FRANKLIN LIFE VARIABLE ANNUITY FUND A, 485APOS, 1999-03-01

FRANKLIN LIFE VARIABLE ANNUITY FUND A
485APOS, 1999-03-01

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 1, 1999
File No. 2-36394
File No. 811-1990

SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM N-4

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. / /
----
Post-Effective Amendment No. 46 /X/
----

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 22 /X/
----

FRANKLIN LIFE VARIABLE ANNUITY FUND
(formerly Franklin Life Variable Annuity Fund A)
(EXACT NAME OF REGISTRANT)

THE FRANKLIN LIFE INSURANCE COMPANY
(NAME OF DEPOSITOR)

#1 Franklin Square
Springfield, Illinois 62713
(ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES)

DEPOSITOR'S TELEPHONE NUMBER, INCLUDING AREA CODE: (800) 528-2011

Elizabeth E. Arthur, Esq.
The Franklin Life Insurance Company
#1 Franklin Square
Springfield, Illinois 62713
(NAME AND ADDRESS OF AGENT FOR SERVICE)

COPY TO:

Stephen E. Roth, Esq.
Sutherland Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, DC 20004-2415

APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after the
effective date of the registration statement.

It is proposed that this filing will become effective (check appropriate box):

/ / Immediately upon filing pursuant to paragraph (b) of Rule 485
/ / On (date) pursuant to paragraph (b) of Rule 485
/X/ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
/ / On (date) pursuant to paragraph (a)(1) of Rule 485

TITLE OF SECURITIES BEING REGISTERED: Individual Variable Annuity Contracts

<PAGE>

FRANKLIN LIFE VARIABLE ANNUITY FUND

PROSPECTUS -- INDIVIDUAL VARIABLE ANNUITY CONTRACTS
ISSUED BY
THE FRANKLIN LIFE INSURANCE COMPANY
#1 Franklin Square
Springfield, Illinois 62713
1-800-528-2011

This prospectus describes three individual variable annuity contracts issued by
The Franklin Life Insurance Company through the Franklin Life Variable Annuity
Fund. The Franklin Life Insurance Company no longer sells the variable annuity
contracts although owners of existing contracts may continue to make payments on
those contracts.

Each variable annuity contract provides annuity payments that may vary with the
investment performance of one of three subaccounts of the Franklin Life Variable
Annuity Fund. The Franklin Life Insurance Company invests assets of each
subaccount exclusively in shares of either the Stock Index Fund or the Money
Market Fund of American General Series Portfolio Company, an open-end mutual
fund. The Franklin Life Insurance Company does not guarantee any minimum value
for amounts allocated to the subaccounts.

This prospectus sets forth the information that a contract owner should know
before investing. Contract owners should keep this prospectus for future
reference. A current prospectus for the designated investment portfolios of
American General Series Portfolio Company must accompany this prospectus.
Please read this prospectus in conjunction with the current prospectus for the
American General Series Portfolio Company.

The Franklin Life Insurance Company has filed a statement of additional
information having the same date as this prospectus with the Securities and
Exchange Commission. The statement of additional information further describes
the variable annuity contracts and the Franklin Life Variable Annuity Fund and
is incorporated herein by reference. To obtain a free copy of this document,
write or call The Franklin Life Insurance Company at its administrative office -
- - FLIC Annuity Service Center, 2727-A Allen Parkway (3-50), Houston, Texas
77019-2191; or P.O. Box 4799, Houston, Texas 77210-4799, (800) 231-0105 or (713)
831-3505.

AN INVESTMENT IN A VARIABLE ANNUITY CONTRACT DESCRIBED IN THIS PROSPECTUS IS NOT
A DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR ENDORSED BY, ANY BANK, NOR IS A
VARIABLE ANNUITY CONTRACT INSURED BY THE UNITED STATES GOVERNMENT. INVESTING IN
A VARIABLE ANNUITY CONTRACT INVOLVES CERTAIN RISKS, INCLUDING THE RISK OF LOSS
OF PAYMENTS (PRINCIPAL).

- --------------------------------------------------------------------------------
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
OF THE SECURITIES DESCRIBED IN THIS PROSPECTUS, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------

April 30, 1999
<PAGE>

TABLE OF CONTENTS
SPECIAL TERMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

FEE TABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Contract A Fee Table and Example. . . . . . . . . . . . . . . . . . . 6
Contract B Fee Table and Example. . . . . . . . . . . . . . . . . . . 8
Contract C Fee Table and Example. . . . . . . . . . . . . . . . . . . 10

SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
General Description . . . . . . . . . . . . . . . . . . . . . . . . . 12
The Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Charges Under the Contracts . . . . . . . . . . . . . . . . . . . . . 13
Minimum Investment. . . . . . . . . . . . . . . . . . . . . . . . . . 14
Redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Death Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Settlement Options. . . . . . . . . . . . . . . . . . . . . . . . . . 15
Termination by The Franklin . . . . . . . . . . . . . . . . . . . . . 15
Inquiries and Written Notices . . . . . . . . . . . . . . . . . . . . 15

CONDENSED FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . 16

THE FRANKLIN, THE FUND, AND THE PORTFOLIOS . . . . . . . . . . . . . . . . 17
The Franklin. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
The Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
The Portfolios. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

DESCRIPTION OF THE CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . 19
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Annuity Payments . . . . . . . . . . . . . . . . . . . . . . . . 21
Changing Periodic Stipulated Payments. . . . . . . . . . . . . . 21
Assignment or Pledge . . . . . . . . . . . . . . . . . . . . . . 22
Purchase Limits. . . . . . . . . . . . . . . . . . . . . . . . . 22
Termination by the Franklin. . . . . . . . . . . . . . . . . . . 23
Right to Revocation of Contract. . . . . . . . . . . . . . . . . 23
Transfers to Other Contracts . . . . . . . . . . . . . . . . . . 23
Deductions and Charges Under the Contracts . . . . . . . . . . . 24
Deferred Variable Annuity Accumulation Period . . . . . . . . . . . . 25
Crediting Accumulation Units . . . . . . . . . . . . . . . . . . 25
Valuation of a Contract Owner's Contract . . . . . . . . . . . . 25
Value of the Accumulation Unit . . . . . . . . . . . . . . . . . 26
Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Payment of Accumulated Value at Time of Death. . . . . . . . . . 27
Options upon Failure to Make Stipulated Payments . . . . . . . . 28
Reinstatement. . . . . . . . . . . . . . . . . . . . . . . . . . 28
Change of Beneficiary or Mode of Payment of Proceeds; Death of
Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . 28
Settlement Options . . . . . . . . . . . . . . . . . . . . . . . 29

<PAGE>

Transfer of Fixed-Dollar Annuity Values to Acquire Variable
Annuity Accumulation Units. . . . . . . . . . . . . . . . . . 32
Loans under Contract B . . . . . . . . . . . . . . . . . . . . . 32
Annuity Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Electing Annuity Payments and Settlement Option; Commencement of
Annuity Payments. . . . . . . . . . . . . . . . . . . . . . . 34
The Annuity Unit . . . . . . . . . . . . . . . . . . . . . . . . 34
Determination of Amount of First Monthly Annuity Payment
(Deferred Variable Annuity Contracts) . . . . . . . . . . . . 35
Amount of Second and Subsequent Monthly Annuity Payments
(Deferred Variable Annuity Contracts) . . . . . . . . . . . . 36
Determination of Amount of Annuity Payments (Immediate Variable
Annuity Contracts). . . . . . . . . . . . . . . . . . . . . . 36
Assumed Net Investment Rate. . . . . . . . . . . . . . . . . . . 36

FEDERAL INCOME TAX STATUS. . . . . . . . . . . . . . . . . . . . . . . . . 37
Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
The Franklin. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
The Contracts: Qualified Plans. . . . . . . . . . . . . . . . . . . . 37
The Contracts: Non-Qualified Plans. . . . . . . . . . . . . . . . . . 40
Aggregation of Contracts. . . . . . . . . . . . . . . . . . . . . . . 41
Income Tax Withholding. . . . . . . . . . . . . . . . . . . . . . . . 42

VOTING PRIVILEGES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

SERVICES UNDER THE CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . 44

STATE REGULATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

REPORTS TO OWNERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

EFFECT OF NON-QUALIFICATION. . . . . . . . . . . . . . . . . . . . . . . . 44

YIELD INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

REGISTRATION STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 45

TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION . . . . . . . 45

THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH AN OFFERING MAY NOT LAWFULLY BE MADE. THE FRANKLIN LIFE INSURANCE COMPANY
AND FRANKLIN LIFE VARIABLE ANNUITY FUND HAVE NOT AUTHORIZED ANY PERSON TO MAKE
ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED
IN THIS PROSPECTUS AND IN ANY AUTHORIZED SUPPLEMENTAL SALES MATERIAL.

3
<PAGE>

SPECIAL TERMS

ACCUMULATION UNIT - A unit of measure used to determine the value of a Contract
Owner's interest in a Subaccount prior to the initial Annuity Payment Date.

ADMINISTRATIVE OFFICE - The Administrative Office is the FLIC Annuity Service
Center, 2727-A Allen Parkway (3-50), Houston, Texas 77019-2191. The mailing
address and telephone number are P.O. Box 4799, Houston, Texas 77210-4799, (800)
231-0105 or (713) 831-3505.

ANNUITY PAYMENT DATE - The date The Franklin makes the first monthly Annuity
Payment to the Variable Annuitant, and the same day of each month thereafter so
long as the annuity is due. Depending on the Settlement Option elected, Annuity
Payment Dates may occur on a periodic basis other than monthly.

ANNUITY PAYMENTS - Periodic payments made to a Variable Annuitant pursuant to a
Contract. In certain circumstances, The Franklin may pay Annuity Payments to a
Beneficiary after the death of a Variable Annuitant.

ANNUITY UNIT - A unit of measure used to determine the value of Annuity Payments
after the first.

BENEFICIARY - The person or persons designated by the Contract Owner to whom any
payment due on death is payable.

CASH VALUE - The value of all Accumulation Units or Annuity Units attributable
to a Contract.

CODE - The Internal Revenue Code of 1986, as amended.

CONTRACT - One of the three individual variable annuity contracts issued by The
Franklin Life Insurance Company through Franklin Life Variable Annuity Fund that
is offered by this Prospectus ("Contract A," "Contract B," and "Contract C.")

CONTRACT ANNIVERSARY - An anniversary of the Effective Date of a Contract.

CONTRACT OWNER - Generally, the Contract Owner is the individual Variable
Annuitant to whom The Franklin issues a Contract, or another person if the
application for a Contract designates an owner other than the Variable
Annuitant. In cases where a Contract is issued to a trustee of a qualified
employees' trust or pursuant to a qualified annuity plan (Contract A or Contract
C only), the Contract Owner will be the trustee or the employer establishing
such trust or plan, and the employee named as the Variable Annuitant of such
Contract is referred to herein as the employee. When the term "Contract Owner"
is used in the context of voting rights, it includes the owners of all Contracts
which depend in whole or in part on the investment performance of a Subaccount.

CONTRACT YEAR - Each twelve-month period starting with the Effective Date and
each Contract Anniversary thereafter.

DEFERRED VARIABLE ANNUITY - An annuity contract that provides for Annuity
Payments to commence at some future date. Included are periodic payment
deferred contracts and single payment deferred contracts.

EFFECTIVE DATE - The date shown on the Schedule Page of a Contract as the date
the first Contract Year begins.

FIXED-DOLLAR ANNUITY - An annuity contract that provides for Annuity Payments
which remain fixed as to dollar amount throughout the Annuity Payment period.

THE FRANKLIN - The Franklin Life Insurance Company.

FUND - Franklin Life Variable Annuity Fund.

HOME OFFICE - The Home Office of The Franklin located at #1 Franklin Square,
Springfield, Illinois 62713.

IMMEDIATE VARIABLE ANNUITY - An annuity contract that provides for Annuity
Payments to commence immediately rather than at some future date.

INDIVIDUAL RETIREMENT ANNUITY - An annuity contract described in Section 408(b)
of the Code. Individual Retirement Annuities may also qualify as Simplified
Employee Pensions.

NON-QUALIFIED CONTRACTS - Contracts (either Contract B or Contract C) issued
under Non-Qualified Plans.

NON-QUALIFIED PLANS - Retirement or deferred compensation plans or arrangements
that do not receive favorable tax treatment under the Code.

PERIODIC STIPULATED PAYMENT CONTRACT - An annuity contract which provides that
payments made to purchase the contract will be made in periodic instalments
rather than in a single sum.

PORTFOLIO - A series of American General Series Portfolio Company, an open-end
management investment company in which the Fund invests.

QUALIFIED CONTRACTS - Contracts (either Contract A or Contract C) issued under
Qualified Plans.

4
<PAGE>

QUALIFIED PLANS - Retirement plans that receive favorable tax treatment under
the Code.

ROLLOVER CONTRIBUTION - A transfer pursuant to Sections 402(c)(1), 402(c)(9),
403(a)(4), 403(b)(8) or 408(d)(3) of the Code.

SEC - Securities and Exchange Commission.

SETTLEMENT OPTION OR OPTIONS - Alternative terms under which payment of the
amounts due in settlement of the Contracts may be received.

SIMPLIFIED EMPLOYEE PENSION - An Individual Retirement Annuity that meets the
additional requirements of Section 408(k) of the Code.

SINGLE STIPULATED PAYMENT CONTRACT - An annuity contract which provides that the
total payment to purchase the contract will be made in a single sum rather than
in periodic instalments. Included are single payment immediate contracts and
single payment deferred contracts.

STIPULATED PAYMENTS - The payment or payments to be made to The Franklin under a
Contract.

SUBACCOUNT - A subdivision of the Fund, whose assets are invested in a
corresponding Portfolio.

VALUATION DATE - The Valuation Date is each day on which both the New York Stock
Exchange and the Administrative Office are open for business except for a day
that a Subaccount's corresponding Portfolio does not value its shares. The New
York Stock Exchange is currently closed on weekends and on the following
holidays: New Year's Day; Reverend Dr. Martin Luther King, Jr. Holiday;
Presidents' Day; Good Friday; Memorial Day; Independence Day; Labor Day;
Thanksgiving Day; and Christmas Day.

VALUATION PERIOD - The period commencing on a Valuation Date and ending on the
next Valuation Date.

VARIABLE ANNUITANT - Any natural person with respect to whom a The Franklin has
issued a Contract and a Variable Annuity has been, will be or (but for death)
would have been effected thereunder. In certain circumstances, a Variable
Annuitant may elect to receive Annuity Payments on a fixed-basis or a
combination of a fixed and variable basis.

VARIABLE ANNUITY - An annuity contract which provides for a series of periodic
annuity payments, the amounts of which may increase or decrease as a result of
the investment experience of a separate account.

5
<PAGE>

FEE TABLES

The following pages present separate Fee Tables for each of the three Contracts.
Each Fee Table assists Contract Owners in understanding the various fees and
expenses that they bear directly or indirectly. Each table reflects expenses of
the Fund as well as the Portfolios. Although the Contracts provide for certain
administration fees, sales loads, or surrender or deferred sales charges,
effective October 1998, The Franklin waived the imposition and receipt of all
sales loads, surrender or deferred sales charges, and administration fees
specified in the Contracts. The Franklin may make deductions from Stipulated
Payments for any premium taxes payable by The Franklin on the amounts received
from the sale of the Contracts. See "Premium Taxes." See "Charges under the
Contracts" for a more detailed description of fees and expenses for each
Contract.

CONTRACT A FEE TABLE AND EXAMPLE

<TABLE>
<S> <C>
CONTRACT A - OWNER TRANSACTIONS EXPENSES

Sales Load Imposed on Purchases (as a percentage of purchase payments) None (1)

Administration Fee (as a percentage of purchase payments) None (2)

SUBACCOUNT A - ANNUAL EXPENSES (as a percentage of average net assets)

Mortality Fees 0.90%

Expense Risk Fees 0.10%

Total Subaccount A Annual Expenses 1.00%
PORTFOLIO (STOCK INDEX FUND) - ANNUAL EXPENSES (as a percentage of average net assets)

Management Fees 0.27%

Other Expenses (after expense limitations or reimbursements) 0.04%

Total Portfolio Annual Expenses (after expense limitations or reimbursements) 0.31%
Total Subaccount A and Portfolio Annual Expenses 1.31%
</TABLE>

- -----------------------

(1) Reflects waiver of the specified Contract charge. Contract A provides
that: (1) in the case of a Single Stipulated Payment Contract, a deduction equal
to 5% of the total single payment would be made for sales expenses; and (2) in
the case of Periodic Stipulated Payment Contracts, a deduction equal to 6% of
each periodic payment would be made for sales expenses.

(2) Reflects waiver of the specified Contract charge. Contract A provides
that: (1) in the case of a Single Stipulated Payment Contract, a deduction equal
to 4% (with a maximum of $100) of the total single payment would be made for
administrative expenses; and (2) in the case of Periodic Stipulated Payment
Contracts, a deduction equal to 3% of each periodic payment would be made for
administrative expenses.

6
<PAGE>

EXAMPLE

If you surrender your Contract A at the end of the applicable time period, you
would pay the following expenses (based on expenses for the year ended December
31, 1998) on a $1,000 investment, assuming a 5% annual return on assets:

<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>

Single Stipulated Payment Contract $15 $45 $78 $171

Periodic Stipulated Payment Contract $15 $45 $78 $171
</TABLE>

If you do not surrender your Contract A, you would pay the following expenses
(based on expenses for the year ended December 31, 1998) on a $1,000 investment,
assuming a 5% annual return on assets:

<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>

Single Stipulated Payment Contract $15 $45 $78 $171

Periodic Stipulated Payment Contract $15 $45 $78 $171
</TABLE>

PLEASE DO NOT CONSIDER THIS EXAMPLE AS A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

The example assumes that a single Stipulated Payment of $1,000 is made at the
beginning of the periods shown. (It should be noted that The Franklin will not
actually issue a Single Stipulated Payment Contract unless the single payment is
at least $2,500.) This assumption applies even with respect to Periodic
Stipulated Payment Contracts, which would normally require additional payments.
The example also assumes a constant investment return of 5% and the expenses
might be different if the return of the Subaccount averaged 5% over the periods
shown but fluctuated during such periods. The amounts shown in the example
represent the aggregate amounts that would be paid over the life of a Contract
if the Contract were surrendered at the end of the applicable time periods.

7
<PAGE>

CONTRACT B FEE TABLE AND EXAMPLE

<TABLE>
<S> <C>
CONTRACT B - OWNER TRANSACTIONS EXPENSES

Sales Load Imposed on Purchases (as a percentage of purchase payments) None (3)

Administration Fee (as a percentage of purchase payments) None (3)

SUBACCOUNT B - ANNUAL EXPENSES (as a percentage of average net assets)

Mortality Fees 0.90%

Expense Risk Fees 0.10%

Total Subaccount B Annual Expenses 1.00%

PORTFOLIO (STOCK INDEX FUND) - ANNUAL EXPENSES (as a percentage of average net assets)

Management Fees 0.27%

Other Expenses (after expense limitations and reimbursements) 0.04%

Total Portfolio Annual Expenses (after expense limitations and reimbursements) 0.31%

Total Subaccount B and Portfolio Annual Expenses 1.31%
</TABLE>

- ---------------------
(3) Reflects waiver of the specified Contract charge. Contract B provides
that in the case of a Single Stipulated Payment Contract, a deduction equal to
5% of the total single payment would be made for sales expenses and a deduction
of $100 would be made for administrative expenses (for a combined total, in the
case of a minimum Single Stipulated Payment Contract sold, of 9%). In the case
of Periodic Stipulated Payment Contracts, Contract B provides that a deduction,
which varies depending upon the length of the Stipulated Payment period agreed
upon in the Contract and the Contract Year with respect to which the payment is
scheduled to be made, would be made for sales and administrative expenses. Over
the entire life of a 12-year Periodic Stipulated Payment Contract, total
deductions equal to 4.33% of all periodic payments are made for sales expenses
and total deductions equal to 4.67% of all periodic payments would be made for
administrative expenses (for a combined total of 9%); the combined total
deductions amount to 9.89% of the net amount invested assuming no premium taxes
are applicable (4.76% for sales expenses and 5.13% for administrative expenses).
During the first four years of a 12-year contract, however, combined total
deductions amount to 17.65%.

