INVESTORS
LIFE INSURANCE COMPANY
OF NORTH AMERICA
(Herein called Investors Life)
INA/PUTNAM SEPARATE ACCOUNT
FINANCIAL STATEMENTS
June 30, 1996
(Unaudited)
This report is submitted for the general information of owners of
Investors Life Insurance Company of North America INA/Putnam
Separate Account variable annuity contracts. The Separate
Account does not accept new contracts; accordingly, this report
is not authorized for distribution to prospective purchasers of
such contracts.
Investors Life Insurance
Company of North America
Administrative Offices: Austin, TX
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
INA/PUTNAM SEPARATE ACCOUNT
COMBINED BALANCE SHEET
June 30, 1996
ASSETS
Investments at Market Value (Notes 1 and 2):
PUTNAM DIVISIONS
Money Market (formerly Daily Dividend Trust)
579,491 qualified shares (cost $579,491) $579,491
1,549,402 non-qualified shares (cost $1,549,402) 1,549,402
High Yield Trust
24,539 qualified shares (cost $394,202) 296,187
165,835 non-qualified shares (cost $2,740,585) 2,001,632
Equity Income Fund
10,128 qualified shares (cost $78,115) 121,230
43,313 non-qualified shares (cost $495,521) 518,456
Investors Trust
76,987 qualified shares (cost $777,269) 732,917
103,120 non-qualified shares (cost $948,884) 981,695
Income Fund
37,199 qualified shares (cost $239,818) 254,067
50,694 non-qualified shares (cost $271,430) 346,240
PCM DIVISIONS
Money Market Division
8,618,454 non-qualified shares (cost $8,618,454) 8,618,455
Growth and Income Division
150,703 non-qualified shares (cost $2,631,476) 3,313,969
Income Division
159,465 non-qualified shares (cost $2,072,371) 1,994,913
Total Assets $21,308,654
The accompanying notes are an integral part of these financial statements.
CONTRACT OWNERS' EQUITY
Contract Owners' Equity (Notes 3 and 7):
PUTNAM DIVISIONS
Money Market (formerly Daily Dividend Trust)
210,670 qualified accumulation ($2.7507032 per unit) $579,491
units outstanding
557,432 non-qualified accumulation ($2.7795354 per unit) 1,549,402
units outstanding
High Yield Trust
53,545 qualified accumulation ($5.5315581 per unit) 296,187
units outstanding
379,190 non-qualified accumulation ($5.2787046 per unit) 2,001,632
units outstanding
Equity Income Fund
24,576 qualified accumulation ($4.9328618 per unit) 121,230
units outstanding
104,217 non-qualified accumulation ($4.9747716 per unit) 518,456
units outstanding
Investors Trust
101,310 qualified accumulation ($7.2343964 per unit) 732,917
units outstanding
147,599 non-qualified accumulation ($6.6510971 per unit) 981,695
units outstanding
Income Fund
51,422 qualified accumulation ($4.9408204 per unit) 254,067
units outstanding
73,126 non-qualified accumulation ($4.7348352 per unit) 346,240
units outstanding
PCM DIVISIONS
Money Market Division
3,761,022 non-qualified accumulation ($2.2915193 per unit) 8,618,455
units outstanding
Growth and Income Division
668,185 non-qualified accumulation ($4.9596578 per unit) 3,313,969
units outstanding
Income Division
661,413 non-qualified accumulation ($3.0161385 per unit) 1,994,913
units outstanding
Contract Owners' Equity $21,308,654
The accompanying notes are an integral part of these financial statements.
