INVESTORS
LIFE INSURANCE COMPANY
OF NORTH AMERICA
(Herein called Investors Life)
INA/PUTNAM SEPARATE ACCOUNT
FINANCIAL STATEMENTS
December 31, 1995
(Audited)
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. This 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, Texas
Report of Independent Accountants
To the Contracts Owners of Investors Life Insurance Company
of North America INA/Putnam Separate Account and the Board of
Directors of Investors Life Insurance Company of North America
In our opinion, the accompanying combined balance sheet and the
related individual statements of operations and of changes in
total assets present fairly, in all material respects, the
combined financial position of the subdivisions comprising the
Investors Life Insurance Company of North America INA/Putnam
Separate Account (the Separate Account) at December 31, 1995, the
results of each of their operations for the year then ended and
the changes in each of their total assets for the two years in
the period then ended, in conformity with generally accepted
accounting principles. These financial statements are the
responsibility of the Separate Account's management; our
responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
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. We
believe that our audits provide a reasonable basis for the
opinion expressed above.
Price Waterhouse LLP
Dallas, Texas
February 15, 1996
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
INA/PUTNAM SEPARATE ACCOUNT
COMBINED BALANCE SHEET
DECEMBER 31, 1995
ASSETS
Investments at Market Value (Notes 1 and 2):
PUTNAM DIVISIONS
Money Market (formerly Daily Dividend Trust)
657,207 qualified shares (cost $657,207) $ 657,207
1,680,838 non-qualified shares (cost $1,680,838) 1,680,838
High Yield Trust
23,756 qualified shares (cost $384,709) 289,586
182,768 non-qualified shares (cost $2,959,499) 2,227,943
Equity Income Fund
10,281 qualified shares (cost $79,802) 114,119
49,358 non-qualified shares (cost $580,744) 547,880
Investors Trust
78,011 qualified shares (cost $786,069) 671,668
105,128 non-qualified shares (cost $966,174) 905,154
Income Fund
38,236 qualified shares (cost $247,102) 276,446
49,431 non-qualified shares (cost $262,667) 357,384
PCM DIVISIONS
Money Market Division
9,457,268 non-qualified shares (cost $9,455,268) 9,457,268
Growth and Income Division
134,581 non-qualified shares (cost $2,334,807) 2,889,462
Income Division
155,375 non-qualified shares (cost $2,021,974) 2,134,857
Total Assets $22,209,812
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)
243,748 qualified accumulation ($2.6962551 per unit) $ 657,207
units outstanding
616,936 non-qualified accumulation ($2.7244925 per unit) 1,680,838
units outstanding
High Yield Trust
54,154 qualified accumulation ($5.3474480 per unit) 289,586
units outstanding
436,583 non-qualified accumulation ($5.1031366 per unit) 2,227,943
units outstanding
Equity Income Fund
25,171 qualified accumulation ($4.5337460 per unit) 114,119
units outstanding
119,831 non-qualified accumulation ($4.5721053 per unit) 547,880
units outstanding
Investors Trust
102,180 qualified accumulation ($6.5733774 per unit) 671,668
units outstanding
149,772 non-qualified accumulation ($6.0435452 per unit) 905,154
units outstanding
Income Fund
54,398 qualified accumulation ($5.0819211 per unit) 276,446
units outstanding
73,385 non-qualified accumulation ($4.8699880 per unit) 357,384
units outstanding
PCM DIVISIONS
Money Market Division
4,209,398 non-qualified accumulation ($2.2467032 per unit) 9,457,268
units outstanding
Growth and Income Division
633,002 non-qualified accumulation ($4.5646966 per unit) 2,889,462
units outstanding
Income Division
683,185 non-qualified accumulation ($3.1248593 per unit) 2,134,857
units outstanding
Contract Owners' Equity $22,209,812
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
TWELVE MONTHS ENDED DECEMBER 31, 1995
