINUED) 1IT 2IT 1SP 2SP 1AA 2AA ASSETS Investments in shares of mutual funds and portfolios: at cost $ 47,805,554 $ 42,426,921 $ 50,142,172 $ 44,060,106 $ 3,149,106 $ 3,723,685 ---------------------------------------------------------------------------------------- at market value $ 25,663,389 $ 23,627,517 $ 53,762,660 $ 47,363,850 $ 3,110,295 $ 3,682,381 Dividends receivable -- -- -- -- -- -- Accounts receivable from IDS Life for contract purchase payments 54,413 42,996 -- 102,437 9,847 54,585 Receivable from mutual funds and portfolios for share redemptions 20,390 14,808 66,470 29,052 15,824 2,198 ------------------------------------------------------------------------------------------------------------------------------------ Total assets 25,738,192 23,685,321 53,829,130 47,495,339 3,135,966 3,739,164 ==================================================================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 20,390 14,808 42,149 29,052 2,364 2,198 Contract terminations -- -- 24,321 -- 13,460 -- Payable to mutual funds and portfolios for investments purchased 54,413 42,996 -- 102,437 -- 54,585 ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 74,803 57,804 66,470 131,489 15,824 56,783 ------------------------------------------------------------------------------------------------------------------------------------ Net assets applicable to contracts in accumulation period 25,552,121 23,569,698 53,632,104 47,310,776 3,120,142 3,682,381 Net assets applicable to contracts in payment period 111,268 57,819 130,556 53,074 -- -- ==================================================================================================================================== Total net assets $ 25,663,389 $ 23,627,517 $ 53,762,660 $ 47,363,850 $ 3,120,142 $ 3,682,381 ==================================================================================================================================== Accumulation units outstanding 30,296,994 27,817,713 46,456,080 40,791,482 3,223,573 3,799,139 ==================================================================================================================================== Net asset value per accumulation unit $ 0.84 $ 0.85 $ 1.15 $ 1.16 $ 0.97 $ 0.97 ====================================================================================================================================
See accompanying notes to financial statements. 86
SEGREGATED ASSET SUBACCOUNTS ---------------------------------------------------------- DECEMBER 31, 2001 (CONTINUED) 1WI 2WI 1SG 2SG ASSETS Investments in shares of mutual funds and portfolios: at cost $ 922,365 $ 1,075,272 $ 1,917,328 $ 1,843,295 ---------------------------------------------------------- at market value $ 927,595 $ 1,080,049 $ 2,095,392 $ 1,939,030 Dividends receivable -- -- -- -- Accounts receivable from IDS Life for contract purchase payments 9,976 6,562 13,562 45,521 Receivable from mutual funds and portfolios for share redemptions 669 643 1,538 1,094 ------------------------------------------------------------------------------------------------------------------------------------ Total assets 938,240 1,087,254 2,110,492 1,985,645 ==================================================================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 669 643 1,538 1,094 Contract terminations -- -- -- -- Payable to mutual funds and portfolios for investments purchased 9,976 6,562 13,562 45,521 ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 10,645 7,205 15,100 46,615 ------------------------------------------------------------------------------------------------------------------------------------ Net assets applicable to contracts in accumulation period 927,595 1,080,049 2,095,392 1,939,030 Net assets applicable to contracts in payment period -- -- -- -- ==================================================================================================================================== Total net assets $ 927,595 $ 1,080,049 $ 2,095,392 $ 1,939,030 ==================================================================================================================================== Accumulation units outstanding 1,030,776 1,199,580 2,229,738 2,060,286 ==================================================================================================================================== Net asset value per accumulation unit $ 0.90 $ 0.90 $ 0.94 $ 0.94 ====================================================================================================================================
See accompanying notes to financial statements. 87 STATEM ENTS OF OPERATIONS
SEGREGATED ASSET SUBACCOUNTS --------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 BC1 BC2 BD1 BD2 CR1 CR2 INVESTMENT INCOME Dividend income from mutual funds and portfolios $ 311,275 $ 246,283 $ 5,262,706 $ 3,983,855 $ 63,642 $ 62,571 Variable account expenses 393,817 246,860 790,194 472,628 194,218 153,981 ----------------------------------------------------------------------------------------------------------------------------- Investment income (loss) -- net (82,542) (577) 4,472,512 3,511,227 (130,576) (91,410) ============================================================================================================================= REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 3,465,560 1,644,705 987,617 1,356,308 2,225,725 2,810,088 Cost of investments sold 4,379,260 2,064,152 977,009 1,344,769 3,239,602 4,256,896 ----------------------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on sale of investments (913,700) (419,447) 10,608 11,539 (1,013,877) (1,446,808) Distributions from capital gains -- -- -- -- -- -- Net change in unrealized appreciation or depreciation of investments (7,186,847) (5,811,752) 125,819 21,829 (3,287,133) (3,108,462) ----------------------------------------------------------------------------------------------------------------------------- Net gain (loss) on investments (8,100,547) (6,231,199) 136,427 33,368 (4,301,010) (4,555,270) ----------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ (8,183,089) $ (6,231,776) $ 4,608,939 $ 3,544,595 $ (4,431,586) $ (4,646,680) ============================================================================================================================= SEGREGATED ASSET SUBACCOUNTS --------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 (CONTINUED) CM1 CM2 DE1 DE2 EM1 EM2 INVESTMENT INCOME Dividend income from mutual funds and portfolios $ 9,256,118 $ 8,505,982 $ 316,604 $ 325,184 $ 168 $ 198 Variable account expenses 2,478,864 1,812,773 241,031 194,378 7,990 7,638 ----------------------------------------------------------------------------------------------------------------------------- Investment income (loss) -- net 6,777,254 6,693,209 75,573 130,806 (7,822) (7,440) ============================================================================================================================= REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 62,081,735 71,342,713 383,077 637,244 139,767 158,567 Cost of investments sold 62,087,959 71,347,828 376,840 655,823 163,737 190,955 ----------------------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on sale of investments (6,224) (5,115) 6,237 (18,579) (23,970) (32,388) Distributions from capital gains -- -- -- -- -- -- Net change in unrealized appreciation or depreciation of investments (1,569) (2,181) 318,919 400,925 24,439 30,375 ----------------------------------------------------------------------------------------------------------------------------- Net gain (loss) on investments (7,793) (7,296) 325,156 382,346 469 (2,013) ----------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ 6,769,461 $ 6,685,913 $ 400,729 $ 513,152 $ (7,353) $ (9,453) =============================================================================================================================
See accompanying notes to financial statements. 88
SEGREGATED ASSET SUBACCOUNTS --------------------------------------------------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) ES1(1) ES2(1) EI1 EI2 FI1 FI2 INVESTMENT INCOME Dividend income from mutual funds and portfolios $ -- $ -- $ 7,432,607 $ 4,719,306 $ 2,028,921 $ 1,664,446 Variable account expenses 5,336 4,556 650,179 326,209 426,601 278,143 ----------------------------------------------------------------------------------------------------------------------------- Investment income (loss) -- net (5,336) (4,556) 6,782,428 4,393,097 1,602,320 1,386,303 ============================================================================================================================= REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 202,151 22,141 2,146,282 1,316,626 5,050,151 6,096,911 Cost of investments sold 205,456 22,896 2,450,259 1,477,509 4,934,807 5,991,077 ----------------------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on sale of investments (3,305) (755) (303,977) (160,883) 115,344 105,834 Distributions from capital gains -- -- -- -- -- -- Net change in unrealized appreciation or depreciation of investments 145,238 166,115 (4,672,141) (3,021,874) 303,044 183,508 ----------------------------------------------------------------------------------------------------------------------------- Net gain (loss) on investments 141,933 165,360 (4,976,118) (3,182,757) 418,388 289,342 ----------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ 136,597 $ 160,804 $ 1,806,310 $ 1,210,340 $ 2,020,708 $ 1,675,645 =============================================================================================================================
(1) For the period May 1, 2001 (commencement of operations) to Dec. 31, 2001.
SEGREGATED ASSET SUBACCOUNTS --------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 (CONTINUED) GB1 GB2 GR1 GR2 IE1 IE2 INVESTMENT INCOME Dividend income from mutual funds and portfolios $ 702,551 $ 472,508 $ -- $ -- $ 164,645 $ 141,730 Variable account expenses 187,551 98,400 854,224 644,742 126,794 86,102 ----------------------------------------------------------------------------------------------------------------------------- Investment income (loss) -- net 515,000 374,108 (854,224) (644,742) 37,851 55,628 ============================================================================================================================= REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 547,705 761,222 3,602,416 3,271,396 5,065,193 2,391,380 Cost of investments sold 539,962 752,421 6,173,622 5,327,863 8,195,035 4,162,922 ----------------------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on sale of investments 7,743 8,801 (2,571,206) (2,056,467) (3,129,842) (1,771,542) Distributions from capital gains -- -- -- -- -- -- Net change in unrealized appreciation or depreciation of investments (374,661) (248,055) (33,312,633) (31,681,624) (1,774,706) (2,564,164) ----------------------------------------------------------------------------------------------------------------------------- Net gain (loss) on investments (366,918) (239,254) (35,883,839) (33,738,091) (4,904,548) (4,335,706) ----------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ 148,082 $ 134,854 $(36,738,063) $(34,382,833) $ (4,866,697) $ (4,280,078) =============================================================================================================================
See accompanying notes to financial statements. 89
SEGREGATED ASSET SUBACCOUNTS --------------------------------------------------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) MF1 MF2 ND1 ND2 SV1(1) SV2(1) INVESTMENT INCOME Dividend income from mutual funds and portfolios $ 1,191,376 $ 861,143 $ 579,907 $ 503,017 $ -- $ -- Variable account expenses 448,189 256,064 2,352,130 1,580,237 9,562 8,569 ----------------------------------------------------------------------------------------------------------------------------- Investment income (loss) -- net 743,187 605,079 (1,772,223) (1,077,220) (9,562) (8,569) ============================================================================================================================= REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS-- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 2,463,875 2,581,055 4,254,895 2,528,479 4,927 4,521 Cost of investments sold 2,996,402 3,194,827 5,704,930 3,354,907 4,793 4,399 ----------------------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on sale of investments (532,527) (613,772) (1,450,035) (826,428) 134 122 Distributions from capital gains -- -- -- -- -- -- Net change in unrealized appreciation or depreciation of investments (5,943,562) (4,117,880) (43,582,529) (36,023,903) 636,330 719,093 ----------------------------------------------------------------------------------------------------------------------------- Net gain (loss) on investments (6,476,089) (4,731,652) (45,032,564) (36,850,331) 636,464 719,215 ----------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ (5,732,902) $ (4,126,573) $(46,804,787) $(37,927,551) $ 626,902 $ 710,646 =============================================================================================================================
(1) For the period Aug. 14, 2001 (commencement of operations) to Dec. 31, 2001.
SEGREGATED ASSET SUBACCOUNTS --------------------------------------------------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) IV1 IV2 SC1 SC2 ST1(1) ST2(1) INVESTMENT INCOME Dividend income from mutual funds and portfolios $ 202,523 $ 167,667 $ -- $ -- $ 795 $ 788 Variable account expenses 211,482 134,876 209,229 151,301 716 712 ----------------------------------------------------------------------------------------------------------------------------- Investment income (loss) -- net (8,959) 32,791 (209,229) (151,301) 79 76 ============================================================================================================================= REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 1,480,912 838,952 1,027,216 915,840 20,163 75,303 Cost of investments sold 1,747,542 955,838 1,105,230 1,018,265 19,767 77,068 ----------------------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on sale of investments (266,630) (116,886) (78,014) (102,425) 396 (1,765) Distributions from capital gains -- -- -- -- -- -- Net change in unrealized appreciation or depreciation of investments (2,445,276) (1,793,989) (950,703) (831,931) 17,935 13,051 ----------------------------------------------------------------------------------------------------------------------------- Net gain (loss) on investments (2,711,906) (1,910,875) (1,028,717) (934,356) 18,331 11,286 ----------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ (2,720,865) $ (1,878,084) $ (1,237,946) $ (1,085,657) $ 18,410 $ 11,362 =============================================================================================================================
(1) For the period Aug. 13, 2001 (commencement of operations) to Dec. 31, 2001. See accompanying notes to financial statements. 90
SEGREGATED ASSET SUBACCOUNTS --------------------------------------------------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) SA1 SA2 1AC(1) 2AC(1) 1AD(1) 2AD(1) INVESTMENT INCOME Dividend income from mutual funds and portfolios $ 121,255 $ 104,694 $ -- $ -- $ -- $ -- Variable account expenses 549,231 370,030 2,608 1,721 1,907 1,641 ----------------------------------------------------------------------------------------------------------------------------- Investment income (loss) -- net (427,976) (265,336) (2,608) (1,721) (1,907) (1,641) ============================================================================================================================= REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 3,823,757 2,351,519 55,751 -- -- 100,891 Cost of investments sold 8,310,817 4,938,937 63,183 -- -- 107,116 ----------------------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on sale of investments (4,487,060) (2,587,418) (7,432) -- -- (6,225) Distributions from capital gains -- -- 113,227 108,945 -- -- Net change in unrealized appreciation or depreciation of investments (20,948,920) (18,639,966) (1,017) (21,754) 85,443 100,285 ----------------------------------------------------------------------------------------------------------------------------- Net gain (loss) on investments (25,435,980) (21,227,384) 104,778 87,191 85,443 94,060 ----------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $(25,863,956) $(21,492,720) $ 102,170 $ 85,470 $ 83,536 $ 92,419 =============================================================================================================================
(1) For the period Aug. 13, 2001 (commencement of operations) to Dec. 31, 2001.
SEGREGATED ASSET SUBACCOUNTS --------------------------------------------------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 1AB(1) 2AB(1) 1AL(1) 2AL(1) 1AI(1) 2AI(1) INVESTMENT INCOME Dividend income from mutual funds and portfolios $ -- $ -- $ -- $ -- $ -- $ -- Variable account expenses 1,028 740 6,103 5,751 2,701 2,098 ----------------------------------------------------------------------------------------------------------------------------- Investment income (loss) -- net (1,028) (740) (6,103) (5,751) (2,701) (2,098) ============================================================================================================================= REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 7,229 15,975 2,910 47,355 -- 3,895 Cost of investments sold 7,226 16,356 2,913 47,665 -- 4,163 ----------------------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on sale of investments 3 (381) (3) (310) -- (268) Distributions from capital gains -- -- -- -- -- -- Net change in unrealized appreciation or depreciation of investments 36,094 32,400 130,188 149,955 20,221 20,730 ----------------------------------------------------------------------------------------------------------------------------- Net gain (loss) on investments 36,097 32,019 130,185 149,645 20,221 20,462 ----------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ 35,069 $ 31,279 $ 124,082 $ 143,894 $ 17,520 $ 18,364 =============================================================================================================================
(1) For the period Aug. 13, 2001 (commencement of operations) to Dec. 31, 2001. See accompanying notes to financial statements. 91
SEGREGATED ASSET SUBACCOUNTS --------------------------------------------------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 1AV(1) 2AV(1) 1SR 2SR 1CG(1) 2CG(1) INVESTMENT INCOME Dividend income from mutual funds and portfolios $ -- $ -- $ 203,131 $ 150,549 $ -- $ -- Variable account expenses 11,475 9,729 33,063 19,366 1,396 2,018 ----------------------------------------------------------------------------------------------------------------------------- Investment income (loss) -- net (11,475) (9,729) 170,068 131,183 (1,396) (2,018) ============================================================================================================================= REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 44,589 -- 409,607 167,099 23,337 1,941 Cost of investments sold 48,062 -- 442,522 182,321 21,783 1,950 ----------------------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on sale of investments (3,473) -- (32,915) (15,222) 1,554 (9) Distributions from capital gains -- -- 98,967 73,349 -- -- Net change in unrealized appreciation or depreciation of investments 470,877 507,102 (464,785) (348,450) 25,050 22,091 ----------------------------------------------------------------------------------------------------------------------------- Net gain (loss) on investments 467,404 507,102 (398,733) (290,323) 26,604 22,082 ----------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ 455,929 $ 497,373 $ (228,665) $ (159,140) $ 25,208 $ 20,064 =============================================================================================================================
(1) For the period Aug. 13, 2001 (commencement of operations) to Dec. 31, 2001.
SEGREGATED ASSET SUBACCOUNTS --------------------------------------------------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 1FG(1) 2FG(1) 1FM(1) 2FM(1) 1FO(1) 2FO(1) INVESTMENT INCOME Dividend income from mutual funds and portfolios $ -- $ -- $ -- $ -- $ -- $ -- Variable account expenses 12,618 7,836 10,706 8,449 3,354 2,672 ----------------------------------------------------------------------------------------------------------------------------- Investment income (loss) -- net (12,618) (7,836) (10,706) (8,449) (3,354) (2,672) ============================================================================================================================= REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales -- -- -- -- 10,234 7,803 Cost of investments sold -- -- -- -- 10,116 7,933 ----------------------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on sale of investments -- -- -- -- 118 (130) Distributions from capital gains -- -- -- -- -- -- Net change in unrealized appreciation or depreciation of investments 282,907 224,707 355,168 351,139 28,981 45,398 ----------------------------------------------------------------------------------------------------------------------------- Net gain (loss) on investments 282,907 224,707 355,168 351,139 29,099 45,268 ----------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ 270,289 $ 216,871 $ 344,462 $ 342,690 $ 25,745 $ 42,596 =============================================================================================================================
(1) For the period Aug. 13, 2001 (commencement of operations) to Dec. 31, 2001. See accompanying notes to financial statements. 92
SEGREGATED ASSET SUBACCOUNTS --------------------------------------------------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 1RE 2RE 1SI 2SI 1MS(1) 2MS(1) INVESTMENT INCOME Dividend income from mutual funds and portfolios $ 592,285 $ 687,350 $ 27,749 $ 31,830 $ -- $ -- Variable account expenses 153,949 143,861 73,504 63,295 1,361 1,015 ----------------------------------------------------------------------------------------------------------------------------- Investment income (loss) -- net 438,336 543,489 (45,755) (31,465) (1,361) (1,015) ============================================================================================================================= REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 218,140 144,064 727,623 579,286 1,563 85,390 Cost of investments sold 207,662 136,774 623,580 527,306 1,533 89,565 ----------------------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on sale of investments 10,478 7,290 104,043 51,980 30 (4,175) Distributions from capital gains -- -- 160,532 184,139 -- -- Net change in unrealized appreciation or depreciation of investments 906,281 1,105,161 774,134 856,927 33,928 31,264 ----------------------------------------------------------------------------------------------------------------------------- Net gain (loss) on investments 916,759 1,112,451 1,038,709 1,093,046 33,958 27,089 ----------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ 1,355,095 $ 1,655,940 $ 992,954 $ 1,061,581 $ 32,597 $ 26,074 =============================================================================================================================
(1) For the period Aug. 13, 2001 (commencement of operations) to Dec. 31, 2001.
SEGREGATED ASSET SUBACCOUNTS --------------------------------------------------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 1UE 2UE 1MC 2MC 1ID(1) 2ID(1) INVESTMENT INCOME Dividend income from mutual funds and portfolios $ 277,763 $ 234,560 $ 293,669 $ 284,333 $ -- $ -- Variable account expenses 551,464 354,012 204,646 142,383 2,084 1,578 ----------------------------------------------------------------------------------------------------------------------------- Investment income (loss) -- net (273,701) (119,452) 89,023 141,950 (2,084) (1,578) ============================================================================================================================= REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 1,734,426 1,078,996 682,917 193,877 7,600 14,922 Cost of investments sold 2,147,916 1,305,575 595,269 176,217 6,946 15,457 ----------------------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on sale of investments (413,490) (226,579) 87,648 17,660 654 (535) Distributions from capital gains -- -- 1,516,830 1,468,606 -- -- Net change in unrealized appreciation or depreciation of investments (7,282,490) (5,877,468) 906,258 801,503 112,547 102,102 ----------------------------------------------------------------------------------------------------------------------------- Net gain (loss) on investments (7,695,980) (6,104,047) 2,510,736 2,287,769 113,201 101,567 ----------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ (7,969,681) $ (6,223,499) $ 2,599,759 $ 2,429,719 $ 111,117 $ 99,989 =============================================================================================================================
(1) For the period Aug. 13, 2001 (commencement of operations) to Dec. 31, 2001. See accompanying notes to financial statements. 93
SEGREGATED ASSET SUBACCOUNTS --------------------------------------------------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 1FS(1) 2FS(1) 1TC(1) 2TC(1) 1TL(1) 2TL(1) INVESTMENT INCOME Dividend income from mutual funds and portfolios $ -- $ -- $ -- $ -- $ -- $ -- Variable account expenses 1,459 1,348 1,183 459 916 414 ----------------------------------------------------------------------------------------------------------------------------- Investment income (loss) -- net (1,459) (1,348) (1,183) (459) (916) (414) ============================================================================================================================= REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 35,515 29,424 397 -- 400 278 Cost of investments sold 35,507 29,648 430 -- 386 293 ----------------------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on sale of investments 8 (224) (33) -- 14 (15) Distributions from capital gains 3,430 4,132 -- -- -- -- Net change in unrealized appreciation or depreciation of investments 27,144 46,701 48,864 27,249 19,798 13,599 ----------------------------------------------------------------------------------------------------------------------------- Net gain (loss) on investments 30,582 50,609 48,831 27,249 19,812 13,584 ----------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ 29,123 $ 49,261 $ 47,648 $ 26,790 $ 18,896 $ 13,170 =============================================================================================================================
(1) For the period Aug. 13, 2001 (commencement of operations) to Dec. 31, 2001.
SEGREGATED ASSET SUBACCOUNTS --------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 (CONTINUED) 1GT 2GT 1IG 2IG 1IP 2IP INVESTMENT INCOME Dividend income from mutual funds and portfolios $ 98,213 $ 93,750 $ 239,566 $ 219,706 $ 621 $ 491 Variable account expenses 136,304 103,871 301,564 216,992 113,110 70,563 ----------------------------------------------------------------------------------------------------------------------------- Investment income (loss) -- net (38,091) (10,121) (61,998) 2,714 (112,489) (70,072) ============================================================================================================================= REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 833,472 465,669 151,145 24,431 199,927 234,481 Cost of investments sold 1,690,080 859,123 202,661 34,484 250,127 273,202 ----------------------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on sale of investments (856,608) (393,454) (51,516) (10,053) (50,200) (38,721) Distributions from capital gains -- -- -- -- 40,919 32,329 Net change in unrealized appreciation or depreciation of investments (6,499,353) (6,655,709) (8,186,408) (7,319,717) (3,156,967) (2,476,219) ----------------------------------------------------------------------------------------------------------------------------- Net gain (loss) on investments (7,355,961) (7,049,163) (8,237,924) (7,329,770) (3,166,248) (2,482,611) Net increase (decrease) in net assets resulting from operations $ (7,394,052) $ (7,059,284) $(8,299,922) $(7,327,056) $ (3,278,737) $ (2,552,683) =============================================================================================================================
See accompanying notes to financial statements. 94
SEGREGATED ASSET SUBACCOUNTS --------------------------------------------------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 1MG 2MG 1MD 2MD 1UT(1) 2UT(1) INVESTMENT INCOME Dividend income from mutual funds and portfolios $ 16,777 $ 15,999 $ -- $ -- $ -- $ -- Variable account expenses 253,463 190,580 217,120 155,358 4,238 3,369 ----------------------------------------------------------------------------------------------------------------------------- Investment income (loss) -- net (236,686) (174,581) (217,120) (155,358) (4,238) (3,369) ============================================================================================================================= REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 588,344 225,405 296,925 201,209 103,687 40,222 Cost of investments sold 751,767 288,065 333,288 227,973 113,912 40,903 ----------------------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on sale of investments (163,423) (62,660) (36,363) (26,764) (10,225) (681) Distributions from capital gains 202,473 193,086 641,417 576,479 -- -- Net change in unrealized appreciation or depreciation of investments (6,873,424) (6,415,382) (884,200) (833,867) (34,480) (34,930) ----------------------------------------------------------------------------------------------------------------------------- Net gain (loss) on investments (6,834,374) (6,284,956) (279,146) (284,152) (44,705) (35,611) ----------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ (7,071,060) $ (6,459,537) $ (496,266) $ (439,510) $ (48,943) $ (38,980) =============================================================================================================================
(1) For the period Aug. 13, 2001 (commencement of operations) to Dec. 31, 2001.
SEGREGATED ASSET SUBACCOUNTS --------------------------------------------------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 1PE(1) 2PE(1) 1EU(1) 2EU(1) 1HS(1) 2HS(1) INVESTMENT INCOME Dividend income from mutual funds and portfolios $ 3,394 $ 4,216 $ -- $ -- $ -- $ -- Variable account expenses 1,333 1,408 250 133 2,478 2,632 ----------------------------------------------------------------------------------------------------------------------------- Investment income (loss) -- net 2,061 2,808 (250) (133) (2,478) (2,632) ============================================================================================================================= REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 4,657 54,061 14,811 21 6,926 12,324 Cost of investments sold 4,681 53,697 14,318 21 6,775 12,165 ----------------------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on sale of investments (24) 364 493 -- 151 159 Distributions from capital gains -- -- -- -- -- -- Net change in unrealized appreciation or depreciation of investments 17,886 22,936 5,596 2,869 5,205 2,523 ----------------------------------------------------------------------------------------------------------------------------- Net gain (loss) on investments 17,862 23,300 6,089 2,869 5,356 2,682 ----------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ 19,923 $ 26,108 $ 5,839 $ 2,736 $ 2,878 $ 50 =============================================================================================================================
(1) For the period Aug. 13, 2001 (commencement of operations) to Dec. 31, 2001. See accompanying notes to financial statements. 95
SEGREGATED ASSET SUBACCOUNTS --------------------------------------------------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 1PI(1) 2PI(1) 1VS 2VS 1SO(1) 2SO(1) INVESTMENT INCOME Dividend income from mutual funds and portfolios $ -- $ -- $ -- $ -- $ 13,728 $ 13,398 Variable account expenses 3,052 2,691 718,809 448,604 5,893 4,049 ----------------------------------------------------------------------------------------------------------------------------- Investment income (loss) -- net (3,052) (2,691) (718,809) (448,604) 7,835 9,349 ============================================================================================================================= REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 7,145 5,041 2,651,781 542,205 25,751 15,609 Cost of investments sold 7,061 5,512 4,662,836 991,473 27,275 16,886 ----------------------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on sale of investments 84 (471) (2,011,055) (449,268) (1,524) (1,277) Distributions from capital gains -- -- 8,994,193 6,840,074 454,410 408,628 Net change in unrealized appreciation or depreciation of investments 52,532 50,124 (40,243,494) (31,629,377) (223,060) (180,468) ----------------------------------------------------------------------------------------------------------------------------- Net gain (loss) on investments 52,616 49,653 (33,260,356) (25,238,571) 229,826 226,883 ----------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ 49,564 $ 46,962 $(33,979,165) $(25,687,175) $ 237,661 $ 236,232 =============================================================================================================================
(1) For the period Aug. 13, 2001 (commencement of operations) to Dec. 31, 2001.
SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------------------------------------------------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 1IT 2IT 1SP 2SP 1AA(1) 2AA(1) INVESTMENT INCOME Dividend income from mutual funds and portfolios $ -- $ -- $ 23,230 $ 18,864 $ 19,272 $ 23,704 Variable account expenses 234,391 163,619 387,234 256,502 8,855 8,456 ----------------------------------------------------------------------------------------------------------------------------- Investment income (loss) -- net (234,391) (163,619) (364,004) (237,638) 10,417 15,248 ============================================================================================================================= REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 929,055 332,956 362,776 106,588 49,546 28,557 Cost of investments sold 1,624,256 593,399 365,233 112,204 50,500 30,697 ----------------------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on sale of investments (695,201) (260,443) (2,457) (5,616) (954) (2,140) Distributions from capital gains 7,477,081 6,456,348 -- -- 30,669 37,877 Net change in unrealized appreciation or depreciation of investments (12,695,973) (11,400,356) 4,610,313 3,898,993 (38,811) (41,304) ----------------------------------------------------------------------------------------------------------------------------- Net gain (loss) on investments (5,914,093) (5,204,451) 4,607,856 3,893,377 (9,096) (5,567) ----------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ (6,148,484) $ (5,368,070) $ 4,243,852 $ 3,655,739 $ 1,321 $ 9,681 =============================================================================================================================
(1) For the period May 1, 2001 (commencement of operations) to Dec. 31, 2001. See accompanying notes to financial statements. 96
SEGREGATED ASSET SUBACCOUNTS --------------------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 1WI(1) 2WI(1) 1SG(1) 2SG(1) INVESTMENT INCOME Dividend income from mutual funds and portfolios $ 68 $ 86 $ -- $ -- Variable account expenses 2,383 2,250 4,217 3,924 ----------------------------------------------------------------------------------------------- Investment income (loss) -- net (2,315) (2,164) (4,217) (3,924) =============================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 89,046 101,259 20,642 248,552 Cost of investments sold 94,762 112,404 22,448 317,243 ----------------------------------------------------------------------------------------------- Net realized gain (loss) on sale of investments (5,716) (11,145) (1,806) (68,691) Distributions from capital gains -- -- -- -- Net change in unrealized appreciation or depreciation of investments 5,230 4,777 178,064 95,735 ----------------------------------------------------------------------------------------------- Net gain (loss) on investments (486) (6,368) 176,258 27,044 ----------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ (2,801) $ (8,532) $ 172,041 $ 23,120 ===============================================================================================
(1) For the period May 1, 2001 (commencement of operations) to Dec. 31, 2001. See accompanying notes to financial statements. 97 STATEMENTS OF CHANGES IN NET ASSETS
SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------- YEAR ENDED DECEMBER 31, 2001 BC1 BC2 BD1 OPERATIONS Investment income (loss) -- net $ (82,542) $ (577) $ 4,472,512 Net realized gain (loss) on sale of investments (913,700) (419,447) 10,608 Distributions from capital gains -- -- -- Net change in unrealized appreciation or depreciation of investments (7,186,847) (5,811,752) 125,819 ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (8,183,089) (6,231,776) 4,608,939 ====================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 6,713,990 6,771,370 49,725,069 Net transfers(1) 1,293,753 1,958,191 21,962,987 Transfers for policy loans -- (40,036) -- Annuity payments (9,583) (10,278) (16,215) Contract charges (17,721) (23,153) (14,674) Contract terminations: Surrender benefits (805,610) (769,340) (1,194,952) Death benefits (884,333) (220,527) (879,328) ---------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 6,290,496 7,666,227 69,582,887 ---------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year 42,640,523 32,328,669 46,643,337 ---------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 40,747,930 $ 33,763,120 $ 120,835,163 ====================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 43,160,879 32,624,409 43,919,764 Contract purchase payments 7,625,134 7,686,234 45,045,501 Net transfers(1) 1,058,740 2,014,717 19,675,405 Transfers for policy loans -- (46,285) -- Contract charges (20,805) (27,391) (13,229) Contract terminations: Surrender benefits (929,594) (904,763) (1,077,005) Death benefits (997,245) (264,288) (790,563) ---------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 49,897,109 41,082,633 106,759,873 ====================================================================================================================== SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------- YEAR ENDED DECEMBER 31, 2001 BD2 CR1 CR2 OPERATIONS Investment income (loss) -- net $ 3,511,227 $ 130,576) $ (91,410) Net realized gain (loss) on sale of investments 11,539 (1,013,877) (1,446,808) Distributions from capital gains -- -- -- Net change in unrealized appreciation or depreciation of investments 21,829 (3,287,133) (3,108,462) ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 3,544,595 (4,431,586) (4,646,680) ====================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 42,970,829 4,389,778 4,776,551 Net transfers(1) 18,805,553 594,595 (1,587,827) Transfers for policy loans (70,196) -- (16,136) Annuity payments (29,070) (8,738) (14,795) Contract charges (11,523) (8,792) (11,664) Contract terminations: Surrender benefits (1,777,156) (673,922) (674,343) Death benefits (426,007) (292,495) (79,495) ---------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 59,462,430 4,000,426 2,392,291 ---------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year 32,903,174 20,805,184 22,498,228 ---------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 95,910,199 $ 20,374,024 $ 20,243,839 ====================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 30,783,302 22,158,834 24,003,237 Contract purchase payments 38,716,653 5,314,026 5,867,959 Net transfers(1) 16,518,832 574,720 (2,553,526) Transfers for policy loans (59,966) -- (19,854) Contract charges (10,334) (11,157) (14,838) Contract terminations: Surrender benefits (1,594,166) (874,065) (848,811) Death benefits (385,976) (383,402) (107,334) ---------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 83,968,345 26,778,956 26,326,833 ======================================================================================================================
(1) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 98
SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------- YEAR ENDED DECEMBER 31, 2001 (CONTINUED) CM1 CM2 DE1 OPERATIONS Investment income (loss) -- net $ 6,777,254 $ 6,693,209 $ 75,573 Net realized gain (loss) on sale of investments (6,224) (5,115) 6,237 Distributions from capital gains -- -- -- Net change in unrealized appreciation or depreciation of investments (1,569) (2,181) 318,919 ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 6,769,461 6,685,913 400,729 ====================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 342,222,386 369,657,167 14,054,361 Net transfers(1) (263,139,059) (281,078,216) 14,212,636 Transfers for policy loans -- (646,854) -- Annuity payments (8,031) (10,821) (4,776) Contract charges (36,516) (34,717) (6,393) Contract terminations: Surrender benefits (8,710,090) (9,225,653) (479,935) Death benefits (3,529,330) (913,821) (378,637) ---------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 66,799,360 77,747,085 27,397,256 ---------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year 216,160,455 182,627,717 14,383,005 ---------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 289,729,276 $ 267,060,715 $ 42,180,990 ====================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 203,921,835 171,785,378 14,226,644 Contract purchase payments 317,770,845 341,825,045 13,856,380 Net transfers(1) (244,865,486) (259,751,737) 14,080,483 Transfers for policy loans -- (603,310) -- Contract charges (33,798) (31,998) (6,381) Contract terminations: Surrender benefits (8,070,470) (8,515,673) (485,399) Death benefits (3,267,463) (837,718) (372,450) ---------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 265,455,463 243,869,987 41,299,277 ====================================================================================================================== SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------- YEAR ENDED DECEMBER 31, 2001 (CONTINUED) DE2 EM1 EM2 OPERATIONS Investment income (loss) -- net $ 130,806 $ 7,822) $ (7,440) Net realized gain (loss) on sale of investments (18,579) (23,970) (32,388) Distributions from capital gains -- -- -- Net change in unrealized appreciation or depreciation of investments 400,925 24,439 30,375 ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 513,152 (7,353) (9,453) ====================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 13,752,558 340,551 423,682 Net transfers(1) 19,259,054 306,917 224,616 Transfers for policy loans (45,235) -- 6 Annuity payments (15,001) -- -- Contract charges (7,748) (325) (388) Contract terminations: Surrender benefits (909,530) (38,486) (15,340) Death benefits (47,949) (3,324) -- ---------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 31,986,149 605,333 632,576 ---------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year 12,314,922 510,421 667,909 ---------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 44,814,223 $ 1,108,401 $ 1,291,032 ====================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 12,123,600 693,177 905,842 Contract purchase payments 13,564,035 474,542 610,461 Net transfers(1) 18,634,557 437,651 296,013 Transfers for policy loans (44,661) -- 8 Contract charges (7,724) (495) (585) Contract terminations: Surrender benefits (894,796) (58,645) (22,297) Death benefits (46,843) (4,724) -- ---------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 43,328,168 1,541,506 1,789,442 ======================================================================================================================
(1) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 99
SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) ES1(1) ES2(1) EI1 OPERATIONS Investment income (loss) -- net $ (5,336) $ (4,556) $ 6,782,428 Net realized gain (loss) on sale of investments (3,305) (755) (303,977) Distributions from capital gains -- -- -- Net change in unrealized appreciation or depreciation of investments 145,238 166,115 (4,672,141) ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 136,597 160,804 1,806,310 ====================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 1,223,750 1,104,678 26,521,344 Net transfers(2) 865,376 1,222,298 9,620,050 Transfers for policy loans -- (2,271) -- Annuity payments -- -- (9,476) Contract charges (51) (93) (12,818) Contract terminations: Surrender benefits (821) (8,855) (1,051,390) Death benefits (420) -- (777,077) ---------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 2,087,834 2,315,757 34,290,633 ---------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year -- -- 47,919,805 ---------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 2,224,431 $ 2,476,561 $ 84,016,748 ====================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year -- -- 52,654,863 Contract purchase payments 1,328,039 1,194,587 28,119,894 Net transfers(2) 911,692 1,306,648 9,999,258 Transfers for policy loans -- (2,764) -- Contract charges (55) (98) (13,626) Contract terminations: Surrender benefits (829) (9,603) (1,120,170) Death benefits (495) -- (826,853) ---------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 2,238,352 2,488,770 88,813,366 ====================================================================================================================== SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) EI2 FI1 FI2 OPERATIONS Investment income (loss) -- net $ 4,393,097 $ 1,602,320 $ 1,386,303 Net realized gain (loss) on sale of investments (160,883) 115,344 105,834 Distributions from capital gains -- -- -- Net change in unrealized appreciation or depreciation of investments 3,021,874) 303,044 183,508 ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 1,210,340 2,020,708 1,675,645 ====================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 17,068,500 41,951,942 45,451,233 Net transfers(2) 9,900,374 (3,649,829) (5,340,773) Transfers for policy loans (18,715) -- 13,336 Annuity payments (7,176) (17,845) (21,104) Contract charges (7,504) (5,991) (4,504) Contract terminations: Surrender benefits (1,163,675) (1,083,884) (1,246,093) Death benefits (412,002) (1,132,180) (132,028) ---------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 25,359,802 36,062,213 38,720,067 ---------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year 28,915,641 26,743,478 17,556,373 ---------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 55,485,783 $ 64,826,399 $ 57,952,085 ====================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 31,722,406 24,654,215 16,257,973 Contract purchase payments 18,004,587 37,617,335 40,630,026 Net transfers(2) 10,328,772 (3,318,511) (5,159,591) Transfers for policy loans (33,737) -- 14,016 Contract charges (7,970) (5,337) (4,001) Contract terminations: Surrender benefits (1,230,737) (970,409) (1,110,127) Death benefits (435,132) (1,011,495) (118,564) ---------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 58,348,189 56,965,798 50,509,732 ======================================================================================================================
(1) For the period May 1, 2001 (commencement of operations) to Dec. 31, 2001. (2) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 100
SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------- YEAR ENDED DECEMBER 31, 2001 (CONTINUED) GB1 GB2 GR1 OPERATIONS Investment income (loss) -- net $ 515,000 $ 374,108 $ (854,224) Net realized gain (loss) on sale of investments 7,743 8,801 (2,571,206) Distributions from capital gains -- -- -- Net change in unrealized appreciation or depreciation of investments (374,661) (248,055) (33,312,633) ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 148,082 134,854 (36,738,063) ====================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 6,302,051 3,913,988 16,856,244 Net transfers(1) 4,226,401 4,150,291 6,551,337 Transfers for policy loans -- (7,782) -- Annuity payments -- (223) (8,261) Contract charges (3,360) (2,027) (50,870) Contract terminations: Surrender benefits (251,279) (238,993) (1,763,967) Death benefits (265,966) (49,779) (876,449) ---------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 10,007,847 7,765,475 20,708,034 ---------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year 14,463,486 9,199,006 100,465,370 ---------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 24,619,415 $ 17,099,335 $ 84,435,341 ====================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 14,136,694 8,967,857 106,410,129 Contract purchase payments 6,194,256 3,840,138 21,363,294 Net transfers(1) 4,148,142 4,053,818 6,683,732 Transfers for policy loans -- (6,265) -- Contract charges (3,291) (1,972) (71,973) Contract terminations: Surrender benefits (245,710) (233,242) (2,419,809) Death benefits (259,921) (48,247) (1,201,738) ---------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 23,970,170 16,572,087 130,763,635 ====================================================================================================================== SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------- YEAR ENDED DECEMBER 31, 2001 (CONTINUED) GR2 IE1 IE2 OPERATIONS Investment income (loss) -- net $ (644,742) $ 37,851 $ 55,628 Net realized gain (loss) on sale of investments (2,056,467) (3,129,842) (1,771,542) Distributions from capital gains -- -- -- Net change in unrealized appreciation or depreciation of investments (31,681,624) (1,774,706) (2,564,164) ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (34,382,833) (4,866,697) (4,280,078) ====================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 22,672,049 2,526,895 3,347,153 Net transfers(1) 5,300,049 322,065 (1,055,780) Transfers for policy loans (73,853) -- (2,785) Annuity payments (13,230) (5,487) (1,816) Contract charges (82,403) (5,833) (7,519) Contract terminations: Surrender benefits (1,542,695) (208,700) (528,184) Death benefits (577,553) (134,254) (79,529) ---------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 25,682,364 2,494,686 1,671,540 ---------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year 92,620,324 14,922,547 13,261,738 ---------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 83,919,855 $ 12,550,536 $ 10,653,200 ====================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 97,753,895 15,669,531 13,967,274 Contract purchase payments 29,129,404 3,247,058 4,307,312 Net transfers(1) 5,493,506 239,461 (1,622,539) Transfers for policy loans (91,133) -- (4,766) Contract charges (119,314) (7,867) (10,211) Contract terminations: Surrender benefits (2,109,768) (289,347) (707,757) Death benefits (871,044) (194,512) (108,239) ---------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 129,185,546 18,664,324 15,821,074 ======================================================================================================================
(1) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 101
SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) MF1 MF2 ND1 OPERATIONS Investment income (loss) -- net $ 743,187 $ 605,079 $ (1,772,223) Net realized gain (loss) on sale of investments (532,527) (613,772) (1,450,035) Distributions from capital gains -- -- -- Net change in unrealized appreciation or depreciation of investments (5,943,562) (4,117,880) (43,582,529) ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (5,732,902) (4,126,573) (46,804,787) ====================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 12,432,772 10,904,709 59,630,863 Net transfers(2) 2,859,791 436,226 31,815,657 Transfers for policy loans -- (62,185) -- Annuity payments (32,558) (28,440) (106,582) Contract charges (16,001) (18,959) (122,887) Contract terminations: Surrender benefits (883,015) (1,016,110) (4,269,471) Death benefits (1,023,983) (251,211) (3,154,328) ---------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 13,337,006 9,964,030 83,793,252 ---------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year 42,321,065 30,159,611 235,893,042 ---------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 49,925,169 $ 35,997,068 $ 272,881,507 ====================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 39,809,954 28,347,806 219,315,532 Contract purchase payments 12,624,783 10,883,619 63,685,877 Net transfers(2) 2,672,442 (71,035) 32,657,262 Transfers for policy loans -- (62,503) -- Contract charges (16,866) (19,991) (135,276) Contract terminations: Surrender benefits (933,490) (1,055,709) (4,683,672) Death benefits (1,060,378) (261,905) (3,519,791) ---------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 53,096,445 37,760,282 307,319,932 ====================================================================================================================== SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) ND2 SV1(1) SV2(1) OPERATIONS Investment income (loss) -- net $ (1,077,220) $ (9,562) $ (8,569) Net realized gain (loss) on sale of investments (826,428) 134 122 Distributions from capital gains -- -- -- Net change in unrealized appreciation or depreciation of investments (36,023,903) 636,330 719,093 ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (37,927,551) 626,902 710,646 ====================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 69,607,526 4,132,831 4,402,590 Net transfers(2) 30,242,168 2,005,237 2,286,137 Transfers for policy loans (300,355) -- (822) Annuity payments (64,007) -- -- Contract charges (209,732) -- -- Contract terminations: Surrender benefits (4,656,885) (2,142) (6,910) Death benefits (1,242,509) -- (11,230) ---------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 93,376,206 6,135,926 6,669,765 ---------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year 190,659,736 -- -- ---------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 246,108,391 $ 6,762,828 $ 7,380,411 ====================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 177,036,037 -- -- Contract purchase payments 75,517,249 4,265,176 4,576,323 Net transfers(2) 30,544,238 2,050,945 2,327,936 Transfers for policy loans (327,660) -- (891) Contract charges (234,162) -- -- Contract terminations: Surrender benefits (5,097,329) (2,074) (6,804) Death benefits (1,384,427) -- (11,277) ---------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 276,053,946 6,314,047 6,885,287 ======================================================================================================================
(1) For the period Aug. 14, 2001 (commencement of operations) to Dec. 31, 2001. (2) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 102
SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) IV1 IV2 SC1 OPERATIONS Investment income (loss) -- net $ (8,959) $ 32,791 $ (209,229) Net realized gain (loss) on sale of investments (266,630) (116,886) (78,014) Distributions from capital gains -- -- -- Net change in unrealized appreciation or depreciation of investments (2,445,276) (1,793,989) (950,703) ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (2,720,865) (1,878,084) (1,237,946) ====================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 13,255,005 11,375,665 5,853,998 Net transfers(2) 9,098,862 10,347,928 3,157,833 Transfers for policy loans -- (8,382) -- Annuity payments (12,768) (4,371) (2,360) Contract charges (5,261) (6,867) (9,334) Contract terminations: Surrender benefits (298,965) (302,197) (385,481) Death benefits (171,996) (92,554) (199,328) ---------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 21,864,877 21,309,222 8,415,328 ---------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year 12,868,330 8,897,601 18,980,101 ---------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 32,012,342 $ 28,328,739 $ 26,157,483 ====================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 14,083,617 9,811,519 16,348,580 Contract purchase payments 16,088,251 13,932,671 5,556,365 Net transfers(2) 11,020,795 12,722,058 3,010,893 Transfers for policy loans -- (10,599) -- Contract charges (6,709) (8,769) (9,009) Contract terminations: Surrender benefits (389,780) (375,218) (373,745) Death benefits (221,196) (114,275) (186,586) ---------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 40,574,978 35,957,387 24,346,498 ====================================================================================================================== SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) SC2 ST1(1) ST2(1) OPERATIONS Investment income (loss) -- net $ (151,301) $ 79 $ 76 Net realized gain (loss) on sale of investments (102,425) 396 (1,765) Distributions from capital gains -- -- -- Net change in unrealized appreciation or depreciation of investments (831,931) 17,935 13,051 ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (1,085,657) 18,410 11,362 ====================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 5,837,161 417,797 530,726 Net transfers(2) 3,277,581 62,954 64,267 Transfers for policy loans (22,951) -- -- Annuity payments (151) -- -- Contract charges (10,559) -- -- Contract terminations: Surrender benefits (501,925) (40) -- Death benefits (146,546) -- -- ---------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 8,432,610 480,711 594,993 ---------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year 17,246,771 -- -- ---------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 24,593,724 $ 499,121 $ 606,355 ====================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 14,830,157 -- -- Contract purchase payments 5,537,409 452,721 563,788 Net transfers(2) 3,075,969 64,809 64,501 Transfers for policy loans (22,722) -- -- Contract charges (10,209) -- -- Contract terminations: Surrender benefits (478,787) (42) -- Death benefits (139,578) -- -- ---------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 22,792,239 517,488 628,289 ======================================================================================================================
(1) For the period Aug. 13, 2001 (commencement of operations) to Dec. 31, 2001. (2) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 103
SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) SA1 SA2 1AC(1) OPERATIONS Investment income (loss) -- net $ (427,976) $ (265,336) $ (2,608) Net realized gain (loss) on sale of investments (4,487,060) (2,587,418) (7,432) Distributions from capital gains -- -- 113,227 Net change in unrealized appreciation or depreciation of investments (20,948,920) (18,639,966) (1,017) ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (25,863,956) (21,492,720) 102,170 ====================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 9,246,850 12,570,125 1,272,672 Net transfers(2) 1,648 887,054 295,221 Transfers for policy loans -- (42,648) -- Annuity payments (10,453) (9,925) -- Contract charges (33,125) (48,827) -- Contract terminations: Surrender benefits (913,800) (1,190,958) (304) Death benefits (471,176) (242,645) -- ---------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 7,819,944 11,922,176 1,567,589 ---------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year 71,088,816 57,335,128 -- ---------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 53,044,804 $ 47,764,584 $ 1,669,759 ====================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 58,413,697 46,977,698 -- Contract purchase payments 9,712,757 13,376,509 1,389,052 Net transfers(2) (929,954) 114,697 322,693 Transfers for policy loans -- (51,536) -- Contract charges (37,329) (55,627) -- Contract terminations: Surrender benefits (1,025,427) (1,350,333) (327) Death benefits (559,361) (263,638) -- ---------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 65,574,383 58,747,770 1,711,418 ====================================================================================================================== SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 2AC(1) 1AD(1) 2AD(1) OPERATIONS Investment income (loss) -- net $ (1,721) $ (1,907) $ (1,641) Net realized gain (loss) on sale of investments -- -- (6,225) Distributions from capital gains 108,945 -- -- Net change in unrealized appreciation or depreciation of investments (21,754) 85,443 100,285 ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) assets resulting from operations 85,470 83,536 92,419 ====================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 998,022 837,295 1,026,467 Net transfers(2) 586,627 280,883 317,468 Transfers for policy loans -- -- (1,038) Annuity payments -- -- -- Contract charges -- -- -- Contract terminations: Surrender benefits (323) -- (2,034) Death benefits -- -- -- ---------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 1,584,326 1,118,178 1,340,863 ---------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year -- -- -- ---------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 1,669,796 $ 1,201,714 $ 1,433,282 ====================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year -- -- -- Contract purchase payments 1,087,142 919,601 1,120,921 Net transfers(2) 623,218 304,791 341,550 Transfers for policy loans -- -- (1,060) Contract charges -- -- -- Contract terminations: Surrender benefits (355) -- (2,218) Death benefits -- -- ---------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 1,710,005 1,224,392 1,459,193 ======================================================================================================================
(1) For the period Aug. 13, 2001 (commencement of operations) to Dec. 31, 2001. (2) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 104
SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 1AB(1) 2AB(1) 1AL(1) OPERATIONS Investment income (loss) -- net $ (1,028) $ (740) $ (6,103) Net realized gain (loss) on sale of investments 3 (381) (3) Distributions from capital gains -- -- -- Net change in unrealized appreciation or depreciation of investments 36,094 32,400 130,188 ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 35,069 31,279 124,082 ====================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 574,902 571,388 3,116,862 Net transfers(2) 161,241 184,088 985,097 Transfers for policy loans -- -- -- Annuity payments -- -- (289) Contract charges -- -- -- Contract terminations: Surrender benefits -- (166) (548) Death benefits -- -- -- ---------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 736,143 755,310 4,101,122 ---------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year -- -- -- ---------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 771,212 $ 786,589 $ 4,225,204 ====================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year -- -- -- Contract purchase payments 618,416 608,110 3,331,999 Net transfers(2) 171,782 196,975 1,031,695 Transfers for policy loans -- -- -- Contract charges -- -- -- Contract terminations: Surrender benefits -- (176) (592) Death benefits -- -- -- ---------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 790,198 804,909 4,363,102 ====================================================================================================================== SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 2AL(1) 1AI(1) 2AI(1) OPERATIONS Investment income (loss) -- net $ (5,751) $ (2,701) $ (2,098) Net realized gain (loss) on sale of investments (310) -- (268) Distributions from capital gains -- -- -- Net change in unrealized appreciation or depreciation of investments 149,955 20,221 20,730 ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 143,894 17,520 18,364 ====================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 3,677,719 1,267,311 1,227,141 Net transfers(2) 1,550,983 512,649 573,507 Transfers for policy loans (1,703) -- -- Annuity payments (164) (35) -- Contract charges -- -- -- Contract terminations: Surrender benefits (4,954) (277) (1,528) Death benefits -- (373) -- ---------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 5,221,881 1,779,275 1,799,120 ---------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year -- -- -- ---------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 5,365,775 $ 1,796,795 $ 1,817,484 ====================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year -- -- -- Contract purchase payments 3,920,141 1,372,449 1,328,329 Net transfers(2) 1,636,834 554,816 623,429 Transfers for policy loans (1,783) -- -- Contract charges -- -- -- Contract terminations: Surrender benefits (5,157) (304) (1,664) Death benefits -- (409) -- ---------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 5,550,035 1,926,552 1,950,094 ======================================================================================================================
(1) For the period Aug. 13, 2001 (commencement of operations) to Dec. 31, 2001. (2) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 105
SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 1AV(1) 2AV(1) 1SR OPERATIONS Investment income (loss) -- net $ (11,475) $ (9,729) $ 170,068 Net realized gain (loss) on sale of investments (3,473) -- (32,915) Distributions from capital gains -- -- 98,967 Net change in unrealized appreciation or depreciation of investments 470,877 507,102 (464,785) ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 455,929 497,373 (228,665) ====================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 5,828,858 5,344,703 2,027,795 Net transfers(2) 1,457,582 1,868,268 2,100,155 Transfers for policy loans -- (732) -- Annuity payments (819) (63) -- Contract charges -- -- (1,091) Contract terminations: Surrender benefits (1,249) (12,707) (107,149) Death benefits -- (65,105) (14,150) ---------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 7,284,372 7,134,364 4,005,560 ---------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year -- -- 1,626,644 ---------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 7,740,301 $ 7,631,737 $ 5,403,539 ====================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year -- -- 1,692,742 Contract purchase payments 5,997,971 5,522,293 2,218,817 Net transfers(2) 1,301,188 1,912,474 2,315,274 Transfers for policy loans -- (705) -- Contract charges -- -- (1,219) Contract terminations: Surrender benefits (1,272) (12,833) (119,334) Death benefits -- (65,059) (15,831) ---------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 7,297,887 7,356,170 6,090,449 ====================================================================================================================== SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 2SR 1CG(1) 2CG(1) OPERATIONS Investment income (loss) -- net $ 131,183 $ (1,396) $ (2,018) Net realized gain (loss) on sale of investments (15,222) 1,554 (9) Distributions from capital gains 73,349 -- -- Net change in unrealized appreciation or depreciation of investments (348,450) 25,050 22,091 ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (159,140) 25,208 20,064 ====================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 1,627,761 660,262 1,077,535 Net transfers(2) 1,370,419 279,284 395,527 Transfers for policy loans (15,288) -- -- Annuity payments -- -- -- Contract charges (2,458) -- -- Contract terminations: Surrender benefits (57,223) (296) (244) Death benefits (2,099) -- -- ---------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 2,921,112 939,250 1,472,818 ---------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year 1,234,663 -- -- ---------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 3,996,635 $ 964,458 $ 1,492,882 ====================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 1,282,907 -- -- Contract purchase payments 1,779,788 709,008 1,144,758 Net transfers(2) 1,513,134 306,275 425,359 Transfers for policy loans (16,900) -- -- Contract charges (2,766) -- -- Contract terminations: Surrender benefits (63,819) (321) (261) Death benefits (2,480) -- -- ---------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 4,489,864 1,014,962 1,569,856 ======================================================================================================================
(1) For the period Aug. 13, 2001 (commencement of operations) to Dec. 31, 2001. (2) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 106
SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 1FG(1) 2FG(1) 1FM(1) OPERATIONS Investment income (loss) -- net $ (12,618) $ (7,836) $ (10,706) Net realized gain (loss) on sale of investments -- -- -- Distributions from capital gains -- -- -- Net change in unrealized appreciation or depreciation of investments 282,907 224,707 355,168 ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 270,289 216,871 344,462 ====================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 5,965,121 4,338,296 5,128,614 Net transfers(2) 2,091,085 1,823,373 1,477,269 Transfers for policy loans -- (715) -- Annuity payments (726) -- -- Contract charges -- -- -- Contract terminations: Surrender benefits (2,809) (24,223) (443) Death benefits -- -- (402) ---------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 8,052,671 6,136,731 6,605,038 ---------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year -- -- -- ---------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 8,322,960 $ 6,353,602 $ 6,949,500 ====================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year -- -- -- Contract purchase payments 6,188,074 4,505,678 5,194,892 Net transfers(2) 1,992,080 1,882,174 1,495,095 Transfers for policy loans -- (729) -- Contract charges -- -- -- Contract terminations: Surrender benefits (2,839) (24,477) (450) Death benefits -- -- (406) ---------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 8,177,315 6,362,646 6,689,131 ====================================================================================================================== SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 2FM(1) 1FO(1) 2FO(1) OPERATIONS Investment income (loss) -- net $ (8,449) $ (3,354) $ (2,672) Net realized gain (loss) on sale of investments -- 118 (130) Distributions from capital gains -- -- -- Net change in unrealized appreciation or depreciation of investments 351,139 28,981 45,398 ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 342,690 25,745 42,596 ====================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 5,165,530 1,566,086 1,262,715 Net transfers(2) 1,782,687 444,528 724,187 Transfers for policy loans (2,340) -- -- Annuity payments (427) -- -- Contract charges -- -- -- Contract terminations: Surrender benefits (5,687) (9) (665) Death benefits (36,810) -- -- ---------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 6,902,953 2,010,605 1,986,237 ---------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year -- -- -- ---------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 7,245,643 $ 2,036,350 $ 2,028,833 ====================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year -- -- -- Contract purchase payments 5,216,209 1,683,221 1,369,471 Net transfers(2) 1,732,488 473,492 778,105 Transfers for policy loans (2,332) -- -- Contract charges -- -- -- Contract terminations: Surrender benefits (5,595) (9) (708) Death benefits (37,286) -- -- ---------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 6,903,484 2,156,704 2,146,868 ======================================================================================================================
(1) For the period Aug. 13, 2001 (commencement of operations) to Dec. 31, 2001. (2) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 107
SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 1RE 2RE 1SI OPERATIONS Investment income (loss) -- net $ 438,336 $ 543,489 $ (45,755) Net realized gain (loss) on sale of investments 10,478 7,290 104,043 Distributions from capital gains -- -- 160,532 Net change in unrealized appreciation or depreciation of investments 906,281 1,105,161 774,134 ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 1,355,095 1,655,940 992,954 ====================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 8,885,161 10,446,964 4,041,752 Net transfers(2) 8,981,834 12,674,981 4,664,868 Transfers for policy loans -- (27,212) -- Annuity payments (1,844) (3,884) (1,810) Contract charges (3,956) (3,675) (2,243) Contract terminations: Surrender benefits (213,105) (294,970) (193,616) Death benefits (261,009) (67,577) (82,052) ---------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 17,387,081 22,724,627 8,426,899 ---------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year 7,721,569 8,611,678 3,449,583 ---------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 26,463,745 $ 32,992,245 $ 12,869,436 ====================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 6,181,452 6,879,005 2,896,941 Contract purchase payments 6,986,100 8,159,536 3,191,589 Net transfers(2) 7,011,251 9,745,835 3,715,737 Transfers for policy loans -- (21,550) -- Contract charges (3,111) (2,877) (1,779) Contract terminations: Surrender benefits (166,798) (230,473) (151,482) Death benefits (205,440) (52,626) (67,400) ---------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 19,803,454 24,476,850 9,583,606 ====================================================================================================================== SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 2SI 1MS(1) 2MS(1) OPERATIONS Investment income (loss) -- net $ (31,465) $ (1,361) $ (1,015) Net realized gain (loss) on sale of investments 51,980 30 (4,175) Distributions from capital gains 184,139 -- -- Net change in unrealized appreciation or depreciation of investments 856,927 33,928 31,264 ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 1,061,581 32,597 26,074 ====================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 4,522,531 837,177 649,697 Net transfers(2) 5,794,604 205,025 235,110 Transfers for policy loans (2,027) -- -- Annuity payments (1,529) -- -- Contract charges (2,860) -- -- Contract terminations: Surrender benefits (151,486) -- (1,083) Death benefits (12,078) -- -- ---------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 10,147,155 1,042,202 883,724 ---------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year 3,399,162 -- -- ---------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 14,607,898 $ 1,074,799 $ 909,798 ====================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 2,846,415 -- -- Contract purchase payments 3,562,029 895,612 694,027 Net transfers(2) 4,524,344 218,452 249,528 Transfers for policy loans (1,530) -- -- Contract charges (2,263) -- -- Contract terminations: Surrender benefits (119,134) -- (1,152) Death benefits (9,602) -- -- ---------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 10,800,259 1,114,064 942,403 ======================================================================================================================
(1) For the period Aug. 13, 2001 (commencement of operations) to Dec. 31, 2001. (2) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 108
SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 1UE 2UE 1MC OPERATIONS Investment income (loss) -- net $ (273,701) $ (119,452) $ 89,023 Net realized gain (loss) on sale of investments (413,490) (226,579) 87,648 Distributions from capital gains -- -- 1,516,830 Net change in unrealized appreciation or depreciation of investments (7,282,490) (5,877,468) 906,258 ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (7,969,681) (6,223,499) 2,599,759 ====================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 11,247,637 11,891,552 9,032,982 Net transfers(2) 5,103,333 5,262,528 10,002,095 Transfers for policy loans -- (24,460) -- Annuity payments (15,794) (7,300) (4,549) Contract charges (21,579) (25,706) (6,832) Contract terminations: Surrender benefits (953,975) (660,399) (232,786) Death benefits (656,027) (223,897) (209,063) ---------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 14,703,595 16,212,318 18,581,847 ---------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year 54,626,689 42,286,180 12,654,338 ---------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 61,360,603 $ 52,274,999 $ 33,835,944 ====================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 55,239,000 42,626,277 10,264,919 Contract purchase payments 12,436,157 13,184,883 7,058,847 Net transfers(2) 5,367,228 5,578,691 7,737,981 Transfers for policy loans -- (27,757) -- Contract charges (24,432) (29,269) (5,370) Contract terminations: Surrender benefits (1,083,166) (742,451) (180,113) Death benefits (750,081) (247,628) (165,101) ---------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 71,184,706 60,342,746 24,711,163 ====================================================================================================================== SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 2MC 1ID(1) 2ID(1) OPERATIONS Investment income (loss) -- net $ 141,950 $ (2,084) $ (1,578) Net realized gain (loss) on sale of investments 17,660 654 (535) Distributions from capital gains 1,468,606 -- -- Net change in unrealized appreciation or depreciation of investments 801,503 112,547 102,102 ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 2,429,719 111,117 99,989 ====================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 9,221,589 905,790 1,015,710 Net transfers(2) 12,104,964 352,662 388,587 Transfers for policy loans (15,381) -- -- Annuity payments (1,322) -- (163) Contract charges (8,207) -- -- Contract terminations: Surrender benefits (329,366) (616) (1,501) Death benefits (170,149) -- -- ---------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 20,802,128 1,257,836 1,402,633 ---------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year 9,404,909 -- -- ---------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 32,636,756 $ 1,368,953 $ 1,502,622 ====================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 7,621,857 -- -- Contract purchase payments 7,185,335 1,027,741 1,136,672 Net transfers(2) 9,348,264 399,410 414,729 Transfers for policy loans (12,103) -- -- Contract charges (6,403) -- -- Contract terminations: Surrender benefits (256,934) (673) (1,624) Death benefits (131,864) -- ---------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 23,748,152 1,426,478 1,549,777 ======================================================================================================================
(1) For the period Aug. 13, 2001 (commencement of operations) to Dec. 31, 2001. (2) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 109
SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 1FS(1) 2FS(1) 1TC(1) OPERATIONS Investment income (loss) -- net $ (1,459) $ (1,348) $ (1,183) Net realized gain (loss) on sale of investments 8 (224) (33) Distributions from capital gains 3,430 4,132 -- Net change in unrealized appreciation or depreciation of investments 27,144 46,701 48,864 ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 29,123 49,261 47,648 ====================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 615,076 740,869 620,220 Net transfers(2) 230,715 253,940 160,253 Transfers for policy loans -- -- -- Annuity payments -- -- -- Contract charges -- -- -- Contract terminations: Surrender benefits (5,774) (244) (402) Death benefits -- -- -- ---------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 840,017 994,565 780,071 ---------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year -- -- -- ---------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 869,140 $ 1,043,826 $ 827,719 ====================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year -- -- -- Contract purchase payments 660,567 805,555 732,687 Net transfers(2) 246,490 275,889 178,929 Transfers for policy loans -- -- -- Contract charges -- -- -- Contract terminations: Surrender benefits (6,154) (258) (422) Death benefits -- -- -- ---------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 900,903 1,081,186 911,194 ====================================================================================================================== SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 2TC(1) 1TL(1) 2TL(1) OPERATIONS Investment income (loss) -- net $ (459) $ (916) $ (414) Net realized gain (loss) on sale of investments -- 14 (15) Distributions from capital gains -- -- -- Net change in unrealized appreciation or depreciation of investments 27,249 19,798 13,599 ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 26,790 18,896 13,170 ====================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 272,604 375,609 233,348 Net transfers(2) 146,055 121,573 97,036 Transfers for policy loans (40) -- (917) Annuity payments -- -- -- Contract charges -- -- -- Contract terminations: Surrender benefits (360) -- (3,064) Death benefits -- -- -- ---------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 418,259 497,182 326,403 ---------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year -- -- -- ---------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 445,049 $ 516,078 $ 339,573 ====================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year -- -- -- Contract purchase payments 322,446 467,676 282,524 Net transfers(2) 167,632 145,852 125,858 Transfers for policy loans (44) -- (1,082) Contract charges -- -- -- Contract terminations: Surrender benefits (400) -- (3,752) Death benefits -- -- -- ---------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 489,634 613,528 403,548 ======================================================================================================================
(1) For the period Aug. 13, 2001 (commencement of operations) to Dec. 31, 2001. (2) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 110
SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------- YEAR ENDED DECEMBER 31, 2001 (CONTINUED) 1GT 2GT 1IG OPERATIONS Investment income (loss) -- net $ (38,091) $ (10,121) $ (61,998) Net realized gain (loss) on sale of investments (856,608) (393,454) (51,516) Distributions from capital gains -- -- -- Net change in unrealized appreciation or depreciation of investments (6,499,353) (6,655,709) (8,186,408) ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (7,394,052) (7,059,284) (8,299,922) ====================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 4,011,029 5,730,228 14,980,212 Net transfers(1) 2,542,755 2,603,897 9,522,379 Transfers for policy loans -- (23,450) -- Annuity payments (1,091) (2,178) (6,037) Contract charges (8,500) (16,036) (11,672) Contract terminations: Surrender benefits (315,933) (227,404) (409,006) Death benefits (81,265) (101,131) (243,905) ---------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 6,146,995 7,963,926 23,831,971 ---------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year 15,683,198 13,879,202 23,432,894 ---------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 14,436,141 $ 14,783,844 $ 38,964,943 ====================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 22,949,067 20,288,328 29,250,538 Contract purchase payments 7,706,877 10,839,841 22,128,762 Net transfers(1) 4,322,817 4,385,598 13,809,533 Transfers for policy loans -- (45,348) -- Contract charges (19,122) (37,533) (19,189) Contract terminations: Surrender benefits (733,212) (469,230) (631,010) Death benefits (175,952) (194,833) (391,384) ---------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 34,050,475 34,766,823 64,147,250 ====================================================================================================================== SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------- YEAR ENDED DECEMBER 31, 2001 (CONTINUED) 2IG 1IP 2IP OPERATIONS Investment income (loss) -- net $ 2,714 $ (112,489) $ (70,072) Net realized gain (loss) on sale of investments (10,053) (50,200) (38,721) Distributions from capital gains -- 40,919 32,329 Net change in unrealized appreciation or depreciation of investments (7,319,717) (3,156,967) (2,476,219) ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (7,327,056) (3,278,737) (2,552,683) ====================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 14,291,665 4,029,595 3,536,625 Net transfers(1) 9,953,694 3,406,698 3,104,721 Transfers for policy loans (49,143) -- (4,243) Annuity payments (3,479) (5,591) (3,743) Contract charges (17,536) (3,291) (4,305) Contract terminations: Surrender benefits (388,797) (154,209) (110,735) Death benefits (214,976) (127,739) (38,890) ---------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 23,571,428 7,145,463 6,479,430 ---------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year 20,660,098 10,425,108 7,677,904 ---------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 36,904,470 $ 14,291,834 $ 11,604,651 ====================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 25,763,066 10,774,085 7,957,614 Contract purchase payments 21,190,994 5,051,786 4,394,123 Net transfers(1) 14,582,951 4,255,381 3,706,041 Transfers for policy loans (69,969) -- (5,825) Contract charges (29,188) (4,139) (5,461) Contract terminations: Surrender benefits (598,637) (188,758) (135,186) Death benefits (312,190) (160,990) (50,888) ---------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 60,527,027 19,727,365 15,860,418 ======================================================================================================================
(1) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 111
SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 1MG 2MG 1MD OPERATIONS Investment income (loss) -- net $ (236,686) $ (174,581) $ (217,120) Net realized gain (loss) on sale of investments (163,423) (62,660) (36,363) Distributions from capital gains 202,473 193,086 641,417 Net change in unrealized appreciation or depreciation of investments (6,873,424) (6,415,382) (884,200) ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (7,071,060) (6,459,537) (496,266) ====================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 12,812,258 13,407,756 10,978,441 Net transfers(2) 9,300,911 9,808,312 8,706,484 Transfers for policy loans -- (11,334) -- Annuity payments (2,646) (3,017) (817) Contract charges (8,618) (11,958) (7,125) Contract terminations: Surrender benefits (393,028) (308,843) (328,860) Death benefits (140,271) (129,532) (214,216) ---------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 21,568,606 22,751,384 19,133,907 ---------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year 19,889,237 17,708,263 14,406,775 ---------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 34,386,783 $ 34,000,110 $ 33,044,416 ====================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 21,973,127 19,520,956 15,060,304 Contract purchase payments 17,264,583 18,104,083 12,549,526 Net transfers(2) 12,582,742 13,220,164 9,841,991 Transfers for policy loans -- (16,378) -- Contract charges (12,803) (18,019) (8,555) Contract terminations: Surrender benefits (561,954) (428,241) (378,057) Death benefits (194,392) (171,046) (243,012) ---------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 51,051,303 50,211,519 36,822,197 ====================================================================================================================== SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 2MD 1UT(1) 2UT(1) OPERATIONS Investment income (loss) -- net $ (155,358) $ (4,238) $ (3,369) Net realized gain (loss) on sale of investments (26,764) (10,225) (681) Distributions from capital gains 576,479 -- -- Net change in unrealized appreciation or depreciation of investments (833,867) (34,480) (34,930) ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (439,510) (48,943) (38,980) ====================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 11,309,994 2,124,621 2,173,364 Net transfers(2) 8,326,647 439,371 542,525 Transfers for policy loans (21,488) -- (516) Annuity payments (1,028) (268) -- Contract charges (11,665) -- -- Contract terminations: Surrender benefits (250,725) (1,478) (4,389) Death benefits (33,747) -- -- ---------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 19,317,988 2,562,246 2,710,984 ---------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year 11,803,502 -- -- ---------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 30,681,980 $ 2,513,303 $ 2,672,004 ====================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 12,307,954 -- -- Contract purchase payments 12,741,013 2,344,463 2,393,768 Net transfers(2) 9,389,635 434,984 608,446 Transfers for policy loans (25,357) -- (568) Contract charges (14,113) -- -- Contract terminations: Surrender benefits (289,439) (1,716) (4,936) Death benefits (37,360) -- -- ---------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 34,072,333 2,777,731 2,996,710 ======================================================================================================================
(1) For the period Aug. 13, 2001 (commencement of operations) to Dec. 31, 2001. (2) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 112
SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 1PE(1) 2PE(1) 1EU(1) OPERATIONS Investment income (loss) -- net $ 2,061 $ 2,808 $ (250) Net realized gain (loss) on sale of investments (24) 364 493 Distributions from capital gains -- -- -- Net change in unrealized appreciation or depreciation of investments 17,886 22,936 5,596 ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 19,923 26,108 5,839 ====================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 898,095 714,994 96,006 Net transfers(2) 160,546 543,582 38,091 Transfers for policy loans -- -- -- Annuity payments -- -- -- Contract charges -- -- -- Contract terminations: Surrender benefits (352) (1,026) -- Death benefits -- -- -- ---------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 1,058,289 1,257,550 134,097 ---------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year -- -- -- ---------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 1,078,212 $ 1,283,658 $ 139,936 ====================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year -- -- -- Contract purchase payments 938,839 745,187 102,794 Net transfers(2) 168,020 572,167 40,555 Transfers for policy loans -- -- -- Contract charges -- -- -- Contract terminations: Surrender benefits (368) (1,069) -- Death benefits -- -- -- ---------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 1,106,491 1,316,285 143,349 ====================================================================================================================== SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 2EU(1) 1HS(1) 2HS(1) OPERATIONS Investment income (loss) -- net $ (133) $ (2,478) $ (2,632) Net realized gain (loss) on sale of investments -- 151 159 Distributions from capital gains -- -- -- Net change in unrealized appreciation or depreciation of investments 2,869 5,205` 2,523 ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 2,736 2,878 50 ====================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 61,751 1,390,896 1,650,070 Net transfers(2) 53,933 321,405 450,753 Transfers for policy loans -- -- (807) Annuity payments -- -- -- Contract charges -- -- -- Contract terminations: Surrender benefits -- (4,730) (1,841) Death benefits -- -- -- ---------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 115,684 1,707,571 2,098,175 ---------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year -- -- -- ---------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 118,420 $ 1,710,449 $ 2,098,225 ====================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year -- -- -- Contract purchase payments 64,670 1,420,572 1,681,017 Net transfers(2) 56,539 327,778 458,508 Transfers for policy loans -- -- (835) Contract charges -- -- -- Contract terminations: Surrender benefits -- (4,922) (1,872) Death benefits -- -- -- ---------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 121,209 1,743,428 2,136,818 ======================================================================================================================
(1) For the period Aug. 13, 2001 (commencement of operations) to Dec. 31, 2001. (2) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 113
SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 1PI(1) 2PI(1) 1VS OPERATIONS Investment income (loss) -- net $ (3,052) $ (2,691) $ (718,809) Net realized gain (loss) on sale of investments 84 (471) (2,011,055) Distributions from capital gains -- -- 8,994,193 Net change in unrealized appreciation or depreciation of investments 52,532 50,124 (40,243,494) ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 49,564 46,962 (33,979,165) ====================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 1,534,262 1,525,823 15,797,036 Net transfers(2) 508,344 790,874 6,556,174 Transfers for policy loans -- -- -- Annuity payments -- -- (11,857) Contract charges -- -- (42,306) Contract terminations: Surrender benefits (35) (413) (1,205,261) Death benefits -- -- (866,383) ---------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 2,042,571 2,316,284 20,227,403 ---------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year -- -- 88,234,933 ---------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 2,092,135 $ 2,363,246 $ 74,483,171 ====================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year -- -- 68,406,853 Contract purchase payments 1,640,626 1,623,905 15,971,024 Net transfers(2) 539,684 836,932 5,571,397 Transfers for policy loans -- -- -- Contract charges -- -- (47,229) Contract terminations: Surrender benefits (36) (431) (1,323,108) Death benefits -- -- (856,572) ---------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 2,180,274 2,460,406 87,722,365 ====================================================================================================================== SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 2VS 1SO(1) 2SO(1) OPERATIONS Investment income (loss) -- net $ (448,604) $ 7,835 $ 9,349 Net realized gain (loss) on sale of investments (449,268) (1,524) (1,277) Distributions from capital gains 6,840,074 454,410 408,628 Net change in unrealized appreciation or depreciation of investments (31,629,377) (223,060) (180,468) ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (25,687,175) 237,661 236,232 ====================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 19,660,439 2,560,919 2,364,635 Net transfers(2) 6,897,008 913,494 1,074,013 Transfers for policy loans (33,928) -- -- Annuity payments (6,159) -- (71) Contract charges (55,900) -- -- Contract terminations: Surrender benefits (1,021,512) (541) (3,271) Death benefits (290,696) -- -- ---------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 25,149,252 3,473,872 3,435,306 ---------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year 64,390,419 -- -- ---------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 63,852,496 $ 3,711,533 $ 3,671,538 ====================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 49,764,177 -- -- Contract purchase payments 20,196,251 2,769,914 2,559,785 Net transfers(2) 6,352,975 977,748 1,144,282 Transfers for policy loans (34,193) -- -- Contract charges (63,132) -- -- Contract terminations: Surrender benefits (1,112,370) (598) (3,449) Death benefits (284,741) -- -- ---------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 74,818,967 3,747,064 3,700,618 ======================================================================================================================
(1) For the period Aug. 13, 2001 (commencement of operations) to Dec. 31, 2001. (2) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 114
SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 1IT 2IT 1SP OPERATIONS Investment income (loss) -- net $ (234,391) $ (163,619) $ (364,004) Net realized gain (loss) on sale of investments (695,201) (260,443) (2,457) Distributions from capital gains 7,477,081 6,456,348 -- Net change in unrealized appreciation or depreciation of investments (12,695,973) (11,400,356) 4,610,313 ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (6,148,484) (5,368,070) 4,243,852 ====================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 5,516,656 6,525,652 10,704,962 Net transfers(2) 3,132,241 3,196,285 8,497,550 Transfers for policy loans -- (22,174) -- Annuity payments (3,039) (2,146) (7,788) Contract charges (11,914) (15,572) (16,721) Contract terminations: Surrender benefits (284,371) (385,501) (498,756) Death benefits (232,447) (132,811) (541,875) ---------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 8,117,126 9,163,733 18,137,372 ---------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year 23,694,747 19,831,854 31,381,436 ---------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 25,663,389 $ 23,627,517 $ 53,762,660 ====================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 21,844,002 18,245,122 29,881,218 Contract purchase payments 5,822,402 6,894,850 9,799,940 Net transfers(2) 3,201,244 3,288,789 7,725,129 Transfers for policy loans -- (31,299) -- Contract charges (12,672) (16,769) (15,497) Contract terminations: Surrender benefits (305,412) (416,135) (452,233) Death benefits (252,570) (146,845) (482,477) ---------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 30,296,994 27,817,713 46,456,080 ====================================================================================================================== SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 2SP 1AA(1) 2AA(1) OPERATIONS Investment income (loss) -- net $ (237,638) $ 10,417 $ 15,248 Net realized gain (loss) on sale of investments (5,616) (954) (2,140) Distributions from capital gains -- 30,669 37,877 Net change in unrealized appreciation or depreciation of investments 3,898,993 (38,811) (41,304) ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 3,655,739 1,321 9,681 ====================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 10,940,739 1,257,831 1,426,856 Net transfers(2) 8,429,669 1,871,651 2,273,572 Transfers for policy loans (29,819) -- (25,507) Annuity payments (1,601) -- -- Contract charges (20,088) (51) (126) Contract terminations: Surrender benefits (519,636) (9,704) (2,095) Death benefits (112,238) (906) -- ---------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 18,687,026 3,118,821 3,672,700 ---------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year 25,021,085 -- -- ---------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 47,363,850 $ 3,120,142 $ 3,682,381 ====================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 23,812,549 -- -- Contract purchase payments 10,053,634 1,304,764 1,475,852 Net transfers(2) 7,550,055 1,929,862 2,352,845 Transfers for policy loans (28,015) -- (27,305) Contract charges (18,584) (53) (133) Contract terminations: Surrender benefits (474,882) (10,000) (2,120) Death benefits (103,275) (1,000) -- ---------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 40,791,482 3,223,573 3,799,139 ======================================================================================================================
(1) For the period May 1, 2001 (commencement of operations) to Dec. 31, 2001. (2) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 115
SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 1WI(1) 2WI(1) 1SG(1) 2SG(1) OPERATIONS Investment income (loss) -- net $ (2,315) $ (2,164) $ (4,217) $ (3,924) Net realized gain (loss) on sale of investments (5,716) (11,145) (1,806) (68,691) Distributions from capital gains -- -- -- -- Net change in unrealized appreciation or depreciation of investments 5,230 4,777 178,064 95,735 ------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (2,801) (8,532) 172,041 23,120 =============================================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 602,610 490,980 1,068,838 856,426 Net transfers(2) 328,552 606,011 856,358 1,082,956 Transfers for policy loans -- (96) -- (113) Annuity payments -- -- -- -- Contract charges (24) (59) (75) (69) Contract terminations: Surrender benefits (641) (8,255) (1,770) (23,290) Death benefits (101) -- -- -- ------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 930,396 1,088,581 1,923,351 1,915,910 ------------------------------------------------------------------------------------------------------------------------------- Net assets at beginning of year -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 927,595 $ 1,080,049 $ 2,095,392 $ 1,939,030 =============================================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year -- -- -- -- Contract purchase payments 668,859 550,610 1,263,608 986,305 Net transfers(2) 362,750 657,790 968,011 1,098,757 Transfers for policy loans -- (103) -- (120) Contract charges (28) (65) (87) (79) Contract terminations: Surrender benefits (687) (8,652) (1,794) (24,577) Death benefits (118) -- -- -- ------------------------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 1,030,776 1,199,580 2,229,738 2,060,286 ===============================================================================================================================
(1) For the period May 1, 2001 (commencement of operations) to Dec. 31, 2001. (2) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 116
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 ================================================================================================================================== 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. 117
SEGREGATED ASSET SUBACCOUNTS --------------------------------------------------------------------------------- YEAR 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 ================================================================================================================================== SEGREGATED ASSET SUBACCOUNTS --------------------------------------------------------------------------------- YEAR 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. 118
SEGREGATED ASSET SUBACCOUNTS --------------------------------------------------------------------------------- YEAR 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 ================================================================================================================================== SEGREGATED ASSET SUBACCOUNTS --------------------------------------------------------------------------------- YEAR 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 operartions (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. 119
SEGREGATED ASSET SUBACCOUNTS --------------------------------------------------------------------------------- YEAR 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 ================================================================================================================================== SEGREGATED ASSET SUBACCOUNTS --------------------------------------------------------------------------------- YEAR 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. 120
SEGREGATED ASSET SUBACCOUNTS --------------------------------------------------------------------------------- YEAR 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 invesments 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 ================================================================================================================================== SEGREGATED ASSET SUBACCOUNTS --------------------------------------------------------------------------------- YEAR 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. 121
SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------ YEAR 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 ============================================================================================================= SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------ YEAR 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. 122 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 open-end management investment companies and have the following investment managers.
