SEMI ANNUAL REPORT
JUNE 30, 2000
TEMPLETON IMMEDIATE VARIABLE ANNUITY
- TIVA Separate Account
- Franklin Templeton
Variable Insurance Products Trust
Templeton Growth Securities Fund - Class 1
<PAGE>
A WORD ABOUT RISK
All of the funds are subject to certain risks, which will cause investment
returns and the value of your principal to increase or decrease. Generally,
investments offering the potential for higher returns are accompanied by a
higher degree of risk. Stocks and other equities, representing an ownership
interest in an individual company, have historically outperformed other asset
classes over the long term, but tend to fluctuate more dramatically over the
shorter term. Securities of smaller companies, and companies involved in
reorganization or bankruptcy, may have greater price swings and greater credit
and other risks.
Bonds and other debt obligations are affected by the creditworthiness of their
issuers and changes in interest rates, with prices declining as interest rates
increase. High yield, lower-rated ("junk") bonds generally have greater price
swings and higher default risks than investment grade bonds.
Foreign investing, especially in emerging market countries, has additional
risks such as changes in currency values, market price swings, and economic,
political, or social instability. These, and other risks pertaining to specific
portfolios, such as specialized industry or geographic sectors or use of
complex securities, are discussed in the prospectus. Your investment
representative can help you determine which portfolios may be right for you.
<PAGE>
TEMPLETON IMMEDIATE VARIABLE ANNUITY
SEMIANNUAL REPORT
TABLE OF CONTENTS
Letter to Contract Owners .............. 2
Manager's Discussion ................... TG-1
Performance ............................ TG-4
Financial Highlights ................... TG-5
Statement of Investments ............... TG-7
Financial Statements ................... TG-13
Notes to Financial Statements ......... TG-16
Tax Designation ........................ TG-20
Templeton Immediate Variable Annuity
Separate Account Financials .......... SA-1
Please retain this document with your current prospectus for reference.
THANK YOU FOR INVESTING WITH TEMPLETON IMMEDIATE VARIABLE ANNUITY. WE ENCOURAGE
OUR INVESTORS TO MAINTAIN A LONG-TERM PERSPECTIVE, AND REMEMBER THAT ALL
SECURITIES MARKETS MOVE BOTH UP AND DOWN, AS DO FUND UNIT PRICES. WE APPRECIATE
YOUR PAST SUPPORT AND LOOK FORWARD TO SERVING YOUR INVESTMENT NEEDS IN THE YEARS
AHEAD.
<PAGE>
LETTER TO CONTRACT OWNERS
Dear Contract Owners:
We are pleased to bring you the Templeton Immediate Variable Annuity
semiannual report for the period ended June 30, 2000.
During the first six months of 2000, many of the world's economies
strengthened, in contrast to the U.S. economy, which began to show the first
signs of slowing toward the period's end. Abroad, those countries in the
European Union were able to take advantage of the euro's weakness to bolster
exports and create jobs, pushing the region's unemployment to its lowest level
in seven years. Many Asian and Latin American emerging countries' economies
also enjoyed brisk growth during the period, with steadier consumer consumption
replacing exports and government spending as the principal foundation for
growth. The Japanese economy recently reported a 2.4% annualized increase in
its gross domestic product (GDP) for the first quarter of 2000, the highest in
four years.
It was a different story in the U.S., as the Federal Reserve Board (the Fed)
continued to raise short-term interest rates in an effort to stem what they
apparently believed was a rising inflation threat as a result of the
super-heated economy. The first signs of a slowdown appeared in March, when
retail sales, new vehicle sales and housing starts fell, and this trend
continued into June, reinforcing the possibility that the economy was indeed
decelerating.
In spite of the generally strong economic backdrop, most stock markets around
the globe ended the period in negative territory, weighed down by rising
interest rates. However, this environment affected various stocks differently,
and the end result does not tell the entire story.
For the stock markets, the beginning of the period witnessed the continuance of
many investors' ravenous appetites for "new economy" stocks -- technology,
biotechnology, telecommunications and Internet-related companies -- seemingly at
the expense of "old economy" stocks, which meant almost everything else. Taking
a cue from the end of 1999 and apparently fueled by a rapidly increasing money
supply and central bank reluctance to raise rates in anticipation of potential
Y2K problems, investors jumped into these new economy stocks, and many rocketed
in the first two months of 2000. This was most obvious in the U.S., where at its
peak on March 10, 2000, the technology-heavy Nasdaq(R) had increased 24.1% since
the start of the year, but this "tech mania" also included technology companies
in Europe and Japan, which saw
2
<PAGE>
the prices of some of their hottest stocks double, triple and more.(1) However,
many of these stocks ran out of gas in March with the Nasdaq falling 37.3% from
its high, as investor confidence waned following recurrent Fed interest-rate
increases. For the period, the Nasdaq returned -2.02%.
While new economy stocks were grabbing headlines, it was some of the old
economy stocks that were the best performers in the period. Supported by oil
prices hovering around $29 a barrel and natural gas prices at three-year highs,
many energy-related company stocks increased significantly. Likewise,
pharmaceutical stocks rose strongly, as investors seemed to feel that an aging
world population would likely increase the demand for such companies' products
regardless of the level of economic growth or interest rates.
U.S. Treasury and corporate bond prices were volatile in this rising
interest-rate environment, partially due to investor uncertainty over the U.S.
economy's strength. Surprisingly, many emerging market bonds posted solid
performances, bolstered by these countries' improving financial conditions.
It is important to remember, of course, that securities markets always have
been, and always will be, subject to volatility. No one can predict exactly how
they will perform in the future. For this reason, we urge you to exercise
patience and focus not on day-to-day market movements, but on your long-term
retirement and investment goals. As always, we appreciate your support, welcome
your questions and comments, and look forward to serving your investment needs
in the years ahead.
Sincerely,
/s/RUPERT H. JOHNSON, JR.
Rupert H. Johnson, Jr.
Vice President
Franklin Templeton Variable Insurance Products Trust
/s/RICHARD P. AUSTIN
Richard P. Austin
President
Templeton Funds Annuity Company
(1) The Nasdaq Composite Index measures all Nasdaq domestic and non-U.S. based
common stocks listed on the Nasdaq Stock Market(R). The Index is market-value
weighted and includes over 5,000 companies (as of 6/30/00).
3
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TEMPLETON GROWTH SECURITIES FUND
--------------------------------------------------------------------------------
FUND GOAL AND PRIMARY INVESTMENTS: TEMPLETON GROWTH SECURITIES FUND (FORMERLY
TEMPLETON GLOBAL GROWTH FUND) SEEKS LONG-TERM CAPITAL GROWTH. THE FUND INVESTS
PRIMARILY IN EQUITY SECURITIES OF COMPANIES OF ANY NATION, INCLUDING THOSE IN
THE U.S. AND EMERGING MARKETS.
--------------------------------------------------------------------------------
During the six months under review, global economies appeared to be improving,
although most trailed the U.S. economy's growth rate. Europe displayed slow but
steady improvement in manufacturing output, unemployment rates slightly
declined and consumer confidence increased. The euro has fallen significantly
since its introduction, but a more positive economic outlook for Europe should
help benefit the currency.
In the U.S., the economy continued to post solid gross domestic product (GDP)
gains during the six months under review, but began to show signs of modest
deceleration. During this period, the Federal Reserve Board raised the federal
funds target rate three separate times to 6.5%, up from 5.5%. While by no means
necessarily signaling a major slowdown, some core economic indicators, such as
housing starts and unemployment claims, finally registered signs of slowing.
