-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, a3LpzsG86AlXc/eRRcw22HgTD6kcFvPVNmOG5ZOTIQIhWr900BgYmmOLlwHattYc KurVsnpO+LPJscJJMSp9ig== 0000912057-95-007483.txt : 19950908 0000912057-95-007483.hdr.sgml : 19950908 ACCESSION NUMBER: 0000912057-95-007483 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950907 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FRANKLIN LIFE VARIABLE ANNUITY FUND A CENTRAL INDEX KEY: 0000038748 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 370281650 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-01990 FILM NUMBER: 95570648 BUSINESS ADDRESS: STREET 1: FRANKLIN SQ CITY: SPRINGFIELD STATE: IL ZIP: 62713 BUSINESS PHONE: 2175282011 MAIL ADDRESS: STREET 1: FRANKLIN SQUARE CITY: SPRINGFIELD STATE: IL ZIP: 62713-0001 N-30D 1 N-30D Dear Contract Owner: We are pleased to provide this 1995 semiannual report which shows the status of and balances in your Franklin Life Variable Annuity Fund A contract.
INVESTMENT POSITION AS OF JUNE 30, 1995 ---------------------------------------- Variable Unit Value $60.09 ------ Fixed Portion Interest Rate on Amounts Contributed During Most Recent Contract Year. Current Crediting Rate Not Guaranteed For Future Years. 6.50%* ------ *LESS A CONTRACT EXPENSE CHARGE
The economy closed out strong in 1994, with inflation and the potential for higher interest rates being strong continuing concerns. The Federal Reserve did raise rates in February, but signs of a slowing economy soon followed. The stock market moved up strong in the first half of 1995 and intermediate and long-term interest rates declined. Short-term interest rates were reduced in July to cushion an economy that was showing signs of slowing too fast.
VARIABLE PORTION: JUNE 30, 1995 DECEMBER 31, 1994 JUNE 30, 1994 ----------------- ------------- ----------------- ------------- Net asset value per unit $60.09 $53.99 $51.47 ------ ------ ------- Percentage Change From: June 30, 1994 +16.7% ------ December 31, 1994 +11.3% ------
The net asset value is based on the market price of the investments held by the Fund. A listing of the investments held at June 30, 1995 appears on page 3. Fixed Portion: -------------- As noted above, if your contract anniversary was in the first half of 1995, additional units in the fixed rate portion of your annuity arising from contributions credited during the contract year ending in 1995 were based on a 6.50% interest rate, less a contract expense charge. If your contract anniversary is in the second half of 1995, the interest rate for the fixed portion of your annuity applicable to contributions made during the contract year ending in 1995 is anticipated to be 6.50%, less a contract expense charge. Amounts selected for investment in the fixed rather than the variable portion of your annuity do not participate in the investment experience of the Fund. Contract units resulting from interest added or contributions made prior to the contract year ending in 1995 continue to be credited with additional interest based on investment yields which reflect the years during which such units were purchased. Crediting rates are not guaranteed for future years. The U. S. economy slowed in the first quarter of 1995, with Gross Domestic Product up 2.7%, after a strong fourth quarter in 1994 of +5.1% and +4.1% for all of 1994. The Federal Reserve increased the Fed Funds rate again in February to 6.00% as growth and inflation worries continued to be a concern. With the slower first quarter growth reported and the second quarter projections being even lower, the Fed reduced rates at its July meeting to 5.75%. Corporate profits continued to show good growth and the stock market responded in the first half of 1995 with the best six months performance since late 1990 and early 1991. A stock market correction continues to be anticipated, but continuing growth in the economy, inflation staying under control and expanding corporate profits should support the current market level. We have been holding a higher than average cash level in anticipation of a market correction. We will reduce the cash position somewhat as opportunities occur. In today's fast-paced world, products, markets, client's needs, and individual risk tolerance all change. In this environment, you may want to take some extra time and review how well this product continues to meet your retirement investment objectives. A Franklin Life representative would be happy to review your financial situation with you and suggest the most appropriate mix of products to provide financial security consistent with your risk tolerance. Cordially yours, /s/ HOWARD C. HUMPHREY ------------------------------------------ Howard C. Humphrey Chairman of the Board and Chief Executive Officer 1 FRANKLIN LIFE VARIABLE ANNUITY FUND A STATEMENT OF NET ASSETS JUNE 30, 1995
