<PAGE>
----------------------------------------------------------
[LOGO OF TEMPLETON INVESTMENT PLUS APPEARS HERE]
TEMPLETON
INVESTMENT
PLUS
SEMI-ANNUAL REPORT
JUNE 30, 1995
[LOGO OF FRANKLIN TEMPLETON APPEARS HERE]
<PAGE>
TABLE OF
CONTENTS
Templeton Investment Plus (TIP) is an individual deferred
variable annuity contract consisting of five sub-accounts.
On the following pages, you will find a report on each of the
funds you have chosen for your TIP investments:
LETTER FROM THE PRESIDENT.................................... 2
TEMPLETON STOCK FUND......................................... 4
TEMPLETON INTERNATIONAL FUND................................. 6
TEMPLETON ASSET ALLOCATION FUND.............................. 8
TEMPLETON BOND FUND..........................................10
TEMPLETON MONEY MARKET FUND..................................12
---------------------------------------------------------------
Mutual Funds, annuities, and other investment products:
. are not FDIC insured;
. are not deposits or obligations of, or guaranteed by, any
financial institution;
. are subject to investment risks, including possible loss of
the principal amount invested.
---------------------------------------------------------------
1
<PAGE>
LETTER FROM August 15, 1995
THE PRESIDENT
Dear Contract Owner:
We are pleased to bring you the semi-annual report of Templeton
Investment Plus for the period ended June 30, 1995.
Although problems related to Mexico's December 1994 currency
devaluation cast a bearish pall over the world's financial
markets in early 1995, the second quarter of the year had a
much more bullish feel to it. A combination of slower economic
growth, subdued inflation, falling interest rates, and better-
than-anticipated corporate earnings improved the flow of assets
into mutual funds and benefited many stock and bond markets.
Only Japanese and emerging markets turned in negative
performances, while many others were able to post double-digit
advances. European stocks moved higher as returns for U.S.
investors improved due to the rather sharp decline in the value
of the dollar versus many European currencies. Asian stock
markets other than Japan's also improved, with Hong Kong
leading the rebound from last year's dismal returns. Overall,
however, U.S. stocks were the investment of choice during this
time, as the Dow Jones Industrial Average/(R)/ achieved all-
time high levels.
These conditions presented us with challenges as we searched
for undervalued stocks -- particularly in the U.S. It has also
become more difficult to identify bargain stocks in Europe,
especially in the hard currency countries (Germany, France,
Switzerland, and the Netherlands). We did add to our holdings
of some European banks which, after improving their balance
sheets, should be able to take advantage of a growing demand
for loans. As a whole, however, equity valuations in Europe
have not become so attractive that our "bargain list" is
cluttered with European names.
Asia presented a different story. Because of Japan's and
China's economic problems, investor interest in these countries
was somewhat subdued, and since many Asian countries are
indirectly tied to the value of the depressed U.S. dollar, we
were able to find many bargain-priced stocks in this region. We
took advantage of market volatility by purchasing shares of
Asian banks and Hong Kong-based conglomerates, which should
benefit from development and growth in China and the rest of
Asia.
With regard to fixed-income securities, we emphasized two
primary investment strategies. First, we focused on the hard
currency markets of Germany, Japan, and the U.S. because of
their low debt levels and relative resistance to rising
interest rates throughout 1994. The currencies of Germany and
Japan were among the strongest against the U.S. dollar during
the period, and consequently offered bond investors the highest
returns.
2
<PAGE>
We also concentrated on countries such as the United Kingdom,
Canada, Australia, and New Zealand, where monetary policy was
expected to be the tightest, and interest rates the highest.
This second strategy proved beneficial because, as economic
growth slowed unexpectedly, monetary policy in these countries
proved to be tighter than necessary, and interest rates fell
sharply. Although rates have already declined significantly,
further declines are possible in some markets.
Looking forward, we are optimistic about the long-term
prospects for global investing. We believe the moderate
economic growth and stable inflation that characterized the
first half of 1995 may persist into 1996. Economic activity in
the U.S. has clearly begun to slow, but with the U.S. financial
system in good health, corporate balance sheets improving,
interest rates low, and the dollar weak, a long period of
decline does not appear likely. Furthermore, the acceptance of
capitalism by almost all nations, increasingly free trade, and
technological advancements all point toward economic growth and
improved corporate earnings.
We shall continue to implement the investment methodologies
that have served our clients well for so long, and although we
are pleased with our results thus far in 1995, we intend to
intensify our bargain-hunting efforts in our search for even
better potential long-term investment opportunities for our
contract holders.
In closing, we would like to mention that although Sir John
Templeton has not been involved in investment management of the
Templeton Funds since October 1992, we were saddened by his
recent decision to step down as Chairman and Director of the
U.S.-registered Templeton funds. The Fund's Board of Trustees
have elected John Wm. Galbraith, former vice chairman of
Templeton, Galbraith & Hansberger, Ltd. to succeed him. The
investment manager will continue to use the investment
philosophies and principles established by Sir John.
We appreciate your participation in Templeton Investment Plus
and look forward to serving your investment needs in the years
to come.
Sincerely,
/s/ Charles E. Johnson
Charles E. Johnson
President
Templeton Variable Products Series Fund
3
<PAGE>
TEMPLETON The Templeton Stock Fund seeks capital growth through a policy
STOCK FUND of investing primarily in common stocks issued by companies,
large and small, in various nations throughout the world.
At the end of the reporting period, the U.S. represented the
Fund's largest single-country exposure at 36.3% of total net
assets, up from 31.5% on December 31, 1994. The U.S. stock
market performed extremely well in the first half of 1995 due
to a combination of falling interest rates, better-than-
expected corporate earnings, and an increased flow of assets
into mutual funds. Although U.S. stocks appeared expensive
compared with those in other markets, we were able to find
pockets of value when industry groups temporarily fell out of
favor with investors, and we purchased shares of some retail
and technology stocks at prices we considered attractive
relative to their earnings potential. Examples include DSC
Communications Corp., Federated Department Stores Inc., and
Toys R Us Inc.
Our second-largest geographic exposure was Europe, which
accounted for 32.6% of total net assets on June 30, 1995. As a
whole, the
---------------------------------------------------------------
TEMPLETON STOCK FUND
Geographic Distribution on 6/30/95
Based on Total Net Assets
[PIE CHART APPEARS HERE] Australia/
New Zealand 4.2%
Latin America 4.4%
Asia 9.2%
North America 37.3%
Europe 32.6%
Short-Term Obligations &
Other Net Assets 12.3%
<TABLE>
<CAPTION>
---------------------------------------------------------------
TEMPLETON STOCK FUND
Top 10 Holdings on 6/30/95
Based on Total Net Assets
% of Total
Company, Industry, Country Net Assets
---------------------------------------------------------------
<S> <C>
News Corp. Ltd.;
Broadcasting & Publishing, Australia 2.3%
---------------------------------------------------------------
SmithKline Beecham PLC;
Health & Personal Care, U.K. 2.0%
---------------------------------------------------------------
Intel Corp.;
Electronic Components &
Instruments, U.S. 1.8%
---------------------------------------------------------------
Federal National Mortgage Assn.;
Financial Services, U.S. 1.8%
---------------------------------------------------------------
Astra AB;
Health & Personal Care, Sweden 1.8%
---------------------------------------------------------------
Akzo Nobel NV;
Chemicals, Netherlands 1.7%
---------------------------------------------------------------
BBC Brown Boveri Ltd., br.;
Electrical & Electronics, Switzerland 1.7%
---------------------------------------------------------------
Aegon NV;
Insurance, Netherlands 1.5%
---------------------------------------------------------------
BankAmerica Corp.;
Banking, U.S. 1.5%
---------------------------------------------------------------
Telefonos de Mexico SA;
Telecommunications, Mexico 1.5%
---------------------------------------------------------------
</TABLE>
For a complete list of portfolio holdings, please see page 14
of this report.
weakness of the U.S. dollar versus many European currencies
enhanced the performance of our European stocks during the
reporting period. Although it was difficult to find many
bargain stocks in Europe, we did focus on some banks that
should benefit from improved balance sheets and a growing
demand for loans. An example is Sparbanken Sverige AB, which is
the central banking institution for the Swedish savings bank
system. We also found value in those utilities companies whose
cash flows have increased and whose costs have come down
through privatization and restructuring. We increased our
pharmaceutical exposure by purchasing additional shares of
Pharmacia AB, a Swedish holding company that has operating
divisions in pharmaceuticals, biotechnology, consumer products,
beverages and foods.
4
<PAGE>
Political instability and economic uncertainty created much
volatility in Asian stock markets during this period, and we
took advantage of price declines by purchasing shares of some
Hong Kong-based conglomerates that we believe should benefit
from development and growth in Asia. Examples include Cheung
Kong Holdings Ltd., Hutchison Whampoa Ltd., and Jardine
Strategic Holdings Ltd. As investors regained some confidence
in emerging markets, many of these stocks rebounded,
contributing to the Fund's strong performance during the
reporting period.
There are, of course, special risks involved with global
investing related to market, currency, economic, political, and
other factors; developing markets involve similar but
heightened risks. These risks are discussed in the prospectus.
PERFORMANCE The Templeton Stock Fund provided a total return of 14.12% for
SUMMARY the six-month period ended June 30, 1995. Total return
represents the change in the Fund's net asset value and
includes reinvestment of dividends. It does not include
deductions at the Fund or contract level for cost of insurance
charges, premium load, administrative charges, maintenance
fees, premium tax charges, mortality and expense risk charges
or other charges that may be incurred under the variable
annuity contract for which the Fund serves as an underlying
investment vehicle.
<TABLE>
<CAPTION>
---------------------------------------------------------------
TEMPLETON STOCK FUND
Periods ended 6/30/95
---------------------------------------------------------------
Since
Inception
1-Year 5-Year (8/24/88)
<S> <C> <C> <C>
Average Annual
Total Return/1/ 15.07% 12.20% 11.75%
Cumulative
Total Return/2/ 15.07% 77.81% 113.95%
---------------------------------------------------------------
</TABLE>
1. Average annual total return represents the average annual
increase in value of an investment and assumes reinvestment of
dividends.
2. Cumulative total return represents the change in the Fund's
net asset value and assumes reinvestment of dividends.
Note: Total return figures do not include deductions at the
Fund or contract level for cost of insurance charges, premium
load, administrative charges, maintenance fees, premium tax
charges, mortality and expense risk charges or other charges
that may be incurred under the variable annuity contract for
which the Fund serves as an underlying investment vehicle.
Investment return and principal value will fluctuate with
market conditions, currencies and the economic and political
climates of the countries where investments are made, and
shares, when redeemed, may be worth more or less than their
initial cost. Past performance is not indicative of future
results.
5
<PAGE>
TEMPLETON The Templeton International Fund seeks long-term capital growth
INTERNATIONAL through a flexible policy of investing in stocks and debt
FUND obligations of companies and governments outside the United
States.
At the end of the reporting period, equities represented 80.8%
of the Fund's total net assets, with the remaining 19.2% in
cash and other liquid assets. Our largest geographic
concentration of securities continued to be in Europe, which
represented 51.6% of total net assets on June 30, up from 44.0%
on December 31, 1994. The weakness of the U.S. dollar versus
many European currencies enhanced the performance of our
European stocks during the reporting period. Although it was
difficult to find many bargain stocks in Europe, we did focus
on some banks that should benefit from improved balance sheets
and a growing demand for loans. An example is Sparbanken
Sverige AB, which is the central banking institution for the
Swedish savings bank system. We also found value in those
utilities companies whose cash flows have increased and whose
costs have come down through privatization and restructuring.
We increased our pharmaceutical expo-
---------------------------------------------------------------
TEMPLETON INTERNATIONAL FUND
Geographic Distribution on 6/30/95
Based on Total Net Assets
[PIE CHART APPEARS HERE] Europe 51.6%
Asia 13.9%
Latin America 7.0%
Australia/
New Zealand 4.7%
Canada 3.6%
Short-Term Obligations &
Other Net Assets 19.2%
<TABLE>
<CAPTION>
---------------------------------------------------------------
TEMPLETON
INTERNATIONAL FUND
Top 10 Holdings on 6/30/95
Based on Total Net Assets
% of Total
Company, Industry, Country Net Assets
---------------------------------------------------------------
<S> <C>
News Corp. Ltd.;
Broadcasting & Publishing, Australia 2.3%
---------------------------------------------------------------
Philips Electronics NV;
Electrical & Electronics, Netherlands 2.3%
---------------------------------------------------------------
Akzo Nobel NV;
Chemicals, Netherlands 1.9%
---------------------------------------------------------------
Pharmacia AB;
Health & Personal Care, Sweden 1.9%
---------------------------------------------------------------
HSBC Holdings PLC;
Banking, Hong Kong 1.8%
---------------------------------------------------------------
Jardine Matheson Holdings Ltd.;
Multi-Industry, Hong Kong 1.7%
---------------------------------------------------------------
BBC Brown Boveri Ltd., br.;
Electrical & Electronics, Switzerland 1.7%
---------------------------------------------------------------
Bangkok Bank Public Co. Ltd.;
Banking, Thailand 1.6%
---------------------------------------------------------------
STET (Sta Finanziaria
Telefonica Torino) SPA;
Telecommunications, Italy 1.6%
---------------------------------------------------------------
SmithKline Beecham PLC;
Health & Personal Care, U.K. 1.6%
---------------------------------------------------------------
</TABLE>
For a complete list of portfolio holdings, please see page 17
of this report.
sure by purchasing additional shares of Pharmacia AB, a Swedish
holding company that has operating divisions in
pharmaceuticals, biotechnology, consumer products, beverages
and foods.
Political instability and economic uncertainty created
volatility in Asian stock markets during this period, and we
took advantage of price declines by purchasing shares of some
Asian banks and Hong Kong-based conglomerates that should
benefit from development and growth in Asia. Examples include
Daegu Bank Co. Ltd., Shinhan Bank Co. Ltd., Cheung Kong
Holdings Ltd., Hutchison Whampoa Ltd., and Jardine Matheson
Holdings Ltd. As investors regained some confidence in emerging
markets, many Asian stocks rebounded in the second half of the
reporting period. The Fund's performance relative to other
international funds was also aided by its small
6
<PAGE>
amount of exposure to the struggling Japanese equity market.*
Latin American stocks experienced volatility throughout the
reporting period, largely due to fears of export declines in
Mexico and potential currency weakness in Argentina. This gave
us the opportunity to purchase several telecommunications
stocks at potentially bargain prices. For example, we added to
our positions in Telefonica de Argentina SA, Compania de
Telecomunicaciones de Chile SA, and Telefonos de Mexico SA
(Telmex). Although we are optimistic about the long-term
outlook for this region, we continue to be very selective by
conducting in-depth research before making any new stock
purchases.
There are, of course, special risks involved with global
investing related to market, currency, economic, political, and
other factors; developing markets involve similar but
heightened risks. These risks are discussed in the prospectus.
*Source: Lipper Analytical Services, Inc.
PERFORMANCE The Templeton International Fund provided a total return of
SUMMARY 8.05% for the six-month period ended June 30, 1995. Total
return represents the change in the Fund's net asset value and
includes reinvestment of dividends and capital gains. It does
not include deductions at the Fund or contract level for cost
of insurance charges, premium load, administrative charges,
maintenance fees, premium tax charges, mortality and expense
risk charges or other charges that may be incurred under the
variable annuity contract for which the Fund serves as an
underlying investment vehicle.
<TABLE>
<CAPTION>
---------------------------------------------------------------
TEMPLETON INTERNATIONAL FUND
Periods ended 6/30/95
---------------------------------------------------------------
Since
Inception
1-Year (5/1/92)
<S> <C> <C>
Average Annual
Total Return/1/ 11.42% 12.74%
Cumulative
Total Return/2/ 11.42% 46.11%
---------------------------------------------------------------
</TABLE>
1. Average annual total return represents the average annual
increase in value of an investment and assumes reinvestment of
dividends and capital gains.
2. Cumulative total return represents the change in the Fund's
net asset value, and assumes reinvestment of dividends and
capital gains.
Note: Total return figures do not include deductions at the
Fund or contract level for cost of insurance charges, premium
load, administrative charges, maintenance fees, premium tax
charges, mortality and expense risk charges or other charges
that may be incurred under the variable annuity contract for
which the Fund serves as an underlying investment vehicle. Past
expense reductions by the Fund's manager increased the Fund's
total returns. Investment return and principal value will
fluctuate with market conditions, currencies and the economic
and political climates of the countries where investments are
made, and shares, when redeemed, may be worth more or less than
their initial cost. Past performance is not indicative of
future results.
---------------------------------------------------------------
7
<PAGE>
TEMPLETON
ASSET
ALLOCATION
FUND
The Templeton Asset Allocation Fund seeks a high level of total
return through a flexible policy of investing in stocks of
companies in any nation, debt obligations of companies and
governments of any nation, and money market instruments. The
Fund's assets are allocated among different investments
depending upon worldwide market and economic conditions.
As of June 30, 1995, the Fund's assets were invested as
follows: 62.3% equities, 33.7% bonds, and 4.0% short-term
obligations and other assets.
