UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
|X| ANNUAL REPORT PURSUANT TO SECTION 30 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, 2004
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 No. 2-23772
American Express Certificate Company
(Exact name of registrant as specified in its charter)
Delaware 41-6009975
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
52 AXP Financial Center
Minneapolis, Minnesota 55474
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (612) 671-3131
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------------------------ ----------------------------
None None
Securities registered pursuant to Section 12(g) of the Act: 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. _____
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes _____ No __X__
As of December 31, 2004, there were no voting shares held by non-affiliates
of the registrant. Common shares of the registrant outstanding at March 14, 2005
were 150,000.
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.
TABLE OF CONTENTS
Form 10-K
Item Number
Page
PART I
1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . 1 - 7
2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . 7
3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . 7
4. Submission of Matters to a Vote of Security Holders. . . . . 8
PART II
5. Market for the Registrant's Common Stock and Related
Stockholder Matters. . . . . . . . . . . . . . . . . . . . . 8
6. Selected Financial Data. . . . . . . . . . . . . . . . . . . 8
. . . . . . . . . . . .
7. Management's Discussion and Analysis of Financial Condition
and Results of Operation . . . . . . . . . . . . . . . . . . 9-14
7A. Quantitative and Qualitative Disclosures About Market Risk. 14
8. Financial Statements and Supplementary Data. . . . . . . . . 14
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure . . . . . . . . . . . . . . . . . . 15
9A. Controls and Procedures. . . . . . . . . . . . . . . . . . . 15
PART III
14. Principal Accountant Fees and Services . . . . . . . . . . . 15 - 16
PART IV
15. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . 17 - 18
Index to Financial Statements. . . . . . . . . . . . . . . . F-1
Exhibit Index. . . . . . . . . . . . . . . . . . . . . . . . E-1 - E-4
PART I
ITEM 1. BUSINESS
American Express Certificate Company (AECC) is incorporated under the laws of
Delaware. AECC's 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
located at 200 AXP Financial Center, Minneapolis, Minnesota 55474, owns 100
percent of the outstanding voting securities of AECC. AEFC is a wholly-owned
subsidiary of American Express Company (American Express), a New York
corporation, with headquarters at World Financial Center, 200 Vesey Street, New
York, New York 10285.
On February 1, 2005, American Express announced plans to pursue a tax-free
spin-off of the common stock of AEFC through a special dividend to American
Express common shareholders. The final transaction, which is subject to certain
conditions including receipt of a favorable tax ruling and approval by American
Expresses' Board of Directors, is expected to close in the third quarter of
2005.
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 Advisors Inc. (AEFAI), and American
Express Bank Ltd. (AEB), both affiliates of AECC. AEFAI is registered as a
broker-dealer in all 50 states, the District of Columbia and Puerto Rico. AEFC
acts as investment advisor for AECC.
As of the date of this report, AECC offered the following nine different
certificate products to the public:
1. American Express Cash Reserve Certificate
o Currently sold without a sales charge.
o Available as qualified investments for IRAs, 401(k) plans, and other
qualified retirement plans.
o Single payment certificate that permits additional investments and AECC
guarantees interest in advance for a three-month term on these
certificates.
o Distributed pursuant to a Distribution Agreement with AEFAI.
o Current policy is to re-evaluate the certificate product interest
crediting rates weekly to respond to marketplace changes.
o AECC refers to an independent index or source to set the rates for new
sales and must set the rates for an initial purchase of the certificate
within a specified range of the rate from such index or source and for
renewals, AECC uses such rates as an indication of the competitors'
rates, but is not required to set rates within a specified range.
o Published rates of the U.S. ninety day treasury bill are used as a
guide in setting rates.
1
o Competes 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.
2. American Express Flexible Savings Certificate
o Currently sold without a sales charge.
o Currently bear surrender charges for premature surrenders.
o Available as qualified investments for IRAs, 401(k) plans, and other
qualified retirement plans.
o Distributed pursuant to a Distribution Agreement with AEFAI.
o Single payment certificate that permits a limited amount of additional
payments and on which AECC guarantees interest in advance for a term of
six, twelve, eighteen, twenty-four, thirty or thirty-six months, and
potentially other terms, at the certificate product owner's option.
o Current policy is to re-evaluate the certificate product interest
crediting rates weekly to respond to marketplace changes.
o AECC refers to an independent index or source to set the rates for new
sales and must set the rates for an initial purchase of the certificate
within a specified range of the rate from such index or source and for
renewals, AECC uses such rates as an indication of the competitors'
rates, but is not required to set rates within a specified range.
o Published rates of the BANK RATE MONITOR(R) Top 25 Market Average (the
BRM Average) for various length bank certificates of deposit are used
as the guide in setting rates. BANK RATE Monitor and Top 25 Market
Average are marks owned by BANKRATE.COM(SM), publication of Bankrate,
Inc., N. Palm Beach, FL 33408.
o Competes 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.
3. American Express Installment Certificate
o Currently sold without a sales charge.
o Currently bear surrender charges for premature surrenders.
o Available as qualified investments for IRAs, 401(k) plans, and other
qualified retirement plans.
o Distributed pursuant to a Distribution Agreement with AEFAI.
o 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.
o Current policy is to re-evaluate the certificate product interest
crediting rates weekly to respond to marketplace changes.
o AECC refers to an independent index or source to set the rates for new
sales and must set the rates for an initial purchase of the certificate
within a specified range of the rate from such index or source and for
renewals, AECC uses such rates as an indication of the competitors'
rates, but is not required to set rates within a specified range.
o Average interest rate for money market deposit accounts, as published
by the BRM Average(R), is used as a guide in setting rates.
o Intended to help clients save systematically and may compete with
passbook savings and NOW accounts.
2
4. American Express Preferred Investors Certificate
o Currently sold without a sales charge.
o Currently bear surrender charges for premature surrenders.
o Available as qualified investments for IRAs, 401(k) plans, and other
qualified retirement plans.
o Distributed pursuant to a Distribution Agreement with AEFAI.
o Single payment certificate that combines a fixed rate of return with
AECC's guarantee of principal for investments ranging from $250,000 to
$5 million and interest crediting rates are guaranteed in advance by
AECC for a term of one, two, three, six, twelve, twenty-four or
thirty-six months, at the certificate product owner's option.
o Current policy is to re-evaluate such rates on a daily basis.
o AECC refers to an independent index or source to set the rates for new
sales and must set the rates for an initial purchase of the certificate
within a specified range of the rate from such index or source and for
renewals, AECC uses such rates as an indication of the competitors'
rates, but is not required to set rates within a specified range.
o Published average rates for comparable length dollar deposits available
on an interbank basis, referred to as the London Interbank Offering
Rates (LIBOR), and are used as a guide in setting rates.
o Competes with short-term products, and references LIBOR rates.
5. American Express Stock Market Certificate
o Currently sold without a sales charge.
o Currently bear surrender charges for premature surrenders.
o Distributed pursuant to a Distribution Agreement with AEFAI.
o AEFAI has a Selling Agent Agreement with American Express Bank
International (AEBI), a direct subsidiary of AEB(1), to sell a version
of American Express Stock Market Certificate.
o AEFAI has a Selling Agent Agreement effective March 10, 1999 with
Securities America Inc., an affiliate of AECC.
o Single payment certificate that offers the certificate product owner
the opportunity to have all or part of the certificate product returns
tied to fifty-two week stock market performance, up to a maximum
return, as measured by a broad stock market index, with return of
principal guaranteed by AECC and the owner can also choose to earn a
fixed rate of interest after the first term.
o Certificate is also marketed by AEBI under the Selling Agent Agreement
with AEFAI to AEBI's clients, who are neither citizens nor residents of
the United States.
o Current policy is to re-evaluate the certificate product interest
crediting rates weekly and maximum return rates at least monthly to
respond to marketplace changes.
o Certain banks offer certificates of deposit that have features similar
to this certificate.
6. American Express Market Strategy Certificate
o Currently sold without a sales charge.
o Currently bear surrender charges for premature surrenders.
o Available as qualified investments for IRAs, 401(k) plans, and other
qualified retirement plans.
o Distributed pursuant to a Distribution Agreement with AEFAI.
3
o Flexible payment certificate that pays interest at a fixed rate or that
offers the certificate product owner the opportunity to have all or
part of the certificate product returns tied to fifty-two week stock
market performance, up to a maximum return, as measured by a broad
stock market index, for a series of fifty-two week terms starting every
month or at intervals the certificate product owner selects.
o Current policy is to re-evaluate the certificate product interest
crediting rates weekly and maximum return rates at least monthly to
respond to marketplace changes.
o Certain banks offer certificates of deposit that have features similar
to this certificate.
7. American Express Equity Indexed Savings Certificates
o Currently sold without a sales charge.
o Currently bear surrender charges for premature surrenders.
o Distributed pursuant to a Distribution Agreement with AEFAI.
o AEFAI has a Selling Dealer Agreement effective July 31, 2000 with
Securities America, Inc. There is no assurance that AECC's certificates
will be sold by Securities America Inc.
o Available as qualified investments for IRAs, 401(k) plans, and other
qualified retirement plans.
o Single payment certificate that offers the certificate product owner
the opportunity to have all or part of the certificate product returns
tied to a fifty two week stock market performance, up to a maximum
return, as measured by a broad stock market index, with return of
principal guaranteed by AECC.
o Current policy is to re-evaluate the certificate product interest
maximum return rates at least monthly to respond to marketplace
changes.
o Certain banks offer certificates of deposit that have features similar
to this certificate.
8. American Express Investors Certificate (including a version of American
Express Investors Certificate offered to select investors who expect to
invest at least $50 million in the aggregate in this certificate)
o Currently sold without a sales charge.
o Currently bear surrender charges for premature surrenders.
o Selling Agent Agreement with American Express Bank International
(AEBI), a direct subsidiary of AEB (1).
o Distributed pursuant to a Distribution Agreement with AEFAI.
o Single payment certificate that generally permits additional payments
within fifteen days of term renewal and interest crediting rates are
guaranteed in advance by AECC for a term of one, two, three, six,
twelve, twenty-four, or thirty-six months, at the certificate product
owner's option.
o Currently this certificate is sold only to AEBI's clients who are
neither citizens nor residents of the United States.
o Current policy is to re-evaluate such rates on a daily basis.
o AECC refers to an independent index or source to set the rates for new
sales and must set the rates for an initial purchase of the certificate
within a specified range of the rate from such index or source and for
renewals, AECC uses such rates as an indication of the competitors'
rates, but is not required to set rates within a specified range.
o Published average rates for comparable length dollar deposits available
on an interbank basis, referred to as the LIBOR, and are used as a
guide in setting rates.
4
o Competes with short-term investment products and references LIBOR
rates.
9. American Express Special Deposits
o Marketed only through offices of AEB, an indirect wholly-owned
subsidiary of American Express in England, and is not registered for
sale in the United States.
o Currently sold without a sales charge.
o Currently bear surrender charges for premature surrenders.
o AECC has a Marketing Agreement with AEB.
o Single payment certificate that generally permits additional payments
within fifteen days of term renewal and interest crediting rates are
guaranteed in advance by AECC for a term of one, two, three, six,
twelve, twenty-four, or thirty-six months, at the certificate product
owner's option.
o Only sold to AEB's clients who are neither citizens nor residents of
the United States.
o Current policy is to re-evaluate such interest crediting rates on a
daily basis.
o AECC refers to an independent index or source to set the rates for new
sales.
o Published average rates for comparable length dollar deposits available
on an interbank basis, referred to as the LIBOR, and are used as a
guide in setting rates.
o Competes with short-term investment products and references LIBOR
rates.
(1) AEBI is an Edge Act corporation organized under the provisions of Section
25(a) of the Federal Reserve Act.
The specified maturities of most of AECC's certificate products range from ten
to twenty years. Within that maturity period, most certificates have interest
crediting rate terms ranging from one to thirty-six months. Interest crediting
rates are subject to change and certificate product owners can surrender their
certificates without penalty at term end.
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.
5
AECC's certificate product payments received and certificate surrenders paid for
each of the three years ended December 31, 2004 were (in millions of US
dollars):
2004 2003 2002
---- ---- ----
Single Payment Certificates
Non-Qualified
Payments through:
AEFAI $ 1,650.5 $ 1,124.2 $ 1,116.1
AEBI and AEB $ 1,259.4 $ 1,095.4 $ 512.6
Surrenders through:
AEFAI $ 1,022.4 $ 1,039.2 $ 865.1
AEBI and AEB $ 980.0 $ 999.6 $ 601.5
Qualified
Payments through:
AEFAI $ 342.3 $ 312.4 $ 361.6
Surrenders through:
AEFAI $ 268.9 $ 292.6 $ 224.1
Installment Payment Certificates
Through AEFAI
Non-Qualified
Payments $ 32.9 $ 38.6 $ 40.8
Surrenders $ 41.7 $ 47.9 $ 57.2
Qualified
Payments $ 0.5 $ 0.6 $ 0.3
Surrenders $ 0.4 $ 0.7 $ 0.5
For the year ended December 31, 2004, 38.7 percent of single payment certificate
products payments were through AEBI and AEB and 10.5 percent of payments
received by AECC on single payment certificate products and 1.5 percent of
payments received by AECC on installment certificate products were from
tax-qualified certificate products for use in IRAs, 401(k) plans, and other
qualified retirement plans.
The certificates offered by AEFAI are sold pursuant to a distribution agreement
which is terminable on sixty 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 AEFAI or AECC as that term is defined in the 1940 Act.
The distribution agreement provides for the payment of distribution fees to
AEFAI for services provided. For the sale of the American Express Investors
Certificate and the American Express Stock Market Certificate by AEBI, AEFAI, in
turn, has a Selling Agent Agreement with AEBI. For the sale of American Express
Stock Market Certificate, AEFAI has a Selling Agent Agreement with Securities
America Inc. effective March 10, 1999. For the sale of American Express Equity
Indexed Savings Certificates, AEFAI 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 sixty days' notice and subject to annual review by directors who
are not "interested persons" of AEFAI or AECC except that such annual review is
not required for selling agent agreements.
6
AECC receives advice, statistical data, and recommendations with respect to the
acquisition and disposition of securities in its investment portfolio from AEFC,
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 AEFC 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 percent 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 percent 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 U.S. generally accepted accounting principles
(GAAP). AECC is subject to annual examination and supervision by the State of
Minnesota, Department of Commerce (Banking Division).
Prior to September 30, 2004, distribution fees on sales of certain certificate
products were deferred and amortized over the estimated lives of the related
certificates, which was generally one year but could have been up to 10 years.
Upon surrender prior to maturity, unamortized deferred distribution fees were
reflected in expenses and any related surrender charges were reflected as a
reduction to the provision expense for certificate reserves. During the third
quarter of 2004, and based on management's recent review of AECC's certificate
product portfolio mix and certificate portfolio maturities, AECC determined it
to be appropriate to not defer distribution fees in the future and to completely
write-down previously deferred balances to zero. As a result of these actions,
investment expenses increased $5.7 million on a pre-tax basis during the third
quarter of 2004.
ITEM 2. PROPERTIES
None.
ITEM 3. LEGAL PROCEEDINGS
AECC is a party to litigation and arbitration proceedings in the ordinary course
of its business. The outcome of any litigation or threatened litigation cannot
be predicted with any certainty. However, in the aggregate, AECC does not
consider any lawsuits in which it is named as a defendant to have a material
impact on AECC's financial position or operating results.
7
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 AECC's common stock since it is a wholly-owned subsidiary
of AEFC and, indirectly, of American Express Company. Frequency and amount of
capital transactions with AEFC during the past two years were (in millions of
dollars):
For the year ended December 31, 2004: Dividends Contributions
March 31, 2004 $ 10 $ -
June 30, 2004 10 -
December 31, 2004 - (20)
-------- ---------
Total $ 20 $ (20)
======== =========
For the year ended December 31, 2003:
August 8, 2003 $ 30 $ -
December 15, 2003 20 -
-------- ---------
Total $ 50 $ -
======== =========
Restriction on AECC's present or future ability to make return of capital
payments or to pay dividends to AEFC:
Certain series of installment certificate products 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 percent on such series of certificates have been
authorized by AECC. This requirement has been met for 2004 and 2003 by AECC's
declaration of additional credits in meeting this requirement. This requirement
was also met for 2005.
Appropriated retained earnings resulting from the pre-declaration of additional
credits to AECC's certificate product 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 pre-declaration as to outstanding certificates if at any time the
capital and unappropriated retained earnings of AECC should be less than 5
percent of net certificate reserves (certificate reserves less certificate
loans). At December 31, 2004, the capital and unappropriated retained earnings
amounted to 5.6 percent of net certificate reserves.
ITEM 6. SELECTED FINANCIAL DATA
Item omitted pursuant to General Instructions I (2)(a) of Form 10-K.
8
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
American Express Certificate Company's (AECC's) net income is derived primarily
from the after-tax yield on investments and realized investment gains (losses),
less investment expenses and interest credited on certificate reserve
liabilities. Changes in net income trends occur largely due to changes in
investment returns, interest crediting rates to certificate products, the mix of
fully taxable and tax-advantaged investments in AECC's portfolio and from
realization of investment gains (losses). AECC follows U.S. generally accepted
accounting principles (GAAP).
Net income in 2004 decreased $3.3 million, or 6.3 percent, reflecting an
increase in investment expenses which was mainly due to the write-off of
previously deferred distribution fees paid to AEFC. Net income in 2003 increased
$6.8 million, or 14.8 percent, reflecting increased investment income, increased
gross realized gains and decreased gross realized losses on sale of investments,
partially offset by slightly higher investment expenses and a higher provision
for certificate reserves.
In 2004, investment income increased $1.4 million, or 0.5 percent, reflecting a
slight increase in investment income from available-for-sale securities offset
by a decrease in net pre-tax gains on equity index options due to the effect of
lower appreciation in the S&P 500 on the value of options hedging outstanding
stock market certificates compared to 2003. In 2003, investment income increased
$43.1 million, or 19.5 percent, reflecting a $66.0 million increase in net
pre-tax gains on equity index options, partially offset by lower investment
portfolio yields. The increase in net pre-tax gains on equity index options was
due to the effect of appreciation in the S&P 500 on the value of options
economically hedging stock market certificate products.
In 2004, provision for certificate reserves decreased $1.5 million or 1.1
percent reflecting lower appreciation in the S&P 500. In 2003, provision for
certificate reserves increased $41.2 million or 41.1 percent reflecting the
effect on stock market certificates of appreciation in the S&P 500 during 2003
versus depreciation during 2002, partially offset by lower interest crediting
rates on the interest rate sensitive portion of AECC's certificate product
portfolio.
AECC's gross realized gains on sales of securities classified as
Available-for-Sale, using the specific identification method, were $6.1 million
and $47.1 million for the years ended December 31, 2004 and 2003, respectively.
Gross realized losses on sales were ($1.1 million) and ($2.8 million) for the
same periods. AECC also recognized losses of ($0.6 million) and ($36.0 million)
in other-than-temporary impairments on Available-for-Sale securities for the
years ended December 31, 2004 and 2003, respectively.
Certain Critical Accounting Policies
AECC's significant accounting policies are described in Note 1 to the Financial
Statements. The following provides a description of the critical accounting
policy on investment securities valuation that is important to the Financial
Statements.
Investment securities valuation
Generally, investment securities are carried at fair value on the balance sheet
with unrealized gains (losses) recorded in accumulated other comprehensive
income (loss) within equity, net of income tax provisions (benefits). At
December 31, 2004, AECC had net unrealized pretax gains on
9
Available-for-Sale securities of $21.8 million. Gains and losses are recognized
in results of operations upon disposition of the securities. In addition, losses
are 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 and size of that gap, and
management's judgment about the issuer's current and prospective financial
condition. As of December 31, 2004, there were $31.9 million in gross unrealized
losses that related to $2.7 billion of securities, of which only $321.6 million
has been in a continuous unrealized loss position for twelve months or more. As
part of its ongoing monitoring process, management has determined that
substantially all of the gross unrealized losses on these securities is
attributable to changes in interest rates. Additionally, AECC has the ability
and intent to hold these securities for a time sufficient to recover its
amortized cost and has, therefore, concluded that none of these securities is
other-than-temporarily impaired at December 31, 2004.
Liquidity and Capital Resources
AECC's principal sources of cash are receipts from sales of face-amount
certificate products and cash flows from investments. AECC's principal uses of
cash are payments to certificate product owners for matured and surrendered
certificates, purchases of investments, and return of capital or dividend
payments to AEFC.
Cash received from sales of certificates totaled $3.3 billion, $2.6 billion and
$2.0 billion for the three years ended December 31, 2004, respectively.
Certificate maturities and cash surrenders totaled $2.4 billion, $2.4 billion
and $1.8 billion for the three years ended December 31, 2004, respectively.
AECC, as an issuer of face-amount certificates, is impacted by significant
changes in interest rates as interest crediting rates on certificate products
generally reset at shorter intervals than the change in the yield on AECC's
investment portfolio. The specified maturities of most of AECC's certificate
products range from ten to twenty years. Within that maturity period, most
certificates have interest crediting rate terms ranging from one to thirty-six
months. Interest crediting rates are subject to change and certificate product
owners can surrender their certificates without penalty at term end. AECC has
investment certificate obligations totaling $5.9 billion of which $5.4 billion
have terms ending in 2005, $0.3 billion have terms ending in 2006 and $0.2
billion have terms ending in 2007. Contractholders have the right to redeem the
investment certificates earlier and at their discretion subject to a surrender
charge. Redemptions are most likely to occur in periods of dramatic increases in
interest rates. AECC has investments in mortgage and asset-backed securities,
and to a lesser extent, intermediate term corporate debt securities. AECC enters
into interest rate swap contracts that effectively lengthen the rate reset
interval on certificate products. 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. Also, on three series of AECC's certificates,
interest is credited to certificate products 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 equity market
sensitive certificates, AECC purchases and writes index call options on a major
stock market index and, from time to time, enters into futures contracts.
10
AECC's investment program is designed to maintain an investment portfolio that
will produce the competitive portfolio yields within acceptable risk and
liquidity parameters. AECC's investment program considers investment securities
as investments acquired to meet anticipated certificate owner obligations.
Debt securities and marketable equity securities are classified as
Available-for-Sale and are carried at fair value. The Available-for-Sale
classification does not mean AECC expects to sell these securities, but rather
these securities are available to meet possible liquidity needs should there be
significant changes in market interest rates or certificate owner redemptions.
At December 31, 2004, securities classified as Available-for-Sale were carried,
in the aggregate, at a fair market value of $5.6 billion. Based on amortized
costs, fixed maturity securities comprise 92 percent of AECC's total investment
portfolio. Of these securities, 96 percent are investment grade. Investments
primarily include mortgage and asset-backed securities and corporate debt
securities. AECC's corporate debt securities are a diverse portfolio with
concentrations in the following industries: banking and finance, utilities,
communications, food processing and retail. Other than U.S. Government Agency
mortgage-backed securities, no one issuer represents more than 1 percent of
AECC's total investment portfolio.
AECC paid AEFC return of capital amounts of $20 million and $50 million during
2004 and 2003, respectively. In addition, AEFC paid AECC a capital contribution
of $20 million during the fourth quarter of 2004.
Cash used in investing activities was $1,130.2 million and $522.5 million in
2004 and 2003, respectively. This change was primarily due to the decrease in
sales and maturities and redemptions of Available-for-Sale investments partially
offset by the increase in the amount due to brokers.
Cash provided by financing activities was $1,050.2 million and $246.8 million in
2004 and 2003, respectively. This increase primarily resulted from an increase
in the payments received from certificate owners and lower amounts of return of
capital paid to American Express Financial Corporation.
Impact of Market Volatility on Results of Operations
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 percent 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.
11
AECC primarily invests in mortgage and asset-backed securities, and intermediate
term corporate debt securities to provide its certificate owners with a
competitive rate of return on their certificate while managing risk. These
investments 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.
AEFC's Asset Liability Committee (ALCO), which is comprised of senior business
managers, holds regular scheduled meetings to review models projecting various
interest rate scenarios and risk/return measures and their effect on various
portfolios managed by AEFC, including that of AECC. AECC's Board of Directors
has appointed the ALCO as the investment committee of AECC. The ALCO'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 such, certificate product interest crediting rates reset at shorter intervals
than the changes in the investment portfolio yield related to new investments
and reinvestments. Therefore, AECC's spreads 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, "Accounting for Derivative
Instruments and Hedging Activities". At December 31, 2004, AECC had $300 million
notional of interest rate swaps expiring by February 2005.
AECC is also exposed to risk associated with fluctuations in the equity market
from three series of its certificate products. Such amounts credited to
certificate product owners' accounts are tied to the relative change in a major
stock market index between the beginning and end of the certificates' terms.
AECC purchases and writes equity index call options on a major stock market
index in order to meet such obligations.
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 to the Financial
Statements for further discussion of AECC's derivative and hedging activities.
The negative impact on AECC's annual pretax income of a 100 basis point increase
in interest rates, which assumes certificate product interest crediting rate
reset intervals and customer behavior based on the application of proprietary
models, to the book of business at December 31,
12
2004 and 2003, would be $9.8 million and $11.8 million, respectively. A 10
percent decrease in the level of a major stock market index would have a minimal
impact on AECC's annual pretax income related as of December 31, 2004 and 2003,
because the income effect is a decrease in option related 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 Certificates product owners' accounts.
The ratio of shareholder's equity, excluding accumulated other comprehensive
income (loss) net of tax, to total assets less certificate loans and net
unrealized gains (losses) on securities classified as Available-for-Sale (the
Capital-to-Assets Ratio) at December 31, 2004 and 2003, was 5.2 percent and 5.4
percent, respectively. In accordance with 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 percent. In
addition, 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
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 percent of net certificate reserves.
Other Reporting Matters
In January 2003, the Financial Accounting Standards Board issued Interpretation
No. 46, "Consolidation of Variable Interest Entities" (FIN 46), as revised,
which addresses consolidation by business enterprises of variable interest
entities (VIEs) and was subsequently revised in December 2003. In general, FIN
46 requires a VIE to be consolidated when an enterprise has a variable interest
for which it is deemed to be the primary beneficiary which means that it will
absorb a majority of the VIE's expected losses or receive a majority of the
VIE's expected residual return.
During 2003, FIN 46 did not impact the accounting for $27 million in a
minority-owned secured loan trust (SLT) or $6 million in a collateralized debt
obligation traunche (solely supported by a portfolio of high yield bonds), both
of which were managed by third parties, as AECC was not the primary beneficiary.
AECC had a 33 percent ownership interest in the SLT, which provided returns to
investors primarily based on the performance of an underlying portfolio of high
yield loans. The aggregate fair value of the loans related to AECC's pro rata
share of this structure was $92.5 million. During 2004, the minority-owned
secured loan trust and the CDO were both liquidated.
In November 2003, the FASB ratified a consensus on the disclosure provisions of
Emerging Issues Task Force Issue 03-1, "The Meaning of Other-Than-Temporary
Impairment and its Application to Certain Investments" (EITF 03-1). AECC
complied with the disclosure provisions of this rule in its Annual Report on
Form 10-K for the year ended December 31, 2003. In March 2004, the FASB reached
a consensus regarding the application of a three-step impairment model to
determine whether investments accounted for in accordance with SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities", and other
cost method investments are other-than-temporarily impaired. However, with the
issuance of FSP EITF 03-1-1 on September 30, 2004, the provisions of the
consensus relating to the measurement and recognition of other-than-temporary
13
impairments will be deferred pending further clarification from the FASB. The
remaining provisions of this rule, which primarily relate to disclosure
requirements, are required to be applied prospectively to all current and future
investments accounted for in accordance with SFAS No. 115 and other cost method
investments. The Company will evaluate the potential impact of EITF 03-1 after
the FASB completes its reassessment.
