SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the registrant [ X ]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ X ] Preliminary proxy statement [ ] Confidential, for
use of the Commission only
(as permitted Rule
14a-6(e)(2)
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to 240.14a-11(c) or 240.14a-12
(Name of Registrant as Specified in Its Charter)
TEMPLETON VARIABLE PRODUCTS SERIES FUND
(Name of Person(s) Filing Proxy Statement)
TEMPLETON VARIABLE PRODUCTS SERIES FUND
Payment of filing fee (Check the appropriate box):
[ ] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2), or Item 22(a)(2) of Schedule 14A..
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and O-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11(Set forth the
amount on which the filing fee is calculated and state
how it was determined.)
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary material.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identifying the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
TEMPLETON VARIABLE PRODUCTS SERIES FUND
IMPORTANT INFORMATION FOR
CONTRACT AND POLICYHOLDERS
This document announces the date, time and location of a special meeting of
shareholders, identifies the proposals to be voted on at the meeting, and
contains a proxy statement and voting instruction card. A voting instruction
card is, in essence, a ballot. When you complete your voting instruction card,
it tells your insurance company how to vote its proxy on important issues
relating to the portion of your account that is allocated to your fund(s). If
you complete and sign the voting instruction card, the shares will be voted
exactly as you instruct. If you simply sign the voting instruction card, it will
be voted in the same proportion as shares for which instructions have been
received from other Contract Owners.
WE URGE YOU TO SPEND A FEW MINUTES WITH THE PROXY STATEMENT REVIEWING THE
PROPOSALS AT HAND. THEN, FILL OUT YOUR VOTING INSTRUCTION CARD AND RETURN IT. WE
WANT TO KNOW HOW YOU WOULD LIKE TO VOTE AND WELCOME YOUR COMMENTS. PLEASE TAKE A
FEW MINUTES WITH THESE MATERIALS AND RETURN YOUR VOTING INSTRUCTION CARD. IF YOU
HAVE ANY QUESTIONS, CALL THE FUND INFORMATION DEPARTMENT AT 1-800/DIAL BEN.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Notice of Meeting......................................................... 2
Information About Voting............................................................ 3
The Proposals........................................................................... 5
1. Electing Trustees.......................................................... 5
2. Ratifying or Rejecting Independent Auditors Auditors 12
3. Approving or Disapproving New Investment Management
Agreements................................................................. 12
Information About the Trust and the Funds............................. 19
Additional Information About Voting and The Shareholders Meeting....... 28
</TABLE>
PROXY OR VOTING INSTRUCTION CARD ENCLOSED
<PAGE>
TEMPLETON VARIABLE PRODUCTS SERIES FUND
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of Templeton Variable Products Series Fund (the "Trust"),
consisting of the following series: Templeton Stock Fund ("Stock Fund");
Templeton Bond Fund ("Bond Fund"); Templeton International Fund ("International
Fund"); Templeton Asset Allocation Fund ("Asset Allocation Fund"); Templeton
Developing Markets Fund ("Developing Markets"); and Templeton Money Market Fund
("Money Market Fund") (each a "Fund" and, collectively, the "Funds"):
A Special Meeting (the "Meeting") of shareholders of each of the Funds will be
held at ____________________________ on Monday, February 10, 1997 at 10:00 A.M.
(EST).
During the Meeting, shareholders of the Trust will vote on four proposals:
1. Electing Trustees of the Trust to hold office for the terms specified;
2. Ratifying or rejecting the selection of McGladrey & Pullen, LLP as
independent auditors of the Trust for the fiscal year ending December
31, 1997; and
3. Approving or disapproving new Investment Management Agreements between
Templeton Investment Counsel, Inc. and the Trust on behalf of Stock
Fund, Asset Allocation Fund and International Fund, respectively, as
described in this proxy statement, which increase the investment
management fee. (Votes of shareholders of each such Fund will be
counted separately for the Investment Management Agreements with their
respective Funds.)
4. Transaction of any other business as may properly come before the
Meeting.
By Order of the Board of Trustees,
Barbara J. Green, Secretary
January 13, 1997
WE URGE YOU TO MARK, SIGN, DATE AND MAIL THE ENCLOSED VOTING INSTRUCTION CARD IN
THE POSTAGE-PAID ENVELOPE PROVIDED SO YOU WILL BE REPRESENTED AT THE MEETING.
TEMPLETON VARIABLE PRODUCTS SERIES FUND
PROXY STATEMENT
INFORMATION ABOUT VOTING:
WHO IS ASKING FOR MY VOTE?
The enclosed proxy is solicited by and on behalf of the management of
Templeton Variable Products Series Fund (the "Trust") for use at a Meeting
of Shareholders to be held on Monday, February 10, 1997, and, if your
Fund's Meeting is adjourned, at any later meetings, for the purposes stated
in the Notice of Meeting.
WHO IS ELIGIBLE TO VOTE?
Shareholders of record at the close of business on December 9, 1996 are
entitled to be present and to vote at the Meeting or any adjourned Meeting.
As of the record date, certain insurance companies were the shareholders of
record of each of the Funds (collectively the "Insurance Companies"). Each
such Insurance Company will vote shares of the Fund or Funds held by it in
accordance with voting instructions received from variable annuity contract
and variable life insurance policy owners (collectively, the "Contract
Owners") for whose accounts the shares are held. Accordingly, this Proxy
Statement is intended to be used by the Insurance Companies in obtaining
such voting instructions from Contract Owners. The Notice of Meeting, the
proxy (or voting instruction card), and the proxy statement were mailed to
shareholders of record and Contract Owners on or about January 13, 1997.
Each share is entitled to one vote. Shares represented by duly executed
proxies will be voted in accordance with the Insurance Company
shareholders' instructions. If the proxy is signed by the Insurance Company
shareholder but no instructions are made, the proxy will be voted in
accordance with the Trustees' recommendations.
In the event that a Contract Owner gives no instructions, either by not
returning the voting instruction card or returning the card signed but does
not indicate instructions, the relevant Insurance Company will vote the
shares of the appropriate Funds attributable to the Contract Owner in the
same proportion as shares of each Fund for which it has received
instructions.
Voting on Proposals 1 and 2 shall be tabulated on a Trust-wide basis, with
shares of all Funds voting together as a single class, while voting on
Proposal 3 shall be tabulated separately for each relevant Fund.
<PAGE>
ON WHAT ISSUES AM I BEING ASKED TO VOTE?
You are being asked to vote on four proposals:
1. Electing nominees to the position of Trustee;
2. Ratifying or rejecting the selection of McGladrey & Pullen, LLP as
independent auditors of the Trust for the fiscal year ending December
31, 1997;
3. Approving or disapproving new Investment Management Agreements between
Templeton Investment Counsel, Inc. ("TICI" or "Investment Manager") and
the Trust on behalf of Stock Fund, Asset Allocation Fund and
International Fund, respectively, as described in this proxy statement,
which increase the investment management fee. (Votes of shareholders of
each such Fund will be counted separately for the Investment Management
Agreements for their respective Funds); and
4. Transaction of any other business that may properly come before the
Meeting.
The following table sets forth the proposals that apply to
your Fund. On proposals 1 and 2, all Funds will vote together as a
single class. Proposal 3 relates to approval or disapproval of new
investment management agreements for certain Funds:
<TABLE>
<CAPTION>
ASSET ALLOCATION DEVELOPING MONEY
FUND BOND FUND INTERNATIONAL STOCK FUND MARKETS FUND MARKET FUND
PROPOSAL FUND
<S> <C> <C> <C> <C> <C> <C>
1. (Trustees) X X X X X X
2. (Auditors) X X X X X X
3. (Advisory X X X
Agreements)
</TABLE>
WHAT VOTE IS REQUIRED?
A plurality of all votes cast at the Meeting is sufficient to approve
Proposal 1. A majority of the shares present in person or by proxy at the
Meeting is sufficient to approve Proposal 2. Approval of Proposal 3
requires the affirmative vote of the holders of the lesser of (a) 67% of
each Fund's shares present at the Meeting in person or by proxy, or (b) a
majority of each Fund's outstanding shares.
<PAGE>
HOW DO THE TRUSTEES RECOMMEND THAT I VOTE? The Trustees recommend that
you vote:
1. FOR electing all nominees as Trustees of the Trust;
2. FOR ratifying the selection of McGladrey & Pullen, LLP as independent
auditors for the Trust;
3. FOR approving each of the new Investment Management Agreements; and
4. FOR the proxyholders to vote, in their discretion, on any other
business that may properly come before the Meeting.
CAN I REVOKE MY VOTING INSTRUCTION?
You may revoke your voting instruction at any time before the proxy is
voted by (1) delivering a written revocation to the Secretary of the Trust,
(2) forwarding to the Trust a later-dated proxy that is received by the
Trust at or prior to the Meeting, or (3) attending the Meeting and voting
in person.
THE PROPOSALS
PROPOSAL 1. ELECTING TRUSTEES
HOW ARE NOMINEES SELECTED?
The Board of Trustees of the Trust (the "Board") has established a
Nominating and Compensation Committee (the "Committee") consisting of
Messrs. Hines and Macklin. The Committee is responsible for the selection,
nomination for appointment and election of candidates to serve as Trustees
of the Trust. The Committee will review shareholders' nominations to fill
vacancies on the Board, if these nominations are in writing and addressed
to the Committee at the Trust's offices. However, the Committee expects to
be able to identify from its own resources an ample number of qualified
candidates.
WHO ARE THE NOMINEES?
All of the nominees are currently directors or trustees of other investment
companies in the Franklin Group of Funds(R) and the Templeton Group of
Funds (the "Franklin Templeton Group of Funds"), and all of the nominees
except Edith E. Holiday are currently members of the Board.
Certain nominees hold director and/or officer positions with Franklin
Resources, Inc. ("Resources") and its affiliates. Resources is a publicly
owned holding company, the principal shareholders of which are Charles B.
Johnson and Rupert H. Johnson, Jr., who own approximately 20% and 16%,
respectively, of its outstanding shares. Resources is primarily engaged,
through various subsidiaries, in providing investment management, share
distribution, transfer agent and administrative services to a family of
investment companies. Resources is an NYSE, Inc. listed holding company
(NYSE: BEN). There are no family relationships among any of the Trustees or
nominees for Trustees other than Charles B. Johnson and Rupert H. Johnson,
Jr., who are brothers.
In order to be elected as Trustees the nominees must receive the vote of a
majority of the shares of all Funds, voting together as a single class. The
Trustees serve until their successors are elected and qualified.
Each nominee has consented to serve as Trustee if elected. If any of the
nominees should become unavailable, the persons named in the proxy will
vote in their discretion for another person or other persons who may be
nominated as Trustees.
Listed below, for each nominee, is a brief description of recent
professional experience:
<TABLE>
<CAPTION>
SHARES OWNED
BENEFICIALLY AND % OF
NAME AND OFFICES PRINCIPAL OCCUPATION DURING TRUSTEE TOTAL OUTSTANDING ON
WITH THE TRUST PAST FIVE YEARS AND AGE SINCE DECEMBER 9, 1996
<S> <C> <C> <C>
HARRIS J. ASHTON Chairman of the board, president 1992 -0-
TRUSTEE and chief executive officer of
General Host Corporation (nursery
and craft centers); director of RBC
Holdings (U.S.A.) Inc. (a bank
holding company) and Bar-S Foods;
and director or trustee of 56 of
the investment companies in the
Franklin Templeton Group of Funds.
Age 64.
NICHOLAS F. BRADY* Chairman of Templeton Emerging 1994 -0-
TRUSTEE Markets Investment Trust PLC;
chairman of Templeton Latin America
Investment Trust PLC; chairman of
Darby Overseas Investments, Ltd.
(an investment firm)
(1994-present); chairman and
director of Templeton Central and
Eastern European Fund; director of
the Amerada Hess Corporation,
Christiana Companies, and the H.J.
Heinz Company; formerly, Secretary
of the United States Department of
the Treasury (1988-1993) and
chairman of the board of Dillon,
Read & Co. Inc. (investment
banking) prior to 1988; and
director or trustee of 23 of the
investment companies in the
Franklin Templeton Group of Funds.
Age 66.
S. JOSEPH FORTUNATO Member of the law firm of Pitney, 1992 -0-
TRUSTEE Hardin, Kipp & Szuch; director of
General Host Corporation (nursery
and craft centers); and director or
trustee of 58 of the investment
companies in the Franklin Templeton
Group of Funds. Age 64.
