-----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, Cy/CTOEOT023kWRRtlwguHhdf7yCvHv3snDymCKSqaiV0ODp61UAlt7ZeeM1Zmhl ITxe0+PrVL4syDZP05+AIg== 0001047469-98-033676.txt : 19980907 0001047469-98-033676.hdr.sgml : 19980907 ACCESSION NUMBER: 0001047469-98-033676 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980904 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: 98704077 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 [GRAPHIC] THE FRANKLIN Life Insurance Company -------------------------------- *An American General Company #1 Franklin Square, Springfield, Illinois 62713-0001 Dear Contract Owner: We are pleased to provide this unaudited report for the six-month period ended June 30, 1998, which shows the status of and balances in your Franklin Life Variable Annuity Fund A contract.
Investment Position ------------------- June 30, 1998 December 31, 1997 June 30, 1997 ------------- ----------------- ------------- Variable Portion: ----------------- Accumulation Unit Value $108.49 $98.43 $91.56 ------- ------ ------ ------- ------ ------ Percentage Change From: December 31, 1997 +10.22% ------- ------- June 30, 1997 +18.49% ------- -------
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, 1998 appears on page 3. FIXED PORTION: Additional units in the fixed rate portion of your annuity arising from contributions credited during the contract year ending in the first half of 1998 were based on a 6.25% interest rate, less a contract expense charge. If your contract anniversary is in the second half of 1998, the interest rate for the fixed portion of your annuity applicable to contributions made during the contract year ending in 1998 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 prior to the contract year ending in 1998 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 United States economy continued to expand at an above average rate through the first quarter of 1998, as measured by the Gross Domestic Product. The Gross Domestic Product increased 3.8% in 1997 and 5.4% in the first quarter of 1998. The economy is expected to slow from the pace of the last six quarters to a more normal growth rate of 2.0% to 2.5% for the second quarter and balance of 1998. Employment has continued to expand, with the unemployment rate dropping to 4.3% in May and back up to 4.5% in June. Intermediate and long term interest rates have declined somewhat in the first half of 1998 and short term interest rates have held steady, with the Federal Reserve Board holding the Federal Funds rate at 5.50% since March 25, 1997. The stock market continued to move up during the first half of 1998 as new funds flowed into equity mutual funds. Stock prices are currently considered to be high by most traditional measurements. The Standard & Poor's 500 Index was up 16.8% in the first six months of the year despite the high price/earnings ratios, the slowing growth of corporate earnings and the economic conditions of several foreign countries. Inflation, as measured by the Gross Domestic Product deflator, was up 1.7% in 1997, and for the first three months of 1998 inflation increased at an annual rate of 1.1%. The Consumer Price Index increased by 1.7% in 1997, the lowest increase since 1986, but April prices increased 0.2% and then May prices increased 0.3%, the highest gain in 17 months. June Consumer Prices were just announced at +0.1%, down from May in light of lower energy prices and the lower Asian currencies which reduced import prices. The Producers Price Index increased 0.2% in April and May after recording five straight months of declining prices. The Producers Price Index is currently showing a decline of 0.9% from May 1997 to May 1998. Corporate profits declined 1.2% in the first quarter of 1998 after several years of good growth. Strong flow of new money going into equity mutual funds the first six months of this year has helped to move equity prices higher. Continued higher stock prices are contingent upon higher corporate profits, lower interest rates, the ability to move price/earnings ratios higher and the ability of several foreign governments to work through economic problems. 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/ William A. Simpson William A. Simpson Chairman and Chief Executive Officer 1 FRANKLIN LIFE VARIABLE ANNUITY FUND A STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1998 (UNAUDITED) Assets Investments-at fair value (cost-$5,942,360): Common stocks $ 11,123,254 Short-term notes 1,166,607 ------------- 12,289,861 Cash on deposit 71,414 Dividends and interest receivable 13,633 ------------- Total Assets 12,374,908 Liability -due to The Franklin Life Insurance Company 17,490 ------------- Contract owners' equity Annuity reserves $ 19,775 Value of 113,721.261 accumulation units outstanding, equivalent to $108.49020941 per unit 12,337,643 $ 12,357,418 ------------- ------------- -------------
STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED) Investment income Dividends $ 65,429 Interest 39,562 ------------- Total Income $ 104,991 Expenses Mortality and expense charges $ 62,854 Investment management services 27,477 ------------- Total expenses 90,331 ------------- Net investment income 14,660 Realized and unrealized gain on investments: Net realized gain from investment transactions (excluding short-term investments): Proceeds from sales $ 300,890 Cost of investments sold (identified cost method) 139,273 ------------- Net realized gain 161,617 Net unrealized appreciation of investments Beginning of period $ 5,298,442 End of period 6,347,501 ------------- Net unrealized appreciation 1,049,059 ------------- Net gain on investments 1,210,676 ------------- Net increase in contract owners' equity resulting from operations $ 1,225,336 ------------- -------------
STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY
SIX MONTHS YEAR ENDED JUNE 30, ENDED 1998 DECEMBER 31, (UNAUDITED) 1997 ---------------------------------- Net investment income $ 14,660 $ 78,567 Net realized gain from investment transactions 161,617 452,962 Net unrealized appreciation of investments 1,049,059 1,714,372 ---------------------------------- Net increase in contract owners' equity resulting from operations 1,225,336 2,245,901 Net contract purchase payments 78,228 268,272 Reimbursement for contract guarantees - 172 Annuity payments (2,557) (4,568) Withdrawals (1,238,478) (1,636,104) ---------------------------------- Net increase in contract owners' equity 62,529 873,673 Contract owners' equity at beginning of period 12,294,889 11,421,216 ---------------------------------- Contract owners' equity at end of period $ 12,357,418 $ 12,294,889 ---------------------------------- ----------------------------------
SEE NOTES TO FINANCIAL STATEMENTS 2 FRANKLIN LIFE VARIABLE ANNUITY FUND A PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (UNAUDITED)
NUMBER OF FAIR SHARES VALUE - ------------ ------------- COMMON STOCKS (90.01%) BANKING (5.10%) 12,862 SLM Holding Corporation $ 630,238 BEVERAGES (1.47%) 4,400 PepsiCo, Incorporated 181,225 BUSINESS SERVICES (1.64%) 5,600 Equifax Inc. 203,350 CHEMICALS (2.11%) 2,700 Dow Chemical 261,056 COMPUTER SERVICES (3.85%) 8,100 Ceridian Corporation* 575,875 COSMETICS & HOUSEHOLD PRODUCTS (3.68%) 8,000 Gillette Company 455,000 DRUGS & HEALTH CARE (26.66%) 8,000 Eli Lilly and Company 530,000 4,300 Merck & Company, Inc. 575,125 4,200 Pfizer, Incorporated 456,487 6,450 St. Jude Medical, Inc.* 237,441 6,600 Schering-Plough Corporation 604,725 6,000 Stryker Corporation 230,250 16,000 Walgreen Company 661,000 ------------- 3,295,028 ELECTRONICS & INSTRUMENTATIONS (2.81%) 5,800 Hewlett-Packard Company 347,275 FOOD PROCESSING (2.72%) 10,600 ConAgra, Inc. 335,888 FOOD - RETAIL (2.39%) 5,700 Albertson's, Inc. 295,331 FOOD - WHOLESALE ( 2.78%) 13,400 Sysco Corporation 343,375 HOUSEHOLD PRODUCTS (1.49%) 3,700 Newell Co. 184,306 MACHINERY - INDUSTRIAL & CONSTRUCTION (.62%) 1,500 Fluor Corporation 76,500 OFFICE EQUIPMENT & SERVICES (7.92%) 15,055.75 Compaq Computers Corporation 427,207 4,800 International Business Machines Corporation 551,100 ------------- 978,307 OIL SERVICES & DRILLING ( 2.23%) 6,200 Halliburton Company 275,513 NUMBER OF FAIR SHARES VALUE - ------------ ------------- OILS & OIL RELATED PRODUCTS (4.69%) 5,400 Amoco Corporation 225,450 2,600 Atlantic Richfield Company 203,125 2,600 Kerr-McGee Corporation 150,475 ------------- 579,050 PACKAGING - CONTAINERS ( 3.65%) 8,400 Avery-Dennison Corporation 451,500 PHOTOGRAPHY ( 2.42%) 4,100 Eastman Kodak Company 299,556 RETAIL-SPECIALTY (2.84%) 7,200 NIKE, Inc. 350,550 TECHNOLOGY (6.22%) 5,000 AMP, Incorporated 171,875 4,950 Diebold, Incorporated 