Forward-Looking Statements
Certain statements in Item 7. of this Form 10-K Annual Report contain
forward-looking statements, which are subject to risks and uncertainties. The
words "believe," "expect," "anticipate," "optimistic," "intend," "plan," "aim,"
"will," "may," "should," "could," "would," "likely," and similar expressions are
intended to identify forward-looking statements. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
the date on which they are made. AECC undertakes no obligation to update or
revise any forward-looking statements. Factors that could cause actual results
to differ materially from these forward-looking statements include, but are not
limited to: AECC's ability to successfully implement a business model that
allows for significant net income growth based on revenue growth that is lower
than historical levels, including the ability to improve its operating expense
to revenue ratio both in the short-term and over time, which will depend in part
on the effectiveness of reengineering and other cost control initiatives, as
well as factors impacting AECC's revenues; AECC's ability to grow its business,
over time, which will depend on AECC's ability to manage its capital needs and
the effect of business mix; the ability to increase investment spending, which
will depend in part on the equity markets and other factors affecting revenues,
and the ability to capitalize on such investments to improve business metrics;
the accuracy of certain critical accounting estimates, including the fair value
of the assets in AECC's investment portfolio (including those investments that
are not readily marketable), fluctuation in the equity and fixed income markets,
which can affect the amount and types of certificate products sold by AECC,
potential deterioration in AECC's high-yield and other investments, which could
result in further losses in AECC's investment portfolio; the ability of AECC to
sell certain high-yield investments at expected values and within anticipated
timeframes and to maintain its high-yield portfolio at certain levels in the
future; and spreads in the certificate businesses; credit trends and the rate of
bankruptcies, which can affect returns on AECC's investment portfolios;
fluctuations in foreign currency exchange rates, which could affect commercial
activities, among other businesses, or restrictions on convertibility of certain
currencies; changes in laws or government regulations, including tax laws
affecting AECC's businesses or that may affect the sales of the products and
services that it offers, and regulatory activity in the areas of customer
privacy, consumer protection, business continuity and data protection; the
adoption of recently issued accounting rules related to the consolidation of
variable interest entities, including those involving collateralized debt
obligations and secured loan trusts, that AECC invests in, which could affect
both AECC's balance sheet and results of operations; and outcomes and costs
associated with litigation and compliance and regulatory matters. A further
description of these and other risks and uncertainties can be found in AECC's
other reports filed with the SEC.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Items required under this section are included in the Management's Discussion
and Analysis of Financial Condition and Results of Operations under the section
titled Impact of Recent Market-Volatility on Results of Operations.
14
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Financial Statements at page F-1 hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
ITEM 9A. CONTROLS AND PROCEDURES
AECC's management, with the participation of the AECC's Chief Executive Officer
and Chief Financial Officer, has evaluated the effectiveness of the Company's
disclosure controls and procedures (as such term is defined in Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) as of the end of the period covered by this report. Based on
such evaluation, AECC's Chief Executive Officer and Chief Financial Officer have
concluded that, as of the end of such period, the Company's disclosure controls
and procedures are effective. There have not been any changes in the Company's
internal control over financial reporting (as such term is defined in Rules
13a-15(f) and 15d-15(f) under the Exchange Act) during the Company's fourth
fiscal quarter that have materially affected, or are reasonably likely to
materially affect, the Company's internal control over financial reporting.
PART III
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The Audit Committee of the Board of Directors of American Express Company has
appointed Ernst & Young LLP (Ernst & Young) as independent auditors to audit the
consolidated financial statements of AECC for the year ended December 31, 2004
and 2005.
Audit fees
The aggregate fees billed or to be billed by Ernst & Young for each of the last
two years for professional services rendered for the audit of AECC's annual
financial statements and services that were provided in connection with
statutory and regulatory filings were $113,000 for 2004 and $160,000 for 2003.
Audit-related fees
AECC was not billed by Ernst & Young for any fees for audit-related services for
2004 or 2003.
Tax fees
AECC was not billed by Ernst & Young for any tax fees for 2004 or 2003.
All other fees
AECC was not billed by Ernst & Young for any other fees for 2004 or 2003.
15
Policy on pre-approval of services provided by independent auditor
Pursuant to the requirements of the Sarbanes-Oxley Act of 2002, the terms of the
engagement of Ernst & Young are subject to the specific pre-approval of the
Audit Committee of American Express Company. All audit and permitted non-audit
services to be performed by Ernst & Young for AECC require pre-approval by the
Audit Committee of American Express Company in accordance with pre-approval
procedures established by the Audit Committee of American Express Company. The
procedures require all proposed engagements of Ernst & Young for services to
AECC of any kind to be directed to the General Auditor of American Express
Company and then submitted for approval to the Audit Committee of American
Express Company prior to the beginning of any services.
In addition, the charter of AECC's Audit Committee requires pre-approval of any
engagement, including the fees and other compensation, of Ernst & Young (1) to
provide any services to AECC and prohibits the performance of certain specified
non-audit services, and (2) to provide any non-audit services to AEFC or any
affiliate of AEFC that controls, is controlled by, or under common control with
AEFC. Certain exceptions apply to the pre-approval requirement.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements:
See Index to Financial Statements on page F-1 hereof.
2. Financial Statement Schedules:
See Index to Financial Statements on page F-1 hereof.
3. Exhibits:
See Exhibit Index on pages E-1 through E-4 hereof.
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed by AECC during the quarterly
period ended December 31, 2004.
16
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 14, 2005
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 14, 2005
BY /s/ Brian J. McGrane
------------------------
NAME AND TITLE Brian J. McGrane, Vice President
and Chief Financial Officer
(Principal Financial Officer)
DATE March 14, 2005
BY /s/ David K. Stewart
--------------------
NAME AND TITLE David K. Stewart, Vice President
and Controller
(Principal Accounting Officer)
DATE March 14, 2005
BY /s/ Rodney P. Burwell*
----------------------
NAME AND TITLE Rodney P. Burwell, Director
DATE March 14, 2005
BY /s/ Jean B. Keffeler*
-------------------------
NAME AND TITLE Jean B. Keffeler, Director
DATE March 14, 2005
17
BY /s/ Thomas R. McBurney*
----------------------------
NAME AND TITLE Thomas R. McBurney, Director
DATE March 14, 2005
BY /s/ Karen M. Bohn*
----------------------
NAME AND TITLE Karen M. Bohn, Director
DATE March 14, 2005
*By /s/ Paula R. Meyer
--------------------
Name: Paula R. Meyer
Executed by Paula R. Meyer on behalf of those indicated pursuant to a Power of
Attorney dated February 22, 2005, filed electronically herewith as Exhibit
24(a).
- --------------------------------------------------------------------------------
18
Index to Financial Statements and Schedules
Financial Statements:
Part I. Financial Information:
Item 1. Financial Statements
Responsibility of Management F-2
Report of Independent Registered Public Accounting Firm F-3
Balance Sheets - December 31, 2004 and 2003 F-4 - F-5
Statements of Operations - Years ended December
31, 2004, 2003 and 2002 F-6 - F-7
Statements of Cash Flows - Years ended December
31, 2004, 2003 and 2002 F-8
Statements of Comprehensive Income - Years ended
December 31, 2004, 2003 and 2002 F-9
Statements of Shareholder's Equity - Years ended
December 31, 2004, 2003 and 2002 F-10
Notes to Financial Statements F-11 - F-30
Schedule No.:
Financial Schedules:
I Investments in Securities of Unaffiliated Issuers,
December 31, 2004
F-31 - F-45
II Investments in and Advances to Affiliates and Income
thereon, December 31, 2004, 2003 and 2002 F-46 - F-47
III Mortgage Loans on Real Estate and Interest earned on
Mortgages, year ended December 31, 2004 F-48 - F-51
V Qualified Assets on Deposit, December 31, 2004 F-52
VI Certificate Reserves, year ended December 31, 2004 F-53 - F-70
VII Valuation and Qualifying Accounts, years ended
December 31, 2004, 2003 and 2002 F-71
Schedules I, III, V and VI for the years ended December 31, 2003 and 2002 are
included in Registrant's Annual Reports on Form 10-K, 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.
F-1
American Express Certificate Company
Responsibility of Management
The management of American Express Certificate Company (AECC) is responsible for
the preparation and fair presentation of its Financial Statements, which have
been prepared in conformity with U.S. generally accepted accounting principles;
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 filing.
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 which 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 system should not exceed the benefits derived.
The internal control system is founded on an ethical climate and includes: (i)
an organizational structure with clearly defined lines of responsibility,
policies and procedures; (ii) a Code of Conduct; and (iii) a careful selection
and training of employees. Internal auditors monitor and assess the
effectiveness of internal control system and report their findings to management
and the Board of Directors 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 control system over financial reporting to the
extent they believed necessary to support their report.
F-2
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
American Express Certificate Company
We have audited the accompanying balance sheets of American Express Certificate
Company (the Company), a wholly-owned subsidiary of American Express Financial
Corporation, as of December 31, 2004 and 2003, and the related statements of
operations, comprehensive income, shareholder's equity and cash flows for each
of the three years in the period ended December 31, 2004. Our audits also
include the financial statement schedules listed in the index at Item 8. These
financial statements and schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedules based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
investments owned as of December 31, 2004 and 2003, by correspondence with the
custodian. 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 the Company at December 31,
2004 and 2003, the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2004, in conformity with U.S.
generally accepting accounting principles. 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.
/s/ ERNST & YOUNG LLP
Minneapolis, Minnesota
February 18, 2005
F-3
Balance Sheets
AMERICAN EXPRESS CERTIFICATE COMPANY
December 31, (Thousands, except share amount) 2004 2003
- -------------------------------------------------------------------------------------------------------------
Assets
Qualified Assets (Note 2)
- -------------------------------------------------------------------------------------------------------------
Investments in unaffiliated issuers (Note 3):
Cash and cash equivalents $ 35,212 $ 25,099
Available-for-Sale securities 5,603,789 4,509,726
First mortgage loans on real estate and other loans 461,211 469,309
Certificate loans - secured by certificate reserves 13,006 15,606
- -------------------------------------------------------------------------------------------------------------
Total investments 6,113,218 5,019,740
- -------------------------------------------------------------------------------------------------------------
Receivables:
Dividends and interest 42,162 36,007
Investment securities sold 3,699 7,946
- -------------------------------------------------------------------------------------------------------------
Total receivables 45,861 43,953
- -------------------------------------------------------------------------------------------------------------
Equity index options (Note 9) 116,285 153,162
- -------------------------------------------------------------------------------------------------------------
Total qualified assets 6,275,364 5,216,855
- -------------------------------------------------------------------------------------------------------------
Other Assets
- -------------------------------------------------------------------------------------------------------------
Due from AEFC for federal income taxes - 22,963
Deferred taxes, net (Note 8) 34,483 9,321
Due from other affiliates 1,939 -
Deferred distribution fees and other - 6,453
- -------------------------------------------------------------------------------------------------------------
Total other assets 36,422 38,737
- -------------------------------------------------------------------------------------------------------------
Total assets $ 6,311,786 $ 5,255,592
- -------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements
F-4
Balance Sheets (continued)
AMERICAN EXPRESS CERTIFICATE COMPANY
December 31, (Thousands, except share amount) 2004 2003
- -------------------------------------------------------------------------------------------------------------
Liabilities and Shareholder's Equity
Liabilities
- -------------------------------------------------------------------------------------------------------------
Certificate Reserves (Note 5):
Installment certificates:
Reserves to mature $ 116,637 $ 146,052
Additional credits and accrued interest 3,092 3,514
Advance payments and accrued interest 474 499
Other 2 32
Fully paid certificates:
Reserves to mature 5,666,939 4,573,514
Additional credits and accrued interest 48,053 64,114
Due to unlocated certificate holders 46 92
- -------------------------------------------------------------------------------------------------------------
Total certificate reserves 5,835,243 4,787,817
- -------------------------------------------------------------------------------------------------------------
Accounts Payable and Accrued Liabilities:
Due to AEFC (Note 7) 1,190 880
Due to other affiliates (Note 7) 687 560
Current taxes payable (Note 8) 16,096 -
Payable for investment securities purchased 25,541 9,173
Equity index options and other liabilities (Note 9) 89,960 133,949
- -------------------------------------------------------------------------------------------------------------
Total accounts payable and accrued liabilities 133,474 144,562
- -------------------------------------------------------------------------------------------------------------
Total liabilities 5,968,717 4,932,379
- -------------------------------------------------------------------------------------------------------------
Commitments (Note 4)
- -------------------------------------------------------------------------------------------------------------
Shareholder's Equity (Note 6)
- -------------------------------------------------------------------------------------------------------------
Common stock, $10 par - authorized and issued 150,000 shares 1,500 1,500
Additional paid-in capital 323,844 323,844
Retained earnings:
Appropriated for pre-declared additional credits and interest 549 184
Appropriated for additional interest on advance payments 15 15
Unappropriated 2,712 (46,556)
Accumulated other comprehensive income - net of tax (Note 1) 14,449 44,226
- -------------------------------------------------------------------------------------------------------------
Total shareholder's equity 343,069 323,213
- -------------------------------------------------------------------------------------------------------------
Total liabilities and shareholder's equity $ 6,311,786 $ 5,255,592
- -------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements
F-5
Statements of Operations
AMERICAN EXPRESS CERTIFICATE COMPANY
Years ended December 31, (Thousands) 2004 2003 2002
- ----------------------------------------------------------------------------------------------------------------------
Investment Income
Interest income from unaffiliated investments:
Available-for-Sale securities $ 213,125 $ 204,932 $ 227,609
Mortgage loans on real estate and other loans 26,232 27,093 27,719
Certificate loans 772 933 1,095
Dividends 3,348 5,074 9,949
Equity index options (Note 9) 25,639 29,538 (36,421)
Interest rate swap agreements (Note 9) (5,367) (5,301) (9,780)
Other 1,879 1,969 980
- ----------------------------------------------------------------------------------------------------------------------
Total investment income 265,628 264,238 221,151
- ----------------------------------------------------------------------------------------------------------------------
Investment Expenses
AEFC and affiliated company fees (Note 7):
Distribution 37,960 29,731 29,762
Investment advisory and services 10,940 10,436 9,980
Transfer agent 3,522 3,378 3,203
Depository 414 349 321
Other 1,162 523 360
- ----------------------------------------------------------------------------------------------------------------------
Total investment expenses 53,998 44,417 43,626
- ----------------------------------------------------------------------------------------------------------------------
Net investment income before provision for certificate reserves
and income tax benefit $ 211,630 $ 219,821 $ 177,525
See Notes to Financial Statements
F-6
Statements of Operations (continued)
AMERICAN EXPRESS CERTIFICATE COMPANY
Years ended December 31, (Thousands) 2004 2003 2002
- ----------------------------------------------------------------------------------------------------------------------
Provision for Certificate Reserves (Note 5)
According to the terms of the certificates:
Provision for certificate reserves $ 6,416 $ 6,043 $ 7,888
Interest on additional credits 348 425 543
Interest on advance payments 16 17 19
Additional credits/interest authorized by AECC:
On fully paid certificates 131,888 132,975 88,201
On installment certificates 2,650 3,379 4,757
- ----------------------------------------------------------------------------------------------------------------------
Total provision for certificate reserves before reserve recoveries 141,318 142,839 101,408
Reserve recoveries from terminations prior to maturity (1,360) (1,356) (1,156)
- ----------------------------------------------------------------------------------------------------------------------
Net provision for certificate reserves 139,958 141,483 100,252
- ----------------------------------------------------------------------------------------------------------------------
Net investment income before income tax expense 71,672 78,338 77,273
Income tax expense (Note 8) (25,040) (27,296) (24,866)
- ----------------------------------------------------------------------------------------------------------------------
Net investment income 46,632 51,042 52,407
- ----------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments
Securities of unaffiliated issuers before income tax
benefit (expense) 4,616 2,944 (9,899)
Income tax (expense) benefit (Note 8) (1,615) (1,031) 3,631
- ----------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments 3,001 1,913 (6,268)
- ----------------------------------------------------------------------------------------------------------------------
Net income $ 49,633 $ 52,955 $ 46,139
- ----------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements
F-7
Statements of Cash Flows
AMERICAN EXPRESS CERTIFICATE COMPANY
Years Ended December 31, (Thousands) 2004 2003 2002
- -------------------------------------------------------------------------------------------------------------------------
Cash Flows from Operating Activities
Net income $ 49,633 $ 52,955 $ 46,139
Adjustments to reconcile net income to net
cash provided by operating activities:
Interest added to certificate loans (530) (630) (738)
Amortization of premiums, accretion of discounts, net 17,915 14,907 (2,426)
Deferred taxes, net (9,127) (38,877) (3,288)
Net realized (gain) loss on investments before income tax
provision (4,616) (2,944) 9,899
Changes in other operating assets and liabilities:
Deferred distribution fees, net 6,453 (479) 1,801
Equity index options purchased and written, net (946) 44,273 13,306
Dividends and interest receivable (6,155) (1,893) 4,184
Due to American Express Financial Corporation - federal
income taxes 37,553 - 3,908
Other assets and liabilities, net (114) (6,856) (9,911)
- -------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 90,066 60,456 62,874
- -------------------------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities
Available-for-Sale investments:
Sales 124,575 1,132,131 887,193
Maturities and redemptions 842,427 1,305,953 1,111,493
Purchases (2,126,951) (2,626,239) (2,228,071)
Other investments:
Sales 25,022 16,972 59,515
Maturities and redemptions 128,463 117,159 39,195
Purchases (144,660) (231,478) (210,061)
Certificate loans:
Payments 1,902 2,805 2,919
Fundings (1,558) (1,553) (2,085)
Changes in amounts due to and from brokers, net 20,615 (238,262) 97,482
- -------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (1,130,165) (522,512) (242,420)
- -------------------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities
Payments from certificate owners 3,285,610 2,571,209 2,031,414
Net provision for certificate reserves 139,958 141,483 100,252
Certificate maturities and cash surrenders (2,375,356) (2,415,860) (1,788,995)
Payment of capital from American Express Financial Corporation 20,000 - -
Return of capital to American Express Financial Corporation (20,000) (50,000) (10,000)
- -------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 1,050,212 246,832 332,671
- -------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 10,113 (215,224) 153,125
Cash and cash equivalents at beginning of year 25,099 240,323 87,198
- -------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 35,212 $ 25,099 $ 240,323
- -------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements
F-8
Statements of Comprehensive Income
AMERICAN EXPRESS CERTIFICATE COMPANY
Years Ended December 31, (Thousands) 2004 2003 2002
- --------------------------------------------------------------------------------------------------------------------------
Net income $ 49,633 $ 52,955 $ 46,139
- --------------------------------------------------------------------------------------------------------------------------
Other comprehensive (loss) income net of tax
- --------------------------------------------------------------------------------------------------------------------------
Unrealized (losses) gains on Available-for-Sale securities:
Unrealized holding (losses) gains arising during period (47,844) (52,669) 82,904
Income tax benefit (provision) 16,745 18,434 (29,016)
- --------------------------------------------------------------------------------------------------------------------------
Net unrealized holding (losses) gains arising during the period (31,099) (34,235) 53,888
- --------------------------------------------------------------------------------------------------------------------------
Reclassification adjustment for (gains) losses included in net
income (4,395) (8,260) 8,142
Income tax provision (benefit) 1,538 2,891 (2,850)
- --------------------------------------------------------------------------------------------------------------------------
Net reclassification adjustment for (gains) losses included in net
income (2,857) (5,369) 5,292
- --------------------------------------------------------------------------------------------------------------------------
Net unrealized (losses) gains on Available-for-Sale securities (33,956) (39,604) 59,180
- --------------------------------------------------------------------------------------------------------------------------
Unrealized gains (losses) on interest rate swaps:
Unrealized gains (losses) arising during the period 1,062 (4,579) (8,141)
Income tax (benefit) provision (372) 1,603 2,849
- --------------------------------------------------------------------------------------------------------------------------
Net unrealized holding gains (losses) arising during the period 690 (2,976) (5,292)
- --------------------------------------------------------------------------------------------------------------------------
Reclassification adjustment for gains included in net income 5,367 5,300 9,780
Income tax benefit (1,878) (1,855) (3,423)
- --------------------------------------------------------------------------------------------------------------------------
Net reclassification adjustment for losses included in net income 3,489 3,445 6,357
- --------------------------------------------------------------------------------------------------------------------------
Net unrealized gains on interest rate swaps 4,179 469 1,065
- --------------------------------------------------------------------------------------------------------------------------
Net other comprehensive (loss) income (29,777) (39,135) 60,245
- ----------------------------------------------------------------------------------------------------------- --------------
Total comprehensive income $ 19,856 $ 13,820 $ 106,384
- --------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements
F-9
Statements of Shareholder's Equity
AMERICAN EXPRESS CERTIFICATE COMPANY
Years Ended December 31, (Thousands) 2004 2003 2002
- --------------------------------------------------------------------------------------------------------------------------
Common Stock $ 1,500 $ 1,500 $ 1,500
- --------------------------------------------------------------------------------------------------------------------------
Additional Paid-in Capital
Balance at beginning of year $ 323,844 $ 373,844 $ 383,844
Receipt of capital from Parent 20,000 - -
Return of capital to Parent (20,000) (50,000) (10,000)
- --------------------------------------------------------------------------------------------------------------------------
Balance at end of year $ 323,844 $ 323,844 $ 373,844
- --------------------------------------------------------------------------------------------------------------------------
Retained Earnings
Appropriated for pre-declared additional credits/interest
(Note 5)
Balance at beginning of year $ 184 $ 811 $ 1,123
Transferred from (to) unappropriated retained earnings 365 (627) (312)
- --------------------------------------------------------------------------------------------------------------------------
Balance at end of year $ 549 $ 184 $ 811
- --------------------------------------------------------------------------------------------------------------------------
Appropriated for additional interest on advance payments $ 15 $ 15 $ 15
- --------------------------------------------------------------------------------------------------------------------------
Unappropriated (Note 6)
Balance at beginning of year $ (46,556) $ (100,142) $ (146,593)
Net income 49,633 52,955 46,139
Transferred (to) from appropriated retained earnings (365) 627 312
Other - 4 -
- --------------------------------------------------------------------------------------------------------------------------
Balance at end of year $ 2,712 $ (46,556) $ (100,142)
- --------------------------------------------------------------------------------------------------------------------------
Accumulated other comprehensive income - net of tax
Balance at beginning of year $ 44,226 $ 83,361 $ 23,116
Net other comprehensive (loss) income (29,777) (39,135) 60,245
- --------------------------------------------------------------------------------------------------------------------------
Balance at end of year $ 14,449 $ 44,226 $ 83,361
- --------------------------------------------------------------------------------------------------------------------------
Total shareholder's equity $ 343,069 $ 323,213 $ 359,389
- --------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements
F-10
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 (AEFC), 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. (AEFAI) and American Express Bank Ltd. (AEB), both
affiliates of AECC. AEFAI is registered as a broker dealer in all 50 states, the
District of Columbia and Puerto Rico. AEFC acts as investment advisor for AECC.
As of December 31, 2004, AECC offered nine different certificate products to the
public. AECC is impacted by significant changes in interest rates as interest
crediting rates on certificate products generally reset at shorter intervals
than the change in the yield on AECC's investment portfolio. The specified
maturities of most of AECC's certificate products range from ten to twenty
years. Within that maturity period, most certificates have interest crediting
rate terms ranging from one to thirty-six months. Interest crediting rates are
subject to change and certificate product owners can surrender their
certificates without penalty at term end. In addition, three types of
certificate products have interest tied, in whole or in part, to a broad-based
stock market index. Except for two types of certificate products, all of the
certificates are available as qualified investments for Individual Retirement
Accounts, 401(k) plans and other qualified retirement plans.
AECC's net investment income is derived primarily from interest and dividends
generated by its investments. AECC's net income is determined by deducting from
net investment income provision expenses for certificate reserves, and other
expenses, including taxes, fees paid to AEFC for investment advisory and other
services, distribution fees paid to AEFAI, and marketing fees paid to AEB, a
wholly-owned indirect subsidiary of American Express Company.
Basis of financial statement presentation
The accompanying financial statements are presented in accordance with U.S.
generally accepted accounting principles. AECC uses the equity method of
accounting for its wholly-owned unconsolidated subsidiary, Investors Syndicate
Development Corporation, as prescribed by the Securities and Exchange Commission
(SEC) for non-investment company subsidiaries. Certain reclassifications of
prior period amounts have been made to conform to the current presentation.
Accounting estimates are an integral part of the Financial Statements. In part,
they are based upon assumptions concerning future events. Among the more
significant is investment securities valuation as discussed in Note 3. These
accounting estimates reflect the best judgment of management and actual results
could differ.
F-11
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.
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 date basis.
Cash and cash equivalents
AECC has defined cash and cash equivalents as cash in banks and highly liquid
investments with original maturities of ninety days or less.
Available-for-Sale investments
Debt securities and marketable equity securities are classified as
Available-for-Sale and carried at fair value. Unrealized gains (losses) on
securities classified as Available-for-Sale are reflected, net of taxes, in
accumulated other comprehensive income as part of Shareholder's Equity.
The basis for determining cost in computing realized gains (losses) on
securities is specific identification. Gains (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 net realized gain (loss) on investments
in the statements of operations.
Fair value is generally based on quoted market prices. However, AECC's
investment portfolio contained structured investments of various asset quality
as of December 31, 2003, which were not readily marketable. As a result, the
carrying values of these structured investments were based on future cash flow
projections that required a significant degree of management judgment as to the
amount and timing of cash payments, defaults and recovery rates of the
underlying investments and as such, are subject to change. The structured
investments were called in 2004 and AECC has no exposure as of December 31,
2004.
First mortgage loans on real estate and other loans
First mortgage loans on real estate reflect principal amounts outstanding less
reserves for losses, which is the basis for determining realized gains (losses).
Estimated fair values of mortgage loans on real estate are determined by a
discounted cash flow analysis using mortgage interest rates
F-12
currently offered for mortgages of similar maturities. Other loans reflect
amortized cost less reserve for losses. Fair values of other loans represent
estimated fair values when quoted prices are not available.
The reserve for loan 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.
Certificate Reserves
Investment certificates may be purchased either with a lump-sum payment or by
installment payments. Certificate product 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 fees and other
Prior to September 30, 2004, distribution fees on sales of certain certificate
products were deferred and amortized over the estimated lives of the related
certificates, which was generally one year but could have been up to 10 years.
Upon surrender prior to maturity, unamortized deferred distribution fees were
reflected in expenses and any related surrender charges were reflected as a
reduction to the provision expense for certificate reserves. During the third
quarter of 2004, and based on management's recent review of AECC's certificate
product portfolio mix and certificate portfolio maturities, AECC determined it
to be appropriate to not defer distribution fees in the future and to completely
write-down previously deferred balances to zero. As a result of these actions,
investment expenses increased $5.7 million on a pre-tax basis during the third
quarter of 2004.
Federal income taxes
AECC's taxable income 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 AEFC 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 AEFC and its subsidiaries that
AEFC will reimburse its subsidiaries for any tax benefits recorded.
F-13
Supplemental Disclosures of Cash Flow Information
Net cash paid for income taxes in 2004, 2003 and 2002 was $6.5 million, ($71.6)
million and ($22.2) million, respectively. Certificate maturities and surrenders
through loan reductions in 2004, 2003 and 2002 was $2.8 million, $2.4 million
and $3.1 million, respectively.
Recently Issued Accounting Standards
In January 2003, the Financial Accounting Standards Board issued Interpretation
No. 46, "Consolidation of Variable Interest Entities" (FIN 46), as revised,
which addresses consolidation by business enterprises of variable interest
entities (VIEs) and was subsequently revised in December 2003. In general, FIN
46 requires a VIE to be consolidated when an enterprise has a variable interest
for which it is deemed to be the primary beneficiary which means that it will
absorb a majority of the VIE's expected losses or receive a majority of the
VIE's expected residual return.
During 2003, FIN 46 did not impact the accounting for $27 million in a
minority-owned secured loan trust (SLT) or $6 million in a collateralized debt
obligation traunche (solely supported by a portfolio of high yield bonds), both
of which were managed by third parties, as AECC was not the primary beneficiary.
AECC had a 33 percent ownership interest in the SLT, which provided returns to
investors primarily based on the performance of an underlying portfolio of high
yield loans. The aggregate fair value of the loans related to AECC's pro rata
share of this structure was $92.5 million. During 2004, the minority-owned
secured loan trust and the CDO were both liquidated.
In November 2003, the FASB ratified a consensus on the disclosure provisions of
Emerging Issues Task Force Issue 03-1, "The Meaning of Other-Than-Temporary
Impairment and its Application to Certain Investments" (EITF 03-1). AECC
complied with the disclosure provisions of this rule in its Annual Report on
Form 10-K for the year ended December 31, 2003. In March 2004, the FASB reached
a consensus regarding the application of a three-step impairment model to
determine whether investments accounted for in accordance with SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities", and other
cost method investments are other-than-temporarily impaired. However, with the
issuance of FSP EITF 03-1-1 on September 30, 2004, the provisions of the
consensus relating to the measurement and recognition of other-than-temporary
impairments will be deferred pending further clarification from the FASB. The
remaining provisions of this rule, which primarily relate to disclosure
requirements, are required to be applied prospectively to all current and future
investments accounted for in accordance with SFAS No. 115 and other cost method
investments. The Company will evaluate the potential impact of EITF 03-1 after
the FASB completes its reassessment.