ANDREW H. HINES, JR. Consultant for the Triangle 1992 -0-
TRUSTEE Consulting Group; chairman and
director of Precise Power
Corporation; executive-in-residence
of Eckerd College (1991-present);
director of Checkers Drive-In
Restaurants, Inc.; formerly,
chairman of the board and chief
executive officer of Florida
Progress Corporation (1982-1990)
and director of various of its
subsidiaries; and officer and/or
director or trustee of 24 of the
investment companies in the
Franklin Templeton Group of Funds.
Age 73.
EDITH E. HOLIDAY Director (1993 - present) of ** -0-
Nominee Amerada Hess Corporation and
Hercules Incorporated; director of
Beverly Enterprises, Inc.
(1995-present) and H. J. Heinz
Company (1994-present); chairman
(1995-present) and trustee
(1993-present) of National Child
Research Center; formerly,
assistant to the President of the
United States and Secretary of the
Cabinet (1990-1993), general
counsel to the United States
Treasury Department (1989-1990),
and counselor to the Secretary and
Assistant Secretary for Public
Affairs and Public Liaison - United
States Treasury Department
(1988-1989); and director or
trustee of 15 of the investment
companies in the Franklin Templeton
Group of Funds. Age
CHARLES B. JOHNSON* President, chief executive officer, 1995 -0-
CHAIRMAN OF THE BOARD AND and director of Franklin Resources,
VICE PRESIDENT Inc.; chairman of the board and
director of Franklin Advisers, Inc.
and Franklin Templeton
Distributors, Inc.; director of
General Host Corporation (nursery
and craft centers), Franklin
Templeton Investor Services, Inc.
and Templeton Global Investors,
Inc.; and officer and/or director,
trustee or managing general
partner, as the case may be, of
most other subsidiaries of Franklin
Resources, Inc. and 56 of the
investment companies in the
Franklin Templeton Group of Funds.
Age. 63.
BETTY P. KRAHMER Director or trustee of various 1990 -0-
TRUSTEE civic associations; formerly,
economic analyst, U.S. government;
and director or trustee of 23 of
the investment companies in the
Franklin Templeton Group of Funds.
Age 67.
GORDON S. MACKLIN Chairman of White River Corporation 1994 -0-
TRUSTEE (information services); director of
Fund America Enterprises Holdings,
Inc., MCI Communications
Corporation, Fusion Systems
Corporation, Infovest Corporation,
MedImmune, Inc., Source One
Mortgage Services Corporation, and
Shoppers Express, Inc. (on-line
shopping service); formerly,
chairman of Hambrecht and Quist
Group, director of H&Q Healthcare
Investors and Lockheed Martin
Corporation, and president of the
National Association of Securities
Dealers, Inc.; and director or
trustee of 53 of the investment
companies in the Franklin Templeton
Group of Funds. Age 68.
FRED R. MILLSAPS Manager of personal investments 1990 ***
TRUSTEE (1978-present); director of various
business and nonprofit
organizations; formerly, chairman
and chief executive officer of
Landmark Banking Corporation
(1969-1978), financial vice
president of Florida Power and
Light (1965-1969), and vice
president of The Federal Reserve
Bank of Atlanta (1958-1965); and
director or trustee of 24 of the
investment companies in the
Franklin Templeton Group of Funds.
Age 67.
</TABLE>
---------------------------------------
* NICHOLAS F. BRADY AND CHARLES B. JOHNSON ARE "INTERESTED PERSONS" AS
DEFINED BY THE INVESTMENT COMPANY ACT OF 1940 (THE "1940 ACT"). THE 1940
ACT STIPULATES THAT INTERESTED PERSONS CAN COMPRISE NO MORE THAN 60% OF
A FUND'S BOARD OF DIRECTORS/TRUSTEES. CHARLES B. JOHNSON IS AN
INTERESTED PERSON DUE TO HIS OWNERSHIP INTEREST IN RESOURCES. MR. BRADY'S
STATUS AS AN INTERESTED PERSON RESULTS FROM HIS BUSINESS AFFILIATIONS
WITH RESOURCES AND TEMPLETON GLOBAL ADVISORS LTD. MR. BRADY AND
RESOURCES ARE BOTH LIMITED PARTNERS OF DARBY OVERSEAS PARTNERS, L.P.
("DARBY OVERSEAS"). MR. BRADY ESTABLISHED DARBY OVERSEAS IN FEBRUARY 1994,
AND IS CHAIRMAN AND SHAREHOLDER OF THE CORPORATE GENERAL PARTNER OF DARBY
OVERSEAS. IN ADDITION, DARBY OVERSEAS AND TEMPLETON GLOBAL ADVISORS LTD.
ARE LIMITED PARTNERS OF DARBY EMERGING MARKETS FUND, L.P. THE REMAINING
NOMINEES AND TRUSTEES OF THE TRUST ARE NOT INTERESTED PERSONS (THE
"INDEPENDENT TRUSTEES").
** MS. HOLIDAY IS NOT CURRENTLY A TRUSTEE OF THE TRUST.
*** LESS THAN 0.01%. SUCH TRUSTEES HAVE AN INTEREST IN SHARES OF
ONE OR MORE FUNDS THROUGH VARIABLE ANNUITY CONTRACTS OR
VARIABLE LIFE INSURANCE POLICIES.
HOW OFTEN DO THE TRUSTEES MEET AND WHAT ARE THEY PAID?
The Trustees generally meet quarterly to review the operations of the Funds
and other funds within the Franklin Templeton Group of Funds. Each fund
pays its independent directors/trustees and Mr. Brady an annual retainer
and/or fees for attendance at board and committee meetings. This
compensation is based on the level of assets in the fund. Accordingly, the
Trust pays the Independent Trustees and Mr. Brady an annual retainer of
$6,000 and a fee of $500 per meeting of the Board and its committees
attended, including the Audit Committee and the Nominating and Compensation
Committee. Independent Trustees are reimbursed by the Trust for any
expenses incurred in attending Board meetings.
During the fiscal year ended December 31, 1996, there were four meetings of
the Board, one meeting of the Nominating and Compensation Committee, and
one meeting of the Audit Committee. Each of the Trustees then in office
attended at least 75% of the total number of meetings of the Board and the
Audit Committee throughout the year. There was 100% attendance at the
meeting of the Nominating and Compensation Committee.
Certain Trustees and officers of the Trust are shareholders of Resources
and may receive indirect remuneration due to their participation in
management fees and other fees received from the Franklin Templeton Group
of Funds by TICI and its affiliates. TICI or its affiliates pay the
salaries and expenses of the officers. No pension or retirement benefits
are accrued as part of Trust or Fund expenses.
The following table shows the compensation paid to Independent Trustees and
Mr. Brady by the Trust and by the Franklin Templeton Group of Funds:
<TABLE>
<CAPTION>
NUMBER OF BOARDS WITHIN TOTAL COMPENSATION
THE FRANKLIN TEMPLETON FROM THE FRANKLIN
AGGREGATE GROUP TEMPLETON GROUP OF
COMPENSATION FROM OF FUNDS ON WHICH TRUSTEE FUNDS**
NAME OF TRUSTEE THE TRUST* SERVES
--------------------------- ------------------- ---------------------------- ---------------------
<S> <C> <C> <C>
Harris J. Ashton $7,350 56 $327,925
Nicholas F. Brady 7,350 23 98,225
F. Bruce Clarke*** 7,697 19 83,350
Hasso-G von
Diergardt-Naglo*** 7,697 19 77,350
S. Joseph Fortunato 7,350 58 344,745
Andrew H. Hines, Jr. 8,027 24 106,325
Betty P. Krahmer 7,350 23 93,475
Gordon S. Macklin 7,680 53 321,525
Fred R. Millsaps 7,697 24 104,325
Edith E. Holiday 0 15 0
</TABLE>
* FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996.
** FOR THE CALENDAR YEAR ENDED DECEMBER 31, 1995.
*** MESSRS. CLARKE AND VON DIERGARDT-NAGLO RESIGNED AS TRUSTEES
DURING 1996.
THE TRUSTEES RECOMMEND THAT YOU VOTE FOR THE NOMINEES.
PROPOSAL 2. RATIFYING OR REJECTING INDEPENDENT AUDITORS
HOW IS AN INDEPENDENT AUDITOR SELECTED?
The Board established a standing Audit Committee consisting of Messrs.
Hines and Millsaps, both of whom are Independent Trustees. The Audit
Committee reviews generally the maintenance of the Trust's records and the
safekeeping arrangements of the Trust's custodian, reviews both the audit
and non-audit work of the Trust's independent auditor, and submits a
recommendation to the Board as to the selection of an independent auditor.
WHICH INDEPENDENT AUDITOR DID THE BOARD OF TRUSTEES SELECT?
For the current fiscal year, the Trustees selected as auditors the firm of
McGladrey & Pullen, LLP, 555 Fifth Avenue, New York, New York 10017.
McGladrey & Pullen, LLP has been the auditor of the Trust since its
inception in 1988, and have examined and reported on the fiscal year-end
financial statements, and certain related Securities and Exchange
Commission filings. Neither the firm of McGladrey & Pullen, LLP nor any of
its members have any material direct or indirect financial interest in the
Trust or the Funds.
Representatives of McGladrey & Pullen, LLP are not expected to be present
at the Meeting, but have been given the opportunity to make a statement if
they wish, and will be available should any matter arise requiring their
presence.
Approval by a majority of the shares of all Funds voting together as a
single class is necessary to ratify the selection of auditors.
THE TRUSTEES RECOMMEND THAT YOU VOTE FOR RATIFYING THE INDEPENDENT AUDITORS
PROPOSAL 3. APPROVING OR DISAPPROVING NEW INVESTMENT MANAGEMENT AGREEMENTS
You are being asked to approve new Investment Management Agreements (the
"Proposed Agreements") between TICI and the Trust on behalf of Asset
Allocation Fund, International Fund and Stock Fund. (For the purposes of
Proposal 3, the term "Funds" refers only to Asset Allocation Fund,
International Fund and Stock Fund). The Proposed Agreements would replace
each Fund's existing Investment Management Agreement (the "Current
Agreement") between TICI and the Trust on behalf of such Funds. In order
for the Proposed Agreements to become effective, the Investment Company Act
of 1940, as amended (the "1940 Act"), requires that the Proposed Agreements
be approved by the Trust's Board and each such Fund's shareholders. The
Trustees of the Trust, including those Trustees who are not "interested
persons" or affiliates (as defined in the 1940 Act) of any party to the
Proposed Agreements (the "Independent Trustees"), approved the Proposed
Agreements in person at a meeting held on December 3, 1996. The Proposed
Agreements are identical in all material respects to the Current Agreement
except that the Proposed Agreements reflect an increase in the investment
management fee payable to TICI.
<TABLE>
<CAPTION>
FUND CURRENT FEE (ANNUAL RATE)* PROPOSED FEE (ANNUAL RATE)*
------------------- ----------------------------------- -----------------------------------------
<S> <C> <C>
Asset Allocation .50% up to $200 million, 0.45% 0.65% up to $200 million,
up to $1.3 billion 0.40% over 0.585% up to $1.3 billion
$1.3 billion. 0.52% over $1..3 billion.
International 0.50% up to $200 million, 0.75% up to $200 million
0.45% up to $1.3 billion 0.40% 0.675% up to $1..3 billion
over $1.3 billion 0.60% over $1.3 billion
Stock 0.50% up to $200 million, 0.75% up to $200 million
0.45% up to $1.3 billion 0.40% 0.675% up to $1.3 billion
over $1.3 billion 0.60% over $1.3 billion
</TABLE>
* BASED UPON AVERAGE DAILY NET ASSETS.
The Trustees believe that as a result of the revised fees schedule, the
Funds' investment manager will be better able to continue to provide high
quality services to the Funds and their shareholders.
The Current Agreement and the Proposed Agreements, including the services
to be provided, terms relating to compensation, and procedures for
termination and renewal, are described below under "What are the terms of
the Current and Proposed Agreements?" The description of the Proposed
Agreements is qualified in its entirety by reference to the form of
Proposed Agreements set forth in Appendix A to this proxy statement.
Additional information about TICI is set forth below under "Other
Information."
WHAT ARE THE TERMS OF THE CURRENT AND PROPOSED AGREEMENTS?
