LIFE INSURANCE COMPANY
OF NORTH AMERICA
SEPARATE ACCOUNT A
FINANCIAL STATEMENTS
December 31, 1999
(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
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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, 1999, 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 in the United States. 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 in the United States 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 which included confirmation of securities at December
31, 1999 by correspondence with the underlying funds provide a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers LLP
Dallas, Texas
February 22, 2000
<PAGE>
LIFE INSURANCE COMPANY OF NORTH AMERICA
SEPARATE ACCOUNT A
COMBINED BALANCE SHEET
As of December 31, 1999
ASSETS
Investments at Market Value (Notes 1 and 2):
Selligman Growth Fund, Inc.
1,768,892 qualified shares (Cost $11,579,363) $15,247,842
256,200 non-qualified shares (Cost $2,097,439) 2,207,851
Oppenheimer Multiple Strategies Fund
(formerly Oppenheimer Fund)
85,189 qualified shares (Cost $936,765) 1,160,267
11,733 non-qualified shares (Cost $142,843) 159,792
Delaware Group Decatur Fund, Inc.
827,170 qualified shares (Cost $10,983,620) 13,797,190
213,271 non-qualified shares (Cost $2,590,271) 3,557,355
Windsor Fund
530,229 qualified shares (Cost $6,120,921) 8,043,573
118,668 non-qualified shares (Cost $1,675,419) 1,800,182
Dreyfus Third Century Fund
969,827 qualified shares (Cost $5,120,525) 14,110,966
29,583 non-qualified shares (Cost $196,892) 434,350
Windsor Fund B
250,968 qualified shares (Cost $4,148,349) 3,807,176
102,442 non-qualified shares (Cost $1,625,189) 1,554,058
CIGNA High Yield Fund, Inc.
47,963 qualified shares (Cost $509,848) 386,581
119,966 non-qualified shares (Cost $1,130,676) 966,926
Total Assets $67,234,109
The accompanying notes are an integral part of these financial statements
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CONTRACT OWNERS' EQUITY
Contract Owners' Equity (Notes 3 and 7):
Seligman Growth Fund, Inc.
627,027 qualified accumulation
units outstanding ($24.3176780 Per Unit) $15,247,842
112,479 non-qualified accumulation
units outstanding ($19.6290060 Per Unit) 2,207,851
Oppenheimer Multiple Strategies Fund
(formerly Oppenheimer Fund)
121,783 qualified accumulation
units outstanding ($9.5273310 Per Unit) 1,160,267
17,141 non-qualified accumulation
units outstanding ($9.3222380 Per Unit) 159,792
Delaware Group Decatur Fund, Inc.
516,817 qualified accumulation
units outstanding ($26.6964700 Per Unit) 13,797,190
137,069 non-qualified accumulation
units outstanding ($25.9530220 Per Unit) 3,557,355
Windsor Fund
379,625 qualified accumulation
units outstanding ($21.1882080 Per Unit) 8,043,573
96,078 non-qualified accumulation
units outstanding ($18.7366770 Per Unit) 1,800,182
Dreyfus Third Century Fund
367,152 qualified accumulation
units outstanding ($38.4335800 Per Unit) 14,110,966
12,832 non-qualified accumulation
units outstanding ($33.8489830 Per Unit) 434,350
Windsor Fund B
156,228 qualified accumulation
units outstanding ($24.3693580 Per Unit) 3,807,176
63,049 non-qualified accumulation
units outstanding ($24.6484140 Per Unit) 1,554,058
CIGNA High Yield Fund, Inc.
56,999 qualified accumulation
units outstanding ($6.7822420 Per Unit) 386,581
140,410 non-qualified accumulation
units outstanding ($6.8864490 Per Unit) 966,926
Contract Owners' Equity $67,234,109
The accompanying notes are an integral part of these financial statements
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LIFE INSURANCE COMPANY OF NORTH AMERICA
SEPARATE ACCOUNT A
INDIVIDUAL STATEMENTS OF OPERATIONS
Year Ended December 31, 1999
Seligman Seligman
Growth Fund Growth Fund
Inc. Inc.