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
INA/PUTNAM SEPARATE ACCOUNT
INDIVIDUAL STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
PUTNAM DIVISIONS
Money Money
Market Market
Qualified Non-Qualified
(formerly Daily (formerly Daily
Dividend Trust) Dividend Trust)
Investment Income:
Dividends $15,445 $40,959
Expenses:
Mortality risk and expense 2,974 7,812
fees guarantees (Notes 1 and 3)
Investment income-net 12,471 33,147
Net Realized and Unrealized
Gain (Loss) on Investments:
Net realized capital gain distributions 0 0
Net realized gain (loss) on investments:
Proceeds from sale of shares 93,133 171,833
Cost of shares sold 93,133 171,833
Net realized gain (loss) on investments 0 0
Net unrealized gain (loss) on investments 0 0
Net realized and unrealized gain (loss) 0 0
on investments
Net Increase (Decrease) in Net Assets $12,471 $33,147
from Investment Operations
High Yield High Yield
Trust Trust
Qualified Non-Qualified
Investment Income:
Dividends $14,192 $104,984
Expenses:
Mortality risk and expense 1,387 10,273
fees guarantees (Notes 1 and 3)
Investment income-net 12,805 94,711
Net Realized and Unrealized
Gain (Loss) on Investments:
Net realized capital gain distributions: 0 0
Net realized gain (loss) on investments:
Proceeds from sale of shares 4,719 309,668
Cost of shares sold 4,699 323,174
Net realized gain (loss) on investments 20 (13,506)
Net unrealized gain (loss) on investments (2,892) (7,397)
Net realized and unrealized gain (loss) (2,872) (20,903)
on investments
Net Increase (Decrease) in Net Assets $9,933 $73,808
from Investment Operations
Equity Equity
Income Income
Qualified Non-Qualified
Investment Income:
Dividends $1,616 $7,123
Expenses:
Mortality risk and expense 558 2,542
fees guarantees (Notes 1 and 3)
Investment income-net 1,058 4,581
Net Realized and Unrealized
Gain (Loss) on Investments:
Net realized capital gain distributions 0 0
Net realized gain (loss) on investments:
Proceeds from sale of shares 3,340 77,577
Cost of shares sold 3,259 91,742
Net realized gain (loss) on investments 81 (14,165)
Net unrealized gain (loss) on investments 8,798 55,799
Net realized and unrealized gain (loss) 8,879 41,634
on investments
Net Increase (Decrease) in Net Assets $9,937 $46,215
from Investment Operations
Investors Investors
Trust Trust
Qualified Non-Qualified
Investment Income:
Dividends $0 $0
Expenses:
Mortality risk and expense 3,332 4,489
fees guarantees (Notes 1 and 3)
Investment income-net (3,332) (4,489)
Net Realized and Unrealized
Gain (Loss) on Investments:
Net realized capital gain distributions 0 0
Net realized gain (loss) on investments:
Proceeds from sale of shares 9,312 18,102
Cost of shares sold 8,725 16,937
Net realized gain (loss) on investments 587 1,165
Net unrealized gain (loss) on investments 70,049 93,831
Net realized and unrealized gain (loss) 70,636 94,996
on investments
Net Increase (Decrease) in Net Assets $67,304 $90,507
from Investment Operations
Income Income
Fund Fund
Qualified Non-Qualified
Investment Income:
Dividends $8,687 $11,635
Expenses:
Mortality risk and expense 1,228 1,644
fees guarantees (Notes 1 and 3)
Investment income-net 7,459 9,991
Net Realized and Unrealized
Gain (Loss) on Investments:
Net realized capital gain distributions: 0 0
Net realized gain (loss) on investments:
Proceeds from sale of shares 15,771 2,751
Cost of shares sold 15,587 2,748
Net realized gain (loss) on investments 184 3
Net unrealized gain (loss) on investments (15,095) (19,907)
Net realized and unrealized gain (loss) (14,911) (19,904)
on investments
Net Increase (Decrease) in Net Assets ($7,452) ($9,913)
from Investment Operations
PCM DIVISIONS
Money
Market
Non-Qualified
Investment Income:
Dividends $222,171
Expenses:
Mortality risk and expense 42,806
fees guarantees (Notes 1 and 3)
Investment income - net 179,365
Net Realized and Unrealized
Gain (Loss) on Investments:
Net realized capital gain distributions: 0
Net realized gain (loss) on investments:
Proceeds from sale of shares 1,078,921
Cost of shares sold 1,078,921
Net realized gain (loss) on investments 0
Net unrealized gain (loss) on investments 0
Net realized and unrealized gain (loss) 0
on investments
Net Increase (Decrease) in Net Assets $179,365
from Investment Operations
Growth &
Income
Non-Qualified
Investment Income:
Dividends $127,712
Expenses:
Mortality risk and expense 14,131
fees guarantees (Notes 1 and 3)
Investment income-net 113,581
Net Realized and Unrealized
Gain (Loss) on Investments:
Net realized capital gain distributions: 0
Net realized gain (loss) on investments:
Proceeds from sale of shares 91,811
Cost of shares sold 87,546
Net realized gain (loss) on investments 4,265
Net unrealized gain (loss) on investments 127,838
Net realized and unrealized gain (loss) 132,103
on investments
Net Increase (Decrease) in Net Assets $245,684
from Investment Operations
Income
Non-Qualified
Investment Income:
Dividends $126,164
Expenses:
Mortality risk and expense 9,692
fees guarantees (Notes 1 and 3)
Investment income - net 116,472
Net Realized and Unrealized
Gain (Loss) on Investments:
Net realized capital gain distributions 0
Net realized gain (loss) on investments:
Proceeds from sale of shares 129,516
Cost of shares sold 130,193
Net realized gain (loss) on investments (677)
Net unrealized gain (loss) on investments (190,341)
Net realized and unrealized gain (loss) (191,018)
on investments
Net Increase (Decrease) in Net Assets ($74,546)
from Investment Operations
The accompanying notes are an integral part of these financial statements
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
INA/PUTNAM SEPARATE ACCOUNT
INDIVIDUAL STATEMENTS OF CHANGES IN TOTAL ASSETS
SIX MONTHS ENDED JUNE 30, 1996
PUTNAM DIVISIONS
Money Money
Market Market
Qualified Non-Qualified
(formerly Daily (formerly Daily
Dividend Trust) Dividend Trust)
Investment Operations:
Investment income-net $12,471 $33,147
Realized capital gain distributions 0 0
Net realized gain (loss) on investments 0 0
Net unrealized gain (loss) on investments 0 0
Net increase (decrease) in net 12,471 33,147
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and 0 0
transfers in (Note 3)
Net contract surrenders and transfers (89,260) (161,425)
out (Note 3)
Benefit payments to annuitants (927) (3,158)
Net increase (Decrease) from accumulation (90,187) (164,583)
unit transactions
Net Increase (Decrease) in Net Assets (77,716) (131,436)
Net Assets:
Net assets at December 31, 1995 $657,207 $1,680,838
Net assets at June 30, 1996 $579,491 $1,549,402
High Yield High Yield
Trust Trust
Qualified Non-Qualified
Investment Operations:
Investment income-net $12,805 $94,711
Realized capital gain distributions 0 0
Net realized gain (loss) on investments 20 (13,506)
Net unrealized gain (loss) on investments (2,892) (7,397)
Net increase (decrease) in net 9,933 73,808
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and 0 0
transfers in (Note 3)
Net contract surrenders and transfers (687) (298,537)
out (Note 3)
Benefit payments to annuitants (2,645) (1,582)
Net Increase (Decrease) from accumulation (3,332) (300,119)
unit transactions
Net Increase (Decrease) in Net Assets 6,601 (226,311)
Net Assets:
Net assets at December 31, 1995 $289,586 $2,227,943
Net assets at June 30, 1996 $296,187 $2,001,632
Equity Equity
Income Income
Qualified Non-Qualified
Investment Operations:
Investment income-net $1,058 $4,581
Realized capital gain distributions 0 0
Net realized gain (loss) on investments 81 (14,165)
Net unrealized gain (loss) on investments 8,798 55,799
Net increase (decrease) in net 9,937 46,215
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and 0 0
transfers in (Note 3)
Net contract surrenders and transfers (708) (75,639)
out (Note 3)
Benefit payments to annuitants (2,118) 0
Net Increase (Decrease) from accumulation (2,826) (75,639)
unit transactions
Net Increase (Decrease) in Net Assets 7,111 (29,424)
Net Assets:
Net assets at December 31, 1995 $114,119 $547,880