THE CURRENT AGREEMENT. The Current Agreement, dated October 30, 1992,
provides that TICI shall render investment management services to each of
the Funds subject to the control and supervision of the Trustees of the
Trust. The shareholders of each Fund approved the Current Agreement on
October 30, 1992. By its terms, the Current Agreement will continue in
effect from year to year so long as it is approved annually by the Trustees
(at a meeting called for that purpose) or by vote of a majority of each
Fund's outstanding shares. In either case, renewal of the Current Agreement
must be approved by a majority of the Trust's Independent Trustees. The
Current Agreement is subject to termination without penalty on 60 days'
written notice by either party to the other and will terminate
automatically in the event of assignment. The Board last approved
continuance of the Current Agreement through April 30, 1997, at a meeting
held on February 23, 1996.
Under the Current Agreement, subject to the control and supervision of the
Trustees, TICI manages the investment and reinvestment of each Fund's
assets in accordance with each Fund's investment objectives and policies,
makes all determination with respect to buying, holding, and selling each
Fund's securities as well as exercising any investment security rights,
including voting rights. The Investment Manager is not required to furnish
any personnel, overhead items or facilities for the Funds, including
trading desk facilities or daily pricing of the Funds' portfolios, although
those services are provided for some other investment companies by their
investment managers. In performing duties under the Current Agreement, TICI
is required to comply with the provisions of the Trust's Agreement and
Declaration of Trust and By-Laws and each Fund's stated investment
objective policies and restrictions.
The Current Agreement provides that TICI will abide by the Funds' brokerage
policies when selecting broker-dealers to execute portfolio transactions
for the Funds. Although the services provided by broker-dealers may
incidentally help TICI reduce its expenses or otherwise benefit TICI, its
clients, its affiliates, and the Funds, the value of these services is
indeterminable and TICI's fee is not reduced by any offsetting or
compensating arrangement.
The Current Agreement also provides that TICI, its directors, officers,
employees or agents will have no liability to the Funds or any shareholder
of the Funds for any error in judgment, mistake of law, or for loss arising
out of any investment or other act or omission in the performance of its
duties, except for any liability, loss or damage resulting from willful
misfeasance, bad faith, gross negligence or reckless disregard of duty.
For the fiscal year ended December 31, 1995, TICI received the following
fees from the Funds:
<TABLE>
<CAPTION>
TOTAL FEES RECEIVED BY TICI
FUND FISCAL YEAR ENDED 12/31/95
<S> <C>
Asset Allocation $ 1,662,023
Stock $ 2,102,259
International $ 1,222,834
</TABLE>
THE PROPOSED AGREEMENTS. Except for the change in the investment management
fee described above on page 17, the Current Agreement and the Proposed
Agreements are substantially the same. If approved, each of the Proposed
Agreements will continue in effect until February, 1999, and thereafter
from year to year as long as approved annually by the Trustees at a meeting
called for that purpose or by a vote of each Fund's shareholders, and by a
vote of a majority of the Independent Trustees. If the Proposed Agreements
are not approved by the shareholders, the Current Agreement will remain in
effect through April 30, 1997.
COMPARISON OF FEES AND EXPENSES UNDER THE CURRENT AGREEMENT AND THE
PROPOSED AGREEMENTS. The following tables and examples are provided to help
you understand and compare the various costs and expenses of each Fund that
would be borne directly or indirectly by the shareholders of each Fund
under the Current Agreement and the Proposed Agreements.
THE TABLES INCLUDE ONLY EXPENSES AND FEES CHARGED AT THE FUND LEVEL AND DO
NOT REFLECT SEPARATE ACCOUNT OR CONTRACT-BASED FEES AND EXPENSES.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31, 1995
<S> <C> <C> <C>
Effective Management Fee Rate STOCK INTERNATIONAL ASSET ALLOCATION
---------------------------------- ------------------------ --------------------- ------------------------
- Current Agreement .47% .49% .48%
---------------------- ------------------
---------------------
- Proposed Agreements .69% .71% .62%
---------------------- ---------------------
------------------
- Percentage Change .22% .22% .14%
---------------------- ------------------ ---------------------
Expense Ratio
---------------------------------
- Current Agreement .66% .71% .66%
----------------------
------------------ ---------------------
- Proposed Agreements .88% .93% .80%
---------------------- ------------------ ---------------------
- Percentage Change .22% .22% .14%
------------------
---------------------- ---------------------
Management Fee
---------------------------------
- Current Agreement $2,102,259 $1,222,834 $1,662,023
---------------------
---------------------- ------------------
- Proposed Agreements $3,092,462 $1,821,937 $2,162,022
---------------------
---------------------- ------------------
- Difference between $990,203 $599,103 $499,999
---------------------- ------------------ ---------------------
aggregate amounts
---------------------- ------- ------------------ ------- ---------------------
AVERAGE NET ASSETS OF FUND $444,994,144 $249,528,820 $347,354,142
---------------------- ------------------ ---------------------
</TABLE>
Shown below is a comparison of fees and expenses the Funds incurred during
the fiscal year ended December 31, 1995, and the fees and expenses the
Funds would have incurred had the proposed fee increase been in effect. The
table includes only expenses and fees charged at the Fund level and does
not reflect separate account or contract-based fees and expenses.
<TABLE>
<CAPTION>
Stock Fund International Fund Asset Allocation Fund
----------------------- ---------------------- -------------------------
Annual Fund Expenses CURRENT PROPOSED CURRENT PROPOSED CURRENT PROPOSED
------- -------- ------- -------- ------- --------
--------------------------
<S> <C> <C> <C> <C> <C> <C>
Management Fees .49% .69% .49% .71% .48% .62%
---- ---- ---- ---- ---- ----
Distribution Fees None None None None None None
Other Expenses .19% .19% .22% .22% .18% .18%
---- ---- - ---- ---- ---- ----
TOTAL FUND EXPENSES .66% .88% .71% .93% .66% .80%
==== ==== ==== ==== ==== ====
</TABLE>
The following example illustrates, for both the existing fee schedule and
the proposed fee increase, the expenses you would incur on a $1000
investment, assuming a 5% annual rate of return and redemption at the end
of each period shown. This is an illustration only and does not reflect
separate account or contract expenses. Actual expenses and performance may
be more or less than shown.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
STOCK FUND
Current $7 $21 $37 $82
----------- ----------- ----------- ------------
Proposed 9 28 49 108
----------- ----------- ----------- ------------
INTERNATIONAL FUND
Current $7 $23 $40 $88
----------- ----------- ----------- ------------
Proposed 9 30 51 114
----------- ----------- ----------- ------------
ASSET ALLOCATION FUND
Current $7 $21 $37 $82
----------- ----------- ----------- ------------
Proposed 9 26 44 99
----------- ----------- ----------- ------------
</TABLE>
HOW HAVE THE FUNDS PERFORMED UNDER THE INVESTMENT MANAGER'S DIRECTION?
The Funds' performance for the periods ending June 30, 1996 is set forth in
the following chart. All performance figures shown reflect all Fund
operating expenses, but do not include deductions for the cost of insurance
charges, sales charges, administrative charges, maintenance fees, premium
tax charges, mortality and expense risk charges or other charges that may
be incurred under the variable annuity and variable life insurance
contracts for which the Funds serve as underlying investment vehicles. If
they had been included, performance would have been lower. Please refer to
the contract prospectus for a complete description of expenses, including
any applicable sales charges. Please remember that the performance data
shown below is historical and cannot predict or guarantee future results.
Principal value and investment return will vary and you may have a gain or
loss when you withdraw your money.
STOCK FUND
<TABLE>
<CAPTION>
1-YEAR 5-YEAR SINCE INCEPTION - (8/24/88)
<S> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURN1 21.32% 17.68% 12.92%
CUMULATIVE TOTAL RETURN2 21.32% 125.78% 159.56%
VALUE OF $10,000 INVESTMENT3 $12,132 $22,578 $25,956
INTERNATIONAL FUND
1-YEAR 5-YEAR SINCE INCEPTION - (8/24
/88)
AVERAGE ANNUAL TOTAL RETURN1 18.83% 17.95% 14.17%
CUMULATIVE TOTAL RETURN2 18.83% 64.11% 73.62%
VALUE OF $10,000 INVESTMENT3 $11,883 $16,411 $17,362
ASSET ALLOCATION FUND
1-YEAR 5-YEAR SINCE INCEPTION -
(8/24 /88)
AVERAGE ANNUAL TOTAL RETURN1 18.46% 15.35% 11.80%
CUMULATIVE TOTAL RETURN2 18.46% 105.23% 139.94%
VALUE OF $10,000 INVESTMENT3 $11,846 $20,423 $23,994
</TABLE>
-----------------------
1. AVERAGE ANNUAL TOTAL RETURN REPRESENTS THE AVERAGE ANNUAL CHANGE IN
VALUE OF AN INVESTMENT AND ASSUMES REINVESTMENT OF DIVIDENDS AND
CAPITAL GAINS.
2. CUMULATIVE TOTAL RETURN REPRESENTS THE CHANGE IN THE FUNDS`S NET ASSET
VALUE OVER THE PERIODS INDICATED AND ASSUMES REINVESTMENT OF DIVIDENDS
AND CAPITAL GAINS.
3. THESE FIGURES REPRESENT THE VALUE OF A HYPOTHETICAL $10,000 INVESTMENT
IN THE FUND OVER THE SPECIFIED PERIODS AND ASSUME REINVESTMENT OF
DIVIDENDS AND CAPITAL GAINS.
WHAT FACTORS DID THE TRUSTEES CONSIDER PRIOR TO RECOMMENDING APPROVAL
OF THE PROPOSED AGREEMENTS?
In determining whether or not it was appropriate to approve the
Proposed Agreements which increase the investment management fees
payable to TICI and to recommend approval to shareholders, the Trustees
considered various matters and extensive information provided by TICI
and the Trust's legal counsel, Dechert Price & Rhoads. The nature of
the matters to be considered and the standards to be used by the
Trustees in reaching their decision were reviewed by the Trust's legal
counsel and Bleakley Platt & Schmidt, legal counsel to the Independent
Trustees. After review and discussions of the information provided, the
Independent Trustees met separately to discuss the information and
consider the factors to be weighed and standards to be applied in
evaluating the proposed fee increase.
The Independent Trustees first examined the nature, quality and scope
of the services provided to the Funds by TICI. Second, they reviewed
the basis for an increase in the investment management fee and analyzed
the fee schedule proposed by TICI in terms of investment management
fees charged by TICI and other investment advisers. Finally the
Independent Trustees examined mutual fund-related revenues and expenses
of TICI.
The Independent Trustees were provided with data as to the
qualifications of TICI's personnel, the quality and extent of the
services rendered, and its commitments to its mutual fund advisory
business. The Independent Trustees also considered data presented by
TICI showing the extent to which it had substantially expanded its
investment personnel and other services, including significant
continuing upgrading and development of its computer and communication
systems, dedicated to its mutual fund advisory activities, both in the
United States and abroad. Information prepared specifically for the
purpose of assisting the Independent Trustees in their evaluation of
the Proposed Agreements included an analysis of the performance and
expenses of the Funds prepared by Lipper Analytical Services, Inc.
("Lipper").
After consideration of all of the data and information provided to them
and the separate meeting to evaluate the new investment management fee
proposed by the Investment Manager, the Independent Trustees discussed
the proposed fee schedule with representatives of TICI. After such
discussion, the Independent Trustees then unanimously determined to
recommend to the Board and the Board unanimously approved the fee
schedule reflected in the Proposed Agreements. Noting their favorable
experience in overseeing, on an ongoing basis, the nature, quality and
extent of TICI's services to the Funds, the Independent Trustees
considered, among other factors: (1) the necessity of TICI maintaining
and enhancing its ability to retain and attract capable personnel to
serve the Funds; (2) the increased complexity and expansion of the
domestic and international securities markets and TICI's and its
affiliates shared expenditures and projected expenses associated with
opening and maintaining research and support offices in Australia,
Bahamas, Canada, Scotland, Luxembourg, France, Italy, and in the United
States; (3) the Investment Manager's expenditures in developing
worthwhile and innovative advisory services for the Funds such as a
proprietary research database; (4) the complexity of research and
investment activities, and related travel expenses, in developed and
emerging markets; (5) the investment record of the Investment Manager
in managing the Funds and other investment companies for which it acts
as investment adviser; (6) the Investment Manager's and its
affiliates'overall profitability; (7) the effect of the proposed
investment management fee increase on the expense ratio of the Funds;
(8) data as to investment performance, advisory fees and expense ratios
of other investment companies not advised by the Investment Manager but
believed to be generally comparable to the Funds; (9) other benefits to
the Investment Manager from serving as investment manager to the Funds,
as well as benefits to its affiliates serving as principal underwriter
and business manager of the Trust or providing other services to the
Funds and their shareholders; (10) current and developing conditions in
the financial services industry, including the entry into the industry
of large and highly capitalized companies which are spending and appear
to be prepared to continue to spend substantial sums to engage
personnel and to provide services to competing investment companies;
and (11) the financial resources of the Investment Manager.
