LIFE INSURANCE COMPANY
OF NORTH AMERICA
SEPARATE ACCOUNT A
FINANCIAL STATEMENTS
December 31, 1997
(Audited)
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
Report of Independent Accountants
To the Contract Owners of Life Insurance Company of North America
Separate Account A and the Board of Directors of Life Insurance
Company of North America
In our opinion, the accompanying combined balance sheet and the
related individual statements of operations and of changes in
total assets present fairly, in all material respects, the
combined financial position of the subdivisions comprising the
Life Insurance Company of North America Separate Account A (the
Separate Account) at December 31, 1997, the results of each of
their operations for the year then ended and the changes in each
of their total assets for the two years in the period then ended,
in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Separate
Account's management; our responsibility is to express an opinion
on these financial statements based on our audits. We conducted
our audits of these financial statements in accordance with
generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Dallas, Texas
February 20, 1998 LIFE INSURANCE COMPANY OF NORTH AMERICA
SEPARATE ACCOUNT A
COMBINED BALANCE SHEET
DECEMBER 31, 1997
ASSETS
Investments at Market Value (Notes 1 and 2):
Seligman Growth Fund, Inc.
1,665,071 qualified shares (cost $10,568,457) $10,123,637
239,038 non-qualified shares (cost $1,935,417) 1,453,352
Oppenheimer Multiple Strategies Fund
(formerly Oppenheimer Fund)
101,056 qualified shares (cost $1,090,736) 1,473,394
19,241 non-qualified shares (cost $225,568) 280,534
Delaware Group Decatur Fund, Inc.
745,226 qualified shares (cost $9,556,435) 15,008,865
213,137 non-qualified shares (cost $2,623,848) 4,292,568
Windsor Fund
843,986 qualified shares (cost $10,702,165) 14,330,896
93,365 non-qualified shares (cost $1,292,379) 1,585,334
Dreyfus Third Century Fund
929,669 qualified shares (cost $4,419,097) 9,770,819
27,919 non-qualified shares (cost $158,591) 293,421
Windsor Fund B
258,339 qualified shares (cost $4,363,569) 4,386,602
102,519 non-qualified shares (cost $1,648,708) 1,740,785
CIGNA High Yield Fund, Inc.
51,041 qualified shares (cost $542,622) 518,580
93,725 non-qualified shares (cost $871,602) 952,248
Total Assets $66,211,035
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.
720,560 qualified accumulation ($14.0496790 per unit) $10,123,637
units outstanding
128,134 non-qualified accumulation ($11.3424352 per unit) 1,453,352
units outstanding
Oppenheimer Multiple Strategies Fund
(formerly Oppenheimer Fund)
179,887 qualified accumulation ($8.1906645 per unit) 1,473,394
units outstanding
34,996 non-qualified accumulation ($8.0161745 per unit) 280,534
units outstanding
Delaware Group Decatur Fund, Inc.
584,884 qualified accumulation ($25.6612671 per unit) 15,008,865
units outstanding
171,929 non-qualified accumulation ($24.9670942 per unit) 4,292,568
units outstanding
Windsor Fund
747,640 qualified accumulation ($19.1681770 per unit) 14,330,896
units outstanding
93,494 non-qualified accumulation ($16.9565330 per unit) 1,585,334
units outstanding
Dreyfus Third Century Fund
423,700 qualified accumulation ($23.0607006 per unit) 9,770,819
units outstanding
14,428 non-qualified accumulation ($20.3369424 per unit) 293,421
units outstanding
Windsor Fund B
198,377 qualified accumulation ($22.1124538 per unit) 4,386,602
units outstanding
78,031 non-qualified accumulation ($22.3088893 per unit) 1,740,785
units outstanding
CIGNA High Yield Fund, Inc.