Net assets at June 30, 1996 $121,230 $518,456
Investors Investors
Trust Trust
Qualified Non-Qualified
Investment Operations:
Investment income-net ($3,332) ($4,489)
Realized capital gain distributions 0 0
Net realized gain (loss) on investments 587 1,165
Net unrealized gain (loss) on investments 70,049 93,831
Net increase (decrease) in net 67,304 90,507
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and 0 0
transfers in (Note 3)
Net contract surrenders and transfers (1,900) (12,067)
out (Note 3)
Benefit payments to annuitants (4,155) (1,899)
Net Increase (Decrease) from accumulation (6,055) (13,966)
unit transactions
Net Increase (Decrease) in Net Assets 61,249 76,541
Net Assets:
Net assets at December 31, 1995 $671,668 $905,154
Net assets at June 30, 1996 $732,917 $981,695
Income Income
Fund Fund
Qualified Non-Qualified
Investment Operations:
Investment income-net $7,459 $9,991
Realized capital gain distributions 0 0
Net realized gain (loss) on investments 184 3
Net unrealized gain (loss) on investments (15,095) (19,907)
Net increase (decrease) in net (7,452) (9,913)
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and 0 0
transfers in (Note 3)
Net contract surrenders and transfers (14,927) (25)
out (Note 3)
Benefit payments to annuitants 0 (1,206)
Net Increase (Decrease) from accumulation (14,927) (1,231)
unit transactions
Net Increase (Decrease) in Net Assets (22,379) (11,144)
Net Assets:
Net assets at December 31, 1995 $276,446 $357,384
Net assets at June 30, 1996 $254,067 $346,240
PCM DIVISIONS
Money
Market
Non-Qualified
Investment Operations:
Investment income-net $179,365
Realized capital gain distributions 0
Net realized gain (loss) on investments 0
Net unrealized gain (loss) on investments 0
Net increase (decrease) in net 179,365
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and 19,116
transfers in (Note 3)
Net contract surrenders and transfers (1,020,616)
out (Note 3)
Benefit payments to annuitants (16,678)
Net Increase (Decrease) from accumulation (1,018,178)
unit transactions
Net Increase (Decrease) in Net Assets (838,813)
Net Assets:
Net assets at December 31, 1995 $9,457,268
Net assets at June 30, 1996 $8,618,455
Growth &
Income
Non-Qualified
Investment Operations:
Investment income-net $113,581
Realized capital gain distributions 0
Net realized gain (loss) on investments 4,265
Net unrealized gain (loss) on investments 127,838
Net increase (decrease) in net 245,684
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and 276,289
transfers in (Note 3)
Net contract surrenders and transfers (92,928)
out (Note 3)
Benefit payments to annuitants (4,538)
Net Increase (Decrease) from accumulation 178,823
unit transactions
Net Increase (Decrease) in Net Assets 424,507
Net Assets:
Net assets at December 31, 1995 $2,889,462
Net assets at June 30, 1996 $3,313,969
Income
Non-Qualified
Investment Operations:
Investment income-net $116,472
Realized capital gain distributions 0
Net realized gain (loss) on investments (677)
Net unrealized gain (loss) on investments (190,341)
Net increase (decrease) in net (74,546)
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and 54,788
transfers in (Note 3)
Net contract surrenders and transfers (111,131)
out (Note 3)
Benefit payments to annuitants (9,055)
Net Increase (Decrease) from accumulation (65,398)
unit transactions
Net Increase (Decrease) in Net Assets (139,944)
Net Assets:
Net assets at December 31, 1995 $2,134,857
Net assets at June 30, 1996 $1,994,913
The accompanying notes are an integral part of these financial statements
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
INA/PUTNAM SEPARATE ACCOUNT
INDIVIDUAL STATEMENTS OF CHANGES IN TOTAL ASSETS
SIX MONTHS ENDED JUNE 30, 1995
PUTNAM DIVISIONS
Money Money
Market Market
Qualified Non-Qualified
(formerly Daily (formerly Daily
Dividend Trust) Dividend Trust)
Investment Operations:
Investment income-net $14,259 $41,054
Realized capital gain distributions 0 0
Net realized gain (loss) on investments 0 0
