UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 30(a) OF THE INVESTMENT COMPANY ACT
OF 1940 AND SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to ______________________.
Commission file number 2-23772.
American Express Certificate Company
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(Exact name of registrant as specified in its charter)
Delaware 41-6009975
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
52 AXP Financial Center, Minneapolis, Minnesota 55474
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (612) 671-3131
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class: None Name of each exchange on which registered: None
Securities registered pursuant to Section 12(g) of the Act:
Title of class: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes __X__ No _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
Aggregate market value of the voting stock held by non-affiliates of the
registrant. None
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
150,000 Common shares
CERTAIN DOCUMENTS INCORPORATED BY REFERENCE.
None
The registrant meets the conditions set forth in General Instructions I(1)(a)
and (b) of Form 10-K and is therefore filing this Form with the reduced
disclosure format.
The Exhibit Index is located on sequential pages 18-22.
Item 1. Business
American Express Certificate Company (AECC), is incorporated under the
laws of Delaware. Its principal executive offices are located at 52 AXP
Financial Center, Minneapolis, Minnesota 55474, and its telephone number is
(612) 671-3131. American Express Financial Corporation (AEFC), a Delaware
corporation, 200 AXP Financial Center, Minneapolis, Minnesota 55474, owns 100%
of the outstanding voting securities of AECC. American Express Financial
Corporation is a wholly-owned subsidiary of American Express Company (American
Express), a New York Corporation, with headquarters at American Express Tower,
World Financial Center, New York, New York.
AECC is a face-amount certificate investment company registered under
the Investment Company Act of 1940 (1940 Act). AECC is in the business of
issuing face-amount certificates. Face-amount certificates issued by AECC
entitle the certificate owner to receive, at maturity, a stated amount of money
and interest or credits declared from time to time by AECC, in its discretion.
AECC currently offers nine certificates to the public: "American Express Cash
Reserve Certificate," "American Express Flexible Savings Certificate", "American
Express Installment Certificate," "American Express Preferred Investors
Certificate," "American Express Stock Market Certificate," "American Express
Market Strategy Certificate," "American Express Equity Indexed Savings
Certificates", "American Express Investors Certificate" (including a form of
American Express Investors Certificate offered to select investors who, among
other things, invest at least $100,000 in the certificate), and "American
Express Special Deposits." The American Express Special Deposits is marketed
only through offices of American Express Bank Ltd. (AEB) in England and Hong
Kong and is not registered for sale in the United States. All certificates are
currently sold without a sales charge. The American Express Installment
Certificate, the American Express Flexible Savings Certificate, the American
Express Stock Market Certificate, the American Express Preferred Investors
Certificate, the American Express Market Strategy Certificate, the American
Express Equity Indexed Savings Certificates, the American Express Investors
Certificate and the American Express Special Deposits currently bear surrender
charges for premature surrenders. All of the above described certificates,
except the American Express Special Deposits, are distributed pursuant to a
Distribution Agreement with American Express Financial Advisors Inc., an
affiliate of AECC. With respect to the American Express Investors Certificate
and a form of the American Express Stock Market Certificate, American Express
Financial Advisors Inc., in turn, has Selling Agent Agreements with American
Express Bank International (AEBI), an indirect subsidiary of American Express,
and Coutts & Co. (USA) International (Coutts), a subsidiary of National
Westminster Bank PLC, for selling the certificates. With respect to the American
Express Special Deposits, AECC has a Marketing Agreement with AEB, a direct
subsidiary of American Express, for marketing the certificate. With respect to
American Express Stock Market Certificate, American Express Financial Advisors
Inc. has a Selling Agent Agreement effective March 10, 1999 with Securities
America Inc., an affiliate of AECC. With respect to American Express Equity
Indexed Savings Certificates, American Express Financial Advisors Inc. has a
Selling Dealer Agreement effective
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July 31, 2000 with Securities America, Inc., an affiliate with AECC. There is no
assurance that American Express certificates will be sold by Securities America
Inc.
AEBI and Coutts are Edge Act corporations organized under the
provisions of Section 25(a) of the Federal Reserve Act. American Express
Financial Advisors Inc. has entered into a consulting agreement with AEBI under
which AEBI provides consulting services related to any selling agent agreements
between American Express Financial Advisors Inc. and other Edge Act
corporations.
AECC also offers one certificate in connection with certain employee
benefit plans available to eligible American Express Financial Corporation
employees, financial advisors, retirees, and eligible employees of the American
Express funds, and to IRAs of persons retired as employees or financial advisors
with American Express Financial Corporation. This certificate is called the
Series D-1 Investment Certificate.
Except for the American Express Investors Certificate and the American
Express Special Deposits, all of the certificates are available as qualified
investments for Individual Retirement Accounts (IRAs), or 401(k) plans and other
qualified retirement plans.
The specified maturities of the certificates range from ten to twenty
years. Within that maturity period, most certificates have interest rate terms
ranging from one to thirty-six months. Interest rates change and certificate
owners can surrender their certificates without penalty at term end.
The American Express Cash Reserve Certificate is a single payment
certificate that permits additional investments. AECC guarantees interest in
advance for a three-month term on these certificates.
The American Express Flexible Savings Certificate is a single payment
certificate that permits a limited amount of additional payments and on which
AECC guarantees interest in advance for a term of 6, 12, 18, 24, 30, or 36
months, and potentially other terms, at the investor's option.
The American Express Installment Certificate is an installment payment
certificate that declares interest in advance for a three-month period and
offers bonuses for up to four certificate years for regular investments.
The American Express Stock Market Certificate is a single payment
certificate that offers the certificate owner the opportunity to have all or
part of his/her interest tied to 52-week stock market performance, as measured
by a broad stock market index, with return of principal guaranteed by AECC. The
owner can also choose to earn a fixed rate of interest. This certificate is also
marketed by AEBI and Coutts, under Selling Agent Agreements with American
Express Financial Advisors Inc., to AEBI's clients and certain of Coutts'
clients, respectively, who are neither citizens nor residents of the United
States.
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The American Express Market Strategy Certificate is a flexible payment
certificate that pays interest at a fixed rate or that offers the owner the
opportunity to have all or part of his/her interest tied to 52-week stock market
performance as measured by a broad stock market index, for a series of 52-week
terms starting every month or at intervals the owner selects.
The American Express Investors Certificate is a single payment
certificate that generally permits additional payments within 15 days of term
renewal. Interest rates are guaranteed in advance by AECC for a term of 1, 2, 3,
6, 12, 24, or 36 months, at the investor's option. This certificate is currently
sold by AEBI and Coutts, under Selling Agent Agreements with American Express
Financial Advisors Inc., only to AEBI's clients and certain of Coutts' clients,
respectively, who are neither citizens nor residents of the United States.
The American Express Preferred Investors Certificate is a single
payment certificate that combines a fixed rate of return with AECC's guarantee
of principal for investments of $250,000 to $5,000,000. Interest rates are
guaranteed in advance by AECC for a term of 1, 2, 3, 6, 12, 24 or 36 months, at
the investor's option.
The American Express Special Deposits Certificate is a single payment
certificate that generally permits additional payments within 15 days of term
renewal. Interest rates are guaranteed in advance by AECC for a term of 1, 2, 3,
6, 12, 24, or 36 months, at the investor's option. This certificate is currently
marketed by AEB through its London and Hong Kong offices, under a Marketing
Agreement with AECC, only to AEB's clients who are neither citizens nor
residents of the United States. This certificate is not registered for sale in
the United States.
To AECC's knowledge, AECC is by far the largest issuer of face-amount
certificates in the United States. However, such certificates compete with many
other investments offered by banks, savings and loan associations, mutual funds,
broker-dealers and others, which may be viewed by potential clients as offering
a comparable or superior combination of safety and return on investment. In
particular, some of AECC's products are designed to be competitive with the
types of investment offered by banks and thrifts. Since AECC's face-amount
certificates are securities, their offer and sale are subject to regulation
under federal and state securities laws. AECC's certificates are backed by its
qualified assets on deposit and are not insured by any governmental agency or
other entity.
For all the certificates, except for the American Express Investors
Certificate, American Express Preferred Investors Certificate, and the American
Express Special Deposits, AECC's current policy is to re-evaluate the
certificate rates weekly to respond to marketplace changes. For the American
Express Investors Certificate, American Express Preferred Investors Certificate,
and the American Express Special Deposits, AECC's current policy is to
re-evaluate the rates on a daily basis. For each product, AECC refers to an
independent index or source to set the rates for new sales. Except for American
Express Special Deposits, AECC must set the rates for an initial purchase of the
certificate within a specified range of the rate from such index or source. For
renewals, AECC uses such rates as an indication of the competitors' rates, but
is not required to set rates within a specified range.
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For the American Express Flexible Savings Certificate, and the American
Express Series D-1 Investment Certificate, the published rates of the BANK RATE
MONITOR Top 25 Market Average(R) (the BRM Average(R)) for various length bank
certificates of deposit are used as the guide in setting rates. For the American
Express Installment Certificate, the average interest rate for money market
deposit accounts, as published by the BRM Average(R), is used as a guide in
setting rates. For the American Express Cash Reserve Certificates, the published
rates of the U.S. 90 day Treasury Bill are used as the guide in setting rates.
For the American Express Investors Certificate, American Express Preferred
Investors Certificate, and American Express Special Deposits, the published
average rates for comparable length dollar deposits available on an interbank
basis, referred to as the London Interbank Offering Rates (LIBOR), are used as a
guide in setting rates.
To compete with popular short-term investment vehicles such as
certificates of deposit, money market certificates and money market mutual funds
that offer comparable yields, liquidity and safety of principal, AECC offers the
American Express Cash Reserve Certificate and the American Express Flexible
Savings Certificate. The yields and features on these products are designed to
be competitive with such short-term products. The American Express Investors
Certificate, American Express Preferred Investors Certificate and American
Express Special Deposits also compete with short-term products, but use LIBOR
rates. The American Express Installment Certificate is intended to help clients
save systematically and may compete with passbook savings and NOW accounts. The
American Express Stock Market Certificate, American Express Market Strategy
Certificate and American Express Equity Indexed Savings Certificates are
designed to offer interest tied to a major stock market index and principal
guaranteed by AECC. Certain banks offer certificates of deposit that have
features similar to the American Express Stock Market Certificate, American
Express Market Strategy Certificate and American Express Equity Indexed Savings
Certificates.
AECC's gross income is derived principally from interest and dividends
generated by its investments. AECC's net income is determined by deducting from
such gross income its provision for certificate reserves, and other expenses,
including taxes, the fee paid to American Express Financial Corporation for
advisory and other services, the distribution fees paid to American Express
Financial Advisors Inc., and marketing fees paid to AEB.
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AECC may make forward-looking statements in documents such as this 10-K
Annual Report. In addition, from to time to time, AECC may make oral
forward-looking statements through its management. Forward-looking statements
are subject to uncertainties that could cause actual results to differ
materially from such statements. Readers are cautioned not to place undue
reliance on forward-looking statements, which speak only as of the date on which
they are made. AECC undertakes no obligation to update publicly or revise any
forward-looking statements.
The following table shows AECC's certificate payments received and certificate
surrenders for the three years ended December 31, 2002:
2002 2001 2000
($ in Millions)
Single Payment Certificates
Non-Qualified
Payments through:
American Express Financial Advisors Inc. $1,116.1 $1,044.9 $773.5
AEBI, AEB, and Coutts 512.6 562.8 636.1
Surrenders through:
American Express Financial Advisors Inc. 865.1 865.1 710.2
AEBI, AEB, and Coutts 601.5 585.5 482.9
Qualified
Payments through:
American Express Financial Advisors Inc. 361.6 263.3 209.1
Surrenders through:
American Express Financial Advisors Inc. 224.1 167.8 151.8
Installment Payment Certificates
Through American Express Financial Advisors Inc.
Non-Qualified
Payments 40.8 41.1 48.3
Surrenders 57.2 68.7 101.8
Qualified
Payments .3 .3 .4
Surrenders .5 .7 1.4
In 2002, approximately 26% of single payment certificate payments were
through AEBI, AEB, and Coutts, and approximately 18% of single payment
certificate payments and 1% of installment certificate payments were of
tax-qualified certificates for use in IRAs, 401(k) plans and other qualified
retirement plans.
The certificates offered by American Express Financial Advisors Inc.
are sold pursuant to a distribution agreement which is terminable on 60 days'
notice and is subject to annual approval by AECC's Board of Directors, including
a majority of the directors who are not "interested persons" of American Express
Financial Advisors Inc. or AECC as that term is defined in the
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1940 Act. The agreement provides for the payment of distribution fees to
American Express Financial Advisors Inc. for services provided thereunder.
American Express Financial Advisors Inc. is a wholly-owned subsidiary of
American Express Financial Corporation. For the sale of the American Express
Investors Certificate and the American Express Stock Market Certificate by AEBI,
American Express Financial Advisors Inc., in turn, has Selling Agent Agreements
with AEBI and Coutts. For the sale of American Express Stock Market Certificate,
American Express Financial Advisors Inc. has a Selling Agent Agreement with
Securities America Inc. effective March 10, 1999. For the sale of American
Express Equity Indexed Savings Certificates, American Express Financial Advisors
Inc. has a Selling Dealer Agreement with Securities America, Inc., effective
July 31, 2000. For marketing American Express Special Deposits, AECC has a
Marketing Agreement with AEB. These agreements are terminable upon 60 days'
notice and subject to annual review by directors who are not "interested
persons" of American Express Financial Advisors Inc. or AECC except that such
annual review is not required for selling agent agreements.
AECC receives advice, statistical data and recommendations with respect
to the acquisition and disposition of securities for its portfolio from American
Express Financial Corporation, under an investment management agreement which is
subject to annual review and approval by AECC's Board of Directors, including a
majority of the directors who are not "interested persons" of American Express
Financial Corporation or AECC.
AECC is required to maintain cash and "qualified investments" meeting
the standards of Section 28(b) of the 1940 Act, as modified by an order of the
Securities and Exchange Commission (the SEC). The amortized cost of such
investments must be at least equal to AECC's net liabilities on all outstanding
face-amount certificates plus $250,000. So long as AECC wishes to rely on the
SEC order, as a condition to the order, AECC has agreed to maintain an amount of
unappropriated retained earnings and capital equal to at least 5% of net
certificate reserves. For these purposes, net certificate reserves means
certificate reserves less outstanding certificate loans. In determining
compliance with this condition, qualified investments are valued in accordance
with the provisions of Minnesota Statutes where such provisions are applicable.
AECC's qualified assets consist of cash and cash equivalents, first mortgage
loans on real estate and other loans, U.S. government and government agency
securities, municipal bonds, corporate bonds, preferred stocks and other
securities meeting specified standards. AECC has also entered into a written
informal understanding with the State of Minnesota, Department of Commerce, that
AECC will maintain capital equal to 5% of the assets of AECC (less any loans on
outstanding certificates). When computing its capital for these purposes, AECC
values its assets on the basis of statutory accounting for insurance companies
rather than generally accepted accounting principles. AECC is subject to annual
examination and supervision by the State of Minnesota, Department of Commerce
(Banking Division).
Distribution fees on sales of certain certificates are deferred and
amortized over the estimated lives of the related certificates, which is
approximately 10 years. Upon surrender, unamortized deferred distribution fees
and any related surrender charges are recognized in income. Thus, these
certificates must remain in effect for a period of time to permit AECC to
recover such costs.
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Item 2. Properties
None.
Item 3. Legal Proceedings
Registrant has no material pending legal proceedings other than
ordinary routine litigation incidental to its business.
Item 4. Submission of Matters to a Vote of Security Holders
Item omitted pursuant to General Instructions I(2)(c) of Form 10-K.
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters
There is no market for the Registrant's common stock since it is a
wholly-owned subsidiary of American Express Financial Corporation and,
indirectly, of American Express Company. Frequency and amount of dividends
declared during the past two years are as follows:
Cash Dividend (Return of Capital) Payable Date
For the year ended December 31, 2002:
December 30, 2002 $10,000,000
Capital Dividend Payable Date
For the year ended December 31, 2001:
October 17, 2001 $166,907,522
Restriction on the Registrant's present or future ability to pay
dividends:
Certain series of installment certificates outstanding provide that
cash dividends may be paid by AECC only in calendar years for which additional
credits of at least 1/2 of 1% on such series of certificates have been
authorized by AECC. This restriction has been removed for 2002 and 2003 by
AECC's declaration of additional credits in excess of this requirement.
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Appropriated retained earnings resulting from the pre-declaration of
additional credits to AECC's certificate owners are not available for the
payment of dividends by AECC. In addition, AECC will discontinue issuance of
certificates subject to the pre-declaration of additional credits and will make
no further predeclaration as to outstanding certificates if at any time the
capital and unappropriated retained earnings of AECC should be less than 5% of
net certificate reserves (certificate reserves less certificate loans). At
December 31, 2002, the capital and unappropriated retained earnings amounted to
6.2% of net certificate reserves.
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Item 6. Selected Financial Data
SUMMARY OF SELECTED FINANCIAL INFORMATION
The following selected financial information has been derived from the audited
financial statements and should be read in conjunction with those statements and
the related notes to financial statements. Also see "Management's Discussion and
Analysis of Financial Condition and Results of Operations" for additional
comments.
Year Ended December 31, (In thousands) 2002 2001 2000 1999 1998
Statements of Operations Data
Investment income $ 267,352 $ 261,523 $ 266,106 $ 254,344 $ 273,135
Investment expenses 89,827 101,228 87,523 77,235 76,811
------ ------- ------ ------ ------
Net investment income before provision
for certificate reserves and income
tax (expense) benefit 177,525 160,295 178,583 177,109 196,324
Net provision for certificate reserves 100,252 155,387 155,461 138,555 167,108
------- ------- ------- ------- -------
Net investment income before income
tax (expense) benefit 77,273 4,908 23,122 38,554 29,216
Income tax (expense) benefit (24,866) 3,348 (14) (4,615) 265
------- ----- --- ------ ---
Net investment income 52,407 8,256 23,108 33,939 29,481
------ ----- ------ ------ ------
Net realized (loss) gain on investments in securities of
unaffiliated issuers before income taxes (9,899) (92,375) (10,110) 1,250 5,143
Income tax benefit (expense) 3,631 32,331 3,539 (437) (1,800)
----- ------ ----- ---- ------
Net realized (loss) gain on investments (6,268) (60,044) (6,571) 813 3,343
Net income - wholly-owned subsidiary - - - 4 1,646
Cumulative effect of accounting change - (397) - - -
---------- ---------- ---------- ---------- ----------
Net income (loss) $ 46,139 $ (52,185) $ 16,537 $ 34,756 $ 34,470
---------- ---------- ---------- ---------- ----------
Cash Dividends Declared $ - $ - $ 5,000 $ 40,000 $ 29,500
Capital Dividends Declared - 166,906 - - -
(Return of capital to) contributions from Parent (10,000) 240,000 - - -
Balance Sheet Data
Total assets $5,183,282 $4,628,353 $4,032,745 $3,761,068 $3,834,244
Certificate loans 18,614 21,807 25,547 28,895 32,343
Certificate reserves 4,493,372 4,159,926 3,831,059 3,536,659 3,404,883
Stockholder's equity 359,389 263,005 166,514 141,702 222,033
------- ------- ------- ------- -------
American Express Certificate Company (AECC), is 100% owned by American Express
Financial Corporation (Parent).
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Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of operations
American Express Certificate Company's (AECC) earnings are derived primarily
from the after-tax yield on invested assets less investment expenses and
interest credited on certificate reserve liabilities, as well as realized
investment gains or losses. Changes in earnings trends occur largely due to
changes in investment returns, interest crediting rates to certificate owner
accounts, the mix of fully taxable and tax-advantaged investments in the AECC
portfolio and from realization of investment gains or losses.
During 2002, total assets and certificate reserves increased $555 million and
$333 million, respectively. The increase in total assets resulted primarily from
increases in the investment portfolio. The level of the investment portfolio
rose due primarily to an increase in net unrealized appreciation on
available-for-sale securities of $91 million, higher levels of short term
securities and certificate payments exceeding certificate maturities and
surrenders by $242 million. The increase in net after-tax unrealized
appreciation on available-for-sale securities during 2002 is due to unrealized
gains on fixed maturity holdings, which primarily explains the difference
between net income of $46 million and total comprehensive income of $106
million. The increase in certificate reserves resulted primarily from interest
accruals of $100 million and the total certificate payments being greater than
the maturities and surrenders.
During 2001, total assets and certificate reserves increased $596 million and
$329 million, respectively. The increase in total assets resulted primarily from
capital contributions from AEFC of $240 million, an increase in net unrealized
appreciation on available-for-sale securities of $125 million and certificate
payments exceeding certificate maturities and surrenders by $185 million. The
increase in certificate reserves resulted primarily from interest accruals of
$155 million and the total certificate payments being greater than the
maturities and surrenders.
2002 compared to 2001
Gross investment income increased 2.2% primarily due to higher levels of
invested assets and the 2001 adjustments to interest income on investments in
certain structured securities. Partially offsetting the increase in gross
investment income is the impact of lower investment yields. The declining
investment yields are due to AECC's decision in 2001 to lower its risk profile
and from lower interest rates.
Investment expenses decreased 11.3% in 2002. The decrease resulted primarily
from lower interest rate swap expense of $7.8 million. AECC enters into interest
rate swap contracts to hedge the risk of rising interest rates on a portion of
the Certificate products. Note 9 in the attached financial statements provides
more detail about the interest rate swaps.
The net provision for certificate reserves decreased 35.5% in 2002 as a result
of lower client interest crediting rates, partially offset by the increase
in certificate reserves during 2002.
During 2002, AECC experienced net pretax realized losses on investments of $9.9
million as compared to $92.4 million of pretax losses in 2001. The net losses in
2002 include $15.8 million of losses due to declines in the fair value of
corporate debt or structured available-for-sale securities that were other-than-
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temporary. The losses in 2001 are primarily composed of a $36.9 million loss to
recognize the impact of higher default assumptions used to determine impairment
on rated structured investments and a $57.1 million loss on high-yield
securities. The write-down of these investments was associated with AECC's
decision to reduce its holdings of high-yield investments and rebalance the
fixed maturity investment portfolio towards higher quality, less volatile
holdings.
Income tax expenses increased significantly over 2002 primarily due to the net
investment losses recognized in 2001.
2001 compared to 2000
Gross investment income decreased 1.7% due primarily to lower rates of return on
invested assets, and adjustments to interest income on investments in certain
structured securities.
Investment expenses increased 15.7% in 2001. The increase resulted primarily
from higher interest rate swap expense of $17.6 million partially offset by
lower index options expense.
The net provision for certificate reserves remained relatively flat to 2000
levels as lower accrual rates offset the impact from the growth in certificate
reserves during 2001.
During 2001, AECC experienced net pretax realized losses on investments of $92.4
million as compared to $10.1 million of pretax losses in 2000. The losses for
the year are primarily composed of a $36.9 million loss to recognize the impact
of higher default assumptions used to determine impairment on rated structured
investments and a $57.1 million loss on high-yield securities. The write-down of
these investments was associated with AECC's decision to reduce its holdings of
high-yield investments and rebalance the fixed maturity investment portfolio
towards higher quality, less volatile holdings.
The increase in income tax benefit resulted from lower pretax income, primarily
due to the investment losses realized during 2001.
Liquidity and cash flow
AECC's principal sources of cash are receipts from sales of face-amount
certificates and cash flows from investments. AECC's principal uses of cash are
payments to certificate owners for matured and surrendered certificates,
purchase of investments and dividend payments to AEFC.
Certificate sales continued to be strong in 2002 despite declining interest
rates, reflecting clients' ongoing desire for safety of principal in the current
times of general market turmoil. Sales of certificates totaled $2.0 billion in
2002 compared to $1.9 billion and $1.5 billion in 2001 and 2000, respectively.
The higher certificate sales in 2002 over 2001 resulted primarily from special
promotions during 2002 of the American Express Flexible Savings Certificate.
Certificate sales in 2001 compared to 2000 benefited primarily from special
promotions of the seven-month term American Express Flexible Savings
Certificate, which produced sales of $388 million in 2001.
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Certificate maturities and surrenders totaled $1.8 billion during 2002, compared
to $1.7 billion in 2001 and $1.5 billion in 2000. The slightly higher
certificate maturities and surrenders in 2002, compared to 2001, resulted
primarily from higher surrenders of American Express Flexible Savings
Certificates.
AECC, as an issuer of face-amount certificates, is impacted whenever there is a
significant change in interest rates as customer interest crediting rates are
reset at shorter intervals than the yield on underlying investments. In view of
the continued uncertainty in the investment markets and due to the short-term
repricing nature of certificate reserve liabilities, AECC continues to invest in
securities that provide for more immediate, periodic interest/principal
payments, resulting in improved liquidity. To accomplish this, AECC continues to
invest much of its cash flow in intermediate-term bonds and mortgage-backed
securities. In addition, AECC enters into interest rate swap contracts that
effectively lengthen the rate reset interval on customer's certificates.
AECC's investment program is designed to maintain an investment portfolio that
will produce the highest possible after-tax yield within acceptable risk and
liquidity parameters. The program considers investment securities as investments
acquired to meet anticipated certificate owner obligations.
Debt securities, as well as all marketable equity securities, are classified as
available-for-sale and carried at fair value. The available-for-sale
classification does not mean that AECC expects to sell these securities, but
that these securities are available to meet possible liquidity needs should
there be significant changes in market interest rates or certificate owner
demand.
At December 31, 2002, securities classified as available-for-sale were carried
at a fair market value of $4.4 billion. The fixed maturity securities comprise
83% of AECC's total invested assets. Of these securities, approximately 97% are
investment grade. Investments primarily include corporate debt and
mortgage-backed securities. AECC's corporate debt securities is a diverse
portfolio with the largest concentrations, accounting for approximately 69% of
the portfolio, in the following industries: banking and finance, utilities,
communications and media, and transportation. Other than U.S. Government Agency
mortgage-backed securities, no one issuer represents more than 1% of total
securities.
At December 31, 2002, approximately 3.4% of AECC's invested assets were below
investment grade bonds, compared to 1.7% at December 31, 2001. Investment losses
continued in 2002, although at significantly lower levels than in 2001, with
$15.8 million of other-than-temporary impairments recognized in 2002. As
described earlier, in 2001 AECC recognized approximately $57.1 million in losses
on high-yield securities, which primarily includes below investment grade bonds,
largely associated with AECC's decision to reduce its holdings of high-yield
investments and rebalance the fixed maturity investment portfolio towards higher
quality, less volatile holdings. See notes 1 and 3 to the financial statements
for additional information relating to investments. Additional investment
security losses through 2003 are possible but the amount of any such losses is
dependent on a number of factors and cannot be estimated at this time.* AECC's
management believes that there will be no adverse impact on the certificate
owners of
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any such losses.*
*Statements in this discussion and analysis of AECC's financial condition and
results of operations marked with an asterisk are forward-looking statements,
which are subject to risks and uncertainties. Important factors that could cause
results to differ materially from these forward-looking statements include,
among other things, changes in the industry-wide and AECC's default rate on
below investment grade bonds and other investments, changes in economic
conditions, such as a recession or a substantial increase in prevailing interest
rates or other factors that could cause a slowdown in the economy, outcomes in
litigation, adoption of recently issued accounting rules such as the
consolidation of variable interest entities, and changes in government
regulation that affects the ability of issuers to repay their debt.
AECC paid a cash dividend (return of capital) to AEFC of $10 million during
2002. During the fourth quarter of 2001, AECC paid a $167 million dividend to
AEFC by transferring at book value certain collateralized debt obligation (CDO)
securities owned by AECC. In part, the dividend was paid to allow AEFC to
transfer the CDO securities and related accrued interest into a securitization
trust. Additionally, AECC received $240 million in total cash as capital
contributions from AEFC during 2001.
Market risk and derivative financial instruments
The sensitivity analysis of two different tests of market risk discussed below
estimate the effects of hypothetical sudden and sustained changes in the
applicable market conditions on the ensuing year's earnings based on year-end
positions. The market changes, assumed to occur as of year-end, are a 100 basis
point increase in market interest rates and a 10% decline in a major stock
market index. Computation of the prospective effects of hypothetical interest
rate and major stock market index changes are based on numerous assumptions,
including relative levels of market interest rates and the major stock market
index level, as well as the levels of assets and liabilities. The hypothetical
changes and assumptions presented will be different than what actually occurs in
the future.
Furthermore, the computations do not anticipate actions that may be taken by
management if the hypothetical market changes occur over time. As a result,
actual earnings effects in the future will differ from those quantified below.
AECC primarily invests in intermediate-term and long-term fixed income
securities to provide its certificate owners with a competitive rate of return
on their certificate while managing risk. These investment securities provide
AECC with a historically dependable and targeted margin between the interest
rate earned on investments and the interest rate credited to certificate owners'
accounts. AECC does not invest in securities to generate short-term trading
profits for its own account.
AECC's goal is to manage interest rate sensitivity by modifying the repricing
characteristics of certificate liabilities so that the interest credited to
related investment certificate owners is not adversely affected by movements in
interest rates. AEFC holds regularly scheduled investment
-14-
committee meetings which is comprised of senior business managers, to review
models projecting various interest rate scenarios and risk/return measures and
their effect on the profitability of AECC. The committee's objectives are to
structure AECC's portfolio of investment securities based upon the type and
behavior of the certificates in the certificate reserve liabilities, to achieve
targeted levels of profitability within defined risk parameters and to meet
certificate contractual obligations. Part of the committee's strategy includes
entering into interest rate swaps to hedge interest rate risk.
