INVESTORS
LIFE INSURANCE COMPANY
OF NORTH AMERICA
(Herein called Investors Life)
INA/PUTNAM SEPARATE ACCOUNT
FINANCIAL STATEMENTS
June 30, 1999
(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
<PAGE>
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
INA/PUTNAM SEPARATE ACCOUNT
COMBINED BALANCE SHEET
Period Ended June 30,1999
ASSETS
Investments at Market Value (Notes 1 and 2):
PUTNAM DIVISIONS
Money Market
383,535 qualified shares (Cost $383,535) $ 383,535
835,280 non-qualified shares (Cost $835,280) 835,280
High Yield Trust
13,585 qualified shares (Cost $231,473) 146,035
189,028 non-qualified shares (Cost $3,009,769) 2,032,047
Equity Income Fund
6,498 qualified shares (Cost $29,428) 111,832
50,241 non-qualified shares (Cost $601,562) 864,649
Investors Trust
61,052 qualified shares (Cost $626,188) 992,705
89,955 non-qualified shares (Cost $853,960) 1,462,669
Income Fund
36,594 qualified shares (Cost $235,909) 240,426
37,998 non-qualified shares (Cost $191,083) 249,650
PUTNAM VARIABLE TRUST DIVISIONS
Putnam Variable Trust Money Market
7,058,087 non-qualified shares (Cost $7,058,087) 7,058,087
Putnam Variable Trust Growth and Income
163,437 non-qualified shares (Cost $3,075,523) 4,769,085
Putnam Variable Trust Income Fund
(formerly U.S. Government and High Quality Bond)
144,270 non-qualified shares (Cost $1,891,186) 1,806,265
Total Assets $ 20,952,265
The accompanying notes are an integral part of these financial statements
<PAGE>
CONTRACT OWNERS' EQUITY
Contract Owners' Equity (Notes 3 and 7):
PUTNAM DIVISIONS
Money Market
123,360 qualified accumulation
units outstanding (3.1090743 Per Unit) 383,535
265,928 non-qualified accumulation
units outstanding (3.1410012 Per Unit) 835,280
High Yield Trust
22,653 qualified accumulation
units outstanding (6.4466144 Per Unit) 146,035
330,220 non-qualified accumulation
units outstanding (6.1536156 Per Unit) 2,032,047
Equity Income Fund
13,246 qualified accumulation
units outstanding (8.4426756 Per Unit) 111,832
101,596 non-qualified accumulation
units outstanding (8.5106619 Per Unit) 864,649
Investors Trust
64,184 qualified accumulation
units outstanding (15.4665486 Per Unit) 992,705
102,857 non-qualified accumulation
units outstanding (14.2204097 Per Unit) 1,462,669
Income Fund
42,701 qualified accumulation
units outstanding (5.6304648 Per Unit) 240,426
46,286 non-qualified accumulation
units outstanding (5.3936478 Per Unit) 249,650
PUTNAM VARIABLE TRUST DIVISIONS
Putnam Variable Trust Money Market
2,727,708 non-qualified accumulation
units outstanding (2.5875521 Per Unit) 7,058,087
Putnam Variable Trust Growth and Income
558,858 non-qualified accumulation
units outstanding (8.5336254 Per Unit) 4,769,085
Putnam Variable Trust Income Fund
(formerly U.S. Government and High Quality Bond)
506,778 non-qualified accumulation
units outstanding (3.5642145 Per Unit) 1,806,265
Total Contract Owners' Equity $ 20,952,265
The accompanying notes are an integral part of these financial statements
<PAGE>
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
INA/PUTNAM SEPARATE ACCOUNT
INDIVIDUAL STATEMENTS OF OPERATIONS
Period Ended June 30, 1999
Money Market Money Market
Qualified Non-Qualified
Investment Income:
Dividends $9,150 $22,076
Expenses:
Mortality risk and expense fees guarantees
(Notes 1 and 3) 1,845 4,439
Investment income - net 7,305 17,637
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 140,037 265,892
Cost of shares sold 140,037 265,892
Net realized gain (loss) on investments 0 0
Net unrealized gain (loss) on investments 0 0
Net realized and unrealized gain (loss)
on investments 0 0
Net Increase (Decrease) in Net Assets
from Investment Operations $7,305 $17,637
High Yield High Yield
Trust Trust
Qualified Non-Qualified
Investment Income:
Dividends $12,065 $109,231
Expenses:
Mortality risk and expense fees guarantees
(Notes 1 and 3) 1,026 9,428
Investment income - net 11,039 99,803
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 80,701 17,698
Cost of shares sold 111,406 17,685
Net realized gain (loss) on investments (30,705) 13
Net unrealized gain (loss) on investments 29,033 (13,157)
Net realized and unrealized gain (loss)
on investments (1,672) (13,144)
Net Increase (Decrease) in Net Assets
from Investment Operations $9,367 $86,659
The accompanying notes are an integral part of these financial statements
<PAGE>
Equity Equity
Income Income
Qualified Non-Qualified
Investment Income:
Dividends $912 $7,028
Expenses:
Mortality risk and expense fees guarantees
(Notes 1 and 3) 504 3,867
Investment income - net 408 3,161
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 3,603 10,201
Cost of shares sold 3,373 9,452
Net realized gain (loss) on investments 230 749
Net unrealized gain (loss) on investments 10,358 80,471
Net realized and unrealized gain (loss)
on investments 10,588 81,220
Net Increase (Decrease) in Net Assets
from Investment Operations $10,996 $84,381
Investors Investors
Trust Trust
Qualified Non-Qualified
Investment Income:
Dividends $0 $0
Expenses:
Mortality risk and expense fees guarantees
(Notes 1 and 3) 4,552 6,822
Investment income - net (4,552) (6,822)
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 201,497 232,395
Cost of shares sold 141,369 158,774
Net realized gain (loss) on investments 60,128 73,621
Net unrealized gain (loss) on investments 30,288 64,754
Net realized and unrealized gain (loss)
on investments 90,416 138,375
Net Increase (Decrease) in Net Assets
from Investment Operations $85,864 $131,553
The accompanying notes are an integral part of these financial statements
<PAGE>
Income Income
Fund Fund
Qualified Non-Qualified
Investment Income:
Dividends $7,639 $9,364
Expenses:
Mortality risk and expense fees guarantees
(Notes 1 and 3) 1,149 1,410
Investment income - net 6,490 7,954
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 48,019 138,530
Cost of shares sold 48,066 136,194
Net realized gain (loss) on investments (47) 2,336
Net unrealized gain (loss) on investments (12,657) (17,681)
Net realized and unrealized gain (loss)
on investments (12,704) (15,345)
Net Increase (Decrease) in Net Assets
from Investment Operations ($6,214) ($7,391)
Putnam
Variable Trust
Money
Market
Non-Qualified
Investment Income:
Dividends $162,521
Expenses:
Mortality risk and expense fees guarantees
(Notes 1 and 3) 33,632
Investment income - net 128,889
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 386,911
Cost of shares sold 386,911
Net realized gain (loss) on investments 0
Net unrealized gain (loss) on investments 0
Net realized and unrealized gain (loss)
on investments 0
Net Increase (Decrease) in Net Assets
from Investment Operations $128,889
The accompanying notes are an integral part of these financial statements
<PAGE>
Putnam Variable
Trust Growth
and Income
Non-Qualified
Investment Income:
Dividends $110,751
Expenses:
Mortality risk and expense fees guarantees
(Notes 1 and 3) 21,599
Investment income - net 89,152
Net Realized and Unrealized Gain (Loss)
on Investments:
Net realized capital gain distributions 259,426
Net realized gain (loss) on investments:
Proceeds from sale of shares 319,598
Cost of shares sold 275,540
Net realized gain (loss) on investments 44,058
Net unrealized gain (loss) on investments 48,542
Net realized and unrealized gain (loss)
on investments 352,026
Net Increase (Decrease) in Net Assets
from Investment Operations $441,178
Putnam
Variable Trust
Income Fund
(formerly US Gov't and
High Quality Bond)
Non-Qualified
Investment Income:
Dividends $117,940
Expenses:
Mortality risk and expense fees guarantees