72,762 qualified accumulation ($7.1270678 per unit) 518,580
units outstanding
131,589 non-qualified accumulation ($7.2365297 per unit) 952,248
units outstanding
Contract Owners' Equity $66,211,035
The accompanying notes are an integral part of these financial statements
LIFE INSURANCE COMPANY OF NORTH AMERICA
SEPARATE ACCOUNT A
INDIVIDUAL STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
Seligman
Seligman Growth
Growth Fund, Inc.
Fund, Inc. Non-
Qualified Qualified
Investment Income:
Dividends $0 $0
Expenses:
Mortality risk and expense 88,850 12,696
fees guarantees (Note 3)
Investment income - net (88,850) (12,696)
Net Realized and Unrealized
Gain on Investments:
Net realized capital gain distributions 1,187,359 169,266
Net realized gain (loss) on investments:
Proceeds from sale of shares 975,458 154,254
Cost of shares sold 893,642 140,567
Net realized gain (loss) on investments 81,816 13,687
Net unrealized gain (loss) on investments 375,448 47,572
Net realized and unrealized gain 1,644,623 230,525
on investments
Net Increase in Net Assets from $1,555,773 $217,829
Investment Operations
Oppenheimer Oppenheimer
Multiple Strategies Multiple Strateg
Fund (formerly Fund (formerly
Oppenheimer Fund) Oppenheimer Fund
Qualified Non-Qualified
Investment Income:
Dividends $58,004 $10,638
Expenses:
Mortality risk and expense 14,722 2,473
fees guarantees (Note 3)
Investment income - net 43,282 8,165
Net Realized and Unrealized
Gain on Investments:
Net realized capital gain distributions 217,823 36,783
Net realized gain (loss) on investments:
Proceeds from sale of shares 569,320 10,091
Cost of shares sold 411,951 9,271
Net realized gain (loss) on investments 157,369 820
Net unrealized gain (loss) on investments (19,955) 5,688
Net realized and unrealized gain 355,237 43,291
on investments
Net Increase in Net Assets from $398,519 $51,456
Investment Operations
Delaware Delaware
Group Group
Decatur Decatur
Fund, Inc. Fund, Inc.
Qualified Non-Qualified
Investment Income:
Dividends $962,982 $273,455
Expenses:
Mortality risk and expense 125,519 35,523
fees guarantees (Note 3)
Investment income - net 837,463 237,932
Net Realized and Unrealized
Gain on Investments:
Net realized capital gain distributions 1,413,813 404,241
Net realized gain (loss) on investments:
Proceeds from sale of shares 1,363,168 350,169
Cost of shares sold 1,240,313 331,427
Net realized gain (loss) on investments 122,855 18,742
Net unrealized gain (loss) on investments 1,122,353 321,660
Net realized and unrealized gain 2,659,021 744,643
on investments
Net Increase in Net Assets from $3,496,484 $982,575
Investment Operations
Windsor
Windsor Fund
Fund Non-
Qualified Qualified
Investment Income:
Dividends $856,375 $92,743
Expenses:
Mortality risk and expense 128,776 13,239
fees guarantees (Note 3)
Investment income - net 727,599 79,504
Net Realized and Unrealized
Gain on Investments:
Net realized capital gain distributions 1,448,303 160,034
Net realized gain (loss) on investments:
Proceeds from sale of shares 2,291,364 70,041
Cost of shares sold 1,738,802 64,136
Net realized gain (loss) on investments 552,562 5,905
Net unrealized gain (loss) on investments 19,955 21,529
Net realized and unrealized gain 2,020,820 187,468
on investments
Net Increase in Net Assets from $2,748,419 $266,972
Investment Operations
Dreyfus
Dreyfus Third
Third Century
Century Non-
Qualified Qualified
Investment Income:
Dividends $240,303 $7,095
Expenses:
Mortality risk and expense 82,154 2,418
fees guarantees (Note 3)
Investment income - net 158,149 4,677
Net Realized and Unrealized
Gain on Investments:
Net realized capital gain distributions 549,264 16,216