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 $5.8 billion and $4.8 billion at December 31, 2004 and 2003,
respectively. AECC reported Qualified Assets of $6.2 billion and $5.1 billion at
December 31, 2004 and 2003, respectively, excluding net unrealized pretax gains
on Available-for-Sale securities of $22 million and $74 million at
F-14
December 31, 2004 and 2003, respectively, and unsettled investment purchases of
$26 million and $9 million at December 31, 2004 and 2003, 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 either amortized cost, market value or par value based on the state
requirements 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 (accounted for on
a trade date basis) of AECC were deposited as follows:
December 31, 2004
--------------------------------------------------
Required
(Thousands) Deposits Deposits Excess
- ----------------------------------------------------------------------------------------------------------------
Deposits to meet certificate liability requirements:
Pennsylvania (at market value) $ 155 $ 100 $ 55
Texas, Illinois, New Jersey (at par value) $ 215 $ 185 $ 30
Central Depository (at amortized cost) $ 6,133,903 $ 5,791,501 $ 342,402
- ----------------------------------------------------------------------------------------------------------------
December 31, 2003
--------------------------------------------------
Required
(Thousands) Deposits Deposits Excess
- -----------------------------------------------------------------------------------------------------------------
Deposits to meet certificate liability requirements:
Pennsylvania (at market value) $ 162 $ 100 $ 62
Texas, Illinois, New Jersey (at par value) $ 215 $ 185 $ 30
Central Depository (at amortized cost) $ 5,004,553 $ 4,742,572 $ 261,981
- ----------------------------------------------------------------------------------------------------------------
The assets on deposit with the central depository at December 31, 2004 and 2003
consisted of securities and other loans having a deposit value of $5.7 billion
and $4.6 billion, respectively, mortgage loans on real estate of $322 million
and $331 million, respectively, and other investments of $81 million and $74
million, respectively. Additionally, these assets on deposit include unsettled
purchases of investments in the amount of $26 million and $9 million at December
31, 2004 and 2003, respectively.
American Express Trust Company, the custodian for AECC, is the Central
Depository. See Note 7.
3. INVESTMENTS IN UNAFFILIATED ISSUERS
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
F-15
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.
Investments classified as Available-for-Sale securities at December 31 are
distributed by type as presented below:
2004
--------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
(Thousands) Cost Gains Losses Value
- ---------------------------------------------------------------------------------------------------------------
Mortgage and asset-backed securities $ 3,226,417 $ 23,251 $ (17,372) $ 3,232,296
Corporate debt securities 2,279,295 29,927 (14,043) 2,295,179
Stated maturity preferred stock 24,043 348 (9) 24,382
Perpetual preferred stock 17,782 168 (81) 17,869
U.S. Government & agency obligations 25,365 62 (120) 25,307
State and municipal obligations 9,048 2 (294) 8,756
- ---------------------------------------------------------------------------------------------------------------
Total $ 5,581,950 $ 53,758 $ (31,919) $ 5,603,789
- ---------------------------------------------------------------------------------------------------------------
2003
-------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
(Thousands) Cost Gains Losses Value
- ----------------------------------------------------------------------------------------------------------------
Mortgage and asset-backed securities $ 2,605,686 $ 35,954 $ (10,975) $ 2,630,665
Corporate debt securities 1,710,353 53,497 (7,762) 1,756,088
Stated maturity preferred stock 44,340 1,178 (34) 45,484
Structured Investments 32,592 1,788 - 34,380
Perpetual preferred stock 17,782 270 - 18,052
U.S. Government & agency obligations 15,355 350 - 15,705
State and municipal obligations 9,539 6 (214) 9,331
Common Stock - 21 - 21
- ----------------------------------------------------------------------------------------------------------------
Total $ 4,435,647 $ 93,064 $ (18,985) $ 4,509,726
- ----------------------------------------------------------------------------------------------------------------
F-16
The following table provides information about Available-for-Sale securities
with gross unrealized losses and the length of time that individual securities
have been in a continuous unrealized loss position as of December 31, 2004:
(Thousands) Less than 12 months 12 months or more Total
- -------------------------------------------------------------------------------------------------------------------------------
Description of Securities Fair Value Unrealized Fair Value Unrealized Fair Value Unrealized
Losses Losses Losses
- -------------------------------------------------------------------------------------------------------------------------------
Corporate debt securities $ 875,416 $ (10,104) $ 135,885 $ (3,939) $ 1,011,301 $ (14,043)
Mortgage and other
asset-backed
securities 1,444,363 (12,085) 180,808 (5,287) 1,625,171 (17,372)
State and
municipal
obligations 3,850 (150) 4,859 (144) 8,709 (294)
US Government &
agency obligations 10,053 (120) - - 10,053 (120)
- -------------------------------------------------------------------------------------------------------------------------------
Perpetual preferred stock 5,213 (81) - - 5,213 (81)
- -------------------------------------------------------------------------------------------------------------------------------
Stated maturity
preferred stock 1,285 (9) - - 1,285 (9)
- -------------------------------------------------------------------------------------------------------------------------------
Total $ 2,340,180 $ (22,549) $ 321,552 $ (9,370) $ 2,661,732 $ (31,919)
===============================================================================================================================
In evaluating potential other-than-temporary impairments, AECC considers the
extent to which cost exceeds fair value and the duration and size of that
difference. A key metric in performing this evaluation is the ratio of fair
value to cost. The following table summarizes the unrealized losses by ratio of
fair value to cost as of December 31, 2004:
(Millions, except Less than 12 months 12 months or more Total
number of securities)
- ------------------------------------------------------------------------------------------------------------------------------------
Number Gross Number Gross Number Gross
Ratio of Fair Value of Fair Unrealized of Fair Unrealized of Fair Unrealized
to Amortized Cost Securities Value Losses Securities Value Losses Securities Value Losses
- ------------------------------------------------------------------------------------------------------------------------------------
95% - 100% 248 $2,326,063 $ (21,666) 37 $311,595 $(7,589) 285 $2,637,658 $(29,255)
90% - 95% 1 14,117 (883) 1 3,249 (276) 2 17,366 (1,159)
80% - 90% - - - 1 6,708 (1,505) 1 6,708 (1,505)
- ------------------------------------------------------------------------------------------------------------------------------------
Total 249 $2,340,180 $ (22,549) 39 $321,552 $(9,370) 288 $2,661,732 $(31,919)
- ------------------------------------------------------------------------------------------------------------------------------------
Substantially, all of the gross unrealized losses on the securities are
attributable to changes in interest rates. Credit spreads and specific credit
events associated with individual issuers can also cause unrealized losses
although these impacts are not significant as of December 31, 2004. As noted in
the table above, a significant portion of the unrealized loss relates to
securities that have a fair value to cost ratio of 95% or above resulting in an
overall 99% ratio of fair value to cost for all securities with an unrealized
loss.
The $1.5 million in unrealized losses for securities with an unrealized loss for
twelve months or more and a fair value to cost ratio in 80-90% category relates
to a commercial mortgage-backed security collateralized by a commercial property
for which AECC expects that all contractual
F-17
principal and interest will be received. The unrealized losses in the other
categories are not concentrated in any individual industries or with any
individual securities.
The Company monitors the investments and metrics discussed above on a quarterly
basis to identify and evaluate investments that have indications of possible
other-than-temporary impairment. See the Available-for-Sale Investments section
of Note 1 for information regarding AECC's policy for determining when an
investment's decline in value is other than temporary. As stated earlier,
substantially all of the gross unrealized losses on its Available-for-Sale
securities are attributable to changes in interest rates. Additionally, AECC has
the ability and intent to hold these securities for a time sufficient to recover
its amortized cost and has, therefore, concluded that none are
other-than-temporarily impaired at December 31, 2004.
The amortized cost and fair value of Available-for-Sale securities, by
contractual maturity at December 31, 2004 are shown below. Cash flows may differ
from contractual maturities because issuers may call or prepay obligations.
Amortized Fair
(Thousands) Cost Value
- --------------------------------------------------------------------------------
Due within one year $ 122,541 $ 125,200
Due from one to five years 1,749,956 1,758,232
Due from five to ten years 461,132 466,082
Due in more than ten years 4,122 4,110
- --------------------------------------------------------------------------------
$ 2,337,751 $ 2,353,624
Mortgage and asset-backed securities 3,226,417 3,232,296
Perpetual preferred stock 17,782 17,869
- --------------------------------------------------------------------------------
Total $ 5,581,950 $ 5,603,789
- --------------------------------------------------------------------------------
Mortgage and other asset-backed securities primarily reflect GNMA, FNMA, and
FHLMC securities at December 31, 2004 and 2003. The expected payouts on mortgage
and other asset-backed securities may not coincide with their contractual
maturities. As such, these securities, as well as perpetual preferred stock,
were not included in the maturities distribution.
Gross realized gains on sales of securities classified as Available-for-Sale,
using the specific identification method, were $6.1 million, $47.1 million and
$23.4 million for the years ended December 31, 2004, 2003 and 2002,
respectively. Gross realized losses on sales were ($1.1 million), ($2.8 million)
and ($15.7 million) for the same periods. AECC also recognized losses of ($0.6
million), ($36 million) and ($15.8 million) in other-than-temporary impairments
on Available-for-Sale securities for the years ended December 31, 2004, 2003 and
2002, respectively.
F-18
Investments in securities with fixed maturities comprised 92 percent and 90
percent of AECC's total investments at December 31, 2004 and 2003, respectively.
Securities are rated by Moody's and Standard & Poors (S&P), or by AEFC'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 2004 2003
- -------------------------------------------------------------------------------
AAA 57% 60%
AA 6 2
A 15 16
BBB 18 18
Below investment grade 4 4
- -------------------------------------------------------------------------------
Total 100% 100%
- -------------------------------------------------------------------------------
Of the securities rated AAA, 76 percent and 94 percent at December 31, 2004 and
2003, respectively, are U.S. Government Agency mortgage-backed securities that
are rated by a public rating agency. At December 31, 2004 and 2003,
approximately 3 percent and 6 percent, respectively, of securities with fixed
maturities, other than U.S. Government Agency mortgage-backed securities, are
rated by AEFC's internal analysts.
At December 31, 2004 and 2003 no one issuer, other than U.S. Government Agency
mortgage-backed securities, is greater than 1 percent 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. AECC's board
of directors, using the aforementioned procedures and factors, approve fair
value procedures, which are implemented by investment accounting.
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.
F-19
4. INVESTMENTS IN FIRST MORTGAGE LOANS ON REAL ESTATE AND OTHER LOANS
The carrying amounts and fair values of first mortgage loans on real estate and
other loans at December 31 are below:
2004 2003
--------------------------------------------------
Carrying Fair Carrying Fair
(Thousands) Amount Value Amount Value
- ---------------------------------------------------------------------------------------------
First mortgage loans on real estate $ 329,452 $ 342,116 $ 337,489 $ 355,442
Other loans 139,295 140,428 141,356 141,356
Reserve for losses (7,536) - (9,536) -
- ---------------------------------------------------------------------------------------------
Net first mortgage and other loans $ 461,211 $ 482,544 $ 469,309 $ 496,798
- ---------------------------------------------------------------------------------------------
During the years ended December 31, 2004 and 2003, AECC held investments in
impaired mortgage or other loans totaling $4.6 million and $9.9 million,
respectively. AECC recognized $0.5 million and $0.4 million of interest income
related to such investments for the years ended December 31, 2004 and 2003,
respectively.
At December 31, 2004 and 2003, approximately 5 percent and 7 percent,
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 of the United States of America 2004 2003
- -------------------------------------------------------------------------------
South Atlantic 20% 18%
West North Central 15 15
East North Central 10 12
Mountain 10 10
West South Central 17 17
Pacific 16 16
New England 8 7
Middle Atlantic 4 5
- -------------------------------------------------------------------------------
Total 100% 100%
- -------------------------------------------------------------------------------
Property Type 2004 2003
- -------------------------------------------------------------------------------
Office buildings 44% 42%
Retail/shopping centers 21 23
Apartments 11 10
Industrial buildings 14 14
Other 10 11
- -------------------------------------------------------------------------------
Total 100% 100%
- -------------------------------------------------------------------------------
F-20
At December 31, 2004 and 2003, commitments for funding of first mortgage loans
on real estate, at market interest rates, aggregated $2.5 million and $9.8
million, 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 is restricted to
80 percent or less of the market value of the real estate at the time of the
loan funding. Fair values for these commitments were not substantial at December
31, 2004 and 2003.
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:
2004
---------------------------------------------------------
Average Average
Gross Additional
Reserve Accumulation Credit
(Dollars in Thousands) Balance Rates Rates
- ----------------------------------------------------------------------------- --------------------- ------------------
Installment certificates:
Reserves to mature:
With guaranteed rates $ 9,394 4.00% 0.50%
Without guaranteed rates (a) 107,243 - 0.88%
Additional credits and accrued interest 3,092 3.25% -
Advance payments and accrued interest (b) 474 3.37% -
Other 2 - 5.67%
Fully paid certificates:
Reserves to mature:
With guaranteed rates 82,424 3.21% 0.01%
Without guaranteed rates (a) and (c) 5,584,515 - 0.65%
Additional credits and accrued interest 48,053 3.02% -
Due to unlocated certificate holders 46 - -
- -----------------------------------------------------------------------------
Total $ 5,835,243
- -----------------------------------------------------------------------------
F-21
2003
---------------------------------------------------------
Average Average
Gross Additional
Reserve Accumulation Credit
(Dollars in Thousands) Balance Rates Rates
- ----------------------------------------------------------------------------- --------------------- ------------------
Installment certificates:
Reserves to mature:
With guaranteed rates $ 11,153 4.00% .50%
Without guaranteed rates (a) 134,899 - .80%
Additional credits and accrued interest 3,514 3.22% -
Advance payments and accrued interest (b) 499 3.35% -
Other 32 - .32%
Fully paid certificates:
Reserves to mature:
With guaranteed rates 90,149 3.21% .01%
Without guaranteed rates (a) and (c) 4,483,365 - .53%
Additional credits and accrued interest 64,114 3.05% -
Due to unlocated certificate holders 92 - -
- -----------------------------------------------------------------------------
Total $ 4,787,817
- -----------------------------------------------------------------------------
(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 percent. AECC's rate of accrual is
currently set at 4 percent, which is in effect through April 2006.
(c) American Express Stock Market Certificate, American Express Market Strategy
Certificate and American Express Equity Indexed Savings Certificates 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, 2004 and 2003 was
$1.5 billion and $1.3 billion, respectively.
Certificate maturities and surrenders through loan reductions during the years
ended December 31, 2004 and 2003 were $2.4 million.
On certain series of single payment certificates, additional interest is
pre-declared for periods greater than one year. The retained earnings
appropriated for the pre-declared additional interest at December 31, 2004 and
2003 was $549,000 and $184,000, respectively, which reflects 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.
F-22
The carrying amounts and fair values of certificate reserves at December 31,
consisted of the following:
2004 2003
--------------------------------- ---------------------------------------
Carrying Fair Carrying Fair
(Thousands) Amount Value Amount Value
- ------------------------------------------- ----------------- --------------- -------------------- ------------------
Reserves with terms of one year or
less $ 5,393,448 $ 5,416,179 $ 4,322,321 $ 4,320,182
Other 441,795 439,636 465,496 471,427
- ---------------------------------------------------------------------------------------------------------------------
Total certificate reserves $ 5,835,243 $ 5,855,815 $ 4,787,817 $ 4,791,609
Unapplied certificate transactions 4,933 4,933 3,499 3,499
Certificate loans and accrued interest (13,176) (13,176) (15,798) (15,798)
- ---------------------------------------------------------------------------------------------------------------------
Total $ 5,827,000 $ 5,847,572 $ 4,775,518 $ 4,779,310
- ---------------------------------------------------------------------------------------------------------------------
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 one percent on such series of certificates have
been authorized by AECC. This restriction has been satisfied for 2004 and 2003
by AECC's declaration of additional credits in meeting this requirement.
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 percent 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 percent 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 U.S. generally accepted accounting principles
(GAAP). AECC is subject to annual examination and supervision by the State of
Minnesota, Department of Commerce (Banking Division).
F-23
7. RELATED PARTY TRANSACTIONS
Investment advisory, joint facilities and technology support
The investment advisory and services agreement with AEFC provides for a
graduated scale of fees equal on an annual basis to 0.750 percent on the first
$250 million of total book value of investments of AECC, 0.650 percent on the
next $250 million, 0.550 percent on the next $250 million, 0.500 percent on the
next $250 million and 0.107 percent 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 investments 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 bank loans is equal to 0.35 percent on an annual basis.
Distribution services
Fees payable to AEFAI on sales of AECC's certificates are based upon terms of
agreements giving AEFAI 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 AEFAI may be
lowered. From September 29, 2004 through December 31, 2004, AECC sponsored a
sales promotion on the Flexible Savings Certificate. During that time, the
distribution fee on 7 and 11 month Flexible Savings Certificates has been 0.08
percent per quarter.
The aggregate fees payable under the agreements is $25 per $1,000 face amount of
installment certificates sold on or after April 30, 1997. The aggregate fees
payable for the first year is $2.50 and the remaining $22.50 aggregate fees is
payable over nine subsequent years.
American Express Investors Certificates have contractual distribution fee rates
at an annualized rate of 1 percent 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, twelve, twenty-four or thirty-six month term.
American Express Preferred Investors Certificates have contractual distribution
fee rates of 0.165 percent of the initial payment on issue date of the
certificate and 0.165 percent of the certificate's reserve at the beginning of
the second and subsequent quarters from issue date.
Effective April 26, 2000, the American Express Flexible Savings Certificate have
contractual distribution fee rates of 0.08 percent of the purchase price at the
time of issuance and 0.08 percent 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 percent of the purchase price at time of issuance and
0.20 percent of the reserves maintained for these certificates at the beginning
of the second and subsequent quarters from issue date.
F-24
Effective April 25, 2001, the American Express Cash Reserve Certificate have
contractual distribution fee rates of 0.0625 percent of the purchase price at
the time of issuance and 0.0625 percent 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, the American
Express Cash Reserve Certificates have contractual distribution fee rates of
0.20 percent of the purchase price at the time of issuance and 0.20 percent of
the reserves maintained for these certificates at the beginning of the second
and subsequent quarters from issue date.
Effective April 28, 1999, the American Express Stock Market, sold through AEFAI,
and American Express Market Strategy Certificates have contractual distribution
fee rates of 0.90 percent. For certificates sold from April 30, 1997 to April
27, 1999, fees were at the rate of 0.70 percent. 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, the American Express Stock Market Certificates, sold
through American Express Bank International, have contractual distribution fee
rates of 0.90 percent. For certificates sold from April 28, 1999 to April 25,
2000, fees were paid at the rate of 1.00 percent. For certificates sold from
April 30, 1997 to April 27, 1999, fees were at a rate of 1.25 percent. 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.
The American Express Equity Indexed Savings Certificates have contractual
distribution fee rates of 1.00 percent of the initial investment on the first
day of each certificate's term and 1.00 percent 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:
Depository 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.
F-25
Other 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 on an
annualized basis is 1.25 percent of the reserves maintained for the certificates
on an amount from $100,000 to $249,999, 0.80 percent on an amount from $250,000
to $499,999, 0.65 percent on an amount from $500,000 to $999,999 and 0.50
percent 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 six, twelve,
twenty-four, or thirty-six month terms.
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 December 2, 2004. 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.
8. INCOME TAXES
Income tax (expense) benefit as shown in the Statements of Operations for the
three years ended December 31 consists of:
(Thousands) 2004 2003 2002
- ------------------------------------------------------------------------------------------------------------------------
Federal:
Current $ (44,763) $ (44,777) $ (24,367)
Deferred 18,934 17,804 3,288
- ------------------------------------------------------------------------------------------------------------------------
(25,829) (26,973) (21,079)
State (826) (1,354) (156)
- ------------------------------------------------------------------------------------------------------------------------
Total income tax expense $ (26,655) $ (28,327) $ (21,235)
- ------------------------------------------------------------------------------------------------------------------------
Income tax expense differs from that computed by using the federal statutory
rate of 35%. The principal causes of the difference in each year are shown
below:
(Thousands) 2004 2003 2002
- -------------------------------------------------------------------------------------------------------------------------------
Federal tax expense at federal statutory
rate $ (26,701) 35.0% $ (28,449) 35.0% $ (23,581) 35.0%
Dividend exclusion 820 (1.1)% 998 (1.2)% 2,462 (3.6)%
Other, net 52 (0.1)% 478 (0.6)% 40 (0.1)%
- -------------------------------------------------------------------------------------------------------------------------------
Federal tax expense $ (25,829) 33.8% $ (26,973) 33.2% $ (21,079) 31.3%
- -------------------------------------------------------------------------------------------------------------------------------
F-26
Deferred income tax provision (benefit) results from differences between assets
and liabilities measured for financial reporting and for income tax purposes.
The significant components of deferred tax assets and liabilities at December
31, 2004 and 2003 are reflected in the following table:
(Thousands) 2004 2003
- -------------------------------------------------------------------------------
Deferred tax assets:
Certificate reserves $ 18,676 $ 18,454
Investments 24,512 34,425
Other, net - 140
- -------------------------------------------------------------------------------
Total deferred tax assets $ 43,188 $ 53,019
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Deferred tax liabilities:
Investment unrealized gains, net $ 7,780 $ 23,814
Deferred distribution fees - 2,259
Purchased/written call options - 17,501
Other, net 925 124
- -------------------------------------------------------------------------------
Total deferred tax liabilities 8,705 43,698
- -------------------------------------------------------------------------------
Net deferred tax assets $ 34,483 $ 9,321
- -------------------------------------------------------------------------------
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.
Net income taxes paid during the years ended December 31, 2004 and 2003 were
$6.5 million and $71.6 million, respectively.
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. AECC
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 enters into interest rate swap contracts that
effectively lengthen the rate reset interval on certificate products. As a
result of interest rate fluctuations, the amount of interest paid on hedged
liabilities will positively
F-27
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.
AECC uses interest rate swap contracts to hedge the risk of interest rate
fluctuations 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 counterparties 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. Amounts are reclassified from other comprehensive
income to investment income 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, 2004 and 2003, AECC recognized no losses on the
derivatives as a result of ineffectiveness. AECC reclassified into earnings
pretax losses of ($5.4 million) and ($5.3 million) during 2004 and 2003,
respectively. An estimated ($0.4 million) of the unrealized losses accumulated
in other comprehensive income related to derivatives designated as cash flow
hedges will be reclassified into earnings by December 31, 2005. 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 2 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 economically 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 equity index options receivable and equity indexed options and other
liabilities, respectively, on the balance sheet. The fair value of the embedded
derivatives is reflected in certificate reserves. Gains (losses) on options and
futures are
F-28
reflected in investment income, equity index options, on the statements of
operations. Changes in fair values of embedded derivative instruments are
reflected in provision for certificate reserves.
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, cash flow and
income effects of such derivatives generally offset effects of the underlying
certificate product reserves.
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:
2004 2003
---------------------------------------------------------------------
Carrying Fair Carrying Fair
(Thousands) Value Value Value Value
- ---------------------------------------------------------------------------------------------------------------------------
Financial assets:
Assets for which carrying values
approximate fair values $ 102,703 $ 102,703 $ 101,105 $ 101,105
Available-for-sale securities (Note 3) $ 5,603,789 $ 5,603,789 $ 4,509,726 $ 4,509,726
First mortgage loans on real estate and
other loans (Note 4) $ 468,747 $ 482,544 $ 469,309 $ 493,798
Derivative financial instruments (Note 9) $ 116,285 $ 116,285 $ 153,162 $ 153,162
Financial liabilities:
Liabilities for which carrying values
approximate fair values $ 55,560 $ 55,560 $ 24,444 $ 24,444
Net certificate reserves (Note 5) $ 5,827,000 $ 5,847,572 $ 4,775,518 $ 4,779,310
Derivative financial instruments (Note 9) $ 72,428 $ 72,428 $ 116,680 $ 116,680
- ---------------------------------------------------------------------------------------------------------------------------
F-29
11. SUBSEQUENT EVENT
On February 1, 2005, American Express Company announced plans to pursue a
tax-free spin-off of the common stock of AEFC through a special dividend to
American Express Company common shareholders. The final transaction, which is
subject to certain conditions including receipt of a favorable tax ruling and
approval by American Express Company's Board of Directors, is expected to close
in the third quarter of 2005.
At the time of the spin-off, American Express Company intends to provide
additional capital to AEFC that will provide additional liquidity and a senior
debt rating that will allow AEFC to have efficient access to the capital
markets. Additionally, American Express Company anticipates that it will incur
spin-off related expenses associated with establishing an independent company
that could be significant on a cumulative basis. These expenses will be recorded
by American Express Company or AEFC, as appropriate, as they are incurred each
quarter.