PUTNAM DIVISIONS
Money Money
Market Market
Qualified Non-Qualified
(formerly Daily (formerly Daily
Dividend Trust) Dividend Trust)
Investment Income:
Dividends $ 34,718 $ 95,009
Expenses:
Mortality risk and expense 6,139 16,806
fees guarantees (Notes 1 and 3)
Investment income - net 28,579 78,203
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 19,150 378,068
Cost of shares sold 19,150 378,068
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 $ 28,579 $ 78,203
from Investment Operations
High Yield High Yield
Trust Trust
Qualified Non-Qualified
Investment Income:
Dividends $ 28,200 $ 223,406
Expenses:
Mortality risk and expense 2,567 20,337
fees guarantees (Notes 1 and 3)
Investment income - net 25,633 203,069
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 8,174 289,056
Cost of shares sold 8,159 295,769
Net realized gain (loss) on investments 15 (6,713)
Net unrealized gain (loss) on investments 16,887 142,700
Net realized and unrealized gain (loss) 16,902 135,987
on investments
Net Increase (Decrease) in Net Assets $ 42,535 $ 339,056
from Investment Operations
Equity Equity
Income Income
Qualified Non-Qualified
Investment Income:
Dividends $ 2,788 $ 14,916
Expenses:
Mortality risk and expense 965 5,083
fees guarantees (Notes 1 and 3)
Investment income - net 1,823 9,833
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 4,810 158,725
Cost of shares sold 5,102 205,106
Net realized gain (loss) on investments (292) (46,381)
Net unrealized gain (loss) on investments 27,203 189,597
Net realized and unrealized gain (loss) 26,911 143,216
on investments
Net Increase (Decrease) in Net Assets $ 28,734 $ 153,049
from Investment Operations
Investors Investors
Trust Trust
Qualified Non-Qualified
Investment Income:
Dividends $ 10,830 $ 14,577
Expenses:
Mortality risk and expense 5,982 7,630
fees guarantees (Notes 1 and 3)
Investment income - net 4,848 6,947
Net Realized and Unrealized
Gain (Loss) on Investments:
Net realized capital gain distributions 71,968 96,873
Net realized gain (loss) on investments:
Proceeds from sale of shares 76,958 57,144
Cost of shares sold 60,438 47,974
Net realized gain (loss) on investments 16,520 9,170
Net unrealized gain (loss) on investments 101,449 134,240
Net realized and unrealized gain (loss) 189,937 240,283
on investments
Net Increase (Decrease) in Net Assets $ 194,785 $ 247,230
from Investment Operations
Income Income
Fund Fund
Qualified Non-Qualified
Investment Income:
Dividends $ 17,746 $ 23,672
Expenses:
Mortality risk and expense 2,408 3,212
fees guarantees (Notes 1 and 3)
Investment income - net 15,338 20,460
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 2,561 34,894
Cost of shares sold 2,545 34,526
Net realized gain (loss) on investments 16 368
Net unrealized gain (loss) on investments 28,199 37,592
Net realized and unrealized gain (loss) 28,215 37,960
on investments
Net Increase (Decrease) in Net Assets $ 43,553 $ 58,420
from Investment Operations
PCM DIVISIONS
Money
Market
Non-Qualified
Investment Income:
Dividends $ 539,868
Expenses:
Mortality risk and expense 94,435
fees guarantees (Notes 1 and 3)
Investment income - net 445,433
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 1,938,451
Cost of shares sold 1,938,451
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 $ 445,433
from Investment Operations
Growth and
Income
Non-Qualified
Investment Income:
Dividends $ 22,847
Expenses:
Mortality risk and expense 23,841
fees guarantees (Notes 1 and 3)
Investment income - net (994)
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 556,817
Cost of shares sold 537,330
Net realized gain (loss) on investments 19,487
Net unrealized gain (loss) on investments 732,939
Net realized and unrealized gain (loss) 752,426
on investments
Net Increase (Decrease) in Net Assets $ 751,432
from Investment Operations
Income
Non-Qualified
Investment Income:
Dividends $ 39,573
Expenses:
Mortality risk and expense 18,953
fees guarantees (Notes 1 and 3)
Investment income - net 20,620
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 255,131
Cost of shares sold 249,357
Net realized gain (loss) on investments 5,774
Net unrealized gain (loss) on investments 319,380
Net realized and unrealized gain (loss) 325,154
on investments
Net Increase (Decrease) in Net Assets $ 345,774
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
TWELVE MONTHS ENDED DECEMBER 31, 1995
PUTNAM DIVISIONS
Money Money
Market Market
Qualified Non-Qualified
(formerly Daily (formerly Daily
Dividend Trust) Dividend Trust)
Investment Operations:
Investment income-net $ 28,579 $ 78,203
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 28,579 78,203
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and 0 0
transfers in (Note 3)
Net contract surrenders and transfers (10,395) (354,850)
out (Note 3)
Benefit payments to annuitants (2,615) (6,410)
Net decrease from accumulation (13,010) (361,260)
unit transactions
Net Increase (Decrease) in Net Assets 15,569 (283,057)
Net Assets:
Net assets at December 31, 1994 641,638 1,963,895
Net assets at December 31, 1995 $ 657,207 $ 1,680,838
High Yield High Yield
Trust Trust
Qualified Non-Qualified
Investment Operations:
Investment income-net $ 25,633 $ 203,069
Realized capital gain distributions 0 0
Net realized gain (loss) on investments 15 (6,713)
Net unrealized gain (loss) on investments 16,887 142,700
Net Increase (Decrease) in net 42,535 339,056
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and 0 10,336
transfers in (Note 3)
Net contract surrenders and transfers (197) (269,819)
out (Note 3)
Benefit payments to annuitants (5,410) (3,056)
Net Increase (Decrease) from accumulation (5,607) (262,539)
unit transactions
Net Increase (Decrease) in Net Assets 36,928 76,517
Net Assets:
Net assets at December 31, 1994 252,658 2,151,426
Net assets at December 31, 1995 $ 289,586 $2,227,943
Equity Equity
Income Income
Qualified Non-Qualified
Investment Operations:
Investment income-net $ 1,823 $ 9,833
Realized capital gain distributions 0 0
Net realized gain (loss) on investments (292) (46,381)
Net unrealized gain (loss) on investments 27,203 189,597
Net increase (decrease) in net 28,734 153,049
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and 0 3,943
transfers in (Note 3)
Net contract surrenders and transfers (104) (157,585)
out (Note 3)
Benefit payments to annuitants (3,742) 0
Net decrease from accumulation (3,846) (153,642)
unit transactions
Net Increase (Decrease) in Net Assets 24,888 (593)
Net Assets:
Net assets at December 31, 1994 89,231 548,473
Net assets at December 31, 1995 $ 114,119 $ 547,880
Investors Investors
Trust Trust
Qualified Non-Qualified
Investment Operations:
Investment income-net $ 4,848 $ 6,947
Realized capital gain distributions 71,968 96,873
Net realized gain (loss) on investments 16,520 9,170
Net unrealized gain (loss) on investments 101,449 134,240
Net increase (decrease) in net 194,785 247,230
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and 0 0
transfers in (Note 3)
Net contract surrenders and transfers (62,361) (46,164)
out (Note 3)
Benefit payments to annuitants (7,358) (3,350)
Net decrease from accumulation (69,719) (49,514)
unit transactions
Net Increase (Decrease) in Net Assets 125,066 197,716
Net Assets:
Net assets at December 31, 1994 546,602 707,438
Net assets at December 31, 1995 $ 671,668 $ 905,154
Income Income
Fund Fund
Qualified Non-Qualified
Investment Operations:
Investment income-net $ 15,338 $ 20,460
Realized capital gain distributions 0 0
Net realized gain (loss) on investments 16 368
Net unrealized gain (loss) on investments 28,199 37,592
Net increase (decrease) in net 43,553 58,420
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and 0 0
transfers in (Note 3)
Net contract surrenders and transfers (153) (29,264)
out (Note 3)
Benefit payments to annuitants 0 (2,418)
