INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
(Herein called Investors Life)
INA/PUTNAM SEPARATE ACCOUNT
FINANCIAL STATEMENTS
June 30, 1997
(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
INA/PUTNAM SEPARATE ACCOUNT
COMBINED BALANCE SHEET
June 30, 1997
ASSETS
Investments at Market Value (Notes 1 and 2):
PUTNAM DIVISIONS
Money Market (formerly Daily Dividend Trust)
455,942 qualified shares (cost $455,942) $455,942
1,445,669 non-qualified shares (cost $1,445,669) 1,455,669
High Yield Trust
24,627 qualified shares (cost $393,679) 312,269
169,821 non-qualified shares (cost $2,787,588) 2,153,326
Equity Income Fund
9,165 qualified shares (cost $65,226) 137,477
43,199 non-qualified shares (cost $493,668) 647,987
Investors Trust
81,416 qualified shares (cost $820,616) 892,315
95,726 non-qualified shares (cost $898,801) 1,049,160
Income Fund
39,457 qualified shares (cost $255,516) 275,807
45,595 non-qualified shares (cost $238,138) 318,710
PCM DIVISIONS
Money Market Division
8,196,848 non-qualified shares (cost $8,196,848) 8,196,848
Growth and Income Division
162,415 non-qualified shares (cost $3,010,053) 4,289,387
Income Division
147,543 non-qualified shares (cost $1,925,973) 1,873,798
Total Assets $22,048,695
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)
159,129 qualified accumulation ($2.8652356 per unit) $455,942
units outstanding
499,390 non-qualified accumulation ($2.8948707 per unit) 1,445,669
units outstanding
High Yield Trust
49,597 qualified accumulation ($6.2961296 per unit) 312,269
units outstanding
358,395 non-qualified accumulation ($6.0082476 per unit) 2,153,326
units outstanding
Equity Income Fund
21,955 qualified accumulation ($6.2617592 per unit) 137,477
units outstanding
102,625 non-qualified accumulation ($6.3141265 per unit) 647,987
units outstanding
Investors Trust
95,143 qualified accumulation ($9.3786711 per unit) 892,315
units outstanding
121,664 non-qualified accumulation ($8.6234220 per unit) 1,049,160
units outstanding
Income Fund
51,397 qualified accumulation ($5.3662090 per unit) 275,807
units outstanding
62,003 non-qualified accumulation ($5.1402337 per unit) 318,710
units outstanding
PCM DIVISIONS
Money Market Division
3,433,748 non-qualified accumulation ($2.3871430 per unit) 8,196,848
units outstanding
Growth and Income Division
675,014 non-qualified accumulation ($6.3545163 per unit) 4,289,387
units outstanding
Income Division
577,719 non-qualified accumulation ($3.2434411 per unit) 1,873,798
units outstanding
Contract Owners' Equity $22,048,695
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, 1997
PUTNAM DIVISIONS
Money Money
Market Market
Qualified Non-Qualified
(formerly Daily (formerly Daily
Dividend Trust) Dividend Trust)
Investment Income:
Dividends $11,811 $36,063
Expenses:
Mortality risk and expense 2,211 6,751
fees guarantees (Notes 1 and 3)
Investment income - net 9,600 29,312
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 40,893 90,750
Cost of shares sold 40,893 90,750
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 $9,600 $29,312
from Investment Operations
High Yield High Yield
Trust Trust
Qualified Non-Qualified
Investment Income:
Dividends $13,537 $93,111
Expenses:
Mortality risk and expense 1,422 9,788
fees guarantees (Notes 1 and 3)
Investment income - net 12,115 83,323
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 4,212 59,865
Cost of shares sold 4,209 59,398
Net realized gain (loss) on investments 3 467
Net unrealized gain (loss) on investments 4,197 28,557
Net realized and unrealized gain (loss) 4,200 29,024
on investments
Net Increase (Decrease) in Net Assets $16,315 $112,347
from Investment Operations
Equity Equity
Income Income
Qualified Non-Qualified
Investment Income:
Dividends $1,282 $6,017
Expenses:
Mortality risk and expense 605 2,823
fees guarantees (Notes 1 and 3)
Investment income - net 677 3,194
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 3,113 2,823
Cost of shares sold 3,007 2,746
Net realized gain (loss) on investments 106 77
Net unrealized gain (loss) on investments 17,206 80,802
Net realized and unrealized gain (loss) 17,312 80,879
on investments
Net Increase (Decrease) in Net Assets $17,989 $84,073
from Investment Operations
Investors Investors
Trust Trust
Qualified Non-Qualified
Investment Income:
Dividends $0 $0
Expenses:
Mortality risk and expense 3,877 4,652
fees guarantees (Notes 1 and 3)
Investment income - net (3,877) (4,652)
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 8,789 183,576
Cost of shares sold 8,125 157,122
Net realized gain (loss) on investments 664 26,454
Net unrealized gain (loss) on investments 142,472 150,771
Net realized and unrealized gain (loss) 143,136 177,225
on investments
Net Increase (Decrease) in Net Assets $139,259 $172,573
from Investment Operations
Income Income
Fund Fund
Qualified Non-Qualified
Investment Income:
Dividends $8,625 $10,241
Expenses:
Mortality risk and expense 1,269 1,509
fees guarantees (Notes 1 and 3)
Investment income - net 7,356 8,732
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 1,338 16,445
Cost of shares sold 1,346 15,707
Net realized gain (loss) on investments (8) 738
Net unrealized gain (loss) on investments (736) (1,761)
Net realized and unrealized gain (loss) (744) (1,023)
on investments
Net Increase (Decrease) in Net Assets $6,612 $7,709
from Investment Operations
PCM DIVISIONS
Money
Market
Non-Qualified
Investment Income:
Dividends $206,576
Expenses:
Mortality risk and expense 38,839
fees guarantees (Notes 1 and 3)
Investment income - net 167,737
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 414,961
Cost of shares sold 414,961
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 $167,737
from Investment Operations
Growth &
Income
Non-Qualified
Investment Income:
Dividends $117,111
Expenses:
Mortality risk and expense 18,320
fees guarantees (Notes 1 and 3)
Investment income - net 98,791
Net Realized and Unrealized
Gain (Loss) on Investments:
Net realized capital gain distributions 156,196
Net realized gain (loss) on investments:
Proceeds from sale of shares 113,197
Cost of shares sold 107,936
Net realized gain (loss) on investments 5,261
Net unrealized gain (loss) on investments 298,388
Net realized and unrealized gain (loss) 459,845
on investments
Net Increase (Decrease) in Net Assets $558,636
from Investment Operations
Income
Non-Qualified
Investment Income:
Dividends $121,496
Expenses:
Mortality risk and expense 9,184
fees guarantees (Notes 1 and 3)
Investment income - net 112,312
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 189,479
Cost of shares sold 177,285
Net realized gain (loss) on investments 12,194
Net unrealized gain (loss) on investments (81,328)
Net realized and unrealized gain (loss) (69,134)
on investments
Net Increase (Decrease) in Net Assets $43,178
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, 1997
PUTNAM DIVISIONS
Money Money
Market Market
Qualified Non-Qualified
(formerly Daily (formerly Daily
Dividend Trust) Dividend Trust)
Investment Operations:
Investment income-net $9,600 $29,312
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 9,600 29,312
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and 0 0
transfers in (Note 3)
Net contract surrenders and transfers (38,403) (80,843)
out (Note 3)
Benefit payments to annuitants (280) (3,155)
Net Increase (Decrease) from accumulation (38,683) (83,998)
unit transactions
Net Increase (Decrease) in Net Assets (29,083) (54,686)
Net Assets:
Net assets at December 31, 1996 $485,025 $1,500,355
Net assets at June 30, 1997 $455,942 $1,445,669
High Yield High Yield
Trust Trust
Qualified Non-Qualified
Investment Operations:
Investment income-net $12,115 $83,323
Realized capital gain distributions 0 0
Net realized gain (loss) on investments 3 467
Net unrealized gain (loss) on investments 4,197 28,557
Net increase (decrease) in net 16,315 112,347
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and 0 0
transfers in (Note 3)
Net contract surrenders and transfers (86) (48,452)
out (Note 3)
Benefit payments to annuitants (2,706) (1,625)
Net Increase (Decrease) from accumulation (2,792) (50,077)
unit transactions
Net Increase (Decrease) in Net Assets 13,523 62,270
Net Assets:
Net assets at December 31, 1996 $298,746 $2,091,056
Net assets at June 30, 1997 $312,269 $2,153,326
Equity Equity
Income Income
Qualified Non-Qualified
Investment Operations:
Investment income-net $677 $3,194
Realized capital gain distributions 0 0
Net realized gain (loss) on investments 106 77
Net unrealized gain (loss) on investments 17,206 80,802
Net increase (decrease) in net 17,989 84,073
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and 0 0
