Registration Nos. 33-11780 and 811-5023
As filed with the Securities and Exchange Commission on July 2, 1996
==========================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 12
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 15
TEMPLETON FUNDS RETIREMENT ANNUITY SEPARATE ACCOUNT
(Exact Name of Registrant)
TEMPLETON FUNDS ANNUITY COMPANY
(Name of Depositor)
700 Central Avenue, St. Petersburg, Florida 33701-3628
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number (813) 823-8712
Ellen F. Stoutamire
Templeton Funds Annuity Company
700 Central Avenue, P.O. Box 33030
St. Petersburg, Florida 33701-3628
(Name and Address of Agent for Service)
Copies to:
Jeffrey S. Puretz, Esq.
Dechert Price & Rhoads
1500 K Street, N.W.
Washington, D.C. 20005
It is proposed that this filing will become effective 60 days after filing
pursuant to paragraph (a) of Rule 485.
The Registrant has registered an indefinite number of shares under the
Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act
of 1940 and has filed its Rule 24f-2 Notice for the fiscal year ended December
31,1995 on or before February 29, 1996.
<PAGE>
TEMPLETON FUNDS RETIREMENT ANNUITY SEPARATE ACCOUNT
CROSS REFERENCE SHEET
Item No. Caption(s)
PART A
1 Cover Page
2 Glossary of Special Terms
3 Summary
4 Annuity Unit Values
5 Templeton Funds Annuity Company; The
Separate Account; Templeton Variable Annuity
Fund; Voting Rights
6 Deductions and Charges
7 The Annuities; Substitution of Securities and
Other Changes; Cover Page
8 The Annuities
9 The Annuities
10 Purchase of Annuities; The Annuities;
Templeton Funds Annuity Company
11 N/A
12 Tax Information
13 N/A
14 Statement of Additional Information Table of
Contents
PART B
15 Cover Page
16 Table of Contents
17 Templeton Funds Annuity Company
18 Templeton Funds Annuity Company;
Independent Accountants
19 N/A
20 Templeton Funds Annuity Company; Purchase
of Annuities (in prospectus)
21 N/A
22 N/A
23 Financial Statements -- Templeton Funds
Retirement Annuity Separate Account;
Financial Statements -- Templeton Funds
Annuity Company
<PAGE>
PROSPECTUS
_______________, 1996
TEMPLETON RETIREMENT ANNUITIES
ISSUED BY TEMPLETON FUNDS RETIREMENT ANNUITY
SEPARATE ACCOUNT
OF
TEMPLETON FUNDS ANNUITY COMPANY
700 Central Avenue
St. Petersburg, Florida 33701-3628
Telephone (800) 774-5001
A TEMPLETON RETIREMENT ANNUITY ("Annuity") is an immediate variable annuity. The
Annuities are available only to an investor who has maintained a Franklin
Templeton Tax Deferred Retirement Plan ("Plan") with one of the Franklin
Templeton Mutual Funds for a period of at least one year and wishes to use all
or a portion of his or her Plan to purchase an Annuity. The Annuities will not
be available to any investor who resides in a state where the Annuities may not
lawfully be sold. The minimum amount required to purchase an Annuity is $10,000.
The Annuities are sold without a sales charge. Once Annuity Payments commence,
the purchase price may not be refunded or redeemed.
The Annuities are issued pursuant to either (i) a Group Contract between
Templeton Funds Annuity Company (the "Company") and Franklin Templeton Trust
Company (the "Contractholder") and represent participations in the Group
Contract or (ii) an Individual Contract between the Company and an individual
Contractowner ("Individual Contractowner"). Both Individual Contracts and Group
Contracts are referred to in this Prospectus by the term "Contract." All assets
under the Contracts are invested, through Templeton Funds Retirement Annuity
Separate Account (the "Separate Account"), in shares of Templeton Variable
Annuity Fund (the "Fund") and the value of the Annuities, and the amount of each
Annuity Payment, will vary with the performance of the Fund.
TEMPLETON VARIABLE ANNUITY FUND has for its investment objective long term
capital growth through a flexible policy of investing in stocks and debt
obligations of companies and governments of any nation.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIESAND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This Prospectus sets forth concisely information about the Annuities and the
Separate Account that a prospective investor should know before investing.
A Statement of Additional Information (the "SAI") dated _______________, 1996,
is on file with the Securities and Exchange Commission and is, in its entirety,
incorporated by reference into and made a part of this Prospectus. (See page 13
for the Statement of Additional lnformation Table of Contents.) A copy of the
SAI is made available upon request and without charge by calling or writing
Templeton Funds Annuity Company at the address indicated above.
THIS PROSPECTUS SHOULD BE ACCOMPANIED BY A CURRENT PROSPECTUS OF TEMPLETON
VARIABLE ANNUITY FUND. BOTH PROSPECTUSES SHOULD BE READ CAREFULLY AND RETAINED
FOR FUTURE REFERENCE.
[Page 1]
<PAGE>
TABLE OF CONTENTS
PAGE
Glossary of Special Terms
Expense Table
Summary
Templeton Funds Annuity Company
The Separate Account
Templeton Variable Annuity Fund
Purchase of Annuities
The Annuities
Payment Options
Beneficiaries
Annuity Payments
Annuity Units
Value of the Separate Account
Delays in Valuation and Payment
Deductions and Charges
Tax Information
Internal Revenue Code Limitations
Federal Income Tax Status
(a) Federal Tax Status of the Company and the Separate Account
(b) Federal Tax Status of Annuitants
(c) Withholding
Voting Rights
Substitution of Securities and Other Changes
Performance Information
Illustration of Values
Statement of Additional Information Table of Contents
Appendix A--Compliance with Internal Revenue Code Rules
Appendix B--Dollar Value of First Monthly Payment
[Page 2]
<PAGE>
GLOSSARY OF SPECIAL TERMS
ANNUITANT A person on whose life the Annuity Payments are based.
ANNUITY A Templeton Retirement Annuity issued pursuant to the
Contracts.
ANNUITY BENEFITS Those benefit payments, including Annuity
Payments, made to an Annuitant, a Joint Annuitant, one
or more Beneficiaries and/or any of their respective
estates under the terms of the Contracts.
ANNUITY PAYMENTS The monthly payments made in accordance with
the Annuity Option elected by the Participant under the
Group Contract or the Individual Contractowner under an
Individual Contract. Annuity Payments will be
determined by applying the initial contribution, less
any applicable taxes, to the tables shown in Appendix B
hereto.
ANNUITY PURCHASE DATE The date the contribution is made and the
order to purchase the Annuity is effected.
ANNUITY UNIT An accounting unit of measure used to calculate
the dollar amount of Annuity Payments and Annuity
Benefits. The value of an Annuity Unit fluctuates
generally with the value of the Fund.
APPLICANT A Plan accountholder who submits an application or
enrollment form requesting that his or her Plan
purchase an Annuity.
BENEFICIARY A person or persons designated by a Participant to
receive benefits under an Annuity, if any, payable
after the last death of an Annuitant and any Joint
Annuitant.
BUSINESS DAY Any day on which the New York Stock Exchange is
open for business.
COMPANY Templeton Funds Annuity Company, a Florida insurance
company which maintains the Separate Account and issues
the Annuities.
GROUP CONTRACTHOLDER Franklin Templeton Trust Company, a trust company
chartered under California law, and its successors and
assigns.
FRANKLIN TEMPLETON The Franklin Templeton Mutual Funds include each
MUTUAL FUNDS existing and future U.S. registered open-end investment
company for which Franklin Advisors, Inc. or Templeton
Global Advisors Limited or an affiliate acts as
investment adviser or manager and for which Franklin
Templeton Distributors, Inc. acts as principal
underwriter, unless otherwise specified by the Company.
(See "The Annuities.")
FUND Templeton Variable Annuity Fund, the registered
open-end management investment company in which the
Contracts' assets are invested by the Separate Account.
GROUP CONTRACT The Group Retirement Annuity Contract number
GA-002 between the Company and the Contractholder.
INDIVIDUAL CONTRACT An individual Retirement Annuity Contract
between the Company and an Individual Contractowner.
INDIVIDUAL An individual or individuals entitled to the ownership
CONTRACTOWNER rights stated in the Individual Contract and in whose
name the Contract is issued.
JOINT ANNUITANT A person other than the Annuitant designated
by the Participant as a person on whose life Annuity
Payments may also be based.
PARTICIPANT An Applicant whose application or enrollment form
requesting that his or her Plan purchase an Annuity has
been approved. A Participant will generally also be an
Annuitant.
PAYMENT DATE A day on which the value of Annuity Units for a
given Annuity Payment is calculated.
PERIODIC CHARGE An amount deducted periodically from the Separate
Account to compensate the Company for assuming
mortality and expense risks. (See "Deductions and
Charges.")
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<PAGE>
PLAN Any one of the group of Franklin Templeton Tax
Deferred Retirement Plans offered in connection with
the Franklin Templeton Mutual Funds, and for which the
Contractholder acts as trustee or custodian, to provide
for the accumulation of retirement funds for
individuals or groups of individuals under which at
least a part of the accumulation is tax deferred under
the Internal Revenue Code and under which an Annuity
may be purchased. These Plans currently include the
Franklin Templeton Individual Retirement Account
("IRA"), the Franklin Templeton Simplified Employee
Pension ("SEP-IRA"), Franklin Templeton "403(b)"
retirement plans for employees of tax exempt
organizations, Franklin Templeton "401(k)" plans and
qualified plans for corporations, self employed
individuals and partnerships, and are held for the
individuals or groups by Franklin Templeton Trust
Company as trustee or custodian.
SEPARATE ACCOUNT Templeton Funds Retirement Annuity Separate Account, a
separate account of the Company registered with the
Securities and Exchange Commission as a unit investment
trust. The Separate Account invests all its assets in
the Fund. The assets of the Separate Account are not
commingled with the general assets of the Company, and
the investment performance of the Separate Account is
kept separate from that of the general assets of the
Company.
[Page 4]
<PAGE>
EXPENSE TABLE
Separate Account Annual Expenses
(As a percentage of average account value)
Mortality and Expense Risk Fee 0.80%
Administration Fee 0.30%
Total Separate Account Annual Expenses 1.10%
Templeton Variable Annuity Fund Annual
Expenses
(As a percentage of Fund average net assets)*
Management Fees 0.50%
Other Expenses 0.50%
Administrative Fees 0.15%
Other (after fee reduction) 0.35%
Total Fund Annual Expenses 1.00%
- --------------------
Templeton Investment Counsel, Inc., the Fund's investment manager, has
voluntarily agreed to reduce its investment management fee to the extent
necessary to limit total expenses (excluding interest, taxes, brokerage
commissions, and extraordinary expenses) to 1% of the Fund's average daily net
assets until May 1, 1997. If such fee reduction is insufficient to so limit the
Fund's total expenses, the Fund's business manager, Templeton Funds Annuity
Company, has agreed to reduce its fee and, to the extent necessary, assume other
Fund expenses, so as to limit the Fund's expenses. Expenses borne by the
investment manager amounted to $.01 per share for the fiscal year ended December
31, 1995. If these expenses had been incurred by the Fund, the ratio of expenses
to average net assets would have been 1.06%.
SUMMARY
A Templeton Retirement Annuity is an immediate variable annuity designed to be
used to distribute the benefits of tax deferred retirement plans. The Annuities
are available only to persons who have maintained an account in a Plan for at
least one year. The minimum Annuity purchase is $10,000. Once Annuity Payments
commence, the purchase price may not be refunded or redeemed.
The Participant may select an assumed annual interest rate of 3% or 7% and from
a variety of payment options based on his life (or his life and that of a Joint
Annuitant) or for a period certain (see "Payment Options"). The value of the
first Annuity Payment depends on the amount invested, the assumed annual
interest rate specified and the Annuity Payment option selected by the
Participant. The amount of each Annuity Payment thereafter will fluctuate based
on the performance of the underlying mutual fund in which the Annuity assets are
invested (see "Templeton Variable Annuity Fund"). The investment objective of
the Fund is long term capital growth through a flexible policy of investing in
stocks and debt obligations of companies and governments of any nation.
The Annuities are available under the Group Contract issued to the
Contractholder by the Company. In those states where the Group Contract may not
be offered, an Individual Contract, with substantially similar terms, will be
issued to the Applicant. All obligations under the Contracts are obligations of
the Company. All assets under the Contracts are held in a segregated account of
the Company and are not chargeable with other liabilities of the Company (see
"The Separate Account").
The Annuities are sold without a sales charge. Any applicable state premium
taxes are deducted, as required, from the initial contribution or from Annuity
Payments or Annuity Benefits. The Company assesses a total charge on an annual
basis of 1.1% of assets of the Separate Account as compensation for Separate
Account expenses and for assuming expense and mortality risks. The Company
guarantees that these charges will not increase for Annuities already issued
(see "Deductions and Charges"). Expenses of Templeton Variable Annuity Fund are
described in its prospectus.
TEMPLETON FUNDS ANNUITY COMPANY
Templeton Funds Annuity Company (the "Company"), 700 Central Avenue, St.