As the U.S. stock market advanced during the past decade, domestic household
net worth increased, consumer consumption rose, annual savings rates dropped
and many investors borrowed money to purchase stocks (margin debt). During the
reporting period, margin debt reached its highest point ever as a percentage of
total stock market capitalization. As a percentage of GDP, margin debt exceeded
2.4% at the end of the period after hovering at less than 1% for several
decades.
As margin debt has grown, so has the Nasdaq Composite Index. More than half of
the index's stocks are in the telecommunications and technology sectors that
have attracted margin buying. This focus on technology and telecom stocks
during the past several years is due partly to these sectors' earnings growth,
which has far exceeded non-technology companies' earnings growth. Despite the
difference in earnings growth, global technology and telecom companies' share
of world net income was not substantially different from the early 1980s.
However, these stocks comprise over a third of world stock market
capitalization, up from about 15% in the early 1980s, indicating that
GEORGRAPHIC DISTRIBUTION
Templeton Growth Securities Fund
Based on Total Net Assets
6/30/00
[This chart in pie format shows the geographic distribution of Templeton Growth
Securities Fund, as a percentage of total net assets as of 6/30/00.]
North America 34.5%
Europe 32.8%
Asia 14.6%
Latin America 4.5%
Australia/New Zealand 4.0%
Short-Term Investments & Other Net Assets 9.6%
TG-1
<PAGE>
TOP 10 HOLDINGS
Templeton Growth Securities Fund
6/30/00
COMPANY % OF TOTAL
SECTOR, COUNTRY NET ASSETS
---------------------------------------
H.J. Heinz Co. 2.1%
Food & Household
Products, U.S.
Cheung Kong
Holdings Ltd. 1.8%
Multi-Industry,
Hong Kong
Australia & New Zealand
Banking Group Ltd. 1.7%
Banking, Australia
HSBC Holdings PLC 1.6%
Banking, Hong Kong
Kroger Co. 1.5%
Merchandising, U.S.
Abbott Laboratories 1.5%
Health & Personal Care,
U.S.
Aventis SA 1.5%
Health & Personal Care,
France
Fuji Photo Film Co. Ltd. 1.4%
Electrical & Electronics,
Japan
Ford Motor Co. 1.3%
Automobiles, U.S.
Albertson's Inc. 1.3%
Merchandising, U.S.
The dollar value, number of shares or principal value, and complete legal
titles of all portfolio holdings are listed in the Fund's Statement of
Investments.
while such companies' stock prices have soared, their share of world net income
has not experienced the same climb. At Templeton, we have a history of avoiding
what we believe are the most speculative parts of the markets. During the
reporting period, we continued to consider telecommunications and technology
speculative. While we sold most of the Fund's holdings in these sectors too
early, we did so in an attempt to avoid the downside risks.
During the reporting period, the most substantial change to the Fund was an
increase in U.S. exposure. Although this move may appear unusual given
historically high domestic stock market valuations, we believe most risks in
the U.S. are narrowly focused and that those indexes that appear highly priced
actually mask many undervalued securities. Many investors and financial leaders
were concerned about the state of U.S. financial markets partly due to the
combination of many stocks' historically high valuations, the market's size
relative to the overall economy, relatively large margin debt and the rapid
turnover of investments. However, despite these risks, we are comfortable with
the Fund's holdings and with increasing its U.S. exposure.
At the period's end, we believe Templeton Growth Securities Fund's holdings are
substantially less expensive than overall market averages. Generally speaking,
we feel that indexes were expensive because parts of the market were priced
excessively. However, behind the overall market advances, most stocks have been
declining in value. For example, since 1998 more stocks on the New York Stock
Exchange have actually been falling in value rather than increasing, even while
indexes have hit all-time highs. Because of the two-tier nature of valuations,
we were able to identify several securities that had what we believed were low
prices.
Despite a price-to-earnings ratio for the Standard & Poor's 500(R) Composite
Index of 29 times at period-end, the average stock's decline has left the
median price-to-earnings ratio for U.S. stocks at about 13 times. We increased
our U.S. holdings in an attempt to take advantage of such investment
opportunities. Additions to the Fund's portfolio include H.J. Heinz,
BankAmerica, Albertson's and K-Mart. We added each of these stocks after they
suffered substantial price declines and traded at what we believed were
exceptional valuations.
TG-2
<PAGE>
Overseas, we perceived a similar divergence in values. The Hong Kong Stock
Market, for example, had a price-to-earnings ratio in the high 20s early in the
period, but when technology and new economy stocks are removed from the index,
the ratio falls to about 13 -- in our opinion, a reasonable number, and one not
much higher than where the market was during 1998's Asian financial crisis. The
same holds true for South Korea, with the index there, minus technology and
telecommunications stocks, falling below 10 times earnings, also to a level
similar to that during the Asian financial crisis. The Fund's Asian exposure
declined from 20% of total net assets at the beginning of the period to less
than 15% by the end. Many of our Asian positions performed well and we
attempted to take advantage of dramatic price increases by reducing our
holdings.
In Latin America, the Fund's holdings fell from 7.9% of total net assets at the
beginning of the period to 4.5%. Latin American markets were hard hit during
the period, due in large part to rising U.S. interest rates and local election
concerns.
The Fund's exposure to Europe decreased during the six months under review, as
we sold several positions. Our total holdings in Europe declined from 37.6% at
the beginning of the period to 32.8% by the end. However, we found a large
number of companies we believe are inexpensive based on cash flow. During the
latest economic cycle, free cash flow as a percentage of sales in Europe was
twice as high as during the previous cycle. This contributed to a substantial
increase in mergers and acquisitions. In fact, most of the recent global merger
activity involved European companies purchasing American assets. Looking
forward, we believe this trend will continue, and that it should benefit many
of the Fund's holdings.
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This discussion reflects our views, opinions and portfolio holdings as of June
30, 2000, the end of the reporting period. The information provided is not a
complete analysis of every aspect of any country, industry, security or the
Fund. Our strategies and the Fund's portfolio composition will change depending
on market and economic conditions. Although historical performance is no
guarantee of future results, these insights may help you understand our
investment and management philosophy.
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TG-3
<PAGE>
TEMPLETON GROWTH
SECURITIES FUND - CLASS 1
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Performance reflects the Fund's Class 1 operating expenses, but does not include
any contract fees, expenses or sales charges. If they had been included,
performance would be lower. These charges and deductions, particularly for
variable life policies, can have a significant effect on contract values and
insurance benefits. See the contract prospectus for a complete description of
these expenses, including sales charges.
-------------------------------------------------------------------------------
PERFORMANCE SUMMARY AS OF 6/30/00
TEMPLETON GROWTH SECURITIES FUND - CLASS 1 DELIVERED A -1.96% CUMULATIVE TOTAL
RETURN FOR THE SIX-MONTH PERIOD ENDED 6/30/00. Total return of Class 1 shares
represents the cumulative or average annual change in value, assuming
reinvestment of dividends and capital gains. Average returns smooth out
variations in returns, which can be significant; they are not the same as
year-by-year results.
Templeton Growth Securities Fund - Class 1
Periods ended 6/30/00
SINCE
INCEPTION
1-YEAR 5-YEAR (3/15/94)
--------------------------------------------------------------------
Average Annual Total Return +5.97% +13.37% +12.25%
Cumulative Total Return +5.97% +87.26% +106.98%
Value of $10,000 Investment $10,597 $18,726 $20,698
ONGOING STOCK MARKET VOLATILITY CAN DRAMATICALLY CHANGE THE FUND'S SHORT-TERM
PERFORMANCE; CURRENT RESULTS MAY BE LOWER.
