LIFE INSURANCE COMPANY OF NORTH AMERICA
SEPARATE ACCOUNT A
FINANCIAL STATEMENTS
June 30, 1997
(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
SEPARATE ACCOUNT A
COMBINED BALANCE SHEET
JUNE 30, 1997
ASSETS
Investments at Market Value (Notes 1 and 2):
Seligman Growth Fund, Inc.
1,539,096 qualified shares (cost $9,823,706) $10,142,648
212,876 non-qualified shares (cost $1,779,018) 1,402,850
Oppenheimer Multiple Strategies Fund (formerly Oppenheimer Fund)
137,696 qualified shares (cost $1,259,699) 2,068,191
20,942 non-qualified shares (cost $203,389) 314,549
Delaware Group Decatur Fund, Inc.
673,141 qualified shares (cost $8,106,516) 14,304,244
184,823 non-qualified shares (cost $2,064,160) 3,927,490
Windsor Fund
775,076 qualified shares (cost $9,423,603) 14,633,438
76,243 non-qualified shares (cost $995,192) 1,439,482
Dreyfus Third Century Fund
883,306 qualified shares (cost $3,857,734) 9,151,058
25,452 non-qualified shares (cost $132,070) 263,672
Windsor Fund B
228,779 qualified shares (cost $3,871,816) 4,319,353
88,870 non-qualified shares (cost $1,422,546) 1,677,880
CIGNA High Yield Fund, Inc.
48,962 qualified shares (cost $521,570) 483,749
140,757 non-qualified shares (cost $1,313,624) 1,390,677
Total Assets $65,519,281
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.
753,549 qualified accumulation ($13.4598381 per unit) $10,142,648
units outstanding
128,101 non-qualified accumulation ($10.9511263 per unit) 1,402,850
units outstanding
Oppenheimer Multiple Strategies Fund (formerly Oppenheimer fund)
228,521 qualified accumulation ($9.0503317 per unit) 2,068,191
units outstanding
35,490 non-qualified accumulation ($8.8630444 per unit) 314,549
units outstanding
Delaware Group Decatur Fund, Inc.
615,711 qualified accumulation ($23.2320749 per unit) 14,304,244
units outstanding
173,581 non-qualified accumulation ($22.6262651 per unit) 3,927,490
units outstanding
Windsor Fund
806,183 qualified accumulation ($18.1515089 per unit) 14,633,438
units outstanding
89,642 non-qualified accumulation ($16.0581234 per unit) 1,439,482
units outstanding
Dreyfus Third Century Fund
435,171 qualified accumulation ($21.0286481 per unit) 9,151,058
units outstanding
14,217 non-qualified accumulation ($18.5462317 per unit) 263,672
units outstanding
Windsor Fund B
206,152 qualified accumulation ($20.9522731 per unit) 4,319,353
units outstanding
79,413 non-qualified accumulation ($21.1285306 per unit) 1,677,880
units outstanding
CIGNA High Yield Fund, Inc.
72,762 qualified accumulation ($6.6483746 per unit) 483,749
units outstanding
206,001 non-qualified accumulation ($6.7508269 per unit) 1,390,677
units outstanding
Contract Owners' Equity $65,519,281
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, 1997
Seligman
Seligman Growth
Growth Fund Inc.
Fund Inc. Non-
Qualified Qualified
Investment Income:
Dividends $0 $0
Expenses:
Mortality risk and expense 42,565 6,038
fees guarantees (Note 3)
Investment income - net (42,565) (6,038)
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 387,891 86,884
Cost of shares sold 375,249 75,091
Net realized gain (loss) on investments 12,642 11,793
Net unrealized gain (loss) on investments 1,139,212 153,469
Net realized and unrealized gain (loss) 1,151,854 165,262
on investments
Net Increase (Decrease) in Net Assets $1,109,289 $159,224
from Investment Operations
Oppenheimer
Multiple
Oppenheimer Strategies
Multiple Strategies (formerly
Fund (formerly Oppenheimer
Oppenheimer) Non-
Qualified Qualified
Investment Income:
Dividends $10,654 $1,623
Expenses:
Mortality risk and expense 7,369 1,113
fees guarantees (Note 3)
Investment income - net 3,285 510
Net Realized and Unrealized
Gain (Loss) on Investments:
Net realized capital gain distributions 124,692 18,995
Net realized gain (loss) on investments:
Proceeds from sale of shares 90,939 4,802
Cost of shares sold 85,403 4,457
Net realized gain (loss) on investments 5,536 345
Net unrealized gain (loss) on investments 405,879 61,882
Net realized and unrealized gain (loss) 536,107 81,222
on investments
Net Increase (Decrease) in Net Assets $539,392 $81,732
from Investment Operations
Delaware
Delaware Group
Group Decatur
Decatur Fund, Inc.