Petersburg, Florida 33701-3628, is the sponsor of the Separate Account. The
Company was organized as a Florida corporation on January 25, 1984 and is
licensed to engage in the life insurance business in Florida. The Company is an
indirect wholly-owned subsidiary of Franklin Resources, Inc. (See "Templeton
Funds Annuity Company" in the SAI for additional information.)
THE SEPARATE ACCOUNT
The Separate Account was established on February 4, 1987, by resolution of the
Board of Directors of the Company and is registered with the Securities and
Exchange Commission (the "Commission") as a unit investment trust. This
registration does not involve any supervision by the Commission of the
administration or investment practices or policies of the Separate Account or of
the Fund. The Separate Account invests its assets, net of certain expenses (see
"Deductions and Charges"), exclusively in Templeton Variable Annuity Fund (the
"Fund"). Although empowered to establish subaccounts which may make other
investments, the Separate Account has no present intention of so doing.
[Page 5]
<PAGE>
The Separate Account is administered and accounted for as part of the general
business of the Company, but the income and capital gains or losses from assets
allocated to the Separate Account, whether or not realized, are, in accordance
with the resolution establishing the Separate Account, credited to or charged
against those assets without regard to other income, gains or losses of the
Company. The assets of the Separate Account are not chargeable with liabilities
arising out of any other business of the Company. The obligations arising under
the Contracts are obligations of the Company.
TEMPLETON VARIABLE ANNUITY FUND
The Fund is registered under the Investment Company Act of 1940 as an open-end
diversified management investment company. The Fund was organized as a
Massachusetts business trust on February 5, 1987. The Fund's investment
objective is long term capital growth. It pursues this objective through a
flexible policy of investing primarily in stocks and debt obligations of
companies and governments of any nation, including issuers inside as well as
outside the United States. The Fund's Investment Manager is Templeton Investment
Counsel, Inc., an affiliate of the Company. A prospectus containing more
complete information concerning the Fund accompanies this Prospectus and should
be read carefully before purchasing an Annuity.
The following are graphs showing how the Annuity Payments can fluctuate based on
past investment performance through December 31, 1995. The graphs show the
effect that the Fund's investment performance would have had if a Contract with
an assumed annual interest rate of 3% or 7%, providing an initial monthly
Annuity Payment of $500, was purchased on the date the Fund commenced
operations. Annuity Payments increase for a given month if the annualized net
rate of return for that month is higher than the assumed annual rate of return,
and decreases for a given month if the annualized net rate of return is lower
than the assumed annual rate of return. The annuity purchase amount necessary
for an initial monthly Annuity Payment of $500 will vary depending on the age
and sex of the Annuitant (and Joint Annuitant, if any), the Payment Option, and
the Annuity Purchase Date.
The graphs take into account all charges under the Contract and the actual
expenses of the Fund.
[The following table replaces a graph showing the Fund's past investment
performance with an assumed annual interest rate of 3%.]
Date
Feb 88 500.00
Mar 88 510.14
Apr 88 492.34
May 88 489.03
Jun 88 503.94
Jul 88 498.01
Aug 88 482.77
Sep 88 485.58
Oct 88 504.50
Nov 88 489.81
Dec 88 494.82
Jan 89 519.30
Feb 89 545.66
Mar 89 545.13
Apr 89 556.06
May 89 569.81
Jun 89 563.22
Jul 89 583.89
Aug 89 611.66
Sep 89 624.13
Oct 89 610.81
[Page 6]
<PAGE>
Nov 89 618.08
Dec 89 630.79
Jan 90 619.90
Feb 90 600.04
Mar 90 597.56
Apr 90 614.11
May 90 626.22
Jun 90 640.35
Jul 90 666.43
Aug 90 595.49
Sep 90 564.24
Oct 90 531.17
Nov 90 524.69
Dec 90 543.30
Jan 91 544.61
Feb 91 609.29
Mar 91 613.34
Apr 91 629.79
May 91 610.10
Jun 91 603.06
Jul 91 616.20
Aug 91 596.17
Sep 91 636.49
Oct 91 639.61
Nov 91 646.02
Dec 91 641.96
Jan 92 694.79
Feb 92 700.95
Mar 92 702.86
Apr 92 705.10
May 92 725.27
Jun 92 703.38
Jul 92 717.74
Aug 92 705.22
Sep 92 701.98
Oct 92 688.90
Nov 92 696.88
[Page 7]
<PAGE>
Dec 92 717.27
Jan 93 745.30
Feb 93 740.83
Mar 93 758.61
Apr 93 787.86
May 93 775.91
Jun 93 794.08
Jul 93 791.26
Aug 93 838.96
Sep 93 854.45
Oct 93 895.44
Nov 93 897.22
Dec 93 921.98
Jan 94 962.42
Feb 94 979.92
Mar 94 946.46
Apr 94 910.06
May 94 922.14
Jun 94 921.97
Jul 94 940.17
Aug 94 961.21
Sep 94 959.77
Oct 94 943.89
Nov 94 922.71
Dec 94 880.53
Jan 95 872.92
Feb 95 886.33
Mar 95 881.05
Apr 95 922.58
May 95 955.76
Jun 95 978.43
Jul 95 1,030.58
Aug 95 1,019.24
Sept 95 1,047.34
Oct 95 1,036.11
Nov 95 1,008.58
Dec 95 1,030.99
[Page 8]
<PAGE>
[The following table replaces a graph showing the Fund's past investment
performance with an assumed annual interest rate of 7%].
Date
Mar 88 500.00
Apr 88 508.50
May 88 489.17
Jun 88 484.37
Jul 88 497.59
Aug 88 490.15
Sep 88 473.62
Oct 88 474.80
Nov 88 491.81
Dec 88 476.00
Jan 89 479.28
Feb 89 501.41
Mar 89 525.39
Apr 89 523.19
May 89 531.97
Jun 89 543.42
Jul 89 535.29
Aug 89 553.27
Sep 89 577.72
Oct 89 587.60
Nov 89 573.27
Dec 89 578.34
Jan 90 588.46
Feb 90 576.26
Mar 90 556.23
Apr 90 552.04
May 90 565.62
Jun 90 574.98
Jul 90 586.00
Aug 90 607.96
Sep 90 541.39
Oct 90 511.48
Nov 90 479.95
Dec 90 472.67
Jan 91 487.86
Feb 91 487.41
[Page 9]
<PAGE>
Mar 91 543.77
Apr 91 545.74
May 91 558.46
Jun 91 539.31
Jul 91 531.37
Aug 91 541.20
Sep 91 521.87
Oct 91 555.48
Nov 91 556.42
Dec 91 560.35
Jan 92 554.99
Feb 92 598.54
Mar 92 602.27
Apr 92 601.85
May 92 601.95
Jun 92 617.31
Jul 92 596.62
Aug 92 606.72
Sep 92 594.34
Oct 92 589.77
Nov 92 576.86
Dec 92 581.84
Jan 93 596.94
Feb 93 618.20
Mar 93 612.90
Apr 93 625.39
May 93 647.35
Jun 93 635.68
Jul 93 648.47
Aug 93 644.02
Sep 93 680.72
Oct 93 691.13
Nov 93 721.95
Dec 93 721.20
Jan 94 738.73
Feb 94 768.57
Mar 94 780.34
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<PAGE>
Apr 94 751.19
May 94 719.98
Jun 94 727.34
Jul 94 724.86
Aug 94 736.80
Sep 94 750.86
Oct 94 747.25
Nov 94 732.67
Dec 94 714.07
Jan 95 679.31
Feb 95 671.13
Mar 95 679.53
Apr 95 673.10
May 95 702.78
Jun 95 725.78
Jul 95 740.45
Aug 95 777.57
Sep 95 766.54
Oct 95 785.14
Nov 95 774.30
Dec 95 751.46
PURCHASE OF ANNUITIES
Applications and enrollment forms for requesting the purchase of an Annuity are
available from Templeton Funds Annuity Company, 700 Central Avenue, St.
Petersburg, Florida 33701-3628. Annuities are available on a continuing basis
only to eligible persons and are sold with no sales charge. Persons eligible to
request the purchase of an Annuity are those who have maintained an account in a
Plan for at least one year prior to the Annuity Purchase Date. The
Contractholder will determine whether each Applicant meets the eligibility
requirements. For each eligible Applicant requesting to have an Annuity
purchased by his Plan, the Contractholder acting in its capacity as custodian or
trustee under the particular Plan will effect the purchase of an Annuity in
accordance with the Applicant's instructions. Annuity purchases will be effected
only for Applicants who reside in states where the Annuities may lawfully be
sold.
To arrange for the purchase of an Annuity, each Applicant must return a properly
completed application or enrollment form to the Company together with any other
forms which the Company may require. The form contains an authorization for the
Contractholder, as trustee or custodian under the Applicant's Plan, to use a
specified amount of Plan assets to purchase an Annuity. The minimum amount for
purchase of an Annuity is $10,000. After the Contractholder has reviewed each
application or enrollment form to determine eligibility, the Company will notify
each Applicant whether his or her request to have an Annuity purchased has been
approved. Each approved Applicant covered by the Group Contract will be sent a
certificate confirming the terms, the Annuity Payment option and amount of the
Annuity selected as well as the identity of the Annuitant, any Joint Annuitant
and Beneficiaries. The certificate will also describe applicable terms of the
Group Contract. Other approved Applicants will receive their own Individual
Contract.
Each order to purchase an Annuity will be effected on the 10th Business Day
prior to the first day of the month or on such earlier Business Day as the
Company, in its sole discretion, may determine. On each such day, the payment
for each approved application or enrollment request will be transferred from the
applicable Plan and invested in accordance with the Contract at the Annuity Unit
value determined on that day (see "Annuity Units"). (Prior to such transfer,
amounts to be transferred from Plans will continue to be invested under such
Plans.) Completed application or enrollment forms must be received by the
Company at least 10 days prior to a Business Day on which the Company effects
orders
[Page 11]
<PAGE>
to purchase Annuities in order for the order to be processed on that latter
date. Applicants whose application or enrollment forms are not complete or are
not timely received will be notified that the order will be processed on the
next day on which orders are effected, provided any additional necessary
information is timely provided. An Applicant may withdraw his or her request for
application or enrollment at any time before the Annuity Purchase Date.
The principal underwriter of the Annuities is Templeton Franklin Investment
Services, Inc. ("TFIS"). TFIS is an indirect wholly-owned subsidiary of Franklin
Resources, Inc. and is an affiliate of the Company. TFIS receives no
compensation for its services as principal underwriter.
THE ANNUITIES
The Annuities are offered only to persons who have maintained an account for at
least one year in a Franklin Templeton Tax Deferred Retirement Plan ("Plan")
with any one or more of the Franklin Templeton Mutual Funds. The Annuities are
designed to permit such persons, on or after the retirement date permitted under
the applicable Plan, to instruct the Contractholder, in its capacity as
custodian or trustee under the Plan, to have the Plan purchase an immediate
variable annuity having a payout option selected by the Applicant (see "Payment
Options"). Once Annuity Payments commence, the purchase price may not be
refunded or redeemed, and no exchanges may be made to another Franklin Templeton
Mutual Fund. Benefits payable under the Annuities will vary in amount based on
the performance of the Fund. The Company guarantees that the dollar amount of
Annuity Payments for Annuities already issued will not be affected by the
changes in the expense assumptions used in determining the first Annuity
Payment. However, because the Fund in which assets used to purchase the Annuity
are invested fluctuates in value daily, there can be no guarantee that the
remaining value of an Annuity (net of deductions and charges), together with any
Annuity Payments already made, will at any given time exceed or even equal the
amount of assets used to purchase the Annuity.
PAYMENT OPTIONS
Annuity Payments will be made monthly. The value of the first Annuity Payment is
determined as indicated in Appendix B, based on the amount of contribution and
the payment option specified in the application or enrollment form, which may be
one of the following:
Option I--Life Annuity--An Annuity payable monthly during the lifetime of the
Annuitant. The Annuity will stop with the last Annuity Payment due prior to the
death of the Annuitant. Only one Annuity Payment would be made under this Option
if the Annuitant dies before the second Annuity Payment is due; only two Annuity
Payments would be made if the Annuitant dies before the third Annuity Payment is
due, etc.
Option II--Life Annuity with 60 or 120 Monthly Payments Guaranteed--An Annuity
payable monthly during the lifetime of an Annuitant with a guarantee that if, at
the death of the Annuitant, Annuity Payments have been made for less than 60 or
120 months, as elected, then Annuity Payments will be continued thereafter, to a
Beneficiary designated by the Participant during the remainder of said period.
Option III--Joint and Last Survivor Annuity--An Annuity payable monthly during
the joint lifetime of the Annuitant and a designated Joint Annuitant. Upon the
death of the Annuitant, Annuity Payments will be made to the Joint Annuitant
during the Joint Annuitant's remaining lifetime at a level of 100%, 75% or 50%
of the original level, as elected by the Participant. This percentage is
selected by the Participant in his application or enrollment form. Under this
Option, only one Annuity Payment would be made if both the Annuitant and the
Joint Annuitant die before the second Annuity Payment is due; only two Annuity
Payments would be made if they both die before the third Annuity Payment is due,
etc.