-------------------------------------------------------------------------------
Since markets can go down as well as up, investment return and the value of your
principal will fluctuate with market conditions, and you may have a gain or loss
when you sell your shares.
-------------------------------------------------------------------------------
Past performance does not guarantee future results.
TG-4
<PAGE>
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
TEMPLETON GROWTH SECURITIES FUND
Financial Highlights (continued)
<TABLE>
<CAPTION>
CLASS 1
---------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2000 --------------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period .......... $15.63 $14.77 $15.34 $13.80 $11.75 $10.48
---------------------------------------------------------------------------------
Income from investment operations:
Net investment income(c) ..................... .20 .28 .35 .33 .25 .16
Net realized and unrealized gains (losses) ... (.55) 2.66 .98 1.53 2.22 1.17
---------------------------------------------------------------------------------
Total from investment operations .............. (.35) 2.94 1.33 1.86 2.47 1.33
---------------------------------------------------------------------------------
Less distributions from:
Net investment income ........................ (.27) (.36) (.41) (.24) (.21) (.06)
Net realized gains ........................... (1.75) (1.72) (1.49) (.08) (.21) --
---------------------------------------------------------------------------------
Total distributions ........................... (2.02) (2.08) (1.90) (.32) (.42) (.06)
---------------------------------------------------------------------------------
Net asset value, end of period ................ $13.26 $15.63 $14.77 $15.34 $13.80 $11.75
=================================================================================
Total return(b) ............................... (1.96%) 21.04% 8.98% 13.50% 21.28% 12.72%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............. $1,243,828 $708,310 $747,080 $758,445 $579,877 $338,755
Ratios to average net assets:
Expenses ..................................... .88%(a) .88% .88% .88% .93% .97%
Net investment income ........................ 2.87%(a) 1.87% 2.27% 2.49% 2.20% 2.46%
Portfolio turnover rate ....................... 64.71% 46.54% 32.30% 24.81% 12.32% 30.92%
</TABLE>
(a)Annualized
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for period less than one
year.
(c)Based on average shares outstanding effective year ended December 31, 1999.
TG-5
<PAGE>
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
TEMPLETON GROWTH SECURITIES FUND
Financial Highlights (continued)
<TABLE>
<CAPTION>
CLASS 2
---------------------------------------
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999(C)
---------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ................ $15.60 $15.34
---------------------------------------
Income from investment operations:
Net investment income(d) ........................... .20 .17
Net realized and unrealized gains (losses) ......... (.58) 2.17
---------------------------------------
Total from investment operations .................... (.38) 2.34
---------------------------------------
Less distributions from:
Net investment income .............................. (.25) (.36)
Net realized gains ................................. (1.75) (1.72)
---------------------------------------
Total distributions ................................. (2.00) (2.08)
---------------------------------------
Net asset value, end of period ...................... $13.22 $15.60
=======================================
Total return(b) ..................................... (2.08%) 16.35%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ................... $72,156 $4,483
Ratios to average net assets:
Expenses ........................................... 1.13%(a) 1.14%(a)
Net investment income .............................. 3.08%(a) 1.17%(a)
Portfolio turnover rate ............................. 64.71% 46.54%
</TABLE>
(a)Annualized
(b)Total return does not include any fees, charges or expenses imposed by the
variable annuity and life insurance contracts for which the Franklin
Templeton Variable Insurance Products Trust serves as an underlying
investment vehicle. Total return is not annualized for periods less than one
year.
(c)For the period January 6, 1999 (effective date) to December 31, 1999.
(d)Based on average shares outstanding.
See notes to financial statements.
TG-6
<PAGE>
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
TEMPLETON GROWTH SECURITIES FUND
Statement of Investments, June 30, 2000 (unaudited)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCKS 89.1%
AEROSPACE & MILITARY TECHNOLOGY 4.5%
BAE Systems PLC ...................................... United Kingdom 2,090,590 $ 12,944,144
Boeing Co. ........................................... United States 182,500 7,630,781
Lockheed Martin Corp. ................................ United States 612,500 15,197,656
Raytheon Co., A ...................................... United States 483,374 9,395,582
Rolls-Royce PLC ...................................... United Kingdom 3,988,521 14,174,203
-------------
59,342,366
-------------
APPLIANCES & HOUSEHOLD DURABLES
Guangdong Kelon Electrical Holdings Ltd., H .......... China 1,123,000 608,658
-------------
AUTOMOBILES 4.5%
Bayerische Motorenwerke AG ........................... Germany 203,600 6,225,643
Ford Motor Co. ....................................... United States 407,000 17,501,000
General Motors Corp. ................................. United States 140,000 8,128,750
Regie Nationale des Usines Renault SA ................ France 165,000 7,528,469
(a) Visteon Corp. ........................................ United States 53,290 646,138
Volkswagen AG ........................................ Germany 165,400 6,389,345
Volvo AB, B .......................................... Sweden 571,100 12,469,006
-------------
58,888,351
-------------
BANKING 8.1%
Australia & New Zealand Banking Group Ltd. ........... Australia 2,844,184 21,874,923
Banca Nazionale del Lavoro SpA ....................... Italy 1,781,960 6,268,733
Banco Popular Espanol SA ............................. Spain 140,000 4,347,993
Bank Austria AG ...................................... Austria 109,065 5,333,860
Bank of America Corp. ................................ United States 395,000 16,985,000
Deutsche Bank AG ..................................... Germany 150,700 12,646,932
Foreningssparbanken AB, A ............................ Sweden 200,000 2,941,512
HSBC Holdings PLC .................................... Hong Kong 1,800,801 20,559,990
National Australia Bank Ltd. ......................... Australia 465,000 7,788,714
U.S. Bancorp. ........................................ United States 425,000 8,181,250
-------------
106,928,907
-------------
BROADCASTING & PUBLISHING .4%
Wolters Kluwer NV .................................... Netherlands 215,100 5,752,550
-------------
BUILDING MATERIALS & COMPONENTS .6%
Caradon PLC .......................................... United Kingdom 2,805,290 6,412,625
Owens Corning ........................................ United States 200,000 1,850,000
-------------
8,262,625
-------------
BUSINESS & PUBLIC SERVICES .6%
(a) Gartner Group Inc., B ................................ United States 224,400 2,215,950
(a) Humana Inc. .......................................... United States 250,000 1,218,750
Waste Management Inc. ................................ United States 250,000 4,750,000
-------------
8,184,700
-------------
CHEMICALS 4.3%
Akzo Nobel NV ........................................ Netherlands 355,200 15,151,260
BASF AG .............................................. Germany 253,200 10,314,980
DSM NV, Br. .......................................... Netherlands 300,000 9,662,206
Eastman Chemical Co. ................................. United States 125,000 5,968,750
Kemira OY ............................................ Finland 447,900 2,189,611
Lyondell Chemical Co. ................................ United States 770,500 12,905,875
-------------
56,192,682
-------------
</TABLE>
TG-7
<PAGE>
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
TEMPLETON GROWTH SECURITIES FUND
Statement of Investments, June 30, 2000 (unaudited) (cont.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCKS (CONT.)