The U.S. stock market performed extremely well during the
reporting period, as a combination of falling interest rates,
better-than-expected corporate earnings, and an increased flow
of assets into mutual funds fueled a surge in stock prices. In
many respects, U.S. stocks appeared expensive compared with
those in other markets, but we were able to find bargains when
certain industry groups temporarily fell out of favor with
investors. For example, we purchased shares of some retail and
technology stocks at attractive prices relative to their long-
term earnings potential. These included
---------------------------------------------------------------
TEMPLETON ASSET ALLOCATION FUND
Geographic Distribution on 6/30/95
Based on Total Net Assets
[PIE CHART APPEARS HERE] Fixed Income 33.7%
Stocks 62.3%
Short-Term Obligations &
Other Net Assets 4.0%
---------------------------------------------------------------
TEMPLETON ASSET ALLOCATION FUND
Asset Distribution on 6/30/95
Based on Total Net Assets
[PIE CHART APPEARS HERE] Canada 3.3%
Latin America 3.7%
Asia 11.7%
Australia/
New Zealand 4.6%
Europe 30.8%
United States 45.9%
DSC Communications Corp., Federated Department Stores Inc., and
Toys R Us Inc.
The weakness of the U.S. dollar versus many European currencies
enhanced the performance of our European stocks during the
reporting period. Although it was difficult to find many
bargain stocks in Europe, we did focus on some banks that
should benefit from improved balance sheets and a growing
demand for loans in this region. An example is Sparbanken
Sverige AB, which is the central banking institution for the
Swedish savings bank system. We also found value in those
utilities companies whose cash flows have increased and whose
costs have come down through privatization and restructuring.
We continued to add to our pharmaceutical exposure by
purchasing additional shares of Pharmacia AB, a Swedish holding
company that has operating divisions in pharmaceuticals,
biotechnology, consumer products, beverages and foods.
During this six-month period, we employed two strategies in our
fixed-income security selection. First, we emphasized the hard-
currency markets of Germany, Japan and the United States
because of their low debt levels and their relative resistance
to rising
8
<PAGE>
interest rates throughout 1994. The German mark and Japanese
yen were also among the strongest currencies versus the dollar,
which offered investors attractive returns. Second, we focused
on countries such as the United Kingdom, Australia, Canada, and
New Zealand, where monetary policy was expected to be the
tightest, and interest rates the highest. This strategy
benefited the Fund because, as growth slowed unexpectedly in
these markets, monetary policy proved to be tighter than
necessary, which caused interest rates to fall.
In implementing these two strategies, we generated a moderate
amount of turnover in the fixed-income portfolio. We increased
allocations to both Germany and Japan, and reduced exposure to
the United Kingdom toward the end of the period, due to
deteriorating political fundamentals and the Bank of England's
reluctance to tighten monetary policy further in light of
growing inflation. The proceeds were invested in French and
German bonds. Finally, we reduced our Canadian exposure, due to
federal budget concerns and political factors related to the
Quebec secessionist movement, and invested these proceeds in
U.S. fixed-income securities.
We remain optimistic about the long-term prospects for global
investing. The moderate economic growth and stable inflationary
environment that emerged in the first half of 1995 may persist
into 1996, and although rates have already declined
significantly, further declines are possible in some areas.
This may be bullish for global stock and bond markets.
There are, of course, special risks involved with global
investing related to market, currency, economic, political, and
other factors; developing markets involve similar but
heightened risks. These risks are discussed in the prospectus.
PERFORMANCE The Templeton Asset Allocation Fund provided a total return of
SUMMARY 11.94% for the six-month period ended June 30, 1995. Total
return represents the change in the Fund's net asset value and
includes reinvestment of dividends and capital gains. It does
not include deductions at the Fund or contract level for cost
of insurance charges, premium load, administrative charges,
maintenance fees, premium tax charges, mortality and expense
risk charges or other charges that may be incurred under the
variable annuity contract for which the Fund serves as an
underlying investment vehicle.
<TABLE>
<CAPTION>
---------------------------------------------------------------
TEMPLETON
ASSET ALLOCATION FUND
Periods ended 6/30/95
---------------------------------------------------------------
Since
Inception
1-Year 5-Year (8/24/88)
<S> <C> <C> <C>
Average Annual
Total Return/1/ 13.90% 11.20% 10.86%
Cumulative
Total Return/2/ 13.90% 70.00% 102.55%
---------------------------------------------------------------
</TABLE>
1. Average annual total return represents the average annual
increase in value of an investment and assumes reinvestment of
dividends and capital gains.
2. Cumulative total return represents the change in the Fund's
net asset value, and assumes reinvestment of dividends and
capital gains.
Note: Total return figures do not include deductions at the
Fund or contract level for cost of insurance charges, premium
load, administrative charges, maintenance fees, premium tax
charges, mortality and expense risk charges or other charges
that may be incurred under the variable annuity contract for
which the Fund serves as an underlying investment vehicle. Past
expense reductions by the Fund's manager increased the Fund's
total returns. Investment return and principal value will
fluctuate with market conditions, currencies and the economic
and political climates of the countries where investments are
made, and shares, when redeemed, may be worth more or less than
their initial cost. Past performance is not indicative of
future results.
---------------------------------------------------------------
9
<PAGE>
TEMPLETON The Templeton Bond Fund seeks high current income through a
BOND FUND flexible policy of investing primarily in debt securities of
companies, governments and government agencies of various
nations throughout the world.
During the six-month reporting period, it was increasingly
evident that global economic growth was slowing significantly.
This slower growth exceeded the expectations of investors, and
a more positive environment ensued for global bond markets.
After increasing at an annualized rate of 5.1% in the fourth
quarter of 1994, U.S. Gross Domestic Product (GDP) slowed to
just 2.7% in the first quarter of 1995, and growth in the
second quarter was considerably slower.* These reports indicate
that the U.S. economy has already responded to the Federal
Reserve Board's interest rate increases throughout 1994.
Japan's economic growth was essentially flat, as its GDP
increased at an annualized rate of 0.3% for the first quarter
of 1995.** Consumer spending remained sluggish, and the yen's
strength hampered economic growth throughout the reporting
period.
---------------------------------------------------------------
TEMPLETON BOND FUND
Geographic Distribution on 6/30/95
Based on Total Net Assets
[PIE CHART APPEARS HERE] Canada 7.3%
Asia 17.8%
Europe 31.4%
Latin America 1.5%
Australia/
New Zealand 9.8%
United States 32.2%
Another governmental plan to stimulate consumer spending is
being implemented, but apparently Japan's strong currency and
weak banking system are preventing a resurgence of business
activity.
Germany also felt growth pressures during this time, primarily
the result of the strong Deutschemark. Tax hikes and sluggish
wage increases have also made German consumers very cautious.
Seeking to alleviate some of this downward pressure, the
Bundesbank eased monetary policy in March, and the German
economy is now expected to slow next year to an annualized rate
of around 2.5%, down from the projected 3% in 1995.
We emphasize a broadly diversified investment style that
focuses on fixed-income securities from any of the world's
developed markets. In pursuing this strategy, we concentrate on
countries with the most attractive fundamentals for interest
rates, and attempt to adjust the portfolio's interest-rate
sensitivity in accordance with prevailing market fundamentals.
During the reporting period, we followed two strategies in
market selection. First, we emphasized the hard-currency
markets of Germany, Japan and the United States because of
their low debt levels and their relative resistance to rising
interest rates throughout 1994. The German mark and Japanese
yen were among the strongest currencies versus the dollar,
which consequently offered investors attractive returns. We
also focused on countries such as the United Kingdom,
Australia, Canada, and New Zealand, where monetary policy was
expected to be the tightest, and interest rates the highest.
This second strategy benefited the Fund because, as growth
slowed unexpectedly in these markets, monetary policy proved to
be tighter than necessary, which caused interest rates to fall.
* Source: U.S. Commerce Dept.
** Source: Japanese Ministry of International Trade and
Industry
10
<PAGE>
Adherence to these two strategies generated a moderate amount
of turnover in the Fund's portfolio. The Fund's allocations to
both Germany and Japan changed the most significantly. Our
German exposure increased from 5.0% of total net assets on
December 31, 1994, to 11.6% on June 30, 1995, while our
Japanese exposure increased from zero to 10.3% over the same
period. We reduced the Fund's holdings in the United Kingdom
toward the end of the period due to deteriorating political
fundamentals and the Bank of England's reluctance to tighten
monetary policy further in light of growing inflation. The
proceeds were invested in French and German bonds.
We believe that the moderate growth and stable inflationary
environment that emerged in the first half of 1995 may persist
into 1996, which should be a positive influence on interest
rates. Although rates have already declined significantly,
further declines are possible in some markets.
There are, of course, special risks involved with global
investing related to market, currency, economic, political, and
other factors; developing markets involve similar but
heightened risks. These risks are discussed in the prospectus.
PERFORMANCE The Templeton Bond Fund delivered a total return of 9.31% for
SUMMARY the six-month period ended June 30, 1995. Total return
represents the change in the Fund's net asset value and
includes reinvestment of dividends. It does not include
deductions at the Fund or contract level for cost of insurance
charges, premium load, administrative charges, maintenance
fees, premium tax charges, mortality and expense risk charges
or other charges that may be incurred under the variable
annuity contract for which the Fund serves as an underlying
investment vehicle.
<TABLE>
<CAPTION>
---------------------------------------------------------------
TEMPLETON BOND FUND
Periods ended 6/30/95
---------------------------------------------------------------
Since
Inception
1-Year 5-Year (8/24/88)
<S> <C> <C> <C>
Average Annual
Total Return/1/ 10.63% 8.09% 7.61%
Cumulative
Total Return/2/ 10.63% 47.52% 65.28%
---------------------------------------------------------------
</TABLE>
1. Average annual total return represents the average annual
increase in value of an investment and assumes reinvestment of
dividends and capital gains.
2. Cumulative total return represents the change in the Fund's
net asset value, and assumes reinvestment of dividends and
capital gains.
Note: Total return figures do not include deductions at the
Fund or contract level for cost of insurance charges, premium
load, administrative charges, maintenance fees, premium tax
charges, mortality and expense risk charges or other charges
that may be incurred under the variable annuity contract for
which the Fund serves as an underlying investment vehicle. Past
expense reductions by the Fund's manager increased the Fund's
total returns. Investment return and principal value will
fluctuate with market conditions, currencies and the economic
and political climates of the countries where investments are
made, and shares, when redeemed, may be worth more or less than
their initial cost. Past performance is not indicative of
future results.
---------------------------------------------------------------
11
<PAGE>
TEMPLETON The Templeton Money Market Fund seeks current income, stability
MONEY MARKET of principal, and liquidity by investing in money market
FUND instruments with maturities not exceeding 397 days. The Fund
may invest in short-term U.S. government securities,
certificates of deposit, time deposits, bankers' acceptances,
commercial paper and repurchase agreements.*
Over the course of the six-month reporting period, the U.S.
economy showed signs of being on a path to slower growth. After
increasing at an annualized rate of 5.1% in the fourth quarter
of 1994, U.S. Gross Domestic Product slowed to just 2.7% in the
first quarter of 1995. At the same time, inflation remained
relatively subdued.
This past February, Federal Reserve Board Chairman Alan
Greenspan pointed to this slower growth rate as a reason to
keep monetary policy steady for the time being. However,
subsequent economic data caused concern that economic growth
was slowing more than desired, which led the Fed to lower
short-term interest rates on July 6, 1995. Now that the Fed has
moved toward a more accommodative monetary policy, we believe
further interest-rate decreases this year are possible.
Anticipating lower short-term interest rates, the Fund's
manager extended the portfolio's average maturity from 22.41
days on December 31, 1994 to 60.0 days on June 30, 1995. This
strategy contributed significantly to the Fund's performance
over the course of the reporting period. Furthermore, we
believe that the Fund is positioned to take advantage of any
future interest-rate moves by the Federal Reserve.
On June 30, 1995, the Fund's 7-day annualized yield was 5.49%
and the 30-day annualized yield was 6.85%.
*Please remember that an investment in the Fund is neither
insured nor guaranteed by the U.S. government, and that there
can be no assurance that the Fund will be able to maintain a
stable net asset value of $1.00 per share.
12
<PAGE>
Templeton Variable Products Series Fund
Templeton Stock Fund
Financial Highlights
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31
JUNE 30, 1995 ------------------------------------------------
(UNAUDITED) 1994 1993 1992 1991 1990
------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 16.94 $ 17.53 $ 13.33 $ 12.72 $ 10.29 $ 11.75
-------- -------- -------- -------- -------- --------
Income from investment
operations:
Net investment income .23 .26 .23 .25 .27 .32
Net realized and
unrealized gain (loss) 2.13 (.64) 4.23 .64 2.49 (1.57)
-------- -------- -------- -------- -------- --------
Total from investment
operations 2.36 (.38) 4.46 .89 2.76 (1.25)
-------- -------- -------- -------- -------- --------
Distributions:
Dividends from net
investment income (.27) (.21) (.25) (.28) (.33) (.19)
Distributions from net
realized gains (.04) -- (.01) -- -- (.02)
-------- -------- -------- -------- -------- --------
Total distributions (.31) (.21) (.26) (.28) (.33) (.21)
-------- -------- -------- -------- -------- --------
Change in net asset
value 2.05 (.59) 4.20 .61 2.43 (1.46)
-------- -------- -------- -------- -------- --------
Net asset value, end of
period $ 18.99 $ 16.94 $ 17.53 $ 13.33 $ 12.72 $ 10.29
======== ======== ======== ======== ======== ========
TOTAL RETURN * 14.12% (2.20)% 34.00% 7.12% 27.93% (10.23)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period (000) $452,089 $378,849 $298,392 $166,219 $116,943 $ 74,264
Ratio of expenses to
average net assets 0.69%** 0.73% 0.73% 0.75% 0.82% 0.85%
Ratio of net investment
income to average net
assets 2.77%** 1.81% 1.88% 2.36% 2.82% 3.78%
Portfolio turnover rate 6.32% 5.10% 4.88% 8.10% 41.24% 17.94%
</TABLE>
* TOTAL RETURN DOES NOT INCLUDE DEDUCTIONS AT THE FUND OR CONTRACT LEVEL FOR
COST OF INSURANCE CHARGES, PREMIUM LOAD, ADMINISTRATIVE CHARGES, MORTALITY
AND EXPENSE RISK CHARGES OR OTHER CHARGES THAT MAY BE INCURRED UNDER THE
VARIABLE ANNUITY CONTRACT FOR WHICH THE FUND SERVES AS AN UNDERLYING
INVESTMENT VEHICLE.
** ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
Templeton Variable Products Series Fund
Templeton Stock Fund
Investment Portfolio, June 30, 1995 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
COMMON STOCKS: 85.5%
Aerospace & Military Technical Systems: 0.8%
Boeing Co. 25,000 $ 1,565,625
British Aerospace PLC 230,000 2,058,894
------------
3,624,519
------------
Appliances & Household Durables: 1.0%
Sony Corp. 94,000 4,512,355
------------
Automobiles: 2.7%
Bayerische Motorenwerke (BMW) 6,545 3,591,941
Ford Motor Co. 130,000 3,867,500
General Motors Corp. 18,000 843,750
Volvo AB, B 200,000 3,807,769
------------
12,110,960
------------
Banking: 12.5%
Banco Bilbao Vizcaya 73,200 2,112,149
Banco Popular Espanol 6,615 983,034
Bangkok Bank Public Co. Ltd., fgn. 197,700 2,178,424
BankAmerica Corp. 130,000 6,841,250
Bankinter SA 50,000 4,499,484
Banque Nationale de Paris NV 30,000 1,447,050
Banque Nationale de Paris, NV, ADR 10,600 511,291
Barnett Banks Inc. 44,700 2,290,875
Chemical Banking Corp. 88,000 4,158,000
Citicorp 100,000 5,787,500
Crestar Financial Corp. 55,000 2,695,000
C.S. Holding, br. 40,000 3,664,785
Grupo Financiero Banamex Accival SA, B 450,000 684,000
Grupo Financiero Banamex Accival SA, L 40,875 62,130
*Grupo Financiero Serfin SA de CV, rts. 278,000 590
Grupo Financiero Serfin SA, ADR 50,000 231,250
Grupo Financiero Serfin SA, B 278,000 193,933
HSBC Holdings PLC 301,786 3,870,901
National Australia Bank Ltd. 332,376 2,626,955
NationsBank Corp. 59,000 3,163,875
Royal Bank of Canada 10,000 223,840
Royal Bank of Scotland Group PLC 237,931 1,617,279
Sparbanken Sverige AB, A 55,200 462,871
Standard Chartered PLC 600,000 3,214,984
Westpac Banking Corp. 882,346 3,198,360
------------
56,719,810
------------
Broadcasting & Publishing: 1.4%
Grupo Televisa SA, GDS 5,000 101,875
News Corp. Ltd. 96,427 538,691
News Corp. Ltd., ADR 260,000 5,882,500
------------
6,523,066
------------
Business & Public Services: 2.3%
Columbia Healthcare Corp. 74,587 3,225,888
Tenet Healthcare Corp. 200,000 2,875,000
WMX Technologies Inc. 150,000 4,256,250
------------
10,357,138
------------
Chemicals: 4.1%
Akzo Nobel NV 65,000 7,768,958
Bayer AG 16,000 3,976,283
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
DSM NV 15,000 $ 1,292,352
Rhone-Poulenc SA, A 123,200 2,775,730
Solvay SA 5,000 2,742,038
------------
18,555,361
------------
Data Processing & Reproduction: 1.6%
*Microsoft Corp. 30,000 2,711,250
*Newbridge Networks Corp. 130,000 4,582,500
------------
7,293,750
------------
Electrical & Electronics: 5.2%
BBC Brown Boveri Ltd., br. 7,297 7,553,647
*DSC Communications Corp. 73,700 3,427,050
Hitachi Ltd. 274,000 2,730,790
Johnson Electric Holdings Ltd. 300,000 604,823
Motorola Inc. 72,000 4,833,000
Philips Electronics NV 100,000 4,233,624
------------
23,382,934
------------
Electronic Components & Instruments: 1.8%
Intel Corp. 132,000 8,357,250
------------
Energy Sources: 2.0%
Shell Transport & Trading Co. PLC 120,000 1,432,910
Societe Elf Aquitane SA 15,720 1,161,684
Total SA, B 95,000 5,718,114
Valero Energy Corp. 30,000 607,500
------------
8,920,208
------------
Financial Services: 6.3%
American Express Co. 125,000 4,390,625
Dean Witter Discover & Co. 110,612 5,198,764
Federal National Mortgage Assn. 88,400 8,342,750
First Financial Management Corp. 42,000 3,591,000
MBNA Corp. 180,000 6,075,000
Peregrine Investments Holdings Ltd. 500,000 710,796
------------
28,308,935
------------
Food & Household Products: 1.6%
Grupo Embotellador de Mexico SA, B 62,500 325,000
Nestle SA 4,000 4,165,002
Unilever NV 12,000 1,561,278
Vitro SA, ADR 120,000 1,035,000
------------
7,086,280
------------
Forest Products & Paper: 3.6%
Assidomaen AB 150,000 3,226,982
Carter Holt Harvey Ltd. 1,239,126 3,032,018
Enso Gutzeit OY, R 300,000 2,718,015
International Paper Co. 49,000 4,201,750
PT Barito Pacific Timber, fgn. 64,000 91,962
Stora Kopparbergs Bergslags AB, B 225,000 3,046,559
------------
16,317,286
------------
Health & Personal Care: 6.6%
Astra AB, A 100,000 3,086,080
Astra AB, B 165,000 4,967,283
Medeva PLC 747,357 2,970,748
Pfizer Inc. 36,000 3,325,500
Pharmacia AB, A 50,000 1,096,280
</TABLE>
14
<PAGE>
Templeton Variable Products Series Fund
Templeton Stock Fund
Investment Portfolio, June 30, 1995 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
COMMON STOCKS (CONT.)