Net decrease from accumulation (153) (31,682)
unit transactions
Net Increase (Decrease) in Net Assets 43,400 26,738
Net Assets:
Net assets at December 31, 1994 233,046 330,646
Net assets at December 31, 1995 $ 276,446 $ 357,384
PCM DIVISIONS
Money
Market
Non-Qualified
Investment Operations:
Investment income-net $ 445,433
Realized capital gain distributions 0
Net realized gain (loss) on investments 0
Net unrealized gain (loss) on investments 0
Net increase (decrease) in net 445,433
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and 110,021
transfers in (Note 3)
Net contract surrenders and transfers (1,768,130)
out (Note 3)
Benefit payments to annuitants (27,526)
Net decrease from accumulation (1,685,635)
unit transactions
Net Increase (Decrease) in Net Assets (1,240,202)
Net Assets:
Net assets at December 31, 1994 10,697,470
Net assets at December 31, 1995 $ 9,457,268
Growth and
Income
Non-Qualified
Investment Operations:
Investment income-net $ (994)
Realized capital gain distributions 0
Net realized gain (loss) on investments 19,487
Net unrealized gain (loss) on investments 732,939
Net increase (decrease) in net 751,432
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and 226,089
transfers in (Note 3)
Net contract surrenders and transfers (347,319)
out (Note 3)
Benefit payments to annuitants (894)
Net decrease from accumulation (122,124)
unit transactions
Net Increase (Decrease) in Net Assets 629,308
Net Assets:
Net assets at December 31, 1994 2,260,154
Net assets at December 31, 1995 $2,889,462
Income
Non-Qualified
Investment Operations:
Investment income-net $ 20,620
Realized capital gain distributions 0
Net realized gain (loss) on investments 5,774
Net unrealized gain (loss) on investments 319,380
Net increase (decrease) in net 345,774
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and 58,677
transfers in (Note 3)
Net contract surrenders and transfers (211,052)
out (Note 3)
Benefit payments to annuitants (25,627)
Net decrease from accumulation (178,002)
unit transactions
Net Increase (Decrease) in Net Assets 167,772
Net Assets:
Net assets at December 31, 1994 1,967,085
Net assets at December 31, 1995 $2,134,857
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
TWELVE MONTHS ENDED DECEMBER 31, 1994
PUTNAM DIVISIONS
Money Money
Market Market
Qualified Non-Qualified
(formerly Daily (formerly Daily
Dividend Trust) Dividend Trust)
Investment Operations:
Investment income-net $ 19,026 $ 57,564
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 19,026 57,564
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and 16,409 23,378
transfers in (Note 3)
Net contract surrenders and transfers (183,737) (746,130)
out (Note 3)
Benefit payments to annuitants (2,292) (6,480)
Net decrease from accumulation (169,620) (729,232)
unit transactions
Net Increase (Decrease) in Net Assets (150,594) (671,668)
Net Assets:
Net assets at December 31, 1993 792,232 2,635,563
Net assets at December 31, 1994 $ 641,638 $1,963,895
High Yield High Yield
Trust Trust
Qualified Non-Qualified
Investment Operations:
Investment income-net $ 39,677 $ 230,987
Realized capital gain distributions 0 0
Net realized gain (loss) on investments (46,484) (26,182)
Net unrealized gain (loss) on investments (17,663) (348,702)
Net increase (decrease) in net (24,470) (143,897)
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and 0 5,013
transfers in (Note 3)
Net contract surrenders and transfers (292,607) (383,695)
out (Note 3)
Benefit payments to annuitants (31,684) (3,102)
Net decrease from accumulation (324,291) (381,784)
unit transactions
Net Increase (Decrease) in Net Assets (348,761) (525,681)
Net Assets:
Net assets at December 31, 1993 601,419 2,677,107
Net assets at December 31, 1994 $ 252,658 $2,151,426
Equity Equity
Income Income
Qualified Non-Qualified
Investment Operations:
Investment income-net $ 7,252 $ 26,575
Realized capital gain distributions 0 0