transfers in (Note 3)
Net contract surrenders and transfers (37) 0
out (Note 3)
Benefit payments to annuitants (2,471) 0
Net Increase (Decrease) from accumulation (2,508) 0
unit transactions
Net Increase (Decrease) in Net Assets 15,481 84,073
Net Assets:
Net assets at December 31, 1996 $121,996 $563,914
Net assets at June 30, 1997 $137,477 $647,987
Investors Investors
Trust Trust
Qualified Non-Qualified
Investment Operations:
Investment income-net ($3,877) ($4,652)
Realized capital gain distributions 0 0
Net realized gain (loss) on investments 664 26,454
Net unrealized gain (loss) on investments 142,472 150,771
Net increase (decrease) in net 139,259 172,573
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and 0 0
transfers in (Note 3)
Net contract surrenders and transfers (123) (176,793)
out (Note 3)
Benefit payments to annuitants (4,790) (2,131)
Net Increase (Decrease) from accumulation (4,913) (178,924)
unit transactions
Net Increase (Decrease) in Net Assets 134,346 (6,351)
Net Assets:
Net assets at December 31, 1996 $757,969 $1,055,511
Net assets at June 30, 1997 $892,315 $1,049,160
Income Income
Fund Fund
Qualified Non-Qualified
Investment Operations:
Investment income-net $7,356 $8,732
Realized capital gain distributions 0 0
Net realized gain (loss) on investments (8) 738
Net unrealized gain (loss) on investments (736) (1,761)
Net increase (decrease) in net 6,612 7,709
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and 0 0
transfers in (Note 3)
Net contract surrenders and transfers (70) (2,024)
out (Note 3)
Benefit payments to annuitants 0 (12,912)
Net Increase (Decrease) from accumulation (70) (14,936)
unit transactions
Net Increase (Decrease) in Net Assets 6,542 (7,227)
Net Assets:
Net assets at December 31, 1996 $269,265 $325,937
Net assets at June 30, 1997 $275,807 $318,710
PCM DIVISIONS
Money
Market
Non-Qualified
Investment Operations:
Investment income-net $167,737
Realized capital gain distributions 0
Net realized gain (loss) on investments 0
Net unrealized gain (loss) on investments 0
Net increase (decrease) in net 167,737
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and 417
transfers in (Note 3)
Net contract surrenders and transfers (341,331)
out (Note 3)
Benefit payments to annuitants (35,206)
Net Increase (Decrease) from accumulation (376,120)
unit transactions
Net Increase (Decrease) in Net Assets (208,383)
Net Assets:
Net assets at December 31, 1996 $8,405,231
Net assets at June 30, 1997 $8,196,848
Growth &
Income
Non-Qualified
Investment Operations:
Investment income-net $98,791
Realized capital gain distributions 156,196
Net realized gain (loss) on investments 5,261
Net unrealized gain (loss) on investments 298,388
Net increase (decrease) in net 558,636
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and 231,547
transfers in (Note 3)
Net contract surrenders and transfers (107,313)
out (Note 3)
Benefit payments to annuitants (5,254)
Net Increase (Decrease) from accumulation 118,980
unit transactions
Net Increase (Decrease) in Net Assets 677,616
Net Assets:
Net assets at December 31, 1996 $3,611,771
Net assets at June 30, 1997 $4,289,387
Income
Non-Qualified
Investment Operations:
Investment income-net $112,312
Realized capital gain distributions 0
Net realized gain (loss) on investments 12,194
Net unrealized gain (loss) on investments (81,328)
Net increase (decrease) in net 43,178
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and 0
transfers in (Note 3)
Net contract surrenders and transfers (171,363)
out (Note 3)
Benefit payments to annuitants (8,931)
Net Increase (Decrease) from accumulation (180,294)
unit transactions
Net Increase (Decrease) in Net Assets (137,116)
Net Assets:
Net assets at December 31, 1996 $2,010,914
Net assets at June 30, 1997 $1,873,798
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
CIGNA 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
Equity
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
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
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 Putnam VT
Divisions which correspond to three portfolios of the Putnam
Variable Trust (formerly the Putnam Capital Manager Trust") (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 Putnam
Variable Trust: Putnam VT Money Market Fund, Putnam VT U.S.
