LIFE INSURANCE
COMPANY
OF NORTH AMERICA
SEPARATE ACCOUNT A
FINANCIAL STATEMENTS
June 30, 1996
(Unaudited)
This report is submitted for the general information of owners of
Life Insurance Company of North America Separate Account A
contracts. The Separate Account does not issue new contracts;
accordingly, this report is not authorized for distribution to
prospective purchasers of variable annuity contracts.
Life Insurance Company of North America
Philadelphia, PA
LIFE INSURANCE COMPANY OF NORTH AMERICA
SEPARATE ACCOUNT A
COMBINED BALANCE SHEET
JUNE 30, 1996
ASSETS
Investments at Market Value (Notes 1 and 2):
Seligman Growth Fund, Inc.
1,503,386 qualified shares (cost $9,596,725) $8,794,813
233,294 non-qualified shares (cost $1,881,558) 1,364,770
Oppenheimer Fund
138,459 qualified shares (cost $1,225,341) 1,680,897
19,710 non-qualified shares (cost $184,048) 239,281
Delaware Group Decatur Fund, Inc.
623,858 qualified shares (cost $6,898,405) 11,909,446
175,478 non-qualified shares (cost $1,808,727) 3,349,877
Windsor Fund
839,908 qualified shares (cost $10,236,622) 12,984,975
80,662 non-qualified shares (cost $1,049,969) 1,247,044
Dreyfus Third Century Fund
865,007 qualified shares (cost $3,552,865) 7,897,515
24,187 non-qualified shares (cost $120,913) 220,832
Windsor Fund B
213,745 qualified shares (cost $3,620,106) 3,304,489
85,717 non-qualified shares (cost $1,366,385) 1,325,187
CIGNA High Yield Fund, Inc.
90,733 qualified shares (cost $933,712) 857,423
135,235 non-qualified shares (cost $1,258,288) 1,277,974
Total Assets $56,454,523
The accompanying notes are an integral part of these financial statements
CONTRACT OWNERS' EQUITY
Contract Owners' Equity (Notes 3 and 7):
Seligman Growth Fund, Inc.
788,523 qualified accumulation ($11.1535279 per unit) $8,794,813
units outstanding
150,403 non-qualified accumulation ($9.0740878 per unit) 1,364,770
units outstanding
Oppenheimer Fund
272,940 qualified accumulation ($6.1584850 per unit) 1,680,897
units outstanding
39,676 non-qualified accumulation ($6.0308774 per unit) 239,281
units outstanding
Delaware Group Decatur Fund, Inc.
668,395 qualified accumulation ($17.8179763 per unit) 11,909,446
units outstanding
193,073 non-qualified accumulation ($17.3503110 per unit) 3,349,877
units outstanding
Windsor Fund
955,592 qualified accumulation ($13.5884095 per unit) 12,984,975
units outstanding
103,808 non-qualified accumulation ($12.0129836 per unit) 1,247,044
units outstanding
Dreyfus Third Century Fund
490,606 qualified accumulation ($16.0974694 per unit) 7,897,515
units outstanding
15,568 non-qualified accumulation ($14.1849867 per unit) 220,832
units outstanding
Windsor Fund B
210,710 qualified accumulation ($15.6826417 per unit) 3,304,489
units outstanding
83,806 non-qualified accumulation ($15.8125500 per unit) 1,325,187
units outstanding
CIGNA High Yield Fund, Inc.
146,342 qualified accumulation ($5.8590345 per unit) 857,423
units outstanding
214,739 non-qualified accumulation ($5.9512891 per unit) 1,277,974
units outstanding
Contract Owners' Equity $56,454,523
The accompanying notes are an integral part of these financial statements
LIFE INSURANCE COMPANY OF NORTH AMERICA
SEPARATE ACCOUNT A
INDIVIDUAL STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
Seligman
Seligman Growth
Growth Fund,Inc.
