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[LETTERHEAD]
Dear Contract Owner:
We are pleased to provide this 1996 semi-annual report which shows the status of
and balances in your Franklin Life Money Market Variable Annuity Fund C
contract.
The gain in the accumulation unit value of the Fund since year end 1995 was as
follows:
June 30, 1996 December 31, 1995
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Accumulation Unit Value $22.45 $22.03
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Percentage Change 3.82%*
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*This represents the annualized percentage increase figure of 1.91% for
December 31, 1995 to June 30, 1996.
As we have pointed out in past reports, the annual increase figure should not be
compared with fully taxable money market fund rates. Your annuity contract
shelters this income from Federal income taxes prior to your annuity starting
date so long as your money remains with the Fund. Also, your contract provides
that Franklin Life assumes the risk that administrative deductions may be
insufficient to cover actual administrative expenses.
The U.S. economy closed out 1995 on the weak side, with the Gross Domestic
Product up only 0.5%, but the first quarter of 1996 showed growth in the economy
of +2.2%, with the prospects for the second quarter showing even stronger
growth. The unemployment rate dropped to 5.3% in June, the lowest level in six
years. Inflation appears to be moving up from its reasonable level of the last
several years and is approaching the 3% level.
At its early July meeting, the Federal Reserve Board agreed to hold the Federal
Funds rate at the 5.25% level it established in January. Short term yields
remained within 20 basis points of the December 1995 close, but intermediate and
long term yields increased some 100 basis points since year end. It appears
that short term yields could increase over the next several months.
Franklin Life Money Market Variable Annuity Fund C, like other money market
funds, offers preservation of capital, liquidity and a return that reflects
prevailing short-term interest rates. In today's interest rate environment, you
may want to take some extra time and review what role this product should play
in your retirement financial planning. Franklin Life and your registered
representative would appreciate the opportunity to discuss with you this and
other products which will help you find financial security.
Cordially yours,
Robert J. Gibbons
President and
Chief Executive Officer
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FRANKLIN LIFE MONEY MARKET VARIABLE ANNUITY FUND C
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996
Assets
Investments-at cost which approximates fair value
Corporate short-term notes $1,073,586
U.S. Government short-term note 1,117,405
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2,190,991
Cash on deposit 28,199
Interest receivable 8,718
Miscellaneous Receivables 141
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Total Assets 2,228,049
Liability-Due to The Franklin Life Insurance Company 5,931
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Contract Owners' Equity
Value of 98,988 Accumulation Units outstanding,
equivalent to $22.44841402 per unit $2,222,118
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STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
Investment Income-Interest $ 58,481
Expenses
Mortality and expense charges $11,946
Investment management services 4,204
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Total Expenses 16,150
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Net Investment Income $ 42,331
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STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY
SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
1996 1995
--------------------------------
Net investment income $ 42,331 $ 106,270
Net contract purchase payments 19,613 36,795
Payment for contract guarantees 41 (148)
Withdrawals (144,408) (640,200)
Administrative expense charges (680) (1,060)
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Net Decrease in Contract Owners' Equity (83,103) (498,343)
Contract Owners' Equity at Beginning
of Period 2,305,221 2,803,564
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Contract Owners' Equity at End of Period $ 2,222,118 $ 2,305,221
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SEE NOTES TO FINANCIAL STATEMENTS
2
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FRANKLIN LIFE MONEY MARKET VARIABLE ANNUITY FUND C
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996
PRINCIPAL FAIR
AMOUNT VALUE
- --------- -----
CORPORATE SHORT-TERM NOTES (48.3%)
Automotive (4.9%)
$110,000 Ford Motor Credit Corporation
5.38%, due 8/7/96 $ 109,310
FINANCE COMPANIES - CONSUMER (19.3%)
110,000 Associates Corporation of North America
5.36%, due 7/29/96 109,312
110,000 Beneficial Corporation
5.33% due 7/25/96 109,267
100,000 Household Finance Corporation
5.31%, due 7/10/96 99,454
110,000 Norwest Financial, Inc.
