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
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (section)240-14a-11(c) or
(section)240-14a-12
Franklin Valuemark Funds
(Name of Registrant as Specified In its Charter)
Franklin Valuemark Funds
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2)
[ ] $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 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 0-11:1
4) Proposed maximum aggregate value of transaction:
1 Set forth the amount on which the filing fee is calculated and state how
it was determined.
[ ] 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:
FRANKLIN VALUEMARK FUNDS
IMPORTANT INFORMATION FOR
CONTRACTHOLDERS 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 accordance with the Trustees' recommendations.
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 1-800/342-FUND.
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TABLE OF CONTENTS
PAGE
Notice of Meeting............................................................
Information About Voting.....................................................
The Proposals.................................................................
1. Electing Trustees of the Trust to hold office for the terms specified;
2. Ratifying or rejecting the selection of Coopers & Lybrand L.L.P.
as independent auditors of the Trust for fiscal year ending December
31, 1997;
3. Approving or disapproving changes in the investment objective and
industry concentration policy of the Precious Metals Fund to those of a
natural resources fund;.
4. If Proposal 3 is approved, approving or disapproving a change in
the fundamental investment policy of the Precious Metals Fund to permit
a change from investments in precious metals commodities to natural
resources commodities, and to clarify that the fund may invest in
futures contracts related to such commodities;.............................
5. If Proposal 3 is approved, approving or disapproving a change in
the fundamental investment policy of the Precious Metals Fund to permit
a change from 5% to up to 10% of the fund's assets to be invested in
unseasoned issuers.........................................................
Other Business
Information About the Trust and the Funds....................................
Additional Information About Voting and The Shareholders Meeting.............
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PROXY OR VOTING INSTRUCTION CARD ENCLOSED
FRANKLIN VALUEMARK FUNDS
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of Franklin Valuemark Funds (the "Trust"), consisting of
twenty-three series (each a "Fund" and, collectively, the "Funds") which are:
Capital Growth Fund; Growth and Income Fund; High Income Fund; Income Securities
Fund; Money Market Fund; Mutual Discovery Securities Fund; Mutual Shares
Securities Fund; Precious Metals Fund; Real Estate Securities Fund; Rising
Dividends Fund; Small Cap Fund; Templeton Developing Markets Equity Fund;
Templeton Global Asset Allocation Fund; Templeton Global Growth Fund; Templeton
Global Income Securities Fund; Templeton International Equity Fund; Templeton
International Smaller Companies Fund; Templeton Pacific Growth Fund; U.S.
Government Securities Fund; Utility Equity Fund; Zero Coupon Funds 2000, 2005,
2010.
A Special Meeting (the "Meeting") of shareholders of each of the Funds will be
held at the offices of Franklin Resources, Inc., 777 Mariners Island Boulevard,
San Mateo, California on April 4, 1997 at 10:00 a.m.
During the Meeting, shareholders of the Trust as of the close of business
January 21, 1997 will vote on the proposals listed below. 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. Voting on Proposals 3, 4 and 5 shall be tabulated
separately for the Precious Metals Fund, with shares of that fund only voting as
a single class.
1. Electing Trustees of the Trust to hold office for the terms specified;
2. Ratifying or rejecting the selection of Coopers & Lybrand L.L.P. as
independent auditors of the Trust for the fiscal year ending December 31, 1997;
3. Approving or disapproving changes in the investment objective and industry
concentration policy of the Precious Metals Fund to those of a natural resources
fund;
4. If Proposal 3 is approved, approving or disapproving a change in the
fundamental investment policy of the Precious Metals Fund to permit a change
from investments in precious metals commodities to natural resources
commodities, and to clarify that the fund may invest in futures contracts
related to such commodities;
5. If Proposal 3 is approved, approving or disapproving a change in the
fundamental investment policy of the Precious Metals Fund to permit a change
from 5% to up to 10% of the fund's assets to be invested in unseasoned issuers.
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,
Deborah R. Gatzek
Secretary
January __, 1997
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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.
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FRANKLIN VALUEMARK FUNDS
PROXY STATEMENT
O INFORMATION ABOUT VOTING:
WHO IS ASKING FOR MY VOTE?
The enclosed proxy is solicited by and on behalf of the management of
Franklin Valuemark Funds (the "Trust") for use at a Meeting of Shareholders
to be held on April 4, 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 January 21, 1997 are
entitled to be present and to vote at the Meeting or any adjourned Meeting.
As of the record date, Allianz Life Insurance Company of North America, and
its wholly owned subsidiary Preferred Life Insurance Company of New York
(collectively the "Insurance Companies"), on behalf of their separate
accounts, were the only shareholders of record of each of the Funds. 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 [February 20], 1997.
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 the 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 gives no instructions, by not returning
the voting instruction card, the relevant Insurance Company will vote the
shares of a Fund attributable to the Contract Owner in the same manner and
in the same proportion as the shares of such 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.
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. Voting on Proposals
3, 4 and 5 shall be tabulated separately for the Precious Metals Fund, with
shares of that fund only voting as a single class.
ON WHAT ISSUES AM I BEING ASKED TO VOTE?
This Proxy Statements covers the proposals listed below. All Shareholders
and Contract Owners are asked to vote on proposals 1 and 2. Only Precious
Metals Fund shareholders and Contract Owners for whose accounts Precious
Metals Fund shares are held are asked to vote on proposals 3, 4 and 5.
1. Electing Trustees of the Trust to hold office for the terms specified;
2. Ratifying or rejecting the selection of Coopers & Lybrand L.L.P. as
independent auditors of the Trust for the fiscal year ending December 31,
1997;
3. Approving or disapproving changes in the investment objective and
industry concentration policy of the Precious Metals Fund to those of a
natural resources fund;
4. If Proposal 3 is approved, approving or disapproving a change in the
fundamental investment policy of the Precious Metals Fund to permit a
change from investments in precious metals commodities to natural resources
commodities, and to clarify that the fund may invest in futures contracts
related to such commodities;
5. If Proposal 3 is approved, approving or disapproving a change in the
fundamental investment policy of the Precious Metals Fund to permit a
change from 5% to up to 10% of the fund's assets to be investment in
unseasoned issuers.
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.
THE FOLLOWING TABLE SETS FORTH THE PROPOSALS THAT APPLY TO YOUR FUND.
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. VOTING ON PROPOSALS
3, 4 AND 5 SHALL BE TABULATED SEPARATELY FOR THE PRECIOUS METALS FUND, WITH
SHARES OF THAT FUND ONLY VOTING AS A SINGLE CLASS.
------------------------------------------------------------------------
ALL FRANKLIN
PROPOSAL VALUEMARK FUNDS PRECIOUS METALS
FUND
------------------------------------------------------------------------
------------------------------------------------------------------------
1. Election of Trustees X X
------------------------------------------------------------------------
------------------------------------------------------------------------
2. Ratification of Auditors X X
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------------------------------------------------------------------------
3. Precious Metals Fund X
Objective and Concentration
Policy Change
------------------------------------------------------------------------
------------------------------------------------------------------------
4. Precious Metals Fund X
Fundamental Policy
Change: Commodities and Futures
------------------------------------------------------------------------
------------------------------------------------------------------------
5. Precious Metals Fund X
Fundamental Policy Change:
Unseasoned Issuers
------------------------------------------------------------------------
------------------------------------------------------------------------
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 Proposals 3, 4 and
5 requires the affirmative vote of the holders of the lesser of (a) 67% of
the Precious Metals Fund's shares at the Meeting represented in person or
by proxy if the holders of more than 50% of the Fund's shares are
represented at the meeting, or (b) a majority of the Precious Metals Fund's
outstanding shares.
HOW DO THE TRUSTEES RECOMMEND THAT I VOTE?
The Board of Trustees ("Trustees") of the Trust recommend that you vote:
1. FOR electing all nominees as Trustees of the Trust for the terms
specified;
2. FOR ratifying the selection of Coopers & Lybrand L.L.P. as independent
auditors of the Trust for the fiscal year ending December 31, 1997;
3. FOR changes in the investment objective and industry concentration
policy of the Precious Metals Fund to those of a natural resources fund;
4. FOR a change in the fundamental investment policy of the Precious Metals
Fund to permit a change from investments in precious metals commodities to
natural resources commodities, and to clarify that the fund may invest in
futures contracts related to such commodities (if Proposal 3 is approved);
and
5. FOR a change in the fundamental investment policy of the Precious Metals
Fund to permit a change from 5% to up to 10% of the fund's assets to be
invested in unseasoned issuers (if Proposal 3 is approved).
