N-30D 1 n-30d.txt N-30D -------------------------------------------------------------------------------- THE FRANKLIN LIFE INSURANCE COMPANY FRANKLIN LIFE VARIABLE ANNUITY FUND JUNE 30, 2000 SEMI-ANNUAL REPORT (UNAUDITED) -------------------------------------------------------------------------------- PRINCIPAL OFFICE LOCATED AT: #1 Franklin Square Springfield, Illinois 62713 ================================================================================ The Semi-Annual Report of The Franklin Life Variable Annuity Fund is prepared and provided by The Franklin Life Insurance Company. -------------------------------------------------------------------------------- This Semi-Annual Report is not to be construed as an offering for sale of any Franklin Life contract. No offering is made except in conjunction with a prospectus which must precede or accompany this report. THE FRANKLIN LIFE INSURANCE COMPANY FRANKLIN LIFE VARIABLE ANNUITY FUND STATEMENT OF NET ASSETS JUNE 30, 2000 (UNAUDITED)
AMERICAN GENERAL SERIES PORTFOLIO COMPANY ------------------------------------------------------------- STOCK INDEX STOCK INDEX MONEY MARKET FUND FUND FUND SUBACCOUNT A SUBACCOUNT B SUBACCOUNT C ------------------------------------------------------------- ASSETS Investments in Funds at fair value (cost: see below) $ 11,984,669 $ 1,569,675 $ 1,342,711 Due from (to) General Account (170) (385) (367) ------------------------------------------------------------- NET ASSETS $ 11,984,499 $ 1,569,290 $ 1,342,344 ============================================================= Unit value $ 132.19 $ 154.02 $ 26.01 ============================================================= Units outstanding 90,662 10,189 51,611 ============================================================= Cost of investments $ 11,172,028 $ 1,465,278 $ 1,342,711 =============================================================
SEE NOTES TO FINANCIAL STATEMENTS 1 THE FRANKLIN LIFE INSURANCE COMPANY FRANKLIN LIFE VARIABLE ANNUITY FUND STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
AMERICAN GENERAL SERIES PORTFOLIO COMPANY ------------------------------------------------------------ STOCK INDEX STOCK INDEX MONEY MARKET FUND FUND FUND SUBACCOUNT A SUBACCOUNT B SUBACCOUNT C ------------------------------------------------------------ NET INVESTMENT INCOME (EXPENSE) Income Dividends and interest $ 55,046 $ 6,966 $ 37,566 Capital gains distributions - - - Expenses Mortality and expense risk charge 63,271 8,477 6,255 ------------------------------------------------------------ Net investment income (expense) (8,225) (1,511) 31,311 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) 62,065 6,655 - Net unrealized appreciation (depreciation) Beginning of period 924,575 114,346 - End of period 812,641 104,397 - ------------------------------------------------------------ Net change in unrealized appreciation (depreciation) during the period (111,934) (9,949) - ------------------------------------------------------------ Net realized and unrealized gain (loss) on investments (49,869) (3,294) - ------------------------------------------------------------ Net increase (decrease) in net assets from operations $ (58,094) $ (4,805) $ 31,311 ============================================================
SEE NOTES TO FINANCIAL STATEMENTS 2 FRANKLIN LIFE VARIABLE ANNUITY FUND STATEMENT OF CHANGES IN NET ASSETS
AMERICAN GENERAL SERIES PORTFOLIO COMPANY --------------------------------------------------------------- STOCK INDEX STOCK INDEX MONEY MARKET FUND FUND FUND SUBACCOUNT A SUBACCOUNT B SUBACCOUNT C --------------------------------------------------------------- FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED) CHANGE IN NET ASSETS FROM OPERATIONS: Net investment income (expense) $ (8,225) $ (1,511) $ 31,311 Net realized gain (loss) on investments 62,065 6,655 - Net change in unrealized appreciation (depreciation) on investments (111,934) (9,949) - --------------------------------------------------------------- Net increase (decrease) in net assets from operations (58,094) (4,805) 31,311 FROM CONTRACT RELATED TRANSACTIONS: Net contract purchase payments 30,519 4,972 5,833 Withdrawals (1,203,446) (60,664) (76,549) Transfers from (to) fixed account 18,007 - - --------------------------------------------------------------- Net increase (decrease) in net assets from contract related transactions (1,154,920) (55,692) (70,716) --------------------------------------------------------------- Net increase (decrease) in net assets (1,213,014) (60,497) (39,405) Net assets, beginning of period 13,197,513 1,629,787 1,381,749 --------------------------------------------------------------- Net assets, end of period $ 11,984,499 $ 1,569,290 $ 1,342,344 =============================================================== FOR THE YEAR ENDED DECEMBER 31, 1999 CHANGE IN NET ASSETS FROM OPERATIONS: Net investment income (expense) $ 62,250 $ 4,572 $ 46,491 Net realized gain (loss) on investments 7,637,684 1,213,110 - Net change in unrealized appreciation (depreciation) on investments (6,746,099) (1,151,564) - --------------------------------------------------------------- Net increase (decrease) in net assets from operations 953,835 66,118 46,491 FROM CONTRACT RELATED TRANSACTIONS: Net contract purchase payments 234,854 16,346 15,560 Withdrawals (1,590,062) (489,383) (226,081) Transfers from (to) fixed account 57,386 - - --------------------------------------------------------------- Net increase (decrease) in net assets from contract related transactions (1,297,822) (473,037) (210,521) --------------------------------------------------------------- Net increase (decrease) in net assets (343,987) (406,919) (164,030) Net assets, beginning of year 13,541,500 2,036,706 1,545,779 --------------------------------------------------------------- Net assets, end of year $ 13,197,513 $ 1,629,787 $ 1,381,749 ===============================================================
