2000 ANNUAL REVIEW
KENTUCKY INVESTORS, INC.



Letter to our Stockholders                   2
Board of Directors                           5
Corporate Officers                           6
Management's Discussion and Analysis         7


Selected Financial Data                      19
Report of Independent Auditors               19
Consolidated Financial Statements            20

Notes to Consolidated Financial Statements   24
Stock Prices and Annual Meeting              36










                          LETTER TO OUR STOCKHOLDERS


April 26, 2001, will mark the fortieth anniversary of the first life insurance
policy sold by Investors Heritage Life Insurance Company.  This year also marks
the thirty-eighth anniversary of the incorporation of Kentucky Investors, Inc.
to buy controlling interest in Investors Heritage, which was completed on April
30, 1964.

Since that first sale in 1961, we have sold hundreds of thousands of insurance
policies and grown into a strong and vital organization.  Ordinary life
insurance sales this past year exceeded $36 Million, a 7.3% increase over 1999
sales.  Our Sales Managers have set a goal of $38,500,000 for 2001.  The Graph
below shows the sales growth we have experienced over the past eleven years.

The niche markets in which Investors Heritage Life Insurance Company
concentrates have proven to be outstanding ones in which to operate.  We are a
leader in the Final Expense and Preneed market, insuring clients of over 600
funeral homes in sixteen states.  We are, and have been since 1966, a
significant writer of Credit related products sold primarily in Kentucky through
financial institutions and automobile dealers.

We have solid sales operations in the Preneed market in sixteen states.
Virginia, Georgia, Tennessee & Kentucky showed special growth during 2000.  As
always, North Carolina was our leading Preneed producing state.  We received
approval to do business in Pennsylvania in February 2001.  This is the 29th
state in which we have been licensed.

Particularly exciting Preneed growth developed in Michigan.  We began a new
joint venture with Key Life Insurance Company in mid-year.  They have been a
longtime, substantial producer of Preneed insurance in Michigan and now market
our products there and co-insure a portion of the business.  The first six
months of our partnership have been very successful and prospects for continued
growth in Michigan are excellent.

A graph appears here showing sales growth experienced over the past eleven
years.


1990 - $ 5,480,831
1991 - $ 7,334,826
1992 - $12,901,838
1993 - $12,600,405
1994 - $14,463,449
1995 - $17,288,702
1996 - $22,362,542
1997 - $27,237,530
1998 - $28,442,443
1999 - $33,838,526
2000 - $36,312,636

Since 1966, the Credit insurance market has played a significant role in our
operations.  The Financial Modernization Act of 1999 created new insurance
opportunities for financial institutions and we are prepared to expand our
service to those wishing to increase their insurance activities.  Many financial
institutions in Kentucky are aware of their new options and are exploring the
possibilities, but there has not been a substantial change in their operations
or emphasis.  We believe we will benefit from the Credit related products market
far into the future.

We have developed a new Term policy to help us in this market as well as in the
regular life insurance market.  The Level Term To 95 product will be competitive
and attractive to our agents and their customers. We also plan to introduce a
revised Final Expense Product in 2001 to be sold outside the Preneed market.

We plan to reinsure a portion of this new Final Expense policy in the future
because statutory surplus growth is difficult with continual record sales and it
will help stabilize our profit streams.  We are also considering the possibility
of reinsuring a larger portion of the Level Term To 95 and Life Paid Up At 95
policies to minimize unprojected losses.  A few large claims in the Ordinary
Life insurance market that occur during unexpected time frames can disrupt the
steady progressive profits we want to maintain, and reinsuring a larger portion
of the risk will ease this situation.

We believe that strategic alliances in sales and administration with other
companies are important. In addition to our new alliance with Key Life, we are
continuing our nonexclusive partnership with Aurora Casket Company and strategic
alliance with Family Assistance Service, Inc.

Last year I reported on the success of our strategic alliance with Family
Assistance.  This group lends to funeral home clients when necessary and
requested.  During the first two years of this partnership, over $2.5 Million in
loans have been approved for clients of our funeral home accounts.  We are
involved in other successful relationships and are considering more to assist in
the sales of our insurance products.

On May 26, 2000, Investors Heritage Life Insurance Company entered into a
reinsurance agreement with the National Organization of Life & Health Insurance
Guaranty Associations the liquidator of Franklin American Life Insurance
Company, and participating state guaranty associations.  Under the agreement,
Investors Heritage assumed the covered obligations of the policies issued by
Franklin American in those states.  We assumed the administration and
responsibility for more than 18,000 policies.  This transaction has run smoothly
and is a tribute to the men and women of our organization who prepared for the
assumption and carried it out in great fashion.

During 2000, Invested Assets increased 14.1% over year-end 1999.  Assets Other
Than Investments increased 64.2%, due primarily to the acquisition of the
Franklin American block of business.  Total Assets increased 25.7%, Total
Liabilities 26.3%, and Shareholders' Equity 20.1%.  Book Value Per Share
increased from $26.87 in 1999 to $32.36 at December 31, 2000.  Total Benefits
and Expenses increased 9.1%.

As I mentioned earlier, sales have been at record levels for the past 13 years.
In order to provide outstanding coverage and service to our clients, we
constantly fine-tune our products and marketing as well as our underwriting and
administrative systems.

Profits, as shown in the Financial Statements, were not as high as anticipated,
primarily for the following reasons:

1. Unanticipated, extra expenses in the Agency Sales Department.  We have taken
steps to bring our sales expense back to levels expected in 2000.  We believe
this can be accomplished without reducing our strong sales results.

2. Extra mortality in our Life Paid Up At 95 product line, especially due to two
large unexpected and non-reinsured claims.  This is one reason for considering
the lowering of our retention and reinsuring more of our large, individual
cases, thereby reducing our loss exposure.

3. Extra mortality in the Legacy 2000 Reduced Benefits product.  The previously
mentioned new Final Expense product has been designed to correct current product
deficiencies and replace the Reduced Benefits product.  Reinsurance is also
contemplated for this product in the future.

We believe these steps will enable us to meet projections in the future and
stabilize our profit stream.  The Management's Discussion & Analysis (pages 8 &
9) provides more discussion of these issues.

Glenn Doran served as a member of the Kentucky Investors, Inc. Board of
Directors since August 8, 1963 and Investors Heritage Life Insurance Company
Board of Directors since July 16, 1992.  Mr. Doran retired from our Boards,
effective January 1, 2001.  The Boards regretfully accepted his resignation but
were pleased to elect Harold Doran, his son, to succeed him.  The Dorans built a
strong banking company in west Kentucky during the past several decades and are
significant stockholders in Kentucky Investors, Inc.    Harold Doran, age 47, is
a retired banker having recently sold his interest in the banks.   Among his
many accomplishments is his service on the Kentucky Economic Development Finance
Authority.

Personally and on behalf of the Kentucky Investors, Inc. family of companies, I
want to thank Glenn Doran for his longtime friendship to my family and for his
advice and counsel to us and all the officers of Kentucky Investors, Inc. and
Investors Heritage Life Insurance Company over these many years.  Harold Doran
is an outstanding addition to our Boards of Directors and we look forward to his
wise judgment and advice.

Kentucky Investors, Inc., Investors Heritage Life Insurance Company, and other
subsidiaries through the years have been blessed with talented sales personnel
and administrative staff members.  Through our family of employees, with their
talent, loyalty and interest in the success of the company, we have forged
lasting relationships with our clients.  This has led to our good fortune in
experiencing record sales nearly every year.  Our people and business practices
allow us to quickly recognize and react to problems and opportunities that may
arise.

On behalf of the Boards of Directors, management, staff, and sales associates of
Kentucky Investors, Inc. and Investors Heritage Life Insurance Company, I want
to express our appreciation to all our stockholders for their continued
confidence and support.

/s/
Harry Lee Waterfield II



BOARD & CORPORATE OFFICERS

Harry Lee Waterfield II
Chairman of the Board
President and Chief Executive Officer
Frankfort, Kentucky


BOARD                              OFFICERS
-----                              --------

H. Glenn Doran                    Howard L. Graham
Board Member                      Vice President, Corporate Services
Cottage Grove, Tennessee          Frankfort, Kentucky

Gordon C. Duke                    Jane S. Jackson
Board Member                      Assistant Secretary
Frankfort, Kentucky               Frankfort, Kentucky

Robert M. Hardy, Jr.              Bobby D. Russell
Board Member                      Treasurer
Vice President & General Counsel  Frankfort, Kentucky
Frankfort, Kentucky

Jerry F. Howell                   Nancy W. Walton
Board Member                      First Vice President
Leesburg, Florida                 Frankfort, Kentucky

Dr. Jerry F. Howell               Wilma C. Yeary
Board Member                      Secretary
Morehead, Kentucky                Frankfort, Kentucky

David W. Reed                     Ernst & Young LLP
Board Member                      Independent Auditors
Gilbertsville, Kentucky

Helen S. Wagner
Board Member
Owensboro, Kentucky





CORPORATE OFFICERS OF SUBSIDIARIES

Harry Lee Waterfield II
Chairman, President and
Chief Executive Officer IFP


Rick Calvert                      Raymond L. Carr
Vice President P                  Vice President, I
                                  Administrative Operations &
                                  Computer Services

Michael F. Dudgeon, Jr.
Vice President, Financial Services I
Vice President F                  Howard L. Graham
                                  Vice President,
Robert M. Hardy, Jr.              Corporate Services I
Vice President & General Counsel I
Vice President, Legal F           N. Douglas Hippe
                                  Vice President, Accounting I
Julie Hunsinger
Vice President and Chief Actuary I
                                  Jane S. Jackson
                                  Assistant Secretary I
Margaret J. Kays                  Secretary FP
Vice President, Human Resources I
                                  Don R. Philpot
Jimmy R. McIver                   Vice President, Agency I
Vice President, Corporate Accounting I
Treasurer FP
Assistant Treasurer I
                                  Bobby D. Russell
                                  Treasurer I

Lawrence J. Sprecher, M.D.        Nancy W. Walton
Medical Director I                Vice President, Underwriting I

L. Jane Wise
Vice President, Policy Services I

Wilma C. Yeary
Secretary I




I  Investors Heritage Life Insurance Company
F  Investors Heritage Financial Services Group, Inc.
P  Investors Heritage Printing, Inc.







                  MANAGEMENT'S DISCUSSION  & ANALYSIS


ORGANIZATIONAL STRUCTURE

Effective December 31, 1999, Kentucky Investors, Inc. ("Kentucky Investors")
became the holder of 100% of the outstanding common stock of Investors Heritage
Life Insurance Company ("Investors Heritage") a Kentucky domiciled life
insurance company, through a statutory share exchange.  As a result of the share
exchange each Investors Heritage stockholder received 1.24 shares of Kentucky
Investors common stock in exchange for each share of Investors Heritage common
stock.  The share exchange did not have the effect of changing control of
Investors Heritage since Kentucky Investors already owned 74% of the outstanding
common stock of Investors Heritage prior to the effective date of the
transaction.


