-----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, MKDAO822FQcxhAx+XIZDV0o7tWXZ5wIkb0qzaL5vZyZmJDSAdl1wK7fyRTgaC4Rl TtnJI/k8wchY6HisiH6Yjg== 0001047469-99-034660.txt : 19990906 0001047469-99-034660.hdr.sgml : 19990906 ACCESSION NUMBER: 0001047469-99-034660 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990903 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: 99705791 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 THE FRANKLIN LIFE INSURANCE COMPANY FRANKLIN LIFE VARIABLE ANNUITY FUND JUNE 30, 1999 SEMI-ANNUAL REPORT PRINCIPAL OFFICE LOCATED AT: #1 Franklin Square Springfield, Illinois 62713 SEMI-ANNUAL REPORT DATED JUNE 30, 1999 - ------------------------------------------------------------------------------- The Semi-Annual Report of The Franklin Life Variable Annuity Fund is prepared and provided by The Franklin Life Insurance Company. - ------------------------------------------------------------------------------- This Semi-Annual Report is not to be construed as an offering for sale of any Franklin Life contract. No offering is made except in conjunction with a prospectus which must precede or accompany this report. 1 THE FRANKLIN LIFE INSURANCE COMPANY FRANKLIN LIFE VARIABLE ANNUITY FUND STATEMENT OF NET ASSETS JUNE 30, 1999 (UNAUDITED)
AMERICAN GENERAL SERIES PORTFOLIO COMPANY ------------------------------------------------------------------ STOCK INDEX STOCK INDEX MONEY MARKET FUND FUND FUND SUBACCOUNT A SUBACCOUNT B SUBACCOUNT C ------------------------------------------------------------------ ASSETS Investments in Funds at fair value: (cost: see below) $ 12,823,731 $ 1,796,771 $ 1,412,256 Due from (to) General Account 29 (96) - ------------------------------------------------------------------ NET ASSETS $ 12,823,760 $ 1,796,675 $ 1,412,256 ------------------------------------------------------------------ ------------------------------------------------------------------ Unit value, at June 30, 1999 $ 121.52 $ 141.59 $ 24.96 ------------------------------------------------------------------ ------------------------------------------------------------------ Units outstanding, at June 30, 1999 105,532 12,689 56,574 ------------------------------------------------------------------ ------------------------------------------------------------------ Cost of investments $ 12,929,922 $ 1,811,657 $ 1,412,256 ------------------------------------------------------------------ ------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS 2 THE FRANKLIN LIFE INSURANCE COMPANY FRANKLIN LIFE VARIABLE ANNUITY FUND STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
AMERICAN GENERAL SERIES PORTFOLIO COMPANY ------------------------------------------------------------ STOCK INDEX STOCK INDEX MONEY MARKET FUND FUND FUND SUBACCOUNT A SUBACCOUNT B SUBACCOUNT C ------------------------------------------------------------ NET INVESTMENT INCOME (EXPENSE) Income Dividends and interest $ 77,036 $ 10,004 $ 31,663 Expenses Mortality and expense risk charge 72,003 11,083 8,016 Investment management services 18,519 2,750 1,779 ------------------------------------------------------------ Net investment income (expense) (13,486) (3,829) 21,868 NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) 7,631,867 1,211,333 - Net unrealized appreciation (depreciation) Beginning of period 7,670,674 1,265,910 - End of period (106,191) (14,886) - ------------------------------------------------------------ Net change in unrealized appreciation (depreciation) during the period (7,776,865) (1,280,796) - ------------------------------------------------------------ Net realized and unrealized gain (loss) on investments (144,998) (69,463) - ------------------------------------------------------------ Net increase (decrease) in net assets from operations $ (158,484) $ (73,292) $ 21,868 ------------------------------------------------------------ ------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS 3 THE FRANKLIN LIFE INSURANCE COMPANY FRANKLIN LIFE VARIABLE ANNUITY FUND STATEMENT OF CHANGES IN NET ASSETS SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
