SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM S-1
POST-EFFECTIVE AMENDMENT NUMBER 33 TO
REGISTRATION STATEMENT NUMBER 2-95577
American Express Flexible Savings Certificate
UNDER
THE SECURITIES ACT OF 1933
AMERICAN EXPRESS CERTIFICATE COMPANY
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(Exact name of registrant as specified in charter)
DELAWARE
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(State or other jurisdiction of incorporation or organization)
6725
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(Primary Standard Industrial Classification Code Number)
41-6009975
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(I.R.S. Employer Identification No.)
70100 AXP Financial Center, Minneapolis, MN 55474, (612) 671-3131
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(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
H. Bernt von Ohlen - 50606 AXP Financial Center,
Minneapolis, MN 55474, (612) 671-7981
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(Name, address, including zip code, and telephone number,
including area code, of agent for service)
CONTENTS OF THIS POST-EFFECTIVE AMENDMENT NO. 33 TO
REGISTRATION STATEMENT NO. 2-95577
Cover Page
Prospectus
Part II Information
Signatures
Exhibits
American Express(R) Certificates
Prospectus April 27, 2005
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American Express Cash Reserve You may:
Certificate Earn competitive rates with ready o Purchase this certificate in any amount from $1,000 through $1 million
access to your cash reserves. or with monthly investments of at least $50.
o Earn a fixed rate of interest declared every three months.
o Invest in successive three-month terms up to a total of 20 years from the
issue date of the certificate.
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American Express Flexible Savings Certificate You may:
Earn competitive rates guaranteed by American o Purchase this certificate in any amount from $1,000 through $1 million.
Express Certificate Company for the term you choose.
o Select a term of six, 12, 18, 24, 30 or 36 months.
o Invest in successive terms up to a total of 20 years from the issue date
of the certificate. Purchases through some distribution channels and
recipients of promotional coupons may be eligible for special rates. See
"Initial Interest Rates for American Express Flexible Savings
Certificate" as well as "Rates for New Purchases" under "About the
Certificate."
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American Express Installment Certificate You may:
Earn competitive rates while you build your o Purchase this certificate with monthly investments in any amount from $50
savings. through $5,000.
o Earn a fixed rate of interest declared every three months.
o Receive bonus interest payments if you make regular investments for
specified periods.
o Keep your certificate for up to 10 years from its issue date.
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American Express Market Strategy Certificate You may:
Potential for stock market growth with safety of o Purchase this certificate in any amount from $1,000 through $1 million.
principal.
o Allocate your money to a fixed-interest subaccount. You must make
periodic investments from this subaccount to participation terms.
o Participate through participation terms in any increase of the stock
market based on the S&P 500 Index while protecting your principal, up to
a maximum return between 5% and 6%, for a 52-week term.
o Decide whether to choose a partial participation term in order to
guarantee part of your return or whether to link all of your return to
the market.
o Keep your certificate for up to 20 years from its issue date. Purchasers
of these certificates or other similar certificates through some
distribution channels may be eligible for special rates. See "Initial
Interest and Participation Rates for American Express Market Strategy
Certificate," as well as "Maximum Return" in "Interest" under "About the
Certificate."
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American Express Stock Market Certificate You may:
Potential for stock market growth with safety of o Purchase this certificate in any amount from $1,000 through $1 million.
principal.
o Participate in any increase of the stock market based on the S&P 500
Index while protecting your principal, up to a maximum return between 5%
and 6%, for a 52-week term.
o Decide whether to choose a partial participation term in order to
guarantee part of your return or whether to link all of your return to
the market.
o Keep your certificate for up to 14 successive terms. Purchasers of these
certificates or other similar certificates through some distribution
channels may be eligible for special rates. See "Initial Interest and
Participation Rates for American Express Stock Market Certificate," as
well as "Maximum Return" in "Interest" under "About the Certificate."
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Like all investment companies, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
AECC is not a bank or financial institution, and the securities it offers are
not deposits or obligations of, or backed or guaranteed or endorsed by, any bank
or financial institution, nor are they insured by the Federal Deposit Insurance
Corporation (FDIC), the Federal Reserve Board or any other agency.
American Express Certificates are backed solely by the assets of American
Express Certificate Company. For American Express Market Strategy Certificate
and American Express Stock Market Certificate to the extent your product
interest is linked to the S&P 500 Index, you might earn no interest. See "Risk
Factors."
The distributor is not required to sell any specific amount of certificates.
Issuer: American Express Certificate Company, 70100 AXP Financial Center,
Minneapolis, MN 55474, (800) 862-7919 (toll free)
Distributor: American Express Financial Advisors Inc.
Initial Interest Rates for American Express Cash Reserve Certificate
American Express Certificate Company (AECC) guarantees a fixed interest rate for
each three-month period during the life of the certificate. For your initial
term, AECC guarantees that when the rate for new purchases takes effect, the
rate will be within a specified range of the U.S. 90-day Treasury Bill rate. See
"About the Certificate" for more explanation.
Here are the interest rates in effect on April 27, 2005:
Investment amount Interest rate* Effective annualized yield**
$50 to $9,999 1.27% 1.27%
$10,000 to $24,999 2.27% 2.29%
$25,000 or more 2.52% 2.54%
* Rates may depend on factors described in "Rates for New Purchases" under
"About the Certificate."
** Assuming monthly compounding.
These rates may or may not have changed when you apply to purchase your
certificate. Rates for later three-month terms are set at the discretion of AECC
and may also differ from the rates shown here. See "Rates for New Purchases"
under "About the Certificate" for further information.
Initial Interest Rates for American Express Flexible Savings Certificate
AECC guarantees a fixed rate of interest for each term. For the initial term,
the rate will be within a specified range of certain average certificate of
deposit interest rates, published in the most recent BANK RATE MONITOR(R) (BRM),
Top 25 Market Average(R). BANK RATE MONITOR and Top 25 Market Average are marks
owned by BANKRATE.COMSM, a publication of Bankrate, Inc., N. Palm Beach, FL
33408. See "About the Certificate" for more explanation.
Here are the interest rates in effect on April 27, 2005:
Term Interest rate* Effective annualized yield**
6 month 3.01% 3.05%
12 month 3.44% 3.49%
18 month 3.67% 3.73%
24 month 3.90% 3.97%
30 month 3.95% 4.02%
36 month 4.19% 4.27%
* These are the rates for investments under $100,000. Rates may depend on the
factors described in "Rates for New Purchases" and "Promotions and Pricing
Flexibility" under "About the Certificate."
** Assuming monthly compounding.
These rates may or may not have changed when you apply to purchase your
certificate. Rates for future terms are set at the discretion of AECC and may
also differ from the rates shown here. Recipients of promotional coupons may be
eligible for special rates. See "Rates for New Purchases" under "About the
Certificate" for more explanation.
Initial Interest Rates for American Express Installment Certificate
AECC guarantees a fixed rate of interest for each three-month period during the
life of your certificate. The rate for your first three months will be within a
specified range of the average rate for bank money market accounts published in
the most recent BANK RATE MONITOR(R) (BRM), Top 25 Market Average(R). BANK RATE
MONITOR and Top 25 Market Average are marks owned by BANKRATE.COMSM, a
publication of Bankrate, Inc., N. Palm Beach, FL 33408. See "About the
Certificate" for more explanation.
Here are the interest rates in effect on April 27, 2005:
Interest rate 0.25%
Effective annualized yield* 0.25%
* Assuming monthly compounding.
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2p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
These rates may or may not have changed when you apply to purchase your
certificate. Rates for later three-month terms are set at the discretion of AECC
and may also differ from the rates shown here. See "Rates for New Purchases"
under "About the Certificate" for further information.
Initial Interest and Participation Rates for American Express Market Strategy
Certificate
AECC guarantees your principal. The interest on your certificate may be fixed or
may be linked to stock market performance as measured by the Standard & Poor's
500 Composite Stock Index (S&P 500 Index). See "About the Certificate" for more
explanation.
Here are the interest rates and market participation percentages in effect on
April 27, 2005:
Fixed interest:
Currently 2.09%
Participation terms:
Maximum return Market participation percentage Minimum interest
5% 100% (full) None
5% 25% (partial) 1%
These rates may or may not have changed when you apply to purchase your
certificate. If you choose fixed interest, AECC guarantees that when the rate
for new purchases takes effect, the rate will be within a specified range of the
average rate for 12-month certificates of deposit published in the most recent
BANK RATE MONITOR(R) (BRM), Top 25 Market Average(R). BANK RATE MONITOR and Top
25 Market Average are marks owned by BANKRATE.COMSM, a publication of Bankrate,
Inc., N. Palm Beach, FL 33408. See "About the Certificate" for more explanation.
For your first term, your maximum return will be between 5.00% and 6.00%. Rates
for future terms are set at the discretion of AECC and may differ from the rates
shown here.
Initial Interest and Participation Rates for
American Express Stock Market Certificate
AECC guarantees your principal. The interest on your certificate is linked to
stock market performance as measured by the S&P 500 Index. See "About the
Certificate" for more explanation.
Here are the interest rates and market participation percentages in effect on
April 27, 2005:
Maximum return Market participation percentage Minimum interest
5% 100% (full) None
5% 25% (partial) 1%
These rates may or may not have changed when you apply to purchase your
certificate. For your first term, your maximum return will be between 5% and 6%.
However, if you have received a special promotional rate and comply with the
requirements as described in "Maximum return" in "Interest" under "About the
Certificate," then your maximum return for your first term will be between 6%
and 7%. Rates for later terms are set at the discretion of the Issuer and may
differ from the rates shown here.
AECC may offer different rates, maximum returns, market participation
percentages and minimum interest rates for different distribution channels or in
other circumstances. For more information call (800) 862-7919 and see
"Promotions and Pricing Flexibility" under "About the Certificates."
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3p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
Risk Factors
You should consider the following when investing in American Express
Certificates:
These certificates are backed solely by the assets of AECC. Most of our assets
are debt securities and are subject to the following risks:
Interest rate risk: The price of debt securities generally falls as interest
rates increase, and rises as interest rates decrease. In general, the longer the
maturity of a bond, the greater its loss of value as interest rates increase,
and the greater its gain in value as interest rates decrease. See "How Your
Money Is Used and Protected."
Credit risk: This is the risk that the issuer of a security, or the counterparty
to a contract, will default or otherwise become unable to honor a financial
obligation (such as payments due on a bond or note). Credit ratings of the
issuers of securities in our portfolio vary. See "How Your Money Is Used and
Protected."
To the extent you link your interest to the S&P 500 Index when you invest in
American Express Market Strategy Certificate and American Express Stock Market
Certificate, you might earn no interest. If you choose to link all of your
returns on these certificates to the S&P 500 Index, you earn interest only if
the value of the S&P 500 Index is higher on the last day of your term than it
was on the first day of your term. See "Interest" under "About the Certificate."
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4p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
Table of Contents
Initial Interest Rates
for American Express Cash Reserve Certificate 2p
Initial Interest Rates
for American Express Flexible Savings Certificate 2p
Initial Interest Rates
for American Express Installment Certificate 2p
Initial Interest and Participation Rates
for American Express Market Strategy Certificate 3p
Initial Interest and Participation Rates
for American Express Stock Market Certificate 3p
Risk Factors 4p
American Express Cash Reserve Certificate 7p
About the Certificate 7p
Read and Keep This Prospectus 7p
Investment Amounts and Terms 7p
Face Amount and Principal 7p
Value at Maturity 7p
Receiving Cash During the Term 7p
Interest 7p
Rates for New Purchases 8p
Promotions and Pricing Flexibility 8p
How to Invest and Withdraw Funds 9p
Buying Your Certificate 9p
Bonus Payment 10p
Additional Investments 10p
How to Make Investments 11p
Full and Partial Withdrawals 12p
When Your Certificate Term Ends 12p
Transfers to Other Accounts 12p
How to Request a Withdrawal
or Transfer 13p
How to Receive Payment When You Withdraw Funds 13p
American Express Flexible Savings Certificate 14p
About the Certificate 14p
Read and Keep This Prospectus 14p
Investment Amounts and Terms 14p
Face Amount and Principal 14p
Value at Maturity 14p
Receiving Cash During the Term 15p
Interest 15p
Rates for New Purchases 15p
Promotions and Pricing Flexibility 17p
How to Invest and Withdraw Funds 18p
Buying Your Certificate 18p
Additional Investments 18p
How to Make Investments 19p
Full and Partial Withdrawals 19p
When Your Certificate Term Ends 20p
Transfers to Other Accounts 21p
How to Request a Withdrawal or Transfer 21p
How to Receive Payment When You Withdraw Funds 22p
American Express Installment Certificate 23p
About the Certificate 23p
Read and Keep This Prospectus 23p
Investment Amounts 23p
Face Amount and Principal 23p
Value at Maturity 23p
Receiving Cash During the Term 23p
Interest 23p
Rates for New Purchases 24p
Promotions and Pricing Flexibility 24p
Bonus Payments 25p
Calculating Your Bonus 27p
How to Invest and Withdraw Funds 29p
Buying Your Certificate 29p
How to Make Monthly Investments 29p
Full and Partial Withdrawals 30p
Transfers to Other Accounts 31p
How to Request a Withdrawal or Transfer 31p
How to Receive Payment When You Withdraw Funds 31p
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5p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
American Express Market Strategy Certificate 32p
About the Certificate 32p
Read and Keep This Prospectus 32p
Investment Amounts 32p
Face Amount and Principal 32p
Participation Term 32p
Value at Maturity 33p
Receiving Cash During the Term 33p
Interest 33p
Promotions and Pricing Flexibility 37p
Historical Data on the S&P 500 Index 37p
Calculation of Return 40p
About the S&P 500 Index 42p
Opportunities at the End of a Participation Term 43p
How to Invest and Withdraw Funds 43p
Buying Your Certificate 43p
How to Make Investments 44p
Full and Partial Withdrawals 45p
Transfers to Other Accounts 45p
How to Request a Withdrawal or Transfer 46p
How to Receive Payment When You Withdraw Funds 46p
American Express Stock Market Certificate 47p
About the Certificate 47p
Read and Keep This Prospectus 47p
Investment Amounts 47p
Face Amount and Principal 47p
Certificate Term 47p
Value at Maturity 47p
Receiving Cash During the Term 47p
Interest 48p
Promotions and Pricing Flexibility 49p
Historical Data on the S&P 500 Index 50p
Calculation of Return 52p
About the S&P 500 Index 54p
Opportunities at the End of a Term 55p
How to Invest and Withdraw Funds 55p
Buying Your Certificate 55p
How to Make Investments 56p
Full and Partial Withdrawals 56p
Transfers to Other Accounts 57p
How to Request a Withdrawal or Transfer 58p
How to Receive Payment When You Withdraw Funds 58p
General Information 59p
Retirement Plans: Special Policies 59p
Withdrawal at Death for American Express
Flexible Savings Certificate and
American Express Installment Certificate 59p
Transfer of Ownership 59p
For More Information 59p
Taxes on Your Earnings 60p
Retirement Accounts 60p
Gifts to Minors 60p
Your TIN and Backup Withholding 61p
How Your Money Is Used and Protected 61p
Invested and Guaranteed by AECC 61p
Regulated by Government 62p
Backed by Our Investments 62p
Investment Policies 62p
General Information on AECC and How It Operates 64p
Relationship Between AECC
and American Express Financial Corporation 64p
Corporate Reorganization 64p
Capital Structure and Certificates Issued 64p
Service Providers 65p
Investment Management and Services 65p
Distribution 66p
Selling Agent 67p
Other Selling Agents 67p
Transfer Agent 67p
Custodian 67p
Directors and Officers 68p
Independent Registered Public Accounting Firm 69p
Appendix 70p
Annual Financial Information 71p
Summary of Selected Financial Information 71p
Management's Discussion and Analysis of
Financial Condition and Results of Operations 72p
American Express Certificate Company
Responsibility of Management 76p
Report of Independent Registered
Public Accounting Firm 77p
Financial Statements 78p
Notes to Financial Statements 84p
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6p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
American Express Cash Reserve Certificate
About the Certificate
READ AND KEEP THIS PROSPECTUS
This prospectus section describes terms and conditions of your American Express
Cash Reserve Certificate. It contains facts that can help you decide if the
certificate is the right investment for you. Read the prospectus before you
invest and keep it for future reference. No one has the authority to vary the
terms and conditions of the American Express Cash Reserve Certificate from those
described in the prospectus, or to bind AECC by any statement not in it.
INVESTMENT AMOUNTS AND TERMS
You may purchase the American Express Cash Reserve Certificate in any amount
from $1,000 or monthly investments of at least $50 through scheduled bank
authorization or payroll deduction. Your total investments, less withdrawals,
over the life of the certificate may not exceed $1 million unless you receive
prior approval from AECC. AECC guarantees your principal and interest.
The certificate may be used as an investment for your Individual Retirement
Account (IRA), 401(k) plan account or other qualified retirement plan account. A
minimum investment of $50 per month is required for these types of accounts. If
so used, the amount of your contribution (investment) will be subject to any
limitations of the plan and applicable federal law.
FACE AMOUNT AND PRINCIPAL
The face amount of the certificate is the amount of your initial investment, and
will remain the same over the life of the certificate.
The principal is the amount that is reinvested at the beginning of each
subsequent term, and is calculated as follows:
Principal equals Face amount (initial investment)
plus At the end of a term, interest credited to your
account during the term
minus Any interest paid to you in cash
plus Any additional investments
minus Any withdrawals, fees and applicable penalties
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For example, assume your initial investment (face amount) of $5,000 has earned
$75 of interest during the term. You have not taken any interest as cash, or
made any withdrawals. You have invested an additional $2,500 at the beginning of
the next term. Your principal for the next term will equal:
$5,000 Face amount (initial investment)
plus 75 Interest credited to your account
minus (0) Interest paid to you in cash
plus 2,500 Additional investment
minus (0) Withdrawals and applicable penalties or fees
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$7,575 Principal at the beginning of the next term
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VALUE AT MATURITY
Your certificate matures 20 years from its issue date. At maturity, you will
receive a distribution for the value of your certificate. This will be the total
of your purchase price, plus additional investments and any credited interest
not paid to you in cash, less any withdrawals, penalties and fees. Bank
authorizations will automatically be stopped at maturity or full withdrawal.
RECEIVING CASH DURING THE TERM
If you need your money before your certificate term ends, you may withdraw part
or all of its value at any time, less any penalties that apply. Procedures for
withdrawing money, as well as conditions under which penalties apply, are
described in "How to Invest and Withdraw Funds."
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7p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
INTEREST
Your investments earn interest from the date they are credited to your account.
Interest is compounded and credited at the end of each certificate month on the
monthly anniversary of the issue date.
AECC declares and guarantees a fixed rate of interest for each three-month
period during the life of your certificate. We calculate the amount of interest
you earn each certificate month by:
o applying the interest rate then in effect to your balance each day,
o adding these daily amounts to get a monthly total, and
o subtracting interest accrued on any amount you withdraw during the
certificate month.
Interest is calculated on a 30-day month and 360-day year basis.
This certificate may be available through other distributors or selling agents
with different interest rates or related features and consequently with
different returns. You may obtain information about other such distributors or
selling agents by calling American Express Client Service Corporation (AECSC) at
one of the telephone numbers listed on the back cover.
RATES FOR NEW PURCHASES
AECC has complete discretion to determine whether to accept an application and
sell a certificate. When your application is accepted, and we have received your
initial investment, we will send you a confirmation showing the rate that your
investment will earn for the first term. AECC guarantees rates for new purchases
based on the following:
Investment Amount Rate For New Purchases
Less than $10,000 Within a range of 150 basis points (1.50%) below to
50 basis points (0.50%) below the rate published
for a U.S. 90 day Treasury Bill
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From $10,000 to $24,999 Within a range from 50 basis points (0.50%) below
to 50 basis points (0.50%) above the rate published
for a U.S. 90 day Treasury Bill
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$25,000 and above Within a range from 25 basis points (0.25%) below
to 75 basis points (0.75%) above the rate published
for a U.S. 90 day Treasury Bill
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For example, if the average rate most recently published for the U.S. 90 day
Treasury Bill is 4.00%, our rate in effect for the following week for amounts of
$10,000 to $24,999 would be between 3.50% and 4.50%.
The U.S. 90 day Treasury Bill is a debt instrument issued by the U.S. Treasury.
The U.S. 90 day Treasury Bill is published on the Chicago Mercantile Exchange
website at www.cme.com. The U.S. 90 day Treasury Bill rate is available at
approximately 4:30 p.m. In the future, we may use a later time cut-off if it
becomes feasible to do so. We will use this rate to determine the rates for new
certificates. Each Wednesday the U.S. 90 day Treasury Bill closing rate is used
for establishing the rates starting the following Wednesday.
Rates for new purchases are reviewed and may change weekly. Normally, the rate
you receive will be the higher of:
o the rate in effect on the date of your application, or
o the rate in effect on the date your completed application is accepted by
AECC.
However if your application bears a date more than seven days before its receipt
by AECC, the rate you receive will be the higher of:
o the rate in effect on the date your completed application is accepted by
AECC, or
o the rate in effect seven days prior to receipt.
PROMOTIONS AND PRICING FLEXIBILITY
AECC may sponsor or participate in promotions involving the certificate and its
respective terms. For example, we may offer different rates to new clients, to
existing clients, or to individuals who purchase or use other products or
services offered by American Express Company or its affiliates. Rates also may
vary depending on the amount invested, geographic location and whether the
certificate is purchased for an IRA or qualified retirement plan account. These
rates will be within a range, described in "Rates for New Purchases."
These promotions will generally be for a specified period of time. If we offer a
promotion, the rates will be set as follows:
For accounts of less than $10,000 the rate will be 125 basis points
(1.25%) below to 25 basis points (0.25%) below the rate published for a
U.S. 90 day Treasury Bill. For accounts from $10,000 to $24,999 the rate
will be from 25 basis points (0.25%) below to 75 basis points (0.75%)
above the rate published for a U.S. 90 day Treasury Bill. For accounts of
$25,000 and more the rate will be 0 basis points (.00%) above to 100 basis
points (1.00%) above the rate published for a U.S. 90 day Treasury Bill.
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8p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
Rates for future terms: Interest on your certificate for future three-month
terms may be greater or less than the rates you receive during the first three
months. In setting future rates, a primary consideration will be the prevailing
investment climate, including the U.S. 90 day Treasury Bill rate. Nevertheless,
we have complete discretion as to what interest is declared beyond the initial
three-month term. If the U.S. 90 day Treasury Bill rate is no longer publicly
available or feasible to use, AECC may use another similar source as a guide for
setting rates.
Performance: From February 1996 through April 24, 2001, American Express Cash
Reserve yields were compared to and were generally higher than average bank and
thrift three-month CD yields, as measured by the BANKRATE MONITOR (BRM) Top 25
Market Average. BANKRATE MONITOR and National Index are marks owned by
BANKRATE.COMSM, a publication of Bankrate, Inc., N. Palm Beach, FL, 33408.
The BRM is a weekly magazine published by Advertising News Service Inc., an
independent national news organization that collects and disseminates
information about bank products and interest rates. Advertising News Service
Inc. has no connection with AECC, AEFC, or any of their affiliates. The BRM Top
25 Market Average is an index of rates and annual effective yields offered on
various length certificates of deposit by large banks and thrifts in 25
metropolitan areas. The frequency of compounding varies among the banks and
thrifts. CDs in the BRM Top 25 Market Average are government insured fixed-rate
time deposits.
From April 25, 2001, American Express Cash Reserve yields were compared to and
were generally comparable to the U.S. 90 day Treasury Bill rate.
[line chart]
Yields from February 1996 through February 2005
American Money
Express Cash BRM Top Market U.S. 90
Reserve 25 Market Deposit day
Certificate Average Account Treasury Bill
Feb-96 4.39 4.15 2.77 4.96
Mar-96 4.25 4.09 2.73 5.10
Apr-96 4.25 4.10 2.72 5.09
May-96 4.25 4.09 2.67 5.15
Jun-96 4.25 4.09 2.66 5.23
Jul-96 4.25 4.13 2.68 5.30
Aug-96 4.30 4.16 2.68 5.19
Sep-96 4.30 4.16 2.66 5.24
Oct-96 4.30 4.17 2.65 5.12
Nov-96 4.30 4.14 2.62 5.17
Dec-96 4.30 4.13 2.61 5.04
Jan-97 4.30 4.11 2.60 5.17
Feb-97 4.30 4.14 2.59 5.14
Mar-97 4.30 4.13 2.60 5.28
Apr-97 4.20 4.14 2.58 5.30
May-97 4.20 4.18 2.59 5.20
Jun-97 4.20 4.19 2.60 5.07
Jul-97 4.20 4.19 2.60 5.19
Aug-97 4.30 4.19 2.59 5.28
Sep-97 4.30 4.19 2.59 5.08
Oct-97 4.30 4.19 2.59 5.11
Nov-97 4.20 4.19 2.58 5.28
Dec-97 4.25 4.20 2.58 5.30
Jan-98 4.25 4.21 2.58 5.18
Feb-98 4.20 4.17 2.55 5.23
Mar-98 4.20 4.15 2.55 5.16
Apr-98 4.20 4.16 2.50 5.08
May-98 4.20 4.13 2.49 5.14
Jun-98 4.15 4.13 2.48 5.12
Jul-98 4.15 4.13 2.48 5.09
Aug-98 4.15 4.13 2.49 5.04
Sep-98 4.15 4.11 2.49 4.74
Oct-98 4.10 4.07 2.47 4.07
Nov-98 4.00 3.91 2.41 4.53
Dec-98 3.90 3.86 2.37 4.50
Jan-99 3.85 3.81 2.28 4.45
Feb-99 3.85 3.80 2.29 4.56
Mar-99 3.80 3.78 2.29 4.57
Apr-99 3.85 3.79 2.25 4.41
May-99 3.80 3.77 2.24 4.63
Jun-99 3.80 3.78 2.21 4.72
Jul-99 3.85 3.80 2.19 4.69
Aug-99 3.85 3.84 2.20 4.87
Sep-99 3.90 3.89 2.20 4.82
Oct-99 4.00 3.94 2.22 5.02
Nov-99 4.05 4.01 2.21 5.23
Dec-99 4.09 4.07 2.21 5.36
Jan-00 4.15 4.12 2.22 5.50
Feb-00 4.20 4.14 2.22 5.73
Mar-00 4.30 4.25 2.24 5.86
Apr-00 4.35 4.28 2.22 5.82
May-00 4.35 4.32 2.24 5.99
Jun-00 4.45 4.40 2.26 5.86
Jul-00 4.50 4.47 2.26 6.14
Aug-00 4.50 4.51 2.26 6.28
Sep-00 4.55 4.53 2.29 6.18
Oct-00 4.55 4.53 2.28 6.29
Nov-00 4.55 4.53 2.27 6.36
Dec-00 4.55 4.53 2.29 5.94
Jan-01 4.55 4.53 2.28 5.29
Feb-01 4.40 4.39 2.24 5.01
Mar-01 4.20 4.22 2.19 4.86
Apr-01 4.00 4.00 2.13 4.29
May-01 4.27 3.76 2.05 3.88
Jun-01 3.72 3.48 1.95 3.62
Jul-01 3.52 3.35 1.89 3.66
Aug-01 3.10 3.27 1.84 3.52
Sep-01 2.96 3.09 1.79 3.37
Oct-01 2.64 2.65 1.61 2.37
Nov-01 2.17 2.20 1.41 2.01
Dec-01 1.76 1.89 1.25 1.73
Jan-02 1.25 1.78 1.19 1.73
Feb-02 1.21 1.66 1.15 1.73
Mar-02 1.24 1.64 1.12 1.74
Apr-02 1.29 1.64 1.11 1.75
May-02 1.21 1.64 1.11 1.74
Jun-02 1.23 1.61 1.10 1.72
Jul-02 1.19 1.58 1.08 1.69
Aug-02 1.18 1.52 1.06 1.66
Sep-02 1.14 1.47 1.03 1.61
Oct-02 1.13 1.44 1.00 1.55
Nov-02 0.98 1.41 0.97 1.47
Dec-02 0.80 1.20 0.83 1.20
Jan-03 0.66 1.14 0.78 1.20
Feb-03 0.65 1.13 0.79 1.16
Mar-03 0.68 1.10 0.77 1.18
Apr-03 0.65 1.05 0.74 1.15
May-03 0.59 1.02 0.71 1.09
Jun-03 0.59 0.98 0.68 1.09
Jul-03 0.41 0.91 0.65 0.91
Aug-03 0.45 0.84 0.55 0.95
Sep-03 0.49 0.83 0.54 0.99
Oct-03 0.43 0.82 0.53 0.93
Nov-03 0.45 0.82 0.52 0.95
Dec-03 0.44 0.82 0.52 0.94
Jan-04 0.43 0.82 0.52 0.93
Feb-04 0.43 0.82 0.51 0.93
Mar-04 0.45 0.81 0.49 0.95
Apr-04 0.43 0.80 0.49 0.93
May-04 0.47 0.80 0.46 0.97
Jun-04 0.57 0.81 0.45 1.07
Jul-04 0.80 0.86 0.45 1.30
Aug-04 0.94 0.92 0.45 1.44
Sep-04 1.04 0.95 0.46 1.54
Oct-04 1.21 1.00 0.47 1.71
Nov-04 1.41 1.08 0.48 1.90
Dec-04 1.69 1.21 0.49 2.17
Jan-05 1.73 1.34 0.50 2.22
Feb-05 1.92 1.45 0.51 2.41
This graph compares past yields offered on American Express Cash Reserve
Certificate to those of three-month CDs and money market deposit accounts, as
measured by the BRM Top 25 Market Average(R) and the U.S. 90 day Treasury Bill.
It should not be considered a prediction of future performance.
How to Invest and Withdraw Funds
BUYING YOUR CERTIFICATE
Your American Express financial advisor will help you fill out and submit an
application to open an account with us and purchase a certificate. If you
purchase your certificate other than through an American Express financial
advisor -- for example, through a direct marketing channel -- you may be given
different purchase instructions. We will process the application at our
corporate offices in Minneapolis, Minnesota. When we have accepted your
application and received your initial investment, we will send you a
confirmation of your purchase, indicating your account number and applicable
rate of interest for your first term, as described under "Rates for New
Purchases." See "Purchase policies" below.
You cannot purchase this certificate in a Coverdell Education Savings Account.
Important: When you open an account, you must provide AECC with your correct
Taxpayer Identification Number (TIN), which is either your Social Security or
Employer Identification number. See "Taxes on Your Earnings."
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9p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
BONUS PAYMENT
AECC will pay a bonus at a rate of 50 basis points (.50%) on your Cash Reserve
Certificate if you meet certain requirements. In order for you to be eligible
for the bonus, you must keep your certificate for 12 months. The issue date of
your certificate will be used for determining when your bonus payment will be
made. The bonus will be calculated based on the amount invested minus any
withdrawals made during the 12-month period. Any additional payments or credited
interest paid during the 12-month period will not be used to calculate your
bonus payment.
For example, if you open a new account with a $50,000 balance and during the
following 12-month period you withdraw $10,000, the bonus payment is calculated
based on the remaining $40,000 balance. If during the same 12-month period you
add $15,000 to your certificate and your certificate earns $2,500 of interest,
your bonus payment is still calculated based on your original investment of
$50,000, minus $10,000 withdrawn during the 12-month period. Based on the 0.50%
bonus rate, your principal at the end of the 12-month period will equal:
$ 50,000 Face amount (initial payment)
plus 15,000 Additional payment
plus 2,500 Credited interest
minus (10,000) Withdrawal
plus 200 Credited bonus interest (Beginning balance less
withdrawals throughout the year times bonus rate
($50,000-$10,000) x 0.005 = $200)
- --------------------------------------------------------------------------------
$ 57,700 Principal at the end of the 12-month period
- --------------------------------------------------------------------------------
The bonus for your second 12-month period will be based on the principal at the
end of your first 12-month period minus any withdrawals made during the second
12-month period. Any additional payments and credited interest earned during the
second 12-month period will not be counted towards the second 12-month period
bonus payment. The subsequent years' bonus payments will be calculated in the
same manner.
AECC reserves the right to discontinue payment of the bonus at any time. In the
event the bonus is discontinued, the bonus will be available only for
certificateholders who purchased their certificate at the time the bonus was
available, and kept their certificate for the 12-month period following the date
of purchase. If the bonus is discontinued, the bonus will not be paid for the
12-month period(s) subsequent to the initial 12-month period immediately
following the purchase, including 12-month renewal periods that begin after the
bonus is discontinued.
There is no assurance these rates will be in effect or that these results will
be achieved at the time you invest. AECC reserves the right to change the bonus
rate for new 12-month periods.
ADDITIONAL INVESTMENTS
You may make additional investments at any time. Additional investments can be
in any amount from $50, but your total investment, less withdrawals, may not
exceed $1 million, unless you receive prior approval from AECC to invest more.
You will earn interest on additional investments from the date we accept them.
AECC will send a confirmation of additional investments.
If you add to a certificate purchased other than through an American Express
financial advisor, you may be given different instructions regarding additional
investments.
If you make no investments for a period of at least 12 consecutive months and
your principal is less than $1,000, we may send you a notice of our intent to
cancel the certificate. After the notice, if an investment is not made within 60
days your certificate may be canceled, and we may send you a check for its full
value.
Purchase policies
o Investments must be received and accepted in the Minneapolis headquarters on
a business day before 3 p.m. Central time to be included in your account that
day. Otherwise your purchase will be processed the next business day.
o You have 15 days from the date of purchase to cancel your investment without
penalty by either writing or calling AECSC at the address or phone number on
the back of this prospectus. If you decide to cancel your certificate within
this 15-day period, you will not earn any interest.
o If you purchase a certificate with a personal check or other non-guaranteed
funds, AEFC will wait one business day for the process of converting your
check to federal funds (e.g., monies of member banks with the Federal Reserve
Bank) before your purchase will be accepted and you begin earning interest.
For information on how to avoid this delay, for example by using a certified
check, please call AECSC at the telephone numbers listed on the back cover.
o AECC has complete discretion to determine whether to accept an application
and sell a certificate.
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10p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
o You must maintain a balance of at least $1,000 in your Cash Reserve
Certificate account unless you are using an authorized systematic pay-in or
payout arrangement. If you use a scheduled pay-in arrangement, your minimum
balance requirement is $50.
o If your additional investment increases the principal of your certificate so
that your certificate's principal has exceeded a break point for a higher
interest rate, the certificate will earn this higher interest rate for the
remainder of the term, from the date the additional investment is accepted.
A number of special policies apply to purchases, withdrawals and exchanges
within IRAs, 401(k) plans and other qualified retirement plans. See
"Retirement Plans: Special Policies."
HOW TO MAKE INVESTMENTS
By scheduled investment plan
Contact your financial advisor to set up one of the following scheduled plans
for monthly investments:
o Bank authorization (automatic deduction from your account)
o Automatic payroll deduction
o Direct deposit of social security check
o Other plan approved by AECC
o Monthly minimum investment must be $50
To cancel a bank authorization, you must instruct AECC in writing or by phone.
We must receive notice at least three business days before the date funds would
normally be withdrawn from your bank account.
By mail
For monthly or lump sum investments, send your check, by regular or express
mail, along with your name and account number to:
American Express Financial Advisors Inc.
70200 AXP Financial Center
Minneapolis, MN 55474
By wire
If you have an established account, you may wire money to:
Wells Fargo Bank Minnesota, N.A.
Routing No. 091000019
Minneapolis, MN
Attn: Domestic Wire Dept.
Give these instructions: Credit American Express Financial Advisors Account
#0000030015 for personal account # (your personal number) for (your name).
Please be sure to include all 10 digits of the American Express Financial
Advisors account number, including the zeros.
If this information is not included, the order may be rejected and all money
received, less any costs AEFC incurs, will be returned promptly.
o Minimum amount for each wire investment: $1,000.
o Wire orders can be accepted only on days when your bank, AEFC, AECC and Wells
Fargo Bank Minnesota, N.A. are open for business.
o Wire purchases are completed when wired payment is received and we accept the
purchase.
o Wire investments must be received and accepted in our Minneapolis
headquarters on a business day before 3 p.m. Central time to be credited that
day. Otherwise your purchase will be processed the next business day.
o AECC, AEFC and its other subsidiaries are not responsible for any delays that
occur in wiring funds, including delays in processing by the bank.
o You must pay for any fee the bank charges for wiring.
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11p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
FULL AND PARTIAL WITHDRAWALS
You may withdraw your certificate for its full value or make a partial
withdrawal of $100 or more at any time. If you purchase this certificate for an
IRA, 401(k), or other retirement plan account, early withdrawals or cash
payments of interest taken prematurely may be subject to IRS penalty taxes.
o Complete withdrawal of your certificate is made by giving us proper
instructions. To complete these transactions, see "How to Request a
Withdrawal or Transfer."
o Interest payments in cash may be sent to you at the end of each certificate
month, quarter, or on a semiannual or annual basis.
o Scheduled partial withdrawals may be sent to you monthly, quarterly,
semiannually or annually. The minimum withdrawal amount is $50.
o Because we credit interest on your certificate's monthly anniversary,
withdrawals before the end of the certificate month will result in loss of
interest on the amount withdrawn. You will get the best result by timing a
withdrawal at the end of the certificate month, that is, on an interest
crediting date. If you withdraw during a certificate month, you will not earn
interest for the month on the amount withdrawn.
o Withdrawals that reduce your certificate's principal below a break point for
a lower interest rate will cause the remaining principal to earn the lower
interest rate for the rest of the term from the date of the withdrawal.
o You may not make a withdrawal from your certificate if that withdrawal causes
your balance to fall below $1,000 unless you are making bank authorization or
payroll deduction payments or taking systematic payments from your
certificate. In these instances, the remaining balance will earn the lower
interest rate in effect for balances of less than $1,000.
WHEN YOUR CERTIFICATE TERM ENDS
Shortly before the end of your certificate's term we may send you a notice
indicating the interest rate that will apply to the new term. Unless you tell us
otherwise, your certificate will automatically continue for another term. The
interest rate that will apply to your new term will be the rate in effect on the
day the new term begins. This rate of interest will not change during that term
unless your certificate's principal falls below a break point for a lower
interest rate or goes above a break point for a higher interest rate.