CONSOLIDATION

Kentucky Investors is also the holding company of Investors Heritage Printing,
Inc., a printing company ("Heritage Printing") and Investors Heritage Financial
Services Group, Inc., an insurance marketing company ("Financial Services
Group").  Kentucky Investors and its subsidiaries are collectively hereinafter
referred to as the "Company". The accompanying consolidated financial statements
of Kentucky Investors include the accounts of its respective wholly owned
subsidiaries, after elimination of intercompany transactions. However,
approximately ninety-nine percent (99%) of Kentucky Investors' operations are
generated by Investors Heritage.


GROWTH, EXPANSION AND ACQUISITION

During the year the Company acquired the covered policy obligations of Franklin
American Life Insurance Company ("Franklin American") through negotiations with
the National Organization of Life & Health Insurance Guaranty Associations, the
liquidator of Franklin American, and participating state guaranty associations.
The majority of Franklin American's covered obligations were related to Preneed
life insurance products.  Investors Heritage has participated in this market
since 1986.  In addition to acquiring business that the Company currently
markets, it put Investors Heritage in a position to add former Franklin American
independent contractual agents to our agency force.  In conjunction with the
assumption reinsurance agreement, Investors Heritage entered into a coinsurance
agreement with Scottish Annuity & Life Insurance Company (Cayman) Ltd.
("Scottish") whereby Investors Heritage ceded 85% of the assumed policy
obligations from Franklin American.  This transaction was closed effective April
1, 2000.  For additional discussion of this agreement, see Note B to the
Consolidated Financial Statements.

The Company has been expanding its market share in the Preneed funeral market
for the last several years. The result has been consistent growth in almost all
of the states that were targeted for expansion.

Financial Services Group continues to operate under marketing agreements with
Investors Heritage.  This arrangement has proven to be successful and enabled
Financial Services Group and Investors Heritage to continue utilizing their
expertise in the marketing and administration of Credit insurance products.
Further, Financial Services Group enables Investors Heritage to offer mortgage
protection and ordinary life insurance products through financial institutions.


FINANCIAL STRENGTH

The quality of our investment portfolio and the current level of shareholders'
equity continue to provide a sound financial base as we strive to expand our
marketing system to offer competitive, quality products.  Please see
INVESTMENTS, LIQUIDITY AND FUND RESTRICTIONS for a more detailed discussion.


BUSINESS SEGMENTS

Statement of Financial Accounting Standard ("SFAS") No. 131 requires a
"management approach" in the presentation of business segments based on how
management internally evaluates the operating performance of its business units.
The segment data that follows has been prepared in accordance with SFAS No. 131.
Please refer to the Notes to the Consolidated Financial Statements for
additional information regarding segment data.


REVENUES

Overall revenues were $65,427,000, $62,772,000 and $57,708,000 in 2000, 1999 and
1998, respectively.  The increases were due primarily to our growth as a
provider of quality Preneed products, growth in invested assets due to increased
sales of the Preneed and Burial products, and the acquisition of Franklin
American business during 2000.  A discussion of the changes follows.
Additionally, the Company has experienced steady growth in net investment income
which increased 12% or $1,806,000 in 2000 from 1999.  The 1999 increase over
1998 was 7% or $1,045,000.


PRENEED & BURIAL PRODUCTS

The Preneed & Burial Products segment includes both life and annuity products
sold by funeral directors or affiliated agents to fund prearranged funerals.

Revenues for the Preneed & Burial Products business segment were 7% or
$3,371,000 higher in 2000 than 1999. The 1999 increase over 1998 was 14% or
$5,839,000.

New premium production increased approximately 5% in 2000 over 1999.  New
premiums collected during 2000, 1999 and 1998 were $30,794,000, $29,242,000 and
$24,504,000, respectively. During 2000, Investors Heritage targeted sixteen
states for developing new accounts.  Investors Heritage continues to utilize the
endorsements of two state funeral directors associations, North Carolina and
West Virginia. These associations work with us in promoting Preneed sales.  In
addition, during 2000 Investors Heritage entered into a strategic partnership
with Key Life Insurance Company of Indianapolis, Indiana, an experienced Preneed
insurer in Michigan.  Key Life utilizes the endorsement of the Michigan Funeral
Directors Association to market Investors Heritage Preneed products in that
state.

Premium production remains strong in North Carolina.  However, due to the
successful expansion of our marketing operation in other states, new Preneed
premiums from North Carolina agents accounted for 37% of the total new Preneed
premiums collected in 2000 compared to 40% for 1999.  New premium collections
from Kentucky in 2000 increased 9% in 2000 over 1999 and accounted for 17% of
the total premium collected in 2000.  Other states showing significant gains
were Georgia, Michigan, Mississippi, South Carolina, Tennessee and Virginia.
Management plans to continue to develop the Preneed funeral market and
anticipates increases in single premium production for 2001 over 2000.  It is
anticipated that increases will be derived from higher production in the states
noted above and from expansion into Pennsylvania where Investors Heritage has
recently been authorized to do business.

Increase in net investment income earned by Preneed and Burial products also
contributed to the overall increase in Revenues.  Net investment income
increased 15% in 2000 compared to 1999 and 11% in 1999 compared to 1998.  The
increase in net investment income is partially due to the Company's investments
in mortgage loans, which have been selectively increased due to the continuing
low rates on fixed maturities.  This strategy has added value to the overall
portfolio.  (See Investments, Liquidity and Fund Restrictions.)

The Company has also continued its partnership with Family Assistance Service,
Inc., a firm that provides an at-need financing program and an accounts
receivable/cash management system for funeral homes. The Company offers this
program to existing Preneed funeral home clients as well as funeral homes that
do not currently sell our Preneed insurance products. While this relationship
has not produced significant income for the Company, it has been a very
productive relationship.  Most importantly, Family Assistance has been helpful
in increasing our core lines of business by giving the Company an opportunity to
offer a valuable service to our funeral home accounts.

Management anticipates the introduction of a new whole life final expense
product during the third quarter of 2001.  The new product, Heritage Final
Expense, will replace the Legacy 2000 Final Expense series and will be marketed
through funeral homes and independent agencies.  The Company is also exploring
reinsurance opportunities with regard to this new product to reduce initial
surplus strain and level out future profits.


TRADITIONAL & UNIVERSAL LIFE PRODUCTS

This segment includes traditional life and group life insurance products,
annuities (primarily qualified) and universal life products.

Revenues for 2000, 1999 and 1998 were $13,007,000, $13,573,000 and $14,146,000,
respectively. New premiums collected during 2000, 1999 and 1998 were $2,313,287,
$2,884,000 and $2,953,000, respectively. For the past few years, emphasis on
recruiting has been primarily concentrated in the Preneed and Burial markets.
Traditional and Universal Life products will continue to be a sales division
within Investors Heritage and we will continue to service our business in force
as well as actively recruit new agents and associates to supplement the agency
force in this sales division.

Net investment income for this segment increased 2% in 2000 compared to 1999 and
1% in 1999 compared to 1998.  The increase in net investment income compared to
1999 is due to the overall increase in the Company's net investment income.

Financial Services Group will also continue to market traditional insurance
products of Investors Heritage through banks and other financial institutions.
Management anticipates the introduction of a new term product during the first
quarter of 2001.  The new product, Level Term To 95, will replace the Company's
prior Level Term product and will be marketed through the Ordinary distribution
system and through Financial Services Group.  The Company has a tentative
reinsurance agreement in place with regard to this product to reduce initial
surplus strain and level out future profits.


CREDIT INSURANCE PRODUCTS & ADMINISTRATIVE SERVICES

This segment includes the marketing and administration of Credit Life and Credit
Accident and Health insurance products (respectively "Credit Life" and "Credit
A&H", and collectively "Credit Insurance").  Credit Insurance premiums written
during 2000, 1999 and 1998 were $15,455,000, $18,774,000 and $17,390,000,
respectively.  Since the Investors Heritage Credit Insurance agency force has
not been reduced, management believes the decrease in Credit insurance premiums
is directly related to a decrease in loan demand.  All of the related
underwriting risk is being reinsured 100% with major, well-known life companies,
Munich American Reassurance Company and ReliaStar Life Insurance Company. In
addition, Financial Services Group has obtained reinsurance relationships for
Investors Heritage with three other companies, Life Investors Insurance Company,
Bankers Life Insurance Company and American United Life Insurance Company.  Each
of these agreements generates marketing and retention fees, but not
administration fees.   The agreement with Bankers Life Insurance Company was
canceled effective January 31, 2001 with respect to new business.

Revenues for this segment were $423,000, $345,000 and $307,000 for 2000, 1999
and 1998, respectively.


CORPORATE & OTHER

This segment consists of corporate accounts measured primarily by stockholders'
Paid-In Capital, Contributed Surplus, Earned Surplus, Property and Equipment and
other minor business lines which include group annuities and group and
individual accident and health products.

Revenues from this segment were $1,468,000 in 2000, $1,696,000 in 1999 and
$1,936,000 in 1998.  Realized capital losses in 2000 and 1999 were $599,000 and
$307,000 respectively, that were offset by higher net investment income. The
primary reason for the higher revenues during 1998 was a $126,000 realized
capital gain.


OPERATING RESULTS

The Company's Net Income for 2000 decreased $873,000 or 37% from 1999 and for
1999 increased $404,000 or 20% from 1998.  The decrease in net income when
compared to 1999 comes from several areas in operations.  General expenses were
higher than projected due to opportunities to increase our home office field
agency staff, agency related general expenses were underestimated and overall
mortality was 8% higher than expected due to unanticipated anti-selection in
certain final expense products.  Corrective measures include increasing
involvement of department heads and staff in development of the general expense
budget, a reduction in the retention limit on any one life in traditional and
universal life products, the utilization of reinsurance to lower the mortality
risk on any future life products that are developed and to minimize initial
surplus strain, and the development of the "Heritage Final Expense" product.

Earnings per share were $1.31, $2.79 and $2.34 for 2000, 1999 and 1998,
respectively.


PRENEED & BURIAL PRODUCTS

Pre-tax income (Income from Operations Before Federal Income Tax) for this
business segment of the Company was $1,358,000, $3,590,000 and $2,408,000 for
2000, 1999 and 1998, respectively.  The decrease in pre-tax income in 2000 is
primarily due to causes identified above.  The majority of the general expense
overruns as well as the higher than expected mortality was related to this
segment of business. The increases for the prior two years are the result of
actively managing the investment portfolio and reduced levels of relative
policyholder benefits and expenses related to in force business.  However,
current market conditions, including competitive pricing for this segment and
the low interest rate environment continue to narrow profits generated from new
sales.


TRADITIONAL & UNIVERSAL LIFE PRODUCTS

Pre-tax income for this segment was $667,000, $1,047,000 and $1,194,000 in 2000,
1999 and 1998, respectively. 1999 and 1998 were close to projections for
revenues and expenses. Higher than expected unreinsured claims and expense
levels in 2000 reduced pre-tax income.