F-30
AmEx Certificate Company Schedule 1
Investments of Securities in Unaffiliated Issuers
At December 31, 2004
(Thousands)
Bal Held at
12/31/04
Principal
Amt of Bonds Value at
& Notes or # Cost 12/31/04
Issuer Name and Issuer Title of Shares (Notes a & c) (Note a)
- ---------------------------------------------------- -------------- --------------- ---------------
BONDS AND NOTES
U.S. Government
U.S. Government-Direct Obligations
FNMA COLLATERAL - MUNI 2008 4.000% 15,000 14,992 15,048
FNMA COLLATERAL - MUNI 2012 4.450% 10,000 10,000 9,881
US TREASURY 2006 5.625% 200 200 206
US TREASURY 2014 4.750% 165 173 172
-------------------------------------------------------------------------------
Total - U.S. Government-Direct Obligations 25,365 25,365 25,307
-------------------------------------------------------------------------------
Total - U.S. Government 25,365 25,365 25,307
Mortgage Backed Securities
Mortgage Backed Securities
AESOP FUNDING II LLC AESOP_03- 2009 3.720% 7,500 7,625 7,433 (d)
AMCAR_04-BM 2011 2.670% 4,200 4,123 4,102
ARG FUNDING CORP 2007 2.860% 3,500 3,500 3,502 (d)
ARMT_2004-2 2035 5.287% 7,429 7,579 7,542
BAA_2003-1 2033 5.000% 7,558 7,607 7,630
BACM_03-1 2036 3.878% 9,465 9,401 9,385
BACM_2004-5 2041 4.176% 12,000 12,038 12,071
BALL_01-7WTC 2011 3.237% 8,213 8,213 6,708
BALL_01-FM 2016 6.119% 3,574 3,574 3,820 (d)
BANK OF AMERICA MORTGAGE SECUR 2034 3.998% 9,431 9,401 9,190
BANK OF AMERICA MORTGAGE SECUR 2033 4.202% 15,000 14,932 15,038
BANK ONE ISSUANCE TRUST BOIT 2011 2.723% 10,000 10,049 10,047
BANK ONE ISSUANCE TRUST BOIT 2011 3.860% 13,400 13,397 13,444
BOAMS_04-F_2A6 2034 4.179% 10,000 9,743 9,809
BOAMS_04G 2034 4.629% 8,649 8,458 8,606
BOAMS_2004-E 2034 4.128% 15,000 14,879 14,784
BOAMS_2004-E 2034 4.051% 5,970 5,671 5,644
BOIT_2003-B1 2010 2.773% 9,750 9,806 9,809
BSARM_2003-2 2033 3.990% 10,000 10,098 10,032 (d)
BSCMS_03-TOP10 2040 4.000% 8,182 8,217 8,102
BSCMS_2004-PWR5 2042 4.254% 7,200 7,238 7,210
CARAT_2004-2 2007 3.120% 10,000 9,999 10,003
CDCSC_02-FX1 2019 5.252% 8,972 9,001 9,317
CENTEX HOME EQUITY CHECK_03-A 2031 3.750% 14,000 13,740 13,977
CENTEX HOME EQUITY CHEC_01-A 2029 6.470% 4,015 4,004 4,078
CFHE_03-2 2024 2.864% 10,000 9,991 9,967
CHASE_99-AS2 2029 6.500% 1,142 1,142 1,164
CIT EQUIPMENT COLLATERAL 2004- 2008 3.500% 5,000 4,999 4,964
CMAC_98-C1 2031 6.490% 10,000 10,841 10,751
COAFT_02-B 2009 3.320% 10,000 10,114 10,009
COMM_04-LNB3 2037 4.713% 7,500 7,533 7,680
COPAR_2004-3 2007 3.040% 10,000 9,999 10,005
COUNTRYWIDE HOME EQUITY LOAN C 2034 2.683% 9,081 9,077 9,097
CSFBMSC_04-C2 2036 3.819% 6,692 6,515 6,543
CWA_2004-33 2034 5.017% 9,579 9,744 9,719
CWA_2004-J7 2034 4.673% 10,000 9,996 9,929
F-31
Bal Held at
12/31/04
Principal
Amt of Bonds Value at
& Notes or # Cost 12/31/04
Issuer Name and Issuer Title of Shares (Notes a & c) (Note a)
- ---------------------------------------------------- -------------- --------------- ---------------
CWHEL_04-R 2030 2.687% 10,000 10,000 10,000
CWHEL_04-U 2035 2.690% 10,000 10,000 10,000
CWHEL_2004-N 2034 2.683% 9,163 9,159 9,179
CWHEL_2004-S 2030 2.678% 10,000 10,000 9,998
CWHL_04-12 2034 4.671% 7,509 7,388 7,469
DLJCMC_99-CG3 2032 7.120% 5,441 5,448 5,759
DRAT_04-1 2008 3.500% 5,000 5,000 5,012 (d)
EQUITY ONE EQABS_2004-3 2034 4.265% 10,000 10,060 9,983
EQUITY ONE EQABS_2004-3 2034 5.099% 10,000 10,224 10,168
FANNIE MAE FNMA_01-22 2011 6.000% 4,608 4,590 4,622
FANNIE MAE FNMA_02-9 2042 5.000% 11,508 11,489 11,561
FANNIE MAE FNMA_03-28 2022 5.000% 11,222 11,355 11,338
FANNIE MAE FNMA_99-8 2014 6.000% 6,502 6,461 6,732
FHAT_2004-A4 2034 5.459% 9,496 9,707 9,689
FHLMC_2382 2030 5.500% 7,623 7,566 7,897
FHLMC_2473 2030 5.500% 3,955 3,944 3,981
FHLMC_2478 2021 5.250% 10,469 10,456 10,478
FHLMC_2619 2022 5.000% 23,293 23,736 23,220
FHLMC_2835 2032 4.500% 11,773 11,761 11,705
FHLMC_2872 2022 4.500% 10,000 10,024 9,891
FHLMC_2901 2033 4.500% 10,000 9,994 10,041
FHLMC_2907 2019 4.500% 10,000 9,997 10,100
FMGT_03-T5 2013 4.055% 7,604 7,604 7,623
FNMA COLLATERAL - MUNI 2019 6.075% 16,222 16,631 16,818
FNMA COLLATERAL - MUNI 2034 3.750% 10,000 10,149 9,891
FNMA COLLATERAL - MUNI 2033 4.538% 12,487 12,307 12,339
FNMA COLLATERAL - MUNI 105989 2020 5.811% 334 350 345
FNMA COLLATERAL - MUNI 190726 2033 4.825% 1,307 1,336 1,353
FNMA COLLATERAL - MUNI 249907 2024 3.750% 1,248 1,266 1,241
FNMA COLLATERAL - MUNI 250670 2011 7.000% 448 450 477
FNMA COLLATERAL - MUNI 250671 2011 7.500% 1,410 1,411 1,500
FNMA COLLATERAL - MUNI 250857 2012 7.000% 1,248 1,245 1,330
FNMA COLLATERAL - MUNI 252259 2014 5.500% 88 86 91
FNMA COLLATERAL - MUNI 252344 2014 5.500% 6,279 6,136 6,526
FNMA COLLATERAL - MUNI 252381 2014 5.500% 5,998 5,853 6,213
FNMA COLLATERAL - MUNI 254010 2008 5.500% 1,672 1,668 1,708
FNMA COLLATERAL - MUNI 254195 2017 5.500% 9,304 9,279 9,631
FNMA COLLATERAL - MUNI 254508 2012 5.000% 17,348 17,710 17,907
FNMA COLLATERAL - MUNI 254584 2012 5.000% 26,721 27,153 27,583
FNMA COLLATERAL - MUNI 254586 2013 5.000% 41,237 42,211 42,568
FNMA COLLATERAL - MUNI 254590 2018 5.000% 31,022 31,273 31,558
FNMA COLLATERAL - MUNI 254591 2018 5.500% 17,459 18,067 18,063
FNMA COLLATERAL - MUNI 254663 2013 5.000% 5,836 5,926 6,024
FNMA COLLATERAL - MUNI 254719 2018 4.500% 111,003 111,985 110,922
FNMA COLLATERAL - MUNI 254720 2018 4.500% 85,504 85,931 85,441
FNMA COLLATERAL - MUNI 303259 2025 3.853% 1,164 1,197 1,158
FNMA COLLATERAL - MUNI 303445 2009 5.500% 2,601 2,534 2,692
FNMA COLLATERAL - MUNI 303970 2024 6.000% 4,685 4,623 4,868
FNMA COLLATERAL - MUNI 313042 2011 7.000% 1,016 1,018 1,078
FNMA COLLATERAL - MUNI 313522 2012 7.000% 2,431 2,440 2,578
FNMA COLLATERAL - MUNI 313561 2012 8.000% 1,432 1,454 1,524
FNMA COLLATERAL - MUNI 323290 2013 6.000% 223 222 234
FNMA COLLATERAL - MUNI 323748 2014 6.500% 3,681 3,606 3,907
FNMA COLLATERAL - MUNI 323833 2014 6.000% 1,885 1,867 1,978
FNMA COLLATERAL - MUNI 36225 2016 9.000% 12 13 14
FNMA COLLATERAL - MUNI 367005 2012 7.000% 982 977 1,042
F-32
Bal Held at
12/31/04
Principal
Amt of Bonds Value at
& Notes or # Cost 12/31/04
Issuer Name and Issuer Title of Shares (Notes a & c) (Note a)
- ---------------------------------------------------- -------------- --------------- ---------------
FNMA COLLATERAL - MUNI 386642 2008 3.930% 11,791 12,133 11,752
FNMA COLLATERAL - MUNI 40877 2017 9.000% 19 19 21
FNMA COLLATERAL - MUNI 50973 2009 6.000% 3,951 3,895 4,115
FNMA COLLATERAL - MUNI 509806 2014 6.500% 1,571 1,556 1,667
FNMA COLLATERAL - MUNI 51617 2017 10.000% 12 12 14
FNMA COLLATERAL - MUNI 545249 2016 5.500% 11,331 11,375 11,729
FNMA COLLATERAL - MUNI 545303 2016 5.000% 11,942 11,772 12,157
FNMA COLLATERAL - MUNI 545400 2017 5.500% 14,913 14,839 15,437
FNMA COLLATERAL - MUNI 545492 2022 5.500% 4,290 4,246 4,393
FNMA COLLATERAL - MUNI 545679 2022 5.500% 9,005 8,767 9,222
FNMA COLLATERAL - MUNI 545786 2032 5.580% 2,961 2,974 2,931
FNMA COLLATERAL - MUNI 555366 2018 4.500% 133,185 134,363 133,211
FNMA COLLATERAL - MUNI 555724 2018 4.500% 12,689 12,627 12,685
FNMA COLLATERAL - MUNI 566074 2031 5.777% 1,572 1,570 1,597
FNMA COLLATERAL - MUNI 584507 2031 5.709% 1,505 1,498 1,571
FNMA COLLATERAL - MUNI 584829 2016 6.000% 3,651 3,624 3,828
FNMA COLLATERAL - MUNI 585743 2016 5.500% 10,377 10,428 10,742
FNMA COLLATERAL - MUNI 616220 2016 5.000% 9,347 9,171 9,516
FNMA COLLATERAL - MUNI 617270 2017 5.000% 10,151 10,026 10,334
FNMA COLLATERAL - MUNI 620293 2032 5.487% 4,468 4,428 4,560
FNMA COLLATERAL - MUNI 622462 2016 5.500% 8,139 8,040 8,425
FNMA COLLATERAL - MUNI 623866 2017 5.000% 11,176 11,145 11,378
FNMA COLLATERAL - MUNI 625943 2017 5.000% 16,104 16,060 16,381
FNMA COLLATERAL - MUNI 626925 2018 4.500% 4,764 4,807 4,760
FNMA COLLATERAL - MUNI 651629 2032 5.181% 2,849 2,854 2,884
FNMA COLLATERAL - MUNI 653342 2032 5.305% 1,970 1,978 2,004
FNMA COLLATERAL - MUNI 654158 2032 4.962% 4,995 5,004 5,140
FNMA COLLATERAL - MUNI 654195 2032 4.918% 5,190 5,194 5,189
FNMA COLLATERAL - MUNI 655646 2032 5.783% 3,132 3,137 3,149
FNMA COLLATERAL - MUNI 655798 2032 5.245% 7,152 7,137 7,254
FNMA COLLATERAL - MUNI 661349 2032 5.428% 2,616 2,623 2,657
FNMA COLLATERAL - MUNI 661501 2032 5.118% 3,028 3,042 3,077
FNMA COLLATERAL - MUNI 661744 2032 5.346% 5,039 5,062 5,124
FNMA COLLATERAL - MUNI 664521 2032 5.117% 6,292 6,319 6,403
FNMA COLLATERAL - MUNI 664750 2032 4.966% 3,611 3,620 3,666
FNMA COLLATERAL - MUNI 670731 2032 5.308% 7,213 7,242 7,488
FNMA COLLATERAL - MUNI 670779 2032 5.135% 7,278 7,326 7,186
FNMA COLLATERAL - MUNI 670890 2032 4.731% 9,009 9,043 9,266
FNMA COLLATERAL - MUNI 670912 2032 5.069% 6,985 7,008 7,247
FNMA COLLATERAL - MUNI 670947 2032 4.685% 9,539 9,583 9,810
FNMA COLLATERAL - MUNI 677680 2018 4.500% 35,312 35,628 35,319
FNMA COLLATERAL - MUNI 685479 2018 4.500% 28,724 28,920 28,697
FNMA COLLATERAL - MUNI 694852 2033 5.037% 8,875 9,035 8,941
FNMA COLLATERAL - MUNI 70007 2017 3.553% 252 255 251
FNMA COLLATERAL - MUNI 701161 2018 4.500% 21,676 21,826 21,656
FNMA COLLATERAL - MUNI 70117 2017 3.418% 95 96 95
FNMA COLLATERAL - MUNI 701269 2018 4.500% 21,679 21,830 21,659
FNMA COLLATERAL - MUNI 703991 2018 4.500% 23,190 23,347 23,168
FNMA COLLATERAL - MUNI 704592 2018 5.000% 14,037 14,509 14,275
FNMA COLLATERAL - MUNI 70694 2005 9.500% 32 32 33
FNMA COLLATERAL - MUNI 708635 2018 5.000% 10,116 10,452 10,288
FNMA COLLATERAL - MUNI 708646 2018 4.500% 13,272 13,311 13,259
FNMA COLLATERAL - MUNI 722779 2033 4.408% 14,402 14,433 14,664
FNMA COLLATERAL - MUNI 725558 2034 4.589% 5,293 5,242 5,313
FNMA COLLATERAL - MUNI 725694 2034 4.802% 7,103 6,957 7,114
FNMA COLLATERAL - MUNI 725719 2033 4.854% 10,060 10,019 10,144
F-33
Bal Held at
12/31/04
Principal
Amt of Bonds Value at
& Notes or # Cost 12/31/04
Issuer Name and Issuer Title of Shares (Notes a & c) (Note a)
- ---------------------------------------------------- -------------- --------------- ---------------
FNMA COLLATERAL - MUNI 730652 2018 4.500% 21,178 21,501 21,158
FNMA COLLATERAL - MUNI 73227 2005 6.700% 369 369 391
FNMA COLLATERAL - MUNI 733525 2033 3.949% 15,861 15,200 15,358
FNMA COLLATERAL - MUNI 739194 2033 5.092% 5,840 5,858 5,898
FNMA COLLATERAL - MUNI 743856 2033 4.723% 4,056 4,062 4,035
FNMA COLLATERAL - MUNI 758873 2033 4.497% 8,682 8,582 8,572
FNMA COLLATERAL - MUNI 774968 2034 4.763% 4,562 4,617 4,509
FNMA COLLATERAL - MUNI 794787 2034 5.219% 14,993 15,191 15,210
FNMA COLLATERAL - MUNI 799733 2034 5.050% 7,499 7,634 7,619
FNMA COLLATERAL - MUNI 804561 2034 4.444% 9,463 9,486 9,478
FNMA COLLATERAL - MUNI 88879 2019 4.924% 362 368 366
FNMA COLLATERAL - MUNI 89125 2019 3.500% 1,044 1,066 1,065
FNMA_02-10 2042 5.000% 11,871 11,866 11,958
FNMA_03-18 2043 4.610% 15,000 15,135 15,083
FNMA_04-81 2020 4.350% 12,500 12,523 12,385
FNMA_04-89 2022 4.500% 10,000 9,937 10,121
FNMA_2004-W8 2044 4.572% 9,000 9,034 9,046
FREDDIE MAC 2034 5.200% 58,386 59,110 58,901
FREDDIE MAC 2032 3.750% 10,000 9,956 9,753
FREDDIE MAC 1B0183 2031 5.458% 3,623 3,579 3,645
FREDDIE MAC 350190 2022 3.375% 529 550 533
FREDDIE MAC 405014 2019 3.837% 135 135 136
FREDDIE MAC 405092 2019 3.740% 279 277 282
FREDDIE MAC 405185 2018 3.346% 377 377 381
FREDDIE MAC 405243 2019 3.385% 152 154 153
FREDDIE MAC 405360 2019 3.503% 52 53 52
FREDDIE MAC 405437 2019 4.150% 149 148 151
FREDDIE MAC 405455 2019 3.970% 128 128 129
FREDDIE MAC 405615 2019 3.900% 272 276 275
FREDDIE MAC 605041 2019 3.267% 26 26 26
FREDDIE MAC 605048 2018 3.545% 150 150 151
FREDDIE MAC 605432 2017 3.961% 151 152 152
FREDDIE MAC 605433 2017 3.154% 299 301 301
FREDDIE MAC 605454 2017 3.141% 650 648 650
FREDDIE MAC 606024 2019 3.085% 378 375 381
FREDDIE MAC 606025 2019 3.377% 1,078 1,080 1,083
FREDDIE MAC 630074 2018 3.750% 103 102 103
FREDDIE MAC 780514 2033 5.030% 18,482 18,979 18,637
FREDDIE MAC 780845 2033 4.555% 8,933 8,679 8,894
FREDDIE MAC 780903 2033 4.561% 8,838 8,754 8,717
FREDDIE MAC 785363 2025 3.878% 563 571 585
FREDDIE MAC 785619 2026 4.250% 267 268 275
FREDDIE MAC 785634 2026 4.500% 315 316 326
FREDDIE MAC 788941 2031 5.611% 917 904 931
FREDDIE MAC 840031 2019 3.500% 12 13 13
FREDDIE MAC 840035 2019 4.040% 134 133 136
FREDDIE MAC 840036 2019 4.127% 311 315 318
FREDDIE MAC 840072 2019 3.182% 411 410 416
FREDDIE MAC 845154 2022 3.856% 417 434 429
FREDDIE MAC 845523 2023 3.947% 393 405 402
FREDDIE MAC 845654 2024 4.161% 1,026 1,041 1,046
FREDDIE MAC 845730 2023 3.917% 1,676 1,735 1,729
FREDDIE MAC 845733 2024 3.581% 1,431 1,458 1,471
FREDDIE MAC 846072 2029 3.810% 558 572 568
FREDDIE MAC 846107 2025 4.008% 589 603 606
FREDDIE MAC 865008 2018 5.928% 733 748 757
F-34
Bal Held at
12/31/04
Principal
Amt of Bonds Value at
& Notes or # Cost 12/31/04
Issuer Name and Issuer Title of Shares (Notes a & c) (Note a)
- ---------------------------------------------------- -------------- --------------- ---------------
FREDDIE MAC FHLMC_2393 2030 5.500% 4,176 4,163 4,196
FREDDIE MAC FHLMC_2542 2022 5.500% 16,505 16,808 16,989
FREDDIE MAC FHLMC_2548 2022 5.500% 43,508 44,096 44,574
FREDDIE MAC FHLMC_2550 2022 5.500% 12,238 12,417 12,489
FREDDIE MAC FHLMC_2556 2022 5.500% 53,350 54,190 54,243
FREDDIE MAC FHLMC_2558 2022 5.500% 15,799 16,013 16,202
FREDDIE MAC FHLMC_2574 2022 5.000% 11,872 12,037 12,026
FREDDIE MAC FHLMC_2586 2023 5.500% 16,186 16,489 16,562
FREDDIE MAC FHLMC_2595 2022 5.500% 110,244 112,338 113,323
FREDDIE MAC FHLMC_2597 2022 5.500% 47,464 48,392 48,286
FREDDIE MAC FHLMC_2603 2022 5.500% 40,789 41,587 41,698
FREDDIE MAC GOLD C90581 2022 5.500% 4,825 4,788 4,939
FREDDIE MAC GOLD C90582 2022 5.500% 3,173 3,150 3,248
FREDDIE MAC GOLD E00151 2007 7.500% 321 324 335
FREDDIE MAC GOLD E00383 2010 7.000% 1,235 1,232 1,309
FREDDIE MAC GOLD E00388 2010 7.000% 750 742 795
FREDDIE MAC GOLD E00426 2011 6.500% 771 765 817
FREDDIE MAC GOLD E00484 2012 6.500% 622 610 660
FREDDIE MAC GOLD E01140 2017 6.000% 14,455 14,952 15,142
FREDDIE MAC GOLD E76761 2014 6.500% 2,937 2,893 3,115
FREDDIE MAC GOLD E77557 2014 6.500% 228 224 242
FREDDIE MAC GOLD E80594 2014 6.500% 332 325 352
FREDDIE MAC GOLD E90153 2017 6.000% 3,806 3,959 3,987
FREDDIE MAC GOLD E90154 2017 6.000% 9,328 9,702 9,771
FREDDIE MAC GOLD E91041 2017 5.000% 10,853 10,871 11,034
FREDDIE MAC GOLD E91491 2012 5.000% 6,721 6,864 6,870
FREDDIE MAC GOLD E93341 2012 5.000% 20,435 21,078 20,821
FREDDIE MAC GOLD E95403 2018 5.000% 9,767 10,108 9,930
FREDDIE MAC GOLD E95556 2013 4.500% 6,824 7,041 6,823
FREDDIE MAC GOLD E95562 2013 4.500% 12,069 12,445 12,068
FREDDIE MAC GOLD E95671 2018 5.000% 14,309 14,768 14,543
FREDDIE MAC GOLD E96172 2013 4.500% 37,368 38,615 37,751
FREDDIE MAC GOLD G10364 2010 7.000% 1,296 1,290 1,371
FREDDIE MAC GOLD G10369 2010 6.500% 3,383 3,352 3,577
FREDDIE MAC GOLD G10439 2011 6.500% 385 378 409
FREDDIE MAC GOLD G10665 2012 7.000% 4,807 4,795 5,095
FREDDIE MAC GOLD G10949 2014 6.500% 1,903 1,878 2,018
FREDDIE MAC GOLD G11004 2015 7.000% 648 645 688
FREDDIE MAC GOLD G11193 2016 5.000% 7,594 7,485 7,727
FREDDIE MAC GOLD G11298 2017 5.000% 10,988 11,009 11,171
FREDDIE MAC GOLD G30227 2023 5.500% 11,842 12,319 12,115
GCCF_02-C1 2013 3.357% 3,820 3,818 3,791
GCCF_03-C2 2036 4.022% 6,000 6,099 5,991
GECAF_2003-1A 2015 2.967% 10,000 10,116 9,997 (d)
GECAF_2004-1A 2013 2.587% 10,000 10,000 10,000 (d)
GECCMC_04-C2 2040 4.119% 12,700 12,527 12,652
GINNIE MAEII 8157 2023 3.375% 746 759 742
GINNIE MAEII 8206 2017 3.375% 325 321 324
GINNIE MAEII 8240 2017 3.750% 130 125 131
GINNIE MAEII 8251 2017 3.750% 12 11 12
GINNIE MAEII 8274 2017 4.625% 422 415 430
GINNIE MAEII 8283 2017 4.625% 57 56 58
GINNIE MAEII 8293 2017 4.625% 110 108 113
GINNIE MAEII 8341 2018 3.375% 28 28 28
GINNIE MAEII 8353 2018 3.375% 240 235 239
GINNIE MAEII 8365 2018 3.375% 317 307 316
F-35
Bal Held at
12/31/04
Principal
Amt of Bonds Value at
& Notes or # Cost 12/31/04
Issuer Name and Issuer Title of Shares (Notes a & c) (Note a)
- ---------------------------------------------------- -------------- --------------- ---------------
GINNIE MAEII 8377 2018 3.750% 111 107 112
GINNIE MAEII 8428 2018 4.625% 45 44 46
GINNIE MAEII 8440 2018 4.625% 171 169 175
GINNIE MAEII 8638 2025 3.375% 793 800 789
GMACCMSI_2004-C3 2041 4.207% 8,000 8,039 7,993
GMHE_2004-AR2 2034 4.449% 9,162 9,195 9,091
GMHE_2004-AR2 2034 5.287% 12,302 12,336 12,584
GNMA_02-48 2030 5.750% 2,433 2,427 2,453
GNMA_02-81 2025 3.815% 13,568 13,486 13,403
GNMA_03-17 2018 2.578% 9,254 9,202 8,969
GNMA_04-10 2031 4.043% 9,852 9,805 9,760
GNMA_04-19 2034 4.500% 14,199 14,267 14,349
GNMA_04-77 2020 4.585% 9,899 10,134 10,070
GNMA_2004-23 2027 3.629% 14,776 14,774 14,405
GNMA_2004-45 2021 4.020% 9,830 9,763 9,763
GNMA_2004-60 2018 4.104% 9,833 9,833 9,888
GNMA_2004-XX 2020 2.913% 11,598 11,254 11,281
GSMS_2004-GG2 2038 4.602% 7,000 7,142 7,138
GSR_04-10F 2019 4.500% 6,673 6,731 6,721
HARBORVIEW MORTGAGE LOAN TRUST 2034 4.870% 9,214 9,291 9,114
HERTZ CORP 2009 3.230% 15,000 14,995 14,514 (d)
HLMLT_2004-2 2035 2.670% 10,000 10,000 10,013
HOND_2004-3 2008 2.910% 7,500 7,499 7,416
HVMLT_04-11 2035 2.770% 15,000 15,000 15,000
HVMLT_04-5 2034 4.059% 10,000 9,617 9,855
HVMLT_2004-10 2035 5.304% 7,500 7,607 7,602
HVMLT_2004-6 2034 4.781% 7,080 7,026 7,068
HVML_2004-4 2034 2.975% 7,890 7,789 7,812
JPMCCMSC_03-CIBC6 2037 4.393% 9,167 9,054 9,233
JPMCC_02-CIB5 2037 4.372% 9,159 9,248 9,262
JPMCC_04-C2 2041 4.278% 9,644 9,642 9,731
JPMCMFC_04-C1 2038 3.053% 6,216 6,088 6,062
JPMCMFC_99-C7 2035 6.180% 4,353 4,355 4,539
LB COMM CONDUIT MORT TRUST LBC 2035 5.870% 2,018 2,017 2,050
LB-UBS COMM MORT TRUST LBUBSCM 2026 5.969% 7,500 7,518 7,935
LB-UBS COMM MORT TRUST LBUBSCM 2026 4.904% 7,500 7,521 7,726
LB-UBS COMM MORT TRUST LBUBSCM 2026 4.023% 5,500 5,514 5,523
LB-UBS COMM MORT TRUST LBUBSCM 2026 4.071% 8,888 8,948 8,887
LB-UBS COMM MORT TRUST LBUBSCM 2027 4.064% 10,000 10,033 10,004
LB-UBS COMM MORT TRUST LBUBSCM 2027 3.636% 13,638 13,689 13,551
LB-UBS COMM MORT TRUST LBUBSCM 2027 4.207% 7,000 7,034 7,051
LBUBSCMT_2004-C4 2029 4.567% 10,000 10,120 10,190
LBUBSCMT_2004-C7 2029 3.625% 7,311 7,346 7,280
LIFT - LEASE INVESTMENT FLIGHT 2016 2.833% 3,525 3,525 3,249
MBNA CREDIT CARD MASTER NOTE T 2010 2.843% 10,000 10,070 10,091
MERRILL LYNCH MORT INVEST INC 2033 4.086% 10,000 9,980 10,013
MLCC_2004-1 2034 4.779% 4,970 4,987 4,998
MORGAN STANLEY CAPITAL I MSDWC 2040 3.270% 8,903 8,939 8,561
MSAC_2004-OP1 2034 2.997% 10,000 10,000 10,014
MSALT_2004-HB2 2009 2.940% 4,670 4,670 4,630
MSC 2004-IQ8 A3 2040 4.500% 7,000 7,032 7,047
MSCI_00-HG 2005 7.563% 2,500 2,499 2,596 (d)
MSCI_04-HQ4 2040 4.220% 7,000 7,007 7,012
MSCI_97-XL1 2030 6.590% 1,133 1,133 1,133
MSDWCI_02-IQ2 2035 4.090% 2,115 2,113 2,130
MSDWCI_02-IQ2 2035 5.160% 2,500 2,506 2,590
F-36
Bal Held at
12/31/04
Principal
Amt of Bonds Value at
& Notes or # Cost 12/31/04
Issuer Name and Issuer Title of Shares (Notes a & c) (Note a)
- ---------------------------------------------------- -------------- --------------- ---------------
MSDWCI_02-TOP7 2039 5.380% 4,548 4,585 4,770
MSDWCI_04-T13 2045 3.940% 15,000 14,690 14,789
MSM_2004-10AR 2049 4.831% 9,447 9,618 9,588
MSM_2004-10AR 2034 5.148% 9,947 10,136 10,064
MSM_2004-6AR 2034 4.443% 7,486 7,420 7,498
NPF XII INC NPF12_00-2 2006 2.700% 10,000 669 669 (b)(d)(e)
PROVIDIAN GATEWAY MASTER TRUST 2011 3.350% 5,000 4,999 4,945 (d)
RALI_2004-QR1 2034 5.250% 9,844 9,937 9,909
RALI_2004-QS5 2034 4.750% 7,847 7,819 7,883
RASC_04-KS12 2035 2.940% 7,000 7,000 7,019
RASC_2004-KS11 2034 3.417% 10,750 10,750 10,785
RESTRUCTURED ASSET SECURITIES 2030 4.000% 8,732 8,695 8,608
RFMSI_03-QS2 2033 4.500% 9,230 9,140 9,080
RFMSI_04-KS9 2034 4.620% 11,000 10,999 10,961
SASC_2003-24A 2033 5.564% 4,339 4,425 4,394
SASC_2004-18H 2034 4.750% 10,000 10,144 10,018
SAST_2004-3 2034 2.597% 9,575 9,575 9,577
SMALL BUSINESS ADMIN 2022 4.750% 4,407 4,497 4,438
SMALL BUSINESS ADMIN 2013 3.900% 3,244 3,289 3,228
SMALL BUSINESS ADMIN 2014 3.870% 6,637 6,718 6,603
STRUCTURED ADJUSTABLE RATE MOR 2034 4.935% 9,964 10,208 10,010
TOPT_01-TZH 2013 6.522% 5,000 4,997 5,290 (d)
WAMU_2004-AR4 2034 3.812% 10,000 9,752 9,865
WASHINGTON MUTUAL WAMU_03-A11 2033 3.985% 7,500 7,495 7,459
WASHINGTON MUTUAL WAMU_03-A12 2034 3.961% 12,500 12,493 12,300
WASHINGTON MUTUAL WAMU_03-AR3 2033 3.927% 10,000 10,000 9,954
WASHINGTON MUTUAL WAMU_04-AR5- 2034 3.862% 10,000 9,626 9,866
WASHINGTON MUTUAL WAMU_04-AR7 2034 3.957% 10,000 9,661 9,882
WASHINGTON MUTUAL WAMU_04-S3 2034 5.500% 17,367 17,860 17,714
WASHINGTON MUTUAL WAMU_05-AR1 2045 2.630% 15,000 15,000 15,000
WBCMT_2004-C11 2041 3.333% 9,001 8,925 8,917
WFMBS_04-DD 2035 4.548% 5,761 5,773 5,761
WFMBS_04-P 2034 4.304% 7,908 7,702 7,698
WFMBS_2004-0 2034 4.941% 9,355 9,260 9,362
WFMBS_2004-CC 2035 4.977% 10,000 10,052 10,050
WFMBS_2004-W 2030 4.634% 20,000 20,162 20,009
WFOT_03-4 2008 2.390% 5,000 5,000 4,975
-------------------------------------------------------------------------------
Total - Mortgage Backed Securities 3,215,883 3,226,417 3,232,296
-------------------------------------------------------------------------------
Total - Mortgage Backed Securities 3,215,883 3,226,417 3,232,296
Municipal Bonds
New Jersey
NEW JERSEY STATE TRNPK AUTH 2009 3.140% 4,000 4,000 3,850
-------------------------------------------------------------------------------
Total - New Jersey 4,000 4,000 3,850
New York
NEW YORK CITY GO - LT 2008 3.000% 5,000 5,003 4,859
-------------------------------------------------------------------------------
Total - New York 5,000 5,003 4,859
Pennsylvania
WYOMING VALLEY PA SANI AUTH WT 2007 5.125% 45 45 47
-------------------------------------------------------------------------------
Total - Pennsylvania 45 45 47
-------------------------------------------------------------------------------
F-37
Bal Held at
12/31/04
Principal
Amt of Bonds Value at
& Notes or # Cost 12/31/04
Issuer Name and Issuer Title of Shares (Notes a & c) (Note a)
- ---------------------------------------------------- -------------- --------------- ---------------
Total - Municipal Bonds 9,045 9,048 8,756
Corporate Debt Securities
Corporate - Finance
ALLIANCE CAPITAL MGMT -LP 2006 5.625% 12,500 12,476 12,929
ALLSTATE CORP 2006 5.375% 5,000 4,993 5,179
ALLSTATE FINANCIAL GLOBAL FUND 2008 4.250% 5,000 4,993 5,052 (d)
AMB PROPERTY CORP 2005 7.200% 5,000 4,998 5,172
AMERICAN GENERAL FINANCE CORP 2007 4.500% 7,500 7,487 7,654
AMERICAN GENERAL FINANCE CORP 2008 2.750% 7,500 7,429 7,212
ASSOCIATED BK GREEN BAY 2007 3.700% 6,000 5,962 6,092
BANK OF AMERICA CORP 2010 7.800% 5,000 5,773 5,815