Fund,Inc. Non-
Qualified Qualified
Investment Income:
Dividends $0 $0
Expenses:
Mortality risk and expense 37,680 5,887
fees guarantees (Note 3)
Investment income-net (37,680) (5,887)
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 133,944 51,589
Cost of shares sold 126,208 48,498
Net realized gain (loss) on investments 7,736 3,091
Net unrealized gain (loss) on investments 946,401 146,631
Net realized and unrealized gain (loss) 954,137 149,722
on investments
Net Increase (Decrease) in Net Assets $916,457 $143,835
from Investment Operations
Oppenheimer
Oppenheimer Fund
Fund Non-
Qualified Qualified
Investment Income:
Dividends $0 $0
Expenses:
Mortality risk and expense 7,393 1,063
fees guarantees (Note 3)
Investment income-net (7,393) (1,063)
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 36,148 11,151
Cost of shares sold 33,128 10,501
Net realized gain (loss) on investments 3,020 650
Net unrealized gain (loss) on investments 141,171 20,090
Net realized and unrealized gain (loss) 144,191 20,740
on investments
Net Increase (Decrease) in Net Assets $136,798 $19,677
from Investment Operations
Delaware
Delaware Group
Group Decatur
Decatur Fund, Inc.
Fund, Inc. Non-
Qualified Qualified
Investment Income:
Dividends $222,772 $60,339
Expenses:
Mortality risk and expense 55,699 15,192
fees guarantees (Note 3)
Investment income-net 167,073 45,147
Net Realized and Unrealized
Gain (Loss) on Investments:
Net realized capital gain distributions 0 0
Net realized gain (loss) on investments:
Proceeds from sale of shares 1,305,351 513,495
Cost of shares sold 1,162,846 420,431
Net realized gain (loss) on investments 142,505 93,064
Net unrealized gain (loss) on investments 445,657 48,305
Net realized and unrealized gain (loss) 588,162 141,369
on investments
Net Increase (Decrease) in Net Assets $755,235 $186,516
from Investment Operations
Windsor
Windsor Fund
Fund Non-
Qualified Qualified
Investment Income:
Dividends $165,979 $15,955
Expenses:
Mortality risk and expense 58,619 5,506
fees guarantees (Note 3)
Investment income-net 107,360 10,449
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 955,000 18,717
Cost of shares sold 910,435 17,536
Net realized gain (loss) on investments 44,565 1,181
Net unrealized gain (loss) on investments 771,397 74,154
Net realized and unrealized gain (loss) 815,962 75,335
on investments
Net Increase (Decrease) in Net Assets $923,322 $85,784
from Investment Operations
Dreyfus
Dreyfus Third
Third Century
Century Non-
Qualified Qualified
Investment Income:
Dividends $0 $0
Expenses:
Mortality risk and expense 35,388 956
fees guarantees (Note 3)
Investment income-net (35,388) (956)
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 685,379 1,253
Cost of shares sold 622,492 1,166
Net realized gain (loss) on investments 62,887 87
Net unrealized gain (loss) on investments 738,917 21,525
Net realized and unrealized gain (loss) 801,804 21,612
on investments
Net Increase (Decrease) in Net Assets $766,416 $20,656
from Investment Operations
Windsor
Windsor Fund B
Fund B Non-
Qualified Qualified
Investment Income:
Dividends $42,387 $16,931
Expenses:
Mortality risk and expense 14,675 5,813
fees guarantees (Note 3)
Investment income-net 27,712 11,118
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 100,293 44,998
Cost of shares sold 96,326 45,175
Net realized gain (loss) on investments 3,967 (177)
Net unrealized gain (loss) on investments 196,976 78,698
Net realized and unrealized gain (loss) 200,943 78,521
on investments
Net Increase (Decrease) in Net Assets $228,655 $89,639
from Investment Operations
CIGNA High CIGNA High
Yield Fund, Yield Fund,
Inc. Inc. Non-
Qualified Qualified
Investment Income:
Dividends $40,877 $58,383
Expenses:
Mortality risk and expense 3,768 5,369
fees guarantees (Note 3)
Investment income-net 37,109 53,014
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 40,007 9,070
Cost of shares sold 39,881 9,070
Net realized gain (loss) on investments 126 0
Net unrealized gain (loss) on investments 1,585 2,397
Net realized and unrealized gain (loss) 1,711 2,397
on investments
Net Increase (Decrease) in Net Assets $38,820 $55,411
from Investment Operations
The accompanying notes are an integral part of these financial statements
LIFE INSURANCE COMPANY OF NORTH AMERICA
SEPARATE ACCOUNT A
INDIVIDUAL STATEMENTS OF CHANGES IN TOTAL ASSETS
SIX MONTHS ENDED JUNE 30, 1996
Seligman
Seligman Growth
Growth Fund,Inc.