In their review of the proposed increase in the level of the investment
management fees, the Independent Trustees considered the fact that the
current investment management fees paid by the Funds are lower than
those paid to the Investment Manager by other investment companies with
investment objectives comparable to that of the Funds for which it also
serves as investment adviser. The Independent Trustees also took into
account the fact that the Funds' total expense ratios, including the
investment management fees, are well below the median fee rates and
expense ratios of groups of mutual funds selected by Lipper as
comparison groups. Moreover, if the Proposed Agreements had been in
effect, the total expense ratio (including the investment management
fee) for each of the Funds would rank in the second lowest quintile for
their groups - or well below the median for their groups..
Based upon the factors and information described above, the Trustees
concluded that the proposed fee increases represent an appropriate
level of compensation for the services rendered, and approved the
Proposed Agreements, subject to shareholder approval, effective May 1,
1997.
THE TRUSTEES RECOMMEND THAT YOU VOTE FOR APPROVAL OF THE NEW INVESTMENT
MANAGEMENT AGREEMENTS.
PROPOSAL 4. OTHER BUSINESS
The Trustees know of no other business to be presented at the Meeting.
However, if any additional matters should be properly presented, proxies
will be voted as specified. Proxies reflecting no specification will be
voted in accordance with the judgment of the persons named in the proxy.
INFORMATION ABOUT THE TRUST AND THE FUNDS
The Trust was organized as a Massachusetts business trust on February 25,
1988 and is registered under the 1940 Act as an open-end diversified
investment management company. The Trust currently has six series of
shares: Templeton Money Market Fund, Templeton Bond Fund, Templeton Stock
Fund, Templeton Asset Allocation Fund, Templeton International Fund and
Templeton Developing Markets Fund. Shares of the Funds are sold only to
insurance company separate accounts to serve as the investment vehicle for
certain variable annuity and life insurance contracts.
The Trust's last audited financial statements and annual report, and a copy
of its semi-annual report for any subsequent semi-annual period are
available free of charge. To obtain a copy, please call 1-800/DIAL BEN or
forward a written request to Franklin Templeton Investor Services, Inc.,
P.O. Box 33030, St.
Petersburg, Florida 33733-8030.
The following table shows the Assets and shares outstanding of each Fund as
of December 2, 1996:
<TABLE>
<CAPTION>
FUND NAME NET ASSETS NUMBER OF SHARES OUTSTANDING
<S> <C> <C>
Asset Allocation Fund $550,417,129 26260359.209
International Fund $656,396,931 36505947.234
Stock Fund $629,659,505 28047194.005
Bond Fund $34,199,941 2940665.607
Developing Markets Fund $ 63,464.118 6687472.925
Money Market Fund $13,102,691 12102690.650
------------------------- --- ---------------------------------------
TOTAL $1,945,938,038 22464439.630
============= ============
</TABLE>
<PAGE>
As of December 2, 1996, the following Insurance Companies owned, on behalf
of certain separate accounts, more than 5% of the Funds' outstanding
shares:
<TABLE>
<CAPTION>
PERCENT OF
NAME AND ADDRESS OUTSTANDING
FUND INSURANCE COMPANY NUMBER OF SHARES SHARES
----------------------- -----------------
--------------------------- -----------------------------------
<S> <C> <C> <C>
Money Market Phoenix Home Mutual Life 13102690.650 100%
Insurance Company
100 Bright Meadows Blvd.
Enfield, CT 06082
----------------------- -----------------
Bond Fund Phoenix Home Mutual Life
Insurance Company 1731750.715 58.59%
----------------------- -----------------
-----------------------
The Travelers Insurance Company 1208914.892 41.11%
One Tower Square
Hartford, CT 06183
-----------------------
-----------------
Stock Fund The Travelers Insurance Company 136122080.059 48.53%
----------------------- -----------------
14431531.461 51.45%
Phoenix Home Mutual Life
Insurance Company
----------------------- -----------------
International Fund Phoenix Home Mutual Life 6274201.077
Insurance Company 17.19%
----------------------- -----------------
----------------------- -----------------
The Variable Annuity Life 28251566.517 77.39%
Insurance Company
2929 Allen Parkway
Houston, TX 77019
----------------------- -----------------
Asset Allocation Fund Phoenix Home Mutual Life 7303552.679 27.81%
Insurance Company
---------------------- -----------------
The Travelers Insurance Company 9920740.282 37.78%
---------------------- -----------------
The Variable Annuity Life 9029052.133 34.38%
Insurance Company
---------------------- -----------------
Developing Markets Fund IDS Life Insurance Company 6579962.876 98.39%
IDS Tower 10
Minneapolis, MN 55440
---------------------- -----------------
</TABLE>
However, the above-named Insurance Companies will exercise voting rights
attributable to the shares held by them in accordance with voting
instructions received from owners of the contracts issued by them. To this
extent, such Insurance Companies do not exercise control over the Trust or
the Funds by virtue of the voting rights arising from their record
ownership of Trust shares.
THE EXECUTIVE OFFICERS OF THE TRUST. Officers of the Trust are appointed by
the Trustees and serve at the pleasure of the Board. Listed below, for each
Executive Officer, is a brief description of recent professional
experience:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME AND OFFICES WITH TRUST DURING PAST FIVE YEARS AND AGE
-------------------------------------- --------------------------------------
<S> <C>
CHARLES B. JOHNSON See Proposal 1, "Electing
CHAIRMAN AND VICE PRESIDENT Trustees".
SINCE 1995
CHARLES E. JOHNSON Senior vice president and director
PRESIDENT SINCE 1996 of Franklin Resources, Inc.; senior
vice president of Franklin Templeton
Distributors, Inc.; president and
chief executive officer of Templeton
Worldwide, Inc.; president and
director of Franklin Institutional
Services Corporation; chairman of
the board of Templeton Investment
Counsel, Inc.; officer and/or
director, as the case may be, of
other subsidiaries of Franklin
Resources, Inc.; and officer and/or
director or trustee of 39 of the
investment companies in the Franklin
Templeton Group of Funds. Age 40.
RUPERT H. JOHNSON, JR. Executive vice president and
VICE PRESIDENT SINCE 1996 director of Franklin Resources, Inc.
and Franklin Templeton Distributors,
Inc.; president and director of Franklin
Advisers,Inc.; director of Franklin
Templeton Investor Services, Inc.; and
officer and/or director, trustee or
managing general partner, as the case
may be, of most other subsidiaries
of Franklin Resources, Inc. and 60
of the investment companies in the
Franklin Templeton Group of
Funds. Age56.
HARMON E. BURNS Executive vice president, secretary
VICE PRESIDENT SINCE 1996 and director of Franklin Resources,
Inc.; executive vice president
and director of Franklin Templeton
Distributors, Inc.; executive vice
president of Franklin Advisers, Inc.;
officer and/or director, as the case
may be,of other subsidiaries of Franklin
Resources, Inc.; and officer and/or
director or trustee of 60 of the
investment companies in the Franklin
Templeton Group of Funds. Age 51.
DEBORAH R. GATZEK Senior vice president and general
VICE PRESIDENT SINCE 1996 counsel of Franklin Resources, Inc.;
senior vice president of Franklin
Templeton Distributors, Inc.; vice
president of Franklin Advisers,
Inc.; and officer of 60 of the
investment companies in the Franklin
Templeton Group of Funds. Age 47.
ELIZABETH M. KNOBLOCK General counsel, secretary and a
VICE PRESIDENT - COMPLIANCE senior vice president of Templeton
SINCE 1996 Investment Counsel, Inc.; formerly,
vice president and associate general
counsel of Kidder Peabody & Co. Inc.
(1989-1990), assistant general counsel
of Gruntal & Co., Inc. (1988), vice
president and associate general
counsel of Shearson Lehman Hutton Inc.
(1988), vice president and assistant
general counsel of E.F. Hutton & Co.
Inc. (1986-1988), and special counsel
of the division of investment
management of the Securities and
Exchange Commission (1984-1986); and
officer of 23 of the investment
companies in the Franklin Templeton
Group of Funds. Age 44.
MARK G. HOLOWESKO President and director of Templeton
VICE PRESIDENT SINCE 1994 Global Advisors Limited; chief
investment officer of global equity
research for Templeton Worldwide,
Inc.; president or vice president of
the Templeton Funds; formerly,
investment administrator with Roy West
Trust Corporation (Bahamas) Limited
(1984-1985); and officer of 23 of the
investment companies in the Franklin
Templeton Group of Funds. Age 36.
MARTIN L. FLANAGAN Senior vice president, treasurer and
VICE PRESIDENT SINCE 1994 chief financial officer of Franklin
Resources, Inc.;director and executive
vice president of Templeton Investment
Counsel,Inc.; director, president
and chief executive officer of Templeton
Global Investors, Inc.; a member of
the International Society of Financial
Analysts and the American Institute
of Certified Public Accountants;
formerly, accountant with Arthur
Andersen & Company(1982-1983);
officer and/or director, as the case
may be, of othersubsidiaries
of Franklin Resources, Inc.; and
officer and/or director or trustee of
60 of the investment companies
in the Franklin Templeton Groupof
Funds. Age 36
SAMUEL J. FORESTER, JR. President of the Templeton Global Bond
VICE PRESIDENT SINCE 1994 Managers Division of Templeton
Investment Counsel, Inc.; president or
vice president of other Templeton
Funds; founder and partner of
Forester, Hairston Investment
Management (1989-1990); managing
director (Mid-East Region) of Merrill
Lynch, Pierce, Fenner & Smith Inc.
(1987-1988); advisor for Saudi Arabian
Monetary Agency (1982-1987). Age 48.
JOHN R. KAY Vice president and treasurer of
VICE PRESIDENT SINCE 1994 Templeton Global Investors, Inc. and
Templeton Worldwide, Inc.; assistant
vice president of Franklin Templeton
Distributors, Inc.; formerly, vice
president and controller of the
Keystone Group, Inc.; and officer of
27 of the investment companies in the
Franklin Templeton Group of Funds. Age
56.
THOMAS LATTA Vice president of the Templeton
VICE PRESIDENT SINCE 1994 Global Bond Managers division of
Templeton Investment Counsel, Inc.;
vice president of various Templeton
Funds; formerly, portfolio manager,
Forester & Hairston (1988-1991);
investment adviser, Merrill Lynch,
Pierce, Fenner & Smith Incorporated
(1981-1988). Age 35.
BARBARA J. GREEN Senior vice president of Templeton
SECRETARY SINCE 1996 Worldwide, Inc. and Templeton Global
Investors, Inc.; formerly, deputy
director of the Division of
Investment Management, executive
assistant and senior advisor to the
chairman, counselor to the chairman,
special counsel and attorney fellow,
U.S. Securities and Exchange
Commission (1986-1995), attorney,
Rogers & Wells, and judicial clerk,
U.S. District Court (District of
Massachusetts); and secretary of 23
of the investment companies in the
Franklin Templeton Group of Funds.
Age 49.
JAMES R. BAIO Certified public accountant; senior
TREASURER SINCE 1994 vice president of Templeton
Worldwide, Inc.,Templeton Global
Investors, Inc., and Templeton
Funds TrustCompany; formerly,
senior tax manager with Ernst
& Young (certified public accountants)
(1977-1989); and treasurer of 23 of
the investment companies in the
Franklin Templeton Group of
Funds. Age 42.
</TABLE>
THE INVESTMENT MANAGER. TICI, whose address is 500 East Broward Boulevard,
suite 2100, Fort Lauderale, Florida, is a wholly-owned subsidiary of Templeton
Global Investors, Inc., which is a wholly-owned subsidiary of Templeton
Worldwide, Inc., which, in turn, is a wholly-owned subsidiary of Franklin
Resources, Inc. ("Resources"), 777 Mariners Island Blvd., San Mateo, California,
94404-1585. Resources is primarily engaged, through various subsidiaries, in
providing investment management, share distribution, transfer
agent and administrative services to a family of investment companies.