8
<PAGE>

EXAMPLE

If you surrender your Contract B at the end of the applicable time period, you
would pay the following expenses (based on expenses for the year ended December
31, 1998) on a $1,000 investment, assuming a 5% annual return on assets:

<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>

Single Stipulated Payment Contract $15 $45 $78 $171

Periodic Stipulated Payment Contract $15 $45 $78 $171
</TABLE>

If you do not surrender your Contract B, you would pay the following expenses
(based on expenses for the year ended December 31, 1998) on a $1,000 investment,
assuming a 5% annual return on assets:

<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>

Single Stipulated Payment Contract $15 $45 $78 $171

Periodic Stipulated Payment Contract $15 $45 $78 $171
</TABLE>

PLEASE DO NOT CONSIDER THIS EXAMPLE AS A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

<PAGE>

CONTRACT C FEE TABLE AND EXAMPLE

<TABLE>
<S> <C>
CONTRACT C - OWNER TRANSACTIONS EXPENSES

Sales Load (as a percentage of purchase payments) None (4)

Administration Fee (as a charge against purchase payments) None (5)

SUBACCOUNT C - ANNUAL EXPENSES (as a percentage of average net assets)

Mortality Fees 0.90%

Expense Risk Fees 0.16%

Total Subaccount C Annual Expenses 1.06%

PORTFOLIO (MONEY MARKET FUND) - ANNUAL EXPENSES (as a percentage of average net assets)

Management Fees 0.50%

Other Expenses (after expense limitations and reimbursements) 0.05%

Total Portfolio Annual Expenses (after expense limitations and reimbursements) 0.55%

Total Subaccount C and Portfolio Annual Expenses (after expense limitations)(6) 1.44%
</TABLE>

- ----------------------
(4) Reflects waiver of the specified Contract charge. Contract C provides
that a contingent deferred sales charge, applied against the lesser of the Cash
Value or Stipulated Payments made during the immediately preceding 72 months,
would be deducted in the event of certain redemptions. In the case of Periodic
Stipulated Payment Contracts, such charges for total redemptions would start at
8% for the first three Contract Years and then decline by 2% increments per year
through the sixth Contract Year, with no such charge being imposed after the end
of the sixth Contract Year. In the case of Single Stipulated Payment Contracts,
such charges for total redemptions would start at 6% for the first two Contract
Years and then decline by 2% increments per year through the fourth Contract
Year, with no such charge being imposed after the end of the fourth Contract
Year.

(5) Reflects waiver of the specified Contract charge. Under Contract C, a
deduction of $20 per Contract Year (subject to increase by The Franklin to a
maximum of $30 per Contract Year) and a transaction fee of $1.00 per Stipulated
Payment ($.50 if by Bank Draft or by employer or military preauthorized
automatic deduction from compensation) in the case of Periodic Stipulated
Payment Contracts, and a one-time deduction of $100 in the case of Single
Stipulated Payment Contracts, would be made from Stipulated Payments for
administrative expenses.

(6) The Franklin implemented an expense limitation whereby the Subaccount's
total annual expenses (as a percentage of average net assets), will not exceed
1.44%, which was the total annual expenses (as a percentage of average net
assets) for the year ended December 31, 1998 of the separate account that
previously issued Contract C (Franklin Life Money Market Variable Annuity Fund
C). Absent this expense limitation, the total Subaccount C and Portfolio annual
expenses (as a percentage of average net assets) would have been 1.615%. See
"Summary -- Charges Under the Contracts."

10
<PAGE>

EXAMPLE

If you surrender your Contract C at the end of the applicable time period, you
would pay the following expenses (based on expenses for the year ended December
31, 1998) on a $1,000 investment, assuming a 5% annual return on assets:

<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Single Stipulated Payment Contract $15 $45 $78 $171

Periodic Stipulated Payment Contract $15 $45 $78 $171
</TABLE>

If you do not surrender your Contract C, you would pay the following expenses
(based on expenses for the year ended December 31, 1998) on a $1,000 investment,
assuming a 5% annual return on assets:

<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>

Single Stipulated Payment Contract $15 $45 $78 $171

Periodic Stipulated Payment Contract $15 $45 $78 $171
</TABLE>

PLEASE DO NOT CONSIDER THIS EXAMPLE AS A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

11
<PAGE>

SUMMARY

GENERAL DESCRIPTION

This prospectus provides Contract Owners with information regarding the three
separate variable annuity contracts that The Franklin offers through this
prospectus. Each Contract is a variable annuity contract issued through the
Fund by The Franklin that is designed to assist in retirement planning for
individuals:

- Contract A is used in connection with certain qualified plans and
trusts accorded special tax treatment or as individual retirement
annuities under the Code.

- Contract B is designed for retirement planning for individuals, and is
NOT for use in connection with employer-related plans or qualified
plans and trusts (including individual retirement annuities) accorded
special tax treatment under the Code.

- Contract C is used as an individual retirement annuity or in
connection with trusts and retirement or deferred compensation plans
that may or may not qualify for special federal tax treatment under
the Code. See "Federal Income Tax Status," below.

THE FRANKLIN NO LONGER ISSUES NEW CONTRACTS ALTHOUGH PAYMENTS ARE STILL ACCEPTED
ON EXISTING CONTRACTS. Because the Contracts are similar in many respects, this
prospectus includes one description of provisions that apply to each of the
Contracts once. The prospectus includes separate descriptions for provisions
that differ among the Contracts. This summary provides a concise description of
the more significant aspects of each Contract. This prospectus, the related
Statement of Additional Information, and each Contract provide further detail.
Separate prospectuses describe the Portfolios. Please contact the
Administrative Office for further information.

The Franklin offered two types of each Contract:

- Immediate Variable Annuities, where Annuity Payments to the Variable
Annuitant commence immediately, and

- Deferred Variable Annuities, where Annuity Payments to the Variable
Annuitant commence in the future.

Immediate Variable Annuities could only be purchased with a single Stipulated
Payment, and Deferred Variable Annuities could be purchased either with periodic
Stipulated Payments or with a single Stipulated Payment.

The basic purpose of each Contract is to provide Annuity Payments that will
commence on the initial Annuity Payment Date selected by the Contract Owner and
may vary with the investment performance of a designated Subaccount of Franklin
Life Variable Annuity Fund. The Franklin is the issuer of the Contracts and the
obligations under the Contracts are The Franklin's obligations. The Franklin
does not guarantee any minimum value for amounts allocated to the Subaccounts.

12
<PAGE>

THE FUND

The Fund is a unit investment trust that currently has three Subaccounts:

- Subaccount A, which holds payments by owners of Contract A and values
with respect to Contract A;

- Subaccount B, which holds payments by owners of Contract B and values
with respect to Contract B; and

- Subaccount C, which holds payments by owners of Contract C and values
with respect to Contract C.

Prior to April 30, 1999, each Contract was issued through a different management
company separate account established by The Franklin: Contract A was issued
through Franklin Life Variable Annuity Fund A (the predecessor to the Fund),
Contract B was issued through Franklin Life Variable Annuity Fund B, and
Contract C was issued through Franklin Life Money Market Variable Annuity Fund
C.

However, pursuant to a set of transactions approved by Contract Owners in April
of 1999, Franklin Life Variable Annuity Fund A: (1) was renamed "Franklin Life
Variable Annuity Fund"; (2) was consolidated with Franklin Life Variable Annuity
Fund B and Franklin Life Money Market Variable Annuity Fund C; and (3) was
converted from a management investment company into a unit investment trust
having separate Subaccounts corresponding to each of the three Contracts.

Each Subaccount invests exclusively in shares of a certain Portfolio of American
General Series Portfolio Company, an open-end management investment company as
follows:

- assets of Subaccount A and Subaccount B are invested in the Stock
Index Fund of American General Series Portfolio Company; and

- assets of Subaccount C are invested in the Money Market Fund of
American General Series Portfolio Company.

The Cash Value of payments allocated to the Franklin Life Variable Annuity Fund
will vary with the investment performance of the Subaccounts and The Franklin
does not guarantee the Cash Value.

CHARGES UNDER THE CONTRACTS

The separate Fee Tables that appear immediately before this summary illustrate
the charges applicable to each Contract. These charges also are described below
under "Deductions and Charges Under the Contracts." Although the Contracts
provide for certain administration fees, sales loads, or surrender or deferred
sales charges, beginning in October 1998, The Franklin waived the imposition and
receipt of all sales loads, surrender or deferred sales charges, and
administration fees specified in the Contracts. In addition, The Franklin
implemented an expense limitation whereby each Subaccount's total annual
expenses (as a percentage of average net assets), will not exceed the total
annual expenses (as a percentage of average net assets) for the year ended
December 31, 1998 of the separate account that previously issued the Contract.
The following is a summary of the remaining charges associated with each
Contract.

13
<PAGE>

- MORTALITY AND EXPENSE RISK CHARGES. For Contract A and Contract B,
The Franklin assesses a daily charge of 1.002% of net asset value on
an annual basis against Subaccount A and Subaccount B (consisting of
0.900% for The Franklin's assurances of annuity rates or mortality
factors and 0.102% for The Franklin's assurances of expense factors).
The charges for annuity rate, mortality assurances and expense
assurances associated with Contract C total 1.065% on an annual basis
and are made daily against the net asset value of Subaccount C (0.900%
for The Franklin's assurance of annuity rates or mortality factors and
0.165% for The Franklin's assurances of expense factors). See
"Mortality and Expense Risk Charge," below.

- PORTFOLIO EXPENSES. The investment experience of each Subaccount
reflects that of the Portfolio whose shares it holds. The investment
experience of each Portfolio reflects its fees and other operating
expenses. Please read the prospectuses of the Portfolios for details.

- PREMIUM TAXES. The various jurisdictions in which The Franklin is
transacting business regarding the Contracts charge premium taxes
ranging up to 5% of the premiums received by The Franklin from the
sale of the Contracts. The Franklin deducts the amount of such taxes
from the Stipulated Payments at the time any premium taxes are
payable.

MINIMUM INVESTMENT

Subject to limited exceptions, the minimum single Stipulated Payment is $2,500.
The minimum Periodic Stipulated Payment Contract sold is one under which the
annual payments are currently $120 (for Contract A and Contract B) or $360 (for
Contract C), and the minimum of each monthly Stipulated Payment is currently $10
(for Contract A and Contract B) or $30 (for Contract C). See "Purchase Limits,"
below.

REDEMPTION

Prior to the death of the Variable Annuitant and prior to the Contract's initial
Annuity Payment Date, a Contract Owner under a Deferred Variable Annuity
Contract may redeem all or part of the Contract and receive the Cash Value less
federal income tax withholding, if applicable. The Cash Value is equal to the
number of Accumulation Units credited to the part of the Contract redeemed
multiplied by the value of an Accumulation Unit at the end of the Valuation
Period in which The Franklin receives the redemption request. Under Contract A
and Contract C, any redemption will be subject to any limitations on early
settlement contained in an applicable Qualified Plan and subject to limitations
on early withdrawals imposed in connection with Section 403(b) annuity purchase
plans (see "Federal Income Tax Status," below). Partial redemptions under
Contract C must be in amounts of at least $500. For information as to
Accumulation Units, see "Value of the Accumulation Unit," below.

Subject to certain limitations, a Contract Owner may elect to have all or a
portion of the amount due upon a total redemption of a Contract applied under
certain Settlement Options or applied toward the purchase of other annuity or
insurance products offered by The Franklin. Federal tax penalties may apply to
certain redemptions. See "Redemption," "Transfers to Other Contracts,"
"Settlement Options," and "Federal Income Tax Status," below.

14
<PAGE>

DEATH BENEFITS

The Franklin will pay death benefits to the surviving Beneficiary if a Variable
Annuitant dies before the initial Annuity Payment Date. The death benefits
payable will be the Cash Value of a Contract determined as of the Valuation Date
on which The Franklin receives written notice of death. See "Payment of
Accumulated Value at Time of Death," below.

SETTLEMENT OPTIONS

At any time prior to the initial Annuity Payment Date and during the Variable
Annuitant's lifetime, the Contract Owner may elect to have all or a portion of
the amount due in settlement of a Contract applied under any of the available
Settlement Options. A Contract Owner may select available Settlement Options on
a fixed or variable basis or a combination thereof. Certain Settlement Options
are subject to satisfactory proof of age of the person or persons to whom the
Annuity Payments are to be made. See "Settlement Options," below.

TERMINATION BY THE FRANKLIN

The Franklin currently reserves the right to terminate Contracts if Stipulated
Payments are less than $120 (for Contract A and Contract B) or $360 (for
Contract C) in each of three consecutive Contract Years (excluding the first
Contract Year), and if the Cash Value is less than $500 at the end of such
three-year period. For Contract A and Contract C, different termination
provisions apply in the case of Individual Retirement Annuities. See
"Termination by The Franklin," below.

INQUIRIES AND WRITTEN NOTICES

Please contact the Administrative Office with any inquiry regarding a Contract,
procedures or other matters, and any written notice or request. All inquiries
and requests should include the Contract number, the Contract Owner's name and
signature, and the Variable Annuitant's name.

15
<PAGE>

CONDENSED FINANCIAL INFORMATION

The following condensed financial information shows the value of an Accumulation
Unit and how it has changed during the past 10 years. The information is
derived from the financial statements for Franklin Life Variable Annuity Fund A
(the separate account that held values with respect to Contract A during the
past 10 years), Franklin Life Variable Annuity Fund B (the separate account that
held values with respect to Contract B during the past 10 years), and Franklin
Life Money Market Variable Annuity Fund C (the separate account that held values
with respect to Contract C during the past 10 years). Please read the
information in conjunction with the financial statements, related notes and
other financial information in the Statement of Additional Information.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31

1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
SUBACCOUNT A

Accumulation Unit value at beginning of period $98.429 $81.485 $69.200 $53.988 $53.593

Accumulation Unit value at end of period $123.031 $98.429 $81.485 $69.200 $53.988

Number of Accumulation Units outstanding at end of period 109,896 124,714 139,945 150,474 172,507

SUBACCOUNT B

Accumulation Unit value at beginning of period $110.589 $86.875 $73.016 $57.630 $57.854

Accumulation Unit value at end of period $147.176 $110.589 $86.875 $73.016 $57.630

Number of Accumulation Units outstanding at end of period 13,839 16,323 18,648 21,059 23,165

SUBACCOUNT C

Accumulation Unit value at beginning of period $23.733 $22.866 $22.030 $21.136 $20.593

Accumulation Unit value at end of period $24.594 $23.733 $22.866 $22.030 $21.136

Number of Accumulation Units outstanding at end of period 62,851 80,944 87,386 104,641 132,646

<CAPTION>
YEAR ENDED DECEMBER 31

1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
SUBACCOUNT A

Accumulation Unit value at beginning of period $53.023 $51.912 $37.134 $39.664 $31.828

Accumulation Unit value at end of period $53.593 $53.023 $51.912 $37.134 $39.664

Number of Accumulation Units outstanding at end of period 198,763 217,948 229,368 256,831 277,735

SUBACCOUNT B

Accumulation Unit value at beginning of period $55.693 $54.103 $39.821 $40.984 $32.432

Accumulation Unit value at end of period $57.854 $55.693 $54.103 $39.821 $40.984

Number of Accumulation Units outstanding at end of period 26,542 29,973 31,205 48,192 53,877

SUBACCOUNT C

Accumulation Unit value at beginning of period $20.270 $19.819 $18.948 $17.712 $16.414

Accumulation Unit value at end of period $20.593 $20.270 $19.810 $18.948 $17.712

Number of Accumulation Units outstanding at end of period 159,929 210,310 247,150 270,271 307,850
</TABLE>

FINANCIAL STATEMENTS - The Statement of Additional Information includes
financial statements for the Fund and The Franklin and the reports of the
independent auditors and accountants for the Fund and The Franklin.

16
<PAGE>

THE FRANKLIN, THE FUND, AND THE PORTFOLIOS

THE FRANKLIN

The Franklin Life Insurance Company:

- is a legal reserve stock life insurance company located at #1 Franklin
Square, Springfield, Illinois 62713

- was organized under the laws of the state of Illinois in 1884 as
Franklin Life Association (an assessment association)

- reincorporated as a mutual company under its present name in 1898, and
converted to a stock company in 1910

- issues individual life insurance, annuity and accident and health
insurance policies, group annuities and group life insurance and
offers a variety of whole life, life, retirement income and level and
decreasing term insurance plans

- is licensed in the District of Columbia, Puerto Rico, the Virgin
Islands, and all states except New York

- is an indirect wholly owned subsidiary of American General
Corporation, a financial services organization located at 2929 Allen
Parkway, Houston, Texas 77019

THE FUND

By resolution of the Board of Directors of The Franklin pursuant to the
provisions of the Illinois Insurance Code, The Franklin established Franklin
Life Variable Annuity Fund A (the immediate predecessor to the Fund) as a
separate investment account of The Franklin on November 5, 1969. Franklin Life
Variable Annuity Fund A was established as an open-end diversified management
investment company. In April of 1999, The Franklin effected a set of
transactions whereby Franklin Life Variable Annuity Fund A was renamed Franklin
Life Variable Annuity Fund (the "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.

As a unit investment trust, the Fund consists of three Subaccounts that each
invest exclusively in shares of a specified Portfolio. The Fund is registered
with the SEC under the Investment Company Act of 1940 (the "1940 Act") and meets
the definition of a "separate account" under the federal securities laws. Such
registration does not involve supervision of the management of the Fund or of
The Franklin by the SEC. The Fund also is governed by the laws of Illinois, The
Franklin's state of domicile, and may also be governed by laws of other states
in which The Franklin does business.

Under the provisions of the Illinois Insurance Code: (1) the income, gains or
losses of the Fund are credited to or charged against the amounts allocated to
the Fund in accordance with the terms of the Contracts, without regard to the
other income, gains or losses of The Franklin; and (2) the assets of the Fund
are not chargeable with liabilities arising out of The Franklin's other business
activities, including liabilities of any other separate account which may be
established. The Franklin holds these assets with

17
<PAGE>

relation to the Contracts described in this prospectus and such other variable
annuity contracts as The Franklin may issue and designate as participating in
the Fund. All obligations arising under the Contracts, including the promise to
make Annuity Payments, are general corporate obligations of The Franklin.
Accordingly, all of The Franklin's assets (except those allocated to other
separate accounts which have been or may be established) are available to meet
its obligations and expenses under the Contracts participating in the Fund.

The Franklin is taxed as a "life insurance company" under the Code. The Fund is
subject to tax as part of The Franklin for federal income tax purposes.
However, the Fund's operations are considered separately from The Franklin's
other operations in computing The Franklin's tax liability, and the Fund is not
affected by federal income taxes paid by The Franklin with respect to its other
operations. The Fund's operations are treated separately from The Franklin's
other operations for accounting and financial statement purposes. Under
existing law, The Franklin pays no federal income tax on investment income and
realized capital gains of the Fund. See "Federal Income Tax Status," below.

THE PORTFOLIOS

The Subaccounts of the Fund will invest exclusively in shares of American
General Series Portfolio Company's Stock Index Fund and Money Market Fund.
American General Series Portfolio Company is registered with the SEC as an
open-end management investment company -- a type of company commonly known as a
"mutual fund." The Stock Index Fund and Money Market Fund offer their
respective shares of common stock exclusively to variable annuity and variable
life insurance separate accounts of insurance companies. As a "series" type of
investment company, American General Series Portfolio Company issues distinct
series of shares, each of which represents an interest in a separate diversified
portfolio or "pool" of investments. Both the Stock Index Fund and Money Market
Fund resemble a separate mutual fund issuing a separate series of shares.
Additional information about the Stock Index Fund and the Money Market Fund is
contained in American General Series Portfolio Company's prospectus and in the
statement of additional information referred to in that prospectus.

Each issued and outstanding share of a Portfolio is entitled to participate
equally in dividends and distributions from such Portfolio and in the net assets
of such Portfolio (I.E., the assets remaining after satisfaction of outstanding
liabilities) upon a liquidation or dissolution. Portfolio shares entitle their
holders to one vote per share; however, separate votes will be taken by each
series on matters affecting an individual series. Shares have noncumulative
voting rights and no preemptive or subscription rights. The Portfolios are not
required to hold shareholder meetings annually, although shareholder meetings
may be called for purposes such as electing or removing directors, changing
fundamental policies or approving an investment management contract.