Other full and partial withdrawal policies
o If you request a partial or full withdrawal of a certificate recently
purchased or added to by a check or money order that is not guaranteed, we
will wait for your check to clear. Please expect a minimum of 10 days from
the date of your payment before AECC mails a check to you.
o If your certificate is pledged as collateral, any withdrawal will be delayed
until we get approval from the secured party.
o Any payments to you may be delayed under applicable rules, regulations or
orders of the Securities and Exchange Commission (SEC).
TRANSFERS TO OTHER ACCOUNTS
You may transfer part or all of your certificate to any other American Express
Certificate or into another new or existing American Express Financial Advisors
Inc. account that has the same ownership, subject to any terms and conditions
that may apply. Transfers to another American Express Financial Advisors Inc.
account with different ownership will require a written request.
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12p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
HOW TO REQUEST A WITHDRAWAL OR TRANSFER
By phone
Call AECSC at one of the telephone numbers listed on the back cover.
o Maximum telephone withdrawal request: $100,000.
o Transfers into an American Express Financial Advisors Inc. account with the
same ownership.
o A telephone withdrawal request will not be allowed within 30 days of a
phoned-in address change.
o We will honor any telephone withdrawal or transfer request believed to be
authentic and will use reasonable procedures to confirm authenticity.
You may request that telephone withdrawals not be authorized from your account
by writing to AECSC.
By mail
Send your name, account number and request for a withdrawal or transfer, by
regular or express mail, to:
American Express Financial Advisors Inc.
70100 AXP Financial Center
Minneapolis, MN 55474
Written requests are required for:
o Withdrawals over $100,000.
o Pension plans.
o Custodial accounts where the minor has reached the age at which custodianship
should terminate.
o Transfers to another American Express Financial Advisors Inc. account with
different ownership. All current registered owners must sign the request.
o All owners must sign a written request if there was an address change within
the last 30 days.
HOW TO RECEIVE PAYMENT WHEN YOU WITHDRAW FUNDS
By regular or express mail
o Mailed to address on record; please allow seven days for mailing.
o Payable to name(s) listed on the account.
o The express mail delivery charges you pay will vary depending on the courier
you select. We will deduct the fee from your remaining certificate balance,
provided that balance would not be less than $1,000. If the balance would be
less than $1,000, we will deduct the fee from the proceeds of the withdrawal.
By wire
o Minimum wire amount: $1,000.
o Request that money be wired to your bank.
o Bank account must be in same ownership as the AECC account.
o Pre-authorization required. Complete the bank wire authorization section in
the application or use a form supplied by your American Express financial
advisor. All registered owners must sign.
o Applicable wire charges will be deducted from your balance for partial
withdrawals or from the proceeds of a full withdrawal.
By electronic transfer
o Available only for pre-authorized scheduled partial withdrawals and other
full or partial withdrawals.
o No charge.
o Deposited electronically in your bank account.
o Allow two to five business days from request to deposit.
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13p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
American Express Flexible Savings Certificate
About the Certificate
READ AND KEEP THIS PROSPECTUS
This prospectus section describes terms and conditions of your American Express
Flexible Savings Certificate. It contains facts that can help you decide if the
certificate is the right investment for you. Read the prospectus before you
invest and keep it for future reference. No one has the authority to vary the
terms and conditions of the American Express Flexible Savings Certificate from
those described in the prospectus, or to bind AECC by any statement not in it.
INVESTMENT AMOUNTS AND TERMS
You may purchase the American Express Flexible Savings Certificate in any amount
from $1,000 payable in U.S. currency. Unless you receive prior approval from
AECC, your total amount paid in over the life of the certificate, less
withdrawals, cannot exceed $1 million. If we offer a promotion, we may require a
higher initial amount.
After determining the amount you wish to invest, you select a term of six, 12,
18, 24, 30 or 36 months for which AECC will guarantee an interest rate. AECC
guarantees your principal and interest. Generally, you will be able to select
any of the terms offered. But if your certificate is nearing its 20-year
maturity, you will not be allowed to select a term that would carry the
certificate past its maturity date.
The certificate may be used as an investment for your Individual Retirement
Account (IRA), 401(k) plan account or other qualified retirement plan account.
If so used, the amount of your contribution (investment) will be subject to any
limitations of the plan and applicable federal law. You cannot purchase this
certificate in a Coverdell Education Savings Account.
FACE AMOUNT AND PRINCIPAL
The face amount of the certificate is the amount of your initial investment, and
will remain the same over the life of the certificate. Any investment or
withdrawal within 15 days of the end of a term will be added on or deducted to
determine principal for the new term. A withdrawal at any other time is taken
first from interest credited to your investment during that term. The principal
is the amount that is reinvested at the beginning of each subsequent term, and
is calculated as follows:
Principal equals Face amount (initial investment)
plus At the end of a term, interest credited to your
account during the term
minus Any interest paid to you in cash
plus Any additional investments
minus Any withdrawals, fees and applicable penalties
- --------------------------------------------------------------------------------
Principal may change during a term as described in "Add-on feature" under
"Additional Investments," and "Full and Partial Withdrawals."
For example, assume your initial investment (face amount) of $5,000 has earned
$75 of interest during the term. You have not taken any interest as cash, or
made any withdrawals. You have invested an additional $2,500 prior to the
beginning of the next term. Your principal for the next term will equal:
$5,000 Face amount (initial investment)
plus 75 Interest credited to your account
minus (0) Interest paid to you in cash
plus 2,500 Additional investment
minus (0) Withdrawals and applicable penalties or fees
- --------------------------------------------------------------------------------
$7,575 Principal at the beginning of the next term
================================================================================
VALUE AT MATURITY
You may continue to invest for successive terms up to a total of 20 years. Your
certificate matures at 20 years from its issue date. At maturity, you will
receive a distribution for the value of your certificate. This will be the total
of your purchase price, plus additional investments and any credited interest
not paid to you in cash, less any withdrawals and penalties. Certain other fees
may apply as described in "How to Invest and Withdraw Funds."
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14p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
RECEIVING CASH DURING THE TERM
If you need your money before your certificate term ends, you may withdraw part
or all of its value at any time, less any penalties that apply. Procedures for
withdrawing money, as well as conditions under which penalties apply, are
described in "How to Invest and Withdraw Funds."
INTEREST
Your investments earn interest from the date they are credited to your account.
Interest is compounded and credited at the end of each certificate month on the
monthly anniversary of the issue date.
AECC declares and guarantees a fixed rate of interest for each term during the
life of your certificate. We calculate the amount of interest you earn each
certificate month by:
o applying the interest rate then in effect to your balance each day,
o adding these daily amounts to get a monthly total, and
o subtracting interest accrued on any amount you withdraw during the
certificate month.
Interest is calculated on a 30-day month and 360-day year basis.
If you withdraw during a certificate month, you will not earn interest for the
month on the amount withdrawn.
This certificate may be available through other distributors or selling agents
with different interest rates or related features and consequently with
different returns. You may obtain information about other such distributors or
selling agents by calling AECSC at the telephone numbers listed on the back
cover.
RATES FOR NEW PURCHASES
AECC has complete discretion to determine whether to accept an application and
sell a certificate. When your completed application is accepted and we have
received your initial investment, we will send you a confirmation of your
purchase showing the rate that your investment will earn. AECC guarantees that
when rates for new purchases take effect, the rates will be within a range based
on the average interest rates then published in the BRM Top 25 Market Average(R)
for comparable length certificates of deposit (CDs) available from banks.
For purchases of certificates for less than $100,000, AECC guarantees that your
rate for your initial term will be:
6 months Within a range of 35 basis points (.35%) above to 135
basis points (1.35%) above the rate of 6-month CDs.
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12 months Within a range of 35 basis points (.35%) above to 135
basis points (1.35%) above the rate of 12-month CDs.
- --------------------------------------------------------------------------------
18 months Within a range of 45 basis points (.45%) above to 145
basis points (1.45%) above the rate of 12-month CDs.
- --------------------------------------------------------------------------------
24 months Within a range of 35 basis points (.35%) above to 135
basis points (1.35%) above the rate of 24-month CDs.
- --------------------------------------------------------------------------------
30 months Within a range of 35 basis points (.35%) above to 135
basis points (1.35%) above the rate of 30-month CDs.
- --------------------------------------------------------------------------------
36 months Within a range of 35 basis points (.35%) above to 135
basis points (1.35%) above the rate of 36-month CDs.
- --------------------------------------------------------------------------------
For purchases of certificates for $100,000 or more, AECC guarantees that your
rate for your initial term will be:
6 months Within a range of 50 basis points (.50%) above to 150
basis points (1.50%) above the rate of 6-month CDs.
- --------------------------------------------------------------------------------
12 months Within a range of 50 basis points (.50%) above to 150
basis points (1.50%) above the rate of 12-month CDs.
- --------------------------------------------------------------------------------
18 months Within a range of 60 basis points (.60%) above to 160
basis points (1.60%) above the rate of 12-month CDs.
- --------------------------------------------------------------------------------
24 months Within a range of 50 basis points (.50%) above to 150
basis points (1.50%) above the rate of 24-month CDs.
- --------------------------------------------------------------------------------
30 months Within a range of 50 basis points (.50%) above to 150
basis points (1.50%) above the rate of 30-month CDs.
- --------------------------------------------------------------------------------
36 months Within a range of 50 basis points (.50%) above to 150
basis points (1.50%) above the rate of 36-month CDs.
- --------------------------------------------------------------------------------
For persons who have received a special promotional coupon from AECC for
purchase of a Flexible Savings Certificate, for purchases of certificates for
less than $100,000, AECC guarantees that your rate for your initial term will
be:
6 months Within a range of 85 basis points (.85%) above to 185
basis points (1.85%) above the rate of 6-month CDs.
- --------------------------------------------------------------------------------
12 months Within a range of 85 basis points (.85%) above to 185
basis points (1.85%) above the rate of 12-month CDs.
- --------------------------------------------------------------------------------
18 months Within a range of 95 basis points (.95%) above to 195
basis points (1.95%) above the rate of 12-month CDs.
- --------------------------------------------------------------------------------
24 months Within a range of 85 basis points (.85%) above to 185
basis points (1.85%) above the rate of 24-month CDs.
- --------------------------------------------------------------------------------
30 months Within a range of 85 basis points (.85%) above to 185
basis points (1.85%) above the rate of 30-month CDs.
- --------------------------------------------------------------------------------
36 months Within a range of 85 basis points (.85%) above to 185
basis points (1.85%) above the rate of 36-month CDs.
- --------------------------------------------------------------------------------
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15p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
For persons who have received a special promotional coupon from AECC for
purchase of a Flexible Savings Certificate, for purchases of certificates for
$100,000 or more, AECC guarantees that your rate for your initial term will
be:
6 months Within a range of 100 basis points (1.00%) above to
200 basis points (2.00%) above the rate of 6-month CDs.
- --------------------------------------------------------------------------------
12 months Within a range of 100 basis points (1.00%) above to
200 basis points (2.00%) above the rate of 12-month CDs.
- --------------------------------------------------------------------------------
18 months Within a range of 110 basis points (1.10%) above to
210 basis points (2.10%) above the rate of 12-month CDs.
- --------------------------------------------------------------------------------
24 months Within a range of 100 basis points (1.00%) above to
200 basis points (2.00%) above the rate of 24-month CDs.
- --------------------------------------------------------------------------------
30 months Within a range of 100 basis points (1.00%) above to
200 basis points (2.00%) above the rate of 30-month CDs.
- --------------------------------------------------------------------------------
36 months Within a range of 100 basis points (1.00%) above to
200 basis points (2.00%) above the rate of 36-month CDs.
- --------------------------------------------------------------------------------
For example, the coupon may require that you make a minimum investment and
that you are not an existing client of American Express Financial Corporation
(AEFC), American Express Financial Advisors Inc., or another subsidiary of
AEFC. AECC or AEFC will select persons to receive the coupon based on a
business strategy to build relationships with persons who work for particular
employers or with new clients in selected market segments who AECC or AEFC
believes meet threshold requirements for such factors as household income and
home values. Coupons may be sent only to persons who both fit such a strategy
and live in particular parts of the country or are affiliated with particular
organizations. AECC also may give such a coupon to active or retired AEFC
employees, American Express financial advisors, their immediate families and
any U.S. employee of any affiliated company of AECC. This promotional rate
will only be available if the recipient of the coupon presents it to American
Express Financial Advisors Inc. at the time of applying to purchase the
certificate.
For your initial term, AECC may offer certificates with different terms than
those described above, for purchases of certificates for less than $100,000,
AECC guarantees that your rate for your initial term will be:
7 months Within a range of 85 basis points (.85%) above to 185
basis points (1.85%) above the rate of 6-month CDs.
- --------------------------------------------------------------------------------
11 months Within a range of 85 basis points (.85%) above to 185
basis points (1.85%) above the rate of 12-month CDs.
- --------------------------------------------------------------------------------
13 months Within a range of 85 basis points (.85%) above to 185
basis points (1.85%) above the rate of 12-month CDs.
- --------------------------------------------------------------------------------
19 months Within a range of 95 basis points (.95%) above to 195
basis points (1.95%) above the rate of 12-month CDs.
- --------------------------------------------------------------------------------
25 months Within a range of 85 basis points (.85%) above to 185
basis points (1.85%) above the rate of 24-month CDs.
- --------------------------------------------------------------------------------
31 months Within a range of 85 basis points (.85%) above to 185
basis points (1.85%) above the rate of 30-month CDs.
- --------------------------------------------------------------------------------
37 months Within a range of 85 basis points (.85%) above to 185
basis points (1.85%) above the rate of 36-month CDs.
- --------------------------------------------------------------------------------
For your initial term, AECC may offer certificates with different terms than
those described above, for purchases of certificates for $100,000 or more,
AECC guarantees that your rate for your initial term will be:
7 months Within a range of 100 basis points (1.00%) above to
200 basis points (2.00%) above the rate of 6-month CDs.
- --------------------------------------------------------------------------------
11 months Within a range of 100 basis points (1.00%) above to
200 basis points (2.00%) above the rate of 12-month CDs.
- --------------------------------------------------------------------------------
13 months Within a range of 100 basis points (1.00%) above to
200 basis points (2.00%) above the rate of 12-month CDs.
- --------------------------------------------------------------------------------
19 months Within a range of 110 basis points (1.10%) above to
210 basis points (2.10%) above the rate of 12-month CDs.
- --------------------------------------------------------------------------------
25 months Within a range of 100 basis points (1.00%) above to
200 basis points (2.00%) above the rate of 24-month CDs.
- --------------------------------------------------------------------------------
31 months Within a range of 100 basis points (1.00%) above to
200 basis points (2.00%) above the rate of 30-month CDs.
- --------------------------------------------------------------------------------
37 months Within a range of 100 basis points (1.00%) above to
200 basis points (2.00%) above the rate of 36-month CDs.
- --------------------------------------------------------------------------------
Purchase of a certificate in one of these special offers may result in a later
term of less than six months in order to assure that your certificate matures
20 years from its issue date. AECC may limit the offering of these
certificates to persons who have received a coupon as a promotion, based on a
business strategy to build relationships with new clients in related market
segments or persons who AEFC believes meet threshold requirements for such
factors as household income and home values or persons who fit this strategy
and live in particular areas of the country or are affiliated with particular
organizations. AECC may also offer different rates or terms to new clients,
existing clients, or to individuals who have purchased other products or used
other services of American Express Company or its subsidiaries, and may offer
some terms only in selected distribution channels. We also may offer different
rates based on your amount invested, your geographic location and whether the
certificate is purchased for an IRA or for a qualified retirement account.
Note: In the case of the 18-month term, because BRM Top 25 Market Average does
not typically publish rates for comparable length CDs AECC uses a different
range based on the rates for 12-month CDs.
The BRM is a weekly magazine published by Advertising News Service Inc., an
independent national news organization that collects and disseminates
information about bank products and interest rates. Advertising News Service
Inc. has no connection with AECC, AEFC or any of their affiliates.
- --------------------------------------------------------------------------------
16p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
The BRM Top 25 Market Average is an index of rates and annual effective yields
offered on various length CDs by large banks and thrifts in 25 metropolitan
areas. The frequency of compounding varies among the banks and thrifts. CDs in
the BRM Top 25 Market Average are government insured fixed-rate time deposits.
The BRM may be available in your local library. To obtain information on current
BRM Top 25 Market Average rates, call AECSC at the telephone numbers listed on
the back cover.
Rates for new purchases are reviewed and may change weekly. Normally, the rate
you receive will be the higher of:
o the rate in effect for your chosen term on the date of your application, or
o the rate in effect on the date your completed application is accepted by
AECC.
However, if your application bears a date more than seven days before its
receipt by AECC, the rate you receive will be the higher of:
o the rate in effect on the date your completed application is accepted by
AECC, or
o the rate in effect seven days before receipt.
Rates for future terms: Interest on your certificate for future terms may be
greater or less than the rates you receive during your first term. In setting
future interest rates, a primary consideration will be the prevailing investment
climate, including CD yields as reflected in the BRM Top 25 Market Average.
Nevertheless, we have complete discretion as to what interest rate is declared
beyond the initial term. At least six days in advance of each term, we will send
you notice of the rate that your certificate will earn for that term. If the BRM
Top 25 Market Average is no longer publicly available or feasible to use, AECC
may use another, similar index as a guide for setting rates.
Performance: From February 1996 through February 2005, American Express Flexible
Savings Certificate one year CD yields were generally higher than average bank
and thrift one year CD yields as measured by the BRM Top 25 Market Average.
[line chart]
Yields from February 1996 through February 2005
American Express
Flexible Savings Certificate of
Certificate Deposit
Feb-96 4.94 4.90
Mar-96 4.80 4.74
Apr-96 4.91 4.81
May-96 5.00 4.88
Jun-96 5.12 4.96
Jul-96 5.17 5.02
Aug-96 5.26 5.09
Sep-96 5.27 5.10
Oct-96 5.32 5.15
Nov-96 5.27 5.12
Dec-96 5.26 5.10
Jan-97 5.18 5.08
Feb-97 5.21 5.10
Mar-97 5.21 5.10
Apr-97 5.25 5.13
May-97 5.32 5.21
Jun-97 5.35 5.24
Jul-97 5.34 5.24
Aug-97 5.31 5.20
Sep-97 5.25 5.18
Oct-97 5.24 5.18
Nov-97 5.21 5.15
Dec-97 5.22 5.16
Jan-98 5.22 5.15
Feb-98 5.12 5.06
Mar-98 5.09 5.03
Apr-98 5.08 5.02
May-98 5.07 5.02
Jun-98 5.06 5.00
Jul-98 5.06 5.00
Aug-98 5.03 4.97
Sep-98 5.03 4.97
Oct-98 4.85 4.80
Nov-98 4.53 4.47
Dec-98 4.47 4.42
Jan-99 4.39 4.34
Feb-99 4.39 4.34
Mar-99 4.41 4.36
Apr-99 4.44 4.39
May-99 4.42 4.37
Jun-99 4.46 4.41
Jul-99 4.66 4.51
Aug-99 4.75 4.60
Sep-99 4.86 4.70
Oct-99 4.93 4.77
Nov-99 5.01 4.85
Dec-99 5.07 4.91
Jan-00 5.19 4.99
Feb-00 5.27 5.06
Mar-00 5.40 5.19
Apr-00 5.44 5.27
May-00 6.31 5.31
Jun-00 6.56 5.56
Jul-00 6.55 5.55
Aug-00 6.54 5.59
Sep-00 6.52 5.57
Oct-00 6.53 5.59
Nov-00 6.51 5.56
Dec-00 6.49 5.54
Jan-01 6.36 5.41
Feb-01 5.85 4.90
Mar-01 5.64 4.68
Apr-01 5.28 4.35
May-01 5.02 4.08
Jun-01 4.79 3.85
Jul-01 4.66 3.73
Aug-01 4.61 3.68
Sep-01 4.43 3.50
Oct-01 3.93 3.01
Nov-01 3.44 2.52
Dec-01 3.18 2.26
Jan-02 3.13 2.22
Feb-02 3.08 2.15
Mar-02 3.06 2.14
Apr-02 3.18 2.26
May-02 3.22 2.30
Jun-02 3.71 2.27
Jul-02 3.64 2.21
Aug-02 2.95 2.04
Sep-02 2.82 1.91
Oct-02 2.75 1.84
Nov-02 2.70 1.79
Dec-02 2.49 1.58
Jan-03 2.44 1.53
Feb-03 2.40 1.49
Mar-03 2.37 1.46
Apr-03 2.75 1.37
May-03 2.20 1.34
Jun-03 2.13 1.27
Jul-03 2.02 1.16
Aug-03 1.95 1.09
Sep-03 1.98 1.12
Oct-03 2.00 1.15
Nov-03 2.01 1.16
Dec-03 2.02 1.17
Jan-04 2.05 1.20
Feb-04 2.04 1.18
Mar-04 2.04 1.19
Apr-04 2.01 1.16
May-04 2.07 1.21
Jun-04 2.21 1.35
Jul-04 2.38 1.52
Aug-04 2.45 1.60
Sep-04 2.49 1.63
Oct-04 2.54 1.68
Nov-04 2.61 1.74
Dec-04 2.74 1.87
Jan-05 2.87 2.01
Feb-05 3.03 2.16
The graph compares past yields and should not be considered a prediction of
future performance.
PROMOTIONS AND PRICING FLEXIBILITY
AECC may sponsor or participate in promotions involving the certificate and its
respective terms. For example, we may offer different rates to new clients, to
existing clients, to Gold and Platinum Financial Services clients, or to
individuals who have purchased other products or used other services of American
Express Company or its affiliates. Different rates may be offered to Gold and
Platinum Financial Services clients and may be restricted to initial terms only.
We also may offer different rates based on the amount invested and/or geographic
location and whether the certificate is purchased for an IRA or a qualified
retirement account.
These promotions will generally be for a specified period of time. If we offer a
promotion, the rates for new purchases will be within the range of rates
described under "Rates for New Purchases."
- --------------------------------------------------------------------------------
17p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
How to Invest and Withdraw Funds
BUYING YOUR CERTIFICATE
Your American Express financial advisor will help you fill out and submit an
application to open an account with us and purchase a certificate. If you
purchase your certificate other than through an American Express financial
advisor -- for example, through a direct marketing channel -- you may be given
different purchase instructions. We will process the application at our
corporate offices in Minneapolis, Minnesota. When we have accepted your
application and received your initial investment, we will send you a
confirmation of your purchase, indicating your account number and applicable
rate of interest for your first term, as described under "Rates for New
Purchases." See "Purchase policies" below.
Important: When you open an account, you must provide AECC with your correct
Taxpayer Identification Number (TIN), which is either your Social Security or
Employer Identification number. See "Taxes on Your Earnings."
Purchase policies
o Investments must be received and accepted in the Minneapolis headquarters on
a business day before 3 p.m. Central time to be included in your account that
day. Otherwise your purchase will be processed the next business day.
o You have 15 days from the date of purchase to cancel your investment without
penalty by either writing or calling AECSC at the address or phone number on
the back of this prospectus. If you decide to cancel your certificate within
this 15-day period, you will not earn any interest.
o If you purchase a certificate with a personal check or other non-guaranteed
funds, AEFC will wait one day for the process of converting your check to
federal funds (e.g., monies of member banks within the Federal Reserve Bank)
before your purchase will be accepted and you begin earning interest. For
information on how to avoid this delay, for example by using a certified
check, please call AECSC at the telephone number listed on the back cover.
o AECC has complete discretion to determine whether to accept an application
and sell a certificate.
A number of special policies apply to purchases, withdrawals and exchanges
within IRAs, 401(k) plans and other qualified retirement plans. See
"Retirement Plans: Special Policies."
ADDITIONAL INVESTMENTS
You may make investments within 15 calendar days after the end of a term (the
grace period) as well as during the 15 day period following date of purchase.
Investments added to your certificate during the grace period will increase the
principal balance for purposes of the 25% add-on feature described below and the
10% withdrawal feature described under "Full and Partial Withdrawals."
Additional investments may be in any amount so long as your total investment,
less withdrawals, does not exceed $1 million, unless you receive prior approval
from AECC to invest more. You will earn interest on additional investments from
the date we accept them. AECC will send a confirmation of additional
investments.
If you add to a certificate purchased other than through an American Express
financial advisor, you may be given different instructions regarding additional
investments.
Add-on feature: You may also add to your certificate during the term. These
additional investments may not exceed 25% of the certificate's initial principal
balance at the end of the grace period. This principal includes the balance at
the end of the previous term, plus or minus any deposits or withdrawals during
the grace period.
Any add-on or withdrawal during the grace period will change the principal
amount used to determine the amount available for the 25% add-on feature.
For example, suppose your original balance is $9,000. During the grace period,
you add $1,000. At any time during the current term, you could add up to 25% of
principal ($9,000 + $1,000 = $10,000), or $2,500 to your certificate.
The interest rate for these additional investments is the rate then in effect
for your account. If your additional investment increases the principal of your
certificate so that your certificate's principal has exceeded a break point for
a higher interest rate, the certificate will earn this higher interest rate for
the remainder of the term, from the date the additional investment is accepted.
- --------------------------------------------------------------------------------
18p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
HOW TO MAKE INVESTMENTS
By mail
Send your check, by regular or express mail, along with your name and account
number to:
American Express Financial Advisors Inc.
70200 AXP Financial Center
Minneapolis, MN 55474
By wire
For investment into an established account, you may wire money to:
Wells Fargo Bank Minnesota, N.A.
Routing No. 091000019
Minneapolis, MN
Attn: Domestic Wire Dept.
Give these instructions: Credit American Express Financial Advisors Account
#0000030015 for personal account # (your account number) for (your name). Please
be sure to include all 10 digits of the American Express Financial Advisors
account number, including the zeros.
If this information is not included, the order may be rejected and all money
received, less any costs AECC incurs, will be returned promptly.
o Minimum amount you may wire: $1,000.
o Wire orders can be accepted only on days when your bank, American Express
Financial Corporation (AEFC), AECC and Wells Fargo Bank Minnesota, N.A. are
open for business.
o Wire purchases are completed when wired payment is received and we accept the
purchase.
o Wire investments must be received and accepted in our Minneapolis
headquarters on a business day before 3 p.m. Central time to be credited that
day. Otherwise your purchase will be processed the next business day.
o AECC, AEFC and its other subsidiaries are not responsible for any delays that
occur in wiring funds, including delays in processing by the bank.
o You must pay any fee the bank charges for wiring.
FULL AND PARTIAL WITHDRAWALS
o You may withdraw your certificate for its full value or make a partial
withdrawal of $100 or more at any time. If you purchase this certificate for
an IRA, 401(k) or other retirement plan account, early withdrawals or cash
payments of interest taken prematurely may be subject to IRS penalty taxes.
o If you withdraw during a certificate month, you will not earn interest for
the month on the amount withdrawn.
o Complete withdrawal of your certificate is made by giving us proper
instructions. To complete these transactions, see "How to Request a
Withdrawal or Transfer."
o Full and partial withdrawals of principal are subject to penalties, described
below.
o Interest payments in cash may be sent to you at the end of each certificate
month, quarter, or on a semiannual or annual basis.
o If a withdrawal reduces your account value to a point where we pay a lower
interest rate, you will earn the lower rate from the date of the withdrawal.
o You may not otherwise make a partial withdrawal if it would reduce your
certificate balance to less than $1,000. If you request such a withdrawal, we
will contact you for revised instructions.
o Scheduled partial withdrawals may be made monthly, quarterly, semiannually,
annually and at term end.
o Because we credit interest on your certificate's monthly anniversary,
withdrawals before the end of the certificate month will result in loss of
accrued interest on the amount withdrawn. You will get the best result by
timing a withdrawal at the end of the certificate month, that is, on an
interest crediting date.
Penalties for early withdrawal: When you request a full or partial withdrawal,
we pay the amount you request:
o first from interest credited during the current term,
o then from the principal of your certificate.
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19p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
Any additional investments or withdrawals during a term are added to or deducted
from the principal and are used in determining any withdrawal charges.
You may not make a partial withdrawal if it would reduce your certificate
balance to less than $1,000. If you request such a withdrawal, we will contact
you for revised instructions.
Withdrawal penalties: For withdrawals during the term of more than the interest
credited that term and over 10% of the certificate's principal, a 2% withdrawal
penalty will be deducted from the account's remaining balance.
For example, assume you invest $20,000 in a certificate and select a two-year
term. A little over a year later assume you have earned $1,600 in interest. The
following demonstrates how the withdrawal charge is deducted:
When you withdraw a specific amount of money in excess of the interest
credited, we would have to withdraw additional funds more from your
account to cover the withdrawal charge. For instance, suppose you request
a $5,000 check. The first $1,600 paid to you is interest earned that term,
the next $2,000 is 10% of principal, and not subject to the withdrawal
penalty, and the remaining $1,400 paid to you is principal over the 10%
limit. We would send you a check for $5,000 and deduct a withdrawal charge
of $28.00 ($1,400 x 2%) from the remaining balance of your certificate
account. Your new balance would be $16,572 ($21,600 - $5,028).
Total investments $20,000
Interest credited 1,600
- --------------------------------------------------------------------------------
Total balance $21,600
Requested check $ 5,000
- --------------------------------------------------------------------------------
Credited interest withdrawn (1,600)
10% of principal -- not subject to penalty (2,000)
- --------------------------------------------------------------------------------
Remaining portion of requested withdrawal -- subject to penalty $ 1,400
Withdrawal penalty percent 2%
Actual withdrawal penalty $28
Balance prior to withdrawal $21,600
Requested withdrawal check (5,000)
Withdrawal penalty (28)
- --------------------------------------------------------------------------------
Total balance after withdrawal $16,572
================================================================================
Penalty exceptions: There is never a penalty for withdrawal of interest. In
addition, you may withdraw up to 10% of your principal during the term without a
withdrawal penalty. The principal available for the 10% no-penalty withdrawal
feature is the balance in the certificate at the beginning of the term plus or
minus any deposits or withdrawals made during the grace period.
The following example demonstrates how this feature works:
Assume your certificate balance is $1,000. During the grace period you add
$500, bringing the principal to $1,500. At any time during the term you
could withdraw up to $150 of principal with no penalty.
Any additional investments or withdrawals following the grace period will not
change the principal amount used to determine the amount available for the 10%
no-penalty withdrawal feature.
The 2% penalty is waived upon death of the certificate owner. When this
certificate is owned by a revocable trust, this penalty also is waived upon
death of any grantor of the revocable trust. We will also waive withdrawal
penalties on withdrawals for IRA certificate accounts for your required minimum
distributions at age 701/2. See "Retirement Plans: Special Policies."
For more information on withdrawal charges, talk with your American Express
financial advisor or call AECSC at the number on the back cover.
WHEN YOUR CERTIFICATE TERM ENDS
Shortly before the end of the term you have selected for your certificate, we
will send you a notice indicating the interest rate that will apply to the
certificate for the new term. When your certificate term ends we will
automatically renew your certificate for the standard term (six, 12, 18, 24, 30
or 36 month) nearest in length to your initial term. If your initial term is
equidistant from two standard terms, we will automatically renew your
certificate to the term with the longest term length that is shorter than your
initial term. If you wish to select a different term, you must notify us in
writing before the end of the grace period. You will not be allowed to select a
term that would carry the certificate past its maturity date.
- --------------------------------------------------------------------------------
20p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
The interest rates that will apply to your new term will be those in effect on
the day the new term begins. We will send you a confirmation showing the rate of
interest that will apply to the new term you have selected. This rate of
interest will not change during that term unless your certificate's principal
falls below a break point for a lower rate or goes above a break point for a
higher interest rate.
If you want to withdraw your certificate without a withdrawal charge, you must
notify us within 15 calendar days following the end of a term. However, you will
lose any interest accrued since the end of the term.
You may also add to your investment within the 15 calendar days following the
end of your term. See "Additional Investments" under "How to Invest and Withdraw
Funds." You may also make a withdrawal within the 15 calendar days following the
end of your term. See "Full and Partial Withdrawals" under "How to Invest and
Withdraw Funds."
Other full and partial withdrawal policies
o If you request a partial or full withdrawal of a certificate recently
purchased or added to by a check or money order that is not guaranteed, we
will wait for your check to clear. Please expect a minimum of 10 days from
the date of your payment before AECC mails a check to you.
o If your certificate is pledged as collateral, any withdrawal will be delayed
until we get approval from the secured party.
o Any payments to you may be delayed under applicable rules, regulations or
orders of the Securities and Exchange Commission (SEC).
TRANSFERS TO OTHER ACCOUNTS
You may transfer part or all of your certificate to any other American Express
Certificate or into another new or existing American Express Financial Advisors
Inc. account that has the same ownership, subject to any terms and conditions
that may apply.
Transfers to another American Express Financial Advisors Inc. account with
different ownership will require a written request.
HOW TO REQUEST A WITHDRAWAL OR TRANSFER
By phone
Call AECSC at one of the telephone numbers listed on the back cover.
o Maximum telephone withdrawal request: $100,000.
o Transfers into an American Express Financial Advisors Inc. account with the
same ownership.
o A telephone withdrawal request will not be allowed within 30 days of a
phoned-in address change.
o We will honor any telephone withdrawal or transfer request believed to be
authentic and will use reasonable procedures to confirm authenticity.
You may request that telephone withdrawals not be authorized from your account
by writing to AECSC.
By mail
Send your name, account number and request for a withdrawal or transfer, by
regular or express mail, to:
American Express Financial Advisors Inc.
70100 AXP Financial Center
Minneapolis, MN 55474
Written requests are required for:
o Withdrawals over $100,000.
o Pension plans.
o Custodial accounts where the minor has reached the age at which custodianship
should terminate.
o Transfers to another American Express Financial Advisors Inc. account with
different ownership. All current registered owners must sign the request.
o All owners must sign a written request if there was an address change within
the last 30 days.
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21p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
HOW TO RECEIVE PAYMENT WHEN YOU WITHDRAW FUNDS
By regular or express mail
o Mailed to address on record; please allow seven days for mailing.
o Payable to name(s) listed on the account.
o The express mail delivery charges you pay will vary depending on the courier
you select. We will deduct the fee from your remaining certificate balance,
provided that balance would not be less than $1,000. If the balance would be
less than $1,000, we will deduct the fee from the proceeds of the withdrawal.
By wire
o Minimum wire amount: $1,000.
o Request that money be wired to your bank.
o Bank account must be in same ownership as the AECC account.
o Pre-authorization required. Complete the bank wire authorization section in
the application or use a form supplied by your American Express financial
advisor. All registered owners must sign.
o Applicable wire charges will be deducted from your balance for partial
withdrawals or from the proceeds of a full withdrawal.
By electronic transfer
o Available only for pre-authorized scheduled partial withdrawals and other
full or partial withdrawals.
o No charge.
o Deposited electronically in your bank account.
o Allow two to five business days from request to deposit.
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22p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
American Express Installment Certificate
About the Certificate
READ AND KEEP THIS PROSPECTUS
This prospectus section describes terms and conditions of your American Express
Installment Certificate. It contains facts that can help you decide if the
certificate is the right investment for you. Read the prospectus before you
invest and keep it for future reference. No one has the authority to vary the
terms and conditions of the American Express Installment Certificate from those
described in the prospectus, or to bind AECC by any statement not in it.
INVESTMENT AMOUNTS
AECC offers the American Express Installment Certificate for scheduled monthly
purchase payment installments in any amount from $50 through $5,000 payable in
U.S. currency, unless you receive prior approval from AECC to invest more. You
may also make additional lump-sum investments in any amount, as long as these
investments plus your scheduled payments over the life of the certificate do not
total more than $600,000. AECC guarantees your principal and interest.
The certificate may be used as an investment for your Individual Retirement
Account (IRA), 401(k) plan account or other qualified retirement plan account.
If so used, the amount of your contribution (investment) will be subject to any
limitations of the plan and applicable federal law. You cannot purchase this
certificate in a Coverdell Education Savings Account.
FACE AMOUNT AND PRINCIPAL
The face amount of your certificate is the total of your scheduled monthly
investments during its 10-year life. The minimum face amount is $6,000 or the
total of 120 monthly investments of $50 each. Your maximum face amount cannot
exceed $600,000. Your principal is the amount you actually invest over the life
of the certificate, less any withdrawals of your investments, and penalties and
fees. The principal amount is guaranteed by AECC.
VALUE AT MATURITY
Your certificate matures 10 years from its issue date. At maturity, you will
receive a distribution for the value of your certificate, which will be the
total of your actual investments, plus credited interest not paid to you in cash
and any bonus payments, less withdrawals, penalties and fees.
RECEIVING CASH DURING THE TERM
If you need your money before your certificate term ends, you may withdraw part
or all of its value at any time, less any penalties that apply. Procedures for
withdrawing money, as well as conditions under which penalties apply, are
described in "How to Invest and Withdraw Funds."
INTEREST
Your investments earn interest from the date they are credited to your account.
Interest is compounded and credited at the end of each certificate month on the
monthly anniversary of the issue date.
AECC declares and guarantees a fixed rate of interest for each three-month term
during the life of your certificate. We calculate the amount of interest you
earn each certificate month by:
o applying the interest rate then in effect to your balance each day,
o adding these daily amounts to get a monthly total, and
o subtracting interest accrued on any amount you withdraw during the
certificate month.
Interest is calculated on a 30-day month and 360-day year basis.
This certificate may be available through other distributors or selling agents
with different interest rates or related features and consequently with
different returns. You may obtain information about other such distributors or
selling agents by calling AECSC at the telephone numbers listed on the back
cover.
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23p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
RATES FOR NEW PURCHASES
AECC has complete discretion to determine whether to accept an application and
sell a certificate. When your completed application is accepted, and we have
received your initial investment, we will send you a confirmation showing the
rate that your investment will earn for the first three-month period. AECC
guarantees that when this rate takes effect it will be within a range from 50
basis points (0.50%) below to 50 basis points (0.50%) above the average interest
rate for bank money market deposit accounts published in the BRM Top 25 Market
Average. For example, if the average rate most recently published is 2.75%, our
rate in effect for a one-week period beginning on the Wednesday after that
publication would be between 2.25% and 3.25%.
The BRM is a weekly magazine published by Advertising News Service Inc., an
independent national news organization that collects and disseminates
information about bank products and interest rates. Advertising News Service
Inc. has no connection with AECC, American Express Financial Corporation (AEFC),
or any of their affiliates.