Resources is an NYSE, Inc. listed holding company (NYSE: BEN). Resources'
principal shareholders are Charles B. Johnson, a Trustee of the Trust, and
Rupert H. Johnson, Jr. who own approximately 20% and 16%, respectively, of its
outstanding shares.
The principal executive officers of TICI are:
<TABLE>
<CAPTION>
NAME AND OFFICE PRINCIPAL OCCUPATION ADDRESS
<S> <C> <C>
Charles E. Johnson Executive Manager 500 East Broward Blvd., Suite 2100
Director and Chairman Fort Lauderdale, Florida
Donald F. Reed Securities Analyst 500 East Broward Blvd., Suite 2100
Director and President Fort Lauderdale, Florida
Martin L. Flanagan Accountant 777 Mariners Island Blvd.
Director, Executive Vice San Mateo, California
President and Chief
Operating Officer
Gregory E. McGowan Attorney 500 East Broward Blvd., Suite 2100
Director and Executive Vice Fort Lauderdale, Florida
President
Gary P. Motyl Securities Analyst 500 East Broward Blvd., Suite 2100
Director and Executive Vice Fort Lauderdale, Florida
President
Elizabeth M. Knoblock Attorney 500 East Broward Blvd., Suite 2100
Senior Vice President, Fort Lauderdale, Florida
General Counsel and
Secretary
Howard Joseph Leonard Securities Analyst 500 East Broward Blvd., Suite 2100
Executive Vice President Fort Lauderdale, Florida
Niels E. Andersen Securities Analyst 500 East Broward Blvd., Suite 2100
Senior Vice President Fort Lauderdale, Florida
Mark R. Beveridge Securities Analyst 500 East Broward Blvd., Suite 2100
Senior Vice President Fort Lauderdale, Florida
Gary R. Clemons Securities Analyst 500 East Broward Blvd., Suite 2100
Senior Vice President Fort Lauderdale, Florida
William T. Howard, Jr. Securities Analyst 500 East Broward Blvd., Suite 2100
Senior Vice President Fort Lauderdale, Florida
Charles Reed Hutchens Securities Analyst 500 East Broward Blvd., Suite 2100
Senior Vice President Fort Lauderdale, Florida
Mark S. Joseph Securities Analyst 500 East Broward Blvd., Suite 2100
Senior Vice President Fort Lauderdale, Florida
Michael J. Corcoran Accountant 777 Mariners Island Blvd.
Vice President and San Mateo, California
Controller
</TABLE>
Some of the Trustees or officers of the Trust (whose addresses and
biographical information are set forth above under "Electing Trustees")
also serve as directors or officers of TICI. These Trustees and officers
are listed below:
Martin L. Flanagan
Charles E. Johnson
Elizabeth M. Knoblock
TICI also serves as investment manager to other U.S. registered investment
companies that have an investment objective similar to that of Stock Fund,
International Fund and Asset Allocation Fund. TICI receives and expects to
receive from these investment companies the following investment management
fees:
<TABLE>
<CAPTION>
APPROXIMATE NET ASSETS AS OF INVESTMENT MANAGEMENT FEE (ANNUAL
INVESTMENT COMPANY DECEMBER 2, 1996 RATE)
<S> <C> <C>
Templeton Institutional Funds, $2,763,347,553.90 .70%
Inc. - Foreign Equity Series
Templeton Global Opportunities $629,148,846.78 0.950% up to $200 million
Fund 0.935% of next $500 million
0.900% of next $500 million 0.875%
thereafter
Templeton Capital Accumulator
Fund, Inc. $125,891,703.70 0.75%
Franklin Valuemark Funds-Asset 0.65% up up $200 million
Allocation Fund* $52,647,036.62 0.585% up to 1.3 Billion
0.52% over 1.3 Billion
Franklin Valuemark Funds- 1.00% up to $100 million
International Equity Fund $1,084,023,738.56 0.90% up to $250 million
0.80% up to $500 million
0.75% over $500 million
including Fund Administration Fees
</TABLE>
*TICI SERVES AS SUB-ADVISER TO THESE FUNDS.
THE BUSINESS MANAGER. The business manager of the Trust and each of the
Funds is Templeton Funds Annuity Company ("TFAC"), a Florida corporation,
located at 700 Central Avenue, St. Petersburg, Florida 33701-3628. TFAC is
an indirect, wholly-owned subsidiary of Resources. Pursuant to a Business
Management Agreement between the Trust and TFAC dated October 30, 1992, as
amended and restated February 23, 1996, TFAC performs certain
administrative functions for the Funds. TFAC will continue to serve as the
business manager if the Proposed Agreements are approved. For its services,
TFAC receives a monthly fee equal on an annual basis to 0.15% of the
combined average daily net assets of all of the Funds, reduced to 0.135% of
the Funds' aggregate net assets in excess of $200 million, and further
reduced to 0.075% annually of such net assets in excess of $1.2 billion.
This fee is allocated among the Funds according to their respective average
daily net assets. During the fiscal year ended December 31, 1995, TFAC
received fees from the Trust totaling $1,380,760.00.
THE PRINCIPAL UNDERWRITER. Franklin Templeton Distributors, Inc. ("FTD"),
700 Central Avenue, St.Petersburg, Florida 33701-3628, an indirect, wholly
-owned subsidiary of Resources, serves as the principal underwriter for
the Funds' shares and will continue to do so if the Proposed Agreements
are approved. FTD receives no compensation for its services as the Funds
principal underwriter.
THE CUSTODIAN. The custodian for the Funds is The Chase Manhattan Bank, 1
Chase Manhattan Plaza, New York, New York 10081, pursuant to a Custody
Agreement dated February 23, 1996 and last amended May 10, 1996.
ADDITIONAL INFORMATION ABOUT VOTING
AND THE SHAREHOLDERS MEETING
SOLICITATION OF PROXIES. In addition to soliciting proxies by mail, the
Trustees and the employees of the Insurance Companies and Resources and its
affiliates may solicit voting instructions from Contract Owners in person
or by telephone. The cost of soliciting proxies, including the fees of a
proxy soliciting agent, are borne by the Trust. The Trust, however, does
not reimburse Trustees, officers, and regular employees and agents involved
in the solicitation of proxies.
QUORUM. A majority of the shares entitled to vote--present in person or
represented by proxy--constitutes a quorum at the Meeting. Shares whose
proxies reflect an abstention on any item are all counted as shares present
and entitled to vote for purposes of determining the presence of a quorum.
METHODS OF TABULATION. The inspector of election will count the total
number of votes cast "for" approval of each of the proposals for purposes
of determining whether sufficient affirmative votes have been cast.
Abstentions will be treated as votes not cast and, therefore, will not be
counted for purposes of obtaining approval of Proposals 1 and 2, and will
not have any effect on the outcome of the proposal. With respect to any
other proposal, abstentions have the effect of a negative vote on the
proposal.
Each of the Insurance Companies holding shares of the Funds have agreed to
vote their shares in proportion to and in the manner instructed by Contract
Owners. If a Contract Owner gives no instructions, either by not returning
the voting instruction card, or by returning the card without indicating
instructions, the relevant Insurance Company will vote shares in the same
proportion as shares of that Fund for which it has received instructions.
ADJOURNMENT. If a sufficient number of votes in favor of the proposals
contained in the Notice of Annual Meeting and Proxy Statement is not
received by the time scheduled for the Meeting, the persons named in the
proxy may propose one or more adjournments of the Meeting to permit further
solicitation of proxies with respect to any such proposals. Any proposed
adjournment requires the affirmative vote of a majority of shares present
at the Meeting. The appropriate Insurance Company will vote in favor of
such adjournment those shares which they are entitled to vote in favor of
such proposals. They will vote against such adjournment those shares
required to be voted against such proposals. Any proposals for which
sufficient favorable votes have been received by the time of the Meeting
may be acted upon and considered final regardless of whether the Meeting is
adjourned to permit additional solicitation with respect to any other
proposal.
REVOCATION OF PROXIES. Proxies executed by any of the Insurance Companies
may be revoked at any time before they are voted by written revocation
received by the Secretary of the Trust, by properly executing a later-dated
proxy or by attending the Meeting and voting in person.
SHAREHOLDER PROPOSALS. The Trust's Agreement and Declaration of Trust does
not provide for annual meetings of shareholders, and the Trust does not
currently intend to hold such meeting in 1998. Shareholder proposals to be
included in the proxy statement for any subsequent meeting must be received
at the Trust's offices, 700 Central Avenue, St. Petersburg, Florida
33701-3628, within a reasonable period of time prior to any such meeting.
By Order of the Board of Trustees,
Barbara J. Green, Secretary
January 10, 1997
VOTING INSTRUCTIONS FORM
INSURANCE COMPANY A SEPARATE VOTING INSTRUCTION FORM IS
NAME PRINTS PROVIDED FOR EACH TEMPLETON VARIABLE
HERE PRODUCTS SERIES FUND PORTFOLIO IN WHICH
YOUR CONTRACT VALUES WERE INVESTED AS OF
DECEMBER 9, 1996. PLEASE SIGN, DATE AND
RETURN ALL VOTING INSTRUCTION FORMS
RECEIVED IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.
VOTING INSTRUCTIONS MUST BE RECEIVED BY
FEBRUARY 9, 1997 TO BE VOTED FOR THE
MEETING TO BE HELD ON FEBRUARY 10, 1997
Please fold and detach card at perforation. Return portion below only.
PORTFOLIO NAME PRINTS HERE
THESE VOTING INSTRUCTIONS ARE SOLICITED BY (INSURANCE COMPANY) IN CONNECTION
WITH A SOLICITATION OF PROXIES BY THE TRUSTEES OF TEMPLETON VARIABLE PRODUCTS
SERIES FUND.
The undersigned hereby instructs (Insurance Company) to vote the shares of
Templeton Variable Products Series Fund ("TVPSF") attributable to his or her
variable annuity contract at the Meeting of Shareholders to be held at 500
Broward Blvd., Ft. Lauderdale, FL at 10:00 a.m., February 10, 1997, and any
adjournments thereof, as indicated below.
DATE:
PLEASE SIGN IN BOX
BELOW IF A CONTRACT IS HELD JOINTLY,
EACH CONTRACT OWNER SHOULD SIGN. IF
ONLY ONE SIGNS, HIS OR HER SIGNATURE
WILL BE BINDING. IF THE CONTRACT
OWNER IS A CORPORATION, THE PRESIDENT
OR A VICE PRESIDENT SHOULD SIGN IN
HIS OR HER OWN NAME, INDICATING
TITLE. IF THE CONTRACT OWNER IS A
PARTNERSHIP, A PARTNER SHOULD SIGN IN
HIS OR HER NAME, INDICATING THAT HE
OR HE S A "PARTNER." IF THE
CONTRACT OWNER IS A TRUST, THE
TRUSTEE SHOULD SIGN IN HIS OR HER OWN
NAME, INDICATING THAT HE OR SHE IS A
"TRUSTEE."
Signature(s) Title(s), if applicable
INDICATE YOUR VOTE BELOW BY FILLING IN THE APPROPRIATE BOXES IN THIS MANNER
USING BLUE OR BLACK INK OR DARK PENCIL. PLEASE DO NOT USE RED INK.
PLEASE FOLD AND DETACH CARD AT PERFORATION. RETURN PORTION BELOW ONLY.
THIS VOTING INSTRUCTION, IF PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED BY THE CONTRACTHOLDER. IF NO DIRECTION IS MADE, THIS VOTING
INSTRUCTION WILL BE VOTED FOR ALL PROPOSALS. PLEASE REFER TO THE PROXY STATEMENT
FOR A DISCUSSION OF THE PROPOSALS.
<TABLE>
<CAPTION>
PROPOSAL 1 - Election of Trustees
<S> <C> <C>
Nominees: Harris J. Ashton, Nicholas F. Brady, S. Joseph FOR electing all WITHHOLD
Fortunato, Andrew H. Hines, Jr., Edith E. Holiday, Charles B. nominees AUTHORITY
Johnson, Betty P. Krahmer, Gordon S. Macklin and Fred R. listed (except as to vote for all
Millsaps marked to the right) nominees
To withhold authority to vote for any individual
nominee(s), write that nominee's name on the line below.
</TABLE>
Proposal 2 - Ratification of the selection of McGladrey & Pullen, LLP as the
Trust's independent auditors for the fiscal year ending December 31, 1997.