CREDIT INSURANCE PRODUCTS & ADMINISTRATIVE SERVICES

During the third quarter of 1994 Investors Heritage began the process of phasing
out of the Credit insurance market as a direct writer.  Pre-tax gain (losses)
were $113,000, ($43,000), and ($142,000) for 2000, 1999 and 1998, respectively.

Prior year losses were generated by the run-off of Credit Insurance and the
related deferred acquisition costs amortization from an aged block of business.
Improvement in this line is due to the fact that Investors Heritage has been
reinsuring 100% of the Credit Insurance risks for the past few years while
generating revenues by servicing and administering the business for our
reinsurers.  This segment's performance should continue to improve due to the
growth of the income from fully reinsured business and reduced amortization from
run-off business.


CORPORATE & OTHER

Pre-tax income for this segment was $106,000, $258,000 and $550,000 for 2000,
1999 and 1998, respectively.  Pre-tax realized capital losses were $599,000 and
$307,000 for 2000 and 1999, respectively. Pre-tax realized capital gains were
$126,000 during 1998.


INVESTMENTS, LIQUIDITY AND FUND RESTRICTIONS

The Company's investment portfolio continues to provide financial stability.  It
is management's opinion that the Company has adequate cash flows both on a long-
term and short-term basis as evidenced by the Consolidated Statements of Cash
Flows presented in this Annual Review. The Company's cash flows were derived
from insurance premiums and investments. Management anticipates these cash flows
to experience steady growth due to the profitability of all three subsidiaries.

During 2000, Financial Services Group's fifth full year of operation, revenues
were $539,000, down 12% or $71,000 compared to 1999, and dividends in the
aggregate amount of $210,000 were paid to Kentucky Investors.  Revenues from
Heritage Printing were $534,000 in 2000, down 1% compared to $542,000 in 1999,
and Heritage Printing paid $27,500 in dividends to Kentucky Investors in 2000.
Management of Heritage Printing will continue to work to improve revenues from
unaffiliated sources as well as to provide printing services for Investors
Heritage.  Revenues from these sources constitute approximately 1% of the
Company's overall Revenues in 2000 and management is working on the continued
growth and profitability of both Financial Services Group and Heritage Printing.

Management is not aware of any commitments or unusual events that could
materially affect the Company's capital resources.  During the fourth quarter of
2000 Kentucky Investors borrowed $2,000,000 on a long-term basis; however, there
was no short-term external debt.  Kentucky Investors utilized $200,000 of the
loan amount to reduce debt to Investors Heritage and $1,800,000 was loaned to
Investors Heritage in exchange for a surplus note.  (See Note F to the Financial
Statements).

Other than the items disclosed in Note H to the Consolidated Financial
Statements and the increased regulatory reporting requirements which generally
increase administrative expenses, management is not aware of any current
recommendations by any regulatory authority which if implemented would have any
material effect on the Company's liquidity, capital resources or operations.

The Company will continue to explore various opportunities including mergers and
acquisitions and purchasing blocks of business from other companies, which may
dictate a need for either long-term or short-term debt.  There are no
restrictions as to use of funds except the restriction on Investors Heritage as
to the payment of cash dividends to shareholders which is discussed in more
detail in Note H to the Consolidated Financial Statements.

Since inception, we have maintained a sound, conservative investment strategy.
The fixed income portfolio of public bonds is managed by an independent
portfolio manager, Charter Oak Capital Management, Inc. ("Charter Oak").
Effective December 31, 2000, Charter Oak was purchased by Conning Asset
Management Company ("Conning") and Conning will continue to manage the Company's
fixed income assets.  As of December 31, 2000, 86.6% of the Company's total
invested assets are managed by Conning pursuant to specific investment
guidelines which have been approved by the Board of Directors.  The primary
investment objectives have been to maintain the quality and integrity of the
fixed income portfolio while improving the total return on investments.  These
goals have been accomplished by methodically diversifying the portfolio over the
last 12 years.

The fixed income portfolio is diversified among sectors.  The market value and
the Standard & Poor's average quality rating of this portfolio as of December
31, 2000 are $220.4 million and AA, respectively.  At year-end 2000 the fixed
income portfolio was allocated as follows:  47.9% - corporate; 14.5% -
government; 22.1% - mortgage-backed securities; 9.6% - foreign; 5.4% - asset-
backed securities; and 0.5% - states and political subdivisions.  Within the
corporate bond sector, the portfolio is also diversified with 33.7% of that
sector invested in bank and finance, 51.8% in industrial and miscellaneous, and
14.5% in utilities.  Pie charts showing the Distribution of Fixed Income Assets
and Distribution of Corporate Bonds are located on page 17.

The fixed income portfolio also includes $48.7 million (at fair value) of
mortgage-backed securities ("MBS"), which represents 19% of total invested
assets and 22% of the fixed income portfolio.  MBS add value to the portfolio
and Conning has provided the expertise to purchase MBS with the confidence that
the credits have been properly analyzed and that the investment properly suits
the Company's asset and liability needs.

There have been concerns expressed by rating agencies, various regulators and
other constituencies regarding investments in MBS by insurers and other
financial institutions.  Although these highly rated securities provide
excellent credit quality, their liquidity and risk must be monitored.  Except
for two commercial-backed mortgages of approximately $1.3 million, all of the
collateral of the MBS owned are guaranteed by the Government National Mortgage
Association ("GNMA"), Federal National Mortgage Association ("FNMA") or Federal
Home Loan Mortgage Corporation ("FHLMC").

The FNMA and FHLMC securities are structured either as publicly traded
collateralized mortgage obligations ("CMO") or pass-throughs.  Unlike most
corporate or real estate debt, the primary concern with an MBS is the
uncertainty of timing of cash flows due to prepayment assumptions rather than
the possibility of loss of principal.

CMO holdings represent approximately 65% of the total MBS portfolio.  When these
securities are purchased at a discount or premium, the income yield will vary
with changes in prepayment speeds due to the change in accretion of discount or
amortization of premium, as well as the timing of the basic principal and
interest cash flows.  The overall impact of the CMO variability in yields on the
portfolio is not significant in relation to the yield and cash flows of the
total invested assets.  More importantly, the investment portfolio has no
exposure to the more volatile, high-risk CMO, such as those structured to share
in residual cash flows.  Except for one sequential pay CMO of approximately
$959,000, the CMO held are either planned amortization class ("PAC") bonds,
including one planned amortization class-Z account ("PAC-Z"), or support class
("SUP") bonds, both of which are structured to provide more certain cash flows
to the investor and therefore have reduced prepayment risk.

Pass-throughs comprise the remainder of MBS owned representing approximately 35%
of the total MBS portfolio.  Pass-throughs are GNMA, FNMA or FHLMC guaranteed
MBS which, simply stated, pass-through interest and principal payments to the
investors in accordance with their respective ownership percentage.

Additionally, the Company also engages in commercial and residential mortgage
lending with approximately 93% of these investments being in commercial
properties.  All mortgage loans are originated in-house and all loans are
secured by first mortgages on the real estate.  Loan to value ratios of 80% or
less and debt service coverage from existing cash flows of 115% are generally
required.  The Company minimizes credit risk in its mortgage loan portfolio
through various methods, including stringently underwriting the loan request,
maintaining small average loan balances, reviewing its larger mortgage loans on
an annual basis and diversifying the portfolio by property type.  The average
loan balance is $378,798 and the average loan to value is 54.0%.  The largest
loan currently held is $844,688.  The Company has $23.9 million invested in
mortgage loans, which represents 9% of total invested assets.  The portfolio is
diversified across various property types as follows:  14.5% - office; 49.7% -
retail; 8.0% -industrial; 6.9% - 1 to 4 family; 9.5% - apartments; and 11.4% -
other.  A pie chart showing the Distribution of Mortgage Loans is located on
page 18.

The Company has been methodically reducing the concentration of mortgage loans
on properties located in Kentucky and diversifying its portfolio geographically.
Approximately 48.5%, compared to 62.6% at year-end 1999, of the mortgage loans
are located in the various geographic regions of Kentucky.  The Company is
familiar with its mortgage loan markets and is not aware of any negative factors
or trends, which would have a material impact on the local economies where the
mortgage loan properties are located. The Company has been successful in adding
value to the total investment portfolio through its mortgage loan originations
due to the fact that yields realized from the mortgage loan portfolio are from
114 to 237 basis points higher than yields realized from fixed income
investments.  Value has also been added because the mortgage loan portfolio has
consistently performed well.  As of December 31, 2000, the Company had only one
non-performing mortgage loan, which would include loans past due 90 days or
more, loans in process of foreclosure, restructured loans and real estate
acquired through foreclosure.  The non-performing mortgage loan, which is more
than 90 days past due, is a Residential Mortgage with an outstanding balance of
under $50,000.  The property securing the loan has a fair market value of
$75,000.

The strength of our liquidity is found in our conservative approach in the
product development area and in the strength and stability of our fixed income
portfolio and our mortgage loans.  For 2000, the fixed income investments were
99.8% investment grade as rated by Standard & Poor's, down from 0.2% from 1999.
None of the Company's fixed income assets are in default.  Liquidity is also
managed by laddering maturities of our fixed income portfolio.  The average
duration of our fixed income investments is 5.2 years with approximately $7.0
million due within 12 months and approximately $30.2 million due within the
following four years.  Historically management has anticipated that all such
investments will be held until maturity.  However, one of the responsibilities
of our independent portfolio manager is to constantly monitor the credit rating
of our fixed income investments to determine if rating changes of any investment
requires action by management.  As explained in detail in Note A to the
Consolidated Financial Statements, all fixed income securities and all
marketable equity securities are classified as available-for-sale and are
carried at fair value.


MARKET RISK EXPOSURES

Measuring market risk is a key function of our asset/liability management
process.  To test financial risk and investment strategy, the Company performs
an asset adequacy analysis each year.  Dynamic models of both assets and
liabilities are created to project financial results under several shifts in the
current interest rate environment.  Results show that the Company's exposure to
a relative 10% increase or decrease in the interest rates prevalent at December
31, 2000 is a net loss of less than $500,000.  A graph of the total price
behavior curve tested is shown on Page 18 of this Annual Review.

Items taken into account on the asset side include prepayment and liquidity
risks, asset diversification and quality considerations.  On the liability side,
interest crediting strategies and policyholder and agent behavior (lapses,
loans, withdrawals and premium flow) are dynamically modeled in relationship to
the particular interest rate environment tested.  Although the Company is
careful to ensure that these assumptions are consistent with the best available
data, interest-sensitive cash flows cannot be forecast with certainty and can
deviate significantly from the assumptions made.  Because asset and liability
durations are continually changing as new policyholder contracts are issued and
as new investments are added to the portfolio, the Company manages its balance
sheet on an ongoing basis and its net exposure to changes in interest rates may
vary over time.