AECC is exposed to risk associated with fluctuating interest payments from
certain certificate products tied to the London Interbank Offering Rate (LIBOR)
as the certificate products reset at shorter intervals than the average maturity
of the investment portfolio. Therefore, AECC's margins may be negatively
impacted by increases in the general level of interest rates. AECC hedges the
risk of rising interest rates by entering into pay-fixed, receive-variable
(LIBOR based) interest rate swaps that convert fluctuating crediting rate
payments to fixed payments, effectively protecting AECC from unfavorable
interest rate movements. The interest rate swaps are treated as cash flow hedges
per Statement of Financial Accounting Standards (SFAS) No. 133. At December 31,
2002, AECC has outstanding $950 million notional of interest rate swaps which
expire from 2003 to 2005.
On three series of certificates, interest is credited to the certificate owners'
accounts based upon the relative change in a major stock market index between
the beginning and end of the certificates' terms. To meet the obligations
related to the provisions of these certain certificates, AECC purchases
and writes index call options on a major stock market index and/or enters into
futures contracts.
SFAS No. 133 establishes accounting and reporting standards for derivative
instruments and hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities on the balance sheet and measure
those instruments at fair value. Changes in the fair value of a derivative are
recorded in earnings or directly to equity, depending on the instrument's
designated use. Those derivative instruments that are designated and qualify as
hedging instruments under SFAS No. 133 are further classified as either fair
value hedges, cash flow hedges or hedges of a net investment in a foreign
operation, based upon the exposure being hedged. See note 9 for further
discussion of the Company's derivative and hedging activities.
The negative impact on AECC's pretax earnings of the 100 basis point increase in
interest rates, which assumes repricings and customer behavior based on the
application of proprietary models, to the book of business at December 31, 2002
and 2001, would be approximately $0.9 million and $2.2 million for 2002 and
2001, respectively. The 10% decrease in a major stock market index level would
have a minimal impact on AECC's pretax earnings as of December 31, 2002 and
2001, because the income effect is a decrease in option income and a
corresponding decrease in interest credited to the American Express Stock Market
Certificate, American Express Market Strategy Certificate and American Express
Equity Indexed Savings Certificate owners' accounts.
-15-
Ratios
The ratio of stockholder's equity, excluding accumulated other comprehensive
income (loss) net of tax, to total assets less certificate loans and net
unrealized holding gains/losses on investment securities (capital to asset
ratio) at December 31, 2002 and 2001, was 5.4% and 5.2%, respectively. Under an
informal agreement established with the Commissioner of Commerce for the State
of Minnesota, AECC has agreed to maintain at all times a minimum capital to
assets ratio of 5.0%.
-16-
Item 7A. Ouantitative and Qualitative Disclosures About Market Risk
See Item 7.
Item 8. Financial Statements and Supplementary Data
1. Financial Statements and Schedules Required under Regulation S-X
Index to Financial Statements and Schedules Page
Financial Statements:
Responsibility for Preparation of Financial Statements 31
Report of Independent Auditors 32
Balance Sheets, December 31, 2002 and 2001 33 - 34
Statements of Operations, years ended December 31, 2002, 2001 and 2000 35 - 36
Statements of Comprehensive Income, years ended December 31, 2002,
2001 and 2000 37
Statements of Stockholder's Equity, years ended December 31, 2002,
2001 and 2000 38
Statements of Cash Flows, years ended December 31, 2002, 2001 and 2000 39 - 40
Notes to Financial Statements 41 - 55
Schedules:
I - Investments in Securities of Unaffiliated Issuers, December 31, 2002
II - Investments in and Advances to Affiliates and Income Thereon,
December 31, 2002, 2001 and 2000
III - Mortgage Loans on Real Estate and Interest earned on Mortgages,
year ended December 31, 2002
IV - Qualified Assets on Deposit, December 31, 2002
VI - Certificate Reserves, year ended December 31, 2002
VII - Valuation and Qualifying Accounts, years ended December 31, 2002, 2001
and 2000
Schedules I, III and VI for the year ended December 31, 2001, and
Schedule VI for the year ended December 31, 2000, are included in Registrant's
Annual Reports on Form 10-K for the fiscal years ended December 31, 2001 and
December 31, 2000, respectively, Commission file 2-23772, and are incorporated
herein by reference.
All other Schedules required by Article 6 of the Regulation S-X are not
required under the related instructions or are inapplicable and therefore have
been omitted.
-17-
2. Supplementary Data
None
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
None
PART III
Items omitted pursuant to General Instructions I(2)(c) of Form 10-K.
PART IV
Item 14. Controls and Procedures
Within the 90-day period prior to the filing of this report, AECC
carried out an evaluation under the supervision and with the
participation of AECC's management, including the Chief Executive
Officer ("CEO") and Chief Financial Officer ("CFO"), of the
effectiveness of its disclosure controls and procedures. Based on that
evaluation, the CEO and CFO have concluded that AECC's disclosure
controls and procedures are effective to ensure that information
required to be disclosed by AECC in reports that it files or submits
under the Securities Exchange Act of 1934, as amended, is recorded,
processed, summarized and reported within the time periods specified
in Securities and Exchange Commission rules and forms. The CEO and CFO
also note that subsequent to the date of their evaluation, there were
no significant changes in AECC's internal controls or in other factors
that could significantly affect the internal controls, including any
corrective actions with regard to significant deficiencies and
material weaknesses.
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) List the following documents filed as a part of the report:
1. All financial statements. See Item 8.
2. Financial statement schedules. See Item 8.
3. Exhibits.
1. None or not applicable.
2. None or not applicable.
3(a). Certificate of Incorporation, dated December 31, 1977,
filed electronically as Exhibit 3(a) to Post-Effective
Amendment No. 10 to Registration Statement No. 2-89507, is
incorporated herein by reference.
-18-
3(b). Certificate of Amendment, dated April 2, 1984 filed
electronically as Exhibit 3(b) to Post-Effective Amendment
No. 10 to Registration Statement No. 2-89507, is
incorporated herein by reference.
3(c). Certificate of Amendment, dated September 12, 1995, filed
electronically as Exhibit 3(c) to Post-Effective Amendment
No. 44 to Registration Statement No. 2-55252, is
incorporated herein by reference.
3(d). Certificate of Amendment, dated April 30, 1999, filed
electronically as Exhibit 3(a) to Registrant's March 31,
1999 Quarterly Report on Form 10-Q is incorporated herein
by reference.
3(e). Certificate of Amendment, dated January 28, 2000, filed
electronically as exhibit 3(e) to Post-Effective Amendment
No. 47 to Registration Statement No. 2-55252, is
incorporated herein by reference.
3(f). Current By-Laws, filed electronically as Exhibit 3(e) to
Post-Effective Amendment No. 19 to Registration Statement
No. 33-26844, are incorporated herein by reference.
4-9. None or not applicable.
10(a). Investment Advisory and Services Agreement between
Registrant and American Express Financial Corporation
dated March 6, 2002, filed electronically as Exhibit 10(a)
to Registrant's Post-Effective Amendment No. 51 to
Registration Statement No. 2-55252, is incorporated herein
by reference.
10(b). Distribution Agreement dated November 18, 1988, between
Registrant and IDS Financial Services Inc., filed
electronically as Exhibit 1(a) to the Registration
Statement No. 33-26844, for the American Express
International Investment Certificate (now called, the IDS
Investors Certificate) is incorporated herein by
reference.
10(c). Depositary and Custodial Agreement dated September 30,
1985 between IDS Certificate Company and IDS Trust
Company, filed electronically as Exhibit 10(b) to
Registrant's Post-Effective Amendment No. 3 to
Registration Statement No. 2-89507, is incorporated herein
by reference.
10(d). Foreign Deposit Agreement dated November 21, 1990, between
IDS Certificate Company and IDS Bank & Trust, filed
electronically as Exhibit 10(h) to Post-Effective
Amendment No. 5 to Registration Statement No. 33-26844, is
incorporated herein by reference.
-19-
10(e). Selling Agent Agreement dated June 1, 1990, between
American Express Bank International and IDS Financial
Services Inc. for the American Express Investors and
American Express Stock Market Certificates, filed
electronically as Exhibit 1(c) to the Post-Effective
Amendment No. 5 to Registration Statement No. 33-26844, is
incorporated herein by reference.
10(f). Second amendment to Selling Agent Agreement between
American Express Financial Advisors Inc. and American
Express Bank International dated as of May 2, 1995, filed
electronically as Exhibit (1) to Registrant's June 30,
1995, Quarterly Report on Form 10-Q, is incorporated
herein by reference.
10(g). Marketing Agreement dated October 10, 1991, between
Registrant and American Express Bank Ltd., filed
electronically as Exhibit 1(d) to Post-Effective Amendment
No. 31 to Registration Statement 2-55252, is incorporated
herein by reference.
10(h). Amendment to the Selling Agent Agreement dated December
12, 1994, between IDS Financial Services Inc. and American
Express Bank International, filed electronically as
Exhibit 1(d) to Post-Effective Amendment No. 13 to
Registration Statement No. 2-95577, is incorporated herein
by reference.
10(i). Selling Agent Agreement dated December 12, 1994, between
IDS Financial Services Inc. and Coutts & Co. (USA)
International, filed electronically as Exhibit 1(e) to
Post-Effective Amendment No. 13 to Registration Statement
No. 2-95577, is incorporated herein by reference.
10(j). Consulting Agreement dated December 12, 1994, between IDS
Financial Services Inc. and American Express Bank
International, filed electronically as Exhibit 16(f) to
Post-Effective Amendment No. 13 to Registration Statement
No. 2-95577 is incorporated herein by reference.
10(k). Letter amendment dated January 9, 1997 to the Marketing
Agreement dated October 10, 1991, between Registrant and
American Express Bank Ltd. filed electronically as Exhibit
10(j) to Post-Effective Amendment No. 40 to Registration
Statement No. 2-55252, is incorporated herein by
reference.
10(l). Form of Letter amendment dated April 7, 1997 to the
Selling Agent Agreement dated June 1, 1990 between
American Express Financial Advisors Inc. and American
Express Bank International, filed electronically as
Exhibit 10 (j) to Post-Effective Amendment No. 14 to
Registration Statement 33-26844, is incorporated herein by
reference.
-20-
10(m). Letter Agreement dated July 28, 1999 amending the
Selling Agent Agreement dated June 1, 1990, or a
schedule thereto, as amended, between American
Express Financial Advisors Inc. (formerly IDS
Financial Services Inc.) and American Express Bank
International, filed electronically to Registrant's
June 30, 1999 Quarterly Report on Form 10-Q, is
incorporated herein by reference.
10(n). Letter Agreement dated July 28, 1999, amending the
Marketing Agreement dated October 10, 1991, or a
schedule thereto, as amended, between IDS
Certificate Company and American Express Bank Ltd.,
filed electronically to Registrant's June 30, 1999
Quarterly Report on Form 10-Q, is incorporated
herein by reference.
10(o) Selling Agent Agreement, dated March 10, 1999
between American Express Financial Advisors Inc. and
Securities America, Inc., filed electronically as
Exhibit 10 (l) to Post-Effective Amendment No. 18 to
Registration Statement 33-26844, is incorporated
herein by reference.
10(p) Letter Agreement, dated April 10, 2000, amending the
Selling Agent Agreement, dated March 10, 1999,
between American Express Financial Advisors Inc. and
Securities America, Inc., filed electronically as
Exhibit 10 (o) to Post-Effective Amendment No. 20 to
Registration Statement 33-26844, is incorporated
herein by reference.
10(q) (1) Code of Ethics under rule 17j-1 for Registrant,
filed electronically as Exhibit 10(p)(1) to
Pre-Effective Amendment No. 1 to Registration
Statement No. 333-34982, is herein by reference.
(2) Code of Ethics under rule 17j-1 for Registrant's
investment advisor and principal underwriters, filed
electronically as Exhibit 10(p)(2) to Pre-Effective
Amendment No. 1 to Registration Statement No.
333-34982, is incorporated herein by reference.
10(r) Letter of Representations dated August 22, 2000 between
American Express Certificate Company and the Depository
Trust Company, filed electronically as Exhibit 10(r) to
Post-Effective Amendment No. 2-552527 is incorporated
herein by reference.
11-23. None or not applicable.
24(a). Officers' Power of Attorney, dated March 5, 2003, filed
electronically as Exhibit 24(a) to Post-Effective
Amendment No. 29 to Registration Statement No. 2-95577 on
or about March 24, 2003 is incorporated by reference.
24(b). Directors' Power of Attorney, dated December 4, 2002,
filed electronically as Exhibit 24(b) to Post-Effective
Amendment No. 29 to Registration Statement No. 2-95577 on
or about March 24, 2003 is incorporated by reference.
25-99. None or not applicable.
-21-
99.1 Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
99.2 Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
99.3 Certification pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
99.4 Certification pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
(b) Reports on Form 8-K filed during the last quarter of the period
covered by this report.
None.
-22-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
REGISTRANT American Express Certificate Company
BY /s/ Paula R. Meyer
----------------------
NAME AND TITLE Paula R. Meyer, President
DATE March 27, 2003
Pursuant to the requirements of the Securities and Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
BY /s/ Paula R. Meyer
---------------------------------
NAME AND TITLE Paula R. Meyer, President and Director
(Principal Executive Officer)
DATE March 27, 2003
BY /s/ Judd K. Lohmann
---------------------------------
NAME AND TITLE Judd K. Lohmann, Treasurer
(Principal Financial Officer)
DATE March 27, 2003
BY /s/ Philip C. Wentzel
---------------------------------
NAME AND TITLE Philip C. Wentzel, Vice President and Controller
(Principal Accounting Officer)
DATE March 27, 2003
BY /s/ Rodney P. Burwell *
---------------------------------
NAME AND TITLE Rodney P. Burwell, Director
DATE March 27, 2003
BY /s/ Kent M. Bergene *
---------------------------------
NAME AND TITLE Kent M. Bergene, Director
DATE March 27, 2003
BY /s/ Jean B. Keffeler *
---------------------------------
NAME AND TITLE Jean B. Keffeler, Director
DATE March 27, 2003
-23-
BY /s/ Thomas R. McBurney *
---------------------------------
NAME AND TITLE Thomas R. McBurney, Director
DATE March 27, 2003
BY /s/ Walter S Berman *
---------------------------------
NAME AND TITLE Walter S Berman, Director
DATE March 27, 2003
BY /s/ Karen M. Bohn *
---------------------------------
NAME AND TITLE Karen M. Bohn, Director
DATE March 27, 2003
* Signed pursuant to Directors' Power of Attorney dated December 4, 2002,
filed electronically as Exhibit 24(b) to Post-Effective Amendment No. 29 to
Registration Statement No. 2-95577 on or about March 24, 2003 is
incorporated by reference by:
/s/ Paula R. Meyer
- --------------------
Paula R. Meyer
-24-
Contents of this page are filed electronically herewith as Exhibit 99.1.
-25-
Contents of this page are filed electronically herewith as Exhibit 99.2.
-26-
Contents of this page are filed electronically herewith as Exhibit 99.3.
-27-
Contents of this page are filed electronically herewith as Exhibit 99.3.
-28-
Contents of this page are filed electronically herewith as Exhibit 99.4.
-29-
Contents of this page are filed electronically herewith as Exhibit 99.4.
-30-
American Express Certificate Company
Responsibility for Preparation of Financial Statements
The management of American Express Certificate Company (AECC) is responsible for
the preparation and fair presentation of its financial statements. The financial
statements have been prepared in conformity with accounting principles generally
accepted in the United States which are appropriate in the circumstances, and
include amounts based on the best judgment of management. AECC's management is
also responsible for the accuracy and consistency of other financial information
included in this Form 10-K.
In recognition of its responsibility for the integrity and objectivity of data
in the financial statements, AECC maintains a system of internal control over
financial reporting. The system is designed to provide reasonable, but not
absolute, assurance with respect to the reliability of AECC's financial
statements. The concept of reasonable assurance is based on the notion that the
cost of internal control should not exceed the benefits derived.
The internal control system is founded on an ethical climate and includes an
organizational structure with clearly defined lines of responsibility, policies
and procedures, a Code of Conduct, and the careful selection and training of
employees. Internal auditors monitor and assess the effectiveness of the
internal control system and report their findings to management throughout the
year. AECC's independent auditors are engaged to express an opinion on the
year-end financial statements and, with the coordinated support of the internal
auditors, review the financial records and related data and test internal
controls over financial reporting.
-31-
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Security Holders
American Express Certificate Company:
We have audited the accompanying balance sheets of American Express Certificate
Company a wholly-owned subsidiary of American Express Financial Corporation, as
of December 31, 2002 and 2001, and the related statements of operations,
comprehensive income, stockholder's equity, and cash flows for each of the three
years in the period ended December 31, 2002. Our audits also included the
financial statement schedules listed in the index at Item 8. These financial
statements and schedules are the responsibility of the management of American
Express Certificate Company. Our responsibility is to express an opinion on
these financial statements and schedules based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
schedules are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and schedules. Our procedures included confirmation of investments
owned as of December 31, 2002 and 2001, by correspondence with custodians. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American Express Certificate
Company at December 31, 2002 and 2001, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 2002, in
conformity with accounting principles generally accepted in the United States.
Also, in our opinion, the related financial statement schedules, 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 LLP
Minneapolis, Minnesota
January 27, 2003
-32-
Balance Sheets, December 31,
Assets
(In thousands) 2002 2001
Qualified Assets (note 2)
Investments in unaffiliated issuers (notes 3, 4 and 10):
Cash and cash equivalents $ 224,363 $ 72,817
Available-for-sale securities 4,389,396 4,073,901
First mortgage loans on real estate and other loans 452,243 343,434
Certificate loans - secured by certificate reserves 18,614 21,807
Investments in and advances to affiliates - 422
--------- ---------
Total investments 5,084,616 4,512,381
--------- ---------
Receivables:
Dividends and interest 34,114 38,298
Investment securities sold 24,170 21,500
------ ------
Total receivables 58,284 59,798
------ ------
Other (notes 9 & 10) 34,403 48,393
------ ------
Total qualified assets 5,177,303 4,620,572
--------- ---------
Other Assets
Deferred distribution fees and other 5,979 7,781
----- -----
Total other assets 5,979 7,781
----- -----
Total assets $5,183,282 $4,628,353
---------- ----------
-33-
Balance Sheets, December 31, (continued)
Liabilities and Stockholder's Equity
(In thousands, except share amounts) 2002 2001
Liabilities
Certificate Reserves (note 5):
Installment certificates:
Reserves to mature $ 168,957 $ 193,175
Additional credits and accrued interest 3,988 5,082
Advance payments and accrued interest 564 645
Other 34 33
Fully paid certificates:
Reserves to mature 4,277,348 3,900,824
Additional credits and accrued interest 42,311 59,948
Due to unlocated certificate holders 170 219
--- ---
Total certificate reserves 4,493,372 4,159,926
--------- ---------
Accounts Payable and Accrued Liabilities:
Due to Parent (note 7) 887 878
Due to Parent for federal income taxes 3,908 1,774
Due to other affiliates (note 7) 690 587
Deferred federal income taxes, net (note 8) 29,556 404
Payable for investment securities purchased 263,658 163,507
Other (notes 9 and 10) 31,822 38,272
------ ------
Total accounts payable and accrued liabilities 330,521 205,422
------- -------
Total liabilities 4,823,893 4,365,348
--------- ---------
Commitments (note 4)
Stockholder's Equity (notes 5 and 6)
Common stock, $10 par - authorized and issued 150,000 shares 1,500 1,500
Additional paid-in capital 373,844 383,844
Retained earnings (deficit):
Appropriated for predeclared additional credits/interest 811 1,123
Appropriated for additional interest on advance payments 15 15
Unappropriated (100,142) (146,593)
Accumulated other comprehensive income - net of tax (note 1) 83,361 23,116
------ ------
Total stockholder's equity 359,389 263,005
------- -------
Total liabilities and stockholder's equity $5,183,282 $4,628,353
---------- ----------
See notes to financial statements.
-34-
Statements of Operations
Year ended December 31, (In thousands) 2002 2001 2000
Investment Income
Interest income from unaffiliated investments:
Bonds and notes $227,609 $214,534 $204,923
Mortgage loans on real estate and other loans 27,719 25,133 26,675
Certificate loans 1,095 1,293 1,471
Dividends 9,949 19,986 32,478
Other 980 577 559
--- --- ---
Total investment income 267,352 261,523 266,106
------- ------- -------
Investment Expenses
Parent and affiliated company fees (note 7):
Distribution 29,762 30,924 31,209
Investment advisory and services 9,980 9,248 8,779
Transfer agent 3,203 3,161 3,300
Depository 321 285 254
Options (note 9) 36,421 39,510 43,430
Repurchase agreements - 52 124
Interest rate swap agreements (note 9) 9,780 17,616 17
Other 360 432 410
--- --- ---
Total investment expenses 89,827 101,228 87,523
------ ------- ------
Net investment income before provision for certificate
reserves and income tax (expense) benefit $177,525 $160,295 $178,583
-------- -------- --------
-35-
Statements of Operations (continued)
Year ended December 31, (In thousands) 2002 2001 2000
Provision for Certificate Reserves (notes 5 and 9)
According to the terms of the certificates:
Provision for certificate reserves $ 7,888 $ 10,321 $ 12,599
Interest on additional credits 543 597 714
Interest on advance payments 19 34 33
Additional credits/interest authorized by AECC:
On fully paid certificates 88,201 138,020 134,633
On installment certificates 4,757 7,559 8,483
----- ----- -----
Total provision for certificate reserves before reserve recoveries 101,408 156,531 156,462
Reserve recoveries from terminations prior to maturity (1,156) (1,144) (1,001)
------ ------ ------
Net provision for certificate reserves 100,252 155,387 155,461
------- ------- -------
Net investment income before income tax (expense) benefit 77,273 4,908 23,122
Income tax (expense) benefit (note 8) (24,866) 3,348 (14)
------- ----- ---
Net investment income 52,407 8,256 23,108
------ ----- ------
Net realized loss on investments
Securities of unaffiliated issuers before income tax benefit (9,899) (92,375) (10,110)
------ ------- -------
Income tax benefit (expense) (note 8):
Current (5,742) 36,320 (537)
Deferred 9,373 (3,989) 4,076
----- ------ -----
Total income tax benefit 3,631 32,331 3,539
----- ------ -----
Net realized loss on investments (6,268) (60,044) (6,571)
------ ------- ------
Cumulative effect of accounting change (net of income tax benefit of $214) - (397) -
-------- -------- --------
Net income (loss) $ 46,139 $(52,185) $ 16,537
-------- -------- --------
See notes to financial statements.
-36-
Statements of Comprehensive Income
Year ended December 31, (In thousands) 2002 2001 2000
Net income (loss) $ 46,139 $(52,185) $16,537
-------- -------- -------
Other comprehensive income net of tax (note 1)
Cumulative effect of accounting change (note 1) - (2,187) -
Unrealized gains on available-for-sale securities:
Unrealized holding gains arising during year 99,188 19,959 21,840
Income tax expense (34,716) (6,986) (7,644)
------- ------ ------
Net unrealized holding gains arising during the period 64,472 12,973 14,196
Reclassification adjustment for (gains) losses included in net income (loss) (8,142) 101,754 (1,417)
Income tax expense (benefit) 2,850 (35,614) 496
----- ------- ---
Net reclassification adjustment for (gains) losses included in net income (loss) (5,292) 66,140 (921)
------ ------ ----
Net unrealized gains on available-for-sale securities 59,180 79,113 13,275
------ ------ ----
Unrealized losses on interest rate swaps:
Unrealized losses arising during the period (8,141) (19,683) -
Income tax benefit 2,849 6,889 -
------ ------ ----
Net unrealized holding losses arising during the period (5,292) (12,794) -
------ ------ ----
Reclassification adjustment for losses included in net income (loss) 9,780 17,616 -
Income tax benefit (3,423) (6,166) -
------ ------ ----
Net reclassification adjustment for losses included in net income (loss) 6,357 11,450 -
------ ------ ----
Net unrealized gains (losses) on interest rate swaps 1,065 (1,344) -
Net other comprehensive income 60,245 75,582 13,275
------ ------ ------
Total comprehensive income $106,384 $ 23,397 $29,812
-------- -------- -------
See notes to financial statements.
-37-
Statements of Stockholder's Equity
Year ended December 31, (In thousands) 2002 2001 2000
Common Stock
Balance at beginning and end of year $ 1,500 $ 1,500 $ 1,500
--------- --------- --------
Additional Paid-in Capital
Balance at beginning of year $ 383,844 $ 143,844 $143,844
(Return of capital to) contribution from Parent (10,000) 240,000 -
--------- --------- --------
Balance at end of year $ 373,844 $ 383,844 $143,844
--------- --------- --------
Retained Earnings
Appropriated for predeclared additional credits/interest (note 5)
Balance at beginning of year $ 1,123 $ 2,684 $ 2,879
Transferred to unappropriated retained earnings (312) (1,561) (195)
---- ------ ----
Balance at end of year $ 811 $ 1,123 $ 2,684
--------- --------- --------
Appropriated for additional interest on advance payments (note 5)
Balance at beginning of year $ 15 $ 15 $ 10
Transferred from unappropriated retained earnings - - 5
--------- --------- --------
Balance at end of year $ 15 $ 15 $ 15
--------- --------- --------
Unappropriated (note 6)
Balance at beginning of year $(146,593) $ 70,937 $ 59,210
Net income (loss) 46,139 (52,185) 16,537
Transferred from appropriated retained earnings 312 1,561 190
Capital dividends declared - (166,906) -
Cash dividends declared - - (5,000)
--------- --------- --------
Balance at end of year $(100,142) $(146,593) $ 70,937
--------- --------- --------
Accumulated other comprehensive income -
net of tax (note 1)
Balance at beginning of year $ 23,116 $ (52,466) $(65,741)
Net other comprehensive income 60,245 75,582 13,275
------ ------ ------
Balance at end of year $ 83,361 $ 23,116 $(52,466)
--------- --------- --------
Total stockholder's equity $ 359,389 $ 263,005 $166,514
--------- --------- --------
See notes to financial statements.
-38-
Statements of Cash Flows
Year ended December. 31, (In thousands) 2002 2001 2000
Cash Flows from Operating Activities
Net income (loss) $ 46,139 $ (52,185) $ 16,537
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Cumulative effect of accounting change, net of tax (note 1) - 397 -
Net provision for certificate reserves 100,252 155,387 155,461
Interest income added to certificate loans (738) (820) (914)
Amortization of premiums/discounts-net (2,426) (1,483) 42,192
Provision for deferred federal income taxes (3,288) (9,793) 4,940
Net realized loss on investments before income taxes 9,899 92,375 10,110
Decrease (increase) in dividends and interest receivable 4,184 9,603 (6,317)
Decrease in deferred distribution fees 1,802 1,525 2,946
Decrease (increase) in other assets 13,990 4,622 (7,016)
Increase (decrease) in other liabilities 14,848 14,001 (2,823)
------ ------ ------
Net cash provided by operating activities 184,662 213,629 215,116
------- ------- -------
Cash Flows from Investing Activities
Maturity and redemption of investments:
Held-to-maturity securities - - 138,150
Available-for-sale securities 1,111,493 704,877 447,643
Other investments 88,437 30,307 68,877
Sale of investments:
Held-to-maturity securities - - 8,836
Available-for-sale securities 884,524 969,308 312,612
Other investments 11,166 - -
Certificate loan payments 2,919 3,127 3,399
Purchase of investments:
Held-to-maturity securities - - (161)
Available-for-sale securities (2,128,914) (2,274,412) (1,250,487)
Other investments (233,075) (54,927) (49,460)
Certificate loan fundings (2,085) (2,830) (3,197)
------ ------ ------
Net cash used in investing activities $ (265,535) $ (624,550) $ (323,788)
----------- ----------- -----------
-39-
Statements of Cash Flows (continued)
Year ended December 31, (In thousands) 2002 2001 2000
Cash Flows from Financing Activities
Payments from certificate owners $ 2,031,414 $ 1,919,769 $ 1,667,475
Proceeds from repurchase agreements - 500 -
Certificate maturities and cash surrenders (1,788,995) (1,734,742) (1,517,178)
Payments under repurchase agreements - (500) (25,000)
(Return of capital to) contribution from parent (10,000) 240,000 -
Dividends paid - - (5,000)
------- ------- -------
Net cash provided by financing activities 232,419 425,027 120,297
------- ------- -------
Net increase in cash and cash equivalents 151,546 14,106 11,625
Cash and cash equivalents at beginning of year 72,817 58,711 47,086
------ ------ ------
Cash and cash equivalents at end of year $ 224,363 $ 72,817 $ 58,711
----------- ----------- -----------
Supplemental Disclosures Including Non-cash Transactions
Cash paid for income taxes $ 22,233 $ - $ 2,558
Certificate maturities and surrenders through
loan reductions $ 3,097 $ 4,263 $ 4,060
See notes to financial statements.