Net unrealized gain (loss) on investments 0 0
Net increase (decrease) in net 14,259 41,054
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and 0 0
transfers in (Note 3)
Net contract surrenders and transfers (2,375) (228,715)
out (Note 3)
Benefit payments to annuitants (1,441) (3,206)
Net Increase (Decrease) from accumulation (3,816) (231,921)
unit transactions
Net Increase (Decrease) in Net Assets 10,443 (190,867)
Net Assets:
Net assets at December 31, 1994 $641,638 $1,963,895
Net assets at June 30, 1995 $652,081 $1,773,028
High Yield High Yield
Trust Trust
Qualified Non-Qualified
Investment Operations:
Investment income-net $12,883 $104,906
Realized capital gain distributions 0 0
Net realized gain (loss) on investments 16 (6,722)
Net unrealized gain (loss) on investments 10,558 94,100
Net increase (decrease) in net 23,457 192,284
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and 0 0
transfers in (Note 3)
Net contract surrenders and transfers (90) (242,180)
out (Note 3)
Benefit payments to annuitants (2,787) (1,493)
Net Increase (Decrease) from accumulation (2,877) (243,673)
unit transactions
Net Increase (Decrease) in Net Assets 20,580 (51,389)
Net Assets:
Net assets at December 31, 1994 $252,659 $2,151,427
Net assets at June 30, 1995 $273,239 $2,100,038
Equity Equity
Income Income
Qualified Non-Qualified
Investment Operations:
Investment income-net $1,202 $6,698
Realized capital gain distributions 0 0
Net realized gain (loss) on investments (84) (27,486)
Net unrealized gain (loss) on investments 13,968 106,200
Net increase (decrease) in net 15,086 85,412
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and 0 0
transfers in (Note 3)
Net contract surrenders and transfers (37) (118,445)
out (Note 3)
Benefit payments to annuitants (1,759) 0
Net Increase (Decrease) from accumulation (1,796) (118,445)
unit transactions
Net Increase (Decrease) in Net Assets 13,290 (33,033)
Net Assets:
Net assets at December 31, 1994 $89,232 $548,473
Net assets at June 30, 1995 $102,522 $515,440
Investors Investors
Trust Trust
Qualified Non-Qualified
Investment Operations:
Investment income-net ($2,797) ($3,555)
Realized capital gain distributions 0 0
Net realized gain (loss) on investments 806 4,009
Net unrealized gain (loss) on investments 113,385 140,875
Net increase (decrease) in net 111,394 141,329
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and 0 0
transfers in (Note 3)
Net contract surrenders and transfers (243) (29,610)
out (Note 3)
Benefit payments to annuitants (3,510) (1,560)
Net Increase (Decrease) from accumulation (3,753) (31,170)
unit transactions
Net Increase (Decrease) in Net Assets 107,641 110,159
Net Assets:
Net assets at December 31, 1994 $546,602 $707,438
Net assets at June 30, 1995 $654,243 $817,597
Income Income
Fund Fund
Qualified Non-Qualified
Investment Operations:
Investment income-net $7,600 $10,435
Realized capital gain distributions 0 0
Net realized gain (loss) on investments 14 366
Net unrealized gain (loss) on investments 18,673 25,270
Net increase (decrease) in net 26,287 36,071
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and 0 0
transfers in (Note 3)
Net contract surrenders and transfers (84) (29,060)
out (Note 3)
Benefit payments to annuitants 0 (1,181)
Net Increase (Decrease) from accumulation (84) (30,241)
unit transactions
Net Increase (Decrease) in Net Assets 26,203 5,830
Net Assets:
Net assets at December 31, 1994 $233,045 $330,644
Net assets at June 30, 1995 $259,248 $336,474
CIGNA DIVISIONS
Money
Market
Non-Qualified
Investment Operations:
Investment income-net $236,794
Realized capital gain distributions 0
Net realized gain (loss) on investments 0
Net unrealized gain (loss) on investments (12,508)
Net increase (decrease) in net 224,286
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and 109,956
transfers in (Note 3)
Net contract surrenders and transfers (934,904)
out (Note 3)
Benefit payments to annuitants (10,581)
Net Increase (Decrease) from accumulation (835,529)