DATA PROCESSING & REPRODUCTION .9%
Compaq Computer Corp. ....................... United States 400,000 $ 10,225,000
Fujitsu Ltd. ................................ Japan 30,000 1,040,594
-------------
11,265,594
-------------
ELECTRICAL & ELECTRONICS 5.0%
ABB Ltd. .................................... Switzerland 25,975 3,026,616
Alcatel SA .................................. France 187,175 12,325,948
Fuji Photo Film Co. Ltd. .................... Japan 450,000 18,458,485
Hitachi Ltd. ................................ Japan 1,003,500 14,511,176
(a) Hyundai Electronics Industries Co. .......... South Korea 100,000 1,973,050
Koninklijke Philips Electronics NV .......... Netherlands 124,928 5,915,650
Marconi PLC ................................. United Kingdom 237,900 3,091,832
Motorola Inc. ............................... United States 30,300 880,594
Sony Corp. .................................. Japan 57,900 5,417,608
-------------
65,600,959
-------------
ELECTRONIC COMPONENTS & INSTRUMENTS .1%
(a) Agilent Technologies Inc. ................... United States 3,814 281,283
Hewlett-Packard Co. ......................... United States 10,000 1,248,750
-------------
1,530,033
-------------
ENERGY EQUIPMENT & SERVICES .4%
TransCanada PipeLines Ltd. .................. Canada 623,900 4,758,095
-------------
ENERGY SOURCES 6.6%
Amerada Hess Corp. .......................... United States 87,928 5,429,554
Burlington Resources Inc. ................... United States 193,400 7,397,550
Eni SpA ..................................... Italy 2,469,050 14,294,948
Norsk Hydro ASA ............................. Norway 47,000 1,979,480
Occidental Petroleum Corp. .................. United States 623,100 13,124,044
Petroleo Brasileiro SA, ADR ................. Brazil 170,000 5,059,200
(a) Ranger Oil Ltd. ............................. Canada 273,050 1,455,824
(a) Renaissance Energy Ltd. ..................... Canada 254,800 2,467,693
Repsol SA ................................... Spain 200,000 3,997,163
Shell Transport & Trading Co. PLC ........... United Kingdom 1,632,853 13,830,196
Societe Elf Aquitaine SA, Br. ............... France 37,072 7,622,353
Texaco Inc. ................................. United States 180,000 9,585,000
Valero Energy Corp. ......................... United States 28,500 904,875
-------------
87,147,880
-------------
FINANCIAL SERVICES 3.3%
AXA SA ...................................... France 20,880 3,302,404
ING Groep NV ................................ Netherlands 164,034 11,132,249
Lend Lease Corp. Ltd. ....................... Australia 485,500 6,211,145
Merrill Lynch & Co. Inc. .................... United States 125,000 14,375,000
Nomura Securities Co. Ltd. .................. Japan 340,000 8,338,925
-------------
43,359,723
-------------
FOOD & HOUSEHOLD PRODUCTS 5.3%
Archer-Daniels-Midland Co. .................. United States 912,196 8,950,923
H.J. Heinz Co. .............................. United States 630,000 27,562,500
Nabisco Group Holdings Corp. ................ United States 443,900 11,513,656
Newell Rubbermaid Inc. ...................... United States 75,000 1,931,250
Northern Foods PLC .......................... United Kingdom 2,208,797 4,004,170
PanAmerican Beverages Inc., A ............... Mexico 150,000 2,240,625
Sara Lee Corp. .............................. United States 400,000 7,725,000
Tate & Lyle PLC ............................. United Kingdom 450,000 2,285,526
Unilever NV ................................. Netherlands 545,900 3,307,696
-------------
69,521,346
-------------
</TABLE>
TG-8
<PAGE>
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
TEMPLETON GROWTH SECURITIES FUND
Statement of Investments, June 30, 2000 (unaudited) (cont.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCKS (CONT.)
FOREST PRODUCTS & PAPER 2.9%
Assidoman AB ........................ Sweden 192,100 $ 2,748,666
Assidoman AB, 144A .................. Sweden 57,630 824,600
Bowater Inc. ........................ United States 225,000 9,928,125
Carter Holt Harvey Ltd. ............. New Zealand 1,155,252 1,006,094
Georgia-Pacific Timber Co. .......... United States 222,200 4,805,075
International Paper Co. ............. United States 200,000 5,962,500
Metsa Serla OY, B ................... Finland 270,000 2,005,770
Stora Enso OYJ, R ................... Finland 132,700 1,214,759
UPM-Kymmene Corp. ................... Finland 400,000 9,968,943
------------
38,464,532
------------
HEALTH & PERSONAL CARE 4.4%
Abbott Laboratories ................. United States 445,370 19,846,801
Aventis SA .......................... France 260,002 19,053,289
(a) CellTech Group PLC .................. United Kingdom 796,142 15,330,588
Pharmacia Corp. ..................... United States 69,000 3,566,438
------------
57,797,116
------------
INDUSTRIAL COMPONENTS 1.2%
Goodyear Tire & Rubber Co. .......... United States 269,000 5,380,000
Michelin SA, B ...................... France 120,000 3,866,033
Sandvik AB .......................... Sweden 200,000 4,218,447
Yamato Kogyo Co. Ltd. ............... Japan 539,000 2,496,196
------------
15,960,676
------------
INSURANCE 5.4%
Ace Ltd. ............................ Bermuda 302,000 8,456,000
Aetna Inc. .......................... United States 110,000 7,060,625
Allstate Corp. ...................... United States 457,700 10,183,825
Partnerre Ltd. ...................... Bermuda 214,500 7,601,344
Scor ................................ France 8,542 373,453
Torchmark Corp. ..................... United States 273,400 6,749,563
Unumprovident Corp. ................. United States 81,100 1,627,069
XL Capital Ltd., A .................. Bermuda 127,100 6,879,288
Zurich Allied AG .................... Switzerland 11,500 5,700,141
Zurich Allied PLC ................... United Kingdom 1,386,000 16,302,920
------------
70,934,228
------------
LEISURE & TOURISM .3%
Galileo International Inc. .......... United States 160,000 3,340,000
------------
MACHINERY & ENGINEERING .9%
CNH Global NV ....................... Netherlands 106,800 987,900
Invensys PLC ........................ United Kingdom 1,769,383 6,629,461
METSO OYJ ........................... Finland 392,800 4,744,143
------------
12,361,504
------------
MERCHANDISING 6.4%
Albertson's Inc. .................... United States 512,800 17,050,600
J.C. Penney Co. Inc. ................ United States 180,000 3,318,750
(a) Kmart Corp. ......................... United States 1,100,000 7,493,750
(a) Kroger Co. .......................... United States 910,000 20,076,875
Marks & Spencer PLC ................. United Kingdom 3,261,000 11,428,335
Safeway PLC ......................... United Kingdom 3,223,718 12,542,131
Sears, Roebuck & Co. ................ United States 255,900 8,348,738
W.H. Smith PLC ...................... United Kingdom 673,850 4,014,109
------------
84,273,288
------------
</TABLE>
TG-9
<PAGE>
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
TEMPLETON GROWTH SECURITIES FUND
Statement of Investments, June 30, 2000 (unaudited) (cont.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCKS (CONT.)