-40-
Notes to Financial Statements
(In thousands unless indicated otherwise)
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of business
American Express Certificate Company (AECC), is a wholly-owned subsidiary of
American Express Financial Corporation (Parent), which is a wholly-owned
subsidiary of American Express Company. AECC is registered as an investment
company under the Investment Company Act of 1940 ("the 1940 Act") and is in the
business of issuing face-amount investment certificates. Face-amount
certificates issued by AECC entitle the certificate owner to receive at maturity
a stated amount of money and interest or credits declared from time to time by
AECC, at its discretion. The certificates issued by AECC are not insured by any
government agency. AECC's certificates are sold primarily by American Express
Financial Advisor Inc.'s (AEFA) (an affiliate) field force operating in 50
states, the District of Columbia and Puerto Rico. The Parent acts as investment
advisor for AECC.
AECC currently offers ten types of certificates with specified maturities
ranging from 10 to 20 years. Within their specified maturity, most certificates
have interest rate terms of one- to 36-months. In addition, three types of
certificates have interest tied, in whole or in part, to any upward movement in
a broad-based stock market index. Except for two types of certificates, all of
the certificates are available as qualified investments for Individual
Retirement Accounts or 401(k) plans and other qualified retirement plans.
AECC's gross income is derived primarily from interest and dividends generated
by its investments. AECC's net income is determined by deducting from such gross
income its provision for certificate reserves, and other expenses, including
taxes, the fee paid to Parent for investment advisory and other services, and
the distribution fees paid to AEFA.
Basis of financial statement presentation
The accompanying financial statements are presented in accordance with
accounting principles generally accepted in the United States. AECC uses the
equity method of accounting for its wholly-owned unconsolidated subsidiary,
which is the method prescribed by the Securities and Exchange Commission (SEC)
for non-investment company subsidiaries. Certain prior year amounts have been
reclassified to conform to the current year's presentation.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities and the reported amounts of
income and expenses during the year then ended. Actual results could differ from
those estimates.
Fair values of financial instruments
The fair values of financial instruments disclosed in the notes to financial
statements are estimates based upon current market conditions and perceived
risks, and require varying degrees of management judgment.
-41-
Interest Income
Interest income is accrued as earned using the effective interest method, which
makes an adjustment for security premiums and discounts, so that the related
security recognizes a constant rate of return on the outstanding balance
throughout its term.
Preferred stock dividend income
AECC recognizes dividend income from cumulative redeemable preferred stocks with
fixed maturity amounts on an accrual basis similar to that used for recognizing
interest income on debt securities. Dividend income from perpetual preferred
stock is recognized on an ex-dividend basis.
Cash and cash equivalents
Cash equivalents are carried at amortized cost, which approximates fair value.
AECC has defined cash and cash equivalents as cash in banks and highly liquid
investments with a maturity of three months or less at acquisition and are not
interest rate sensitive.
Investment securities
Debt securities and marketable equity securities are classified as
available-for-sale and carried at fair value. Unrealized holding gains and
losses on securities classified as available-for-sale are carried as a separate
component, net of deferred income taxes, in Accumulated other comprehensive
income (loss) in Stockholder's Equity.
The basis for determining cost in computing realized gains and losses on
securities is specific identification. Gains and losses are recognized in the
results of operations upon disposition of the securities. In addition, losses
are also recognized when management determines that a decline in value is
other-than-temporary, which requires judgment regarding the amount and timing of
recovery. Indicators of other-than-temporary impairment for debt securities
include issuer downgrade, default or bankruptcy. AECC also considers the extent
to which cost exceeds fair value, the duration of time of that decline and
management's judgment as to the issuer's current and prospective financial
condition. The charges are reflected in the Net realized loss on investments
within the Statement of Operations.
First mortgage loans on real estate and other loans
Mortgage and other loans reflects principal amounts outstanding less reserves
for losses, which is the basis for determining any realized gains or losses. The
estimated fair value of the mortgage loans on real estate is determined by a
discounted cash flow analysis using mortgage interest rates currently offered
for mortgages of similar maturities. The fair value of the other loans
represents market prices or estimated fair values when quoted prices are not
available.
The reserve for losses is measured as the excess of the loan's recorded
investment over its present value of expected principal and interest payments
discounted at the loan's effective interest rate or the fair value of
collateral. Additionally, the level of the reserve account is determined based
on several factors, including historical experience and current economic and
political conditions. Management regularly evaluates the adequacy of the reserve
for loan losses, and believes it is adequate to absorb estimated losses in the
portfolio.
AECC generally stops accruing interest on mortgage loans on real estate for
which interest payments are delinquent more than three months. Based on
management's judgment as to the ultimate collectibility of principal, interest
payments received are either recognized as income or applied to the recorded
investment in the loan.
-42-
Certificates
Investment certificates may be purchased either with a lump-sum payment or by
installment payments. Certificate owners are entitled to receive at maturity a
definite sum of money. Payments from certificate owners are credited to
investment certificate reserves. Investment certificate reserves accumulate
interest at specified percentage rates as declared by AECC. Reserves also are
maintained for advance payments made by certificate owners, accrued interest
thereon, and for additional credits in excess of minimum guaranteed rates and
accrued interest thereon. On certificates allowing for the deduction of a
surrender charge, the cash surrender values may be less than accumulated
investment certificate reserves prior to maturity dates. Cash surrender values
on certificates allowing for no surrender charge are equal to certificate
reserves. The payment distribution, reserve accumulation rates, cash surrender
values, reserve values and other matters are governed by the 1940 Act.
Deferred distribution fee expense
On certain series of certificates, distribution fees are deferred and amortized
over the estimated lives of the related certificates, which is approximately 10
years. Upon surrender prior to maturity, unamortized deferred distribution fees
are recognized in expense and any related surrender charges are recognized as a
reduction in Provision for certificate reserves.
Federal income taxes
AECC's taxable income or loss is included in the consolidated federal income tax
return of American Express Company. AECC provides for income taxes on a separate
return basis, except that, under an agreement between Parent and American
Express Company, tax benefits are recognized for losses to the extent they can
be used in the consolidated return. It is the policy of the Parent and its
subsidiaries that the Parent will reimburse a subsidiary for any tax benefits
recorded.
Accounting developments
Effective January 1, 2001, AECC adopted Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities," as amended (SFAS No. 133), which establishes the accounting and
reporting standards for derivative instruments and hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities on the balance sheet and measure those instruments at fair value.
Changes in the fair value of a derivative are recorded in earnings or directly
to equity, depending on the instrument's designated use. Those derivative
instruments that are designated and qualify as hedging instruments are further
classified as either a cash flow hedge, a fair value hedge, or a hedge of a net
investment in a foreign operation, based upon the exposure being hedged. The
adoption of SFAS No. 133 on January 1, 2001, resulted in a cumulative after-tax
reduction of $397 and $2,187 to earnings and other comprehensive income (OCI),
respectively. See note 9 for further discussion of the Company's derivative and
hedging activities.
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities" (FIN 46), which addresses consolidation by business
enterprises of variable interest entities (VIEs). The accounting provisions and
expanded disclosure requirements for VIEs existing at December 31, 2002, are
fully effective for reporting periods beginning after June 15, 2003. An entity
shall be subject to consolidation according to the provisions of FIN 46, if, by
design, either (i) the total equity investment at risk is not sufficient to
permit the entity to finance its activities without additional subordinated
financial support from other parties, or (ii) as a group, the holders of the
equity investment at risk lack (a) direct or indirect ability to make decisions
about an entity's activities; (b) the obligation to absorb the expected losses
of the entity if they occur; or (c) the right to receive the expected residual
return of the entity if they occur. In general, FIN 46 will require a VIE to be
consolidated when an enterprise has a variable interest that will absorb a
majority of the VIE's expected losses or receive a majority of the VIE's
expected residual return.
It is likely that AECC will disclose additional information about VIE's when FIN
46 becomes effective in the third quarter of 2003. The entity primarily impacted
by FIN 46 relates to a secured loan trust (SLT) for which AECC has a 33%
ownership interest. The SLT provides returns to investors primarily based on the
performance of an underlying portfolio of high-yield loans. AECC's pro rata
return is based on the performance of up to $125,000 of high yield loans.
Currently, the underlying portfolio consists of $114,472 in high-yield loans
which have a market value of $103,739. The SLT has an
-43-
adjusted cost basis of $26,593. AECC continues to evaluate other relationships
and interest in entities that may be considered VIEs. The impact of adopting FIN
46 on the Consolidated Financial Statements is still being reviewed.
2. DEPOSIT OF ASSETS AND MAINTENANCE OF QUALIFIED ASSETS
Under the provisions of its certificates and the 1940 Act, AECC was required to
have Qualified Assets (as that term is defined in Section 28(b) of the 1940 Act)
in the amount of $4,492,725 and $4,152,437 at December 31, 2002 and 2001,
respectively. AECC had Qualified Assets of $4,778,592 and $4,413,104 at December
31, 2002 and 2001, respectively, excluding net unrealized appreciation on
Available-for-sale securities of $135,010 and $43,962 at December 31, 2002 and
2001, respectively, and Payable for investment securities purchased of $263,658
and $163,507 at December 31, 2002 and 2001, respectively.
Qualified Assets are valued in accordance with such provisions of Minnesota
Statutes as are applicable to investments of life insurance companies. These
values are the same as financial statement carrying values, except for debt
securities classified as available-for-sale and all marketable equity
securities, which are carried at fair value in the financial statements but are
valued at amortized cost for qualified asset and deposit maintenance purposes.
Pursuant to provisions of the certificates, the 1940 Act, the central depository
agreement and requirements of various states, qualified assets of AECC were
deposited as follows:
December 31, 2002
Required
Deposits deposits Excess
Deposits to meet certificate liability requirements:
States $ 362 $ 318 $ 44
Central Depository 5,031,924 4,472,886 559,038
--------- --------- -------
Total $5,032,286 $4,473,204 $559,082
---------- ---------- --------
December 31, 2001
Required
Deposits deposits Excess
Deposits to meet certificate liability requirements:
States $ 361 $ 318 $ 43
Central Depository 4,547,283 4,129,056 418,227
--------- --------- -------
Total $4,547,644 $4,129,374 $418,270
---------- ---------- --------
The assets on deposit at December 31, 2002 and 2001 consisted of securities and
other loans having a deposit value of $4,608,914 and $3,955,748, respectively;
mortgage loans on real estate of $338,924 and $343,434, respectively, and other
assets of $84,448 and $248,462, respectively.
American Express Trust Company is the central depository for AECC. See note 7.
-44-
3. INVESTMENTS IN SECURITIES
Fair values of investments in securities represent market prices or estimated
fair values when quoted prices are not available. Estimated fair values are
determined by using established procedures involving, among other things, review
of market indexes, price levels of current offerings and comparable issues,
price estimates, estimated future cash flows, and market data from independent
brokers. The procedures are reviewed annually by management and the Board of
Directors.
Because of changes to the rules for hedging investments, the transition
provisions of SFAS No. 133, as amended, permitted held-to-maturity securities
under SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," to be reclassified at the date of adoption to available-for-sale or
trading. AECC reclassified all held-to-maturity securities to available-for-sale
upon adoption as of January 1, 2001.
A summary of Available-for-sale securities at December 31, is as follows:
2002
Gross Gross
Amortized unrealized unrealized Fair
cost gains losses value
U.S. Government and
agency obligations $ 362 $ 37 $ - $ 399
Mortgage and asset-backed securities 2,938,348 94,528 1,728 3,031,148
Structured investments 33,470 2,175 - 35,645
State and municipal obligations 9,424 385 - 9,809
Corporate debt securities 1,172,446 53,394 15,540 1,210,300
Stated maturity preferred stock 82,554 1,876 383 84,047
Perpetual preferred stock 17,782 266 - 18,048
---------- -------- ------- ----------
Total $4,254,386 $152,661 $17,651 $4,389,396
---------- -------- ------- ----------
2001
Gross Gross
Amortized unrealized unrealized Fair
cost gains losses value
U.S. Government and
agency obligations $ 361 $ 24 $ - $ 385
Mortgage and asset-backed securities 2,136,070 23,121 10,059 2,149,132
Structured investments 59,586 582 2,613 57,555
State and municipal obligations 10,893 563 - 11,456
Corporate debt securities 1,623,612 38,078 10,379 1,651,311
Stated maturity preferred stock 168,963 4,489 150 173,302
Perpetual preferred stock 30,282 454 320 30,416
Common stock 172 172 - 344
---------- -------- ------- ----------
Total $4,029,939 $ 67,483 $23,521 $4,073,901
---------- -------- ------- ----------
-45-
The amortized cost and fair value of Available-for-sale securities, by
contractual maturity at December 31, 2002 are shown below. Cash flows may differ
from contractual maturities because issuers may call or prepay obligations.
Amortized Fair
cost value
Due within one year $ 212,117 $ 214,421
Due from one to five years 869,934 911,737
Due from five to ten years 204,791 203,097
Due in more than ten years 11,414 10,945
------ ------
$1,298,256 $1,340,200
Mortgage and asset-backed securities 2,938,348 3,031,148
Perpetual preferred stock 17,782 18,048
------ ------
Total $4,254,386 $4,389,396
---------- ----------
During the years ended December 31, 2002 and 2001, there were no securities
classified as trading securities.
The proceeds from sales of Available-for-sale securities and the gross realized
gains and gross realized losses on those sales during the years ended December
31, were as follows:
2002 2001 2000
Proceeds $ 887,194 $ 1,694,615 $ 312,728
Gross realized gains 23,394 20,679 4,447
Gross realized losses 15,741 83,932 3,136
------ ------ -----
During the years ended December 31, 2002, 2001 and 2000, AECC also recognized
losses of $15,789, $27,932, and $11,413, respectively, due to declines in the
fair value of corporate debt or structured available-for-sale securities that
were other-than-temporary. These amounts are reflected in Net realized loss on
investments in the Statements of Operations.
Sales of Held-to-maturity securities, due to credit concerns and acceptance of a
tender offer during the year ended December 31, 2000 was as follows:
2002 2001 2000
Amortized cost $ - $ - $ 9,015
Gross realized gains - - 94
Gross realized losses - - 273
------ ------ -----
Investments in securities with fixed maturities comprised 83% and 88% of AECC's
total invested assets at December 31, 2002 and 2001, respectively. Securities
are rated by Moody's and Standard & Poors (S&P), or by Parent's internal
analysts, using criteria similar to Moody's and S&P, when a public rating does
not exist. Ratings are presented using S&P's convention and if the two agency's
ratings differ, the lower rating is used. A summary of investments in securities
with fixed maturities, at amortized cost, by rating of investment is as follows:
Rating 2002 2001
AAA 69% 60%
AA 1 2
A 11 12
BBB 16 24
Below investment grade 3 2
--- ---
Total 100% 100%
--- ---
-46-
Of the securities rated AAA, 94% and 88% at December 31, 2002 and 2001,
respectively, are U.S. Government Agency mortgage-backed securities that are not
rated by a public rating agency. At December 31, 2002 and 2001, approximately 9%
and 11%, respectively, of securities with fixed maturities, other than U.S.
Government Agency mortgage-backed securities, are rated by Parent's internal
analysts.
At December 31, 2002 and 2001 no one issuer, other than U.S. Government Agency
mortgage-backed securities, is greater than 1% of AECC's total investment in
securities with fixed maturities.
AECC reserves freedom of action with respect to its acquisition of restricted
securities that offer advantageous and desirable investment opportunities. In a
private negotiation, AECC may purchase for its portfolio all or part of an issue
of restricted securities. Since AECC would intend to purchase such securities
for investment and not for distribution, it would not be "acting as a
distributor" if such securities are resold by AECC at a later date.
The fair values of restricted securities are determined by the board of
directors using the procedures and factors as described previously.
In the event AECC were to be deemed to be a distributor of the restricted
securities, it is possible that AECC would be required to bear the costs of
registering those securities under the Securities Act of 1933, although in most
cases such costs would be incurred by the issuer of the restricted securities.
AECC's net losses in 2001 were primarily composed of a $36.9 million loss to
recognize the impact of higher default assumptions used to determine impairment
on rated structured investments and a $57.1 million loss on high-yield
securities. The write-downs of these investments were associated with the
company's decision to reduce the Company's holdings of high-yield investments
and rebalance the fixed maturity investment portfolio towards higher quality,
less volatile holdings.
4. INVESTMENTS IN FIRST MORTGAGE LOANS ON REAL ESTATE AND OTHER LOANS
During the years ended December 31, 2002 and 2001, AECC held no investments in
impaired mortgage or other loans. During 2000, the average recorded investment
in impaired loans was $195.
AECC recognized $13 of interest income related to impaired mortgage and other
loans for the year ended December 31, 2000.
The reserve for loss on mortgage loans and other loans increased to $4,223 on
December 31, 2002, from $1,935 at December 31, 2001 and $744 at December 31,
2000.
At December 31, 2002 and 2001, approximately 7% and 8%, respectively, of AECC's
invested assets were First mortgage loans on real estate. A summary of First
mortgage loans on real estate by region and property type at December 31, is as
follows:
Region 2002 2001
South Atlantic 18% 20%
West North Central 15 17
East North Central 13 15
Mountain 13 17
West South Central 17 13
Pacific 12 9
New England 6 4
Middle Atlantic 6 5
--- ---
Total 100% 100%
--- ---
-47-
Property Type 2002 2001
Office buildings 41% 29%
Retail/shopping centers 20 24
Apartments 14 17
Industrial buildings 15 14
Other 10 16
--- ---
Total 100% 100%
--- ---
The carrying amounts and fair values of First mortgage loans on real estate and
other loans at December 31 are below. The fair values for first mortgage loans
on real estate are estimated using discounted cash flow analyses, using market
interest rates currently being offered for loans with similar maturities. The
fair value of other loans represents market prices or estimated fair values when
quoted prices are not available.
2002 2001
Carrying Fair Carrying Fair
amount value amount value
First mortgage loans on real estate $342,147 $366,198 $345,369 $348,873
Other loans 114,319 111,550 - -
Reserve for losses (4,223) - (1,935) -
-------- -------- -------- --------
Net first mortgage and other loans $452,243 $477,748 $343,434 $348,873
-------- -------- -------- --------
At December 31, 2002 and 2001, commitments for fundings of first mortgage loans
on real estate, at market interest rates, aggregated $13,400 and $7,100,
respectively. AECC holds the mortgage document, which gives it the right to take
possession of the property if the borrower fails to perform according to the
terms of the agreements. AECC employs policies and procedures to ensure the
creditworthiness of the borrowers and that funds will be available on the
funding date. AECC's first mortgage loans on real estate fundings are restricted
to 80% or less of the market value of the real estate at the time of the loan
funding. Management believes there is no fair value for these commitments.
5. CERTIFICATE RESERVES
Reserves maintained on outstanding certificates have been computed in accordance
with the provisions of the certificates and Section 28 of the 1940 Act. The
average rates of accumulation on certificate reserves at December 31, were as
follows:
2002
Average Average
gross additional
Reserve accumulation credit
balance rate rate
Installment certificates:
Reserves to mature:
With guaranteed rates $ 12,663 3.50% .50%
Without guaranteed rates (A) 156,294 - 1.04
Additional credits and accrued interest 3,988 3.20 -
Advance payments and accrued interest (B) 564 3.30 .18
Other 34 - -
Fully paid certificates:
Reserves to mature:
With guaranteed rates 95,941 3.20 .01
Without guaranteed rates (A) and (C) 4,181,407 - .73
Additional credits and accrued interest 42,311 3.08 -
Due to unlocated certificate holders 170 - -
---------- ---- ---
Total $4,493,372
----------
-48-
2001
Average Average
gross additional
Reserve accumulation credit
balance rate rate
Installment certificates:
Reserves to mature:
With guaranteed rates $ 14,367 3.50% .50%
Without guaranteed rates (A) 178,808 - 3.94
Additional credits and accrued interest 5,082 3.18 -
Advance payments and accrued interest (B) 645 3.26 .21
Other 33 - -
Fully paid certificates:
Reserves to mature:
With guaranteed rates 104,025 3.20 .24
Without guaranteed rates (A) and (C) 3,796,799 - 2.71
Additional credits and accrued interest 59,948 3.12 -
Due to unlocated certificate holders 219 - -
---------- ---- ---
Total $4,159,926
----------
A) There is no minimum rate of accrual on these reserves. Interest is declared
periodically, quarterly or annually, in accordance with the terms of the
separate series of certificates.
B) Certain series of installment certificates guarantee accrual of interest on
advance payments at an average of 3.26%. AECC has increased the rate of accrual
to 4.00% through April 30, 2004. An appropriation of retained earnings of $15
has been made, which represents the estimated additional accrual that will
result from the increase granted by AECC.
C) American Express Stock Market Certificate, American Express Market Strategy
Certificate and American Express Equity Indexed Savings Certificate enable the
certificate owner to participate in any relative rise in a major stock market
index without risking loss of principal. Generally the certificates have a term
of 52 weeks and may continue for up to 20 successive terms. The reserve balance
on these certificates at December 31, 2002 and 2001 was $999,067 and $1,095,531,
respectively.
On certain series of single payment certificates, additional interest is
predeclared for periods greater than one year. At December 31, 2002, $811 of
retained earnings had been appropriated for the predeclared additional interest,
which represents the difference between certificate reserves on these series,
calculated on a statutory basis, and the reserves maintained per books.
Fair values of certificate reserves with interest rate terms of one year or less
approximated the carrying values less any applicable surrender charges. Fair
values for other certificate reserves are determined by discounted cash flow
analyses using interest rates currently offered for certificates with similar
remaining terms, less any applicable surrender charges.
-49-
The carrying amounts and fair values of certificate reserves at December 31,
consisted of the following:
2002 2001
Carrying Fair Carrying Fair
amount value amount value
Reserves with terms of one year or less $4,007,664 $4,008,793 $3,867,493 $3,872,897
Other 485,708 497,689 292,433 301,621
------- ------- ------- -------
Total certificate reserves 4,493,372 4,506,482 4,159,926 4,174,518
Unapplied certificate transactions 801 801 2,152 2,152
Certificate loans and accrued interest (18,824) (18,824) (22,054) (22,054)
------- ------- ------- -------
Total $4,475,349 $4,488,459 $4,140,024 $4,154,616
---------- ---------- ---------- ----------
6. DIVIDEND RESTRICTION
Certain series of installment certificates outstanding provide that cash
dividends may be paid by AECC only in calendar years for which additional
credits of at least one-half of 1% on such series of certificates have been
authorized by AECC. This restriction has been removed for 2003 and 2004 by
AECC's declaration of additional credits in excess of this requirement.
7. RELATED PARTY TRANSACTIONS ($ NOT IN THOUSANDS)
Investment advisory, joint facilities, technology support and treasury services
The investment advisory and services agreement with Parent provides for a
graduated scale of fees equal on an annual basis to 0.750% on the first $250
million of total book value of assets of AECC, 0.650% on the next $250 million,
0.550% on the next $250 million, 0.500% on the next $250 million and 0.107% on
the amount in excess of $1 billion. The fee is payable monthly in an amount
equal to one-twelfth of each of the percentages set forth above. Excluded from
assets for purposes of this computation are first mortgage and other loans, real
estate and any other asset on which AECC pays an outside advisory or service
fee. The fee paid to AEFC for managing and servicing the other loans is 0.35%.
Distribution services
Fees payable to AEFA on sales of AECC's certificates are based upon terms of
agreements giving AEFA the right to distribute the certificates covered under
the agreements. The agreements provide for payment of fees over a period of
time.
From time to time, AECC may sponsor or participate in sales promotions involving
one or more of the certificates and their respective terms. These promotions may
offer a special interest rate to attract new clients or retain existing clients.
To cover the cost of these promotions, distribution fees paid to AEFA may be
lowered. There were no changes to the distribution fees for the promotion of the
American Express Flexible Savings Certificate which occurred June 5, 2002 to
July 23, 2002. For the promotion of the seven-month interest rate term American
Express Flexible Savings Certificate which occurred March 7, 2001 to May 8, 2001
and October 31, 2001 to December 11, 2001, the distribution fee was lowered to
0.030% and 0.017%, respectively.
The Aggregate fees payable under the agreements per $1,000 face amount of
installment certificates and a summary of the periods over which the fees are
payable are:
Number of
certificate
years over
Aggregate fees payable which
subsequent
First Subsequent years' fees
Total year years are payable
On sales effective April 30, 1997 $25.00 $ 2.50 $22.50 9
-50-
Effective April 25, 2001 fees on the American Express Cash Reserve Certificate
are paid at a rate of 0.0625% of the purchase price at the time of issuance and
0.0625% of the reserves maintained for these certificates at the beginning of
the second and subsequent quarters from issue date. For certificates sold from
April 30, 1997 to April 24, 2001, fees on the American Express Cash Reserve
Certificate are paid at a rate of 0.20% of the purchase price at the time of
issuance and 0.20% of the reserves maintained for these certificates at the
beginning of the second and subsequent quarters from issue date.
Effective April 26, 2000, fees on the American Express Flexible Savings
Certificate are paid at a rate of 0.08% of the purchase price at the time of
issuance and 0.08% of the reserves maintained for these certificates at the
beginning of the second and subsequent quarters from issue date. For
certificates sold from April 30, 1997 to April 25, 2000, fees were paid at the
rate of 0.20% of the purchase price at time of issuance and 0.20% of the
reserves maintained for these certificates at the beginning of the second and
subsequent quarters from issue date.
Fees on the American Express Investors Certificate are paid at an annualized
rate of 1% of the reserves maintained for the certificates. Fees are paid at the
end of each term on certificates with a one-, two- or three-month term. Fees are
paid each quarter from date of issuance on certificates with a six-,12-, 24- or
36-month term.
Fees on the American Express Preferred Investors Certificate are paid at a rate
of 0.165% of the initial payment on issue date of the certificate and 0.165% of
the certificate's reserve at the beginning of the second and subsequent quarters
from issue date.
Effective April 28, 1999, fees on the American Express Stock Market, sold
through AEFA, and American Express Market Strategy Certificates are paid at a
rate of 0.90%. For certificates sold from April 30, 1997 to April 27, 1999, fees
were paid at the rate of 0.70%. Fees are paid on the purchase price on the first
day of the certificate's term and on the reserves maintained for these
certificates at the beginning of each subsequent term.
Effective April 26, 2000, fees on the American Express Stock Market
Certificates, sold through American Express Bank International, are paid at a
rate of 0.90%. For certificates sold from April 28, 1999 to April 25, 2000, fees
were paid at the rate of 1.00%. For certificates sold from April 30, 1997 to
April 27, 1999, fees were paid at a rate of 1.25%. Fees are paid on the purchase
price on the first day of the certificate's term and on the reserves maintained
for these certificates at the beginning of each subsequent term.
Fees on the American Express Equity Indexed Savings Certificate are paid at a
rate of 1.00% of the initial investment on the first day of each certificate's
term and 1.00% of the certificate's reserve at the beginning of each subsequent
term.
Depository fees
The basis for computing fees paid or payable to American Express Trust Company
for depository services is as follows:
Depository fees paid or payable to American Express Trust Company (an affiliate)
is:
- --------------------------------------------------------------------------------
Maintenance charge per account 5 cents per $1,000 of assets on deposit
Transaction charge $20 per transaction
Security loan activity:
Depositary Trust Company
receive/deliver $20 per transaction
Physical receive/deliver $25 per transaction
Exchange collateral $15 per transaction
- --------------------------------------------------------------------------------
A transaction consists of the receipt or withdrawal of securities and commercial
paper and/or a change in the security position. The charges are payable
quarterly except for maintenance, which is an annual fee.
-51-
Distribution fees
The basis for computing fees paid or payable to American Express Bank Ltd. (an
affiliate) for the distribution of the American Express Special Deposits
Certificate on an annualized basis is 1.25% of the reserves maintained for the
certificates on an amount from $100,000 to $249,999, 0.80% on an amount from
$250,000 to $499,999, 0.65% on an amount from $500,000 to $999,999 and 0.50% on
an amount $1,000,000 or more. Fees are paid at the end of each term on
certificates with a one-, two- or three-month term. Fees are paid at the end of
each quarter from date of issuance on certificates with a six-, 12-, 24- or
36-month term.
Transfer agent fees
The basis of computing Transfer agent fees paid or payable to American Express
Client Service Corporation (AECSC) (an affiliate) is under a Transfer Agency
Agreement effective January 1, 1998. AECSC maintains certificate owner accounts
and records. AECC pays AECSC a monthly fee of one-twelfth of $10.353 per
certificate owner account for this service. Prior to January 1, 1998, AEFC
provided this service to AECC under the investment advisory and services
agreement.
Dividends
In 2001, AECC paid a $167 million dividend to its parent by transferring at book
value certain collateralized debt obligation (CDO) securities owned by the
Company. In part, the dividend was paid to allow AEFC to transfer the CDO
securities and related accrued interest into a securitization trust.
8. INCOME TAXES
Income tax (expense) benefit as shown in the Statements of Operations for the
three years ended December 31, consists of:
2002 2001 2000
Federal:
Current $(24,367) $26,007 $ 8,586
Deferred 3,288 9,792 (4,941)
----- ----- ------
(21,079) 35,799 3,645
State (156) (120) (120)
---- ---- ----
Total income tax (expense) benefit $(21,235) $35,679 $ 3,525
-------- ------- -------
Income tax (expense) benefit differs from that computed by using the federal
statutory rate of 35%. The principal causes of the difference in each year are
shown below:
2002 2001 2000
Federal tax (expense) benefit at
federal statutory rate $(23,581) $30,752 $(4,554)
Dividend exclusion 2,462 4,971 8,064
Other, net 40 76 135
-- -- ---
Federal tax (expense) benefit $(21,079) $35,799 $ 3,645
-------- ------- -------
-52-
Deferred income taxes result from the net tax effects of temporary differences.