Qualified Non-Qualified
Investment Income:
Dividends $0 $0
Expenses:
Mortality risk and expense fees
guarantees (Notes 3) 116,434 16,771
Investment income - net (116,434) (16,771)
Net Realized and Unrealized Gain
on Investments:
Net realized capital gain distributions 1,518,869 219,807
Net realized gain (loss) on investments:
Proceeds from sale of shares 1,217,453 140,840
Cost of shares sold 1,095,812 125,026
Net realized gain (loss) on investments 121,641 15,814
Net unrealized gain (loss) on investments 1,959,390 283,458
Net realized and unrealized gain (Loss)
on investments 3,599,900 519,079
Net Increase (Decrease) in Net Assets
from Investment Operations $3,483,466 $502,308
Oppenheimer Oppenheimer
Multiple Multiple
Strategies Strategies
Fund (formerly Fund (formerly
Oppenheimer) Oppenheimer)
Qualified Qualified
Investment Income:
Dividends $50,603 $8,510
Expenses:
Mortality risk and expense fees
guarantees (Notes 3) 10,894 1,870
Investment income - net 39,709 6,640
Net Realized and Unrealized Gain
on Investments:
Net realized capital gain distributions 78,520 10,699
Net realized gain (loss) on investments:
Proceeds from sale of shares 365,590 136,369
Cost of shares sold 278,909 109,901
Net realized gain (loss) on investments 86,681 26,468
Net unrealized gain (loss) on investments (90,965) (24,470)
Net realized and unrealized gain (Loss)
on investments 74,236 12,697
Net Increase (Decrease) in Net Assets
from Investment Operations $113,945 $19,337
The accompanying notes are an integral part of these financial statements
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Delaware Delaware
Group Group
Decatur Decatur
Fund, Inc. Fund, Inc.
Qualified Non-Qualified
Investment Income:
Dividends $409,299 $106,594
Expenses:
Mortality risk and expense fees
guarantees (Notes 3) 136,633 35,776
Investment income - net 272,666 70,818
Net Realized and Unrealized Gain
on Investments:
Net realized capital gain distributions 384,524 97,595
Net realized gain (loss) on investments:
Proceeds from sale of shares 2,375,332 620,942
Cost of shares sold 2,326,117 621,013
Net realized gain (loss) on investments 49,215 (71)
Net unrealized gain (loss) on investments (1,352,313) (340,298)
Net realized and unrealized gain (Loss)
on investments (918,574) (242,774)
Net Increase (Decrease) in Net Assets
from Investment Operations $(645,908) $(171,956)
Windsor Windsor
Fund Fund
Qualified Non-Qualified
Investment Income:
Dividends $343,107 $70,631
Expenses:
Mortality risk and expense fees
guarantees (Notes 3) 91,631 15,608
Investment income - net 251,476 55,023
Net Realized and Unrealized Gain
on Investments:
Net realized capital gain distributions 735,781 155,480
Net realized gain (loss) on investments:
Proceeds from sale of shares 6,501,575 14,195
Cost of shares sold 5,553,462 13,263
Net realized gain (loss) on investments 948,113 932
Net unrealized gain (loss) on investments (768,878) (43,602)
Net realized and unrealized gain (Loss)
on investments 915,016 112,810
Net Increase (Decrease) in Net Assets
from Investment Operations $1,166,492 $167,833
The accompanying notes are an integral part of these financial statements
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Dreyfus Dreyfus
Third Century Third Century
Qualified Non-Qualified
Investment Income:
Dividends $206,010 $6,338
Expenses:
Mortality risk and expense fees
guarantees (Notes 3) 111,256 3,638
Investment income - net 94,754 2,700
Net Realized and Unrealized Gain
on Investments:
Net realized capital gain distributions 985,840 30,330
Net realized gain (loss) on investments:
Proceeds from sale of shares 1,393,244 169,583
Cost of shares sold 1,270,400 162,663
Net realized gain (loss) on investments 122,844 6,920
Net unrealized gain (loss) on investments 2,043,692 55,172
Net realized and unrealized gain (Loss)
on investments 3,152,376 92,422
Net Increase (Decrease) in Net Assets
from Investment Operations $3,247,130 $95,122
Windsor Windsor
Fund B Fund B
Qualified Non-Qualified
Investment Income:
Dividends $152,558 $61,846
Expenses:
Mortality risk and expense fees
guarantees (Notes 3) 35,963 14,555
Investment income - net 116,595 47,291
Net Realized and Unrealized Gain
on Investments:
Net realized capital gain distributions 329,655 134,239
Net realized gain (loss) on investments:
Proceeds from sale of shares 744,543 341,632
Cost of shares sold 697,607 314,802
Net realized gain (loss) on investments 46,936 26,830
Net unrealized gain (loss) on investments (83,964) (28,929)
Net realized and unrealized gain (Loss)
on investments 292,627 132,140
Net Increase (Decrease) in Net Assets
from Investment Operations $409,222 $179,431
The accompanying notes are an integral part of these financial statements
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CIGNA CIGNA
High Fund High Fund
Fund, Inc. Fund, Inc.
