SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ X ] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section.240-14a-11(c) or
Section.240-14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e) (2))
Templeton Variable Products Series Fund
(Name of Registrant as Specified In Its Charter)
Templeton Variable Products Series Fund
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
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 identify 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:
[FT LOGO]
Franklin(R) Templeton(R)
500 East Broward Blvd., Suite 2100
Fort Lauderdale, Florida 33394-3091
TEMPLETON VARIABLE PRODUCTS SERIES FUND
TEMPLETON BOND FUND
IMPORTANT INFORMATION FOR
CONTRACTHOLDERS AND POLICYHOLDERS
A special shareholders meeting of the Templeton Bond Fund, a series of
Templeton Variable Products Series Fund, will take place on February 16, 1999
at 2:00 p.m., at 500 East Broward Blvd., Fort Lauderdale Blvd., FL. These
materials discuss the proposal to be voted on at the meeting, and contain 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 this fund. 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 accordance with the
Trustees' recommendations. If you do not return a voting instruction card at
all, the shares will be voted in the same proportion as shares for which
instructions have been received from other Contract Owners.
PLEASE SPEND A FEW MINUTES REVIEWING THE PROPOSAL DESCRIBED BELOW. THEN,
FILL OUT YOUR VOTING INSTRUCTION CARD AND RETURN IT. WE WANT TO KNOW HOW YOU
WOULD LIKE TO VOTE AND WELCOME YOUR COMMENTS. IF YOU HAVE ANY QUESTIONS,
CALL 1-800/342-FUND.
TABLE OF CONTENTS
Notice of Special Meeting of Shareholders.................... 3
The Proxy Statement.......................................... 4
Proposal 1 - To approve or disapprove a change in the classification of the
Templeton Bond Fund from a diversified to a non-diversified fund and a
related change to the Fund's
fundamental investment restrictions.......................... 6
Proposal 2 - Other matters.................................. 9
Additional Information About Voting and the Shareholders
Meeting...................................................... 9
TEMPLETON VARIABLE PRODUCTS SERIES FUND
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of Templeton Bond Fund ("Fund"), a series of Templeton
Variable Products Series Fund (the "Trust").
A Special Meeting (the "Meeting") of shareholders of the Fund, will be held
at the offices of the Trust located at 500 East Broward Blvd., Suite 2100,
Fort Lauderdale, Florida, on February 16, 1999, at 2:00 p.m.
During the Meeting, shareholders of the Bond Fund as of the close of business
on December 31, 1998 will vote on the proposal(s) listed below.
1. To approve or disapprove a change in the classification of the
Bond Fund from a diversified to a non-diversified fund and a
related change to the Fund's fundamental investment restrictions.
In addition, shareholders may vote on any other business as may properly come
before the Meeting or any adjournment thereof (none known as of the date of
this notice).
By order of the Board of Trustees,
Barbara J. Green
Secretary
January ____, 1999
PLEASE 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
TEMPLETON BOND FUND
PROXY STATEMENT
INFORMATION ABOUT VOTING:
WHO IS ASKING FOR MY VOTE?
The management of Templeton Variable Products Series Fund (the "Trust") is
asking for your vote for use at a Special Shareholders Meeting to be held on
February 16, 1999.
WHO IS ELIGIBLE TO VOTE?
Shareholders of record of both Class 1 and Class 2 shares of the Templeton
Bond Fund ("Fund"), at the close of business on December 31, 1998 may attend
the Meeting and vote. Separate accounts of certain insurance companies (the
"Insurance Companies"), are the only shareholders of the Fund. Each
Insurance Company will vote its shares of the Fund based on voting
instructions received from variable annuity contract and variable life
insurance policy owners (collectively, the "Contract Owners"). This Proxy
Statement will be used by the Insurance Companies in obtaining 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 11, 1999.
SHAREHOLDERS. Each Class 1 and Class 2 share is entitled to one vote.
Shares represented by duly executed proxies will be voted in accordance with
the Insurance Company Shareholders' instructions. If a proxy is signed by
the Insurance Company Shareholder but no express voting instructions are given
for a proposal, the proxy will be voted in accordance with the Trustees'
recommendations.
CONTRACT OWNERS. If a Contract Owner returns a properly executed voting
instruction card with express voting instructions, the relevant Insurance
Company will vote those shares in accordance with the Contract Owner's
instructions. If a Contract Owner does not return the voting instruction
card, the relevant Insurance Company will vote the shares of the Fund
attributable to the Contract Owner in the same manner and in the same
proportion as the shares of that Fund for which it has received
instructions. If a Contract Owner returns the voting instruction card
properly executed but with no express voting instructions indicated on the
card, the relevant Insurance Company will vote the shares in accordance with
the Trustees' recommendations.