REGULATORY MATTERS

The statutory capital and surplus of Investors Heritage decreased $567,000 in
2000 following a decrease of $507,000 in 1999.  During the last quarter of 2000
two fixed maturity investments were sold at a substantial loss.  To offset this
loss an investment in an unaffiliated common stock was sold at a gain.  The net
realized gain was $131,000.  However, a net unrealized loss of $936,000 was
recognized in 2000 on the unaffiliated common stock and an unrealized gain of
$346,000 on affiliated investments for a net charge to capital and surplus of
$590,000.

Another charge to statutory surplus for 2000 was Goodwill in the amount of
$598,000.  Statutory goodwill associated with the 2000 purchase of the covered
obligations of Franklin American was disallowed as an admitted asset by the
Kentucky Department of Insurance even though statutory goodwill, up to 10% of
the insurer's capital and surplus, is an admitted asset under the Accounting
Practices and Procedures of the National Association of Insurance Commissioners
("NAIC").  The Kentucky General Assembly has recently  adopted legislation that
will allow the statutory goodwill to be included as an admitted asset in
accordance with NAIC standards.  Therefore, the amortized statutory goodwill
will be added back to surplus after the effective date of the legislation.  The
decrease in capital and surplus in 1999 was primarily due to an unrealized loss
in unaffiliated common stock recognized at year-end 1999.

In addition to the loss in investments, Investors Heritage experienced a
$467,000 operating loss in 2000.  Acquisition costs on record insurance sales
which are required to be expensed in the year of sale under statutory accounting
practices, adverse mortality experience in both Preneed and Traditional Life
Products, a non-budgeted one-time general expense and the acquisition costs in
connection with the Franklin American business were the primary reasons.  For
additional discussion on statutory accounting practices refer to Note H to the
Consolidated Financial Statements.


FORWARD LOOKING INFORMATION

The Company cautions readers regarding certain forward-looking statements
contained in this report and in any other statements made by, or on behalf of,
the Company, whether or not in future filings with the Securities and Exchange
Commission (the "SEC"). Forward-looking statements are statements not based on
historical information and which relate to future operations, strategies,
financial results or other developments. Statements using verbs such as
"expect", "anticipate", "believe" or words of similar import generally involve
forward-looking statements. Without limiting the foregoing, forward-looking
statements include statements which represent the Company's beliefs concerning
future levels of sales and redemptions of the Company's products, investment
spreads and yields or the earnings and profitability of the Company's
activities.

Forward-looking statements are necessarily based on estimates and assumptions
that are inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond the Company's control
and many of which are subject to change. These uncertainties and contingencies
could cause actual results to differ materially from those expressed in any
forward-looking statements made by, or on behalf of, the Company. Whether or not
actual results differ materially from forward-looking statements may depend on
numerous foreseeable and unforeseeable factors and developments. Some of these
maybe national in scope, such as general economic conditions, changes in tax
laws and changes in interest rates. Some may be related to the insurance
industry generally, such as pricing competition, regulatory developments,
industry consolidation and the effects of competition in the insurance business
from other insurance companies and other financial institutions operation in the
Company's market area and elsewhere. Others may relate to the Company
specifically, such as credit, volatility and other risks associated with the
Company's investment portfolio. The Company cautions that such factors are not
exclusive. The Company disclaims any obligation to update forward-looking
information.


Explanation of graphs appear here.


DISTRIBUTION OF INVESTED ASSETS

A pie chart appears on this page showing the Distribution of Invested Assets for
all of the assets of the Company.  The chart shows the following breakdown:
Fixed Maturities:  86.3%; Mortgage Loans - R.E.:  9.3%; Policy Loans:  3.0%;
Equity Securities:  0.5%; Short Term Investments:  0.7%; Other Long Term
Investments:  0.2%.


DISTRIBUTION OF FIXED INCOME ASSETS

A pie chart appears on this page showing the Distribution of Fixed Income
Assets.  The chart shows the following breakdown:  Corporate:  47.9%; Mortgage-
backed Securities:  22.1%; Government:  14.5%; Foreigns:  9.6%; Asset-backed
Securities:  5.4%; States & Political Subdivisions:  0.5%.


DISTRIBUTION OF CORPORATE BONDS

A pie chart appears on this page showing the Distribution of Corporate Bonds.
This chart shows the following breakdown:  Industrial and Miscellaneous:  51.8%;
Bank and Finance:  33.7%; and Utilities:  14.5%.


DISTRIBUTION OF MORTGAGE LOANS

A pie chart appears on this page showing the Distribution of Mortgage Loans.
This chart shows the following breakdown:  Retail:  49.7%; Other:  11.4%;
Apartments:  9.5%; Office Properties:  14.5%; residential (1-4 families):  6.9%;
and Industrial:  8.0%.


OPTION ADJUSTED VALUE VS TERM STRUCTURE SHIFT GRAPH

A graph appears on this page showing the results of the Asset Adequacy Analysis
performed by the Company.  The graph demonstrates the option-adjusted prices of
assets, liabilities, and surplus at various shifts in the interest rate
environment.



                         SELECTED FINANCIAL DATA

        (000's omitted except for Earnings and Cash Dividends Per Share)


                    2000     1999    1998    1997     1996
                    ----     ----    ----    ----     ----

Total Revenue     $ 65,427 $ 62,772 $57,708 $52,707 $ 47,962
Total Benefits &
   Expenses         63,183   57,920  53,698  49,863   46,320
Net Income           1,506    2,379   1,975   1,523    1,147
Earnings Per          1.31     2.79    2.34    1.84     1.41
Share
Total Assets       365,936  291,215 288,369  256,872 224,997
Total Liabilities  328,681  260,186 243,673  217,543 190,997
Debt                 2,229      264     407      -0-     -0-
Cash Dividends
  Per Share            .38      .38     .38      .38     .38



                           REPORT OF INDEPENDENT ANDITORS

The Board of Directors and Stockholders
Kentucky Investors, Inc.

      We have audited the accompanying consolidated balance sheets of Kentucky
Investors, Inc. and subsidiaries as of December 31, 2000 and 1999, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 2000. These
financial statements are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these financial statements based on
our audits.

      We conducted our audits in accordance with auditing standards generally
accepted in the United States.  Those standards 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.  An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation.  We believe that our audits provide a
reasonable basis for our opinion.

      In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Kentucky Investors, Inc. and subsidiaries at December 31, 2000 and 1999, and the

consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States.


/s/
Ernst & Young, LLP
Cincinnati, Ohio
March 15, 2001








                            KENTUCKY INVESTORS, INC.

                          CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 2000 and 1999

ASSETS                                                  2000             1999
                                                        ----             ----

   INVESTMENTS
   Securities available-for-sale, at fair value:
     Fixed maturities (amortized cost: 2000-
       $215,983,658; 1999- $198,948,096)           $220,446,702   $195,009,506
     Equity securities (cost: 2000-$845,735; 1999-
       $1,150,392)                                    1,366,982      2,363,864
   Mortgage loans on real estate                     23,864,291     17,795,599
   Policy loans                                       7,760,207      7,379,349
   Other long-term investments                          428,042        528,850
   Short-term investments                             1,890,815      1,037,081
                                                   ------------   ------------
   Total investments                               $255,757,039   $224,114,249

   Cash and cash equivalents                          3,324,447      2,428,652
   Accrued investment income                          3,826,971      3,464,177
   Due and deferred premiums                          4,601,062      4,440,484
   Deferred acquisition costs                        23,962,641     23,341,062
   Present value of future profits                      586,298            -0-
   Leased property under capital leases                 224,879        255,381
   Property and equipment                             1,909,928      2,129,443
   Goodwill                                           1,019,407      1,067,952
   Other assets                                       1,319,856      1,333,183
   Amounts recoverable from reinsurers               69,403,217     28,640,627
                                                  -------------   ------------
                                                   $365,935,745   $291,215,210
                                                  =============  =============

LIABILITIES AND STOCKHOLDERS' EQUITY

   LIABILITIES
   Policy liabilities:
     Benefit reserves                             $290,096,285    $226,449,401
     Unearned premium reserves                      23,816,171      24,163,694
     Policy claims                                   2,570,382       2,012,392
     Other policyholders' funds:
     Dividend & endowment accumulations              1,084,217       1,043,436
     Reserves for dividends & endowments & other       801,687         787,172
                                                  ------------    ------------
       Total policy liabilities                   $318,368,742    $254,456,095
     Federal income taxes                            3,810,143       1,459,622
     Obligations under capital leases                  228,991         264,324
     Notes payable                                   2,000,000             -0-
     Other liabilities                               4,273,551       4,006,294
                                                  ------------    ------------
       Total liabilities                          $328,681,427    $260,186,335
                                                  ------------    ------------

   STOCKHOLDERS' EQUITY
     Common stock (shares issued: 2000-1,151,323, $  1,151,323    $  1,154,880
       1999-1,154,880)
     Paid-in surplus                                 8,399,106       8,499,592
     Accumulated other comprehensive income (loss)   3,001,407      (2,313,784)
     Retained earnings                              24,702,482      23,688,187
                                                  ------------    ------------
     Total stockholders' equity                   $ 37,254,318    $ 31,028,875
                                                  ------------    -----------
                                                  $365,935,745    $291,215,210
                                                  ============    ============

                       See notes to consolidated financial statements.



                            KENTUCKY INVESTORS, INC.

                       CONSOLIDATED STATEMENTS OF INCOME
               FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, 1998

                                             2000        1999          1998
                                             ----        ----          ----

REVENUE
Premiums and other considerations        $47,939,399  $46,907,642  $42,638,289
  Investment income, net of expenses      17,017,723   15,211,964   14,167,232
  Realized gain (loss) on investments,      (599,238)    (307,275)     126,179
    net
  Other income                             1,069,180      959,332      776,612
                                         -----------  -----------  -----------
    Total revenue                        $65,427,064  $62,771,663  $57,708,312
                                         -----------  -----------  -----------
BENEFITS AND EXPENSES
   Death and other benefits              $26,629,623  $22,845,282  $20,767,497
   Guaranteed annual endowments              746,215      776,742      800,041
   Dividends to policyholders                716,426      715,448      626,325
   Increase in benefit reserves and
     unearned premiums                    20,400,433   20,187,658   18,400,657
   Acquisition costs deferred             (8,526,224)  (8,407,930)  (7,060,559)
   Amortization of deferred acquisition    7,213,058    6,335,810    6,551,456
     costs
   Commissions                             5,998,730    6,358,819    5,231,882
   Other insurance expenses               10,005,106    9,108,078    8,380,727
                                         -----------  -----------  -----------
     Total benefits and expenses         $63,183,367  $57,919,907  $53,698,026
                                         -----------  -----------  -----------

INCOME FROM OPERATIONS BEFORE
   FEDERAL INCOME TAX AND MINORITY
   INTEREST IN NET INCOME OF SUBSIDIARY  $ 2,243,697  $ 4,851,756  $ 4,010,286
                                         -----------  -----------  -----------

   Provision for income taxes:
     Current                             $    65,330  $   326,000  $   362,000
     Deferred                                672,000    1,305,000      952,000
                                         -----------  -----------  -----------
                                         $   737,330  $ 1,631,000  $ 1,314,000
                                         -----------  -----------  -----------

INCOME FROM OPERATIONS BEFORE
   MINORITY INTEREST IN NET INCOME
   OF SUBSIDIARY                         $ 1,506,367  $ 3,220,756  $ 2,696,286
                                         -----------  -----------  -----------

MINORITY INTEREST IN NET INCOME
   OF SUBSIDIARY                                 -0-      841,500      721,149

NET INCOME                               $ 1,506,367  $ 2,379,256  $ 1,975,137
                                         ===========  ===========  ===========

EARNINGS PER SHARE                       $      1.31  $      2.79  $      2.34
                                         ===========  ===========  ===========


                See notes to consolidated financial statements.