Pharmacia AB, B 250,500 $ 5,440,712
SmithKline Beecham PLC, ADR 200,000 9,050,000
------------
29,936,603
------------
Industrial Components: 1.0%
Goodyear Tire & Rubber Co. 110,000 4,537,500
------------
Insurance: 5.2%
Aegon NV 200,000 6,918,361
Aetna Life & Casualty Co. 70,000 4,401,250
Allstate Corp. 51,000 1,510,875
American International Group Inc. 29,062 3,313,068
International Nederlanden Group 90,000 4,977,735
Torchmark Corp. 60,000 2,265,000
------------
23,386,289
------------
Merchandising: 4.6%
*Federated Department Stores Inc. 200,000 5,150,000
Home Depot Inc. 110,000 4,468,750
*Kroger Co. 25,000 671,875
Limited Inc. 134,500 2,959,000
Sears Roebuck & Co. 70,000 4,191,250
*Toys R Us Inc. 120,000 3,510,000
------------
20,950,875
------------
Metals & Mining: 1.2%
Aluminum Co. of America 40,000 2,005,000
Companhia Siderurgica Nacional 16,300,000 368,499
Reynolds Metals Co. 55,500 2,872,125
------------
5,245,624
------------
Multi-Industry: 5.2%
Cheung Kong Holdings Ltd. 1,050,000 5,197,214
Dairy Farm International Holdings Ltd. 2,000,000 1,720,000
Hutchison Whampoa Ltd. 1,333,000 6,442,942
Jardine Matheson Holdings Ltd. 500,000 3,675,000
Jardine Strategic Holdings Ltd. 350,048 1,127,155
*Jardine Strategic Holdings Ltd., wts. 38,894 17,113
Pacific Dunlop Ltd. 4,295 9,036
Swire Pacific Ltd., A 620,000 4,727,442
Swire Pacific Ltd., B 304,500 369,911
------------
23,285,813
------------
Real Estate: 0.4%
New World Development Co. Ltd. 600,000 1,996,692
------------
Telecommunications: 6.0%
Alcatel Alsthom SA 32,385 2,915,902
Compania de Telecomunicaciones de Chile SA, ADR 26,000 2,115,750
MCI Communications Corp. 202,000 4,444,000
Philippine Long Distance Telephone Co. 10,000 717,500
STET (Sta Finanziaria Telefonica Torino) SPA 1,094,500 3,036,840
Telefonica de Argentina SA, B, ADR 81,000 2,004,750
Telefonica de Espana SA 271,000 3,490,279
<CAPTION>
SHARES VALUE
----------- ------------
<S> <C> <C>
Telefonos de Mexico SA, L, ADR 221,800 $ 6,570,825
*Worldcom Inc. 72,400 1,954,800
------------
27,250,646
------------
Textiles & Apparel: 1.7%
*Fruit of the Loom Inc., A 125,000 2,640,625
Nike Inc., B 60,000 5,040,000
------------
7,680,625
------------
Transportation: 1.7%
*AMR Corp. 20,000 1,492,500
Atlantic Southeast Airlines Inc. 78,100 2,352,763
British Airways PLC 400,000 2,620,323
Koninklijke Nedlloyd NV 40,000 1,363,020
------------
7,828,606
------------
Utilities--Electrical & Gas: 4.8%
American Electric Power Co. Inc. 61,000 2,142,625
Endesa-Empresa Nacional de
Electricidad SA 115,000 5,677,606
Iberdrola SA 200,000 1,505,882
Pinnacle West Capital Corp. 90,000 2,205,000
Southern Co. 142,000 3,177,250
Southern Electric PLC 400,000 4,083,125
VEBA AG 7,000 2,748,373
------------
21,539,861
------------
Wholesale & International Trade: 0.2%
Sime Darby Hongkong Ltd. 650,000 714,027
------------
TOTAL COMMON STOCKS (cost $285,942,011) 386,423,013
------------
PREFERRED STOCKS: 2.2%
Cemig-Cia Energetica de Minas Gerais, pfd. 12,676,000 247,874
Dairy Farm International Holdings Ltd., 6.50%,
conv., pfd. 162,000 123,120
Jardine Strategic Holdings Ltd., 7.50%, conv.,
pfd. 113,000 124,865
News Corp. Ltd., pfd. 248,213 1,227,869
News Corp. Ltd., pfd., ADR 130,000 2,600,000
Telebras-Telecomunicacoes Brasileiras
SA, pfd. 143,434,677 4,783,753
Telebras-Telecomunicacoes Brasileiras
SA, pfd., ADR 31,300 1,030,944
------------
TOTAL PREFERRED STOCKS (cost $4,537,157) 10,138,425
------------
<CAPTION>
PRINCIPAL
IN LOCAL
CURRENCY
----------
<S> <C> <C> <C>
SHORT TERM OBLIGATIONS: 12.1%
(cost $54,444,316)
U.S. Treasury Bills, 5.26% to 5.65% with
maturities to 8/24/95 U.S. 54,770,000 54,482,598
------------
TOTAL INVESTMENTS: 99.8% (cost $344,923,484) 451,044,036
OTHER ASSETS, LESS LIABILITIES: 0.2% 1,044,997
------------
TOTAL NET ASSETS: 100.0% $452,089,033
============
</TABLE>
*NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
Templeton Variable Products Series Fund
Templeton International Fund
Financial Highlights
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period)
<TABLE>
<CAPTION>
PERIOD FROM
SIX MONTHS YEAR ENDED MAY 1, 1992
ENDED DECEMBER 31 (COMMENCEMENT
JUNE 30, 1995 ----------------- OF OPERATIONS) TO
(UNAUDITED) 1994 1993 DECEMBER 31, 1992
------------- -------- ------- -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning
of period $ 13.22 $ 13.83 $ 9.39 $ 10.00
-------- -------- ------- -------
Income from investment
operations:
Net investment income .17 .12 .10 .06
Net realized and unrealized
gain (loss) .88 (.42) 4.34 (.67)
-------- -------- ------- -------
Total from investment
operations 1.05 (.30) 4.44 (.61)
-------- -------- ------- -------
Distributions:
Dividends from net
investment income (.10) (.08) -- --
Distributions from net
realized gain (.05) (.23) -- --
-------- -------- ------- -------
Total distributions (.15) (.31) -- --
-------- -------- ------- -------
Change in net asset value .90 (.61) 4.44 (.61)
-------- -------- ------- -------
Net asset value, end of
period $ 14.12 $ 13.22 $ 13.83 $ 9.39
======== ======== ======= =======
TOTAL RETURN * 8.05% (2.22)% 47.28% (6.10)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000) $250,336 $150,090 $43,877 $7,050
Ratio of expenses to average
net assets 0.72%** 0.83% 0.95% 1.40%**
Ratio of expenses, net of
reimbursement, to average
net assets 0.72%** 0.83% 0.95% 1.00%**
Ratio of net investment
income to average net
assets 3.53%** 1.89% 1.62% 1.76%**
Portfolio turnover rate 2.00% 6.32% 15.65% 4.50%
</TABLE>
* TOTAL RETURN DOES NOT INCLUDE DEDUCTIONS AT THE FUND OR CONTRACT LEVEL FOR
COST OF INSURANCE CHARGES, PREMIUM LOAD, ADMINISTRATIVE CHARGES, MORTALITY
AND EXPENSE RISK CHARGES OR OTHER CHARGES THAT MAY BE INCURRED UNDER THE
VARIABLE ANNUITY CONTRACT FOR WHICH THE FUND SERVES AS AN UNDERLYING
INVESTMENT VEHICLE.
** ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
Templeton Variable Products Series Fund
Templeton International Fund
Investment Portfolio June 30, 1995 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- ------------
<S> <C> <C>
COMMON STOCKS: 78.3%
Aerospace & Military Technical Systems: 0.3%
British Aerospace PLC 90,000 $ 805,654
------------
Appliances & Household Durables: 0.8%
Email Ltd. 432,000 1,053,164
Sony Corp. 21,000 1,008,079
------------
2,061,243
------------
Automobiles: 3.0%
Bayerische Motorenwerke (BMW) 1,200 658,568
Regie Nationale des Usines Renault SA 78,000 2,443,906
Volkswagen AG 7,000 2,016,992
Volvo AB, B 130,000 2,475,050
------------
7,594,516
------------
Banking: 16.9%
ABN AMRO Holding NV 99,050 3,822,646
Argentaria Corporacion Bancaria de Espana SA 13,000 480,289
Argentaria Corporacion Bancaria de Espana SA, AD 7,300 134,138
Australia & New Zealand Banking Group Ltd. 259,510 922,237
Banco Bilbao Vizcaya 9,000 259,690
Banco Ganadero SA, ADR C 20,000 416,250
Banco Popular Espanol 16,000 2,377,709
Banco Portugues de Investimento SA 18,700 326,579
Bangkok Bank Public Co. Ltd., fgn. 373,800 4,118,841
Bankinter SA 32,000 2,879,670
Banque Nationale de Paris NV 16,000 771,760
Banque Nationale de Paris, NV, ADR 11,800 569,173
Barclays PLC 30,200 324,362
C.S. Holding, br. 10,000 916,196
Canadian Imperial Bank of Commerce 160,000 3,843,494
Daegu Bank Co. Ltd. 40,000 479,525
Den Norske Bank 1,100,000 2,981,175
Grupo Financiero Banamex Accival SA, B 335,000 509,200
Grupo Financiero Banamex Accival SA, L 19,900 30,248
Grupo Financiero Serfin SA, ADR 12,500 57,813
Grupo Financiero Serfin SA, B 95,200 66,412
*Grupo Financiero Serfin SA de CV, rts. 95,200 202
HSBC Holdings PLC 35,800 4,591,938
National Bank of Canada 127,900 1,047,407
Philippine National Bank 29,572 344,469
PT Bank Bali, fgn. 25,000 63,426
PT Panin Bank, fgn. 250,000 297,485
*PT Panin Bank, rts. 62,500 21,048
Shinhan Bank Co. Ltd. 30,600 629,555
Sparbanken Sverige AB, A 54,500 457,001
Stadshypotek AB, A 50,000 742,309
Standard Chartered PLC 128,000 685,863
Svenska Handelsbanken, A 48,000 715,916
Unidanmark AS, A 50,000 2,454,385
Westpac Banking Corp. 1,121,849 4,066,519
------------
42,404,930
------------
Broadcasting & Publishing: 1.4%
Grupo Televisa SA, GDS 4,800 97,800
News Corp. Ltd., ADR 125,200 2,832,650
<CAPTION>
SHARES VALUE
---------- ------------
<S> <C> <C>
Oriental Press Group Limited 1,277,000 $ 515,731
South China Morning Post Holdings Ltd. 158,000 94,949
------------
3,541,130
------------
Building Materials & Components: 0.8%
*Cementos Paz del Rio, ADR 21,000 354,375
Cie de Saint Gobain 13,454 1,625,157
------------
1,979,532
------------
Business & Public Services: 0.2%
Ecco SA 2,250 352,950
Societe Generale de Surveillance Holdings Ltd., br. 100 173,686
------------
526,636
------------
Chemicals: 5.1%
Akzo Nobel NV 40,000 4,780,897
Bayer AG 1,110 275,855
DSM NV 16,000 1,378,509
*European Vinyls Corp. EVC International NV 50,000 2,329,784
Rhone-Poulenc SA, A 129,800 2,924,430
Solvay SA 1,800 987,134
------------
12,676,609
------------
Data Processing & Reproduction: 1.3%
*Newbridge Networks Corp. 90,000 3,172,500
Sligos SA 2,000 181,397
------------
3,353,897
------------
Electrical & Electronics: 4.9%
BBC Brown Boveri Ltd., br. 4,000 4,140,686
Gold Peak Industries (Holdings) Ltd. 1,000 426
Hitachi Ltd. 250,000 2,491,596
Philips Electronics NV 135,000 5,715,392
------------
12,348,100
------------
Energy Equipment & Services: 0.7%
Koninklijke Pakhoed NV 55,000 1,682,478
------------
Energy Sources: 1.6%
Repsol SA 2,500 78,638
Societe Elf Aquitane SA 14,400 1,064,138
Total SA, B 48,000 2,889,152
------------
4,031,928
------------
Financial Services: 0.7%
Govett & Co. Ltd. 23,600 103,191
Invesco PLC 65,000 219,619
Korea Fund Inc. 45,660 896,078
Peregrine Investments Holdings Ltd. 300,000 426,478
------------
1,645,366
------------
Food & Household Products: 0.8%
Embotelladora Andina SA, ADR 12,700 446,088
Grupo Embotellador de Mexico SA, B 83,600 434,720
Grupo Embotellador de Mexico SA de CV, GDR 38,200 391,550
Lam Soon Foods Inc. 205,000 39,740
</TABLE>
17
<PAGE>
Templeton Variable Products Series Fund
Templeton International Fund
Investment Portfolio June 30, 1995 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- ------------
<S> <C> <C>
COMMON STOCKS (CONT.)
