SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(b)
of the Securities Exchange Act of 1934
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[ ] 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
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[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
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previously. Identify the previous filing by registration statement number, or
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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.
TABLE OF CONTENTS
Page
Notice of Meeting
Information About Voting 1
The Proposals
1. Electing Trustees of the Trust to hold office
until their successors are elected and qualified; 3
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; 7
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; 8
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; 11
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 13
Other Business 15
Information About the Trust and the Funds 15
Additional Information About Voting and the Shareholders Meeting. 18
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 will be counted on a Trust-wide basis, with shares of all Funds voting
together. Voting on Proposals 3, 4 and 5 will be counted separately for the
Precious Metals Fund, with only shares of that fund voting.
1. Electing Trustees of the Trust to hold office until their successors
are elected and qualified;
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
February 20, 1997
WE URGE YOU TO MARK, SIGN, DATE AND MAIL THE ENCLOSED VOTING INSTRUCTION CARD IN
THE POSTAGE-PAID ENVELOPE PROVIDED SO YOU WILL BE REPRESENTED AT THE MEETING.
FRANKLIN VALUEMARK FUNDS
PROXY STATEMENT
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 may attend
and vote at the Meeting or any adjourned Meeting. On that date, separate
accounts of Allianz Life Insurance Company of North America, and its wholly
owned subsidiary Preferred Life Insurance Company of New York (collectively the
"Insurance Companies"), were the only shareholders of each of the Funds. Each
Insurance Company will vote its shares of the Funds 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 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 a proxy is signed by the Insurance Company
Shareholder but no express voting instructions are given for a proposal, the
proxy will be voted in accordance with the Trustees' recommendations.
Contract Owners. If a Contract Owner returns a properly executed voting
instruction card with express voting instructions, the relevant Insurance
Company will vote those shares in accordance with the Contract Owner's
instructions. If a Contract Owner does not return the voting instruction card,
the relevant Insurance Company will vote the shares of a 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.
Voting on Proposals 1 and 2 will be counted on a Trust-wide basis, with shares
of all Funds voting together. Voting on Proposals 3, 4 and 5 will be counted
separately for the Precious Metals Fund, with only shares of that fund voting.
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 until their successors
are elected and qualified;
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 will be counted on a Trust-wide basis, with shares of all
Funds voting together. Voting on Proposals 3, 4 and 5 will be counted separately
for the Precious Metals Fund, with only shares of that fund voting.
All Franklin Precious
Proposal Valuemark Funds Metals Fund
1. Election of Trustees X X
2. Ratification of Auditors X X
3. Precious Metals Fund Objective
and Concentration Policy Change X
4. Precious Metals Fund Fundamental
Policy Change: Commodities and Futures X
5. Precious Metals Fund Fundamental
Policy Change: Unseasoned Issuers X
What vote is required?
Provided that a quorum is present, the nine nominees receiving the greatest
number of votes will be elected under 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 until their
successors are elected and qualified;
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.
THE PROPOSALS
PROPOSAL 1. ELECTING TRUSTEES OF THE TRUST TO HOLD OFFICE UNTIL THEIR SUCCESSORS
ARE ELECTED AND QUALIFIED
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 in 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 Templeton Group of Funds(R). 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.
Provided that a quorum is present, the nine nominees receiving the greatest
number of votes will be elected, with shares of all Funds voting together. 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:
Shares owned
Beneficially and % of
Name and Offices Principal Occupation Trustee Total Outstanding on
with the Trust During Past Five Years and Age Since December 31, 1996
FRANK H. ABBOTT, III 1988 -0-
Trustee
Member of the Audit Committee of 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 Templeton Group of Funds. Age 75.
LOWELL C. ANDERSON* 1995 -0-
Trustee
Chairman, President and Chief 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 1988 -0-
Trustee
Chairman of the board, president 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 (a meat packing company); and director
or trustee of 56 of the investment companies in the Franklin Templeton Group of
Funds. Age 64.
