PROSPECTUS
November 20, 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 November 20, 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.
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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
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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.
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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.")
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.
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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.)
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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.
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.
<PAGE>
The graphs take into account all charges under the Contract and the actual
expenses of the Fund. Past performance is not indicative of future performance.
No representation can be made that the performance shown in the graphs can be
achieved for any period of time in the future.
MONTHLY INCOME
3% ASSUMED INTEREST RATE
[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
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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
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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
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MONTHLY INCOME
7% ASSUMED INTEREST RATE
[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
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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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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
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orders 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 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.
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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.")
<PAGE>
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.
<PAGE>
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
[Page 14]
<PAGE>
Company also 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 rate of return after
expenses is 3% (or 5.19% before expenses).
[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.
MONTHLY INCOME
3% ASSUMED INTEREST RATE
[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 annualualized rate of return
after expenses is 7% (or 9.27% before expenses).
[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.
MONTHLY INCOME
7% ASSUMED INTEREST RATE
[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.
[Page 23]
<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]
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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]
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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]
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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]
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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]
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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]
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