Nestle SA 560 $ 583,100
PT Japfa Comfeed Indonesia, fgn. 72,000 50,112
Vitro SA 26,700 75,956
Vitro SA, ADR 12,720 109,710
------------
2,130,976
------------
Forest Products & Paper: 5.3%
Assidomaen AB 60,000 1,290,793
Cartiere Burgo SPA 21,600 142,557
*Cartiere Burgo SPA, wts. 3,600 317
Enso Gutzeit OY, R 200,000 1,812,010
Kimberly Clark de Mexico SA, A 159,500 1,824,680
Metsa Serla OY, B 80,450 3,578,485
Munksjo AB 70,000 611,030
PT Barito Pacific Timber, fgn. 12,000 17,243
PT Pabrik Kertas Tjiwi Kimia, fgn. 10,080 20,255
Stora Kopparbergs Bergslags AB, B 300,000 4,062,079
------------
13,359,449
------------
Health & Personal Care: 6.7%
Astra AB, A 30,000 925,824
Astra AB, B 52,000 1,565,447
Ciba-Geigy AG 4,000 2,931,828
Hafslund Nycomed SA, B 65,000 1,503,165
Medeva PLC 222,277 883,552
Pharmacia AB, A 23,700 519,637
Pharmacia AB, B 196,100 4,259,176
SmithKline Beecham PLC, ADR 90,000 4,072,500
------------
16,661,129
------------
Insurance: 2.3%
Aegon NV 28,353 980,764
International Nederlanden Group 30,000 1,659,245
La France SA 180 26,715
London Insurance Group Inc. 50,000 932,666
Skandia Foersaekrings AB, free 90,000 1,744,426
Swiss Reinsurance Co. 400 308,120
------------
5,651,936
------------
Machinery & Engineering: 0.6%
*Tampella AB OY 169,300 428,056
*Tampella AB OY, 144A 62,666 158,444
Valmet OY 39,000 881,072
------------
1,467,572
------------
Merchandising: 1.9%
Argyll Group PLC 400,000 2,136,963
Burton Group PLC 40,000 52,629
Cifra SA, B 321,800 442,797
Karstadt AG 5,000 2,180,043
------------
4,812,432
------------
Metals & Mining: 1.5%
*ARBED SA 250 36,033
Bohler Uddeholm AG 34,400 2,380,452
China Steel Corp., ADR 10,000 211,300
Companhia Siderurgica Nacional 12,700,000 287,112
Maanshan Iron & Steel Co. Ltd., H 1,000,000 209,362
Pechiney SA, invt., ctf. 3,950 227,738
<CAPTION>
SHARES VALUE
---------- ------------
<S> <C> <C>
SIG-Schweizerische Industrie Gesellschaft Holdings AG 160 $ 373,773
South African Iron & Steel Industrial Corp., Ltd. 8,353 9,487
------------
3,735,257
------------
Multi-Industry: 5.7%
Cheung Kong Holdings Ltd. 450,000 2,227,377
Dairy Farm International Holdings Ltd. 839,000 721,540
DESC Sociedad de Fomento Industrial SA, B 84,000 278,880
Hutchison Whampoa Ltd. 600,000 2,900,049
Jardine Matheson Holdings Ltd. 566,800 4,165,980
Jardine Strategic Holdings Ltd. 225,000 724,500
*Jardine Strategic Holdings Ltd., wts. 25,000 11,000
Swire Pacific Ltd., A 400,000 3,049,963
Wheelock & Co. Ltd. 126,000 209,246
------------
14,288,535
------------
Real Estate: 0.6%
Hang Lung Development Co. Ltd. 700,000 1,112,719
New World Development Co. Ltd. 152,783 508,434
------------
1,621,153
------------
Recreation, Other Consumer Goods: 0.5%
SMH AG, br. 1,800 1,156,752
------------
Telecommunications: 6.9%
Alcatel Alsthom SA 24,000 2,160,928
Compania de Telecomunicaciones de Chile SA, ADR 29,300 2,384,288
Philippine Long Distance Telephone Co. 4,000 287,000
STET (Sta Finanziaria Telefonica Torino) SPA, di Risp 1,850,000 4,099,679
Telefonica de Argentina SA, B, ADR 88,000 2,178,000
Telefonica de Espana SA, ADR 70,000 2,712,500
Telefonos de Mexico SA, L, ADR 112,600 3,335,775
------------
17,158,170
------------
Transportation: 0.5%
Koninklijke Nedlloyd NV 24,800 845,073
Singapore Airlines Ltd., fgn. 33,000 304,615
------------
1,149,688
------------
Utilities--Electrical & Gas: 7.2%
*CEZ 19,000 690,909
Compania Sevillana de Electricidad 220,000 1,353,148
Consolidated Electric Power Asia Ltd., ADR 32,000 752,000
Electricas Reunidas de Zaragoza 41,250 880,341
Electricidad de Caracas 603,730 536,700
Endesa-Empresa Nacional de Electricidad SA 1,000 49,370
Endesa-Empresa Nacional de Electricidad SA, ADR 60,000 2,955,000
Hongkong Electric Holdings Ltd. 131,000 445,256
Iberdrola SA 14,500 109,176
National Power PLC 516,000 3,655,065
Shandong Huaneng Power 100,000 762,500
South Wales Electricity 200,000 2,216,463
Southern Electric PLC 185,000 1,888,445
VEBA AG 4,600 1,806,074
------------
18,100,447
------------
</TABLE>
18
<PAGE>
Templeton Variable Products Series Fund
Templeton International Fund
Investment Portfolio June 30, 1995 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- ------------
<S> <C> <C>
COMMON STOCKS (CONT.)
Wholesale & International Trade: 0.1%
Computer 2000 AG 400 $ 138,829
------------
TOTAL COMMON STOCKS (cost $181,185,907) 196,084,344
------------
PREFERRED STOCKS: 2.5%
ABN Amro Holdings NV, conv., pfd. 803 29,228
Cemig-Cia Energetica de Minas Gerais, pfd. 10,123,000 197,951
Dairy Farm International Holdings Ltd., 6.50%, conv.,
pfd. 6,000 4,560
Jardine Strategic Holdings Ltd., 7.50%, conv., pfd. 13,000 14,365
News Corp. Ltd., pfd. 150,000 742,025
News Corp. Ltd., pfd., ADR 110,100 2,202,000
Telebras-Telecomunicacoes Brasileiras SA, pfd. 4,866,533 162,306
Telebras-Telecomunicacoes Brasileiras SA, pfd., ADR 85,400 2,812,863
------------
TOTAL PREFERRED STOCKS (cost $5,357,411) 6,165,298
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
PRINCIPAL
IN LOCAL
CURRENCY VALUE
---------- ------------
<S> <C> <C> <C>
SHORT TERM OBLIGATIONS: 18.8%
(cost $47,065,194)
U.S. Treasury Bills 5.26% to 5.65% with
maturities to 8/24/95 U.S. 47,340,000 $ 47,095,514
------------
TOTAL INVESTMENTS: 99.6% (cost $233,608,512) 249,345,156
OTHER ASSETS, LESS LIABILITIES: 0.4% 990,630
------------
TOTAL NET ASSETS: 100.0% $250,335,786
============
</TABLE>
* NON-INCOME PRODUCING.
19
<PAGE>
Templeton Variable Products Series Fund
Templeton Asset Allocation Fund
Financial Highlights
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31
JUNE 30, 1995 ---------------------------------------------
(UNAUDITED) 1994 1993 1992 1991 1990
------------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 15.69 $ 16.55 $ 13.49 $ 12.85 $ 10.45 $ 11.62
-------- -------- -------- ------- ------- -------
Income from investment
operations:
Net investment income .31 .44 .42 .39 .40 .34
Net realized and
unrealized gain (loss) 1.52 (.92) 3.03 .66 2.38 (1.23)
-------- -------- -------- ------- ------- -------
Total from investment
operations 1.83 (.48) 3.45 1.05 2.78 (.89)
-------- -------- -------- ------- ------- -------
Distributions:
Dividends from net
investment income (.41) (.31) (.35) (.41) (.38) (.25)
Distributions from net
realized gains -- (.07) (.04) -- -- (.03)
-------- -------- -------- ------- ------- -------
Total distributions (.41) (.38) (.39) (.41) (.38) (.28)
-------- -------- -------- ------- ------- -------
Change in net asset
value 1.42 (.86) 3.06 .64 2.40 (1.17)
-------- -------- -------- ------- ------- -------
Net asset value, end of
period $ 17.11 $ 15.69 $ 16.55 $ 13.49 $ 12.85 $ 10.45
======== ======== ======== ======= ======= =======
TOTAL RETURN * 11.94% (2.96)% 26.12% 8.42% 27.05% (7.80)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period (000) $350,069 $288,172 $183,360 $79,242 $35,821 $22,702
Ratio of expenses to
average net assets 0.68%** 0.75% 0.77% 0.80% 0.89% 1.03%
Ratio of expenses, net
of reimbursement,
to average net assets 0.68%** 0.75% 0.77% 0.80% 0.89% 1.00%
Ratio of net investment
income to average net
assets 4.46%** 4.02% 4.16% 4.47% 3.99% 4.56%
Portfolio turnover rate 32.63% 51.36% 81.50% 120.53% 76.65% 8.46%
</TABLE>
* TOTAL RETURN DOES NOT INCLUDE DEDUCTIONS AT THE FUND OR CONTRACT LEVEL FOR
COST OF INSURANCE CHARGES, PREMIUM LOAD, ADMINISTRATIVE CHARGES, MORTALITY
AND EXPENSE RISK CHARGES OR OTHER CHARGES THAT MAY BE INCURRED UNDER THE
VARIABLE ANNUITY CONTRACT FOR WHICH THE FUND SERVES AS AN UNDERLYING
INVESTMENT VEHICLE.
** ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE>
Templeton Variable Products Series Fund
Templeton Asset Allocation Fund
Investment Portfolio June 30, 1995 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- ------------
<S> <C> <C>
COMMON STOCKS: 60.1%
Aerospace & Military Technical Systems: 0.8%
Boeing Co. 27,000 $ 1,690,875
British Aerospace PLC 130,000 1,163,723
------------
2,854,598
------------
Appliances & Household Durables: 0.6%
Sony Corp. 42,000 2,016,159
------------
Automobiles: 1.6%
Ford Motor Co. 42,000 1,249,500
General Motors Corp. 40,000 1,875,000
Volvo AB, B 130,000 2,475,050
------------
5,599,550
------------
Banking: 9.9%
Banco Popular Espanol 3,220 478,514
Bangkok Bank Public Co. Ltd., fgn. 157,800 1,738,773
Bank of Montreal 10,000 208,371
BankAmerica Corp. 64,000 3,368,000
Bankinter SA 39,625 3,565,841
Banque Nationale de Paris NV 15,000 723,525
Banque Nationale de Paris, NV, ADR 5,400 260,469
Barclays PLC 137,500 1,476,814
Barnett Banks Inc. 15,000 768,750
C.S. Holding, br. 15,250 1,397,199
Canadian Imperial Bank of Commerce 70,000 1,681,529
Chemical Banking Corp. 50,000 2,362,500
Citicorp 60,000 3,472,500
Corestates Financial Corp. 18,000 627,750
Crestar Financial Corp. 46,000 2,254,000
Grupo Financiero Banamex Accival SA, B 200,000 304,000
Grupo Financiero Banamex Accival SA, L 20,500 31,160
Grupo Financiero Serfin SA, ADR 25,000 115,625
Grupo Financiero Serfin SA, B 178,500 124,522
*Grupo Financiero Serfin SA de CV, rts. 178,500 379
HSBC Holdings PLC 282,200 3,619,679
National Australia Bank Ltd. 50,603 399,944
NationsBank Corp. 30,000 1,608,750
Royal Bank of Canada 1,400 31,338
Royal Bank of Scotland Group PLC 54,310 369,159
Sparbanken Sverige AB, A 40,800 342,122
Standard Chartered PLC 280,000 1,500,326
Toronto Dominion Bank 8,000 123,749
Westpac Banking Corp. 449,074 1,627,820
------------
34,583,108
------------
Broadcasting & Publishing: 1.1%
Grupo Televisa SA, GDS 4,500 91,688
News Corp. Ltd., ADR 160,000 3,620,000
------------
3,711,688
------------
Business & Public Services: 1.5%
Columbia Healthcare Corp. 31,500 1,362,375
Tenet Healthcare Corp. 70,000 1,006,250
WMX Technologies Inc. 100,000 2,837,500
------------
5,206,125
------------
Chemicals: 3.6%
Akzo Nobel NV 48,700 5,820,742
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
---------- ------------
<S> <C> <C>
Bayer AG 4,400 $ 1,093,478
DSM NV 25,000 2,153,921
Rhone-Poulenc SA, A 61,800 1,392,371
Solvay SA 4,000 2,193,630
------------
12,654,142
------------
Data Processing & Reproduction: 1.5%
*Microsoft Corp. 25,000 2,259,375
*Newbridge Networks Corp. 90,000 3,172,500
------------
5,431,875
------------
Electrical & Electronics: 3.5%
BBC Brown Boveri Ltd., br. 4,260 4,409,831
*DSC Communications Corp. 63,900 2,971,350
Hitachi Ltd. 80,000 797,311
Motorola Inc. 4,000 268,500
Philips Electronics NV 90,000 3,810,261
------------
12,257,253
------------
Electronic Components & Instruments: 0.7%
Intel Corp. 36,000 2,279,250
------------
Energy Sources: 1.0%
Shell Transport & Trading Co. PLC 80,000 955,273
Societe Elf Aquitane SA 4,000 295,594
Total SA, B 39,000 2,347,436
------------
3,598,303
------------
Financial Services: 4.7%
American Express Co. 129,000 4,531,125
Dean Witter Discover & Co. 74,683 3,510,101
Federal National Mortgage Assn. 40,000 3,775,000
MBNA Corp. 127,500 4,303,125
Peregrine Investments Holdings Ltd. 350,000 497,557
------------
16,616,908
------------
Food & Household Products: 0.8%
Grupo Embotellador de Mexico SA, B 58,900 306,280
Nestle SA 1,200 1,249,501
Unilever NV 3,400 442,362
Unilever PLC 12,300 248,863
Vitro SA, ADR 49,800 429,525
------------
2,676,531
------------
Forest Products & Paper: 2.8%
Assidomaen AB 90,000 1,936,189
Carter Holt Harvey Ltd. 293,020 716,991
Enso Gutzeit OY, R 225,000 2,038,511
International Paper Co. 25,000 2,143,750
PT Barito Pacific Timber, fgn. 36,000 51,729
Stora Kopparbergs Bergslags AB, B 225,000 3,046,559
------------
9,933,729
------------
Health & Personal Care: 4.3%
Astra AB, A 45,000 1,388,736
Astra AB, B 90,000 2,709,427
Medeva PLC 233,722 929,046
Pfizer Inc. 11,000 1,016,125
</TABLE>
21
<PAGE>
Templeton Variable Products Series Fund
Templeton Asset Allocation Fund
Investment Portfolio June 30, 1995 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- ------------
<S> <C> <C>
COMMON STOCKS (CONT.)
Pharmacia AB, B 241,000 $ 5,234,377
SmithKline Beecham PLC, ADR 85,000 3,846,250
------------
15,123,961
------------
Industrial Components: 0.7%
Goodyear Tire & Rubber Co. 60,000 2,475,000
------------
Insurance: 2.5%
Aegon NV 62,500 2,161,988
Aetna Life & Casualty Co. 16,700 1,050,013
Allstate Corp. 27,000 799,875
International Nederlanden Group 50,000 2,765,408
Swiss Reinsurance Co. 253 194,886
Torchmark Corp. 45,000 1,698,750
------------
8,670,920
------------
Merchandising: 3.8%
*Federated Department Stores Inc. 200,000 5,150,000
Home Depot Inc. 65,000 2,640,625
Sears Roebuck & Co. 42,000 2,514,750
*Toys R Us Inc. 100,000 2,925,000
------------
13,230,375
------------
Metals & Mining: 0.6%
Aluminum Co. of America 12,000 601,500
Companhia Siderurgica Nacional 16,100,000 363,977
Reynolds Metals Co. 22,000 1,138,500
------------
2,103,977
------------
Multi-Industry: 3.3%
Cheung Kong Holdings Ltd. 600,000 2,969,836
Dairy Farm International Holdings Ltd. 1,000,000 860,000
Hutchison Whampoa Ltd. 844,000 4,079,402
Jardine Matheson Holdings Ltd. 220,800 1,622,880
Jardine Strategic Holdings Ltd. 168,750 543,375
*Jardine Strategic Holdings Ltd., wts. 18,750 8,250
Swire Pacific Ltd., A 192,000 1,463,982
Swire Pacific Ltd., B 158,000 191,941
------------
11,739,666
------------
Real Estate: 0.3%
New World Development Co. Ltd. 300,000 998,346
------------
Telecommunications: 5.6%
Alcatel Alsthom SA 27,619 2,486,777
Compania de Telecomunicaciones de Chile SA, ADR 15,000 1,220,625
MCI Communications Corp. 196,000 4,312,000
STET (Sta Finanziaria Telefonica Torino) SPA 477,000 1,323,502
Telefonica de Argentina SA, B, ADR 60,000 1,485,000
Telefonica de Espana SA 130,000 1,674,303
Telefonos de Mexico SA, L, ADR 180,900 5,359,163
*Worldcom Inc. 60,100 1,622,700
------------
19,484,070
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
---------- ------------
<S> <C> <C>
Textiles & Apparel: 1.4%
*Fruit of the Loom Inc., A 90,000 $ 1,901,250
Nike Inc., B 36,000 3,024,000
------------
4,925,250
------------
Transportation: 1.0%
*AMR Corp. 4,500 335,813
Atlantic Southeast Airlines Inc. 62,000 1,867,750
British Airways PLC 100,000 655,081
Koninklijke Nedlloyd NV 20,000 681,510
------------
3,540,154
------------
Utilities--Electrical & Gas: 2.4%
American Electric Power Co. Inc. 20,000 702,500
Endesa-Empresa Nacional de Electricidad SA 30,500 1,505,800
Endesa-Empresa Nacional de Electricidad SA, ADR 22,000 1,083,500
Iberdrola SA 85,000 640,000
Pinnacle West Capital Corp. 40,000 980,000
Southern Co. 34,000 760,750
Southern Electric PLC 120,000 1,224,938
VEBA AG 3,500 1,374,187
------------
8,271,675
------------
Wholesale & International Trade: 0.1%
Sime Darby Hongkong Ltd. 300,000 329,551
------------
TOTAL COMMON STOCKS (cost $168,642,097) 210,312,164
------------
PREFERRED STOCKS: 2.2%
Cemig-Cia Energetica de Minas Gerais, pfd. 12,676,000 247,874
News Corp. Ltd., pfd. 200,000 989,367
News Corp. Ltd., ADR, pfd. 80,000 1,600,000
Santander Finance Ltd., B, pfd. 91,500 2,161,688
Telebras-Telecomunicacoes Brasileiras
SA, pfd. 40,981,336 1,366,787
Telebras-Telecomunicacoes Brasileiras
SA, ADR, pfd. 45,600 1,501,950
------------
TOTAL PREFERRED STOCKS (cost $4,869,439) 7,867,666
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
IN LOCAL
CURRENCY**
-----------
<S> <C> <C> <C>
BONDS: 33.7%
Deutsche Bundespost, 7.75%, 10/01/04 Ger. 3,640,000 2,717,498
Essar Gujarat Ltd.,
9.40%, FRN, 7/15/99 U.S. 2,765,000 2,751,175
Eurofima,
9.875%, 1/17/07 Aus. 1,000,000 744,069
European Investment Bank,
5.875%, 11/26/99 Jpn. 280,000,000 3,846,553
Federal Home Loan Bank,
7.735%, 2/09/98 U.S. 1,700,000 1,769,853
Federal Home Loan Mortgage Corp.,
7.82%, 1/27/98 U.S. 2,240,000 2,335,200
Federal National Mortgage Assn.,
7.74%, 2/03/98 U.S. 4,100,000 4,264,779
Federal Republic Germany, Bundeschatweis,
6.875%, 12/02/98 Ger. 7,350,000 5,477,158
</TABLE>
22
<PAGE>
Templeton Variable Products Series Fund
Templeton Asset Allocation Fund
Investment Portfolio June 30, 1995 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
IN LOCAL
CURRENCY** VALUE
----------- ------------
<S> <C> <C> <C>
BONDS (CONT.)