S. JOSEPH FORTUNATO 1992 -0-
Trustee
Member of the law firm of Pitney, Hardin, Kipp & Szuch; director of General Host
Corporation (nursery and craft centers); and director or trustee of 58 of the
investment companies in the Franklin Templeton Group of Funds. Age 64.
Shares owned
Beneficially and % of
Name and Offices Principal Occupation Trustee Total Outstanding on
with the Trust During Past Five Years and Age Since December 31, 1996
DAVID W. GARBELLANO 1988 -0-
Trustee
Member of the Audit Committee of 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 Templeton Group of Funds. Age 81.
CHARLES B. JOHNSON* 1988 -0-
Chairman of the Board and Trustee
President, chief executive officer, and director of Franklin 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* 1988 -0-
President and Trustee
Senior Vice President and 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* 1988 -0-
Vice President and Trustee
Executive Vice President and Director, Franklin Resources, Inc. 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.
Shares owned
Beneficially and % of
Name and Offices Principal Occupation Trustee Total Outstanding on
with the Trust During Past Five Years and Age Since December 31, 1996
FRANK W. T. LAHAYE 1988 -0-
Trustee
Chairman of the Audit Committee of 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 Corporation (computer software);
Director, FischerImaging Corporation (medical imaging systems); and director or
trustee, as the case may be, of 27 of the investment companies in the Franklin
Templeton Group of Funds. Age 67.
GORDON S. MACKLIN 1993 -0-
Trustee
Chairman, White River Corporation (information and financial services);
Director, Fund American Enterprises Holdings, Inc.(financial services); 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 services); 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 (venture capital
and investment banking); Director, H & Q Healthcare Investors (investment
trust); and President, National Association of Securities Dealers, Inc. Age 68.
*"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 and Rupert H. Johnson, Jr. are interested persons due
to their ownership interest in Resources; Charles E. Johnson is an interested
person due to his family and employment affiliations noted above. 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 54% of such meetings. The Audit
Committee members are Mr. LaHaye, Chair, and Messrs. Abbott and Garbellano. The
Trust's Board does not have a nominating or compensation committee.
Certain Trustees and officers of the Trust are shareholders of Resources and may
receive indirect remuneration due to their participation in management fees and
other fees received from the Franklin Templeton Group of Funds 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:
Number of
Boards within Total
the Franklin Compensation
Aggregate Templeton Group from the
Compensation of Funds on which Franklin Templeton
Name of Trustee from the Trust* Trustee Serves Group of Funds**
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
*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 those of the retail Franklin Natural Resources Fund.
1. Current Investment Objective
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.
2. New Investment Objective and Policy
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, 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 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 could be made, and the following changes which would
automatically 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. Portfolio Turnover: 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.
3. High-Yield Bonds: The Natural Resources Securities Fund would be permitted to
invest up to 15% of its 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 portfolio managers do not
currently anticipate investing more than 5% of their assets in such obligations,
but this may change in the future.
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 Board of 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, 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. 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. Because the Natural Resources Securities Fund would not
be required to concentrate its investments solely in the precious metals
industry, it would likely provide investors with greater diversification than
the Precious Metals Fund. In many cases, greater diversification provides lower
volatility (or smaller up and down price movements). Of course, since the
Natural Resources Securities Fund would invest primarily in the natural
resources sector and could from time to time have investments of up to 25% in
one industry within that sector, it would most likely remain less diversified
and more volatile than funds which do not concentrate in one sector.
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.
Nonetheless, in approving Proposal 3, the Board of Trustees determined, in the
exercise of their business judgment and in light of their fiduciary duties under
relevant state law and the 1940 Act that, based upon the factors considered by
them, 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.
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.
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 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:
Each of the Funds may not: . . . .
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.
What factors did the Board of 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 Board of Trustees determined, in the exercise of
their business judgment and in light of their fiduciary duties under relevant
state law and the 1940 Act that, based upon the factors considered by them,
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 Board of 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.
