Registration Nos. 33-11780 and 811-5023
As filed with the Securities and Exchange Commission on May 11, 1998
=======================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 15
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 18
TEMPLETON FUNDS RETIREMENT ANNUITY SEPARATE ACCOUNT
(Exact Name of Registrant)
TEMPLETON FUNDS ANNUITY COMPANY
(Name of Depositor)
100 Fountain Parkway, St. Petersburg, Florida 33716-1205
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number (813) 823-8712
Robert W. Smith
Templeton Funds Annuity Company
100 Foutain Parkway
St. Petersburg, Florida 33716-1205
(Name and Address of Agent for Service)
Copies to:
Karen L. Skidmore
777 Mariners Isld. Blvd.
San Mateo, CA 94402
It is proposed that this filing will become effective (check appropriate box):
[X] immediately upon filing pursuant to paragraph (b)
[ ] On ____ pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph(a)(1)
[ ] on _____________ pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph(a)(2)of Rule 485
Title of Securities Being Registered:
Templeton Funds Retirement Annuities
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previous filed post-effective amendment.
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 Stock
Fund; Voting Rights
6 Deductions and Charges
7 The Annuities; Substitution of Securities
and b: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
MAY 11, 1998
TEMPLETON RETIREMENT ANNUITIES
ISSUED BY TEMPLETON FUNDS RETIREMENT ANNUITY
SEPARATE ACCOUNT
OF
TEMPLETON FUNDS ANNUITY COMPANY
100 Fountain Parkway
St. Petersburg, Florida 33716-1205
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.
Currently, new annuity contracts are not being offered or sold.
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 Class 1 shares of Templeton Stock
Fund (the "Stock Fund"), a series of the Templeton Variable Products Series
Fund. The value of the Annuities, and the amount of each Annuity Payment, will
vary with the performance of the Stock Fund - Class 1.
Shares of the Stock Fund are not deposits of or obligations of, or guaranteed or
endorsed by, any bank; further, such shares are not federally insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other
agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
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 May 11, 1998, 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
___for the Statement of Additional Information 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 STOCK
FUND - CLASS 1. BOTH PROSPECTUSES SHOULD BE READ CAREFULLY AND RETAINED FOR
FUTURE REFERENCE.
<PAGE>
TABLE OF CONTENTS
PAGE
Glossary of Special Terms .................................
Expense Table .............................................
Summary ...................................................
Templeton Funds Annuity Company ...........................
The Separate Account ......................................
Templeton Stock 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 ...................................
Statement of Additional Information Table of Contents .....
Appendix A--Compliance with Internal Revenue Code Rules ...
Appendix B--Dollar Value of First Monthly Payment .........
<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 Stock 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 GROUP All U.S. registered investment companies in the
OF FUNDS Franklin Group of Funds(R) and the Templeton Group
of Funds. (See "The Annuities.")
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 CONTRACTOWNER An individual or individuals entitled to the
ownership 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 Class 1
shares of the Stock 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.
STOCK FUND Templeton Stock Fund, a series of Templeton
Variable Products Series Fund, a registered
open-end management investment company. The
Contracts' assets will be invested by the Separate
Account in Class 1 shares of the Stock Fund.
<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 Stock Fund - Class 1 Annual Expenses
(As a percentage of Fund average net assets)*
Management Fees ...........................................0.69%
Other Expenses ..............................................0.19%
Total Fund Operating Expenses ...............................0.88%
*Management Fees and Total Fund Operating Expenses have been restated to reflect
the management fee schedule approved by shareholders and effective May 1, 1997.
Actual Management Fees and Total Fund Operating Expenses before May 1, 1997 were
lower. See the Stock Fund prospectus for details.
The purpose of this Expense Table is to help you understand the costs of
investing directly in the Contract. The Expense Table reflects expenses of the
Separate Account as well as the Stock Fund. Except as noted above, the Stock
Fund's operating expenses are based on the historical expenses for the fiscal
year ended December 31, 1997. Actual expenses may be greater or less than those
shown.