The BRM Top 25 Market Average is an index of rates and annual effective yields
offered on various length certificates of deposit by large banks and thrifts in
25 metropolitan areas. The frequency of compounding varies among the banks and
thrifts. Certificates of deposit in the BRM Top 25 Market Average are
government-insured fixed-rate time deposits.
The BRM may be available in your local library. To obtain information on the
current BRM Top 25 Market Average rates, call AECSC at the telephone numbers
listed on the back cover.
Rates for new purchases are reviewed and may change weekly. Normally, the rate
you receive will be the higher of:
o the rate in effect on the date of your application, or
o the rate in effect on the date your completed application is accepted by
AECC.
However, if your application bears a date more than seven days before its
receipt by AECC, the rate you receive will be the higher of:
o the rate in effect on the date your completed application is accepted by
AECC, or
o the rate in effect seven days prior to receipt.
Active or retired American Express employees, AECC directors, American Express
financial advisors, their immediate families and any U.S. employee of any
affiliated company of AECC may receive an initial rate 75 basis points (0.75%)
above the rate offered to the general public, reflecting the lower distribution
costs associated with such sales. Consequently, the highest and lowest rate in
the range of rates for initial terms of such certificates purchased at the
employee rate will be 75 basis points (0.75%) higher than the comparable rates
described at the beginning of this section for ranges of rates for initial
terms.
Rates for future periods: Interest on your certificate for future three-month
periods may be greater or less than the rates you receive during the first three
months. In setting future interest rates, a primary consideration will be the
prevailing investment climate, including bank money market deposit account
average rates as reflected in the BRM Top 25 Market Average. Nevertheless, we
have complete discretion as to what interest shall be declared beyond the
initial three-month period. At least six days in advance of each three-month
period, we will send you notice of the rate that your certificate will earn for
that period. If the BRM Top 25 Market Average is no longer publicly available or
feasible to use, AECC may use another, similar index as a guide for setting
rates.
PROMOTIONS AND PRICING FLEXIBILITY
AECC may sponsor or participate in promotions involving the certificate and its
respective terms. For example, we may offer different rates to new clients, to
existing clients, or to individuals who purchase or use products or services
offered by American Express Company or its affiliates.
We also may offer different rates based on the amount invested, maturity
selected, geographic location and whether the certificate is purchased for an
IRA or a qualified retirement account.
These promotions will generally be for a specified period of time. If we offer a
promotion, rates will be within the range of rates described under "Rates for
New Purchases."
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24p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
Performance: From February 1996 through February 2005, American Express
Installment Certificate yields were generally comparable to average bank money
market deposit accounts and Super NOW accounts, as measured by the BRM Top 25
Market Average.
[line chart]
Yields from February 1996 through February 2005
American Money
Express Market Super
Installment Deposit NOW
Date Certificate Account Account
Feb-96 3.25 2.77 1.59
Mar-96 3.25 2.73 1.56
Apr-96 3.00 2.72 1.55
May-96 3.00 2.67 1.54
Jun-96 3.00 2.66 1.53
Jul-96 3.00 2.68 1.53
Aug-96 3.00 2.68 1.52
Sep-96 3.00 2.66 1.52
Oct-96 3.00 2.65 1.53
Nov-96 3.00 2.62 1.52
Dec-96 3.00 2.61 1.50
Jan-97 3.00 2.60 1.50
Feb-97 3.00 2.59 1.48
Mar-97 3.00 2.60 1.49
Apr-97 3.00 2.58 1.49
May-97 3.00 2.59 1.49
Jun-97 3.00 2.60 1.49
Jul-97 3.00 2.60 1.49
Aug-97 3.00 2.59 1.47
Sep-97 3.00 2.59 1.47
Oct-97 3.00 2.60 1.47
Nov-97 3.00 2.58 1.45
Dec-97 3.00 2.58 1.44
Jan-98 3.00 2.58 1.44
Feb-98 3.00 2.55 1.40
Mar-98 3.00 2.55 1.40
Apr-98 3.00 2.51 1.38
May-98 3.00 2.49 1.36
Jun-98 3.00 2.48 1.36
Jul-98 3.00 2.49 1.35
Aug-98 3.00 2.49 1.35
Sep-98 3.00 2.49 1.37
Oct-98 3.00 2.47 1.34
Nov-98 2.75 2.41 1.29
Dec-98 2.75 2.37 1.26
Jan-99 2.75 2.28 1.18
Feb-99 2.75 2.29 1.17
Mar-99 2.50 2.29 1.16
Apr-99 2.50 2.25 1.13
May-99 2.50 2.24 1.12
Jun-99 2.50 2.21 1.11
Jul-99 2.50 2.19 1.09
Aug-99 2.50 2.20 1.07
Sep-99 2.50 2.20 1.06
Oct-99 2.75 2.22 1.05
Nov-99 2.75 2.21 1.05
Dec-99 2.75 2.21 1.04
Jan-00 2.75 2.22 1.04
Feb-00 3.25 2.21 1.04
Mar-00 3.00 2.24 1.03
Apr-00 3.00 2.23 1.02
May-00 3.00 2.23 1.02
Jun-00 3.00 2.27 1.01
Jul-00 3.00 2.26 1.01
Aug-00 3.00 2.27 1.00
Sep-00 3.00 2.28 1.00
Oct-00 3.00 2.28 0.99
Nov-00 3.00 2.27 0.99
Dec-00 3.00 2.29 1.00
Jan-01 3.00 2.28 1.00
Feb-01 3.00 2.22 0.98
Mar-01 3.00 2.19 0.97
Apr-01 3.00 2.13 0.95
May-01 3.00 2.05 0.86
Jun-01 2.50 1.95 0.84
Jul-01 2.25 1.89 0.82
Aug-01 2.25 1.84 0.82
Sep-01 2.25 1.79 0.79
Oct-01 1.75 1.61 0.71
Nov-01 1.50 1.41 0.63
Dec-01 1.50 1.25 0.58
Jan-02 1.50 1.19 0.56
Feb-02 1.25 1.15 0.54
Mar-02 1.25 1.12 0.54
Apr-02 1.25 1.11 0.54
May-02 1.25 1.11 0.53
Jun-02 1.00 1.10 0.54
Jul-02 1.00 1.08 0.53
Aug-02 1.00 1.06 0.51
Sep-02 1.00 1.03 0.50
Oct-02 1.00 1.00 0.49
Nov-02 0.80 0.97 0.48
Dec-02 0.80 0.83 0.43
Jan-03 0.80 0.78 0.42
Feb-03 0.65 0.79 0.42
Mar-03 0.65 0.77 0.41
Apr-03 0.65 0.74 0.40
May-03 0.65 0.71 0.39
Jun-03 0.50 0.68 0.36
Jul-03 0.50 0.65 0.35
Aug-03 0.50 0.55 0.26
Sep-03 0.50 0.54 0.30
Oct-03 0.50 0.53 0.30
Nov-03 0.50 0.52 0.30
Dec-03 0.50 0.52 0.30
Jan-04 0.35 0.52 0.30
Feb-04 0.35 0.51 0.29
Mar-04 0.35 0.49 0.29
Apr-04 0.35 0.49 0.29
May-04 0.35 0.46 0.27
Jun-04 0.10 0.45 0.26
Jul-04 0.10 0.45 0.26
Aug-04 0.10 0.45 0.26
Sep-04 0.10 0.46 0.26
Oct-04 0.10 0.47 0.26
Nov-04 0.10 0.48 0.28
Dec-04 0.10 0.49 0.28
Jan-05 0.10 0.50 0.28
Feb-05 0.10 0.51 0.28
The graph compares past yields and should not be considered a prediction of
future performance.
BONUS PAYMENTS
If you meet our requirements for your investments, AECC will pay you a monthly
bonus for a period of time. Your bonus will be a percentage of your weighted
average monthly investment (WAMI). This percentage may increase from time to
time if you continue to meet our requirements, including maintaining a minimum
balance. These requirements are set out in the table below. All the periods of
12 months mentioned in the table must begin and end on the date we issue your
certificate or an annual anniversary of that date.
To be eligible for this bonus for 12 months: You must meet these requirements:
- ------------------------------------------------- -----------------------------------------------------------------------------
5% annualized bonus payment on your WAMI: During a 12-month period, you must make one or more payments totaling at
least $600. In a subsequent 12-month period, you must make payments
totaling at least an additional $600 for a total principal amount
invested of $1,200, not including interest. The two 12-month periods do
not have to be consecutive. Further, the first 12-month period does not
have to be the year beginning with your first investment. This bonus may
be earned in any certificate year from the second through the ninth
year.
- ------------------------------------------------- -----------------------------------------------------------------------------
8% annualized bonus payment on your WAMI: During a 12-month period subsequent to your qualification for the 5%
annualized bonus payments, you must make one or more payments totaling
at least $600 for a total principal amount invested of $1,800, not
including interest. This bonus may be earned in any certificate year
from the third through the ninth certificate year.
- ------------------------------------------------- -----------------------------------------------------------------------------
10% annualized bonus payment on your WAMI: During a 12-month period subsequent to your qualification for the 8%
annualized bonus payments, you must make one or more payments totaling
at least $600 for a total principal amount invested of $2,400, not
including interest. This bonus may be earned in any certificate year
from the fourth through the ninth certificate year.
- ------------------------------------------------- -----------------------------------------------------------------------------
20% annualized bonus payment on your WAMI: During a 12-month period subsequent to your qualification for the 10%
annualized bonus payments, you must make one or more payments totaling
at least $600 for a total principal amount invested of $3,000, not
including interest. This bonus may be earned in any certificate year
from the fifth through the ninth certificate year.
- ------------------------------------------------- -----------------------------------------------------------------------------
The rate in the remaining years following attainment of the 20% bonus is
comparable to a fixed rate investment. It may be obtained as soon as the seventh
certificate year or as late as the tenth certificate year.
Bonus payments are credited to your account at the end of each certificate
month. They immediately become part of your balance and begin to earn interest.
- --------------------------------------------------------------------------------
25p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
The illustrations below show the cumulative effect of bonus payments on a
hypothetical investment. Assume you invest $100 per month, receive interest at a
constant rate of 1.00% (an effective annual yield of 1.00%, assuming a March 1
purchase) and make no additional lump-sum investments and no withdrawals. (The
rate and yield are for illustration only and may not be in effect when you
purchase your certificate.) Your interest, balance and average annual yield
would increase as follows:
[area chart]
Installment Certificate Example
Installment Certificate Example
Amount Paid In Interest Bonus
$1,200.00 $1,206.49 $1,206.49
2,400.00 2,425.05 2,425.05
3,600.00 3,655.79 3,716.11
4,800.00 4,898.83 5,056.28
6,000.00 6,154.31 6,433.98
7,200.00 7,422.35 7,946.11
Without bonus Added by bonus Total with bonus
- -------------------------------------------------------------------------------------------------------------------------------
Cumulative Cumulative Average
Cumulative interest on Cumulative interest on annual
investments investments Balance bonus bonus Balance yield*
1st 12-month period $1,200.00 $ 6.49 $1,206.49 $ 0.00 $0.00 $1,206.49 1.00%
2nd 12-month period 2,400.00 25.05 2,425.05 0.00 0.00 2,425.05 1.00
3rd 12-month period 3,600.00 55.79 3,655.79 60.00 0.32 3,716.11 2.07
4th 12-month period 4,800.00 98.83 4,898.83 156.00 1.45 5,056.28 2.56
5th 12-month period 6,000.00 154.31 6,154.31 276.00 3.67 6,433.98 2.75
6th 12-month period 7,200.00 222.35 7,422.35 516.00 7.77 7,946.11 3.24
* Average from date of issue to end of year indicated.
Important: The increase in yield that you receive from bonus payments may be
more or less than in the example, depending upon interest rates during the six
years following issue of your certificate. If actual interest rates are higher
than in the example, the effect of the bonus will be less. For example, at a
3.00% interest rate, bonus payments would raise the certificate's average annual
yield from issue through year six by 2.18%, compared to 2.24% (3.24% - 1.00%) in
the example. If actual interest rates are lower than in the example, the
increase in the average annual yield would be somewhat more than 2.24%.
- --------------------------------------------------------------------------------
26p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
CALCULATING YOUR BONUS
To determine your bonus we:
o first calculate your average monthly investment over the life of your
certificate, weighting it to reflect the amount of time each dollar has been
invested (your weighted average monthly investment). Money invested early is
given more weight than money invested later; and
o then calculate your monthly bonus as a specified percentage of your weighted
average monthly investment.
Here is an example to illustrate the two calculations. Assume you make 24
consecutive monthly investments - $100 per month for the first six months and
$150 per month thereafter (a total of $3,300).
Calculating your bonus
Month Investment Months held Weighted value
- -------------------------------------------------------------------------------------------------------------------------------
1 $ 100 x 24 = $ 2,400
2 100 23 2,300
3 100 22 2,200
4 100 21 2,100
5 100 20 2,000
6 100 19 1,900
7... 150 18... 2,700
24 150 1 150
- -------------------------------------------------------------------------------------------------------------------------------
Sum $3,300 300 $38,550
Total amount invested over
24 months
1. Calculate the weighted value of each month's investment.
Multiply the amount invested ($100) by the number of months it is held -- 24
months for the first $100, 23 months for the second, etc.
Example: Amount invested in month 1 is $100. The investment will be held 24
months. Amount invested in month 2 is $100, which will be held 23 months.
$100 x 24 months = $2,400 monthly weighted value.
$100 x 23 months = $2,300 monthly weighted value.
$100 x 22 months = $2,200 monthly weighted value.
2. Add the weighted values:
$2,400 + $2,300 + $2,200 +...$150 = $38,550 is the total weighted value of
the investment.
3. Add the number of months held:
24 + 23 + 22 +...1 = 300
300 is the total number of months the investment is held.
4. Divide the total weighted value of the investment (step 2) by the total
number of months the investment is held (step 3):
$38,550 / 300 = $128.50 is your weighted average monthly investment (WAMI)
at the end of 24 months.
5. Multiply your WAMI by the applicable bonus percentage (5% in the third
year):
5% of $128.50 = $6.43 is your bonus payment each month in year three, a
total of $77 for the year.
Here is another example. Assume you make one investment of $600 in the first
month and then your next investment is $600 in the 24th month (a total of
$1,200).
Month Investment Months held Weighted Value
- -------------------------------------------------------------------------------------------------------------------------------
1 $ 600 x 24 = $14,400
2 0 23 0
3 0 22 0
4 0 21 0
5 0 20 0
6 0 19 0
7 0 18 0
24 600 1 600
- -------------------------------------------------------------------------------------------------------------------------------
Sum $1,200 300 $15,000
Total amount invested
over 24 months
- --------------------------------------------------------------------------------
27p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
1. Calculate the weighted value of each month's investment.
Multiply the amount invested ($600) by the number of months it is held.
Example: Amount invested in month 1 is $600. The investment will be held 24
months. $600 x 24 months = $14,400 monthly weighted value.
2. Add the weighted values:
$14,400 + 0 + $600 = $15,000
$15,000 is the total weighted value of the investment.
3. Add the number of months held:
24 + 23 + 22 +...1 = 300
300 is the total number of months the investment is held.
4. Divide the total weighted value of the investment (step 2) by the total
number of months the investment is held (step 3):
$15,000 / 300 = $50 is your weighted average monthly investment (WAMI) at
the end of 24 months.
5. Multiply your WAMI by the applicable bonus percentage (5% in the third
year):
5% of $50 = $2.50 is your bonus payment each month in year three, a total of
$30 for the year.
This procedure is repeated in months 36, 48 and 60 to calculate your weighted
average monthly investment from issue through years three, four and five,
respectively, assuming you continue to make sufficient payments each certificate
year to maintain bonus eligibility. These weighted averages are then multiplied
by the applicable percentages -- 8%, 10% and 20% -- to determine monthly bonus
payments for years four, five and six, respectively.
Effect of partial withdrawals: If you withdraw part of your principal, you will
not receive credit toward a bonus for the sum(s) you withdraw or at all, since
you would not qualify for the bonus for the year if the value drops below the
required amount at the required time. In effect, you reduce the size of the
bonus you are eligible to receive. This is because removing principal will
reduce the weighted value of your investment. The weighted value will decrease
in proportion to the amount of principal you withdraw. Using the first example
above, if you withdrew $1,000 of the principal in the 24th month, your total
investment would decrease by 30.3% ($1,000 / 3,300 = .303); therefore the
reduction factor you will use to figure out the amount of your reduced bonus is
..303.
To figure out how much your bonus will be, follow these steps:
1. Multiply the original total weighted value (see original example) of your
investment by the reduction factor calculated above.
$38,550 x .303 = $11,680.65.
2. Subtract the number calculated in Step 1 from the original total weighted
value of your investment.
$38,550 - 11,680.65 = $26,869.35.
The new weighted value of your investment after making the $1,000 withdrawal
is $26,869.35.
3. Divide the new weighted value of your investment by the total number of
months held.
(300 in this example).
$26,869 / 300 = $89.56.
Your new weighted average monthly investment (WAMI) is $89.56.
4. Multiply the new WAMI by the applicable bonus percentage. In this example,
5% is the bonus because that is the amount on the third year bonus. Due to
the time-weighted nature of the calculation, the earlier the withdrawal
occurs, the more your bonus will be reduced.
$89.56 x .05 = $4.48, or $53.76 total bonus for the year.
Withdrawals may also affect your eligibility for bonus payments in the third
through sixth years. To remain eligible your balance at the end of a relevant
12-month period must be at least equal to the amount set out in the table under
"Bonus Payments" above. You will become ineligible if withdrawals reduce your
balance below this level at the end of a relevant 12-month period.
Other eligibility policies: If you have not made the required minimum
investments specified earlier, you may not receive bonus payments in the year
bonuses would otherwise be paid. But you may become eligible during the next
bonus period by making the required investments in the next year. For example,
assume that you make the required investments for the first 24 months and
receive bonus payments in the third year. But during the third year, you make
payments of only $400, so the total principal invested is $1,600 instead of the
required $1,800. In that case, you would not receive the bonus payments that
would normally be made in the fourth year. However, if you make all your regular
monthly investments in the fourth year, and your account principal balance
reaches the required equivalent of 36 investments of $50 per month ($1,800 at
the end of the fourth year), then you would qualify for 8% bonus payments in
year five, based on the new weighted average monthly investment.
- --------------------------------------------------------------------------------
28p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
Interest rate from years seven through 10: This may be as soon as year seven or
as late as year ten. A rate will be declared during the last month in which you
receive a bonus payment and will be guaranteed by AECC for a three-month period
starting in the next month. Thereafter, the rate will be declared every three
months and guaranteed for three-month periods.
How to Invest and Withdraw Funds
BUYING YOUR CERTIFICATE
Your American Express financial advisor will help you fill out and submit an
application to open an account with us and purchase a certificate. If you
purchase your certificate other than through an American Express financial
advisor -- for example, through a direct marketing channel -- you may be given
different purchase instructions. We will process the application at our
corporate offices in Minneapolis, Minnesota. When we have accepted your
application and received your initial investment, we will send you a
confirmation of your purchase, indicating your account number and showing the
rate of interest for your first three months as described under "Rates for New
Purchases." See "Purchase policies" below.
Important: When you open an account, you must provide AECC with your correct
Taxpayer Identification Number (TIN), which is either your Social Security or
Employer Identification number. See "Taxes on Your Earnings." Once your account
is set up, there are several convenient ways to make monthly investments.
Purchase policies
o Investments must be received and accepted in the Minneapolis headquarters on
a business day before 3 p.m. Central time to be included in your account that
day. Otherwise your purchase will be processed the next business day.
o You have 15 days from the date of purchase to cancel your investment without
penalty by either writing or calling AECSC at the address or phone number on
the back of this prospectus. If you decide to cancel your certificate within
this 15-day period, you will not earn any interest.
o If you purchase a certificate with a personal check or other non-guaranteed
funds, AEFC will wait one day for the process of converting your check to
federal funds (e.g., monies of member banks within the Federal Reserve Bank)
before your purchase will be accepted and you begin earning interest. For
information on how to avoid this delay, for example by using a certified
check, please call AECSC at the telephone number listed on the back cover.
o AECC has complete discretion to determine whether to accept an application
and sell a certificate.
o If you make no investments for a period of at least six consecutive months
and your principal is less than $500, we may send you a notice of our intent
to cancel the certificate. After the notice, if an investment is not made
within 60 days, your certificate will be canceled, and we will send you a
check for its full value.
A number of special policies apply to purchases, withdrawals and exchanges
within IRAs, 401(k) plans and other qualified retirement plans. See
"Retirement Plans: Special Policies."
HOW TO MAKE MONTHLY INVESTMENTS
By scheduled investment plan
Contact your financial advisor to set up one of the following scheduled plans:
o Bank authorization (automatic deduction from your bank account)
o Automatic payroll deduction
o Direct deposit of Social Security check
o Other plan approved by AECC
To cancel a bank authorization, you must instruct AECC in writing or over the
phone. We must receive notice at least three business days before the date funds
would normally be withdrawn from your bank account. Bank authorization will
automatically be stopped at maturity or full withdrawal.
By mail
Send your check, by regular or express mail, along with your name and account
number to:
American Express Financial Advisors Inc.
70200 AXP Financial Center
Minneapolis, MN 55474
- --------------------------------------------------------------------------------
29p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
FULL AND PARTIAL WITHDRAWALS
o You may withdraw your certificate for its full value or make a partial
withdrawal of $100 or more at any time. If you purchase this certificate for
an IRA, 401(k), or other retirement plan account, early withdrawals or cash
payments of interest taken prematurely may be subject to IRS penalty taxes.
o Complete withdrawal of your certificate is made by giving us proper
instructions. To complete these transactions, see "How to Request a
Withdrawal or Transfer."
o Full and partial withdrawals of principal in the first three years are
subject to penalties, described below.
o You may not make a partial withdrawal if it would reduce your certificate
balance to less than $250. If you request such a withdrawal, we will contact
you for revised instructions.
o As noted earlier, withdrawals during the first six years will affect the
amount of your bonus payments and may make you ineligible for a bonus. If you
do not receive all your bonus payments in the first six years, future
withdrawals also may affect the amount of your bonus payments. See "Bonus
Payments."
o You may withdraw accumulated interest during any term without paying a
surrender charge. A withdrawal of interest must be at least $100 and not
reduce your certificate balance below $250.
Penalties for early withdrawal: If you withdraw money within three years after
the certificate was purchased, you will pay a penalty of 2% of the principal
withdrawn. Except to the extent your balance would be less than $250, this
penalty will be taken from the remaining balance, not the amount withdrawn. The
2% penalty is waived upon death of the certificate owner. When this certificate
is owned by a revocable trust, this penalty also is waived upon death of any
grantor of the revocable trust. We also will waive withdrawal penalties on
withdrawals for IRA certificate accounts for your required distributions. See
"Retirement Plans: Special Policies."
When you request a full or partial withdrawal, we pay the amount you request:
o first from interest and bonus payments credited to your account,
o then from the principal of your certificate.
For example, assume this is your balance at the end of the second year:
Total investments $7,200.00
Interest and bonus credited 488.61
- --------------------------------------------------------------------------------------------
Total balance $7,688.61
If you request a $1,000 check, we would withdraw funds in this order:
Credited interest and bonus $ 488.61
Withdrawal of principal 511.39
- --------------------------------------------------------------------------------------------
Total requested withdrawal $1,000.00
In addition, we would have to withdraw funds to cover the full withdrawal penalty:
Principal withdrawn $511.39
Withdrawal penalty % 2%
Withdrawal penalty $ 10.23
The total transaction would be:
Beginning balance $7,688.61
Credited interest and bonus withdrawn (488.61)
Principal withdrawn (511.39)
Withdrawal penalty (also from principal) (10.23)
- --------------------------------------------------------------------------------------------
Remaining balance $6,678.38
============================================================================================
Loss of interest: Because we credit interest on your certificate's monthly
anniversary, if you make a withdrawal at any time other than the last day of the
certificate month, you will lose interest accrued on the withdrawal amount since
the end of the last certificate month. You'll get the best result by timing a
withdrawal at the end of the certificate month -- that is, on an interest
crediting date.
Other full and partial withdrawal policies
o If you request a partial or full withdrawal of a certificate recently
purchased or added to by a check or money order that is not guaranteed, we
will wait for your check to clear. Please expect a minimum of 10 days from
the date of your payment before AECC mails a check to you.
o If your certificate is pledged as collateral, any withdrawal will be delayed
until we get approval from the secured party.
o Any payments to you may be delayed under applicable rules, regulations or
orders of the Securities and Exchange Commission (SEC).
- --------------------------------------------------------------------------------
30p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
TRANSFERS TO OTHER ACCOUNTS
You may transfer part or all of your certificate to any other American Express
Certificate or into another new or existing American Express Financial Advisors
Inc. account that has the same ownership, subject to any terms and conditions
that may apply.
Transfers to another American Express Financial Advisors Inc. account with
different ownership will require a written request.
HOW TO REQUEST A WITHDRAWAL OR TRANSFER
By phone
o Call AECSC at one of the telephone numbers listed on the back cover.
o Maximum telephone withdrawal request: $100,000.
o Transfers into an American Express Financial Advisors Inc. account with the
same ownership.
o A telephone withdrawal request will not be allowed within 30 days of a
phoned-in address change.
o We will honor any telephone withdrawal or transfer request and will use
reasonable procedures to confirm authenticity.
You may request that telephone withdrawals not be authorized from your account
by writing to AECSC.
By mail
Send your name, account number and request for a withdrawal or transfer, by
regular or express mail, to:
American Express Financial Advisors Inc.
70100 AXP Financial Center
Minneapolis, MN 55474
Written requests are required for:
o Withdrawals over $100,000.
o Pension plans.
o Custodial accounts where the minor has reached the age at which custodianship
should terminate.
o Transfers to another American Express Financial Advisors Inc. account with
different ownership. All current registered owners must sign the request.
o All owners must sign a written request if there was an address change within
the last 30 days.
HOW TO RECEIVE PAYMENT WHEN YOU WITHDRAW FUNDS
By regular or express mail
o Mailed to address on record; please allow seven days for mailing.
o Payable to name(s) listed on the account.
o The express mail delivery charges you pay will vary depending on the courier
you select. This fee for partial withdrawals is deducted from the remaining
balance, or from the proceeds for full withdrawals.
By wire
o Minimum wire amount: $1,000.
o Request that money be wired to your bank.
o Bank account must be in same ownership as the AECC account.
o Pre-authorization required. Complete the bank wire authorization section in
the application or use a form supplied by your American Express financial
advisor. All registered owners must sign.
o Applicable wire charges will be deducted from your balance for partial
withdrawals or from the proceeds of a full withdrawal.
By electronic transfer
o Available only for pre-authorized scheduled partial withdrawals and other
full or partial withdrawals.
o No charge.
o Deposited electronically in your bank account.
o Allow two to five business days from request to deposit.
- --------------------------------------------------------------------------------
31p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
American Express Market Strategy Certificate
About the Certificate
READ AND KEEP THIS PROSPECTUS
This prospectus section describes terms and conditions of your American Express
Market Strategy Certificate. It contains facts that can help you decide if the
certificate is the right investment for you. Read the prospectus before you
invest and keep it for future reference. No one has the authority to vary the
terms and conditions of the American Express Market Strategy Certificate from
those described in the prospectus, or to bind AECC by any statement not in it.
INVESTMENT AMOUNTS
You may purchase the American Express Market Strategy Certificate in any amount
from $1,000 through $1 million, payable in U.S. currency, unless you receive
prior approval from AECC to invest more. You may also make additional lump-sum
investments in any amount in the fixed-interest portion of your investment at
any time, as long as your total amount paid in is not more than the $1 million,
unless you receive prior approval from AECC to invest more.
Your certificate is recorded as one certificate account in our records. Within
this account, you may allocate your investment among a subaccount that earns
fixed interest and other subaccounts that earn interest linked to the S&P 500
Index during a participation term. Your investment always is placed initially in
the fixed-interest subaccount. Consequently, your investment initially earns
fixed interest. The minimum time that money must remain in the fixed-interest
subaccount before being moved to a participation term is one day. This could
happen if we accept your application and receive your investment on a Tuesday,
you instruct us to start your first participation term as soon as possible and
as long as we received guaranteed funds.
After determining the initial amount you wish to invest, you must set up
periodic investments from the fixed-interest subaccount to participation terms.
When you make your investment, you must give instructions to move money from the
fixed-interest subaccount to participation terms monthly, quarterly, or
semiannually. If your total investment is $1,000, however, you will have only
one participation term. You may subsequently change your initial instructions.
Thus, you could choose to change your instructions to keep your investment in
the fixed-interest subaccount and never start a participation term. Each
participation term is 52 weeks and each has its own grace period. The amount
invested in each participation term must be at least $1,000. If your certificate
is nearing its 20-year maturity, you will not be able to select a participation
term that would carry the certificate past its 20-year maturity date. Each
account can have a maximum of 12 participation terms at one time. We will send
you a confirmation at the time you purchase your certificate confirming your
instructions at the time you submitted your application.
This certificate provides the ability to make a single payment that can be
invested in individually staggered stock market participation terms in one
certificate that lets you select participation terms like those you might select
when staggering several American Express Stock Market Certificates. The American
Express Stock Market Certificate is another certificate that offers interest
linked to the S&P 500 Index, but permits only one participation term at a time.
"Staggering" is the strategy of purchasing several smaller certificates over a
period of a year instead of one larger certificate, as a method of increasing
liquidity and reducing the possibility of unfavorable market exposure.
The certificate may be used as an investment for your Individual Retirement
Account (IRA), 401(k) plan or other qualified retirement plan account. If so
used, the amount of your contribution (investment) will be subject to
limitations in applicable federal law.
You cannot purchase this certificate in a Coverdell Education Savings Account.
FACE AMOUNT AND PRINCIPAL
The face amount of your certificate is the amount of your initial investment.
Your principal consists of the amount you actually have invested in your
certificate plus interest credited to your account and compounded less
withdrawals, penalties and any compounded interest paid to you in cash. AECC
guarantees your principal.
PARTICIPATION TERM
Each participation term in your certificate is a 52-week period that begins on a
Wednesday and ends the Tuesday before the one-year anniversary. Subsequent terms
are 52-week periods that begin on the Wednesday following the 14-day grace
period at the end of the prior 52-week term, unless you start a new term during
the grace period as described in "New term." Each account can have a maximum of
12 terms at one time. The principal of your certificate that is not invested in
participation terms will earn fixed interest. See "Fixed interest" under
"Interest."
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32p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
VALUE AT MATURITY
Your certificate matures after 20 years. Then you will receive a distribution
for its value. At maturity, the value of your certificate will be the total of
your actual investments, plus credited interest not paid to you in cash, less
any withdrawals and withdrawal penalties. Certain other fees may apply.
RECEIVING CASH DURING THE TERM
If you need your money before your certificate term ends, you may withdraw part
or all of its value at any time, less any penalties that apply. Procedures for
withdrawing money, as well as conditions under which penalties apply, are
described in "How to Invest and Withdraw Funds."
INTEREST
You choose from two types of participation interest for your first-term: 1) full
participation, or 2) partial participation together with minimum interest.
Interest earned under both of these options has an upper limit which is the
maximum annual return explained below. Your selection is established at the time
of purchase but can be changed at any time for participation terms that have not
yet started. You may change your participation interest selection at any time
prior to any term start date or during a 14-day grace period. The change will be
in effect for any future term unless we again receive instructions from you
changing your selection.
Full participation interest: With this option:
o You participate 100% in any percentage increase in the S&P 500 Index up to
the maximum return. For the maximum return in effect on the date of this
prospectus, see "Initial Interest and Participation Rates for American
Express Market Strategy Certificate."
o You earn interest only if the value of the S&P 500 Index is higher on the
last day of your term than it was on the first day of your term.
o Your return is linked to stock market performance.
The S&P 500 Index is frequently used to measure the relative performance of the
stock market. For a more detailed discussion of the S&P 500 Index, see "About
the S&P 500 Index."
Partial participation and minimum interest: This option allows you to
participate in a portion (market participation percentage) of any increase in
the S&P 500 Index and also receive a rate of interest guaranteed by AECC in
advance for each term (minimum interest). Your return consists of two parts:
o a percentage of any increase in the S&P 500 Index, and
o a rate of interest guaranteed by AECC in advance for each term.
Together, they cannot exceed the maximum return. For the maximum return in
effect on the date of this prospectus, see "Initial Interest and Participation
Rates."
The market participation rate and the minimum interest rate on the date of this
prospectus are listed on the inside cover under "Initial Interest and
Participation Rates."
Fixed interest: The fixed-interest subaccount allows you to earn interest on
your principal that is not invested in participation terms, including your
entire investment before the start of your first participation term, and amounts
in the 14-day grace period in between participation term end dates and start
dates. Your fixed interest accrues daily and is credited and compounded monthly.
Your fixed interest rates are reset quarterly, based on the original date of
your certificate.
Amounts in the fixed-interest subaccount, including compounded fixed interest,
can be withdrawn at any time without a withdrawal penalty. If these amounts are
not withdrawn, they will become part of a participation term according to the
instructions you've established with the company, unless you change your
instructions, which can be changed at any time. Values in participation terms
can not be withdrawn without withdrawal penalties.
AECC has complete discretion to determine whether to accept an application and
sell a certificate. When your application is accepted and we have received your
initial investment, we will send you a confirmation of your purchase showing the
initial rate that your investment will earn as well as confirmation of your
instructions for moving your money to your participation terms. Instructions for
moving your money are given at the time you purchase your certificate. You
choose the day of the month for the movement of your money, as well as the
amount, starting month, and full or partial participation. Your term resulting
from those instructions will begin on the Wednesday following that date. If that
date is a Wednesday, the term will begin on the following Wednesday.
- --------------------------------------------------------------------------------
33p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
AECC guarantees that when fixed-interest rates for new purchases take effect,
the rates will be within a range based on the average interest rates then
published in the BRM Top 25 Market Average (the BRM Average). In the case of
fixed interest, AECC guarantees that your rate for your initial term will be 100
basis points (1.00%) below to 0 basis points (.00%) above the average interest
rate published for 12-month certificates of deposit in the BRM Top 25 Market
Average. If the BRM Top 25 Market Average is no longer publicly available or
feasible to use, AECC may use another, similar index as a guide for setting
rates.
The BRM is a weekly magazine published by Advertising News Service Inc., an
independent national news organization that collects and disseminates
information about bank products and interest rates. Advertising News Service has
no connection with AECC, American Express Financial Corporation (AEFC) or any of
their affiliates.
The BRM Top 25 Market Average is an index of rates and annual effective yields
offered on various length certificates of deposit by large banks and thrifts in
25 metropolitan areas. The frequency of compounding varies among the banks and
thrifts. Certificates of deposit in the BRM Top 25 Market Average are
government-insured fixed-rate time deposits.
The BRM may be available in your local library. To obtain information or current
BRM Top 25 Market Average rates, call AECSC at one of the telephone numbers
listed on the back cover.
Rates for new purchases are reviewed and may change weekly. Normally, the
initial fixed-interest rate you receive will be the higher of:
o the fixed-interest rate in effect on the date of your application, or
o the fixed-interest rate in effect on the date your completed application is
accepted by AECC.
However, if your application bears a date more than seven days before its
receipt by AECC, the initial fixed-interest rate you receive will be the higher
of:
o the fixed-interest rate in effect on the date your completed application is
accepted by AECC, or
o the fixed-interest rate in effect seven days before receipt.
Maximum return: This is the cap, or upper limit, on your return on the amount
invested in each participation term, regardless of whether you choose full or
partial participation. Your total return, including both participation interest
and minimum interest for a term for which you have chosen partial participation
will be limited to this maximum return percentage. For the maximum return in
effect on the date of this prospectus, see "Initial Interest and Participation
Rates for American Express Market Strategy Certificate."
Determining the S&P 500 Index value: The stock market generally closes at 3 p.m.
Central time. The S&P 500 Index value generally is available at approximately
4:30 p.m Central time. This is the value we currently use to determine
participation interest. Occasionally, Standard & Poor's (S&P) makes minor
adjustments to the closing value after 4:30 p.m., and the value we use may not
be exactly the one that is published the next business day.
In the future, we may use a later time cut-off if it becomes feasible to do so.
If the stock market is not open or the S&P 500 Index is unavailable as of the
last day of your term, the preceding business day for which a value is available
will be used instead. Each Tuesday's closing value of the S&P 500 Index is used
for establishing the term start and the term end values each week.
Earning interest: AECC calculates, credits and compounds participation interest
at the end of your participation term. Minimum interest accrues daily and is
credited and compounded at the end of your participation term. Fixed interest
accrues daily and is credited and compounded monthly, except that, if amounts
move from fixed interest to a participation term and the resulting balance in
the fixed-interest subaccount is zero, then fixed interest credited on the
principal moved will be compounded on the day the participation term begins.
Both minimum and fixed interest are calculated on a 30-day month and 360-day
year basis.
Moving between fixed and participation interest: You can move all or part of
your investment from the fixed-interest subaccount to a participation term. The
move from the fixed-interest subaccount to a participation term happens
according to your standing instructions unless you notify us separately. If you
make the change from fixed interest to participation interest either through a
scheduled or an unscheduled move, your participation term will begin on the
Wednesday following the move instructions. For further explanation of how we
apply your instructions, see "Fixed interest" above.
You may not move from participation interest to fixed interest during a
participation term without incurring a surrender charge. At the end of a
participation term, you can elect to leave the money in the fixed-interest
subaccount.
Rates for future periods: After your certificate purchase date, the maximum
return, and the market participation percentage and minimum interest rate for
participation terms, may be greater or less than those shown on the front of or
elsewhere in this prospectus or its wrapper. Fixed interest may be greater or
lesser than that shown. We review rates weekly and have complete discretion to
decide what interest rate will be declared.
- --------------------------------------------------------------------------------
34p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
If you plan to continue with a new participation term, to find out what your
certificate's new maximum return, market participation percentage and minimum
interest rate, if applicable, will be for your next term, please consult your
American Express financial advisor, or AECSC at one of the telephone numbers
listed on the back cover.
