-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, dYfqrQeeV1R+GfuVeGxwyRLkUTIYgSnAT8CXxa3ycagGmy92/Vy5/doFvNN2CD50 vGs/QCZD4pPMFSVPtAmp8Q== 0000820027-94-000219.txt : 19940428 0000820027-94-000219.hdr.sgml : 19940428 ACCESSION NUMBER: 0000820027-94-000219 CONFORMED SUBMISSION TYPE: 486BPOS PUBLIC DOCUMENT COUNT: 13 FILED AS OF DATE: 19940427 EFFECTIVENESS DATE: 19940427 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IDS LIFE ACCOUNT F CENTRAL INDEX KEY: 0000353965 STANDARD INDUSTRIAL CLASSIFICATION: 0000 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 486BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-47302 FILM NUMBER: 94524727 BUSINESS ADDRESS: STREET 1: IDS TWR 10 CITY: MINNEAPOLIS STATE: MN ZIP: 55440 BUSINESS PHONE: 6123723794 486BPOS 1 IDS LIFE ACCOUNTS F, IZ, JZ, G, H & N (GVAC) PAGE 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Post-Effective Amendment No. 2 (File No. 33-47302) X and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. 4 (File No. 811-3217) X IDS LIFE ACCOUNT F IDS LIFE ACCOUNT IZ IDS LIFE ACCOUNT JZ IDS LIFE ACCOUNT G IDS LIFE ACCOUNT H IDS LIFE ACCOUNT N (Exact Name of Registrant) IDS Life Insurance Company (Name of Depositor) IDS Tower 10, Minneapolis, MN 55440-0010 (Address of Depositor's Principal Executive Offices) (Zip Code) Depositor's Telephone Number, including Area Code (612) 671-3678 Mary Ellyn Minenko, IDS Tower 10, Minneapolis, MN 55440-0010 (Name and Address of Agent for Service) It is proposed that this filing will become effective: immediately upon filing pursuant to paragraph (b) of Rule 486 X on April 29, 1994, pursuant to paragraph (b) of Rule 486 60 days after filing pursuant to paragraph (a) of Rule 486 on (date) pursuant to paragraph (a) of Rule 486 The Registrant has registered an indefinite number or amount of securities under the Securities Act of 1933 pursuant to section 24f of the Investment Company Act of 1940. Registrant's Rule 24f-2 Notice for its most recent fiscal year was filed on or about Feb. 25, 1994. PAGE 2
CROSS REFERENCE SHEET Cross reference sheet showing location in the prospectus of the information called for by the items enumerated in Part A and B of Form N-4. Negative answers omitted from prospectus are so indicated. PART A PART B Page Number in Page Number Statement of Item No. in Prospectus Item No. Additional Information 1 3 15 62 2 6-7 16 63 3(a) 10-11 17(a) NA (b) 7-10 (b) NA (c) 15* 4(a) 11-12 (b) 13-14 18(a) NA (c) 13 (b) NA (c) 67 5(a) 3,15 (d) NA (b) 16-17 (e) NA (c) 17-18 (f) 67 (d) 3,18 (e) 29-30 19(a) 67 (f) NA (b) 23-25* 6(a) 25-28 20(a) 67 (b) 26-27 (b) 67 (c) 27 (c) 67 (d) NA (d) NA (e) 18 (f) NA 21(a) 64-66 (b) 64-66 7(a) 18-19 (b) 16-17,20-21,23,29 22 NA (c) 17-18 (d) 3 23(a) 69-76 (b) 44-60* 8(a) 28 (b) NA (c) 28-29 (d) 28-29 (e) 29 (f) NA 9(a) NA (b) NA 10(a) 18-19,19-20 (b) 19-20 (c) 18-19,19-20 (d) NA 11(a) 21-25 (b) NA (c) 22 (d) 25 (e) NA 12(a) 31-33 (b) 3 (c) NA 13 NA 14 61 *Designates page number in the prospectus, which is hereby incorporated by reference in this Statement of Additional Information.
PAGE 3 IDS Life Group Variable Annuity Contract Prospectus/April 29, 1994 This prospectus describes a group, unallocated deferred annuity contract (the Contract) offered by IDS Life Insurance Company (the Company). This Contract is designed to fund employer group retirement plans (the Plans) that qualify as retirement programs under Sections 401 (including 401(k)) and 457 of the Internal Revenue Code of 1986, as amended (the Code). The Contracts provide for the accumulation of values on a fixed and/or variable basis. Retirement payments are made on a fixed basis. IDS Life Accounts F, IZ, JZ, G, H and N Group, Unallocated Fixed/Variable Annuity Contracts for Qualified Retirement Plans Sold by: IDS Life Insurance Company IDS Tower 10 Minneapolis, MN 55440-0010 Telephone: (612) 671-3131 THIS PROSPECTUS SETS FORTH THE INFORMATION ABOUT IDS LIFE ACCOUNTS F, IZ, JZ, G, H AND N THAT YOU SHOULD KNOW BEFORE INVESTING. THIS PROSPECTUS IS ACCOMPANIED OR PRECEDED BY THE PROSPECTUS OF IDS LIFE CAPITAL RESOURCE FUND, IDS LIFE INTERNATIONAL EQUITY FUND, IDS LIFE AGGRESSIVE GROWTH FUND, IDS LIFE SPECIAL INCOME FUND, INC., IDS LIFE MONEYSHARE FUND, INC. AND IDS LIFE MANAGED FUND, INC. ALL PROSPECTUSES SHOULD BE RETAINED FOR FUTURE REFERENCE. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. IDS LIFE INSURANCE COMPANY IS NOT A BANK AND THE SECURITIES IT OFFERS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY ANY BANK, NOR ARE THEY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. A Statement of Additional Information dated April 29, 1994 has been filed with the Securities and Exchange Commission (SEC) and is available without charge by contacting the Company at the telephone number or address shown above. The Table of Contents of the Statement of Additional Information appears on page 51 of this prospectus. PAGE 4 Table of Contents Definitions......................................................3 Summary of Contents..............................................4 Expense Summary..................................................7 Condensed Financial Information..................................8 Financial Statements.............................................9 Performance Information..........................................10 Yield............................................................10 Total Return.....................................................10 About the Contract...............................................11 Purpose of the Contract..........................................11 Who Issues the Contract..........................................11 About the Accounts and Funds.....................................11 The Fixed Account................................................11 The Variable Accounts............................................12 Investment Objectives of the Funds...............................13 Using the Contract...............................................14 Buying the Contract..............................................14 Allocation of Purchase Payments..................................14 Contract Value...................................................14 Transfers of Contract Values.....................................15 Cash Withdrawals, Loans and Conversions..........................16 Contract Transfer, Termination and Market Value Adjustment.......................................................17 Contract Charges - Charges Against the Accounts..................19 Annuity Settlement Provisions....................................20 Other Contractual Provisions.....................................21 Nontransferability...............................................21 Voting of Fund Shares............................................22 Periodic Reports.................................................22 Substitution.....................................................22 Modification.....................................................22 Prohibited Investments...........................................23 Proof of Condition or Event......................................23 Distribution of Contracts........................................23 Federal Tax Status...............................................23 Introduction.....................................................23 Tax Treatment of the Company and the Variable Account............24 Taxation of Annuities in General.................................24 Recordkeeper.....................................................25 Additional Information about the Company.........................25 Selected Financial Data..........................................25 Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations..............................25 Reinsurance......................................................29 Reserves.........................................................29 Investments......................................................29 Competition......................................................29 Employees........................................................29 Properties.......................................................30 State Regulation.................................................30 Directors and Executive Officers.................................30 Executive Compensation...........................................31 Security Ownership of Management.................................32 Legal Proceedings and Opinion....................................32 PAGE 5 Experts..........................................................32 Appendix.........................................................33 IDS Life Financial Information...................................34 Table of Contents of the Statement of Additional Information......................................................49 PAGE 6 Definitions Accounts (Variable Accounts) - IDS Life Account F, IDS Life Account IZ, IDS Life Account JZ, IDS Life Account G, IDS Life Account H and IDS Life Account N. These are the Variable Accounts from which the Owner may choose. Each Account invests in shares of a separate Mutual Fund. IDS Life Account F invests in shares of IDS Life Capital Resource Fund, IDS Life Account IZ invests in shares of IDS Life International Equity Fund, IDS Life Account JZ invests in shares of IDS Life Aggressive Growth Fund, IDS Life Account G invests in shares of IDS Life Special Income Fund, Inc., IDS Life Account H invests in shares of IDS Life Moneyshare Fund, Inc. and IDS Life Account N invests in shares of IDS Life Managed Fund, Inc. Accumulation Unit - A unit of measure used in the calculation of the value of the Variable Accounts. Contract Anniversary - An anniversary of the effective date of this Contract. Contract Value - The total value of the Contract before any applicable withdrawal charge, market value adjustment and contract administrative charge or other applicable charge have been deducted. Contract Year - Any period of one year commencing with the effective date of this Contract or with any contract anniversary. Fixed Account - An additional account the Owner may choose to allocate purchase payments and contract values. It provides guaranteed values and periodically adjusted interest rates. Mutual Funds (Funds) - IDS Life Capital Resource Fund (Capital Resource Fund),IDS Life International Equity Fund (International Equity Fund), IDS Life Aggressive Growth Fund (Aggressive Growth Fund), IDS Life Special Income Fund, Inc. (Special Income Fund), IDS Life Moneyshare Fund, Inc. (Moneyshare Fund) and IDS Life Managed Fund, Inc. (Managed Fund). These Funds are referred to as the IDS Life Retirement Annuity Mutual Funds. The Owner may choose to invest purchase payments into a Variable Account investing in shares of one of these Funds. Owner - The plan sponsor or trustee of the Plan. Participant - An eligible employee or other person who is entitled to benefits under the Plan. Plan - The retirement Plan under which the Contract is issued and which meets the requirements of Code Sections 401 (including 401(k)) or 457. Purchase Payment (Payment) - An amount paid to the Company as consideration for the benefits provided by the Contract. Valuation Date - Each day the New York Stock Exchange is open for trading. PAGE 7 Valuation Period - The interval of time commencing at the close of business on each valuation date and ending at the close of business on the next valuation date. Close of business is normally 3 p.m. (Central time). Withdrawal Charge - A deferred sales charge that may be applied if the Owner takes a total or partial withdrawal or the Contract is transferred or terminated. Summary of Contents About the Contract Purpose of the Contract - The Contract is available for Plans that meet the requirements of Code Sections 401 (including 401(k)) and 457. The Contract allows the Owner to elect to have Contract Values accumulate in all of six Variable Accounts, as well as the Fixed Account. Retirement payments will be made on a fixed basis (page 11). Who Issues the Contract - IDS Life Insurance Company, a subsidiary of IDS Financial Corporation (IDS), issues the Contract (page 11). About the Accounts and Funds The Fixed Account and the Variable Accounts - There are six separate Variable Accounts available for investment and a Fixed Account. The six Variable Accounts are registered together as a single unit investment trust under the Investment Company Act of 1940 (1940 Act) (page 11). Investment Objectives of the Funds - Each Fund has a different investment objective. Capital Resource Fund invests primarily in common stocks and securities convertible into common stocks. International Equity Fund invests primarily in equity securities of foreign issuers. Aggressive Growth Fund invests primarily in common stocks of small- and medium-size companies. Special Income Fund invests primarily in bonds of the four highest ratings or the equivalent. Moneyshare Fund invests in money market securities. Managed Fund invests in common and preferred stock, securities convertible into common stock, bonds and money-market instruments (page 13). Using the Contract Buying the Contract - The Owner may obtain an application for the Contract from an IDS financial planner. Applications are subject to acceptance at the Company's office in Minneapolis (page 14). Purchase payments are to be paid to the Company at its Minneapolis office. Generally, payments may be made annually, semiannually, quarterly or monthly or on any other frequency acceptable to the Company (page 14). Allocation of Purchase Payments - Upon receipt by the Company, purchase payments will be allocated to the Account(s) the Owner chooses (page 14). PAGE 8 Contract Value - The contract value at any time is the sum of the Fixed Account contract value and the Variable Account contract value. Purchase payments or contract values allocated to any Variable Account will be credited in the form of accumulation units. The variable accumulation unit value increases or decreases with the performance of the underlying Mutual Fund (page 14). Transfers of Contract Values - While this Contract is in force, the Owner can give the Company instructions to redistribute investments among the six Variable Accounts and, subject to certain restrictions, between the Variable Accounts and the Fixed Account (page 15). Cash Withdrawals, Loans and Conversions - While this Contract is in force, the Owner may request a total or partial withdrawal of the contract value. Withdrawals may be subject to withdrawal charges and income taxes and may be subject to federal tax penalties. Total withdrawals may be subject to a market value adjustment. Payment usually will be mailed within seven days of the receipt of a request for a withdrawal (page 16). The Owner also may request a withdrawal for the purpose of funding loans for participants in accordance with the terms of the Plan. A withdrawal for the purpose of funding a loan will not be subject to withdrawal charges. However, the Company reserves the right to deduct such withdrawal charges from the remaining contract value to the extent of any unpaid loans at the time of a total withdrawal of contract value or at Contract transfer or termination (page 16). If a participant terminates employment, the Owner may direct the Company to withdraw a part of the contract value so that the participant can purchase an individual deferred annuity contract then offered by the Company. No withdrawal charges will apply at the time of such withdrawal for conversion (page 16). Contract Transfer, Termination and Market Value Adjustment - The Owner may direct the Company to withdraw the total contract value and transfer that value to another funding agent (page 17). Under certain circumstances, the Company may terminate the Contract (page 18). If the value of the Fixed Account is canceled due to total withdrawal, Contract transfer or Contract termination, a market value adjustment may be imposed in addition to applicable Contract charges. The amount of the market value adjustment approximates the gain or loss resulting from sale by the Company of assets purchased by the purchase payments (page 19). Contract Charges - The Company charges a fee for establishing and maintaining its records and for normal administrative expenses and services for this Contract. The annual charge is $500 deducted from the contract value on a quarterly basis ($125 per quarter) each contract year or, if earlier, when the contract value is totally withdrawn or the Contract is transferred or terminated. PAGE 9 The Company reserves the right to increase this contract administrative charge in the future, but guarantees that it will never exceed $1,000 per year ($250 per quarter) (page 19). The Company also deducts a mortality and expense risk charge at an annual rate of 1 percent of the average daily net assets of the Variable Accounts (page 19). Subject to certain exceptions, a withdrawal charge applies to amounts withdrawn from the Contract prior to the eighth contract year. The withdrawal charge starts at 6 percent of the amount withdrawn in the first two contract years and reduces by 1 percent per year thereafter so that there is no withdrawal charge in the eighth and later contract years (page 19). The Company may be able to reduce or eliminate certain contract charges for some purchases (page 20). Certain state and local governments may impose premium taxes (page 20). Annuity Settlement Provisions - The Owner may select one of five annuity payout options under the Contract and direct the Company to begin retirement payments to a payee under the option. The payment schedule under the option selected must meet the requirements of the Plan. The benefits under an option will be provided on a fixed basis (page 20). Other Contractual Provisions Nontransferability - In general, no benefit or privilege under this Contract may be assigned (page 21). Voting of Fund Shares - The Company will vote fund shares held by the Variable Accounts at meetings of shareholders of the funds in accordance with instructions received from persons having the right to give voting instructions (page 22). Periodic Reports - The Company will send the Owner quarterly reports (page 22). Substitution - Under certain circumstances, the Company may substitute shares of another registered open-end management investment company both for fund shares already purchased by the Variable Accounts and for purchases to be made in the future (page 22). Modification - Upon notice to the Owner, the Company may modify the Contract under certain circumstances (page 22). Prohibited Investments - The Owner will not offer under the Plan as a funding vehicle to which future contributions may be made: (1) guaranteed investment contracts; (2) bank investment contracts; (3) annuity contracts; or (4) funding vehicles providing a guarantee of principal (page 23). Proof of Condition or Event - Under certain circumstances, the Company may require proof that a certain condition has been met prior to making payment (page 23). PAGE 10 Distribution of Contracts The Company is the principal underwriter for the Contracts (page 23). Federal Tax Status Tax Treatment of the Company and the Variable Accounts - The Company is taxed as a life insurance company under the Code. The income and capital gains of the Variable Accounts, to the extent applied to increase reserves under the Contract, are not taxable to the Company (page 24). Taxation of Annuities in General - According to current interpretations of federal income tax law, generally there is no federal income tax to Participants on contributions made by the Owner to the Contract or on any increases in the Contract's value until distributions are made. Under certain circumstances, there also may be a 10 percent IRS penalty tax and 20 percent income tax withholding imposed on distributions. The rights of any person to benefits under the Plans will be subject to the terms of the Plans themselves (page 24). Recordkeeper Any person or entity authorized by the Owner to administer recordkeeping services for the Plan and Participants must be approved by the Company (page 25). Expense Summary The purpose of the following table is to help Owners and prospective purchasers understand the costs and expenses that are borne, directly and indirectly, by Owners. The table reflects expenses of the Variable Accounts and the underlying Mutual Funds. The information set forth should be considered together with the narrative provided under the heading "Contract Charges - Charges Against the Accounts" in this prospectus, and with the prospectus for the Funds. For more information about withdrawal charges, see page 20. Withdrawal Charge (as a percentage of amounts withdrawn) _________________________________________________________________ Amount Withdrawn in Contract Year Withdrawal Charge _________________________________________________________________ 1 6% 2 6 3 5 4 4 5 3 6 2 7 1 8 and later 0 _________________________________________________________________ PAGE 11 Annual Contract Administrative Charge $500 Total Separate Account Annual Expenses* (as a percentage of average daily net assets) Mortality and Expense Risk Charge 1% Annual Operating Expenses of Underlying Mutual Funds
_____________________________________________________________________________________________________________________________ (as a percentage of Capital International Aggressive Special average daily net assets) Resource Equity Growth Income Moneyshare Managed Management Fees.............. .65% .89% .65% .65% .55% .65% Other Expenses............... .04 .14 .07 .04 .04 .04 Total Operating Expenses of Underlying Mutual Funds**.... .69% 1.03% .72% .69% .59% .69%
Example** You would pay the following expenses on a $1,000 investment, assuming (1) 5-percent annual return and (2) surrender at the end of each time period: 1 year........... $ 84.47 $ 87.74 $ 84.76 $ 84.47 $ 83.50 $ 84.47 3 years.......... 124.57 134.49 125.45 124.57 121.65 124.57 5 years.......... 154.86 171.72 156.36 154.86 149.36 154.86 10 years......... 258.41 293.11 261.52 258.41 247.97 258.41 You would pay the following expenses on the same investment assuming no surrender: 1 year........... $ 22.84 $ 26.32 $ 23.14 $ 22.84 $ 21.81 $ 22.84 3 years.......... 70.39 80.55 71.31 70.39 67.30 70.39 5 years.......... 120.56 137.99 122.11 120.56 115.38 120.56 10 years......... 258.41 293.11 261.52 258.41 247.97 258.41 _____________________________________________________________________________________________________________________________ This example should not be considered a representation of past or future expenses. Actual expenses may be more or less than those shown. *Premium taxes imposed by some state and local governments may be applicable. They are not reflected in this table. **Annualized operating expenses of underlying Mutual Funds at Dec. 31, 1993. ***In this example, the $500 Annual Contract Administrative Charge is approximated as a .538 percent charge based on IDS Life's average contract size.
Condensed Financial Information (Unaudited) The tables below give per-unit information about the financial history of each Account.
Years Ended Dec. 31, 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 Account F (Investing in shares of Capital Resource Fund) Accumulation unit value at beginning of period .......... $4.82 $4.67 $3.22 $3.23 $2.57 $2.31 $2.07 $1.92 $1.52 $1.61 Accumulation unit value at end of period ................ $4.93 $4.82 $4.67 $3.22 $3.23 $2.57 $2.31 $2.07 $1.92 $1.52 Number of accumulation units outstanding at end of period (000 omitted) ................ 488,632 402,977 309,984 242,767 204,645 186,639 180,907 148,626 112,2981 73,572 Ratio of operating expense to average net assets ........... 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% Account IZ2 (Investing in shares of International Equity Fund) Accumulation unit value at beginning of period .......... $0.98 $1.00 - - - - - - - - PAGE 12 Accumulation unit value at end of period ................ $1.29 $0.98 - - - - - - - - Number of accumulation units outstanding at end of period (000 omitted) ................ 405,536 69,874 - - - - - - - - Ratio of operating expense to average net assets ........... 1.00% 1.00% - - - - - - - - Account JZ3 (Investing in shares of Aggressive Growth Fund) Accumulation unit value at beginning of period .......... $1.08 $1.00 - - - - - - - - Accumulation unit value at end of period ................ $1.21 $1.08 - - - - - - - - Number of accumulation units outstanding at end of period (000 omitted) ................ 347,336 115,574 - - - - - - - - Ratio of operating expense to average net assets ........... 1.00% 1.00% - - - - - - - - Account G (Investing in shares of Special Income Fund) Accumulation unit value at beginning of period .......... $3.48 $3.21 $2.76 $2.67 $2.48 $2.27 $2.27 $1.93 $1.59 $1.42 Accumulation unit value at end of period ................ $3.99 $3.48 $3.21 $2.76 $2.67 $2.48 $2.27 $2.27 $1.93 $1.59 Number of accumulation units outstanding at end of period (000 omitted) ................ 405,429 330,000 270,858 236,926 222,248 175,878 170,241 156,811 93,0544 49,052 ________________________________________________________________________________________________________________________ Ratio of operating expense to average net assets ........... 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1Account F includes 17,665,211 accumulation units issued in the merger of Account C into Account F on Dec. 13, 1985. 2Account IZ commenced operations on Jan. 13, 1992. 3Account JZ commenced operations on Jan. 13, 1992. 4Account G includes 23,659,421 accumulation units issued in the merger of Account D into Account G on Dec. 13, 1985.
Years Ended Dec. 31, 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 Account H (Investing in shares of Moneyshare Fund) Accumulation unit value at beginning of period .......... $2.09 $2.04 $1.95 $1.82 $1.69 $1.59 $1.51 $1.43 $1.34 $1.22 Accumulation unit value at end of period ................ $2.12 $2.09 $2.04 $1.95 $1.82 $1.69 $1.59 $1.51 $1.43 $1.34 Number of accumulation units outstanding at end of period (000 omitted) ................ 74,935 102,277 126,489 139,005 108,690 63,005 51,578 38,126 42,7475 29,247 ________________________________________________________________________________________________________________________ Ratio of operating expense to average net assets ........... 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% Simple yield6 ................ 1.48% 1.60% 3.26% 6.25% 6.81% 7.30% 5.72% 4.14% 6.39% 7.51% ________________________________________________________________________________________________________________________ Compound yield6 .............. 1.49% 1.62% 3.31% 6.44% 7.04% 7.57% 5.88% 4.22% 6.59% 7.79% ________________________________________________________________________________________________________________________ Account N7 (Investing in shares of Managed Fund) Accumulation unit value at beginning of period .......... $1.98 $1.86 $1.45 $1.42 $1.14 $1.06 $1.01 $1.00 - - Accumulation unit value at end of period ................ $2.21 $1.98 $1.86 $1.45 $1.42 $1.14 $1.06 $1.01 - - Number of accumulation units outstanding at end of period (000 omitted) ................ 910,254 650,797 496,554 400,961 331,315 325,918 321,395 101,678 - - Ratio of operating expense to average net assets ........... 1.00% 1.00% 1.00 1.00% 1.00% 1.00% 1.00% 1.00% - - 5Account H includes 17,002,551 accumulation units issued in the merger of Account E into Account H on Dec. 13, 1985. 6Net of annual contract administrative charge and mortality and expense risk charge. 7Account N commenced operations on April 30, 1986.