Qualified Non-Qualified
Investment Income:
Dividends $43,770 $108,599
Expenses:
Mortality risk and expense fees
guarantees (Notes 3) 3,760 9,322
Investment income - net 40,010 99,277
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 80,598 246,025
Cost of shares sold 85,467 273,312
Net realized gain (loss) on investments (4,869) (27,287)
Net unrealized gain (loss) on investments (29,032) (58,458)
Net realized and unrealized gain (Loss)
on investments (33,901) (85,745)
Net Increase (Decrease) in Net Assets
from Investment Operations $6,109 $13,532
The accompanying notes are an integral part of these financial statements
<PAGE>
LIFE INSURANCE COMPANY OF NORTH AMERICA
SEPARATE ACCOUNT A
INDIVIDUAL STATEMENTS OF CHANGES IN TOTAL ASSETS
Year Ended December 31, 1999
Seligman Seligman
Growth Fund Growth Fund
Inc. Inc.
Qualified Non-Qualified
Investment Operations:
Investment income-net $(116,434) $(16,771)
Realized capital gain distributions 1,518,869 219,807
Net realized gain (loss) on investments 121,641 15,814
Net unrealized gain (loss) on investments 1,959,390 283,458
Net Increase (Decrease) in net assets
from investment operations 3,483,466 502,308
Accumulation Unit Transactions:
Net contract considerations and
transfers in (Note 3). 9,349 0
Net contract surrenders and
transfers out (Note 3) (732,376) (99,567)
Benefit payments to annuitants (110,685) (24,502)
Net Increase (Decrease) from accumulation
unit transactions (833,712) (124,069)
Net Increase (Decrease) in Net Assets 2,649,754 378,239
Net Assets:
Net assets at December 31, 1998 $12,598,088 $1,829,612
Net assets at December 31, 1999 $15,247,842 $2,207,851
Seligman Seligman
Growth Fund Growth Fund
Inc. Inc.