Federal Republic Germany,
Bundesobl 110,
5.375%, 2/22/99 Ger. 2,630,000 $ 1,877,322
Federal Republic of Germany, Bundes,
8.00%, 1/21/02 Ger. 2,400,000 1,842,082
Federal Republic of Germany, Unity,
8.75%, 8/20/01 Ger. 5,140,000 4,084,497
Government of Canada:
6.25%, 9/15/95 Can. 850,000 617,414
10.25%, 12/01/98 Can. 5,033,000 3,976,940
10.50%, 3/01/01 Can. 520,000 427,356
Government of Denmark:
9.00%, 11/15/98 Den. 4,328,000 830,566
8.00%, 5/15/03 Den. 8,392,000 1,510,980
Government of France:
8.50%, 3/28/00 Fr. 9,612,000 2,085,762
9.50%, 1/25/01 Fr. 9,058,000 2,052,742
Henderson Capital International Ltd.,
4.25%, 10/27/96 U.S. 3,000,000 3,000,000
International Bank Recon/Dev.:
6.75%, 3/15/00 Jpn. 298,000,000 4,236,180
7.125%, 4/12/05 Ger. 2,160,000 1,552,061
Kingdom of Denmark, 8.00%, 11/15/01 Den. 14,247,000 2,607,398
Korea Development Bank,
9.48%, 4/02/01 U.S. 500,000 556,640
New South Wales
Treasury Corp.,
7.00%, 4/01/04 Aus. 1,200,000 733,215
Pohang Iron & Steel, 6.625%, 7/01/03 U.S. 1,000,000 973,930
Province of British Columbia,
7.75%, 6/16/03 Can. 1,625,000 1,162,193
Queensland Treasury Corp. Exch. Global,
8.00%, 5/14/03 Aus. 3,775,000 2,501,015
Thailand Military Bank:
11.125%, 6/03/96 Thai. 10,000,000 405,104
11.00%, 6/05/96 Thai. 11,000,000 446,417
Treasury Corp. of Victoria,
8.25%, 10/15/03 Aus. 4,736,000 3,155,168
U.S. Treasury Bonds:
7.25%, 5/15/16 U.S. 1,984,000 2,102,723
6.25%, 8/15/23 U.S. 2,862,000 2,703,245
7.625%, 2/15/25 U.S. 4,656,000 5,258,347
U.S. Treasury Notes:
8.50%, 5/15/97 U.S. 4,180,000 4,372,029
8.75%, 10/15/97 U.S. 8,770,000 9,301,637
8.125%, 2/15/98 U.S. 14,800,000 15,593,132
9.125%, 5/15/99 U.S. 1,370,000 1,516,412
6.875%, 7/31/99 U.S. 1,000,000 1,031,250
7.50%, 11/15/01 U.S. 2,803,000 3,008,852
6.25%, 2/15/03 U.S. 1,175,000 1,178,126
7.25%, 5/15/04 U.S. 5,275,000 5,631,907
11.625%, 11/15/04 U.S. 1,130,000 1,553,400
------------
TOTAL BONDS
(cost $115,899,543) 117,792,327
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
PRINCIPAL
IN LOCAL
CURRENCY** VALUE
--------------------------
<S> <C> <C> <C>
INDEXED SECURITY: 0.7%
(cost $2,410,000)
Goldman Sachs Group LP, (principal and
interest is linked to the change in the
Indonesian Rupiah to U.S. Dollar foreign
exchange rate between issue date (2226.35
Rupiah/U.S. Dollar) and maturity date)
15.85%, 9/15/95 U.S. 2,410,000 $ 2,395,299
------------
SHORT TERM OBLIGATIONS: 2.4%
Bangkok Bank, 11.50%, 5/16/96 Thai. 10,000,000 406,772
Federal Home Loan Bank, 5.89%, 7/13/95 U.S. 800,000 798,688
Federal Home Loan
Mortage Corp.,
5.82%, 8/02/95 U.S. 820,000 816,007
Federal National Mortgage Assn.:
5.88%, 7/11/95 U.S. 3,000,000 2,996,070
5.82%, 7/25/95 U.S. 2,595,000 2,585,476
U.S. Treasury Bills, 5.34%
to 5.74% with
maturities to 9/21/95 U.S. 715,000 708,207
------------
TOTAL SHORT TERM OBLIGATIONS
(cost $8,305,744) 8,311,220
------------
TOTAL INVESTMENTS: 99.1%
(cost $300,126,823) 346,678,676
UNREALIZED LOSS IN FORWARD EXCHANGE CONTRACTS: (0.1)% (Note 5) (217,959)
OTHER ASSETS, LESS LIABILITIES: 1.0% 3,607,969
------------
TOTAL NET ASSETS: 100.0% $350,068,686
============
</TABLE>
*NON-INCOME PRODUCING.
**PRINCIPAL AMOUNT IN CURRENCY OF COUNTRY INDICATED.
23
<PAGE>
Templeton Variable Products Series Fund
Templeton Bond Fund
Financial Highlights
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31
JUNE 30, 1995 -------------------------------------------
(UNAUDITED) 1994 1993 1992 1991 1990
------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 10.86 $ 12.15 $ 10.91 $ 10.99 $ 10.35 $ 10.32
------- ------- ------- ------- ------- -------
Income from investment
operations:
Net investment income .41 .71 .60 .58 .61 .60
Net realized and
unrealized gain (loss) .56 (1.28) .65 .03 1.02 .05
------- ------- ------- ------- ------- -------
Total from investment
operations .97 (.57) 1.25 .61 1.63 .65
------- ------- ------- ------- ------- -------
Distributions:
Dividends from net
investment income (.53) (.55) (.005) (.57) (.64) (.62)
Distributions from net
realized gains -- (.17) (.005) (.12) (.35) --
------- ------- ------- ------- ------- -------
Total distributions (.53) (.72) (.01) (.69) (.99) (.62)
------- ------- ------- ------- ------- -------
Change in net asset
value .44 (1.29) 1.24 (.08) .64 .03
------- ------- ------- ------- ------- -------
Net asset value, end of
period $ 11.30 $ 10.86 $ 12.15 $ 10.91 $ 10.99 $ 10.35
======= ======= ======= ======= ======= =======
TOTAL RETURN * 9.31% (4.88)% 11.46% 5.53% 15.86% 6.33%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period (000) $31,311 $29,343 $29,347 $15,674 $ 8,142 $ 4,076
Ratio of expenses to
average net assets 0.77%** 0.90% 0.83% 1.00% 1.06% 1.56%
Ratio of expenses, net
of reimbursement,
to average net assets 0.77%** 0.90% 0.83% 1.00% 1.00% 1.00%
Ratio of net investment
income to average net
assets 7.63%** 6.80% 6.50% 6.93% 7.63% 7.65%
Portfolio turnover rate 146.84% 203.91% 170.33% 147.77% 551.45% 107.58%
</TABLE>
* TOTAL RETURN DOES NOT INCLUDE DEDUCTIONS AT THE FUND OR CONTRACT LEVEL FOR
COST OF INSURANCE CHARGES, PREMIUM LOAD, ADMINISTRATIVE CHARGES, MORTALITY
AND EXPENSE RISK CHARGES OR OTHER CHARGES THAT MAY BE INCURRED UNDER THE
VARIABLE ANNUITY CONTRACT FOR WHICH THE FUND SERVES AS AN UNDERLYING
INVESTMENT VEHICLE.
** ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
24
<PAGE>
Templeton Variable Products Series Fund
Templeton Bond Fund
Investment Portfolio, June 30, 1995 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT* VALUE
-------------- -----------
<S> <C> <C> <C>
BONDS--CORPORATE: 11.2%
Aracruz Celulose SA, 10.375%, 1/31/02 U.S. 500,000 $ 466,250
Essar Gujarat Ltd.,
9.40%, FRN, 7/15/99 U.S. 284,000 282,580
Ford Motor Credit Corp.,
8.21%, 03/16/99 U.S. 1,300,000 1,371,578
General Motors Corp., 7.625%, 2/15/97 U.S. 375,000 381,923
Henderson Capital International Ltd.,
4.25%, 10/27/96 U.S. 1,000,000 1,000,000
-----------
TOTAL BONDS--CORPORATE
(cost $3,545,792) 3,502,331
-----------
BONDS--GOVERNMENT & GOVERNMENT
AGENCIES: 85.0%
European Investment Bank,
5.875%, 11/26/99 Jpn. 113,000,000 1,552,359
Federal Republic Germany, Bundeschatweis,
6.875%, 12/02/98 Ger. 1,560,000 1,162,499
Federal Republic of Germany, Bundes,
8.00%, 1/21/02 Ger. 500,000 383,767
Government of Canada:
10.25%, 12/01/98 Can. 1,000,000 790,173
10.50%, 3/01/01 Can. 246,000 202,172
Government of Denmark:
9.00%, 11/15/98 Den. 1,635,000 313,765
8.00%, 5/15/03 Den. 3,306,000 595,245
Government of France:
8.50%, 3/28/00 Fr. 3,558,000 772,070
9.50%, 1/25/01 Fr. 3,352,000 759,637
International Bank Recon/Dev.:
6.75%, 3/15/00 Jpn. 118,000,000 1,677,413
7.125%, 4/12/05 Ger. 855,000 614,357
KFW International Finance,
6.25%, 10/15/03 Ger. 900,000 613,341
Kingdom of Denmark,
8.00%, 11/15/01 Den. 3,429,000 627,554
Kingdom of Norway,
6.125%, 5/05/98 Ger. 1,700,000 1,245,806
LKB,
6.75%, 6/22/05 Ger. 2,110,000 1,479,136
New South Wales
Treasury Corp.,
7.00%, 2/01/00 Aus. 2,300,000 1,528,881
NHA, Bank Nova Scotia,
6.375%, 11/01/97 Can. 295,223 210,254
NHA, CIBC,
8.25%, 6/01/97 Can. 492,849 363,874
Province of British Columbia,
7.75%, 6/16/03 Can. 1,000,000 715,196
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT* VALUE
-------------- -----------
<S> <C> <C> <C>
Softe SA,
8.75%, 3/24/97 Itl. 1,000,000,000 $ 598,930
Statkraft SF,
7.50% 11/10/99 Ger. 1,700,000 1,275,307
Thailand Military
Bank, CD,
11.00%, 6/05/96 Thai. 12,000,000 487,000
Treasury Corp. of Victoria,
8.25%, 10/15/03 Aus. 2,290,000 1,525,620
U.S. Treasury Bonds:
7.25%, 5/15/16 U.S. 102,000 108,104
7.625%, 2/15/25 U.S. 935,000 1,055,961
U.S. Treasury Notes:
8.75% 8/15/00 U.S. 320,000 358,400
7.50%, 11/15/01 U.S. 2,223,000 2,386,257
7.25%, 5/15/04 U.S. 2,806,000 2,995,854
11.625%, 11/15/04 U.S. 150,000 206,204
-----------
TOTAL BONDS--GOVERNMENT &
GOVERNMENT AGENCIES
(cost $26,115,523) 26,605,136
-----------
INDEXED SECURITY: 1.8%
(cost $580,000)
Goldman Sachs Group LP, (principal and
interest is linked to the change in the
Indonesian Rupiah to U.S. Dollar foreign
exchange rate between issue date
(2226.35 Rupiah/U.S. Dollar) and
maturity date) 15.85%, 9/15/95 U.S. 580,000 576,462
-----------
SHORT TERM OBLIGATIONS: 0.6%
(cost $172,821)
U.S. Treasury Bill,
5.40%, 9/21/95 U.S. 175,000 172,945
-----------
TOTAL INVESTMENTS: 98.6%
(cost $30,414,136) 30,856,874
UNREALIZED LOSS ON FORWARD EXCHANGE
CONTRACTS: (0.1)% (Note 5) (13,227)
OTHER ASSETS, LESS LIABILITIES: 1.5% 467,300
-----------
TOTAL NET ASSETS: 100.0% $31,310,947
===========
</TABLE>
*CURRENCY OF COUNTRIES INDICATED.
25
<PAGE>
Templeton Variable Products Series Fund
Templeton Money Market Fund
Financial Highlights
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31
JUNE 30, 1995 -------------------------------------------
(UNAUDITED) 1994 1993 1992 1991 1990
------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- -------
Net investment income .03 .03 .02 .03 .05 .07
Dividends from net
investment income (.03) (.03) (.02) (.03) (.05) (.07)
------- ------- ------- ------- ------- -------
Change in net asset
value -- -- -- -- -- --
------- ------- ------- ------- ------- -------
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= =======
TOTAL RETURN * 2.60% 3.48% 2.41% 3.10% 5.59% 7.51%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period (000) $20,052 $33,090 $16,992 $21,454 $22,046 $17,982
Ratio of expenses to
average net assets 0.69%** 0.71% 0.75% 0.69% 0.70% 0.84%
Ratio of expenses, net
of reimbursement, to
average net assets 0.69%** 0.71% 0.75% 0.69% 0.70% 0.84%
Ratio of net investment
income to average
net assets 5.27%** 3.56% 2.38% 3.02% 5.28% 7.19%
</TABLE>
* TOTAL RETURN DOES NOT INCLUDE DEDUCTIONS AT THE FUND OR CONTRACT LEVEL FOR
COST OF INSURANCE CHARGES, PREMIUM LOAD, ADMINISTRATIVE CHARGES, MORTALITY
AND EXPENSE RISK CHARGES OR OTHER CHARGES THAT MAY BE INCURRED UNDER THE
VARIABLE ANNUITY CONTRACT FOR WHICH THE FUND SERVES AS AN UNDERLYING
INVESTMENT VEHICLE.
** ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
26
<PAGE>
Templeton Variable Products Series Fund
Templeton Money Market Fund
Investment Portfolio, June 30, 1995 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- -----------
<S> <C> <C>
GOVERNMENT & GOVERNMENT
AGENCIES: 85.2%
Federal Farm Credit Bank:
6.00%, 7/05/95 $1,600,000 $ 1,600,000
6.15%, 10/02/95 2,000,000 2,000,437
Federal Home Loan Bank:
5.91%, 7/06/95 1,600,000 1,598,424
5.87%, 7/07/95 1,390,000 1,388,414
5.80% 9/26/95 1,500,000 1,499,118
Federal Home Loan Mortgage Corp.:
5.89%, 7/20/95 1,600,000 1,594,764
5.88%, 7/20/95 1,200,000 1,196,080
5.82%, 8/03/95 1,500,000 1,491,755
Federal National Mortgage Assn.:
5.85%, 8/17/95 1,200,000 1,190,640
8.80%, 11/10/95 1,910,000 1,927,403
6.46%, 3/27/96 1,600,000 1,599,325
-----------
TOTAL INVESTMENTS:
(cost $17,086,360) 17,086,360
OTHER ASSETS, LESS LIABILITIES: 14.8% 2,965,511
-----------
TOTAL NET ASSETS: 100.0% $20,051,871
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
27
<PAGE>
Templeton Variable Products Series Fund
Templeton Stock Fund
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995 (unaudited)
<TABLE>
<S> <C>
Assets:
Investment in securities, at value (identified cost $344,923,484) $451,044,036
Cash 112,607
Receivables:
Fund shares sold 6,650
Dividends and interest 1,527,749
------------
Total assets 452,691,042
------------
Liabilities:
Payables:
Investment securities purchased 73,752
Fund shares redeemed 57,905
Accrued expenses 470,352
------------
Total liabilities 602,009
------------
Net assets, at value $452,089,033
============
Net assets consist of:
Undistributed net investment income $ 5,748,480
Net unrealized appreciation 106,120,552
Accumulated net realized gain 5,182,230
Net capital paid in on shares of beneficial interest 335,037,771
------------
Net assets, at value $452,089,033
============
Shares outstanding 23,802,867
============
Net asset value
($452,089,033 / 23,802,867) $ 18.99
============
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1995 (unaudited)
<TABLE>
<S> <C> <C>
Investment income: (net of $514,692
foreign taxes withheld)
Dividends $ 5,652,407
Interest 1,399,129
-----------
Total income $ 7,051,536
Expenses:
Management fees (Note 3) 965,479
Administrative fees (Note 3) 262,879
Custodian fees 101,653
Reports to shareholders 34,500
Audit fees 11,000
Legal fees 3,000
Registration and filing fees 15,000
Trustees' fees and expenses 14,500
Other 6,045
-----------
Total expenses 1,414,056
-----------
Net investment income 5,637,480
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments 5,673,637
Foreign currency transactions (169,299)
-----------
5,504,338
Net unrealized appreciation on investments 44,058,145
-----------
Net realized and unrealized gain 49,562,483
-----------
Net increase in net assets resulting from
operations $55,199,963
===========
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1995 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1994
------------- -----------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 5,637,480 $ 6,368,933
Net realized gain from security and foreign
currency transactions 5,504,338 2,662,297
Net unrealized appreciation (depreciation) 44,058,145 (19,221,431)
------------ ------------
Net increase (decrease) in net assets
resulting from operations 55,199,963 (10,190,201)
Distributions to shareholders:
From net investment income (6,246,335) (3,863,504)
From net realized gain (809,710) --
Fund share transactions (Note 2) 25,096,562 94,510,645
------------ ------------
Net increase in net assets 73,240,480 80,456,940
Net assets:
Beginning of period 378,848,553 298,391,613
------------ ------------
End of period $452,089,033 $378,848,553
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
28
<PAGE>
Templeton Variable Products Series Fund
Templeton International Fund
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995 (unaudited)
<TABLE>
<S> <C>
Assets:
Investment in securities, at value
(identified cost $233,608,512) $249,345,156
Cash 61,964
Receivables:
Fund shares sold 196,614
Dividends and interest 1,034,595
------------
Total assets 250,638,329
------------
Liabilities:
Payables for investment securities purchased 67,885
Accrued expenses 234,658
------------
Total liabilities 302,543
------------
Net assets, at value $250,335,786
============
Net assets consist of:
Undistributed net investment income $ 3,551,222
Unrealized appreciation on investments 15,736,644
Accumulated net realized loss (397,575)
Net capital paid in on shares of beneficial interest 231,445,495
------------
Net assets, at value $250,335,786
============
Shares outstanding 17,733,784
============
Net asset value
($250,335,786 / 17,733,784) $ 14.12
============
</TABLE>
STATEMENT OF OPERATIONS
for the six months ended June 30, 1995 (unaudited)
<TABLE>
<S> <C> <C>
Investment income: (net of $448,276 foreign taxes
withheld)
Dividends $ 3,011,723
Interest 1,158,173
-----------
Total income $ 4,169,896
Expenses:
Management fees (Note 3) 491,052
Administrative fees (Note 3) 127,765
Custodian fees 37,500
Reports to shareholders 7,500
Audit fees 8,000
Legal fees 1,500
Registration fees 22,000
Trustees' fees and expenses 6,000
Other 1,950
-----------
Total expenses 703,267
-----------
Net investment income 3,466,629
Realized and unrealized gain (loss):
Net realized loss on:
Investments (57,332)
Foreign currency transactions (146,563)
-----------
(203,895)
Net unrealized appreciation on investments 14,356,913
-----------
Net realized and unrealized gain 14,153,018
-----------
Net increase in net assets resulting from operations $17,619,647
===========
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1995 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1994
------------- -----------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 3,466,629 $ 1,530,321
Net realized gain (loss) from security and
foreign currency transactions (203,895) 435,785
Net unrealized appreciation (depreciation) 14,356,913 (6,228,265)
------------ ------------
Net increase (decrease) in net assets re-
sulting from operations 17,619,647 (4,262,159)
Distributions to shareholders:
From net investment income (1,444,552) (310,975)
From net realized gain (619,093) (894,051)
Fund share transactions (Note 2) 84,689,405 111,680,756
------------ ------------
Net increase in net assets 100,245,407 106,213,571
Net assets:
Beginning of period 150,090,379 43,876,808
------------ ------------
End of period $250,335,786 $150,090,379
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
29
<PAGE>
Templeton Variable Products Series Fund
Templeton Asset Allocation Fund
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995 (unaudited)
<TABLE>
<S> <C>
Assets:
Investment in securities, at value
(identified cost $300,126,823) $346,678,676
Cash 97,953
Receivables:
Investment securities sold 18,169
Fund shares sold 126,288
Dividends and interest 3,743,188
------------
Total assets 350,664,274
------------
Liabilities:
Payables for investment securities purchased 51,124
Unrealized loss in forward exchange contracts
(Note 5) 217,959
Accrued expenses 326,505
------------
Total liabilities 595,588
------------
Net assets, at value $350,068,686
============
Net assets consist of:
Undistributed net investment income $ 8,378,404
Net unrealized appreciation 46,332,420
Accumulated net realized loss (5,412,277)
Net capital paid in on shares of beneficial interest 300,770,139
------------
Net assets, at value $350,068,686
============
Shares outstanding 20,462,717
============
Net asset value
($350,068,686 / 20,462,717) $ 17.11
============
</TABLE>
STATEMENT OF OPERATIONS
for the six months ended June 30, 1995 (unaudited)
<TABLE>
<S> <C> <C>
Investment income: (net of $297,356 foreign taxes
withheld)
Dividends $ 2,947,819
Interest 5,082,512
-----------
Total income $ 8,030,331
Expenses:
Management fees (Note 3) 753,755
Administrative fees (Note 3) 205,774
Custodian fees 36,000
Reports to shareholders 22,500
Audit fees 11,000
Legal fees 1,500
Registration and filing fees 15,000
Trustees' fees and expenses 12,500
Other 4,059
-----------
Total expenses 1,062,088
-----------
Net investment income 6,968,243
Realized and unrealized gain (loss):
Net realized loss on:
Investments (187,213)
Foreign currency transactions (787,314)
-----------
(974,527)
-----------
Net unrealized appreciation on:
Investments 30,595,347
Foreign currency translation of other assets and
liabilities 19,215
-----------
30,614,562
-----------
Net realized and unrealized gain 29,640,035
-----------
Net increase in net assets resulting from operations $36,608,278
===========
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1995 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1994
------------- -----------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 6,968,243 $ 9,666,407
Net realized loss from security and foreign
currency transactions (974,527) (4,437,748)
Net unrealized appreciation (depreciation) 30,614,562 (13,727,789)
------------ ------------
Net increase (decrease) in net assets re-
sulting from operations 36,608,278 (8,499,130)
Distributions to shareholders:
From net investment income (7,828,137) (3,982,153)
From net realized gain -- (841,797)
Fund share transactions (Note 2) 33,116,327 118,135,628
------------ ------------
Net increase in net assets 61,896,468 104,812,548
Net assets:
Beginning of period 288,172,218 183,359,670
------------ ------------
End of period $350,068,686 $288,172,218
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
30
<PAGE>
Templeton Variable Products Series Fund
Templeton Bond Fund
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995 (unaudited)
<TABLE>
<S> <C>
Assets:
Investment in securities, at value
(identified cost $30,414,136) $30,856,874
Receivables:
Investment securities sold 1,478,144
Fund shares sold 69
Interest 697,604
Unrealized gain in forward exchange contracts
(Note 5) 2,209
-----------
Total assets 33,034,900
-----------
Liabilities:
Payables:
Investment securities purchased 1,614,506
Fund shares redeemed 21,015
Unrealized loss in forward exchange contracts
(Note 5) 15,436
Accrued expenses 72,996
-----------
Total liabilities 1,723,953
-----------
Net assets, at value $31,310,947
===========
Net assets consist of:
Undistributed net investment income $ 1,731,511
Net unrealized appreciation 431,260
Accumulated net realized loss (2,285,273)
Net capital paid in on shares of beneficial interest 31,433,449
-----------
Net assets, at value $31,310,947
===========
Shares outstanding 2,771,764
===========
Net asset value
($31,310,947 / 2,771,764) $ 11.30
===========
</TABLE>
STATEMENT OF OPERATIONS
for the six months ended June 30, 1995 (unaudited)
<TABLE>
<S> <C> <C>
Interest income $ 1,277,116
Expenses:
Management fees (Note 3) $ 75,989
Administrative fees (Note 3) 26,867
Reports to shareholders 5,600
Audit fees 2,000
Legal fees 1,000
Registration and filing fees 1,000
Trustees' fees and expenses 1,500
Other 3,184
Total expenses 117,140
-----------
Net investment income 1,159,976
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments 595,873
Foreign currency transactions (305,423)
----------
290,450
----------
Net unrealized appreciation on:
Investments 1,281,531
Foreign currency translation of other assets and lia-
bilities 4,681
----------
1,286,212
----------
Net realized and unrealized gain 1,576,662
-----------
Net increase in net assets resulting from operations $ 2,736,638
===========
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1995 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1994
------------- -----------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 1,159,976 $ 2,036,843
Net realized gain (loss) from security and
foreign currency transactions 290,450 (2,557,896)
Net unrealized appreciation (depreciation) 1,286,212 (1,079,199)
----------- -----------
Net increase (decrease) in net assets re-
sulting from operations 2,736,638 (1,600,252)
Distributions to shareholders:
From net investment income (1,445,138) (1,463,533)
From net realized gain -- (417,139)
Fund share transactions (Note 2) 676,066 3,477,319
----------- -----------
Net increase (decrease) in net assets 1,967,566 (3,605)
Net assets:
Beginning of period 29,343,381 29,346,986
----------- -----------
End of period $31,310,947 $29,343,381
=========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
31
<PAGE>
Templeton Variable Products Series Fund
Templeton Money Market Fund
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995 (unaudited)
<TABLE>
<S> <C>
Assets:
Investments in securities, at value and cost $17,086,360
Cash 4,443
Receivables:
Investment securities sold 2,875,474
Fund shares sold 370
Interest 130,206
-----------
Total assets 20,096,853
-----------
Liabilities:
Accrued expenses 44,982
-----------
Total liabilities 44,982
-----------
Net assets (equivalent to $1.00 per share based on 20,051,871
shares of beneficial interest outstanding) $20,051,871
===========
</TABLE>
STATEMENT OF OPERATIONS
for the six months ended June 30, 1995 (unaudited)
<TABLE>
<S> <C> <C>
Interest income $690,071
Expenses:
Management fees (Note 3) $40,957
Administrative fees (Note 3) 15,042
Custodian fees 8,000
Reports to shareholders 2,000
Audit Fees 3,500
Registration Fees 1,000
Legal Fees 2,000
Trustees' fees and expenses 5,500
Other 1,374
-------
Total expenses 79,373
--------
Net investment income 610,698
Net realized loss on investments (1,883)
--------
Net increase in net assets resulting from operations $608,815
========
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1995 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1994
------------- -----------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 610,698 $ 896,760
Net realized loss from security transac-
tions (1,883) (6,688)
------------ -----------
Net increase in net assets resulting from
operations 608,815 890,072
Distributions to shareholders from net
investment income (608,815) (890,072)
Fund share transactions (Note 2) (13,038,264) 16,098,487
------------ -----------
Net increase (decrease) in net assets (13,038,264) 16,098,487
Net assets:
Beginning of period 33,090,135 16,991,648
------------ -----------
End of Period $ 20,051,871 $33,090,135
============ ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
32
<PAGE>
Templeton Variable Products Series Fund
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
1. SUMMARY OF ACCOUNTING POLICIES
Templeton Variable Products Series Fund (the Trust) is a Massachusetts business
trust and an open-end, diversified management investment company registered un-
der the Investment Company Act of 1940. The Trust is divided into five series
(the Funds), each with its own investment objective and policies. The five
funds of the Trust are: Templeton Stock Fund, Templeton International Fund,
Templeton Asset Allocation Fund, Templeton Bond Fund, and Templeton Money Mar-
ket Fund. The following summarizes the Trust's significant accounting policies.
a. Securities Valuations:
Securities held by Templeton Stock, International, Asset Allocation, and Bond
Funds listed or traded on a recognized national or foreign stock exchange or
NASDAQ are valued at the last reported sales prices on the principal exchange
on which the securities are traded. Over-the-counter securities and listed se-
curities for which no sale is reported are valued at the mean between the last
current bid and asked prices. Securities for which market quotations are not
readily available are valued at fair value as determined by management and ap-
proved in good faith by the Board of Trustees. Securities held by Templeton
Money Market Fund are valued using the amortized cost valuation method, which
involves valuing a portfolio security at its cost and thereafter assuming a
constant amortization to maturity of any discount or premium.
b. Foreign Exchange Contracts:
Templeton Asset Allocation and Bond Funds may enter into forward exchange con-
tracts and currency option contracts in order to hedge against foreign exchange
risks.
(i) Forward Exchange Contracts: These contracts are valued daily and each
Fund's equity therein, representing unrealized gain or loss on the contracts,
is included in the Statement of Assets and Liabilities. Realized and
unrealized gains and losses are included in the Statement of Operations.
(ii) Currency Option Contracts: Options purchased are recorded as investments;
options written (sold) are accounted for as liabilities. When an option ex-
pires, the premium (original option value) is realized as a gain if the op-
tion was written or realized as a loss if the option was purchased. When the
exercise of an option results in a cash settlement, the difference between
the premium and the settlement proceeds is realized as a gain or loss. When
securities are acquired or delivered upon exercise of an option, the acquisi-
tion cost or sale proceeds are adjusted by the amount of the premium. When an
option is closed, the difference between the premium and the cost to close
the position is realized as a gain or loss.
c. Indexed Securities:
The Bond Fund and Asset Allocation Fund may invest in debt instruments in which
the principal and/or interest is dependent on another factor such as a yield
curve, currency exchange rates or commodity prices. The Fund's objective in
holding these notes, commonly called structured notes, is to tailor the Fund's
investment based on specific risk and returns it wishes to assume while avoid-
ing unwanted risk or change the Fund's exposure to a particular foreign ex-
change rate or the spread between two foreign exchange rates.
d. Foreign Currency Translations:
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the rate of exchange of
such currencies against U.S. dollars on the date of valuation. Purchases and
sales of portfolio securities and income items denominated in foreign curren-
cies are translated into U.S. dollar amounts on the respective dates of such
transactions. When the Fund purchases or sells foreign securities it will cus-
tomarily enter into a foreign exchange contract to minimize currency risk from
the trade date to the settlement date of such transaction.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of for-
eign currencies, currency gains or losses realized between the trade and set-
tlement dates on securities transactions, the differences between the amounts
of dividends, interest, and foreign withholding taxes recorded on the Fund's
books, and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities other than investments in securities at the end
of the fiscal period, resulting from changes in the exchange rate.
e. Income Taxes:
It is the Fund's policy to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all its
taxable income to its shareholders. Therefore, no provision has been made for
income taxes.
f. Distributions to Shareholders:
Templeton Money Market Fund's net investment income (consisting principally of
interest accrued or discount earned less amortization of premium and estimated
expenses) is declared as a dividend daily, including weekends and holidays, im-
mediately prior to the determination of net asset value, and is paid monthly.
Templeton Stock, International, Asset Allocation, and Bond Funds normally pay
annual dividends representing substantially all of their net investment income
and distribute annually any net realized capital gains. Distributions to share-
holders are recorded on the ex-dividend date.
g. Security Transactions, Investment Income, and Expenses:
Security transactions are accounted for on a trade date basis. Dividend income
is recorded on the ex-dividend date. Certain dividends on foreign securities
are recorded as soon as information is available to the Fund. Interest income
and estimated expenses are accrued daily. Distributions to shareholders, which
are determined in accordance with income tax regulations, are recorded on the
ex-dividend date.
33
<PAGE>
Templeton Variable Products Series Fund
Notes to Financial Statements (unaudited) (cont.)
- --------------------------------------------------------------------------------
2. TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
At June 30, 1995, there were an unlimited number of shares of beneficial inter-
est authorized ($0.01 par value). Transactions in the Fund's shares were as
follows:
<TABLE>
<CAPTION>
TEMPLETON STOCK FUND
----------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1995 DECEMBER 31, 1994
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares sold 2,107,306 $ 36,756,265 7,300,635 $128,222,948
Shares issued on
reinvestment of
distributions 416,778 7,056,045 221,703 3,862,069
Shares redeemed (1,082,030) (18,715,748) (2,181,965) (37,574,372)
----------- ------------ ----------- ------------
Net increase 1,442,054 $ 25,096,562 5,340,373 $ 94,510,645
=========== ============ =========== ============
<CAPTION>
TEMPLETON INTERNATIONAL FUND
----------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1995 DECEMBER 31, 1994
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares sold 6,835,172 $ 90,916,703 9,440,218 $128,557,308
Shares issued on
reinvestment of
distributions 160,096 2,063,645 88,932 1,205,026
Shares redeemed (615,503) (8,290,943) (1,346,946) (18,081,578)
----------- ------------ ----------- ------------
Net increase 6,379,765 $ 84,689,405 8,182,204 $111,680,756
=========== ============ =========== ============
<CAPTION>
TEMPLETON ASSET ALLOCATION FUND
----------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1995 DECEMBER 31, 1994
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares sold 2,179,207 $ 34,747,497 7,349,436 $119,000,722
Shares issued on
reinvestment of
distributions 506,348 7,828,137 298,716 4,821,275
Shares redeemed (591,566) (9,459,307) (357,371) (5,686,369)
----------- ------------ ----------- ------------
Net increase 2,093,989 $ 33,116,327 7,290,781 $118,135,628
=========== ============ =========== ============
<CAPTION>
TEMPLETON BOND FUND
----------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1995 DECEMBER 31, 1994
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares sold 246,509 $ 2,694,930 775,899 $ 8,775,844
Shares issued on
reinvestment of
distributions 136,463 1,445,138 167,093 1,874,785
Shares redeemed (314,381) (3,464,002) (654,733) (7,173,310)
----------- ------------ ----------- ------------
Net increase 68,591 $ 676,066 288,259 $ 3,477,319
=========== ============ =========== ============
<CAPTION>
TEMPLETON MONEY MARKET FUND
----------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1995 DECEMBER 31, 1994
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares sold 12,156,506 $ 12,156,506 62,016,452 $ 62,016,452
Shares issued on
reinvestment of
distributions 608,629 608,629 888,510 888,510
Shares redeemed (25,803,399) (25,803,399) (46,806,475) (46,806,475)
----------- ------------ ----------- ------------
Net increase (decrease) (13,038,264) $(13,038,264) 16,098,487 $ 16,098,487
=========== ============ =========== ============
</TABLE>
34
<PAGE>
Templeton Variable Products Series Fund
Notes to Financial Statements (unaudited) (cont.)