SUBACCOUNT INVESTS EXCLUSIVELY IN SHARES OF INVESTMENT MANAGER --------------------------------------------------------------------------------------------------------------- BC1 AXP(R) Variable Portfolio - Blue Chip Advantage Fund IDS Life Insurance Company(1) BC2 BD1 AXP(R) Variable Portfolio - Bond Fund IDS Life Insurance Company(1) BD2 CR1 AXP(R) Variable Portfolio - Capital Resource Fund IDS Life Insurance Company(1) CR2 CM1 AXP(R) Variable Portfolio - Cash Management Fund IDS Life Insurance Company(1) CM2 DE1 AXP(R) Variable Portfolio - Diversified Equity Income Fund IDS Life Insurance Company(1) DE2 EM1 AXP(R) Variable Portfolio - Emerging Markets Fund IDS Life Insurance Company(2) EM2 ES1 AXP(R) Variable Portfolio - Equity Select Fund IDS Life Insurance Company(1) ES2 EI1 AXP(R) Variable Portfolio - Extra Income Fund IDS Life Insurance Company(1) EI2 FI1 AXP(R) Variable Portfolio - Federal Income Fund IDS Life Insurance Company(1) FI2 GB1 AXP(R) Variable Portfolio - Global Bond Fund IDS Life Insurance Company(1) GB2 GR1 AXP(R) Variable Portfolio - Growth Fund IDS Life Insurance Company(1) GR2 IE1 AXP(R) Variable Portfolio - International Fund IDS Life Insurance Company(2) IE2 MF1 AXP(R) Variable Portfolio - Managed Fund IDS Life Insurance Company(1) MF2 ND1 AXP(R) Variable Portfolio - NEW DIMENSIONS FUND(R) IDS Life Insurance Company(1) ND2 SV1 AXP(R) Variable Portfolio - Partners Small Cap Value Fund IDS Life Insurance Company(3) SV2 IV1 AXP(R) Variable Portfolio - S&P 500 Index Fund IDS Life Insurance Company(1) IV2 SC1 AXP(R) Variable Portfolio - Small Cap Advantage Fund IDS Life Insurance Company(4) SC2 ST1 AXP(R) Variable Portfolio - Stock Fund IDS Life Insurance Company(1) ST2 SA1 AXP(R) Variable Portfolio - Strategy Aggressive Fund IDS Life Insurance Company(1) SA2 1AC AIM V.I. Capital Appreciation Fund, Series II A I M Advisors, Inc. 2AC 1AD AIM V.I. Capital Development Fund, Series II A I M Advisors, Inc. 2AD 1AB Alliance VP AllianceBernstein International Alliance Capital Management, L.P. 2AB Value Portfolio (Class B) 1AL Alliance VP Growth and Income Portfolio (Class B) Alliance Capital Management, L.P. 2AL 123 SUBACCOUNT INVESTS EXCLUSIVELY IN SHARES OF INVESTMENT MANAGER --------------------------------------------------------------------------------------------------------------- 1AI American Century(R) VP International, Class II American Century Investment Management, Inc. 2AI 1AV American Century(R) VP Value, Class II American Century Investment Management, Inc. 2AV 1SR Calvert Variable Series, Inc. Social Balanced Portfolio Calvert Asset Management Company, Inc.(5) 2SR 1CG Evergreen VA Capital Growth Fund, Class L Shares Evergreen Investment Management Company, LLC(6) 2CG 1FG Fidelity VIP Growth & Income Portfolio (Service Class 2) Fidelity Management & Research Company (FMR)(7) 2FG 1FM Fidelity VIP Mid Cap Portfolio (Service Class 2) Fidelity Management & Research Company (FMR)(7) 2FM 1FO Fidelity VIP Overseas Portfolio (Service Class 2) Fidelity Management & Research Company (FMR)(8) 2FO 1RE FTVIPT Franklin Real Estate Fund - Class 2 Franklin Advisers, Inc. 2RE 1SI FTVIPT Franklin Small Cap Value Securities Fund - Class 2 Franklin Advisory Services, LLC 2SI (previously FTVIPT Franklin Value Securities Fund - Class 2) 1MS FTVIPT Mutual Shares Securities Fund - Class 2 Franklin Mutual Advisers, LLC 2MS 1UE Goldman Sachs VIT CORE(SM) U.S. Equity Fund Goldman Sachs Asset Management 2UE 1MC Goldman Sachs VIT Mid Cap Value Fund Goldman Sachs Asset Management 2MC 1ID Invesco VIF - Dynamics Fund INVESCO Funds Group, Inc. 2ID 1FS Invesco VIF - Financial Services Fund INVESCO Funds Group, Inc. 2FS 1TC Invesco VIF - Technology Fund INVESCO Funds Group, Inc. 2TC 1TL Invesco VIF - Telecommunications Fund INVESCO Funds Group, Inc. 2TL 1GT Janus Aspen Series Global Technology Portfolio: Janus Capital 2GT Service Shares 1IG Janus Aspen Series International Growth Portfolio: Janus Capital 2IG Service Shares 1IP Lazard Retirement International Equity Portfolio Lazard Asset Management 2IP 1MG MFS(R) Investors Growth Stock Series - Service Class MFS Investment Management(R) 2MG 1MD MFS(R) New Discovery Series - Service Class MFS Investment Management(R) 2MD 1UT MFS(R) Utilities Series - Service Class MFS Investment Management(R) 2UT 1PE Pioneer Equity Income VCT Portfolio - Class II Shares Pioneer 2PE 1EU Pioneer Europe VCT Portfolio - Class II Shares Pioneer 2EU 1HS Putnam VT Health Sciences Fund - Class IB Shares Putnam Investment Management, LLC 2HS 1PI Putnam VT International Growth Fund - Class IB Shares Putnam Investment Management, LLC 2PI 1VS Putnam VT Vista Fund - Class IB Shares Putnam Investment Management, LLC 2VS 1SO Strong Opportunity Fund II - Advisor Class Strong Capital Management, Inc. 2SO 124 SUBACCOUNT INVESTS EXCLUSIVELY IN SHARES OF INVESTMENT MANAGER --------------------------------------------------------------------------------------------------------------- 1IT Wanger International Small Cap Liberty Wanger Asset Management, L.P. 2IT 1SP Wanger U.S. Smaller Companies Liberty Wanger Asset Management, L.P. 2SP (previously Wanger U.S. Small Cap) 1AA Wells Fargo VT Asset Allocation Fund Wells Fargo Funds Management, LLC(9) 2AA 1WI Wells Fargo VT International Equity Fund Wells Fargo Funds Management, LLC(9) 2WI 1SG Wells Fargo VT Small Cap Growth Fund Wells Fargo Funds Management, LLC(9) 2SG
(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-adviser. (3) AEFC is the investment adviser. Royce & Associates, LLC and EQSF Advisers, Inc. are the sub-advisers. (4) AEFC is the investment adviser. Kenwood Capital Management LLC is the sub-adviser. (5) SSgA Funds Management, Inc. and Brown Capital Management are the investement sub-advisers. (6) Pilgrim Baxter Value Investors, Inc. is the sub-investment adviser. (7) FMR U.K. and FMR Far East are the sub-investment advisers. (8) FMR U.K., FMR Far East, Fidelity International Investment Advisors (FIIA) and FIIA U.K. are the sub-investment advisers. (9) Wells Capital Management Incorporated is the sub-adviser. 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. 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. VARIABLE PAYOUT Net assets allocated to contracts in the payout period are periodically compared to a computation which uses the Annuity 2000 Basic Mortality Table and which assumes future mortality improvement. The assumed investment return is 5% unless the annuitant elects otherwise, in which case the rate would be 3.5%, as regulated by the laws of the respective states. The mortality risk is fully borne by IDS Life and may result in additional amounts being transferred into the variable annuity account by IDS Life to cover greater longevity of annuitants than expected. Conversely, if amounts allocated exceed amounts required, transfers may be made to the insurance company. 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. 125 3. VARIABLE ACCOUNT EXPENSES 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. IDS Life deducts a daily mortality and expense risk fee equal, on an annual basis, to 0.75% or 0.95% of the average daily net assets of each subaccount, depending on the contract option selected. 4. CONTRACT CHARGES IDS Life deducts a contract administrative charge of $30 per year. This charge reimburses IDS Life for expenses incurred in establishing and maintaining the annuity records. Certain products may waive this charge based upon the underlying contract value. An optional maximum anniversary value death benefit rider, enhanced earnings death benefit rider and enhanced earnings plus death benefit rider are available on certain products and if selected, the related fees are deducted annually from the contract value on the contract anniversary. Additional information can be found in the applicable product's prospectus. 5. SURRENDER CHARGES IDS Life will use a surrender charge to help it recover certain expenses related to the sale of the annuity. A surrender charge of up to 8% may be deducted for surrenders up to the first ten payment years following a purchase payment, as depicted in the surrender charge schedule included in the applicable product's prospectus. Charges by IDS Life for surrenders are not identified on an individual segregated asset account basis. Charges for all segregated asset accounts amounted to $19,059,480 in 2001 and $18,285,051 in 2000. Such charges are not treated as a separate expense of the subaccounts. They are ultimately deducted from contract surrender benefits paid by IDS Life. 6. RELATED PARTY TRANSACTIONS Management fees were paid indirectly to IDS Life in its capacity as investment manager for the AXP(R) Variable Portfolio Funds. The Fund's Investment Management Agreement provides for a fee at a percentage of each Fund's average daily net assets in reducing percentages annually as follows:
FUND PERCENTAGE RANGE --------------------------------------------------------------------------------------- AXP(R) Variable Portfolio - Blue Chip Advantage Fund 0.560% to 0.470% AXP(R) Variable Portfolio - Bond Fund 0.610% to 0.535% AXP(R) Variable Portfolio - Capital Resource Fund 0.630% to 0.570% AXP(R) Variable Portfolio - Cash Management Fund 0.510% to 0.440% AXP(R) Variable Portfolio - Diversified Equity Income Fund 0.560% to 0.470% AXP(R) Variable Portfolio - Emerging Markets Fund 1.170% to 1.095% AXP(R) Variable Portfolio - Equity Select Fund 0.650% to 0.560% AXP(R) Variable Portfolio - Extra Income Fund 0.620% to 0.545% AXP(R) Variable Portfolio - Federal Income Fund 0.610% to 0.535% AXP(R) Variable Portfolio - Global Bond Fund 0.840% to 0.780% AXP(R) Variable Portfolio - Growth Fund 0.630% to 0.570% AXP(R) Variable Portfolio - International Fund 0.870% to 0.795% AXP(R) Variable Portfolio - Managed Fund 0.630% to 0.550% AXP(R) Variable Portfolio - NEW DIMENSIONS FUND(R) 0.630% to 0.570% AXP(R) Variable Portfolio - Partners Small Cap Value Fund 1.020% to 0.920% AXP(R) Variable Portfolio - S&P 500 Index Fund 0.290% to 0.260% AXP(R) Variable Portfolio - Small Cap Advantage Fund 0.790% to 0.650% AXP(R) Variable Portfolio - Stock Fund 0.560% to 0.470% AXP(R) Variable Portfolio - Strategy Aggressive Fund 0.650% to 0.575%
IDS Life, in turn, pays to AEFC, an affiliate of IDS Life, a fee based on a percentage of each Fund's average daily net assets for the year. This fee is equal to 0.35% for AXP Variable Portfolio - International Fund and AXP Variable Portfolio - S&P 500 Index Fund and 0.25% for each remaining Fund. The AXP(R) Variable Portfolio Funds also have an agreement with IDS Life for distribution services. Under a Plan and Agreement of Distribution, each Fund pays a distribution fee at an annual rate up to 0.125% of each Fund's average daily net assets. 126 The AXP(R) Variable Portfolio Funds have an Administrative Services Agreement with AEFC. Under this agreement, each Fund pays AEFC a fee for administration and accounting services at a percentage of each Fund's average daily net assets in reducing percentages annually as follows:
FUND PERCENTAGE RANGE --------------------------------------------------------------------------------------- AXP(R) Variable Portfolio - Blue Chip Advantage Fund 0.040% to 0.020% AXP(R) Variable Portfolio - Bond Fund 0.050% to 0.025% AXP(R) Variable Portfolio - Capital Resource Fund 0.050% to 0.030% AXP(R) Variable Portfolio - Cash Management Fund 0.030% to 0.020% AXP(R) Variable Portfolio - Diversified Equity Income Fund 0.040% to 0.020% AXP(R) Variable Portfolio - Emerging Markets Fund 0.100% to 0.050% AXP(R) Variable Portfolio - Equity Select Fund 0.060% to 0.030% AXP(R) Variable Portfolio - Extra Income Fund 0.050% to 0.025% AXP(R) Variable Portfolio - Federal Income Fund 0.050% to 0.025% AXP(R) Variable Portfolio - Global Bond Fund 0.060% to 0.040% AXP(R) Variable Portfolio - Growth Fund 0.050% to 0.030% AXP(R) Variable Portfolio - International Fund 0.060% to 0.035% AXP(R) Variable Portfolio - Managed Fund 0.040% to 0.020% AXP(R) Variable Portfolio - NEW DIMENSIONS FUND(R) 0.050% to 0.030% AXP(R) Variable Portfolio - Partners Small Cap Value Fund 0.080% to 0.055% AXP(R) Variable Portfolio - S&P 500 Index Fund 0.080% to 0.065% AXP(R) Variable Portfolio - Small Cap Advantage Fund 0.060% to 0.035% AXP(R) Variable Portfolio - Stock Fund 0.040% to 0.020% AXP(R) Variable Portfolio - Strategy Aggressive Fund 0.060% to 0.035%
The AXP(R) Variable Portfolio Funds pay custodian fees to American Express Trust Company, an affiliate of IDS Life. 7. INVESTMENT IN SHARES The subaccounts' investments in shares of the Funds as of Dec. 31, 2001 were as follows:
SUBACCOUNT INVESTMENT SHARES NAV ------------------------------------------------------------------------------------------------------- BC1 AXP(R) Variable Portfolio - Blue Chip Advantage Fund 4,978,008 $ 8.19 BC2 4,123,794 8.19 ------------------------------------------------------------------------------------------------------- BD1 AXP(R) Variable Portfolio - Bond Fund 11,453,301 10.47 BD2 9,117,143 10.47 ------------------------------------------------------------------------------------------------------- CR1 AXP(R) Variable Portfolio - Capital Resource Fund 939,661 21.69 CR2 933,588 21.69 ------------------------------------------------------------------------------------------------------- CM1 AXP(R) Variable Portfolio - Cash Management Fund 287,316,788 1.00 CM2 266,316,180 1.00 ------------------------------------------------------------------------------------------------------- DE1 AXP(R) Variable Portfolio - Diversified Equity Income Fund 4,159,687 10.10 DE2 4,431,607 10.10 ------------------------------------------------------------------------------------------------------- EM1 AXP(R) Variable Portfolio - Emerging Markets Fund 149,388 7.41 EM2 174,369 7.41 ------------------------------------------------------------------------------------------------------- ES1 AXP(R) Variable Portfolio - Equity Select Fund 217,462 10.16 ES2 243,488 10.16 ------------------------------------------------------------------------------------------------------- EI1 AXP(R) Variable Portfolio - Extra Income Fund 12,697,285 6.57 EI2 8,362,801 6.57 ------------------------------------------------------------------------------------------------------- FI1 AXP(R) Variable Portfolio - Federal Income Fund 6,263,989 10.33 FI2 5,535,927 10.33 ------------------------------------------------------------------------------------------------------- GB1 AXP(R) Variable Portfolio - Global Bond Fund 2,556,527 9.55 GB2 1,774,962 9.55 ------------------------------------------------------------------------------------------------------- GR1 AXP(R) Variable Portfolio - Growth Fund 12,978,972 6.51 GR2 12,892,886 6.51 ------------------------------------------------------------------------------------------------------- IE1 AXP(R) Variable Portfolio - International Fund 1,551,751 8.10 IE2 1,315,663 8.10 ------------------------------------------------------------------------------------------------------- MF1 AXP(R) Variable Portfolio - Managed Fund 3,239,902 15.42 MF2 2,334,619 15.42 ------------------------------------------------------------------------------------------------------- ND1 AXP(R) Variable Portfolio - NEW DIMENSIONS FUND(R) 17,093,707 15.97 ND2 15,400,343 15.97 ------------------------------------------------------------------------------------------------------- SV1 AXP(R) Variable Portfolio - Partners Small Cap Value Fund 617,192 10.72 SV2 683,447 10.72 ------------------------------------------------------------------------------------------------------- 127 SUBACCOUNT INVESTMENT SHARES NAV ------------------------------------------------------------------------------------------------------- IV1 AXP(R) Variable Portfolio - S&P 500 Index Fund 4,073,157 $ 7.82 IV2 3,606,273 7.82 ------------------------------------------------------------------------------------------------------- SC1 AXP(R) Variable Portfolio - Small Cap Advantage Fund 2,500,214 10.47 SC2 2,349,328 10.47 ------------------------------------------------------------------------------------------------------- ST1 AXP(R) Variable Portfolio - Stock Fund 52,358 9.49 ST2 63,882 9.49 ------------------------------------------------------------------------------------------------------- SA1 AXP(R) Variable Portfolio - Strategy Aggressive Fund 6,360,882 8.34 SA2 5,725,049 8.34 ------------------------------------------------------------------------------------------------------- 1AC AIM V.I. Capital Appreciation Fund, Series II 76,947 21.70 2AC 76,949 21.70 ------------------------------------------------------------------------------------------------------- 1AD AIM V.I. Capital Development Fund, Series II 100,646 11.94 2AD 120,040 11.94 ------------------------------------------------------------------------------------------------------- 1AB Alliance VP AllianceBernstein International Value 78,137 9.87 Portfolio (Class B) 2AB 79,695 9.87 ------------------------------------------------------------------------------------------------------- 1AL Alliance VP Growth and Income Portfolio (Class B) 191,793 22.03 2AL 243,567 22.03 ------------------------------------------------------------------------------------------------------- 1AI American Century(R) VP International, Class II 272,655 6.59 2AI 275,794 6.59 ------------------------------------------------------------------------------------------------------- 1AV American Century(R) VP Value, Class II 1,040,363 7.44 2AV 1,025,771 7.44 ------------------------------------------------------------------------------------------------------- 1SR Calvert Variable Series, Inc. Social Balanced Portfolio 3,070,193 1.76 2SR 2,270,816 1.76 ------------------------------------------------------------------------------------------------------- 1CG Evergreen VA Capital Growth Fund, Class L Shares 68,743 14.03 2CG 106,406 14.03 ------------------------------------------------------------------------------------------------------- 1FG Fidelity VIP Growth & Income Portfolio (Service Class 2) 636,799 13.07 2FG 486,121 13.07 ------------------------------------------------------------------------------------------------------- 1FM Fidelity VIP Mid Cap Portfolio (Service Class 2) 356,567 19.49 2FM 371,762 19.49 ------------------------------------------------------------------------------------------------------- 1FO Fidelity VIP Overseas Portfolio (Service Class 2) 147,455 13.81 2FO 146,910 13.81 ------------------------------------------------------------------------------------------------------- 1RE FTVIPT Franklin Real Estate Fund - Class 2 1,471,025 17.99 2RE 1,833,921 17.99 ------------------------------------------------------------------------------------------------------- 1SI FTVIPT Franklin Small Cap Value Securities Fund - Class 2 1,181,766 10.89 2SI (previously FTVIPT Franklin Value 1,341,405 10.89 Securities Fund - Class 2) ------------------------------------------------------------------------------------------------------- 1MS FTVIPT Mutual Shares Securities Fund - Class 2 76,607 14.03 2MS 64,847 14.03 ------------------------------------------------------------------------------------------------------- 1UE Goldman Sachs VIT CORE(SM) U.S. Equity Fund 5,608,830 10.94 2UE 4,778,336 10.94 ------------------------------------------------------------------------------------------------------- 1MC Goldman Sachs VIT Mid Cap Value Fund 2,996,984 11.29 2MC 2,890,767 11.29 ------------------------------------------------------------------------------------------------------- 1ID Invesco VIF - Dynamics Fund 109,167 12.54 2ID 119,826 12.54 ------------------------------------------------------------------------------------------------------- 1FS Invesco VIF - Financial Services Fund 69,979 12.42 2FS 84,044 12.42 ------------------------------------------------------------------------------------------------------- 1TC Invesco VIF - Technology Fund 53,853 15.37 2TC 28,956 15.37 ------------------------------------------------------------------------------------------------------- 1TL Invesco VIF - Telecommunications Fund 92,653 5.57 2TL 60,965 5.57 ------------------------------------------------------------------------------------------------------- 1GT Janus Aspen Series Global Technology Portfolio: Service Shares 3,538,270 4.08 2GT 3,623,491 4.08 ------------------------------------------------------------------------------------------------------- 1IG Janus Aspen Series International Growth Portfolio: Service Shares 1,672,315 23.30 2IG 1,583,883 23.30 ------------------------------------------------------------------------------------------------------- 1IP Lazard Retirement International Equity Portfolio 1,572,259 9.09 2IP 1,276,639 9.09 ------------------------------------------------------------------------------------------------------- 1MG MFS(R) Investors Growth Stock Series - Service Class 3,556,027 9.67 2MG 3,516,040 9.67 ------------------------------------------------------------------------------------------------------- 128 SUBACCOUNT INVESTMENT SHARES NAV ------------------------------------------------------------------------------------------------------- 1MD MFS(R) New Discovery Series - Service Class 2,171,118 $ 15.22 2MD 2,015,899 15.22 ------------------------------------------------------------------------------------------------------- 1UT MFS(R) Utilities Series - Service Class 158,069 15.90 2UT 168,051 15.90 ------------------------------------------------------------------------------------------------------- 1PE Pioneer Equity Income VCT Portfolio - Class II Shares 58,313 18.49 2PE 69,424 18.49 ------------------------------------------------------------------------------------------------------- 1EU Pioneer Europe VCT Portfolio - Class II Shares 16,880 8.29 2EU 14,285 8.29 ------------------------------------------------------------------------------------------------------- 1HS Putnam VT Health Sciences Fund - Class IB Shares 146,192 11.70 2HS 179,335 11.70 ------------------------------------------------------------------------------------------------------- 1PI Putnam VT International Growth Fund - Class IB Shares 169,267 12.36 2PI 191,201 12.36 ------------------------------------------------------------------------------------------------------- 1VS Putnam VT Vista Fund - Class IB Shares 6,568,181 11.34 2VS 5,630,732 11.34 ------------------------------------------------------------------------------------------------------- 1SO Strong Opportunity Fund II - Advisor Class 191,415 19.39 2SO 189,352 19.39 ------------------------------------------------------------------------------------------------------- 1IT Wanger International Smaller Companies 1,666,454 15.40 2IT 1,534,254 15.40 ------------------------------------------------------------------------------------------------------- 1SP Wanger U.S. Smaller Companies 2,416,299 22.25 2SP (previously Wanger U.S. Small Cap) 2,128,712 22.25 ------------------------------------------------------------------------------------------------------- 1AA Wells Fargo VT Asset Allocation Fund 252,459 12.32 2AA 298,895 12.32 ------------------------------------------------------------------------------------------------------- 1WI Wells Fargo VT International Equity Fund 123,679 7.50 2WI 144,006 7.50 ------------------------------------------------------------------------------------------------------- 1SG Wells Fargo VT Small Cap Growth Fund 266,929 7.85 2SG 247,010 7.85 -------------------------------------------------------------------------------------------------------
8. INVESTMENT TRANSACTIONS The subaccounts' purchases of the Funds' shares, including reinvestment of dividend distributions, for the year ended Dec. 31, 2001 were as follows:
SUBACCOUNT INVESTMENT PURCHASES ------------------------------------------------------------------------------------------------------- BC1 AXP(R) Variable Portfolio - Blue Chip Advantage Fund $ 9,730,729 BC2 9,345,485 ------------------------------------------------------------------------------------------------------- BD1 AXP(R) Variable Portfolio - Bond Fund 74,378,460 BD2 64,018,370 ------------------------------------------------------------------------------------------------------- CR1 AXP(R) Variable Portfolio - Capital Resource Fund 6,123,203 CR2 5,205,160 ------------------------------------------------------------------------------------------------------- CM1 AXP(R) Variable Portfolio - Cash Management Fund 136,036,279 CM2 156,169,973 ------------------------------------------------------------------------------------------------------- DE1 AXP(R) Variable Portfolio - Diversified Equity Income Fund 27,716,708 DE2 32,691,012 ------------------------------------------------------------------------------------------------------- EM1 AXP(R) Variable Portfolio - Emerging Markets Fund 734,933 EM2 785,812 ------------------------------------------------------------------------------------------------------- ES1(1) AXP(R) Variable Portfolio - Equity Select Fund 2,269,769 ES2(1) 2,330,770 ------------------------------------------------------------------------------------------------------- EI1 AXP(R) Variable Portfolio - Extra Income Fund 43,103,613 EI2 30,829,441 ------------------------------------------------------------------------------------------------------- FI1 AXP(R) Variable Portfolio - Federal Income Fund 42,673,918 FI2 45,602,214 ------------------------------------------------------------------------------------------------------- GB1 AXP(R) Variable Portfolio - Global Bond Fund 10,853,292 GB2 8,794,757 ------------------------------------------------------------------------------------------------------- GR1 AXP(R) Variable Portfolio - Growth Fund 23,721,644 GR2 28,506,847 ------------------------------------------------------------------------------------------------------- IE1 AXP(R) Variable Portfolio - International Fund 7,743,252 IE2 4,123,423 ------------------------------------------------------------------------------------------------------- 129 SUBACCOUNT INVESTMENT PURCHASES ----------------------------------------------------------------------------------------------------------- MF1 AXP(R) Variable Portfolio - Managed Fund $ 16,647,377 MF2 13,230,889 ----------------------------------------------------------------------------------------------------------- ND1 AXP(R) Variable Portfolio - NEW DIMENSIONS FUND(R) 86,961,867 ND2 95,031,149 ----------------------------------------------------------------------------------------------------------- SV1(2) AXP(R) Variable Portfolio - Partners Small Cap Value Fund 5,984,218 SV2(2) 6,611,254 ----------------------------------------------------------------------------------------------------------- IV1 AXP(R) Variable Portfolio - S&P 500 Index Fund 23,311,366 IV2 22,126,125 ----------------------------------------------------------------------------------------------------------- SC1 AXP(R) Variable Portfolio - Small Cap Advantage Fund 9,164,777 SC2 9,220,820 ----------------------------------------------------------------------------------------------------------- ST1(3) AXP(R) Variable Portfolio - Stock Fund 498,682 ST2(3) 670,228 ----------------------------------------------------------------------------------------------------------- SA1 AXP(R) Variable Portfolio - Strategy Aggressive Fund 11,509,683 SA2 14,080,627 ----------------------------------------------------------------------------------------------------------- 1AC(3) AIM V.I. Capital Appreciation Fund, Series II 1,733,959 2AC(3) 1,691,550 ----------------------------------------------------------------------------------------------------------- 1AD(3) AIM V.I. Capital Development Fund, Series II 1,116,271 2AD(3) 1,440,113 ----------------------------------------------------------------------------------------------------------- 1AB(3) Alliance VP AllianceBernstein International Value Portfolio (Class B) 742,344 2AB(3) 770,545 ----------------------------------------------------------------------------------------------------------- 1AL(3) Alliance VP Growth and Income Portfolio (Class B) 4,097,929 2AL(3) 5,263,485 ----------------------------------------------------------------------------------------------------------- 1AI(3) American Century(R) VP International, Class II 1,776,574 2AI(3) 1,800,917 ----------------------------------------------------------------------------------------------------------- 1AV(3) American Century(R) VP Value, Class II 7,317,486 2AV(3) 7,124,635 ----------------------------------------------------------------------------------------------------------- 1SR Calvert Variable Series, Inc. Social Balanced Portfolio 4,684,202 2SR 3,292,743 ----------------------------------------------------------------------------------------------------------- 1CG(3) Evergreen VA Capital Growth Fund, Class L Shares 961,191 2CG(3) 1,472,741 ----------------------------------------------------------------------------------------------------------- 1FG(3) Fidelity VIP Growth & Income Portfolio (Service Class 2) 8,040,053 2FG(3) 6,128,895 ----------------------------------------------------------------------------------------------------------- 1FM(3) Fidelity VIP Mid Cap Portfolio (Service Class 2) 6,594,332 2FM(3) 6,894,504 ----------------------------------------------------------------------------------------------------------- 1FO(3) Fidelity VIP Overseas Portfolio (Service Class 2) 2,017,485 2FO(3) 1,991,368 ----------------------------------------------------------------------------------------------------------- 1RE FTVIPT Franklin Real Estate Fund - Class 2 18,043,557 2RE 23,412,180 ----------------------------------------------------------------------------------------------------------- 1SI FTVIPT Franklin Small Cap Value Securities Fund - Class 2 9,269,299 2SI (previously FTVIPT Franklin Value Securities Fund - Class 2) 10,879,115 ----------------------------------------------------------------------------------------------------------- 1MS(3) FTVIPT Mutual Shares Securities Fund - Class 2 1,042,404 2MS(3) 968,099 ----------------------------------------------------------------------------------------------------------- 1UE Goldman Sachs VIT CORE(SM) U.S. Equity Fund 16,164,320 2UE 17,171,862 ----------------------------------------------------------------------------------------------------------- 1MC Goldman Sachs VIT Mid Cap Value Fund 20,870,617 2MC 22,606,561 ----------------------------------------------------------------------------------------------------------- 1ID(3) Invesco VIF - Dynamics Fund 1,263,352 2ID(3) 1,415,977 ----------------------------------------------------------------------------------------------------------- 1FS(3) Invesco VIF - Financial Services Fund 877,503 2FS(3) 1,026,773 ----------------------------------------------------------------------------------------------------------- 1TC(3) Invesco VIF - Technology Fund 779,285 2TC(3) 417,800 ----------------------------------------------------------------------------------------------------------- 1TL(3) Invesco VIF - Telecommunications Fund 496,666 2TL(3) 326,267 ----------------------------------------------------------------------------------------------------------- 1GT Janus Aspen Series Global Technology Portfolio: Service Shares 6,942,376 2GT 8,419,474 ----------------------------------------------------------------------------------------------------------- 130 SUBACCOUNT INVESTMENT PURCHASES ----------------------------------------------------------------------------------------------------------- 1IG Janus Aspen Series International Growth Portfolio: Service Shares $ 23,921,118 2IG 23,598,573 ----------------------------------------------------------------------------------------------------------- 1IP Lazard Retirement International Equity Portfolio 7,273,820 2IP 6,676,168 ----------------------------------------------------------------------------------------------------------- 1MG MFS(R) Investors Growth Stock Series - Service Class 22,122,737 2MG 22,995,294 ----------------------------------------------------------------------------------------------------------- 1MD MFS(R) New Discovery Series - Service Class 19,855,129 2MD 19,940,318 ----------------------------------------------------------------------------------------------------------- 1UT(3) MFS(R) Utilities Series - Service Class 2,661,695 2UT(3) 2,747,837 ----------------------------------------------------------------------------------------------------------- 1PE(3) Pioneer Equity Income VCT Portfolio - Class II Shares 1,065,007 2PE(3) 1,314,419 ----------------------------------------------------------------------------------------------------------- 1EU(3) Pioneer Europe VCT Portfolio - Class II Shares 148,658 2EU(3) 115,572 ----------------------------------------------------------------------------------------------------------- 1HS(3) Putnam VT Health Sciences Fund - Class IB Shares 1,712,019 2HS(3) 2,107,867 ----------------------------------------------------------------------------------------------------------- 1PI(3) Putnam VT International Growth Fund - Class IB Shares 2,046,664 2PI(3) 2,318,634 ----------------------------------------------------------------------------------------------------------- 1VS Putnam VT Vista Fund - Class IB Shares 31,154,568 2VS 32,082,927 ----------------------------------------------------------------------------------------------------------- 1SO(3) Strong Opportunity Fund II - Advisor Class 3,961,868 2SO(3) 3,868,892 ----------------------------------------------------------------------------------------------------------- 1IT Wanger International Small Cap 16,288,871 2IT 15,789,248 ----------------------------------------------------------------------------------------------------------- 1SP Wanger U.S. Smaller Companies 18,136,144 2SP (previously Wanger U.S. Small Cap) 18,555,976 ----------------------------------------------------------------------------------------------------------- 1AA(1) Wells Fargo VT Asset Allocation Fund 3,199,606 2AA(1) 3,754,382 ----------------------------------------------------------------------------------------------------------- 1WI(1) Wells Fargo VT International Equity Fund 1,017,127 2WI(1) 1,187,676 ----------------------------------------------------------------------------------------------------------- 1SG(1) Wells Fargo VT Small Cap Growth Fund 1,939,776 2SG(1) 2,160,538 -----------------------------------------------------------------------------------------------------------
(1) Operations commenced on May 1, 2001. (2) Operations commenced on Aug. 14, 2001. (3) Operations commenced on Aug. 13, 2001. 9. FINANCIAL HIGHLIGHTS The table below shows certain financial information regarding the subaccounts.
BC1 BC2 BD1 BD2 CR1 CR2 CM1 ------------------------------------------------------------------------------- AT DEC. 31, 2000 Accumulation unit value $ 0.98 $ 0.99 $ 1.06 $ 1.06 $ 0.93 $ 0.93 $ 1.06 --------------------------------------------------------------------------------------------------------------- AT DEC. 31, 2001 Accumulation unit value $ 0.81 $ 0.82 $ 1.13 $ 1.13 $ 0.76 $ 0.76 $ 1.09 Units (000s) 49,897 41,083 106,760 83,968 26,779 26,327 265,455 Net assets (000s) $ 40,748 $ 33,763 $ 120,835 $ 95,910 $ 20,374 $ 20,244 $ 289,729 --------------------------------------------------------------------------------------------------------------- FOR YEAR ENDED DEC. 31, 2001 Investment income(1) 0.75% 0.75% 6.38% 6.38% 0.31% 0.30% 3.57% Expense ratio(2) 0.95% 0.75% 0.95% 0.75% 0.95% 0.75% 0.95% Total return(3) (17.35%) (17.17%) 6.60% 6.60% (18.28%) (18.28%) 2.83% --------------------------------------------------------------------------------------------------------------- CM2 DE1 DE2 -------------------------------------- AT DEC. 31, 2000 Accumulation unit value $ 1.06 $ 1.01 $ 1.01 ------------------------------------------------------------------------ AT DEC. 31, 2001 Accumulation unit value $ 1.09 $ 1.02 $ 1.02 Units (000s) 243,870 41,299 43,328 Net assets (000s) $ 267,061 $ 42,181 $ 44,814 ------------------------------------------------------------------------ FOR YEAR ENDED DEC. 31, 2001 Investment income(1) 3.55% 1.26% 1.26% Expense ratio(2) 0.75% 0.95% 0.75% Total return(3) 2.83% 0.99% 0.99% ------------------------------------------------------------------------ 131 EM1 EM2 ES1(4) ES2(4) EI1 EI2 ----------------------------------------------------------------------- AT DEC. 31, 2000 Accumulation unit value $ 0.74 $ 0.74 $ -- $ -- $ 0.91 $ 0.91 ------------------------------------------------------------------------------------------------------- AT DEC. 31, 2001 Accumulation unit value $ 0.72 $ 0.72 $ 0.99 $ 1.00 $ 0.94 $ 0.95 Units (000s) 1,542 1,789 2,238 2,489 88,813 58,348 Net assets (000s) $ 1,108 $ 1,291 $ 2,224 $ 2,477 $ 84,017 $ 55,486 ------------------------------------------------------------------------------------------------------- FOR YEAR ENDED DEC. 31, 2001 Investment income(1) 0.02% 0.02% -- -- 10.93% 10.92% Expense ratio(2) 0.95% 0.75% 0.95% 0.75% 0.95% 0.75% Total return(3) (2.70%) (2.70%) (1.00%) 0.00% 3.30% 4.40% ------------------------------------------------------------------------------------------------------- FI1 FI2 GB1 GB2 ------------------------------------------- AT DEC. 31, 2000 Accumulation unit value $ 1.08 $ 1.08 $ 1.02 $ 1.03 ----------------------------------------------------------------------------- AT DEC. 31, 2001 Accumulation unit value $ 1.13 $ 1.14 $ 1.03 $ 1.03 Units (000s) 56,966 50,510 23,970 16,572 Net assets (000s) $ 64,826 $ 57,952 $ 24,619 $ 17,099 ----------------------------------------------------------------------------- FOR YEAR ENDED DEC. 31, 2001 Investment income(1) 4.55% 4.52% 3.58% 3.62% Expense ratio(2) 0.95% 0.75% 0.95% 0.75% Total return(3) 4.63% 5.56% 0.98% 0.00% ----------------------------------------------------------------------------- GR1 GR2 IE1 IE2 MF1 MF2 ----------------------------------------------------------------------- AT DEC. 31, 2000 Accumulation unit value $ 0.94 $ 0.95 $ 0.95 $ 0.95 $ 1.05 $ 1.05 ------------------------------------------------------------------------------------------------------- AT DEC. 31, 2001 Accumulation unit value $ 0.64 $ 0.65 $ 0.67 $ 0.67 $ 0.93 $ 0.94 Units (000s) 130,764 129,186 18,664 15,821 53,096 37,760 Net assets (000s) $ 84,435 $ 83,920 $ 12,551 $ 10,653 $ 49,925 $ 35,997 ------------------------------------------------------------------------------------------------------- FOR YEAR ENDED DEC. 31, 2001 Investment income(1) -- -- 1.23% 1.23% 2.53% 2.53% Expense ratio(2) 0.95% 0.75% 0.95% 0.75% 0.95% 0.75% Total return(3) (31.91%) (31.58%) (29.47%) (29.47%) (11.43%) (10.48%) ------------------------------------------------------------------------------------------------------- ND1 ND2 SV1(5) SV2(5) ---------------------------------------------- AT DEC. 31, 2000 Accumulation unit value $ 1.07 $ 1.07 $ -- $ -- ------------------------------------------------------------------------------ AT DEC. 31, 2001 Accumulation unit value $ 0.88 $ 0.89 $ 1.07 $ 1.07 Units (000s) 307,320 276,054 6,314 6,885 Net assets (000s) $ 272,882 $ 246,108 $ 6,763 $ 7,380 ------------------------------------------------------------------------------ FOR YEAR ENDED DEC. 31, 2001 Investment income(1) 0.23% 0.24% -- -- Expense ratio(2) 0.95% 0.75% 0.95% 0.75% Total return(3) (17.76%) (16.82%) 7.00% 7.00% ------------------------------------------------------------------------------ IV1 IV2 SC1 SC2 ST1(6) ST2(6) ------------------------------------------------------------------------- AT DEC. 31, 2000 Accumulation unit value $ 0.91 $ 0.91 $ 1.16 $ 1.16 $ -- $ -- --------------------------------------------------------------------------------------------------------- AT DEC. 31, 2001 Accumulation unit value $ 0.79 $ 0.79 $ 1.07 $ 1.08 $ 0.96 $ 0.97 Units (000s) 40,575 35,957 24,346 22,792 517 628 Net assets (000s) $ 32,012 $ 28,329 $ 26,157 $ 24,594 $ 499 $ 606 --------------------------------------------------------------------------------------------------------- FOR YEAR ENDED DEC. 31, 2001 Investment income(1) 0.91% 0.93% -- -- 0.16% 0.13% Expense ratio(2) 0.95% 0.75% 0.95% 0.75% 0.95% 0.75% Total return(3) (13.19%) (13.19%) (7.76%) (6.90%) (4.00%) (3.00%) --------------------------------------------------------------------------------------------------------- SA1 SA2 1AC(6) 2AC(6) ------------------------------------------------ AT DEC. 31, 2000 Accumulation unit value $ 1.21 $ 1.22 $ -- $ -- --------------------------------------------------------------------------------- AT DEC. 31, 2001 Accumulation unit value $ 0.81 $ 0.81 $ 0.98 $ 0.98 Units (000s) 65,574 58,748 1,711 1,710 Net assets (000s) $ 53,045 $ 47,765 $ 1,670 $ 1,670 --------------------------------------------------------------------------------- FOR YEAR ENDED DEC. 31, 2001 Investment income(1) 0.21% 0.21% -- -- Expense ratio(2) 0.95% 0.75% 0.95% 0.75% Total return(3) (33.06%) (33.61%) (2.00%) (2.00%) --------------------------------------------------------------------------------- 1AD(6) 2AD(6) 1AB(6) 2AB(6) 1AL(6) 2AL(6) ------------------------------------------------------------------------ AT DEC. 31, 2000 Accumulation unit value $ -- $ -- $ -- $ -- $ -- $ -- --------------------------------------------------------------------------------------------------------- AT DEC. 31, 2001 Accumulation unit value $ 0.98 $ 0.98 $ 0.98 $ 0.98 $ 0.96 $ 0.96 Units (000s) 1,224 1,459 790 805 4,363 5,550 Net assets (000s) $ 1,202 $ 1,433 $ 771 $ 787 $ 4,225 $ 5,366 --------------------------------------------------------------------------------------------------------- FOR YEAR ENDED DEC. 31, 2001 Investment income(1) -- -- -- -- -- -- Expense ratio(2) 0.95% 0.75% 0.95% 0.75% 0.95% 0.75% Total return(3) (2.00%) (2.00%) (2.00%) (2.00%) (4.00%) (4.00%) --------------------------------------------------------------------------------------------------------- 1AI(6) 2AI(6) 1AV(6) 2AV(6) ---------------------------------------- AT DEC. 31, 2000 Accumulation unit value $ -- $ -- $ -- $ -- ------------------------------------------------------------------------ AT DEC. 31, 2001 Accumulation unit value $ 0.93 $ 0.93 $ 1.04 $ 1.04 Units (000s) 1,927 1,950 7,298 7,356 Net assets (000s) $ 1,797 $ 1,817 $ 7,740 $ 7,632 ------------------------------------------------------------------------ FOR YEAR ENDED DEC. 31, 2001 Investment income(1) -- -- -- -- Expense ratio(2) 0.95% 0.75% 0.95% 0.75% Total return(3) (7.00%) (7.00%) 4.00% 4.00% ------------------------------------------------------------------------ 132 1SR 2SR 1CG(6) 2CG(6) 1FG(6) 2FG(6) ------------------------------------------------------------------- AT DEC. 31, 2000 Accumulation unit value $ 0.96 $ 0.96 $ -- $ -- $ -- $ -- -------------------------------------------------------------------------------------------------- AT DEC. 31, 2001 Accumulation unit value $ 0.89 $ 0.89 $ 0.95 $ 0.95 $ 1.00 $ 1.00 Units (000s) 6,090 4,490 1,015 1,570 8,177 6,363 Net assets (000s) $ 5,404 $ 3,997 $ 964 $ 1,493 $ 8,323 $ 6,354 -------------------------------------------------------------------------------------------------- FOR YEAR ENDED DEC. 31, 2001 Investment income(1) 5.84% 5.83% -- -- -- -- Expense ratio(2) 0.95% 0.75% 0.95% 0.75% 0.95% 0.75% Total return(3) (7.29%) (7.29%) (5.00%) (5.00%) 0.00% 0.00% -------------------------------------------------------------------------------------------------- 1FM(6) 2FM(6) 1FO(6) 2FO(6) -------------------------------------------- AT DEC. 31, 2000 Accumulation unit value $ -- $ -- $ -- $ -- ----------------------------------------------------------------------------- AT DEC. 31, 2001 Accumulation unit value $ 1.04 $ 1.04 $ 0.94 $ 0.95 Units (000s) 6,689 6,903 2,157 2,147 Net assets (000s) $ 6,950 $ 7,246 $ 2,036 $ 2,029 ----------------------------------------------------------------------------- FOR YEAR ENDED DEC. 31, 2001 Investment income(1) -- -- Expense ratio(2) 0.95% 0.75% 0.95% 0.75% Total return(3) 4.00% 4.00% (6.00%) (5.00%) ----------------------------------------------------------------------------- 1RE 2RE 1SI 2SI 1MS(6) 2MS(6) ------------------------------------------------------------------- AT DEC. 31, 2000 Accumulation unit value $ 1.25 $ 1.25 $ 1.19 $ 1.19 $ -- $ -- -------------------------------------------------------------------------------------------------- AT DEC. 31, 2001 Accumulation unit value $ 1.33 $ 1.34 $ 1.34 $ 1.35 $ 0.96 $ 0.97 Units (000s) 19,803 24,477 9,584 10,800 1,114 942 Net assets (000s) $ 26,464 $ 32,992 $ 12,869 $ 14,608 $ 1,075 $ 910 -------------------------------------------------------------------------------------------------- FOR YEAR ENDED DEC. 31, 2001 Investment income(1) 3.69% 3.61% 0.36% 0.38% -- -- Expense ratio(2) 0.95% 0.75% 0.95% 0.75% 0.95% 0.75% Total return(3) 6.40% 7.20% 12.61% 13.45% (4.00%) (3.00%) -------------------------------------------------------------------------------------------------- 1UE 2UE 1MC 2MC --------------------------------------------- AT DEC. 31, 2000 Accumulation unit value $ 0.99 $ 0.99 $ 1.23 $ 1.23 ---------------------------------------------------------------------------- AT DEC. 31, 2001 Accumulation unit value $ 0.86 $ 0.86 $ 1.37 $ 1.37 Units (000s) 71,185 60,343 24,711 23,748 Net assets (000s) $ 61,361 $ 52,275 $ 33,836 $ 32,637 ---------------------------------------------------------------------------- FOR YEAR ENDED DEC. 31, 2001 Investment income(1) 0.48% 0.50% 1.38% 1.51% Expense ratio(2) 0.95% 0.75% 0.95% 0.75% Total return(3) (13.13%) (13.13%) 11.38% 11.38% ---------------------------------------------------------------------------- 1ID(6) 2ID(6) 1FS(6) 2FS(6) 1TC(6) 2TC(6) ------------------------------------------------------------------- AT DEC. 31, 2000 Accumulation unit value $ -- $ -- $ -- $ -- $ -- $ -- -------------------------------------------------------------------------------------------------- AT DEC. 31, 2001 Accumulation unit value $ 0.96 $ 0.96 $ 0.96 $ 0.97 $ 0.91 $ 0.91 Units (000s) 1,426 1,550 901 1,081 911 490 Net assets (000s) $ 1,369 $ 1,503 $ 869 $ 1,044 $ 828 $ 445 -------------------------------------------------------------------------------------------------- FOR YEAR ENDED DEC. 31, 2001 Investment income(1) -- -- -- -- -- -- Expense ratio(2) 0.95% 0.75% 0.95% 0.75% 0.95% 0.75% Total return(3) (4.00%) (4.00%) (4.00%) (3.00%) (9.00%) (9.00%) -------------------------------------------------------------------------------------------------- 1TL(6) 2TL(6) 1GT 2GT --------------------------------------------- AT DEC. 31, 2000 Accumulation unit value $ -- $ -- $ 0.68 $ 0.68 ----------------------------------------------------------------------------- AT DEC. 31, 2001 Accumulation unit value $ 0.84 $ 0.84 $ 0.42 $ 0.43 Units (000s) 614 404 34,050 34,767 Net assets (000s) $ 516 $ 340 $ 14,436 $ 14,784 ----------------------------------------------------------------------------- FOR YEAR ENDED DEC. 31, 2001 Investment income(1) -- -- 0.67% 0.67% Expense ratio(2) 0.95% 0.75% 0.95% 0.75% Total return(3) (16.00%) (16.00%) (38.24%) (36.76%) ----------------------------------------------------------------------------- 1IG 2IG 1IP 2IP 1MG 2MG ------------------------------------------------------------------- AT DEC. 31, 2000 Accumulation unit value $ 0.80 $ 0.80 $ 0.96 $ 0.96 $ 0.90 $ 0.91 -------------------------------------------------------------------------------------------------- AT DEC. 31, 2001 Accumulation unit value $ 0.61 $ 0.61 $ 0.72 $ 0.72 $ 0.67 $ 0.68 Units (000s) 64,147 60,527 19,727 15,860 51,051 50,212 Net assets (000s) $ 38,965 $ 36,904 $ 14,292 $ 11,605 $34,387 $34,000 -------------------------------------------------------------------------------------------------- FOR YEAR ENDED DEC. 31, 2001 Investment income(1) 0.75% 0.76% 0.01% 0.01% 0.06% 0.06% Expense ratio(2) 0.95% 0.75% 0.95% 0.75% 0.95% 0.75% Total return(3) (23.75%) (23.75%) (25.00%) (25.00%) (25.56%) (25.27%) -------------------------------------------------------------------------------------------------- 1MD 2MD 1UT(6) 2UT(6) --------------------------------------------- AT DEC. 31, 2000 Accumulation unit value $ 0.96 $ 0.96 $ -- $ -- ----------------------------------------------------------------------------- AT DEC. 31, 2001 Accumulation unit value $ 0.90 $ 0.90 $ 0.89 $ 0.89 Units (000s) 36,822 34,072 2,778 2,997 Net assets (000s) $ 33,044 $ 30,682 $ 2,513 $2,672 ----------------------------------------------------------------------------- FOR YEAR ENDED DEC. 31, 2001 Investment income(1) -- -- -- -- Expense ratio(2) 0.95% 0.75% 0.95% 0.75% Total return(3) (6.25%) (6.25%) (11.00%) (11.00%) ----------------------------------------------------------------------------- 133 1PE(6) 2PE(6) 1EU(6) 2EU(6) 1HS(6) 2HS(6) ------------------------------------------------------------------- AT DEC. 31, 2000 Accumulation unit value $ -- $ -- $ -- $ -- $ -- $ -- -------------------------------------------------------------------------------------------------- AT DEC. 31, 2001 Accumulation unit value $ 0.97 $ 0.98 $ 0.98 $ 0.98 $ 0.98 $ 0.98 Units (000s) 1,106 1,316 143 121 1,743 2,137 Net assets (000s) $ 1,078 $ 1,284 $ 140 $ 118 $ 1,710 $ 2,098 -------------------------------------------------------------------------------------------------- FOR YEAR ENDED DEC. 31, 2001 Investment income(1) 0.36% 0.34% -- -- -- -- Expense ratio(2) 0.95% 0.75% 0.95% 0.75% 0.95% 0.75% Total return(3) (3.00%) (2.00%) (2.00%) (2.00%) (2.00%) (2.00%) -------------------------------------------------------------------------------------------------- 1PI(6) 2PI(6) 1VS 2VS --------------------------------------------- AT DEC. 31, 2000 Accumulation unit value $ -- $ -- $ 1.29 $ 1.29 ----------------------------------------------------------------------------- AT DEC. 31, 2001 Accumulation unit value $ 0.96 $ 0.96 $ 0.85 $ 0.85 Units (000s) 2,180 2,460 87,722 74,819 Net assets (000s) $ 2,092 $ 2,363 $ 74,483 $ 63,852 ----------------------------------------------------------------------------- FOR YEAR ENDED DEC. 31, 2001 Investment income(1) -- -- -- -- Expense ratio(2) 0.95% 0.75% 0.95% 0.75% Total return(3) (4.00%) (4.00%) (34.11%) (34.11%) ----------------------------------------------------------------------------- 1SO(6) 2SO(6) 1IT 2IT 1SP 2SP ------------------------------------------------------------------- AT DEC. 31, 2000 Accumulation unit value $ -- $ -- $ 1.08 $ 1.08 $ 1.05 $ 1.05 -------------------------------------------------------------------------------------------------- AT DEC. 31, 2001 Accumulation unit value $ 0.99 $ 0.99 $ 0.84 $ 0.85 $ 1.15 $ 1.16 Units (000s) 3,747 3,701 30,297 27,818 46,456 40,791 Net assets (000s) $ 3,712 $ 3,672 $ 25,663 $ 23,628 $53,763 $47,364 -------------------------------------------------------------------------------------------------- FOR YEAR ENDED DEC. 31, 2001 Investment income(1) 0.34% 0.38% -- -- 0.06% 0.06% Expense ratio(2) 0.95% 0.75% 0.95% 0.75% 0.95% 0.75% Total return(3) (1.00%) (1.00%) (22.22%) (21.30%) 9.52% 10.48% -------------------------------------------------------------------------------------------------- 1AA(4) 2AA(4) 1WI(4) 2WI(4) --------------------------------------------- AT DEC. 31, 2000 Accumulation unit value $ -- $ -- $ -- $ -- ----------------------------------------------------------------------------- AT DEC. 31, 2001 Accumulation unit value $ 0.97 $ 0.97 $ 0.90 $ 0.90 Units (000s) 3,224 3,799 1,031 1,200 Net assets (000s) $ 3,120 $ 3,682 $ 928 $ 1,080 ----------------------------------------------------------------------------- FOR YEAR ENDED DEC. 31, 2001 Investment income(1) 0.94% 0.95% 0.01% 0.01% Expense ratio(2) 0.95% 0.75% 0.95% 0.75% Total return(3) (3.00%) (3.00%) (10.00%) (10.00%) ----------------------------------------------------------------------------- 1SG(4) 2SG(4) --------------------- AT DEC. 31, 2000 Accumulation unit value $ -- $ -- ---------------------------------------------------------------------------- AT DEC. 31, 2001 Accumulation unit value $ 0.94 $ 0.94 Units (000s) 2,230 2,060 Net assets (000s) $ 2,095 $ 1,939 ---------------------------------------------------------------------------- FOR YEAR ENDED DEC. 31, 2001 Investment income(1) -- -- Expense ratio(2) 0.95% 0.75% Total return(3) (6.00%) (6.00%) ----------------------------------------------------------------------------
