SUPPLEMENT DATED MARCH 1, 1998
TO THE PROSPECTUSES
DATED May 1, 1997
TEMPLETON VARIABLE PRODUCTS SERIES FUND
TEMPLETON ASSET ALLOCATION FUND-CLASS 1 TEMPLETON INTERNATIONAL FUND-CLASS 1
TEMPLETON BOND FUND - CLASS 1 TEMPLETON MONEY MARKET FUND
TEMPLETON DEVELOPING MARKETS FUND - CLASS 1 TEMPLETON STOCK FUND - CLASS 1
Each prospectus is supplemented as follows:
I. The discussion under "Risk Factors" is amended by adding the following text
(not applicable to Money Market Fund):
Hong Kong reverted to the sovereignty of China on July 1, 1997. As with any
major political transfer of power, this could result in political, social,
economic, market or other developments in Hong Kong, China or other
countries that could affect the value of Fund investments.
II. The following Expense Summary is added:
Expense Summary
This table is designed to help you understand the costs of investing in the
shares of each Fund listed below. Except as noted, it is based on the
historical expenses of the indicated shares for the fiscal year ended December
31, 1996. The Funds' actual expenses may vary.
Shares of the Funds are sold only to insurance companies for use in variable
annuity and variable life insurance contracts ("Contracts"). Investors in such
Contracts should consider the Fund expenses listed below as well as the
additional expenses listed in the Contract prospectus or disclosure document.
A. Shareholder Transaction Expenses
<TABLE>
<CAPTION>
Templeton
Asset Templeton Templeton
Allocation Templeton Developing International Templeton Templeton
Fund Bond Fund Markets Fund Fund Money Stock Fund
Class 1 Class 1 Class 1 Class 1 Market Fund Class 1
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Maximum Sales Charge
(as a percentage of Offering Price)
Paid at time of purchase ............... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Paid at redemption ..................... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
B. Annual Fund Operating Expenses
(as a percentage of average net assets)
Templeton
Asset Templeton Templeton
Allocation Templeton Developing International Templeton Templeton
Fund Bond Fund Markets Fund/2/ Fund Money Stock Fund
Class 1 Class 1 Class 1 Class 1 Market Fund Class 1
-----------------------------------------------------------------------------------
Management Fees......................... 0.61%/1/ 0.50% 1.25%/3/ 0.70%/1/ 0.35% 0.70%/1/
Other Expenses ......................... 0.17% 0.18% 0.53% 0.18% 0.20% 0.18%
----------------------------------------------------------------------------------
Total Fund Operating Expenses .......... 0.78%/1/ 0.68% 1.78%/3/ 0.88%/1/ 0.55% 0.88%/1/
-----------------------------------------------------------------------------------
</TABLE>
C. Example
Assume the annual returns are 5%, operating expenses are as described
above, and you sell your shares after the number of years shown. These are the
projected expenses for each $1,000 that you invest in each Fund.
<TABLE>
<CAPTION>
One Year Three Years Five Years Ten Years
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Asset Allocation Fund - Class 1 $ 8 $25 $43 $ 97
Bond Fund - Class 1 $ 7 $22 $38 $ 85
Developing Markets Fund - Class 1 $18 $56 $96 $209
International Fund - Class 1 $ 9 $28 $49 $108
Money Market Fund $ 6 $18 $31 $ 69
Stock Fund - Class 1 $ 9 $28 $49 $108
</TABLE>
THIS IS JUST AN EXAMPLE. IT DOES NOT REPRESENT PAST OR FUTURE EXPENSES OR
RETURNS. ACTUAL EXPENSES AND RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN. Each
Fund pays its operating expenses. The effects of these expenses are reflected in
the Net Asset Value or dividends of each Fund and are not directly charged to
your account. As noted above, these expenses do not include Contract expenses.
1. Management Fees and total operating expenses have been restated to reflect
the management fee schedule approved by shareholders and effective May 1, 1997.
See fund prospectus for details. Actual management fees and total fund operating
expenses before May 1, 1997 were lower.
2. Figures are estimates for 1997 based on annualized 1996 figures. The fund
began operations in March 1996.
3. Figures do not reflect the Investment Manager's agreement in advance to waive
of a portion of its fees during 1996. After the waiver, actual management fees
and total operating expenses of the portfolio in 1996 were 1.17% and 1.70% of
net assets, respectively. This waiver agreement has been terminated.