Fund, Inc. Non-
Qualified Qualified
Investment Income:
Dividends $205,432 $57,321
Expenses:
Mortality risk and expense 59,157 16,750
fees guarantees (Note 3)
Investment income - net 146,275 40,571
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 537,429 258,920
Cost of shares sold 515,719 241,590
Net realized gain (loss) on investments 21,710 17,330
Net unrealized gain (loss) on investments 1,867,651 516,270
Net realized and unrealized gain (loss) 1,889,361 533,600
on investments
Net Increase (Decrease) in Net Assets $2,035,636 $574,171
from Investment Operations
Windsor
Windsor Fund
Fund Non-
Qualified Qualified
Investment Income:
Dividends $153,733 $15,103
Expenses:
Mortality risk and expense 61,067 6,138
fees guarantees (Note 3)
Investment income - net 92,666 8,965
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 999,291 64,503
Cost of shares sold 820,020 58,615
Net realized gain (loss) on investments 179,271 5,888
Net unrealized gain (loss) on investments 1,601,059 172,864
Net realized and unrealized gain (loss) 1,780,330 178,752
on investments
Net Increase (Decrease) in Net Assets $1,872,996 $187,717
from Investment Operations
Dreyfus
Dreyfus Third
Third Century
Century Non-
Qualified Qualified
Investment Income:
Dividends $0 $0
Expenses:
Mortality risk and expense 38,249 1,136
fees guarantees (Note 3)
Investment income - net (38,249) (1,136)
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 478,793 23,966
Cost of shares sold 461,120 21,687
Net realized gain (loss) on investments 17,673 2,279
Net unrealized gain (loss) on investments 1,371,580 39,033
Net realized and unrealized gain (loss) 1,389,253 41,312
on investments
Net Increase (Decrease) in Net Assets $1,351,004 $40,176
from Investment Operations
Windsor
Windsor Fund B
Fund B Non-
Qualified Qualified
Investment Income:
Dividends $45,306 $17,591
Expenses:
Mortality risk and expense 18,395 7,074
fees guarantees (Note 3)
Investment income - net 26,911 10,517
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 191,814 63,526
Cost of shares sold 179,172 60,680
Net realized gain (loss) on investments 12,642 2,846
Net unrealized gain (loss) on investments 518,532 202,851
Net realized and unrealized gain (loss) 531,174 205,697
on investments
Net Increase (Decrease) in Net Assets $558,085 $216,214
from Investment Operations
CIGNA High CIGNA High
Yield Fund, Yield Fund,
Inc. Inc. Non-
Qualified Qualified
Investment Income:
Dividends $26,318 $61,048
Expenses:
Mortality risk and expense 2,638 5,990
fees guarantees (Note 3)
Investment income - net 23,680 55,058
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 368,861 5,990
Cost of shares sold 370,508 6,002
Net realized gain (loss) on investments (1,647) (12)
Net unrealized gain (loss) on investments 3,853 363
Net realized and unrealized gain (loss) 2,206 351
on investments
Net Increase (Decrease) in Net Assets $25,886 $55,409
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, 1997
Seligman
Seligman Growth
Growth Fund Inc.
Fund Inc. Non-
Qualified Qualified
Investment Operations:
Investment income-net ($42,565) ($6,038)
Realized capital gain distributions 0 0
Net realized gain (loss) on investments 12,642 11,793
Net unrealized gain (loss) on investments 1,139,212 153,469
Net increase (decrease) in net 1,109,289 159,224
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and transfers 84,061 0
in (Note 3)
Net contract surrenders and transfers (354,274) (71,509)
out (Note 3)
Benefit payments to annuitants (19,660) (9,337)
Net Increase from accumulation (289,873) (80,846)
unit transactions(68,316)
Net Increase (Decrease) in Net Assets 819,416 78,378
Net Assets:
Net assets at December 31, 1996 $9,323,232 $1,324,472
Net assets at June 30, 1997 $10,142,648 $1,402,850
Oppenheimer Oppenheimer
Multiple Multiple
Strategies Strategies
Fund (formerly Fund (forme
Oppenheimer) Oppenheimer
Qualified Non-Qualifi
Investment Operations:
Investment income-net $3,285 $510
Realized capital gain distributions 124,692 18,995
Net realized gain (loss) on investments 5,536 345
Net unrealized gain (loss) on investments 405,879 61,882
Net increase (decrease) in net 539,392 81,732
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and transfers 3,000 0
in (Note 3)
Net contract surrenders and transfers (83,259) 0
out (Note 3)
Benefit payments to annuitants (3,312) (3,689)
Net Increase from accumulation (83,571) (3,689)
unit transactions(68,316)
Net Increase (Decrease) in Net Assets 455,821 78,043
Net Assets:
Net assets at December 31, 1996 $1,612,370 $236,506
Net assets at June 30, 1997 $2,068,191 $314,549
Delaware
Delaware Group
Group Decatur
Decatur Fund, Inc.