In addition, to the extent they are authorized to do so, the proxy holders
may vote, in their discretion, on any other business that 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.
CAN I REVOKE MY VOTING INSTRUCTION?
Contract Owners may revoke their voting instructions 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.
O THE PROPOSALS
PROPOSAL 1. ELECTING TRUSTEES OF THE TRUST TO HOLD OFFICE FOR THE TERMS
SPECIFIED
WHO ARE THE NOMINEES?
THE ROLE OF TRUSTEES IS TO PROVIDE GENERAL OVERSIGHT OF THE TRUST'S
BUSINESS, AND TO ENSURE THAT EACH FUND IS OPERATED FOR THE BEST INTEREST OF
SHAREHOLDERS. THE TRUSTEES MEET MONTHLY, AND REVIEW EACH FUND'S INVESTMENT
PERFORMANCE. THE TRUSTEES ALSO OVERSEE THE SERVICES FURNISHED TO THE FUND
BY ITS INVESTMENT ADVISER AND VARIOUS OTHER SERVICE PROVIDERS.
All of the nominees are currently members of the Board of Trustees, and all
except Lowell C. Anderson 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"). Mr. Anderson is
Chairman, President and Chief Executive Officer of Allianz Life Insurance
Company of North America, which directly or through its subsidiary
Preferred Life Insurance Company of New York, holds all shares of the
Trust.
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). The Funds' investment managers and business manager are
indirect wholly owned subsidiaries of Resources. 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, and the
father and uncle respectively of Charles E. Johnson.
In order to be elected as Trustees, the nominees must receive a plurality
of all votes cast at the meeting, with 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 to serve, 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
NAME AND OFFICES PRINCIPAL OCCUPATION DURING TRUSTEE BENEFICIALLY AND % OF
WITH THE TRUST PAST FIVE YEARS AND AGE SINCE TOTAL OUTSTANDING ON
DECEMBER 31, 1996
------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FRANK H. ABBOTT, III Member of the Audit Committee of 1988 -0-
TRUSTEE the Trust's Board of Trustees;
President and Director, Abbott
Corporation (an investment
company); and director, trustee or
managing general partner, as the
case may be, of 32 of the
investment companies in the
Franklin Group of Funds. Age 75.
LOWELL C. ANDERSON* Chairman, President and Chief 1995 -0-
TRUSTEE Executive Officer, Allianz Life
Insurance Company of North America
(privately owned company, formerly
North American Life & Casualty
Company); Director, Preferred Life
Insurance Company of New York. Age
58.
HARRIS J. ASHTON Chairman of the board, president 1988 -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.
Member of the law firm of Pitney, 1992 -0-
S. JOSEPH FORTUNATO Hardin, Kipp & Szuch; director of
TRUSTEE 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.
DAVID W. GARBELLANO Member of the Audit Committee of 1988 -0-
TRUSTEE the Trust's Board of Trustees;
Private Investor; Assistant
Secretary/Treasurer and Director,
Berkeley Science Corporation (a
venture capital company); and
director, trustee or managing
general partner, as the case may
be, of 31 of the investment
companies in the Franklin Group of
Funds. Age 81.
CHARLES B. JOHNSON* President, chief executive 1988 -0-
CHAIRMAN OF THE BOARD officer, and director of Franklin
AND TRUSTEE Resources, 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.
CHARLES E. JOHNSON* Senior Vice President and 1988 -0-
PRESIDENT AND TRUSTEE Director, Franklin Resources,
Inc.; Senior Vice President,
Franklin Templeton Distributors,
Inc.; President and Director,
Templeton Worldwide, Inc. and
Franklin Institutional Services
Corporation; officer and/or
director, as the case may be, of
some of the subsidiaries of
Franklin Resources, Inc. and
officer and/or director or
trustee, as the case may be, of 24
of the investment companies in the
Franklin Templeton Group of Funds.
Age 39.
RUPERT H. JOHNSON, JR*. Executive Vice President and 1988 -0-
VICE PRESIDENT AND Director, Franklin Resources, Inc.
TRUSTEE and Franklin Templeton
Distributors, Inc.; President and
Director, Franklin Advisers, Inc.;
Director, 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 of 61 of the
investment companies in the
Franklin Templeton Group of Funds.
Age 55.
FRANK W. T. LAHAYE Chairman of the Audit Committee of 1988 -0-
TRUSTEE the Trust's Board of Trustees;
General Partner, Peregrine
Associates and Miller & LaHaye,
which are General Partners of
Peregrine Ventures and Peregrine
Ventures II (venture capital
firms); Chairman of the Board and
Director, Quarterdeck Office
Systems, Inc.; Director,
FischerImaging Corporation; and
director or trustee, as the case
may be, of 27 of the investment
companies in the Franklin Group of
Funds. Age 67.
GORDON S. MACKLIN Chairman, White River Corporation 1993 -0-
TRUSTEE (financial services); Director,
Fund American Enterprises
Holdings, Inc., MCI Communications
Corporation, CCC Information
Services Group, Inc. (information
services), MedImmune, Inc.
(biotechnology), Source One
Mortgage Services Corporation
(financial services), Shoppers
Express (home shopping), Spacehab,
Inc. (aerospace technology); and
director, trustee or managing
general partner, as the case may
be, of 53 of the investment
companies in the Franklin
Templeton Group of Funds; formerly
Chairman, Hambrecht and Quist
Group; Director, H & Q Healthcare
Investors; and President, National
Association of Securities Dealers, Inc.
</TABLE>
* "INTERESTED PERSONS" AS DEFINED BY THE INVESTMENT COMPANY ACT OF 1940 (THE
"1940 ACT"). THE 1940 ACT LIMITS THE PERCENTAGE OF INTERESTED PERSONS THAT
CAN COMPRISE A FUND'S BOARD OF DIRECTORS/TRUSTEES. LOWELL C. ANDERSON IS AN
INTERESTED PERSON DUE TO HIS ASSOCIATION WITH ALLIANZ LIFE INSURANCE
COMPANY OF NORTH AMERICA AND PREFERRED LIFE INSURANCE COMPANY OF NEW YORK,
THE ISSUERS OF THE VARIABLE ANNUITIES AND VARIABLE LIFE INSURANCE POLICIES
WHICH INVEST IN THE TRUST. CHARLES B. JOHNSON, CHARLES E. JOHNSON AND
RUPERT H. JOHNSON, JR. ARE INTERESTED PERSONS DUE TO THEIR OWNERSHIP
INTEREST IN RESOURCES. THE REMAINING NOMINEES AND TRUSTEES OF THE TRUST ARE
NOT INTERESTED PERSONS (THE "INDEPENDENT TRUSTEES").
HOW OFTEN DO THE TRUSTEES MEET AND WHAT ARE THEY PAID?
The Trustees generally meet monthly to review the operations of the Funds
and other funds within the Franklin Templeton Group of Funds. Each fund
pays its independent directors/trustees 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 an annual retainer of $6,600 and a fee of $183 per
meeting of the Board and the Audit 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 11 meetings of
the Board, and one meeting of the Audit Committee. Each of the Trustees
then in office attended at least 75% of such meetings of the Board, except
Mr. Anderson and Mr. Charles E. Johnson who attended 45% of such meetings.
The Audit Committee members are Mr. LaHaye, Chair, and Messrs. Abbott and
Garbellano.
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 and its affiliates. Advisers 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 by
the Trust and by the Franklin Templeton Group of Funds:
<TABLE>
<CAPTION>
NUMBER OF BOARDS TOTAL
AGGREGATE WITHIN THE FRANKLIN COMPENSATION
COMPENSATION TEMPLETON GROUP OF FROM THE
NAME OF TRUSTEE FROM THE FUNDS ON WHICH FRANKLIN
TRUST* TRUSTEE SERVES TEMPLETON GROUP
OF FUNDS**
------------------- -------------- --------------------- -----------------
<S> <C> <C> <C>
Frank H. Abbott $8,616.63 32 $165,236
Harris J. Ashton 8,616.63 56 343,591
S. Joseph Fortunato 8,616.63 58 360,411
David Garbellano 8,616.63 31 148,916
Frank W.T. LaHaye 8,433.30 27 139,233
Gordon Macklin 8,616.63 53 335,541
----------------------------------
</TABLE>
* FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996.
** FOR THE CALENDAR YEAR ENDED DECEMBER 31, 1996.
THE TRUSTEES RECOMMEND THAT YOU VOTE FOR THE NOMINEES.