(Notes 1 and 3) 8,744
Investment income - net 109,196
Net Realized and Unrealized Gain (Loss)
on Investments:
Net realized capital gain distributions 10,374
Net realized gain (loss) on investments:
Proceeds from sale of shares 70,361
Cost of shares sold 65,987
Net realized gain (loss) on investments 4,374
Net unrealized gain (loss) on investments (171,630)
Net realized and unrealized gain (loss)
on investments (156,882)
Net Increase (Decrease) in Net Assets
from Investment Operations ($47,686)
The accompanying notes are an integral part of these financial statements
<PAGE>
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
INA/PUTNAM SEPARATE ACCOUNT
INDIVIDUAL STATEMENTS OF CHANGES IN TOTAL ASSETS
Period Ended June 30, 1999
Money Market Money Market
Qualified Non-Qualified
Investment Operations:
Investment income-net $7,305 $17,637
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 assets from
investment operations 7,305 17,637
Accumulation Unit Transactions:
Net contract considerations and transfers in
(Note 3) 0 0
Net contract surrenders and transfers out
(Note 3) (34,488) (254,192)
Benefit payments to annuitants 0 (7,261)
Net increase (decrease) from accumulation unit
transactions (34,488) (261,453)
Net Increase (Decrease) in Net Assets (27,183) (243,816)
Net Assets:
Net assets at December 31, 1998 410,718 1,079,096
Net assets at June 30, 1999 $383,535 $835,280
High Yield High Yield
Trust Trust
Qualified Non-Qualified
Investment Operations:
Investment income-net $11,039 $99,803
Realized capital gain distributions 0 0
Net realized gain (loss) on investments (30,705) 13
Net unrealized gain (loss) on investments 29,033 (13,157)
Net increase (decrease) in net assets from
investment operations 9,367 86,659
Accumulation Unit Transactions:
Net contract considerations and transfers in
(Note 3) 0 0
Net contract surrenders and transfers out
(Note 3) (77,825) (7,078)
Benefit payments to annuitants (1,850) (1,192)
Net increase (decrease) from accumulation
unit transactions (79,675) (8,270)
Net Increase (Decrease) in Net Assets (70,308) 78,389
Net Assets:
Net assets at December 31, 1998 216,343 1,953,658
Net assets at June 30, 1999 $146,035 $2,032,047
The accompanying notes are an integral part of these financial statements
<PAGE>
Equity Equity
Income Income
Qualified Non-Qualified
Investment Operations:
Investment income-net $408 $3,161
Realized capital gain distributions 0 0
Net realized gain (loss) on investments 230 749
Net unrealized gain (loss) on investments 10,358 80,471
Net increase (decrease) in net assets from
investment operations 10,996 84,381
Accumulation Unit Transactions:
Net contract considerations and transfers in
(Note 3) 0 0
Net contract surrenders and transfers out
(Note 3) (39) (6,333)
Benefit payments to annuitants (3,060) 0
Net increase (decrease) from accumulation
unit transactions (3,099) (6,333)
Net Increase (Decrease) in Net Assets 7,897 78,048
Net Assets:
Net assets at December 31, 1998 103,935 786,601
Net assets at June 30, 1999 $111,832 $864,649
Investors Investors
Trust Trust
Qualified Non-Qualified
Investment Operations:
Investment income-net ($4,552) (6,822)
Realized capital gain distributions 0 0
Net realized gain (loss) on investments 60,128 73,621
Net unrealized gain (loss) on investments 30,288 64,754
Net increase (decrease) in net assets from
investment operations 85,864 131,553
Accumulation Unit Transactions:
Net contract considerations and transfers in
(Note 3) 0 0
Net contract surrenders and transfers out
(Note 3) (191,077) (222,679)
Benefit payments to annuitants (5,868) (2,894)
Net increase (decrease) from accumulation
unit transactions (196,945) (225,573)
Net Increase (Decrease) in Net Assets 111,081 (94,020)
Net Assets:
Net assets at December 31, 1998 1,103,786 1,556,689
Net assets at June 30, 1999 $992,705 $1,462,669
The accompanying notes are an integral part of these financial statements
<PAGE>
Income Income
Fund Fund
Qualified Non-Qualified
Investment Operations:
Investment income-net $6,490 $7,954
Realized capital gain distributions 0 0
Net realized gain (loss) on investments (47) 2,336
Net unrealized gain (loss) on investments (12,657) (17,681)
Net increase (decrease) in net assets from
investment operations (6,214) (7,391)
Accumulation Unit Transactions:
Net contract considerations and transfers in
(Note 3) 0 0
Net contract surrenders and transfers out
(Note 3) (46,871) (68,107)
Benefit payments to annuitants 0 (308)
Net increase (decrease) from accumulation
unit transactions (46,871) (68,415)
Net Increase (Decrease) in Net Assets (53,085) (75,806)
Net Assets:
Net assets at December 31, 1998 293,511 325,456
Net assets at June 30, 1999 $240,426 $249,650
Putnam
Variable Trust
Money
Market
Non-Qualified
Investment Operations:
Investment income-net $128,889
Realized capital gain distributions 0
Net realized gain (loss) on investments 0
Net unrealized gain (loss) on investments 0
Net increase (decrease) in net assets from
investment operations 128,889
Accumulation Unit Transactions:
Net contract considerations and transfers in
(Note 3) 0
Net contract surrenders and transfers out
(Note 3) (317,189)
Benefit payments to annuitants (18,282)
Net increase (decrease) from accumulation
unit transactions (335,471)
Net Increase (Decrease) in Net Assets (206,582)
Net Assets:
Net assets at December 31, 1998 7,264,669
Net assets at June 30, 1999 $7,058,087
The accompanying notes are an integral part of these financial statements
<PAGE>
Putnam
Variable
Trust Growth
and Income
Non-Qualified
Investment Operations:
Investment income-net $89,152
Realized capital gain distributions 259,426
Net realized gain (loss) on investments 44,058
Net unrealized gain (loss) on investments 48,542
Net increase (decrease) in net assets from
investment operations 441,178
Accumulation Unit Transactions:
Net contract considerations and transfers
in (Note 3) 0
Net contract surrenders and transfers out
(Note 3) (290,228)
Benefit payments to annuitants (7,771)
Net increase (decrease) from accumulation
unit transactions (297,999)
Net Increase (Decrease) in Net Assets 143,179
Net Assets:
Net assets at December 31, 1998 4,625,906
Net assets at June 30, 1999 $4,769,085
Putnam
Variable Trust
Income Fund
(formerly US Gov't and
High Quality Bond)
Non-Qualified
Investment Operations:
Investment income-net $109,196
Realized capital gain distributions 10,374
Net realized gain (loss) on investments 4,374
Net unrealized gain (loss) on investments (171,630)
Net increase (decrease) in net assets from
investment operations (47,686)
Accumulation Unit Transactions:
Net contract considerations and transfers in
(Note 3) 0
Net contract surrenders and transfers out
(Note 3) (51,709)
Benefit payments to annuitants (9,908)
Net increase (decrease) from accumulation
unit transactions (61,617)
Net Increase (Decrease) in Net Assets (109,303)
Net Assets:
Net assets at December 31, 1998 1,915,568
Net assets at June 30, 1999 $1,806,265
The accompanying notes are an integral part of these financial statements
<PAGE>
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
INA/PUTNAM SEPARATE ACCOUNT
INDIVIDUAL STATEMENTS OF CHANGES IN TOTAL ASSETS
Year Ended December 31, 1998
Money Market Money Market
Qualified Non-Qualified
Investment Operations:
Investment income-net $18,638 $50,109
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 assets from
investment operations 18,638 50,109
Accumulation Unit Transactions:
Net contract considerations and transfers in
(Note 3) 0 0
Net contract surrenders and transfers out
