-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, N6s9Uq3RJca/FJReDeOVAbFemvbEes8kyd/AvetfJA1Ol+kQP7A/+tjIisPnJkI+ TokG/Euz+EtxJYgfffF8xw== 0000912057-97-008093.txt : 19970310 0000912057-97-008093.hdr.sgml : 19970310 ACCESSION NUMBER: 0000912057-97-008093 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970307 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: 97552357 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 1996 annual report which shows the status of and balances in your Franklin Life Variable Annuity Fund A contract. INVESTMENT POSITION AS OF DECEMBER 31, 1996 ------------------------------------------- Accumulation Unit Value $81.48 ------ ------ Fixed Portion Interest Rate on Amounts Contributed During Most Recent Contract Year. Current Crediting Rate Not Guaranteed For Future Years. 6.25%* -------- -------- *LESS A CONTRACT EXPENSE CHARGE The U.S. economy is showing somewhat stronger growth in 1996, with the Gross Domestic Product (GDP) expected to be above the 2.2% in 1995. The unemployment rate was 5.3% in December of 1996, with unemployment ranging from a high of 5.8% in January to a low of 5.1% in August. The Federal Reserve Board lowered the Federal Funds rate in January of 1996 by 25 basis points to 5.25% and then held the rate constant for the balance of the year. The stock market had another good year, with the Standard & Poor's Index up 20.26% in 1996.
VARIABLE PORTION: DECEMBER 31, 1996 JUNE 30, 1996 DECEMBER 31, 1995 ----------------- ----------------- ------------- ----------------- Accumulation Unit Value $81.48 $74.36 $69.20 -------- ------ ------ -------- ------ ------ Percentage Change From: December 31,1995 +17.75% -------- -------- June 30, 1996 +9.58% -------- --------
The accumulation unit value is based on the market price of the investments held by the Fund. A listing of the investments held at December 31, 1996 appears on page 3. FIXED PORTION: As noted above, additional units in the fixed rate portion of your annuity arising from contributions credited during the contract year ending in 1996 were based on a 6.25% interest rate, less a contract expense charge. If your contract anniversary is in the first half of 1997, the interest rate for the fixed portion of your annuity applicable to contributions made during the contract year ending in 1997 is anticipated to be 6.25%, 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 during or 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 economy expanded at a stronger pace in the first three quarters of 1996, as indicated by the Gross Domestic Product, up 3.0%, compared to the annual 1995 increase of 2.2%. Inflation continues to be under control and corporate profits continue to grow at a good rate. The unemployment rate continues at a good level, but it could be an indication of higher inflation down the road. The Federal Reserve continues to hold the Federal Funds rate at 5.25%. Short term interest rates have held steady during 1996, while longer term rates have increased slightly since December of 1995. The strong flow of new money into the equity mutual funds, good corporate profits and inflation remaining under control will be needed in 1997 to allow the stock market to continue its upward momentum. 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, Robert J. Gibbons President and Chief Executive Officer FRANKLIN LIFE VARIABLE ANNUITY FUND A STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1996 Assets Investments-at fair value (cost-$7,784,013): Common stocks $9,595,990 Short-term notes 1,772,093 ---------- 11,368,083 Cash on deposit 43,985 Dividends and interest receivable 24,459 ---------- Total Assets 11,436,527 Liability - Due to The Franklin Life Insurance Company 15,311 Contract Owners' Equity Annuity reserves $ 17,875 Value of 139,945 Accumulation Units outstanding, equivalent to $81.48471104 per unit 11,403,341 $11,421,216 ------------ ----------- ------------ -----------
STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1996 Investment Income Dividends $166,120 Interest 75,477 ------------ Total Income $ 241,597 Expenses Mortality and expense charges $108,769 Investment management services 47,550 ------------ Total Expenses 156,319 ----------- Net Investment Income 85,278 Realized and Unrealized Gain on Investments Net realized gain from investment transactions Proceeds from sales $1,734,452 Cost of investments sold (identified cost method 1,464,659 ------------ Net Realized Gain 269,793 Net unrealized appreciation of investments Beginning of year $2,177,308 End of year 3,584,070 ------------ Net Unrealized Appreciation 1,406,762 ----------- Net Gain On Investments 1,676,555 ----------- Net Increase In Contract Owners' Equity Resulting From Operations $1,761,833 ----------- -----------
STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY
YEAR ENDED DECEMBER 31 1996 1995 --------------------------- Net investment income $ 85,278 $ 172,356 Net realized gain from investment transactions 269,793 16,856 Net unrealized appreciation of investments 1,406,762 2,255,131 --------------------------- Net Increase In Contract Owners' Equity Resulting From Operations 1,761,833 2,444,343 Net contract purchase payments 475,974 354,276 Reimbursement for contract guarantees 3,178 407 Annuity payments (3,878) (3,262) Withdrawals (1,244,804) (1,694,308) --------------------------- Net Increase in Contract Owners' Equity 992,303 1,101,456 Contract Owners' Equity at Beginning of Year 10,428,913 9,327,457 --------------------------- Contract Owners' Equity At End of Year $11,421,216 $10,428,913 ---------------------------
See notes to financial statements 2 FRANKLIN LIFE VARIABLE ANNUITY FUND A PORTFOLIO OF INVESTMENTS DECEMBER 31, 1996 NUMBER OF FAIR SHARES VALUE - ------ --------- COMMON STOCKS (84.02%) BANKING (3.0%) 3,675 Student Loan Marketing Association $ 342,234 BEVERAGES (1.13%) 4,400 PepsiCo, Incorporated 128,700 BUSINESS SERVICES (1.5%) 5,600 Equifax Inc. 171,500 CHEMICALS (1.85%) 2,700 Dow Chemical 211,612 COMPUTER SERVICES (2.87%) 8,100 Ceridian Corporation* 328,050 COSMETICS & HOUSEHOLD PRODUCTS (2.72%) 4,000 Gillette Company 311,000 DRUGS & HEALTH CARE (17.08%) 4,791 Eckerd Corporation* 153,312 4,000 Eli Lilly and Company 292,000 4,300 Merck & Company, Inc. 342,387 2,100 Pfizer, Incorporated 174,300 6,450 St. Jude Medical, Inc. 273,319 3,300 Schering-Plough Corporation 213,675 6,000 Stryker Corporation 179,250 8,000 Walgreen Company 322,000 --------- 1,950,243 ELECTRONICS & INSTRUMENTATIONS (2.55%) 5,800 Hewlett-Packard Company 291,450 FOOD PROCESSING (2.31%) 5,300 ConAgra, Inc. 263,675 FOOD - RETAIL (1.78%) 5,700 Albertson's, Inc. 203,063 FOOD-WHOLESALE (1.91%) 6,700 Sysco Corporation 218,587 HOUSEHOLD PRODUCTS (1.02%) 3,700 Newell Co. 116,550 MACHINERY - INDUSTRIAL & CONSTRUCTION (1.81%) 1,500 Fluor Corporation 94,125 3,000 Trinity Industry 112,500 --------- 206,625 OFFICE EQUIPMENT & SERVICES (6.18%) 2,000 Compaq Computers Corporation* 148,750 5,350 Digital Equipment Corporation* 193,938 2,400 International Business Machines Corporation 363,600 --------- 706,288 OIL SERVICES & DRILLING (1.64%) 3,100 Halliburton Company 186,775 OILS & OIL RELATED PRODUCTS (8.15%) 2,700 Amoco Corporation $ 217,688 1,300 Atlantic Richfield Company 172,250 2,500 British Petroleum Company, p.l.c. 353,437 2,600 Kerr-McGee Corporation 187,200 --------- 930,575 PACKAGING - CONTAINERS (2.6%) 8,400 Avery-Dennison Corporation 297,150 PHOTOGRAPHY (2.88%) 4,100 Eastman Kodak Company 329,025 RESTAURANTS/LODGING (1.64%) 3,400 Marriott International, Inc. 187,850 RETAIL-SPECIALTY (3.78%) 7,200 NIKE, Inc. 432,000 TECHNOLOGY (8.38%) 5,000 AMP, Incorporated 191,875 3,300 Diebold, Incorporated 207,488 2,400 Intel Corporation 314,250 3,100 Marshall, Incorporated* 94,937 3,600 Millipore Corporation 148,950 --------- 957,500 UTILITIES-ELECTRIC (5.46%) 6,500 American Electric Power Company, Inc. 267,313 6,900 Baltimore Gas and Electric Company 184,575 4,200 Texas Utilities Company 171,150 --------- 623,038 UTILITIES - TELEPHONE (1.77%) 5,000 BellSouth Corporation 202,500 TOTAL COMMON STOCKS (COST-$6,011,920) 9,595,990 --------- PRINCIPAL AMOUNT - --------- SHORT-TERM NOTES (15.52%) $ 200,000 United States Treasury Bill due 1/16/97 (cost-$199,322) 199,322 1,585,000 United States Treasury Bill due 1/16/97 (cost-$1,572,771) 1,572,771 --------- TOTAL SHORT-TERM NOTES (COST - $1,772,093) 1,772,093 TOTAL INVESTMENTS (99.5%) (COST -$7,784,013) 11,368,083 CASH AND RECEIVABLES, LESS LIABILITY (.5%) 53,133 --------- TOTAL CONTRACT OWNERS' EQUITY (100.0%) $11,421,216 --------- --------- *NON-INCOME PRODUCING INVESTMENT IN 1996. 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 FRANKLIN LIFE VARIABLE ANNUITY FUND A 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. The Fund no longer issues new contracts. 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 fair value. 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 1996 aggregated $439,020 and $1,153,903, 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 Sales and administrative charges aggregating $21,860 and $30,845 were deducted from the proceeds of the sales of accumulation units and retained by Franklin Financial Services Corporation and The Franklin during 1996 and 1995, respectively. 