TEMPLETON VARIABLE PRODUCTS SERIES FUND, 485BPOS, 1995-04-27

TEMPLETON VARIABLE PRODUCTS SERIES FUND
485BPOS, 1995-04-27

Previous: WEINGARTEN REALTY INVESTORS /TX/, S-2, 1995-04-27

Next: PIONEER AMERICA INCOME TRUST, 485BPOS, 1995-04-27

REDLINED
Registration No. 33-20313
As filed with the Securities and Exchange Commission on April 27, 1995

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /

Pre-Effective Amendment No. ___ / /

Post-Effective Amendment No. 9 / X /

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY / X /
ACT OF 1940

Amendment No. 12 / X /

(Check appropriate box or boxes)

TEMPLETON VARIABLE PRODUCTS SERIES FUND
(Exact Name of Registrant as Specified in Charter)

700 Central Avenue, P.O. Box 33030, St. Petersburg, Florida 33733-8030
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number: (813) 823-8712

Thomas M. Mistele
700 Central Avenue
P.O. Box 33030
St. Petersburg, Florida 33733-8030
(Name and Address of Agent for Service)

It is proposed that this filing will become effective (check appropriate box):

/ / immediately upon filing pursuant to paragraph (b) or

/ / on (date) pursuant to paragraph (b) or

/ / 60 days after filing pursuant to paragraph (a) or

/X / on May 1, 1995 pursuant to paragraph (a) of Rule 485

* The Registrant has registered an indefinite number of shares of
beneficial interest under the Securities Act of 1933 pursuant to Rule
24f-2 under the Investment Company Act of 1940, and filed its Rule 24f-2
Notice for the fiscal year ended December 31, 1994 on February 28, 1995.

<PAGE>

TEMPLETON VARIABLE PRODUCTS SERIES FUND

CROSS-REFERENCE SHEET
REQUIRED BY RULE 495
UNDER THE SECURITIES ACT OF 1933

ITEM NO. PART A CAPTION

1 Cover Page

2 Synopsis

3 ^Financial Highlights

4 Investment Objectives and Policies;
Description of Securities and
Investment Techniques

5 Management of the Trust

6 Dividends and Distributions; Other
Information

7 Purchase of Shares; Net Asset Value

8 Redemption of Shares

9 Not Applicable

PART B

10 Cover Page

11 Table of Contents

12 General Information and History

13 Investment Objectives and Policies

14 Management of the Trust

15 Principal Shareholders

16 Investment Management and Other
Services

17 Brokerage Allocation

<PAGE>

ITEM NO. CAPTION

PART B

18 Description of Shares; Other
Information, Part A

19 Purchase and Redemption of Shares;
Net Asset Value

20 Tax Status

21 Purchase of Shares (Prospectus)

22 Yield and Performance Information

23 Not Applicable

<PAGE>
[INSERT LOGO]

Prospectus -- May 1, 1995
TEMPLETON VARIABLE PRODUCTS SERIES FUND
- --------------------------------------------------------------------------------

Templeton Variable Products Series Fund (the 'Trust') is an open-end,
diversified management investment company currently consisting of five separate
series (the 'Funds'), each with its own investment objective and policies.
Shares of the Funds are currently sold only to insurance company separate
accounts ('Separate Accounts') to serve as the investment vehicle for Variable
Annuity Contracts (the 'Contracts'). The Separate Accounts invest in shares of
one or more of the Funds of the Trust in accordance with allocation instructions
received from owners of the Contracts. Such allocation rights are described
further in the accompanying Prospectus for the Separate Accounts. Certain Funds
are not available as an investment vehicle for all Contracts. This Prospectus
sets forth concisely information about the Trust that a prospective investor
ought to know before investing.

The five Funds of the Trust are as follows:

TEMPLETON MONEY MARKET FUND
TEMPLETON BOND FUND
TEMPLETON STOCK FUND
TEMPLETON ASSET ALLOCATION FUND
TEMPLETON INTERNATIONAL FUND

AN INVESTMENT IN TEMPLETON MONEY MARKET FUND IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT THE FUND
WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.

------------------------------------------------------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK; FURTHER, SUCH SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY.

A STATEMENT OF ADDITIONAL INFORMATION DATED MAY 1, 1995 HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION AND IS INCORPORATED IN ITS ENTIRETY BY
REFERENCE IN AND MADE A PART OF THIS PROSPECTUS. THIS STATEMENT IS AVAILABLE
WITHOUT CHARGE UPON REQUEST TO FRANKLIN TEMPLETON DISTRIBUTORS, INC., P.O. BOX
33030, ST. PETERSBURG, FLORIDA 33733-8030 OR BY CALLING THE FUND INFORMATION
DEPARTMENT AT 1-800-774-5001 OR 813-823-8712.

------------------------------------------------------------------------

SHARES OF THE FUNDS ARE AVAILABLE EXCLUSIVELY TO INSURANCE COMPANY SEPARATE
ACCOUNTS AS AN INVESTMENT VEHICLE FOR VARIABLE INSURANCE CONTRACTS. THIS
PROSPECTUS SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS OFFERING THE
VARIABLE INSURANCE CONTRACT. BOTH PROSPECTUSES SHOULD BE READ CAREFULLY AND
RETAINED FOR FUTURE REFERENCE.

T-1
<PAGE>
TABLE OF CONTENTS

PAGE

<TABLE>
<CAPTION>
<S> <C>
PROSPECTUS SYNOPSIS....................................................................................................... T-3

FINANCIAL HIGHLIGHTS...................................................................................................... T-5

INVESTMENT OBJECTIVES AND POLICIES........................................................................................ T-9

Templeton Money Market Fund........................................................................................... T-9

Templeton Bond Fund...................................................................................................T-10

Templeton Stock Fund..................................................................................................T-10

Templeton Asset Allocation Fund.......................................................................................T-10

Templeton International Fund..........................................................................................T-11

DESCRIPTION OF SECURITIES AND INVESTMENT TECHNIQUES.......................................................................T-11

RISK FACTORS..............................................................................................................T-15

PURCHASE OF SHARES........................................................................................................T-16

NET ASSET VALUE...........................................................................................................T-16

REDEMPTION OF SHARES......................................................................................................T-17

EXCHANGES.................................................................................................................T-17

MANAGEMENT OF THE TRUST...................................................................................................T-17

BROKERAGE COMMISSIONS.....................................................................................................T-18

DIVIDENDS AND DISTRIBUTIONS...............................................................................................T-19

FEDERAL INCOME TAX STATUS.................................................................................................T-19

OTHER INFORMATION.........................................................................................................T-19
</TABLE>

T-2
<PAGE>
PROSPECTUS SYNOPSIS

THE TRUST

Templeton Variable Products Series Fund (the 'Trust') is an open-end,
diversified management investment company organized as a business trust under
the laws of Massachusetts. An Agreement and Declaration of Trust dated February
25, 1988 (the 'Declaration of Trust') authorizes the Shares of the Trust to be
divided into two or more series related to separate portfolios of investments.
The Trust currently consists of five series (the 'Funds'), each with its own
investment objective and policies. The Funds of the Trust are: Templeton Money
Market Fund, Templeton Bond Fund, Templeton Stock Fund, Templeton Asset
Allocation Fund, and Templeton International Fund. There can be no assurance
that any particular Fund's investment objective will be attained. The Board of
Trustees may establish additional Funds at any time.

The Trust was organized primarily as an investment vehicle for use in
connection with variable annuity contracts and variable life insurance policies
('variable contracts') offered by one or more life insurance companies. Shares
of each Fund may be offered to separate accounts established by insurance
companies to serve as the underlying investment vehicle for both variable
annuity and life insurance contracts. Shares of the Funds are not offered
directly to the general public.

The various Funds may be used independently or in combination. Shareholders
may exchange Shares of a Fund for Shares of one or more of the other Funds. (See
'Exchanges.') Owners of variable contracts should consult the Prospectus for the
applicable contract on allocation or transfer of cash value under the contract
to a separate account or divisions thereof that invest in the Trust.

The rights of a separate account as Shareholder should be distinguished from
the rights of an owner of a variable contract, which are described in the
accompanying Prospectus for the variable contracts. As long as Shares of the
Fund are sold only to insurance company separate accounts, the term
'Shareholder' or 'Shareholders' in this Prospectus refers to the separate
accounts.

INVESTMENT OBJECTIVES

The investment objectives of each of the Funds are as follows:

TEMPLETON MONEY MARKET FUND seeks current income, stability of
principal, and liquidity by investing in money market instruments with
maturities not exceeding 397 days, consisting primarily of short-term
U.S. Government securities, certificates of deposit, time deposits,
bankers' acceptances, commercial paper, and repurchase agreements.

TEMPLETON BOND FUND seeks high current income through a flexible policy
of investing primarily in debt securities of companies, governments and
government agencies of various nations throughout the world, and in debt
securities which are convertible into common stock of such companies.
The debt securities selected may be rated in any category by Standard &
Poor's Corporation ('S&P') or Moody's Investors Service, Inc.
('Moody's'), as well as securities which are unrated by any rating
agency.

TEMPLETON STOCK FUND pursues an investment objective of capital growth
through a policy of investing primarily in common stocks issued by
companies, large and small, in various nations throughout the world.

TEMPLETON ASSET ALLOCATION FUND seeks a high level of total return
through a flexible policy of investing in stocks of companies in any
nation, debt obligations of companies and governments of any nation, and
in money market instruments. Changes in the asset mix will be adjusted
in an attempt to capitalize on total return potential produced by
changing economic conditions throughout the world.

TEMPLETON INTERNATIONAL FUND seeks long-term capital growth through a
flexible policy of investing in stocks and debt obligations of companies
and governments outside the United States. Any income realized will be
incidental.

Further information regarding the investment practices of each Fund is set
forth under 'Investment Objectives and Policies' in this Prospectus.
MANAGEMENT OF THE TRUST

The investment manager of Templeton Stock Fund, Templeton Asset Allocation Fund
and Templeton International Fund is Templeton Investment Counsel, Inc. ('TICI').
The investment manager of Templeton Bond Fund and Templeton Money Market Fund is
Templeton Global Bond Managers ('TGBM'), a division of TICI. TICI, including the
TGBM division, (the 'Investment Managers') is a Florida corporation with offices
at Broward Financial Centre, Fort Lauderdale, Florida 33394-3091. Subject to the
overall supervision of the Board of Trustees of the Trust, the Investment
Managers manage the investment and reinvestment of the Funds' assets. For its
services, Templeton Money Market Fund pays TGBM a maximum amount of 0.35% and
Templeton Bond, Stock, Asset Allocation, and International Funds pay TGBM or
TICI a maximum amount of 0.50% of the average daily net assets of each Fund.
Templeton Funds Annuity Company provides certain administrative facilities and
services for the Trust. (See 'Management of the Trust.')

T-3
<PAGE>
PURCHASE OF SHARES

The Shares may be purchased only by separate accounts of insurance companies
which issue variable annuity or life insurance contracts. (See 'Purchase of
Shares.')

REDEMPTIONS AND EXCHANGES

Shares of each Fund may be redeemed without cost at the net asset value per
share of the Fund next determined after receipt of the redemption request.

Shares of any Fund may be exchanged for Shares of any other Fund on the
basis of relative net asset values. (See 'Exchanges.')

DIVIDENDS AND DISTRIBUTIONS

Dividends from net investment income and any distributions of net realized
capital gains will be distributed as described under 'Dividends and
Distributions.' All such distributions will normally be automatically reinvested
without charge in additional Shares of the same Fund, unless a Shareholder
requests that they be paid in cash.

SPECIAL CHARACTERISTICS

Templeton Bond, Stock, Asset Allocation, and International Funds have an
unlimited right to purchase securities in any foreign country and Templeton
Stock and Asset Allocation Funds may purchase and sell stock index futures
contracts. Templeton Bond Fund may purchase and sell bond index futures
contracts. Templeton Bond and Asset Allocation Funds may also purchase and sell
financial futures, foreign currency futures contracts and forward foreign
currency exchange contracts. Each Fund may invest in repurchase agreements,
purchase securities on a 'when-issued' basis, and lend its portfolio securities.
Each of these techniques may involve risk, as discussed more fully under
'Description of Securities and Investment Techniques' and 'Risk Factors.'

TRANSFER AGENT AND CUSTODIAN

The Trust serves as its own transfer and dividend disbursing agent. The Chase
Manhattan Bank, N.A. serves as Custodian of each Fund's securities and cash.

T-4
<PAGE>
FINANCIAL HIGHLIGHTS

FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED

The following table of financial highlights has been audited by McGladrey &
Pullen, LLP, independent certified public accountants, for the periods indicated
in their report which is incorporated by reference and which appears in the
Trust's 1994 Annual Report to Shareholders. This statement should be read in
conjunction with the other financial statements and notes thereto included in
the Trust's 1994 Annual Report to Shareholders, which contains further
information about the Funds' performance, and which is available to shareholders
upon request and without charge.

<TABLE>
<CAPTION>
Templeton Money Market Fund
-----------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988*
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE (for a share outstanding
throughout the year)

NET ASSET VALUE, BEGINNING OF YEAR........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------------------------------------------------------------------------------------------------------------

NET INVESTMENT INCOME..................................... .03 .02 .03 .05 .07 .08 .02
- ----------------------------------------------------------------------------------------------------------------------------

DIVIDENDS FROM NET INVESTMENT INCOME...................... (.03) (.02) (.03) (.05) (.07) (.08) (.02)
- ----------------------------------------------------------------------------------------------------------------------------

Change in net asset value for the year.................... -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------ ------

NET ASSET VALUE, END OF YEAR.............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------------------------------------------------------------------------------------------------------------

TOTAL RETURN /dagger/..................................... 3.48% 2.41% 3.10% 5.59% 7.51% 8.13% 1.95%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000)........................... $33,090 $16,992 $21,454 $22,046 $17,982 $5,984 $ 679

Ratio of expenses to average net assets................... 0.71% .75% .69% .70% .84% 1.82% 12.95%**

Ratio of expenses, net of reimbursement,
to average net assets................................... 0.71% .75% .69% .70% .84% 1.00% 1.50%**

Ratio of net investment income to average
net assets.............................................. 3.56% 2.38% 3.02% 5.28% 7.19% 7.79% 5.83%**
- ----------------------------------------------------------------------------------------------------------------------------
<FN>
* For the period August 31, 1988 (commencement of operations) to December 31, 1988.

** Annualized.

/dagger/ Total return figures do not include charges applied under the Contracts. Inclusion of such charges would reduce the total
return figures for all periods shown.
</FN>
</TABLE>

T-5
<PAGE>

<TABLE>
<CAPTION>
Templeton Bond Fund
-----------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988*
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE (for a share outstanding
throughout the year)
NET ASSET VALUE, BEGINNING OF YEAR........................ $ 12.15 $ 10.91 $ 10.99 $10.35 $10.32 $10.19 $10.00
- ----------------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income................................... .71 .60 .58 .61 .60 .83 .20
Net realized and unrealized gain (loss)................. (1.28) .65 .03 1.02 .05 (.07) (.01)
------- ------- ------- ------- ------- ------ ------
TOTAL FROM INVESTMENT OPERATIONS...................... (.57) 1.25 .61 1.63 .65 .76 .19
- ----------------------------------------------------------------------------------------------------------------------------
Distributions:
Dividends from net investment income.................... (.55) (.005) (.57) (.64) (.62) (.63) --
Distributions from net realized gains................... (.17) (.005) (.12) (.35) -- -- --
------- ------- ------- ------- ------- ------ ------
TOTAL DISTRIBUTIONS................................... (.72) (.01) (.69) (.99) (.62) (.63) --
- ----------------------------------------------------------------------------------------------------------------------------
Change in net asset value for the year.................... (1.29) 1.24 (.08) .64 .03 .13 .19
------- ------- ------- ------- ------- ------ ------
NET ASSET VALUE, END OF YEAR.............................. $ 10.86 $ 12.15 $ 10.91 $10.99 $10.35 $10.32 $10.19
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN /dagger/.................................... (4.88)% 11.46% 5.53% 15.86% 6.33% 7.65% 1.90%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000)........................... $29,343 $29,347 $15,674 $8,142 $4,076 $2,349 $ 254
Ratio of expenses to average net assets................... 0.90% .83% 1.00% 1.06% 1.56% 3.67% 15.44%**
Ratio of expenses, net of reimbursement,
to average net assets................................... 0.90% .83% 1.00% 1.00% 1.00% 1.00% 1.50%**
Ratio of net investment income to average
net assets.............................................. 6.80% 6.50% 6.93% 7.63% 7.65% 8.12% 5.94%**
Portfolio turnover rate................................... 203.91% 170.33% 147.77% 551.45% 107.58% 48.87% --
- ----------------------------------------------------------------------------------------------------------------------------
<FN>
* For the period August 31, 1988 (commencement of operations) to December 31, 1988.
** Annualized.
/dagger/ Total return figures do not include charges applied under the Contracts. Inclusion of such charges would reduce the total
return figures for all periods shown.
</FN>
</TABLE>

T-6
<PAGE>

<TABLE>
<CAPTION>
Templeton Stock Fund
----------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988*
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE (for a share
outstanding throughout the year)
NET ASSET VALUE, BEGINNING OF YEAR................. $ 17.53 $ 13.33 $ 12.72 $ 10.29 $ 11.75 $ 10.25 $10.00
- --------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income............................ .26 .23 .25 .27 .32 .18 .18
Net realized and unrealized
gain (loss).................................... (.64) 4.23 .64 2.49 (1.57) 1.34 .071
-------- -------- -------- -------- ------- ------- ------
TOTAL FROM INVESTMENT
OPERATIONS.................................. (.38) 4.46 .89 2.76 (1.25) 1.52 .25
- --------------------------------------------------------------------------------------------------------------------------
Distributions:
Dividends from net
investment income.............................. (.21) (.25) (.28) (.33) (.19) (.02) --
Distributions from net realized gains............ -- (.01) -- -- (.02) -- --
-------- -------- -------- -------- ------- ------- ------
TOTAL DISTRIBUTIONS............................ (.21) (.26) (.28) (.33) (.21) (.02) --
- --------------------------------------------------------------------------------------------------------------------------
Change in net asset value for the year............. (.59) 4.20 .61 2.43 (1.46) 1.50 .25
-------- -------- -------- -------- ------- ------- ------
NET ASSET VALUE END OF YEAR........................ $ 16.94 $ 17.53 $ 13.33 $ 12.72 $ 10.29 $ 11.75 $10.25
- --------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN /dagger/............................. (2.20)% 34.00% 7.12% 27.93% (10.23)% 14.85% 2.50%

RATIOS/SUPPLEMENTAL DATA
Net assets end of year (000)....................... $378,849 $298,392 $166,219 $116,943 $74,264 $49,787 $3,037
Ratio of expenses to average net assets............ .73% .73% .75% .82% .85% 1.08% 4.39%**
Ratio of expenses, net of reimbursement,
to average net assets............................ .73% .73% .75% .82% .85% .99% 1.50%**
Ratio of net investment income to average
net assets....................................... 1.81% 1.88% 2.36% 2.82% 3.78% 3.63% 5.55%**
Portfolio turnover rate............................ 5.10% 4.88% 8.10% 41.24% 17.94% 5.27% --
- --------------------------------------------------------------------------------------------------------------------------
<FN>
* Period from August 31, 1988 (commencement of operations) to December 31, 1988.
** Annualized.
/dagger/ Total return figures do not include charges applied under the Contracts. Inclusion of such charges would reduce the total
return figures for all periods shown.
</FN>
</TABLE>

T-7
<PAGE>

<TABLE>
<CAPTION>
Templeton Asset Allocation Fund
--------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988*
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE (for a share
outstanding throughout the year)
NET ASSET VALUE, BEGINNING OF YEAR.................... $ 16.55 $ 13.49 $ 12.85 $ 10.45 $ 11.62 $ 10.28 $10.00
- ---------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income............................... .44 .42 .39 .40 .34 .25 .07
Net realized and unrealized gain (loss)............. (.92) 3.03 .66 2.38 (1.23) 1.11 .21
-------- -------- ------- ------- ------- ------- ------
TOTAL FROM INVESTMENT OPERATIONS.................. (.48) 3.45 1.05 2.78 (.89) 1.36 .28
- ---------------------------------------------------------------------------------------------------------------------------
Distributions:
Dividends from net investment income................ (.31) (.35) (.41) (.38) (.25) (.02) --
Distributions from net realized gains............... (.07) (.04) -- -- (.03) -- --
-------- -------- ------- ------- ------- ------- ------
TOTAL DISTRIBUTIONS............................... (.38) (.39) (.41) (.38) (.28) (.02) --
- ---------------------------------------------------------------------------------------------------------------------------
Change in net asset value for the year................ (.86) 3.06 .64 2.40 (1.17) 1.34 .28
-------- -------- ------- ------- ------- ------- ------
NET ASSET VALUE, END OF YEAR.......................... $ 15.69 $ 16.55 $ 13.49 $ 12.85 $ 10.45 $ 11.62 $10.28
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN /dagger/................................ (2.96)% 26.12% 8.42% 27.05% (7.80)% 13.25% 2.80%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000)......................... $288,172 $183,360 $79,242 $35,821 $22,702 $13,150 $ 388
Ratio of expenses to average net assets............... .75% .77% .80% .89% 1.03% 1.41% 14.92%**
Ratio of expenses, net of reimbursement,
to average net assets............................... .75% .77% .80% .89% 1.00% 1.00% 1.50%**
Ratio of net investment income to average
net assets.......................................... 4.02% 4.16% 4.47% 3.99% 4.56% 4.81% 2.86%**
Portfolio turnover rate............................... 51.36% 81.50% 120.53% 76.65% 8.46% 10.68% --
- ---------------------------------------------------------------------------------------------------------------------------
<FN>
* Period from August 31, 1988 (commencement of operations) to December 31, 1988.
** Annualized.
/dagger/ Total return figures do not include charges applied under the Contracts. Inclusion of such figures would reduce the total
return figures for all periods shown.
</FN>
</TABLE>

T-8
<PAGE>

<TABLE>
<CAPTION>
Templeton International Fund
-------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1993 1992*
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
NET ASSET VALUE, BEGINNING OF PERIOD........................................................ $ 13.83 $ 9.39 $10.00
- ----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income..................................................................... .12 .10 .06
Net realized and unrealized gain (loss)................................................... (.42) 4.34 (.67)
-------- ------- ------
TOTAL FROM INVESTMENT OPERATIONS........................................................ (.30) 4.44 (.61)
- ----------------------------------------------------------------------------------------------------------------------------
Distributions:
Dividends from net investment income...................................................... (.08) -- --
Distributions from net realized gain...................................................... (.23) -- --
-------- ------- ------
TOTAL DISTRIBUTIONS..................................................................... (.31) -- --
- ----------------------------------------------------------------------------------------------------------------------------
Change in net asset value for the year...................................................... (.61) 4.44 (.61)
-------- ------- ------
NET ASSET VALUE, END OF YEAR................................................................ $ 13.22 $ 13.83 $ 9.39
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN /dagger/...................................................................... (2.22)% 47.28% (6.10)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000)............................................................. $150,090 $43,877 $7,050
Ratio of expenses to average net assets..................................................... .83% .95% 1.40%**
Ratio of expenses, net of reimbursement, to average net assets.............................. .83% .95% 1.00%**
Ratio of net investment income to average net assets........................................ 1.89% 1.62% 1.76%**
Portfolio turnover rate..................................................................... 6.32% 15.65% 4.50%
- ----------------------------------------------------------------------------------------------------------------------------
<FN>
* Period from May 1, 1992 (commencement of operations) to December 31, 1992.
** Annualized.
/dagger/ Total return figures do not include charges applied under the Contracts. Inclusion of such figures would reduce the total
return figures for all periods shown.
</FN>
</TABLE>

INVESTMENT OBJECTIVES AND POLICIES

The Trust offers five Funds with different investment objectives that are
described below. There can be no assurance that any of the Funds will achieve
its investment objective.

The Funds are subject to investment restrictions that are described under
the heading 'Investment Restrictions' in the Statement of Additional
Information. Those investment restrictions so designated and the investment
objective of each Fund are 'fundamental policies' of the Trust, which means that
they may not be changed without a majority vote of Shareholders of the affected
Fund. With the exception of investment objectives and those restrictions
specifically identified as fundamental, all investment policies and practices
described in this Prospectus and in the Statement of Additional Information are
not fundamental, meaning that the Board of Trustees may change them without
Shareholder approval.

Certain types of investments and investment techniques are described in
greater detail under 'Description of Securities and Investment Techniques' in
this Prospectus and also in the Statement of Additional Information.

TEMPLETON MONEY MARKET FUND

The investment objective of Templeton Money Market Fund is current income,
stability of principal, and liquidity, which it seeks to achieve by investing in
money market instruments with maturities not exceeding 397 days, consisting
primarily of short term U.S. Government securities, certificates of deposit,
time deposits, bankers' acceptances, commercial paper, and repurchase agreements
with banks or broker-dealers with respect to these securities. As a fundamental
policy, the Fund invests at least 80% of its total assets in these securities.

In addition, the Fund will not invest more than 5% of its total assets in
the securities (including the securities collateralizing a repurchase agreement)
of, or subject to puts issued by, a single issuer, except that (i) the Fund may
invest in
T-9
<PAGE>
U.S. Government securities or repurchase agreements that are fully
collateralized by U.S. Government securities without any such limitation, and
(ii) the limitation with respect to puts does not apply to unconditional puts if
no more than 10% of the Fund's total assets is invested in securities issued or
guaranteed by the issuer of the unconditional put. Investments in rated
securities not rated in the highest category by at least two rating
organizations (or one rating organization if the instrument was rated by only
one such organization), and unrated securities not determined by the Board of
Trustees to be comparable to those rated in the highest category, will be
limited to 5% of the Fund's total assets, with the investment in any one such
issuer being limited to no more than the greater of 1% of the Fund's total
assets or $1,000,000.

Templeton Money Market Fund intends to use its best efforts to maintain its
net asset value at $1.00 per Share, although there can be no assurance that this
will be achieved. The Fund values all of its portfolio securities using the
amortized cost method, which involves valuing a security at cost on the date of
acquisition and thereafter assuming a constant accretion of discount or
amortization of premium. See 'Purchase and Redemption of Shares; Net Asset
Value' in the Statement of Additional Information for a description of certain
conditions and procedures followed by the Fund in connection with amortized cost
valuation.