The Variable Annuity Life Insurance Company ("VALIC"), an investment adviser
registered with the SEC under the Investment Advisers Act of 1940, serves as the
investment adviser to each to the Stock Index Fund and the Money Market Fund.
VALIC has engaged Bankers Trust Company as the investment sub-adviser for the
Stock Index Fund. The investment objectives of the Stock Index Fund and the
Money Market Fund are as follows:

18
<PAGE>

- The Stock Index Fund seeks long-term capital growth through investment
in common stocks that, as a group, are expected to provide investment
results closely corresponding to the performance of the Standard &
Poor's 500 Stock Index-Registered Trademark- ("S&P 500")(7).

- The Money Market Fund seeks liquidity, protection of capital and
current income through investments in short-term money market
instruments.

THERE IS NO ASSURANCE THAT ANY PORTFOLIO WILL ACHIEVE ITS STATED OBJECTIVE.

THE PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION FOR THE AMERICAN GENERAL
SERIES PORTFOLIO COMPANY CONTAINS MORE DETAILED INFORMATION CONCERNING THE
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS OF THE PORTFOLIOS, THE EXPENSES
OF THE PORTFOLIOS, THE RISKS ATTENDANT TO INVESTING IN THE PORTFOLIOS AND OTHER
ASPECTS OF THEIR OPERATIONS. PLEASE READ THE PORTFOLIOS' PROSPECTUS CAREFULLY
BEFORE MAKING ANY DECISION CONCERNING INVESTMENTS IN THE CONTRACTS.

The Franklin cannot guarantee that each Portfolio will always be available for
its variable annuity contracts, but in the unlikely event that a Portfolio is
not available, The Franklin will take reasonable steps to secure the
availability of a comparable portfolio. The Fund purchases and redeems shares
of each Portfolio at net asset value, without a sales charge.

American General Series Portfolio Company sells shares of the Portfolios to
separate accounts of insurance companies other than The Franklin, a practice
known as "shared funding." Shares of the Portfolios are also sold to separate
accounts to serve as the underlying investment for both variable annuity
contracts and variable life insurance contracts, a practice known as "mixed
funding." As a result, there is a possibility that a material conflict may
arise between the interests of Contract Owners, and of owners of other contracts
whose contract values are allocated to one or more other separate accounts
investing in any one of the Portfolios. In the event of any such material
conflicts, The Franklin will consider what action may be appropriate, including
removing the Portfolio from the Fund or replacing the Portfolio with another
portfolio.

DESCRIPTION OF THE CONTRACTS

GENERAL

The description of the Contracts contained in this prospectus is qualified in
its entirety by reference to the respective Contract, a copy of which is
available upon request from the Administrative Office. Unless otherwise
indicated in this prospectus, the discussion of the Contracts herein refers to
Variable Annuity Contracts, or to the Variable Annuity portion in cases where
both a Variable Annuity and a Fixed-Dollar Annuity are provided in the same
Contract, and not to any Fixed-Dollar Annuity. Provisions relating to a
Fixed-Dollar Annuity and a Variable Annuity are separate, and neither is
dependent upon the other in its operation.

- ------------------

(7) Standard & Poor's-Registered Trademark-, S&P-Registered Trademark-,
S&P 500-Registered Trademark-, and Standard & Poor's 500-Registered Trademark-
are trademarks of The McGraw-Hill Companies, Inc. The Stock Index Fund is not
sponsored, endorsed, sold or promoted by Standard & Poor's, and Standard &
Poor's makes no representation regarding the advisability of investing in the
Stock Index Fund.

19
<PAGE>

The Franklin designed the three Contracts offered by this prospectus primarily
to assist in retirement planning for individuals. The Contracts provide Annuity
Payments for life commencing on a selected Annuity Payment Date, but other
Settlement Options are available. The amount of the Annuity Payments may vary
with the investment performance of the specified Subaccount of the Fund.

For each of the three Contracts, The Franklin offers two types of Contracts
pursuant to this prospectus: those under which Annuity Payments to the Variable
Annuitant commence immediately - "Immediate Variable Annuities" - and those
under which Annuity Payments to the Variable Annuitant commence in the future -
"Deferred Variable Annuities." Deferred Variable Annuities could be purchased
either with periodic Stipulated Payments or with a single Stipulated Payment,
while Immediate Variable Annuities could only be purchased with a single
Stipulated Payment.

The Contract Owner may elect to have a portion of the Stipulated Payment or
Payments applied by The Franklin for the purchase of a Fixed-Dollar Annuity
subject to the terms of any plan pursuant to which a Contract is issued.
Fixed-Dollar Annuity contracts do not, however, participate in the Fund and the
amounts associated with Fixed-Dollar Annuity contracts are held in The
Franklin's general account. In cases where both a Fixed-Dollar and a Variable
Annuity are provided under the same contract, either annuity may be terminated
and the Cash Value attributable thereto obtained or other Settlement Option
elected by the Contract Owner, at any time prior to commencement of Annuity
Payments by The Franklin. Under these circumstances, the other annuity may be
continued in effect, provided that the annual stipulated payment allocated to
the other annuity satisfies The Franklin's usual underwriting practices. These
practices presently require that each periodic Stipulated Payment which
purchases the Variable Annuity be at least $10 for Contracts A and B, and $30
for Contract C. See generally "Redemption," "Settlement Options," and "Federal
Income Tax Status-Individual Retirement Annuities," below.

The discussion of Contract terms herein in many cases summarizes those terms.
Reference is made to the full text of the separate Contract forms, which are
filed with the SEC as exhibits to the Registration Statement under the
Securities Act of 1933 and the Investment Company Act of 1940, and are available
upon request to the Administrative Office. For Contract A and Contract C, the
exercise of certain of the Contract rights herein described may be subject to
the terms and conditions of any Qualified Plan under which such Contract may be
purchased. This prospectus contains no information concerning any such
Qualified Plan. Further information relating to some Qualified Plans may be
obtained from the disclosure documents required to be distributed to employees
under the Employee Retirement Income Security Act of 1974.

The Qualified Contracts described in this Prospectus were not knowingly sold
other than for use:

(1) in connection with qualified employee pension and profit-sharing
trusts described in Section 401(a) and tax-exempt under Section 501(a)
of the Code, and qualified annuity plans described in Section 403(a)
of the Code;

(2) in connection with qualified pension, profit-sharing and annuity plans
established by self-employed persons ("H.R. 10 Plans");

(3) in connection with annuity purchase plans adopted by public school
systems and certain tax-exempt organizations pursuant to Section
403(b) of the Code; or

20
<PAGE>

(4) as Individual Retirement Annuities described in Section 408(b) of the
Code, including Simplified Employee Pensions described in Section
408(k) of the Code.

The sections below discuss other provisions of the Contracts and administrative
practices of The Franklin with respect to the Contracts.

ANNUITY PAYMENTS

The Franklin determines Variable Annuity Payments on the basis of (1) an annuity
rate table specified in the Contract, and (2) the investment performance of the
Subaccount. In the case of Deferred Variable Annuity Contracts, the annuity
rate table is set forth in the Contract. In the case of Immediate Variable
Annuities, the table is that used by The Franklin on the date of issue of the
Contract. Mortality experience adverse to The Franklin or an increase in The
Franklin's expenses related to the Fund or the Contracts in excess of the
expense deductions provided for in the Contracts will not affect the amount of
the Annuity Payments. The Variable Annuitant under an annuity with a life
contingency or one providing for a number of Annuity Payments certain will
receive the value of a fixed number of Annuity Units each month, determined as
of the initial Annuity Payment Date on the basis of the applicable annuity rate
table and the then value of his or her account. The value of Annuity Units, and
thus the amounts of the monthly Annuity Payments, will, however, reflect
investment gains and losses and investment income occurring after the initial
Annuity Payment Date, and thus the amount of the Annuity Payments will vary with
the investment experience of the Fund. See "Annuity Period," below.

Certain of the Contracts described in this prospectus incorporate annuity rate
tables which reflect the age and sex of the Variable Annuitant and the
Settlement Option selected. Such sex-distinct tables are appropriate for use,
for example, under Contracts which are not purchased in connection with certain
"employer-related" plans (such as individual retirement annuities not sponsored
by an employer). However, The Franklin will provide "unisex" annuity rate
tables for use under Contracts purchased in connection with "employer-related"
plans.

CHANGING PERIODIC STIPULATED PAYMENTS

Contract Owners can pay Stipulated Payments on an annual, semi-annual or
quarterly schedule or, with The Franklin's consent, monthly. The first
Stipulated Payment was due as of the date of issue and each subsequent
Stipulated Payment is due on the first day following the interval covered by the
next preceding Stipulated Payment and on the same date each month as the date of
issue.

A Contract Owner (of Contract A or Contract C) may increase the amount of a
Stipulated Payment on an annualized basis under a Periodic Stipulated Payment
Contract (except in the case of an Individual Retirement Annuity, which cannot
be increased above the amounts described under "Purchase Limits," below) up to
an amount on an annualized basis equal to twice (or ten times in the case of
Contract C) the amount of the first Stipulated Payment on an annualized basis.

For all Contracts, the amount of a periodic Stipulated Payment may be decreased
by the Contract Owner on any date a Stipulated Payment is due (subject to the
limitations described under "Purchase Limits" below). After such a decrease
under Contract B, the Contract Owner is permitted to increase his periodic
Stipulated Payments up to, but not in excess of, the amount originally provided
in the Contract. Unless otherwise agreed to by The Franklin, the Contract Owner
can change the mode of Stipulated Payment only on a Contract Anniversary.

<PAGE>

For Contracts A and C, the Contract Owner may continue making Stipulated
Payments after the agreed number of Stipulated Payments has been made, but The
Franklin will not accept Stipulated Payments after age 75. Submission of a
Stipulated Payment in an amount different from that of the previous payment,
subject to the aforesaid limits, will constitute notice of the election of the
Contract Owner to make such change. A Contract Owner of Contract B having a
Stipulated Payment period of 12 years or more may continue making Stipulated
Payments after the agreed amount of Stipulated Payments has been made, subject
to the limitation that no more than twice the amount of Stipulated Payments
specified in the Contract will be received by The Franklin, and The Franklin
reserves the right not to accept Stipulated Payments after age 75.

ASSIGNMENT OR PLEDGE

A Contract Owner may not assign a Qualified Contract unless it was issued to a
trustee in connection with certain types of plans designed to qualify under
Section 401 of the Code or when made pursuant to a qualified domestic relations
order rendered by a state court in satisfaction of family support obligations.
In general, a pledge or assignment made with respect to certain Qualified
Contracts may, depending on such factors as the amount pledged or assigned, be
treated as a taxable distribution. See "Individual Retirement Annuities,"
below, for special rules applicable thereto. Moreover, in certain instances,
pledges or assignments of a Qualified Contract may result in the imposition of
certain tax penalties. See "The Contracts: Qualified Plans," below.

A Contract Owner may assign a Non-Qualified Contract or pledge a Non-Qualified
Contract as collateral security as provided in the Non-Qualified Contract.
Assignments or pledges of a Non-Qualified Contract will be treated as
distributions that may be taxable. Moreover, in certain instances, pledges or
assignments of a Non-Qualified Contract may result in the imposition of certain
tax penalties. See "The Contracts: Non-Qualified Plans," below.

Persons contemplating the assignment or pledge of a Qualified Contract or a
Non-Qualified Contract should consult a qualified tax advisor concerning the
federal income tax consequences.

PURCHASE LIMITS

The Contracts have different provisions regarding purchase limits as described
below.

CONTRACT A AND CONTRACT C - Currently, no periodic Stipulated Payment may be
less than $10 ($120 on an annual basis) for Contract A, or $30 ($360 on an
annual basis) for Contract C. Under the terms of Contract A, The Franklin may
increase the minimum periodic Stipulated Payment to $20 ($240 on an annual
basis). No single Stipulated Payment may be less than $2,500, except that in
the case of a deferred Single Stipulated Payment Contract to be used as an
Individual Retirement Annuity funded with a Rollover Contribution, the total
Stipulated Payment applicable to the Variable Annuity must be at least $1,000
unless, with consent of The Franklin, a smaller single Stipulated Payment is
permitted. In the case of a Qualified Contract issued for use as an Individual
Retirement Annuity, annual premium payments may not, in general, exceed $2,000.
However, if the Individual Retirement Annuity is a Simplified Employee Pension,
annual premium payments may not exceed $24,500. Single Stipulated Payment
Contracts are not available as Individual Retirement Annuities except for those
funded with Rollover Contributions and except for those to be used as Simplified
Employee Pensions.

<PAGE>

CONTRACT B - No single Stipulated Payment may be less than $2,500. Currently,
no Stipulated Payment may be less than $10 ($120 on an annual basis). Under the
terms of Contract B, The Franklin may increase the minimum periodic Stipulated
Payment to $20 ($240 on an annual basis).

TERMINATION BY THE FRANKLIN

The Franklin currently reserves the right to terminate any Contract, other than
a Contract issued for use as an Individual Retirement Annuity, if total
Stipulated Payments paid are less than $120 (for Contract A and Contract B) or
$360 (for Contract C) in each of three consecutive Contract Years (excluding the
first Contract Year) and if the Cash Value is less than $500 at the end of such
three-year period. Under the terms of Contract A and Contract B, The Franklin
may terminate such Contracts if total Stipulated Payments paid are less than
$240 in each of such three consecutive Contract Years and if the Cash Value is
less than $500 at the end of such three-year period. For each Contract, The
Franklin must give 31 days' notice by mail to the Contract Owner of such
termination.

For Contract A and Contract C, The Franklin reserves the right to terminate any
Contract issued for use as an Individual Retirement Annuity if no Stipulated
Payments have been received for any two Contract Years and if the first monthly
Annuity Payment, determined at the initial Annuity Payment Date, arising from
the Stipulated Payments received prior to such two-year period would be less
than $20.

Upon termination as described above, The Franklin will pay to the Contract Owner
the Cash Value of the Contract, less federal income tax withholding, if
applicable. For certain tax consequences upon such payment, see "Federal Income
Tax Status," below.

RIGHT TO REVOCATION OF CONTRACT

No new Contracts are being sold, but the following revocation right will apply
if The Franklin decides to sell any new Contracts. A Contract Owner has the
right to revoke the purchase of a Contract within 10 days after receipt of the
Contract, and upon such revocation will be entitled to a return of the entire
amount paid. The request for revocation must be made by mailing or
hand-delivering the Contract and a written request for its revocation within
such 10-day period either to the Administrative Office, or to the agent from
whom the Contract was purchased. In general, notice of revocation given by mail
is deemed to be given on the date of the postmark, or, if sent by certified or
registered mail, the date of certification or registration.

TRANSFERS TO OTHER CONTRACTS

Contracts may be redeemed prior to the death of the Variable Annuitant and the
initial Annuity Payment Date and the Cash Value (less the required amount of
federal income tax withholding, if any) may be applied to the purchase of
certain other Variable Annuities, Fixed-Dollar Annuities or life insurance
contracts issued by The Franklin. For Contracts issued in connection with a
Qualified Plan, redemptions will be subject to any limitations in the Qualified
Plan.

It is not clear whether gain or loss will be recognized for federal income tax
purposes upon the redemption of a Contract, another annuity contract or a life
insurance contract issued by The Franklin for purposes of applying the
redemption proceeds to the purchase of another contract issued by The Franklin.
Federal tax penalties may also apply to such redemptions. Since the income and
withholding tax consequences of such redemption and purchase depend on many
factors, any person contemplating

<PAGE>

redemption of a Contract or another contract issued by The Franklin for purposes
of purchasing a different contract issued by The Franklin (or any other
contract) should to consult a qualified tax advisor prior to the time of
redemption.

DEDUCTIONS AND CHARGES UNDER THE CONTRACTS

The Contracts provide for certain administration fees, sales loads, or surrender
or deferred sales charges. However, beginning in October 1998, The Franklin
waived the imposition and receipt of all sales loads, surrender or deferred
sales charges, and administration fees specified in the Contracts. See "Fee
Tables" above, or contact the Administrative Office for more information.

SALES, SURRENDER AND ADMINISTRATION DEDUCTIONS. Prior to October of 1998, The
Franklin applied all sales loads, surrender or deferred sales charges, and
administration fees specified in the Contracts. During that time:

(1) The Franklin made deductions for sales expenses of Contract A and
Contract B from Stipulated Payments pursuant to Sales Agreements with
Franklin Financial Services Corporation ("Franklin Financial");

(2) for Contract C, The Franklin made no deductions from Stipulated
Payments, but The Franklin paid commissions on the sales of Contracts
C to agents of Franklin Financial pursuant to an agreement, and
contingent deferred sales charges were applied upon redemption of a
Contract; and

(3) for all Contracts, The Franklin made deductions for administrative
expenses pursuant to Administration Agreements with The Franklin.

MORTALITY AND EXPENSE RISK CHARGE. While Annuity Payments will reflect the
investment performance of the Subaccounts, they will not be affected by adverse
mortality experience or by the actual expenses of the Contracts and the Fund.
The Franklin assumes the risk that Annuity Payments will continue for a longer
period than anticipated because the Variable Annuitant lives longer than
expected (or the Variable Annuitants as a class do so) and also assumes the risk
that the administration deductions may be insufficient to cover the actual
expenses of the administration of the Contracts and of the Fund. The Franklin
assumes these risks for the duration of the Contracts and the annuity rate,
mortality and expense risk deductions and charges set forth herein will not be
increased (beyond the maximum stated below, in the case of Contract C)
regardless of the actual mortality and expense experience. The mortality risk
charge is imposed regardless of whether or not the payment option selected
involves a life contingency.

For assuming these risks, The Franklin imposes a daily charge against the value
of the Accumulation Unit and the Annuity Unit. (For further information as to
the Accumulation Unit and the Annuity Unit, see "Deferred Variable Annuity
Accumulation Period" and "Annuity Period," below.) For Contract A and Contract
B, these charges are at the current combined annual rate of 1.002% (.002745% on
a daily basis), of which .900% is for annuity rate and mortality assurances and
.102% is for expense assurances. For Contract C, these charges are at the
current combined annual rate of 1.065% (.002918% on a daily basis), of which
.900% is for annuity rate and mortality assurances and .165% (subject to
increase at any time by The Franklin up to a maximum of .850%) is for expense
assurances.

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<PAGE>

PREMIUM TAXES. At the time any premium taxes are payable by The Franklin on the
consideration received from the sale of the Contracts, the amount thereof will
be deducted from the Stipulated Payments. Premium taxes ranging up to 5% are
charged by various jurisdictions in which The Franklin is transacting business.

PORTFOLIO EXPENSES. The investment performance of each Portfolio reflects the
management fee that it pays to its investment manager or adviser as well as
other operating expenses that it incurs. Investment management fees are
generally daily fees computed as a percent of a Portfolio's average daily net
assets at an annual rate. Please read the prospectus for each Portfolio for
complete details.

CHARGE FOR THE FRANKLIN'S TAXES. At the present time, The Franklin makes no
charge to the Fund for any federal, state, or local taxes that The Franklin
incurs which may be attributable to the Fund or the Contracts. The Franklin,
however, reserves the right in the future to make a charge for any such tax or
other economic burden resulting from the application of the tax laws that it
determines to be properly attributable to the Subaccounts or to the Contracts.

DEFERRED VARIABLE ANNUITY ACCUMULATION PERIOD

CREDITING ACCUMULATION UNITS

During the accumulation period (the period before the initial Annuity Payment
Date) and after October 1998, The Franklin makes no deductions from Stipulated
Payments for sales or administrative expenses. See "Deductions and Charges Under
the Contracts," above. However, The Franklin deducts any applicable premium
taxes, as specified above under that caption, from the Stipulated Payments. The
Franklin credits the balance of each Stipulated Payment to the Contract Owner in
the form of Accumulation Units.

The Franklin determines the number of a Contract Owner's Accumulation Units by
dividing the net amount of Stipulated Payments credited to his or her Contract
by the value of an Accumulation Unit at the end of the Valuation Period during
which The Franklin receives the Stipulated Payment.