Qualified Non-Qualified
Investment Operations:
Investment income-net $(83,813) $(12,047)
Realized capital gain distributions 1,143,452 162,787
Net realized gain (loss) on investments 121,557 15,208
Net unrealized gain (loss) on investments 2,153,909 309,018
Net Increase (Decrease) in net assets
from investment operations 3,335,105 474,966
Accumulation Unit Transactions:
Net contract considerations and transfers
in (Note 3) 11,090 0
Net contract surrenders and
transfers in (Note 3) (745,799) (78,113)
Benefit payments to annuitants (125,945) (20,593)
Net Increase (Decrease) from accumulation
unit transactions (860,654) (98,706)
Net Increase (Decrease) in Net Assets 2,474,451 376,260
Net Assets:
Net assets at December 31, 1997 $10,123,637 $1,453,352
Net assets at December 31, 1998 $12,598,088 $1,829,612
The accompanying notes are an integral part of these financial statements
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Oppenherimer Oppenheimer
Multiple Multiple
Strategies Strategies
Fund Fund
(formerly (formerly
Oppenheimer) Oppenheimer)
Investment Operations:
Investment income-net $39,709 $6,640
Realized capital gain distributions 78,520 10,699
Net realized gain (loss) on investments 86,681 26,468
Net unrealized gain (loss) on investments (90,965) (24,470)
Net Increase (Decrease) in net assets
from investment operations 113,945 19,337
Accumulation Unit Transactions:
Net contract considerations and transfers
in (Note 3) 1,226 0
Net contract surrenders and transfers out (339,015) (55,464)
Benefit payments to annuitants (16,907) (79,036)
Net Increase (Decrease) from
accumulation unit transactions (354,696) (134,500)
Net Increase (Decrease) in Net Assets (240,751) (115,163)
Net Assets:
Net assets at December 31, 1998 $1,401,018 $274,955
Net assets at December 31, 1999 $1,160,267 $159,792
Oppenheimer Oppenheimer
Multiple Multiple
Strategies Strategies
Fund Fund
(formerly (formerly
Oppenheimer) Oppenheimer)
Investment Operations:
Investment income-net $37,061 $7,069
Realized capital gain distributions 112,996 22,153
Net realized gain (loss) on investments 824 1,302
Net unrealized gain (loss) on investments (68,182) (13,547)
Net Increase (Decrease) in net assets
from investment operations 82,699 16,977
Accumulation Unit Transactions:
Net contract considerations and transfers
in (Note 3) 1,330 0
Net contract surrenders and transfers out
(Note 3) (149,210) (185)
Benefit payments to annuitants (7,195) (22,371)
Net Increase (Decrease) from accumulation
unit transactions (155,075) (22,556)
Net Increase (Decrease) in Net Assets (72,376) (5,579)
Net Assets:
Net assets at December 31, 1997 $1,473,394 $280,534
Net assets at December 31, 1998 $1,401,018 $274,955
The accompanying notes are an integral part of these financial statements
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Delaware Delaware
Group Group
Decatur Decatur
Fund, Inc. Fund, Inc.
Qualified Non-Qualified
Investment Operations:
Investment income-net $272,666 $70,818
Realized capital gain distributions 384,524 97,595
Net realized gain (loss) on investments 49,215 (71)
Net unrealized gain (loss) on investments (1,352,313) (340,298)
Net increase (decrease) in net assets
from investment operations (645,908) (171,956)
Accumulation Unit Transactions:
Net contract considerations and transfers
in (Note 3) 651,974 0
Net contract surrenders and transfers out
(Note 3) (1,547,806) (300,479)
Benefit payments to annuitants (97,603) (284,687)
Net Increase (Decrease) from
accumulation unit unit transactions (993,435) (585,166)
Net Increase (Decrease) in Net Assets (1,639,343) (757,122)
Net Assets:
Net assets at December 31, 1998 $15,436,533 $4,314,477
Net assets at December 31, 1999 $13,797,190 $3,557,355
Delaware Delaware
Group Group
Decatur Decatur
Fund, Inc. Fund, Inc.
Qualified Non-Qualified
Investment Operations:
Investment income-net $662,201 $184,897
Realized capital gain distributions 1,888,067 527,749
Net realized gain (loss) on investments 30,422 16,313
Net unrealized gain (loss) on investments (1,286,547) (361,338)
Net Increase (decrease) in assets
from Investment operations 1,294,143 367,621
Accumulation Unit Transactions:
Net contract considerations and transfers in
Note 3) 47,625 0
Net contract surrenders and transfers out (833,765) (278,898)
Benefit payments to annuitants (80,335) (66,814)