Temporary differences are differences between the tax bases of assets and
liabilities and their reported amounts in the financial statements that will
result in differences between income for tax purposes and income for financial
statement purposes in future years. Principal components of AECC's Deferred tax
assets and Deferred tax liabilities as of December 31, are as follows:
Deferred tax assets 2002 2001
Certificate reserves 1,793 5,743
Investments 14,649 14,269
Purchased/written call options 689 -
Other, net 245 160
--- ---
Total deferred tax assets $ 17,376 $20,172
-------- -------
Deferred tax liabilities
Investment unrealized gains, net $ 44,720 $12,389
Deferred distribution fees 2,091 2,721
Purchased/written call options - 5,227
Dividends receivable 79 196
Return of capital dividends 42 43
-- --
Total deferred tax liabilities 46,932 20,576
------ ------
Net deferred tax liabilities $(29,556) $ (404)
-------- -------
AECC is required to establish a valuation allowance for any portion of the
Deferred tax assets that management believes will not be realized. In the
opinion of management, it is more likely than not that AECC will realize the
benefit of the Deferred tax assets and, therefore, no such valuation allowance
has been established.
9. DERIVATIVE FINANCIAL INSTRUMENTS
AECC maintains an overall risk management strategy that incorporates the use of
derivative instruments to minimize significant unplanned fluctuations in
earnings that are caused by interest rate and equity market volatility. The
Company enters into interest rate swaps to manage interest rate sensitivity and
enters into options and futures contracts to mitigate the negative effect on
earnings that would result from an increase in the equity markets.
AECC is exposed to risk associated with fluctuating interest payments on certain
certificate products tied to the London Interbank Offering Rate (LIBOR) as the
certificate products reset at shorter intervals than the average maturity of the
investment portfolio. AECC's goal is to manage interest rate sensitivity by
modifying the repricing characteristics of certificate liabilities so that the
interest credited to related investment certificate owners is not adversely
affected by movements in interest rates. As a result of interest rate
fluctuations, the amount of interest paid on hedged liabilities will positively
or negatively impact reported earnings. Income or loss on the derivative
instruments that are linked to the hedged liabilities will generally offset the
effect of this impact. The Company views this strategy as a prudent management
of interest rate sensitivity, such that earnings are not exposed to undue risk
presented by changes in interest rates.
-53-
AECC uses interest rate swap contracts to hedge the risk of rising interest
rates on a portion of the certificate products. Interest rate swaps generally
involve the exchange of fixed and variable rate interest rate payments between
two parties, based on a common notional principal amount and maturity date. The
Company is required to pay the counterparty to the contracts a stream of fixed
interest payments, and in turn, receives a stream of LIBOR-based variable
interest payments.
The interest rate swaps qualify for and are designated as cash flow hedges. The
effective portions of changes in the fair value of the derivatives are recorded
in Other Comprehensive Income (OCI). Amounts are reclassified from OCI to
Investment expenses as interest is credited to certificate reserves. The fair
value of the interest rate swaps are included in Accounts payable and accrued
liabilities on the balance sheet.
For the years ended December 31, 2002 and 2001, AECC recognized no losses on the
derivatives as a result of ineffectiveness. AECC reclassified into earnings
pretax losses of $9,780 and $17,616 during 2002 and 2001, respectively. An
estimated $4,000 of the unrealized losses accumulated in OCI related to
derivatives designated as cash flow hedges will be reclassified into earnings by
December 31, 2003. This effect will occur at the same time as the Company
realizes the benefits of lower market rates of interest on its certificates. The
longest period of time over which the Company is hedging exposure to the
variability in future cash flows is 26 months.
AECC offers American Express Stock Market Certificates ("SMC") that offer a
return based upon the relative change in a major stock market index between the
beginning and end of the SMC's term. The SMC product contains an embedded
derivative, essentially the equity based return of the certificate, that must be
separated from the host contract and accounted for as a derivative instrument
per SFAS No. 133. As a result of fluctuations in equity markets, and the
corresponding changes in value of the embedded derivative, the amount of
expenses incurred by the Company related to SMC will positively or negatively
impact reported earnings. As a means of hedging its obligations under the
provisions for these certificates, the Company purchases and writes call options
on the major market index. The Company views this strategy as a prudent
management of equity market sensitivity, such that earnings are not exposed to
undue risk presented by changes in equity market levels.
On the same series of certificates, AECC also purchases futures on the major
market index to hedge its obligations. The futures are marked-to-market daily
and exchange traded, exposing the Company to no counterparty risk.
The options and futures contracts do not receive special hedge accounting under
SFAS No. 133. As such, any changes in the fair value of the contracts are taken
through earnings. The fair values of the purchased and written call options are
included in Other qualified assets and Accounts payable and accrued liabilities,
respectively, on the balance sheet. The fair value of the embedded derivatives
are included under Certificate reserves. The gains and losses on the options,
futures and embedded derivative instruments are recognized in Investment
expenses on the statement of operations.
By using derivative instruments, AECC is exposed to credit and market risk.
Credit risk is the possibility that the counterparty will not fulfill the terms
of the contract. AECC monitors credit risk related to derivative financial
instruments through established approval procedures, including setting
concentration limits by counterparty, reviewing credit ratings and requiring
collateral where appropriate.
Market risk is the possibility that the value of the derivative financial
instrument will change due to fluctuations in a factor from which the instrument
derives its value, primarily an interest rate or a major market index. AECC
manages the market risk associated with interest rate contracts by establishing
and monitoring limits as to the types and degree of risk that may be undertaken.
AECC primarily uses derivatives to manage risk and, therefore, the cash flow and
income effects of the derivatives are generally inverse to the effects of the
underlying hedged transactions.
-54-
10. FAIR VALUES OF FINANCIAL INSTRUMENTS
AECC discloses fair value information for most on- and off-balance sheet
financial instruments for which it is practicable to estimate that value. The
fair value of the financial instruments presented may not be indicative of their
future fair values. The estimated fair value of certain financial instruments
such as Cash and cash equivalents, Receivables for Dividends and interest, and
Investment securities sold, Accounts Payable Due to Parent and other affiliates,
Payable for investment securities purchased and Other accounts payable and
accrued expenses approximate the carrying amounts disclosed in the Balance
Sheets.
A summary of fair values of financial instruments as of December 31, is as
follows:
2002 2001
Carrying Fair Carrying Fair
value value value value
Financial assets:
Assets for which carrying values
approximate fair values $ 282,382 $ 282,382 $ 132,303 $ 132,303
Investment securities (note 3) 4,389,396 4,389,396 4,073,901 4,073,901
First mortgage loans on real estate and other loans (note 4) 452,243 477,748 343,434 348,873
Derivative financial instruments (note 9) 34,403 34,403 48,393 48,393
Financial liabilities:
Liabilities for which carrying values
approximate fair values 306,841 306,841 179,080 179,080
Certificate reserves (note 5) 4,475,349 4,488,459 4,140,024 4,154,616
Derivative financial instruments (note 9) 26,703 26,703 32,558 32,558
------ ------ ------ ------
-55-
American Express Certificate Company Schedule I
Investments of Securities in Unaffiliated Issuers
At December 31, 2002
(In thousands)
Bal Held at
12/31/02 Principal
Amt of Bonds & Value at
Notes or # of Cost 12/31/02
Issuer Name and Issuer Title Maturity Rate Shares (Notes a & c) (Note a)
- ------------------------------------------------------------------------------------------------------------------------------------
BONDS AND NOTES
U.S. Government U.S. Government-Direct Obligations
US TREASURY BD NTS STRP 2004 5.8750% 165 163 178
US TREASURY BD NTS STRP 2006 5.6250% 200 199 221
Total - U.S. Government-Direct Obligations 365 362 400
Total - U.S. Government 365 362 400
Mortgage Backed Securities
AERCO LIMITED - ABS 2023 2.7700% 12,666 12,569 12,467
BANC AMERICA LARGE LOAN 2016 6.1190% 4,360 4,360 4,723 (d)
BANC AMERICA LARGE LOAN 2011 2.6500% 8,213 8,213 7,012
BANK OF AMERICA - ABS 2043 3.3660% 9,043 9,042 9,204
CDC COMMERCIAL MORTGAGE TRUST 2019 5.2520% 9,814 9,861 10,364
CENTEX HOME EQUITY 2029 6.4700% 10,000 10,013 10,601
CHASE COMMERCIAL MORT SECURITI 2029 6.4500% 955 953 1,001
CHASE MORTGAGE FINANCE CORP - 2029 6.5000% 4,347 4,348 4,459
CITICORP MORTGAGE SECURITIES I 2029 6.5000% 4,185 4,179 4,240
CONTIMORTGAGE HOME EQUITY LN T 2016 6.6900% 2,582 2,576 2,579
DLJ COMMERCIAL MORTGAGE CORP 2032 7.1200% 8,112 8,135 8,991
EQCC HOME EQUITY TRUST - ABS 2021 6.6100% 981 981 997
FDIC REMIC TRUST - ABS 2026 6.7500% 143 142 143
FEDERAL HOME LOAN MTGE CORP 2018 5.5000% 100,000 102,750 103,562
FEDERAL HOME LOAN MTGE CORP 2030 5.5000% 39,271 38,875 40,474
FEDERAL HOME LOAN MTGE CORP 2030 5.5000% 41,693 41,505 42,757
FEDERAL HOME LOAN MTGE CORP 2019 6.5000% 1,935 1,929 1,938
FEDERAL HOME LOAN MTGE CORP 2026 6.5000% 119 118 119
FEDERAL HOME LOAN MTGE CORP 2031 7.0000% 688 683 689
FEDERAL HOME LOAN MTGE CORP 2028 6.0000% 11,724 11,649 12,015
FEDERAL HOME LOAN MTGE CORP 2027 6.0000% 29,091 28,966 29,701
FEDERAL HOME LOAN MTGE CORP 2029 6.0000% 14,767 14,684 15,334
FEDERAL HOME LOAN MTGE CORP 2030 6.0000% 15,159 15,056 15,427
FEDERAL HOME LOAN MTGE CORP 2026 5.5000% 13,000 12,942 13,378
FEDERAL HOME LOAN MTGE CORP 2031 5.7500% 25,000 24,964 25,821
FEDERAL HOME LOAN MTGE CORP 2031 5.5000% 25,000 24,945 25,738
FEDERAL HOME LOAN MTGE CORP 2030 5.7500% 33,412 33,278 34,478
FEDERAL HOME LOAN MTGE CORP 2026 5.5000% 12,000 11,940 12,355
FEDERAL HOME LOAN MTGE CORP 2030 5.5000% 25,000 24,911 25,701
FEDERAL HOME LOAN MTGE CORP 2031 5.7000% 28,624 28,685 29,460
-56-
American Express Certificate Company Schedule I
Investments of Securities in Unaffiliated Issuers
At December 31, 2002
(In thousands)
Bal Held at
12/31/02 Principal
Amt of Bonds & Value at
Notes or # of Cost 12/31/02
Issuer Name and Issuer Title Maturity Rate Shares (Notes a & c) (Note a)
- ------------------------------------------------------------------------------------------------------------------------------------
FEDERAL HOME LOAN MTGE CORP 2021 5.2500% 30,000 30,001 30,847
FEDERAL HOME LOAN MTGE CORP 2022 5.5000% 30,000 31,172 31,200
FEDERAL HOME LOAN MTGE CORP 2023 5.5000% 20,165 20,735 21,028
FEDERAL HOME LOAN MTGE CORP 2022 5.5000% 25,000 25,641 25,984
FEDERAL HOME LOAN MTGE CORP 2023 5.5000% 25,000 25,664 25,953
FEDERAL HOME LOAN MTGE CORP 2018 5.5000% 75,000 77,034 77,496
FEDERAL HOME LOAN MTGE CORP 1B0183 2031 5.6150% 13,421 13,257 13,770
FEDERAL HOME LOAN MTGE CORP 219679 2003 9.5000% 1 1 1
FEDERAL HOME LOAN MTGE CORP 219757 2003 11.0000% 1 1 1
FEDERAL HOME LOAN MTGE CORP 350190 2022 4.7500% 759 790 781
FEDERAL HOME LOAN MTGE CORP 380025 2003 9.5000% 18 18 18
FEDERAL HOME LOAN MTGE CORP 405014 2019 5.6440% 187 189 193
FEDERAL HOME LOAN MTGE CORP 405092 2019 6.1000% 435 431 448
FEDERAL HOME LOAN MTGE CORP 405185 2018 5.8110% 494 493 511
FEDERAL HOME LOAN MTGE CORP 405243 2019 4.9750% 172 175 178
FEDERAL HOME LOAN MTGE CORP 405360 2019 5.4020% 228 232 234
FEDERAL HOME LOAN MTGE CORP 405437 2019 4.2750% 163 161 166
FEDERAL HOME LOAN MTGE CORP 405455 2019 5.2910% 371 375 382
FEDERAL HOME LOAN MTGE CORP 405615 2019 4.6090% 348 353 355
FEDERAL HOME LOAN MTGE CORP 502175 2004 10.5000% 1 1 1
FEDERAL HOME LOAN MTGE CORP 605041 2019 5.2470% 139 140 143
FEDERAL HOME LOAN MTGE CORP 605048 2018 5.0610% 389 390 401
FEDERAL HOME LOAN MTGE CORP 605432 2017 4.8970% 169 170 173
FEDERAL HOME LOAN MTGE CORP 605433 2017 4.7490% 434 436 447
FEDERAL HOME LOAN MTGE CORP 605454 2017 4.3230% 1,272 1,267 1,300
FEDERAL HOME LOAN MTGE CORP 606024 2019 4.2180% 609 602 621
FEDERAL HOME LOAN MTGE CORP 606025 2019 3.9400% 1,664 1,669 1,695
FEDERAL HOME LOAN MTGE CORP 630048 2018 7.3750% 10 10 11
FEDERAL HOME LOAN MTGE CORP 630074 2018 5.6250% 184 184 192
FEDERAL HOME LOAN MTGE CORP 785363 2025 6.4300% 839 847 874
FEDERAL HOME LOAN MTGE CORP 785619 2026 4.7500% 331 332 342
FEDERAL HOME LOAN MTGE CORP 785634 2026 4.6470% 405 405 419
FEDERAL HOME LOAN MTGE CORP 788870 2031 5.8540% 22,560 22,486 23,306
FEDERAL HOME LOAN MTGE CORP 788912 2031 5.7870% 16,629 16,491 17,144
FEDERAL HOME LOAN MTGE CORP 788941 2031 5.6460% 8,481 8,356 8,697
FEDERAL HOME LOAN MTGE CORP 840031 2019 5.2690% 39 39 40
FEDERAL HOME LOAN MTGE CORP 840035 2019 5.7630% 159 158 162
FEDERAL HOME LOAN MTGE CORP 840036 2019 4.7900% 343 347 351
FEDERAL HOME LOAN MTGE CORP 840072 2019 5.0270% 487 487 494
FEDERAL HOME LOAN MTGE CORP 845154 2022 4.8020% 715 744 739
FEDERAL HOME LOAN MTGE CORP 845523 2023 4.7500% 653 673 669
-57-
American Express Certificate Company Schedule I
Investments of Securities in Unaffiliated Issuers
At December 31, 2002
(In thousands)
Bal Held at
12/31/02 Principal
Amt of Bonds & Value at
Notes or # of Cost 12/31/02
Issuer Name and Issuer Title Maturity Rate Shares (Notes a & c) (Note a)
- ------------------------------------------------------------------------------------------------------------------------------------
FEDERAL HOME LOAN MTGE CORP 845654 2024 5.8030% 1,894 1,922 1,952
FEDERAL HOME LOAN MTGE CORP 845730 2023 5.0840% 2,620 2,710 2,718
FEDERAL HOME LOAN MTGE CORP 845733 2024 5.4600% 2,951 3,005 3,039
FEDERAL HOME LOAN MTGE CORP 846072 2029 5.3940% 1,061 1,088 1,092
FEDERAL HOME LOAN MTGE CORP 846107 2025 6.0160% 845 865 866
FEDERAL HOME LOAN MTGE CORP 865008 2018 7.3630% 1,354 1,372 1,404
FEDERAL HOME LOAN MTGE CORP 885008 2003 10.0000% 18 18 18
FEDERAL HOME LOAN MTGE CORP 885009 2003 9.5000% 7 7 8
FEDERAL HOME LOAN MTGE CORP C90581 2022 5.5000% 14,111 14,005 14,557
FEDERAL HOME LOAN MTGE CORP C90582 2022 5.5000% 9,779 9,709 10,088
FEDERAL HOME LOAN MTGE CORP C90583 2022 6.0000% 19,579 20,204 20,394
FEDERAL HOME LOAN MTGE CORP E00151 2007 7.5000% 1,083 1,099 1,147
FEDERAL HOME LOAN MTGE CORP E00383 2010 7.0000% 3,526 3,519 3,757
FEDERAL HOME LOAN MTGE CORP E00388 2010 7.0000% 2,277 2,251 2,426
FEDERAL HOME LOAN MTGE CORP E00426 2011 6.5000% 2,392 2,373 2,539
FEDERAL HOME LOAN MTGE CORP E00484 2012 6.5000% 2,288 2,242 2,426
FEDERAL HOME LOAN MTGE CORP E01140 2017 6.0000% 46,427 48,044 48,580
FEDERAL HOME LOAN MTGE CORP E76761 2014 6.5000% 8,610 8,477 9,120
FEDERAL HOME LOAN MTGE CORP E77557 2014 6.5000% 1,165 1,141 1,234
FEDERAL HOME LOAN MTGE CORP E80594 2014 6.5000% 2,408 2,356 2,553
FEDERAL HOME LOAN MTGE CORP E83348 2016 6.0000% 20,910 20,887 21,892
FEDERAL HOME LOAN MTGE CORP E83349 2016 6.0000% 17,471 17,428 18,292
FEDERAL HOME LOAN MTGE CORP E83358 2016 6.0000% 15,646 15,612 16,381
FEDERAL HOME LOAN MTGE CORP E83365 2016 6.0000% 5,703 5,675 5,971
FEDERAL HOME LOAN MTGE CORP E90153 2017 6.0000% 13,083 13,614 13,690
FEDERAL HOME LOAN MTGE CORP E90154 2017 6.0000% 33,042 34,383 34,575
FEDERAL HOME LOAN MTGE CORP E90625 2017 5.5000% 104,971 105,102 109,001
FEDERAL HOME LOAN MTGE CORP E91041 2017 5.0000% 23,188 23,227 23,809
FEDERAL HOME LOAN MTGE CORP E91491 2012 5.0000% 10,866 11,134 11,214
FEDERAL HOME LOAN MTGE CORP E93341 2012 5.0000% 34,062 35,293 35,156
FEDERAL HOME LOAN MTGE CORP G10364 2010 7.0000% 4,096 4,076 4,367
FEDERAL HOME LOAN MTGE CORP G10369 2010 6.5000% 10,176 10,072 10,811
FEDERAL HOME LOAN MTGE CORP G10439 2011 6.5000% 1,168 1,145 1,240
FEDERAL HOME LOAN MTGE CORP G10665 2012 7.0000% 16,119 16,080 17,180
FEDERAL HOME LOAN MTGE CORP G10949 2014 6.5000% 6,677 6,589 7,073
FEDERAL HOME LOAN MTGE CORP G11004 2015 7.0000% 2,707 2,692 2,881
FEDERAL HOME LOAN MTGE CORP G11177 2011 5.5000% 20,694 20,721 21,716
FEDERAL HOME LOAN MTGE CORP G11193 2016 5.0000% 16,250 16,011 16,689
FEDERAL HOME LOAN MTGE CORP G11298 2017 5.0000% 23,929 23,977 24,569
FEDERAL NATIONAL MORTGAGE ASSO 2013 5.0000% 10,000 10,173 10,331
FEDERAL NATIONAL MORTGAGE ASSO 2023 6.5000% 1,494 1,478 1,511
-58-
American Express Certificate Company Schedule I
Investments of Securities in Unaffiliated Issuers
At December 31, 2002
(In thousands)
Bal Held at
12/31/02 Principal
Amt of Bonds & Value at
Notes or # of Cost 12/31/02
Issuer Name and Issuer Title Maturity Rate Shares (Notes a & c) (Note a)
- ------------------------------------------------------------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSO 2024 6.5000% 419 417 419
FEDERAL NATIONAL MORTGAGE ASSO 2024 6.5000% 680 678 683
FEDERAL NATIONAL MORTGAGE ASSO 2011 6.0000% 18,767 18,698 19,829
FEDERAL NATIONAL MORTGAGE ASSO 2029 6.0000% 15,845 15,684 16,240
FEDERAL NATIONAL MORTGAGE ASSO 2028 6.0000% 15,092 14,946 15,449
FEDERAL NATIONAL MORTGAGE ASSO 2014 6.0000% 10,000 9,925 10,731
FEDERAL NATIONAL MORTGAGE ASSO 2021 6.5000% 10,343 10,284 10,496
FEDERAL NATIONAL MORTGAGE ASSO 2012 5.0000% 49,646 50,563 51,456
FEDERAL NATIONAL MORTGAGE ASSO 2032 5.0110% 10,029 10,053 10,591
FEDERAL NATIONAL MORTGAGE ASSO 2032 5.1500% 14,197 14,271 14,643
FEDERAL NATIONAL MORTGAGE ASSO 2032 5.0000% 9,976 10,005 10,289
FEDERAL NATIONAL MORTGAGE ASSO 2032 5.2000% 10,000 10,074 10,209
FEDERAL NATIONAL MORTGAGE ASSO 2032 4.7560% 15,130 15,204 15,897
FEDERAL NATIONAL MORTGAGE ASSO 2032 5.0740% 10,029 10,068 10,195
FEDERAL NATIONAL MORTGAGE ASSO 2032 4.7000% 15,137 15,230 15,344
FEDERAL NATIONAL MORTGAGE ASSO 2028 5.6250% 11,505 11,552 11,898
FEDERAL NATIONAL MORTGAGE ASSO 2030 6.0000% 11,569 11,587 11,897
FEDERAL NATIONAL MORTGAGE ASSO 2042 5.3000% 45,500 45,341 47,309
FEDERAL NATIONAL MORTGAGE ASSO 2042 5.0000% 12,500 12,622 12,843
FEDERAL NATIONAL MORTGAGE ASSO 2042 5.0000% 15,000 15,081 15,413
FEDERAL NATIONAL MORTGAGE ASSO 105989 2020 6.4650% 573 602 598
FEDERAL NATIONAL MORTGAGE ASSO 190726 2033 4.9270% 2,380 2,435 2,446
FEDERAL NATIONAL MORTGAGE ASSO 249907 2024 6.2500% 2,067 2,098 2,123
FEDERAL NATIONAL MORTGAGE ASSO 250670 2011 7.0000% 1,409 1,417 1,507
FEDERAL NATIONAL MORTGAGE ASSO 250671 2011 7.5000% 3,943 3,948 4,225
FEDERAL NATIONAL MORTGAGE ASSO 250857 2012 7.0000% 3,945 3,935 4,218
FEDERAL NATIONAL MORTGAGE ASSO 252259 2014 5.5000% 17,778 17,476 18,610
FEDERAL NATIONAL MORTGAGE ASSO 252344 2014 5.5000% 16,403 16,023 17,149
FEDERAL NATIONAL MORTGAGE ASSO 252381 2014 5.5000% 15,343 14,963 16,033
FEDERAL NATIONAL MORTGAGE ASSO 253844 2016 5.5000% 7,977 7,988 8,282
FEDERAL NATIONAL MORTGAGE ASSO 253878 2016 5.5000% 20,445 20,498 21,227
FEDERAL NATIONAL MORTGAGE ASSO 254010 2008 5.5000% 10,539 10,519 10,916
FEDERAL NATIONAL MORTGAGE ASSO 254195 2017 5.5000% 23,283 23,221 24,174
FEDERAL NATIONAL MORTGAGE ASSO 254507 2012 5.5000% 19,590 20,257 20,619
FEDERAL NATIONAL MORTGAGE ASSO 254508 2012 5.0000% 35,410 36,226 36,701
FEDERAL NATIONAL MORTGAGE ASSO 254586 2012 5.0000% 73,514 75,469 76,194
FEDERAL NATIONAL MORTGAGE ASSO 254590 2017 5.0000% 50,000 50,430 51,337
FEDERAL NATIONAL MORTGAGE ASSO 254591 2018 5.5000% 35,000 36,239 36,339
FEDERAL NATIONAL MORTGAGE ASSO 303115 2004 6.5000% 1,057 1,034 1,083
FEDERAL NATIONAL MORTGAGE ASSO 303259 2025 4.8250% 1,635 1,682 1,677
FEDERAL NATIONAL MORTGAGE ASSO 303445 2009 5.5000% 6,789 6,584 7,145
-59-
American Express Certificate Company Schedule I
Investments of Securities in Unaffiliated Issuers
At December 31, 2002
(In thousands)
Bal Held at
12/31/02 Principal
Amt of Bonds & Value at
Notes or # of Cost 12/31/02
Issuer Name and Issuer Title Maturity Rate Shares (Notes a & c) (Note a)
- ------------------------------------------------------------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSO 303970 2024 6.0000% 13,316 13,139 13,918
FEDERAL NATIONAL MORTGAGE ASSO 313042 2011 7.0000% 3,245 3,253 3,469
FEDERAL NATIONAL MORTGAGE ASSO 313522 2012 7.0000% 7,956 7,990 8,483
FEDERAL NATIONAL MORTGAGE ASSO 313561 2012 8.0000% 3,940 4,004 4,268
FEDERAL NATIONAL MORTGAGE ASSO 323290 2013 6.0000% 12,958 12,866 13,616
FEDERAL NATIONAL MORTGAGE ASSO 323748 2014 6.5000% 11,710 11,466 12,406
FEDERAL NATIONAL MORTGAGE ASSO 323833 2014 6.0000% 6,261 6,202 6,575
FEDERAL NATIONAL MORTGAGE ASSO 36225 2016 9.0000% 84 86 94
FEDERAL NATIONAL MORTGAGE ASSO 367005 2012 7.0000% 2,629 2,615 2,801
FEDERAL NATIONAL MORTGAGE ASSO 40877 2017 9.0000% 28 28 31
FEDERAL NATIONAL MORTGAGE ASSO 484933 2014 6.0000% 11,056 11,028 11,611
FEDERAL NATIONAL MORTGAGE ASSO 50973 2009 6.0000% 10,913 10,731 11,547
FEDERAL NATIONAL MORTGAGE ASSO 509806 2014 6.5000% 4,740 4,693 5,018
FEDERAL NATIONAL MORTGAGE ASSO 511817 2016 5.5000% 18,785 18,865 19,503
FEDERAL NATIONAL MORTGAGE ASSO 511824 2016 5.5000% 17,557 17,587 18,228
FEDERAL NATIONAL MORTGAGE ASSO 511828 2016 5.5000% 11,690 11,687 12,137
FEDERAL NATIONAL MORTGAGE ASSO 51617 2017 10.0000% 46 47 53
FEDERAL NATIONAL MORTGAGE ASSO 545187 2031 5.9720% 23,995 23,913 24,838
FEDERAL NATIONAL MORTGAGE ASSO 545249 2016 5.5000% 36,144 36,286 37,527
FEDERAL NATIONAL MORTGAGE ASSO 545303 2016 5.0000% 18,270 17,998 18,767
FEDERAL NATIONAL MORTGAGE ASSO 545400 2017 5.5000% 44,169 43,950 45,859
FEDERAL NATIONAL MORTGAGE ASSO 545492 2022 5.5000% 10,712 10,604 11,058
FEDERAL NATIONAL MORTGAGE ASSO 545529 2032 5.6780% 20,375 20,179 20,982
FEDERAL NATIONAL MORTGAGE ASSO 54557 2032 5.5560% 28,304 28,355 29,196
FEDERAL NATIONAL MORTGAGE ASSO 545679 2022 5.5000% 21,384 20,820 22,074
FEDERAL NATIONAL MORTGAGE ASSO 545786 2032 5.8920% 9,031 9,070 9,404
FEDERAL NATIONAL MORTGAGE ASSO 564907 2031 5.9410% 11,978 11,937 12,459
FEDERAL NATIONAL MORTGAGE ASSO 566074 2031 5.9000% 7,471 7,469 7,775
FEDERAL NATIONAL MORTGAGE ASSO 583747 2016 5.5000% 14,124 14,149 14,665
FEDERAL NATIONAL MORTGAGE ASSO 584059 2031 5.9030% 19,712 19,605 20,162