Your fixed interest rates are declared quarterly. You will be given notice of
the changes in interest rates in your periodic statements or you may call AECSC
at the numbers listed on the back cover to find out your current rate.
The following example shows how the Market Strategy Certificate works assuming
an initial investment of $12,000 and moving $1,000 per month into a full
participation term. The example is based on assumptions that the fixed-interest
subaccount pays an interest rate of 2.00% while the yield earned for each
participation term is the maximum of 7.00%. There is no assurance that any of
these returns will be achieved.
Full participation in the stock market
Initial investment $12,000.00
Maximum return 7.00%
Minimum return 0.00%
Fixed interest rate 2.00%
Market
Fixed Participation
1st Term Renewal Interest Interest
Fixed Staggered Staggered Earned Earned Market
Interest Investment Investment In Prior For the Term Participation Total
Date Balance Amount Amount Month Just Ended Balance Balance
Beginning of Month 1 $11,000.00 $1,000.00 0.00 $ 1,000.00 $12,000.00
Beginning of Month 2 10,018.33 1,000.00 18.33 2,000.00 12,018.33
Beginning of Month 3 9,035.03 1,000.00 16.7 3,000.00 12,035.03
Beginning of Month 4 8,050.09 1,000.00 15.06 4,000.00 12,050.09
Beginning of Month 5 7,063.51 1,000.00 13.42 5,000.00 12,063.51
Beginning of Month 6 6,075.28 1,000.00 11.77 6,000.00 12,075.28
Beginning of Month 7 5,085.41 1,000.00 10.13 7,000.00 12,085.41
Beginning of Month 8 4,093.89 1,000.00 8.48 8,000.00 12,093.89
Beginning of Month 9 3,100.71 1,000.00 6.82 9,000.00 12,100.71
Beginning of Month 10 2,105.88 1,000.00 5.17 10,000.00 12,105.88
Beginning of Month 11 1,109.39 1,000.00 3.51 11,000.00 12,109.39
Beginning of Month 12 111.24 1,000.00 1.85 12,000.00 12,111.24
Beginning of Month 13 111.43 0.19 70.00 12,000.00 12,111.43
Middle of Month 13 111.43 1,070.00 12,070.00* 12,181.43
Beginning of Month14 112.51 1.08 70.00 12,070.00 12,182.51
Middle of Month 14 112.51 1,070.00 12,140.00** 12,252.51
* The market participation balance at the middle of month 13 is equal to
$12,070. This is equal to the total invested principal balance of $12,000,
plus $70 interest earned (participation return). The $70 interest earned is
based on $1,000 invested at month 1 which is assumed to earn the maximum of
7%. ($ 12,000 + $ 1,000 x 7% = $ 12,070). During the grace period for the
first participation term, $1,070 of this balance will earn interest in the
fixed interest subaccount. In the middle of month 13, at the end of the
grace period, this $1,070 balance begins a new participation term.
** The market participation balance at the middle of month 14 is equal to
$12,140. This is equal to the total invested principal balance of $12,000,
plus $70 interest earned on $1,000 invested at the beginning of month 1,
plus $70 interest earned on $1,000 invested at the beginning of month 2
(both $1,000 investments are assumed to earn the maximum of 7% ($12,000 + $
1,000 x 7% + $ 1,000 x 7% = $12,140)). During the grace period for the
second participation term, $1,070 of this balance will earn interest in the
fixed interest subaccount. In the middle of month 14, at the end of the
grace period, this $1,070 balance begins a new participation term.
- --------------------------------------------------------------------------------
35p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
The following example shows how the Market Strategy Certificate works assuming
an initial investment of $12,000 and moving $1,000 per month into a partial
participation term. The example is based on the assumptions that the fixed
interest subaccount pays an interest rate of 2.00% and that the yield earned for
each participation term is the minimum of 1.50%. There is no assurance that any
of these returns will be achieved when you invest. In this example, we assume
that the index declined at the end of each term compared to the beginning of
each term so that no market participation interest was earned.
Partial participation in the stock market
Initial investment $12,000.00
Maximum return 7.00%
Minimum return 1.50%
Fixed interest rate 2.00%
Guaranteed Market
Fixed Minimum Participation
1st Term Renewal Interest Interest Interest
Fixed Staggered Staggered Earned Earned Earned Market
Interest Investment Investment In Prior For the Term For the Term Participation Total
Date Balance Amount Amount Month Just Ended Just Ended Balance Balance
Beginning of Month 1 $11,000.00 $1,000.00 0.00 $ 1,000.00 $12,000.00
Beginning of Month 2 10,018.33 1,000.00 18.33 2,000.00 12,018.33
Beginning of Month 3 9,035.03 1,000.00 16.7 3,000.00 12,035.03
Beginning of Month 4 8,050.09 1,000.00 15.06 4,000.00 12,050.09
Beginning of Month 5 7,063.51 1,000.00 13.42 5,000.00 12,063.51
Beginning of Month 6 6,075.28 1,000.00 11.77 6,000.00 12,075.28
Beginning of Month 7 5,085.41 1,000.00 10.13 7,000.00 12,085.41
Beginning of Month 8 4,093.89 1,000.00 8.48 8,000.00 12,093.89
Beginning of Month 9 3,100.71 1,000.00 6.82 9,000.00 12,100.71
Beginning of Month 10 2,105.88 1,000.00 5.17 10,000.00 12,105.88
Beginning of Month 11 1,109.39 1,000.00 3.51 11,000.00 12,109.39
Beginning of Month 12 111.24 1,000.00 1.85 12,000.00 12,111.24
Beginning of Month 13 111.43 0.19 15.00 0.00 12,000.00 12,111.43
Middle of Month 13 111.43 1,015.00 12,015.00* 12,126.43
Beginning of Month14 112.47 1.04 15.00 0.00 12,015.00 12,127.47
Middle of Month 14 112.47 1,015.00 12,030.00** 12,142.47
* The market participation balance at the middle of month 13 is equal to
$12,015. This is equal to the total invested principal balance of $12,000,
plus $15 interest earned (guaranteed return). The $15 interest earned is
based on $1,000 invested at month 1 which is assumed to earn only the
minimum of 1.50%. ($ 12,000 + $ 1,000 x 1.50% = $12,015). During the grace
period for the first participation term, $1,015 of this balance will earn
interest in the fixed interest subaccount. In the middle of month 13, at
the end of the grace period, this $1,015 balance begins a new participation
term.
** The market participation balance at the middle of month 14 is equal to
$12,030. This is equal to the total invested principal balance of $12,000,
plus $15 interest earned on $1,000 invested at the beginning of month 1,
plus $15 interest earned on $1,000 invested at the beginning of month 2
(both $1,000 investments are assumed to earn only the minimum of 1.50% ($
12,000 + $ 1,000 x 1.50% + $ 1,000 x 1.50% = $12,030)). During the grace
period for the second participation term, $1,015 of this balance will earn
interest in the fixed interest subaccount. In the middle of month 14, at
the end of the grace period, this $1,015 balance begins a new participation
term.
This certificate may be available through other distributors or selling agents
with different interest rates or related features and consequently with
different returns. You may obtain information about other such distributors or
selling agents by calling AECSC at the telephone numbers listed on the back
cover.
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36p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
PROMOTIONS AND PRICING FLEXIBILITY
AECC may sponsor or participate in promotions involving the certificate and its
respective terms. For example, we may offer different rates to new clients, to
existing clients, or to individuals who purchase or use other products or
services offered by American Express Company or its affiliates. These promotions
will generally be for a specified period of time.
We also may offer different rates based on your amount invested, geographic
location and whether the certificate is purchased for an IRA or a qualified
retirement account.
HISTORICAL DATA ON THE S&P 500 INDEX
The following chart illustrates the month-end closing values of the Index from
Dec. 31, 1984 through Feb. 28, 2005. The values of the S&P 500 Index are
reprinted with the permission of S&P.
[line chart]
S&P 500 Index Values - December 1984 to February 2005
S&P 500
Index
Date Value
Dec-84 167.24
Jan-85 179.63
Feb-85 181.18
Mar-85 180.66
Apr-85 179.83
May-85 189.55
Jun-85 191.85
Jul-85 190.92
Aug-85 188.63
Sep-85 182.08
Oct-85 189.82
Nov-85 202.17
Dec-85 211.28
Jan-86 211.78
Feb-86 226.92
Mar-86 238.90
Apr-86 235.52
May-86 247.35
Jun-86 250.84
Jul-86 236.12
Aug-86 252.93
Sep-86 231.32
Oct-86 243.98
Nov-86 249.22
Dec-86 242.17
Jan-87 274.08
Feb-87 284.20
Mar-87 291.70
Apr-87 288.36
May-87 290.10
Jun-87 304.00
Jul-87 318.66
Aug-87 329.80
Sep-87 321.83
Oct-87 251.79
Nov-87 230.30
Dec-87 247.08
Jan-88 257.07
Feb-88 267.82
Mar-88 258.89
Apr-88 261.33
May-88 262.16
Jun-88 273.50
Jul-88 272.02
Aug-88 261.52
Sep-88 271.91
Oct-88 278.97
Nov-88 273.70
Dec-88 277.72
Jan-89 297.47
Feb-89 288.86
Mar-89 294.87
Apr-89 309.64
May-89 320.52
Jun-89 317.98
Jul-89 346.08
Aug-89 351.45
Sep-89 349.15
Oct-89 340.36
Nov-89 345.99
Dec-89 353.40
Jan-90 329.08
Feb-90 331.89
Mar-90 339.94
Apr-90 330.80
May-90 361.23
Jun-90 358.02
Jul-90 356.15
Aug-90 322.56
Sep-90 306.05
Oct-90 304.00
Nov-90 322.22
Dec-90 330.22
Jan-91 343.93
Feb-91 367.07
Mar-91 375.22
Apr-91 375.35
May-91 389.83
Jun-91 371.16
Jul-91 387.81
Aug-91 395.43
Sep-91 387.86
Oct-91 392.46
Nov-91 375.22
Dec-91 417.09
Jan-92 408.79
Feb-92 412.70
Mar-92 403.69
Apr-92 414.95
May-92 415.35
Jun-92 408.14
Jul-92 424.21
Aug-92 414.03
Sep-92 417.80
Oct-92 418.67
Nov-92 431.35
Dec-92 435.71
Jan-93 438.78
Feb-93 443.38
Mar-93 451.67
Apr-93 440.19
May-93 450.21
Jun-93 450.53
Jul-93 448.13
Aug-93 463.56
Sep-93 458.93
Oct-93 467.83
Nov-93 461.79
Dec-93 466.50
Jan-94 481.61
Feb-94 467.14
Mar-94 445.77
Apr-94 450.91
May-94 456.51
Jun-94 444.27
Jul-94 458.25
Aug-94 475.50
Sep-94 462.71
Oct-94 472.35
Nov-94 453.69
Dec-94 459.27
Jan-95 470.42
Feb-95 487.39
Mar-95 500.71
Apr-95 514.71
May-95 533.41
Jun-95 544.75
Jul-95 562.06
Aug-95 561.88
Sep-95 584.41
Oct-95 581.50
Nov-95 605.37
Dec-95 615.93
Jan-96 636.02
Feb-96 640.44
Mar-96 645.50
Apr-96 654.18
May-96 669.14
Jun-96 670.63
Jul-96 639.95
Aug-96 651.99
Sep-96 687.33
Oct-96 705.27
Nov-96 757.02
Dec-96 740.74
Jan-97 786.16
Feb-97 790.82
Mar-97 757.41
Apr-97 801.34
May-97 848.28
Jun-97 885.76
Jul-97 954.31
Aug-97 899.48
Sep-97 947.28
Oct-97 914.62
Nov-97 955.40
Dec-97 970.43
Jan-98 980.28
Feb-98 1049.34
Mar-98 1101.76
Apr-98 1111.77
May-98 1090.82
Jun-98 1133.84
Jul-98 1120.73
Aug-98 957.68
Sep-98 1017.07
Oct-98 1098.69
Nov-98 1163.74
Dec-98 1230.59
Jan-99 1279.28
Feb-99 1238.33
Mar-99 1286.39
Apr-99 1335.18
May-99 1301.85
Jun-99 1371.65
Jul-99 1328.71
Aug-99 1320.35
Sep-99 1282.72
Oct-99 1363.17
Nov-99 1388.95
Dec-99 1469.25
Jan-00 1394.46
Feb-00 1366.41
Mar-00 1507.78
Apr-00 1452.43
May-00 1420.65
Jun-00 1454.6
Jul-00 1430.84
Aug-00 1517.68
Sep-00 1436.48
Oct-00 1429.4
Nov-00 1314.95
Dec-00 1320.28
Jan-01 1366.01
Feb-01 1239.94
Mar-01 1160.34
Apr-01 1249.48
May-01 1255.82
Jun-01 1224.38
Jul-01 1211.23
Aug-01 1133.58
Sep-01 1040.94
Oct-01 1059.78
Nov-01 1139.45
Dec-01 1148.08
Jan-02 1130.2
Feb-02 1106.74
Mar-02 1147.39
Apr-02 1076.92
May-02 1067.14
Jun-02 989.82
Jul-02 911.62
Aug-02 916.07
Sep-02 815.28
Oct-02 885.76
Nov-02 936.31
Dec-02 879.82
Jan-03 855.70
Feb-03 841.15
Mar-03 848.18
Apr-03 916.92
May-03 963.59
Jun-03 974.51
Jul-03 990.31
Aug-03 1008.01
Sep-03 995.97
Oct-03 1050.71
Nov-03 1058.20
Dec-03 1111.92
Jan-04 1131.13
Feb-04 1144.94
Mar-04 1126.21
Apr-04 1107.30
May-04 1120.68
Jun-04 1140.84
Jul-04 1101.72
Aug-04 1104.24
Sep-04 1114.58
Oct-04 1130.20
Nov-04 1173.82
Dec-04 1211.92
Jan-05 1181.27
Feb-05 1203.60
S&P 500 Index Average Annual Return
Beginning date Dec. 31, Period held in years Average annual return
1994 10 10.19%
1999 5 -3.78%
2003 1 8.99%
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37p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
The next chart illustrates, on a moving 52-week basis, the price return of the
S&P 500 Index measured for every 52-week period beginning with the period ended
Dec. 31, 1985. The price return is the percentage return for each period using
month-end closing prices of the S&P 500 Index. Dividends and other distributions
on the securities comprising the S&P 500 Index are not included in calculating
the price return.
[line chart]
S&P 500 Index - December 1985 to February 2005
52-Week Moving Price Return
S&P 500
12 Mth
Date Return
Dec-85 26.33%
Jan-86 17.90%
Feb-86 25.25%
Mar-86 32.24%
Apr-86 30.97%
May-86 30.49%
Jun-86 30.75%
Jul-86 23.67%
Aug-86 34.09%
Sep-86 27.04%
Oct-86 28.53%
Nov-86 23.27%
Dec-86 14.62%
Jan-87 29.42%
Feb-87 25.24%
Mar-87 22.10%
Apr-87 22.44%
May-87 17.28%
Jun-87 21.19%
Jul-87 34.96%
Aug-87 30.39%
Sep-87 39.13%
Oct-87 3.20%
Nov-87 -7.59%
Dec-87 2.03%
Jan-88 -6.21%
Feb-88 -5.76%
Mar-88 -11.25%
Apr-88 -9.37%
May-88 -9.63%
Jun-88 -10.03%
Jul-88 -14.64%
Aug-88 -20.70%
Sep-88 -15.51%
Oct-88 10.79%
Nov-88 18.84%
Dec-88 12.40%
Jan-89 15.72%
Feb-89 7.86%
Mar-89 13.90%
Apr-89 18.49%
May-89 22.26%
Jun-89 16.26%
Jul-89 27.23%
Aug-89 34.39%
Sep-89 28.41%
Oct-89 22.01%
Nov-89 26.41%
Dec-89 27.25%
Jan-90 10.63%
Feb-90 14.90%
Mar-90 15.28%
Apr-90 6.83%
May-90 12.70%
Jun-90 12.59%
Jul-90 2.91%
Aug-90 -8.22%
Sep-90 -12.34%
Oct-90 -10.68%
Nov-90 -6.87%
Dec-90 -6.56%
Jan-91 4.51%
Feb-91 10.60%
Mar-91 10.38%
Apr-91 13.47%
May-91 7.92%
Jun-91 3.67%
Jul-91 8.89%
Aug-91 22.59%
Sep-91 26.73%
Oct-91 29.10%
Nov-91 16.45%
Dec-91 26.31%
Jan-92 18.86%
Feb-92 12.43%
Mar-92 7.59%
Apr-92 10.55%
May-92 6.55%
Jun-92 9.96%
Jul-92 9.39%
Aug-92 4.70%
Sep-92 7.72%
Oct-92 6.68%
Nov-92 14.96%
Dec-92 4.46%
Jan-93 7.34%
Feb-93 7.43%
Mar-93 11.89%
Apr-93 6.08%
May-93 8.39%
Jun-93 10.39%
Jul-93 5.64%
Aug-93 11.96%
Sep-93 9.84%
Oct-93 11.74%
Nov-93 7.06%
Dec-93 7.07%
Jan-94 9.76%
Feb-94 5.36%
Mar-94 -1.31%
Apr-94 2.44%
May-94 1.40%
Jun-94 -1.39%
Jul-94 2.26%
Aug-94 2.58%
Sep-94 0.82%
Oct-94 0.97%
Nov-94 -1.75%
Dec-94 -1.55%
Jan-95 -2.32%
Feb-95 4.33%
Mar-95 12.32%
Apr-95 14.15%
May-95 16.85%
Jun-95 22.62%
Jul-95 22.65%
Aug-95 18.17%
Sep-95 26.30%
Oct-95 23.11%
Nov-95 33.43%
Dec-95 34.11%
Jan-96 35.20%
Feb-96 31.40%
Mar-96 28.92%
Apr-96 27.10%
May-96 25.45%
Jun-96 23.11%
Jul-96 13.86%
Aug-96 16.04%
Sep-96 17.61%
Oct-96 21.28%
Nov-96 25.05%
Dec-96 20.26%
Jan-97 23.61%
Feb-97 23.48%
Mar-97 17.34%
Apr-97 22.50%
May-97 26.77%
Jun-97 32.08%
Jul-97 49.12%
Aug-97 37.96%
Sep-97 37.82%
Oct-97 29.68%
Nov-97 26.21%
Dec-97 31.01%
Jan-98 24.69%
Feb-98 32.69%
Mar-98 45.46%
Apr-98 38.74%
May-98 28.59%
Jun-98 28.01%
Jul-98 17.44%
Aug-98 6.47%
Sep-98 7.37%
Oct-98 20.13%
Nov-98 21.81%
Dec-98 26.81%
Jan-99 30.50%
Feb-99 18.01%
Mar-99 16.76%
Apr-99 20.09%
May-99 19.35%
Jun-99 20.97%
Jul-99 18.56%
Aug-99 37.87%
Sep-99 26.12%
Oct-99 24.07%
Nov-99 19.35%
Dec-99 19.39%
Jan-00 9.00%
Feb-00 10.34%
Mar-00 17.21%
Apr-00 8.78%
May-00 9.13%
Jun-00 6.05%
Jul-00 7.69%
Aug-00 14.95%
Sep-00 11.99%
Oct-00 4.86%
Nov-00 -5.33%
Dec-00 -10.14%
Jan-01 -2.04%
Feb-01 -9.26%
Mar-01 -23.04%
Apr-01 -13.97%
May-01 -11.60%
Jun-01 -15.83%
Jul-01 -15.35%
Aug-01 -25.31%
Sep-01 -27.54%
Oct-01 -25.86%
Nov-01 -13.35%
Dec-01 -13.04%
Jan-02 -17.26%
Feb-02 -10.74%
Mar-02 -1.12%
Apr-02 -13.81%
May-02 -15.02%
Jun-02 -19.16%
Jul-02 -24.74%
Aug-02 -19.19%
Sep-02 -21.68%
Oct-02 -16.42%
Nov-02 -17.83%
Dec-02 -23.37%
Jan-03 -24.29%
Feb-03 -24.00%
Mar-03 -26.08%
Apr-03 -14.86%
May-03 -9.70%
Jun-03 -1.55%
Jul-03 8.63%
Aug-03 10.04%
Sep-03 22.16%
Oct-03 18.62%
Nov-03 13.02%
Dec-03 26.38%
Jan-04 32.19%
Feb-04 36.12%
Mar-04 32.78%
Apr-04 20.76%
May-04 16.30%
Jun-04 17.07%
Jul-04 11.25%
Aug-04 9.55%
Sep-04 11.91%
Oct-04 7.57%
Nov-04 10.93%
Dec-04 8.99%
Jan-05 4.43%
Feb-05 4.95%
Using the same dates and data on price returns described above, the next graph
expands on the information in the preceding chart by illustrating the number of
weeks when the 52-week price return was in the range specified below under each
column. For example, the most common 52-week return during this time period was
in the 10% range.
(bar graph)
S&P 500 Index - December 1985 to February 2005
Distribution of 52-Week Moving Price Returns
Occurrences
-15 20
-10 13
-5 11
0 8
5 15
10 28
15 26
20 23
25 24
29.9 26
>=30 25
- --------------------------------------------------------------------------------
38p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
The last chart illustrates, on a moving weekly basis, the actual 52-week return
of the Stock Market Certificate at full and partial participation compared to
the price return of the S&P 500 Index.
Like American Express Stock Market Certificate, American Express Market Strategy
Certificate permits you to receive all or part of your interest based on stock
market performance, as measured by the S&P 500 Index, with AECC's guarantee of
return of principal. In fact, the full and partial participation terms of
American Express Stock Market Certificate and American Express Market Strategy
Certificate are identical, assuming that the amount invested at the beginning of
the term is the same in both certificates. The amounts earned in the
fixed-interest account for Market Strategy Certificate will not be the same as
interim interest for the Stock Market Certificate. (For Stock Market
Certificate, interest earned before the initial participation term or during the
grace period is called interim interest.) Although performance during
participation terms will be the same for Market Strategy Certificate and Stock
Market Certificate, money earned outside of participation terms will vary. If a
participation term for Stock Market Certificate and for Market Strategy
Certificate starts on the same day with the same amount of money and the same
selection of either full or partial participation, then the interest earned for
the participation term in both certificates will be identical. American Express
Market Strategy Certificate increases your choices by allowing you to have up to
12 participation terms plus a fixed-interest alternative simultaneously within
the same certificate. The certificates also pay interest differently on amounts
that are invested at only a fixed rate.
[line & area chart]
Actual 52-Week Return - 12/6/94 to 2/22/05
Stock Market
Stock Market Certificate
Certificate 25%
Market 100% Participation
Date Index Participation + Minimum Rate
12/06/94 -2.78% 0.00% 2.50%
12/13/94 -2.79% 0.00% 2.50%
12/20/94 -1.76% 0.00% 2.50%
12/27/94 -1.79% 0.00% 2.50%
01/03/95 -1.66% 0.00% 2.50%
01/10/95 -2.62% 0.00% 2.50%
01/17/95 -0.88% 0.00% 2.50%
01/24/95 -1.07% 0.00% 2.50%
01/31/95 -1.91% 0.00% 2.50%
02/07/95 2.07% 2.07% 3.01%
02/14/95 2.12% 2.12% 3.03%
02/21/95 2.38% 2.38% 3.09%
02/28/95 4.94% 4.94% 3.73%
03/07/95 3.48% 3.48% 3.37%
03/14/95 5.54% 5.54% 3.88%
03/21/95 5.60% 5.60% 3.90%
03/28/95 11.36% 10.00% 5.34%
04/04/95 12.70% 10.00% 5.67%
04/11/95 12.94% 10.00% 5.73%
04/18/95 14.19% 10.00% 6.04%
04/25/95 13.34% 10.00% 5.83%
05/02/95 13.64% 10.00% 5.91%
05/09/95 17.38% 10.00% 6.84%
05/16/95 17.54% 10.00% 6.88%
05/23/95 16.22% 10.00% 6.55%
05/30/95 14.69% 10.00% 6.17%
06/06/95 16.87% 10.00% 6.71%
06/13/95 15.93% 10.00% 6.48%
06/20/95 20.74% 10.00% 7.68%
06/27/95 21.60% 10.00% 7.90%
07/04/95 22.56% 10.00% 8.14%
07/11/95 23.84% 10.00% 8.46%
07/18/95 23.04% 10.00% 8.26%
07/25/95 23.76% 10.00% 8.44%
08/01/95 21.51% 10.00% 7.87%
08/08/95 22.37% 10.00% 8.09%
08/15/95 20.11% 10.00% 7.52%
08/22/95 20.45% 10.00% 7.61%
08/29/95 17.62% 10.00% 6.90%
09/05/95 20.62% 10.00% 7.65%
09/12/95 23.31% 10.00% 8.32%
09/19/95 26.07% 10.00% 9.01%
09/26/95 25.83% 10.00% 8.95%
10/03/95 28.10% 10.00% 9.52%
10/10/95 23.98% 10.00% 8.49%
10/17/95 25.47% 10.00% 8.86%
10/24/95 27.08% 10.00% 9.27%
10/31/95 24.14% 10.00% 8.53%
11/07/95 25.91% 10.00% 9.22%
11/14/95 26.72% 10.00% 9.43%
11/21/95 33.36% 10.00% 10.00%
11/28/95 33.23% 10.00% 10.00%
12/05/95 36.25% 10.00% 10.00%
12/12/95 37.46% 10.00% 10.00%
12/19/95 33.87% 10.00% 10.00%
12/26/95 32.82% 10.00% 10.00%
01/02/96 35.20% 10.00% 10.00%
01/09/96 32.00% 10.00% 10.00%
01/16/96 29.44% 10.00% 10.00%
01/23/96 31.53% 10.00% 10.00%
01/30/96 33.95% 10.00% 10.00%
02/06/96 34.42% 10.00% 10.00%
02/13/96 36.88% 10.00% 10.00%
02/20/96 32.71% 10.00% 10.00%
02/27/96 32.79% 10.00% 10.00%
03/05/96 36.02% 10.00% 10.00%
03/12/96 29.25% 10.00% 10.00%
03/19/96 31.63% 10.00% 10.00%
03/26/96 29.58% 10.00% 10.00%
04/02/96 29.68% 10.00% 10.00%
04/09/96 27.03% 10.00% 9.50%
04/16/96 27.63% 10.00% 9.65%
04/23/96 27.22% 10.00% 9.55%
04/30/96 27.05% 12.00% 10.26%
05/07/96 21.90% 12.00% 8.97%
05/14/96 26.01% 12.00% 10.00%
05/21/96 27.27% 12.00% 10.31%
05/28/96 28.39% 12.00% 10.59%
06/04/96 25.58% 12.00% 9.89%
06/11/96 25.16% 12.00% 9.79%
06/18/96 21.48% 12.00% 8.87%
06/25/96 23.23% 12.00% 9.30%
07/02/96 23.12% 12.00% 9.28%
07/09/96 18.01% 12.00% 8.00%
07/16/96 12.52% 12.00% 6.63%
07/23/96 11.72% 11.72% 6.43%
07/30/96 13.51% 12.00% 6.87%
08/06/96 18.19% 12.00% 8.04%
08/13/96 18.19% 12.00% 8.04%
08/20/96 18.98% 12.00% 8.24%
08/27/96 18.99% 12.00% 8.24%
09/03/96 15.03% 12.00% 7.25%
09/10/96 15.14% 12.00% 7.28%
09/17/96 16.90% 12.00% 7.72%
09/24/96 17.92% 12.00% 7.98%
10/01/96 18.32% 12.00% 8.08%
10/08/96 21.31% 12.00% 8.82%
10/15/96 19.73% 12.00% 8.43%
10/22/96 20.46% 12.00% 8.61%
10/29/96 20.63% 12.00% 8.65%
11/05/96 21.80% 12.00% 8.95%
11/12/96 23.80% 12.00% 9.45%
11/19/96 23.64% 12.00% 9.41%
11/26/96 24.65% 12.00% 9.66%
12/03/96 21.14% 12.00% 8.78%
12/10/96 20.80% 12.00% 8.70%
12/17/96 18.64% 12.00% 8.16%
12/24/96 22.25% 12.00% 9.06%
12/31/96 19.33% 12.00% 8.33%
01/07/97 23.59% 12.00% 9.39%
01/14/97 26.36% 12.00% 10.09%
01/21/97 27.73% 10.00% 10.00%
01/28/97 21.40% 10.00% 8.60%
02/04/97 22.11% 10.00% 8.77%
02/11/97 19.53% 10.00% 8.13%
02/18/97 27.41% 10.00% 10.00%
02/25/97 25.46% 10.00% 9.61%
03/04/97 20.60% 10.00% 8.40%
03/11/97 27.35% 10.00% 10.00%
03/18/97 21.17% 10.00% 8.54%
03/25/97 20.84% 10.00% 8.46%
04/01/97 15.92% 10.00% 7.23%
04/08/97 19.29% 10.00% 8.07%
04/15/97 17.01% 10.00% 7.50%
04/22/97 18.87% 10.00% 7.96%
04/29/97 21.38% 10.00% 8.59%
05/06/97 29.69% 10.00% 10.00%
05/13/97 25.16% 10.00% 9.54%
05/20/97 25.10% 10.00% 9.52%
05/27/97 26.39% 10.00% 9.84%
06/03/97 25.70% 10.00% 9.67%
06/10/97 28.95% 10.00% 10.00%
06/17/97 35.09% 10.00% 10.00%
06/24/97 34.08% 10.00% 10.00%
07/01/97 32.27% 10.00% 10.00%
07/08/97 40.32% 10.00% 10.00%
07/15/97 47.32% 10.00% 10.00%
07/22/97 48.97% 10.00% 10.00%
07/29/97 48.33% 10.00% 10.00%
08/05/97 43.78% 10.00% 10.00%
08/12/97 40.34% 10.00% 10.00%
08/19/97 39.09% 10.00% 10.00%
08/26/97 37.00% 10.00% 10.00%
09/02/97 41.67% 10.00% 10.00%
09/09/97 40.64% 10.00% 10.00%
09/16/97 38.46% 10.00% 10.00%
09/23/97 38.84% 10.00% 10.00%
09/30/97 37.47% 10.00% 10.00%
10/07/97 40.31% 10.00% 10.00%
10/14/97 38.10% 10.00% 10.00%
10/21/97 37.60% 10.00% 10.00%
10/28/97 31.41% 10.00% 10.00%
11/04/97 31.73% 10.00% 10.00%
11/11/97 26.62% 10.00% 9.90%
11/18/97 26.41% 10.00% 9.85%
11/25/97 25.77% 10.00% 9.69%
12/02/97 29.85% 10.00% 10.00%
12/09/97 30.53% 10.00% 10.00%
12/16/97 33.33% 10.00% 10.00%
12/23/97 25.04% 10.00% 9.51%
12/30/97 31.06% 10.00% 10.00%
01/06/98 28.32% 10.00% 10.00%
01/13/98 23.83% 10.00% 9.20%
01/20/98 25.02% 10.00% 9.50%
01/27/98 26.66% 10.00% 9.91%
02/03/98 27.45% 10.00% 10.00%
02/10/98 29.06% 10.00% 10.00%
02/17/98 25.29% 10.00% 9.57%
02/24/98 26.90% 10.00% 9.97%
03/03/98 33.01% 10.00% 10.00%
03/10/98 31.17% 10.00% 10.00%
03/17/98 36.82% 10.00% 10.00%
03/24/98 40.12% 10.00% 10.00%
03/31/98 45.03% 10.00% 10.00%
04/07/98 44.82% 10.00% 10.00%
04/14/98 47.83% 10.00% 10.00%
04/21/98 45.41% 10.00% 10.00%
04/28/98 36.65% 10.00% 10.00%
05/05/98 34.77% 10.00% 10.00%
05/12/98 33.92% 10.00% 10.00%
05/19/98 31.82% 10.00% 10.00%
05/26/98 28.75% 10.00% 9.93%
06/02/98 29.30% 10.00% 10.00%
06/09/98 29.25% 10.00% 10.00%
06/16/98 21.58% 10.00% 8.14%
06/23/98 24.89% 10.00% 8.97%
06/30/98 27.25% 10.00% 9.56%
07/07/98 25.67% 10.00% 9.16%
07/14/98 27.20% 10.00% 9.55%
07/21/98 24.75% 10.00% 8.93%
07/28/98 19.93% 10.00% 7.73%
08/04/98 12.57% 10.00% 5.89%
08/11/98 15.37% 10.00% 6.59%
08/18/98 18.91% 10.00% 7.47%
08/25/98 19.69% 10.00% 7.67%
09/01/98 7.18% 7.18% 4.54%
09/08/98 9.62% 9.62% 5.15%
09/15/98 9.72% 9.72% 5.18%
09/22/98 8.16% 8.16% 4.79%
09/29/98 10.74% 10.00% 5.43%
10/06/98 0.15% 0.15% 2.78%
10/13/98 2.53% 2.53% 3.13%
10/20/98 9.42% 9.42% 4.85%
10/27/98 15.56% 10.00% 6.39%
11/03/98 18.08% 10.00% 7.02%
11/10/98 22.13% 10.00% 8.03%
11/17/98 21.43% 10.00% 7.85%
11/24/98 24.41% 10.00% 8.60%
12/01/98 20.95% 10.00% 7.73%
12/08/98 21.07% 10.00% 7.76%
12/15/98 20.11% 10.00% 7.52%
12/22/98 28.15% 10.00% 9.53%
12/29/98 27.90% 10.00% 9.47%
01/05/99 28.78% 10.00% 9.69%
01/12/99 30.18% 10.00% 10.00%
01/19/99 27.93% 10.00% 9.48%
01/26/99 29.22% 10.00% 9.80%
02/02/99 25.44% 10.00% 8.86%
02/09/99 19.34% 10.00% 7.33%
02/16/99 21.42% 10.00% 7.85%
02/23/99 23.34% 10.00% 8.33%
03/02/99 16.49% 10.00% 6.62%
03/09/99 20.25% 10.00% 7.56%
03/16/99 20.90% 10.00% 7.72%
03/23/99 14.15% 10.00% 6.03%
03/30/99 18.06% 10.00% 7.01%
04/06/99 18.77% 10.00% 7.19%
04/13/99 20.97% 10.00% 7.74%
04/20/99 15.96% 10.00% 6.49%
04/27/99 25.59% 10.00% 8.89%
05/04/99 19.39% 10.00% 7.34%
05/11/99 21.49% 10.00% 7.87%
05/18/99 20.17% 10.00% 7.54%
05/25/99 17.40% 10.00% 6.85%
06/01/99 18.39% 10.00% 7.09%
06/08/99 17.79% 10.00% 6.94%
06/15/99 19.64% 10.00% 7.41%
06/22/99 19.32% 10.00% 7.33%
06/29/99 19.18% 10.00% 7.29%
07/06/99 20.21% 10.00% 7.55%
07/13/99 18.33% 10.00% 7.08%
07/20/99 18.19% 10.00% 7.04%
07/27/99 20.59% 10.00% 7.64%
08/03/99 23.31% 10.00% 8.32%
08/10/99 19.87% 10.00% 7.46%
08/17/99 22.06% 10.00% 8.01%
08/24/99 24.76% 10.00% 8.69%
08/31/99 32.79% 10.00% 10.00%
09/07/99 31.94% 10.00% 10.00%
09/14/99 28.77% 10.00% 9.69%
09/21/99 26.99% 10.00% 9.24%
09/28/99 22.22% 10.00% 8.05%
10/05/99 32.17% 10.00% 10.00%
10/12/99 31.98% 10.00% 10.00%
10/19/99 18.55% 10.00% 7.13%
10/26/99 20.32% 10.00% 7.58%
11/02/99 21.32% 10.00% 7.83%
11/09/99 21.01% 10.00% 7.75%
11/16/99 24.63% 10.00% 8.65%
11/23/99 18.73% 10.00% 7.18%
11/30/99 18.17% 10.00% 7.04%
12/07/99 19.28% 10.00% 7.32%
12/14/99 20.68% 10.00% 7.67%
12/21/99 19.09% 9.00% 7.27%
12/28/99 17.38% 9.00% 6.84%
01/04/00 12.42% 9.00% 5.60%
01/11/00 16.05% 9.00% 6.51%
01/18/00 16.22% 9.00% 6.55%
01/25/00 12.59% 9.00% 5.64%
02/01/00 11.66% 9.00% 5.41%
02/08/00 18.52% 9.00% 7.13%
02/15/00 12.89% 9.00% 5.72%
02/22/00 6.37% 6.37% 4.09%
02/29/00 11.49% 9.00% 5.37%
03/07/00 5.92% 5.92% 3.98%
03/14/00 4.04% 4.04% 3.51%
03/21/00 18.35% 9.00% 7.08%
03/28/00 15.91% 9.00% 6.47%
04/04/00 13.41% 9.00% 5.85%
04/11/00 11.17% 9.00% 5.29%
04/18/00 10.35% 9.00% 5.08%
04/25/00 8.42% 8.42% 4.60%
05/02/00 8.57% 8.57% 4.64%
05/09/00 4.17% 4.17% 3.54%
05/16/00 9.95% 9.00% 4.98%
05/23/00 6.96% 6.96% 4.24%
05/30/00 9.89% 9.00% 4.97%
06/06/00 10.66% 9.00% 5.16%
06/13/00 12.93% 9.00% 5.73%
06/20/00 10.51% 9.00% 5.12%
06/27/00 7.33% 7.33% 4.33%
07/04/00 5.84% 5.84% 3.96%
07/11/00 6.26% 6.26% 4.06%
07/18/00 8.46% 8.46% 4.61%
07/25/00 8.18% 8.18% 4.54%
08/01/00 8.76% 8.76% 4.69%
08/08/00 15.71% 9.00% 6.42%
08/15/00 10.43% 9.00% 5.10%
08/22/00 9.87% 9.00% 4.96%
08/29/00 14.35% 9.00% 6.08%
09/05/00 11.59% 9.00% 5.39%
09/12/00 10.90% 9.00% 5.22%
09/19/00 11.64% 9.00% 5.41%
09/26/00 11.31% 9.00% 5.32%
10/03/00 9.58% 9.00% 4.89%
10/10/00 5.55% 5.55% 3.88%
10/17/00 7.02% 7.02% 4.25%
10/24/00 9.06% 9.00% 4.76%
10/31/00 6.05% 6.05% 4.01%
11/07/00 4.87% 4.87% 3.71%
11/14/00 -2.61% 0.00% 2.50%
11/21/00 -4.08% 0.00% 2.50%
11/28/00 -3.80% 0.00% 2.50%
12/05/00 -2.31% 0.00% 2.50%
12/12/00 -2.29% 0.00% 2.50%
12/19/00 -8.91% 0.00% 2.50%
12/26/00 -9.77% 0.00% 2.50%
01/02/01 -8.29% 0.00% 2.50%
01/09/01 -9.57% 0.00% 2.50%
01/16/01 -8.83% 0.00% 2.50%
01/23/01 -3.52% 0.00% 2.50%
01/30/01 -2.51% 0.00% 2.50%
02/06/01 -6.18% 0.00% 2.50%
02/13/01 -5.93% 0.00% 2.50%
02/20/01 -5.41% 0.00% 2.50%
02/27/01 -7.93% 0.00% 2.50%
03/06/01 -7.51% 0.00% 2.50%
03/13/01 -11.88% 0.00% 2.50%
03/20/01 -23.51% 0.00% 2.50%
03/27/01 -21.59% 0.00% 2.50%
04/03/01 -25.97% 0.00% 2.50%
04/10/01 -22.13% 0.00% 2.50%
04/17/01 -17.32% 0.00% 2.50%
04/24/01 -18.14% 0.00% 2.50%
05/01/01 -12.43% 0.00% 2.50%
05/08/01 -10.68% 0.00% 2.50%
05/15/01 -14.77% 0.00% 2.50%
05/22/01 -4.69% 0.00% 2.50%
05/29/01 -10.86% 0.00% 2.50%
06/05/01 -11.95% 0.00% 2.50%
06/12/01 -14.53% 0.00% 2.50%
06/19/01 -17.86% 0.00% 2.75%
06/26/01 -16.11% 0.00% 2.75%
07/03/01 -15.98% 0.00% 2.75%
07/10/01 -20.21% 0.00% 2.75%
07/17/01 -18.69% 0.00% 2.75%
07/24/01 -20.53% 0.00% 2.75%
07/31/01 -15.77% 0.00% 2.75%
08/07/01 -19.70% 0.00% 2.75%
08/14/01 -20.05% 0.00% 2.75%
08/21/01 -22.75% 0.00% 2.75%
08/28/01 -23.07% 0.00% 2.75%
09/04/01 -24.82% 0.00% 2.75%
09/11/01 -26.27% 0.00% 2.75%
09/18/01 -29.25% 0.00% 2.75%
09/25/01 -29.08% 0.00% 2.75%
10/02/01 -26.28% 0.00% 2.75%
10/09/01 -23.75% 0.00% 2.75%
10/16/01 -18.69% 0.00% 2.75%
10/23/01 -22.41% 0.00% 2.75%
10/30/01 -25.85% 0.00% 2.75%
11/06/01 -21.86% 0.00% 2.75%
11/13/01 -17.63% 0.00% 2.75%
11/20/01 -15.19% 0.00% 2.75%
11/27/01 -13.96% 0.00% 2.75%
12/04/01 -16.83% 0.00% 2.75%
12/11/01 -17.09% 0.00% 2.75%
12/18/01 -12.46% 0.00% 2.75%
12/25/01 -12.96% 0.00% 2.75%
01/01/02 -10.53% 0.00% 2.75%
01/08/02 -10.81% 0.00% 2.75%
01/15/02 -13.60% 0.00% 2.75%
01/22/02 -17.72% 0.00% 2.75%
01/29/02 -19.87% 0.00% 2.75%
02/05/02 -19.39% 0.00% 2.50%
02/12/02 -16.02% 0.00% 2.50%
02/19/02 -15.29% 0.00% 2.50%
02/26/02 -11.80% 0.00% 2.50%
03/05/02 -8.58% 0.00% 2.50%
03/12/02 -2.67% 0.00% 2.50%
03/19/02 2.42% 2.42% 3.10%
03/26/02 -3.69% 0.00% 2.50%
04/02/02 2.73% 2.73% 3.18%
04/09/02 -4.32% 0.00% 2.50%
04/16/02 -5.32% 0.00% 2.50%
04/23/02 -8.97% 0.00% 2.50%
04/30/02 -14.96% 0.00% 2.50%
05/07/02 -16.78% 0.00% 2.50%
05/14/02 -12.17% 0.00% 2.50%
05/21/02 -17.52% 0.00% 2.50%
05/28/02 -15.25% 0.00% 2.50%
06/04/02 -18.92% 0.00% 2.50%
06/11/02 -19.28% 0.00% 2.50%
06/18/02 -14.47% 0.00% 2.50%
06/25/02 -19.77% 0.00% 2.50%
07/02/02 -23.19% 0.00% 2.50%
07/09/02 -19.35% 0.00% 2.50%
07/16/02 -25.81% 0.00% 2.50%
07/23/02 -31.91% 0.00% 2.50%
07/30/02 -25.46% 0.00% 2.50%
08/06/02 -27.80% 0.00% 2.50%
08/13/02 -25.49% 0.00% 2.50%
08/20/02 -18.99% 0.00% 2.50%
08/27/02 -19.51% 0.00% 2.50%
09/03/02 -22.50% 0.00% 2.50%
09/10/02 -16.74% 0.00% 2.50%
09/17/02 -15.41% 0.00% 2.50%
09/24/02 -19.06% 0.00% 2.50%
10/01/02 -19.34% 0.00% 2.50%
10/08/02 -24.43% 0.00% 2.50%
10/15/02 -19.70% 0.00% 2.50%
10/22/02 -17.94% 0.00% 2.50%
10/29/02 -16.76% 0.00% 2.50%
11/05/02 -18.18% 0.00% 2.00%
11/12/02 -22.48% 0.00% 2.00%
11/19/02 -21.52% 0.00% 2.00%
11/26/02 -20.54% 0.00% 1.00%
12/03/02 -19.57% 0.00% 1.00%
12/10/02 -20.43% 0.00% 1.00%
12/17/02 -20.99% 0.00% 1.00%
12/24/02 -22.03% 0.00% 1.00%
12/31/02 -23.36% 0.00% 1.00%
01/07/03 -20.44% 0.00% 1.00%
01/14/03 -18.71% 0.00% 1.00%
01/21/03 -20.69% 0.00% 1.00%
01/28/03 -21.99% 0.00% 1.00%
02/04/03 -22.18% 0.00% 1.00%
02/11/03 -25.12% 0.00% 1.00%
02/18/03 -21.43% 0.00% 1.00%
02/25/03 -24.41% 0.00% 1.00%
03/04/03 -28.28% 0.00% 1.00%
03/11/03 -31.30% 0.00% 1.00%
03/18/03 -25.96% 0.00% 1.00%
03/25/03 -23.16% 0.00% 1.00%
04/01/03 -24.48% 0.00% 1.00%
04/08/03 -21.42% 0.00% 1.00%
04/15/03 -21.05% 0.00% 1.00%
04/22/03 -17.22% 0.00% 1.00%
04/29/03 -14.77% 0.00% 1.00%
05/06/03 -10.96% 0.00% 1.00%
05/13/03 -14.12% 0.00% 1.00%
05/20/03 -14.83% 0.00% 1.00%
05/27/03 -11.45% 0.00% 1.00%
06/03/03 -6.64% 0.00% 1.00%
06/10/03 -2.83% 0.00% 1.00%
06/17/03 -2.45% 0.00% 1.00%
06/24/03 0.74% 0.74% 1.43%
07/01/03 3.60% 3.60% 2.15%
07/08/03 5.77% 5.77% 2.69%
07/15/03 11.04% 6.00% 4.01%
07/22/03 23.86% 6.00% 6.00%
07/29/03 9.58% 6.00% 3.64%
08/05/03 12.32% 6.00% 4.33%
08/12/03 12.00% 6.00% 4.25%
08/19/03 6.92% 6.00% 2.98%
08/26/03 6.62% 6.00% 2.90%
09/02/03 16.39% 6.00% 5.34%
09/09/03 12.48% 6.00% 4.37%
09/16/03 17.83% 6.00% 5.70%
09/23/03 25.60% 6.00% 6.00%
09/30/03 17.45% 6.00% 5.61%
10/07/03 30.14% 6.00% 6.00%
10/14/03 19.08% 6.00% 6.00%
10/21/03 17.51% 5.00% 5.00%
10/28/03 18.66% 5.00% 5.00%
11/04/03 15.06% 5.00% 5.00%
11/11/03 18.53% 5.00% 5.00%
11/18/03 15.32% 5.00% 5.00%
11/25/03 15.39% 5.00% 5.00%
12/02/03 15.84% 5.00% 5.00%
12/09/03 17.21% 5.00% 5.00%
12/16/03 19.06% 5.00% 5.00%
12/23/03 22.80% 5.00% 5.00%
12/30/03 26.12% 5.00% 5.00%
01/06/04 21.75% 5.00% 5.00%
01/13/04 20.34% 5.00% 5.00%
01/20/04 28.29% 5.00% 5.00%
01/27/04 33.25% 5.00% 5.00%
02/03/04 33.93% 5.00% 5.00%
02/10/04 38.14% 5.00% 5.00%
02/17/04 35.92% 5.00% 5.00%
02/24/04 35.83% 5.00% 5.00%
03/02/04 39.79% 5.00% 5.00%
03/09/04 42.44% 5.00% 5.00%
03/16/04 28.19% 5.00% 5.00%
03/23/04 25.05% 5.00% 5.00%
03/30/04 31.27% 5.00% 5.00%
04/06/04 30.72% 5.00% 5.00%
04/13/04 26.78% 5.00% 5.00%
04/20/04 22.68% 5.00% 5.00%
04/27/04 24.00% 5.00% 5.00%
05/04/04 19.81% 5.00% 5.00%
05/11/04 16.25% 5.00% 5.00%
05/18/04 18.67% 5.00% 5.00%
05/25/04 16.98% 5.00% 5.00%
06/01/04 15.40% 5.00% 4.85%
06/08/04 15.97% 5.00% 4.99%
06/15/04 11.89% 5.00% 3.97%
06/22/04 15.35% 5.00% 4.83%
06/29/04 15.66% 5.00% 4.91%
07/06/04 10.75% 5.00% 3.68%
07/13/04 11.46% 5.00% 3.86%
07/20/04 12.20% 5.00% 4.05%
07/27/04 10.66% 5.00% 3.66%
08/03/04 13.88% 5.00% 4.47%
08/10/04 8.95% 5.00% 3.23%
08/17/04 7.91% 5.00% 2.97%
08/24/04 9.97% 5.00% 3.49%
08/31/04 8.04% 5.00% 3.01%
09/07/04 9.59% 5.00% 3.39%
09/14/04 9.61% 5.00% 3.40%
09/21/04 9.74% 5.00% 3.43%
09/28/04 11.45% 5.00% 3.86%
10/05/04 9.16% 5.00% 3.29%
10/12/04 6.89% 5.00% 2.72%
10/19/04 5.46% 5.00% 2.36%
10/26/04 6.14% 5.00% 2.53%
11/02/04 7.34% 5.00% 2.83%
11/09/04 11.22% 5.00% 3.80%
11/16/04 13.66% 5.00% 4.41%
11/23/04 11.67% 5.00% 3.91%
11/30/04 10.05% 5.00% 3.51%
12/07/04 11.02% 5.00% 3.75%
12/14/04 11.92% 5.00% 3.98%
12/21/04 9.98% 5.00% 3.49%
12/28/04 9.36% 5.00% 3.34%
01/04/05 5.72% 5.00% 2.43%
01/11/05 5.50% 5.00% 2.37%
01/18/05 5.02% 5.00% 2.25%
01/25/05 2.12% 2.12% 1.53%
02/01/05 4.69% 4.69% 2.17%
02/08/05 4.95% 4.95% 2.23%
02/15/05 4.59% 4.59% 2.14%
02/22/05 3.95% 3.95% 1.98%
The performance information shown is the performance of American Express Stock