Commercial paper must be issued by domestic corporations or foreign
corporations affiliated with domestic corporations and must meet the quality
standards described under 'Description of Securities and Investment Techniques.'
The Fund may also enter into repurchase agreements, invest in short term
corporate debt obligations, purchase securities on a 'when-issued' basis, lend
its portfolio securities, and borrow money for emergency purposes. The Fund will
not invest more than 10% of its assets in time deposits maturing in more than
seven days which do not have secondary trading markets and which are subject to
early withdrawal penalties. (See 'Description of Securities and Investment
Techniques.')

TEMPLETON BOND FUND

The investment objective of Templeton Bond Fund is high current income. The Fund
seeks to achieve its objective through a flexible policy of investing primarily
in debt securities of companies, governments and government agencies of various
nations throughout the world, and in debt securities which are convertible into
common stock of such companies. In pursuit of its investment objective, the Fund
will invest at least 65% of its assets in bonds and debentures of such issuers.
The Fund may invest in debt securities rated in any category by Standard &
Poor's Corporation ('S&P') or Moody's Investors Service, Inc. ('Moody's') and
securities which are unrated by any rating agency. See 'Risk Factors' and the
Appendix in the Statement of Additional Information for a description of the S&P
and Moody's ratings.

The average maturity of debt securities in the Fund's portfolio will
fluctuate depending upon TGBM's judgment as to future interest rate changes.
Debt securities in which the Fund may also invest include various corporate debt
obligations, commercial paper, certificates of deposit, bankers' acceptances,
and repurchase agreements with respect to these securities.

Templeton Bond Fund may also buy and sell financial futures contracts, bond
index futures contracts, and foreign currency futures contracts. The Fund may
purchase and sell any of these futures contracts for hedging purposes only and
not for speculation. It may engage in such transactions only if the total
contract value of the futures contracts does not exceed 20% of the Fund's total
assets. In addition, the Fund may invest in forward foreign currency exchange
contracts, options on foreign currencies, 'when-issued' securities and
collateralized mortgage obligations, lend its portfolio securities, and borrow
money for investment purposes (i.e., 'leverage' its portfolio). These investment
techniques are discussed under 'Description of Securities and Investment
Techniques.'

TEMPLETON STOCK FUND

Templeton Stock Fund pursues an investment objective of capital growth through a
policy of investing primarily in common stocks issued by companies, large and
small, in various nations throughout the world. In the pursuit of its investment
objective, the Fund will normally maintain at least 65% of its assets in common
and preferred stocks. The Fund may also invest in securities convertible into
common stocks rated in any category by S&P or Moody's and securities which are
unrated by any rating agency. See the Appendix in the Statement of Additional
Information for a description of the S&P and Moody's ratings. Current income
will usually be a less significant factor in selecting investments for the Fund.

For temporary defensive purposes, the Fund may invest without limit in
commercial paper, certificates of deposit, bankers' acceptances, U.S. Government
securities, corporate debt obligations, and repurchase agreements with respect
to these securities. The Fund may also enter into firm commitment agreements,
purchase securities on a 'when-issued' basis, invest in restricted securities,
such as private placements, and borrow money for investment purposes. (See
'Description of Securities and Investment Techniques.')

The Fund may also purchase and sell stock index futures contracts for
hedging purposes only and not for speculation. It may engage in such
transactions only if the total contract value of the futures contracts does not
exceed 20% of the Fund's total assets. (See 'Description of Securities and
Investment Techniques.')

TEMPLETON ASSET ALLOCATION FUND

Templeton Asset Allocation Fund seeks a high level of total return through a
flexible policy of investing in the following market segments: stocks of
companies in any nation, debt securities of companies and governments of any
nation, and money market instruments such as those in which Templeton Money
Market Fund may invest. The mix of investments
T-10
<PAGE>
among these three market segments will be adjusted in an attempt to capitalize
on total return potential produced by changing economic conditions throughout
the world.

There are no minimum or maximum percentages as to the amount of the Fund's
assets which may be invested in each of the market segments. Except as noted
below and under 'Investment Restrictions' in the Statement of Additional
Information, TICI has complete flexibility in determining the amount and nature
of stock, debt securities, or money market instruments in which the Fund may
invest.

The Fund seeks investment opportunities in all types of securities issued by
companies or governments of any nation. It has the flexibility to invest in
preferred stocks and certain debt securities, rated or unrated, such as
convertible bonds and bonds selling at a discount. The Fund may invest in
collateralized mortgage obligations and restricted securities, lend its
portfolio securities, and borrow money for investment purposes.

The Fund may purchase and sell financial futures contracts, stock index
futures contracts, and foreign currency futures contracts for hedging purposes
only and not for speculation. It may engage in such transactions only if the
total contract value of the futures contracts does not exceed 20% of the Fund's
total assets. The Fund may also invest in forward foreign currency exchange
contracts and options on foreign currencies. (See 'Description of Securities and
Investment Techniques.')

TEMPLETON INTERNATIONAL FUND

Templeton International Fund seeks long-term capital growth through a flexible
policy of investing in stocks and debt obligations of companies and governments
outside the United States. In pursuit of its investment objective, the Fund will
invest at least 65% of its assets in securities of issuers in at least three
countries outside the United States. Any income realized will be incidental.
Although the Fund generally invests in common stock, it may also invest in
preferred stocks and certain debt securities such as convertible bonds which are
rated in any category by S&P or Moody's or which are unrated by any rating
agency. See the Appendix in the Statement of Additional Information for a
description of the S&P and Moody's ratings.

For temporary defensive purposes, the Fund may invest without limit in
commercial paper, certificates of deposit, bank time deposits in the currency of
any nation, bankers' acceptances, U.S. Government securities, corporate debt
obligations, and repurchase agreements with respect to these securities. The
Fund may also enter into firm commitment agreements, purchase securities on a
'when-issued' basis, invest in restricted securities, such as private
placements, and borrow money for investment purposes. (See 'Description of
Securities and Investment Techniques.')

The Fund may purchase and sell financial futures contracts, stock index
futures contracts, and foreign currency futures contracts for hedging purposes
only and not for speculation. It may engage in such transactions only if the
total contract value of the futures contracts does not exceed 20% of the Fund's
total assets. (See 'Description of Securities and Investment Techniques.')

DESCRIPTION OF SECURITIES AND INVESTMENT TECHNIQUES

U.S. GOVERNMENT SECURITIES

Each Fund may invest in U.S. Government securities, which are obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalities. Some
U.S. Government securities, such as Treasury bills and bonds, which are direct
obligations of the U.S. Treasury, and Government National Mortgage Association
('GNMA') certificates, the principal and interest of which the Treasury
guarantees, are supported by the full faith and credit of the Treasury; others,
such as those of Federal Home Loan Banks, are supported by the right of the
issuer to borrow from the Treasury; others, such as those of the Federal
National Mortgage Association, are supported by the discretionary authority of
the U.S. Government to purchase the agency's obligations; still others are
supported only by the credit of the instrumentality. Each Fund may invest in
GNMA certificates, which are securities representing part ownership of a pool of
mortgage loans on which interest and principal payments are guaranteed by the
Treasury. Principal is repaid monthly over the term of the loan. Expected
payments may be delayed due to the delays in registering newly traded
certificates. The mortgage loans will be subject to normal principal
amortization and may be prepaid prior to maturity. Reinvestment of prepayments
may occur at higher or lower rates than the original yield on the certificates.

COLLATERALIZED MORTGAGE OBLIGATIONS ('CMOS')

Templeton Bond and Asset Allocation Funds may invest in CMOs, which are
fixed-income securities collateralized by pools of mortgage loans created by
commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers, and other issuers in the U.S. In effect, CMOs
'pass-through' the monthly payments made by individual borrowers on their
mortgage loans. Timely payment of interest and principal (but not the market
value) of these pools is supported by various forms of insurance or guarantees
issued by U.S. Government agencies, private issuers, and mortgage poolers;
however, the obligation itself is not guaranteed. If the collateral securing the
obligations is insufficient to make payment on the obligation, a holder could
sustain a loss. In addition, Templeton Bond and Asset Allocation Funds may buy
CMOs without insurance or guarantees if, in the opinion of the Investment
Managers, the sponsor is creditworthy. The
T-11
<PAGE>
ratings of the CMOs will be consistent with the ratings criteria of each of the
Funds. Prepayments of the mortgages included in the mortgage pool may influence
the yield of the CMO. Prepayments usually increase when interest rates are
decreasing, thereby decreasing the life of the pool. Reinvestment of prepayments
may be at a lower rate than that on the original CMO. As a result, the value of
CMOs decrease like other debt securities when interest rates rise, but when
interest rates decline, they may not increase as much as other debt securities,
due to the prepayment feature.

BANK OBLIGATIONS

Each Fund may invest in certificates of deposit, which are negotiable
certificates issued against funds deposited in a commercial bank for a definite
period of time and earning a specified return. All Funds except Templeton Asset
Allocation Fund may invest in bankers' acceptances, which are negotiable drafts
or bills of exchange normally drawn by an importer or exporter to pay for
specific merchandise and which are 'accepted' by a bank, meaning, in effect,
that the bank unconditionally agrees to pay the face value of the instrument on
maturity. Each Fund may invest in dollar-denominated certificates of deposit and
bankers' acceptances of foreign and domestic banks having total assets in excess
of $1 billion. Each Fund may also invest in certificates of deposit of federally
insured savings and loan associations having total assets in excess of $1
billion. Templeton Asset Allocation and International Funds may hold cash and
time deposits with banks in the currency of any major nation.

COMMERCIAL PAPER

Each Fund may invest in commercial paper. Investments in commercial paper are
limited to obligations rated Prime-1 or Prime-2 by Moody's or A-1 or A-2 by S&P
or, if not rated by Moody's or S&P, issued by companies having an outstanding
debt issue currently rated Aaa or Aa by Moody's or AAA or AA by S&P. See the
Appendix in the Statement of Additional Information for a description of these
ratings.

DEBT SECURITIES

Debt securities in which a Fund may invest consistent with its investment
objective and policies may include many types of debt obligations of both
domestic and foreign issuers such as bonds, debentures, notes, commercial paper,
and obligations issued or guaranteed by governments or government agencies or
instrumentalities. The market value of debt securities generally varies in
response to changes in interest rates and the financial condition of each
issuer. During periods of declining interest rates, the value of debt securities
generally increases. Conversely, during periods of rising interest rates, the
value of such securities generally declines. These changes in market value will
be reflected in a Fund's net asset value.

As an operating policy, which may be changed by the Board of Trustees
without shareholder approval, Templeton Stock, Asset Allocation and
International Funds will not invest more than 5% of each Fund's total assets in
debt securities rated below BBB by S&P or Baa by Moody's. Templeton Bond and
Asset Allocation Funds may invest in medium and lower quality debt securities
that are rated between BBB and as low as CC by S&P, and between Baa and as low
as Ca by Moody's or, if unrated, are of equivalent investment quality as
determined by the Investment Manager. Bonds rated BB or lower are predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal in accordance with the terms of the obligation and may be in default.
Issues of bonds rated Ca may often be in default. The Board may consider a
change in this operating policy if, in its judgment, economic conditions change
such that a higher level of investment in high risk, lower quality debt
securities would be consistent with the interests of the Fund and its
Shareholders. High risk, lower quality debt securities, commonly referred to as
'junk bonds,' are regarded, on balance, as predominantly speculative with
respect to the issuer's capacity to pay interest and repay principal and may be
in default. Regardless of rating levels, all debt securities considered for
purchase (whether rated or unrated) will be carefully analyzed by a Fund's
Investment Manager to insure, to the extent possible, that the planned
investment is sound. For temporary defensive purposes, Templeton Stock and
International Funds may invest in short-term corporate debt obligations
similarly rated. Unrated debt securities are not necessarily of lower quality
than rated securities but they may not be attractive to as many buyers.
Templeton Bond and Asset Allocation Funds may, from time to time, purchase
defaulted debt securities if, in the opinion of the Investment Managers, the
issuer may resume interest payments in the near future. Neither of these Funds
will invest more than 10% of its total assets in defaulted debt securities.

Debt securities with similar maturities may have different yields, depending
upon several factors, including the relative financial condition of the issuers.
For example, higher yields are generally available from securities in the lower
rating categories of S&P or Moody's. However, the values of lower rated
securities generally fluctuate more than those of higher rated securities. As a
result, lower rated securities involve greater risk of loss of income and
principal than higher rated securities. A full discussion of the risks of
investing in lower quality debt securities is contained under the caption 'Risk
Factors.'

REPURCHASE AGREEMENTS

Each Fund may invest in repurchase agreements. When a Fund acquires a security
from a bank or a registered broker-dealer, it may simultaneously enter into a
repurchase agreement, wherein the seller agrees to repurchase the security at a
specified time and price. The repurchase price is in excess of the purchase
price by an amount which reflects an agreed upon rate of return, which is not
tied to the coupon rate on the underlying security. The term of such an
agreement is generally quite
T-12
<PAGE>
short, possibly overnight or for a few days, although it may extend over a
number of months (up to one year) from the date of delivery. Repurchase
agreements will be fully collateralized. However, if the seller should default
on its obligation to repurchase the underlying security, a Fund may experience
delay or difficulty in exercising its rights to realize upon the security and
might incur a loss if the value of the security should decline, as well as incur
disposition costs in liquidating the security. Securities subject to repurchase
agreements will be held in a segregated account. The Investment Managers will
monitor the value of the collateral to ensure it always equals or exceeds the
repurchase price.

BORROWING

Templeton Money Market Fund may borrow up to 5% of its total assets for
temporary or emergency purposes. In addition, Templeton Bond, Stock, Asset
Allocation, and International Funds may borrow up to 30% of the value of their
net assets to increase their holdings of portfolio securities. Under the 1940
Act, the Funds may borrow from banks only, and are required to maintain
continuous asset coverage of 300% with respect to such borrowings and to sell
(within three days) sufficient portfolio holdings to restore such coverage if it
should decline to less than 300% due to market fluctuations or otherwise, even
if disadvantageous from an investment standpoint. Leveraging by means of
borrowing will exaggerate the effect of any increase or decrease in the value of
portfolio securities on a Fund's net asset value, and money borrowed will be
subject to interest and other costs (which may include commitment fees and/or
the cost of maintaining minimum average balances) which may or may not exceed
the income received from the securities purchased with borrowed funds.

WHEN-ISSUED SECURITIES

Each Fund may purchase securities on a 'when-issued' basis. New issues of
certain debt securities are often offered on a when-issued basis, that is, the
payment obligation and the interest rate are fixed at the time the buyer enters
into the commitment, but delivery and payment for the securities normally takes
place after the date of the commitment to purchase. The value of when-issued
securities may vary prior to and after delivery depending on market conditions
and changes in interest rate levels. However, a Fund will not accrue any income
on these securities prior to delivery. A Fund will maintain in a segregated
account with its Custodian an amount of cash or high quality debt securities
equal (on a daily marked-to-market basis) to the amount of its commitment to
purchase the when-issued securities.

LOANS OF PORTFOLIO SECURITIES

Each Fund may lend to broker-dealers or U.S. banks portfolio securities with an
aggregate market value of up to one-third of its total assets. Such loans must
be secured by collateral (consisting of any combination of cash, U.S. Government
securities, or irrevocable letters of credit) in an amount at least equal (on a
daily marked-to-market basis) to the current market value of the securities
loaned. A Fund may terminate the loans at any time and obtain the return of the
securities loaned within five business days. A Fund will continue to receive any
interest or dividends paid on the loaned securities and will continue to have
voting rights with respect to the securities. It should be noted that in
connection with the lending of its portfolio securities, the Funds are exposed
to the risk of delay in recovery of the securities loaned or possible loss of
rights in the collateral should the borrower become insolvent. In determining
whether to lend securities, the Investment Managers will consider all relevant
facts and circumstances including the creditworthiness of the borrower.

RESTRICTED SECURITIES

Templeton Stock, Asset Allocation, and International Funds may invest in
restricted securities, which are securities subject to legal or contractual
restrictions on their resale, such as private placements. Such restrictions
might prevent the sale of restricted securities at a time when sale would
otherwise be desirable. No restricted securities and no securities for which
there is not a readily available market ('illiquid assets') will be acquired by
the Funds if such acquisition would cause the aggregate value of illiquid assets
and restricted securities to exceed 10% of the Fund's total assets. Restricted
securities may be sold only in privately negotiated transactions or in a public
offering with respect to which a registration statement is in effect under the
Securities Act of 1933. Where registration is required, the Funds may be
obligated to pay all or part of the registration expenses and a considerable
period may elapse between the time of the decision to sell and the time the
Funds may be permitted to sell a security under an effective registration
statement. If, during such a period, adverse market conditions were to develop,
the Funds might obtain a less favorable price than prevailed when it decided to
sell. Restricted securities will be priced at fair value as determined by the
management and approved in good faith by the Board of Trustees.

FOREIGN SECURITIES

Templeton Bond, Stock, Asset Allocation, and International Funds have an
unlimited right to purchase securities in any foreign country, developed or
underdeveloped, if they are listed on an exchange, as well as a limited right to
purchase such securities if they are unlisted. (See 'Risk Factors.') Templeton
Money Market Fund may invest in dollar-denominated obligations of foreign
branches of domestic banks ('Eurodollar obligations') and dollar-denominated
obligations of domestic branches of foreign banks ('Yankee obligations').

DEPOSITARY RECEIPTS

Templeton Bond, Stock, Asset Allocation and International Funds may purchase
sponsored or unsponsored American Depositary Receipts ('ADRs'), European
Depositary Receipts ('EDRs') and Global Depositary Receipts ('GDRs')
T-13
<PAGE>
(collectively, 'Depositary Receipts'). ADRs are Depositary Receipts typically
issued by a U.S. bank or trust company which evidence ownership of underlying
securities issued by a foreign corporation. EDRs and GDRs are typically issued
by foreign banks or trust companies, although they also may be issued by U.S.
banks or trust companies, and evidence ownership of underlying securities issued
by either a foreign or a United States corporation. Generally, Depositary
Receipts in registered form are designed for use in the U.S. securities market
and Depositary Receipts in bearer form are designed for use in securities
markets outside the United States. Depositary Receipts may not necessarily be
denominated in the same currency as the underlying securities into which they
may be converted. Depositary Receipts may be issued pursuant to sponsored or
unsponsored programs. In sponsored programs, an issuer has made arrangements to
have its securities traded in the form of Depositary Receipts. In unsponsored
programs, the issuer may not be directly involved in the creation of the
program. Although regulatory requirements with respect to sponsored and
unsponsored programs are generally similar, in some cases it may be easier to
obtain financial information from an issuer that has participated in the
creation of a sponsored program. Accordingly, there may be less information
available regarding issuers of securities underlying unsponsored programs and
there may not be a correlation between such information and the market value of
the Depositary Receipts. Depositary Receipts also involve the risks of other
investments in foreign securities, as discussed below. For purposes of each
Fund's investment policies, a Fund's investments in Depositary Receipts will be
deemed to be investments in the underlying securities.

EURODOLLAR AND YANKEE OBLIGATIONS

Templeton Money Market Fund may invest in dollar-denominated obligations of
foreign branches of domestic banks ('Eurodollar obligations') and
dollar-denominated obligations of domestic branches of foreign banks ('Yankee
obligations'). These investments may involve risks that are different in some
r
espects from investments in obligations of domestic branches of domestic banks.
Such investment risks may include future political and economic developments,
the possible imposition of withholding taxes on interest income payable on the
Eurodollar and Yankee obligations held by the Fund, possible seizure or
nationalization, and the possible establishment of exchange controls or the
adoption of other foreign government laws and restrictions applicable to the
payment of Eurodollar and Yankee obligations which might adversely affect the
payment of principal and interest.

FUTURES CONTRACTS

For hedging purposes only, Templeton Bond, Asset Allocation, and International
Funds may buy and sell financial futures contracts and foreign currency futures
contracts. Also, for hedging purposes only, Templeton Stock, Asset Allocation,
and International Funds may purchase and sell stock index futures contracts, and
Templeton Bond Fund may purchase and sell bond index futures contracts. A
financial futures contract is an agreement between two parties to buy or sell a
specified debt security at a set price on a future date. An index futures
contract is an agreement to take or make delivery of an amount of cash based on
the difference between the value of the index at the beginning and at the end of
the contract period. A futures contract on a foreign currency is an agreement to
buy or sell a specified amount of a currency for a set price on a future date.

When a Fund enters into a futures contract, it must make an initial deposit,
known as 'initial margin,' as a partial guarantee of its performance under the
contract. As the value of the security, index or currency fluctuates, either
party to the contract is required to make additional margin payments, known as
'variation margin,' to cover any additional obligation it may have under the
contract. A Fund may not commit more than 5% of its total assets to initial
margin deposits on futures contracts. In addition, a Fund must deposit in a
segregated account additional cash or high quality debt securities to ensure the
futures contracts are unleveraged. The value of assets held in the segregated
account must be equal to the daily market value of all outstanding futures
contracts less any amounts deposited as margin.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS AND OPTIONS ON FOREIGN CURRENCIES.

Templeton Bond Fund and Templeton Asset Allocation Fund may enter into forward
foreign currency exchange contracts ('forward contracts') to attempt to minimize
the risk to a Fund from adverse changes in the relationship between the U.S.
dollar and foreign currencies. A forward contract is an obligation to purchase
or sell a specific currency for an agreed price at a future date which is
individually negotiated and privately traded by currency traders and their
customers. A Fund may enter into a forward contract, for example, when it enters
into a contract for the purchase or sale of a security denominated in a foreign
currency in order to 'lock in' the U.S. dollar price of the security or, when
the Investment Manager believes that the currency of a particular foreign
country may suffer or enjoy a substantial movement against another currency, it
may enter into a forward contract to sell or buy the former foreign currency (or
another currency which acts as a proxy for that currency) approximating the
value of some or all of the Fund's portfolio securities denominated in such
foreign currency. This later investment practice is generally referred to as
'cross-hedging.' The Funds have no specific limitation on the percentage of
assets they may commit to foreign contracts, except that a Fund will not enter
into a forward contract if the amount of assets set aside to cover the contract
would impede portfolio management or the Fund's ability to meet redemption
requests. A Fund may also purchase and write put and call options on foreign
currencies for the purpose of protecting against declines in the dollar value of
foreign portfolio securities and against increases in the U.S. dollar cost of
foreign securities to be acquired.

T-14
<PAGE>
RISK FACTORS

Shareholders should understand that all investments involve risk and there can
be no guarantee against loss resulting from an investment in the Funds; nor can
there be any assurance that the Funds' investment objectives will be attained.
As with any investment in securities, the value of, and income from, an
investment in the Funds can decrease as well as increase, depending on a variety
of factors which may affect the values and income generated by the Funds'
portfolio securities, including general economic conditions and market factors.
In addition to the factors which affect the value of individual securities, a
Shareholder may anticipate that the value of the Shares of the Funds will
fluctuate with movements in the broader equity and bond markets, as well. A
decline in the stock market of any country in which a Fund is invested may also
be reflected in declines in the price of the Shares of the Fund. Changes in
interest rates will affect the value of a Fund's portfolio and thus its share
price. Increased rates of interest which frequently accompany inflation and/or a
growing economy are likely to have a negative effect on the value of a Fund's
Shares. Changes in currency valuations will also affect the price of the Shares
of a Fund. History reflects both decreases and increases in worldwide stock
markets, the prevailing rate of interest, and currency valuations, and these may
reoccur unpredictably in the future. Additionally, investment decisions made by
the Investment Managers will not always be profitable or prove to have been
correct. The Funds are not intended as a complete investment program.

Templeton Bond, Stock, Asset Allocation, and International Funds have an
unlimited right to purchase securities in any foreign country, developed or
underdeveloped. An investor should consider carefully the risks involved in
investing in securities issued by companies and governments of foreign nations,
which are in addition to the usual risks inherent in domestic investments. There
is the possibility of expropriation, nationalization or confiscatory taxation,
taxation of income earned in foreign nations (including withholding taxes) or
other taxes imposed with respect to investments in foreign nations, foreign
exchange controls (which may include suspension of the ability to transfer
currency from a given country), default in foreign government securities,
political or social instability or diplomatic developments which could affect
investments in securities of issuers in foreign nations. Also, some countries
may withhold portions of interest and dividends at the source. These
considerations generally are more of a concern in developing countries, where
the possibility of political instability (including revolution) and dependence
on foreign economic assistance may be greater than in developed countries.
Investments in companies domiciled in developing countries therefore may be
subject to potentially higher risks than investments in developed countries.

In many countries there is less publicly available information about issuers
than is available in reports about companies in the United States. Foreign
companies are not generally subject to uniform accounting and auditing and
financial reporting standards, and auditing practices and requirements may not
be comparable to those applicable to United States companies. It may be more
difficult to pursue legal remedies and obtain judgments in foreign courts.
Commission rates in foreign countries, which are generally fixed rather than
subject to negotiation as in the United States, are likely to be higher. Foreign
securities markets also have different clearance and settlement procedures, and
in certain markets there have been times when settlements have been unable to
keep pace with the volume of securities transactions, making it difficult to
conduct such transactions. Delays in settlement could result in temporary
periods when assets of the Funds are uninvested and no return is earned thereon.
The inability of a Fund to make intended security purchases due to settlement
problems could cause the Fund to miss attractive investment opportunities.
Inability to dispose of portfolio securities due to settlement problems could
result either in losses to the Fund due to subsequent declines in value of the
portfolio security or, if a Fund has entered into a contract to sell the
security, could result in possible liability to the purchaser. In many foreign
countries there is less government supervision and regulation of business and
industry practices, stock exchanges, brokers and listed companies than in the
United States. The foreign securities markets of any of the countries in which a
Fund may invest may also be smaller, less liquid, and subject to greater price
volatility than those in the United States. Certain Funds may invest in Eastern
European countries, which involves special risks that are described under
'Investment Objectives and Policies--Risk Factors' in the SAI.

Although they may offer higher yields than do higher rated securities, low
rated and unrated securities generally involve greater volatility of price and
risk of principal and income, including the possibility of default by, or
bankruptcy of, the issuers of the securities. In addition, the markets in which
low rated and unrated securities are traded are more limited than those in which
higher rated securities are traded. The existence of limited markets for
particular securities may diminish a Fund's ability to sell the securities at
fair value either to meet redemption requests or to respond to a specific
economic event such as a deterioration in creditworthiness of the issuer.
Reduced secondary market liquidity for certain low rated or unrated debt
securities may also make it more difficult for a Fund to obtain accurate market
quotations for the purpose of valuing the Fund's portfolio. Market quotations
are generally available on many low rated or unrated securities only from a
limited number of dealers and may not necessarily represent firm bids of such
dealers or prices for actual sales.

Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the values and liquidity of low rated
securities, especially in a thinly traded market. Analysis of the
creditworthiness of issuers of debt securities that are low rated securities may
be more complex than for issuers of higher rated securities, and the ability of
a Fund to achieve its investment objective may, to the extent of investment in
low rated securities, be more dependent upon such creditworthiness analysis than
would be the case if the Fund were investing in higher rated securities.

T-15
<PAGE>
Low rated securities may be more susceptible to real or perceived adverse
economic and competitive industry conditions than investment grade securities.
The prices of low rated securities have been found to be less sensitive to
interest rate changes than higher rated investments, but more sensitive to
adverse economic downturns or individual corporate developments. A projection of
an economic downturn or of a period of rising interest rates, for example, could
cause a decline in low rated securities prices because the advent of a recession
could lessen the ability of a highly leveraged company to make principal and
interest payments on its debt securities. If the issuer of low rated securities
defaults, a Fund may incur additional expenses to seek recovery. The low rated
bond market is relatively new, and many of the outstanding low rated bonds have
not endured a major business recession.

The Funds will usually effect currency exchange transactions on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign exchange market.
However, some price spread on currency exchange (to cover service charges) will
be incurred when a Fund converts assets from one currency to another.

Successful use of forward contracts, options and futures contracts are
subject to special risk considerations and transaction costs. A liquid secondary
market for forward contracts, options and futures contracts may not be available
when a position is sought to be closed. In addition, there may be an imperfect
correlation between movements in the securities or foreign currency on which the
contract or option is based and movements in the securities or currency in a
Fund's portfolio. Successful use of forward contracts, options and futures
contracts is further dependent on the ability of a Fund's Investment Manager to
correctly predict movements in the securities or foreign currency markets and no
assurance can be given that its judgment will be correct.

PURCHASE OF SHARES

Shares of the Funds are offered on a continuous basis at the respective net
asset value of each Fund only to separate accounts of insurance companies to
serve as the underlying investment vehicle for both variable annuity and
variable life insurance contracts. Individuals may not purchase shares directly
from the Funds. Please read the prospectus of the insurance company Separate
Account for more information on the purchase of Fund Shares.

In the event that the Trust serves as investment vehicle for both variable
annuity and variable life insurance contracts, or for both variable life
insurance contracts of an insurer and other variable contracts of an
unaffiliated insurer, the Trust's Board of Trustees will monitor events in order
to identify any material conflicts between variable annuity contract owners and
variable life policy owners and/or between separate accounts of different
insurers, as the case may be, and will determine what action, if any, should be
taken in the event of such a conflict. Although the Trust does not currently
foresee any disadvantages to contract owners, an irreconcilable material
conflict may conceivably arise between contract owners of different separate
accounts investing in the Trust due to differences in tax treatment, the
management of investments, or other considerations.

NET ASSET VALUE

The net asset value of the Shares of each Fund is determined as of the scheduled
closing time of the New York Stock Exchange (NYSE) (generally 4:00 p.m., New
York time) on each day the NYSE is open for trading. The net asset value of the
Shares of Templeton Bond, Stock, Asset Allocation, and International Funds is
computed by dividing the value of the Fund's securities plus any cash and other
assets (including accrued interest and dividends receivable) less all
liabilities (including accrued expenses) by the number of shares outstanding,
adjusted to the nearest whole cent. A security listed or traded on a recognized
stock exchange or NASDAQ is valued at its last sale price on the principal
exchange on which the security is traded. The value of a foreign security is
determined in its national currency as of the close of trading on the foreign
exchange on which it is traded, or as of the scheduled closing time of the NYSE
(generally 4:00 p.m., New York time), if that is earlier, and that value is then
converted into its U.S. dollar equivalent at foreign exchange rates in effect at
noon, New York time, on the day the value of the foreign security is determined.
If no sale is reported at that time, the mean between the current bid and asked
price is used. Occasionally, events which affect the values of such securities
and such exchanges rates may occur between the times at which they are
determined and the close of the NYSE, and will therefore not be reflected in the
computation of each Fund's net asset value. If events materially affecting the
value of such securities occur during such period, then these securities will be
valued at fair value as determined by the management and approved in good faith
by the Board of Trustees. All other securities for which over-the-counter market
quotations are readily available are valued at the mean between the current bid
and asked price. Securities for which market quotations are not readily
available and other assets are valued at fair value as determined by the
management and approved in good faith by the Board of Trustees.

Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed well before the close of business
in New York on each day on which the NYSE is open. Trading in European or Far
Eastern securities generally, or in a particular country or countries, may not
take place on every New York business day. Furthermore, trading takes place in
various foreign markets on days which are not business days in New York and on
which the Fund's net asset value is not calculated. Each Fund calculates net
asset value per Share, and therefore effects sales and redemptions of its
Shares, as of the close of the NYSE once on each day on which the NYSE is open.
Such calculation does not take place contemporaneously with the determination of
the prices of many of the portfolio securities used in such
T-16
<PAGE>
calculation and if events occur which materially affect the value of these
foreign securities, they will be valued at fair market value as determined by
the management and approved in good faith by the Board of Trustees.

Templeton Money Market Fund uses the amortized cost method to determine the
value of its portfolio securities. This method involves valuing a security at
cost and then assuming a constant accretion of discount or premium over the
period until maturity, regardless of the impact of fluctuating interest rates on
the market value of the security. The Fund intends to use its best efforts to
maintain its net asset value at $1.00 per Share, although there can be no
assurance that this will be achieved. See 'Purchase and Redemption of Shares;
Net Asset Value' in the Statement of Additional Information for a description of
certain conditions and procedures followed by the Fund in connection with
amortized cost valuation.

REDEMPTION OF SHARES

The Trust will redeem all full and fractional Shares presented for redemption on
any business day. Redemptions are effected at the per Share net asset value next
determined after receipt of proper notice of the redemption. Redemption proceeds
normally will be paid to the insurance company within seven days following
receipt of instructions in proper form. The right of redemption may be suspended
by the Trust when the NYSE is closed (other than customary weekend and holiday
closings) or for any period during which trading thereon is restricted because
an emergency exists, as determined by the Securities and Exchange Commission,
making disposal of portfolio securities or valuation of net assets not
reasonably practicable, and whenever the Securities and Exchange Commission has
by order permitted such suspension or postponement for the protection of
shareholders. The Trust will redeem Shares of each Fund solely in cash up to the
lesser of $250,000 or 1% of its net assets during any 90-day period for any one
Shareholder. In consideration of the best interests of the remaining
Shareholders, the Trust reserves the right to pay any redemption price exceeding
this amount in whole or in part by a distribution in kind of securities held by
the Fund in lieu of cash. It is highly unlikely that Shares would ever be
redeemed in kind. If Shares are redeemed in kind, however, the redeeming
Shareholder should expect to incur transaction costs upon the disposition of the
securities received in the distribution.

Please refer to the prospectus of your insurance company's Separate Account
for information on how to redeem from each Fund.

EXCHANGES

Shares of any one Fund may be exchanged for Shares of any other Fund available
as an investment option in a Separate Account. Exchanges are treated as a
redemption of Shares of one Fund and a purchase of Shares of the other Fund and
are effected at the respective net asset value per Share of each Fund on the
date of the exchange. Please refer to the prospectus of your insurance company's
Separate Account for more information concerning exchanges.

MANAGEMENT OF THE TRUST

The Trust is managed by its Board of Trustees and all powers of the Trust are
exercised by or under authority of the Board. Information relating to the
Trustees and Officers is set forth under the heading 'Management of the Trust'
in the Statement of Additional Information.

INVESTMENT MANAGERS

The Investment Manager of Templeton Stock Fund, Templeton Asset Allocation Fund
and Templeton International Fund is Templeton Investment Counsel, Inc. ('TICI').
The Investment Manager of Templeton Bond Fund and Templeton Money Market Fund is
Templeton Global Bond Managers, a division of TICI. TICI is a Florida
corporation with offices at Broward Financial Centre, Fort Lauderdale, Florida
33394-3091. The Investment Managers manage the investment and reinvestment of
the Fund's assets. TICI is an indirect wholly owned subsidiary of Franklin
Resources, Inc. ('Franklin'). Through its subsidiaries, Franklin is engaged in
various aspects of the financial services industry. The Investment Managers and
their affiliates serve as advisers for a wide variety of public investment
mutual funds and private clients in many nations. The Templeton organization has
been investing globally over the past 52 years and, with its affiliates,
provides investment management and advisory services to a worldwide client base,
including over 4.3 million mutual fund shareholders, foundations, endowments,
employee benefit plans and individuals. The Investment Managers and their
affiliates have approximately 4,100 employees in ten different countries,
including the United States, Australia, Scotland, Germany, Hong Kong,
Luxembourg, Bahamas, Singapore, Canada and Russia.

The Investment Managers use a disciplined, long-term approach to value
oriented global and international investing. They have an extensive global
network of investment research sources. Securities are selected for each Fund's
portfolio on the basis of fundamental company-by-company analysis. Many
different selection methods are used for different funds and clients and these
methods are changed and improved by the Investment Managers' research on
superior selection methods.

The Investment Managers do not furnish any other services or facilities for
the Funds, although such expenses are paid by some investment advisers of other
investment companies. As compensation for these services, each Fund pays its
respective Investment Manager a fee which, during the most recent fiscal year,
represented the following percentage of its
T-17
<PAGE>
average daily net assets: Templeton Money Market Fund, 0.35%; Templeton Bond
Fund, 0.50%; Templeton Stock Fund, 0.50%; Templeton Asset Allocation Fund,
0.50%; and Templeton International Fund, 0.50%.

Currently, the lead portfolio manager of Templeton Bond Fund and the fixed
income portion of the Templeton Asset Allocation Fund is Thomas Latta, Vice
President of TGBM. Mr. Latta joined the Templeton organization in 1991. He is
the senior portfolio manager for developed markets fixed income and has research
responsibilities for the core European markets. Mr. Latta is also responsible
for internal fixed income systems development. Mr. Latta began working in the
securities industry in 1981. His experience includes seven years with Merrill
Lynch where he was part of an investment team to the Saudi Arabian Monetary
Authority in Riyadh, Saudi Arabia. While at Merrill Lynch, Mr. Latta also acted
as an advisor to investment managers concerning the modeling and application of
interest rate strategies in fixed income portfolios. Neil Devlin and Tom
Wilkinson exercise secondary portfolio management responsibilities with respect
to Bond Fund and the fixed income portion of the Asset Allocation Fund. Mr.
Devlin, Executive Vice President of Templeton Global Bond Managers division of
the Investment Manager, joined the Templeton organization in 1987. Prior to that
time, he was a portfolio manager and bond analyst with Constitutional Capital
Management of Boston, where he managed a portion of the Bank of New England's
pension money, a number of trust and corporate pension accounts, and began and
managed a mortgage-backed securities fund for the Bank. Before that, Mr. Devlin
was a bond trader and research analyst for the Bank of New England. Mr.
Wilkinson, Vice President of TGBM, joined the Templeton organization in 1985 and
is the senior portfolio manager for Franklin Templeton's emerging markets fixed
income group with research responsibilities covering East Asia.

The lead portfolio manager for Templeton Stock Fund, Templeton International
Fund and the equity portion of the Templeton Asset Allocation Fund is Daniel L.
Jacobs. Mr. Jacobs joined the Templeton organization in 1984 as portfolio
manager and security analyst and is Senior Vice President of TICI. Prior to
joining the Templeton organization, Mr. Jacobs was with the First National Bank
of Atlanta for eight years, where he was vice president and portfolio manager in
the Institutional Investment Group. His responsibilities included the management
of institutional accounts and international equity portfolios. Lauretta A.
Reeves, Vice President of TICI, and Peter Nori, Research Analyst for TICI,
exercise secondary portfolio management responsibilities for Templeton Stock
Fund, Templeton International Fund and the equity portion of the Templeton Asset
Allocation Fund. Ms. Reeves joined the Templeton organization in 1987 as an
equity trader and moved into the research group in 1989. Prior to joining the
Templeton organization, Ms. Reeves was manager of equity trading for the First
Equity Corporation of Florida, a regional brokerage firm. Previously, she worked
in similar trading positions with two other brokerage houses. Prior to joining
the Templeton organization, Mr. Nori was co-portfolio manager of Franklin
Convertible Securities Fund.

Further information concerning the Investment Managers, including the
services they render and their selection of brokers to execute portfolio
transactions, is included under the heading 'Investment Management and Other
Services' in the Statement of Additional Information.

BUSINESS MANAGER

Templeton Funds Annuity Company, P.O. Box 33030, St. Petersburg, Florida
33733-8030, telephone (800) 774-5001 or (813) 823-8712, provides certain
administrative facilities and services for the Trust, including payment of
salaries of officers, preparation and maintenance of books and records, daily
pricing of each Fund's investment portfolio, preparation of tax reports,
preparation of financial reports, and monitoring compliance with regulatory
requirements. For its services, the Business Manager receives a fee equivalent
on an annual basis to 0.15% of the combined average daily net assets of the
Funds, reduced to 0.135% of such assets in excess of $200,000,000, to 0.10% of
such assets in excess of $700,000,000, and to 0.075% of such assets in excess of
$1,200,000,000.

EXPENSES

During the fiscal year ended December 31, 1994, expenses amounted to the
following percentage of each Fund's average daily net assets: Templeton Money
Market Fund, 0.71%; Templeton Bond Fund, 0.90%; Templeton Stock Fund, 0.73%;
Templeton Asset Allocation Fund, 0.75%; and Templeton International Fund, 0.83%.

DISTRIBUTOR

Shares of the Trust are distributed through Franklin Templeton Distributors,
Inc., P.O. Box 33030, St. Petersburg, Florida 33733-8030, toll free telephone
(800) 292-9293.

BROKERAGE COMMISSIONS

The Trust's brokerage policies are described under the heading 'Brokerage
Allocation' in the Statement of Additional Information. The Trust's brokerage
policies provide that the receipt of research services from a broker is a factor
which may be taken into account in allocating securities transactions as long as
the prices and execution provided by the broker equal the best available within
the scope of the Trust's brokerage policies.

T-18
<PAGE>
DIVIDENDS AND DISTRIBUTIONS

Templeton Money Market Fund's net investment income (consisting principally of
interest accrued or discount earned less amortization of premium and estimated
expenses) is declared as a dividend daily, including weekends and holidays,
immediately prior to the determination of net asset value, and is paid monthly.
Templeton Bond, Stock, Asset Allocation, and International Funds normally intend
to pay annual dividends representing substantially all of their net investment
income and to distribute annually any net realized capital gains.

Any distributions made by any Fund will be automatically reinvested in
additional Shares of that Fund, unless an election is made on behalf of a
Shareholder to receive distributions in cash. Dividends or distributions by a
Fund other than Templeton Money Market Fund will reduce the per share net asset
value by the per share amount so paid.

FEDERAL INCOME TAX STATUS

Each Fund intends to qualify each year as a regulated investment company under
Subchapter M of the Internal Revenue Code (the 'Code'). A Fund so qualifying
generally will not be subject to federal income taxes on amounts distributed to
Shareholders. In order to qualify as a regulated investment company, a Fund
must, among other things, meet certain source of income requirements. In
addition, each Fund must diversify its holdings so that, at the end of each
quarter of the taxable year, (a) at least 50% of the market value of the Fund's
assets is represented by cash, U.S. Government securities, the securities of
other regulated investment companies and other securities, with such other
securities of any one issuer limited for the purposes of this calculation to an
amount not greater than 5% of the value of the Fund's total assets and 10% of
the outstanding voting securities of such issuer, and (b) not more than 25% of
the value of its total assets is invested in the securities of any one issuer
(other than U.S. Government securities or the securities of other regulated
investment companies).

Amounts not distributed by a Fund on a timely basis in accordance with a
calendar year distribution requirement are subject to a nondeductible 4% excise
tax. See the Statement of Additional Information for more information about this
tax and its applicability to the Funds.

Distributions of any net investment income and of any net realized
short-term capital gains in excess of net realized long-term capital losses are
treated as ordinary income for tax purposes in the hands of the Shareholder (the
Separate Account). The excess of any net long-term capital gains over net
short-term capital losses will, to the extent distributed and designated by a
Fund as a capital gain dividend, be treated as long-term capital gains in the
hands of the Separate Account regardless of the length of time the Separate
Account may have held the Shares. Any distributions that are not from a Fund's
investment company taxable income or net capital gain may be characterized as a
return of capital to shareholders or, in some cases, as capital gain. Reference
is made to the Prospectus for the applicable Contract for information regarding
the federal income tax treatment of distributions to an owner of a Contract.

To comply with regulations under Section 817(h) of the Code each Fund is
required to diversify its investments so that on the last day of each quarter of
a calendar year no more than 55% of the value of its assets is represented by
any one investment, no more than 70% is represented by any two investments, no
more than 80% is represented by any three investments, and no more than 90% is
represented by any four investments. Generally, all securities of the same
issuer are treated as a single investment. For this purpose, in the case of U.S.
Government securities, each U.S. Government agency or instrumentality is treated
as a separate issuer. Any securities issued, guaranteed, or insured (to the
extent so guaranteed or insured) by the U.S. Government or an instrumentality of
the U.S. Government are treated as a U.S. Government security for this purpose.

The Treasury Department has indicated that it may issue future
pronouncements addressing the circumstances in which a variable contract owner's
control of the investments of a separate account may cause the contract owner,
rather than the insurance company, to be treated as the owner of the assets held
by the separate account. If the contract owner is considered the owner of the
securities underlying the separate account, income and gains produced by those
securities would be included currently in the contract owner's gross income. It
is not known what standards will be set forth in such pronouncements or when, if
at all, these pronouncements may be issued.

In the event that rules or regulations are adopted, there can be no
assurance that the Funds will be able to operate as currently described in the
Prospectus, or that the Trust will not have to change any Fund's investment
objective or investment policies. While each Fund's investment objective is
fundamental and may be changed only by a vote of a majority of its outstanding
Shares, the Trustees have reserved the right to modify the investment policies
of the Funds as necessary to prevent any such prospective rules and regulations
from causing the contract owners to be considered the owners of the Shares of
the Funds underlying the Separate Account.

OTHER INFORMATION

CAPITALIZATION

The Trust was organized as a Massachusetts business trust on February 25, 1988
and currently consists of five separately managed Funds. The Board of Trustees
may establish additional Funds in the future. The capitalization of the Trust
consists
T-19
<PAGE>
solely of an unlimited number of Shares of beneficial interest with a par value
of $0.01 each. When issued, Shares of the Trust are fully paid, non-assessable
by the Trust and freely transferable.

Unlike the stockholder of a corporation, Shareholders could under certain
circumstances be held personally liable for the obligations of the Trust.
However, the Declaration of Trust disclaims liability of the Shareholders,
Trustees or officers of the Trust for acts or obligations of the Trust which are
binding only on the assets and property of the Trust. The Declaration of Trust
provides for indemnification out of Trust property for all loss and expense of
any Shareholder held personally liable for the obligations of the Trust. The
risk of a Shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which the Trust itself would be unable
to meet its obligations and thus should be considered remote.

VOTING RIGHTS

Shareholders of the Trust are given certain voting rights. Each Share of each
Fund will be given one vote, unless a different allocation of voting rights is
required under applicable law for a mutual fund that is an investment medium for
variable life insurance or annuity contracts. In accordance with current
applicable law, the Separate Account, as Shareholder of the Trust, is required
to vote the Shares of the Trust at any regular and special meeting of the
Shareholders of the Trust in accordance with instructions received from owners
of the variable contracts. See the Prospectus for the Variable Contract for more
information regarding the pass-through of these voting rights.

Massachusetts business trust law does not require the Trust to hold annual
shareholder meetings, although special meetings may be called for a specific
Fund, or for the Trust as a whole, for purposes such as electing or removing
Trustees, changing fundamental policies or approving an investment management
contract. In addition, the Trust will be required to hold a meeting to elect
Trustees to fill any existing vacancies on the Board if, at any time, fewer than
a majority of the Trustees have been elected by the Shareholders of the Trust.
In addition, the holders of not less than two-thirds of the outstanding Shares
or other voting interests of the Trust may remove a person serving as Trustee
either by declaration in writing or at a meeting called for such purpose. The
Trustees are required to call a meeting for the purpose of considering the
removal of a person serving as trustee, if requested in writing to do so by the
holders of not less than 10% of the outstanding Shares or other voting interests
of the Trust. The Trust is required to assist in Shareholders' communications.
In accordance with current laws, an insurance company issuing a variable life
insurance or annuity contract that participates in the Trust will request voting
instructions from contract owners and will vote Shares or other voting interests
in the separate account in proportion to the voting instructions received.

For more information on the Trust, the Funds, and their investment activity
and concurrent risks, a Statement of Additional Information may be obtained
without charge upon request to Franklin Templeton Distributors, Inc., P.O. Box
33030, St. Petersburg, Florida, 33733-8030 -- toll free telephone (800) 774-5001
or (813) 823-8712.

PERFORMANCE INFORMATION

Templeton Money Market Fund may include its yield and effective yield in
advertisements or reports to Shareholders or prospective investors, and each
Fund may include its total return in advertisements or reports to Shareholders
or prospective investors. Performance information for the Funds will not be
advertised unless accompanied by comparable performance information for a
separate account to which the Funds offer their Shares.

Templeton Money Market Fund calculates current yield by annualizing the
dividend for the most recent seven-day period and dividing by the net asset
value on the last day of the period for which yield is presented. Templeton
Money Market Fund's effective yield is calculated similarly but assumes that
income earned from the investment is reinvested. The Fund's effective yield will
be slightly higher than its yield because of the compounding effect of this
assumed reinvestment. Quotations of average annual total return for each Fund
will be expressed in terms of the average annual compounded rate of return on a
hypothetical investment in a Fund over a period of 1, 5 and 10 years (or up to
the life of the Fund), will reflect the deduction of the maximum initial sales
charge and deduction of a proportional share of Fund expenses (on an annual
basis), and will assume that all dividends and distributions are reinvested when
paid. Total return may be expressed in terms of the cumulative value of an
investment in a Fund at the end of a defined period of time. Quotations of yield
or total return for the Funds will not take into account charges and deductions
against any separate account to which the Funds' Shares are sold or charges and
deductions against variable insurance contracts, although comparable performance
information for a separate account will take such charges into account. For a
description of the methods used to determine total return for the Funds, see
'Performance Information' in the Statement of Additional Information.

STATEMENTS AND REPORTS

The Trust's fiscal year ends on December 31. Annual reports (containing
financial statements audited by independent auditors and additional information
regarding the Funds' performance) and semi-annual reports (containing unaudited
financial statements) are sent to Shareholders each year. Additional copies may
be obtained, without charge, upon request to the Business Manager.

T-20

<PAGE>
TEMPLETON VARIABLE PRODUCTS SERIES FUND

THIS STATEMENT OF ADDITIONAL INFORMATION DATED MAY 1, 1995, IS

NOT A PROSPECTUS. IT SHOULD BE READ IN CONJUNCTION
WITH THE PROSPECTUS OF TEMPLETON VARIABLE PRODUCTS SERIES
FUND DATED MAY 1, 1995, WHICH MAY BE OBTAINED WITHOUT
CHARGE UPON REQUEST TO FRANKLIN TEMPLETON DISTRIBUTORS, INC.,
700 CENTRAL AVENUE, P.O. BOX 33030,
ST. PETERSBURG, FLORIDA 33733-8030
TOLL FREE TELEPHONE: (800) 292-9293.

TABLE OF CONTENTS

General Information and History. . . . . . . . . . . 1
Investment Objectives and Policies . . . . . . . . . 1
-Investment Policies. . . . . . . . . . . . . . . . 1
-Futures Contracts . . . . . . . . . . . . . . . . 1
-Foreign Currency Hedging Transactions. . . . . . . 2
-Stock Index Futures Contracts. . . . . . . . . . . 4
-Risk Factors . . . . . . . . . . . . . . . . . . . 6
Investment Restrictions. . . . . . . . . . . . . . . 10
Trading Policies . . . . . . . . . . . . . . . . . . 12
-Personal Securities Transactions . . . . . . . . 12
Management of the Trust. . . . . . . . . . . . . . . 13
Trustee Compensation . . . . . . . . . . . . . . . . 19
Principal Shareholders . . . . . . . . . . . . . . . 20
Investment Management and Other Services . . . . . . 21
-Investment Management Agreements . . . . . . . . . 21
-Management Fees. . . . . . . . . . . . . . . . . . 23
-The Investment Managers. . . . . . . . . . . . . . 23
-Research Services. . . . . . . . . . . . . . . . . 23
-Business Manager . . . . . . . . . . . . . . . . . 23
-Custodian. . . . . . . . . . . . . . . . . . . . . 25
-Legal Counsel. . . . . . . . . . . . . . . . . . . 25
-Independent Accountants. . . . . . . . . . . . . . 25
-Reports to Shareholders. . . . . . . . . . . . . . 25
Brokerage Allocation . . . . . . . . . . . . . . . . 25
-Portfolio Turnover . . . . . . . . . . . . . . . . 28
Purchase and Redemption of Shares;
Net Asset Value . . . . . . . . . . . . . . . . . . 29
Tax Status . . . . . . . . . . . . . . . . . . . . . 31
Description of Shares. . . . . . . . . . . . . . . . 35
Yield and Performance Information. . . . . . . . . . 36
Financial Statements . . . . . . . . . . . . . . . . 40

Appendix - Corporate Bond, Preferred
Stock and Commercial Paper Ratings . . . . . . . . i

GENERAL INFORMATION AND HISTORY

Templeton Variable Products Series Fund (the "Trust") was organized
as a Massachusetts business trust on February 25, 1988 and is registered
under the Investment Company Act of 1940 (the "1940 Act") as an open-end div-
ersified management investment company. The Trust currently has five series
of Shares: Templeton Money Market Fund, Templeton Bond Fund, Templeton Stock
Fund, Templeton Asset Allocation Fund and Templeton International Fund
(collectively, the "Funds").
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES

INVESTMENT POLICIES. The investment objective and policies of each
Fund are described in the Prospectus under the heading "Investment Objectives
and Policies."

FUTURES CONTRACTS. Templeton Bond, Asset Allocation and International
Funds may purchase and sell financial futures contracts. Currently, futures
contracts are available on several types of fixed-income securities including:
U.S. Treasury bonds, notes and bills, commercial paper, and certificates of
deposit.

