-----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, HJxxnsxrsecO2pIsU62NyDg+8bpmAVvOihRyg0QnhIfUatR9PcLQdEVgsGFNKn6d ifwMj++ACHgSqO1kHd65HQ== 0001047469-98-008837.txt : 19980309 0001047469-98-008837.hdr.sgml : 19980309 ACCESSION NUMBER: 0001047469-98-008837 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980306 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: 98558751 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] 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 1997 annual report which shows the status of and balances in your Franklin Life Variable Annuity Fund A contract.
INVESTMENT POSITION ------------------- DECEMBER 31, JUNE 30, DECEMBER 31, 1997 1997 1996 ------------ -------- ------------ VARIABLE PORTION: - ----------------- Accumulation Unit Value $98.43 $91.56 $81.48 -------- ------ ------ -------- ------ ------ Percentage Change From: December 31, 1996 +20.80% -------- -------- June 30, 1997 + 7.50% -------- --------
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, 1997 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 1997 were based on a 6.25% interest rate, less a contract expense charge. If your contract anniversary is in the first 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 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 continued to expand at a very rapid rate in 1997. It is estimated that the Gross Domestic Product will increase some 3.5% to 4.0% for the year, well ahead of the expectations expressed at the beginning of 1997. Employment continues to grow, with the unemployment rate dropping to 4.7% in December 1997, down from 5.3% in December 1996, but up from 4.6% in November 1997. The Federal Reserve Board has kept the Federal Funds rate steady the last half of 1997 after raising the rate from 5.25% to 5.50% on March 25, 1997. The stock market had another good year, the third year in a row, with the Standard & Poor's 500 Index up 31.01% in 1997. This increase came with a great deal of difficulty in the second half of the year, as the Asian markets ran into financial uncertainty. The U.S. companies are showing very high price/earnings ratios and the U.S. economic growth is expected to slow in the near future. Inflation, as measured by the Gross Domestic Product deflator, was a very acceptable 1.9% in 1996, then declining to 1.4% by the third quarter of 1997. The Consumer Price Index increased 3.3% in 1996 and in 1997, 1.7%, the smallest increase since 1986. The Producers Price Index declined 0.2% in December, with a decline in nine of the twelve months of 1997 and an annual decline in 1997 of 1.2%. The decline in wholesale prices will be good news on the inflation front. The stock market will likely have a period of consolidation as it works its way through the Asian crisis, high price/earnings ratios and a slowing economy. 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, Chief Executive Officer and President 1 FRANKLIN LIFE VARIABLE ANNUITY FUND A STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1997
Assets Investments-at fair value (cost-$6,923,517): Common stocks $ 10,325,291 Short-term notes 1,896,668 ---------------- 12,221,959 Cash on deposit 54,548 Dividends and interest receivable 19,871 ---------------- Total Assets 12,296,378 Liability -due to The Franklin Life Insurance Company 1,489 ---------------- Contract owners' equity Annuity reserves $ 19,380 Value of 124,714.114 accumulation units outstanding, equivalent to $98.42918992 per unit 12,275,509 $ 12,294,889 ------------ ---------------- STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1997 Investment income Dividends $ 167,447 Interest 83,552 ------------ Total Income $ 250,999 Expenses Mortality and expense charges $ 119,981 Investment management services 52,451 ------------ Total expenses 172,432 ---------------- Net investment income 78,567 Realized and unrealized gain on investments: Net realized gain from investment transactions (excluding short-term investments): Proceeds from sales $1,508,962 Cost of investments sold (identified cost method) 1,056,000 ------------ Net realized gain 452,962 Net unrealized appreciation of investments Beginning of year $3,584,070 End of year 5,298,442 ------------ Net unrealized appreciation 1,714,372 ---------------- Net gain on investments 2,167,334 ---------------- Net increase in contract owners' equity resulting from operations $ 2,245,901 ---------------- ---------------- STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY YEAR ENDED DECEMBER 31 1997 1996 -------------------------------------- Net investment income $ 78,567 $ 85,278 Net realized gain from investment transactions 452,962 269,793 Net unrealized appreciation of investments 1,714,372 1,406,762 -------------------------------------- Net increase In contract owners' equity resulting from operations 2,245,901 1,761,833 Net contract purchase payments 268,272 226,321 Reimbursement for contract guarantees 172 3,178 Annuity payments (4,568) (3,878) Withdrawals (1,636,104) (995,151) -------------------------------------- Net increase in contract owners' equity 873,673 992,303 Contract owners' equity at beginning of year 11,421,216 10,428,913 -------------------------------------- Contract owners' equity at end of year $12,294,889 $11,421,216 -------------------------------------- --------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS 2 FRANKLIN LIFE VARIABLE ANNUITY FUND A PORTFOLIO OF INVESTMENTS DECEMBER 31, 1997