Market Certificate and not that of American Express Market Strategy Certificate.
Past performance is not indicative of future performance and there is no
assurance that the performance of American Express Market Strategy Certificate
will replicate that of American Express Stock Market Certificate.
The Stock Market Certificate was first available on Jan. 24, 1990. The
performance reflects the returns on the 52-week anniversary date, falling on a
Wednesday, of each of the weeks shown.
Your participation earnings are tied to the movement of the S&P 500 Index. They
will be based on any increase in this Index as measured on the beginning and
ending date of each 52-week term. Of course, if the Index is not higher on the
last day of your term than it was on the first day, your principal will be
secure but you will earn no participation interest.
How the Index has performed in the past does not indicate how the stock market
or the certificate will perform in the future. There is no assurance that
certificate owners will receive interest on their accounts beyond any minimum
interest or fixed interest selected. The Index could decline.
- --------------------------------------------------------------------------------
39p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
CALCULATION OF RETURN
The increase or decrease in the S&P 500 Index, as well as the actual return paid
to you, is calculated as follows:
Rate of return on S&P 500 Index
Term ending value of S&P 500 Index minus
Term beginning value of S&P 500 Index divided by
Term beginning value of S&P 500 Index equals
Rate of return on S&P 500 Index
The actual return paid to you will depend on your interest participation
selection.
For example, assume:
Term ending value of S&P 500 Index 940
Term beginning value of S&P 500 Index 900
Maximum return 5%
Minimum return 1.00%
Partial participation rate 25%
940 Term ending value of S&P 500 Index
minus 900 Term beginning value of S&P 500 Index
- --------------------------------------------------------------------------------
equals 40 Difference between beginning and ending values
40 Difference between beginning and ending values
divided by 900 Term beginning value of S&P 500 Index
- --------------------------------------------------------------------------------
equals 4.44% Percent increase -- full participation return
4.44% Percent increase or decrease
times 25% Partial participation rate
- --------------------------------------------------------------------------------
equals 1.11%
plus 1.00% Minimum interest rate
- --------------------------------------------------------------------------------
equals 2.11% Partial participation return
- --------------------------------------------------------------------------------
In both cases in the example, the return would be less than the 5% maximum.
Maximum Return and Partial Participation Minimum Rate History -- The following
table illustrates the maximum annual returns and partial participation minimum
rates that have been in effect since the Stock Market Certificate was
introduced. American Express Market Strategy Certificate was introduced on April
29, 1998.
Start of term Maximum annual return Partial participation minimum rate
Jan. 24, 1990 18.00% 5.00%
Feb. 5, 1992 18.00 4.00
May 13, 1992 15.00 4.00
Sept. 9, 1992 12.00 3.00
Nov. 11, 1992 10.00 2.50
Nov. 2, 1994 10.00 2.75
April 26, 1995 12.00 3.50
Jan. 17, 1996 10.00 3.25
Feb. 26, 1997 10.00 3.00
May 7, 1997 10.00 2.75
Oct. 8, 1997 10.00 2.50
Dec. 16 1998 9.00 2.50
Feb. 2, 2000 10.00 2.50
June 14, 2000 11.00 2.75
Aug. 16, 2000 10.00 2.75
- --------------------------------------------------------------------------------
40p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
Start of term Maximum annual return Partial participation minimum rate
Jan. 31, 2001 9.00% 2.50%
Sept. 5, 2001 8.00 2.50
Oct. 31, 2001 8.00 2.00
Nov. 21, 2001 6.00 1.00
June 26, 2002 6.00 1.25
Oct. 23, 2002 5.00 1.25
Feb. 19, 2003 5.00 1.00
May 12, 2004 4.00 0.75
April 27, 2005 5.00 1.00
Examples
To help you understand how a participation term of this certificate works, here
are some hypothetical examples. The following are four different examples of
market scenarios and how they affect the certificate's return. Assume for all
examples that:
o you purchased the certificate with a $10,000 original investment,
o the partial participation rate is 25%,
o the minimum interest rate for partial participation is 1%,
o the maximum total return for full and partial participation is 5%.
1. If the S&P 500 Index value rises
Week 1/Wed Week 52/Tues
S&P 500 S&P 500
Index 1,000 4% increase in the S&P 500 Index Index 1,040
- -------------------------------------------------------------------------------------------------------------------------------
Full participation interest Partial participation interest and minimum interest
$10,000 Original investment $10,000 Original investment
+ 400 4% x $10,000 + 100 1.00% (Minimum interest rate) x $10,000
Participation interest + 100 25% x 4% x $10,000 Participation interest
------- -------
$10,400 Ending balance $10,200 Ending balance
(4% Total return) (2.00% Total return)
- -------------------------------------------------------------------------------------------------------------------------------
2. If the S&P 500 Index value falls
Week 1/Wed Week 52/Tues
S&P 500 S&P 500
Index 1,000 4% decrease in the S&P 500 Index Index 960
- -------------------------------------------------------------------------------------------------------------------------------
Full participation interest Partial participation interest and minimum interest
$10,000 Original investment $10,000 Original investment
+ 0 Participation interest + 100 1.00% (Minimum interest rate) x $10,000
------- + 0 Participation interest
$10,000 Ending balance -------
(0% Total return) $10,100 Ending balance
(1.00% Total return)
- -------------------------------------------------------------------------------------------------------------------------------
3. If the S&P 500 Index value rises above the maximum return for full participation
Week 1/Wed Week 52/Tues
S&P 500 S&P 500
Index 1,000 10% increase in the S&P 500 Index Index 1,100
- -------------------------------------------------------------------------------------------------------------------------------
Full participation interest Partial participation interest and minimum interest
$10,000 Original investment $10,000 Original investment
+ 500 5% x $10,000 + 100 1.00% (Minimum interest rate) x $10,000
Maximum interest + 250 25% x 10% x $10,000 Participation interest
------- -------
$10,500 Ending balance $10,350 Ending balance
(5% Total return) (3.50% Total return)
- -------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
41p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
4. If the S&P 500 Index value rises above the maximum return for partial participation Week 1/Wed Week 52/Tues
S&P 500 S&P 500
Index 1,000 30% increase in the S&P 500 Index Index 1,300
- -------------------------------------------------------------------------------------------------------------------------------
Full participation interest Partial participation interest and minimum interest
$10,000 Original investment $10,000 Original investment
+ 500 5% x $10,000 + 100 1.00% (Minimum interest rate) x $10,000
Maximum interest + 400 25% x 30% = 7.5%; capped at (5%-1%) x $10,000
Participation interest
------- -------
$10,500 Ending balance $10,500 Ending balance
(5% Total return) (5% Total return)
- -------------------------------------------------------------------------------------------------------------------------------
ABOUT THE S&P 500 INDEX
The description in this prospectus of the S&P 500 Index including its make-up,
method of calculation and changes in its components is derived from publicly
available information regarding the S&P 500 Index. AECC does not assume any
responsibility for the accuracy or completeness of such information.
The S&P 500 Index is composed of 500 common stocks, most of which are listed on
the New York Stock Exchange. The S&P 500 Index is published by S&P and is
intended to provide an indication of the pattern of common stock movement. S&P
chooses the 500 stocks to be included in the S&P 500 Index with the aim of
achieving a distribution by broad industry groupings that approximates the
distribution of these groupings in the U.S. common stock population. Changes in
the S&P 500 Index are reported daily in the financial pages of many major
newspapers. The index used for the American Express Market Strategy Certificate
excludes dividends on the 500 stocks.
"Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard & Poor's 500" and
"500" are trademarks of The McGraw-Hill Companies Inc. and have been licensed
for use by AECC. The certificate is not sponsored, endorsed, sold or promoted by
S&P. S&P makes no representation or warranty, express or implied, to the owners
of the certificate or any member of the public regarding the advisability of
investing in securities generally or in the certificate particularly or the
ability of the S&P 500 Index to track general stock market performance.
S&P's only relationship to AECC is the licensing of certain trademarks and trade
names of S&P and of the S&P 500 Index, which is determined, composed and
calculated by S&P without regard to AECC or the certificate. S&P has no
obligation to take the needs of AECC or the owners of the certificate into
consideration in determining, composing or calculating the S&P 500 Index. S&P is
not responsible for and has not participated in the determination of the timing
of, prices at, or quantities of the certificate to be issued or in the
determination or calculation of the equation by which the certificate is to be
converted into cash. S&P has no obligation or liability in connection with the
administration, marketing or trading of the certificate.
S&P does not guarantee the accuracy and/or the completeness of the S&P 500 Index
or any data included therein and S&P shall have no liability for any errors,
omissions, or interruptions therein. S&P makes no warranty, express or implied,
as to the results to be obtained by AECC, owners of the certificate, or any
person or entity from the use of the S&P 500 Index or any data included therein.
S&P makes no express or implied warranties, and expressly disclaims all
warranties of merchantability or fitness for a particular purpose or use with
respect to the S&P 500 Index or any data included therein. Without limiting any
of the foregoing, in no event shall S&P have any liability for any special,
punitive, indirect, or consequential damages (including lost profits), even if
notified of the possibility of such damages.
If for any reason the S&P 500 Index were to become unavailable or not reasonably
feasible to use, AECC would use a comparable stock market index for determining
participation interest. If this were to occur, we would send you a notice by a
practical means such as correspondence (which may be electronic if you and we
have so agreed) or a quarterly account statement. The notice would indicate the
comparable index and give you the option to withdraw your principal without an
early withdrawal penalty. If you chose early withdrawal, you would lose any
interest accrued during the term.
- --------------------------------------------------------------------------------
42p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
OPPORTUNITIES AT THE END OF A PARTICIPATION TERM
Grace period: When a participation term ends, we will notify you of the start of
a 14-day grace period before a new term automatically begins. During this 14-day
grace period you can:
o change your participation selection,
o add money to your certificate,
o change your participation term to remain in fixed interest,
o renew your principal from the preceding term in a new participation term and
allow interest earned in a term to remain in fixed interest,
o withdraw part or all of your money in your fixed term or the money in the
participation term that just ended without a withdrawal penalty or loss of
interest,
o or receive your participation interest in cash.
By starting your new term early and waiving the 14-day grace period, you are
choosing to start your next term without knowing the ending value of your
current term.
Changing fixed participation selection: Money can be withdrawn from the
fixed-interest subaccount at any time without a surrender penalty. The fixed
interest on these amounts continues for the life of the certificate. You can add
money to your fixed-interest investment at any time. The money added will earn
the same rate as the rest of the money in the fixed term.
New term: If you do not make changes when a participation term ends, your
certificate will continue with your current selections when the new
participation term begins 14 days later as long as the minimum invested for the
participation term is $1,000. You will earn fixed interest during this 14-day
grace period. If you do not want to wait 14 days before starting your next
market participation term, you must phone or send written instructions before
your current term ends. You can tell us to start your next term on any Wednesday
during the grace period. This will remain in effect for all future terms, unless
we receive instructions changing your selection before the term ends. The 2%
withdrawal charge will apply when you start your new term during the grace
period. Your notice may also tell us to change your interest selection or add to
your certificate. You can arrange to make periodic additional investments at
each participation term renewal. You can tell us to change your participation
selection, add money to your renewing participation term, change your interest
selection to remain in fixed interest, renew your principal from the preceding
term in a new participation term and allow interest earned in a term to remain
in fixed interest, or withdraw part of your money. The change will be in effect
for any future term unless we receive instructions from you changing your
selection. To learn indexing information and the amount of interest (if any) at
the end of a participation term, you can contact your American Express financial
advisor or call AECSC.
How to Invest and Withdraw Funds
BUYING YOUR CERTIFICATE
Your American Express financial advisor can help you fill out and submit an
application to open an account with us and purchase a certificate. If you
purchase your certificate other than through an American Express financial
advisor -- for example, through a direct marketing channel -- you may be given
different purchase instructions. We will process the application at our
corporate offices in Minneapolis, Minnesota. When we have accepted your
application and received your initial investment and instructions, we will send
you a confirmation showing the acceptance date, the initial interest rate for
amounts invested at fixed interest, the date your participation term begins and
the participation interest selection you have made, detailing your market
participation percentage, instructions for participation terms and, if
applicable, the minimum interest rate for your first term. After the beginning
of each participation term that includes an additional investment sent to us by
you, we will send you notice of the value of the S&P 500 Index on the day the
term began. For a description of how we determine the fixed interest rate that
initially applies to a new investment, see the paragraph on "Fixed interest" of
"Interest" under "About the Certificate." For additional considerations, see
"Purchase policies" below. The participation rates and maximum interest in
effect at the time of movement from fixed-interest to a participation term will
apply to those participation terms.
Important: When you open an account, you must provide AECC with your correct
Taxpayer Identification Number (TIN), which is either your Social Security or
Employer Identification number. See "Taxes on Your Earnings."
- --------------------------------------------------------------------------------
43p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
Purchase policies
o Investments must be received and accepted in the Minneapolis headquarters on
a business day before 3 p.m. Central time to be included in your account that
day. Otherwise your purchase will be processed the next business day.
o If you purchase a certificate with a personal check or other non-guaranteed
funds, AEFC will wait one day for the process of converting your check to
federal funds (e.g., monies of member banks within the Federal Reserve Bank)
before your purchase will be accepted and you begin earning interest. For
information on how to avoid this delay, for example by using a certified
check, please call AECSC at the telephone number listed on the back cover.
o AECC has complete discretion to determine whether to accept an application
and sell a certificate.
A number of special policies apply to purchases, withdrawals and exchanges
within IRAs, 401(k) plans and other qualified retirement plans. See
"Retirement Plans: Special Policies."
HOW TO MAKE INVESTMENTS
By mail
Send your check, by regular or express mail, along with your name and account
number to:
American Express Financial Advisors Inc.
70200 AXP Financial Center
Minneapolis, MN 55474
By wire
For investment into an established account, you may wire money to:
Wells Fargo Bank Minnesota, N.A.
Routing No. 091000019
Minneapolis, MN
Attn: Domestic Wire Dept.
Give these instructions: Credit American Express Financial Advisors Account
#0000030015 for personal account # (your account number) for (your name). Please
be sure to include all 10 digits of the American Express Financial Advisors
account number, including the zeros.
If this information is not included, the order may be rejected and all money
received, less any costs AECC incurs, will be returned promptly.
o Minimum amount you may wire: $1,000.
o Wire orders can be accepted only on days when your bank, American Express
Financial Corporation (AEFC), AECC and Wells Fargo Bank Minnesota, N.A. are
open for business.
o Wire purchases are completed when wired payment is received and we accept the
purchase.
o Wire investments must be received and accepted in our Minneapolis
headquarters on a business day before 3 p.m. Central time to be credited that
day. Otherwise your purchase will be processed the next business day.
o AECC, AEFC and its other subsidiaries are not responsible for any delays that
occur in wiring funds, including delays in processing by the bank.
o You must pay any fee the bank charges for wiring.
- --------------------------------------------------------------------------------
44p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
FULL AND PARTIAL WITHDRAWALS
o You may make withdrawals at any time.
o If you request a withdrawal, the dollars will be removed from credited
fixed-interest first, then from principal in your fixed-interest subaccount,
then from any renewing participation terms in the grace period, and then from
principal in participation terms beginning with the most recent term start
date and continuing with such subsequent terms in order of term start dates.
o You can withdraw the full value of your certificate is made by giving us
proper instructions. To complete these transactions, see "How to Request a
Withdrawal or Transfer."
o Full and partial withdrawals may result in loss of interest, depending upon
the timing of your withdrawal.
o You may not make a partial withdrawal if it would reduce your certificate
balance to less than $1,000 or if it would reduce the amount in a
participation term to less than $1,000. If you request such a withdrawal, we
will contact you for revised instructions.
Penalties for withdrawal from your participation terms: If you withdraw money
from a participation term, you will pay a penalty of 2% of the principal
withdrawn. Except to the extent your balance would be less than $1,000, this
penalty will be taken from the remaining balance, not the amount withdrawn. The
2% penalty is waived upon death of the certificate owner. When this certificate
is owned by a revocable trust, this penalty also is waived upon death of any
grantor of the revocable trust. We will also waive withdrawal penalties on
withdrawals for IRA certificate accounts for your required minimum distributions
at age 701/2. See "Retirement Plans: Special Policies."
Loss of interest: If you make a withdrawal from a participation term at any time
other than at the end of the term, you will lose any interest accrued on the
withdrawal amount since we credit participation interest only at the end of a
term.
Withdrawals from the fixed-interest subaccount before the end of the certificate
month (the monthly anniversary of the issue date of your certificate) will
result in loss of interest on the amount withdrawn. You will get the best result
by timing a withdrawal at the end of the certificate month.
Following are examples describing a $2,000 withdrawal during a participation
term and from a fixed-interest investment:
Participation term
Balance in participation term $10,000
Interest (interest is credited at the end of the term) 0
Withdrawal of principal (2,000)
2% withdrawal penalty (40)
- ----------------------------------------------------------------------------
Balance after withdrawal $ 7,960
============================================================================
You will forfeit any accrued interest on the withdrawal amount.
Fixed interest subaccount
Balance earning fixed interest $10,000
Interest credited to date 100
Withdrawal of credited interest (100)
Withdrawal of principal (1,900)
- ----------------------------------------------------------------------------
Balance after withdrawal $ 8,100
============================================================================
Retirement plans: In addition, you may be subject to IRS penalties for early
withdrawals if your certificate is in an IRA, 401(k) or other qualified
retirement plan account.
Other full and partial withdrawal policies
o If you request a partial or full withdrawal of a certificate recently
purchased or added to by a check or money order that is not guaranteed, we
will wait for your check to clear. Please expect a minimum of 10 days from
the date of your payment before AECC mails a check to you.
o If your certificate is pledged as collateral, any withdrawal will be delayed
until we get approval from the secured party.
o Any payments to you may be delayed under applicable rules, regulations or
orders of the Securities and Exchange Commission (SEC).
TRANSFERS TO OTHER ACCOUNTS
You may transfer part or all of your certificate to any other American Express
Certificate or into another new or existing American Express Financial Advisors
Inc. account that has the same ownership, subject to any terms and conditions
that may apply.
Transfers to another American Express Financial Advisors Inc. account with
different ownership will require a written request.
- --------------------------------------------------------------------------------
45p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
HOW TO REQUEST A WITHDRAWAL OR TRANSFER
By phone
Call AECSC at one of the telephone numbers listed on the back cover.
o Maximum telephone withdrawal request: $100,000.
o Transfers into an American Express Financial Advisors Inc. account with the
same ownership.
o A telephone withdrawal request will not be allowed within 30 days of a
phoned-in address change.
o We will honor any telephone withdrawal or transfer request believed to be
authentic and will use reasonable procedures to confirm authenticity.
You may request that telephone withdrawals not be authorized from your account
by writing to AECSC.
By mail
Send your name, account number and request for a withdrawal or transfer, by
regular or express mail, to:
American Express Financial Advisors Inc.
70100 AXP Financial Center
Minneapolis, MN 55474
Written requests are required for:
o Withdrawals over $100,000.
o Pension plans.
o Custodial accounts where the minor has reached the age at which custodianship
should terminate.
o Transfers to another American Express Financial Advisors Inc. account with
different ownership. All current registered owners must sign the request.
o All owners must sign a written request if there was an address change within
the last 30 days.
HOW TO RECEIVE PAYMENT WHEN YOU WITHDRAW FUNDS
By regular or express mail
o Mailed to address on record; please allow seven days for mailing.
o Payable to name(s) listed on the account.
o The express mail delivery charges you pay will vary depending on the courier
you select. We will deduct the fee from your remaining certificate balance,
provided that balance would not be less than $1,000. If the balance would be
less than $1,000, we will deduct the fee from the proceeds of the withdrawal.
By wire
o Minimum wire amount: $1,000.
o Request that money be wired to your bank.
o Bank account must be in same ownership as the AECC account.
o Pre-authorization required. Complete the bank wire authorization section in
the application or use a form supplied by your American Express financial
advisor. All registered owners must sign.
o Applicable wire charges will be deducted from your balance for partial
withdrawals or from the proceeds of a full withdrawal.
By electronic transfer
o Available only for pre-authorized scheduled partial withdrawals and other
full or partial withdrawals.
o No charge.
o Deposited electronically in your bank account.
o Allow two to five business days from request to deposit.
- --------------------------------------------------------------------------------
46p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
American Express Stock Market Certificate
About the Certificate
READ AND KEEP THIS PROSPECTUS
This prospectus section describes terms and conditions of your American Express
Stock Market Certificate. It contains facts that can help you decide if the
certificate is the right investment for you. Read the prospectus before you
invest and keep it for future reference. No one has the authority to vary the
terms and conditions of the American Express Stock Market Certificate from those
described in the prospectus, or to bind AECC by any statement not in it.
INVESTMENT AMOUNTS
You may purchase the American Express Stock Market Certificate in any amount
from $1,000 through $1 million, payable in U.S. currency, unless you receive
prior approval from AECC to invest more. You may also make additional lump-sum
investments in any amount at the end of any term as long as your total amount
paid in is not more than the $1 million, unless you receive prior approval from
AECC to invest more.
The certificate may be used as an investment for your Individual Retirement
Account (IRA), 401(k) plan or other qualified retirement accounts. If so used,
the amount of your contribution (investment) will be subject to limitations in
applicable federal law. You cannot purchase this certificate in a Coverdell
Education Savings Account.
FACE AMOUNT AND PRINCIPAL
The face amount of your certificate is the amount of your initial investment.
Your principal is the value of your certificate at the beginning of each
subsequent term. AECC guarantees your principal. It consists of the amount you
actually invest plus interest credited to your account and any additional
investment you make less withdrawals, penalties and any interest paid to you in
cash.
For example, assume your initial investment (face amount) of $10,000 has earned
a return of 5.00%. AECC credits interest to your account at the end of the term.
You have not taken any interest as cash, or made any withdrawals. You have
invested an additional $2,500 prior to the beginning of the next term. Your
principal for the next term will equal:
$10,000 Face amount (initial investment)
plus 500 Interest credited to your account at the end of the term
plus 5 Interim interest (See "Interim interest" under "Interest")
minus (0) Interest paid to you in cash
plus 2,500 Additional investment
minus (0) Withdrawals and applicable penalties
- --------------------------------------------------------------------------------
$13,005 Principal at the beginning of the next term
================================================================================
CERTIFICATE TERM
Your first certificate term is a 52-week period. It begins on the Wednesday
after AECC accepts your application and ends the Tuesday before the 52-week
anniversary of its acceptance. AECC has complete discretion to determine whether
to accept an application and sell a certificate. For example, if AECC accepts
your application on a Wednesday, your first term would begin the next Wednesday.
Your certificate will earn interest at the interim interest rate then in effect
until the term begins. See "Interim interest" under "Interest." It will not earn
any participation interest until the term begins. If you choose to continue to
receive participation interest, subsequent terms are 52-week periods that begin
on the Wednesday following the 14-day grace period at the end of the prior
52-week term. You may begin your next term on any Wednesday during the 14-day
period by providing prior written instructions to AECC. If you choose to receive
fixed interest, subsequent terms will be up to 52 weeks as described in "Fixed
interest" under "Interest" below.
VALUE AT MATURITY
Your certificate matures after 14 terms. Then you will receive a distribution
for its value. Participation terms are always 52 weeks. Fixed interest terms may
be less than 52 weeks if you change to participation before the end of the
52-week period. At maturity, the value of your certificate will be the total of
your actual investments, plus credited interest not paid to you in cash, less
any withdrawals and withdrawal penalties. Certain other fees may apply.
RECEIVING CASH DURING THE TERM
If you need money before your certificate term ends, you may withdraw part or
all of its value at any time, less any penalties that apply. Procedures for
withdrawing money, as well as conditions under which penalties apply, are
described in "How to Invest and Withdraw Funds."
- --------------------------------------------------------------------------------
47p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
INTEREST
You choose from two types of participation interest for your first term: 1) full
participation, or 2) partial participation together with minimum interest.
Interest earned under both of these options has an upper limit which is the
maximum annual return explained below. After your first term, you may choose
full or partial participation; or not to participate in any market movement and
receive a fixed rate of interest.
Full participation interest: With this option:
o you participate 100% in any percentage increase in the S&P 500 Index up to
the maximum return. For the maximum return in effect on the date of this
prospectus, see "Initial Interest and Participation Rates for American
Express Stock Market Certificate";
o you earn interest only if the value of the S&P 500 Index is higher on the
last day of your term than it was on the first day of your term; and
o your return is linked to stock market performance.
The S&P 500 Index is frequently used to measure the relative performance of the
stock market. For a more detailed discussion of the S&P 500 Index, see "About
the S&P 500 Index."
Partial participation and minimum interest: This option allows you to
participate in a portion (market participation percentage) of any increase in
the S&P 500 Index and also a rate of interest guaranteed by AECC in advance for
each term (minimum interest). Your return consists of two parts:
o a percentage of any increase in the S&P 500 Index, and
o a rate of interest guaranteed by AECC in advance for each term.
Together, they cannot exceed the maximum return. For the maximum return in
effect on the date of this prospectus, see "Initial Interest and Participation
Rates."
The market participation rate and the minimum interest rate on the date of this
prospectus are listed on the inside cover under "Initial Interest and
Participation Rates for American Express Stock Market Certificate."
Fixed interest: After your first term, this fixed interest option allows you to
stop participating in the market entirely for some period of time. A fixed
interest term is 52 weeks unless you choose to start a new participation term
before your 52 week term ends. You may choose to receive a fixed rate of
interest for any term after the first term. During the term when you are
receiving fixed interest, you can change from your fixed interest selection to
again participate in the market. If you make the change from fixed interest to
participation interest, your next term would begin on the Wednesday following
our receipt of notice of your new selection. In this way, you may have a term
(during which you would earn fixed interest) that is less than 52 weeks. You may
not change from participation interest to fixed interest during a term.
Maximum return: This is the cap, or upper limit, of your return. Your total
return including both participation and minimum interest for a term for which
you have chosen participation interest will be limited to this maximum return
percentage. For the maximum return in effect on the date of this prospectus, see
"Initial Interest and Participation Rates for American Express Stock
Market Certificate."
