-----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, Cl6o8GUuoq/AoAi1fnXMFw1tgbIAQMeCCYNT6osVZOS/912C7O9DpIqu9b1VXjVE AS77Lq7KzMO0Z/bhwqRFVw== 0000912057-97-030161.txt : 19970912 0000912057-97-030161.hdr.sgml : 19970912 ACCESSION NUMBER: 0000912057-97-030161 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970908 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: SEC FILE NUMBER: 811-01990 FILM NUMBER: 97676706 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 [Logo of The Franklin Life Insurance Company] Dear Contract Owner: We are pleased to provide this report for the six-month period ended June 30, 1997, which shows the status of and balances in your Franklin Life Variable Annuity Fund A contract. Fund Position ------------- June 30, 1997 December 31, 1996 June 30, 1996 ------------- ----------------- ------------- Variable Portion: - ----------------- Accumulation Unit Value $91.56 $81.48 $74.36 ------ ------ ------ Percentage Change From: June 30, 1996 +23.1% ------ December 31, 1996 +12.4% ------ The accumulation unit value is based on the market price of the investments held by the Fund. A listing of the investments held at June 30, 1997 appears on page 3. FIXED PORTION: If your contract anniversary was in the first half of 1997, additional units in the fixed rate portion of your annuity arising from contributions credited during the contract year ending in 1997 were based on a 6.25% interest rate, less a contract expense charge. This rate is expected to apply to contracts with anniversaries in the second half of 1997, as well. 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 1997 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 closed out 1996 on a very positive note, with fourth quarter Gross Domestic Product (GDP) up 3.8%. The growth continued into 1997, with first quarter GDP up 5.9%. GDP in the second quarter of 1997 is expected to show growth of 2.0% to 2.5%, with growth in the last half of the year in the area of 2.5% to 3.0%. The unemployment rate dropped from 5.3% in December 1996 to 5.0% in June 1997, with the May unemployment rate reaching 4.8%. The Federal Reserve Board raised the Federal Funds Rate at its March 25, 1997 meeting by 25 basis points to 5.50% but left the short-term interest rate unchanged in its May and July meetings.. The increase was the first change since it lowered rates in January 1996 by 25 basis points. The stock market declined in March and April, losing all of its earlier year to date gains but rebounded in May and June to record levels. The Standard & Poor's 500 Index was up 19.5% in the first half of the year. Inflation as measured by the Gross Domestic Product deflator was up 1.9% in 1996, with the first quarter of 1997 up 1.5%. The consumer price index increased 3.3% in 1996, with the first quarter of 1997 up 1.4%. The Producers Price Index, a measure of inflation at the wholesale level, declined again in June for the sixth month in a row. The six months of decline is a record number of declines for this index since the index was started in 1947. Inflation isn't a concern to the economy at the present time. Corporate profits remain at a good level, translating into increased earnings per share. The strong flow of new money going into equity mutual funds, along with the earnings and inflation reports, continues to push the stock market into record territory. The stock market needs to pause in light of the current price/earnings multiple and the high price/book value ratio. While a market correction is possible, it isn't expected to be a lengthy correction. 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 1 FRANKLIN LIFE VARIABLE ANNUITY FUND A STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1997 (UNAUDITED)
Assets Investments-at fair value (cost-$7,335,852): Common stocks $ 9,915,178 Short-term notes 2,113,929 ------------ 12,029,107 Cash on deposit 38,976 Dividends and interest receivable 29,867 ------------ Total Assets 12,097,950 Liability -due to The Franklin Life Insurance Company 14,373 ------------ Contract owners' equity Annuity reserves $ 18,161 Value of 131781.486 accumulation units outstanding, equivalent to $91.55623614 per unit 12,065,416 $ 12,083,577 ---------- ------------ ------------
STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED) Investment income Dividends $ 92,854 Interest 38,259 ---------- Total Income $ 131,113 Expenses Mortality and expense charges $ 57,330 Investment management services 25,062 ---------- Total expenses 82,392 ------------ Net investment income 48,721 Realized and unrealized gain on investments: Net realized gain from investment transactions (excluding short-term investments): Proceeds from sales $1,030,614 Cost of investments sold (identified cost method) 844,160 ---------- Net realized gain 186,454 Net unrealized appreciation of investments Beginning of period $3,584,070 End of period 4,693,255 ---------- Net unrealized appreciation 1,109,185 ------------ Net gain on investments 1,295,639 ------------ Net increase in contract owners' equity resulting from operations $ 1,344,360 ------------ ------------
STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY (UNAUDITED)
SIX MONTHS YEAR ENDED ENDED JUNE 30, DECEMBER 31, 1997 1996 --------------------------------- Net investment income $ 48,721 $ 85,278 Net realized gain from investment transactions 186,454 269,793 Net unrealized appreciation of investments 1,109,185 1,406,762 --------------------------------- Net increase in contract owners' equity resulting from operations 1,344,360 1,761,833 Net contract purchase payments 214,529 475,974 Reimbursement for contract guarantees 1,759 3,178 Annuity payments (2,151) (3,878) Withdrawals (896,136) (1,244,804) --------------------------------- Net increase in contract owners' equity 662,361 992,303 Contract owners' equity at beginning of period 11,421,216 10,428,913 --------------------------------- Contract owners' equity at end of period $12,083,577 $11,421,216 --------------------------------- ---------------------------------
SEE NOTES TO FINANCIAL STATEMENTS 2 FRANKLIN LIFE VARIABLE ANNUITY FUND A PORTFOLIO OF INVESTMENTS JUNE 30, 1997 (UNAUDITED) NUMBER OF FAIR SHARES VALUE - ------ ---------- COMMON STOCKS (82.05%) BANKING (3.86%) 3,675 Student Loan Marketing Association $ 466,725 BEVERAGES (1.37%) 4,400 PepsiCo, Incorporated 165,275 BUSINESS SERVICES (1.72%) 5,600 Equifax Inc. 208,250 CHEMICALS (1.94%) 2,700 Dow Chemical 234,562 COMPUTER SERVICES (2.83%) 8,100 Ceridian Corporation* 342,225 COSMETICS & HOUSEHOLD PRODUCTS (3.14 %) 4,000 Gillette Company 379,000 DRUGS & HEALTH CARE (19.31%) 4,000 Eli Lilly and Company 437,250 4,300 Merck & Company, Inc. 439,944 2,100 Pfizer, Incorporated 250,950 6,450 St. Jude Medical, Inc.* 251,550 6,600 Schering-Plough Corporation 315,975 6,000 Stryker Corporation 209,250 8,000 Walgreen Company 429,000 ----------- 2,333,919 ELECTRONICS & INSTRUMENTATIONS (2.69%) 5,800 Hewlett-Packard Company 324,800 FOOD PROCESSING (2.82%) 5,300 ConAgra, Inc. 340,194 FOOD - RETAIL (1.72 %) 5,700 Albertson's, Inc. 208,050 FOOD - WHOLESALE ( 2.02%) 6,700 Sysco Corporation 244,550 HOUSEHOLD PRODUCTS (1.22%) 3,700 Newell Co. 147,075 MACHINERY - INDUSTRIAL & CONSTRUCTION (.69%) 1,500 Fluor Corporation 82,781 OFFICE EQUIPMENT & SERVICES (6.80%) 2,000 Compaq Computers Corporation* 199,000 5,350 Digital Equipment Corporation* 189,591 4,800 International Business Machines Corporation 433,200 ----------- 821,791 OIL SERVICES & DRILLING ( 2.03%) 3,100 Halliburton Company $ 245,675 OILS & OIL RELATED PRODUCTS (7.92%) 2,700 Amoco Corporation 234,731 2,600 Atlantic Richfield Company 183,300 5,000 British Petroleum Company, p.l.c. 374,375 2,600 Kerr-McGee Corporation 164,775 ----------- 957,181 PACKAGING - CONTAINERS ( 2.79%) 8,400 Avery-Dennison Corporation 337,050 PHOTOGRAPHY ( 2.60%) 4,100 Eastman Kodak Company 314,675 RESTAURANTS/LODGING (1.73%) 3,400 Marriott International, Inc. 208,675 RETAIL-SPECIALTY (3.48%) 7,200 NIKE, Inc. 420,300 TECHNOLOGY (7.45%) 5,000 AMP, Incorporated 208,750 4,950 Diebold, Incorporated 193,050 2,400 Intel Corporation 340,350 3,600 Millipore Corporation 158,400 ----------- 900,550 UTILITIES - TELEPHONE (1.92%) 5,000 BellSouth Corporation 231,875 TOTAL COMMON STOCKS (COST-$5,221,923) 9,915,178 ----------- PRINCIPAL AMOUNT - --------- SHORT-TERM NOTES (17.5%) $ 975,000 United States Treasury Bill 4.40%, due 7/3/97 (cost-$972,498) 972,498 $1,150,000 United States Treasury Bill 4.79%, due 7/3/97 (cost-$1,141,431) 1,141,431 ----------- TOTAL SHORT-TERM NOTES 2,113,929 TOTAL INVESTMENTS (99.55%) (COST -$7,335,852 ) 12,029,107 CASH AND RECEIVABLES, LESS LIABILITY (.45 %) 54,470 ----------- TOTAL CONTRACT OWNERS' EQUITY (100.0%) $12,083,577 ----------- ----------- *NON-INCOME PRODUCING INVESTMENT DURING THE SIX-MONTH PERIOD ENDING JUNE 30, 1997. 