Option IV--Joint and Last Survivor Annuity with 60 or 120 Monthly Payments
Guaranteed--An Annuity payable monthly during the joint lifetime of an Annuitant
and a Joint Annuitant with no reduction in amount after the death of the
Annuitant and with a guarantee that if, at the latter death of either the
Annuitant or the Joint Annuitant, Annuity Payments have been made for less than
60 or 120 months as elected, then Annuity Payments will be continued thereafter
to a Beneficiary designated by the Participant during the remainder of said
period.
Option V--Unit Refund Life Annuity--An Annuity payable monthly during the
lifetime of an Annuitant, ceasing with the last Annuity Payment due prior to the
death of the Annuitant with a guarantee that, at the death of the Annuitant, the
Beneficiary will receive in one sum the then dollar value of the number of
Annuity Units equal to (1) the total net amount applied to purchase the Annuity
divided by the Annuity Unit value used to determine the first Annuity Payment,
minus (2) the product of the number of the Annuity Units represented by each
payment and the number of payments made. No payment will be made if the
difference of (1) minus (2) is negative.
Other payment options may be arranged subject to prior approval by the Company.
See "Tax Information--Internal Revenue Code Limitations," regarding limitations
and other requirements which should be considered when selecting a payment
option. For Internal Revenue Code requirements which may modify payments under
the Annuity options in certain cases, see Appendix A.
[Page 12]
<PAGE>
BENEFICIARIES
An Applicant for an Annuity may designate a Beneficiary or Beneficiaries to
receive any remaining payments or sums which may become payable upon the last
death of the Annuitant and the Joint Annuitant. An Applicant may also designate
one or more contingent Beneficiaries to receive Annuity Benefits in the event
all Beneficiaries die before all Annuity Benefits payable to such Beneficiaries
have been paid. These designations may be changed by the Participant from time
to time.
If more than one Beneficiary or contingent Beneficiary is designated and the
respective interest of each is not specified, they will be paid in equal shares.
If any of several Beneficiaries dies before the Annuitant and any Joint
Annuitant, any amounts payable upon the death of the Annuitant and any Joint
Annuitant will be paid to the surviving Beneficiaries, in equal shares or as
otherwise designated by the Participant. If any of several contingent
Beneficiaries dies before all the Beneficiaries, any amounts payable upon the
death of all Beneficiaries will be paid to the surviving contingent
Beneficiaries, in equal shares or as otherwise designated by the Participant.
After the start of Annuity Payments to one or more of several Beneficiaries or
contingent Beneficiaries, if any of the designated Beneficiaries or contingent
Beneficiaries dies, Annuity Payments will be continued in equal shares to the
remaining Beneficiaries or contingent Beneficiaries then eligible to receive
such payments unless otherwise specified by the Participant. After the start of
Annuity Payments to a Beneficiary or contingent Beneficiary and after the death
of all designated Beneficiaries or contingent Beneficiaries, the commuted value
of any remaining guaranteed Annuity Payments due or to become due will be paid
in one sum to the estate of the person or persons then receiving such payments.
Such commuted value will be determined on the basis of the assumed interest rate
selected by the Applicant, compounded annually. (See "Annuity Payments.")
Any designation or change of Beneficiary or contingent Beneficiary shall be made
to the Company's home office by filing satisfactory written notice. When
acknowledged in writing by the Company, such designation or change will take
effect on the date the notice was signed. The Company will not be liable for any
payment made or action taken by it before notice was acknowledged.
ANNUITY PAYMENTS
The first payment under any of the Annuity Options will be determined in
accordance with the Annuity Payment rate based on the assumed annual interest
rate selected by the Applicant. No purchase of an Annuity will be effected until
the Company has received proof acceptable to it of the birthdate of the
Annuitant and any Joint Annuitant.
Under the Contract the Annuitant may choose between an assumed annual interest
rate of 3% or 7%. If the Annuitant chooses the 7% assumed annual interest rate,
as compared to choosing the 3% interest rate, Annuity Payments would start at a
higher level but would increase moreslowly if investment returns are more than
7% and decrease more rapidly. Therefore, election of the 7% assumed annual rate
of interest would result in a higher first monthly payment, but would increase
the possibility of reduced future payments during the periods when net
investment performance of the Separate Account did not exceed the 7% assumed
annual interest rate.
If the Annuitant chooses the 3% assumed annual interest rate, Annuity Payments
would start at a lower level but would increase more rapidly if the investment
returns are greater than 3% and decrease more slowly. Therefore, election of the
3% assumed annual interest rate would result in a lower first monthly payment
but would decrease the possibility of reduced future payments.
The first Annuity Payment, for payments made on a monthly basis, is calculated
by dividing the Purchase Payment, less any applicable taxes, by 1000 and
multiplying the result by the appropriate figure shown on Appendix B. Values not
shown will be calculated on an equivalent basis. The first Annuity Payment is
then divided by the then current value of an Annuity Unit (see below) to
determine the fixed number of Annuity Units used to calculate each subsequent
Annuity Payment. Thereafter, each Annuity Payment is calculated by multiplying
the fixed number of Annuity Units, as determined above, by the current Annuity
Unit Value, less any applicable taxes. Since the value of an Annuity Unit will
fluctuate from month to month, the amount of each Annuity Payment may also be
expected to fluctuate. However, the Company guarantees that the Administrative
Fee and the Periodic Charge will not be changed for any Annuity once issued.
(See "Deductions and Charges.")
In some states the combination of the 7% and 3% assumed interest rates may not
be available. Alternate rates may be offered as permitted under applicable state
law.
ANNUITY UNITS
The value of an Annuity Unit was initially set at $1.00 upon commencement of the
Separate Account's operations. The value of an Annuity Unit is thereafter
determined as follows on each Payment Date:
First: The Net Investment Factor is determined by dividing (a) by (b) and adding
(c) to the result, where:
(a) is the net increase or decrease in the net asset value per share of the
Fund, plus the per share amount of any dividend or capital gain
distribution paid or deemed paid by the Fund since the preceding Payment
Date, plus or minus a per share charge or credit for any taxes incurred by
or reserved for in the Separate Account as of the end of the current
Payment Date which the Company determines to have resulted from maintenance
of the Separate Account;
[Page 13]
<PAGE>
(b) is the net asset value per share of the Fund on the preceding Payment Date,
plus or minus a per share charge or credit for any taxes incurred by or
reserved for in the Separate Account as of the end of the immediately
preceding Payment Date which the Company determines to have resulted from
maintenance of the Separate Account;
(c) is the net result of 1.000, less the Periodic Charge (see "Deductions and
Charges").
The Net Investment Factor may be more or less than one.
Second: An Annuity Unit value for a Payment Date is equal to:
(a) the value of the Annuity Unit on the immediately preceding Payment Date;
(b) multiplied by the Net Investment Factor for the period from the preceding
Payment Date ending on the current Payment Date;
(c) divided by the Assumed Net Investment Factor for that period.
The Assumed Net Investment Factor is equal to one plus the interest rate used in
determining the basis for purchase of Annuities, adjusted to reflect the
performance of the Separate Account during the particular valuation period. For
example, using the 7% assumed annual interest rate, the Assumed Net lnvestment
Factor for a one-year valuation period would be 1.07. For a one-day valuation
period, the Assumed Net lnvestment Factor would be 1.000185. Using the 3%
assumed annual interest rate, the Assumed Net Investment Factor for a one-year
valuation period would be 1.03. For a one-day valuation period, the Assumed Net
Investment Factor would be 1.000081. The value of an Annuity Unit will increase
only when the actual investment results of the Separate Account exceeds the
assumed rate of interest. If actual results are less than the assumed rate, the
value of an Annuity Unit will decrease.
The value of an Annuity Unit as of any date other than a given Payment Date is
equal to its value on the next succeeding Payment Date.
VALUE OF THE SEPARATE ACCOUNT
The value of the Separate Account on a Payment Date is equal to (a) its value on
the previous Payment Date, less (b) the Periodic Charge, the Administration Fee
and applicable taxes for the period since the preceding Payment Date (see
"Deductions and Charges"), less (c) Annuity Benefits paid since the previous
Payment Date, plus (d) net new contributions, plus (e) any dividend or capital
gains distributions paid to the Separate Account by the Fund, and plus or minus
(f) the increase or decrease in the net asset value of the Fund since the
preceding Payment Date.
DELAYS IN VALUATION AND PAYMENT
The determination of Net Asset Value or of Annuity Unit value and making of
payments under the Annuities may be suspended or delayed:
(a) for any period (i) during which the New York Stock Exchange is closed other
than customary weekend and holiday closings or (ii) during which trading on
the New York Stock Exchange is restricted;
(b) for any period during which an emergency exists (as determined in
accordance with any applicable regulatory requirements) as a result of
which (i) disposal by the Separate Account or the Fund of securities owned
by it is not reasonably practicable or (ii) it is not reasonably
practicable for the Separate Account or the Fund fairly to determine the
value of its net assets; or
(c) for such other periods as the Commission may by order permit for the
protection of Participants, Annuitants, Joint Annuitants and/or
Beneficiaries.
DEDUCTIONS AND CHARGES
Any applicable state premium taxes and other taxes will be deducted either from
the initial Purchase Payment at the time an Annuity is purchased or from Annuity
Payments or Annuity Benefits, as required by applicable law from time to time.
The Company assesses a Periodic Charge against the Separate Account, equal on an
annual basis to 0.8% of Separate Account assets. The Periodic Charge, in the
following amounts, compensates the Company for assuming the risks that mortality
experience will be lower than the rate assumed and that expenses will be greater
than what is assumed: 0.3% of average annual net assets to cover expense risk
and 0.5% to cover the mortality risk. The Periodic Charge is guaranteed as to
Annuities issued prior to the effective date of any change in the Periodic
Charge. The Company also assesses an administrative charge (the "Administration
Fee"), equal on an annual basis to 0.3% of the Separate Account assets, to
reimburse the Company for a portion of its administrative expenses incurred in
administering the Separate Account. The Company does not expect to recover from
the Administration Fee an amount in excess of its accumulated administrative
expenses. Even though the administrative expenses may increase, the Company
guarantees it will not increase the amount of the Administration Fee. The
Company also
[Page 14]
<PAGE>
levies a charge against the Separate Account to reimburse the Company for the
amount of any tax liability paid or reserved by the Company that results from
the maintenance of the Separate Account. (For expenses borne by the Fund, see
the current prospectus of the Fund.)
TAX INFORMATION
INTERNAL REVENUE CODE LIMITATIONS
The availability or terms of any payment option may be modified or restricted to
the extent necessary to comply with U.S. Treasury Regulations covering
permissible distributions from retirement plans. (See Appendix A.) In addition,
persons contemplating the purchase of an Annuity should refer to the terms of
their Plan for any limitations or restrictions regarding the date on which
Annuity Payments must commence. In general, and except as otherwise permitted by
U.S. Treasury Regulations, federal tax law requires that Annuity Payment must
commence no later than April 1 of the year after the year in which the Annuitant
attains age 70 1/2 . If the minimum distribution is not made, a 50%
nondeductible excise tax is imposed as to the amount not distributed in
accordance with U.S. Treasury Regulations.
In selecting a payment option for an Annuity, purchasers should also note that
the Internal Revenue Code (the "Code") provides that benefit payments may be
made only (a) over the life of the Annuitant or the lives of the Annuitant and
any Joint Annuitant; or (b) over a period certain that does not exceed the life
expectancy of the Annuitant or the joint life expectancy of the Annuitant and
any Joint Annuitant. Additionally, the Code allows selection of a payment option
with a 100% joint and survivor annuity (i.e., the 100% level under Option 3
under the Contracts) only if the Joint Annuitant is either the Annuitant's
spouse or is no more than 10 years younger than the Annuitant. If the Annuitant
dies before the entire distribution due under the Annuity has been paid, such
unpaid portion of the Annuity will be distributed (without interest) at least as
rapidly as under the method of distribution being used as of the date of his
death.
FEDERAL INCOME TAX STATUS
The following discussion is general in nature and is not intended as tax advice.
Each person concerned should consult a competent tax adviser. The discussion is
based on the Company's understanding of current federal income tax laws as they
are currently interpreted by the Internal Revenue Service (the "I.R.S."). No
representation is made regarding the likelihood that either the particular laws
or their interpretation will continue. No attempt is made to consider any state
or other tax laws which may be applicable.
(A) FEDERAL TAX STATUS OF THE COMPANY AND THE SEPARATE ACCOUNT
General: The Company is taxed as a life insurance company under Part I,
Subchapter L of the Code. Because the Separate Account is not a separate entity
from the Company for purposes of the Code, the Company will be liable for any
federal income taxes which become payable with respect to the income of the
Separate Account. Under current law, no item of dividend income, interest income
or realized capital gain attributable, at a minimum, to appreciation after
January 1,1985, of the Separate Account will be taxed to the Company to the
extent it is applied to increase reserves under the Contracts.
Under the principles set forth in I.R.S. Revenue Ruling 81-225 and Section
817(h) of the Code and regulations thereunder, the Company believes that the
Company will be treated as owner of the assets invested in the Separate Account
for federal income tax purposes, with the result that earnings and gains, if
any, derived from those assets will not be included in an Annuitant's gross
income until amounts are received pursuant to an Annuity.