SEE NOTES TO FINANCIAL STATEMENTS 3 THE FRANKLIN LIFE INSURANCE COMPANY FRANKLIN LIFE VARIABLE ANNUITY FUND NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000 (UNAUDITED) 1. NATURE OF OPERATIONS AND REORGANIZATION Franklin Life Variable Annuity Fund (the Fund or the Ongoing Fund) is a separate account of The Franklin Life Insurance Company (Franklin) under Illinois insurance law and a unit investment trust under the Investment Company Act of 1940. The Fund supports the operations of Franklin's variable annuity contracts (the Contracts). New contracts are no longer being issued. Prior to April 30, 1999, Franklin maintained Franklin Life Variable Annuity Funds A and B, and Franklin Life Money Market Variable Annuity Fund C (the Former Funds) which were originally established as open-end diversified management investment companies under the Investment Company Act of 1940. On April 30, 1999, a reorganization was effected under which Franklin Life Variable Annuity Fund A was renamed Franklin Life Variable Annuity Fund, converted into a unit investment trust, and consolidated with Franklin Life Variable Annuity Fund B and Franklin Life Money Market Variable Annuity Fund C. The assets of the Former Funds were transferred to Subaccounts A, B, and C, respectively, of the Ongoing Fund. The Ongoing Fund consists of three subaccounts invested in units of beneficial interest (shares) of two portfolios of American General Series Portfolio Company (AGSPC), an affiliated open-end management investment company. Subaccounts A and B invest in the AGSPC Stock Index Fund portfolio and Subaccount C invests in the AGSPC Money Market Fund portfolio. The Statement of Operations and the Statement of Changes in Net Assets for the year ended December 31, 1999 for the new Subaccounts A, B, and C reflect the consolidated activity of the Former Funds through April 30, 1999, and Subaccounts A, B and C of the Ongoing Fund from May 1, 1999 to December 31, 1999. Franklin Financial Services Corporation, a wholly owned subsidiary of Franklin, acts as principal underwriter for the Contracts, as defined in the Investment Company Act of 1940. The assets of the Fund are the property of Franklin; however, the portion of the Fund's assets applicable to the Contracts is not chargeable with liabilities arising out of any other business Franklin may conduct. 2. SIGNIFICANT ACCOUNTING POLICIES Investments: Investments are carried at fair value based on the net asset values of the respective AGSPC portfolios. Investment transactions are recorded on the trade date. Dividends are recorded as received. Realized gains and losses on sales of investments are determined based on the specific identification method. Taxation: Operations of the Fund form a part of, and are taxed with those of, Franklin, which is taxed as a life insurance company under the Internal Revenue Code. Under current law, no federal income taxes are payable with respect to the Fund. Reserves: Annuity reserves on Contracts, all involving life contingencies, are calculated using the Progressive Annuity Table with an assumed investment rate of 3-1/2%. At June 30, 2000, net assets includes $16,630 for annuity reserves. 3. CONTRACT CHARGES In conjunction with the reorganization, Franklin waived all sales loads, surrender or deferred sales charges and administrative fees specified in each Contract beginning October 1998. AGSPC deducts a charge for investment management and other expenses for the Stock Index Fund portfolio and the Money Market Fund portfolio of 0.35% and 0.50%, respectively. In addition, Franklin deducts a charge from the assets of the Fund to cover mortality and expense risks related to the operations of the Fund at an effective annual rate of 1.00% for Subaccounts A and B and 0.94% for Subaccount C. Total annual Fund expenses are capped at 1.44%. Total charges paid by the Fund to Franklin were $78,003 for the period ended June 30, 2000 and $206,577 for the year ended December 31, 1999. 4 THE FRANKLIN LIFE INSURANCE COMPANY FRANKLIN LIFE VARIABLE ANNUITY FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) 4. SUMMARY OF UNIT VALUES AND CHANGES IN OUTSTANDING UNITS
AMERICAN GENERAL SERIES PORTFOLIO COMPANY ----------------------------------------------------------------------- STOCK INDEX STOCK INDEX MONEY MARKET FUND FUND FUND SUBACCOUNT A SUBACCOUNT B SUBACCOUNT C ----------------------------------------------------------------------- FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED) Unit value, beginning of period $132.58 $154.47 $25.41 ======================================================================= Unit value, end of period $132.19 $154.02 $26.01 ======================================================================= Number of units outstanding, beginning of period 99,547 10,551 54,370 Net contract purchase payments 238 33 230 Withdrawals (9,265) (395) (2,989) Transfers from (to) fixed account 142 - - ----------------------------------------------------------------------- Number of units outstanding, end of period 90,662 10,189 51,611 ======================================================================= FOR THE YEAR ENDED DECEMBER 31, 1999 Unit value, beginning of year $123.03 $147.18 $24.59 ======================================================================= Unit value, end of year $132.58 $154.47 $25.41 ======================================================================= Number of units outstanding, beginning of year 109,896 13,839 62,851 Net contract purchase payments 1,967 110 601 Withdrawals (12,508) (3,398) (9,082) Transfers from (to) fixed account 192 - - ----------------------------------------------------------------------- Number of units outstanding, end of year 99,547 10,551 54,370 =======================================================================
5. REMUNERATION OF MANAGEMENT The Fund incurs no liability for payment to directors, members of advisory boards, officers or any other person who might provide a service for the Fund, except as described in Note 3. 5