Government and High Quality Bond Fund and Putnam VT Growth and
Income Fund (the "Putnam VT Divisions"). The contract owners'
equity of each subdivision of the Separate Account is affected by
the investment results of the appropriate Putnam Fund, or Putnam VT
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, 1997; (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 Putnam Variable Trust serves as the underlying investment
vehicle (see Note 5). The amount of all transfers for the six-
month period ended June 30, 1997 was $231,964. Payments for the
six-month period ended June 30, 1997 were $728,676 with respect to
contract surrender benefits and $79,462 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 Putnam Variable Trust were
substituted for shares of the applicable CIGNA Fund as 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 shares of certain portfolios of Putnam Variable Trust 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 Putnam Variable Trust.
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, 1997 and units outstanding at June 30, 1997
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, 1996 172,761 528,939
Units purchased and transfers in 0 0
Benefits, surrenders and transfers out (13,632) (29,549)
Units outstanding at June 30, 1997 159,129 499,390
High Yield High Yield
Trust Trust
Qualified Non-Qualified
Units outstanding at December 31, 1996 50,055 367,144
Units purchased and transfers in 0 0
Benefits, surrenders and transfers out (458) (8,749)
Units outstanding at June 30, 1997 49,597 358,395
Equity Equity
Income Income
Qualified Non-Qualified
Units outstanding at December 31, 1996 22,389 102,625
Units purchased and transfers in 0 0
Benefits, surrenders and transfers out (434) 0
Units outstanding at June 30, 1997 21,955 102,625
Investors Investors
Trust Trust
Qualified Non-Qualified
Units outstanding at December 31, 1996 95,730 144,982
Units purchased and transfers in 0 0
Benefits, surrenders and transfers out (587) (23,318)
Units outstanding at June 30, 1997 95,143 121,664
Income Income
Fund Fund
Qualified Non-Qualified
Units outstanding at December 31, 1996 51,410 64,939
Units purchased and transfers in 0 0
Benefits, surrenders and transfers out (13) (2,936)
Units outstanding at June 30, 1997 51,397 62,003
PCM DIVISIONS
Money
Market
Non-Qualified
Units outstanding at December 31, 1996 3,593,092
Units purchased and transfers in 178
Benefits, surrenders and transfers out (159,522)
Units outstanding at June 30, 1997 3,433,748
Growth &
Income
Non-Qualified
Units outstanding at December 31, 1996 655,172
Units purchased and transfers in 39,402
Benefits, surrenders and transfers out (19,560)
Units outstanding at June 30, 1997 675,014
Income
Non-Qualified
Units outstanding at December 31, 1996 634,438
Units purchased and transfers in 0
Benefits, surrenders and transfers out (56,719)
Units outstanding at June 30, 1997 577,719
The accumulation units for eleven of the subdivisions include units
applicable to contract owners who are "on benefit annuitants." At
June 30, 1997 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 Di 1,956 $5,604
Money Market Non-Qualified 26,244 $75,973
(formerly Daily Dividend Trust)
High Yield Trust Qualified 8,498 $53,504
High Yield Trust Non-Qualified 6,212 $37,324
Equity Income Fund Qualified 10,262 $64,258
Investors Trust Qualified 11,719 $109,909
Investors Trust Non-Qualified 4,745 $40,918
Income Fund Non-Qualified 2,679 $13,771
Money Market Non-Qualified 172,293 $411,288
Growth & Income Non-Qualified 19,229 $122,191
Income Non-Qualified 71,985 $233,479
Monthly Annuity
Annuity Units Unit Value
Money Market Qualified (formerly Daily Di 74 1.3787333
Money Market Non-Qualified 561 1.1127899
(formerly Daily Dividend Trust)
High Yield Trust Qualified 319 3.5220422
High Yield Trust Non-Qualified 148 3.4725425
Equity Income Fund Qualified 180 2.5969943
Investors Trust Qualified 320 3.8906291
Investors Trust Non-Qualified 217 2.2283753
Income Fund Non-Qualified 103 3.1162715
Money Market Non-Qualified 3,149 1.2852985
Growth & Income Non-Qualified 402 2.6900033
Income Non-Qualified 1,054 1.7090219