Net realized gain (loss) on investments:
Proceeds from sale of shares 781,382 25,519
Cost of shares sold 689,325 22,970
Net realized gain (loss) on investments 92,057 2,549
Net unrealized gain (loss) on investments 1,429,978 42,261
Net realized and unrealized gain 2,071,299 61,026
on investments
Net Increase in Net Assets from $2,229,448 $65,703
Investment Operations
Windsor
Windsor Fund B
Fund B Non-
Qualified Qualified
Investment Income:
Dividends $267,336 $102,853
Expenses:
Mortality risk and expense 39,115 15,088
fees guarantees (Note 3)
Investment income - net 228,221 87,765
Net Realized and Unrealized
Gain on Investments:
Net realized capital gain distributions 457,654 175,744
Net realized gain (loss) on investments:
Proceeds from sale of shares 388,441 101,856
Cost of shares sold 371,553 95,524
Net realized gain (loss) on investments 16,888 6,332
Net unrealized gain (loss) on investments 94,029 39,594
Net realized and unrealized gain 568,571 221,670
on investments
Net Increase in Net Assets from $796,792 $309,435
Investment Operations
CIGNA High CIGNA High
Yield Fund, Yield Fund,
Inc. Inc. Non-
Qualified Qualified
Investment Income:
Dividends $49,635 $107,624
Expenses:
Mortality risk and expense 4,909 10,685
fees guarantees (Note 3)
Investment income - net 44,726 96,939
Net Realized and Unrealized
Gain on Investments:
Net realized capital gain distributions
0 0
Net realized gain (loss) on investments:
Proceeds from sale of shares 371,132 523,413
Cost of shares sold 372,773 494,601
Net realized gain (loss) on investments (1,641) 28,812
Net unrealized gain (loss) on investments 17,632 3,957
Net realized and unrealized gain 15,991 32,769
on investments
Net Increase in Net Assets from $60,717 $129,708
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
YEAR ENDED DECEMBER 31, 1997
Seligman
Seligman Growth
Growth Fund, Inc.
Fund, Inc. Non-
Qualified Qualified
Investment Operations:
Investment income-net ($88,850) ($12,696)
Realized capital gain distributions 1,187,359 169,266
Net realized gain (loss) on investments 81,816 13,687
Net unrealized gain (loss) on investments 375,448 47,572
Net increase in net assets from 1,555,773 217,829
investment operations
Accumulation Unit Transactions:
Net contract considerations and transfers 13,012 0
in (Note 3)
Net contract surrenders and transfers (728,383) (70,004)
out (Note 3)
Benefit payments to annuitants (39,997) (18,945)
Net Increase (Decrease) from accumulation (755,368) (88,949)
unit transactions
Net Increase (Decrease) in Net Assets 800,405 128,880
Net Assets:
Net assets at December 31, 1996 9,323,232 1,324,472
Net assets at December 31, 1997 $10,123,637 $1,453,352
Oppenheimer Oppenheimer
Multiple Multiple
Strategies Strategies
Fund (formerly Fund (formerly
Oppenheimer Fund) Oppenheimer Fund
Qualified Non-Qualified
Investment Operations:
Investment income-net $ 43,282 $ 8,165
Realized capital gain distributions 217,823 36,783
Net realized gain (loss) on investments 157,369 820
Net unrealized gain (loss) on investments (19,955) 5,688
Net increase in net assets from 398,519 51,456
investment operations
Accumulation Unit Transactions:
Net contract considerations and transfers 4,780 0
in (Note 3)
Net contract surrenders and transfers (535,348) 0
out (Note 3)
Benefit payments to annuitants (6,927) (7,428)
Net Increase (Decrease) from accumulation (537,495) (7,428)
unit transactions
Net Increase (Decrease) in Net Assets (138,976) 44,028
Net Assets:
Net assets at December 31, 1996 1,612,370 236,506
Net assets at December 31, 1997 $1,473,394 $280,534
Delaware
Delaware Group
Group Decatur
Decatur Fund, Inc.