                           KENTUCKY INVESTORS, INC.

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
               FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, 1998

                                 ACCUMULAED
                                 OTHER                         TOTAL
           COMMON      PAID-IN   COMPREHENSIVE    RETANED      STOCKHOLDERS'
           STOCK       SURPLUS   INCOME (LOSS)    EARNINGS     EQUITY
           -----       -------   -------------    --------     ------

BALANCE, JANUARY 1, 1998
         $  836,895   $3,384,06  $ 4,043,101     $19,822,763   $28,086,820
Comprehensive Income:
     Net Income                                    1,975,137     1,975,137
     Change in net unrealized appreciation
       on available-for sale securities
                                   2,349,645                     2,349,645
                                                                ----------
Total comprehensive income                                       4,324,782
   Cash dividend                                    (354,926)     (354,926)
Issuance of common stock, net
             11,221       58,187                      98,651       168,059
         ----------    ---------- -----------    -----------   -----------
BALANCE, DECEMBER 31, 1998
         $   848,116  $3,442,248  $ 6,392,746    $21,541,625   $32,224,735

Comprehensive Income:
     Net Income                                    2,379,256     2,379,256
     Change in net unrealized appreciation
       on available-for sale securities           (8,706,530)   (8,706,530)
                                                               -----------
         Total comprehensive income(loss)                       (6,327,274)
   Cash dividend                                    (358,185)     (358,185)
   Issuance of common stock, net
             15,079       149,584                    125,491       290,154
   Share exchange transaction
            291,685     4,907,760                                5,199,445
         ----------    ----------  -----------   ----------    -----------
BALANCE, DECEMBER 31, 1999
         $1,154,880    $8,499,592  $(2,313,784)  $23,688,187   $31,028,875

Comprehensive Income:
     Net Income                                    1,506,367     1,506,367
     Change in net unrealized appreciation
       on available-for sale securities
                                     5,315,191                   5,315,191
                                                               -----------
       Total comprehensive income                                6,821,558
   Cash dividend                                    (470,133)     (470,133)
   Issuance of common stock, net
              2,731         37,851                    (7,320)       33,262
   Share exchange transaction
             (6,288)      (138,337)                  (14,619)     (159,244)
         ----------     ----------  ---------    -----------   -----------
BALANCE, DECEMBER 31, 2000
         $1,151,323     $8,399,106  $3,001,407   $24,702,482   $37,254,318
         ==========     ==========  ==========   ===========   ===========



                See notes to consolidated financial statements.

                            KENTUCKY INVESTORS, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
               FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, 1998

                                   2000              1999              1998
                                   ----              ----              ----

OPERATING ACTIVITIES
   Net income                   $1,506,367        $2,379,256        $1,975,137
   Adjustments to reconcile
     net income to net cash
     provided by operating
     activities:
       Change in operating
         assets and liabilities:
         Benefit reserves       20,495,926        25,460,007        25,220,661
         Claims liability          557,990           (73,924)         (170,338)
          Other policyholder
            funds                   55,296            (7,994)          (79,384)
          Accrued investment
            income                (362,794)         (365,247)         (193,426)
          Other assets and
            other liabilities      155,186           (79,947)          646,584
          Due and deferred
            premiums               (49,651)         (310,517)         (115,790)
          Amounts recoverable
            from reinsurers         69,538        (5,284,996)       (6,411,014)
       Amortization o deferred
            acquisition costs    7,213,058         6,335,810         6,551,456
       Policy acquisition
            costs deferred      (8,526,224)       (8,407,930)       (7,060,559)
       Realized loss (gain)
            on investments         599,238            307,275         (209,187)
       Provision for deferred
            federal income taxes   672,000          1,305,000          952,000
       Federal income tax          (24,110)        (3,384,143)             -0-
       Net adjustment for
            premium and discount
            on investments          85,974            286,189          269,283
       Depreciation and other
            amortization           541,140            484,853          201,157
       Change in minority
            interest and other    (159,244)         3,627,261          487,559
                               -----------         ----------      -----------
NET CASH PROVIDED BY
   OPERATING ACTIVITIES        $22,829,690        $22,270,953      $22,064,139
                               -----------        -----------      -----------

INVESTING ACTIVITIES
   Securities available-for-sale:
     Purchases                $(31,984,036)      $(45,334,028)    $(30,462,168)
     Sales and maturities       14,481,063         27,475,182       13,194,144
   Other investments:
     Cost of acquisition        (9,477,581)        (5,568,194)      (4,857,026)
     Sales and maturities        2,601,078          3,965,182        2,300,420
     Considerations from
        assumption of Franklin
        American Life Insurance
        Company policy
        obligations              6,303,944                -0-              -0-
   Net additions to property
      and equipment               (187,129)          (794,581)        (583,872)
                              ------------        ------------    ------------
NET CASH USED BY INVESTING
  ACTIVITIES                  $(18,262,661)      $(20,256,439)    $(20,408,502)
                              ------------        ------------    ------------
FINANCING ACTIVITIES
   Receipts from universal
     life policies credited to
     policyholder account
     balances                 $  3,308,407        $  4,324,562     $ 4,356,590
   Return of policyholder
     account balances on
     Universal life policies    (8,542,770)         (6,356,764)     (6,250,442)
   Proceeds from notes
     payable                     2,000,000                 -0-             -0-
   Issuances of common stock        33,262             290,154         168,059
   Dividends                      (470,133)           (358,185)       (354,926)
                              ------------        ------------     -----------
NET CASH USED BY FINANCING
   ACTIVITIES                 $ (3,671,234)       $ (2,100,233)    $(2,080,719)
                              ------------        ------------     -----------
INCREASE (DECREASE) IN CASH   $    895,795        $    (85,719)    $  (425,082)
   Cash and cash equivalents
     at beginning of year        2,428,952           2,514,371       2,939,453
                              ------------        ------------     -----------
CASH AND CASH EQUIVALENTS AT
  END OF YEAR                 $  3,324,447        $  2,428,652     $ 2,514,371
                              ============        ============     ===========



                See notes to consolidated financial statements.


NOTE  A - Nature of Operations and Accounting Policies

Kentucky Investors, Inc. (Kentucky Investors) is the holding company of
Investors Heritage Life Insurance Company (Investors Heritage), Investors
Heritage Printing, Inc., a printing company and Investors Heritage Financial
Services Group, Inc., an insurance marketing company.  These entities are
collectively hereinafter referred to as the "Company". Ninety-nine percent of
Kentucky Investors operations are generated by Investors Heritage.

The Company's operations involve the sale and administration of various
insurance and annuity products, including, but not limited to, participating,
non-participating, whole life, limited pay, universal life, annuity contracts,
Credit life, Credit Accident and Health and group insurance policies.  The
principal markets for the Company's products are in the Commonwealths of
Kentucky and Virginia, and the states of North Carolina, South Carolina, Ohio,
Indiana, Florida, Tennessee, Illinois, Georgia, West Virginia, Arizona,
Michigan, Mississippi and Texas.

Basis of Presentation:  The accompanying consolidated financial statements of
Kentucky Investors, Inc. and subsidiaries have been prepared in accordance with
accounting principles generally accepted in the United States (GAAP).

Principles of Consolidation:  The consolidated financial statements include the
wholly-owned subsidiaries of Kentucky Investors which are Investors Heritage and
its subsidiary, Investors Underwriters, Inc., Investors Heritage Printing, Inc.
and Investors Heritage Financial Services Group, Inc.  Intercompany transactions
are eliminated in the Company's consolidated financial statements.

Investments:  In accordance with Statement of Financial Accounting Standards
(SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity
Securities", the Company classifies all fixed maturities and equity securities
as available-for-sale.  Under SFAS No. 115, securities classified as available-
for-sale are carried at fair value with appreciation (depreciation) relating to
temporary market value changes recorded as an adjustment to other comprehensive
income.

Premiums and discounts on fixed maturity investments are amortized into income
using the interest method.  Anticipated prepayments on mortgage-backed
securities are considered in the determination of the effective yield on such
securities.  If a difference arises between anticipated prepayments and actual
prepayments, the carrying value of the investment is adjusted with a
corresponding charge or credit to interest income.

Realized gains and losses on the sale of investments are determined based upon
the specific identification method and include provisions for other-than-
temporary impairments where appropriate.

Mortgage loans, policy loans and other long-term investments are carried at
unpaid balances.  Short-term investments represent securities with maturity
dates within one year but exceeding three months.  These securities are carried
at amortized cost.

Cash equivalents include money market funds on deposit at various financial
institutions with contractual maturity dates within three months at the time of
purchase.

Deferred Acquisition Costs:  Commissions and other acquisition costs which vary
with and are primarily related to the production of new business are deferred
and amortized over the life of the related policies (refer to Revenues and
Expenses discussed later regarding amortization methods).  Recoverability of
deferred acquisition costs is evaluated annually by comparing the current
estimate of the present value of expected pretax future profits to the
unamortized asset balance.  If such current estimate is less than the existing
balance, the difference is charged to expense.

Property and Equipment:  Property and equipment is carried at cost less
accumulated depreciation, using principally the straight-line method.
Accumulated depreciation on property and equipment was $3,787,054 and $3,555,675
at December 31, 2000 and 1999, respectively.

Capital Leases: During 2000 the Company entered into two five-year capital
leases for office equipment.  Total lease payments for 2000, 1999 and 1998

relating to new and previously existing capital leases were $186,826, $163,668
and $48,646 respectively. Future minimum lease payments for 2001, 2002, 2003,
2004 and 2005 are $147,292, $32,269, $32,269, $32,269 and $8,905, respectively.
The present value of net minimum lease payments at December 31, 2000 was
$230,463, which is equal to the total future minimum lease payments of $253,004
less imputed interest of $22,541. Accumulated amortization on the leased
property was $357,763 and $193,099 at December 31, 2000 and 1999, respectively.

Goodwill:  Goodwill is being amortized over forty years using the straight-line
method.  Accumulated amortization was $1,229,363 and $1,180,818 at December 31,
2000 and 1999, respectively.