FOR AGAINST ABSTAIN
Proposal 3 - Approval of new Investment Manager Agreements between Templeton
Investment Counsel, Inc. and the Trust on behalf of Templeton Stock Fund,
Templeton Asset Allocation Fund and Templeton International Fund, respectively,
as described in the proxy statement, which increase the investment management
fee paid by such Funds.
FOR AGAINST ABSTAIN
PLEASE MARK YOUR VOTING INSTRUCTION FORM, DATE AND SIGN IT ON THE REVERSE SIDE,
AND RETURN IT PROMPTLY IN THE ACCOMPANYING ENVELOPE WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES.
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT dated as of [DATE] between TEMPLETON VARIABLE
PRODUCTS SERIES FUND, a Massachusetts business trust (hereinafter referred to as
the "Trust"), on behalf of its series TEMPLETON ASSET ALLOCATION FUND ("Fund"),
and TEMPLETON INVESTMENT COUNSEL, INC., a Florida corporation ("Investment
Manager").
WHEREAS, the Trust has been organized and intends to operate
as an investment company registered under the Investment Company Act of 1940
(the "1940 Act") for the purpose of investing and reinvesting its assets in
securities, as set forth in its Agreement and Declaration of Trust, its By-Laws
and its Registration Statements under the 1940 Act and the Securities Act of
1933, all as heretofore and hereafter amended and supplemented; and the Trust,
on behalf of the Fund, desires to avail itself of the services of the Investment
Manager; and,
WHEREAS, the Investment Manager is registered as an investment adviser
under the Investment Advisers Act of 1940, is engaged in the business of
rendering investment management services and desires to provide these services
to the Fund.
THEREFORE, in consideration of the mutual agreements herein
made, the Trust and the Investment Manager understand and agree as follows:
(1) The Investment Manager shall manage the investment and
reinvestment of the Fund's assets consistent with the provisions of the Trust's
Agreement and Declaration of Trust and the Fund's investment policies as adopted
and declared by the Trust's Board of Trustees. In pursuance of the foregoing,
the Investment Manager shall make all determinations with respect to the
investment of the Fund's assets and the purchase and sale of its investment
securities, and shall take such steps as may be necessary to implement those
determinations. Such determinations and services shall include determining the
manner in which any voting rights, rights to consent to corporate action and any
other rights pertaining to the Fund's investment securities shall be exercised,
subject to guidelines adopted by the Board of Trustees.
(2) The Investment Manager is not required to furnish any
personnel, overhead items or facilities for the Trust, including trading desk
facilities or daily pricing of the Fund's portfolio.
(3) The Investment Manager shall be responsible for selecting
members of securities exchanges, brokers and dealers (such members, brokers and
dealers being hereinafter referred to as "brokers") for the execution of the
Fund's portfolio transactions consistent with the Fund's brokerage policies and,
when applicable, the negotiation of commissions in connection therewith.
All decisions and placements shall be made in accordance with the following
principles:
A. Purchase and sale orders will usually be placed with
brokers which are selected by the
Investment Manager as able to achieve "best
execution" of such orders. "Best execution" shall
mean prompt and reliable execution at the most
favorable security price, taking into account the
other provisions hereinafter set forth. The
determination of what may constitute best execution
and price in the execution of a securities
transaction by a broker involves a number of
considerations, including, without limitation, the
overall direct net economic result to the Fund
(involving both price paid or received and any
commissions and other costs paid), the efficiency
with which the transaction is effected, the ability
to effect the transaction at all where a large block
is involved, availability of the broker to stand
ready to execute possibly difficult transactions in
the future, and the financial strength and stability
of the broker. Such considerations are judgmental and
are weighed by the Investment Manager in determining
the overall reasonableness of brokerage commissions.
B. In selecting brokers for portfolio transactions, the
Investment Manager shall take into account its past
experience as to brokers qualified to achieve "best
execution," including brokers who specialize in any
foreign securities held by the Fund.
C. The Investment Manager is authorized to allocate
brokerage business to brokers who have provided
brokerage and research services, as such services
are defined in Section 28(e) of the Securities
Exchange Act of 1934 (the "1934 Act"), for the Fund
and/or other accounts, if any, for which the
Investment Manager exercises investment
discretion (as defined in Section 3(a)(35)
of the 1934 Act) and, as to transactions
for which fixed minimum commission rates are not
applicable, to cause the Fund to pay
a commission for effecting a securities transaction
in excess of the amount another broker would have
charged for effecting that transaction, if the
Investment Manager determines in good faith that
such amount of commission is reasonabl in relation
to the value of the brokerage and research services
provided by such broker, viewed in terms of either
that particular transaction or the Investment
Manager's overall responsibilities with respect to
the Fund and the other accounts, if any, as to which
it exercises investment discretion. In reaching
such determination, the Investment Manager will not
be required to place or attempt to place a specific
dollar value on the research or execution services
of a broker or on the portion of any commission
reflecting either of said services. In
demonstrating
that such determinations were made in good faith,
the Investment Manager shall be prepared to show that
all commissions were allocated and paid for purposes
contemplated by the Fund's brokerage policy; that
the research services provide lawful and appropriate
assistance to the Investment Manager in the
performance of its investment decision-making
responsibilities; and that the commissions paid
were within a reasonable range. Whether commissions
were within a reasonable range shall be based on
any available information as to the level of
commission known to be charged by other brokers on
comparable transactions, but there shall be taken
into account the Fund's policies
that (i) obtaining a low commission is deemed
secondary to obtaining a favorable
securities price, since it is recognized that
usually it is more beneficial to the Fund to
obtain a favorable price than to pay the lowest
commission; and (ii) the quality, comprehensiveness
and frequency of research studies that are provided
for the Investment Manager are useful to the
Investment Manager in performing its advisory
services under this Agreement. Research
services provided by brokers to the
Investment Manager are considered to be in
addition to, and not in lieu of, services
required to be performed by the Investment
Manager under this Agreement. Research
furnished by brokers through which the Fund
effects securities transactions may be
used by the Investment Manager for any of its
accounts, and not all research may be
used by the Investment Manager for the Fund. When
execution of portfolio transactions
is allocated to brokers trading on exchanges with
fixed brokerage commission rates,
account may be taken of various services provided by
the broker.
D. Purchases and sales of portfolio securities within
the United States other than on a securities exchange
shall be executed with primary market makers acting
as principal, except where, in the judgment of the
Investment Manager, better prices and execution may
be obtained on a commission basis or from other
sources.
E. Sales of the Fund's shares (which shall be deemed to
include also shares of other
registered investment companies which have either
the same adviser or an investment adviser affiliated
with the Investment Manager) by a broker are one
factor among others to be taken into account in
deciding to allocate portfolio transactions
(including agency transactions, principal
transactions, purchases in underwritings or
tenders in response to tender offers) for the
account of the Fund to that broker; provided that
the broker shall furnish "best execution," as
defined in subparagraph A above, and that such
allocation shall be within the scope of the Fund's
policies as stated above; provided further, that in
every allocation made to a broker in which the
sale of Fund shares is taken into account, there
shall be no increase in the amount of
the commissions or other compensation paid to
such broker beyond a reasonable commission or
other compensation determined, as set forth in
subparagraph C above, on the basis of best execution
alone or best execution plus research services,
without taking account of or placing any value upon
such sale of the Fund's shares.
(4) The Trust agrees to pay to the Investment Manager a
monthly fee in dollars at an annual rate of 0.65% of the first $200,000,000 of
the Fund's average daily net assets, reduced for such assets over $200,000,000
to 0.585%, and further reduced for such assets in excess of $1,300,000,000 to
0.52%, payable at the end of each calendar month.
Notwithstanding the foregoing, if the total expenses of the
Fund (including the fee to the Investment Manager) in any fiscal year of the
Fund exceed any expense limitation imposed by applicable State law, the
Investment Manager shall reimburse the Fund for such excess in the manner and to
the extent required by applicable State law. The term "total expenses," as used
in this paragraph, does not include interest, taxes, litigation expenses,
distribution expenses, brokerage commissions or other costs of acquiring or
disposing of any of the Fund's portfolio securities or any costs or expenses
incurred or arising other than in the ordinary and necessary course of the
Fund's business. When the accrued amount of such expenses exceeds this limit,
the monthly payment of the Investment Manager's fee will be reduced by the
amount of such excess, subject to adjustment month by month during the balance
of the Fund's fiscal year if accrued expenses thereafter fall below the limit.
The Manager may waive all or a portion of its fees provided
for hereunder and such waiver shall be treated as a reduction in purchase price
of its services. The Manager shall be contractually bound hereunder by the terms
of any publicly announced waiver of its fee, or any limitation of the Fund's
expenses, as if such waiver or limitation were fully set forth herein.
(5) This Agreement shall become effective on [DATE] and shall
continue in effect until [DATE]. If not sooner terminated, this Agreement shall
continue in effect for successive periods of 12 months each thereafter, provided
that each such continuance shall be specifically approved annually by the vote
of a majority of the Trust's Board of Trustees who are not parties to this
Agreement or "interested persons" (as defined in the Investment Company Act of
1940 (the "1940 Act")) of any such party, cast in person at a meeting called for
the purpose of voting on such approval and either the vote of (a) a majority of
the outstanding voting securities of the Fund, as defined in the 1940 Act, or
(b) a majority of the Trust's Board of Trustees as a whole.
(6) Notwithstanding the foregoing, this Agreement may be
terminated by either party at any time, without the payment of any penalty, on
sixty (60) days' written notice to the other party, provided that termination by
the Trust is approved by vote of a majority of the Trust's Board of Trustees in
office at the time or by vote of a majority of the outstanding voting securities
of the Fund (as defined by the 1940 Act).
(7) This Agreement will terminate automatically and
immediately in the event of its assignment (as defined in the 1940 Act).
(8) In the event this Agreement is terminated and the
Investment Manager no longer acts as Investment Manager to the Fund, the
Investment Manager reserves the right to withdraw from the Trust and the Fund
the use of the names "Franklin," "Templeton" or any name misleadingly implying a
continuing relationship between the Trust or the Fund and the Investment Manager
or any of its affiliates.
(9) Except as may otherwise be provided by the 1940 Act,
neither the Investment Manager nor its officers, directors, employees or agents
shall be subject to any liability for any error of judgment, mistake of law, or
any loss arising out of any investment or other act or omission in the
performance by the Investment Manager of its duties under the Agreement or for
any loss or damage resulting from the imposition by any government of exchange
control restrictions which might affect the liquidity of the Fund's assets, or
from acts or omissions of custodians, or securities depositories, or from any
war or political act of any foreign government to which such assets might be
exposed, or for failure, on the part of the custodian or otherwise, timely to
collect payments, except for any liability, loss or damage resulting from
willful misfeasance, bad faith or gross negligence on the Investment Manager's
part or by reason of reckless disregard of the Investment Manager's duties under
this Agreement. It is hereby understood and acknowledged by the Trust that the
value of the investments made for the Fund may increase as well as decrease and
are not guaranteed by the Investment Manager. It is further understood and
acknowledged by the Trust that investment decisions made on behalf of the Fund
by the Investment Manager are subject to a variety of factors which may affect
the values and income generated by the Fund's portfolio securities, including
general economic conditions, market factors and currency exchange rates, and
that investment decisions made by the Investment Manager will not always be
profitable or prove to have been correct.
(10) It is understood that the services of the Investment Manager
are not deemed to be exclusive, and nothing in this Agreement shall prevent the
Investment Manager, or any affiliate thereof, from providing similar services to
other investment companies and other clients, including clients which may invest
in the same types of securities as the Fund, or, in providing such services,
from using information furnished by others. When the Investment Manager
determines to buy or sell the same security for the Fund that the Investment
Manager or one or more of its affiliates has selected for clients of the
Investment Manager or its affiliates, the orders for all such security
transactions shall be placed for execution by methods determined by the
Investment Manager, with approval by the Trust's Board of Trustees, to be
impartial and fair.
(11) This Agreement shall be construed in accordance with the laws
of the State of Florida, provided that nothing herein shall be construed as
being inconsistent with applicable Federal and state securities laws and any
rules, regulations and orders thereunder.
(12) If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby and, to this extent, the provisions of
this Agreement shall be deemed to be severable.
(13) Nothing herein shall be construed as constituting the
Investment Manager an agent of the Trust.