unit transactions
Net Increase (Decrease) in Net Assets (611,243)
Net Assets:
Net assets at December 31, 1994 $10,697,470
Net assets at June 30, 1995 $10,086,227
Equity
Non-Qualified
Investment Operations:
Investment income-net $10,148
Realized capital gain distributions 0
Net realized gain (loss) on investments 5,562
Net unrealized gain (loss) on investments 366,390
Net increase (decrease) in net 382,100
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and 16,662
transfers in (Note 3)
Net contract surrenders and transfers (143,558)
out (Note 3)
Benefit payments to annuitants (5,447)
Net Increase (Decrease) from accumulation (132,343)
unit transactions
Net Increase (Decrease) in Net Assets 249,757
Net Assets:
Net assets at December 31, 1994 $2,260,154
Net assets at June 30, 1995 $2,509,911
Income
Non-Qualified
Investment Operations:
Investment income-net $29,955
Realized capital gain distributions 0
Net realized gain (loss) on investments 764
Net unrealized gain (loss) on investments 169,827
Net increase (decrease) in net 200,546
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and 8,434
transfers in (Note 3)
Net contract surrenders and transfers (138,872)
out (Note 3)
Benefit payments to annuitants (9,458)
Net Increase (Decrease) from accumulation (139,896)
unit transactions
Net Increase (Decrease) in Net Assets 60,650
Net Assets:
Net assets at December 31, 1994 $1,967,085
Net assets at June 30, 1995 $2,027,735
The accompanying notes are an integral part of these financial statements
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
INA/PUTNAM SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
June 30, 1996
Note 1. Organization
Investors Life Insurance Company of North America - INA/Putnam
Separate Account (the "Separate Account"), a separate account of
Investors Life Insurance Company of North America ("Investors
Life"), is registered under the Investment Company Act of 1940,
as amended, as a unit investment trust. The Separate Account
currently has five specific Putnam Divisions which correspond to
five Putnam mutual funds (the "Putnam Funds") and three PCM
Divisions which correspond to three portfolios of the PCM Trust
(the "PCM Funds") (and, collectively, the "Funds"). Each
Division contains two subdivisions, one for the allocation of tax
qualified and one for the allocation of non-tax qualified net
payments made under variable annuity contracts.
Amounts allocated to the Separate Account for variable annuity
contracts can be invested by Investors Life in up to three of the
following mutual funds: Putnam Income Fund, Inc., Putnam High
Yield Trust, Putnam Equity Income Fund (formerly Putnam Strategic
Income Trust), Putnam Money Market Fund (which was known as the
Putnam Daily Dividend Trust prior to a name change which was
effective September 1, 1994) and Putnam Investors Fund, Inc. (the
"Putnam Divisions"). In addition, variable annuity contract
values transferred as a result of Revenue Ruling 81-225 (see Note
5), can be invested in up to three of the following portfolios of
PCM Trust: PCM Money Market Fund, PCM Income Fund and PCM Growth
and Income Fund (the "PCM Divisions"). The contract owners'
equity of each subdivision of the Separate Account is affected by
the investment results of the appropriate Putnam Fund, or PCM
Fund, shares designated for the subdivision, the mortality risk
and expense fees guarantees assessed on Separate Account assets
(see Note 3) and the administrative charge deductions.
Note 2. Significant Accounting Policies
Following is a summary of the significant accounting policies of
the Separate Account:
(a) the market value of investments is based on closing bid
prices (net asset value) at June 30, 1996; (b) investment
transactions are accounted for on the trade date and income is
recorded on the ex-dividend date; (c) the cost of investments
sold is determined on the specific identification method. See
Notes 4 through 6 with respect to income taxes.