AMERICAN GENERAL SERIES PORTFOLIO COMPANY --------------------------------------------------------- STOCK INDEX STOCK INDEX MONEY MARKET FUND FUND FUND SUBACCOUNT A SUBACCOUNT B SUBACCOUNT C --------------------------------------------------------- FOR THE SIX MONTHS ENDED JUNE 30, 1999 --------------------------------------------------------- CHANGE IN NET ASSETS FROM OPERATIONS: Net investment income (expense) $ (13,486) $ (3,829) $ 21,868 Net realized gain (loss) on investments 7,631,867 1,211,333 -- Net change in unrealized appreciation (depreciation) on investments (7,776,865) (1,280,796) -- ------------------------------------------------ Net increase (decrease) in net assets from operations (158,484) (73,292) 21,868 FROM CONTRACT RELATED TRANSACTIONS: Net contract purchase payments 134,543 10,564 5,978 Withdrawals (763,607) (177,303) (161,369) Transfers from (to) fixed account 69,808 -- -- ------------------------------------------------ Net increase (decrease) in net assets from contract related transactions (559,256) (166,739) (155,391) ------------------------------------------------ Increase (decrease) in net assets (717,740) (240,031) (133,523) Net assets, beginning of period 13,541,500 2,036,706 1,545,779 ------------------------------------------------ Net assets, end of period $ 12,823,760 $ 1,796,675 $ 1,412,256 ------------------------------------------------ ------------------------------------------------
FRANKLIN LIFE FRANKLIN LIFE FRANKLIN LIFE VARIABLE VARIABLE MONEY MARKET ANNUITY ANNUITY VARIABLE ANNUITY FUND A FUND B FUND C ----------------------------------------------------- FOR THE YEAR ENDED DECEMBER 31, 1998 ----------------------------------------------------- CHANGE IN NET ASSETS FROM OPERATIONS: Net investment income (expense) $ 21,258 $ 61 $ 60,558 Net realized gain (loss) on investments 428,455 144,577 -- Net change in unrealized appreciation (depreciation) on investments 2,372,232 397,045 -- ----------------------------------------------------- Net increase (decrease) in net assets from operations 2,821,945 541,683 60,558 FROM CONTRACT RELATED TRANSACTIONS: Net contract purchase payments 133,181 14,091 22,030 Withdrawals (1,729,939) (323,234) (457,908) Transfers from (to) fixed account 21,424 (1,012) -- ----------------------------------------------------- Net increase (decrease) in net assets from contract related transactions (1,575,334) (310,155) (435,878) ----------------------------------------------------- Increase (decrease) in net assets 1,246,611 231,528 (375,320) Net assets, beginning of period 12,294,889 1,805,178 1,921,099 ----------------------------------------------------- Net assets, end of period $ 13,541,500 $ 2,036,706 $ 1,545,779 ----------------------------------------------------- -----------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS 4 THE FRANKLIN LIFE INSURANCE COMPANY FRANKLIN LIFE VARIABLE ANNUITY FUND NOTES TO FINANCIAL STATEMENTS JUNE 30, 1999 (UNAUDITED) 1. NATURE OF OPERATIONS AND REORGANIZATION Franklin Life Variable Annuity Fund (the Fund or the Ongoing Fund) is a separate account of The Franklin Life Insurance Company (Franklin) under Illinois insurance law and a unit investment trust under the Investment Company Act of 1940. The Fund supports the operations of Franklin's variable annuity contracts (the Contracts). New contracts are no longer being issued. Prior to April 30, 1999, Franklin maintained Franklin Life Variable Annuity Funds A, B, and C (the Former Funds) which were originally established as open-end diversified management investment companies under the Investment Company Act of 1940. On April 30, 1999, a reorganization was effected under which Franklin Life Variable Annuity Fund A was renamed Franklin Life Variable Annuity Fund, converted into a unit investment trust, and consolidated with Franklin Life Variable Annuity Fund B and Franklin Life Money Market Variable Annuity Fund C. The assets of the Former Funds were transferred to Subaccounts A, B, and C, respectively, of the Ongoing Fund. The Ongoing Fund consists of three subaccounts invested in units of beneficial interest (shares) of two portfolios of American General Series Portfolio Company (AGSPC), an affiliated open-end management investment company. Subaccounts A and B invest in the AGSPC Stock Index Fund portfolio and Subaccount C invests in the AGSPC Money Market Fund portfolio. The Statement of Operations and the Statement of Changes in Net Assets for the new Subaccounts A, B, and C reflect the consolidated activity of the Former Funds through April 30, 1999, and Subaccounts A, B and C of the Ongoing Fund from May 1, 1999 to June 30, 1999. Franklin Financial Services Corporation, a wholly owned subsidiary of Franklin, acts as principal underwriter for the Contracts, as defined in the Investment Company Act of 1940. The assets of the Fund are the property of Franklin; however, the portion of the Fund's assets applicable to the Contracts is not chargeable with liabilities arising out of any other business Franklin may conduct. 