Fund, Inc. Non-
Qualified Qualified
Investment Operations:
Investment income-net $146,275 $40,571
Realized capital gain distributions 0 0
Net realized gain (loss) on investments 21,710 17,330
Net unrealized gain (loss) on investments 1,867,651 516,270
Net increase (decrease) in net 2,035,636 574,171
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and transfers 99,571 0
in (Note 3)
Net contract surrenders and transfers (470,748) (213,358)
out (Note 3)
Benefit payments to annuitants (27,884) (28,812)
Net Increase from accumulation (399,061) (242,170)
unit transactions(68,316)
Net Increase (Decrease) in Net Assets 1,636,575 332,001
Net Assets:
Net assets at December 31, 1996 $12,667,669 $3,595,489
Net assets at June 30, 1997 $14,304,244 $3,927,490
Windsor
Windsor Fund
Fund Non-
Qualified Qualified
Investment Operations:
Investment income-net $92,666 $8,965
Realized capital gain distributions 0 0
Net realized gain (loss) on investments 179,271 5,888
Net unrealized gain (loss) on investments 1,601,059 172,864
Net increase (decrease) in net 1,872,996 187,717
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and transfers 370,071 0
in (Note 3)
Net contract surrenders and transfers (940,108) (58,366)
out (Note 3)
Benefit payments to annuitants (44,312) 0
Net Increase from accumulation (614,349) (58,366)
unit transactions
Net Increase (Decrease) in Net Assets 1,258,647 129,351
Net Assets:
Net assets at December 31, 1996 $13,374,791 $1,310,131
Net assets at June 30, 1997 $14,633,438 $1,439,482
Dreyfus
Dreyfus Third
Third Century
Century Non-
Qualified Qualified
Investment Operations:
Investment income-net ($38,249) ($1,136)
Realized capital gain distributions 0 0
Net realized gain (loss) on investments 17,673 2,279
Net unrealized gain (loss) on investments 1,371,580 39,033
Net increase (decrease) in net 1,351,004 40,176
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and transfers 112,635 0
in (Note 3)
Net contract surrenders and transfers (449,229) (22,481)
out (Note 3)
Benefit payments to annuitants (19,433) (349)
Net Increase from accumulation (356,027) (22,830)
unit transactions(68,316)
Net Increase (Decrease) in Net Assets 994,977 17,346
Net Assets:
Net assets at December 31, 1996 $8,156,081 $246,326
Net assets at June 30, 1997 $9,151,058 $263,672
Windsor
Windsor Fund B
Fund B Non-
Qualified Qualified
Investment Operations:
Investment income-net $26,911 $10,517
Realized capital gain distributions 0 0
Net realized gain (loss) on investments 12,642 2,846
Net unrealized gain (loss) on investments 518,532 202,851
Net increase (decrease) in net 558,085 216,214
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and transfers 21,012 0
in (Note 3)
Net contract surrenders and transfers (185,445) (55,418)
out (Note 3)
Benefit payments to annuitants (1,291) (1,034)
Net Increase from accumulation (165,724) (56,452)
unit transactions(68,316)
Net Increase (Decrease) in Net Assets 392,361 159,762
Net Assets:
Net assets at December 31, 1996 $3,926,992 $1,518,118
Net assets at June 30, 1997 $4,319,353 $1,677,880
CIGNA High CIGNA High
Yield Fund, Yield Fund,
Inc. Inc. Non-
Qualified Qualified
Investment Operations:
Investment income-net $23,680 $55,058
Realized capital gain distributions 0 0
Net realized gain (loss) on investments (1,647) (12)
Net unrealized gain (loss) on investments 3,853 363
Net increase (decrease) in net 25,886 55,409
assets from investment operations
Accumulation Unit Transactions:
Net contract considerations and transfers 0 0
in (Note 3)
Net contract surrenders and transfers (366,223) 0
out (Note 3)
Benefit payments to annuitants 0 0
Net Increase from accumulation (366,223) 0
unit transactions(68,316)
Net Increase (Decrease) in Net Assets (340,337) 55,409
Net Assets:
Net assets at December 31, 1996 $824,086 $1,335,268
Net assets at June 30, 1997 $483,749 $1,390,677
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 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 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 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 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 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 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 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
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
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
Multiple Strategies Fund (formerly 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, 1997; (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-month period ended June 30, 1997 were
$101,653.47 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-month period ended June 30, 1997 were as
follows:
Transfers between Separate
Account A subdivisions $187,077
Transfers from the general
accumulation account $454,248
Transfers to the general
accumulation account $282,234
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-month
period ending December 31, 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 1997, 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 1997 and units
outstanding at June 30, 1997 were as follows:
Seligman
Seligman Growth
Growth Fund Inc.