However, AECC guarantees that, for persons who have received a special
promotional coupon from AECC for purchase of a Stock Market Certificate and have
satisfied any requirement stated in the coupon, the maximum return for the
initial term will be the maximum return for special promotional coupons, see
"Initial Interest and Participation Rates for American Express Stock Market
Certificate." For example, the coupon may require that you make a minimum
investment and that you are not an existing client of AEFC, or another affiliate
of AEFC. AECC or AEFC will select persons to receive the coupon based on a
business strategy to build relationships with persons who work for particular
employers or with new clients in selected market segments who AECC or AEFC
believes meet threshold requirements for such factors as household income and
home values. Coupons may be sent only to persons who both fit such a strategy
and live in particular parts of the country or are affiliated with particular
organizations. AECC also may give such a coupon to active or retired AEFC
employees, American Express financial advisors, their immediate families and any
U.S. employee of any affiliated company of AECC. This promotional rate will only
be available if the recipient of the coupon presents it to the distributor or
selling agent at the time of applying to purchase the certificate.
Determining the S&P 500 Index value: The stock market closes at 3 p.m. Central
time. The S&P 500 Index value is available at approximately 4:30 p.m Central
time. This is the value we currently use to determine participation interest.
Occasionally, Standard & Poor's (S&P) makes minor adjustments to the closing
value after 4:30 p.m., and the value we use may not be exactly the one that is
published the next business day. In the future, we may use a later time cut-off
if it becomes feasible to do so. If the stock market is not open or the S&P 500
Index is unavailable as of the last day of your term, the preceding business day
for which a value is available will be used instead. Each Tuesday's closing
value of the S&P 500 Index is used for establishing the term start and the term
end values each week.
- --------------------------------------------------------------------------------
48p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
Interim interest: When we accept your application, we pay interim interest to
your account for the time before your first term begins. We also pay interim
interest for the 14-day period between terms unless you write or call to ask us
to begin your next term earlier. You may withdraw this interest in cash at any
time before it becomes part of your certificate's principal without a withdrawal
penalty. If it is not withdrawn, the interest will become part of your
certificate's principal at the start of the next succeeding term. For example,
the interest you earn between the end of the first and the beginning of the
second term will become part of the principal at the start of your third term.
Interim interest rates for the time before your first term begins will be within
a range 50 basis points (.50%) below to 50 basis points (.50%) above the average
interest rate published for 12-month certificates of deposit (CDs) in the BANK
RATE MONITOR (BRM), Top 25 Market Average. BANK RATE MONITOR and National Index
are marks owned by BANKRATE.COMSM, a publication of Bankrate, Inc., N. Palm
Beach, FL 33408. If the BRM Average is no longer publicly available or feasible
to use, AECC may use another, similar index as a guide for setting rates.
The BRM is a weekly magazine published by Advertising News Service Inc., an
independent national news organization that collects and disseminates
information about bank products and interest rates. Advertising News Service has
no connection with AECC, AEFC or any of their affiliates.
The BRM Top 25 Market Average is an index of rates and annual effective yields
offered on various length CDs by large banks and thrifts in 25 metropolitan
areas. The frequency of compounding varies among the banks and thrifts. CDs in
the BRM Average are government insured fixed-rate time deposits.
The BRM may be available in your local library. To obtain information or current
BRM Average rates, call AECSC at the telephone numbers listed on the back cover.
Earning interest: AECC calculates, credits and compounds participation interest
at the end of your certificate term. Minimum interest accrues daily and is
credited and compounded at the end of your certificate term. Fixed interest
accrues and is credited daily and compounds at the end of your term. Both
minimum and fixed interest are calculated on a 30-day month and 360-day year
basis. Interim interest accrues and is credited daily and compounds at the end
of your term immediately following the period in which interim interest is
credited.
Rates for future periods: After the initial term, the maximum return, market
participation percentage or minimum interest rate on your certificate may be
greater or less than those shown on the front of this prospectus. We review
rates weekly, and have complete discretion to decide what interest rate will be
declared.
To find out what your certificate's new maximum return, market participation
percentage and minimum interest rate will be for your next term, please consult
your American Express financial advisor, or AECSC at the telephone numbers
listed on the back cover.
This certificate may be available through other distributors or selling agents
with different interest rates or related features and consequently with
different returns. You may obtain information about other such distributors or
selling agents by calling AECSC at the telephone numbers listed on the back
cover.
PROMOTIONS AND PRICING FLEXIBILITY
AECC may sponsor or participate in promotions involving the certificate and its
respective terms. For example, we may offer different rates to new clients, to
existing clients, or to individuals who purchase or use other products or
services offered by American Express Company or its affiliates. These promotions
will generally be for a specified period of time.
We also may offer different rates based on your amount invested, geographic
location and whether the certificate is purchased for an IRA or a qualified
retirement account.
- --------------------------------------------------------------------------------
49p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
HISTORICAL DATA ON THE S&P 500 INDEX
The following chart illustrates the month-end closing values of the Index from
Dec. 31, 1984 through Feb. 28, 2005. The values of the S&P 500 Index are
reprinted with the permission of S&P.
[line chart]
S&P 500 Index Values - December 1984 to February 2005
S&P 500
Index
Date Value
Dec-84 167.24
Jan-85 179.63
Feb-85 181.18
Mar-85 180.66
Apr-85 179.83
May-85 189.55
Jun-85 191.85
Jul-85 190.92
Aug-85 188.63
Sep-85 182.08
Oct-85 189.82
Nov-85 202.17
Dec-85 211.28
Jan-86 211.78
Feb-86 226.92
Mar-86 238.90
Apr-86 235.52
May-86 247.35
Jun-86 250.84
Jul-86 236.12
Aug-86 252.93
Sep-86 231.32
Oct-86 243.98
Nov-86 249.22
Dec-86 242.17
Jan-87 274.08
Feb-87 284.20
Mar-87 291.70
Apr-87 288.36
May-87 290.10
Jun-87 304.00
Jul-87 318.66
Aug-87 329.80
Sep-87 321.83
Oct-87 251.79
Nov-87 230.30
Dec-87 247.08
Jan-88 257.07
Feb-88 267.82
Mar-88 258.89
Apr-88 261.33
May-88 262.16
Jun-88 273.50
Jul-88 272.02
Aug-88 261.52
Sep-88 271.91
Oct-88 278.97
Nov-88 273.70
Dec-88 277.72
Jan-89 297.47
Feb-89 288.86
Mar-89 294.87
Apr-89 309.64
May-89 320.52
Jun-89 317.98
Jul-89 346.08
Aug-89 351.45
Sep-89 349.15
Oct-89 340.36
Nov-89 345.99
Dec-89 353.40
Jan-90 329.08
Feb-90 331.89
Mar-90 339.94
Apr-90 330.80
May-90 361.23
Jun-90 358.02
Jul-90 356.15
Aug-90 322.56
Sep-90 306.05
Oct-90 304.00
Nov-90 322.22
Dec-90 330.22
Jan-91 343.93
Feb-91 367.07
Mar-91 375.22
Apr-91 375.35
May-91 389.83
Jun-91 371.16
Jul-91 387.81
Aug-91 395.43
Sep-91 387.86
Oct-91 392.46
Nov-91 375.22
Dec-91 417.09
Jan-92 408.79
Feb-92 412.70
Mar-92 403.69
Apr-92 414.95
May-92 415.35
Jun-92 408.14
Jul-92 424.21
Aug-92 414.03
Sep-92 417.80
Oct-92 418.67
Nov-92 431.35
Dec-92 435.71
Jan-93 438.78
Feb-93 443.38
Mar-93 451.67
Apr-93 440.19
May-93 450.21
Jun-93 450.53
Jul-93 448.13
Aug-93 463.56
Sep-93 458.93
Oct-93 467.83
Nov-93 461.79
Dec-93 466.50
Jan-94 481.61
Feb-94 467.14
Mar-94 445.77
Apr-94 450.91
May-94 456.51
Jun-94 444.27
Jul-94 458.25
Aug-94 475.50
Sep-94 462.71
Oct-94 472.35
Nov-94 453.69
Dec-94 459.27
Jan-95 470.42
Feb-95 487.39
Mar-95 500.71
Apr-95 514.71
May-95 533.41
Jun-95 544.75
Jul-95 562.06
Aug-95 561.88
Sep-95 584.41
Oct-95 581.50
Nov-95 605.37
Dec-95 615.93
Jan-96 636.02
Feb-96 640.44
Mar-96 645.50
Apr-96 654.18
May-96 669.14
Jun-96 670.63
Jul-96 639.95
Aug-96 651.99
Sep-96 687.33
Oct-96 705.27
Nov-96 757.02
Dec-96 740.74
Jan-97 786.16
Feb-97 790.82
Mar-97 757.41
Apr-97 801.34
May-97 848.28
Jun-97 885.76
Jul-97 954.31
Aug-97 899.48
Sep-97 947.28
Oct-97 914.62
Nov-97 955.40
Dec-97 970.43
Jan-98 980.28
Feb-98 1049.34
Mar-98 1101.76
Apr-98 1111.77
May-98 1090.82
Jun-98 1133.84
Jul-98 1120.73
Aug-98 957.68
Sep-98 1017.07
Oct-98 1098.69
Nov-98 1163.74
Dec-98 1230.59
Jan-99 1279.28
Feb-99 1238.33
Mar-99 1286.39
Apr-99 1335.18
May-99 1301.85
Jun-99 1371.65
Jul-99 1328.71
Aug-99 1320.35
Sep-99 1282.72
Oct-99 1363.17
Nov-99 1388.95
Dec-99 1469.25
Jan-00 1394.46
Feb-00 1366.41
Mar-00 1507.78
Apr-00 1452.43
May-00 1420.65
Jun-00 1454.6
Jul-00 1430.84
Aug-00 1517.68
Sep-00 1436.48
Oct-00 1429.4
Nov-00 1314.95
Dec-00 1320.28
Jan-01 1366.01
Feb-01 1239.94
Mar-01 1160.34
Apr-01 1249.48
May-01 1255.82
Jun-01 1224.38
Jul-01 1211.23
Aug-01 1133.58
Sep-01 1040.94
Oct-01 1059.78
Nov-01 1139.45
Dec-01 1148.08
Jan-02 1130.2
Feb-02 1106.74
Mar-02 1147.39
Apr-02 1076.92
May-02 1067.14
Jun-02 989.82
Jul-02 911.62
Aug-02 916.07
Sep-02 815.28
Oct-02 885.76
Nov-02 936.31
Dec-02 879.82
Jan-03 855.7
Feb-03 841.15
Mar-03 848.18
Apr-03 916.92
May-03 963.59
Jun-03 974.51
Jul-03 990.31
Aug-03 1008.01
Sep-03 995.97
Oct-03 1050.71
Nov-03 1058.2
Dec-03 1111.92
Jan-04 1131.13
Feb-04 1144.94
Mar-04 1126.21
Apr-04 1107.3
May-04 1120.68
Jun-04 1140.84
Jul-04 1101.72
Aug-04 1104.24
Sep-04 1114.58
Oct-04 1130.2
Nov-04 1173.82
Dec-04 1211.92
Jan-05 1181.27
Feb-05 1203.6
S&P 500 Index Average Annual Return
Beginning date Dec. 31, Period held in years Average annual return
1994 10 10.19%
1999 5 -3.78%
2003 1 8.99%
The next chart illustrates, on a moving 52-week basis, the price return of the
S&P 500 Index measured for every 52-week period beginning with the period ended
Dec. 31, 1985. The price return is the percentage return for each period using
month-end closing prices of the S&P 500 Index. Dividends and other distributions
on the securities comprising the S&P 500 Index are not included in calculating
the price return.
[line chart]
S&P 500 Index - December 1985 to February 2005
52-Week Moving Price Return
Date Change
Dec-85 26.33%
Jan-86 17.90%
Feb-86 25.25%
Mar-86 32.24%
Apr-86 30.97%
May-86 30.49%
Jun-86 30.75%
Jul-86 23.67%
Aug-86 34.09%
Sep-86 27.04%
Oct-86 28.53%
Nov-86 23.27%
Dec-86 14.62%
Jan-87 29.42%
Feb-87 25.24%
Mar-87 22.10%
Apr-87 22.44%
May-87 17.28%
Jun-87 21.19%
Jul-87 34.96%
Aug-87 30.39%
Sep-87 39.13%
Oct-87 3.20%
Nov-87 -7.59%
Dec-87 2.03%
Jan-88 -6.21%
Feb-88 -5.76%
Mar-88 -11.25%
Apr-88 -9.37%
May-88 -9.63%
Jun-88 -10.03%
Jul-88 -14.64%
Aug-88 -20.70%
Sep-88 -15.51%
Oct-88 10.79%
Nov-88 18.84%
Dec-88 12.40%
Jan-89 15.72%
Feb-89 7.86%
Mar-89 13.90%
Apr-89 18.49%
May-89 22.26%
Jun-89 16.26%
Jul-89 27.23%
Aug-89 34.39%
Sep-89 28.41%
Oct-89 22.01%
Nov-89 26.41%
Dec-89 27.25%
Jan-90 10.63%
Feb-90 14.90%
Mar-90 15.28%
Apr-90 6.83%
May-90 12.70%
Jun-90 12.59%
Jul-90 2.91%
Aug-90 -8.22%
Sep-90 -12.34%
Oct-90 -10.68%
Nov-90 -6.87%
Dec-90 -6.56%
Jan-91 4.51%
Feb-91 10.60%
Mar-91 10.38%
Apr-91 13.47%
May-91 7.92%
Jun-91 3.67%
Jul-91 8.89%
Aug-91 22.59%
Sep-91 26.73%
Oct-91 29.10%
Nov-91 16.45%
Dec-91 26.31%
Jan-92 18.86%
Feb-92 12.43%
Mar-92 7.59%
Apr-92 10.55%
May-92 6.55%
Jun-92 9.96%
Jul-92 9.39%
Aug-92 4.70%
Sep-92 7.72%
Oct-92 6.68%
Nov-92 14.96%
Dec-92 4.46%
Jan-93 7.34%
Feb-93 7.43%
Mar-93 11.89%
Apr-93 6.08%
May-93 8.39%
Jun-93 10.39%
Jul-93 5.64%
Aug-93 11.96%
Sep-93 9.84%
Oct-93 11.74%
Nov-93 7.06%
Dec-93 7.07%
Jan-94 9.76%
Feb-94 5.36%
Mar-94 -1.31%
Apr-94 2.44%
May-94 1.40%
Jun-94 -1.39%
Jul-94 2.26%
Aug-94 2.58%
Sep-94 0.82%
Oct-94 0.97%
Nov-94 -1.75%
Dec-94 -1.55%
Jan-95 -2.32%
Feb-95 4.33%
Mar-95 12.32%
Apr-95 14.15%
May-95 16.85%
Jun-95 22.62%
Jul-95 22.65%
Aug-95 18.17%
Sep-95 26.30%
Oct-95 23.11%
Nov-95 33.43%
Dec-95 34.11%
Jan-96 35.20%
Feb-96 31.40%
Mar-96 28.92%
Apr-96 27.10%
May-96 25.45%
Jun-96 23.11%
Jul-96 13.86%
Aug-96 16.04%
Sep-96 17.61%
Oct-96 21.28%
Nov-96 25.05%
Dec-96 20.26%
Jan-97 23.61%
Feb-97 23.48%
Mar-97 17.34%
Apr-97 22.50%
May-97 26.77%
Jun-97 32.08%
Jul-97 49.12%
Aug-97 37.96%
Sep-97 37.82%
Oct-97 29.68%
Nov-97 26.21%
Dec-97 31.01%
Jan-98 24.69%
Feb-98 32.69%
Mar-98 45.46%
Apr-98 38.74%
May-98 28.59%
Jun-98 28.01%
Jul-98 17.44%
Aug-98 6.47%
Sep-98 7.37%
Oct-98 20.13%
Nov-98 21.81%
Dec-98 26.81%
Jan-99 30.50%
Feb-99 18.01%
Mar-99 16.76%
Apr-99 20.09%
May-99 19.35%
Jun-99 20.97%
Jul-99 18.56%
Aug-99 37.87%
Sep-99 26.12%
Oct-99 24.07%
Nov-99 19.35%
Dec-99 19.39%
Jan-00 9.00%
Feb-00 10.34%
Mar-00 17.21%
Apr-00 8.78%
May-00 9.13%
Jun-00 6.05%
Jul-00 7.69%
Aug-00 14.95%
Sep-00 11.99%
Oct-00 4.86%
Nov-00 -5.33%
Dec-00 -10.14%
Jan-01 -2.04%
Feb-01 -9.26%
Mar-01 -23.04%
Apr-01 -13.97%
May-01 -11.60%
Jun-01 -15.83%
Jul-01 -15.35%
Aug-01 -25.31%
Sep-01 -27.54%
Oct-01 -25.86%
Nov-01 -13.35%
Dec-01 -13.04%
Jan-02 -17.26%
Feb-02 -10.74%
Mar-02 -1.12%
Apr-02 -13.81%
May-02 -15.02%
Jun-02 -19.16%
Jul-02 -24.74%
Aug-02 -19.19%
Sep-02 -21.68%
Oct-02 -16.42%
Nov-02 -17.83%
Dec-02 -23.37%
Jan-03 -24.29%
Feb-03 -24.00%
Mar-03 -26.08%
Apr-03 -14.86%
May-03 -9.70%
Jun-03 -1.55%
Jul-03 8.63%
Aug-03 10.04%
Sep-03 22.16%
Oct-03 18.62%
Nov-03 13.02%
Dec-03 26.38%
Jan-04 32.19%
Feb-04 36.12%
Mar-04 32.78%
Apr-04 20.76%
May-04 16.30%
Jun-04 17.07%
Jul-04 11.25%
Aug-04 9.55%
Sep-04 11.91%
Oct-04 7.57%
Nov-04 10.93%
Dec-04 8.99%
Jan-05 4.43%
Feb-05 4.95%
- --------------------------------------------------------------------------------
50p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
Using the same dates and data on price returns described above, the next graph
expands on the information in the preceding chart by illustrating the number of
weeks when the 52-week price return was in the range specified below under each
column. For example, the most common 52-week return during this time period was
in the 10% range.
(bar graph)
S&P 500 Index - December 1985 to February 2005
Distribution of 52-Week Moving Price Returns
Occurrences
-15 20
-10 13
-5 11
0 8
5 15
10 28
15 26
20 23
25 24
29.9 26
>=30 25
The last chart illustrates, on a moving weekly basis, the actual 52-week return
of the Stock Market Certificate at full and partial participation compared to
the price return of the S&P 500 Index.
[line & area chart]
Actual 52-Week Return - 12/6/94 to 2/22/05
Stock Market
Stock Market Certificate
Certificate 25%
Market 100% Participation
Date Index Participation + Minimum Rate
12/06/94 -2.78% 0.00% 2.50%
12/13/94 -2.79% 0.00% 2.50%
12/20/94 -1.76% 0.00% 2.50%
12/27/94 -1.79% 0.00% 2.50%
01/03/95 -1.66% 0.00% 2.50%
01/10/95 -2.62% 0.00% 2.50%
01/17/95 -0.88% 0.00% 2.50%
01/24/95 -1.07% 0.00% 2.50%
01/31/95 -1.91% 0.00% 2.50%
02/07/95 2.07% 2.07% 3.01%
02/14/95 2.12% 2.12% 3.03%
02/21/95 2.38% 2.38% 3.09%
02/28/95 4.94% 4.94% 3.73%
03/07/95 3.48% 3.48% 3.37%
03/14/95 5.54% 5.54% 3.88%
03/21/95 5.60% 5.60% 3.90%
03/28/95 11.36% 10.00% 5.34%
04/04/95 12.70% 10.00% 5.67%
04/11/95 12.94% 10.00% 5.73%
04/18/95 14.19% 10.00% 6.04%
04/25/95 13.34% 10.00% 5.83%
05/02/95 13.64% 10.00% 5.91%
05/09/95 17.38% 10.00% 6.84%
05/16/95 17.54% 10.00% 6.88%
05/23/95 16.22% 10.00% 6.55%
05/30/95 14.69% 10.00% 6.17%
06/06/95 16.87% 10.00% 6.71%
06/13/95 15.93% 10.00% 6.48%
06/20/95 20.74% 10.00% 7.68%
06/27/95 21.60% 10.00% 7.90%
07/04/95 22.56% 10.00% 8.14%
07/11/95 23.84% 10.00% 8.46%
07/18/95 23.04% 10.00% 8.26%
07/25/95 23.76% 10.00% 8.44%
08/01/95 21.51% 10.00% 7.87%
08/08/95 22.37% 10.00% 8.09%
08/15/95 20.11% 10.00% 7.52%
08/22/95 20.45% 10.00% 7.61%
08/29/95 17.62% 10.00% 6.90%
09/05/95 20.62% 10.00% 7.65%
09/12/95 23.31% 10.00% 8.32%
09/19/95 26.07% 10.00% 9.01%
09/26/95 25.83% 10.00% 8.95%
10/03/95 28.10% 10.00% 9.52%
10/10/95 23.98% 10.00% 8.49%
10/17/95 25.47% 10.00% 8.86%
10/24/95 27.08% 10.00% 9.27%
10/31/95 24.14% 10.00% 8.53%
11/07/95 25.91% 10.00% 9.22%
11/14/95 26.72% 10.00% 9.43%
11/21/95 33.36% 10.00% 10.00%
11/28/95 33.23% 10.00% 10.00%
12/05/95 36.25% 10.00% 10.00%
12/12/95 37.46% 10.00% 10.00%
12/19/95 33.87% 10.00% 10.00%
12/26/95 32.82% 10.00% 10.00%
01/02/96 35.20% 10.00% 10.00%
01/09/96 32.00% 10.00% 10.00%
01/16/96 29.44% 10.00% 10.00%
01/23/96 31.53% 10.00% 10.00%
01/30/96 33.95% 10.00% 10.00%
02/06/96 34.42% 10.00% 10.00%
02/13/96 36.88% 10.00% 10.00%
02/20/96 32.71% 10.00% 10.00%
02/27/96 32.79% 10.00% 10.00%
03/05/96 36.02% 10.00% 10.00%
03/12/96 29.25% 10.00% 10.00%
03/19/96 31.63% 10.00% 10.00%
03/26/96 29.58% 10.00% 10.00%
04/02/96 29.68% 10.00% 10.00%
04/09/96 27.03% 10.00% 9.50%
04/16/96 27.63% 10.00% 9.65%
04/23/96 27.22% 10.00% 9.55%
04/30/96 27.05% 12.00% 10.26%
05/07/96 21.90% 12.00% 8.97%
05/14/96 26.01% 12.00% 10.00%
05/21/96 27.27% 12.00% 10.31%
05/28/96 28.39% 12.00% 10.59%
06/04/96 25.58% 12.00% 9.89%
06/11/96 25.16% 12.00% 9.79%
06/18/96 21.48% 12.00% 8.87%
06/25/96 23.23% 12.00% 9.30%
07/02/96 23.12% 12.00% 9.28%
07/09/96 18.01% 12.00% 8.00%
07/16/96 12.52% 12.00% 6.63%
07/23/96 11.72% 11.72% 6.43%
07/30/96 13.51% 12.00% 6.87%
08/06/96 18.19% 12.00% 8.04%
08/13/96 18.19% 12.00% 8.04%
08/20/96 18.98% 12.00% 8.24%
08/27/96 18.99% 12.00% 8.24%
09/03/96 15.03% 12.00% 7.25%
09/10/96 15.14% 12.00% 7.28%
09/17/96 16.90% 12.00% 7.72%
09/24/96 17.92% 12.00% 7.98%
10/01/96 18.32% 12.00% 8.08%
10/08/96 21.31% 12.00% 8.82%
10/15/96 19.73% 12.00% 8.43%
10/22/96 20.46% 12.00% 8.61%
10/29/96 20.63% 12.00% 8.65%
11/05/96 21.80% 12.00% 8.95%
11/12/96 23.80% 12.00% 9.45%
11/19/96 23.64% 12.00% 9.41%
11/26/96 24.65% 12.00% 9.66%
12/03/96 21.14% 12.00% 8.78%
12/10/96 20.80% 12.00% 8.70%
12/17/96 18.64% 12.00% 8.16%
12/24/96 22.25% 12.00% 9.06%
12/31/96 19.33% 12.00% 8.33%
01/07/97 23.59% 12.00% 9.39%
01/14/97 26.36% 12.00% 10.09%
01/21/97 27.73% 10.00% 10.00%
01/28/97 21.40% 10.00% 8.60%
02/04/97 22.11% 10.00% 8.77%
02/11/97 19.53% 10.00% 8.13%
02/18/97 27.41% 10.00% 10.00%
02/25/97 25.46% 10.00% 9.61%
03/04/97 20.60% 10.00% 8.40%
03/11/97 27.35% 10.00% 10.00%
03/18/97 21.17% 10.00% 8.54%
03/25/97 20.84% 10.00% 8.46%
04/01/97 15.92% 10.00% 7.23%
04/08/97 19.29% 10.00% 8.07%
04/15/97 17.01% 10.00% 7.50%
04/22/97 18.87% 10.00% 7.96%
04/29/97 21.38% 10.00% 8.59%
05/06/97 29.69% 10.00% 10.00%
05/13/97 25.16% 10.00% 9.54%
05/20/97 25.10% 10.00% 9.52%
05/27/97 26.39% 10.00% 9.84%
06/03/97 25.70% 10.00% 9.67%
06/10/97 28.95% 10.00% 10.00%
06/17/97 35.09% 10.00% 10.00%
06/24/97 34.08% 10.00% 10.00%
07/01/97 32.27% 10.00% 10.00%
07/08/97 40.32% 10.00% 10.00%
07/15/97 47.32% 10.00% 10.00%
07/22/97 48.97% 10.00% 10.00%
07/29/97 48.33% 10.00% 10.00%
08/05/97 43.78% 10.00% 10.00%
08/12/97 40.34% 10.00% 10.00%
08/19/97 39.09% 10.00% 10.00%
08/26/97 37.00% 10.00% 10.00%
09/02/97 41.67% 10.00% 10.00%
09/09/97 40.64% 10.00% 10.00%
09/16/97 38.46% 10.00% 10.00%
09/23/97 38.84% 10.00% 10.00%
09/30/97 37.47% 10.00% 10.00%
10/07/97 40.31% 10.00% 10.00%
10/14/97 38.10% 10.00% 10.00%
10/21/97 37.60% 10.00% 10.00%
10/28/97 31.41% 10.00% 10.00%
11/04/97 31.73% 10.00% 10.00%
11/11/97 26.62% 10.00% 9.90%
11/18/97 26.41% 10.00% 9.85%
11/25/97 25.77% 10.00% 9.69%
12/02/97 29.85% 10.00% 10.00%
12/09/97 30.53% 10.00% 10.00%
12/16/97 33.33% 10.00% 10.00%
12/23/97 25.04% 10.00% 9.51%
12/30/97 31.06% 10.00% 10.00%
01/06/98 28.32% 10.00% 10.00%
01/13/98 23.83% 10.00% 9.20%
01/20/98 25.02% 10.00% 9.50%
01/27/98 26.66% 10.00% 9.91%
02/03/98 27.45% 10.00% 10.00%
02/10/98 29.06% 10.00% 10.00%
02/17/98 25.29% 10.00% 9.57%
02/24/98 26.90% 10.00% 9.97%
03/03/98 33.01% 10.00% 10.00%
03/10/98 31.17% 10.00% 10.00%
03/17/98 36.82% 10.00% 10.00%
03/24/98 40.12% 10.00% 10.00%
03/31/98 45.03% 10.00% 10.00%
04/07/98 44.82% 10.00% 10.00%
04/14/98 47.83% 10.00% 10.00%
04/21/98 45.41% 10.00% 10.00%
04/28/98 36.65% 10.00% 10.00%
05/05/98 34.77% 10.00% 10.00%
05/12/98 33.92% 10.00% 10.00%
05/19/98 31.82% 10.00% 10.00%
05/26/98 28.75% 10.00% 9.93%
06/02/98 29.30% 10.00% 10.00%
06/09/98 29.25% 10.00% 10.00%
06/16/98 21.58% 10.00% 8.14%
06/23/98 24.89% 10.00% 8.97%
06/30/98 27.25% 10.00% 9.56%
07/07/98 25.67% 10.00% 9.16%
07/14/98 27.20% 10.00% 9.55%
07/21/98 24.75% 10.00% 8.93%
07/28/98 19.93% 10.00% 7.73%
08/04/98 12.57% 10.00% 5.89%
08/11/98 15.37% 10.00% 6.59%
08/18/98 18.91% 10.00% 7.47%
08/25/98 19.69% 10.00% 7.67%
09/01/98 7.18% 7.18% 4.54%
09/08/98 9.62% 9.62% 5.15%
09/15/98 9.72% 9.72% 5.18%
09/22/98 8.16% 8.16% 4.79%
09/29/98 10.74% 10.00% 5.43%
10/06/98 0.15% 0.15% 2.78%
10/13/98 2.53% 2.53% 3.13%
10/20/98 9.42% 9.42% 4.85%
10/27/98 15.56% 10.00% 6.39%
11/03/98 18.08% 10.00% 7.02%
11/10/98 22.13% 10.00% 8.03%
11/17/98 21.43% 10.00% 7.85%
11/24/98 24.41% 10.00% 8.60%
12/01/98 20.95% 10.00% 7.73%
12/08/98 21.07% 10.00% 7.76%
12/15/98 20.11% 10.00% 7.52%
12/22/98 28.15% 10.00% 9.53%
12/29/98 27.90% 10.00% 9.47%
01/05/99 28.78% 10.00% 9.69%
01/12/99 30.18% 10.00% 10.00%
01/19/99 27.93% 10.00% 9.48%
01/26/99 29.22% 10.00% 9.80%
02/02/99 25.44% 10.00% 8.86%
02/09/99 19.34% 10.00% 7.33%
02/16/99 21.42% 10.00% 7.85%
02/23/99 23.34% 10.00% 8.33%
03/02/99 16.49% 10.00% 6.62%
03/09/99 20.25% 10.00% 7.56%
03/16/99 20.90% 10.00% 7.72%
03/23/99 14.15% 10.00% 6.03%
03/30/99 18.06% 10.00% 7.01%
04/06/99 18.77% 10.00% 7.19%
04/13/99 20.97% 10.00% 7.74%
04/20/99 15.96% 10.00% 6.49%
04/27/99 25.59% 10.00% 8.89%
05/04/99 19.39% 10.00% 7.34%
05/11/99 21.49% 10.00% 7.87%
05/18/99 20.17% 10.00% 7.54%
05/25/99 17.40% 10.00% 6.85%
06/01/99 18.39% 10.00% 7.09%
06/08/99 17.79% 10.00% 6.94%
06/15/99 19.64% 10.00% 7.41%
06/22/99 19.32% 10.00% 7.33%
06/29/99 19.18% 10.00% 7.29%
07/06/99 20.21% 10.00% 7.55%
07/13/99 18.33% 10.00% 7.08%
07/20/99 18.19% 10.00% 7.04%
07/27/99 20.59% 10.00% 7.64%
08/03/99 23.31% 10.00% 8.32%
08/10/99 19.87% 10.00% 7.46%
08/17/99 22.06% 10.00% 8.01%
08/24/99 24.76% 10.00% 8.69%
08/31/99 32.79% 10.00% 10.00%
09/07/99 31.94% 10.00% 10.00%
09/14/99 28.77% 10.00% 9.69%
09/21/99 26.99% 10.00% 9.24%
09/28/99 22.22% 10.00% 8.05%
10/05/99 32.17% 10.00% 10.00%
10/12/99 31.98% 10.00% 10.00%
10/19/99 18.55% 10.00% 7.13%
10/26/99 20.32% 10.00% 7.58%
11/02/99 21.32% 10.00% 7.83%
11/09/99 21.01% 10.00% 7.75%
11/16/99 24.63% 10.00% 8.65%
11/23/99 18.73% 10.00% 7.18%
11/30/99 18.17% 10.00% 7.04%
12/07/99 19.28% 10.00% 7.32%
12/14/99 20.68% 10.00% 7.67%
12/21/99 19.09% 9.00% 7.27%
12/28/99 17.38% 9.00% 6.84%
01/04/00 12.42% 9.00% 5.60%
01/11/00 16.05% 9.00% 6.51%
01/18/00 16.22% 9.00% 6.55%
01/25/00 12.59% 9.00% 5.64%
02/01/00 11.66% 9.00% 5.41%
02/08/00 18.52% 9.00% 7.13%
02/15/00 12.89% 9.00% 5.72%
02/22/00 6.37% 6.37% 4.09%
02/29/00 11.49% 9.00% 5.37%
03/07/00 5.92% 5.92% 3.98%
03/14/00 4.04% 4.04% 3.51%
03/21/00 18.35% 9.00% 7.08%
03/28/00 15.91% 9.00% 6.47%
04/04/00 13.41% 9.00% 5.85%
04/11/00 11.17% 9.00% 5.29%
04/18/00 10.35% 9.00% 5.08%
04/25/00 8.42% 8.42% 4.60%
05/02/00 8.57% 8.57% 4.64%
05/09/00 4.17% 4.17% 3.54%
05/16/00 9.95% 9.00% 4.98%
05/23/00 6.96% 6.96% 4.24%
05/30/00 9.89% 9.00% 4.97%
06/06/00 10.66% 9.00% 5.16%
06/13/00 12.93% 9.00% 5.73%
06/20/00 10.51% 9.00% 5.12%
06/27/00 7.33% 7.33% 4.33%
07/04/00 5.84% 5.84% 3.96%
07/11/00 6.26% 6.26% 4.06%
07/18/00 8.46% 8.46% 4.61%
07/25/00 8.18% 8.18% 4.54%
08/01/00 8.76% 8.76% 4.69%
08/08/00 15.71% 9.00% 6.42%
08/15/00 10.43% 9.00% 5.10%
08/22/00 9.87% 9.00% 4.96%
08/29/00 14.35% 9.00% 6.08%
09/05/00 11.59% 9.00% 5.39%
09/12/00 10.90% 9.00% 5.22%
09/19/00 11.64% 9.00% 5.41%
09/26/00 11.31% 9.00% 5.32%
10/03/00 9.58% 9.00% 4.89%
10/10/00 5.55% 5.55% 3.88%
10/17/00 7.02% 7.02% 4.25%
10/24/00 9.06% 9.00% 4.76%
10/31/00 6.05% 6.05% 4.01%
11/07/00 4.87% 4.87% 3.71%
11/14/00 -2.61% 0.00% 2.50%
11/21/00 -4.08% 0.00% 2.50%
11/28/00 -3.80% 0.00% 2.50%
12/05/00 -2.31% 0.00% 2.50%
12/12/00 -2.29% 0.00% 2.50%
12/19/00 -8.91% 0.00% 2.50%
12/26/00 -9.77% 0.00% 2.50%
01/02/01 -8.29% 0.00% 2.50%
01/09/01 -9.57% 0.00% 2.50%
01/16/01 -8.83% 0.00% 2.50%
01/23/01 -3.52% 0.00% 2.50%
01/30/01 -2.51% 0.00% 2.50%
02/06/01 -6.18% 0.00% 2.50%
02/13/01 -5.93% 0.00% 2.50%
02/20/01 -5.41% 0.00% 2.50%
02/27/01 -7.93% 0.00% 2.50%
03/06/01 -7.51% 0.00% 2.50%
03/13/01 -11.88% 0.00% 2.50%
03/20/01 -23.51% 0.00% 2.50%
03/27/01 -21.59% 0.00% 2.50%
04/03/01 -25.97% 0.00% 2.50%
04/10/01 -22.13% 0.00% 2.50%
04/17/01 -17.32% 0.00% 2.50%
04/24/01 -18.14% 0.00% 2.50%
05/01/01 -12.43% 0.00% 2.50%
05/08/01 -10.68% 0.00% 2.50%
05/15/01 -14.77% 0.00% 2.50%
05/22/01 -4.69% 0.00% 2.50%
05/29/01 -10.86% 0.00% 2.50%
06/05/01 -11.95% 0.00% 2.50%
06/12/01 -14.53% 0.00% 2.50%
06/19/01 -17.86% 0.00% 2.75%
06/26/01 -16.11% 0.00% 2.75%
07/03/01 -15.98% 0.00% 2.75%
07/10/01 -20.21% 0.00% 2.75%
07/17/01 -18.69% 0.00% 2.75%
07/24/01 -20.53% 0.00% 2.75%
07/31/01 -15.77% 0.00% 2.75%
08/07/01 -19.70% 0.00% 2.75%
08/14/01 -20.05% 0.00% 2.75%
08/21/01 -22.75% 0.00% 2.75%
08/28/01 -23.07% 0.00% 2.75%
09/04/01 -24.82% 0.00% 2.75%
09/11/01 -26.27% 0.00% 2.75%
09/18/01 -29.25% 0.00% 2.75%
09/25/01 -29.08% 0.00% 2.75%
10/02/01 -26.28% 0.00% 2.75%
10/09/01 -23.75% 0.00% 2.75%
10/16/01 -18.69% 0.00% 2.75%
10/23/01 -22.41% 0.00% 2.75%
10/30/01 -25.85% 0.00% 2.75%
11/06/01 -21.86% 0.00% 2.75%
11/13/01 -17.63% 0.00% 2.75%
11/20/01 -15.19% 0.00% 2.75%
11/27/01 -13.96% 0.00% 2.75%
12/04/01 -16.83% 0.00% 2.75%
12/11/01 -17.09% 0.00% 2.75%
12/18/01 -12.46% 0.00% 2.75%
12/25/01 -12.96% 0.00% 2.75%
01/01/02 -10.53% 0.00% 2.75%
01/08/02 -10.81% 0.00% 2.75%
01/15/02 -13.60% 0.00% 2.75%
01/22/02 -17.72% 0.00% 2.75%
01/29/02 -19.87% 0.00% 2.75%
02/05/02 -19.39% 0.00% 2.50%
02/12/02 -16.02% 0.00% 2.50%
02/19/02 -15.29% 0.00% 2.50%
02/26/02 -11.80% 0.00% 2.50%
03/05/02 -8.58% 0.00% 2.50%
03/12/02 -2.67% 0.00% 2.50%
03/19/02 2.42% 2.42% 3.10%
03/26/02 -3.69% 0.00% 2.50%
04/02/02 2.73% 2.73% 3.18%
04/09/02 -4.32% 0.00% 2.50%
04/16/02 -5.32% 0.00% 2.50%
04/23/02 -8.97% 0.00% 2.50%
04/30/02 -14.96% 0.00% 2.50%
05/07/02 -16.78% 0.00% 2.50%
05/14/02 -12.17% 0.00% 2.50%
05/21/02 -17.52% 0.00% 2.50%
05/28/02 -15.25% 0.00% 2.50%
06/04/02 -18.92% 0.00% 2.50%
06/11/02 -19.28% 0.00% 2.50%
06/18/02 -14.47% 0.00% 2.50%
06/25/02 -19.77% 0.00% 2.50%
07/02/02 -23.19% 0.00% 2.50%
07/09/02 -19.35% 0.00% 2.50%
07/16/02 -25.81% 0.00% 2.50%
07/23/02 -31.91% 0.00% 2.50%
07/30/02 -25.46% 0.00% 2.50%
08/06/02 -27.80% 0.00% 2.50%
08/13/02 -25.49% 0.00% 2.50%
08/20/02 -18.99% 0.00% 2.50%
08/27/02 -19.51% 0.00% 2.50%
09/03/02 -22.50% 0.00% 2.50%
09/10/02 -16.74% 0.00% 2.50%
09/17/02 -15.41% 0.00% 2.50%
09/24/02 -19.06% 0.00% 2.50%
10/01/02 -19.34% 0.00% 2.50%
10/08/02 -24.43% 0.00% 2.50%
10/15/02 -19.70% 0.00% 2.50%
10/22/02 -17.94% 0.00% 2.50%
10/29/02 -16.76% 0.00% 2.50%
11/05/02 -18.18% 0.00% 2.00%
11/12/02 -22.48% 0.00% 2.00%
11/19/02 -21.52% 0.00% 2.00%
11/26/02 -20.54% 0.00% 1.00%
12/03/02 -19.57% 0.00% 1.00%
12/10/02 -20.43% 0.00% 1.00%
12/17/02 -20.99% 0.00% 1.00%
12/24/02 -22.03% 0.00% 1.00%
12/31/02 -23.36% 0.00% 1.00%
01/07/03 -20.44% 0.00% 1.00%
01/14/03 -18.71% 0.00% 1.00%
01/21/03 -20.69% 0.00% 1.00%
01/28/03 -21.99% 0.00% 1.00%
02/04/03 -22.18% 0.00% 1.00%
02/11/03 -25.12% 0.00% 1.00%
02/18/03 -21.43% 0.00% 1.00%
02/25/03 -24.41% 0.00% 1.00%
03/04/03 -28.28% 0.00% 1.00%
03/11/03 -31.30% 0.00% 1.00%
03/18/03 -25.96% 0.00% 1.00%
03/25/03 -23.16% 0.00% 1.00%
04/01/03 -24.48% 0.00% 1.00%
04/08/03 -21.42% 0.00% 1.00%
04/15/03 -21.05% 0.00% 1.00%
04/22/03 -17.22% 0.00% 1.00%
04/29/03 -14.77% 0.00% 1.00%
05/06/03 -10.96% 0.00% 1.00%
05/13/03 -14.12% 0.00% 1.00%
05/20/03 -14.83% 0.00% 1.00%
05/27/03 -11.45% 0.00% 1.00%
06/03/03 -6.64% 0.00% 1.00%
06/10/03 -2.83% 0.00% 1.00%
06/17/03 -2.45% 0.00% 1.00%
06/24/03 0.74% 0.74% 1.43%
07/01/03 3.60% 3.60% 2.15%
07/08/03 5.77% 5.77% 2.69%
07/15/03 11.04% 6.00% 4.01%
07/22/03 23.86% 6.00% 6.00%
07/29/03 9.58% 6.00% 3.64%
08/05/03 12.32% 6.00% 4.33%
08/12/03 12.00% 6.00% 4.25%
08/19/03 6.92% 6.00% 2.98%
08/26/03 6.62% 6.00% 2.90%
09/02/03 16.39% 6.00% 5.34%
09/09/03 12.48% 6.00% 4.37%
09/16/03 17.83% 6.00% 5.70%
09/23/03 25.60% 6.00% 6.00%
09/30/03 17.45% 6.00% 5.61%
10/07/03 30.14% 6.00% 6.00%
10/14/03 19.08% 6.00% 6.00%
10/21/03 17.51% 5.00% 5.00%
10/28/03 18.66% 5.00% 5.00%
11/04/03 15.06% 5.00% 5.00%
11/11/03 18.53% 5.00% 5.00%
11/18/03 15.32% 5.00% 5.00%
11/25/03 15.39% 5.00% 5.00%
12/02/03 15.84% 5.00% 5.00%
12/09/03 17.21% 5.00% 5.00%
12/16/03 19.06% 5.00% 5.00%
12/23/03 22.80% 5.00% 5.00%
12/30/03 26.12% 5.00% 5.00%
01/06/04 21.75% 5.00% 5.00%
01/13/04 20.34% 5.00% 5.00%
01/20/04 28.29% 5.00% 5.00%
01/27/04 33.25% 5.00% 5.00%
02/03/04 33.93% 5.00% 5.00%
02/10/04 38.14% 5.00% 5.00%
02/17/04 35.92% 5.00% 5.00%
02/24/04 35.83% 5.00% 5.00%
03/02/04 39.79% 5.00% 5.00%
03/09/04 42.44% 5.00% 5.00%
03/16/04 28.19% 5.00% 5.00%
03/23/04 25.05% 5.00% 5.00%
03/30/04 31.27% 5.00% 5.00%
04/06/04 30.72% 5.00% 5.00%
04/13/04 26.78% 5.00% 5.00%
04/20/04 22.68% 5.00% 5.00%
04/27/04 24.00% 5.00% 5.00%
05/04/04 19.81% 5.00% 5.00%
05/11/04 16.25% 5.00% 5.00%
05/18/04 18.67% 5.00% 5.00%
05/25/04 16.98% 5.00% 5.00%
06/01/04 15.40% 5.00% 4.85%
06/08/04 15.97% 5.00% 4.99%
06/15/04 11.89% 5.00% 3.97%
06/22/04 15.35% 5.00% 4.83%
06/29/04 15.66% 5.00% 4.91%
07/06/04 10.75% 5.00% 3.68%
07/13/04 11.46% 5.00% 3.86%
07/20/04 12.20% 5.00% 4.05%
07/27/04 10.66% 5.00% 3.66%
08/03/04 13.88% 5.00% 4.47%
08/10/04 8.95% 5.00% 3.23%
08/17/04 7.91% 5.00% 2.97%
08/24/04 9.97% 5.00% 3.49%
08/31/04 8.04% 5.00% 3.01%
09/07/04 9.59% 5.00% 3.39%
09/14/04 9.61% 5.00% 3.40%
09/21/04 9.74% 5.00% 3.43%
09/28/04 11.45% 5.00% 3.86%
10/05/04 9.16% 5.00% 3.29%
10/12/04 6.89% 5.00% 2.72%
10/19/04 5.46% 5.00% 2.36%
10/26/04 6.14% 5.00% 2.53%
11/02/04 7.34% 5.00% 2.83%
11/09/04 11.22% 5.00% 3.80%
11/16/04 13.66% 5.00% 4.41%
11/23/04 11.67% 5.00% 3.91%
11/30/04 10.05% 5.00% 3.51%
12/07/04 11.02% 5.00% 3.75%
12/14/04 11.92% 5.00% 3.98%
12/21/04 9.98% 5.00% 3.49%
12/28/04 9.36% 5.00% 3.34%
01/04/05 5.72% 5.00% 2.43%
01/11/05 5.50% 5.00% 2.37%
01/18/05 5.02% 5.00% 2.25%
01/25/05 2.12% 2.12% 1.53%
02/01/05 4.69% 4.69% 2.17%
02/08/05 4.95% 4.95% 2.23%
02/15/05 4.59% 4.59% 2.14%
02/22/05 3.95% 3.95% 1.98%
The Stock Market Certificate was first available on Jan. 24, 1990. The
performance reflects the returns on the 52-week anniversary date, falling on a
Wednesday, of each of the weeks shown.