5.36%, due 8/05/96 109,247
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427,280
FINANCE COMPANIES - COMMERCIAL (4.5%)
100,000 General Electric Capital Corporation
5.30%, due 7/15/96 99,411
FINANCIAL SAVINGS & SERVICE (4.9%)
110,000 American Express Credit Corporation
5.31%, due 7/08/96 109,432
MACHINERY - INDUSTRIAL & CONSTRUCTION (4.9%)
110,000 John Deere Capital Corporation
5.35%, due 7/23/96 $ 109,444
OFFICE EQUIPMENT & SERVICES (4.9%)
110,000 IBM Credit Corporation
5.35%, due 7/17/96 109,444
OILS & OIL RELATED PRODUCTS (4.9%)
110,000 Chevron Oil Finance Company
5.35%, due 8/8/96 109,265
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TOTAL CORPORATE SHORT-TERM
NOTES (COST-$1,073,586) 1,073,586
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U.S. TREASURY BILL (50.3%)
1,125,000 United States Treasury Bill
due 7/11/96 (cost-$1,117,405) 1,117,405
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TOTAL INVESTMENTS (98.6%)
(COST-$2,190,991) 2,190,991
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CASH AND RECEIVABLE, LESS LIABILITY (1.4%) 31,127
TOTAL CONTRACT OWNERS'
EQUITY (100.0%) $2,222,118
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SEE NOTES TO FINANCIAL STATEMENTS
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THIS REPORT HAS BEEN PREPARED FOR THE INFORMATION OF FRANKLIN LIFE MONEY MARKET
VARIABLE ANNUITY FUND C CONTRACT OWNERS. IT IS NOT AUTHORIZED FOR DISTRIBUTION
TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS.
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NOTES TO FINANCIAL STATEMENTS
NOTE A-SIGNIFICANT ACCOUNTING POLICIES
Franklin Life Money Market Variable Annuity Fund C (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: Securities with remaining maturities of 60 days or
less are valued at amortized cost, which is equivalent to fair value.
Securities purchased with more than 60 days to maturity are valued at market
value until the 61st day prior to maturity. Thereafter, any discount or premium
from that market value to maturity value is recognized by constant,
proportionate amortization until maturity.
INVESTMENT TRANSACTIONS AND RELATED INVESTMENT INCOME: Investment transactions
are accounted for on the trade date. 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.
NOTE B-EXPENSES
Amounts are paid to The Franklin for investment management services at the rate
of .001027% of the current value of the Fund per day (.375% on an annual basis)
and for mortality and expense risk assurances at the rate of .002918% of the
current value of the Fund per day (1.065% on an annual basis). The investment
management service charge and the mortality and expense risk charge may be
increased to maximum rates, on an annual basis, of .500% and 1.750%,
respectively.
Certain other deductions are made from the Fund and paid to The Franklin
including administrative fees and contingent deferred sales charges on certain
amounts withdrawn. These deductions are more fully described in the Fund's
prospectus.
NOTE C-SUMMARY OF CHANGES IN ACCUMULATION UNITS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
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Units Amount Units Amount
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<S> <C> <C> <C> <C>
Balance at beginning of period 104,641 $2,305,221 132,646 $2,803,56
Purchases 891 19,613 1,801 36,795
Net investment income - 42,331 106,270
Withdrawals (6,514) (144,408) (29,757) (640,200)
Payment for contract guarantees - 41 - (148)
Administrative expense charge (30) (680) (49) (1,060)
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Balance at end of period 98,988 $2,222,118 104,641 $2,305,221
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</TABLE>
NOTE D-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.
4
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SUPPLEMENTARY INFORMATION
PER-UNIT INCOME AND CHANGES IN ACCUMULATION UNIT VALUE
(SELECTED DATA AND RATIOS FOR AN ACCUMULATION UNIT
OUTSTANDING THROUGHOUT EACH YEAR)
SIX
MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
1996 1995 1994 1993 1992
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Investment income $ .580 $ 1.203 $ .846 $ .617 $ .746
Expenses .160 .309 .303 .294 .286
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Net investment income .420 .894 .543 .323 .460
Accumulation unit value:
Beginning of period 22.030 21.136 20.593 20.270 19.810
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End of Period $22.450 $22.030 $21.136 $20.593 $20.270
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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 3.76% 4.17% 2.58% 1.58% 2.32%
Number of accumulation units
outstanding at end of period 98,988 104,641 132,646 159,929 210,310
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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:
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For Against Abstain
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Election of
Robert G. Spencer as
Member, Board of Managers 54,766 1,789 0
Election of
Dr. Robert C. Spencer as
Member, Board of Managers 54,766 1,789 0
Election of
James W. Voth as
Member, Board of Managers 54,766 1,789 0
Election of
Clifford L. Greenwalt as
Member, Board of Managers 54,766 1,789 0
Ratification of Selection
of Ernst & Young LLP as
independent auditors 54,069 308 2,177
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