- --------------------------------------------------------------------------------
3. INVESTMENT MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Certain officers of the Trust are also directors or officers of Templeton In-
vestment Counsel, Inc. (TICI) and Templeton Funds Annuity Company (TFAC), the
Funds' investment manager and administrative manager, respectively. TICI serves
as investment manager of the Templeton Stock, International, and Asset Alloca-
tion Funds; and Templeton Global Bond Managers, a division of TICI, serves as
investment manager of the Templeton Bond and Money Market Funds. Templeton
Stock, International, Asset Allocation, and Bond Funds each pay a monthly in-
vestment management fee, equal on an annual basis, to 0.50% of its average
daily net assets up to $200 million, 0.45% of such net assets from $200 million
up to $1.3 billion, and 0.40% of such net assets in excess of $1.3 billion.
Templeton Money Market Fund pays a monthly investment management fee equal on
an annual basis to 0.35% of its average daily net assets up to $200 million,
0.30% of such net assets from $200 million up to $1.3 billion, and 0.25% of
such net assets in excess of $1.3 billion.
Each Fund pays TFAC its allocable share of a monthly fee equivalent on an an-
nual basis to 0.15% of the combined average daily net assets of the Funds, re-
duced to 0.135% of such assets in excess of $200 million, 0.10% of such assets
in excess of $700 million and 0.075% of such assets in excess of $1.2 billion.
4. PURCHASES AND SALES OF SECURITIES
The cost of securities for federal income tax purposes is the same as that
shown in the investment portfolios. Realized gains and losses are reported on
an identified cost basis.
The aggregate gross unrealized appreciation and depreciation of portfolio secu-
rities, based on cost for federal income tax purposes, and purchases and sales
of securities (excluding short-term securities) for the six months ended June
30, 1995, were as follows:
<TABLE>
<CAPTION>
TEMPLETON TEMPLETON TEMPLETON TEMPLETON
STOCK INTERNATIONAL ASSET BOND
FUND FUND ALLOCATION FUND FUND
------------ ------------- --------------- -----------
<S> <C> <C> <C> <C>
Unrealized appreciation $118,706,778 $24,109,626 $ 55,141,363 $ 647,018
Unrealized depreciation (12,586,226) (8,372,982) (8,589,510) (204,280)
------------ ----------- ------------ -----------
Net unrealized
appreciation $106,120,552 $15,736,644 $ 46,551,853 $ 442,738
------------ ----------- ------------ -----------
Purchases $ 30,015,925 $84,482,572 $163,887,095 $43,588,831
------------ ----------- ------------ -----------
Sales $ 14,290,915 $ 3,171,303 $ 93,159,893 $41,199,324
============ =========== ============ ===========
</TABLE>
At December 31, 1994, Templeton Asset Allocation and Bond Funds had tax basis
capital losses of $2,600,000 and $1,900,000, respectively, which may be carried
over to offset future capital gains. Such losses expire December 31, 2002.
5. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
During the six months ended June 30, 1995, Templeton Asset Allocation and Bond
Funds have been parties to financial instruments with off-balance-sheet risks,
primarily forward exchange contracts, futures contracts, and written currency
options, in order to minimize the risk to the Funds with respect to their port-
folio transactions from adverse changes in the relationship between the U.S.
dollar and foreign currencies and interest rates. These instruments involve
market risks in excess of the amount recognized on the Statements of Assets and
Liabilities; some of these risks have been minimized by offsetting contracts.
Risks arise from the possible inability of counterparties to meet the terms of
their contracts, future movement in currency value and interest rates and con-
tract positions that are not exact offsets. The contract amounts indicate the
extent of the Funds' involvement in such contracts.
Forwards: A forward exchange contract is an agreement between two parties to
exchange different currencies at a specified rate at an agreed upon future
date.
At June 30, 1995, the Asset Allocation and Bond Funds had outstanding forward
exchange contracts for the purchase and sale of currencies as set out below.
These contracts are reported in the financial statements at each Fund's net eq-
uity, as measured by the difference between the forward exchange rates at the
reporting date and the forward exchange rates at the dates of entry into the
contract:
<TABLE>
<S> <C>
TEMPLETON ASSET ALLOCATION FUND
Contracts to sell:
3,600,000 Deutschemarks for 2,570,786 U.S. dollars,
July 31, 1995 $ (35,853)
Unrealized loss from offsetting forward exchange
contracts (182,106)
---------
Net unrealized loss in forward exchange contracts $(217,959)
=========
TEMPLETON BOND FUND
Contract to sell:
1,000,000,000 Italian Lira for 610,687 U.S. dollars,
July 31, 1995 $ 2,209
---------
Contract to sell:
1,550,000 Deutschemarks for 1,106,866 U.S. dollars,
July 31, 1995 (15,436)
---------
Net unrealized loss in forward exchange contracts $ (13,227)
=========
</TABLE>
35
<PAGE>
Phoenix Home Life Variable Accumulation Account
Templeton Stock Sub-Account
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
June 30, 1995 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments in Templeton Stock Fund (identified cost
$183,968,723) $280,280,160
------------
LIABILITIES:
Accrued expenses due related parties 314,508
------------
Net assets $279,965,652
============
CAPITAL:
Cost to participants $179,790,240
Undistributed investment income 16,897,181
Mortality and expense risk and administrative charges (12,238,136)
Net realized loss (795,070)
Net unrealized appreciation 96,311,437
------------
Total capital $279,965,652
============
Accumulation units outstanding 148,323,570
============
Net asset value per unit $ 1.887533
============
</TABLE>
STATEMENT OF OPERATIONS
for the six months endedJune 30, 1995 (Unaudited)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 4,513,137
EXPENSES:
Mortality and expense risk and administrative
charges 1,772,943
-----------
Net investment income 2,740,194
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss $ (13,887)
Net unrealized appreciation on investment in the
Templeton Variable Products Series Fund 30,137,824
-----------
Net gain on investments 30,123,937
-----------
Net increase in net assets resulting from
operations $32,864,131
===========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1995 YEAR ENDED
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED) DECEMBER 31, 1994
------------- -----------------
<S> <C> <C>
Increase (decrease) in net assets:
OPERATIONS:
Net investment income (loss) $ 2,740,194 $ (470,403)
Net realized loss (13,887) (543,455)
Net unrealized appreciation (depreciation) 30,137,824 (8,428,617)
------------ ------------
Increase (decrease) in net assets resulting
from operations 32,864,131 (9,442,475)
ACCUMULATION UNIT TRANSACTIONS:
Participant deposits 6,444,561 29,642,336
Participant transfers 12,357,935 (3,154,829)
Participant withdrawals (12,934,314) (12,541,172)
------------ ------------
Net increase resulting from participant
transactions 5,868,182 13,946,335
------------ ------------
Total increase in net assets 38,732,313 4,503,860
NET ASSETS:
Beginning of period 241,233,339 236,729,479
------------ ------------
End of period $279,965,652 $241,233,339
============ ============
PARTICIPANT ACCUMULATION UNIT TRANSACTIONS
(IN UNITS):
Participant deposits 3,723,328 17,130,701
Participant transfers 7,164,766 (2,067,568)
Participant withdrawals (7,436,156) (7,299,381)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
36
<PAGE>
Phoenix Home Life Variable Accumulation Account
Templeton International Sub-Account
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
June 30, 1995 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments in Templeton International Fund (identified cost
$72,857,967) $84,299,273
-----------
LIABILITIES:
Accrued expenses due related parties 94,600
-----------
Net assets $84,204,673
===========
CAPITAL:
Cost to participants $72,811,632
Undistributed investment income 2,072,302
Mortality and expense risk and administrative charges (1,768,465)
Net realized loss (352,102)
Net unrealized appreciation 11,441,306
-----------
Total capital $84,204,673
===========
Accumulation units outstanding 60,206,083
===========
Net asset value per unit $ 1.398607
===========
</TABLE>
STATEMENT OF OPERATIONS
for the six months ended June 30, 1995 (Unaudited)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 867,276
EXPENSES:
Mortality and
expense risk and
administrative charges 553,198
----------
Net investment income 314,078
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain $ 3,514
Net unrealized appreciation on investment in the
Templeton Variable Products Series Fund 5,335,599
----------
Net gain on investments 5,339,113
----------
Net increase in net assets resulting from operations $5,653,191
==========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1995 YEAR ENDED
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED) DECEMBER 31, 1994
------------- -----------------
<S> <C> <C>
Increase (decrease) in net assets:
OPERATIONS:
Net investment income $ 314,078 $ 281,774
Net realized gain (loss) 3,514 (357,279)
Net unrealized appreciation (depreciation) 5,335,599 (2,769,264)
----------- -----------
Increase (decrease) in net assets resulting
from operations 5,653,191 (2,844,769)
ACCUMULATION UNIT TRANSACTIONS:
Participant deposits 3,142,801 29,007,117
Participant transfers 748,760 7,898,814
Participant withdrawals (1,223,597) (1,930,505)
----------- -----------
Net increase resulting from participant
transactions 2,667,964 34,975,426
----------- -----------
Total increase in net assets 8,321,155 32,130,657
NET ASSETS:
Beginning of period 75,883,518 43,752,861
----------- -----------
End of period $84,204,673 $75,883,518
=========== ===========
PARTICIPANT ACCUMULATION UNIT TRANSACTIONS
(IN UNITS):
Participant deposits 2,387,532 21,504,720
Participant transfers 529,918 5,771,206
Participant withdrawals (925,676) (1,423,282)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
37
<PAGE>
Phoenix Home Life Variable Accumulation Account
Templeton Asset Allocation Sub-Account
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
June 30, 1995 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment in Templeton Asset Allocation Fund (identified cost
$104,853,153) $135,636,160
------------
LIABILITIES:
Accrued expenses due related parties 152,620
------------
Net assets $135,483,540
============
CAPITAL:
Cost to participants $ 99,474,785
Undistributed investment income 10,399,167
Mortality and expense risk and administrative charges (5,134,197)
Net realized loss (39,222)
Net unrealized appreciation 30,783,007
------------
Total capital $135,483,540
============
Accumulation units outstanding 74,940,805
============
Net asset value per unit $ 1.807874
============
</TABLE>
STATEMENT OF OPERATIONS
for the six months ended June 30, 1995 (Unaudited)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 3,191,683
EXPENSES:
Mortality and
expense risk and
administrative charges 870,318
-----------
Net investment income 2,321,365
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain $ 56,456
Net unrealized appreciation on investments in the
Templeton Variable Products Series Fund 11,303,833
-----------
Net gain on investments 11,360,289
-----------
Net increase in net assets resulting from
operations $13,681,654
===========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1995 YEAR ENDED
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED) DECEMBER 31, 1994
------------- -----------------
<S> <C> <C>
Increase (decrease) in net assets:
OPERATIONS:
Net investment income $ 2,321,365 $ 1,068,291
Net realized gain (loss) 56,456 (22,925)
Net change in unrealized appreciation
(depreciation) 11,303,833 (6,484,867)
------------ ------------
Increase (decrease) in net assets resulting
from operations 13,681,654 (5,439,501)
ACCUMULATION UNIT TRANSACTIONS:
Participant deposits 3,168,940 18,348,190
Participant transfers 615,731 (1,298,081)
Participant withdrawals (3,768,311) (3,504,621)
------------ ------------
Net increase resulting from participant
transactions 16,360 13,545,488
------------ ------------
Total increase in net assets 13,698,014 8,105,987
NET ASSETS:
Beginning of period 121,785,526 113,679,539
------------ ------------
End of period $135,483,540 $121,785,526
============ ============
PARTICIPANT ACCUMULATION UNIT TRANSACTIONS
(IN UNITS):
Participant deposits 1,884,711 10,912,869
Participant transfers 373,331 (814,228)
Participant withdrawals (2,218,294) (2,100,180)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
38
<PAGE>
Phoenix Home Life Variable Accumulation Account
Templeton Bond Sub-Account
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
June 30, 1995 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments in Templeton Bond Fund (identified cost $18,618,022) $18,720,644
-----------
LIABILITIES:
Accrued expenses due related parties 21,373
-----------
Net assets $18,699,271
===========
CAPITAL:
Cost to participants $15,918,571
Undistributed investment income 3,653,513
Mortality and expense risk and administrative charges (828,833)
Net realized loss (146,602)
Net unrealized appreciation 102,622
-----------
Total capital $18,699,271
===========
Accumulation units outstanding 12,604,120
===========
Net asset value per unit $ 1.483584
===========
</TABLE>
STATEMENT OF OPERATIONS
for the six months ended June 30, 1995 (Unaudited)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 885,991
EXPENSES:
Mortality and expense risk and administrative charges 127,734
----------
Net investment income 758,257
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain $ 15,873
Net unrealized appreciation on investment in the
Templeton Variable Products Series Fund 764,307
--------
Net gain on investments 780,180
----------
Net increase in net assets resulting from operations $1,538,437
==========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1995 YEAR ENDED
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED) DECEMBER 31, 1994
------------- -----------------
<S> <C> <C>
Increase (decrease) in net assets:
OPERATIONS:
Net investment income $ 758,257 $ 985,952
Net realized gain (loss) 15,873 (177,668)
Net unrealized appreciation (depreciation) 764,307 (2,112,571)
----------- -----------
Increase (decrease) in net assets resulting
from operations 1,538,437 (1,304,287)
ACCUMULATION UNIT TRANSACTIONS:
Participant deposits 365,519 3,724,931
Participant transfers (513,632) (3,300,200)
Participant withdrawals (606,605) (985,996)
----------- -----------
Net decrease resulting from participant
transactions (754,718) (561,265)
----------- -----------
Total increase (decrease) in net assets 783,719 (1,865,552)
NET ASSETS:
Beginning of period 17,915,552 19,781,104
----------- -----------
End of period $18,699,271 $17,915,552
=========== ===========
PARTICIPANT ACCUMULATION UNIT TRANSACTIONS
(IN UNITS):
Participant deposits 258,097 2,641,788
Participant transfers (340,637) (2,398,127)
Participant withdrawals (423,843) (711,053)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
39
<PAGE>
Phoenix Home Life Variable Accumulation Account
Templeton Money Market Sub-Account
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
June 30, 1995 (Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments in Templeton Money Market Fund (identified cost
$19,951,750) $19,951,750
Dividends receivable 84,771
-----------
Total assets 20,036,521
-----------
LIABILITIES:
Accrued expenses due related parties 19,419
-----------
Net assets $20,017,102
===========
CAPITAL:
Cost to participants $16,890,352
Undistributed investment income 4,612,074
Mortality and expense risk and administrative charges (1,485,327)
Net realized gain 3
-----------
Total capital $20,017,102
===========
Accumulation units outstanding 15,851,908
===========
Net asset value per unit $ 1.262757
===========
</TABLE>
STATEMENT OF OPERATIONS
for the six months endedJune 30, 1995 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends $612,973
EXPENSES:
Mortality and expense risk and administrative charges 161,527
--------
Net investment income 451,446
REALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain 3
--------
Net increase in net assets resulting
from operations $451,449
========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1995 YEAR ENDED
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED) DECEMBER 31, 1994
------------- -----------------
<S> <C> <C>
Increase (decrease) in net assets:
OPERATIONS:
Net investment income $ 451,446 $ 535,293
Net realized gain 3 --
------------ -----------
Increase in net assets resulting from
operations 451,449 535,293
ACCUMULATION UNIT TRANSACTIONS:
Participant deposits 3,436,244 19,201,805
Participant transfers (14,527,425) (889,691)
Participant withdrawals (2,243,903) (2,802,348)
------------ -----------
Net (decrease) increase resulting from
participant transactions (13,335,084) 15,509,766
------------ -----------
Total (decrease) increase in net assets (12,883,635) 16,045,059
NET ASSETS:
Beginning of period 32,900,737 16,855,678
------------ -----------
End of period $ 20,017,102 $32,900,737
============ ===========
PARTICIPANT ACCUMULATION UNIT TRANSACTIONS
(IN UNITS):
Participant deposits 2,744,620 15,730,225
Participant transfers (11,662,301) (765,826)
Participant withdrawals (1,795,956) (2,290,446)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
40
<PAGE>
Phoenix Home Life Variable Accumulation Account
Templeton Stock Sub-Account
Financial Highlights
- --------------------------------------------------------------------------------
PER UNIT OPERATING PERFORMANCE
(for a unit outstanding throughout the period)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1995 --------------------------------------------------
(UNAUDITED) 1994 1993 1992 1991 1990
------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Unit value, beginning of
period $1.665152 $1.726593 $1.305609 $1.235446 $ .981990 $1.119352
--------- --------- --------- --------- --------- ---------
Income from investment
operations:
Net investment income
(loss) .018542 (.003061) .001905 .005151 .013660 .004289
Net realized and
unrealized gain (loss) .203839 (.058380) .419079 .065012 .239796 (.141651)
--------- --------- --------- --------- --------- ---------
Change in unit value for
the period .222381 (.061441) .420984 .070163 .253456 (.137362)
--------- --------- --------- --------- --------- ---------
Unit value, end of
period $1.887533 $1.665152 $1.726593 $1.305609 $1.235446 $ .981990
========= ========= ========= ========= ========= =========
TOTAL RETURN 13.35% (3.56)% 32.24% 5.68% 25.81% (12.27)%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of