METALS & MINING 3.3%
AK Steel Holding Corp. ................................... United States 695,400 $ 5,563,200
Barrick Gold Corp. ....................................... Canada 668,800 12,120,948
Companhia Siderurgica Nacional Sid Nacional CSN .......... Brazil 129,100,000 4,049,045
Corus Group PLC .......................................... United Kingdom 2,000,000 2,914,150
Industrias Penoles SA .................................... Mexico 1,875,300 3,029,133
Pohang Iron & Steel Co. Ltd. ............................. South Korea 127,102 11,053,066
USX-U. S. Steel Group .................................... United States 250,000 4,640,625
------------
43,370,167
------------
MULTI-INDUSTRY 4.4%
Amoy Properties Ltd. ..................................... Hong Kong 2,935,500 1,977,009
Beijing Datang Power Generation Co. Ltd., H .............. China 6,860,000 1,540,031
Broken Hill Proprietary Co. Ltd. ......................... Australia 231,654 2,746,924
Cheung Kong Holdings Ltd. ................................ Hong Kong 2,114,500 23,395,585
Cheung Kong Infrastructure Holdings Ltd. ................. Hong Kong 1,768,000 2,903,083
DESC SA de CV DESC, B .................................... Mexico 5,237,300 3,351,957
DESC SA de CV DESC, C .................................... Mexico 2,671,800 1,682,853
Hutchison Whampoa Ltd. ................................... Hong Kong 207,570 2,609,503
Pacific Dunlop Ltd. ...................................... Australia 1,979,000 1,770,402
Swire Pacific Ltd., A .................................... Hong Kong 2,463,800 14,412,438
Swire Pacific Ltd., B .................................... Hong Kong 1,304,000 1,062,230
------------
57,452,015
------------
REAL ESTATE 1.4%
China Resources Beijing Land Ltd. ........................ China 4,652,000 620,641
General Growth Properties Inc. ........................... United States 164,500 5,222,875
Hang Lung Development Co. Ltd. ........................... Hong Kong 3,624,000 2,812,618
Highwoods Properties Inc. ................................ United States 107,900 2,589,600
National Health Investors Inc. ........................... United States 311,100 3,422,100
New World Development Co. Ltd. ........................... Hong Kong 13,457 15,019
Rouse Co. ................................................ United States 180,000 4,455,000
------------
19,137,853
------------
RECREATION & OTHER CONSUMER GOODS .4%
Eastman Kodak Co. ........................................ United States 89,600 5,331,200
------------
TELECOMMUNICATIONS 3.3%
Cable & Wireless HKT Ltd. ................................ Hong Kong 209,746 461,450
(a) General Motors Corp., H .................................. United States 18,000 526,500
Nippon Telegraph & Telephone Corp. ....................... Japan 848 11,300,789
SK Telecom Co. Ltd., ADR ................................. South Korea 100,000 3,631,250
Smartone Telecommunications Holdings Ltd. ................ Hong Kong 310,000 685,990
Telecom Corp. of New Zealand Ltd. ........................ New Zealand 2,362,716 8,286,251
Telecomunicacoes de Sao Paulo SA ......................... Brazil 276,690,000 3,021,504
Telefonica de Argentina SA, ADR .......................... Argentina 67,000 2,127,250
Telefonos de Mexico SA (Telmex), ADR ..................... Mexico 229,855 13,130,467
------------
43,171,451
------------
TEXTILES & APPAREL .3%
Adidas-Salomon AG ........................................ Germany 80,000 4,417,009
------------
TRANSPORTATION 1.9%
Airborne Freight Corp. ................................... United States 272,000 5,151,000
British Airways PLC ...................................... United Kingdom 1,745,832 10,036,479
Peninsular & Oriental Steam Navigation Co. ............... United Kingdom 294,200 2,507,450
Singapore Airlines Ltd. .................................. Singapore 703,100 6,953,736
------------
24,648,665
------------
</TABLE>
TG-10
<PAGE>
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
TEMPLETON GROWTH SECURITIES FUND
Statement of Investments, June 30, 2000 (unaudited) (cont.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
UTILITIES ELECTRICAL & GAS 8.0%
Centrais Eletricas Brasileiras SA (Eletrobras), ADR ....................... Brazil 514,400 $ 5,144,000
CLP Holdings Ltd. ......................................................... Hong Kong 2,043,000 9,513,540
E.On AG ................................................................... Germany 258,000 12,488,977
Endesa SA ................................................................. Spain 200,000 3,889,805
Entergy Corp. ............................................................. United States 97,900 2,661,656
Evn AG .................................................................... Austria 83,370 3,116,665
Hong Kong Electric Holdings Ltd. .......................................... Hong Kong 2,944,000 9,479,353
Iberdrola SA, Br. ......................................................... Spain 981,200 12,697,174
Korea Electric Power Corp. ................................................ South Korea 458,200 14,218,264
National Grid Group PLC ................................................... United Kingdom 275,100 2,157,255
National Power PLC ........................................................ United Kingdom 1,802,600 11,474,837
Potomac Electric Power Co. ................................................ United States 100,000 2,500,000
Powergen PLC .............................................................. United Kingdom 600,000 5,054,725
Thames Water Group PLC .................................................... United Kingdom 530,800 6,826,144
Transportadora de Gas del Sur SA, B, ADR .................................. Argentina 386,900 3,482,100
--------------
104,704,495
--------------
TOTAL COMMON STOCKS (COST $1,115,126,998).................................. 1,172,708,668
--------------
PREFERRED STOCKS 1.3%
Centrais Eletricas Brasileiras SA (Electrobras), ADR, pfd. ................ Brazil 158,760 1,686,825
Embotelladora Andina SA, B, ADR, pfd. ..................................... Chile 302,900 2,896,481
News Corp. Ltd., pfd. ..................................................... Australia 185,422 2,244,911
Petroleo Brasileiro SA, pfd. .............................................. Brazil 157,470 4,757,270
Telecomunicacoes de Sao Paulo SA, ADR, pfd. ............................... Brazil 205,300 3,798,050
Volkswagen AG, pfd. ....................................................... Germany 60,000 1,432,077
--------------
TOTAL PREFERRED STOCKS (COST $18,882,057).................................. 16,815,614
--------------
TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENTS (COST $1,134,009,055)....... 1,189,524,282
--------------
</TABLE>
TG-11
<PAGE>
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
TEMPLETON GROWTH SECURITIES FUND
Statement of Investments, June 30, 2000 (unaudited) (cont.)
<TABLE>
<CAPTION>
PRINCIPAL
COUNTRY AMOUNT VALUE
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(b) REPURCHASE AGREEMENTS 9.4%
Deutsche Bank AG, 6.80%, 7/03/00 (Maturity Value $40,022,667)
Collaterized by U.S. Treasury Notes and Bonds .................. United States $40,000,000 $ 40,000,000
Dresdner Bank AG, 6.40%, 7/03/00 (Maturity Value $43,794,345)
Collaterized by U.S. Treasury Notes and Bonds .................. United States 43,771,000 43,771,000
HSBC Securities Inc., 6.80%, 7/03/00 (Maturity Value $40,022,667)
Collaterized by U.S. Treasury Notes and Bonds .................. United States 40,000,000 40,000,000
--------------
TOTAL REPURCHASE AGREEMENTS (COST $123,771,000).................. 123,771,000
--------------
TOTAL INVESTMENTS (COST $1,257,780,055) 99.8%.................... 1,313,295,282
OTHER ASSETS, LESS LIABILITIES .2% .............................. 2,688,014
--------------
TOTAL NET ASSETS 100.0% ......................................... $1,315,983,296
==============
</TABLE>
(a)Non-income producing
(b)At June 30, 2000, all repurchase agreements held by the Fund had been entered
into on that date.