Note 3. Contract Owner Transactions
Contract owners have limited rights to transfer their contract
values between Separate Account Divisions. Certain contract
owners affected by Revenue Ruling 81-225 have limited rights to
transfer their contract values to Divisions for which one of the
portfolios of PCM Funds serves as the underlying investment
vehicle (see Note 5). The amount of all transfers for the six
months ended June 30, 1996 was $350,193. Payments for the six
months ended June 30, 1996 were $1,529,657 with respect to
contract surrender benefits and $47,961 with respect to annuity
benefits. Investors Life charges a fee to each Separate Account
subdivision for assuming the mortality risk and expense fees
guarantees. The daily equivalent of the annual charges of 0.95%
is made against the average net value of the Separate Account.
Note 4. Income Taxes
Investors Life is taxed as a life insurance company under the
Internal Revenue Code. The Separate Account is taxed as a part of
Investors Life. Under the current provisions of the Code, no
federal income taxes are payable by Investors Life with respect
to investment income and capital gains on the assets of the
Separate Account when used to determine contract values.
Investors Life retains the right to make adjustments for taxes to
Separate Account assets should future changes in the Internal
Revenue Code so warrant.
Note 5. Effect of Revenue Ruling 81-225
Revenue Ruling 81-225 was issued by the Internal Revenue Service
on September 25, 1981. The Ruling pertains to variable
annuities, where the insurance company, through a separate
account, holds shares of mutual funds which also offer their
shares to the public independently. The Ruling also questioned
the tax treatment of variable annuity contracts where the
underlying mutual funds are not managed by the issuing insurance
company or an affiliate, or where the contract owner may
initially allocate and subsequently reallocate the contract
values among several underlying funds.
The Ruling adversely affected the tax status of the Separate
Account variable annuity contracts issued on a non-tax qualified
basis after December 31, 1980, and those issued after September
25, 1981 which were intended to qualify under Internal Revenue
Code Sections 403(a), 403(b) or 408(b).
As a result, Investors Life suspended new contract sales
utilizing the Putnam Division. A former affiliate of Investors
Life sponsored the creation of a new money market mutual fund
called INA Annuity Fund Inc. This fund became the CIGNA Annuity
Fund, Inc. Money Market portfolio late in 1982 and three
additional portfolios were introduced. In October, 1985, the
CIGNA Annuity Fund, Inc. was reorganized as the CIGNA Annuity
Funds Group, pursuant to a plan of reorganization approved by
shareholders of the Fund. Contract owners who transfer their
Putnam Division contract values to the CIGNA Division cannot
later reverse the transfer back to any of the Putnam Division.
As of April 18, 1995, shares of the PCM Funds were substituted
for shares of the applicable CIGNA Fund and the underlying
investment vehicle. Investors Life obtained an order from the
U.S. Securities and Exchange Commission approving the provisions
of the substitution. Thereafter, the proposal was submitted to
contractholders for their approval, in accordance with the
provisions of the variable annuity contracts. The substitution
of PCM Funds as the underlying investment vehicle for the
variable annuity contracts was effected by Investors Life's
exchange of shares of each of the portfolios of the CIGNA Funds
for shares of the corresponding portfolio of PCM Funds.
Note 6. Diversification Requirements
Under the provisions of Section 817(h) of the Internal Revenue
Code, a variable annuity contract, other than a contract issued
in connection with certain types of employee benefit plans, will
not be treated as an annuity contract for federal tax purposes
for any period for which the investments of the segregated asset
account on which the contract is based are not adequately
diversified. The Code provides that the "adequately diversified"
requirement may be met if the underlying investments satisfy
either a statutory safe harbor test or diversification
requirements set forth in regulations issued by the Secretary of
Treasury.
The Internal Revenue Service has issued regulations under section
817(h) of the Code. Investors Life believes that the Separate
Account satisfies the current requirements of the regulations,
and it intends that the Separate Account will continue to meet
such requirements.