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 the six-month period ended June 30, 1997 aggregated $54,162 and $1,004,568, 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 $9,664 and $21,860 were deducted from the proceeds of the sales of accumulation units and retained by Franklin Financial Services Corporation and The Franklin for the six-month period ended June 30, 1997 and the year ended December 31, 1996, 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
SIX MONTHS ENDED YEAR ENDED JUNE 30, 1997 DECEMBER 31, 1996 ------------------------------------------------------------------- UNITS AMOUNT UNITS AMOUNT ----- ------ ----- ------ Balance at beginning of period 139,945 $11,403,341 150,474 $10,412,808 Purchases 5,091 214,529 6,506 475,974 Net investment income* - 48,632 - 85,005 Net realized gain from investment transactions* - 186,116 - 268,930 Net unrealized appreciation of investments* - 1,107,178 - 1,402,260 Withdrawals (13,254) (896,136) (17,035) (1,244,804) Reimbursement for contract guarantees* - 1,756 - 3,168 ------------------------------------------------------------------- Balance at end of period 131,782 $12,065,416 139,945 $11,403,341 ------------------------------------------------------------------- -------------------------------------------------------------------
*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 OF INVESTMENTS Net unrealized appreciation of investments at June 30, 1997 and December 31, 1996 was as follows: JUNE 30, DECEMBER 31, 1997 1996 --------------------------- Gross unrealized appreciation $4,769,125 $3,670,260 Gross unrealized depreciation 75,870 86,190 --------------------------- Net unrealized appreciation of investments $4,693,255 $3,584,070 --------------------------- --------------------------- 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 PERIOD)
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31, 1997* 1996 1995 1994 1993 --------------------------------------------------------------------- Investment income $ .975 $ 1.685 $ 1.948 $ 1.408 $ 1.231 Expenses .613 1.090 .875 .773 .773 --------------------------------------------------------------------- Net investment income .362 .595 1.073 .635 .458 Net realized and unrealized gain (loss) on investments 9.710 11.690 14.139 (.240) .112 --------------------------------------------------------------------- Net increase in accumulation unit value 10.072 12.285 15.212 .395 .570 Accumulation unit value: Beginning of period 81.485 69.200 53.988 53.593 53.023 --------------------------------------------------------------------- End of period $ 91.557 $ 81.485 $ 69.200 $ 53.988 $ 53.593 --------------------------------------------------------------------- --------------------------------------------------------------------- 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 .85% .79% 1.76% 1.18% .85% Portfolio turnover rate .64% 4.77% 14.66% 88.99% 68.62% Number of accumulation units outstanding at end of period 131,781 139,945 150,474 172,507 198,763 - -------------------------------------------------------------------------------------------------------------------------------- *(Not annualized)
MATTERS SUBMITTED TO VOTE OF CONTRACT OWNERS An annual meeting of Contract Owners of the Fund was held on April 21, 1997. 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 59,899 1,753 0 Election of Dr. Robert C. Spencer as Member, Board of Managers 59,899 1,753 0 Election of James W. Voth as Member, Board of Managers 60,015 1,637 0 Election of Clifford L. Greenwalt as Member, Board of Managers 60,015 1,637 0 Ratification of Selection of Ernst & Young LLP as independent auditors 59,688 1,135 829 5 -----END PRIVACY-ENHANCED MESSAGE-----