(Note 3) (44,153) (218,307)
Benefit payments to annuitants (5,516) (2,828)
Net increase (Decrease) from accumulation
unit transactions (49,669) (221,135)
Net Increase (Decrease) in Net Assets (31,031) (171,026)
Net Assets:
Net assets at December 31, 1997 441,749 1,250,122
Net assets at December 31, 1998 $410,718 $1,079,096
High Yield High Yield
Trust Trust
Qualified Non-Qualified
Investment Operations:
Investment income-net $25,021 $199,445
Realized capital gain distributions 0 0
Net realized gain (loss) on investments (10,214) 959
Net unrealized gain (loss) on investments (38,459) (390,368)
Net increase (decrease) in net assets from
investment operations (23,652) (189,964)
Accumulation Unit Transactions:
Net contract considerations and transfers in
(Note 3) 0 0
Net contract surrenders and transfers out
(Note 3) (31,067) (132,954)
Benefit payments to annuitants (16,925) (7,967)
Net increase (Decrease) from accumulation
unit transactions (47,992) (140,921)
Net Increase (Decrease) in Net Assets (71,644) (330,885)
Net Assets:
Net assets at December 31, 1997 287,987 2,284,543
Net assets at December 31, 1998 $216,343 $1,953,658
The accompanying notes are an integral part of these financial statements
<PAGE>
Equity Equity
Income Income
Qualified Non-Qualified
Investment Operations:
Investment income-net $2,791 $19,456
Realized capital gain distributions 7,435 56,280
Net realized gain (loss) on investments 10,561 153
Net unrealized gain (loss) on investments (4,687) 6,163
Net increase (decrease) in net assets from
investment operations 16,100 82,052
Accumulation Unit Transactions:
Net contract considerations and transfers in
(Note 3) 0 0
Net contract surrenders and transfers out
(Note 3) (51,834) (1,730)
Benefit payments to annuitants (7,327) 0
Net increase (Decrease) from accumulation
unit transactions (59,161) (1,730)
Net Increase (Decrease) in Net Assets (43,061) 80,322
Net Assets:
Net assets at December 31, 1997 146,996 706,279
Net assets at December 31, 1998 $103,935 $786,601
Investors Investors
Trust Trust
Qualified Non-Qualified
Investment Operations:
Investment income-net ($9,964) ($12,568)
Realized capital gain distributions 27,728 39,075
Net realized gain (loss) on investments 34,798 3,214
Net unrealized gain (loss) on investments 254,375 368,836
Net increase (decrease) in net assets from
investment operations 306,937 398,557
Accumulation Unit Transactions:
Net contract considerations and transfers in
(Note 3) 0 0
Net contract surrenders and transfers out
(Note 3) (126,892) (6,269)
Benefit payments to annuitants (14,715) (5,285)
Net increase (Decrease) from accumulation
unit transactions (141,607) (11,554)
Net Increase (Decrease) in Net Assets 165,330 387,003
Net Assets:
Net assets at December 31, 1997 938,456 1,169,686
Net assets at December 31, 1998 $1,103,786 $1,556,689
The accompanying notes are an integral part of these financial statements
<PAGE>
Income Income
Fund Fund
Qualified Non-Qualified
Investment Operations:
Investment income-net $15,591 $17,482
Realized capital gain distributions 0 0
Net realized gain (loss) on investments (6) (65)
Net unrealized gain (loss) on investments (7,876) (8,842)
Net increase (decrease) in net assets from
investment operations 7,709 8,575
Accumulation Unit Transactions:
Net contract considerations and transfers in
(Note 3) 0 0
Net contract surrenders and transfers out
(Note 3) (3,180) (125)
Benefit payments to annuitants 0 (5,938)
Net increase (Decrease) from accumulation
unit transactions (3,180) (6,063)
Net Increase (Decrease) in Net Assets 4,529 2,512
Net Assets:
Net assets at December 31, 1997 288,982 322,944
Net assets at December 31, 1998 $293,511 $325,456
Putnam
Variable Trust
Money
Market
Non-Qualified
Investment Operations:
Investment income-net $309,830