Your interest earnings are tied to the movement of the S&P 500 Index. They will
be based on any increase in this Index as measured on the beginning and ending
date of each 52-week term. Of course, if this Index is not higher on the last
day of your term than it was on the first day, your principal will be secure but
you will earn no participation interest.
- --------------------------------------------------------------------------------
51p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
How an index has performed in the past does not indicate how the stock market or
the certificate will perform in the future. There is no assurance that
certificate owners will receive interest on their accounts beyond any minimum
interest or fixed interest selected. The index could decline.
CALCULATION OF RETURN
The increase or decrease in the S&P 500 Index, as well as the actual return paid
to you, is calculated as follows:
Rate of return on S&P 500 Index
Term ending value of S&P 500 Index minus
Term beginning value of S&P 500 Index divided by
Term beginning value of S&P 500 Index equals
Rate of return on S&P 500 Index
The actual return paid to you will depend on your interest participation
selection.
For example, assume:
Term ending value of S&P 500 Index 940
Term beginning value of S&P 500 Index 900
Maximum return 5%
Minimum return 1.00%
Partial participation rate 25%
940 Term ending value of S&P 500 Index
minus 900 Term beginning value of S&P 500 Index
- --------------------------------------------------------------------------------
equals 40 Difference between beginning and ending values
40 Difference between beginning and ending values
divided by 900 Term beginning value of S&P 500 Index
- --------------------------------------------------------------------------------
equals 4.44% Percent increase -- full participation return
4.44% Percent increase or decrease
times 25% Partial participation rate
- --------------------------------------------------------------------------------
equals 1.11%
plus 1.00% Minimum interest rate
- --------------------------------------------------------------------------------
equals 2.11% Partial participation return
- --------------------------------------------------------------------------------
In both cases in the example, the return would be less than the 5% maximum.
Maximum Return and Partial Participation Minimum Rate History -- The following
table illustrates the maximum annual returns and partial participation minimum
rates that have been in effect since the Stock Market Certificate was
introduced.
Start of term Maximum annual return Partial participation minimum rate
Jan. 24, 1990 18.00% 5.00%
Feb. 5, 1992 18.00 4.00
May 13, 1992 15.00 4.00
Sept. 9, 1992 12.00 3.00
Nov. 11, 1992 10.00 2.50
Nov. 2, 1994 10.00 2.75
April 26, 1995 12.00 3.50
Jan. 17, 1996 10.00 3.25
Feb. 26, 1997 10.00 3.00
May 7, 1997 10.00 2.75
Oct. 8, 1997 10.00 2.50
Dec. 16 1998 9.00 2.50
Feb. 2, 2000 10.00 2.50
- --------------------------------------------------------------------------------
52p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
Start of term Maximum annual return Partial participation minimum rate
June 14, 2000 11.00% 2.75%
Aug. 16, 2000 10.00 2.75
Jan. 31, 2001 9.00 2.50
Sept. 5, 2001 8.00 2.50
Oct. 31, 2001 8.00 2.00
Nov. 21, 2001 6.00 1.00
June 26, 2002 6.00 1.25
Oct. 23, 2002 5.00 1.25
Feb. 19, 2003 5.00 1.00
May 12, 2004 4.00 0.75
April 27, 2005 5.00 1.00
Examples
To help you understand how this certificate works, here are some hypothetical
examples. The following are four different examples of market scenarios and how
they affect the certificate's return. Assume for all examples that:
o you purchased the certificate with a $10,000 original investment,
o the partial participation rate is 25%,
o the minimum interest rate for partial participation is 1%,
o the maximum total return for full and partial participation is 5%.
1. If the S&P 500 Index value rises
Week 1/Wed Week 52/Tues
S&P 500 S&P 500
Index 1,000 4% increase in the S&P 500 Index Index 1,040
- -----------------------------------------------------------------------------------------------------------------------------------
Full participation interest Partial participation interest and minimum interest
$10,000 Original investment $10,000 Original investment
+ 400 4% x $10,000 + 100 1.00% (Minimum interest rate) x $10,000
Participation interest + 100 25% x 4% x $10,000 Participation interest
------- -------
$10,400 Ending balance $10,200 Ending balance
(4% Total return) (2.00% Total return)
- -----------------------------------------------------------------------------------------------------------------------------------
2. If the S&P 500 Index value falls
Week 1/Wed Week 52/Tues
S&P 500 S&P 500
Index 1,000 4% decrease in the S&P 500 Index Index 960
- -----------------------------------------------------------------------------------------------------------------------------------
Full participation interest Partial participation interest and minimum interest
$10,000 Original investment $10,000 Original investment
+ 0 Participation interest + 100 1.00% (Minimum interest rate) x $10,000
------- + 0 Participation interest
$10,000 Ending balance -------
(0% Total return) $10,100 Ending balance
(1.00% Total return)
- -----------------------------------------------------------------------------------------------------------------------------------
3. If the S&P 500 Index value rises above the maximum return for full participation
Week 1/Wed Week 52/Tues
S&P 500 S&P 500
Index 1,000 10% increase in the S&P 500 Index Index 1,100
- -----------------------------------------------------------------------------------------------------------------------------------
Full participation interest Partial participation interest and minimum interest
$10,000 Original investment $10,000 Original investment
+ 500 5% x $10,000 + 100 1.00% (Minimum interest rate) x $10,000
Maximum interest + 250 25% x 10% x $10,000 Participation interest
------- -------
$10,500 Ending balance $10,350 Ending balance
(5% Total return) (3.50% Total return)
- -----------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
53p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
4. If the S&P 500 Index value rises above the maximum return for partial participation
Week 1/Wed Week 52/Tues
S&P 500 S&P 500
Index 1,000 30% increase in the S&P 500 Index Index 1,300
- -----------------------------------------------------------------------------------------------------------------------------------
Full participation interest Partial participation interest and minimum interest
$10,000 Original investment $10,000 Original investment
+ 500 5% x $10,000 + 100 1.00% (Minimum interest rate) x $10,000
Maximum interest + 400 25% x 30% = 7.5%; capped at (5%-1%) x $10,000
Participation interest
------- -------
$10,500 Ending balance $10,500 Ending balance
(5% Total return) (5% Total return)
- -----------------------------------------------------------------------------------------------------------------------------------
ABOUT THE S&P 500 INDEX
The description in this prospectus of the S&P 500 Index including its make-up,
method of calculation and changes in its components is derived from publicly
available information regarding the S&P 500 Index. AECC does not assume any
responsibility for the accuracy or completeness of such information.
The S&P 500 Index is composed of 500 common stocks, most of which are listed on
the New York Stock Exchange. The S&P 500 Index is published by S&P and is
intended to provide an indication of the pattern of common stock movement. S&P
chooses the 500 stocks to be included in the S&P 500 Index with the aim of
achieving a distribution by broad industry groupings that approximates the
distribution of these groupings in the U.S. common stock population. Changes in
the S&P 500 Index are reported daily in the financial pages of many major
newspapers. The index used for the American Express Stock Market Certificate
excludes dividends on the 500 stocks.
"Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard & Poor's 500" and
"500" are trademarks of The McGraw-Hill Companies Inc. and have been licensed
for use by AECC. The certificate is not sponsored, endorsed, sold or promoted by
S&P. S&P makes no representation or warranty, express or implied, to the owners
of the certificate or any member of the public regarding the advisability of
investing in securities generally or in the certificate particularly or the
ability of the S&P 500 Index to track general stock market performance.
S&P's only relationship to AECC is the licensing of certain trademarks and trade
names of S&P and of the S&P 500 Index, which is determined, composed and
calculated by S&P without regard to AECC or the certificate. S&P has no
obligation to take the needs of AECC or the owners of the certificate into
consideration in determining, composing or calculating the S&P 500 Index. S&P is
not responsible for and has not participated in the determination of the timing
of, prices at, or quantities of the certificate to be issued or in the
determination or calculation of the equation by which the certificate is to be
converted into cash. S&P has no obligation or liability in connection with the
administration, marketing or trading of the certificate.
S&P does not guarantee the accuracy and/or the completeness of the S&P 500 Index
or any data included therein and S&P shall have no liability for any errors,
omissions, or interruptions therein. S&P makes no warranty, express or implied,
as to the results to be obtained by AECC, owners of the certificate, or any
person or entity from the use of the S&P 500 Index or any data included therein.
S&P makes no express or implied warranties, and expressly disclaims all
warranties of merchantability or fitness for a particular purpose or use with
respect to the S&P 500 Index or any data included therein. Without limiting any
of the foregoing, in no event shall S&P have any liability for any special,
punitive, indirect, or consequential damages (including lost profits), even if
notified of the possibility of such damages.
If for any reason the S&P 500 Index were to become unavailable or not reasonably
feasible to use, AECC would use a comparable stock market index for determining
participation interest. If this were to occur, we would send you a notice by a
practical means such as correspondence (which may be electronic if you and we
have so agreed) or a quarterly account statement. The notice would indicate the
comparable index and give you the option to withdraw your principal without an
early withdrawal penalty. If you chose early withdrawal, you would lose any
interest accrued during the term.
- --------------------------------------------------------------------------------
54p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
OPPORTUNITIES AT THE END OF A TERM
Grace period: When your certificate term ends, you have 14 days before a new
term automatically begins. During this 14-day grace period you can:
o change your interest selection,
o add money to your certificate,
o change your term start date,
o withdraw part or all of your money without a withdrawal penalty or loss of
interest,
o or receive your interest in cash.
By starting your new term early and waiving the 14-day grace period, you are
choosing to start your next term without knowing the ending value of your
current term.
Changing fixed participation selection: The grace period does not apply if you
made the change from fixed interest back to participation interest during a term
as discussed in "Fixed interest" under "Interest" above. Instead, your new
52-week term will begin on the Wednesday following our receipt of your notice of
your new interest selection.
New term: If you do not make changes, your certificate will continue with your
current selections when the new term begins 14 days later. You will earn interim
interest during this 14-day grace period. If you do not want to wait 14 days
before starting your next market participation term, you must phone or send
written instructions before your current term ends. You can tell us to start
your next term on any Wednesday that is during the grace period and immediately
following the date on which we receive your notice. Your notice may also tell us
to change your interest selection, or add to your certificate. You cannot
withdraw part of your money and skip the 14-day grace period. If you make a
withdrawal, a seven- or 14-day grace period is required. The notification that
we send you at the end of the term cannot be sent before the term ends because
indexing information and interest (if any) are included in the notice and are
not known until the term ends. Any additional payments received during the
current term will be applied at the end of the current term.
How to Invest and Withdraw Funds
BUYING YOUR CERTIFICATE
Your American Express financial advisor will help you fill out and submit an
application to open an account with us and purchase a certificate. If you
purchase your certificate other than through an American Express financial
advisor -- for example, through a direct marketing channel -- you may be given
different purchase instructions. We will process the application at our
corporate offices in Minneapolis, Minnesota. When we have accepted your
application and received your initial investment, we will send you a
confirmation showing the acceptance date, the date your term begins and the
interest selection you have made detailing your market participation percentage
and, if applicable, the minimum interest rate for your first term. After your
term begins, we will send you notice of the value of the S&P 500 Index on the
day your term began. The rates in effect on the date we accept your application
are the rates that apply to your certificate. See "Purchase policies" below.
Important: When you open an account, you must provide AECC with your correct
Taxpayer Identification Number (TIN), which is either your Social Security or
Employer Identification number. See "Taxes on Your Earnings."
Purchase policies
o Investments must be received and accepted in the Minneapolis headquarters on
a business day before 3 p.m. Central time to be included in your account that
day. Otherwise your purchase will be processed the next business day.
o If you purchase a certificate with a personal check or other non-guaranteed
funds, AEFC will wait one day for the process of converting your check to
federal funds (e.g., monies of member banks within the Federal Reserve Bank)
before your purchase will be accepted and you begin earning interest. For
information on how to avoid this delay, for example by using a certified
check, please call AECSC at the telephone number listed on the back cover.
o AECC has complete discretion to determine whether to accept an application
and sell a certificate.
A number of special policies apply to purchases, withdrawals and exchanges
within IRAs, 401(k) plans and other qualified retirement plans. See
"Retirement Plans: Special Policies."
- --------------------------------------------------------------------------------
55p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
HOW TO MAKE INVESTMENTS
By mail
Send your check, by regular or express mail, along with your name and account
number to:
American Express Financial Advisors Inc.
70200 AXP Financial Center
Minneapolis, MN 55474
By wire
For investment into an established account, you may wire money to:
Wells Fargo Bank Minnesota, N.A.
Routing No. 091000019
Minneapolis, MN
Attn: Domestic Wire Dept.
Give these instructions: Credit American Express Financial Advisors Account
#0000030015 for personal account # (your account number) for (your name). Please
be sure to include all 10 digits of the American Express Financial Advisors
account number, including the zeros.
If this information is not included, the order may be rejected and all money
received, less any costs AECC incurs, will be returned promptly.
o Minimum amount you may wire: $1,000.
o Wire orders can be accepted only on days when your bank, American Express
Financial Corporation (AEFC), AECC and Wells Fargo Bank Minnesota, N.A. are
open for business.
o Wire purchases are completed when wired payment is received and we accept the
purchase.
o Wire investments must be received and accepted in our Minneapolis
headquarters on a business day before 3 p.m. Central time to be credited that
day. Otherwise your purchase will be processed the next business day.
o AECC, AEFC and its other subsidiaries are not responsible for any delays that
occur in wiring funds, including delays in processing by the bank.
o You must pay any fee the bank charges for wiring.
FULL AND PARTIAL WITHDRAWALS
You may withdraw your certificate for its full value or make a partial
withdrawal of $100 or more at any time. If you purchase this certificate for an
IRA, 401(k), or other retirement plan account, early withdrawals or cash
payments of interest taken prematurely may be subject to IRS penalty taxes.
o You can withdraw the full value of your certificate net any applicable
penalties, by giving us proper instructions. To complete these transactions,
see "How to Request a Withdrawal or Transfer."
o Full and partial withdrawals of principal during a term are subject to
penalties, described below.
o You may not make a partial withdrawal if it would reduce your certificate
balance to less than $1,000. If you request such a withdrawal, we will
contact you for revised instructions.
Penalties for withdrawal during a term: If you withdraw money during a term, you
will pay a penalty of 2% of the principal withdrawn. This penalty will be taken
from the remaining balance, not the amount withdrawn unless withdrawals of the
penalty would cause your balance to be less than $1,000 in which case the
penalty will be deducted from the amount withdrawn. The 2% penalty is waived
upon death of the certificate owner. When this certificate is owned by a
revocable trust, this penalty also is waived upon death of any grantor of the
revocable trust. We will also waive withdrawal penalties on withdrawals for IRA
certificate accounts for your required distributions. See "Retirement Plans:
Special Policies."
When you request a full or partial withdrawal during a term, we pay you from the
principal of your certificate.
Loss of interest: If you make a withdrawal at any time other than at the end of
the term, you will lose any interest accrued on the withdrawal amount since we
credit minimum and participation interest only at the end of a term. However, we
will pay accrued fixed and interim interest to the date of the withdrawal.
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56p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
Following are examples describing a $2,000 withdrawal during a term for
participation and fixed interest:
Participation interest
Account balance $10,000
Interest (interest is credited at the end of the term) 0
Withdrawal of principal (2,000)
2% withdrawal penalty (40)
- --------------------------------------------------------------------------------
Balance after withdrawal $ 7,960
================================================================================
You will forfeit any accrued interest on the withdrawal amount.
Fixed interest
Account balance $10,000
Interest credited to date 100
Withdrawal of credited interest (100)
Withdrawal of principal (1,900)
2% withdrawal penalty (on $1,900 principal withdrawn) (38)
- --------------------------------------------------------------------------------
Balance after withdrawal $ 8,062
================================================================================
Retirement plans: In addition, you may be subject to IRS penalties for early
withdrawals if your certificate is in an IRA, 401(k) or other qualified
retirement plan account.
Other full and partial withdrawal policies
o If you request a partial or full withdrawal of a certificate recently
purchased or added to by a check or money order that is not guaranteed, we
will wait for your check to clear. Please expect a minimum of 10 days from
the date of your payment before AECC mails a check to you.
o If your certificate is pledged as collateral, any withdrawal will be delayed
until we get approval from the secured party.
o Any payments to you may be delayed under applicable rules, regulations or
orders of the Securities and Exchange Commission (SEC).
TRANSFERS TO OTHER ACCOUNTS
You may transfer part or all of your certificate to any other American Express
Certificate or into another new or existing American Express Financial Advisors
Inc. account that has the same ownership, subject to any terms and conditions
that may apply.
Transfers to another American Express Financial Advisors Inc. account with
different ownership will require a written request.
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57p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
HOW TO REQUEST A WITHDRAWAL OR TRANSFER
By phone
o Call AECSC at one of the telephone numbers listed on the back cover.
o Maximum telephone withdrawal request: $100,000.
o Transfers into an American Express Financial Advisors Inc. account with the
same ownership.
o A telephone withdrawal request will not be allowed within 30 days of a
phoned-in address change.
o We will honor any telephone withdrawal or transfer request and will use
reasonable procedures to confirm authenticity.
You may request that telephone withdrawals not be authorized from your account
by writing to AECSC.
By mail
Send your name, account number and request for a withdrawal or transfer, by
regular or express mail, to:
American Express Financial Advisors Inc.
70100 AXP Financial Center
Minneapolis, MN 55474
Written requests are required for:
o Withdrawals over $100,000.
o Pension plans.
o Custodial accounts where the minor has reached the age at which custodianship
should terminate.
o Transfers to another American Express Financial Advisors Inc. account with
different ownership. All current registered owners must sign the request.
o All owners must sign a written request if there was an address change within
the last 30 days.
HOW TO RECEIVE PAYMENT WHEN YOU WITHDRAW FUNDS
By regular or express mail
o Mailed to address on record; please allow seven days for mailing.
o Payable to name(s) listed on the account.
o The express mail delivery charges you pay will vary depending on the courier
you select. We will deduct the fee from your remaining certificate balance,
provided that balance would not be less than $1,000. If the balance would be
less than $1,000, we will deduct the fee from the proceeds of the withdrawal.
By wire
o Minimum wire amount: $1,000.
o Request that money be wired to your bank.
o Bank account must be in same ownership as the AECC account.
o Pre-authorization required. Complete the bank wire authorization section in
the application or use a form supplied by your American Express financial
advisor. All registered owners must sign.
o Applicable wire charges will be deducted from your balance for partial
withdrawals or from the proceeds of a full withdrawal.
By electronic transfer
o Available only for pre-authorized scheduled partial withdrawals and other
full or partial withdrawals.
o No charge.
o Deposited electronically in your bank account.
o Allow two to five business days from request to deposit.
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58p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
General Information
RETIREMENT PLANS: SPECIAL POLICIES
o If the certificate is purchased for a 401(k) plan or other qualified
retirement plan account, the terms and conditions of the certificate apply to
the plan as the owner of the certificate. However, the terms of the plan, as
interpreted by the plan trustee or administrator, will determine how a
participant's benefit under the plan is administered. These terms may differ
from the terms of the certificate.
o If your certificate is held in a custodial or investment only retirement plan
(including a Keogh plan), special rules may apply at maturity. If no other
investment instructions are provided directing how to handle your certificate
at maturity, the full value of the certificate will automatically transfer to
a new or existing cash management account according to rules outlined in the
plan document or as otherwise provided in the plan document.
o The annual custodial fee for TSCAs or IRAs may be deducted from your
certificate account. It may reduce the amount payable at maturity or the
amount received upon an early withdrawal.
o Retirement plan withdrawals may be subject to withdrawal penalties or loss of
interest even if they are not subject to federal tax penalties.
o If applicable, we will waive withdrawal penalties on withdrawals for
qualified retirement plan, TSCA, and IRA certificate accounts for your
required minimum distributions.
o If your certificate is held in an IRA, special rules or fees, or both, may
apply at maturity. If no other investment instructions are provided directing
how to handle your certificate at maturity, you will receive a distribution
for the full value of your certificate. The distribution will be income
taxable to you, and if applicable, subject to a 10% premature withdrawal
penalty tax.
o If you withdraw all funds from your last account in an IRA at American
Express Trust Company, a termination fee will apply as set out in Your Guide
to IRAs, the IRS disclosure information received when you opened your
account.
o The IRA termination fee will be waived if a withdrawal occurs after you have
reached age 701/2 or upon the owner's death.
WITHDRAWAL AT DEATH FOR AMERICAN EXPRESS FLEXIBLE SAVINGS CERTIFICATE AND
AMERICAN EXPRESS INSTALLMENT CERTIFICATE
If a certificate is surrendered upon the client's death, any applicable
surrender charge will be waived. In addition, if an IRA termination fee is
applicable, it will also be waived.
TRANSFER OF OWNERSHIP
While this certificate is not negotiable, AECC will transfer ownership upon
written notification to AECSC. However, if you have purchased your certificate
for a 401(k) plan or other qualified retirement plan, or an IRA you may be
unable to transfer or assign the certificate without losing the account's
favorable tax status. Please consult your tax advisor.
FOR MORE INFORMATION
For information on purchases, withdrawals, exchanges, transfers of ownership,
proper instructions and other service questions regarding your certificate,
please consult your American Express financial advisor or call AECSC at the
telephone numbers listed on the back cover.
If you purchase your certificate other than through a financial advisor, you may
be given different purchase and withdrawal instructions.
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59p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
Taxes on Your Earnings
Each calendar year we provide the certificate owners and the IRS with reports of
all interest of $10 and above credited to certificate owners' accounts on Form
1099-INT, "Interest Income." Withdrawals are reported to certificate owners and
the IRS on Form 1099-B, "Proceeds from Broker and Barter Exchange Transactions."
The bonus payments for American Express Cash Reserve Certificate and American
Express Installment Certificate and interest on your certificate, including
interest on bonus payments for American Express Cash Reserve Certificate and
American Express Installment Certificate, are taxable when credited to your
account.
We also provide information on participation and minimum interest on American
Express Market Strategy Certificate and American Express Stock Market
Certificate when credited to owners' accounts, generally at the end of each
certificate term, and fixed and interim interest accrued through the end of each
calendar year. The manner in which such income is to be reported for tax
purposes by a certificate owner will be based on the method of accounting that
the owner uses in general to report income.
Under IRS regulations governing the tax treatment of debt instruments such as
the American Express Market Strategy Certificate and American Express Stock
Market Certificate which provide for variable rates of interest, the certificate
is treated as either a variable rate debt instrument (VRDI) or a contingent debt
instrument (CDI). We believe there is a sound basis under these regulations to
treat and report the certificate as a VRDI. Under the VRDI approach, full
participation interest or partial participation together with minimum interest
on the certificate would generally be treated as qualified stated interest that
accrues over each term. However, there can be no guarantee that the certificate
will not be treated as a CDI since, among other items, the regulations do not
address an instrument with all the features of the certificate. If treated as
CDI, interest would generally be taken into account for each term under a
"noncontingent bond method," under which an owner would have taxable income to
report under the rules similar to those for accruing original issue discount.
For cash-basis owners, this could result in income having to be reported in
advance of interest being credited to their accounts. There also could be
differences in the character of income reported if the certificate were
classified as a CDI rather than a VRDI.
The foregoing does not address the tax consequences of ownership of a
certificate through an IRA, 401(k) or other tax qualified retirement plan
account, or try to cover all tax consequences arising from the ownership of a
certificate. It is possible that changes in tax laws or interpretations may
result in changes to the foregoing descriptions. As always, before purchasing an
American Express Certificate, you should consult your own tax advisor as to all
tax consequences of ownership of the certificate.
RETIREMENT ACCOUNTS
If this certificate is held in an IRA or other qualified plan account, certain
income tax rules apply to withdrawals.
Income Tax Withholding: When you take a distribution from an IRA, 10% of the
amount must be withheld for federal income taxes, unless you elect not to have
the tax withholding apply. When you take a distribution from a qualified plan
account, such as a 401(k) or 403(b), 20% of the amount must be withheld for
federal income taxes unless the distribution is directly rolled over to another
qualified plan or IRA.
Tax Penalties: In general, distributions from IRAs and other qualified plan
accounts are also subject to an IRS 10% premature distribution penalty tax
unless the distribution is made after age 591/2 or to your beneficiaries
following your death, or you are disabled. Other exceptions may also apply.
Consult your tax advisor to see how these rules apply to you before you request
a distribution from your plan or IRA.
This certificate may not be available for all types of retirement accounts.
GIFTS TO MINORS
The certificate may be given to a minor under either the Uniform Gifts or
Uniform Transfers to Minors Act (UGMA/UTMA), whichever applies in your state.
UGMAs/UTMAs are irrevocable. Generally, under federal tax laws, income over
$1,600 for the year 2005 on property owned by children under age 14 will be
taxed at the parents' marginal tax rate, while income on property owned by
children 14 or older will be taxed at the child's rate.
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60p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
YOUR TIN AND BACKUP WITHHOLDING
As with any financial account you open, you must list your current and correct
TIN, which is either your Social Security or Employer Identification number. You
must certify your TIN under penalties of perjury on your application when you
open an account.
If you don't provide and certify the correct TIN, you could be subject to backup
withholding of 28% of your interest earnings. You could also be subject to
further penalties, such as:
o a $50 penalty for each failure to supply your correct TIN;
o a civil penalty of $500 if you make a false statement that results in no
backup withholding; and
o criminal penalties for falsifying information.
You could also be subject to backup withholding because you failed to report
interest on your tax return as required.
How to Determine the Correct TIN
For this type of account: Use the Social Security or Employer
Identification Number of:
- ----------------------------------- --------------------------------------------
Individual or joint account The individual or one of the owners listed
on the joint account
- ----------------------------------- --------------------------------------------
Custodian account of a minor The minor
(Uniform Gifts/Transfers to
Minors Act)
- ----------------------------------- --------------------------------------------
A revocable living trust The grantor-trustee (the person who puts
the money into the trust)
- ----------------------------------- --------------------------------------------
An irrevocable trust, pension The legal entity (not the personal
trust or estate representative or trustee, unless no legal
entity is designated in the account title)
- ----------------------------------- --------------------------------------------
Sole proprietorship or The owner
single-owner LLC
- ----------------------------------- --------------------------------------------
Partnership or multi-member LLC The partnership
- ----------------------------------- --------------------------------------------
Corporate or LLC electing The corporation
corporate status on Form 8832
- ----------------------------------- --------------------------------------------
Association, club or tax-exempt The organization
organization
- ----------------------------------- --------------------------------------------
For details on TIN requirements, ask your financial advisor or contact your
local American Express Financial Advisors Inc. office for federal Form W-9,
Request for Taxpayer Identification Number and Certification. You also may
obtain the form on the Internet at www.irs.gov.
How Your Money is Used and Protected
INVESTED AND GUARANTEED BY AECC
AECC, a wholly owned subsidiary of AEFC, issues and guarantees American Express
Certificates. AECC is the largest issuer of face-amount certificates in the
United States, with total assets of more than $6.3 billion and a net worth in
excess of $343 million on Dec. 31, 2004.
We back our certificates by investing the money received and keeping the
invested assets on deposit. Our investments generate interest and dividends, out
of which we pay:
o interest to certificate owners, and
o various expenses, including taxes, fees to AEFC for advisory and other
services, distribution fees to American Express Financial Advisors Inc.,
selling agent fees to selling agents, custody fees to American Express Trust
Company, and transfer agent fees to AECSC.
For a review of significant events relating to our business, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations." No
national rating agency rates our certificates
Most banks and thrifts offer investments known as CDs that are similar to our
certificates in many ways. Early withdrawals of bank CDs often result in
penalties. Banks and thrifts generally have federal deposit insurance for their
deposits and lend much of the money deposited to individuals, businesses and
other enterprises. Other financial institutions and some insurance companies may
offer investments with comparable combinations of safety and return on
investment.
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61p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
REGULATED BY GOVERNMENT
Because American Express Certificates are securities, their offer and sale are
subject to regulation under federal and state securities laws. American Express
Certificates are face-amount certificates. Each certificate is not a bank
product, an equity investment, a form of life insurance or an investment trust.
The federal Investment Company Act of 1940 requires us to keep investments on
deposit in a segregated custodial account. These investments back the entire
value of your certificate account. Their amortized cost must exceed the required
carrying value of the outstanding certificates by at least $250,000. As of Dec.
31, 2004, the amortized cost of these investments exceeded the required carrying
value of our outstanding certificates by more than $243.1 million. We are
required to use amortized cost for these regulatory purposes. In general,
amortized cost is determined by systematically increasing the carrying value of
a security if acquired at a discount, or reducing the carrying value if acquired
at a premium, so that the carrying value is equal to maturity value on the
maturity date.
AECC has agreed with the SEC to maintain capital and surplus equal to 5% of
outstanding liabilities on certificates (not including loans made on
certificates in accordance with terms of some certificates that no longer are
offered by AECC). AECC also has entered into a written informal understanding
with the Minnesota Commerce Department that AECC will maintain capital equal to
5% of the assets of AECC (less any loans on outstanding certificates). When
computing its capital for these purposes, AECC values its assets on the basis of
statutory accounting for insurance companies rather than generally accepted
accounting principles.
BACKED BY OUR INVESTMENTS
Our investments are varied and of high quality. This was the composition of
the AECC portfolio at Dec. 31, 2004:
Type of investment Net amount invested
Government agency bonds 53%
Corporate and other bonds 37
Mortgage loans and other loans 8
Cash and cash equivalents 1
Preferred stocks 1
At Dec. 31, 2004 about 93.5% of our securities portfolio (including bonds and
preferred stocks) is rated investment grade by Moody's and Standard & Poors
(S&P) and approximately 2.5% of the portfolio is deemed investment grade based
on AEFC's internal analysis, using criteria similar to those used by Moody's and
S&P, when a public rating does not exist. For additional information regarding
securities ratings, please refer to Note 3 to the financial statements.
Most of our investments are on deposit with American Express Trust Company,
Minneapolis, although we also maintain separate deposits as required by certain
states. American Express Trust Company is a wholly owned subsidiary of AEFC.
Copies of our Dec. 31, 2004 schedule of Investments in Securities of
Unaffiliated Issuers are available upon request. For comments regarding the
valuation, carrying values and unrealized appreciation (depreciation) of
investment securities, see Notes 1, 2 and 3 to the financial statements.
INVESTMENT POLICIES
AEFC serves as AECC's investment manager and invests the assets in AECC's
portfolio in accordance with AECC's investment policy and applicable law. The
following policies currently govern AEFC's investment decisions:
Debt securities
Most of our investments are in debt securities as referenced in the table in
"Backed by Our Investments" under "How Your Money is Used and Protected."