Fund, Inc. Non-
Qualified Qualified
Investment Operations:
Investment income-net ($37,680) ($5,887)
Realized capital gain distributions 0 0
Net realized gain (loss) on investments 7,736 3,091
Net unrealized gain (loss) on investments 946,401 146,632
Net increase (decrease) in net 916,457 143,836
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and transfers 7,161 0
in (Note 3)
Net contract surrenders and transfers (59,108) (38,024)
out (Note 3)
Benefit payments to annuitants (16,369) (7,680)
Net Increase (Decrease) from accumulation (68,316) (45,704)
unit transactions
Net Increase (Decrease) in Net Assets 848,141 98,132
Net Assets:
Net assets at December 31, 1995 $7,946,672 $1,266,638
Net assets at June 30, 1996 $8,794,813 $1,364,770
Oppenheimer
Oppenheimer Fund
Fund Non-
Qualified Qualified
Investment Operations:
Investment income-net ($7,393) ($1,063)
Realized capital gain distributions 0 0
Net realized gain (loss) on investments 3,020 650
Net unrealized gain (loss) on investments 141,171 20,090
Net increase (decrease) in net 136,798 19,677
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and transfers 3,000 0
in (Note 3)
Net contract surrenders and transfers (28,783) (6,257)
out (Note 3)
Benefit payments to annuitants (2,972) (3,831)
Net Increase (Decrease) from accumulation (28,755) (10,088)
unit transactions
Net Increase (Decrease) in Net Assets 108,043 9,589
Net Assets:
Net assets at December 31, 1995 $1,572,854 $229,692
Net assets at June 30, 1996 $1,680,897 $239,281
Delaware
Delaware Group
Group Decatur
Decatur Fund, Inc.
Fund, Inc. Non-
Qualified Qualified
Investment Operations:
Investment income-net $167,073 $45,147
Realized capital gain distributions 0 0
Net realized gain (loss) on investments 142,505 93,064
Net unrealized gain (loss) on investments 445,657 48,304
Net increase (decrease) in net 755,235 186,515
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and transfers 64,109 0
in (Note 3)
Net contract surrenders and transfers (1,211,362) (470,167)
out (Note 3)
Benefit payments to annuitants (51,142) (28,136)
Net Increase (Decrease) from accumulation (1,198,395) (498,303)
unit transactions
Net Increase (Decrease) in Net Assets (443,160) (311,788)
Net Assets:
Net assets at December 31, 1995 $12,352,606 $3,661,665
Net assets at June 30, 1996 $11,909,446 $3,349,877
Windsor
Windsor Fund
Fund Non-
Qualified Qualified
Investment Operations:
Investment income-net $107,360 $10,449
Realized capital gain distributions 0 0
Net realized gain (loss) on investments 44,565 1,181
Net unrealized gain (loss) on investments 771,397 74,154
Net increase (decrease) in net 923,322 85,784
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and transfers 200,033 0
in (Note 3)
Net contract surrenders and transfers (772,532) (13,209)
out (Note 3)
Benefit payments to annuitants (31,586) 0
Net Increase (Decrease) from accumulation (604,085) (13,209)
unit transactions
Net Increase (Decrease) in Net Assets 319,237 72,575
Net Assets:
Net assets at December 31, 1995 $12,665,738 $1,174,469
Net assets at June 30, 1996 $12,984,975 $1,247,044
Dreyfus
Dreyfus Third
Third Century
Century Non-
Qualified Qualified
Investment Operations:
Investment income-net ($35,388) ($956)
Realized capital gain distributions 0 0
Net realized gain (loss) on investments 62,887 87
Net unrealized gain (loss) on investments 738,917 21,525
Net increase (decrease) in net 766,416 20,656
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and transfers 113,786 0
in (Note 3)
Net contract surrenders and transfers (678,985) 0
out (Note 3)
Benefit payments to annuitants (16,066) (293)