FEDERAL NATIONAL MORTGAGE ASSO 584507 2031 5.9340% 6,470 6,441 6,628
FEDERAL NATIONAL MORTGAGE ASSO 584829 2016 6.0000% 14,906 14,796 15,604
FEDERAL NATIONAL MORTGAGE ASSO 585743 2016 5.5000% 33,514 33,677 34,796
FEDERAL NATIONAL MORTGAGE ASSO 597087 2031 5.9190% 18,253 18,173 18,700
FEDERAL NATIONAL MORTGAGE ASSO 605933 2016 5.5000% 15,971 16,036 16,582
FEDERAL NATIONAL MORTGAGE ASSO 606120 2031 5.7590% 19,964 19,874 20,472
FEDERAL NATIONAL MORTGAGE ASSO 609060 2016 5.5000% 8,177 8,186 8,490
FEDERAL NATIONAL MORTGAGE ASSO 616220 2016 5.0000% 22,599 22,172 23,213
FEDERAL NATIONAL MORTGAGE ASSO 617270 2017 5.0000% 22,842 22,560 23,462
FEDERAL NATIONAL MORTGAGE ASSO 620293 2032 5.5040% 13,368 13,242 13,740
FEDERAL NATIONAL MORTGAGE ASSO 621822 2032 5.8080% 17,260 17,203 18,121
-60-
American Express Certificate Company Schedule I
Investments of Securities in Unaffiliated Issuers
At December 31, 2002
(In thousands)
Bal Held at
12/31/02 Principal
Amt of Bonds & Value at
Notes or # of Cost 12/31/02
Issuer Name and Issuer Title Maturity Rate Shares (Notes a & c) (Note a)
- ------------------------------------------------------------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSO 622462 2016 5.5000% 21,924 21,656 22,762
FEDERAL NATIONAL MORTGAGE ASSO 623866 2017 5.0000% 22,803 22,739 23,422
FEDERAL NATIONAL MORTGAGE ASSO 625943 2017 5.0000% 25,708 25,640 26,396
FEDERAL NATIONAL MORTGAGE ASSO 628055 2032 5.6960% 21,788 21,623 22,475
FEDERAL NATIONAL MORTGAGE ASSO 651629 2032 5.3640% 14,292 14,323 14,740
FEDERAL NATIONAL MORTGAGE ASSO 653342 2032 5.3720% 9,743 9,780 10,139
FEDERAL NATIONAL MORTGAGE ASSO 654195 2032 4.9630% 9,730 9,737 9,934
FEDERAL NATIONAL MORTGAGE ASSO 655798 2032 5.2980% 18,835 18,800 19,426
FEDERAL NATIONAL MORTGAGE ASSO 661349 2032 5.5000% 14,655 14,696 15,160
FEDERAL NATIONAL MORTGAGE ASSO 661501 2032 5.2490% 9,650 9,699 9,953
FEDERAL NATIONAL MORTGAGE ASSO 661744 2032 5.3990% 14,405 14,478 14,846
FEDERAL NATIONAL MORTGAGE ASSO 66458 2004 10.0000% 111 111 113
FEDERAL NATIONAL MORTGAGE ASSO 70007 2017 5.1380% 465 470 482
FEDERAL NATIONAL MORTGAGE ASSO 70117 2017 4.4300% 165 167 168
FEDERAL NATIONAL MORTGAGE ASSO 70694 2005 9.5000% 204 204 217
FEDERAL NATIONAL MORTGAGE ASSO 73227 2005 6.7000% 1,165 1,167 1,240
FEDERAL NATIONAL MORTGAGE ASSO 88879 2019 7.1450% 521 531 538
FEDERAL NATIONAL MORTGAGE ASSO 89125 2019 4.6260% 1,738 1,774 1,778
FEDERAL NATIONAL MORTGAGE ASSO 9999 2032 5.8930% 13,230 13,257 13,646
FEDERAL NATIONAL MORTGAGE ASSO 9999 2032 5.7450% 12,254 12,278 12,638
FEDERAL NATIONAL MORTGAGE ASSO 9999 2032 5.3230% 10,062 10,103 10,635
FIRST BOSTON MORTGAGE SEC. - A 2033 7.5000% 4,789 4,840 4,779
FIRST BOSTON MORTGAGE SEC. - A 2006 6.7500% 492 487 492
FIRST UNION RE EQ & MORTGAGE I 2029 7.1500% 0 0 0
GMAC MORTGAGE SECURITIES INC - 2029 6.4510% 2,803 2,803 2,936
GMAC MORTGAGE SECURITIES INC - 2009 2.4700% 3,000 3,000 2,978 (d)
GOVERNMENT NATIONAL MTGE ASSOC 2024 3.8150% 15,474 15,364 15,389
GOVERNMENT NATIONAL MTGE ASSOC 2030 5.7500% 13,471 13,442 14,076
GOVERNMENT NATIONAL MTGE ASSOC 8157 2023 5.3750% 1,544 1,573 1,596
GOVERNMENT NATIONAL MTGE ASSOC 8206 2017 5.3750% 459 453 475
GOVERNMENT NATIONAL MTGE ASSOC 8240 2017 5.7500% 261 249 269
GOVERNMENT NATIONAL MTGE ASSOC 8251 2017 5.7500% 22 21 23
GOVERNMENT NATIONAL MTGE ASSOC 8274 2017 6.6250% 711 697 736
GOVERNMENT NATIONAL MTGE ASSOC 8283 2017 6.6250% 122 120 127
GOVERNMENT NATIONAL MTGE ASSOC 8293 2017 6.6250% 215 210 222
GOVERNMENT NATIONAL MTGE ASSOC 8341 2018 5.3750% 69 68 72
GOVERNMENT NATIONAL MTGE ASSOC 8353 2018 5.3750% 346 337 358
GOVERNMENT NATIONAL MTGE ASSOC 8365 2018 5.3750% 579 559 598
GOVERNMENT NATIONAL MTGE ASSOC 8377 2018 5.7500% 209 201 215
GOVERNMENT NATIONAL MTGE ASSOC 8428 2018 6.6250% 97 96 101
GOVERNMENT NATIONAL MTGE ASSOC 8440 2018 6.6250% 284 280 294
-61-
American Express Certificate Company Schedule I
Investments of Securities in Unaffiliated Issuers
At December 31, 2002
(In thousands)
Bal Held at
12/31/02 Principal
Amt of Bonds & Value at
Notes or # of Cost 12/31/02
Issuer Name and Issuer Title Maturity Rate Shares (Notes a & c) (Note a)
- ------------------------------------------------------------------------------------------------------------------------------------
GOVERNMENT NATIONAL MTGE ASSOC 8638 2025 5.3750% 1,745 1,762 1,804
GREEN TREE ACCEPTANCE - ABS 2018 7.7000% 5,942 5,615 5,615 (b)
GREENWICH CAPITAL DERIVATIVES 2013 3.3570% 5,000 5,000 5,052
JP MORGAN CHASE COMM MORT SEC 2033 5.2880% 5,219 5,215 5,470
JP MORGAN COMM MORT FIN CORP 2032 7.5900% 3,760 3,767 4,156
LEHMAN BROTHERS - ABS 2030 6.3300% 1,693 1,691 1,720
LEHMAN BROTHERS - ABS 2035 5.8700% 3,738 3,743 3,959
LEHMAN BROTHERS - ABS 2026 5.9690% 7,500 7,532 8,251
LEHMAN BROTHERS - ABS 2026 4.9040% 7,500 7,534 7,920
LEHMAN BROTHERS - ABS 2026 4.0230% 5,500 5,526 5,590
LIFT - LEASE INVESTMENT FLIGHT 2016 1.8500% 4,283 4,283 4,127
MORGAN - J.P. COMM MTGE FIN CO 2027 6.4700% 504 503 531
MORGAN - J.P. COMM MTGE FIN CO 2030 6.3730% 1,215 1,214 1,214
MORGAN - J.P. COMM MTGE FIN CO 2035 6.1800% 7,726 7,744 8,343
MORGAN STANLEY 2039 5.3800% 4,901 4,911 5,190
MORGAN STANLEY 2035 4.0900% 4,659 4,659 4,823
MORGAN STANLEY 2035 5.1600% 2,500 2,512 2,661
MORGAN STANLEY MORTGAGE TRUST 2028 7.3280% 3,930 3,938 4,041
MORGAN STANLEY MORTGAGE TRUST 2030 6.5900% 9,494 9,505 10,148
MORGAN STANLEY MORTGAGE TRUST 2030 6.2500% 1,308 1,310 1,392
MORGAN STANLEY MTG TRUST - CMO 2005 7.5620% 2,500 2,500 2,804 (d)
NORWEST ASSET SECURITIES CORP 2029 6.5000% 1,937 1,931 1,944
NPF XII INC - ABS 2003 1.8000% 10,000 3,000 3,000 (b)(d)(e)
PROTECTIVE LIFE CORP - ABS 2027 7.0200% 1,024 1,028 1,026
RESIDENTIAL ASSET SECURITIES C 2027 6.3900% 5,000 4,979 5,117
RESIDENTIAL FUNDING MORTGAGE S 2028 6.0000% 265 266 265
RESIDENTIAL FUNDING MORTGAGE S 2013 7.4900% 325 324 325
SALOMON BROTHERS MTG SEC VII 2008 7.4600% 8,416 8,377 9,470
SHEARSON LEHMAN PASS-THROUGH S 2004 6.8750% 3,111 3,109 3,190 (d)
STRATEGIC HOTELS - CMBS 2009 2.9313% 5,000 5,000 4,979
TRIZEC CORP LTD 2013 6.5220% 5,000 4,999 5,501 (d)
UNITED COMPANIES FIN CORP - AB 2023 6.9400% 547 545 548
------------------------------------------------------------------------------
Total - Mortgage Backed Securities 2,932,791 2,938,348 3,031,147
Municipal Bonds
California
CALIFORNIA HSG FIN AGY SGL FAM 2016 7.8900% 1,855 1,855 1,863
Total - California 1,855 1,855 1,863
Colorado
COLORADO HEALTH FACS AUTH REV 2003 6.9500% 7,500 7,499 7,871
-62-
American Express Certificate Company Schedule I
Investments of Securities in Unaffiliated Issuers
At December 31, 2002
(In thousands)
Bal Held at
12/31/02 Principal
Amt of Bonds & Value at
Notes or # of Cost 12/31/02
Issuer Name and Issuer Title Maturity Rate Shares (Notes a & c) (Note a)
- ------------------------------------------------------------------------------------------------------------------------------------
Total - Colorado 7,500 7,499 7,871
Pennsylvania
WYOMING VALLEY PA SANI AUTH WT 2007 5.1250% 70 70 76
Total - Pennsylvania 70 70 76
Total - Municipal Bonds 9,425 9,424 9,809
Corporate Debt Securities
Corporate - Finance
ALLIANCE CAPITAL MGMT -LP 2006 5.6250% 12,500 12,449 13,209
ALLSTATE CORP 2006 5.3750% 5,000 4,987 5,390
AMB PROPERTY CORP 2005 7.2000% 5,000 4,995 5,427
AMERICAN GENERAL FINANCE CORP 2007 4.5000% 7,500 7,479 7,720
AON CORP 2004 6.9000% 3,000 2,999 3,066
ASSOCIATED BANC CORP 2007 3.7000% 6,000 5,937 6,064
BANK OF AMERICA CORP 2006 7.1250% 5,000 5,193 5,703
BANK OF NEW YORK CO INC 2007 5.2000% 7,000 7,099 7,535
BANK ONE CORPORATION 2006 6.5000% 10,000 10,096 11,046
BANKAMERICA CORP 2004 6.6250% 5,000 4,997 5,353
CAPITAL ONE BANK 2003 6.3750% 5,500 5,500 5,491
CAPITAL ONE BANK 2003 2.3500% 12,000 12,000 11,945
COUNTRYWIDE FUNDING CORP 2004 5.2500% 10,000 9,989 10,417
COUNTRYWIDE HOME LOANS 2006 5.5000% 5,000 4,981 5,301
DUKE REALTY INVESTMENTS INC. 2003 7.3000% 7,500 7,499 7,687
ERAC USA FINANCE COMPANY 2004 6.9500% 9,000 9,029 9,374 (d)
FIRST UNION CORP 2004 6.6250% 3,000 2,997 3,209
FORD MOTOR CREDIT CO 2006 6.8750% 5,000 5,069 5,009
GE CAPITAL MTG SERVICES INC - 2003 7.8750% 5,000 4,999 5,113
GOLDMAN SACHS GROUP INC 2005 7.6250% 10,000 10,402 11,278
GOLDMAN SACHS GROUP INC 2012 6.6000% 10,000 10,175 11,050
HERTZ CORP 2004 1.9275% 10,000 10,000 9,310
HOUSEHOLD FINANCE CORP 2006 6.5000% 2,000 1,997 2,130
HOUSEHOLD INTERNATIONAL 2007 5.7500% 5,000 4,908 5,233
JP MORGAN CHASE & COMPANY 2006 5.6250% 10,000 10,219 10,698
KELLOGG UK HOLDING CO LIMITED 2006 4.4900% 11,200 11,200 10,582 (d)
LEHMAN BROTHERS HLDGS 2006 6.2500% 10,000 9,987 10,936
MARSHALL & ILSLEY CORP 2006 5.7500% 10,000 9,995 10,846
MBNA AMERICA BANK NA 2005 7.7500% 6,000 5,987 6,585
MERRILL LYNCH & CO INC 2009 4.7500% 10,000 9,980 10,238
-63-
American Express Certificate Company Schedule I
Investments of Securities in Unaffiliated Issuers
At December 31, 2002
(In thousands)
Bal Held at
12/31/02 Principal
Amt of Bonds & Value at
Notes or # of Cost 12/31/02
Issuer Name and Issuer Title Maturity Rate Shares (Notes a & c) (Note a)
- ------------------------------------------------------------------------------------------------------------------------------------
MERRILL LYNCH AIG CBO 2010 0.0000% 6,500 0 0 (b)(e)
MERRILL LYNCH ELLIOTT & PAIGE 2010 0.0000% 11,000 0 0 (b)(d)(e)
MGIC INVESTMENT CORP/WI 2005 7.5000% 7,000 6,983 7,658
MORGAN STANLEY 2006 6.1000% 5,000 4,997 5,447
MORGAN STANLEY 2007 5.8000% 5,000 4,987 5,448
O'N'E' LOAN TRUST 2007 2.4000% 25,000 26,595 27,500 (b)(d)
POPULAR NA INC 2003 6.5800% 5,000 4,998 5,197
SAFECO CORP 2003 7.8750% 7,000 6,998 7,074
SALOMON SMITH BARNEY HOLDINGS 2006 5.8750% 5,000 4,990 5,403
SIMON DEBARTOLO GROUP INC. 2007 7.1250% 10,000 10,216 11,113
SOUTHERN COMPANY FUNDING 2007 5.3000% 6,500 6,491 6,884
SOVEREIGN BANCORP INC 2004 10.2500% 1,000 1,000 1,053
SOVEREIGN BANCORP INC 2005 10.2000% 3,679 3,679 4,067 (d)
ST PAUL COMPANIES 2007 5.7500% 7,000 6,979 7,265
SUNTRUST BANKS INC 2007 5.0500% 7,500 7,497 8,045
UNION PLANTERS CORP 2007 5.1250% 5,000 4,998 5,325
US BANCORP 2003 7.5000% 10,000 10,000 10,339
WACHOVIA BANK 2005 7.4500% 5,000 5,000 5,601
WACHOVIA BANK 2006 4.9500% 6,000 5,991 6,402
WASHINGTON MUTUAL INC 2006 7.5000% 1,400 1,395 1,575
WASHINGTON MUTUAL INC 2008 4.3750% 5,000 4,976 5,095
WAYLAND INVESTMENT FUND LLC 2004 7.7900% 5,000 5,000 5,233 (d)
WELLS FARGO & CO 2007 5.1250% 10,000 10,000 10,740
Total - Corporate - Finance 381,779 366,914 385,407
Corporate - Industrial
ABITIBI CONSOLIDATED INC 2005 8.3000% 3,250 3,250 3,435
ALCOA INC 2007 4.2500% 10,000 9,969 10,411
AMERICAN AIRLINES 2008 6.4000% 1,782 1,782 1,780 (d)
AMERICAN AIRLINES 2008 6.4000% 1,358 1,358 1,356 (d)
AMERICAN AIRLINES 2008 6.4000% 206 206 206 (d)
AMERICAN AIRLINES 2008 6.4000% 1,774 1,774 1,772 (d)
AMERICAN AIRLINES 2008 6.4000% 207 207 207 (d)
AMERICAN AIRLINES 2008 8.9700% 8,791 8,972 3,692
AMERICAN AIRLINES 2008 6.4000% 979 979 978 (d)
AMERICAN AIRLINES 2008 6.4000% 979 979 978 (d)
AMERICAN AIRLINES 2008 6.4000% 979 979 978 (d)
AMERICAN AIRLINES 2008 6.4000% 204 204 203 (d)
AMERICAN AIRLINES 2008 6.4000% 205 205 205 (d)
AMERICAN AIRLINES 2008 6.4000% 524 524 523 (d)
AMERICAN AIRLINES 2008 6.4000% 523 523 523 (d)
-64-
American Express Certificate Company Schedule I
Investments of Securities in Unaffiliated Issuers
At December 31, 2002
(In thousands)
Bal Held at
12/31/02 Principal
Amt of Bonds & Value at
Notes or # of Cost 12/31/02
Issuer Name and Issuer Title Maturity Rate Shares (Notes a & c) (Note a)
- ------------------------------------------------------------------------------------------------------------------------------------
AMERICAN AIRLINES 2008 6.4000% 524 524 523 (d)
AMERICAN STANDARD COMPANIES 2008 7.3750% 2,000 1,929 2,090
ARVINMERITOR INC 2007 6.6250% 5,000 4,985 4,925
ASHLAND INC 2005 7.8300% 2,200 2,200 2,322
BECKMAN INSTRUMENTS INC 2003 7.1000% 3,000 3,000 3,018
BLACK & DECKER 2003 7.5000% 10,000 10,020 10,123
BRITISH SKY BROADCASTING 2009 6.8750% 1,500 1,455 1,534
BURLINGTON NORTHERN SANTA FE C 2005 6.3750% 5,000 4,999 5,544
CABLEVISION SYSTEMS CORPORATIO 2007 7.8750% 2,500 2,399 2,403
CATERPILLAR FINANCE SERVICES L 2004 6.8750% 5,000 4,993 5,374
CINTAS CORP 2007 5.1250% 2,000 1,999 2,140 (d)
CLEAR CHANNEL COMMUNICATIONS 2003 7.2500% 5,000 4,999 5,101
COCA-COLA ENTERPRISES INC 2007 5.2500% 10,000 9,953 10,755
COMCAST CABLEVISION 2006 6.3750% 1,300 1,298 1,363
CONAGRA FOODS INC 2005 7.5000% 4,000 3,995 4,490
CONOCO INC 2004 5.9000% 7,500 7,497 7,890
CONOCO INC 2006 5.4500% 3,000 3,128 3,238
CONSTELLATION BRANDS INC 2006 8.6250% 1,000 992 1,060
CONTINENTAL AIRLINES 2013 6.9400% 7,475 7,684 6,169
COTT BEVERAGES INC 2011 8.0000% 1,500 1,469 1,590 (d)
CROSS TIMBERS OIL CO. 2009 8.7500% 1,500 1,500 1,560
CSX CORP 2009 4.8750% 4,000 3,994 4,069
CYTEC INDUSTRIES INC. 2003 6.5000% 10,500 10,499 10,543
DAIMLER CHRYSLER NA - US 2003 7.1250% 10,000 9,999 10,105
DAIMLER CHRYSLER NA - US 2006 6.4000% 6,000 6,202 6,491
DELHAIZE AMERICA INC 2006 7.3750% 3,500 3,514 3,421
DELPHI CORP 2006 6.5500% 5,000 4,996 5,272
DEVON ENERGY CORPORATION 2004 6.7500% 6,500 6,552 6,787
DEVON ENERGY CORPORATION 2004 8.0500% 2,000 1,992 2,130
DIAGEO PLC 2007 3.5000% 4,000 3,992 4,024
DIAGEO PLC 2004 6.6250% 6,000 5,998 6,402
DISNEY COMPANY - THE WALT 2006 5.5000% 10,000 10,055 10,582
DISNEY COMPANY - THE WALT 2007 5.3750% 5,000 4,990 5,299
ELAN CORP PLC 2005 7.7200% 10,000 9,919 10,498 (d)
ELAN CORP PLC 2005 7.6200% 7,000 7,000 7,349 (d)
ENERGIZER HOLDINGS INC 2005 7.8600% 7,000 7,000 7,388 (d)
EQUIFAX INC 2007 4.9500% 4,000 3,993 4,070 (d)
FIRSTPLUS FINL GROUP - ABS 2023 19.6200% 1,886 1,875 2,913 (b)(d)
GANNETT CO INC 2007 5.5000% 10,000 9,939 10,849
GENERAL ELECTRIC CAP CORP 2007 5.3750% 5,000 4,983 5,370
GENERAL ELECTRIC CAP CORP 2008 4.2500% 4,000 3,976 4,109
-65-
American Express Certificate Company Schedule I
Investments of Securities in Unaffiliated Issuers
At December 31, 2002
(In thousands)
Bal Held at
12/31/02 Principal
Amt of Bonds & Value at
Notes or # of Cost 12/31/02
Issuer Name and Issuer Title Maturity Rate Shares (Notes a & c) (Note a)
- ------------------------------------------------------------------------------------------------------------------------------------
GENERAL MILLS 2007 5.1250% 7,300 7,657 7,756
GENERAL MOTORS CORPORATION 2004 6.3800% 14,000 14,000 14,374
GIANT INDUSTRIES INC 2007 9.0000% 3,000 3,000 2,070
HANOVER EQUIPMENT TRUST 2008 8.5000% 1,000 1,030 975 (d)
HARRAH'S ENTERTAINMENT INC 2005 7.8750% 2,000 2,052 2,120
HORTON - D. R. INC 2009 8.0000% 2,000 1,992 2,000
INGERSOLL RAND 2004 5.8000% 10,000 9,996 10,491
INTERNATIONAL SHIPHOLDING CORP 2007 7.7500% 2,000 1,994 1,600
INTL FLAVORS & FRAG 2006 6.4500% 10,000 9,987 10,802
JONES APPAREL GROUP INC 2004 7.5000% 3,000 2,998 3,199
JONES APPAREL GROUP INC 2006 7.8750% 2,000 1,996 2,225
KAUFMAN & BROAD HOME 2004 7.7500% 3,000 2,993 3,060
KELLOGG CO. 2003 5.5000% 5,000 5,000 5,045
KELLOGG CO. 2006 6.0000% 5,150 5,592 5,582
KENDALL-JACKSON WINE ESTATES L 2009 3.0700% 12,000 12,000 12,660 (d)
KRAFT FOODS INC 2006 4.6250% 15,000 14,982 15,811
KROGER COMPANY 2006 8.1500% 4,000 4,002 4,525
LAMAR ADVERTISING 2007 8.6250% 2,000 2,001 2,090
LEAR CORP 2005 7.9600% 1,500 1,503 1,539
LOUISIANA PACIFIC 2005 8.5000% 1,000 993 1,037
MASCO CORP 2007 4.6250% 5,000 4,989 5,160
MEDIA GENERAL 2006 6.9500% 5,000 4,998 5,319
MERISTAR HOSPITALITY CORP 2007 8.7500% 3,000 2,998 2,010
MEYER - FRED INC 2003 7.1500% 5,000 5,000 5,032
NCI BUILDING SYSTEMS INC 2009 9.2500% 2,000 2,019 2,038
NEWFIELD EXPLORATION CO 2011 7.6250% 1,000 1,002 1,055
NORSKE SKOG 2011 8.6250% 1,500 1,511 1,511 (d)
NORTHWEST AIRLINES CORP 2011 6.8410% 10,000 10,000 9,500
OCCIDENTAL PETROLEUM CORP 2008 7.3750% 7,500 8,486 8,765
OFFSHORE LOGISTICS INC. 2008 7.8750% 2,000 2,003 1,920
PARACELSUS ESCROW 2006 0.0000% 5,000 0 0 (e)
PHILIP MORRIS COMPANIES INC. 2004 7.5000% 5,000 5,083 5,250
PRAXAIR INC. 2003 6.7500% 5,000 4,992 5,038
PULTE HOMES INC 2003 9.5000% 13,000 13,000 13,165
QUAKER OATS COMPANY 2003 6.9400% 1,500 1,500 1,529
QUEBECOR WORLD INC 2006 7.2000% 10,000 10,000 10,469 (d)
QUEBECOR WORLD- USA 2008 8.3750% 3,000 3,000 3,123
REPUBLIC SERVICES INC 2004 6.6250% 5,000 4,992 5,250
RIO ALTO EXPLORATION LTD 2005 7.6900% 9,000 9,000 9,442 (d)
S C INTERNATIONAL SERVICES INC 2007 9.2500% 1,340 1,343 878
SAFEWAY INC 2007 4.8000% 10,000 9,982 10,336
-66-
American Express Certificate Company Schedule I
Investments of Securities in Unaffiliated Issuers
At December 31, 2002
(In thousands)
Bal Held at
12/31/02 Principal
Amt of Bonds & Value at
Notes or # of Cost 12/31/02
Issuer Name and Issuer Title Maturity Rate Shares (Notes a & c) (Note a)
- ------------------------------------------------------------------------------------------------------------------------------------
SARA LEE CORP 2003 8.3750% 5,000 4,997 5,181
SARA LEE CORP 2005 8.5000% 4,000 3,994 4,581
SCHULER HOMES INC 2009 9.3750% 1,000 1,000 1,020
SCOTTS COMPANY 2009 8.6250% 2,000 1,947 2,110
STANLEY WORKS 2007 3.5000% 2,500 2,490 2,510 (d)
STATION CASINOS INC. 2008 8.3750% 1,500 1,512 1,590
TARGET CORP 2003 6.4000% 10,000 9,999 10,051
TARGET CORP 2009 5.3750% 6,150 6,424 6,541
TEKKAY SHIPPING CORP 2008 8.3200% 1,500 1,507 1,539
TENET HEALTHCARE CORP. 2007 5.0000% 6,000 5,951 5,430
TEXTRON INC 2004 6.3750% 3,000 2,995 3,119
TIME WARNER ENTERTAINMENT CO. 2006 6.1250% 8,000 7,988 8,260
TRANS OCEAN CONTAINER CORP 2007 6.6700% 5,667 5,655 6,257 (d)
TTX COMPANY 2004 7.3500% 4,000 4,000 4,347 (d)
TYCO INTL GROUP SA 2003 6.2500% 10,000 10,112 9,925
UNILEVER NV NY SHRS 2003 6.7500% 9,500 9,490 9,907
UNION PACIFIC CORP 2004 5.8400% 5,000 5,000 5,262
UNION TANK 2008 6.5000% 3,305 3,300 3,572
UNITED AIR LINES INC 2008 9.2000% 3,380 1,614 1,614 (b)
UNITED AIR LINES INC 2010 7.0320% 3,920 3,920 3,075
UNITED HEALTHCARE 2005 7.5000% 6,000 5,987 6,768
UNITED STATIONERS INC. 2008 8.3750% 1,000 1,000 1,010
USX CORP 2004 7.2000% 10,000 10,063 10,529
VALERO ENERGY CORP 2007 6.1250% 3,500 3,494 3,611
VALSPAR CORP 2007 6.0000% 10,000 9,956 10,602
VIACOM INC 2007 5.6250% 10,000 10,150 10,916
WALMART STORES 2006 5.4500% 10,000 10,238 10,928
WEYERHAEUSER CO 2008 5.9500% 10,000 10,400 10,675 (d)
WYETH 2004 5.8750% 5,000 4,997 5,198
WYETH 2006 6.2500% 5,000 4,999 5,432
Total - Corporate - Industrial 614,859 611,242 625,440
Corporate - Utility
ALABAMA POWER CO 2003 7.8500% 7,000 6,998 7,153
AMERICAN ELECTRIC POWER 2006 6.1250% 7,500 7,484 7,386
BELLSOUTH CORP 2006 5.0000% 15,000 14,973 16,016
BRITISH TELECOMM/PP 2005 7.8750% 12,500 13,303 14,096
CINERGY CORP 2004 6.1250% 4,000 3,998 4,092
CINGULAR WIRELESS 2006 5.6250% 5,000 4,985 5,257 (d)
CITIZENS COMMUNICATIONS COMPAN 2004 6.3750% 10,000 10,157 10,246 (d)
CMS ENERGY CORP 2009 7.5000% 1,500 1,507 1,275
-67-
American Express Certificate Company Schedule I
Investments of Securities in Unaffiliated Issuers
At December 31, 2002
(In thousands)
Bal Held at
12/31/02 Principal
Amt of Bonds & Value at
Notes or # of Cost 12/31/02
Issuer Name and Issuer Title Maturity Rate Shares (Notes a & c) (Note a)
- ------------------------------------------------------------------------------------------------------------------------------------
DOMINION RESOURCES INC 2003 7.6000% 11,000 11,000 11,256
DTE ENERGY CO 2004 6.0000% 10,000 9,989 10,437
ENERGY EAST CORP 2006 5.7500% 7,500 7,466 7,956
FIRST ENERGY CORP 2006 5.5000% 10,000 9,991 10,040
FRANCE TELECOM 2006 8.7000% 2,850 3,000 3,120
GEORGIA POWER 2003 5.7500% 5,000 5,000 5,012
K N ENERGY INC. 2003 6.4500% 8,000 7,999 8,037
KANSAS CITY POWER & LIGHT 2005 7.1250% 10,000 10,311 11,105
KANSAS CITY POWER & LIGHT 2007 6.0000% 4,000 3,993 4,264 (d)
LIMESTONE ELECTRON TRUST 2003 8.6250% 11,000 11,009 10,350 (d)
NIAGARA MOHAWK POWER CORP 2003 7.3750% 3,000 3,014 3,085
NISOURCE INC 2003 7.5000% 5,000 4,997 5,050
PINNACLE PARTNERS 2004 8.8300% 6,000 6,000 5,520 (d)
PPL CORPORATION 2005 7.7500% 3,000 2,999 3,166
PROGRESS ENERGY INC 2004 6.5500% 2,500 2,500 2,598
PROGRESS ENERGY INC 2006 6.7500% 2,100 2,099 2,256
PROGRESS ENERGY INC 2008 5.8500% 10,000 9,996 10,589
SBC COMMUNICATIONS INC 2006 5.7500% 10,000 10,246 10,845
SOUTHWESTERN PUB SRV CO 2006 5.1250% 7,000 6,985 6,484
TELEFONICA EUROPE 2005 7.3500% 8,000 7,998 8,820
VIRGINIA ELEC & PWR CO 2006 5.7500% 4,675 4,663 5,022
VODAFONE AIRTOUCH PLC 2005 7.6250% 10,000 10,129 11,079
WILLIAMS COMPANIES INC - THE 2007 7.5500% 3,000 3,002 2,822
WISCONSIN ENERGY 2006 5.8750% 10,000 9,967 10,663
Total - Corporate - Utility 226,125 227,758 235,097
Total - Corporate Debt Securities 1,222,764 1,205,914 1,245,945
Total - BONDS AND NOTES 4,165,345 4,154,049 4,287,300
PREFERRED STOCK
Preferred Stock - Stated Maturity
Corporate - Industrial
BHP OPERATIONS 2006 6.7600% 50 5,000 5,319 (d)
WHIRLPOOL CORP 2008 6.5500% 180 18,076 18,169 (d)
Total - Corporate - Industrial 230 23,076 23,488
Corporate - Utility
APPALACHIAN POWER 2008 5.9000% 10 998 884
APPALACHIAN POWER 2008 5.9200% 11 1,094 1,060
-68-
American Express Certificate Company Schedule I
Investments of Securities in Unaffiliated Issuers
At December 31, 2002
(In thousands)
Bal Held at
12/31/02 Principal
Amt of Bonds & Value at
Notes or # of Cost 12/31/02
Issuer Name and Issuer Title Maturity Rate Shares (Notes a & c) (Note a)
- ------------------------------------------------------------------------------------------------------------------------------------
BELL ATLANTIC CORP 2004 5.8000% 100 10,000 10,203 (d)
BELL ATLANTIC NZ - US 2004 7.0800% 25 2,524 2,599 (d)
CENTRAL ILLINOIS LIGHT COMPANY 2008 5.8500% 35 3,499 3,485
INDIANA MICHIGAN PWR CO 2009 6.3000% 52 5,223 5,266
INDIANA MICHIGAN PWR CO 2009 6.2500% 20 2,001 2,010
INDIANA MICHIGAN PWR CO 2009 5.9000% 33 3,173 3,202
LOUISVILLE GAS & ELECTRIC CO 2008 5.8750% 12 1,198 1,279
OHIO POWER CO 2009 5.9000% 36 3,560 3,908
OHIO POWER CO 2008 6.0200% 10 994 1,094
OHIO POWER CO 2008 6.3500% 5 505 538
POTOMAC ELECTRIC 2007 6.8000% 154 7,675 7,841
RGS ENERGY GROUP INC 2009 6.6000% 100 10,082 10,459
SAN DIEGO GAS & ELEC COMPANY 2008 1.7625% 60 1,532 1,489
TEXAS UTILITIES ELECTRIC COMPA 2008 6.3750% 54 5,420 5,241
Total - Corporate - Utility 717 59,479 60,560
Total - Preferred Stock - Stated Maturity 947 82,555 84,048
Preferred Stock - Perpetual
Corporate - Finance
CITIBANK-NEW YORK NY 0.0000% 100 10,000 10,081
CITIGROUP INC 5.8600% 150 7,782 7,966
Total - Corporate - Finance 250 17,782 18,048
Total - Preferred Stock - Perpetual 250 17,782 18,048
Total - PREFERRED STOCK 1,196 100,337 102,095
TOTAL Investments in Securities of Unaffiliated Issuers 4,166,541 4,254,386 4,389,396
NOTES:
a) See Notes 1 and 3 to the financial statements regarding determination of
cost and fair values. All available for sale securities are carried at fair
value on the balance sheet.