Assets Investments-at market value (cost-$8,972,625): Common stocks $6,824,978 United States Treasury Bill 2,975,033 ----------- 9,800,011 Cash on deposit 32,300 Dividends and interest receivable 31,813 Miscellaneous receivables 271 ---------- Total Assets 9,864,395 Liability - Due to The Franklin Life Insurance Company 14,040 ---------- Contract Owners' Equity Annuity reserves $ 15,047 Value of 163,670 Accumulation Units outstanding, equivalent to $60.092178 per unit 9,835,308 $9,850,355 ------------ ---------- STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1995 Investment Income: Dividends $ 87,778 Interest 86,010 ------------ Total Income $ 173,788 Expenses: Mortality and expense charges $ 47,866 Investment management services 20,925 ----------- Total Expenses 68,791 ----------- Net Investment Income 104,997 Realized and Unrealized Gain (Loss) on Investments: Net realized gain from investment transactions (excluding short-term investments): Proceeds from sales $ 172,225 Cost of investments sold (identified cost method) 158,270 ------------ Net Realized Gain 13,955 Net unrealized appreciation (depreciation) of investments: Beginning of period $ (77,823) End of period 827,387 ------------ Net Unrealized Appreciation 905,210 ----------- Net Gain On Investments 919,165 ----------- Net Increase In Contract Owners' Equity Resulting From Operations $1,024,162 ----------- ----------- STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY SIX MONTHS YEAR ENDED ENDED JUNE 30, DECEMBER 31, 1995 1994 ----------------------------------- Net investment income $104,997 $116,171 Net realized gain from investment transactions 13,955 708,267 Net unrealized appreciation (depreciation) of investments 905,210 (749,740) ----------------------------------- Net Increase In Contract Owners' Equity Resulting From Operations 1,024,162 74,698 Net contract purchase payments 196,541 521,549 Reimbursement for contract guarantees 296 3,436 Annuity payments (1,548) (3,002) Withdrawal of funds on terminated contracts (696,553) (1,936,673) ----------------------------------- Net Increase (Decrease) in Contract Owners' Equity 522,898 (1,339,992) Contract Owners' Equity at Beginning of Period 9,327,457 10,667,449 ----------------------------------- Contract Owners' Equity At End of Period $9,850,355 $9,327,457 ----------------------------------- -----------------------------------
See notes to financial statement 2 FRANKLIN LIFE VARIABLE ANNUITY FUND A PORTFOLIO OF INVESTMENTS JUNE 30, 1995
NUMBER OF MARKET SHARES VALUE - ----------- ------------- COMMON STOCKS (69.3%) BANKING (2.0%) 4,175 Student Loan Marketing Association $195,703 BEVERAGES (1.9%) 3,200 Anheuser-Busch Companies, Inc. 182,000 BUSINESS SERVICES (1.3%) 2,800 Equifax Inc. 93,450 2,200 Wheelabrator Technologies, Inc. 33,825 ------------ 127,275 COMPUTER SERVICES (3.0%) 8,100 Ceridian Corporation* 298,688 COSMETICS & HOUSEHOLD PRODUCTS (3.2%) 3,200 Dial Corp. 79,200 5,200 Gillette Company 232,050 ------------ 311,250 DRUGS & HEALTH CARE (14.2%) 9,600 Beverly Enterprises, Inc.* 118,800 7,900 Eckerd Corporation* 252,800 3,000 Eli Lilly and Company 235,500 5,300 Merck & Company, Inc. 259,700 4,300 St. Jude Medical, Inc. 215,537 4,600 Schering-Plough Corporation 202,975 3,000 Stryker Corporation 115,125 ------------ 1,400,437 ELECTRONICS & INSTRUMENTATIONS (2.2%) 2,900 Hewlett-Packard Company 216,050 FOOD PROCESSING (2.9%) 5,300 ConAgra, Inc. 184,837 4,500 Ralcorp Holdings, Inc.* 102,938 ------------ 287,775 FOOD - RETAIL (1.7%) 5,700 Albertson's, Inc. 169,575 HOUSEHOLD PRODUCTS (.9%) 3,700 Newell Co. 90,650 MACHINERY - INDUSTRIAL & CONSTRUCTION (.8%) 1,500 Fluor Corporation 78,000 MINING & MINERALS (.8%) 2,000 Cleveland-Cliffs Inc. 77,000 OFFICE EQUIPMENT & SERVICES (7.3%) 5,350 Digital Equipment Corporation* 218,013 2,400 International Business Machines Corporation 230,400 5,900 Policy Management Systems Corporation* 271,400 ------------ 719,813 OIL SERVICES & DRILLING (1.1%) 3,100 Halliburton Company 110,825 OILS & OIL RELATED PRODUCTS (8.9%) 2,700 Amoco Corporation $179,887 1,300 Atlantic Richfield Company 142,675 2,500 British Petroleum Company, p.1.c. 214,062 3,700 Diamond Shamrock, Inc. 95,275 2,600 Kerr-McGee Corporation 139,425 3,700 Unocal Corporation 102,213 ------------ 873,537 PHOTOGRAPHY (2.5%) 4,100 Eastman Kodak Company 248,563 RESTAURANTS/LODGING (1.3%) 3,400 Marriott International, Inc. 121,975 RETAIL-SPECIALTY (1.8%) 1,800 NIKE, Inc. 151,200 4,600 Payless Cashways, Inc.