Present Value of Future Profits:  Present value of future profits represents the
estimated value assigned to the insurance in force of the assumed policy
obligations at the date of acquisition.  The assigned value is amortized over
the expected remaining life of the insurance in force (which approximates a
weighted average of 8 years).  At December 31, 2000, accumulated amortization
was $55,449.  Annual amortization in each of the following five years will be
approximately $74,000.

Benefit Reserves and Policyholder Deposits:  Reserves on traditional life and
accident and health insurance products are calculated using the net level
premium method based upon estimated future investment yields, mortality,
withdrawals and other assumptions, including dividends on participating
policies.  The assumptions used for prior year issues are locked in. Current
year issues are reserved for using updated assumptions determined by reviewing
the Company's past experience and includes a provision for possible unfavorable
deviation.

Benefit reserves and policyholder deposits on universal life and investment-type
products are determined by using the retrospective deposit method and represent
the policy account value before consideration of surrender charges.  In
addition, unearned revenues are included as a part of the benefit reserve.

The mortality assumptions for regular ordinary business are based on the 1955-60
Basic Table, Select and Ultimate, for plans issued prior to 1982, the 1965-70
Basic Table, Select and Ultimate, for plans issued in 1982 through 1984, the
1975-80 Basic Table, Select and Ultimate, for plans issued after 1984 and on the
Company's experience for final expense plans.

Reinsurance:  The Company assumes and cedes reinsurance under various agreements
providing greater diversification of business, allowing management to control
exposure to potential losses arising from large risks, and providing additional
capacity for growth.  Amounts recoverable from reinsurers are estimated in a
manner consistent with the related liabilities associated with the reinsured
policies.  In accordance with SFAS No. 113, "Accounting and Reporting for
Reinsurance of Short-Duration and Long-Duration Contracts", reserves ceded to
reinsurers of $67,985,728 and $27,814,276 at December 31, 2000 and 1999,
respectively, are shown gross on the Company's balance sheet.

Unearned Premium Reserves:  Credit life unearned premium reserves are calculated
for level and reducing coverage using the monthly pro rata and Rule of 78's
methods, respectively.  Credit Accident and Health unearned premium reserves are
determined based upon the Rule of 78's.

Policy Claims:  Policy claims are based on reported claims plus estimated
incurred but not reported claims developed from trends of historical data
applied to current exposure.

Other Policyholders' Funds:  Other policyholders' funds consist primarily of
dividends and endowments left on deposit at interest.

Participating Policies:  Participating business approximates 9% of ordinary life
insurance in force.  Participating dividends are accrued as declared by the
Board of Directors of Investors Heritage.  The liability for future policy
benefits for participating policies was determined based on the Net Level
Premium Reserve Method, 3% interest, and the 1941 CSO Mortality and 1958 CSO
Mortality tables.  All guaranteed benefits were considered in calculating these
reserves.  Deferred acquisition costs are amortized in proportion to expected
gross profits.  The average assumed investment yields used in determining
expected gross profits ranged from 3.56% to 9.17% (for the current and all
future years an assumed investment yield of 6.80% was utilized).

Federal Income Taxes:  The Company utilizes the liability method in accordance
with SFAS No. 109, "Accounting for Income Taxes", to account for income taxes.
Under such method, deferred tax assets and liabilities are determined based on
differences between the financial reporting and the tax bases of assets and
liabilities and are measured using the enacted tax rates.

Revenues and Expenses:  Revenues on traditional life and accident and health
insurance products consist of direct and assumed premiums reported as earned
when due.  Liabilities for future policy benefits, including unearned premium
reserves on accident and health policies and unreleased profits on limited-pay
life policies, are provided and acquisition costs are amortized by associating
benefits and expenses with earned premiums to recognize related profits over the
life of the contracts.  Acquisition costs are amortized over the premium paying
period using the net level premium method.  Traditional life insurance products
are treated as long duration contracts since they are ordinary whole life
insurance products which generally remain in force for the lifetime of the
insured.  The accident and health insurance products are treated as long
duration contracts because they are non-cancelable.

Revenues for universal life and investment-type products consist of investment
income and policy charges for the cost of insurance and policy initiation and
administrative fees.  Expenses include interest credited to policy account
balances, actual administrative expenses and benefit payments in excess of
policy account balances.

Deferred acquisition costs related to universal life and investment-type
products are amortized as a uniform percentage of each year's expected gross
profits, over the life of the policies.  Amortization is unlocked for
significant changes in expected versus actual gross profits, including the
effects of realized gains or losses.

Common Stock and Earnings per Share:  The par value per share is $1.00 with
4,000,000 shares authorized. Earnings per share of common stock were computed
based on the weighted average number of common shares outstanding during each
year.  The number of common shares used in this computation was 1,148,302 in
2000, 854,135 in 1999 and 843,251 in 1998.  Cash dividends per share were $.38
in 2000, 1999 and 1998.

Accumulated Other Comprehensive Income(Loss): SFAS No. 130, "Reporting
Comprehensive Income", requires unrealized gains or losses on available-for-sale
securities to be included in other comprehensive income.  The reclassification
amounts (net of 34% tax) for the years ended December 31, 2000, 1999 and 1998
are summarized as follows:


                              2000           1999            1998
                              ----           ----            ----
Net unrealized gain
   (loss) arising
   during period          $ 4,629,104    $ (8,981,205)    $ 3,215,115

Reclassification
   adjustment for net
   (gains) losses included
   in net income              686,087         274,675        (123,898)

Minority interest in
   other comprehensive
   income                         -0-             -0-        (741,572)
                           -----------    -----------     -----------
Net unrealized gain
   (loss) on certain
   securities             $ 5,315,191   $  (8,706,530)    $ 2,349,645
                          ===========   =============     ===========

Reclassifications:  Certain prior year amounts have been reclassified to conform
to the 2000 presentations.

Use of Estimates:  The preparation of financial statements requires management
to make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes.  Actual results could differ from
those estimates.

NOTE  B - Acquisitions

Effective April 1, 2000, Investors Heritage assumed the covered obligations of
Franklin American Life Insurance Company ("Franklin American") through an
assumption reinsurance agreement with the liquidator of Franklin American, the
National Organization of Life and Health Guaranty Associations ("NOLHGA") and
participating life and health insurance guaranty associations.  The gross
acquisition price was approximately $4,400,000, subject to adjustments to be
determined within 180 days from the effective date of the transaction.  The
difference between the fair values of assets received and liabilities assumed
was recorded as the present value of future profits ("PVFP"), representing the
actuarially determined present value of anticipated profits to be realized from
the business, using a risk-adjusted discount rate.

In conjunction with the assumption reinsurance agreement, Investors Heritage
entered into a coinsurance agreement with Scottish Annuity & Life Insurance
Company (Cayman) Ltd. ("Scottish") whereby Investors Heritage ceded 85% of the
assumed policy obligations from Franklin American.  Pursuant to this
arrangement, Investors Heritage eliminated the portion of PVFP associated with
the ceded business.  Benefit reserves ceded to Scottish and included in the
amounts recoverable from reinsurers equaled $39,273,582 at December 31, 2000.
An escrow account has been established by Scottish to secure Investors
Heritage's ceded benefit obligations.  During 2000, the Company received
$132,840 of fee income associated with this reinsurance agreement.

On December 31, 1999 Kentucky Investors acquired the minority stockholders'
common stock of Investors Heritage through a share exchange. Under the terms of
this share exchange, Kentucky Investors issued 1.24 shares of common stock for
every 1 share of Investors Heritage common stock held by minority stockholders.
Kentucky Investors issued approximately 291,685 shares of stock with a value of
approximately $6,709,000. Prior to the share exchange, Kentucky Investors owned
approximately 74% of Investors Heritage. The acquisition of the remaining 26%
from Investors Heritage's minority
transaction; accordingly, the deferred tax liability of Kentucky Investors at
the date of the acquisition was utilized to decrease the purchase price.  The
net purchase price for the minority stockholders' interest in Investors Heritage
was approximately $5,200,000 (including costs associated with the acquisition of
approximately $324,000 and reduction of the deferred tax liability of
approximately $1,833,000).

NOTE  C - Investments

The Company limits credit risk by emphasizing investment grade securities and by
diversifying its investment portfolio among government and corporate bonds and
mortgage loans.  The Company manages its fixed income portfolio to diversify
between and within industry sectors.  Mortgage loans are issued at loan to value
ratios not exceeding 80 percent.  Approximately $11,578,000 of the loans
outstanding at December 31, 2000 were to borrowers located in Kentucky.  All
loans are secured by a first mortgage on the property.

Investments in available-for-sale securities are summarized as follows:

2000                                Gross        Gross
                     Amortized    Unrealized   Unrealized      Fair
                        Cost        Gains       Losses        Value
                        ----        -----       ------        -----
Available-for-sale
securities:
U.S. Government
   Obligations       $ 30,940,882  $1,002,385   $  20,817  $ 31,922,450
States & Political
   Subdivisions           992,029      12,081         -0-     1,004,110
Corporate             115,630,291   3,084,247   1,089,950   117,624,588
Foreign                20,618,688     678,728      94,327    21,203,089
Mortgage-Backed
   Securities          47,801,768     998,015     107,318    48,692,465
                     ------------ -----------  ----------  ------------
Total Fixed Maturity
   Securities        $215,983,882  $5,775,456  $1,312,412  $220,446,702
Equity Securities         845,735     526,402       5,155     1,366,982
                     ------------ -----------  ----------  ------------
Total                $216,829,393  $6,301,858  $1,317,567  $221,813,684
                     ============  ==========  ==========  ============


1999                                Gross        Gross
                     Amortized    Unrealized   Unrealized      Fair
                        Cost        Gains       Losses        Value
                        ----        -----       ------        -----
Available-for-sale
securities:
U.S. Government
   Obligations       $ 29,645,625   $  160,724  $  523.259  $ 29.283,090
States & Political
   Subdivisions         1,990,263        4,112      14,615     1,979,760
Corporate             106,945,355      195,430   2,437,705   104,703,080
Foreign                19,542,937          -0-     554,527    18,988,410
Mortgage-Backed
   Securities          40,823,916       75,918     844,668    40,055,166
                     ------------   ----------  ----------  ------------
Total Fixed Maturity
   Securities        $198,948,096   $  436,184  $4,374,774  $195,009,506
Equity Securities       1,150,392    1,253,859      40,387     2,363,864
                     ------------   ----------  ----------  ------------
Total                $200,098,488   $1,690,043  $4,415,161  $197,373,370
                     ============   ==========  ==========  ============

In accordance with SFAS No. 115, net unrealized gains (losses) for investments
classified as available-for-sale are shown, net of the effect on deferred income
taxes and deferred policy acquisition costs assuming that the appreciation
(depreciation) had been realized.  A summary follows:

                                             December 31
                                        2000              1999
                                        ----              ----

Net unrealized appreciation
(depreciation) on
   Available-for-sale securities   $4,984,291        $(2,725,118)
   Adjustment to deferred
     acquisition costs               (436,708)           254,879
   Deferred income taxes           (1,546,176            156,455
                                   ----------        -----------
Net unrealized appreciation
   (depreciation) on
   Available-for-sale securities   $3,001,407        $(2,313,784)
                                   ==========        ===========

The amortized cost and fair value of debt securities at December 31, 2000, by
contractual maturity, are presented below.  Expected maturities will differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.