Net Increase (Decrease) from accumulation (581,265) (293)
unit transactions
Net Increase (Decrease) in Net Assets 185,151 20,363
Net Assets:
Net assets at December 31, 1995 $7,712,364 $200,469
Net assets at June 30, 1996 $7,897,515 $220,832
Windsor
Windsor Fund B
Fund B Non-
Qualified Qualified
Investment Operations:
Investment income-net $27,712 $11,118
Realized capital gain distributions 0 0
Net realized gain (loss) on investments 3,967 (177)
Net unrealized gain (loss) on investments 196,976 78,698
Net increase (decrease) in net 228,655 89,639
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and transfers 30,267 0
in (Note 3)
Net contract surrenders and transfers (102,643) 507
out (Note 3)
Benefit payments to annuitants (1,076) (844)
Net Increase (Decrease) from accumulation (73,452) (337)
unit transactions
Net Increase (Decrease) in Net Assets 155,203 89,302
Net Assets:
Net assets at December 31, 1995 $3,149,286 $1,235,885
Net assets at June 30, 1996 $3,304,489 $1,325,187
CIGNA High CIGNA High
Yield Fund, Yield Fund,
Inc. Inc. Non-
Qualified Qualified
Investment Operations:
Investment income-net $37,109 $53,014
Realized capital gain distributions 0 0
Net realized gain (loss) on investments 126 0
Net unrealized gain (loss) on investments 1,585 2,397
Net increase (decrease) in net 38,820 55,411
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and transfers 17,033 65,080
in (Note 3)
Net contract surrenders and transfers (21,374) (6,815)
out (Note 3)
Benefit payments to annuitants (15,106) 0
Net Increase (Decrease) from accumulation (19,447) 58,265
unit transactions
Net Increase (Decrease) in Net Assets 19,373 113,676
Net Assets:
Net assets at December 31, 1995 $838,050 $1,164,298
Net assets at June 30, 1996 $857,423 $1,277,974
The accompanying notes are an integral part of these financial statements
LIFE INSURANCE COMPANY OF NORTH AMERICA
SEPARATE ACCOUNT A
INDIVIDUAL STATEMENTS OF CHANGES IN TOTAL ASSETS
SIX MONTHS ENDED JUNE 30, 1995
Seligman
Seligman Growth
Growth Fund,Inc.
Fund, Inc. Non-
Qualified Qualified
Investment Operations:
Investment income-net ($31,317) ($4,834)
Realized capital gain distributions 0 0
Net realized gain (loss) on investments 10,274 1,548
Net unrealized gain (loss) on investments 812,315 125,595
Net increase (decrease) in net 791,272 122,309
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and transfers 15,708 0
in (Note 3)
Net contract surrenders and transfers (134,388) (6,820)
out (Note 3)
Benefit payments to annuitants (11,239) (6,606)
Net Increase (Decrease) from accumulation (129,919) (13,426)
unit transactions
Net Increase (Decrease) in Net Assets 661,353 108,883
Net Assets:
Net assets at December 31, 1994 $6,758,061 $1,037,291
Net assets at June 30, 1995 $7,419,414 $1,146,174
Oppenheimer
Oppenheimer Fund
Fund Non-
Qualified Qualified
Investment Operations:
Investment income-net ($6,459) ($911)
Realized capital gain distributions 0 0
Net realized gain (loss) on investments 6,087 326
Net unrealized gain (loss) on investments 200,539 28,825
Net increase (decrease) in net 200,167 28,240
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and transfers 3,140 0
in (Note 3)
Net contract surrenders and transfers (48,955) 0
out (Note 3)
Benefit payments to annuitants (17,990) (3,041)
Net Increase (Decrease) from accumulation (63,805) (3,041)
unit transactions
Net Increase (Decrease) in Net Assets 136,362 25,199
Net Assets:
Net assets at December 31, 1994 $1,371,152 $191,353
Net assets at June 30, 1995 $1,507,513 $216,552
Delaware
Delaware Group
Group Decatur
Decatur Fund, Inc.