b) In the absence of market quotations, securities are valued by American
Express Certificate Company at fair value
c) Aggregate cost of investment in securities of unaffiliated issuers for
federal income tax purposes was $4,272,585
d) Securities acquired in private negotiation which may require registration
under federal securities law if they were to be publicly sold. Also see
note 3 to financial statements
e) Non-income producing securities
-69-
AMERICAN EXPRESS CERTIFICATE COMPANY SCHEDULE II
Investments in and Advances to Affiliates and Income Thereon
December 31, 2002, 2001 and 2000
(In thousands)
Balance December 31, 2002
Interest
Dividends
Principal Carrying Credited
Amount or Cost Value to Income
Name of Issuer and Title of Issue No of Shares (a) (b) (c)
Wholly-Owned Subsidiary (b):
Real Estate Investment Company:
Investors Syndicate Development Corporation:
Capital Stock 100 $422 $422 $0
=== ---- ---- ---
Investors Syndicate Development Corporation:
Undistributed Net Income $0 (467) (467) 0
=== ---- ---- ---
Other Affiliates (as defined in Sec 2(a)(3) of the
Investment Company Act of 1940) $0 0 0 0
=== ---- ---- ---
Total affiliates ($45) ($45) $0
==== ==== ==
Balance December 31, 2001
Interest
Dividends
Principal Carrying Credited
Amount or Cost Value to Income
Name of Issuer and Title of Issue No of Shares (a) (b) (c)
Wholly-Owned Subsidiary (b):
Real Estate Investment Company:
Investors Syndicate Development Corporation:
Capital Stock 100 $422 $422 $0
=== ---- ---- ---
Other Controlled Companies: $0 0 0 0
=== ---- ---- ---
Other Affiliates (as defined in Sec 2(a)(3) of the
Investment Company Act of 1940) $0 0 0 0
=== ---- ---- ---
Total affiliates $422 $422 $0
==== ==== ==
Balance December 31, 2000
Interest
Dividends
Principal Carrying Credited
Amount or Cost Value to Income
Name of Issuer and Title of Issue No of Shares (a) (b) (c)
Wholly-Owned Subsidiary (b):
Real Estate Investment Company:
Investors Syndicate Development Corporation:
Capital Stock 100 $422 $422 $0
=== ---- ---- ---
Other Controlled Companies: $0 0 0 0
=== ---- ---- ---
Other Affiliates (as defined in Sec 2(a)(3) of the
Investment Company Act of 1940) $0 0 0 0
=== ---- ---- ---
Total affiliates $422 $422 $0
==== ==== ==
-70-
AMERICAN EXPRESS CERTIFICATE COMPANY SCHEDULE II
Investments in and Advances to Affiliates and Income Thereon
December 31, 2002, 2001 and 2000
(In thousands)
NOTES:
(a) The aggregate cost for federal income tax purposes was ($45) at December
31, 2002, and $422 at December 2001, and 2000, subject to possible
adjustment in certain circumstances under consolidated income tax return
regulations
(b) Investments in stocks of wholly-owned subsidiaries are carried at cost
adjusted for equity in undistributed net income since organization or
acquisition of the subsidiaries
(c) There were no dividends or interest earned which were not credited to
income
-71-
AMERICAN EXPRESS CERTIFICATE COMPANY SCHEDULE III
Mortgage Loans on Real Estate and Interest
Earned on Mortgages
Year Ended December 31, 2002
(In thousands)
Part 1 - Mortgage loans on real estate Part 2 - Interest earned
at end of period on mortgages
-------- ------------------------------- -----------------------
Amount of principal
unpaid at end of period
-------------------------
Average
gross rate
Carrying Interest of interest
amount of Subject Amount due and on
mortgages to of accrued mortgages
Number Prior (c),(g), delinquent mortgages at end held at
of liens (h) and interest being of period end of
Description (a) loans (b) (i) Total (d) foreclosed (e) period (f)
- ------------------------------------------------ ----- ----- -------- ----- ---------- ---------- --------- -----------
First mortgages:
Insured by Federal Housing Administration -
liens on:
Residential - under $100 0 $0 $0 $0 $0 0.000%
Apartment and business - under $100 0 0 0 0 0 0.000%
------ ----- ---- ----- ------ --------
Total 0 0 0 0 0 0.000%
------ ----- ---- ----- ------ --------
Partially guaranteed under Serviceman's
Readjustment Act of 1944, as amended -
liens on:
Residential - under $100 0 0 0 0 0 0.000%
Apartment and business - under $100 0 0 0 0 0 0.000%
------ ----- ---- ----- ------ --------
Total 0 0 0 0 0 0.000%
------ ----- ---- ----- ------ --------
Other - liens on:
Residential 0 0 0 0 0 0.000%
------ ----- ---- ----- ------ --------
Apartment and business:
Under $100 0 0 0 0 0 9.500%
$100 to $150 0 0 0 0 0 0.000%
$150 to $200 0 0 0 0 0 0.000%
$200 to $250 0 0 0 0 0 0.000%
$250 to $300 1 255 255 0 0 8.500%
$300 to $350 0 0 0 0 0 0.000%
$350 to $400 0 0 0 0 0 0.000%
$400 to $450 0 0 0 0 0 0.000%
$450 to $500 0 0 0 0 0 0.000%
Over $500:
Loan No. Mortgagor Property Location
21-47110 Village North Brooklyn Park, MN 1 940 940 0 0 8.72000
21-47139 Treasure's Island Inc. Eagan, MN 1 1,236 1,236 0 0 8.25000
21-47140 Harbour Run LTD Mentor-On-The-Lake, OH 1 3,299 3,299 0 0 6.91000
21-47147 T & R Hilliard, OH 1 6,402 6,402 0 0 7.99000
21-47157 John A. Belanich Tampa, FL 1 2,870 2,870 0 0 7.65000
21-47164 Regency Hamilton, OH 1 5,224 5,224 0 0 5.00000
21-47165 Bowling Green
Partnership Sussex, WI 1 2,391 2,391 0 0 7.20000
21-47167 Wilder Corp of Delaware Ruskin, FL 1 5,911 5,911 0 0 7.44000
21-47168 Wilder Corp of Delaware Riverview, FL 1 3,168 3,168 0 0 7.44000
21-47173 Cinram Associates Fairfield, NJ 1 3,646 3,646 0 0 7.26000
21-47186 Mack Edison Company Edison, NJ 1 5,590 5,590 0 0 6.85000
21-47187 Industrial Development
Association Mebane, NC 1 2,684 2,684 0 0 7.22000
21-47190 Bradley Oper Davenport, IA 1 3,517 3,517 0 0 7.87500
21-47195 Tipotex Inc. Pharr, TX 1 1,439 1,439 0 0 7.40000
21-47196 Tropic Star Pharr, TX 1 3,120 3,120 0 0 7.40000
21-47197 Winter Ranch Alamo, TX 1 737 737 0 0 7.40000
21-47204 Fort Walton Mary Esther, FL 1 2,746 2,746 0 0 7.04000
21-47205 Kavanagh Tucson, AZ 1 3,639 3,639 0 0 7.05000
21-47206 Artrisco Albuquerque, NM 1 4,905 4,905 0 0 6.00000
21-47208 Newport VI Albuquerque, NM 1 871 871 0 0 8.12500
21-47209 Fountain Lake Brandeton, FL 1 5,437 5,437 0 0 6.40000
21-47210 Orion West Haven, CT 1 3,870 3,870 0 0 6.60000
21-47214 West Health Inc. Plymouth, MN 1 10,140 10,140 0 0 7.45000
21-47215 Invespro Urbandale, IA 1 3,125 3,125 0 0 6.25000
21-47216 Invespro Urbandale, IA 1 2,460 2,460 0 0 6.25000
21-47219 Favorite Bay Albuquerque, NM 1 2,413 2,413 0 0 7.85000
21-47223 Westwood Plaza Houston, TX 1 5,592 5,592 0 0 6.15000
21-47224 Custer Office Plano, TX 1 2,600 2,600 0 0 6.00000
21-47225 Valley Mining Eagan, MN 1 1,489 1,489 0 0 7.21000
21-47226 Jake's LP Austin, TX 1 2,570 2,570 0 0 6.95000
21-47227 PW Holdings Falls Township, PA 1 4,326 4,326 0 0 7.88000
21-47228 Lafayette Square Bridgeport, CT 1 4,061 4,061 0 0 7.14000
21-47230 Wilcrest Gree Houston, TX 1 1,941 1,941 0 0 7.08000
21-47232 DHIR Group LLC Milwaukee, WI 1 4,111 4,111 0 0 7.40000
21-47233 Capital Plaza Jefferson City, MO 1 1,954 1,954 0 0 7.15000
21-47234 Southwest Medical Littleton, CO 1 3,059 3,059 0 0 7.18000
21-47235 2507 & 2473 Assc Southport, CT 1 2,556 2,556 0 0 7.02000
21-47237 Abmar Valley Roanoke, VA 1 1,539 1,539 0 0 7.10000
21-47238 Cicero Place Cicero, IN 1 3,221 3,221 0 0 7.00000
21-47240 Crystal Plaza Baltimore, MD 1 3,722 3,722 0 0 7.02000
21-47241 Pal, Inc Sioux Falls, SD 1 1,059 1,059 0 0 7.05000
21-47242 Northpoint AT San Antonio, TX 1 4,600 4,600 0 0 7.33000
21-47243 Pam-Joy Realty Chesapeake. VA 1 2,844 2,844 0 0 6.96000
21-47245 Tide Mill Southport, CT 1 2,321 2,321 0 0 6.98000
-72-
21-47246 JLC, IX PF LTD Dallas, TX 1 925 925 0 0 7.01000
21-47248 HMJ Moorehead, MN 1 5,420 5,420 0 0 6.96000
21-47249 MIDEB Ventura, CA 1 4,799 4,799 0 0 6.75000
21-47250 Thomas Ribis Alexandria, VA 1 2,593 2,593 0 0 6.90000
21-47251 Arcadia Villa Phoenix, AZ 1 2,650 2,650 0 0 6.80000
21-47252 Broken Arrow Broken Arrow, OK 1 3,162 3,162 0 0 6.80000
21-47253 Palo Verde Plaxa Phoenix, AZ 1 1,581 1,581 0 0 6.80000
21-47254 Village S. Tulsa, OK 1 3,301 3,301 0 0 6.80000
21-47255 Gaughan Forest Lake/
Stillwater, MN 1 5,110 5,110 0 0 6.83000
21-47256 Fremont Apts Rapid City, SD 1 1,018 1,018 0 0 6.75000
21-47257 American Bank Plaza Corpus Christi, TX 1 6,737 6,737 0 0 6.90000
21-47259 Anza Plaza Santa Clarita, CA 1 1,824 1,824 0 0 6.95000
21-47260 Eisenhower 3 Ann Arbor, MI 1 2,763 2,763 0 0 6.98000
21-47261 KKMP Properties Bloomington, MN 1 1,068 1,068 0 0 7.06000
21-47262 312 Third Street Fargo, ND 1 5,473 5,473 0 0 6.90000
21-47263 G.O.L.D Columbus, OH 1 2,071 2,071 0 0 6.95000
21-47264 Esnet Properties Orem, UT 1 1,850 1,850 0 0 6.81000
21-47265 Eaglecreek A Lakewood, CO 1 2,138 2,138 0 0 6.77000
21-47266 Independence Clarkston, MI 1 3,984 3,984 0 0 6.89000
21-47267 Blairhill LLC Charlotte, NC 1 1,332 1,332 0 0 6.91000
21-47268 Lemans Limited Seebring, FL 1 5,313 5,313 0 0 6.85000
21-47269 Hampton Inn Spokane, WA 1 3,992 3,992 0 0 7.15000
21-47270 Brookhollow-2 Houston, TX 1 2,650 2,650 0 0 6.80000
21-47271 Wilsonville Wilsonville, OR 1 1,676 1,676 0 0 6.85000
21-47272 Southeast Com Aurora, CO 1 1,867 1,867 0 0 6.44000
21-47273 Sears Bldg Rapid City, SD 1 828 828 0 0 6.85000
21-47274 Edison Towson, MD 1 1,117 1,117 0 0 6.85000
21-47275 Colorado & SA Colorado Springs, CO 1 1,873 1,873 0 0 6.55000
21-47277 Alvernon Place Tucson, AZ 1 2,138 2,138 0 0 7.00000
21-47278 VL Grand Rdge Kennewick, WA 1 6,320 6,320 0 0 6.75000
21-47279 Daniel G Chetek, WI 1 1,962 1,962 0 0 7.25000
21-47281 Cleveland Shaker Heights, OH 1 2,286 2,286 0 0 7.00000
21-47282 Cary Bldg LP Springfield, VA 1 2,097 2,097 0 0 6.85000
21-47283 Paragon DTC P Englewood, CO 1 6,998 6,998 0 0 6.80000
21-47285 Equity One In Fort Meyers, FL 1 4,156 4,156 0 0 6.75000
21-47286 Sandhill SQ Las Vegas, NV 1 2,450 2,450 0 0 7.00000
21-47287 ML LTD Moen Rogers, MN 1 5,562 5,562 0 0 7.30000
21-47288 Hilde Plymouth, MN 1 1,867 1,867 0 0 6.85000
21-47289 Camp Morrison Newport News, VA 1 2,511 2,511 0 0 6.90000
21-47290 Oakcliff Doraville, GA 1 2,529 2,529 0 0 7.00000
21-47291 Truway Liverpool, NY 1 2,938 2,938 0 0 7.00000
21-47292 Desert Inn Las Vegas, NV 1 6,341 6,341 0 0 7.09500
21-47293 Julantru Corvallis, OR 1 4,198 4,198 0 0 6.75000
21-47294 Carolace Emb. Hope Mills, NC 1 1,509 1,509 0 0 7.00000
21-47295 Mastercraft Concord, OH 1 1,179 1,179 0 0 7.00000
21-47296 Viviani Painesville, OH 1 1,032 1,032 0 0 7.00000
21-47297 Viviani Concord, OH 1 1,736 1,736 0 0 7.00000
21-47298 Shiland Hills Rock Hill, SC 1 845 845 0 0 7.25000
21-47299 Crest Escondido, CA 1 2,158 2,158 0 0 7.00000
21-47303 KWI 1304 Santa Monica, CA 1 5,184 5,184 0 0 4.08000
21-47304 Memorial Six Houston, TX 1 7,079 7,079 0 0 6.40000
21-47305 Post/Paddock Grand Prairie, TX 1 5,979 5,979 0 0 3.95625
21-47306 Falls Towne FairviewPrk/
Cuyahoga falls, OH 1 4,575 4,575 0 0 3.47000
21-47308 Wilder Clearwater, FL 1 6,174 6,174 0 0 6.18000
21-47309 Center Point III Arlington, TX 1 3,925 3,925 0 0 6.48000
21-47310 Hurley-Howe Sacramento, CA 1 5,790 5,790 0 0 3.95000
21-47311 Hurley-Howe Sacramento, CA 1 3,720 3,720 0 0 3.95000
21-47312 80 Central Street Boxborough, MA 1 7,845 7,845 0 0 4.22000
21-47313 J P Spec Orchard Park, NY 1 4,350 4,350 0 0 3.84100
104 342,147 342,147 0 0 6.613%
---- ------- ------- ------ ------ --------
Total Other 104 342,147 342,147 0 0 6.613%
---- ------- ------- ------ ------ --------
Unallocated Reserve for Losses 3,223
-----
Total First Mortgage Loans on Real Estate 104 338,924 342,147 $0 $0 6.613%
==== ======= ======= ====== ====== ========
-73-
Part 3 - Location of mortgaged properties Schedule III (con't)
(In thousands)
Amount of principal
unpaid at end of period
--------------------------
Carrying Subject
amount of to Amount of
State in Number Prior mortgages delinquent mortgages
which mortgaged of liens (c), (g), interest being
property is located loans (b) (h) and (i) Total (d) foreclosed
- ---------------------------- -------- ----- ----------- ---------- ------------- -------------
Arizona 4 10,008 10,008 0 0
California 6 23,476 23,476 0 0
Colorado 5 15,935 15,935 0 0
Connecticut 4 12,807 12,807 0 0
Florida 8 35,775 35,775 0 0
Georgia 1 2,529 2,529 0 0
Iowa 3 9,103 9,103 0 0
Indiana 1 3,221 3,221 0 0
Massachusetts 1 7,845 7,845 0 0
Maryland 2 4,838 4,838 0 0
Michigan 2 6,747 6,747 0 0
Minnesota 9 32,832 32,832 0 0
Missouri 1 1,954 1,954 0 0
Nevada 2 8,791 8,791 0 0
New Jersey 2 9,236 9,236 0 0
New Mexico 3 8,189 8,189 0 0
New York 2 7,288 7,288 0 0
North Carolina 4 6,704 6,704 0 0
North Dakota 1 5,473 5,473 0 0
Ohio 8 26,624 26,624 0 0
Oklahoma 2 6,463 6,463 0 0
Oregon 2 5,874 5,874 0 0
Pennsylvania 1 4,326 4,326 0 0
South Carolina 1 845 845 0 0
South Dakota 4 3,160 3,160 0 0
Texas 14 49,894 49,894 0 0
Utah 1 1,850 1,850 0 0
Virginia 5 11,584 11,584 0 0
Washington 2 10,312 10,312 0 0
Wisconsin 3 8,464 8,464 0 0
--- -------- -------- ------- -----
104 342,147 342,147 0 0
----- -------- -------- ------- -----
Unallocated Reserve
for Losses 3,223
--------
Total 104 $338,924 $342,147 $0 $0
===== ======== ======== ======= =====
-74-
NOTES: Schedule III (con't)
(a) The classification "residential" includes single dwellings only.
Residential multiple dwellings are included in "apartment and business".
(b) Real estate taxes and easements, which in the opinion of the Company are
not undue burden on the properties, have been excluded from the
determination of "prior liens".
(c) In this schedule III, carrying amount of mortgage loans represents unpaid
principal balances plus unamortized premiums less unamortized discounts
and reserve for loss.
(d) Interest in arrears for less than three months has been disregarded in
computing the total amount of principal subject to delinquent interest.
The amounts of mortgage loans being foreclosed are also included in
amounts subject to delinquent interest.
(e) Information as to interest due and accrued for the various classes within
the types of mortgage loans is not readily available and the obtaining
thereof would involve unreasonable effort and expense.
The Company does not accrue interest on loans which are over three
months delinquent.
(f) Information as to interest income by type and class of loan has been
omitted because it is not readily available and the obtaining thereof
would involve unreasonable effort and expense. In lieu thereof, the
average gross interest rates (exclusive of amortization of discounts and
premiums) on mortgage loans held at December 31, 2002 are shown by type
and class of loan.
The average gross interest rates on mortgage loans held at December 31,
2002, 2001, and 2000 are summarized as follows:
2002 2001 2000
--------- -------- ---------
First mortgages:
Insured by Federal Housing Administration 0.000% 0.000% 0.000%
Partially guaranteed under Servicemen's
Readjustment Act of 1944, as amended 0.000 0.000 0.000
Other 6.613 6.978 7.276
--------- -------- ---------
Combined average 6.613% 6.978% 7.276%
========= ======== =========
(g) Following is a reconciliation of the carrying amount of mortgage loans
for the years ended December 31, 2002, 2001 and 2000.
2002 2001 2000
-------- -------- --------
Balance at beginning of period $343,434 $358,575 $378,047
New loans acquired:
Nonaffiliated companies 45,128 16,356 763
Reserve for loss reversal 0 0 0
-------- -------- --------
Total additions 45,128 16,356 763
-------- -------- --------
388,562 374,931 378,810
-------- -------- --------
Deductions during period:
Collections of principal 48,349 30,306 20,002
Reserve for loss 1,289 1,191 233
-------- -------- --------
Total deductions 49,638 31,497 20,235
-------- -------- --------
Balance at end of period $338,924 $343,434 $358,575
======== ======== ========
(h) The aggregate cost of mortgage loans for federal income tax purposes at
December 31, 2002 was $342,147.
(i) At December 31, 2002, an unallocated reserve for loss on first mortgage
loans of $3,223 is recorded.
-75-
SCHEDULE IV
AMERICAN EXPRESS CERTIFICATE COMPANY
Qualified Assets on Deposit
December 31, 2002
(In thousands)
Investment Securities
---------------------------
Bonds and Mortgage
Notes Stocks Loans Other
Name of Depositary (a) (b) (c) (d) Total
- ---------------------------------------------------------- ------------ -------------- --------------- ------------ -----------
Deposits with states or their depositories to
meet requirements of statutes and
agreements:
Illinois - Secretary of
State of Illinois $49 $0 $0 $0 $49
New Jersey - Commissioner
of Banking and Insurance
of New Jersey 50 0 0 0 50
Pennsylvania - Treasurer
of the State of
Pennsylvania 149 0 0 0 149
Texas - Treasurer of the
State of Texas 114 0 0 0 114
---------- -------- -------- ------- ----------
Total deposits with states or their
depositories to meet requirements of
statutes and agreements 362 0 0 0 362
Central depository - American
Express Trust Company 4,508,214 100,337 338,924 84,449 5,031,924
---------- -------- -------- ------- ----------
Total $4,508,576 $100,337 $338,924 $84,449 $5,032,286
========== ======== ======== ======= ==========
Notes:
(a) Represents amortized cost of bonds and notes.
(b) Represents average cost of individual issues of stocks.
(c) Represents unpaid principal balance of mortgage loans less unamortized
discounts and reserve for losses.