PROPOSAL 2. RATIFYING OR REJECTING THE SELECTION OF COOPERS & LYBRAND L.L.P. AS
INDEPENDENT AUDITORS OF THE TRUST FOR FISCAL YEAR ENDING DECEMBER
31, 1997
HOW IS AN INDEPENDENT AUDITOR SELECTED?
The Board established a standing Audit Committee consisting of Mr. LaHaye,
Chair, and Messrs. Abbott and Garbellano, all 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
Coopers & Lybrand L.L.P., 333 Market Street, San Francisco, California
94105. Coopers & Lybrand has been the auditor of the Trust since its
inception in 1988, and has examined and reported on the fiscal year-end
financial statements, and certain related Securities and Exchange
Commission filings. Neither the firm of Coopers & Lybrand L.L.P. nor any of
its members have any material direct or indirect financial interest in the
Trust or the Funds.
Representatives of Coopers & Lybrand L.L.P. 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 by telephone 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 CHANGES IN THE INVESTMENT OBJECTIVE AND
INDUSTRY CONCENTRATION POLICY OF THE PRECIOUS METALS FUND TO THOSE
OF A NATURAL RESOURCES FUND
WHAT IS THE PURPOSE OF THE PROPOSAL AND WHAT WOULD HAPPEN IF THE PROPOSAL IS
APPROVED?
The purpose of Proposal 3 is to change the investment objective and broaden the
industry concentration policy of the Precious Metals Fund to those of a fund
which invests primarily in companies in natural resources industries. In
addition, if Proposal 3 is approved, the Trustees will change the fund's name to
the Natural Resources Securities Fund. All of these changes would take effect on
May 1, 1997 or, if the Meeting is postponed beyond that date, immediately upon
approval by shareholders. The changes would make the Valuemark Natural Resources
Securities Fund resemble the Franklin Natural Resources Fund, a retail mutual
fund managed by the same investment adviser, Franklin Advisers, Inc.
("Manager"). Of course, differences in portfolio size, investments held,
Contract Owner transactions, and additional administrative and insurance costs
of variable annuities and variable life insurance contracts, among others, will
cause the composition and performance of the Natural Resources Securities Fund
to differ from that of the retail Franklin Natural Resources Fund.
The Precious Metals Fund's CURRENT investment objective is capital appreciation
through concentration of investments in the precious metals industry. Current
income is a secondary objective. Proposal 3 seeks shareholder approval to change
both the fund's investment objective and the scope of its policy of
"concentrating" its investments (I.E., investing 25% or more of its assets) in a
single industry or group of industries. The prospectus now states:
THE PRINCIPAL INVESTMENT OBJECTIVE OF THE PRECIOUS METALS FUND IS
CAPITAL APPRECIATION THROUGH CONCENTRATION OF ITS INVESTMENTS IN
SECURITIES OF ISSUERS ENGAGED IN MINING, PROCESSING OR DEALING IN
GOLD AND OTHER PRECIOUS METALS. THE FUND'S SECONDARY OBJECTIVE IS TO
PROVIDE CURRENT INCOME RETURN THROUGH THE RECEIPT OF DIVIDENDS OR
INTEREST FROM ITS INVESTMENTS.
The Natural Resources Securities Fund's NEW investment objective would simply be
capital appreciation with current income as a secondary objective, and the
Precious Metals Fund's policy of concentrating in the precious metals industry
would be deleted from the investment objective. The fund would instead seek to
meet its objective by concentrating its investments (i.e., investing 25% or more
of its assets) in a broader group of industries in the natural resources sector.
Moreover, if the shareholders approve the changes in investment objective and
concentration policy, the Trustees will adopt a nonfundamental policy of
investing primarily in the natural resources sector and change the name of
the fund to the Natural Resources Securities Fund, to better
reflect its revised investment strategy. The prospectus would be changed
to read in substance:
THE NATURAL RESOURCES SECURITIES FUND'S INVESTMENT OBJECTIVE IS
CAPITAL APPRECIATION WITH CURRENT INCOME AS A SECONDARY OBJECTIVE.
THE FUND SEEKS TO ACHIEVE ITS OBJECTIVE BY CONCENTRATING ITS
INVESTMENTS IN SECURITIES ISSUED BY COMPANIES IN OR RELATED TO THE
NATURAL RESOURCES SECTOR. UNDER NORMAL MARKET CONDITIONS, THE FUND
WILL INVEST PRIMARILY IN THAT SECTOR.
The natural resources sector includes companies in the precious metals industry,
in which the Precious Metals Fund currently invests, as well as companies in
other natural resources industries. Companies in this sector may own, produce,
refine, process or market natural resources, or provide support services for
natural resources companies (E.G., develop technologies or provide services,
supplies or equipment directly related to the production of natural
resources).The natural resources sector includes, but is not limited to, the
following industries: gold and precious metals; integrated oil; oil and gas
exploration and production; steel and iron ore production; aluminum production;
forest products; farming products; paper products; chemicals; building
materials; energy services and technology; environmental services; and energy
generation and distribution.
If this Proposal is approved, the Natural Resources Securities Fund will invest
25% or more of its assets in the group of industries within the natural
resources sector. Such a policy of concentration may expose the Natural
Resources Securities Fund to greater investment risk than a more diversified
fund because developments in the natural resources industry will have a greater
impact on the fund's investments, and consequently on shareholders. Risk factors
associated with investing in the natural resources sector include that certain
of the industries' resources are subject to limited pricing flexibility as a
result of supply and demand factors, while others are subject to broad price
fluctuations, reflecting the volatility of certain raw materials' prices and the
instability of supplies of other resources. These factors can affect the overall
profitability of an individual company operating within the natural resources
sector. Moreover, there will be occasions where the value of an individual
company's securities will prove more volatile than the broader market. In
addition, many of these companies operate in areas of the world where they are
subject to unstable political environments, currency fluctuations and
inflationary pressures. The Manager believes, however, that diversification of
the fund's assets into different industries and companies within the natural
resources sector will help mitigate, although it cannot eliminate, the inherent
risks of such sector concentration. Of course, the Natural Resources Securities
Fund is still likely to have greater industry and country diversification than
the Precious Metals Fund has at present, due to the current restrictive policy
requiring investment of at least 65% of the Precious Metals Fund's assets in the
precious metals industry. In addition, if Proposal 3 is approved, during the
first year after approval, the Natural Resources Securities Fund will probably
experience higher portfolio turnover, which may exceed 100%, as the portfolio
managers sell precious metals securities and purchase securities in the broader
natural resources sector. After that, it is not expected that the Natural
Resources Securities Fund will have portfolio turnover exceeding 100%. Higher
portfolio turnover rates generally increase transaction costs, which are fund
expenses, but would not create capital gains for investors because of the
tax-deferred status of variable annuity and variable life insurance investments.
In the event that shareholders approve this proposal 3, the Board and the
Manager have also approved certain additional changes to the fund in order to
permit the Natural Resources Securities Fund to be managed like the retail
Natural Resources Fund. These include the changes in fundamental investment
policies described in Proposals 4 and 5, which are subject to shareholder
approval before they can be made, and the following changes which will
take place if Proposal 3 is approved:
1. PORTFOLIO MANAGERS: The Fund currently has three portfolio managers: Martin
Wiskemann, Suzanne Killea, and Shan Green. If the proposals are approved,
Suzanne Killea would remain as a portfolio manager of the Natural Resources
Securities Fund, Martin Wiskemann and Shan Green would no longer act as
portfolio managers, and Ed Perks would be named as a new portfolio manager.
(Suzanne Killea and Ed Perks currently manage the retail Franklin Natural
Resources Fund.)
2. HIGH-YIELD BONDS: Consistent with the current investment strategy of the
Precious Metals Fund, the portfolio managers of the Natural Resources
Securities Fund do not currently anticipate investing more than 5% of their
assets in higher-yielding, lower-rated or unrated debt obligations
("junk bonds"), which may be subject to greater credit and market risks
than higher-rated debt obligations. The Natural Resources Securities Fund
would, however, reserve the right to invest up to 15% of its assets in such
obligations.
- --------------------------------------------------------------------------------
IMPORTANT NOTE: PLEASE REFER TO APPENDIX 1, WHICH CONTAINS A DRAFT OF PROSPECTUS
LANGUAGE RELATED TO THE PROPOSED NATURAL RESOURCES SECURITIES FUND, FOR MORE
COMPLETE INFORMATION ABOUT INVESTMENT POLICIES AND RISKS.