* 29,325 ------------ 180,525 TECHNOLOGY (1.2%) 1,800 Millipore Corporation 121,500 UTILITIES-ELECRTIC (8.7%) 6,500 American Electric Power Company, Inc. 228,312 6,900 Baltimore Gas and Electric Company 172,500 9,100 DPL Inc. 201,337 4,500 Entergy Corporation 108,563 4,200 Texas Utilities Company 144,375 ------------ 855,087 UTILITIES - TELEPHONE (1.6%) 2,500 BellSouth Corporation 158,750 ------------ TOTAL COMMON STOCKS (COST-5,997,592) 6,824,978 PRINCIPAL U.S. TREASURY BILL (30.2%) AMOUNT - --------- $3,000,000 United States Treasury Bill due 8/3/95 (cost-$2,975,033) 2,975,033 ------------ TOTAL INVESTMENTS (99.5%) (COST - $8,972,625) 9,800,011 ------------ CASH AND RECEIVABLES, LESS LIABILITY (.5%) 50,344 ------------ TOTAL CONTRACT OWNERS' EQUITY (100.0%) $9,850,355 ------------ *Non-income producing investment during the year ended June 30, 1995
See notes to financial statements - ------------------------------------------------------------------------------ THIS REPORT HAS BEEN PREPARED FOR THE INFORMATION OF FRANKLIN LIFE VARIABLE ANNUITY FUND A CONTRACT OWNERS. IT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS. 3 NOTES TO FINANCIAL STATEMENTS NOTE A-SIGNIFICANT ACCOUNTING POLICIES Franklin Life Variable Annuity Fund A (Fund) is a segregated investment account of The Franklin Life Insurance Company (The Franklin) and is registered as an open-end diversified management investment company under the Investment Company Act of 1940, as amended. Significant accounting policies of the Fund are as follows: VALUATION OF INVESTMENTS: Investments in common stocks listed on national stock exchanges are valued at closing sales prices. Unlisted common stocks are valued at the most recent bid prices, as supplied by broker-dealers. Short-term notes are valued at cost, which approximates market. INVESTMENT TRANSACTIONS AND RELATED INVESTMENT INCOME: Investment transactions are accounted for on the trade date. Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. FEDERAL INCOME TAXES: Operations of the Fund will form a part of, and be taxed with those of, The 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. ANNUITY RESERVES: Reserves on contracts, all involving life contingencies, are calculated using the Progressive Annuity Table with an assumed investment rate of 3-1/2%. NOTE B-INVESTMENTS Exclusive of short-term investments, the cost of investments purchased and the proceeds from investments sold during the six months ended June 30, 1995 aggregated $249,319 and $172,225, respectively. NOTE C-EXPENSES Amounts are paid to The Franklin for investment management services at the rate of .0012% of the current value of the Fund per day (.438% on an annual basis) and for mortality and expense risk assurances at the rate of .002745% of the current value of the Fund per day (1.002% on an annual basis). NOTE D-SALES AND ADMINISTRATIVE CHARGES During the six months ended June 30, 1995, sales and administrative charges aggregating $19,096 were deducted from the proceeds of the sales of accumulation units and retained by Franklin Financial Services Corporation and The Franklin. Franklin Financial Services Corporation is a wholly-owned subsidiary of The Franklin and principal underwriter for the Fund. NOTE E-SUMMARY OF CHANGES IN ACCUMULATION UNITS
SIX MONTHS ENDED YEAR ENDED JUNE 30, 1995 DECEMBER 31, 1994 ----------------------------------------------------------- UNITS AMOUNT UNITS AMOUNT ----- ------ ----- ------ Balance at beginning of period 172,507 $9,313,322 198,763 $10,652,285 Purchases 3,478 196,541 9,726 521,549 Net investment income* - 104,745 - 113,239 Net realized gain from investment transactions* - 13,922 - 690,391 Net unrealized appreciation (depreciation) of investments* - 903,036 - (730,818) Withdrawals (12,315) (696,553) (35,982) (1,936,673) Reimbursement for contract guarantees* - 295 - 3,349 ----------------------------------------------------------- Balance at End of period 163,670 $9,835,308 172,507 $9,313,322 ----------------------------------------------------------- ----------------------------------------------------------- *Excludes portion allocated to annuity reserves on a pro rata basis.