Net Increase (Decrease) from
accumulation unit transactions (866,475) (345,712)
Net Increase (Decrease) in Net Assets 427,668 21,909
Net Assets:
Net assets at December 31, 1997 $15,008,865 $4,292,568
Net assets at December 31, 1998 $15,436,533 $4,314,477
The accompanying notes are an integral part of these financial statements
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Windsor Windsor
Fund Fund
Qualified Non-Qualified
Investment Operations:
Investment income-net $251,476 $55,023
Realized capital gain distributions 735,781 155,480
Net realized gain (loss) on investments 948,113 932
Net unrealized gain (loss) on investments (768,878) (43,602)
Net Increase (decrease) in net assets
from investment operations 1,166,492 167,833
Accumulation Unit Transactions:
Net contract considerations and transfers
in (Note 3) 34,907 50,000
Net contract surrenders and transfers out
(Note 3) (5,415,444) (1,553)
Benefit payments to annuitants (111,399) 0
Net Increase (Decrease) from
accumulation unit transactions (5,491,936) 48,447
Net Increase (Decrease) in Net Assets (4,325,444) 216,280
Net Assets:
Net assets at December 31, 1998 $12,369,017 $1,583,902
Net assets at December 31, 1999 $8,043,573 $1,800,182
Windsor Windsor
Fund Fund
Qualified Non-Qualified
Investment Operations:
Investment income-net $62,877 $8,772
Realized capital gain distributions 895,070 114,633
Net realized gain (loss) on investments 65,708 (246)
Net unrealized gain (loss) on investments (937,201) (124,591)
Net Increase (decrease) in net assets
from investment operations 86,454 (1,432)
Accumulation Unit Transactions:
Net contract considerations and transfers
in (Note 3) 322,791 0
Net contract surrenders and transfers out
(Note 3) (2,238,922) 0
Benefit payments to annuitants (132,202) 0
Net Increase (Decrease) from
accumulation unit transactions (2,048,333) 0
Net Increase (Decrease) in Net Assets (1,961,879) (1,432)
Net Assets:
Net assets at December 31, 1997 $14,330,896 $1,585,334
Net assets at December 31, 1998 $12,369,017 $1,583,902
The accompanying notes are an integral part of these financial statements
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Dreyfus Dreyfus
Third Century Third Century
Qualified Non-Qualified
Investment Operations:
Investment income-net $94,754 $2,700
Realized capital gain distributions 985,840 30,330
Net realized gain (loss) on investments 122,844 6,920
Net unrealized gain (loss) on investments 2,043,692 55,172
Net Increase (decrease) in net assets
from investment operations 3,247,130 95,122
Accumulation Unit Transactions:
Net contract considerations and transfers
in (Note 3) 465,060 165,392
Net contract surrenders and transfers out
(Note 3) (1,294,227) (177,115)
Benefit payments to annuitants (25,445) (1,017)
Net Increase (Decrease) from accumulation
unit transactions (854,612) (12,740)
Net Increase (Decrease) in Net Assets 2,392,518 82,382
Net Assets:
Net assets at December 31, 1998 $11,718,448 $351,968
Net assets at December 31, 1999 $14,110,966 $434,350
Dreyfus Dreyfus
Third Century Third Century
Qualified Non-Qualified
Investment Operations:
Investment income-net $91,171 $2,446
Realized capital gain distributions 973,251 28,945
Net realized gain (loss) on investments 54,645 4,427
Net unrealized gain (loss) on investments 1,595,026 47,456
Net Increase (decrease) in net assets
from investment operations 2,714,093 83,274
Accumulation Unit Transactions:
Net contract considerations and transfers
in (Note 3) 10,603 0
Net contract surrenders and transfers out (755,943) (23,878)
Benefit payments to annuitants (21,124) (849)
Net Increase (Decrease) from accumulation
unit transactions (766,464) (24,727)
Net Increase (Decrease) in Net Assets 1,947,629 58,547
Net Assets:
Net assets at December 31, 1997 9,770,819 293,421
Net assets at December 31, 1998 $11,718,448 $351,968
The accompanying notes are an integral part of these financial statements
<PAGE>
Windsor Windsor
Fund B Fund B
Qualified Non-Qualified
Investment Operations:
Investment income-net $116,595 $47,291
Realized capital gain distributions 329,655 134,239
Net realized gain (loss) on investments 46,936 26,830
Net unrealized gain (loss) on investments (83,964) (28,929)
Net Increase (decrease) in net assets
from investment operations 409,222 179,431
Accumulation Unit Transactions:
Net contract considerations and transfers