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 YEAR ENDED YEAR ENDED DECEMBER 31, 1996 DECEMBER 31, 1995 ------------------------------------------------------------ UNITS AMOUNT UNITS AMOUNT Balance at beginning of year 150,474 $10,412,808 172,507 $ 9,313,322 Purchases 6,506 475,974 5,872 354,276 Net investment income* - 85,005 - 171,988 Net realized gain from investment transactions* - 268,930 - 16,819 Net unrealized appreciation of investments* - 1,402,260 - 2,250,305 Withdrawals (17,035) (1,244,804) (27,905) (1,694,308) Reimbursement for contract guarantees* - 3,168 - 406 ------------------------------------------------------------ Balance at end of year 139,945 $11,403,341 150,474 $10,412,808 ------------------------------------------------------------ ------------------------------------------------------------ *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 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 OF INVESTMENTS Net unrealized appreciation of investments at December 31, 1996 and 1995 was as follows: DECEMBER 31 DECEMBER 31 1996 1995 -------------------------------------- Gross unrealized appreciation $3,670,260 $2,225,359 Gross unrealized depreciation 86,190 48,051 -------------------------------------- Net unrealized appreciation of investments $3,584,070 $2,177,308 -------------------------------------- -------------------------------------- 4 FRANKLIN LIFE VARIABLE ANNUITY FUND A SUPPLEMENTARY INFORMATION PER-UNIT INCOME AND CHANGES IN ACCUMULATION UNIT VALUE (SELECTED DATA AND RATIOS FOR AN ACCUMULATION UNIT OUTSTANDING THROUGHOUT EACH YEAR)
YEAR ENDED DECEMBER 31 1996 1995 1994 1993 1992 --------------------------------------------------------------- Investment income $1.685 $1.948 $1.408 $1.231 $1.064 Expenses 1.090 .875 .773 .773 .723 --------------------------------------------------------------- Net investment income .595 1.073 .635 .458 .341 Net realized and unrealized gain (loss) on investments 11.690 14.139 (.240) .112 .770 --------------------------------------------------------------- Net increase in accumulation unit value 12.285 15.212 .395 .570 1.111 Accumulation unit value: Beginning of year 69.200 53.988 53.593 53.023 51.912 --------------------------------------------------------------- End of year $81.485 $69.200 $53.988 $53.593 $53.023 --------------------------------------------------------------- --------------------------------------------------------------- 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 .79% 1.76% 1.18% .85% .68% Portfolio turnover rate 4.77% 14.66% 88.99% 68.62% 59.84% Number of accumulation units outstanding at end of year 139,945 150,474 172,507 198,763 217,948 - -------------------------------------------------------------------------------------------------------------------------
5 MATTERS SUBMITTED TO VOTE OF CONTRACT OWNERS An annual meeting of Contract Owners of the Fund was held on April 15, 1996. At the meeting, the individuals named below were elected as Members of the Board of Managers of the Fund and Ernst & Young LLP was ratified as the Fund's independent auditors 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 77,058 839 0 Election of Dr. Robert C. Spencer as Member, Board of Managers 75,873 2,024 0 Election of James W. Voth as Member, Board of Managers 76,845 1,051 0 Election of Clifford L. Greenwalt as Member, Board of Managers 77,058 839 0 Ratification of Selection of Ernst & Young LLP as independent auditors 74,487 107 3,303 6 REPORT OF INDEPENDENT AUDITORS Board of Managers and Contract Owners Franklin Life Variable Annuity Fund A We have audited the accompanying statement of assets and liabilities of Franklin Life Variable Annuity Fund A, including the portfolio of investments, as of December 31, 1996, the related statement of operations for the year then ended and the statements of changes in contract owners' equity, and the table of per-unit income and changes in accumulation unit value for each of the two years then ended. These financial statements and the table of per-unit income and changes in accumulation unit value are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and the table of per-unit income and changes in accumulation unit value based on our audits. The table of per-unit income and changes in accumulation unit value for each of the three years in the period ended December 31, 1994 was audited by other auditors whose report dated February 1, 1995, expressed an unqualified opinion on that table. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the table of per-unit income and changes in accumulation unit value are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of investments held by the custodian as of December 31, 1996. 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 financial statements and the 1996 and 1995 table of per-unit income and changes in accumulation unit value referred to above present fairly, in all material respects, the financial position of Franklin Life Variable Annuity Fund A at December 31, 1996, and the results of its operations for the year then ended, and the changes in its contract owners' equity, and per-unit income and changes in accumulation unit value for each of the two years then ended in conformity with generally accepted accounting principles. Ernst & Young LLP Chicago, Illinois January 31, 1997 7 -----END PRIVACY-ENHANCED MESSAGE-----