Net realized gain (loss) on investments (72,144) 717
Net unrealized gain (loss) on investments 69,189 (14,237)
Net increase (decrease) in net 4,297 13,055
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and 25 11,551
transfers in (Note 3)
Net contract surrenders and transfers (117,279) (47,508)
out (Note 3)
Benefit payments to annuitants (2,933) 0
Net decrease from accumulation (120,187) (35,957)
unit transactions
Net Increase (Decrease) in Net Assets (115,890) (22,902)
Net Assets:
Net assets at December 31, 1993 205,121 571,375
Net assets at December 31, 1994 $ 89,231 $ 548,473
Investors Investors
Trust Trust
Qualified Non-Qualified
Investment Operations:
Investment income-net $ (5,854) $ (5,875)
Realized capital gain distributions 50,876 67,663
Net realized gain (loss) on investments (9,409) (3,212)
Net unrealized gain (loss) on investments (65,622) (83,177)
Net increase (decrease) in net (30,009) (24,601)
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and 0 158,691
transfers in (Note 3)
Net contract surrenders and transfers (378) (129,040)
out (Note 3)
Benefit payments to annuitants (123,327) (3,060)
Net decrease from accumulation (123,705) 26,591
unit transactions
Net Increase (Decrease) in Net Assets (153,714) 1,990
Net Assets:
Net assets at December 31, 1993 700,316 705,448
Net assets at December 31, 1994 $ 546,602 $ 707,438
Income Income
Fund Fund
Qualified Non-Qualified
Investment Operations:
Investment income-net $ 16,591 $ 23,889
Realized capital gain distributions 0 0
Net realized gain (loss) on investments (1,690) (2,366)
Net unrealized gain (loss) on investments (25,849) (37,368)
Net increase (decrease) in net (10,948) (15,845)
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and 0 0
transfers in (Note 3)
Net contract surrenders and transfers (17,313) (39,973)
out (Note 3)
Benefit payments to annuitants 0 (2,373)
Net decrease from accumulation (17,313) (42,346)
unit transactions
Net Increase (Decrease) in Net Assets (28,261) (58,191)
Net Assets:
Net assets at December 31, 1993 261,307 388,837
Net assets at December 31, 1994 $ 233,046 $ 330,646
CIGNA DIVISIONS
Money
Market
Non-Qualified
Investment Operations:
Investment income-net $ 277,373
Realized capital gain distributions 0
Net realized gain (loss) on investments 0
Net unrealized gain (loss) on investments 0
Net increase (decrease) in net 277,373
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and 128,351
transfers in (Note 3)
Net contract surrenders and transfers (2,189,487)
out (Note 3)
Benefit payments to annuitants (34,919)
Net decrease from accumulation (2,096,055)
unit transactions
Net Increase (Decrease) in Net Assets (1,818,682)
Net Assets:
Net assets at December 31, 1993 12,516,152
Net assets at December 31, 1994 $10,697,470
Equity
Non-Qualified
Investment Operations:
Investment income-net $ 56,581
Realized capital gain distributions 0
Net realized gain (loss) on investments (17,318)
Net unrealized gain (loss) on investments (51,647)
Net increase (decrease) in net (12,384)
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and 153,245
transfers in (Note 3)
Net contract surrenders and transfers (545,927)
out (Note 3)
Benefit payments to annuitants (7,387)
Net decrease from accumulation (400,069)
unit transactions
Net Increase (Decrease) in Net Assets (412,453)
Net Assets:
Net assets at December 31, 1993 2,672,607
Net assets at December 31, 1994 $2,260,154
Income
Non-Qualified
Investment Operations:
Investment income-net $ 113,476
Realized capital gain distributions 0
Net realized gain (loss) on investments (26,199)
Net unrealized gain (loss) on investments (172,469)
Net increase (decrease) in net (85,192)
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and 301,271
transfers in (Note 3)
Net contract surrenders and transfers (652,149)
out (Note 3)
Benefit payments to annuitants (18,768)
Net decrease from accumulation (369,646)
unit transactions