(1) These amounts represent the dividends, excluding distributions of capital gains, received by the subaccount from the underlying mutual fund, net of management fees assessed by the fund manager, divided by the average net assets. These ratios exclude variable account expenses that result in direct reductions in the unit values. The recognition of investment income by the subaccount is affected by the timing of the declaration of dividends by the underlying fund in which the subaccounts invest. (2) These ratios represent the annualized contract expenses of the separate account, consisting primarily of mortality and expense charges, for each period indicated. The ratios include only those expenses that result in a direct reduction to unit values. Charges made directly to contract owner accounts through the redemption of units and expenses of the underlying fund are excluded. (3) These amounts represent the total return for the periods indicated, including changes in the value of the underlying fund, and reflect deductions for all items included in the expense ratio. The total return does not include any expenses assessed through the redemption of units; inclusion of these expenses in the calculation would result in a reduction in the total return presented. Investment options with a date notation indicate the effective date of that investment option in the variable account. The total return is calculated for the period indicated or from the effective date through the end of the reporting period. (4) Operations commenced on May 1, 2001. (5) Operations commenced on Aug. 14, 2001. (6) Operations commenced on Aug. 13, 2001 134 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, 2001 and 2000, 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, 2001. 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, 2001 and 2000, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States. Ernst & Young LLP January 28, 2002 Minneapolis, Minnesota IDS Life Insurance Company -------------------------------------------------------------------------------- Consolidated Balance Sheets
December 31, (In thousands, except share amounts) 2001 2000 Assets Investments: Fixed maturities: Held-to-maturity, at amortized cost (fair value: 2000, $6,471,798) $ -- $ 6,463,613 Available-for-sale, at fair value (amortized cost: 2001, $20,022,072; 2000, $12,929,870) 20,157,137 12,399,990 Common stocks 1,704 10,333 Mortgage loans on real estate 3,680,394 3,738,091 Policy loans 619,571 618,973 Other investments 621,897 575,551 ------- ------- Total investments 25,080,703 23,806,551 Cash and cash equivalents 1,150,251 316,974 Amounts recoverable from reinsurers 529,166 416,480 Amounts due from brokers 90,794 15,302 Other accounts receivable 46,349 42,324 Accrued investment income 278,199 334,928 Deferred policy acquisition costs 3,107,187 2,951,655 Deferred income taxes, net 156,308 136,588 Other assets 123,246 80,054 Separate account assets 27,333,697 32,349,347 ---------- ---------- Total assets $57,895,900 $60,450,203 =========== =========== Liabilities and stockholder's equity Liabilities: Future policy benefits: Fixed annuities $19,592,273 $19,417,446 Universal life-type insurance 3,433,904 3,410,871 Traditional life insurance 241,165 232,913 Disability income and long-term care insurance 1,227,172 1,012,247 Policy claims and other policyholders' funds 71,879 52,067 Amounts due to brokers 1,740,031 446,347 Other liabilities 437,017 463,561 Separate account liabilities 27,333,697 32,349,347 ---------- ---------- Total liabilities 54,077,138 57,384,799 ---------- ---------- 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 688,327 288,327 Accumulated other comprehensive income (loss), net of tax: Net unrealized securities gains (losses) 85,549 (333,734) Net unrealized derivative (losses) (774) -- ---------- ---------- Total accumulated other comprehensive income (loss) 84,775 (333,734) ---------- ---------- Retained earnings 3,042,660 3,107,811 ---------- ---------- Total stockholder's equity 3,818,762 3,065,404 ---------- ---------- Total liabilities and stockholder's equity $57,895,900 $60,450,203 =========== ===========
See notes to consolidated financial statements. IDS Life Insurance Company -------------------------------------------------------------------------------- Consolidated Statements of Income
Years ended December 31, (In thousands) 2001 2000 1999 Revenues Premiums: Traditional life insurance $ 59,415 $ 56,187 $ 53,790 Disability income and long-term care insurance 255,428 231,311 201,637 ------- ------- ------- Total premiums 314,843 287,498 255,427 Net investment income 1,485,688 1,730,605 1,919,573 Contractholder charges 489,583 438,127 411,994 Management and other fees 473,406 598,168 473,108 Net realized (loss) gain on investments (649,752) (16,975) 26,608 -------- ------- ------ Total revenues 2,113,768 3,037,423 3,086,710 --------- --------- --------- Benefits and expenses Death and other benefits: Traditional life insurance 35,519 29,042 29,819 Universal life-type insurance and investment contracts 175,247 131,467 118,561 Disability income and long-term care insurance 44,725 40,246 30,622 Increase in liabilities for future policy benefits: Traditional life insurance 7,231 5,765 7,311 Disability income and long-term care insurance 123,227 113,239 87,620 Interest credited on universal life-type insurance and investment contracts 1,137,636 1,169,641 1,240,575 Amortization of deferred policy acquisition costs 371,342 362,106 321,036 Other insurance and operating expenses 407,798 378,653 346,849 ------- ------- ------- Total benefits and expenses 2,302,725 2,230,159 2,182,393 --------- --------- --------- (Loss) income before income tax (benefit) expense a nd cumulative effect of accounting change (188,957) 807,264 904,317 Income tax (benefit) expense (145,222) 221,627 267,864 -------- ------- ------- (Loss) income before cumulative effect of accounting change (43,735) 585,637 636,453 Cumulative effect of accounting change (net of income tax benefit of $11,532) (21,416) -- -- -------- ------- ------- Net (loss) income $ (65,151) $ 585,637 $ 636,453 ---------- ---------- ----------
See notes to consolidated financial statements. IDS Life Insurance Company -------------------------------------------------------------------------------- Consolidated Statements of Stockholder's Equity
Accumulated other Additional comprehensive Total Capital paid-in income (loss), Retained stockholder's For the three years ended December 31, 2001 (In thousands) stock capital net of tax earnings equity Balance, January 1, 1999 $3,000 $288,327 $ 169,584 $2,645,721 $3,106,632 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 income taxes of $304,936 -- -- (566,311) -- (566,311) Reclassification adjustment for gains included in net income, net of income tax of $7,810 -- -- (14,503) -- (14,503) ------ -------- --------- ---------- ---------- Other comprehensive loss -- -- (580,814) -- (580,814) ------ -------- --------- ---------- ---------- Comprehensive income 55,639 Cash dividends -- -- -- (350,000) (350,000) ------ -------- --------- ---------- ---------- Balance, December 31, 1999 3,000 288,327 (411,230) 2,932,174 2,812,271 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 income taxes of ($46,921) -- -- 87,138 -- 87,138 Reclassification adjustment for gains included in net income, net of income tax of $5,192 -- -- (9,642) -- (9,642) ------ -------- --------- ---------- ---------- Other comprehensive income -- -- 77,496 -- 77,496 ------ -------- --------- ---------- ---------- Comprehensive income 663,133 Cash dividends -- -- -- (410,000) (410,000) ------ -------- --------- ---------- ---------- Balance, December 31, 2000 3,000 288,327 (333,734) 3,107,811 3,065,404 Comprehensive income: Net loss -- -- -- (65,151) (65,151) Cumulative effect of adopting SFAS No. 133, net of income tax benefit of $626 -- -- (1,162) -- (1,162) Unrealized holding losses on available-for-sale securities arising during the year, net of deferred policy acquisition costs of ($20,191) and income taxes of $15,037 -- -- (11,262) -- (11,262) Reclassification adjustment for losses on available-for-sale securities included in net loss, net of income tax benefit of $228,003 -- -- 423,434 -- 423,434 Reclassification adjustment for losses on derivatives included in net loss, net of income tax benefit of $4,038 -- -- 7,499 -- 7,499 ------ -------- --------- ---------- ---------- Other comprehensive income -- -- 418,509 -- 418,509 ------ -------- --------- ---------- ---------- Comprehensive income 353,358 Capital contribution -- 400,000 -- -- 400,000 ------ -------- --------- ---------- ---------- Balance, December 31, 2001 $3,000 $688,327 $ 84,775 $3,042,660 $3,818,762 ====== ======== ========= ========== ==========
See notes to consolidated financial statements. IDS Life Insurance Company -------------------------------------------------------------------------------- Consolidated Statements of Cash Flows
Years ended December 31, (In thousands) 2001 2000 1999 Cash flows from operating activities Net (loss) income $ (65,151) $ 585,637 $ 636,453 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Cumulative effect of accounting change, net of tax 21,416 -- -- Policy loans, excluding universal life-type insurance: Issuance (43,687) (61,313) (56,153) Repayment 54,004 56,088 54,105 Change in amounts recoverable from reinsurers (112,686) (89,312) (64,908) Change in other accounts receivable (4,025) 6,254 (615) Change in accrued investment income 56,729 8,521 23,125 Change in deferred policy acquisition costs, net (175,723) (291,634) (140,379) Change in liabilities for future policy benefits for traditional life, disability income and long-term care insurance 223,177 206,377 153,157 Change in policy claims and other policyholder's funds 19,812 27,467 (45,709) Deferred income tax (benefit) provision (246,205) 37,704 79,796 Change in other liabilities (24,509) (120,256) 169,395 Amortization of premium (accretion of discount), net 108,958 37,909 (17,907) Net realized loss (gain) on investments 649,752 16,975 (26,608) Contractholder charges, non-cash (217,496) (151,745) (175,059) Other, net (83,023) (9,279) (5,324) ------- ------ ------ Net cash provided by operating activities 161,343 259,393 583,369 ------- ------- ------- Cash flows from investing activities Held-to-maturity securities: Purchases -- (4,487) (3,030) Maturities, sinking fund payments and calls -- 589,742 741,949 Sales -- 50,067 66,547 Available-for-sale securities: Purchases (9,477,740) (1,454,010) (3,433,128) Maturities, sinking fund payments and calls 2,706,147 1,019,403 1,442,507 Sales 5,493,141 1,237,116 1,691,389 Other investments, excluding policy loans: Purchases (442,876) (706,082) (657,383) Sales 370,636 435,633 406,684 Change in amounts due from brokers (75,492) (15,157) 182 Change in amounts due to brokers 1,293,684 298,236 (47,294) --------- ------- ------- Net cash (used in) provided by investing activities (132,500) 1,450,461 208,423 -------- --------- ------- Cash flows from financing activities Activities related to universal life-type insurance and investment contracts: Considerations received 2,088,114 1,842,026 2,031,630 Surrenders and other benefits (2,810,401) (3,974,966) (3,669,759) Interest credited to account balances 1,137,636 1,169,641 1,240,575 Universal life-type insurance policy loans: Issuance (83,720) (134,107) (102,239) Repayment 72,805 82,193 67,881 Capital contribution 400,000 -- -- Dividends paid -- (410,000) (350,000) -------- --------- ------- Net cash provided by (used in) financing activities 804,434 (1,425,213) (781,912) -------- --------- ------- Net increase in cash and cash equivalents 833,277 284,641 9,880 Cash and cash equivalents at beginning of year 316,974 32,333 22,453 -------- --------- ------- Cash and cash equivalents at end of year $ 1,150,251 $ 316,974 $ 32,333 =========== ============ ============= Supplemental disclosures: Income taxes paid $ -- $ 225,704 $ 214,940 Interest on borrowings 23,688 3,299 4,521
See notes to consolidated financial statements. IDS Life Insurance Company -------------------------------------------------------------------------------- Notes to Consolidated Financial Statements (In 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. Revenue recognition Profits on fixed deferred annuities are the excess of contractholder charges and investment income earned from investment of contract considerations over interest credited to contract values, amortization of deferred acquisition costs, and other expenses. Profits on variable deferred annuities also include the excess of management and other fees over the costs of guaranteed benefits provided. Contractholder charges include policy fees and surrender charges. Management and other fees include investment management fees from underlying proprietary mutual funds, certain fee revenues from underlying nonproprietary mutual funds and mortality and expense risk fees from the variable annuity separate accounts. Profits on fixed universal life insurance are the excess of contractholder charges and investment income earned from investment of contract considerations over interest credited to contract values, death and other benefits paid in excess of contract values, amortization of deferred acquisition costs, and other expenses. Profits on variable universal life insurance also include management and other fees. 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, certain fee revenues from underlying nonproprietary mutual funds and mortality and expense risk fees received from the variable life insurance separate accounts. 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. 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). Certain prior year amounts have been reclassified to conform to the current year's presentation. 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 -- securities Debt securities 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 debt securities and marketable equity securities are classified as available-for-sale and carried at fair value. Unrealized gains and losses on securities classified as available-for-sale are carried as a separate component of accumulated other comprehensive income (loss), net of the related deferred policy acquisition costs and income taxes. When evidence indicates there is a decline in a security's value, which is other than temporary, the security is written down to fair value through a charge to current year's earnings. IDS Life Insurance Company -------------------------------------------------------------------------------- The Company's investment portfolio contains structured investments, including Collateralized Debt Obligations (CDOs) (obligations that are primarily backed by high-yield bonds), which are not readily marketable. The carrying values of these investments are based on cash flow projections and, as such, these values are subject to change. If actual cash flows are less than projected, losses would be recognized; increases in cash flows would be recognized over future periods. Realized investment gains or losses are 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. Investments -- mortgage loans on real estate Mortgage loans on real estate are carried at amortized cost less reserves for losses. The estimated fair value of the mortgage loans is determined by discounted cash flow analyses using mortgage interest rates currently offered for mortgages of similar maturities. Impairment of mortgage loans is measured as the excess of the 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 losses. The reserve for 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 collectability of principal, interest payments received are either recognized as income or applied to the recorded investment in the loan. Policy loans Policy loans are carried at the aggregate of the unpaid loan balances, which do not exceed the cash surrender values of the related policies. Cash and cash equivalents 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. 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 the interest method. The costs for universal life and variable universal life 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 fixed and variable universal life 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 prospective assumptions underlying the amortization models. 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. Unlocking adjustments resulted in a net increase in amortization of $33,600 in 2001 and net decreases in amortization of $12,300 in 2000 and $56,800 in 1999. In amortizing deferred policy acquisition costs associated with variable annuities, the Company assumes contract values will appreciate at a specified long-term annual rate. The Company may project near-term appreciation at a different rate in order to maintain the long-term rate assumption. Liabilities for future policy benefits Liabilities for fixed and variable universal life insurance and fixed and variable deferred annuities are accumulation values. Liabilities for equity indexed deferred annuities issued in 1997 and 1998 are equal to the present value of guaranteed benefits and the intrinsic value of index-based benefits. Liabilities for equity indexed deferred annuities issued in 1999 or later are equal to the accumulation of host contract values covering guaranteed benefits and the market value of embedded equity options. 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. IDS Life Insurance Company -------------------------------------------------------------------------------- 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 Reinsurance premiums and benefits paid or provided are accounted for on a basis consistent with those used in accounting for original policies issued and with the terms of the reinsurance contracts. 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 20% of the mortality risk on new variable universal life insurance policies and 10% of the risk on new term 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. 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 to be payable at the initial level regardless of investment performance so long as minimum premium payments are made. Accounting developments 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 and Retained Beneficial Interests in Securitized Financial Assets." The Company adopted the consensus as of January 1, 2001. Issue 99-20 prescribes new procedures for recording interest income and measuring impairment on retained and purchased beneficial interests. The consensus primarily affects certain high-yield investments contained in structured securities. Adoption of the consensus required the Company to adjust the carrying amount of these investments downward by $21,416, net of tax, upon adoption. See Note 2 for further discussion. Effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended (SFAS No. 133), which requires an entity to 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 are recorded in earnings or directly to equity, depending on the instrument's designated use. The adoption of SFAS No. 133 on January 1, 2001, resulted in a cumulative after-tax reduction to other comprehensive income of $1,162. The cumulative impact to earnings was not significant. See Note 8 for further discussion of the Company's derivative and hedging activities. IDS Life Insurance Company -------------------------------------------------------------------------------- SFAS No. 133 also provided a one-time opportunity to reclassify held-to-maturity security investments to available-for-sale without tainting the remaining securities in the held-to-maturity portfolio. The Company elected to take the opportunity to reclass all its held-to-maturity investments to available-for-sale. The Company adopted SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," which superseded SFAS No. 125. The Statement was effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001. The Statement was 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 impact on the Company's financial position or results of operations of adopting the Statement was not significant. 2. INVESTMENTS Securities Pursuant to the adoption of SFAS No. 133 the Company reclassified all held-to-maturity securities with a carrying value of $6,463,613 and net unrealized gains of $8,185 to available-for-sale as of January 1, 2001.
The following is a summary of securities available-for-sale at December 31, 2001: Gross Gross Amortized unrealized unrealized Fair cost gains losses value Fixed maturities: U.S. Government agency obligations $ 31,074 $ 2,190 $ 56 $ 33,208 State and municipal obligations 7,826 149 -- 7,975 Corporate bonds and obligations 11,658,888 276,332 218,365 11,716,855 Mortgage-backed securities 8,292,576 103,109 32,801 8,362,884 Foreign government bonds and obligations 31,708 4,507 -- 36,215 ----------- -------- -------- ----------- Total fixed maturity securities $20,022,072 $386,287 $251,222 $20,157,137 =========== ======== ======== =========== Common stocks $ 805 $ 899 $ -- $ 1,704 =========== ======== ======== ===========
The amortized cost and fair value of fixed maturity securities at December 31, 2001 by contractual maturity are as follows: Amortized Fair cost value Due within one year $ 1,093,557 $ 1,114,618 Due from one to five years 2,885,509 3,007,435 Due from five to ten years 5,503,284 5,519,588 Due in more than ten years 2,247,146 2,152,612 Mortgage-backed securities 8,292,576 8,362,884 --------- --------- Total $20,022,072 $20,157,137 =========== ===========
The timing of actual receipts may differ from contractual maturities because issuers may call or prepay obligations.
The following is a summary of held-to-maturity and available-for-sale securities at December 31, 2000: 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 --------- ----- ----- --------- Total fixed maturity securities $6,463,613 $124,067 $115,882 $6,471,798 ========== ======== ======== ========== Gross Gross Amortized unrealized unrealized Fair Available-for-sale cost gains losses value Fixed maturities: 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 maturity securities $12,929,870 $187,769 $717,649 $12,399,990 =========== ======== ======== =========== Common stocks $ 11,829 $ -- $ 1,496 $ 10,333 =========== ======== ======== ===========
At December 31, 2001, bonds carried at $14,639 were on deposit with various states as required by law. IDS Life Insurance Company -------------------------------------------------------------------------------- At December 31, 2001, fixed maturity securities comprised approximately 80 percent of the Company's total investments. These securities are rated by Moody's and Standard & Poor's (S&P), except for approximately $2.6 billion of securities which are rated by AEFC's internal analysts using criteria similar to Moody's and S&P. A summary of fixed maturity securities, at amortized cost, by rating on December 31, is as follows: Rating 2001 2000 Aaa/AAA $ 8,977,075 $ 6,559,188 Aaa/AA -- 32,001 Aa/AA 261,252 220,446 Aa/A 372,120 327,147 A/A 2,602,027 2,494,621 A/BBB 911,477 747,636 Baa/BBB 5,904,013 5,828,847 Baa/BB 274,228 287,583 Below investment grade 719,880 2,896,014 ------- --------- Total $20,022,072 $19,393,483 =========== =========== At December 31, 2001, approximately 93 percent of the securities rated Aaa/AAA are GNMA, FNMA and FHLMC mortgage-backed securities. No holdings of any other issuer were greater than ten percent of stockholder's equity. During the years ended December 31, 2000 and 1999, fixed maturities classified as held-to-maturity were sold with amortized cost of $53,169 and $68,470, 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. Available-for-sale securities were sold during 2001 with proceeds of $5,493,141 and gross realized gains and losses of $116,485 and $767,144, respectively. Available-for-sale securities were sold during 2000 with proceeds of $1,237,116 and gross realized gains and losses of $25,101 and $10,267, respectively. Available-for-sale securities were sold during 1999 with proceeds of $1,691,389 and gross realized gains and losses of $36,568 and $14,255, respectively. The net unrealized gain (loss) on available-for-sale securities as of December 31, 2001 and 2000, was $135,964 and ($531,376), respectively, with the $667,340 change, net of taxes and deferred policy acquisition costs, reflected as a separate component in accumulated other comprehensive income for the year ended December 31, 2001. For the year ended December 31, 2000 the change in net unrealized losses on available-for-sale securities was a decrease of $122,196. For the year ended December 31, 1999 the change in net unrealized gain on available-for-sale securities was a decrease of $921,920. During 2001, the Company recorded pretax losses of $828,175 to recognize the impact of higher default rate assumptions on certain structured investments; to write down lower rated securities (most of which were sold during 2001) in connection with the Company's decision to lower its risk profile by reducing the level of its high-yield portfolio, allocating holdings toward stronger credits, and reducing the concentration of exposure to individual companies and industry sectors; to write down certain other investments; and, to adopt EITF Issue 99-20, as previously discussed. Within the Consolidated Statements of Income, approximately $623,958 of these losses are included in Net realized (losses) gains on investments and approximately $171,269 are included in Net investment income, with the remaining losses recorded as a cumulative effect of accounting change. During 2001, the Company placed a majority of its rated Collateralized Debt Obligation (CDO) (obligations that are backed primarily by high-yield bonds) securities and related accrued interest, (collectively referred to as transferred assets), having an aggregate book value of $675,347, into a securitization trust. In return, the Company received $89,535 in cash relating to sales to unaffiliated investors and retained interests with allocated book amounts aggregating $585,812. The book amount is determined by allocating the previous carrying value of the transferred assets between assets sold and the retained interests based on their relative fair values. Fair values are based on the estimated present value of future cash flows. There was no cash flow related to this transaction other than the receipt of the initial $89,535. Cash flows on the assets sold to investors and retained interests are not scheduled to begin until March 31, 2002 in accordance with governing documents. Included in Other investments are affordable housing investment credits, trading securities, and real estate. Fair values of investments 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, estimated future cash flows and market data from independent brokers. IDS Life Insurance Company -------------------------------------------------------------------------------- Mortgages loans on real estate At December 31, 2001, approximately 15 percent of the Company's investments were mortgage loans on real estate. Concentration of credit risk by region of the United States and by type of real estate are as follows:
December 31, 2001 December 31, 2000 On balance Funding On balance Funding Region sheet commitments sheet commitments East North Central $ 670,387 $ 1,873 $ 691,694 $18,868 West North Central 549,015 -- 564,576 7,621 South Atlantic 815,837 9,490 884,723 7,667 Middle Atlantic 352,821 9,363 378,702 13,813 New England 274,486 8,700 279,147 4,604 Pacific 355,945 14,618 318,727 921 West South Central 214,000 600 173,158 28,548 East South Central 55,798 -- 49,176 2,763 Mountain 413,053 27 409,677 10,209 ---------- ------- ---------- ------- 3,701,342 44,671 3,749,580 95,014 Less reserves for losses 20,948 -- 11,489 -- ---------- ------- ---------- ------- Total $3,680,394 $44,671 $3,738,091 $95,014 ========== ======= ========== ======= December 31, 2001 December 31, 2000 On balance Funding On balance Funding Property type sheet commitments sheet commitments Department/retail stores $1,117,195 $13,200 $1,174,763 $11,130 Apartments 694,214 11,531 780,228 -- Office buildings 1,203,090 7,650 1,085,948 59,941 Industrial buildings 333,713 2,263 323,766 23,943 Hotels/motels 108,019 -- 100,680 -- Medical buildings 106,927 6,000 128,101 -- Nursing/retirement homes 39,590 -- 49,822 -- Mixed use 86,972 27 87,537 -- Other 11,622 4,000 18,735 -- ---------- ------- ---------- ------- 3,701,342 44,671 3,749,580 95,014 Less reserves for losses 20,948 -- 11,489 -- ---------- ------- ---------- ------- Total $3,680,394 $44,671 $3,738,091 $95,014 ========== ======= ========== =======
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 fund mortgages are made in the ordinary course of business. The fair value of the mortgage commitments is $nil. At December 31, 2001, 2000 and 1999, the Company's recorded investment in impaired loans was $39,601, $24,999 and $21,375, respectively, with reserves of $7,225, $4,350 and $5,750, respectively. During 2001, 2000 and 1999, the average recorded investment in impaired loans was $24,498, $27,063 and $23,815, respectively. The Company recognized $1,285, $1,033 and $1,190 of interest income related to impaired loans for the years ended December 31, 2001, 2000 and 1999, respectively. The following table presents changes in the reserves for mortgage loan losses:
2001 2000 1999 Balance, January 1 $11,489 $ 28,283 $39,795 Provision (reduction) for mortgage loan losses 14,959 (14,894) (9,512) Loan payoffs -- (1,200) (500) Foreclosures and write-offs (5,500) (700) (1,500) ------ ---- ------ Balance, December 31 $20,948 $ 11,489 $28,283 ======= ======== =======
IDS Life Insurance Company -------------------------------------------------------------------------------- Sources of investment income and realized (losses) gains on investments Net investment income for the years ended December 31 is summarized as follows: 2001 2000 1999 Interest on fixed maturities $1,276,966 $1,473,560 $1,598,059 Interest on mortgage loans 290,608 286,611 285,921 Interest on cash equivalents 2,218 8,084 5,871 Other (44,145) 1,750 70,892 ------- ----- ------ 1,525,647 1,770,005 1,960,743 Less investment expenses 39,959 39,400 41,170 ------ ------ ------ Total $1,485,688 $1,730,605 $1,919,573 ========== ========== ==========
Net realized (losses) gains on investments for the years ended December 31 is summarized as follows: 2001 2000 1999 Fixed maturities $(621,400) $(34,857) $ 8,802 Mortgage loans (22,443) 15,845 10,210 Other investments (5,909) 2,037 7,596 ------ ----- ----- $(649,752) $(16,975) $26,608 ========= ======== =======
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 (benefit) expense for the years ended December 31 consists of the following: 2001 2000 1999 Federal income taxes Current $ 88,121 $176,397 $178,444 Deferred (234,673) 37,704 79,796 -------- ------ ------ (146,552) 214,101 258,240 State income taxes-current 1,330 7,526 9,624 ----- ----- ----- Income tax (benefit) expense before cumulative effect of accounting change (145,222) 221,627 267,864 Cumulative effect of accounting change income tax benefit (11,532) -- -- ----- ----- ----- Income tax (benefit) expense $(156,754) $221,627 $267,864 ========= ======== ========
Income tax (benefit) expense before the cumulative effect of accounting change, differs from that computed by using the United States statutory rate of 35%. The principal causes of the difference in each year are shown below:
2001 2000 1999 Provision Rate Provision Rate Provision Rate Federal income taxes based on the statutory rate $ (66,136) (35.0%) $282,542 35.0% $316,511 35.0% Tax-excluded interest and dividend income (4,663) (2.5) (3,788) (0.5) (9,626) (1.1) State taxes, net of federal benefit 865 0.4 4,892 0.6 6,256 0.7 Affordable housing credits (73,200) (38.7) (54,569) (6.8) (31,000) (3.4) Other, net (2,088) (1.1) (7,450) (0.8) (14,277) (1.6) ------ ---- ------ ---- ------- ---- Total income taxes $(145,222) (76.9%) $221,627 27.5% $267,864 29.6% ========= ===== ======== ==== ======== ====
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, 2001, 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 -------------------------------------------------------------------------------- Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred income tax assets and liabilities as of December 31 are as follows:
2001 2000 Deferred income tax assets Policy reserves $ 705,637 $730,239 Unrealized loss -- available-for-sale securities -- 179,702 Investments, other 330,675 34,600 Life insurance guaranty fund assessment reserve 1,330 1,365 Other 26,492 -- --------- ------- Total deferred income tax assets 1,064,134 945,906 --------- ------- Deferred income tax liabilities Deferred policy acquisition costs 861,892 796,292 Unrealized gain -- available-for-sale securities 45,934 -- Other -- 13,026 --------- ------- Total deferred income tax liabilities 907,826 809,318 --------- ------- Net deferred income tax assets $ 156,308 $136,588 ========== ========
The Company is required to establish a valuation allowance for any portion of the deferred income tax assets that management believes will not be realized. In the opinion of management, it is more likely than not that the Company will realize the benefit of the deferred tax assets and, therefore, no such valuation allowance has been established. 4. STOCKHOLDER'S EQUITY Retained earnings available for distribution as dividends to AEFC are limited to the Company's surplus as determined in accordance with accounting practices prescribed by state insurance regulatory authorities. Statutory unassigned surplus aggregated $1,262,335 as of December 31, 2001 and $1,493,292 as of December 31, 2000 (see Note 3 with respect to the income tax effect of certain distributions). In addition, any dividend distributions in 2002 in excess of approximately $194,435 would require approval of the Department of Commerce of the State of Minnesota. Statutory net (loss) income for the years ended December 31 and capital and surplus as of December 31 are summarized as follows: 2001 2000 1999 Statutory net (loss) income $ (317,973) $ 344,973 $ 478,173 Statutory capital and surplus 1,947,350 1,778,306 1,978,406 --------- --------- --------- The National Association of Insurance Commissioners (NAIC) revised the Accounting Practices and Procedures Manual in a process referred to as Codification. The revised regulations took effect 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 resulted in changes to the accounting practices that the Company uses to prepare its statutory-basis financial statements. The impact of implementing these changes was an increase of $4,660 to the Company's statutory-basis capital and surplus as of January 1, 2001. 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, 2001 and 2000. 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 2001, 2000 and 1999. 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. Company 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 $263, $250 and $223 in 2001, 2000 and 1999, 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 2001, 2000 and 1999 were $662, $1,707 and $1,906, 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 cost of these plans charged to operations in 2001, 2000 and 1999 was $1,011, $1,136 and $1,147, respectively. IDS Life Insurance Company -------------------------------------------------------------------------------- Charges by AEFC for use of joint facilities, technology support, marketing services and other services aggregated $505,526, $582,836 and $485,177 for 2001, 2000 and 1999, respectively. Certain of these costs are included in deferred policy acquisition costs. Expenses allocated to the Company may not be reflective of expenses that would have been incurred by the Company on a stand-alone basis. Included in other liabilities at December 31, 2001 and 2000 are $68,919 and $41,059, respectively, payable to and receivable from AEFC for federal income taxes. 6. LINES OF CREDIT The Company has available lines of credit with AEFC 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 $nil and $50,000 uncommitted at December 31, 2001 and 2000, respectively. 7. COMMITMENTS AND CONTINGENCIES At December 31, 2001, 2000 and 1999, traditional life and universal life-type insurance in force aggregated $108,255,014, $98,060,472 and $89,271,957 respectively, of which $25,986,706, $17,429,851 and $8,281,576 were reinsured at the respective year ends. The Company also reinsures a portion of the risks assumed under long-term care policies. Under all reinsurance agreements, premiums ceded to reinsurers amounted to $114,534, $89,506 and $76,970 and reinsurance recovered from reinsurers amounted to $43,388, $32,500, and $27,816 for the years ended December 31, 2001, 2000 and 1999, respectively. Reinsurance contracts do not relieve the Company from its primary obligation to policyholders. At December 31, 2001, the Company had no commitments to purchase investments other than mortgage loan fundings (see Note 2). 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, both state and federal courts gave preliminary approval to the proposed settlement and AEFC mailed notices to all of the over two million class members. In May 2001, the courts entered orders approving the settlement. The orders became final in August 2001 and in October 2001 the settlement was implemented. The anticipated costs of settlement remain unchanged from prior years. The settlement as approved provides for release by class members of all insurance and annuity market conduct claims dating back to 1985. Some class members opted out of the settlement and therefore did not release their claims against AEFC or the Company. Some of these class members who opted out were represented by counsel and presented separate claims to AEFC or the Company. Most of their claims have been settled. 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. 8. DERIVATIVE FINANCIAL INSTRUMENTS The Company maintains an overall risk management strategy that incorporates the use of derivative instruments to minimize significant unplanned fluctuations in earnings caused by interest rate and equity market volatility. The Company does not enter into derivative instruments for speculative purposes. As prescribed per SFAS No. 133, derivative instruments that are designated and qualify as hedging instruments are classified as a cash flow hedge, fair value hedge, or a hedge of a net investment in a foreign operation, based upon the exposure being hedged. The Company currently has economic hedges that either do not qualify or are not designated for hedge accounting treatment under SFAS No. 133. For the year ended December 31, 2001, the net effect on earnings of accounting for the net changes in fair value of the following undesignated derivatives under SFAS No. 133 compared with prior rules was not significant. The Company enters into interest rate swaps, caps and floors to manage the Company's interest rate risk and options and futures to manage equity-based risk. The values of derivative financial instruments are based on market values, dealer quotes or pricing models. 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. IDS Life Insurance Company -------------------------------------------------------------------------------- Interest rate caps, swaps and floors are used principally to manage the Company's interest rate risk. These instruments are primarily used to protect the margin between interest rates earned on investments and the interest rates credited to related annuity contract holders. No interest rate swaps or floors were outstanding as of December 31, 2001. The interest rate caps expire by January 2003. The fair value of the interest rate caps is included in Other assets. Changes in the value of the interest rate caps are included in Other insurance and operating expenses. A purchased (written) option conveys the right (obligation) to buy or sell an instrument at a fixed price for a set period of time or on a specific date. The Company writes and purchases index options to manage the risks related to annuity products that pay interest based upon the relative change in a major stock market index between the beginning and end of the product's term. The Company views this strategy as a prudent management of equity market sensitivity, such that earnings are not exposed to undue risk presented by changes in equity market levels. The annuity products contain embedded derivatives, essentially the equity based return of the product, which must be separated from the host contract and accounted for as derivative instruments per SFAS No. 133. As a result of fluctuations in equity markets, and the corresponding changes in value of the embedded derivatives, the amount of interest credited incurred by the Company related to the annuity product will positively or negatively impact reported earnings. The purchased and written options are carried at fair value and included in Other assets and Other liabilities, respectively. The fair value of the embedded options are included in Future policy benefits for fixed annuities. The changes in fair value of the options are recognized in Other insurance and operating expenses and the embedded derivatives are recognized in Interest credited on universal life-type insurance and investment contracts. The purchased and written options expire on various dates from 2002 to 2008. The Company also purchases futures to hedge its obligations under equity indexed annuities. The futures purchased are marked-to-market daily and exchanged traded, exposing the Company to no counterparty risk. The futures contracts mature within four months. 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. There are no index options outstanding as of December 31, 2001 related to this strategy. 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.