PAGE 13 Financial Statements The SAI dated April 29, 1994, contains complete audited financial statements of the variable accounts including statements of net assets as of Dec. 31, 1993; statements of operations for the year ended Dec. 31, 1993; and statements of changes in net assets for the years ended Dec. 31, 1993 and Dec. 31, 1992 (for Accounts IZ and JZ, the period from Jan. 13, 1992 when they commenced operations, to Dec. 31, 1992). The SAI also includes complete audited financial statements for IDS Life including consolidated balance sheets as of Dec. 31, 1993 and Dec. 31, 1992; and related consolidated statements of income and cash flows for each of three years in the period ended Dec. 31, 1993. Complete financial statements for IDS Life Insurance Company are presented in this prospectus beginning on page __. These financial statements include: audited consolidated balance sheets as of Dec. 31, 1993 and 1992, and audited related consolidated statements of income and cash flows for each of the three years in the period ended Dec. 31, 1993. Performance Information Yield Performance information for the Variable Accounts, including simple yield, compound yield and average annual total return for IDS Life Account H (investing in Moneyshare Fund), and yield and average annual total return for the remaining Variable Accounts, may appear from time to time in advertisements or sales literature. For Account H, simple yield is based on income received by a hypothetical investment (exclusive of capital change) over a given seven-day period. This income then is "annualized" by assuming that the seven-day yield would be received for 52 weeks and is stated in terms of an annual percentage return on the investment. The compound yield is calculated in a manner similar to that used to calculate simple yield. However, when annualized, the income earned by the investment is assumed to be reinvested. The compound yield will be slightly higher than the simple yield due to the compounding effect of this assumed reinvestment. Yield quotations for the remaining Variable Accounts will be based on all investment income per accumulation unit earned during a given 30-day period, less expenses accrued during the period (net investment income). Yield quotations are computed by dividing this net investment income by the value of an accumulation unit on the last day of the period. Total Return Average annual total return quotations will be expressed in terms of the average annual compounded rate of return of a hypothetical investment in a Contract over a period of one, five and 10 years (or, if less, up to the life of the Variable Account). The total return quotations will reflect the deduction of all applicable PAGE 14 charges including the contract administrative charge and the mortality and expense risk charge. Total return quotations will be made that reflect the deduction of the applicable withdrawal charge (assuming a withdrawal at the end of the illustrated period). Additional total return quotations may be made that do not reflect a withdrawal charge deduction (assuming no withdrawal at the end of the illustrated period). A Variable Account also may use aggregate total return figures for various periods, representing the cumulative change in value of an investment in an Account for the specific period (again reflecting changes in an Account's accumulation unit value and assuming reinvestment of investment earnings). Aggregate total returns may be shown by means of schedules, charts or graphs. Performance information reflects only the performance of a hypothetical investment in a Variable Account during the particular time period on which the calculations are based. Performance information should be considered in light of the investment objectives and policies, characteristics and quality of the fund in which the Account invests, and the market conditions during the given time period and is not intended to indicate future performance. Advertised yields and total return figures for the Variable Accounts include all charges attributable to the Contract which have the effect of decreasing the advertised performance of an Account. For this reason, performance information for a Variable Account should not be compared to that for mutual funds that sell their shares directly to the public. See the Statement of Additional Information for a description of the methods used to determine yield and total return information for the Variable Accounts. About the Contract Purpose of the Contract The Contract is designed for use in connection with retirement Plans which meet the requirements of Code Sections 401 (including 401(k)) and 457. Certain federal tax advantages are currently available to these Plans. The Contract permits purchase payments to be allocated to any one or more of six Variable Accounts or to the Fixed Account. Each Variable Account invests only in shares of a single Mutual Fund. Retirement benefits will be paid under a fixed annuity. A variable annuity differs from a fixed annuity in that the Owner assumes the risk of gain or loss according to the performance of the investment in the underlying mutual fund. The Owner should read the prospectus carefully to decide if the Contract will meet the needs of the Owner and the Plan. The Owner also must read the prospectus for the IDS Life Retirement Annuity Mutual Funds to help determine the most appropriate investments. These prospectuses should be kept for future reference. PAGE 15 Who Issues the Contract IDS Life Insurance Company issues the Contract. The Company is a wholly owned subsidiary of IDS, which itself is a wholly owned subsidiary of American Express Company (American Express). American Express is a financial services company principally engaged through subsidiaries (in addition to IDS) in travel related services, investment services and international banking services. The Company is a stock insurance company organized in 1957 under the laws of the State of Minnesota. The Company's corporate office is at IDS Tower 10, Minneapolis, MN 55440-0010. The Company conducts a conventional life insurance business in the District of Columbia and all states except New York. About the Accounts and Funds The Fixed Account The Fixed Account is made up of all of the general assets of the Company other than those allocated to any variable account. Purchase payments will be allocated to the Fixed Account to the extent elected by the Owner at the time the Contract is issued or as subsequently changed. The Company will invest the assets of the Fixed Account in those assets chosen by the Company and allowed by applicable state laws regarding the nature and quality of investments that may be made by life insurance companies and the percentage of their assets that may be committed to any particular type of investment. In general, these laws permit investments, within specified limits and subject to certain qualifications, in federal, state and municipal obligations, corporate bonds, preferred and common stocks, real estate mortgages, real estate and certain other investments. The Company will credit interest to the Fixed Account contract value. The interest rate credited to a purchase payment is guaranteed for one year from the date the payment is allocated to the Fixed Account. After that, the amount of interest credited will be determined by the Company from time to time. However, the Company guarantees that it will credit interest at a rate of not less than a compounded yield of 4 percent per year to amounts allocated to the Fixed Account under the Contract. The Owner assumes the risk that interest credited to Fixed Account allocations may not exceed the minimum guarantee of a compounded yield of 4 percent for any given year. In addition, a market value adjustment is imposed on the Fixed Account if the Owner cancels the value of the Fixed Account due to total withdrawal, Contract transfer or Contract termination. The amount of the market value adjustment approximates the gain or loss resulting from sale by the Company of assets purchased with purchase payments. See "Market Value Adjustment." Interests in the Contract relating to the Fixed Account are registered under the Securities Act of 1933, but the Fixed Account is not subject to the restrictions of the 1940 Act. PAGE 16 The Variable Accounts In addition to the Fixed Account, the Owner may choose to invest purchase payments in any or all of six Variable Accounts. Each of the Variable Accounts invests only in a single Mutual Fund: o IDS Life Account F invests in shares of Capital Resource Fund; o IDS Life Account IZ invests in shares of International Equity Fund; o IDS Life Account JZ invests in shares of Aggressive Growth Fund; o IDS Life Account G invests in shares of Special Income Fund; o IDS Life Account H invests in shares of Moneyshare Fund; and o IDS Life Account N invests in shares of Managed Fund. Accounts F, G and H were established on May 13, 1981. Account N was established on April 17, 1985. Accounts IZ and JZ were established on Sept. 20, 1991. All Variable Accounts were established as separate accounts under Minnesota law and are registered together as a single unit investment trust under the 1940 Act. This registration does not involve any supervision of the Company's management or investment practices or policies by the SEC. Each Variable Account meets the definition of a separate account under federal securities laws. Income, capital gains and capital losses of each Account are credited or charged to that Account alone. No Account will be charged with liabilities of any other Account or of the Company's general business. Nevertheless, all obligations arising under the Contracts are general corporate obligations of the Company. Since purchase payments are fully invested in fund shares, the investment performance of the Variable Accounts reflects the investment performance of the underlying Funds. Values of fund shares held by each Variable Account fluctuate and are subject to the risks of changing economic conditions and of the ability of the management of the Funds to anticipate these changes and make necessary changes to their portfolios. Therefore, the Owner bears the entire investment risk. The Treasury and the Internal Revenue Service (IRS) have indicated they may provide additional guidance concerning investment control. The additional guidance would address the number of Variable Accounts offered to the Owner and the number of exchanges that would be allowed before the Owner would be considered to have investment control and thus would be currently taxed on the income earned on the underlying separate account assets. It is not clear, at this time, what the additional guidance would be and the timing of further action is unknown. The Company reserves the right to modify the Contract, as necessary, to prevent the Owner from being currently taxed as the owner of the assets of the Variable Accounts for income tax purposes. PAGE 17 The IRS has issued final regulations relating to the diversification requirements under Section 817(h) of the Code. Each Mutual Fund intends to comply with those diversification requirements. The Company intends to comply with all Treasury guidance to insure that the Contract continues to qualify as an annuity for federal income tax purposes. Investment Objectives of the Funds The investment objectives of the Mutual Funds are as follows: o Capital Resource Fund seeks capital appreciation by investing primarily in U.S. common stocks listed on national securities exchanges and other securities convertible into common stock. Stocks and other securities will be selected for capital appreciation based on the investment manager's assessment of market conditions. The Fund attempts to reduce overall exposure to risk from declines in securities prices by spreading its investments over many different companies in a variety of industries. o International Equity Fund seeks capital appreciation by investing primarily in common stock and securities convertible into common stock of foreign issuers. The Fund may invest in bonds issued or guaranteed by countries that are members of the Organization for Economic Cooperation and Development or bonds issued or guaranteed by international agencies (such as the World Bank or the European Investment Bank) if the manager believes they have a greater potential for capital appreciation than equity securities. The Fund may enter into foreign currency exchange transactions. The securities in which the Fund invests may be thought of as speculative and may involve substantial risk. Risks arising from investments in foreign securities include fluctuations in currency exchange rates, adverse political and economic developments and lack of comparable regulatory requirements applicable to U.S. companies. The Owner should invest in the Fund only if willing to assume such risks. o Aggressive Growth Fund seeks capital appreciation by investing primarily in common stock and emphasizes investments in small- and medium-size companies. The Fund also may invest in warrants or debt securities or in large, well-established companies when the investment manager believes such investments offer the best opportunity for capital appreciation. An investment risk of small companies is that they often have limited product lines,smaller markets or fewer financial resources. In addition, many of the companies in which the Fund invests are without business histories. The securities of small companies also may be subject to more abrupt or erratic market movements than the securities of large, more-established companies or market averages in general. Some of the securities in which the Fund invests may be considered speculative and may involve substantial risk. PAGE 18 o Special Income Fund seeks a high level of current income while conserving the value of the investment by investing primarily in corporate bonds of the four highest ratings, in other corporate bonds that are not rated but that the Fund believes have the same investment qualities and in government bonds. Bonds in the top four ratings are of the highest quality and involve less risk than bonds with lower ratings. The Fund attempts to reduce overall exposure to risk from declines in securities prices by spreading its investments over many different companies in a variety of industries. o Moneyshare Fund seeks maximum current income consistent with liquidity and conservation of capital by investing in money-market securities. The Fund intends to use the amortized cost method of valuing portfolio securities to help maintain a constant net asset value of $1 per share. In doing so, the Fund will not purchase any security with a remaining maturity of more than 13 months. The Fund also will maintain a dollar-weighted average portfolio maturity of 90 days or less and will limit its investments to those that are denominated in U.S. dollars, are of high quality and present minimal credit risks. o Managed Fund seeks to maximize total investment return by investing primarily in U.S. common stocks listed on national securities exchanges and other securities convertible into common stock, warrants, fixed income securities (primarily high-quality corporate bonds), and money-market instruments. The Fund attempts to reduce overall exposure to risk from declines in securities prices by spreading its investments over many different companies in a variety of industries. The Company does not guarantee that the Funds will meet their investment objectives. Whether they meet their goals depends on their management's ability to manage the risks of changing economic conditions. The Company is the investment adviser for each of the Funds. Detailed information about each Mutual Fund is in the separate prospectus for the Funds. The Owner may obtain a copy from the Company or from an IDS planner. Be sure to read it carefully. There are deductions from, and expenses paid out of, the assets of the Funds that are described in the prospectus for the Funds. Using the Contract Buying the Contract An IDS financial planner will help the Owner prepare the application, which will be sent with the initial purchase payments to the Company's office in Minneapolis. If the application is complete, the Company will apply the payments not later than two days after their receipt. The Company may retain the purchase payments for up to five days while attempting to complete an incomplete application or to obtain any other necessary documentation. If the Company cannot accept the application within PAGE 19 five days, the prospective Owner will be informed of the reasons for the delay and the purchase payments will be returned immediately unless the parties agree otherwise. When the Company accepts the application, it will send the Owner a Contract. All purchase payments are to be paid to the Company at its Minneapolis office unless the Company agrees otherwise. Purchase payments may be made annually, semiannually, quarterly, monthly, or on any other frequency acceptable to the Company. Allocation of Purchase Payments The Owner selects the Accounts to which purchase payments will be allocated at the time of application. Purchase payments will be allocated to the Accounts the Owner has chosen at the next close of business after the Company accepts the application or receives a purchase payment, whichever is later. Purchase payments can be allocated to the Variable Accounts, the Fixed Account or to both Variable and Fixed Accounts in accordance with the allocations specified by the Owner in the application or as subsequently changed. The allocation instructions for new purchase payments between the Variable Accounts and the Fixed Account may be changed by the Owner in accordance with any telephone procedures in effect at the time or by written request. Any change will take effect with the first purchase payment received with or after receipt of notice of the change by the Company and will continue in effect until subsequently changed. Contract Value The contract value at any time is the sum of the Fixed Account contract value and the Variable Account contract value. Fixed Account Contract Value - The Fixed Account contract value is the sum of all amounts under the Contract resulting from purchase payments allocated or transferred to the Fixed Account less any amounts deducted for charges or withdrawals. The Company guarantees that, at any time, the Fixed Account contract value will not be less than the amount of purchase payments allocated to the Fixed Account, plus interest at the rate of no less than a compounded yield of 4 percent per year, plus any additional interest that the Company may credit to the Fixed Account, less the sum of all applicable Contract charges, any amounts previously withdrawn, and the effect of any market value adjustment imposed on the Fixed Account due to a total withdrawal or to Contract transfer or termination. See "Market Value Adjustment." Variable Account Contract Value - The Variable Account contract value is the sum of the value of all accumulation units under the Contract resulting from purchase payments allocated or transferred to the Variable Accounts less any units deducted for charges or withdrawals. PAGE 20 Accumulation Units - Upon receipt of a purchase payment by the Company, all or that portion, if any, of the purchase payment to be allocated to any Variable Account will be converted into accumulation units. The number of accumulation units to be credited to the Account is determined by dividing the dollar amount allocated to the particular Account by the accumulation unit value for that Account for the valuation period during which the purchase payment is received by the Company. Accumulation Unit Value - The accumulation unit value for each Variable Account was originally set at $1. The accumulation unit value for the particular Account for any subsequent valuation period is determined by methodology which is the mathematical equivalent of multiplying the accumulation unit value for the Account for the last valuation period by the net investment factor for the Account for such subsequent valuation period. The accumulation unit value for each Variable Account for any valuation period is the value determined as of the end of the particular valuation period and may increase, decrease or remain constant from one period to the next. The Owner bears this investment risk. Net Investment Factor - The net investment factor is an index applied to measure the investment performance of a Variable Account from one valuation period to the next. The net investment factor may be greater or less than one; therefore the value of an accumulation unit may increase or decrease. The net investment factor for any Variable Account for any valuation period is determined by: dividing (1) by (2) and subtracting (3) from the result. This is done where: (1) is the "adjusted net asset value" per share of the Mutual Fund held in the Variable Account determined at the end of the current valuation period; (2) is the "adjusted net asset value" per share of the Mutual Fund held in the Variable Account determined at the end of the last prior valuation period; (3) is a factor representing the mortality and expense risk charge. "Adjusted net asset value" for any Mutual Fund held in the Variable Account is the net asset value per share plus a per share amount of any dividend or capital gain distribution made by such fund. Transfers of Contract Values While the Contract is in force, the Owner may transfer contract values according to methods established by the Company as outlined below: 1. The Owner may transfer all or a part of the values held in one or more of the Variable Accounts to another one or more of the Variable Accounts. Subject to item 2, the Owner also may transfer values held in one or more of the Variable Accounts to the Fixed Account. PAGE 21 2. Within the 60 days after: o the anniversary of each Plan year; and o the first day of the seventh month in each Plan year, the Owner may transfer values from the Fixed Account to one or more of the Variable Accounts. Only one such transfer is allowed during each transfer period. If such a transfer is made, no transfers from a Variable Account to the Fixed Account may be made until the next eligible transfer period. The Owner may make a transfer by written request or by any other method acceptable to the Company. There is no fee or charge for these transfers. This transfer privilege may be suspended or modified by the Company at any time. Cash Withdrawals, Loans and Conversions Cash Withdrawals - At any time while the Contract is in force, the Owner may make a request in writing or by any other method acceptable to the Company to make a total or partial withdrawal of the contract value. Any withdrawal request must specify the amount of the withdrawal and will be effective on the date that it is received by the Company. Total Withdrawals - The Owner may request a total withdrawal of the contract value. A total withdrawal will result in a cash withdrawal payment equal to the total contract value less the contract administrative charge, any applicable premium tax and any applicable withdrawal charge. See "Contract Charges - Charges Against the Accounts." In addition, a market value adjustment may apply to the withdrawal of the Fixed Account value. See "Contract Transfer, Termination and Market Value Adjustment." The Company will compute the contract value at the close of business, currently the same as the close of the New York Stock Exchange, after receipt of the request for a total withdrawal. Upon a total withdrawal, the Contract will terminate. The Company may require the Owner to return the Contract before payment of the total withdrawal. Partial Withdrawals - The Owner may request a partial withdrawal of the contract value. At the time of the request, the Owner or recordkeeper must state the reason for the partial withdrawal and must specify from which Accounts the withdrawal should be made. Otherwise the Company will withdraw money from all of the Accounts in the same proportion as the Owner's interest in each Account bears to the contract value. A withdrawal charge may apply to a partial surrender. Loans - The Owner may request withdrawals for the purpose of funding loans for Participants. At the time of the loan request, the Owner must specify from which Accounts the withdrawal for the loan should be made. The amount and terms of the loan must be in accordance with the applicable requirements of the Plan and the PAGE 22 Code. The Company assumes no responsibility for the validity of the loan or whether the loan complies with such applicable requirements. Withdrawals for the purpose of funding a loan under the Plan will not be subject to withdrawal charges when the loan is made. However, the Company reserves the right to deduct any such withdrawal charges from the remaining contract value to the extent of any unpaid loans at the time of a total withdrawal of the contract value or at Contract transfer or termination. See "Contract Charges - Charges Against the Accounts." Receiving Payment - The Company will mail payment within seven days after receipt of the Owner's request for a withdrawal and completion of all required documentation and information. However, the Company may postpone payment if: o the contract value includes a purchase payment check that has not cleared; o the New York Stock Exchange is closed, except for normal holiday and weekend closings; o trading on the New York Stock Exchange is restricted according to the rules of the SEC; o an emergency, as defined by the rules of the SEC, makes it impracticable to sell securities or to value the Accounts' net assets; or o the SEC permits the Company to delay payment for the protection of security holders. The Company reserves the right to defer the payment of amounts withdrawn from the Fixed Account for a period not to exceed six months from the date the Company receives the request for withdrawal. Since Contracts offered will be issued in connection with Plans that meet the requirements of Code Sections 401 (including 401(k)) and 457, reference should be made to the terms of the particular Plan for any further limitations or restrictions on cash withdrawals. A withdrawal charge will be deducted from the amount withdrawn subject to certain limitations and exceptions. See "Contract Charges - Charges Against the Accounts." A cash withdrawal also is subject to federal income taxes and may incur federal tax penalties. The tax consequences of a cash withdrawal payment should be carefully considered. See "Federal Tax Status." Conversion - In the event of a Participant's termination of employment or for other reasons that meet the requirements of the Plan and the Code and which are acceptable to the Company, the Owner may elect to transfer, on the Participant's behalf, part of the contract value to an individual deferred annuity contract then PAGE 23 offered by the Company. This individual contract will be qualified as an individual retirement annuity under Section 408 or will qualify under other applicable sections of the Code. Such contract will be in a form then customarily issued by the Company for business under such qualified plans. No withdrawal charges will apply at the time of such conversion. Contract Transfer, Termination and Market Value Adjustment Withdrawals by Owner for Transfer of Funds - The Owner may direct the Company to withdraw the total contract value and transfer that value to another funding agent. All applicable contract charges including withdrawal charges will be payable by the Owner and will be deducted from the first withdrawal payment unless the total contract value is transferred to a plan then offered by the Company or its affiliates. See "Contract Charges - Charges Against the Accounts." The Owner must provide the Company with a written request to make such a withdrawal. This written request must be sent to the Company's corporate office and must specify the initial withdrawal date and payee to whom the withdrawal payments are to be made. At the Owner's option, the Company will pay the contract value less any applicable charges in annual installments or in a lump sum as follows: 1. The contract value may be paid in five annual installments beginning on the initial withdrawal date and then on each of the next four anniversaries of such date as follows: _________________________________________________________________ % of Then Remaining Installment Payment Contract Value Balance _________________________________________________________________ 1 20% 2 25 3 33 4 50 5 100 _________________________________________________________________ No additional withdrawals for benefits or other transfers of contract values will be allowed and no additional purchase payments will be accepted after the first withdrawal payment is made. The Company will continue to credit interest to any contract value balance remaining after an installment payment at the interest crediting rate then in effect for the Fixed Account. 2. The contract value may be paid in a lump sum. Any amount attributable to the Fixed Account value will be based on the market value of such balance. The market value will be determined by the Company by applying the formula described below under "Market Value Adjustment." The Company will make lump sum payments according to the provisions of the above section titled "Cash Withdrawals, Loans and Conversions - Receiving Payment." PAGE 24 Market Value Adjustment (MVA) - A market value adjustment applies only when the Company pays out the Fixed Account value in a lump sum when: o the Owner withdraws the total contract value to transfer that value to another funding vehicle; o the Owner makes a total withdrawal of the Fixed Account contract value; or o the Company terminates the contract as described below. See "Contract Termination by the Company." The MVA will be applied to the amount being withdrawn from the Fixed Account after deduction of any applicable contract administrative charge and withdrawal charge. See "Contract Charges - - Charges Against the Accounts." The MVA will reflect the relationship between the current interest rate being credited to new purchase payments allocated to the Fixed Account and the rate being credited to all prior purchase payments. The MVA is calculated as follows: MVA = Fixed Account Value x (A - B) x C Where: A = the weighted average interest rate (in decimal form) being credited to all Fixed Account purchase payments made by the Owner at the time of termination, rounded to 4 decimal places; B = the interest rate (in decimal form) being credited to new purchase payments to the Contract at the time of termination or total withdrawal, rounded to 4 decimal places; and C = the annuity factor, which represents the relationship between the contract year and the average duration of underlying investments from the following table: _________________________________________________________________ Contract Year Annuity Factor _________________________________________________________________ 1 - 3 6.0 4 - 6 5.0 7+ 4.0 _________________________________________________________________ For an example showing an upward and downward MVA, please see Appendix. No MVA applies if: o the Owner makes a partial withdrawal of the Fixed Account contract value; o installment payments are made when the Owner withdraws the total contract value to transfer that value to another funding vehicle or the Company terminates the Contract; or PAGE 25 o the Owner transfers contract values from the Fixed Account to the Variable Accounts as described above under "Transfers of Contract Values." Contract Termination by the Company - The Company reserves the right upon 30 days' written notice to the Owner to declare a contract termination date that will be any date on or after the expiration of the 30-day notification period. A contract termination date may be declared if: o The Owner adopts an amendment to the Plan that causes the Plan to be materially different from the Plan originally in existence when the Contract was purchased. To be "materially different," the amendment must cause a substantial change in the level of the dollar amounts of purchase payments or Contract benefits to be paid by the Company; o The Plan fails to qualify or becomes disqualified under the appropriate sections of the Code; o The Owner offers under the Plan as a funding vehicle to which future contributions may be made a guaranteed investment contract, bank investment contract, annuity contract or funding vehicle providing a guarantee of principal. See "Prohibited Investments"; or o The Owner changes to a recordkeeper that is not approved by the Company. If the Company waives its right to terminate the Contract under any provision of this section at any time, such waiver will not be considered a precedent and will not prohibit the Company from exercising the right to terminate this Contract, for the reasons noted above, at any future time. Procedures at Contract Termination - On the contract termination date, the Company will withdraw any outstanding charges, including any contract administrative charges, from the accumulation account. A withdrawal charge may apply and be payable by the Owner on account of any termination under this provision and will be deducted from the first termination payment. See "Contract Charges - - Charges Against the Accounts." At the Owner's option, the Company will pay the accumulation account balance in a lump sum or in annual installment payments according to the table under "Withdrawals by Owner for Transfer of Funds" above. A lump sum payment will be subject to an applicable Market Value Adjustment to the Fixed Account value. If the Owner does not select an option, the Company will pay the accumulation account balance to the Owner under the installment option. Contract Charges - Charges Against the Accounts Contract Administrative Charge - The Company charges the Contract an administrative charge of $500 per year ($125 per quarter). The Company reserves the right to increase this contract administrative PAGE 26 charge in the future, but guarantees that it will never exceed $1,000 per year ($250 per quarter). This charge is for establishing and maintaining records and for normal administrative expenses and services for this Contract. The Company deducts this charge on a pro-rata basis from the Fixed Account and each Variable Account at the end of each three-month period measured from the contract date or, if earlier, when the contract value is totally withdrawn or the Contract is transferred or terminated. The Company does not expect to profit from the contract administrative charge. Mortality and Expense Risk Charge - This charge is applied daily to the Variable Accounts and equals 1 percent of the average daily net assets of the Variable Accounts on an annual basis. It covers the Company's annuity mortality risk and expense risk. The Company estimates that approximately two-thirds of this charge is for assumption of the mortality risk, and one-third is for assumption of the expense risk. The mortality and expense risk charge does not apply to values allocated to the Fixed Account. The mortality risk is the Company's guarantee to make retirement payments according to the terms of the Contract, no matter how long a specific Participant lives and no matter how long the entire group of the Company's annuitants live. If, as a group, the Company's annuitants outlive the life expectancy the Company has assumed in its actuarial tables, then the Company must take money from its general assets to meet its obligations. If, as a group, the Company's annuitants do not live as long as expected, the Company could profit from the mortality risk charge. The expense risk is the risk that the contract administrative charge, which cannot be increased above $1,000 per year, will not cover the Company's expenses. Any deficit would have to be made up from the Company's general assets. The Company could profit from the expense risk charge if the annual contract administrative charge is more than sufficient to meet expenses. The Company does not plan to profit from the contract administrative charge. However, the Company hopes to profit from the mortality and expense risk charge. Any profits realized by the Company from this fee would be available to it for any proper corporate purpose, including, among other things, payment of distribution (selling) expenses. The Company does not expect that the withdrawal charge, which is discussed in the following paragraphs, will cover sales and distribution expenses incurred by the Company in connection with the Contract. Withdrawal Charge - If the Owner makes a total or partial withdrawal or if the Contract is transferred or terminated, a withdrawal charge may apply. This withdrawal charge represents a percentage of the amount withdrawn as follows: PAGE 27 _________________________________________________________________ Amount Withdrawn in Contract Year Withdrawal Charge _________________________________________________________________ 1 6% 2 6 3 5 4 4 5 3 6 2 7 1 8 and later 0 _________________________________________________________________ In the case of a partial withdrawal, the withdrawal charge is deducted from the contract value remaining after the Owner is paid the partial withdrawal amount requested. For example, if the Owner requested a partial withdrawal net check amount of $1,000 and the withdrawal charge rate that applied to that amount was 5 percent, the Owner would receive the $1,000 requested and the withdrawal charge amount would be $52.63 for a total withdrawal of $1,052.63. No withdrawal charge is imposed upon amounts withdrawn from the Contract because a Participant: o attains age 59 1/2; o purchases an immediate annuity under the annuity settlement provisions of this Contract after separation from service; o retires under the Plan after age 55; o becomes disabled (as defined in the Code); o dies; o encounters financial hardship as permitted under the Plan and the Code; o receives a loan as requested by the Owner; or o converts contract value to an individual retirement annuity or other qualified annuity then offered by the Company as requested by the Owner. In no event will withdrawal charges exceed 8.5 percent of aggregate purchase payments made. Reduction in Contract Charges - In some cases, the Company expects to incur lower sales and administrative expenses or perform fewer services. Therefore, the Company may be able to reduce or eliminate certain contract charges for some purchases. The Company expects this to occur infrequently. PAGE 28 Premium Taxes - A charge will be made by the Company against the contract value for any state premium taxes to the extent the taxes are payable in connection with the purchase of an annuity contract under the annuity settlement provisions. Annuity Settlement Provisions When a Plan Participant reaches his or her retirement date, the Owner can select one of the five annuity payout options outlined below, or the Owner and the Company can mutually agree on other payment arrangements. Since the Contract is issued in connection with Plans that meet the requirements of Code Sections 401 (including 401(k)) and 457, the payment schedule must meet the applicable requirements of the particular Plan and of the Code, including the distribution and incidental death benefit requirements. In general, the annuity payout option must provide for retirement payments: o over the life of the Participant; o over the joint lives of the Participant and a designated beneficiary; o for a period not exceeding the life expectancy of the Participant; or o for a period not exceeding the joint life expectancies of the Participant and a designated beneficiary. Retirement payments will be made on a fixed basis. The Company will make these retirement payments under a supplemental fixed immediate annuity in the form customarily offered by the Company at the time of purchase. Retirement Payout Options - The Owner may choose any one of these annuity payout options by giving the Company written instructions at least 30 days before contract values are to be withdrawn to purchase the immediate annuity: o Plan A - Life Annuity - No Refund - Monthly payments are made until the annuitant's death. Payments end with the last monthly payment before the annuitant's death; no further payments will be made. This means that if the annuitant dies after only one monthly payment has been made, no more payments will be made. o Plan B - Life Annuity with Five, 10 or 15 Years Certain - Monthly payments are made until the annuitant's death. However, payments are guaranteed for five, 10 or 15 years, as elected, whether or not the annuitant is living. o Plan C - Life Annuity - Installment Refund - Monthly payments are made until the annuitant's death, with the Company's guarantee that payments will continue for at least the number of months determined by dividing the amount applied under this Option by the first monthly payment, whether or not the annuitant is living. PAGE 29 o Plan D - Joint and Last Survivor Life Annuity - No Refund - Monthly payments are made to the annuitant and a joint annuitant while both are living. If either annuitant dies, monthly payments continue at the full amount until the death of the surviving annuitant. Payments end with the death of the second annuitant. o Plan E - Payments for a Specified Period - Monthly payments are made for a specified period of years. The period may be no less than 10 years and no more than 30 years. Payments are guaranteed for the period of years selected, whether or not the annuitant is living. If Monthly Payments Would be Less Than $20 - The Company will calculate the amount of monthly payments at the time the immediate annuity is purchased to provide retirement payments. If the calculations show that monthly payments would be less than $20, the Company has the right to pay the contract value to the Owner in a lump sum. Other Contractual Provisions Nontransferability Ownership of the Contract may not be transferred except to: (1) a trustee or successor trustee of a pension or profit sharing trust that is qualified under the Code; or (2) as otherwise permitted by laws and regulations governing the Plans under which the Contract is issued. Subject to the foregoing, the Contract may not be sold, assigned, transferred, discounted or pledged as collateral for a loan or as security for the performance of an obligation or for any other purpose to any person other than the Company. Voting of Fund Shares The Company will vote the shares of each Fund held by the Variable Accounts at meetings of shareholders of the Funds in accordance with instructions received from the Owner or other authorized party. Fund shares held in each Variable Account for which no timely voting instructions are received, and Fund shares that are not otherwise attributable to Owners, will be voted by the Company in the same proportion as the shares for which instructions are received. Neither the Variable Accounts nor the Company is under any duty to inquire as to the instructions received on the voting of Fund shares. Except as a Variable Account or the Company has actual knowledge to the contrary, the instructions given by the persons entitled to vote will be valid as they affect the Variable Account, the Company and any others having voting instruction rights with respect to the Variable Account. All Fund proxy materials, together with voting instructions, will be provided to each person having the right to give voting instructions at least 10 days prior to each meeting of the shareholders of the particular Fund. The number of Fund shares to which each person is entitled will be determined by the Company on PAGE 30 a date not more than 60 days prior to each such meeting. The number of votes a person has is determined by applying that person's percentage interest in the Variable Account to the total number of votes allowed to the Account. Periodic Reports The Company will send the Owner quarterly, or more frequently as the Code may require, a statement showing the number, type and value of accumulation units credited to the Contract. This statement will be accurate as of a date not more than two months prior to the date of mailing. In addition, every person having voting rights will receive any required reports or prospectuses. The Company also will send any statements that may be required by applicable laws, rules and regulations showing Contract transactions. Substitution Shares of any of the underlying Funds may not always be available for purchase by the Variable Accounts, or the Company may decide that further investment in any such Fund's shares is no longer appropriate in view of the purposes of the Variable Account. In either event, shares of another registered open-end management investment company may be substituted both for Fund shares already purchased by the Variable Account and for purchases to be made in the future. In the event of any substitution pursuant to this provision, the Company may make appropriate endorsement to the Contract to reflect the substitution. The Company reserves the right to split or combine the value of accumulation units. In effecting such change of unit values, strict equity will be preserved and no change will have a material effect on the benefits or other provisions of the Contract. Modification Upon notice to the Owner, the Contract may be modified by the Company if such modification: o is necessary to make the Contract or the Variable Accounts comply with any law or regulation issued by a governmental agency to which the Company or the Variable Accounts are subject; o is necessary to assure continued qualification of the Contract under the Code or other federal or state laws relating to retirement annuities or annuity contracts; o is necessary to reflect a change in the Variable Accounts; or o provides additional accumulation options for the Variable Accounts. In the event of any such modification, the Company may make appropriate endorsement to the Contract to reflect such modification. PAGE 31 Prohibited Investments While the Contract is in force, and prior to any withdrawal or contract termination, the Owner will not offer under the Plan as a funding vehicle to which future contributions may be made any of the following: o guaranteed investment contracts; o bank investment contracts; o annuity contracts with fixed and/or variable accounts; or o funding vehicles providing a guarantee of principal. The Company reserves the right to terminate the Contract if one or more of these prohibited investments is offered. See "Contract Transfer, Termination and Market Value Adjustment." Proof of Condition or Event Where any payments under the Contract depend on the recipient being alive and/or being a certain age on a given date, or depend on the occurrence of a specific event, the Company may require proof satisfactory to it that such a condition has been met prior to making the payment. Distribution of Contracts The Company is the principal underwriter for the Contracts. The Company is registered with the SEC under the Securities and Exchange Act of 1934 (1934 Act) as a broker-dealer and is a member of the National Association of Securities Dealers, Inc. The Company may enter into Distribution Agreements with certain broker-dealers registered under the 1934 Act. The Company will pay a maximum commission of 5 percent for the sale of a Contract. In addition, the Company may pay a service commission when the Owner maintains the Contract in force. Federal Tax Status Introduction The Contracts described in this prospectus are designed for use by Plans that meet the requirements of Code Sections 401 (including 401(k)) and 457. The ultimate effect of federal income taxes on the increase in contract value, on annuity payments and on the economic benefit to the Owner, the Participant, the annuitant, or any payee or beneficiary may depend upon a number of different factors. The discussion contained herein is general in nature, is based upon the Company's understanding of current federal income tax laws and is not intended as tax advice. Before purchasing a Contract, the prospective Owner should consult a qualified tax adviser. The Company does not make any guarantee regarding the tax status, federal, state or local, of any Contract or any transaction involving the Contracts. PAGE 32 Tax Treatment of the Company and the Variable Account The Company is taxed as a life insurance company under the Code. Although the operations of the Variable Accounts are accounted for separately from other operations of the Company for purposes of federal income taxation, the Variable Accounts are not taxable as entities separate from the Company. Under existing federal income tax laws, the income and capital gains of the Variable Accounts, to the extent applied to increase reserves under the Contracts, are not taxable to the Company. Taxation of Annuities in General Generally, there is no tax to the Participants on contributions made by the Owner to the Contract or on any increases in the value of the Contract. However, when distribution to a Participant occurs, the distribution will be subject to taxation (except contributions that were made with after-tax dollars). Distributions made prior to age 59 1/2 generally are subject to a 10 percent IRS penalty tax on any amount includible in ordinary income. This penalty will not apply if the distribution was made because the Participant: o attains age 59 1/2; o purchases a life annuity under the annuity settlement provisions of this Contract that provides for a series of substantially equal periodic payments made at least annually over the life or life expectancy of the annuitant (or joint life expectancies of the annuitant and designated beneficiary); o retires under the Plan after age 55; o becomes disabled (as defined in the Code); or o dies. These are the major exceptions to the 10 percent IRS penalty tax. Additional exceptions and other penalties also may apply. Beginning Jan. 1, 1993, in general, if a Participant receives a distribution, mandatory 20 percent income tax withholding will be imposed at the time the payment is made. In addition, federal income tax and the 10 percent IRS penalty tax for early withdrawals may apply to amounts properly includible in income. This mandatory 20 percent income tax withholding will not be imposed if: o instead of receiving the payment, the Participant elects to have the payment rolled over directly to an IRA or another eligible plan; o the payment is one of a series of substantially equal periodic payments, made at least annually, over the life or life expectancy of the annuitant (or joint lives or life expectancies of the annuitant and a designated beneficiary) or made over a period of 10 years or more; or PAGE 33 o the payment is a minimum distribution required under the Code. These are the major exceptions to the mandatory 20 percent income tax withholding. For taxable distributions that are not subject to the mandatory 20 percent withholding, federal income tax will be withheld from the taxable part of the distribution unless otherwise elected. State withholding also may be imposed on taxable distributions. The rights of any person to any benefits under the Plans under which these Contracts are issued will be subject to the terms and conditions of the Plans themselves, regardless of the terms and conditions of the Contracts issued in connection with the plans. Recordkeeper The Company provides a Contract to fund Plans that meet the requirements of Code Sections 401 (including 401(k)) and 457. The Company does not provide any administrative or recordkeeping services in connection with the Plan. The Company will rely on information and/or instructions provided by the Plan administrator and/or recordkeeper in order to properly administer the Contract. For this reason, any person or entity authorized by the Owner to administer recordkeeping services for the Plan and Participants must be approved by the Company. Additional Information About the Company Selected Financial Data The following selected financial data for the Company and its subsidiaries should be read in conjunction with the consolidated financial statements and notes.