142,931 4,800 Intel Corporation 355,800 3,600 Millipore Corporation 98,100 ------------- 768,706 UTILITIES - TELEPHONE (2.72%) 5,000 BellSouth Corporation 335,625 ------------- TOTAL COMMON STOCKS (COST-$4,775,753) 11,123,254 PRINCIPAL AMOUNT ------ SHORT-TERM NOTES (9.44%) $1,075,000 United States Treasury Bill 4.75%, due 7/23/98 (cost-$1,067,057) 1,067,057 $ 100,000 United States Treasury Bill 4.76%, due 7/23/98 (cost-$99,550) 99,550 ----------- TOTAL SHORT-TERM NOTES 1,166,607 ----------- TOTAL INVESTMENTS (99.45%) (COST-$5,942,360) 12,289,861 CASH AND RECEIVABLES, LESS LIABILITY (.55 %) 67,557 ----------- TOTAL CONTRACT OWNERS' EQUITY (100.0%) $12,357,418 ----------- -----------
*NON-INCOME PRODUCING INVESTMENT DURING THE SIX-MONTH PERIOD ENDING JUNE 30, 1998. 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 (the 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, 1998 aggregated $153,637 and $300,890, 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 $7,448 and $16,926 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, 1998 and the year ended December 31, 1997, 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, 1998 DECEMBER 31, (UNAUDITED) 1997 ----------------------------------------------------------- UNITS AMOUNT UNITS AMOUNT ----- ------ ----- ------ Balance at beginning of period 124,714 $12,275,509 139,945 $11,403,341 Purchases 726 78,228 2,945 268,272 Net investment income* - 4,625 - 78,354 Net realized gain from investment transactions* - 161,226 - 451,738 Net unrealized appreciation of investments* - 1,046,533 - 1,709,736 Withdrawals (11,719) (1,238,478) (18,176) (1,636,104) Reimbursement for contract guarantees* - - - 172 ----------------------------------------------------------- Balance at end of period 113,721 $12,337,643 124,714 $12,275,509 ----------------------------------------------------------- -----------------------------------------------------------
*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, 1998 and December 31, 1997 was as follows:
JUNE 30, 1998 DECEMBER 31, (UNAUDITED) 1997 ---------------------------- Gross unrealized appreciation $6,379,664 $5,387,633 Gross unrealized depreciation 32,163 89,191 Net unrealized appreciation ---------------------------- of investments $6,347,501 $5,298,442 ---------------------------- ----------------------------
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, 1998 -------------------------------------------------- (UNAUDITED) 1997 1996 1995 1994 ----------------------------------------------------------------- Investment income $.881 $1.910 $1.685 $1.948 $1.408 Expenses .758 1.312 1.090 .875 .773 ----------------------------------------------------------------- Net investment income .123 .598 .595 1.073 .635 Net realized and unrealized gain (loss) on investments 9.938 16.346 11.690 14.139 (.240) ----------------------------------------------------------------- Net increase in accumulation unit value 10.061 16.944 12.285 15.212 .395 Accumulation unit value: Beginning of period 98.429 81.485 69.200 53.988 53.593 ----------------------------------------------------------------- End of period $108.490 $98.429 $81.485 $69.200 $53.988 ----------------------------------------------------------------- ----------------------------------------------------------------- Ratio of expenses to average net assets (annualized) 1.44% 1.44% 1.44% 1.44% 1.44% Ratio of net investment income to average net assets (annualized) .23% .66% .79% 1.76% 1.18% Portfolio turnover rate (annualized) 1.40% .70% 4.77% 14.66% 88.99% Number of accumulation units outstanding at end of period 113,721 124,714 139,945 150,474 172,507 - ---------------------------------------------------------------------------------------------------------------------------
MATTERS SUBMITTED TO VOTE OF CONTRACT OWNERS An annual meeting of Contract Owners of the Fund was held on April 20, 1998. 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 52,846 683 0 Election of Dr. Robert C. Spencer as Member, Board of Managers 52,751 778 0 Election of James W. Voth as Member, Board of Managers 52,846 683 0 Election of Clifford L. Greenwalt as Member, Board of Managers 52,846 683 0 Ratification of Selection of Ernst & Young LLP as independent auditors 52,200 573 756
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