2001 2000 Carrying Fair Carrying Fair Financial Assets value value value value Fixed maturities: Held-to-maturity securities $ -- $ -- $ 6,463,613 $ 6,471,798 Available-for-sale securities 20,157,137 20,157,137 12,399,990 12,399,990 Common stocks 1,704 1,704 10,333 10,333 Mortgage loans on real estate 3,680,394 3,845,950 3,738,091 3,821,825 Cash and cash equivalents 1,150,251 1,150,251 316,974 316,974 Other securities 75,721 75,721 1,130 1,130 Derivative financial instruments 34,477 34,477 50,387 60,615 Separate account assets 27,333,697 27,333,697 32,349,347 32,349,347 ---------- ---------- ---------- ---------- Financial Liabilities Future policy benefits for fixed annuities $18,139,462 $17,671,777 $18,020,824 $17,479,187 Derivative financial instruments 2,506 2,506 3,098 6,069 Separate account liabilities 24,280,092 23,716,854 28,791,949 27,822,667 ---------- ---------- ---------- ----------
At December 31, 2001 and 2000, the carrying amount and fair value of future policy benefits for fixed annuities exclude life insurance-related contracts carried at $1,368,254 and $1,300,018, respectively, and policy loans of $84,557 and $96,603, respectively. The fair value of these benefits is based on the status of the annuities at December 31, 2001 and 2000. 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 2001 and 2000. At December 31, 2001 and 2000, 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 $3,053,605 and $3,557,398, respectively. S-6406-20 D (5/02) STATEMENT OF ADDITIONAL INFORMATION FOR AMERICAN EXPRESS RETIREMENT ADVISOR ADVANTAGE(SM) VARIABLE ANNUITY - BAND 3 IDS LIFE VARIABLE ACCOUNT 10 MAY 1, 2002 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(SM) 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 Independent Auditors p. 12 Financial Statements
2 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 subaccounts invested in them at that time, which, in some cases, they did not. Although we base performance figures on historical earnings, past performance does not guarantee future results. 3 AVERAGE ANNUAL TOTAL RETURN(a) WITH SELECTION OF MAV AND EEP DEATH BENEFIT RIDERS FOR PERIODS ENDING DEC. 31, 2001
PERFORMANCE OF PERFORMANCE OF THE SUBACCOUNT THE FUND 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) (17.55%) (8.01%) (17.55%) --% --% (8.01%) BD3 Bond Fund (9/99; 10/81) 6.47 5.34 6.47 3.80 6.16 9.07 CR3 Capital Resource Fund (9/99; 10/81) (19.17) (10.85) (19.17) 4.02 5.65 10.85 CM3 Cash Management Fund (9/99; 10/81) 2.56 3.63 2.56 3.74 3.31 5.21 DE3 Diversified Equity Income Fund (9/99; 9/99) 0.98 1.47 0.98 -- -- 1.47 EM3 Emerging Markets Fund (5/00; 5/00) (2.55) (18.64) (2.55) -- -- (18.64) ES3 Equity Select Fund (5/01; 5/01) -- (2.01)(c) -- -- -- (2.01)(d) EI3 Extra Income Fund (9/99; 5/96) 3.80 (2.53) 3.80 0.69 -- 1.47 FI3 Federal Income Fund (9/99; 9/99) 5.18 5.57 5.18 -- -- 5.57 GB3 Global Bond Fund (9/99; 5/96) 0.14 1.03 0.14 1.16 -- 2.26 GR3 Growth Fund (9/99; 9/99) (31.93) (17.06) (31.93) -- -- (17.07) IE3 International Fund (9/99; 1/92) (29.68) (15.86) (29.68) (2.64) -- 2.68 MF3 Managed Fund (9/99; 4/86) (11.69) (2.63) (11.69) 5.59 7.61 8.99 ND3 NEW DIMENSIONS FUND(R)(9/99; 5/96) (17.76) (4.64) (17.76) 8.64 -- 9.56 SV3 Partners Small Cap Value Fund (8/01; 8/01) -- 6.22(c) -- -- -- 6.22(d) IV3 S&P 500 Index Fund (5/00; 5/00) (13.55) (14.30) (13.55) -- -- (14.30) SC3 Small Cap Advantage Fund (9/99; 9/99) (7.65) 3.20 (7.65) -- -- 3.20 ST3 Stock Fund (8/01; 8/01) -- (3.90)(c) -- -- -- (3.90)(d) SA3 Strategy Aggressive Fund (9/99; 1/92) (33.88) (8.58) (33.88) 0.28 -- 5.48 AIM V.I. 3AC Capital Appreciation Fund, Series II (8/01; 5/93)(e) -- (3.32)(c) (24.37) 4.80 -- 10.51 3AD Capital Development Fund, Series II (8/01; 5/98)(e) -- (3.02)(c) (9.20) -- -- 3.88 ALLIANCE VP 3AB AllianceBernstein International Value Portfolio (Class B) (8/01; 5/01)(f) -- (3.09)(c) -- -- -- (2.25)(d) 3AL Growth and Income Portfolio (Class B) (8/01; 1/91)(f) -- (4.23)(c) (0.98) 13.30 13.60 12.56 AMERICAN CENTURY(R) VARIABLE PORTFOLIOS, INC. 3AI VP International, Class II (8/01; 5/94)(g) -- (7.72)(c) (30.16) 3.50 -- 4.46 3AV VP Value, Class II (8/01; 5/96)(g) -- 2.94(c) 11.64 10.59 -- 11.40 CALVERT VARIABLE SERIES, INC. 3SR Social Balanced Portfolio (5/00; 9/86) (7.91) (7.40) (7.91) 6.00 7.61 8.13 EVERGREEN VA 3CG Capital Growth Fund, Class L Shares (8/01; 3/98)(h) -- (5.62)(c) (14.10) -- -- 3.34 FIDELITY VIP 3FG Growth & Income Portfolio (Service Class 2) (8/01; 12/96)(i) -- (0.74)(c) (10.11) 8.72 -- 8.72 3FM Mid Cap Portfolio (Service Class 2) 8/01; 12/98)(i) -- 3.07(c) (4.65) -- -- 24.19 3FO Overseas Portfolio (Service Class 2) (8/01; 1/87)(i) -- (5.89)(c) (22.24) 1.47 4.66 4.91 4 PERFORMANCE OF PERFORMANCE OF THE SUBACCOUNT THE FUND SINCE SINCE SUBACCOUNT INVESTING IN: 1 YEAR COMMENCEMENT 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT FTVIPT 3RE Franklin Real Estate Fund - Class 2 (9/99; 1/89)(b),(j) 6.69% 13.95% 6.69% 4.76% 10.24% 9.01% 3SI Franklin Small Cap Value Securities Fund - Class 2 (9/99; 5/98)(j) 12.56 14.84 12.56 -- -- 2.05 (previously FTVIPT Franklin Value Securities Fund - Class 2) 3MS Mutual Shares Securities Fund - Class 2 (8/01; 11/96)(j) -- (4.18)(c) 5.85 8.95 -- 9.15 GOLDMAN SACHS VIT 3UE CORE(SM) U.S. Equity Fund (9/99; 2/98)(k) (13.03) (5.86) (13.03) -- -- 2.12 3MC Mid Cap Value Fund (9/99; 5/98) 10.85 15.04 10.85 -- -- 5.23 INVESCO VIF 3ID Dynamics Fund (8/01; 8/97) -- (6.16)(c) (32.13) -- -- 4.56 3FS Financial Services Fund (8/01; 9/99) -- (4.08)(c) (10.94) -- -- 9.04 3TC Technology Fund (8/01; 5/97) -- (11.28)(c) (46.74) -- -- 8.76 3TL Telecommunications Fund (8/01; 9/99) -- (17.64)(c) (54.88) -- -- (23.58) JANUS ASPEN SERIES 3GT Global Technology Portfolio: Service Shares (5/00; 1/00)(l) (38.26) (41.06) (38.26) -- -- (37.24) 3IG International Growth Portfolio: Service Shares (5/00; 5/94)(l) (24.46) (26.73) (24.46) 8.68 -- 12.40 LAZARD RETIREMENT SERIES 3IP International Equity Portfolio (9/99; 9/98) (25.09) (13.35) (25.09) -- -- (3.10) MFS(R) 3MG Investors Growth Stock Series - Service Class (5/00; 5/99)(m) (25.85) (21.84) (25.85) -- -- (1.68) 3MD New Discovery Series - Service Class (5/00; 5/98)(m) (6.38) (8.08) (6.38) -- -- 13.26 3UT Utilities Series - Service Class (8/01; 1/95)(m) -- (11.06)(c) (25.34) 9.32 -- 13.14 PIONEER VCT 3PE Pioneer Equity Income VCT Portfolio - Class II Shares (8/01; 3/95)(n) -- (2.96)(c) (8.27) 10.89 -- 13.25 3EU Pioneer Europe VCT Portfolio - Class II Shares (8/01; 10/98)(o) -- (3.74)(c) (24.88) -- -- (6.28) PUTNAM VARIABLE TRUST 3HS Putnam VT Health Sciences Fund - Class IB Shares (8/01; 4/98)(p) -- (3.31)(c) (20.80) -- -- 3.23 3PI Putnam VT International Growth Fund - Class IB Shares (8/01; 1/97)(q) -- (4.92)(c) (21.65) -- -- 8.38 3VS Putnam VT Vista Fund - Class IB Shares (9/99; 1/97)(q) (34.47) (6.84) (34.47) -- -- 6.29 STRONG FUNDS 3SO Strong Opportunity Fund II - Advisor Class (8/01; 5/92)(r) -- (1.95)(c) (5.28) 12.90 -- 14.97 5 PERFORMANCE OF PERFORMANCE OF THE SUBACCOUNT THE FUND SINCE SINCE SUBACCOUNT INVESTING IN: 1 YEAR COMMENCEMENT 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT WANGER 3IT International Small Cap (9/99; 5/95) (22.20%) (7.22%) (22.20%) 6.88% --% 14.30% 3SP U.S. Smaller Companies (9/99; 5/95) 10.17 6.35 10.17 11.22 -- 16.99 (previously Wanger U.S. Small Cap) WELLS FARGO VT 3AA Asset Allocation Fund (5/01; 4/94)(s) -- (4.65)(c) (8.07) 8.05 -- 9.95 3WI International Equity Fund (5/01; 7/00) -- (11.31)(c) (17.16) -- -- (18.38) 3SG Small Cap Growth Fund (5/01; 5/95)(t) -- (6.94)(c) (25.40) (2.92) -- 3.93
(a) Current applicable charges deducted from performance include a $30 annual contract administrative charge, a 0.15% MAV fee, a 0.40% annual EEP fee, and a 0.55% annual 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) 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. (f) Because Class B shares were not offered until August 15, 2001, standardized Class A fund performance for prior periods represents historical results of Class A shares. For periods beginning August 15, 2001, Class B's results reflect an additional 12b-1 fee expense, which also affects future performance. (g) 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. (h) 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. (i) Initial offering of the Service Class of each fund took place on Nov. 3, 1997 (except VIP Mid Cap which took place on Dec. 28, 1998). Returns prior to Nov. 3, 1997 (or Dec. 28, 1998 for VIP Mid Cap) are those of the Initial Class, which has no 12b-1 fee. If Service Class's 12b-1 fee of 0.10% had been reflected, returns prior to Nov. 3, 1997 would have been lower. (j) 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. (k) CORE(SM) is a service mark of Goldman, Sachs & Co. (l) 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). (m) 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. (n) 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 0.25% distribution fee, which Class I shares do not pay. Consequently, the performance of Class II shares will be lower. (o) 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 0.25% distribution fee, which Class I shares do not pay. Consequently, the performance of Class II shares will be lower. (p) The Trustees of the Putnam Variable Trust currently limit 12b-1 fee payments on Class IB Shares to 0.25% of average net assets. (q) 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 0.25%. Restated to reflect an increase in 12b-1 fees effective April 30, 2001. Actual 12b-1 fees during the most recent fiscal year were 0.22%. (r) 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. (s) Performance for periods prior to Sept. 20, 1999, reflects performance of the Life and Annuity Trust Asset Allocation Fund, its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust Funds were reorganized into the Wells Fargo Variable Trust Funds. (t) Performance for periods prior to Sept. 20, 1999, reflects performance of the Norwest Select Small Company Stock Fund (the accounting survivor of a merger of the Life and Annuity Trust Strategic Growth Fund and the Norwest Select Small Company Stock Fund), its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust and Norwest Select Funds were reorganized into the Wells Fargo Variable Trust Funds. 6 AVERAGE ANNUAL TOTAL RETURN(a) FOR PERIODS ENDING DEC. 31, 2001
PERFORMANCE OF PERFORMANCE OF THE SUBACCOUNT THE FUND 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) (17.00%) (7.46%) (17.00%) --% --% (7.46%) BD3 Bond Fund (9/99; 10/81) 7.02 5.89 7.02 4.35 6.71 9.62 CR3 Capital Resource Fund (9/99; 10/81) (18.62) (10.30) (18.62) 4.57 6.20 11.40 CM3 Cash Management Fund (9/99; 10/81) 3.11 4.18 3.11 4.29 3.86 5.76 DE3 Diversified Equity Income Fund (9/99; 9/99) 1.53 2.02 1.53 -- -- 2.02 EM3 Emerging Markets Fund (5/00; 5/00) (2.00) (18.09) (2.00) -- -- (18.09) ES3 Equity Select Fund (5/01; 5/01) -- (1.46)(c) -- -- -- (1.46)(d) EI3 Extra Income Fund (9/99; 5/96) 4.35 (1.98) 4.35 1.24 -- 2.02 FI3 Federal Income Fund (9/99; 9/99) 5.73 6.12 5.73 -- -- 6.12 GB3 Global Bond Fund (9/99; 5/96) 0.69 1.58 0.69 1.71 -- 2.81 GR3 Growth Fund (9/99; 9/99) (31.38) (16.51) (31.38) -- -- (16.52) IE3 International Fund (9/99; 1/92) (29.13) (15.31) (29.13) (2.09) -- 3.23 MF3 Managed Fund (9/99; 4/86) (11.14) (2.08) (11.14) 6.14 8.16 9.54 ND3 NEW DIMENSIONS FUND(R)(9/99; 5/96) (17.21) (4.09) (17.21) 9.19 -- 10.11 SV3 Partners Small Cap Value Fund (8/01; 8/01) -- 6.77(c) -- -- -- 6.77(d) IV3 S&P 500 Index Fund (5/00; 5/00) (13.00) (13.75) (13.00) -- -- (13.75) SC3 Small Cap Advantage Fund (9/99; 9/99) (7.10) 3.75 (7.10) -- -- 3.75 ST3 Stock Fund (8/01; 8/01) -- (3.35)(c) -- -- -- (3.35)(d) SA3 Strategy Aggressive Fund (9/99; 1/92) (33.33) (8.03) (33.33) 0.83 -- 6.03 AIM V.I. 3AC Capital Appreciation Fund, Series II (8/01; 5/93)(e) -- (2.77)(c) (23.82) 5.35 -- 11.06 3AD Capital Development Fund, Series II (8/01; 5/98)(e) -- (2.47)(c) (8.65) -- -- 4.43 ALLIANCE VP 3AB AllianceBernstein International Value Portfolio (Class B) (8/01; 5/01)(f) -- (2.54)(c) -- -- -- (1.70)(d) 3AL Growth and Income Portfolio (Class B) (8/01; 1/91)(f) -- (3.68)(c) (0.43) 13.85 14.15 13.11 AMERICAN CENTURY(R) VARIABLE PORTFOLIOS, INC. 3AI VP International, Class II (8/01; 5/94)(g) -- (7.17)(c) (29.61) 4.05 -- 5.01 3AV VP Value, Class II (8/01; 5/96)(g) -- 3.49(c) 12.19 11.14 -- 11.95 CALVERT VARIABLE SERIES, INC. 3SR Social Balanced Portfolio (5/00; 9/86) (7.36) (6.85) (7.36) 6.55 8.16 8.68 EVERGREEN VA 3CG Capital Growth Fund, Class L Shares (8/01; 3/98)(h) -- (5.07)(c) (13.55) -- -- 3.89 FIDELITY VIP 3FG Growth & Income Portfolio (Service Class 2) (8/01; 12/96)(i) -- (0.19)(c) (9.56) 9.27 -- 9.27 3FM Mid Cap Portfolio (Service Class 2) (8/01; 12/98)(i) -- 3.62(c) (4.10) -- -- 24.74 3FO Overseas Portfolio (Service Class 2) (8/01; 1/87)(i) -- (5.34)(c) (21.69) 2.02 5.21 5.46 7 PERFORMANCE OF PERFORMANCE OF THE SUBACCOUNT THE FUND SINCE SINCE SUBACCOUNT INVESTING IN: 1 YEAR COMMENCEMENT 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT FTVIPT 3RE Franklin Real Estate Fund - Class 2 (9/99; 1/89)(b),(j) 7.24% 14.50% 7.24% 5.31% 10.79% 9.56% 3SI Franklin Small Cap Value Securities Fund - Class 2 (9/99; 5/98)(j) 13.11 15.39 13.11 -- -- 2.60 (previously FTVIPT Franklin Value Securities Fund - Class 2) 3MS Mutual Shares Securities Fund - Class 2 (8/01; 11/96)(j) -- (3.63)(c) 6.40 9.50 -- 9.70 GOLDMAN SACHS VIT 3UE CORE(SM) U.S. Equity Fund (9/99; 2/98)(k) (12.48) (5.31) (12.48) -- -- 2.67 3MC Mid Cap Value Fund (9/99; 5/98) 11.40 15.59 11.40 -- -- 5.78 INVESCO VIF 3ID Dynamics Fund (8/01; 8/97) -- (5.61)(c) (31.58) -- -- 5.11 3FS Financial Services Fund (8/01; 9/99) -- (3.53)(c) (10.39) -- -- 9.59 3TC Technology Fund (8/01; 5/97) -- (10.73)(c) (46.19) -- -- 9.31 3TL Telecommunications Fund (8/01; 9/99) -- (17.09)(c) (54.33) -- -- (23.03) JANUS ASPEN SERIES 3GT Global Technology Portfolio: Service Shares (5/00; 1/00)(l) (37.71) (40.51) (37.71) -- -- (36.69) 3IG International Growth Portfolio: Service Shares (5/00; 5/94)(l) (23.91) (26.18) (23.91) 9.23 -- 12.95 LAZARD RETIREMENT SERIES 3IP International Equity Portfolio (9/99; 9/98) (24.54) (12.80) (24.54) -- -- (2.55) MFS(R) 3MG Investors Growth Stock Series - Service Class (5/00; 5/99)(m) (25.30) (21.29) (25.30) -- -- (1.13) 3MD New Discovery Series - Service Class (5/00; 5/98)(m) (5.83) (7.53) (5.83) -- -- 13.81 3UT Utilities Series - Service Class (8/01; 1/95)(m) -- (10.51)(c) (24.79) 9.87 -- 13.69 PIONEER VCT 3PE Pioneer Equity Income VCT Portfolio - Class II Shares (8/01; 3/95)(n) -- (2.41)(c) (7.72) 11.44 -- 13.80 3EU Pioneer Europe VCT Portfolio - Class II Shares (8/01; 10/98)(o) -- (3.19)(c) (24.33) -- -- (5.73) PUTNAM VARIABLE TRUST 3HS Putnam VT Health Sciences Fund - Class IB Shares (8/01; 4/98)(p) -- (2.76)(c) (20.25) -- -- 3.78 3PI Putnam VT International Growth Fund - Class IB Shares (8/01; 1/97)(q) -- (4.37)(c) (21.10) -- -- 8.93 3VS Putnam VT Vista Fund - Class IB Shares (9/99; 1/97)(q) (33.92) (6.29) (33.92) -- -- 6.84 STRONG FUNDS 3SO Strong Opportunity Fund II - Advisor Class (8/01; 5/92)(r) -- (1.40)(c) (4.73) 13.45 -- 15.52 8 PERFORMANCE OF PERFORMANCE OF THE SUBACCOUNT THE FUND SINCE SINCE SUBACCOUNT INVESTING IN: 1 YEAR COMMENCEMENT 1 YEAR 5 YEARS 10 YEARS COMMENCEMENT WANGER 3IT International Small Cap (9/99; 5/95) (21.65%) (6.67%) (21.65%) 7.43% --% 14.85% 3SP U.S. Smaller Companies (9/99; 5/95) 10.72 6.90 10.72 11.77 -- 17.54 (previously Wanger U.S. Small Cap) WELLS FARGO VT 3AA Asset Allocation Fund (5/01; 4/94)(s) -- (4.10)(c) (7.52) 8.60 -- 10.50 3WI International Equity Fund (5/01; 7/00) -- (10.76)(c) (16.61) -- -- (17.83) 3SG Small Cap Growth Fund (5/01; 5/95)(t) -- (6.39)(c) (24.85) (2.37) -- 4.48
(a) Current applicable charges deducted from fund performance include a $30 annual contract administrative charge and a 0.55% annual 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) 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. (f) Because Class B shares were not offered until August 15, 2001, standardized Class A fund performance for prior periods represents historical results of Class A shares. For periods beginning August 15, 2001, Class B's results reflect an additional 12b-1 fee expense, which also affects future performance. (g) 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. (h) 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. (i) Initial offering of the Service Class of each fund took place on Nov. 3, 1997 (except VIP Mid Cap which took place on Dec. 28, 1998). Returns prior to Nov. 3, 1997 (or Dec. 28, 1998 for VIP Mid Cap) are those of the Initial Class, which has no 12b-1 fee. If Service Class's 12b-1 fee of 0.10% had been reflected, returns prior to Nov. 3, 1997 would have been lower. (j) 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. (k) CORE(SM) is a service mark of Goldman, Sachs & Co. (l) 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). (m) 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. (n) 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 0.25% distribution fee, which Class I shares do not pay. Consequently, the performance of Class II shares will be lower. (o) 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 0.25% distribution fee, which Class I shares do not pay. Consequently, the performance of Class II shares will be lower. (p) The Trustees of the Putnam Variable Trust currently limit 12b-1 fee payments on Class IB Shares to 0.25% of average net assets. (q) 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 0.25%. Restated to reflect an increase in 12b-1 fees effective April 30, 2001. Actual 12b-1 fees during the most recent fiscal year were 0.22%. (r) 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. (s) Performance for periods prior to Sept. 20, 1999, reflects performance of the Life and Annuity Trust Asset Allocation Fund, its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust Funds were reorganized into the Wells Fargo Variable Trust Funds. (t) Performance for periods prior to Sept. 20, 1999, reflects performance of the Norwest Select Small Company Stock Fund (the accounting survivor of a merger of the Life and Annuity Trust Strategic Growth Fund and the Norwest Select Small Company Stock Fund), its predecessor fund. Effective at the close of business Sept. 17, 1999, the Life and Annuity Trust and Norwest Select Funds were reorganized into the Wells Fargo Variable Trust Funds. 9 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. ANNUALIZED 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) raising the base period return to the power of 365/7. The subaccount's value includes: - any declared dividends, - the value of any shares purchased with dividends paid during the period, and - 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)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 YIELD BASED ON THE SEVEN-DAY PERIOD ENDING DEC. 31, 2001
VARIABLE ACCOUNT INVESTING IN: SIMPLE YIELD COMPOUND YIELD CM3 AXP(R) Variable Portfolio - Cash Management Fund 1.05% 1.06%
ANNUALIZED YIELD FOR A SUBACCOUNT INVESTING IN AN INCOME FUND 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 ANNUALIZED YIELD BASED ON 30-DAY PERIOD ENDED DEC. 31, 2001
SUBACCOUNT INVESTING IN YIELD BD3 AXP(R) Variable Portfolio - Bond Fund 2.84% EI3 AXP(R) Variable Portfolio - Extra Income Fund 11.80 FI3 AXP(R) Variable Portfolio - Federal Income Fund 5.61 GB3 AXP(R) Variable Portfolio - Global Bond Fund 9.70
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 PAYMENTS 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: - determine the dollar value of your contract on the valuation date and then deduct any applicable premium tax; then - 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: - the annuity unit value on the valuation date; by - 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: - the net investment factor; and - 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: - 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 - dividing that sum by the previous adjusted net asset value per share; and - 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. 11 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: - take the value of your fixed account at the retirement date or the date you selected to begin receiving your annuity payouts; then - 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 We receive ratings from 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. For detailed information on the agency ratings given to IDS Life, refer to the American Express Web site at (americanexpress.com/advisors) or contact your financial advisor. Or view our current ratings by visiting the agency Web sites directly at: A.M. Best www.ambest.com Fitch www.fitchratings.com Moody's www.moodys.com/insurance
A.M. Best -- Rates insurance companies for their financial strength. Fitch (formerly Duff & Phelps)-- Rates insurance companies for their claims- paying ability. Moody's-- Rates insurance companies for their financial strength. PRINCIPAL UNDERWRITER IDS Life serves as principal underwriter for the contract, which it offers on a continuous basis. IDS Life is registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934 as a broker-dealer and is a member of the National Association of Securities Dealers, Inc. IDS Life is ultimately controlled by American Express Company. IDS Life currently pays underwriting commissions for its role as principal underwriter of all variable annuities associated with this variable account. For the past three years, the aggregate dollar amount of underwriting commissions paid in its role as principal underwriter for the variable account has been: 2001: $41,792,624; 2000: $56,851,815; and 1999: $21,517,281. IDS Life retains no underwriting commission from the sale of the contract. INDEPENDENT AUDITORS The financial statements appearing in this SAI have been audited by Ernst & Young LLP (1400 Pillsbury Center, 220 South Sixth Street, Minneapolis, MN 55402) independent auditors, as stated in their report appearing herein. 12 REPORT OF INDEPENDENT AUDITORS THE BOARD OF DIRECTORS IDS LIFE INSURANCE COMPANY We have audited the accompanying individual statements of assets and liabilities of the segregated asset subaccounts of IDS Life Variable Account 10 - American Express Retirement Advisor Advantage(SM) Variable Annuity - Band 3 (comprised of subaccounts BC3, BD3, CR3, CM3, DE3, EM3, ES3, EI3, FI3, GB3, GR3, IE3, MF3, ND3, SV3, IV3, SC3, ST3, SA3, 3AC, 3AD, 3AL, 3AB, 3AI, 3AV, 3SR, 3CG, 3FG, 3FM, 3FO, 3RE, 3SI, 3MS, 3UE, 3MC, 3ID, 3FS, 3TC, 3TL, 3GT, 3IG, 3IP, 3MG, 3MD, 3UT, 3PE, 3EU, 3HS, 3PI, 3VS, 3SO, 3IT, 3SP, 3AA, 3WI and 3SG) as of December 31, 2001, 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, 2001 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(SM) Variable Annuity - Band 3 at December 31, 2001, 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 22, 2002 13 STATEMENTS OF ASSETS AND LIABILITIES
SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------- DECEMBER 31, 2001 BC3 BD3 CR3 CM3 ASSETS Investments in shares of mutual funds and portfolios: at cost $ 611,671 $ 365,128 $ 217,781 $ 5,443,014 ------------------------------------------------------------- at market value $ 597,524 $ 362,247 $ 222,421 $ 5,443,005 Dividends receivable -- 1,777 -- 9,672 Accounts receivable from IDS Life for contract purchase payments -- 758,050 -- 769,040 Receivable from mutual funds and portfolios for share redemptions -- -- -- -- -------------------------------------------------------------------------------------------------------------- Total assets 597,524 1,122,074 222,421 6,221,717 ============================================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 280 178 120 2,945 Contract terminations -- -- -- -- Payable to mutual funds and portfolios for investments purchased -- -- -- -- -------------------------------------------------------------------------------------------------------------- Total liabilities 280 178 120 2,945 -------------------------------------------------------------------------------------------------------------- Net assets applicable to contracts in accumulation period 597,244 1,121,896 222,301 6,218,772 Net assets applicable to contracts in payment period -- -- -- -- Net assets applicable to seed money -- -- -- -- -------------------------------------------------------------------------------------------------------------- Total net assets $ 597,244 $ 1,121,896 $ 222,301 $ 6,218,772 ============================================================================================================== Accumulation units outstanding 728,975 984,546 291,207 5,658,076 ============================================================================================================== Net asset value per accumulation unit $ 0.82 $ 1.14 $ 0.76 $ 1.10 ============================================================================================================== SEGREGATED ASSET SUBACCOUNTS --------------------------------------------- DECEMBER 31, 2001 DE3 EM3 ES3 ASSETS Investments in shares of mutual funds and portfolios: at cost $ 365,985 $ 4,225,791 $ 1,978,395 --------------------------------------------- at market value $ 369,131 $ 3,676,115 $ 2,063,642 Dividends receivable -- -- -- Accounts receivable from IDS Life for contract purchase payments -- -- -- Receivable from mutual funds and portfolios for share redemptions -- -- -- ---------------------------------------------------------------------------------------------- Total assets 369,131 3,676,115 2,063,642 ============================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 260 1,713 998 Contract terminations 80,987 -- -- Payable to mutual funds and portfolios for investments purchased -- -- -- ---------------------------------------------------------------------------------------------- Total liabilities 81,247 1,713 998 ---------------------------------------------------------------------------------------------- Net assets applicable to contracts in accumulation period 287,884 2,405 38,163 Net assets applicable to contracts in payment period -- -- -- Net assets applicable to seed money -- 3,671,997 2,024,481 ---------------------------------------------------------------------------------------------- Total net assets $ 287,884 $ 3,674,402 $ 2,062,644 ============================================================================================== Accumulation units outstanding 281,449 3,269 37,676 ============================================================================================== Net asset value per accumulation unit $ 1.02 $ 0.73 $ 1.01 ============================================================================================== See accompanying notes to financial statements. 14 SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------- DECEMBER 31, 2001 (CONTINUED) EI3 FI3 GB3 GR3 ASSETS Investments in shares of mutual funds and portfolios: at cost $ 3,013,865 $ 678,637 $ 260,404 $ 1,010,685 ------------------------------------------------------------- at market value $ 2,998,820 $ 677,102 $ 256,485 $ 827,367 Dividends receivable 15,324 3,614 2,072 -- Accounts receivable from IDS Life for contract purchase payments -- -- -- 43 Receivable from mutual funds and portfolios for share redemptions -- -- -- -- -------------------------------------------------------------------------------------------------------------- Total assets 3,014,144 680,716 258,557 827,410 ============================================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 821 365 120 405 Contract terminations 1,537,869 -- -- -- Payable to mutual funds and portfolios for investments purchased -- -- -- -- -------------------------------------------------------------------------------------------------------------- Total liabilities 1,538,690 365 120 405 -------------------------------------------------------------------------------------------------------------- Net assets applicable to contracts in accumulation period 1,475,454 680,351 258,437 827,005 Net assets applicable to contracts in payment period -- -- -- -- Net assets applicable to seed money -- -- -- -- -------------------------------------------------------------------------------------------------------------- Total net assets $ 1,475,454 $ 680,351 $ 258,437 $ 827,005 ============================================================================================================== Accumulation units outstanding 1,549,237 591,528 249,453 1,285,420 ============================================================================================================== Net asset value per accumulation unit $ 0.95 $ 1.15 $ 1.04 $ 0.64 ============================================================================================================== SEGREGATED ASSET SUBACCOUNTS --------------------------------------------- DECEMBER 31, 2001 (CONTINUED) IE3 MF3 ND3 ASSETS Investments in shares of mutual funds and portfolios: at cost $ 42,871 $ 276,726 $ 3,107,828 --------------------------------------------- at market value $ 43,891 $ 278,272 $ 3,062,864 Dividends receivable -- -- -- Accounts receivable from IDS Life for contract purchase payments -- 219 -- Receivable from mutual funds and portfolios for share redemptions -- -- -- ---------------------------------------------------------------------------------------------- Total assets 43,891 278,491 3,062,864 ============================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 94 134 1,434 Contract terminations -- -- 160,213 Payable to mutual funds and portfolios for investments purchased -- -- -- ---------------------------------------------------------------------------------------------- Total liabilities 94 134 161,647 ---------------------------------------------------------------------------------------------- Net assets applicable to contracts in accumulation period 43,797 278,357 2,901,217 Net assets applicable to contracts in payment period -- -- -- Net assets applicable to seed money -- -- -- ---------------------------------------------------------------------------------------------- Total net assets $ 43,797 $ 278,357 $ 2,901,217 ============================================================================================== Accumulation units outstanding 65,188 295,986 3,252,328 ============================================================================================== Net asset value per accumulation unit $ 0.67 $ 0.94 $ 0.89 ============================================================================================== See accompanying notes to financial statements. 15 SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------- DECEMBER 31, 2001 (CONTINUED) SV3 IV3 SC3 ST3 ASSETS Investments in shares of mutual funds and portfolios: at cost $ 4,414,191 $ 727,444 $ 538,804 $ 2,002,279 ------------------------------------------------------------- at market value $ 4,719,545 $ 606,017 $ 541,007 $ 1,900,422 Dividends receivable -- -- -- -- Accounts receivable from IDS Life for contract purchase payments -- -- -- -- Receivable from mutual funds and portfolios for share redemptions -- -- -- -- -------------------------------------------------------------------------------------------------------------- Total assets 4,719,545 606,017 541,007 1,900,422 ============================================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 2,156 288 267 888 Contract terminations -- -- 132,601 -- Payable to mutual funds and portfolios for investments purchased -- -- -- -- -------------------------------------------------------------------------------------------------------------- Total liabilities 2,156 288 132,868 888 -------------------------------------------------------------------------------------------------------------- Net assets applicable to contracts in accumulation period 439,561 605,729 408,139 -- Net assets applicable to contracts in payment period -- -- -- -- Net assets applicable to seed money 4,277,828 -- -- 1,899,534 -------------------------------------------------------------------------------------------------------------- Total net assets $ 4,717,389 $ 605,729 $ 408,139 $ 1,899,534 ============================================================================================================== Accumulation units outstanding 411,004 770,207 378,441 -- ============================================================================================================== Net asset value per accumulation unit $ 1.07 $ 0.79 $ 1.08 $ 0.95 ============================================================================================================== SEGREGATED ASSET SUBACCOUNTS --------------------------------------------- DECEMBER 31, 2001 (CONTINUED) SA3 3AC 3AD ASSETS Investments in shares of mutual funds and portfolios: at cost $ 494,259 $ 5,969 $ 2,916 --------------------------------------------- at market value $ 498,588 $ 5,956 $ 3,156 Dividends receivable -- -- -- Accounts receivable from IDS Life for contract purchase payments -- -- -- Receivable from mutual funds and portfolios for share redemptions -- 3 1 ---------------------------------------------------------------------------------------------- Total assets 498,588 5,959 3,157 ============================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 283 3 1 Contract terminations 3,895 -- -- Payable to mutual funds and portfolios for investments purchased -- -- -- ---------------------------------------------------------------------------------------------- Total liabilities 4,178 3 1 ---------------------------------------------------------------------------------------------- Net assets applicable to contracts in accumulation period 494,410 5,956 3,156 Net assets applicable to contracts in payment period -- -- -- Net assets applicable to seed money -- -- -- ---------------------------------------------------------------------------------------------- Total net assets $ 494,410 $ 5,956 $ 3,156 ============================================================================================== Accumulation units outstanding 607,048 6,095 3,211 ============================================================================================== Net asset value per accumulation unit $ 0.81 $ 0.98 $ 0.98 ============================================================================================== See accompanying notes to financial statements. 16 SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------- DECEMBER 31, 2001 (CONTINUED) 3AB 3AL 3AI 3AV ASSETS Investments in shares of mutual funds and portfolios: at cost $ 199,946 $ 132,726 $ 1,184 $ 148,463 ------------------------------------------------------------- at market value $ 205,356 $ 131,419 $ 1,235 $ 150,940 Dividends receivable -- -- -- -- Accounts receivable from IDS Life for contract purchase payments -- -- -- -- Receivable from mutual funds and portfolios for share redemptions 65 59 1 68 -------------------------------------------------------------------------------------------------------------- Total assets 205,421 131,478 1,236 151,008 ============================================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 65 59 1 68 Contract terminations -- -- -- -- Payable to mutual funds and portfolios for investments purchased -- -- -- -- -------------------------------------------------------------------------------------------------------------- Total liabilities 65 59 1 68 -------------------------------------------------------------------------------------------------------------- Net assets applicable to contracts in accumulation period 205,356 131,419 1,235 150,940 Net assets applicable to contracts in payment period -- -- -- -- Net assets applicable to seed money -- -- -- -- -------------------------------------------------------------------------------------------------------------- Total net assets $ 205,356 $ 131,419 $ 1,235 $ 150,940 ============================================================================================================== Accumulation units outstanding 209,971 136,127 1,324 145,573 ============================================================================================================== Net asset value per accumulation unit $ 0.98 $ 0.97 $ 0.93 $ 1.04 ============================================================================================================== SEGREGATED ASSET SUBACCOUNTS --------------------------------------------- DECEMBER 31, 2001 (CONTINUED) 3SR 3CG 3FG ASSETS Investments in shares of mutual funds and portfolios: at cost $ 6,095 $ 9 $ 131,167 --------------------------------------------- at market value $ 5,638 $ 9 $ 132,379 Dividends receivable -- -- -- Accounts receivable from IDS Life for contract purchase payments -- -- -- Receivable from mutual funds and portfolios for share redemptions 2 -- 28 ---------------------------------------------------------------------------------------------- Total assets 5,640 9 132,407 ============================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 2 -- 28 Contract terminations -- -- -- Payable to mutual funds and portfolios for investments purchased -- -- -- ---------------------------------------------------------------------------------------------- Total liabilities 2 -- 28 ---------------------------------------------------------------------------------------------- Net assets applicable to contracts in accumulation period 5,638 9 132,379 Net assets applicable to contracts in payment period -- -- -- Net assets applicable to seed money -- -- -- ---------------------------------------------------------------------------------------------- Total net assets $ 5,638 $ 9 $ 132,379 ============================================================================================== Accumulation units outstanding 6,328 10 132,462 ============================================================================================== Net asset value per accumulation unit $ 0.89 $ 0.95 $ 1.00 ============================================================================================== See accompanying notes to financial statements. 17 SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------- DECEMBER 31, 2001 (CONTINUED) 3FM 3FO 3RE 3SI ASSETS Investments in shares of mutual funds and portfolios: at cost $ 134,112 $ 6,613 $ 275,692 $ 196,326 ------------------------------------------------------------- at market value $ 137,013 $ 6,712 $ 283,986 $ 203,677 Dividends receivable -- -- -- -- Accounts receivable from IDS Life for contract purchase payments -- -- -- -- Receivable from mutual funds and portfolios for share redemptions 29 3 121 77 -------------------------------------------------------------------------------------------------------------- Total assets 137,042 6,715 284,107 203,754 ============================================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 29 3 121 77 Contract terminations -- -- -- -- Payable to mutual funds and portfolios for investments purchased -- -- -- -- -------------------------------------------------------------------------------------------------------------- Total liabilities 29 3 121 77 -------------------------------------------------------------------------------------------------------------- Net assets applicable to contracts in accumulation period 137,013 6,712 283,986 203,677 Net assets applicable to contracts in payment period -- -- -- -- Net assets applicable to seed money -- -- -- -- -------------------------------------------------------------------------------------------------------------- Total net assets $ 137,013 $ 6,712 $ 283,986 $ 203,677 ============================================================================================================== Accumulation units outstanding 131,673 7,097 210,936 150,319 ============================================================================================================== Net asset value per accumulation unit $ 1.04 $ 0.95 $ 1.35 $ 1.35 ============================================================================================================== SEGREGATED ASSET SUBACCOUNTS --------------------------------------------- DECEMBER 31, 2001 (CONTINUED) 3MS 3UE 3MC ASSETS Investments in shares of mutual funds and portfolios: at cost $ 9 $ 939,179 $ 274,350 --------------------------------------------- at market value $ 9 $ 818,177 $ 275,802 Dividends receivable -- -- -- Accounts receivable from IDS Life for contract purchase payments -- -- -- Receivable from mutual funds and portfolios for share redemptions -- 391 128 ---------------------------------------------------------------------------------------------- Total assets 9 818,568 275,930 ============================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee -- 386 128 Contract terminations -- 5 -- Payable to mutual funds and portfolios for investments purchased -- -- -- ---------------------------------------------------------------------------------------------- Total liabilities -- 391 128 ---------------------------------------------------------------------------------------------- Net assets applicable to contracts in accumulation period 9 818,177 275,802 Net assets applicable to contracts in payment period -- -- -- Net assets applicable to seed money -- -- -- ---------------------------------------------------------------------------------------------- Total net assets $ 9 $ 818,177 $ 275,802 ============================================================================================== Accumulation units outstanding 10 943,339 200,117 ============================================================================================== Net asset value per accumulation unit $ 0.97 $ 0.87 $ 1.38 ============================================================================================== See accompanying notes to financial statements. 18 SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------- DECEMBER 31, 2001 (CONTINUED) 3ID 3FS 3TC 3TL ASSETS Investments in shares of mutual funds and portfolios: at cost $ 1,094 $ 9 $ 9 $ 9 ------------------------------------------------------------- at market value $ 1,258 $ 10 $ 10 $ 10 Dividends receivable -- -- -- -- Accounts receivable from IDS Life for contract purchase payments -- -- -- -- Receivable from mutual funds and portfolios for share redemptions 1 -- -- -- -------------------------------------------------------------------------------------------------------------- Total assets 1,259 10 10 10 ============================================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 1 -- -- -- Contract terminations -- -- -- 76,428 Payable to mutual funds and portfolios for investments purchased -- -- -- -- -------------------------------------------------------------------------------------------------------------- Total liabilities 1 -- -- -- -------------------------------------------------------------------------------------------------------------- Net assets applicable to contracts in accumulation period 1,258 10 10 10 Net assets applicable to contracts in payment period -- -- -- -- Net assets applicable to seed money -- -- -- -- -------------------------------------------------------------------------------------------------------------- Total net assets $ 1,258 $ 10 $ 10 $ 10 ============================================================================================================== Accumulation units outstanding 1,309 10 11 11 ============================================================================================================== Net asset value per accumulation unit $ 0.96 $ 0.97 $ 0.91 $ 0.84 ============================================================================================================== SEGREGATED ASSET SUBACCOUNTS --------------------------------------------- DECEMBER 31, 2001 (CONTINUED) 3GT 3IG 3IP ASSETS Investments in shares of mutual funds and portfolios: at cost $ 116,273 $ 368,567 $ 196,212 --------------------------------------------- at market value $ 86,122 $ 369,605 $ 184,363 Dividends receivable -- -- -- Accounts receivable from IDS Life for contract purchase payments -- 261 -- Receivable from mutual funds and portfolios for share redemptions 76,504 173 85 ---------------------------------------------------------------------------------------------- Total assets 162,626 370,039 184,448 ============================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 76 173 85 Contract terminations -- -- -- Payable to mutual funds and portfolios for investments purchased -- 261 -- ---------------------------------------------------------------------------------------------- Total liabilities 76,504 434 85 ---------------------------------------------------------------------------------------------- Net assets applicable to contracts in accumulation period 86,122 369,605 184,363 Net assets applicable to contracts in payment period -- -- -- Net assets applicable to seed money -- -- -- ---------------------------------------------------------------------------------------------- Total net assets $ 86,122 $ 369,605 $ 184,363 ============================================================================================== Accumulation units outstanding 201,887 605,897 253,393 ============================================================================================== Net asset value per accumulation unit $ 0.43 $ 0.61 $ 0.73 ============================================================================================== See accompanying notes to financial statements. 19 SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------- DECEMBER 31, 2001 (CONTINUED) 3MG 3MD 3UT 3PE ASSETS Investments in shares of mutual funds and portfolios: at cost $ 680,483 $ 496,635 $ 121,862 $ 9 ------------------------------------------------------------- at market value $ 617,667 $ 494,612 $ 123,407 $ 9 Dividends receivable -- -- -- -- Accounts receivable from IDS Life for contract purchase payments 348 310 -- -- Receivable from mutual funds and portfolios for share redemptions 283 226 56 -- -------------------------------------------------------------------------------------------------------------- Total assets 618,298 495,148 123,463 9 ============================================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 283 226 56 -- Contract terminations -- -- -- -- Payable to mutual funds and portfolios for investments purchased 348 310 -- -- -------------------------------------------------------------------------------------------------------------- Total liabilities 631 536 56 -- -------------------------------------------------------------------------------------------------------------- Net assets applicable to contracts in accumulation period 617,667 494,612 123,407 9 Net assets applicable to contracts in payment period -- -- -- -- Net assets applicable to seed money -- -- -- -- -------------------------------------------------------------------------------------------------------------- Total net assets $ 617,667 $ 494,612 $ 123,407 $ 9 ============================================================================================================== Accumulation units outstanding 913,438 547,539 138,296 10 ============================================================================================================== Net asset value per accumulation unit $ 0.68 $ 0.90 $ 0.89 $ 0.98 ============================================================================================================== SEGREGATED ASSET SUBACCOUNTS --------------------------------------------- DECEMBER 31, 2001 (CONTINUED) 3EU 3HS 3PI ASSETS Investments in shares of mutual funds and portfolios: at cost $ 9 $ 128,758 $ 399,883 --------------------------------------------- at market value $ 9 $ 126,387 $ 402,161 Dividends receivable -- -- -- Accounts receivable from IDS Life for contract purchase payments -- -- -- Receivable from mutual funds and portfolios for share redemptions -- 57 127 ---------------------------------------------------------------------------------------------- Total assets 9 126,444 402,288 ============================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee -- 57 127 Contract terminations -- -- -- Payable to mutual funds and portfolios for investments purchased -- -- -- ---------------------------------------------------------------------------------------------- Total liabilities -- 57 127 ---------------------------------------------------------------------------------------------- Net assets applicable to contracts in accumulation period 9 126,387 402,161 Net assets applicable to contracts in payment period -- -- -- Net assets applicable to seed money -- -- -- ---------------------------------------------------------------------------------------------- Total net assets $ 9 $ 126,387 $ 402,161 ============================================================================================== Accumulation units outstanding 10 128,607 418,356 ============================================================================================== Net asset value per accumulation unit $ 0.98 $ 0.98 $ 0.96 ============================================================================================== See accompanying notes to financial statements. 20 SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------- DECEMBER 31, 2001 (CONTINUED) 3VS 3SO 3IT 3SP ASSETS Investments in shares of mutual funds and portfolios: at cost $ 1,382,673 $ 156,256 $ 690,133 $ 881,140 ------------------------------------------------------------- at market value $ 934,611 $ 134,428 $ 654,220 $ 958,142 Dividends receivable -- -- -- -- Accounts receivable from IDS Life for contract purchase payments -- -- 258 -- Receivable from mutual funds and portfolios for share redemptions 5,541 61 278 442 -------------------------------------------------------------------------------------------------------------- Total assets 940,152 134,489 654,756 958,584 ============================================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 435 61 278 439 Contract terminations 5,106 -- -- 3 Payable to mutual funds and portfolios for investments purchased -- -- 258 -- -------------------------------------------------------------------------------------------------------------- Total liabilities 5,541 61 536 442 -------------------------------------------------------------------------------------------------------------- Net assets applicable to contracts in accumulation period 934,611 134,428 654,220 955,196 Net assets applicable to contracts in payment period -- -- -- 2,946 Net assets applicable to seed money -- -- -- -- -------------------------------------------------------------------------------------------------------------- Total net assets $ 934,611 $ 134,428 $ 654,220 $ 958,142 ============================================================================================================== Accumulation units outstanding 1,092,048 135,509 768,839 819,784 ============================================================================================================== Net asset value per accumulation unit $ 0.86 $ 0.99 $ 0.85 $ 1.17 ============================================================================================================== SEGREGATED ASSET SUBACCOUNTS --------------------------------------------- DECEMBER 31, 2001 (CONTINUED) 3AA 3WI 3SG ASSETS Investments in shares of mutual funds and portfolios: at cost $ 8,274 $ 461 $ 2,066 --------------------------------------------- at market value $ 7,876 $ 455 $ 2,047 Dividends receivable -- -- -- Accounts receivable from IDS Life for contract purchase payments -- -- -- Receivable from mutual funds and portfolios for share redemptions 4 -- 1 ---------------------------------------------------------------------------------------------- Total assets 7,880 455 2,048 ============================================================================================== LIABILITIES Payable to IDS Life for: Mortality and expense risk fee 4 -- 1 Contract terminations -- -- -- Payable to mutual funds and portfolios for investments purchased -- -- -- ---------------------------------------------------------------------------------------------- Total liabilities 4 -- 1 ---------------------------------------------------------------------------------------------- Net assets applicable to contracts in accumulation period 7,876 455 2,047 Net assets applicable to contracts in payment period -- -- -- Net assets applicable to seed money -- -- -- ---------------------------------------------------------------------------------------------- Total net assets $ 7,876 $ 455 $ 2,047 ============================================================================================== Accumulation units outstanding 8,116 506 2,169 ============================================================================================== Net asset value per accumulation unit $ 0.97 $ 0.90 $ 0.94 ==============================================================================================
See accompanying notes to financial statements. 21 STATEMENTS OF OPERATIONS
SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 BC3 BD3 CR3 CM3 INVESTMENT INCOME Dividend income from mutual funds and portfolios $ 3,588 $ 38,320 $ 706 $ 272,942 Variable account expenses 2,804 3,372 1,433 40,706 -------------------------------------------------------------------------------------------------------------- Investment income (loss)-- net 784 34,948 (727) 232,236 ============================================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 3,297,642 4,878,350 5,996,477 158,456,563 Cost of investments sold 3,396,615 4,868,565 6,152,004 158,456,743 -------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on sale of investments (98,973) 9,785 (155,527) (180) Distributions from capital gains -- -- -- -- Net change in unrealized appreciation or depreciation of investments 8,389 (5,986) 77,338 (9) -------------------------------------------------------------------------------------------------------------- Net gain (loss) on investments (90,584) 3,799 (78,189) (189) -------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ (89,800) $ 38,747 $ (78,916) $ 232,047 ============================================================================================================== SEGREGATED ASSET SUBACCOUNTS --------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 DE3 EM3 ES3(1) INVESTMENT INCOME Dividend income from mutual funds and portfolios $ 4,025 $ 575 $ -- Variable account expenses 2,271 20,181 7,461 ---------------------------------------------------------------------------------------------- Investment income (loss)-- net 1,754 (19,606) (7,461) ============================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 10,079,132 1,163,361 2,452,136 Cost of investments sold 10,063,252 1,474,157 2,499,907 ---------------------------------------------------------------------------------------------- Net realized gain (loss) on sale of investments 15,880 (310,796) (47,771) Distributions from capital gains -- -- -- Net change in unrealized appreciation or depreciation of investments (3,401) 257,738 85,247 ---------------------------------------------------------------------------------------------- Net gain (loss) on investments 12,479 (53,058) 37,476 ---------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ 14,233 $ (72,664) $ 30,015 ==============================================================================================
(1) For the period May 1, 2001 (commencement of operations) to Dec. 31, 2001.