See notes to financial statements.
TG-12
<PAGE>
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
TEMPLETON GROWTH SECURITIES FUND
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
Assets:
Investments in securities:
Cost ................................................ $1,257,780,055
==============
Value ............................................... 1,313,295,282
Receivables:
Investment securities sold ......................... 4,786,463
Capital shares sold ................................ 3,533,236
Dividends and interest ............................. 5,960,655
--------------
Total assets ...................................... 1,327,575,636
--------------
Liabilities:
Payables:
Investment securities purchased .................... 4,655,301
Capital shares redeemed ............................ 5,668,779
Affiliates ......................................... 897,842
Funds advanced by custodian .......................... 130,936
Other liabilities .................................... 239,482
--------------
Total liabilities ................................. 11,592,340
--------------
Net assets, at value ........................... $1,315,983,296
==============
Net assets consist of:
Undistributed net investment income .................. $ 12,535,658
Net unrealized appreciation .......................... 55,515,227
Accumulated net realized gain ........................ 149,380,456
Capital shares ....................................... 1,098,551,955
--------------
Net assets, at value ........................... $1,315,983,296
==============
CLASS 1:
Net assets, at value ................................. $1,243,827,684
==============
Shares outstanding ................................... 93,801,883
==============
Net asset value and offering price per share ......... $ 13.26
==============
CLASS 2:
Net assets, at value ................................. $ 72,155,612
==============
Shares outstanding ................................... 5,459,676
==============
Net asset value and offering price per share ......... $ 13.22
==============
See notes to financial statements.
TG-13
<PAGE>
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
TEMPLETON GROWTH SECURITIES FUND
Financial Statements (continued)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
Investment income:
(net of foreign taxes of $1,390,890)
Dividends ................................................. $ 14,731,773
Interest .................................................. 1,669,919
--------------
Total investment income ................................ 16,401,692
--------------
Expenses:
Management fees (Note 3) .................................. 3,568,968
Distribution fees - Class 2 (Note 3) ...................... 34,064
Custodian fees ............................................ 176,100
Reports to shareholders ................................... 34,000
Professional fees (Note 3) ................................ 38,200
Trustees' fees and expenses ............................... 2,900
Other ..................................................... 8,351
--------------
Total expenses ......................................... 3,862,583
--------------
Net investment income ................................. 12,539,109
--------------
Realized and unrealized gains (losses):
Net realized gain from:
Investments .............................................. 149,442,355
Foreign currency transactions ............................ 105,598
--------------
Net realized gain ...................................... 149,547,953
Net unrealized depreciation on investments ................ (160,733,474)
--------------
Net realized and unrealized loss ........................... (11,185,521)
--------------
Net increase in net assets resulting from operations ....... $ 1,353,588
==============
See notes to financial statements.
TG-14
<PAGE>
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
TEMPLETON GROWTH SECURITIES FUND
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED) AND THE YEAR ENDED DECEMBER
31, 1999
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
-----------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ............................................... $ 12,539,109 $ 13,240,797
Net realized gain from investments and foreign currency transactions 149,547,953 72,994,064
Net unrealized appreciation (depreciation) on investments ........... (160,733,474) 47,953,928
-----------------------------------
Net increase in net assets resulting from operations ............. 1,353,588 134,188,789
Distributions to shareholders from:
Net investment income:
Class 1 ........................................................... (11,099,754) (15,661,321)
Class 2 ........................................................... (152,094) (19,742)
Net realized gains:
Class 1 ........................................................... (73,119,422) (75,768,827)
Class 2 ........................................................... (1,029,478) (95,513)
-----------------------------------
Total distributions to shareholders .................................. (85,400,748) (91,545,403)
Capital share transactions (Note 2):
Class 1 ........................................................... 620,018,983 (80,925,896)
Class 2 ........................................................... 67,218,023 3,995,606
-----------------------------------
Total capital share transactions ..................................... 687,237,006 (76,930,290)
Net increase (decrease) in net assets ............................ 603,189,846 (34,286,904)
Net assets:
Beginning of period .................................................. 712,793,450 747,080,354
-----------------------------------
End of period ........................................................ $1,315,983,296 $ 712,793,450
===================================
Undistributed net investment income included in net assets:
End of period ........................................................ $ 12,535,658 $ 11,248,397
===================================
</TABLE>
See notes to financial statements.
TG-15
<PAGE>
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
TEMPLETON GROWTH SECURITIES FUND
Notes to Financial Statements (unaudited)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Templeton Growth Securities Fund (the Fund) is a separate, diversified
series of the Franklin Templeton Variable Insurance Products Trust (the Trust),
which is an open-end investment company registered under the Investment Company
Act of 1940. Shares of the Fund are sold only to insurance company separate
accounts to fund the benefits of variable life insurance policies or variable
annuity contracts. The Fund seeks long-term capital growth. The portfolio
invests primarily in equity securities of issuers in foreign countries with
emerging markets.
Effective May 1, 2000, the name of the Templeton Global Growth Fund changed to
Templeton Growth Securities Fund, as a result of Fund mergers, as discussed in
Note 6. The Fund's investment objectives and other policies did not change as a
result of the name change.
The following summarizes the Fund's significant accounting policies.
A. SECURITY VALUATION
Securities listed or traded on a recognized national exchange or NASDAQ are
valued at the latest reported sales price. Over-the-counter securities and
listed securities for which no sale is reported are valued within the range of
the latest quoted bid and asked prices. Securities for which market quotations
are not readily available are valued at fair value as determined by management
in accordance with procedures established by the Board of Trustees.
B. FOREIGN CURRENCY TRANSLATION
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the exchange rate of such
currencies against U.S. dollars on the date of valuation. Purchases and sales
of securities and income items denominated in foreign currencies are translated
into U.S. dollars at the exchange rate in effect on the transaction date. When
the Fund purchases or sells foreign securities, the Fund will customarily enter
into a foreign exchange contract to minimize foreign exchange risk from the
trade date to the settlement date of such transactions.
The Fund does not separately report the effect of changes in foreign exchange
rates from changes in market prices on securities held. Such changes are
included in net realized and unrealized gain or loss from investments.
Realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on securities transactions and the difference between the recorded
amounts of dividends, interest, and foreign withholding taxes and the U.S.
dollar equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in foreign exchange rates
on foreign denominated assets and liabilities other than investments in
securities held at the end of the reporting period.
C. INCOME TAXES
No provision has been made for income taxes because the Fund's policy is to
qualify as a regulated investment company under the Internal Revenue Code and
to distribute substantially all of its taxable income.
D. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Security transactions are accounted for on trade date. Realized gains and
losses on security transactions are determined on a specific identification
basis. Interest income and estimated expenses are accrued daily. Dividend
income and distributions to shareholders are recorded on the ex-dividend date.
TG-16
<PAGE>
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
TEMPLETON GROWTH SECURITIES FUND
Notes to Financial Statements (unaudited) (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)
D. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS (CONT.)
Common expenses incurred by the Trust are allocated among the funds based on
the ratio of net assets of each fund to the combined net assets. Other expenses
are charged to each fund on a specific identification basis.
Realized and unrealized gains and losses and net investment income, other than
class specific expenses, are allocated daily to each class of shares based upon
the relative proportion of net assets of each class.
E. ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.
2. SHARES OF BENEFICIAL INTEREST
The Fund offers two classes of shares: Class 1 and Class 2. Each class of
shares differs by its distribution fees, voting rights on matters affecting a
single class, and its exchange privilege.