(B) FEDERAL TAX STATUS OF ANNUITANTS
The Annuities are designed for use with the Plans and other similar tax deferred
retirement plans. The tax rules applicable to participants in such plans who
purchase an Annuity vary according to the type of plan and the terms and
conditions of the plan itself. Therefore, this discussion is designed to provide
only general information about the use of the Annuities in connection with the
various types of plans. Participants in plans are cautioned that the rights of
any person to any benefits under the plans may be subject to the terms and
conditions of the plans themselves regardless of the terms and conditions of the
Contract and the Annuities.
The Company believes that the Annuitant is not subject to federal income tax on
increases in Annuity value until payments are received under the Annuity.
Federal income taxation of Annuity Payments and Annuity Benefits is determined
under Section 72 of the Code. Section 72 provides, in general, that a portion of
each Annuity Payment which represents the Annuitant's "investment" in the
Annuity is excluded from gross income for income tax purposes. ("Investment"
refers generally to contributions that were not deductible or excludable from
income when made.) If the Annuity is purchased entirely with assets which were
excludable from the Annuitant/Participant's income, the "investment" by the
Annuitant/Participant will be deemed to be zero and distributions will be fully
taxable as payments are received. To the extent an Annuity is purchased with
contributions that were subject to income tax when made to such a plan,
proportional amounts of each Annuity Payment may be excluded from gross income
for income tax purposes up to the aggregate amount of such contributions. In
some circumstances, Annuity Payments made before the Annuitant attains age 59
1/2 may be subject to an additional 10% penalty tax. In addition, distributions
in excess of $155,000 per year in the case of periodic distributions and in
excess of $775,000 in the case of lump sum distributions may be subject to an
additional 15% excise tax.
[Page 15]
<PAGE>
(C) WITHHOLDING
With certain limited exceptions, withholding is required on Annuity Payments and
Annuity Benefits. However, with certain exceptions, recipients of Annuity
Payments and Annuity Benefits are allowed to make an election not to have
federal income tax withheld, which election is revocable at any time.
The withholding rate, as determined from the recipient's withholding
certificate, will be applied against the taxable portion of each Annuity
Payment. If no withholding certificate is filed with the Company, tax will be
withheld from Annuity Payments and Annuity Benefits on the basis that the payee
is married with three withholding exemptions.
Persons who elect not to have withholding made are nonetheless liable for
federal income tax on the Annuity Payments and Annuity Benefits received by them
and may become subject to penalties under the estimated tax payment rules if
withholding and estimated tax payments are not sufficient.
VOTING RIGHTS
In accordance with its view of present applicable law, the Company will vote the
shares of the Fund held in the Separate Account at special meetings of the
shareholders of the Fund in accordance with instructions received from persons
having a voting interest in the Separate Account. The Company understands that
under present applicable law, persons currently receiving payments under an
Annuity have such voting interest. The Company will vote shares for which it has
not received instructions in the same proportion as it votes shares for which it
has received instructions.
The number of votes which a person has a right to instruct will be determined by
dividing the reserve for the applicable Annuity in the Separate Account by the
net asset value per share of the Fund. Such number of shares will be determined
as of a date coincident with the date established by the Fund for determining
shareholders eligible to vote at the meeting of the Fund, which shall not be
more than 90 days prior to any meeting of the Fund. Voting instructions will be
solicited by written communication at least 14 days prior to such meeting. The
votes attributable to each Annuity decrease as reserves allocated to that
Annuity decrease.
SUBSTITUTION OF SECURITIES AND OTHER CHANGES
If the shares of the Fund should no longer be available for investment by the
Separate Account or if, in the judgment of the Company, further investment in
such shares should be inappropriate in view of the purpose of the Annuities, the
Company may substitute shares of another mutual fund or other investment vehicle
for shares of the Fund already purchased or to be purchased in the future under
the Annuities. No substitution of securities may take place without prior
approval of the Securities and Exchange Commission in accordance with such
requirements as it may impose, without notice to or approval by persons having
voting interest, or without complying with filing or other procedures
established by applicable state insurance regulators.
At the Company's election and subject to any necessary vote by persons having
the right to give instructions with respect to the voting of Fund shares, the
Separate Account may be operated as a management company under the Investment
Company Act of 1940 or in any other permitted form, or it may be deregistered
under the Act in the event registration is no longer required. The Company also
reserves the right to add or delete other separate accounts or subaccounts of
the Separate Account; to combine the Separate Account with other separate
accounts and to combine one or more subaccounts; to transfer assets among
separate accounts and subaccounts established by the Company or its affiliate or
their successors or assigns; to add or delete mutual funds, other investment
vehicles, or series of either as investments for a separate account or
subaccount; to add a fixed account providing for the provision of Annuity
Benefits out of the Company's general account; and to split or combine the value
of the Annuity Units provided such action has no material effect on benefits or
other provisions of Annuities previously issued under the Contracts.
On the first anniversary of the effective date of the Group Contract and on each
anniversary of that date thereafter, the Company, upon 90 days' advance written
notice to the Contractholder, may change any or all of the terms of the Group
Contract, except that no such change may affect in any way the amount, value or
terms of any Annuity purchased prior to the effective date of the change. In
addition, upon notice to the person(s) currently receiving payments under an
Annuity, the Contracts or an Annuity may be modified by the Company, but only if
such modification: (1) is necessary to make the Contracts and/or the Annuities
comply with any law or regulation issued by a governmental agency to which the
Company, the Separate Account, the Contracts and/or an Annuity are subject; or
(2) is necessary to assure continued qualification of the Contracts or the
Annuities under the Internal Revenue Code or other applicable federal or state
laws relating to annuity contracts, deferred compensation plans, pension or
profit sharing plans, individual retirement accounts or other retirement plans,
as such laws may be amended from time to time; or (3) is necessary to reflect a
change in the operation of the Separate Account as described in the preceding
paragraph. In the event of any such modifications, the Company will make
appropriate endorsement to the Contracts and, if applicable, the certificates.
[Page 16]
<PAGE>
PERFORMANCE INFORMATION
Performance information for the Separate Account, including the yield and total
return, may appear in advertisements, reports, and promotional literature to
current or prospective Contractowners.
ILLUSTRATION OF VALUES
The following tables have been prepared to show how investment performance
affects variable annuity payments over time. The variable annuity payment
amounts reflect three different assumptions for a constant investment return
before all expenses: 0%, 6%, and 12%. There are hypothetical rates of return
and, of course, the Company does not guarantee that the Contract will earn these
returns for any one year or any sustained period of time. The tables are for
illustrative purposes only and do not represent past or future investment
returns.
The variable annuity payments may be more or less than the payments shown if the
actual returns of the Fund are different than those illustrated. Since it is
very likely that investment returns will fluctuate over time, the amount of
variable annuity payments will also fluctuate. The total amount of annuity
payments ultimately received will depend on cumulative investment returns and
how long the Annuitant lives and the option chosen.
Another factor which determines the amount of variable annuity payments is the
assumed annual interest rate. Income will increase from one Payment Date to the
next if the annualized net rate of return during that time is greater than the
assumed annual interest rate, and will decrease if the annualized net rate of
return is greater than the assumed annual interest rate.
Two illustrations follow. The first is based on a 3% assumed annual interest
rate, and the second is based on a 7% assumed annual interest rate.
The payment amounts shown reflect the deduction of all fees and expenses. Actual
Fund fees and expenses may vary from year to year and thus may be higher or
lower than the assumed rate. The illustrations assume that the Fund will incur
expenses at the annual rate of 1.0% of the average daily net assets of the Fund.
(This is the amount of the Fund's total operating expenses, net of fee
reduction, as of 12/31/95.) The Mortality and Expense Risk Fee and
Administration Fee are calculated, in the aggregate, at an annual rate of 1.10%
of the average daily net assets of the Separate Account. After taking these
expenses and charges into consideration, the illustrated gross investment return
0%, 6%, and 12% are approximately equal to net rates of -2.08%, 3.80%, and
9.67%, respectively.
TEMPLETON RETIREMENT ANNUITY ILLUSTRATION
Annuitant: John Doe Annuity Purchase Amount: $100,000
Date of Birth: 1/1/26 First Annuity Payment Date: 1/1/96
Annuity Option: Option 1 -- Frequency of Annuity Payment Monthly
Life Annuity
Premium Tax: 0% Assumed Annual Interest Rate: 3%
Annuity Factor: 6.74
The amount of monthly variable annuity payments shown in the table below and the
graph that follows assumes a constant annual investment return. The amount of
the variable annuity payment that is actually received will depend on the
investment performance of the Fund. The variable annuity payment can go up or
down and no minimum dollar amount of variable annuity payment is guaranteed.
Calculation of the amounts shown takes into account a 3% assumed annual interest
rate and the expenses for the Fund as reflected in the Expense Table. Income
will remain constant at $674 per month when the annualized net rate of return
after expenses is 3%.
[Page 17]
<PAGE>
MONTHLY ANNUITY PAYMENTS
Annual rate of
return before
expenses: 0% 6.00% 12.00%
Annuity Annual rate of
Payment return after
Date Age expenses: -2.08% 3.80% 9.67%
January 1, 1996 70 674 674 674
January 1, 1997 71 641 679 718
January 1, 1998 72 609 684 764
January 1, 1999 73 579 690 814
January 1, 2000 74 551 695 866
January 1, 2001 75 523 701 923
January 1, 2006 80 407 728 1,263
January 1, 2011 85 316 757 1,728
January 1, 2016 90 245 786 2,366
January 1, 2021 95 190 817 3,238
January 1, 2026 100 148 849 4,432
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ARE ILLUSTRATIVE ONLY AND
SHOULD NOT BE DEEMED TO REPRESENT PAST OR FUTURE INVESTMENT PERFORMANCE. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS.
[The following table replaces a graph]
Investment Amount $100,000
Effective Date 1/1/96
1st Annuity Income Date 1/1/96
Annuity factor 6.74
AIR 3%
Net rates of return -2.08% 3.80% 9.67%
Year 1 674 674 674
Year 2 641 679 718
Year 3 609 684 764
Year 4 579 690 814
Year 5 551 695 868
Year 6 523 701 923
Year 7 498 706 982
Year 8 473 711 1,046
Year 9 450 717 1,114
Year 10 428 722 1,186
Year 11 407 728 1,263
Year 12 386 734 1,344
Year 13 367 739 1,432
[Page 18]
<PAGE>
Year 14 349 745 1,524
Year 15 332 751 1,623
Year 16 316 757 1,728
Year 17 300 763 1,840
Year 18 285 768 1,959
Year 19 271 774 2,086
Year 20 258 780 2,222
Year 21 245 786 2,366
Year 22 233 793 2,519
Year 23 222 799 2,682
Year 24 211 805 2,856
Year 25 200 811 3,041
Year 26 190 817 3,238
Year 27 181 824 3,447
Year 28 172 830 3,671
Year 29 164 836 3,909
Year 30 156 843 4,162
Year 31 148 849 4,432
TEMPLETON RETIREMENT ANNUITY ILLUSTRATION
Annuitant: John Doe Annuity Purchase Amount: $100,000
Date of Birth: 1/1/26 First Annuity Payment Date: 1/1/96
Annuity Option: Option 1 Frequency of Annuity Payment Monthly
Life Annuity
Premium Tax: 0% Assumed Annual Interest Rate: 7%
Annuity Factor: 9.11
The amount of monthly variable annuity payments shown in the table below and the
graph that follows assumes a constant annual investment return. The amount of
the variable annuity payment that is actually received will depend on the
investment performance of the Fund. The variable annuity payment can go up or
down and no minimum dollar amount of variable annuity payment is guaranteed.
Calculation of the amounts shown takes into account a 7% assumed annual interest
rate and the expenses for the Fund as reflected in the Expense Table. Income
will remain constant at $911 per month when the annual rate of return after
expenses is 7%.
[Page 19]
<PAGE>
MONTHLY ANNUITY PAYMENTS
Annual rate of
return before
expenses 0% 6.00% 12.00%
Annuity Annual rate of
Payment return after
Date Age expenses: -2.08% 3.80% 9.67%
January 1, 1996 70 911 911 911
January 1, 1997 71 834 884 934
January 1, 1998 72 763 857 957
January 1, 1999 73 698 832 981
January 1, 2000 74 639 807 1,006
January 1, 2001 75 585 783 1,031
January 1, 2006 80 375 672 1,166
January 1, 2011 85 241 578 1,319
January 1, 2016 90 155 496 1,492
January 1, 2021 95 99 426 1,688
January 1, 2026 100 64 366 1,910
THE HYPOTHETICAL INVESTMENT RATES OF RETURNS SHOWN ARE ILLUSTRATIVE ONLY AND
SHOULD NOT BE DEEMED TO REPRESENT PAST OR FUTURE INVESTMENT PERFORMANCE. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS.