BANK OF AMERICA CORP 2009 5.875% 5,000 5,341 5,368
BANK OF NEW YORK/NEW YORK 2007 5.200% 7,000 7,058 7,278
BANK OF NEW YORK/NEW YORK 2009 3.625% 10,000 9,978 9,937
BANK ONE NA 2008 3.700% 19,000 19,152 19,030
BANKNORTH GROUP INC 2008 3.750% 8,650 8,706 8,606
BEAR STEARNS COMPANIES INC 2008 4.000% 10,000 10,375 10,074
BERKSHIRE HATHAWAY 2008 3.375% 17,500 17,453 17,300
CAMDEN PROPERTY TRUST 2009 4.700% 3,750 3,745 3,793
CAMDEN PROPERTY TRUST 2010 4.375% 10,000 10,017 9,968
CAPITAL ONE BANK 2006 6.875% 8,800 9,049 9,129
CLOROX COMPANY 2010 4.200% 27,660 27,657 27,800 (d)
COUNTRYWIDE HOME LOANS 2006 5.500% 5,000 4,991 5,157
CREDIT SUISSE FIRST BOSTON USA 2008 4.625% 15,000 15,287 15,371
CREDIT SUISSE FIRST BOSTON USA 2009 3.875% 2,000 2,000 1,988
DEX WEST 2011 5.875% 1,250 1,250 1,244 (d)
DIAGEO CAPITAL PLC 2007 3.500% 4,000 3,995 3,987
DIAGEO CAPITAL PLC 2008 3.375% 10,000 9,950 9,901
EOP OPERATING LP 2007 7.750% 10,762 11,882 11,878
ERP OPERATING LP 2009 4.750% 12,500 12,480 12,779
FIFTH THIRD BANCORP 2008 3.375% 12,000 11,918 11,839
FLEETBOSTON FINANCIAL CORP 2007 4.200% 11,000 11,119 11,191
FLEETBOSTON FINANCIAL CORP 2005 7.250% 2,900 3,004 2,984
FORD MOTOR CREDIT CO 2006 6.875% 5,000 5,026 5,151
GOLDMAN SACHS 2005 7.625% 10,000 10,102 10,295
GOLDMAN SACHS 2012 6.600% 10,000 10,144 11,160
GREAT WESTERN FINL CORP 2006 7.500% 1,400 1,397 1,490
GREAT WESTERN FINL CORP 2008 4.375% 12,980 13,207 13,182
HOUSEHOLD FINANCE CORP 2006 6.500% 2,000 1,999 2,068
HOUSEHOLD FINANCE CORP 2007 5.750% 5,000 4,950 5,219
HOUSEHOLD FINANCE CORP 2008 4.625% 12,000 12,253 12,287
HSBC BANK USA 2009 3.875% 7,500 7,492 7,435
JP MORGAN CHASE & COMPANY 2008 4.000% 10,000 10,035 10,066
JP MORGAN CHASE & COMPANY 2009 3.500% 10,000 9,949 9,798
KEY BANK OF NY 2008 7.500% 9,000 10,391 10,070
LA QUINTA PROPERTIES 2012 7.000% 2,501 2,674 2,645
LABRANCHE & CO 2009 9.500% 1,500 1,500 1,530
LUBRIZOL CORP 2009 4.625% 2,000 1,998 1,997
M & I MARSHALL & ILSLEY BANK 2009 3.950% 21,500 21,468 21,402
MARSHALL & ILSLEY CORP 2006 5.750% 10,000 9,998 10,387
MBNA AMERICA BANK NA 2005 7.750% 6,000 5,996 6,183 (d)
MBNA CORP 2008 4.625% 5,000 4,994 5,084
MERLONI ELETTRODOMESTICI SPA 2009 5.170% 19,000 19,000 19,292 (d)
MERRILL LYNCH & CO INC 2009 4.750% 10,000 9,985 10,237
F-38
Bal Held at
12/31/04
Principal
Amt of Bonds Value at
& Notes or # Cost 12/31/04
Issuer Name and Issuer Title of Shares (Notes a & c) (Note a)
- ---------------------------------------------------- -------------- --------------- ---------------
MERRILL LYNCH & CO INC 2008 3.700% 7,500 7,669 7,480
MERRILL LYNCH & CO INC 2010 4.500% 2,000 2,009 2,013
MERRILL LYNCH AIG CBO 2010 0.000% 6,500 0 0 (b)(e)
MERRILL LYNCH ELLIOTT & PAIGE 2010 0.000% 11,000 0 0 (b)(d)(e)
METLIFE INC 2005 3.911% 10,000 10,038 10,045
MGIC INVESTMENT CORP/WI 2005 7.500% 7,000 6,995 7,222
MORGAN STANLEY 2006 6.100% 5,000 4,999 5,177
MORGAN STANLEY 2007 5.800% 5,000 4,993 5,248
MORGAN STANLEY 2009 3.875% 14,000 13,899 13,938
NATIONWIDE BLDG SOCIETY 2009 4.000% 5,000 4,991 4,979
NATWEST - NATIONAL WESTMINSTER 2009 7.375% 12,650 14,566 14,373
NEWS AMERICA INC 2008 6.625% 15,750 17,263 16,998
NEWS AMERICA INC 2010 4.750% 2,000 2,035 2,038
NEWS AMERICA INC 2014 5.300% 5,000 4,996 5,059 (d)
NISOURCE INC 2006 3.628% 10,000 10,046 9,988
OLD NATIONAL BANCORP 2008 3.500% 7,000 6,984 6,945
POPULAR NA INC 2008 4.250% 12,500 12,469 12,622
POPULAR NA INC 2008 3.875% 2,500 2,503 2,497
PRICOA GLOBAL FUNDING I 2008 4.350% 35,000 35,128 35,554 (d)
PRICOA GLOBAL FUNDING I 2010 2.700% 15,000 15,000 14,978 (d)
ROGERS WIRELESS INC 2010 5.525% 1,500 1,557 1,571 (d)
SAFECO CORP 2010 4.875% 6,000 5,976 6,144
SHEAR LEH HUTT HLDG 2006 6.250% 10,000 9,994 10,407
SHEAR LEH HUTT HLDG 2008 4.000% 5,000 5,147 5,042
SHEAR LEH HUTT HLDG 2010 4.375% 8,500 8,439 8,518
SIMON PROPERTY GROUP INC 2007 7.125% 10,000 10,133 10,819
SIMON PROPERTY GROUP L.P. 2009 3.750% 9,000 8,900 8,857
SLM CORP 2008 3.625% 15,000 15,029 14,928
SOVEREIGN BANK 2005 10.200% 2,647 2,647 2,695 (d)
ST PAUL COMPANIES 2007 5.750% 7,000 6,989 7,303
SUNTRUST BANK 2011 6.375% 3,500 3,931 3,878
SUNTRUST BANKS INC 2007 5.050% 7,500 7,498 7,756
TEXAS GENCO HOLDINGS 2014 6.875% 2,250 2,335 2,326 (d)
TIAA GLOBAL MARKETS 2008 3.875% 7,500 7,495 7,554 (d)
TRAVELERS PROPERTY CASUALTY 2008 3.750% 5,000 4,992 4,959
UNION PLANTERS NATIONAL BANK 2007 5.125% 5,000 4,999 5,186
US BANCORP 2008 3.125% 5,000 4,913 4,912
US BANK NA 2009 3.400% 4,000 3,988 3,895
US BANK NA 2011 6.375% 11,455 12,549 12,721
WACHOVIA CORP 2005 7.450% 5,000 5,000 5,116
WACHOVIA CORP 2006 4.950% 6,000 5,995 6,167
WACHOVIA CORP 2009 3.625% 10,000 9,981 9,885
WASHINGTON MUTUAL BANK FA 2011 6.875% 1,500 1,673 1,688
WELLS FARGO & CO 2007 5.125% 5,000 5,000 5,172
WELLS FARGO & CO 2008 3.500% 5,000 4,996 4,969
WELLS FARGO BANK NA 2011 6.450% 14,000 15,623 15,569
WESTFIELD GROUP 2010 4.375% 12,500 12,454 12,363 (d)
WORLD SAVINGS BANK FSB 2009 4.125% 15,000 14,954 15,003
WORLD SAVINGS BANK FSB 2009 4.500% 30,000 30,124 30,575
-------------------------------------------------------------------------------
Total - Corporate - Finance 859,905 854,970 861,817
Corporate - Industrial
ABITIBI CONSOLIDATED INC 2005 8.300% 3,250 3,250 3,327
AINSWORTH LUMBER CO LTD 2014 6.750% 700 651 681
ALCOA INC 2007 4.250% 10,000 9,982 10,174
F-39
Bal Held at
12/31/04
Principal
Amt of Bonds Value at
& Notes or # Cost 12/31/04
Issuer Name and Issuer Title of Shares (Notes a & c) (Note a)
- ---------------------------------------------------- -------------- --------------- ---------------
AMERICAN STANDARD COMPANIES 2008 7.375% 2,000 1,953 2,190
ANADARKO PETRO CORP 2008 3.250% 10,000 10,096 9,828
ARCH WESTERN FINANCE LLC 2013 6.750% 500 508 516
ARGOSY GAMING 2014 7.000% 455 456 503
ASHLAND INC 2005 7.830% 1,100 1,100 1,130
BALL CORP 2012 6.875% 2,000 2,057 2,150
BCP CAYLUX HLDG LUX SCA 2014 9.625% 500 505 564 (d)
BEAZER HOMES USA INC 2013 6.500% 750 770 759
BOISE CASCADE LLC 2012 5.005% 1,000 1,020 1,038 (d)
BOISE CASCADE 2013 7.000% 1,500 1,584 1,727
BOISE CASCADE LLC 2014 7.125% 500 526 529 (d)
BOYD GAMING CORP 2014 6.750% 750 753 786
BRITISH SKY BROADCASTING 2009 6.875% 1,500 1,467 1,646
BURLINGTON NORTHERN SANTA FE C 2005 6.375% 5,000 5,000 5,147
BURLINGTON NORTHERN SANTA FE C 2010 7.125% 5,000 5,696 5,710
CADBURY SCHWEPPES US 2008 3.875% 12,500 12,472 12,456 (d)
CAESARS ENTERTAINMENT INC 2013 7.000% 1,000 1,079 1,103
CALIFORNIA STEEL INDUSTRIES 2014 6.125% 1,500 1,492 1,489
CAMPBELL SOUP CO. 2008 5.875% 6,000 6,606 6,417
CANADIAN NATL RAILWAY COMPANY 2009 4.250% 15,250 15,207 15,398
CANADIAN NATURAL RESOURCES LTD 2005 7.690% 9,000 9,000 9,319 (d)
CARNIVAL PLC 2007 3.750% 10,000 9,974 10,012
CASCADES INC 2013 7.250% 435 446 461
CASE CORP 2005 7.250% 1,000 1,011 1,018
CASE NEW HOLLAND INC 2009 6.000% 500 475 495 (d)
CHESAPEAKE ENERGY CORP 2013 7.500% 1,500 1,579 1,633
CHESAPEAKE ENERGY CORP 2016 6.875% 750 801 786
CHESAPEAKE ENERGY CORP 2014 7.500% 1,000 1,024 1,093
CHESAPEAKE ENERGY CORP 2015 6.375% 300 304 308 (d)
CHURCH & DWIGHT 2012 6.000% 1,500 1,515 1,526 (d)
CINTAS CORP 2007 5.125% 2,000 2,000 2,077
COCA-COLA ENTERPRISES INC 2007 5.250% 10,000 9,973 10,387
COMCAST CORP 2011 5.500% 7,500 7,911 7,924
COMMUNITY HEALTH SYSTEMS INC 2012 6.500% 2,350 2,376 2,368
CONOCO FINANCIAL 2006 5.450% 3,000 3,063 3,107
COTT BEVERAGES INC 2011 8.000% 1,750 1,739 1,905
CSC HOLDINGS INC 2007 7.875% 2,500 2,434 2,681
CSC HOLDINGS INC 2012 6.750% 500 514 514 (d)
CSX CORP 2007 7.450% 3,600 3,911 3,902
CSX CORP 2009 4.875% 8,000 8,094 8,200
CVS CORP 2009 4.000% 17,500 17,582 17,418
DAIMLERCHRYSLER NA HLDG 2006 6.400% 6,000 6,086 6,244
DAIMLERCHRYSLER NA HLDG 2008 4.750% 9,000 9,340 9,185
DAIMLERCHRYSLER NA HLDG 2008 4.050% 10,000 10,110 9,973
DENBURY RESOURCES INC 2013 7.500% 500 516 540
DEX MEDIA WEST 2010 8.500% 890 936 990
DISNEY COMPANY - THE WALT 2006 5.500% 10,000 10,029 10,427
DISNEY COMPANY - THE WALT 2007 5.375% 5,000 4,994 5,202
DOMINOS INC 2011 8.250% 500 523 546
DONNELLEY - RR & SONS 2009 3.750% 7,500 7,491 7,401
DOW CHEMICAL 2009 4.027% 22,500 22,500 21,606 (d)
DRS TECHNOLOGIES INC 2013 6.875% 1,800 1,821 1,881
ECHOSTAR DBS CORP 2008 5.750% 1,750 1,756 1,772
ECHOSTAR DBS CORP 2011 6.375% 1,000 1,000 1,023
EMMIS COMMUNICATIONS CORP 2012 6.875% 1,000 1,004 1,046
ENCORE ACQUISITION CO 2012 8.375% 1,000 1,054 1,113
F-40
Bal Held at
12/31/04
Principal
Amt of Bonds Value at
& Notes or # Cost 12/31/04
Issuer Name and Issuer Title of Shares (Notes a & c) (Note a)
- ---------------------------------------------------- -------------- --------------- ---------------
ENCORE ACQUISITION CO 2014 6.250% 1,000 951 1,005
ENERGIZER HOLDINGS INC 2007 3.440% 6,000 6,000 5,956 (d)
EQUIFAX INC 2007 4.950% 4,000 3,995 4,137
EQUISTAR CHEMICALS LP 2009 8.750% 1,500 1,559 1,680
EURAMAX INTERNATIONAL INC 2011 8.500% 1,000 1,041 1,068
EXCO RESOURCES INC 2011 7.250% 750 769 803
FEDEX CORP 2009 3.500% 27,000 26,951 26,436
FISHER SCIENTIFIC INTL INC 2013 8.000% 1,000 1,057 1,135
FLEXTRONICS INTERNATIONAL 2013 6.500% 1,050 1,061 1,076
FOREST OIL CORP 2014 7.750% 500 536 544
GANNETT CO INC 2007 5.500% 9,445 9,413 9,839
GENERAL ELECTRIC CAP CORP 2008 3.500% 7,500 7,495 7,444
GENERAL ELECTRIC CAP CORP 2010 4.250% 2,000 1,991 1,997
GENERAL ELECTRIC CAP CORP 2007 5.375% 5,000 4,991 5,198
GENERAL ELECTRIC CAP CORP 2008 4.250% 4,000 3,985 4,067
GENERAL MILLS 2007 5.125% 7,300 7,491 7,495
GENERAL MOTORS ACCEPTANCE CORP 2011 6.875% 12,500 13,341 12,810
GEORGIA GULF CORP 2013 7.125% 1,950 2,023 2,106
GRAPHIC PKG INTL CORP 2011 8.500% 1,000 1,093 1,093
HALLIBURTON CO 2010 5.500% 17,500 18,069 18,432
HALLMARK CARDS INC 2008 4.220% 10,000 10,000 9,931 (d)
HARRAHS OPERATING CO 2005 7.875% 2,000 2,018 2,080
HCA INC 2012 6.300% 1,800 1,825 1,826
HCA INC 2009 5.500% 500 502 500
HILTON HOTELS CORP 2009 7.200% 1,500 1,546 1,673
HOME DEPOT INC 2009 3.750% 33,500 33,483 33,200 (d)
HORTON D R INC 2009 8.000% 2,000 1,995 2,233
HOST MARRIOTT L.P. 2013 7.125% 1,500 1,541 1,603
INTERNATIONAL PAPER COMPANY 2008 3.800% 15,000 15,076 14,938
INTERNATIONAL PAPER COMPANY 2009 4.250% 2,000 1,997 2,008
INTERNATIONAL PAPER COMPANY 2010 4.000% 7,500 7,494 7,360
JAMES RIVER CORP 2007 6.875% 1,000 1,021 1,063
JC PENNEY INC 2015 6.875% 500 523 541
JEAN COUTU GROUP 2012 7.625% 500 508 529 (d)
JOHN DEERE CAPITAL CORPORATION 2008 3.900% 15,000 15,116 15,105
JONES APPAREL GROUP INC 2006 7.875% 2,000 1,998 2,116
JONES APPAREL GROUP INC 2009 4.250% 18,750 18,752 18,684 (d)
K HOVNANIAN ENTERPRISES INC 2014 6.375% 1,000 1,030 1,003
K HOVNANIAN ENTERPRISES INC 2015 6.250% 750 750 737 (d)
KB HOME 2014 5.750% 1,250 1,244 1,238
KB HOME 2015 5.875% 750 736 743
KELLOGG CO. 2006 6.000% 5,150 5,325 5,310
KELLOGG CO. 2008 2.875% 5,000 4,999 4,862
KELLOGG UK HOLDING CO LIMITED 2006 4.490% 5,600 5,600 5,663 (d)
KENDALL-JACKSON WINE ESTATES L 2009 3.360% 12,000 12,000 11,402 (d)
KEY ENERGY GROUP INC 2013 6.375% 820 778 834
KIRBY CORPORATION 2013 3.581% 12,000 12,000 12,139 (d)
KRAFT FOODS INC 2006 4.625% 15,000 14,991 15,304
KRAFT FOODS INC 2008 4.000% 4,000 3,982 4,001
KROGER COMPANY 2006 8.150% 4,000 4,001 4,271
L-3 COMMUNICATIONS CORP 2013 6.125% 2,750 2,751 2,839
LAMAR MEDIA CORP 2013 7.250% 1,745 1,855 1,885
LEAR CORP 2005 7.960% 1,500 1,500 1,524
LIN TELEVISION CORP 2013 6.500% 1,000 980 1,029
LOCKHEED CORP 2009 8.200% 16,000 18,949 18,863
LOUISIANA PACIFIC 2005 8.500% 1,000 998 1,027
F-41
Bal Held at
12/31/04
Principal
Amt of Bonds Value at
& Notes or # Cost 12/31/04
Issuer Name and Issuer Title of Shares (Notes a & c) (Note a)
- ---------------------------------------------------- -------------- --------------- ---------------
MANITOWOC CO 2013 7.125% 1,575 1,607 1,705
MASCO CORP 2007 4.625% 5,000 4,993 5,120
MAY DEPT STORES 2009 4.800% 17,500 17,579 17,794
MEDIA GENERAL 2006 6.950% 5,000 4,999 5,211
MEDIANEWS GROUP INC 2013 6.875% 1,500 1,494 1,538 (d)
MERITOR AUTOMOTIVE INC 2009 6.800% 500 516 525
MGM MIRAGE INC 2009 6.000% 2,250 2,261 2,318
MOHEGAN TRIBAL GAMING AUTHORIT 2009 6.375% 1,500 1,515 1,541
NALCO COMPANY 2011 7.750% 1,500 1,546 1,620
NEIGHBORCARE INC 2013 6.875% 500 505 524
NEWFIELD EXPLORATION CO 2011 7.625% 2,500 2,579 2,813
NEWFIELD EXPLORATION CO 2014 6.625% 200 210 212 (d)
NORAMPAC INC 2013 6.750% 2,500 2,487 2,631
NORTHROP GRUMMAN 2011 7.125% 5,000 5,583 5,738
NOVA CHEMICALS CORPORATION 2012 6.500% 1,300 1,355 1,378
OCCIDENTAL PETROLEUM CORP 2008 7.375% 7,500 8,180 8,411
OFFSHORE LOGISTICS INC. 2013 6.125% 500 479 508
OMNICARE INC 2013 6.125% 1,750 1,780 1,759
OWENS-BROCKWAY 2011 7.750% 1,500 1,556 1,624
PACIFIC ENERGY PARTNERS 2014 7.125% 500 508 533
PACKAGING CORP OF AMERICA 2008 4.375% 3,250 3,239 3,247
PEABODY ENERGY CORP 2013 6.875% 2,500 2,586 2,706
PEABODY ENERGY CORP 2016 5.875% 1,000 1,007 995
PRAXAIR INC. 2008 2.750% 15,000 14,955 14,456
QUEBECOR WORLD INC 2006 7.200% 10,000 10,000 10,304 (d)
RAYTHEON COMPANY 2010 6.550% 1,655 1,862 1,821
RAYTHEON COMPANY 2010 6.000% 638 703 690
RAYTHEON COMPANY 2007 4.500% 2,995 3,028 3,064
RIO TINTO LTD 2008 2.625% 12,500 12,498 11,974
ROGERS CABLE SYSTEMS 2013 6.250% 1,500 1,522 1,504
RUSSEL METALS 2014 6.375% 865 854 878
SAFEWAY INC 2007 4.800% 5,000 4,995 5,098
SARA LEE CORP 2008 2.750% 15,000 14,964 14,527
SCHULER HOMES INC 2009 9.375% 1,000 1,000 1,075
SCOTTS COMPANY 2013 6.625% 1,500 1,529 1,579
SEAGATE TECHNOLOGY 2009 8.000% 250 267 270
SHAW COMMUNICATIONS INC 2011 7.250% 1,250 1,302 1,378
SILGAN HOLDING 2013 6.750% 1,000 1,001 1,040
SINCLAIR BROADCAST GROUP INC. 2012 8.000% 500 526 531
SPEEDWAY MOTOR SPORT 2013 6.750% 1,000 1,012 1,055
SPX CORP 2011 6.250% 250 252 264
STANDARD PACIFIC CP 2008 6.500% 1,500 1,505 1,573
STANLEY WORKS 2007 3.500% 2,500 2,494 2,492
STARWOOD HOTELS AND RESORTS WO 2012 7.875% 500 551 571
STATION CASINOS INC. 2012 6.000% 1,000 956 1,019
SUSQUEHANNA MEDIA CO 2013 7.375% 1,000 1,035 1,070
TARGET CORP 2009 5.375% 6,150 6,347 6,510
TEREX CORPORATION 2014 7.375% 500 495 536
THOMSON CORP 2009 4.250% 7,500 7,448 7,513
TIME WARNER INC 2006 6.125% 8,000 7,995 8,284
TIME WARNER INC 2007 6.150% 8,000 8,472 8,464
TRANS OCEAN CONTAINER CORP 2007 6.670% 277 277 279 (d)
TRANSDIGM INC 2011 8.375% 750 793 804
TRIAD HOSPITALS 2013 7.000% 500 514 511
TRIAD HOSPITALS 2012 7.000% 1,500 1,500 1,579
TYCO INTL GROUP SA 2009 6.125% 13,500 14,190 14,567
F-42
Bal Held at
12/31/04
Principal
Amt of Bonds Value at
& Notes or # Cost 12/31/04
Issuer Name and Issuer Title of Shares (Notes a & c) (Note a)
- ---------------------------------------------------- -------------- --------------- ---------------
UNION PACIFIC CORP 2009 3.875% 6,000 5,988 5,953
UNION PACIFIC CORP 2010 3.625% 3,000 2,984 2,891
UNION PACIFIC RAILROAD COMPANY 2012 3.860% 15,000 15,000 14,789 (d)
UNION TANK 2008 6.500% 2,203 2,202 2,306
UNITED AIRLINES PASS THROUGH T 2010 7.032% 3,920 3,528 3,528
UNITED HEALTHCARE 2005 7.500% 6,000 5,996 6,193
UNITED RENTALS - NORTH AMERICA 2012 6.500% 915 914 892
UNITED STATES STEEL 2010 9.750% 1,500 1,576 1,718
UNIVERSAL COMPRESSION INC 2010 7.250% 500 521 534
VAIL RESORTS INC 2014 6.750% 500 509 509
VALERO ENERGY CORP 2007 6.125% 3,500 3,497 3,682
VALMONT INDUSTRIES 2014 6.875% 1,500 1,503 1,560
VALSPAR CORP 2007 6.000% 10,000 9,975 10,390
VIACOM INC 2007 5.625% 10,000 10,085 10,455
VIDEOTRON - LE GRPE LTD 2014 6.875% 1,000 1,020 1,034
VIN & SPIRIT AB - V&S 2008 3.570% 15,000 15,000 14,688 (d)
VIVENDI UNIVERSAL 2008 6.250% 1,070 1,096 1,161
VWR INTERNATIONAL INC 2012 6.875% 1,000 1,033 1,045 (d)
WABTEC 2013 6.875% 1,000 1,016 1,050
WALMART STORES 2006 5.450% 10,000 10,110 10,343
WALMART STORES 2011 4.125% 20,000 20,101 20,067
WCI COMMUNITIES 2013 7.875% 1,810 1,855 1,905
WEYERHAEUSER CO 2008 5.950% 10,000 10,275 10,709
XTO ENERGY INC 2013 6.250% 1,500 1,540 1,636
XTO ENERGY INC 2014 4.900% 1,000 994 998
-------------------------------------------------------------------------------
Total - Corporate - Industrial 884,063 896,516 903,503
Corporate - Utility
AMERICAN ELECTRIC POWER 2006 6.125% 2,500 2,498 2,591
AMERICAN ELECTRIC POWER 2010 5.375% 6,000 6,291 6,279
AMERICAN ELECTRIC POWER 2009 3.550% 15,000 15,000 14,117 (d)
AMERITECH CAPITAL FUNDING CORP 2008 6.150% 7,000 7,624 7,472
BELLSOUTH CAP FUNDING 2010 7.750% 15,000 17,203 17,377
BRITISH TELECOMM/PP 2005 7.875% 12,500 12,774 13,037
BROADWING (CINCINNATI BELL) 2013 7.250% 1,250 1,272 1,284
CAROLINA PWR & LT 2009 5.950% 4,000 4,250 4,274
CINGULAR WIRELESS LLC 2006 5.625% 5,000 4,992 5,193
COMCAST CABLE COMMUNICATIONS I 2008 6.200% 15,000 16,128 16,198
COMCAST CABLE COMMUNICATIONS I 2006 6.375% 1,300 1,299 1,342
CONSOLIDATED EDISON CO OF NEW 2008 6.250% 6,000 6,493 6,421
CONSOLIDATED EDISON INC 2008 3.625% 9,000 8,979 8,923
CONSOLIDATED NAT GAS CO 2008 6.625% 5,700 6,246 6,219
CONSUMERS ENERGY 2008 6.375% 2,500 2,707 2,673
CONSUMERS ENERGY 2008 4.250% 9,500 9,738 9,593
DETROIT ENERGY 2009 6.650% 5,000 5,457 5,463
DEUTSCHE TELEKOM INTERNATIONAL 2010 8.500% 15,750 18,848 18,764
DEUTSCHE TELEKOM INTERNATIONAL 2008 3.875% 5,000 5,002 4,993
DPL INC 2011 6.875% 1,250 1,293 1,365
DUKE ENERGY CORP. 2008 3.750% 4,500 4,501 4,494
DUKE ENERGY CORP. 2008 4.200% 10,000 10,067 10,076
ENERGY EAST CORP 2006 5.750% 7,500 7,483 7,796
FIRSTENERGY CORP. 2006 5.500% 10,000 9,995 10,333
FPL FUELS INC 2006 2.340% 5,370 5,370 5,283 (d)
FPL FUELS INC 2006 2.340% 4,630 4,630 4,555 (d)
FPL GROUP CAPITAL INC. 2007 4.086% 15,000 15,174 15,159
F-43
Bal Held at
12/31/04
Principal
Amt of Bonds Value at
& Notes or # Cost 12/31/04
Issuer Name and Issuer Title of Shares (Notes a & c) (Note a)
- ---------------------------------------------------- -------------- --------------- ---------------
FRANCE TELECOM 2006 7.950% 14,301 14,937 15,016
GULF STATE UTILITIES 2009 2.800% 10,000 10,000 9,993
KANSAS CITY POWER & LIGHT 2005 7.125% 10,000 10,107 10,360
KANSAS CITY POWER & LIGHT 2007 6.000% 4,000 3,996 4,161
MIDAMERICAN ENERGY HLDGS 2008 3.500% 9,500 9,490 9,306
NISOURCE FINANCE CORPORATION 2010 7.875% 7,500 8,737 8,817
NISOURCE FINANCE CORPORATION 2006 3.200% 3,000 3,001 2,982
NORTHERN STATES POWER 2010 4.750% 3,500 3,493 3,562
PACIFIC GAS AND ELECTRIC COMPA 2009 3.600% 17,500 17,116 17,257
PACIFIC GAS AND ELECTRIC COMPA 2011 4.200% 6,250 6,235 6,152
PACIFICORP 2008 4.300% 6,500 6,493 6,564
PECO ENERGY COMPANY 2008 3.500% 20,000 20,000 19,842
PLAINS EXPLOR & PROD 2014 7.125% 895 905 976
PPL CORPORATION 2005 7.750% 3,000 3,000 3,038
PPL ELECTRIC UTILITIES CORPORA 2007 5.875% 6,135 6,593 6,449
PROGRESS ENERGY INC 2006 6.750% 2,100 2,100 2,179
PROGRESS ENERGY INC 2008 5.850% 10,000 9,997 10,546
PUB SERV CO OF COLORADO 2008 4.375% 8,730 8,903 8,874
PUGET ENERGY INC 2008 3.363% 3,500 3,500 3,437
RELIANT RESOURCES INC 2014 6.750% 1,500 1,525 1,500
SBC COMMUNICATIONS INC 2011 6.250% 7,000 7,568 7,680
SBC COMMUNICATIONS INC 2006 5.750% 5,000 5,052 5,160
SBC COMMUNICATIONS INC 2009 4.125% 5,000 4,967 4,991
SEMPRA ENERGY 2009 4.750% 11,000 10,995 11,213
SOUTHERN CA EDISON 2007 2.545% 15,000 14,978 14,995
SOUTHERN CA GAS CO 2009 2.630% 10,000 10,000 9,998
SOUTHERN COMPANY CAPITAL FUNDI 2007 5.300% 6,500 6,495 6,797
SOUTHWESTERN PUB SRV CO 2006 5.125% 7,000 6,992 7,184
SPRINT CAPITAL CORP 2011 7.625% 10,000 11,350 11,610
TAMPA ELECTRIC CO 2007 5.375% 3,785 4,017 3,937
TELECOM ITALIA CAPITAL 2008 4.000% 10,000 10,090 9,962
TELEFONICA EUROPE 2005 7.350% 8,000 7,999 8,237
TELUS CORP ORD 2007 7.500% 9,000 9,675 9,779
TOYO COMMUNICATION EQUIPMENT 2008 2.875% 20,000 19,925 19,476
TRANS CONTINENTAL GAS PIPELINE 2011 7.000% 750 794 822
VERIZON NEW YORK INC 2012 6.875% 4,000 4,380 4,490
VIRGINIA ELEC & PWR CO 2006 5.750% 4,675 4,671 4,813
VODAFONE GROUP PLC 2005 7.625% 10,000 10,008 10,053
VODAFONE GROUP PLC 2010 7.750% 4,400 5,204 5,114
VODAFONE GROUP PLC 2008 3.950% 3,500 3,533 3,524
WESTERN RESOURCES 2007 7.875% 2,448 2,637 2,662
WISCONSIN ENERGY 2008 5.500% 2,500 2,596 2,632
XCEL ENERGY 2008 3.400% 2,500 2,438 2,443
-------------------------------------------------------------------------------
Total - Corporate - Utility 511,219 527,806 529,857
-------------------------------------------------------------------------------
Total - Corporate Debt Securities 2,255,188 2,279,295 2,295,179
-------------------------------------------------------------------------------
Total - BONDS AND NOTES 5,505,480 5,540,125 5,561,538
PREFERRED STOCK
Preferred Stock - Stated Maturity
Corporate - Industrial
BHP OPERATIONS 2006 6.760% 50 5,000 5,184 (d)
WHIRLPOOL CORP 2008 6.550% 9 902 970 (d)
-------------------------------------------------------------------------------
Total - Corporate - Industrial 59 5,902 6,154
F-44
Bal Held at
12/31/04
Principal
Amt of Bonds Value at
& Notes or # Cost 12/31/04
Issuer Name and Issuer Title of Shares (Notes a & c) (Note a)
- ---------------------------------------------------- -------------- --------------- ---------------
Corporate - Utility
AMERENCILCO 2008 5.850% 33 3,315 3,331
INDIANA MICHIGAN PWR CO 2009 6.300% 52 5,224 5,225
INDIANA MICHIGAN PWR CO 2009 6.250% 20 2,000 2,000
INDIANA MICHIGAN PWR CO 2009 5.900% 28 2,768 2,822
LOUISVILLE GAS & ELECTRIC CO 2008 5.875% 11 1,079 1,082
OHIO POWER CO 2009 5.900% 25 2,461 2,483
SAN DIEGO GAS & ELEC COMPANY 2008 7.050% 51 1,294 1,285
-------------------------------------------------------------------------------
Total - Corporate - Utility 220 18,141 18,228
-------------------------------------------------------------------------------
Total - Preferred Stock - Stated Maturity 279 24,043 24,383
Preferred Stock - Perpetual
Corporate - Finance
CITIBANK-NEW YORK NY 0.000% 100 10,000 10,075
CITIGROUP INC 5.860% 150 7,782 7,793
-------------------------------------------------------------------------------
Total - Corporate - Finance 250 17,782 17,868
-------------------------------------------------------------------------------
Total - Preferred Stock - Perpetual 250 17,782 17,868
-------------------------------------------------------------------------------
Total - PREFERRED STOCK 529 41,825 42,251
-------------------------------------------------------------------------------
TOTAL Investments in Securities of
Unaffiliated Issuers 5,506,009 5,581,950 5,603,789
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 AmEx
Certificate Company at fair value
c) Aggregate cost of investment in securities of unaffiliated issuers for
federal income tax purposes was $4,990,644.