Years ended Dec. 31, (Thousands) 1993 1992 1991 1990 1989 Premiums $ 127,245 $ 114,379 $ 102,338 $ 89,749 $ 135,700 Net investment income 1,783,219 1,616,821 1,422,866 1,204,934 1,030,232 Net gain (loss) on investments (6,737) (3,710) (5,837) 1,022 17,668 Other 304,344 240,959 198,344 165,742 136,809 Total revenues 2,208,071 1,968,449 1,717,711 1,461,447 1,320,409 Income before income taxes 412,726 315,821 259,467 227,742 214,639 Net income 270,079 211,170 182,037 157,748 144,019 Total assets 33,057,753 27,295,773 22,558,809 18,088,351 15,119,628
Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations Results of Operations 1993 Compared to 1992: Consolidated income before income taxes totaled $413 million in 1993, compared with $316 million in 1992. In 1993, $104 million was from the life, disability income, health and long-term care insurance segment, compared with $96 million in 1992. In 1993, $315 million was from the annuity segment, compared PAGE 34 with $223 million in 1992. The remaining $6.7 million loss in 1993 was a net loss on investments, compared with a net loss on investments of $3.7 million in 1992. Total premiums received increased to $5.3 billion in 1993, compared with $4.4 billion in 1992. This increase is primarily due to strong sales of variable annuities due to the low interest rate environment. In addition, the Company reported small increases in its fixed single premium deferred annuity line. Universal life-type insurance and variable universal life insurance premiums received also increased from the prior year. Total revenues increased to $2.2 billion in 1993, compared with $2.0 billion in 1992. Of this, net investment income was $1.8 billion in 1993, compared with $1.6 billion in 1992, reflecting an increase in invested assets. Total invested assets grew 14 percent to $21.9 billion at Dec. 31, 1993, from $19.2 billion at Dec. 31, 1992. Policyholder and contractholder charges, which consist primarily of cost of insurance charges on universal life-type policies, increased 18 percent to $184 million in 1993, compared with $156 million in 1992. This increase reflects higher total life insurance in force which grew 13 percent to $46.1 billion at Dec. 31, 1993. Management and other fees increased 41 percent to $120 million in 1993, compared with $85 million in 1992. This is primarily due to an increase in assets held in segregated asset accounts, which grew 45 percent to $9.0 billion at Dec. 31, 1993, resulting from strong sales of variable products. The Company provides investment management services for the mutual funds used as investment options for variable annuities and variable life insurance. The Company also receives a mortality and expense risk fee from the segregated asset accounts. In 1993, the Company reported a net loss on investments of $6.7 million, compared with a net loss on investments of $3.7 million in 1992. During 1993, net realized losses from the sale of investments amounted to $12.5 million. This was offset by a net decrease in allowance for losses of $5.8 million, including an increase of $9.3 million for mortgage investments and real estate, offset by a decrease of $15.1 million for below investment grade bonds (those rated below BBB). Total benefits and expenses increased to $1.8 billion in 1993, compared with $1.7 billion in 1992. The largest component of expenses, interest credited to policyholder accounts for universal life-type insurance and investment contracts aggregated $1.2 billion and was essentially unchanged from the prior year. This reflected interest credited to higher accumulation values offset by lower interest credited rates. Amortization of deferred policy acquisition costs increased to $212 million in 1993, compared with $140 million in 1992, reflecting prior years' growth of life insurance and annuity business and a cumulative adjustment driven by the long-term decrease in accrual rates on fixed annuities. PAGE 35 Other insurance and operating expenses, which include non- capitalized commissions and indirect selling expenses, direct and indirect operating expenses, premium taxes and guaranty association expenses increased to $242 million in 1993, compared with $216 million in 1992. In May 1993, the Financial Accounting Standards Board issued SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," which the Company will implement, effective Jan. 1, 1994. Under the new rules, debt securities that the Company has both the positive intent and ability to hold to maturity will be carried at amortized cost. Debt securities that the Company does not have the positive intent and ability to hold to maturity and all marketable equity securities will be classified as available-for-sale and carried at fair value. Unrealized gains and losses on securities classified as available-for-sale will be carried as a separate component of stockholder's equity. The effect of the new rules will be to increase stockholder's equity by approximately $181 million, net of taxes, as of Jan. 1, 1994, but the new rules will have no material impact on the Company's results of operations. SFAS No. 114, "Accounting by Creditors for Impairment of a Loan," and FASB Interpretation No. 39, "Offsetting of Amounts Related to Certain Contracts," are expected to have no material impact on the Company's results of operations or financial condition. 1992 Compared to 1991: Consolidated income before income taxes totaled $316 million in 1992, compared with $259 million in 1991. In 1992, $96 million was from the life, disability income, health and long-term care insurance segment, compared with $90 million in 1991. In 1992, $223 million was from the annuity segment, compared with $175 million in 1991. The remaining $3.7 million loss in 1992 was a net loss on investments, compared with a net loss on investments of $5.8 million in 1991. Total premiums received increased to $4.4 billion in 1992, compared with $3.3 billion in 1991. This increase is primarily due to strong sales of annuities with equity investment options as investors were attracted to the stock market due to the low interest rate environment. In addition, the Company reported increases in its fixed single premium deferred annuity line. Universal life-type insurance and variable universal life insurance premiums increased from the prior year. Traditional life insurance premiums were essentially unchanged from the prior year, while long-term care sales increased. Total revenues increased to $2.0 billion in 1992, compared with $1.7 billion in 1991. Of this, net investment income was $1.6 billion in 1992, compared with $1.4 billion in 1991, reflecting an increase in invested assets, partially offset by lower yields. Total invested assets grew 20 percent to $19.2 billion at Dec. 31, 1992, from $16.0 billion at Dec. 31, 1991. PAGE 36 Policyholder and contractholder charges, which consist primarily of cost of insurance charges on universal life-type policies, increased to $156 million in 1992, compared with $137 million in 1991. This increase reflects higher total life insurance in force which grew 12 percent to $40.9 billion at Dec. 31, 1992. Management and other fees increased to $85 million in 1992, compared with $61 million in 1991. This is primarily due to an increase in assets held in segregated asset accounts, which grew 33 percent to $6.2 billion at Dec. 31, 1992, resulting from strong sales of variable products and market appreciation. The Company provides investment management services for the mutual funds used as investment options for variable annuities and variable life insurance. The Company also receives a mortality and expense risk fee from the segregated asset accounts. In 1992, the Company reported a net loss on investments of $3.7 million, compared with a net loss on investments of $5.8 million in 1991. During 1992, net realized gains from the sale of investments amounted to $1.2 million. This was offset by a net increase in allowance for losses of $4.9 million, including an increase of $12.5 million for mortgage investments and real estate, offset by a decrease of $7.6 million for below investment grade bonds (those rated below BBB). During 1991, net realized gains from the sale of investments of $16.0 million were offset by an increase in allowance for losses of $21.8 million, resulting in a net loss of $5.8 million. Total benefits and expenses increased to $1.7 billion in 1992, compared with $1.5 billion in 1991. The largest component of expenses, interest credited to policyholder accounts for universal life-type insurance and investment contracts, increased to $1.2 billion in 1992, compared with $1.1 billion in 1991. This reflects an increase in liabilities for future policy benefits for universal life-type insurance, which grew 8.8 percent to $2.6 billion at Dec. 31, 1992, and an increase in liabilities for future policy benefits for fixed annuities, which grew 20 percent to $16 billion at Dec. 31, 1992. Amortization of deferred policy acquisition costs increased to $140 million in 1992, compared with $116 million in 1991, reflecting prior years' growth of life insurance and annuity business. Other insurance and operating expenses, which include non- capitalized commissions and indirect selling expenses, direct and indirect operating expenses, premium taxes and guaranty association expenses increased to $216 million in 1992, compared with $154 million in 1991. The increase is primarily due to an increased provision for assessments by state guaranty associations. The assessments are used to fund claims of policyholders of insolvent insurance companies. PAGE 37 Liquidity and Capital Resources The liquidity requirements of the Company are met by funds provided from operations and investment activity. The components of the funds provided are premiums, investment income, proceeds from sales of investments as well as maturities and periodic repayments of investment principal. The primary uses of funds are policy benefits, commissions and operating expenses, policy loans and new investment purchases. The Company has available lines of credit with two banks aggregating $75 million, which are used strictly as short-term sources of funds. Borrowings outstanding under the agreements were $1.5 million at Dec. 31, 1993. The Company also uses reverse repurchase agreements for short-term liquidity needs. Reverse repurchase agreements aggregated $30 million at Dec. 31, 1993. At Dec. 31, 1993, investments in fixed maturities comprised 89 percent of the Company's total invested assets. Of the fixed maturity portfolio, approximately 51 percent is invested in GNMA, FNMA and FHLMC mortgage-backed securities which are considered AAA/Aaa quality. At Dec. 31, 1993, approximately 8.8 percent of the Company's investments in fixed maturities were below investment grade bonds. These investments may be subject to a higher degree of risk than the more "traditional" issues because of the borrower's generally greater sensitivity to adverse economic conditions, such as recession or increasing interest rates, and in certain instances, the lack of an active secondary market. Expected returns on below investment grade bonds reflect consideration of such factors. The Company has established an allowance for losses for below investment grade bonds totaling $23 million at Dec. 31, 1993. Management believes that the allowance for losses is adequate, however, future economic factors could impact the ratings of securities owned and additional reserves for losses may be required. At Dec. 31, 1993, net unrealized appreciation on fixed maturities included $1.1 billion of gross unrealized appreciation and $82 million of gross unrealized depreciation. At Dec. 31, 1993, the Company had an allowance for losses for mortgage loans totaling $35 million and for real estate totaling $11 million. The economy and other factors have caused an increase in the number of insurance companies that are under regulatory supervision. This circumstance has resulted in an increase in assessments by state guaranty associations to cover losses to policyholders of insolvent or rehabilitated companies. Some assessments can be partially recovered through a reduction in future premium taxes in certain states. The Company established an asset for guaranty association assessments from those states allowing a reduction in future premium taxes over a reasonable period of time. The asset will be amortized as future premium taxes are reduced. The Company has PAGE 38 also estimated the potential effect of future assessments on the Company's financial position and results of operations and has established a reserve for such potential assessments. In the first quarter of 1994, the Company paid a $40 million dividend to its parent. In 1993, dividends paid to its parent were $25 million. Segment Information The Company's operations consist of two business segments: Individual and group life, disability income, long-term care and health insurance; and fixed and variable annuity products designed for individuals, pension plans,small businesses and employer-sponsored groups. The Company is not dependent upon any single customer and no single customer accounted for more than 10 percent of revenue in 1993, 1992 or 1991. (See Note 8, Segment information, in the "Notes to Consolidated Financial Statements.") Reinsurance Reinsurance arrangements are used to reduce exposure to large losses. The maximum amount of risk retained by the Company on any one life is $750,000 of life and waiver of premium benefits plus $50,000 of accidental death benefits. The excesses are reinsured with other life insurance companies. At Dec. 31, 1993, traditional life and universal life-type insurance in force aggregated $46.1 billion, of which $3.0 billion was reinsured. The Company has a reinsurance agreement with an affiliated company, whereby the Company assumed 100 percent of a block of single premium life insurance business. Reserves related to this agreement were $760 million at Dec. 31, 1993. The Company also has a reinsurance agreement to cede 50 percent of its long-term care insurance business to an affiliated company. Reserves and reinsurance receivables related to this agreement both amounted to $44.1 million at Dec. 31, 1993. Reserves In accordance with the insurance laws and regulations under which the Company operates, it is obligated to carry on its books, as liabilities, actuarially determined reserves to meet its obligations on its outstanding life and health insurance policies and annuity contracts. Reserves for policies and contracts are based on mortality and morbidity tables in general use in the United States. These reserves are computed amounts that, with additions from premiums to be received, and with interest on such reserves compounded annually at assumed rates, will be sufficient to meet the Company's policy obligations at their maturities or in the event of an insured's death. In the accompanying financial statements these reserves are determined in accordance with generally accepted accounting principles. (See Note 1, Liabilities for future policy benefits, in the "Notes to Consolidated Financial Statements," page 38). PAGE 39 Investments Of the Company's consolidated total investments of $21.9 billion at Dec. 31, 1993, 46 percent was invested in mortgage-backed securities, 43 percent in corporate and other bonds, 9.4 percent in primary mortgage loans on real estate, 1.6 percent in policy loans and the remaining 0.5 percent in other investments. Competition The Company is engaged in a business that is highly competitive due to the large number of stock and mutual life insurance companies and other entities marketing insurance products. There are over 2,600 stock, mutual and other types of insurers in the life insurance business. In Fortune magazine's May 1993 listing of the 50 largest life insurance companies as ranked by assets, the Company ranked fourteenth. Best's Insurance Reports, Life-Health edition, 1993, assigned the Company one of its highest classifications, A+ (Superior). Employees As of Dec. 31, 1993, the Company and its subsidiaries had 764 employees; including 711 employed at the corporate office in Minneapolis, MN, and 53 employed at IDS Life Insurance Company of New York, located in Albany, NY. Properties The Company occupies office space in Minneapolis, MN, which is rented by its parent, IDS Financial Corporation. The Company reimburses IDS Financial Corporation for rent based on direct and indirect allocation methods. Facilities occupied by the Company and its subsidiaries are believed to be adequate for the purposes for which they are used and are well maintained. State Regulation The Company is subject to the laws of the State of Minnesota governing insurance companies and to the regulations of the Minnesota Department of Commerce. An annual statement in the prescribed form is filed with the Minnesota Department of Commerce each year covering the Company's operation for the preceding year and its financial condition at the end of such year. Regulation by the Minnesota Department of Commerce includes periodic examination to determine the Company's contract liabilities and reserves so that the Minnesota Department of Commerce may certify that these items are correct. The Company's books and accounts are subject to review by the Minnesota Department of Commerce at all times. Such regulation does not, however, involve any supervision of the account's management or the company's investment practices or policies. In addition, the Company is subject to regulation under the insurance laws of other jurisdictions in which it operates. A full examination of the Company's operations is conducted periodically by the National Association of Insurance Commissioners. PAGE 40 Under insurance guaranty fund laws, in most states, insurers doing business therein can be assessed up to prescribed limits for policyholder losses incurred by insolvent companies. Most of these laws do provide however, that an assessment may be excused or deferred if it would threaten an insurer's own financial strength. Directors and Executive Officers* The directors and principal executive officers of the Company and the principal occupation of each during the last five years is as follows: Directors Louis C. Fornetti, 44 Director since March 1994; Senior Vice President, and Director, IDS, since February 1985. David R. Hubers, 51 Director since September 1989; President and Chief Executive Officer, IDS, since August 1993, and Director, IDS, since January 1984. Senior Vice President, Finance and Chief Financial Officer, IDS, from January 1984 to August 1993. Richard W. Kling, 53 Director since February 1984; President since March 1994. Executive Vice President, Marketing and Products from January 1988 to March 1994. Vice President, IDS, since January 1988. Director of IDS Life Series Fund, Inc. and Manager of IDS Life Variable Annuity Funds A & B. Paul F. Kolkman, 47 Director since May 1984; Executive Vice President since March 1994; Vice President, Finance from May 1984 to March 1994; Vice President, IDS, since January 1987. Peter A. Lefferts, 52 Director and Executive Vice President, Marketing since March 1994; Senior Vice President and Director, IDS, since February 1986. Janis E. Miller, 42 Director and Executive Vice President, Variable Assets since March 1994; Vice President, IDS, since June 1990. Director, Mutual Funds Product Development and Marketing, IDS, from May 1987 to May 1990. Director of IDS Life Series Fund, Inc. and Manager of IDS Life Variable Annuity Funds A & B. James A. Mitchell, 52 Chairman of the Board since March 1994; Director since July 1984; Chief Executive Officer since November 1986; President from July 1984 to March 1994; Executive Vice President, IDS, since March 1994; Director, IDS, since July 1984; Senior Vice President, IDS, from July 1984 to March 1994. PAGE 41 Barry J. Murphy, 43 Director and Executive Vice President, Client Service since March 1994; Senior Vice President, Operations, Travel Related Services (TRS), a subsidiary of American Express Company, since July 1992; Vice President, TRS, from November 1989 to July 1992; Chief Operating Officer, TRS, from March 1988 to November 1989. Stuart A. Sedlacek, 36 Director and Executive Vice President, Assured Assets since March 1994; Vice President, IDS, since September 1988. Melinda S. Urion, 40 Director and Controller since September 1991; Executive Vice President since March 1994; Vice President and Treasurer from September 1991 to March 1994; Vice President, IDS, since September 1991; Chief Accounting Officer, IDS, from July 1988 to September 1991. Officers Other Than Directors Morris Goodwin Jr., 42 Vice President and Treasurer since March 1994; Vice President and Corporate Treasurer, IDS, since July 1989; Chief Financial Officer and Treasurer, IDS Bank & Trust, from January 1988 to July 1989. William A. Stoltzmann, 45 Vice President, General Counsel and Secretary since 1985. *The address for all of the directors and principal officers is: IDS Tower 10, Minneapolis, MN 55440-0010. Executive Compensation Executive officers of the Company also may serve one or more affiliated companies. The following table reflects cash compensation paid to the five most highly compensated executive officers as a group for services rendered in 1993 to the Company and its affiliates. The table also shows the total cash compensation paid to all executive officers of the Company, as a group, who were executive officers at any time during 1993. Name of individual Cash or number in group Position held compensation Five most highly $1,929,713 compensated executive officers as a group: James A. Mitchell President Richard W. Kling Exec. Vice President, Marketing and Products ReBecca K. Roloff Exec. Vice President, Operations PAGE 42 Alan R. Dakay Vice President, Institutional Insurance Marketing Paul F. Kolkman Vice President, Finance All executive officers as a group (12) $2,811,894 ___________________________________________________________________ Security Ownership of Management The Company's directors and officers do not beneficially own any outstanding shares of stock of the Company. All of the outstanding shares of stock of the Company are beneficially owned by its parent, IDS Financial Corporation. The percentage of shares of IDS Financial Corporation owned by any director, and by all directors and officers of the Company as a group, does not exceed 1 percent of the class outstanding. Legal Proceedings and Opinion Legal matters in connection with federal laws and regulations affecting the issue and sale of the Contracts described in this prospectus and the organization of the Company, its authority to issue Contracts under Minnesota law and the validity of the forms of the Contracts under Minnesota law have been passed on by the General Counsel of the Company. Experts The consolidated financial statements of IDS Life Insurance Company at Dec. 31, 1993 and 1992, and for each of the three years in the period ended Dec. 31, 1993, appearing in this prospectus and registration statement have been audited by Ernst & Young, independent auditors, as set forth in their reports thereon appearing elsewhere herein and in the registration statement, and are included in reliance upon such reports given upon the authority of such firm as experts in accounting and auditing. Appendix 1. Assume: contract effective date of October 1, 1993 contract termination date of July 1, 1998 contract year at termination is 5 Purchase Initial Current Accumulation Year Payments Rate Rate Account Value _________________________________________________________________ 1 $10,000 6.50% 6.25% $12,560 2 8,000 6.00 6.25 9,870 3 12,000 6.25 6.25 13,960 4 15,000 7.50 6.75 16,660 5 20,000 6.50 6.50 20,640 _________________________________________________________________ PAGE 43 Total Accumulation Account Value = $73,690 Withdrawal Charge = .03 x 73,690 = 2,211 Fixed Account Value = 73,690 - 2,211 = 71,479 Weighted Average Interest Rate = 6.433% Interest Rate on New Purchase Payments = 6.750 MVA = $71,479 x (.06433 - .06750) x 5.0 = $-1,132.94 Market Value = 71,479 - 1,132.94 = 70,346.06 2. Assume: contract effective date of January 15, 1994 contract termination date of September 20, 1996 contract year at termination is 3 Purchase Initial Current Accumulation Year Payments Rate Rate Account Value _________________________________________________________________ 1 $15,000 7.00% 6.25% $17,710 2 20,000 6.50 6.00 22,140 3 25,000 5.50 5.50 25,910 _________________________________________________________________ Total Accumulation Account Value = $65,760 Withdrawal Charge = .05 x 65,760 = 3,288 Fixed Account Value = 65,760 - 3,288 = 62,472 Weighted Average Interest Rate = 5.870% Interest Rate on New Purchase Payments = 5.250 MVA = $62,472 x (.05870 - .05250) x 6 = $+2,323.96 Market Value = 62,472 + 2,323.96 = 64,795.96 PAGE 44 IDS Life Financial Information The financial statements shown below are those of the insurance company and not those of the Fund. They are included in the prospectus for the purpose of informing investors as to the financial condition of the insurance company and its ability to carry out its obligations under the variable annuity contracts. IDS Life Insurance Company
Consolidated Balance Sheets Dec. 31, 1993 Dec. 31, 1992 Assets (Thousands) ______________________________________________________________________________________________________________________________ Investments Fixed maturities (Fair value: 1993, $20,425,979; 1992, $17,896,374) $19,392,424 $17,185,879 Mortgage loans on real estate (Fair value: 1993, $2,125,686; 1992, $1,785,970) 2,055,450 1,688,490 Policy loans 350,501 320,016 Other investments 56,307 51,955 ______________________________________________________________________________________________________________________________ Total investments 21,854,682 19,246,340 ______________________________________________________________________________________________________________________________ Cash and cash equivalents 146,281 73,563 Receivables: Reinsurance 55,298 - Amounts due from brokers 5,719 20,202 Other accounts receivable 21,459 20,095 Premiums due 1,329 1,361 ______________________________________________________________________________________________________________________________ Total receivables 83,805 41,658 ______________________________________________________________________________________________________________________________ Accrued investment income 307,177 285,120 Deferred policy acquisition costs 1,652,384 1,440,875 Other assets 21,730 18,672 Assets held in segregated asset accounts, primarily common stocks at market 8,991,694 6,189,545 ______________________________________________________________________________________________________________________________ Total assets $33,057,753 $27,295,773 ______________________________________________________________________________________________________________________________ Liabilities and Stockholder's Equity ______________________________________________________________________________________________________________________________ Liabilities: Fixed annuities - future policy benefits $18,492,135 $16,342,419 Universal life-type insurance - future policy benefits 2,753,455 2,567,687 Traditional life-type insurance - future policy benefits 210,205 210,886 Disability income, health and long-term care insurance - future policy benefits 185,272 104,896 Policy claims and other policyholders' funds 44,516 49,899 Deferred federal income taxes 43,620 87,913 Amounts due to brokers 351,486 258,654 Other liabilities 292,024 235,509 Liabilities related to segregated asset accounts 8,991,694 6,189,545 ______________________________________________________________________________________________________________________________ Total liabilities 31,364,407 26,047,408 ______________________________________________________________________________________________________________________________ Stockholder's equity: Capital stock, $30 per value per share; 100,000 shares authorized, issued and outstanding 3,000 3,000 Additional paid-in capital 222,000 22,000 Net unrealized appreciation on equity securities 114 214 Retained earnings 1,468,232 1,223,151 ______________________________________________________________________________________________________________________________ Total stockholder's equity 1,693,346 1,248,365 ______________________________________________________________________________________________________________________________ Total liabilities and stockholder's equity $33,057,753 $27,295,773 Commitments and contingencies (Note 6) ______________________________________________________________________________________________________________________________ See accompanying notes to consolidated financial statements.