ON WHAT ISSUES AM I BEING ASKED TO VOTE?
This Proxy Statement covers the proposal listed below. All Shareholders and
Contract Owners are asked to vote.
1. To approve or disapprove a change in the classification of the
Fund from a diversified to a non-diversified fund and a related
change to the Fund's fundamental investment restrictions.
In addition, Shareholders and Contract Owners may vote on any other business
as may properly come before the Meeting. The Trustees of the Trust do not
intend to bring any other business before the Meeting and are not currently
aware of any other business to be presented at the Meeting.
WHAT VOTE IS REQUIRED?
Approval of the change in the classification of the Fund and the related
change in the Fund's fundamental investment restrictions requires the
favorable vote of a majority of the outstanding shares of the Fund, as
defined in the 1940 Act, which means the vote of the lesser of (i) a majority
of the Fund's outstanding shares, or (ii) 67% or more of the Fund's shares
represented at the Meeting if more than 50% of the outstanding shares are
represented.
HOW DO THE TRUSTEES RECOMMEND THAT I VOTE?
The Board of Trustees ("Trustees") of the Trust recommends that you vote:
1. FOR the approval of a change in the classification of the Fund
from a diversified to a non-diversified fund and a related change
to the Fund's fundamental investment restrictions.
In addition, to the extent they are authorized to do so, the proxy holders
may vote, in their discretion, on any other business before the Meeting. The
Trust's management is not currently aware of any other business to be
presented.
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 instructing the
Insurance Company in person.
THE PROPOSALS
PROPOSAL 1. TO APPROVE OR DISAPPROVE A CHANGE IN THE CLASSIFICATION OF
THE TEMPLETON BOND FUND FROM A DIVERSIFIED TO A
NON-DIVERSIFIED FUND AND A RELATED CHANGE TO THE FUND'S
FUNDAMENTAL INVESTMENT RESTRICTIONS
1. WHAT IS THE PROPOSAL?
The Fund's Investment Manager, Templeton Investment Counsel, Inc. ("Manager")
has proposed to change the classification of the Fund from "diversified" to
"non-diversified," as defined under the Investment Company Act of 1940 and to
change a related fundamental investment restriction. The Manager believes
these changes would give the Fund greater investment flexibility to pursue
its investment objectives. This flexibility may at times be important to the
Fund's investment strategy since the number of issuers of foreign debt
obligations is limited, and foreign government securities are not considered
"Government securities" for purposes of the exemption to federal securities
laws diversification rules for Government securities. As a result, the
proposed change from a diversified to a non-diversified fund will permit the
Fund to invest a greater portion of its assets in fewer foreign government
issuers. On December 1, 1998, the Trustees approved this proposal, subject
to a vote of the Fund's shareholders.
2. WHAT ARE THE CURRENT DIVERSIFICATION STANDARDS THAT APPLY TO THE
FUND?
The Fund is currently classified as a "diversified" fund pursuant to Section
5(b)(1) of the 1940 Act. As a diversified fund, the Fund may not invest more
than 5% of its total assets in the securities of any one issuer (other than
securities issued by the U.S. Government or its agencies or
instrumentalities). This limit applies to 75% of the Fund's total assets, so
that up to 25% may be invested without regard to the 5% issuer limitation.
The Trust's current investment restriction number (2) restates the same
rule. It states that each fund of the Trust will not,
"With respect to 75% of its total assets, invest more than 5% of the
total value of its assets in the securities of any one issuer, or
purchase more than 10% of any class of securities of any one company,
including more than 10% of its outstanding voting securities (except
for investments in obligations issued or guaranteed by the U.S.
government or its agencies or instrumentalities)."
3. HOW WOULD THESE STANDARDS CHANGE IF THE PROPOSAL IS APPROVED?
If the proposal is approved, the Fund would be reclassified from
"diversified" to "non-diversified" and fundamental investment restriction
number 2 would no longer apply to the Fund.
As a "non-diversified" fund under the federal securities laws, the Fund could
invest all of its assets in the obligations of a single issuer or relatively
few issuers. However, the Fund intends to continue to be diversified under
the federal tax laws described below.