[The following table replaces a graph]
Investment Amount $100,000
Effective Date 1/1/96
1st Annuity Income Date 1/1/96
Annuity factor 9.11
AIR 7%
Net rates of return -2.08% 3.80% 9.67%
Year 1 911 911 911
Year 2 834 884 934
Year 3 763 857 957
Year 4 698 832 981
Year 5 639 807 1,006
Year 6 585 783 1,031
Year 7 535 759 1,056
Year 8 490 736 1,083
Year 9 448 714 1,110
Year 10 410 693 1,138
Year 11 375 672 1,166
Year 12 344 652 1,195
[Page 20]
<PAGE>
Year 13 314 633 1,225
Year 14 288 614 1,256
Year 15 263 595 1,287
Year 16 241 578 1,319
Year 17 221 560 1,352
Year 18 202 543 1,386
Year 19 185 527 1,420
Year 20 169 511 1,456
Year 21 155 496 1,492
Year 22 142 481 1,530
Year 23 130 467 1,568
Year 24 119 453 1,607
Year 25 108 439 1,647
Year 26 99 426 1,688
Year 27 91 413 1,730
Year 28 83 401 1,774
Year 29 76 389 1,818
Year 30 70 377 1,863
Year 31 64 366 1,910
[Page 21]
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS
Templeton Funds Annuity Company
Independent Accountants
Performance Information
Financial Information
Financial Statements--Templeton Funds Retirement Annuity Separate Account
Financial Statements--Templeton Funds Annuity Company
[Page 22]
<PAGE>
APPENDIX A
Compliance with Internal Revenue Code Rules Relating To Annuity Contracts
Purchased for Distributions From Qualified Retirement Plans And Individual
Retirement Accounts
1. Benefit payments may be made only (a) over the life of the Annuitant or the
lives of the Annuitant and a Joint Annuitant, or (b) for a period certain
that does not exceed the life expectancy of the Annuitant or the joint life
expectancy of the Annuitant and any Joint Annuitant.
2. If the Annuitant dies before his entire interest in the Annuity has been
paid him, the unpaid interest of the Annuitant will be distributed at least
as rapidly as under the method of distribution being used as of the date of
his death.
3. The availability of, and payments pursuant to, the various Annuity Options
under the Contracts may be restricted or altered to the extent necessary to
comply with applicable U.S. Treasury Regulations.
4. The above rules may be supplemented or amended in order to comply with U.S.
Treasury Regulations, including such regulations as may be issued from time
to time under the Internal Revenue Code Sections 72, 401(a)(9) and 408.
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<PAGE>
APPENDIX B
DOLLAR VALUE OF FIRST MONTHLY PAYMENT
FOR EACH $1,000 OF NET PURCHASE PAYMENT
The following Tables show the dollar value of the first monthly payment for each
$1,000 of Net Purchase Payment. The amount of each payment depends upon the
Annuity Option chosen and the Annuitant's and Joint Annuitant's, if any, actual
age at the time the first payment is due. "Actual age", as used above, shall
mean actual age to the nearest month on the Annuity Purchase Date. Annuity
Payments under the Contracts will normally be made monthly. The Company may, in
its discretion, agree to less frequent payments, based upon appropriate Annuity
values and procedures.
OPTION 1--LIFE ANNUITY
FIRST MONTHLY PAYMENT USING FIRST MONTHLY PAYMENT USING
7% ASSUMED INTEREST RATE 3% ASSUMED INTEREST RATE
FIRST MONTHLY FIRST MONTHLY
ACTUAL AGE PAYMENT ACTUAL AGE PAYMENT
50 $6.59 50 $4.09
51 6.65 51 4.16
52 6.75 52 4.23
53 6.79 53 4.31
54 6.86 54 4.39
55 6.94 55 4.48
56 7.02 56 4.57
57 7.11 57 4.67
58 7.21 58 4.77
59 7.31 59 4.88
60 7.42 60 5.00
61 7.54 61 5.13
62 7.67 62 5.26
63 7.81 63 5.41
64 7.95 64 5.56
65 8.11 65 5.73
66 8.29 66 5.90
67 8.47 67 6.09
68 8.67 68 6.29
69 8.88 69 6.50
70 9.11 70 6.74
71 9.36 71 6.98
72 9.63 72 7.25
73 9.92 73 7.54
74 10.23 74 7.85
75 10.57 75 8.18
[Page 24]
<PAGE>
OPTION 2--LIFE ANNUITY WITH 60 OR 120 PAYMENTS GUARANTEED
FIRST MONTHLY FIRST MONTHLY
PAYMENT PAYMENT
USING 7% ASSUMED USING 3% ASSUMED
INTEREST INTEREST
NUMBER OF NUMBER OF
GUARANTEED GUARANTEED
ACTUAL MONTHLY PAYMENTS MONTHLY PAYMENTS
AGE 60 120 60 120
50 $6.58 $6.53 $4.08 $4.06
51 6.64 6.59 4.15 4.12
52 6.70 6.65 4.22 4.19
53 6.77 6.71 4.30 4.27
54 6.84 6.77 4.38 4.35
55 6.91 6.84 4.47 4.43
56 6.99 6.91 4.56 4.51
57 7.08 6.99 4.65 4.60
58 7.17 7.07 4.76 4.70
59 7.27 7.16 4.86 4.80
60 7.37 7.25 4.98 4.90
61 7.49 7.35 5.10 5.02
62 7.61 7.46 5.23 5.13
63 7.74 7.56 5.37 5.26
64 7.88 7.68 5.52 5.39
65 8.03 7.80 5.68 5.52
66 8.19 7.93 5.84 5.67
67 8.36 8.06 6.02 5.81
68 8.54 8.20 6.21 5.97
69 8.73 8.35 6.41 6.13
70 8.94 8.50 6.63 6.30
71 9.16 8.65 6.85 6.47
72 9.40 8.81 7.10 6.65
73 9.65 8.97 7.36 6.83
74 9.91 9.14 7.63 7.02
75 10.19 9.31 7.92 7.20
[Page 25]
<PAGE>
OPTION 3(a)--JOINT AND 100% SURVIVOR LIFE ANNUITY
FIRST MONTHLY PAYMENT USING 7% ASSUMED INTEREST RATE
Actual Age of Annuitant
Actual Age of
Joint Annuitant 50 55 60 65 70 75
50 $6.12 $6.20 $6.29 $6.36 $6.43 $6.48
55 6.20 6.32 6.45 6.56 6.67 6.75
60 6.29 6.45 6.62 6.80 6.96 7.10
65 6.36 6.56 6.80 7.05 7.31 7.54
70 6.43 6.67 6.96 7.31 7.68 8.06
75 6.48 6.75 7.10 7.54 8.06 8.62
FIRST MONTHLY PAYMENT USING 3% ASSUMED INTEREST RATE
Actual Age of Annuitant
Actual Age of
Joint Annuitant 50 55 60 65 70 75
50 $3.62 $3.74 $3.83 $3.91 $3.97 $4.02
55 3.74 3.90 4.05 4.18 4.28 4.35
60 3.83 4.05 4.26 4.46 4.64 4.77
65 3.91 4.18 4.46 4.76 5.03 5.27
70 3.97 4.28 4.64 5.03 5.45 5.83
75 4.02 4.35 4.77 5.27 5.83 6.42
OPTION 3(b)--JOINT AND 75% SURVIVOR LIFE ANNUITY
FIRST MONTHLY PAYMENT USING 7% ASSUMED INTEREST RATE
Actual Age of Annuitant
Actual Age of
Joint Annuitant 50 55 60 65 70 75
50 $6.23 $6.37 $6.54 $6.73 $6.94 $7.17
55 6.30 6.47 6.66 6.89 7.15 7.42
60 6.36 6.56 6.80 7.08 7.40 7.74
65 6.42 6.65 6.94 7.29 7.69 8.12
70 6.47 6.73 7.07 7.49 8.00 8.57
75 6.51 6.80 7.18 7.68 8.30 9.03
[Page 26]
<PAGE>
FIRST MONTHLY PAYMENT USING 3% ASSUMED INTEREST RATE
Actual Age of Annuitant
Actual Age of
Joint Annuitant 50 55 60 65 70 75
50 $3.73 $3.90 $4.07 $4.25 $4.43 $4.60
55 3.82 4.03 4.25 4.48 4.71 4.93
60 3.90 4.15 4.43 4.72 5.03 5.32
65 3.96 4.25 4.59 4.97 5.37 5.78
70 4.00 4.33 4.72 5.19 5.72 6.28
75 4.03 4.38 4.83 5.37 6.03 6.79
OPTION 3(c)--JOINT AND 50% SURVIVOR LIFE ANNUITY
FIRST MONTHLY PAYMENT USING 7% ASSUMED INTEREST RATE
Actual Age of Annuitant
Actual Age of
Joint Annuitant 50 55 60 65 70 75
50 $6.35 $6.55 $6.81 $7.13 $7.54 $8.04
55 6.39 6.62 6.90 7.26 7.70 8.24
60 6.44 6.68 7.00 7.40 7.89 8.50
65 6.48 6.75 7.09 7.55 8.11 8.80
70 6.51 6.80 7.18 7.69 8.34 9.14
75 6.54 6.84 7.26 7.82 8.55 9.49
FIRST MONTHLY PAYMENT USING 3% ASSUMED INTEREST RATE
Actual Age of Annuitant
Actual Age of
Joint Annuitant 50 55 60 65 70 75
50 $3.84 $4.07 $4.34 $4.65 $5.00 $5.39
55 3.90 4.17 4.47 4.83 5.23 5.68
60 3.96 4.25 4.60 5.02 5.49 6.03
65 4.00 4.32 4.72 5.20 5.76 6.41
70 4.03 4.38 4.81 5.36 6.02 6.81
75 4.05 4.42 4.88 5.49 6.25 7.20
[Page 27]
<PAGE>
OPTION 4(a)--JOINT AND 100% SURVIVOR LIFE ANNUITY
WITH 60 PAYMENTS GUARANTEED
FIRST MONTHLY PAYMENT USING 7% ASSUMED INTEREST RATE
Actual Age of Annuitant
Actual Age of
Joint Annuitant 50 55 60 65 70 75
50 $6.12 $6.21 $6.29 $6.36 $6.43 $6.48
55 6.21 6.32 6.45 6.56 6.67 6.75
60 6.29 6.45 6.62 6.80 6.96 7.10
65 6.36 6.56 6.80 7.05 7.30 7.53
70 6.43 6.67 6.96 7.30 7.68 8.04
75 6.48 6.75 7.10 7.53 8.04 8.59
FIRST MONTHLY PAYMENT USING 3% ASSUMED INTEREST RATE
Actual Age of Annuitant
Actual Age of
Joint Annuitant 50 55 60 65 70 75
50 $3.62 $3.74 3.83 $3.91 $3.97 $4.02
55 3.74 3.90 4.05 4.18 4.28 4.35
60 3.83 4.05 4.26 4.46 4.63 4.77
65 3.91 4.18 4.46 4.76 5.03 5.26
70 3.97 4.28 4.63 5.03 5.44 5.82
75 4.02 4.35 4.77 5.26 5.82 6.41
OPTION 4(b)--JOINT AND 100% SURVIVOR LIFE ANNUITY
WITH 120 PAYMENTS GUARANTEED
FIRST MONTHLY PAYMENT USING 7% ASSUMED INTEREST RATE
Actual Age of Annuitant
Actual Age of
Joint Annuitant 50 55 60 65 70 75
50 $6.12 $6.20 $6.29 $6.36 $6.42 $6.47
55 6.20 6.32 6.44 6.56 6.66 6.73
60 6.29 6.44 6.61 6.78 6.94 7.07
65 6.36 6.56 6.78 7.03 7.27 7.48
70 6.42 6.66 6.94 7.27 7.62 7.94
75 6.47 6.73 7.07 7.48 7.94 8.41
[Page 28]
<PAGE>
FIRST MONTHLY PAYMENT USING 3% ASSUMED INTEREST RATE
Actual Age of Annuitant
Actual Age of
Joint Annuitant 50 55 60 65 70 75
50 $3.62 $3.74 $3.83 $3.91 $3.97 $4.01
55 3.74 3.90 4.05 4.17 4.27 4.34
60 3.83 4.05 4.26 4.46 4.62 4.75
65 3.91 4.17 4.46 4.75 5.01 5.23
70 3.97 4.27 4.62 5.01 5.40 5.75
75 4.01 4.34 4.75 5.23 5.75 6.27
[Page 29]
<PAGE>
OPTION 5--UNIT REFUND LIFE ANNUITY
FIRST MONTHLY PAYMENT FIRST MONTHLY PAYMENT
USING USING
7% ASSUMED INTEREST RATE 3% ASSUMED INTEREST RATE
First Monthly First Monthly
Actual Age Payment Actual Age Payment
50 $6.46 50 $3.90
51 6.51 51 3.95
52 6.56 52 4.00
53 6.61 53 4.06
54 6.67 54 4.13
55 6.74 55 4.19
56 6.80 56 4.26
57 6.87 57 4.33
58 6.95 58 4.41
59 7.03 59 4.49
60 7.11 60 4.57
61 7.20 61 4.66
62 7.30 62 4.75
63 7.40 63 4.84
64 7.50 64 4.94
65 7.61 65 5.05
66 7.73 66 5.15
67 7.86 67 5.27
68 7.99 68 5.39
69 8.13 69 5.52
70 8.28 70 5.65
71 8.43 71 5.79
72 8.60 72 5.94
73 8.78 73 6.10
74 8.96 74 6.26
75 9.16 75 6.43
[Page 30]
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
[Page 31]
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION TO THE PROSPECTUS
FOR
TEMPLETON RETIREMENT ANNUITIES
ISSUED BY
TEMPLETON FUNDS RETIREMENT ANNUITY SEPARATE ACCOUNT
OF
TEMPLETON FUNDS ANNUITY COMPANY
700 Central Avenue
St. Petersburg, Florida 33701-3628
Dated _____________, 1996
This Statement of Additional Information is not a prospectus. It provides
information which is supplemental to that contained in the current Prospectus
for Templeton Retirement Annuities, dated ___________, 1996. This Statement
should be read in conjunction with the Prospectus, which may be obtained by
calling (800) 774-5001, or by writing Templeton Funds Annuity Company, P. O. Box
33030, St. Petersburg, Florida 33733-8030.