d) Securities acquired in private negotiation which may require registration
under federal securities law if they were to be publicly sold. Also see note
3b to financial statements
e) Non-income producing securities
F-45
AMERICAN EXPRESS CERTIFICATE COMPANY SCHEDULE II
Investments in and Advances to Affiliates and Income Thereon
December 31, 2004, 2003 and 2002
($ in thousands)
Balance December 31, 2004
--------------------------------------------------
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 ($41) ($41) $0
=================
Investors Syndicate Development Corporation:
Undistributed Net Income.......................... $0 0
=================
Other Affiliates (as defined in Sec. 2(a)(3) of the
Investment Company Act of 1940)......................... $0 0 0 0
================= ------------ -------------- ---------------
Total affiliates.................................... ($41) ($41) $0
============ ============== ===============
Balance December 31, 2003
--------------------------------------------------
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 ($45) ($45) $0
=================
Other Controlled Companies: $0 4 4 0
=================
Other Affiliates (as defined in Sec. 2(a)(3) of the
Investment Company Act of 1940)......................... $0 0 0 0
================= ------------ -------------- ---------------
Total affiliates.................................... ($41) ($41) $0
============ ============== ===============
F-46
AMERICAN EXPRESS CERTIFICATE COMPANY SCHEDULE II
Investments in and Advances to Affiliates and Income Thereon
December 31, 2004, 2003 and 2002
($ 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
=================
Other Controlled Companies: $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
============ ============== ===============
NOTES:
(a) The aggregate cost for federal income tax purposes was $(41), ($41) and
($45) at December 31, 2004, 2003 and 2002, 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.
F-47
AMERICAN EXPRESS CERTIFICATE COMPANY SCHEDULE III
Mortgage Loans on Real Estate and Interest
Earned on Mortgages
Year Ended December 31, 2004
(Thousands)
Mortgage loans on real estate at Part 2 - Interest
Part 1 - end of period earned on mortgages
-------- --------------------------------------- ---------------------
Amount of principal
unpaid at end of
period
--------------------
Average
gross
rate of
Carrying Interest interest
amount of Subject Amount due and on
mortgages to of accrued mortgages
Number Prior (c),(g), delinquent mortgages at end of held at end
of liens (h) and interest being period of period
Loan No. Description (a) Property Location loans (b) (i) Total (d) foreclosed (e) (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 0.000%
$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:
21-47139 Eagan, MN 1 1,087 1,087 0 0 8.25000
21-47157 Tampa, FL 1 2,484 2,484 0 0 7.65000
21-47167 Ruskin, FL 1 5,367 5,367 0 0 7.44000
21-47168 Riverview, FL 1 2,877 2,877 0 0 7.44000
21-47173 Fairfield, NJ 1 3,467 3,467 0 0 7.26000
21-47187 Mebane, NC 1 2,523 2,523 0 0 7.22000
21-47195 Pharr, TX 1 1,873 1,873 0 0 3.80000
21-47196 Pharr, TX 1 4,192 4,192 0 0 3.80000
21-47197 Alamo, TX 1 960 960 0 0 3.80000
21-47204 Mary Esther, FL 1 2,586 2,586 0 0 7.04000
21-47205 Tucson, AZ 1 3,513 3,513 0 0 7.05000
21-47206 Albuquerque, NM 1 3,608 4,608 0 0 6.00000
21-47209 Brandeton, FL 1 5,131 5,131 0 0 6.40000
21-47210 West Haven, CT 1 3,658 3,658 0 0 6.60000
21-47214 Plymouth, MN 1 9,830 9,830 0 0 7.45000
21-47215 Urbandale, IA 1 2,894 2,894 0 0 6.25000
21-47216 Urbandale, IA 1 2,279 2,279 0 0 6.25000
21-47223 Houston, TX 1 5,390 5,390 0 0 6.15000
21-47224 Plano, TX 1 2,457 2,457 0 0 6.00000
21-47226 Austin, TX 1 2,435 2,435 0 0 5.50000
21-47228 Bridgeport, CT 1 3,812 3,812 0 0 7.14000
21-47230 Houston, TX 1 1,794 1,794 0 0 7.08000
21-47232 Milwaukee, WI 1 3,577 3,577 0 0 7.40000
21-47233 Jefferson City, MO 1 1,809 1,809 0 0 7.15000
21-47234 Littleton, CO 1 2,920 2,920 0 0 7.18000
21-47235 Southport, CT 1 2,439 2,439 0 0 7.02000
21-47237 Roanoke, VA 1 1,319 1,319 0 0 5.25000
21-47238 Cicero, IN 1 3,073 3,073 0 0 7.00000
21-47240 Baltimore, MD 1 3,553 3,553 0 0 7.02000
21-47241 Sioux Falls, SD 1 917 917 0 0 7.05000
21-47242 San Antonio, TX 1 3,997 3,997 0 0 7.33000
21-47243 Chesapeake. VA 1 2,711 2,711 0 0 6.96000
21-47245 Southport, CT 1 2,219 2,219 0 0 6.98000
21-47246 Dallas, TX 1 856 856 0 0 7.01000
21-47248 Moorehead, MN 1 5,034 5,034 0 0 6.96000
21-47249 Ventura, CA 1 4,439 4,439 0 0 6.75000
21-47250 Alexandria, VA 1 2,472 2,472 0 0 6.90000
21-47251 Phoenix, AZ 1 2,534 2,534 0 0 6.80000
21-47252 Broken Arrow, OK 1 3,016 3,016 0 0 6.80000
21-47253 Phoenix, AZ 1 1,511 1,511 0 0 6.80000
21-47254 Tulsa, OK 1 3,149 3,149 0 0 6.80000
21-47255 Forest Lake/
Stillwater, MN 1 4,419 4,419 0 0 6.83000
21-47256 Rapid City, SD 1 881 881 0 0 6.75000
21-47259 Santa Clarita, CA 1 1,740 1,740 0 0 6.95000
21-47260 Ann Arbor, MI 1 2,559 2,559 0 0 6.98000
21-47261 Bloomington, MN 1 989 989 0 0 7.06000
21-47262 Fargo, ND 1 5,220 5,220 0 0 6.90000
21-47263 Columbus, OH 1 1,979 1,979 0 0 6.95000
F-48
AMERICAN EXPRESS CERTIFICATE COMPANY SCHEDULE III
Mortgage Loans on Real Estate and Interest
Earned on Mortgages
Year Ended December 31, 2004
(Thousands)
Mortgage loans on real estate at Part 2 - Interest
Part 1 - end of period earned on mortgages
-------- --------------------------------------- ---------------------
Amount of principal
unpaid at end of
period
--------------------
Average
gross
rate of
Carrying Interest interest
amount of Subject Amount due and on
mortgages to of accrued mortgages
Number Prior (c),(g), delinquent mortgages at end of held at end
of liens (h) and interest being period of period
Loan No. Description (a) Property Location loans (b) (i) Total (d) foreclosed (e) (f)
- ----------------------------------- ------------------ ------ ----- --------- ------- ----------- ---------- --------- -----------
21-47264 Orem, UT 1 1,760 1,760 0 0 6.81000
21-47266 Clarkston, MI 1 3,701 3,701 0 0 6.89000
21-47267 Charlotte, NC 1 1,232 1,232 0 0 6.91000
21-47268 Seebring, FL 1 5,693 5,693 0 0 6.85000
21-47269 Spokane, WA 1 3,484 3,484 0 0 7.15000
21-47270 Houston, TX 1 2,528 2,528 0 0 6.80000
21-47271 Wilsonville, OR 1 1,529 1,529 0 0 6.85000
21-47272 Aurora, CO 1 1,779 1,779 0 0 6.44000
21-47273 Rapid City, SD 1 721 721 0 0 6.85000
21-47274 Towson, MD 1 1,065 1,065 0 0 6.85000
21-47277 Tucson, AZ 1 2,042 2,042 0 0 7.00000
21-47278 Kennewick, WA 1 6,028 6,028 0 0 6.75000
21-47279 Chetek, WI 1 1,876 1,876 0 0 7.25000
21-47281 Shaker Heights, OH 1 2,128 2,128 0 0 7.00000
21-47282 Springfield, VA 1 2,002 2,002 0 0 6.85000
21-47285 Fort Meyers, FL 1 3,622 3,622 0 0 6.75000
21-47286 Las Vegas, NV 1 2,341 2,341 0 0 7.00000
21-47287 Rogers, MN 1 4,874 4,874 0 0 7.30000
21-47288 Plymouth, MN 1 1,783 1,783 0 0 6.85000
21-47289 Newport News, VA 1 2,194 2,194 0 0 6.90000
21-47290 Doraville, GA 1 2,763 2,763 0 0 7.00000
21-47291 Liverpool, NY 1 2,731 2,731 0 0 7.00000
21-47292 Las Vegas, NV 1 7,419 7,419 0 0 6.84000
21-47293 Corvallis, OR 1 4,006 4,006 0 0 6.75000
21-47294 Hope Mills, NC 1 1,319 1,319 0 0 7.00000
21-47295 Concord, OH 1 1,026 1,026 0 0 7.00000
21-47296 Painesville, OH 1 987 987 0 0 7.00000
21-47297 Concord, OH 1 1,660 1,660 0 0 7.00000
21-47298 Rock Hill, SC 1 741 741 0 0 7.25000
21-47299 Escondido, CA 1 2,064 2,064 0 0 7.00000
21-47303 Santa Monica, CA 1 6,183 6,183 0 0 3.21375
21-47304 Houston, TX 1 6,814 6,814 0 0 6.40000
21-47306 FairviewPrk/ 1 4,229 4,229 0 0 3.23000
Cuyahoga Falls, OH
21-47308 Clearwater, FL 1 5,949 5,949 0 0 6.18000
21-47310 Sacramento, CA 1 5,363 5,363 0 0 3.11938
21-47311 Sacramento, CA 1 3,521 3,521 0 0 3.11938
21-47312 Boxborough, MA 1 7,534 7,534 0 0 3.36375
21-47313 Orchard Park, NY 1 4,036 4,036 0 0 3.23000
21-47315 Humble, TX 1 6,546 6,546 0 0 3.36938
21-47317 Oak Lawn, IL 1 1,528 1,528 0 0 5.00000
21-47318 Silverdale, WA 1 4,595 4,595 0 0 4.41000
21-47319 Pittsburgh, PA 1 2,548 2,548 0 0 4.93000
21-47320 Kirland, WA 1 3,222 3,222 0 0 4.66000
21-47321 Clinton
Township, MI 1 6,829 6,829 0 0 3.81000
21-47322 Colleyville, TX 1 2,417 2,417 0 0 3.94000
21-47323 Alameda, CA 1 6,054 6,054 0 0 3.62750
21-47330 Meriden, CT 1 4,300 4,300 0 0 5.39000
21-87316 Huson, MA 1 1,442 1,442 0 0 4.46250
21-87324 Falls Church, VA 1 2,250 2,250 0 0 4.79000
21-87325 Austin, TX 1 3,930 3,930 0 0 4.85000
21-873256 Austin, TX 1 2,270 2,270 0 0 4.31250
21-87327 Marietta, GA 1 2,483 2,483 0 0 4.80000
21-87328 Charlotte, NC 1 3,300 3,300 0 0 4.99000
21-87329 Omaha, NE 1 1,141 1,141 0 0 5.40000
21-87331 Omaha, NE 1 4,125 4,125 0 0 4.49000
21-87332 Denver, CO 1 5,191 5,191 0 0 4.80000
Total Other 104 328,452 329,452 0 0 6.242%
------ --------- ------- ----------- ---------- -----------
Unallocated Reserve for Losses 4,036
--------
Total First Mortgage Loans on Real Estate 104 $324,416 $329,452 $0 $0 6.242%
====== ========= ======== ========== ========== ===========
F-49
AMERICAN EXPRESS CERTIFICATE COMPANY SCHEDULE III
Mortgage Loans on Real Estate and Interest
Earned on Mortgages
Year Ended December 31, 2004
(Thousands)
Part 3 - Location of mortgaged properties 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 9,601 9,601 0 0
California 7 29,363 29,363 0 0
Colorado 3 9,891 9,891 0 0
Connecticut 5 16,429 16,429 0 0
Florida 8 33,708 33,708 0 0
Georgia 2 5,245 5,245 0 0
Iowa 2 5,173 5,173 0 0
Ilinois 1 1,528 1,528 0 0
Indiana 1 3,073 3,073 0 0
Massachusetts 2 8,976 8,976 0 0
Maryland 2 4,619 4,619 0 0
Michigan 3 13,090 13,090 0 0
Minnesota 7 28,017 28,017 0 0
Missouri 1 1,809 1,809 0 0
Nevada 2 9,760 9,760 0 0
New Jersey 1 3,467 3,467 0 0
New Mexico 1 3,608 4,608 0 0
New York 2 6,767 6,767 0 0
North Carolina 5 9,401 9,401 0 0
North Dakota 1 5,220 5,220 0 0
Nebraska 2 5,266 5,266
Ohio 5 10,983 10,983 0 0
Oklahoma 2 6,165 6,165 0 0
Oregon 2 5,535 5,535 0 0
Pennsylvania 1 2,548 2,548 0 0
South Carolina 1 741 741 0 0
South Dakota 3 2,520 2,520 0 0
Texas 15 48,460 48,460 0 0
Utah 1 1,760 1,760 0 0
Virginia 6 12,948 12,948 0 0
Washington 4 17,328 17,328 0 0
Wisconsin 2 5,453 5,453 0 0
-------- ---------- --------- ---------- -----------
Total 104 328,452 329,452 0 0
-------- ---------- --------- ---------- -----------
Unallocated Reserve
for Losses 4,036
----------
Total 104 $324,416 $329,452 $0 $0
======== ========== ========= ========== ===========
F-50
AMERICAN EXPRESS CERTIFICATE COMPANY SCHEDULE III
Mortgage Loans on Real Estate and Interest
Earned on Mortgages
Year Ended December 31, 2004
(Thousands)
NOTES:
(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, 2004 are shown by type and class of
loan.
The average gross interest rates on mortgage loans held at December 31, 2004,
2003 and 2002 are summarized as follows:
2004 2003 2002
-------- -------- --------
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 6.242 6.108 6.613
-------- -------- --------
Combined average 6.242% 6.108% 6.613%
======== ======== ========
(g) Following is a reconciliation of the carrying amount of mortgage loans for the
years ended December 31, 2004, 2003 and 2002.
2004 2003 2002
-------- -------- --------
Balance at beginning of period $330,953 $338,924 $343,434
New loans acquired:
Nonaffiliated companies 34,507 43,030 45,128
Reserve for loss reversal 0 0 0
-------- -------- --------
Total additions 34,507 43,030 45,128
-------- -------- --------
365,460 381,954 388,562
-------- -------- --------
Deductions during period:
Collections of principal 37,544 47,688 48,349
Reserve for loss 3,500 3,313 1,289
-------- -------- --------
Total deductions 41,044 51,001 49,638
--------------------------------------
Balance at end of period $324,416 $330,953 $338,924
======== ======== ========
(h) The aggregate cost of mortgage loans for federal income tax purposes at
December 31, 2004 was $329,452.
(i) At December 31, 2004, an unallocated reserve for loss on first mortgage
loans of $4,036 is recorded.
F-51
AMERICAN EXPRESS CERTIFICATE COMPANY SCHEDULE V
Qualified Assets on Deposit
December 31, 2004
($ 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 $52 $0 $0 $0 $52
New Jersey - Commissioner
of Banking and Insurance
of New Jersey 50 0 0 0 50
Pennsylvania - Treasurer
of the State of
Pennsylvania 150 0 0 0 150
Texas - Treasurer of the
State of Texas 120 0 0 0 120
----------- -------- --------- -------- ----------
Total deposits with states or their
depositories to meet requirements of
statues and agreements 372 0 0 0 372
Central depository - American
Express Trust Company 5,675,917 41,825 325,416 90,745 6,133,903
----------- -------- --------- -------- ----------
Total $5,676,289 $41,825 $325,416 $90,745 $6,134,275
=========== ======== ========= ======== ==========
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 and accounts payable purchased.