in (Note 3) 114,977 0
Net contract surrenders and transfers out
(Note 3) (652,069) (324,781)
Benefit payments to annuitants (2,756) (2,296)
Net Increase (Decrease) from accumulation
unit transactions (539,848) (327,077)
Net Increase (Decrease) in Net Assets (130,626) (147,646)
Net Assets:
Net assets at December 31, 1998 $3,937,802 $1,701,704
Net assets at December 31, 1999 $3,807,176 $1,554,058
Windsor Windsor
Fund B Fund B
Qualified Non-Qualified
Investment Operations:
Investment income-net $(13,278) $9,280
Realized capital gain distributions 285,754 123,118
Net realized gain (loss) on investments 41,782 5,191
Net unrealized gain (loss) on investments (280,242) (134,279)
Net Increase (decrease) in net assets
from investment operations 34,016 3,310
Accumulation Unit Transactions:
Net contract considerations and transfers
in (Note 3) 75,498 0
Net contract surrenders and transfers out (555,599) (40,166)
Benefit payments to annuitants (2,715) (2,225)
Net Increase (Decrease) from accumulation
unit transactions (482,816) (42,391)
Net Increase (Decrease) in Net Assets (448,800) (39,081)
Net Assets:
Net assets at December 31, 1997 $4,386,602 $1,740,785
Net assets at December 31, 1998 $3,937,802 $1,701,704
The accompanying notes are an integral part of these financial statements
<PAGE>
CIGNA CIGNA
High Yield High Yield
Fund, Inc. Fund, Inc.
Non-Qualified Non-Qualified
Investment Operations:
Investment income-net $40,010 $99,277
Realized capital gain distributions 0 0
Net realized gain (loss) on investments (4,869) (27,287)
Net unrealized gain (loss) on investments (29,032) (58,458)
Net Increase (decrease) in net assets
from investment operations 6,109 13,532
Accumulation Unit Transactions:
Net contract considerations and transfers
in (Note 3) 0 0
Net contract surrenders and transfers out
(Note 3) (76,838) (236,703)
Benefit payments to annuitants 0 0
Net Increase (Decrease) from accumulation
unit transactions (76,838) (236,703)
Net Increase (Decrease) in Net Assets (70,729) (223,171)
Net Assets:
Net assets at December 31, 1998 $457,310 $1,190,097
Net assets at December 31, 1999 $386,581 $966,926
CIGNA CIGNA
High Yield High Yield
Fund, Inc. Fund, Inc.
Non-Qualified Non-Qualified
Investment Operations:
Investment income-net $41,095 $101,689
Realized capital gain distributions 0 0
Net realized gain (loss) on investments 585 (149)
Net unrealized gain (loss) on investments (70,193) (185,939)
Net Increase (decrease) in net assets from
investment operations (28,513) (84,399)
Accumulation Unit Transactions:
Net contract considerations and transfers
in (Note 3) 0 323,340
Net contract surrenders and transfers out
(Note 3) (32,757) (1,092)
Benefit payments to annuitants 0 0
Net Increase (Decrease) from accumulation
unit transactions (32,757) 322,248
Net Increase (Decrease) in Net Assets (61,270) 237,849
Net Assets:
Net assets at December 31, 1997 $518,580 $952,248
Net assets at December 31, 1998 $457,310 $1,190,097
The accompanying notes are an integral part of these financial statements
<PAGE>
LIFE INSURANCE COMPANY OF NORTH AMERICA
SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
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").
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 not 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, 1999; (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.
<PAGE>
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, 1999 were $111,208 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 year
ended December 31, 1999 were as follows:
Transfers between Separate
Account A subdivisions $ 1,059,116
Transfers from the General
Account $ 322,561
Transfers to the General
Account $ 547,188
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 year ended December 31,
1999, 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 1999, 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.
<PAGE>
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.
<PAGE>
LIFE INSURANCE COMPANY OF NORTH AMERICA
Note 7. Accumulation Unit Transactions:
Period Ended 12/31/99
The changes in the number of accumulation units (the measure of ownership in the
Separate Account) during the period ended December 31, 1999 and units
outstanding at December 31, 1999 were as follows:
Seligman Seligman
Growth Fund Growth Fund
Inc. Inc.