The Franklin will not change the number of Accumulation Units so determined
based on any subsequent change in the dollar value of an Accumulation Unit, but
the dollar value of an Accumulation Unit may vary from day to day depending upon
the investment experience of the Subaccounts.

VALUATION OF A CONTRACT OWNER'S CONTRACT

A Contract Owner can determine the Cash Value of a Contract at any time prior to
the initial Annuity Payment Date by multiplying the total number of Accumulation
Units credited to the account by the current Accumulation Unit value. The
Contract Owner bears the investment risk, that is, the risk that market values
may decline. There is no assurance that the Cash Value of the Contract will
equal or exceed the Stipulated Payments made. A Contract Owner may obtain from
the Administrative Office information as to the current value of an Accumulation
Unit and the number of Accumulation Units credited to his or her Contract.

<PAGE>

VALUE OF THE ACCUMULATION UNIT

The value of an Accumulation Unit was set at $10 effective July 1, 1971 for
Contracts A and B, and effective July 1, 1981 for Contract C. The Franklin
values Accumulation Units for each Subaccount currently on each Valuation Date.
After the close of trading on a Valuation Date, or on a day when Accumulation
Units are not valued, the value of an Accumulation Unit is equal to its value as
of the immediately following Valuation Date. For each Subaccount, the value of
an Accumulation Unit on the last day of any Valuation Period is determined by
multiplying the value of an Accumulation Unit on the last day of the immediately
preceding Valuation Period by the Net Investment Factor (defined below) for the
current Valuation Period.

The Net Investment Factor is an index used to measure the investment performance
of a Subaccount from one Valuation Period to the next. For any Valuation
Period, the Net Investment Factor for any Subaccount reflects the change in the
net asset value per share of the Portfolio held in the Subaccount from one
Valuation Period to the next, adjusted for the daily deduction of the mortality
and expense risk charge from assets in the Subaccount. If any "ex-dividend"
date occurs during the Valuation Period, the per share amount of any dividend or
capital gain distribution is taken into account. Also, if any taxes need to be
reserved, a per share charge or credit for any taxes reserved for, which is
determined by The Franklin to have resulted from the operations of the
Subaccount, is taken into account. The Franklin calculates the Net Investment
Factor by dividing (1) by (2) and subtracting (3) from the result, where:

(1) is the result of:

a. the net asset value per share of the Portfolio held in the
Subaccount, determined at the end of the current Valuation
Period; plus

b. the per share amount of any dividend or capital gain
distributions made by the Portfolio held in the Subaccount, if
the "ex-dividend" date occurs during the current Valuation
Period; plus or minus

c. a per share charge or credit for any taxes reserved for, which
The Franklin determines to have resulted from the Subaccount's
operations.

(2) is the net asset value per share of the Portfolio held in the
Subaccount, determined at the end of the last prior Valuation Period.

(3) is a daily factor representing the mortality and expense risk charge
deducted from the Subaccount, adjusted for the number of days in the
Valuation Period.

REDEMPTION

Prior to the death of the Variable Annuitant and prior to the initial Annuity
Payment Date, a Contract Owner under a Deferred Variable Annuity Contract may
redeem the Contract, in whole or in part (at least $500 for any Contract C), by
submitting the Contract and a written request for its redemption to the
Administrative Office. Upon redemption, the Contract Owner will receive the
Cash Value of the part of the Contract redeemed. For Qualified Contracts,
redemption will be subject to any limitations on early settlement contained in
an applicable Qualified Plan. Early withdrawal of certain amounts attributable
to Contracts issued pursuant to an annuity purchase plan meeting the
requirements of Code Section 403(b)

<PAGE>

may be prohibited. See "Federal Income Tax Status," below. The Cash Value of a
Contract or part thereof redeemed prior to the initial Annuity Payment Date is
the number of Accumulation Units credited to the Contract (or that part so
redeemed) multiplied by the value of an Accumulation Unit at the end of the
Valuation Period in which the request for redemption is received. Except in
limited circumstances discussed below, The Franklin will pay the Cash Value
within seven days after the date The Franklin receives at the Administrative
Office a properly completed and documented request for redemption. The right of
redemption may be suspended or the date of payment postponed during any periods
when the New York Stock Exchange is closed (other than customary weekend and
holiday closings); when trading in the markets each Subaccount's Portfolio
normally utilizes is restricted, or an emergency exists as determined by the SEC
so that disposal of the Portfolio's investments or determination of its net
asset value is not reasonably practicable; or for such other periods as the SEC
by order may permit to protect Contract Owners.

Where the Contract Owner has both a Variable Annuity and a Fixed-Dollar Annuity,
a request for partial redemption, if no other indication is obtained from the
Contract Owner, will be treated as a pro rata request for partial redemption of
the Variable Annuity and the Fixed-Dollar Annuity.

In lieu of a single payment of the amount due upon redemption of a Contract, the
Contract Owner may elect, at any time prior to the initial Annuity Payment Date
and during the lifetime of the Variable Annuitant, to have all or any portion of
the amount due applied under any available Settlement Option. See "Settlement
Options," below. However, no Settlement Option may be elected upon redemption
without surrender of the entire Contract.

The payment of the Cash Value of a redeemed Contract either in a single payment
or under an available Settlement Option may be subject to federal income tax
withholding and federal tax penalties. See "Federal Income Tax Status," below.

PAYMENT OF ACCUMULATED VALUE AT TIME OF DEATH

In the event of the death of the Variable Annuitant prior to the initial Annuity
Payment Date, The Franklin will pay death benefits to the surviving beneficiary
within seven days after The Franklin receives written notice of such death. The
death proceeds payable will be the Cash Value of the Contract determined as of
the date on which written notice of death is received by The Franklin by mail if
such date is a Valuation Date. If such date is not a Valuation Date, The
Franklin will make the determination on the next following Valuation Date.
There is no assurance that the Cash Value of a Contract will equal or exceed the
Stipulated Payments made. For payment of death proceeds in the event no
Beneficiary is surviving at the death of the Variable Annuitant, see "Change of
Beneficiary or Mode of Payment of Proceeds; Death of Beneficiaries," below. The
Code imposes certain requirements concerning payment of death benefits payable
before the initial Annuity Payment Date in the case of Qualified Contracts
issued in connection with qualified pension and profit-sharing plans under
Section 401(a) of the Code. Under those Contracts, death benefits will be paid
as required by the Code and as specified in the governing plan documents.
Consult the terms of such documents to determine the death benefits and any
limitations the plan may impose. You should consult your legal counsel and tax
advisor regarding these requirements.

Subject to the foregoing, at any time prior to the initial Annuity Payment Date
the Contract Owner may elect that all or any portion of such death proceeds be
paid to the Beneficiary under any one of the available Settlement Options. See
"Settlement Options," below. If the Contract Owner has not made

<PAGE>

such an election, the Beneficiary may do so after the death of the Variable
Annuitant. The Contract Owner or the Beneficiary, whichever selects the method
of settlement, may designate contingent Beneficiaries to receive any other
amounts due should the first Beneficiary die before completion of the specified
payments. If neither the Contract Owner nor the Beneficiary elects payment of
death proceeds under an available Settlement Option, The Franklin will make
payment to the Beneficiary in a single sum. Death proceeds may be applied to
provide variable payments, fixed-dollar payments or a combination of both. The
payment of death proceeds may be subject to federal income tax withholding. See
"Income Tax Withholding," below.

In the event of the death of the Variable Annuitant after the initial Annuity
Payment Date, The Franklin will make payments under a Contract as described in
"Settlement Options," below.

OPTIONS UPON FAILURE TO MAKE STIPULATED PAYMENTS

Upon a failure to make a Stipulated Payment under a Periodic Stipulated Payment
Contract, subject to The Franklin's power of termination described under
"Termination by The Franklin," above, and subject to The Franklin's right to pay
the value of the Contract Owner's account in a single sum at the initial Annuity
Payment Date if the value on such date is less than $2,000, the Contract Owner
may elect, prior to the death of the Variable Annuitant and prior to the initial
Annuity Payment Date, either of the following options:

(1) to exercise any of the available Settlement Options described
under "Settlement Options," below, or redeem the Contract as
described under "Redemption," above; or

(2) to have the Contract continued from the date of failure to make a
Stipulated Payment as a paid-up annuity to commence on the
initial Annuity Payment Date stated in the Contract.

If the Contract Owner does not elect an option within 31 days after failure to
make a Stipulated Payment, the Contract will automatically be continued under
the paid-up annuity option.

REINSTATEMENT

By making one Stipulated Payment, a Contract Owner may reinstate a Periodic
Stipulated Payment Contract as to which there has been a failure to make a
Stipulated Payment, if the Contract at the time of the payment is being
continued as a paid-up annuity. However, such reinstatement does not
automatically reinstate the benefits provided by any riders to the Contract
providing life insurance or disability benefits. Contact The Franklin for
further information.

CHANGE OF BENEFICIARY OR MODE OF PAYMENT OF PROCEEDS; DEATH OF BENEFICIARIES

While a Contract is in force the Contract Owner may (by filing a written request
at the Administrative Office of The Franklin) change the Beneficiary or
Settlement Option, or, if agreed to by The Franklin, change to a mode of payment
different from one of the Settlement Options, subject to applicable limitations
under the Code and any governing Qualified Plan.

If any Beneficiary predeceases the Variable Annuitant, the interest of such
Beneficiary will pass to the surviving Beneficiaries, if any, unless otherwise
provided by endorsement. If no Beneficiary survives the Variable Annuitant and
no other provision has been made, then, upon the death of the Variable
Annuitant,

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<PAGE>

The Franklin will pay the proceeds in a single sum to the Contract Owner or, if
the Variable Annuitant was the Contract Owner, to the executors or
administrators of the Contract Owner's estate.

SETTLEMENT OPTIONS

In the case of Deferred Variable Annuity Contracts, at any time prior to the
initial Annuity Payment Date and during the lifetime of the Variable Annuitant,
the Contract Owner may elect to have all or a portion of the amount due in
settlement of a Contract applied under any of the available Settlement Options
described below. If the Contract Owner fails to elect a Settlement Option,
payment automatically will be made in the form of a life annuity. See "First
Option," below, and "Deferred Variable Annuity Contracts," below.

Annuity Payments made pursuant to a Settlement Option are made to the Variable
Annuitant during his or her lifetime, or for such shorter period that may apply
under the particular Settlement Option. Upon the death of the original Variable
Annuitant after the initial Annuity Payment Date, any remaining Annuity Payments
that are due according to the Settlement Option elected will be continued to the
Beneficiary or, if elected by the Contract Owner (or, if elected by the
Beneficiary when so designated by the Contract Owner), the Cash Value of the
Contract, as described under such Settlement Option below, will be paid to the
Beneficiary in one lump sum. Upon the death of any Beneficiary to whom payments
are being made under a Settlement Option, a single payment equal to the then
remaining Cash Value of the Contract, if any, will be paid to the executors or
administrators of the Beneficiary, unless other provision has been specified and
accepted by The Franklin. For a discussion of payments if no Beneficiary is
surviving at the death of the Variable Annuitant, see "Change of Beneficiary or
Mode of Payment of Proceeds; Death of Beneficiaries," immediately above.

Payment to a Contract Owner upon redemption of a Contract, and payment of death
proceeds to a Beneficiary upon the death of the Variable Annuitant prior to the
initial Annuity Payment Date, may also be made under an available Settlement
Option in certain circumstances. See "Redemption," above, and "Payment of
Accumulated Value at Time of Death," above.

Contract Owners may select available Settlement Options on a fixed or variable
basis or a combination thereof, except the Seventh Option, which is available on
a fixed basis only. Under an Option that is paid on a fixed basis, there is no
sharing in the investment experience of the Subaccount and, upon commencement of
payments, participation in the Subaccount terminates (the subject Contract will
be transferred to the general account of The Franklin). Settlement under the
First, Second, Third, Fourth or Fifth Option below is subject to satisfactory
proof of age of the person or persons to whom the Annuity Payments are to be
made.

The minimum amount of proceeds which may be applied under any Settlement Option
for any person is $2,000 and proceeds of a smaller amount may be paid in a
single sum in the discretion of The Franklin, except in the case of a deferred
Single Stipulated Payment Contract funded with a Rollover Contribution not in
excess of $2,000. See "Purchase Limits," above. Further, if at any time
payments under a Settlement Option become less than $25 per payment, The
Franklin has the right to change the frequency of payment to such intervals as
will result in payments of at least $25.

In the case of Immediate Variable Annuity Contracts, the only Settlement Options
offered are the life annuity, the life annuity with 120, 180 or 240 monthly
payments certain, or the joint and last survivor life

29
<PAGE>

annuity. See "First Option," "Second Option" and "Fourth Option," below, and
"Immediate Variable Annuity Contracts," below.

The distribution rules which Qualified Plans must satisfy in order to be
tax-qualified under the Code may limit the utilization of certain Settlement
Options, or may make certain Settlement Options unavailable, in the case of
Qualified Contracts issued in connection therewith. Similarly, the distribution
rules which Non-Qualified Contracts must satisfy in order to qualify as "annuity
contracts" under the Code may also limit available Settlement Options under
Non-Qualified Contracts. These distribution rules could affect such factors as
the commencement of distributions and the period of time over which
distributions may be made. All Settlement Options are offered subject to the
limitations of the distribution rules.

The Statement of Additional Information describes certain limitations on
Settlement Options based on The Franklin's current understanding of the
distribution rules generally applicable to Non-Qualified Contracts and to
Qualified Contracts purchased under this prospectus for use as Individual
Retirement Annuities or issued in connection with Section 403(b) annuity
purchase plans. See "Limitations on Settlement Options" in the Statement of
Additional Information. Contract Owners contemplating election of a Settlement
Option are urged to obtain and read the Statement of Additional Information.
Various questions exist, however, about the application of the distribution
rules to distributions from the Contracts and their effect on Settlement Option
availability thereunder. Contract Owners should consult a qualified tax advisor
concerning the effect of the distribution rules on the Settlement Option or
Options he or she is contemplating.

Neither this prospectus nor the Statement of Additional Information, however,
describes limitations on Settlement Options based on applicable distribution
rules in the case of Qualified Contracts issued in connection with qualified
pension and profit-sharing plans under Section 401(a) of the Code and annuity
plans under Section 403(a) of the Code. Under those Contracts, available
Settlement Options are limited to those Options specified in the governing plan
documents. The terms of such documents should be consulted to determine
Settlement Option availability and any other limitations the plan may impose on
early redemption of the Qualified Contract, payment in settlement thereof, or
similar matters. Generally, limitations comparable to those described in the
Statement of Additional Information for Individual Retirement Annuities and
Section 403(b) annuity purchase plans also apply with respect to such qualified
pension, profit-sharing and annuity plans (including H.R. 10 Plans).

Persons contemplating election of the Fifth, Sixth or Seventh Option should
consult a qualified tax advisor to determine whether the continuing right of
redemption under any such Option might be deemed for tax purposes to result in
the "constructive receipt" of the Cash Value of the Contract or proceeds
remaining on deposit with The Franklin.

FIRST OPTION - LIFE ANNUITY. An annuity payable monthly during the lifetime of
the Variable Annuitant, ceasing with the last Annuity Payment due prior to the
death of the Variable Annuitant. This Option offers the maximum level of
monthly Annuity Payments since there is no guarantee of a minimum number of
Annuity Payments or provision for any continued payments to a Beneficiary upon
the death of the Variable Annuitant. It would be possible under this Option for
the Variable Annuitant to receive only one Annuity Payment if he or she died
before the second Annuity Payment Date, or to receive only two Annuity Payments
if he or she died after the second Annuity Payment Date but before the third
Annuity Payment Date, and so forth.

<PAGE>

SECOND OPTION - LIFE ANNUITY WITH 120, 180 OR 240 MONTHLY PAYMENTS CERTAIN. An
annuity payable monthly during the lifetime of the Variable Annuitant including
the commitment that if, at the death of the Variable Annuitant, Annuity Payments
have been made for less than 120 months, 180 months or 240 months (as selected
by the Contract Owner in electing this Option), Annuity Payments shall be
continued during the remainder of the selected period to the Beneficiary. The
Cash Value under this Settlement Option is the present value of the current
dollar amount of any unpaid Annuity Payments certain.

THIRD OPTION - UNIT REFUND LIFE ANNUITY. An annuity payable monthly during the
lifetime of the Variable Annuitant, ceasing with the last Annuity Payment due
prior to the death of the Variable Annuitant, provided that, at the death of the
Variable Annuitant, the Beneficiary will receive a payment of the then dollar
value of the number of Annuity Units equal to the excess, if any, of (a) over
(b) where (a) is the total amount applied under this Option divided by the
Annuity Unit value at the initial Annuity Payment Date and (b) is the number of
Annuity Units represented by each Annuity Payment multiplied by the number of
Annuity Payments made.

For example, if $10,000 were applied on the first Annuity Payment Date to the
purchase of an annuity under this Option, the Annuity Unit value at the initial
Annuity Payment Date were $2.00, the number of Annuity Units represented by each
Annuity Payment were 30.55, 10 Annuity Payments were paid prior to the date of
the Variable Annuitant's death and the value of an Annuity Unit on the Valuation
Date following the Variable Annuitant's death were $2.05, the amount paid to the
Beneficiary would be $9,623.73, computed as follows:

FOURTH OPTION - JOINT AND LAST SURVIVOR LIFE ANNUITY. An annuity payable
monthly during the joint lifetime of the Variable Annuitant and a secondary
variable annuitant, and thereafter during the remaining lifetime of the
survivor, ceasing with the last Annuity Payment due prior to the death of the
survivor. Since there is no minimum number of guaranteed payments under this
Option, it would be possible under this Option to receive only one Annuity
Payment if both the Variable Annuitant and the secondary variable annuitant died
before the second Annuity Payment Date, or to receive only two Annuity Payments
if both the Variable Annuitant and the secondary variable annuitant died after
the second Annuity Payment Date but before the third Annuity Payment Date, and
so forth.

FIFTH OPTION - PAYMENTS FOR A DESIGNATED PERIOD. An amount payable monthly to
the Variable Annuitant for a number of years which may be from one to 30 (as
selected by the Contract Owner in electing this Option). At the death of the
Variable Annuitant, payments will be continued to the Beneficiary for the
remaining period. The cash value under this Settlement Option is the then
present value of the current dollar amount of any unpaid Annuity Payments
certain. A Contract under which Annuity Payments are being made under this
Settlement Option may be redeemed in whole or in part (but, if in part for
Contract C, not less than $500) at any time by the Contract Owner for the
aforesaid cash value of the part of the Contract redeemed. See "Redemption,"
above.

It should be noted that, while this Option does not involve a life contingency,
charges for annuity rate assurances, which include a factor for mortality risks,
are included in the computation of Annuity Payments due under this Option.
Further, although not contractually required to do so, The Franklin currently
follows a practice, which may be discontinued at any time, of permitting persons
receiving Annuity Payments under this Option to elect to convert such payments
to a Variable Annuity involving a

<PAGE>

life contingency under the First, Second, Third or Fourth Options above if, and
to the extent, such other Options are otherwise available to such person.

SIXTH OPTION - PAYMENTS OF A SPECIFIED DOLLAR AMOUNT. The amount due will be
paid to the Variable Annuitant in equal annual, semiannual, quarterly or monthly
Annuity Payments of a designated dollar amount (not less than $75 a year per
$1,000 of the original amount due) until the remaining balance (adjusted each
Valuation Period by the Net Investment Factor for the period) is less than the
amount of one Annuity Payment, at which time such balance will be paid and will
be the final Annuity Payment under this Option. Upon the death of the Variable
Annuitant, payments will be continued to the Beneficiary until such remaining
balance is paid. The cash value under this Settlement Option is the amount of
proceeds then remaining with The Franklin. A Contract under which Annuity
Payments are being made under this Settlement Option may be redeemed at any time
by the Contract Owner for the aforesaid cash value.

Annuity Payments made under the Sixth Option may, under certain circumstances,
be converted into a Variable Annuity involving a life contingency. See the last
paragraph under the Fifth Option, above, which applies in its entirety to the
Sixth Option as well.

SEVENTH OPTION - INVESTMENT INCOME. The amount due may be left on deposit with
The Franklin in its general account and a sum will be paid annually,
semiannually, quarterly or monthly, as selected by the Contract Owner in
electing this Option, which shall be equal to the net investment rate of 3%
stipulated as payable upon fixed-dollar amounts for the period multiplied by the
amount remaining on deposit. Upon the death of the Variable Annuitant, the
aforesaid payments will be continued to the Beneficiary. The sums left on
deposit with The Franklin may be withdrawn at any time.