(14) It is understood and expressly stipulated that neither the
holders of shares of the Trust nor any Trustee, officer, agent or employee of
the Trust shall be personally liable hereunder, nor shall any resort be
had to other private property for the satisfaction of any claim or
obligation hereunder, but the Trust only shall be liable.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their duly authorized officers and their
respective corporate seals to be hereunto duly affixed and attested.
TEMPLETON VARIABLE PRODUCTS SERIES FUND
By:___________________
TEMPLETON INVESTMENT COUNSEL, INC.
By:___________________
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT dated as of [DATE] between TEMPLETON VARIABLE
PRODUCTS SERIES FUND, a Massachusetts business trust (hereinafter referred to as
the "Trust"), on behalf of its series TEMPLETON INTERNATIONAL FUND ("Fund"), and
TEMPLETON INVESTMENT COUNSEL, INC., a Florida corporation ("Investment
Manager").
WHEREAS, the Trust has been organized and intends to operate
as an investment company registered under the Investment Company Act of 1940
(the "1940 Act") for the purpose of investing and reinvesting its assets in
securities, as set forth in its Agreement and Declaration of Trust, its By-Laws
and its Registration Statements under the 1940 Act and the Securities Act of
1933, all as heretofore and hereafter amended and supplemented; and the Trust,
on behalf of the Fund, desires to avail itself of the services of the Investment
Manager; and,
WHEREAS, the Investment Manager is registered as an investment adviser
under the Investment Advisers Act of 1940, is engaged in the business of
rendering investment management services and desires to provide these services
to the Fund.
THEREFORE, in consideration of the mutual agreements herein
made, the Trust and the Investment Manager understand and agree as follows:
(1) The Investment Manager shall manage the investment and
reinvestment of the Fund's assets consistent with the provisions of the Trust's
Agreement and Declaration of Trust and the Fund's investment policies as adopted
and declared by the Trust's Board of Trustees. In pursuance of the foregoing,
the Investment Manager shall make all determinations with respect to the
investment of the Fund's assets and the purchase and sale of its investment
securities, and shall take such steps as may be necessary to implement those
determinations. Such determinations and services shall include determining the
manner in which any voting rights, rights to consent to corporate action and any
other rights pertaining to the Fund's investment securities shall be exercised,
subject to guidelines adopted by the Board of Trustees.
(2) The Investment Manager is not required to furnish any
personnel, overhead items or facilities for the Trust, including trading desk
facilities or daily pricing of the Fund's portfolio.
(3) The Investment Manager shall be responsible for selecting
members of securities exchanges, brokers and dealers (such members, brokers and
dealers being hereinafter referred to as "brokers") for the execution of the
Fund's portfolio transactions consistent with the Fund's brokerage policies and,
when applicable, the negotiation of commissions in connection therewith.
All decisions and placements shall be made in accordance with
the following principles:
A. Purchase and sale orders will usually be placed with
brokers which are selected by the
Investment Manager as able to achieve "best
execution" of such orders. "Best execution" shall
mean prompt and reliable execution at the most
favorable security price, taking into account the
other provisions hereinafter set forth. The
determination of what may constitute best execution
and price in the execution of a securities
transaction by a broker involves a number of
considerations, including, without limitation, the
overall direct net economic result to the Fund
(involving both price paid or received and any
commissions and other costs paid), the efficiency
with which the transaction is effected, the ability
to effect the transaction at all where a large block
is involved, availability of the broker to stand
ready to execute possibly difficult transactions in
the future, and the financial strength and stability
of the broker. Such considerations are judgmental and
are weighed by the Investment Manager in determining
the overall reasonableness of brokerage commissions.
B. In selecting brokers for portfolio transactions, the
Investment Manager shall take into account its past
experience as to brokers qualified to achieve "best
execution," including brokers who specialize in any
foreign securities held by the Fund.
C. The Investment Manager is authorized to allocate
brokerage business to brokers who
have provided brokerage and research services,
as such services are defined in
Section 28(e) of the Securities Exchange Act of
1934 (the "1934 Act"), for the Fund and/or other
accounts, if any, for which the Investment Manager
exercises investment discretion (as defined
in Section 3(a)(35) of the 1934 Act) and, as to
transactions
for which fixed minimum commission rates are not
applicable, to cause the Fund to pay
a commission for effecting a securities transaction
in excess of the amount another
broker would have charged for effecting that
transaction, if the Investment Manager
determines in good faith that such amount of
commission is reasonable in relation to
the value of the brokerage and research services
provided by such broker, viewed in
terms of either that particular transaction or
the Investment Manager's overall
responsibilities with respect to the Fund and the
other accounts, if any, as to which
it exercises investment discretion. In reaching
such determination, the Investment
Manager will not be required to place or attempt
to place a specific dollar value on
the research or execution services of a broker
or on the portion of any commission
reflecting either of said services. In
demonstrating that such determinations were
made in good faith, the Investment Manager shall
be prepared to show that all
commissions were allocated and paid for purposes
contemplated by the Fund's brokerage
policy; that the research services provide lawful
and appropriate assistance to the
Investment Manager in the performance of
its investment decision-making
responsibilities; and that the commissions paid
were within a reasonable range.
Whether commissions were within a reasonable range
shall be based on any available
information as to the level of commission known
to be charged by other brokers on
comparable transactions, but there shall be taken
into account the Fund's policies
that (i) obtaining a low commission is deemed
secondary to obtaining a favorable
securities price, since it is recognized that
usually it is more beneficial to the
Fund to obtain a favorable price than to pay the
lowest commission; and (ii) the quality,
comprehensiveness and frequency of research studies
that are provided for the
Investment Manager are useful to the Investment
Manager in performing its advisory
services under this Agreement. Research
services provided by brokers to the
Investment Manager are considered to be in
addition to, and not in lieu of, services
required to be performed by the Investment
Manager under this Agreement. Research
furnished by brokers through which the Fund
effects securities transactions may be
used by the Investment Manager for any of its
accounts, and not all research may be
used by the Investment Manager for the Fund. When
execution of portfolio transactions
is allocated to brokers trading on exchanges with
fixed brokerage commission rates,
account may be taken of various services provided by
the broker.
D. Purchases and sales of portfolio securities within
the United States other than on a securities exchange
shall be executed with primary market makers acting
as principal, except where, in the judgment of the
Investment Manager, better prices and execution may
be obtained on a commission basis or from other
sources.
E. Sales of the Fund's shares (which shall be deemed
to include also shares of other
registered investment companies which have either
the same adviser or an investment
adviser affiliated with the Investment Manager)
by a broker are one factor among
others to be taken into account in deciding to
allocate portfolio transactions
(including agency transactions, principal
transactions, purchases in underwritings or
tenders in response to tender offers) for the
account of the Fund to that broker;
provided that the broker shall furnish "best
execution," as defined in subparagraph A
above, and that such allocation shall be within
the scope of the Fund's policies as
stated above; provided further, that in every
allocation made to a broker in which the
sale of Fund shares is taken into account, there
shall be no increase in the amount of
the commissions or other compensation paid to
such broker beyond a reasonable
commission or other compensation determined, as
set forth in subparagraph C above, on
the basis of best execution alone or best execution
plus research services, without
taking account of or placing any value upon such
sale of the Fund's shares.
(4) The Trust agrees to pay to the Investment Manager a
monthly fee in dollars at an annual rate of 0.75% of the first $200,000,000 of
the Fund's average daily net assets, reduced for such assets over $200,000,000
to 0.675%, and further reduced for such assets in excess of $1,300,000,000 to
0.60%, payable at the end of each calendar month.
Notwithstanding the foregoing, if the total expenses of the
Fund (including the fee to the Investment Manager) in any fiscal year of the
Fund exceed any expense limitation imposed by applicable State law, the
Investment Manager shall reimburse the Fund for such excess in the manner and to
the extent required by applicable State law. The term "total expenses," as used
in this paragraph, does not include interest, taxes, litigation expenses,
distribution expenses, brokerage commissions or other costs of acquiring or
disposing of any of the Fund's portfolio securities or any costs or expenses
incurred or arising other than in the ordinary and necessary course of the
Fund's business. When the accrued amount of such expenses exceeds this limit,
the monthly payment of the Investment Manager's fee will be reduced by the
amount of such excess, subject to adjustment month by month during the balance
of the Fund's fiscal year if accrued expenses thereafter fall below the limit.
The Manager may waive all or a portion of its fees provided
for hereunder and such waiver shall be treated as a reduction in purchase price
of its services. The Manager shall be contractually bound hereunder by the terms
of any publicly announced waiver of its fee, or any limitation of the Fund's
expenses, as if such waiver or limitation were fully set forth herein.
(5) This Agreement shall become effective on [DATE] and shall
continue in effect until [DATE]. If not sooner terminated, this Agreement shall
continue in effect for successive periods of 12 months each thereafter, provided
that each such continuance shall be specifically approved annually by the vote
of a majority of the Trust's Board of Trustees who are not parties to this
Agreement or "interested persons" (as defined in the Investment Company Act of
1940 (the "1940 Act")) of any such party, cast in person at a meeting called for
the purpose of voting on such approval and either the vote of (a) a majority of
the outstanding voting securities of the Fund, as defined in the 1940 Act, or
(b) a majority of the Trust's Board of Trustees as a whole.
(6) Notwithstanding the foregoing, this Agreement may be
terminated by either party at any time, without the payment of any penalty, on
sixty (60) days' written notice to the other party, provided that termination by
the Trust is approved by vote of a majority of the Trust's Board of Trustees in
office at the time or by vote of a majority of the outstanding voting securities
of the Fund (as defined by the 1940 Act).
(7) This Agreement will terminate automatically and
immediately in the event of its assignment (as defined in the 1940 Act).
(8) In the event this Agreement is terminated and the
Investment Manager no longer acts as Investment Manager to the Fund, the
Investment Manager reserves the right to withdraw from the Trust and the Fund
the use of the names "Franklin," "Templeton" or any name misleadingly implying a
continuing relationship between the Trust or the Fund and the Investment Manager
or any of its affiliates.
(9) Except as may otherwise be provided by the 1940 Act,
neither the Investment Manager nor its officers, directors, employees or agents
shall be subject to any liability for any error of judgment, mistake of law, or
any loss arising out of any investment or other act or omission in the
performance by the Investment Manager of its duties under the Agreement or for
any loss or damage resulting from the imposition by any government of exchange
control restrictions which might affect the liquidity of the Fund's assets, or
from acts or omissions of custodians, or securities depositories, or from any
war or political act of any foreign government to which such assets might be
exposed, or for failure, on the part of the custodian or otherwise, timely to
collect payments, except for any liability, loss or damage resulting from
willful misfeasance, bad faith or gross negligence on the Investment Manager's
part or by reason of reckless disregard of the Investment Manager's duties under
this Agreement. It is hereby understood and acknowledged by the Trust that the
value of the investments made for the Fund may increase as well as decrease and
are not guaranteed by the Investment Manager. It is further understood and
acknowledged by the Trust that investment decisions made on behalf of the Fund
by the Investment Manager are subject to a variety of factors which may affect
the values and income generated by the Fund's portfolio securities, including
general economic conditions, market factors and currency exchange rates, and
that investment decisions made by the Investment Manager will not always be
profitable or prove to have been correct.
(10) It is understood that the services of the Investment Manager
are not deemed to be exclusive, and nothing in this Agreement shall prevent the
Investment Manager, or any affiliate thereof, from providing similar services to
other investment companies and other clients, including clients which may invest
in the same types of securities as the Fund, or, in providing such services,
from using information furnished by others. When the Investment Manager
determines to buy or sell the same security for the Fund that the Investment
Manager or one or more of its affiliates has selected for clients of the
Investment Manager or its affiliates, the orders for all such security
transactions shall be placed for execution by methods determined by the
Investment Manager, with approval by the Trust's Board of Trustees, to be
impartial and fair.
(11) This Agreement shall be construed in accordance with the laws
of the State of Florida, provided that nothing herein shall be construed as
being inconsistent with applicable Federal and state securities laws and any
rules, regulations and orders thereunder.
(12) If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby and, to this extent, the provisions of
this Agreement shall be deemed to be severable.
(13) Nothing herein shall be construed as constituting the
Investment Manager an agent of the Trust.
(14) It is understood and expressly stipulated that neither
the holders of shares of the Trust nor any Trustee, officer, agent or employee
of the Trust shall be personally liable hereunder, nor shall any resort
be had to other private property for the satisfaction of any claim or
obligation hereunder, but the Trust only shall be liable.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their duly authorized officers and their
respective corporate seals to be hereunto duly affixed and attested.
