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:
[ ] Preliminary Proxy Statement
[X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240-14a-11(c) or ss.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, FL 33394-3091
TEMPLETON VARIABLE PRODUCTS SERIES FUND
TEMPLETON BOND FUND
IMPORTANT INFORMATION FOR
CONTRACT HOLDERS
A Special Meeting of shareholders of the Templeton Bond Fund, a series of
Templeton Variable Products Series 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. These materials discuss the
proposals 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
variable annuity and variable life insurance Contract Owners.
PLEASE SPEND A FEW MINUTES REVIEWING THE PROPOSALS 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
1-800/774-5001.
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..........................................10
Additional Information About Voting and the Shareholders
Meeting.............................................................12
TEMPLETON VARIABLE PRODUCTS SERIES FUND
TEMPLETON BOND FUND
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of Templeton Bond Fund (the "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. (EST).
During the Meeting, shareholders of the Fund as of the close of business on
December 31, 1998 will vote on the proposals listed below.
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.
2. To 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 15, 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 ("Meeting") to
be held on February 16, 1999.
WHO IS ELIGIBLE TO VOTE?
Shareholders of record of the Templeton Bond Fund (the "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 15, 1999.
SHAREHOLDERS. 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 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 recommendations of the Board of
Trustees (the "Trustees") of the Trust.
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 proposals 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.
2. To vote on any other business as may properly come
before the Meeting. The Trustees 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 Investment
Company Act of 1940 (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 Trustees of the Trust recommend 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 properly presented at
the Meeting. The Trustees are 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. (the
"Manager"), has proposed to change the classification of the Fund from
"diversified" to "non-diversified," as defined under the 1940 Act, and to change
a related fundamental investment restriction. The Manager believes these changes
would give the Fund greater investment flexibility to pursue its investment
objective of high current income. This flexibility may at times be important to
the Fund's investment strategy since the number of issuers of suitable foreign
debt obligations is limited, and 1940 Act diversification rules place limits on
investments in foreign government securities, that do not apply to U.S.
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 debt obligations of fewer foreign government issuers, as well as those
of non-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).
In addition, a diversified fund may not purchase more than 10% of the
outstanding voting securities of any one issuer. These limits apply to 75% of
the Fund's total assets, so that up to 25% may be invested without regard to
these limitations.
The Trust's current investment restriction number (2) restates the same
rules. 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 it
meets two tests at the close of each quarter of its taxable year. First, not
more than 25% of its total assets will be invested in the securities (other than
U.S. Government securities or the securities of other regulated investment
companies) of any one issuer. Second, at least 50% of the value of its total
assets will be represented by cash and cash items (including receivables),
government securities and securities of other regulated investment companies,
and other securities limited in respect of any one issuer to 5% or less of the
value of the Fund's total assets and 10% or less of the outstanding voting
securities of the issuer. These limitations are not 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 are not 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 may help the Fund achieve its investment objective.
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. The number of issuers of foreign
government debt securities is limited, however, and foreign government
securities (unlike U.S. government securities), are subject to 1940 Act
diversification rules. As a diversified fund, therefore, 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 potentially have a greater effect on the Fund's
investments and its share price. Further, the Fund's share price could decline
as a result of interest rate fluctuations affecting 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 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, Proposal 2 would permit proxies to 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 management
investment company. The Trust currently has eight series or funds, but only the
Templeton Bond Fund would be affected by the proposals 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., 777 Mariners Island
Blvd., San Mateo, CA, 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 December 31, 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 $30,207,158.03 2,728,740.563
As of December 31, 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 1,356,024.944 49.7%
Bond Fund Life Mutual
Insurance Company
100 Bright Meadows Blvd.
Enfield, CT 06082
The Travelers 1,372,715.619 50.3%
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 Contract Owners. 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 on
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 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. 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 (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.
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. If a shareholder
submits a proposal after that date, the proposal will not appear in the proxy
statement and the persons named as proxies may exercise discretionary voting
power with respect to such proposal.
By Order of the Board of Trustees,
Barbara J. Green
Secretary
Dated: January 15, 1999
INSURANCE COMPANY NAME PRINTS HERE
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.
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., 12th Floor, 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 15, 1999, receipt of which is hereby acknowledged.
Dated: , 1999
PLEASE SIGN IN BOX BELOW.
If a contract is held jointly,
each contract owner should sign.
If only one contract owner 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
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 AND 2.
PLEASE VOTE BY FILLING IN THE APPROPRIATE BOXES BELOW.
1. To approve a change in the classification 0 FOR 0 AGAINST 0 ABSTAIN
of the fund from a diversified to a non-
diversified fund and a related change to the
fund's fundamental investment restrictions.
2. To grant the proxy holders the authority 0 FOR 0 AGAINST 0 ABSTAIN
to vote upon any other business that may
legally come before the meeting.
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 ON FEBRUARY 16, 1999.