- --------------------------------------------------------------------------------
WHAT FACTORS DID THE TRUSTEES CONSIDER PRIOR TO RECOMMENDING APPROVAL OF THE
PROPOSAL?
Management recommended to the Trustees that the Precious Metals Fund be changed
to the Natural Resources Securities Fund for a number of reasons, including the
limited investor demand for a precious metals fund and the investment
community's interest in a natural resources fund. Management also believes that
the rapid economic growth and industrialization of many nations may result in
increased long-term demand for natural resources, creating profit opportunities
for many natural resource companies. The Natural Resources Securities Fund would
seek to take advantage of these growth opportunities, while focusing on
companies with asset or technology based advantages in a wide range of
industries and geographic regions. Moreover, broadening the industries in which
the Precious Metals Fund may invest will likely also broaden the diversity of
countries in which the fund is invested. Potential increased industry and
country diversity in the Natural Resources Securities Fund could also lead to
lower volatility than the Precious Metals Fund. Nonetheless, the fund would
continue to be a global sector fund which involves special risks, such as
increased susceptibility to adverse economic or regulatory developments,
currency volatility and political uncertainty.
In determining whether to approve the proposal for consideration by
shareholders, the Trustees considered the recommendations of Management as well
as several other factors. The Trustees took note of the limited recent investor
demand for the Precious Metals Fund within the Valuemark variable insurance
products. Available since the Trust's inception in 1989, the Precious Metals
Fund had approximately $110 million in assets as of December 31, 1996, down from
approximately $125 million as of December 31, 1994, in products with over $9
billion in assets. Flat or decreasing assets are generally considered
unfavorable for shareholders because expenses may increase as a percentage of
total fund assets and because portfolio managers may be forced to sell
securities at inopportune times to meet redemptions. In addition, the Trustees
considered Management's report of a favorable response from the investment
community to the idea of a natural resources fund within the Valuemark products,
as well as continued strong recent demand for equity funds, including global
funds. The proposed changes are intended to place the Fund in the position of
being able to potentially benefit from such a response and, therefore, increase
in assets. Generally, the potential for increased assets is considered favorable
for shareholders because increased assets may reduce expenses as a percentage of
total fund assets, and may allow the Fund to take advantage of increased
investment opportunities. The Trustees also considered the experience of
Franklin Advisers, Inc. in managing assets in the natural resources sector,
including managing the Franklin Natural Resources Fund, a retail mutual fund,
since 1995. Finally, the Trustees considered that investors may benefit from
potentially greater industry and country diversification as described above.
These factors reflect the Board's business judgment and there can be no
guarantee that any of the potential benefits of this proposal will in fact be
realized. Specifically, the Natural Resources Securities Fund may not experience
greater assets, lower expense ratios or lower volatility, and Contract Owners
may still have a gain or a loss when investing in the Natural Resources
Securities Fund.
In approving Proposal 3, 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,
Proposal 3 is reasonably likely to benefit the Precious Metals Fund and its
shareholders and Contract Owners.
WHAT VOTE IS REQUIRED?
Approval of Proposal 3 requires the affirmative vote of the holders of the
lesser of (a) 67% of the Precious Metals Fund's shares at the Meeting in person
or by proxy if the holders of more than 50% of the Precious Metals Fund's shares
are represented at the meeting, or (b) a majority of the Precious Metals Fund's
outstanding shares.
THE TRUSTEES RECOMMEND A VOTE FOR THE PROPOSAL.
PROPOSAL 4. IF PROPOSAL 3 IS APPROVED, APPROVING OR DISAPPROVING A CHANGE IN THE
FUNDAMENTAL INVESTMENT POLICY OF THE PRECIOUS METALS FUND TO PERMIT
A CHANGE FROM INVESTMENTS IN PRECIOUS METALS COMMODITIES TO NATURAL
RESOURCES COMMODITIES, AND TO CLARIFY THAT THE FUND MAY INVEST IN
FUTURES CONTRACTS RELATED TO SUCH COMMODITIES
WHAT WOULD THE PROPOSAL CHANGE?
If Proposals 3 and 4 are approved, Proposal 4 would revise two fundamental
investment policies which currently permit investments only in precious metals
commodities and may be read to prohibit any investment in futures transactions
generally. Consistent with broadening the permissible investments of the fund to
include all natural resources related investments, Proposal 4 would have the
effect of permitting the Natural Resources Securities Fund to purchase
commodities related to the natural resources sector and would further clarify
that the fund would be permitted to invest in related futures transactions.
Currently, the portfolio managers who would manage the Natural Resources
Securities Fund do not expect to make significant use of commodities or
commodities futures investments, but would like to have the same flexibility to
take advantage of investment opportunities as the retail Franklin Natural
Resources Fund.
1. Text of Current Investment Policies
The following is the text of the current fundamental investment policies which
may prohibit or limit such commodities or futures transactions as it appears in
the Trust's Statement of Additional Information:
EACH OF THE FUNDS MAY NOT: . . . .
9. MAINTAIN A MARGIN ACCOUNT WITH A SECURITIES DEALER . . . ,
WITH THE EXCEPTIONS THAT . . . (III) THE [TEMPLETON] GLOBAL
INCOME [SECURITIES} FUND, THE [TEMPLETON] GLOBAL GROWTH FUND,
THE [TEMPLETON] DEVELOPING MARKETS [EQUITY] FUND, THE
[TEMPLETON GLOBAL] ASSET ALLOCATION FUND, THE [TEMPLETON]
INTERNATIONAL EQUITY FUND, THE [TEMPLETON] INTERNATIONAL
SMALLER COMPANIES FUND, THE [TEMPLETON] PACIFIC [GROWTH] FUND,
THE MUTUAL DISCOVERY [SECURITIES] FUND, THE MUTUAL SHARES
[SECURITIES] FUND AND THE SMALL CAP FUND MAY MAKE INITIAL
DEPOSITS AND PAY VARIATION MARGIN IN CONNECTION WITH FUTURES
CONTRACTS ;
10. INVEST IN COMMODITIES OR COMMODITY POOLS, EXCEPT THAT . . .
(III) THE [PRECIOUS] METALS FUND MAY INVEST IN GOLD BULLION AND
FOREIGN CURRENCY IN THE FORM OF GOLD COINS. SECURITIES OR OTHER
INSTRUMENTS BACKED BY COMMODITIES ARE NOT CONSIDERED COMMODITIES
FOR THE PURPOSE OF THIS RESTRICTION.
2. Text of Proposed Investment Policies
If Proposal 4 is approved by shareholders, the underlined language would be
added to policy 9 and clause (iii) of policy 10 would be replaced with the
underlined language below:
9. MAINTAIN A MARGIN ACCOUNT WITH A SECURITIES DEALER . . . ,
WITH THE EXCEPTIONS THAT . . . (III) THE NATURAL RESOURCES
SECURITIES FUND, THE [TEMPLETON] GLOBAL INCOME [SECURITIES}
FUND, THE [TEMPLETON] GLOBAL GROWTH FUND, THE [TEMPLETON]
DEVELOPING MARKETS [EQUITY] FUND, THE [TEMPLETON GLOBAL] ASSET
ALLOCATION FUND, THE [TEMPLETON] INTERNATIONAL EQUITY FUND, THE
[TEMPLETON] INTERNATIONAL SMALLER COMPANIES FUND, THE
[TEMPLETON] PACIFIC [GROWTH] FUND, THE MUTUAL DISCOVERY
[SECURITIES] FUND, THE MUTUAL SHARES [SECURITIES] FUND AND THE
SMALL CAP FUND MAY MAKE INITIAL DEPOSITS AND PAY VARIATION
MARGIN IN CONNECTION WITH FUTURES CONTRACTS;
10. INVEST IN COMMODITIES OR COMMODITY POOLS, EXCEPT THAT . . .
(III) THE NATURAL RESOURCES SECURITIES FUND MAY INVEST IN
COMMODITIES AND COMMODITY FUTURES CONTRACTS WITH RESPECT TO
COMMODITIES RELATED TO THE NATURAL RESOURCES SECTOR AS DEFINED
IN THE PROSPECTUS. SECURITIES OR OTHER INSTRUMENTS BACKED BY
COMMODITIES ARE NOT CONSIDERED COMMODITIES FOR THE PURPOSE OF
THIS RESTRICTION.