Realized capital gain distributions 0
Net realized gain (loss) on investments 0
Net unrealized gain (loss) on investments 0
Net increase (decrease) in net assets from
investment operations 309,830
Accumulation Unit Transactions:
Net contract considerations and transfers in
(Note 3) 350,854
Net contract surrenders and transfers out
(Note 3) (1,253,011)
Benefit payments to annuitants (37,400)
Net increase (Decrease) from accumulation
unit transactions (939,557)
Net Increase (Decrease) in Net Assets (629,727)
Net Assets:
Net assets at December 31, 1997 7,894,396
Net assets at December 31, 1998 $7,264,669
The accompanying notes are an integral part of these financial statements
<PAGE>
Putnam
Variable
Trust Growth
and Income
Non-Qualified
Investment Operations:
Investment income-net $136,497
Realized capital gain distributions 414,679
Net realized gain (loss) on investments 1,212
Net unrealized gain (loss) on investments 61,530
Net increase (decrease) in net assets from
investment operations 613,918
Accumulation Unit Transactions:
Net contract considerations and transfers in
(Note 3) 127,963
Net contract surrenders and transfers out
(Note 3) (656,777)
Benefit payments to annuitants (11,881)
Net increase (Decrease) from accumulation
unit transactions (540,695)
Net Increase (Decrease) in Net Assets 73,223
Net Assets:
Net assets at December 31, 1997 4,552,683
Net assets at December 31, 1998 $4,625,906
Putnam
Variable Trust
US Gov't and
High Quality Bond
Non-Qualified
Investment Operations:
Investment income-net $90,639
Realized capital gain distributions 0
Net realized gain (loss) on investments 7,127
Net unrealized gain (loss) on investments 36,901
Net increase (decrease) in net assets from
investment operations 134,667
Accumulation Unit Transactions:
Net contract considerations and transfers in
(Note 3) 37,328
Net contract surrenders and transfers out
(Note 3) (212,126)
Benefit payments to annuitants (20,534)
Net increase (Decrease) from accumulation
unit transactions (195,332)
Net Increase (Decrease) in Net Assets (60,665)
Net Assets:
Net assets at December 31, 1997 1,976,233
Net assets at December 31, 1998 $1,915,568
The accompanying notes are an integral part of these financial statements
<PAGE>
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
INA/PUTNAM SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
June 30, 1999
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 Variable Trust 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 Variable Trust Money Market Fund, Putnam
Variable Trust Income Fund (formerly Putnam Variable Trust U.S. Government and
High Quality Bond Fund) and Putnam Variable Trust Growth and Income Fund (the
"Putnam Variable Trust 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 Variable Trust 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.
Under the current provisions of the Internal Revenue Code (the "Code"),
transfers of contract values from one division of the Separate Account to
another division are not subject to current taxation. There can be no assurance
that future changes in the Code will not subject such transfers to current
taxation.
<PAGE>
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, 1999; (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 period
ended June 30, 1999 was $0 . Payments for the period ended June 30, 1999 were
$1,567,814 with respect to contract surrender benefits and $58,394 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 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
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
<PAGE>
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 Divisions.
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 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.