Fund, Inc. Non-
Qualified Qualified
Investment Operations:
Investment income-net $837,463 $237,932
Realized capital gain distributions 1,413,813 404,241
Net realized gain (loss) on investments 122,855 18,742
Net unrealized gain (loss) on investments 1,122,353 321,660
Net increase in net assets from 3,496,484 982,575
investment operations
Accumulation Unit Transactions:
Net contract considerations and transfers 124,184 0
in (Note 3)
Net contract surrenders and transfers (1,220,653) (225,262)
out (Note 3)
Benefit payments to annuitants (58,819) (60,234)
Net Increase (Decrease) from accumulation (1,155,287) (285,496)
unit transactions
Net Increase (Decrease) in Net Assets 2,341,197 697,079
Net Assets:
Net assets at December 31, 1996 12,667,669 3,595,489
Net assets at December 31, 1997 $15,008,865 $4,292,568
Windsor
Windsor Fund
Fund Non-
Qualified Qualified
Investment Operations:
Investment income-net $727,599 $79,504
Realized capital gain distributions 1,448,303 160,034
Net realized gain (loss) on investments 552,562 5,905
Net unrealized gain (loss) on investments 19,955 21,529
Net increase in net assets from 2,748,419 266,972
investment operations
Accumulation Unit Transactions:
Net contract considerations and transfers 219,230 66,991
in (Note 3)
Net contract surrenders and transfers (1,916,725) (58,760)
out (Note 3)
Benefit payments to annuitants (94,819) 0
Net Increase (Decrease) from accumulation (1,792,313) 8,231
unit transactions
Net Increase (Decrease) in Net Assets 956,106 275,203
Net Assets:
Net assets at December 31, 1996 13,374,791 1,310,131
Net assets at December 31, 1997 $14,330,896 $1,585,334
Dreyfus
Dreyfus Third
Third Century
Century Non-
Qualified Qualified
Investment Operations:
Investment income-net $158,149 $4,677
Realized capital gain distributions 549,264 16,216
Net realized gain (loss) on investments 92,057 2,549
Net unrealized gain (loss) on investments 1,429,978 42,261
Net increase in net assets from 2,229,448 65,703
investment operations
Accumulation Unit Transactions:
Net contract considerations and transfers 19,625 4,612
in (Note 3)
Net contract surrenders and transfers (605,093) (22,476)
out (Note 3)
Benefit payments to annuitants (29,242) (744)
Net Increase (Decrease) from accumulation (614,710) (18,608)
unit transactions
Net Increase (Decrease) in Net Assets 1,614,738 47,095
Net Assets:
Net assets at December 31, 1996 8,156,081 246,326
Net assets at December 31, 1997 $9,770,819 $293,421
Windsor
Windsor Fund B
Fund B Non-
Qualified Qualified
Investment Operations:
Investment income-net $228,221 $87,765
Realized capital gain distributions 457,654 175,744
Net realized gain (loss) on investments 16,888 6,332
Net unrealized gain (loss) on investments 94,029 39,594
Net increase in net assets from 796,792 309,435
investment operations
Accumulation Unit Transactions:
Net contract considerations and transfers 39,318 0
in (Note 3)
Net contract surrenders and transfers (373,799) (84,585)
out (Note 3)
Benefit payments to annuitants (2,701) (2,183)
Net Increase (Decrease) from accumulation (337,182) (86,768)
unit transactions
Net Increase (Decrease) in Net Assets 459,610 222,667
Net Assets:
Net assets at December 31, 1996 3,926,992 1,518,118
Net assets at December 31, 1997 $4,386,602 $1,740,785
CIGNA High CIGNA High
Yield Fund, Yield Fund,
Inc. Inc. Non-
Qualified Qualified
Investment Operations:
Investment income-net $44,726 $96,939
Realized capital gain distributions 0 0
Net realized gain (loss) on investments (1,641) 28,812
Net unrealized gain (loss) on investments 17,632 3,957
Net increase in net assets from 60,717 129,708
investment operations
Accumulation Unit Transactions:
Net contract considerations and transfers 0 0
in (Note 3)
Net contract surrenders and transfers (366,223) (512,728)
out (Note 3)
Benefit payments to annuitants 0 0
Net Increase (Decrease) from accumulation (366,223) (512,728)
unit transactions
Net Increase (Decrease) in Net Assets (305,506) (383,020)
Net Assets:
Net assets at December 31, 1996 824,086 1,335,268
Net assets at December 31, 1997 $518,580 $952,248
The accompanying notes are an integral part of these financial statements
YEAR ENDED DECEMBER 31, 1996
Seligman
Seligman Growth
Growth Fund, Inc.