                                    Available-for-Sale
                                  Amortized         Fair
                                    Cost           Value
                                    ----           -----

Due in one year or less        $  7,042,130     $7,096,307
Due after one year through
   five years                    30,221,089     30,889,675
Due after five years
   through ten years             76,168,108     77,869,033
Due after ten years              42,933,920     43,772,075
Due at multiple maturity
   dates                         59,618,411     60,819,612
                               ------------   ------------
Total                          $215,983,658   $220,446,702
                               ============   ============


Proceeds during 2000, 1999 and 1998 from sales and maturities of investments in
available-for-sale securities were $14,481,063, $27,473,932 and $13,194,150,
respectively.  Gross gains of $853,970, $121,729 and $162,746 and gross losses
of $1,540,057, $396,404 and $38,848 were realized on those sales during 2000,
1999 and 1998, respectively.

Presented below is investment information, including the accumulated and annual
change in net unrealized investment gain or loss.  Additionally, the table below
shows the annual change in net unrealized investment gain (loss) and the amount
of realized investment gain (loss) on debt and equity securities for the years
ended December 31, 2000, 1999 and 1998:

                           2000           1999          1998
                           ----           ----          ----

Change in unrealized
investment
     gain (loss):
   Available-for-sale:
     Debt securities    $ 8,401,634   $(15,963,266)   $4,921,880
     Equity securities     (692,231)    (1,251,285)      207,845
Realized investment
gain (loss):
   Available-for-sale:
     Debt securities    $(1,461,834)  $   (276,554)   $  123,892
     Equity securities      775,747          1,879             6

Major categories of investment income are summarized as follows:

                           2000          1999          1998
                           ----          ----          ----

Fixed maturities        $14,829,680   $13,489,661   $12,442,337
Mortgage loans on
   real estate            1,763,981     1,324,602     1,311,727
Other                     1,022,273       952,956       932,821
                        -----------   -----------   -----------
                        $17,615,934   $15,767,219   $14,686,885
Investment expenses         598,211       555,255       519,653
                        -----------   -----------   -----------
                        $17,017,723   $15,211,964   $14,167,232
                        ===========   ===========   ===========

The Company is required to hold assets on deposit for the benefit of
policyholders in accordance with statutory rules and regulations.  At December
31, 2000 and 1999, these required deposits had book values of $23,322,627 and
$23,619,365, respectively.


NOTE  D - Fair Values of Financial Instruments

The following disclosure of the estimated fair values of financial instruments
is made in accordance with the requirements of SFAS No. 107, "Disclosures about
Fair Value of Financial Instruments".  The estimated fair value amounts have
been determined using available market information and appropriate valuation
methodologies.  However, considerable judgment was necessarily required to
interpret market data to develop these estimates.  Accordingly, the estimates
are not necessarily indicative of the amounts which could be realized in a
current market exchange.  The use of different market assumptions or estimation
methodologies may have a material effect on the fair value amounts.


                                          December 31
                                          -----------

                                 2000                     1999
                                 ----                     ----

                          Carrying      Fair      Carrying      Fair
                            Value       Value       Value       Value
                            -----       -----       -----       -----
Assets:
   Fixed maturities     $220,446,702 $220,446,701 $195,009,506 $195,009,506
   Equity securities       1,366,982    1,366,982    2,363,864    2,363,864
   Mortgages on real
      estate:
      Commercial          22,207,606   22,785,340   16,556,357   16,888,874
      Residential          1,656,685    1,713,032    1,239,242    1,272,462
   Policy loans            7,760,207    7,760,207    7,379,349    7,379,349
   Other long-term
      investments            428,042      428,042      528,850      528,850
   Short-term
      investments          1,890,815    1,890,815    1,037,081    1,037,081
   Cash and cash
      equivalents          3,324,447    3,324,447    2,428,652    2,428,652
   Accrued investment
      income               3,826,971    3,826,971    3,464,177    3,464,177

Liabilities:
   Policyholder deposits
      (investment-type
      contracts)         $79,998,756  $75,168,177  $57,635,081  $53,475,174
   Policy claims           2,570,382    2,570,382    2,012,392    2,012,392
   Obligations under
      capital leases         228,991      228,991      264,324      264,324
   Notes payable           2,000,000    2,000,000          -0-          -0-

The following methods and assumptions were used in estimating the "fair value"
disclosures for financial instruments in the accompanying financial statements
and notes thereto:

Cash, cash equivalents, short-term investments, policy loans, accrued investment
income and other long-term investments:  The carrying amounts reported for these
financial instruments approximate their fair values.

Fixed maturities and equity securities:  The fair values for fixed maturities
and equity securities (including redeemable preferred stocks) are based on
quoted market prices.

Mortgage loans:  The fair values for mortgage loans are estimated using
discounted cash flow analyses, using the actual spot rate yield curve in effect
at December 31.

Investment-type contracts:  The fair values for the liabilities under
investment-type insurance contracts are calculated as surrender values on these
contracts.

Policy claims, obligations under capital leases and notes payable:  The carrying
amounts reported for these liabilities approximate their fair value.

The fair values for insurance contracts other than investment contracts are not
required to be disclosed under SFAS No. 107.


NOTE  E - Federal Income Tax

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.  Significant components
of the Company's deferred tax liabilities and assets as of December 31 are as
follows:


                                       2000           1999
                                       ----           ----

Deferred tax liabilities:
   Policy acquisition costs         $5,901,000      $5,700,000
   Net unrealized gain on
      available-for-sale securities  1,546,000             -0-
   Other                             1,928,000       2,877,000
                                    ----------      ----------
     Total deferred tax
      liabilities                   $9,375,000      $8,577,000
Deferred tax assets:
   Benefit reserves                 $3,774,000      $4,841,000
   Net unrealized loss on
     available-for-sale securities         -0-         840,000
   Other                             1,791,000       2,120,000
                                    ----------      ----------
     Total deferred tax assets      $5,565,000      $7,801,000
     Valuation allowance for
       deferred tax assets                 -0-        (684,000)
                                    ----------      ----------
     Net deferred tax assets        $5,565,000      $7,117,000
                                    ----------      ----------
     Net deferred tax liabilities   $3,810,000      $1,460,000
                                    ==========      ==========

A valuation allowance was recorded on the net deferred tax asset related to the
net unrealized loss on available-for-sale securities.  The valuation allowance
was established to record the net asset at its estimated realizable value.

Federal income taxes in the consolidated balance sheets include deferred taxes
and taxes currently payable.

The reconciliation of income tax attributable to operations computed at the
federal statutory tax rate to income tax expense is:

                                2000         1999       1998
                                ----         ----       ----
Statutory federal income tax
   rate                        35.0 %       35.0 %     35.0 %
Graduated tax rate             (1.0)%       (1.0)%     (1.0)%
Small life insurance company
   deduction                     .0 %       (3.9)%     (7.5)%
Dividend exclusion and tax-
   exempt income                (.9)%        (.5)%      (.6)%
Alternative minimum taxes        .0 %         .8 %      1.4 %
Purchase accounting
   differences                   .7 %         .5 %       .6 %
Other, net                      3.3 %         .2 %       .4 %
Consolidating adjustments      (4.2)%        2.5 %      4.5 %
                               ------      -------     ------
   Effective income tax rate   32.9 %       33.6 %     32.8 %

At December 31, 2000 approximately $4,000,000 of the retained earnings of the
Company represents earnings prior to 1984 which accumulated in an account known
as policyholders' surplus, which was not subject to income taxation.  In certain
circumstances, including if distributions are made to stockholders in excess of
approximately $27,500,000, the Company could be subject to additional federal
income tax unrelated to its normal taxable income.  No provision for such income
tax has been made at December 31, 2000.

The Company made income tax payments of $272,364, $343,153 and $286,653 in 2000,
1999 and 1998, respectively.


NOTE  F - Notes Payable

On December 27, 2000, the Company entered into long-term debt with Fifth Third
Bank in the amount of $2,000,000, at an interest rate of 8.5%, due on December
27, 2005.  The funds were used to retire notes payable and to issue a surplus
note to its subsidiary, Investors Heritage.  The note calls for Investors
Heritage to pay, on or before the first day of each quarter, interest at an 8.5%
annual rate, upon prior approval by the Kentucky Department of Insurance.  Such
interest may be paid out of Investors Heritage's earned surplus, operating
income, or paid-in and contributed surplus.

NOTE  G - Employee Benefit Plans

The Company participates in a noncontributory retirement plan which covers
substantially all employees.  Benefits are based on years of service and the
highest consecutive 60 months average earnings within the last 120 months of
credited service.  Benefits are funded based on actuarially-determined amounts.

The following tables provide additional details for the Company on a
consolidated basis.


                                  2000          1999         1998
                                  ----          ----         ----
Change in benefit obligation:
   Benefit obligation at
      beginning of year        $6,792,209    $6,011,932   $5,662,063
   Service cost                   291,466       284,761      251,795
   Interest cost                  525,402       462,102      430,739
   Actuarial loss                 206,174       147,391       72,114
   Benefits paid                 (412,000)     (113,977)    (404,779)
                               ----------    ----------   ----------
   Benefit obligation
      at end of year           $7,403,251    $6,792,209   $6,011,932
                               ----------    ----------   ----------

Change in plan assets:
   Fair value of plan assets
      at beginning of year     $ 5,855,055    $5,087,542   $4,771,638
   Actual return on plan
      assets                       372,886       581,490      468,683
   Employer contribution           312,000       300,000      252,000
   Benefits paid                  (412,000)     (113,977)    (404,779)
                               -----------    ----------   ----------
   Fair value of plan assets
      at end of year           $ 6,127,941    $5,855,055   $5,087,542
                               -----------    ----------   ----------

   Funded status               $(1,275,310)   $ (937,154)  $ (924,390)
   Unrecognized net actuarial
      loss                       1,298,935     1,009,044    1,065,329
   Unrecognized transition
      asset                        (34,143)      (68,287)    (102,430)
   Unrecognized prior service
      credit                      (126,367)     (161,470)    (196,573)
                                ----------    ----------   ----------
   Accrued pension cost         $ (136,885)   $ (157,867)  $ (158,064)
                                ==========    ==========   ==========
Components of net periodic
   benefit cost:
   Service cost                 $  291,466     $ 284,761    $ 251,795
   Interest cost                   525,402       462,102      430,739
   Expected return on plan
      assets                      (525,433)     (457,692)    (468,683)
   Recognized net loss              68,830        79,878      122,318
   Amortization of prior
      service cost                 (35,103)      (35,103)     (35,103)
   Amortization of transition
      asset                        (34,144)      (34,143)     (34,144)
                                ----------     ---------    ---------
   Net periodic benefit cost    $  291,018     $ 299,803    $ 266,922
                                ==========     =========    =========

The discount rate used in determining the actuarial present value of the
projected benefit obligation was 7.5% for 2000 and 1999.  The rate of increase
in future compensation levels was 5% for 2000, 1999 and 1998.  The expected
long-term rate of return on plan assets was 9% in 2000, 1999 and 1998.  Plan
assets represent a deposit administration fund of Investors Heritage.