(d) Represents cost of purchased call options
-76-
AMERICAN EXPRESS CERTIFICATE COMPANY SCHEDULE VI
Certificate Reserves
Part 1 - Summary of Changes
Year ended December 31, 2002
(In thousands)
Balance at beginning of period Additions
------------------------------- --------------------------------
Number
of Charged
Yield accounts Amount Charged Reserve to other
to maturity with of Amount to profit payments by accounts
on an annual security maturity of and loss certificate (per
Description payment basis holders value reserves or income holders part 2)
------------- ------------------- -------- -------- -------- ----------- ------------ --------
Installment certificates:
Reserves to mature:
Series 15, includes extended maturities 2.40 Inst/2.50 Ext. 0
" 20, " " " 2.52 Inst/2.50 Ext. 0 0
" 15A, " " " 2.66 Inst/3.04 Ext. 0 0
" 22A, " " " 3.09 461 10,874 9,091 248 95 165
" I-76, " " " 3.35 359 8,027 5,278 178 138 19
" Reserve Plus Flexible Payment (note a) 135 1,256 606 0 81 7
" IC-Q-Installment (note a) 37 460 139 0 15 2
" IC-Q-Ins (note a) 485 5,501 2,612 0 185 17
" IC-Q-Ins Emp (note a) 3 29 18 0 1 0
" IC-I (note a) 19,577 320,290 146,963 0 28,416 3,620
" IC-I-Emp (note a) 118 1,724 1,104 0 306 33
" Inst 8,097 0 24,634 0 12,692 321
" Inst-Emp 40 0 91 0 69 2
" RP-Q-Installment (note a) 88 1,206 829 0 8 10
" RP-Q-Flexible Payment (note a) 7 83 57 0 0 1
" RP-Q-Ins (note a) 9 310 72 0 2 1
" RP-Q-Ins Emp (note a) 0 0 1 0 0 0
" RP-I (note a) 111 2,949 1,244 0 114 30
" RP-I-Emp (note a) 1 6 0 0 0 0
" Inst-R 84 10,587 240 0 205 4
" Inst-R-Emp 2 12 5 0 1 0
0 0 0 0 14 0
------ ------- ------- ------ ------ ------
Total 29,614 363,314 192,984 426 42,342 4,231
------ ------- ------- ------ ------ ------
Payments made in advance of certificate
year requirements and accrued interest
thereon:
Series 15, includes extended maturities 2 Not Not 0
" 20, " " " 2 Readily Applicable (1) 0
" 15A, " " " 3 Available 1 0 0 0
" 22A, " " " 3 308 8 0 0
" I-76, " " " 3.5 337 11 61 7
23 1
------ ------ ------ ------
Total 645 19 84 8
------ ------ ------ ------
Deductions Balance at close of period
----------------------------------- ------------------------------
Numbers
Credited of
Cash to other accounts Amount
surrenders accounts with of Amount
prior to (per security maturity of
Description Maturities maturity part 2) holders value reserves
------------- ------------ ---------- --------- ----------- ---------- --------
Installment certificates:
Reserves to mature:
Series 15, includes extended maturities 0 0 0
" 20, " " " 0 0 0
" 15A, " " " 0 0 0
" 22A, " " " 122 584 1,360 367 8,787 7,533
" I-76, " " " 0 362 121 327 7,319 5,130
" Reserve Plus Flexible Payment 192 168 20 70 670 314
" IC-Q-Installment 0 57 0 29 406 99
" IC-Q-Ins 1,223 506 13 205 2,431 1,072
" IC-Q-Ins Emp 1 2 0 2 23 16
" IC-I 10,287 48,307 0 14,947 244,184 120,405
" IC-I-Emp 89 258 0 87 1,290 1,096
" Inst 0 6,599 0 9,056 0 31,048
" Inst-Emp 0 28 0 51 0 134
" RP-Q-Installment 147 94 70 59 875 536
" RP-Q-Flexible Payment 2 7 0 5 65 49
" RP-Q-Ins 8 11 0 6 278 56
" RP-Q-Ins Emp 0 0 0 0 0 1
" RP-I 87 369 0 69 1,706 932
" RP-I-Emp 0 0 0 0 0 0
" Inst-R 0 64 0 165 12,826 385
" Inst-R-Emp 0 0 0 4 1,602 6
0 1 0 0 0 13
------ ------ ----- ------ ------- -------
Total 12,158 57,416 1,584 25,449 282,462 168,825
------ ------ ----- ------ ------- -------
Payments made in advance of certificate
year requirements and accrued interest
thereon:
Series 15, includes extended maturities Not Not 0
" 20, " " " Readily Applicable (1)
" 15A, " " " 0 0 0 Available 1
" 22A, " " " 0 0 1 315
" I-76, " " " 1 31 125 259
0 25 10 (11)
------ ------ ------ --------
Total 1 56 136 563
------ ------ ------ --------
-77-
AMERICAN EXPRESS CERTIFICATE COMPANY SCHEDULE VI
Certificate Reserves
Part 1 - Summary of Changes
Year ended December 31, 2002
(In thousands)
Balance at beginning of period Additions
------------------------------- --------------------------------
Number
of Charged
Yield accounts Amount Charged Reserve to other
to maturity with of Amount to profit payments by accounts
on an annual security maturity of and loss certificate (per
Description payment basis holders value reserves or income holders part 2)
------------- ----------------- -------- -------- -------- ----------- ------------ --------
Additional credits and accrued interest
thereon:
Series 15, includes extended maturities 2.5 Not Not 0
" 20, " " " 2.5 Readily Applicable 0 0 0 0
" 15A, " " " 3 Available (1) 0 0 0
" 22A, " " " 3 2,173 57 0 160
" I-76, " " " 3.5 1,229 42 0 68
" Reserve Plus Flexible Payment (note a) 0 7 0 0
" IC-Q-Installment (note a) 0 1 0 0
" IC-Q-Ins (note a) 0 17 0 0
" IC-Q-Ins Emp (note a) 0 0 0 0
" IC-I (note a) 172 3,574 0 0
" IC-I-Emp (note a) 2 31 0 0
" Inst (note a) 17 315 0 0
" Inst-Emp (note a) 0 2 0 0
" RP-Q-Installment (note a) 0 10 0 0
" RP-Q-Flexible Payment (note a) 0 1 0 0
" RP-Q-Ins (note a) 0 1 0 0
" RP-Q-Ins Emp (note a) 0 0 0 0
" RP-I (note a) 0 30 0 0
" RP-I-Emp (note a) 0 0 0 0
0 4 0 0
" Inst-RP (note a) 0 0 0 0
" Inst-RP-Emp (note a) 0 0 0 0
----- ----- ------ ------
Total 3,593 4,093 0 228
----- ----- ------ ------
Reserve for accrued extra contribution 3rd year 1,574 631 (1,314)
Reserve for accrued extra contribution 6th year 0
Accrued interest on reserves in default I-76 3.5 (0) 4 0
Reserve for additional credits to be allowed 0
Installment Certificates-Special Additional Not Not 0
Credits I-76 Readily Applicable 0 NA
Accrued for additional credits to be allowed at Available 0
Deductions Balance at close of period
-------------------------------------- -------------------------------
Numbers
Credited of
Cash to other accounts Amount
surrenders accounts with of Amount
prior to (per security maturity of
Description Maturities maturity part 2) holders value reserves
------------- ------------ ---------- --------- ----------- ---------- --------
Additional credits and accrued interest
thereon:
Series 15, includes extended maturities Not Not 0
" 20, " " " 0 0 0 Readily Applicable 0
" 15A, " " " 0 0 0 Available (1)
" 22A, " " " 34 138 372 1,846
" I-76, " " " 0 85 31 1,223
" Reserve Plus Flexible Payment 0 0 7 0
" IC-Q-Installment 0 0 2 (1)
" IC-Q-Ins 0 0 17 0
" IC-Q-Ins Emp 0 0 0 (0)
" IC-I 0 0 3,625 121
" IC-I-Emp 0 0 32 1
" Inst 0 0 321 11
" Inst-Emp 0 0 2 0
" RP-Q-Installment 0 0 10 0
" RP-Q-Flexible Payment 0 0 1 0
" RP-Q-Ins 0 0 1 (0)
" RP-Q-Ins Emp 0 0 0 0
" RP-I 0 0 29 1
" RP-I-Emp 0 0 0 0
0 0 4 0
" Inst-RP 0 0 0 0
" Inst-RP-Emp 0 0 0 0
----- ------ ------ -------
Total 34 223 4,454 3,202
----- ------ ------ -------
Reserve for accrued extra contribution 3rd year 891
Reserve for accrued extra contribution 6th year 0
Accrued interest on reserves in default I-76 0 3 1
Reserve for additional credits to be allowed 0
Installment Certificates-Special Additional Not Not 0
Credits I-76 Readily Applicable 0
Accrued for additional credits to be allowed at Available 0
-78-
AMERICAN EXPRESS CERTIFICATE COMPANY SCHEDULE VI
Certificate Reserves
Part 1 - Summary of Changes
Year ended December 31, 2002
(In thousands)
Balance at beginning of period Additions
------------------------------- --------------------------------
Number
of Charged
Yield accounts Amount Charged Reserve to other
to maturity with of Amount to profit payments by accounts
on an annual security maturity of and loss certificate (per
Description payment basis holders value reserves or income holders part 2)
------------- ----------------- -------- -------- -------- ----------- ------------ --------
next anniversary 106 132
Reserve for death and disability refund options 0
Reserve for reconversion of paid-up certificates 33
--------- ----- -------- ------
1,713 767 (1,314) 0
Total installment certificates 29,614 363,314 198,935 5,305 41,112 4,467
------ --------- --------- ----- -------- ------
Fully paid certificates:
Single-Payment certificates:
SP 74 3.5 0 0 0 0 0 0
SP 75 3.5 0 0 0
SP 76 3.5 0 0 0
SP 77 3.5 0 0 0
SP 78 3.5 0 0 0
SP 79 3.5 0 0 0
SP 80 3.5 2 15 15
SP 81A 3.5 1 4 6 0 0 0
SP 82A 3.5 57 359 356 2 0 0
SP 82B 3.5 161 1,398 1,365 33 0 0
SP 83A 3.5 282 2,521 2,432 78 0 0
SP 83B 3.5 51 398 379 13 0 0
IC-2-84 3.5 123 1,203 1,125 38 0 0
IC-2-85 3.5 410 4,056 3,668 123 0 0
IC-2-86 3.5 204 3,684 2,742 0 0 100
IC-2-87 3.5 116 1,864 1,500 0 0 55
IC-2-88 3.5 156 2,557 2,206 0 0 84
Reserve Plus Single Payment (note a) 298 4,792 4,042 0 0 150
Cash Reserve Single Payment (note b) 474 2,327 4,141 0 0 27
IC-Flexible Savings (Variable Term) (note d) 21 143 161 0 0 1
IC-Flexible Savings Emp (VT) (note d) 72,171 871,426 948,653 0 810,107 39,364
IC-Preferred Investors 732 9,777 12,494 0 421 434
IC-Investors (note d) 30 17,179 18,600 0 42,568 552
IC-Special Deposits U.K. (note d) 637 1,020,204 1,096,420 0 453,854 22,122
IC-Special Deposits HONG KONG (note d) 53 73,684 99,275 0 9,793 1,565
IC-1-84 (note c) 4 14,585 0
Cash Reserve Variable Payment (note b) 33 285 260 0 0 13
Cash Reserve Variable PMT-3mo. (note e) 250 1,156 1,640 0 121 11
IC-Future Value (note f) 35,346 124,332 132,986 0 103,568 909
Deductions Balance at close of period
----------------------------------- ---------------------------------
Numbers
Credited of
Cash to other accounts Amount
surrenders accounts with of Amount
prior to (per security maturity of
Description Maturities maturity part 2) holders value reserves
------------- ------------ ---------- --------- ----------- ---------- ----------
next anniversary 210 28
Reserve for death and disability refund options 0
Reserve for reconversion of paid-up certificates 0 33
------ -------- ------ ---------
0 0 213 953
Total installment certificates 12,192 57,695 6,387 25,449 282,462 173,543
------ -------- ------ ------ --------- ---------
Fully paid certificates:
Single-Payment certificates:
SP 74 0 0 0 0 0 0
SP 75 0 0 0
SP 76 0 0 0
SP 77 0 0 0
SP 78 0 0 0
SP 79 2 15 0
SP 80 0 0 15
SP 81A 4 0 0 2 20 2
SP 82A 208 18 112 5 61 20
SP 82B 849 96 392 162 1,370 61
SP 83A 609 222 316 48 373 1,363
SP 83B 0 24 0 110 1,115 368
IC-2-84 0 84 0 367 3,685 1,079
IC-2-85 0 340 0 184 2,475 3,451
IC-2-86 0 273 0 101 1,721 2,569
IC-2-87 0 146 0 139 2,203 1,409
IC-2-88 0 347 0 264 4,114 1,943
Reserve Plus Single Payment 0 465 0 166 809 3,727
Cash Reserve Single Payment 2,148 621 0 19 139 1,399
IC-Flexible Savings (Variable Term) 0 11 0 98,380 1,279,720 151
IC-Flexible Savings Emp (VT) 0 428,895 0 627 8,455 1,369,229
IC-Preferred Investors 0 2,268 0 25 23,376 11,081
IC-Investors 0 37,945 0 579 981,601 23,775
IC-Special Deposits U.K. 0 531,009 0 39 51,050 1,041,387
IC-Special Deposits HONG KONG 0 41,859 0 3 11,354 68,774
IC-1-84 29 243 0
Cash Reserve Variable Payment 0 41 0 200 831 232
Cash Reserve Variable PMT-3mo. 0 557 0 31,103 106,423 1,215
IC-Future Value 0 124,724 0 1,129 12,589 112,739
-79-
AMERICAN EXPRESS CERTIFICATE COMPANY SCHEDULE VI
Certificate Reserves
Part 1 - Summary of Changes
Year ended December 31, 2002
(In thousands)
Balance at beginning of period Additions
------------------------------- --------------------------------
Number
of Charged
Yield accounts Amount Charged Reserve to other
to maturity with of Amount to profit payments by accounts
on an annual security maturity of and loss certificate (per
Description payment basis holders value reserves or income holders part 2)
------------- ----------------- -------- -------- -------- ----------- ----------- ---------
IC-Future Value Emp (note f) 1,680 18,435 18,435 0 0 0
34 282 282 0 0 0
IC-Stock Market (note g) 97,475 430,142 490,311 0 110,774 2,420
IC-MSC (note g) 21,588 304,732 315,059 0 78,774 1,747
Equity Indexed Savings 15 1,220 1,220 0 2,505 6
IC-AEBI Stock Market (note g) 177 66,083 66,752 0 16,199 897
------- --------- --------- ------ --------- -------
Total 232,581 2,978,843 3,226,525 287 1,628,684 70,457
------- --------- --------- ------ --------- -------
Additional credits and accrued interest thereon:
SP 74 3.5 0
SP 75 3.5 0
SP 76 3.5 0
SP 77 3.5 0
SP 78 3.5 0
SP 79 3.5 15
SP 80 3.5 5 0 0 0
SP 81A 3.5 243 1 0 5
SP 82A 3.5 1,051 26 0 1
SP 82B 3.5 1,765 58 0 30
SP 83A 3.5 222 8 0 2
SP 83B 3.5 618 21 0 9
IC-2-84 3.5 2,021 68 0 30
IC-2-85 3.5 44 92 0 0
IC-2-86 3.5 25 51 0 0
IC-2-87 3.5 41 71 0 0
IC-2-88 3.5 75 136 0 0
Reserve Plus SP 2004-4061 (note a) 0 27 0 0
Cash Reserve SP (note b) 0 1 0 0
IC-Flexible Savings (note d) 1,758 43,422 0 0
IC-Preferred Investors (note d) 23 552 0 0
IC-FS-EMP (note d) 26 513 0 0
IC-Investors (note d) 1,081 23,507 0 0
IC-Special Deposits U.K. (note d) 76 1,556 0 0
IC-Special Deposits HONG KONG (note d) 0
IC-1-84 - 2013-4061 (note c) 5 12 0 (0)
Cash Reserve VP 2004-4061 (note b) 0 11 0 0
Deductions Balance at close of period
-------------------------------------- --------------------------------
Numbers
Credited of
Cash to other accounts Amount
surrenders accounts with of Amount
prior to (per security maturity of
Description Maturities maturity part 2) holders value reserves
------------- ------------ ---------- --------- ----------- ---------- ----------
IC-Future Value Emp 4,459 1,387 0 23 179 12,589
104 0 0 86,992 385,066 178
IC-Stock Market 0 170,852 0 21,790 301,876 432,653
IC-MSC 0 85,248 0 20 2,731 310,332
Equity Indexed Savings 0 1,000 0 138 52,407 2,731
IC-AEBI Stock Market 0 30,606 0 0 0 53,242
------ --------- ------ ------- ---------- ----------
Total 8,381 1,459,038 820 242,646 3,236,001 3,457,714
------ --------- ------ ------- ---------- ----------
Additional credits and accrued interest thereon:
SP 74 0
SP 75 0
SP 76 0
SP 77 0
SP 78 0
SP 79 15
SP 80 4 0 0 1
SP 81A 153 15 63 18
SP 82A 642 78 307 51
SP 82B 482 148 228 995
SP 83A 0 16 0 216
SP 83B 0 45 0 603
IC-2-84 0 196 0 1,923
IC-2-85 0 4 92 40
IC-2-86 0 1 50 25
IC-2-87 0 4 72 36
IC-2-88 0 8 132 71
Reserve Plus SP 2004-4061 0 0 27 0
Cash Reserve SP 0 0 1 0
IC-Flexible Savings 0 3,904 39,388 1,888
IC-Preferred Investors 0 5 554 16
IC-FS-EMP 0 87 434 18
IC-Investors 0 1,874 22,122 592
IC-Special Deposits U.K. 0 31 1,565 36
IC-Special Deposits HONG KONG 0
IC-1-84 - 2013-4061 0 0 12 4
Cash Reserve VP 2004-4061 0 0 11 (0)
-80-
AMERICAN EXPRESS CERTIFICATE COMPANY SCHEDULE VI
Certificate Reserves
Part 1 - Summary of Changes
Year ended December 31, 2002
(In thousands)
Balance at beginning of period Additions
------------------------------- --------------------------------
Number
of Charged
Yield accounts Amount Charged Reserve to other
to maturity with of Amount to profit payments by accounts
on an annual security maturity of and loss certificate (per
Description payment basis holders value reserves or income holders part 2)
------------- ----------------- -------- -------- -------- ----------- ----------- ---------
Cash Reserve Variable Payment-3mo. (note e) 310 1,180 (334) 0
IC-Future Value (note f) 13,058 1,943 0 0
IC-Future Value Emp (note f) 225 34 0 0
IC-Stk Mkt, 2004/16/31-4000/16 (note g) 1,323 1,470 (0) 0
IC-MSC (note g) 243 1,398 (0) 0
IC - EISC 1 6 0 0
IC-AEBI Stk Mkt 2004/31/19-4000/16 (note g) 242 737 0 0
------ ------- ----- -----
Total 24,496 76,901 (334) 77
------ ------- ----- -----
Accrued for additional credits to be allowed
at next anniversaries:
SP 78 0 0 0 0
SP 79 0 0 0 0
SP 80 0 0 0 0
SP 81A 3 0 0 0
SP 82A 0 1 0 0
SP 82B 27 4 0 0
SP 83A 1 1 0 0
SP 83B 7 1 0 0
IC-2-84 - 2019-4061 27 4 0 0
IC-2-85 6 2 0 0
IC-2-86 5 1 0 0
IC-2-87 10 2 0 0
IC-2-88 14 3 (0) 0
IC-Stock Mkt - 2019/31-4061 SEC 5 from C2785-81 6,313 (4,223) 0 0
IC-Market Strategy Certificate (SEC 5 from c2785-81) 3,322 (1,969) 0 0
IC-EISC 13 0 0 0
IC-AEBI Stock Market 946 (813) 0 0
------ --------- ----- -----
Total 10,694 (6,986) (0) (0)
------ ------- ----- -----
R Series Single-Payment certificates:
R-76 3.5 4 15 14 0 1
R-77 3.5 18 348 208 0 8
R-78 3.5 39 310 274 0 11
Deductions Balance at close of period
------------------------------------- ---------------------------------
Numbers
Credited of
Cash to other accounts Amount
surrenders accounts with of Amount
prior to (per security maturity of
Description Maturities maturity part 2) holders value reserves
------------- ------------ ---------- --------- ----------- ---------- ----------
Cash Reserve Variable Payment-3mo. 0 16 911 229
IC-Future Value 3,868 935 0 10,198
IC-Future Value Emp 107 0 0 152
IC-Stk Mkt, 2004/16/31-4000/16 0 136 2,069 588
IC-MSC 0 20 1,497 124
IC - EISC 0 0 6 1
IC-AEBI Stk Mkt 2004/31/19-4000/16 0 43 835 101
------ ----- ------ -------
Total 5,256 7,567 70,376 17,941
------ ----- ------ -------
Accrued for additional credits to be allowed
at next anniversaries:
SP 78 0 0 0 0
SP 79 0 0 0 0
SP 80 0 0 0 0
SP 81A 0 0 5 (2)
SP 82A 0 0 1 (0)
SP 82B 0 0 30 1
SP 83A 0 0 2 (0)
SP 83B 0 0 9 (1)
IC-2-84 - 2019-4061 0 0 30 1
IC-2-85 0 0 8 0
IC-2-86 0 0 5 1
IC-2-87 0 0 12 0
IC-2-88 0 0 18 (1)
IC-Stock Mkt - 2019/31-4061 SEC 5 from C2785-81 0 11 353 1,726
IC-Market Strategy Certificate (SEC 5 from c2785-81) 0 12 251 1,090
IC-EISC 0 0 13
IC-AEBI Stock Market 0 0 61 72
------ ----- ------ -------
Total (0) 23 785 2,900
------ ----- ------ -------
R Series Single-Payment certificates:
R-76 2 0 4 13 13
R-77 11 0 15 320 205
R-78 30 0 34 279 255
-81-
AMERICAN EXPRESS CERTIFICATE COMPANY SCHEDULE VI
Certificate Reserves
Part 1 - Summary of Changes
Year ended December 31, 2002
(In thousands)
Balance at beginning of period Additions
------------------------------- --------------------------------
Number
of Charged
Yield accounts Amount Charged Reserve to other
to maturity with of Amount to profit payments by accounts
on an annual security maturity of and loss certificate (per
Description payment basis holders value reserves or income holders part 2)
------------- ----------------- -------- -------- -------- ----------- ------------ ----------
R-79 3.5 50 637 532 0 20
R-80 3.5 44 410 298 0 13
R-81 3.5 20 290 214 0 7
R-82A 3.5 115 800 498 0 24
RP-Q (note a) 270 459 1,087 0 8
R-II 3.5 76 644 323 0 14
RP-2-84 3.5 212 2,819 1,158 0 48
RP-2-85 3.5 72 279 334 0 14
RP-2-86 3.5 19 69 75 0 3
RP-2-87 3.5 43 673 262 0 11
RP-2-88 3.5 61 454 315 0 12
Cash Reserve RP (note b) 5 15 32 0 0
IC-Flexible Savings RP (note d) 15,438 273,256 296,606 0 272,943 14,262
RP-Preferred Investors (note d) 6 2,847 3,044 0 298 107
Cash Reserve RP-3 mo. (note e) 1,687 14,165 15,191 0 31,020 192
IC-Flexible Savings RP Emp (note d) 252 3,522 4,578 0 95 186
RP-Future Value (note f) 1,451 25,529 25,527 0
RP-Future Value Emp (note f) 53 818 820 0
RP-Stock Market (note g) 12,652 113,582 126,546 0 36,915 559
RP-Market Strategy 3,455 93,107 95,640 0 19,892 473
D-1 (note a) 154 16,174 20,059 0 827 499
---------- ---------- -------- ---- ------- ------
Total 36,196 551,222 593,635 0 361,990 16,472
---------- ---------- -------- ---- ------- ------
Additional Interest on R-Series Single
Payment Reserves:
R-76 3.5 Not Not 0 0 NA
R-77 3.5 Applicable Applicable 3 7
R-78 3.5 7 10
R-79 3.5 10 18
R-80 3.5 10 10
R-81 3.5 5 6
R-82A 3.5 20 18
RP-Q (note a) 0 8
R-II 3.5 9 11
RP-2-84 3.5 30 41
Deductions Balance at close of period
----------------------------------- -----------------------------------
Numbers
Credited of
Cash to other accounts Amount
surrenders accounts with of Amount
prior to (per security maturity of
Description Maturities maturity part 2) holders value reserves
------------- ----------- ---------- --------- ----------- ---------- ----------
R-79 49 0 48 584 503
R-80 30 0 38 374 281
R-81 116 0 16 138 105
R-82A 39 0 106 705 483
RP-Q 204 0 220 365 891
R-II 32 0 71 584 305
RP-2-84 111 0 188 2,585 1,095
RP-2-85 35 0 64 249 313
RP-2-86 1 0 19 69 77
RP-2-87 28 0 37 647 245
RP-2-88 106 0 47 293 221
Cash Reserve RP 0 0 5 15 32
IC-Flexible Savings RP 102,341 0 25,630 452,429 481,470
RP-Preferred Investors 1,082 0 5 2,148 2,367
Cash Reserve RP-3 mo. 30,221 0 1,629 15,351 16,182
IC-Flexible Savings RP Emp 864 0 219 2,974 3,995
RP-Future Value 6,977 1,493 0 954 17,057 17,057
RP-Future Value Emp 327 31 0 38 462 462
RP-Stock Market 0 50,244 0 11,937 103,259 113,776
RP-Market Strategy 29,675 0 3,474 84,498 86,330
D-1 0 4,968 0 142 12,934 16,417
--------- --------- ---- ------- ---------- -------
Total 7,304 221,713 0 44,940 698,332 743,080
--------- --------- ---- ------- ---------- -------
Additional Interest on R-Series Single
Payment Reserves:
R-76 0 1 Not Not 0
R-77 0 8 Applicable Applicable 2
R-78 0 11 6
R-79 0 20 8
R-80 0 13 7
R-81 1 9 1
R-82A 1 24 13
RP-Q 8 0
R-II 0 14 6
RP-2-84 1 48 22
-82-
AMERICAN EXPRESS CERTIFICATE COMPANY SCHEDULE VI
Certificate Reserves
Part 1 - Summary of Changes
Year ended December 31, 2002
(In thousands)
Balance at beginning of period Additions
------------------------------- --------------------------------
Number
of Charged
Yield accounts Amount Charged Reserve to other
to maturity with of Amount to profit payments by accounts
on an annual security maturity of and loss certificate (per
Description payment basis holders value reserves or income holders part 2)
------------- ----------------- -------- -------- -------- ---------- ------------ ----------
RP-2-85 3.5 11 12
RP-2-86 3.5 2 3
RP-2-87 3.5 8 10
RP-2-88 3.5 6 11
Cash Reserve RP (note b) 0 0
IC-Flexible Savings RP (note d) 568 15,489
RP-Preferred Investors (note d) 6 126
Cash Reserve RP-3 mo. (note e) 37 228 (37)
IC-Flexible Savings RP Emp (note d) 10 201
IC-Future Value (note f) 17,933 2,616
IC-Future Value Emp (note f) 549 90
RP-Stock Market (note g) 287 325
RP-Market Strategy 63 380
D-1 (note a) 0 554
Total 19,574 20,175 (37) 0
--------- ------- ---------- ------
Accrued for additional credits to be allowed
at next anniversaries:
RP-Stock Market 1,761 (1,132) 0 0
RP-Market Strategy 1,005 (613) 0 0
--------- ------- ---------- ------
Total single payment 3,877,690 88,632 1,990,303 87,005
--------- -------- ---------- ------
Paid-up certificates:
Series 15 and 20 3.25 5 50 47 2 0 0
" 15A and 22A 3.5 207 4,648 4,139 120 0 254
" I-76 3.5 502 2,489 1,882 64 0 141
--------- -------- ------- -------- ------ -----
Total 714 7,187 6,068 186 0 395
--------- -------- ------- -------- ------ -----
Additional credits and accrued interest thereon:
Series 15 and 20 2.5 Not Not 3 0 0 1
" 15A and 22A 3 Applicable Applicable 107 3 0 34
" I-76 3.5 172 6 0 22
------- --------- ------ -----
Total 282 9 0 57
------- --------- ------ -----
Accrued for additional credits to be allowed
Deductions Balance at close of period
----------------------------------- -----------------------------------
Numbers
Credited of
Cash to other accounts Amount
surrenders accounts with of Amount
prior to (per security maturity of
Description Maturities maturity part 2) holders value reserves
------------- ----------- ---------- --------- ----------- ------------ ----------
RP-2-85 0 16 7
RP-2-86 0 3 2
RP-2-87 0 11 7
RP-2-88 1 12 4
Cash Reserve RP 0 (0)
IC-Flexible Savings RP 1,094 14,262 701
RP-Preferred Investors 20 107 5
Cash Reserve RP-3 mo. 2 192 34
IC-Flexible Savings RP Emp 17 186 8
IC-Future Value 6,021 1,083 13,445
IC-Future Value Emp 214 29 396
RP-Stock Market 27 443 142
RP-Market Strategy 2 402 39
D-1 54 499 1
------ --------- ------ ---------
Total 6,235 2,334 16,289 14,854
------ --------- ------ ---------
Accrued for additional credits to be allowed
at next anniversaries:
RP-Stock Market 0 3 116 510
RP-Market Strategy 0 7 71 314
------ --------- ------ ---------
Total single payment 27,176 1,690,685 88,457 4,237,313
------ --------- ------ ---------
Paid-up certificates:
Series 15 and 20 5 0 0 4 45 44
" 15A and 22A 398 661 399 150 3,397 3,055
" I-76 0 208 11 486 2,386 1,868
------ --------- ------ --------- ----- ---------
Total 403 869 410 640 5,828 4,967
------ --------- ------ ---------- ----- ---------
Additional credits and accrued interest thereon:
Series 15 and 20 0 0 0 Not Not 4
" 15A and 22A 20 10 19 Applicable Applicable 95
" I-76 0 12 0 188
------ ------ ------ ---------
Total 20 22 19 287
------ ------ ------ ---------
Accrued for additional credits to be allowed
-83-
AMERICAN EXPRESS CERTIFICATE COMPANY SCHEDULE VI
Certificate Reserves
Part 1 - Summary of Changes
Year ended December 31, 2002
(In thousands)
Balance at beginning of period Additions
------------------------------- --------------------------------
Number
of Charged
Yield accounts Amount Charged Reserve to other
to maturity with of Amount to profit payments by accounts
on an annual security maturity of and loss certificate (per
Description payment basis holders value reserves or income holders part 2)
------------- ----------------- -------- -------- -------- ---------- ------------ ---------
at next anniversaries 36 21 0 0
--------- ------ ------- ------ ---------- -------
Total paid-up 714 7,187 6,386 216 0 452
--------- ------ ------- ------ ---------- -------
Optional settlement certificates:
Series 1, IST&G 3 12 2 0 0 0
Other series and conversions from Single 0 0 0 0
Payment certificates 2.5-3-3-3.5 5,133 73,113 2,165 0 3,707
Series R-76 thru R-82A 3 0 36 1 0 0
Series R-II & RP-2-84 thru 88 3.5 0 235 7 0 0
Reserve Plus Single-Payment (note a) 68 718 5 0 0
Reserve Plus Flex-Pay & IC-Q-Inst (note a) 13 60 1 0 32
Series R-Installment (note a) 26 142 2 0 70
Series R-Single-Payment (note a) 13 7 0 0 0
Add'l credits and accrued int. thereon 2.5-3 Not Not 8,975 253 0 1,392
Add'l credits and accrued int. thereon-IST&G 2.5-3 Applicable Applicable 0 0 0 0
Accrued for additional credits to be allowed
at next anniversaries 694 709 0 0
Accrued for additional credits to be allowed
at next anniversaries-R-76 thru R-82A & R-II (1) 0 0
Accrued for additional credits to be allowed
at next anniversaries-IST&G 0 0 0 0
-------- ------- ------ ---------- -------
Total optional settlement 5,265 83,980 3,143 0 5,201
-------- ------- ------ ---------- -------
Not Not
Due to unlocated certificate holders Applicable 219 1 Applicable 35
------- ------ ---------- -------
Total certificate reserves 4,167,210 97,297 2,031,415 97,161
========= ======= ========= =======
Income (loss) from purchased and written call
options included in provision for certificate
reserves in Statement of Operations
Total adjusted certificate reserves
Deductions Balance at close of period
----------------------------------- ---------------------------------
Numbers
Credited of