Periodic payments received under this Option may be treated like interest for
federal income tax purposes. Interest payments are fully taxable and are not
subject to the general rules applicable to the taxation of annuities described
in "Federal Income Tax Status," below. Persons contemplating election of this
Seventh Option are advised to consult a qualified tax advisor concerning the
availability and tax effect of its election.

TRANSFER OF FIXED-DOLLAR ANNUITY VALUES TO ACQUIRE VARIABLE ANNUITY ACCUMULATION
UNITS

Under Contract A and Contract B, where a Deferred Variable Annuity and a
Fixed-Dollar Annuity have been issued on the same Contract, on any Contract
Anniversary during the accumulation period of the Contract, the Contract Owner
may have the cash value of his Fixed-Dollar Annuity transferred in whole or in
part to his Variable Annuity to purchase Variable Annuity Accumulation Units at
net asset value. However, any such partial transfer of cash value must be at
least $500. (A similar privilege, but available four times in one Contract
Year, permits transfer of Variable Annuity Accumulation Unit values to establish
values under a Fixed-Dollar Annuity issued on the same Contract.)

LOANS UNDER CONTRACT B

While Contract B is in force, prior to the initial Annuity Payment Date or the
death of the Variable Annuitant, The Franklin will make a contract loan on the
sole security of the Contract. Upon receiving a request for a contract loan, The
Franklin will convert Accumulation Units under the Contract to a fixed-dollar
contract loan account in an amount necessary to provide a sufficient "loan
value" for the proposed loan. The maximum amount which may be borrowed on any
Contract B (the "loan value") is that amount

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which, when added to any existing contract loan and interest on the total
contract loan to the next Contract Anniversary, will equal what the Cash Value
of the contract loan account would be on such anniversary. The Contract, except
to the extent so converted, has no loan value and The Franklin will not make
loans or arrange for the making of loans thereon.

The Accumulation Units in the contract loan account do not participate in the
investment experience of Subaccount B, but receive interest credits at the rate
then paid by The Franklin upon Fixed-Dollar Annuity accumulations. At the
current time, that rate is 4 1/2% per annum during the first five Contract
Years, 4% per annum for the sixth through tenth Contract Years, and 3 1/2% per
annum thereafter.

Where the Contract Owner has both a Variable Annuity and a Fixed-Dollar Annuity
under the same Contract, unless he otherwise indicates, a contract loan request
will be considered a request for a loan on each annuity and will be allocated
pro rata according to the loan values available under each annuity.

Whenever the total contract loan is equal to or exceeds the Cash Value, the
Contract shall terminate, but in no event shall such termination take effect
until 31 days after notice shall have been mailed to the last known address of
the Contract Owner and any known assignee.

On any Contract B issued in South Carolina, the interest rate on the principal
of the contract loan is 7.4% per annum payable in advance to the end of the
current Contract Year, and annually in advance thereafter. In all other states
the rate is adjustable. This means that the rate may be changed each Contract
Year, effective on the Contract Anniversary. The adjustable loan interest rate
will be reflective of the rates then available to The Franklin for corporate
bonds as indicated by the "Moody's Corporate Bond Yield Average." Interest not
paid when due will be added to the principal of the loan and bear the same rate
of interest. Upon a repayment of the Contract B loan prior to the date through
which interest has been paid in advance, the Contract Owner will receive a pro
rata credit for the unearned interest.

It should be noted that the annual rate of interest charged on contract loans is
in excess of the interest credited by The Franklin upon the contract loan
account; thus, there is, in effect, a continuing net charge against the Contract
Owner of the difference between the two rates while the contract loan is
outstanding. The whole or any part of the contract loan may be repaid at any
time while the Contract is in force prior to its maturity. Where variable
Accumulation Units have been converted into a contract loan account prior to the
making of a contract loan, repayments of the loan will result in the conversion
of accumulation units under the contract loan account to variable Accumulation
Units at net asset value, unless the Contract Owner elects that such conversion
shall not take place. The Contract Owner has the power to designate whether a
payment made by him or her is to be applied as a Stipulated Payment (within the
limitations on Stipulated Payments set forth under "Annuity Payments," above,
"Changing Periodic Stipulated Payments," above) or as a repayment in the
contract loan account. In the case of payments by a Contract Owner having a
contract loan outstanding which are not identified, The Franklin will make
inquiry as to the intention of the Contract Owner.

Contract loans will be treated as distributions that may be taxable. See
"Federal Income Tax Status," below. Any Contract Owner contemplating obtaining
a contract loan is advised to consult a qualified tax advisor concerning the
possibly unfavorable federal income tax treatment of contract loan proceeds and
interest payments with respect thereto.

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ANNUITY PERIOD

ELECTING ANNUITY PAYMENTS AND SETTLEMENT OPTION; COMMENCEMENT OF ANNUITY
PAYMENTS

For Deferred Variable Annuity Contracts, a Contract Owner selects a Settlement
Option and an initial Annuity Payment Date prior to the issuance of the Deferred
Variable Annuity Contract, except that Qualified Contracts issued in connection
with qualified pension and profit-sharing plans (including H.R. 10 Plans) under
Section 401(a) of the Code and annuity plans (including H.R. 10 Plans) under
Section 403(a) of the Code provide for Annuity Payments to commence at the date
and under the Settlement Option specified in the plan. The Contract Owner may
defer the initial Annuity Payment Date and continue the Contract to a date not
later than the Contract Anniversary on which the attained age of the Variable
Annuitant is 75 unless the provisions of the Code or any governing Qualified
Plan require Annuity Payments to commence at an earlier date. See "Limitations
on Settlement Options" in the Statement of Additional Information. The Franklin
will require satisfactory proof of age of the Variable Annuitant prior to the
initial Annuity Payment Date.

The Franklin offered three forms of Immediate Variable Annuity Contracts: the
life annuity, the life annuity with 120, 180 or 240 monthly payments certain and
the joint and last survivor life annuity. For a description of these forms of
annuity, see the First, Second and Fourth Options under "Settlement Options,"
above.

Under Immediate Variable Annuity Contracts, the first Annuity Payment is made to
the Variable Annuitant one month after the Effective Date of the Contract,
unless the period selected by the Contract Owner for the frequency of Annuity
Payments is more than one month, in which case the first Annuity Payment will be
made after a period equal to the period so selected from the Effective Date
(subject in every case to the survival of the Variable Annuitant, except in
cases where a guaranteed payment period is provided).

THE ANNUITY UNIT

The Annuity Unit is a measure used to value the First Option (including the
automatic life annuity) and the Second, Third, Fourth and Fifth Options, if
elected on a variable basis.

The value of the Annuity Unit was fixed at $1.00 as of July 1, 1971 for Contract
A and Contract B, and as of July 1, 1981 for Contract C. For each day
thereafter, the value of the Annuity Unit is determined by multiplying the value
of the Annuity Unit on the preceding day by the "Annuity Change Factor" for the
Valuation Period ending on the tenth preceding day or by 1.0 if no Valuation
Period ended on the tenth preceding day. The "Annuity Change Factor" for any
Valuation Period is equal to the amount determined by dividing the Net
Investment Factor for that Valuation Period by a number equal to 1.0 plus the
interest rate for the number of calendar days in such Valuation Period at the
effective annual rate of 3 1/2%. The division by 1.0 plus an interest factor of
3 1/2% in calculating the Annuity Change Factor is effected in order to cancel
out the assumed net investment rate of 3 1/2% per year which is built into the
annuity tables specified in the Contract. See "Determination of Amount of First
Monthly Annuity Payment (Deferred Variable Annuity Contracts)," below, and
"Assumed Net Investment Rate," below.

Annuity Units are valued in respect of each Annuity Payment Date as of a
Valuation Date not less than 10 days prior to the Annuity Payment Date in
question in order to permit calculation of amounts of Annuity Payments and
mailing of checks in advance of their due dates.

<PAGE>

DETERMINATION OF AMOUNT OF FIRST MONTHLY ANNUITY PAYMENT (DEFERRED VARIABLE
ANNUITY CONTRACTS)

When Annuity Payments commence under a Deferred Variable Annuity Contract, the
value of the Contract Owner's account is determined as the product of the value
of an Accumulation Unit on the first Annuity Payment Date and the number of
Accumulation Units credited to the Contract Owner's account as of such Annuity
Payment Date.

The Contracts use tables indicating the dollar amount of the first monthly
Annuity Payment under each Settlement Option for each $1,000 of Cash Value of
the Contract. The first monthly Annuity Payment varies according to the
Settlement Option selected (see "Settlement Options," above) and the "adjusted
age" of the Variable Annuitant. The first monthly Annuity Payment may also vary
according to the sex of the Variable Annuitant. See "Annuity Payments," above.
(The Contracts provide for age adjustment based on the year of birth of the
Variable Annuitant and any joint Variable Annuitant; a person's actual age when
Annuity Payments commence may not be the same as the "adjusted age" used in
determining the amount of the first Annuity Payment.)

For Contracts using sex-distinct annuity tables, the tables for the First,
Second, Third and Fourth Options are determined from the Progressive Annuity
Table assuming births in the year 1900 and a net investment rate of 3 1/2% a
year. The tables for the Fifth Option are based on a net investment rate of 3%
for the General Account and 3 1/2% for the Fund. The total first monthly
Annuity Payment is determined by multiplying the number of thousands of dollars
of Cash Value of the Contract Owner's Contract by the amount of the first
monthly Annuity Payment per $1,000 of value from the tables in the Contract.

The amount of the first monthly Annuity Payment, determined as above, is divided
as of the initial Annuity Payment Date by the value of an Annuity Unit to
determine the number of Annuity Units represented by the first Annuity Payment.
Annuity Units are valued as of a Valuation Date not less than 10 days prior to
the initial Annuity Payment Date, pursuant to the procedure discussed under "The
Annuity Unit," above. Thus, there will be a double effect of the investment
experience of a Portfolio during the 10-day period referred to in the preceding
sentence, since that experience will be included (as part of the value of an
Accumulation Unit) in valuing the Contract Owner's account on the initial
Annuity Payment Date, and (as part of the changes in value of an Annuity Unit)
in determining the second monthly Annuity Payment. Also, the number of Annuity
Units (and hence the amount of Annuity Payments) will be affected by the net
asset value of a Portfolio approximately 10 days prior to the initial Annuity
Payment Date even though changes in the net asset value have occurred during
that 10-day period, and even though the value of the Accumulation Units used to
determine the Cash Value of the Contract will reflect those changes. See
"Amount of Second and Subsequent Monthly Annuity Payments (Deferred Variable
Annuity Contracts)," immediately below.

Each Contract contains a provision that the first monthly Annuity Payment will
not be less than 103% of the first monthly Annuity Payment available under a
then currently issued Immediate Variable Annuity of The Franklin if a single
Stipulated Payment were made equal to the value which is being applied under the
Contract to provide annuity benefits. This provision assures the Variable
Annuitant that if at the initial Annuity Payment Date the annuity rates then
applicable to new Immediate Variable Annuity Contracts are significantly more
favorable than the annuity rates provided in his or her Contract, the Variable
Annuitant will be given the benefit of the new annuity rates.

<PAGE>

AMOUNT OF SECOND AND SUBSEQUENT MONTHLY ANNUITY PAYMENTS (DEFERRED VARIABLE
ANNUITY CONTRACTS)

The number of Annuity Units credited to a Contract on the initial Payment Date
remains fixed during the annuity period, and as of each subsequent Annuity
Payment Date the dollar amount of the Annuity Payment is determined by
multiplying this fixed number of Annuity Units by the value of an Annuity Unit.

DETERMINATION OF AMOUNT OF ANNUITY PAYMENTS (IMMEDIATE VARIABLE ANNUITY
CONTRACTS)

In the case of Immediate Variable Annuities, the number of Annuity Units per
month purchased is specified in the Contract. The number of such units is
determined by: (1) multiplying the net single Stipulated Payment (after any
deductions for premium taxes) by the applicable annuity factor from the annuity
tables then used by The Franklin for Immediate Variable Annuity Contracts, and
(2) dividing such product by the value of the Annuity Unit as of the date of
issue of the Contract. This number of Annuity Units remains fixed for each
month during the annuity period, and the dollar amount of the Annuity Payment is
determined as of each Annuity Payment Date by multiplying this fixed number of
Annuity Units by the value of an Annuity Unit as of each such Annuity Payment
Date.

Annuity Units are valued as of a Valuation Date not less than 10 days prior to
the Effective Date of the Contract, pursuant to the procedure discussed under
"The Annuity Unit," above. Thus, the number of Annuity Units (and hence the
amount of the Annuity Payments) will be affected by the net asset value of a
Portfolio approximately 10 days prior to the Effective Date of the Contract,
even though changes in the net asset value have occurred during that 10-day
period.

As of the date of this prospectus, The Franklin was using, in connection with
the determination of the number of Annuity Units per month purchased under
Immediate Variable Annuity Contracts, the 1955 American Annuity Table with
assumed 4 1/2% interest, the purchase rates in such table being increased by
0.5% (which percentage is decreased 0.2% for each year of age at the Effective
Date in excess of 70 years for male Variable Annuitants and in excess of 75
years for female Variable Annuitants). However, in lieu of such table, The
Franklin will provide "unisex" annuity rate tables for use under Contracts
purchased in connection with certain employer-related plans. See "Annuity
Payments," above.

The Annuity Change Factors used by The Franklin for Immediate Variable Annuity
Contracts assume a net investment rate of 3 1/2%.

ASSUMED NET INVESTMENT RATE

The objective of a Variable Annuity Contract is to provide level Annuity
Payments during periods when the economy, price levels and investment returns
are relatively stable and to reflect as increased Annuity Payments only the
excess investment results flowing from inflation, increases in productivity or
other factors increasing investment returns. The achievement of this objective
will depend in part upon the validity of the assumption in the annuity factor
that a 3 1/2% net investment rate would be realized in the periods of relative
stability assumed. A higher rate assumption would mean a higher initial Annuity
Payment but a more slowly rising series of subsequent Annuity Payments in the
event of a rising actual investment rate (or a more rapidly falling series of
subsequent Annuity Payments in the event of a lower actual investment rate). A
lower assumption would have the opposite effect. If the actual net investment
rate is at the annual rate of 3 1/2%, the Annuity Payments under Contracts whose
Annuity Payments are measured by Annuity Units will be level.

<PAGE>

FEDERAL INCOME TAX STATUS

INTRODUCTION

The Contracts are designed for use by individuals in connection with Qualified
Plans (Contract A and Contract C) or Non-Qualified Plans (Contract B and
Contract C) under the Code. The federal income tax treatment of the Contracts
and payments received thereunder depends on various factors, including, among
other factors, the tax status of The Franklin, the type of retirement plan or
program in connection with which the Contracts are used and the form in which
payments are received. The discussion of federal income taxes contained in this
prospectus, which focuses on rules applicable to Contracts purchased under this
prospectus, is general in nature and is based on existing federal income tax
law, which is subject to change. The tax discussion is not intended as tax
advice. The applicable federal income tax law is complex and contains many
special rules and exceptions in addition to the general rules summarized herein.
For these reasons, various questions about the applicable rules exist.
Accordingly, each person contemplating the purchase of a Contract is advised to
consult with a qualified tax advisor concerning federal income taxes and any
other federal, state or local taxes that may be applicable.

THE FRANKLIN

The Franklin is taxed as a "life insurance company" under the Code. Since the
operations of the Fund are part of the overall operations of The Franklin, the
Fund is subject to tax as part of The Franklin for federal income tax purposes.
Thus, the Fund is not taxed separately as a "regulated investment company" under
the Code.

Under the Code a life insurance company like The Franklin is generally taxed at
regular corporate rates, under a single-phase system, on its specially-computed
life insurance company taxable income. Some special rules continue to apply,
however, in the case of segregated asset accounts like the Fund.

Investment income and realized capital gains on the assets of the Fund are
reinvested by The Franklin for the benefit of the Fund and are taken into
account in determining the value of Accumulation Units and Annuity Units. As a
result, such income and gains are applied to increase reserves applicable to the
Fund. Under the Code, no federal income tax is payable by The Franklin on such
investment income or on realized capital gains of the Fund on assets held in the
Fund.

THE CONTRACTS: QUALIFIED PLANS

The manner in which payments received under a Contract are taxed for federal
income tax purposes depends on the form of payment. If payments are received in
the form of an annuity, then, in general, under Section 72 of the Code, such
payment is taxable to the recipient as ordinary income to the extent that such
payment exceeds the portion, if any, of the cost basis of the Contract that is
allocable to that payment. A payment received on account of partial redemption
of an annuity contract generally is taxable in whole or part. The taxation of a
partial redemption is governed by complex rules and a qualified tax advisor
should be consulted prior to a proposed partial redemption. If the Variable
Annuitant's life span exceeds his or her life expectancy, the Variable
Annuitant's cost basis will eventually be recovered, and any payments made after
that point will be fully taxable. If, however, the Annuity Payments cease after
the initial Annuity Payment Date by reason of the death of the Variable
Annuitant, the amount of any unrecovered cost basis in the Qualified Contract
will generally be allowed as a deduction to the Variable Annuitant for his or
her last taxable year.

<PAGE>

Generally, payment of the proceeds of a Qualified Contract in a lump sum
instead of in the form of an annuity, either at or before maturity, also is
taxable as ordinary income to the extent the lump sum exceeds the cost basis
of the Qualified Contract. Taxation may be deferred, however, to the extent,
if any, that "rollover" treatment is available and elected for a
particular distribution.

The Qualified Contracts are designed for use in connection with several types of
Qualified Plans, as described generally below.

QUALIFIED PENSION, PROFIT-SHARING AND ANNUITY PLANS

Under pension and profit-sharing plans that qualify under Section 401(a) of the
Code and annuity purchase plans that qualify under Section 403(a) of the Code
(collectively "Corporate Qualified Plans"), amounts contributed by an employer
to the Corporate Qualified Plan on behalf of an employee and any gains thereon
are not, in general, taxable to the employee until distribution. Generally, the
cost basis of an employee under a Corporate Qualified Plan will equal the amount
of non-deductible contributions, if any, that the employee made to the Corporate
Qualified Plan. These retirement plans may permit the purchase of the Contracts
to accumulate retirement savings under the plans. Adverse tax consequences to
the plan, to the participant, or both may result if this Contract is assigned or
transferred to any individual as a means to provide benefit payments.

The Code imposes an additional tax of 10% on the taxable portion of any early
withdrawal from a Corporate Qualified Plan made by a Variable Annuitant before
age 59 1/2, death, or disability. The additional income tax on early
withdrawals will not apply however to certain distributions including (a)
distributions beginning after separation from service that are part of a series
of substantially equal periodic payments made at least annually for the life of
the Variable Annuitant or the joint lives of the Variable Annuitant and his or
her Beneficiary, and (b) distributions made to Variable Annuitants after
attaining age 55 and after separating from service. Further, additional
penalties may apply to distributions made on behalf of a "5-percent owner" (as
defined by Section 416(i)(1)(B) of the Code).

If a lump sum payment of the proceeds of a Contract qualifies as a "lump sum
distribution" under the Code, special tax rules (including limited capital gain
and income averaging treatment in some circumstances) may apply.

H.R. 10 PLANS (SELF-EMPLOYED INDIVIDUALS)

Self-employed persons (including members of partnerships) are permitted to
establish and participate in Corporate Qualified Plans under Sections 401(a) and
403(a) of the Code. Corporate Qualified Plans in which self-employed persons
participate are commonly referred to as "H.R. 10 Plans."

The tax treatment of annuity payments and lump sum payments received in
connection with an H.R. 10 Plan is, in general, subject to the same rules
described in "Qualified Pension, Profit-Sharing and Annuity Plans," immediately
above. Some special rules apply, however, in the case of self-employed persons
which, for example, affect certain "lump sum distribution" and "rollover" rules.

<PAGE>

SECTION 403(b) ANNUITIES

Section 403(b) of the Code permits public schools and other tax-exempt
organizations described in Section 501(c)(3) of the Code to purchase annuity
contracts for their employees subject to special tax rules.