SEGREGATED ASSET SUBACCOUNTS -------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 (CONTINUED) EI3 FI3 GB3 GR3 INVESTMENT INCOME Dividend income from mutual funds and portfolios $ 159,665 $ 15,791 $ 3,884 $ -- Variable account expenses 8,177 2,078 464 6,112 --------------------------------------------------------------------------------------------------------------- Investment income (loss)-- net 151,488 13,713 3,420 (6,112) =============================================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 10,540,175 3,245,327 875,816 1,623,107 Cost of investments sold 10,762,498 3,239,962 869,293 2,249,148 --------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on sale of investments (222,323) 5,365 6,523 (626,041) Distributions from capital gains -- -- -- -- Net change in unrealized appreciation or depreciation of investments 124,421 (1,551) (3,993) 96,024 --------------------------------------------------------------------------------------------------------------- Net gain (loss) on investments (97,902) 3,814 2,530 (530,017) --------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ 53,586 $ 17,527 $ 5,950 $ (536,129) =============================================================================================================== SEGREGATED ASSET SUBACCOUNTS --------------------------------------------- YEAR ENDED DECEMBER 31, 2001 (CONTINUED) IE3 MF3 ND3 INVESTMENT INCOME Dividend income from mutual funds and portfolios $ 3,875 $ 6,597 $ 7,133 Variable account expenses 1,644 1,454 18,642 ---------------------------------------------------------------------------------------------- Investment income (loss)-- net 2,231 5,143 (11,509) ============================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 46,796,094 1,767,005 9,433,243 Cost of investments sold 46,522,957 1,801,792 10,854,634 ---------------------------------------------------------------------------------------------- Net realized gain (loss) on sale of investments 273,137 (34,787) (1,421,391) Distributions from capital gains -- -- -- Net change in unrealized appreciation or depreciation of investments 15,747 18,304 616,580 ---------------------------------------------------------------------------------------------- Net gain (loss) on investments 288,884 (16,483) (804,811) ---------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ 291,115 $ (11,340) $ (816,320) ============================================================================================== See accompanying notes to financial statements. 22 SEGREGATED ASSET SUBACCOUNTS -------------------------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) SV3(1) IV3 SC3 ST3(2) INVESTMENT INCOME Dividend income from mutual funds and portfolios $ -- $ 15,219 $ -- $ 5,930 Variable account expenses 9,094 15,350 2,670 4,232 --------------------------------------------------------------------------------------------------------------- Investment income (loss)-- net (9,094) (131) (2,670) 1,698 =============================================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS-- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 269,196 8,353,111 2,944,565 3,346 Cost of investments sold 259,658 10,118,664 2,974,915 3,651 --------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on sale of investments 9,538 (1,765,553) (30,350) (305) Distributions from capital gains -- -- -- -- Net change in unrealized appreciation or depreciation of investments 305,354 893,596 7,734 (101,857) --------------------------------------------------------------------------------------------------------------- Net gain (loss) on investments 314,892 (871,957) (22,616) (102,162) --------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ 305,798 $ (872,088) $ (25,286) $ (100,464) =============================================================================================================== SEGREGATED ASSET SUBACCOUNTS --------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) SA3 3AC(2) 3AD(2) INVESTMENT INCOME Dividend income from mutual funds and portfolios $ 1,492 $ -- $ -- Variable account expenses 4,256 6 3 ----------------------------------------------------------------------------------------------- Investment income (loss)-- net (2,764) (6) (3) =============================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS-- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 15,868,693 5 2 Cost of investments sold 16,539,021 5 2 ----------------------------------------------------------------------------------------------- Net realized gain (loss) on sale of investments (670,328) -- -- Distributions from capital gains -- 479 -- Net change in unrealized appreciation or depreciation of investments 336,284 (13) 240 ----------------------------------------------------------------------------------------------- Net gain (loss) on investments (334,044) 466 240 ----------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ (336,808) $ 460 $ 237 ===============================================================================================
(1) For the period Aug. 14, 2001 (commencement of operations) to Dec. 31, 2001. (2) For the period Aug. 13, 2001 (commencement of operations) to Dec. 31, 2001.
SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 3AB(1) 3AL(1) 3AI(1) 3AV(1) INVESTMENT INCOME Dividend income from mutual funds and portfolios $ -- $ -- $ -- $ -- Variable account expenses 65 90 1 116 -------------------------------------------------------------------------------------------------------------- Investment income (loss)-- net (65) (90) (1) (116) ============================================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS-- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 65 127,773 1 129,116 Cost of investments sold 63 124,611 1 124,816 --------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on sale of investments 2 3,162 -- 4,300 Distributions from capital gains -- -- -- -- Net change in unrealized appreciation or depreciation of investments 5,410 (1,307) 51 2,477 --------------------------------------------------------------------------------------------------------------- Net gain (loss) on investments 5,412 1,855 51 6,777 --------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ 5,347 $ 1,765 $ 50 $ 6,661 =============================================================================================================== SEGREGATED ASSET SUBACCOUNTS --------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 3SR 3CG(1) 3FG(1) INVESTMENT INCOME Dividend income from mutual funds and portfolios $ 213 $ -- $ -- Variable account expenses 15 -- 31 ---------------------------------------------------------------------------------------------- Investment income (loss)-- net 198 -- (31) ============================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS-- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 1,364 -- 30 Cost of investments sold 1,486 -- 30 ---------------------------------------------------------------------------------------------- Net realized gain (loss) on sale of investments (122) -- -- Distributions from capital gains 104 -- -- Net change in unrealized appreciation or depreciation of investments (308) -- 1,212 ---------------------------------------------------------------------------------------------- Net gain (loss) on investments (326) -- 1,212 ---------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ (128) $ -- $ 1,181 ==============================================================================================
(1) For the period Aug. 13, 2001 (commencement of operations) to Dec. 31, 2001. See accompanying notes to financial statements. 23
SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 3FM(1) 3FO(1) 3RE 3SI INVESTMENT INCOME Dividend income from mutual funds and portfolios $ -- $ -- $ 8,200 $ 410 Variable account expenses 41 5 1,272 577 -------------------------------------------------------------------------------------------------------------- Investment income (loss)-- net (41) (5) 6,928 (167) ============================================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS-- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 34 4 3,054,846 118,743 Cost of investments sold 33 4 3,034,663 127,158 -------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on sale of investments 1 -- 20,183 (8,415) Distributions from capital gains -- -- -- 2,370 Net change in unrealized appreciation or depreciation of investments 2,901 99 2,232 6,700 -------------------------------------------------------------------------------------------------------------- Net gain (loss) on investments 2,902 99 22,415 655 -------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ 2,861 $ 94 $ 29,343 $ 488 ============================================================================================================== SEGREGATED ASSET SUBACCOUNTS --------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 3MS(1) 3UE 3MC INVESTMENT INCOME Dividend income from mutual funds and portfolios $ -- $ 3,723 $ 2,442 Variable account expenses -- 3,850 784 ---------------------------------------------------------------------------------------------- Investment income (loss)-- net -- (127) 1,658 ============================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS-- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales -- 124,760 131,032 Cost of investments sold -- 148,135 134,498 ---------------------------------------------------------------------------------------------- Net realized gain (loss) on sale of investments -- (23,375) (3,466) Distributions from capital gains -- -- 12,617 Net change in unrealized appreciation or depreciation of investments -- (64,516) (676) ---------------------------------------------------------------------------------------------- Net gain (loss) on investments -- (87,891) 8,475 ---------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ -- $ (88,018) $ 10,133 ==============================================================================================
(1) For the period Aug. 13, 2001 (commencement of operations) to Dec. 31, 2001.
SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 3ID(1) 3FS(1) 3TC(1) 3TL(1) INVESTMENT INCOME Dividend income from mutual funds and portfolios $ -- $ -- $ -- $ -- Variable account expenses 1 -- -- -- -------------------------------------------------------------------------------------------------------------- Investment income (loss)-- net (1) -- -- -- ============================================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS-- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 1 -- -- -- Cost of investments sold 1 -- -- -- -------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on sale of investments -- -- -- -- Distributions from capital gains -- -- -- -- Net change in unrealized appreciation or depreciation of investments 164 1 1 1 -------------------------------------------------------------------------------------------------------------- Net gain (loss) on investments 164 1 1 1 -------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ 163 $ 1 $ 1 $ 1 ============================================================================================================== SEGREGATED ASSET SUBACCOUNTS --------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 3GT 3IG 3IP INVESTMENT INCOME Dividend income from mutual funds and portfolios $ 1,211 $ 2,384 $ 15 Variable account expenses 1,000 2,495 728 ---------------------------------------------------------------------------------------------- Investment income (loss)-- net 211 (111) (713) ============================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS-- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 1,255,971 12,443,118 1,641,608 Cost of investments sold 1,417,425 12,490,219 1,653,410 ---------------------------------------------------------------------------------------------- Net realized gain (loss) on sale of investments (161,454) (47,101) (11,802) Distributions from capital gains -- -- 953 Net change in unrealized appreciation or depreciation of investments 55,614 (6,034) (9,460) ---------------------------------------------------------------------------------------------- Net gain (loss) on investments (105,840) (53,135) (20,309) ---------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ (105,629) $ (53,246) $ (21,022) ==============================================================================================
(1) For the period Aug. 13, 2001 (commencement of operations) to Dec. 31, 2001. See accompanying notes to financial statements. 24
SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 3MG 3MD 3UT(1) 3PE(1) INVESTMENT INCOME Dividend income from mutual funds and portfolios $ 305 $ -- $ -- $ -- Variable account expenses 2,594 2,118 81 -- -------------------------------------------------------------------------------------------------------------- Investment income (loss) -- net (2,289) (2,118) (81) -- ============================================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 797,713 440,918 122,255 -- Cost of investments sold 905,354 475,192 125,037 -- -------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on sale of investments (107,641) (34,274) (2,782) -- Distributions from capital gains 3,682 11,262 -- -- Net change in unrealized appreciation or depreciation of investments (25,399) 12,810 1,545 -- -------------------------------------------------------------------------------------------------------------- Net gain (loss) on investments (129,358) (10,202) (1,237) -- -------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ (131,647) $ (12,320) $ (1,318) $ -- ============================================================================================================== SEGREGATED ASSET SUBACCOUNTS --------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 3EU(1) 3HS(1) 3PI(1) INVESTMENT INCOME Dividend income from mutual funds and portfolios $ -- $ -- $ -- Variable account expenses -- 84 127 ---------------------------------------------------------------------------------------------- Investment income (loss) -- net -- (84) (127) ============================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS -- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales -- 128,609 127 Cost of investments sold -- 125,049 126 ---------------------------------------------------------------------------------------------- Net realized gain (loss) on sale of investments -- 3,560 1 Distributions from capital gains -- -- -- Net change in unrealized appreciation or depreciation of investments -- (2,371) 2,278 ---------------------------------------------------------------------------------------------- Net gain (loss) on investments -- 1,189 2,279 ---------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ -- $ 1,105 $ 2,152 ==============================================================================================
(1) For the period Aug. 13, 2001 (commencement of operations) to Dec. 31, 2001.
SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 3VS 3SO(1) 3IT 3SP INVESTMENT INCOME Dividend income from mutual funds and portfolios $ -- $ 505 $ -- $ 704 Variable account expenses 6,355 90 3,283 5,577 -------------------------------------------------------------------------------------------------------------- Investment income (loss) -- net (6,355) 415 (3,283) (4,873) ============================================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS-- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 1,481,367 132,855 8,698,013 2,882,342 Cost of investments sold 1,919,692 124,713 8,970,877 2,845,513 -------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on sale of investments (438,325) 8,142 (272,864) 36,829 Distributions from capital gains 163,984 20,545 177,936 -- Net change in unrealized appreciation or depreciation of investments (303,292) (21,828) (26,983) 83,242 -------------------------------------------------------------------------------------------------------------- Net gain (loss) on investments (577,633) 6,859 (121,911) 120,071 -------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ (583,988) $ 7,274 $ (125,194) $ 115,198 ============================================================================================================== SEGREGATED ASSET SUBACCOUNTS --------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 3AA(2) 3WI(2) 3SG(2) INVESTMENT INCOME Dividend income from mutual funds and portfolios $ 90 $ -- $ -- Variable account expenses 32 41 7 ---------------------------------------------------------------------------------------------- Investment income (loss) -- net 58 (41) (7) ============================================================================================== REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS-- NET Realized gain (loss) on sales of investments in mutual funds and portfolios: Proceeds from sales 228,488 1,427,070 1,104 Cost of investments sold 228,827 1,427,367 1,193 ---------------------------------------------------------------------------------------------- Net realized gain (loss) on sale of investments (339) (297) (89) Distributions from capital gains 210 -- -- Net change in unrealized appreciation or depreciation of investments (398) (6) (19) ---------------------------------------------------------------------------------------------- Net gain (loss) on investments (527) (303) (108) ---------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ (469) $ (344) $ (115) ==============================================================================================
(1) For the period Aug. 13, 2001 (commencement of operations) to Dec. 31, 2001. (2) For the period May 1, 2001 (commencement of operations) to Dec. 31, 2001. See accompanying notes to financial statements. 25 STATEMENTS OF CHANGES IN NET ASSETS
SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 BC3 BD3 CR3 CM3 OPERATIONS Investment income (loss) -- net $ 784 $ 34,948 $ (727) $ 232,236 Net realized gain (loss) on sale of investments (98,973) 9,785 (155,527) (180) Distributions from capital gains -- -- -- -- Net change in unrealized appreciation or depreciation of investments 8,389 (5,986) 77,338 (9) --------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (89,800) 38,747 (78,916) 232,047 =============================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 12,629 102,774 7,965 12,532,302 Net transfers(2) 264,035 578,387 46,804 (4,219,613) Transfers for policy loans -- -- -- (3,472) Contract charges (97) (18) (67) (422) Contract terminations: Surrender benefits (36,893) (33,915) (3,000) (9,369,308) Death benefits -- -- -- -- --------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 239,674 647,228 51,702 (1,060,513) --------------------------------------------------------------------------------------------------------------- Net assets at beginning of year 447,370 435,921 249,515 7,047,238 --------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 597,244 $ 1,121,896 $ 222,301 $ 6,218,772 =============================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 453,558 409,536 266,218 6,615,282 Contract purchase payments 15,353 93,465 9,392 11,574,554 Net transfers(2) 303,239 511,400 19,648 (3,894,708) Transfers for policy loans -- -- -- (3,192) Contract charges (113) (16) (82) (385) Contract terminations: Surrender benefits (43,062) (29,839) (3,969) (8,633,475) Death benefits -- -- -- -- --------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 728,975 984,546 291,207 5,658,076 =============================================================================================================== SEGREGATED ASSET SUBACCOUNTS --------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 DE3 EM3 ES3(1) OPERATIONS Investment income (loss) -- net $ 1,754 $ (19,606) $ (7,461) Net realized gain (loss) on sale of investments 15,880 (310,796) (47,771) Distributions from capital gains -- -- -- Net change in unrealized appreciation or depreciation of investments (3,401) 257,738 85,247 ---------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 14,233 (72,664) 30,015 ============================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 23,747 9 2,001,788 Net transfers(2) 193,867 1,302 30,841 Transfers for policy loans -- -- -- Contract charges (76) -- -- Contract terminations: Surrender benefits (163,632) -- -- Death benefits -- -- -- ---------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 53,906 1,311 2,032,629 ---------------------------------------------------------------------------------------------- Net assets at beginning of year 219,745 3,745,755 -- ---------------------------------------------------------------------------------------------- Net assets at end of year $ 287,884 $ 3,674,402 $ 2,062,644 ============================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 218,167 1,252 -- Contract purchase payments 24,242 14 1,930 Net transfers(2) 198,574 2,003 35,746 Transfers for policy loans -- -- -- Contract charges (77) -- -- Contract terminations: Surrender benefits (159,457) -- -- Death benefits -- -- -- ---------------------------------------------------------------------------------------------- Units outstanding at end of year 281,449 3,269 37,676 ==============================================================================================
(1) For the period May 1, 2001 (commencement of operations) to Dec. 31, 2001. (2) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 26
SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 (CONTINUED) EI3 FI3 GB3 GR3 OPERATIONS Investment income (loss) -- net $ 151,488 $ 13,713 $ 3,420 $ (6,112) Net realized gain (loss) on sale of investments (222,323) 5,365 6,523 (626,041) Distributions from capital gains -- -- -- -- Net change in unrealized appreciation or depreciation of investments 124,421 (1,551) (3,993) 96,024 --------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 53,586 17,527 5,950 (536,129) =============================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 28,149 47,030 4,415 87,097 Net transfers(1) 318,431 623,192 243,869 (341,843) Transfers for policy loans -- (8,413) -- 383 Contract charges (81) -- (6) (391) Contract terminations: Surrender benefits (6,983) -- -- (32,568) Death benefits -- -- -- -- --------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 339,516 661,809 248,278 (287,322) --------------------------------------------------------------------------------------------------------------- Net assets at beginning of year 1,082,352 1,015 4,209 1,650,456 --------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 1,475,454 $ 680,351 $ 258,437 $ 827,005 =============================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 1,185,569 934 4,092 1,761,529 Contract purchase payments 30,373 41,646 4,248 115,884 Net transfers(1) 340,788 556,291 241,119 (539,778) Transfers for policy loans -- (7,343) -- 552 Contract charges (85) -- (6) (553) Contract terminations: Surrender benefits (7,408) -- -- (52,214) Death benefits -- -- -- -- --------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 1,549,237 591,528 249,453 1,285,420 =============================================================================================================== SEGREGATED ASSET SUBACCOUNTS --------------------------------------------- YEAR ENDED DECEMBER 31, 2001 (CONTINUED) IE3 MF3 ND3 OPERATIONS Investment income (loss) -- net $ 2,231 $ 5,143 $ (11,509) Net realized gain (loss) on sale of investments 273,137 (34,787) (1,421,391) Distributions from capital gains -- -- -- Net change in unrealized appreciation or depreciation of investments 15,747 18,304 616,580 ----------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 291,115 (11,340) (816,320) =============================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 8,016 164,766 223,803 Net transfers(1) (320,543) (18,863) (456,464) Transfers for policy loans -- -- 521 Contract charges (43) (36) (708) Contract terminations: Surrender benefits (11,447) (9,000) (270,298) Death benefits -- -- -- ----------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions (324,017) 136,867 (503,146) ----------------------------------------------------------------------------------------------- Net assets at beginning of year 76,699 152,830 4,220,683 ----------------------------------------------------------------------------------------------- Net assets at end of year $ 43,797 $ 278,357 $ 2,901,217 =============================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 80,621 144,523 3,919,497 Contract purchase payments 11,347 162,392 240,350 Net transfers(1) (12,152) (1,215) (608,454) Transfers for policy loans -- -- 588 Contract charges (55) (36) (777) Contract terminations: Surrender benefits (14,573) (9,678) (298,876) Death benefits -- -- -- ----------------------------------------------------------------------------------------------- Units outstanding at end of year 65,188 295,986 3,252,328 ===============================================================================================
(1) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 27
SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) SV3(1) IV3 SC3 ST3(2) OPERATIONS Investment income (loss) -- net $ (9,094) $ (131) $ (2,670) $ 1,698 Net realized gain (loss) on sale of investments 9,538 (1,765,553) (30,350) (305) Distributions from capital gains -- -- -- -- Net change in unrealized appreciation or depreciation of investments 305,354 893,596 7,734 (101,857) --------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 305,798 (872,088) (25,286) (100,464) =============================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 4,012,515 2,851 15,918 1,999,998 Net transfers(3) 399,076 433,418 223,978 -- Transfers for policy loans -- -- 64 -- Contract charges -- (8) (73) -- Contract terminations: Surrender benefits -- (8,248,026) (138,514) -- Death benefits -- (3,318) -- -- --------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 4,411,591 (7,815,083) 101,373 1,999,998 --------------------------------------------------------------------------------------------------------------- Net assets at beginning of year -- 9,292,900 332,052 -- --------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 4,717,389 $ 605,729 $ 408,139 $ 1,899,534 =============================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year -- 285,103 286,198 -- Contract purchase payments 12,780 3,071 15,253 -- Net transfers(3) 398,224 513,204 205,147 -- Transfers for policy loans -- -- 64 -- Contract charges -- (10) (74) -- Contract terminations: Surrender benefits -- (26,869) (128,147) -- Death benefits -- (4,292) -- -- --------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 411,004 770,207 378,441 -- =============================================================================================================== SEGREGATED ASSET SUBACCOUNTS --------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) SA3 3AC(2) 3AD(2) OPERATIONS Investment income (loss) -- net $ (2,764) $ (6) $ (3) Net realized gain (loss) on sale of investments (670,328) -- -- Distributions from capital gains -- 479 -- Net change in unrealized appreciation or depreciation of investments 336,284 (13) 240 ---------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (336,808) 460 237 ============================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 48,432 275 578 Net transfers(3) (181,643) 5,221 2,341 Transfers for policy loans 457 -- -- Contract charges (370) -- -- Contract terminations: Surrender benefits (10,151) -- -- Death benefits -- -- -- ---------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions (143,275) 5,496 2,919 ---------------------------------------------------------------------------------------------- Net assets at beginning of year 974,493 -- -- ---------------------------------------------------------------------------------------------- Net assets at end of year $ 494,410 $ 5,956 $ 3,156 ============================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 798,425 -- -- Contract purchase payments 55,944 291 622 Net transfers(3) (236,405) 5,804 2,589 Transfers for policy loans 539 -- -- Contract charges (405) -- -- Contract terminations: Surrender benefits (11,050) -- -- Death benefits -- -- -- ---------------------------------------------------------------------------------------------- Units outstanding at end of year 607,048 6,095 3,211 ==============================================================================================
(1) For the period Aug. 14, 2001 (commencement of operations) to Dec. 31, 2001. (2) For the period Aug. 13, 2001 (commencement of operations) to Dec. 31, 2001. (3) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 28
SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 3AB(1) 3AL(1) 3AI(1) 3AV(1) OPERATIONS Investment income (loss) -- net $ (65) $ (90) $ (1) $ (116) Net realized gain (loss) on sale of investments 2 3,162 -- 4,300 Distributions from capital gains -- -- -- -- Net change in unrealized appreciation or depreciation of investments 5,410 (1,307) 51 2,477 ---------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 5,347 1,765 50 6,661 ================================================================================================================ CONTRACT TRANSACTIONS Contract purchase payments 9 129,654 1,185 141,399 Net transfers(2) 200,000 -- -- 2,880 Transfers for policy loans -- -- -- -- Contract charges -- -- -- -- Contract terminations: Surrender benefits -- -- -- -- Death benefits -- -- -- -- ---------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 200,009 129,654 1,185 144,279 ---------------------------------------------------------------------------------------------------------------- Net assets at beginning of year -- -- -- -- ---------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 205,356 $ 131,419 $ 1,235 $ 150,940 ================================================================================================================ ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year -- -- -- -- Contract purchase payments 10 136,127 1,324 142,560 Net transfers(2) 209,961 -- -- 3,013 Transfers for policy loans -- -- -- -- Contract charges -- -- -- -- Contract terminations: Surrender benefits -- -- -- -- Death benefits -- -- -- -- --------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 209,971 136,127 1,324 145,573 =============================================================================================================== SEGREGATED ASSET SUBACCOUNTS --------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 3SR 3CG(1) 3FG(1) OPERATIONS Investment income (loss) -- net $ 198 $ -- $ (31) Net realized gain (loss) on sale of investments (122) -- -- Distributions from capital gains 104 -- -- Net change in unrealized appreciation or depreciation of investments (308) -- 1,212 ----------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (128) -- 1,181 =============================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 830 9 1,186 Net transfers(2) 340 -- 130,012 Transfers for policy loans -- -- -- Contract charges -- -- -- Contract terminations: Surrender benefits (122) -- -- Death benefits -- -- -- ----------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 1,048 9 131,198 ----------------------------------------------------------------------------------------------- Net assets at beginning of year 4,718 -- -- ----------------------------------------------------------------------------------------------- Net assets at end of year $ 5,638 $ 9 $ 132,379 =============================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 4,896 -- -- Contract purchase payments 876 10 1,277 Net transfers(2) 693 -- 131,185 Transfers for policy loans -- -- -- Contract charges -- -- -- Contract terminations: Surrender benefits (137) -- -- Death benefits -- -- -- ----------------------------------------------------------------------------------------------- Units outstanding at end of year 6,328 10 132,462 ===============================================================================================
(1) For the period Aug. 13, 2001 (commencement of operations) to Dec. 31, 2001. (2) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 29
SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 3FM(1) 3FO(1) 3RE 3SI OPERATIONS Investment income (loss) -- net $ (41) $ (5) $ 6,928 $ (167) Net realized gain (loss) on sale of investments 1 -- 20,183 (8,415) Distributions from capital gains -- -- -- 2,370 Net change in unrealized appreciation or depreciation of investments 2,901 99 2,232 6,700 --------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 2,861 94 29,343 488 =============================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 9,152 6,618 8,238 33,993 Net transfers(2) 125,000 -- 68,584 164,697 Transfers for policy loans -- -- -- -- Contract charges -- -- (72) (20) Contract terminations: Surrender benefits -- -- (1,253) (6,564) Death benefits -- -- (6,040) -- --------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 134,152 6,618 69,457 192,106 --------------------------------------------------------------------------------------------------------------- Net assets at beginning of year -- -- 185,186 11,083 --------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 137,013 $ 6,712 $ 283,986 $ 203,677 =============================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year -- -- 147,540 9,257 Contract purchase payments 9,244 7,097 6,495 25,689 Net transfers(2) 122,429 -- 62,644 120,960 Transfers for policy loans -- -- -- -- Contract charges -- -- (55) (15) Contract terminations: Surrender benefits -- -- (1,036) (5,572) Death benefits -- -- (4,652) -- --------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 131,673 7,097 210,936 150,319 =============================================================================================================== SEGREGATED ASSET SUBACCOUNTS --------------------------------------------- 3MS(1) 3UE 3MC OPERATIONS Investment income (loss) -- net $ -- $ (127) $ 1,658 Net realized gain (loss) on sale of investments -- (23,375) (3,466) Distributions from capital gains -- -- 12,617 Net change in unrealized appreciation or depreciation of investments -- (64,516) (676) ----------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations -- (88,018) 10,133 =============================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 9 29,985 81,997 Net transfers(2) -- 328,864 227,145 Transfers for policy loans -- (53) (4,996) Contract charges -- (200) (83) Contract terminations: Surrender benefits -- (24,224) (56,438) Death benefits -- -- -- ----------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 9 334,372 247,625 ----------------------------------------------------------------------------------------------- Net assets at beginning of year -- 571,823 18,044 ----------------------------------------------------------------------------------------------- Net assets at end of year $ 9 $ 818,177 $ 275,802 =============================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year -- 577,230 14,593 Contract purchase payments 10 32,330 65,228 Net transfers(2) -- 362,668 167,062 Transfers for policy loans -- (60) (3,853) Contract charges -- (224) (65) Contract terminations: Surrender benefits -- (28,605) (42,848) Death benefits -- -- -- ----------------------------------------------------------------------------------------------- Units outstanding at end of year 10 943,339 200,117 ===============================================================================================
(1) For the period Aug. 13, 2001 (commencement of operations) to Dec. 31, 2001. (2) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 30
SEGREGATED ASSET SUBACCOUNTS ------------------------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 3ID(1) 3FS(1) 3TC(1) 3TL(1) OPERATIONS Investment income (loss) -- net $ (1) $ -- $ -- $ -- Net realized gain (loss) on sale of investments -- -- -- -- Distributions from capital gains -- -- -- -- Net change in unrealized appreciation or depreciation of investments 164 1 1 1 -------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 163 1 1 1 ============================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 1,095 9 9 9 Net transfers(2) -- -- -- -- Transfers for policy loans -- -- -- -- Contract charges -- -- -- -- Contract terminations: Surrender benefits -- -- -- -- Death benefits -- -- -- -- -------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 1,095 9 9 9 -------------------------------------------------------------------------------------------------------------- Net assets at beginning of year -- -- -- -- -------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 1,258 $ 10 $ 10 $ 10 ============================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year -- -- -- -- Contract purchase payments 1,309 10 11 11 Net transfers(2) -- -- -- -- Transfers for policy loans -- -- -- -- Contract charges -- -- -- -- Contract terminations: Surrender benefits -- -- -- -- Death benefits -- -- -- -- -------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 1,309 10 11 11 ============================================================================================================== SEGREGATED ASSET SUBACCOUNTS --------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 3GT 3IG 3IP OPERATIONS Investment income (loss) -- net $ 211 $ (111) $ (713) Net realized gain (loss) on sale of investments (161,454) (47,101) (11,802) Distributions from capital gains -- -- 953 Net change in unrealized appreciation or depreciation of investments 55,614 (6,034) (9,460) ----------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (105,629) (53,246) (21,022) =============================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 20,612 61,719 5,085 Net transfers(2) 40,583 (46,691) 148,913 Transfers for policy loans -- -- 64 Contract charges (227) (93) (74) Contract terminations: Surrender benefits (81,420) (37,148) (3,464) Death benefits -- -- -- ----------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions (20,452) (22,213) 150,524 ----------------------------------------------------------------------------------------------- Net assets at beginning of year 212,203 445,064 54,861 ----------------------------------------------------------------------------------------------- Net assets at end of year $ 86,122 $ 369,605 $ 184,363 =============================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 309,990 555,627 56,924 Contract purchase payments 40,841 74,737 6,709 Net transfers(2) 40,845 35,872 193,586 Transfers for policy loans -- -- 89 Contract charges (508) (150) (92) Contract terminations: Surrender benefits (189,281) (60,189) (3,823) Death benefits -- -- -- ----------------------------------------------------------------------------------------------- Units outstanding at end of year 201,887 605,897 253,393 ===============================================================================================
(1) For the period Aug. 13, 2001 (commencement of operations) to Dec. 31, 2001. (2) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 31
SEGREGATED ASSET SUBACCOUNTS -------------------------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 3MG 3MD 3UT(1) 3PE(1) OPERATIONS Investment income (loss) -- net $ (2,289) $ (2,118) $ (81) $ -- Net realized gain (loss) on sale of investments (107,641) (34,274) (2,782) -- Distributions from capital gains 3,682 11,262 -- -- Net change in unrealized appreciation or depreciation of investments (25,399) 12,810 1,545 -- --------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (131,647) (12,320) (1,318) -- =============================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 141,372 49,174 124,725 9 Net transfers(2) 125,534 127,146 -- -- Transfers for policy loans (16) -- -- -- Contract charges (72) (98) -- -- Contract terminations: Surrender benefits (123) (6,910) -- -- Death benefits -- -- -- -- --------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 266,695 169,312 124,725 9 --------------------------------------------------------------------------------------------------------------- Net assets at beginning of year 482,619 337,620 -- -- --------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 617,667 $ 494,612 $ 123,407 $ 9 =============================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 532,539 352,144 -- -- Contract purchase payments 208,754 56,265 138,296 10 Net transfers(2) 172,490 147,288 -- -- Transfers for policy loans (23) -- -- -- Contract charges (104) (115) -- -- Contract terminations: Surrender benefits (218) (8,043) -- -- Death benefits -- -- -- -- --------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 913,438 547,539 138,296 10 =============================================================================================================== SEGREGATED ASSET SUBACCOUNTS ----------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 3EU(1) 3HS(1) 3PI(1) OPERATIONS Investment income (loss) -- net $ -- $ (84) $ (127) Net realized gain (loss) on sale of investments -- 3,560 1 Distributions from capital gains -- -- -- Net change in unrealized appreciation or depreciation of investments -- (2,371) 2,278 ------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations -- 1,105 2,152 ================================================================================================ CONTRACT TRANSACTIONS Contract purchase payments 9 125,282 9 Net transfers(2) -- -- 400,000 Transfers for policy loans -- -- -- Contract charges -- -- -- Contract terminations: Surrender benefits -- -- -- Death benefits -- -- -- ------------------------------------------------------------------------------------------------ Increase (decrease) from contract transactions 9 125,282 400,009 ------------------------------------------------------------------------------------------------ Net assets at beginning of year -- -- -- ------------------------------------------------------------------------------------------------ Net assets at end of year $ 9 $ 126,387 $ 402,161 ================================================================================================ ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year -- -- -- Contract purchase payments 10 128,607 10 Net transfers(2) -- -- 418,346 Transfers for policy loans -- -- -- Contract charges -- -- -- Contract terminations: Surrender benefits -- -- -- Death benefits -- -- -- ------------------------------------------------------------------------------------------------ Units outstanding at end of year 10 128,607 418,356 ================================================================================================
(1) For the period Aug. 13, 2001 (commencement of operations) to Dec. 31, 2001. (2) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 32
SEGREGATED ASSET SUBACCOUNTS -------------------------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 3VS 3SO(1) 3IT 3SP OPERATIONS Investment income (loss) -- net $ (6,355) $ 415 $ (3,283) $ (4,873) Net realized gain (loss) on sale of investments (438,325) 8,142 (272,864) 36,829 Distributions from capital gains 163,984 20,545 177,936 -- Net change in unrealized appreciation or depreciation of investments (303,292) (21,828) (26,983) 83,242 --------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (583,988) 7,274 (125,194) 115,198 =============================================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 99,376 127,154 120,217 56,138 Net transfers(2) (271,807) -- 23,742 (230,847) Transfers for policy loans 383 -- (799) -- Contract charges (338) -- (382) (202) Contract terminations: Surrender benefits (30,701) -- (13,798) (23,788) Death benefits -- -- -- -- --------------------------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions (203,087) 127,154 128,980 (198,699) --------------------------------------------------------------------------------------------------------------- Net assets at beginning of year 1,721,686 -- 650,434 1,041,643 --------------------------------------------------------------------------------------------------------------- Net assets at end of year $ 934,611 $ 134,428 $ 654,220 $ 958,142 =============================================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 1,330,395 -- 599,215 990,217 Contract purchase payments 100,690 135,509 132,754 50,060 Net transfers(2) (306,017) -- 52,731 (198,497) Transfers for policy loans 424 -- (1,130) -- Contract charges (380) -- (415) (186) Contract terminations: Surrender benefits (33,064) -- (14,316) (21,810) Death benefits -- -- -- -- --------------------------------------------------------------------------------------------------------------- Units outstanding at end of year 1,092,048 135,509 768,839 819,784 =============================================================================================================== SEGREGATED ASSET SUBACCOUNTS ---------------------------------------------- PERIOD ENDED DECEMBER 31, 2001 (CONTINUED) 3AA(2) 3WI(2) 3SG(2) OPERATIONS Investment income (loss) -- net $ 58 $ (41) $ (7) Net realized gain (loss) on sale of investments (339) (297) (89) Distributions from capital gains 210 -- -- Net change in unrealized appreciation or depreciation of investments (398) (6) (19) ----------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (469) (344) (115) =============================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 409 269 79 Net transfers(2) 7,936 535 2,025 Transfers for policy loans -- -- 64 Contract charges -- (5) (6) Contract terminations: Surrender benefits -- -- -- Death benefits -- -- -- ----------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 8,345 799 2,162 ----------------------------------------------------------------------------------------------- Net assets at beginning of year -- -- -- ----------------------------------------------------------------------------------------------- Net assets at end of year $ 7,876 $ 455 $ 2,047 =============================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year -- -- -- Contract purchase payments 425 270 87 Net transfers(2) 7,691 242 2,016 Transfers for policy loans -- -- 75 Contract charges -- (6) (9) Contract terminations: Surrender benefits -- -- -- Death benefits -- -- -- ----------------------------------------------------------------------------------------------- Units outstanding at end of year 8,116 506 2,169 ===============================================================================================
(1) For the period Aug. 13, 2001 (commencement of operations) to Dec. 31, 2001. (2) For the period May 1, 2001 (commencement of operations) to Dec. 31, 2001. (3) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 33
SEGREGATED ASSET SUBACCOUNTS ---------------------------------------------- PERIOD ENDED DECEMBER 31, 2000 BC3 BD3 CR3 OPERATIONS Investment income (loss) -- net $ (284) $ 6,659 $ 83,919 Net realized gain (loss) on investments (9,469) (747) (113,559) Net change in unrealized appreciation or depreciation of investments (44,170) 3,200 (130,039) ----------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (53,923) 9,112 (159,679) =============================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 58,126 192,487 265,037 Net transfers(2) 245,033 191,734 (851,504) Transfers for policy loans -- -- -- Contract charges (29) -- (6) Contract terminations: Surrender benefits (35,345) (5,581) -- ----------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 267,785 378,640 (586,473) ----------------------------------------------------------------------------------------------- Net assets at beginning of year 233,508 48,169 995,667 ----------------------------------------------------------------------------------------------- Net assets at end of year $ 447,370 $ 435,921 $ 249,515 =============================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 210,746 47,444 871,976 Contract purchase payments 52,636 188,193 241,310 Net transfers(2) 222,598 179,315 (847,061) Transfers for policy loans -- -- -- Contract charges (28) -- (7) Contract terminations: Surrender benefits (32,394) (5,416) -- ----------------------------------------------------------------------------------------------- Units outstanding at end of year 453,558 409,536 266,218 =============================================================================================== SEGREGATED ASSET SUBACCOUNTS ---------------------------------------------- PERIOD ENDED DECEMBER 31, 2000 CM3 DE3 EM3(1) OPERATIONS Investment income (loss) -- net $ 148,842 $ 1,021 $ (12,234) Net realized gain (loss) on investments (29,829) 7,148 (419,249) Net change in unrealized appreciation or depreciation of investments 1 6,069 (807,414) Net increase (decrease) in net assets resulting from operations 119,014 14,238 (1,238,897) =============================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 7,243,061 15,668 5,000,000 Net transfers(2) 2,220,181 166,784 (15,348) Transfers for policy loans -- -- -- Contract charges (296) (33) -- Contract terminations: Surrender benefits (388,336) -- -- ----------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 4,634,248 182,419 4,984,652 ----------------------------------------------------------------------------------------------- Net assets at beginning of year 2,293,976 23,088 -- ----------------------------------------------------------------------------------------------- Net assets at end of year $ 7,047,238 $ 219,745 $ 3,745,755 =============================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 2,266,486 22,622 -- Contract purchase payments 6,914,984 15,958 -- Net transfers(2) (2,199,449) 179,621 1,252 Transfers for policy loans -- -- -- Contract charges (280) (34) -- Contract terminations: Surrender benefits (366,459) -- -- ----------------------------------------------------------------------------------------------- Units outstanding at end of year 6,615,282 218,167 1,252 ===============================================================================================
(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. 34
SEGREGATED ASSET SUBACCOUNTS --------------------------------------------- YEAR ENDED DECEMBER 31, 2000 (CONTINUED) EI3 FI3 GB3 OPERATIONS Investment income (loss) -- net $ 89,792 $ 345 $ 118 Net realized gain (loss) on investments (65,064) 27 (121) Net change in unrealized appreciation or depreciation of investments (139,838) 19 97 ---------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (115,110) 391 94 ============================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 1,914,727 65,402 (246) Net transfers(1) (756,503) (85,642) 1,549 Transfers for policy loans -- -- -- Contract charges (10) -- (5) Contract terminations: Surrender benefits (9,538) -- -- ---------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 1,148,676 (20,240) 1,298 ---------------------------------------------------------------------------------------------- Net assets at beginning of year 48,786 20,864 2,817 ---------------------------------------------------------------------------------------------- Net assets at end of year $ 1,082,352 $ 1,015 $ 4,209 ============================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 48,194 9,663 2,813 Contract purchase payments 1,949,394 61,805 (246) Net transfers(1) (802,277) (70,534) 1,531 Transfers for policy loans -- -- -- Contract charges (11) -- (6) Contract terminations: Surrender benefits (9,731) -- -- ---------------------------------------------------------------------------------------------- Units outstanding at end of year 1,185,569 934 4,092 ============================================================================================== SEGREGATED ASSET SUBACCOUNTS --------------------------------------------- YEAR ENDED DECEMBER 31, 2000 (CONTINUED) GR3 IE3 MF3 OPERATIONS Investment income (loss) -- net $ (7,028) $ 14,347 $ 10,656 Net realized gain (loss) on investments (34,905) 59,267 3,173 Net change in unrealized appreciation or depreciation of investments (342,081) (32,516) (17,141) ---------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (384,014) 41,098 (3,312) ============================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 1,539,082 45,116 21,479 Net transfers(1) 215,652 (166,404) 124,199 Transfers for policy loans (1,478) -- -- Contract charges (102) (4) (4) Contract terminations: Surrender benefits (186,378) (12,606) -- ---------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 1,566,776 (133,898) 145,674 ---------------------------------------------------------------------------------------------- Net assets at beginning of year 467,694 169,499 10,468 ---------------------------------------------------------------------------------------------- Net assets at end of year $ 1,650,456 $ 76,699 $ 152,830 ============================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 400,647 133,025 9,618 Contract purchase payments 1,292,730 37,299 21,284 Net transfers(1) 242,715 (78,891) 113,625 Transfers for policy loans (1,171) -- -- Contract charges (91) (4) (4) Contract terminations: Surrender benefits (173,301) (10,808) -- ---------------------------------------------------------------------------------------------- Units outstanding at end of year 1,761,529 80,621 144,523 ==============================================================================================
(1) Includes transfer activity from (to) other subaccounts and transfers from (to) IDS Life's fixed account. See accompanying notes to financial statements. 35
SEGREGATED ASSET SUBACCOUNTS --------------------------------------------- PERIOD ENDED DECEMBER 31, 2000 (CONTINUED) ND3 IV3(1) SC3 OPERATIONS Investment income (loss) -- net $ 248,067 $ 33,024 $ 8,339 Net realized gain (loss) on investments 25,623 4,672 29,975 Net change in unrealized appreciation or depreciation of investments (702,359) (1,015,023) (72,468) ---------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (428,669) (977,327) (34,154) ============================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 2,589,396 10,206,195 133,746 Net transfers(2) 1,831,870 64,032 185,041 Transfers for policy loans (4,040) -- -- Contract charges (323) -- (29) Contract terminations: Surrender benefits (275,034) -- (414,304) ---------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 4,141,869 10,270,227 (95,546) ---------------------------------------------------------------------------------------------- Net assets at beginning of year 507,483 -- 461,752 ---------------------------------------------------------------------------------------------- Net assets at end of year $ 4,220,683 $ 9,292,900 $ 332,052 ============================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 426,131 -- 27,894 Contract purchase payments 2,173,284 218,925 111,759 Net transfers(2) 1,559,162 66,178 148,062 Transfers for policy loans (3,595) -- -- Contract charges (289) -- (25) Contract terminations: Surrender benefits (235,196) -- (1,492) ---------------------------------------------------------------------------------------------- Units outstanding at end of year 3,919,497 285,103 286,198 ============================================================================================== SEGREGATED ASSET SUBACCOUNTS --------------------------------------------- PERIOD ENDED DECEMBER 31, 2000 (CONTINUED) SA3 3SR(1) 3RE OPERATIONS Investment income (loss) -- net $ 347,022 $ 350 $ 29,902 Net realized gain (loss) on investments (315,311) (533) (2,692) Net change in unrealized appreciation or depreciation of investments (341,167) (149) 6,014 ---------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (309,456) (332) 33,224 ============================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 1,091,392 4,516 154,925 Net transfers(2) 391,148 534 (5,142) 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 ---------------------------------------------------------------------------------------------- Net assets at beginning of year 49,897 -- 3,989 ---------------------------------------------------------------------------------------------- Net assets at end of year $ 974,493 $ 4,718 $ 185,186 ============================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 32,918 -- 4,160 Contract purchase payments 689,417 4,548 137,759 Net transfers(2) 259,388 348 7,103 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 ==============================================================================================
(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. 36
SEGREGATED ASSET SUBACCOUNTS --------------------------------------------- PERIOD ENDED DECEMBER 31, 2000 (CONTINUED) 3SI 3IS 3UE OPERATIONS Investment income (loss) -- net $ (39) $ 335 $ 4,740 Net realized gain (loss) on investments 7,376 24,306 (4,937) Net change in unrealized appreciation or depreciation of investments 592 (104) (61,980) ---------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 7,929 24,537 (62,177) ============================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 7,737 40,086 469,167 Net transfers(2) (6,146) (31,219) (19,983) Transfers for policy loans -- -- -- Contract charges -- (14) (72) Contract terminations: Surrender benefits -- -- (2,822) ---------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 1,591 8,853 446,290 ---------------------------------------------------------------------------------------------- Net assets at beginning of year 1,563 9,405 187,710 ---------------------------------------------------------------------------------------------- Net assets at end of year $ 11,083 $ 42,795 $ 571,823 ============================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 1,623 9,250 170,333 Contract purchase payments 7,829 38,553 434,350 Net transfers(2) (195) (4,931) (24,837) Transfers for policy loans -- -- -- Contract charges -- (14) (69) Contract terminations: Surrender benefits -- -- (2,547) ---------------------------------------------------------------------------------------------- Units outstanding at end of year 9,257 42,858 577,230 ============================================================================================== SEGREGATED ASSET SUBACCOUNTS --------------------------------------------- PERIOD ENDED DECEMBER 31, 2000 (CONTINUED) 3MC 3GT(1) 3IG(1) OPERATIONS Investment income (loss) -- net $ 515 $ 723 $ 7,570 Net realized gain (loss) on investments 1,533 (493) (1,726) Net change in unrealized appreciation or depreciation of investments 2,027 (85,765) 7,072 ---------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 4,075 (85,535) 12,916 ============================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 3,143 160,360 428,802 Net transfers(2) 3,647 139,701 6,408 Transfers for policy loans 76 -- -- Contract charges (15) (28) (2) Contract terminations: Surrender benefits (412) (2,295) (3,060) ---------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 6,439 297,738 432,148 ---------------------------------------------------------------------------------------------- Net assets at beginning of year 7,530 -- -- ---------------------------------------------------------------------------------------------- Net assets at end of year $ 18,044 $ 212,203 $ 445,064 ============================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 7,935 -- -- Contract purchase payments 3,019 158,252 500,751 Net transfers(2) 3,970 154,235 58,193 Transfers for policy loans 80 -- -- Contract charges (13) (29) (3) Contract terminations: Surrender benefits (398) (2,468) (3,314) ---------------------------------------------------------------------------------------------- Units outstanding at end of year 14,593 309,990 555,627 ==============================================================================================
(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. 37
SEGREGATED ASSET SUBACCOUNTS --------------------------------------------- PERIOD ENDED DECEMBER 31, 2000 (CONTINUED) 3IP 3MG(1) 3MD(1) OPERATIONS Investment income (loss) -- net $ 549 $ (661) $ (486) Net realized gain (loss) on investments 26 (556) 1,429 Net change in unrealized appreciation or depreciation of investments (2,955) (37,417) (14,833) ---------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (2,380) (38,634) (13,890) ============================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 33,130 485,821 162,022 Net transfers(2) 15,182 35,436 191,979 Transfers for policy loans -- -- -- Contract charges (35) (4) (1) Contract terminations: Surrender benefits -- -- (2,490) ---------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 48,277 521,253 351,510 ---------------------------------------------------------------------------------------------- Net assets at beginning of year 8,964 -- -- ---------------------------------------------------------------------------------------------- Net assets at end of year $ 54,861 $ 482,619 $ 337,620 ============================================================================================== ACCUMULATION UNIT ACTIVITY Units outstanding at beginning of year 8,363 -- -- Contract purchase payments 33,127 496,790 163,559 Net transfers(2) 15,472 35,753 191,061 Transfers for policy loans -- -- -- Contract charges (38) (4) (1) Contract terminations: Surrender benefits -- -- (2,475) ---------------------------------------------------------------------------------------------- Units outstanding at end of year 56,924 532,539 352,144 ============================================================================================== SEGREGATED ASSET SUBACCOUNTS --------------------------------------------- PERIOD ENDED DECEMBER 31, 2000 (CONTINUED) 3VS 3IT 3SP OPERATIONS Investment income (loss)-- net $ 6,776 $ 64,295 $ 123,532 Net realized gain (loss) on investments 19,640 (250,961) (212,677) Net change in unrealized appreciation or depreciation of investments (162,052) (39,390) (14,033) ---------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (135,636) (226,056) (103,178) ============================================================================================== CONTRACT TRANSACTIONS Contract purchase payments 1,524,126 635,975 1,086,657 Net transfers(2) 304,320 127,299 16,218 Transfers for policy loans (1,535) 3,180 -- Contract charges (154) (85) (37) Contract terminations: Surrender benefits (217,319) (59,230) (101,430) ---------------------------------------------------------------------------------------------- Increase (decrease) from contract transactions 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 $ 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 1,078,608 410,305 963,969 Net transfers(2) 221,461 121,611 3,491 Transfers for policy loans (879) 2,229 -- Contract charges (111) (71) (37) Contract terminations: Surrender benefits (151,401) (46,650) (101,744) ---------------------------------------------------------------------------------------------- Units outstanding at end of year 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. 38 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 open-end management investment companies and have the following investment managers.