F-52
AMERICAN EXPRESS CERTIFICATE COMPANY SCHEDULE VI
Certificate Reserves
Part 1 - Summary of Changes
Year ended December 31, 2004
(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
15, " " " 0 0 0 0 0 0
20, " " " 0 0 0 0 0 0
15A, " " " 0 0 0 0 0 0
22A, " " " 3.09 289 7,076 6,250 165 55 47
I-76, " " " 3.35 294 6,581 4,903 159 109 8
Reserve Plus Flex Payment 24 249 158 0 2 0
IC-Q-Installment 21 328 70 0 11 0
IC-Q-Ins 156 1,813 840 0 108 2
IC-Q-Ins Emp 2 23 17 0 1 0
IC-I 10,841 175,508 92,554 0 15,920 1,655
IC-I-Emp 70 1,092 891 0 269 19
Inst 10,112 0 38,563 0 16,817 250
Inst-E 55 0 164 0 143 3
RP-Q-Installment 39 559 274 0 1 1
RP-Q-Flexible Payment 5 65 48 0 0 0
RP-Q-Ins 5 272 43 0 1 0
RP-Q-Ins Emp 0 0 1 0 0 0
RP-I 32 610 396 0 28 7
RP-I-EMP 0 0 0 0 0 0
Inst-R & RP I95 246 30,766 780 0 467 3
Inst-R-E 4 260 10 0 6 0
----------- --------- --------- ---------- ------------ ---------
Total 22,195 225,202 145,962 324 33,938 1,995
----------- --------- --------- ---------- ------------ ---------
Payments made in advance of certificate
year requirements and accrued interest
thereon:
15, includes ext maturities 2 0 0 0 0 0 0
20, " " " 2 0 0 (1) 0 0 0
15A, " " " 3 0 0 1 0 0 0
22A, " " " 3 0 0 163 4 42 0
I-76, " " " 3.5 0 0 336 12 18 0
----------- --------- --------- ---------- ------------ ---------
Total 0 0 499 16 60 0
----------- --------- --------- ---------- ------------ ---------
Additional credits and accrued interest
thereon:
" 15, includes ext mat 2.5 0 0 0 0 0 0
" 20, " " " 2.5 0 0 0 0 0 0
" 15A, " " " 3 0 0 (1) 0 0 0
" 22A, " " " 3 0 0 1,496 38 0 29
" I-76, " " " 3.5 0 0 1,156 38 0 18
" Res Plus Flex Pay 0 0 0 0 0 0
" IC-Q-Installment 0 0 (1) 0 0 0
" IC-Q-Ins 0 0 0 2 0 0
" IC-Q-Ins Emp 0 0 0 0 0 0
" IC-I 0 0 77 1,645 0 0
" IC-I-Emp 0 0 0 19 0 0
" Inst 0 0 11 252 0 0
" Inst-E 0 0 0 3 0 0
" RP-Q-Installment 0 0 0 1 0 0
" RP-Q-Flexible Pay 0 0 0 0 0 0
" RP-Q-Ins 0 0 0 0 0 0
" RP-Q-Ins Emp 0 0 0 0 0 0
" RP-I 0 0 0 7 0 0
" RP-I-EMP 0 0 0 0 0 0
" Inst-R 0 0 0 3 0 0
" Inst-R-E 0 0 0 0 0 0
----------- --------- --------- ---------- ------------ ---------
Total 0 0 2,738 2,008 0 47
----------- --------- --------- ---------- ------------ ---------
Deductions Balance at close of period
--------------------------------- -----------------------------
Number
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
15, " " " 0 0 0 0 0 0
20, " " " 0 0 0 0 0 0
15A, " " " 0 0 0 0 0 0
22A, " " " 272 237 1,221 208 5,270 4,787
I-76, " " " 0 424 148 264 5,816 4,607
Reserve Plus Flex Payment 90 26 0 2 24 43
IC-Q-Installment 20 14 0 13 229 47
IC-Q-Ins 65 163 0 133 1,481 722
IC-Q-Ins Emp 0 0 0 2 23 18
IC-I 21,725 29,152 0 6,786 108,275 59,252
IC-I-Emp 51 265 0 51 888 861
Inst 0 11,231 0 10,541 0 44,399
Inst-E 0 49 0 67 0 261
RP-Q-Installment 20 67 6 26 343 183
RP-Q-Flexible Payment 0 9 0 4 45 39
RP-Q-Ins 0 41 0 3 24 3
RP-Q-Ins Emp 0 0 0 0 0 1
RP-I 83 110 0 19 360 239
RP-I-EMP 0 0 0 0 0 0
Inst-R & RP I95 0 169 0 291 26,098 1,081
Inst-R-E 0 0 0 5 860 16
------------ --------- ---------- -------- ---------- ---------
Total 22,326 41,957 1,375 18,415 149,736 116,559
------------ --------- ---------- -------- ---------- ---------
Payments made in advance of certificate
year requirements and accrued interest
thereon:
15, includes ext maturities 0 0 0 0 0 0
20, " " " 0 0 0 0 0 (1)
15A, " " " 0 0 0 0 0 1
22A, " " " 4 13 64 0 0 128
I-76, " " " 0 13 8 0 0 345
------------ --------- ---------- -------- ---------- ---------
Total 4 26 72 0 0 473
------------ --------- ---------- -------- ---------- ---------
Additional credits and accrued interest
thereon:
" 15, includes ext mat 0 0 0 0 0 0
" 20, " " " 0 0 0 0 0 0
" 15A, " " " 0 0 0 0 0 (1)
" 22A, " " " 71 52 318 0 0 1,122
" I-76, " " " 0 91 30 0 0 1,091
" Res Plus Flex Pay 0 0 0 0 0 0
" IC-Q-Installment 0 0 0 0 0 1
" IC-Q-Ins 0 0 2 0 0 0
" IC-Q-Ins Emp 0 0 0 0 0 0
" IC-I 0 0 1,658 0 0 64
" IC-I-Emp 0 0 19 0 0 0
" Inst 0 0 250 0 0 12
" Inst-E 0 0 3 0 0 0
" RP-Q-Installment 0 0 1 0 0 0
" RP-Q-Flexible Pay 0 0 0 0 0 0
" RP-Q-Ins 0 0 1 0 0 (1)
" RP-Q-Ins Emp 0 0 0 0 0 0
" RP-I 0 0 7 0 0 0
" RP-I-EMP 0 0 0 0 0 0
" Inst-R 0 0 3 0 0 0
" Inst-R-E 0 0 0 0 0 0
------------ --------- ---------- -------- ---------- ---------
Total 71 143 2,292 0 0 2,286
------------ --------- ---------- -------- ---------- ---------
F-53
AMERICAN EXPRESS CERTIFICATE COMPANY SCHEDULE VI
Certificate Reserves
Part 1 - Summary of Changes
Year ended December 31, 2004
(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)
- ----------------------------------------------- ------------------ ----------- --------- --------- ---------- ------------ --------
Res for accrued 3rd year 2113 - Installment
Prod only. 0 0 837 594 (572) 0
Res for accrued 6th year 2114 0 0 0 0 0 0
Acc int - default I-76 2003/2025 3.5 0 0 0 4 0 0
Res for add'l credits to be allowed 0 0 0 0 0 0
Installment Cert-Special Add'l 0 0 0 0 0 0
Credits I-76 (2105) 0 0 0 0 0 0
Accrued for add'l credits to 0 0 0 0 0 0
be allowed at next anni (2102) 0 0 25 43 0 0
Reserve for death & disab (2111) 0 0 0 0 0 0
Res for reconversion (2104) 0 0 36 0 (32) 0
----------- --------- --------- ---------- ------------ --------
Total 0 0 898 641 (604) 0
----------- --------- --------- ---------- ------------ --------
Total installment certificates 22,195 225,202 150,097 2,989 33,394 2,042
----------- --------- --------- ---------- ------------ --------
Fully paid certificates:
Single-Payment certificates:
SP 74 (C2740-10 Prod 40) 3.5 0 0 0 0 0 0
SP 75 - 50 3.5 0 0 0 0 0 0
SP 76 - 60 3.5 0 0 0 0 0 0
SP 77 - 70 3.5 0 0 0 0 0 0
SP 78 - 80 3.5 0 0 0 0 0 0
SP 79 - 90 3.5 2 15 15 0 0 0
SP 80 - 100 3.5 0 0 2 0 0 0
SP 81A - 110 3.5 1 10 10 0 0 0
SP 82A - 111 3.5 2 22 22 0 0 0
SP 82B - 112 3.5 4 30 29 0 0 0
SP 83A - 113 3.5 0 0 0 0 0 0
SP 83B - 114 3.5 48 427 425 2 0 0
IC-2-84 - 115, 116,117,118,119 3.5 336 3,364 3,262 94 0 0
IC-2-85 - 120,121,122,123,124,125,126,
127,128,129,130 3.5 163 2,249 2,370 0 0 79
IC-2-86 - 131 3.5 95 1,599 1,310 0 0 46
IC-2-87 - 132 3.5 126 2,082 1,878 0 0 62
IC-2-88 - 133 3.5 244 3,822 3,603 0 0 125
Reserve Plus Single Payment - 150 43 239 400 0 0 0
Cash Reserve Single Payment - 160 19 139 150 0 0 0
IC-Flexible Savings (Variable Term) - 165 114,974 1,407,686 1,504,219 0 1,128,631 37,185
IC-Flexible Savings Emp (VT) - 166 554 7,711 10,104 0 181 216
IC-Preferred Investors - 250 17 13,607 13,757 0 27,515 156
IC-Investors - 201, 202,203 473 925,975 960,935 0 1,092,394 12,949
IC-Special Deposits U.K. - 204 31 41,218 43,891 0 8,423 560
IC-Special Deposits HONG KONG - 205 0 0 0 0 0 0
IC-1-84 - 170, 171,172,173,174 27 233 210 0 0 6
Cash Reserve Variable Payment - 660 166 645 953 0 110 2
Cash Reserve Variable PMT-3mo. - 662 29,506 98,723 103,690 0 140,939 516
IC-Future Value - 155 810 9,481 9,481 0 0 0
IC-Future Value Emp - 156 17 126 125 0 0 0
IC-Stock Market - 180 82,167 424,970 472,621 0 215,853 21,521
IC-MSC - 181 22,488 322,900 335,128 0 128,149 12,923
IC-EISC - 185 34 2,468 2,472 0 947 120
IC-AEBI Stock Market - 301, 302,303,304,
305 562 243,486 245,331 0 167,036 11,269
----------- --------- --------- ---------- ------------ --------
Total 252,909 3,513,227 3,716,393 96 2,910,178 97,735
----------- --------- --------- ---------- ------------ --------
Additional credits and accrued interest
thereon:
SP 74 (2030/1 4022) 3.5 0 0 0 0 0 0
SP 75 3.5 0 0 0 0 0 0
SP 76 3.5 0 0 0 0 0 0
SP 77 3.5 0 0 0 0 0 0
SP 78 3.5 0 0 0 0 0 0
SP 79 3.5 0 0 15 0 0 0
SP 80 3.5 0 0 1 0 0 0
SP 81A 3.5 0 0 9 0 0 0
SP 82A 3.5 0 0 19 0 0 0
SP 82B 3.5 0 0 23 0 0 0
SP 83A 3.5 0 0 0 0 0 0
SP 83B 3.5 0 0 248 1 0 0
IC-2-84 3.5 0 0 1,811 52 0 1
IC-2-85 3.5 0 0 35 79 0 0
IC-2-86 3.5 0 0 24 40 0 0
Deductions Balance at close of period
--------------------------------- ------------------------------
Number
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
- ----------------------------------------------- ------------ --------- ---------- -------- ---------- ----------
Res for accrued 3rd year 2113 - Installment
Prod only. 0 0 0 0 0 859
Res for accrued 6th year 2114 0 0 0 0 0 0
Acc int - default I-76 2003/2025 0 1 3 0 0 1
Res for add'l credits to be allowed 0 0 0 0 0 0
Installment Cert-Special Add'l 0 0 0 0 0 0
Credits I-76 (2105) 0 0 0 0 0 0
Accrued for add'l credits to 0 0 0 0 0 0
be allowed at next anni (2102) 0 0 47 0 0 22
Reserve for death & disab (2111) 0 0 0 0 0 0
Res for reconversion (2104) 0 0 0 0 0 1
---------- ----------- ---------- -------- ---------- ----------
Total 0 1 50 0 0 883
---------- ----------- ---------- -------- ---------- ----------
Total installment certificates 22,401 42,128 3,790 18,415 149,736 120,205
---------- ----------- ---------- -------- ---------- ----------
Fully paid certificates:
Single-Payment certificates:
SP 74 (C2740-10 Prod 40) 0 0 0 0 0 0
SP 75 - 50 0 0 0 0 0 0
SP 76 - 60 0 0 0 0 0 0
SP 77 - 70 0 0 0 0 0 0
SP 78 - 80 0 0 0 0 0 0
SP 79 - 90 0 0 0 2 15 15
SP 80 - 100 0 0 0 0 0 2
SP 81A - 110 0 0 0 1 10 10
SP 82A - 111 0 0 0 2 22 22
SP 82B - 112 0 0 0 3 20 29
SP 83A - 113 10 0 0 0 0 (10)
SP 83B - 114 319 14 94 0 0 0
IC-2-84 - 115, 116,117,118,119 1,189 251 617 113 1,302 1,298
IC-2-85 - 120,121,122,123,124,125,126,
127,128,129,130 0 301 0 145 2,004 2,148
IC-2-86 - 131 0 253 0 90 1,372 1,102
IC-2-87 - 132 0 312 0 113 1,798 1,628
IC-2-88 - 133 0 576 0 221 3,236 3,153
Reserve Plus Single Payment - 150 113 115 0 9 128 173
Cash Reserve Single Payment - 160 146 5 0 0 0 0
IC-Flexible Savings (Variable Term) - 165 0 647,113 0 136,212 1,922,458 2,022,922
IC-Flexible Savings Emp (VT) - 166 0 1,695 0 483 6,716 8,806
IC-Preferred Investors - 250 0 25,079 0 17 16,152 16,349
IC-Investors - 201, 202,203 0 829,343 0 587 1,209,080 1,236,934
IC-Special Deposits U.K. - 204 0 14,429 0 26 36,405 38,445
IC-Special Deposits HONG KONG - 205 0 0 0 0 0 0
IC-1-84 - 170, 171,172,173,174 88 68 7 7 76 51
Cash Reserve Variable Payment - 660 112 253 0 110 476 701
Cash Reserve Variable PMT-3mo. - 662 0 121,027 0 29,481 119,970 124,118
IC-Future Value - 155 6,554 1,316 0 201 1,612 1,612
IC-Future Value Emp - 156 117 3 0 2 6 5
IC-Stock Market - 180 528 133,985 0 84,759 520,219 575,482
IC-MSC - 181 0 67,681 0 25,206 389,104 408,519
IC-EISC - 185 0 2,036 0 31 1,494 1,503
IC-AEBI Stock Market - 301, 302,303,304,
305 0 147,083 0 741 272,665 276,553
---------- ----------- ---------- -------- ---------- ----------
Total 9,176 1,992,938 718 278,562 4,506,340 4,721,570
---------- ----------- ---------- -------- ---------- ----------
Additional credits and accrued interest
thereon:
SP 74 (2030/1 4022) 0 0 0 0 0 0
SP 75 0 0 0 0 0 0
SP 76 0 0 0 0 0 0
SP 77 0 0 0 0 0 0
SP 78 0 0 0 0 0 0
SP 79 0 0 0 0 0 15
SP 80 0 0 0 0 0 1
SP 81A 0 0 0 0 0 9
SP 82A 0 0 0 0 0 19
SP 82B 8 0 0 0 0 16
SP 83A 0 0 0 0 0 0
SP 83B 190 8 51 0 0 1
IC-2-84 704 139 344 0 0 677
IC-2-85 0 5 78 0 0 30
IC-2-86 0 0 46 0 0 18
F-54
AMERICAN EXPRESS CERTIFICATE COMPANY SCHEDULE VI
Certificate Reserves
Part 1 - Summary of Changes
Year ended December 31, 2004
(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-2-87 3.5 0 0 35 61 0 0
IC-2-88 3.5 0 0 69 120 0 0
Reserve Plus SP 2004-4061 0 0 0 0 0 0
Cash Reserve SP 0 0 0 0 0 0
IC-Flexible Savings 0 0 1,587 41,000 0 0
IC-Preferred Investors 0 0 6 166 0 0
IC-FS-EMP 0 0 12 260 0 0
IC-Investors 0 0 468 15,893 0 0
IC-Special Deposits U.K. 0 0 22 574 0 0
IC-Special Deposits HONG KONG 0 0 0 0 0 0
IC-1-84 - 2013-4061 0 0 3 6 0 1
Cash Reserve VP 2004-4061 0 0 (0) 2 0 0
Cash Reserve Variable Payment-3mo. 0 0 192 862 (281) 0
IC-Future Value 0 0 9,040 1,005 0 0
IC-Future Value Emp 0 0 137 12 0 0
IC-Stk Mkt, 2004/16/31-4000/16 0 0 506 952 (0) 0
IC-MSC 0 0 143 960 (0) 0
IC - EISC 0 0 1 1 0 0
IC-AEBI Stk Mkt 2004/31/19-4000/16 0 0 284 967 0 0
---------- --------- --------- ---------- ------------ --------
Total 0 0 14,689 63,013 (281) 2
---------- --------- --------- ---------- ------------ --------
Accrued for additional credits to be allowed
at next anniversaries:
SP 74 (2102-4070) 0 0 0 0 0 0
SP 75 0 0 0 0 0 0
SP 76 0 0 0 0 0 0
SP 77 0 0 0 0 0 0
SP 78 0 0 0 0 0 0
SP 79 0 0 0 0 0 0
SP 80 0 0 0 0 0 0
SP 81A 0 0 (1) 0 0 0
SP 82A 0 0 0 0 0 0
SP 82B 0 0 1 0 0 0
SP 83A 0 0 (0) 0 0 0
SP 83B 0 0 (1) 0 0 0
IC-2-84 - 2019-4061 0 0 2 1 0 0
IC-2-85 0 0 (0) 0 0 0
IC-2-86 0 0 1 0 0 0
IC-2-87 0 0 (0) 0 0 0
IC-2-88 0 0 (1) 0 0 0
IC-Stock Mkt - 2019/31-4061 SEC 5 from
C2785-81 0 0 20,443 22,309 0 0
IC-Market Strategy Certificate (SEC 5
from c2785-81) 0 0 11,920 13,230 (1) 0
IC-EISC 0 0 116 71 0 0
IC-AEBI Stock Market 0 0 10,989 11,058 (0) 0
---------- --------- --------- ---------- ------------ --------
Total 0 0 43,468 46,669 (1) 0
---------- --------- --------- ---------- ------------ --------
Total Single Payment - Non Qualified 252,909 3,513,227 3,774,549 109,788 2,909,896 97,739
---------- --------- --------- ---------- ------------ --------
R Series Single-Payment certificates:
R-76 - 900 3.5 3 10 9 0 0 0
R-77 - 910 3.5 14 286 204 0 0 7
R-78 - 911 3.5 32 214 207 0 0 7
R-79 - 912 3.5 45 553 491 0 0 16
R-80 - 913 3.5 34 258 230 0 0 8
R-81 - 914 3.5 15 126 99 0 0 3
R-82A - 915 3.5 99 655 465 0 0 16
RP-Q - 916 193 279 737 0 0 2
R-II - 920 3.5 66 540 292 0 0 10
RP-2-84 - 921,922,923,924,925 3.5 174 2,212 1,056 0 0 31
RP-2-85 - 926,927,928,929,930,931,932,
933,934,935,936 3.5 63 243 315 0 0 11
RP-2-86 - 937 3.5 17 64 75 0 0 3
RP-2-87 - 938 3.5 35 640 246 0 0 9
Deductions Balance at close of period
--------------------------------- ------------------------------
Number
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-2-87 0 5 62 0 0 29
IC-2-88 0 6 125 0 0 59
Reserve Plus SP 2004-4061 0 0 0 0 0 0
Cash Reserve SP 0 0 0 0 0 0
IC-Flexible Savings 0 3,171 37,211 0 0 2,205
IC-Preferred Investors 0 7 156 0 0 9
IC-FS-EMP 0 47 216 0 0 10
IC-Investors 0 2,326 12,949 0 0 1,085
IC-Special Deposits U.K. 0 6 560 0 0 30
IC-Special Deposits HONG KONG 0 0 0 0 0 0
IC-1-84 - 2013-4061 0 1 7 0 0 2
Cash Reserve VP 2004-4061 0 0 2 0 0 (0)
Cash Reserve Variable Payment-3mo. 0 6 517 0 0 250
IC-Future Value 7,158 1,422 0 0 0 1,465
IC-Future Value Emp 142 3 0 0 0 4
IC-Stk Mkt, 2004/16/31-4000/16 0 75 831 0 0 552
IC-MSC 0 14 918 0 0 171
IC - EISC 0 0 2 0 0 0
IC-AEBI Stk Mkt 2004/31/19-4000/16 0 99 801 0 0 352
--------- ---------- --------- -------- --------- ----------
Total 8,202 7,340 54,876 0 0 7,009
--------- ---------- --------- -------- --------- ----------
Accrued for additional credits to be allowed
at next anniversaries:
SP 74 (2102-4070) 0 0 0 0 0 0
SP 75 0 0 0 0 0 0
SP 76 0 0 0 0 0 0
SP 77 0 0 0 0 0 0
SP 78 0 0 0 0 0 0
SP 79 0 0 0 0 0 0
SP 80 0 0 0 0 0 0
SP 81A 0 0 0 0 0 (1)
SP 82A 0 0 0 0 0 0
SP 82B 0 0 0 0 0 1
SP 83A 0 0 0 0 0 (0)
SP 83B 0 0 0 0 0 (1)
IC-2-84 - 2019-4061 0 0 1 0 0 1
IC-2-85 0 0 0 0 0 (0)
IC-2-86 0 0 0 0 0 1
IC-2-87 0 0 0 0 0 (0)
IC-2-88 0 0 0 0 0 (1)
IC-Stock Mkt - 2019/31-4061 SEC 5 from
C2785-81 0 618 20,709 0 0 21,425
IC-Market Strategy Certificate (SEC 5
from c2785-81) 0 336 12,017 0 0 12,796
IC-EISC 0 0 119 0 0 68
IC-AEBI Stock Market 0 1,185 10,468 0 0 10,394
--------- ---------- --------- -------- --------- ----------
Total 0 2,139 43,314 0 0 44,683
--------- ---------- --------- -------- --------- ----------
Total Single Payment - Non Qualified 17,377 2,002,417 98,908 278,562 4,506,340 4,773,262
--------- ---------- --------- -------- --------- ----------
R Series Single-Payment certificates:
R-76 - 900 0 0 0 3 10 11
R-77 - 910 0 10 0 13 257 201
R-78 - 911 0 34 0 27 180 180
R-79 - 912 0 53 0 44 501 455
R-80 - 913 0 17 0 30 240 222
R-81 - 914 0 12 0 12 112 91
R-82A - 915 0 25 0 92 621 456
RP-Q - 916 0 166 0 153 217 571
R-II - 920 0 28 0 60 491 275
RP-2-84 - 921,922,923,924,925 315 210 6 109 1,152 557
RP-2-85 - 926,927,928,929,930,931,932,
933,934,935,936 0 32 0 58 219 294
RP-2-86 - 937 0 1 0 17 63 76
RP-2-87 - 938 0 3 0 35 638 252
F-55
AMERICAN EXPRESS CERTIFICATE COMPANY SCHEDULE VI
Certificate Reserves
Part 1 - Summary of Changes
Year ended December 31, 2004
(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-2-88 - 939 3.5 43 263 210 0 0 7
Cash Reserve RP - 970 4 14 30 0 0 0
RP-Flexible Savings - 971 31,664 478,987 511,320 0 227,337 13,495
RP-Preferred Investors - 950 1 441 496 0 1,791 15
Cash Reserve RP-3 mo. - 972 1,637 12,980 13,629 0 29,739 87
RP-Flexible Savings Emp - 973 203 2,483 3,409 0 18 89
RP-Future Value - 975 680 12,850 12,851 0 0 0
RP-Future Value Emp - 976 29 368 369 0 0 0
RP-Stock Market - 960 12,723 124,162 135,011 0 57,635 6,330
Market Strategy Cert - 961 (section 1-6
from Report 2785-81-RP-STOCK-VB 2001) 3,641 84,337 87,182 0 25,499 3,371
D-1 - sum of SERIES D on Summary page -
400 + 990-993 126 11,108 14,254 0 300 281
----------- --------- --------- ---------- ------------ --------
Total 51,541 734,073 783,187 0 342,319 23,798
----------- --------- --------- ---------- ------------ --------
Additional Interest on R-Series Single
Payment Reserves:
R-76 3.5 0 0 (0) 0 0 0
R-77 3.5 0 0 1 7 0 0
R-78 3.5 0 0 5 7 0 0
R-79 3.5 0 0 7 17 0 0
R-80 3.5 0 0 5 8 0 0
R-81 3.5 0 0 1 3 0 0
R-82A 3.5 0 0 14 16 0 0
RP-Q 0 0 0 2 0 0
R-II 3.5 0 0 5 10 0 0
RP-2-84 3.5 0 0 21 30 0 0
RP-2-85 3.5 0 0 7 11 0 0
RP-2-86 3.5 0 0 2 3 0 0
RP-2-87 3.5 0 0 6 9 0 0
RP-2-88 3.5 0 0 4 7 0 0
Cash Reserve RP 0 0 (0) 0 0 0
RP-Flexible Savings 0 0 579 14,283 0 0
RP-Preferred Investors 0 0 0 17 0 0
Cash Reserve RP-3 mo. Plus 0 0 22 92 0 0
RP-Flexible Savings Emp 0 0 5 91 0 0
RP-Future Value 0 0 11,945 1,431 0 0
RP-Future Value Emp 0 0 371 50 0 0
RP-Stock Market 0 0 132 260 0 0
Market Strategy Cert (2785-81 RP-STOCK VB
2004/4000 & 2016/2031/4016) 0 0 45 238 0 0
D-1 - 400 1 302 0 0
----------- --------- --------- ---------- ------------ --------
Total 0 0 13,178 16,894 0 0
----------- --------- --------- ---------- ------------ --------
Accrued for additional credits to be allowed
at next anniversaries:
RP-Stock Market 0 0 5,916 7,045 0 0
Market Strategy Cert (C2785-81 2019/2102/
4061) 0 0 3,190 3,271 0 0
----------- --------- --------- ---------- ------------ --------
Total 0 0 9,106 10,316 0 0
----------- --------- --------- ---------- ------------ --------
Total Single Payment - Qualified 51,541 734,073 805,471 27,210 342,319 23,798
----------- --------- --------- ---------- ------------ --------
Paid-up certificates:
Series 15 and 20 3.25 3 43 43 0 0 0
" 15A and 22A 3.5 120 2,896 2,668 80 0 278
" I-76 - 640 3.5 465 2,314 1,884 66 (0) 181
----------- --------- --------- ---------- ------------ --------
Total 588 5,253 4,595 146 (0) 459
----------- --------- --------- ---------- ------------ --------
Additional credits and accrued interest
thereon:
Series 15 and 20 2.5 0 0 3 0 0 0
" 15A and 22A 3 0 0 62 1 0 0
" I-76 3.5 0 0 181 6 (0) 0
----------- --------- --------- ---------- ------------ --------
Total 0 0 246 8 (0) 0
----------- --------- --------- ---------- ------------ --------
Deductions Balance at close of period
--------------------------------- ------------------------------
Number
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-2-88 - 939 0 37 0 38 173 180
Cash Reserve RP - 970 0 0 0 4 14 30
RP-Flexible Savings - 971 0 176,296 0 35,035 541,885 575,855
RP-Preferred Investors - 950 0 327 0 2 1,906 1,976
Cash Reserve RP-3 mo. - 972 0 28,750 0 1,947 14,251 14,704
RP-Flexible Savings Emp - 973 0 565 0 173 2,099 2,950
RP-Future Value - 975 7,071 1,898 0 204 3,881 3,881
RP-Future Value Emp - 976 175 39 0 9 155 156
RP-Stock Market - 960 668 38,418 0 14,104 147,093 159,890
Market Strategy Cert - 961 (section 1-6
from Report 2785-81-RP-STOCK-VB 2001) 0 16,571 0 3,935 94,386 99,481
D-1 - sum of SERIES D on Summary page -
400 + 990-993 0 2,387 0 113 9,985 12,448
------------ --------- ---------- -------- ---------- ---------
Total 8,229 265,879 6 56,217 820,529 875,192
------------ --------- ---------- -------- ---------- ---------
Additional Interest on R-Series Single
Payment Reserves:
R-76 0 0 0 0 0 (0)
R-77 0 0 7 0 0 1
R-78 0 0 7 0 0 4
R-79 0 1 16 0 0 7
R-80 0 0 8 0 0 5
R-81 0 0 3 0 0 1
R-82A 0 0 16 0 0 13
RP-Q 0 0 2 0 0 0
R-II 0 1 10 0 0 5
RP-2-84 0 4 31 0 0 16
RP-2-85 0 0 11 0 0 6
RP-2-86 0 0 3 0 0 2
RP-2-87 0 0 9 0 0 6
RP-2-88 0 1 7 0 0 4
Cash Reserve RP 0 0 0 0 0 (0)
RP-Flexible Savings 0 717 13,495 0 0 651
RP-Preferred Investors 0 0 15 0 0 2
Cash Reserve RP-3 mo. Plus 0 0 87 0 0 27
RP-Flexible Savings Emp 0 3 89 0 0 4
RP-Future Value 7,713 2,004 0 0 0 3,659
RP-Future Value Emp 221 48 0 0 0 151
RP-Stock Market 0 11 236 0 0 146
Market Strategy Cert (2785-81 RP-STOCK VB
2004/4000 & 2016/2031/4016) 0 1 233 0 0 49
D-1 - 400 0 21 281 1
------------ --------- ---------- -------- ---------- ---------
Total 7,934 2,812 14,566 0 0 4,760
------------ --------- ---------- -------- ---------- ---------
Accrued for additional credits to be allowed
at next anniversaries:
RP-Stock Market 0 58 6,094 0 0 6,810
Market Strategy Cert (C2785-81 2019/2102/
4061) 0 153 3,137 0 0 3,170
------------ --------- ---------- -------- ---------- ---------
Total 0 211 9,231 0 0 9,980
------------ --------- ---------- -------- ---------- ---------
Total Single Payment - Qualified 16,163 268,902 23,802 56,216 820,526 889,932
------------ --------- ---------- -------- ---------- ---------
Paid-up certificates:
Series 15 and 20 33 0 0 2 9 10
" 15A and 22A 203 496 265 95 2,208 2,062
" I-76 - 640 0 87 0 448 2,440 2,043
------------ --------- ---------- -------- ---------- ---------
Total 236 583 265 545 4,657 4,115
------------ --------- ---------- -------- ---------- ---------
Additional credits and accrued interest
thereon:
Series 15 and 20 2 0 0 0 0 1
" 15A and 22A 7 8 7 0 0 43
" I-76 0 9 0 0 0 179
------------ --------- ---------- -------- ---------- ---------
Total 9 17 7 0 0 223
------------ --------- ---------- -------- ---------- ---------
F-56
AMERICAN EXPRESS CERTIFICATE COMPANY SCHEDULE VI
Certificate Reserves
Part 1 - Summary of Changes
Year ended December 31, 2004
(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)
- -------------------------------------------- ---------------------- --------- ---------- --------- ---------- ----------- ----------
Accrued for additional credits to be allowed
at next anniversaries 0 0 0 0 0 0
Total paid-up 588 5,253 4,841 153 (0) 459
Optional settlement certificates:
Series IST&G 3 3 0 (1) 0 0 0
Other series and conversions from Single Source 2740-10 0 0 0 0 0 0
Payment certificates 2.5-3-3-3.5 4,292 0 68,316 2,034 (0) 2,970
Series R-76 thru R-82A - Prod 900 3 2 0 24 1 0 0
Series R-II & RP-2-84 thru 88 - Prod 921 3.5 6 0 189 6 0 6
Reserve Plus Single-Payment (Prod 150) 43 0 430 1 0 0
Reserve Plus Flex-Pay & IC-Q-Inst (Prod 650,
651, 652) 13 0 67 0 0 0
Series R-Installment (Prod 980, 981,982) 14 0 82 0 0 6
Series R-Single-Payment (Prod 133) 5 0 0 0 0 0
Add'l credits and accrued int. thereon 2.5-3 0 0 7,854 211 0 6
Add'l credits and accrued int. thereon-IST&G 2.5-3 0 0 0 0 0 0
Accrued for additional credits to be allowed 0 0 0 0 0 0
at next anniversaries 0 0 4 6 (0) 0
Accrued for additional credits to be allowed 0 0 0 0 0 0
at next anniversaries-R-76-R-82A & R-II 0 0 (1) 0 0 0
Accrued for additional credits to be allowed 0 0 0 0 0 0
at next anniversaries-IST&G 0 0 (5) 0 0 0
--------- ---------- --------- ---------- ----------- ----------
Total optional settlement 4,378 0 76,959 2,259 (0) 2,988
--------- ---------- --------- ---------- ----------- ----------
Due to unlocated cert holders 0 0 92 1 2 41
--------- ---------- --------- ---------- ----------- ----------
Total certificate reserves 331,611 4,477,755 4,812,009 142,390 3,285,611 127,065
--------- ---------- --------- ---------- ----------- ----------
Deductions Balance at close of period
--------------------------------- ------------------------------
Number
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
- ---------------------------------------------- ------------ --------- ---------- -------- ---------- ----------
Accrued for additional credits to be allowed
at next anniversaries 0 0 0 0 0 (0)
Total paid-up 245 600 272 545 4,657 4,338
Optional settlement certificates:
Series IST&G 0 0 0 1 0 (1)
Other series and conversions from Single 0 0 0 3,933 0 0
Payment certificates 3,498 4,520 0 0 0 65,296
Series R-76 thru R-82A - Prod 900 5 0 0 0 0 19
Series R-II & RP-2-84 thru 88 - Prod 921 15 14 0 0 0 172
Reserve Plus Single-Payment (Prod 150) 2 179 0 32 0 250
Reserve Plus Flex-Pay & IC-Q-Inst (Prod 650,
651, 652) 2 9 0 10 0 57
Series R-Installment (Prod 980, 981,982) 16 4 0 13 0 69
Series R-Single-Payment (Prod 133) 0 0 0 4 0 0
Add'l credits and accrued int. thereon 337 520 312 0 0 6,903
Add'l credits and accrued int. thereon-IST&G 0 0 0 0 0 (0)
Accrued for additional credits to be allowed 0 0 0 0 0 0
at next anniversaries 0 0 6 0 0 4
Accrued for additional credits to be allowed 0 0 0 0 0 0
at next anniversaries-R-76-R-82A & R-II 0 0 0 0 0 (1)
Accrued for additional credits to be allowed 0 0 0 0 0 0
at next anniversaries-IST&G 0 0 0 0 0 0
--------- ----------- --------- --------- ---------- -----------
Total optional settlement 3,874 5,246 318 3,993 0 72,768
--------- ----------- --------- --------- ---------- -----------
Due to unlocated cert holders 0 12 77 0 0 46
--------- ----------- --------- --------- ---------- -----------
Total certificate reserves 60,060 2,319,304 127,166 357,731 5,481,259 5,860,548
--------- ----------- --------- --------- ---------- -----------
F-57
Certificate Reserves
(In thousands)
December 31, 2004
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 $ 47