NOTE F-REMUNERATION OF MANAGEMENT No person receives any remuneration from the Fund because The Franklin pays the fees of members of the Board of Managers and officers and employees of the Fund pursuant to expense assurances. Certain members of the Board of Managers and officers of the Fund are also directors, officers or employees of The Franklin or Franklin Financial Services Corporation. Amounts paid by the Fund to The Franklin and to Franklin Financial Services Corporation are disclosed in this report. NOTE G-NET UNREALIZED APPRECIATION/DEPRECIATION Unrealized Appreciation/Depreciation on investment securities at June 30, 1995 and December 31, 1994 were as follows:
JUNE 30, DECEMBER 31, 1995 1994 ----------------------------------- Gross unrealized appreciation $1,034,707 $351,869 Gross unrealized depreciation 207,320 429,692 ----------------------------------- Net $827,387 $(77,823) ----------------------------------- -----------------------------------
4 SUPPLEMENTARY INFORMATION PER-UNIT INCOME AND CHANGES IN ACCUMULATION UNIT VALUE (SELECTED DATA AND RATIOS FOR AN ACCUMULATION UNIT OUTSTANDING THROUGHOUT EACH PERIOD)
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31, 1995 1994 1993 1992 1991 ------------------------------------------------------------------------- Investment Income $1.050 $1.408 $1.231 $1.064 $1.194 Expenses .416 .773 .773 .723 .654 ------------------------------------------------------------------------- Net investment income .634 .635 .458 .341 .540 Net realized and unrealized gain (loss) on securities 5.470 (.240) .112 .770 14.238 ------------------------------------------------------------------------- Net increase in accumulation unit value 6.104 .395 .570 1.111 14.778 ------------------------------------------------------------------------- Accumulation unit value: Beginning of period 53.988 53.593 53.023 51.912 37.134 ------------------------------------------------------------------------- End of Period $60.092 $53.988 $53.593 $53.023 $51.912 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Ratio of expenses to average net assets 1.44%* 1.44% 1.44% 1.44% 1.44% Ratio of net investment income to average net assets 2.20%* 1.18% .85% .68% 1.19% Portfolio turnover rate 2.70% 88.99% 68.62% 59.84% 28.47% Number of accumulation units outstanding at end of period 163,670 172,507 198,763 217,948 229,368 - ---------------------------------------------------------------------------------------------------------- *Annualized
MATTERS SUBMITTED TO VOTE OF CONTRACT OWNERS An annual meeting of Contract Owners of the Fund was held on April 17, 1995. At the meeting, the individuals named below were elected as Members of the Board of Managers of the Fund, a new Investment Management Agreement between The Franklin and the Fund was approved and Ernst & Young LLP was ratified as the Fund's independent accountants for the ensuing fiscal year. The number of votes cast for, against or withheld, as well as the number of abstentions and broker non-votes, if applicable, as to each matter is set forth in the table below.
MATTER VOTES: ------------- -------------------------------------- FOR AGAINST ABSTAIN --- ------- ------- Election of Robert G. Spencer as Member, Board of Managers 84,620 3,192 0 Election of Dr. Robert C. Spencer as Member, Board of Managers 84,908 2,904 0 Election of James W. Voth as Member, Board of Managers 84,858 2,954 0 Election of Clifford L. Greenwalt as Member, Board of Managers 84,858 2,954 0 Approval of new Investment Management Agreement between the Fund and The Franklin 80,996 2,493 4,323 Ratification of Selection of Ernst & Young LLP as independent accountants 82,781 1,137 3,894
5 CHANGE OF INDEPENDENT AUDITORS The Board of Managers has selected the firm of Ernst & Young LLP, Chicago, Illinois, as the independent auditors for the Fund to serve for 1995. That firm has also been selected as the independent auditors for The Franklin and its parents and subsidiaries, for two other separate accounts of The Franklin, and for two separate accounts of The American Franklin Life Insurance Company, a wholly-owned subsidiary of The Franklin. Ernst & Young LLP has no direct or indirect interest in the Fund or in The Franklin or its subsidiaries. On February 22, 1995, the Fund terminated the engagement of Coopers & Lybrand L.L.P. as the independent auditors for the Fund for periods beginning on or after January 1, 1995. Ernst & Young LLP has been selected to audit the financial statements of The Franklin and the Board of Managers decided to retain Ernst & Young LLP as a matter of efficiency. During the audits of the Fund's financial statements for the years ended December 31, 1993 and 1994, there was no disagreement between the Fund and Coopers & Lybrand L.L.P. on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure which disagreement, if not resolved to the satisfaction of Coopers & Lybrand L.L.P., would have caused Coopers & Lybrand L.L.P. to make reference in connection with its reports to the subject matter of the disagreement. 6 -----END PRIVACY-ENHANCED MESSAGE-----