PAGE 45
Consolidated Statements of Income Years ended Dec. 31, 1993 1992 1991 (Thousands) __________________________________________________________________________________________________________________________________ Revenues: Premiums Traditional life insurance $ 48,137 $ 49,719 $ 49,706 Disability income and long-term care insurance 79,108 64,660 52,632 __________________________________________________________________________________________________________________________________ 127,245 114,379 102,338 Policyholder and contractholder charges 184,205 156,368 137,202 Management and other fees 120,139 84,591 61,142 Net investment income 1,783,219 1,616,821 1,422,866 Net loss on investments (6,737) (3,710) (5,837) __________________________________________________________________________________________________________________________________ Total revenues 2,208,071 1,968,449 1,717,711 __________________________________________________________________________________________________________________________________ Benefits and expenses: Death and other benefits - traditional life insurance 32,136 34,139 30,170 Death and other benefits - universal life-type insurance and investment contracts 49,692 42,174 38,529 Death and other benefits - disability income, health and long-term care insurance 13,148 10,701 8,242 Decrease in liabilities for future policy benefits - traditional life insurance (4,513) (5,788) (6,425) Increase in liabilities for future policy benefits - disability income, health and long-term care insurance 32,528 27,172 19,700 Interest credited on universal life-type insurance and investment contracts 1,218,647 1,188,379 1,098,281 Amortization of deferred policy acquisition costs 211,733 140,159 116,078 Other insurance and operating expenses 241,974 215,692 153,669 __________________________________________________________________________________________________________________________________ Total benefits and expenses 1,795,345 1,652,628 1,458,244 __________________________________________________________________________________________________________________________________ Income before income taxes 412,726 315,821 259,467 Income taxes 142,647 104,651 77,430 __________________________________________________________________________________________________________________________________ Net income $ 270,079 $ 211,170 $ 182,037 __________________________________________________________________________________________________________________________________ See accompanying notes to consolidated financial statements.
PAGE 46
Consolidated Statements of Cash Flows Years ended Dec. 31, 1993 1992 1991 (Thousands) __________________________________________________________________________________________________________________________________ Cash flows from operating activities: Net income $ 270,079 $ 211,170 $ 182,037 Adjustments to reconcile net income to net cash provided by operating activities: Issuance - policy loans, excluding universal life-type insurance (35,886) (32,881) (29,309) Repayment - policy loans, excluding universal life-type insurance 29,557 26,750 19,928 Change in reinsurance receivable (55,298) - - Change in other accounts receivable (1,364) (4,772) (1,558) Change in accrued investment income (22,057) (15,853) (26,022) Change in deferred policy acquisition costs, net (211,509) (229,252) (175,442) Change in liabilities for future policy benefits for traditional life, disability income, health and long-term care insurance 79,695 21,384 13,275 Change in policy claims and other policyholders' funds (5,383) (1,347) 11,801 Change in deferred federal income taxes (44,237) (30,385) (29,207) Change in other liabilities 56,515 88,997 45,323 Amortization of premium (accretion of discount), net (27,438) (4,289) 19,726 Net loss on investments 6,737 3,710 5,837 Premiums related to universal life-type insurance 397,883 312,621 264,504 Surrenders and death benefits related to universal life-type insurance (255,133) (166,162) (109,307) Interest credited to account balances related to universal life-type insurance 156,885 161,873 160,585 Policyholder and contractholder charges, non-cash (115,140) (100,975) (96,211) Other, net (1,907) (10,647) 2,258 __________________________________________________________________________________________________________________________________ Net cash provided by operating activities $ 221,999 $ 229,942 $ 258,218 __________________________________________________________________________________________________________________________________ Cash flows from investing activities: Acquisition of investments, excluding policy loans $(7,102,546) $(7,001,348) $(5,518,481) Maturities, sinking fund payments and calls of investments, excluding policy loans 3,931,819 2,700,479 838,589 Sale of investments, excluding policy loans 613,571 1,073,950 2,274,401 Change in amounts due from brokers 14,483 289,335 (134,312) Change in amounts due to brokers 92,832 42,182 72,382 __________________________________________________________________________________________________________________________________ Net cash used in investing activities (2,449,841) (2,895,402) (2,467,421) __________________________________________________________________________________________________________________________________ Cash flows from financing activities: Considerations received related to investment contracts 2,843,668 2,821,069 2,316,333 Surrenders and death benefits related to investment contracts (1,765,869) (1,168,633) (871,808) Interest credited to account balances related to investment contracts 1,071,917 1,026,506 937,696 Issuance - universal life-type insurance policy loans (70,304) (72,007) (76,010) Repayment - universal life-type insurance policy loans 46,148 40,351 31,860 Capital contribution from parent 200,000 - - Cash dividend to parent (25,000) (20,000) (20,000) __________________________________________________________________________________________________________________________________ Net cash provided by financing activities 2,300,560 2,627,286 2,318,071 __________________________________________________________________________________________________________________________________ Net increase (decrease) in cash and cash equivalents 72,718 (38,174) 108,868 Cash and cash equivalents at beginning of year 73,563 111,737 2,869 __________________________________________________________________________________________________________________________________ Cash and cash equivalents at end of year $ 146,281 $ 73,563 $ 111,737 __________________________________________________________________________________________________________________________________ See accompanying notes to consolidated financial statements.
PAGE 47 Notes to Consolidated Financial Statements ($ Thousands) Dec. 31, 1993, 1992, 1991 1. Summary of significant accounting policies Nature of business IDS Life Insurance Company (the Company) is engaged in the insurance and annuity business. The Company sells various forms of fixed and variable individual life insurance, group life insurance, individual and group disability income insurance, long-term care insurance, and single and installment premium fixed and variable annuities. Basis of presentation The Company is a wholly owned subsidiary of IDS Financial Corporation (IDS), which is a wholly owned subsidiary of American Express Company. The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, IDS Life Insurance Company of New York and American Enterprise Life Insurance Company. All material intercompany accounts and transactions have been eliminated in consolidation. The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles which vary in certain respects from reporting practices prescribed or permitted by state insurance regulatory authorities. Also, the consolidated financial statements are presented on a historical cost basis without adjustment of the net assets attributable to the 1984 acquisition of IDS by American Express Company. Investments Investments in fixed maturities are carried at cost, adjusted where appropriate for amortization of premiums and accretion of discounts. Mortgage loans on real estate are carried principally at the unpaid principal balances of the related 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. Other investments include interest rate caps, real estate and equity securities. When evidence indicates a decline, which is other than temporary, in the underlying value or earning power of individual investments, such investments are written down to the estimated realizable value by a charge to income. Equity securities are carried at market value and the related net unrealized appreciation or depreciation is reported as a credit or charge to stockholder's equity. The Company has the ability and the intent to recover the costs of these investments by holding them for the forseeable future. The ability to hold investments to scheduled maturity dates is dependent on, among other things, annuity contract owners maintaining their annuity contracts in force. The Company will implement, effective January 1, 1994, Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities." Under the new rules, debt securities that the Company has both the positive intent and ability to hold to maturity will be carried at amortized cost. PAGE 48 1. Summary of significant accounting policies (continued) Debt securities that the Company does not have the positive intent and ability to hold to maturity and all marketable equity securities will be classified as available-for-sale and carried at fair value. Unrealized gains and losses on securites classified as available-for-sale will be carried as a separate component of stockholder's equity. The effect of the new rules will be to increase stockholder's equity by approximately $181 million, net of taxes, as of January 1, 1994, but the new rules will have no material impact on the Company's results of operations. Realized investment gain or loss is determined on an identified cost basis. Interest rate cap contracts are purchased to reduce the Company's exposure to rising interest rates which would increase the cost of future policy benefits for interest sensitive products. Costs are amortized over the lives of the agreements and benefits are recognized when realized. 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. Statement of cash flows The Company considers investments with a maturity at the date of their acquisition of three months or less to be cash equivalents. These securities are carried principally at amortized cost which approximates fair value. Supplementary information to the consolidated statement of cash flows for the years ended Dec. 31 is summarized as follows: 1993 1992 1991 ___________________________________________________________________ Cash paid during the year for: Income taxes $188,204 $140,445 $111,809 Interest on borrowings 2,661 1,265 108 ___________________________________________________________________ Recognition of profits on annuity contracts and insurance policies The Company issues single premium deferred annuity contracts that provide for a service fee (surrender charge) at annually decreasing rates upon withdrawal of the annuity accumulation value by the contract owner. No sales fee is deducted from the contract considerations received on these contracts ("no load" annuities). Single premium deferred annuities issued prior to 1980 had a sales fee and no surrender charge. All of the Company's single premium deferred annuity contracts provide for crediting the contract owners' accumulations at specified rates of interest. Such rates are revised by the Company from time to time based on changes in the market investment yield rates for fixed-income securities. PAGE 49 1. Summary of significant accounting policies (continued) Profits on single premium deferred annuities and installment annuities are recognized by the Company over the lives of the contracts and represent the excess of investment income earned from investment of contract considerations over interest credited to contract owners and other expenses. The retrospective deposit method is used in accounting for universal life-type insurance. This method recognizes profits over the lives of the policies in proportion to the estimated gross profits expected to be realized. Premiums on traditional life, disability income, health and long-term care insurance policies are recognized as revenue when collected or 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. 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 single premium deferred annuities and installment annuities are amortized based upon surrender charge revenue and a portion of the excess of investment income earned from investment of the contract considerations over the interest credited to contract owners. The costs for universal life-type insurance are amortized over the lives of the policies as a percentage of the estimated gross profits expected to be realized on the policies. For traditional life, disability income, health and long-term care insurance policies, the costs are amortized over an appropriate period in proportion to premium revenue. Liabilities for future policy benefits Liabilities for universal life-type insurance, single premium deferred annuities and installment annuities are accumulation values. Liabilities for fixed annuities in a benefit status are based on the Progressive Annuity Table with interest at 5 percent, the 1971 Individual Annuity Table with interest at 7 percent or 8.25 percent, or the 1983a Table with various interest rates ranging from 5.5 percent to 9.5 percent, depending on year of issue. Liabilities for future benefits on traditional life insurance have been computed principally by the net level premium method, based on anticipated rates of mortality (approximating the 1965-1970 Select and Ultimate Basic Table for policies issued after 1980 and the 1955-1960 Select and Ultimate Basic Table for policies issued prior to 1981), policy persistency derived from Company experience data (first year rates ranging from approximately 70 percent to 90 percent and increasing rates thereafter), and estimated future investment yields of 4 percent for policies issued before 1974 and PAGE 50 1. Summary of significant accounting policies (continued) 5.25 percent for policies issued from 1974 to 1980. Cash value plans issued in 1980 and later assume future investment rates that grade from 9.5 percent to 5 percent over 20 years. Term insurance issued from 1981 to 1984 assumes an 8 percent level investment rate and term insurance issued after 1984 assumes investment rates that grade from 10 percent to 6 percent over 20 years. Liabilities for future disability income policy benefits have been computed principally by the net level premium method, based on the 1964 Commissioners Disability Table with the 1958 Commissioners Standard Ordinary Mortality Table at 3 percent interest for 1980 and prior, 8 percent interest for persons disabled from 1981 to 1991 and 6 percent interest for persons disabled after 1991. Liabilities for future benefits on long-term care insurance have been computed principally by the net level premium method, using morbidity rates based on the 1985 National Nursing Home Survey and mortality rates based on the 1983a Table. The interest rate basis is 9.5 percent grading to 7 percent over ten years for policies issued from 1989 to 1992, 7.75 percent grading to 7 percent over four years for policies issued after 1992, 8 percent for claims incurred in 1989 to 1991 and 6 percent for claims incurred after 1991. At Dec. 31, 1993 and 1992, the carrying amount and fair value of fixed annuities future policy benefits, after excluding life insurance-related contracts carried at $913,127 and $834,909, were $17,579,008 and $15,507,510, and $16,881,747 and $14,867,066, respectively. The fair value is net of policy loans of $59,132 and $51,394 at Dec. 31, 1993 and 1992, respectively. The fair value of these benefits is based on the status of the annuities at Dec. 31, 1993 and 1992. The fair value of deferred annuities is estimated as the carrying amount less any 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 the rate appropriate for contracts issued in 1993 and 1992. Reinsurance The maximum amount of life insurance risk retained by the Company on any one life is $750 of life and waiver of premium benefits plus $50 of accidental death benefits. The maximum amount of disability income risk retained by the Company on any one life is $6 of monthly benefit for benefit periods longer than three years. The excesses are reinsured with other life insurance companies on a yearly renewable term basis. Graded premium whole life policies and long term care are primarily reinsured on a coinsurance basis. In 1993 the Company adopted Statement of Financial Accounting Standards (SFAS) No. 113, "Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts." Under SFAS No. 113, amounts paid or deemed to have been paid for reinsurance contracts are recorded as reinsurance receivables. Prior to 1993, these amounts were recorded as a reduction of the liability for future insurance policy benefits. The cost of reinsurance is accounted for over the period covered by the reinsurance contract. PAGE 51 1. Summary of significant accounting policies (continued) 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 IDS 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 IDS and its subsidiaries that IDS will reimburse a subsidiary for any tax benefit. Included in other liabilities at Dec. 31, 1993 and 1992 are $14,709 and $18,181, respectively, payable to IDS for federal income taxes. Segregated asset account business The segregated asset 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 and mortality and expense assurance fees from the variable annuity and variable life insurance mutual funds and segregated asset accounts. The Company also deducts a monthly cost of insurance charge and receives a minimum death benefit guarantee fee and issue and administrative fee from the variable life insurance segregated asset accounts. The Company makes contractual mortality assurances to the variable annuity contract owners that the net assets of the segregated asset accounts will not be affected by future variations in the actual life expectancy experience of the annuitants and the beneficiaries from the mortality assumptions implicit in the annuity contracts. The Company makes periodic fund transfers to, or withdrawals from, the segregated asset accounts for such actuarial adjustments for variable annuities that are in the benefit payment period. The Company guarantees, for the variable life insurance policyholders, the cost of the contractual insurance rate and that the death benefit will never be less than the death benefit at the date of issuance. At Dec. 31, 1993 and 1992 the fair value of liabilities related to segregated asset accounts was $8,305,209 and $5,727,402, respectively. The fair value of these liabilities at Dec. 31, 1993 and 1992 is estimated as the carrying amount less variable insurance contracts carried at $346,276 and $226,946, respectively, and surrender charges, if applicable. Reclassification Certain 1992 and 1991 amounts have been reclassified to conform to the 1993 presentation. 2. Investments Market values of investments in fixed maturities represent quoted market prices and estimated fair values when quoted prices are not available. Estimated fair values are determined by established procedures involving, among other things, review of market indices, PAGE 52 2. Investments (continued) price levels of current offerings of comparable issues, price estimates and market data from independent brokers and financial files. Net gain (loss) on investments for the years ended Dec. 31 is summarized as follows:
1993 1992 1991 Fixed maturities $ 5,460 $ 14,474 $ 22,750 Mortgage loans (11,422) (5,004) (1,064) Other investments (6,606) (8,265) (5,695) (12,568) 1,205 15,991 Net (increase) decrease in allowance for losses 5,831 (4,915) (21,828) $ (6,737) $ (3,710) $ (5,837) Changes in net unrealized appreciation (depreciation) of investments for the years ended Dec. 31 are summarized as follows: 1993 1992 1991 Fixed maturities $323,060 $(128,683) $861,355 Equity securities (156) 300 418
Fair values of and gross unrealized gains and losses on investments in fixed maturities carried at amortized cost at Dec. 31 are as follows: Gross Gross Amortized Unrealized Unrealized Fair 1993 Cost Gains Losses Value U.S. Government agency obligations $ 63,532 $ 3,546 $ 1,377 $ 65,701 State and municipal obligations 11,072 2,380 - 13,452 Corporate bonds and obligations 9,362,074 768,747 45,706 10,085,115 Mortgage-backed securities 9,978,523 341,067 57,879 10,261,711 19,415,201 1,115,740 104,962 20,425,979 Less allowance for losses 22,777 - 22,777 - $19,392,424 $1,115,740 $ 82,185 $20,425,979 Gross Gross Amortized Unrealized Unrealized Fair 1992 Cost Gains Losses Value U.S. Government agency obligations $ 36,753 $ 3,658 $ 4 $ 40,407 State and municipal obligations 11,234 1,542 - 12,776 Corporate bonds and obligations 7,688,190 431,781 104,707 8,015,264 Mortgage-backed securities 9,487,601 377,539 37,213 9,827,927 17,223,778 814,520 141,924 17,896,374 Less allowance for losses 37,899 - 37,899 - $17,185,879 $ 814,520 $104,025 $17,896,374 The amortized cost and fair value of investments in fixed maturities at Dec. 31, 1993 by contractual maturity are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Amortized Fair Cost Value Due in one year or less $ 89,160 $ 90,928 Due from one to five years 1,430,756 1,532,298 Due from five to ten years 5,488,955 5,924,580 Due in more than ten years 2,427,807 2,616,462 Mortgage-backed securities 9,978,523 10,261,711 $19,415,201 $20,425,979
PAGE 53 2. Investments (continued) Proceeds from sales of investments in fixed maturities during 1993 and 1992 were $482,523 and $996,619, respectively. During 1993 and 1992, gross gains of $48,499 and $94,915, respectively, and gross losses of $43,039 and $80,441, respectively, were realized on those sales. At Dec. 31, 1993, the amount of net unrealized appreciation on equity securities included $160 of gross unrealized appreciation, $nil of gross unrealized depreciation and deferred tax credits of $46. At Dec. 31, 1992, the amount of net unrealized appreciation on equity securities included $328 of gross unrealized appreciation, $12 of gross unrealized depreciation and deferred tax credits of $102. The fair value of equity securities was $1,900 and $2,005 at Dec. 31, 1993 and 1992, respectively. Included in other investments at Dec. 31, 1993 are interest rate caps at amortized cost of $26,923 with a fair value of $14,201. These interest rate caps carry a notional amount of $4,400,000 and expire on various dates from 1994 to 1998. At Dec. 31, 1993, bonds carried at $4,184 were on deposit with various states as required by law. Net investment income for the years ended Dec. 31 is summarized as follows:
1993 1992 1991 ______________________________________________________________________________________ Interest on fixed maturities $1,589,802 $1,449,234 $1,279,317 Interest on mortgage loans 175,063 148,693 122,723 Other investment income 29,345 24,281 20,005 Interest on cash equivalents 2,137 5,363 8,729 1,796,347 1,627,571 1,430,774 Less investment expenses 13,128 10,750 7,908 ______________________________________________________________________________________ $1,783,219 $1,616,821 $1,422,866 ______________________________________________________________________________________ At Dec. 31, 1993, investments in fixed maturities comprised 89 percent of the Company's total invested assets. These securities are rated by Moody's and Standard & Poor's (S&P), except for approximately $2.1 billion which is rated by IDS internal analysts using criteria similar to Moody's and S&P. A summary of investments in fixed maturities by rating on Dec. 31 is as follows: Dec. 31, Dec. 31, Rating 1993 1992 ________________________________________________________________________ Aaa/AAA $ 9,959,884 $ 9,480,345 Aa/AA 258,659 219,370 Aa/A 160,638 109,806 A/A 2,021,177 1,735,750 A/BBB 654,949 447,592 Baa/BBB 3,936,366 3,352,192 Baa/BB 717,606 392,361 Below investment grade 1,705,922 1,486,362 ________________________________________________________________________ $19,415,201 $17,223,778 ________________________________________________________________________
PAGE 54 2. Investments (continued) At Dec. 31, 1993, 99 percent of the securities rated Aaa/AAA are GNMA, FNMA and FHLMC mortgage-backed securities. No holdings of any other issuer are greater than 1 percent of the Company's total investments in fixed maturities. At Dec. 31, 1993, approximately 9.4 percent of the Company's invested assets were mortgage loans on real estate. Summaries of mortgage loans by region of the United States and by type of real estate at Dec. 31, 1993 and 1992 are as follows:
Dec. 31, 1993 Dec. 31, 1992 On Balance Commitments On Balance Commitments Region Sheet to Purchase Sheet to Purchase ______________________________________________________________________________________ East North Central $ 552,150 $ 20,933 $ 484,808 $ 21,728 West North Central 361,704 16,746 357,388 14,327 South Atlantic 452,679 52,440 320,593 32,022 Middle Atlantic 260,239 41,090 188,294 56,816 New England 155,214 17,620 114,170 24,677 Pacific 120,378 15,492 89,636 5,148 West South Central 43,948 525 46,296 716 East South Central 73,748 - 83,994 10,085 Mountain 70,410 14,594 26,906 8,882 ______________________________________________________________________________________ 2,090,470 179,440 1,712,085 174,401 Less allowance for losses 35,020 - 23,595 - ______________________________________________________________________________________ $2,055,450 $179,440 $1,688,490 $174,401 ______________________________________________________________________________________ Dec. 31, 1993 Dec. 31, 1992 On Balance Commitments On Balance Commitments Property type Sheet to Purchase Sheet to Purchase ______________________________________________________________________________________ Apartments $ 744,788 $ 79,153 $ 541,855 $ 70,198 Department/retail stores 624,651 65,402 504,331 74,671 Office buildings 234,042 15,583 327,216 12,950 Industrial buildings 217,648 9,279 203,361 15,150 Nursing/retirement homes 83,768 917 56,431 716 Hotels/motels 33,138 - 34,631 716 Medical buildings 30,429 5,954 23,006 - Residential 78 - 6,618 - Other 121,928 3,152 14,636 - ______________________________________________________________________________________ 2,090,470 179,440 1,712,085 174,401 Less allowance for losses 35,020 - 23,595 - ______________________________________________________________________________________ $2,055,450 $179,440 $1,688,490 $174,401 ______________________________________________________________________________________
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 the right to take possession of the property if the borrower fails to perform according to the terms of the agreement. The fair value of the mortgage loans is determined by a discounted cash flow analysis using mortgage interest rates currently offered for mortgages of similar maturities. Commitments to purchase mortgages are made in the ordinary course of business. The fair value of the mortgage commitments is $nil. PAGE 55 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. Income tax expense consists of the following:
1993 1992 1991 Federal income taxes: Current $180,558 $130,998 $104,292 Deferred (44,237) (30,385) (29,207) 136,321 100,613 75,085 State income taxes-Current 6,326 4,038 2,345 Income tax expense $142,647 $104,651 $ 77,430
Increases (decreases) to the federal tax provision applicable to pretax income based on the statutory rate are attributable to:
1993 1992 1991 Provision Rate Provision Rate Provision Rate Federal income taxes based on the statutory rate $144,454 35.0% $107,379 34.0% $88,219 34.0% Increases (decreases) are attributable to: Tax-excluded interest and dividend income (11,002) (2.7) (8,209) (2.6) (9,496) (3.7) Other, net 2,869 0.7 1,443 0.4 (3,638) (1.4) Federal income taxes $136,321 33.0% $100,613 31.8% $75,085 28.9%
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 Dec. 31, 1993, the Company had a policyholders' surplus account balance of $19,032. 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 $6,661 have not been established because no distributions of such amounts are contemplated. Significant components of the Company's deferred tax assets and liabilities as of Dec. 31 are as follows:
Deferred tax assets: 1993 1992 Policy reserves $453,436 $356,712 Life insurance guarantee fund assessment reserve 35,000 21,794 Total deferred tax assets 488,436 378,506 Deferred tax liabilities: Deferred policy acquisition costs 509,868 446,579 Investments 10,105 2,435 Other 12,083 17,405 Total deferred tax liabilities 532,056 466,419 Net deferred tax liabilities $ 43,620 $ 87,913
PAGE 56 4. Stockholder's equity Retained earnings available for distribution as dividends to parent are limited to the Company's surplus as determined in accordance with accounting practices prescribed by state insurance regulatory authorities. Statutory unassigned surplus aggregated $922,246 as of Dec. 31, 1993 and $685,103 as of Dec. 31, 1992 (see Note 3 with respect to the income tax effect of certain distributions). In addition, any dividend distributions in 1994 in excess of approximately $259,063 would require approval of the Department of Commerce of the State of Minnesota. Statutory net income for 1993, 1992 and 1991 and stockholder's equity as of Dec. 31, 1993, 1992 and 1991 are summarized as follows:
1993 1992 1991 ___________________________________________________________________________________ Statutory net income $ 275,015 $180,296 $200,704 Statutory stockholder's equity 1,157,022 714,942 551,939 ___________________________________________________________________________________