The Fund intends to continue to conduct its operation so as to qualify as a
"regulated investment company" or "RIC" for purposes of the Internal Revenue
Code of 1986, as amended. Qualifying as a RIC relieves the Fund of any
liability for federal income tax and excise tax to the extent it distributes
substantially all of its taxable income and capital gains to its
shareholders. To continue to qualify as a RIC, the Fund will be required to
limit its investments so that, at the close of each quarter of its taxable
year, (i) not more than 25% of its total assets is invested in the securities
(other than U.S. Government securities or the securities of other regulated
investment companies) of any one issuer, and (ii) at least 50% of the value
of its total assets is represented by cash and cash items (including
receivables), government securities and securities of other regulated
investment companies, and other securities for purposes of this calculation
limited in respect of any one issuer to an amount not greater in value than
5% of the value of the Fund's total assets and to not more than 10% of the
outstanding voting securities of the issuer. These limitations would not be
fundamental and could be modified to the extent that federal tax requirements
change.
In addition to compliance with the rules of the Internal Revenue Code to
qualify as a RIC, the Fund also intends to continue to comply with tax rules
relating to diversification of variable annuities. Those rules require that
(i) no more than 55% of the Fund's assets is represented by any one
investment; (ii) no more than 70% of the Fund's assets is represented by any
two investments; (iii) no more than 80% of the Fund's assets is represented
by any three investments; and (iv) no more than 90% of the Fund's assets is
represented by any four investments. In the case of obligations of U.S.
Government agencies or instrumentalities, each agency or instrumentality is
treated as a separate issuer for purposes of these rules. These limitations
also would not be fundamental and could be modified to the extent that
federal tax requirements change.
4. WHAT FACTORS DID THE TRUSTEES CONSIDER BEFORE RECOMMENDING
APPROVAL?
The Trustees first considered the Manager's reasons for recommending the
change in diversification policy. The Manager indicated that, as a general
matter, there are a limited number of issuers of foreign bonds and other
foreign debt securities available for investment. Due to the limited number
of issuers of foreign debt securities, it may be difficult, and not
necessarily in the best interests of the Fund's shareholders, to maintain the
Fund as a diversified portfolio at all times, while pursuing the Fund's
investment strategy. Moreover, the Manager believes that the ability of the
Fund to invest a significant portion of its assets in the securities of a
single issuer for a given time will help the Fund achieve its investment
objectives.
In particular, the Manager believes that at times foreign government debt
securities may be more liquid, and may present less credit risk, than
non-government foreign debt securities. Because the number of issuers of
foreign government debt securities is limited, and foreign government
securities are not considered "government securities" for 1940 Act
diversification purposes, the Fund is currently restricted with respect to
the securities of a single foreign government issuer it may purchase.
Consequently, the Manager believes the less restrictive diversification
requirements applicable to non-diversified portfolios under the 1940 Act may
be more appropriate.
The Trustees also considered the experience of the Manager in advising or
sub-advising a number of other non-diversified global bond funds which are
much larger than the Fund. These include Templeton Global Bond Fund,
Franklin Global Government Income Fund (a series of Franklin Investors
Securities Trust), and Templeton Global Income Securities Fund (a series of
Franklin Valuemark Funds), among others.
Finally, the Trustees considered the additional potential risks of a
non-diversified fund. Since, as a "non-diversified" fund under the 1940 Act,
the Fund will be permitted to invest a greater proportion of its assets in
the obligations of a smaller number of foreign issuers, changes in the value
of a single issuer's securities may have a greater effect on the Fund's
investments and its share price. Further, the Fund's share price could be
adversely affected as a result of the interest rate fluctuations with respect
to a specific debt security holding. Finally, a number of the risks of
investing in foreign securities could be exacerbated as a result of the
non-diversified status of the Fund. For example, if the Fund had a
substantial holding in a security denominated in a single foreign currency
and there was a substantial decline in the value of the U.S. dollar as
compared to the currency, the Fund's share price could decline to a greater
degree than if that portion of the Fund's portfolio were invested in
securities denominated in several additional foreign currencies where such a
decline had not occurred.
In approving this proposal, the Board of Trustees determined, in the exercise
of their business judgment and in light of their fiduciary duties under
relevant state law and the 1940 Act that, based upon the factors considered
by them, the proposal is reasonably likely to benefit the Fund and its
shareholders and Contract Owners.
THE TRUSTEES RECOMMEND A VOTE FOR THE PROPOSAL.
PROPOSAL 2: OTHER MATTERS
The Trustees do not intend to bring any matters before the Meeting other than
Proposal 1 described above, and are not aware of any other business to be
presented at the Meeting. However, if any additional matters should be
properly presented, proxies may be voted on such matters in accordance with
the judgment of the persons named in the proxy.
INFORMATION ABOUT THE TRUST AND THE FUND
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 eight series or
funds, but only the Templeton Bond Fund would be affected by the proposal in
this proxy statement.