As long as required by regulatory authorities, Templeton Bond, Asset
Allocation and International Funds will limit their use of futures contracts
to hedging transactions in order to avoid being a commodity pool. For
example, they might use futures contracts to hedge against anticipated changes
in interest rates that might adversely affect either the value of the Funds'
securities or the price of the securities which the Funds intend to purchase.
The Funds' hedging may include sales of futures contracts as an offset against
the effect of expected increases in interest rates and purchases of futures
contracts as an offset against the effect of expected declines in interest
rates. Although other techniques could be used to reduce the Funds' exposure
to interest rate fluctuations, they may be able to hedge their exposure more
effectively and perhaps at a lower cost by using futures contracts.

At the time a Fund purchases or sells a futures contract, it is re-
quired to deposit with its custodian (or broker, if legally permitted) a
specified amount of cash or U.S. Government securities ("initial margin").
The margin required for a futures contract is set by the exchange or board of
trade on which the contract is traded and may be modified during the term of the
contract. The initial margin is in the nature of a performance bond or good
faith deposit on the futures contract which is returned to the Fund upon
termination of the contract, assuming all contractual obligations have been
satisfied. The Funds expect to earn interest income on initial margin
deposits. A futures contract held by a Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day the Funds
pay or receive cash, called "variation margin," equal to the daily change in
value of the futures contract. This process is known as "marking to market."
Variation margin does not represent a borrowing or loan by a Fund but is
instead settlement between the Fund and the broker of the amount one would owe
the other if the futures contract expired. In computing daily net asset
value, a Fund will mark to market its open futures positions. In addition,
the Fund must deposit in a segregated account additional cash or high quality
debt securities to ensure the futures contracts are unleveraged. The value of
assets held in the segregated account must be equal to the daily market value
of all outstanding futures contracts less any amounts deposited as margin.

Although some financial futures contracts call for making or taking
delivery of the underlying securities, in most cases these obligations are
closed out before the settlement date. The closing of a contractual
obligation is accomplished by purchasing or selling an identical offsetting
futures contract. Other financial futures contracts by their terms call for
cash settlements.

FOREIGN CURRENCY HEDGING TRANSACTIONS. In order to hedge against
foreign currency exchange rate risks, Templeton Bond and Asset Allocation
Funds may enter into forward foreign currency exchange contracts, as well as

<PAGE>

purchase put or call options on foreign currencies. In addition, for hedging
purposes only, Templeton Bond, Asset Allocation and International Funds may
enter into foreign currency futures contracts, as described below. The Funds
may also conduct their foreign currency exchange transactions on a spot (I.E.,
cash) basis at the spot rate prevailing in the foreign currency exchange
market.

A Fund may enter into forward foreign currency exchange contracts
("forward contracts") to attempt to minimize the risk to the Fund from adverse
changes in the relationship between the U.S. dollar and foreign currencies. A
forward contract is an obligation to purchase or sell a specific currency for
an agreed price at a future date which is individually negotiated and
privately traded by currency traders and their customers. A Fund may enter
into a forward contract, for example, when it enters into a contract for the
purchase or sale of a security denominated in a foreign currency in order to
"lock in" the U.S. dollar price of the security. In addition, for example,
when a Fund believes that a foreign currency may suffer a substantial decline
against the U.S. dollar, it may enter into a forward contract to sell an
amount of that foreign currency approximating the value of some or all of the
Fund's portfolio securities denominated in such foreign currency, or when a
Fund believes that the U.S. dollar may suffer a substantial decline against a
foreign currency, it may enter into a forward contract to buy that foreign
currency for a fixed dollar amount. This second investment practice is
generally referred to as "cross-hedging." Because in connection with a Fund's
forward foreign currency transactions an amount of the Fund's assets equal to
the amount of the purchase will be held aside or segregated to be used to pay
for the commitment, a Fund will always have cash, cash equivalents or high
quality debt securities available sufficient to cover any commitments under
these contracts or to limit any potential risk. The segregated account will
be marked-to-market on a daily basis. While these contracts are not presently
regulated by the Commodity Futures Trading Commission ("CFTC"), the CFTC may
in the future assert authority to regulate forward contracts. In such event,
a Fund's ability to utilize forward contracts in the manner set forth above
may be restricted. Forward contracts may limit potential gain from a positive
change in the relationship between the U.S. dollar and foreign currencies.
Unanticipated changes in currency prices may result in poorer overall
performance for a Fund than if it had not engaged in such contracts.

Templeton Bond and Asset Allocation Funds may purchase and write put
and call options on foreign currencies for the purpose of protecting against
declines in the dollar value of foreign portfolio securities and against
increases in the dollar cost of foreign securities to be acquired. As is the
case with other kinds of options, however, the writing of an option on foreign
currency will constitute only a partial hedge, up to the amount of the premium
received, and a Fund could be required to purchase or sell foreign currencies
at disadvantageous exchange rates, thereby incurring losses. The purchase of
an option on foreign currency may constitute an effective hedge against
fluctuation in exchange rates, although, in the event of rate movements
adverse to a Fund's position, the Fund may forfeit the entire amount of the
premium plus related transaction costs. Options on foreign currencies to be
written or purchased by a Fund will be traded on U.S. and foreign exchanges or
over-the-counter.

Templeton Bond, Asset Allocation and International Funds may enter into
exchange-traded contracts for the purchase or sale for future delivery of
foreign currencies ("foreign currency futures"). This investment technique
will be used only to hedge against anticipated future changes in exchange
rates which otherwise might adversely affect the value of a Fund's portfolio
securities or adversely affect the prices of securities that a Fund intends to
purchase at a later date. The successful use of foreign currency futures will
usually depend on the ability of a Fund's Investment Manager to forecast

<PAGE>

currency exchange rate movements correctly. Should exchange rates move in an
unexpected manner, a Fund may not achieve the anticipated benefits of foreign
currency futures or may realize losses.

STOCK INDEX FUTURES CONTRACTS. Templeton Stock, Asset Allocation and
International Funds may buy and sell index futures contracts with respect to
any stock index, and Templeton Bond Fund may buy and sell index futures
contracts with respect to any bond index traded on a recognized stock exchange
or board of trade. The Funds may invest in index futures contracts for
hedging purposes only, and not for speculation. A Fund may engage in such
transactions only to an extent that the total contract value of the futures
contracts do not exceed 20% of the Fund's total assets at the time when such
contracts are entered into. Successful use of stock index futures is subject
to the ability of Templeton Investment Counsel, Inc. (the Investment Manager
of Templeton Stock Fund, Templeton Asset Allocation Fund, and Templeton
International Fund) and the Templeton Global Bond Managers division of
Templeton Investment Counsel, Inc. (the Investment Manager of Templeton Bond
Fund and Templeton Money Market Fund) (collectively, the "Investment
Managers") to predict correctly movements in the direction of the stock
markets. No assurance can be given that the Investment Manager's judgment in
this respect will be correct.

A stock index futures contract is a contract to buy or sell units of a
stock index at a specified future date at a price agreed upon when the
contract is made. The value of a unit is the current value of the stock
index. For example, the Standard & Poor's Stock Index ("S&P 500 Index" or
"Index") is composed of 500 selected common stocks, most of which are listed
on the New York Stock Exchange. The S&P 500 Index assigns a relative weighing
to the value of one share of each of these 500 common stocks included in the
Index, and the Index fluctuates with changes in the market values of the
shares of those common stocks. In the case of the S&P 500 Index, contracts
are to buy or sell 500 units. Thus, if the value of the S&P 500 Index were
$150, one contract would be worth $75,000 (500 units x $150). The stock index
futures contract specifies that no delivery of the actual stocks making up the
index will take place. Instead, settlement in cash must occur upon the
termination of the contract, with the settlement being the difference between
the contract price and the actual level of the stock index at the expiration
of the contract. For example, if a Fund enters into a futures contract to buy
500 units of the S&P 500 Index at a specified future date at a contract price
of $150 and the S&P 500 Index is at $154 on that future date, the Fund will
gain $2,000 (500 units x gain of $4). If a Fund enters into a futures
contract to sell 500 units of the stock index at a specified future date at a
contract price of $150 and the S&P 500 Index is at $154 on the future date,
the Fund will lose $2,000 (500 units x loss of $4).

During or in anticipation of a period of market appreciation, Templeton
Stock Fund, Templeton Asset Allocation Fund or Templeton International Fund
may enter into a "long hedge" of common stock which it proposes to add to its
portfolio by purchasing stock index futures for the purpose of reducing the
effective purchase price of such common stock. To the extent that the
securities which a Fund proposes to purchase change in value in correlation
with the stock index contracted for, the purchase of futures contracts on that
index would result in gains to the Fund which could be offset against rising
prices of such common stock.

During or in anticipation of a period of market decline, Templeton
Stock Fund, Templeton Asset Allocation Fund or Templeton International Fund may
"hedge" common stock in its portfolio by selling stock index futures for the
purpose of limiting the exposure of its portfolio to such decline. To the

<PAGE>

extent that a Fund's portfolio of securities changes in value in correlation
with a given stock index, the sale of futures contracts on that index could
substantially reduce the risk to the portfolio of a market decline and, by so
doing, provide an alternative to the liquidation of securities positions in
the portfolio with resultant transaction costs.

RISK FACTORS. Templeton Bond Fund, Templeton Stock Fund, Templeton Asset
Allocation Fund and Templeton International Fund have an unlimited right to
purchase securities in any foreign country, developed or developing, if they
are listed on an exchange, as well as a limited right to purchase such
securities if they are unlisted. Investors should consider carefully the
risks involved in securities of companies and governments of foreign nations,
which are in addition to the usual risks inherent in domestic investments.

Investments in companies domiciled in developing countries may be
subject to potentially higher risks than investments in developed countries.
These risks include (i) less social, political and economic stability; (ii)
the small current size of the markets for such securities and the currently
low or nonexistent volume of trading, which result in a lack of liquidity and
in greater price volatility; (iii) certain national policies which may
restrict the Funds' investment opportunities, including restrictions on
investment in issuers or industries deemed sensitive to national interests;
(iv) foreign taxation; (v) the absence of developed structures governing
private or foreign investment or allowing for judicial redress for injury to
private property; (vi) the absence, until recently in certain Eastern European
countries, of a capital market structure or market-oriented economy; and (vii)
the possibility that recent favorable economic developments in Eastern Europe
may be slowed or reversed by unanticipated political or social events in such
countries.

Despite the recent dissolution of the Soviet Union, the Communist Party
may continue to exercise a significant role in certain Eastern European
countries. To the extent of the Communist Party's influence, investments in
such countries may involve risks of nationalization, expropriation and
confiscatory taxation. The communist governments of a number of Eastern
European countries expropriated large amounts of private property in the past,
in many cases without adequate compensation, and there can be no assurance
that such expropriation will not occur in the future. In the event of such
expropriation, the Funds could lose a substantial portion of any investments
it has made in the affected countries. Further, no accounting standards exist
in Eastern European countries. Finally, even though certain Eastern European
currencies may be convertible into U.S. dollars, the conversion rates may be
artificial to the actual market values and may be adverse to the Funds'
Shareholders.

There may be less publicly available information about foreign com-
panies comparable to the reports and ratings published about companies in the
United States. Foreign companies are not generally subject to uniform
accounting, auditing and financial reporting standards, and auditing prac-
tices and requirements may not be comparable to those applicable to United
States companies. Foreign markets have substantially less volume than the
New York Stock Exchange, and securities of some foreign companies are less
liquid and more volatile than securities of comparable United States companies.
Commission rates in foreign countries, which are generally fixed rather than
subject to negotiation as in the United States, are likely to be higher. In
many foreign countries there is less government supervision and regulation of
stock exchanges, brokers and listed companies than in the United States.

<PAGE>
The Funds endeavor to buy and sell foreign currencies on as favorable a
basis as practicable. Some price spread on currency exchange (to cover
service charges) may be incurred, particularly when a Fund changes investment
from one country to another or when proceeds of the sale of Shares in U.S.
dollars are used for the purchase of securities in foreign countries. Also,
some countries may adopt policies which would prevent a Fund from transferring
cash out of the country or withhold portions of interest and dividends at the
source, or impose other taxes with respect to a Fund's investments in
securities of issuers of that country. There is the possibility of
expropriation, nationalization or confiscatory taxation, foreign exchange
controls (which may include suspension of the ability to transfer currency
from a given country), default in foreign government securities, political or
social instability or diplomatic developments which could affect investments
in securities of issuers in those nations.

Each Fund may be affected either unfavorably or favorably by
fluctuations in the relative rates of exchange between the currencies of
different nations, by exchange control regulations and by indigenous economic
and political developments. Through each Fund's flexible policy, the
Investment Managers endeavor to avoid unfavorable consequences and to take
advantage of favorable developments in particular nations where from time to
time it places a Fund's investments. The exercise of this flexible policy may
include decisions to purchase securities with substantial risk characteristics
and other decisions such as changing the emphasis on investments from one
nation to another and from one type of security to another. Some of these
decisions may later prove profitable and others may not. No assurance can be
given that profits, if any, will exceed losses.

The Trustees consider at least annually the likelihood of the im-
position by any foreign government of exchange control restrictions which
would affect the liquidity of the Funds' assets maintained with custodians in
foreign countries, as well as the degree of risk from political acts of foreign
governments to which such assets may be exposed. They also consider the
degree of risk involved through the holding of portfolio securities in
domestic and foreign securities depositories (see "Investment Management and
Other Services - Custodian"). However, in the absence of willful misfeasance,
bad faith or gross negligence on the part of the Investment Managers, or
reckless disregard of the obligations and duties under the Investment
Management Agreements, any losses resulting from the holding of a Fund's
portfolio securities in foreign countries and/or with securities depositories
will be at risk of the Shareholders. No assurance can be given that the
Trustees' appraisal of the risks will always be correct or that such exchange
control restrictions or political acts of foreign governments might not occur.

There are several risks associated with the use of futures contracts
and stock index futures contracts as hedging techniques. A purchase or sale
of a futures contract may result in losses in excess of the amount invested.
There can be significant differences between the securities and futures
markets that could result in an imperfect correlation between the markets,
causing a given hedge not to achieve its objectives. The degree of imper-
fection of correlation depends on circumstances such as variations in specu-
lative market demand for futures, including technical influences in futures
trading, and differences between the financial instruments being hedged and
the instruments underlying the standard contracts available for trading in
such respects as interest rate levels, maturities, and creditworthiness of
issuers. A decision as to whether, when, and how to hedge involves the
exercise of skill and judgment, and even a well-conceived hedge may be un-
successful to some degree because of market behavior or unexpected interest
rate trends.

<PAGE>

Futures exchanges may limit the amount of fluctuation permitted in
certain futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may vary
either up or down from the previous day's settlement price at the end of the
current trading session. Once the daily limit has been reached in a futures
contract subject to the limit, no more trades may be made on that day at a
price beyond that limit. The daily limit governs only price movements during
a particular trading day and, therefore, does not limit potential losses
because the limit may work to prevent the liquidation of unfavorable
positions. For example, futures prices have occasionally moved to the daily
limit for several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of positions and subjecting some holders of
futures contracts to substantial losses.

There can be no assurance that a liquid market will exist at a time
when a Fund seeks to close out a futures position, and it would remain ob-
ligated to meet margin requirements until the position is closed. Templeton
Bond, Stock, Asset Allocation and International Funds intend to purchase or
sell futures only on exchanges or boards of trade where there appears to be
an active secondary market, but there is no assurance that a liquid secondary
market will exist for any particular contract or at any particular time. In
addition, many of the futures contracts available may be relatively new
instruments without a significant trading history. As a result, there can be
no assurance that an active secondary market will develop or continue to
exist.

Use of stock index futures for hedging may involve risks because of
imperfect correlations between movements in the prices of the stock index
futures on the one hand and movements in the prices of the securities being
hedged or of the underlying stock index on the other. Successful use of stock
index futures by a Fund for hedging purposes also depends upon the Investment
Manager's ability to predict correctly movements in the direction of the
market, as to which no assurance can be given.

Templeton Bond, Asset Allocation and International Funds may enter into
a contract for the purchase or sale of a security denominated in a foreign
currency and may enter into a forward foreign currency contract ("forward
contract") in order to "lock in" the U.S. dollar price of the security. In
addition, when the Investment Manager believes that the currency of a
particular foreign country may suffer or enjoy a substantial movement against
another currency, it may enter into a forward contract to sell or buy the
amount of the former foreign currency, approximating the value of some or all
of the Fund's portfolio securities denominated in such foreign currency. The
projection of short-term currency market movement is extremely difficult, and
the successful execution of a short-term hedging strategy is highly uncertain.

It is impossible to forecast with absolute precision the market value
of portfolio securities at the expiration of the contract. Accordingly, it may
be necessary for the Funds to purchase additional foreign currency on the spot
market (and bear the expense of such purchase) if the market value of the
security is less than the amount of foreign currency a Fund is obligated to
deliver and if a decision is made to sell the security and make delivery of
the foreign currency. Conversely, it may be necessary to sell on the spot
market some of the foreign currency received upon the sale of the portfolio
security if its market value exceeds the amount of foreign currency the Fund
is obligated to deliver.

<PAGE>

If a Fund retains the portfolio security and engages in an offsetting
transaction, the Fund will incur a gain or a loss to the extent that there has
been movement in forward contract prices. If a Fund engages in an offsetting
transaction, it may subsequently enter into a new forward contract to sell the
foreign currency. Should forward prices decline during the period between a
Fund entering into a forward contract for the sale of a foreign currency and
the date it enters into an offsetting contract for the purchase of the foreign
currency, the Fund will realize a gain to the extent the price of the currency
it has agreed to sell exceeds the price of the currency it has agreed to
purchase. Should forward prices increase, a Fund will suffer a loss to the
extent the price of the currency it has agreed to purchase exceeds the price
of the currency it has agreed to sell.

INVESTMENT RESTRICTIONS

The Funds have imposed upon themselves certain investment restrictions
which, together with their investment objectives, are fundamental policies
except as otherwise indicated. No changes in a Fund's investment objectives,
policies or investment restrictions (except those which are not fundamental
policies) can be made without the approval of the Shareholders of that Fund.
For this purpose, the provisions of the 1940 Act require the affirmative vote
of the lesser of either (a) 67% or more of the Fund's Shares present at a
Shareholders' meeting at which the holders more than 50% of the outstanding
Shares are present or represented by proxy or (b) more than 50% of the
outstanding Shares of the Fund.

In accordance with these restrictions, a Fund will not:

1. Invest in real estate or mortgages on real estate, or pur-
chase or sell commodity contracts, except that Templeton
Bond and Asset Allocation Funds may invest in marketable
securities secured by real estate or interests therein, such
as CMOs, or issued by companies or investment trusts which
invest in real estate or interests therein and Templeton
Bond, Asset Allocation and International Funds may purchase
and sell foreign currency futures and financial futures, and
Templeton Stock, Asset Allocation and
International Funds may purchase and sell stock index futures
contracts, and Templeton Bond Fund may purchase and sell bond
index futures contracts.

2. With respect to 75% of its total assets, invest more than 5% of
the total value of its assets in the securities of any one
issuer, or purchase more than 10% of any class of securities
of any one company, including more than 10% of its out-
standing voting securities (except for investments in ob-
ligations issued or guaranteed by the U.S. Government or its
agencies or instrumentalities).

3. Act as an underwriter or issue senior securities.

4. Lend money, except that all Funds may purchase publicly
distributed bonds, debentures, notes and other evidences of
indebtedness and may buy from a bank or broker-dealer U.S.
Government obligations with a simultaneous agreement by the
seller to repurchase them at the original purchase price
plus accrued interest, and may lend their portfolio securities.

5. Borrow money for any purpose other than redeeming its Shares or
purchasing its Shares for cancellation, and then only as a
temporary measure up to an amount not exceeding 5% of the
value of its total assets, except that Templeton Bond,
Stock, Asset Allocation and International Funds may borrow
money in amounts up to 30% of the value of its net assets.

6. Invest more than 25% of its total assets in a single industry,
except that this limitation will not apply to investments in
securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, or repurchase agreements on such
securities, and Templeton Money Market Fund may invest in
obligations issued by domestic banks (including certificates of
deposit, repurchase agreements, and bankers' acceptances)
without regard to this limitation.

As non-fundamental investment policies, which may be changed by the
Board of Trustees without Shareholder approval, a Fund will not invest more
than 15% of its total assets in securities of foreign issuers which are not
listed on a recognized United States or foreign securities exchange, or more
than 10% of its total assets in (a) securities with a limited trading market,
(b) securities subject to legal or contractual restrictions as to resale, and
(c) repurchase agreements not terminable within seven days. In addition, as
non-fundamental investment policies, Templeton Stock, Asset Allocation and
International Funds will not invest more than 5% of each Fund's assets in debt
securities rated lower than Baa by Moody's Investors Service, Inc. or BBB by
Standard & Poor's Corporation.

Whenever any investment policy or investment restriction states a
maximum percentage of a Fund's assets which may be invested in any security or
other property, it is intended that such maximum percentage limitation be
determined immediately after and as a result of the Fund's acquisition of such
security or property. The investment restrictions do not preclude a Fund from
purchasing the securities of any issuer pursuant to the exercise of
subscription rights distributed to a Fund by the issuer, unless such purchase
would result in a violation of investment restriction number 6, or the non-
fundamental investment policies discussed above.

TRADING POLICIES

The Investment Managers and their affiliated companies serve as
investment manager to other investment companies and private clients.
Accordingly, the respective portfolios of these funds and clients may contain
many or some of the same securities. When any two or more of these funds or
clients are engaged simultaneously in the purchase or sale of the same
security, the transactions are placed for execution in a manner designed to be
equitable to each party. The larger size of the transaction may affect the
price of the security and/or the quantity which may be bought or sold for each
party. If the transaction is large enough, brokerage commissions may be
negotiated below those otherwise chargeable.

Sale or purchase of securities, without payment of brokerage
commissions, fees (except customary transfer fees) or other remuneration in
connection therewith, may be effected between any of these funds, or between
funds and private clients, under procedures adopted pursuant to Rule 17a-7
under the 1940 Act.

PERSONAL SECURITIES TRANSACTIONS. Access persons of the Franklin
Templeton Group, as defined in the SEC Rule 17(j) under the 1940 Act, who are
employees of Franklin Resources, Inc. or their subsidiaries, are permitted to
engage in personal securities transactions subject to the following general
restrictions and procedures: (1) The trade must receive advance clearance from

<PAGE>

a Compliance Officer and must be completed within 24 hours after this
clearance; (2) Copies of all brokerage confirmations must be sent to the
Compliance Officer and within 10 days after the end of each calendar quarter,
a report of all securities transactions must be provided to the Compliance
Officer; (3) In addition to items (1) and (2), access persons involved in
preparing and making investment decisions must file annual reports of their
securities holdings each January and also inform the Compliance Officer (or
other designated personnel) if they own a security that is being considered
for a fund or other client transaction or if they are recommending a security
in which they have an ownership interest for purchase or sale by a fund or
other client.

MANAGEMENT OF THE TRUST

The name, address, principal occupation during the past five years and
other information with respect to each of the Trustees and Principal Executive
Officers of the Trust are as follows:

NAME, ADDRESS AND PRINCIPAL OCCUPATION
OFFICES WITH TRUST DURING PAST FIVE YEARS

CHARLES E. JOHNSON* Senior vice president and director, 777
Mariners Island Blvd. Franklin Resources, Inc.; senior vice
San Mateo, Calaifornia president, Franklin Templeton
Trustee and President Distributors, Inc.; president and
director, Franklin Institutional Service
Corporation and Templeton Worldwide,
Inc.; chairman of the board of Templeton
Investment Counsel, Inc.; vice president
and/or director, as the case may be, for
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.

HARRIS J. ASHTON Chairman of the board, president, and
Metro Center, 1 Station chief executive officer of General Host
Place Corporation (nursery and craft centers);
Stamford, Connecticut director of RBC Holdings Inc. (a bank
Trustee holding company) and Bar-S Foods.

S. JOSEPH FORTUNATO Member of the law firm of Pitney,
200 Campus Drive Hardin, Kipp & Szuch; director of
Florham Park, New Jersey General Host Corporation.
Trustee

HASSO-G VON DIERGARDT-NAGLO Farmer; president of Clairhaven
R.R. 3 Investments, Ltd. and other private
Stouffville, Ontario investment companies.
Trustee

F. BRUCE CLARKE Retired; former credit adviser for
19 Vista View Blvd. National Bank of Canada, Toronto.
Thornhill, Ontario
Trustee

BETTY P. KRAHMER A director or trustee of various
2201 Kentmere Parkway civic associations; former economic
Wilmington, Delaware analyst, U.S. Government.
Trustee

FRED R. MILLSAPS Manager of personal investments (1978-
2665 NE 37th Drive present); chairman and chief executive
Fort Lauderdale, Florida officer of Landmark Banking Corporation
Trustee (1969-1978); financial vice president of
Florida Power and Light (1965-1969); vice
president of Federal Reserve Bank of
Atlanta (1958-1965); director of various
business and nonprofit organizations.

JOHN G. BENNETT, JR. Founder, chairman of the board
3 Radnor Corporate Center and president of New Era Philanthropy,
Suite 150 Inc.; chairman of Human Service Systems,
100 Matsonford Rd. Inc.; president of The Foundation
Radnor, Pennsylvania for New Era Philanthropy; a director or
Trustee trustee of many national and interna-
tional organizations, including uni-
versities and grant-making founda-
tions; member of the Public Policy
Committee of the Advertising Council.

ANDREW H. HINES, JR. Consultant, Triangle Consulting
150 2nd Avenue N. Group; chairman of the board and chief
St. Petersburg, Florida executive officer of Florida Progress
Trustee Corporation (1982-February, 1990) and
director of various of its subsidiaries;
chairman and director of Precise Power
Corporation; Executive-in-Residence of
Eckerd College (1991-present);
director of Checkers Drive-In
Restaurants, Inc.

GORDON S. MACKLIN Chairman of White River Corporation
8212 Burning Tree Road (information services); director of
Bethesda, Maryland 20817 Fund America Enterprises Holdings, Inc.,
Trustee Lockheed Martin Marietta Corporation, MCI
Communications Corporation and Medimmune,
Inc.; formerly, chairman, Hambrecht and
Quist Group, director, H&Q Healthcare
Investors, and president, National
Association of Securities Dealers, Inc.