2. SIGNIFICANT ACCOUNTING POLICIES Investments: Investments in shares of the Fund are carried at fair value based on the net asset values of the respective AGSPC portfolios. Investment transactions are recorded on the trade date. Dividends are recorded as received. Realized gains and losses on sales of the Fund shares are determined based on the specific identification method. Taxation: Operations of the Fund form a part of, and are taxed with those of, 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. Reserves: Annuity reserves on Contracts, all involving life contingencies, are calculated using the Progressive Annuity Table with an assumed investment rate of 3-1/2%. 3. CONTRACT CHARGES In conjunction with the reorganization, Franklin waived all sales loads, surrender or deferred sales charges and administrative fees specified in each Contract beginning October 1998. AGSPC deducts a charge for investment management and other expenses for the Stock Index Fund portfolio and for the Money Market Fund portfolio. In addition, Franklin deducts a charge from the assets of the Fund to cover mortality and expense risks related to the operations of the Fund at an effective annual rate of 1.00% for Subaccounts A and B and 1.065% for Subaccount C. As part of the reorganization, total annual Fund expenses are capped at 1.44%. Total charges paid by the Fund to Franklin were $38,263 for the period ended June 30, 1999. 5 THE FRANKLIN LIFE INSURANCE COMPANY FRANKLIN LIFE VARIABLE ANNUITY FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 1999 (UNAUDITED) 4. SUMMARY OF UNIT VALUES AND CHANGES IN OUTSTANDING UNITS
AMERICAN GENERAL SERIES PORTFOLIO COMPANY ------------------------------------------------------ STOCK INDEX STOCK INDEX MONEY MARKET FUND FUND FUND SUBACCOUNT A SUBACCOUNT B SUBACCOUNT C ------------------------------------------------------ FOR THE SIX MONTHS ENDED JUNE 30, 1999 ------------------------------------------------------ Unit value, beginning of period $ 123.03 $ 147.18 $ 24.59 ------------------------------------------------------ ------------------------------------------------------ Unit value, end of period $ 121.52 $ 141.59 $ 24.96 ------------------------------------------------------ ------------------------------------------------------ Number of units outstanding Beginning of period 109,896 13,839 62,851 Number of contract purchase payments 1,197 73 239 Withdrawals (5,855) (1,223) (6,516) Transfers from (to) fixed account 294 -- -- ------------------------------------------------------ Number of units outstanding, end of period 105,532 12,689 56,574 ------------------------------------------------------ ------------------------------------------------------
FRANKLIN LIFE FRANKLIN LIFE FRANKLIN LIFE VARIABLE VARIABLE MONEY MARKET ANNUITY ANNUITY VARIABLE ANNUITY FUND A FUND B FUND C ---------------------------------------------------------- FOR THE YEAR ENDED DECEMBER 31, 1998 ---------------------------------------------------------- Unit value, beginning of period $ 98.43 $ 110.59 $ 23.73 ---------------------------------------------------------- ---------------------------------------------------------- Unit value, end of period $ 123.03 $ 147.18 $ 24.59 ---------------------------------------------------------- ---------------------------------------------------------- Number of units outstanding Beginning of period 124,714 16,323 80,944 Number of contract purchase payments 1,559 115 930 Withdrawals (16,377) (2,599) (19,023) Transfers from (to) fixed account -- -- -- ---------------------------------------------------------- Number of units outstanding, end of period 109,896 13,839 62,851 ---------------------------------------------------------- ----------------------------------------------------------
6 THE FRANKLIN LIFE INSURANCE COMPANY FRANKLIN LIFE VARIABLE ANNUITY FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 1999 (UNAUDITED) 5. REMUNERATION OF MANAGEMENT The Account incurs no liability for payment to directors, members of advisory boards, officers or any other person who might provide a service for the Account, except as described in Note 3. 6. YEAR 2000 INTERNAL SYSTEMS. Franklin's ultimate parent, American General Corporation (AGC), has numerous technology systems that are managed on a decentralized basis. AGC's Year 2000 readiness efforts have been performed by its key business units with centralized oversight. Each business unit, including Franklin, has executed a plan to minimize the risk of a significant negative impact on its operations. While the specifics of the plans varied, the plans included the following activities: (1) perform an inventory of Franklin's information technology and non-information technology systems; (2) assess which items in the inventory may expose Franklin to business interruptions due to Year 2000 issues; (3) reprogram or replace systems that are not Year 2000 ready; (4) test systems to prove