Net Increase (Decrease) in Net Assets (454,838)
Net Assets:
Net assets at December 31, 1993 2,421,923
Net assets at December 31, 1994 $1,967,085
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
December 31, 1995
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 U.S. Government and High
Quality Bond 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 the 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 December 31, 1995; (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 year
ended December 31, 1995 was $393,573. Payments for the year
ended December 31, 1995 were $2,863,820 with respect to contract
surrender benefits and $88,407 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 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 twelve months of
1995 and units outstanding at December 31, 1995 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, 1994 248,652 753,161
Units purchased and transfers in 4,534 0
Benefits, surrenders and transfers out (9,438) (136,225)
Units outstanding at December 31, 1995 243,748 616,936
High Yield High Yield
Trust Trust
Qualified Non-Qualified
Units outstanding at December 31, 1994 55,282 493,344
Units purchased and transfers in 0 2,106
Benefits, surrenders and transfers out (1,128) (58,867)
Units outstanding at December 31, 1995 54,154 436,583
Equity Equity
Income Income
Qualified Non-Qualified
Units outstanding at December 31, 1994 26,133 159,286
Units purchased and transfers in 0 3,217
Benefits, surrenders and transfers out (962) (42,672)
Units outstanding at December 31, 1995 25,171 119,831
Investors Investors
Trust Trust
Qualified Non-Qualified
Units outstanding at December 31, 1994 113,309 159,523
Units purchased and transfers in 0 0
Benefits, surrenders and transfers out (11,129) (9,751)
Units outstanding at December 31, 1995 102,180 149,772
Income Income
Fund Fund
Qualified Non-Qualified
Units outstanding at December 31, 1994 54,431 80,616
Units purchased and transfers in 0 0
Benefits, surrenders and transfers out (33) (7,231)
Units outstanding at December 31, 1995 54,398 73,385
PCM DIVISIONS
Money
Market
Non-Qualified
Units outstanding at December 31, 1994 4,978,512
Units purchased and transfers in 73,985
Benefits, surrenders and transfers out (843,099)
Units outstanding at December 31, 1995 4,209,398
Growth and
Income
Non-Qualified
Units outstanding at December 31, 1994 666,416
Units purchased and transfers in 78,126
Benefits, surrenders and transfers out (111,540)
Units outstanding at December 31, 1995 633,002
Income
Non-Qualified
Units outstanding at December 31, 1994 747,285
Units purchased and transfers in 19,839
Benefits, surrenders and transfers out (83,939)
Units outstanding at December 31, 1995 683,185
The accumulation units for eleven of the subdivisions include units
applicable to contract owners who are "on benefit annuitants." At
December 31, 1995 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 7,858 $ 21,187
Money Market Non-Qualified 29,609 $ 80,669
High Yield Trust Qualified 9,890 $ 52,886
High Yield Trust Non-Qualified 7,086 $ 36,161
Equity Income Fund Qualified 11,571 $ 52,460
Investors Trust Qualified 13,463 $ 88,497
Investors Trust Non-Qualified 5,603 $ 33,862
Income Fund Non-Qualified 5,708 $ 27,798
Money Market Non-Qualified 161,689 $ 363,267
Growth and Income Non-Qualified 21,991 $ 100,382
Income Non-Qualified 80,676 $ 252,101
Monthly Annuity
Annuity Units Unit Value
Money Market Qualified 200 1.3665109
Money Market Non-Qualified 561 1.1030650
High Yield Trust Qualified 319 3.1537673
High Yield Trust Non-Qualified 148 3.1095630
Equity Income Fund Qualified 180 1.9792875
Investors Trust Qualified 320 2.8782896
Investors Trust Non-Qualified 217 1.6484216
Income Fund Non-Qualified 103 3.1078365
Money Market Non-Qualified 2,632 1.2740671
Growth & Income Non-Qualified 513 2.0348117
Income Non-Qualified 1,162 1.7332041
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