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 Stock Fund"). The investment objective of the Stock
Fund is capital growth through a flexible policy of investing in common and
preferred stocks issued by companies, large and small, in various nations
throughout the world.
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 Stock Fund - Class 1 are described
in its prospectus.
TEMPLETON FUNDS ANNUITY COMPANY
Templeton Funds Annuity Company (the "Company"), 100 Fountain Parkway, St.
Petersburg, Florida 33716-1205, 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 Stock Fund. The Separate Account invests its assets, net of certain expenses
(see "Deductions and Charges"), exclusively in the Stock 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 STOCK FUND
IMPORTANT NOTE: THE PREVIOUSLY ANNOUNCED MERGER OF THE TEMPLETON VARIABLE
ANNUITY FUND (THE "VARIABLE ANNUITY FUND") AND THE TEMPLETON STOCK FUND (THE
"STOCK FUND") IS EXPECTED TO BE COMPLETED IN MAY 1998. FROM ITS INCEPTION UNTIL
THE MERGER IS COMPLETED, THE SEPARATE ACCOUNT INVESTED 100% OF ITS ASSETS IN THE
VARIABLE ANNUITY FUND. AS A RESULT OF THE MERGER, THE SEPARATE ACCOUNT WILL
RECEIVE CLASS 1 SHARES OF THE STOCK FUND EQUAL IN VALUE TO THE VARIABLE ANNUITY
FUND SHARES PREVIOUSLY OWNED BY THE SEPARATE ACCOUNT. AFTER THE MERGER, ANNUITY
PAYMENTS UNDER THE CONTRACTS WILL BE CALCULATED IN THE SAME MANNER AS EARLIER
PAYMENTS, BUT WILL BE BASED ON THE PERFORMANCE OF THE STOCK FUND - CLASS 1.
The Stock Fund is a diversified series of Templeton Variable Products Series
Fund ("Trust"), which is registered under the Investment Company Act of 1940 as
an open-end diversified management investment company. The Trust was organized
as a Massachusetts business trust on February 25, 1988. The Stock Fund's Class1
shares are used as a funding vehicle for the Contracts as well as variable
annuity and variable life insurance contracts issued by TFAC and other unrelated
insurance companies. The Stock Fund's investment objective is capital growth. It
invests primarily (normally at least 65% of its assets) in common and preferred
stocks issued by companies, large and small, in various nations throughout the
world. The Stock Fund's Investment Manager is Templeton Investment Counsel,
Inc., an affiliate of the Company. A prospectus containing more complete
information concerning the Stock Fund accompanies this Prospectus and should be
read carefully before purchasing an Annuity.
<PAGE>
PURCHASE OF ANNUITIES
Currently, new Annuity Contracts are not being offered or sold.
Applications and enrollment forms for requesting the purchase of an Annuity are
available from Templeton Funds Annuity Company, 100 Fountain Parkway, St.
Petersburg, Florida 33716-1205. 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 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 Stock Fund's Class 1 shares. 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 Stock 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.
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 birth date 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 more slowly 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 Class 1
share of the Stock Fund, plus the per share amount of any dividend or
capital gain distribution paid or deemed paid by the Stock Fund on its
Class 1 shares 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;
(b) is the net asset value per Class 1 share of the Stock 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. As explained above
(see "Templeton Stock Fund"), after completion of the merger of the
Variable Annuity Fund with the Stock Fund, the change in value of the Stock
Fund's Class 1 shares will be used to determine the Annuity Unit Value.
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 Investment
Factor for a one-year valuation period would be 1.07. For a one-day valuation
period, the Assumed Net Investment 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 Stock Fund - Class 1,
and plus or minus (f) the increase or decrease in the net asset value of the
Stock Fund's Class 1 shares 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 Stock Fund of securities
owned by it is not reasonably practicable or (ii) it is not reasonably
practicable for the Separate Account or the Stock 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 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
Stock Fund - Class 1, see the current prospectus of the Stock 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.