NICHOLAS F. BRADY* Chairman and president of Darby
102 East Dover Street Overseas Investments, Ltd. (an investment
Easton, Maryland firm) since 1994; director of the
Trustee H. J. Heinz Company, Amerada Hess
Corporation, Capital Cities/ABC, Inc. and
the Christiana Companies; Secretary of
the United States Department of the
Treasury from 1988 to January, 1993;
chairman of the board of Dillon, Read
& Co. Inc.(investment banking) prior
thereto.

CHARLES B. JOHNSON President, chief executive officer, and
777 Mariners Island Blvd. director of Franklin Resources, Inc.;
San Mateo, California chairman of the board and director,
Vice President Franklin Advisers, Inc.and Franklin
Templeton Distributors, Inc.; director,
Franklin Administrative Services, Inc.,
General Host Corporation and Templeton
Global Investors, Inc.; director or
trustee of other Templeton Funds; and
officer and director, trustee, or
managing general partner, as the case
may be, of most other subsidiaries of
Franklin Resources, Inc. and of most
of the investment companies in the
Franklin Group of Funds.

MARK G. HOLOWESKO President, chief executive officer and
Lyford Cay director of Templeton, Galbraith &
Nassau, Bahamas Hansberger Ltd. ("TGH"); director of
Vice President global equity research for TGH; president
or vice president of the Templeton Funds;
investment administrator with Roy West
Trust Corporation (Bahamas) Limited
(1984-1985).

MARTIN L. FLANAGAN Senior vice president, treasurer, and
777 Mariners Island Blvd. chief financial officer of Franklin
San Mateo, California Resources, Inc.; executive vice president,
Vice President chief executive officer and director of
Templeton Investment Counsel, Inc. and
director, president and chief executive
officer of Templeton Global Investors,
Inc.; director or trustee and president or
vice president of the Templeton Funds;
accountant, Arthur Andersen & Company
(1982-1983); member of the International
Society of Financial Analysts and the
American Institute of Certified Public
Accountants.

SAMUEL J. FORESTER, JR. President of the Templeton Global Bond
500 East Broward Blvd. Managers Division of Templeton Investment
Fort Lauderdale, Florid Counsel, Inc.; president or vice president
Vice President of other Templeton Funds; founder and
partner of Forester, Hairston Investment
Management (1989-1990); managing director
(Mid-East Region) of Merrill Lynch,
Pierce, Fenner & Smith Inc. (1987-1988);
advisor for Saudi Arabian Monetary Agency
(1982-1987).

DANIEL L. JACOBS Executive vice president and
500 East Broward Blvd. director of Templeton Investment Counsel,
Fort Lauderdale, Florida Inc.; director of Templeton Global
Vice President Investors, Inc.; president or vice
president of certain of the Templeton
Funds.

JOHN R. KAY Vice president of the Templeton
500 East Broward Blvd. Funds; vice president and treasurer of
Fort Lauderdale, Florida Templeton Global Investors, Inc. and
Vice President Templeton Worldwide, Inc.; formerly, vice
president and controller of the Keystone
Group, Inc.

THOMAS J. LATTA Vice president of the Templeton Global
500 East Broward Blvd. Investment Counsel, Inc.; vice president
Fort Lauderdale, Florida of certain of the Templeton Funds;
Vice President formerly, portfolio manager, Forester &
Hairston (1988-1991); investment adviser,
Merrill Lynch, Pierce, Fenner & Smith
Incorporated (1981-1988).

THOMAS M. MISTELE Senior vice president of Templeton
700 Central Avenue Global Investors, Inc.; vice president
St. Petersburg, Florida of Franklin Templeton Distributors, Inc.;
Secretary secretary of the Templeton Funds;
attorney, Dechert Price & Rhoads (1985-
1988) and Freehill, Hollingdale & Page
(1988); judicial clerk, U.S. District
Court (Eastern District of Virginia)
(1984-1985).

JAMES R. BAIO Certified public accountant; treasurer
500 East Broward Blvd. of the Templeton Funds; senior vice
Fort Lauderdale, Florida president of Templeton Worldwide, Inc.,
Treasurer Templeton Global Investors, Inc., and
Templeton Funds Trust Company; formerly,
senior tax manager of Ernst & Young
(certified public accountants)(1977-1989).

JACK L. COLLINS Assistant treasurer of the Templeton
700 Central Avenue Funds; assistant vice president of
St. Petersburg, Florida Franklin Templeton Investor Services,
Assistant Treasurer Inc.; former partner of Grant Thornton,
independent public accountants.

JEFFREY L. STEELE Partner, Dechert Price & Rhoads.
1500 K Street, N.W.
Washington, D.C.
Assistant Secretary
- ---------------

* Messrs. Johnson and Brady are Directors who are "interested persons" of
the Fund as that term is defined in the 1940 Act. Mr. Brady and Franklin
Resources, Inc. are limited partners of Darby Overseas Partners, L.P. ("Darby
Overseas"). Mr. Brady established Darby Overseas in February, 1994, and is
Chairman and a shareholder of the corporate general partner of Darby Overseas.
In addition, Darby Overseas and Templeton, Galbraith & Hansberger, Ltd. are
limited partners of Darby Emerging Markets Fund, L.P.

<PAGE>

TRUSTEE COMPENSATION

All of the Trust's officers and Trustees also hold positions with other
investment companies in the Franklin Templeton Group. No compensation is paid
by the Trust to any officer or trustee who is an officer, trustee or employee
of the Investment Managers or their affiliates. Each Templeton Fund pays its
independent directors and trustees and Mr. Brady an annual retainer and/or
fees for attendance at Board and Committee meetings, the amount of which is
based on the level of assets in each fund. Accordingly, based upon the assets
of the Trust as of December 31, 1994, the Trust will pay the independent
Trustees and Mr. Brady an annual retainer of $4000.00 and a fee of $350.00 per
meeting attended of the Board and its Committees. The independent Trustees
and Mr. Brady are reimbursed for any expenses incurred in attending meetings,
paid pro rata by each Franklin Templeton fund in which they serve. No pension
or retirement benefits are accrued as part of Trust expenses.

The following table shows the total compensation paid to the
Trustees by the Trust and by all investment companies in the Franklin
Templeton Group for the fiscal year ended December 31, 1994:

NUMBER OF TOTAL COMPENSATION
NAME AGGREGATE FRANKLIN TEMPLETON FROM ALL FUNDS IN
OF COMPENSATION FUND BOARDS ON WHICH FRANKLIN TEMPLETON
DIRECTOR FROM THE TRUST TRUSTEE SERVES GROUP

Harris J. Ashton $2,850 54 $319,925

John G. Bennett 3,350 23 105,625

Nicholas F. Brady 2,850 23 86,125

F. Bruce Clarke 3,350 19 95,275

S. Joseph Fortunato 2,850 56 336,065

Andrew H. Hines, Jr. 3,350 23 106,125

Betty P. Krahmer 2,850 19 75,275

Gordon S. Macklin 2,850 51 303,695

Fred R. Millsaps 3,350 23 106,125

Hasso-G von
Diergardt-Naglo 2,850 19 75,275

</TABLE>

<PAGE>

PRINCIPAL SHAREHOLDERS

Shares of the Fund are sold to and owned only by insurance company
separate accounts to serve as the investment vehicle for variable annuity
contracts. As of March 24, 1995, there were 22,838,642 Shares of Templeton
Money Market Fund outstanding, of which no Shares were owned by the Trustees
and officers of the Trust; 2,856,232 Shares of Templeton Bond Fund outstanding,
of which no Shares were owned by the Trustees and officers of the Trust;
23,454,897 Shares of Templeton Stock Fund outstanding, of which no Shares
were owned, by the Trustees and officers of the Trust; 19,835,756 Shares of
Templeton Asset Allocation Fund outstanding, of which no Shares were owned
by the Trustees and officers of the Trust; and 14,780,740 Shares of Templeton
International Fund outstanding, of which no Shares were owned by the Trustees
and officers of the Trust. As of March 24, 1995, Phoenix Home Mutual Life
Insurance Company ("Phoenix Home Life") owned 100% of the outstanding Shares
of Templeton Money Market Fund, 62% of the outstanding Shares of Templeton
Bond Fund, 63% of the outstanding Shares of Templeton Stock Fund, 40% of the
outstanding Shares of Templeton Asset Allocation Fund, and 40% of the out-
standing Shares ofTempleton International Fund, including Shares received in
return for monies paid in connection with the initial capital advances made
to the Trust. As of March 24, 1995, The Travelers Insurance Company ("The
Travelers") owned 38% of the outstanding Shares of Templeton Bond Fund, 37%
of the outstanding Shares of Templeton Stock Fund, and 44% of the outstanding
Shares of Templeton Asset Allocation Fund. As of March 24, 1995, the
Variable Annuity Life Insurance Company ("VALIC") owned 16% of the out-
standing shares of Templeton Asset Allocation Fund and 59% of Templeton
International Fund. However, Phoenix Home Life, The Travelers and VALIC will
exercise voting rights attributable to these Shares in accordance with voting
instructions received by owners of the contracts issued by Phoenix Home Life,
The Travelers, and VALIC. To this extent, Phoenix Home Life, The Travelers
and VALIC do not exercise control over the Trust by virtue of the voting
rights from their ownership of Trust Shares. To the knowledge of
management, as of March 24, 1995, no other person owned of record or
beneficially 5% or more of the Shares of any of the Funds.

INVESTMENT MANAGEMENT AND OTHER SERVICES

INVESTMENT MANAGEMENT AGREEMENTS. The Investment Manager of
Templeton Money Market Fund and Templeton Bond Fund is the Templeton Global
Bond Managers division ("TGBM") of Templeton Investment Counsel, Inc., a
Florida corporation with offices in Fort Lauderdale, Florida. The Investment
Manager of Templeton Asset Allocation Fund, Templeton Stock Fund, and Templeton
International Fund is Templeton Investment Counsel, Inc. ("TICI"). The
Investment Management Agreements between the Investment Managers and the
Trust on behalf of the Funds (the "Management Agreements"), dated October 30,
1992, and amended and restated on February 25, 1994, were approved by the
Shareholders of the Funds on October 30, 1992, and were last approved by the
Board of Trustees, including a majority of the Trustees who were not parties
to the Agreements or interested persons of any such party, at a meeting held
on February 24, 1995, and will continue through April 30, 1996. The
Management Agreements will continue from year to year thereafter subject to
approval annually by the Board of Trustees or by vote of a majority of the
outstanding Shares of each Fund (as defined in the 1940 Act) and also, in
either event, the approval of a majority of those Trustees who are not
parties to the Management Agreements or interested persons of any such party
in person at a meeting called for the purpose of voting on such approval.

The Investment Management Agreements require the Investment Managers
to manage the investment and reinvestment of each Fund's assets. The
Investment Managers are not required to furnish any personnel, overhead items
or facilities for the Funds, including daily pricing or trading desk
facilities, although such expenses are paid by investment advisers of some other
investment companies.

The Management Agreements provide that the Investment Managers will
select brokers and dealers for execution of each Fund's portfolio transac-
tions consistent with the Fund's brokerage policies (see "Brokerage
Allocation"). Although the services provided by broker-dealers in
accordance with the brokerage policies incidentally may help reduce the
expenses of or otherwise benefit the Investment Managers and other investment
management clients of the Investment Managers and of their affiliates, as
well as the Funds, the value of such services is indeterminable and the
Investment Managers' fee is not reduced by any offset arrangement by
reason thereof.

Under the Management Agreements, the Investment Manager is permitted
to provide investment advisory services to other clients, including clients
which may invest in the same types of securities as the Funds and, in provid-
ing such services, the Investment Managers may use information furnished by
others. Conversely, information furnished by others to the Investment
Managers in providing services to other clients may be useful to the Invest-
ment Managers in providing services to the Funds. When an Investment Manager
determines to buy or sell the same security for a Fund that the Investment
Manager or one or more of its affiliates has selected for one or more of its
other clients or for clients of its affiliates, the orders for all such
securities transactions are placed for execution by methods determined by the
Investment Manager, with approval by the Board of Trustees, to be impartial
and fair, in order to seek good results for all parties. Records of securit-
ies transactions of persons who know when orders are placed by a Fund are
available for inspection at least four times annually by the compliance
officer of the Trust so that the non-interested Trustees (as defined in the
1940 Act) can be satisfied that the procedures are generally fair and
equitable to all parties.

The Management Agreements provide that the Investment Managers shall
have no liability to the Trust, a Fund or any Shareholder of a Fund for any
error of judgment, mistake of law, or any loss arising out of any investment
or other act or omission in the performance by the Investment Manager of its
duties under the Management Agreement, or for any loss or damage resulting from
the imposition by any government of exchange control restrictions which might
affect the liquidity of a Fund's assets, or from acts or omissions of custo-
dians or securities depositories, or from any wars or political acts of any
foreign governments to which such assets might be exposed, except any liab-
ility resulting from willful misfeasance, bad faith or gross negligence
on the Investment Manager's part, or reckless disregard of its duties under
the Management Agreement. The Management Agreements will terminate auto-
matically in the event of their assignment, and may be terminated by the
Trust on behalf of a Fund at any time without payment of any penalty on 60 days'
written notice, with the approval of a majority of the Trustees in office at the
time or by vote of a majority of the outstanding voting securities of that
Fund (as defined by the 1940 Act).

<PAGE>

MANAGEMENT FEES. For its services, Templeton Money Market Fund pays
its Investment Manager a monthly fee equal on an annual basis to 0.35% of its
average daily net assets up to $200 million, reduced to 0.30% of such net
assets from $200 million up to $1,300 million and further reduced to 0.25% of
such net assets in excess of $1,300 million. Templeton Bond, Stock, Asset
Allocation and International Funds each pay their Investment Manager a
monthly fee equal on an annual basis to 0.50% of its average daily net assets
up to $200 million, reduced to 0.45% of such net assets from $200 million up
to $1,300 million and further reduced to 0.40% of such net assets in excess
of $1,300 million. During the fiscal year ended December 31, 1994, Templeton
Money Market Fund, Templeton Bond Fund, Templeton Stock Fund, Templeton Asset
Allocation Fund, and Templeton International Fund paid investment management
fees of $88,106, $149,843, $1,686,602, $1,186,540, and $404,532, respectively.
During the fiscal year ended December 31, 1993, Templeton Money Market Fund,
Templeton Bond Fund, Templeton Stock Fund, Templeton Asset Allocation Fund,
and Templeton International Fund paid investment management fees of $55,445,
$111,575, $1,089,643, $608,471, and $95,518, respectively. During the fiscal
year ended December 31, 1992, Templeton Money Market Fund, Templeton Bond Fund,
Templeton Stock Fund, Templeton Asset Allocation Fund, and Templeton Inter-
national Fund paid investment management fees of $77,049, $55,211, $702,809,
$264,566, and $13,597, respectively.

THE INVESTMENT MANAGERS. The Investment Managers are indirect wholly
owned subsidiaries of Franklin, a publicly traded company whose shares are
listed on the New York Stock Exchange. Charles B. Johnson (a Trustee and Vice
President of the Trust), Rupert H. Johnson, Jr., and R. Martin Wiskemann are
principal shareholders of Franklin and own, respectively, approximately 20%,
16% and 9.2% of its outstanding shares. Messrs. Charles B. Johnson and
Rupert H. Johnson, Jr. are brothers.

BUSINESS MANAGER. Templeton Funds Annuity Company performs certain
administrative functions as Business Manager for the Trust, including:

o providing office space, telephone, office equipment and
supplies for the Trust;

o paying compensation of the Trust's officers for services
rendered as such;

o authorizing expenditures and approving bills for payment on
behalf of the Trust;

o supervising preparation of annual and semi-annual reports,
notices of dividends, capital gains distributions and tax
credits;

o daily pricing of the Funds' investment portfolios and super-
vising publication of daily quotations of the bid and asked
prices of the Funds' Shares, earnings reports and other fin-
ancial data;

o providing trading desk facilities for the Funds;

o monitoring relationships with organizations serving the
Trust, including the Custodian and printers;

o supervising compliance by the Trust with recordkeeping
requirements under the 1940 Act and regulations thereunder,
with state regulatory requirements, maintaining books and
records for the Trust (other than those maintained by the
Custodian and Transfer Agent), and filing of tax reports on
behalf of the Trust other than the Trust's income tax
returns; and

o providing executive, clerical and secretarial help needed to
carry out these responsibilities.

For its services, the Business Manager receives a monthly fee equal on
an annual basis to 0.15% of the combined average daily net assets of the Funds,
reduced to 0.135% of the Funds'aggregate net assets in excess of $200 million,
further reduced to 0.10% annually of such net assets in excess of $700 million
and further reduced to 0.075% annually of such net assets in excess of $1,200
million. The fee is allocated among the Funds according to their respective
average daily net assets. Since the Business Manager's fee covers services
often provided by investment advisers to other funds, the Funds' combined
expenses for management and administrative services together may be higher than
those of some other investment companies. During the fiscal years ended
December 31, 1994, 1993, and 1992, the Business Manager received fees of
$1,006,867, $568,481 and $339,772, respectively.

The Business Manager is relieved of liability to the Trust for any
act or omission in the course of its performance under the Business Manage-
ment Agreement, in the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of its obligations and duties under the
Agreement. The Business Management Agreement may be terminated by a Fund at
any time on 60 days' written notice

<PAGE>

without payment of penalty, provided that such termination shall be directed
or approved by vote of a majority of the Trustees of the Trust in office at
the time or by vote of a majority of the outstanding voting securities of
that Fund, and shall terminate automatically and immediately in the event of
its assignment.

Templeton Funds Annuity Company is an indirect wholly-owned
subsidiary of Franklin.

CUSTODIAN. The Chase Manhattan Bank, N.A. serves as Custodian of
the Trust's assets, which are maintained at the Custodian's principal office,
MetroTech Center, Brooklyn, New York, New York 11245 and at the offices of
its branches and agencies throughout the world. The Custodian has entered
into agreements with foreign sub-custodians approved by the Trustees pursuant
to Rule 17f-5 under the 1940 Act. The Custodian, its branches and sub-cus-
todians, generally domestically and frequently abroad, do not actually hold
certificates for the securities in their custody, but instead have book
records with domestic and foreign securities depositories, which in turn have
book records with the transfer agents of the issuers of the securities.
Compensation for the services of the Custodian is based on a schedule of
charges agreed on from time to time.

LEGAL COUNSEL. Dechert Price & Rhoads, 1500 K Street, N.W.,
Washington, D.C. 20005, is legal counsel for the Trust.

INDEPENDENT ACCOUNTANTS. McGladrey & Pullen LLP, 555 Fifth Avenue,
New York, New York 10017, serves as independent accountants for the Trust.
Its audit services comprise examination of the Trust's financial statements,
review of the Trust's filings with the Securities and Exchange Commission and
preparation of the Trust's federal and state corporation tax returns.

REPORTS TO SHAREHOLDERS. The Trust's fiscal year ends on December
31. Shareholders are provided at least semi-annually with reports showing
the Funds' portfolios and other information, including an annual report with
financial statements audited by independent accountants.

BROKERAGE ALLOCATION

The Management Agreements provide that the Investment Managers are
responsible for selecting members of securities exchanges, brokers and
dealers (such members, brokers and dealers being hereinafter referred to as
"brokers") for the execution of a Fund's portfolio transactions, and, when
applicable, the negotiation of commissions in connection therewith. All
recommendations, decisions and placements are made in accordance with the
following principles:

1. Purchase and sale orders are usually placed with brokers who
are selected by an Investment Manager as able to achieve
"best execution" of such orders. "Best execution" means
prompt and reliable execution at the most favorable securities
price, taking into account the other provisions hereinafter
set forth. The determination of what may constitute best
execution and price in the execution of a securities trans-
action by a broker involves a number of considerations,
including, without limitation, the overall direct net
economic result to a Fund (involving both price paid or
received and any commissions and other costs paid), the
efficiency with which the transaction is effected, the
ability to effect the transaction at all where a large block
is involved, availability of the broker to stand ready to
execute possibly difficult transactions in the future, and the
financial strength and stability of the broker. Such
considerations are judgmental and are weighed by an Invest-
ment Manager in determining the overall reasonableness of
brokerage commissions.

2. In selecting brokers for portfolio transactions, the
Investment Managers take into account its past experience as
to brokers qualified to achieve "best execution,"
including brokers who specialize in any foreign securities
held by a Fund.

3. The Investment Managers are authorized to allocate brokerage
business to brokers who have provided brokerage and research
services, as such services are defined in Section 28(e) of the
Securities Exchange Act of 1934 (the "1934 Act"), for a Fund
and/or other accounts, if any, for which an Investment
Manager exercises investment discretion (as defined in
Section 3(a)(35) of the 1934 Act) and, as to transactions as
to which fixed minimum commission rates are not applicable, to
cause a Fund to pay a commission for effecting a securities
transaction in excess of the amount another broker would
have charged for effecting that transaction, if an Invest-
ment Manager in making the selection in question determines
in good faith that such amount of commission is reasonable
in relation to the value of the brokerage and research
services provided by such broker, viewed in terms of either
that particular transaction or the Investment Manager's
overall responsibilities with respect to the Fund and the
other accounts, if any, as to which it exercises investment
discretion. In reaching such determination, an Investment
Manager is not required to place or to attempt to place a
specific dollar value on the

<PAGE>

research or execution services of a broker or on the portion
of any commission reflecting either of said services. In
demonstrating that such determinations were made in good
faith, the Investment Manager shall be prepared to show that
all commissions were allocated and paid for purposes con-
templated by the Trust's brokerage policy; that the research
services provide lawful and appropriate assistance to an
Investment Manager in the performance of its investment
decision-making responsibilities; and that the commissions
paid were within a reasonable range. The determination that
commissions were within a reasonable range shall be based on
any available information as to the level of commissions
known to be charged by other brokers on comparable trans-
actions, but there shall be taken into account the Trust's
policies that (i) obtaining a low commission is deemed
secondary to obtaining a favorable securities price, since
it is recognized that usually it is more beneficial to a
Fund to obtain a favorable price than to pay the lowest
commission and (ii) the quality, comprehensiveness and
frequency of research studies which are provided for an
Investment Manager are useful to the Investment Manager in
performing its management services under its Management
Agreement with the Trust. Research services provided by
brokers to an Investment Manager are considered to be in
addition to, and not in lieu of, services required
to be performed by the Investment Manager under its
Management Agreement with the Trust. Research furnished by
brokers through whom a Fund effects securities transactions
may be used by an Investment Manager for any of its accounts,
and not all such research may be used by the Investment
Manager for that Fund. When execution of portfolio tran-
sactions is allocated to brokers trading on exchanges
with fixed brokerage commission rates, account may be taken
of various services provided by the broker, including quot-
ations outside the United States for daily
pricing of foreign securities held in a Fund's portfolio.

4. Purchases and sales of portfolio securities within the
United States other than on a securities exchange are
executed with primary market makers acting as principal,
except where, in the judgement of an Investment Manager,
better prices and execution may be obtained on a commission
basis or from other sources.

5. Sales of shares of investment companies registered under the
1940 Act which have either the same investment adviser, or
an investment adviser affiliated with an Investment Manager,
made by a broker is one factor among others to be taken into
account in deciding to allocate portfolio transactions
(including agency transactions, principal transactions,
purchases in underwritings or tenders in response to tender
offers) for the account of a Fund to that broker; provided that
the broker shall furnish "best execution," as defined in
paragraph 1 above, and that such allocation shall be within
the scope of the Fund's other policies as stated above; and
provided further, that in every allocation made to a broker in
which such sale of shares is taken into account there shall
be no increase in the amount of the commissions or other
compensation paid to such broker beyond a reasonable commis-
sion or other compensation determined, as set forth in para-
graph 3 above, on the basis of best execution alone or best
execution plus research services, without taking account of
or placing any value upon such sale of shares.

Insofar as known to management, no Trustee or officer of the Trust,
nor the Investment Manager or Principal Underwriter or any person affiliated
with any of them, has any material direct or indirect interest in any broker
employed by or on behalf of the Trust. Franklin Templeton Distributors, Inc.,
the Trust's Principal Underwriter, is a registered broker-dealer but it has
never executed any purchase or sale transactions for the Funds' portfolios or
participated in any commissions on any such transactions, and has no
intention of doing so in the future. The total brokerage commissions on the
Trust's portfolio transactions during the fiscal years ended December 31,
1994, 1993, and 1992 were as follows: total commissions (not including
any spreads or concessions on principal transactions) of $672,000, $340,552
and $230,000, respectively. All portfolio transactions are allocated to
broker-dealers only when their prices and execution, in the good faith
judgment of management, are equal to the best available within the scope of the
Trust's policies. There is no fixed method used in determining which broker-
dealers receive which order or how many orders.

PORTFOLIO TURNOVER. For reporting purposes, each Fund's portfolio
turnover rate is calculated by dividing the value of the lesser of purchases
or sales of portfolio securities for the fiscal year by the monthly average
of the value of the portfolio securities owned by the Fund during the fiscal
year. In determining such portfolio turnover, short-term U.S. Government
securities and all other securities whose maturities at the time of acquisi-
tion were one year or less are excluded. A 100% portfolio turnover rate
would occur, for example, if all of the securities in the portfolio (other
than short-term securities) were replaced once during the fiscal year. The
portfolio turnover rate for each of the Funds will vary from year to year,
depending on market conditions.

<PAGE>
It is anticipated that the rate of portfolio turnover as defined
above for Templeton Stock, Asset Allocation and International Funds will be
less than 50%, and for Templeton Bond Fund, less than 100%, under normal
market conditions. Portfolio turnover could be greater in periods of unusual
market movement and volatility. Templeton Bond Fund's portfolio turnover
rates for the fiscal years ended December 31, 1994, 1993, and 1992 were
203.91%, 170.3% and 148.7%, respectively. The increase in the Fund's
portfolio turnover rate was the result of trading by the Investment Manager
to improve the Fund's yield in response to rising interest rates and to hedge
currency exposure. In light of rising interest rates, the Investment Manager
determined to increase the Fund's positions in bonds with shorter maturities,
which resulted in the higher portfolio turnover rate.

PURCHASE AND REDEMPTION OF SHARES; NET ASSET VALUE

The Prospectus describes the manner in which a Fund's Shares may be
purchased and redeemed. See "How to Buy Shares of the Funds" and "How to
Sell Shares of the Funds."

Net asset value per Share is calculated separately for each Fund.
Net asset value per Share is determined as of the scheduled closing time of
the New York Stock Exchange( generally 4:00 p.m., New York time) every Monday
through Friday (exclusive of national business holidays). The Trust's
offices will be closed, and net asset value will not be calculated, on those
days on which the New York Stock Exchange is closed, which currently are:
New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.