Cash to other accounts Amount
surrenders accounts with of Amount
prior to (per security maturity of
Description Maturities maturity part 2) holders value reserves
------------- ----------- ---------- --------- ----------- ---------- ----------
at next anniversaries 0 0 57 0
---------- --------- ---------- ----- ---------- --------
Total paid-up 423 891 486 640 5,828 5,254
---------- --------- ---------- ----- ---------- --------
Optional settlement certificates:
Series 1, IST&G 1 0 0 12 1
Other series and conversions from Single 0 0 0 0 0
Payment certificates 4,109 4,458 0 5,133 70,418
Series R-76 thru R-82A 7 2 0 0 28
Series R-II & RP-2-84 thru 88 22 21 0 0 199
Reserve Plus Single-Payment 6 226 0 68 491
Reserve Plus Flex-Pay & IC-Q-Inst 2 21 0 13 70
Series R-Installment 61 31 0 26 122
Series R-Single-Payment 3 2 0 13 2
Add'l credits and accrued int. thereon 695 552 443 0 8,930
Add'l credits and accrued int. thereon-IST&G 0 0 0 0 0
Accrued for additional credits to be allowed
at next anniversaries 3 0 1,396 0 4
Accrued for additional credits to be allowed
at next anniversaries-R-76 thru R-82A & R-II 0 0 0 0 (1
Accrued for additional credits to be allowed
at next anniversaries-IST&G 0 0 0 0 0
---------- --------- ---------- ----- --------
Total optional settlement 4,909 5,313 1,839 5,265 80,263
---------- --------- ---------- ----- --------
Not Not
Due to unlocated certificate holders Applicable 5 80 Applicable 170
---------- --------- --------- --------
Total certificate reserves 44,700 1,754,589 97,249 4,496,544
========== ========= ==========
Income (loss) from purchased and written call
options included in provision for certificate 4,496,544
reserves in Statement of Operations 3,172
---------
Total adjusted certificate reserves 4,493,372
=========
-84-
Part 2 - Description of Additions to Reserves Charged to Other Schedule VI (con't)
Accounts and Deductions from Reserves Credited to Other Accounts
Year ended December 31, 2002
(In thousands)
Additions to reserves charged to other accounts Deductions from reserves credited to other accounts
----------------------------------------------- ---------------------------------------------------
Transfers of
maturities
to extended Conversions
maturities- to optional Maturities
Reconversions charged to settlement transferred
of paid-up reserves Conversions certificates- to extended
certificate to mature, to paid-up credited maturities-
charged Charged additional certificates- to optional credited to
to paid-up to credits/ credited settlement reserves to
reserves and advance interest Transferred to paid-up reserves and mature-
reserve for payments and advance to Federal surrender surrender extended
reconversions reserve payments Withholding Total income income maturities Total
------------- -------- ----------- ----------- ----- ------------ ------------- ---------- -----
Reserves to mature
installment certificates:
Series 15, including
extended maturities 0 0 0 0 0 0 0 0 0
Series 20, including
extended maturities 0 0 0 0 0 0 0 0 0
Series 15A, including
extended maturities 0 0 0 0 0 0 0 0 0
Series 22A, including
extended maturities 47 75 43 0 165 206 1,111 43 1,360
Series I-76 9 10 0 0 19 111 10 0 121
Series Reserve Plus
Flexible Payment 0 0 7 0 7 0 20 0 20
Series IC-Q-Installment 0 0 2 0 2 0 0 0 0
Series IC-Q-Ins 0 0 17 0 17 0 13 0 13
Series IC-Q-Ins Emp 0 0 0 0 0 0 0 0 0
Series IC-I 0 0 3,619 6 3,625 0 0 0 0
Series IC-I-Emp 0 0 33 0 33 0 0 0 0
Series Inst 0 0 321 0 321 0 0 0 0
Series Inst-Emp 0 0 2 0 2 0 0 0 0
Series RP-Q-Installment 0 0 10 0 10 0 70 0 70
Series RP-Q-Flexible
Payment 0 0 1 0 1 0 0 0 0
Series RP-Q-Ins 0 0 1 0 1 0 0 0 0
Series RP-Q-Ins Emp 0 0 0 0 0 0 0 0 0
Series RP-I 0 0 30 0 30 0 0 0 0
Series RP-I Emp 0 0 4 0 4 0 0 0 0
----- ----- ------- ----- ------- ----- ------- ------ -------
Total 56 85 4,090 6 4,237 317 1,224 43 1,584
===== ===== ======= ===== ======= ===== ======= ====== =======
-85-
Part 2 - Description of Additions to Reserves Charged to Other Schedule VI (con't)
Accounts and Deductions from Reserves Credited to Other Accounts
Year ended December 31, 2002
(In thousands)
Additions to reserves charged to other accounts Deductions from reserves credited to other accounts
----------------------------------------------- ---------------------------------------------------
Additions Maturities
Additions to reserves Applied to Conversions transferred
to advance to mature- certificates- to optional to extended
Reconversions payments- extended credited to settlement maturities- Conversions
of paid-up charged to maturities reserves to certificates- credited to to paid-up
Payments made in advance certificates- default charged to mature, credited reserves certificates-
of current certificate charged to interest reserves to loading to optional to mature- credited to
year requirements and paid-up on late mature from and settlement extended paid-up
accrued interest thereon: reserves payments maturity Total insurance reserves maturities reserves Total
-------------- ---------- ------------ ----- ------------ ------------- ------------ ------------- -----
Series 15, including
extended maturities 0 0 0 0 0 0 0 0 0
Series 20, including
extended maturities 0 0 0 0 0 0 0 0 0
Series 15A, including
extended maturities 0 0 0 0 0 0 0 0 0
Series 22A, including
extended maturities 2 0 5 7 76 44 5 0 125
Series I-76 0 1 0 1 10 0 0 0 10
Series Reserve Plus
Flexible Payment 0 0 0 0 0 0 0 0 0
Series IC-Q Installment 0 0 0 0 0 0 0 0 0
Series IC-Q Ins 0 0 0 0 0 0 0 0 0
Series IC-Q Ins Emp 0 0 0 0 0 0 0 0 0
Series IC-I 0 0 0 0 0 0 0 0 0
Series IC-I Emp 0 0 0 0 0 0 0 0 0
Series RP-Q Installment 0 0 0 0 0 0 0 0 0
Series RP-Q Flexible
Payment 0 0 0 0 0 0 0 0 0
Series RP-Q Ins 0 0 0 0 0 0 0 0 0
Series RP-Q Ins Emp 0 0 0 0 0 0 0 0 0
Series RP-I 0 0 0 0 0 0 0 0 0
Series RP-I Emp 0 0 0 0 0 0 0 0 0
---- ------ ----- ----- ------ ------ ------- ----- -----
Total 2 1 5 8 86 44 5 0 135
==== ====== ===== ===== ====== ====== ======= ===== =====
-86-
Certificate Reserves Schedule VI (con't)
(In thousands)
Year ended December 31, 2002
Part 2 - Descriptions of Additions to Reserves Charged to Other
Accounts and Deductions from Reserves Credited to Other Accounts
Additional credits on installment certificates and accrued interest thereon:
Other additions represent:
Transfers from accruals for additional credits to be allowed at next anniversaries $ 208
Reconversions of paid-up certificates-charged to paid-up reserves 12
Transfers from maturities to extended maturities 8
-----
$ 228
=====
Other deductions represent:
Transfers to reserves on a quarterly basis for Reserve Plus Flexible-
Payment, IC-Q-Installment and R-Flexible-Payment $4,050
Conversions to optional settlement certificates-credited to optional
settlement reserves 320
Conversions to paid-up certificates-credited to paid-up reserves 76
Transfers to extended maturities at maturity 8
-----
$4,454
=====
Accrual for additional credits to be allowed on installment certificates at next
anniversaries:
Other deductions represent:
Transfers to reserves for additional credits on installment certificates $ 209
=====
Reserve for death and disability refund options: Other deductions represent:
Payments, in excess of installment reserves, made to certificate holders
who exercised the death and disability refund options. $ 0
=====
Reserve for reconversions of paid-up certificates:
The amount shown as charged to profit and loss has been deducted from
reserve recoveries in the accompanying Statement of Operations $ 0
=====
Other deductions represent:
Amounts credited to installment certificate reserves to mature, on
reconversions of paid-up certificates. $ 0
=====
Paid-up certificates:
Other additions represent:
Conversions from installment certificates (charged to installment reserves
less surrender charges) $ 395
Transfers from accrual for additional credits to be allowed at next
anniversaries 57
-----
$ 452
=====
Other deductions represent:
Transfers credited to installment reserves on reconversions to installment
certificates $ 69
Transfers for accrual for additional credits and accrued interest thereon 57
Transfers to settlement options 360
-----
$ 486
=====
-87-
Certificate Reserves Schedule VI (con't)
(In thousands)
Year ended December 31, 2002
Part 2 - Descriptions of Additions to Reserves Charged to Other
Accounts and Deductions from Reserves Credited to Other Accounts
Default interest on installment certificates:
Other additions represent:
Reconversions of paid-up certificates charged to paid-up reserves $ 0
======
Other deductions represent:
Conversions to paid-up certificates - credited to paid-up reserves $ 2
Transfers to advance payments as late payments are credited to certificates 1
------
$ 3
======
Optional settlement certificates:
Other additions represent:
Transfers from installment certificate reserves (less surrender charges),
single-payment and Series D certificate reserves upon election of
optional settlement privileges $ 3,445
Transfers from paid-up certificate reserves 360
Transfers from accruals for additional credits to be allowed at next anniversaries 1,392
------
$ 5,197
======
Other deductions represent:
Transfers to reserve for additional credits and accrued interest thereon $ 1,395
Transfers to optional settlement reserves 444
------
$ 1,839
======
Single-Payment certificates:
Other additions represent:
Transfers from accruals for additional credits to be allowed at next anniversaries $ 77
Transfers from accruals on a quarterly basis on: 0
Reserve Plus Single-Payment 27
Cash Reserve Single-Payment 1
Flexible Savings 39,364
Flexible Savings-Emp 434
Preferred Investors 552
Investors 22,122
Special Deposits 1,565
Cash Reserve 11
Cash Reserve-3mo 909
Future Value 0
Stock Market 2,420
Market Strategy 1,747
AEBI Stock Market 897
R82-B 8
Cash Reserve-RP 0
Cash Reserve-RP-3mo 192
Flexible Saving-RP 14,262
Flexible Savings-RP-Emp 186
Preferred Investors-RP 107
Stock Market-RP 559
Market Strategy-RP 473
Transfers from accruals at anniversaries maintained in a separate 1,087
------
reserve account. $87,000
======
-88-
Certificate Reserves Schedule VI (con't)
(In thousands)
Year ended December 31, 2002
Part 2 - Descriptions of Additions to Reserves Charged to Other
Accounts and Deductions from Reserves Credited to Other Accounts
Single-Payment certificates continued:
Other deductions represent:
Transfers to optional settlement reserves:
Single-Payment $ 3,641
R Single-Payment 0
Transfers to reserves for additional credits and accrued interest thereon 1,087
Transfers to a separate reserve account from the accrual account 77
Transfers to reserves on a quarterly basis:
Reserve Plus Single-Payment 27
Cash Reserve Single-Payment 1
Flexible Savings 39,366
Flexible Savings-Emp 434
Preferred Investors 554
Investors 22,122
Special Deposits 1,565
Cash Reserve 11
Cash Reserve-3mo 909
Stock Market 2,421
AEBI Stock Market 896
R82-B 8
Cash Reserve-RP 0
Cash Reserve-RP-3mo 192
Flexible Saving-RP 14,262
Flexible Savings-RP-Emp 186
Preferred Investors-RP 107
Stock Market-RP 559
Transfers to Federal tax withholding 32
------
$88,457
======
Due to unlocated certificate holders:
Other additions represent:
Amounts equivalent to payments due certificate holders who could
not be located $ 35
======
Other deductions represent:
Payments to certificate holders credited to cash $ 79
======
-89-
Part 3 - Information Regarding Installment Certificates
Classified by Age Groupings
(In thousands)
Year ended December 31, 2002
Deductions from Reserves
------------------------
Number of Cash
Accounts with Amount of Amount of Surrenders
Months Certificate Holders Maturity Value Reserves Prior to
Certificate Series Paid December 31, December 31, December 31, Maturity Other
- ------------------ -------- ------------------- ---------------- ---------------- ------------- ------
2001 2002 2001 2002 2001 2002 2002 2002
------ ------ ------- ------- ------- ------- ------ -----
20, including extended maturities 253-264 0 0 0 0 0 0 0 0
265-276 0 0 0 0 0 0 0 0
277-288 0 0 0 0 0 0 0 0
289-300 0 0 0 0 0 0 0 0
301-312 0 0 0 0 0 0 0 0
313-324 0 0 0 0 0 0 0 0
325-336 0 0 0 0 0 0 0 0
337-348 0 0 0 0 0 0 0 0
349-360 (a) 0 0 0 0 0 0 0 0
------ ------ ------- ------- ------- ------- ------ ----
Total 0 0 0 0 0 0 0 0
------ ------ ------- ------- ------- ------- ------ ----
15A, including extended maturities 229-240 (a) 0 0 0 0 0 0 0 0
241-252 0 0 0 0 0 0 0 0
------ ------ ------- ------- ------- ------- ------ ----
Total 0 0 0 0 0 0 0 0
------ ------ ------- ------- ------- ------- ------ ----
22A, including extended maturities 73-84 0 0 0 0 0 0 0 0
85-96 0 0 0 0 0 0 0 0
97-108 0 0 0 0 0 0 0 0
109-120 0 0 0 0 0 0 0 0
121-132 0 0 0 0 0 0 0 0
133-144 1 0 13 0 6 0 0 0
145-156 1 2 19 32 8 15 0 0
157-168 1 0 15 0 8 0 0 0
169-180 2 1 56 15 33 9 0 0
181-192 0 1 0 38 0 24 12 0
193-204 2 0 38 0 26 0 0 0
205-216 0 2 0 38 0 27 0 0
217-228 1 1 18 19 14 15 0 0
229-240 0 0 0 0 0 0 0 0
-90-
Part 3 - Information Regarding Installment Certificates
Classified by Age Groupings
(In thousands)
Year ended December 31, 2002
Deductions from Reserves
------------------------
Number of Cash
Accounts with Amount of Amount of Surrenders
Months Certificate Holders Maturity Value Reserves Prior to
Certificate Series Paid December 31, December 31, December 31, Maturity Other
- ------------------ -------- ------------------- ---------------- ---------------- ------------- ------
2001 2002 2001 2002 2001 2002 2002 2002
------ ------ ------- ------- ------- ------- ------ -----
241-252 3 1 34 15 30 13 0 0
253-264 (a) 6 2 148 19 145 18 93 43
265-276 2 2 36 75 22 45 0 0
277-288 5 2 276 36 177 23 0 0
289-300 3 4 331 146 224 100 0 89
301-312 14 2 380 325 276 233 46 0
313-324 67 13 1,702 364 1,277 279 12 36
325-336 71 66 1,718 1,663 1,366 1,319 70 0
337-348 85 68 2,027 1,588 1,711 1,332 11 121
349-360 69 75 1,569 1,793 1,389 1,590 126 0
361-372 65 69 1,270 1,598 1,180 1,488 52 45
373-384 63 56 1,224 1,026 1,198 1,003 161 957
------ ------ ------- ------- ------- ------- ------ -----
Total 461 367 10,874 8,790 9,090 7,533 583 1,291
------ ------ ------- ------- ------- ------- ------ -----
I-76 145-156 0 0 0 0 0 0 0 0
157-168 1 0 37 0 12 0 0 0
169-180 0 1 0 37 0 13 0 0
181-192 0 0 0 0 0 0 0 0
193-204 2 0 40 0 17 0 0 0
205-216 1 2 26 40 11 18 0 0
217-228 0 1 0 25 0 12 0 0
229-240 11 0 240 0 127 0 7 16
241-252 39 8 984 178 555 102 35 0
253-264 60 37 1,522 941 920 568 8 46
265-276 63 54 1,328 1,313 858 847 97 38
277-288 78 60 1,488 1,313 1,019 904 38 0
289-300 65 68 1,510 1,267 1,105 923 75 11
301-312 39 59 852 1,381 654 1,072 81 9
313-324 0 37 0 824 0 670 23 0
------ ------ ------- ------- ------- ------- ------ -----
Total 359 327 8,027 7,319 5,278 5,129 364 120
------ ------ ------- ------- ------- ------- ------ -----
-91-
Part 3 - Information Regarding Installment Certificates
Classified by Age Groupings
(In thousands)
Year ended December 31, 2002
Deductions from Reserves
------------------------
Number of Cash
Accounts with Amount of Amount of Surrenders
Months Certificate Holders Maturity Value Reserves Prior to
Certificate Series Paid December 31, December 31, December 31, Maturity Other
- ------------------ -------- ------------------- ---------------- ---------------- ------------- ------
2001 2002 2001 2002 2001 2002 2002 2002
------ ------ ------- ------- ------- ------- ------ -----
Reserve Plus Flexible Payment 193-204 0 0 0 0 0 0 0 0
205-216 24 0 240 0 113 0 0 0
217-228 60 22 552 225 228 108 25 0
229-240 51 47 464 427 263 165 83 0
241-252 0 1 0 18 0 41 57 20
------ ------ ------- ------- ------- ------- ------ -----
Total 135 70 1,256 670 604 314 165 20
------ ------ ------- ------- ------- ------- ------ -----
IC-Q-Installment 169-180 0 0 0 0 0 0 0 0
181-192 3 0 51 0 5 0 0 0
193-204 17 3 277 51 59 5 1 0
205-216 17 16 132 265 74 54 12 0
217-228 0 10 0 90 0 38 43 0
------ ------ ------- ------- ------- ------- ------ -----
Total 37 29 460 406 138 97 56 0
------ ------ ------- ------- ------- ------- ------ -----
IC-Q-Ins 85-96 0 0 0 0 0 0 0 0
97-108 0 0 0 0 0 0 0 0
109-120 259 0 2,917 0 1,351 0 0 0
121-132 64 23 679 292 352 113 176 0
133-144 39 47 436 517 265 246 96 0
145-156 36 33 491 343 170 231 25 0
157-168 58 33 693 468 363 158 30 0
169-180 20 48 204 590 94 257 133 0
181-192 9 13 81 147 15 54 27 12
193-204 0 8 0 75 0 14 8 0
------ ------ ------- ------- ------- ------- ------ -----
Total 485 205 5,501 2,432 2,610 1,073 495 12
------ ------ ------- ------- ------- ------- ------ -----
-92-
Part 3 - Information Regarding Installment Certificates
Classified by Age Groupings
(In thousands)
Year ended December 31, 2002
Deductions from Reserves
------------------------
Number of Cash
Accounts with Amount of Amount of Surrenders
Months Certificate Holders Maturity Value Reserves Prior to
Certificate Series Paid December 31, December 31, December 31, Maturity Other
- ------------------ -------- ------------------- ---------------- ---------------- ------------- ------
2001 2002 2001 2002 2001 2002 2002 2002
------ ------ ------- ------- ------- ------- ------ -----
IC-Q-Ins Emp 97-108 0 0 0 0 0 0 0 0
109-120 1 0 6 0 1 0 0 0
121-132 0 0 0 0 0 0 0 0
133-144 1 0 6 0 2 0 0 0
145-156 0 1 0 6 0 0 2 0
157-168 1 0 17 0 15 0 0 0
169-180 0 1 0 17 0 16 0 0
------ ------ ------- ------- ------- ------- ------ -----
Total 3 2 29 23 18 16 2 0
------ ------ ------- ------- ------- ------- ------ -----
IC-I 1-12 1 2 6 18 0 1 0 0
13-24 2 0 12 0 2 0 1 0
25-36 8 2 82 12 34 2 0 0
37-48 2 7 32 76 12 30 1 0
49-60 2,210 2 37,827 32 14,458 15 0 0
61-72 5,036 1,849 84,715 31,177 35,813 13,355 2,302 0
73-84 4,980 3,775 81,965 63,148 38,676 28,868 9,437 0
85-96 3,646 4,103 60,087 66,807 29,086 34,904 6,613 0
97-108 2,479 3,165 37,983 51,879 18,706 26,781 3,631 0
109-120 1,213 2,011 17,580 30,627 10,176 16,211 2,208 0
121-132 0 31 0 407 0 237 1,336
------ ------ ------- ------- ------- ------- ------ -----
Total 19,577 14,947 320,289 244,183 146,963 120,404 25,529 0
------ ------ ------- ------- ------- ------- ------ -----
IC-I-Emp 1-12 0 1 0 6 0 3 0 0
37-48 0 0 0 0 0 0 0 0
49-60 11 0 120 0 72 0 0 0
61-72 35 10 609 114 282 68 4 0
73-84 28 27 308 484 193 250 70 0
85-96 22 23 300 266 227 182 29 0
97-108 15 18 210 222 117 193 20 0
109-120 7 7 177 78 216 63 21 0
-93-
Part 3 - Information Regarding Installment Certificates
Classified by Age Groupings
(In thousands)
Year ended December 31, 2002
Deductions from Reserves
------------------------
Number of Cash
Accounts with Amount of Amount of Surrenders
Months Certificate Holders Maturity Value Reserves Prior to
Certificate Series Paid December 31, December 31, December 31, Maturity Other
- ------------------ -------- ------------------- ---------------- ---------------- ------------- ------
2001 2002 2001 2002 2001 2002 2002 2002
------ ------ ------- ------- ------- ------- ------ -----
0 1 0 120 0 337 0 0
------ ------ ------- ------- ------- ------- ------ ----
Total 118 87 1,724 1,290 1,107 1,096 144 0
------ ------ ------- ------- ------- ------- ------ ----
Inst 1-12 1,733 2,220 0 0 1,742 2,840 82 0
13-24 1,439 1,351 0 0 3,127 3,128 339 0
25-36 1,690 1,221 0 0 5,420 4,065 480 0
37-48 1,971 1,432 0 0 8,139 6,158 704
49-60 1,264 1,729 0 0 6,206 8,681 918 0
0 1,103 0 0 0 6,174 708 0
------ ------ ------- ------- ------- ------- ------ ----
Total 8,097 9,056 0 0 24,634 31,046 3,231 0
------ ------ ------- ------- ------- ------- ------ ----
Inst-Emp 1-12 10 16 0 0 5 12 0 0
13-24 9 8 0 0 15 14 2 0
25-36 9 8 0 0 13 22 2 0
37-48 7 7 0 0 34 11 1 0
49-60 5 7 0 0 24 48 0 0
61-72 0 5 0 0 27 0 0
------ ------ ------- ------- ------- ------- ------ ----
Total 40 51 0 0 91 134 5 0
------ ------ ------- ------- ------- ------- ------ ----
R Flexible Payment 181-192 0 0 0 0 0 0 0 0
193-204 25 0 369 349 210 0 0 0
205-216 7 24 115 115 32 214 3 0
217-228 30 7 421 301 230 31 0 0
229-240 26 21 301 110 356 154 33 0
241-252 0 7 0 0 0 137 48 70
------ ------ ------- ------- ------- ------- ------ ----
Total 88 59 1,206 875 828 536 84 70
------ ------ ------- ------- ------- ------- ------ ----
RP-Q-Installments 169-180 0 0 0 0 0 0 0 0
-94-
Part 3 - Information Regarding Installment Certificates
Classified by Age Groupings
(In thousands)
Year ended December 31, 2002
Deductions from Reserves
------------------------
Number of Cash
Accounts with Amount of Amount of Surrenders
Months Certificate Holders Maturity Value Reserves Prior to
Certificate Series Paid December 31, December 31, December 31, Maturity Other
- ------------------ -------- ------------------- ---------------- ---------------- ------------- ------
2001 2002 2001 2002 2001 2002 2002 2002
------ ------ ------- ------- ------- ------- ------ -----
181-192 5 0 65 0 45 0 0 0
193-204 2 4 18 59 12 39 5 0
205-216 0 1 0 6 0 10 0 0
------ ------ ------- ------- ------- ------- ------ -----
Total 7 5 83 65 57 49 5 0
------ ------ ------- ------- ------- ------- ------ -----
RP-Q-Ins 85-96 0 0 0 0 0 0 0 0
97-108 0 0 0 0 0 0 0 0
109-120 3 0 32 0 8 0 0 0
121-132 0 0 0 0 0 0 0 0
133-144 4 0 260 0 59 0 0 0
145-156 2 4 18 260 5 51 0 0
157-168 0 2 0 18 0 5 0 0
------ ------ ------- ------- ------- ------- ------ -----
Total 9 6 310 278 72 56 0 0
------ ------ ------- ------- ------- ------- ------ -----
RP-Q-Ins Emp 97-108 0 0 0 0 0 0 0 0
109-120 0 0 0 0 0 0 0 0
------ ------ ------- ------- ------- ------- ------ -----
Total 0 0 0 0 0 0 0 0
------ ------ ------- ------- ------- ------- ------ -----
RP-I 25-36 0 0 0 0 0 0 0 0
37-48 0 0 0 0 0 0 0 0
49-60 21 0 666 0 214 0 0 0
61-72 21 15 528 215 237 139 111 0
73-84 16 15 594 235 219 173 86 0
85-96 17 11 418 538 210 219 24 0
97-108 19 14 431 376 259 186 36 0
109-120 17 14 312 341 106 215 64 0
121-132 0 0 0 0 0 0 15 0
------ ------ ------- ------- ------- ------- ------ -----
Total 111 69 2,949 1,705 1,245 932 336 0
------ ------ ------- ------- ------- ------- ------ -----
Part 3 - Information Regarding Installment Certificates
Classified by Age Groupings
(In thousands)
Year ended December 31, 2002
Deductions from Reserves
------------------------
Number of Cash
Accounts with Amount of Amount of Surrenders
Months Certificate Holders Maturity Value Reserves Prior to
Certificate Series Paid December 31, December 31, December 31, Maturity Other
- ------------------ -------- ------------------- ---------------- ---------------- ------------- ------
2001 2002 2001 2002 2001 2002 2002 2002
------ ------ ------- ------- ------- ------- ------ -----
Inst-R 1-12 36 104 3,820 4,883 50 109 17 0
13-24 9 21 2,106 3,725 33 75 1 0
25-36 19 9 3,776 2,106 91 44 0 0
37-48 16 15 210 1,261 58 85 29 0
49-60 4 13 675 182 10 63 10 0
61-72 0 3 0 669 0 10 0 0
------ ------ ------- ------- ------- ------- ------ -----
Total 84 165 10,587 12,826 242 386 57 0
------ ------ ------- ------- ------- ------- ------ -----
Inst-R-E 1-12 0 2 0 1,590 0 11 0 0
13-24 0 0 6 0 3 0 0 0
25-36 1 1 6 0 3 0 0 0
37-48 1 1 0 6 0 4 0 0
49-60 0 6 3 0 0
------ ------ ------- ------- ------- ------- ------ -----
Total 2 4 12 1,602 6 18 0 0
------ ------ ------- ------- ------- ------- ------ -----
Total All Series 29,613 25,449 363,307 282,464 192,983 168,819 31,056 1,513
====== ====== ======= ======= ======= ======= ====== =====
(a) Includes accounts on which all payments necessary to mature have been made, but
additional time must elapse before the certificate maturity year is completed.
Also includes accounts for which maturity election has been made, but no
further payments have been received.
-96-
Year ended December 31, 2002
Part 4 - Amounts Periodically Credited to Certificate Holders' Accounts
to Accumulate the Maturity Amount of Installment Certificates.
Information as to (1) amounts periodically credited to each class of
security holders' accounts from installment payments and (2) such other
amounts periodically credited to accumulate the maturity amount of the
certificate (on a $1,000 face-amount certificate basis for the term of
the certificate), is filed in Part 4 of Schedule IX as part of Post-
effective Amendment No. 9 to Registration Statement No. 2-17681, Post
effective Amendment No. 1 to Registration Statement No. 2-23772 and
Post-effective Amendment No. 1 to Registration Statement No. 2-258081
and is incorporated herein by reference.
-97-
AMERICAN EXPRESS CERTIFICATE COMPANY SCHEDULE VII
Valuation and Qualifying Accounts
Years ended December 31, 2002, 2001, and 2000
(In thousands)
Year ended December 31, 2002
- ------------------------------------------------------------------------------------------------------------------------------------
Additions
--------------------------------
Reserves Balance Charged Balance
deducted from at to costs Deductions at
assets to beginning and from end
which they apply of period expenses Other reserves/writedowns of period
- ---------------------------- -------------- ------------- ------------- ----------------------- -------------
Allowance for losses:
Conventional first
mortgage loans
and other loans 1,935 2,288 0 0 4,223
Year ended December 31, 2001
- ------------------------------------------------------------------------------------------------------------------------------------
Additions
--------------------------------
Reserves Balance Charged Balance
deducted from at to costs Deductions at
assets to beginning and from end
which they apply of period expenses Other reserves/writedowns of period
- ---------------------------- -------------- ------------- ------------- ----------------------- -------------
Allowance for losses:
Conventional first
mortgage loans 744 1,191 0 0 1,935
Year ended December 31, 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Additions
--------------------------------
Reserves Balance Charged Balance
deducted from at to costs Deductions at
assets to beginning and from end
which they apply of period expenses Other reserves/writedowns of period
- ---------------------------- -------------- ------------- ------------- ----------------------- -------------
Allowance for losses:
Conventional first
mortgage loans 511 233 0 0 744
-98-