Dividends paid to IDS were $25,000 in 1993, $20,000 in 1992 and $20,000 in 1991. 5. Related party transactions The Company has loaned funds or agreed to loan funds to IDS under two separate loan agreements. The balance of the first loan was $75,000 and $nil at Dec. 31, 1993 and 1992, respectively. This loan can be increased to a maximum of $100,000 and pays interest at a rate equal to the preceding month's effective new money rate for the Company's permanent investments. It is collateralized by equities valued at $96,790 at Dec. 31, 1993. The second loan was used to fund the construction of the IDS Operations Center. This loan had an outstanding balance of $84,588 and $85,278 at Dec. 31, 1993 and 1992, respectively. The loan is secured by a first lien on the IDS Operations Center property and has an interest rate of 9.89 percent. The Company also has a loan to an affiliate which was used to fund construction of the IDS Learning Center. At Dec. 31, 1993 and 1992, the balance outstanding was $22,573 and $22,755, respectively. The loan is secured by a first lien on the IDS Learning Center property and has an interest rate of 9.82 percent. Interest income on the above loans totaled $11,116, $10,711 and $14,783 in 1993, 1992 and 1991, respectively. The Company purchased a five year secured note from an affiliated company which had an outstanding balance of $27,222 and $31,111 at Dec. 31, 1993 and 1992, respectively. The note bears a market interest rate, revised semi-annually, which at Dec. 31, 1993 was 8.42 percent. The Company has a reinsurance agreement whereby it assumed 100 percent of a block of single premium life insurance business from an affiliated company. The accompanying consolidated balance sheet at Dec. 31, 1993 and 1992 includes $759,714 and $746,060, respectively, of future policy benefits related to this agreement. PAGE 57 5. Related party transactions (continued) The accompanying consolidated statement of income includes revenue from policyholder charges of $21, $109 and $243, and expenses of $4,931, $5,897 and $6,445 related to this agreement for 1993, 1992 and 1991, respectively. The Company has a reinsurance agreement to cede 50 percent of its long-term care insurance business to an affiliated company. The accompanying consolidated balance sheet at Dec. 31, 1993 includes $44,086 of reinsurance receivables related to this agreement. Liabilities for future policy benefits were reduced by $27,028 at Dec. 31, 1992 for the effect of this agreement. Premiums ceded amounted to $16,230, $12,499 and $6,365 and reinsurance recovered from reinsurers amounted to $404, $250 and $187 for the years ended Dec. 31, 1993, 1992 and 1991, respectively. The Company participates in the retirement plan of IDS which covers all permanent employees age 21 and over who have met certain employment requirements. The benefits are based on the number of years the employee participates in the plan, their final average monthly salary, the level of social security benefits the employee is eligible for and the level of vesting the employee has earned in the plan. IDS' policy is to fund retirement plan costs accrued subject to ERISA and federal income tax considerations. The Company's share of the total net periodic pension cost was $nil in 1993, 1992 and 1991. The Company also participates in defined contribution pension plans of IDS 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 1993, 1992 and 1991 were $2,008, $1,826 and $1,682, respectively. The Company participates in defined benefit health care plans of IDS that provide health care and life insurance benefits to retired employees and retired financial planners. The plans include participant contributions and service-related eligibility requirements. Upon retirement, such employees are considered to have been employees of IDS. IDS expenses these benefits and allocates the expenses to its subsidiaries. Accordingly, costs of such benefits to the Company are included in employee compensation and benefits and cannot be identified on a separate company basis. Charges by IDS for use of joint facilities and other services aggregated $243,346, $204,675 and $174,500 for 1993, 1992 and 1991, respectively. Certain of these costs are included in deferred policy acquisition costs. In addition, the Company rents its home office space from IDS on an annual renewable basis. Such rentals aggregated $4,513, $4,074 and $3,469 for 1993, 1992 and 1991, respectively. Certain commission and marketing services expenses are allocated to the Company by its affiliates. The expenses for 1993, 1992 and 1991 were $127,000, $110,064 and $95,367, respectively. Certain of the costs assessed to the Company are included in deferred policy acquisition costs. PAGE 58 6. Commitments and contingencies At Dec. 31, 1993 and 1992, traditional life insurance and universal life-type insurance in force aggregated $46,125,515 and $40,904,345, respectively, of which $3,038,426 and $2,937,590 were reinsured at the respective year ends. The Company also reinsures a portion of the risks assumed under disability income policies. Under the agreements, premiums ceded to reinsurers amounted to $28,276, $24,222 and $16,908 and reinsurance recovered from reinsurers amounted to $3,345, $6,766 and $6,447 for the years ended Dec. 31, 1993, 1992 and 1991. Reinsurance contracts do not relieve the Company from its primary obligation to policyholders. The Company is a defendant in various lawsuits, none of which, in the opinion of the Company counsel, will result in a material liability. The Company received the revenue agent's report for the tax years 1984 through 1986 in February 1992, and has settled on all agreed audit issues. The Company will protest the remaining open issues and, while the outcome of the appeal is not known at this time, management does not believe there will be any material impact as a result of this audit. 7. Lines of credit The Company has available lines of credit with two banks aggregating $75,000 at 45 to 80 basis points over the banks' cost of funds or equal to the prime rate, depending on which line of credit agreement is used. Borrowings outstanding under these agreements were $1,519 and $nil at Dec. 31, 1993 and 1992, respectively. 8. Segment information The Company's operations consist of two business segments; first, individual and group life insurance, disability income, health and long-term care insurance, and second, annuity products designed for individuals, pension plans, small businesses and employer-sponsored groups. The consolidated statement of income for the years ended Dec. 31, 1993, 1992 and 1991 and total assets at Dec. 31, 1993, 1992 and 1991 by segment are summarized as follows: PAGE 59 8. Segment information (continued)
1993 1992 1991 ___________________________________________________________________________________________________________ Net investment income: Life, disability income, health and long-term care insurance $ 250,224 $ 246,676 $ 233,828 Annuities 1,532,995 1,370,145 1,189,038 ___________________________________________________________________________________________________________ $ 1,783,219 $ 1,616,821 $ 1,422,866 ___________________________________________________________________________________________________________ Premiums and other considerations: Life, disability income and long-term care insurance $ 281,284 $ 250,386 $ 220,754 Annuities 143,876 104,952 79,928 ___________________________________________________________________________________________________________ $ 425,160 $ 355,338 $ 300,682 ___________________________________________________________________________________________________________ Income before income taxes: Life, disability income, health and long-term care insurance $ 104,127 $ 96,215 $ 90,050 Annuities 315,336 223,316 175,254 Net loss on investments (6,737) (3,710) (5,837) ___________________________________________________________________________________________________________ $ 412,726 $ 315,821 $ 259,467 ___________________________________________________________________________________________________________ Total assets: Life, disability income, health and long-term care insurance $ 4,810,145 $ 4,093,778 $ 3,670,197 Annuities 28,247,608 23,201,995 18,888,612 ___________________________________________________________________________________________________________ $33,057,753 $27,295,773 $22,558,809 ___________________________________________________________________________________________________________
Allocations of net investment income and certain general expenses are based on various assumptions and estimates. Assets are not individually identifiable by segment and have been allocated principally based on the amount of future policy benefits by segment. Capital expenditures and depreciation expense are not material, and consequently, are not reported. PAGE 60 Annual Financial Information 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 IDS Financial Corporation) as of December 31, 1993 and 1992, and the related consolidated statements of income and cash flows for each of the three years in the period ended December 31, 1993. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of IDS Life Insurance Company at December 31, 1993 and 1992, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. ERNST & YOUNG February 3, 1994 Minneapolis, Minnesota PAGE 61 Table of Contents of the Statement of Additional Information Performance Information.............................. p. 3 Rating Agencies...................................... p. 6 Principal Underwriter................................ p. 7 Independent Auditors................................. p. 7 Mortality and Expense Risk Charge.................... p. 7 Prospectus........................................... p. 7 Financial Statements - - IDS Life Accounts F, IZ, JZ, G, H and N.......... p. 8 _________________________________________________________________ Please check the appropriate box to receive a copy of the Statement of Additional Information for: ________ IDS Life Group Variable Annuity Contract ________ IDS Life Retirement Annuity Mutual Funds Please return this request to: IDS Life Annuity Service IDS Life Insurance Company P.O. Box 499 Minneapolis, MN 55440-0499 Your name _____________________________________________ Address _______________________________________________ City ____________________ State ________ Zip __________ PAGE 62 STATEMENT OF ADDITIONAL INFORMATION for GROUP, UNALLOCATED FIXED/VARIABLE ANNUITY CONTRACTS IDS LIFE ACCOUNTS F, IZ, JZ, G, H and N April 29, 1994 IDS Life Accounts F, IZ, JZ, G, H and N are separate accounts established and maintained by IDS Life Insurance Company (IDS Life). This Statement of Additional Information dated April 29, 1994, is not a prospectus. It should be read together with the accounts' prospectus, dated April 29, 1994, which may be obtained from your IDS financial planner, or by writing or calling IDS Life at the address or telephone number below. IDS Life Insurance Company P10/199 P.O. Box 74 Minneapolis, MN 55440-0074 (612) 671-3131 PAGE 63 TABLE OF CONTENTS Performance Information........................................p. 3 Rating Agencies................................................p. 5 Principal Underwriter..........................................p. 6 Independent Auditors...........................................p. 6 Mortality and Expense Risk Charge..............................p. 6 Prospectus.....................................................p. 7 Financial Statements - IDS Life Accounts F, IZ, JZ, G, H, and N.........p. 8 PAGE 64 PERFORMANCE INFORMATION Calculation of yield for Account H IDS Life Account H, which invests in IDS Life Moneyshare Fund, Inc., calculates an annualized simple yield and a compound yield based on a seven-day period. The simple yield is calculated by determining the net change in the value of a hypothetical account having the balance of one accumulation unit at the beginning of the seven-day period. (The net change does not include capital change, but does include a pro rata share of the annual contract charges, including the annual contract administrative charge and the mortality and expense risk fee.) The net change in the account value is divided by the value of the account at the beginning of the period to obtain the return for the period. That return is then multiplied by 365/7 to obtain an annualized figure. The value of the hypothetical account includes the amount of any declared dividends, the value of any shares purchased with any dividend paid during the period and any dividends declared for such shares. The account's yield does not include any realized or unrealized gains or losses, nor does it include the effect of any applicable withdrawal charge. The account calculates its compound yield according to the following formula: 365/7 Compound Yield = [return for seven-day period +1) ] - 1 On Dec. 31, 1993, the account's annualized yield was 1.48% and its compound yield was 1.49%. The rate of return, or yield, on the account's accumulation unit may fluctuate daily and does not provide a basis for determining future yields. Investors must consider, when comparing an investment in Account H with fixed annuities, that fixed annuities often provide an agreed-to or guaranteed fixed yield for a stated period of time, whereas the variable account's yield fluctuates. In comparing the yield of Account H to a money market fund, you should consider the different services that the annuity provides. Calculation of yield for non-money market accounts For an account other than the Money Market Account, quotations of yield will be based on all investment income earned during a particular 30-day period, less expenses accrued during the period (net investment income) and will be computed by dividing net investment income per accumulation unit by the value of an accumulation unit on the last day of the period, according to the following formula: YIELD = 2[(a-b + 1)6 - 1] cd PAGE 65 where: a = dividends and investment income earned during the period b = expenses accrued for the period (net of reimbursements) c = the average daily number of accumulation units outstanding during the period that were entitled to receive dividends d = the maximum offering price per accumulation unit on the last day of the period Yield on the account is earned from the increase in the net asset value of shares of the fund in which the account invests and from dividends declared and paid by the fund, which are automatically invested in shares of the fund. Calculation of average annual total return Quotations of average annual total return for an account will be expressed in terms of the average annual compounded rate of return of a hypothetical investment in the annuity contract over a period of one, five and 10 years (or, if less, up to the life of the account), calculated according to the following formula: P(1+T)n = ERV where: P = a hypothetical initial payment of $1,000 T = average annual total return n = number of years ERV = Ending Redeemable Value of a hypothetical $1,000 payment made at the beginning of the one, five or ten year (or other) period at the end of the one, five or ten year (or other) period (or fractional portion thereof) Account total return figures reflect the deduction of the contract administrative charge and mortality and expense risk fee. Performance figures will be shown with the deduction of the applicable surrender charge; in addition, performance figures may be shown without the deduction of a surrender charge. The Securities and Exchange Commission requires that an assumption be made that the contract owner surrenders the entire contract at the end of the one, five and ten year periods (or, if less, up to the life of the account) for which performance is required to be calculated. Aggregate total return Aggregate total return represents the cumulative change in the net asset value of shares of the Fund in which the subaccount invests over a specified period of time and is computed by the following formula: ERV - P P PAGE 66 where: P = a hypothetical initial payment of $1,000 ERV = Ending Redeemable Value of a hypothetical $1,000 payment made at the beginning of the one, five, or ten year (or other) period at the end of the one, five, or ten year (or other) period (or fractional portion thereof) Performance of the accounts may be quoted or compared to rankings, yields, or returns as published or prepared by independent rating or statistical services or publishers or publications such as The Bank Rate Monitor National Index, Barron's, Business Week, Donoghue's Money Market Fund Report, Financial Services Week, Financial Times, Financial World, Forbes, Fortune, Global Investor, Institutional Investor, Investor's Daily, Kiplinger's Personal Finance, Lipper Analytical Services, Money, 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. RATING AGENCIES The following chart provides information on the relevance of ratings* given to IDS Life Insurance Company by independent rating agencies that evaluate the financial soundness of insurance companies. IDS Life has one of the most liquid and highest quality balance sheets of the largest insurance companies in the industry.** Rating Agency Rating Relevance of Rating A.M. Best A+ Reflects A.M. Best's opinion (Superior) regarding IDS Life's strong distribution network, favorable overall balance sheet profile, consistently improving profitability, adequate level of capitalization and asset liability management expertise. Duff & Phelps AAA Reflects Duff & Phelps' opinion regarding IDS Life's consistently excellent profitability record, stable operating leverage, leadership position in chosen markets and effective use of asset/liability management techniques. PAGE 67 Moody's Aa2 Reflects Moody's opinion regarding IDS Life's leadership position in financial planning, strong asset/liability management and good capitalization. IDS Life has a strong market focus, and it greatly emphasizes quality service. A.M. Best rates over 1,600 insurance companies on a 15 level scale with letters ranging from A++ to F to "NA" ratings based on a company's financial strength and claims paying ability. Duff & Phelps rates over 125 companies for claims-paying ability with 19 rating categories from AAA to CCC-. Moody's rates over 80 companies for financial strength with 19 rating categories ranging from Aaa to C. * Ratings relate to IDS Life's ability to fulfill its obligations under its contracts and not to the management or performance of the separate accounts. ** Measured by comparing the 15 largest life insurance companies' investments in below investment grade (junk) bonds, mortgages and real estate as a percentage of those companies' total assets. PRINCIPAL UNDERWRITER The principal underwriter for the accounts is IDS Life which offers the variable annuities on a continuous basis. Surrender charges received by IDS Life for 1993, 1992 and 1991, aggregated $4,408,562, $3,649,836 and $3,264,084, respectively. Commissions paid to IDS Life for 1993, 1992 and 1991, aggregated $16,783,495, $10,334,092 and $5,205,239, respectively. The surrender charges were applied toward payment of commissions. INDEPENDENT AUDITORS The Financial Statements of the Accounts (F, IZ, JZ, G, H and N) appearing in this Statement of Additional Information have been audited by Ernst & Young, independent auditors, 1400 Pillsbury Center, Minneapolis, MN 55402, to the extent indicated in their reports. Ernst & Young are experts in accounting and auditing. MORTALITY AND EXPENSE RISK CHARGE IDS Life has represented to the SEC that: IDS Life has reviewed publicly available information regarding products of other companies. Based upon this review, IDS Life has concluded that the mortality and expense risk charge is within the range of charges determined by industry practice. IDS Life will PAGE 68 maintain at its principal office, and make available on request of the SEC or its staff, a memorandum setting forth in detail the variable products analyzed and the methodology, and results of, its comparative review. IDS Life has concluded that there is a reasonable likelihood that the proposed distribution financing arrangements made with respect to the annuities will benefit the variable account and investors in the annuities. The basis for such conclusion is set forth in a memorandum which will be made available to the SEC or its staff on request. PROSPECTUS The prospectus dated April 29, 1994, is hereby incorporated in this Statement of Additional Information by reference. PAGE 69 Annual Financial Information Report of Independent Auditors The Board of Directors IDS Life Insurance Company We have audited the accompanying individual and combined statements of net assets of IDS Life Accounts F, IZ, JZ, G, H and N as of December 31, 1993, and the related statements of operations for the year then ended, and the statements of changes in net assets for each of the two years in the period then ended except for IDS Life Accounts IZ and JZ which are for the period January 13, 1992 (commencement of operations) to December 31, 1993. 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 generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation by the underlying affiliated mutual funds of securities owned at December 31, 1993. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the individual and combined financial position of IDS Life Accounts F, IZ, JZ, G, H and N at December 31, 1993, and the individual and combined results of their operations and changes in their net assets for the periods described in the first paragraph, in conformity with generally accepted accounting principles. ERNST & YOUNG Minneapolis, Minnesota March 18, 1994 PAGE 70
Statements of Net Assets Dec. 31, 1993 Combined Segregated Asset Account Retirement Assets F IZ JZ G H N Annuity Investments in shares of mutual funds, at market value: IDS Life Capital Resource Fund -- 94,837,426 shares at net asset value of $25.43 per share (cost $1,991,400,812)........$2,411,267,719 $ -- $ -- $ -- $ -- $ -- $2,411,267,719 IDS Life International Equity Fund -- 41,509,370 shares at net asset value of $12.57 per share (cost $461,031,235).......... -- 521,910,962 -- -- -- -- 521,910,962 IDS Life Aggressive Growth Fund, -- 34,278,328 shares at net asset value of $12.29 per share (cost $368,702,502).......... -- -- 421,606,329 -- -- -- 421,606,329 IDS Life Special Income Fund, -- 135,075,730 shares at net asset value of $11.99 per share (cost $1,523,131,704).. -- -- -- 1,619,234,023 -- -- 1,619,234,023 IDS Life Moneyshare Fund, Inc. -- 158,870,219 shares at net asset value of $1.00 per share (cost $158,857,627).... -- -- -- -- 158,857,816 -- 158,857,816 IDS Life Managed Fund, Inc. -- 138,944,946 shares at net asset value of $14.46 per share (cost $1,754,012,931)........ -- -- -- -- -- 2,009,505,150 2,009,505,150 2,411,267,719 521,910,962 421,606,329 1,619,234,023 158,857,816 2,009,505,150 7,142,381,999 Dividends receivable... -- -- -- 9,126,110 366,846 -- 9,492,956 Accounts receivable from IDS Life for contract purchase payments............... 1,521,330 2,089,111 1,456,511 2,879,798 482,090 2,241,108 10,669,948 Receivable from mutual funds for share redemptions............ 136,660 9,372 4,216 286,798 294,805 290 732,141 Total assets........... 2,412,925,709 524,009,445 423,067,056 1,631,526,729 160,001,557 2,011,746,548 7,163,277,044 Liabilities Payable to IDS Life for: Mortality and expense risk fee............... 2,033,249 417,035 341,862 1,358,210 133,998 1,679,007 5,963,361 Contract terminations.. 136,660 9,372 4,216 286,798 294,805 290 732,141 Payable to mutual funds for investments purchased.............. 1,521,330 2,089,111 1,456,511 10,647,698 714,938 2,241,108 18,670,696 Total liabilities...... 3,691,239 2,515,518 1,802,589 12,292,706 1,143,741 3,920,405 25,366,198 Net assets applicable to contracts in accumulation period.... 2,406,633,155 521,347,188 420,534,021 1,618,401,149 158,648,082 2,007,151,790 7,132,715,385 Net assets applicable to contracts in payment period (Note 5)........ 2,601,315 146,739 730,446 832,874 209,734 674,353 5,195,461 Total net assets.......$2,409,234,470 $521,493,927 $421,264,467 $1,619,234,023 $158,857,816 $2,007,826,143 $7,137,910,846 Accumulation units outstanding............ 488,632,295 405,535,877 347,336,270 405,428,501 74,934,517 910,254,254 Net asset value per accumulation unit...... $4.93 $1.29 $1.21 $3.99 $2.12 $2.21 See accompanying notes to financial statements.
PAGE 71
Statements of Operations Year ended Dec. 31, 1993 Combined Segregated Asset Account Retirement Investment income: F IZ JZ G H N Annuity Dividend income from mutual funds............ $126,032,695 $ 7,728,149 $ 461,885 $ 99,351,189 $ 4,794,084 $ 99,239,239 $337,607,241 Mortality and expense risk fee (Note 3)....... 21,195,575 2,231,776 2,497,382 13,940,846 1,817,471 16,469,332 58,152,382 Investment income (loss) -- net........... 104,837,120 5,496,373 (2,035,497) 85,410,343 2,976,613 82,769,907 279,454,859 Realized and Unrealized Gain (Loss) on Investments -- net Realized gain (loss) on sales of investments in mutual funds: Proceeds from sales..... 10,418,477 173,462 73,718 33,166,404 70,623,484 -- 114,455,545 Cost of investments sold.................... 8,691,756 173,891 64,577 31,429,796 70,623,127 -- 110,983,147 Net realized gain (loss) on investments.......... 1,726,721 (429) 9,141 1,736,608 357 -- 3,472,398 Net change in unrealized appreciation or depreciation of investments............. (37,650,583) 61,178,701 39,404,999 95,406,120 (1,023) 87,484,868 245,823,082 Net gain (loss) on investments............. (35,923,862) 61,178,272 39,414,140 97,142,728 (666) 87,484,868 249,295,480 Net increase from operations.............. $ 68,913,258 $66,674,645 $37,378,643 $182,553,071 $ 2,975,947 $170,254,775 $528,750,339 See accompanying notes to financial statements.
PAGE 72
Statements of Changes in Net Assets Year ended Dec.31, 1993 Combined Segregated Asset Account Retirement Operations F IZ JZ G H N Annuity Investment income (loss) -- net...........$ 104,837,120 $ 5,496,373 ($ 2,035,497) $ 85,410,343 $ 2,976,613 $ 82,769,907 $ 279,454,859 Net realized gain (loss) on investments... 1,726,721 (429) 9,141 1,736,608 357 -- 3,472,398 Net change in unrealized appreciation or depreciation of investments............. (37,650,583) 61,178,701 39,404,999 95,406,120 (1,023) 87,484,868 245,823,082 Net increase from operations.............. 68,913,258 66,674,645 37,378,643 182,553,071 2,975,947 170,254,775 528,750,339 Contract Transactions Variable annuity contract purchase payments................ 330,981,853 160,547,955 124,277,716 466,011,798 70,267,853 382,661,419 1,534,748,594 Net transfers*.......... 134,056,694 229,679,989 139,206,625 (129,912,208) (116,421,311) 210,725,612 467,335,401 Loan repayments......... 4,553,364 434,912 549,319 1,585,070 340,014 2,550,478 10,013,157 Annuity payments........ (125,502) (2,998) (26,439) (49,683) (15,350) (57,871) (277,843) Contract charges (Note 3)................ (3,519,430) (315,610) (441,927) (1,727,247) (232,943) (2,388,727) (8,625,884) Contract terminations: Surrender benefits...... (58,637,955) (3,483,175) (4,541,055) (39,415,894) (10,201,392) (39,703,861) (155,983,332) Death benefits.......... (7,598,094) (382,391) (510,497) (7,426,206) (1,132,267) (6,836,999) (23,886,454) Increase (decrease) from contract transactions... 399,710,930 386,478,682 258,513,742 289,065,630 (57,395,396) 546,950,051 1,823,323,639 Net assets at beginning of year................. 1,940,610,282 68,340,600 125,372,082 1,147,615,322 213,277,265 1,290,621,317 4,785,836,868 Net assets at end of year....................$2,409,234,470 $521,493,927 $421,264,467 $1,619,234,023 $158,857,816 $2,007,826,143 $7,137,910,846 Accumulation Unit Activity Units outstanding at beginning of year....... 402,977,447 69,874,129 115,574,391 330,000,476 102,276,956 650,797,089 Contract purchase payments................ 71,151,021 139,260,645 111,983,807 122,331,094 33,585,205 182,420,082 Net transfers*.......... 28,700,204 200,006,390 124,582,489 (34,086,653) (55,447,607) 100,014,180 Transfers for policy loans................... 974,940 383,588 495,860 417,082 161,745 1,213,283 Contract charges........ (762,431) (278,873) (401,877) (460,280) (112,836) (1,148,105) Contract terminations: Surrender benefits...... (12,665,962) (3,361,172) (4,418,007) (10,711,698) (4,976,299) (19,632,960) Death benefits.......... (1,742,924) (348,830) (480,393) (2,061,520) (552,647) (3,409,315) Units outstanding at end of year................. 488,632,295 405,535,877 347,336,270 405,428,501 74,934,517 910,254,254 *Includes transfer activity from (to) other Accounts and transfers (from) to IDS Life for conversion from (to) Fixed Account. See accompanying notes to financial statements.
PAGE 73
Statements of Changes in Net Assets Year ended Dec. 31, 1992 Combined Segregated Asset Account Retirement Operations F IZ** JZ** G H N Annuity Investment income (loss) -- net...........$ 62,121,933 $ 363,607 $ (404,603) $ 71,053,958 $ 5,419,237 $ 70,542,812 $ 209,096,944 Net realized gain (loss) on investments.......... 820,127 (1,614) 15,318 13,778 319 51,381 899,309 Net change in unrealized appreciation or depreciation of investments............. 8,102,003 (298,974) 13,498,828 9,615,183 (320) 6,686,625 37,603,345 Net increase from operations.............. 71,044,063 63,019 13,109,543 80,682,919 5,419,236 77,280,818 247,599,598 Contract Transactions Variable annuity contract purchase payments................ 301,729,494 32,417,536 52,979,790 300,743,943 94,833,237 228,843,086 1,011,547,086 Net transfers*.......... 165,276,623 36,140,728 59,837,347 (70,686,134) (132,238,987) 90,701,414 149,030,991 Loan repayments......... 3,643,321 127,993 181,808 1,412,858 310,334 1,951,613 7,627,927 Annuity payments........ (83,723) (667) (9,057) (34,133) (16,308) (29,245) (173,133) Contract charges (Note 3)................ (2,983,949) (49,441) (99,259) (1,503,657) (323,814) (1,837,345) (6,797,465) Contract terminations: Surrender benefits...... (41,098,551) (316,740) (536,353) (26,626,047) (11,245,662) (26,555,646) (106,378,999) Death benefits.......... (5,237,503) (41,828) (91,737) (6,755,704) (1,434,225) (4,665,355) (18,226,352) Increase (decrease) from contract transactions... 421,245,712 68,277,581 112,262,539 196,551,126 (50,115,425) 288,408,522 1,036,630,055 Net assets at beginning of period............... 1,448,320,507 -- -- 870,381,277 257,973,454 924,931,977 3,501,607,215 Net assets at end of period..................$1,940,610,282 $68,340,600 $125,372,082 $1,147,615,322 $213,277,265 $1,290,621,317 $4,785,836,868 Accumulation Unit Activity Units outstanding at beginning of period..... 309,984,128 -- -- 270,858,142 126,489,114 496,554,222 Contract purchase payments................ 66,980,300 33,247,637 54,874,829 90,369,007 46,320,252 123,004,274 Net transfers*.......... 36,426,995 36,980,682 61,605,435 (20,790,672) (64,055,536) 48,304,655 Transfers for policy loans................... 808,337 131,312 192,301 422,608 150,122 1,044,642 Contract charges........ (669,013) (51,414) (105,232) (456,724) (159,690) (995,835) Contract terminations: Surrender benefits...... (9,296,411) (390,634) (899,463) (8,320,218) (5,695,771) (14,383,004) Death benefits.......... (1,256,889) (43,454) (93,479) (2,081,667) (771,535) (2,731,865) Units outstanding at end of period............... 402,977,447 69,874,129 115,574,391 330,000,476 102,276,956 650,797,089 *Includes transfer activity from (to) other Accounts and transfers (from) to IDS Life for conversion from (to) Fixed Account. **For the period from Jan. 13, 1992 (commencement of operations) to Dec. 31, 1992. See accompanying notes to financial statements.