(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
Class 1 shares of the Stock Fund held in the Separate Account at special
meetings of the shareholders of the Stock 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 Class 1 share of the Stock Fund. Such number of shares will
be determined as of a date coincident with the date established by the Stock
Fund for determining shareholders eligible to vote at the meeting of the Stock
Fund, which shall not be more than 90 days prior to any meeting of the Stock
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 Class 1 shares of the Stock Fund should no longer be available for
investment by the Separate Account or if, in the Company's sole discretion the
Company determines to discontinue such funding option, the Company may
substitute shares of another mutual fund or other investment vehicle for Class 1
shares of the Stock 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 Stock Fund Class 1
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.
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.
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS
Templeton Funds Annuity Company ........................................2
Independent Accountants ................................................2
Performance Information ................................................2
Financial Information ..................................................3
Financial Statements--Templeton Funds Retirement Annuity Separate Account 4
Financial Statements--Templeton Funds Annuity Company ..................7
<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>
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 7% FIRST MONTHLY PAYMENT USING 3%
ASSUMED INTEREST RATE 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>
OPTION 2--LIFE ANNUITY WITH 60 OR 120 PAYMENTS GUARANTEED
FIRST MONTHLY PAYMENT FIRST MONTHLY PAYMENT
USING 7% ASSUMED USING 3% ASSUMED
INTEREST INTEREST
NUMBER OF GUARANTEED NUMBER OF GUARANTEED
MONTHLY PAYMENTS MONTHLY PAYMENTS
ACTUAL 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>
<TABLE>
<CAPTION>
OPTION 3(A)--JOINT AND 100% SURVIVOR LIFE ANNUITY
FIRST MONTHLY PAYMENT USING 7% ASSUMED INTEREST RATE
ACTUAL AGE OF ANNUITANT
Actual Age
<S> <C> <C> <C> <C> <C> <C>
of JOINT 50 55 60 65 70 75
------ -- -- -- -- -- --
ANNUITANT
---------
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
</TABLE>
<TABLE>
<CAPTION>
FIRST MONTHLY PAYMENT USING 3% ASSUMED INTEREST RATE
ACTUAL AGE OF ANNUITANT
Actual Age
<S> <C> <C> <C> <C> <C> <C>
of Joint 50 55 60 65 70 75
-- -- -- -- -- --
Annuitant
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
</TABLE>
<TABLE>
<CAPTION>
OPTION 3(B)--JOINT AND 75% SURVIVOR LIFE ANNUITY
FIRST MONTHLY PAYMENT USING 7% ASSUMED INTEREST RATE
ACTUAL AGE OF ANNUITANT
Actual Age
<S> <C> <C> <C> <C> <C> <C>
of Joint 50 55 60 65 70 75
-- -- -- -- -- --
Annuitant
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
</TABLE>
<TABLE>
<CAPTION>
FIRST MONTHLY PAYMENT USING 3% ASSUMED INTEREST RATE
ACTUAL AGE OF ANNUITANT
Actual Age
<S> <C> <C> <C> <C> <C> <C>
of Joint 50 55 60 65 70 75
-- -- -- -- -- --
Annuitant
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
</TABLE>
<TABLE>
<CAPTION>
OPTION 3(C)--JOINT AND 50% SURVIVOR LIFE ANNUITY
FIRST MONTHLY PAYMENT USING 7% ASSUMED INTEREST RATE
ACTUAL AGE OF ANNUITANT
Actual Age
<S> <C> <C> <C> <C> <C> <C>
of JOINT 50 55 60 65 70 75
------ -- -- -- -- -- --
ANNUITANT
---------
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
</TABLE>
<TABLE>
<CAPTION>
FIRST MONTHLY PAYMENT USING 3% ASSUMED INTEREST RATE
ACTUAL AGE OF ANNUITANT
Actual Age
<S> <C> <C> <C> <C> <C> <C>
of JOINT 50 55 60 65 70 75
------ -- -- -- -- -- --
ANNUITANT
---------
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
</TABLE>
<TABLE>
<CAPTION>
<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
<S> <C> <C> <C> <C> <C> <C>
of JOINT 50 55 60 65 70 75
------ -- -- -- -- -- --
ANNUITANT
---------
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
</TABLE>
<TABLE>
<CAPTION>
FIRST MONTHLY PAYMENT USING 3% ASSUMED INTEREST RATE
ACTUAL AGE OF ANNUITANT
Actual Age
<S> <C> <C> <C> <C> <C> <C>
of JOINT 50 55 60 65 70 75
------ -- -- -- -- -- --
ANNUITANT
---------
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
</TABLE>
<TABLE>