At June 30, 2000, there were an unlimited number of shares authorized ($.01 par
value). Transactions in the Fund's shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999(A)
--------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
CLASS 1 SHARES: --------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ........................................ 6,155,205 $ 82,942,043 3,559,626 $ 53,423,886
Shares issued on merger (Note 6) ................... 48,592,348 628,298,597 -- --
Shares issued in reinvestment of distributions ..... 6,513,470 84,219,176 6,314,237 91,430,148
Shares redeemed .................................... (12,780,815) (175,440,833) (15,136,586) (225,779,930)
--------------------------------------------------------------------
Net increase (decrease) ............................ 48,480,208 $ 620,018,983 (5,262,723) $ (80,925,896)
====================================================================
CLASS 2 SHARES:
Shares sold ........................................ 5,301,315 $ 73,217,208 3,228,083 $ 46,873,543
Shares issued on merger (Note 6) ................... 4,308,381 55,535,000 -- --
Shares issued in reinvestment of distributions ..... 91,595 1,181,572 7,976 115,255
Shares redeemed .................................... (4,528,932) (62,715,757) (2,948,742) (42,993,192)
--------------------------------------------------------------------
Net increase ....................................... 5,172,359 $ 67,218,023 287,317 $ 3,995,606
====================================================================
</TABLE>
(a)For the period January 6, 1999 (effective date) to December 31, 1999, for
Class 2.
TG-17
<PAGE>
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
TEMPLETON GROWTH SECURITIES FUND
Notes to Financial Statements (unaudited) (continued)
3. TRANSACTIONS WITH AFFILIATES
Certain officers and trustees of the Trust are also officers and/or directors
of the following entities:
<TABLE>
<CAPTION>
ENTITY AFFILIATION
--------------------------------------------------------------------------------------
<S> <C>
Franklin Templeton Services, Inc. (FT Services) Administrative manager
Templeton Global Advisors Ltd. (TGAL) Investment manager
Franklin/Templeton Distributors, Inc. (Distributors) Principal underwriter
Franklin/Templeton Investor Services, Inc. (Investor Services) Transfer agent
</TABLE>
The Fund pays an investment management fee to TGAL based on the average net
assets of the Fund as follows:
<TABLE>
<CAPTION>
ANNUALIZED FEE RATE DAILY NET ASSETS
------------------------------------------------------------------
<S> <C>
1.00% First $100 million
.90% Over $100 million, up to and including $250 million
.80% Over $250 million, up to and including $500 million
.75% Over $500 million
</TABLE>
Under an agreement with TGAL, FT Services provides administrative services to
the Fund. The fee is paid by TGAL based on the average daily net assets, and is
not an additional expense of the Fund.
The Fund reimburses Distributors up to .25% per year of its average daily net
assets of Class 2, for costs incurred in marketing the Fund's shares.
Investor Services, under terms of an agreement, performs shareholder servicing
for the Fund and is not paid by the Fund for the services.
Included in professional fees are legal fees of $616 that were paid to a law
firm in which a partner of that firm was an officer of the Fund.
4. INCOME TAXES
Net investment income and net realized capital gains differ for financial
statement and tax purposes primarily due to differing treatments of foreign
currency transactions and merger related expenses.
At June 30, 2000, the net unrealized appreciation based on the cost of
investments for income tax purposes of $1,259,349,622 was as follows:
Unrealized appreciation ............. $ 181,924,154
Unrealized depreciation ............. (127,978,494)
--------------
Net unrealized appreciation ......... $ 53,945,660
==============
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the
period ended June 30, 2000 aggregated $912,419,966 and $512,178,868,
respectively.
TG-18
<PAGE>
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
TEMPLETON GROWTH SECURITIES FUND
Notes to Financial Statements (unaudited) (continued)
6. MERGERS
On May 1, 2000, the Franklin Templeton Variable Insurance Products Trust
(FTVIPT) - Templeton Growth Securities Fund acquired the net assets of the
Templeton Variable Products Series Fund (TVP) - Templeton Stock Fund pursuant
to a plan of reorganization approved by TVP - Templeton Stock Fund's
shareholders. The merger was accomplished by a tax-free exchange of 48,592,348
Class 1 shares and 4,308,381 Class 2 shares of the FTVIPT - Templeton Growth
Securities Fund (valued at $12.93 per share and $12.89 per share, respectively)
for the net assets of the TVP - Templeton Stock Fund which aggregated
$683,833,597, including $122,735,093 of unrealized appreciation. The merger was
accounted for as a pooling-of-interests without restatement for financial
reporting purposes. The combined net assets of the FTVIPT - Templeton Growth
Securities Fund immediately after the merger were $1,325,793,044.
TG-19
<PAGE>
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
TEMPLETON GROWTH SECURITIES FUND
Tax Designation
At December 31, 1999, more than 50% of the Fund's total assets were invested in
securities of foreign issuers. In most instances, foreign taxes were withheld
from dividends paid to the Fund on these investments. The Fund intends to make
an election under Section 853 of the Internal Revenue Code. This election will
allow shareholders to treat their proportionate share of foreign taxes paid by
the Fund as having been paid directly by them.
The following table provides a breakdown by country of foreign source income
and foreign taxes paid, as designated by the Fund, to Class 1 and Class 2
shareholders of record on April 26, 2000.
<TABLE>
<CAPTION>
CLASS 1 CLASS 2
---------------------------------------------------------
FOREIGN TAX FOREIGN FOREIGN TAX FOREIGN
PAID SOURCE INCOME PAID SOURCE INCOME
COUNTRY PER SHARE PER SHARE PER SHARE PER SHARE
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Argentina .................... 0.0000 0.0177 0.0000 0.0175
Australia .................... 0.0011 0.0226 0.0011 0.0224
Austria ...................... 0.0011 0.0068 0.0011 0.0067
Belgium ...................... 0.0011 0.0060 0.0011 0.0059
Bermuda ...................... 0.0000 0.0035 0.0000 0.0034
Brazil ....................... 0.0026 0.0167 0.0026 0.0166
Canada ....................... 0.0004 0.0022 0.0004 0.0021
China ........................ 0.0000 0.0042 0.0000 0.0041
Ecuador ...................... 0.0000 0.0003 0.0000 0.0003
Finland ...................... 0.0030 0.0165 0.0030 0.0163
France ....................... 0.0017 0.0115 0.0017 0.0114
Germany ...................... 0.0003 0.0024 0.0003 0.0024
Hong Kong .................... 0.0000 0.0410 0.0000 0.0406
Hungary ...................... 0.0005 0.0019 0.0005 0.0019
India ........................ 0.0000 0.0059 0.0000 0.0058
Italy ........................ 0.0004 0.0024 0.0004 0.0023
Japan ........................ 0.0017 0.0094 0.0017 0.0093
Mexico ....................... 0.0003 0.0044 0.0003 0.0043
Netherlands .................. 0.0020 0.0108 0.0020 0.0107
New Zealand .................. 0.0002 0.0008 0.0002 0.0008
Norway ....................... 0.0004 0.0022 0.0004 0.0022
Philippines .................. 0.0002 0.0008 0.0002 0.0008
Singapore .................... 0.0011 0.0040 0.0011 0.0040
South Africa ................. 0.0000 0.0072 0.0000 0.0071
South Korea .................. 0.0013 0.0065 0.0013 0.0064
Spain ........................ 0.0014 0.0074 0.0014 0.0073
Sweden ....................... 0.0016 0.0100 0.0016 0.0099
Switzerland .................. 0.0006 0.0033 0.0006 0.0033
Thailand ..................... 0.0003 0.0026 0.0003 0.0025
United Kingdom ............... 0.0103 0.0780 0.0103 0.0772
---------------------------------------------------
TOTAL ........................ $0.0336 $0.3090 $0.0336 $0.3055
====================================================
</TABLE>
Shareholders are advised to check with their tax advisors for information on
the treatment of these amounts on their individual income tax returns.
