Ameriprise 2008 Annual Report Download - page 150

2007 for the 2006 plan year. The variable match contributions are based primarily on the performance of the Company. In
addition, the Company makes a contribution equal to 1% of base salary each pay period. This contribution is automatically
invested in the Ameriprise Financial Stock Fund, which invests primarily in the Company’s common stock, and can be
redirected at any time into other 401(k) Plan investment options.
Under the 401(k) Plan, employees become eligible for all contributions under the plan on the first pay period following 60 days
of service. Employees must be employed on the last working day of the year to receive the Company’s variable match
contributions. For plan years beginning in 2007, fixed and variable match contributions and stock contributions vest on a
five-year graded schedule of 20% per year of service. For plan years 2006 and prior, match and stock contributions vested
immediately. Profit sharing contributions for plan years 2006 and prior generally vest after five years of service. The
Company’s defined contribution plan expense was $22 million, $33 million and $34 million in 2008, 2007 and 2006,
respectively.
Threadneedle Profit Sharing Arrangements
On an annual basis, Threadneedle employees are eligible for two profit sharing arrangements: (i) a profit sharing plan for all
employees based on individual performance criteria, and (ii) an equity participation plan (‘‘EPP’’) for certain key personnel.
This employee profit sharing plan provides for profit sharing of 30% based on an internally defined recurring pretax operating
income measure for Threadneedle, which primarily includes pretax income related to investment management services and
investment portfolio income excluding gains and losses on asset disposals, certain reorganization expenses, equity
participation plan expenses and other non-recurring expenses. Compensation expense related to the employee profit sharing
plan was $49 million, $84 million and $75 million in 2008, 2007 and 2006, respectively.
The EPP is a cash award program for certain key personnel who are granted awards based on a formula tied to Threadneedle’s
financial performance. The EPP provides for 50% vesting after three years and 50% vesting after four years, with required
cash-out after five years. All awards are settled in cash, based on a value as determined by an annual independent valuation
of Threadneedle’s fair market value. The value of the award is recognized as compensation expense evenly over the vesting
periods. However, each year’s EPP expense is adjusted to reflect Threadneedle’s current valuation. Increases or decreases in
the value of vested awards are recognized immediately. Increases or decreases in the value of unvested shares are recognized
over the remaining vesting periods. Compensation expense related to the EPP was $15 million, $42 million and $48 million
for the years ended December 31, 2008, 2007 and 2006, respectively.
20. Derivatives and Hedging Activities
Derivative instruments enable the Company to manage its exposure to various market risks. The value of such instruments is
derived from an underlying variable or multiple variables, including equity, foreign exchange and interest rate indices or prices.
The Company does not engage in any derivative instrument trading activities other than as it relates to holdings in
consolidated hedge funds. The following table presents a summary of the notional amount and the current fair value of
derivative instruments:
December 31,
2008 2007
Fair Value Fair Value
Notional Notional
Amount Asset Liability Amount Asset Liability
(in millions)
Interest rate swaps $ 11,445 $ 853 $ (250) $ 202 $ 6 $ (3)
Swaptions 3,200 26 — 800 1 —
Purchased equity options 17,363 1,535 (79) 7,385 475 (36)
Written equity options 3,602 22 (274) 1,023 — (28)
Total return swaps 1,749 25 (63) 54 2 —
Foreign currency forward
contracts 75 — (7) 966 20 (3)
Treasury futures sold(1) 4—— 4——
Equity futures purchased(1) 1——74——
Equity futures sold(1) 608 — — 241 — —
Total(2) $ 38,047 $ 2,461 $ (673) $ 10,749 $ 504 $ (70)
(1) Treasury and equity futures have no recorded value as they are cash settled daily.
(2) The above table does not include embedded derivatives.
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