Templeton Money Market Fund uses the amortized cost method to
determine the value of its portfolio securities pursuant to Rule 2a-7 under
the 1940 Act. The amortized cost method involves valuing a security at its
cost and amortizing any discount or premium over the period until maturity,
regardless of the impact of fluctuating interest rates on the market value of
the security. While this method provides certainty in valuation, it may
result in periods during which the value, as determined by amortized cost, is
higher or lower than the price which Templeton Money Market Fund would
receive if the security were sold. During these periods the yield to a
shareholder may differ somewhat from that which could be obtained from a
similar fund which utilizes a method of valuation based upon market prices.
Thus, during periods of declining interest rates, if the use of the amortized
cost method resulted in a lower value of the Fund's portfolio on a particular
day, a prospective investor in the Fund would be able to obtain a
somewhat higher yield than would result from investment in a fund utilizing
solely market values, and existing Shareholders would receive corresponding
less income. The converse would apply during periods of rising interest rates.

In accordance with Rule 2a-7, the Fund is required to (i) maintain a
dollar-weighted average portfolio maturity of 90 days or less; (ii) purchase
only instruments having remaining maturities of 397 days or less; and (iii)
invest only in U.S. dollar denominated securities determined in accordance
with procedures established by the Board of Trustees to present minimal
credit risks and which are rated in one of the two highest rating categories
for debt obligations by at least two nationally recognized statistical rating
organizations (or one rating organization if the instrument was rated by only
one such organization, subject to ratification of the investment by the Board
of Trustees). If a security is unrated, it must be of comparable quality as
determined in accordance with procedures established by the Board of Trustees,
including approval or ratification of the security by the Board except in the
case of U.S. Government securities. Pursuant to the Rule, the Board is
required to establish procedures designed to stabilize, to the extent
reasonably possible, the Fund's price per Share as computed for the purpose
of sales and redemptions at $1.00. Such procedures will include review of the
Fund's portfolio holdings by the Board of Trustees, at such intervals as it
may deem appropriate, to determine whether the Fund's net asset value
calculated by using available market quotations deviates from $1.00 per Share
based on amortized cost. The extent of any deviation will be examined by the
Board of Trustees. If such deviation exceeds 1/2 of 1%, the Board will
promptly consider what action, if any, will be initiated. In the event the
Board determines that a deviation exists which may result in material
dilution or other unfair results to investors or existing Shareholders, the
Board will take such corrective action as it regards as necessary and appro-
priate, including the sale of portfolio instruments prior to maturity to
realize capital gains or losses or to shorten average portfolio maturity,
withholding dividends or establishing a net asset value per Share by using
available market quotations.

The Board of Trustees may establish procedures under which a Fund
may suspend the determination of net asset value for the whole or any part
of any period during which (1) the New York Stock Exchange is closed other
than for customary weekend and holiday closings, (2) trading on the New York
Stock Exchange is restricted, (3) an emergency exists, as determined by the
Securities and Exchange Commission, as a result of which disposal of
securities owned by the Fund is not reasonably practicable or it is not
reasonably practicable for the Fund fairly to determine the value of its net
assets, or (4) for such other period as the Securities and Exchange Commis-
sion may by order permit for the protection of the holders of a Fund's Shares.

<PAGE>

TAX STATUS

Templeton Money Market Fund intends to declare dividends daily and
to pay dividends monthly. Templeton Stock, Bond, Asset Allocation and
International Funds normally intend to pay an annual dividend representing
substantially all of their net investment income and to distribute annually
any net realized capital gains. By so doing and meeting certain
diversification of assets and other requirements of the Internal Revenue Code
of 1986, as amended (the "Code"), and as described in the Prospectus, each
Fund intends to qualify as a regulated investment company under the Code.
The status of the Funds as regulated investment companies does not involve
government supervision or management of their investment practices or policies.
As a regulated investment company, each Fund will be relieved of liability for
United States federal income tax on that portion of its net investment income
and net realized capital gains which it distributes to its Separate Account
Shareholders.

Amounts not distributed on a timely basis in accordance with a
calendar year distribution requirement are also subject to a nondeductible 4%
excise tax unless the exception described below applies. To avoid the tax if
it otherwise applies, a Fund must distribute during each calendar year, (i)
at least 98% of its ordinary income (not taking into account any capital gains
or losses) for the calendar year, (ii) at least 98% of its capital gains in
excess of its capital losses for the twelve-month period ending on October 31
of the calendar year (adjusted for certain ordinary losses), and (iii) all
ordinary income and capital gains for previous years that were not
distributed during such years. To avoid application of the excise tax, each
Fund intends to make its distributions in accordance with the calendar year
distribution requirement. A distribution will be treated as paid on December
31 of the calendar if it is declared by a Fund during October, November, or
December of that year to Shareholders of record on a date in such a month and
paid by the Fund during January of the following calendar year. Such
distributions will be taxable to Shareholders (a Separate Account) in the
calendar year in which the distributions are declared, rather than the
calendar year in which the distributions are received. The excise tax
provisions described above will not apply in a given calendar year to a
Fund if all of its shareholders at all times during the calendar year are
segregated asset accounts of life insurance companies where the shares are
held in connection with variable contracts. (For this purpose, any shares of
a regulated investment company attributable to an investment not exceeding
$250,000 made in connection with the organization of the company is not
taken into account.) Accordingly, if this condition regarding the ownership
of Shares of each of the Funds is met, the excise tax will be inapplicable to
that Fund even if the calendar year distribution requirement is not met.

The Funds may invest in shares of foreign corporations which may be
classified under the Code as passive foreign investment companies (PFICs").
In general, a foreign corporation is classified as a PFIC if at least one-
half of its assets constitute investment-type assets or 75% or more of its
gross income is investment-type income. If a Fund receives a so-called "excess
distribution" with respect to PFIC stock, the Fund itself may be subject to
tax on a portion of the excess distribution, whether or not the corresponding
income is distributed by the Fund to Shareholders. In general, under the
PFIC rules, an excess distribution is treated as having been realized ratably
over the period during which a Fund held the PFIC shares. A Fund itself will
be subject to tax on the portion, if any, of an excess distribution that is
so allocated to prior Fund taxable years and an interest factor will be added
to the tax, as if the tax had been payable in such prior taxable years.
Certain distributions from a PFIC as well as gain from the sale of PFIC
shares are treated as excess distributions. Excess distributions are
characterized as ordinary income even though, absent application of the PFIC
rules, certain excess distributions might have been classified as capital gain.

The Funds may be eligible to elect alternative tax treatment with
respect to PFIC shares. Under an election that currently is available in
some circumstances, a Fund generally would be required to include in its g
ross income its share of the earnings of a PFIC on a current basis, regardless
of whether distributions are received from the PFIC in a given year. If this
election were made, the special rules, discussed above, relating to the
taxation of excess distributions, would not apply. In addition, another
election may be available that would involve marking to market the Fund's
PFIC shares at the end of each taxable year (and on certain other dates
prescribed in the Code), with the result that unrealized gains are treated as t
though they were realized. If this election were made, tax at the Fund level
under the PFIC rules would generally be eliminated, but the Fund could, in
limited circumstances, incur nondeductible interest charges. The Fund's
intention to qualify annually as a regulated investment company may limit
its elections with respect to PFIC shares.

Because the application of the PFIC rules may affect, among other
things, the character of gains, the amount of gain or loss and the timing of
the recognition of income with respect to PFIC shares, as well as subject a
Fund itself to tax on certain income from PFIC shares, the amount that must be
distributed to Shareholders, and which will be taxed to Shareholders as ordinary
income or long-term capital gain, may be increased or decreased substantially
as compared to a fund that did not invest in PFIC shares.

Income received by a Fund from sources within a foreign country may
be subject to withholding taxes and other taxes imposed by that country. Tax
conventions between certain countries and the U.S. may reduce or eliminate
such taxes.

<PAGE>
Under the Code, gains or losses attributable to fluctuations in
exchange rates which occur between the time a Fund accrues income or other
receivables or accrues expenses or other liabilities denominated in a foreign
currency and the time that Fund actually collects such receivables or pays
such liabilities generally are treated as ordinary income or ordinary loss.
Similarly, on disposition of debt securities denominated in a foreign
currency and on disposition of certain futures contracts and forward
contracts, gains or losses attributable to fluctuations in the value of foreign
currency between the date of acquisition of the security or contract and the
date of disposition also are treated as ordinary gain or loss. These gains
or losses, referred to under the Code as "Section 988" gains or losses, may
increase or decrease the amount of a Fund's net investment income to be
distributed to its Shareholders as ordinary income.

Debt securities purchased by a Fund may be treated for federal
income tax purposes as having original issue discount. Original issue
discount essentially represents interest for federal income tax purposes and
can be defined generally as the excess of the stated redemption price at
maturity over the issue price. Original issue discount, whether or not any
income is actually received by a Fund, is treated for U.S. federal income tax
purposes as ordinary income earned by the Fund, and therefore is subject to
the distribution requirements of the Code. Generally, the amount of original
issue discount included in the income of a Fund each year is determined on
the basis of a constant yield to maturity which takes into account the com-
pounding of accrued but unpaid interest.

Some of the debt securities may be purchased by the Fund at a discount
which exceeds the original issue discount on such debt securities, if any.
This additional discount represents market discount for Federal income tax
purposes. The gain realized on the disposition of any taxable debt security
having market discount will be treated as ordinary income to the extent it
does not exceed the accrued market discount on such debt security.
Generally, market discount accrues on a daily basis for each day the debt
security is held by the Fund at a constant rate over the time remaining to
the debt security's maturity or, at the election of the Fund, at a
constant yield to maturity which takes into account the semi-annual
compounding of interest.

Certain options, futures contracts and forward contracts in which the
Templeton Stock, Bond, Asset Allocation and International Funds may invest
are "section 1256 contracts." Gains or losses on section 1256 contracts
generally are considered 60% long-term and 40% short-term capital gains or
losses ("60-40"), except for certain foreign currency gains and losses which
will be treated as ordinary in character. Also, section 1256 contracts held
by a Fund at the end of each taxable year (and, in some cases, for purposes
of the 4% excise tax, on October 31 of each year) are "marked-to-market" with
the result that unrealized gains or losses are treated as though they were
realized.

The hedging transactions undertaken by certain of the Funds may result
in "straddles" for federal income tax purposes. The straddle rules may
affect the character of gains (or losses) realized by a Fund. In addition,
losses realized by a Fund on positions that are part of a straddle may be
deferred under the straddle rules, rather than being taken into account in
calculating the taxable income for the taxable year in which such losses are
realized. Because only a few regulations implementing the straddle rules
have been promulgated, the tax consequences to the Funds of hedging
transactions are not entirely clear. The hedging transactions may increase
the amount of short-term capital gain realized by the Funds which is
taxed as ordinary income when distributed to Shareholders.

Each Fund may make one or more of the elections available under the Code
which are applicable to straddles. If the Fund makes any of the elections,
the amount, character and timing of the recognition of gains or losses from
the affected straddle positions will be determined under rules that vary
according to the elections made. The rules applicable under certain of the
elections may operate to accelerate the recognition of gains or losses from
the affected straddle positions.

Because application of the straddle rules may affect the character of
gains or losses, defer losses and/or accelerate the recognition of gains or
losses from the affected straddle positions, the amount which must be dis-
tributed to shareholders, and which will be taxed to shareholders as
ordinary income or long-term capital gain, may be increased or decreased
substantially as compared to a fund that did not engage in such hedging
transactions.

The requirements under the Code relating to the qualification of a
Fund as a regulated investment company may limit the extent to which a Fund
may engage in futures and forward currency contracts.

Distributions of any net investment income and of any net realized
short term capital gains are treated as ordinary income for tax purposes in
the hands of the Separate Account Shareholder. The excess of any net long-
term capital gains over net short-term capital losses will, to the extent
distributed and designated by the distributing Fund as a capital gain
dividend, be treated as long-term capital gains in the hands of the
Shareholder regardless of the length of time a Separate Account may have
held the Shares.

Reference is made to the Prospectus for the applicable Contract for
information regarding the federal income tax treatment of distributions to
owners of contracts.

<PAGE>

DESCRIPTION OF SHARES

The Shares of each Fund have the same preferences, conversion and
other rights, voting powers, restrictions and limitations as to dividends,
qualifications, and terms and conditions of redemption, except as follows:
all consideration received from the sale of Shares of a Fund, together with
all income, earnings, profits and proceeds thereof, belongs to that Fund and is
charged with liabilities in respect to that Fund and of that Fund's part of
general liabilities of the Trust in the proportion that the total net assets
of the Fund bear to the total net assets of all Funds. The net asset value
of a Share of a Trust is based on the assets belonging to that Fund less the
liabilities charged to that Fund, and dividends are paid on Shares of a Fund
only out of lawfully available assets belonging to that Fund. In the event
of liquidation or dissolution of the Trust, the Shareholders of each Fund
will be entitled, out of assets of the Fund available for distributions, to
the assets belonging to that particular Fund.

Under Massachusetts law, shareholders could, under certain cir-
cumstances, be held personally liable for the obligations of the Trust.
However, the Declaration of Trust disclaims liability of the Shareholders,
Trustees or officers of the Trust for acts or obligations of the Trust,
which, under the terms of the Declaration of Trust, are binding only on the
property of the Trust, which, under the terms of the Declaration of Trust,
are binding only on the property of the Trust. The Declaration of the Trust
provides for indemnification out of Trust property for all loss and expense
of any Shareholder held personally liable for the obligations of the Trust.
The risk of a Shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which the Trust itself would be
unable to meet its obligations and, thus, should be considered remote.

YIELD AND PERFORMANCE INFORMATION

The Trust may, from time to time, include the yield and effective
yield of Templeton Money Market Fund or the total return of all Funds in
advertisements or reports to Shareholders or prospective investors.
Performance information for the Funds will not be advertised unless
accompanied by comparable performance information for a separate account to
which the Funds offer their Shares.

Current yield for Templeton Money Market Fund will be based on the
change in the value of a hypothetical investment (exclusive of capital
changes) over a particular seven-day period, less a pro-rata share of
Templeton Money Market Fund expenses accrued over that period (the "base
period"), and stated as a percentage of the investment at the start of the
base period (the "base period return"). The base period return is then
annualized by multiplying by 365/7, with the resulting yield figure carried
to at least the nearest hundredth of one percent. "Effective Yield" for
Templeton Money Market Fund assumes that all dividends received during an
annual period have been reinvested. Calculation of "effective yield" begins
with the same "base period return" used in the calculation of yield, which is
then annualized to reflect weekly compounding pursuant to the following
formula:

EFFECTIVE YIELD = (1 + Base Period Return) 365/7 - 1

YIELD = 2[(1 + A-B)6 - 1]
cd

WHERE a = dividend and interest earned during the period,

b = expenses accrued for the period (net of
reimbursements),

c = the average daily number of Shares outstanding
during the period that were
entitled to receive dividends, and

d = the maximum offering price per Share on the last day
of the period.

For the seven-day period ending December 31, 1994, the 7-day
annualized yield of Money Market Fund was 4.96% and the effective yield of
Money Market Fund was 5.05%.

Quotations of average annual total return for the Funds will be
expressed in terms of the average annual compounded rate of return for
periods in excess of one year or the total return for periods less than one
year of a hypothetical investment in the Funds over periods of one, five, or
ten years (up to the life of a Fund) calculated pursuant to the following
formula: P(1 + T)n = ERV (where P = a hypothetical initial payment of
$1,000, T = the average annual total return for periods of one year or more
or the total return for periods of less than one year, n = the number of
years, and ERV = the ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the period). All total return figures reflect the
deduction of the maximum initial sales charge and deduction of a proportional
share of Fund expenses on an annual basis, and assume that all dividends and
distributions are reinvested when paid. Templeton Money Market

<PAGE>

Fund's average annual total return for the one- and five-year periods ended
December 31, 1994 and from inception on August 31, 1988 through December 31,
1994, was 3.48%, 4.40%, and 5.05% respectively. Templeton Bond Fund's
average annual total return for the one- and five-year periods ended December
31, 1994 and from inception on August 31, 1988 through December 31, 1994,
was -4.88%, 6.63%, and 6.73%, respectively. Templeton Stock Fund's average
annual total return for the one- and five-year periods ended December 31,
1994 and from inception on August 31, 1988 through December 31, 1994, was
- -2.20%, 9.75%, and 10.40%, respectively. Templeton Asset Allocation Fund's
average annual total return for the one- and five-year periods ended December
31, 1994 and from inception on August 31, 1988 through December 31, 1994, was
-2.96%, 9.22%, and 9.79%, respectively. Templeton International Fund's
average annual total return for the one-year period ended December 31, 1994
and from inception on May 1, 1992 through December 31, 1994, was -2.22% and
11.98%, respectively.

Performance information for a Fund may be compared, in reports and
promotional literature, to: (i) unmanaged indices so that investors may
compare the Fund's results with those of a group of unmanaged securities
widely regarded by investors as representative of the securities market
in general; (ii) other groups of mutual funds tracked by Lipper Analytical
Services, Inc., a widely used independent research firm which ranks mutual
funds by overall performance, investment objectives and assets, or tracked
by other services, companies, publications, or persons who rank mutual funds
on overall performance or other criteria; and (iii) the Consumer Price Index
(measure for inflation) to assess the real rate of return from an investment
in a Fund. Unmanaged indices may assume the reinvestment of dividends but
generally do not reflect deductions for administrative and management costs
and expenses.

Quotations of yield or total return for a Fund will not take into
account charges and deductions against any separate account to which the
Funds' Shares are sold or charges and deductions against variable insurance
contracts, although comparable performance information for a separate account
will take such charges into account. Performance information for a Fund
reflects only the performance of a hypothetical investment in a Fund during
the particular time period on which the calculations are based. Performance
information should be considered in light of a Fund's investment objective
and policies, characteristics and quality of the portfolio and the market
conditions during the given time period, and should not be considered as a
representation of what may be achieved in the future.

From time to time, each Fund and the Investment Managers may also
refer to the following information:

(1) The Investment Managers' and their affiliates' market share of
international equities managed in mutual funds prepared or
published by Strategic Insight or a similar statistical
organization.

(2) The performance of U.S. equity and debt markets relative to
foreign markets prepared or published by Morgan Stanley
Capital International or a similar financial organization.

(3) The capitalization of U.S. and foreign stock markets as
prepared or published by the International Finance Corp.,
Morgan Stanley Capital International or a similar financial
organization.

(4) The geographic distribution of the Fund's portfolio.

(5) The gross national product and populations, including age
characteristics, of various countries as published by
various statistical organizations.

(6) To assist investors in understanding the different returns
and risk characteristics of various investments, the Fund
may show historical returns of various investments and
published indices (E.G., Ibbotson Associates, Inc. Charts
and Morgan Stanley EAFE - Index).

(7) The major industries located in various jurisdictions as
published by the Morgan Stanley Index.

(8) Rankings by DALBAR Surveys, Inc. with respect to mutual fund
shareholder services.

<PAGE>

(9) Allegorical stories illustrating the importance of per-
sistent long-term investing.

(10) The Fund's portfolio turnover rate and its ranking relative
to industry standards as published by Lipper Analytical
Services, Inc. or Morningstar, Inc.

(11) A description of the Templeton organization's investment
management philosophy and approach, including its worldwide
search for undervalued or "bargain" securities and its
diversification by industry, nation and type of stocks or
other securities.

(12) Quotations from the Templeton organization's founder, Sir
John Templeton <F1>, advocating the virtues of diversifica-
tion and long-term investing, including the following:

o "Never follow the crowd. Superior performance is
possible only if you invest differently from the
crowd."

o "Diversify by company, by industry and by country."

o "Always maintain a long-term perspective."

o "Invest for maximum total real return."

o "Invest - don't trade or speculate."

o "Remain flexible and open-minded about types of
investment."

o "Buy low."

o "When buying stocks, search for bargains among
quality stocks."

o "Buy value, not market trends or the economic outlook."

o "Diversify. In stocks and bonds, as in much else,
there is safety in numbers."

o "Do your homework or hire wise experts to help you."

o "Aggressively monitor your investments."

o "Don't panic."

o "Learn from your mistakes."

o "Outperforming the market is a difficult task."

o "An investor who has all the answers doesn't even
understand all the questions."

o "There's no free lunch."

o "And now the last principle: Do not be fearful or
negative too often."

- -----------------
<F1> Sir John Templeton, who formerly served as Chairman of the Trust's Board,
is not involved in nvestment decisions, which are made by each Fund's
Investment Manager.

In addition, each Fund and the Investment Managers may also refer to
the number of shareholders in the Fund or the aggregate number of share-
holders in the Franklin Templeton Group or the dollar amount of fund and
private account assets under management in advertising materials.

FINANCIAL STATEMENTS

The financial statements contained in the Trust's December 31, 1994
Annual Report to Shareholders are incorporated herein by reference.

<PAGE>
APPENDIX

DESCRIPTION OF BOND RATINGS
MOODY'S INVESTORS SERVICE

Aaa: Bonds which are rated Aaa by Moody's Investors Service Inc.
("Moody's") are judged to be of the best quality. They carry the smallest
degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.

Aa: Bonds which are rated Aa are judged to be of high quality by
all standards. Together with a Aaa group, they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or fluctuation
of protective elements may be of greater amplitude, or there may be other
elements present which make the long-term risks appear somewhat greater than
the Aaa securities.

A: Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade obligations.
Factors giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to impairment
some time in the future.

Baa: Bonds which are rated Baa are considered as medium-grade
obligations, (I.E., they are neither highly protected nor poorly secured).
Interest payments and principal security appear adequate for the present, but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as well.

Ba: Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and,
thereby, not well safeguarded during other good and bad times over the
future. Uncertainty of position characterizes bonds in this class.

B: Bonds which are rated B generally lack characteristics of
the desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the security over any long period of time may
be small.

Caa: Bonds which are rated Caa are of poor standing. Such
securities may be in default or there may be present elements of danger with
respect to principal or interest.

Ca: Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.

C: Bonds which are rated C are the lowest rated class of bonds
are regarded as having extremely poor prospects of ever attaining any real
investment standing.

Absence of Rating: Where no rating has been assigned or where a
rating has been suspended or withdrawn, it may be for reasons unrelated to
the quality of the issue.

Should no rating be assigned, the reason may be one of the following:

1. An application for rating was not received or accepted.

2. The issue or issuer belongs to a group of securities that
are not rated as a matter of policy.

3. There is a lack of essential data pertaining to the issue or
issuer.

4. The issue was privately placed, in which case the rating is
not published in Moody's publications.

Suspension or withdrawal may occur if new and material circumstances
arise, the effects of which preclude satisfactory analysis; if there is no
longer available reasonable up-to-date data to permit a judgment to be
formed; if a bond is called for redemption; or for other reasons.

Note: Moody's applies numerical modifiers 1, 2 and 3 in each
generic ratings classification from Aa through B in its corporate bond rating
system. The modifier 1 indicates that the security ranks in the higher end
of its generic rating category; the modifier 2 indicates a mid-range ranking;
and the modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.

<PAGE>
STANDARD & POOR'S CORPORATION

AAA: Debt rated "AAA" by Standard & Poor's Corporation ("S&P") has
the highest rating assigned by S&P. Capacity to pay interest and repay
principal is extremely strong.

AA: Debt rated "AA" has a very strong capacity to pay interest
and repay principal and differs from the higher rated issues only in a small
degree.

A: Debt rated "A" has a very strong capacity to pay interest
and repay principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt in the
highest rated categories.

BBB: Debt rated "BBB" is regarded as having an adequate capacity
to pay interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for debt in this category than in higher rated categories.

BB, B, CCC, CC, C: Debt rated "BBB", "B", "CCC", "CC" and
"C" are regarded, on balance, as predominantly speculative with respect to
capacity to pay interest and repay principal in accordance with the terms of
this obligation. "BB" indicates that the lowest degree of speculation and
"C" the highest degree of speculation. While such debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.

BB: Debt rated "BB" has less near-term vulnerability to default
than other speculative issues. However, it faces major ongoing uncertainties
or exposure to adverse business, financial, or economic conditions which
could lead to inadequate capacity to meet timely interest and principal
payments. The "BB" rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied "BBB-" rating.

B: Debt rated "B" has a greater vulnerability to default but cur-
rently has the capacity to meet interest payments and principal repayments.
Adverse business, financial, or economic conditions will likely impair cap-
acity or willingness to pay interest and repay principal. The "B" rating
category is also used for debt subordinated to senior debt that is assigned
an actual or implied "BB" or "BB-" rating.

CCC: Debt rated "CCC" has a currently indefinable vulnerability to
default, and is dependent upon favorable business, financial and economic
conditions to meet timely payment of interest and repayment of principal. In
the event of adverse business, financial or economic conditions, it is not
likely to have to capacity to pay interest and repay principal. The "CCC"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "B" or "B-" rating.

CC: The rating "CC" is typically applied to debt subordinated to
senior debt that is assigned an actual or implied "CCC" rating.

C: The rating "C" is typically applied to debt subordinated to
senior debt which is assigned an actual or implied "CCC-" debt rating. The
"C" rating may be used to cover a situation where a bankruptcy petition has
been filed, but debt service payments are continued.

CI: The rating "CI" is reserved for income bonds on which no
interest is being paid.

D: Debt rated "D" is in payment default. The "D" rating is
used when interest payments are not made on the date due even if the
applicable grace periods has not expired, unless S&P believe that such
payments will be made during such grace period. The "D" rating also will be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.

Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be
modified by the addition of a plus or minus sign to show relative standing
within the major rating categories.

NR: Indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate
a particular type of obligation as a matter of policy.

DESCRIPTION OF PREFERRED STOCK RATINGS
MOODY'S INVESTORS SERVICE

aaa: considered to be a top-quality preferred stock. This rating
indicates good asset protection and the least risk of dividend impairment
within the universe of preferred stocks.

aa: considered a high-grade preferred stock. This rating
indicates that there is a reasonable assurance that earnings and asset
protection will remain relatively well maintained in the foreseeable future.

<PAGE>

a: considered to be an upper-medium-grade preferred stock.
While risks are judged to be somewhat greater than in the aaa and aa
classifications, earnings and asset protection are, nevertheless, expected to
be maintained at adequate levels.

baa: considered to be medium-grade, neither highly protected nor
poorly secured. Earnings and asset protection appear adequate at present but
may be questionable over any great length of time.

ba: considered to have speculative elements and its future
cannot be considered well assured. Earnings and asset protection may be very
moderate and not well safeguarded during adverse periods. Uncertainty of
position characterizes preferred stocks in this class.

b: generally lacks the characteristics of a desirable invest-
ment. Assurance of dividend payments and maintenance of other terms of the
issue over any long period of time may be small.

caa: likely to be in arrears on dividend payments. This rating
designation does not purport to indicate the future status of payments.

ca: speculative in a high degree and is likely to be in arrears
on dividends with little likelihood of eventual payments.

c: lowest rated class of preferred or preference stock. Issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.