Fund, Inc. Non-
Qualified Qualified
Investment Operations:
Investment income-net $186,130 $52,327
Realized capital gain distributions 0 0
Net realized gain (loss) on investments 9,426 11,893
Net unrealized gain (loss) on investments 1,573,660 436,509
Net increase (decrease) in net 1,769,216 500,729
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and transfers 64,474 0
in (Note 3)
Net contract surrenders and transfers (521,678) (173,881)
out (Note 3)
Benefit payments to annuitants (26,174) (21,371)
Net Increase (Decrease) from accumulation
unit transactions (483,378) (195,252)
Net Increase (Decrease) in Net Assets
Net Assets: 1,285,838 305,477
Net assets at December 31, 1994 $10,990,300 $3,084,629
Net assets at June 30, 1995 $12,276,138 $3,390,106
Windsor
Windsor Fund
Fund Non-
Qualified Qualified
Investment Operations:
Investment income-net $111,909 $11,512
Realized capital gain distributions 0 0
Net realized gain (loss) on investments 70,232 1,677
Net unrealized gain (loss) on investments 1,971,497 202,319
Net increase (decrease) in net 2,153,638 215,508
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and transfers 87,274 0
in (Note 3)
Net contract surrenders and transfers (790,296) (21,548)
out (Note 3)
Benefit payments to annuitants (27,287) 0
Net Increase (Decrease) from accumulation (730,309) (21,548)
unit transactions
Net Increase (Decrease) in Net Assets 1,423,329 193,960
Net Assets:
Net assets at December 31, 1994 $11,049,421 $1,077,486
Net assets at June 30, 1995 $12,472,750 $1,271,446
Dreyfus
Dreyfus Third
Third Century
Century Non-
Qualified Qualified
Investment Operations:
Investment income-net ($30,350) ($760)
Realized capital gain distributions 0 0
Net realized gain (loss) on investments 52,572 1,071
Net unrealized gain (loss) on investments 1,109,864 28,117
Net increase (decrease) in net 1,132,086 28,428
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and transfers 29,452 0
in (Note 3)
Net contract surrenders and transfers (588,442) (19,656)
out (Note 3)
Benefit payments to annuitants (842) (271)
Net Increase (Decrease) from accumulation (559,832) (19,927)
unit transactions
Net Increase (Decrease) in Net Assets 572,254 8,501
Net Assets:
Net assets at December 31, 1994 $6,667,375 $176,570
Net assets at June 30, 1995 $7,239,629 $185,071
Windsor
Windsor Fund B
Fund B Non-
Qualified Qualified
Investment Operations:
Investment income-net $25,950 $10,427
Realized capital gain distributions 0 0
Net realized gain (loss) on investments 14,953 2,990
Net unrealized gain (loss) on investments 459,559 183,410
Net increase (decrease) in net 500,462 196,827
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and transfers 53,614 0
in (Note 3)
Net contract surrenders and transfers (103,358) (39,402)
out (Note 3)
Benefit payments to annuitants (81,349) (708)
Net Increase (Decrease) from accumulation (131,093) (40,110)
unit transactions
Net Increase (Decrease) in Net Assets 369,369 156,717
Net Assets:
Net assets at December 31, 1994 $2,527,090 $996,372
Net assets at June 30, 1995 $2,896,459 $1,153,089
CIGNA High CIGNA High
Yield Fund, Yield Fund,
Inc. Inc. Non-
Qualified Qualified
Investment Operations:
Investment income-net $35,497 $41,391
Realized capital gain distributions 0 0
Net realized gain (loss) on investments 24 3,001
Net unrealized gain (loss) on investments 35,928 37,315
Net increase (decrease) in net 71,449 81,707
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and transfers 0 557,383
in (Note 3)
Net contract surrenders and transfers (10,997) (234,841)
out (Note 3)
Benefit payments to annuitants (597) 0
Net Increase (Decrease) from accumulation (11,594) 322,542
unit transactions
Net Increase (Decrease) in Net Assets 59,855 404,249
Net Assets:
Net assets at December 31, 1994 $726,941 $700,854
Net assets at June 30, 1995 $786,796 $1,105,103
The accompanying notes are an integral part of these financial statements
LIFE INSURANCE COMPANY OF NORTH AMERICA
SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS
June 30, 1996
Note 1. Organization
Life Insurance Company of North America - Separate Account A (the
"Separate Account"), a separate account of Life Insurance Company
of North America ("LINA"), is registered under the Investment
Company Act of 1940, as amended, as a unit investment trust. The
Separate Account consists of seven divisions, corresponding to
the specific mutual fund shares underlying the values of such
division. Variable annuity contract payments allocated to the
Separate Account, except as modified by Note 5, are invested by
LINA in shares of a designated mutual fund for allocation to the
corresponding Separate Account division. The current divisions
of the Separate Account are designated as follows: Delaware Group
Decatur Fund, Inc., Seligman Growth Fund, Inc., Oppenheimer Fund,
Windsor Fund, Windsor Fund B, Dreyfus Third Century Fund, and
CIGNA High Yield Fund, Inc. (the "Funds").