Fund Inc. Non-
Qualified Qualified
Units outstanding at December 31, 1996 776,867 135,645
Units purchased and transfers in 755 0
Benefits, surrenders and transfers out (24,073) (7,544)
Units outstanding at June 30, 1997 753,549 128,101
Oppenheimer Oppenheimer
Multiple Multiple
Strategies Fund Strategies Fund
(formerly (formerly
Oppenheimer) Oppenheimer)
Qualified Non-Qualified
Units outstanding at December 31, 1996 240,426 36,010
Units purchased and transfers in 398 0
Benefits, surrenders and transfers out (12,303) (520)
Units outstanding at June 30, 1997 228,521 35,490
Delaware
Delaware Group
Group Decatur
Decatur Fund, Inc.
Fund, Inc. Non-
Qualified Qualified
Units outstanding at December 31, 1996 634,694 184,973
Units purchased and transfers in 4,411 0
Benefits, surrenders and transfers out (23,394) (11,392)
Units outstanding at June 30, 1997 615,711 173,581
Windsor
Windsor Fund
Fund Non-
Qualified Qualified
Units outstanding at December 31, 1996 843,324 93,436
Units purchased and transfers in 9,554 0
Benefits, surrenders and transfers out (46,695) (3,794)
Units outstanding at June 30, 1997 806,183 89,642
Dreyfus
Dreyfus Third
Third Century
Century Non-
Qualified Qualified
Units outstanding at December 31, 1996 453,612 15,547
Units purchased and transfers in 322 0
Benefits, surrenders and transfers out (18,763) (1,330)
Units outstanding at June 30, 1997 435,171 14,217
Windsor
Windsor Fund B
Fund B Non-
Qualified Qualified
Units outstanding at December 31, 1996 214,502 82,259
Units purchased and transfers in 980 0
Benefits, surrenders and transfers out (9,330) (2,846)
Units outstanding at June 30, 1997 206,152 79,413
CIGNA High CIGNA High
Yield Fund, Yield Fund,
Inc. Inc. Non-
Qualified Qualified
Units outstanding at December 31, 1996 129,088 206,001
Units purchased and transfers in 0 0
Benefits, surrenders and transfers out (56,326) 0
Units outstanding at June 30, 1997 72,762 206,001
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
Seligman Growth Fund, Inc. Qualified 35,868 $482,777
Seligman Growth Fund, Inc. Non-Qualified 11,432 $125,193
Oppenheimer Fund Qualified 6,020 $54,483
Oppenheimer Fund Non-Qualified 13,382 $118,605
Delaware Group Decatur Fund, 30,509 $708,787
Inc. Qualified
Delaware Group Decatur Fund, 35,884 $811,921
Inc. Non-Qualified
Windsor Fund Qualified 58,053 $1,053,750
Dreyfus Third Century Qualified 11,268 $236,951
Dreyfus Third Century Non-Qualified 498 $9,236
Windsor Fund B Qualified 1,565 $32,790
Windsor Fund B Non-Qualified 1,587 $33,531
Monthly Annuity
Annuity Units Unit Value
Seligman Growth Fund, Inc. Qualified 6,769 $5.3805632
Seligman Growth Fund, Inc. Non-Qualified 969 $4.3786086
Oppenheimer Fund Qualified 245 $3.6342999
Oppenheimer Fund Non-Qualified 266 $3.5602532
Delaware Group Decatur Fund, 840 $9.3607525
Inc. Qualified
Delaware Group Decatur Fund, 718 $9.0555980
Inc. Non-Qualified
Windsor Fund Qualified 13,198 $7.2912677
Dreyfus Third Century Qualified 6,130 $4.4525108
Dreyfus Third Century Non-Qualified 19 $4.4048432
Windsor Fund B Qualified 108 $2.9134656
Windsor Fund B Non-Qualified 103 $1.8457956