Moody's applies numerical modifiers 1, 2 and 3 in each rating class-
ification: the modifier 1 indicates that the security ranks in the higher
end of its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the issue ranks in the lower end
of its generic rating category.

STANDARD & POOR'S CORPORATION

"AAA": This is the highest rating that may be assigned by S&P to a
preferred stock issue and indicates an extremely strong capacity to pay the
preferred stock obligations.

"AA": A preferred stock issue rated "AA" also qualifies as a high-
quality fixed-income security. The capacity to pay preferred stock
obligations is very strong, although not as overwhelming as for issues rated
"AAA."

"A": An issue rated "A" is backed by a sound capacity to pay the
preferred stock obligations, although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions.

"BBB": An issue rated "BBB" is regarded as backed by an adequate
capacity to pay the preferred stock obligations. Whereas it normally
exhibits adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to make
payments for preferred stock in this category than for issues in the "A"
category.

"BB", "B", "CCC": Preferred stock rated "BB", "B", and "CCC" are
regarded, on balance, as predominantly speculative with respect to the
issuer's capacity to pay preferred stock obligations. "BB" indicates the
lowest degree of speculation and "CCC" the highest degree of speculation.
While such issues will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk exposures to
adverse conditions.

"CC": The rating "CC" is reserved for a preferred stock issue in
arrears on dividends or sinking fund payments but that is currently paying.

"C": The preferred stock rated "C" is a non-paying issue.

"D": A preferred stock rated "D" is a non-paying issue with the
issuer in default on debt instruments.

NR indicates that no rating has been requested, that there is in-
sufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.

Plus (+) or Minus(-): To provide more detailed indications of
preferred stock quality, the ratings from "AA" to "CCC" may be modified by
the addition of a plus or minus sign to show relative standing within the
major rating categories.

<PAGE>

DESCRIPTION OF COMMERCIAL PAPER RATINGS
MOODY'S INVESTORS SERVICE

The term "commercial paper" as used by Moody's means promissory
obligations not having anoriginal maturity in excess of nine months.

Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment capacity of rated issuers:

Issuers rated PRIME-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations.
Prime-1 repayment capacity will normally be evidenced by the following
characteristics:

- Leading market positions in well-established industries.

- High rates of return on funds employed.

- Conservative capitalization structures with moderate
reliance on debt and ample asset protection.

- Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.

- Well-established access to a range of financial markets and
assured sources of alternate liquidity.

Issuers rated PRIME-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This
will normally be evidenced by many of the characteristics cited above but to
a lesser degree. Earnings trends and coverage ratios, while sound, will be
more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.

Issuers rated PRIME-3 (or supporting institutions) have an
acceptable capacity for repayment of short-term promissory obligations. The
effect of industry characteristics and market composition may be more pro-
nounced. Variability in earnings and profitability may result in changes in the
level of debt protection measurements and the requirement for relatively high
financial leverage. Adequate alternate liquidity is maintained.

Issuers rated NOT PRIME do not fall within any of the Prime rating
categories.

STANDARD & POOR'S CORPORATION

S&P's commercial paper rating is a current assessment of the like-
lihood of timely payment of debt having an original maturity of no more than
365 days. Ratings are graded into four categories ranging from "A" for the
highest quality obligations to "D" for the lowest. The four categories are
as follows:

A: Commercial paper rated "A" is regarded as having the
greatest capacity for timely payment. Issues in this
category are delineated with the numbers 1, 2 and 3 to
indicate the relative degree of safety.

A-1: Commercial paper rated "A-1" is regarded as having a very
strong degree of safety regarding timely payment. A "+"
designation is applied to those issues rated "A-1" which
possess an overwhelming degree of safety.

A-2: Commercial paper rated "A-2" is regarded as having a strong
capacity for timely payment; however, the relative degree of
safety is not as high as for issues designated "A-1".

A-3: Commercial paper rated "A-3" is regarded as having a
satisfactory capacity for timely payment. They are,
however, somewhat more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher
designations.

B: Commercial paper rated "B" is regarded as having only an
adequate capacity for timely payment and such capacity may
be damaged by changing conditions or short-term adversities.

C: Commercial paper rated "C" is regarded as having a doubtful
capacity for repayment.

D: Commercial paper rated "D" is for a payment default. The "D"
rating is used when interest payments or principal payments
are not made on the date due even if the applicable grace
period has not expired, unless S&P believes that such payments
will be made during such grace period.

<PAGE>
PART C

OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS

(a) FINANCIAL STATEMENTS

Part A:

Financial Highlights

Part B:

Incorporated by reference to Registrant's 1994 Annual Report:

(1) Report of Independent Certified Public Accountants

(2) Statement of Assets and Liabilities as of
December 31, 1994

(3) Statement of Operations for fiscal period
ended December 31, 1994

(4) Statement of Changes in Net Assets

(5) Investment Portfolio as of December 31, 1994

(6) Notes to Financial Statements

(b) EXHIBITS

(1) Declaration of Trust 1

(2) By-Laws 1

(3) N/A

(4) N/A

1. Reference is made to Registration Statement No. 33-20313, filed on
February 25, 1988.

<PAGE>

(5) (a) Amended and Restated Investment
Management Agreement for
Templeton Stock Fund, Templeton
International Fund and Templeton
Asset Allocation Fund

(b) Amended and Restated Investment Management
Agreement for Templeton Money Market Fund
and Templeton Bond Fund

(6) Distribution Agreement 5

(7) N/A

(8) Custodian Agreement 2

(9) Form of Business Management Agreement 4

(10) Opinion and consent of counsel - filed with
Rule 24f-2 Notice on February 28, 1995

(11) Consent of independent certified public accountants

(12) N/A

(13) Letter concerning initial capital 3

(14) N/A

(15) N/A

(16) Schedule showing computation of performance
quotations provided in response to Item 22 (unaudited)

- --------------

2. Reference is made to Pre-Effective Amendment No. 1 to the Registration
Statement, filed on June 8, 1988.

3. Reference is made to Pre-Effective Amendment No. 2 to the Registration
Statement, filed on August 26, 1988.

4. Reference is made to Post-Effective Amendment No. 6 to the
Registration Statement, filed on October 30, 1992.

5. Reference is made to Post-Effective Amendment No. 8 to the
Registration Statement, filed on March 2, 1994.

<PAGE>

ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

As of March 24, 1995, Phoenix Home Life Mutual Insurance
Company, a Connecticut corporation ("Phoenix Home Life"), on
its own behalf and on behalf of its Phoenix Variable
Accumulation Account, owned of record 63% of the outstanding
shares of Templeton Stock Fund, 40% of the outstanding
shares of Templeton Asset Allocation Fund, 62% of the out-
standing shares of Templeton Bond Fund, 100% of the
outstanding shares of Templeton Money Market Fund and 40% of
the outstanding shares of Templeton International Fund. As
of March 24, 1995, The Travelers Insurance Company ("The
Travelers"), on behalf of The Travelers Fund U for
Variable Annuities, owned of record 37% of the outstanding
shares of Templeton Stock Fund, 44% of the outstanding
shares of Templeton Asset Allocation Fund, and 38% of the
outstanding shares of Templeton Bond Fund. As of March 24,
1995, The Variable Life Insurance company ("VALIC"), a Texas
Corporation, on behalf of The Variable Life Insurance
Company Separate Account A, owned of record 16% of the
outstanding shares of Templeton Asset Allocation Fund and
59% of Templeton International Fund. Phoenix Home Life, The
Travelers and VALIC will vote shares in accordance with the
voting instructions of holders of variable annuity
contracts issued by Phoenix Home Life, The Travelers or
VALIC for which the Registrant serves as the investment
vehicle.

ITEM 26. NUMBER OF RECORD HOLDERS

Number of Record
Holders as of
TITLE OF CLASS MARCH 24, 1995

Templeton Stock Fund 2
Templeton Bond Fund 2
Templeton Asset Allocation Fund 3
Templeton Money Market Fund 1
Templeton International Fund 3

ITEM 27. INDEMNIFICATION

Reference is made to Article IV of the Registrant's
Declaration of Trust, which is incorporated herein by
reference.

Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers
and controlling persons of the Registrant by the Registrant
pursuant to the Declaration of Trust or otherwise, the
Registrant is aware that in the opinion of the Securities
and Exchange Commission, such indemnification is against
public policy as expressed in the Act and, therefore, is
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by trustees,
officers or controlling persons of the Registrant in
connection with the successful defense of any act, suit or
proceeding) is asserted by such trustees, officers or
controlling persons in connection with the shares
being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the
final adjudication of such issues.
<PAGE>
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER AND ITS
OFFICERS AND DIRECTORS

The business and other connections of Registrant's
Investment Managers are described in Part B of this
Registration Statement.

For information relating to the Investment Managers'
officers and directors, reference is made to Form ADV filed
under the Investment Advisers Act of 1940 by Templeton
Investment Counsel, Inc.

ITEM 29. PRINCIPAL UNDERWRITERS

(a) Franklin Templeton Distributors, Inc. also acts as
principal underwriter of shares of Templeton Growth
Fund, Inc., Templeton Funds, Inc., Templeton Smaller
Companies Growth Fund, Inc., Templeton Income Trust,
Templeton Real Estate Securities Fund, Templeton
Capital Accumulator Fund, Inc., Templeton Developing
Markets Trust, Templeton American Trust, Inc.,
Templeton Institutional Funds, Inc., Templeton
Global Opportunities Trust, Templeton Global
Investment Trust, AGE High Income Fund, Inc.,
Franklin Balance Sheet Investment Fund, Franklin
California Tax Free Income Fund, Inc., Franklin
California Tax Free Trust, Franklin Custodian Funds,
Inc., Franklin Equity Fund, Franklin Federal Tax-
Free Income Fund, Franklin Gold Fund, Franklin
Investors Securities Trust, Franklin International
Trust, Franklin Managed Trust, Franklin Municipal
Securities Trust, Franklin New York Tax-Free
Income Fund, Franklin New York Tax-Free Trust,
Franklin Pennsylvania Investors Fund, Franklin
Premier Return Fund, Franklin Strategic Series,
Franklin Tax-Advantaged High Yield Securities Fund,
Franklin Tax-Advantaged International Bond Fund,
Franklin Tax-Advantaged U.S. Government Securities
Fund, Franklin Tax-Free Trust, Franklin Strategic
Mortgage Portfolio, Institutional Fiduciary Trust,
Franklin Money Fund, Franklin Federal Money Fund,
Franklin Tax Exempt Money Fund, Franklin Real Estate
Securities Fund and Franklin Templeton Japan Fund.

(b) The directors and officers of FTD, located at 700
Central Avenue, P.O. Box 33030, St. Petersburg,
Florida 33733, are as follows:

<TABLE>
<CAPTION>
POSITION WITH POSITION WITH
NAME UNDERWRITER THE REGISTRANT

<S> <C> <C>
Charles B. Johnson Chairman of the Board Trustee and Vice
President

Gregory E. Johnson President None

Rupert H. Johnson, Jr. Executive Vice President None
and Director

Harmon E. Burns Executive Vice President None
and Director

Edward V. McVey Senior Vice President None

Kenneth V. Domingues Senior Vice President None

</TABLE>
<PAGE>

<TABLE>
<CAPTION>
POSITION WITH POSITION WITH
NAME UNDERWRITER THE
REGISTRANT
<S> <C> <C>

Martin L. Flanagan Senior Vice President Vice
and Treasurer President

William J. Lippman Senior Vice President None

Deborah R. Gatzek Senior Vice President None
and Assistant Secretary

Richard C. Stoker Senior Vice President None

Charles E. Johnson Senior Vice President President

Loretta Fry Vice President None

James K. Blinn Vice President None

Richard O. Conboy Vice President None

James A. Escobedo Vice President None

Robert N. Geppner Vice President None

Mike Hackett Vice President None

Peter Jones Vice President None

Philip J. Kearns Vice President None

Ken Leder Vice President None

Jack Lemein Vice President None

John R. McGee Vice President None

Thomas M. Mistele Vice President Secretary

Harry G. Mumford Vice President None

Vivian J. Palmieri Vice President None

Kent P. Strazza Vice President None

Leslie M. Kratter Secretary None

John R. Kay Assistant Vice President Vice
President

Karen DeBellis Assistant Treasurer None

Philip A. Scatena Assistant Treasurer None

</TABLE>

<PAGE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS

The accounts, books, and other documents required to be
maintained by Registrant pursuant to Section 31(a) of the
Investment Company Act of 1940 and rules promulgated there-
under are in the possession of Templeton Variable Annuity
Company, 700 Central Avenue, St. Petersburg, Florida
33733-3080.

ITEM 31. MANAGEMENT SERVICES

Not applicable.

ITEM 32. UNDERTAKINGS

(a) Not applicable.

(b) Not applicable.

(c) Registrant undertakes to furnish to each person to
whom a Prospectus is provided a copy of its latest
Annual Report, upon request and without charge.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant certifies that it has
met the requirements for effectiveness of the Registration Statement pursuant
to Rule 485(b) under the Securities Act of 1933 and has duly caused this
Amendment to this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of St. Petersburg,
Florida on the 26th day of April, 1995.

TEMPLETON VARIABLE PRODUCTS SERIES FUND

By: ___________________________
Charles E. Johnson*
President

*By: /s/ Thomas M. Mistele
____________________________
Thomas M. Mistele
as attorney-in-fact**

Pursuant to the requirements of the Securities Act of 1933,
this Post-Effective Amendment to this Registration Statement has been signed
below by the following persons in the capacities and on the date indicated:

SIGNATURE TITLE DATE

_____________________ President April ___, 1995
Charles E. Johnson* (Chief Executive
Officer) and Trustee

_____________________ Trustee April ___, 1995
Hasso-G von Diergardt-Naglo*

_____________________ Trustee April ___, 1995
Fred R. Millsaps*

____________________ Trustee April ___, 1995
F. Bruce Clarke*

<PAGE>

____________________ Trustee April ___, 1995
Betty P. Krahmer*

____________________ Trustee April ___, 1995
Charles B. Johnson*

___________________ Trustee April ___, 1995
Harris J. Ashton*

___________________ Trustee April ___, 1995
S. Joseph Fortunato*

___________________ Trustee April ___, 1995
Andrew H. Hines, Jr.*

____________________ Trustee April ___, 1995
Gordon S. Macklin*

____________________ Trustee April ___, 1995
Nicholas F. Brady*

____________________ Trustee April ___, 1995
John G. Bennett, Jr.*

____________________ Treasurer April ___, 1995
James R. Baio* (Principal
Financial
Officer)

*By: /s/ Thomas M. Mistele
______________________
Thomas M. Mistele**
as attorney-in-fact

** Powers of Attorney were previously filed with Registration
Statement No. 33-20313 and are incorporated by reference or
filed herewith.

<PAGE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned, being a duly elected
Trustee of Templeton Variable Products Series Fund (the "Trust"), constitutes
and appoints Allan S. Mostoff, Jeffrey L. Steele, William J. Kotapish and
Thomas M. Mistele, and each of them, his true and lawful attorneys-in-fact
and agents with full power of substitution and resubstitution for him in his
name, place and stead, in any and all capacities, to sign the Trust's
registration statement and any and all amendments thereto, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorneys-in-
fact and agents full power and authority to do and perform each and every act
and thing requisite and necessary to be done, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and conforming
all that said attorneys-in-fact and agents, or any of them, or his substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.

Dated: February 25, 1994 /s/ Nicholas F. Brady
---------------------------
Nicholas F. Brady

<PAGE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned, being a duly elected
Treasurer and Chief Financial Officer of Templeton Variable Products Series Fund
(the "Trust"), constitutes and appoints Allan S. Mostoff, Jeffrey L. Steele,
William J. Kotapish and Thomas M. Mistele, and each of them, his true and lawful
attorneys-in-fact and agents with full power of substitution and resubstitution
for him in his name, place and stead, in any and all capacities, to sign the
Trust's registration statement and any and all amendments thereto, and to file
the same, with all exhibits thereto, and other documents in connection there-
with, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each
and every act and thing requisite and necessary to be done, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
conforming all that said attorneys-in-fact and agents, or any of them, or his
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.

Dated: February 25, 1994 /s/ James R. Baio
---------------------------
James R. Baio

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

EXHIBITS
FILED
WITH

POST-EFFECTIVE AMENDMENT NO. 9 TO
REGISTRATION STATEMENT

FORM N-1A

TEMPLETON VARIABLE PRODUCTS SERIES FUND

<PAGE>
EXHIBIT LIST

EXHIBIT NUMBER NAME OF EXHIBIT

(11) Consent of Independent Public
Accountants

(16) Schedule Showing Computation of
Performance Quotations Provided
in Response to Item 22
(Unaudited)

(5) (a) Amended and Restated Investment
Management Agreement for
Templeton Stock Fund, Templeton
International Fund and
Templeton Asset Allocation Fund

(5) (b) Amended and Restated Investment
Management Agreement for
Templeton Money Market Fund and
Templeton Bond Fund

McGladrey & Pullen, LLP
555 Fifth Avenue
New York, NY 10017-2416

CONSENT OF INDEPENDENT AUDITORS

We hereby consent to the use of our report dated February 3,
1995 on the financial statements of Templeton Stock Fund, Templeton
International Fund, Templeton Asset Allocation Fund, Templeton
Money Market Fund and Templeton Bond Fund series of Templeton
Variable Products Series Fund referred to therein which appears in
the 1994 Annual Report to Shareholders, and which is incorporated
herein by reference, in Post-Effective Amendment No. 9 to the
Registration Statement on Form N-1A, File No. 33-20313, as filed
with the Securities and Exchange Commission.

We also consent to the reference to our firm in the Prospectus
under the caption "Financial Highlights" and in the Statement of
Additional Information under the caption "Independent Accountants".

McGladrey & Pullen, LLP

New York, New York
April 11, 1995

EXHIBIT 16

COMPUTATION OF PERFORMANCE QUOTATIONS
PROVIDED IN RESPONSE TO ITEM 22
(UNAUDITED)

TEMPLETON VARIABLE PRODUCTS SERIES FUND
Templeton Money Market Fund

Total Return for One Year

P (1 + T)N = ERV

$1000 (1 + T)1 = $1,034.80

(1 + T) = 1.02435

T = .02435

T = 3.48%

Total Return for Five Years

$1000 (1 + T)5 = $1,240.20

(1 + T)5 = 1.29619

1 + T = 1.0533

T = .0533

T = 4.40%

Total Return Since Inception on August 24, 1988 - 6.35 Years

$1000 (1 + T)6.35 = $1,367.10

(1 + T)6.35 = 1.3214

(1 + T) = 1.0536

T = .0536

T = 5.05%<PAGE>

EXHIBIT 16

COMPUTATION OF PERFORMANCE QUOTATIONS
PROVIDED IN RESPONSE TO ITEM 22
(UNAUDITED)

TEMPLETON VARIABLE PRODUCTS SERIES FUND
Templeton Bond Fund

Total Return for One Year

P (1 + T)N = ERV

$1000 (1 + T)1 = $951.20

(1 + T) = 1.11463

T = .1146

T = -4.88%

Total Return for Five Years

$1000 (1 + T)5 = $1,378.50

(1 + T)5 = 1.56005

1 + T = 1.0930

T = .0930

T = 6.63%

Total Return Since Inception on August 24, 1988 - 6.35 Years

$1000 (1 + T)6.35 = $1,512.10

(1 + T)6.35 = 1.58969

(1 + T) = 1.0907

T = .0907

T = 6.73%<PAGE>

EXHIBIT 16

COMPUTATION OF PERFORMANCE QUOTATIONS
PROVIDED IN RESPONSE TO ITEM 22
(UNAUDITED)

TEMPLETON VARIABLE PRODUCTS SERIES FUND
Templeton Stock Fund

Total Return for One Year

P (1 + T)N = ERV

$1000 (1 + T)1 = $978.00

(1 + T) = 1.34004

T = .34004

T = -2.20%

Total Return for Five Years

$1000 (1 + T)5 = $1,592.50

(1 + T)5 = 1.86658

1 + T = 1.1329

T = .1329

T = 9.75%

Total Return Since Inception on August 24, 1988 - 6.35 Years

$1000 (1 + T)6.35 = $1,874.80

(1 + T)6.35 = 1.91698

(1 + T) = 1.1296

T = .1296

T = 10.40%<PAGE>

EXHIBIT 16

COMPUTATION OF PERFORMANCE QUOTATIONS
PROVIDED IN RESPONSE TO ITEM 22
(UNAUDITED)

TEMPLETON VARIABLE PRODUCTS SERIES FUND
Templeton Asset Allocation Fund

Total Return for One Year

P (1 + T)N = ERV

$1000 (1 + T)1 = $970.40

(1 + T) = 1.26124

T = .2612

T = -2.96%

Total Return for Five Years

$1000 (1 + T)5 = $1,554.20

(1 + T)5 = 1.81394

1 + T = 1.1265

T = .1265

T = 9.22%

Total Return Since Inception on August 24, 1988 - 6.35 Years

$1000 (1 + T)6.35 = $1,809.40

(1 + T)6.35 = 1.86473

(1 + T) = 1.1238

T = .1238

T = 9.76%<PAGE>

EXHIBIT 16

COMPUTATION OF PERFORMANCE QUOTATIONS
PROVIDED IN RESPONSE TO ITEM 22
(UNAUDITED)

TEMPLETON VARIABLE PRODUCTS SERIES FUND
Templeton International Fund

Total Return for One Year

P (1 + T)N = ERV

$1000 (1 + T)1 = $977.80

(1 + T) = 1.47284

T = .47284

T = -2.22%

Total Return Since Inception on May 1, 1992 - 2.67 Years

$1000 (1 + T)2.67 = $1,352.30

(1 + T)2.67 = 1.383

(1 + T) = 1.2143

T = .2143

T = 11.98%<PAGE>

EXHIBIT 16

TEMPLETON VARIABLE PRODUCTS SERIES FUND

TEMPLETON MONEY MARKET FUND YIELDS

Value of Account at Beginning of Period 1.000000

Value of Same Account (excluding capital changes)
at end of seven-day period including all expense
charges 1.000451

Current Yield = .000451 x (365/7) = 4.96%

Effective Yield = (1 + .000451)365/7 - 1 = 5.05%

INVESTMENT MANAGEMENT AGREEMENT

AGREEMENT made as of the 30th day of October, 1992, and amended
and restated as of the February 25, 1994, between TEMPLETON VARIABLE PRODUCTS
SERIES FUND, a Massachusetts business trust (the "Trust"), and TEMPLETON
INVESTMENT COUNSEL, INC., a Florida corporation (the "Investment Manager").
WHEREAS, the Trust currently consists of five portfolios, three of
which are designated as Templeton Stock Fund, Templeton Asset Allocation Fund,
and Templeton International Fund, such portfolios together with all other
portfolios subsequently established by the Trust with respect to which the
Trust desires to retain the Investment Manager to render services hereunder
and with respect to which the Investment Manager is willing to do so, being
herein collectively referred to as the "Funds;"
Therefore, in consideration of the mutual promises and covenants
herein made, the parties hereto understand and agree as follows:
1. The Investment Manager shall manages the investment and
reinvestment of the Trust's assets consistent with the provisions of the
Trust's Agreement and Declaration of Trust and the investment policies adopted
and declared by the Trust's Board of Trustees. In pursuance of the foregoing,
the Investment Manager shall make all determinations with respect to the
investment of the Trust's assets and the purchase and sale of its investment
securities, and shall take all such steps as may be necessary to implement
those determination. Such determinations and services shall include
determining the manner in which any voting rights, rights to consent to
corporate action and any other rights pertaining to the Trust's investment
securities shall be exercised, subject to the guidelines adopted by the Board
of Trustees.
2. The Investment Manager is not required to furnish any personnel,
overhead items or facilities for the Funds.
3. The Investment Manager shall be responsible for selecting
members of securities exchanges, brokers and dealers (such members, brokers
and dealers being hereinafter referred to as "brokers") for the execution of

<PAGE>
the Funds' portfolio transactions consistent with the Fund's brokerage
policies and, when applicable, the negotiation of commissions in connection
therewith.
All recommendations, decisions and placements shall be made in
accordance with the following principles:
(1) Purchase and sale orders will usually be placed with
brokers which are selected by the Investment Manager as able to
achieve "best execution" of such orders. "Best execution" shall
mean prompt and reliable execution at the most favorable security
price, taking into account the other provisions as hereinafter set
forth. The determination of what may constitute best execution
and price in the execution of a securities transaction by a broker
involves a number of considerations, including, without
limitation, the overall direct net economic result to each of the
Funds (involving both price paid or received and any commissions
and other costs paid), the efficiency with which the transaction
is effected, the ability to effect the transaction at all where a
large block is involved, availability of the broker to stand ready
to execute possibly difficult transactions in the future, and the
financial strength and stability of the broker. Such
considerations are judgmental and are weighed by the Investment
Manager in determining the overall reasonableness of brokerage
commissions.

(2) In selecting brokers for portfolio transactions, the
Investment Manager shall take into account its past experience as
to brokers qualified to achieve "best execution," including
brokers who specialize in any foreign securities held by the
Funds.