The Windsor Fund has, with certain exceptions, ceased offering
shares to investors; however, the Separate Account has obtained
confirmation from the fund that it will continue to provide its
shares for use as an underlying investment medium for eligible
variable annuity contract holders.
Each of the seven mutual fund divisions contains two
subdivisions, one for the tax-qualified and one for the
allocation of non-tax qualified variable annuity contract values.
The contract owners' equity is affected by the investment results
of the appropriate mutual fund designated for the subdivision and
the mortality risk and expense fees guarantees assessed on
Separate Account assets (See Note 3).
Note 2. Significant Accounting Policies
The accompanying financial statements include only the contract
owners' payments pertaining to the variable portion of their
contracts, and exclude any payments for fixed dollar benefits,
the latter being included in the general account of LINA.
Following is a summary of the significant accounting policies of
the Separate Account: (a) the market value investments is based
on closing bid prices (net asset value) at June 30,1996; (b)
investment transactions are accounted for on the trade date and
income is recorded on the ex-dividend date; (c) the cost of the
investments sold is determined on the specific identification
method. See Notes 4 through 6 with respect to income taxes.
Note 3. Contract Owner Transactions
Net contract considerations represent gross contributions
allocated to the Separate Account by the contract owners less a
deduction by LINA for sales and administrative expenses, death
benefits for group contracts and any applicable premium taxes.
These deductions, exclusive of premium taxes, are charged against
the gross contributions and vary as follows: group contracts
from 1% to 6%; individual contracts from 4% to 8.5%. Net
contract considerations for the six months ended June 30, 1996
were $140,739.20 after deductions for sales and administrative
expenses. Contract owners unaffected by Revenue Ruling 81-225
(See Note 5) have limited rights to transfer their investment
between the Separate Account subdivisions and to transfer from
and to the general accumulation account of LINA. Contract owners
affected by Revenue Ruling 81-225 have limited rights to transfer
certain contract values to the general accumulation account of
LINA to lessen the impact of the Ruling (See Note 5). The amounts
of all transfers for the six months ended June 30, 1996 were as
follows:
Transfers between Separate
Account A subdivisions $ 197
Transfers from the general
accumulation account $221,272
Transfers to the general
accumulation account $276,684
LINA charges a fee to each Separate Account subdivision for
assuming the mortality risk and expense fee guarantees. The
daily equivalent of the annual charge of 0.90% is made against
the average net asset value of the Separate Account.
Note 4. Income Taxes
The Separate Account is taxed as part of LINA. For the six
months ending June 30, 1996, LINA was taxed as a casualty
insurance company as part of the consolidated group of CIGNA
Corporation, its ultimate parent. LINA anticipates that, for
calendar year 1996, it will be taxed as a casualty insurance
company as part of CIGNA Corporation's consolidated group.
Although LINA may be taxed as a casualty insurance company, it
treats the operations of the Separate Account as if it were part
of a life insurance company. Under the current provisions of the
Internal Revenue Code, no federal income taxes are payable by a
company taxed as a life insurance company with respect to
investment income and capital gains of the assets of a separate
account when used to determine contract values. LINA reserves the
right to make adjustments for taxes to the assets of the Separate
Account should future changes in the Internal Revenue Code
applicable to life insurance companies 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 mutual funds shares which are also sold to the
public independent of the variable annuity contracts. 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, and where the policyholder may
initially allocate and subsequently reallocate his 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).
In order to comply with the IRS opinions expressed in Revenue
Ruling 81-225, allocations to the Separate Account resulting from
new purchases were terminated except as noted below. In
addition, LINA suspended new contract sales which permitted
allocations to the Separate Account in both the non-tax qualified
and tax qualified markets described above.
Payments on behalf of individuals who were participants under
contracts before September 25, 1981 may continue to be allocated
to the Separate Account where such contracts were issued to
qualify pursuant to Code Sections 403(a), 403(b) or 408(b), or
where the contract owner is not subject to federal income tax.