NUMBER OF FAIR SHARES VALUE ------------ --------------- COMMON STOCKS (83.98%) BANKING (4.16%) 3,675 SLM Holding Corporation $ 511,284 BEVERAGES (1.30%) 4,400 PepsiCo, Incorporated 159,500 BUSINESS SERVICES (1.61%) 5,600 Equifax Inc. 198,450 CHEMICALS (2.23%) 2,700 Dow Chemical 274,050 COMPUTER SERVICES (3.00%) 8,100 Ceridian Corporation* 371,081 COSMETICS & HOUSEHOLD PRODUCTS (3.27%) 4,000 Gillette Company 401,750 DRUGS & HEALTH CARE (21.62%) 8,000 Eli Lilly and Company 557,000 4,300 Merck & Company, Inc. 455,800 4,200 Pfizer, Incorporated 313,163 6,450 St. Jude Medical, Inc.* 196,725 6,600 Schering-Plough Corporation 410,025 6,000 Stryker Corporation 223,500 16,000 Walgreen Company 502,000 -------------- 2,658,213 ELECTRONICS & INSTRUMENTATIONS (2.94%) 5,800 Hewlett-Packard Company 361,775 FOOD PROCESSING (2.86%) 10,600 ConAgra, Inc. 351,125 FOOD - RETAIL (2.19%) 5,700 Albertson's, Inc. 269,325 FOOD - WHOLESALE ( 2.48%) 6,700 Sysco Corporation 305,269 HOUSEHOLD PRODUCTS (1.28%) 3,700 Newell Co. 157,250 MACHINERY - INDUSTRIAL & CONSTRUCTION (.46%) 1,500 Fluor Corporation 56,062 OFFICE EQUIPMENT & SERVICES (8.00%) 5,000 Compaq Computers Corporation* 282,500 5,350 Digital Equipment Corporation* 198,619 4,800 International Business Machines Corporation 502,200 -------------- 983,319 OIL SERVICES & DRILLING ( 2.62%) 6,200 Halliburton Company 321,625 OILS & OIL RELATED PRODUCTS (4.9%) 2,700 Amoco Corporation 229,838 2,600 Atlantic Richfield Company 208,325 2,600 Kerr-McGee Corporation 164,612 -------------- 602,775 PACKAGING - CONTAINERS ( 3.06%) 8,400 Avery-Dennison Corporation 375,900 PHOTOGRAPHY ( 2.02%) 4,100 Eastman Kodak Company 248,306 RESTAURANTS/LODGING (1.92%) 3,400 Marriott International, Inc. 235,450 RETAIL-SPECIALTY (2.29%) 7,200 NIKE, Inc. 281,250 TECHNOLOGY (7.48%) 5,000 AMP, Incorporated 210,000 4,950 Diebold, Incorporated 250,594 4,800 Intel Corporation 337,200 3,600 Millipore Corporation 122,175 -------------- 919,969 UTILITIES - TELEPHONE (2.29%) 5,000 BellSouth Corporation 281,562 -------------- TOTAL COMMON STOCKS (COST-$5,026,849) 10,325,290 PRINCIPAL AMOUNT - --------- SHORT-TERM NOTES (15.43%) $ 450,000 United States Treasury Bill 4.93%, due 2/5/98 (cost-$446,549) 446,549 $1,460,000 United States Treasury Bill 5.05%, due 2/5/98 (cost-$1,450,119) 1,450,119 -------------- TOTAL SHORT-TERM NOTES 1,896,669 -------------- TOTAL INVESTMENTS (99.41%) (COST -$6,923,517) 12,221,959 CASH AND RECEIVABLES, LESS LIABILITY (.59 %) 72,930 -------------- TOTAL CONTRACT OWNERS' EQUITY (100.0%) $12,294,889 -------------- --------------
*NON-INCOME PRODUCING INVESTMENT IN 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 (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 1997 aggregated $70,929 and $1,508,962, 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 $16,926 and $21,860 were deducted from the proceeds of the sales of accumulation units and retained by Franklin Financial Services Corporation and The Franklin during 1997 and 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
YEAR ENDED YEAR ENDED DECEMBER 31, 1997 DECEMBER 31, 1996 ------------------------------------------------------ UNITS AMOUNT UNITS AMOUNT ----- ------ ----- ------ Balance at beginning of year 139,945 $11,403,341 150,474 $10,412,808 Purchases 2,945 268,272 3,007 226,321 Net investment income* - 78,354 - 85,005 Net realized gain from investment transactions* - 451,738 - 268,930 Net unrealized appreciation of investments* - 1,709,736 - 1,402,260 Withdrawals (18,176) (1,636,104) (13,536) (995,151) Reimbursement for contract guarantees* - 172 - 3,168 ------------------------------------------------------ Balance at end of year 124,714 $12,275,509 139,945 $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 December 31, 1997 and 1996 was as follows:
DECEMBER 31, DECEMBER 31, 1997 1996 -------------------------------- Gross unrealized appreciation $5,387,633 $3,670,260 Gross unrealized depreciation 89,191 86,190 -------------------------------- Net unrealized appreciation of investments $5,298,442 $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 YEAR)
YEAR ENDED DECEMBER 31 1997 1996 1995 1994 1993 ---------------------------------------------------------------------- Investment income $1.910 $1.685 $1.948 $1.408 $1.231 Expenses 1.312 1.090 .875 .773 .773 ---------------------------------------------------------------------- Net investment income .598 .595 1.073 .635 .458 Net realized and unrealized gain (loss) on investments 16.346 11.690 14.139 (.240) .112 ---------------------------------------------------------------------- Net increase in accumulation unit value 16.944 12.285 15.212 .395 .570 Accumulation unit value: Beginning of year 81.485 69.200 53.988 53.593 53.023 ---------------------------------------------------------------------- End of year $98.429 $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 .66% .79% 1.76% 1.18% .85% Portfolio turnover rate .70% 4.77% 14.66% 88.99% 68.62% Number of accumulation units outstanding at end of year 124,714 139,945 150,474 172,507 198,763 - -------------------------------------------------------------------------------------------------------------------------------
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 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, 1997, the related statement of operations for the year then ended and the statements of changes in contract owners' equity for each of the two years then ended, and the table of per-unit income and changes in accumulation unit value for each of the three 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 two 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, 1997. 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 1997, 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, 1997, and the results of its operations for the year then ended, and the changes in its contract owners' equity for each of the two years then ended, and per-unit income and changes in accumulation unit value for each of the three years then ended in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP Chicago, Illinois January 30, 1998 6 -----END PRIVACY-ENHANCED MESSAGE-----