<CAPTION>
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
<S> <C> <C> <C> <C> <C> <C>
of JOINT 50 55 60 65 70 75
------ -- -- -- -- -- --
ANNUITANT
---------
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
</TABLE>
<TABLE>
<CAPTION>
FIRST MONTHLY PAYMENT USING 3% ASSUMED INTEREST RATE
ACTUAL AGE OF ANNUITANT
Actual Age
<S> <C> <C> <C> <C> <C> <C>
of JOINT 50 55 60 65 70 75
------ -- -- -- -- -- --
ANNUITANT
---------
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
</TABLE>
<PAGE>
OPTION 5--UNIT REFUND LIFE ANNUITY
FIRST MONTHLY PAYMENT FIRST MONTHLY
USING 7% ASSUMED PAYMENT USING 3%
INTEREST RATE ASSUMED INTEREST RATE
First Monthly First
ACTUAL PAYMENT ACTUAL Monthly
AGE 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>
[THIS PAGE INTENTIONALLY LEFT BLANK]
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
100 Fountain Parkway
St. Petersburg, Florida 33716-1205
Dated May 11, 1998
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 May 11, 1998. 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, 100
Fountain Parkway, St. Petersburg, Florida 33716-1205.
PAGE
TABLE OF CONTENTS
Page
Templeton Funds Annuity Company.........................................
Independent Accountants.................................................
Performance Information.................................................
Financial Information...................................................
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 the underwriter
of Contracts pursuant to which Templeton Retirement Annuities are issued, and is
custodian of the assets of the Separate Account. The Company is wholly owned by
Franklin Agency, Inc. ("Franklin Agency") and is located at 100 Fountain
Parkway, St. Petersburg, Florida 33716-1205. 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. 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 affiliates act as an investment advisers to
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:
6
YIELD = 2[((a-b/cd) + 1) - 1]
where
a = net investment income earned during the period by the Fund attributable
to shares owned by the Separate Account,
b = expenses accrued for the period (net of reimbursements),
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). Total returns will be consistent with applicable with
SEC rules. Performance information for the Separate Account may also be
advertised based on the historical performance of the Fund for periods beginning
prior to the date the Separate Account commenced operations. Any such
performance calculation will be based on the assumption that the Separate
Account was in existence throughout the stated period and that the contractual
charges and expenses of the Separate Account during the period were equal to
those currently assessed under the Contract. Quotations of total return may
simultaneously be shown for the same or other periods that do not take into
account certain contractual charges.
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 investment 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.
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
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
Templeton Funds Retirement Annuity Separate Account of Templeton
Funds Annuity Company
Audited Financial Statements incorporated herein by reference
to the Registrant's Annual Report to Shareholders dated
December 31, 1997, as filed with the SEC electronically on
Form Type N-30D on March 5, 1998
Report of Independent Accountants
Statement of Assets and Liabilities
Statement of Operations
Statements of Changes in Net Assets
Notes to Financial Statements
Contained in Part B:
Templeton Funds Annuity Company
Year ended 12/31/97
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 Amendment No. 11 to the Registration Statement filed on December
1, 1995. Post-Effective Amendment No. 13 filed on November 20, 1996, and
Post-Effective Amendment No. 6 of Templeton Immediate Variable Annuity
(Registration Nos. 33-37846 and 811-6230) filed on July 28, 1997. 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,
100 Fountain Parkway Chief Executive Officer
St. Petersburg, Florida 33716-1205
/s/ Karen L. Skidmore Vice President and Secretary
777 Mariners Isld. Blvd.
San Mateo, CA 94402
Louie N. Adcock, Jr. Director
Fisher & Sauls, P.A.