While the proposed changes would generally not permit the Natural Resources
Securities Fund to place a greater percentage of its assets at risk in
commodities and futures investments than the Precious Metals Fund currently may,
any investments in commodities and related futures are subject to special risks.
Specifically, investments in commodities and futures, whether related to the
precious metals industry or to the natural resources sector, may fluctuate
significantly and unpredictably in response to any events affecting supply and
demand, such as weather, agricultural productivity, political activity, currency
fluctuations, and regional and worldwide economic conditions. In addition,
direct investments in commodities may be illiquid, and an investment in any type
of futures contract is subject to additional risks. These risks are discussed in
the Trust's Statement of Additional Information ("SAI"). There is no guarantee
that the Natural Resources Securities Fund's investments, if any, in these
instruments will be successful. Of course, illiquid investments are currently
limited, and would continue to be limited, to 10% of the fund's assets.
WHAT FACTORS DID THE TRUSTEES CONSIDER PRIOR TO RECOMMENDING APPROVAL OF THE
PROPOSAL?
With regard to Proposal 4, the Trustees considered Management's recommendation
that the Natural Resources Securities Fund be managed in a manner that is
similar to the way in which the retail Franklin Natural Resources Fund is
currently being managed, in light of the retail fund's performance and marketing
success. While past performance is no guarantee of future results, investments
in natural resources commodities and related futures would provide the Natural
Resources Securities Fund with the same flexibility as the retail Franklin
Natural Resources Fund, which has no comparable restrictions, in seeking to
achieve its objectives. The Trustees also considered that the Precious Metals
Fund can currently invest in commodities in the form of gold bullion and gold
coins, and that this proposal would simply broaden the types of commodities and
commodities futures in which the Natural Resources Securities Fund could invest,
to correspond with the changes in name, investment objective and concentration
policy. The Trustees also noted that approval of Proposal 4 would not increase
in the foreseeable future the percentage of the Natural Resources Securities
Fund's total assets that may be invested in commodities and
commodities futures transactions, which would remain at 5% of total assets based
on the fund's current prospectus disclosure.
In approving Proposal 4, 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, including
that any future change in these policies would have to conform to applicable law
and be disclosed in the prospectus, Proposal 4 is reasonably likely to benefit
the Natural Resources Securities Fund and its shareholders and Contract Owners.
WHAT WOULD HAPPEN IF PROPOSAL 3 OR PROPOSAL 4 IS NOT APPROVED?
If Proposal 3 is not approved, then Proposal 4 will not take effect whether or
not it receives the necessary number of votes, and the current investment
policies reprinted above would remain in place.
If Proposal 3 is approved and Proposal 4 is not approved, the current investment
policies reprinted above would then apply to the reconfigured Natural Resources
Securities Fund. This would limit the Natural Resources Securities Fund to
investments in gold and foreign currency in the form of gold coins, and preclude
investments in other natural resources commodities and related futures
contracts. While these limitations would not greatly restrict the expected
investments of the Natural Resources Securities Fund, the portfolio managers
have requested the flexibility to invest in the commodities and futures
contracts from time to time when they believe appropriate investment
opportunities exist.
WHAT VOTE IS REQUIRED TO APPROVE PROPOSAL 4?
Approval of Proposal 4 requires the affirmative vote of the holders of the
lesser of (a) 67% of the Precious Metals Fund's shares at the Meeting in person
or by proxy if the holders of more than 50% of the Precious Metals Fund's shares
are represented at the meeting, or (b) a majority of the Precious Metals Fund's
outstanding shares. Proposal 4 will only take effect if Proposal 3 is approved.
THE TRUSTEES RECOMMEND A VOTE FOR THE PROPOSAL.
PROPOSAL 5. IF PROPOSAL 3 IS APPROVED, APPROVING OR DISAPPROVING A CHANGE IN
THE FUNDAMENTAL INVESTMENT POLICY OF THE PRECIOUS METALS FUND TO
PERMIT A CHANGE FROM 5% TO UP TO 10% OF THE FUND'S ASSETS TO BE
INVESTED IN UNSEASONED ISSUERS
WHAT WOULD THE PROPOSAL CHANGE?
If Proposals 3 and 5 are approved, Proposal 5 would modify a fundamental
investment policy of the Precious Metals Fund to increase the Natural Resources
Securities Fund's authority to invest in "unseasoned" issuers from 5% to 10% of
its total assets. "Unseasoned issuers" are companies which have less than 3
years of operating history, including the operations of predecessor companies.
This change would simply conform the Natural Resources Securities Fund's policy
regarding unseasoned issuers to match the policy of the retail Franklin Natural
Resources Fund. Within the Trust, different funds are subject to different
limits with regard to unseasoned issuers, and some newer funds (such as the
Small Cap Fund) have no restrictions at all in this regard. The SEC does not
require investment companies to have any fundamental policy concerning such
investments, but does of course require prospectus disclosure of all material
investment risks.
Subject to the 10% limit of Proposal 5, the Natural Resources Securities Fund's
investments in unseasoned issuers may include investments in new small companies
involved in mining or oil and gas exploration, and in real estate investment
trusts (REITs). While investments in small mining or oil and gas exploration
concerns may have significant potential for appreciation, they are subject to
the risk that their exploration efforts will not be successful. In addition,
like all new smaller companies, they may be more volatile than larger, more
established companies, because of relatively small revenues, limited product
lines, small market share, less depth of management, or difficulties in reaching
their intended markets. REITs can provide an attractive alternative to direct
real estate investments by combining the relatively stable cash flows of an
investment in real estate with the liquidity of common stock. REITs are,
however, subject to risks related to the skill of their management, changes in
the value of the properties owned by the REITs, the quality of any credit
extended by the REITs and other factors. Except for these types of issuers, the
portfolio managers do not currently expect to make significant investments in
the securities of unseasoned issuers. These risks are further discussed in the
Trust's prospectus and SAI.
WHAT FACTORS DID THE TRUSTEES CONSIDER PRIOR TO RECOMMENDING APPROVAL OF THE
PROPOSAL?
As with Proposal 4, Management recommended approval of the proposal in order to
give the Natural Resources Securities Fund the same flexibility as the retail
Franklin Natural Resources Fund, which is managed by the same portfolio managers
who will manage the Valuemark portfolio. The Trustees further considered the
potential investment opportunities and risks of investments in unseasoned
issuers, as described by the Manager, as well as the experience of the Managers
in managing these types of assets. In addition, the Trustees considered that the
Precious Metals Fund, as well as many other funds in the Trust, may invest in
unseasoned issuers to some extent already, and that Proposal 5 would only
increase modestly the permissible limit on such investments in the Natural
Resources Securities Fund.
In approving Proposal 5, 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, including
the full disclosure of the risks of these types of investments in the
prospectus, Proposal 5 is reasonably likely to benefit the Natural Resources
Securities Fund and its shareholders and Contract Owners.
WHAT WOULD HAPPEN IF PROPOSAL 3 OR PROPOSAL 5 IS NOT APPROVED?
If Proposal 3 is not approved, then Proposal 5 will not take effect whether or
not it receives the necessary number of votes, and the current investment policy
would remain in place.
If Proposal 3 is approved and Proposal 5 is not approved, the current investment
policy limiting the fund's investments in unseasoned issuers to 5% of its assets
would then apply to the Natural Resources Securities Fund. While this
limitations would not greatly restrict the expected investments of the Natural
Resources Securities Fund, the portfolio managers have requested the flexibility
to invest up to 10% in unseasoned issuers because they believe that appropriate
investment opportunities in unseasoned issuers are and will in the future be
available.
WHAT VOTE IS REQUIRED TO APPROVE PROPOSAL 5?
Approval of Proposal 5 requires the affirmative vote of the holders of the
lesser of (a) 67% of the Precious Metals Fund's shares at the Meeting in person
or by proxy if the holders of more than 50% of the Precious Metals Fund's shares
are represented at the meeting, or (b) a majority of the Precious Metals Fund's
outstanding shares. Proposal 5 will only take effect if Proposal 3 is approved.
THE TRUSTEES RECOMMEND A VOTE FOR THE PROPOSAL.
OTHER BUSINESS
The Trustees do not intend to bring any matters before the Meeting other
than Proposals 1 through 5 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.