period (000) $ 279,966 $ 241,233 $ 236,729 $ 154,657 $ 116,511 $ 73,537
Ratio of expenses to
average net assets 1.38%* 1.38% 1.38% 1.38% 1.38% 1.38%
Ratio of net investment
income (loss) to
average net assets 2.13%* (0.19)% 0.29% 0.63% 1.27% 0.14%
Portfolio turnover rate 13%* 13% 12% 13% 11% 9%
</TABLE>
* ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
41
<PAGE>
Phoenix Home Life Variable Accumulation Account
Templeton International Sub-Account
Financial Highlights
- --------------------------------------------------------------------------------
PER UNIT OPERATING PERFORMANCE
(for a unit outstanding throughout the period)
<TABLE>
<CAPTION>
PERIOD FROM
SIX MONTHS YEAR ENDED MAY 1, 1992
ENDED DECEMBER 31, (COMMENCEMENT OF
JUNE 30, 1995 -------------------- OPERATIONS) TO
(UNAUDITED) 1994 1993 DECEMBER 31, 1992
------------- --------- --------- -----------------
<S> <C> <C> <C> <C>
Unit value, beginning of
period $1.303520 $1.351997 $ .930016 $1.000000
--------- --------- --------- ---------
Income from investment
operations:
Net investment income
(loss) .005283 .004802 (.004905) (.004118)
Net realized and
unrealized gain (loss) .089804 (.053279) .426886 (.065866)
--------- --------- --------- ---------
Change in unit value for
the period .095087 (.048477) .421981 (.069984)
--------- --------- --------- ---------
Unit value, end of
period $1.398607 $1.303520 $1.351997 $ .930016
========= ========= ========= =========
TOTAL RETURN 7.29% (3.59)% 45.37% (7.00)%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of
period (000) $ 84,205 $ 75,884 $ 43,753 $ 7,033
Ratio of expenses to
average net assets 1.38%* 1.38% 1.38% 1.38%*
Ratio of net investment
income (loss) to
average net assets 0.78%* 0.42% (1.38)% (1.32)%*
Portfolio turnover rate 11%* 27% 11% 24%*
</TABLE>
* ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
42
<PAGE>
Phoenix Home Life Variable Accumulation Account
Templeton Asset Allocation Sub-Account
Financial Highlights
- --------------------------------------------------------------------------------
PER UNIT OPERATING PERFORMANCE
(for a unit outstanding throughout the period)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1995 --------------------------------------------------
(UNAUDITED) 1994 1993 1992 1991 1990
------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Unit value, beginning of
period $1.625952 $1.699180 $1.365257 $1.280431 $1.016125 $1.119543
--------- --------- --------- --------- --------- ---------
Income from investment
operations:
Net investment income .030867 .014382 .005156 .004793 .016438 .009497
Net realized and
unrealized gain (loss) .151055 (.087610) .328767 .080033 .247868 (.112915)
--------- --------- --------- --------- --------- ---------
Change in unit value for
the period .181922 (.073228) .333923 .084826 .264306 (.103418)
--------- --------- --------- --------- --------- ---------
Unit value, end of
period $1.807874 $1.625952 $1.699180 $1.365257 $1.280431 $1.016125
========= ========= ========= ========= ========= =========
TOTAL RETURN 11.19% (4.31)% 24.46% 6.62% 26.01% (9.24)%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of
period (000) $ 135,484 $ 121,786 $ 113,680 $ 64,099 $ 35,747 $ 22,329
Ratio of expenses to
average net assets 1.38%* 1.38% 1.38% 1.38% 1.38% 1.38%
Ratio of net investment
income to average
net assets 3.68%* 0.88% 0.91% 1.20% 1.65% 0.69%
Portfolio turnover rate 7%* 5% 4% 3% 13% 11%
</TABLE>
* ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
43
<PAGE>
Phoenix Home Life Variable Accumulation Account
Templeton Bond Sub-Account
Financial Highlights
- --------------------------------------------------------------------------------
PER UNIT OPERATING PERFORMANCE
(for a unit outstanding throughout the period)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1995 ---------------------------------------------------
(UNAUDITED) 1994 1993 1992 1991 1990
------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Unit value, beginning of
period $1.366504 $1.456861 $1.324996 $1.272743 $1.113263 $1.061263
--------- --------- --------- --------- --------- ---------
Income from investment
operations:
Net investment income
(loss) .057706 .068304 (.064612) .016813 .056694 .033475
Net realized and
unrealized gain (loss) .059374 (.158661) .196477 .035440 .102786 .018525
--------- --------- --------- --------- --------- ---------
Change in unit value for
the period .117080 (.090357) .131865 .052253 .159480 .052000
--------- --------- --------- --------- --------- ---------
Unit value, end of
period $1.483584 $1.366504 $1.456861 $1.324996 $1.272743 $1.113263
========= ========= ========= ========= ========= =========
TOTAL RETURN 8.57% (6.20)% 9.95% 4.11% 14.33% 4.90%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of
period (000) $ 18,699 $ 17,916 $ 19,781 $ 11,842 $ 7,141 $ 3,216
Ratio of expenses to
average net assets 1.38%* 1.38% 1.38% 1.38% 1.38% 1.38%
Ratio of net investment
income (loss) to
average net assets 8.19%* 5.16% (1.31)% 6.67% 11.65% 6.87%
Portfolio turnover rate 27%* 27% 13% 31% 50% 35%
</TABLE>
* ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
44
<PAGE>
Phoenix Home Life Variable Accumulation Account
Templeton Money Market Sub-Account
Financial Highlights
- --------------------------------------------------------------------------------
PER UNIT OPERATING PERFORMANCE
(for a unit outstanding throughout the period)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1995 -------------------------------------------------
(UNAUDITED) 1994 1993 1992 1991 1990
------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Unit value, beginning of
period $1.238474 $1.213373 $1.201078 $1.181114 $1.134278 $1.069449
--------- --------- --------- --------- --------- ---------
Income from investment
operations:
Net investment income .024283 .025101 .012295 .019964 .046836 .064829
--------- --------- --------- --------- --------- ---------
Unit value, end of
period $1.262757 $1.238474 $1.213373 $1.201078 $1.181114 $1.134278
========= ========= ========= ========= ========= =========
TOTAL RETURN 1.96% 2.07% 1.02% 1.69% 4.13% 6.06%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of
period (000) $ 20,017 $ 32,901 $ 16,856 $ 21,300 $ 21,890 $ 17,626
Ratio of expenses to
average net assets 1.38%* 1.38% 1.38% 1.38% 1.38% 1.38%
Ratio of net investment
income to
average net assets 3.86%* 2.15% 1.02% 1.68% 3.97% 5.85%
Portfolio turnover rate 105%* 179% 181% 126% 80% 86%
</TABLE>
* ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
45
<PAGE>
Phoenix Home Life Variable Accumulation Account
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
1. ORGANIZATION
Phoenix Home Life Variable Accumulation Account (the Account) is a separate in-
vestment account of Phoenix Home Life Mutual Insurance Company (Phoenix Home
Life) registered as a unit investment trust. The Account consists of eleven
Sub-accounts. These financial statements include five Sub-accounts, Templeton
Stock, Templeton International, Templeton Asset Allocation, Templeton Bond, and
Templeton Money Market which invest solely in a designated portfolio of Temple-
ton Variable Products Series Fund (the Fund). The other six Sub-accounts are
presented in separate financial statements. Each series of the Fund has dis-
tinct investment objectives. Templeton Stock Fund is a capital growth common
stock fund; the Templeton International Fund invests in stocks and debt obliga-
tions of companies and governments outside the United States; the Templeton As-
set Allocation Fund invests in stocks and debt obligations of companies and
governments and money market instruments seeking high total return; the Temple-
ton Bond Fund seeks high current income through investing in debt securities,
rated and unrated, in any category of companies, government and government
agencies, and in debt securities which are convertible into common stock of
such companies; and the Templeton Money Market Fund seeks current income, sta-
bility of principal and liquidity by investing in short-term money market in-
struments.
2. SIGNIFICANT ACCOUNTING POLICIES
a. Valuation of Investments:
Investments are made exclusively in the Funds and are valued at the net asset
value per share of the Series.
b. Investment Transactions and Related Income:
Investment transactions are recorded on the trade date. Realized gains and
losses on sales of investments are determined on the last-in, first-out (LIFO)
cost basis of the investment sold. Dividends from the Fund are recorded on the
ex-dividend date.
c. Income Taxes:
The Account is not a separate entity from Phoenix Home Life and under current
federal income tax law, income arising from the Account is not taxed since re-
serves are established equivalent to such income. Therefore, no provision for
related federal or state income taxes is required.
3. PURCHASES AND SALES OF SHARES OF TEMPLETON VARIABLE PRODUCTS SERIES FUND
Purchases and sales of shares of the Fund for the six months ended June 30,
1995 aggregated the following:
<TABLE>
<CAPTION>
PURCHASES SALES
----------- -----------
<S> <C> <C>
Templeton Stock Fund $24,570,601 $16,503,409
Templeton International Fund 7,278,442 4,466,775
Templeton Asset Allocation Fund 6,709,689 4,645,153
Templeton Bond Fund 2,541,072 2,578,123
Templeton Money Market Fund 12,529,740 25,452,171
</TABLE>
4. INVESTMENT ADVISORY FEES AND RELATED PARTY TRANSACTIONS
Phoenix Home Life provides all administrative services to the Account.
Phoenix Home Life assumes the risk that annuitants as a class may live longer
than expected and that its expenses may be higher than its deductions for such
expenses. In return for the assumption of these mortality and expense risks,
Phoenix Home Life charges each Sub-account the daily equivalent of 0.40% on an
annual basis of the current value of the Sub-account's net assets for mortality
risks assumed and the daily equivalent of 0.85% on an annual basis for expense
risks assumed.
The fees charged for mortality and expense risks assumed by Phoenix Home Life
for the Templeton Stock Sub-account, the Templeton International Sub-account,
the Templeton Asset Allocation Sub-account, the Templeton Bond Sub-account, and
the Templeton Money Market Sub-account aggregated $1,611,766, $502,907,
$791,198, $116,122 and $146,843, respectively, for the six months ended June
30, 1995.
As compensation for administrative services provided to the Account, Phoenix
Home Life additionally receives $35 per year from each annuity contract prior
to the contract's date of maturity. This cost-based charge is deducted from the
Sub-account holding the assets of the participant or on a pro-rata basis from
two or more Sub-accounts in relation to their values under the contract. Upon a
full surrender of a contract, the entire annual administrative charges of $35
is deducted regardless of when the surrender occurs. Phoenix Home Life received
$259,330 for administrative services provided for the six months ended June 30,
1995.
Phoenix Home Life also charges each Sub-account the daily equivalent of 0.125%
on an annual basis of the current value of the Sub-account's net assets to
cover its variable costs of administration, such as printing and distribution
of participant mailings. The variable costs of administrative services provided
by Phoenix Home Life for the Templeton Stock Sub-account, Templeton Interna-
tional Sub-account, Templeton Asset Allocation Sub-account, Templeton Bond Sub-
account and Templeton Money Market Sub-account aggregated $161,177, $50,291,
$79,120, $11,612 and $14,684, respectively, for the six months ended June 30,
1995.
Franklin/Templeton Funds Distributors, Inc. is the principal underwriter and
distributor for the Templeton Sub-accounts of the Account. Phoenix Home Life
reimburses Franklin/Templeton Funds Distributors for expenses incurred as un-
derwriter. On surrender of a contract, surrender charges, which vary from 0-6%
depending upon the duration of each contract deposit, are deducted from the
proceeds and are paid to Phoenix Home Life as reimbursement for services pro-
vided. The surrender charges deducted and paid to Phoenix Home Life were
$305,777 for the six months ended June 30, 1995.
46
<PAGE>
Phoenix Home Life Variable Accumulation Account
Notes to Financial Statements (Cont.)
- --------------------------------------------------------------------------------
Templeton Investment Counsel, Inc. (TICI) serves as investment manager of the
Templeton Stock, International, and Asset Allocation Funds; and Templeton
Global Bond Manager, a division of TICI, serves as investment manager of the
Templeton Bond and Money Market Funds. The investment managers furnish the
Funds with investment research and advice and supervise the investment programs
for the Funds in accordance with each Series' investment objective, policies
and restrictions. Templeton Stock, International, Asset Allocation and Bond
Funds each pay a monthly investment management fee, equal on an annual basis to
0.50% of the average daily net assets up to $200 million, 0.45% of such net as-
sets from $200 million up to $1.3 billion and 0.40% of such net assets in ex-
cess of $1.3 billion. Templeton Money Market Fund pays a monthly investment
management fee equal on an annual basis to 0.35% of its average daily net as-
sets up to $200 million, 0.30% of such net assets from $200 million up to $1.3
billion and 0.25% of such net assets in excess of $1.3 billion.
Each Fund pays the business manager, Templeton Fund Annuity Company (TFAC), a
monthly fee equivalent on an annual basis to 0.15% of the combined average
daily net assets of the Funds, reduced to 0.135% of such assets in excess of
$200 million, 0.10% of such assets in excess of $700 million, and 0.075% of
such assets in excess of $1.2 billion. TFAC provides certain administrative fa-
cilities and services for the Funds.
5. DISTRIBUTION OF NET INCOME
The Account does not expect to declare dividends to participants from accumu-
lated net income. The accumulated net income is distributed to participants as
part of withdrawals of amounts in the form of surrenders, death benefits,
transfers or annuity payments in excess of net purchase payments.
6. DIVERSIFICATION REQUIREMENTS
Under the provisions of Section 817(h) of the Internal Revenue Code (the Code),
a variable annuity contract, other than a contract issued in connection with
certain types of employee benefit plans, will not be treated as an annuity con-
tract for federal tax purposes for any period for which the investments of the
segregated asset account on which the contract is based are not adequately di-
versified. The Code provides that the "adequately diversified" requirement may
be met if the underlying investments satisfy either a statutory safe harbor
test or diversification requirements set forth in regulations issued by the
Secretary of Treasury.
The Internal Revenue Service has issued regulations under Section 817(h) of the
Code. Phoenix Home Life believes that the Account satisfies the current re-
quirements of the regulations, and it intends that the Account will continue to
meet such requirements.
47
<PAGE>
Notes
-----
<PAGE>
THE FRANKLIN TEMPLETON GROUP
Literature Request ~ Call today for a free descriptive brochure and prospectus
on any of the funds listed below. The prospectus contains more complete
information, including fees, charges and expenses, and should be read carefully
before investing or sending money.
Templeton Funds
Americas Government
Securities Fund
Developing Markets Trust
Foreign Fund
Global Infrastructure Fund
Global Opportunities Trust
Greater European Fund
Growth Fund
Growth and Income Fund
Income Fund
Latin American Fund
Real Estate
Securities Fund
Smaller Companies
Growth Fund
World Fund
Franklin Funds Seeking
Tax-Free Income
Federal Tax-Free
Income Fund
Federal Intermediate-Term
Tax-Free Income Fund
High Yield Tax-Free
Income Fund
Insured Tax-Free
Income Fund***
Puerto Rico Tax-Free
Income Fund
Franklin State-Specific
Funds Seeking Tax-Free Income
Alabama
Arizona*
Arkansas**
California*
Colorado
Connecticut
Florida*
Georgia
Hawaii**
Indiana
Kentucky
Louisiana
Maryland
Massachusetts***
Michigan***
Minnesota***
Missouri
New Jersey
New York*
North Carolina
Ohio***
Oregon
Pennsylvania
Tennessee
Texas
Virginia
Washington**
Franklin Funds
Seeking Capital Growth
California Growth Fund
DynaTech Fund
Equity Fund
Global Health
Care Fund
Gold Fund
Growth Fund
International
Equity Fund
Japan Fund
Pacific Growth Fund
Small Cap Growth Fund
Franklin Funds Seeking
Growth and Income
Balance Sheet
Investment Fund
Convertible Securities Fund
Equity Income Fund
Global Utilities Fund
Income Fund
Natural Resources Fund
Premier Return Fund
Real Estate Securities Fund
Rising Dividends Fund
Strategic Income Fund
Utilities Fund
Franklin Funds Seeking
High Current Income
AGE High Income Fund
Global Government
Income Fund
Investment Grade
Income Fund
U.S. Government
Securities Fund
Franklin Funds Seeking
High Current Income and
Stability of Principal
Adjustable Rate
Securities Fund
Adjustable U.S. Government
Securities Fund
Short-Intermediate U.S.
Government
Securities Fund
Franklin Funds for
Non-U.S. Investors
Tax-Advantaged High Yield
Securities Fund
Tax-Advantaged International
Bond Fund
Tax-Advantaged U.S. Government
Securities Fund
Franklin Templeton Global
Currency Funds
German Government
Bond Fund
Global Currency Fund
High Income Currency Fund
Hard Currency Fund
Franklin Money
Market Funds
Money Fund
Federal Money Fund
Tax-Exempt Money
Fund
California Tax-Exempt
Money Fund
New York Tax-Exempt
Money Fund
IFT U.S. Treasury Money
Market Portfolio
Franklin Fund for
Corporations
Corporate Qualified
Dividend Fund
Franklin Tax-Deferred
Annuity
Franklin Valuemark
Franklin Templeton
Valuemark Income Plus
(an immediate annuity)
Fund Information: 1-800/292-9293
Account Services: 1-800/393-3001
To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded and accessed. These calls can be
determined by the presence of a regular beeping tone.
*Two or more fund options available: long-term portfolio, intermediate-term
portfolio, a portfolio of insured municipal securities, and a high yield
portfolio (CA).
**The fund may invest up to 100% of its assets in bonds that pay interest
subject to the federal alternative minimum tax.
***Portfolio of insured municipal securities.
<PAGE>
[LOGO OF FRANKLIN TEMPLETON APPEARS HERE]
700 CENTRAL AVENUE
ST. PETERSBURG, FL 33701
This report must be preceded or accompanied
by the Phoenix Home Life Variable
Accumulation Account and the Templeton
Variable Products Series Fund prospectuses
which set forth the costs, risks and
advantages of an investment in the funds.
These reports and prospectuses do not
constitute an offering in any jurisdiction
in which such offering may not lawfully be [RECYCLING LOGO
made. TIP S95 06/95 APPEARS HERE]