<PAGE>
TABLE OF CONTENTS
Page
Templeton Funds Annuity Company...........................
Independent Accountants...................................
Performance Information...................................
Financial Information.....................................
Financial Statements--Templeton
Funds Retirement Annuity Separate Account..............
Financial Statements--Templeton Funds Annuity Company.....
TEMPLETON FUNDS ANNUITY COMPANY
Templeton Funds Annuity Company (the "Company"), the sponsor of Templeton
Funds Retirement Annuity Separate Account (the "Separate Account"), is a Florida
insurance company which was organized on January 25, 1984 and is licensed to
engage in the life insurance business in Florida. The Company is custodian of
the assets of the Separate Account. The Company is wholly owned by Franklin
Agency, Inc. ("Franklin Agency") and is located at 700 Central Avenue, St.
Petersburg, Florida 33701-3628. Franklin Agency is an affiliate of Franklin
Templeton Distributors, Inc. ("FTD"), a registered broker-dealer which serves as
principal underwriter for all of the publicly-distributed open-end Templeton
Funds, and Templeton Franklin Investment Services, Inc. ("TFIS"), the principal
underwriter of the Contracts. Franklin Agency, FTD and Franklin Templeton Trust
Company are wholly-owned subsidiaries of Franklin Resources, Inc. ("Franklin"),
a publicly-traded financial services company whose stock is listed on the New
York Stock Exchange. Franklin and its affiliates act as an investment adviser to
several of the funds in the Franklin Templeton group of funds.
INDEPENDENT ACCOUNTANTS
The firm of Coopers & Lybrand L.L.P. serves as independent accountants for
the Separate Account.
PERFORMANCE INFORMATION
Performance information for the Separate Account, including yield and total
return, may appear in advertisements, reports, and promotional literature to
current or prospective Contractowners.
Quotations of yield for the Separate Account will be based on all
investment income per Annuity Unit earned during a particular 30-day period,
less expenses accrued during the period ("net investment income"), and will be
computed by dividing net investment income by the value of the Annuity Unit on
the last day of the period, according to the following formula:
YIELD = 2[((a - b)/cd) / 1)6 - 1]
where
a = net investment income earned during the period by the Fund attrib- utable
to shares owned by the Separate Account,
b = expenses accrued for the period (net of reimbursements),
<PAGE>
c = the average daily number of Annuity Units outstanding during the period
that were entitled to receive dividends, and
d = the maximum offering price per Annuity Unit on the last day of the
period.
Quotations of average annual total return for the Separate Account will be
expressed in terms of the average annual compounded rate of return of a
hypothetical investment in an Annuity over a period of one, five, and ten years
(or, if less, up to the life of the Separate Account), calculated pursuant to
the following formula: P(1 + T)n = ERV (where P = a hypothetical initial payment
of $1,000, T = the average annual total return, n = the number of years, and ERV
= the ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the period). All total return figures reflect the deduction of the
Administration Fee and the Mortality and Expense Risk Fee. Quotations of total
return may simultaneously be shown for the same or other periods that do not
take into account certain contractual charges such as the Administration Fee.
Performance information for the Separate Account may be compared, in
reports and promotional literature, to the Standard & Poor's 500 Stock Index
("S&P 500"), the Dow Jones Industrial Average ("DJIA"), or other indices that
measure performance of a pertinent group of securities so that investors may
compare the Separate Account's results with those of a group of securities
widely regarded by investors as representative of the securities markets in
general or representative of a particular type of security. Performance
information may also be compared to (i) other groups of variable annuity
separate accounts or other investment products tracked by Lipper Analytical
Services, a widely used independent research firm which ranks mutual funds and
other investment companies by overall performance, investment objectives, and
assets, or tracked by other services, companies, publications or persons who
rank such invest- ment companies on overall performance or other criteria; and
(ii) the Consumer Price Index (measure for inflation) to assess the real rate of
return from an investment in an Annuity. Unmanaged indices may assume the
reinvestment of dividends but generally do not reflect deductions for
administrative and management costs and expenses.
Performance information for the Separate Account reflects only the
performance of a hypothetical Contract, the assets of which are invested in the
Fund, during a particular time period on which the calculations are based.
Performance information should be considered in light of the investment
objectives and policies of the Fund, and the market conditions during the given
time period, and should not be considered as a representation of what may be
achieved in the future.
Reports and promotional literature may also contain other information
including the ranking of the Separate Account derived from rankings of variable
annuity separate accounts or other investment products tracked by Lipper
Analytical Services or by other rating services, companies, publications, or
other persons who rank separate accounts or other investment products on overall
performance or other criteria.
For the one- and five-year periods ended December 31, 1995, and for the
period of February 16, 1988 (commencement of operations) to December 31, 1995,
the average annual total return of the Separate Account, reflecting the
deduction for the Administration Fee and the Mortality and Expense Risk Fee, was
24.12%, and 17.58%, and 13.25%, respectively.
<PAGE>
FINANCIAL INFORMATION
The financial statements of the Company included in this Statement of
Additional Information ("SAI") should be considered only as bearing on the
ability of the Company to meet its obligations under the Contracts.
<PAGE>
TEMPLETON FUNDS RETIREMENT ANNUITY SEPARATE ACCOUNT
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
Assets
Investment in Templeton Variable Annuity Fund,
at value (cost $8,458,143)
$11,264,697
Receivable from Templeton Funds Annuity
Company 17,503
Net Assets $11,282,200
Net assets attributable to annuitants--Annuity reserves (Note 1)
$11,282,200
STATEMENT OF OPERATIONS
for the year ended December 31, 1995
Investment Income:
Income:
Dividend distributions $110,058
Capital gains distributions 742,890
Total income 852,948
Expenses:
Periodic charge (Note 2) 119,140
Net investment income 733,808
Realized and unrealized gain on investments:
Net realized gain on investments
Unrealized appreciation 436,311
1,155,950
Net gain on investments 1,592,261
Net increase in net assets from operations $2,326,069
See Notes to Financial Statements
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS for the years ended December 31, 1995 and
1994
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Increase (decrease) in net assets from operations:
Net investment income
Net realized gain on $733,808 $340,663
investments 436,311 469,901
Unrealized appreciation
(depreciation) 1,155,950 (1,356,713)
Net increase (decrease) in net assets from
operations 2,326,069 (546,149)
Annuity unit transactions:
Proceeds from units sold 228,833 350,411
Annuity Payments (1,368,267) (1,274,550)
Increase in annuity reserves for mortality
experience (Note 1) 63,847 9,728
Net decrease in net assets derived from annuity
unit transactions
(1,075,587) (914,411)
Total increase (decrease) in net assets
1,250,482 (1,460,560)
Net Assets:
Beginning of year 10,031,718 11,492,278
End of year $11,282,200 $10,031,718
</TABLE>
See Notes to Financial Statements.
<PAGE>
TEMPLETON FUNDS RETIREMENT ANNUITY SEPARATE ACCOUNT
Notes to Financial Statements
1. Summary of Accounting Policies
The Templeton Funds Retirement Annuity Separate Account (the "Separate Account")
was established on February 4, 1987 by resolution of the Board of Directors of
Templeton Funds Annuity Company (the "Company") and is registered under the
Investment Company Act of 1940 as a unit investment trust. The Separate Account
is sold exclusively for use with the Templeton Retirement Annuity, an immediate
variable annuity designed for distributing the benefits of tax deferred
retirement plans. The Separate Account invests all its assets in the Templeton
Variable Annuity Fund (the "Fund"). The following is a summary of significant
accounting policies followed by the Separate Account in the preparation of its
financial statements.
A. Valuation of Securities:
Investment in shares of the Fund are carried in the Statement of Assets and
Liabilities at net asset value (market value).
B. Dividends:
Dividend income and capital gain distributions are recorded as income on the
ex-dividend date and reinvested in additional shares of the Fund.
C. Income Taxes:
Operations of the Separate Account form a part of the Company, which is taxed as
a life insurance company under the Internal Revenue Code (the "Code"). Under
current law, no federal income taxes are payable with respect to the Separate
Account. Under the principles set forth in Internal Revenue Service Ruling
81-225 and Section 817(h) of the Code and regulations thereunder, the Company
understands that it will be treated as owner of the assets invested in the
Separate Account for federal income tax purposes, with the result that earnings
and gains, if any, derived from those assets will not be included in an
Annuitant's gross income until amounts are received pursuant to an Annuity.
D. Annuity Reserves:
Annuity reserves are computed according to the 1983a Blended Unisex Mortality
Table, with a 50% male/female content. The assumed interest rates are 9%, 7% and
3%. Charges to annuity reserves for mortality experience are reimbursed to the
Company if the reserves required are less than originally estimated. If
additional reserves are required, the Company reimburses the Separate Account.
2. Periodic Charge
The company assess a Periodic Charge against the Separate Account, equal on an
annual basis to 1.1% of Separate Account assets. The Periodic Charge, in the
following amounts, compensates the Company for expenses of administering the
Separate Account and for assuming the risks that mortality experience will be
lower than the rate assumed and that expenses will be greater than what is
assumed: 0.3% of average annual net assets to cover expenses, 0.3% to cover
expense risk and 0.5% to cover the mortality risk. The Periodic Charge is
guaranteed as to Annuities issued prior to the effective date of any change in
the Periodic Charge.
<PAGE>
3. Investment Transactions
During the year ended December 31, 1995, purchases and sales of Templeton
Variable Annuity Fund shares aggregated $1,081,781 and $1,020,671 respectively.
Realized gains and losses are reported on an identified cost basis.
4. Concentration of Credit Risk
Financial instruments which potentially subject the Separate Account to
concentrations of credit risk consist of investments in the Templeton Variable
Annuity Fund. The Fund's investment securities are managed by professional
investment managers within established guidelines. As of December 31, 1995, in
management's opinion, the Separate Account had no significant concentrations of
credit risk.
<PAGE>
TEMPLETON FUNDS RETIREMENT ANNUITY SEPARATE ACCOUNT
REPORT OF INDEPENDENT ACCOUNTANTS
The Participants of
Templeton Funds Retirement Annuity Separate Account
We have audited the accompanying statement of assets and liabilities of
Templeton Funds Retirement Annuity Separate Account as of December 31, 1995, 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, 1995 and 1994. These
financial statements are the responsibility of the Separate Account's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned at December 31, 1995, by correspondence with
the Templeton Variable Annuity Fund. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Templeton Funds Retirement
Annuity Separate Account as of December 31, 1995, and the results of its
operations for the year then ended and the changes in its net assets for the
years ended December 31, 1995, and 1994 in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Tampa, Florida
February 9, 1996
<PAGE>
COOPERS & LYBRAND
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Templeton Funds Annuity Company
St. Petersburg, Florida
We have audited the accompanying balance sheets of Templeton Funds Annuity
Company as of December 31, 1995 and 1994, and the related statements of income,
stockholder's equity and cash flows for each of the three years in the period
ended December 31, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Templeton Funds Annuity Company
as of December 31, 1995 and 1994, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.
As discussed in Note 1, effective January 1, 1994, the Company adopted Statement
of Financial Accounting Standards No. 115, Accounting for Certain Investments in
Debt and Equity Securities.
/s/ COOPERS & LYBRAND, L.L.P.
Tampa, Florida
February 9, 1996
<PAGE>
TEMPLETON FUNDS ANNUITY COMPANY
BALANCE SHEETS
December 31, 1995 and 1994
ASSETS 1995 1994
Cash and investments:
Cash and cash equivalents $ 1,153,899 $ 447,200
Investments in securities 13,244,216 12,121,344
14,398,115 12,568,544
Receivables:
Interest 242,920 244,639
Due from affiliates 16,485 6,756
Other 120,589 123,058
Refundable income taxes 0 39,786
Other assets 293,132 159,730
Recoverable on future annuity
benefits liability 3,825,883 225,282
Assets held in separate
accounts 14,114,938 12,566,130
$ 33,012,062 $ 25,933,925
LIABILITIES AND
STOCKHOLDER'S EQUITY
Liabilities:
Accounts payable and accrued
expenses $ 281,656 $ 234,575
Due to affiliates 152,302 133,459
Income taxes payable 59,635 0
Deferred income taxes
payable 540,000 76,000
Liability for future annuity
benefits 3,825,883 225,282
Liabilities related to
separate accounts 14,114,938 12,566,130
Total liabilities 18,974,414 13,235,446
Stockholder's equity:
Common stock, par value $1
per share; authorized
and issued
2,500,000 shares 2,500,000 2,500,000
Additional paid-in capital 5,976,970 5,976,970
Unrealized investment gains
(losses), net 741,192 (48,535)
Retained earnings 4,819,486 4,270,044
Total stockholder's 14,037,648 12,698,479
equity
$ 33,012,062 $ 25,933,925
The accompanying notes are an integral part of these financial statements.