O INFORMATION ABOUT THE TRUST AND THE FUNDS
The Trust was organized as a Massachusetts business trust on April 26, 1988
and is registered under the 1940 Act as an open-end diversified investment
management company. The Trust currently has twenty-three series (each, a
"Fund") of shares: Capital Growth Fund; Growth and Income Fund; High Income
Fund; Income Securities Fund; Money Market Fund; Mutual Discovery
Securities Fund; Mutual Shares Securities Fund; Precious Metals Fund; Real
Estate Securities Fund; Rising Dividends Fund; Small Cap Fund; Templeton
Developing Markets Equity Fund; Templeton Global Asset Allocation Fund;
Templeton Global Growth Fund; Templeton Global Income Securities Fund;
Templeton International Equity Fund; Templeton International Smaller
Companies Fund; Templeton Pacific Growth Fund; U.S. Government Securities
Fund; Utility Equity Fund; Zero Coupon Funds 2000, 2005, 2010. 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 1-800/342-FUND or forward a written
request to Franklin Templeton Investor Services, Inc., 777 Mariners Island
Boulevard, San Mateo, Ca 94404.
The following table shows the net assets and shares outstanding of each Fund as
of December 31, 1996:
Net Assets Number of Shares
Fund Name (in (000's) Outstanding
- -------------------------------------------------------------------------
Money Market Fund $408,929,812.58 408,929,812.581
Growth & Income Fund 1,077,688,114.06 61,406,730.147
Precious Metals Fund 109,577,431.60 7,668,119.775
Real Estate Fund 322,681,458.14 14,568,011.654
Utility Equity Fund 1,202,507,930.73 66,144,550.645
High Income Fund 446,200,819.23 31,511,357.290
Global Income Fund 221,834,762.10 16,287,427.467
Income Securities Fund 1,350,691,913.34 78,493,846.419
US Govt. Securities Fund 844,066,028.38 62,667,402.554
Zero Coupon 2000 Fund 129,581,499.63 8,530,236.331
Zero Coupon 2005 Fund 85,580,759.31 5,052,522.275
Zero Coupon 2010 Fund 78,496,037.67 4,839,072.468
Rising Dividends Fund 597,487,397.97 38,791,703.729
Pacific Growth Fund 356,790,431.71 24,170,760.817
International Equity Fund 1,108,208,229.62 71,718,407.647
Developing Markets Fund 271,779,514.31 23,468,431.404
Global Growth Fund 580,359,819.26 42,027,863.905
Asset Allocation Fund 55,931,658.78 4,469,290.760
Small Cap Fund 170,975,923.56 12,956,069.433
Capital Growth Fund 44,649,794.34 3,930,828.364
International Smaller Companies Fund 16,314,853.31 1,445,259.027
Mutual Discovery Fund 15,356,573.18 1,510,496.885
Mutual Shares Fund 27,589,234.11 2,673,901.280
As of December 31, 1996 Allianz Life Insurance Company of North America, 1750
Hennepin Avenue, Minneapolis, MN 55403, and its wholly owned subsidiary
Preferred Life Insurance Company of New York owned, on behalf of
certain separate accounts, more than 5% of the Funds' outstanding shares:
<TABLE>
<CAPTION>
Alliaz Life Percent of Preferred Life Percent of
Separate Outstanding Separate Outstanding
Fund Name Account B Shares Account C Shares
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Money Market Fund 375,683,462.057 91.9% 32,512,106.780 8.0%
Growth & Income Fund 55,677,919.634 90.7 5,631,174.704 9.2
Precious Metals Fund 7,085,866.789 92.4 573,227.948 7.5
Real Estate Fund 13,633,919.247 93.6 918,198.253 6.3
Utility Equity Fund 60,391,637.033 91.3 5,678,280.921 8.6
High Income Fund 28,418,055.102 90.2 2,960,786.763 9.4
Global Income Fund 14,609,494.963 89.7 1,668,299.539 10.2
Income Securities Fund 72,741,873.749 92.7 5,701,039.590 7.3
US Govt. Securities Fund 55,160,226.688 88.0 7,438,090.179 11.9
Zero Coupon 2000 Fund 6,855,483.446 80.4 1,651,626.248 19.4
Zero Coupon 2005 Fund 4,491,904.267 88.9 537,016.732 10.6
Zero Coupon 2010 Fund 4,357,084.814 90.0 460,097.686 9.5
Rising Dividends Fund 35,399,138.411 91.3 3,372,626.934 8.7
Pacific Growth Fund 22,369,609.633 92.5 1,771,784.818 7.3
International Equity Fund 67,097,978.069 93.6 4,554,515.907 6.4
Global Growth Fund 39,862,082.151 94.8 2,109,157.993 5.0
Asset Allocation Fund 4,139,990.437 92.6 298,778.271 6.7
Capital Growth Fund 3,707,556.705 94.3 222,882.599 5.7
Developing Markets Fund 22,377,244.488 95.4
Small Cap Fund 12,554,791.860 96.8
International Smaller Companies 1,380,809.248 95.5
Fund
Mutual Discovery Fund 1,478,301.035 97.9
Mutual Shares Fund 2,622,909.657 98.1
</TABLE>
However, the 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.
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:
PRINCIPAL OCCUPATION
NAME AND OFFICES WITH FUND DURING PAST FIVE YEARS AND AGE
------------------------------- --------------------------------------------
CHARLES B. JOHNSON See Proposal 1, "Electing Trustees," above.
CHAIRMAN AND VICE PRESIDENT
SINCE 1988
CHARLES E. JOHNSON See Proposal 1, "Electing Trustees," above.
PRESIDENT SINCE 1993
RUPERT H. JOHNSON, JR. See Proposal 1, "Electing Trustees," above.
VICE PRESIDENT SINCE 1988
HARMON E. BURNS Executive vice president, secretary and
VICE PRESIDENT SINCE 1988 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 counsel
VICE PRESIDENT SINCE 1992 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.
MARTIN L. FLANAGAN Senior vice president, treasurer and
VICE PRESIDENT SINCE 1995 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 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 36
DIOMEDES LOO-TAM Employee of Franklin Advisers, Inc.; and
TREASURER AND PRINCIPAL officer of 37 of the investment companies
ACCOUNTING OFFICER SINCE 1995 in the Franklin Group of Funds. Age 57.
EDWARD MCVEY Senior Vice President/National Sales
VICE PRESIDENT SINCE 1988 Manager, Franklin Templeton Distributors,
Inc.; and officer of 32 of the investment
companies in the Franklin Group of Funds.
Age 58.
THE INVESTMENT MANAGERS. The Manager for all series of the Trust, except the
Asset Allocation, Developing Markets, Global Growth, International Smaller
Companies, Mutual Discovery, Mutual Shares and Rising Dividends Funds, is
Franklin Advisers, Inc. ("Advisers"), 777 Mariners Island Blvd., P.O. Box 7777,
San Mateo, California 94403-7777. In addition, Advisers employs Templeton
Investment Counsel, Inc. ("Templeton Florida"), Broward Financial Centre, Suite
2100, Fort Lauderdale, Florida 33394, to act as subadviser to the International
Equity Fund, the Pacific Fund, and the Global Income Fund.
The Manager for the Rising Dividends Fund is Franklin Advisory Services, Inc.,
("Franklin New Jersey") One Parker Plaza, Sixteenth Floor, Fort Lee, New Jersey,
07024.
The Manager for the Mutual Discovery and the Mutual Shares Funds is Franklin
Mutual Advisers, Inc. ("Franklin Mutual") 51 John F. Kennedy Parkway, Short
Hills, New Jersey, 07078.
The Manager for the Asset Allocation and Global Growth Funds is Templeton Global
Advisors Limited ("Templeton Nassau") Lyford Cay Nassau, N.P. Bahamas. Templeton
Nassau employs Templeton Florida to act as subadviser to the Asset Allocation
Fund.
The Manager for the Developing Markets Fund is Templeton Asset Management
Ltd.("Templeton Singapore") 7 Temasek Boulevard, # 38-03, Suntec Tower One,
Singapore, 038987.
Each Manager is a direct or indirect wholly owned subsidiary of Resources.
THE FUND ADMINISTRATOR. Franklin Templeton Services, Inc. ("FT Services"), an
indirect, wholly-owned subsidiary of Resources, located at 777 Mariners Island
Boulevard, San Mateo, Ca 94404, serves as Fund Administrator to each Fund
through either a direct contract with the Trust or a subcontract with the Fund's
Manager.
THE PRINCIPAL UNDERWRITER. Franklin Templeton Distributors, Inc. ("FTDI"), 777
Mariners Island Boulevard, San Mateo CA, 94404, an indirect, wholly-owned
subsidiary of Resources, serves as the principal underwriter for the Trust.