The Company also sponsors a 401(k) defined contribution plan.  Matching
contributions to the plan expensed for 2000, 1999 and 1998 were $218,041,
$204,112, and $186,000, respectively.


NOTE  H - Stockholders' Equity and Dividend Restrictions

Statutory restrictions limit the amount of dividends which may be paid by
Investors Heritage.  Generally, dividends during any year may not be paid,
without prior regulatory approval, in excess of the lessor of (a) 10 percent of
statutory stockholders' equity as of the preceding December 31, or (b) statutory
net income for the preceding year.  In addition, dividends are limited to the
amount of unassigned surplus reported for statutory purposes, which was
$6,590,617 at December 31, 2000.

The Company's 1999 stock option and stock appreciation rights plan became
effective as of September 16, 1999. The 1999 plan authorizes the Company's board
to grant non-qualified stock options to the Company's and its subsidiaries' key
employees and non-employee directors. The Company authorized for issuance a
total of 250,000 shares of common stock under the 1999 plan and granted options
to purchase 75,000 shares of common stock at $23.00 per share, all of which will
vest on September 24, 2001.

The Company accounts for its stock option grants in accordance with APB Opinion
No. 25, "Accounting for Stock Issued to Employees". No compensation expense has
been recognized for these stock options. The effect of applying the fair value
method of accounting for the Company's stock based awards results in net income
and earnings per share that are not materially different from the amounts
reported.


NOTE  I - Statutory Accounting Practices

Investors Heritage's statutory-basis capital and surplus was $12,504,973 and
$13,072,059 at December 31, 2000 and 1999, respectively.  Statutory-basis net
income (loss) was $(335,535), $1,003,580 and $1,297,550 for 2000, 1999 and 1998,
respectively.

Principle adjustments to statutory amounts to derive GAAP amounts include: a)
costs of acquiring new policies are deferred and amortized; b) benefit reserves
are calculated using more realistic investment, mortality and withdrawal
assumptions; c) deferred income taxes are provided; d) value of business
acquired and goodwill are established for acquired companies and e) accounting
for certain investments in debt securities.

Investors Heritage is domiciled in the Commonwealth of Kentucky and prepares its
statutory-basis financial statements in accordance with accounting practices
prescribed or permitted by the Kentucky Department of Insurance (the
"Department").  Currently, "prescribed" statutory accounting practices are
interspersed throughout state insurance laws and regulations, as well as a
variety of publications of the National Association of Insurance Commissioners
("NAIC").  "Permitted" statutory accounting practices encompass all accounting
practices that are not prescribed; such practices may differ from state to
state, may differ from company to company within a state, and may change in the
future. In 1998, the NAIC adopted codified statutory accounting principles
("Codification") which revised the Accounting Practices and Procedures Manual to
be effective beginning in 2001.  Kentucky has adopted the provisions of the
revised manual, except where state law differs.  The revised manual has changed,
to some extent, prescribed statutory accounting practices and will result in
changes to the accounting practices that Investors Heritage uses to prepare its
statutory-basis financial statements.  The cumulative effect of changes in
accounting principles adopted to conform to the revised Accounting Practices and
Procedures Manual, as modified by the Kentucky Department of Insurance will be
reported as an adjustment to surplus as of January 1, 2001.  Management believes
the effect of these changes will not result in a significant reduction in
Investors Heritage's statutory-basis capital and surplus.


NOTE  J - Segment and Reinsurance Data

SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information", requires a "management approach" (how management internally
evaluates the operating performance of its business units) in the presentation
of business segments. The segment data that follows has been prepared in
accordance with SFAS No. 131.

The Company operates in four segments as shown in the following table.  All
segments include both individual and group insurance.  Identifiable revenues,
expenses and assets are assigned directly to the applicable segment.  Net
investment income and invested assets are generally allocated to the insurance
and the corporate segments in proportion to policy liabilities and stockholders'
equity, respectively.  Certain assets, such as property and equipment and leased
property under capital leases, are assigned to the Corporate segment.  Goodwill
has been allocated to the insurance lines based upon the mix of business of
companies acquired. Results for the parent company, Investors Heritage Printing,
Inc. and Investors Heritage Financial Services Group, Inc. after elimination of
inter-company amounts, are allocated to the Corporate segment.

                                  2000        1999          1998
                                  ----        ----          ----
                                        (000's omitted)

Revenue:
   Preneed & Burial Products   $ 50,529    $ 47,158      $ 41,319
   Traditional & Universal
      Life Products              13,007      13,573        14,146
   Credit Insurance Products &
      Administrative Services       423         345           307
   Corporate & other              1,468       1,696         1,936
                               --------    --------      --------
                               $ 65,427    $ 62,772      $ 57,708
                               ========    ========      ========
Pre-Tax Income from
Operations:
   Preneed & Burial Products   $  1,358    $  3,590      $  2,408
   Traditional & Universal
      Life Products                 667       1,047         1,194
   Credit Insurance Products &
      Administrative Services       113         (43)         (142)
   Corporate & other                106         258           550
                               --------    --------      --------
                               $  2,244    $  4,852      $  4,010
                               ========    ========      ========
Assets:
   Preneed & Burial Products   $216,149    $152,096      $139,993
   Traditional & Universal       69,361      73,117        75,168
Life Products
   Credit Insurance Products &
     Administrative Services     27,413      27,151        21,987
   Corporate & other             53,013      38,851        51,221
                               --------    --------      --------
                               $365,936    $291,215      $288,369
                               ========    ========      ========

Amortization and Depreciation
Expense:
   Preneed & Burial Products   $  5,514    $  4,249      $  4,095
   Traditional & Universal        1,789       2,094         2,265
      Life Products
   Credit Insurance Products &
      Administrative Services        11          33           149
   Corporate & other                440         445           431
                               --------    --------      --------
                               $  7,754    $  6,821      $  6,940
                               ========    ========      ========

The Company ceded 100% of the risks associated with its Credit Life and Accident
insurance written during 2000, 1999 and 1998 through coinsurance agreements with
various companies.  The Company administers the ceded Credit life and accident
insurance for an agreed-upon fee.  During 2000, 1999 and 1998, the Company
received $698,513, $733,682 and $612,081, respectively, of fee income associated
with these reinsurance arrangements which is recognized in the Credit Insurance
Products & Administrative Services and Corporate & other lines of the preceding
table.  Ceded benefit and claim reserves associated with these reinsurance
arrangements  at  December 31,  2000, 1999  and 1998  were  $22,973,197,
$21,988,882  and $17,310,827, respectively.  Additionally, the Company utilizes
yearly renewable term reinsurance to cede life insurance coverage in excess of
its retention limit which has been set at $100,000.   (Refer to footnote B for
information relating to reinsurance associated with its purchase of Franklin
American policy obligations.)

Total premiums ceded amounted to $19,372,000, $19,575,000 and $18,123,000 in
2000, 1999 and 1998, respectively and commissions and expense allowances
received were $8,993,000, $11,449,000 and $10,900,000 in 2000, 1999 and 1998,
respectively.  Unearned premium reserves were reduced by $23,756,000 and
$24,071,000 at December 31, 2000 and 1999, respectively, for credit-related
reinsurance transactions.  Benefit recoveries associated with the Company's
ceded reinsurance contracts were $7,786,000, $3,145,000 and $2,403,000 in 2000,
1999 and 1998, respectively.  The Company remains contingently liable on all
ceded insurance should any reinsurer be unable to meet their obligations.
Assumed reinsurance premiums were $2,375,000, $2,618,000 and $2,787,000 in 2000,
1999 and 1998, respectively.


NOTE K - Contingent Liabilities

The Company is named as a defendant in a number of legal actions arising
primarily from claims made under insurance policies.  Management and its legal
counsel are of the opinion that the settlement of those actions will not have a
material adverse effect on financial position or results of operations.

In most of the states in which the Company is licensed to do business, guaranty
fund assessments may be taken as a credit against premium taxes over a five year
period.  These assessments, brought about by the insolvency of life and health
insurers, are levied at the discretion of the various state guaranty fund
associations to cover association obligations.  It is management's opinion that
the effect of any future assessments would not be material on the financial
position or results of operations of the Company because of the use of premium
tax off-sets.


NOTE L - Quarterly Financial Data (Unaudited)

The following tables show the unaudited quarterly financial data for the
Company.

2000                   1st            2nd           3rd           4th
                     Quarter        Quarter       Quarter       Quarter
                     -------        -------       -------       -------

Premiums           $12,072,877   $11,893,188   $12,786,790   $11,186,544
Total Revenue       16,491,433    16,317,696    17,440,685    15,177,250
Net Income             600,996       535,600       659,299      (289,528)
Earnings Per Share        0.52          0.47          0.57         (0.25)


1999                    1st           2nd           3rd          4th
                      Quarter       Quarter       Quarter      Quarter
                      -------       -------       -------      -------

Premiums            $10,871,846   $11,803,041   $12,871,624   $11,361,131
Total Revenue        14,764,042     15,680,00     16,926,70    15,400,914
Net Income              509,479       485,500       794,252       635,025
Earnings Per Share         0.60          0.57          0.93          0.69



STOCK PRICES
================================================================

OTC BULLETIN BOARD MARKET QUOTATIONS
------------------------------------


2000 Market Price Range

 March           June               Sept.            Dec.
19 - 23      20 - 20 1/2      20 1/4 - 20 1/2   20 1/2 - 20 3/4

2000 Annual Dividend Per Share - $.38
-------------------------------------------------------------------

1999 Market Price Range

 March           June               Sept.            Dec.
18 - 18        18 - 21             21 - 23        23 - 23 1/2

1999 Annual Dividend Per Share - $.38
-------------------------------------------------------------------

The stock of Kentucky Investors is quoted on the OTC Bulletin Board.  The
quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission, and may not represent actual transactions.  The symbol for Kentucky
Investors is KINV.

The 2001 cash dividend to be paid to its stockholders by Kentucky Investors on
April 6, 2001 is $.38 per share.


ANNUAL MEETING
=====================================================================

The 2001 meeting of shareholders of Kentucky Investors, Inc. is scheduled for 11
a.m. on Thursday, May 10, 2001 at the company auditorium, Second and Shelby
Streets, Frankfort, Kentucky.


FORM 10-K
======================================================================

A copy of the Form 10-K Annual Report to the Securities and Exchange Commission
for the Company can be obtained upon request to the Secretary.


TRANSFER AGENT
=======================================================================

Investors Heritage Life Insurance Company
Stock Transfer Department
P.O. Box 717
Frankfort, Kentucky 40602-0717

(502) 223-2364, ext. 1009