SUBACCOUNT INVESTS EXCLUSIVELY IN SHARES OF INVESTMENT MANAGER ------------------------------------------------------------------------------------------------------------------------------------ BC3 AXP(R) Variable Portfolio - Blue Chip Advantage Fund IDS Life Insurance Company(1) BD3 AXP(R) Variable Portfolio - Bond Fund IDS Life Insurance Company(1) CR3 AXP(R) Variable Portfolio - Capital Resource Fund IDS Life Insurance Company(1) CM3 AXP(R) Variable Portfolio - Cash Management Fund IDS Life Insurance Company(1) DE3 AXP(R) Variable Portfolio - Diversified Equity Income Fund IDS Life Insurance Company(1) EM3 AXP(R) Variable Portfolio - Emerging Markets Fund IDS Life Insurance Company(2) ES3 AXP(R) Variable Portfolio - Equity Select Fund IDS Life Insurance Company(1) EI3 AXP(R) Variable Portfolio - Extra Income Fund IDS Life Insurance Company(1) FI3 AXP(R) Variable Portfolio - Federal Income Fund IDS Life Insurance Company(1) GB3 AXP(R) Variable Portfolio - Global Bond Fund IDS Life Insurance Company(1) GR3 AXP(R) Variable Portfolio - Growth Fund IDS Life Insurance Company(1) IE3 AXP(R) Variable Portfolio - International Fund IDS Life Insurance Company(2) MF3 AXP(R) Variable Portfolio - Managed Fund IDS Life Insurance Company(1) ND3 AXP(R) Variable Portfolio - NEW DIMENSIONS FUND(R) IDS Life Insurance Company(1) SV3 AXP(R) Variable Portfolio - Partners Small Cap Value Fund IDS Life Insurance Company(3) IV3 AXP(R) Variable Portfolio - S&P 500 Index Fund IDS Life Insurance Company(1) SC3 AXP(R) Variable Portfolio - Small Cap Advantage Fund IDS Life Insurance Company(4) ST3 AXP(R) Variable Portfolio - Stock Fund IDS Life Insurance Company(1) SA3 AXP(R) Variable Portfolio - Strategy Aggressive Fund IDS Life Insurance Company(1) 3AC AIM V.I. Capital Appreciation Fund, Series II A I M Advisors, Inc. 3AD AIM V.I. Capital Development Fund, Series II A I M Advisors, Inc. 3AB Alliance VP AllianceBernstein International Value Portfolio (Class B) Alliance Capital Management, L.P. 3AL Alliance VP Growth and Income Portfolio (Class B) Alliance Capital Management, L.P. 3AI American Century(R) VP International, Class II American Century Investment Management, Inc. 3AV American Century(R) VP Value, Class II American Century Investment Management, Inc. 3SR Calvert Variable Series, Inc. Social Balanced Portfolio Calvert Asset Management Company, Inc.(5) 3CG Evergreen VA Capital Growth Fund, Class L Shares Evergreen Investment Management Company, LLC(6) 3FG Fidelity VIP Growth & Income Portfolio (Service Class 2) Fidelity Management & Research Company (FMR)(7) 3FM Fidelity VIP Mid Cap Portfolio (Service Class 2) Fidelity Management & Research Company (FMR)(7) 3FO Fidelity VIP Overseas Portfolio (Service Class 2) Fidelity Management & Research Company (FMR)(8) 3RE FTVIPT Franklin Real Estate Fund - Class 2 Franklin Advisers, Inc. 3SI FTVIPT Franklin Small Cap Value Securities Fund - Class 2 Franklin Advisory Services, LLC (previously FTVIPT Franklin Value Securities Fund - Class 2) 3MS FTVIPT Mutual Shares Securities Fund - Class 2 Franklin Mutual Advisers, LLC 3UE Goldman Sachs VIT CORE(SM) U.S. Equity Fund Goldman Sachs Asset Management 3MC Goldman Sachs VIT Mid Cap Value Fund Goldman Sachs Asset Management 3ID INVESCO VIF - Dynamics Fund INVESCO Funds Group, Inc. 3FS INVESCO VIF - Financial Services Fund INVESCO Funds Group, Inc. 3TC INVESCO VIF - Technology Fund INVESCO Funds Group, Inc. 3TL INVESCO VIF - Telecommunications Fund INVESCO Funds Group, Inc. 3GT Janus Aspen Series Global Technology Portfolio: Service Shares Janus Capital 3IG Janus Aspen Series International Growth Portfolio: Service Shares Janus Capital 3IP Lazard Retirement International Equity Portfolio Lazard Asset Management 3MG MFS(R) Investors Growth Stock Series - Service Class MFS Investment Management(R) 3MD MFS(R) New Discovery Series - Service Class MFS Investment Management(R) 3UT MFS(R) Utilities Series - Service Class MFS Investment Management(R) 3PE Pioneer Equity Income VCT Portfolio - Class II Shares Pioneer 3EU Pioneer Europe VCT Portfolio - Class II Shares Pioneer 3HS Putnam VT Health Sciences Fund - Class IB Shares Putnam Investment Management, LLC 3PI Putnam VT International Growth Fund - Class IB Shares Putnam Investment Management, LLC 3VS Putnam VT Vista Fund - Class IB Shares Putnam Investment Management, LLC 3SO Strong Opportunity Fund II -Advisor Class Strong Capital Management, Inc. 39 SUBACCOUNT INVESTS EXCLUSIVELY IN SHARES OF INVESTMENT MANAGER ----------------------------------------------------------------------------------------------------------------------------------- 3IT Wanger International Small Cap Liberty Wanger Asset Management, L.P. 3SP Wanger U.S. Smaller Companies Liberty Wanger Asset Management, L.P. (previously Wanger U.S. Small Cap) 3AA Wells Fargo VT Asset Allocation Fund Wells Fargo Funds Management, LLC(9) 3WI Wells Fargo VT International Equity Fund Wells Fargo Funds Management, LLC(9) 3SG Wells Fargo VT Small Cap Growth Fund Wells Fargo Funds Management, LLC(9) -----------------------------------------------------------------------------------------------------------------------------------
(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-adviser. (3) AEFC is the investment advisor. Royce & Associates, LLC and EQSF Advisers, Inc. are the sub-advisers. (4) AEFC is the investment adviser. Kenwood Capital Management LLC is the sub-adviser. (5) SSgA Funds Management, Inc. and Brown Capital Management are the investment sub-advisers. (6) Pilgrim Baxter Value Investors, Inc. is the sub-investment adviser. (7) FMR U.K. and FMR Far East are the sub-investment advisers. (8) FMR U.K., FMR Far East, Fidelity International Investment Advisors (FIIA) and FIIA U.K. are the sub-investment advisers. (9) Wells Capital Management Incorporated is the sub-adviser. 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. 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. VARIABLE PAYOUT Net assets allocated to contracts in the payout period are periodically compared to a computation which uses the Annuity 2000 Basic Mortality Table and which assumes future mortality improvement. The assumed investment return is 5% unless the annuitant elects otherwise, in which case the rate would be 3.5%, as regulated by the laws of the respective states. The mortality risk is fully borne by IDS Life and may result in additional amounts being transferred into the variable annuity account by IDS Life to cover greater longevity of annuitants than expected. Conversely, if amounts allocated exceed amounts required, transfers may be made to the insurance company. 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. VARIABLE ACCOUNT EXPENSES 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. IDS Life deducts a daily mortality and expense risk fee equal, on an annual basis, to 0.55% of the average daily net assets of each subaccount. 4. CONTRACT CHARGES IDS Life deducts a contract administrative charge of $30 per year. This charge reimburses IDS Life for expenses incurred in establishing and maintaining the annuity records. Certain products may waive this charge based upon the underlying contract value. An optional maximum anniversary value death benefit rider, enhanced earnings death benefit rider and enhanced earnings plus death benefit rider are available on certain products and if selected, the related fees are deducted annually from the contract value on the contract anniversary. Additional information can be found in the applicable product's prospectus. 40 5. RELATED PARTY TRANSACTIONS Management fees were paid indirectly to IDS Life in its capacity as investment manager for the AXP(R) Variable Portfolio Funds. The Fund's Investment Management Agreement provides for a fee at a percentage of each Fund's average daily net assets in reducing percentages annually as follows:
FUND PERCENTAGE RANGE --------------------------------------------------------------------------------------------------------------- AXP(R) Variable Portfolio - Blue Chip Advantage Fund 0.560% to 0.470% AXP(R) Variable Portfolio - Bond Fund 0.610% to 0.535% AXP(R) Variable Portfolio - Capital Resource Fund 0.630% to 0.570% AXP(R) Variable Portfolio - Cash Management Fund 0.510% to 0.440% AXP(R) Variable Portfolio - Diversified Equity Income Fund 0.560% to 0.470% AXP(R) Variable Portfolio - Emerging Markets Fund 1.170% to 1.095% AXP(R) Variable Portfolio - Equity Select Fund 0.650% to 0.560% AXP(R) Variable Portfolio - Extra Income Fund 0.620% to 0.545% AXP(R) Variable Portfolio - Federal Income Fund 0.610% to 0.535% AXP(R) Variable Portfolio - Global Bond Fund 0.840% to 0.780% AXP(R) Variable Portfolio - Growth Fund 0.630% to 0.570% AXP(R) Variable Portfolio - International Fund 0.870% to 0.795% AXP(R) Variable Portfolio - Managed Fund 0.630% to 0.550% AXP(R) Variable Portfolio - NEW DIMENSIONS FUND(R) 0.630% to 0.570% AXP(R) Variable Portfolio - Partners Small Cap Value Fund 1.020% to 0.920% AXP(R) Variable Portfolio - S&P 500 Index Fund 0.290% to 0.260% AXP(R) Variable Portfolio - Small Cap Advantage Fund 0.790% to 0.650% AXP(R) Variable Portfolio - Stock Fund 0.560% to 0.470% AXP(R) Variable Portfolio - Strategy Aggressive Fund 0.650% to 0.575% ---------------------------------------------------------------------------------------------------------------
IDS Life, in turn, pays to AEFC, an affiliate of IDS Life, a fee based on a percentage of each Fund's average daily net assets for the year. This fee is equal to 0.35% for AXP Variable Portfolio - International Fund and AXP Variable Portfolio - S&P 500 Index Fund and 0.25% for each remaining Fund. The AXP(R) Variable Portfolio Funds also have an agreement with IDS Life for distribution services. Under a Plan and Agreement of Distribution, each Fund pays a distribution fee at an annual rate up to 0.125% of each Fund's average daily net assets. The AXP(R) Variable Portfolio Funds have an Administrative Services Agreement with AEFC. Under this agreement, each Fund pays AEFC a fee for administration and accounting services at a percentage of each Fund's average daily net assets in reducing percentages annually as follows:
FUND PERCENTAGE RANGE --------------------------------------------------------------------------------------------------------------- AXP(R) Variable Portfolio - Blue Chip Advantage Fund 0.040% to 0.020% AXP(R) Variable Portfolio - Bond Fund 0.050% to 0.025% AXP(R) Variable Portfolio - Capital Resource Fund 0.050% to 0.030% AXP(R) Variable Portfolio - Cash Management Fund 0.030% to 0.020% AXP(R) Variable Portfolio - Diversified Equity Income Fund 0.040% to 0.020% AXP(R) Variable Portfolio - Emerging Markets Fund 0.100% to 0.050% AXP(R) Variable Portfolio - Equity Select Fund 0.060% to 0.030% AXP(R) Variable Portfolio - Extra Income Fund 0.050% to 0.025% AXP(R) Variable Portfolio - Federal Income Fund 0.050% to 0.025% AXP(R) Variable Portfolio - Global Bond Fund 0.060% to 0.040% AXP(R) Variable Portfolio - Growth Fund 0.050% to 0.030% AXP(R) Variable Portfolio - International Fund 0.060% to 0.035% AXP(R) Variable Portfolio - Managed Fund 0.040% to 0.020% AXP(R) Variable Portfolio - NEW DIMENSIONS FUND(R) 0.050% to 0.030% AXP(R) Variable Portfolio - Partners Small Cap Value Fund 0.080% to 0.055% AXP(R) Variable Portfolio - S&P 500 Index Fund 0.080% to 0.065% AXP(R) Variable Portfolio - Small Cap Advantage Fund 0.060% to 0.035% AXP(R) Variable Portfolio - Stock Fund 0.040% to 0.020% AXP(R) Variable Portfolio - Strategy Aggressive Fund 0.060% to 0.035% ---------------------------------------------------------------------------------------------------------------
The AXP(R) Variable Portfolio Funds pay custodian fees to American Express Trust Company, an affiliate of IDS Life. 41 6. INVESTMENT IN SHARES The subaccounts' investments in shares of the Funds as of Dec. 31, 2001 were as follows:
SUBACCOUNT INVESTMENT SHARES NAV ------------------------------------------------------------------------------------------------------------------------------------ BC3 AXP(R) Variable Portfolio - Blue Chip Advantage Fund 72,936 $ 8.19 BD3 AXP(R) Variable Portfolio - Bond Fund 34,608 10.47 CR3 AXP(R) Variable Portfolio - Capital Resource Fund 10,254 21.69 CM3 AXP(R) Variable Portfolio - Cash Management Fund 5,444,960 1.00 DE3 AXP(R) Variable Portfolio - Diversified Equity Income Fund 36,541 10.10 EM3 AXP(R) Variable Portfolio - Emerging Markets Fund 496,386 7.41 ES3 AXP(R) Variable Portfolio - Equity Select Fund 203,102 10.16 EI3 AXP(R) Variable Portfolio - Extra Income Fund 456,291 6.57 FI3 AXP(R) Variable Portfolio - Federal Income Fund 65,528 10.33 GB3 AXP(R) Variable Portfolio - Global Bond Fund 26,870 9.55 GR3 AXP(R) Variable Portfolio - Growth Fund 127,131 6.51 IE3 AXP(R) Variable Portfolio - International Fund 5,420 8.10 MF3 AXP(R) Variable Portfolio - Managed Fund 18,047 15.42 ND3 AXP(R) Variable Portfolio - NEW DIMENSIONS FUND(R) 191,807 15.97 SV3 AXP(R) Variable Portfolio - Partners Small Cap Value Fund 440,292 10.72 IV3 AXP(R) Variable Portfolio - S&P 500 Index Fund 77,529 7.82 SC3 AXP(R) Variable Portfolio - Small Cap Advantage Fund 51,669 10.47 ST3 AXP(R) Variable Portfolio - Stock Fund 200,266 9.49 SA3 AXP(R) Variable Portfolio - Strategy Aggressive Fund 59,751 8.34 3AC AIM V.I. Capital Appreciation Fund, Series II 274 21.70 3AD AIM V.I. Capital Development Fund, Series II 264 11.94 3AB Alliance VP AllianceBernstein International Value Portfolio (Class B) 20,806 9.87 3AL Alliance VP Growth and Income Portfolio (Class B) 5,965 22.03 3AI American Century(R) VP International, Class II 187 6.59 3AV American Century(R) VP Value, Class II 20,288 7.44 3SR Calvert Variable Series, Inc. Social Balanced Portfolio 3,204 1.76 3CG Evergreen VA Capital Growth Fund, Class L Shares 1 14.03 3FG Fidelity VIP Growth & Income Portfolio (Service Class 2) 10,128 13.07 3FM Fidelity VIP Mid Cap Portfolio (Service Class 2) 7,030 19.49 3FO Fidelity VIP Overseas Portfolio (Service Class 2) 486 13.81 3RE FTVIPT Franklin Real Estate Fund - Class 2 15,786 17.99 3SI FTVIPT Franklin Small Cap Value Securities Fund - Class 2 18,703 10.89 (previously FTVIPT Franklin Value Securities Fund - Class 2) 3MS FTVIPT Mutual Shares Securities Fund - Class 2 1 14.03 3UE Goldman Sachs VIT CORE(SM) U.S. Equity Fund 74,788 10.94 3MC Goldman Sachs VIT Mid Cap Value Fund 24,429 11.29 3ID Invesco VIF - Dynamics Fund 100 12.54 3FS Invesco VIF - Financial Services Fund 1 12.42 3TC Invesco VIF - Technology Fund 1 15.37 3TL Invesco VIF - Telecommunications Fund 2 5.57 3GT Janus Aspen Series Global Technology Portfolio: Service Shares 21,108 4.08 3IG Janus Aspen Series International Growth Portfolio: Service Shares 15,863 23.30 3IP Lazard Retirement International Equity Portfolio 20,282 9.09 3MG MFS(R) Investors Growth Stock Series - Service Class 63,875 9.67 3MD MFS(R) New Discovery Series - Service Class 32,497 15.22 3UT MFS(R) Utilities Series - Service Class 7,761 15.90 3PE Pioneer Equity Income VCT Portfolio - Class II Shares 1 18.49 3EU Pioneer Europe VCT Portfolio - Class II Shares 1 8.29 3HS Putnam VT Health Sciences Fund - Class IB Shares 10,802 11.70 3PI Putnam VT International Growth Fund - Class IB Shares 32,537 12.36 3VS Putnam VT Vista Fund - Class IB Shares 82,417 11.34 3SO Strong Opportunity Fund II -Advisor Class 6,933 19.39 3IT Wanger International Small Cap 42,482 15.40 3SP Wanger U.S. Smaller Companies 43,063 22.25 (previously Wanger U.S. Small Cap) 3AA Wells Fargo VT Asset Allocation Fund 639 12.32 3WI Wells Fargo VT International Equity Fund 61 7.50 3SG Wells Fargo VT Small Cap Growth Fund 261 7.85 ------------------------------------------------------------------------------------------------------------------------------------
42 7. INVESTMENT TRANSACTIONS The subaccounts' purchases of the Funds' shares, including reinvestment of dividend distributions, for the year ended Dec. 31, 2001 were as follows:
SUBACCOUNT INVESTMENT PURCHASES ------------------------------------------------------------------------------------------------------------------------------------ BC3 AXP(R) Variable Portfolio - Blue Chip Advantage Fund $ 3,538,188 BD3 AXP(R) Variable Portfolio - Bond Fund 4,789,890 CR3 AXP(R) Variable Portfolio - Capital Resource Fund 6,049,408 CM3 AXP(R) Variable Portfolio - Cash Management Fund 162,965,465 DE3 AXP(R) Variable Portfolio - Diversified Equity Income Fund 10,215,947 EM3 AXP(R) Variable Portfolio - Emerging Markets Fund 1,145,148 ES3(1) AXP(R) Variable Portfolio - Equity Select Fund 4,478,302 EI3 AXP(R) Variable Portfolio - Extra Income Fund 12,564,478 FI3 AXP(R) Variable Portfolio - Federal Income Fund 3,917,603 GB3 AXP(R) Variable Portfolio - Global Bond Fund 1,125,560 GR3 AXP(R) Variable Portfolio - Growth Fund 1,335,657 IE3 AXP(R) Variable Portfolio - International Fund 46,474,368 MF3 AXP(R) Variable Portfolio - Managed Fund 1,910,866 ND3 AXP(R) Variable Portfolio - NEW DIMENSIONS FUND(R) 9,087,636 SV3(2) AXP(R) Variable Portfolio - Partners Small Cap Value Fund 4,673,849 IV3 AXP(R) Variable Portfolio - S&P 500 Index Fund 534,135 SC3 AXP(R) Variable Portfolio - Small Cap Advantage Fund 2,176,922 ST3(3) AXP(R) Variable Portfolio - Stock Fund 2,005,930 SA3 AXP(R) Variable Portfolio - Strategy Aggressive Fund 15,726,511 3AC(3) AIM V.I. Capital Appreciation Fund, Series II 5,974 3AD(3) AIM V.I. Capital Development Fund, Series II 2,918 3AB(3) Alliance VP AllianceBernstein International Value Portfolio (Class B) 200,009 3AL(3) Alliance VP Growth and Income Portfolio (Class B) 257,337 3AI(3) American Century(R) VP International, Class II 1,185 3AV(3) American Century(R) VP Value, Class II 273,279 3SR Calvert Variable Series, Inc. Social Balanced Portfolio 5,608 3CG(3) Evergreen VA Capital Growth Fund, Class L Shares 9 3FG(3) Fidelity VIP Growth & Income Portfolio (Service Class 2) 131,197 3FM(3) Fidelity VIP Mid Cap Portfolio (Service Class 2) 134,145 3FO(3) Fidelity VIP Overseas Portfolio (Service Class 2) 6,617 3RE FTVIPT Franklin Real Estate Fund - Class 2 3,131,231 3SI FTVIPT Franklin Small Cap Value Securities Fund - Class 2 313,052 (previously FTVIPT Franklin Value Securities Fund - Class 2) 3MS(3) FTVIPT Mutual Shares Securities Fund - Class 2 9 3UE Goldman Sachs VIT CORE(SM) U.S. Equity Fund 459,005 3MC Goldman Sachs VIT Mid Cap Value Fund 392,932 3ID(3) Invesco VIF - Dynamics Fund 1,095 3FS(3) Invesco VIF - Financial Services Fund 9 3TC(3) Invesco VIF - Technology Fund 9 3TL(3) Invesco VIF - Telecommunications Fund 9 3GT Janus Aspen Series Global Technology Portfolio: Service Shares 1,235,730 3IG Janus Aspen Series International Growth Portfolio: Service Shares 12,420,794 3IP Lazard Retirement International Equity Portfolio 1,792,372 3MG MFS(R) Investors Growth Stock Series - Service Class 1,065,801 3MD MFS(R) New Discovery Series - Service Class 619,374 3UT(3) MFS(R) Utilities Series - Service Class 246,899 3PE(3) Pioneer Equity Income VCT Portfolio - Class II Shares 9 3EU(3) Pioneer Europe VCT Portfolio - Class II Shares 9 3HS(3) Putnam VT Health Sciences Fund - Class IB Shares 253,807 3PI(3) Putnam VT International Growth Fund - Class IB Shares 400,009 3VS Putnam VT Vista Fund - Class IB Shares 1,435,909 3SO(3) Strong Opportunity Fund II -Advisor Class 280,969 3IT Wanger International Small Cap 9,003,831 3SP Wanger U.S. Smaller Companies 2,678,770 (previously Wanger U.S. Small Cap) 3AA(1) Wells Fargo VT Asset Allocation Fund 237,101 3WI(1) Wells Fargo VT International Equity Fund 1,427,828 3SG(1) Wells Fargo VT Small Cap Growth Fund 3,259 ------------------------------------------------------------------------------------------------------------------------------------
(1) Operations commenced on May 1, 2001. (2) Operations commenced on Aug. 14, 2001. (3) Operations commenced on Aug. 13, 2001. 43 8. FINANCIAL HIGHLIGHTS The table below shows certain financial information regarding the subaccounts.
BC3 BD3 CR3 CM3 DE3 EM3 ES3(4) EI3 FI3 GB3 --------------------------------------------------------------------------------------------------- AT DEC. 31, 2000 Accumulation unit value $ 0.99 $ 1.06 $ 0.94 $ 1.07 $ 1.01 $ 0.75 $ -- $ 0.91 $ 1.09 $ 1.03 ------------------------------------------------------------------------------------------------------------------------------------ AT DEC. 31, 2001 Accumulation unit value $ 0.82 $ 1.14 $ 0.76 $ 1.10 $ 1.02 $ 0.73 $ 1.01 $ 0.95 $ 1.15 $ 1.04 Units (000s) 729 985 291 5,658 281 3 38 1,549 592 249 Net assets (000s) $ 597 $ 1,122 $ 222 $ 6,219 $ 288 $ 3,674 $ 2,063 $ 1,475 $ 680 $ 258 ------------------------------------------------------------------------------------------------------------------------------------ FOR THE YEAR ENDED DEC. 31, 2001 Investment income(1) 0.70% 6.32% 0.27% 3.60% 0.98% 0.02% -- 10.89% 4.22% 4.82% Expense ratio(2) 0.55% 0.55% 0.55% 0.55% 0.55% 0.55% 0.55% 0.55% 0.55% 0.55% Total return(3) (17.17%) 7.55% (19.15%) 2.80% 0.99% (2.67%) 1.00% 4.40% 5.50% 0.97% ------------------------------------------------------------------------------------------------------------------------------------ GR3 IE3 MF3 ND3 SV3(5) IV3 SC3 ST3(6) SA3 3AC(6) ------------------------------------------------------------------------------------------------ AT DEC. 31, 2000 Accumulation unit value $ 0.94 $ 0.95 $ 1.06 $ 1.08 $ -- $ 0.90 $ 1.16 $ -- $ 1.22 $ -- ------------------------------------------------------------------------------------------------------------------------------------ AT DEC. 31, 2001 Accumulation unit value $ 0.64 $ 0.67 $ 0.94 $ 0.89 $ 1.07 $ 0.79 $ 1.08 $ 0.95 $ 0.81 $ 0.98 Units (000s) 1,285 65 296 3,252 411 770 378 -- 607 6 Net assets (000s) $ 827 $ 44 $ 278 $ 2,901 $4,717 $ 606 $ 408 $ 1,900 $ 494 $ 6 ------------------------------------------------------------------------------------------------------------------------------------ FOR THE YEAR ENDED DEC. 31, 2001 Investment income(1) -- 1.60% 2.50% 0.21% -- 0.55% -- 0.13% 0.19% -- Expense ratio(2) 0.55% 0.55% 0.55% 0.55% 0.55% 0.55% 0.55% 0.55% 0.55% 0.55% Total return(3) (31.91%) (29.47%) (11.32%) (17.59%) 7.00% (12.22%) (6.90%) (5.00%) (33.61%) (2.00%) ------------------------------------------------------------------------------------------------------------------------------------ 3AD(6) 3AB(6) 3AL(6) 3AI(6) 3AV(6) 3SR 3CG(6) 3FG(6) 3FM(6) 3FO(6) ------------------------------------------------------------------------------------------------ AT DEC. 31, 2000 Accumulation unit value $ -- $ -- $ -- $ -- $ -- $ 0.96 $ -- $ -- $ -- $ -- ------------------------------------------------------------------------------------------------------------------------------------ AT DEC. 31, 2001 Accumulation unit value $ 0.98 $ 0.98 $ 0.97 $ 0.93 $ 1.04 $ 0.89 $ 0.95 $ 1.00 $ 1.04 $ 0.95 Units (000s) 3 210 136 1 146 6 -- 132 132 7 Net assets (000s) $ 3 $ 205 $ 131 $ 1 $ 151 $ 6 -- $ 132 $ 137 $ 7 ------------------------------------------------------------------------------------------------------------------------------------ FOR THE YEAR ENDED DEC. 31, 2001 Investment income(1) -- -- -- -- -- 7.75% -- -- -- -- Expense ratio(2) 0.55% 0.55% 0.55% 0.55% 0.55% 0.55% 0.55% 0.55% 0.55% 0.55% Total return(3) (2.00%) (2.00%) (3.00%) (7.00%) 4.00% (7.29%) (5.00%) 0.00% 4.00% (5.00%) ------------------------------------------------------------------------------------------------------------------------------------ 3RE 3SI 3MS(6) 3UE 3MC 3ID(6) 3FS(6) 3TC(6) 3TL(6) 3GT ------------------------------------------------------------------------------------------------ AT DEC. 31, 2000 Accumulation unit value $ 1.26 $ 1.20 $ -- $ 0.99 $ 1.24 $ -- $ -- $ -- $ -- $ 0.68 ------------------------------------------------------------------------------------------------------------------------------------ AT DEC. 31, 2001 Accumulation unit value $ 1.35 $ 1.35 $ 0.97 $ 0.87 $ 1.38 $ 0.96 $ 0.97 $ 0.91 $ 0.84 $ 0.43 Units (000s) 211 150 -- 943 200 1 -- -- -- 202 Net assets (000s) $ 284 $ 204 -- $ 818 $ 276 $ 1 -- -- -- $ 86 ------------------------------------------------------------------------------------------------------------------------------------ FOR THE YEAR ENDED DEC. 31, 2001 Investment income(1) 3.55% 0.39% -- 0.53% 1.73% -- -- -- -- 0.65% Expense ratio(2) 0.55% 0.55% 0.55% 0.55% 0.55% 0.55% 0.55% 0.55% 0.55% 0.55% Total return(3) 7.14% 12.50% (3.00%) (12.12%) 11.29% (4.00%) (3.00%) (9.00%) (16.00%) (36.76%) 44 3IG 3IP 3MG 3MD 3UT(6) 3PE(6) 3EU(6) 3HS(6) 3PI(6) 3VS ------------------------------------------------------------------------------------------------ AT DEC. 31, 2000 Accumulation unit value $ 0.80 $ 0.96 $ 0.91 $ 0.96 $ -- $ -- $ -- $ -- $ -- $ 1.29 ------------------------------------------------------------------------------------------------------------------------------------ AT DEC. 31, 2001 Accumulation unit value $ 0.61 $ 0.73 $ 0.68 $ 0.90 $ 0.89 $ 0.98 $ 0.98 $ 0.98 $ 0.96 $ 0.86 Units (000s) 606 253 913 548 138 -- -- 129 418 1,092 Net assets (000s) $ 370 $ 184 $ 618 $ 495 $ 123 -- -- $ 126 $ 402 $ 935 ------------------------------------------------------------------------------------------------------------------------------------ FOR THE YEAR ENDED DEC. 31, 2001 Investment income(1) 0.52% 0.01% 0.06% -- -- -- -- -- -- -- Expense ratio(2) 0.55% 0.55% 0.55% 0.55% 0.55% 0.55% 0.55% 0.55% 0.55% 0.55% Total return(3) (23.75%) (23.96%) (25.27%) (6.25%) 11.00%) (2.00%) (2.00%) (2.00%) (4.00%) (33.33%) ------------------------------------------------------------------------------------------------------------------------------------ 3SO(6) 3IT 3SP 3AA(4) 3WI(4) 3SG(4) ------------------------------------------------------------ AT DEC. 31, 2000 Accumulation unit value $ -- $ 1.09 $ 1.05 $ -- $ -- $ -- ------------------------------------------------------------------------------------------------------------------------------------ AT DEC. 31, 2001 Accumulation unit value $ 0.99 $ 0.85 $ 1.17 $ 0.97 $ 0.90 $ 0.94 Units (000s) 136 769 820 8 1 2 Net assets (000s) $ 134 $ 654 $ 958 $ 8 -- $ 2 ------------------------------------------------------------------------------------------------------------------------------------ FOR THE YEAR ENDED DEC. 31, 2001 Investment income(1) 0.47% -- 0.07% 0.71% -- -- Expense ratio(2) 0.55% 0.55% 0.55% 0.55% 0.55% 0.55% Total return(3) (1.00%) (22.02%) 11.43% (3.00%) 10.00%) (6.00%) ------------------------------------------------------------------------------------------------------------------------------------
(1) These amounts represent the dividends, excluding distributions of capital gains, received by the subaccount from the underlying mutual fund, net of management fees assessed by the fund manager, divided by the average net assets. These ratios exclude variable account expenses that result in direct reductions in the unit values. The recognition of investment income by the subaccount is affected by the timing of the declaration of dividends by the underlying fund in which the subaccounts invest. (2) These ratios represent the annualized contract expenses of the separate account, consisting primarily of mortality and expense charges, for each period indicated. The ratios include only those expenses that result in a direct reduction to unit values. Charges made directly to contract owner accounts through the redemption of units and expenses of the underlying fund are excluded. (3) These amounts represent the total return for the periods indicated, including changes in the value of the underlying fund, and reflect deductions for all items included in the expense ratio. The total return does not include any expenses assessed through the redemption of units; inclusion of these expenses in the calculation would result in a reduction in the total return presented. Investment options with a date notation indicate the effective date of that investment option in the variable account. The total return is calculated for the period indicated or from the effective date through the end of the reporting period. (4) Operations commenced on May 1, 2001. (5) Operations commenced on Aug. 14, 2001. (6) Operations commenced on Aug. 13, 2001 45 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, 2001 and 2000, 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, 2001. 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, 2001 and 2000, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States. Ernst & Young LLP January 28, 2002 Minneapolis, Minnesota IDS Life Insurance Company -------------------------------------------------------------------------------- Consolidated Balance Sheets
December 31, (In thousands, except share amounts) 2001 2000 Assets Investments: Fixed maturities: Held-to-maturity, at amortized cost (fair value: 2000, $6,471,798) $ -- $ 6,463,613 Available-for-sale, at fair value (amortized cost: 2001, $20,022,072; 2000, $12,929,870) 20,157,137 12,399,990 Common stocks 1,704 10,333 Mortgage loans on real estate 3,680,394 3,738,091 Policy loans 619,571 618,973 Other investments 621,897 575,551 ------- ------- Total investments 25,080,703 23,806,551 Cash and cash equivalents 1,150,251 316,974 Amounts recoverable from reinsurers 529,166 416,480 Amounts due from brokers 90,794 15,302 Other accounts receivable 46,349 42,324 Accrued investment income 278,199 334,928 Deferred policy acquisition costs 3,107,187 2,951,655 Deferred income taxes, net 156,308 136,588 Other assets 123,246 80,054 Separate account assets 27,333,697 32,349,347 ---------- ---------- Total assets $57,895,900 $60,450,203 =========== =========== Liabilities and stockholder's equity Liabilities: Future policy benefits: Fixed annuities $19,592,273 $19,417,446 Universal life-type insurance 3,433,904 3,410,871 Traditional life insurance 241,165 232,913 Disability income and long-term care insurance 1,227,172 1,012,247 Policy claims and other policyholders' funds 71,879 52,067 Amounts due to brokers 1,740,031 446,347 Other liabilities 437,017 463,561 Separate account liabilities 27,333,697 32,349,347 ---------- ---------- Total liabilities 54,077,138 57,384,799 ---------- ---------- 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 688,327 288,327 Accumulated other comprehensive income (loss), net of tax: Net unrealized securities gains (losses) 85,549 (333,734) Net unrealized derivative (losses) (774) -- ---------- ---------- Total accumulated other comprehensive income (loss) 84,775 (333,734) ---------- ---------- Retained earnings 3,042,660 3,107,811 ---------- ---------- Total stockholder's equity 3,818,762 3,065,404 ---------- ---------- Total liabilities and stockholder's equity $57,895,900 $60,450,203 =========== ===========
See notes to consolidated financial statements. IDS Life Insurance Company -------------------------------------------------------------------------------- Consolidated Statements of Income
Years ended December 31, (In thousands) 2001 2000 1999 Revenues Premiums: Traditional life insurance $ 59,415 $ 56,187 $ 53,790 Disability income and long-term care insurance 255,428 231,311 201,637 ------- ------- ------- Total premiums 314,843 287,498 255,427 Net investment income 1,485,688 1,730,605 1,919,573 Contractholder charges 489,583 438,127 411,994 Management and other fees 473,406 598,168 473,108 Net realized (loss) gain on investments (649,752) (16,975) 26,608 -------- ------- ------ Total revenues 2,113,768 3,037,423 3,086,710 --------- --------- --------- Benefits and expenses Death and other benefits: Traditional life insurance 35,519 29,042 29,819 Universal life-type insurance and investment contracts 175,247 131,467 118,561 Disability income and long-term care insurance 44,725 40,246 30,622 Increase in liabilities for future policy benefits: Traditional life insurance 7,231 5,765 7,311 Disability income and long-term care insurance 123,227 113,239 87,620 Interest credited on universal life-type insurance and investment contracts 1,137,636 1,169,641 1,240,575 Amortization of deferred policy acquisition costs 371,342 362,106 321,036 Other insurance and operating expenses 407,798 378,653 346,849 ------- ------- ------- Total benefits and expenses 2,302,725 2,230,159 2,182,393 --------- --------- --------- (Loss) income before income tax (benefit) expense a nd cumulative effect of accounting change (188,957) 807,264 904,317 Income tax (benefit) expense (145,222) 221,627 267,864 -------- ------- ------- (Loss) income before cumulative effect of accounting change (43,735) 585,637 636,453 Cumulative effect of accounting change (net of income tax benefit of $11,532) (21,416) -- -- -------- ------- ------- Net (loss) income $ (65,151) $ 585,637 $ 636,453 ---------- ---------- ----------
See notes to consolidated financial statements. IDS Life Insurance Company -------------------------------------------------------------------------------- Consolidated Statements of Stockholder's Equity
Accumulated other Additional comprehensive Total Capital paid-in income (loss), Retained stockholder's For the three years ended December 31, 2001 (In thousands) stock capital net of tax earnings equity Balance, January 1, 1999 $3,000 $288,327 $ 169,584 $2,645,721 $3,106,632 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 income taxes of $304,936 -- -- (566,311) -- (566,311) Reclassification adjustment for gains included in net income, net of income tax of $7,810 -- -- (14,503) -- (14,503) ------ -------- --------- ---------- ---------- Other comprehensive loss -- -- (580,814) -- (580,814) ------ -------- --------- ---------- ---------- Comprehensive income 55,639 Cash dividends -- -- -- (350,000) (350,000) ------ -------- --------- ---------- ---------- Balance, December 31, 1999 3,000 288,327 (411,230) 2,932,174 2,812,271 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 income taxes of ($46,921) -- -- 87,138 -- 87,138 Reclassification adjustment for gains included in net income, net of income tax of $5,192 -- -- (9,642) -- (9,642) ------ -------- --------- ---------- ---------- Other comprehensive income -- -- 77,496 -- 77,496 ------ -------- --------- ---------- ---------- Comprehensive income 663,133 Cash dividends -- -- -- (410,000) (410,000) ------ -------- --------- ---------- ---------- Balance, December 31, 2000 3,000 288,327 (333,734) 3,107,811 3,065,404 Comprehensive income: Net loss -- -- -- (65,151) (65,151) Cumulative effect of adopting SFAS No. 133, net of income tax benefit of $626 -- -- (1,162) -- (1,162) Unrealized holding losses on available-for-sale securities arising during the year, net of deferred policy acquisition costs of ($20,191) and income taxes of $15,037 -- -- (11,262) -- (11,262) Reclassification adjustment for losses on available-for-sale securities included in net loss, net of income tax benefit of $228,003 -- -- 423,434 -- 423,434 Reclassification adjustment for losses on derivatives included in net loss, net of income tax benefit of $4,038 -- -- 7,499 -- 7,499 ------ -------- --------- ---------- ---------- Other comprehensive income -- -- 418,509 -- 418,509 ------ -------- --------- ---------- ---------- Comprehensive income 353,358 Capital contribution -- 400,000 -- -- 400,000 ------ -------- --------- ---------- ---------- Balance, December 31, 2001 $3,000 $688,327 $ 84,775 $3,042,660 $3,818,762 ====== ======== ========= ========== ==========
See notes to consolidated financial statements. IDS Life Insurance Company -------------------------------------------------------------------------------- Consolidated Statements of Cash Flows
Years ended December 31, (In thousands) 2001 2000 1999 Cash flows from operating activities Net (loss) income $ (65,151) $ 585,637 $ 636,453 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Cumulative effect of accounting change, net of tax 21,416 -- -- Policy loans, excluding universal life-type insurance: Issuance (43,687) (61,313) (56,153) Repayment 54,004 56,088 54,105 Change in amounts recoverable from reinsurers (112,686) (89,312) (64,908) Change in other accounts receivable (4,025) 6,254 (615) Change in accrued investment income 56,729 8,521 23,125 Change in deferred policy acquisition costs, net (175,723) (291,634) (140,379) Change in liabilities for future policy benefits for traditional life, disability income and long-term care insurance 223,177 206,377 153,157 Change in policy claims and other policyholder's funds 19,812 27,467 (45,709) Deferred income tax (benefit) provision (246,205) 37,704 79,796 Change in other liabilities (24,509) (120,256) 169,395 Amortization of premium (accretion of discount), net 108,958 37,909 (17,907) Net realized loss (gain) on investments 649,752 16,975 (26,608) Contractholder charges, non-cash (217,496) (151,745) (175,059) Other, net (83,023) (9,279) (5,324) ------- ------ ------ Net cash provided by operating activities 161,343 259,393 583,369 ------- ------- ------- Cash flows from investing activities Held-to-maturity securities: Purchases -- (4,487) (3,030) Maturities, sinking fund payments and calls -- 589,742 741,949 Sales -- 50,067 66,547 Available-for-sale securities: Purchases (9,477,740) (1,454,010) (3,433,128) Maturities, sinking fund payments and calls 2,706,147 1,019,403 1,442,507 Sales 5,493,141 1,237,116 1,691,389 Other investments, excluding policy loans: Purchases (442,876) (706,082) (657,383) Sales 370,636 435,633 406,684 Change in amounts due from brokers (75,492) (15,157) 182 Change in amounts due to brokers 1,293,684 298,236 (47,294) --------- ------- ------- Net cash (used in) provided by investing activities (132,500) 1,450,461 208,423 -------- --------- ------- Cash flows from financing activities Activities related to universal life-type insurance and investment contracts: Considerations received 2,088,114 1,842,026 2,031,630 Surrenders and other benefits (2,810,401) (3,974,966) (3,669,759) Interest credited to account balances 1,137,636 1,169,641 1,240,575 Universal life-type insurance policy loans: Issuance (83,720) (134,107) (102,239) Repayment 72,805 82,193 67,881 Capital contribution 400,000 -- -- Dividends paid -- (410,000) (350,000) -------- --------- ------- Net cash provided by (used in) financing activities 804,434 (1,425,213) (781,912) -------- --------- ------- Net increase in cash and cash equivalents 833,277 284,641 9,880 Cash and cash equivalents at beginning of year 316,974 32,333 22,453 -------- --------- ------- Cash and cash equivalents at end of year $ 1,150,251 $ 316,974 $ 32,333 =========== ============ ============= Supplemental disclosures: Income taxes paid $ -- $ 225,704 $ 214,940 Interest on borrowings 23,688 3,299 4,521
See notes to consolidated financial statements. IDS Life Insurance Company -------------------------------------------------------------------------------- Notes to Consolidated Financial Statements (In 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. Revenue recognition Profits on fixed deferred annuities are the excess of contractholder charges and investment income earned from investment of contract considerations over interest credited to contract values, amortization of deferred acquisition costs, and other expenses. Profits on variable deferred annuities also include the excess of management and other fees over the costs of guaranteed benefits provided. Contractholder charges include policy fees and surrender charges. Management and other fees include investment management fees from underlying proprietary mutual funds, certain fee revenues from underlying nonproprietary mutual funds and mortality and expense risk fees from the variable annuity separate accounts. Profits on fixed universal life insurance are the excess of contractholder charges and investment income earned from investment of contract considerations over interest credited to contract values, death and other benefits paid in excess of contract values, amortization of deferred acquisition costs, and other expenses. Profits on variable universal life insurance also include management and other fees. 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, certain fee revenues from underlying nonproprietary mutual funds and mortality and expense risk fees received from the variable life insurance separate accounts. 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. 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). Certain prior year amounts have been reclassified to conform to the current year's presentation. 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 -- securities Debt securities 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 debt securities and marketable equity securities are classified as available-for-sale and carried at fair value. Unrealized gains and losses on securities classified as available-for-sale are carried as a separate component of accumulated other comprehensive income (loss), net of the related deferred policy acquisition costs and income taxes. When evidence indicates there is a decline in a security's value, which is other than temporary, the security is written down to fair value through a charge to current year's earnings. IDS Life Insurance Company -------------------------------------------------------------------------------- The Company's investment portfolio contains structured investments, including Collateralized Debt Obligations (CDOs) (obligations that are primarily backed by high-yield bonds), which are not readily marketable. The carrying values of these investments are based on cash flow projections and, as such, these values are subject to change. If actual cash flows are less than projected, losses would be recognized; increases in cash flows would be recognized over future periods. Realized investment gains or losses are 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. Investments -- mortgage loans on real estate Mortgage loans on real estate are carried at amortized cost less reserves for losses. The estimated fair value of the mortgage loans is determined by discounted cash flow analyses using mortgage interest rates currently offered for mortgages of similar maturities. Impairment of mortgage loans is measured as the excess of the 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 losses. The reserve for 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 collectability of principal, interest payments received are either recognized as income or applied to the recorded investment in the loan. Policy loans Policy loans are carried at the aggregate of the unpaid loan balances, which do not exceed the cash surrender values of the related policies. Cash and cash equivalents 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. 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 the interest method. The costs for universal life and variable universal life 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 fixed and variable universal life 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 prospective assumptions underlying the amortization models. 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. Unlocking adjustments resulted in a net increase in amortization of $33,600 in 2001 and net decreases in amortization of $12,300 in 2000 and $56,800 in 1999. In amortizing deferred policy acquisition costs associated with variable annuities, the Company assumes contract values will appreciate at a specified long-term annual rate. The Company may project near-term appreciation at a different rate in order to maintain the long-term rate assumption. Liabilities for future policy benefits Liabilities for fixed and variable universal life insurance and fixed and variable deferred annuities are accumulation values. Liabilities for equity indexed deferred annuities issued in 1997 and 1998 are equal to the present value of guaranteed benefits and the intrinsic value of index-based benefits. Liabilities for equity indexed deferred annuities issued in 1999 or later are equal to the accumulation of host contract values covering guaranteed benefits and the market value of embedded equity options. 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. IDS Life Insurance Company -------------------------------------------------------------------------------- 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 Reinsurance premiums and benefits paid or provided are accounted for on a basis consistent with those used in accounting for original policies issued and with the terms of the reinsurance contracts. 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 20% of the mortality risk on new variable universal life insurance policies and 10% of the risk on new term 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. 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 to be payable at the initial level regardless of investment performance so long as minimum premium payments are made. Accounting developments 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 and Retained Beneficial Interests in Securitized Financial Assets." The Company adopted the consensus as of January 1, 2001. Issue 99-20 prescribes new procedures for recording interest income and measuring impairment on retained and purchased beneficial interests. The consensus primarily affects certain high-yield investments contained in structured securities. Adoption of the consensus required the Company to adjust the carrying amount of these investments downward by $21,416, net of tax, upon adoption. See Note 2 for further discussion. Effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended (SFAS No. 133), which requires an entity to 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 are recorded in earnings or directly to equity, depending on the instrument's designated use. The adoption of SFAS No. 133 on January 1, 2001, resulted in a cumulative after-tax reduction to other comprehensive income of $1,162. The cumulative impact to earnings was not significant. See Note 8 for further discussion of the Company's derivative and hedging activities. IDS Life Insurance Company -------------------------------------------------------------------------------- SFAS No. 133 also provided a one-time opportunity to reclassify held-to-maturity security investments to available-for-sale without tainting the remaining securities in the held-to-maturity portfolio. The Company elected to take the opportunity to reclass all its held-to-maturity investments to available-for-sale. The Company adopted SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," which superseded SFAS No. 125. The Statement was effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001. The Statement was 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 impact on the Company's financial position or results of operations of adopting the Statement was not significant. 2. INVESTMENTS Securities Pursuant to the adoption of SFAS No. 133 the Company reclassified all held-to-maturity securities with a carrying value of $6,463,613 and net unrealized gains of $8,185 to available-for-sale as of January 1, 2001.