O 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 of any item 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 these proposals. 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 by not returning the
voting instruction card, the relevant Insurance Company will vote the
shares in the same proportion as shares of that Fund 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 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. The costs of any additional solicitation and of any adjourned
session will be borne by the Trust.
REVOCATION OF PROXIES. Proxies executed by either 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 a meeting in 1998. Shareholder proposals to
be included in the proxy statement for any subsequent meeting must be
received at the Trust's offices, 777 Mariners Island Boulevard, San Mateo,
CA 94404, at least 120 days prior to any such meeting.
By Order of the Board of Trustees,
Deborah R. Gatzek, Secretary
January __, 1997
<PAGE>
FRANKLIN VALUEMARK FUNDS
PROXY STATEMENT
APPENDIX 1
DRAFT PROSPECTUS DISCLOSURE FOR
NATURAL RESOURCES SECURITIES FUND
If Proposal 3 of the attached Proxy Statement is approved by
shareholders, the name, investment objective and concentration policy of the
Precious Metals Fund, a series of Franklin Valuemark Funds ("Trust"), would
be changed into those of a proposed Natural Resources Securities Fund. This
Appendix contains the proposed description of the Natural Resources
Securities Fund which would replace the description of the Precious Metals
Fund in the Trust prospectus.
This description is intended to provide you with additional information
regarding Proposal 3. It does not, however, have all of the information
which will appear in the prospectus. In particular, it does not contain
financial information, or detailed descriptions of the investment policies,
restrictions and risks which are common to more than one fund. This
information, currently in the Franklin Valuemark Funds prospectus dated
November 8, 1996 (as amended January 14, 1997) would not be affected by
Proposal 3. In addition, like all prospectus disclosures (other than
fundamental policies or restrictions requiring shareholder approval), the
description below may be changed by the Trust in the future. FOR THESE
REASONS, YOU SHOULD READ THE PROSPECTUS WHICH IS IN EFFECT AT THE TIME OF
YOUR NEXT INVESTMENT DECISION PRIOR TO MAKING AN INVESTMENT IN THE FUND
DESCRIBED BELOW.
A. THE FOLLOWING WOULD REPLACE THE SUBSECTION ENTITLED "PRECIOUS
METALS FUND" UNDER "FUND INVESTMENT OBJECTIVES AND POLICIES":
NATURAL RESOURCES SECURITIES FUND
The Natural Resources Securities Fund's investment objective is
capital appreciation; current income is a secondary objective.
The Fund seeks to achieve its objective by concentrating its
investments in securities issued by companies in or related to
the natural resources sector.
PORTFOLIO INVESTMENTS. Under normal market conditions, the Fund
will invest primarily (at least 65% of assets) in securities
issued by companies in or related to the natural resources
sector. Companies in the natural resources sector may own,
produce, refine, process or market natural resources, or provide
support services for natural resources companies (e.g., develop
technologies or provide services, supplies or equipment directly
related to the production of natural resources). The natural
resources sector includes, but is not limited to, the following
industries: integrated oil; oil and gas exploration and
production; gold and precious metals; steel and iron ore
production; aluminum production; forest products; farming
products; paper products; chemicals; building materials; energy
services and technology; environmental services; and energy
generation and distribution.
The Fund may invest in common stocks (including preferred or debt
securities convertible into common stocks), preferred stocks and
debt obligations. While the Fund normally expects to invest
primarily in equity securities, the mixture of common stocks,
preferred stocks and debt obligations may vary from time to time
based upon the Manager's assessment as to whether investments in
each category will contribute to meeting the Fund's investment
objective.
RISKS OF INVESTING IN NATURAL RESOURCES SECTOR. Due to the
Fund's policy of concentrating its investments in the natural
resources sector, the Fund's shares may be subject to greater
risk of adverse developments in those industries than an
investment in a fund with greater industry diversification. In
addition, at the Manager's discretion, the Fund may from time to
time invest up to 25% (but not more than 25%) of its assets in
any industry or group of industries within the natural resources
sector; such a strategy may expose the Fund to greater investment
risk than a more diversified strategy within the sector.
Certain of the natural resources industries' commodities are
subject to limited pricing flexibility as a result of similar
supply and demand factors. Others are subject to broad price
fluctuations, reflecting the volatility of certain raw materials'
prices and the instability of supplies of other resources. These
factors can affect the overall profitability of an individual
company operating within the natural resources sector. While
Advisers may strive to diversify among the industries within the
natural resources sector to reduce this volatility, there will be
occasions where the value of an individual company's securities
will prove more volatile than the broader market. In addition,
many of these companies operate in areas of the world where they
are subject to unstable political environments, currency
fluctuations and inflationary pressures.
FOREIGN INVESTMENTS. While the Fund will normally invest a
greater percentage of its assets in securities of U.S. issuers
than in securities of issuers in any other single country, the
Fund may invest 50% or more of its assets in foreign securities,
including Depository Receipts, of issuers in both developed and
developing markets. Foreign securities include both equity
securities and debt obligations. INVESTMENTS IN FOREIGN
SECURITIES, ESPECIALLY IN DEVELOPING MARKETS, INVOLVE SPECIAL AND
ADDITIONAL RISKS RELATED TO CURRENCY, MARKET, POLITICAL AND OTHER
FACTORS THAT ARE DIFFERENT FROM INVESTMENTS IN SIMILAR
OBLIGATIONS OF DOMESTIC ENTITIES. SEE "HIGHLIGHTED RISK
CONSIDERATIONS, FOREIGN TRANSACTIONS" AND THE SAI.
SMALL CAP INVESTMENTS. The Fund may invest without minimum or
maximum limitation in small capitalization companies ("small cap
companies") which have market capitalizations of $1 billion or
less at the time of purchase. These may include investments in
small mining or oil and gas exploration concerns which are
believed to have significant potential for appreciation, but are
subject to the risk that their exploration efforts will not be
successful. In general, securities of small cap companies,
particularly if they are unseasoned, present greater risks than
securities of larger, more established companies. The companies
may have relatively small revenues, limited product lines, and a
small share of the market for their products or services. Small
cap companies may lack depth of management, they may be unable to
internally generate funds necessary for growth or potential
development or to generate such funds through external financing
on favorable terms, or they may be developing or marketing new
products or services for which markets are not yet established
and may never become established. Due to these and other factors,
small cap companies may suffer significant losses as well as
realize substantial growth, and investments in such companies
tend to be more volatile and are therefore speculative. Besides
exhibiting greater volatility, small cap company stocks may
fluctuate independently of larger company stocks. See "Investment
Methods and Risks." The Fund will not invest more than 10% of
its assets in securities of companies with less than three years
of continuous operation.
DEBT OBLIGATIONS AND CREDIT QUALITY. Subject to its policy of
concentration in the natural resources sector, the Fund may
invest in debt obligations issued by domestic or foreign
corporations or governments. These obligations may be subject to
credit and market risks, and foreign debt obligations may be
subject to currency, political or other risks as noted above.
The Fund may invest, without percentage limitation, in debt
obligations rated as "investment grade" by Moody's or S&P, or in
unrated debt obligations of similar quality as determined by the
Manager. The Fund may also invest up to 15% of its total assets
in debt obligations rated BB or lower by S&P or Ba or lower by
Moody's, so long as they are not rated lower than B by Moody's or
S&P, or in unrated debt obligations of similar quality as
determined by the Manager. Higher yields are generally available
from securities in the higher risk, lower rating categories of
S&P or Moody's (commonly referred to as "junk bonds"); however,
the values of lower rated securities generally fluctuate more
than those of higher rated securities and involve greater risk of
loss of income and principal. SEE "HIGHLIGHTED RISK
CONSIDERATIONS, LOWER RATED DEBT OBLIGATIONS," "INVESTMENT
METHODS AND RISKS, DEBT OBLIGATIONS," AND "APPENDIX."
OTHER INVESTMENT POLICIES. The Fund may invest up to 35% of its
assets in equity securities or debt obligations of foreign or
domestic issuers outside the natural resources sector, which may
include including REITs. Some of these issuers may be in
industries related to the natural resources sector and,
therefore, may be subject to similar risks. The Fund may invest
up to 5% of its assets in commodities (including gold bullion or
gold coins) or futures on commodities related to the natural
resources sector as defined above. The Fund will not, however,
(1) invest in any commodity or commodity futures transactions,
except for BONA FIDE hedging transactions, if as a result more
than 5% of its assets would be at risk in such transactions; or
(2) operate in such a manner as to become a "Commodity Pool
Operator" under the Commodity Exchange Act. Currently, in order
to avoid becoming a "Commodity Pool Operator," a fund must limit
its aggregate initial margin and premiums on commodity futures
and options positions to 5% of the Fund's assets. Under the
policies discussed in "Investment Methods and Risks,"
"Highlighted Risk Considerations," and in the SAI, the Fund may
also make temporary defensive investments, purchase debt
obligations on a "when-issued" or "delayed delivery" basis, write
covered call options, loan its portfolio securities, enter into
repurchase transactions, borrow money, invest in restricted or
illiquid securities, and engage in other activities specifically
identified for this Fund.