<PAGE>
TEMPLETON FUNDS ANNUITY COMPANY
STATEMENTS OF INCOME
for the years ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Revenue:
Premiums and annuity
considerations $ 3,905,740 $2,383,931 $ 1,408,228
Business management fees 1,393,325 1,024,304 584,766
Interest and dividends 894,563 831,367 806,120
$6,193,628 $4,239,602 $2,799,114
Benefits and expenses:
Salaries and other
compensation costs 707,290 631,375 393,894
Annuity and death benefits 1,820,940 1,432,045 1,231,016
Increase in liability for
future annuity benefits 1,992,025 777,619 35,650
Professional fees 136,709 213,521 251,577
Other 783,776 578,203 390,917
5,440,740 3,632,763 2,303,054
Income before income taxes
and realized gains on sales of
investments 752,888 606,839 496,060
Realized gains on sales of
investments 65,475 156,427 499,435
Income before taxes 818,363 763,266 995,495
Income taxes (credits)
Current 303,921 240,140 395,836
Deferred (35,000) (46,000) (37,000)
268,921 194,140 358,836
Net Income 549,442 569,126 636,659
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
TEMPLETON FUNDS ANNUITY COMPANY
STATEMENT OF STOCKHOLDER'S EQUITY
for the years ended December 31, 1995, 1994, and 1993
<TABLE>
<S> <C> <C> <C> <C> <C>
Unrealized
Additional Investment
Common Stock Paid-in Gains Retained
Shares Amount Capital (Losses), Net Earnings
Balance, December
31, 1992 $ 2,500,000 $ 2,500,000 $ 5,976,970 $ 738,888 $ 3,064,259
Net income 0 0 0 0 636,659
Increase in
unrealized
investment gains,
net of deferred
taxes of $127,000 0 0 0 209,821 0
Balance, December
31, 1993 2,500,000 2,500,000 5,976,970 948,709 3,700,918
Net income 0 0 0 0 569,126
Increase in
unrealized
investment (losses)
net of deferred
taxes of $602,000 0 0 0 (997,244) 0
Balance, December
31, 1994 2,500,000 2,500,000 5,976,970 (48,535) 4,270,044
Net income 0 0 0 0 549,442
Increase in
unrealized
investment gains,
net of deferred
taxes of $499,000 0 0 0 789,727 0
Balance, December
31, 1995 2,500,000 2,500,000 5,976,970 $ 741,192 $4,819,486
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
TEMPLETON FUNDS ANNUITY COMPANY
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1995, 1994 and 1993
<TABLE>
<S> <C> <C> <C>
1995 1994 1993
Cash flows from operating activities:
Net income $ 549,422 $ 569,126 $ 636,659
Adjustments to reconcile net
income to net cash provided
by operating activities:
Realized gains on sales of
investments (65,475) (156,427) (499,435)
Amortization of premium on
investments 60,270 60,270 60,270
Accretion of discount on
investments (78,183) (52,704) (25,897)
Deferred income taxes (35,000) (46,000) (37,000)
Change in asset and liability
accounts:
Receivables (5,541) (36,483) (51,286)
Refundable income taxes 39,786 (39,786) 67,000
Accounts payable, accrues
expenses and due to affiliates 65,924 132,010 89,929
Income taxes payable 59,635 (58,210) 58,210
Net cash provided by operating 590,858 371,796 298,450
activities
Cash flows from investing activities:
Purchases of investments (1,786,586) (3,522,594) (2,612,046)
Proceeds on sales and maturities of
investments 2,035,829 3,097,767 2,352,910
Increase in other assets (133,402) (80,423) (23,358)
Net cash provided by (used in)
investing activities 115,841 (505,250) (282,494)
Net increase (decrease) in cash and
cash equivalents 706,699 (133,454) 15,956
Cash and cash equivalents:
Beginning of year 447,200 580,654 564,698
End of year $ 1,153,899 $ 447,200 $580,654
Supplemental disclosure of cash flow information:
Income taxes paid during the year $ 204,499 $ 338,136 $ 270,626
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
TEMPLETON FUNDS ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES:
NATURE OF BUSINESS - Templeton Funds Annuity Company (the Company) is a wholly
owned subsidiary of Templeton Global Investors, Inc. (TGII). Prior to December
1, 1993, the Company was a wholly owned subsidiary of Templeton Funds
Management, Inc. (TFM). On December 1, 1993, all of the Company's stock was
transferred to TGII by dividend. On October 30, 1992, as part of a merger
agreement between TGII's parent and Franklin Resources, Inc. (Franklin), the
stock of TGII was sold to Franklin. As a result of the merger, the Company
became an indirect wholly owned subsidiary of Franklin. On January 1, 1996,
ownership of the Company was transferred to Franklin Agency, Inc.
The Company operates as a life insurance enterprise, with its principal product
being variable annuity contracts sold to participants throughout the 39 states
and the District of Columbia where it is licensed to do business. The Company
has established the Templeton Funds Retirement Annuity Separate Account and the
Templeton Immediate Variable Annuity Separate Account (the Separate Accounts),
which are registered with the Securities and Exchange Commission as unit
investment trusts. The Separate Accounts constitute separate records of the
Company's fiduciary responsibility to fund its liability to holders of the
variable annuity contracts. Investment income, gains and losses of the separate
accounts are not reflected in the Company's financial statements. The Company is
also engaged in certain reinsurance activities as described in Note 4.
A summary of the Company's significant accounting policies follows:
BASIS OF PRESENTATION - The accompanying financial statements are prepared in
accordance with generally accepted accounting principles, which differ in some
respects with accounting practices prescribed by the Insurance Department of the
State of Florida. The more significant differences are as follows: (a) policy
reserves are not computed on "surplus relief" contracts which do not transfer
substantial risk to the Company, (b) unrealized investment gains and losses are
reported as a separate component of stockholder's equity, (c) deferred income
taxes are recognized, and (d) deferral of policy acquisition costs.
The preparation of financial statements in conformity with generally accepted
accounting principles requires the Company to use estimates and assumptions
based on analytical methods in determining deferred acquisition costs, deferred
income taxes, liabilities for future annuity benefits, and various other
accruals. Actual results could differ from those estimates.
STATEMENTS OF CASH FLOWS - For purposes of statement of cash flows, the Company
considers all debt instruments which have a maturity of three months or less
from the date of purchase and other highly liquid investments which are readily
convertible into cash to be cash equivalents. Cash equivalents are stated at
cost, which approximates value.
VALUATION OF SECURITIES - Effective January 1, 1994, the Company adopted the
provisions of Statement of Financial Accounting Standards No. 115 (SFAS No.
115), Accounting for Certain Investments in Debt and Equity Securities, that
addresses the accounting and reporting for investments in marketable equity
securities and for all investments in debt securities. SFAS No. 115 requires
investments in debt and marketable equity securities to be classified in three
categories and accounted for as follows: held to maturity (recorded at amortized
cost), available for sale (recorded at fair value with unrealized gains and
losses reported as a separate component of stockholder's equity), and trading
securities (recorded at fair value with unrealized gains and losses included in
earnings). As investments in securities were previously stated at value and were
<PAGE>
deemed to be available for sale, there was no cumulative effect of adopting SFAS
No. 115. The cost of investments sold is determined by specific identification.
SEPARATE ACCOUNTS - The assets of the Separate Accounts are stated at market
value and are not subject to claims which may arise out of other business
activities of the Company. Investment income and investment gains and losses
related to the assets of the Separate Accounts accrue directly to the contract
holders.
Annuity reserves held in the Separate Accounts are computed according to the
1983a Blended Unisex Mortality Table with a 50% male/female content. The assumed
interest rates are 9%, 7%, 5%, and 3%. Changes to annuity reserves for mortality
experience are reimbursed to the Company if the reserves required are less than
originally estimated. If additional reserves are required, the Company
reimburses the Separate Accounts.
RECOVERABLE ON FUTURE ANNUITY BENEFITS LIABILITY - This recoverable represents
assets held by the ceding insurance company for holders of variable annuity
contracts issued under a modified coinsurance agreement described in Note 4.
DEFERRED POLICY ACQUISITION COSTS - The costs of acquiring new business,
principally first-year commissions, have been deferred. These acquisition costs
are being amortized in proportion to the present value of expected future gross
profits. Unamortized deferred acquisition costs of approximately $239,000 and
$117,000 are included in other assets at December 31, 1995 and 1994,
respectively.
LIABILITY FOR FUTURE ANNUITY BENEFITS - The liability for future annuity
benefits represents annuity reserves the Company has assumed under a modified
coinsurance agreement described in Note 4. Annuity reserves are computed
according to the 1983a Blended Unisex Mortality Table with a 50% male/female
content. The assumed interest rates are 5% and 3%.
REVENUES - Premiums and annuity considerations are recognized when due. Business
management fees are recorded as revenue when earned. Interest and dividends are
recognized on the accrual basis.
INCOME TAXES - Deferred income taxes are provided on temporary differences which
represent the differences between the tax bases of unrealized investment gains
and losses, and death and surrender benefits and reserves for policy benefits
and the amounts at which these items are reported in the financial statements
using the enacted marginal tax rate. Deferred income tax expense or credits are
based on changes in the asset or liability from period to period. Deferred tax
amounts are adjusted to reflect changes in tax rates or other provisions of tax
law in the period in which a new tax law is enacted.
RECLASSIFICATION - Certain amounts in the 1993 and 1994 financial statements
have been reclassified to conform with the presentation adopted in 1995.
<PAGE>
2. INVESTMENTS IN SECURITIES:
Investments in securities available for sale at December 31, 1995 and 1994 are
as follows:
<TABLE>
<S> <C> <C> <C> <C>
1995
Amortized Gross Gross Estimated
Cost Unrealized Unrealized Market
Gains Losses Value
U.S. Treasury securities $7,472,066 $1,202,345 $ 0 $8,674,411
Convertible debentures 3,312,409 132,281 138,190 3,306,500
Municipal bonds 1,248,549 14,756 0 1,263,305
$12,033,024 $1,349,382 $ 138,190 $13,244,216
1994
Amortized Gross Gross Estimated
Cost Unrealized Unrealized Market
Gains Losses Value
U.S. Treasury securities $7,533,934 $ 402,127 $ 128,397 $7,807,664
Convertible debentures 3,416,948 30,005 329,828 3,117,125
Municipal bonds 1,247,997 0 51,442 1,196,555
$12,198,879 $ 432,132 $ 509,667 $12,121,344
</TABLE>
The cost and market value of investments at December 31, 1995 by
contractual maturity are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or prepay
certain of these obligations.
Amortized Market
Cost Value
Due in one year or less $ 995,778 $ 995,778
Due after one year through five years 4,648,092 4,880,234
Due after five years through ten years 2,351,506 2,484,220
Due after ten years 4,037,648 4,883,984
$ 12,033,024 $
13,244,216
Gross realized investment gains were $71,277, $173,802 and $508,922 and gross
realized investment losses were $6,633, $17,375 and $9,487 for 1995, 1994 and
1993, respectively.
At December 31, 1995 and 1994, securities with a market value of $4,038,333 and
$4,858,214 have been pledged as collateral in connection with the bulk
reinsurance contract referred to in Notes 1 and 4 and in accordance with state
insurance laws for the protection of the Company's policyholders and creditors.
3. RELATED PARTY TRANSACTIONS:
The Company provides business management services to certain Templeton mutual
funds. Total business management fee revenue for these services amounted to
$1,393,325, $1,024,304, and $584,766 in 1995, 1994, and 1993, respectively.
Expenses related to business management services provided by TFM and TGII of
$297,680, $216,664, and $120,833 in 1995, 1994, and 1993, respectively, are
included in other expenses in the accompanying financial statements.
The Company shares office space, personnel and other common administrative
expenses with its
<PAGE>
parent and affiliated companies. Rent is allocated on the basis of square
footage utilized; administrative and shared expenses are allocated on the basis
of the number of employees. Total rental and administrative cost amounted to
$114,208, $54,693 and $21,399 in 1995, 1994 and 1993, respectively.
The Company also provides group term life insurance coverage on the employees of
certain affiliated companies. The Company reinsures a portion of its risk with
another company. Net premiums from group term life insurance amounted to
$63,118, $44,997 and $35,172 in 1995, 1994 and 1993, respectively.