100 Second Avenue South
Suite 700, City Center
St. Petersburg, Florida 33715
Thomas A. Watson Director
4971 Bacopa Lane South #301
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
100 Foutain Parkway Operating Officer
St. Petersburg, Florida 33716-1205
Peter E. Barnett Vice President
100 Fountain Parkway
St. Petersburg, Florida 33176-1205
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 December 31, 1997, the Registrant had 303 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
indemnification is against public policy as expressed in the Act and
is therefore unenforce- able. 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) Templeton Funds Annuity Company is underwriter of the contracts,
and does not serve as principal underwriter for any other
investment companies.
(b) See Item 25.
(c) Not applicable.
Item 30. Location of Accounts and Records
Registrant's accounts and records are maintained by Templeton Funds
Annuity Company, 100 Fountain Parkway, St. Petersburg, Florida
33716-1205.
Item 31. Management Related Services
N/A
PAGE
Item 32. Undertakings
(a) Registrant undertakes to file a post-effective amendment to
this Registration Statement as frequently as is necessary to
ensure that the audited financial statements in the
Registration Statement are never more than 16 months old for
so long as payments under the 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.
The Registrant and its Depositor, Templeton Funds Annuity
Company, are relying on the Great-West Life and Annuity Insurance
Company no-action letter (pub. avail. October 23, 1990), and are
delivering financial statements to contrat owners as required by that
letter.
PAGE
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all the
requirements of effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Post-Effective
Amendment No. 15 to this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of San Mateo in the
State of California on this 11th day of May, 1998.
TEMPLETON FUNDS RETIREMENT ANNUITY SEPARATE ACCOUNT
(Registrant)
By: TEMPLETON FUNDS ANNUITY COMPANY
(Depositor)
By: /s/ Richard P. Austin
Richard P. Austin
President
PAGE
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 15 to the Registration Statement has been signed
below by the following persons in the capacities and on the dates indicated:
Signature Title Date
_________________________ Vice Chairman and May 11, 1998
Gordon W. Campbell Director
Richard P. Austin* Director, President May 11, 1998
and Chief Executive Officer
_________________________ Director May 11, 1998
Louie N. Adcock, Jr.*
_________________________ Director May 11, 1998
Thomas A. Watson*
_________________________ Director May 11, 1998
Martin L. Flanagan* and Treasurer
_________________________ Director and Chairman May 11, 1998
Thomas C. Banzhof*
David J. Tobin* Senior Vice President and May 11, 1998
Chief Operating Officer
/s/Karen L. Skidmore Vice President and Secretary May 11, 1998
Karen L. Skidmore
*By: /s/ Karen L. Skidmore
Karen L. Skidmore
as attorney-in-fact
* By Powers of Attorney previously filed.
COOPERS & LYBRAND L.L.P.
CONSENT OF INDEPENDENT ACCOUNTANTS
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in Post-Effective Amendment No. 6 to the
Registration Statement of the Templeton Funds Retirement Annuity Separate
Account on Form N-4 (Registration Nos. 33-37846 and 811-6230) of our reports
dated February 20, 1998 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, 1997, and the Templeton Funds Annuity Company
for the years ended December 31, 1997 and 1996, which are included in the
Post-Effective Amendment to the Registration Statement.
COOPERS & LYBRAND L.L.P.
May 11, 1998
Jacksonville, Florida
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
The schedule contains summary financial information extracted from the Templeton
Funds Retirement Annuity Separate Account December 31, 1997 annual report and is
qaulified in its entirety by reference to such financial statements
</LEGEND>
<CIK> 0000810356
<NAME> TEMPLETON FUNDS RETIREMENT ANNUITY SEPARATE ACCOUNT
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