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 Fund's investment manager is Templeton Investment Counsel, Inc., 500 East
Broward Blvd., Fort Lauderdale, FL. For all funds in the Trust, the fund
administrator is Franklin Templeton Services, Inc., 500 East Broward Blvd.,
Fort Lauderdale, FL, and the principal underwriter is Franklin Templeton
Distributors, Inc., 100 Fountain Parkway, St. Petersburg, FL.
The following table shows the net assets and shares outstanding of the Fund
as of November 30, 1998. As of the record date, all outstanding Fund shares
were Class 1 shares.
Number of
FUND NAME NET ASSETS SHARES OUTSTANDING
Templeton Bond Fund $30,157,872.35 2,736,649.033
As of November 30, 1998 the following Insurance Companies owned, on behalf of
certain separate accounts, more than 5% of the Fund's outstanding shares:
Percent of
Name and Address Number Outstanding
FUND NAME INSURANCE COMPANY OF SHARES SHARES
Templeton Phoenix Home 1,362,492.341 49.8%
Bond Fund Life Mutual
Insurance Company
100 Bright Meadows Blvd.
Enfield, CT 06082
The Travelers 1,374,156.692 50.2%
Insurance Company
One Tower Square
Hartford, CT 06183
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 Fund by virtue of the voting rights arising from their record ownership
of Trust shares.
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 1-800/774-5001 or forward a
written request to Templeton Funds Annuity Company, 100 Fountain Parkway, St.
Petersburg, Florida, 33716-1205.
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 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 the 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 COUNTING THE VOTES. 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 of any item will be treated as votes not cast and, therefore,
will not be counted for purposes of obtaining approval of the proposal.
Each of the Insurance Companies holding shares of the Fund have agreed to
vote their shares in proportion to and in the manner instructed by Contract
Owners. If a Contract Owner gives no instructions by not returning the
voting instruction card, the relevant Insurance Company will vote the shares
in the same proportion as shares for which it has received instructions. If
a Contract Owner returns a signed voting instruction card but does not
indicate specific instructions, the shares will be voted in accordance with
the Trustees' recommendations.
ADJOURNMENT. If a sufficient number of votes in favor of the proposals
contained in the Notice of Meeting and Proxy Statement is not received by the
time scheduled for the Meeting, the person 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. The costs of any additional
solicitation and of any adjourned session will be borne by the Trust.
REVOCATION OF PROXIES. Proxies executed by 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 a meeting in 1999. Shareholder proposals to be
included in the proxy statement for any subsequent meeting must be received
at the Trust's offices, 500 East Broward Blvd., Suite 2100, Fort Lauderdale,
Florida 33394-3091, at least 120 days prior to any such meeting.
By Order of the Board of Trustees,
Barbara J. Green
Secretary
Dated: January ____, 1999
[NAME OF INSURANCE COMPANY SOLICITING PROXY]
THESE VOTING INSTRUCTIONS ARE SOLICITED BY THE ABOVE-REFERENCED INSURANCE
COMPANY IN CONNECTION WITH A SOLICITATION OF PROXIES
BY THE TRUSTEES OF TEMPLETON VARIABLE PRODUCTS SERIES FUND.
Please sign, date and return the voting instruction form in the enclosed
postage-paid envelope. Voting instructions must be received by February 15,
1999 to be voted for the Meeting to be held February 16, 1999.
The undersigned hereby instructs the above-referenced insurance company to
vote the shares of Templeton Bond Fund, a series of Templeton Variable
Products Series Fund, attributable to the undersigned's variable annuity or
variable life insurance contract at the Meeting of Shareholders to be held at
500 East Broward Blvd., Suite 2100, Fort Lauderdale, Florida at 2:00 p.m.
Eastern time on the 16th day of February, 1999, and at any adjournments
thereof, as indicated below, with respect to the matters set forth on the
reverse side and described in the Notice of Special Meeting and Proxy
Statement dated January ___, 1999, receipt of which is hereby acknowledged.
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 own name,
indicating that he or she is 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.
THIS VOTING INSTRUCTION, IF PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED BY THE CONTRACT OWNER. IF THIS VOTING INSTRUCTION IS EXECUTED AND
NO DIRECTION IS MADE, THIS VOTING INSTRUCTION WILL BE VOTED FOR ALL PROPOSALS
AND IN THE DISCRETION OF THE INSURANCE COMPANY UPON SUCH OTHER BUSINESS AS
MAY PROPERLY COME BEFORE THE MEETING.
THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF PROPOSALS 1-2.
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1. To approve a change in the O FOR O AGAINST O ABSTAIN
classification of the fund from a
diversified to a non-diversified fund and
a related change to one of the fund's
fundamental investment restrictions.
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2. To grant the proxy holders the O GRANT O WITHHOLD
authority to vote upon any other business
that may legally come before the meeting.
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