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:
<TABLE>
<CAPTION>
Net Assets Number of Fund Name
(in (000's) Shares Outstanding
<S> <C> <C>
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
Templeton Global Income Securities Fund 221,834,762.10 16,287,427.467
Income Securities Fund 1,350,691,913.34 78,493,846.419
US Government 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
Templeton Pacific Growth Fund 356,790,431.71 24,170,760.817
Templeton International Equity Fund 1,108,208,229.62 71,718,407.647
Templeton Developing Markets Equity Fund 271,779,514.31 23,468,431.404
Templeton Global Growth Fund 580,359,819.26 42,027,863.905
Templeton Global 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
Templeton International Smaller Companies Fund 16,314,853.31 1,445,259.027
Mutual Discovery Securities Fund 15,356,573.18 1,510,496.885
Mutual Shares Securities 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:
Allianz 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
Templeton Global Income Securities 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 Government 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
Templeton Pacific Growth Fund 22,369,609.633 92.5 1,771,784.818 7.3
Templeton International Equity Fund 67,097,978.069 93.6 4,554,515.907 6.4
Templeton Global Growth Fund 39,862,082.151 94.8 2,109,157.993 5.0
Templeton Global 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
Templeton Developing Markets Equity Fund 22,377,244.488 95.4
Small Cap Fund 12,554,791.860 96.8
Templeton International Smaller Companies Fund 1,380,809.248 95.5
Mutual Discovery Securities Fund 1,478,301.035 97.9
Mutual Shares Securities 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, the 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 Board of Trustees and serve at the
pleasure of the Board. Listed below, for each Executive Officer, is a brief
description of recent professional experience:
<TABLE>
<CAPTION>
Principal Occupation
Name and Offices with Fund During Past Five Years and Age
<S> <C>
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 director of Franklin
Resources, Vice President since 1988 Inc.; executive vice president and director
of Franklin Templeton Distributors, Inc.; executive vice president of Franklin
Advisers, Inc. and Franklin Templeton Services, 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 of Franklin Resources, Inc.; Vice
President since 1992 senior vice president of Franklin
Templeton Services, Inc. and 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 chief financial officer of Franklin Vice
President since 1995 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 officer of 37 of the investment Treasurer
and Principal companies in the Franklin Templeton Group of Funds. Age
57. Accounting Officer since 1995
EDWARD MCVEY Senior Vice President/National Sales Manager, Franklin Templeton
Vice President since 1988 Distributors, Inc.; and officer of 32 of the
investment companies in the Franklin Templeton Group of Funds. Age 58.
</TABLE>
The Investment Managers. The Manager for all series of the Trust, except the
Templeton Global Asset Allocation, Templeton Developing Markets Equity,
Templeton Global Growth, Templeton International Smaller Companies, Mutual
Discovery Securities, Mutual Shares Securities 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. Templeton Florida is
Manager of the Templeton International Smaller Companies 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 Securities and the Mutual Shares Securities
Funds is Franklin Mutual Advisers, Inc. ("Franklin Mutual") 51 John F. Kennedy
Parkway, Short Hills, New Jersey, 07078.
The Manager for the Templeton Global Asset Allocation and Templeton 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 Templeton Global Asset Allocation Fund.
The Manager for the Templeton Developing Markets Equity 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.
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 Counting the Votes. The inspector of election will count the total
number of votes cast "for" approval of each of the proposals for purposes of
determining whether sufficient affirmative votes have been cast. Abstentions of
any item will be treated as votes not cast and, therefore, will not be counted
for purposes of obtaining approval of 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
February 20, 1997
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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 lower rated debt obligations,
which are rated BB or lower by S&P or Ba or lower by Moody's but not lower
than B by Moody's or S&P, or in unrated debt obligations of similar
quality as determined by the Manager. The Manager does not currently
expect investments in lower rated debt obligations to exceed 5% of the
Fund's assets. 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 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. 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 the
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.
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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.
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.