<PAGE>
INA/Putnam Separate Account
Note 7. Accumulation Units Transactions
For the Period Ended 6/30/99
The changes in the number of accumulation units (the measure of ownership in the
Separate Account) during the period ended June 30, 1999 and units outstanding at
June 30, 1999 were as follows:
PUTNAM DIVISIONS
Money Market Money Market
Qualified Non-Qualified
Units outstanding at December 31, 1998 134,573 349,907
Units purchased and transfers in 0 0
Benefits, surrenders and transfers out (11,213) (83,979)
Units outstanding at June 30, 1999 123,360 265,928
High Yield High Yield
Trust Trust
Qualified Non-Qualified
Units outstanding at December 31, 1998 35,048 331,566
Units purchased and transfers in 0 0
Benefits, surrenders and transfers out (12,395) (1,346)
Units outstanding at June 30, 1999 22,653 330,220
Equity Equity
Income Income
Qualified Non-Qualified
Units outstanding at December 31, 1998 13,634 102,352
Units purchased and transfers in 0 0
Benefits, surrenders and transfers out (388) (756)
Units outstanding at June 30, 1999 13,246 101,596
Investors Investors
Trust Trust
Qualified Non-Qualified
Units outstanding at December 31, 1998 77,934 119,546
Units purchased and transfers in 0 0
Benefits, surrenders and transfers out (13,750) (16,689)
Units outstanding at June 30, 1999 64,184 102,857
Income Income
Fund Fund
Qualified Non-Qualified
Units outstanding at December 31, 1998 50,830 58,830
Units purchased and transfers in 0 0
Benefits, surrenders and transfers out (8,129) (12,544)
Units outstanding at June 30, 1999 42,701 46,286
PUTNAM VARIABLE TRUST DIVISIONS
Putnam
Variable Trust
Money
Market
Non-Qualified
Units outstanding at December 31, 1998 2,858,428
Units purchased and transfers in 0
Benefits, surrenders and transfers out (130,720)
Units outstanding at June 30, 1999 2,727,708
Putnam Variable
Trust Growth
and Income
Non-Qualified
Units outstanding at December 31, 1998 596,576
Units purchased and transfers in 0
Benefits, surrenders and transfers out (37,718)
Units outstanding at June 30, 1999 558,858
Putnam Variable
Trust Income Fund
(Formerly US Gov't and
High Quality Bond)
Non-Qualified
Units outstanding at December 31, 1998 523,878
Units purchased and transfers in 0
Benefits, surrenders and transfers out (17,100)
Units outstanding at June 30, 1999 506,778
The accumulation units for eleven of the subdivisions include units applicable
to contract owners who are "on benefit annuitants." At June 30, 1999, 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 Non-Qualified 118,153 $371,119
High Yield Trust Qualified 5,344 $34,451
High Yield Trust Non-Qualified 4,393 $27,033
Equity Income Fund Qualified 8,431 $71,180
Investors Trust Qualified 9,525 $147,319
Investors Trust Non-Qualified 3,784 $53,810
Income Fund Non-Qualified 1,418 $7,648
Putnam Variable Trust Money
Market, Non-Qualified 142,155 $367,833
Putnam Variable Trust Growth
and Income , Non-Qualified 23,314 $198,953
Putnam Variable Trust Income Fund,
Non-Qualified 70,433 $251,038
Monthly Annuity
Annuity Units Unit Value
Money Market Non-Qualified 410 $1.1271968
High Yield Trust Qualified 255 $3.3700029
High Yield Trust Non-Qualified 104 $3.3235873
Equity Income Fund Qualified 172 $3.2669802
Investors Trust Qualified 312 $6.0028003
Investors Trust Non-Qualified 217 $3.4379826
Income Fund Non-Qualified 23 $3.0508851
Putnam Variable Trust Money
Market, Non-Qualified 3,005 $1.3006304
Putnam Variable Trust Growth
and Income , Non-Qualified 505 $3.3717875
Putnam Variable Trust Income Fund,
Non-Qualified 1,136 $1.7522515