If the requirements of Section 403(b) are satisfied, amounts contributed by the
employer to purchase an annuity contract for an employee, and any gains thereon,
are not, subject to certain limitations, taxable to the employee until
distributed to the employee. However, these payments may be subject to FICA
(Social Security) taxes. Generally, the cost basis of an employee under a
Section 403(b) annuity contract will equal the amount of any non-deductible
contributions the employee made toward the contract plus any employer
contributions that were taxable to the employee because they exceeded excludable
amounts.

Federal tax law imposes limitations on distributions from Section 403(b) annuity
contracts. Withdrawals of amounts attributable to contributions made pursuant
to a salary reduction agreement in connection with a Section 403(b) annuity
contract will be permitted only (1) when an employee attains age 59 1/2,
separates from service, dies or becomes totally and permanently disabled or (2)
in the case of hardship. A withdrawal made in the case of hardship may not
include income attributable to the contributions. However, these limitations
generally do not apply to distributions which are attributable to assets held as
of December 31, 1988. In general, therefore, contributions made prior to
January 1, 1989, and earnings on such contributions through December 31, 1988,
are not subject to these limitations. In addition, these limitations do not
apply to contributions made other than by a salary reduction agreement. A
number of questions exist concerning the application of these rules. Anyone
considering a withdrawal from a Contract issued in connection with a Section
403(b) annuity plan should consult a qualified tax advisor.

The 10% penalty tax on early withdrawals described under "Qualified Pension,
Profit-Sharing and Annuity Plans," above, also applies to Section 403(b) annuity
contracts.

INDIVIDUAL RETIREMENT ANNUITIES

SECTION 408(b) INDIVIDUAL RETIREMENT ANNUITIES

Under Sections 408(b) and 219 of the Code, special tax rules apply to Individual
Retirement Annuities. As described below, certain contributions to such
annuities (other than Rollover Contributions) are deductible within certain
limits and the gains on contributions (including Rollover Contributions) are not
taxable until distributed. Generally, the cost basis in an Individual
Retirement Annuity will equal the amount of non-deductible contributions, if
any, made to the Individual Retirement Annuity. Under special rules, all
individual retirement plans will be treated as one plan for purposes of these
rules.

Section 408(b) sets forth various requirements that an annuity contract must
satisfy before it will be treated as an Individual Retirement Annuity. Although
final regulations that interpret some of these requirements have been adopted,
other regulations have been proposed that interpret the additional requirement
that, under a Section 408(b) Individual Retirement Annuity, the premiums may not
be fixed. These proposed regulations, which contain certain ambiguities, may,
of course, be changed before they are issued in final form. ACCORDINGLY, WHILE
THE FRANKLIN BELIEVES THAT THE CONTRACTS OFFERED BY THIS PROSPECTUS MEET THE
REQUIREMENTS OF SECTION 408(b), THE FINAL REGULATIONS AND THE CURRENTLY PROPOSED
REGULATIONS THEREUNDER, THERE CAN BE NO ASSURANCE THAT THE CONTRACTS QUALIFY AS
INDIVIDUAL RETIREMENT ANNUITIES UNDER SECTION 408(b) PENDING THE ISSUANCE OF
COMPLETE FINAL REGULATIONS UNDER THAT CODE SECTION.

39
<PAGE>

Individuals who are not "active participants" in an employer-related retirement
plan described in Section 219(g) of the Code will, in general, be allowed to
contribute to an Individual Retirement Annuity and to deduct a maximum of $2,000
annually (or 100% of the individual's compensation if less). In addition, this
deduction will be allowed for individuals who are active participants in
Qualified Plans with annual adjusted gross income that is not above $25,000
($40,000 for married individuals filing a joint return). This deduction will be
phased out for individuals who are active participants in Qualified Plans with
annual adjusted gross income between $25,000 and $35,000 ($40,000 and $50,000
for married individuals filing a joint return), and will not be allowed for such
active participants with annual adjusted gross income above $35,000 ($50,000 for
married individuals filing a joint return). The active participant status of
both spouses is taken into account in determining the deductible limit. In
addition, an individual will not be considered married for a year in which the
individual and the individual's spouse (1) file separate returns and (2) did not
live together at any time during the year. Individuals who may not make
deductible contributions to an Individual Retirement Annuity may, instead, make
non-deductible contributions (up to the applicable maximum described above) on
which earnings will accumulate on a tax-deferred basis. If the Individual
Retirement Annuity includes non-deductible contributions, distributions will be
divided on a pro rata basis between taxable and non-taxable amounts. Special
rules apply if, for example, an individual contributes to an Individual
Retirement Annuity for his or her own benefit and to another Individual
Retirement Annuity for the benefit of his or her spouse.

Individual Retirement Annuities are subject to limitations on the time when
distributions must commence. In addition, the 10% penalty tax on early
withdrawals described under "Qualified Pension, Profit-Sharing and Annuity
Plans," above, also applies to Individual Retirement Annuities, except that the
circumstances in which the penalty tax will not apply are different in certain
respects. Further, for any year in which a Contract Owner borrows any money
under or by use of the Individual Retirement Annuity, the Contract ceases to
qualify under Section 408(b), and an amount equal to the fair market value of
the Contract as of the first day of such year will be includible in the Contract
Owner's gross income for such year.

SECTION 408(k) SIMPLIFIED EMPLOYEE PENSIONS

An Individual Retirement Annuity described in Section 408(b) of the Code that
also meets the special requirements of Section 408(k) qualifies as a Simplified
Employee Pension. Under a Simplified Employee Pension, employers may contribute
to the Individual Retirement Annuities of their employees subject to the
limitation in Section 408(j). An employee may exclude the employer's
contribution on his or her behalf to a Simplified Employee Pension from gross
income subject to certain limitations. Elective deferrals under a Simplified
Employee Pension are to be treated like elective deferrals under a cash or
deferred arrangement under Section 401(k) of the Code and are subject to a
$7,000 limitation, adjusted for inflation. In general, the employee may also
contribute and deduct an additional amount not in excess of the lesser of (a)
$2,000 or (b) 100% of compensation, subject to the phaseout discussed above, if
the Simplified Employee Pension meets the qualifications for an Individual
Retirement Annuity.

In general, except as stated in this section, the rules discussed in "Section
408(b) Individual Retirement Annuities," above, apply to a Simplified Employee
Pension.

THE CONTRACTS: NON-QUALIFIED PLANS

In the case of Non-Qualified Contracts issued in connection with retirement or
deferred compensation plans which are Non-Qualified Plans, the provisions of the
Plan determine the tax treatment of Plan participants.

<PAGE>

For example, contributions to, or deferred compensation in connection with,
Non-Qualified Plans may or may not be currently taxable to participants.

Payments received under a Non-Qualified Contract are subject to tax under
Section 72 of the Code. If payments are received in the form of an annuity,
then, in general, each payment is taxable as ordinary income to the extent that
such payment exceeds the portion of the cost basis of the annuity contract that
is allocable to that payment. Payment of the proceeds of an annuity contract in
a lump sum either before or at maturity is taxable as ordinary income to the
extent the lump sum exceeds the cost basis of the annuity contract. If the
Variable Annuitant's life span exceeds his or her life expectancy, the Variable
Annuitant's cost basis will eventually be recovered, and any payments made after
that point will be fully taxable. If, however, the Annuity Payments cease after
the initial Annuity Payment Date by reason of the death of the Variable
Annuitant, the amount of any unrecovered cost basis in the Contract will
generally be allowed as a deduction to the Variable Annuitant for his or her
last taxable year.

A payment received on account of a partial redemption of an annuity contract
generally is taxable as ordinary income in whole or in part. Also, if prior
to the initial Annuity Payment Date, (i) an annuity contract is assigned or
pledged, or (ii) a Contract issued after April 22, 1987 is transferred
without adequate consideration, then the amount assigned, pledged or
transferred may similarly be taxable. Special rules may apply with respect
to investments in a Contract made before August 14, 1982. Because the
applicable tax treatment is complex, a qualified tax advisor should be
consulted prior to a partial withdrawal, assignment, pledge, or contract
transfer.

Further, in general, in the case of a payment received under a Non-Qualified
Contract in a taxable year beginning after December 31, 1986, a penalty may be
imposed equal to 10% of the taxable portion of the payment. However, the 10%
penalty does not apply in various circumstances. For example, the penalty is
generally inapplicable to payments that are: (i) made on or after age 59 1/2;
(ii) allocable to investments in the Contract before August 14, 1982, (iii) made
on or after the death of the holder; (iv) made incident to disability; (v) part
of a series of substantially equal periodic payments (not less frequently than
annually) made for the life (or the life expectancy) of the Variable Annuitant
or the joint lives (or joint life expectancies) of the Variable Annuitant and
his or her beneficiary; or (vi) made under a Contract purchased with a single
premium and which has an annuity starting date commencing no later than one year
from the purchase date of the annuity and which provides for a series of
substantially equal periodic payments (to be made not less frequently than
annually) during the annuity period.

A Non-Qualified Contract will not be treated as an annuity contract for purposes
of certain Code sections, including Section 72, for any period (and any
subsequent period) for which the investments made by the Fund attributable to
such Non-Qualified Contract are not, in accordance with Treasury regulations,
adequately diversified. Although certain questions exist about the
diversification standards, The Franklin believes that the Fund presently
satisfies those standards and intends that the Fund will continue to be
adequately diversified for those purposes.

AGGREGATION OF CONTRACTS

Under a provision of the federal tax law effective for annuity contracts entered
into after October 21, 1988, all annuity contracts (other than contracts held in
connection with Qualified Plans) issued by the same company (or affiliates) to
the same contract owner during any calendar year will generally be treated as
one annuity contract for the purpose of determining the amount of any
distribution, not in the form of an annuity, that is includable in gross income.
This rule may have the effect of causing more

<PAGE>

rapid taxation of the distributed amounts from such combination of contracts.
It is not certain how this rule will be applied or interpreted by the Internal
Revenue Service. In particular, it is not clear if or how this rule applies to
Immediate Variable Annuity Contracts or "split" annuity arrangements.
Accordingly, a qualified tax advisor should be consulted about the application
and effect of this rule.

INCOME TAX WITHHOLDING

Withholding of federal income tax is generally required from distributions from
Qualified Plans and Non-Qualified Plans, or Contracts issued in connection
therewith, to the extent the distributions are taxable and are not otherwise
subject to withholding as wages ("Distributions"). See "The Contracts:
Qualified Plans," above, and "The Contracts: Non-Qualified Plans," above,
regarding the taxation of Distributions.

Federal income tax is generally required to be withheld from all or any portion
of a Distribution made on or after January 1, 1993 that constitutes an "eligible
rollover distribution." An "eligible rollover distribution" generally includes
any distribution from a qualified trust described in Section 401(a) of the Code,
a qualified annuity plan described in Section 403(a) of the Code or a qualified
annuity contract described in Section 403(b) of the Code except for (1) a
distribution which is one of a series of substantially equal periodic
instalments payable at least annually for the life (or over the life expectancy)
of the Variable Annuitant or for the joint lives (or over the joint life
expectancies) of the Variable Annuitant and his or her Beneficiary, or for a
specified period of 10 years or more, or (2) a minimum distribution required
pursuant to Section 401(a)(9) of the Code, and (3) an amount which is not
includible in gross income (for example, the return of non-deductible
contributions). Any eligible rollover distribution which is not rolled over
directly from a Section 401(a) qualified trust, a Section 403(a) qualified
annuity plan or a Section 403(b) qualified annuity contract to an "eligible
retirement plan" is subject to mandatory federal income tax withholding in an
amount equal to 20% of the eligible rollover distribution. An "eligible
retirement plan" generally includes a qualified trust described in Section
401(a) of the Code, a qualified annuity plan described in Section 403(a) of the
Code, an individual retirement account described in Section 408(a) of the Code
or an Individual Retirement Annuity described in Section 408(b) of the Code.
Mandatory federal income tax withholding is required even if the Variable
Annuitant receives an eligible rollover distribution and rolls it over within 60
days to an eligible retirement plan. Federal income tax is not required to be
withheld from any eligible rollover distribution which is rolled over directly
from a qualified trust described in Section 401(a) of the Code, a qualified
annuity plan described in Section 403(a) of the Code or a qualified annuity
contract described in Section 403(b) of the Code to an eligible retirement plan.

Except with respect to certain payments delivered outside the United States or
any possession of the United States, federal income tax is not required to be
withheld from any Distribution which does not constitute an eligible rollover
distribution, if the Variable Annuitant or Beneficiary properly elects in
accordance with the prescribed procedures not to have withholding apply. In the
absence of a proper election not to have withholding apply, the amount to be
withheld from a Distribution which is not an eligible rollover distribution
depends upon the type of payment being made. Generally, in the case of a
periodic payment which is not an eligible rollover distribution, the amount to
be withheld from such payment is the amount that would be withheld therefrom
under specified wage withholding tables if the payment were a payment of wages
for the appropriate payroll period. In the case of a non-periodic payment which
is not an eligible rollover distribution, the amount to be withheld is generally
equal to 10% of the amount of the Distribution.

<PAGE>

The applicable federal law pertaining to income tax withholding from
Distributions is complex and contains many special rules and exceptions in
addition to the general rules summarized above. Special rules apply, for
example, if the Distribution is made to the surviving spouse of a Variable
Annuitant or if the Distribution is an eligible rollover distribution from a
qualified annuity contract under Section 403(b) of the Code. Any Variable
Annuitant or Beneficiary considering a Distribution should consult a qualified
tax advisor.

VOTING PRIVILEGES

In accordance with current interpretations of applicable law, The Franklin votes
Portfolio shares held in the Fund at regular and special shareholder meetings of
the Portfolios in accordance with instructions received from persons having
voting interests in the corresponding Subaccounts. If, however, the 1940 Act or
any regulation thereunder should be amended, or if the present interpretation
thereof should change, or The Franklin otherwise determines that it is allowed
to vote the shares in its own right, it may elect to do so.

The number of votes that a Contract Owner or Variable Annuitant has the right to
instruct are calculated separately for each Subaccount, and may include
fractional votes. Prior to the Annuity Payment Date, the Contract Owner holds a
voting interest in each Subaccount to which Contract value is allocated. After
the Annuity Payment Date, the Variable Annuitant has a voting interest in each
Subaccount from which Variable Annuity payments are made.

For each Contract Owner, the number of votes attributable to a Subaccount will
be determined by dividing the Contract Owner's value in the Subaccount by the
Net Asset Value Per Share of the Portfolio in which that Subaccount invests.
For each Variable Annuitant, the number of votes attributable to a Subaccount is
determined by dividing the liability for future Variable Annuity payments to be
paid from that Subaccount by the Net Asset Value Per Share of the Portfolio in
which that Subaccount invests. This liability for future payments is calculated
on the basis of the mortality assumptions, the selected rate of return and the
Annuity Unit value of that Subaccount on the date that the number of votes is
determined. As Variable Annuity payments are made, the liability for future
payments decreases as does the number of votes.

The number of votes available to an Contract Owner or Variable Annuitant are
determined as of the date coinciding with the date established by the Portfolio
for determining shareholders eligible to vote at the relevant meeting of the
Portfolio's shareholders. Voting instructions are solicited by written
communication prior to such meeting in accordance with procedures established
for the Portfolio. Each Contract Owner or Variable Annuitant having a voting
interest in a Subaccount will receive proxy materials and reports relating to
any meeting of shareholders of the Portfolio in which that Subaccount invests.

Portfolio shares as to which no timely instructions are received and shares held
by The Franklin in a Subaccount as to which no Contract Owner or Variable
Annuitant has a beneficial interest are voted in proportion to the voting
instructions that are received with respect to all Contracts participating in
that Subaccount. Under the 1940 Act, certain actions affecting the Subaccounts
may require Contract Owner approval. In that case, a Contract Owner will be
entitled to vote in proportion to the value of his Contract.

<PAGE>

SERVICES UNDER THE CONTRACTS

Franklin Financial Services Corporation ("Franklin Financial") serves as
"principal underwriter" (as that term is defined in the 1940 Act) for the
Contracts pursuant to Sales Agreements with the Fund. The Sales Agreements are
described under "Distribution of The Contracts" in the Statement of Additional
Information. Franklin Financial, located at #1 Franklin Square, Springfield,
Illinois 62713, is organized under the laws of the State of Delaware and is a
wholly owned subsidiary of The Franklin.

The Fund no longer offers new Contracts. However, commissions are paid to
registered representatives of Franklin Financial with respect to Stipulated
Payments received by The Franklin under outstanding Contracts to a maximum of 5%
of such Stipulated Payments for Contract A, 4% of such Stipulated Payments for
Contract B, and 2% of such Stipulated Payments for Contract C.

Beginning in October 1998, administrative services under the Contracts are
provided by American General Life Insurance Company pursuant to a services
agreement.

STATE REGULATION

As a life insurance company organized and operated under Illinois law, The
Franklin is subject to statutory provisions governing such companies and to
regulation by the Illinois Director of Insurance. An annual statement is filed
with the Director on or before March 1 of each year covering the operations of
The Franklin for the preceding year and its financial condition on December 31
of such year. The Franklin's books and accounts are subject to review and
examination by the Illinois Insurance Department at all times, and a full
examination of its operations is conducted by the National Association of
Insurance Commissioners ("NAIC") periodically. The NAIC has divided the
country into six geographic zones. A representative of each such zone may
participate in the examination. In addition, The Franklin is subject to the
insurance laws and regulations of the jurisdictions other than Illinois in which
it is licensed to operate.

REPORTS TO OWNERS

The Franklin will mail Contract Owners (or persons receiving payments following
the Annuity Payment Date), at their last known address of record, any reports
and communications required by applicable law or regulation. Therefore, prompt
written notice of any address change should be given to The Franklin at its
Administrative Office.

EFFECT OF NON-QUALIFICATION

In the event that a plan intended to qualify as a Qualified Plan under the Code
fails to meet the applicable qualification requirements under the Code
(including Section 818(a)) or in the event that a Qualified Plan ceases to
qualify thereunder, The Franklin shall have the right, upon receiving notice of
such non-qualification, to treat any such Contract issued in connection with
such a plan as a Non-Qualified Contract participating in the Fund.

YIELD INFORMATION

In accordance with regulations adopted by the SEC, the Fund has computed an
annualized yield and an effective yield for a seven-day period for Subaccount C
that does not take into consideration any realized or unrealized gains or losses
on shares of the Money Market Fund or on its portfolio securities. This current
annualized yield is computed by determining the net change (exclusive of
realized gains and losses from the sale of securities and unrealized
appreciation and depreciation on investments) in the

<PAGE>

value of a hypothetical pre-existing account having a balance of one
Accumulation Unit of Subaccount C at the beginning of such seven-day period,
dividing the net change in account value by the value of the account at the
beginning of the seven-day period (the "base period return") and multiplying
this result by 365/7 to obtain an annualized yield. The annualized yield for
the seven calendar day period ended December 31, 1998 was ____%. The effective
yield is computed by compounding the base period return by adding one, raising
the sum to a power equal to 365 divided by 7, and subtracting one from the
result. The effective yield for the seven calendar day period ended December
31, 1998 was ____%. The effective yield is higher because it represents a
compound yield, i.e., it assumes that the increase in account value represented
by the base period return is reinvested.

Yield as determined with respect to a portfolio composed primarily of money
market securities normally will fluctuate on a daily basis and is affected by
changes in interest rates on money market securities, average portfolio
maturities, the type and quality of portfolio securities held and the expenses
of the Money Market Fund. Therefore, the yield for any given past period should
not be considered as a representation of the yield for any future period.

In addition, although yield information may be useful in reviewing Subaccount
C's performance and in providing a basis for comparison with other investment
alternatives, it should be kept in mind that Subaccount C's yield cannot be
compared to the yield on bank deposits and other investments which pay fixed
yields for a stated period of time and that other investment companies may
calculate yield on additional bases. When comparing the yields of investment
companies, consideration should be given to the quality and maturity of the
portfolio of securities of each company as well as to the type of expenses
incurred. In this connection, it should be noted that the accrued expenses of
Subaccount C differ from those incurred under conventional money market funds
that do not offer variable annuity contracts in that additional charges are made
against Subaccount C relating to The Franklin's assumption of mortality and
expense risks under the Contract. See "Mortality and Expense Risk Charge,"
above. In addition, unlike investments in conventional money market funds which
may be held on a non-qualified basis by the investor, investment income earned
by Subaccount C during the accumulation period is not currently taxable to
holders of Contracts. See "Federal Income Tax Status," above.