4. REINSURANCE:
The Company has assumed a portion of risk associated with specified insurance
policies written by the ceding company under a bulk reinsurance agreement, which
is in substance a surplus relief contract. The Company has retroceded a portion
of its assumed risk, and has structured the agreement so that its net risk
decreases annually to zero over a ten-year period. The Company has determined
that its risk of material loss under the bulk reinsurance agreement is remote
and, accordingly, accounts for the contracts as financing transactions and
provides no reserves.
Effective July 1, 1994, the Company entered into a modified coinsurance
agreement, whereby the Company assumes a 50% quota share of single premium
immediate variable annuity contracts issued by the ceding company.
The Company has also ceded a portion of its risk related to group term life
insurance coverage provided to employees of certain affiliated companies.
An analysis of the impact of reinsurance on the Company's operations is as
follows:
1995 1994 1993
Direct premiums and annuity
considerations $ 576,926 $2,187,478 $1,431,413
Assumed premiums and annuity
considerations 3,368,921 227,585 0
Ceded reinsurance premiums and
annuity considerations
(40,107) (31,132) (23,185)
Premiums and annuity considerations
$3,905,740 $2,383,931 $1,408,228
The Company is contingently liable for reinsurance ceded to reinsurance
companies in the event such reinsurance companies are unable to pay their
portion of the claims. The Company evaluates the financial condition of its
reinsurers and monitors concentrations of credit risk arising from similar
geographic regions, activities or economic characteristics of the reinsurance to
minimize exposure to significant losses from reinsurer insolvencies. At December
31, 1995, the Company does not believe there to be a significant concentration
of credit risk related to its reinsurance program.
<PAGE>
5. EMPLOYEE RETIREMENT PLAN:
The Company's parent has a defined contribution retirement plan covering
substantially all of the Company's employees. The Company's contribution to the
plan for the years ended December 31, 1995, 1994 and 1993 was $65,070, $83,632
and $42,935, respectively.
6. INCOME TAXES:
The provisions for federal and state income taxes for the years ended December
31, 1995, 1994 and 1993 are as follows:
1995 1994 1993
Federal $ 232,441 $ 154,240 $ 307,472
State 36,480 39,900 51,364
$ 268,921 $ 194,140 $ 358,836
Income tax expense is less than the expected statutory rate due to the benefit
of Alternative Minimum Tax credits and tax-exempt interest.
Deferred income tax credits reflected in the statement of income arise primarily
from death and surrender benefits, and the net decrease in reserves under the
reinsurance and retrocession agreements.
At December 31, 1995 and 1994, the tax effects of temporary differences resulted
in net deferred tax payables of $540,000 and $76,000, respectively, computed as
follows:
1995 1994
Reserves under reinsurance and
retrocession agreements,
net of death and surrender
benefits $ 79,000 $ 113,000
Unrealized gains and (losses) on investments
470,000 (29,000)
Deferred bonuses (9,000) (8,000)
$ 540,000 $ 76,000
7. STATUTORY FINANCIAL INFORMATION:
The consolidated financial statements of the Company included herein have been
prepared in conformity with generally accepted accounting principles (GAAP). The
company separately reports to the Insurance Department of the State of Florida
on the basis of statutory accounting practices. <PAGE>
A reconciliation between consolidated GAAP stockholder's equity and statutory
capital and surplus of the Company follows:
1995 1994
Stockholder's equity (GAAP) $ 14,037,648 $ 12,698,479
Less certain asset exclusions:
Deferred policy acquisition
costs (239,032) (116,891)
Prepaid expenses (54,100) (42,839)
(293,132) (159,730)
Statutory investment reserves (345,980) (310,015)
GAAP accounting rules:
Income taxes (FAS 109) 540,000 76,000
Reinsurance (FAS 113) (199,250) (298,885)
Investments (FAS 115) (1,211,192) 77,535
Other (7,190) (6,782)
Statutory capital and surplus $12,520,904 $12,076,602
Results of the Company's operations for the years ended December 31, 1995, 1994,
and 1993 reconciled to a statutory basis are as follows:
1995 1994 1993
GAAP net income $549,442 $569,126 $636,659
Deferred policy acquisition costs
(122,141) (82,975) (24,082)
Statutory investment reserves
(23,180) (14,572) (238,338)
GAAP accounting rules:
Income taxes (FAS 109) (35,000) (46,000) (37,000)
Reinsurance (FAS 113) 99,633 99,614 89,808
Other (407) 11,301 24,903
Statutory net income $468,347 $536,494 $451,950
Payments of cash dividends are subject to restrictions relating to statutory
surplus and are limited to an amount equal to or less than the greater of
statutory net operating profits or realized capital gains for the immediately
preceding calendar year, among other restrictions.
8. CONCENTRATIONS OF CREDIT RISK:
Financial instruments which potentially subject the Company to concentration of
credit risk consist primarily of cash and cash equivalents and separate account
assets. The Company maintains its cash and cash equivalents with what it
believes to be high credit quality financial institutions.
Separate account assets principally consist of investments in Templeton Variable
Annuity Fund, an open-end diversified management investment company whose
investments are managed by professional investment managers within established
guidelines. As of December 31, 1995, in management's opinion the Company has no
concentration of credit risk.
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
Contained in Part B:
Templeton Funds Retirement Annuity
Separate Account of Templeton Funds
Annuity Company
Report of Independent Accountants
Statement of Assets and Liabilities
Statement of Operations
Statements of Changes in Net Assets
Notes to Financial Statements
Templeton Funds Annuity Company
Report of Independent Accountants
Balance Sheets
Statements of Income
Statements of Stockholders' Equity
Statements of Cash Flows
Notes to Financial Statements
(b) Exhibits
(10) Consent of Independent Public Accountants
(14) Financial Data Schedule
All other relevant exhibits have been previously filed and
are incorporated by reference.*
--------
* For other Exhibits, reference is made to the Registrant's Pre-Effective
Amendment No. 3 to the Registration Statement filed on February 16, 1988,
Post-Effective Amendment No. 3 to the Registration Statement filed on
August 31, 1990, Post-Effective Amendment No. 4 to the Registration
Statement filed on December 20, 1990, Post-Effective Amendment No. 6 to the
Registration Statement filed on March 20, 1992 and Post-Effective Amend-
ment No. 11 to the Registration Statement filed on December 1, 1995. Note
that the Opinion of Counsel and Consent to Use was filed as Exhibit
24(b)(10) to the Post- Effective Amendment No. 4 to the Registration
Statement. In accordance with Part C of the Form N-4, the Opinion of
Counsel and Consent to Use should have been filed as Exhibit 24(b)(9).
<PAGE>
Item 25. Directors and Executive Officers of the Depositor
Name and Principal Positions and Offices
Business Address With Depositor
Gordon W. Campbell Director, Vice Chairman
425 22nd Avenue, North
St. Petersburg, Florida 33709
Richard P. Austin Director, President,
700 Central Avenue Chief Executive Officer
St. Petersburg, Florida 33701-3628
Thomas M. Mistele Director, Executive Vice President,
700 Central Avenue Secretary, General Counsel
St. Petersburg, Florida 33701-3628
Louie N. Adcock, Jr. Director
Fisher & Sauls, P.A.
100 Second Avenue South
Suite 700, City Center
St. Petersburg, Florida 33701
Thomas A. Watson Director
4989 62nd Avenue South
St. Petersburg, Florida 33715
Martin L. Flanagan Director, Treasurer
777 Mariners Island Blvd.
San Mateo, California 94404-1585
Thomas C. Banzhof Director, Chairman
777 Mariners Island Blvd.
San Mateo, California 94404-1585
David J. Tobin Senior Vice President, Chief
700 Central Avenue Operating Officer
St. Petersburg, Florida 33701-3628
<PAGE>
Item 26. Persons Controlled By or Under Common Control with the Depositor or
Registrant
Reference is made to the section entitled "Templeton Funds Annuity
Company" in Part B of this Registration Statement.
Item 27. Number of Contractowners
As of April 22, 1996, the Registrant had 298 contractowners.
Item 28. Indemnification
Article VIII of the Articles of Incorporation of Securities
Fund Annuities, Inc. (now Templeton Funds Annuity Company)
provides:
"This corporation shall indemnify any incorporator, director or
officer to the full extent permitted by law."
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provision, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnifica- tion is against
public policy as expressed in the Act and is therefore unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid
by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Act and the Registrant will be governed by the final
adjudication of such issue.
Item 29. Principal Underwriter
(a) The Principal Underwriter of the Contracts is Templeton/Franklin
Invest- ment Services, Inc. ("TFIS"). TFIS does not serve as
principal under writer for any other investment companies.
(b) The officers and executive directors of TFIS, all of whom are
located at 700 Mariners Island Boulevard, San Mateo, CA are as
follows:
Name Position with Principal Underwriter
Charles E. Johnson President, CEO and Director
Harmon E. Burns Executive Vice President and Director
Martin L. Flanagan Director
Jerome M. Ledzinski Executive Vice President,
President TPA Div.
<PAGE>
H.G. Mumford Executive Vice President, President Bank Trust
Sales Div.
Deborah R. Gatzek Senior Vice President
Donald P. Gould Senior Vice President, Corporate Development
Gary R. Clemons Vice President
Thomas M. Mistele Vice President, Assistant Secretary
G. Frederick Schroeder, Jr. Vice President
Robert M. Schubert Vice President
Kenneth A. Lewis Treasurer
Michael J. Corcoran Controller, Financial Principal
Leslie M. Kratter Secretary
James Davis Chief Compliance Officer
(c) Not Applicable.
Item 30. Location of Accounts and Records
Registrant's accounts and records are maintained by Templeton Funds
Annuity Company, 700 Central Avenue, St. Petersburg, Florida
33701-3628.
Item 31. Management Related Services
N/A
Item 32. Undertakings
(a) Registrant undertakes to file a post-effective amendment to this
Regis- tration 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 variable annuity contracts may be accepted.
(b) Registrant undertakes to include either (1) as part of any
application or enrollment form for the purchase of an Annuity
offered by the Prospectus, a space that an applicant can check to
request a Statement of Additional Information, or (2) a post card
or similar written communication affixed to or included in the
Prospectus that an applicant can remove to send for a Statement
of Additional Information.
(c) Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made
available under this Form N-4 promptly upon written or oral
request.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment No. 12 to this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of St.
Petersburg in the State of Florida on June 28th, 1996.
TEMPLETON FUNDS RETIREMENT ANNUITY SEPARATE ACCOUNT
(Registrant)
By: TEMPLETON FUNDS ANNUITY COMPANY
(Depositor)
By:
/s/ Richard P. Austin
President
ATTEST:
/s/ Thomas M. Mistele
Executive Vice President,
Secretary and General Counsel
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 12 to the Registration Statement has been signed
below by the following persons in the capacities and on the dates indicated:
Signature Title Date
_________________________ Director and June 28, 1996
Gordon W. Campbell* Chairman
_________________________ Director and June 28, 1996
Richard P. Austin* President
_________________________ Director, Executive June 28, 1996
Thomas M. Mistele* Vice President, Secretary
and General Counsel
_________________________ Director June 28, 1996
Louie N. Adcock, Jr.*
_________________________ Director June 28, 1996
Thomas A. Watson*
_________________________ Director June 28, 1996
Martin L. Flanagan* and Treasurer
_________________________ Director June 28, 1996
Thomas C. Banzhof*
_______________________ Senior Vice President and June 28, 1996
David J. Tobin* Chief Operating Officer
*By: /s/ Thomas M. Mistele
Thomas M. Mistele
as attorney-in-fact
(Powers of Attorney are contained in the Post-Effective Amendment No. 3 to
this Registration Statement filed on August 31, 1990, in the Post-Effective
Amendment No. 7 to this Registration Statement filed on May 1, 1992, in the
Post-Effective Amendment No. 9 to this Registration Statement filed on April 29,
1994 and in the Post-Effective Amendment No. 11 to this Registration Statement
on December 1, 1995.)
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit
(10) Consents of Independent Public Accountants
(14) Financial Data Schedule
[LOGO]
Coopers & Lybrand L.L.P.
a professional services firm
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in Post-Effective Amendment No. 12 to the
Registration Statement of the Templeton Funds Retirement Annuity Separate
Account on Form N-4 (Registration Nos. 33-11780 and 811-5023) of our reports
dated February 9, 1996, on our audits of the financial statements of the
Templeton Funds Retirement Annuity Separate Account, which report is included in
the Annual Report to Contract Owners of the Templeton Variable Annuity Fund for
the year ended December 31, 1995, and the Templeton Funds Annuity Company for
the years ended December 31, 1995 and 1994, which are included in the
Post-Effective Amendment to the Registration Statement.
/s/ Coopers & Lybrand L.L.P.
June 26, 1996
Jacksonville, Florida
Coopers & Lybrand L. L. P., a registered limited liability partnership, is a
member firm of Coopers & Lybrand (International).
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
The schedule contains summary financial information extracted from the
Templeton Funds Retirment Annuity Separate Account December 31, 1995 annual
report and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000810356
<NAME> TEMPLETON FUNDS RETIREMENT ANNUITY SEPARATE ACCOUNT
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 8458143
<INVESTMENTS-AT-VALUE> 11264697
<RECEIVABLES> 17503
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 11282200
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
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