TG-20
<PAGE>
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
TEMPLETON IMMEDIATE VARIABALE ANNUITY SEPARATE ACCOUNT
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
Assets:
Investments in Templeton Variable Products Series
Stock Fund
Cost .............................................. $3,608,643
===========
Value ............................................. $3,196,828
Liabilities:
Payable to Templeton Funds Annuity Company ......... $5,438
-----------
Net assets, at value ......................... $3,191,390
===========
Net assets attributable to annuitants-
Annuity reserves (Note 1) .................... $3,191,390
===========
See notes to financial statements.
SA-1
<PAGE>
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
TEMPLETON IMMEDIATE VARIABLE ANNUITY SEPARATE ACCOUNT
Financial Statements (continued)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
Investment income:
Income:
Dividend distributions .................................... $35,947
Capital gains distributions ............................... $677,697
------------
Total income ............................................. $713,644
Expenses:
Periodic charge (Note 2) .................................. $19,198
------------
Net investment income ................................... $694,446
------------
Realized and unrealized losses on investments:
Net realized loss on investments .......................... ($19,839)
Net unrealized depreciation on investments ................ ($583,381)
------------
Net realized and unrealized loss on investments ......... ($603,219)
------------
Net income in net assets resulting from operations ......... $91,227
============
See notes to financial statements.
SA-2
<PAGE>
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
TEMPLETON IMMEDIATE VARIABLE ANNUITY SEPARATE ACCOUNT
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
---------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ................................................. $694,446 $237,673
Net realized gain (loss) on investments ............................... ($19,839) ($36,006)
Net unrealized appreciation (depreciation) on investments ............. ($583,381) $518,353
---------------------------------
Net increase in net assets resulting from operations ................ $91,227 $720,020
---------------------------------
Annuity unit transactions:
Annuity payments ...................................................... ($142,862) ($262,477)
Increase in annuity reserves for mortality experience (Note 1) ........ $6,649 $19,950
---------------------------------
Net decrease in net assets derived from annuity unit transactions ..... ($136,214) ($242,527)
---------------------------------
Net increase (decrease) in net assets ............................... ($44,987) $477,493
Net assets:
Beginning of period ..................................................... $3,236,377 $2,758,884
---------------------------------
End of period ........................................................... $3,191,390 $3,236,377
=================================
</TABLE>
See notes to financial statements.
SA-3
<PAGE>
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
TEMPLETON IMMEDIATE VARIABLE ANNUITY SEPARATE ACCOUNT
Notes to Financial Statements (unaudited)
-------------------------------------------------------------------------------
1. ORGANIZATION AND SUMMARY OF ACCOUNTING POLICIES
The Templeton Immediate Variable Annuity Separate Account (the Separate Account)
was established on November 6, 1990 by resolution of the Board of Directors of
Templeton Funds Annuity Company (the Company) and is registered under the
Investment Company Act of 1940 as a unit investment trust. The Separate Account
is sold exclusively for use with the Templeton Immediate Variable Annuity which
is designed for distributing the benefits of tax deferred retirement plans and
to provide annuity income from non-tax qualified accumulation. On May 1, 2000,
the Separate Account's shares in the Templeton Variable Products Series Fund -
Stock Fund Class 1 valued at $3,186,312 were exchanged for shares of equal value
in the Franklin Templeton Variable Insurance Products Trust (FTVIPT) - Templeton
Growth Securities Fund Class 1. As of June 30, 2000 all assets of the Separate
Account are invested in the FTVIPT - Templeton Growth Securities Fund Class
1.The following is a summary of significant accounting policies followed by the
Separate Account in the preparation of its financial statements.
VALUATION OF SECURITIES
Investments in shares of the Fund are carried in the Statement of Assets and
Liabilities at net asset value (market value).
DIVIDENDS
Dividend income and capital gain distributions are recorded as income on the
ex-dividend date and reinvestment in additional shares of the Fund.
INCOME TAXES
Operations of the Separate Account from a part of the Company, which is taxed as
a life insurance company under the Internal Revenue Code (the Code). Under
current law, no federal income taxes are payable with respect to the Separate
Account. Under the principles set forth in Internal Revenue Service Ruling
81-225 and Section 817(h) of the Code and regulations thereunder, the Company
understands that it will be treated as owner of the assets invested in the
Separate Account for federal income tax purposes, with the result that earnings
and gains, if any, derived from those assets will not be included in an
Annuitant's gross income until amounts are received pursuant to an Annuity.
ANNUITY RESERVES
Annuity reserves are computed according to the 1983a Blended Unisex Mortality
Table, with a 50% male/female content. The assumed interest rate is 5%. Charges
to annuity reserves for mortality experience are reimbursed to the Company if
the reserves required are less than originally estimated. If additional reserves
are required, the Company reimburses the Separate Account.
SA-4
<PAGE>
TEMPLETON IMMEDIATE VARIABLE ANNUITY SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
2. PERIODIC CHARGE
The Company assesses a Periodic Charge against the Separate Account, equal on an
annual basis to 1.2% of Separate Account assets. The Periodic Charge, in the
following amounts, compensates the Company for expenses of administering the
Separate Account and for assuming the risks that mortality experience will be
lower than the rate assumed and that expenses will be greater than what is
assumed: 0.6% of average annual net assets to cover expense risk and 0.6% 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.
3. INVESTMENT
During the period ended June 30, 2000, purchases and sales of FTVIPT - Templeton
Growth Securities Fund Class 1 shares aggregated $718,102 and $149,973
respectively. Realized gains and losses are reported on an identified cost
basis.
4. CONCENTRATIONS OF CREDIT RISKS
Financial instruments which potentially subject the Separate Account to
concentrations of credit risk consist of investments in the FTVIPT - Templeton
Growth Securities Fund Class 1. The Fund's investment securities are managed by
professional investment managers within established guidelines. As of June 30,
2000, in management's opinion, the Separate Account had no significant
concentration of credit risk.
SA-5
<PAGE>
FRANKLIN(R) TEMPLETON(R)
INVESTMENTS
100 Fountain Parkway
St. Petersburg, Florida 33716-1205
SEMIANNUAL REPORT
INSURANCE ISSUER
Templeton Funds Annuity Company
100 Fountain Parkway
St. Petersburg, Florida 33716-1205
1-800-774-5001
INVESTMENT MANAGER
Templeton Global Advisors Limited
Lyford Cay
Nassau, Bahamas
PRINCIPAL UNDERWRITER
Franklin Templeton Distributors, Inc.
777 Mariners Island Blvd.
San Mateo, CA 94404-1585
This report was prepared for contract owners who have previously received a
prospectus for their annuity contract and for Templeton Growth Securities Fund,
a series of Franklin Templeton Variable Insurance Products Trust.
To ensure the highest quality of service, telephone calls to or from our service
department may be monitored, recorded and accessed. These calls can be
determined by the presence of a regular beeping tone.
TIVA S00 08/00 [RECYCLED LOGO] Printed on recycled paper