that they will function into the next century as they do currently; and (5) return the systems to operations. As of June 30, 1999, these activities had been substantially completed, making Franklin's critical systems Year 2000 ready. Franklin will continue to test its systems throughout 1999 to maintain Year 2000 readiness. In addition, Franklin currently is developing plans for the century transition, which will restrict systems modifications from November 1999 through January 2000, create rapid response teams to address problems, and limit vacations for key technical personnel. THIRD PARTY RELATIONSHIPS. Franklin has relationships with various third parties who must also be Year 2000 ready. These third parties provide (or receive) resources and services to (or from) Franklin and include organizations with which Franklin exchanges information. Third parties include vendors of hardware, software, and information services; providers of infrastructure services such as voice and data communications and utilities for office facilities; investors; customers; distribution channels; and joint venture partners. Third parties differ from internal systems in that Franklin exercises less, or no, control over Year 2000 readiness. Franklin assessed and mitigated the risks associated with the potential failure of third parties to achieve Year 2000 readiness. Franklin's activities included the following: (1) identify and classify third party dependencies; (2) research, analyze, and document Year 2000 readiness for critical third parties; and (3) test critical hardware and software products and electronic interfaces. As of June 30, 1999, these activities have been substantially completed. Where necessary, critical third party dependencies have been included in Franklin's contingency plans. Due to the various stages of Year 2000 readiness for these critical third party dependencies, Franklin's testing activities related to critical third parties will extend throughout 1999. CONTINGENCY PLANS. Franklin has undertaken contingency planning to reduce the risk of Year 2000-related business failures. The contingency plans, which address both internal systems and third party relationships, included the following activities: (1) evaluate the consequences of failure of critical business processes with significant exposure to Year 2000 risk; (2) determine the probability of a Year 2000-related failure for those critical processes that have a high consequence of failure; (3) develop an action plan to complete contingency plans for critical processes that rank high in consequence and probability of failure; and (4) complete the applicable contingency plans. As of June 30, 1999, these activities have been substantially completed. The contingency plans will continue to be tested and updated throughout 1999. RISKS AND UNCERTAINTIES. Based on the Year 2000 readiness of internal systems, century transition plans, plans to deal with third party relationships, and contingency plans, Franklin believes that it will experience, at most, isolated and minor disruptions of business processes following the turn of the century. Such disruptions are not expected to have a material effect on Franklin's future results of operations, liquidity, or financial condition. However, due to the magnitude and complexity of this project, risks and uncertainties exist and Franklin is not able to predict a most reasonably likely worst case scenario. If Year 2000 readiness is not achieved due to Franklin's failure to maintain critical systems as Year 2000 ready, failure of critical third parties to achieve Year 2000 readiness on a timely basis, failure of contingency plans to reduce Year 2000-related business failures, or other 7 THE FRANKLIN LIFE INSURANCE COMPANY FRANKLIN LIFE VARIABLE ANNUITY FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 1999 (UNAUDITED) unforeseen circumstances in completing Franklin's plans, the Year 2000 issues could have a material adverse impact on Franklin's operations following the turn of the century. COSTS. In 1999, Franklin has incurred and will continue to incur costs for internal staff, third party vendors, and other expenses to achieve Year 2000 readiness. These costs are not passed to the Account. The cost of activities related to Year 2000 readiness has not had a material adverse effect on Franklin's results of operations or financial condition. In addition, Franklin has elected to accelerate the planned replacement of certain systems as part of the Year 2000 plans. Costs of the replacement systems are being capitalized and amortized over their useful lives, in accordance with Franklin's normal accounting policies. 8 -----END PRIVACY-ENHANCED MESSAGE-----