Fund, Inc. Non-
Qualified Qualified
Investment Operations:
Investment income-net $60,831 $8,250
Realized capital gain distributions 564,389 82,285
Net realized gain (loss) on investments 24,314 21,199
Net unrealized gain (loss) on investments 928,044 133,782
Net increase in net assets from 1,577,578 245,516
investment operations
Accumulation Unit Transactions:
Net contract considerations and transfers 10,591 0
in (Note 3)
Net contract surrenders and transfers (178,352) (144,360)
out (Note 3)
Benefit payments to annuitants (33,257) (43,322)
Net Increase (Decrease) from accumulation (201,018) (187,682)
unit transactions
Net Increase (Decrease) in Net Assets 1,376,560 57,834
Net Assets:
Net assets at December 31, 1995 7,946,672 1,266,638
Net assets at December 31, 1996 $9,323,232 $1,324,472
Oppenheimer
Oppenheimer Fund
Fund Non-
Qualified Qualified
Investment Operations:
Investment income-net $33,348 $4,975
Realized capital gain distributions 106,492 15,646
Net realized gain (loss) on investments 43,131 3,813
Net unrealized gain (loss) on investments 88,228 14,135
Net increase in net assets from 271,199 38,569
investment operations
Accumulation Unit Transactions:
Net contract considerations and transfers 5,380 0
in (Note 3)
Net contract surrenders and transfers (231,025) (24,713)
out (Note 3)
Benefit payments to annuitants (6,038) (7,042)
Net Increase (Decrease) from accumulation (231,683) (31,755)
unit transactions
Net Increase (Decrease) in Net Assets 39,516 6,814
Net Assets:
Net assets at December 31, 1995 1,572,854 229,692
Net assets at December 31, 1996 $1,612,370 $236,506
Delaware
Delaware Group
Group Decatur
Decatur Fund, Inc.
Fund, Inc. Non-
Qualified Qualified
Investment Operations:
Investment income-net $744,945 $209,273
Realized capital gain distributions 1,349,090 384,462
Net realized gain (loss) on investments 269,487 134,069
Net unrealized gain (loss) on investments (235,307) (145,785)
Net increase in net assets from 2,128,215 582,019
investment operations
Accumulation Unit Transactions:
Net contract considerations and transfers 110,019 1,096
in (Note 3)
Net contract surrenders and transfers (1,846,802) (580,616)
out (Note 3)
Benefit payments to annuitants (76,369) (68,675)
Net Increase (Decrease) from accumulation (1,813,152) (648,195)
unit transactions
Net Increase (Decrease) in Net Assets 315,063 (66,176)
Net Assets:
Net assets at December 31, 1995 12,352,606 3,661,665
Net assets at December 31, 1996 $12,667,669 $3,595,489
Windsor
Windsor Fund
Fund Non-
Qualified Qualified
Investment Operations:
Investment income-net $383,825 $35,715
Realized capital gain distributions 883,792 80,653
Net realized gain (loss) on investments 87,572 10,202
Net unrealized gain (loss) on investments 1,631,820 148,505
Net increase in net assets from 2,987,009 275,075
investment operations
Accumulation Unit Transactions:
Net contract considerations and transfers 285,423 0
in (Note 3)
Net contract surrenders and transfers (2,498,437) (139,413)
out (Note 3)
Benefit payments to annuitants (64,942) 0
Net Increase (Decrease) from accumulation (2,277,956) (139,413)
unit transactions