PAGE 74 Notes to Financial Statements ___________________________________________________________________ 1. Organization IDS Life Accounts F, G, H and N were established as segregated asset accounts of IDS Life Insurance Company (IDS Life) under Minnesota law and are registered collectively as a single unit investment trust under the Investment Company Act of 1940. Accounts F, G and H were established on May 13, 1981. Account N was established on April 22, 1985 and commenced operations on April 30, 1986. Accounts IZ and JZ were established as segregated asset accounts on Sept. 20, 1991 and commenced operations on Jan. 13, 1992. IDS Life Accounts F, IZ, JZ, G, H and N are collectively referred to as "the Accounts." The assets of each Account are held for the exclusive benefit of the Retirement Annuity contract owners and are not chargeable with liabilities arising out of the business conducted by any other Account or by IDS Life. Contract owners allocate their variable purchase payments to one or more of the six segregated asset accounts. Such funds are then invested in shares of six mutual funds organized by IDS Life as the investment vehicles for variable annuity contracts issued by IDS Life and by IDS Life Insurance Company of New York. IDS Life Capital Resource Fund, Inc., IDS Life Special Income Fund, Inc. and IDS Life Moneyshare Fund, Inc. commenced operations Oct. 13, 1981. IDS Life Managed Fund, Inc. commenced operations April 30, 1986. These mutual funds are registered under the Investment Company Act of 1940 as diversified, open-end management investment companies. Funds allocated to IDS Life Account F are invested in the shares of IDS Life Capital Resource Fund; IDS Life Account IZ invests in the shares of IDS Life International Equity Fund; IDS Life Account JZ invests in the shares of IDS Life Aggressive Growth Fund; IDS Life Account G invests in the shares of IDS Life Special Income Fund, Inc.; IDS Life Account H invests in the shares of IDS Life Moneyshare Fund, Inc. and IDS Life Account N invests in the shares of IDS Life Managed Fund, Inc. IDS Life serves as manager, investment adviser and distributor for the Accounts and the underlying six mutual funds. ___________________________________________________________________ 2. Summary of Significant Accounting Policies Investments in Mutual Funds Investments in shares of the mutual 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 mutual funds are PAGE 75 ___________________________________________________________________ 2. Summary of Significant Accounting Policies (continued) reinvested, net of any expenses payable to IDS Life, in additional shares of the mutual funds and are recorded as income by the Accounts on the ex-dividend date. Unrealized appreciation or depreciation of investments in the accompanying financial statements represents the Accounts' share of the mutual funds' undistributed net investment income, undistributed realized gain or loss and the unrealized appreciation or depreciation on their investment securities. Federal Income Taxes IDS Life is taxed as a life insurance company. The Accounts are treated as part of IDS Life for federal income tax purposes. Under existing tax law, no income taxes are payable with respect to any income of the Accounts. ___________________________________________________________________ 3. Mortality and Expense Risk Fee and Contract Charges IDS Life makes contractual assurances to the Accounts that possible future adverse changes in administrative expenses and mortality experience of the annuitants and beneficiaries will not affect the Accounts. The mortality and expense risk fee paid to IDS Life is computed daily and is equal, on an annual basis, to 1 percent of the average daily net assets of the Accounts. An annual charge of $20 is deducted from the contract value of each Variable Retirement Annuity contract. An annual charge of $30 is deducted from the contract value of each Combination Retirement Annuity contract. An annual charge of $500 is deducted from the contract value of each Group Variable Annuity contract. An annual charge of $30 is deducted from the certificate value of each Employee Benefit Annuity certificate. A quarterly charge of $6 is deducted from the contract value of each Flexible Annuity contract. The annual charges are deducted at contract year end and the quarterly charges are deducted at contract quarter end, during the accumulation period, for administrative services provided to the Accounts by IDS Life. A contingent deferred sales charge (surrender charge or withdrawal charge) will be imposed upon: a) certain Variable Retirement Annuity contract surrenders during the first seven years, b) Combination Retirement Annuity contract surrenders during the first seven, eight or eleven years, depending on type of contract, c) Group Variable Annuity contract withdrawals during the first seven years, d) Employee Benefit Annuity certificate surrenders during the first eleven years, and PAGE 76 ___________________________________________________________________ 3. Mortality and Expense Risk Fee and Contract Charges (continued) e) Flexible Annuity contract surrenders of amounts other than those representing earnings or those representing purchase payments more than six years old. Charges by IDS Life for surrenders are not available on an individual segregated asset account basis. Charges for all segregated asset accounts amounted to $4,408,562 in 1993 and $3,649,836 in 1992. Such charges are not an expense of the Accounts. They are deducted from contract surrender benefits paid by IDS Life. ___________________________________________________________________ 4. Investment Transactions The Accounts' purchases of mutual fund shares (net of charges), including reinvestment of dividend distributions, were as follows:
Year Ended Dec. 31, Account Investment 1993 1992 F IDS Life Capital Resource Fund..................... $ 515,379,012 $ 487,014,194 IZ IDS Life International Equity Fund................. 392,511,644 68,879,537 JZ IDS Life Aggressive Growth Fund.................... 256,797,588 112,268,445 G IDS Life Special Income Fund....................... 407,642,377 291,204,744 H IDS Life Moneyshare Fund, Inc...................... 16,204,701 38,649,028 N IDS Life Managed Fund, Inc......................... 630,321,175 359,605,519 $2,218,856,497 $1,357,621,467
___________________________________________________________________ 5. Annuity Contracts in Payment Period Net assets and annuity units relating to contracts in the payment period as of Dec. 31, 1993, are as follows:
F IZ JZ G H N Net assets applicable to contracts in payment period................... $2,601,315 $146,739 $730,446 $832,874 $209,734 $674,353 Annuity units in payment period..... 7,448 225 1,880 3,943 1,106 3,856
PAGE 77 PART C. Item 24. Financial Statements and Exhibits (a) Financial Statements included in Part B of this Post- Effective Amendment: IDS Life Accounts F,IZ,JZ,G,H & N: Report of Independent Auditors dated March 18, 1994. Statements of Net Assets at Dec. 31, 1993. Statements of Operations for the year ended Dec. 31, 1993. Statements of Changes in Net Assets for the years ended Dec. 31, 1993 and Dec. 31, 1992. Notes to Financial Statements. IDS Life Insurance Company: Report of Independent Auditors dated February 3, 1994. Consolidated Balance Sheets at Dec. 31, 1993 and 1992; Consolidated Statements of Income for the years ended Dec. 31, 1993, 1992, and 1991; Consolidated Statements of Cash Flows for the years ended Dec. 31, 1993, 1992, and 1991; Notes to Consolidated Financial Statements. Exhibits to Financial Statements included in Part B: Report of Independent Auditors dated February 3, 1994. Financial Statement Schedules I, V, VI, VIII and IX as required by Regulation S-X: Schedule I - Consolidated Summary of Investments Other than Investments in Related Parties Schedule V - Supplementary Insurance Information Schedule VI - Reinsurance Schedule VIII - Valuation and Qualifying Accounts Schedule IX - Short-Term Borrowings All other schedules to the consolidated financial statements required by Article 7 of Regulation S-X are not required under the related instructions or are inapplicable and, therefore have been omitted. (b) Exhibits: 1.1 Resolution of the Executive Committee of the Board of Directors of IDS Life adopted May 13, 1981, filed electronically herewith. 1.2 Resolution of the Executive Committee of the Board of Directors of IDS Life establishing Account N on April 17, 1985, filed electronically herewith. PAGE 78 1.3 Resolution of the Board of Directors of IDS Life establishing Accounts IZ and JZ on September 20, 1991, filed electronically herewith. 2. Not applicable. 3. Not applicable. 4. Form of Group Deferred Variable Annuity Contract (form 34660) dated April, 1992, filed electronically herewith. 5. Copy of Variable Group Deferred Annuity Contract Application (form 34661) dated May, 1992, filed electronically herewith. 6.1 Copy of Certificate of Incorporation of IDS Life, filed electronically herewith. 6.2 Copy of Amended By-Laws of IDS Life, filed electronically herewith. 7. Not applicable. 8. Not applicable. 9. Opinion of counsel and consent to its use as to the legality of the securities registered was filed with Registrant's 24f- 2 Notice on or about Feb. 25, 1994. 10. Consent of Independent Auditors, filed electronically herewith. 11. Financial Statement Schedules and Report of Independent Auditors, filed electronically herewith. 12. Not applicable. 13. Copy of Schedule for computation of each performance quotation filed in Registration Statement in response to item 24, filed electronically herewith. 14.1 Not applicable. 14.2 Power of Attorney dated March 31, 1994, filed electronically herewith. PAGE 79 Item 25. Directors and Officers of the Depositor
Positions and Name Principal Business Address Offices with Depositor Timothy V. Bechtold IDS Tower 10 Vice President-Insurance Minneapolis, MN 55440 Product Development David J. Berry IDS Tower 10 Vice President Minneapolis, MN 55440 Alan R. Dakay IDS Tower 10 Vice President- Minneapolis, MN 55440 Institutional Insurance Marketing Louis C. Fornetti IDS Tower 10 Director Minneapolis, MN 55440 Morris Goodwin Jr. IDS Tower 10 Vice President and Treasurer Minneapolis, MN 55440 Lorraine R. Hart IDS Tower 10 Vice President-Investments Minneapolis, MN 55440 David R. Hubers IDS Tower 10 Director Minneapolis, MN 55440 Roger P. Husemoller IDS Tower 10 Vice President- Minneapolis, MN 55440 Intercorporate Insurance Operations Richard W. Kling IDS Tower 10 Director and President Minneapolis, MN 55440 Paul F. Kolkman IDS Tower 10 Director and Executive Minneapolis, MN 55440 Vice President Ryan R. Larson IDS Tower 10 Vice President- Minneapolis, MN 55440 Annuity Product Development Peter A. Lefferts IDS Tower 10 Director and Executive Minneapolis, MN 55440 Vice President- Marketing Janis E. Miller IDS Tower 10 Director and Executive Minneapolis, MN 55440 Vice President- Variable Assets James A. Mitchell IDS Tower 10 Director, Chairman of Minneapolis, MN 55440 the Board and Chief Executive Officer Barry J. Murphy IDS Tower 10 Director and Executive Minneapolis, MN 55440 Vice President- Client Service PAGE 80 Item 25. Directors and Officers of the Depositor (cont'd) Mary O. Neal IDS Tower 10 Vice President- Minneapolis, MN 55440 Sales Support James R. Palmer IDS Tower 10 Vice President-Taxes Minneapolis, MN 55440 F. Dale Simmons IDS Tower 10 Vice President- Minneapolis, MN 55440 Real Estate Loan Management William A. Stoltzmann IDS Tower 10 Vice President, General Minneapolis, MN 55440 Counsel and Secretary Melinda S. Urion IDS Tower 10 Director, Executive Minneapolis, MN 55440 Vice President and Controller
Item 26. Persons Controlled by or Under Common Control with the Depositor or Registrant IDS Life Insurance Company is a wholly owned subsidiary of IDS Financial Corporation. IDS Financial Corporation is a wholly owned subsidiary of American Express Company (American Express). The following list includes the names of major subsidiaries of American Express. Jurisdiction Name of Subsidiary of Incorporation I. Travel Related Services American Express Travel Related Services Company, Inc. New York II. International Banking Services American Express Bank Ltd. Connecticut III. Investment Services Lehman Brothers Inc. Delaware IV. Companies engaged in Investors Diversified Financial Services American Enterprise Investment Services Inc. Minnesota American Enterprise Life Insurance Company Indiana American Express Minnesota Foundation Minnesota American Express Service Corporation Delaware American Partners Life Insurance Company Minnesota PAGE 81 Item 26. Persons Controlled by or Under Common Control with the Depositor or Registrant (Continued) Jurisdiction Name of Subsidiary of Incorporation IDS Advisory Group Inc. Minnesota IDS Aircraft Services Corporation Minnesota IDS Cable Corporation Minnesota IDS Cable II Corporation Minnesota IDS Capital Holdings Inc. Minnesota IDS Certificate Company Delaware IDS Deposit Corp. Utah IDS Financial Corporation Delaware IDS Financial Services Inc. Delaware IDS Fund Management Limited U.K. IDS Futures Corporation Minnesota IDS Futures III Corporation Minnesota IDS Insurance Agency of Alabama Inc. Alabama IDS Insurance Agency of Arkansas Inc. Arkansas IDS Insurance Agency of Massachusetts Inc. Massachusetts IDS Insurance Agency of Mississippi Inc. Mississippi IDS Insurance Agency of Nevada Inc. Nevada IDS Insurance Agency of New Mexico Inc. New Mexico IDS Insurance Agency of North Carolina Inc. North Carolina IDS Insurance Agency of Ohio Inc. Ohio IDS Insurance Agency of Texas Inc. Texas IDS Insurance Agency of Utah Inc. Utah IDS Insurance Agency of Wyoming Inc. Wyoming IDS International, Inc. Delaware IDS Life Insurance Company Minnesota IDS Life Insurance Company of New York New York IDS Management Corporation Minnesota IDS Partnership Services Corporation Minnesota IDS Plan Services of California, Inc. Minnesota IDS Property Casualty Insurance Company Wisconsin IDS Real Estate Services, Inc. Delaware IDS Realty Corporation Minnesota IDS Sales Support Inc. Minnesota IDS Securities Corporation Delaware IDS Trust Company Minnesota Investors Syndicate Development Corp. Nevada Item 27. Number of Contractowners As of March 31, 1994, 177 (qualified) contracts have been issued. 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, PAGE 82 trust or other enterprise, to any threatened, pending or completed action, suit or proceeding, wherever brought, to the fullest extent permitted by the laws of the State of Minnesota, as now existing or hereafter amended, provided that this Article shall not indemnify or protect any such director, officer, employee or agent against any liability to the Corporation or its security holders to which he would otherwise be subject by reason of willful misfeasance, bad faith, or gross negligence, in the performance of his duties or by reason of his reckless disregard of his obligations and duties. Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to director, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. Item 29. Principal Underwriters (a) IDS Life is the principal underwriter for IDS Life Accounts F, IZ, JZ, G, H and N, IDS Life Variable Annuity Fund A, IDS Life Variable Annuity Fund B, IDS Life Account RE, IDS Life Account MGA and IDS Life Account SLB. (b) This table is the same as our response to Item 25 of this Registration Statement. (c)
Name of Net Underwriting Principal Discounts and Compensation on Brokerage Underwriter Commissions Redemption Commissions Compensation IDS Life None $4,408,562 None None
Item 30. Location of Accounts and Records IDS Life Insurance Company IDS Tower 10 Minneapolis, MN PAGE 83 Item 31. Management Services Not applicable. Item 32. Undertakings (a) Registrant undertakes that it will 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 that it will 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 to IDS Life Contract Owner Service at the address or phone number listed in the prospectus. (d) Registrant represents that it is relying upon the no-action assurance given to the American Council of Life Insurance (pub. avail. Nov. 28, 1989). Further, Registrant represents that it has complied with the provisions of paragraphs (1)-(4) of that no-action letter. PAGE 84 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 the requirements of Securities Act Rule 486(b) for effectiveness of this Registration Statement and has duly caused this Registration Statement to be signed on its behalf in the City of Minneapolis, and State of Minnesota, on this 27th day of April, 1994. IDS LIFE ACCOUNT F IDS LIFE ACCOUNT IZ IDS LIFE ACCOUNT JZ IDS LIFE ACCOUNT G IDS LIFE ACCOUNT H IDS LIFE ACCOUNT N (Registrant) By IDS Life Insurance Company (Sponsor) By /s/ Richard W. Kling* Richard W. Kling President As required by the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated on this 27th day of April, 1994. Signature Title /s/ James A. Mitchell* Chairman of the Board James A. Mitchell and Chief Executive Officer /s/ Richard W. Kling* Director and President Richard W. Kling /s/ Louis C. Fornetti* Director Louis C. Fornetti /s/ David R. Hubers* Director David R. Hubers /s/ Paul F. Kolkman* Director and Executive Vice Paul F. Kolkman President /s/ Peter A. Lefferts* Director and Executive Vice Peter A. Lefferts President, Marketing /s/ Janis E. Miller* Director and Executive Vice Janis E. Miller President, Variable Assets /s/ Barry J. Murphy* Director and Executive Vice Barry J. Murphy President, Client Service PAGE 85 Signature Title /s/ Stuart A. Sedlacek* Director and Executive Vice Stuart A. Sedlacek President, Assured Assets /s/ Melinda S. Urion* Director, Exective Vice Melinda S. Urion President and Controller *Signed pursuant to Power of Attorney dated March 31, 1994, filed electronically herewith. _____________________________ Mary Ellyn Minenko PAGE 86 CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 2 This Amendment is comprised of the following papers and documents: The Cover Page. Cross-reference sheet. Part A. The prospectus. Part B. Statement of Additional Information. Financial Statements. Part C. Other Information. The signatures. Exhibits. EX-99 2 EXHIBIT INDEX PAGE 1 EXHIBIT INDEX 1.1 Resolution of the Executive Committee of the Board of Directors of IDS Life adopted May 13, 1981. 1.2 Resolution of the Executive Committee of the Board of Directors of IDS Life establishing Account N on April 17, 1985. 1.3 Resolution of the Board of Directors of IDS Life establishing Accounts IZ and JZ on September 20, 1991. 4 Form of Group Deferred Variable Annuity Contract (form 34660) dated April, 1992. 5 Copy of Variable Group Deferred Annuity Contract Application (form 34661) dated May, 1992. 6.1 Copy of Certificate of Incorporation of IDS Life. 6.2 Copy of Amended By-Laws of IDS Life. 10 Consent of Independent Auditors. 11 Financial Statement Schedules and Report of Independent Auditors. 13 Copy of Schedule for computation of each performance quotation filed in Registration Statement in response to item 24. 14.2 Power of Attorney dated March 31, 1994. EX-99 3 1.1 RESOLUTION OF THE EXECUTIVE COMMITTEE OF IDS LIFE PAGE 1 IDS LIFE INSURANCE COMPANY MINUTES OF THE ANNUAL MEETING OF THE BOARD OF DIRECTORS MAY 13, 1981 The Annual Meeting of the Board of Directors of IDS Life Insurance Company, a Minnesota corporation, was held at 10:45 a.m., Wednesday, May 13, 1981, at the offices of the Corporation, IDS Tower, Minneapolis, Minnesota, immediately following adjournment of the Annual Meeting of Stockholders of the Corporation, pursuant to written notice duly given. Mr. W.D. Scott, Chairman of the Board, called the meeting to order and presided as Chairman. Mr. D.H. Bruer, Assistant Secretary of the Corporation, acted as Secretary of the meeting. All members of the Board elected at said Annual Meeting of Stockholders were present, except Messrs. Ceithaml and Haase, together with Messrs. R.N. Latzer, Vice President, Investments, and R.J. O'Brien, Vice President, General Counsel and Secretary, of the Corporation. The Chairman stated that the first item to consider was approval of minutes of the meeting of the Board held February 11, 1981, copies of which had been distributed to all members of the Board, and the following resolution was duly adopted: RESOLVED, That the minutes of the regular meeting of the Board held February 11, 1981, as presented to this meeting, are approved. The Chairman stated that the next item to consider was the designation of an Executive Committee. Thereupon, after discussion, the following resolutions were duly adopted: RESOLVED, That an Executive Committee of the Board is created to consist of four members which Committee shall, subject at all times to the control and direction of the Board, have and exercise the authority of the Board in the management of the business of the Corporation in the interval between meetings of the Board; further RESOLVED, That Messrs. George F. Ceithaml, Charles R. Orem, Joseph R. Pickering and Walter D. Scott are designated members of said Executive Committee, to serve at the pleasure of the Board, and that Joseph R. Pickering is designated Presiding Officer of such Executive Committee: further RESOLVED, That such Committee may meet upon call of the Presiding Officer or any two members on annuities", and asked Mr. Pickering to comment thereon. Mr. Pickering directed the Board to a memorandum dated May 1, 1981, and, after discussion, the following resolutions were duly adopted: PAGE 2 WHEREAS, This Board of Directors has determined that it is desirable for the Corporation to issue variable annuity contracts, the values and benefits of which will vary with the investment performance of certain mutual funds (the Funds") which the Corporation has caused to be established, now, therefore, be it RESOLVED, That the six separate accounts set forth below are hereby established in accordance with Section 61A.14, Minnesota Statutes: IDS Life Account C, to invest in shares of IDS Life Capital Resource Fund I, Inc. IDS Life Account D, to invest in shares of IDS Life Special Income Fund I, Inc. IDS Life Account E, to invest in the shares of IDS Life Moneyshare Fund, Inc. IDS Life Account F, to invest in the shares of IDS Life Capital Resource Fund II, Inc. IDS Life Account G, to invest in the shares of IDS Life Special Income Fund II, Inc. IDS Life Account H, to invest in the shares of IDS Life Moneyshare Fund, Inc. RESOLVED FURTHER, That the President of the Corporation is hereby authorized to cause the transfer of One Hundred Thousand Dollars ($100,000) of the Corporation's funds from its general account to each of IDS Life Accounts C, D, and E, all in accordance with the provisions of Section 61A.14, Subd. 8, Minnesota Statutes, to be held therein until this Board of Directors authorizes its retransfer to the general account; and FURTHER RESOLVED, That the proper officers of the Corporation are hereby authorized to enter into an Investment Management and Services Agreement with each of the Funds in the form presented to this meeting. RESOLVED FURTHER, That the proper officers of the Corporation are hereby authorized to enter into an Agreement with Investors Diversified Services, Inc., in the form presented to this meeting, for investment EX-99 4 1.2 RESOLUTION OF THE EXECUTIVE COMMITTEE ESTABLISHING ACCOUNT N PAGE 1 CONSENT IN WRITING IN LIEU OF MEETING OF BOARD OF DIRECTORS Pursuant to Section 300.20 of the Minnesota Statutes TO THE SECRETARY OF IDS LIFE INSURANCE COMPANY As a member of the Board of Directors of IDS Life Insurance Company, a Minnesota corporation I hereby consent to and authorize the adopition of the following resolutions by the Board of Directors of said Corporation, to become effective at the time of your receipt of executed counterparts hereof from all other members of said Board of Directors: WHEREAS, This Board of Directors has determined that it is desirable for the Corporation to provide for the acquisition of shares of IDS Life Managed Fund under its variable annuity contracts, now, therefore, be it RESOLVED, That the two separate accounts set forth below are hereby established in accordance with Section 61A.14, Minnesota Statutes: IDS Life Account M, to invest in shares of IDS Life Managed Fund Inc. IDS Life Account N, to invest in shares of IDS Life Managed Fund Inc. RESOLVED FURTHER, That the Unit Investment Trust comprised of IDS Life Accounts C, D, and E is hereby reconstituted as IDS Life Accounts C, D, E, and M; and the Unit Investment Trust comprised of IDS Life Accounts F, G, and H is hereby reconstituted as IDS Life Accounts F, G, H and N. RESOLVED FURTHER, That the proper officers of the Corporation are hereby authorized and directed to accomplosh all filings and registrations necessary to carry the foregoing into effect. Executed this 17th day of April, 1985. /s/ Harvey Golub /s/ Earlon L. Milbrath Harvey Golub Earlon L. Milbrath /s/ R. W. Kling /s/ Paul Kolkman Richard W. Kling Paul F. Kolkman /s/ James A. Mitchell James A. Mitchell PAGE 2 Received by the Secretary April 17 , 1985 /s/ Richard J. O'Brien Secretary Effective: April 17 , 1985 EX-99 5 1.3 RESOLUTION OF THE BOARD OF DIRECTORS ESTABLISHING ACCOUNTS IZ AND JZ PAGE 1 CONSENT IN WRITING IN LIEU OF MEETING OF BOARD OF DIRECTORS TO THE SECRETARY OF IDS LIFE INSURANCE COMPANY By this consent in writing in lieu of a meeting of the Board of Directors of IDS Life Insurance Company, a Minnesota corporation, we the Directors of said Corporation do hereby consent to and authorize the adoption of the following resolution to be effective immediately upon receipt by the Secretary of the Corporation: WHEREAS, This Board of Directors has determined that it is desirable for the Corporation to provide for the acquisition of shares of IDS Life International Equity Fund and IDS Life Aggressive Growth Fund under its variable annuity contracts. Now, therefore, be it RESOLVED, That the two separate accounts set forth below are hereby established in accordance with Section 61A.14 of the Minnesota Statutes: IDS Life Account IZ, to invest in shares of IDS Life International Equity Fund; and IDS Life Account JZ, to invest in shares of IDS Life Aggressive Growth Fund. RESOLVED FURTHER, That the proper officers of the Corporation are hereby authorized to accomplish all filings, registrations, and applications for exemptive relief necessary to carry the foregoing into effect. /s/ D. R. Hubers /s/ R. W. Kling David R. Hubers Richard W. Kling /s/ Paul F. Kolkman /s/ Christopher R. Kudrna Paul F. Kolkman Christopher R. Kudrna /s/ James A. Mitchell /s/ Rebecca K. Roloff James A. Mitchell Rebecca K. Roloff /s/ Jeffrey E. Stiefler Jeffrey E. Stiefler Received by the Secretary September 20 , 1991 /s/ William A. Stoltzmann William A. Stoltzmann PAGE 2 CONSENT IN WRITING IN LIEU OF MEETING OF BOARD OF DIRECTORS TO THE SECRETARY OF IDS LIFE INSURANCE COMPANY By this consent in writing in lieu of a meeting of the Board of Directors of IDS Life Insurance Company, a Minnesota corporation, we the Directors of said Corporation do hereby consent to and authorize the adoption of the following resolution to be effective immediately upon receipt by the Secretary of the Corporation: WHEREAS, This Board of Directors has determined that it is desirable for the Corporation to provide for the acquisition of shares of IDS Life International Equity Fund and IDS Life Aggressive Growth Fund under its variable annuity contracts. Now, therefore, be it RESOLVED, That the two separate accounts set forth below are hereby established in accordance with Section 61A.14 of the Minnesota Statutes: IDS Life Account IZ, to invest in shares of IDS Life International Equity Fund; and IDS Life Account JZ, to invest in shares of IDS Life Aggressive Growth Fund. RESOLVED FURTHER, That the proper officers of the Corporation are hereby authorized to accomplish all filings, registrations, and applications for exemptive relief necessary to carry the foregoing into effect. /s/ William A. Smith William A. Smith Received by the Secretary April 10 , 1992 /s/ William A. Stoltzmann William A. Stoltzmann EX-99 6 4 FORM OF GROUP DEFERRED VARIABLE ANNUITY CONTRACT PAGE 1 IDS Life Insurance Company IDS Tower 10 Minneapolis, Minnesota GROUP DEFERRED VARIABLE ANNUITY CONTRACT - - GROUP DEFERRED VARIABLE ANNUITY - UNALLOCATED - NONPARTICIPATING - - OPTIONAL FIXED DOLLAR OR VARIABLE ACCUMULATION VALUES - - FIXED DOLLAR ANNUITY PAYMENTS IDS Life Insurance Company, herein called the Company, agrees to pay the benefits herein provided in accordance with and subject to the provisions of this Contract. This Contract is issued in consideration of the application therefor and of payment of purchase payments as provided herein. The provisions set forth on the following pages are a part of this Contract. EXECUTED by the Company at its Home Office in Minneapolis, Minnesota as of the Contract Date. President /s/ James A. Mitchell Secretary /s/ William A. Stoltzmann - - ACCUMULATION VALUES, WHEN BASED ON THE INVESTMENT RESULTS OF THE VARIABLE ACCOUNTS, ARE VARIABLE AND NOT GUARANTEED AS TO FIXED DOLLAR AMOUNT. - - FIXED DOLLAR ACCOUNT VALUES MAY BE SUBJECT TO MARKET VALUE ADJUSTMENT AT CONTRACT TERMINATION. PAGE 2 GUIDE TO CONTRACT PROVISIONS DEFINITIONS Important words and meanings/Page 5 GENERAL PROVISIONS Entire contract; Incontestability; Reliance on Information; Misstatement/Modification; Prohibited Investments; Currency/Page 6 Proof of Condition or Event; Ownership; Limitation of Payment; Facility of Payment; Disclaimer of Responsibility; Assignment - Protection of Proceeds; Nonparticipating; Changes in Plan/Page 7 Notices and Directions; Not Transferable; Payments by Company; Ownership and Control of Assets, State Laws; Voting Rights; Periodic Reports; Beneficiary/Page 8 PURCHASE PAYMENTS Payments; Purchase Payment Allocation/Page 9 CONTRACT VALUES Describes the fixed and variable account contract values; Interest to be credited; Contract administrative charge; Premium taxes, Transfers of contract values/Page 10 FIXED AND VARIABLE ACCOUNTS Describes the variable accounts, accumulation units and values; Net investment factor; Mortality and expense risk charge/Page 11 WITHDRAWALS Withdrawals; Withdrawal Charge; Rules for Withdrawals/Page 12 CONTRACT TRANSFER, Withdrawals for Contract Owner TERMINATION Transfer of Funds; Market Value Adjustment/Page 14 ANNUITY SETTLEMENT Withdrawals for Annuity Purchases/ PROVISIONS Page 16 Annuity Purchase Rates/Page 17 PAGE 3 CONTRACT DATA Contract Owner/Plan Sponsor: ABC Company Trustee: XYZ Bank and Trust Company Plan Name: ABC Company 401(x) Plan Contract Number: 9310-1234567 Contract Effective Date: May 1, 1992 Accounts Initially Available For Investment: Variable Account Mutual Fund F IDS Life Capital Resource Fund G IDS Life Special Income Fund H IDS Life Moneyshare Fund N IDS Life Managed Fund IZ IDS Life International Equity Fund JZ IDS Life Aggressive Growth Fund Fixed Account Guaranteed Interest Rate: 4% per year compounded annually Contract Administrative Charge: $125 deducted from the contract value on a quarterly basis each contract year. This charge may be increased as described on page 10. Withdrawal Charge: A withdrawal charge as described on page 12 may apply to certain withdrawals. PAGE 4 DEFINITIONS The following words are used often in this Contract. With respect to this Contract, the words have these meanings: Variable Accounts - Those assets of the Company in segregated investment accounts established by the Company under Minnesota law to provide variable benefits. Each Variable Account invests in shares of a specific Mutual Fund. Fixed Account - All assets of the Company other than those in any separate account. Accumulation Period - The period before the Annuity Commencement Date with respect to and during the lifetime of a Participant. Annuitant - A Participant or other person for whom annuity benefit payments are provided under the contract. Application - The document signed by the Owner that serves as the Owner's application to the Company for the Contract. Contract Anniversary - An anniversary of the effective date of this Contract. Contract Year - Any period of one year commencing with the effective date of this Contract or with any Contract Anniversary. Owner - The trustee of the Plan. Participant - An eligible employee or other person who is entitled to benefits under the Plan as determined and reported to the Company by the Owner. Plan - The retirement plan under which the Contract is issued and which meets the requirements of Section 401 of the Internal Revenue Code of 1986 as amended ("Code"). Purchase Payment (Payment) - An amount paid to the Company as consideration for the benefits provided by the Contract. Receipt - Receipt by the Company at its Home Office Mailing Address shown on the cover of this Contract. Valuation Date - A Valuation Date is each day the New York Stock Exchange is open for trading. Valuation Period - A Valuation Period is the interval of time commencing at the close of business on each Valuation Date and ending at the close of business on the next Valuation Date. Close of Business is normally 3:00 p.m. Central Time. Written request - A request in writing signed by the Owner delivered to the Company's Home Office. PAGE 5 GENERAL PROVISIONS Entire Contract This Contract is issued in consideration of the application and the payment of the first Purchase Payment.The entire Contract consists of this Contract form, the Application of the Owner, a copy of which is attached hereto and made part hereof, and any endorsements issued in conjunction with this Contract. The Company is not a party to nor bound by the Plan or any other document or agreement issued in connection with such Plan. No one except one of the Company's corporate officers (President, Vice President, Secretary, or Assistant Secretary) can change or waive any of the Company's requirements under this Contract. That person must do so in writing. No representative or other person has the authority to change or waive any of the Company's rights or requirements under this Contract. All statements made by the Owner or on behalf of a Participant are, in the absence of fraud, considered representations and not warranties, and no such statement will void the Contract unless it is contained in a written Application. Incontestable The Contract is incontestable from the date of issue. Reliance on Information The Company is not a party to the Plan, and its obligations and liabilities are limited to those arising from this Contract. In any transaction under this Contract, the Company may rely exclusively on the information furnished by the Owner, any person authorized by the Owner, or any person with authority to act under the Plan. The Company reserves the right to inquire into the accuracy and completeness of any such information and to inspect the relevant records of the owner. However, the Company is under no obligation to make any such inquiry or inspection and will be fully protected in any transaction made under the Contract in reliance upon information furnished by the Owner, any person authorized by the Owner, or any person with authority to act under the Plan. Misstatement If the birthday or any other relevant fact relating to any Participant or person receiving annuity payments is found to be misstated, the amount of the annuity payments will be such as would have been provided on the basis of the correct information, without changing the Annuity Commencement Date, unless other adjustment satisfactory to the Owner and the Company is made. Any adjustment made in accordance with this Section shall be conclusive upon any person affected thereby. The dollar amount of any overpayment made by the Company shall be deducted from the next payment or payments due. PAGE 6 GENERAL PROVISIONS (Continued) Modification Upon notice to the Owner, the Contract may be modified by the Company, but only if such modification: (i) is necessary to make the Contract or any Variable Account comply with any law or regulation issued by a governmental agency to which the Company or the Variable Account is subject; or, (ii) is necessary to assure continued qualification of the Contract under the Code or other federal or state laws relating to retirement annuities or annuity contracts; or (iii) is necessary to reflect a change in any Variable Account; or (iv) provides additional Variable Account and/or Fixed Account accumulation options. In the event of any such modification, the Company may make appropriate endorsement in this Contract to reflect the modification. Prohibited Investments While this Contract is in force, and prior to any withdrawal or contract termination, the Owner agrees that it will not offer under the Plan as a funding vehicle accepting future contributions any of the following: a. Guaranteed Investment Contracts; or b. Bank Investment Contracts; or c. Annuity contracts with fixed and/or variable accounts; or d. Funding vehicles providing a guarantee of principal. Currency All sums payable to the Company under this Contract shall be payable in the lawful currency of the United States of America, to the Company at its Home Office or to its authorized agent. Proof of Survival and Age Where any payments under this Contract depend on the recipient being alive and/or being a certain age on a given date, the Company may require proof satisfactory to it that such a condition has been met prior to making the payment. Ownership The Contract Owner is the Owner of this Contract and has all rights of ownership unless otherwise provided herein. PAGE 7 GENERAL PROVISIONS (Continued) Limitation of Payment If the monthly installment payable under any benefit is less than $20, the Company may change the frequency of payment or pay the actuarial value of the benefit to the payee in a single sum. If payment is made in a lump sum, such payment will be in full settlement of all liability of the Company to the payee for the benefit. Facility of Payment If any payee under this Contract is a minor or is, in the judgment of the Company, otherwise legally incompetent or incapable of executing a valid receipt and discharge for any payment due him or her under this Contract, the Company may, unless and until a claim has been made by a duly appointed guardian of such payee, make such payment, or any part of it to any person or institution then in judgment of the Company contributing toward, or providing for, the care and maintenance of such payee. Any such payment shall completely discharge the liability of the Company with respect to the amount so paid, and the Company will not be obligated to see to the application of the money so paid. Disclaimer of Responsibility The Company is not responsible for the sufficiency of the funds under the Contract to provide the benefits specified in the Plan. The Company has no liability except as provided in the Contract. Assignment - Protection of Proceeds [illegible] assignment of the Contract or of any payment or privilege herein will be valid, [illegible] that this Contract may, with the consent of the Company, be assigned to a successor trustee of the Plan. No assignment of the Contract will be binding upon the Company unless it is in writing and filed at the Company's Home Office. The Company assumes no responsibility for the validity of any assignment. To the extent allowed by law, payments under this Contract are not subject to the claims of creditors or to legal process. Nonparticipating The Contract will not participate in the profits or surplus of the Company. Changes in Plan The Company may request evidence satisfactory to it that the Plan meets the requirements of qualification under Section 401 of the Code. The Owner agrees to notify the Company immediately if, at any time, the Plan fails to meet the requirements of that Section of the Code. PAGE 8 GENERAL PROVISIONS (Continued) Notices and Directions Unless the Company agrees otherwise, it will not be bound by any authorization, direction, election, or notice which is not given in writing and received at its Home Office. Any notice to be given to the Owner by the Company will be in writing and addressed to the Owner at the address shown on the Company's records. Not Transferable No benefit or privilege under this Contract may be sold, assigned, discounted, or pledged as collateral for a loan or as security for the performance of an obligation or for any other purpose, to any person other than the Company. Payments by Company All sums payable by the Company are payable at its Home Office. Any withdrawal or distribution based on the variable accumulation value shall be payable only from the Variable Accounts. Any withdrawal or distribution based on the fixed account value shall be payable only from the Fixed Account. Ownership and Control of Assets The Company shall have exclusive and absolute ownership and control of its assets, including all assets in the Variable Accounts, and shall meet the requirements of any applicable State law. That portion of the assets of the Variable Accounts equal to reserves and other contract liabilities with respect to the Variable Accounts shall be held and applied exclusively for the benefit of the Owner of and Participants in contracts based upon the Variable Accounts. State Laws This Contract shall be construed according to the laws of the jurisdiction of delivery. Voting Rights The Company will vote mutual fund shares held by the Variable Accounts at meetings of shareholders of the fund(s), but will follow voting instructions received at least one day prior to each such meeting from persons having the right to give voting instructions. Such voting rights will be given to the Owner in a manner required by the Investment Company Act of 1940, as amended. Notice will be given to each Owner who may be entitled to vote on any matter. Such notice will specify the matters upon which an Owner may be entitled to vote and the method of determining the number of votes which may be cast at any such meeting. If those having the right to vote do not provide voting instructions, the Company will vote those shares in the same proportion as for voting instructions actually received. PAGE 9 GENERAL PROVISIONS (Continued) Periodic Reports The Company will send the Owner quarterly, or more frequently as the Code may require, a statement showing the number, type and value of Accumulation Units credited to the Contract. The statement shall be accurate as of a date not more than two (2) months prior to the date of mailing. The Company shall also send such statements reflecting transactions in the Contract as may be required by applicable laws, rules and regulations. Beneficiary Beneficiary designations will be made under and maintained by the Plan and will not be the responsibility of the Company unless otherwise agreed to by the Owner and the Company. PAGE 10 PURCHASE PAYMENTS Payments All Purchase Payments are to be paid to the Company at its Home Office or to its authorized agent. Purchase Payment Allocation Each Purchase Payment will be allocated to the Contract upon receipt by the Company, either to the Variable Accounts or to the Fixed Account or to both the Variable Accounts and the Fixed Account in accordance with the allocation factors specified in the application or as subsequently changed. The allocation factors for new Payments between the Fixed Account and the Variable Accounts may be changed at any time by written request. Allocation change requests may also be made according to telephone procedures that are then currently in effect, if any. Any change will take effect with the first Purchase Payment received with or after receipt of written or telephone notification of the change by the Company and will continue in effect until subsequently changed. PAGE 11 CONTRACT VALUE Contract Value The contract value at any time is the sum of: (1) the Fixed Account Contract Value; and (2) the Variable Account Contract Value. If: (1) part or all of the contract value is surrendered; or (2) charges described herein are made against the contract value; then a number of accumulation units from the variable accounts and an amount from the fixed account will be deducted to equal such amount. For surrenders, deductions will be made from the fixed or variable accounts that you specify. Otherwise, the number of units from the variable accounts and the amount from the fixed account will be deducted in the same proportion that the Owner's interest in each bears to the total contract value. Fixed Account Contract Value The fixed account contract value at any time will be: (1) the sum of all amounts credited to the fixed account under this contract, less (2) any amounts deducted for charges or surrenders. Interest to be Credited We will credit interest to the fixed account contract value. Interest will begin to accrue on the date the purchase payments which are received in our home office become available to us for use. Such interest will be credited at rates that we determine from time to time. However, we guarantee that the rate will not be less than the Guaranteed Interest Rate shown under Contract Data. Variable Account Contract Value The variable account contract value at any time will be: (1) the sum of the value of all variable account accumulation units under this contract resulting from purchase payments so allocated, or transfers among the variable and fixed accounts; less (2) any units deducted for charges or surrenders. Contract Administrative Charge The Company charges a fee for establishing and maintaining its records and for normal administrative expenses and services for this contract. The charge is shown under Contract Data and is deducted from the contract value at the end of each three-month period measured from the contract date or, if earlier, when the contract is surrendered. The charge may be increased on any contract anniversary but in no event will the charge exceed $250 on a quarterly basis. Premium Tax Charges A charge will be made by us against the contract value of this contract at any time that any premium taxes not previously deducted are determined to apply to this contract. PAGE 12 CONTRACT VALUE (Continued) Transfers of Contract Values While this contract is in force, transfer of contract values may be made as outlined below: 1. The Owner may transfer all or a part of the values held in one or more of the variable accounts to another one or more of the variable accounts. Subject to item 2, the Owner may also transfer values held in one or more of the variable accounts to the fixed account. 2. Within the 30 days after: a. each contract anniversary; and b. the first day of the seventh month in each contract year, the owner may transfer values from the fixed account to one or more of the variable accounts. Only one such transfer is allowed during this period each year. If such a transfer is made, no transfers from a variable account to the fixed account may be made until the next eligible transfer period. The owner may make a transfer by written request. Transfer requests may also be made according to telephone procedures that are then currently in effect, if any. There is no fee or charge for these transfers. This transfer privilege may be suspended or modified by the Company at any time. PAGE 13 FIXED AND VARIABLE ACCOUNTS The Fixed Account The fixed account is the Company's general account. It is made up of all the Company's assets other than: (1) those in the variable accounts; and (2) those in any other segregated asset account. The Variable Accounts The variable accounts are separate investment accounts. They are named under Contract Data. The Company has allocated a part of its assets for this and certain other contracts to the variable accounts. Such assets remain the Company's property. However, they may not be charged with the liabilities from any other business in which the Company may take part. Investments of the Variable Accounts Purchase payments applied to the variable accounts will be allocated as specified by the owner. Each variable account will buy, at net asset value, shares of the fund shown for that account under Contract Data or as later added or changed. Valuation of Assets Mutual fund shares in the variable accounts will be valued at their net asset value. Variable Account Accumulation Units The number of accumulation units for each of the variable accounts is found by dividing: (1) the net amount allocated to the account; by (2) the accumulation unit value for the account for the valuation period during which the Company received the purchase payment. Variable Account Accumulation Unit Value The value of an accumulation unit for each of the variable accounts was arbitrarily set at $1 when the first mutual fund shares were bought. The value for any later valuation period is found as follows: The accumulation unit value for each variable account for the last prior valuation period is multiplied by the net investment factor for the same account for the next following valuation period. The result is the accumulation unit value. The value of an accumulation unit may increase or decrease from one valuation period to the next. PAGE 14 FIXED AND VARIABLE ACCOUNTS (Continued) Net Investment Factor The next investment factor is an index applied to measure the investment performance of a variable account from one valuation period to the next. The net investment factor may be greater or less than one; therefore, the value of an accumulation unit may increase or decrease. The next investment factor for any such account for any valuation period is determined by: dividing (1) by (2) and subtracting (3) from the result. This is done where: (1) is the "adjusted net asset value" per share of the mutual fund held in the variable account determined at the end of the current valuation period; (2) is the "adjusted net asset value" per share of the mutual fund held in the variable account, determined at the end of the last prior valuation period. (3) is a factor representing the mortality and expense risk charge. Mortality and Expense Risk Charge In calculating accumulation unit values the Company will deduct a mortality and expense risk charge from the variable accounts equal, on an annual basis, to 1.00% of the daily net asset value. This deduction is made to compensate the Company for assuming the mortality and expense risks under contracts of this type. The deduction is: (1) made from each variable account; and (2) computed on a daily basis. PAGE 15 WITHDRAWALS Withdrawals Subject to the other terms and conditions of this Contract, the contract value may be withdrawn in full or in part by written request. Withdrawal Charge A withdrawal charge will be deducted from the amount withdrawn unless such withdrawal is due to a Participant's: 1. purchase of an immediate annuity under the Annuity Settlement Provisions of this contract after separation from service; 2. retirement under the Plan after age 55; 3. disability; 4. death; 5. financial hardship as permitted under the Plan; 6. loan request as permitted under the Plan; 7. conversion to an Individual Retirement Annuity then offered by the Company (see Conversion Provision); 8. attainment of age 59 1/2. Any amounts withdrawn for a purpose other than shown above will be subject to a withdrawal charge as follows: Amount Withdrawn in Contract Year Withdrawal Charge 1 6% 2 6% 3 5% 4 4% 5 3% 6 2% 7 1% 8 and later 0% In no event shall withdrawal charges exceed 8 1/2% of purchase payments paid. Rules for Withdrawals All withdrawals will have the following conditions: 1. The Owner must apply by written request or other method agreed to by the Company while this Contract is in force; and 2. The amount withdrawn with respect to a Participant must be at least $250 or the contract value, if less. PAGE 16 WITHDRAWALS (Continued) 3. The amount withdrawn, less any charges, will normally be paid within seven business days of the receipt of the written request. For surrenders from the fixed account, the Company has the right to defer payment for up to 6 months from the date of the request. 4. For partial withdrawals, the Owner may specify from which accounts the withdrawal is to be made. Otherwise, the withdrawal will be made from the Variable Accounts and Fixed Account in the same proportion as the Owner's interest in each bears to the contract value. 5. Any amounts withdrawn and charges which may apply cannot be repaid. Upon a full withdrawal, the Company may require return of the contract before payment of the full withdrawal value. Suspension or Delay in Payment of Withdrawal The Company has the right to suspend or delay the date of any withdrawal payment from the Variable Accounts for any period: 1. When the New York Stock Exchange is closed; or 2. When trading on the New York Stock Exchange is restricted; or 3. When an emergency exists as result of which: a. disposal of securities held in the Variable Accounts is not reasonably practicable; or b. it is not reasonably practicable to fairly determine the value of the net assets of the Variable Accounts; or 4. During any other period when the Securities and Exchange Commission, by order, so permits for the protection of security holders. Rules and regulations of the Securities and Exchange Commission will govern as to whether the conditions set forth in 2 and 3 exist. Conversion Provision In the event of a Participant's termination of employment, the Owner may direct the Company to withdraw a part of the contract value in order for the Participant to purchase an individual or group deferred annuity contract then offered by the Company and qualified under Section 408 or other applicable Sections of the Code. Such contract shall be in a form then customarily issued by the Company for business under such qualified plans. No withdrawal charges will apply at the time of such withdrawal for conversion. PAGE 17 WITHDRAWALS (Continued) Participant Loans The Owner may, on behalf of a Participant, request withdrawal of a Participant's vested interest in the Plan for the purpose of funding a loan for such Participant. The amount and terms of the loan must be in accordance with the applicable requirements of the underlying Plan and the Code. The Company assumes no responsibility for the validity of the loan or whether the loan complies with such applicable requirements. Withdrawals for the purpose of funding a loan under the Plan shall not be subject to withdrawal charges described in the Contract. However, such withdrawal charges unpaid shall be deducted from the remaining contract value to the extent of any unpaid loan balance including loan interest at the time of contract termination, distribution to the Participant under the terms of the Plan, or if the loan is in default under the terms of the applicable Plan or the Code. PAGE 18 CONTRACT TRANSFER, TERMINATION Withdrawals for Contract Owner Transfer of Funds The Owner may direct the Company to withdraw the contract value to transfer to another funding agent. Applicable withdrawal charges and administrative charges described in this Contract shall be deducted from the first withdrawal payment unless the contract value is transferred to another product or similar plan then offered by the Company or its affiliates. The Owner must provide the Company at least 30 days prior written notice of its intent to make such a withdrawal. This written notice shall be sent to the Company's Home Office and shall specify the initial withdrawal date and payee to whom the withdrawal payments are to be made. The Company shall pay the contract value less any applicable charges in a lump sum or installments at the Owner's option, subject to the following: a. A lump sum payment from the Fixed Account values will be based on a Market Value of the Fixed Account value and will be paid within 30 days after the Owner's request is mailed to the Company. The Market Value will be determined by the Company in accordance with its established procedure for contracts in the same class of business as this Contract. (See Market Value Adjustment provision following.) b. The contract value balance may be paid in five annual installments beginning on the initial withdrawal date and then on each of the next four anniversaries of such date as follows: Installment % of Then-Remaining Payment Contract Value Balance 1 20% 2 25% 3 33% 4 50% 5 100% No additional withdrawals for benefits or other transfers of funds will be allowed and no additional Purchase Payments will be accepted after the first withdrawal payment is made. Market Value Adjustment Withdrawal of the Fixed Account Value under the Contract Transfer/Termination provision will be subject to a market value adjustment (MVA). The MVA will be applied to the amount being withdrawn from the Fixed Account after deduction of any applicable contract administrative and withdrawal charge. PAGE 19 CONTRACT TRANSFER, TERMINATION (Continued) The MVA will reflect the relationship between the current interest rate being credited to new Purchase Payments allocated to the Fixed Account and the rates being credited to all prior Purchase Payments. The MVA is calculated as follows: MVA = Fixed Account Value x (A - B) x C Where: A = the weighted average interest rate (in decimal form) being credited to all Fixed Account Purchase Payments at the time of termination, rounded to 4 decimal places. B = the interest rate (in decimal form) being credited on new Purchase Payments to the contract at the time of termination, rounded to 4 decimal places. C = the annuity factor, based on contract year, from the following table. Contract Year Annuity Factor 1-3 6.0 4-6 5.0 7+ 4.0 Contract Termination by the Company Contract Termination Date The Company reserves the right upon thirty (30) days' written notice to the Owner to declare a "Contract Termination Date", which shall be any date on or after the expiration of the thirty (30) day notification period. A Contract Termination Date may be declared if: a. The Owner adopts an amendment to the Plan that causes the Plan to be materially different from the Plan originally underwritten by the Company. To be "materially different", the amendment must cause a substantial change in the level of the dollar amounts of Purchase Payments or contract benefits to be paid by the Company, or b. The Plan fails to qualify or becomes disqualified under the appropriate Sections of the Code. If the Company waives its right to terminate the Contract under any provision of this Section at any time, such waiver shall not be considered a precedent and shall not prohibit the Company from exercising the right to terminate this contract for the reasons noted above, at any future time. PAGE 20 CONTRACT TRANSFER, TERMINATION (Continued) Procedures at Contract Termination Date If a Contract Termination Date has been declared, the Company shall, on the Contract Termination Date, withdraw any contract administrative charge from the contract value. A Withdrawal Charge, described further in the Withdrawal section of this Contract, will be payable by the Owner on account of any termination under this section and shall be deducted from the first termination payment. At the Owner's option, and as specified in the Contract Transfer section, the Company shall pay the remaining Contract Value balance in a lump sum or installments. A lump sum payment will be subject to an applicable Market Value Adjustment to the Fixed Account Value. If the Owner does not select an option, the Company will pay the remaining contract value balance to the Contract Owner under the installment option. PAGE 21 ANNUITY SETTLEMENT PROVISIONS Withdrawals for Annuity Purchases Subject to other terms and conditions of this Contract, the Owner may direct the Company to withdraw all or part of the Contract Value to purchase immediate annuities from the Company to provide Contract Benefits to payees specified by the Owner. If the amount to be applied to purchase an immediate annuity would not provide a monthly payment of at least $20.00, the Company has the right to pay the withdrawal amount in a lump sum. Withdrawals under this Section will not be subject to the Withdrawal Charge. The immediate annuities which may be purchased by the Owner shall be in the form then customarily offered by the Company for business in this class. The Owner must provide the Company at least 30 days prior written notice of its intent to make a withdrawal to purchase an annuity. This written notice shall be sent to the Company's Home Office and shall contain such information as the Company shall require to effect such a purchase, including satisfactory evidence of the annuitant's age. The price of the immediate annuities which may be purchased under this Section shall be determined by the applicable Annuity Purchase Rates described below. Where applicable, state premium tax is payable by the Owner on the account of the purchase of an annuity under this Section. The Company will withdraw an amount specified by the Contract Owner from the contract value, deduct the state premium tax, if any, from the amount and apply the balance as the annuity purchase payment. The Company guarantees payment of the annuity benefits to each payee for whom an annuity is purchased under this Contract and will send to the Owner for delivery to the payee a nontransferable supplemental annuity contract describing the amount of the annuity benefit and the terms governing its payment. Annuity Purchase Rates The single premium to provide annuity benefits in accordance with this Section shall be based on the Company's published annuity purchase rates in effect for contracts in this class of business on the date the single premium is withdrawn from the contract value to purchase the annuity benefit payments. With respect to annuity benefit payments purchased prior to the 20th Contract Anniversary, the annuity purchase rates shall not exceed the rates specified in Table I of this Article. PAGE 22 ANNUITY SETTLEMENT PROVISIONS (Continued) Table I Premium to Purchase $10 of Monthly Annuity Benefit Payments* Participant's Life with Adjusted Age** Life Annuity*** 10 Year Certain*** 55 $2066.12 $2083.33 56 2032.52 2053.39 57 2000.00 2020.20 58 1964.64 1988.07 59 1926.78 1953.13 60 1890.36 1915.71 61 1851.85 1879.70 62 1811.59 1845.02 63 1769.91 1808.32 64 1730.10 1769.91 65 1689.19 1733.10 66 1644.74 1694.92 67 1602.56 1655.63 68 1557.63 1615.51 69 1512.86 1577.29 70 1468.43 1538.46 * Annuity purchase rates not shown above will be calculated on the same basis as those rates shown above. ** Adjusted age is the age nearest birthday when annuity benefit payments are purchased minus the following adjustment for the participant's calendar year of birth: Calendar Year Calendar Year of Birth Adjustment of Birth Adjustment Before 1920 0 1945 to 1949 - 6 1920 to 1924 - 1 1950 to 1959 - 7 1925 to 1929 - 2 1960 to 1969 - 8 1930 to 1934 - 3 1970 to 1979 - 9 1935 to 1939 - 4 1980 to 1989 -10 1940 to 1944 - 5 After 1989 -11 *** The annuity purchase rates contained herein are exclusive of state premium tax. The applicable state premium tax is payable upon any annuity purchase as specified above. PAGE 23 GROUP DEFERRED ANNUITY CONTRACT - - Group Deferred Variable Annuity - Unallocated - Nonparticipating - - Optional Fixed Dollar or Variable Accumulation Values - - Fixed Dollar Annuity Payments IDS Life Insurance Company IDS Tower 10 Minneapolis, MN 55440 EX-99 7 5 VARIABLE GROUP DEFERRED ANNUITY CONTRACT APPLICATION PAGE 1 Application for Group Deferred Variable Annuity Contract as a Funding Vehicle for a Qualified Retirement Plan. Application is hereby made to IDS Life Insurance Company of Minneapolis, Minnesota (the Company) for issuance of a Group Deferred Annuity Contract (the Contract) containing the following specifications: Trustee ___________________________________________ Employer/Plan Sponsor ___________________________________________ Address ___________________________________________ ___________________________________________ Investment Election Indicate which of the following variable accounts/mutual funds are initially authorized as investments by the Applicant. Note: The Fixed Account and Moneyshare Fund shall always be authorized. Fixed Account ____ Managed Fund ____ Moneyshare Fund ____ International Equity Fund ____ Capital Resource Fund ____ Aggressive Growth Fund ____ Special Income Fund ____ _________________________ ____ The Applicant understands that the contract issued from this application contains certain fees and charges including, but not limited to, withdrawal charges and mortality and expense risk fees. Upon request by the Company, the Applicant agrees to obtain from the Employer/Plan Sponsor, certification that the above-named plan is qualified under the applicable Section(s) of the United States Internal Revenue Code. The Applicant acknowledges receipt of a copy of the Retirement Annuity Mutual Fund prospectuses for the applicable funds listed above. For Ohio residents only: Any person who, with intent to defraud or knowing that he or she is facilitating a fraud against an insurer, submits an application or files a claim containing a false or deceptive statement is guilty of insurance fraud. Dated At: _______________________________ Date:____________ Applicant: _________________________________________________ Name of Trustees By: _________________________________________________ Authorized Signatures (Trustees) PAGE 2 By: _________________________________________________ Authorized Signatures (Trustees) Countersigned: _________________________________________________ Agent Signature Plan Recordkeeper: ________________________________________________ ________________________________________________ Name and Address: ________________________________________________ ________________________________________________ EX-99 8 6.1 CERTIFICATE OF INCORPORATION OF IDS LIFE PAGE 1 CERTIFICATE OF INCORPORATION OF IDS LIFE INSURANCE COMPANY We, the undersigned, for the purpose of forming an insurance corporation under and pursuant to the provisions of the Minnesota Statutes, Chapter 300 relating thereto, and of any amendments thereof, do hereby associate ourselves as a body corporate and do hereby adopt the following Articles of Incorporation: ARTICLE I The name of this Corporation shall be IDS Life Insurance Company. ARTICLE II The purposes of and general nature of its business shall be: (a) To engage in the general business of a life insurance company, and to effect all forms, types, variations and combinations of life insurance, endowment or annuity contracts or policies, on a group or individual basis, for the payment of money in a single sum or in installments upon the contingencies of death, disability or survivorship. To provide in such policies or contracts supplemental thereto, for additional benefits in the event of the death of the insured by accidental means, total and permenent [sic] disability of the insured, or specific dismemberment or disablement suffered by the insured. (b) To engage in the general business of an accident and health insurance company, for the purpose of effecting insurance against loss or damage by the sickness, bodily injury or death by accident of the assured or his dependents, on a group or individual basis; to effect all forms, types, variations and combinations of policies or contracts of insurance providing for indemnities in the event of death, sickness or disability. (c) To effect contracts of reinsurance or co-insurance of any individual or group risk underwritten by this Corporation, to reinsure risks of this Corporation or any part thereof with any other company or to reinsure the whole of or any portion of the risks of any other company. (d) To effect all other contracts of insurance authorized by clauses (4) and (5)(a) of subdivision 1 of Section 60.29 of Minnesota Statutes. PAGE 2 (e) To have one or more offices and to conduct business in this state or elsewhere. (f) To acquire, hold and dispose of shares of stock, notes, bonds or other evidences of indebtedness or securities of any other corporation or corporations. (g) To transact all business and to do all other things necessary or incidental to the foregoing purposes. ARTICLE III The duration of this Corporation shall be perpetual. ARTICLE IV The principal place of transacting the business of this Corporation shall be the City of Minneapolis, State of Minnesota. ARTICLE V 2/9/72 10/18/85 The capital stock of this Corporation shall consist of One Hundred Thousand (100,000) shares of stock with a par value of Thirty Dollars ($30.00) per share. The amount of stated capital of this Corporation shall be Three Million Dollars ($3,000,000). ARTICLE VI (1) The general management of this Corporation shall be vested in a Board of Directors. (2) The names and post office addresses of the members of the first Board of Directors are respectively as follows: Joseph M. Fitzsimmons 800 Investors Building Minneapolis 2, Minnesota John W. McCartin 800 Investors Building Minneapolis 2, Minnesota Virgil C. Sullivan 800 Investors Building Minneapolis 2, Minnesota A. Edward Archibald 800 Investors Building Minneapolis 2, Minnesota Harold E. Miller, M.D. 1531 Medical Arts Building Minneapolis 2, Minnesota Said named Directors shall serve as such until the first annual meeting of the shareholders of the Corporation and until their successors have been duly elected and qualified. PAGE 3 ARTICLE VII The first Board of Directors of this Corporation shall have full power and authority to make and adopt By-Laws for the government of this Corporation and its affairs as they may deem advisable or necessary and as shall not be inconsistent with the provisions of these Articles. The By-Laws may be amended or altered by the shareholders at any regular or special meeting called therefor. ARTICLE VIII These Articles of Incorporation may be amended by the affirmative vote of the holders of a majority of the voting power of the capital stock. ARTICLE IX The first meeting of the Corporation shall be a meeting of the Incorporators and Subscribers to the capital stock of the Corporation. Three days' written notice of such meeting shall be given unless there is a written Waiver of Notice. ARTICLE X The names and post office addresses of the Incorporators are as follows: Lloyd J. Muehlberg 800 Investors Building Minneapolis 2, Minnesota Joseph F. Grinnell 800 Investors Building Minneapolis 2, Minnesota Edward M. Burke 800 Investors Building Minneapolis 2, Minnesota IN TESTIMONY WHEREOF we have set our hands this 23rd day of July, 1957. IN PRESENCE OF: Lloyd J. Muehlberg M. Gould Joseph F. Grinnell D. Fairchild Edward M. Burke State of Minnesota ) ) SS. County of Hennepin ) On this 23rd day of July, 1957, before me, a Notary Public, personally appeared Lloyd J. Muehlberg, Joseph F. Grinnell, and Edward M. Burke, to me known to be the persons named in and who executed the foregoing instrument, and they acknowledged to me that they executed the same as their free act and deed and for the uses and purposes therein expressed. PAGE 4 (Notarial seal) Helen M. Bochnak Helen M. Bochnak Notary Public, Hennepin County, Minn. My Commission Expired Nov. 12, 1958 APPROVAL OF COMMISSIONER OF INSURANCE The foregoing Certificate of Incorporation of Investors Syndicate Life Insurance and Annuity Company is hereby approved this 24th day of July, 1957. Cyril C. Sheehan Commissioner of Insurance State of Minnesota J.O.M. EX-99 9 6.2 AMENDED BY-LAWS OF IDS LIFE PAGE 1 AMENDED BY-LAWS OF IDS LIFE INSURANCE COMPANY ARTICLE I OFFICES Section 1. The principal place of transacting the business of this Corporation shall be in the City of Minneapolis, State of Minnesota. Section 2. The Corporation may also have