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. LINA 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 of 1996 and units
outstanding at June 30, 1996 were as follows:
Seligman
Seligman Growth
Growth Fund,Inc.
Fund Inc. Non-
Qualified Qualified
Units outstanding at December 31, 1995 794,908 155,744
Units purchased and transfers in 3,527 0
Benefits, surrenders and transfers out (9,912) (5,341)
Units outstanding at June 30, 1996 788,523 150,403
Oppenheimer
Oppenheimer Fund
Fund Non-
Qualified Qualified
Units outstanding at December 31, 1995 277,581 41,395
Units purchased and transfers in 472 0
Benefits, surrenders and transfers out (5,113) (1,719)
Units outstanding at June 30, 1996 272,940 39,676
Delaware
Delaware Group
Group Decatur
Decatur Fund, Inc.
Fund, Inc. Non-
Qualified Qualified
Units outstanding at December 31, 1995 735,388 223,021
Units purchased and transfers in 12,182 0
Benefits, surrenders and transfers out (79,175) (29,948)
Units outstanding at June 30, 1996 668,395 193,073
Windsor
Windsor Fund
Fund Non-
Qualified Qualified
Units outstanding at December 31, 1995 1,000,233 104,906
Units purchased and transfers in 25,499 0
Benefits, surrenders and transfers out (70,140) (1,098)
Units outstanding at June 30, 1996 955,592 103,808
Dreyfus
Dreyfus Third
Third Century
Century Non-
Qualified Qualified
Units outstanding at December 31, 1995 528,552 15,589
Units purchased and transfers in 539 0
Benefits, surrenders and transfers out (38,485) (21)
Units outstanding at June 30, 1996 490,606 15,568
Windsor
Windsor Fund B
Fund B Non-
Qualified Qualified
Units outstanding at December 31, 1995 215,431 83,861
Units purchased and transfers in 1,868 2,645
Benefits, surrenders and transfers out (6,589) (2,700)
Units outstanding at June 30, 1996 210,710 83,806
CIGNA High CIGNA High
Yield Fund, Yield Fund,
Inc. Inc. Non-
Qualified Qualified
Units outstanding at December 31, 1995 149,774 204,880
Units purchased and transfers in 2,996 11,153
Benefits, surrenders and transfers out (6,428) (1,294)
Units outstanding at June 30, 1996 146,342 214,739
The accumulation units for eleven of the subdivisions include
units applicable to contract owners who are "on benefit annuitants." At
June 30, 1996, the number of accumulation units, the aggregate
value of the subdivisions' equity and the number of monthly annuity
units and value per unit of "on benefit annuitants" are as follows:
Accumulation Aggregate
Units Value
Seligman Growth Fund, Inc. Qualified 33,112 $369,316
Seligman Growth Fund, Inc. Non-Qualified 16,024 $145,403
Oppenheimer Fund Qualified 6,973 $42,943
Oppenheimer Fund Non-Qualified 14,422 $86,977
Delaware Group Decatur Fund, 33,164 $590,915
Inc. Qualified
Delaware Group Decatur Fund, 39,542 $686,066
Inc. Non-Qualified
Windsor Fund Qualified 50,926 $692,003
Dreyfus Third Century Qualified 6,696 $107,789
Dreyfus Third Century Non-Qualified 539 $7,646
Windsor Fund B Qualified 1,696 $26,598
Windsor Fund B Non-Qualified 1,692 $26,755
Monthly Annuity
Annuity Units Unit Value
Seligman Growth Fund, Inc. Qualified 980 $4.6156312
Seligman Growth Fund, Inc. Non-Qualified 926 $3.7558788
Oppenheimer Fund Qualified 245 $2.5601271
Oppenheimer Fund Non-Qualified 266 $2.5078987
Delaware Group Decatur Fund, 967 $7.4321173
Inc. Qualified
Delaware Group Decatur Fund, 731 $7.1885781
Inc. Non-Qualified
Windsor Fund Qualified 1,181 $5.6505423
Dreyfus Third Century Qualified 252 $3.5284335
Dreyfus Third Century Non-Qualified 19 $3.4876650
Windsor Fund B Qualified 108 $2.2810720
Windsor Fund B Non-Qualified 103 $1.4449597