Net Increase (Decrease) in Net Assets 709,053 135,662
Net Assets:
Net assets at December 31, 1995 12,665,738 1,174,469
Net assets at December 31, 1996 $13,374,791 $1,310,131
Dreyfus
Dreyfus Third
Third Century
Century Non-
Qualified Qualified
Investment Operations:
Investment income-net $363,747 $10,865
Realized capital gain distributions 716,847 21,188
Net realized gain (loss) on investments 258,506 235
Net unrealized gain (loss) on investments 316,011 14,175
Net increase in net assets from 1,655,111 46,463
investment operations
Accumulation Unit Transactions:
Net contract considerations and transfers 119,719 0
in (Note 3)
Net contract surrenders and transfers (1,310,720) 0
out (Note 3)
Benefit payments to annuitants (20,393) (606)
Net Increase (Decrease) from accumulation (1,211,394) (606)
unit transactions
Net Increase (Decrease) in Net Assets 443,717 45,857
Net Assets:
Net assets at December 31, 1995 7,712,364 200,469
Net assets at December 31, 1996 $8,156,081 $246,326
Windsor
Windsor Fund B
Fund B Non-
Qualified Qualified
Investment Operations:
Investment income-net $103,360 $40,355
Realized capital gain distributions 241,771 93,467
Net realized gain (loss) on investments 11,428 2,129
Net unrealized gain (loss) on investments 441,596 172,379
Net increase in net assets from 798,155 308,330
investment operations
Accumulation Unit Transactions:
Net contract considerations and transfers 205,432 0
in (Note 3)
Net contract surrenders and transfers (223,691) (24,361)
out (Note 3)
Benefit payments to annuitants (2,190) (1,736)
Net Increase (Decrease) from accumulation (20,449) (26,097)
unit transactions
Net Increase (Decrease) in Net Assets 777,706 282,233
Net Assets:
Net assets at December 31, 1995 3,149,286 1,235,885
Net assets at December 31, 1996 $3,926,992 $1,518,118
CIGNA High CIGNA High
Yield Fund, Yield Fund,
Inc. Inc. Non-
Qualified Qualified
Investment Operations:
Investment income-net $70,977 $105,813
Realized capital gain distributions 0 0
Net realized gain (loss) on investments 2,131 (456)
Net unrealized gain (loss) on investments 36,200 59,400
Net increase in net assets from 109,308 164,757
investment operations
Accumulation Unit Transactions:
Net contract considerations and transfers 17,033 65,080
in (Note 3)
Net contract surrenders and transfers (125,199) (58,867)
out (Note 3)
Benefit payments to annuitants (15,106) 0
Net Increase (Decrease) from accumulation (123,272) 6,213
unit transactions
Net Increase (Decrease) in Net Assets (13,964) 170,970
Net Assets:
Net assets at December 31, 1995 838,050 1,164,298
Net assets at December 31, 1996 $824,086 $1,335,268
The accompanying notes are an integral part of these financial statements
LIFE INSURANCE COMPANY OF NORTH AMERICA
SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS
December 31, 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).
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 of the Separate Account, or
from the Separate Account to the General account, are not subject
to current taxation. There can be no assurance that future
changes in the Code will subject such transfers to current
taxation.