Reconversions of paid-up certificates-charged to paid-up reserves 0
Transfers from maturities to extended maturities 0
------------
$ 47
============
Other deductions represent:
Transfers to reserves on a quarterly basis for Reserve Plus Flexible-
Payment, IC-Q-Installment and R-Flexible-Payment $ 1,945
Conversions to optional settlement certificates-credited to optional
settlement reserves 264
Conversions to paid-up certificates-credited to paid-up reserves 84
Transfers to extended maturities at maturity 0
------------
$ 2,293
============
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 $ 47
============
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) $ 459
Transfers from accrual for additional credits to be allowed at next
anniversaries 0
------------
$ 459
============
Other deductions represent:
Transfers credited to installment reserves on reconversions to installment
certificates $ 0
Transfers for accrual for additional credits and accrued interest thereon 0
Transfers to settlement options 272
------------
$ 272
============
F-58
Certificate Reserves
(In thousands)
December 31, 2004
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 $ 2,383
Transfers from paid-up certificate reserves 600
Transfers from accruals for additional credits to be allowed at next anniversaries 6
------------
$ 2,989
============
Other deductions represent:
Transfers to reserve for additional credits and accrued interest thereon $ 0
Transfers to optional settlement reserves 0
------------
$ 0
============
Single-Payment certificates:
Other additions represent:
Transfers from accruals for additional credits to be allowed at next anniversaries $ 2
Transfers from accruals on a quarterly basis on: 0
Reserve Plus Single-Payment 0
Cash Reserve Single-Payment 0
Flexible Savings 37,185
Flexible Savings-Emp 216
Preferred Investors 156
Investors 12,949
Special Deposits 560
Cash Reserve 2
Cash Reserve-3mo 516
Future Value 0
Stock Market 21,522
Market Strategy 12,923
AEBI Stock Market 11,269
RP-Q 2
Cash Reserve-RP 0
Cash Reserve-RP-3mo 87
Flexible Saving-RP 13,495
Flexible Savings-RP-Emp 89
Preferred Investors-RP 15
Stock Market-RP 6,330
Market Strategy-RP 3,371
Transfers from accruals at anniversaries maintained in a separate
------------
reserve account. $ 120,689
============
F-59
Certificate Reserves
(In thousands)
December 31, 2004
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 $ 17,542
R Single-Payment 0
Transfers to reserves for additional credits and accrued interest thereon 726
Transfers to a separate reserve account from the accrual account 2
Transfers to reserves on a quarterly basis:
Reserve Plus Single-Payment 0
Cash Reserve Single-Payment 0
Flexible Savings 37,186
Flexible Savings-Emp 216
Preferred Investors 156
Investors 12,949
Special Deposits 560
Cash Reserve 2
Cash Reserve-3mo 516
Stock Market 21,521
AEBI Stock Market 11,269
RP-Q 2
Cash Reserve-RP 0
Cash Reserve-RP-3mo 87
Flexible Saving-RP 13,495
Flexible Savings-RP-Emp 89
Preferred Investors-RP 15
Stock Market-RP 6,330
Transfers to Federal tax withholding 50
------------
$ 122,713
============
Due to unlocated certificate holders:
Other additions represent:
Amounts equivalent to payments due certificate holders who could
not be located $ 41
============
Other deductions represent:
Payments to certificate holders credited to cash $ 77
============
F-60
PART 3 - Information Regarding Installment Certificates
Classified by Age Groupings
(Thousands)
Year ended December 31, 2004
Deductions from Reserves
----------------------------
Number of Accounts Amount of Cash
with Certificate Maturity Amount of Surrenders
Months Holders Value Reserves Prior to
Certificate Series Paid December 31, December 31, December 31, Maturity Other
--------------------------------------------------------------------------------------------------------
2003 2004 2003 2004 2003 2004 2003 2004
----------------------------------------------------------------------------------------------
15 INC EXT 61-72 0 0 0 0 0 0 0 0
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 0 0 0 0 0 0 0 0
145-156 0 0 0 0 0 0 0 0
157-168 0 0 0 0 0 0 0 0
169-180 0 0 0 0 0 0 0 0
181-192 0 0 0 0 0 0 0 0
193-204 0 0 0 0 0 0 0 0
205-216 0 0 0 0 0 0 0 0
217-228 0 0 0 0 0 0 0 0
----------------------------------------------------------------------------------------------
TOTAL 0 0 0 0 0 0 0 0
----------------------------------------------------------------------------------------------
20, including
extended maturities 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 0 0 0 0 0 0 0 0
145-156 0 0 0 0 0 0 0 0
157-168 0 0 0 0 0 0 0 0
169-180 0 0 0 0 0 0 0 0
181-192 0 0 0 0 0 0 0 0
193-204 0 0 0 0 0 0 0 0
205-216 0 0 0 0 0 0 0 0
F-61
PART 3 - Information Regarding Installment Certificates
Classified by Age Groupings
(Thousands)
Year ended December 31, 2004
Deductions from Reserves
----------------------------
Number of Accounts Amount of Cash
with Certificate Maturity Amount of Surrenders
Months Holders Value Reserves Prior to
Certificate Series Paid December 31, December 31, December 31, Maturity Other
--------------------------------------------------------------------------------------------------------
2003 2004 2003 2004 2003 2004 2003 2004
----------------------------------------------------------------------------------------------
217-228 0 0 0 0 0 0 0 0
229-240 0 0 0 0 0 0 0 0
241-252 0 0 0 0 0 0 0 0
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 0 0 0 0 0 0 0 0
----------------------------------------------------------------------------------------------
TOTAL 0 0 0 0 0 0 0 0
----------------------------------------------------------------------------------------------
15 A INC EXT 61-72 0 0 0 0 0 0 0 0
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 0 0 0 0 0 0 0 0
145-156 0 0 0 0 0 0 0 0
157-168 0 0 0 0 0 0 0 0
169-180 0 0 0 0 0 0 0 0
181-192 0 0 0 0 0 0 0 0
193-204 0 0 0 0 0 0 0 0
205-216 0 0 0 0 0 0 0 0
217-228 0 0 0 0 0 0 0 0
229-240 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
----------------------------------------------------------------------------------------------
F-62
PART 3 - Information Regarding Installment Certificates
Classified by Age Groupings
(Thousands)
Year ended December 31, 2004
Deductions from Reserves
----------------------------
Number of Accounts Amount of Cash
with Certificate Maturity Amount of Surrenders
Months Holders Value Reserves Prior to
Certificate Series Paid December 31, December 31, December 31, Maturity Other
--------------------------------------------------------------------------------------------------------
2003 2004 2003 2004 2003 2004 2003 2004
----------------------------------------------------------------------------------------------
22A INC EXT 25-36 0 0 0 0 0 0 0 0
37-48 0 0 0 0 0 0 0 0
49-60 0 0 0 0 0 0 0 0
61-72 0 0 0 0 0 0 0 0
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 0 0 0 0 0 0 0 0
145-156 1 1 19 19 9 9 0 0
157-168 1 0 13 0 7 0 0 0
169-180 0 1 0 13 0 7 0 0
181-192 1 0 15 0 9 0 0 0
193-204 1 1 38 15 26 10 0 0
205-216 1 0 19 0 14 0 28 0
217-228 1 1 19 19 14 14 0 14
229-240 1 0 19 0 16 0 0 0
241-252 1 2 15 34 14 30 0 0
253-264 1 0 9 0 9 0 0 0
265-276 1 0 16 0 10 0 0 0
277-288 1 1 65 16 42 11 42 0
289-300 1 0 19 0 13 0 0 0
301-312 4 1 146 19 106 14 0 0
313-324 2 4 325 146 246 112 0 0
325-336 15 2 403 325 326 260 0 26
337-348 60 14 1,533 370 1,284 316 22 55
349-360 59 58 1,390 1,461 1,228 1,289 6 43
361-372 72 54 1,663 1,302 1,554 1,211 73 12
373-384 65 68 1,351 1,530 1,323 1,503 67 1,021
----------------------------------------------------------------------------------------------
TOTAL 289 208 7,077 5,269 6,250 4,786 238 1,171
----------------------------------------------------------------------------------------------
F-63
PART 3 - Information Regarding Installment Certificates
Classified by Age Groupings
(Thousands)
Year ended December 31, 2004
Deductions from Reserves
----------------------------
Number of Accounts Amount of Cash
with Certificate Maturity Amount of Surrenders
Months Holders Value Reserves Prior to
Certificate Series Paid December 31, December 31, December 31, Maturity Other
--------------------------------------------------------------------------------------------------------
2003 2004 2003 2004 2003 2004 2003 2004
----------------------------------------------------------------------------------------------
I-76 25-36 0 0 0 0 0 0 0 0
37-48 0 0 0 0 0 0 0 0
49-60 0 0 0 0 0 0 0 0
61-72 0 0 0 0 0 0 0 0
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 0 0 0 0 0 0 0 0
145-156 0 0 0 0 0 0 0 0
157-168 0 0 0 0 0 0 0 0
169-180 1 0 37 0 13 0 0 14
181-192 0 0 0 0 0 0 0 0
193-204 0 0 0 0 0 0 0 0
205-216 0 0 0 0 0 0 0 0
217-228 2 0 40 0 19 0 0 0
229-240 1 2 25 40 13 21 0 0
241-252 0 1 0 25 0 14 0 0
253-264 9 0 197 0 120 0 0 11
265-276 32 8 846 181 546 118 12 40
277-288 44 29 1,159 744 797 513 36 50
289-300 53 41 1,126 1,092 823 800 25 0
301-312 63 44 1,092 941 845 731 111 14
313-324 53 58 1,298 1,015 1,068 833 139 0
325-336 36 47 763 1,064 657 926 101 19
337-348 0 34 0 713 0 651 0 0
----------------------------------------------------------------------------------------------
TOTAL 294 264 6,583 5,815 4,901 4,607 424 148
----------------------------------------------------------------------------------------------
F-64
PART 3 - Information Regarding Installment Certificates
Classified by Age Groupings
(Thousands)
Year ended December 31, 2004
Deductions from Reserves
----------------------------
Number of Accounts Amount of Cash
with Certificate Maturity Amount of Surrenders
Months Holders Value Reserves Prior to
Certificate Series Paid December 31, December 31, December 31, Maturity Other
--------------------------------------------------------------------------------------------------------
2003 2004 2003 2004 2003 2004 2003 2004
----------------------------------------------------------------------------------------------
RES+FP 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 0 0 0 0 0 0 0 0
145-156 0 0 0 0 0 0 0 0
157-168 0 0 0 0 0 0 0 0
169-180 0 0 0 0 0 0 0 0
181-192 0 0 0 0 0 0 0 0
193-204 0 0 0 0 0 0 0 0
205-216 0 0 0 0 0 0 0 0
217-228 0 0 0 0 0 0 0 0
229-240 22 0 225 0 115 0 0 0
241-252 1 0 6 0 3 0 26 0
253-264 1 1 18 6 41 3 0 0
265-276 0 1 0 18 0 42 0 0
----------------------------------------------------------------------------------------------
TOTAL 24 2 249 24 159 45 26 0
----------------------------------------------------------------------------------------------
IC-Q-INST 61-72 0 0 0 0 0 0 0 0
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 0 0 0 0 0 0 0 0
145-156 0 0 0 0 0 0 0 0
157-168 0 0 0 0 0 0 0 0
169-180 0 0 0 0 0 0 0 0
181-192 0 0 0 0 0 0 0 0
193-204 0 0 0 0 0 0 0 0
205-216 2 0 30 0 3 0 0 0
217-228 13 1 241 24 44 1 2 0
229-240 6 12 57 205 21 44 9 0
241-252 0 0 0 0 0 0 3 0
----------------------------------------------------------------------------------------------
TOTAL 21 13 328 229 68 45 14 0
----------------------------------------------------------------------------------------------
F-65
PART 3 - Information Regarding Installment Certificates
Classified by Age Groupings
(Thousands)
Year ended December 31, 2004
Deductions from Reserves
----------------------------
Number of Accounts Amount of Cash
with Certificate Maturity Amount of Surrenders
Months Holders Value Reserves Prior to
Certificate Series Paid December 31, December 31, December 31, Maturity Other
--------------------------------------------------------------------------------------------------------
2003 2004 2003 2004 2003 2004 2003 2004
----------------------------------------------------------------------------------------------
IC-Q-IN 1-12 0 0 0 0 0 0 0 0
13-24 0 0 0 0 0 0 0 0
25-36 0 0 0 0 0 0 0 0
37-48 0 0 0 0 0 0 0 0
49-60 0 0 0 0 0 0 0 0
61-72 0 0 0 0 0 0 0 0
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 18 0 244 0 91 0 0 0
145-156 41 15 439 183 216 74 35 0
157-168 28 37 290 359 198 186 22 0
169-180 23 24 292 234 118 180 35 0
181-192 30 21 380 271 157 89 19 0
193-204 10 23 114 296 47 133 39 0
205-216 6 8 54 90 13 47 8 0
217-228 0 5 0 48 0 13 5 0
----------------------------------------------------------------------------------------------
TOTAL 156 133 1,813 1,481 840 722 163 0
----------------------------------------------------------------------------------------------
IC-IN-EMP 1-12 0 0 0 0 0 0 0 0
13-24 0 0 0 0 0 0 0 0
25-36 0 0 0 0 0 0 0 0
37-48 0 0 0 0 0 0 0 0
49-60 0 0 0 0 0 0 0 0
61-72 0 0 0 0 0 0 0 0
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 0 0 0 0 0 0 0 0
145-156 0 0 0 0 0 0 0 0
157-168 1 0 6 0 1 0 0 0
169-180 0 1 0 6 0 2 0 0
181-192 1 0 17 0 16 0 0 0
193-204 0 1 0 17 0 16 0 0
----------------------------------------------------------------------------------------------
TOTAL 2 2 23 23 17 18 0 0
----------------------------------------------------------------------------------------------
F-66
PART 3 - Information Regarding Installment Certificates
Classified by Age Groupings
(Thousands)
Year ended December 31, 2004
Deductions from Reserves
----------------------------
Number of Accounts Amount of Cash
with Certificate Maturity Amount of Surrenders
Months Holders Value Reserves Prior to
Certificate Series Paid December 31, December 31, December 31, Maturity Other
--------------------------------------------------------------------------------------------------------
2003 2004 2003 2004 2003 2004 2003 2004
----------------------------------------------------------------------------------------------
IC-I 1-12 3 2 87 25 4 7 0 0
13-24 1 2 12 81 2 10 0 0
25-36 0 1 0 12 0 1 0 0
37-48 2 0 12 0 4 0 0 0
49-60 6 1 52 6 25 3 1 0
61-72 1 6 24 52 16 34 0 0
73-84 1,428 1 23,254 24 10,691 19 0 0
85-96 3,134 1,227 51,397 19,846 25,582 9,829 1,520 0
97-108 3,526 2,647 57,404 42,164 32,027 22,364 3,697 0
109-120 2,682 2,810 42,635 44,873 23,810 26,236 3,725 0
121-132 35 47 331 790 233 446 4,044 0
133-144 23 26 299 246 160 185 9 0
145-156 0 16 0 155 0 117 29 0
----------------------------------------------------------------------------------------------
TOTAL 10,841 6,786 175,507 108,274 92,554 59,251 13,025 0
----------------------------------------------------------------------------------------------
IC-I-EMP 1-12 0 0 0 0 0 0 0 0
13-24 1 0 6 0 4 0 0 0
25-36 0 1 0 6 0 8 0 0
37-48 0 0 0 0 0 0 0 0
49-60 0 0 0 0 0 0 0 0
61-72 0 0 0 0 0 0 0 0
73-84 9 0 102 0 70 0 0 0
85-96 22 7 424 84 248 74 13 0
97-108 22 22 260 424 196 267 0 0
109-120 15 16 180 218 93 111 35 0
121-132 0 4 0 36 0 14 33 0
133-144 1 0 120 0 280 0 0 0
145-156 0 1 0 120 0 385 0 0
----------------------------------------------------------------------------------------------
TOTAL 70 51 1,092 888 891 859 81 0
----------------------------------------------------------------------------------------------
F-67
PART 3 - Information Regarding Installment Certificates
Classified by Age Groupings
(Thousands)
Year ended December 31, 2004
Deductions from Reserves
----------------------------
Number of Accounts Amount of Cash
with Certificate Maturity Amount of Surrenders
Months Holders Value Reserves Prior to
Certificate Series Paid December 31, December 31, December 31, Maturity Other
--------------------------------------------------------------------------------------------------------
2003 2004 2003 2004 2003 2004 2003 2004
----------------------------------------------------------------------------------------------
IC-I95 1-12 2,446 2,120 0 0 3,859 3,028 148 0
13-24 1,810 1,952 0 0 5,062 6,167 484 0
25-36 1,187 1,613 0 0 4,322 6,947 476 0
37-48 1,051 1,018 0 0 4,651 5,049 511 0
49-60 1,260 926 0 0 6,767 5,131 468 0
61-72 1,481 1,077 0 0 8,545 6,823 801 0
73-84 877 1,119 0 0 5,358 6,574 2,216 0
85-96 0 716 0 0 0 4,679 877 0
----------------------------------------------------------------------------------------------
TOTAL 10,112 10,541 0 0 38,564 44,398 5,981 0
----------------------------------------------------------------------------------------------
IC-I95-E 1-12 14 22 0 0 18 66 1 0
13-24 11 12 0 0 21 32 2 0
25-36 5 10 0 0 14 40 1 0
37-48 7 4 0 0 24 16 2 0
49-60 6 6 0 0 11 31 1 0
61-72 7 4 0 0 43 8 5 0
73-84 5 5 0 0 34 37 8 0
85-96 0 4 0 0 0 32 2 0
----------------------------------------------------------------------------------------------
TOTAL 55 67 0 0 165 262 22 0
----------------------------------------------------------------------------------------------
RP-Q-INST 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 0 0 0 0 0 0 0 0
145-156 0 0 0 0 0 0 0 0
157-168 0 0 0 0 0 0 0 0
169-180 0 0 0 0 0 0 0 0
181-192 0 0 0 0 0 0 0 0
193-204 0 0 0 0 0 0 0 0
205-216 0 0 0 0 0 0 0 0
217-228 21 0 290 0 130 0 0 0
229-240 7 18 115 244 30 98 32 0
241-252 6 0 67 0 29 0 4 6
253-264 5 5 86 47 85 21 7 0
265-276 0 3 0 52 0 65 18 0
----------------------------------------------------------------------------------------------
TOTAL 39 26 558 343 274 184 61 6
----------------------------------------------------------------------------------------------
F-68
PART 3 - Information Regarding Installment Certificates
Classified by Age Groupings
(Thousands)
Year ended December 31, 2004
Deductions from Reserves
----------------------------
Number of Accounts Amount of Cash
with Certificate Maturity Amount of Surrenders
Months Holders Value Reserves Prior to
Certificate Series Paid December 31, December 31, December 31, Maturity Other
--------------------------------------------------------------------------------------------------------
2003 2004 2003 2004 2003 2004 2003 2004
----------------------------------------------------------------------------------------------
RP-Q-FP 61-72 0 0 0 0 0 0 0 0
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 0 0 0 0 0 0 0 0
145-156 0 0 0 0 0 0 0 0
157-168 0 0 0 0 0 0 0 0
169-180 0 0 0 0 0 0 0 0
181-192 0 0 0 0 0 0 0 0
193-204 0 0 0 0 0 0 0 0
205-216 4 0 59 0 39 0 0 0
217-228 1 3 6 39 10 30 9 0
229-240 0 1 0 6 0 10 0 0
----------------------------------------------------------------------------------------------
TOTAL 5 4 65 45 49 40 9 0
----------------------------------------------------------------------------------------------
RP-Q-IN 1-12 0 0 0 0 0 0 0 0
13-24 0 0 0 0 0 0 0 0
25-36 0 0 0 0 0 0 0 0
37-48 0 0 0 0 0 0 0 0
49-60 0 0 0 0 0 0 0 0
61-72 0 0 0 0 0 0 0 0
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 0 0 0 0 0 0 0 0
145-156 0 0 0 0 0 0 0 0
157-168 4 0 260 0 43 0 0 0
169-180 1 2 12 12 0 2 37 0
181-192 0 1 0 12 0 0 0 0
----------------------------------------------------------------------------------------------
TOTAL 5 3 272 24 43 2 37 0
----------------------------------------------------------------------------------------------
RP-IN-EMP 1-12 0 0 0 0 0 0 0 0
13-24 0 0 0 0 0 0 0 0
25-36 0 0 0 0 0 0 0 0
37-48 0 0 0 0 0 0 0 0
49-60 0 0 0 0 0 0 0 0
61-72 0 0 0 0 0 0 0 0
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
----------------------------------------------------------------------------------------------
TOTAL 0 0 0 0 0 0 0 0
----------------------------------------------------------------------------------------------
F-69
PART 3 - Information Regarding Installment Certificates
Classified by Age Groupings
(Thousands)
Year ended December 31, 2004
Deductions from Reserves
----------------------------
Number of Accounts Amount of Cash
with Certificate Maturity Amount of Surrenders
Months Holders Value Reserves Prior to
Certificate Series Paid December 31, December 31, December 31, Maturity Other
--------------------------------------------------------------------------------------------------------
2003 2004 2003 2004 2003 2004 2003 2004
----------------------------------------------------------------------------------------------
RP-I 1-12 0 0 0 0 0 0 0 0
13-24 0 0 0 0 0 0 0 0
25-36 0 0 0 0 0 0 0 0
37-48 0 0 0 0 0 0 0 0
49-60 0 0 0 0 0 0 0 0
61-72 0 0 0 0 0 0 0 0
73-84 6 0 48 0 24 0 0 0
85-96 9 5 105 42 72 27 2 0
97-108 8 7 281 66 203 62 25 0
109-120 9 7 177 252 97 150 62 0
121-132 0 0 0 0 0 0 20 0
----------------------------------------------------------------------------------------------
TOTAL 32 19 611 360 396 239 109 0
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RP-I-EMP 1-12 0 0 0 0 0 0 0 0
13-24 0 0 0 0 0 0 0 0
25-36 0 0 0 0 0 0 0 0
37-48 0 0 0 0 0 0 0 0
49-60 0 0 0 0 0 0 0 0
61-72 0 0 0 0 0 0 0 0
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TOTAL 0 0 0 0 0 0 0 0
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Inst-R (RP-I95) 1-12 109 74 20,700 3,415 287 101 1 0
13-24 86 91 2,260 12,990 206 383 92 0
25-36 16 78 3,652 1,917 91 275 30 0
37-48 9 16 2,105 3,652 47 109 0 0
49-60 13 9 1,237 2,105 90 52 0 0
61-72 10 13 142 1,237 51 109 0 0
73-84 3 8 669 118 10 48 0 0
85-96 0 2 0 663 0 5 6 0
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TOTAL 246 291 30,765 26,097 782 1,082 129 0
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Inst-R-E 1-12 1 0 8 0 0 0 0 0
13-24 1 2 240 608 2 6 0 0
25-36 0 1 0 240 0 2 0 0
37-48 0 0 0 0 0 0 0 0
49-60 1 0 6 0 5 0 0 0
61-72 1 1 6 6 3 5 0 0
73-84 0 1 0 6 0 3 0 0
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TOTAL 4 5 260 860 10 16 0 0
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TOTAL - ALL SERIES 22,195 18,415 225,203 149,732 145,962 116,556 20,317 1,325
=============================================================================================
F-70
AMERICAN EXPRESS CERTIFICATE COMPANY SCHEDULE VII
Valuation and Qualifying Accounts
Years ended December 31, 2004, 2003, and 2002
($ thousands)
Year ended December 31, 2004
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 9,536 (2,000) 0 0 7,536
Year ended December 31, 2003
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 4,223 5,313 0 0 9,536
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 1,935 2,288 0 0 4,223
F-71
EXHIBIT INDEX
The following exhibits are filed as part of this Annual Report:
Exhibit Description
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.
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 as Exhibit 10(a) to Form
10-K as December 31, 2003 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 June 23,
2004 between American Express Certificate Company and
American Express Trust Company, filed electronically
on or about February 18, 2005 as Exhibit 10(b) to
Post-Effective Amendment No. 32 to Registration
Statement No. 2-95577 for American Express Flexible
Savings Certificate, is incorporated herein by
reference.
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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.
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). 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(i). 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(j). 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.
10(k). 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(l). 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.
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10(m) 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(n) 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(o) Selling Dealer Agreement, dated July 31, 2000,
between American Express Financial Advisors Inc. and
Securities America, Inc. filed electronically on or
about February 18, 2005 to Post-Effective Amendment
No. 32 to Registration Statement No. 2-95577 for
American Express Flexible Savings Certificate is
incorporated herein by reference.
10(p) (1) Code of Ethics under rule 17j-1 for Registrant,
filed electronically as Exhibit10(p)(1) to
Pre-Effective Amendment No. 1 to Registration
Statement No. 333-34982, is incorporated herein
by reference.
(2) Code of Ethics under rule 17j-1 for Registrant's
investment advisor and principal underwriters,
filed electronically on or about February 18,
2005 as Exhibit 10(p)(2) to Post-Effective
Amendment No. 32 to Registration Statement No.
2-95577 for American Express Flexible Savings
Certificate, is incorporated herein by
reference.
10(q) Letter of Representations dated August 22, 2000 on
behalf of American Express Certificate Company and
American Express Client Service Corporation filed
electronically as Exhibit 10(r) to Post-Effective
Amendment No. 32 to Registration Statement No.
2-95577, is incorporated herein by reference.
10(r) Transfer Agent Agreement, dated December 2, 2004
between American Express Certificate Company and
American Express Client Service Corporation filed
electronically on or about February 18, 2005 as
Exhibit 10(r) to Post-Effective Amendment No. 32 to
Registration Statement No. 2-95577 for American
Express Flexible Savings Certificate is incorporated
herein by reference.
11-23. None or not applicable.
24(a). Directors' Power of Attorney, dated February 22,
2005, is filed electronically herewith as Exhibit
24(a).
E-3
24(b). Officers' Power of Attorney, dated February 22, 2005,
is filed electronically herewith as Exhibit 24(b).
24(c). Officers' Power of Attorney, dated February 22, 2005,
is filed electronically herewith as Exhibit 24(c).
25-99. None or not applicable.
31.1 Certification of Paula R. Meyer pursuant to Rule
13a-14(a) promulgated under the Securities Exchange
Act of 1934, as amended.
31.2 Certification of Brian J. McGrane pursuant to Rule
13a-14(a) promulgated under the Securities Exchange
Act of 1934, as amended.
32.1 Certification of Paula R. Meyer and Brian J. McGrane
pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
E-4