REGISTRATION STATEMENT

The Franklin and the Fund have filed a Registration Statement with the
Securities and Exchange Commission under the Securities Act of 1933, as amended,
and the 1940 Act with respect to the Contracts offered hereby. This prospectus
does not contain all the information set forth in the Registration Statement and
amendments thereto and exhibits filed as a part thereof, to all of which
reference is hereby made for further information concerning the Fund, The
Franklin and the Contracts offered hereby. Statements contained in this
prospectus as to the content of Contracts and other legal instruments are
summaries. For a complete statement of the terms thereof, reference is made to
such instruments as filed.

TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION

General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Limitations on Settlement Options. . . . . . . . . . . . . . . . . . . . . . . .
Distribution of the Contracts. . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Index to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . .

45
<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

FRANKLIN LIFE VARIABLE ANNUITY FUND

Individual Variable Annuity Contracts

Issued by

The Franklin Life Insurance Company
#1 Franklin Square
Springfield, Illinois 62713
1-800-528-2011

This Statement of Additional Information, dated April 30, 1999, is not a
prospectus and should be read in conjunction with the Prospectus dated the same
date for the individual variable annuity contracts which are referred to herein.
This Statement of Additional Information should be retained for future
reference.

The Prospectus sets forth information that a person should know before investing
in the Contracts. For a copy of the Prospectus, write or call The Franklin at
FLIC Annuity Service Center, 2727-A Allen Parkway (3-50), Houston, Texas
77019-2191; or P.O. Box 4799, Houston, Texas 77210-4799, (800) 231-0105 or (713)
831-3505.

TABLE OF CONTENTS

General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Limitations on Settlement Options. . . . . . . . . . . . . . . . . . . . . 1
Distribution of the Contracts. . . . . . . . . . . . . . . . . . . . . . . 3
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Index to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . 4

<PAGE>

GENERAL INFORMATION

The individual variable annuity contracts offered by the prospectus (the
"Prospectus" ) are designed primarily to provide annuity payments which may vary
with the investment performance of a Subaccount of Franklin Life Variable
Annuity Fund (the "Fund" ), a separate account which has been established by The
Franklin Life Insurance Company ("The Franklin") under Illinois insurance law.
Reference is made to the Prospectus, which should be read in conjunction with
this Statement of Additional Information. Capitalized terms not otherwise
defined in this Statement of Additional Information shall have the meanings
designated in the Prospectus.

American General Corporation ("American General") through its wholly owned
subsidiary, AGC Life Insurance Company ("AGC Life"), owns all of the outstanding
shares of common stock of The Franklin. The address of AGC Life is American
General Center, Nashville, Tennessee 37250-0001. The address of American
General is 2929 Allen Parkway, Houston, Texas 77019-2155. American General is
one of the largest diversified financial services organizations in the United
States. American General's operating subsidiaries are leading providers of
retirement services, consumer loans, and life insurance. The company was
incorporated as a general business corporation in Texas in 1980 and is the
successor to American General Insurance Company, an insurance company
incorporated in Texas in 1926.

LIMITATIONS ON SETTLEMENT OPTIONS

LIMITATIONS ON CHOICE OF SETTLEMENT OPTION. Described below are certain
limitations on Settlement Options based on The Franklin's current understanding
of the distribution rules generally applicable to Contracts purchased for use as
Individual Retirement Annuities or issued in connection with Section 403(b)
annuity purchase plans. Various questions exist, however, about the application
of the distribution rules to distributions from the Contracts and their effect
on Settlement Option availability thereunder.

The Internal Revenue Service has proposed regulations relating to required
distributions from qualified plans, individual retirement plans, and annuity
contracts under Section 403(b) of the Code. These proposed regulations may
limit the availability of the Settlement Options in Contracts purchased for use
as Individual Retirement Annuities or issued in connection with Section 403(b)
annuity purchase plans. The proposed regulations are generally effective for
calendar years after 1984. A person should consult a qualified tax advisor
concerning the effect of the proposed regulations on the Settlement Option or
Options the person is contemplating.

FIRST OPTION - LIFE ANNUITY. Under Contracts issued for use as Individual
Retirement Annuities or in connection with Section 403(b) annuity purchase
plans, if the Variable Annuitant dies before Annuity Payments have commenced,
this Option is not available to a Beneficiary unless distributions to the
Beneficiary begin not later than one year after the date of the Variable
Annuitant's death (except that distributions to a Beneficiary who is the
surviving spouse of the Variable Annuitant need not commence earlier than the
date on which the Variable Annuitant would have attained age 70 1/2). If the
surviving spouse of the Variable Annuitant is the Beneficiary and such surviving
spouse dies before Annuity Payments to such spouse have commenced, the surviving
spouse will be treated as the Variable Annuitant for purposes of the preceding
rule.

SECOND OPTION - LIFE ANNUITY WITH 120, 180 OR 240 MONTHLY PAYMENTS CERTAIN.
Under Contracts issued for use as Individual Retirement Annuities or in
connection with Section 403(b) annuity purchase plans, this Option is not
available unless the selected period does not extend beyond the life expectancy
of the Variable Annuitant (or the life expectancy of the Variable Annuitant and
his or her Beneficiary). Further, if the Variable Annuitant dies before Annuity
Payments have commenced, this Option is not available to a Beneficiary unless
(1) the selected period does not extend beyond the life expectancy of the

<PAGE>

Beneficiary, and (2) the distribution to the Beneficiary commences not later
than one year after the date of the Variable Annuitant's death (except that
distributions to a Beneficiary who is the surviving spouse of the Variable
Annuitant need not commence earlier than the date on which the Variable
Annuitant would have attained age 70 1/2). If the surviving spouse of the
Variable Annuitant is the Beneficiary and the surviving spouse dies before
Annuity Payments to such spouse have commenced, the surviving spouse will be
treated as the Variable Annuitant for purposes of the preceding sentence. This
Option is also not available under Individual Retirement Annuities or in
connection with Section 403(b) annuity purchase plans unless certain minimum
distribution incidental benefit requirements of the proposed regulations are
met.

THIRD OPTION - UNIT REFUND LIFE ANNUITY. This Option is not available under
Contracts issued for use as Individual Retirement Annuities. Also, under
Qualified Contracts issued in connection with Section 403(b) annuity purchase
plans, if the Variable Annuitant dies before Annuity Payments have commenced,
this Option is not available to a Beneficiary unless distributions to the
Beneficiary begin not later than one year after the date of the Variable
Annuitant's death (except that distributions to a Beneficiary who is the
surviving spouse of the Variable Annuitant need not commence earlier than the
date on which the Variable Annuitant would have attained age 70 1/2). If the
surviving spouse of the Variable Annuitant is the Beneficiary and such surviving
spouse dies before Annuity Payments to such spouse have commenced, the surviving
spouse will be treated as the Variable Annuitant for purposes of the preceding
rule. This Option is also not available in connection with Section 403(b)
annuity purchase plans unless certain minimum distribution incidental benefit
requirements of the proposed regulations are met.

FOURTH OPTION - JOINT AND LAST SURVIVOR LIFE ANNUITY. Under Contracts issued
for use as Individual Retirement Annuities or in connection with Section 403(b)
annuity purchase plans, this Option is not available unless the secondary
variable annuitant is the spouse of the Variable Annuitant or unless certain
minimum distribution incidental benefit requirements of the proposed regulations
are met. Further, if the Variable Annuitant dies before Annuity Payments have
commenced, this Option is not available to a Beneficiary under a Contract issued
for use as Individual Retirement Annuities or in connection with Section 403(b)
annuity purchase plans.

FIFTH OPTION - PAYMENTS FOR A DESIGNATED PERIOD. Under Contracts issued for use
as Individual Retirement Annuities or in connection with Section 403(b) annuity
purchase plans, this Option is not available unless the limitations described in
the Second Option, above, applicable to such Qualified Contracts, are satisfied,
except that this Option is otherwise available to a Beneficiary where the
Variable Annuitant dies before Annuity Payments have commenced if the designated
period does not exceed a period that terminates five years after the death of
the Variable Annuitant or the substituted surviving spouse, as the case may be.
In addition, this Option is not available if the number of years in the selected
period over which Annuity Payments would otherwise be paid plus the attained age
of the Variable Annuitant at the initial Annuity Payment Date would exceed 95.

SIXTH OPTION - PAYMENTS OF A SPECIFIED DOLLAR AMOUNT. This Option is not
available under Contracts issued for use as Individual Retirement Annuities or
in connection with Section 403(b) annuity purchase plans.

SEVENTH OPTION - INVESTMENT OPTION. This Option is not available under
Qualified Contracts issued in connection with any Qualified Plan.

LIMITATIONS ON COMMENCEMENT OF ANNUITY PAYMENTS. The Contract Owner may defer
the initial Annuity Payment Date and continue the Contract to a date not later
than age 75 unless the provisions of the Code or any governing Qualified Plan
require Annuity Payments to commence at an earlier date. For example, under
Qualified Contracts, other than those issued for use as Individual Retirement
Annuities,

2
<PAGE>

the Contract Owner may not defer the initial Annuity Payment Date beyond April 1
of the calendar year following the later of the calendar year in which the
Variable Annuitant (1) attains age 70 1/2, or (2) retires, and must be made in a
specified form or manner. In addition, if the plan participant is a "5-percent
owner" (as defined in the Code), or if the Contract is issued for use as an
Individual Retirement Annuity, distributions generally must begin no later than
the date described in (1). The Franklin will require satisfactory proof of age
of the Variable Annuitant prior to the initial Annuity Payment Date.

DISTRIBUTION OF THE CONTRACTS

Franklin Financial Services Corporation ("Franklin Financial" ), #1 Franklin
Square, Springfield, Illinois 62713, is organized under the laws of the State of
Delaware and is a wholly owned subsidiary of The Franklin. Franklin Financial
serves as "principal underwriter" (as that term is defined in the Investment
Company Act of 1940) for the Contracts, pursuant to Sales Agreements between
Franklin Financial and the Fund.

The Fund no longer issues new Contracts. To the extent that Stipulated Payments
continue to be made on Contracts, the Fund may nevertheless be deemed to be
offering interests in Contracts on a continuous basis. Contracts were sold
primarily by persons who are insurance agents or brokers for The Franklin
authorized by applicable law to sell life and other forms of personal insurance
and who are similarly authorized to sell Variable Annuities. Pursuant to an
agreement between Franklin Financial and The Franklin, Franklin Financial agreed
to employ and supervise agents chosen by The Franklin to sell the Contracts and
to use its best efforts to qualify such persons as registered representatives of
Franklin Financial, which is a broker-dealer registered with the Securities and
Exchange Commission under the Securities Exchange Act of 1934 and a member of
the National Association of Securities Dealers, Inc. Franklin Financial also may
enter into agreements with The Franklin and each such agent with respect to the
supervision of such agent.

Pursuant to an agreement between The Franklin and Franklin Financial, The
Franklin has agreed to pay commissions earned by registered representatives of
Franklin Financial on the sale of the Contracts and to bear the cost of
preparation of prospectuses and other disclosure materials. Commissions and
other remuneration and the cost of disclosure materials will be paid by The
Franklin from its General Account. During 1996, 1997, and 1998: (1) a total of
$_____, $_________ and $_______, respectively, were paid in brokerage
commissions on behalf of Contract A; (2) a total of $_____, $________ and
$_______, respectively, were paid in brokerage commissions on behalf of Contract
B; and (3) a total of $_____, $________ and $_______, respectively, were paid
in brokerage commissions on behalf of Contract C. None of such brokerage
business was allocated to Franklin Financial.

Registration as a broker-dealer does not mean that the Securities and Exchange
Commission has in any way passed upon the financial standing, fitness or conduct
of any broker or dealer, upon the merits of any securities offering or upon any
other matter relating to the business of any broker or dealer. Salesmen and
employees selling Contracts, where required, are also licensed as securities
salesmen under state law.

LEGAL MATTERS

Sutherland Asbill & Brennan LLP of Washington, D.C. has provided advice on
certain matters relating to the federal securities laws.

EXPERTS

The statement of assets and liabilities as of December 31, 1998 and the related
statement of operations for the year then ended and the statements of changes in
net assets for the years ended December 31, 1998

<PAGE>

and December 31, 1997 of the Fund, appearing herein, have been audited by Ernst
& Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein. The financial statements of The Franklin at
December 31, 1998 and 1997, and for each of the three years in the period ended
December 31, 1998 appearing herein, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon appearing elsewhere
herein. Such financial information and financial statements referred to above
are included in reliance upon such reports given upon the authority of such firm
as experts in accounting and auditing.

INDEX TO FINANCIAL STATEMENTS

[to be added by amendment]

<PAGE>

PART C

OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS

(a) Financial Statements

PART A: Per Unit Income and Changes in Accumulation Unit Value for the 10
years ended December 31, 1998.

PART B: To be filed by amendment.

(1) Financial Statements of Franklin Life Variable Annuity Fund A (now
Franklin Life Variable Annuity Fund) (the "Separate Account"):

Report of Independent Auditors

Audited Financial Statements:

Statement of Assets and Liabilities, December 31, 1998

Statement of Operations for the year ended December 31, 1998

Statement of Changes in Net Assets for the two years ended December 31,
1998

Notes to Financial Statements

(2) Financial Statements of The Franklin Life Insurance Company:

Report of Independent Auditors

Audited Financial Statements:

Statement of Operations for the years ended December 31, 1998, 1997 and
1996

Balance Sheet, December 31, 1998 and 1997

Statement of Shareholder's Equity for the years ended December 31, 1998,
1997 and 1996

Statement of Cash Flows for the years ended December 31, 1998, 1997 and
1996

Notes to Financial Statements

PART C: None

(b) Exhibits

1(a) Resolutions of the Board of Directors of The Franklin Life Insurance
Company establishing the Separate Account are incorporated herein by
reference to Exhibit 1 to the Registrant's registration statement on
Form N-14 filed with the Securities and Exchange Commission on January
20, 1999 (File No. 333-70813).

(b) Resolutions of the Board of Directors of The Franklin Life Insurance
Company renaming the Separate Account. [to be added by amendment]

2. Custodian Agreement dated April 17, 1995 between The Franklin Life
Insurance Company and State

<PAGE>

Street Bank and Trust Company is incorporated herein by reference to
Exhibit 3 to Post-Effective Amendment No. 42 to the Separate Account's
Registration Statement on Form N-3, filed April 30, 1996 (File No.
2-36394).

3. (a) Sales Agreement among The Franklin Life Insurance Company,
Registrant and Franklin Financial Services Corporation dated
January 31, 1995 is incorporated herein by reference to Exhibit
7(a) to the Registrant's registration statement on Form N-14
filed with the Securities and Exchange Commission on January 20,
1999 (File No. 333-70813).

(b) Form of Agreement among The Franklin Life Insurance Company,
Franklin Financial Services Corporation and agents is
incorporated herein by reference to Exhibit 7(b) to the
Registrant's registration statement on Form N-14 filed with the
Securities and Exchange Commission on January 20, 1999 (File No.
333-70813).

4. (a) Specimen copy of Form 1170, deferred periodic payment variable
annuity contract is incorporated herein by reference to Exhibit
6(a) to the Registrant's registration statement on Form N-14
filed with the Securities and Exchange Commission on January 20,
1999 (File No. 333-70813).

(b) Specimen copy of Form 1171, single payment deferred variable
annuity contract is incorporated herein by reference to Exhibit
6(b) to the Registrant's registration statement on Form N-14
filed with the Securities and Exchange Commission on January 20,
1999 (File No. 333-70813).

(c) Specimen copy of Form 1172, single payment immediate life
variable annuity contract is incorporated herein by reference to
Exhibit 6(c) to the Registrant's registration statement on Form
N-14 filed with the Securities and Exchange Commission on January
20, 1999 (File No. 333-70813).

(d) Specimen copy of Form 1173, single payment immediate life
variable annuity contract with guaranteed period is incorporated
herein by reference to Exhibit 6(d) to the Registrant's
registration statement on Form N-14 filed with the Securities and
Exchange Commission on January 20, 1999 (File No. 333-70813).

(e) Specimen copy of Form 1174, single payment immediate joint and
last survivor life variable annuity contract is incorporated
herein by reference to Exhibit 6(e) to the Registrant's
registration statement on Form N-14 filed with the Securities and
Exchange Commission on January 20, 1999 (File No. 333-70813).

(f) Specimen copy of endorsement to Forms 1170, 1171, 1172, 1173 and
1174 when such contracts are issued to variable annuitants in the
State of Texas is incorporated herein by reference to Exhibit
6(f) to the Registrant's registration statement on Form N-14
filed with the Securities and Exchange Commission on January 20,
1999 (File No. 333-70813).

(g) Contract B [to be added by amendment]

(h) Contract C [to be added by amendment]

5. The applications for the various forms of variable annuity contracts set
forth in Exhibit 4 are included as parts of the respective contract
forms.

6. Rules and Regulations of Franklin Life Variable Annuity Fund A are
incorporated herein by reference to Exhibit 2(a) to the Registrant's
registration statement on Form N-14 filed with the Securities and
Exchange Commission on January 20, 1999 (File No. 333-70813).

<PAGE>

7. Not applicable.

8. (a) Administration Agreement between Franklin Life Variable Annuity
Fund A and The Franklin Life Insurance Company dated June 30,
1971 is incorporated herein by reference to Exhibit 13(a) to the
Registrant's registration statement on Form N-14 filed with the
Securities and Exchange Commission on January 20, 1999 (File No.
333-70813).

(b) Agreement between The Franklin Life Insurance Company and
Franklin Financial Services Corporation dated June 30, 1971 is
incorporated herein by reference to Exhibit 13(b) to the
Registrant's registration statement on Form N-14 filed with the
Securities and Exchange Commission on January 20, 1999 (File No.
333-70813).

9. Opinion re legality of securities (to be added by amendment)

10. (a) Consent of independent auditors (to be added by amendment)

(b) Consent of counsel (to be added by amendment)

11. Not applicable

12. Not applicable

13. Not applicable

14. Not applicable

15. Power of Attorney with respect to the Registration Statement.

ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR

Information as to the directors, executive officers of The Franklin Life
Insurance Company is listed below.

(1) (2)
Name and Principal Business Address Positions and Offices with Depositor
----------------------------------- ------------------------------------
<S> <C>
Robert M. Beuerlein Director, Senior Vice President-
Actuarial/Financial and Treasurer

Pauletta P. Cohn** Secretary

Brady W. Creel Director, Senior Vice President and Chief
Marketing Officer

Barbara Fossum Senior Vice President

Ross D. Friend** Senior Vice President and Chief Compliance Officer

Rodney O. Martin, Jr.** Director and Senior Chairman

<PAGE>

Jon P. Newton* Director and Vice Chairman

Michael M. Nicholson Director and President

Gary D. Reddick** Vice Chairman and Director

Richard W. Scott* Vice President and Chief Investment Officer

William A. Simpson Director and Chief Executive Officer

T. Clayton Spires Director, Corporate Tax

Christian D. Weiss Director-Controller

Diane S. Workman Vice President-Administration
</TABLE>

The principal business address of each individual with an asterisk next
to his name is 2929 Allen Parkway, Houston, Texas 77019. The principal business
address of each individual with two asterisks next to his name is 2727-A Allen
Parkway, Houston, Texas 77019. The principal business address of each other
individual is in care of The Franklin Life Insurance Company, #1 Franklin
Square, Springfield, Illinois 62713.

ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR
OR REGISTRANT

There is no person controlled by or under common control with
Registrant.

The Franklin Life Insurance Company is an indirect wholly owned
subsidiary of American General Corporation ("AGC").

SUBSIDIARIES OF AMERICAN GENERAL CORPORATION

The following is a list of American General Corporation's subsidiaries (1),(2),
(3),(4) as of December 31, 1998. All subsidiaries listed are corporations,
unless otherwise indicated. Indentations indicate subsidiaries of subsidiaries,
and unless otherwise indicated, all subsidiaries are wholly owned. An asterisk
(*) denotes inactive subsidiaries.