offices at such other places, within or without the State, as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE II STOCKHOLDERS' MEETINGS Section 1. All meetings of stockholders for the election of Directors shall be held at the principal office of the Corporation in the City of Minneapolis, Minnesota. Meetings of stockholders for any other purpose may be held at such place, within or without the State of Minnesota, and at such time as may be designated in the call and notice thereof. Section 2. The annual meeting of stockholders for the election of Directors and the transaction of such other business as may properly come before the meeting shall be held on the Wednesday following the first Tuesday on or after the nineteenth day of April in each year, at 10:30 o'clock A.M. Election of Directors shall be by plurality vote. Section 3. In the event the stockholders shall fail to hold an annual meeting at the time specified therefor in Section 2 of this Article, or the Directors are not elected thereat, Directors may be elected at a special meeting held for that purpose upon call and notice as hereinafter provided for a special meeting of stockholders. Section 4. Special meetings of stockholders may be called for any purpose or purposes at any time by the President, the Secretary, the Board of Directors, any two or more members of the Board of Directors or in the manner hereinafter provided by one or more stockholders holding not less than one-tenth of the issued and outstanding stock entitled to vote. Upon request in writing by registered mail or delivered in person to the President, any Vice President, or Secretary, by any person or persons entitled to call a meeting of stockholders, such officer shall forthwith cause notice to be given to the stockholders entitled to vote at a special meeting of stockholders to be held at such time and place as such officer shall fix, not less than ten pr more than sixty days after the receipt of such request. Any such request shall state the purpose or purposes of the proposed meeting. PAGE 2 Section 5. Written notice of each meeting of stockholders, stating the time and place, and in case of a special meeting the purpose thereof, shall be served upon or mailed to each stockholder of record entitled to vote thereat at such address as appears on the stock register of the Corporation, at least ten days before such meeting. Section 6. Notice of the time, place and purpose of any meeting of shareholders, whether required by statute, by the Articles of Incorporation or by these By-Laws, may be waived in writing by any stockholder. Such waiver may be given before or after the meeting, and shall be filed with the Secretary or entered upon the records of the meeting. Section 7. Business transacted at all special meetings shall be confined to the objects stated in the call. Section 8. The presence, at any meeting of stockholders, in person or by proxy of the holders of a majority of the stock entitled to vote thereat shall constitute a quorum for the transaction of business, except as otherwise provided by statute. If, however, a quorum shall not be present at any meeting of the stockholders, the stockholders present in person or by proxy shall have power to adjourn the meeting from time to time, until a quorum shall be present. If any meeting of stockholders be adjourned to another time or place, whether for lack of quorum or otherwise, no notice as to such adjourned meeting need be given other than by an announcement, giving the time and place thereof, at the meeting at which the adjournment is taken. At such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally noticed. The stockholders present at a duly called or held meeting at which a quorum is present may continue to transact business until final adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. Section 9. At each meeting of the stockholders, every stockholder of record at the date fixed by the Board of Directors as the record date for the determination of the persons entitled to vote at a meeting of stockholders, or, of not date has been fixed, then at the date of the meeting, shall be entitled at such meeting to one vote for each share having voting power standing in his name on the books of the Corporation. A stockholder may cast his vote or votes in person or by proxy. The appointment of a proxy shall be in writing filed with the Secretary at or before the meeting. ARTICLE III BOARD OF DIRECTORS Section 1. The number of directors which shall constitute the whole Board shall not be less than three nor more than fourteen, as the stockholders may from time to time determine. The President of the Corporation shall be a Director. Directors shall be elected at the annual meeting of the stockholders of the Corporation, except that if the number of directors is increased at any time other than at an annual meeting of stockholders, an PAGE 3 additional Director or Directors to fill the places on the Board created by any such increase may be elected at a special meeting of stockholders called for that purpose. Each Director shall be elected to serve until the next annual meeting of the stockholders and until his successor shall be elected and shall quality. Section 2. Vacancies in the Board of Directors, not to exceed one-third of the members of the Board in any one year, shall be filled by the remaining members of the Board, though less than a quorum, and each person so elected shall be a Director until his successor is elected by the stockholders who may make such election at their next annual meeting or at any special meeting called for that purpose. A vacancy in the Board of Directors, which cannot be filled by the remaining members of the Board, shall be filled by the stockholders at any special meeting called for that purpose. Section 3. The Board of Directors shall have the general management, control and supervision of all business and affairs of the Corporation, and shall fix and change, as it may from time to time determine, by majority vote, the compensation to be paid Directors, officers and agents of the Corporation, and do all such lawful acts and things as are not by statue [sic] or by the Articles of Incorporation or by the By-Laws directed or required to be exercised or done by the stockholders. ARTICLE IV EXECUTIVE COMMITTEE Section 1. The Board of Directors may, by affirmative action of the entire Board, designate two or more of their number, one of which shall be the President, to constitute an Executive Committee, which, to the extent determined by affirmative action of the entire Board, shall have and exercise the authority of the Board in the management of the business or the Corporation. Any such Executive Committee shall act only in the interval between meetings of the Board, and shall be subject at all times to the control and direction of the Board. The Executive Committee shall keep regular minutes of its proceedings and report the same to the Board. ARTICLE V MEETINGS OF THE BOARD OF DIRECTORS Section 1. The annual meeting of the Board of Directors of the Corporation shall be held at its principal office in the City of Minneapolis, Minnesota, as soon as practicable after the final adjournment of the annual meeting of the stockholders in each year, and no notice of such meeting shall be necessary to the newly elected Directors in order to legally constitute the meeting provided a quorum shall be present; except, however, that such meeting may be held at such other place, whether in this state or elsewhere, as a majority of the Board of Directors may have previously determined. PAGE 4 Section 2. Regular meetings of the Board of Directors may be held without notice at such time and place either within or without the State of Minnesota, as shall from time to time have been previously determined by the Board. Section 3. Special meetings of the Board may be called by the President on two days notice to each Director, either personally or by mail or telegram; special meetings shall be called by the President or Secretary in like manner and on like notice on the written request of two Directors. Any Directors may, in writing, either before or after the meeting, waive notice thereof; and, without notice, any Director by his attendance at and participation in the action taken at the meeting shall be deemed to have waived notice. Section 4. At all meetings of the Board of Directors, a majority of the Directors shall be necessary and sufficient to constitute a quorum for the transaction of business; and the acts of a majority of the Directors present at a meeting at which a quorum is present shall be the acts of the Board of Directors. If a quorum shall not be present at any meeting of Directors, the Directors present thereat may adjourn the meeting from time to time, until a quorum shall be present. No notice of an adjourned meeting, whether for lack of quorum or otherwise, need be given other than by announcement, giving the time and place thereof, at the meeting at which the adjournment is taken. Section 5. Any action, which might be taken at a meeting of the Board of Directors, may be taken without a meeting if done in writing signed by all of the Directors. ARTICLE VI NOTICES Section 1. Whenever under the provisions of statutes or of the Articles of Incorporation or of the By-Laws, notice is required to be given to any Directors or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing by depositing the same in a post office or letter box, in a postpaid sealed wrapper, addressed to such Director or stockholder at such address as appears on the stock register or books of this Corporation, or, in default of address appearing in the stock register of the Corporation or any known address, to such Director or stockholder at the Main Post Office in the City of Minneapolis, Minnesota, and such notice shall be deemed to be given at the time when the same shall thus be mailed. ARTICLE VII OFFICERS Section 1. The officers of the Corporation shall be a Chairman of the Board, a President, one or more Vice Presidents (the number thereof to be determined by the Board of Directors), a Treasurer, a Secretary, a Medical Director, and such Assistant Treasurers, Assistant Secretaries, and such other officers as the PAGE 5 Board of Directors may deem necessary. All officers of the Corporation shall exercise such powers and perform such duties and shall be set forth in these By-Laws and as shall be determined from time to time by the Board of Directors or by the President. Any two of the offices, except those of President and Vice President, Treasurer and Assistant Treasurer, and Secretary and Assistant Secretary may be held by the same person. Section 2. The Board of Directors, at its annual meeting, shall elect a Chairman of the Board, a President, a Secretary, a Treasurer, a Medical Director and such Executive Vice Presidents or Senior Vice Presidents as the Board shall determine. Only the Chairman of the Board and the President need be a member of the Board. The President, or his designee, may appoint any other officers permitted by Section 1 of this Article. Section 3. The officers of the Corporation shall, except in the event of death, resignation, or removal by the Board of Directors, hold office until their successors are chosen and quality in their stead. Any officer elected by the Board of Directors may be removed at any time by the Board of Directors with or without cause; such removal, however, shall be without prejudice to the contract rights, if any, of the person so removed. When a vacancy for any reason occurs among the officers, the Board of Directors shall have the power to elect a successor to fill such vacancy for the unexpired term. Section 4. Chairman of the Board. The Chairman of the Board shall preside at all meetings of the stockholders and of the Board of Directors, and will perform such other duties as are assigned to him by the Board of Directors. Section 5. President. The President shall be the chief executive officer of the Corporation. He shall have general and active supervision and direction over the business affairs of the Corporation and over its several officers, subject to the control of the Board of Directors whose policies he shall execute. He shall see that all lawful orders and resolutions of the Board of Directors and of the Executive Committee are carried into effect and he shall make or cause to be made timely and appropriate reports to the Board of Directors of all matters which in the interest of the Corporation are required to be brought to their notice. He shall be a member of the Executive Committee and shall preside at its meetings and he shall ex officio be a member of all standing committees or other committees as may be from time to time constituted or appointed by the Board of Directors. Section 6. Secretary. The Secretary shall attend all meetings of the Board of Directors and of the stockholders and record their proceedings in a book to be kept for that purpose, and shall perform like duties for the Executive Committee when required. In case the Secretary shall be absent from any meeting, the Chairman of the meeting may appoint a temporary secretary to act at such meeting. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors. He shall have the custody of the stock register, minute books and the seal of the Corporation, PAGE 6 and shall make such reports and perform such other duties as are incident to this office or are properly required of him by the Board of Directors. Section 7. Treasurer. The Treasurer, unless otherwise ordered by the Board of Directors, shall have the custody of all the funds and securities of the Corporation, and shall deposit all monies and valuables in the name of and to the credit of the Corporation in such banks or depositories as the Board of Directors may designate, and shall keep regular books of account, and shall have custody of the books and records incident to his office and such as the Board of Directors may direct, and he shall have such other powers and shall perform such other duties as are incident to his office or which are properly required of him by the Board of Directors. Section 8. Medical Director. The Medical Director shall, under the direction of the Board of Directors, appoint all medical examiners for this Corporation and shall have such other powers and shall perform such other duties as are incident to his office or which are properly required of him by the Board of Directors. In his absence or inability to act, an assistant, designated by the Executive Committee, may act for and in his stead. Section 9. The powers and duties of all other officers shall be such as are usual in like corporations under the direction and control of the Board of Directors. ARTICLE VIII CLOSING OF TRANSFER BOOKS AND FIXING OF RECORD DATE Section 1. The Board of Directors may fix a time, not less than twenty nor more than forty days preceding the date of any meeting of stockholders, as a record date for the determination of the stockholders entitled to notice of any to vote at such meeting, and in such case by stockholders of record on the date so fixed, or their legal representatives, shall be entitled to notice of and to vote at such meeting, notwithstanding any transfer of any shares on the books of the Corporation after any record date so fixed. The Board of Directors may close the books of the Corporation against transfers of shares during the whole or any part of such period. Section 2. The Board of Directors may fix a time not exceeding forty days preceding the date fixed for the payment of any dividend or distribution, or the date for the allotment of rights, or, subject to contract rights with respect thereto, the date when any change or conversion or exchange of shares shall be made or go into effect, as a record date for the determination of the stockholders entitled to receive payment of any such dividend, distribution or allotment of rights or to exercise rights in respect to any such change, conversion or exchange of shares, and in such case only stockholders of record on the date so fixed shall be entitled to receive payment of such dividend, distribution or allotment of rights or to exercise such rights of change, conversion or exchange of shares, as the case may be, PAGE 7 notwithstanding any transfer of any shares on the books of the Corporation after any record date fixed as aforesaid. The Board of Directors may close the books of the Corporation against the transfer of shares during the whole or any part of such period. ARTICLE IX MISCELLANEOUS Section 1. The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof, and, accordingly, shall not be found to recognize any equitable or other claim to or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof, except as expressly provided by the laws of the State of Minnesota. Section 2. The Corporation 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 Manager of Variable Annuity Funds A and B, director, officer, employee or agent of this Corporation, or is or was serving at the direction of the Corporation as a Manager of Variable Annuity Finds A and B, 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 Manager of Variable Annuity Funds A and B, 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. ARTICLE X LOST STOCK CERTIFICATES Section 1. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been destroyed or lost upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost or destroyed, and the Board of Directors, when authorizing such issue of a new certificate or certificates, may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or give the Corporation a bond in such sum as it may direct, to indemnify the Corporation against any claim arising from the issues of such new certificate. PAGE 8 ARTICLE XI POLICIES, CONTRACTS AND CONVEYANCES Section 1. Subject to the provisions of Section 2 of the Article, the President or any Vice President may with the Secretary or any Assistant Secretary, sign, cause the corporate seal to be affixed thereto when necessary, acknowledge and deliver all conveyances, contracts, deeds, notes, mortgages, satisfactions, leases, assignments, licenses, transfers, powers of attorney, certificates for shares of stock, and all other similar and dissimilar instruments. The Board of Directors may by resolution authorize any officer or officers alone or with another officer or officers, to sign, or counter-sign, cause the corporate seal to be affixed thereto when necessary, acknowledge and deliver any written instrument, or class of written instruments, for and on behalf of this Corporation. Section 2. All insurance, annuity or endowment policies or contracts issued by this Corporation and all reinsurance agreements of this Corporation shall be signed by the President or a Vice President and the Secretary or an Assistant Secretary. The signature of any of said officers, on the foregoing or any other instrument may be a facsimile signature, if the same is countersigned by an officer or employee duly authorized by the Board of Directors or Executive Committee of this Corporation to counter-sign the same. Section 3. All checks, demands for money, and notes of the Corporation shall be signed by such officer or officers or such other person or persons as may from time to time be authorized by the Board of Directors. ARTICLE XII AMENDMENTS OF BY-LAWS Section 1. These By-Laws may be altered at any regular meeting of the stockholders, or at any special meeting of the stockholders at which a quorum is present or represented, provided notice of the proposed alternation is contained in the notice of such meeting, by the affirmative vote of the holders of a majority of the shares issued and outstanding and entitled to vote at such meeting and present or represented thereat. EX-99 10 10 CONSENT OF INDEPENDENT AUDITORS PAGE 1 Consent of Independent Auditors We consent to the reference to our firm under the captions "Experts" and "Independent Auditors" and to the use of our reports dated February 3, 1994 on the consolidated financial statements and financial statement schedules of IDS Life Insurance Company and our report dated March 18, 1994 on the financial statements of IDS Life Accounts F, IZ, JZ, G, H and N for the Group Variable Annuity Contract to be offered by IDS Life Insurance Company, in Post- Effective Amendment No. 2 to the Registration Statement (Form N-4 No. 33-47302) being filed under the Securities Act of 1933 and the Investment Company Act of 1940. Ernst & Young Minneapolis, Minnesota April 27, 1994 EX-99 11 11 FINANCIAL STATEMENT SCHEDULES AND REPORT OF INDEPENDENT AUDITORS PAGE 1 Report of Independent Auditors The Board of Directors IDS Life Insurance Company We have audited the consolidated financial statements of IDS Life Insurance Company as of December 31, 1993 and 1992, and for each of the three years in the period ended December 31, 1993, and have issued our report thereon dated February 3, 1994 (included elsewhere in this Registration Statement). Our audits also included the financial statement schedules I, V, VI, VIII and IX included elsewhere in this Registration Statement. These schedules are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. Ernst & Young Minneapolis, Minnesota February 3, 1994 PAGE 2 IDS LIFE INSURANCE COMPANY SCHEDULE I - CONSOLIDATED SUMMARY OF INVESTMENTS OTHER THAN INVESTMENTS IN RELATED PARTIES ($ thousands) AS OF DECEMBER 31, 1993
________________________________________________________________________________________ Column A Column B Column C Column D Type of Investment Cost Value Amount at which shown in the balance sheet ________________________________________________________________________________________ Fixed maturities: Bonds: United States Government and government agencies and authorities (a) $ 5,591,309 $ 5,737,439 $ 5,591,309 States, municipalities and polictical subdivisions 11,072 13,452 11,072 All other corporate bonds 13,790,043 14,675,088 13,790,043 ____________ _____________ ______________ Total fixed maturities 19,392,424 20,425,979 19,392,424 Mortgage loans on real estate 2,055,450 XXXXXXXXX 2,055,450 Policy loans 350,501 XXXXXXXXX 350,501 Other investments 56,307 XXXXXXXXX 56,307 ____________ ______________ ______________ Total investment $ 21,854,682 $ XXXXXXXXX $ 21,854,682 ____________ ______________ ______________ (a) - Includes mortgage-backed securities with a cost and market value of $5,527,777 and $5,671,783 respectively.
PAGE 3 IDS LIFE INSURANCE COMPANY SCHEDULE V - SUPPLEMENTARY INSURANCE INFORMATION ($ thousands) FOR THE YEAR ENDED DECEMBER 31, 1991
Column A Column B Column C Column D Column E Column F Segment Deferred Future Unearned Other policy Premium policy policy premiums claims and revenue acquisition benefits benefits cost losses, payable claims and loss expenses Annuities $ 693,184 $13,663,477 $ - $ 30,041 $ - Life, DI, Long-Term Care and Health Insurance 518,439 2,654,915 - 21,205 102,338 Total $1,211,623 $16,318,392 $ - $ 51,246 $102,338
Column A Column G Column H Column I Column J Column K Segment Net Benefits, Amortization Other Premiums investment claims, of deferred operating written income losses and policy expenses settlement acquisition expenses costs Annuities $1,189,038 $ 1,639 $ 63,821 $ 66,068 $ N/A Life, DI, Long-Term Care and Health Insurance 233,828 88,577 52,257 87,601 N/A Total $1,422,866 $90,216 $116,078 $ 153,669 N/A
IDS LIFE INSURANCE COMPANY SCHEDULE V - SUPPLEMENTARY INSURANCE INFORMATION ($ thousands) FOR THE YEAR ENDED DECEMBER 31, 1992
Column A Column B Column C Column D Column E Column F Segment Deferred Future Unearned Other policy Premium policy policy premiums claims and revenue acquisition benefits benefits cost losses, payable claims and loss expenses Annuities $ 860,027 $16,342,419 $ - $ 28,705 $ - Life, DI, Long-Term Care and Health Insurance 580,848 2,883,469 - 21,194 114,379 Total $1,440,875 $19,225,888 $ - $ 49,899 $114,379
Column A Column G Column H Column I Column J Column K Segment Net Benefits, Amortization Other Premiums investment claims, of deferred operating written income losses and policy expenses settlement acquisition expenses costs Annuities $1,370,145 $ 1,870 $ 81,706 $ 100,928 $ N/A Life, DI, Long-Term Care and Health Insurance 246,676 106,528 58,453 114,764 N/A Total $1,616,821 $108.398 $140,159 $ 215,692 N/A
PAGE 4 IDS LIFE INSURANCE COMPANY SCHEDULE V - SUPPLEMENTARY INSURANCE INFORMATION ($ thousands) FOR THE YEAR ENDED DECEMBER 31, 1993
Column A Column B Column C Column D Column E Column F Segment Deferred Future Unearned Other policy Premium policy policy premiums claims and revenue acquisition benefits benefits cost losses, payable claims and loss expenses Annuities $1,008,378 $18,492,135 $ - $ 21,508 $ - Life, DI, Long-Term Care and Health Insurance 644,006 3,148,932 - 23,008 127,245 Total $1,652,384 $21,641,067 $ - $ 44,516 $127,245
Column A Column G Column H Column I Column J Column K Segment Net Benefits, Amortization Other Premiums investment claims, of deferred operating written income losses and policy expenses settlement acquisition expenses costs Annuities $1,532,995 $ 3,656 $139,602 $ 122,999 $ N/A Life, DI, Long-Term Care and Health Insurance 250,224 119,335 72,131 118,975 N/A Total $1,783,219 $122,991 $211,733 $ 241,974 N/A
PAGE 5 IDS LIFE INSURANCE COMPANY SCHEDULE VI - REINSURANCE ($ thousands) FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
____________________________________________________________________________________________________________________ Column A Column B Column C Column D Column E Column F Gross amount Ceded to other Assumed from Net % of amount companies other companies Amount assumed to net ____________________________________________________________________________________________________________________ For the year ended December 31, 1993 Life insurance in force $ 44,188,493 $ 3,038,426 $ 2,015,382 $ 43,165,449 4.67% ____________________________________________________________________________________________________________________ Premiums: Life insurance $ 51,764 $ 3,627 $ -- $ 48,137 0.00% DI & health insurance 96,250 17,142 -- 79,108 0.00% ____________________________________________________________________________________________________________________ Total premiums $ 148,014 $ 20,769 $ -- $ 127,245 0.00% ____________________________________________________________________________________________________________________ For the year ended December 31, 1992 Life insurance in force $ 38,888,963 $ 2,937,590 $ 2,015,382 $ 37,966,755 5.31% ____________________________________________________________________________________________________________________ Premiums: Life insurance $ 53,238 $ 3,849 $ 330 $ 49,719 0.66% DI & health insurance 78,347 13,687 -- 64,660 0.00% ____________________________________________________________________________________________________________________ Total premiums $ 131,585 $ 17,536 $ 330 $ 114,379 0.29% ____________________________________________________________________________________________________________________ For the year ended December 31, 1991 Life insurance in force $ 34,596,113 $ 2,902,381 $ 2,020,900 $ 33,714,632 5.99% _____________________________________________________________________________________________________________________ Premiums: Life insurance $ 53,223 $ 3,902 $ 385 $ 49,706 0.77% DI & health insurance 59,844 7,212 -- 52,632 0.00% ____________________________________________________________________________________________________________________ Total premiums $ 113,067 $ 11,114 $ 385 $ 102,338 0.38% ____________________________________________________________________________________________________________________
PAGE 6 IDS LIFE INSURANCE COMPANY SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS ($ thousands) FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
____________________________________________________________________________________________________________________ Column A Column B Column C Column D Column E Additions -------------- Balance at Charged to Description Beginning Charged to Other Accounts- Deductions- Balance at End of Period Costs & Expenses Describe * Describe ** of Period ____________________________________________________________________________________________________________________ For the year ended December 31, 1993 - ------------------------------ Reserve for Mortgage Loans $23,595 $13,635 $0 $2,210 $35,020 Reserve for Fixed Maturities $37,899 ($15,122) $0 $22,777 Reserve for Other Investments $12,834 ($4,344) $0 ($2,210) $10,700 For the year ended December 31, 1992 - ------------------------------- Reserve for Mortgage Loans $16,131 $8,440 $0 $976 $23,595 Reserve for Fixed Maturities $45,100 ($7,601) $400 $0 $37,899 Reserve for Other Investments $7,782 $4,076 $0 ($976) $12,834 For the year ended December 31, 1991 - ------------------------------ Reserve for Mortgage Loans $12,655 $6,860 $0 $3,384 $16,131 Reserve for Fixed Maturities $26,096 $19,004 $0 $0 $45,100 Reserve for Other Investments $8,434 ($4,036) $0 ($3,384) $7,782 ____________________________________________________________________________________________________________________ * Cash received on bond previously written down ** Transfer between reserve accounts
PAGE 7 IDS LIFE INSURANCE COMPANY SCHEDULE IX - SHORT-TERM BORROWINGS ($ thousands) FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
_______________________________________________________________________________________________________ Column A Column B Column C Column D Column E Column F Maximum Average Weighted Weighted amount amount average Category of aggregate Balance average outstanding outstanding interest rate short-term borrowing at end interest during the during the during the of period rate period period period _______________________________________________________________________________________________________ 1993 Line of Credit $1,519 N/A $22,700 $1,297 3.70% 1992 Line of Credit $ 0 N/A $20,000 $ 825 5.45% 1991 Line of Credit $ 0 N/A $32,725 $1,483 7.28% _______________________________________________________________________________________________________
EX-99 12 13 SCHEDULE FOR COMPUTATION OF EACH PERFORMANCE QUOTATION IN RESPONSE TO ITEM 24 PAGE 1 IDS Life Group Variable Annuity Contract Performance Calculations NON-MONEY MARKET SUBACCOUNTS TOTAL RETURN The total return is the percentage change between the initial investment at the beginning of the period and the total value of the investment at the end of the period. Total Return = Ending Total Value - Initial Investment Initial Investment The ending total value includes income and capital gains distributions treated as reinvested. It also reflects deductions for the contract administrative charge, variable account administrative charge and the mortality and expense risk charge. AVERAGE ANNUAL TOTAL RETURN The average annual total return of a subaccount reflects the average annual compounded rate of return of a hypothetical investment over a period of one, five and ten years (or, if less, up to the life of the subaccount), calculated according to the following formula: P(1+T)n = ERV where: P = a hypothetical initial payment of $1000. T = average annual total return. n = number of years. ERV = ending redeemable value of a hypothetical $1,000 payment made at the beginning of the one, five or ten year periods (or fractional portion thereof). The average annual total return without withdrawal charge reflects the deduction of the contract administrative charge, variable account administrative charge and mortality and expense risk charge. The average annual total return with withdrawal charge reflects the above deductions and assumes the contract owner surrenders the entire contract at the end of the one, five and ten year periods. YIELD Yield quotations will be based on all investment income earned during a particular 30-day period, less expenses accrued during the period (net investment income) and will be computed by dividing net investment income per share by the value of a share on the last day of the period, according to the following formula: YIELD = 2 [( a - b + 1)6 - 1] cd PAGE 2 a = dividends and interest earned during the period. b = expenses accrued for the period (net of reimbursements). c = the average daily number of shares outstanding during the period that were entitled to receive dividends. d = the maximum offering price per share on the last day of the period. MONEY MARKET SUBACCOUNT YIELD Yield for the money market subaccount will be based on the net change in the value of a hypothetical investment (exclusive of capital changes) from the beginning of a seven day period for which the return will be quoted. A prorata share of fund expenses accrued over the seven day period is subtracted. The difference is divided by the value of the subaccount at the beginning of the period to obtain the base period return. The base period return is annualized by multiplying by 365/7. EFFECTIVE YIELD Calculation of effective yield begins with the same base period return used in the calculation of yield, which is then annualized to reflect compounding according to the following formula: Effective Yield = [(Base Period Return = 1)365/7] - 1 EX-99 13 14.2 POWER OF ATTORNEY PAGE 1 IDS LIFE INSURANCE COMPANY DIRECTORS POWER OF ATTORNEY City of Minneapolis State of Minnesota Each of the undersigned, as directors of the below listed unit investment trusts that previously have filed registration statements and amendments thereto pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940 with the Securities and Exchange Commission:
1933 Act 1940 Act Reg. Number Reg. Number IDS Life Accounts F, IZ, JZ, G, H and N IDS Life Flexible Annuity 33-4173 811-3217 IDS Life Accounts F, IZ, JZ, G, H and N IDS Life Variable and Combination Retirement Annuities 2-73114 811-3217 IDS Life Accounts F, IZ, JZ, G, H and N IDS Life Employee Benefit Annuity 33-52518 811-3217 IDS Life Accounts F, IZ, JZ, G, H and N IDS Life Group Variable Annuity Contract 33-47302 811-3217 IDS Life Insurance Company IDS Life Group Variable Annuity Contract (Fixed Account) 33-48701 N/A IDS Life Insurance Company IDS Life Market Value Annuity 33-28976 N/A IDS Life Insurance Company IDS Life Preferred Choice Annuity 33-50968 N/A IDS Life Variable Life Separate Account Flexible Premium Variable Life Insurance Policy 33-11165 811-4298 IDS Life Variable Life Separate Account IDS Life Single Premium Variable Life 2-97637 811-4298 IDS Life Variable Account for Smith Barney Shearson LifeVest Single Premium Variable Life 33-5210 811-4652 IDS Life Account SBS IDS Life Symphony Annuity 33-40779 812-7731 IDS Life Account RE IDS Life Real Estate Variable Annuity 33-13375 N/A IDS Life Variable Annuity Fund A 2-29081 811-1653 IDS Life Variable Annuity Fund B 2-47430 811-1674
hereby constitutes and appoints William A. Stoltzmann, Mary Ellyn Minenko and Colleen Curran or either one of them, as her or his attorney-in-fact and agent, to sign for her or him in her or his name, place and stead any and all filings, applications (including applications for exemptive relief), periodic reports, registration statements (with all exhibits and other documents required or desirable in connection therewith) other documents, and amendments thereto and to file such filings, applications, periodic reports, registration statements other documents, and amendments thereto with the Securities and Exchange Commission, and any necessary states, and grants to any or all of them the full power and authority to do and perform each and every act required or necessary in connection therewith. PAGE 2 Dated the 31st day of March, 1994. Louis C. Fornetti Janis E. Miller David R. Hubers James A. Mitchell Richard W. Kling Barry J. Murphy Paul F. Kolkman Stuart A. Sedlacek Peter A. Lefferts Melinda S. Urion -----END PRIVACY-ENHANCED MESSAGE-----