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 December 31, 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 year ended December 31, 1997 were
$130,603 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 Account of LINA. Contract owners affected by Revenue
Ruling 81-225 have limited rights to transfer certain contract
values to the General Account of LINA to lessen the impact of
the Ruling (See Note 5). The amounts of all
transfers for the twelve-month period ended December 31, 1997
were as
follows:
Transfers between Separate
Account A subdivisions $ 77,552
Transfers from the General
Account $221,468
Transfers to the General
Account $ 62,129
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
twelve-month period ending December 31, 1997, 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 1998, 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
December 31, 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 5,066 0
Benefits, surrenders and transfers out (61,373) (7,511)
Units outstanding at December 31, 1997 720,560 128,134
Oppenheimer Oppenheimer
Multiple Multiple
Strategies Fund Strategies Fund
(formerly (formerly
Oppenheimer Fund) Oppenheimer Fund
Qualified Non-Qualified
Units outstanding at December 31, 1996 240,426 36,010
Units purchased and transfers in 2,706 0
Benefits, surrenders and transfers out (63,245) (1,014)
Units outstanding at December 31, 1997 179,887 34,996
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 6,007 0
Benefits, surrenders and transfers out (55,817) (13,044)
Units outstanding at December 31, 1997 584,884 171,929
Windsor
Windsor Fund
Fund Non-
Qualified Qualified
Units outstanding at December 31, 1996 843,324 93,436
Units purchased and transfers in 13,316 3,852
Benefits, surrenders and transfers out (109,000) (3,794)
Units outstanding at December 31, 1997 747,640 93,494
Dreyfus
Dreyfus Third
Third Century
Century Non-
Qualified Qualified
Units outstanding at December 31, 1996 453,612 15,547
Units purchased and transfers in 854 231
Benefits, surrenders and transfers out (30,766) (1,350)
Units outstanding at December 31, 1997 423,700 14,428
Windsor
Windsor Fund B
Fund B Non-
Qualified Qualified
Units outstanding at December 31, 1996 214,502 82,259
Units purchased and transfers in 1,709 0
Benefits, surrenders and transfers out (17,834) (4,228)
Units outstanding at December 31, 1997 198,377 78,031
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) (74,412)
Units outstanding at December 31, 1997 72,762 131,589
The accumulation units for eleven of the subdivisions include
units applicable to contract owners who are "on benefit annuitants." At
December 31, 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 34,402 $483,337
Seligman Growth Fund, Inc. Non-Qualified 16,110 $182,727
Oppenheimer Mutltiple Strategies Fund 5,564 $45,573
(formerly Oppenheimer Fund) Qualified
Oppenheimer Multiple Strategies Fund 12,888 $103,312
(formerly Oppenheimer Fund) Non-Qualified
Delaware Group Decatur Fund, 29,247 $750,515
Inc. Qualified
Delaware Group Decatur Fund, 34,724 $866,957
Inc. Non-Qualified
Windsor Fund Qualified 55,435 $1,062,588
Dreyfus Third Century Qualified 10,832 $249,794
Dreyfus Third Century Non-Qualified 478 $9,721
Windsor Fund B Qualified 1,502 $33,213
Windsor Fund B Non-Qualified 1,536 $34,266
Monthly Annuity
Annuity Units Unit Value
Seligman Growth Fund, Inc. Qualified 6,769 $5.5197302
Seligman Growth Fund, Inc. Non-Qualified 969 $4.4570476
Oppenheimer Multiple Strategies Fund 245 $3.2325052
(formerly Oppenheimer Fund) Qualified
Oppenheimer Multiple Strategies Fund 266 $3.1646732
(formerly Oppenheimer Fund) Non-Qualified
Delaware Group Decatur Fund, 840 $10.1616609
Inc. Qualified
Delaware Group Decatur Fund, 699 $9.8205581
Inc. Non-Qualified
Windsor Fund Qualified 13,198 $7.5671986
Dreyfus Third Century Qualified 6,130 $4.7987693
Dreyfus Third Century Non-Qualified 19 $4.7470519
Windsor Fund B Qualified 108 $3.0534406
Windsor Fund B Non-Qualified 103 $1.9353714