Name Jurisdiction of
- ---- Incorporation Insurer
------------- -------
<S> <C> <C>
AGC Life Insurance Company(5) Missouri Yes

American General Life and Accident Insurance Company(6) Tennessee Yes

American General Exchange, Inc. Tennessee No

Independent Fire Insurance Company Florida Yes

American General Property Insurance Company of Florida Florida Yes

<PAGE>

Name Jurisdiction of
- ---- Incorporation Insurer
------------- -------
<S> <C> <C>
Old Faithful General Agency, Inc. Texas No

Independent Life Insurance Company Georgia Yes

American General Life Insurance Company(7) Texas Yes

American General Annuity Service Corporation Texas No

American General Life Insurance Company of New York New York Yes

The Winchester Agency Ltd. New York No

The Variable Annuity Life Insurance Company Texas Yes

The Variable Annuity Marketing Company Texas No

VALIC Investment Services Company Texas No

VALIC Retirement Services Company Texas No

VALIC Trust Company Texas No

Astro Acquisition Corp. Delaware No

The Franklin Life Insurance Company Illinois Yes

The American Franklin Life Insurance Company Illinois Yes

Franklin Financial Services Corporation Delaware No

HBC Development Corporation Virginia No

Allen Property Company Delaware No

Florida Westchase Corporation Delaware No

Hunter's Creek Communications Corporation Florida No

Westchase Development Corporation Delaware No

American General Capital Services, Inc. Delaware No

American General Corporation* Delaware No

American General Delaware Management Corporation ("AGDMC")(1) Delaware No

American General Finance, Inc. Indiana No

AGF Investment Corp. Indiana No

American General Auto Finance, Inc. Delaware No

<PAGE>

Name Jurisdiction of
- ---- Incorporation Insurer
------------- -------
<S> <C> <C>

American General Finance Corporation(8) Indiana No

American General Finance Group, Inc. Delaware No

American General Financial Services, Inc.(9) Delaware No

The National Life and Accident Insurance Company Texas Yes

Merit Life Insurance Co. Indiana Yes

Yosemite Insurance Company California Yes

American General Finance, Inc. Alabama No

American General Financial Center Utah No

American General Financial Center, Inc.* Indiana No

American General Financial Center, Incorporated* Indiana No

American General Financial Center Thrift Company* California No

Thrift, Incorporated* Indiana No

American General Independent Producer Division Co. Delaware No

American General Investment Advisory Services, Inc.* Texas No

American General Investment Holding Corporation(10) Delaware No

American General Investment Management Corporation(10) Delaware No

American General Realty Advisors, Inc. Delaware No

American General Realty Investment Corporation Texas No

American General Mortgage Company Delaware No

GDI Holding, Inc.*(11) California No

Ontario Vineyard Corporation Delaware No

Pebble Creek Country Club Corporation Florida No

Pebble Creek Service Corporation Florida No

SR/HP/CM Corporation Texas No

American General Property Insurance Company Tennessee Yes

Bayou Property Company Delaware No

AGLL Corporation(12) Delaware No

American General Land Holding Company Delaware No

<PAGE>

Name Jurisdiction of
- ---- Incorporation Insurer
------------- -------
<S> <C> <C>

AG Land Associates, LLC(12) California No

Hunter's Creek Realty, Inc.* Florida No

Summit Realty Company, Inc. So. Carolina No

Florida GL Corporation Delaware No

GPC Property Company Delaware No

Cinco Ranch East Development, Inc. Delaware No

Cinco Ranch West Development, Inc. Delaware No

Hickory Downs Development, Inc. Delaware No

Lake Houston Development, Inc. Delaware No

South Padre Development, Inc. Delaware No

Green Hills Corporation Delaware No

Knickerbocker Corporation Texas No

American Athletic Club, Inc. Texas No

Pavilions Corporation Delaware No

USLIFE Corporation New York No

All American Life Insurance Company Illinois Yes

1149 Investment Corp. Delaware No

American General Life Insurance Company of Pennsylvania Pennsylvania Yes

New D Corporation* Iowa No

The Old Line Life Insurance Company of America Wisconsin Yes

The United States Life Insurance Company in the City of New York New York Yes

USLIFE Advisers, Inc. New York No

USLIFE Agency Services, Inc. Illinois No

USLIFE Credit Life Insurance Company Illinois Yes

USLIFE Credit Life Insurance Company of Arizona Arizona Yes

USLIFE Indemnity Company Nebraska Yes

USLIFE Financial Corporation of Delaware* Delaware No

Midwest Holding Corporation Delaware No

<PAGE>

Name Jurisdiction of
- ---- Incorporation Insurer
------------- -------
<S> <C> <C>
I.C. Cal* Nebraska No

Midwest Property Management Co. Nebraska No

USLIFE Financial Institution Marketing Group, Inc. California No

USLIFE Insurance Services Corporation Texas No

USLIFE Realty Corporation Texas No

405 Leasehold Operating Corporation New York No

405 Properties Corporation* New York No

USLIFE Real Estate Services Corporation Texas No

USLIFE Realty Corporation of Florida Florida No

USLIFE Systems Corporation Delaware No
</TABLE>

American General Finance Foundation, Inc. is not included on this list. It is a
non-profit corporation.

NOTES

(1) The following limited liability companies were formed in the State of
Delaware on March 28, 1995. The limited liability interests of each are
jointly owned by AGC and AGDMC and the business and affairs of each are
managed by AGDMC:

American General Capital, L.L.C.
American General Delaware, L.L.C.

(2) On November 26, 1996, American General Institutional Capital A ("AG Cap
Trust A"), a Delaware business trust, was created. On March 10, 1997,
American General Institutional Capital B ("AG Cap Trust B"), also a
Delaware business trust, was created. Both AG Cap Trust A's and AG Cap
Trust B's business and affairs are conducted through their trustees:
Bankers Trust Company and Bankers Trust (Delaware). Capital securities
of each are held by non-affiliated third party investors and common
securities of AG Cap Trust A and AG Cap Trust B are held by AGC.

(3) On November 14, 1997, American General Capital I, American General
Capital II, American General Capital III, and American General Capital
IV (collectively, the "Trusts"), all Delaware business trusts, were
created. Each of the Trusts' business and affairs are conducted through
its trustees: Bankers Trust (Delaware) and James L. Gleaves (not in his
individual capacity but solely as Trustee).

(4) On July 10, 1997, the following insurance subsidiaries of AGC became the
direct owners of the parenthetically indicated percentages of membership
units of SBIL B, L.L.C. ("SBIL B"), a U.S. limited liability company:
VALIC (22.6%), FL (8.1%), AGLA (4.8%) and AGL (4.8%).

Through its aggregate 40.3% interest in SBIL B, VALIC, FL, AGLA and AGL
indirectly own approximately 28% of the securities of SBI, an English
company, and 14% of the securities of ESBL, an English company, SBP, an
English company, and SBFL, a Cayman Islands company. These interests
are held for investment purposes only.

(5) On December 23, 1994, AGCL purchased approximately 40% of the shares of
common stock of Western National Corporation ("WNC"), Western National
Life Insurance Company's ("WNL") indirect intermediate

<PAGE>

parent. Therefore, WNL became approximately 40% indirectly controlled by
AGC. On September 30, 1996, AGC purchased 7,254,464 shares of WNC's
Series A Participating Convertible Preferred Stock (the "Convertible
Preferred Stock"). On November 30, 1996, AGC contributed the Convertible
Preferred Stock to AGCL. On May 14, 1997, WNC's shareholders approved the
conversion of 7,254,464 shares of WNC's Series A Participating
Convertible Preferred Stock held by AGCL into an equal number of WNC
common stock. Thus, at present, the percentage of WNC common stock owned
directly by AGCL (and indirectly by AGC) is 46.2%. WNC, a Delaware
corporation, owns the following companies:

WNL Holding Corporation
Western National Life Insurance Company (TX)
Independent Advantage Financial & Insurance Services, Inc.
WNL Investment Advisory Services, Inc.
Conseco Annuity Guarantee Corp.
WNL Brokerage Services, Inc.
WNL Insurance Services, Inc.

However, AGCL (1) holds the direct interest in WNC (and the indirect
interests in WNC's subsidiaries) for investment purposes; (2) does not
direct the operations of WNC or WNL; (3) has no representatives on the
Board of Directors of WNC; and (4) is restricted, pursuant to a
Shareholder's Agreement between WNC and AGCL, in its right to vote its
shares against the slate of directors proposed by WNC's Board of
Directors. Accordingly, although WNC and its subsidiaries technically
are members of the American General insurance holding company system
under insurance holding company laws, AGCL does not direct the
operations of WNC or its subsidiaries.

(6) AGLA owns approximately 11% of Whirlpool Financial Corp. ("Whirlpool")
on a fully diluted basis. The total investment of AGLA in Whirlpool
represents approximately 3% of the voting power of the capital stock of
Whirlpool, but approximately 11% of the Whirlpool stock which has voting
rights. The interests in Whirlpool (which is a corporations that is not
associated with AGC) are held for investment purposes only.

(7) AGL owns 100% of the common stock of American General Securities
Incorporated ("AGSI"), a full-service NASD broker-dealer. AGSI, in
turn, owns 100% of the stock of the following insurance agencies:

American General Insurance Agency, Inc. (Missouri)
American General Insurance Agency of Hawaii, Inc. (Hawaii)
American General Insurance Agency of Massachusetts, Inc.
(Massachusetts)

In addition, the following agencies are indirectly related to AGSI, but
not owned or controlled by AGSI:
American General Insurance Agency of Ohio, Inc. (Ohio)
American General Insurance Agency of Texas, Inc. (Texas)
American General Insurance Agency of Oklahoma, Inc. (Oklahoma)
Insurance Masters Agency, Inc. (Texas)

AGSI and the foregoing agencies are not affiliates or subsidiaries of
AGL under applicable holding company laws, but they are part of the AGC
group of companies under other laws.

(8) American General Finance Corporation is the parent of an additional 48
wholly owned subsidiaries incorporated in 30 states and Puerto Rico for
the purpose of conducting its consumer finance operations, INCLUDING
those noted in footnote 7.

(9) American General Financial Services, Inc. is the parent of an additional
7 wholly owned subsidiaries incorporated in 4 states and Puerto Rico for
the purpose of conducting its consumer finance operations.

(10) American General Investment Management, L.P. is jointly owned by AGIHC
and AGIMC. AGIHC holds a 99% limited partnership interest, and AGIMC
owns a 1% general partnership interest.

<PAGE>

(11) AGRI owns only a 75% interest in GDI Holding, Inc.

(12) AG Land Associates, LLC is jointly owned by AGLH and AGLL. AGLH holds a
98.75% managing interest and AGLL owns a 1.25% managing interest.

ITEM 27. NUMBER OF CONTRACT OWNERS

As of April 1, 1999, there were ________ owners of Contracts of the class
covered by this registration statement (_____ Qualified Contracts and _____
Non-Qualified Contracts).

<PAGE>

ITEM 28. INDEMNIFICATION

Franklin Life Variable Annuity Fund A's Rules and Regulations provide as
follows:

ARTICLE V. INDEMNIFICATION

The Fund shall indemnify each of the members of its Board of Managers and
officers (and his heirs, executors and administrators) against all liabilities
and expenses, including but not limited to amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and counsel fees, reasonably
incurred by him in connection with the defense or disposition of any action,
suit or other proceeding, whether civil or criminal, before any court or
administrative or legislative body, in which he may be or may have been involved
as a party or otherwise or with which he may be or may have been threatened,
while in office or thereafter, by reason of his being or having been such a
member or officer, except with respect to any matter as to which he shall have
been finally adjudicated in any such action, suit or other proceeding not to
have acted in good faith in the reasonable belief that his action was in the
best interests of the Fund; and except that no member of the Board of Managers
or officer shall be indemnified hereunder or by any provision or arrangement
against any liability to the Fund or its Contract Owners to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office. Expenses, including counsel fees so incurred by any such member or
officer (but excluding amounts paid in satisfaction of judgments, in compromise
or as fines or penalties) may be paid from time to time by the Fund in advance
of the final disposition of any such action, suit or proceeding upon receipt of
an undertaking by or on behalf of such member or officer, secured by an
appropriate deposit or a surety bond approved by independent legal counsel for
the Fund, to repay the amounts so paid to the Fund if it is ultimately
determined that indemnification of such expenses is not authorized under this
Article V.

Any indemnification under this Article V shall be made only upon (1) a
final decision on the merits by a court or other body of competent jurisdiction
before which such proceeding is brought that the member of the Board of Managers
or officer to be indemnified is not liable by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office; or (2) in the absence of such a decision, a reasonable
determination, based upon a review of the facts, that the member of the Board of
Managers or officer to be indemnified was not liable by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office by (a) the vote of a majority of a quorum
of directors who are neither 'interested persons' (as defined in Section
2(a)(19) of the Investment Company Act of 1940) of the Fund or the Company nor
parties to the proceeding or (b) independent legal counsel in a written opinion.
Approval of indemnification by the Board of Managers pursuant to clause 2(a) or
clause 2(b) above shall not prevent the recovery from any member of the Board of
Managers or officer of any amount paid to him in accordance with such clause if
such member of the Board of Managers or officer is subsequently adjudicated by a
court of competent jurisdiction (1) not to have acted in good faith in the
reasonable belief that his actions was in the best interests of the Fund, or (2)
to have been liable to the Fund or its Contract Owners by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.

The right of indemnification hereby provided shall not be exclusive of or
affect any other rights to which any member of the Board of Mangers or officer
may be entitled, provided, however, that no such indemnification shall be
inconsistent with the provisions of Section 17(h) of the Investment Company Act
of 1940. Nothing contained in this Article shall affect any rights to
indemnification to which personnel other than members of the Board of Managers
and officers may be entitled by contract or otherwise under law, provided,
however, that no such indemnification shall be effected in violation of the
Investment Company Act of 1940.

Notwithstanding any other provisions of this Article, in the event that a
claim for indemnification with respect to liabilities arising under the
Securities Act of 1933 is asserted by any member of the Board of Mangers or
officer of the Fund, the Fund will, unless in the opinion of its counsel the
matter has been settled by controlling precedent and such member or officer is
not liable by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office, submit
to a court of appropriate jurisdiction the question whether such indemnification
by it is against the public policy as expressed in the Securities Act of 1933
and the Investment Company Act of 1940, and whether such member or officer is
liable by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office, and

<PAGE>

the party claiming such indemnification and the Fund will be governed by the
final adjudication of such judgment. Any adjudication that such indemnification
is against such public policy, or that such member or officer is so liable,
shall preclude any indemnification by the Fund.

By contract or other agreement with the Fund, the Company may agree to bear
or guarantee the cost of expense of the indemnification provided in this
Article, or any part of it.

The Franklin Life Insurance Company (referred to as "the Company" in the
immediately preceding quoted paragraph) has agreed to bear the expense of such
indemnification pursuant to the Administration Agreement dated June 30, 1971,
between The Franklin Life Insurance Company and Registrant.

ITEM 29. PRINCIPAL UNDERWRITERS

(a) Registrant's principal underwriter, Franklin Financial Services
Corporation, also acts as principal underwriter for Separate Account VUL and
Separate Account VUL-2 of The American Franklin Life Insurance Company, which
offer interests in flexible premium variable life insurance policies, and
Separate Account VA-1 of The American Franklin Life Insurance Company, which
offers interests in variable annuity contracts.

(b) The directors and principal officers of the principal underwriter are:

(1) (2)
Positions and Offices
Name with Underwriter
---- ---------------------
<S> <C>
Earl W. Baucom Director and Treasurer

Robert M. Beuerlein Senior Vice President

Tony M. Carter Vice President

Ross D. Friend Director, Vice President and Secretary

Karen Kunz Chief Financial Officer and Director of
Compliance and Administration

Deanna Osmonson Vice President and Assistant Secretary

Gary D. Osmonson Director and President

Gary D. Reddick Director and Vice Chairman

William A. Simpson Chairman of the Board

Dan E. Trudan Vice President and Assistant Secretary
</TABLE>

The principal business address of each individual except Tony M. Carter is c/o
Franklin Financial Services Corporation, #1 Franklin Square, Springfield,
Illinois 62713. The principal business address of Tony M. Carter is 2900
Greenbrier Drive, Springfield, Illinois 62704.

ITEM 30. LOCATION OF RECORDS

All records referenced under Section 31(a) of the 1940 Act, and Rules 31a-1
through 31a-3 thereunder,

<PAGE>

are maintained and in the custody of The Franklin Life Insurance Company at its
principal executive office located at #1 Franklin Square, Springfield, Illinois
62713 or at The Franklin Life Insurance Company's Administrative Office - FLIC
Annuity Service Center, 2727-A Allen Parkway (3-50), Houston, Texas 77019-2191;
or P.O. Box 4799, Houston, Texas 77210-4799, (800) 231-0105 or (713) 831-3505.

ITEM 31. MANAGEMENT SERVICES

Registrant has no management-related service contract no discussed in Part
A or Part B hereof.

ITEM 32. UNDERTAKINGS AND REPRESENTATIONS

The Registrant undertakes:

(a) to file a post-effective amendment to this Registration Statement as
frequently as is necessary to ensure that the audited financial statements in
the Registration Statement are never more than 16 months old for so long as
payments under the Contracts may be accepted;

(b) to include either (1) as part of any application to purchase a Contract
offered by the Prospectus constituting part of this Registration Statement, a
space that an applicant can check to request a Statement of Additional
Information, or (2) a toll-free number or a post card or similar written
communication affixed to or included in the Prospectus that the applicant can
remove to send for a Statement of Additional Information;

(c) to deliver any Statement of Additional Information and any financial
statements required to be made available under Form N-4 promptly upon written or
oral request;

(d) that the Registrant is relying upon the "no-action" letter of the
Securities and Exchange Commission dated November 28, 1988 in response to the
American Council of Life Insurance with respect to restrictions on withdrawal of
amounts from Contracts used in connection with annuity purchase plans meeting
the requirements of Internal Revenue Code Section 403(b), which amounts are
attributable to contributions made on or after January 1, 1989 pursuant to a
salary reduction agreement or to income earned on or after January 1, 1989 with
respect to contributions made pursuant to a salary reduction agreement and that
the Registrant will comply with the requirement of numbered paragraphs (1)
through (4) of such "no-action" letter;

(e) that the Registrant is relying upon Rule 6c-7 under the 1940 Act with
respect to the offer and sale of Contracts to participants in the Texas Optional
Retirement Program and that the Registrant will comply with the provisions of
paragraphs (a) - (d) of Rule 6c - 7.

(f) The Franklin Life Insurance Company represents that the fees and
charges deducted under the Contracts, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be incurred, and the
risks assumed by The Franklin Life Insurance Company in connection with the
Contracts.

<PAGE>

SIGNATURES

As required by the Securities Act of 1933 and the Investment Company Act of
1940, the registrant has caused this registration statement to be signed on its
behalf, in the City of Springfield, and State of Illinois, on the 26th day of
February, 1999.

Franklin Life Variable Annuity Fund (Registrant)

The Franklin Life Insurance Company (Depositor)

By: /s/ William A. Simpson
--------------------------------
William A. Simpson

Chairman of the Board of Directors and

Chief Executive Officer

Attest:

/s/ Elizabeth Arthur
- -----------------------
Elizabeth E. Arthur

Assistant Secretary

As required by the Securities Act of 1933, this registration statement has been
signed by the following persons in the capacities and on the dates indicated.

SIGNATURE TITLE DATE

*
- ------------------------
Robert M. Beuerlein Director
-----------------

*
- ------------------------
Brady W. Creel Director
-----------------

- ------------------------
Rodney O. Martin Jr. Director
-----------------

<PAGE>

- ------------------------
Jon P. Newton Director
-----------------

*
- ------------------------
Michael M. Nicholson
Director
-----------------

* Executive Vice President
- ------------------------- and Chief Financial
Philip K. Polkinghorn Officer (principal
financial officer and
principal accounting
officer)
-----------------

- ------------------------
Gary D. Reddick Director
-----------------

Chairman of the Board and
* Chief Executive Officer
- ------------------------ (principal executive
William A. Simpson officer)
-----------------

/s/ Elizabeth Arthur Dated February 26, 1999
- -------------------------------
* By Elizabeth E. Arthur,

Attorney-in-Fact