The prices of bonds generally fall as interest rates increase, and rise as
interest rates decrease. The price of a bond also fluctuates if its credit
rating is upgraded or downgraded. The prices of bonds below investment grade may
react more to whether a company can pay interest and principal when due than to
changes in interest rates. They experience greater price fluctuations, are more
likely to experience a default, and sometimes are referred to as junk bonds.
Under normal circumstances, at least 85% of the securities in AECC's portfolio
will be rated investment grade, or in the opinion of AECC's investment advisor
will be the equivalent of investment grade. Securities that are subsequently
downgraded in quality may continue to be held by AECC and will be sold only when
AECC believes it is advantageous to do so.
At Dec. 31, 2004, AECC held about 4% of its investment portfolio in
investments rated below investment grade.
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62p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
Purchasing securities on margin
We will not purchase any securities on margin or participate on a joint basis or
a joint-and-several basis in any trading account in securities.
Commodities
We have not and do not intend to purchase or sell commodities or commodity
contracts except to the extent that transactions described in "Financial
transactions including hedges" in this section may be considered commodity
contracts.
Underwriting
We do not intend to engage in the public distribution of securities issued by
others. However, if we purchase unregistered securities and later resell them,
we may be considered an underwriter (selling securities for others) under
federal securities laws.
Borrowing money
From time to time we have established a line of credit with banks if management
believed borrowing was necessary or desirable. We may pledge some of our assets
as security. We may occasionally use repurchase agreements as a way to borrow
money. Under these agreements, we sell debt securities to our lender, and
repurchase them at the sales price plus an agreed-upon interest rate within a
specified period of time. There is no limit on the extent to which we may borrow
money, except that borrowing must be through the sale of certificates, or must
be short-term and not a public offering and not intended to be publicly offered.
Real estate
We may invest in limited partnership interests in limited partnerships that
either directly, or indirectly through other limited partnerships, invest in
real estate. We may invest directly in real estate. We also invest in mortgage
loans secured by real estate. We expect that equity investments in real estate,
either directly or through a subsidiary of AECC, will be less than 5% of AECC's
assets.
Lending securities
We may lend some of our securities to broker-dealers and receive cash equal to
the market value of the securities as collateral. We invest this cash in
short-term securities. If the market value of the securities goes up, the
borrower pays us additional cash. During the course of the loan, the borrower
makes cash payments to us equal to all interest, dividends and other
distributions paid on the loaned securities. We will try to vote these
securities if a major event affecting our investment is under consideration. We
expect that outstanding securities loans will not exceed 10% of AECC's assets.
When-issued securities
Some of our investments in debt securities and loans originated by banks or
investment banks are purchased on a when-issued or similar basis. It may take as
long as 45 days or more before these investments are available for sale, issued
and delivered to us. We generally do not pay for these investments or start
earning on them until delivery. We have established procedures to ensure that
sufficient cash is available to meet when-issued commitments. AECC's ability to
invest in when-issued investments is not limited except by its ability to set
aside cash or high quality investments to meet when-issued commitments.
When-issued investments are subject to market fluctuations and they may affect
AECC's investment portfolio the same as owned securities.
Financial transactions including hedges
We buy or sell various types of options contracts for hedging purposes or as a
trading technique to facilitate securities purchases or sales. We may buy
interest rate caps for hedging purposes. These pay us a return if interest rates
rise above a specified level. If interest rates do not rise above a specified
level, the interest rate caps do not pay us a return. AECC may enter into other
financial transactions, including futures and other derivatives, for the purpose
of managing the interest rate exposures associated with AECC's assets or
liabilities. Derivatives are financial instruments whose performance is derived,
at least in part, from the performance of an underlying asset, security or
index. A small change in the value of the underlying asset, security or index
may cause a sizable gain or loss in the fair value of the derivative. There is
no limit on AECC's ability to enter into financial transactions to manage the
interest rate risk associated with AECC's assets and liabilities, but AECC does
not foresee a likelihood that it will be feasible to hedge most or all of its
assets or liabilities. We do not use derivatives for speculative purposes.
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63p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
Illiquid securities
A security is illiquid if it cannot be sold in the normal course of business
within seven days at approximately its current market value. Some investments
cannot be resold to the U.S. public because of their terms or government
regulations. All securities, however, can be sold in private sales, and many may
be sold to other institutions and qualified buyers or on foreign markets. AECC's
investment adviser will follow guidelines established by the board of directors
and consider relevant factors such as the nature of the security and the number
of likely buyers when determining whether a security is illiquid. No more than
15% of AECC's investment portfolio will be held in securities that are illiquid.
In valuing its investment portfolio to determine this 15% limit, AECC will use
statutory accounting under an SEC order. This means that, for this purpose, the
portfolio will be valued in accordance with applicable Minnesota law governing
investments of life insurance companies, rather than generally accepted
accounting principles.
Foreign investments
We may invest up to 10% of our assets in certain foreign securities as permitted
by applicable Minnesota law.
Other restrictions
There are no restrictions on concentration of investments in any particular
industry or group of industries or on rates of portfolio turnover.
General Information on AECC and How It Operates
RELATIONSHIP BETWEEN AECC AND AMERICAN EXPRESS FINANCIAL CORPORATION
AECC was originally organized as Investors Syndicate of America, Inc., a
Minnesota corporation, on Oct. 15, 1940, and began business as an issuer of
face amount investment certificates on Jan. 1, 1941. The company became a
Delaware corporation on Dec. 31, 1977, changed its name to IDS Certificate
Company on April 2, 1984, and to American Express Certificate Company on April
26, 2000.
AECC files reports on Form 10-K and 10-Q with the SEC. The public may read and
copy materials we file with the SEC at the SEC's Public Reference Room at 450
Fifth Street, N.W., Washington, D.C. 20549. The public may obtain information on
the operation of the public reference room by calling the SEC at 1-800-SEC-0330.
The SEC maintains an Internet site (http://www.sec.gov) that contains reports,
proxy and information statements, and other information regarding issuers that
file electronically with the SEC.
Before AECC was created, AEFC (formerly known as IDS Financial Corporation), our
parent company, had issued similar certificates since 1894. AECC and AEFC have
never failed to meet their certificate payments.
AEFC is a wholly owned subsidiary of American Express Company, a financial
services company with executive offices at American Express Tower, World
Financial Center, New York, NY 10285. American Express Company is a financial
services company engaged through subsidiaries in other businesses including:
o travel related services (including American Express(R) Card and operations
through American Express Travel Related Services Company, Inc. and its
subsidiaries); and
o international banking services (through American Express Bank Ltd. and its
subsidiaries) and Travelers Cheque and related services.
CORPORATE REORGANIZATION
On Feb. 1, 2005, American Express Company, the parent company of American
Express Certificate Company's investment manager, American Express Financial
Corporation (AEFC), announced plans to pursue a spin-off of 100% of the common
stock of AEFC to shareholders of American Express Company. The transaction,
expected to be completed in the third quarter of 2005, is subject to certain
regulatory and other approvals, as well as final approval by the board of
directors of American Express Company.
Upon completion of the transaction AEFC will be a publicly traded company
separate from American Express Company and will continue to own all of the
outstanding stock of American Express Certificate Company. The current
agreements between American Express Certificate Company and AEFC and its
affiliates will remain in place. No changes in operations or personnel are
anticipated.
CAPITAL STRUCTURE AND CERTIFICATES ISSUED
AECC authorized, issued and has outstanding 150,000 shares of common stock, par
value of $10 per share. AEFC owns all of the outstanding shares.
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64p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
As of the fiscal year ended Dec. 31, 2004, AECC had issued (in face amount)
$144,548,181 of installment certificates and $3,211,598,540 of single payment
certificates. At Dec. 31, 2004, AECC had issued (in face amount)
$15,084,688,787 of installment certificates and $30,861,437,079 of single
payment certificates since its inception in 1941.
SERVICE PROVIDERS
In connection with AECC's business of issuing and distributing certificates and
managing the assets that back the certificates it utilizes a number of service
providers. AECC has entered into agreements with several entities, all of which
are affiliated with AECC, to provide asset management and administrative
services, distribution, transfer agent services, and custody.
INVESTMENT MANAGEMENT AND SERVICES
Under the Investment Advisory and Services Agreement, AEFC acts as our
investment advisor and is responsible for:
o providing investment research,
o making specific investment recommendations, and
o executing purchase and sale orders according to our policy of seeking to
obtain the best price and execution.
All these activities are subject to direction and control by our board of
directors and officers. Our agreement with AEFC requires annual renewal by our
board, including a majority of directors who are not interested persons of AEFC
or AECC as defined in the federal Investment Company Act of 1940.
For its services, we pay AEFC a monthly fee, equal on an annual basis to a
percentage of the total book value of certain assets (included assets).
Included assets are all assets of AECC except mortgage loans, real estate, and
any other asset on which AECC pays an advisory fee or management fee other than
that provided for in the Investment Advisory and Services Agreement. The fee
paid to AEFC for managing and servicing bank loans is 0.35%.
Advisory and services fee rate
Included assets Percentage of total book value
First $250 million 0.750%
Next $250 million 0.650
Next $250 million 0.550
Next $250 million 0.500
Any amount over $1 billion 0.107
Advisory and services fee paid for the past three years
Year Total fees
2004 $10,939,640
2003 10,436,023
2002 9,979,742
Other expenses payable by AECC: The Investment Advisory and Services Agreement
provides that we pay:
o costs incurred by us in connection with real estate and mortgages;
o taxes;
o depository and custodian fees incurred by AECC;
o brokerage commissions and charges in the purchase and sale of AECC's assets;
o fees and expenses for services not covered by other agreements and provided
to us at our request, or by requirement, by attorneys, auditors, examiners
and professional consultants who are not officers or employees of AEFC;
o fees and expenses of our directors who are not officers or employees of
AEFC;
o provision for certificate reserves (interest accrued on certificate owner
accounts);
o expenses of customer settlements not attributable to sales functions; and
o transfer agency fees and expenses.
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65p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
DISTRIBUTION
Under the Distribution Agreement between AECC and American Express Financial
Advisors Inc. (AEFAI), AEFAI receives compensation for the distribution of
American Express certificates as follows:
For American Express Cash Reserve Certificate:
o 0.0625% of the initial payment on the issue date of the certificate, and
o 0.0625% of the certificate's reserve at the beginning of the second and
subsequent quarters from issue date.
For American Express Flexible Savings Certificate:
o 0.08% of the initial payment on the issue date of the certificate, and
o 0.08% of the certificate's reserve at the beginning of the second and
subsequent quarters from issue date.
For American Express Flexible Savings Certificate paying a special promotional
coupon rate described in "Rates for New Purchases" under "About the
Certificate," AEFAI waives its distribution fee.
For American Express Installment Certificate:
o Monthly 2.5% of all payments received during the month. This fee is paid on
all payments received on or after issue of your certificate until the
certificate's maturity date.
For American Express Market Strategy Certificate:
o 0.90% of the initial investment on the first day of the certificate's term,
and
o 0.90% of the certificate's reserve at the beginning of each subsequent term.
For American Express Stock Market Certificate sold through AEFAI but not for
certificates sold through Securities America, Inc. (SAI) or American Express
Bank International (AEBI):
o 0.90% of the initial investment on the first day of the certificate's term,
and
o 0.90% of the certificate's reserve at the beginning of each subsequent term.
For certificates paying a special promotional rate AEFAI waives its distribution
fee and the selling agents waive their commissions, fees and other compensation,
unless a requirement for the special promotional rate is a minimum investment of
$100,000. If a special promotional rate is available for American Express Stock
Market Certificate, the minimum investment in any American Express Stock Market
Certificate purchased will be $100,000.
The distribution fee is not assessed to your certificate account.
Total distribution fees paid to AEFAI for all series of certificates amounted to
$31,506,619 during the year ended Dec. 31, 2004.
See Note 1 to the financial statements regarding deferral of distribution fee
expense.
In addition, AECC may pay distributors additional compensation for distribution
activities under certain circumstances. From time to time, AECC may pay or
permit other promotional incentives, in cash or credit or other compensation.
AECC's products are sold in the United States through a network of financial
advisors who are either employees of or affiliated with AEFAI. AEFAI pays
commissions to its financial advisors, and pays other selling expenses in
connection with services to AECC. The financial advisors sell a range of
investment products, both proprietary and non-proprietary, including products
that may compete with certificates offered by AECC. Differences in the
compensation structure associated with the various products that the financial
advisors sell tend to create conflicts between the interests of the financial
advisors' clients and the interests of the financial advisors themselves. These
conflicts are mitigated by regulatory standards that govern the financial
advisors' sales practices and AEFAI's oversight of those sales practices. AECC's
board of directors, including a majority of directors who are not interested
persons of AEFAI or AECC, approved the distribution agreements.
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66p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
SELLING AGENT
Under the Selling Agent Agreement between AEFAI and American Express Bank
International (AEBI), AEBI receives compensation for its services as a selling
agent for American Express Stock Market Certificate as follows:
o AEBI receives a fee equal to 1.0% per term of the principal amount of each
certificate for which AEBI is the selling agent.
This fee is not assessed to your certificate account.
AEBI is an Edge Act corporation organized under the provisions of Section 25(a)
of the Federal Reserve Act. It is a wholly owned subsidiary of American Express
Bank Ltd. (AEBL). As an Edge Act corporation, AEBI is subject to the provisions
of Section 25(a) of the Federal Reserve Act and Regulation K of the Board of
Governors of the Federal Reserve System (the Federal Reserve). It is supervised
and regulated by the Federal Reserve. AEBI has an extensive international high
net-worth client base that is serviced by a marketing staff in New York and
Florida.
Although AEBI is a banking entity, the American Express Stock Market Certificate
is not a bank product, nor is it backed or guaranteed by AEBI, by AEBL, or by
any other bank, nor is it guaranteed or insured by the FDIC or any other federal
agency. AEBI is registered where necessary as a securities broker-dealer.
OTHER SELLING AGENTS
American Express Stock Market Certificate may be sold through selling agents,
under arrangements with AEFAI at commissions of up to:
o 0.90% of the initial investment on the first day of the certificate's term;
and
o 0.90% of the certificate's reserve at the beginning of each subsequent term.
This fee is not assessed to your certificate account.
In addition, AECC may pay distributors, and AEFAI may pay selling agents,
additional compensation for selling and distribution activities under certain
circumstances. From time to time, AECC or AEFAI may pay or permit other
promotional incentives, in cash or credit or other compensation.
TRANSFER AGENT
Under the Transfer Agency Agreement, AECSC, a wholly owned subsidiary of AEFC,
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.
CUSTODIAN
Under the Custody Agreement, American Express Trust Company (AETC), a wholly
owned subsidiary of AEFC, holds AECC's assets in custody for the benefit of
AECC. The agreement authorizes AETC to enter into subcustodial arrangements with
other banks, and AETC has established such an arrangement with Bank of New York
for custody of foreign assets. AECC pays AETC fees based on the assets held in
custody for AECC as well as per transaction charges for certain types of
transactions and out-of-pocket expenses.
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67p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
DIRECTORS AND OFFICERS
AECC's sole shareholder, AEFC, elects the board of directors that oversees
AECC's operations. The board annually elects the chairman and AECC's executive
officers for a term of one year. The president appoints the other executive
officers.
We paid a total of $78,935 during 2004 to directors not employed by AEFC.
Independent Board Members*
Name, address, age Position held with Principal occupations during Other Committee
AECC and length of past five years directorships memberships
service
- ---------------------------------- -------------------- ----------------------------------- ---------------- ------------------
Karen M. Bohn Board member since President and CEO, Galeo Group Alerus Audit
6620 Iroquois Trail 2002 LLC; Independent business Financial
Edina, MN 55439 consultant Corp., Gander
Born in 1953 Mountain,
Otter Tail
Corporation
- ---------------------------------- -------------------- ----------------------------------- ---------------- ------------------
Rodney P. Burwell Board member since Chairman, Xerxes Corporation TCF Financial Audit, Dividend
7901 Xerxes Avenue South 1999 (fiberglass storage tanks)
Suite 201
Bloomington, MN 55431
Born in 1939
- ---------------------------------- -------------------- ----------------------------------- ---------------- ------------------
Jean B. Keffeler Board member since Retired business executive Audit
P.O. Box 1377 1999
Livingston, MT 59047
Born in 1945
- ---------------------------------- -------------------- ----------------------------------- ---------------- ------------------
Thomas R. McBurney Chairman since President, McBurney Management The Valspar Audit, Dividend
4900 IDS Center 2005, Board Advisors Corporation
80 South Eighth Street member since 1999 (coatings),
Minneapolis, MN 55402 Transport
Born in 1938 Corporation
of America,
Inc.
- ---------------------------------- -------------------- ----------------------------------- ---------------- ------------------
* Mr. Burwell, Ms. Keffeler and Mr. McBurney also serve as directors of IDS
Life Insurance Company of New York and American Centurion Life Assurance
Company which are indirectly controlled by AEFC.
Board Member Affiliated with American Express Certificate Company**
Name, address, age Position held with Principal occupations during Other Committee
AECC and length of past five years directorships memberships
service
- ---------------------------------- -------------------- ----------------------------------- ---------------- ------------------
Paula R. Meyer Board member and Senior Vice President and General Dividend
596 AXP Financial Center President since Manager - Mutual Funds, AEFC,
Minneapolis, MN 55474 1998 since 2002; Vice President and
Born in 1954 Managing Director - American
Express Funds, AEFC, 2000-2002
- ---------------------------------- -------------------- ----------------------------------- ---------------- ------------------
** Interested person by reason of being an officer, director and/or employee of
AEFC.
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68p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
Executive Officers
Name, address, age Position held with Principal occupations during Other Committee
AECC and length of past five years directorships memberships
service
- ---------------------------------- -------------------- ----------------------------------- ---------------- -----------------
Paula R. Meyer Board member and Senior Vice President and General Dividend,
596 AXP Financial Center President since Manager - Mutual Funds, AEFC, Investment
Minneapolis, MN 55474 1998 since 2002; Vice President and
Born in 1954 Managing Director - American
Express Funds, AEFC, 2000-2002
- ---------------------------------- -------------------- ----------------------------------- ---------------- -----------------
Brian J. McGrane Vice President and Vice President - Lead Financial
807 AXP Financial Center Chief Financial Officer - Asset Management
Minneapolis, MN 55474 Officer since 2003 Businesses, AEFC, since 2003;
Born in 1971 Vice President - Lead Financial
Officer - Institutional
and Brokerage, AEFC,
2002-2003; Vice
President - Lead
Financial Officer - US
Brokerage, AEFC,
2001-2002; Director,
Financial Standards and
Accounting Policy -
AEFC, 1999-2001
- ---------------------------------- -------------------- ----------------------------------- ---------------- -----------------
David K. Stewart Vice President, Vice President - AEFA Controller,
802 AXP Financial Center Controller and since 2002; Treasurer - Lutheran
Minneapolis, MN 55474 Chief Accounting Brotherhood, 1985-2002
Born in 1953 Officer since 2004
- ---------------------------------- -------------------- ----------------------------------- ---------------- -----------------
Walter S. Berman Treasurer since Chief Financial Officer - AEFAI
50115 AXP Financial Center 2003 since 2001. Various senior
Minneapolis, MN 55474 financial positions including
Born in 1942 Treasurer of IBM, at other
companies from 1996 to 2001
- ---------------------------------- -------------------- ----------------------------------- ---------------- -----------------
Lorraine R. Hart Vice President - Vice President - Investments
53643 AXP Financial Center Investments Administration Officer, AEFC,
Minneapolis, MN 55474 since 2003; Vice President -
Born in 1951 Insurance Investments, AEFC,
1989-2003
- ---------------------------------- -------------------- ----------------------------------- ---------------- -----------------
Michelle M. Keeley Vice President - Senior Vice President - Fixed
257 AXP Financial Center Investments since Income, AEFC, since 2002;
Minneapolis, MN 55474 2003 Managing Director, Zurich Global
Born in 1964 Assets, 2000-2002
- ---------------------------------- -------------------- ----------------------------------- ---------------- -----------------
Scott R. Plummer Chief Compliance Vice President - Asset Management
813 AXP Financial Center Officer since 2004 Compliance, AEFC, since 2004;
Minneapolis, MN 55474 Senior Vice President and Chief
Born in 1959 Compliance Officer, U.S. Bancorp
Asset Management, 2002-2004;
Second Vice President and
Assistant General Counsel,
Hartford Life, 2001-2002
- ---------------------------------- -------------------- ----------------------------------- ---------------- -----------------
H. Bernt von Ohlen Vice President, Vice President and Group Counsel,
50607 AXP Financial Center General Counsel, AEFC, since 2000
Minneapolis, MN 55474 and Secretary
Born in 1946 since September
2002
- ---------------------------------- -------------------- ----------------------------------- ---------------- -----------------
The officers and directors as a group beneficially own less than 1% of the
common stock of American Express Company.
AECC has provisions in its bylaws relating to the indemnification of its
officers and directors against liability, as permitted by law. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 (the
1933 Act) may be permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, the registrant has been
informed that in the opinion of the SEC such indemnification is against public
policy as expressed in the 1933 Act and is therefore unenforceable.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The financial statements of AECC at December 31, 2004 and 2003, and for each of
the three years in the period ended December 31, 2004, appearing in this
prospectus have been audited by Ernst & Young LLP, independent registered public
accounting firm, as set forth in their report thereon appearing elsewhere
herein, and are included in reliance upon such report given on the authority of
such firms as experts in accounting and auditing.
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69p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
Appendix
Description of corporate bond ratings
Bond ratings concern the quality of the issuing corporation. They are not an
opinion of the market value of the security. Such ratings are opinions on
whether the principal and interest will be repaid when due. A security's rating
may change which could affect its price. Ratings by Moody's Investors Service,
Inc. are Aaa, Aa, A, Baa, Ba, B, Caa, Ca and C. Ratings by Standard & Poor's are
AAA, AA, A, BBB, BB, B, CCC, CC, C and D.
Aaa/AAA -- Judged to be of the best quality and carry the smallest degree of
investment risk. Interest and principal are secure.
Aa/AA -- Judged to be high-grade although margins of protection for interest and
principal may not be quite as good as Aaa or AAA rated securities.
A -- Considered upper-medium grade. Protection for interest and principal is
deemed adequate but may be susceptible to future impairment.
Baa/BBB -- Considered medium-grade obligations. Protection for interest and
principal is adequate over the short-term; however, these obligations may have
certain speculative characteristics.
Ba/BB -- Considered to have speculative elements. The protection of interest and
principal payments may be very moderate.
B -- Lack characteristics of more desirable investments. There may be small
assurance over any long period of time of the payment of interest and principal.
Caa/CCC -- Are of poor standing. Such issues may be in default or there may be
risk with respect to principal or interest.
Ca/CC -- Represent obligations that are highly speculative. Such issues are
often in default or have other marked shortcomings.
C -- Are obligations with a higher degree of speculation. These securities have
major risk exposures to default.
D -- Are in payment default. The D rating is used when interest payments or
principal payments are not made on the due date.
Non-rated securities will be considered for investment. When assessing each
non-rated security, AECC will consider the financial condition of the issuer or
the protection afforded by the terms of the security.
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70p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
Annual Financial Information
SUMMARY OF SELECTED FINANCIAL INFORMATION
The following selected financial information was derived from AECC's audited
financial statements and should be read in conjunction with those statements and
the related notes to financial statements. Also see "Management's Discussion and
Analysis of Financial Condition and Results of Operations" for further
information.
Year Ended December 31, (Thousands) 2004 2003 2002 2001 2000
Statements of Operations Data(a)
Investment income $ 265,628 $ 264,238 $ 221,151 $ 204,345 $ 222,535
Investment expenses 53,998 44,417 43,626 44,050 43,952
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income before provision for certificate reserves
and income tax (expense) benefit 211,630 219,821 177,525 160,295 178,583
Net provision for certificate reserves 139,958 141,483 100,252 155,387 155,461
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income before income tax (expense) benefit 71,672 78,338 77,273 4,908 23,122
Income tax (expense) benefit (25,040) (27,296) (24,866) 3,348 (14)
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income 46,632 51,042 52,407 8,256 23,108
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments in securities
of unaffiliated issuers before income taxes 4,616 2,944 (9,899) (92,375) (10,110)
Income tax (expense) benefit (1,615) (1,031) 3,631 32,331 3,539
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments 3,001 1,913 (6,268) (60,044) (6,571)
Net income -- wholly-owned subsidiary -- -- -- -- --
Cumulative effect of accounting change -- -- -- (397) --
- ----------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 49,633 $ 52,955 $ 46,139 $ (52,185) $ 16,537
- ----------------------------------------------------------------------------------------------------------------------------------
Cash Dividends Declared
$ -- $ -- $ -- $ -- $ 5,000
Capital Dividends Declared
-- -- -- 166,906 --
(Return of capital to) contributions from AEFC
-- (50,000) (10,000) 240,000 --
Balance Sheet Data(a)
Total assets $6,311,786 $5,255,592 $5,199,769 $4,642,734 $4,043,806
Certificate loans $ 13,006 $ 15,606 $ 18,614 $ 21,807 $ 25,547
Certificate reserves $5,835,243 $4,787,817 $4,493,372 $4,159,926 $3,831,059
Shareholder's equity $ 343,069 $ 323,213 $ 359,389 $ 263,005 $ 166,514
- ----------------------------------------------------------------------------------------------------------------------------------
(a) Certain reclassifications of prior period amounts have been made to conform
to the current presentation.
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71p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
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 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.
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72p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
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.
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.
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.
- --------------------------------------------------------------------------------
73p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
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, 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.
- --------------------------------------------------------------------------------
74p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
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.
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.
- --------------------------------------------------------------------------------
75p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
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.
- --------------------------------------------------------------------------------
76p AMERICAN EXPRESS CERTIFICATES -- PROSPECTUS
American Express Certificate Company
- --------------------------------------------------------------------------------
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. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with 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. We were not engaged to perform an
audit of the Company's internal control over financial reporting. Our audit
included 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.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
February 18, 2005
- --------------------------------------------------------------------------------
1
American Express Certificate Company
- --------------------------------------------------------------------------------
Financial Statements
Balance Sheets
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
- --------------------------------------------------------------------------------
2
American Express Certificate Company
- --------------------------------------------------------------------------------
Balance Sheets (continued)
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
- --------------------------------------------------------------------------------
3
American Express Certificate Company
- --------------------------------------------------------------------------------
Statements of Operations
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
- ------------------------------------------------------------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
4
American Express Certificate Company
- --------------------------------------------------------------------------------
Statements of Cash Flows
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
- --------------------------------------------------------------------------------
5
American Express Certificate Company
- --------------------------------------------------------------------------------
Statements of Comprehensive Income
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
- --------------------------------------------------------------------------------
6
American Express Certificate Company
- --------------------------------------------------------------------------------
Statements of Shareholder's Equity
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
- --------------------------------------------------------------------------------
7
American Express Certificate Company
- --------------------------------------------------------------------------------
Notes to Financial Statements
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.
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.
- --------------------------------------------------------------------------------
8
American Express Certificate Company
- --------------------------------------------------------------------------------
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 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.
- --------------------------------------------------------------------------------
9
American Express Certificate Company
- --------------------------------------------------------------------------------
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.
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 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.
- --------------------------------------------------------------------------------
10
American Express Certificate Company
- --------------------------------------------------------------------------------
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 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
- ------------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
11
American Express Certificate Company
- --------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------------------------------------------------------------
Fair Unrealized Fair Unrealized Fair Unrealized
Description of Securities Value Losses Value Losses Value 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:
(Thousands, except number
of securities) Less than 12 months 12 months or more Total
- ------------------------------------------------------------------------------------------------------------------------------------
Gross Gross Gross
Ratio of Fair Value to Number of Fair Unrealized Number of Fair Unrealized Number of Fair Unrealized
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 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
- ------------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
12
American Express Certificate Company
- --------------------------------------------------------------------------------
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.
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.
- --------------------------------------------------------------------------------
13
American Express Certificate Company
- --------------------------------------------------------------------------------
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%
- ------------------------------------------------------------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
14
American Express Certificate Company
- --------------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
15
American Express Certificate Company
- --------------------------------------------------------------------------------
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.
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).
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.
- --------------------------------------------------------------------------------
16
American Express Certificate Company
- --------------------------------------------------------------------------------
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.
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.
- --------------------------------------------------------------------------------
17
American Express Certificate Company
- --------------------------------------------------------------------------------
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.
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%
- ------------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
18
American Express Certificate Company
- --------------------------------------------------------------------------------
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 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.
- --------------------------------------------------------------------------------
19
American Express Certificate Company
- --------------------------------------------------------------------------------
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 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
- ------------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
20
American Express Certificate Company
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
21
Quick telephone reference
(800) 862-7919 American Express Easy Access Line
Account value, cash transaction information, current rate
information (automated response for Touchtone(R) phones only)
(800) 862-7919 American Express Client Service Corporation (AECSC)
Withdrawals, transfers, inquiries
(800) 846-4852 TTY Service
For the hearing impaired
- --------------------------------------------------------------------------------
(logo)
AMERICAN
EXPRESS
(R)
- --------------------------------------------------------------------------------
American Express Certificate Company
70100 AXP Financial Center
Minneapolis, MN 55474
Web site address:
http://www.americanexpress.com
Distributed by
American Express
Financial Advisors Inc.
Investment Company Act File #811-00002
S-6000 W (4/05)
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item
Number
Item 13. Other Expenses of Issuance and Distribution.
The expenses in connection with the issuance and distribution
of the securities being registered are to be borne by the
registrant.
Item 14. Indemnification of Directors and Officers.
The By-Laws of IDS Certificate Company provide that it shall
indemnify any person who was or is a party or is threatened to
be made a party, by reason of the fact that he was or is a
director, officer, employee or agent of the company, or is or
was serving at the direction of the company, or any
predecessor corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture,
trust or other enterprise, to any threatened, pending or
completed action, suit or proceeding, wherever brought, to the
fullest extent permitted by the laws of the state of Delaware,
as now existing or hereafter amended.
The By-Laws further provide that indemnification questions
applicable to a corporation which has been merged into the
company relating to causes of action arising prior to the date
of such merger shall be governed exclusively by the applicable
laws of the state of incorporation and by the by-laws of such
merged corporation then in effect. See also Item 17.
Item 15. Recent Sales of Unregistered Securities.
(a) Securities Sold
2002 American Express Special Deposits 9,792,888.00
2003 American Express Special Deposits 13,341,309.00
2004 American Express Special Deposits 8,423,210.00
(b) Underwriters and other purchasers
American Express Special Deposits are marketed by American Express Bank Ltd.
(AEB), an affiliate of American Express Certificate Company, to private banking
clients of AEB in the United Kingdom.
(c) Consideration
All American Express Special Deposits were sold for cash. The aggregate offering
price was the same as the amount sold in the table above. Aggregate marketing
fees to AEB were $446,326.20 in 2002, $263,897.87 in 2003 and $226,417.33 in
2004.
(d) Exemption from registration claimed
American Express Special Deposits are marketed, pursuant to the exemption in
Regulation S under the Securities Act of 1933, by AEB in the United Kingdom to
persons who are not U.S. persons, as defined in Regulation S.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits
1. (a) 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.
2. Not Applicable.
3. (a) Certificate of Incorporation, dated December 31, 1977, filed
electronically as Exhibit 3(a) to Post-Effective Amendment
No. 10 to Registration Statement No. 2-89507, is
incorporated herein by reference.
(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.
(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.
(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.
(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.
(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. Not Applicable.
5. An opinion and consent of counsel as to the legality of the
securities being registered, filed electronically as Exhibit
16(a)5 to Post-Effective Amendment No. 24 to Registration
Statement No. 2-95577 is incorporated by reference.
6. through 9. -- None.
10. (a) Investment Advisory and Services Agreement between
Registrant and American Express Financial Corporation dated
March 6, 2002, filed electronically as Exhibit 10(a) to
Post-Effective Amendment No. 51 to Registration Statement
No. 2-55252, is incorporated by reference.
(b) Depositary and Custodial Agreement, dated June 23, 2004,
between American Express Certificate Company and American
Express Trust Company, filed electronically on or about Feb.
18, 2005, as Exhibit 10(b) to Registrant's Post-Effective
Amendment No. 32 to Registration Statement No. 2-95577 is
incorporated by reference.
(c) 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.
(d) 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.
(e) Amendment to the Selling Agent Agreement dated December 12,
1994, between IDS Financial Services Inc. and American
Express Bank International, filed electronically as Exhibit
1(d) to Post-Effective Amendment No. 13 to Registration
Statement No. 2-95577, is incorporated herein by reference.
(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.
(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.
(h) 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.
(i) 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.
(j) 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 IDS
Certificate Company's June 30, 1999 Quarterly Report on Form
10-Q, is incorporated herein by reference.
(k) 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 IDS Certificate
Company's June 30, 1999 Quarterly Report on Form 10-Q,
is incorporated herein by reference.
(l) 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.
(m) 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.
(n) Selling Dealer Agreement dated July 31, 2000 between American
Express Financial Advisors Inc., and Securities America Inc.
filed electronically on or about Feb. 18, 2005 as Exhibit
10(n) to Registrant's Post-Effective Amendment No. 32 to
Registration Statement No. 2-95577 is incorporated by
reference.
(o)(1) Code of Ethics under rule 17j-1 for Registrant, filed
electronically as Exhibit 10(p)(1) to Pre-Effective
Amendment No. 1 to Registration Statement No. 333-34982, is
incorporated herein by reference.
(o)(2) Code of Ethics under rule 17j-1 for Registrant's investment
advisor and principal underwriter, filed electronically on or
about Feb. 18, 2005 as Exhibit 10(o)(2) to Registrant's
Post-Effective Amendment No. 32 to Registration Statement
No. 2-95577 is incorporated by reference.
(p) 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. 49 to Registration
Statement No. 2-55252, is incorporated herein by reference.
(q) Transfer Agency Agreement, dated December 2, 2004, between
American Express Certificate Company and American Express
Client Service Corporation filed electronically on or
about Feb. 18, 2005 as Exhibit 10(q) to Registrant's
Post-Effective Amendment No. 32 to Registration Statement
No. 2-95577 is incorporated by reference.
11. through 22. -- None.
23. Consent of Independent Registered Public Accounting Firm is
filed electronically herewith.
24. (a) Directors' Power of Attorney, dated Feb. 22, 2005, is filed
electronically herewith as Exhibit 24(a).
(b) Officers' Power of Attorney, dated Feb. 22, 2005, is filed
electronically herewith as Exhibit 24(b).
(c) Director's and Officer's Power of Attorney, dated Feb. 22,
2005, is filed electronically herewith as Exhibit 24(c).
25. through 27. -- None.
(b) The financial statement schedules for American Express Certificate
Company are filed electronically herewith:
I. Investments in Securities of Unaffiliated Issuers, December 31,
2004.
II. Investments in and Advances to Affiliates and Income Thereon,
December 2004, 2003 and 2002.
III. Mortgage loans on Real Estate and Interest Earned on Mortgages -
Year ended December 31, 2004.
V. Qualified Assets on Deposit - December 31, 2004.
VI. Certificate Reserves - Year ended December 31, 2004.
VII. Valuation and Qualifying Accounts - Years ended December 31,
2004, 2003 and 2002.
Schedule I, Schedule III and Schedule VI for the year ended Dec.
31, 2003 are incorporated by reference to Post-Effective
Amendment No. 31 to Registration Statement No. 2-95577 for
American Express Flexible Savings Certificate. Schedule I,
Schedule III and Schedule VI for the year ended Dec. 31, 2002,
are incorporated by reference to Post-Effective Amendment No. 29
to Registration Statement No. 2-95577 for American Express
Flexible Savings Certificate.
Item 17. Undertakings.
Without limiting or restricting any liability on the part of the
other, American Express Financial Advisors Inc. (formerly, IDS
Financial Services Inc.), as underwriter, will assume any
actionable civil liability which may arise under the Federal
Securities Act of 1933, the Federal Securities Exchange Act of
1934 or the Federal Investment Company Act of 1940, in addition
to any such liability arising at law or in equity, out of any
untrue statement of a material fact made by its agents in the due
course of their business in selling or offering for sale, or
soliciting applications for, securities issued by the Company or
any omission on the part of its agents to state a material fact
necessary in order to make the statements so made, in the light
of the circumstances in which they were made, not misleading (no
such untrue statements or omissions, however, being admitted or
contemplated), but such liability shall be subject to the
conditions and limitations described in said Acts. American
Express Financial Advisors Inc. will also assume any liability of
the Company for any amount or amounts which the Company legally
may be compelled to pay to any purchaser under said Acts because
of any untrue statements of a material fact, or any omission to
state a material fact, on the part of the agents of American
Express Financial Advisors Inc. to the extent of any actual loss
to, or expense of, the Company in connection therewith. The
By-Laws of the Registrant contain a provision relating to
Indemnification of Officers and Directors as permitted by
applicable law.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has
duly caused this amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Minneapolis, State of Minnesota, on
April 22, 2005.
AMERICAN EXPRESS CERTIFICATE COMPANY
By: /s/ Paula R. Meyer
-----------------------
Paula R. Meyer, President
Pursuant to the requirements of the Securities Act of 1933, this amendment has
been signed below by the following persons in the capacities indicated on
April 22, 2005.
Signature Capacity
/s/ Paula R. Meyer President and Director
- ---------------------- (Principal Executive Officer)
Paula R. Meyer
/s/ Brian J. McGrane Vice President and Chief Financial Officer
- ---------------------- (Principal Financial Officer)
Brian J. McGrane
/s/ David K. Stewart Vice President, Controller and
- ---------------------- Chief Accounting Officer
David K. Stewart (Principal Accounting Officer)
/s/ Rodney P. Burwell* Director
- -----------------------
Rodney P. Burwell
/s/ Jean B. Keffeler* Director
- ----------------------
Jean B. Keffeler
/s/ Thomas R. McBurney* Chairman and Director
- ------------------------
Thomas R. McBurney
/s/ Karen M. Bohn* Director
- -------------------
Karen M. Bohn
* Signed pursuant to Directors' Power of Attorney dated Feb. 22, 2005, filed
electronically herewith as Exhibit 24(a), by:
/s/ Paula R. Meyer
- ----------------------
Paula R. Meyer