The following is a summary of securities available-for-sale at December 31, 2001: Gross Gross Amortized unrealized unrealized Fair cost gains losses value Fixed maturities: U.S. Government agency obligations $ 31,074 $ 2,190 $ 56 $ 33,208 State and municipal obligations 7,826 149 -- 7,975 Corporate bonds and obligations 11,658,888 276,332 218,365 11,716,855 Mortgage-backed securities 8,292,576 103,109 32,801 8,362,884 Foreign government bonds and obligations 31,708 4,507 -- 36,215 ----------- -------- -------- ----------- Total fixed maturity securities $20,022,072 $386,287 $251,222 $20,157,137 =========== ======== ======== =========== Common stocks $ 805 $ 899 $ -- $ 1,704 =========== ======== ======== ===========
The amortized cost and fair value of fixed maturity securities at December 31, 2001 by contractual maturity are as follows: Amortized Fair cost value Due within one year $ 1,093,557 $ 1,114,618 Due from one to five years 2,885,509 3,007,435 Due from five to ten years 5,503,284 5,519,588 Due in more than ten years 2,247,146 2,152,612 Mortgage-backed securities 8,292,576 8,362,884 --------- --------- Total $20,022,072 $20,157,137 =========== ===========
The timing of actual receipts may differ from contractual maturities because issuers may call or prepay obligations.
The following is a summary of held-to-maturity and available-for-sale securities at December 31, 2000: 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 --------- ----- ----- --------- Total fixed maturity securities $6,463,613 $124,067 $115,882 $6,471,798 ========== ======== ======== ========== Gross Gross Amortized unrealized unrealized Fair Available-for-sale cost gains losses value Fixed maturities: 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 maturity securities $12,929,870 $187,769 $717,649 $12,399,990 =========== ======== ======== =========== Common stocks $ 11,829 $ -- $ 1,496 $ 10,333 =========== ======== ======== ===========
At December 31, 2001, bonds carried at $14,639 were on deposit with various states as required by law. IDS Life Insurance Company -------------------------------------------------------------------------------- At December 31, 2001, fixed maturity securities comprised approximately 80 percent of the Company's total investments. These securities are rated by Moody's and Standard & Poor's (S&P), except for approximately $2.6 billion of securities which are rated by AEFC's internal analysts using criteria similar to Moody's and S&P. A summary of fixed maturity securities, at amortized cost, by rating on December 31, is as follows: Rating 2001 2000 Aaa/AAA $ 8,977,075 $ 6,559,188 Aaa/AA -- 32,001 Aa/AA 261,252 220,446 Aa/A 372,120 327,147 A/A 2,602,027 2,494,621 A/BBB 911,477 747,636 Baa/BBB 5,904,013 5,828,847 Baa/BB 274,228 287,583 Below investment grade 719,880 2,896,014 ------- --------- Total $20,022,072 $19,393,483 =========== =========== At December 31, 2001, approximately 93 percent of the securities rated Aaa/AAA are GNMA, FNMA and FHLMC mortgage-backed securities. No holdings of any other issuer were greater than ten percent of stockholder's equity. During the years ended December 31, 2000 and 1999, fixed maturities classified as held-to-maturity were sold with amortized cost of $53,169 and $68,470, 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. Available-for-sale securities were sold during 2001 with proceeds of $5,493,141 and gross realized gains and losses of $116,485 and $767,144, respectively. Available-for-sale securities were sold during 2000 with proceeds of $1,237,116 and gross realized gains and losses of $25,101 and $10,267, respectively. Available-for-sale securities were sold during 1999 with proceeds of $1,691,389 and gross realized gains and losses of $36,568 and $14,255, respectively. The net unrealized gain (loss) on available-for-sale securities as of December 31, 2001 and 2000, was $135,964 and ($531,376), respectively, with the $667,340 change, net of taxes and deferred policy acquisition costs, reflected as a separate component in accumulated other comprehensive income for the year ended December 31, 2001. For the year ended December 31, 2000 the change in net unrealized losses on available-for-sale securities was a decrease of $122,196. For the year ended December 31, 1999 the change in net unrealized gain on available-for-sale securities was a decrease of $921,920. During 2001, the Company recorded pretax losses of $828,175 to recognize the impact of higher default rate assumptions on certain structured investments; to write down lower rated securities (most of which were sold during 2001) in connection with the Company's decision to lower its risk profile by reducing the level of its high-yield portfolio, allocating holdings toward stronger credits, and reducing the concentration of exposure to individual companies and industry sectors; to write down certain other investments; and, to adopt EITF Issue 99-20, as previously discussed. Within the Consolidated Statements of Income, approximately $623,958 of these losses are included in Net realized (losses) gains on investments and approximately $171,269 are included in Net investment income, with the remaining losses recorded as a cumulative effect of accounting change. During 2001, the Company placed a majority of its rated Collateralized Debt Obligation (CDO) (obligations that are backed primarily by high-yield bonds) securities and related accrued interest, (collectively referred to as transferred assets), having an aggregate book value of $675,347, into a securitization trust. In return, the Company received $89,535 in cash relating to sales to unaffiliated investors and retained interests with allocated book amounts aggregating $585,812. The book amount is determined by allocating the previous carrying value of the transferred assets between assets sold and the retained interests based on their relative fair values. Fair values are based on the estimated present value of future cash flows. There was no cash flow related to this transaction other than the receipt of the initial $89,535. Cash flows on the assets sold to investors and retained interests are not scheduled to begin until March 31, 2002 in accordance with governing documents. Included in Other investments are affordable housing investment credits, trading securities, and real estate. Fair values of investments 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, estimated future cash flows and market data from independent brokers. IDS Life Insurance Company -------------------------------------------------------------------------------- Mortgages loans on real estate At December 31, 2001, approximately 15 percent of the Company's investments were mortgage loans on real estate. Concentration of credit risk by region of the United States and by type of real estate are as follows:
December 31, 2001 December 31, 2000 On balance Funding On balance Funding Region sheet commitments sheet commitments East North Central $ 670,387 $ 1,873 $ 691,694 $18,868 West North Central 549,015 -- 564,576 7,621 South Atlantic 815,837 9,490 884,723 7,667 Middle Atlantic 352,821 9,363 378,702 13,813 New England 274,486 8,700 279,147 4,604 Pacific 355,945 14,618 318,727 921 West South Central 214,000 600 173,158 28,548 East South Central 55,798 -- 49,176 2,763 Mountain 413,053 27 409,677 10,209 ---------- ------- ---------- ------- 3,701,342 44,671 3,749,580 95,014 Less reserves for losses 20,948 -- 11,489 -- ---------- ------- ---------- ------- Total $3,680,394 $44,671 $3,738,091 $95,014 ========== ======= ========== ======= December 31, 2001 December 31, 2000 On balance Funding On balance Funding Property type sheet commitments sheet commitments Department/retail stores $1,117,195 $13,200 $1,174,763 $11,130 Apartments 694,214 11,531 780,228 -- Office buildings 1,203,090 7,650 1,085,948 59,941 Industrial buildings 333,713 2,263 323,766 23,943 Hotels/motels 108,019 -- 100,680 -- Medical buildings 106,927 6,000 128,101 -- Nursing/retirement homes 39,590 -- 49,822 -- Mixed use 86,972 27 87,537 -- Other 11,622 4,000 18,735 -- ---------- ------- ---------- ------- 3,701,342 44,671 3,749,580 95,014 Less reserves for losses 20,948 -- 11,489 -- ---------- ------- ---------- ------- Total $3,680,394 $44,671 $3,738,091 $95,014 ========== ======= ========== =======
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 fund mortgages are made in the ordinary course of business. The fair value of the mortgage commitments is $nil. At December 31, 2001, 2000 and 1999, the Company's recorded investment in impaired loans was $39,601, $24,999 and $21,375, respectively, with reserves of $7,225, $4,350 and $5,750, respectively. During 2001, 2000 and 1999, the average recorded investment in impaired loans was $24,498, $27,063 and $23,815, respectively. The Company recognized $1,285, $1,033 and $1,190 of interest income related to impaired loans for the years ended December 31, 2001, 2000 and 1999, respectively. The following table presents changes in the reserves for mortgage loan losses:
2001 2000 1999 Balance, January 1 $11,489 $ 28,283 $39,795 Provision (reduction) for mortgage loan losses 14,959 (14,894) (9,512) Loan payoffs -- (1,200) (500) Foreclosures and write-offs (5,500) (700) (1,500) ------ ---- ------ Balance, December 31 $20,948 $ 11,489 $28,283 ======= ======== =======
IDS Life Insurance Company -------------------------------------------------------------------------------- Sources of investment income and realized (losses) gains on investments Net investment income for the years ended December 31 is summarized as follows: 2001 2000 1999 Interest on fixed maturities $1,276,966 $1,473,560 $1,598,059 Interest on mortgage loans 290,608 286,611 285,921 Interest on cash equivalents 2,218 8,084 5,871 Other (44,145) 1,750 70,892 ------- ----- ------ 1,525,647 1,770,005 1,960,743 Less investment expenses 39,959 39,400 41,170 ------ ------ ------ Total $1,485,688 $1,730,605 $1,919,573 ========== ========== ==========
Net realized (losses) gains on investments for the years ended December 31 is summarized as follows: 2001 2000 1999 Fixed maturities $(621,400) $(34,857) $ 8,802 Mortgage loans (22,443) 15,845 10,210 Other investments (5,909) 2,037 7,596 ------ ----- ----- $(649,752) $(16,975) $26,608 ========= ======== =======
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 (benefit) expense for the years ended December 31 consists of the following: 2001 2000 1999 Federal income taxes Current $ 88,121 $176,397 $178,444 Deferred (234,673) 37,704 79,796 -------- ------ ------ (146,552) 214,101 258,240 State income taxes-current 1,330 7,526 9,624 ----- ----- ----- Income tax (benefit) expense before cumulative effect of accounting change (145,222) 221,627 267,864 Cumulative effect of accounting change income tax benefit (11,532) -- -- ----- ----- ----- Income tax (benefit) expense $(156,754) $221,627 $267,864 ========= ======== ========
Income tax (benefit) expense before the cumulative effect of accounting change, differs from that computed by using the United States statutory rate of 35%. The principal causes of the difference in each year are shown below:
2001 2000 1999 Provision Rate Provision Rate Provision Rate Federal income taxes based on the statutory rate $ (66,136) (35.0%) $282,542 35.0% $316,511 35.0% Tax-excluded interest and dividend income (4,663) (2.5) (3,788) (0.5) (9,626) (1.1) State taxes, net of federal benefit 865 0.4 4,892 0.6 6,256 0.7 Affordable housing credits (73,200) (38.7) (54,569) (6.8) (31,000) (3.4) Other, net (2,088) (1.1) (7,450) (0.8) (14,277) (1.6) ------ ---- ------ ---- ------- ---- Total income taxes $(145,222) (76.9%) $221,627 27.5% $267,864 29.6% ========= ===== ======== ==== ======== ====
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, 2001, 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 -------------------------------------------------------------------------------- Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred income tax assets and liabilities as of December 31 are as follows:
2001 2000 Deferred income tax assets Policy reserves $ 705,637 $730,239 Unrealized loss -- available-for-sale securities -- 179,702 Investments, other 330,675 34,600 Life insurance guaranty fund assessment reserve 1,330 1,365 Other 26,492 -- --------- ------- Total deferred income tax assets 1,064,134 945,906 --------- ------- Deferred income tax liabilities Deferred policy acquisition costs 861,892 796,292 Unrealized gain -- available-for-sale securities 45,934 -- Other -- 13,026 --------- ------- Total deferred income tax liabilities 907,826 809,318 --------- ------- Net deferred income tax assets $ 156,308 $136,588 ========== ========
The Company is required to establish a valuation allowance for any portion of the deferred income tax assets that management believes will not be realized. In the opinion of management, it is more likely than not that the Company will realize the benefit of the deferred tax assets and, therefore, no such valuation allowance has been established. 4. STOCKHOLDER'S EQUITY Retained earnings available for distribution as dividends to AEFC are limited to the Company's surplus as determined in accordance with accounting practices prescribed by state insurance regulatory authorities. Statutory unassigned surplus aggregated $1,262,335 as of December 31, 2001 and $1,493,292 as of December 31, 2000 (see Note 3 with respect to the income tax effect of certain distributions). In addition, any dividend distributions in 2002 in excess of approximately $194,435 would require approval of the Department of Commerce of the State of Minnesota. Statutory net (loss) income for the years ended December 31 and capital and surplus as of December 31 are summarized as follows: 2001 2000 1999 Statutory net (loss) income $ (317,973) $ 344,973 $ 478,173 Statutory capital and surplus 1,947,350 1,778,306 1,978,406 --------- --------- --------- The National Association of Insurance Commissioners (NAIC) revised the Accounting Practices and Procedures Manual in a process referred to as Codification. The revised regulations took effect 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 resulted in changes to the accounting practices that the Company uses to prepare its statutory-basis financial statements. The impact of implementing these changes was an increase of $4,660 to the Company's statutory-basis capital and surplus as of January 1, 2001. 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, 2001 and 2000. 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 2001, 2000 and 1999. 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. Company 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 $263, $250 and $223 in 2001, 2000 and 1999, 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 2001, 2000 and 1999 were $662, $1,707 and $1,906, 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 cost of these plans charged to operations in 2001, 2000 and 1999 was $1,011, $1,136 and $1,147, respectively. IDS Life Insurance Company -------------------------------------------------------------------------------- Charges by AEFC for use of joint facilities, technology support, marketing services and other services aggregated $505,526, $582,836 and $485,177 for 2001, 2000 and 1999, respectively. Certain of these costs are included in deferred policy acquisition costs. Expenses allocated to the Company may not be reflective of expenses that would have been incurred by the Company on a stand-alone basis. Included in other liabilities at December 31, 2001 and 2000 are $68,919 and $41,059, respectively, payable to and receivable from AEFC for federal income taxes. 6. LINES OF CREDIT The Company has available lines of credit with AEFC 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 $nil and $50,000 uncommitted at December 31, 2001 and 2000, respectively. 7. COMMITMENTS AND CONTINGENCIES At December 31, 2001, 2000 and 1999, traditional life and universal life-type insurance in force aggregated $108,255,014, $98,060,472 and $89,271,957 respectively, of which $25,986,706, $17,429,851 and $8,281,576 were reinsured at the respective year ends. The Company also reinsures a portion of the risks assumed under long-term care policies. Under all reinsurance agreements, premiums ceded to reinsurers amounted to $114,534, $89,506 and $76,970 and reinsurance recovered from reinsurers amounted to $43,388, $32,500, and $27,816 for the years ended December 31, 2001, 2000 and 1999, respectively. Reinsurance contracts do not relieve the Company from its primary obligation to policyholders. At December 31, 2001, the Company had no commitments to purchase investments other than mortgage loan fundings (see Note 2). 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, both state and federal courts gave preliminary approval to the proposed settlement and AEFC mailed notices to all of the over two million class members. In May 2001, the courts entered orders approving the settlement. The orders became final in August 2001 and in October 2001 the settlement was implemented. The anticipated costs of settlement remain unchanged from prior years. The settlement as approved provides for release by class members of all insurance and annuity market conduct claims dating back to 1985. Some class members opted out of the settlement and therefore did not release their claims against AEFC or the Company. Some of these class members who opted out were represented by counsel and presented separate claims to AEFC or the Company. Most of their claims have been settled. 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. 8. DERIVATIVE FINANCIAL INSTRUMENTS The Company maintains an overall risk management strategy that incorporates the use of derivative instruments to minimize significant unplanned fluctuations in earnings caused by interest rate and equity market volatility. The Company does not enter into derivative instruments for speculative purposes. As prescribed per SFAS No. 133, derivative instruments that are designated and qualify as hedging instruments are classified as a cash flow hedge, fair value hedge, or a hedge of a net investment in a foreign operation, based upon the exposure being hedged. The Company currently has economic hedges that either do not qualify or are not designated for hedge accounting treatment under SFAS No. 133. For the year ended December 31, 2001, the net effect on earnings of accounting for the net changes in fair value of the following undesignated derivatives under SFAS No. 133 compared with prior rules was not significant. The Company enters into interest rate swaps, caps and floors to manage the Company's interest rate risk and options and futures to manage equity-based risk. The values of derivative financial instruments are based on market values, dealer quotes or pricing models. 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. IDS Life Insurance Company -------------------------------------------------------------------------------- Interest rate caps, swaps and floors are used principally to manage the Company's interest rate risk. These instruments are primarily used to protect the margin between interest rates earned on investments and the interest rates credited to related annuity contract holders. No interest rate swaps or floors were outstanding as of December 31, 2001. The interest rate caps expire by January 2003. The fair value of the interest rate caps is included in Other assets. Changes in the value of the interest rate caps are included in Other insurance and operating expenses. A purchased (written) option conveys the right (obligation) to buy or sell an instrument at a fixed price for a set period of time or on a specific date. The Company writes and purchases index options to manage the risks related to annuity products that pay interest based upon the relative change in a major stock market index between the beginning and end of the product's term. The Company views this strategy as a prudent management of equity market sensitivity, such that earnings are not exposed to undue risk presented by changes in equity market levels. The annuity products contain embedded derivatives, essentially the equity based return of the product, which must be separated from the host contract and accounted for as derivative instruments per SFAS No. 133. As a result of fluctuations in equity markets, and the corresponding changes in value of the embedded derivatives, the amount of interest credited incurred by the Company related to the annuity product will positively or negatively impact reported earnings. The purchased and written options are carried at fair value and included in Other assets and Other liabilities, respectively. The fair value of the embedded options are included in Future policy benefits for fixed annuities. The changes in fair value of the options are recognized in Other insurance and operating expenses and the embedded derivatives are recognized in Interest credited on universal life-type insurance and investment contracts. The purchased and written options expire on various dates from 2002 to 2008. The Company also purchases futures to hedge its obligations under equity indexed annuities. The futures purchased are marked-to-market daily and exchanged traded, exposing the Company to no counterparty risk. The futures contracts mature within four months. 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. There are no index options outstanding as of December 31, 2001 related to this strategy. 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.
2001 2000 Carrying Fair Carrying Fair Financial Assets value value value value Fixed maturities: Held-to-maturity securities $ -- $ -- $ 6,463,613 $ 6,471,798 Available-for-sale securities 20,157,137 20,157,137 12,399,990 12,399,990 Common stocks 1,704 1,704 10,333 10,333 Mortgage loans on real estate 3,680,394 3,845,950 3,738,091 3,821,825 Cash and cash equivalents 1,150,251 1,150,251 316,974 316,974 Other securities 75,721 75,721 1,130 1,130 Derivative financial instruments 34,477 34,477 50,387 60,615 Separate account assets 27,333,697 27,333,697 32,349,347 32,349,347 ---------- ---------- ---------- ---------- Financial Liabilities Future policy benefits for fixed annuities $18,139,462 $17,671,777 $18,020,824 $17,479,187 Derivative financial instruments 2,506 2,506 3,098 6,069 Separate account liabilities 24,280,092 23,716,854 28,791,949 27,822,667 ---------- ---------- ---------- ----------
At December 31, 2001 and 2000, the carrying amount and fair value of future policy benefits for fixed annuities exclude life insurance-related contracts carried at $1,368,254 and $1,300,018, respectively, and policy loans of $84,557 and $96,603, respectively. The fair value of these benefits is based on the status of the annuities at December 31, 2001 and 2000. 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 2001 and 2000. At December 31, 2001 and 2000, 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 $3,053,605 and $3,557,398, respectively. S-6407-20 C (5/02) 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: Report of Independent Auditors dated March 22, 2002. Statements of Assets and Liabilities for the year ended Dec. 31, 2001. Statements of Operations for the year ended Dec. 31, 2001. Statements of Changes in Net Assets for the years ended Dec. 31, 2001 and 2000. Notes to Financial Statements. The audited financial statements of the IDS Life Insurance Company for Retirement Advisor Variable Annuity(R) including: Report of Independent Auditors dated Jan. 28, 2002. Consolidated Balance Sheets as of Dec. 31, 2001 and 2000. Consolidated Statements of Income for the years ended Dec. 31, 2001, 2000 and 1999. Consolidated Statements of Stockholder's Equity for the three years ended Dec. 31, 2001, 2000 and 1999. Consolidated Statements of Cash Flows for the years ended Dec. 31, 2001, 2000 and 1999. Notes to Consolidated Financial Statements. The audited financial statements of the IDS Life Variable Account 10 for Retirement Advisor Variable Annuity(R) - Band 3 including: Report of Independent Auditors dated March 22, 2002. Statements of Assets and Liabilities for the year ended Dec. 31, 2001. Statements of Operations for the year ended Dec. 31, 2001. Statements of Changes in Net Assets for the years ended Dec. 31, 2001 and 2000. Notes to Financial Statements. The audited financial statements of the IDS Life Insurance Company for Retirement Advisor Variable Annuity(R) - Band 3 including: Report of Independent Auditors dated Jan. 28, 2002. Consolidated Balance Sheets as of Dec. 31, 2001 and 2000. Consolidated Statements of Income for the years ended Dec. 31, 2001, 2000 and 1999. Consolidated Statements of Stockholder's Equity for the three years ended Dec. 31, 2001, 2000 and 1999. Consolidated Statements of Cash Flows for the years ended Dec. 31, 2001, 2000 and 1999. Notes to Consolidated Financial Statements. The audited financial statements of the IDS Life Variable Account 10 for Retirement Advisor Advantage(SM) Variable Annuity including: Report of Independent Auditors dated March 22, 2002. Statements of Assets and Liabilities for the year ended Dec. 31, 2001. Statements of Operations for the year ended Dec. 31, 2001. Statements of Changes in Net Assets for the years ended Dec. 31, 2001 and 2000. Notes to Financial Statements. The audited financial statements of the IDS Life Insurance Company for Retirement Advisor Advantage (SM) Variable Annuity/ Retirement Advisor Select Variable Annuity including: Report of Independent Auditors dated Jan. 28, 2002. Consolidated Balance Sheets as of Dec. 31, 2001 and 2000. Consolidated Statements of Income for the years ended Dec. 31, 2001, 2000 and 1999. Consolidated Statements of Stockholder's Equity for the three years ended Dec. 31, 2001, 2000 and 1999. Consolidated Statements of Cash Flows for the years ended Dec. 31, 2001, 2000 and 1999. Notes to Consolidated Financial Statements. The audited financial statements of the IDS Life Variable Account 10 for Retirement Advisor Advantage(SM) Variable Annuity - Band 3 including: Report of Independent Auditors dated March 22, 2002. Statements of Assets and Liabilities for the year ended Dec. 31, 2001. Statements of Operations for the year ended Dec. 31, 2001. Statements of Changes in Net Assets for the years ended Dec. 31, 2001 and 2000. Notes to Financial Statements. The audited financial statements of the IDS Life Insurance Company for Retirement Advisor Advantage (SM) Variable Annuity - Band 3 including: Report of Independent Auditors dated Jan. 28, 2002. Consolidated Balance Sheets as of Dec. 31, 2001 and 2000. Consolidated Statements of Income for the years ended Dec. 31, 2001, 2000 and 1999. Consolidated Statements of Stockholder's Equity for the three years ended Dec. 31, 2001, 2000 and 1999. Consolidated Statements of Cash Flows for the years ended Dec. 31, 2001, 2000 and 1999. Notes to Consolidated Financial Statements. (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, filed electronically as Exhibit 1.5 to Registrant's Post-Effective Amendment No. 6 to Registration Statement No. 333-79311, is incorporated herein by reference. 1.6 Resolution of the Board of Directors of IDS Life Insurance Company establishing 112 additional subaccounts within the separate account, dated Feb. 11, 2002, filed electronically as Exhibit 1.6 to Registrant's Post-Effective Amendment No. 8 to Registration Statement No. 333-79311, is incorporated herein by reference. 1.7 Resolution of the Board of Directors of IDS Life Insurance Company establishing 3 additional subaccounts within the separate account, dated Feb. 28, 2002, 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., A I M Distributors, Inc., and IDS Life Insurance Company, on Behalf of Itself and Its Separate Accounts, dated Oct. 7, 1996, filed electronically as Exhibit 8.1(b) to Post-Effective Amendment No. 3 to Registration Statement No. 333-79311 is incorporated herein by reference. 8.2 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. 8.3(a) 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 as Exhibit 8.7 to Post-Effective Amendment No. 3 to Registration Statement No. 333-79311 is incorporated herein by reference. 8.3(b) Copy of Amendment dated January 1, 2002 to 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 is filed electronically herewith. 8.4(a) Copy of Participation Agreement between IDS Life Insurance Company and Warburg Pincus Trust and Warburg Pincus Counselors, Inc. and Counselors 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. 8.4(b) Copy of Amendment No.1 dated April 30, 1999 to Participation Agreement between IDS Life Insurance Company and Warburg Pincus Trust and Credit Suisse Asset Management, LLC and Credit Suisse Asset Management Securities, Inc. and Counselors Securities Inc., filed electronically as Exhibit 8.6(b) to Pre-Effective Amendment No. 3 to Registration Statement No. 333-79311 is incorporated herein by reference 8.4(c) Copy of Amendment dated December 10, 2001 to Participation Agreement between IDS Life Insurance Company and Credit Suisse Warburg Pincus Trust, Credit Suisse Asset Management, Inc. and Credit Suisse Asset Management Securities, Inc. dated March 1, 1996 is filed electronically herewith. 8.5(a) Copy of Participation Agreement by and between Evergreen Variable Annuity Trust and IDS Life Insurance Company, dated August 13, 2001 is filed electronically herewith. 8.5(b) Copy of Amendment dated February 13, 2002 to Participation Agreement by and between Evergreen Variable Annuity Trust and IDS Life Insurance Company, dated August 13, 2001 is filed electronically herewith. 8.6(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. 8.6(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. 8.6(c) Copy of Amendment No. 1 dated April 30, 2001 to Participation Agreement between IDS Life Insurance Company, Variable Insurance Products Fund and Fidelity Distributors Corporation dated September 1, 1999 is filed electronically herewith. 8.6(d) Copy of Amendment No. 1 dated April 30, 2001 to Participation Agreement between IDS Life Insurance Company, Variable Insurance Products Fund III and Fidelity Distributors Corporation dated September 1, 1999 is filed electronically herewith. 8.6(e) Copy of Amendment No. 2 dated June 29, 2001 to Participation Agreement between IDS Life Insurance Company, Variable Insurance Products Fund and Fidelity Distributors Corporation dated September 1, 1999 is filed electronically herewith. 8.6(f) Copy of Amendment No. 2 dated June 29, 2001 to Participation Agreement between IDS Life Insurance Company, Variable Insurance Products Fund III and Fidelity Distributors Corporation dated September 1, 1999 is filed electronically herewith. 8.6(g) Copy of Amendment No. 3 dated February 27, 2002 to Participation Agreement between IDS Life Insurance Company, Variable Insurance Products Fund and Fidelity Distributors Corporation dated September 1, 1999 is filed electronically herewith. 8.6(h) Copy of Amendment No. 3 dated February 27, 2002 to Participation Agreement between IDS Life Insurance Company, Variable Insurance Products Fund III and Fidelity Distributors Corporation dated September 1, 1999 is filed electronically herewith. 8.7 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. 8.8 Copy of Participation Agreement By and Between Goldman Sachs Variable Insurance Trust, Goldman, Sachs & Co. and IDS Life Insurance Company, dated September 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. 8.9 Copy of Participation Agreement between IDS Life Insurance Company and INVESCO Variable Investment Funds, Inc, and INVESCO Distributors, Inc., dated August 13, 2001 is filed electronically herewith. 8.10(a) 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. 8.10(b) Copy of Amendment to Participation Agreement dated July 27, 2001 by and among Janus Aspen Series and IDS Life Insurance Company dated April 21, 2000 is filed electronically herewith. 8.10(c) Copy of Amendment to Participation Agreement dated February 13, 2002 by and among Janus Aspen Series and IDS Life Insurance Company dated April 21, 2000 is filed electronically herewith. 8.11 Copy of Participation Agreement by and among IDS Life Insurance Company, Lazard Asset Management and Lazard Retirement Series, Inc., dated September 1, 1999, filed as Exhibit 8.11 to Post-Effective Amendment No. 3 to Registration Statement No. 333-79311 is incorporated herein by reference. 8.12(a) Copy of Participation Agreement Among MFS Variable Insurance Trust, IDS Life Insurance Company and Massachusetts Financial Services Company, dated March 1, 2000, filed as Exhibit 8.12 to Post-Effective Amendment No. 3 to Registration Statement No. 333-79311 is incorporated herein by reference. 8.12(b) Copy of Amendment dated June 29, 2001 to Participation Agreement by and among MFS Variable Insurance Trust, Massachusetts Financial Services Company and IDS Life Insurance Company dated March 1, 2000 is filed electronically herewith. 8.12(c) Copy of Amendment dated February 13, 2002 to Participation Agreement by and among MFS Variable Insurance Trust, Massachusetts Financial Services Company and IDS Life Insurance Company dated March 1, 2000 is filed electronically herewith. 8.13(a) Copy of Participation Agreement among Pioneer Variable Contracts Trust, IDS Life Insurance Company, Pioneer Investment Management, Inc. and Pioneer Funds Distributor, Inc. dated August 13, 2001 is filed electronically herewith. 8.13(b) Copy of Amendment dated February 13, 2002 to Participation Agreement among Pioneer Variable Contracts Trust, IDS Life Insurance Company, Pioneer Investment Management, Inc. and Pioneer Funds Distributor, Inc. dated August 13, 2001 is filed electronically herewith. 8.14(a) Copy of Participation Agreement by and among 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. 8.14(b) Copy of Amendment 1 dated April 30, 1999 to Participation Agreement by and among IDS Life Insurance Company and Putnam Capital Manager Trust and Putnam Mutual Funds Corp., filed electronically as Exhibit 8.4(b) to Pre-Effective Amendment No. 1 to Registration Statement No. 333-79311 filed on or about August 10, 1999 is incorporated herein by reference. 8.14(c) Copy of Amendment 2 dated February 27, 2002 to Participation Agreement among Putnam Variable Trust, Putnam Retail Management, L.P. and IDS Life Insurance Company dated October 7, 1996 is filed electronically herewith. 8.15 Copy of Participation Agreement by and among Royce Capital Fund and Royce & Associates, Inc. and IDS Life Insurance Company, dated September 1, 1999, filed as Exhibit 8.5 to Post-Effective Amendment No. 3 to Registration Statement No. 333-79311 is incorporated herein by reference. 8.16 Copy of Participation Agreement by and among IDS Life Insurance Company and Strong Opportunity Fund II, Inc. and Strong Investor Services, Inc. and Strong Investments, Inc. dated August 13, 2001 is filed electronically herewith. 8.17 Copy of Participation Agreement by and among Wanger Advisors Trust and Liberty Wanger Asset Management, L.P. and IDS Life Insurance Company dated August 30, 1999 is filed electronically herewith. 8.18(a) Copy of Participation Agreement by and among Wells Fargo Variable Trust and IDS Life Insurance Company and Stephens Inc. dated May 1, 2000 is filed electronically herewith. 8.18(b) Copy of Amendment dated February 13, 2002 to Participation Agreement by and among Wells Fargo Variable Trust and IDS Life Insurance Company and Stephens Inc. dated May 1, 2000 is filed electronically herewith. 9. Opinion of counsel and consent to its use as the legality of the securities being registered filed electronically herewith. 10.1 Consent of Independent Auditors for the American Express Retirement Advisor Variable Annuity filed electronically herewith. 10.2 Consent of Independent Auditors for the American Express Retirement Advisor Variable Annuity - Band 3 filed electronically herewith. 10.3 Consent of Independent Auditors for the American Express Retirement Advisor Advantage Variable Annuity/ American Express Retirement Advisor Select Variable Annuity filed electronically herewith. 10.4 Consent of Independent Auditors for the American Express Retirement Advisor Advantage Variable Annuity - Band 3 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. Not applicable. 15. Power of Attorney to sign Amendment to this Registration Statement, dated April 9, 2002 filed electronically herewith. Item 25.
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 Timothy V. Bechtold 70100 AXP Financial Center Director and President Minneapolis, MN 55474 Lorraine R. Hart 70100 AXP Financial Center Vice President, Investments Minneapolis, MN 55474 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 Barry J. Murphy 70100 AXP Financial Center Director Minneapolis, MN 55474 Teresa J. Rasmussen 70100 AXP Financial Center Vice President and General Counsel Minneapolis, MN 55474 Stephen W. Roszell 70100 AXP Financial Center Director Minneapolis, MN 55474 Bridget Sperl 70100 AXP Financial Center Executive Vice President - Client Minneapolis, MN 55474 Service John T. Sweeny 70100 AXP Financial Center Director, Executive Vice President - Finance Minneapolis, MN 55474 Philip C. Wentzel 70100 AXP Financial Center Vice President and Controller Minneapolis, MN 55474 David L. Yowan 40 Wall Street Vice President, Treasurer and 19th Floor Assistant Secretary
New York, NY 10004 Item 26. Item 26. Persons Controlled by or Under Common Control with the Depositor or Registrant (Continued) 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 Income, LLC Delaware Advisory Capital Partners LLC Delaware Advisory Capital Strategies Group Inc. Minnesota Advisory Select LLC Delaware American Centurion Life Assurance Company New York American Enterprise Investment Services Inc. Minnesota American Enterprise Life Insurance Company Indiana American Enterprise REO 1, LLC Minnesota 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 Certificate Company Delaware 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 Alabama Inc. Alabama American Express Insurance Agency of Arizona Inc. Arizona American Express Insurance Agency of Idaho Inc. Idaho American Express Insurance Agency of Maryland Inc. Maryland American Express Insurance Agency of Massachusetts Inc. Massachusetts American Express Insurance Agency of Nevada Inc. Nevada American Express Insurance Agency of New Mexico Inc. New Mexico American Express Insurance Agency of Oklahoma Inc. Oklahoma American Express Insurance Agency of Oregon Inc. Oregon American Express Insurance Agency of Texas Inc. Texas American Express Insurance Agency of Wyoming Inc. Wyoming American Express Personal Trust Services, FSB Federal 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 Service Corporation Delaware American Express Trust Company Minnesota American Partners Life Insurance Company Arizona AMEX Assurance Company Illinois IDS Cable Corporation Minnesota IDS Cable II Corporation Minnesota IDS Capital Holdings Inc. Minnesota IDS Futures Brokerage Group Minnesota IDS Futures Corporation Minnesota IDS Insurance Agency of Arkansas Inc. Arkansas IDS Insurance Agency of Ohio Inc. Ohio IDS Insurance Agency of Utah Inc. Utah IDS Life Insurance Company Minnesota IDS Life Insurance Company of New York New York IDS Management Corporation Minnesota IDS Partnership Services Corporation Minnesota IDS Property Casualty Insurance Company Wisconsin IDS Realty Corporation Minnesota Kenwood Capital Management LLC Delaware Northwinds Marketing Group, LLC Delaware
Item 27. Number of Contract owners As of March 31, 2002, there were 147,335 non-qualified contract owners and 172,265 qualified contract owners in the IDS Life Variable Account 10. 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 Item 29 Principal Underwriter (IDS Life Insurance Company) Name and Principal Business Address Position and Offices with Underwriter ----------------------------------- ----------------------------------------- Gumer C. Alvero Director and Executive Vice President - 70100 AXP Financial Center Annuities Minneapolis, MN 55474 Timothy V. Bechtold Director and President 70100 AXP Financial Center Minneapolis, MN 55474 Lorraine R. Hart Vice President, Investments 70100 AXP Financial Center Minneapolis, MN 55474 Eric L. Marhoun Vice President, Assistant General 70100 AXP Financial Center Counsel and Assistant Secretary Minneapolis, MN 55474 Timothy S. Meehan Secretary 70100 AXP Financial Center Minneapolis, MN 55474 Mary Ellyn Minenko Vice President, Assistant General 70100 AXP Financial Center Counsel and Assistant Secretary Minneapolis, MN 55474 Barry J. Murphy Director 70100 AXP Financial Center Minneapolis, MN 55474 Teresa J. Rasmussen Vice President and General Counsel 70100 AXP Financial Center Minneapolis, MN 55474 Stephen W. Roszell Director 70100 AXP Financial Center Minneapolis, MN 55474 Bridget Sperl Executive Vice President - Client 70100 AXP Financial Center Service Minneapolis, MN 55474 John T. Sweeney Director and Executive 70100 AXP Financial Center Vice President - Finance Minneapolis, MN 55474 Philip C. Wentzel Vice President and Controller 70100 AXP Financial Center Minneapolis, MN 55474 David L. Yowan Vice President, Treasurer and Assistant 40 Wall Street Secretary New York, NY 10004 (c) Name of Net Underwriting Principal Discounts and Compensation on Brokerage Underwriter Commissions Redemption Commissions Compensation ----------- ----------- ---------- ----------- ------------ IDS Life Insurance $41,792,624 None 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 of the requirements for effectiveness of this Amendment to its Registration Statement under Rule 485(b) of the Securities Act 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 26th day of April, 2002. 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, Amendment to this Registration Statement has been signed by the following persons in the capacities indicated on the 26th day of April, 2002. 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/ Timothy S. Meehan* Secretary ----------------------------------- Timothy S. Meehan /s/ Barry J. Murphy* Director ------------------------------------ Barry J. Murphy /s/ Teresa J. Rasmussen* Vice President and General ------------------------------------ Counsel Teresa J. Rasmussen /s/ Stephen W. Roszell* Director ------------------------------------ Stephen W. Roszell /s/ John T. Sweeney* Director and 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 9, 2002, filed electronically herewith. /s/ Mary Ellyn Minenko ------------------ Mary Ellyn Minenko Counsel CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 10 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.