Qualified Non-Qualified
Units outstanding at December 31, 1998 668,941 120,334
Units purchased and transfers in 451 0
Benefits, surrenders and transfers out (42,365) (7,855)
Units outstanding at December 31, 1999 627,027 112,479
Oppenheimer Oppenheimer
Multiple Multiple
Strategies Strategies
Fund Fund
(formerly (formerly
Oppenheimer Oppenheimer
Fund) Fund)
Qualified Non-Qualified
Units outstanding at December 31, 1998 161,220 32,314
Units purchased and transfers in 128 0
Benefits, surrenders and transfers out (39,565) (15,173)
Units outstanding at December 31, 1999 121,783 17,141
Delaware Delaware
Group Group
Decatur Decatur
Fund, Inc. Fund, Inc.
Qualified Non-Qualified
Units outstanding at December 31, 1998 552,419 158,694
Units purchased and transfers in 23,722 0
Benefits, surrenders and transfers out (59,324) (21,625)
Units outstanding at December 31, 1999 516,817 137,069
Windsor Windsor
Fund Fund
Qualified Non-Qualified
Units outstanding at December 31, 1998 645,749 93,494
Units purchased and transfers in 1,581 2,584
Benefits, surrenders and transfers out (267,705) 0
Units outstanding at December 31, 1999 379,625 96,078
Dreyfus Dreyfus
Third Century Third Century
Qualified Non-Qualified
Units outstanding at December 31, 1998 393,324 13,414
Units purchased and transfers in 14,745 5,974
Benefits, surrenders and transfers out (40,917) (6,556)
<PAGE>
Units outstanding at December 31, 1999 367,152 12,832
Windsor Windsor
Fund B Fund B
Qualified Non-Qualified
Units outstanding at December 31, 1998 178,420 76,345
Units purchased and transfers in 4,534 0
Benefits, surrenders and transfers out (26,726) (13,296)
Units outstanding at December 31, 1999 156,228 63,049
CIGNA High CIGNA High
Yield Fund, Yield Fund,
Inc. Inc.
Qualified Non-Qualified
Units outstanding at December 31, 1998 68,220 174,846
Units purchased and transfers in 0 0
Benefits, surrenders and transfers out (11,221) (34,436)
Units outstanding at December 31, 1999 56,999 140,410
The accumulation units for eleven of the subdivisions include units applicable
to contract owners who are "on benefit annuitants." At December 31, 1999 the
number of accumulation units, the aggregate value of the subdivisions' equity
and the number of monthly annuity units and value per unit of "on benefit
annuitants" are as follows:
Accumulation Aggregate
Units Value
Seligman Growth Fund, Inc. Qualified 25,967 $631,457
Seligman Growth Fund, Inc. Non-Qualified 13,071 $256,571
Multiple Strategies Fund Qualified 2,872 $27,362
Multiple Strategies Fund Non-Qualified 1,474 $13,741
Delaware Group Decatur Fund, Inc. Qualified 28,681 $765,681
Delaware Group Decatur Fund, Inc. Non-Qualified 21,526 $558,665
Windsor Fund Qualified 43,514 $921,984
Dreyfus Third Century Qualified 9,213 $354,089
Dreyfus Third Century Non-Qualified 404 $13,675
Windsor Fund B Qualified 1,269 $30,925
Windsor Fund B Non-Qualified 1,343 $33,103
Monthly Annuity
Annuity Units Unit Value
Seligman Growth Fund, Inc. Qualified 1,128 $ 8.9181518
Seligman Growth Fund, Inc. Non-Qualified 969 $ 7.2001382
Oppenheimer Multiple Strategies Fund
Qualified 192 $ 3.5098797
Oppenheimer Multiple Strategies Fund
Non-Qualified 198 $ 3.4354441
Delaware Group Decatur Fund, Inc. Qualified 941 $ 9.8682961
Delaware Group Decatur Fund, Inc. Non-Qualified 700 $ 9.5292392
Windsor Fund Qualified 1,300 $ 7.8081924
Dreyfus Third Century Qualified 458 $ 7.4656733
Dreyfus Third Century Non-Qualified 19 $ 7.3753786
Windsor Fund B Qualified 108 $ 3.1414046
Windsor Fund B Non-Qualified 103 $ 1.9960752