TEMPLETON VARIABLE PRODUCTS SERIES FUND
By:___________________
TEMPLETON INVESTMENT COUNSEL, INC.
By:___________________
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT dated as of [DATE] between TEMPLETON VARIABLE
PRODUCTS SERIES FUND, a Massachusetts business trust (hereinafter referred to as
the "Trust"), on behalf of its series TEMPLETON STOCK FUND ("Fund"), and
TEMPLETON INVESTMENT COUNSEL, INC., a Florida corporation ("Investment
Manager").
WHEREAS, the Trust has been organized and intends to operate
as an investment company registered under the Investment Company Act of 1940
(the "1940 Act") for the purpose of investing and reinvesting its assets in
securities, as set forth in its Agreement and Declaration of Trust, its By-Laws
and its Registration Statements under the 1940 Act and the Securities Act of
1933, all as heretofore and hereafter amended and supplemented; and the Trust,
on behalf of the Fund, desires to avail itself of the services of the Investment
Manager; and,
WHEREAS, the Investment Manager is registered as an investment adviser
under the Investment Advisers Act of 1940, is engaged in the business of
rendering investment management services and desires to provide these services
to the Fund.
THEREFORE, in consideration of the mutual agreements herein
made, the Trust and the Investment Manager understand and agree as follows:
(1) The Investment Manager shall manage the investment and
reinvestment of the Fund's assets consistent with the provisions of the Trust's
Agreement and Declaration of Trust and the Fund's investment policies as adopted
and declared by the Trust's Board of Trustees. In pursuance of the foregoing,
the Investment Manager shall make all determinations with respect to the
investment of the Fund's assets and the purchase and sale of its investment
securities, and shall take such steps as may be necessary to implement those
determinations. Such determinations and services shall include determining the
manner in which any voting rights, rights to consent to corporate action and any
other rights pertaining to the Fund's investment securities shall be exercised,
subject to guidelines adopted by the Board of Trustees.
(2) The Investment Manager is not required to furnish any
personnel, overhead items or facilities for the Trust, including trading desk
facilities or daily pricing of the Fund's portfolio.
(3) The Investment Manager shall be responsible for selecting
members of securities exchanges, brokers and dealers (such members, brokers and
dealers being hereinafter referred to as "brokers") for the execution of the
Fund's portfolio transactions consistent with the Fund's brokerage policies and,
when applicable, the negotiation of commissions in connection therewith.
All decisions and placements shall be made in accordance with
the following principles:
A. Purchase and sale orders will usually be placed
with brokers which are selected by the
Investment Manager as able to achieve "best
execution" of such orders. "Best execution" shall
mean prompt and reliable execution at the most
favorable security price, taking into account the
other provisions hereinafter set forth. The
determination of what may constitute best execution
and price in the execution of a securities
transaction by a broker involves a number of
considerations, including, without limitation, the
overall direct net economic result to the Fund
(involving both price paid or received and any
commissions and other costs paid), the efficiency
with which the transaction is effected, the ability
to effect the transaction at all where a large block
is involved, availability of the broker to stand
ready to execute possibly difficult transactions in
the future, and the financial strength and stability
of the broker. Such considerations are judgmental and
are weighed by the Investment Manager in determining
the overall reasonableness of brokerage commissions.
B. In selecting brokers for portfolio transactions, the
Investment Manager shall take into account its past
experience as to brokers qualified to achieve "best
execution," including brokers who specialize in any
foreign securities held by the Fund.
C. The Investment Manager is authorized to allocate
brokerage business to brokers who
have provided brokerage and research services,
as such services are defined in
Section 28(e) of the Securities Exchange Act of
1934 (the "1934 Act"), for the Fund
and/or other accounts, if any, for which the
Investment Manager exercises investment
discretion (as defined in Section 3(a)(35) of the
1934 Act) and, as to transactions
for which fixed minimum commission rates are not
applicable, to cause the Fund to pay
a commission for effecting a securities
transaction in excess of the amount another
broker would have charged for effecting that
transaction, if the Investment Manager
determines in good faith that such amount of
commission is reasonable in relation to
the value of the brokerage and research services
provided by such broker, viewed in
terms of either that particular transaction or
the Investment Manager's overall
responsibilities with respect to the Fund and the
other accounts, if any, as to which
it exercises investment discretion. In reaching
such determination, the Investment
Manager will not be required to place or attempt
to place a specific dollar value on
the research or execution services of a broker
or on the portion of any commission
reflecting either of said services. In
demonstrating that such determinations were
made in good faith, the Investment Manager shall
be prepared to show that all
commissions were allocated and paid for purposes
contemplated by the Fund's brokerage
policy; that the research services provide lawful
and appropriate assistance to the
Investment Manager in the performance of
its investment decision-making
responsibilities; and that the commissions paid
were within a reasonable range.
Whether commissions were within a reasonable
range shall be based on any available
information as to the level of commission known
to be charged by other brokers on
comparable transactions, but there shall be taken
into account the Fund's policies
that (i) obtaining a low commission is deemed
secondary to obtaining a favorable
securities price, since it is recognized that
usually it is more beneficial to the
Fund to obtain a favorable price than to pay the
lowest commission; and (ii) the
quality, comprehensiveness and frequency of research
studies that are provided for the
Investment Manager are useful to the Investment
Manager in performing its advisory
services under this Agreement. Research services
provided by brokers to the
Investment Manager are considered to be in
addition to, and not in lieu of, services
required to be performed by the Investment Manager
under this Agreement. Research
furnished by brokers through which the Fund effects
securities transactions may be
used by the Investment Manager for any of its
accounts, and not all research may be
used by the Investment Manager for the Fund. When
execution of portfolio transactions
is allocated to brokers trading on exchanges with
fixed brokerage commission rates,
account may be taken of various services provided by
the broker.
D. Purchases and sales of portfolio securities within
the United States other than on a securities exchange
shall be executed with primary market makers acting
as principal, except where, in the judgment of the
Investment Manager, better prices and execution may
be obtained on a commission basis or from other
sources.
E. Sales of the Fund's shares (which shall be deemed
to include also shares of other
registered investment companies which have either
the same adviser or an investment
adviser affiliated with the Investment Manager)
by a broker are one factor among
others to be taken into account in deciding to
allocate portfolio transactions
(including agency transactions, principal
transactions, purchases in underwritings or
tenders in response to tender offers) for the
account of the Fund to that broker;
provided that the broker shall furnish "best
execution," as defined in subparagraph A
above, and that such allocation shall be within
the scope of the Fund's policies as
stated above; provided further, that in every
allocation made to a broker in which the
sale of Fund shares is taken into account, there
shall be no increase in the amount of
the commissions or other compensation paid to
such broker beyond a reasonable
commission or other compensation determined, as
set forth in subparagraph C above, on
the basis of best execution alone or best
execution plus research services, without
taking account of or placing any value upon such sale
of the Fund's shares.
(4) The Trust agrees to pay to the Investment Manager a
monthly fee in dollars at an annual rate of 0.75% of the first $200,000,000 of
the Fund's average daily net assets, reduced for such assets over $200,000,000
to 0.675%, and further reduced for such assets in excess of $1,300,000,000 to
0.60%, payable at the end of each calendar month.
Notwithstanding the foregoing, if the total expenses of the
Fund (including the fee to the Investment Manager) in any fiscal year of the
Fund exceed any expense limitation imposed by applicable State law, the
Investment Manager shall reimburse the Fund for such excess in the manner and to
the extent required by applicable State law. The term "total expenses," as used
in this paragraph, does not include interest, taxes, litigation expenses,
distribution expenses, brokerage commissions or other costs of acquiring or
disposing of any of the Fund's portfolio securities or any costs or expenses
incurred or arising other than in the ordinary and necessary course of the
Fund's business. When the accrued amount of such expenses exceeds this limit,
the monthly payment of the Investment Manager's fee will be reduced by the
amount of such excess, subject to adjustment month by month during the balance
of the Fund's fiscal year if accrued expenses thereafter fall below the limit.
The Manager may waive all or a portion of its fees provided
for hereunder and such waiver shall be treated as a reduction in purchase price
of its services. The Manager shall be contractually bound hereunder by the terms
of any publicly announced waiver of its fee, or any limitation of the Fund's
expenses, as if such waiver or limitation were fully set forth herein.
(5) This Agreement shall become effective on [DATE] and shall
continue in effect until [DATE]. If not sooner terminated, this Agreement shall
continue in effect for successive periods of 12 months each thereafter, provided
that each such continuance shall be specifically approved annually by the vote
of a majority of the Trust's Board of Trustees who are not parties to this
Agreement or "interested persons" (as defined in the Investment Company Act of
1940 (the "1940 Act")) of any such party, cast in person at a meeting called for
the purpose of voting on such approval and either the vote of (a) a majority of
the outstanding voting securities of the Fund, as defined in the 1940 Act, or
(b) a majority of the Trust's Board of Trustees as a whole.
(6) Notwithstanding the foregoing, this Agreement may be
terminated by either party at any time, without the payment of any penalty, on
sixty (60) days' written notice to the other party, provided that termination by
the Trust is approved by vote of a majority of the Trust's Board of Trustees in
office at the time or by vote of a majority of the outstanding voting securities
of the Fund (as defined by the 1940 Act).
(7) This Agreement will terminate automatically and
immediately in the event of its assignment (as defined in the 1940 Act).
(8) In the event this Agreement is terminated and the
Investment Manager no longer acts as Investment Manager to the Fund, the
Investment Manager reserves the right to withdraw from the Trust and the Fund
the use of the names "Franklin," "Templeton" or any name misleadingly implying a
continuing relationship between the Trust or the Fund and the Investment Manager
or any of its affiliates.
(9) Except as may otherwise be provided by the 1940 Act,
neither the Investment Manager nor its officers, directors, employees or agents
shall be subject to any liability for any error of judgment, mistake of law, or
any loss arising out of any investment or other act or omission in the
performance by the Investment Manager of its duties under the Agreement or for
any loss or damage resulting from the imposition by any government of exchange
control restrictions which might affect the liquidity of the Fund's assets, or
from acts or omissions of custodians, or securities depositories, or from any
war or political act of any foreign government to which such assets might be
exposed, or for failure, on the part of the custodian or otherwise, timely to
collect payments, except for any liability, loss or damage resulting from
willful misfeasance, bad faith or gross negligence on the Investment Manager's
part or by reason of reckless disregard of the Investment Manager's duties under
this Agreement. It is hereby understood and acknowledged by the Trust that the
value of the investments made for the Fund may increase as well as decrease and
are not guaranteed by the Investment Manager. It is further understood and
acknowledged by the Trust that investment decisions made on behalf of the Fund
by the Investment Manager are subject to a variety of factors which may affect
the values and income generated by the Fund's portfolio securities, including
general economic conditions, market factors and currency exchange rates, and
that investment decisions made by the Investment Manager will not always be
profitable or prove to have been correct.
(10) It is understood that the services of the Investment Manager
are not deemed to be exclusive, and nothing in this Agreement shall prevent the
Investment Manager, or any affiliate thereof, from providing similar services to
other investment companies and other clients, including clients which may invest
in the same types of securities as the Fund, or, in providing such services,
from using information furnished by others. When the Investment Manager
determines to buy or sell the same security for the Fund that the Investment
Manager or one or more of its affiliates has selected for clients of the
Investment Manager or its affiliates, the orders for all such security
transactions shall be placed for execution by methods determined by the
Investment Manager, with approval by the Trust's Board of Trustees, to be
impartial and fair.
(11) This Agreement shall be construed in accordance with the laws
of the State of Florida, provided that nothing herein shall be construed as
being inconsistent with applicable Federal and state securities laws and any
rules, regulations and orders thereunder.
(12) If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby and, to this extent, the provisions of
this Agreement shall be deemed to be severable.
(13) Nothing herein shall be construed as constituting the
Investment Manager an agent of the Trust.
(14) It is understood and expressly stipulated that neither the
holders of shares of the Trust nor any Trustee, officer, agent or employee of
the Trust shall be personally liable hereunder, nor shall any resort be had
to other private property for the satisfaction of any claim or obligation
hereunder, but the Trust only shall be liable.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their duly authorized officers and their
respective corporate seals to be hereunto duly affixed and attested.
TEMPLETON VARIABLE PRODUCTS SERIES FUND
By:___________________
TEMPLETON INVESTMENT COUNSEL, INC.
By:___________________
