Years Ended December 31, (Millions, except percentages and where indicated) 2002 2001 2000 Cash sales: Mutual funds $ 31,945 $ 33,581 $ 44,068 Annuities 8,541 5,648 5,886 Investment certificates 4,088 3,788 3,297 Life and other insurance products 710 895 900 Institutional 3,727 5,006 6,601 Other 5,201 5,276 3,557 Total cash sales $ 54,212 $ 54,194 $ 64,309 Number of financial advisors 11,689 11,535 12,663 Fees from financial plans and advice services $ 113.9 $ 107.5 $ 97.7 Percentage of total sales from financial plans and advice services 73.3% 72.5% 68.1% SELECTED STATISTICAL INFORMATION (continued) Liquidity and Capital Resources SELECTED BALANCE SHEET INFORMATION December 31, (Billions, except percentages) 2002 2001 Investments $ 38.2 $ 33.6 Separate account assets $ 22.0 $ 27.3 Deferred acquisition costs $ 3.8 $ 3.7 Total assets $ 73.7 $ 71.5 Client contract reserves $ 37.3 $ 32.8 Separate account liabilities $ 22.0 $ 27.3 Total liabilities $ 67.4 $ 66.1 Total shareholder’s equity $ 6.3 $ 5.4 Return on average equity* 11.6% 1.0% * Computed on a trailing 12-month basis excluding the effect on Shareholder’s Equity of unrealized gains or losses related to SFAS No. 115 and SFAS No. 133. AEFA’s total assets and liabilities increased in 2002 primarily due to higher investments and client contract reserves which were partially offset by decreases in separate account assets and liabilities, which declined primarily as a result of market depreciation. AEFA’s total assets and liabilities decreased in 2001 due to declines in separate account assets and liabilities as a result of market depreciation, partly offset by positive net sales. Investments primarily include corporate debt and mortgage-backed securities. AEFA’s corporate debt securities comprise a diverse portfolio with the largest concentrations, accounting for approximately 63 percent of the portfolio, in the following industries: banking and finance, utilities, communications and media, and transportation. Investments include $2.4 billion and $1.3 billion in below investment grade debt securities at December 31, 2002 and 2001, respec- tively, and $4.0 billion in investment loans at both December 31, 2002 and 2001. Non-performing assets relative to invested assets (excluding short-term cash positions) were 0.1% at both December 31, 2002 and 2001. Investments are principally funded by sales of insurance, annuities and certificates and by reinvested income. Maturities of these investments are largely matched with the expected future payments of insurance and annuity obligations. During 2002, AEFA continued to hold investments in CDOs and secured loan trusts (SLTs), some of which are also managed by AEFA. As a condition to its managing certain CDOs, AEFA is required to invest in the residual or “equity” tranche of the CDO, which is typically the most subordinated tranche of securities issued by the CDO entity. AEFA invested in CDOs and SLTs as part of its investment strategy in order to pay a competitive rate to contractholders’ accounts. AEFA’s exposure as an investor is limited solely to its aggregate investment in the CDOs and SLTs, and it has no obligations or commitments, contin- gent or otherwise, that could require any further funding of such investments. As of December 31, 2002, the carrying values of the CDO residual tranches and SLT notes were $28 million and $684 million, respectively. CDOs and SLTs are illiquid invest- ments. As an investor in the residual tranche of CDOs, AEFA’s return correlates to the performance of portfolios of high-yield bonds and/or bank loans. As a noteholder of SLTs, AEFA’s return is based on a reference portfolio of loans. The carrying value I 47 AXP I FINANCIAL REVIEW