B. UNDER "MANAGEMENT, PORTFOLIO OPERATIONS," THE FOLLOWING WOULD REPLACE
THE INFORMATION ABOUT THE CURRENT PORTFOLIO MANAGERS OF THE PRECIOUS METALS
FUND.
The following persons are responsible for the day-to-day
operations of each Fund:
NATURAL RESOURCES SECURITIES FUND
Suzanne Willoughby Killea
Ed Perks
BIOGRAPHICAL INFORMATION
Suzanne Willoughby Killea
Portfolio Manager
Franklin Advisers, Inc.
Ms. Killea holds a Master of Business Administration degree from
Stanford University. She earned her Bachelor of Arts degree in
architecture from Princeton University. Prior to joining the Franklin
Templeton Group, in 1991, Ms. Killea worked as a summer intern with
Dillon Read & Co., Inc. (1990) and Dodge & Cox (1989), and for five
years as a broker with the Rubicon Group, a commercial real estate
services firm. Ms. Killea managed the Precious Metals Fund from 1994
until its conversion to the Natural Resources Securities Fund in May
1997, and will manage the Natural Resources Fund beginning in May 1997.
Edward D. Perks
Portfolio Manager
Franklin Advisers, Inc.
Mr. Perks holds a bachelor of arts degree from Yale University.
He joined the Franklin Templeton Group in 1992 and will manage
the Natural Resources Securities Fund beginning in May 1997.
<PAGE>
(Proxy Voting Card for Precious Metals Fund Only)
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
[OR]
PREFERRED LIFE INSURANCE COMPANY OF NEW YORK
THESE VOTING INSTRUCTIONS ARE SOLICITED BY [ALLIANZ LIFE INSURANCE COMPANY OF
NORTH AMERICA/PREFERRED LIFE INSURANCE COMPANY OF NEW YORK] IN CONNECTION
WITH A SOLICITATION OF PROXIES BY THE TRUSTEES OF FRANKLIN VALUEMARK FUNDS.
PRECIOUS METALS FUND
A separate voting instruction form is provided for each portfolio of Franklin
Valuemark Funds in which your contract values were invested as of January 21,
1997. Please sign, date and return all voting instruction forms received in
the enclosed postage-paid envelope. Voting instructions must be received by
April 3, 1997 to be voted for the Meeting to be held April 4, 1997.
The undersigned hereby instructs [Allianz Life Insurance Company of North
America/ Preferred Life Insurance Company of New York] to vote the shares of
Franklin Valuemark Funds ("Valuemark Trust") attributable to the
undersigned's variable annuity or variable life insurance contract at the
Meeting of Shareholders to be held at 777 Mariners Island Boulevard, San
Mateo, CA at 10:00 a.m. April 4, 1997, and 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
[ ], 1997, receipt of which is hereby acknowledged.
Please Sign 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 contact 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 her or she is a
"Partner." If the contract owner is a trust, the trustee should sign in his
or her own name, indicating that her or she is a "Trustee."
- -------------------------------
Signature(s) (and Title, if applicable)
- -------------------------------
Date
- --------------------------------------------------------------------------------
(Page Break)
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 THE
PROPOSALS AND IN THE DISCRETION OF THE INSURANCE COMPANY UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
PRECIOUS METALS FUND
FOR Electing All WITHHOLD
of the Nominees Authority to
(Except as Marked Vote for ALL
TO THE CONTRARY) NOMINEES
PROPOSAL 1. ELECTING TRUSTEES OF THE
TRUST TO HOLD OFFICE FOR THE TERMS
SPECIFIED.
Nominees: Frank H. Abbott, III; Lowell C. Anderson;
Harris J. Ashton; S. Joseph Fortunato;
David W. Garbellano; Charles B. Johnson;
Charles E. Johnson; Rupert H. Johnson;
Frank W.T. LaHaye; Gordon S. Macklin.
TO WITHHOLD AUTHORITY TO VOTE FOR ANY
INDIVIDUAL NOMINEE(S), WRITE THAT
NOMINEE'S NAME ON THE LINE BELOW.
- -----------------------------------
FOR AGAINST ABSTAIN
PROPOSAL 2. Ratifying or rejecting the
selection of Coopers & Lybrand L.L.P. as
independent auditors of the Trust for fiscal
year ending December 31, 1997.
PROPOSAL 3. Approving or disapproving changes
in the investment objective and industry
concentration policy of the Precious Metals
Fund to those of a natural resources fund, as
described in the proxy statement.
PROPOSAL 4. If Proposal 3 is approved,
approving or disapproving a change in the
fundamental investment policy of the Precious
Metals Fund to permit a change from
investments in precious metals commodities to
natural resources commodities, and to clarify
that the fund may invest in futures contracts
related to such commodities, as described in
the proxy statement.
PROPOSAL 5. If Proposal 3 is approved,
approving or disapproving a change in the
fundamental investment policy of the Precious
Metals Fund to permit a change from 5% to up
to 10% of the fund's assets to be invested in
unseasoned issuers, as described in the proxy
statement.
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.
<PAGE>
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
[OR]
PREFERRED LIFE INSURANCE COMPANY OF NEW YORK
THESE VOTING INSTRUCTIONS ARE SOLICITED BY [ALLIANZ LIFE INSURANCE COMPANY OF
NORTH AMERICA/PREFERRED LIFE INSURANCE COMPANY OF NEW YORK] IN CONNECTION
WITH A SOLICITATION OF PROXIES BY THE TRUSTEES OF FRANKLIN VALUEMARK FUNDS.
[ FUND NAME - - ALL FUNDS EXCEPT PRECIOUS METALS FUND]
A separate voting instruction form is provided for each portfolio of Franklin
Valuemark Funds in which your contract values were invested as of January 21,
1997. Please sign, date and return all voting instruction forms received in
the enclosed postage-paid envelope. Voting instructions must be received by
April 3, 1997 to be voted for the Meeting to be held April 4, 1997.
The undersigned hereby instructs [Allianz Life Insurance Company of North
America/ Preferred Life Insurance Company of New York] to vote the shares of
Franklin Valuemark Funds ("Valuemark Trust") attributable to the
undersigned's variable annuity or variable life insurance contract at the
Meeting of Shareholders to be held at 777 Mariners Island Boulevard, San
Mateo, CA at 10:00 a.m. April 4, 1997, and 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
[ ], 1997, receipt of which is hereby acknowledged.
Please Sign 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 contact 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 her or she is a
"Partner." If the contract owner is a trust, the trustee should sign in his
or her own name, indicating that her or she is a "Trustee."
- -------------------------------
Signature(s) (and Title, if applicable)
- -------------------------------
Date
- --------------------------------------------------------------------------------
(Page Break)
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 THE
PROPOSALS AND IN THE DISCRETION OF THE INSURANCE COMPANY UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
[FUND NAME]
FOR Electing All of WITHHOLD
the Nominees (Except Authority to
as Marked TO THE Vote for ALL
CONTRARY) NOMINEES
PROPOSAL 1. ELECTING TRUSTEES OF
THE TRUST TO HOLD OFFICE FOR THE
TERMS SPECIFIED.
Nominees: Frank H. Abbott, III;
Lowell C. Anderson; Harris J. Ashton;
S. Joseph Fortunato; David W. Garbellano;
Charles B. Johnson; Charles E. Johnson;
Rupert H. Johnson; Frank W.T. LaHaye;
Gordon S. Macklin.
TO WITHHOLD AUTHORITY TO VOTE FOR
ANY INDIVIDUAL NOMINEE(S), WRITE
THAT NOMINEE'S NAME ON THE LINE
BELOW.
- -----------------------------------
FOR AGAINST ABSTAIN
PROPOSAL 2. Ratifying or rejecting
the selection of Coopers & Lybrand
L.L.P. as independent auditors of
the Trust for fiscal year ending
December 31, 1997.
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.