Note 7. Accumulation Unit Transactions
The changes in the number of accumulation units (the measure of
ownership in the Separate Account) during the six months ended
June 30, 1996, and units outstanding at June 30, 1996
were as follows:
PUTNAM DIVISIONS
Money Money
Market Market
Qualified Non-Qualified
(formerly Daily (formerly Daily
Dividend Trust) Dividend Trust)
Units outstanding at December 31, 1995 243,748 616,936
Units purchased and transfers in 0 0
Benefits, surrenders and transfers out (33,078) (59,504)
Units outstanding at June 30, 1996 210,670 557,432
High Yield High Yield
Trust Trust
Qualified Non-Qualified
Units outstanding at December 31, 1995 54,154 436,583
Units purchased and transfers in 0 0
Benefits, surrenders and transfers out (609) (57,393)
Units outstanding at June 30, 1996 53,545 379,190
Equity Equity
Income Income
Qualified Non-Qualified
Units outstanding at December 31, 1995 25,171 119,831
Units purchased and transfers in 0 0
Benefits, surrenders and transfers out (595) (15,614)
Units outstanding at June 30, 1996 24,576 104,217
Investors Investors
Trust Trust
Qualified Non-Qualified
Units outstanding at December 31, 1995 102,180 149,772
Units purchased and transfers in 0 0
Benefits, surrenders and transfers out (870) (2,173)
Units outstanding at June 30, 1996 101,310 147,599
Income Income
Fund Fund
Qualified Non-Qualified
Units outstanding at December 31, 1995 54,398 73,385
Units purchased and transfers in 0 0
Benefits, surrenders and transfers out (2,976) (259)
Units outstanding at June 30, 1996 51,422 73,126
PCM DIVISIONS
Money
Market
Non-Qualified
Units outstanding at December 31, 1995 4,209,398
Units purchased and transfers in 8,466
Benefits, surrenders and transfers out (456,842)
Units outstanding at June 30, 1996 3,761,022
Growth and
Income
Non-Qualified
Units outstanding at December 31, 1995 633,002
Units purchased and transfers in 47,998
Benefits, surrenders and transfers out (12,815)
Units outstanding at June 30, 1996 668,185
Income
Non-Qualified
Units outstanding at December 31, 1995 683,185
Units purchased and transfers in 18,068
Benefits, surrenders and transfers out (39,840)
Units outstanding at June 30, 1996 661,413
The accumulation units for eleven of the subdivisions include units
applicable to contract owners who are "on benefit annuitants." At
June 30, 1996 the number of accumulation units, the aggregate
value of the subdivisions' equity and the number of monthly annuity
units and value per unit of "on benefit annuitants" are as follows:
Accumulation Aggregate
Units Value
Money Market Qualified (formerly Daily 7,517 $20,676
Dividend Trust)
Money Market Non-Qualified 28,462 $79,110
(formerly Daily Dividend Trust)
High Yield Trust Qualified 9,407 $52,034
High Yield Trust Non-Qualified 6,784 $35,814
Equity Income Fund Qualified 11,126 $54,882
Investors Trust Qualified 12,864 $93,063
Investors Trust Non-Qualified 5,305 $35,283
Income Fund Non-Qualified 5,455 $25,830
Money Market Non-Qualified 154,340 $353,673
Growth & Income Non-Qualified 21,045 $104,376
Income Non-Qualified 77,694 $234,337
Monthly Annuity
Annuity Units Unit Value
Money Market Qualified (formerly Daily 200 1.3703819
Dividend Trust)
Money Market Non-Qualified 561 1.1062010
(formerly Daily Dividend Trust)
High Yield Trust Qualified 319 3.2068314
High Yield Trust Non-Qualified 148 3.1618043
Equity Income Fund Qualified 180 2.1168809
Investors Trust Qualified 320 3.1138224
Investors Trust Non-Qualified 217 1.7832639
Income Fund Non-Qualified 103 1.0000000
Money Market Non-Qualified 2,632 1.2773686
Growth & Income Non-Qualified 402 2.1732492
Income Non-Qualified 1,054 1.6444322