<PAGE>
(3) The Investment Manager is authorized to allocate
brokerage and principal business to brokers who have provided
brokerage and research services, as such services are defined in
Section 28(e)(3) of the Securities Exchange Act of 1934 (the "1934
Act"), for the Funds and/or other accounts, if any, for which the
Investment Manager exercises investment discretion (as defined in
Section 3(a)(35) of the 1934 Act) and, as to transactions as to
which fixed minimum commission rates are not applicable, to cause
the Funds to pay a commission for effecting a securities
transaction in excess of the amount another broker would have
charged for effecting that transaction, if the Investment Manager
determines in good faith that such amount of commission is
reasonable in relation to the value of the brokerage and research
services provided by such broker, viewed in terms of either that
particular transaction or the Investment Manager's overall
responsibilities with respect to the Funds and the other accounts,
if any, as to which it exercises investment discretion. In
reaching such determination, the Investment Manager will not be
required to place or attempt to place a specific dollar value on
the research or execution services of a broker or on the portion
of any commission reflecting either of said services. In
demonstrating that such determinations were made in good faith,
the Investment Manager shall be prepared to show that all
commissions were allocated and paid for purposes contemplated by
the Funds' brokerage policy; that the research services provide
lawful and appropriate assistance to the Investment Manager in the
performance of its investment decision-making responsibilities;
and that the commissions paid were within a reasonable range. The
determination that commissions are within a reasonable range shall
be based on any available information as to the level of
commissions known to be charged by other brokers on comparable
transactions, but there shall be taken into account the Funds'

<PAGE>

policies that (i) obtaining a low commission is deemed secondary
to obtaining a favorable securities price, since it is recognized
that usually it is more beneficial to a Fund to obtain a favorable
price than to pay the lowest commission, and (ii) the quality,
comprehensiveness and frequency of research studies that are
provided for the Investment Manager are useful to the Investment
Manager in performing its advisory services under this Agreement.
Research services provided by brokers to the Investment Manager
are considered to be in addition to, and not in lieu of, services
required to be performed by the Investment Manager under this
Agreement.
(4) Purchases and sales of portfolio securities within the
United States, other than on a securities exchange, shall be
executed with primary market makers acting as principal except
where, in the judgment of the Investment Manager, better prices
and execution may be obtained on a commission basis or from other
sources.
(5) Sales made by a broker of shares of other companies
registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), which have either the same investment manager or
an investment manager or adviser affiliated with the Investment
Manager is one factor among others to be taken into account in
deciding to allocate portfolio transactions (including agency
transactions, principal transactions, purchases in underwritings
or tenders in response to tender offers) for the account of the
Funds to that broker, provided that the broker shall furnish "best
execution," as defined in paragraph 1 above, and that such
allocation shall be within the scope of the Funds' other policies
as stated above, and provided further, that in every allocation

<PAGE>

made to broker in which the sale of shares of other companies with
the same or an affiliated investment manager is taken into
account, there shall be no increase in the amount of the
commissions or other compensation paid to such broker beyond a
reasonable commission or other compensation determined, as set
forth in paragraph 3 above, on the basis of best execution plus
research services, without taking account of nor placing any value
upon such sale of shares of companies with the same or an
affiliated investment manager.
4. During the term of this Agreement, Funds each shall pay the
Investment Manager a monthly fee at an annual rate of 0.50% of the first
$200,000,000 of the Funds average daily net assets, reduced for such assets
over $200,000,000 to 0.45%, and further reduced for such assets in excess of
$1,300,000,000 to 0.40%, the monthly fee to be payable at the end of each
calendar month and to be based on its average daily net assets during the
month.
5. This Agreement is amended and restated as of February 25,
1994 and shall continue in effect until April 30, 1995. If not sooner
terminated, this Agreement shall continue in effect for successive periods of
12 months each thereafter, PROVIDED that each such continuance shall be
specifically approved annually by the vote of a majority of the Trust's Board
of Trustees who are not parties to this Agreement nor interested persons (as
such term is defined in the 1940 Act) of any such party, cast in person at a
meeting called for the purpose of voting on such approval, and either the vote
of (a) a majority of the outstanding voting securities of each Fund, or (b) a
majority of the Trust's Board of Trustees as a whole.
6. Notwithstanding the foregoing, this Agreement may be
terminated by either party at any time, without the payment of any penalty, on
sixty (60) days' written notice to the other party, provided that termination
by the Trust is approved by vote of a majority of the Trust's Board of

<PAGE>
Trustees in office at the time or by vote of a majority of the outstanding
voting securities of the Trust.
7. This Agreement shall automatically and immediately terminate
in the event of its assignment (as such term is defined in the 1940 Act).
8. In the event this Agreement is terminated and the Investment
Manager no longer acts as Investment Manager to the Funds, the Investment
Manager reserves the right to withdraw from the Funds the use of the name
"Templeton" or any name that would mislead by implying a continuing
relationship between the Funds and the Investment Manager or any of its
affiliates.
9. The Funds may purchase and/or sell securities which are also
purchased or sold by the Investment Manager or its owners or its affiliates or
other of its investment management clients.
10. The Investment Manager may rely on information reasonably
believed by it to be accurate and reliable. Except as may otherwise be
provided by the 1940 Act, neither the Investment Manager nor its officers,
directors, employees or agents shall be subject to any liability to the Funds
or to any shareholders of the Funds for any error of judgment, mistake of law
or any loss arising out of any investment or other act or omission in the
performance by the Investment manager of its duties under the Agreement or for
any loss or damage resulting from the imposition by any government of exchange
control restrictions which might affect the liquidity of a Fund's assets, or
from acts or omissions of custodians or securities depositories, or from any
war or political act of any foreign government to which such assets might be
exposed, except for any liability, loss or damage resulting from willful
misfeasance, bad faith or gross negligence on the Investment Manager's part or
by reason of reckless disregard of the Investment Manager's duties under this
Agreement.
11. It is understood that the services of the Investment Manager
are not deemed to be exclusive, and nothing in this Agreement shall prevent
the Investment Manager, or any affiliate thereof, from providing similar

<PAGE>
services to other investment companies and other clients, including clients
which may invest in the same types of securities as the Funds, or, in
providing such services, from using information furnished by others. When the
Investment Manager determines to buy or sell the same security for a Fund that
the Investment Manager or one or more of its affiliates has selected for
clients of the Investment Manager or its affiliates, the orders for all such
securities transactions shall be placed for execution by methods determined by
the Investment Manager, with approval by the Trust's Board of Trustees, to be
impartial and fair.
12. This Agreement shall be construed in accordance with the
laws of the State of Florida, provided that nothing herein shall be construed
as being inconsistent with applicable federal and state securities laws and
any rules, regulations or orders thereunder.
13. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby and, to this extent, the provisions of
this Agreement shall be deemed to be severable.
14. Nothing herein shall be construed as constituting the
Investment Manager an agent of any of the Funds nor of the Trust.
15. It is understood and expressly stipulated that neither the
holders of shares of the Funds nor any Trustee, officer, agent or employee of
the Trust shall be personally liable hereunder, nor shall any resort be had to
other private property for the satisfaction of any claim or obligation
hereunder, but the Trust only shall be liable.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.

TEMPLETON VARIABLE PRODUCTS SERIES FUND

By:___________________________
John R. Kay
Vice President

ATTEST:

_______________________
Thomas M. Mistele
Secretary

TEMPLETON INVESTMENT COUNSEL, INC.

By:___________________________
Donald F. Reed
President

ATTEST:

_____________________
Elizabeth M. Knoblock
Secretary

INVESTMENT MANAGEMENT AGREEMENT

AGREEMENT made as of the 30th day of October, 1992, and amended
and restated as of the February 25, 1994, between TEMPLETON VARIABLE PRODUCTS
SERIES FUND, a Massachusetts business trust (the "Trust"), and TEMPLETON
INVESTMENT COUNSEL, INC., a Florida corporation (the "Investment Manager").
WHEREAS, the Trust currently consists of five portfolios, three of
which are designated as Templeton Money Market Fund and Templeton Bond Fund,
such portfolios together with all other portfolios subsequently established by
the Trust with respect to which the Trust desires to retain the Investment
Manager to render services hereunder and with respect to which the Investment
Manager is willing to do so, being herein collectively referred to as the
"Funds;"
WHEREAS, this Agreement was originally made between the Trust on
behalf of the Funds and Templeton Global Bond Managers, Inc. ("TGBM");
WHEREAS, TGBM is being merged with and into the Investment Manager
in a transaction that will not result in a change of actual control or
management with respect to the Funds' investment management arrangements;
WHEREAS, the purpose of this amendment and restatement is to
identify the Investment Manager as the investment manager hereunder as a
result of said transaction;
NOW THEREFORE, in consideration of the mutual promises and
covenants herein made, the parties hereto understand and agree as follows:
1. The Investment Manager shall manages the investment and
reinvestment of the Trust's assets consistent with the provisions of the
Trust's Agreement and Declaration of Trust and the investment policies adopted
and declared by the Trust's Board of Trustees. In pursuance of the foregoing,
the Investment Manager shall make all determinations with respect to the
investment of the Trust's assets and the purchase and sale of its investment
securities, and shall take all such steps as may be necessary to implement
those determination. Such determinations and services shall include
determining the manner in which any voting rights, rights to consent to

<PAGE>

corporate action and any other rights pertaining to the Trust's investment
securities shall be exercised, subject to the guidelines adopted by the Board
of Trustees.
2. The Investment Manager is not required to furnish any personnel,
overhead items or facilities for the Funds.
3. The Investment Manager shall be responsible for selecting
members of securities exchanges, brokers and dealers (such members, brokers
and dealers being hereinafter referred to as "brokers") for the execution of
the Funds' portfolio transactions consistent with the Fund's brokerage
policies and, when applicable, the negotiation of commissions in connection
therewith.
All recommendations, decisions and placements shall be made in
accordance with the following principles:
(1) Purchase and sale orders will usually be placed with
brokers which are selected by the Investment Manager as able to
achieve "best execution" of such orders. "Best execution" shall
mean prompt and reliable execution at the most favorable security
price, taking into account the other provisions as hereinafter set
forth. The determination of what may constitute best execution
and price in the execution of a securities transaction by a broker
involves a number of considerations, including, without
limitation, the overall direct net economic result to each of the
Funds (involving both price paid or received and any commissions
and other costs paid), the efficiency with which the transaction
is effected, the ability to effect the transaction at all where a
large block is involved, availability of the broker to stand ready
to execute possibly difficult transactions in the future, and the
financial strength and stability of the broker. Such
considerations are judgmental and are weighed by the Investment
Manager in determining the overall reasonableness of brokerage
commissions.

<PAGE>

(3) The Investment Manager is authorized to allocate
brokerage and principal business to brokers who have provided
brokerage and research services, as such services are defined in
Section 28(e)(3) of the Securities Exchange Act of 1934 (the "1934
Act"), for the Funds and/or other accounts, if any, for which the
Investment Manager exercises investment discretion (as defined in
Section 3(a)(35) of the 1934 Act) and, as to transactions as to
which fixed minimum commission rates are not applicable, to cause
the Funds to pay a commission for effecting a securities
transaction in excess of the amount another broker would have
charged for effecting that transaction, if the Investment Manager
determines in good faith that such amount of commission is
reasonable in relation to the value of the brokerage and research
services provided by such broker, viewed in terms of either that
particular transaction or the Investment Manager's overall
responsibilities with respect to the Funds and the other accounts,
if any, as to which it exercises investment discretion. In
reaching such determination, the Investment Manager will not be
required to place or attempt to place a specific dollar value on
the research or execution services of a broker or on the portion
of any commission reflecting either of said services. In

<PAGE>

demonstrating that such determinations were made in good faith,
the Investment Manager shall be prepared to show that all
commissions were allocated and paid for purposes contemplated by
the Funds' brokerage policy; that the research services provide
lawful and appropriate assistance to the Investment Manager in the
performance of its investment decision-making responsibilities;
and that the commissions paid were within a reasonable range. The
determination that commissions are within a reasonable range shall
be based on any available information as to the level of
commissions known to be charged by other brokers on comparable
transactions, but there shall be taken into account the Funds'
policies that (i) obtaining a low commission is deemed secondary
to obtaining a favorable securities price, since it is recognized
that usually it is more beneficial to a Fund to obtain a favorable
price than to pay the lowest commission, and (ii) the quality,
comprehensiveness and frequency of research studies that are
provided for the Investment Manager are useful to the Investment
Manager in performing its advisory services under this Agreement.
Research services provided by brokers to the Investment Manager
are considered to be in addition to, and not in lieu of, services
required to be performed by the Investment Manager under this
Agreement.
(4) Purchases and sales of portfolio securities within the
United States, other than on a securities exchange, shall be
executed with primary market makers acting as principal except
where, in the judgment of the Investment Manager, better prices
and execution may be obtained on a commission basis or from other
sources.
(5) Sales made by a broker of shares of other companies
registered under the Investment Company Act of 1940, as amended

<PAGE>

(the "1940 Act"), which have either the same investment manager or
an investment manager or adviser affiliated with the Investment
Manager is one factor among others to be taken into account in
deciding to allocate portfolio transactions (including agency
transactions, principal transactions, purchases in underwritings
or tenders in response to tender offers) for the account of the
Funds to that broker, provided that the broker shall furnish "best
execution," as defined in paragraph 1 above, and that such
allocation shall be within the scope of the Funds' other policies
as stated above, and provided further, that in every allocation
made to broker in which the sale of shares of other companies with
the same or an affiliated investment manager is taken into
account, there shall be no increase in the amount of the
commissions or other compensation paid to such broker beyond a
reasonable commission or other compensation determined, as set
forth in paragraph 3 above, on the basis of best execution plus
research services, without taking account of nor placing any value
upon such sale of shares of companies with the same or an
affiliated investment manager.
4. During the term of this Agreement, Templeton Money Market
Fund shall pay the Investment Manager a monthly fee at an annual rate of
0.35% of the first $200,000,000 of the Funds average daily net assets, reduced
for such assets over $200,000,000 to 0.30%, and further reduced for such
assets in excess of $1,300,000,000 to 0.25%, the monthly fee to be payable at
the end of each calendar month and to be based on its average daily net assets
during the month.
During the term of this Agreement, Templeton Bond Fund shall pay
the Investment Manager a monthly fee at an annual rate of 0.50% of the first
$200,000,000 of the Funds average daily net assets, reduced for such assets
over $200,000,000 to 0.45%, and further reduced for such assets in excess of

<PAGE>

$1,300,000,000 to 0.40%, the monthly fee to be payable at the end of each
calendar month and to be based on its average daily net assets during the
month.

5. This Agreement is amended and restated as of February 25,
1994 and shall continue in effect until April 30, 1995. If not sooner
terminated, this Agreement shall continue in effect for successive periods of
12 months each thereafter, PROVIDED that each such continuance shall be
specifically approved annually by the vote of a majority of the Trust's Board
of Trustees who are not parties to this Agreement nor interested persons (as
such term is defined in the 1940 Act) of any such party, cast in person at a
meeting called for the purpose of voting on such approval, and either the vote
of (a) a majority of the outstanding voting securities of each Fund, or (b) a
majority of the Trust's Board of Trustees as a whole.
6. Notwithstanding the foregoing, this Agreement may be
terminated by either party at any time, without the payment of any penalty, on
sixty (60) days' written notice to the other party, provided that termination
by the Trust is approved by vote of a majority of the Trust's Board of
Trustees in office at the time or by vote of a majority of the outstanding
voting securities of the Trust.
7. This Agreement shall automatically and immediately terminate
in the event of its assignment (as such term is defined in the 1940 Act).
8. In the event this Agreement is terminated and the Investment
Manager no longer acts as Investment Manager to the Funds, the Investment
Manager reserves the right to withdraw from the Funds the use of the name
"Templeton" or any name that would mislead by implying a continuing
relationship between the Funds and the Investment Manager or any of its
affiliates.

<PAGE>

9. The Funds may purchase and/or sell securities which are also
purchased or sold by the Investment Manager or its owners or its affiliates or
other of its investment management clients.
10. The Investment Manager may rely on information reasonably
believed by it to be accurate and reliable. Except as may otherwise be
provided by the 1940 Act, neither the Investment Manager nor its officers,
directors, employees or agents shall be subject to any liability to the Funds
or to any shareholders of the Funds for any error of judgment, mistake of law
or any loss arising out of any investment or other act or omission in the
performance by the Investment manager of its duties under the Agreement or for
any loss or damage resulting from the imposition by any government of exchange
control restrictions which might affect the liquidity of a Fund's assets, or
from acts or omissions of custodians or securities depositories, or from any
war or political act of any foreign government to which such assets might be
exposed, except for any liability, loss or damage resulting from willful
misfeasance, bad faith or gross negligence on the Investment Manager's part or
by reason of reckless disregard of the Investment Manager's duties under this
Agreement.
11. It is understood that the services of the Investment Manager
are not deemed to be exclusive, and nothing in this Agreement shall prevent
the Investment Manager, or any affiliate thereof, from providing similar
services to other investment companies and other clients, including clients
which may invest in the same types of securities as the Funds, or, in
providing such services, from using information furnished by others. When the
Investment Manager determines to buy or sell the same security for a Fund that
the Investment Manager or one or more of its affiliates has selected for
clients of the Investment Manager or its affiliates, the orders for all such
securities transactions shall be placed for execution by methods determined by
the Investment Manager, with approval by the Trust's Board of Trustees, to be
impartial and fair.

<PAGE>

12. This Agreement shall be construed in accordance with the
laws of the State of Florida, provided that nothing herein shall be construed
as being inconsistent with applicable federal and state securities laws and
any rules, regulations or orders thereunder.
13. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby and, to this extent, the provisions of
this Agreement shall be deemed to be severable.
14. Nothing herein shall be construed as constituting the
Investment Manager an agent of any of the Funds nor of the Trust.
15. It is understood and expressly stipulated that neither the
holders of shares of the Funds nor any Trustee, officer, agent or employee of
the Trust shall be personally liable hereunder, nor shall any resort be had to
other private property for the satisfaction of any claim or obligation
hereunder, but the Trust only shall be liable.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.

TEMPLETON VARIABLE PRODUCTS SERIES FUND

By:___________________________
John R. Kay
Vice President

ATTEST:

_______________________
Thomas M. Mistele
Secretary

TEMPLETON INVESTMENT COUNSEL, INC.

By:___________________________
Donald F. Reed
President

ATTEST:

_______________________
Elizabeth M. Knoblock
Secretary

<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
TEMPLETON ASSET ALLOCATION FUND, DECEMBER 31, 1994 ANNUAL REPORT AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000829959
<NAME> TEMPLETON VARIABLE PRODUCTS SERIES FUND
<SERIES>
<NUMBER> 4
<NAME> ASSET ALLOCATION

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 274834995
<INVESTMENTS-AT-VALUE> 290791501
<RECEIVABLES> 4052324
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 163216
<TOTAL-ASSETS> 295007041
<PAYABLE-FOR-SECURITIES> 6067406
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 767417
<TOTAL-LIABILITIES> 6834823
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 267653812
<SHARES-COMMON-STOCK> 18368728
<SHARES-COMMON-PRIOR> 11077947
<ACCUMULATED-NII-CURRENT> 9238298<F1>
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4437750)<F1>
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 15717858
<NET-ASSETS> 288172218
<DIVIDEND-INCOME> 3268031
<INTEREST-INCOME> 8203045
<OTHER-INCOME> 0
<EXPENSES-NET> 1804669
<NET-INVESTMENT-INCOME> 9666407
<REALIZED-GAINS-CURRENT> (4437748)
<APPREC-INCREASE-CURRENT> (13727789)
<NET-CHANGE-FROM-OPS> (8499130)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3982153)
<DISTRIBUTIONS-OF-GAINS> (841797)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7349436
<NUMBER-OF-SHARES-REDEEMED> (357371)
<SHARES-REINVESTED> 298716
<NET-CHANGE-IN-ASSETS> 104812548
<ACCUMULATED-NII-PRIOR> 5045045
<ACCUMULATED-GAINS-PRIOR> (649206)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1186540
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1804669
<AVERAGE-NET-ASSETS> 240375578
<PER-SHARE-NAV-BEGIN> 16.55
<PER-SHARE-NII> .44
<PER-SHARE-GAIN-APPREC> (.92)
<PER-SHARE-DIVIDEND> (.31)
<PER-SHARE-DISTRIBUTIONS> (.07)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.69
<EXPENSE-RATIO> .75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

<FN>
<F1> As a result of differing book and tax treatments for foreign currency
transactions, the Fund reclassified $1,491,002 from net investment income
to realized gain/loss on investments as of December 31, 1994.

</TABLE>

<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
TEMPLETON BOND FUND, DECEMBER 31, 1994 ANNUAL REPORT AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000829959
<NAME> TEMPLETON VARIABLE PRODUCTS SERIES FUND
<SERIES>
<NUMBER> 2
<NAME> BOND FUND

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 29753952
<INVESTMENTS-AT-VALUE> 28915159
<RECEIVABLES> 669605
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 29584764
<PAYABLE-FOR-SECURITIES> 63271
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 178112
<TOTAL-LIABILITIES> 241383
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 30757383
<SHARES-COMMON-STOCK> 2703173
<SHARES-COMMON-PRIOR> 2414914
<ACCUMULATED-NII-CURRENT> 2016673
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (2575723)
<ACCUM-APPREC-OR-DEPREC> (854952)
<NET-ASSETS> 29343381
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2305578
<OTHER-INCOME> 0
<EXPENSES-NET> 268735
<NET-INVESTMENT-INCOME> 2036843
<REALIZED-GAINS-CURRENT> (2557896)
<APPREC-INCREASE-CURRENT> (1079199)
<NET-CHANGE-FROM-OPS> (1600252)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1463533)
<DISTRIBUTIONS-OF-GAINS> (417139)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 775899
<NUMBER-OF-SHARES-REDEEMED> (654733)
<SHARES-REINVESTED> 167093
<NET-CHANGE-IN-ASSETS> (3605)
<ACCUMULATED-NII-PRIOR> 1443363
<ACCUMULATED-GAINS-PRIOR> 399312
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 149843
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 268735
<AVERAGE-NET-ASSETS> 29968425
<PER-SHARE-NAV-BEGIN> 12.15
<PER-SHARE-NII> .71
<PER-SHARE-GAIN-APPREC> (1.28)
<PER-SHARE-DIVIDEND> (.55)
<PER-SHARE-DISTRIBUTIONS> (.17)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.86
<EXPENSE-RATIO> .90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
TEMPLETON INTERNATIONAL FUND, DECEMBER 31, 1994 ANNUAL REPORT AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000829959
<NAME> TEMPLETON VARIABLE PRODUCTS SERIES FUND
<SERIES>
<NUMBER> 5
<NAME> INTERNATIONAL FUND

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 149437502
<INVESTMENTS-AT-VALUE> 150817233
<RECEIVABLES> 3198976
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 78184
<TOTAL-ASSETS> 154094393
<PAYABLE-FOR-SECURITIES> 3788606
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 215408
<TOTAL-LIABILITIES> 4004014
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 146756090
<SHARES-COMMON-STOCK> 11354019
<SHARES-COMMON-PRIOR> 3171815
<ACCUMULATED-NII-CURRENT> 1529145
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 425413
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1379731
<NET-ASSETS> 150090379
<DIVIDEND-INCOME> 1486734
<INTEREST-INCOME> 718262
<OTHER-INCOME> 0
<EXPENSES-NET> 674675
<NET-INVESTMENT-INCOME> 1530321
<REALIZED-GAINS-CURRENT> 435785
<APPREC-INCREASE-CURRENT> (6228265)
<NET-CHANGE-FROM-OPS> (4262159)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (310975)
<DISTRIBUTIONS-OF-GAINS> (894051)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9440218
<NUMBER-OF-SHARES-REDEEMED> (1346946)
<SHARES-REINVESTED> 88932
<NET-CHANGE-IN-ASSETS> 106213571
<ACCUMULATED-NII-PRIOR> 309799
<ACCUMULATED-GAINS-PRIOR> 883679
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 404532
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 674675
<AVERAGE-NET-ASSETS> 80962226
<PER-SHARE-NAV-BEGIN> 13.83
<PER-SHARE-NII> .12
<PER-SHARE-GAIN-APPREC> (.42)
<PER-SHARE-DIVIDEND> (.08)
<PER-SHARE-DISTRIBUTIONS> (.23)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.22
<EXPENSE-RATIO> .83
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE
TEMPLETON MONEY MARKET FUND, DECEMBER 31, 1994 ANNUAL REPORT
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000829959
<NAME> TEMPLETON VARIABLE PRODUCTS SERIES FUND
<SERIES>
<NUMBER> 1
<NAME> MONEY MARKET FUND

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 33038928
<INVESTMENTS-AT-VALUE> 33038928
<RECEIVABLES> 268782
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 13256
<TOTAL-ASSETS> 33320966
<PAYABLE-FOR-SECURITIES> 169748
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 61083
<TOTAL-LIABILITIES> 230831
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 33090135
<SHARES-COMMON-PRIOR> 16991648
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 33090135
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1075951
<OTHER-INCOME> 0
<EXPENSES-NET> 179191
<NET-INVESTMENT-INCOME> 896760
<REALIZED-GAINS-CURRENT> (6688)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 890072
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (890072)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 62016452
<NUMBER-OF-SHARES-REDEEMED> (46806475)
<SHARES-REINVESTED> 888510
<NET-CHANGE-IN-ASSETS> 16098487
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 88106
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 179191
<AVERAGE-NET-ASSETS> 25183361
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .03
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.03)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .71
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
TEMPLETON STOCK FUND, DECEMBER 31, 1994 ANNUAL REPORT AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000829959
<NAME> TEMPLETON VARIABLE PRODUCTS SERIES FUND
<SERIES>
<NUMBER> 3
<NAME> STOCK FUND

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 317933281
<INVESTMENTS-AT-VALUE> 379995688
<RECEIVABLES> 1689838
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 381685526
<PAYABLE-FOR-SECURITIES> 2210188
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 626785
<TOTAL-LIABILITIES> 2836973
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 309941209
<SHARES-COMMON-STOCK> 22360813
<SHARES-COMMON-PRIOR> 17020439
<ACCUMULATED-NII-CURRENT> 6357335<F1>
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 487602<F1>
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 62062407
<NET-ASSETS> 378848553
<DIVIDEND-INCOME> 6986797
<INTEREST-INCOME> 1947485
<OTHER-INCOME> 0
<EXPENSES-NET> 2565349
<NET-INVESTMENT-INCOME> 6368933
<REALIZED-GAINS-CURRENT> 2662297
<APPREC-INCREASE-CURRENT> (19221431)
<NET-CHANGE-FROM-OPS> (10190201)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3863504)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7300635
<NUMBER-OF-SHARES-REDEEMED> (2181965)
<SHARES-REINVESTED> 221703
<NET-CHANGE-IN-ASSETS> 80456940
<ACCUMULATED-NII-PRIOR> 3988469
<ACCUMULATED-GAINS-PRIOR> (2311258)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1686602
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2565349
<AVERAGE-NET-ASSETS> 352570641
<PER-SHARE-NAV-BEGIN> 17.53
<PER-SHARE-NII> .26
<PER-SHARE-GAIN-APPREC> (.64)
<PER-SHARE-DIVIDEND> (.21)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.94
<EXPENSE-RATIO> .73
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

<FN>
<F1> As a result of differing book and tax treatments for foreign currency
transactions, the Fund reclassified $136,563 from net investment income to
realized gain/loss on investments as of December 31, 1994.

</TABLE>